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AS FILED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION ON MARCH 21, 2000
FILE NO. 2-73948
FILE NO. 811-3258
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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. 56 /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 57 /X/
(Check appropriate box or boxes.)
DFA INVESTMENT DIMENSIONS GROUP INC.
(Exact Name of Registrant as Specified in Charter)
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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
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IRENE R. DIAMANT, VICE PRESIDENT AND SECRETARY
DFA INVESTMENT DIMENSIONS GROUP INC.
1299 OCEAN AVENUE, 11TH FLOOR, SANTA MONICA, CALIFORNIA 90401
(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 24, 2000 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.
The Trustees and principal officers of The DFA Investment Trust Company and
the Directors and principal officers of Dimensional Emerging Markets Value Fund
Inc. also have executed this registration statement.
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Title of Securities Being Registered
U.S. LARGE COMPANY PORTFOLIO
ENHANCED U.S. LARGE COMPANY PORTFOLIO
U.S. LARGE CAP VALUE PORTFOLIO
U.S. 4-10 VALUE PORTFOLIO
U.S. 6-10 VALUE PORTFOLIO
U.S. 6-10 SMALL COMPANY PORTFOLIO
U.S. 9-10 SMALL COMPANY PORTFOLIO
DFA REAL ESTATE SECURITIES PORTFOLIO
LARGE CAP INTERNATIONAL PORTFOLIO
INTERNATIONAL SMALL COMPANY PORTFOLIO
JAPANESE SMALL COMPANY PORTFOLIO
PACIFIC RIM SMALL COMPANY PORTFOLIO
UNITED KINGDOM SMALL COMPANY PORTFOLIO
CONTINENTAL SMALL COMPANY PORTFOLIO
DFA INTERNATIONAL SMALL CAP VALUE PORTFOLIO
EMERGING MARKETS PORTFOLIO
EMERGING MARKETS VALUE PORTFOLIO
EMERGING MARKETS SMALL CAP PORTFOLIO
DFA ONE-YEAR FIXED INCOME PORTFOLIO
DFA TWO-YEAR GLOBAL FIXED INCOME PORTFOLIO
DFA FIVE-YEAR GOVERNMENT PORTFOLIO
DFA FIVE-YEAR GLOBAL FIXED INCOME PORTFOLIO
DFA INTERMEDIATE GOVERNMENT INCOME PORTFOLIO
TAX-MANAGED U.S. MARKETWIDE VALUE PORTFOLIO
TAX-MANAGED U.S. 5-10 VALUE PORTFOLIO
TAX-MANAGED 6-10 SMALL COMPANY PORTFOLIO
TAX-MANAGED DFA INTERNATIONAL VALUE PORTFOLIO
TAX-MANAGED U.S. MARKETWIDE VALUE PORTFOLIO X
TAX-MANAGED U.S. 5-10 VALUE PORTFOLIO X
TAX-MANAGED 6-10 SMALL COMPANY PORTFOLIO X
TAX-MANAGED DFA INTERNATIONAL VALUE PORTFOLIO X
VA SMALL VALUE PORTFOLIO
VA LARGE 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
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<PAGE>
CONTENTS
This Post-Effective Amendment No. 56/57 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 U.S. Large Company
Portfolio, Enhanced U.S. Large Company Portfolio, U.S. Large Cap Value
Portfolio, U.S. 4-10 Value Portfolio, U.S. 6-10 Value Portfolio, U.S. 6-10
Small Company Portfolio, U.S. 9-10 Small Company Portfolio, DFA Real Estate
Securities Portfolio, Large Cap International Portfolio, International Small
Company Portfolio, Japanese Small Company Portfolio, Pacific Rim Small
Company Portfolio, United Kingdom Small Company Portfolio, Continental Small
Company Portfolio, DFA International Small Cap Value Portfolio, Emerging
Markets Portfolio, Emerging Markets Value Portfolio, Emerging Markets Small
Cap Portfolio, DFA One-Year Fixed Income Portfolio, DFA Two-Year Global
Fixed Income Portfolio, DFA Five-Year Government Portfolio, DFA Five-Year
Global Fixed Income Portfolio and DFA Intermediate Government Income
Portfolio series of shares
4. Part A -- Prospectus relating to the Registrant's Tax-Managed U.S.
Marketwide Value Portfolio, Tax-Managed U.S. 5-10 Value Portfolio,
Tax-Managed 6-10 Small Company Portfolio, Tax-Managed DFA International
Value Portfolio, Tax-Managed U.S. Marketwide Value Portfolio X, Tax-Managed
U.S. 5-10 Value Portfolio X, Tax-Managed 6-10 Small Company Portfolio X and
Tax-Managed DFA International Value Portfolio X series of shares
5. Part A -- Prospectus relating to the Registrant's 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
series of shares
6. Part A -- Prospectus (1)
7. Part B -- Statement of Additional Information relating to the Registrant's
U.S. Large Company Portfolio, Enhanced U.S. Large Company Portfolio, U.S.
Large Cap Value Portfolio, U.S. 4-10 Value Portfolio, U.S. 6-10 Value
Portfolio, U.S. 6-10 Small Company Portfolio, U.S. 9-10 Small Company
Portfolio, DFA Real Estate Securities Portfolio, Large Cap International
Portfolio, International Small Company Portfolio, Japanese Small Company
Portfolio, Pacific Rim Small Company Portfolio, United Kingdom Small Company
Portfolio, Continental Small Company Portfolio, DFA International Small Cap
Value Portfolio, Emerging Markets Portfolio, Emerging Markets Value
Portfolio, Emerging Markets Small Cap Portfolio, DFA One-Year Fixed Income
Portfolio, DFA Two-Year Global Fixed Income Portfolio, DFA Five-Year
Government Portfolio, DFA Five-Year Global Fixed Income Portfolio and DFA
Intermediate Government Income Portfolio series of shares
8. Part B -- Statement of Additional Information relating to the Registrant's
Tax-Managed U.S. Marketwide Value Portfolio, Tax-Managed U.S. 5-10 Value
Portfolio, Tax-Managed 6-10 Small Company Portfolio, Tax-Managed DFA
International Value Portfolio, Tax-Managed U.S. Marketwide Value Portfolio
X, Tax-Managed U.S. 5-10 Value Portfolio X, Tax-Managed 6-10 Small Company
Portfolio X and Tax-Managed DFA International Value Portfolio X series of
shares
9. Part B -- Statement of Additional Information relating to the Registrant's
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 series of shares
10. Part B -- Statement of Additional Information (1)
11. Part C -- Other Information
12. Signatures
(1) The Prospectus and Statement of Additional Information relating to the
Registrant's RWB/DFA International High Book to Market Portfolio series of
shares, dated March 24, 2000, are incorporated into this filing by reference
to the electronic filing of 1933 Act/1940 Act Post-Effective Amendment Nos.
29/30 to the Registration Statement of Dimensional Investment Group Inc.
filed March 21, 2000 (File Nos. 33-33980/811-6067).
<PAGE>
P R O S P E C T U S
MARCH 24, 2000
PLEASE CAREFULLY READ THE IMPORTANT INFORMATION IT CONTAINS BEFORE INVESTING.
DFA INVESTMENT DIMENSIONS GROUP INC.
---------------------------------------------
DIMENSIONAL INVESTMENT GROUP INC.
The two mutual funds described in this Prospectus offer a variety of investment
portfolios. Each of the Funds' Portfolios has its own investment objective
and policies, and is the equivalent of a separate mutual fund. DFA
International Value Portfolio is offered by Dimensional
Investment Group Inc. The other listed Portfolios are part
of DFA Investment Dimensions Group Inc.
The Portfolios do not charge sales commissions or "loads".
PORTFOLIOS FOR INVESTORS SEEKING TO INVEST IN:
DOMESTIC EQUITY SECURITIES
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U.S. Large Company Portfolio U.S. 6-10 Value Portfolio
Enhanced U.S. Large Company U.S. 6-10 Small Company
Portfolio Portfolio
U.S. Large Cap Value Portfolio U.S. 9-10 Small Company
U.S. 4-10 Value Portfolio Portfolio
DFA Real Estate Securities
Portfolio
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INTERNATIONAL EQUITY SECURITIES
Large Cap International Continental Small Company
Portfolio Portfolio
DFA International Value DFA International Small Cap
Portfolio Value Portfolio
International Small Company Emerging Markets Portfolio
Portfolio Emerging Markets Value
Japanese Small Company Portfolio
Portfolio Emerging Markets Small Cap
Pacific Rim Small Company Portfolio
Portfolio
United Kingdom Small Company
Portfolio
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FIXED INCOME SECURITIES
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DFA One-Year Fixed Income DFA Five-Year Global Fixed
Portfolio Income Portfolio
DFA Two-Year Global Fixed DFA Intermediate Government
Income Portfolio Fixed Income Portfolio
DFA Five-Year Government
Portfolio
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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.
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TABLE OF CONTENTS
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RISK/RETURN SUMMARY......................................... 1
ABOUT THE PORTFOLIOS...................................... 1
MANAGEMENT................................................ 1
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS............... 3
OTHER RISKS............................................... 7
RISK AND RETURN BAR CHARTS AND TABLES..................... 8
FEES AND EXPENSES........................................... 15
SECURITIES LENDING REVENUE.................................. 19
HIGHLIGHTS.................................................. 19
U.S. LARGE COMPANY PORTFOLIO................................ 21
ENHANCED U.S. LARGE COMPANY PORTFOLIO....................... 21
STANDARD & POOR'S--INFORMATION AND DISCLAIMERS.............. 22
U.S. VALUE PORTFOLIOS....................................... 23
U.S. SMALL COMPANY PORTFOLIOS............................... 24
DFA REAL ESTATE SECURITIES PORTFOLIO........................ 25
INTERNATIONAL PORTFOLIOS--COUNTRIES......................... 27
LARGE CAP INTERNATIONAL PORTFOLIO......................... 28
DFA INTERNATIONAL VALUE PORTFOLIO......................... 29
INTERNATIONAL SMALL COMPANY PORTFOLIOS.................... 29
SMALL COMPANY MASTER FUNDS................................ 33
DFA INTERNATIONAL SMALL CAP VALUE PORTFOLIO............... 34
EMERGING MARKETS PORTFOLIOS, EMERGING MARKETS VALUE
PORTFOLIO AND EMERGING MARKETS SMALL CAP PORTFOLIO........ 35
FIXED INCOME PORTFOLIOS..................................... 37
PORTFOLIO TURNOVER.......................................... 41
PORTFOLIO TRANSACTIONS--ALL PORTFOLIOS...................... 41
SECURITIES LOANS............................................ 42
DEVIATION FROM MARKET CAPITALIZATION WEIGHTING.............. 42
MANAGEMENT OF THE FUNDS..................................... 43
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES............ 44
PURCHASE OF SHARES.......................................... 46
VALUATION OF SHARES......................................... 47
EXCHANGE OF SHARES.......................................... 49
REDEMPTION OF SHARES........................................ 50
THE FEEDER PORTFOLIOS....................................... 52
FINANCIAL HIGHLIGHTS........................................ 53
SERVICE PROVIDERS........................................... 77
</TABLE>
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RISK/RETURN SUMMARY
ABOUT THE PORTFOLIOS
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The Portfolios:
- - Are generally offered to institutional investors and clients of registered
investment advisers.
- - Do not charge sales commissions or "loads".
- - Are designed for long-term investors.
The Portfolios are no-load and low cost.
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.
SOME PORTFOLIOS HAVE SPECIAL STRUCTURES: Certain Portfolios, called "Feeder
Portfolios", do not buy individual securities directly. Instead, they invest in
corresponding mutual funds called "Master Funds". Master Funds in turn purchase
stocks, bonds and/or other securities.
POSSIBLE COMPLICATIONS: The Master-Feeder structure is relatively new and more
complex. While this structure is designed to reduce costs, it may not do so. As
a result, a Feeder Portfolio might encounter operational or other complications.
A Master Fund buys securities directly. A corresponding Feeder Portfolio invests
in the Master Fund's shares. The two have the same gross investment returns.
MANAGEMENT
- ------------
Dimensional Fund Advisors Inc. (the "Advisor") is the investment manager for
each non-Feeder Portfolio and all Master Funds. (A Feeder Portfolio does not
need an investment manager.)
EQUITY INVESTMENT APPROACH:
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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).
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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.
U.S. Large Company Portfolio buys a Master Fund that is managed differently.
Because this Master Fund is an index fund, its only criteria for holding a stock
is whether the stock is in the S&P 500-Registered Trademark- Index.
In contrast, the Master Fund purchased by the Enhanced Large Company Portfolio
generally invests in S&P futures contracts and fixed income securities.
Certain Domestic Equity Portfolios use a market capitalization segmentation
approach. Broadly speaking, this technique involves:
1. Dividing all the companies traded on the New York Stock Exchange ("NYSE")
into 10 groups or "deciles" based on market capitalization. Stocks in
decile 1 have the biggest market capitalizations and those in decile 10, the
smallest.
2. Combining two or more of these deciles into a market cap segment or range.
3. Generally, considering a stock (it may not necessarily be NYSE traded) for
purchase only if its market capitalization falls within the range created.
For example, the Large Cap Value Portfolios buy stocks with market caps in the
range defined by stocks in NYSE deciles 1 through 5. Similarly, U.S. 6-10 Small
Company Portfolio purchases stocks with market caps equivalent to those of
stocks in NYSE deciles 6 through 10; thus its name. In fact, the name of each
other Portfolio employing a market capitalization segmentation approach also
includes the NYSE deciles describing its particular market capitalization
segment.
FIXED INCOME INVESTMENT APPROACH:
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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 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.
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INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
- -----------------------------------------
DOMESTIC EQUITY PORTFOLIOS:
THE U.S. LARGE COMPANY PORTFOLIOS
- -------------------------------
U.S. LARGE COMPANY PORTFOLIO
- - INVESTMENT OBJECTIVE: Produce returns similar to those of the
S&P 500-Registered Trademark- Index.
- - INVESTMENT STRATEGY: Buy shares of a Master Fund that invests in S&P
500-Registered Trademark- Index stocks in about the same proportions as they
are found in the S&P 500-Registered Trademark- Index.
ENHANCED U.S. LARGE COMPANY PORTFOLIO
- - INVESTMENT OBJECTIVE: Outperform the S&P 500-Registered Trademark- Index.
- - INVESTMENT STRATEGY: Purchase shares of a Master Fund that generally invests
in S&P 500-Registered Trademark- Index futures and short-term fixed income
obligations.
ABOUT THE S&P 500 INDEX: The Standard & Poor's 500 Composite Stock Price Index
is market capitalization weighted. Its performance is usually cyclical because
it reflects periods when stock prices generally rise or fall.
THE U.S. VALUE PORTFOLIOS
- ----------------------
U.S. LARGE CAP VALUE PORTFOLIO
U.S. 4-10 VALUE PORTFOLIO
U.S. 6-10 VALUE PORTFOLIO
- - INVESTMENT OBJECTIVE(S): Long-term capital appreciation.
- - INVESTMENT STRATEGY: Buy a Master Fund that purchases value stocks of United
States companies on a market capitalization weighted basis.
- - HOW THE PORTFOLIOS DIFFER: The Portfolios focus on different parts of the
value stocks universe:
- U.S. Large Cap Value Portfolio -- Large capitalization stocks.
- U.S. 4-10 Value Portfolio -- Mid and small capitalization issues.
- U.S. 6-10 Value Portfolio -- Small cap stocks.
"VALUE STOCKS": Compared to other stocks, value stocks sell for low prices
relative to their earnings, dividends and book value.
In selecting value stocks, the Advisor primarily considers price relative to
book value.
MARKET RISK: Although securities of larger firms fluctuate relatively less,
economic, political and issuer specific events will cause the value of all
securities to fluctuate.
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.
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THE U.S. SMALL COMPANY PORTFOLIOS
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U.S. 6-10 SMALL COMPANY PORTFOLIO
U.S. 9-10 SMALL COMPANY PORTFOLIO
- - INVESTMENT OBJECTIVE(S): Long-term capital appreciation.
- - INVESTMENT STRATEGY: Buy a Master Fund that purchases small company stocks
using a market cap weighted approach.
- - HOW THE PORTFOLIOS DIFFER:
The Master Fund in which U.S. 6-10 Small Company Portfolio invests and holds
stocks of small and very small companies. The Master Fund employed by U.S.
9-10 Portfolio exclusively buys stock of very small companies.
RISK OF VERY SMALL COMPANIES: Securities of very small firms are often less
liquid than those of larger companies. As a result, the stocks of very small
companies may fluctuate more in price than the stocks of larger companies.
DFA REAL ESTATE SECURITIES PORTFOLIO
- - INVESTMENT OBJECTIVE: Long-term capital appreciation
- - INVESTMENT STRATEGY: Invest in publicly traded real estate investment trusts
("REITS") on a market capitalization weighted basis.
RISK OF CONCENTRATING IN THE REAL ESTATE INDUSTRY: DFA Real Estate Securities
Portfolio's exclusive focus on the real estate industry may cause its risk to
approximate the risks of direct real estate ownership. For example, a general
decline in real estate prices or an overall decline in the value of the REIT
securities in which the Portfolio invests would cause the Portfolio to lose
money.
INTERNATIONAL PORTFOLIOS:
LARGE CAP INTERNATIONAL PORTFOLIO
- - INVESTMENT OBJECTIVE: Long-term capital appreciation.
- - INVESTMENT STRATEGY: Purchase stocks of large, non-U.S. companies on a market
capitalization weighted basis in each applicable country.
Most Portfolios and Master Funds do not hedge their foreign currency risks.
FOREIGN SECURITIES AND CURRENCIES RISK: Foreign securities prices may decline or
fluctuate because of: (a) economic or political actions 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.
DFA INTERNATIONAL VALUE PORTFOLIO
- - INVESTMENT OBJECTIVE: Long-term capital appreciation.
- - INVESTMENT STRATEGY: Buys a Master Fund that purchases value stocks of large
non-U.S. companies on a market capitalization weighted basis in each
applicable country.
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THE INTERNATIONAL SMALL COMPANY PORTFOLIOS
- ---------------------------------------
INTERNATIONAL SMALL COMPANY PORTFOLIO
JAPANESE SMALL COMPANY PORTFOLIO
PACIFIC RIM SMALL COMPANY PORTFOLIO
UNITED KINGDOM SMALL COMPANY PORTFOLIO
CONTINENTAL (EUROPEAN) SMALL COMPANY PORTFOLIO
- - INVESTMENT OBJECTIVE (EACH PORTFOLIO): Long-term capital appreciation.
- - INVESTMENT STRATEGY OF THE INTERNATIONAL SMALL COMPANY PORTFOLIO: Invest in
the Master Funds employed by the other International Small Company
Portfolios.
- - INVESTMENT STRATEGY OF EACH OTHER INTERNATIONAL SMALL COMPANY PORTFOLIO:
Purchase a Master Fund that uses a market weighted approach to buy small
company stocks of a specific country or region.
DFA INTERNATIONAL SMALL CAP VALUE
- - INVESTMENT OBJECTIVE: Long-term capital appreciation.
- - INVESTMENT STRATEGY: Acquire value stocks of small non-U.S. companies on a
market capitalization weighted basis in each applicable country.
THE EMERGING MARKETS PORTFOLIOS
- -----------------------------
EMERGING MARKETS PORTFOLIO
EMERGING MARKETS VALUE PORTFOLIO
EMERGING MARKETS SMALL CAP PORTFOLIO
- - INVESTMENT OBJECTIVE (EACH PORTFOLIO): Long-term capital appreciation.
- - INVESTMENT STRATEGY: Invest in a Master Fund that buys:
- Emerging Markets Portfolio -- Stocks of larger emerging markets companies.
- Emerging Markets Small Cap Portfolio -- Stocks of smaller emerging markets
companies.
- Emerging Markets Value Fund -- Value stocks of emerging markets companies.
EMERGING MARKETS RISK: Numerous emerging countries have recently experienced
serious, and potentially continuing, economic and political problems. Stock
markets in many emerging countries are relatively small, expensive and risky.
Foreigners are often limited in their ability to invest in, and withdraw assets
from, these markets. Additional restrictions may be imposed under emergency
conditions. Risks generally associated with foreign securities and currencies
also apply.
EMERGING MARKETS are countries with less developed economies not yet at the
level of the world's mature economies.
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FIXED INCOME PORTFOLIOS:
DFA ONE-YEAR FIXED INCOME 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: Purchase shares of a Master Fund that generally acquires
high quality obligations maturing in a year or less. The Master Fund 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 DFA One-Year Fixed Income and/or the Two-Year Global Fixed
Income Portfolios to changes in performance of the banking industry generally.
For example, a change in the market's perception of the riskiness of banks
compared to non-banks would cause the Portfolio's values to fluctuate.
DFA TWO-YEAR GLOBAL FIXED INCOME PORTFOLIO
- - INVESTMENT OBJECTIVE: Maximize total return available from a universe of high
quality fixed income instruments maturing in two years or less.
- - INVESTMENT STRATEGY: Purchase shares of a Master Fund that buys debt
instruments with maturities of no more than two years. Issuers might include
the U.S. and other national governments, supranational organizations (e.g.,
the World Bank) and domestic and foreign corporations. The Master Fund hedges
all foreign currency risks. It also plans to invest heavily in the banking
industry if particular conditions occur.
DFA FIVE-YEAR GOVERNMENT PORTFOLIO
- - INVESTMENT OBJECTIVE: Maximize total return available from a universe of high
quality fixed income investments maturing in five years or less.
- - INVESTMENT STRATEGY: Acquire obligations of the U.S. government and its
agencies maturing within five years, and enter into repurchase agreements
backed by U.S. government securities.
DFA FIVE-YEAR GLOBAL FIXED INCOME 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 and domestic and
foreign corporations. The Portfolio hedges all foreign currency risks.
DFA INTERMEDIATE GOVERNMENT FIXED INCOME PORTFOLIO
- - INVESTMENT OBJECTIVE: Provide a market rate of return and relatively
predictable income from U.S. Treasury and government agency issues with
maturities of between five and fifteen years.
- - INVESTMENT STRATEGY: Invest in top quality, low-risk obligations of the U.S.
government and its agencies, foreign governments and supranational
organizations.
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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). DFA Two-
Year Global Fixed Income Portfolio and DFA Five-Year Global Fixed Income
Portfolio use foreign currency contracts to hedge foreign currency risks. The
International Portfolios may also do so. In an attempt to achieve its investment
objectives, the Enhanced U.S. Large Company Portfolio uses index swap agreements
and stock index futures to hedge against changes in securities prices. Hedging
with derivatives may increase expenses, and there is no guarantee that a hedging
strategy will work.
SECURITIES LENDING:
- ----------------
Non-Feeder Portfolios and Master Funds 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.
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RISK AND RETURN BAR CHARTS AND TABLES
- --------------------------------------
The Bar Charts and Tables opposite illustrate the variability of each
Portfolio's returns and are 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 years, and 10 years (or since inception if shorter)
returns compare with those of a broad measure of market performance.
Reimbursement fees applicable to purchases of shares in certain of the
Portfolios are not reflected in the bar chart. If these fees, where applicable,
were reflected, your returns would be less than those shown. Past performance is
not an indication of future results. The U.S. 4-10 Value Portfolio has not been
in operation for a full calendar year, so no information is shown for it.
8
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EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
U.S. LARGE
COMPANY PORTFOLIO
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Total Returns (%)
1991 30.12
1992 7.31
1993 9.61
1994 1.29
1995 37.08
1996 22.62
1997 33.07
1998 28.67
1999 20.78
January 1991-December 1999
Highest Quarter Lowest Quarter
21.42 (10/98-12/98) -9.93 (7/98-9/98)
Periods ending December 31, 1999
One Five Since 1/91
Annualized Returns (%) Year Years Inception
U.S. Large Company Portfolio 20.78 28.30 20.58
S&P 500 Index 21.03 28.55 20.85
ENHANCED U.S. LARGE
COMPANY PORTFOLIO
Total Returns (%)
1997 32.73
1998 29.54
1999 19.37
January 1997-December 1999
Highest Quarter Lowest Quarter
21.87 (10/98-12/98) -9.79 (7/98-9/98)
Periods ending December 31, 1999
One Since 8/96
Annualized Returns (%) Year Inception
Enhanced U.S. Large Company Portfolio 19.37 29.26
S&P 500 Index 21.03 29.61
U.S. LARGE CAP
VALUE PORTFOLIO
Total Returns (%)
1994 -4.54
1995 38.26
1996 20.22
1997 28.13
1998 11.98
1999 4.80
January 1994-December 1999
Highest Quarter Lowest Quarter
16.78 (10/98-12/98) -17.08 (7/98-9/98)
Periods ending December 31, 1999
One Five Since 4/93
Annualized Returns (%) Year Years Inception
U.S. Large Cap Portfolio 4.80 20.12 15.02
Russell 1000 Value Index 7.35 23.08 17.57
U.S. 6-10
VALUE PORTFOLIO
Total Returns (%)
1994 1.21
1995 29.29
1996 22.32
1997 30.75
1998 -7.28
1999 13.04
January 1994-December 1999
Highest Quarter Lowest Quarter
22.95 (4/99-6/99) -22.30 (7/98-9/98)
Periods ending December 31, 1999
One Five Since 4/93
Annualized Returns (%) Year Years Inception
U.S. 6-10 Value Portfolio 13.04 16.73 14.62
Russell 2000 Value Index -1.49 13.14 11.30
</TABLE>
9
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
U.S. 6-10 SMALL
COMPANY PORTFOLIO
<S> <C> <C> <C>
Total Returns (%)
1993 13.66
1994 -1.34
1995 30.18
1996 17.67
1997 24.23
1998 -5.54
1999 25.41
January 1993-December 1999
Highest Quarter Lowest Quarter
19.99 (4/99-6/99) -22.09 (7/98-9/98)
Periods ending December 31, 1999
One Five Since 4/92
Annualized Returns (%) Year Years Inception
U.S. 6-10 Small Company Portfolio 25.41 17.65 14.21
Russell 2000 Index 21.26 16.70 14.12
U.S. 9-10 SMALL COMPANY PORTFOLIO
Total Returns (%)
1990 -21.56
1991 44.63
1992 23.35
1993 20.98
1994 3.11
1995 34.46
1996 17.62
1997 22.78
1998 -7.31
1999 29.79
January 1990-December 1999
Highest Quarter Lowest Quarter
28.67 (1/91-3/91) -23.22 (7/90-9/90)
Periods ending December 31, 1999
One Five Ten
Annualized Returns (%) Year Years Years
U.S. 9-10 Small Company Portfolio 29.79 18.49 15.09
CRSP 9-10 Index 37.16 19.82 14.80
DFA REAL ESTATE
SECURITIES PORTFOLIO
Total Returns (%)
1993 15.46
1994 -8.39
1995 12.07
1996 33.84
1997 19.37
1998 -15.38
1999 -1.98
January 1993-December 1999
Highest Quarter Lowest Quarter
18.44 (10/96-12/96) -9.79 (7/98-9/98)
Periods ending December 31, 1999
One Five Since 1/93
Annualized Returns (%) Year Years Inception
DFA Real Estate Securities Portfolio -1.98 8.23 6.66
Wilshire REIT-only Index -2.57 8.29 8.41
S&P 500 Index 21.03 28.55 21.51
LARGE CAP
INTERNATIONAL PORTFOLIO
Total Returns (%)
1992 -13.14
1993 25.85
1994 5.30
1995 13.05
1996 6.34
1997 5.51
1998 18.21
1999 28.50
January 1992-December 1999
Highest Quarter Lowest Quarter
19.58 (10/98-12/98) -14.15 (7/98-9/98)
Periods ending December 31, 1999
One Five Since 8/91
Annualized Returns (%) Year Years Inception
Large Cap International Portfolio 28.5 14.01 11.03
MSCI EAFE Index (net dividends) 26.91 12.82 11.04
</TABLE>
10
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DFA INTERNATIONAL
VALUE PORTFOLIO
<S> <C> <C> <C>
Total Returns (%)
1995 11.49
1996 7.81
1997 -3.14
1998 14.87
1999 16.29
January 1995-December 1999
Highest Quarter Lowest Quarter
17.91 (1/98-3/98) -16.89 (7/98-9/98)
Periods ending December 31, 1999
One Five Since 3/94
Annualized Returns (%) Year Years Inception
DFA International Value Portfolio 16.29 9.23 8.13
MSCI EAFE Index (net dividends) 26.91 12.82 10.83
INTERNATIONAL SMALL
COMPANY PORTFOLIO
Total Returns (%)
1997 -23.72
1998 8.20
1999 21.87
January 1997-December 1999
Highest Quarter Lowest Quarter
20.06 (1/98-3/98) -17.65 (10/97-12/97)
Periods ending December 31, 1999
One Since 10/96
Annualized Returns (%) Year Inception
International Small Company Portfolio 21.04 -1.17
Salomon Smith Barney Extended Market Index - Europe,
Pacific, Asia Composite 22.97 6.97
JAPANESE SMALL COMPANY PORTFOLIO
Total Returns (%)
1990 -33.36
1991 7.11
1992 -26.10
1993 14.16
1994 29.49
1995 -3.57
1996 -22.79
1997 -54.78
1998 16.07
1999 14.74
January 1990-December 1999
Highest Quarter Lowest Quarter
28.44 (1/94-3/94) -32.91 (7/97-9/97)
Periods ending December 31, 1999
One Five Ten
Annualized Returns (%) Year Years Years
Japanese Small Company Portfolio 14.17 -14.99 -10.07
Salomon Smith Barney Extended Market Index-Japan 31.98 -8.24 -6.89
PACIFIC RIM SMALL
COMPANY PORTFOLIO
Total Returns (%)
1993 92.63
1994 -12.06
1995 -2.86
1996 14.36
1997 -42.10
1998 -19.07
1999 70.28
January 1993-December 1999
Highest Quarter Lowest Quarter
60.76 (4/99-6/99) -38.67 (10/97-12/97)
Periods ending December 31, 1999
One Five Since 1/93
Annualized Returns (%) Year Years Inception
Pacific Rim Small Company Portfolio 68.58 -2.68 5.64
Salomon Smith Barney Extended Market Index-Japan 35.49 0.29 6.17
</TABLE>
11
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
UNITED KINGDOM SMALL
COMPANY PORTFOLIO
<S> <C> <C> <C>
Total Returns (%)
1990 -6.67
1991 14.76
1992 -13.96
1993 30.62
1994 4.64
1995 10.75
1996 29.79
1997 3.53
1998 -11.19
1999 41.83
January 1990-December 1999
Highest Quarter Lowest Quarter
19.83 (7/91-9/91) -20.50 (7/98-9/98)
Periods ending December 31, 1999 One Five Ten
Annualized Returns (%) Year Years Years
United Kingdom Small Company Portfolio 41.83 13.05 8.81
Salomon Smith Barney Extended Market Index-United Kingdom 33.22 18.43 13.74
CONTINENTAL SMALL COMPANY PORTFOLIO
Total Returns (%)
1990 -4.07
1991 -4.12
1992 -19.84
1993 25.30
1994 11.01
1995 0.02
1996 14.33
1997 11.70
1998 19.56
1999 -2.67
January 1990-December 1999
Highest Quarter Lowest Quarter
21.92 (1/98-3/98) -15.78 (7/90-9/90)
Periods ending December 31, 1999 One Five Ten
Annualized Returns (%) Year Years Years
Continental Small Company Portfolio -3.65 7.92 4.15
Salomon Smith Barney Extended Market Index-Europe ex-United
Kingdom 12.08 15.89 9.07
DFA INTERNATIONAL SMALL CAP VALUE PORTFOLIO
Total Returns (%)
1995 1.16
1996 0.94
1997 -22.72
1998 5.28
1999 19.04
January 1995-December 1999
Highest Quarter Lowest Quarter
20.23 (1/98-3/98) -16.81 (10/97-12/97)
Periods ending December 31, 1999 One Since 1/95
Annualized Returns (%) Year Inception
DFA International Small Cap Value Portfolio 18.24 -0.42
Salomon Smith Barney Extended Market Index-Europe, Pacific,
Asia Composite 22.97 7.04
EMERGING MARKETS PORTFOLIO
Total Returns (%)
1995 2.15
1996 11.40
1997 -18.92
1998 -9.44
1999 71.71
January 1995-December 1999
Highest Quarter Lowest Quarter
31.59 (10/98-12/98) -22.00 (7/98-9/98)
Periods ending December 31, 1999 One Five Since 5/94
Annualized Returns (%) Year Years Inception
Emerging Markets Portfolio 70.85 7.16 7.18
MSCI Emerging Markets Free Index 63.69 -0.14 0.39
</TABLE>
12
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
EMERGING MARKETS
VALUE PORTFOLIO
<S> <C> <C> <C>
Total Returns (%)
1999 84.26
January 1999-December 1999
Highest Quarter Lowest Quarter
40.26 (4/99-6/99) -4.50 (7/99-9/99)
Periods ending December 31, 1999
One Since 4/98
Annualized Returns (%) Year Inception
Emerging Markets Value Portfolio 83.34 30.23
MSCI Emerging Markets Free Index 63.69 6.82
EMERGING MARKETS
SMALL CAP PORTFOLIO
Total Returns (%)
1999 85.34
January 1999-December 1999
Highest Quarter Lowest Quarter
41.11 (4/99-6/99) -0.01 (7/99-9/99)
Periods ending December 31, 1999
One Since 3/98
Annualized Returns (%) Year Inception
Emerging Markets Small Cap Portfolio 83.49 34.59
MSCI Emerging Markets Free Index 63.69 8.80
DFA ONE-YEAR FIXED
INCOME PORTFOLIO
Total Returns (%)
1990 9.09
1991 8.73
1992 5.19
1993 4.41
1994 2.46
1995 7.97
1996 5.78
1997 5.99
1998 5.68
1999 4.59
January 1990-December 1999
Highest Quarter Lowest Quarter
2.52 (1/95-3/95) 0.26 (1/94-3/94)
Periods ending December 31, 1999
One Five Ten
Annualized Returns (%) Year Years Years
DFA One-Year Fixed Income Portfolio 4.59 6.00 5.97
Three-Month U.S. Treasury Bills 4.83 5.35 5.29
Merrill Lynch U.S. Corporate & Government 1-3 Years Index 3.26 6.58 6.68
DFA TWO-YEAR GLOBAL
FIXED INCOME PORTFOLIO
Total Returns (%)
1997 5.87
1998 6.47
1999 4.57
January 1997-December 1999
Highest Quarter Lowest Quarter
2.00 (4/97-6/97) 0.99 (4/99-6/99)
Periods ending December 31, 1999
One Since 3/96
Annualized Returns (%) Year Inception
DFA Two-Year Global Fixed Income Portfolio 4.57 6.07
Merrill Lynch 1-3 Years Government Index 3.08 5.54
</TABLE>
13
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DFA FIVE-YEAR GLOBAL FIXED INCOME PORTFOLIO 12.74
TOTAL RETURNS (%)
1991
<S> <C> <C> <C>
1992 6.49
1993 11.56
1994 -4.33
1995 16.06
1996 10.77
1997 8.31
1998 8.37
1999 3.71
January 1991-December 1999
Highest Quarter Lowest Quarter
4.96 (7/92-9/92) -4.11 (1/94-3/94)
Periods ending December 31, 1999
One Five Since 12/90
Annualized Returns (%) Year Years Inception
DFA Five Year Global Fixed Income Portfolio 3.71 9.37 8.03
Lehman Intermediate
Government/Corporate Index 0.39 7.09 7.11
DFA FIVE-YEAR GOVERNMENT PORTFOLIO
Total Returns (%)
1990 10.82
1991 14.62
1992 7.30
1993 8.31
1994 -3.15
1995 9.56
1996 6.61
1997 6.39
1998 5.43
1999 3.78
January 1990-December 1999
Highest Quarter Lowest Quarter
5.43 (7/91-9/91) -2.35 (1/94-3/94)
Periods ending December 31, 1999
One Five Ten
Annualized Returns (%) Year Years Years
DFA Five-Year Government Portfolio 3.78 6.34 6.87
Lehman Intermediate Government Index 0.50 6.93 7.10
DFA INTERMEDIATE
GOVERNMENT FIXED
INCOME PORTFOLIO
Total Returns (%)
1991 16.88
1992 7.60
1993 11.63
1994 -4.74
1995 19.08
1996 2.37
1997 9.16
1998 10.53
1999 -3.57
January 1991-December 1999
Highest Quarter Lowest Quarter
6.87 (4/95-6/95) -3.33 (1/94-3/94)
Periods ending December 31, 1999
One Five Since 11/90
Annualized Returns (%) Year Years Inception
DFA Intermediate Government
Fixed Income Portfolio -3.57 7.24 7.75
Lehman Government Index -2.25 7.43 7.64
</TABLE>
14
<PAGE>
FEES AND EXPENSES
This table describes the fees and expenses you may pay if you buy and hold
shares of the Portfolios.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT):
REIMBURSEMENT FEES (AS PERCENTAGE OF OFFERING PRICE)(1)
<TABLE>
<S> <C>
Japanese Small Company Portfolio............................ 0.50%
Continental Small Company Portfolio......................... 1.00%
Pacific Rim Small Company Portfolio......................... 1.00%
Emerging Markets Portfolio.................................. 0.50%
Emerging Markets Value Portfolio............................ 0.50%
Emerging Markets Small Cap Portfolio........................ 1.00%
DFA International Small Cap Value Portfolio................. 0.675%
International Small Company Portfolio(2).................... 0.675%
</TABLE>
- ------------------------
(1) Reimbursement fees are charged to purchasers of shares and paid to these
Portfolios, except in the case of certain purchases permitted to be made by
exchange. (See "EXCHANGE OF SHARES.") They serve to offset costs incurred by
a Portfolio when investing the proceeds from the sale of its shares. (See
"VALUATION OF SHARES-Public Offering Price" for a more complete description
of reimbursement fees.) The Master Funds in which the above Portfolio invest
charge a reimbursement fee to purchasers of shares equal to the
reimbursement fee charged by its corresponding Feeder Portfolio as set forth
above (except DFA International Small Cap Value Portfolio which is not a
Feeder Portfolio).
(2) The reimbursement fee for the International Small Company Portfolio is a
blended rate, which is based on the current target investment allocations
among the International Master Funds. Consequently, the reimbursement fee
for the International Small Company Portfolio will change from time to time
if the Portfolio changes the target investment allocation in the
International Master Funds. As of the date of this prospectus, the
reimbursement fee for the Portfolio equals 0.675% of the net asset value of
the shares of International Small Company Portfolio. An investor may call
the Advisor at (310) 395-8005 for the reimbursement fee rate at the time of
investment.
15
<PAGE>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM PORTFOLIO ASSETS)
Except as indicated below, the expenses in the following table are based on
those incurred by the Portfolios and the corresponding Master Funds for the
fiscal year ended November 30, 1999.
<TABLE>
<CAPTION>
TOTAL
ANNUAL
ANNUAL FUND OPERATING EXPENSES MANAGEMENT OTHER OPERATING
(AS A PERCENTAGE OF AVERAGE NET ASSETS) FEE EXPENSES EXPENSES
- ------------------------------------------------------------ ---------- -------- ---------
<S> <C> <C> <C>
U.S. Large Company(3)(4).................................... 0.24% 0.07% 0.31%
Enhanced U.S. Large Company(3)(5)........................... 0.20% 0.20% 0.40%
U.S. Large Cap Value(3)..................................... 0.25% 0.08% 0.33%
U.S. 4-10 Value(3)(6)....................................... 0.30% 0.13% 0.43%
U.S. 6-10 Value(3).......................................... 0.50% 0.08% 0.58%
U.S. 6-10 Small Company(3).................................. 0.35% 0.08% 0.43%
U.S. 9-10 Small Company(3).................................. 0.50% 0.11% 0.61%
DFA Real Estate Securities.................................. 0.30% 0.17% 0.47%
Large Cap International..................................... 0.25% 0.28% 0.53%
DFA International Value(3).................................. 0.40% 0.12% 0.52%
International Small Company(7).............................. 0.50% 0.25% 0.75%
Japanese Small Company(3)(8)................................ 0.50% 0.23% 0.73%
Pacific Rim Small Company(3)(8)............................. 0.50% 0.44% 0.94%
United Kingdom Small Company(3)(8).......................... 0.50% 0.22% 0.72%
Continental Small Company(3)(8)............................. 0.50% 0.20% 0.70%
DFA International Small Cap Value........................... 0.65% 0.18% 0.83%
Emerging Markets(3)......................................... 0.50% 0.41% 0.91%
Emerging Markets Value(3)................................... 0.50% 0.55% 1.05%
Emerging Markets Small Cap(3)............................... 0.65% 1.12% 1.77%
DFA One-Year Fixed Income(3)................................ 0.15% 0.06% 0.21%
DFA Two-Year Global Fixed Income(3)......................... 0.15% 0.12% 0.27%
DFA Five-Year Government.................................... 0.20% 0.08% 0.28%
DFA Five-Year Global Fixed Income........................... 0.25% 0.14% 0.39%
DFA Intermediate Government Fixed Income(9)................. 0.10% 0.11% 0.21%
</TABLE>
- ------------------------
(3) Feeder Portfolio. The "Management Fee" includes an investment advisory fee
payable by the Master Fund and an administration fee payable by the Feeder
Portfolio.
(4) Effective December 1, 1995, pursuant to the terms of the current
administration agreement with respect to the U.S. Large Company Portfolio,
the Advisor agreed to waive its fees and/or assume the expenses of the
Portfolio to the extent (1) necessary to pay the ordinary operating expenses
of the Portfolio (except the administration fee); and (2) that the indirect
expenses the Portfolio bears as a shareholder of the Master Fund, on an
annual basis, exceed 0.025% of the Portfolio's average net assets. Beginning
August 9, 1996, in addition to the waiver/assumption effective on
December 1, 1995, the Advisor agreed to assume expenses or waive the fee
payable by the U.S. Large Company Portfolio under the administration
agreement by an additional .09% of average assets on an annual basis. Under
this arrangement, the net expense ratio was 0.15%.
(5) Effective August 1, 1997, the Advisor has agreed to waive its fee under the
administration agreement and assume direct and indirect expenses to the
extent necessary to reduce the direct and indirect cumulative annual
expenses of the Enhanced U.S. Large Company Portfolio to not more than 0.45%
of average net assets of the Portfolio on an annualized basis; the
Portfolio's direct and indirect cumulative annual expenses may exceed 0.45%
of average net assets on an annualized basis notwithstanding this fee
waiver. This arrangement does not extend to the fees of the Master Fund in
which the Portfolio invests its assets. For the fiscal year ended
November 30, 1999, the Advisor was not required to waive any portion of its
fee pursuant to such arrangement.
16
<PAGE>
(6) "Other Expenses" are annualized estimates based on anticipated fees and
expenses through the fiscal year ended November 30, 2000. The Portfolio had
not commenced operations as of the date of this Prospectus. The Advisor has
agreed to waive its administrative fee and assume the direct and indirect
expenses of the U.S. 4-10 Value Portfolio to the extent necessary to keep
such cumulative expenses of the Portfolio to not more than 0.50% of the
average net assets of the Portfolio on an annualized basis.
(7) With respect to International Small Company Portfolio, the amount set forth
under "Management Fee" reflects its portion of the management fee of each
corresponding International Master Fund, which is equal to 0.10% of the
average net assets of such Master Fund on an annual basis; the amounts set
forth under "Other Expenses" and "Total Operating Expenses" also reflect the
indirect payment of a portion of the expenses of the International Master
Funds. The Advisor has agreed to waive its administration fee and assume the
direct expenses of the International Small Company Portfolio to the extent
necessary to keep the administration fee and direct annual expenses of the
Portfolio to not more than 0.45% of average net assets of the Portfolio on
an annualized basis; this arrangement does not extend to the fees and
expenses of the International Master Funds. The Advisor was not required to
assume expenses or waive any portion of its fee pursuant to such arrangement
for the fiscal year ended November 30, 1999.
(8) Effective August 9, 1996, the Advisor agreed to waive its administrative
fee and assume the direct expenses of the Japanese Small Company, United
Kingdom Small Company, Continental Small Company and Pacific Rim Small
Company Portfolios to the extent necessary to keep the direct annual
expenses of each Portfolio to not more than 0.47% of average net assets of
the Portfolio on an annualized basis; this arrangement does not extend to
the fees and expenses of the Master Funds. For the fiscal year ended
November 30, 1999, the Advisor was not required to waive or assume expenses
of any portion of its fee pursuant to such agreement.
(9) Effective June 1, 1999, the annual investment advisory fee payable by the
Portfolio was reduced from 0.15% to 0.10% of the net assets of the
Portfolio.
For purposes of the waivers and expense assumptions listed above (other than
that described in footnote (6)), the annual expenses are those expenses incurred
in any period consisting of twelve consecutive months. For purposes of the
waivers and expense assumptions described in footnote (6) above, the expenses
referenced are the expenses incurred in any period consisting of thirty six
consecutive months. The Advisor retains the right to recoup any fees and
expenses that were previously waived during the preceeding thirty six months.
The Advisor retains the right, subject to notification to the Board of Directors
of the relevant Fund, to modify or eliminate the waiver of a portion of its fees
or assumption of expenses in the future.
17
<PAGE>
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, that the Portfolio's operating expenses remain the same and current
reimbursement fees apply. 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>
U.S. Large Company(1)....................................... 32 100 174 393
Enhanced US Large Company(2)................................ 41 128 224 505
U.S. Large Cap Value........................................ 34 106 185 418
U.S. 4-10 Value............................................. 54 170 N/A N/A
U.S. 6-10 Value............................................. 59 186 324 726
U.S. 6-10 Small Company..................................... 44 138 241 542
U.S. 9-10 Small Company..................................... 62 195 340 762
DFA Real Estate Securities.................................. 48 151 263 591
Large Cap International..................................... 54 170 296 665
DFA International Value..................................... 53 167 291 653
International Small Company................................. 144 306 482 992
Japanese Small Company...................................... 124 282 454 952
Pacific Rim Small Company................................... 195 397 615 1,243
United Kingdom Small Company................................ 74 230 401 894
Continental Small Company................................... 171 322 486 962
DFA International Small Cap Value........................... 152 331 525 1,086
Emerging Markets............................................ 142 339 551 1,164
Emerging Markets Value...................................... 157 382 626 1,326
Emerging Markets Small Cap.................................. 278 652 1,050 2,163
DFA One-Year Fixed Income................................... 22 68 118 268
DFA Two-Year Global Fixed Income............................ 28 87 152 343
DFA Five-Year Government.................................... 29 90 157 356
DFA Five-Year Global Fixed Income........................... 40 125 219 493
DFA Intermediate Government Fixed Income.................... 22 68 118 268
</TABLE>
- ------------------------
(1) The Example is based on gross expenses before reduction for waivers or
assumption of expenses. See footnote 4 following the table of Annual Fund
Operating Expenses.
(2) The Example is based on gross expenses before reduction for waivers or
assumption of expenses. See footnote 5 following the table of Annual Fund
Operating Expenses.
18
<PAGE>
With respect to the Feeder Portfolios and International Small Company
Portfolio, the table summarizes the aggregate annual operating expenses of both
the Portfolios and the corresponding Master Funds in which the Portfolios
invest.
SECURITIES LENDING REVENUE
For the fiscal year ended November 30, 1999, the following Portfolios and
Master Funds received the following net revenue from a securities lending
program (See "SECURITIES LOANS") which constituted a percentage of the average
daily net assets of the Portfolio or Master Fund:
<TABLE>
<CAPTION>
PERCENTAGE
OF NET
PORTFOLIO/MASTER FUND NET REVENUE ASSETS
- --------------------- ----------- ----------
<S> <C> <C>
U.S. Large Company Series................................... $ 115,000 0.01%
U.S. Large Cap Value Series................................. $ 57,000 0.00%
U.S. 4-10 Value Series...................................... $ 88,000 0.03%
U.S. 6-10 Value Series...................................... $1,486,000 0.06%
U.S. 6-10 Small Company Series.............................. $ 688,000 0.12%
U.S. 9-10 Small Company Series.............................. $1,774,000 0.13%
DFA Real Estate Securities Portfolio........................ $ 4,000 0.00%
Large Cap International Portfolio........................... $ 67,000 0.04%
Japanese Small Company Series............................... $ 547,000 0.27%
Pacific Rim Small Company Series............................ $ 97,000 0.06%
Continental Small Company Series............................ $ 130,000 0.05%
DFA International Value Series.............................. $1,324,000 0.08%
DFA International Small Cap Value Portfolio................. $ 477,000 0.10%
</TABLE>
HIGHLIGHTS
MANAGEMENT AND ADMINISTRATIVE SERVICES
The Advisor serves as investment advisor to each of the Portfolios, except
the Feeder Portfolios, and to each Master Fund. Dimensional Fund Advisors Ltd.
serves as sub-advisor of United Kingdom and Continental Small Company
Portfolio's Master Fund. DFA Australia Limited serves as sub-advisor of Japanese
and Pacific Rim Small Company Portfolio's Master Fund. Dimensional Fund Advisors
Ltd. and DFA Australia Limited also provide consulting services to the Advisor
with respect to DFA International Small Cap Value Portfolio, Large Cap
International Portfolio, DFA International Value Portfolio's Master Fund,
Emerging Markets Portfolio's Master Fund, Emerging Markets Small Cap Portfolio's
Master Fund and Emerging Markets Value Portfolio's Master Fund. The Advisor
provides each Feeder Portfolio and International Small Company Portfolio with
certain administrative services. (See "MANAGEMENT OF THE FUNDS.")
DIVIDEND POLICY
<TABLE>
<CAPTION>
PORTFOLIO/MASTER FUND YEARLY SEMI-ANNUALLY QUARTERLY MONTHLY
- --------------------- ------ ------------- --------- -------
<S> <C> <C> <C> <C>
U.S. Large Company X
Enhanced U.S. Large Company X
U.S. Large Cap Value X
U.S. 4-10 Value X
U.S. 6-10 Value X
U.S. 6-10 Small Company X
U.S. 9-10 Small Company X
DFA Real Estate Securities X
Large Cap International X
DFA International Value X
International Small Company X
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO/MASTER FUND YEARLY SEMI-ANNUALLY QUARTERLY MONTHLY
- --------------------- ------ ------------- --------- -------
<S> <C> <C> <C> <C>
Japanese Small Company X
Pacific Rim Small Company X
United Kingdom Small Company X
Continental Small Company X
DFA International Small Cap Value X
Emerging Markets X
Emerging Markets Value X
Emerging Markets Small Cap X
DFA One-Year Fixed Income* X
DFA Two-Year Global Fixed Income X
DFA Five-Year Government X
DFA Five-Year Global Fixed Income X
DFA Intermediate Government Fixed Income X
</TABLE>
* Net investment income will be distributed each month, except January.
PURCHASE, VALUATION AND REDEMPTION OF SHARES
Shares of the International Equity Portfolios (except United Kingdom Small
Company, Large Cap International and DFA International Value Portfolios) may be
purchased at a public offering price, which is equal to the net asset value of
their shares, plus a reimbursement fee. The reimbursement fee is paid to the
Portfolio whose shares are purchased and used to defray the costs associated
with investment of the proceeds from the sale of its shares. The shares of the
remaining Portfolios are sold at net asset value. The redemption price of the
shares of all of the Portfolios is equal to the net asset value of their shares.
The reimbursement fee for the International Small Company Portfolio is based
on its current target investment allocations among the International Master
Funds in which it invests. The reimbursement fee for the International Small
Company Portfolio will change from time to time if the Portfolio changes the
target investment allocations in the International Master Funds. No
reimbursement fee is assessed in connection with any purchase of shares by
exchange between International Small Company Portfolio and any of the Feeder
Portfolios which invest in the International Master Funds.
The value of the shares issued by each Feeder Portfolio and International
Small Company Portfolio will fluctuate in relation to the investment experience
of the Master Fund(s) in which such Portfolios invest. The value of the shares
issued by all other Portfolios will fluctuate in relation to their own
investment experience. Unlike shares of money market funds, the shares of DFA
One-Year Fixed Income Portfolio (like the other Fixed Income Portfolios) will
tend to reflect fluctuations in interest rates because the corresponding Master
Fund in which the Portfolio invests does not seek to stabilize the price of its
shares by use of the "amortized cost" method of securities valuation. (See
"PURCHASE OF SHARES," "VALUATION OF SHARES" and "REDEMPTION OF SHARES.")
20
<PAGE>
U.S. LARGE COMPANY PORTFOLIO
INVESTMENT OBJECTIVE AND POLICIES
U.S. Large Company Portfolio seeks, as its investment objective, to
approximate the investment performance of the S&P 500-Registered Trademark-
Index, in terms of its total investment return. The Portfolio invests all of its
assets in U.S. Large Company Series (the "U.S. Large Company Series") of The DFA
Investment Trust Company (the "Trust"), which has the same investment objective
and policies as the Portfolio. U.S. Large Company Series intends to invest in
all of the stocks that comprise the S&P 500-Registered Trademark- Index in
approximately the same proportions as they are represented in the Index. The
amount of each stock purchased for the U.S. Large Company Series, therefore,
will be based on the issuer's respective market capitalization. The S&P
500-Registered Trademark- Index is comprised of a broad and diverse group of
stocks most of which are traded on the New York Stock Exchange ("NYSE").
Generally, these are the U.S. stocks with the largest market capitalizations
and, as a group, they represent approximately 70% of the total market
capitalization of all publicly traded U.S. stocks. Under normal market
conditions, at least 95% of the U.S. Large Company Series' assets will be
invested in the stocks that comprise the S&P 500-Registered Trademark- Index.
U.S. Large Company Series may also acquire stock index futures contracts and
options thereon in order to commit funds awaiting investment in stocks or
maintain cash liquidity. To the extent that this Series invests in stock index
futures contracts and options thereon for other than bona fide hedging purposes,
the Series will not purchase such futures contracts or options if as a result
more than 5% of its net assets would then consist of initial margin deposits and
premiums required to establish such contracts or options.
Ordinarily, portfolio securities will not be sold except to reflect
additions or deletions of the stocks that comprise the S&P
500-Registered Trademark- Index, including mergers, reorganizations and similar
transactions and, to the extent necessary, to provide cash to pay redemptions of
the U.S. Large Company Series' shares. For information concerning Standard &
Poor's Rating Group, a Division of The McGraw Hill Companies ("S&P"), and
disclaimers of S&P with respect to the U.S. Large Company Portfolio and the U.S.
Large Company Series, see "STANDARD & POOR'S--INFORMATION AND DISCLAIMERS."
ENHANCED U.S. LARGE COMPANY PORTFOLIO
INVESTMENT OBJECTIVE AND POLICIES
Enhanced U.S. Large Company Portfolio seeks, as its investment objective, to
achieve a total return which exceeds the total return performance of the
S&P 500-Registered Trademark- Index. The Portfolio invests all of its assets in
Enhanced U.S. Large Company Series of the Trust (the "Enhanced U.S. Large
Company Series"). The Enhanced U.S. Large Company Series will have the same
investment objective and policies as the Portfolio. Enhanced U.S. Large Company
Series may invest in all of the stocks represented in the
S&P 500-Registered Trademark- Index, options on stock indices, stock index
futures, options on stock index futures, swap agreements on stock indices and
shares of investment companies that invest in stock indices. Investments by the
Series in shares of investment companies are limited by the federal securities
laws and regulations governing mutual funds. The S&P 500-Registered Trademark-
Index is comprised of a broad and diverse group of stocks most of which are
traded on the NYSE. Generally, these are the U.S. stocks with the largest market
capitalizations and, as a group, they represent approximately 70% of the total
market capitalization of all publicly traded U.S. stocks.
The Enhanced U.S. Large Company Series may, from time to time, also invest
in options on stock indices, stock index futures, options on stock index futures
and swap agreements based on indices other than, but similar to, the
S&P 500-Registered Trademark- Index (such instruments whether or not based on
the S&P 500-Registered Trademark- Index hereinafter collectively referred to as
"Index Derivatives"). The Enhanced U.S. Large Company Series may invest all of
its assets in Index Derivatives. Certain of these Index Derivatives are
speculative and may subject the Portfolio to additional risks. Assets of the
Enhanced U.S. Large Company Series not invested
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<PAGE>
in S&P 500-Registered Trademark- stocks or Index Derivatives may be invested in
the same types of short-term fixed income obligations as may be acquired by DFA
Two-Year Global Fixed Income Series and, to the extent allowed by the 1940 Act,
shares of money market mutual funds (collectively, "Fixed Income Investments")
(See "INVESTMENT OBJECTIVES AND POLICIES--FIXED INCOME PORTFOLIOS--Description
of Investments"). The Series' investments in the securities of other investment
companies may involve duplication of certain fees and expenses.
The percentage of assets of the Enhanced U.S. Large Company Series that will
be invested at any one time in S&P 500-Registered Trademark- Index stocks, Index
Derivatives and Fixed Income Investments may vary from time to time, within the
discretion of the Advisor and according to restraints imposed by the federal
securities laws and regulations governing mutual funds. The Enhanced U.S. Large
Company Series will maintain a segregated account consisting of liquid assets
(or, as permitted by applicable interpretations, enter into offsetting
positions) to cover its open positions in Index Derivatives to avoid leveraging
of the Series.
The Enhanced U.S. Large Company Series will enter into positions in futures
and options on futures only to the extent such positions are permissible with
respect to applicable rules of the Commodity Futures Trading Commission without
registering the Series or the Trust as a commodities pool operator. In addition,
the Enhanced U.S. Large Company Series may not be able to utilize Index
Derivatives to the extent otherwise permissible or desirable because of
constraints imposed by the Internal Revenue Code of 1986, as amended (the
"Code"), or by unanticipated illiquidity in the marketplace for such
instruments.
It is the position of the Securities and Exchange Commission (the "SEC")
that over-the-counter options are illiquid. Accordingly, the Enhanced U.S. Large
Company Series will invest in such options only to the extent consistent with
its 15% limit on investment in illiquid securities.
STANDARD & POOR'S--INFORMATION AND DISCLAIMERS
Neither the U.S. Large Company Portfolio or the Enhanced U.S. Large Company
Portfolio (the "Large Company Portfolios"), nor the U.S. Large Company Series or
the Enhanced U.S. Large Company Series (the "Large Company Master Funds") are
sponsored, endorsed, sold or promoted by S&P. S&P makes no representation or
warranty, express or implied, to the owners of the Large Company Portfolios or
the Large Company Master Funds or any member of the public regarding the
advisability of investing in securities generally or in the Large Company
Portfolios or the Large Company Master Funds particularly or the ability of the
S&P 500-Registered Trademark- Index to track general stock market performance.
S&P's only relationship to the Large Company Portfolios or the Large Company
Master Funds is the licensing of certain trademarks and trade names of S&P and
of the S&P 500-Registered Trademark- Index which is determined, composed and
calculated by S&P without regard to the Large Company Portfolios or the Large
Company Master Funds. S&P has no obligation to take the needs of the Large
Company Portfolios, the Large Company Master Funds or their respective owners
into consideration in determining, composing or calculating the
S&P 500-Registered Trademark- Index. S&P is not responsible for and has not
participated in the determination of the prices and amount of the Large Company
Portfolios or the Large Company Master Funds or the issuance or sale of the
Large Company Portfolios or the Large Company Master Funds or in the
determination or calculation of the equation by which the Large Company
Portfolios or the Large Company Master Funds is to be converted into cash. S&P
has no obligation or liability in connection with the administration, marketing
or trading of the Large Company Portfolios or the Large Company Master Funds.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE
S&P 500-Registered Trademark- INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL
HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES
NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE,
OWNERS OF THE PRODUCT, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE
S&P 500-Registered Trademark- INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO
EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR
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<PAGE>
FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE
S&P 500-Registered Trademark- INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY
SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS),
EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
U.S. VALUE PORTFOLIOS
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of each of these Portfolios is to achieve long-term
capital appreciation. U.S. Large Cap Value Portfolio, U.S. 4-10 Value Portfolio
and U.S. 6-10 Value Portfolio will pursue their investment objectives by
investing all of their assets in U.S. Large Cap Value Series (the "Large Cap
Value Series"), U.S. 4-10 Value Series (the "4-10 Value Series") and U.S. 6-10
Value Series (the "6-10 Value Series") of the Trust, respectively. These series
are collectively called the "Value Master Funds." Each Value Master Fund has the
same investment objective and policies as the corresponding Value Portfolio.
Ordinarily, each of the Value Master Funds will invest at least 80% of its
assets in a broad and diverse group of readily marketable common stocks of U.S.
companies which the Advisor believes to be value stocks at the time of purchase.
Securities are considered value stocks primarily because a company's shares have
a high book value in relation to their market value (a "book to market ratio").
In measuring value, the Advisor may consider additional factors such as cash
flow, economic conditions and developments in the issuer's industry. Generally,
a company's shares will be considered to have a high book to market ratio if the
ratio equals or exceeds the ratios of any of the 30% of companies with the
highest positive book to market ratios whose shares are listed on the NYSE and
will be considered eligible for investment. The Large Cap Value Series will
purchase common stocks of companies whose market capitalizations equal or exceed
that of the company having the median market capitalization of companies whose
shares are listed on the NYSE. The 6-10 Value Series will purchase common stocks
of companies whose market capitalizations are smaller than that of the company
having the median market capitalization of companies whose shares are listed on
the NYSE. The 4-10 Value Series will purchase common stocks of companies whose
market capitalizations are equal to the market capitalizations of companies in
the 4th through 10th deciles of those companies listed on the NYSE. With respect
to the 9th and 10th deciles, the 4-10 Value Series may limit purchases of such
common stocks to those times when it is advantageous to do so.
PORTFOLIO CONSTRUCTION
The Value Master Funds will purchase securities that are listed on the
principal U.S. national securities exchanges or traded or the over-the-counter
market ("OTC"). Each of the Value Master Funds is market capitalization
weighted. That is, each security is generally purchased based on the issuer's
relative market capitalization. In this way, the amount of a particular security
owned by a Master Fund is keyed to that security's market capitalization
compared to all securities eligible for purchase.
On not less than a semi-annual basis, for each Value Master Fund, the
Advisor will calculate the book to market ratio necessary to determine those
companies whose stock may be eligible for investment.
PORTFOLIO TRANSACTIONS
The Value Master Funds do not intend to purchase or sell securities based on
the prospects for the economy, the securities markets or the individual issuers
whose shares are eligible for purchase. As described under "Portfolio
Structure," investments generally will be made in most of the eligible
securities on a market capitalization weighted basis.
Large Cap Value Series may sell portfolio securities when the issuer's
market capitalization falls substantially below that of the issuer with the
minimum market capitalization which is then eligible for purchase by that
Series. The 4-10 and 6-10 Value Series each may sell portfolio securities when
the issuer's
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<PAGE>
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 those Series.
In addition, Large Cap Value Series may sell portfolio securities when their
book to market ratio falls substantially below that of the security with the
lowest such ratio that is then eligible for purchase by that Series. The 4-10
and 6-10 Value Series may also sell portfolio securities in the same
circumstances, however, each of those Series anticipates generally to retain
securities of issuers with relatively smaller market capitalizations for longer
periods, despite any decrease in the issuer's book to market ratio.
U.S. SMALL COMPANY PORTFOLIOS
INVESTMENT OBJECTIVES AND POLICIES
Each U.S. Small Company Portfolio, and the U.S. 6-10 Small Company and
U.S. 9-10 Small Company Series of the Trust (the "U.S. Small Company Master
Funds") have an investment objective to achieve long-term capital appreciation.
The U.S. Small Company Portfolios provide investors with access to securities
portfolios consisting of small U.S. companies. Company size will be determined
for purposes of these Master Funds solely on the basis of a company's market
capitalization which will be calculated by multiplying the price of a company's
stock by the number of its shares of outstanding common stock.
Each U.S. Small Company Master Fund will invest at least 80% of its assets
in equity securities of U.S. companies and will be structured to reflect
reasonably the relative market capitalizations of its portfolio companies. The
Advisor believes that over the long term the investment performance of small
companies is superior to large companies. Investors which, for a variety of
reasons, may choose not to make substantial, or any, direct investment in
companies whose securities will be held by the U.S. Small Company Master Funds,
may participate in the investment performance of these companies through
ownership of a Portfolio's stock.
U.S. 6-10 SMALL COMPANY PORTFOLIO
U.S. 6-10 Small Company Portfolio invests all of its assets in the
U.S. 6-10 Small Company Series of the Trust (the "6-10 Series"), which has the
same investment objective and policies as the Portfolio. The 6-10 Series will
invest in a broad and diverse group of small U.S. companies having readily
marketable securities. References in this prospectus to a "small U.S. company"
means a company whose securities are traded in the U.S. securities markets and
whose market capitalization is not larger than the largest of those in the small
one-half (deciles 6 through 10) of companies listed on the NYSE. The 6-10 Series
will purchase common stocks of companies whose shares are listed on the NYSE,
the American Stock Exchange (the "AMEX") or traded OTC. The 6-10 Series may
invest in securities of foreign issuers which are traded in the U.S. securities
markets, but such investments may not exceed 5% of the gross assets of the
Series. Generally, it is the intention of the 6-10 Series to acquire a portion
of the common stock of eligible NYSE, AMEX and OTC company on a market
capitalization weighted basis. (See "SMALL COMPANY MASTER FUNDS--Portfolio
Construction.") In the future, the 6-10 Series may purchase common stocks of
small U.S. companies which are listed on other U.S. securities exchanges. In
addition, the 6-10 Series is authorized to invest in private placements of
interest-bearing debentures that are convertible into common stock ("privately
placed convertible debentures"). Such investments are considered illiquid and
the value thereof together with the value of all other illiquid investments may
not exceed 15% of the value of the 6-10 Series' net assets at the time of
purchase.
U.S. 9-10 SMALL COMPANY PORTFOLIO
U.S. 9-10 Small Company Portfolio pursues its investment objective by
investing all of its assets in the U.S. 9-10 Small Company Series of the Trust
(the "9-10 Series"). The 9-10 Series will invest in a broad and diverse segment
of small U.S. companies having readily marketable stocks, and whose market
capitalization is not larger than the largest of those in the quintile of
companies listed on the NYSE having the
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<PAGE>
smallest market capitalizations (smallest 20%). The 9-10 Series will purchase
stocks of companies whose shares are listed on the NYSE or AMEX or traded OTC.
The 9-10 Series may invest in securities of foreign issuers which are traded in
the U.S. securities markets, but such investments may not exceed 5% of the gross
assets of the Series. There is some overlap in the companies in which the
9-10 Series and the 6-10 Series invest. Generally, it is the intention of the
9-10 Series to acquire a portion of the stock of eligible NYSE, AMEX and OTC
company on a market capitalization weighted basis. (See "SMALL COMPANY MASTER
FUNDS--Portfolio Construction.") In the future, the 9-10 Series may include
stocks of small U.S. companies which are listed on other U.S. securities
exchanges. The 9-10 Series is authorized to invest in privately placed
convertible debentures and the value thereof together with the value of all
other illiquid investments may not exceed 10% of the value of the 9-10 Series'
net assets at the time of purchase.
For the discussion of portfolio construction and portfolio transactions for
U.S. Small Company Portfolios, see "SMALL COMPANY MASTER FUNDS--Portfolio
Construction" and "SMALL COMPANY MASTER FUNDS--Portfolio Transactions."
DFA REAL ESTATE SECURITIES PORTFOLIO
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of DFA Real Estate Securities Portfolio is to
achieve long-term capital appreciation. The Portfolio will concentrate
investments in readily marketable equity securities of companies whose principal
activities include development, ownership, construction, management, or sale of
residential, commercial or industrial real estate. Investments will include,
principally, equity securities of companies in the following sectors of the real
estate industry: certain real estate investment trusts and companies engaged in
residential construction and firms, except partnerships, whose principal
business is to develop commercial property. In the future, the Advisor may
determine to include companies in other sectors of the real estate industry in
the Portfolio.
The Portfolio will invest in shares of real estate investment trusts
("REITS"). REITS pool investors' funds for investment primarily in income
producing real estate or real estate related loans or interests. A REIT is not
taxed on income distributed to shareholders if it complies with several
requirements relating to its organization, ownership, assets, and income and a
requirement that it distribute to its shareholders at least 95% of its taxable
income (other than net capital gains) for each taxable year. REITS can generally
be classified as Equity REITS, Mortgage REITS and Hybrid REITS. Equity REITS
invest the majority of their assets directly in real property and derive their
income primarily from rents. Equity REITS can also realize capital gains by
selling properties that have appreciated in value. Mortgage REITS invest the
majority of their assets in real estate mortgages and derive their income
primarily from interest payments. Hybrid REITS combine the characteristics of
both Equity REITS and Mortgage REITS. At the present time, the Portfolio intends
to invest only in Hybrid REITS and Equity REITS.
It is anticipated that, ordinarily, at least 80% of the net value of the
Portfolio will be invested in securities of companies in the U.S. real estate
industry. The Portfolio will make equity investments only in securities traded
in the U.S. securities markets, principally on the NYSE, AMEX and OTC. In
addition, the Portfolio is authorized to lend its portfolio securities (see
"SECURITIES LOANS"), and to purchase and sell financial futures contracts and
options thereon. To the extent that the Portfolio invests in futures contracts
and options thereon for other than bona fide hedging purposes, the Portfolio
will not purchase futures contracts or options thereon, if, as a result, more
than 5% of its net assets would then consist of initial margin deposits and
premiums required to establish such positions.
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<PAGE>
PORTFOLIO CONSTRUCTION
The Advisor has prepared and will maintain a schedule of eligible
investments consisting of equity securities of all companies in the sectors of
the real estate industry described above as being presently eligible for
investment. It is the intention of the Portfolio to purchase a portion of the
equity securities of all of these companies on a market capitalization weighted
basis.
The Portfolio will be structured by generally basing the amount of each
security purchased on the issuer's relative market capitalization in relation to
other eligible issuers in the real estate industry. However, even though a
company's stock may meet the applicable criteria described above, it will not be
purchased by the Portfolio if, at the time of purchase, in the judgment of the
Advisor, the issuer is in extreme financial difficulty or is involved in a
merger or consolidation or is the subject of an acquisition which could result
in the company no longer being considered principally engaged in the real estate
business.
If securities must be sold in order to obtain funds to make redemption
payments, such securities may be repurchased by the Portfolio, as additional
cash becomes available to it. However, the Portfolio has retained the right to
borrow to make redemption payments and is also authorized to redeem its shares
in kind. (See "REDEMPTION OF SHARES.") Further, because the securities of
certain companies whose shares are eligible for purchase are thinly traded, the
Portfolio might not be able to purchase the number of shares that strict
adherence to market capitalization weighting might require.
Investments will not be based upon an issuer's dividend payment policy or
record. However, many of the companies whose securities will be included in the
Portfolio do pay dividends. It is anticipated, therefore, that the Portfolio
will receive dividend income. Periodically, the Advisor may expand the
Portfolio's schedule of eligible investments to include equity securities of
companies in sectors of the real estate industry in addition to those described
above as eligible for investment as of the date of this prospectus.
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<PAGE>
INTERNATIONAL PORTFOLIOS--COUNTRIES
As you read the following descriptions of the International Portfolios,
please refer to the tables below to determine in what countries each Portfolio
invests. As of the date of this Prospectus, the International Master Funds and
Portfolios are invested or authorized to invest in the countries listed in the
tables below. The Advisor will determine in its discretion when and whether to
invest in countries which have been authorized, depending on a number of factors
such as asset growth in a portfolio and characteristics of each country's
markets.
DEVELOPED MARKETS
<TABLE>
DFA
DFA JAPANESE PACIFIC U.K. CONTINENTAL INTERNATIONAL
LARGE CAP INTERNATIONAL SMALL RIM SMALL SMALL SMALL SMALL CAP
INTERNATIONAL VALUE COMPANY COMPANY COMPANY COMPANY VALUE
COUNTRIES PORTFOLIO SERIES SERIES SERIES SERIES SERIES PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C>
Australia............ Invested Invested NA Invested NA NA Invested
Austria.............. Invested Invested NA NA NA Invested Invested
Belgium.............. Invested Invested NA NA NA Invested Invested
Denmark.............. Invested Invested NA NA NA Invested Invested
Finland.............. Invested Invested NA NA NA Invested Invested
France............... Invested Invested NA NA NA Invested Invested
Germany.............. Invested Invested NA NA NA Invested Invested
Hong Kong............ Invested Invested NA Invested NA NA Invested
Ireland.............. Invested Invested NA NA NA Invested Invested
Italy................ Invested Invested NA NA NA Invested Invested
Japan................ Invested Invested Invested NA NA NA Invested
Malaysia............. NA NA NA Invested* NA NA NA
Netherlands.......... Invested Invested NA NA NA Invested Invested
New Zealand.......... Invested Invested NA Invested NA NA Invested
Norway............... Invested Invested NA NA NA Invested Invested
Portugal............. Invested Invested NA NA NA NA NA
Singapore............ Invested Invested NA Invested NA NA Invested
Spain................ Invested Invested NA NA NA Invested Invested
Sweden............... Invested Invested NA NA NA Invested Invested
Switzerland.......... Invested Invested NA NA NA Invested Invested
United Kingdom....... Invested Invested NA NA Invested NA Invested
</TABLE>
* As of September 10, 1998, the Pacific Rim Small Company Series discontinued
further investment in Malaysian securities and began divesting itself of
such securities as a consequence of certain restrictions imposed by the
Malaysian government on the repatriation of assets by foreign investors such
as the Series.
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EMERGING MARKETS
<TABLE>
EMERGING MARKET EMERGING MARKETS VALUE EMERGING MARKETS SMALL
COUNTRIES SERIES FUND CAP
<S> <C> <C> <C>
Argentina................ Invested Invested Invested
Brazil................... Invested Invested Invested
Chile.................... Invested Invested NA
Greece................... Invested Invested Invested
Indonesia................ Invested Invested Invested
Israel................... Invested Invested Invested
Korea.................... Invested Invested Invested
Malaysia................. Invested Invested Invested
Mexico................... Invested Invested Invested
Philippines.............. Invested Invested Invested
Portugal................. Invested Invested NA
Taiwan................... Approved Approved Approved
Thailand................. Invested Invested Invested
Turkey................... Invested Invested Invested
Hungary.................. Approved Approved Approved
Poland................... Approved Approved Approved
</TABLE>
LARGE CAP INTERNATIONAL PORTFOLIO
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of Large Cap International Portfolio is to achieve
long-term capital appreciation by investing in the stocks of non-U.S. large
companies. The Portfolio intends to invest in the stocks of large companies in
Europe, Australia and the Far East.
Under normal market conditions, at least 65% of the Portfolio's assets will
be invested in companies organized or having a majority of their assets in or
deriving a majority of their operating income in at least three non-U.S.
countries. The Portfolio reserves the right to invest in index futures contracts
to commit funds awaiting investment or to maintain liquidity. To the extent that
the Portfolio invests in index futures contracts for other than bona fide
hedging purposes, the Portfolio will not purchase futures contracts if as a
result more than 5% of its total assets would then consist of initial margin
deposits on such contracts.
The Portfolio will be approximately market capitalization weighted. In
determining market capitalization weights, the Advisor, using its best judgment,
will seek to eliminate the effect of cross holdings on the individual country
weights. As a result, the weighting of certain countries in the Portfolio may
vary from their weighting in international indices such as those published by
The Financial Times, Morgan Stanley Capital International or Salomon/Russell.
The Advisor, however, will not attempt to account for cross holdings within the
same country. Generally, the companies whose stocks will be selected by the
Advisor for the Portfolio will be in the largest 50% in terms of market
capitalization for each country.
It is management's belief that the stocks of large companies offer, over a
long term, a prudent opportunity for capital appreciation, but, at the same
time, selecting a limited number of large company stocks for inclusion in the
Portfolio involves greater risk than including a large number of them.
The Portfolio does not seek current income as an investment objective and
investments will not be based upon an issuer's dividend payment policy or
record. However, many of the companies whose securities will be included in the
Portfolio do pay dividends. It is anticipated, therefore, that the Portfolio
will receive dividend income.
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<PAGE>
DFA INTERNATIONAL VALUE PORTFOLIO
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of DFA International Value Portfolio is to achieve
long-term capital appreciation. The Portfolio invests all of its assets in the
DFA International Value Series of the Trust (the "International Value Series"),
which has the same investment objective and policies as the Portfolio. The
International Value Series seeks to achieve its objective by investing in the
stocks of large non-U.S. companies that the Advisor believes to be value stocks
at the time of purchase. Securities are considered value stocks primarily
because a company's shares have a high book value in relation to their market
value (a "book to market ratio"). In measuring value, the Advisor may consider
additional factors such as cash flow, economic conditions and developments in
the issuer's industry. Generally, the shares of a company in any given country
will be considered to have a high book to market ratio if the ratio equals or
exceeds the ratios of any of the 30% of companies in that country with the
highest positive book to market ratios whose shares are listed on a major
exchange, and, except as described below, will be considered eligible for
investment. The International Value Series intends to invest in the stocks of
large companies in countries with developed markets.
Under normal market conditions, at least 65% of the International Value
Series' assets will be invested in companies organized or having a majority of
their assets in or deriving a majority of their operating income in at least
three non-U.S. countries, and no more than 40% of the Series' assets will be
invested in such companies in any one country. The International Value Series
reserves the right to invest in index futures contracts to commit funds awaiting
investment or to maintain liquidity. To the extent that the International Value
Series invests in futures contracts for other than bona fide hedging purposes,
the Series will not purchase futures contracts if as a result more than 5% of
its net assets would then consist of initial margin deposits required to
establish such contracts.
As of the date of this prospectus, the International Value Series intends to
invest in companies having at least $800 million of market capitalization, and
the Series will be approximately market capitalization weighted. The Advisor may
reset such floor from time to time to reflect changing market conditions. In
determining market capitalization weights, the Advisor, using its best judgment,
will seek to eliminate the effect of cross holdings on the individual country
weights. As a result, the weighting of certain countries in the International
Value Series may vary from their weighting in international indices such as
those published by The Financial Times, Morgan Stanley Capital International or
Salomon/Russell. The Advisor, however, will not attempt to account for cross
holding within the same country.
It is management's belief that the value stocks of large companies, over a
long term, a prudent opportunity for capital appreciation, but, at the same
time, selecting a limited number of such issues for inclusion in the
International Value Series involves greater risk than including a large number
of them. The Advisor does not anticipate that a significant number of securities
which meet the market capitalization criteria will be selectively excluded from
the International Value Series.
The International Value Series does not seek current income as an investment
objective and investments will not be based upon an issuer's dividend payment
policy or record. However, many of the companies whose securities will be
included in the International Value Series do pay dividends. It is anticipated,
therefore, that the International Value Series will receive dividend income.
INTERNATIONAL SMALL COMPANY PORTFOLIOS
INVESTMENT OBJECTIVES AND POLICIES
The International Small Company Portfolio, and the Japanese Small Company,
Pacific Rim Small Company, United Kingdom Small Company and Continental Small
Company Series of the Trust (the latter four being referred to hereinafter as
the "International Small Company Master Funds") each have an
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investment objective to achieve long-term capital appreciation. The
International Small Company Portfolios provide investors with access to
securities portfolios consisting of small Japanese, United Kingdom, European and
Pacific Rim companies. Company size will be determined for purposes of these
Portfolios and Master Funds solely on the basis of a company's market
capitalization which will be calculated by multiplying the number of outstanding
shares of the company that are similar to domestic common stocks by the price of
the company's stock.
Each International Small Company Master Fund intends to invest at least 80%
of its assets in equity securities of its targeted country or region of the
world. The International Small Company Master Funds will be structured to
reflect reasonably the relative market capitalizations of their portfolio
companies. The Advisor believes that over the long term the investment
performance of small companies is superior to large companies and that
investment in the Portfolios is an effective way to improve global
diversification. Investors which, for a variety of reasons, may choose not to
make substantial, or any, direct investment in companies whose securities will
be held by the International Small Company Master Funds, may participate in the
investment performance of these companies through ownership of a Portfolio's
stock.
INTERNATIONAL SMALL COMPANY PORTFOLIO
The International Small Company Portfolio seeks to achieve its investment
objective by investing virtually all of its assets in up to four International
Small Company Master Funds in such relative portions as determined by the
Advisor from time to time. For a complete description of the investment
objectives and policies, portfolio structure and transactions for each
International Small Company Master Fund, see "INTERNATIONAL SMALL COMPANY
PORTFOLIOS--INVESTMENT OBJECTIVES AND POLICIES." The International Small Company
Portfolio is designed for investors who wish to achieve their investment
objective of capital appreciation by participating in the investment performance
of a broad range of equity securities of Japanese, United Kingdom, European and
Pacific Rim small companies.
As of the date of this prospectus, the International Small Company Portfolio
invests in the shares of the International Small Company Master Funds within the
following percentage ranges:
<TABLE>
<CAPTION>
INTERNATIONAL SMALL COMPANY MASTER FUNDS INVESTMENT RANGE
- ---------------------------------------- ----------------
<S> <C>
Japanese Small Company................................... 20-45%
Pacific Rim Small Company................................ 0-25%
United Kingdom Small Company............................. 5-25%
Continental Small Company................................ 20-45%
</TABLE>
The allocation of the assets of International Small Company Portfolio to be
invested in the International Small Company Master Funds will be determined by
the Advisor on at least a semiannual basis. In setting the target allocation,
the Advisor will first consider the market capitalizations of all eligible
companies in each of the International Small Company Master Funds. The Advisor
will calculate the market capitalizations for each International Small Company
Master Fund in the manner described under "INTERNATIONAL SMALL COMPANY
PORTFOLIOS--INVESTMENT OBJECTIVES AND POLICIES." In determining the target
allocations, the Advisor, using its best judgment, will seek to eliminate the
effect of cross holdings between companies on a portfolio by portfolio basis and
may take into account the existence of substantial private or government
ownership of the shares of a company. The Advisor may also consider such other
factors as it deems appropriate with respect to determining the target
allocations. The Advisor expects to change the relative weights ascribed to each
International Small Company Master Fund, based on its updated market
capitalization calculations, when it determines that fundamental changes in the
relative values ascribed by market forces to each relevant geographic area have
occurred. To maintain target weights during the period, adjustments may be made
by applying future purchases by International Small Company Portfolio in
proportion necessary to rebalance the investment portfolio of the Portfolio.
Under normal conditions, the target allocations for investment by the Portfolio
in the International Small Company Master Fund are: Japanese Small Company
Series--25%; United Kingdom
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Small Company Series--20%; Continental Small Company Series--40%; and Pacific
Rim Small Company Series--15%. As of the date of this prospectus, the target
allocations noted above do not reflect current allocations.
JAPANESE SMALL COMPANY PORTFOLIO
Japanese Small Company Portfolio invests all of its assets in the Japanese
Small Company Series of the Trust (the "Japanese Series"), which has the same
investment objective and policies as the Portfolio. The Japanese Series will
invest in a broad and diverse group of readily marketable stocks of Japanese
small companies which are traded in the Japanese securities markets. Generally,
reference in this prospectus to the term "Japanese small company" means a
company located in Japan whose market capitalization is not larger than the
largest of those in the smaller one-half (deciles 6 through 10) of companies
whose securities are listed on the First Section of the Tokyo Stock Exchange
("TSE").
While the Japanese Series will invest primarily in the stocks of small
companies which are listed on the TSE, it may acquire the stocks of Japanese
small companies which are traded in other Japanese securities markets as well.
It is the intention of the Japanese Series to acquire a portion of the stock of
each of these companies on a market capitalization weighted basis. (See "SMALL
COMPANY MASTER FUNDS--Portfolio Construction.")
PACIFIC RIM SMALL COMPANY PORTFOLIO
Pacific Rim Small Company Portfolio invests all of its assets in the Pacific
Rim Small Company Series of the Trust (the "Pacific Rim Series"), which has the
same investment objective and policies as the Portfolio. The Pacific Rim Series
is authorized to invest in stocks of a broad and diverse group of small
companies located in Australia, New Zealand and 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 in which the
Pacific Rim Series invests. The Advisor typically will use the appropriate
country indices of the Financial Times Actuaries World Index ("FTW") converted
to a common currency and aggregated, to define "small companies." Generally,
companies with publicly traded stock whose market capitalizations are not
greater than the largest of those in the smallest 30% of companies (8th, 9th and
10th deciles) listed in the FTW as combined for the countries in which the
Pacific Rim Series invests will be considered to be "small companies" and will
be eligible for purchase by the Pacific Rim Series.
While the Advisor typically will use the aggregated FTW indices to determine
the maximum size of eligible portfolio companies, portfolio acquisitions will
not be limited to stocks listed on the FTW for any country. The Pacific Rim
Series does not intend to purchase shares of any company whose market
capitalization is less than $5,000,000. The Pacific Rim Series intends to
acquire a portion of the stock of each eligible company on a market
capitalization basis. (See "SMALL COMPANY MASTER FUNDS--Portfolio
Construction.")
UNITED KINGDOM SMALL COMPANY PORTFOLIO
United Kingdom Small Company Portfolio invests all of its assets in the
United Kingdom Small Company Series of the Trust (the "United Kingdom Series"),
which has the same investment objective and policies as the Portfolio. The
United Kingdom Series will invest in a broad and diverse group of readily
marketable stocks of United Kingdom small companies which are traded principally
on the London Stock Exchange ("LSE"). Generally, reference in this prospectus to
a "United Kingdom small company" means a company organized in the United
Kingdom, with shares listed on the LSE whose market capitalization is not larger
than the largest of those in the smaller one-half (deciles 6 through 10) of
companies included in the Financial Times Actuaries All Share Index ("FTA").
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<PAGE>
The FTA is an index of stocks traded on the LSE, which is similar to the
S&P 500-Registered Trademark- 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-Registered Trademark- Index. While the FTA
typically will be used by the United Kingdom Series to determine the maximum
market capitalization of any company whose stock the Series will purchase,
acquisitions by the United Kingdom Series will not be limited to stocks which
are included in the FTA. The United Kingdom Series will not, however, purchase
shares of any investment trust or of any company whose market capitalization is
less than $5,000,000.
It is the intention of United Kingdom Series to acquire a portion of the
stock of each eligible company on a market capitalization basis. (See "SMALL
COMPANY MASTER FUNDS--Portfolio Construction.")
CONTINENTAL SMALL COMPANY PORTFOLIO
Continental Small Company Portfolio invests all of its assets in the
Continental Small Company Series of the Trust (the "Continental Series"), which
has the same investment objective and policies as the Portfolio. The Continental
Series is authorized to invest in readily marketable stocks of a broad and
diverse group of small companies organized under the laws of certain European
countries (See the list of countries under "INTERNATIONAL PORTFOLIOS--Countries"
above). Company size will be determined by the Advisor in a manner that will
compare the market capitalizations of companies in all countries in which the
Continental Series invests. The Advisor typically will use the appropriate
country indices of the 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 which the Continental Series invests
will be considered to be "small companies" and will be eligible for purchase by
the Continental Series.
While the Advisor typically will use the aggregated FTW indices to determine
the maximum size of eligible portfolio companies, portfolio acquisitions will
not be limited to stocks listed on the FTW for any country. The Continental
Series does not intend, however, to purchase shares of any company whose market
capitalization is less than the equivalent of $5,000,000. The Continental Series
intends to acquire a portion of the stock of each eligible company on a market
capitalization basis. The Advisor may in its discretion either limit further
investments in a particular country or divest the Continental Series of holdings
in a particular country. (See "SMALL COMPANY MASTER FUNDS--Portfolio
Construction.")
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SMALL COMPANY MASTER FUNDS
PORTFOLIO CONSTRUCTION
Each U.S. Small Company Master Fund and International Small Company Master
Fund (collectively the "Small Company Master Funds") is market capitalization
weighted. That is, each security is generally purchased based on the issuer's
relative market capitalization. In this way, the amount of a particular security
owned by a Small Company Master Fund is keyed to that security's market
capitalization compared to all securities eligible for purchase. The following
discussion applies to the investment policies of the Small Company Master Funds.
The decision to include or exclude the shares of an issuer will be made on
the basis of such issuer's relative market capitalization determined by
reference to other companies located in the same country, except that with
respect to Continental and Pacific Rim Series, such determination shall be made
by reference to other companies located in all countries in which those Series
invest. Company size is measured in terms of local currencies in order to
eliminate the effect of variations in currency exchange rates, except that
Continental and Pacific Rim Series each will measure company size in terms of a
common currency. Even though a company's stock may meet the applicable market
capitalization criterion, it may not be purchased if (i) in the Advisor's
judgment, the issuer is in extreme financial difficulty, (ii) the issuer is
involved in a merger or consolidation or is the subject of an acquisition or
(iii) a significant portion of the issuer's securities are closely held.
Further, securities of real estate investment trusts will not be acquired
(except as part of a merger, consolidation or acquisition of assets.)
If securities must be sold in order to obtain funds to make redemption
payments, such securities may be repurchased, as additional cash becomes
available. In most instances, however, management would anticipate selling
securities which had appreciated sufficiently to be eligible for sale and,
therefore, would not need to repurchase such securities. (See "SMALL COMPANY
MASTER FUNDS--Portfolio Transactions.")
It is management's belief that the stocks of small companies offer, over a
long term, a prudent opportunity for capital appreciation, but, at the same
time, selecting a limited number of such issues for investment involves greater
risk than investing in a large number of them.
Generally, current income is not sought as an investment objective and
investments will not be based upon an issuer's dividend payment policy or
record. However, many of the companies whose securities will be selected for
investment do pay dividends. It is anticipated, therefore, that dividend income
will be received.
PORTFOLIO TRANSACTIONS
On a periodic basis, the Advisor will review the holdings of each Small
Company Master Fund and determine which, at the time of such review, are no
longer considered small U.S., Japanese, United Kingdom, European or Pacific Rim
companies. The present policy of the Advisor (except with respect to the 6-10
Series) is to consider portfolio securities for sale when they have appreciated
sufficiently to rank, on a market capitalization basis, more than one full
decile higher than the company with the largest market capitalization that is
eligible for purchase by the particular Small Company Master Fund as determined
periodically by the Advisor. The Advisor may, from time to time, revise that
policy if, in the opinion of the Advisor, such revision is necessary to maintain
appropriate market capitalization weighting.
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DFA INTERNATIONAL SMALL CAP VALUE PORTFOLIO
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of the DFA International Small Cap Value Portfolio
is to achieve long-term capital appreciation. The Portfolio pursues its
objective by investing in the stocks of small non-U.S. companies that have a
high book to market ratio. The Investment Committee of the Advisor will
initially set the standards for determining whether the shares of a company in
any given country will be considered to be value stocks at the time of purchase.
Securities are considered value stocks primarily because a company's shares have
a high book to market ratio. Generally, such shares will be considered eligible
for investment. In measuring value, the Advisor may consider additional factors
such as cash flow, economic conditions and developments in the issuer's
industry. The Investment Committee will periodically review its standards for
determining high book to market value and will adjust the standards accordingly.
The Portfolio intends to invest in the stocks of small companies in countries
with developed markets. Under normal market conditions, at least 65% of the
Portfolio's assets will be invested in value stocks of small companies,
organized or having a majority of their assets in or deriving a majority of
their operating income in at least three non-U.S. countries. As of the date of
this prospectus, the Portfolio intends to invest in small companies which, for
purposes of this Portfolio, are defined as companies having no more than
$800 million of market capitalization. The Advisor may reset such ceiling from
time to time to reflect changing market conditions. The Advisor believes that
such maximum amount accounts for variations in company size among countries and
provides a sufficient universe of eligible companies. Currently no more than 40%
of the Portfolio's assets is invested in such companies in any one country, and
if this changes, a supplement to this prospectus will disclose such change. The
Portfolio reserves the right to invest in index futures contracts to commit
funds awaiting investment or to maintain liquidity. To the extent that the
Portfolio invests in futures contracts for other than bona fide hedging
purposes, 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 will be approximately market capitalization weighted. In
determining market capitalization weights, the Advisor, using its best judgment,
will seek to eliminate the effect of cross holdings on the individual country
weights. As a result, the weighting of certain countries in the Portfolio may
vary from their weighting in international indices such as those published by
The Financial Times, Morgan Stanley Capital International or Salomon/Russell.
The Advisor, however, will not attempt to account for cross holding within the
same country.
It is management's belief that the stocks of small companies with high book
to market ratios offer, over a long term, a prudent opportunity for capital
appreciation, but, at the same time, selecting a limited number of such issues
for inclusion in the Portfolio involves greater risk than including a large
number of them. The Advisor does not anticipate that a significant number of
securities which meet the market capitalization criteria will be selectively
excluded from the Portfolio.
The Portfolio does not seek current income as an investment objective and
investments will not be based upon an issuer's dividend payment policy or
record. However, many of the companies whose securities will be included in the
Portfolio do pay dividends. It is anticipated, therefore, that the Portfolio
will receive dividend income.
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EMERGING MARKETS PORTFOLIO,
EMERGING MARKETS VALUE PORTFOLIO AND
EMERGING MARKETS SMALL CAP PORTFOLIO
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of both the Emerging Markets Portfolio and the
Emerging Markets Small Cap Portfolio is to achieve long-term capital
appreciation. The Emerging Markets Portfolio invests all of its assets in the
Emerging Markets Series of the Trust (the "Emerging Markets Series"), which has
the same investment objective and policies as the Portfolio. The Emerging
Markets Small Cap Portfolio invests all of its assets in the Emerging Markets
Small Cap Series of the Trust (the "Emerging Markets Small Cap Series"), which
has the same investment objective and policies as the Portfolio. The investment
objective of the Dimensional Emerging Markets Value Fund Inc. ("Dimensional
Emerging Markets Value Fund") is to seek long-term capital growth through
investment primarily in emerging market equity securities. The Emerging Markets
Value Portfolio invests all of its assets in the Dimensional Emerging Markets
Value Fund, which has the same investment objective and policies as the
Portfolio. The Emerging Markets Series, the Emerging Markets Small Cap Series
and the Dimensional Emerging Markets Value Fund are referred to collectively as
the "Emerging Markets Master Funds." Each Emerging Markets Master Fund seeks to
achieve its investment objective by investing in emerging markets designated by
the Investment Committee of the Advisor ("Approved Markets"). (See the list of
countries under "INTERNATIONAL PORTFOLIOS--COUNTRIES" above.) Each Emerging
Markets Master Fund invests its assets primarily in Approved Market equity
securities listed on bona fide securities exchanges or actively traded on OTC
markets. These exchanges or OTC markets may be either within or outside the
issuer's domicile country, and the securities may be listed or traded in the
form of International Depository Receipts ("IDRs") or American Depository
Receipts ("ADRs").
EMERGING MARKETS MASTER FUNDS CHARACTERISTICS AND POLICIES
The Emerging Markets Series of the Trust will seek a broad market coverage
of larger companies within each Approved Market. This Series will attempt to own
shares of companies whose aggregate overall share of the Approved Market's total
public market capitalization is at least in the upper 40% of such
capitalization, and can be as large as 75%. The Emerging Markets Series may
limit the market coverage in the smaller emerging markets in order to limit
purchases of small market capitalization companies.
The Emerging Markets Small Cap Series of the Trust will seek a broad market
coverage of smaller companies within each Approved Market. This Series will
attempt to own shares of companies whose market capitalization is less than
$1.5 billion. On a periodic basis, the Advisor will review the holdings of the
Emerging Markets Small Cap Series and determine which, at the time of such
review, are no longer considered small emerging market companies. The present
policy is to consider portfolio securities for sale when they have appreciated
sufficiently to rank, on a market capitalization basis, 100% larger than the
largest market capitalization that is eligible for purchase as set by the
Advisor for that Approved Market.
The Dimensional Emerging Markets Value Fund seeks to achieve its objective
by investing in emerging market equity securities which are deemed by the
Advisor to be value stocks at the time of purchase. Securities are considered
value stocks primarily because they have a high book value in relation to their
market value. In measuring value, the Advisor may consider additional factors
such as cash flow, economic conditions and developments in the issuer's
industry.
The Dimensional Emerging Markets Value Fund's policy is to seek to achieve
its investment objective by investing in emerging market equity securities
across all market capitalizations, and specifically those which are deemed by
the Advisor to be value stocks at the time of purchase, as described above.
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Each Emerging Markets Master Fund may not invest in all such companies or
Approved Markets described above or achieve approximate market weights, for
reasons which include constraints imposed within Approved Markets, restrictions
on purchases by foreigners, and each Emerging Markets Master Fund's policy not
to invest more than 25% of its assets in any one industry.
Under normal market conditions, the Emerging Markets Series will invest at
least 65% of its assets in Approved Market securities; the Emerging Markets
Small Cap Series will invest at least 65% of its assets in small company (as
defined above) Approved Market securities; and the Dimensional Emerging Markets
Value Fund will invest at least 65% of its assets in Approved Market equity
securities that are deemed by the Advisor to be value stocks at the time of
purchase. Approved Market securities are defined to be (a) securities of
companies organized in a country in an Approved Market or for which the
principal trading market is in an Approved Market, (b) securities issued or
guaranteed by the government of an Approved Market country, its agencies or
instrumentalities, or the central bank of such country, (c) securities
denominated in an Approved Market currency issued by companies to finance
operations in Approved Markets, (d) securities of companies that derive at least
50% of their revenues primarily from either goods or services produced in
Approved Markets or sales made in Approved Markets and (e) Approved Markets
equity securities in the form of depositary shares. Securities of Approved
Markets may include securities of companies that have characteristics and
business relationships common to companies in other countries. As a result, the
value of the securities of such companies may reflect economic and market forces
in such other countries as well as in the Approved Markets. The Advisor,
however, will select only those companies which, in its view, have sufficiently
strong exposure to economic and market forces in Approved Markets such that
their value will tend to reflect developments in Approved Markets to a greater
extent than developments in other regions. For example, the Advisor may invest
in companies organized and located in the United States or other countries
outside of Approved Markets, including companies having their entire production
facilities outside of Approved Markets, when such companies meet the definition
of Approved Markets securities so long as the Advisor believes at the time of
investment that the value of the company's securities will reflect principally
conditions in Approved Markets.
With respect to the Emerging Markets Series and Emerging Markets Small Cap
Series, the Advisor defines the term "emerging market" to mean a country which
is considered to be an emerging market by the International Finance Corporation.
In determining what countries have emerging markets with respect to the
Dimensional Emerging Markets Value Fund, the data, analysis and classification
of countries published or disseminated by the International Bank for
Reconstruction and Development (commonly known as the World Bank) and the
International Finance Corporation, among other things, will be considered.
Approved emerging markets may not include all such emerging markets. In
determining whether to approve markets for investment, the Advisor will take
into account, among other things, market liquidity, relative availability of
investor information, government regulation, including fiscal and foreign
exchange repatriation rules and the availability of other access to these
markets for the Emerging Markets Series, the Emerging Markets Small Cap Series
and the Dimensional Emerging Markets Value Fund.
Each Emerging Markets Master Fund may invest up to 35% of its assets in
securities of issuers that are not Approved Markets securities, but whose
issuers the Advisor believes derive a substantial proportion, but not less than
50%, of their total revenues from either goods and services produced in, or
sales made in, Approved Markets.
The Emerging Markets Master Funds also may invest up to 10% of their total
assets in shares of other investment companies that invest in one or more
Approved Markets, although they intend to do so only where access to those
markets is otherwise significantly limited. In some Approved Markets, it will be
necessary or advisable for an Emerging Markets Master Fund to establish a wholly
owned subsidiary or a trust for the purpose of investing in the local markets.
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PORTFOLIO CONSTRUCTION
The Emerging Markets Series' and Emerging Markets Small Cap Series' policy
of seeking broad market diversification means that the Advisor will not utilize
"fundamental" securities research techniques in identifying securities
selections. The decision to include or exclude the shares of an issuer will be
made primarily on the basis of such issuer's relative market capitalization
determined by reference to other companies located in the same country. Company
size is measured in terms of reference to other companies located in the same
country and in terms of local currencies in order to eliminate the effect of
variations in currency exchange rates.
Even though a company's stock may meet the applicable market capitalization
criterion for a Series or the Dimensional Emerging Markets Value Fund's
criterion for investment, it may not be included in an Emerging Markets Master
Fund for one or more of a number of reasons. For example, in the Advisor's
judgment, the issuer may be considered in extreme financial difficulty, a
material portion of its securities may be closely held and not likely available
to support market liquidity, or the issuer may be a "passive foreign investment
company" (as defined in the Code). To this extent, there will be the exercise of
discretion and consideration by the Advisor which would not be present in the
management of a portfolio seeking to represent an established index of broadly
traded domestic securities (such as the S&P 500-Registered Trademark- Index).
The Advisor will also exercise discretion in determining the allocation of
investments as between Approved Markets.
Changes in the composition and relative ranking (in terms of book to market
ratio) of the stocks which are eligible for purchase by the Dimensional Emerging
Markets Value Fund take place with every trade when the securities markets are
open for trading due primarily to price fluctuations of such securities. On a
periodic basis, the Advisor will prepare lists of eligible value stocks which
are eligible for investment. Such list will be revised no less than
semi-annually.
It is management's belief that equity investments offer, over a long term, a
prudent opportunity for capital appreciation, but, at the same time, selecting a
limited number of such issues for inclusion in a Series involves greater risk
than including a large number of them.
The Emerging Markets Master Funds do not seek current income as an
investment objective, and investments will not be based upon an issuer's
dividend payment policy or record. However, many of the companies whose
securities will be included in an Emerging Markets Master Fund do pay dividends.
It is anticipated, therefore, that the Emerging Markets Master Funds will
receive dividend income.
FIXED INCOME PORTFOLIOS
DFA ONE-YEAR FIXED INCOME PORTFOLIO
The investment objective of DFA One-Year Fixed Income Portfolio is to
achieve a stable real return in excess of the rate of inflation with a minimum
of risk. The DFA One-Year Fixed Income Portfolio invests all of its assets in
the DFA One-Year Fixed Income Series of the Trust (the "One-Year Fixed Income
Series"), which has the same investment objective and policies as the Portfolio.
The One-Year Fixed Income Series will invest in U.S. government obligations,
U.S. government agency obligations, dollar-denominated obligations of foreign
issuers issued in the U.S., bank obligations, including U.S. subsidiaries and
branches of foreign banks, corporate obligations, commercial paper, repurchase
agreements and obligations of supranational organizations. Generally, the Series
will acquire obligations which mature within one year from the date of
settlement, but substantial investments may be made in obligations maturing
within two years from the date of settlement when greater returns are available.
It is the Series' policy that the weighted average length of maturity of
investments will not exceed one year. The Series principally invests in
certificates of deposit, commercial paper, bankers' acceptances, notes and
bonds. The Series may concentrate its investments in obligations of U.S. and
foreign banks and bank holding companies (see "Investments in the Banking
Industry").
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DFA TWO-YEAR GLOBAL FIXED INCOME PORTFOLIO
The investment objective of DFA Two-Year Global Fixed Income Portfolio is to
maximize total returns consistent with preservation of capital. The DFA Two-Year
Global Fixed Income Portfolio invests all of its assets in the DFA Two-Year
Global Fixed Income Series of the Trust (the "Two-Year Global Fixed Income
Series"). The Two-Year Global Fixed Income Series will have the same investment
objective and policies as the Portfolio. The Two-Year Global Fixed Income Series
will invest in obligations issued or guaranteed by the U.S. and foreign
governments, their agencies and instrumentalities, corporate debt obligations,
bank obligations, commercial paper, repurchase agreements, obligations of other
domestic and foreign issuers having quality ratings meeting the minimum
standards described in "Description of Investments," securities of domestic or
foreign issuers denominated in U.S. dollars but not trading in the United
States, and obligations of supranational organizations, such as the World Bank,
the European Investment Bank, European Economic Community and European Coal and
Steel Community. At the present time, the Advisor expects that most investments
will be made in the obligations of issuers which are in developed countries,
such as those countries which are members of the Organization of Economic
Cooperation and Development ("OECD"). However, in the future, the Advisor
anticipates investing in issuers located in other countries as well. Under
normal market conditions, the Series will invest at least 65% of the value of
its assets in issuers organized or having a majority of their assets in, or
deriving a majority of their operating income in, at least three different
countries, one of which may be the United States.
The Series will acquire obligations which mature within two years from the
date of settlement. Because many of the Series' investments will be denominated
in foreign currencies, the Series will also enter into forward foreign currency
contracts solely for the purpose of hedging against fluctuations in currency
exchange rates. The Series may concentrate its investments in obligations of
U.S. and foreign banks and bank holding companies (see "Investment in the
Banking Industry").
DFA FIVE-YEAR GOVERNMENT PORTFOLIO
The investment objective of DFA Five-Year Government Portfolio is to
maximize total returns available from the universe of debt obligations of the
U.S. government and U.S. government agencies. Ordinarily, the Portfolio will
invest at least 65% of its assets in U.S. government obligations and U.S.
government agency obligations that mature within five years from the date of
settlement. The Portfolio will also acquire repurchase agreements.
DFA FIVE-YEAR GLOBAL FIXED INCOME PORTFOLIO
The investment objective of DFA Five-Year Global Fixed Income Portfolio is
to provide a market rate of return for a fixed income portfolio with low
relative volatility of returns. The Portfolio will invest primarily in
obligations issued or guaranteed by the U.S. and foreign governments, their
agencies and instrumentalities, obligations of other foreign issuers rated AA or
better, corporate debt obligations, bank obligations, commercial paper rated as
set forth in "Description of Investments" and supranational organizations, such
as the World Bank, the European Investment Bank, European Economic Community,
and European Coal and Steel Community. At the present time, the Advisor expects
that most investments will be made in the obligations of issuers which are
developed countries, such as those countries which are members of the OECD.
However, in the future, the Advisor anticipates investing in issuers located in
other countries as well. Under normal market conditions, the Portfolio will
invest at least 65% of the value of its assets in issuers organized or having a
majority of their assets in, or deriving a majority of their 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.
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DFA INTERMEDIATE GOVERNMENT FIXED INCOME PORTFOLIO
The investment objective of DFA Intermediate Government Fixed Income
Portfolio is to earn current income consistent with preservation of capital.
Ordinarily, the Portfolio will invest at least 65% of its assets in non-callable
obligations issued or guaranteed by the U.S. government and U.S. government
agencies, AAA rated, dollar-denominated obligations of foreign governments,
obligations of supranational organizations, and futures contracts on U.S.
Treasury securities. Since government guaranteed mortgage backed securities are
considered callable, such securities will not be included in the Portfolio.
Generally, the Portfolio will purchase securities with maturities of between
five and fifteen years. The Portfolio will not shift the maturity of its
investments in anticipation of interest rate movements and ordinarily will have
an average weighted maturity, based upon market values, of between seven to ten
years. One of the benefits of the Portfolio is expected to be that in a period
of steeply falling interest rates, the Portfolio should perform well because of
its average weighted maturity and the high quality and non-callable nature of
its investments. The Portfolio is expected to match or exceed the returns of the
Lehman Brothers Treasury Index, without exceeding the volatility of that Index.
The Portfolio may invest more than 5% of its assets in the obligations of
foreign governments. Those obligations at the time of purchase must be either
rated in the highest rating category of a nationally recognized statistical
rating organization or, in the case of any obligation that is unrated, of
comparable quality. The Portfolio also may invest in futures contracts on U.S.
Treasury securities or options on such contracts for the purposes of remaining
fully invested and maintaining liquidity to pay redemptions. However, the
Portfolio will not purchase futures contracts or options thereon if as a result
more than 5% of its net assets would then consist of initial margin deposits and
premiums required to establish such positions.
DESCRIPTION OF INVESTMENTS
The following is a description of the categories of investments which may be
acquired by the Fixed Income Portfolios and the One-Year Fixed Income and
Two-Year Global Fixed Income Series.
<TABLE>
<CAPTION>
PERMISSIBLE CATEGORIES:
-----------------------
<S> <C>
DFA One-Year Fixed Income Series......................... 1-6,8
DFA Two-Year Global Fixed Income Series.................. 1-10
DFA Five-Year Government Portfolio....................... 1,2,6
DFA Five-Year Global Fixed Income Portfolio.............. 1-10
DFA Intermediate Government Fixed Income Portfolio....... 1,2,6,7,8
</TABLE>
1. U.S. GOVERNMENT OBLIGATIONS--Debt securities issued by the U.S. Treasury
which are direct obligations of the U.S. government, including bills, notes and
bonds.
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--Nonconvertible corporate debt securities
(e.g., bonds and debentures, which are issued by companies whose commercial
paper is rated Prime1 by Moody's Investors Services, Inc. ("Moody's") or A1 by
S&P and dollar-denominated obligations of foreign issuers issued in the U.S. If
the issuer's commercial paper is unrated, then the debt security would have to
be rated at least AA by S&P or Aa2 by Moody's. If there is neither a commercial
paper rating nor a rating of the debt security, then the Advisor must determine
that the debt security is of comparable quality to equivalent issues of the same
issuer rated at least AA or Aa2.
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4. BANK OBLIGATIONS--Obligations of U.S. banks and savings and loan
associations and dollar-denominated obligations of U.S. subsidiaries and
branches of foreign banks, such as certificates of deposit (including marketable
variable rate certificates of deposit) and bankers' acceptances. Bank
certificates of deposit will only be acquired from banks having assets in excess
of $1,000,000,000.
5. COMMERCIAL PAPER--Rated, at the time of purchase, A1 or better by S&P or
Prime1 by Moody's, or, if not rated, issued by a corporation having an
outstanding unsecured debt issue rated Aaa by Moody's or AAA by S&P, and having
a maximum maturity of nine months.
6. REPURCHASE AGREEMENTS--Instruments through which the Portfolios purchase
securities ("underlying securities") from a bank, or a registered U.S.
government securities dealer, with an agreement by the seller to repurchase the
security at an agreed price, plus interest at a specified rate. The underlying
securities will be limited to U.S. government and agency obligations described
in (1) and (2) above. The Portfolios will not enter into a repurchase agreement
with a duration of more than seven days if, as a result, more than 10% of the
value of the Portfolio's total assets would be so invested. The Portfolios will
also only invest in repurchase agreements with a bank if the bank has at least
$1,000,000,000 in assets and is approved by the Investment Committee of the
Advisor. The Advisor will monitor the market value of the securities plus any
accrued interest thereon so that they will at least equal the repurchase price.
7. FOREIGN GOVERNMENT AND AGENCY OBLIGATIONS--Bills, notes, bonds and other
debt securities issued or guaranteed by foreign governments, or their agencies
and instrumentalities.
8. SUPRANATIONAL ORGANIZATION OBLIGATIONS--Debt securities of supranational
organizations such as the European Coal and Steel Community, the European
Economic Community and the World Bank, which are chartered to promote economic
development.
9. FOREIGN ISSUER OBLIGATIONS--Debt securities of non-U.S. issuers rated AA
or better by S&P or Aa2 or better by Moody's.
10. EURODOLLAR OBLIGATIONS--Debt securities of domestic or foreign issuers
denominated in U.S. dollars but not trading in the United States.
The categories of investments that may be acquired by each of the Fixed
Income Portfolios (other than DFA Intermediate Government Fixed Income
Portfolio) and the One-Year Fixed Income and Two-Year Global Fixed Income Series
may include both fixed and floating rate securities. Floating rate securities
bear interest at rates that vary with prevailing market rates. Interest rate
adjustments are made periodically (e.g., every six months), usually based on a
money market index such as the London Interbank Offered Rate (LIBOR) or the
Treasury bill rate.
INVESTMENTS IN THE BANKING INDUSTRY
The One-Year Fixed Income Series and Two-Year Global Fixed Income Series
will invest more than 25% of their total respective assets in obligations of
U.S. and 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. The Feeder Portfolios that invest in the above Master Funds, the DFA
One-Year Fixed Income Portfolio and DFA Two-Year Global Fixed Income Portfolio,
each have the same policy. This policy can only be changed by a vote of
shareholders. Investments in the Master Funds will not be considered investments
in the banking industry so that a Feeder Portfolio may invest all or
substantially all of its assets in its respective Master Fund. When investment
in such obligations exceeds 25% of the total net assets of any of these Master
Funds, such Master Fund will be considered to be concentrating its investments
in the banking industry. As of the date of this prospectus, (i) the One-Year
Fixed Income Series is not concentrating its investment in this industry and
(ii) the Two-Year Global Fixed Income Series is concentrating its investment in
this industry.
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The types of bank and bank holding company obligations in which the One-Year
Fixed Income Series and DFA Two-Year Global Fixed Income Series may invest
include: dollar-denominated certificates of deposit, bankers' acceptances,
commercial paper and other debt obligations issued in the United States and
which mature within two years of the date of settlement, provided such
obligations meet each Series' established credit rating criteria as stated under
"Description of Investments." In addition, both Series are authorized to invest
more than 25% of their total assets in Treasury bonds, bills and notes and
obligations of federal agencies and instrumentalities.
PORTFOLIO STRATEGY
The One-Year Fixed Income Series and Two-Year Global Fixed Income Series
will be managed with a view to capturing credit risk premiums and term or
maturity premiums. The term "credit risk premium" means the anticipated
incremental return on investment for holding obligations considered to have
greater credit risk than direct obligations of the U.S. Treasury, and "maturity
risk premium" means the anticipated incremental return on investment for holding
securities having maturities of longer than one month compared to securities
having a maturity of one month. The Advisor believes that credit risk premiums
are available largely through investment in high grade commercial paper,
certificates of deposit and corporate obligations. The holding period for assets
of the Series will be chosen with a view to maximizing anticipated returns, net
of trading costs.
The One-Year Fixed Income Series, Two-Year Global Fixed Income Series and
DFA Five-Year Government Portfolio are expected to have high portfolio turnover
rates due to the relatively short maturities of the securities to be acquired.
The rate of portfolio turnover will depend upon market and other conditions; it
will not be a limiting factor when management believes that portfolio changes
are appropriate. It is anticipated that the annual turnover rate of the Two-Year
Global Fixed Income Series, could be 0% to 200%. While the Fixed Income
Portfolios, the One-Year Fixed Income Series and Two-Year Global Fixed Income
Series acquire securities in principal transactions and, therefore, do not pay
brokerage commissions, the spread between the bid and asked prices of a security
may be considered to be a "cost" of trading. Such costs ordinarily increase with
trading activity. However, as stated above, securities ordinarily will be sold
when, in the Advisor's judgment, the monthly return of a Portfolio, the One-Year
Fixed Income Series or the Two-Year Fixed Income Series will be increased as a
result of portfolio transactions after taking into account the cost of trading.
It is anticipated that securities will be acquired in the secondary markets for
short term instruments.
The DFA Five-Year Global Fixed Income Portfolio will be managed with a view
to capturing maturity risk premiums. Ordinarily the Portfolio will invest
primarily in obligations issued or guaranteed by foreign governments and their
agencies and instrumentalities, obligations of other foreign issuers rated AA or
better and supranational organizations. The Portfolio will own obligations
issued or guaranteed by the U.S. government and its agencies and
instrumentalities also. At times when, in the Advisor's judgement, eligible
foreign securities do not offer maturity risk premiums that compare favorably
with those offered by eligible U.S. securities, the Portfolio will be invested
primarily in the latter securities.
PORTFOLIO TURNOVER
The Enhanced U.S. Large Company and DFA Two-Year Global Fixed Income
Portfolios engage in frequent trading of portfolio securities. A high portfolio
turnover rate may have negative tax consequences to shareholders and may result
in increased trading costs.
PORTFOLIO TRANSACTIONS--ALL PORTFOLIOS
With respect to all Domestic and International Equity Portfolios and the
Master Funds in which such Portfolios might invest, investments will generally
be made in eligible securities on a market capitalization weighted basis.
Securities will not be purchased or sold based on the prospects for the economy,
the
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securities markets or the individual issuers whose shares are eligible for
purchase. Securities which have depreciated in value since their acquisition
will not be sold solely because prospects for the issuer are not considered
attractive or due to an expected or realized decline in securities prices in
general. Securities will not be sold to realize short-term profits, but when
circumstances warrant, they may be sold without regard to the length of time
held. Securities, including those eligible for purchase, may be disposed of,
however, at any time when, in the Advisor's judgment, circumstances warrant
their sale, including but not limited to tender offers, mergers and similar
transactions, or bids made for block purchases at opportune prices. Generally,
securities will be purchased with the expectation that they will be held for
longer than one year and will be held until such time as they are no longer
considered an appropriate holding in light of the investment policy of each
Portfolio.
SECURITIES LOANS
All of the Portfolios and Master Funds are authorized to lend securities to
qualified brokers, dealers, banks and other financial institutions for the
purpose of earning additional income, although inasmuch as the Feeder Portfolios
will only hold shares of a corresponding Master Fund, these Portfolios do not
intend to lend those shares. While a Portfolio or Master Fund may earn
additional income from lending securities, such activity is incidental to the
investment objective of a Portfolio or Master Fund. The value of securities
loaned may not exceed 33 1/3% of the value of a Portfolio's or Master Fund's
total assets. In connection with such loans, a Portfolio or Series will receive
collateral consisting of cash or U.S. government securities, which will be
maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities. In addition, the Portfolios and Master
Funds will be able to terminate the loan at any time and will receive reasonable
interest on the loan, as well as amounts equal to any dividends, interest or
other distributions on the loaned securities. In the event of the bankruptcy of
the borrower, the Funds or the Trust could experience delay in recovering the
loaned securities. Management believes that this risk can be controlled through
careful monitoring procedures.
DEVIATION FROM MARKET CAPITALIZATION WEIGHTING
The portfolio structures of each Small Company Portfolio and Master Fund,
the Large Cap International Portfolio, the DFA Real Estate Securities Portfolio,
each Value Master Fund, the International Value Series, the DFA International
Small Cap Value Portfolio involve market capitalization weighting. That is,
their investment portfolios are market capitalization weighted. Deviation from
strict market capitalization weighting may occur for several reasons. The
Advisor may exclude the stock of a company that meets applicable market
capitalization criterion if the Advisor determines in its best judgment that the
purchase of such stock is inappropriate given other conditions. The Advisor does
not anticipate that a significant number of securities that meet the market
capitalization criteria will be selectively excluded from the Large Cap
International Portfolio. 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. A
portion, but generally not in excess of 20% of assets may be invested in
interest bearing obligations, such as money market instruments, 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 the policy of market capitalization weighting
would otherwise require. (The 4-10 Value Series may limit purchases of common
stocks in the 9th and 10th deciles to those times when it is advantageous to do
so.) In addition, securities eligible for purchase or otherwise represented in a
portfolio may be acquired in exchange for the issuance of shares. (See "PURCHASE
OF SHARES--In Kind Purchases.") While such transactions might cause a
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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 whose stock is 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.
MANAGEMENT OF THE FUNDS
Dimensional Fund Advisors Inc. (the "Advisor") serves as investment advisor
to each of the Portfolios, except the Feeder Portfolios, and each Master Fund.
As such, the Advisor is responsible for the management of their respective
assets. Investment decisions for all non-feeder Portfolios and all Master Funds
are made by the Investment Committee of the Advisor which meets on a regular
basis and also as needed to consider investment issues. The Investment Committee
is composed of certain officers and directors of the Advisor who are elected
annually. The Advisor provides the Portfolios (except the Feeder Portfolios and
International Small Company Portfolio) and the Master Funds and International
Master Funds 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. The Advisor's address is 1299 Ocean Avenue,
11th Floor, Santa Monica, CA 90401. For advisory fees that the Portfolios have
incurred for the fiscal year ended November 30, 1999, see "ANNUAL FUND OPERATING
EXPENSES."
The Funds and the Master Funds bear all of their own costs and expenses,
including: services of their independent accountants, legal counsel, brokerage
fees, commissions and transfer taxes in connection with the acquisition and
disposition of portfolio securities, taxes, insurance premiums, costs incidental
to meetings of their shareholders and directors or trustees, the cost of filing
their registration statements under the federal securities laws and the cost of
any filings required under state securities laws, reports to shareholders, and
transfer and dividend disbursing agency, administrative services and custodian
fees, except as described above with respect to waivers or reductions and with
respect to the U.S. Large Company Portfolio. Expenses allocable to a particular
Portfolio or Master Fund are so allocated. The expenses of a Fund which are not
allocable to a particular Portfolio are to be borne by each Portfolio of the
Fund on the basis of its relative net assets. Similarly, the expenses of the
Trust which are not allocable to a particular Series are to be borne by each
Master Fund on the basis of its relative net assets.
The Advisor was organized in May 1981 and is engaged in the business of
providing investment management services to institutional investors. Assets
under management total approximately $36 billion. The Advisor owns 100% of the
outstanding shares of Dimensional Fund Advisors Ltd. ("DFAL") (see "Investment
Services--United Kingdom and Continental Small Company Series") and beneficially
owns 100% of DFA Australia Limited ("DFA Australia") (see "Investment
Services--Japanese and Pacific Rim Small Company Series").
INVESTMENT SERVICES--JAPANESE AND PACIFIC RIM SMALL COMPANY SERIES
Pursuant to Sub Advisory Agreements with the Advisor, DFA Australia,
Suite 2001, Level 20 Gateway, 1 MacQuarie Place, Sydney, New South Wales 2000,
Australia, the successor to Dimensional Fund Advisors Asia Inc., has the
authority and responsibility to select brokers and dealers to execute securities
transactions for Japanese and Pacific Rim Small Company Series. DFA Australia's
duties include the maintenance of a trading desk for each Series and the
determination of the best and most efficient means
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of executing securities transactions. On at least a semiannual basis, the
Advisor reviews the holdings of Japanese and Pacific Rim Small Company Series
and reviews the trading process and the execution of securities transactions.
The Advisor is responsible for determining those securities which are eligible
for purchase and sale by these Series and may delegate this task, subject to its
own review, to DFA Australia. DFA Australia maintains and furnishes to the
Advisor information and reports on Japanese and Pacific Rim small companies,
including its recommendations of securities to be added to the securities that
are eligible for purchase by each Series.
INVESTMENT SERVICES--UNITED KINGDOM AND CONTINENTAL SMALL COMPANY SERIES
Pursuant to Sub-Advisory Agreements with the Advisor, DFAL, 14 Berkeley
Street, London, W1X 5AD, England, a company that is organized under the laws of
England, has the authority and responsibility to select brokers or dealers to
execute securities transactions for United Kingdom and Continental Small Company
Series. DFAL's duties include the maintenance of a trading desk for the Series
and the determination of the best and most efficient means of executing
securities transactions. On at least a semiannual basis the Advisor reviews the
holdings of United Kingdom and Continental Small Company Series and reviews the
trading process and the execution of securities transactions. The Advisor is
responsible for determining those securities which are eligible for purchase and
sale by these Series and may delegate this task, subject to its own review, to
DFAL. DFAL maintains and furnishes to the Advisor information and reports on
United Kingdom and European small companies, including its recommendations of
securities to be added to the securities that are eligible for purchase by the
Series. DFAL is a member of the Investment Management Regulatory Organization
Limited ("IMRO"), a self-regulatory organization for investment managers
operating under the laws of England.
CONSULTING SERVICES--LARGE CAP INTERNATIONAL PORTFOLIO, DFA INTERNATIONAL VALUE
SERIES, DFA INTERNATIONAL SMALL CAP VALUE PORTFOLIO, EMERGING MARKETS SERIES,
EMERGING MARKETS SMALL CAP SERIES AND DIMENSIONAL EMERGING MARKETS VALUE FUND
The Advisor has entered into a Consulting Services Agreement with DFAL and
DFA Australia, respectively. Pursuant to the terms of each Consulting Services
Agreement, DFAL and DFA Australia provide certain trading and administrative
services to the Advisor with respect to DFA International Small Cap Value
Portfolio, Large Cap International Portfolio, Emerging Markets Series, Emerging
Markets Small Cap Series and Dimensional Emerging Markets Value Fund.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
The policy of the Domestic and International Equity Portfolios, except U.S.
Large Company Portfolio, Enhanced U.S. Large Company Portfolio, U.S. Large Cap
Value Portfolio, and DFA International Value Portfolio is to distribute
substantially all of their net investment income together with any net realized
capital gains in December of each year. Dividends from net investment income of
U.S. Large Company Portfolio, Enhanced U.S. Large Company Portfolio, U.S. Large
Cap Value Portfolio, and DFA International Value Portfolio are distributed
quarterly and any net realized capital gains are distributed annually after
November 30. Net investment income, which is accrued daily, will be distributed
monthly (except for January) by DFA One-Year Fixed Income Portfolio, quarterly
by DFA Intermediate Government Fixed Income, DFA Two-Year Global Fixed Income
and DFA Five-Year Global Fixed Income Portfolios, and semiannually by DFA
Five-Year Government Portfolio. Any net realized capital gains of the Fixed
Income Portfolios will be distributed annually after the end of the fiscal year.
Shareholders of each of the Portfolios will automatically receive all income
dividends and capital gains distributions in additional shares of the Portfolio
whose shares they hold at net asset value (as of the business date following the
dividend record date), unless as to U.S. 9-10 Small Company Portfolio, U.S. 6-10
Small Company Portfolio, the Fixed Income Portfolios, DFA Real Estate Securities
Portfolio, U.S.
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Large Company Portfolio and the U.S. Value Portfolios upon written notice to the
Advisor, the shareholder selects one of the options listed below. While
shareholders of the Large Cap International Portfolio and Enhanced U.S. Large
Company Portfolio will automatically receive all capital gains distributions in
additional shares of the respective Portfolio, upon written notice to Advisor,
and completion of account information, they may receive all income dividends in
cash.
Income Option--to receive income dividends in cash and capital
gains distributions in additional shares at net asset value.
Capital Gains Option--to receive capital gains distributions in
cash and income dividends in additional shares at net asset value.
Cash Option--to receive both income dividends and capital gains
distributions in cash.
Certain investments by the Portfolios (or their corresponding Master Fund)
may be subject to special rules which may affect the amount, character and
timing of the income to the investing entity. Some of these rules are referenced
in the statement of additional information. Specifically, prospective investors
should consult the statement of additional information for further information
regarding the extent to which distributions from a Portfolio may be eligible for
the dividends received deduction or whether certain foreign tax credits may be
available to an investor in a Portfolio.
Whether paid in cash or additional shares and regardless of the length of
time a Portfolio's shares have been owned by shareholders who are subject to
U.S. federal income taxes, distributions from long-term capital gains are
taxable as such. Dividends from net investment income or net short-term capital
gains will be taxable as ordinary income, whether received in cash or in
additional shares. For those investors subject to tax, if purchases of shares of
a Portfolio are made shortly before the record date for a dividend or capital
gains distribution, a portion of the investment will be returned as a taxable
distribution. Shareholders are notified annually by the Funds as to the U.S.
federal tax status of dividends and distributions paid by the Portfolio whose
shares they own.
Dividends which are declared in October, November or December to
shareholders of record in such a month, but which, for operational reasons, may
not be paid to the shareholder until the following January, will be treated for
U.S. federal income tax purposes as if paid by the Portfolio and received by the
shareholder on December 31 of the calendar year in which they are declared.
The sale of shares of a Portfolio is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may be
realized from an ordinary redemption of shares or an exchange of shares between
two Portfolios. Any loss incurred on sale or exchange of a Portfolio's shares,
held for six months or less, will be treated as a long-term capital loss to the
extent of capital gain dividends received with respect to such shares.
In addition to federal taxes, shareholders may be subject to state and local
taxes on distributions and on sales of shares of a Portfolio. Distributions of
interest income and capital gains realized from certain types of U.S. government
securities may be exempt from state personal income taxes.
A Portfolio is required to withhold 31% of taxable dividends, capital gains
distributions, and redemptions paid to shareholders who have not complied with
IRS taxpayer identification regulations. You may avoid this withholding
requirement by certifying on the account registration form your proper Taxpayer
Identification Number and by certifying that you are not subject to backup
withholding.
The tax discussion set forth above is included for general information only.
Prospective investors should consult the statement of additional information.
Prospective investors should also consult their own tax advisers concerning the
federal, state, local or foreign tax consequences of an investment in a
Portfolio.
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PURCHASE OF SHARES
CASH PURCHASES
Investors may purchase shares of any Portfolio by first contacting the
Advisor at (310) 395-8005 to notify the Advisor of the proposed investment. All
investments are subject to approval of the Advisor, and all investors must
complete and submit the necessary account registration forms in good order. The
Funds reserve the right to reject any initial or additional investment and to
suspend the offering of shares of any Portfolio.
"Good order" with respect to the purchase of shares means that (1) a fully
completed and properly signed Account Registration Form and any additional
supporting legal documentation required by the Advisor has been received in
legible form and (2) the Advisor has been notified of the purchase by telephone
and, if the Advisor so requests, also in writing, no later than the close of
regular trading on the NYSE (ordinarily 1:00 p.m. PST) on the day of the
purchase. If an order to purchase shares must be canceled due to nonpayment, the
purchaser will be responsible for any loss incurred by a Fund arising out of
such cancellation. To recover any such loss, the Funds reserve the right to
redeem shares owned by any purchaser whose order is canceled, and such purchaser
may be prohibited or restricted in the manner of placing further orders.
Investors having an account with a bank that is a member or a correspondent
of a member of the Federal Reserve System may purchase shares by first calling
the Advisor at (310) 395-8005 to notify the Advisor of the proposed investment,
then requesting the bank to transmit immediately available funds (federal funds)
by wire to PNC Bank, N.A. for the account of DFA Investment Dimensions Group
Inc. (specify Portfolio) or, with regard to purchases of the DFA International
Value Portfolio, for the account of Dimensional Investment Group Inc. (DFA
International Value Portfolio). Additional investments also may be made through
the wire procedure by first notifying the Advisor. Investors who wish to
purchase shares of any Portfolio (other than the DFA International Value
Portfolio) by check should send their check to DFA Investment Dimensions Group
Inc., c/o PFPC Inc., 400 Bellevue Parkway, Wilmington, Delaware 19809. To
purchase shares of the DFA International Value Portfolio investors should send
their check to Dimensional Investment Group Inc., c/o PFPC Inc., at the above
address.
Payment of the total amount due should be made in U.S. dollars. Subject to
approval by the Advisor, payment may be made in any freely convertible currency
and the necessary foreign exchange transactions will be arranged on behalf of,
and at the expense of, the applicant. Applicants settling in any currency other
than U.S. dollars are advised that a delay in processing a purchase or
redemption may occur to allow for currency conversion.
Shares may also be purchased and sold by individuals through securities
firms which may charge a service fee or commission for such transactions. No
such fee or commission is charged on shares which are purchased or redeemed
directly from the Funds. Investors who are clients of investment advisory
organizations may also be subject to investment advisory fees under their own
arrangements with such organizations.
IN-KIND PURCHASES
If accepted by the Funds, shares of the Portfolios may be purchased in
exchange for securities which are eligible for acquisition by the Portfolios (or
their corresponding Master Funds) or otherwise represented in their portfolios
as described in this prospectus or in exchange for local currencies in which
such securities of the International Equity Portfolios, the International Value
Series, Enhanced U.S. Large Company Series, DFA Two-Year Global Fixed Income
Series and DFA Five-Year Global Fixed Income Portfolio are denominated.
Purchases in exchange for securities will not be subject to a reimbursement fee.
Securities and local currencies to be exchanged which are accepted by the Funds
and Fund shares to be issued therefore will be valued as set forth under
"VALUATION OF SHARES" at the time of the next determination of net asset value
after such acceptance. All dividends, interest, subscription, or other rights
46
<PAGE>
pertaining to such securities shall become the property of the Portfolio whose
shares are being acquired and must be delivered to the Fund by the investor upon
receipt from the issuer. Investors who desire to purchase shares of the
International Equity Portfolios, DFA Two-Year Global Fixed Income Portfolio or
DFA Five-Year Global Fixed Income Portfolio with local currencies should first
contact the Advisor for wire instructions.
The Funds will not accept securities in exchange for shares of a Portfolio
unless: (1) such securities are, at the time of the exchange, eligible to be
included, or otherwise represented, in the Portfolio whose shares are to be
issued (or in its corresponding Master Fund) and current market quotations are
readily available for such securities; (2) the investor represents and agrees
that all securities offered to be exchanged are not subject to any restrictions
upon their sale by the Portfolio under the Securities Act of 1933 or under the
laws of the country in which the principal market for such securities exists, or
otherwise; and (3) at the discretion of the respective Fund, the value of any
such security (except U.S. Government securities) being exchanged together with
other securities of the same issuer owned by the Portfolio or Master Fund may
not exceed 5% of the net assets of the Portfolio or Master Fund immediately
after the transaction, however, this last limitation does not apply to DFA
Five-Year Global Fixed Income Portfolio or the International Small Company
Portfolio. The Funds will accept such securities for investment and not for
resale.
A gain or loss for federal income tax purposes will generally be realized by
investors who are subject to federal taxation upon the exchange depending upon
the cost of the securities or local currency exchanged. Investors interested in
such exchanges should contact the Advisor. Purchases of shares will be made in
full and fractional shares calculated to three decimal places. In the interest
of economy and convenience, certificates for shares will not be issued.
VALUATION OF SHARES
NET ASSET VALUE
The net asset value per share of each Portfolio and corresponding Master
Fund is calculated as of the close of the NYSE by dividing the total market
value of the Portfolio's investments and other assets, less any liabilities, by
the total outstanding shares of the stock of the respective Portfolio or Master
Fund. The value of the shares of each Portfolio will fluctuate in relation to
its own investment experience. The value of the shares of the Feeder Portfolios
and International Small Company Portfolio will fluctuate in relation to the
investment experience of the Master Funds in which such Portfolios invest.
Securities held by the Portfolios and the Master Funds which are listed on a
securities exchange and for which market quotations are available are valued at
the last quoted sale price of the day or, if there is no such reported sale, the
9-10 Series, the 6-10 Series, the U.S. Large Company Series, DFA Real Estate
Securities Portfolio, the Value Master Funds, DFA International Value Series,
Emerging Markets Series, Emerging Markets Small Cap Series and Dimensional
Emerging Markets Value Fund value such securities at the mean between the most
recent quoted bid and asked prices. Price information on listed securities is
taken from the exchange where the security is primarily traded. Securities
issued by open-end investment companies, such as the Master Funds, are valued
using their respective net asset values for purchase orders placed at the close
of the NYSE. Unlisted securities for which market quotations are readily
available are valued at the mean between the most recent bid and asked prices.
The value of other assets and securities for which no quotations are readily
available (including restricted securities) are determined in good faith at fair
value in accordance with procedures adopted by the Board of Directors. The net
asset values per share of the International Equity Portfolios (in respect of
those Portfolios that are Feeder Portfolios and International Small Company
Portfolio, the Master Funds), DFA International Value Series, Two-Year Global
Fixed Income Series and DFA Five-Year Global Fixed Income Portfolio are
expressed in U.S. dollars by translating the net assets of each Portfolio, or
Master Fund using the mean between the most recent bid and asked prices for the
dollar as quoted by generally recognized reliable sources.
47
<PAGE>
Provided that the transfer agent has received the investor's Account
Registration Form in good order and the custodian has received the investor's
payment, shares of the Portfolio selected will be priced at the public offering
price calculated next after receipt of the investor's funds by the custodian.
The transfer agent or the Funds may from time to time appoint a sub-transfer
agent for the receipt of purchase orders and funds from certain investors. With
respect to such investors, the shares of the Portfolio selected will be priced
at the public offering price calculated after receipt of the purchase order by
the sub-transfer agent. The only difference between a normal purchase and a
purchase through a sub-transfer agent is that if the investor buys shares
through a sub-transfer agent, the purchase price will be the public offering
price next calculated after the sub-transfer agent receives the order, rather
than on the day the custodian receives the investor's payment (provided that the
sub-transfer agent has received the investor's purchase order in good order).
The value of the shares of the Fixed Income Portfolios, the One-Year Fixed
Income Series and Two-Year Global Fixed Income Series will tend to fluctuate
with interest rates because, unlike money market funds, these Portfolios and the
Series do not seek to stabilize the value of their respective shares by use of
the "amortized cost" method of asset valuation. Net asset value includes
interest on fixed income securities which is accrued daily. Securities which are
traded OTC and on a stock exchange will be valued according to the broadest and
most representative market, and it is expected that for bonds and other fixed
income securities this ordinarily will be the OTC market. Securities held by the
Fixed Income Portfolios, the One-Year Fixed Income Series and Two-Year Global
Fixed Income Series may be valued on the basis of prices provided by a pricing
service when such prices are believed to reflect the current market value of
such securities. Other assets and securities for which quotations are not
readily available will be valued in good faith at fair value using methods
determined by the Board of Directors.
Generally, trading in foreign securities markets is completed each day at
various times prior to the close of the NYSE. The values of foreign securities
held by those Portfolios and Master Funds that invest in such securities are
determined as of such times for the purpose of computing the net asset values of
the Portfolios and Master Funds. If events which materially affect the value of
the investments of a Portfolio or Master Fund occur subsequent to the close of
the securities market on which such securities are primarily traded, the
investments affected thereby will be valued at "fair value" as described above.
Since the International Equity Portfolios and Master Funds own securities that
are primarily listed on foreign exchanges which may trade on days when the
Portfolios and Master Funds do not price their shares, the net asset value of an
International Equity Portfolio may change on days when shareholders will not be
able to purchase or redeem shares.
The Japanese Small Company Portfolio and U.K. Small Company Portfolio are
closed on days that the foreign securities exchange on which its portfolio
securities are principally traded is closed. Purchase and redemption orders for
shares of such Portfolio or Master Fund will not be accepted on those days. For
an International Equity Portfolio or Master Fund that invests in securities
traded on a number of foreign securities exchanges, such Portfolio or Master
Fund will be closed if portfolio securities greater than 50% of its total assets
are principally traded on exchanges that are closed that day.
Certain of the securities holdings of the Emerging Markets Series, Emerging
Markets Small Cap Series and the Dimensional Emerging Markets Value Fund in
Approved Markets may be subject to tax, investment and currency repatriation
regulations of the Approved Markets that could have a material effect on the
valuation of the securities. For example, such Master Funds might be subject to
different levels of taxation on current income and realized gains depending upon
the holding period of the securities. In general, a longer holding period (e.g.,
5 years) may result in the imposition of lower tax rates than a shorter holding
period (e.g., 1 year). The Master Funds may also be subject to certain
contractual arrangements with investment authorities in an Approved Market which
require a Master Fund to maintain minimum holding periods or to limit the extent
of repatriation of income and realized gains. As a result, the valuation of
particular securities at any one time may depend materially upon the assumptions
that a Master Fund makes at that time concerning the anticipated holding period
for the securities. Absent special circumstances as determined by the Board of
Directors or Trustees of the Master Fund, it is
48
<PAGE>
presently intended that the valuation of such securities will be based upon the
assumption that they will be held for at least the amount of time necessary to
avoid higher tax rates or penalties and currency repatriation restrictions.
However, the use of such valuation standards will not prevent the Master Funds
from selling such securities in a shorter period of time if the Advisor
considers the earlier sale to be a more prudent course of action. Revision in
valuation of those securities will be made at the time of the transaction to
reflect the actual sales proceeds inuring to the Master Fund.
Futures contracts are valued using the settlement price established each day
on the exchange on which they are traded. The value of such futures contracts
held by a Portfolio or Master Fund are determined each day as of such close.
PUBLIC OFFERING PRICE
It is management's belief that payment of a reimbursement fee by each
investor, which is used to defray significant costs associated with investing
proceeds of the sale of their shares to such investors, will eliminate a
dilutive effect such costs would otherwise have on the net asset value of shares
held by previous investors. Therefore, the shares of certain Portfolios are sold
at an offering price which is equal to the current net asset value of such
shares plus a reimbursement fee. The amount of the reimbursement fee represents
management's estimate of the costs reasonably anticipated to be associated with
the purchase of securities by those Portfolios and Master Funds and is paid to
the Portfolios and Master Funds and used by them to defray such costs. Such
costs include brokerage commissions on listed securities, imputed commissions on
OTC securities and a .5% Stamp Duty imposed on the purchase of stocks on the
LSE. Reinvestments of dividends and capital gains distributions paid by the
Portfolios and in-kind investments are not subject to a reimbursement fee. (See
"PURCHASE OF SHARES--In-Kind Purchases" and "DIVIDENDS, CAPITAL GAINS
DISTRIBUTIONS AND TAXES.") The table in "FEES AND EXPENSES" in this prospectus
identifies the Portfolios whose shares are sold at an offering price which is
equal to the current net asset value of such shares plus a reimbursement fee.
The reimbursement fee is expressed as a percentage of the net asset value of the
shares of the respective Portfolios.
For each Portfolio that charges a reimbursement fee, except the DFA
International Small Cap Value and the International Small Company Portfolios,
the Master Funds in which the Portfolio invests also charges a reimbursement fee
equal to that charged by the respective Portfolio.
In the case of the International Small Company Portfolio, the reimbursement
fee is equal to a blended rate of the reimbursement fees of the International
Master Funds. The blended rate is determined on a quarterly basis and is based
upon the target allocation in effect at the end of each quarter. The blended
rate will be calculated by multiplying the rate of reimbursement fee of each
International Master Funds by a fraction equal to the portion of the assets of
the Portfolio which, at such time, is being allocated to each International
Master Funds and adding the results thereof. If there is a change to the
reimbursement fee of an International Master Funds during a quarter, the blended
rate will be recalculated to reflect such change in the International Master
Funds' reimbursement fee.
The public offering price of shares of the Domestic Equity Portfolios,
United Kingdom Small Company Portfolio, Large Cap International Portfolio, DFA
International Value Portfolio and the Fixed Income Portfolios is the net asset
value thereof next determined after the receipt of the investor's funds by the
custodian, provided that an Account Registration Form in good order has been
received by the transfer agent; no sales charge or reimbursement fee is imposed.
EXCHANGE OF SHARES
Investors may exchange shares of one Portfolio for those of another Portfolio by
first contacting the Advisor at (310) 395-8005 to notify the Advisor of the
proposed exchange and then completing a letter of
49
<PAGE>
instruction and mailing it to: DFA Investment Dimensions Group Inc. or, in the
case of the DFA International Value Portfolio, to Dimensional Investment Group
Inc., as follows:
Attn: Client Operations
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
The minimum amount for an exchange is $100,000. Exchanges are accepted into
or from any of the Portfolios offered in this prospectus. Such exchange is
subject to any applicable reimbursement fee charged by a Portfolio in connection
with the sale of its shares.
There is no fee imposed on an exchange. However, the Funds reserve the right
to impose an administrative fee in order to cover the costs incurred in
processing an exchange. Any such fee will be disclosed in the prospectus. An
exchange is treated as a redemption and a purchase. Therefore, an investor could
realize a taxable gain or a loss on the transaction. The Funds reserve the right
to revise or terminate the exchange privilege, waive the minimum amount
requirement, limit the amount of or reject any exchange, as deemed necessary, at
any time.
Investors in any Portfolio eligible for the exchange privilege also may
exchange all or part of their Portfolio shares into certain other portfolios of
Dimensional Investment Group Inc., subject to the minimum purchase requirement
set forth in the applicable portfolio's prospectus. Investors may contact the
Advisor at the above-listed phone number for more information on such exchanges
and to request a copy of the prospectuses of other portfolios of Dimensional
Investment Group Inc.
The exchange privilege is not intended to afford shareholders a way to
speculate on short-term movements in the markets. Accordingly, in order to
prevent excessive use of the exchange privilege that may potentially disrupt the
management of the Portfolios or otherwise adversely affect the Funds, any
proposed exchange will be subject to the approval of the Advisor. Such approval
will depend on: (i) the size of the proposed exchange; (ii) the prior number of
exchanges by that shareholder; (iii) the nature of the underlying securities and
the cash position of the Portfolios involved in the proposed exchange; (iv) the
transaction costs involved in processing the exchange; and (v) the total number
of redemptions by exchange already made out of a Portfolio. Excessive use of the
exchange privilege is defined as any pattern of exchanges among portfolios by an
investor that evidences market timing.
The redemption and purchase prices of shares redeemed and purchased by
exchange, respectively, are the net asset values next determined after the
Advisor has received a letter of instruction in good order, plus any applicable
reimbursement fee on purchases by exchange. Exchanges with respect to
International Small Company Portfolio and any of the Feeder Portfolios which
invest in the International Master Funds are not subject to a reimbursement fee.
"Good order" means a completed a letter of instruction specifying the dollar
amount to be exchanged, signed by all registered owners of the shares; and if a
Fund does not have on file the authorized signatures for the account, proof of
authority and a guarantee of the signature of each registered owner by an
"eligible guarantor institution." Such institutions generally include national
or state banks, savings associations, savings and loan associations, trust
companies, savings banks, credit unions and members of a recognized stock
exchange. Exchanges will be accepted only if stock certificates have not been
issued and the shares of the Portfolio being acquired are registered in the
investor's state of residence.
REDEMPTION OF SHARES
REDEMPTION PROCEDURE
Investors who desire to redeem shares of a Portfolio must first contact the
Advisor at (310) 395-8005. Each Portfolio will redeem shares at the net asset
value of such shares next determined, either: (1) where stock certificates have
not been issued, after receipt of a written request for redemption in good
order, by the transfer agent or (2) if stock certificates have been issued,
after receipt of the stock certificates in good
50
<PAGE>
order at the office of the transfer agent. "Good order" means that the request
to redeem shares must include all necessary documentation, to be received in
writing by the Advisor no later than the close of regular trading on the NYSE
(ordinarily 1:00 p.m. PST), including but not limited to: the stock
certificate(s), if issued; a letter of instruction or a stock assignment
specifying the number of shares or dollar amount to be redeemed, signed by all
registered owners (or authorized representatives thereof) of the shares; and, if
a Fund does not have on file the authorized signatures for the account, proof of
authority and a guarantee of the signature of each registered owner by an
eligible guarantor institution; and any other required supporting legal
documents. A signature guarantee may be obtained from a domestic bank or trust
company, broker, dealer, clearing agency or savings association who are
participants in a medallion program recognized by the Securities Transfer
Association. The three recognized medallion programs are Securities Transfer
Agents Medallion (STAMP), Stock Exchanges Medallion Program (SEMP) and New York
Stock Exchange, Inc. Medallion Signature Program (MSP). Signature guarantees
which are not a part of these programs will not be accepted.
Shareholders redeeming shares for which certificates have not been issued,
who have authorized redemption payment by wire in writing, may request that
redemption proceeds be paid in federal funds wired to the bank they have
designated in writing. The Funds reserve the right to send redemption proceeds
by check in their discretion; a shareholder may request overnight delivery of
such check at the shareholder's own expense. If the proceeds are wired to the
shareholder's account at a bank which is not a member of the Federal Reserve
System, there could be a delay in crediting the funds to the shareholder's bank
account. The Funds reserve the right at any time to suspend or terminate the
redemption by wire procedure after prior notification to shareholders. No fee is
charged for redemptions. The redemption of all shares in an account will result
in the account being closed. A new Account Registration Form will be required
for future investments. (See "PURCHASE OF SHARES.") In the interests of economy
and convenience, certificates for shares are not issued.
Although the redemption payments will ordinarily be made within seven days
after receipt, payment to investors redeeming shares which were purchased by
check will not be made until the Funds can verify that the payments for the
purchase have been, or will be, collected, which may take up to fifteen days or
more. Investors may avoid this delay by submitting a certified check along with
the purchase order.
REDEMPTION OF SMALL ACCOUNTS
With respect to each Portfolio, the Funds reserve the right to redeem a
shareholder's account if the value of the shares in a specific Portfolio is $500
or less, whether because of redemptions, a decline in the Portfolio's net asset
value per share or any other reason. Before a Fund involuntarily redeems shares
from such an account and sends the proceeds to the stockholder, the Fund will
give written notice of the redemption to the stockholder at least sixty days in
advance of the redemption date. The stockholder will then have sixty days from
the date of the notice to make an additional investment in order to bring the
value of the shares in the account for a specific Portfolio to more than $500
and avoid such involuntary redemption. The redemption price to be paid to a
stockholder for shares redeemed by a Fund under this right will be the aggregate
net asset value of the shares in the account at the close of business on the
redemption date.
IN-KIND REDEMPTIONS
When in the best interests of a Feeder Portfolio, the Feeder Portfolio may
make a redemption payment, in whole or in part, by a distribution of portfolio
securities that the Feeder Portfolio receives from the Master Fund in lieu of
cash. A Portfolio that is not a Feeder Portfolio may also make a redemption
payment, in whole or in part, by a distribution of Portfolio securities in lieu
of cash, when in the best interests of the Portfolio. Such distributions will be
made in accordance with the federal securities laws and regulations governing
mutual funds. Investors may incur brokerage charges and other transaction costs
selling securities that were received in payment of redemptions. The
International Equity, DFA Two-
51
<PAGE>
Year Global Fixed Income and DFA Five-Year Global Fixed Income Portfolios
reserve the right to redeem their shares in the currencies in which their
investments (and, in respect of the Feeder Portfolios and International Small
Company Portfolio, the currencies in which the corresponding Master Funds'
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.
THE FEEDER PORTFOLIOS
Other institutional investors, including other mutual funds, may invest in
each Master Fund, and the expenses of such other funds and, correspondingly,
their returns may differ from those of the Feeder Portfolios. Please contact The
DFA Investment Trust Company and the Dimensional Emerging Markets Value Fund
Inc. at 1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401, (310) 395-8005
for information about the availability of investing in a Master Fund other than
through a Feeder Portfolio.
The aggregate amount of expenses for a Feeder Portfolio and the
corresponding Master Fund may be greater than it would be if the Portfolio were
to invest directly in the securities held by the corresponding Master Fund.
However, the total expense ratios for the Feeder Portfolios and the Master Funds
are expected to be less over time than such ratios would be if the Portfolios
were to invest directly in the underlying securities. This arrangement enables
various institutional investors, including the Feeder Portfolios, to pool their
assets, which may be expected to result in economies by spreading certain fixed
costs over a larger asset base. Each shareholder in a Master Fund, including a
Feeder Portfolio, will pay its proportionate share of the expenses of that
Master Fund. By investing in shares of the International Master Funds,
International Small Company Portfolio will indirectly bear its pro rata share of
the operating expenses, management expenses and brokerage costs of such Master
Fund, as well as the expense of operating the Portfolio.
The shares of the Master Funds will be offered to institutional investors
for the purpose of increasing the funds available for investment, to reduce
expenses as a percentage of total assets and to achieve other economies that
might be available at higher asset levels. Investment in a Master Fund by other
institutional investors offers potential benefits to the Master Funds, and
through their investment in the Master Funds, the Feeder Portfolios also.
However, such economies and expense reductions might not be achieved, and
additional investment opportunities, such as increased diversification, might
not be available if other institutions do not invest in the Master Funds. Also,
if an institutional investor were to redeem its interest in a Master Fund, the
remaining investors in that Master Fund could experience higher pro rata
operating expenses, thereby producing lower returns, and the Master Fund's
security holdings may become less diverse, resulting in increased risk.
Institutional investors that have a greater pro rata ownership interest in a
Master Fund than the corresponding Feeder Portfolio could have effective voting
control over the operation of the Master Fund.
If the Board of Directors of the relevant Fund determines that it is in the
best interest of a Feeder Portfolio, the Feeder Portfolio may withdraw its
investment in a Master Fund at any time. Upon any such withdrawal, the Board
would consider what action the Portfolio might take, including either seeking to
invest its assets in another registered investment company with the same
investment objective as the Portfolio, which might not be possible, or retaining
an investment advisor to manage the Portfolio's assets in accordance with its
own investment objective, possibly at increased cost. Shareholders of a Feeder
Portfolio will receive written notice thirty days prior to the effective date of
any change in the investment objective of its corresponding Master Fund. A
withdrawal by a Feeder Portfolio of its investment in the corresponding Master
Fund could result in a distribution in kind of portfolio securities (as opposed
to a cash distribution) to the Portfolio. Should such a distribution occur, the
Portfolio could incur brokerage fees or other transaction costs in converting
such securities to cash in order to pay redemptions. In addition, a distribution
in kind to the Portfolio could result in a less diversified portfolio of
investments and could affect adversely the liquidity of the Portfolio. Moreover,
a distribution in kind by the Master Fund corresponding to the U.S. 6-10 Small
Company, U.S. 9-10 Small Company, Enhanced U.S. Large
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Company, DFA One-Year Fixed Income, DFA Two-Year Global Fixed Income,
U.S. 4-10 Value, U.S. 6-10 Value, U.S. Large Cap Value, DFA International Value
and Emerging Markets Value Portfolios may constitute a taxable exchange for
federal income tax purposes resulting in gain or loss to such Portfolios. Any
net capital gains so realized will be distributed to such a Portfolio's
shareholders as described in "DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES."
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. The information for each of the fiscal years has been audited by
PricewaterhouseCoopers LLP, whose report, along with the Portfolios' financial
statements (except the U.S. 4-10 Value Portfolio), are included in the annual
reports. Further information about each Portfolio's performance is contained in
the annual reports which are available upon request.
The "Transfer" transaction referred to below in footnotes to the Financial
Highlights refers to the transaction which took place on August 9, 1996, in
which four Portfolios, the Japanese Small Company Portfolio, the Pacific Rim
Small Company Portfolio, the United Kingdom Small Company Portfolio, and the
Continental Small Company Portfolio, respectively, each transferred their
investable assets in exchange for shares with equal values of a corresponding
Master Fund of the Trust.
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DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
-------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE U.S. LARGE COMPANY PORTFOLIO
----------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $ 34.61 $ 28.48 $ 22.73 $ 18.12 $ 13.58
-------- -------- -------- -------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income.................................... 0.45 0.43 0.42 0.41 0.35
Net Gains on Securities (Realized and Unrealized)........ 6.67 6.20 5.89 4.52 4.57
-------- -------- -------- -------- -------
Total From Investment Operations......................... 7.12 6.63 6.31 4.93 4.92
-------- -------- -------- -------- -------
LESS DISTRIBUTIONS
Net Investment Income.................................... (0.48) (0.43) (0.43) (0.31) (0.36)
Net Realized Gains....................................... (0.17) (0.07) (0.13) (0.01) (0.02)
-------- -------- -------- -------- -------
Total Distributions...................................... (0.65) (0.50) (0.56) (0.32) (0.38)
-------- -------- -------- -------- -------
Net Asset Value, End of Period........................... $ 41.08 $ 34.61 $ 28.48 $ 22.73 $ 18.12
======== ======== ======== ======== =======
Total Return............................................. 20.76% 23.56% 28.26% 27.49% 36.54%
-------- -------- -------- -------- -------
Net Assets, End of Period (thousands).................... $896,404 $549,962 $343,537 $187,757 $97,111
Ratio of Expenses to Average Net Assets**................ 0.15% 0.15% 0.15% 0.21% 0.24%
Ratio of Expenses to Average Net Assets (Excluding
Waivers and Assumption of Expenses)**.................. 0.31% 0.32% 0.35% 0.45% 0.46%
Ratio of Net Investment Income to Average Net Assets..... 1.18% 1.39% 1.66% 2.10% 2.29%
Ratio of Net Investment Income to Average Net Assets
(Excluding Waivers and Assumption of Expenses)......... 1.02% 1.21% 1.46% 1.85% 2.23%
Portfolio Turnover Rate.................................. N/A N/A N/A N/A N/A
Portfolio Turnover Rate of Master Fund Series............ 4.27% 9.31% 4.28% 14.09% 2.38%
</TABLE>
- ------------------------------
** Represents the combined ratios for the Portfolio and its pro-rata share of
its Master Fund Series.
54
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
-------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE ENHANCED U.S.
LARGE COMPANY PORTFOLIO
-----------------------------------------------------
YEAR YEAR YEAR JULY 3,
ENDED ENDED ENDED TO
NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1999 1998 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 14.27 $ 13.61 $ 11.83 $ 10.00
-------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income....................................... 1.54 0.63 0.54 0.12
Net Gains on Securities (Realized and Unrealized)........... 1.12 2.15 2.40 1.71
-------- ------- ------- -------
Total From Investment Operations............................ 2.66 2.78 2.94 1.83
-------- ------- ------- -------
LESS DISTRIBUTIONS
Net Investment Income....................................... (1.14) (0.72) (0.55) --
Net Realized Gains.......................................... (0.67) (1.40) (0.61) --
-------- ------- ------- -------
Total Distributions......................................... (1.81) (2.12) (1.16) --
-------- ------- ------- -------
Net Asset Value, End of Period.............................. $ 15.12 $ 14.27 $ 13.61 $ 11.83
======== ======= ======= =======
Total Return................................................ 20.31% 23.73% 27.22% 18.30%#
-------- ------- ------- -------
Net Assets, End of Period (thousands)....................... $102,200 $61,536 $47,642 $29,236
Ratio of Expenses to Average Net Assets..................... 0.40%(a) 0.45%(a) 0.52%(a) 0.65%*(a)
Ratio of Expenses to Average Net Assets (Excluding Waivers
and Assumption of Expenses)............................... 0.40%(a) 0.46%(a) 0.54%(a) 0.65%*(a)
Ratio of Net Investment Income to Average Net Assets........ 6.27% 4.54% 4.51% 3.44%*
Ratio of Net Investment Income to Average Net Assets
(Excluding Waivers and Assumption of Expenses)............ 6.27% 4.53% 4.49% 3.44%*
Portfolio Turnover Rate..................................... N/A N/A N/A N/A
Portfolio Turnover Rate of Master Fund Series............... 82.40% 86.98% 193.78% 211.07%*
</TABLE>
- ------------------------------
* Annualized
# Non-annualized
(a) Represents the combined ratios for the Portfolio and its pro-rata share of
its Master Fund Series.
55
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
-------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE U.S. LARGE CAP VALUE PORTFOLIO
---------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1999 1998 1997 1996 1995
---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........... $ 20.21 $ 19.22 $ 15.98 $ 13.29 $ 9.91
---------- ---------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income.......................... 0.34 0.31 0.29 0.30 0.29
Net Gains on Securities (Realized and
Unrealized).................................. 0.54 1.83 3.60 2.62 3.55
---------- ---------- -------- -------- --------
Total From Investment Operations............... 0.88 2.14 3.89 2.92 3.84
---------- ---------- -------- -------- --------
LESS DISTRIBUTIONS
Net Investment Income.......................... (0.35) (0.31) (0.30) (0.23) (0.29)
Net Realized Gains............................. (0.65) (0.84) (0.35) -- (0.17)
---------- ---------- -------- -------- --------
Total Distributions............................ (1.00) (1.15) (0.65) (0.23) (0.46)
---------- ---------- -------- -------- --------
Net Asset Value, End of Period................. $ 20.09 $ 20.21 $ 19.22 $ 15.98 $ 13.29
========== ========== ======== ======== ========
Total Return................................... 4.51% 11.69% 25.10% 22.20% 39.13%
---------- ---------- -------- -------- --------
Net Assets, End of Period (thousands).......... $1,177,762 $1,080,470 $840,003 $541,149 $280,915
Ratio of Expenses to Average Net Assets........ 0.33%(a) 0.33%(a) 0.35%(a) 0.36%(a) 0.42%(a)
Ratio of Net Investment Income to Average Net
Assets....................................... 1.63% 1.57% 1.70% 2.17% 2.49%
Portfolio Turnover Rate........................ N/A N/A N/A N/A N/A
Portfolio Turnover Rate of Master Fund
Series....................................... 42.96% 24.70% 17.71% 20.12% 29.41%
</TABLE>
- ------------------------------
(a) Represents the combined ratios for the Portfolio and its pro-rata share of
its Master Fund Series.
56
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
-------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE U.S. 6-10 VALUE PORTFOLIO
------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $ 19.09 $ 22.09 $ 17.00 $ 14.03 $ 11.13
---------- ---------- ---------- ---------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income............................. 0.09 0.12 0.07 0.11 0.10
Net Gains (Losses) on Securities
(Realized and Unrealized)....................... 1.52 (2.10) 5.49 2.93 3.06
---------- ---------- ---------- ---------- --------
Total From Investment Operations.................. 1.61 (1.98) 5.56 3.04 3.16
---------- ---------- ---------- ---------- --------
LESS DISTRIBUTIONS
Net Investment Income............................. (0.08) (0.10) (0.11) (0.02) (0.10)
Net Realized Gains................................ (1.45) (0.92) (0.36) (0.05) (0.16)
---------- ---------- ---------- ---------- --------
Total Distributions............................... (1.53) (1.02) (0.47) (0.07) (0.26)
---------- ---------- ---------- ---------- --------
Net Asset Value, End of Period.................... $ 19.17 $ 19.09 $ 22.09 $ 17.00 $ 14.03
========== ========== ========== ========== ========
Total Return...................................... 9.39% (9.32)% 33.57% 21.70% 28.41%
---------- ---------- ---------- ---------- --------
Net Assets, End of Period (thousands)............. $2,621,646 $2,350,094 $2,098,654 $1,207,298 $609,950
Ratio of Expenses to Average Net Assets**......... 0.58% 0.58% 0.60% 0.61% 0.64%
Ratio of Net Investment Income to Average Net
Assets.......................................... 0.49% 0.57% 0.37% 0.78% 0.85%
Portfolio Turnover Rate........................... N/A N/A N/A N/A N/A
Portfolio Turnover Rate of Master Fund Series..... 29.41% 22.51% 25.47% 14.91% 20.62%
</TABLE>
- ------------------------------
** Represents the combined ratios for the Portfolio and its pro-rata share of
its Master Fund Series.
N/A Refer to Master Fund Series
57
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
-------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE U.S. 6-10 SMALL COMPANY PORTFOLIO
----------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................... $ 13.77 $ 16.89 $ 14.53 $ 12.64 $ 11.08
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................................... 0.08 0.08 0.09 0.11 0.09
Net Gains (Losses) on Securities
(Realized and Unrealized)............................. 2.18 (1.55) 3.42 2.20 2.81
-------- -------- -------- -------- --------
Total From Investment Operations........................ 2.26 (1.47) 3.51 2.31 2.90
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Net Investment Income................................... (0.07) (0.08) (0.12) (0.02) (0.14)
Net Realized Gains...................................... (1.28) (1.57) (1.03) (0.40) (1.20)
-------- -------- -------- -------- --------
Total Distributions..................................... (1.35) (1.65) (1.15) (0.42) (1.34)
-------- -------- -------- -------- --------
Net Asset Value, End of Period.......................... $ 14.68 $ 13.77 $ 16.89 $ 14.53 $ 12.64
======== ======== ======== ======== ========
Total Return............................................ 18.26% (9.27)% 26.12% 18.73% 28.75%
-------- -------- -------- -------- --------
Net Assets, End of Period (thousands)................... $398,665 $324,590 $337,992 $234,194 $186,644
Ratio of Expenses to Average Net Assets**............... 0.43% 0.43% 0.45% 0.48% 0.49%
Ratio of Net Investment Income to Average Net Assets.... 0.62% 0.47% 0.48% 0.75% 0.83%
Portfolio Turnover Rate................................. N/A N/A N/A N/A N/A
Portfolio Turnover Rate of Master Fund Series........... 28.51% 29.15% 30.04% 32.38% 21.16%
</TABLE>
- ------------------------------
** Represents the combined ratios for the Portfolio and its pro-rata share of
its Master Fund Series.
N/A Refer to Master Fund Series
58
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
-------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE U.S. 9-10 SMALL COMPANY PORTFOLIO
------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........... $ 10.65 $ 13.99 $ 12.14 $ 11.03 $ 8.49
---------- ---------- ---------- ---------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income.......................... 0.04 0.02 0.03 0.03 0.05
Net Gains (Losses) on Securities (Realized and
Unrealized).................................. 2.00 (1.44) 3.01 1.85 2.61
---------- ---------- ---------- ---------- --------
Total From Investment Operations............... 2.04 (1.42) 3.04 1.88 2.66
---------- ---------- ---------- ---------- --------
LESS DISTRIBUTIONS
Net Investment Income.......................... (0.02) (0.03) (0.03) (0.01) (0.04)
Net Realized Gains........................... (0.13) (1.89) (1.16) (0.76) (0.08)
---------- ---------- ---------- ---------- --------
Total Distributions............................ (0.15) (1.92) (1.19) (0.77) (0.12)
---------- ---------- ---------- ---------- --------
Net Asset Value, End of Period................. $ 12.54 $ 10.65 $ 13.99 $ 12.14 $ 11.03
========== ========== ========== ========== ========
Total Return................................... 19.47% (11.14)% 27.46% 18.05% 31.37%
---------- ---------- ---------- ---------- --------
Net Assets, End of Period (thousands).......... $1,322,590 $1,338,510 $1,509,427 $1,181,804 $925,474
Ratio of Expenses to Average Net Assets........ 0.61%(a) 0.59%(a) 0.60% 0.61% 0.62%
Ratio of Net Investment Income to Average Net
Assets....................................... 0.30% 0.18% 0.21% 0.22% 0.45%
Portfolio Turnover Rate........................ N/A N/A 27.81% 23.68% 24.65%
Portfolio Turnover Rate of Master Fund
Series....................................... 22.51% 26.44% N/A N/A N/A
</TABLE>
- ------------------------------
(a) Represents the combined ratios for the Portfolio and its pro-rata share of
its Master Fund Series.
59
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
-------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE DFA REAL ESTATE SECURITIES PORTFOLIO
---------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period...................... $ 13.00 $ 15.53 $ 12.65 $ 10.00 $ 9.28
-------- -------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income..................................... 0.77 0.74 0.88 0.71 0.61
Net Gains (Losses) on Securities (Realized and
Unrealized)............................................. (1.62) (2.52) 2.68 2.08 0.68
-------- -------- ------- ------- -------
Total From Investment Operations.......................... (0.85) (1.78) 3.56 2.79 1.29
-------- -------- ------- ------- -------
LESS DISTRIBUTIONS
Net Investment Income..................................... (0.65) (0.75) (0.68) (0.14) (0.46)
Net Realized Gains........................................ -- -- -- -- --
Tax Return of Capital..................................... -- -- -- -- (0.11)
-------- -------- ------- ------- -------
Total Distributions....................................... (0.65) (0.75) (0.68) (0.14) (0.57)
-------- -------- ------- ------- -------
Net Asset Value, End of Period............................ $ 11.50 $ 13.00 $ 15.53 $ 12.65 $ 10.00
======== ======== ======= ======= =======
Total Return.............................................. (6.75)% (12.01)% 29.13% 28.24% 14.00%
-------- -------- ------- ------- -------
Net Assets, End of Period (thousands)..................... $130,039 $106,544 $95,072 $64,390 $43,435
Ratio of Expenses to Average Net Assets................... 0.47% 0.46% 0.48% 0.71% 0.82%
Ratio of Net Investment Income to Average Net Assets...... 6.82% 5.95% 5.73% 7.08% 6.76%
Portfolio Turnover Rate................................... 7.71% 2.55% 30.73% 11.25% 0.66%
</TABLE>
60
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
-------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE LARGE CAP INTERNATIONAL PORTFOLIO
---------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period...................... $ 16.28 $ 14.27 $ 14.18 $ 12.60 $ 11.91
-------- -------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income..................................... 0.20 0.23 0.23 0.21 0.15
Net Gains (Losses) on Securities (Realized and
Unrealized)............................................. 3.19 2.03 0.15 1.39 0.95
-------- -------- ------- ------- -------
Total From Investment Operations.......................... 3.39 2.26 0.38 1.60 1.10
-------- -------- ------- ------- -------
LESS DISTRIBUTIONS
Net Investment Income..................................... (0.26) (0.25) (0.21) (0.02) (0.18)
Net Realized Gains........................................ -- -- (0.08) -- (0.23)
Tax Return of Capital..................................... -- -- -- -- --
-------- -------- ------- ------- -------
Total Distributions....................................... (0.26) (0.25) (0.29) (0.02) (0.41)
-------- -------- ------- ------- -------
Net Asset Value, End of Period............................ $ 19.41 $ 16.28 $ 14.27 $ 14.18 $ 12.60
======== ======== ======= ======= =======
Total Return.............................................. 21.12% 16.13% 2.80% 12.68% 9.37%
-------- -------- ------- ------- -------
Net Assets, End of Period (thousands)..................... $268,340 $114,593 $87,223 $79,322 $67,940
Ratio of Expenses to Average Net Assets................... 0.53% 0.47% 0.47% 0.58% 0.57%
Ratio of Net Investment Income to Average Net Assets...... 1.38% 1.63% 1.69% 1.57% 1.84%
Portfolio Turnover Rate................................... 1.73% 4.36% 2.31% 17.65% 24.44%
</TABLE>
61
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
-------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE DFA INTERNATIONAL VALUE PORTFOLIO
-------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period.............. $ 11.88 $ 10.94 $ 11.90 $ 10.55 $ 10.06
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment
Income.............. 0.28 0.24 0.19 0.21 0.19
Net Gains (Losses) on
Securities (Realized
and Unrealized)..... 1.24 1.08 (0.65) 1.31 0.51
-------- -------- -------- -------- --------
Total from Investment
Operations.......... 1.52 1.32 (0.46) 1.52 0.70
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Net Investment
Income.............. (0.29) (0.24) (0.21) (0.17) (0.19)
Net Realized Gains.... (0.04) (0.14) (0.29) -- (0.02)
-------- -------- -------- -------- --------
Total Distributions... (0.33) (0.38) (0.50) (0.17) (0.21)
-------- -------- -------- -------- --------
Net Asset Value, End
of Period........... $ 13.07 $ 11.88 $ 10.94 $ 11.90 $ 10.55
======== ======== ======== ======== ========
Total Return.......... 12.96% 12.29% (4.04)% 14.54% 6.95%
-------- -------- -------- -------- --------
Net Assets, End of
Period
(thousands)......... $453,713 $435,587 $370,117 $316,708 $245,243
Ratio of Expenses to
Average Net Assets
(1)................. 0.52% 0.53% 0.56% 0.56% 0.65%
Ratio of Expenses to
Average Net Assets
(excluding waivers
and assumption of
expenses) (1)....... 0.52% 0.53% 0.56% 0.57% 0.72%
Ratio of Net
Investment Income to
Average Net
Assets.............. 2.21% 2.04% 1.72% 2.22% 1.79%
Ratio of Net
Investment Income to
Average Net Assets
(excluding waivers
and assumption of
expenses)........... 2.21% 2.04% 1.72% 2.21% 1.71%
Portfolio Turnover
Rate................ N/A N/A N/A N/A N/A
Portfolio Turnover
Rate of Master Fund
Series.............. 5.80% 15.41% 22.55% 12.23% 9.75%
</TABLE>
- ------------------------------
(1) Represents the combined ratio for the Portfolio and its pro-rata share of
its Master Fund Series.
N/A Refer to the Master Fund Series.
62
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
-------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE INTERNATIONAL SMALL COMPANY PORTFOLIO
------------------------------------------------------
YEAR YEAR YEAR OCT. 1,
ENDED ENDED ENDED TO
NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1999 1998 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 7.82 $ 7.82 $ 9.96 $ 10.00
-------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income....................................... 0.15 0.15 0.10 0.01
Net Gains (Losses) on Securities (Realized and
Unrealized)............................................... 1.31 (0.04) (2.22) (0.05)
-------- -------- -------- --------
Total From Investment Operations............................ 1.46 0.11 (2.12) (0.04)
-------- -------- -------- --------
LESS DISTRIBUTIONS
Net Investment Income....................................... (0.15) (0.11) (0.02) --
Net Realized Gains.......................................... -- -- -- --
-------- -------- -------- --------
Total Distributions......................................... (0.15) (0.11) (0.02) --
-------- -------- -------- --------
Net Asset Value, End of Period $ 9.13 $ 7.82 $ 7.82 $ 9.96
======== ======== ======== ========
Total Return................................................ 19.07% 1.49% (21.35)% (0.40)%#
-------- -------- -------- --------
Net Assets, End of Period (thousands)....................... $250,442 $273,992 $230,469 $104,118
Ratio of Expenses to Average Net Assets**................... 0.75% 0.73% 0.75% 0.70%*
Ratio of Expenses to Average Net Assets (Excluding Waivers
and Assumption of Expenses)............................... 0.75% 0.73% 0.75% 0.79%*
Ratio of Net Investment Income to Average Net Assets........ 1.76% 1.62% 1.46% 0.54%*
Ratio of Net Investment Income to Average Net Assets
(Excluding Waivers and Assumption of Expenses)............ 1.76% 1.62% 1.46% 0.45%*
Portfolio Turnover Rate..................................... N/A*** N/A*** N/A*** N/A***
</TABLE>
- ------------------------------
* Annualized
# Non-annualized
** Represents the combined ratios for the Portfolio and its pro-rata share of
its Master Fund Series for the period November 30, 1996 and subsequent
years.
*** Refer to the Master Fund Series
63
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
-------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE JAPANESE SMALL COMPANY PORTFOLIO
----------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................. $ 9.10 $ 9.45 $ 21.03 $ 22.78 $ 25.06
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................................. 0.05 0.07 0.09 0.07 0.06
Net Gains (Losses) on Securities (Realized and
Unrealized)......................................... 2.02 (0.31) (10.45) (1.45) (1.65)
-------- -------- -------- -------- --------
Total From Investment Operations.................. 2.07 (0.24) (10.36) (1.38) (1.59)
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Net Investment Income................................. (0.06) (0.11) (0.06) (0.01) (0.06)
Net Realized Gains.................................... -- -- (1.16) (0.36) (0.63)
-------- -------- -------- -------- --------
Total Distributions................................... (0.06) (0.11) (1.22) (0.37) (0.69)
-------- -------- -------- -------- --------
Net Asset Value, End of Period........................ $ 11.11 $ 9.10 $ 9.45 $ 21.03 $ 22.78
======== ======== ======== ======== ========
Total Return.......................................... 22.96% (2.37)% (51.90)% (6.28)% (6.54)%
-------- -------- -------- -------- --------
Net Assets, End of Period (thousands)................. $144,533 $119,714 $114,017 $294,120 $371,113
Ratio of Expenses to Average Net Assets**............. 0.73% 0.74% 0.73% 0.72% 0.74%
Ratio of Net Investment Income to Average Net
Assets.............................................. 0.61% 0.85% 0.50% 0.24% 0.25%
Portfolio Turnover Rate............................... N/A N/A N/A 18.52%*(a) 7.79%
Portfolio Turnover Rate of Master Fund Series......... 6.21% 8.14% 13.17% 1.67%*(b) N/A
</TABLE>
- ------------------------------
* Annualized
** Represents the combined ratios for the Portfolio and its pro-rata share of
its Master Fund Series.
N/A Refer to the Master Fund Series.
(a) Portfolio turnover calculated for the period December 1, 1995 to August 9,
1996 (through the date on which the Portfolio transferred its investable
assets to its corresponding Master Fund series in a tax-free exchange).
(b) Calculated for the period August 9 to November 30, 1996.
64
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
-------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE PACIFIC RIM SMALL COMPANY PORTFOLIO
----------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $ 6.55 $ 9.52 $ 16.63 $ 14.38 $ 15.98
-------- ------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income.................................. 0.20 0.25 0.32 0.27 0.34
Net Gains (Losses) on Securities (Realized and
Unrealized).......................................... 3.23 (2.40) (6.22) 2.40 (1.33)
-------- ------- -------- -------- --------
Total From Investment Operations....................... 3.43 (2.15) (5.90) 2.67 (0.99)
-------- ------- -------- -------- --------
LESS DISTRIBUTIONS
Net Investment Income.................................. (0.22) (0.32) (0.33) (0.02) (0.34)
Net Realized Gains..................................... -- (0.50) (0.88) (0.40) (0.27)
-------- ------- -------- -------- --------
Total Distributions.................................... (0.22) (0.82) (1.21) (0.42) (0.61)
-------- ------- -------- -------- --------
Net Asset Value, End of Period......................... $ 9.76 $ 6.55 $ 9.52 $ 16.63 $ 14.38
======== ======= ======== ======== ========
Total Return........................................... 54.36% (23.98)% (38.07)% 19.06% (6.27)%
-------- ------- -------- -------- --------
Net Assets, End of Period (thousands).................. $131,782 $89,330 $111,320 $215,542 $193,137
Ratio of Expenses to Average Net Assets**.............. 0.94% 0.84% 0.84% 0.84% 0.83%
Ratio of Net Investment Income to Average Net Assets... 2.50% 3.51% 1.95% 1.70% 2.22%
Portfolio Turnover Rate................................ N/A N/A N/A 7.05%*(a) 5.95%
Portfolio Turnover Rate of Master Fund Series.......... 33.65% 25.84% 24.00% 8.04%(b) N/A
</TABLE>
- ------------------------------
* Annualized
** Represents the combined ratios for the Portfolio and its pro-rata share of
its Master Fund Series.
N/A Refer to the Master Fund Series.
(a) Portfolio turnover calculated for the period December 1, 1995 to August 9,
1996 (through the date on which the Portfolio transferred its investable
assets to its corresponding Master Fund series in a tax-free exchange).
(b) Calculated for the period August 9 to November 30, 1996.
65
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
-------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE UNITED KINGDOM SMALL COMPANY PORTFOLIO
----------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................... $ 21.63 $ 28.69 $ 28.47 $ 24.09 $ 23.20
------- ------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)............................ 0.77 0.87 0.81 0.72 0.84
Net Gains (Losses) on Securities (Realized and
Unrealized)........................................... 5.67 (4.27) 1.46 5.31 1.12
------- ------- -------- -------- --------
Total From Investment Operations........................ 6.44 (3.40) 2.27 6.03 1.96
------- ------- -------- -------- --------
LESS DISTRIBUTIONS
Net Investment Income................................... (0.81) (0.84) (0.73) (0.06) (0.76)
Net Realized Gains...................................... (3.04) (2.82) (1.32) (1.59) (0.31)
------- ------- -------- -------- --------
Total Distributions..................................... (3.85) (3.66) (2.05) (1.65) (1.07)
------- ------- -------- -------- --------
Net Asset Value, End of Period.......................... $ 24.22 $ 21.63 $ 28.69 $ 28.47 $ 24.09
======= ======= ======== ======== ========
Total Return............................................ 36.08% (13.56)% 8.45% 26.76% 8.39%
------- ------- -------- -------- --------
Net Assets, End of Period (thousands)................... $83,826 $79,231 $130,891 $166,789 $167,730
Ratio of Expenses to Average Net Assets**............... 0.72% 0.72% 0.70% 0.73% 0.72%
Ratio of Net Investment Income to Average Net Assets.... 3.11% 2.87% 2.40% 2.49% 2.51%
Portfolio Turnover Rate................................. N/A N/A N/A 3.72%*(a) 7.82%
Portfolio Turnover Rate of Master Fund Series........... 4.95% 11.26% 4.26% 4.55%*(b) N/A
</TABLE>
- ------------------------------
* Annualized
** Represents the combined ratios for the Portfolio and its pro-rata share of
its Master Fund Series for the period ended November 30, 1996 and subsequent
periods.
(a) Portfolio turnover calculated for the period December 1, 1995 to August 9,
1996 (through the date on which the Portfolio transferred its investable
assets to its corresponding Master Fund Series in a tax-free exchange).
(b) Calculated for the period August 9 to November 30, 1996.
N/A Refer to the Master Fund Series
66
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
-------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE CONTINENTAL SMALL COMPANY PORTFOLIO
----------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................. $ 17.42 $ 15.94 $ 15.26 $ 14.13 $ 14.63
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................................. 0.24 0.28 0.29 0.30 0.29
Net Gains (Losses) on Securities (Realized and
Unrealized)......................................... (1.26) 2.55 1.55 1.58 (0.48)
-------- -------- -------- -------- --------
Total From Investment Operations...................... (1.02) 2.83 1.84 1.88 (0.19)
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Net Investment Income................................. (0.29) (0.25) (0.29) (0.02) (0.29)
Net Realized Gains.................................... (1.82) (1.10) (0.87) (0.73) (0.02)
-------- -------- -------- -------- --------
Total Distributions................................... (2.11) (1.35) (1.16) (0.75) (0.31)
-------- -------- -------- -------- --------
Net Asset Value, End of Period........................ $ 14.29 $ 17.42 $ 15.94 $ 15.26 $ 14.13
======== ======== ======== ======== ========
Total Return.......................................... (6.26%) 19.42% 13.02% 13.96% (1.33)%
-------- -------- -------- -------- --------
Net Assets, End of Period (thousands)................. $160,743 $199,838 $232,744 $299,325 $314,116
Ratio of Expenses to Average Net Assets............... 0.70%** 0.70%** 0.72%** 0.73%** 0.74%
Ratio of Net Investment Income to Average Net
Assets.............................................. 1.56% 1.32% 1.41% 1.81% 1.69%
Portfolio Turnover Rate............................... N/A N/A N/A 3.67%*(a) 9.79%
Portfolio Turnover Rate of Master Fund Series......... 10.74% 0.74% 3.46% 6.69%*(b) N/A
</TABLE>
- ------------------------------
* Annualized
** Represents the combined ratios for the Portfolio and its pro-rata share of
its Master Fund Series for the period ended November 30, 1996 and subsequent
periods.
(a) Portfolio turnover calculated for the period December 1, 1995 to August 9,
1996, (through the date on which the Portfolio transferred its investable
assets to its corresponding Master Fund Series in a tax-free exchange).
(b) Items calculated for the period August 9 to November 30, 1996.
67
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
-------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE DFA INTERNATIONAL
SMALL CAP VALUE PORTFOLIO
--------------------------------------------------------------------
YEAR YEAR YEAR YEAR DEC. 30,
ENDED ENDED ENDED ENDED 1994 TO
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1999 1998 1997 1996 1995
--------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................... $ 7.54 $ 7.95 $ 10.45 $ 9.68 $ 10.00
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................................... 0.14 0.15 0.12 0.11 0.05
Net Gains (Losses) on Securities (Realized and
Unrealized)........................................... 1.12 (0.16) (2.19) 0.66 (0.32)
-------- -------- -------- -------- --------
Total From Investment Operations........................ 1.26 (0.01) (2.07) 0.77 (0.27)
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Net Investment Income................................... (0.15) (0.12) (0.13) -- (0.04)
Net Realized Gains...................................... (0.16) (0.28) (0.30) -- (0.01)
-------- -------- -------- -------- --------
Total Distributions..................................... (0.31) (0.40) (0.43) -- (0.05)
-------- -------- -------- -------- --------
Net Asset Value, End of Period.......................... $ 8.49 $ 7.54 $ 7.95 $ 10.45 $ 9.68
======== ======== ======== ======== ========
Total Return............................................ 17.54% 0.17% (20.60)% 8.01% (2.73)%#
-------- -------- -------- -------- --------
Net Assets, End of Period (thousands)................... $525,133 $450,801 $431,257 $375,488 $147,125
Ratio of Expenses to Average Net Assets................. 0.83% 0.86% 0.90% 0.99% 1.23%*
Ratio of Net Investment Income to Average Net Assets.... 1.81% 1.85% 1.47% 1.38% 1.43%*
Portfolio Turnover Rate................................. 16.05% 18.71% 13.63% 14.52% 1.62%*
Portfolio Turnover Rate of Master Fund Series........... N/A N/A N/A N/A N/A
</TABLE>
- ------------------------------
* Annualized
# Non-annualized
68
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
-------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE EMERGING MARKETS PORTFOLIO
----------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $ 8.16 $ 9.61 $ 11.71 $ 10.35 $ 11.30
-------- -------- -------- -------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income.................................... 0.08 0.13 0.12 0.09 0.06
Net Gains (Losses) on Securities (Realized and
Unrealized)............................................ 4.22 (1.32) (2.13) 1.27 (0.96)
-------- -------- -------- -------- -------
Total From Investment Operations......................... 4.30 (1.19) (2.01) 1.36 (0.90)
-------- -------- -------- -------- -------
LESS DISTRIBUTIONS
Net Investment Income.................................... (0.09) (0.26) (0.09) -- (0.05)
Net Realized Gains....................................... -- -- -- -- --
-------- -------- -------- -------- -------
Total Distributions...................................... (0.09) (0.26) (0.09) -- (0.05)
-------- -------- -------- -------- -------
Net Asset Value, End of Period........................... $ 12.37 $ 8.16 $ 9.61 $ 11.71 $ 10.35
======== ======== ======== ======== =======
Total Return............................................. 53.34% (12.57)% (17.27)% 13.18% (7.96)%
-------- -------- -------- -------- -------
Net Assets, End of Period (thousands).................... $330,604 $225,227 $212,048 $162,025 $49,337
Ratio of Expenses to Average Net Assets**................ 0.91% 1.00% 0.99% 1.15% 1.58%
Ratio of Net Investment Income to Average Net Assets..... 0.90% 1.19% 1.19% 1.14% 0.98%
Portfolio Turnover Rate.................................. N/A N/A N/A N/A N/A
Portfolio Turnover Rate of Master Fund Series............ 15.59% 9.76% 0.54% 0.37% 8.17%
</TABLE>
- ------------------------------
** Represents the combined ratios for the Portfolio and its pro-rata share of
its Master Fund Series for the period ended November 30, 1996 and subsequent
periods.
N/A Refer to Master Fund Series
69
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
-------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE EMERGING MARKETS
SMALL CAP PORTFOLIO
-----------------------
YEAR MARCH 6,
ENDED TO
NOV. 30, NOV. 30,
1999 1998
-------- --------
<S> <C> <C>
Net Asset Value, Beginning of Period........................ $ 9.09 $10.00
------- ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income....................................... 0.04 (0.01)
Net Gains (Losses) on Securities (Realized and
Unrealized)............................................... 6.11 (0.90)
------- ------
Total From Investment Operations............................ 6.15 (0.91)
------- ------
LESS DISTRIBUTIONS
Net Investment Income....................................... -- --
Net Realized Gains.......................................... (0.36) --
------- ------
Total Distributions......................................... (.36) --
------- ------
Net Asset Value, End of Period.............................. $ 14.88 $ 9.09
======= ======
Total Return................................................ 70.30% (9.10)%#
------- ------
Net Assets, End of Period (thousands)....................... $11,734 $5,021
Ratio of Expenses to Average Net Assets**................... 1.77% 2.36%*(a)
Ratio of Net Investment Income to Average Net Assets........ 0.73% (0.29)%*(a)
Portfolio Turnover Rate..................................... N/A N/A
Portfolio Turnover Rate of Master Fund Series............... 23.98% 13.41%
</TABLE>
- ------------------------------
* Annualized
# Non-annualized
** Represents the combined ratios for the Portfolio and its pro-rata share of
its Master Fund Series for the period ended November 30, 1996 and subsequent
periods.
(a) Because of commencement of operations and related preliminary transaction
costs, these ratios are not necessarily indicative of future ratios.
N/A Refer to Master Fund Series
70
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
THE EMERGING MARKETS VALUE PORTFOLIO
FINANCIAL HIGHLIGHTS
-------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE APRIL 2, 1998
YEAR ENDED TO
NOV. 30, 1999 NOV. 30, 1998
-------------- --------------
<S> <C> <C>
Net Asset Value, Beginning of Period........................ $ 8.37 $ 10.00
------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income....................................... 0.33 0.06
Net Gains (Losses) on Securities (Realized and
Unrealized)............................................... 5.30 (1.69)
------- -------
Total from Investment Operations............................ 5.63 (1.63)
------- -------
LESS DISTRIBUTIONS
Net Investment Income....................................... (0.33) --
Net Realized Gains.......................................... -- --
------- -------
Total Distributions......................................... (0.33) --
------- -------
Net Asset Value, End of Period.............................. $ 13.67 $ 8.37
======= =======
Total Return................................................ 69.99% (16.30)%#
Net Assets, End of Period (thousands)....................... $43,608 $10,969
Ratio of Expenses to Average Net Assets (1)................. 1.05% 1.96%*
Ratio of Net Investment Income to Average Net Assets........ 1.87% 3.24%*
Portfolio Turnover Rate..................................... N/A N/A
Portfolio Turnover Rate of Master Fund Series............... 17.92% 34.84%(b)
</TABLE>
- ------------------------------
* Annualized
# Non-annualized
(1) Represents the combined ratio for the Portfolio and its pro-rata share of
its Master Fund Series.
(b) Calculated for the period ended November 30, 1998.
N/A Refer to the Master Fund Series.
71
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
-------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE DFA ONE-YEAR FIXED INCOME PORTFOLIO(1)
---------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................... $ 10.22 $ 10.23 $ 10.24 $ 10.21 $ 10.05
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................................... 0.52 0.57 0.59 0.56 0.60
Net Gains (Losses) on Securities (Realized and
Unrealized)........................................... (0.04) -- (0.01) 0.03 0.17
-------- -------- -------- -------- --------
Total From Investment Operations........................ 0.48 0.57 0.58 0.59 0.77
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Net Investment Income................................... (0.52) (0.57) (0.59) (0.56) (0.60)
Net Realized Gains...................................... (0.01) (0.01) -- -- (0.01)
-------- -------- -------- -------- --------
Total Distributions..................................... (0.53) (0.58) (0.59) (0.56) (0.61)
-------- -------- -------- -------- --------
Net Asset Value, End of Period.......................... $ 10.17 $ 10.22 $ 10.23 $ 10.24 $ 10.21
======== ======== ======== ======== ========
Total Return............................................ 4.80% 5.74% 5.84% 5.94% 7.80%
-------- -------- -------- -------- --------
Net Assets, End of Period (thousands)................... $712,520 $752,510 $752,237 $854,521 $704,950
Ratio of Expenses to Average Net Assets**............... 0.21% 0.21% 0.22% 0.21% 0.20%
Ratio of Net Investment Income to Average Net Assets.... 5.07% 5.51% 5.79% 5.39% 5.86%
Portfolio Turnover Rate................................. N/A N/A N/A N/A N/A
Portfolio Turnover Rate of Master Fund Series........... 57.58% 23.62% 82.84% 95.84% 81.31%
</TABLE>
- ------------------------------
(1) Restated to reflect a 900% stock dividend as of January 2, 1996.
** Represents the combined ratio for the Portfolio and its pro-rata share of
its Master Fund Series for the period ended November 30, 1995 and subsequent
periods.
N/A Refer to Master Fund Series
72
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
-------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
THE DFA TWO-YEAR GLOBAL
FIXED INCOME PORTFOLIO
-----------------------------------------------------
YEAR YEAR YEAR FEB. 9,
ENDED ENDED ENDED TO
NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1999 1998 1997 1996
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 10.21 $ 10.40 $ 10.37 $ 10.00
-------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income....................................... 0.56 0.61 0.69 0.24
Net Gains (Losses) on Securities (Realized and
Unrealized)............................................... (0.09) 0.01 (0.12) 0.35
-------- -------- -------- --------
Total From Investment Operations............................ 0.47 0.62 0.57 0.59
-------- -------- -------- --------
LESS DISTRIBUTIONS
Net Investment Income....................................... (0.36) (0.79) (0.53) (0.22)
Net Realized Gains.......................................... (0.01) (0.02) (0.01) --
-------- -------- -------- --------
Total Distributions......................................... (.37) (0.81) (0.54) (0.22)
-------- -------- -------- --------
Net Asset Value, End of Period.............................. $ 10.31 $ 10.21 $ 10.40 $ 10.37
======== ======== ======== ========
Total Return................................................ 4.69% 6.39% 5.66% 6.01%#
-------- -------- -------- --------
Net Assets, End of Period (thousands)....................... $531,488 $440,885 $418,905 $319,343
Ratio of Expenses to Average Net Assets**................... 0.27% 0.29% 0.34% 0.33%*
Ratio of Net Investment Income to Average Net Assets........ 5.59% 5.90% 6.70% 3.10%*
Portfolio Turnover Rate..................................... N/A N/A N/A N/A
Portfolio Turnover Rate of Master Fund Series............... 78.15% 112.93% 119.27% 87.07%
</TABLE>
- ------------------------------
* Annualized
# Non-annualized
** Represents the combined ratio for the Portfolio and its pro-rata share of
its Master Fund Series for the period ended November 30, 1995 and subsequent
periods.
N/A Refer to Master Fund Series
73
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
-------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE DFA FIVE-YEAR GOVERNMENT PORTFOLIO
---------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................... $ 10.35 $ 10.36 $ 10.42 $ 10.05 $ 9.75
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................................... 0.49 0.54 0.59 0.65 0.59
Net Gains (Losses) on Securities (Realized and
Unrealized)........................................... (0.08) 0.01 (0.06) 0.09 0.30
-------- -------- -------- -------- --------
Total From Investment Operations........................ 0.41 0.55 0.53 0.74 0.89
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Net Investment Income................................... (0.50) (0.56) (0.59) (0.37) (0.59)
Net Realized Gains...................................... -- -- -- -- --
-------- -------- -------- -------- --------
Total Distributions..................................... (0.50) (0.56) (0.59) (0.37) (0.59)
-------- -------- -------- -------- --------
Net Asset Value, End of Period.......................... $ 10.26 $ 10.35 $ 10.36 $ 10.42 $ 10.05
======== ======== ======== ======== ========
Total Return............................................ 4.11% 5.50% 5.39% 7.51% 9.35%
-------- -------- -------- -------- --------
Net Assets, End of Period (thousands)................... $219,022 $210,986 $204,377 $174,386 $300,921
Ratio of Expenses to Average Net Assets................. 0.28% 0.29% 0.29% 0.30% 0.28%
Ratio of Net Investment Income to Average Net Assets.... 4.95% 5.18% 5.95% 5.63% 6.14%
Portfolio Turnover Rate................................. 57.35% 6.93% 27.78% 211.97% 398.09%
</TABLE>
- ------------------------------
Restated to reflect a 900% stock dividend as of January 2, 1996.
74
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
-------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE DFA FIVE-YEAR GLOBAL FIXED INCOME PORTFOLIO
---------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................... $ 10.65 $ 10.88 $ 11.04 $ 10.51 $ 9.81
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................................... 0.37 0.45 0.48 0.50 0.39
Net Gains (Losses) on Securities (Realized and
Unrealized)........................................... 0.01 0.42 0.33 0.61 1.08
-------- -------- -------- -------- --------
Total From Investment Operations........................ 0.38 0.87 0.81 1.11 1.47
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Net Investment Income................................... (0.22) (1.04) (0.88) (0.58) (0.77)
Net Realized Gains...................................... (0.28) (0.06) (0.09) -- --
-------- -------- -------- -------- --------
Total Distributions..................................... (0.50) (1.10) (0.97) (0.58) (0.77)
-------- -------- -------- -------- --------
Net Asset Value, End of Period.......................... $ 10.53 $ 10.65 $ 10.88 $ 11.04 $ 10.51
======== ======== ======== ======== ========
Total Return............................................ 3.63% 8.78% 7.87% 11.13% 15.23%
-------- -------- -------- -------- --------
Net Assets, End of Period (thousands)................... $472,334 $371,619 $250,078 $165,772 $208,166
Ratio of Expenses to Average Net Assets................. 0.39% 0.41% 0.42% 0.46% 0.46%
Ratio of Net Investment Income to Average Net Assets.... 3.62% 3.87% 4.50% 4.88% 5.80%
Portfolio Turnover Rate................................. 58.80% 74.36% 95.12% 97.78% 130.41%
</TABLE>
- ------------------------------
Restated to reflect a 900% stock dividend as of January 2, 1996.
75
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
-------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
THE DFA INTERMEDIATE GOVERNMENT FIXED INCOME PORTFOLIO
----------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................... $ 11.78 $ 11.28 $ 11.22 $ 11.24 $ 10.22
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................................... 0.61 0.61 0.66 0.65 0.70
Net Gains (Losses) on Securities (Realized and
Unrealized)........................................... (0.89) 0.59 0.06 (0.13) 1.11
-------- -------- -------- -------- --------
Total From Investment Operations........................ (0.28) 1.20 0.72 0.52 1.81
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Net Investment Income................................... (0.58) (0.65) (0.66) (0.50) (0.70)
Net Realized Gains...................................... (0.08) (0.05) -- (0.04) (0.09)
-------- -------- -------- -------- --------
Total Distributions..................................... (0.66) (0.70) (0.66) (0.54) (0.79)
-------- -------- -------- -------- --------
Net Asset Value, End of Period.......................... $ 10.84 $ 11.78 $ 11.28 $ 11.22 $ 11.24
======== ======== ======== ======== ========
Total Return............................................ (2.41)% 11.07% 6.75% 4.98% 18.04%
-------- -------- -------- -------- --------
Net Assets, End of Period (thousands)................... $256,376 $239,035 $136,555 $107,944 $ 78,087
Ratio of Expenses to Average Net Assets................. 0.21% 0.24% 0.25% 0.26% 0.27%
Ratio of Net Investment Income to Average Net Assets.... 5.58% 5.77% 6.20% 6.22% 6.44%
Portfolio Turnover Rate................................. 13.05% 23.79% 24.06% 30.84% 40.79%
</TABLE>
- ------------------------------
Restated to reflect a 900% stock dividend as of January 2, 1996.
76
<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
DIMENSIONAL FUND ADVISORS LTD. AND TRANSFER AGENT
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 STRADLEY, RONON, STEVENS & YOUNG, LLP
1 MacQuarie Place 2600 One Commerce Square
Sydney, New South Wales 2000 Philadelphia, PA 19103-7098
Australia
Tel. No. (612) 9 247-7822
CUSTODIANS--INTERNATIONAL INDEPENDENT ACCOUNTANTS
CITIBANK, N.A. PRICEWATERHOUSECOOPERS LLP
111 Wall Street 2400 Eleven Penn Center
New York, NY 10005 Philadelphia, PA 19103
THE CHASE MANHATTAN BANK
4 Chase Metrotech Center
Brooklyn, NY 11245
</TABLE>
77
<PAGE>
OTHER AVAILABLE INFORMATION
You can find more information about the Funds and their Portfolios in the Funds'
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.
REQUEST FREE COPIES FROM:
- - Your investment advisor -- you are a client of an investment advisor who has
invested in the Portfolios on your behalf.
- - The Fund -- you represent an institutional investor, registered investment
advisor or other qualifying investor. Call collect at (310) 395-8005.
- - Access current prospectuses on our web site at dfafunds.com.
- - 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
DIMENSIONAL INVESTMENT GROUP INC. (DFA INTERNATIONAL VALUE
PORTFOLIO)--REGISTRATION NO. 811-6067
DFA INVESTMENT DIMENSIONS GROUP INC. (ALL OTHER PORTFOLIOS)--REGISTRATION NO.
811-3258
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
P R O S P E C T U S
MARCH 24, 2000
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 of the Fund's Portfolios has its own investment objective and
policies, and is the equivalent of a separate mutual fund. The Portfolios do
not charge sales commissions or "loads".
PORTFOLIOS FOR INVESTORS SEEKING TO INVEST IN:
DOMESTIC EQUITY SECURITIES
<TABLE>
<S> <C>
Tax-Managed U.S. Marketwide Tax-Managed U.S. 5-10 Value
Value Portfolio Portfolio X
Tax-Managed U.S. Marketwide Tax-Managed U.S. 6-10 Small
Value Portfolio X Company Portfolio
Tax-Managed U.S. 5-10 Value Tax-Managed U.S. 6-10 Small
Portfolio Company Portfolio X
</TABLE>
INTERNATIONAL EQUITY SECURITIES
<TABLE>
<S> <C>
Tax-Managed DFA International Tax-Managed DFA International
Value Portfolio Value Portfolio X
</TABLE>
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......................................... 1
ABOUT THE PORTFOLIOS...................................... 1
MANAGEMENT................................................ 1
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS............... 3
OTHER RISKS............................................... 4
RISK AND RETURN BAR CHARTS AND TABLES..................... 4
FEES AND EXPENSES........................................... 6
SECURITIES LENDING REVENUE.................................. 7
HIGHLIGHTS.................................................. 7
DIVIDEND POLICY............................................. 7
U.S. VALUE PORTFOLIOS....................................... 8
U.S. SMALL COMPANY PORTFOLIOS............................... 9
INTERNATIONAL EQUITY PORTFOLIOS............................. 9
TAX MANAGEMENT STRATEGIES................................... 11
PORTFOLIO TRANSACTIONS--ALL PORTFOLIOS...................... 12
SECURITIES LOANS............................................ 12
DEVIATION FROM MARKET CAPITALIZATION WEIGHTING.............. 12
MANAGEMENT OF THE FUNDS..................................... 13
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES............ 14
PURCHASE OF SHARES.......................................... 15
VALUATION OF SHARES......................................... 17
EXCHANGE OF SHARES.......................................... 18
REDEMPTION OF SHARES........................................ 19
THE FEEDER PORTFOLIOS....................................... 20
FINANCIAL HIGHLIGHTS........................................ 21
SERVICE PROVIDERS........................................... 23
</TABLE>
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RISK/RETURN SUMMARY
ABOUT THE PORTFOLIOS
- -------------------
The Portfolios:
- - Are generally offered to institutional investors and clients of registered
investment advisers.
- - Do not charge sales commissions or "loads".
- - Are designed for long-term investors.
The Portfolios are no-load and low cost.
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.
SOME PORTFOLIOS HAVE SPECIAL STRUCTURES: The Tax-Managed U.S. Marketwide Value
Portfolio and Portfolio X are called "Feeder Portfolios", because they do not
buy individual securities directly. Instead, they invest in corresponding mutual
funds called "Master Funds". Master Funds in turn purchase stocks, bonds and/or
other securities.
POSSIBLE COMPLICATIONS: The Master-Feeder structure is relatively new and more
complex. While this structure is designed to reduce costs, it may not do so. As
a result, a Feeder Portfolio might encounter operational or other complications.
A Master Fund buys securities directly. A corresponding Feeder Portfolio invests
in the Master Fund's shares. The two have the same gross investment returns.
MANAGEMENT
- ------------
Dimensional Fund Advisors Inc. (the "Advisor") is the investment manager for
each non-Feeder Portfolio and Master Fund. (A Feeder Portfolio does not need an
investment manager.)
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).
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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.
Certain Domestic Equity Portfolios use a market capitalization segmentation
approach. Broadly speaking, this technique involves:
1. Dividing all the companies traded on the New York Stock Exchange ("NYSE")
into 10 groups or "deciles" based on market capitalization. Stocks in
decile 1 have the biggest market capitalizations and those in decile 10, the
smallest.
2. Combining two or more of these deciles into a market cap segment or range.
3. Generally, considering a stock (it may not necessarily be NYSE traded) for
purchase only if its market capitalization falls within the range created.
For example, the Tax-Managed U.S. 5-10 Value Portfolios buy stocks with market
caps in the range defined by stocks in NYSE deciles 5 through 10. Similarly,
Tax-Managed U.S. 6-10 Small Company Portfolios purchase stocks with market caps
equivalent to those of stocks in NYSE deciles 6 through 10; thus their name. In
fact, the name of each other Portfolio employing a market capitalization
segmentation approach also includes the NYSE deciles describing its particular
market capitalization segment.
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.
TAX-MANAGED PORTFOLIO STRATEGIES:
The Advisor's tax management strategies are designed to minimize taxable
distributions to shareholders. Generally, the Advisor buys and sells a
tax-managed portfolio's securities with the goals of:
1. Delaying and minimizing the realization of net capital gains (e.g.,
appreciated stocks might be sold later).
2. Maximizing the extent to which any realized net capital gains are long-term
in nature (i.e., taxable at lower capital gains tax rates).
3. Minimizing dividend income.
4. Selling securities to other tax-managed portfolios in order to offset gains
by realizing losses.
HOW THE PORTFOLIOS DIFFER: The Portfolios will invest in a large portion of the
eligible securities, but may not have identical holdings. Thus, the Portfolios
may sell securities to one another, in order to employ certain tax management
strategies.
Shareholders of Tax-Managed Portfolios may save on taxes while they hold their
shares. However, they will still have to pay taxes if they sell their shares at
a profit.
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INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
- -----------------------------------------
DOMESTIC EQUITY PORTFOLIOS:
THE U.S. VALUE PORTFOLIOS
- ----------------------
TAX-MANAGED U.S. MARKETWIDE VALUE PORTFOLIO
TAX-MANAGED U.S. MARKETWIDE VALUE PORTFOLIO X
TAX-MANAGED U.S. 5-10 VALUE PORTFOLIO
TAX-MANAGED U.S. 5-10 VALUE PORTFOLIO X
- - INVESTMENT OBJECTIVE(S): Long-term capital appreciation while minimizing
federal income taxes on returns.
- - INVESTMENT STRATEGY:
- TAX-MANAGED U.S. MARKETWIDE VALUE PORTFOLIOS -- Buy a Master Fund that
purchases value stocks of United States companies on a market
capitalization weighted basis.
- TAX-MANAGED U.S. 5-10 VALUE PORTFOLIOS -- Purchase value stocks of United
States companies on a market capitalization weighted basis.
- - HOW THE PORTFOLIOS DIFFER: The Portfolios focus on different parts of the
value stocks universe:
- TAX-MANAGED U.S. MARKETWIDE PORTFOLIOS -- The full universe except for very
small cap stocks.
- TAX-MANAGED U.S. 5-10 VALUE PORTFOLIOS -- Mid and small capitalization
issues.
"VALUE STOCKS": Compared to other stocks, value stocks sell for low prices
relative to their earnings, dividends and book value.
In selecting value stocks, the Advisor primarily considers price relative to
book value.
MARKET RISK: Although securities of larger firms fluctuate relatively less,
economic, political and issuer specific events will cause the value of all
securities to fluctuate.
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.
THE U.S. SMALL COMPANY PORTFOLIOS
- -------------------------------
TAX-MANAGED U.S. 6-10 SMALL COMPANY PORTFOLIO
TAX-MANAGED U.S. 6-10 SMALL COMPANY PORTFOLIO X
- - INVESTMENT OBJECTIVE(S): Long-term capital appreciation while minimizing
federal income taxes on returns.
- - INVESTMENT STRATEGY: Purchase small company stocks using a market cap
weighted approach.
RISK OF VERY SMALL COMPANIES: Securities of very small firms are often less
liquid than those of larger companies. As a result, the stocks of very small
companies may fluctuate more in price than the stocks of larger companies.
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INTERNATIONAL EQUITY PORTFOLIOS:
TAX-MANAGED DFA INTERNATIONAL VALUE PORTFOLIO
TAX-MANAGED DFA INTERNATIONAL VALUE PORTFOLIO X
- - INVESTMENT OBJECTIVE: Long-term capital appreciation while minimizing federal
income taxes on returns.
- - INVESTMENT STRATEGY: Purchase value stocks of large non-U.S. companies on a
market capitalization weighted basis in each applicable country.
FOREIGN SECURITIES AND CURRENCIES RISK: Foreign securities prices may decline or
fluctuate because of: (a) economic or political actions 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.
Most Portfolios and Master Funds do not hedge their 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). The Tax-
Managed DFA International Value Portfolios may use foreign currency contracts to
hedge foreign currency risks. Hedging with derivatives may increase expenses,
and there is no guarantee that a hedging strategy will work.
SECURITIES LENDING:
- ----------------
Non-Feeder Portfolios and Master Funds 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.
RISK AND RETURN BAR CHARTS AND TABLES
- --------------------------------------
The Bar Charts and Tables opposite show each Portfolio's returns and are meant
to provide some indication of the risks of investing in the Portfolios by
comparing returns with those of a broad measure of market performance. Past
performance is not an indication of future results. The Tax-Managed U.S.
Marketwide Value Portfolio X, Tax-Managed U.S. 5-10 Value Portfolio X,
Tax-Managed U.S. 6-10 Small Company Portfolio X, Tax-Managed DFA International
Value Portfolio and Tax-Managed DFA International Value Portfolio X have not
been in operation for a full calendar year, so no information is shown for them.
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EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TAX MANAGED
U.S. MARKETWIDE
VALUE PORTFOLIO
<S> <C> <C> <C>
Total Returns (%)
1999 5.44
January 1999-December 1999
Highest Quarter Lowest Quarter
16.45 (4/99-6/99) -12.02 (7/99-9/99)
Period ending December 31, 1999
Since 12/98
Annualized Returns (%) Inception
Tax-Managed U.S. Marketwide Value Portfolio 5.44
Russell 3000 Value Index 6.64
TAX-MANAGED
U.S. 5-10 VALUE PORTFOLIO
Total Returns (%)
1999 12.76
January 1999-December 1999
Highest Quarter Lowest Quarter
23.04 (4/99-6/99) -6.82 (7/99-9/99)
Period ending December 31, 1999
Since 12/98
Annualized Returns (%) Inception
Tax-Managed U.S. 5-10 Value Portfolio 12.76
Russell 2000 Value Index -1.49
TAX-MANAGED U.S. 6-10
SMALL COMPANY PORTFOLIO
Total Returns (%)
1999 30.08
January 1999-December 1999
Highest Quarter Lowest Quarter
21.71 (4/99-6/99) -6.78 (1/99-3/99)
Period ending December 31, 1999
Since 12/98
Annualized Returns (%) Inception
Tax-Managed U.S. 6-10 30.08
Small Company Portfolio
Russell 2000 Index 21.26
</TABLE>
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FEES AND EXPENSES
This table describes the fees and expenses you may pay if you buy and hold
shares of the Portfolios.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT): NONE
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM PORTFOLIO ASSETS)
Except as indicated below, the expenses in the following table are
annualized based on those incurred by the Portfolios (and the corresponding
Master Fund, where applicable) from inception through the fiscal year ended
November 30, 1999.
<TABLE>
<CAPTION>
TOTAL
ANNUAL
ANNUAL FUND OPERATING EXPENSES MANAGEMENT OTHER OPERATING
(AS A PERCENTAGE OF AVERAGE NET ASSETS) FEE EXPENSES EXPENSES
- ------------------------------------------------------------ ---------- -------- ---------
<S> <C> <C> <C>
Tax-Managed U.S. Marketwide Value(1)........................ 0.35% 0.34% 0.69%
Tax-Managed U.S. Marketwide Value X(1)(2)................... 0.35% 0.13% 0.48%
Tax-Managed U.S. 5-10 Value................................. 0.50% 0.14% 0.64%
Tax-Managed U.S. 5-10 Value X(2)............................ 0.50% 0.13% 0.63%
Tax-Managed U.S. 6-10 Small Company......................... 0.50% 0.28% 0.78%
Tax-Managed U.S. 6-10 Small Company X(2).................... 0.50% 0.13% 0.63%
Tax-Managed DFA International Value......................... 0.50% 1.06% 1.56%
Tax-Managed DFA International Value X(2).................... 0.50% 0.45% 0.95%
</TABLE>
- ------------------------
(1) Feeder Portfolio. The "Management Fee" includes an investment advisory fee
payable by the Master Fund and an administration fee payable by the Feeder
Portfolio.
(2) "Other Expenses" are annualized estimates based on anticipated fees and
expenses through the fiscal year ending November 30, 2000. These Portfolios
and Master Fund had not begun operations as of the date of this Prospectus.
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>
Tax-Managed U.S. Marketwide Value........................... $ 70 $221 $384 $ 859
Tax-Managed U.S. Marketwide Value X......................... 49 154 N/A N/A
Tax-Managed U.S. 5-10 Value................................. 65 205 357 798
Tax-Managed U.S. 5-10 Value X............................... 64 209 N/A N/A
Tax-Managed U.S. 6-10 Small Company......................... 80 249 433 966
Tax-Managed U.S. 6-10 Small Company X....................... 64 202 N/A N/A
Tax-Managed DFA International Value......................... 159 493 850 1,856
Tax-Managed DFA International Value X....................... 97 303 N/A N/A
</TABLE>
With respect to the Tax-Managed U.S. Marketwide Value Portfolios, the
Example summarizes the aggregate annual operating expenses of both the
Portfolios and the corresponding Master Funds in which the Portfolios invest.
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The Tax-Managed U.S. Marketwide Value Portfolio X, Tax-Managed U.S. 5-10
Value Portfolio X, Tax-Managed U.S. 6-10 Small Company Portfolio X and
Tax-Managed DFA International Value Portfolio X (and the corresponding Master
Fund, where applicable) are new and, therefore, the above example is based on
estimated expenses for the current fiscal year and does not extend over five-
and ten-year periods.
SECURITIES LENDING REVENUE
For the fiscal year ended November 30, 1999, the following Portfolios and
Master Funds received the following net revenue from a securities lending
program (See "SECURITIES LOANS") which constituted a percentage of the average
daily net assets of the Portfolio or Master Fund:
<TABLE>
<CAPTION>
PERCENTAGE
OF NET
PORTFOLIO/MASTER FUND NET REVENUE ASSETS
- --------------------- ----------- ----------
<S> <C> <C>
Tax-Managed U.S. Marketwide Value Series.................... $ 6,000 0.01%
Tax-Managed U.S. 5-10 Value Portfolio....................... 111,000 0.06%
Tax-Managed U.S. 6-10 Small Company Portfolio............... 43,000 0.12%
</TABLE>
HIGHLIGHTS
MANAGEMENT AND ADMINISTRATIVE SERVICES
The Advisor serves as investment advisor to each of the Portfolios, except
the Feeder Portfolios, and to each Master Fund. Dimensional Fund Advisors Ltd.
and DFA Australia Limited provide consulting services to the Advisor with
respect to the Tax-Managed DFA International Value Portfolios. The Advisor
provides each Feeder Portfolio with certain administrative services. (See
"MANAGEMENT OF THE FUNDS.")
DIVIDEND POLICY
<TABLE>
<CAPTION>
PORTFOLIO/MASTER FUND YEARLY SEMI-ANNUALLY QUARTERLY MONTHLY
- --------------------- -------- ------------- --------- --------
<S> <C> <C> <C> <C>
Tax-Managed U.S. Marketwide Value X
Tax-Managed U.S. Marketwide Value X X
Tax-Managed U.S. 5-10 Value X
Tax-Managed U.S. 5-10 Value X X
Tax-Managed U.S. 6-10 Small Company X
Tax-Managed U.S. 6-10 Small Company X X
Tax-Managed DFA International Value X
Tax-Managed DFA International Value X X
</TABLE>
PURCHASE, VALUATION AND REDEMPTION OF SHARES
The shares of the Portfolios are sold at net asset value. The redemption
price of the shares of all of the Portfolios is equal to the net asset value of
their shares. The value of the shares issued by each Feeder Portfolio will
fluctuate in relation to the investment experience of the Master Fund in which
such Portfolio invests. The value of the shares issued by all other Portfolios
will fluctuate in relation to their own investment experience. (See "PURCHASE OF
SHARES," "VALUATION OF SHARES" and "REDEMPTION OF SHARES.")
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U.S. VALUE PORTFOLIOS
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of each of these Portfolios is to achieve long-term
capital appreciation. The Tax-Managed U.S. Marketwide Value Portfolio and
Portfolio X will pursue their investment objectives by investing all of their
assets in the Tax-Managed U.S. Marketwide Value Series and Series X
(collectively, the "Tax-Managed Marketwide Value Series") of The DFA Investment
Trust Company (the "Trust"), respectively. Each Tax-Managed Marketwide Value
Series has the same investment objective and policies as the corresponding
Tax-Managed U.S. Marketwide Value Portfolio.
The Tax-Managed U.S. 5-10 Value Portfolio and Portfolio X and the
Tax-Managed Marketwide Value Series invest directly in portfolio securities.
Ordinarily, each of these Portfolios and Series will invest at least 80% of its
assets in a broad and diverse group of readily marketable common stocks of
U.S. companies which the Advisor believes to be "value" stocks at the time of
purchase. Securities are considered value stocks primarily because the shares
have a high book value in relation to their market value (a "book to market
ratio"). Generally, a company's shares will be considered to have a high book to
market ratio if the ratio equals or exceeds the ratios of any of the 30% of
companies, with the highest positive book to market ratios, whose shares are
listed on the NYSE and, except as described under "Portfolio Structure," will be
considered eligible for investment. In measuring value, however, the Advisor may
consider additional factors such as a company's cash flow, economic conditions
and developments in the company's industry. The Tax-Managed Marketwide Value
Series will purchase common stocks of companies whose market capitalizations
equal the market capitalizations of companies in the 1st through 8th deciles of
those companies listed on the NYSE. The Tax-Managed U.S. 5-10 Value Portfolio
and Portfolio X will purchase common stocks of companies whose market
capitalizations are equal to the market capitalizations of companies in the 5th
through 10th deciles of those companies listed on the NYSE. With respect to
market capitalizations in the 9th through 10th deciles, these Portfolios may
limit purchases of such common stocks to those times when it is advantageous to
do so.
PORTFOLIO CONSTRUCTION
Each Portfolio and Series will purchase securities that are listed on the
principal U.S. national securities exchanges and traded OTC. Each such Portfolio
or Series intends to invest in a large portion of the universe of companies
whose shares are eligible for investment; shares of a certain number of eligible
companies will be held by both such Portfolios or Series. It is intended, for
example, that the securities portfolio of the Tax-Managed U.S. 5-10 Value
Portfolio will not be identical to that of the Tax-Managed U.S. 5-10 Value
Portfolio X, even though the investment criteria of each Portfolio are the same.
The Tax-Managed Marketwide Value Series intend to operate in an identical manner
as described in the preceding two sentences with respect to their own investment
portfolios.
PORTFOLIO TRANSACTIONS
The Tax-Managed Marketwide Value Series may sell portfolio securities when
the issuer's market capitalization falls substantially below that of the issuer
with the minimum market capitalization which is then eligible for purchase by
the Series. The Tax-Managed U.S. 5-10 Value Portfolio and Portfolio X 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.
In addition, each Tax-Managed Marketwide Value Series may sell portfolio
securities when its book to market ratio falls substantially below that of the
security with the lowest such ratio that is then eligible for purchase by the
Series. The Tax-Managed U.S. 5-10 Value Portfolio and Portfolio X may also sell
portfolio securities in the same circumstances, however, it is anticipated that
they will generally retain securities of issuers with relatively small market
capitalizations for longer periods, despite any decrease in the issuer's book to
market ratio. The Tax-Managed U.S. 5-10 Value Portfolio and Portfolio X should
not be expected
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to adhere to their market capitalization weightings to the same extent as the
Tax-Managed Marketwide Value Series.
THE U.S. SMALL COMPANY PORTFOLIOS
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of the Tax-Managed U.S. 6-10 Small Company
Portfolio and Portfolio X is to achieve long-term capital appreciation. The
Portfolios provide investors with access to securities portfolios consisting of
small U.S. companies. Company size will be determined for purposes of the
Portfolios solely on the basis of a company's market capitalization which will
be calculated by multiplying the price of a company's stock by the number of its
shares of outstanding common stock.
The Tax-Managed U.S. 6-10 Small Company Portfolio and Portfolio X will
invest at least 80% of their assets in equity securities of U.S. companies and
will be structured to reflect reasonably the relative market capitalizations of
their portfolio companies. The Advisor believes that over the long term the
investment performance of small companies is superior to large companies.
Investors which, for a variety of reasons, may choose not to make substantial,
or any, direct investment in companies whose securities will be held by the
Portfolios, may participate in the investment performance of these companies
through ownership of a Portfolio's stock.
The Tax-Managed U.S. 6-10 Small Company Portfolio and Portfolio X will
invest in a broad and diverse group of small U.S. companies having readily
marketable securities. The Portfolios will purchase common stocks of companies
whose shares are listed on the NYSE, AMEX or traded OTC. The Portfolios may
invest in securities of foreign issuers which are traded in the U.S. securities
markets, but such investments may not exceed 5% of the gross assets of such
Portfolios. Except as described under "Portfolio Construction," it is the
intention of each Portfolio to acquire a large portion of the common stock of
each eligible NYSE, AMEX and OTC company on a market capitalization weighted
basis. (See "SMALL COMPANY MASTER FUNDS--Portfolio Construction.") In the
future, the Portfolios may purchase may purchase common stocks of small U.S.
companies which are listed on other U.S. securities exchanges. In addition, the
Portfolios are authorized to invest in privately placed convertible debentures.
Such investments are considered illiquid and the value thereof together with the
value of all other illiquid investments may not exceed 15% of the value of each
Portfolio's net assets at the time of purchase.
PORTFOLIO CONSTRUCTION
The Tax-Managed U.S. 6-10 Small Company Portfolio and Portfolio X each
intend to invest in a large portion of the universe of companies whose shares
are eligible for investment; shares of a certain number of eligible companies
will be held by both. It is intended that the securities portfolio of the
Tax-Managed U.S. 6-10 Small Company Portfolio will not be identical to that of
the Tax-Managed U.S. 6-10 Small Company Portfolio X, even though the investment
criteria of each are the same.
INTERNATIONAL EQUITY PORTFOLIOS
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Tax-Managed DFA International Value
Portfolio and Portfolio X is to achieve long-term capital appreciation. Each
Portfolio seeks to achieve its objective by investing in the stocks of large
non-U.S. companies that the Advisor believes to be value stocks at the time of
purchase. Securities are considered value stocks primarily because a company's
shares have a high book value in relation to their market value (a "book to
market ratio"). In measuring value, the Advisor may consider additional factors
such as cash flow, economic conditions and developments in the issuer's
industry. Generally, the shares of a company in any given country will be
considered to have a high book to market ratio if the ratio equals or exceeds
the ratios of any of the 30% of companies in that country with the
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<PAGE>
highest positive book to market ratios whose shares are listed on a major
exchange, and, except as described below, will be considered eligible for
investment. The Portfolios intend to invest in the stocks of large companies in
countries with developed markets. As of the date of this prospectus, the
Portfolios may invest in the stocks of large companies in Australia, Austria,
Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan,
Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,
Switzerland and the United Kingdom. As the Portfolios' asset growth permits,
they may invest in the stocks of large companies in other developed markets.
Under normal market conditions, at least 65% of each Portfolio's assets will
be invested in companies organized or having a majority of their assets in or
deriving a majority of their operating income in at least three non-U.S.
countries, and no more than 40% of each Portfolio's assets will be invested in
such companies in any one country. The Portfolios reserve the right to invest in
index futures contracts to commit funds awaiting investment or to maintain
liquidity. To the extent that a Portfolio invests in futures contracts for other
than bona fide hedging purposes, it 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.
As of the date of this prospectus, each Portfolio intends to invest in
companies having at least $800 million of market capitalization, and each
Portfolio will be approximately market capitalization weighted. The Advisor may
reset such floor from time to time to reflect changing market conditions. In
determining market capitalization weights, the Advisor, using its best judgment,
will seek to eliminate the effect of cross holdings on the individual country
weights. As a result, the weighting of certain countries in a 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.
It is management's belief that the value stocks of large companies, over a
long term, offer a prudent opportunity for capital appreciation, but, at the
same time, selecting a limited number of such issues for inclusion in the
Portfolios involves greater risk than including a large number of them. The
Advisor does not anticipate that a significant number of securities which meet
the market capitalization criteria will be selectively excluded from the
Portfolios.
The Tax-Managed DFA International Value Portfolio and Portfolio X do not
seek current income as an investment objective and investments will not be based
upon an issuer's dividend payment policy or record. However, many of the
companies whose securities will be included in the Portfolios do pay dividends.
It is anticipated, therefore, that the Portfolios will receive dividend income.
PORTFOLIO CONSTRUCTION
The Tax-Managed International Value Portfolio and Portfolio X each intend to
invest in a large portion of the universe of companies whose shares are eligible
for investment; shares of a certain number of eligible companies will be held by
both. It is intended that the securities portfolio of the Tax-Managed DFA
International Value Portfolio will not be identical to that of the Tax-Managed
DFA International Value Portfolio X, even though the investment criteria of each
are the same.
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TAX MANAGEMENT STRATEGIES
The Portfolios and Master Funds described in this Prospectus seek to
minimize the impact of federal taxes on investment returns by managing their
portfolios in a manner that will defer the realization of net capital gains
where possible and may minimize dividend income.
When selling securities, a Portfolio or Master Fund, typically, will select
the highest cost shares of the specific security in order to minimize the
realization of capital gains. In certain cases, the highest cost shares may
produce a short-term capital gain. Since short-term capital gains generally are
taxed at higher tax rates than long-term capital gains, the highest cost shares
with a long-term holding period may be disposed of instead. Each Portfolio or
Master Fund, when possible, will refrain from disposing of a security until the
long-term holding period for capital gains for tax purposes has been satisfied.
Additionally, each Portfolio or Master Fund, when consistent with all other tax
management policies, may sell securities in order to realize capital losses.
Realized capital losses can be used to offset realized capital gains, thus
reducing capital gains distributions.
In addition to selling practices used among all portfolios managed by the
Advisor, securities may be sold by a Portfolio or Master Fund to a Portfolio or
Master Fund having an identical investment objective and policies. Specifically,
for example, Tax-Managed U.S. 5-10 Value Portfolio may sell portfolio securities
to Tax-Managed U.S. 5-10 Value Portfolio X (and vice versa). Such sales would be
made to realize losses on securities which would be used to offset gains on
other securities realized by the selling Portfolio. Such transactions are
intended to benefit both Portfolios or Master Funds that are parties to the
transaction. The selling Portfolio or Master Fund will recognize a loss which it
can use to offset realized gains, while the purchasing Portfolio or Master Fund
will acquire an eligible portfolio security, at a current market price, but
without payment of brokerage commissions.
While the Advisor believes this strategy can be both tax and cost efficient,
applicable federal tax law provides for suspension of recognition of losses and
potential disallowance of such losses incurred on the sale of securities by a
Portfolio or Master Fund to another Portfolio or Master Fund if, as of the date
of any sale of a loss security, five or fewer persons own or are considered for
tax purposes to own more than 50% of the outstanding shares of both the selling
and purchasing Portfolio. The Advisor intends to control the number of investors
in each Portfolio in several ways. First, as with all portfolios that the
Advisor manages, it retains the right in its discretion to reject any initial or
additional investment for any reason and to suspend the offering of shares of
any portfolio. Second, the Advisor intends to offer the shares of each Portfolio
to relatively few institutional investors and anticipates that shares will be
offered primarily to individual investors, thereby creating a substantial number
of shareholders in each Portfolio. Finally, the Advisor intends to monitor
closely all purchases of shares of the Portfolios in order to increase the
probability that the five or fewer shareholder threshold is not violated.
The timing of purchases and sales of securities may be managed to minimize
the receipt of dividends when possible. With respect to dividends that are
received, the Portfolios and Master Funds may not be eligible to flow through
the dividends received deduction attributable to holdings in U.S. equity
securities to corporate shareholders if, because of timing activities, the
requisite holding period of the dividend paying stock is not met. Portfolio
investments also may be managed to emphasize low dividend-yielding securities.
The Portfolios and Master Funds are expected to deviate from their market
capitalization weightings to a greater extent than non-Tax-Managed Portfolios.
For example, the Advisor may exclude the stock of a company that meets
applicable market capitalization criteria in order to avoid dividend income, and
may sell stock of a company that meets applicable market capitalization criteria
in order to realize a capital loss. Also, the Tax-Managed Portfolios and Master
Funds may dispose of securities whenever the Advisor determines that disposition
is consistent with their tax management strategies or is otherwise in the best
interest of a Portfolio or Master Fund.
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Although the Advisor intends to manage each Portfolio or Master Fund in a
manner to minimize the realization of capital gains and taxable dividend income
each year, the Portfolios may nonetheless distribute taxable gains and dividends
to shareholders. Of course, realization of capital gains is not entirely within
the Advisor's control. Capital gains distributions may vary considerably from
year to year; there will be no capital gains distributions in years when a
Portfolio or Master Fund realizes a net capital loss. Furthermore, the redeeming
shareholders will be required to pay taxes on their capital gains, if any, on a
redemption of a Portfolio's shares, whether paid in cash or in kind, if the
amount received on redemption is greater than the amount of the shareholder's
tax basis in the shares redeemed.
PORTFOLIO TRANSACTIONS--ALL PORTFOLIOS
Investments will generally be made in eligible securities on a market
capitalization weighted basis. Securities will not be purchased or sold based on
the prospects for the economy, the securities markets or the individual issuers
whose shares are eligible for purchase. Securities which have depreciated in
value since their acquisition will not be sold solely because prospects for the
issuer are not considered attractive or due to an expected or realized decline
in securities prices in general. Securities will not be sold to realize
short-term profits, but when circumstances warrant, they may be sold without
regard to the length of time held. Securities, including those eligible for
purchase, may be disposed of, however, at any time when, in the Advisor's
judgment, circumstances warrant their sale, including but not limited to tender
offers, mergers and similar transactions, or bids made for block purchases at
opportune prices. Generally, securities will be purchased with the expectation
that they will be held for longer than one year and will be held until such time
as they are no longer considered an appropriate holding in light of the
investment policy of each Portfolio.
SECURITIES LOANS
All of the Portfolios and Master Funds are authorized to lend securities to
qualified brokers, dealers, banks and other financial institutions for the
purpose of earning additional income, although inasmuch as the Feeder Portfolios
will only hold shares of a corresponding Master Fund, these Portfolios do not
intend to lend those shares. While a Portfolio or Master Fund may earn
additional income from lending securities, such activity is incidental to the
investment objective of a Portfolio or Master Fund. The value of securities
loaned may not exceed 33 1/3% of the value of a Portfolio's or Master Fund's
total assets. In connection with such loans, a Portfolio or Master Fund will
receive collateral consisting of cash or U.S. government securities, which will
be maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities. In addition, the Portfolios and Master
Funds will be able to terminate the loan at any time and will receive reasonable
interest on the loan, as well as amounts equal to any dividends, interest or
other distributions on the loaned securities. In the event of the bankruptcy of
the borrower, the Fund or the Trust could experience delay in recovering the
loaned securities. Management believes that this risk can be controlled through
careful monitoring procedures.
DEVIATION FROM MARKET CAPITALIZATION WEIGHTING
The portfolio structures of each Portfolio and Master Fund involve market
capitalization weighting. That is, their investment portfolios are market
capitalization weighted. Deviation from strict market capitalization weighting
may occur for several reasons. The Advisor may exclude the stock of a company
that meets applicable market capitalization criterion if the Advisor determines
in its best judgment that the purchase of such stock is inappropriate given
other conditions. 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. A
portion, but generally not in excess of 20% of assets may be invested in
interest bearing obligations, such as money market instruments, thereby causing
further deviation from
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strict market capitalization weighting. A further deviation may occur due to
investments in privately placed convertible debentures.
The Tax-Managed Portfolios and Series should not be expected to adhere to
their market capitalization weightings to the same extent as non-tax-managed
portfolios advised by the Advisor. The tax management strategies used by the
Advisor to defer the realization of net capital gains or minimize dividend
income, from time to time, may cause deviation from market capitalization
weighting.
Block purchases of eligible securities may be made at opportune prices even
though such purchases exceed the number of shares which, at the time of
purchase, strict adherence to the policy of market capitalization weighting
would otherwise require. In addition, securities eligible for purchase or
otherwise represented in a portfolio may be acquired in exchange for the
issuance of shares. (See "PURCHASE OF SHARES--In Kind Purchases.") While such
transactions might cause a temporary deviation from market capitalization
weighting, they would ordinarily be made in anticipation of further growth of
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 whose stock is eligible for investment
by a Portfolio or Master Fund. 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 or Master Fund'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.
MANAGEMENT OF THE FUNDS
Dimensional Fund Advisors Inc. (the "Advisor") serves as investment advisor
to each of the Portfolios, except the Feeder Portfolios, and each Master Fund.
As such, the Advisor is responsible for the management of their respective
assets. Investment decisions for all non-feeder Portfolios and all Master Funds
are made by the Investment Committee of the Advisor which meets on a regular
basis and also as needed to consider investment issues. The Investment Committee
is composed of certain officers and directors of the Advisor who are elected
annually. The Advisor provides the Portfolios (except the Feeder Portfolios) and
the Master Funds 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. The Advisor's address is 1299 Ocean
Avenue, 11th Floor, Santa Monica, CA 90401. For advisory fees that the
Portfolios have incurred for the fiscal year ended November 30, 1999, see
"ANNUAL FUND OPERATING EXPENSES."
The Fund and the Trust bear all of their own costs and expenses, including:
services of their independent accountants, legal counsel, brokerage fees,
commissions and transfer taxes in connection with the acquisition and
disposition of portfolio securities, taxes, insurance premiums, costs incidental
to meetings of their shareholders and directors or trustees, the cost of filing
their registration statements under the federal securities laws and the cost of
any filings required under state securities laws, reports to shareholders, and
transfer and dividend disbursing agency, administrative services and custodian
fees. Expenses allocable to a particular Portfolio or Master Fund are so
allocated. The expenses of the Fund which are not allocable to a particular
Portfolio are to be borne by each Portfolio of the Fund on the basis of its
relative net assets. Similarly, the expenses of the Trust which are not
allocable to a particular Master Fund are to be borne by each Master Fund on the
basis of its relative net assets.
The Advisor was organized in May 1981 and is engaged in the business of
providing investment management services to institutional investors. Assets
under management total approximately $36 billion.
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The Advisor owns 100% of the outstanding shares of Dimensional Fund Advisors
Ltd. ("DFAL") and beneficially owns 100% of DFA Australia Limited ("DFA
Australia").
CONSULTING SERVICES--TAX-MANAGED DFA INTERNATIONAL VALUE PORTFOLIO AND PORTFOLIO
X
The Advisor has entered into a Consulting Services Agreement with DFAL and
DFA Australia, respectively. Pursuant to the terms of each Consulting Services
Agreement, DFAL and DFA Australia provide certain trading and administrative
services to the Advisor with respect to Tax-Managed DFA International Value
Portfolio and Portfolio X.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
The policy of the Portfolios, except Tax-Managed U.S. Marketwide Value
Portfolio and Tax-Managed U.S. Marketwide Value Portfolio X is to distribute
substantially all of their net investment income together with any net realized
capital gains in December of each year. Dividends from net investment income of
Tax-Managed U.S. Marketwide Value Portfolio and Tax-Managed U.S. Marketwide
Value Portfolio X are distributed quarterly and any net realized capital gains
are distributed annually after November 30.
Shareholders of each of the Portfolios will automatically receive all income
dividends and capital gains distributions in additional shares of the Portfolio
whose shares they hold at net asset value (as of the business date following the
dividend record date), unless as to a Portfolio other than the Tax-Managed DFA
International Value Portfolio and Portfolio X, upon written notice to the
Advisor, the shareholder selects one of the options listed below.
Income Option--to receive income dividends in cash and capital
gains distributions in additional shares at net asset value.
Capital Gains Option--to receive capital gains distributions in
cash and income dividends in additional shares at net asset value.
Cash Option--to receive both income dividends and capital gains
distributions in cash.
Certain investments by the Portfolios (or their corresponding Master Fund)
may be subject to special rules which may affect the amount, character and
timing of the income to the investing entity. Some of these rules are referenced
in the statement of additional information. Specifically, prospective investors
should consult the statement of additional information for further information
regarding the extent to which distributions from a Portfolio may be eligible for
the dividends received deduction or whether certain foreign tax credits may be
available to an investor in a Portfolio.
Whether paid in cash or additional shares and regardless of the length of
time a Portfolio's shares have been owned by shareholders who are subject to
U.S. federal income taxes, distributions from long-term capital gains are
taxable as such. Dividends from net investment income or net short-term capital
gains will be taxable as ordinary income, whether received in cash or in
additional shares. For those investors subject to tax, if purchases of shares of
a Portfolio are made shortly before the record date for a dividend or capital
gains distribution, a portion of the investment will be returned as a taxable
distribution. Shareholders are notified annually as to the U.S. federal tax
status of dividends and distributions paid by the Portfolio whose shares they
own.
Dividends which are declared in October, November or December to
shareholders of record in such a month, but which, for operational reasons, may
not be paid to the shareholder until the following January, will be treated for
U.S. federal income tax purposes as if paid by the Portfolio and received by the
shareholder on December 31 of the calendar year in which they are declared.
The sale of shares of a Portfolio is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may be
realized from an ordinary redemption of shares or an exchange of shares between
two Portfolios. Any loss incurred on sale or exchange of a Portfolio's shares,
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held for six months or less, will be treated as a long-term capital loss to the
extent of capital gain dividends received with respect to such shares.
In addition to federal taxes, shareholders may be subject to state and local
taxes on distributions and on sales of shares of a Portfolio. Distributions of
interest income and capital gains realized from certain types of U.S. government
securities may be exempt from state personal income taxes.
A Portfolio is required to withhold 31% of taxable dividends, capital gains
distributions, and redemptions paid to shareholders who have not complied with
IRS taxpayer identification regulations. You may avoid this withholding
requirement by certifying on the account registration form your proper Taxpayer
Identification Number and by certifying that you are not subject to backup
withholding.
The tax discussion set forth above is included for general information only.
Prospective investors should consult the statement of additional information.
Prospective investors should also consult their own tax advisers concerning the
federal, state, local or foreign tax consequences of an investment in a
Portfolio.
PURCHASE OF SHARES
CASH PURCHASES
Investors may purchase shares of any Portfolio by first contacting the
Advisor at (310) 395-8005 to notify the Advisor of the proposed investment. All
investments are subject to approval of the Advisor, and all investors must
complete and submit the necessary account registration forms in good order. The
Fund reserves the right to reject any initial or additional investment and to
suspend the offering of shares of any Portfolio.
"Good order" with respect to the purchase of shares means that (1) a fully
completed and properly signed Account Registration Form and any additional
supporting legal documentation required by the Advisor has been received in
legible form and (2) the Advisor has been notified of the purchase by telephone
and, if the Advisor so requests, also in writing, no later than the close of
regular trading on the NYSE (ordinarily 1:00 p.m. PST) on the day of the
purchase. If an order to purchase shares must be canceled due to nonpayment, the
purchaser will be responsible for any loss incurred by the Fund arising out of
such cancellation. To recover any such loss, the Fund reserves the right to
redeem shares owned by any purchaser whose order is canceled, and such purchaser
may be prohibited or restricted in the manner of placing further orders.
Investors having an account with a bank that is a member or a correspondent
of a member of the Federal Reserve System may purchase shares by first calling
the Advisor at (310) 395-8005 to notify the Advisor of the proposed investment,
then requesting the bank to transmit immediately available funds (Federal Funds)
by wire to PNC Bank, N.A. for the account of DFA Investment Dimensions Group
Inc. (specify Portfolio). Additional investments also may be made through the
wire procedure by first notifying the Advisor. Investors who wish to purchase
shares of any Portfolio by check should send their check to DFA Investment
Dimensions Group Inc., c/o PFPC Inc., 400 Bellevue Parkway, Wilmington,
Delaware 19809.
Payment of the total amount due should be made in U.S. dollars. Subject to
approval by the Advisor, payment may be made in any freely convertible currency
and the necessary foreign exchange transactions will be arranged on behalf of,
and at the expense of, the applicant. Applicants settling in any currency other
than U.S. dollars are advised that a delay in processing a purchase or
redemption may occur to allow for currency conversion.
Shares may also be purchased and sold by individuals through securities
firms which may charge a service fee or commission for such transactions. No
such fee or commission is charged on shares which are purchased or redeemed
directly from the Fund. Investors who are clients of investment advisory
organizations may also be subject to investment advisory fees under their own
arrangements with such organizations.
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IN-KIND PURCHASES
If accepted by the Fund, shares of the Portfolios may be purchased in
exchange for securities which are eligible for acquisition by the Portfolios (or
their corresponding Master Funds) or otherwise represented in their portfolios
as described in this prospectus or in exchange for local currencies in which
such securities of the Tax-Managed DFA International Value Portfolio or
Portfolio X are denominated. Securities and local currencies to be exchanged
which are accepted by the Fund and Fund shares to be issued therefore will be
valued as set forth under "VALUATION OF SHARES" at the time of the next
determination of net asset value after such acceptance. All dividends, interest,
subscription, or other rights pertaining to such securities shall become the
property of the Portfolio whose shares are being acquired and must be delivered
to the Fund by the investor upon receipt from the issuer. Investors who desire
to purchase shares of the Tax-Managed DFA International Value Portfolio or
Portfolio X with local currencies should first contact the Advisor for wire
instructions.
The Fund will not accept securities in exchange for shares of a Portfolio
unless: (1) such securities are, at the time of the exchange, eligible to be
included, or otherwise represented, in the Portfolio whose shares are to be
issued (or in its corresponding Master Fund) and current market quotations are
readily available for such securities; (2) the investor represents and agrees
that all securities offered to be exchanged are not subject to any restrictions
upon their sale by the Portfolio or Master Fund under the Securities Act of 1933
or under the laws of the country in which the principal market for such
securities exists, or otherwise; and (3) at the discretion of the Fund, the
value of any such security (except U.S. Government securities) being exchanged
together with other securities of the same issuer owned by the Portfolio or
Master Fund may not exceed 5% of the net assets of the Portfolio or Master Fund
immediately after the transaction. The Fund will accept such securities for
investment and not for resale.
A gain or loss for federal income tax purposes will generally be realized by
investors who are subject to federal taxation upon the exchange depending upon
the cost of the securities or local currency exchanged. Investors interested in
such exchanges should contact the Advisor. Purchases of shares will be made in
full and fractional shares calculated to three decimal places. In the interest
of economy and convenience, certificates for shares will not be issued.
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VALUATION OF SHARES
NET ASSET VALUE
The net asset value per share of each Portfolio and corresponding Master
Fund is calculated as of the close of the NYSE by dividing the total market
value of the Portfolio's investments and other assets, less any liabilities, by
the total outstanding shares of the stock of the respective Portfolio or Master
Fund. The value of the shares of each Portfolio will fluctuate in relation to
its own investment experience. The value of the shares of the Feeder Portfolios
will fluctuate in relation to the investment experience of the Master Funds in
which such Portfolios invest. Securities held by the Portfolios and the Master
Funds which are listed on a securities exchange and for which market quotations
are available are valued at the last quoted sale price of the day. 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. Securities
issued by open-end investment companies, such as the Master Funds, are valued
using their respective net asset values for purchase orders placed at the close
of the NYSE. Unlisted securities for which market quotations are readily
available are valued at the mean between the most recent bid and asked prices.
The value of other assets and securities for which no quotations are readily
available (including restricted securities) are determined in good faith at fair
value in accordance with procedures adopted by the Board of Directors.
Provided that the transfer agent has received the investor's Account
Registration Form in good order and the custodian has received the investor's
payment, shares of the Portfolio selected will be priced at the public offering
price calculated next after receipt of the investor's funds by the custodian.
The transfer agent or the Fund may from time to time appoint a sub-transfer
agent for the receipt of purchase orders and funds from certain investors. With
respect to such investors, the shares of the Portfolio selected will be priced
at the public offering price calculated after receipt of the purchase order by
the sub-transfer agent. The only difference between a normal purchase and a
purchase through a sub-transfer agent is that if the investor buys shares
through a sub-transfer agent, the purchase price will be the public offering
price next calculated after the sub-transfer agent receives the order, rather
than on the day the custodian receives the investor's payment (provided that the
sub-transfer agent has received the investor's purchase order in good order).
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 Tax-Managed DFA International Value Portfolio and Portfolio X are
determined as of such times for the purpose of computing the net asset value of
each Portfolio. If events which materially affect the value of the investments
of a Portfolio 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. Since the Tax-Managed DFA
International Value Portfolio and Portfolio X each own securities that are
primarily listed on foreign exchanges, which may trade on days when the
Portfolios do not price their shares, the net asset value of a Portfolio may
change on days when shareholders will not be able to purchase or redeem shares.
The net asset values per share of the Tax-Managed DFA International Value
Portfolio and Portfolio X 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 Tax-Managed DFA International Value Portfolio and Portfolio X are each
closed if portfolio securities greater than 50% of its total assets are
principally traded on exchanges that are closed that day. Purchase and
redemption orders for shares of such Portfolio will not be accepted on those
days.
PUBLIC OFFERING PRICE
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
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value, without imposition of a fee that would be used to reimburse a Portfolio
for such cost ("reimbursement fee"). Reimbursement fees may be charged
prospectively from time to time based upon the future experience of the
Portfolios and their corresponding Master Funds. Any such charges will be
described in the prospectus.
EXCHANGE OF SHARES
Investors may exchange shares of one Portfolio for those of another Portfolio by
first contacting the Advisor at (310) 395-8005 to notify the Advisor of the
proposed exchange and then completing a letter of instruction and mailing it to:
DFA Investment Dimensions Group Inc.
Attn: Client Operations
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
The minimum amount for an exchange is $100,000. Exchanges are accepted into
or from any of the Portfolios offered in this prospectus. Such exchange is
subject to any applicable reimbursement fee charged by a Portfolio in connection
with the sale of its shares.
Investors in any Portfolio eligible for the exchange privilege also may
exchange all or part of their Portfolio shares into portfolios of Dimensional
Investment Group Inc., subject to the minimum purchase requirement set forth in
the applicable portfolio's prospectus. Investors may contact the Advisor at the
above-listed phone number for more information on such exchanges and to request
a copy of the prospectuses of the portfolios of Dimensional Investment Group
Inc.
The exchange privilege is not intended to afford shareholders a way to
speculate on short-term movements in the markets. Accordingly, in order to
prevent excessive use of the exchange privilege that may potentially disrupt the
management of the Portfolios or otherwise adversely affect the Fund, any
proposed exchange will be subject to the approval of the Advisor. Such approval
will depend on: (i) the size of the proposed exchange; (ii) the prior number of
exchanges by that shareholder; (iii) the nature of the underlying securities and
the cash position of the Portfolios involved in the proposed exchange; (iv) the
transaction costs involved in processing the exchange; and (v) the total number
of redemptions by exchange already made out of a Portfolio. Excessive use of the
exchange privilege is defined as any pattern of exchanges among portfolios by an
investor that evidences market timing.
The redemption and purchase prices of shares redeemed and purchased by
exchange, respectively, are the net asset values next determined after the
Advisor has received a letter of instruction in good order, plus any applicable
reimbursement fee on purchases by exchange. "Good order" means a completed a
letter of instruction specifying the dollar amount to be exchanged, signed by
all registered owners of the shares; and if the Fund does not have on file the
authorized signatures for the account, proof of authority and a guarantee of the
signature of each registered owner by an "eligible guarantor institution." Such
institutions generally include national or state banks, savings associations,
savings and loan associations, trust companies, savings banks, credit unions and
members of a recognized stock exchange. Exchanges will be accepted only if stock
certificates have not been issued and the shares of the Portfolio being acquired
are registered in the investor's state of residence.
There is no fee imposed on an exchange. However, the Fund reserves the right
to impose an administrative fee in order to cover the costs incurred in
processing an exchange. Any such fee will be disclosed in the prospectus. An
exchange is treated as a redemption and a purchase. Therefore, an investor could
realize a taxable gain or a loss on the transaction. The Fund reserves the right
to revise or terminate the exchange privilege, waive the minimum amount
requirement, limit the amount of or reject any exchange, as deemed necessary, at
any time.
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REDEMPTION OF SHARES
REDEMPTION PROCEDURE
Investors who desire to redeem shares of a Portfolio must first contact the
Advisor at (310) 395-8005. Each Portfolio will redeem shares at the net asset
value of such shares next determined, either: (1) where stock certificates have
not been issued, after receipt of a written request for redemption in good
order, by the transfer agent or (2) if stock certificates have been issued,
after receipt of the stock certificates in good order at the office of the
transfer agent. "Good order" means that the request to redeem shares must
include all necessary documentation, to be received in writing by the Advisor no
later than the close of regular trading on the NYSE (ordinarily 1:00 p.m. PST),
including but not limited to: the stock certificate(s), if issued; a letter of
instruction or a stock assignment specifying the number of shares or dollar
amount to be redeemed, signed by all registered owners (or authorized
representatives thereof) of the shares; and, if the Fund does not have on file
the authorized signatures for the account, proof of authority and a guarantee of
the signature of each registered owner by an eligible guarantor institution; and
any other required supporting legal documents. A signature guarantee may be
obtained from a domestic bank or trust company, broker, dealer, clearing agency
or savings association who are participants in a medallion program recognized by
the Securities Transfer Association. The three recognized medallion programs are
Securities Transfer Agents Medallion (STAMP), Stock Exchanges Medallion Program
(SEMP) and New York Stock Exchange, Inc. Medallion Signature Program (MSP).
Signature guarantees which are not a part of these programs will not be
accepted.
Shareholders redeeming shares for which certificates have not been issued,
who have authorized redemption payment by wire in writing, may request that
redemption proceeds be paid in federal funds wired to the bank they have
designated in writing. The Fund reserves the right to send redemption proceeds
by check in their discretion; a shareholder may request overnight delivery of
such check at the shareholder's own expense. If the proceeds are wired to the
shareholder's account at a bank which is not a member of the Federal Reserve
System, there could be a delay in crediting the funds to the shareholder's bank
account. The Fund reserves the right at any time to suspend or terminate the
redemption by wire procedure after prior notification to shareholders. No fee is
charged for redemptions. The redemption of all shares in an account will result
in the account being closed. A new Account Registration Form will be required
for future investments. (See "PURCHASE OF SHARES.") In the interests of economy
and convenience, certificates for shares are not issued.
Although the redemption payments will ordinarily be made within seven days
after receipt, payment to investors redeeming shares which were purchased by
check will not be made until the Fund can verify that the payments for the
purchase have been, or will be, collected, which may take up to fifteen days or
more. Investors may avoid this delay by submitting a certified check along with
the purchase order.
REDEMPTION OF SMALL ACCOUNTS
With respect to each Portfolio, the Fund reserves the right to redeem a
shareholder's account if the value of the shares in a specific Portfolio is $500
or less, whether because of redemptions, a decline in the Portfolio's net asset
value per share or any other reason. Before the Fund involuntarily redeems
shares from such an account and sends the proceeds to the stockholder, the Fund
will give written notice of the redemption to the stockholder at least sixty
days in advance of the redemption date. The stockholder will then have sixty
days from the date of the notice to make an additional investment in order to
bring the value of the shares in the account for a specific Portfolio to more
than $500 and avoid such involuntary redemption. The redemption price to be paid
to a stockholder for shares redeemed by the Fund under this right will be the
aggregate net asset value of the shares in the account at the close of business
on the redemption date.
19
<PAGE>
IN-KIND REDEMPTIONS
When in the best interests of a Feeder Portfolio, the Feeder Portfolio may
make a redemption payment, in whole or in part, by a distribution of portfolio
securities that the Feeder Portfolio receives from the Master Fund in lieu of
cash. A Portfolio that is not a Feeder Portfolio may also make a redemption
payment, in whole or in part, by a distribution of Portfolio securities in lieu
of cash, when in the best interests of the Portfolio. The Portfolios and Master
Funds are also authorized to make redemption payments solely by a distribution
of portfolio securities (or a combination of securities and cash) when it is
determined by the Advisor to be consistent with the tax management strategies
described in this prospectus. Such distributions will be made in accordance with
the federal securities laws and regulations governing mutual funds. Investors
may incur brokerage charges and other transaction costs when selling securities
that were received in payment of redemptions. The Tax-Managed DFA International
Value Portfolio and Portfolio X 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.
THE FEEDER PORTFOLIOS
Other institutional investors, including other mutual funds, may invest in
each Master Fund. The expenses of such other funds and, correspondingly, their
returns may differ from those of the Feeder Portfolios. Please contact The DFA
Investment Trust Company at 1299 Ocean Avenue, 11th Floor, Santa Monica, CA
90401, (310) 395-8005 for information about the availability of investing in a
Master Fund other than through a Feeder Portfolio.
The aggregate amount of expenses for a Feeder Portfolio and the
corresponding Master Fund may be greater than it would be if the Portfolio were
to invest directly in the securities held by the corresponding Master Fund.
However, the total expense ratios for the Feeder Portfolios and the Master Funds
are expected to be less over time than such ratios would be if the Portfolios
were to invest directly in the underlying securities. This arrangement enables
various institutional investors, including the Feeder Portfolios, to pool their
assets, which may be expected to result in economies by spreading certain fixed
costs over a larger asset base. Each shareholder in a Master Fund, including a
Feeder Portfolio, will pay its proportionate share of the expenses of that
Master Fund.
The shares of the Master Funds will be offered to institutional investors
for the purpose of increasing the funds available for investment, to reduce
expenses as a percentage of total assets and to achieve other economies that
might be available at higher asset levels. Investment in a Master Fund by other
institutional investors offers potential benefits to the Master Funds, and
through their investment in the Master Funds, the Feeder Portfolios also.
However, such economies and expense reductions might not be achieved, and
additional investment opportunities, such as increased diversification, might
not be available if other institutions do not invest in the Master Funds. Also,
if an institutional investor were to redeem its interest in a Master Fund, the
remaining investors in that Master Fund could experience higher pro rata
operating expenses, thereby producing lower returns, and the Master Fund's
security holdings may become less diverse, resulting in increased risk.
Institutional investors that have a greater pro rata ownership interest in a
Master Fund than the corresponding Feeder Portfolio could have effective voting
control over the operation of the Master Fund.
If the Board of Directors of the Fund determines that it is in the best
interest of a Feeder Portfolio, the Feeder Portfolio may withdraw its investment
in a Master Fund at any time. Upon any such withdrawal, the Board would consider
what action the Portfolio might take, including either seeking to invest its
assets in another registered investment company with the same investment
objective as the Portfolio, which might not be possible, or retaining an
investment advisor to manage the Portfolio's assets in accordance with its own
investment objective, possibly at increased cost. Shareholders of a Feeder
Portfolio will receive written notice thirty days prior to the effective date of
any change in the investment objective of its corresponding
20
<PAGE>
Master Fund. A withdrawal by a Feeder Portfolio of its investment in the
corresponding Master Fund could result in a distribution in kind of portfolio
securities (as opposed to a cash distribution) to the Portfolio. Should such a
distribution occur, the Portfolio could incur brokerage fees or other
transaction costs in converting such securities to cash in order to pay
redemptions. In addition, a distribution in kind to the Portfolio could result
in a less diversified portfolio of investments and could affect adversely the
liquidity of the Portfolio.
FINANCIAL HIGHLIGHTS
The Financial Highlights table is meant to help you understand each
Portfolio's financial performance for the period of that Portfolio's operations,
as indicated by the table. The Tax-Managed U.S. 6-10 Small Company Portfolio X,
Tax-Managed U.S. Marketwide Value Portfolio X, Tax-Managed U.S. 5-10 Value
Portfolio X, and Tax-Managed DFA International Value Portfolio X had not begun
operations by November 30, 1999 so no information is available for them. 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. The information has been audited by
PricewaterhouseCoopers LLP, whose report, along with the Portfolios' financial
statements (except the Tax-Managed U.S. 6-10 Small Company Portfolio X,
Tax-Managed U.S. Marketwide Value Portfolio X, Tax-Managed U.S. 5-10 Value
Portfolio X and Tax-Managed DFA International Value Portfolio X), are included
in the annual report. Further information about each Portfolio's performance
(other than the Tax-Managed U.S. 6-10 Small Company Portfolio X, Tax-Managed
U.S. Marketwide Value Portfolio X, Tax-Managed U.S. 5-10 Value Portfolio X and
Tax-Managed DFA International Value Portfolio X) is contained in the annual
report which is available upon request.
21
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
-------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
THE TAX-MANAGED THE TAX-MANAGED THE TAX-MANAGED THE TAX-MANAGED
U.S. MARKETWIDE U.S. 5-10 VALUE U.S. 6-10 SMALL DFA INTERNATIONAL
VALUE PORTFOLIO PORTFOLIO COMPANY PORTFOLIO VALUE PORTFOLIO
---------------- ---------------- ----------------- -----------------
DEC. 14, 1998 DEC. 11, 1998 DEC. 15, 1998 APR. 16, 1999
TO TO TO TO
NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1999 1999 1999 1999
---------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period... $ 10.00 $ 10.00 $ 10.00 $ 10.00
------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income.................. 0.10 0.05 0.02 0.03
Net Gains on Securities (Realized and
Unrealized).......................... 0.61 1.14 2.17 0.21
------- -------- ------- -------
Total From Investment Operations....... 0.71 1.19 2.19 0.24
------- -------- ------- -------
LESS DISTRIBUTIONS
Net Investment Income.................. (0.07) -- -- --
Net Realized Gains..................... -- -- -- --
------- -------- ------- -------
Total Distributions.................... (0.07) -- -- --
------- -------- ------- -------
Net Asset Value, End of Period......... $ 10.64 $ 11.19 $ 12.19 $ 10.24
======= ======== ======= =======
Total Return........................... 7.02%# 11.90%# 21.90%# 2.40%#
------- -------- ------- -------
Net Assets, End of Period
(thousands).......................... $99,579 $266,735 $67,274 $39,242
Ratio of Expenses to Average Net
Assets............................... 0.69%*(a)(b) 0.64%*(a) 0.78%*(a) 1.56%*(a)
Ratio of Net Investment Income to
Average Net Assets................... 1.27%*(a) 0.66%*(a) 0.37%*(a) 0.83%*(a)
Ratio of Net Investment Income to
Average Net Assets (Excluding Waivers
and Assumption of Expenses).......... -- -- -- 0.83%*(a)
Portfolio Turnover Rate................ N/A 15.24%* 8.92%* 0.12%*
Portfolio Turnover Rate of Master Fund
Series............................... 9.72%* N/A N/A N/A
------- -------- ------- -------
</TABLE>
- ------------------------------
* Annualized
# Non-Annualized
(a) Because of commencement of operations and related preliminary transaction
costs, these ratios are not necessarily indicative of future ratios.
(b) Represents the combined ratios for the respective Portfolio and its
respective pro-rata share of its Master Fund Series.
22
<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
ACCOUNTING SERVICES, DIVIDEND DISBURSING LEGAL COUNSEL
AND TRANSFER AGENT STRADLEY, RONON, STEVENS & YOUNG, LLP
PFPC INC. 2600 One Commerce Square
400 Bellevue Parkway Philadelphia, PA 19103-7098
Wilmington, DE 19809
CUSTODIAN--INTERNATIONAL INDEPENDENT ACCOUNTANTS
CITIBANK, N.A. PRICEWATERHOUSECOOPERS LLP
111 Wall Street 2400 Eleven Penn Center
New York, NY 10005 Philadelphia, PA 19103
</TABLE>
23
<PAGE>
OTHER AVAILABLE INFORMATION
You can find more information about the Fund and the 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.
REQUEST FREE COPIES FROM:
- - Your investment advisor -- you are a client of an investment advisor who has
invested in the Portfolios on your behalf.
- - The Fund -- you represent an institutional investor, registered investment
advisor or other qualifying investor. Call collect at (310) 395-8005.
- - Access current prospectuses on our web site at dfafunds.com.
- - 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
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
P R O S P E C T U S
MARCH 24, 2000
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.............................. 8
SECURITIES LENDING REVENUE.................................. 9
HIGHLIGHTS.................................................. 9
DOMESTIC EQUITY PORTFOLIOS.................................. 9
INVESTMENT OBJECTIVES AND POLICIES........................ 9
INTERNATIONAL EQUITY PORTFOLIOS............................. 10
VA INTERNATIONAL VALUE PORTFOLIO............................ 10
INVESTMENT OBJECTIVE AND POLICIES......................... 10
VA INTERNATIONAL SMALL PORTFOLIO............................ 11
INVESTMENT OBJECTIVE AND POLICIES......................... 11
PORTFOLIO CONSTRUCTION.................................... 12
FIXED INCOME PORTFOLIOS INVESTMENT OBJECTIVES AND
POLICIES.................................................. 13
VA SHORT-TERM FIXED PORTFOLIO............................. 13
VA GLOBAL BOND PORTFOLIO.................................. 13
DESCRIPTION OF INVESTMENTS................................ 14
INVESTMENTS IN THE BANKING INDUSTRY....................... 15
PORTFOLIO STRATEGY........................................ 15
PORTFOLIO TRANSACTIONS--DOMESTIC AND INTERNATIONAL EQUITY
PORTFOLIOS................................................ 16
DEVIATION FROM MARKET CAPITALIZATION WEIGHTING.............. 16
SECURITIES LOANS............................................ 17
MANAGEMENT OF THE FUND...................................... 18
CONSULTING SERVICES--VA INTERNATIONAL VALUE PORTFOLIO..... 18
INVESTMENT SERVICES--VA INTERNATIONAL SMALL PORTFOLIO..... 18
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES............ 19
PURCHASE AND REDEMPTION OF SHARES........................... 19
VALUATION OF SHARES......................................... 19
FINANCIAL HIGHLIGHTS........................................ 21
SERVICE PROVIDERS........................................... 25
</TABLE>
2
<PAGE>
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.
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
3
<PAGE>
stocks. The higher the stock's relative market cap, the greater its
representation.
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.
"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.
INTERNATIONAL PORTFOLIOS:
VA INTERNATIONAL VALUE PORTFOLIO
VA INTERNATIONAL SMALL COMPANY PORTFOLIO
MOST PORTFOLIOS DO NOT HEDGE THEIR FOREIGN CURRENCY RISKS.
- - 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.
4
<PAGE>
FOREIGN SECURITIES AND CURRENCIES RISK: Foreign securities prices may decline or
fluctuate because of: (a) economic or political actions 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.
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.
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.
5
<PAGE>
RISK AND RETURN BAR CHARTS AND TABLES
- --------------------------------------
The Bar Charts and Tables below illustrate the variability of each Portfolio's
returns and are 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 and since inception returns compare with those of a broad
measure of market performance. Past performance is not an indication of future
results.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
VA LARGE VALUE
PORTFOLIO
TOTAL RETURNS (%)
<S> <C> <C>
1996 18.47
1997 29.21
1998 10.74
1999 4.75
January 1996-December 1999
Highest Quarter Lowest Quarter
15.27 (10/98-12/98) -15.84 (7/98-9/98)
Periods ending December 31, 1999
One Since 2/95
Annualized Returns (%) Year Inception
VA Large Value Portfolio 4.75 17.15
Russell 1000 Value Index 7.35 22.76
VA SMALL VALUE
PORTFOLIO
Total Returns (%)
1996 22.05
1997 30.45
1998 -6.62
1999 9.86
January 1996-December 1999
Highest Quarter Lowest Quarter
22.63 (4/99-6/99) -21.73 (7/98-9/98)
Periods ending December 31, 1999
One Since 10/95
Annualized Returns (%) Year Inception
VA Small Value Portfolio 9.86 11.85
Russell 2000 Value Index -1.49 10.31
</TABLE>
6
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
VA INTERNATIONAL
<S> <C> <C>
VALUE PORTFOLIO
Total Returns (%)
1996 7.12
1997 -2.23
1998 11.72
1999 22.02
January 1996-December 1999
Highest Quarter Lowest Quarter
17.29 (10/98-12/98) -18.20 (7/98-9/98)
Periods ending December 31, 1999
One Since 10/95
Annualized Returns (%) Year Inception
VA International Value Portfolio 22.02 10.13
MSCI EAFE Index (net dividends) 26.91 13.46
VA INTERNATIONAL
SMALL PORTFOLIO
Total Returns (%)
1996 0.27
1997 -23.23
1998 5.17
1999 18.52
January 1996-December 1999
Highest Quarter Lowest Quarter
18.98 (1/98-3/98) -16.67 (7/98-9/98)
Periods ending December 31, 1999
One Since 10/95
Annualized Returns (%) Year Inception
VA International Small Portfolio 18.52 -0.71
Salomon Smith Barney Extended Market Index - 22.97 7.61
Europe, Pacific, Asia Composite
VA SHORT-TERM
FIXED PORTFOLIO
Total Returns (%)
1996 5.20
1997 5.70
1998 5.50
1999 4.27
January 1996-December 1999
Highest Quarter Lowest Quarter
1.73 (4/97-6/97) 0.88 (4/99-6/99)
Periods ending December 31, 1999
One Year Since 10/95 Inception
Annualized Returns (%)
VA Short-Term Fixed Portfolio 4.27 5.17
3-Month U.S. Treasury Bill Index 4.83 5.23
Merrill Lynch U.S. Corporate & Government 1-3 Years Index 3.26 5.77
VA GLOBAL BOND
PORTFOLIO
Total Retruns (%)
1996 8.97
1997 7.78
1998 8.24
1999 4.03
January 1996-December 1999
Highest Quarter Lowest Quarter
4.20 (7/96-9/96) -0.15 (1/96-3/96)
Periods ending December 31, 1999
One Year Since 2/95 Inception
Annualized Returns (%)
VA Global Bond Portfolio 4.03 8.54
Lehman Intermediate Government/Corporate Index 0.39 6.85
</TABLE>
7
<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, 1999.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES MANAGEMENT OTHER TOTAL OPERATING
(AS A PERCENTAGE OF AVERAGE NET ASSETS) FEE EXPENSES EXPENSES
- --------------------------------------- ---------- -------- ---------------
<S> <C> <C> <C>
VA Small Value.................................... 0.50% 0.17% 0.67%
VA Large Value.................................... 0.25% 0.18% 0.43%
VA International Value............................ 0.40% 0.25% 0.65%
VA International Small............................ 0.50% 0.29% 0.79%
VA Short-Term Fixed............................... 0.25% 0.15% 0.40%
VA Global Bond.................................... 0.25% 0.24% 0.49%
</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........................................ $68 $214 $373 $ 835
VA Large Value........................................ $44 $138 $241 $ 542
VA International Value................................ $66 $208 $362 $ 810
VA International Small................................ $81 $252 $439 $ 978
VA Short-Term Fixed................................... $41 $128 $224 $ 505
VA Global Bond........................................ $50 $157 $274 $ 616
</TABLE>
8
<PAGE>
SECURITIES LENDING REVENUE
For the fiscal year ended November 30, 1999, 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:
<TABLE>
<CAPTION>
PERCENTAGE
PORTFOLIO NET REVENUE OF NET ASSETS
- --------- ----------- -------------
<S> <C> <C>
VA International Value Portfolio............................ $ 9,000 0.04%
VA International Small Portfolio............................ $ 6,000 0.05%
VA Small Value Portfolio.................................... $15,000 0.08%
</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,
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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. 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, Austria, Belgium, Denmark, Finland, France, Germany,
Hong Kong, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway,
Portugal, 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.
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.
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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.
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 London Stock Exchange ("LSE"); (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 one-half (deciles 6 through 10) of companies
whose securities are listed on the First Section of the Tokyo Stock Exchange
("TSE"). While the Portfolio will invest primarily in the stocks of small
companies which are listed on the TSE, it may acquire the stocks of Japanese
small companies which are traded in other Japanese securities markets as well.
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 LSE
whose market capitalization is not larger than the largest of those in the
smaller one-half (deciles 6 through 10) of companies included in the Financial
Times Actuaries All Share Index ("FTA").
The FTA is an index of stocks traded on the LSE, 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.
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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 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
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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.
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.
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.")
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
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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 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.
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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, 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.
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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.
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
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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.
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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 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 $36 billion. For advisory fees that the
Portfolios have incurred for the fiscal year ended November 30, 1999, 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
18
<PAGE>
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.
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
19
<PAGE>
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 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. Since the International Equity Portfolios
own securities that are primarily listed on foreign exchanges which may trade on
days when the Portfolios do not price their shares, the net asset value of an
International Equity Portfolio may change on days when shareholders will not be
able to purchase or redeem shares.
Each International Equity Portfolio is closed if portfolio securities
greater than 50% of its total assets are principally traded on exchanges that
are closed that day. Purchase and redemption orders for shares of such Portfolio
will not be accepted on those days.
20
<PAGE>
FINANCIAL HIGHLIGHTS
The Financial Highlights table is meant to help you understand each
Portfolio's financial performance for the past 5 years. 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, whose report, along
with the Portfolios' financial statements, are included in the annual report
which is available upon request.
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
VA SMALL VA LARGE
VALUE PORTFOLIO VALUE PORTFOLIO
-------------------------------------------------------- ---------------------------------
YEAR YEAR YEAR YEAR OCT. 3 YEAR YEAR YEAR
ENDED ENDED ENDED ENDED TO ENDED ENDED ENDED
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30 NOV. 30, NOV. 30, NOV. 30,
1999 1998 1997 1996 1995 1999 1998 1997
--------- --------- --------- --------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period............. $ 13.11 $ 15.45 $ 11.75 $ 9.69 $10.00 $ 16.51 $ 16.08 $ 13.46
------- ------- ------- ------ ------ ------- ------- -------
INCOME FROM
INVESTMENT
OPERATIONS
Net Investment
Income............. 0.07 0.04 0.06 0.03 0.01 0.25 0.24 0.24
Net Gains (Losses) on
Securities
(Realized and
Unrealized)........ 0.76 (1.27) 3.78 2.05 (0.31) 0.38 1.47 3.07
------- ------- ------- ------ ------ ------- ------- -------
Total from Investment
Operations......... 0.83 (1.23) 3.84 2.08 (0.30) 0.63 1.71 3.31
------- ------- ------- ------ ------ ------- ------- -------
LESS DISTRIBUTIONS
Net Investment
Income............. (0.04) (0.06) (0.03) (0.02) (0.01) (0.07) (0.24) (0.23)
Net Realized Gains... (1.12) (1.05) (0.11) -- -- (1.07) (1.04) (0.46)
------- ------- ------- ------ ------ ------- ------- -------
Total
Distributions...... (1.16) (1.11) (0.14) (0.02) (0.01) (1.14) (1.28) (0.69)
------- ------- ------- ------ ------ ------- ------- -------
Net Asset Value, End
of Period.......... $ 12.78 $ 13.11 $ 15.45 $11.75 $ 9.69 $ 16.00 $ 16.51 $ 16.08
======= ======= ======= ====== ====== ======= ======= =======
Total Return......... 7.10% (8.45)% 33.02% 21.47% (3.04)%# 4.24% 11.46% 25.72%
Net Assets, End of
Period
(thousands)........ $19,088 $17,832 $17,428 $8,058 $4,848 $32,282 $30,187 $24,545
Ratio of Expenses to
Average Net
Assets............. 0.67% 0.70% 0.71% 1.05% 0.99%* 0.43% 0.46% 0.48%
Ratio of Net
Investment Income
to Average Net
Assets............. 0.51% 0.32% 0.45% 0.34% 0.91%* 1.54% 1.49% 1.71%
Portfolio Turnover
Rate............... 28.29% 22.81% 21.18% 5.19% 0.00%* 52.03% 22.98% 20.49%
<CAPTION>
VA LARGE
VALUE PORTFOLIO
--------------------
YEAR JAN. 13
ENDED TO
NOV. 30, NOV. 30
1996 1995
--------- --------
<S> <C> <C>
Net Asset Value,
Beginning of
Period............. $ 11.29 $10.00
------- ------
INCOME FROM
INVESTMENT
OPERATIONS
Net Investment
Income............. 0.17 0.19
Net Gains (Losses) on
Securities
(Realized and
Unrealized)........ 2.12 1.85
------- ------
Total from Investment
Operations......... 2.29 2.04
------- ------
LESS DISTRIBUTIONS
Net Investment
Income............. (0.12) (0.16)
Net Realized Gains... -- (0.59)
------- ------
Total
Distributions...... (0.12) (0.75)
------- ------
Net Asset Value, End
of Period.......... $ 13.46 $11.29
======= ======
Total Return......... 20.45% 20.41%#
Net Assets, End of
Period
(thousands)........ $13,570 $6,562
Ratio of Expenses to
Average Net
Assets............. 1.03% 1.20%*
Ratio of Net
Investment Income
to Average Net
Assets............. 1.59% 2.03%*
Portfolio Turnover
Rate............... 18.54% 65.38%*
</TABLE>
- ------------------------------
* Annualized
# Non-Annualized
21
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
VA INTERNATIONAL VA INTERNATIONAL
VALUE PORTFOLIO SMALL PORTFOLIO
---------------------------------------------------- ------------------------------
YEAR YEAR YEAR YEAR OCT. 3 YEAR YEAR YEAR
ENDED ENDED ENDED ENDED TO ENDED ENDED ENDED
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30 NOV. 30, NOV. 30, NOV. 30,
1999 1998 1997 1996 1995 1999 1998 1997
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period............. $ 11.65 $ 10.87 $ 11.41 $ 10.03 $10.00 $ 7.78 $ 7.99 $10.48
------- ------- ------- ------- ------ ------- ------- ------
INCOME FROM
INVESTMENT
OPERATIONS
Net Investment Income
(Loss)............. 0.20 0.19 0.17 0.11 -- 0.12 0.11 0.09
Net Gains (Losses) on
Securities
(Realized and
Unrealized)........ 1.66 0.91 (0.56) 1.29 0.03 1.04 (0.14) (2.30)
------- ------- ------- ------- ------ ------- ------- ------
Total from Investment
Operations......... 1.86 1.10 (0.39) 1.40 0.03 1.16 (0.03) (2.21)
------- ------- ------- ------- ------ ------- ------- ------
LESS DISTRIBUTIONS
Net Investment
Income............. (0.21) (0.18) (0.10) -- -- (0.13) (0.09) (0.06)
Net Realized Gains... (0.57) (0.14) (0.05) (0.02) -- (0.50) (0.09) (0.22)
------- ------- ------- ------- ------ ------- ------- ------
Total
Distributions...... (0.78) (0.32) (0.15) (0.02) -- (0.63) (0.18) (0.28)
------- ------- ------- ------- ------ ------- ------- ------
Net Asset Value, End
of Period.......... $ 12.73 $ 11.65 $ 10.87 $ 11.41 $10.03 $ 8.31 $ 7.78 $ 7.99
======= ======= ======= ======= ====== ======= ======= ======
Total Return......... 17.21% 10.43% (3.45)% 13.92% 0.30%# 16.44% (0.23)% (21.54)%
Net Assets, End of
Period
(thousands)........ $23,617 $21,091 $17,610 $10,517 $5,014 $13,308 $12,748 $9,884
Ratio of Expenses to
Average Net
Assets............. 0.65% 0.68% 0.76% 1.17% 1.32%* 0.79% 0.90% 0.99%
Ratio of Net
Investment Income
to Average Net
Assets............. 1.70% 1.63% 1.83% 1.29% (0.20)%* 1.53% 1.56% 1.32%
Portfolio Turnover
Rate............... 20.27% 27.11% 7.95% 4.14% 0.00%* 14.31% 20.82% 8.57%
<CAPTION>
VA INTERNATIONAL
SMALL PORTFOLIO
-------------------
YEAR JAN. 13
ENDED TO
NOV. 30, NOV. 30
1996 1995
-------- --------
<S> <C> <C>
Net Asset Value,
Beginning of
Period............. $ 9.71 $10.00
------ ------
INCOME FROM
INVESTMENT
OPERATIONS
Net Investment Income
(Loss)............. 0.06 (0.01)
Net Gains (Losses) on
Securities
(Realized and
Unrealized)........ 0.71 (0.28)
------ ------
Total from Investment
Operations......... 0.77 (0.29)
------ ------
LESS DISTRIBUTIONS
Net Investment
Income............. -- --
Net Realized Gains... -- --
------ ------
Total
Distributions...... -- --
------ ------
Net Asset Value, End
of Period.......... $10.48 $ 9.71
====== ======
Total Return......... 7.93% (2.90)%#
Net Assets, End of
Period
(thousands)........ $6,007 $4,856
Ratio of Expenses to
Average Net
Assets............. 1.27% 2.52%*
Ratio of Net
Investment Income
to Average Net
Assets............. 0.63% (0.39)%*
Portfolio Turnover
Rate............... 6.40% 0.00%*
</TABLE>
- ------------------------------
* Annualized
# Non-Annualized
22
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
VA SHORT-TERM VA GLOBAL
FIXED PORTFOLIO BOND PORTFOLIO
---------------------------------------------------- ------------------------------
YEAR YEAR YEAR YEAR OCT. 3 YEAR YEAR YEAR
ENDED ENDED ENDED ENDED TO ENDED ENDED ENDED
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30 NOV. 30, NOV. 30, NOV. 30,
1999 1998 1997 1996 1995 1999 1998 1997
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period............. $ 10.09 $ 10.08 $ 10.08 $10.04 $10.00 $ 10.30 $ 10.69 $11.14
------- ------- ------- ------ ------ ------- ------- ------
INCOME FROM
INVESTMENT
OPERATIONS
Net Investment
Income............. 0.46 0.53 0.53 0.48 0.08 0.36 0.52 0.42
Net Gains (Losses) on
Securities
(Realized and
Unrealized)........ (0.02) 0.02 -- 0.04 -- 0.04 0.30 0.34
------- ------- ------- ------ ------ ------- ------- ------
Total from Investment
Operations......... 0.44 0.55 0.53 0.52 0.08 0.40 0.82 0.76
------- ------- ------- ------ ------ ------- ------- ------
LESS DISTRIBUTIONS
Net Investment
Income............. (0.10) (0.53) (0.53) (0.48) (0.04) (0.01) (1.14) (0.94)
Net Realized Gains... (0.01) (0.01) -- -- -- -- (0.04) (0.27)
Tax Return of
Capital............ -- -- -- -- -- -- (0.03) --
------- ------- ------- ------ ------ ------- ------- ------
Total
Distributions...... (0.11) (0.54) (0.53) (0.48) (0.04) (0.01) (1.21) (1.21)
------- ------- ------- ------ ------ ------- ------- ------
Net Asset Value, End
of Period.......... $ 10.42 $ 10.09 $ 10.08 $10.08 $10.04 $ 10.69 $ 10.30 $10.69
======= ======= ======= ====== ====== ======= ======= ======
Total Return......... 4.39% 5.54% 5.46% 5.34% 0.81%# 3.85% 8.44% 7.58%
Net Assets, End of
Period
(thousands)........ $22,135 $18,467 $15,136 $7,789 $5,041 $13,153 $10,483 $7,073
Ratio of Expenses to
Average Net
Assets............. 0.40% 0.41% 0.43% 0.70% 0.63%* 0.49% 0.57% 0.65%
Ratio of Net
Investment Income
to Average Net
Assets............. 4.91% 5.24% 5.44% 4.93% 5.11%* 3.74% 3.65% 4.09%
Portfolio Turnover
Rate............... 29.96% 49.84% 72.92% 29.27% 0.00%* 43.63% 36.97% 58.35%
<CAPTION>
VA GLOBAL
BOND PORTFOLIO
-------------------
YEAR JAN. 13
ENDED TO
NOV. 30, NOV. 30
1996 1995
-------- --------
<S> <C> <C>
Net Asset Value,
Beginning of
Period............. $10.61 $10.00
------ ------
INCOME FROM
INVESTMENT
OPERATIONS
Net Investment
Income............. 0.37 0.48
Net Gains (Losses) on
Securities
(Realized and
Unrealized)........ 0.57 0.81
------ ------
Total from Investment
Operations......... 0.94 1.29
------ ------
LESS DISTRIBUTIONS
Net Investment
Income............. (0.41) (0.57)
Net Realized Gains... -- (0.11)
Tax Return of
Capital............ -- --
------ ------
Total
Distributions...... (0.41) (0.68)
------ ------
Net Asset Value, End
of Period.......... $11.14 $10.61
====== ======
Total Return......... 9.16% 13.09%#
Net Assets, End of
Period
(thousands)........ $3,703 $3,393
Ratio of Expenses to
Average Net
Assets............. 1.73% 1.31%*
Ratio of Net
Investment Income
to Average Net
Assets............. 3.43% 5.08%*
Portfolio Turnover
Rate............... 88.93% 60.09%*
</TABLE>
- ------------------------------
(Restated to reflect a 900% stock dividend as of January 2, 1996.)
* Annualized
# Non-Annualized
23
<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.
24
<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
DIMENSIONAL FUND ADVISORS LTD. AND TRANSFER AGENT
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 STRADLEY, RONON, STEVENS & YOUNG, LLP
1 MacQuarie Place 2600 One Commerce Square
Sydney, New South Wales 2000 Philadelphia, PA 19103-7098
Australia
Tel. No. (612) 9 247-7822
CUSTODIANS--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>
25
<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 current prospectuses on our web site at dfafunds.com.
- - 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
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
DIMENSIONAL INVESTMENT GROUP INC.
1299 OCEAN AVENUE, 11TH FLOOR, SANTA MONICA, CALIFORNIA 90401
TELEPHONE: (310) 395-8005
STATEMENT OF ADDITIONAL INFORMATION
MARCH 24, 2000
DFA Investment Dimensions Group Inc. ("DFAIDG") is an open-end
management investment company that offers thirty-eight series of shares.
Dimensional Investment Group Inc. ("DIG") is an open-end management investment
company that offers fifteen series of shares. This statement of additional
information ("SAI") relates to twenty-three series of DFAIDG and one series of
DIG (individually, a "Portfolio" and collectively, the "Portfolios"):
<TABLE>
DOMESTIC EQUITY PORTFOLIOS
<S> <C>
U.S. Large Company Portfolio (FEEDER) U.S. 6-10 Value Portfolio (FEEDER)
Enhanced U.S. Large Company Portfolio (FEEDER) U.S. 6-10 Small Company Portfolio (FEEDER)
U.S. Large Cap Value Portfolio (FEEDER) U.S. 9-10 Small Company Portfolio (FEEDER)
U.S. 4-10 Value Portfolio (FEEDER) DFA Real Estate Securities Portfolio
INTERNATIONAL EQUITY PORTFOLIOS
Large Cap International Portfolio United Kingdom Small Company Portfolio (FEEDER)
DFA International Value Portfolio (FEEDER) Continental Small Company Portfolio (FEEDER)
International Small Company Portfolio DFA International Small Cap Value Portfolio
Japanese Small Company Portfolio (FEEDER) Emerging Markets Portfolio (FEEDER)
Pacific Rim Small Company Portfolio (FEEDER) Emerging Markets Value Portfolio (FEEDER)
Emerging Markets Small Cap Portfolio (FEEDER)
FIXED INCOME PORTFOLIOS
DFA One-Year Fixed Income Portfolio (FEEDER) DFA Five-Year Global Fixed Income Portfolio
DFA Two-Year Global Fixed Income Portfolio DFA Intermediate Government Fixed Income
(FEEDER) Portfolio
DFA Five-Year Government Portfolio
</TABLE>
This statement of additional information is not a prospectus but should
be read in conjunction with the Portfolios' prospectus dated March 24, 2000, as
amended from time to time. The audited financial statements and financial
highlights of the Funds are incorporated by reference from each Fund's annual
report to shareholders. The prospectus and the annual reports can be obtained by
writing to the above address or by calling the above telephone number.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PORTFOLIO CHARACTERISTICS AND POLICIES...........................3
BROKERAGE COMMISSIONS............................................3
INVESTMENT LIMITATIONS...........................................5
OPTIONS ON STOCK INDICES.........................................9
FUTURES CONTRACTS...............................................10
CASH MANAGEMENT PRACTICES.......................................11
CONVERTIBLE DEBENTURES..........................................13
PORTFOLIO TURNOVER RATES........................................13
DIRECTORS AND OFFICERS..........................................13
SERVICES TO THE FUNDS...........................................16
ADVISORY FEES...................................................19
GENERAL INFORMATION.............................................20
CODES OF ETHICS.................................................21
SHAREHOLDER RIGHTS..............................................21
PRINCIPAL HOLDERS OF SECURITIES.................................22
PURCHASE OF SHARES..............................................25
REDEMPTION AND TRANSFER OF SHARES...............................26
TAXATION OF THE PORTFOLIOS......................................26
CALCULATION OF PERFORMANCE DATA.................................29
FINANCIAL STATEMENTS............................................30
</TABLE>
2
<PAGE>
PORTFOLIO CHARACTERISTICS AND POLICIES
Each of the Portfolios identified as a "Feeder" (a "Feeder Portfolio") on
the cover page of this SAI seeks to achieve its investment objective by
investing all of its investable assets in a corresponding series of The DFA
Investment Trust Company (the "Trust") or in the case of the Emerging Markets
Value Portfolio, in the Dimensional Emerging Markets Value Fund Inc. The series
of the Trust and Dimensional Emerging Markets Value Fund Inc. are referred to as
the "Master Funds." Dimensional Fund Advisors Inc. (the "Advisor") serves as
investment advisor to each of the Portfolios, except the Feeder Portfolios, and
each Master Fund, and provides administrative services to the Feeder Portfolios
and International Small Company Portfolio. The International Small Company
Portfolio seeks to achieve its investment objective by investing in up to four
Master Funds (the "International Master Funds"). Capitalized terms not otherwise
defined in this SAI have the meaning assigned to them in the prospectus.
The following information supplements the information set forth in the
prospectus. Unless otherwise indicated, the following information applies to all
of the Portfolios and Master Funds, including the Feeder Portfolios, through
their investment in the Master Funds.
Each of the Portfolios and the Master Funds, other than the Five-Year
Global Fixed Income Portfolio, are diversified under the federal securities laws
and regulations.
Because the structure of the Domestic Equity and International Equity
Portfolios is based on the relative market capitalizations of eligible holdings,
it is possible that the Portfolios might include at least 5% of the outstanding
voting securities of one or more issuers. In such circumstances, the 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 COMMISSIONS
The following table depicts brokerage commissions paid by the designated
Portfolios and Master Funds. For the Feeder Portfolios, the amounts include
commissions paid by the corresponding Master Fund.
BROKERAGE COMMISSIONS
FISCAL YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
U.S. Large Company Series .......................................... $ 1,250 $ 15,841 $ 40,689
Enhanced U.S. Large Company Series ................................. 11,729 11,311 10,284
U.S. Large Cap Value Series ........................................ 2,492,821 1,116,421 929,005
U.S. 4-10 Value Series ............................................. 1,164,028 717,873 -0-
U.S. 6-10 Value Series ............................................. 4,440,807 4,289,226 4,591,853
U.S. 6-10 Small Company Series ..................................... 733,337 1,022,535 855,652
U.S. 9-10 Small Company Series...................................... 1,429,817 1,541,534 1,641,020
DFA Real Estate Securities Portfolio ............................... 74,545 66,659 53,646
Large Cap International Portfolio .................................. 138,197 32,512 9,322
DFA International Value Series ..................................... 480,344 763,022 1,133,787
Japanese Small Company Series ...................................... 335,177 300,862 602,098
Pacific Rim Small Company Series ................................... 606,240 316,644 485,846
United Kingdom Small Company Series ................................ 85,725 116,482 68,028
Continental Small Company Series ................................... 304,874 278,568 145,195
DFA International Small Cap Value Portfolio ........................ 498,990 573,200 921,326
Emerging Markets Series.............................................. 246,534 375,895 559,853
Emerging Markets Value Portfolio (Dimensional Emerging ............. 403,490 638,643 79,005
Markets Value Fund Inc.) ...........................................
Emerging Markets Small Cap Series .................................. 96,921 40,579 -0-
----------- ----------- -----------
TOTAL............................................................... $13,544,826 $12,208,706 $12,126,609
</TABLE>
3
<PAGE>
The substantial increases or decreases in the amount of brokerage
commissions paid by certain Portfolios from year to year indicated in the
foregoing table resulted from increases or decreases in the amount of securities
that were bought and sold by those Portfolios.
Please note that while the following discussion relates to the policies of
the Portfolios with respect to brokerage commissions, it should be understood
that, with respect to a Feeder Portfolio and International Small Company
Portfolio, the discussion applies to the Master Fund in which the Feeder
Portfolio invests all of its assets and the International Master Funds,
respectively.
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, and brokers will be selected with this goal in
view. The Advisor monitors the performance of brokers which effect transactions
for the Portfolios to determine the effect that their trading has on the market
prices of the securities in which they invest. The Advisor also checks the rate
of commission being paid by the Portfolios to their brokers to ascertain that
they are competitive with those charged by other brokers for similar services.
Dimensional Fund Advisors Ltd. performs these services for the United Kingdom
and Continental Small Company Series and DFA Australia Limited performs these
services for the Japanese and Pacific Rim Small Company Series. Transactions
also may be placed with brokers who provide the Advisor or the sub-advisors with
investment research, such as reports concerning individual issuers, industries
and general economic and financial trends and other research services.
The OTC companies eligible for purchase by the U.S. 9-10 Small Company
Series, the U.S. 6-10 Small Company Series, the U.S. 6-10 Value Series, the U.S.
4-10 Value Series and the DFA Real Estate Securities Portfolio are thinly traded
securities. Therefore, the Advisor believes it needs maximum flexibility to
effect OTC trades on a best execution basis. To that end, the Advisor places buy
and sell orders with market makers, third market brokers, Instinet and with
brokers on an agency basis when the Advisor determines that the securities may
not be available from other sources at a more favorable price. Third market
brokers enable the Advisor to trade with other institutional holders directly on
a net basis. This allows the Advisor to sometimes trade larger blocks than would
be possible by going through a single market maker.
Instinet is an electronic information and communication network whose
subscribers include most market makers as well as many institutions. Instinet
charges a commission for each trade executed on its system. On any given trade,
the U.S. 9-10 Small Company Portfolio, the U.S. 6-10 Small Company Portfolio,
the Value Portfolios and the DFA Real Estate Securities Portfolio, by trading
through Instinet, would pay a spread to a dealer on the other side of the trade
plus a commission to Instinet. However, placing a buy (or sell) order on
Instinet communicates to many (potentially all) market makers and institutions
at once. This can create a more complete picture of the market and thus increase
the likelihood that the Portfolios can effect transactions at the best available
prices.
During the fiscal year 1999, the Portfolios or, in the case of a Feeder
Portfolio, its corresponding Master Fund, paid commissions for securities
transactions to brokers which provided market price monitoring services, market
studies and research services to the Portfolios or Master Funds as follows:
<TABLE>
<CAPTION>
VALUE OF
SECURITIES BROKERAGE
TRANSACTIONS COMMISSIONS
------------ -----------
<S> <C> <C>
U.S. Large Cap Value $164,462,095 $ 179,980
U.S. 4-10 Value 60,217,214 214,638
4
<PAGE>
U.S. 6-10 Value ................................................. 43,205,767 224,108
U.S. 6-10 Small Company.......................................... 15,502,174 79,379
U.S. 9-10 Small Company.......................................... 5,524,765 32,224
DFA International Value.......................................... 83,584,021 38,304
Japanese Small Company........................................... 29,185,623 181,889
Pacific Rim Small Company........................................ 5,770,950 23,086
DFA International Small Cap Value................................ 3,534,854 18,910
------------ --------
TOTAL............................................................ $410,987,463 $992,518
------------ --------
</TABLE>
The investment advisory agreements permit the Advisor knowingly to pay
commissions on these 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 Funds.
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
that 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 Japanese Small Company
Series has been able to avail itself of institutional discounts. The Series'
ability to effect transactions at a discount from fixed commission rates depends
on a number of factors, including the size of the transaction, the relation
between the cost to the member or the licensed non-member firm of effecting such
transaction and the commission receivable, and the law, regulation and practice
discussed above. There can be no assurance that the Series will continue to be
able to realize the benefit of discounts from fixed commissions.
A Feeder Portfolio will not incur any brokerage or other costs in
connection with its purchase or redemption of shares of the corresponding Master
Fund.
INVESTMENT LIMITATIONS
Each of the Portfolios has adopted certain limitations which may not be
changed with respect to any Portfolio without the approval of a majority of the
outstanding voting securities of the Portfolio. A "majority" is defined as the
lesser of: (1) at least 67% of the voting securities of the Portfolio (to be
affected by the proposed change) present at a meeting, if the holders of more
than 50% of the outstanding voting securities of the Portfolio are present or
represented by proxy, or (2) more than 50% of the outstanding voting securities
of such Portfolio.
The Portfolios will not:
(1) invest in commodities or real estate, including limited
partnership interests therein, except the DFA Real Estate
Securities Portfolio, although they may purchase and sell
securities of companies which deal in real estate and
securities which are secured by interests in real estate,
and all Portfolios except the U.S. 9-10 and 6-10 Small
Company Portfolios, the DFA One-Year Fixed Income Portfolio
and the DFA Five-Year Government Portfolio may purchase or
sell financial futures contracts and options thereon; and
the Enhanced U.S. Large Company Portfolio may purchase, sell
and enter into indices-related futures contracts, options on
such futures contracts, securities-related swap agreements
and other derivative instruments;
(2) make loans of cash, except through the acquisition of
repurchase agreements and obligations customarily purchased
by institutional investors; and, with respect to the
5
<PAGE>
Emerging Markets Value Portfolio, except through the
acquisition of publicly-traded debt securities and
short-term money instruments;
(3) as to 75% of the total assets of a Portfolio, invest in the
securities of any issuer (except obligations of the U.S.
Government and its instrumentalities) if, as a result, more
than 5% of the Portfolio's total assets, at market, would be
invested in the securities of such issuer; provided that
this limitation applies to 100% of the total assets of the
U.S. 9-10 Small Company Portfolio and the DFA Five-Year
Global Fixed Income Portfolio is not subject to this
limitation;
(4) purchase or retain securities of an issuer if those officers
and directors of the Fund or the Advisor owning more than
1/2 of 1% of such securities together own more than 5% of
such securities; provided that the U.S. 4-10 Value Portfolio
and Emerging Markets Value Portfolios are not subject to
this limitation;
(5) borrow, except from banks and as a temporary measure for
extraordinary or emergency purposes and then, in no event,
in excess of 5% of a Portfolio's gross assets valued at the
lower of market or cost; provided that each Portfolio, other
than the U.S. 9-10 Small Company, Japanese Small Company,
DFA One-Year Fixed Income, DFA Intermediate Government Fixed
Income, DFA Five-Year Government and Emerging Markets Value
Portfolios, may borrow amounts not exceeding 33% of their
net assets from banks and pledge not more than 33% of such
assets to secure such loans; and with respect to the
Emerging Markets Value Portfolio, borrow, except in
connection with a foreign currency transaction, the
settlement of a portfolio trade, as a temporary measure for
extraordinary or emergency purposes, including to meet
redemption requests, and, in no event in excess of 33% of
the Fund's net assets valued at market;
(6) pledge, mortgage, or hypothecate any of its assets to an
extent greater than 10% of its total assets at fair market
value, except as described in (5) above; provided that the
U.S. 4-10 Value Portfolio and Emerging Markets Value
Portfolios are not subject to this limitation;
(7) invest more than 10% of the value of the Portfolio's total
assets in illiquid securities, which include certain
restricted securities, repurchase agreements with maturities
of greater than seven days, and other illiquid investments;
provided that the Enhanced U.S. Large Company Portfolio,
U.S. 4-10 Value Portfolio, DFA Two-Year Global Fixed Income
Portfolio, International Small Company, Emerging Markets
Small Cap Portfolio and Emerging Markets Value Portfolios
are not subject to this limitation and the DFA Real Estate
Securities Portfolio, the U.S. 6-10 Value Portfolio, the
U.S. Large Cap Value Portfolio, the DFA International Value
Portfolio, the U.S. 6-10 Small Company Portfolio, the
Emerging Markets Portfolio and DFA International Small Cap
Value Portfolio may invest not more than 15% of their total
assets in illiquid securities;
(8) engage in the business of underwriting securities issued by
others;
(9) invest for the purpose of exercising control over management
of any company; provided that the U.S. 9-10 Small Company
Portfolio and the U.S. 4-10 Value Portfolio are not subject
to this limitation;
(10) invest its assets in securities of any investment company,
except in connection with a merger, acquisition of assets,
consolidation or reorganization; provided that (a) the DFA
Real Estate Securities Portfolio may invest in a REIT that
is registered as an investment company; (b) each of the U.S.
4-10 Value Portfolio, Enhanced U.S. Large Company Portfolio,
Emerging Markets Portfolio, Emerging Markets Small Cap
Portfolio, Emerging Markets Value Portfolio, International
Small Company Portfolio and U.S. 9-10 Small
6
<PAGE>
Company Portfolio may invest its assets in securities of
investment companies and units of such companies such as,
but not limited to, S&P Depository Receipts;
(11) invest more than 5% of its total assets in securities of
companies which have (with predecessors) a record of less
than three years' continuous operation; except this
limitation does not apply to the U.S. 9-10 Small Company
Portfolio, U.S. 4-10 Value Portfolio and DFA Real Estate
Securities Portfolios;
(12) acquire any securities of companies within one industry if,
as a result of such acquisition, more than 25% of the value
of the Portfolio's total assets would be invested in
securities of companies within such industry; except that
(a) DFA One-Year Fixed Income and DFA Two-Year Global Fixed
Income Portfolios shall invest more than 25% of its total
assets in obligations of banks and bank holding companies in
the circumstances described in the prospectus under
"Investments in the Banking Industry" and as otherwise
described under "Portfolio Strategy;" and (b) DFA Real
Estate Securities Portfolio shall invest more than 25% of
its total assets in securities of companies in the real
estate industry;
(13) write or acquire options (except as described in (1) above)
or interests in oil, gas or other mineral exploration,
leases or development programs, except that the Enhanced
U.S. Large Company Portfolio, the U.S. 4-10 Value Portfolio
and Emerging Markets Value Portfolios are not subject to
these limitations;
(14) purchase warrants, however, the Domestic and International
Equity Portfolios may acquire warrants as a result of
corporate actions involving their holdings of other equity
securities; provided that the U.S. 4-10 Value Portfolio and
Emerging Markets Value Portfolios are not subject to this
limitation;
(15) purchase securities on margin or sell short; provided that
the U.S. 4-10 Value Portfolio and Emerging Markets Value
Portfolios are not subject to the limitation on selling
securities short;
(16) acquire more than 10% of the voting securities of any
issuer; provided that (a) this limitation applies only to
75% of the assets of the DFA Real Estate Securities
Portfolio, the Value Portfolios, the Emerging Markets
Portfolio, the Emerging Markets Small Cap Portfolio, the DFA
International Small Cap Value Portfolio and the Emerging
Markets Value Portfolio; and (b) the U.S. 9-10 Small Company
Portfolio are not subject to this limitation; or
(17) issue senior securities (as such term is defined in Section
18(f) of the Investment Company Act of 1940 (the "1940
Act")), except to the extent permitted by the 1940 Act.
The investment limitations described in (3), (4), (7), (9), (10), (11),
(12) and (16) above do not prohibit each Feeder Portfolio and International
Small Company Portfolio from investing all or substantially all of its assets in
the shares of another registered, open-end investment company, such as the
Master Funds or the International Master Funds, respectively. The investment
limitations of each Master Fund are the same as those of the corresponding
Feeder Portfolio.
The investment limitations described in (1) and (15) above do not prohibit
each Portfolio that may purchase or sell financial futures contracts and options
thereon from making margin deposits to the extent permitted under applicable
regulations; and the investment limitations described in (1), (13) and (15)
above do not prohibit the Enhanced U.S. Large Company Portfolio from: (i) making
margin deposits in connection with transactions in options; and (ii) maintaining
a short position, or purchasing, writing or selling puts, calls, straddles,
spreads or combinations thereof in connection with transactions in options,
futures, and options on futures and transactions arising under swap agreements
or other derivative instruments.
7
<PAGE>
For purposes of (5) above, the Emerging Markets Portfolio, Emerging Markets
Small Cap Portfolio and Emerging Markets Value Portfolio (indirectly through
their investment in the corresponding Master Funds) may borrow in connection
with a foreign currency transaction or the settlement of a portfolio trade. The
only type of borrowing contemplated thereby is the use of a letter of credit
issued on such Master Funds' behalf in lieu of depositing initial margin in
connection with currency futures contracts, and the Master Funds have no present
intent to engage in any other types of borrowing transactions under this
authority.
Although (2) above prohibits cash loans, the Portfolios are authorized to
lend portfolio securities. Inasmuch as the Feeder Portfolios and International
Small Company Portfolio will only hold shares of certain Master Funds, these
Portfolios do not intend to lend those shares.
For the purposes of (7) above, DFA One-Year Fixed Income Portfolio, DFA
Two-Year Global Fixed Income Portfolio (indirectly through their investment in
the corresponding Master Funds) and DFA Five-Year Global Fixed Income Portfolio
may invest in commercial paper that is exempt from the registration requirements
of the Securities Act of 1933 (the "1933 Act") subject to the requirements
regarding credit ratings stated in the prospectus under "Description of
Investments." Further, pursuant to Rule 144A under the 1933 Act, the Portfolios
may purchase certain unregistered (i.e. restricted) securities upon a
determination that a liquid institutional market exists for the securities. If
it is decided that a liquid market does exist, the securities will not be
subject to the 10% or 15% limitation on holdings of illiquid securities stated
in (7) above. While maintaining oversight, the Board of Directors has delegated
the day-to-day function of making liquidity determinations to the Advisor. For
Rule 144A securities to be considered liquid, there must be at least two dealers
making a market in such securities. After purchase, the Board of Directors and
the Advisor will continue to monitor the liquidity of Rule 144A securities.
For purposes of (12) above, the DFA Five-Year Global Fixed Income Portfolio
will not concentrate its investments in a single industry. This means that it
will not invest more than 25% of its assets in securities of companies in any
one industry. Management does not consider securities which are issued by the
U.S. government or its agencies or instrumentalities to be investments in an
"industry." However, management currently considers securities issued by a
foreign government (but not the U.S. Government or its agencies or
instrumentalities) to be subject to the 25% limitation. Thus, not more than 25%
of the Portfolio's total assets will be invested in securities issued by any one
foreign government or supranational organization. The Portfolio might invest in
certain securities issued by companies, such as Caisse Nationale des
Telecommunication, a communications company, whose obligations are guaranteed by
a foreign government. Management considers such a company to be within a
particular industry (in this case, the communications industry) and, therefore,
the Portfolio will invest in the securities of such a company only if it can do
so under the Portfolio's policy of not being concentrated in any single
industry.
Although not a fundamental policy subject to shareholder approval: (1) the
Large Cap International and Small Company Portfolios, including the U.S. 6-10
Small Company Portfolio, Japanese Small Company Portfolio, Pacific Rim Small
Company Portfolio, United Kingdom Small Company Portfolio and Continental Small
Company Portfolio (directly or indirectly through their investment in the Master
Funds) do not intend to purchase interests in any real estate investment trust;
and (2) the Enhanced U.S. Large Company Portfolio, U.S. 4-10 Value Portfolio,
DFA Two-Year Global Fixed Income Portfolio, International Small Company
Portfolio, Emerging Markets Small Cap Portfolio and Emerging Markets Value
Portfolios (directly or indirectly through their investment in the Master Funds)
do not intend to invest more than 15% of their net assets in illiquid
securities.
The International Equity, DFA Two-Year Global Fixed Income and DFA
Five-Year Global Fixed Income Portfolios (directly or indirectly through their
investment in the Master Funds) may acquire and sell forward foreign currency
exchange contracts in order to hedge against changes in the level of future
currency rates. Such contracts involve an obligation to purchase or sell a
specific currency at a future date at a price set in the contract. While each
Value Portfolio, the DFA International Value Portfolio and the DFA Real Estate
Securities Portfolio (directly or indirectly through their investment in the
Master Funds), have retained authority to buy and sell financial futures
contracts and options thereon, they have no present intention to do so.
Notwithstanding any of the above investment restrictions, the Emerging
Markets Series, the Emerging Markets Small Cap Series and the Dimensional
Emerging Markets Value Fund may establish subsidiaries or other similar vehicles
for the purpose of conducting their investment operations in Approved Markets,
if such subsidiaries
8
<PAGE>
or vehicles are required by local laws or regulations governing foreign
investors such as the Master Funds or the Dimensional Emerging Markets Value
Fund or whose use is otherwise considered by the Master Funds or the Dimensional
Emerging Markets Value Fund to be advisable. Each Master Fund or the Dimensional
Emerging Markets Value Fund would "look through" any such vehicle to determine
compliance with its investment restrictions.
Subject to future regulatory guidance, for purposes of those investment
limitations identified above that are based on total assets, "total assets"
refers to the assets that the Portfolios and Master Funds own, and does not
include assets which the Portfolios and Master Funds do not own but over which
they have effective control. For example, when applying a percentage investment
limitation that is based on total assets, a Portfolio or Master Fund will
exclude from its total assets those assets which represent collateral received
by the Portfolio or Master Fund for its securities lending transactions.
Unless otherwise indicated, all limitations applicable to the Portfolios'
and Master Funds' investments apply only at the time that a transaction is
undertaken. Any subsequent change in a rating assigned by any rating service to
a security or change in the percentage of a Portfolio's or Master Funds' assets
invested in certain securities or other instruments resulting from market
fluctuations or other changes in a Portfolio's or Master Fund's total assets
will not require a Portfolio or Master Fund to dispose of an investment until
the Advisor determines that it is practicable to sell or closeout the investment
without undue market or tax consequences. In the event that ratings services
assign different ratings to the same security, the Advisor will determine which
rating it believes best reflects the security's quality and risk at that time,
which may be the higher of the several assigned ratings.
OPTIONS ON STOCK INDICES
The Enhanced U.S. Large Company Series may purchase and sell options on
stock indices. With respect to the sale of call options on stock indices,
pursuant to published positions of the Securities and Exchange Commission (the
"Commission"), the Enhanced U.S. Large Company Series will either (1) maintain
with its custodian liquid assets equal to the contract value (less any margin
deposits); (2) hold a portfolio of stocks substantially replicating the movement
of the index underlying the call option; or (3) hold a separate call on the same
index as the call written where the exercise price of the call held is (a) equal
to or less than the exercise price of the call written, or (b) greater than the
exercise price of the call written, provided the difference is maintained by the
Series in liquid assets in a segregated account with its custodian. With respect
to the sale of put options on stock indices, pursuant to published Commission
positions, the Enhanced U.S. Large Company Series will either (1) maintain
liquid assets equal to the exercise price (less any margin deposits) in a
segregated account with its custodian; or (2) hold a put on the same index as
the put written where the exercise price of the put held is (a) equal to or
greater than the exercise price of the put written, or (b) less than the
exercise price of the put written, provided an amount equal to the difference is
maintained by the Series in liquid assets in a segregated account with its
custodian.
Prior to the earlier of exercise or expiration, an option may be closed out
by an offsetting purchase or sale of an option of the same series (type,
exchange, underlying index, exercise price, and expiration). There can be no
assurance, however, that a closing purchase or sale transaction can be effected
when the Enhanced U.S. Large Company Series desires.
The Enhanced U.S. Large Company Series will realize a gain from a closing
purchase transaction if the cost of the closing option is less than the premium
received from writing the option, or, if it is more, the Series will realize a
loss. The principal factors affecting the market value of a put or a call option
include supply and demand, interest rates, the current market price of the
underlying index in relation to the exercise price of the option, the volatility
of the underlying index, and the time remaining until the expiration date.
If an option written by the Enhanced U.S. Large Company Series expires, the
Series realizes a gain equal to the premium received at the time the option was
written. If an option purchased by the Enhanced U.S. Large Company Series
expires unexercised, the Series realizes a loss equal to the premium paid.
The premium paid for a put or call option purchased by the Enhanced U.S.
Large Company Series is an asset of the Series. The premium received for an
option written by the Series is recorded as a deferred credit. The value of an
option purchased or written is marked to market daily and is valued at the
closing price on the exchange
9
<PAGE>
on which it is traded or, if not traded on an exchange or no closing price is
available, at the mean between the last bid and asked prices.
RISKS ASSOCIATED WITH OPTIONS ON INDICES
There are several risks associated with transactions in options on indices.
For example, there are significant differences between the securities and
options markets that could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its objectives. The value of
an option position will reflect, among other things, the current market price of
the underlying index, the time remaining until expiration, the relationship of
the exercise price, the term structure of interest rates, estimated price
volatility of the underlying index and general market conditions. A decision as
to whether, when and how to use options involves the exercise of skill and
judgment, and even a well conceived transaction may be unsuccessful to some
degree because of market behavior or unexpected events.
Options normally have expiration dates of up to 90 days. The exercise price
of the options may be below, equal to or above the current market value of the
underlying index. Purchased options that expire unexercised have no value.
Unless an option purchased by the Enhanced U.S. Large Company Series is
exercised or unless a closing transaction is effected with respect to that
position, the Enhanced U.S. Large Company Series will realize a loss in the
amount of the premium paid and any transaction costs.
A position in an exchange-listed option may be closed out only on an
exchange that provides a secondary market for identical options. Although the
Enhanced U.S. Large Company Series intends to purchase or write only those
options for which there appears to be an active secondary market, there is no
assurance that a liquid secondary market will exist for any particular option at
any specific time. Closing transactions may be effected with respect to options
traded in the over the counter markets only by negotiating directly with the
other party to the option contract, or in a secondary market for the option if
such a market exists. There can be no assurance that the Enhanced U.S. Large
Company Series will be able to liquidate an over the counter option at a
favorable price at any time prior to expiration. In the event of insolvency of
the counter-party, the Series may be unable to liquidate an over the counter
option. Accordingly, it may not be possible to effect closing transactions with
respect to certain options, with the result that the Enhanced U.S. Large Series
would have to exercise those options which they have purchased in order to
realize any profit. With respect to options written by the Enhanced U.S. Large
Company Series, the inability to enter into a closing transaction may result in
material losses to the Series.
Index prices may be distorted if trading of a substantial number of
securities included in the index is interrupted causing the trading of options
on that index to be halted. If a trading halt occurred, the Enhanced U.S. Large
Company Series would not be able to close out options which it had purchased and
may incur losses if the underlying index moved adversely before trading resumed.
If a trading halt occurred and restrictions prohibiting the exercise of options
were imposed through the close of trading on the last day before expiration,
exercises on that day would be settled on the basis of a closing index value
that may not reflect current price information for securities representing a
substantial portion of the value of the index.
The Enhanced U.S. Large Company Series' activities in the options markets
may result in higher fund turnover rates and additional brokerage costs;
however, the Series may also save on commissions by using options as a hedge
rather than buying or selling individual securities in anticipation or as a
result of market movements.
INVESTMENT LIMITATIONS ON OPTIONS TRANSACTIONS
The ability of the Enhanced U.S. Large Company Series to engage in options
transactions is subject to certain limitations. The Enhanced U.S. Large Company
Series will only invest in over-the-counter options to the extent consistent
with the 15% limit on investments in illiquid securities.
FUTURES CONTRACTS
Please note that while the following discussion relates to the policies of
certain Portfolios with respect to futures contracts, it should be understood
that with respect to a Feeder Portfolio, the discussion applies to the Master
10
<PAGE>
Fund in which the Feeder Portfolio invests all of its assets and, with respect
to the International Small Company Portfolio, the International Master Funds.
All Portfolios, except the U.S. 9-10 and 6-10 Small Company Portfolios, the
DFA One-Year Fixed Income Portfolio and the DFA Five-Year Government Portfolio,
may enter into futures contracts and options on futures contracts. Such
Portfolios (with the exception of Enhanced U.S. Large Company Portfolio and its
corresponding Master Fund) may enter into futures contracts and options on
future contracts only for the purpose of remaining fully invested and to
maintain liquidity to pay redemptions. The Enhanced U.S. Large Company Portfolio
may use futures contracts and options thereon to hedge against securities prices
or as part of its overall investment strategy.
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of defined securities at a specified future
time and at a specified price. Futures contracts which are standardized as to
maturity date and underlying financial instrument are traded on national futures
exchanges. The Portfolios or Master Fund will be required to make a margin
deposit in cash or government securities with a broker or custodian to initiate
and maintain positions in futures contracts. Minimal initial margin requirements
are established by the futures exchange and brokers may establish margin
requirements which are higher than the exchange requirements. After a futures
contract position is opened, the value of the contract is marked to market
daily. If the futures contract price changes to the extent that the margin on
deposit does not satisfy margin requirements, payment of additional "variation"
margin will be required. Conversely, reduction in the contract value may reduce
the required margin resulting in a repayment of excess margin to the Portfolio
or Master Fund. Variation margin payments are made to and from the futures
broker for as long as the contract remains open. The Portfolios or Master Funds
expect to earn income on their margin deposits. To the extent that a Master Fund
or Portfolio invests in futures contracts and options thereon for other than
bona fide hedging purposes, no Master Fund or Portfolio will enter into such
transactions if, immediately thereafter, the sum of the amount of initial margin
deposits and premiums required to establish such positions would exceed 5% of
the Master Fund's or Portfolio's net assets, after taking into account
unrealized profits and unrealized losses on such contracts it has entered into;
provided, however, that, in the case of an option that is in-the-money at the
time of purchase, the in-the-money amount may be excluded in calculating the 5%.
Pursuant to published positions of the Commission, the Portfolios or Master
Funds may be required to maintain segregated accounts consisting of liquid
assets, (or, as permitted under applicable interpretations, enter into
offsetting positions) in connection with its futures contract transactions in
order to cover its obligations with respect to such contracts.
Positions in futures contracts may be closed out only on an exchange which
provides a secondary market. However, there can be no assurance that a liquid
secondary market will exist for any particular futures contract at any specific
time. Therefore, it might not be possible to close a futures position and, in
the event of adverse price movements, the Portfolio or Master Fund would
continue to be required to make variation margin deposits. In such
circumstances, if the Portfolio or Master Fund has insufficient cash, it might
have to sell portfolio securities to meet daily margin requirements at a time
when it might be disadvantageous to do so. Management intends to minimize the
possibility that it will be unable to close out a futures contract by only
entering into futures which are traded on national futures exchanges and for
which there appears to be a liquid secondary market.
CASH MANAGEMENT PRACTICES
All Portfolios and Master Funds 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, in the case of the Emerging Markets Master Funds, cash investments
may be made for temporary defensive purposes during periods in which market,
economic or political conditions warrant.
All the Portfolios and Master Funds may invest cash in short-term
repurchase agreements. In addition, the following cash investments are
permissible:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Percentage
Portfolios and Master Funds Permissible Cash Investment Guidelines*
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Large Company Short-term fixed income obligations same
as One-Year Fixed Income Portfolio;
11
<PAGE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Percentage
Portfolios and Master Funds Permissible Cash Investment Guidelines*
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
index futures contracts and options
thereon*** 5%
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Enhanced U.S. Large Company Short-term fixed income obligations same N.A.
as Two-Year Global Fixed Income
Portfolio; shares of money market mutual
funds**; index futures contracts and
options thereon***
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
U.S. and International Small Company No limitations 20%
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
The U.S. Value Portfolios and Master Funds High quality, highly liquid fixed income
securities such as money market
instruments; index futures contracts and
options thereon*** 20%
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
DFA Real Estate Securities Portfolio Fixed income obligations such as money
market instruments; index futures
contracts and options thereon*** 20%
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Large Cap International Portfolio Fixed income obligations such as money
market instruments; index futures
contracts and options thereon*** 20%
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
International Small Company Portfolio Short-term, high quality fixed income
obligations Small portion
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
DFA International Small Cap Value Portfolio Index future contracts and options
thereon*** ***
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
DFA International Value Portfolio Fixed income obligations such as
and Master Fund money Fund market instruments; index futures
contracts and options thereon*** 20%
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
The Emerging Markets Portfolios and Money market instruments; highly
Master Funds liquid debtsecurities; freely convertible
currencies; shares of money market mutual
funds**; index futures contracts and
options thereon*** 10%
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
DFA Intermediate Government Future contracts on U.S. Treasury
Fixed Income Portfolio securities or options on such contracts N.A.
- -------------------------------------------------------------------------------------------------------------
</TABLE>
*The percentage guidelines set forth above are not absolute limitations but
the Portfolios and Master Funds do not expect to exceed these guidelines under
normal circumstances.
**Investments in money market mutual funds may involve duplication of
certain fees and expenses.
***To the extent that such Master Funds or Portfolios invest in futures
contracts and options thereon for other than bona fide hedging purposes, no
Master Fund or Portfolio will enter into such transactions if, immediately
thereafter, the sum of the amount of initial margin deposits and premiums
required to establish such positions would exceed 5% of the Master Fund's or
Portfolio's net assets, after taking into account unrealized profits and
unrealized
12
<PAGE>
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%.
CONVERTIBLE DEBENTURES
Each of the International Equity Portfolios and Master Funds may invest up
to 5% of its assets in convertible debentures issued by non U.S. companies
located in the countries where such Portfolio or Master Fund is permitted to
invest. In addition, the 6-10 Series and the 9-10 Series are authorized to
invest in private placements of interest-bearing debentures that are convertible
into common stock. Convertible debentures include corporate bonds and notes that
may be converted into or exchanged for common stock. These securities are
generally convertible either at a stated price or a stated rate (that is, for a
specific number of shares of common stock or other security). As with other
fixed income securities, the price of a convertible debenture to some extent
varies inversely with interest rates. While providing a fixed income stream
(generally higher in yield than the income derived from a common stock but lower
than that afforded by a nonconvertible debenture), a convertible debenture also
affords the investor an opportunity, through its conversion feature, to
participate in the capital appreciation of the common stock into which it is
convertible. As the market price of the underlying common stock declines,
convertible debentures tend to trade increasingly on a yield basis and so may
not experience market value declines to the same extent as the underlying common
stock. When the market price of the underlying common stock increases, the price
of a convertible debenture tends to rise as a reflection of the value of the
underlying common stock. To obtain such a higher yield, a Portfolio or Master
Fund may be required to pay for a convertible debenture an amount in excess of
the value of the underlying common stock. Common stock acquired by a Portfolio
or Master Fund 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.
PORTFOLIO TURNOVER RATES
Generally, securities will be purchased by the Equity Portfolios and Master
Funds with the expectation that they will be held for longer than one year. The
portfolio turnover rate for the U.S. 4-10 Value Series is anticipated to be
approximately 35%. Because the relative market capitalizations of small
companies compared with larger companies generally do not change substantially
over short periods of time, the portfolio turnover rates of the Small Company
Portfolios ordinarily are anticipated to be low. The One-Year Fixed Income
Series, Two-Year Global Fixed Income Series and DFA Five-Year Government
Portfolio are expected to have high portfolio turnover rates due to the
relatively short maturities of the securities to be acquired. The portfolio
turnover rates for Two-Year Global Fixed Income Series and DFA Five-Year
Government Portfolio have varied from year to year due to market and other
conditions. In addition, variations in turnover rates occur because securities
are sold when, in the Advisor's judgment, the return will be increased as a
result of portfolio transactions after taking into account the cost of trading.
DIRECTORS AND OFFICERS
The Board of Directors of each Fund is responsible for establishing Fund
policies and for overseeing the management of that Fund. Each of the Directors
and officers of DFAIDG is also a Director and officer of DIG, a Trustee and
officer of the Trust and a Director and officer of the Dimensional Emerging
Markets Value Fund. The Directors of the Funds, including all of the
disinterested directors, have adopted written procedures to monitor potential
conflicts of interest that might develop between the Feeder Portfolios and the
Master Funds.
The names, locations and dates of birth of the Directors and officers of
the Funds and a brief statement of their present positions and principal
occupations during the past five years is set forth below.
DIRECTORS
David G. Booth*, (12/2/46), Director, President and Chairman-Chief
Executive Officer, Santa Monica, CA. President, Chairman-Chief Executive Officer
and Director of the following companies: Dimensional Fund Advisors Inc., DFA
Securities Inc., DFA Australia Limited, DFA Investment Dimensions Group Inc.,
Dimensional Investment Group Inc. and Dimensional Emerging Markets Value Fund
Inc., Trustee, President and Chairman-Chief
13
<PAGE>
Executive Officer of The DFA Investment Trust Company (registered investment
company). Chairman and Director, Dimensional Fund Advisors Ltd. Director, SA
Funds (registered investment company) and Assante Corporation (investment
management).
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. President, Cardean University (Division of UNext.com).
Trustee, The DFA Investment Trust Company (registered investment company).
Director, DFA Investment Dimensions Group Inc., Dimensional Investment Group
Inc., Dimensional Emerging Markets Value Fund Inc. and Harbor Investment
Advisors. Member of the Boards of Milwaukee Mutual Insurance Company and
UNext.com. Principal and Executive Vice President, Lexecon Inc. (economics, law,
strategy and finance consulting). Formerly, Trustee, First Prairie Funds
(registered investment company).
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. and BIRR
Portfolio Analysis, Inc. (software products). Chairman, Ibbotson Associates,
Inc., Chicago, IL (software, data, publishing and consulting). Formerly,
Director, Hospital Fund, Inc. (investment management services).
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, Menlo Park, CA. Frank E. Buck
Professor Emeritus of Finance, Stanford University. Trustee, The DFA Investment
Trust Company. Director, DFA Investment Dimensions Group Inc. (Dimensional
Investment Group Inc.), Dimensional Emerging Markets Value Fund Inc. and
American Century (Mountain View) Investment Companies. Partner, Oak Hill Capital
Management. Formerly, Limited Partner, Long-Term Capital Management L.P. (money
manager) and Consultant, Arbor Investors.
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 Funds.
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, (4/8/41), Vice President, Santa Monica, CA. Consultant until
October 1995 and Principal and Manager of Product Development, Wells Fargo Nikko
Investment Advisors, San Francisco, CA from 1990-1994.
14
<PAGE>
Jim Davis, (11/29/56), Vice President, Santa Monica, CA. Vice President of
all DFA Entities. Kansas State University, Arthur Anderson & Co., Phillips
Petroleum Co.
Robert Deere, (10/8/57), Vice President, Santa Monica, CA.
Irene R. Diamant, (7/16/50), Vice President and Secretary (Secretary for
all entities other than Dimensional Fund Advisors Ltd.), Santa Monica, CA.
Richard Eustice, (8/5/65), Vice President and Assistant Secretary
(Assistant Secretary for all entities other than Dimensional Fund Advisors
Ltd.), Santa Monica, CA.
Eugene Fama, Jr., (1/21/61), Vice President, Santa Monica, CA.
Kamyab Hashemi-Nejad, (1/22/61), Vice President, Controller and Assistant
Treasurer, Santa Monica, CA.
Judith Jonas, (11/27/55), Vice President, Santa Monica, CA. Vice President
of all DFA Entities. Vice President, Wells Fargo Bank, N.A. from 1989-1990. Vice
President, Demko Baer & Associates, 1991.
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
(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. Vice
President, 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 Fund's
outstanding stock.
Set forth below is a table listing, for each director entitled to receive
compensation, the compensation received from each Fund during the fiscal year
ended November 30, 1999 and the total compensation received from all four
registered investment companies for which the Advisor serves as investment
advisor during that same fiscal year.
15
<PAGE>
<TABLE>
<CAPTION>
Aggregate Aggregate Total Compensation
Compensation Compensation From Fund
Director From DFAIDG From DIG and Fund Complex *
----------- -------- ----------------
<S> <C> <C> <C>
George M. Constantinides................. $13,715 $4,250 $35,000
John P. Gould............................ $13,715 $4,250 $35,000
Roger G. Ibbotson........................ $13,715 $4,250 $35,000
Merton H. Miller......................... $10,396 $3,159 $28,000
Myron S. Scholes......................... $13,396 $4,159 $34,000
</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 on the boards of such companies.
SERVICES TO THE FUNDS
ADMINISTRATIVE SERVICES--THE FEEDER PORTFOLIOS AND INTERNATIONAL SMALL COMPANY
PORTFOLIO
The Funds have entered into administration agreements with the Advisor, on
behalf of the Feeder Portfolios and International Small Company Portfolio.
Pursuant to each administration agreement, the Advisor performs various
services, including: supervision of the services provided by the Portfolio's
custodian and transfer and dividend disbursing agent and others who provide
services to the Fund for the benefit of the Portfolio; providing shareholders
with information about the Portfolio and their investments as they or the Fund
may request; assisting the Portfolio in conducting meetings of shareholders;
furnishing information as the Board of Directors may require regarding the
Master Funds, and any other administrative services for the benefit of the
Portfolio as the Board of Directors may reasonably request. For its
administrative services, the Feeder Portfolios and International Small Company
Portfolio are obligated to pay the Advisor a monthly fee equal to one-twelfth of
the percentages listed below:
<TABLE>
<S> <C>
U.S. Large Company........................ 0.125%(a)
Enhanced U.S. Large Company............... 0.15%(b)
U.S. Large Cap Value...................... 0.15%
U.S. 4-10 Value........................... 0.30%
U.S. 6-10 Value........................... 0.30%
U.S. 6-10 Small Company................... 0.32%
U.S. 9-10 Small Company................... 0.40%
DFA International Value................... 0.20%
International Small Company............... 0.40%(d)
Japanese Small Company.................... 0.40%(c)
Pacific Rim Small Company................. 0.40%(c)
United Kingdom Small Company.............. 0.40%(c)
Continental Small Company................. 0.40%(c)
Emerging Markets.......................... 0.40%
Emerging Markets Value.................... 0.40%
Emerging Markets Small Cap................ 0.45%
DFA One-Year Fixed Income................. 0.10%
DFA Two-Year Global Fixed Income.......... 0.10%
</TABLE>
(a) Pursuant to the terms of the administration agreement between U.S. Large
Company Portfolio and the Advisor, the Advisor has agreed to waive a
portion of its administration fee and/or assume the expenses of the
Portfolio to the extent (1) necessary to pay the ordinary operating
expenses of the Portfolio (except the administration fee); and (2) that the
direct expenses the portfolio bears as a shareholder of the Master Fund, on
an annual basis, exceeds 0.025% of the Portfolio's average net assets.
Beginning August 9, 1996, in addition to the waiver/assumption effective on
December 1, 1995, the Advisor has agreed to assume expenses or waive the
fee payable by the U.S. Large Company Portfolio under the administration
agreement by an additional .09% of average assets on an annual basis. The
above fees reflect that waiver.
16
<PAGE>
(b) Effective August 1, 1997, the Advisor has agreed to waive its
administration fee to the extent necessary to reduce the direct and
indirect cumulative annual expenses of the Enhanced U.S. Large Company
Portfolio to not more than 0.45% of average net assets of the Portfolio on
an annualized basis.
(c) Effective August 9, 1996, the Advisor has agreed to waive its
administration fee and assume the direct expenses of the Japanese Small
Company, United Kingdom Small Company, Continental Small Company and
Pacific Rim Small Company Portfolios to the extent necessary to keep the
direct annual expenses of each Portfolio to not more than 0.47% of average
net assets of the Portfolio on an annualized basis; this arrangement does
not extend to the fees and expenses of the Master Funds.
(d) The Advisor has agreed to waive its administration fee and assume the
direct expenses of the International Small Company Portfolio to the extent
necessary to keep the administration fee and direct annual expenses of the
Portfolio to not more than 0.45% of average net assets of the Portfolio on
an annualized basis.
For the fiscal years ended November 30, 1999, 1998 and 1997, the
Portfolios paid administrative fees to the Advisor as set forth in the following
table:
<TABLE>
<CAPTION>
1999 1998 1997
(000) (000) (000)
--- --- ---
<S> <C> <C> <C>
U.S. Large Company Portfolio.................................. $ 1,580(6) $ 963(3) $ 572(1)
Enhanced U.S. Large Company Portfolio ........................ $ 118 $ 79(4) $ 50(2)
U.S. Large Cap Value Portfolio ............................... $ 1,760 $ 1,486 $ 1,045
U.S. 6-10 Value Portfolio .................................... $ 7,603 $ 6,775 $ 5,061
U.S. 6-10 Small Company Portfolio ............................ $ 1,111 $ 1,111 $ 908
U.S. 9-10 Small Company Portfolio ............................ $ 5,437 $ 5,831 $ n/a
DFA International Value Portfolio ............................ $ 940 $ 828 $ 937
International Small Company Portfolio ........................ $ 990 $ 1,058(5) $ 753
Japanese Small Company Portfolio ............................. $ 555 $ 459 $ 809
Pacific Rim Small Company Portfolio .......................... $ 458 $ 366 $ 784
United Kingdom Small Company Portfolio ....................... $ 353 $ 433 $ 605
Continental Small Company Portfolio .......................... $ 716 $ 911 $ 1,134
Emerging Markets Portfolio ................................... $ 1,093 $ 847 $ 890
Emerging Markets Value Portfolio.............................. $ 121 $ 10 n/a
Emerging Markets Small Cap Portfolio ......................... $ 42 $ 8 n/a
DFA One-Year Fixed Income Portfolio .......................... $ 779 $ 766 $ 768
DFA Two-Year Global Fixed Income Portfolio.................... $ 476 $ 427 $ 370
</TABLE>
(3) $174 after waiver (1) $ 37 after waiver
(4) $ 76 after waiver (2) $ 44 after waiver
(5) $1,044 after
waiver
(6) $372 after waiver
ADMINISTRATIVE SERVICES--ALL PORTFOLIOS
PFPC Inc. ("PFPC"), 400 Bellevue Parkway, Wilmington, DE 19809, serves
as the accounting services, dividend disbursing and transfer agent for all the
Portfolios and Master Funds. The services provided by PFPC are subject to
supervision by the executive officers and the Boards of Directors of the Funds,
and include day-to-day keeping and maintenance of certain records, calculation
of the offering price of the shares, preparation of reports, liaison with its
custodians, and transfer and dividend disbursing agency services. For its
services, each of the Portfolios listed below pays PFPC annual fees which are
set forth in the following table:
17
<PAGE>
DFA REAL ESTATE SECURITIES PORTFOLIO
.10% of the first $200 million of net assets
.075% of the next $200 million of net assets
.05% of the next $200 million of net assets
.03% of the next $200 million of net assets
.02% of net assets over $800 million
The DFA Real Estate Securities Portfolio is subject to a $4,900 per month
minimum fee. PFPC has agreed to limit the minimum fee for this Portfolio from
time to time.
LARGE CAP INTERNATIONAL PORTFOLIO
DFA INTERNATIONAL SMALL CAP VALUE PORTFOLIO
CHARGES FOR EACH PORTFOLIO:
.1230% of the first $300 million of net assets
.0615% of the next $300 million of net assets
.0410% of the next $250 million of net assets
.0205% of the net assets over $850 million
The Large Cap International Portfolio and the DFA International Small Cap Value
Portfolio are each subject to a $75,000 per year minimum fee. PFPC has agreed to
limit the minimum fee for these Portfolios from time to time.
DFA FIVE-YEAR GOVERNMENT PORTFOLIO
DFA INTERMEDIATE GOVERNMENT FIXED INCOME PORTFOLIO
Charges for each Portfolio:
.0513% of the first $100 million of net assets
.0308% of the next $100 million of net assets
.0205% of net assets over $200 million
DFA FIVE-YEAR GLOBAL FIXED INCOME PORTFOLIO
.1230% of the first $150 million of net assets
.0820% of the next $150 million of net assets
.0615% of the next $300 million of net assets
.0410% of the next $250 million of net assets
.0205% of net assets over $850 million
The DFA Five-Year Global Fixed Income Portfolio is subject to a $75,000 per year
minimum fee. PFPC has agreed to limit the minimum fee for this Portfolio from
time to time.
ENHANCED U.S. LARGE COMPANY PORTFOLIO
U.S. LARGE CAP VALUE PORTFOLIO
U.S. 4-10 VALUE PORTFOLIO
U.S. 6-10 VALUE PORTFOLIO
U.S. 6-10 SMALL COMPANY PORTFOLIO
U.S. 9-10 SMALL COMPANY PORTFOLIO
DFA INTERNATIONAL VALUE PORTFOLIO
EMERGING MARKETS VALUE PORTFOLIO
ONE-YEAR FIXED INCOME PORTFOLIO
DFA TWO-YEAR GLOBAL FIXED INCOME PORTFOLIO
The above portfolios are feeder portfolios. PFPC's charges for its services to
feeder portfolios are based on the number of feeder portfolios investing in each
Master Fund and whether the Master Fund is organized to be taxed as a
corporation or partnership for tax purposes. PFPC's charges are allocated
amongst the feeders based on the relative net assets of the feeders. PFPC's
charges in the aggregate to a group of feeder portfolios investing in Master
Funds which are taxed as corporations are $1,000 per month multiplied by the
number of feeders.
18
<PAGE>
U.S. LARGE COMPANY PORTFOLIO
JAPANESE SMALL COMPANY PORTFOLIO
PACIFIC RIM SMALL COMPANY PORTFOLIO
UNITED KINGDOM SMALL COMPANY PORTFOLIO
CONTINENTAL SMALL COMPANY PORTFOLIO
EMERGING MARKETS PORTFOLIO
EMERGING MARKETS SMALL CAP PORTFOLIO
These feeders invest in Master Funds taxed as partnerships. PFPC charges $2,600
per month multiplied by the number of feeders investing in Master Funds taxed as
partnerships.
INTERNATIONAL SMALL COMPANY PORTFOLIO
$2,000 per month (includes custodian fees)
CUSTODIANS
Citibank, N.A., 111 Wall Street, New York, New York, 10005, is the
global custodian for the following Portfolios and Master Funds: DFA
International Small Cap Value Portfolio, Large Cap International Portfolio, DFA
Five-Year Global Fixed Income Portfolio, DFA International Value Series, the
Japanese Small Company Series, the Pacific Rim Small Company Series, the United
Kingdom Small Company Series, the Continental Small Company Series, DFA Two-Year
Global Fixed Income Series, and Enhanced U.S. Large Company Series (co-custodian
with PFPC Trust Co.). The Chase Manhattan Bank, 4 Chase Metrotech Center,
Brooklyn, NY 11245, serves as the custodian for the Emerging Markets Series,
Emerging Markets Small Cap Series and Dimensional Emerging Markets Value Fund
Inc., and PFPC Trust Company, 400 Bellevue Parkway, Wilmington, DE 19809, serves
as the custodian for all of the Feeder Portfolios and the other Master Funds.
DISTRIBUTOR
Each Fund acts as distributor of each series of its own shares of
stock. Each Fund 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 Funds to DFA Securities Inc. under these agreements.
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP serves as legal counsel to the
Funds. Its address is 2600 One Commerce Square, Philadelphia, PA 19103-7098.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP are the independent accountants to the Funds
and audit the financial statements of the Funds. Their address is 2400 Eleven
Penn Center, Philadelphia, PA 19103.
ADVISORY FEES
David G. Booth and Rex A. Sinquefield, as directors and officers of the
Advisor and shareholders 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 (or, with respect to each Feeder Portfolio, the
corresponding Master Fund), the Advisor is paid a monthly fee calculated as a
percentage of average net assets of the Portfolio (or, with respect to each
Feeder Portfolio, the corresponding Master Fund). For the fiscal years ended
November 30, 1997, 1998 and 1999, the Portfolios (or their corresponding Master
Funds) paid management fees (to the Advisor and any sub-advisor) as set forth in
the following table:
<TABLE>
<CAPTION>
1999 1998 1997
(000) (000) (000)
----- ----- -----
<S> <C> <C> <C>
U.S. Large Company Portfolio (b).............................. $ 558 $ 293 $ 160
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<CAPTION>
1999 1998 1997
(000) (000) (000)
----- ----- -----
<S> <C> <C> <C>
Enhanced U.S. Large Company Portfolio......................... $ 40 $ 26 $ 17
U.S. Large Cap Value Portfolio (b)............................ $ 1,831 $ 1,667 $ 1,255
U.S. 4-10 Value Portfolio (b) ................................ $ 291 $ 86 n/a
U.S. 6-10 Value Portfolio (b)................................. $ 5,217 $ 4,743 $ 3,534
U.S. 6-10 Small Company Portfolio (b)......................... $ 167 $ 150 $ 102
U.S. 9-10 Small Company Portfolio (a)......................... $ 1,361 $ 1,458 $ 6,538
DFA Real Estate Securities Portfolio.......................... $ 352 $ 313 $ 290
Large Cap International Portfolio............................. $ 442 $ 248 $ 211
DFA International Value Portfolio (b)......................... $ 3,481 $ 3,466 $ 2,997
International Small Company Portfolio (c)..................... $ 768 $ 805 $ 1,019
Japanese Small Company Portfolio ............................. $ 201 $ 181 $ 258
Pacific Rim Small Company Portfolio........................... $ 162 $ 133 $ 230
United Kingdom Small Company Portfolio........................ $ 135 $ 157 $ 180
Continental Small Company Portfolio........................... $ 270 $ 334 $ 351
DFA International Small Cap Value Portfolio................... $ 3,257 $ 3,104 $ 2,783
Emerging Markets Portfolio (b)................................ $ 284 $ 220 $ 226
Emerging Markets Value Portfolio (d).......................... $ 286 $ 182 $ 1,020
Emerging Markets Small Cap Portfolio (b)...................... $ 62 $ 37 $ 47
DFA One-Year Fixed Income Portfolio (b)....................... $ 444 $ 420 $ 392
DFA Two-Year Global Fixed Income Portfolio.................... $ 238 $ 214 $ 185
DFA Five-Year Government Portfolio............................ $ 424 $ 422 $ 382
DFA Five-Year Global Fixed Income Portfolio................... $ 1,083 $ 755 $ 519
DFA Intermediate Government Fixed Income Portfolio............ $ 304 $ 240 $ 184
</TABLE>
(a) Prior to November 30, 1997, DFAIDG on behalf of the Portfolio had an
investment management agreement with the Advisor. The dollar amount
represents the dollar amount of investment management fees paid by the
Portfolio to the Advisor for the 1997 fiscal year.
(b) The Master Fund has more than one Feeder Portfolio; the dollar amount
represents the total dollar amount of management fees paid by the Master
Fund to the Advisor.
(c) Each of the four International Master Funds in which the Portfolio invests
its assets has more than one Feeder Portfolio (which are also included
elsewhere in this table). The dollar amount represents the total dollar
amount of management fees paid by each International Master Funds to the
Advisor.
(d) Prior to April 2, 1998 Dimensional Emerging Markets Fund Inc. had an
investment management agreement with the Advisor.
GENERAL INFORMATION
DFAIDG was incorporated under Maryland law on June 15, 1981. Until June
1983, DFAIDG was named DFA Small Company Fund Inc. DFAIDG commenced offering
shares of DFA International Small Cap Value Portfolio in December, 1994; DFA
Two-Year Global Fixed Income Portfolio in February, 1996; Enhanced U.S. Large
Company Portfolio in July, 1996; International Small Company Portfolio in
October, 1996; Emerging Markets Small Cap Portfolio in March, 1998; and Emerging
Markets Value Portfolio in April, 1998.
Until September, 1995, The DFA Intermediate Government Fixed Income
Portfolio was named The DFA Intermediate Government Bond Portfolio; The DFA
Five-Year Global Fixed Income Portfolio was named The DFA Global Bond Portfolio;
The Pacific Rim Small Company Portfolio was named The Asia-Australia Small
Company Portfolio; The U.S. Large Cap Value Portfolio was named The U.S. Large
Cap High Book to Market Portfolio; The U.S. 6-10 Value Portfolio was named The
U.S. Small Cap High Book to Market Portfolio; The U.S. 9-10 Small Company
Portfolio was named the Small Company Shares; The DFA One-Year Fixed Income
Portfolio was named The DFA Fixed Income Shares; and The Continental Small
Company Portfolio was named the Continental
20
<PAGE>
European Portfolio. From September 1995 until December 1996, The DFA Real Estate
Securities Portfolio was named DFA/AEW Real Estate Securities Portfolio. From
September, 1995 until August, 1997, the U.S. 6-10 Value Portfolio was named the
U.S. Small Cap Value Portfolio.
DIG was incorporated under Maryland law on March 19, 1990. DIG was
known as DFA U.S. Large Cap Inc. from February 1992, until it amended its
Articles of Incorporation in April 1993, to change to its present name. Prior to
a February 1992, amendment to the Articles of Incorporation, it was known as DFA
U.S. Large Cap Portfolio Inc.
The DFA Investment Trust Company was organized as a Delaware business
trust on October 27, 1992. The Trust offers shares of its Master Funds only to
institutional investors in private offerings. Dimensional Emerging Markets Value
Fund was incorporated under Maryland law on January 9, 1991, and offers its
shares only to institutional investors in private offerings. On November 21,
1997, the shareholders of Dimensional Emerging Markets Value Fund approved its
conversion from a closed-end management investment company to an open-end
management investment company.
CODES OF ETHICS
The Funds, the Trust and the Dimensional Emerging Markets Value Fund Inc. have
adopted a revised Code of Ethics, under Rule 17j-1 of the 1940 Act, for certain
access persons of the Portfolios and Master Funds. In addition, the Advisor has
adopted or will adopt a revised a Code of Ethics. The Codes are designed to
ensure that access persons act in the interest of the Portfolios and Master
Funds, and their shareholders with respect to any personal trading of
securities. Under the Codes, access persons are generally prohibited from
knowingly buying or selling securities (except for mutual funds, U.S. government
securities and money market instruments) which are being purchased, sold or
considered for purchase or sale by a Portfolio or Master Fund unless their
proposed purchases are approved in advance. The Codes also contain certain
reporting requirements and securities trading clearance procedures.
SHAREHOLDER RIGHTS
The shares of each Portfolio, when issued and paid for in accordance
with the Portfolio's prospectus, will be fully paid and non-assessable shares,
with equal, non-cumulative voting rights and no preferences as to conversion,
exchange, dividends, redemption or any other feature.
With respect to matters which require shareholder approval,
shareholders are entitled to vote only with respect to matters which affect the
interest of the class of shares (Portfolio) which they hold, except as otherwise
required by applicable law. If liquidation of a Fund should occur, the Fund's
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 Funds do
not intend to hold annual meetings of shareholders, except as required by the
federal securities laws and regulations governing mutual funds, or other
applicable law. Each Fund's bylaws provide that special meetings of shareholders
shall be called at the written request of at least 10% of the votes entitled to
be cast at such meeting. Such meeting may be called to consider any matter,
including the removal of one or more directors. Shareholders will receive
shareholder communications with respect to such matters as required by the
federal securities laws and regulations governing mutual funds, including
semi-annual and annual financial statements of the Funds, the latter being
audited at least once each year.
Whenever a Feeder Portfolio, as an investor in its corresponding Master
Fund, is asked to vote on a shareholder proposal, the relevant Fund will solicit
voting instructions from the Feeder Portfolio's shareholders with respect to the
proposal. The Directors of the Fund will then vote the Feeder Portfolio's shares
in the Master Fund in accordance with the voting instructions received from the
Feeder Portfolio's shareholders. The Directors of the Fund will vote shares of
the Feeder Portfolio for which they receive no voting instructions in accordance
with their best judgment. With regard to a Master Fund of the Trust organized as
a partnership for federal tax purposes, if a majority shareholder of the Master
Fund declares bankruptcy, a majority in interest of the remaining shareholders
in the Master Fund must vote to approve the continuing existence of the Master
Fund or the Master Fund will be liquidated.
21
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES
As of February 29, 2000, the following persons beneficially owned 5% or
more of the outstanding stock of the Portfolios, as set forth below:
THE U.S. LARGE COMPANY PORTFOLIO
Charles Schwab & Company, Inc.* 83.46%
101 Montgomery Street
San Francisco, CA 94104
ENHANCED U.S. LARGE COMPANY PORTFOLIO
Charles Schwab & Company, Inc.*(1) 67.90%
Misericordia Home Endowment
6300 N. Drive Avenue
Chicago, IL 60660 14.59%
National Investor Services Corp.*
55 Water Street
New York, NY 10041 5.75%
U.S. LARGE CAP VALUE PORTFOLIO
Charles Schwab & Company, Inc.*(1) 72.87%
U.S. 4-10 VALUE PORTFOLIO
Ferris State University
420 Oak Street
Big Rapids, MI 49307 100%
U.S. 6-10 VALUE PORTFOLIO
Charles Schwab & Company, Inc.*(1) 33.62%
Mac & Co.*
P.O. Box 320
Pittsburgh, PA 15230 8.33%
Deluxe Corporation
3680 Victoria Street North
Shoreview, MN 55126 6.00%
THE U.S. 6-10 SMALL COMPANY PORTFOLIO
Charles Schwab & Company, Inc.*(1) 24.23%
Siemens Corporation 18.36%
1301 Avenue of the Americas
New York, NY 10019
22
<PAGE>
Salvation Army-ETHQ
440 W. Nyack Road
West Nyack, NY 10994 9.88%
Salvation Army Central Territory
10 W. Algonquin Road
Des Plaines, IL 60016 7.26%
Northern Telecom Inc.
Long Term Investment Plan
200 Athens Way
Nashville, TN 37228 5.18%
THE U.S. 9-10 SMALL COMPANY PORTFOLIO
Charles Schwab & Company, Inc.*(1) 40.59%
National Electrical Benefit Fund
1125 15th Street NW
Washington, DC 20005 8.68%
PepsiCo Inc. Master Trust
The Northern Trust Company Trustee
Chicago, IL 60675 8.33%
Sara Lee Corporation
Three First National Plaza
Chicago, IL 60602 5.04%
DFA REAL ESTATE SECURITIES PORTFOLIO
Charles Schwab & Company, Inc.*(1) 79.29%
THE LARGE CAP INTERNATIONAL PORTFOLIO
Charles Schwab & Company, Inc.*(1) 78.54%
National Investor Services Corp.*(1) 5.68%
DFA INTERNATIONAL VALUE PORTFOLIO
Charles Schwab & Company, Inc.*(1) 71.35%
FTC & Co.*
P.O. Box 173736
Denver, CO 80217 6.04%
INTERNATIONAL SMALL COMPANY PORTFOLIO
Charles Schwab & Company, Inc.*(1) 86.64%
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<PAGE>
THE JAPANESE SMALL COMPANY PORTFOLIO
BellSouth Corporation Master Pension Trust
1155 Peachtree Street, N.E.
Atlanta, GA 30367 66.17%
Charles Schwab & Company, Inc.*(1) 19.51%
PACIFIC RIM SMALL COMPANY PORTFOLIO
BellSouth Corporation Master Pension Trust(1) 77.48%
Charles Schwab & Company, Inc.*(1) 13.26%
THE UNITED KINGDOM SMALL COMPANY PORTFOLIO
BellSouth Corporation Master Pension Trust(1) 61.61%
Charles Schwab & Company, Inc.*(1) 27.63%
THE CONTINENTAL SMALL COMPANY PORTFOLIO
BellSouth Corporation Master Pension Trust(1) 65.70%
Charles Schwab & Company, Inc.*(1) 24.51%
DFA INTERNATIONAL SMALL CAP VALUE PORTFOLIO
Charles Schwab & Company, Inc.*(1) 64.48%
BellSouth Corporation Master Pension Trust(1) 16.84%
Trust Company of America*
P.O. Box 6503
Englewood, CO 80155 5.88%
EMERGING MARKETS PORTFOLIO
Charles Schwab & Company, Inc.*(1) 65.38%
California Institute of Technology
Mail Code 212-31
Pasadena, CA 91125 6.80%
EMERGING MARKETS VALUE PORTFOLIO
Charles Schwab & Company, Inc.*(1) 72.50%
Schroder & Co., Inc.*
Harbor Financial Center
Plaza 2
34 Exchange Place
Jersey City, NJ 07311 12.55%
EMERGING MARKETS SMALL CAP PORTFOLIO
Charles Schwab & Company, Inc.*(1) 70.63%
National Investor Services Corp.*(1) 11.37%
24
<PAGE>
FTC & Co.*(1) 7.33%
Donaldson, Lufkin & Jenrette Securities Corp.
P.O. Box 2052
Jersey City, NJ 07303 5.17%
THE DFA ONE-YEAR FIXED INCOME PORTFOLIO
Charles Schwab & Company, Inc.*(1) 56.03%
The McConnell Foundation
P.O. Box 492050
Redding, CA 96049 5.27%
Furniture Brands
101 South Hanley Road
St. Louis, MO 63105 5.04%
DFA TWO-YEAR GLOBAL FIXED INCOME PORTFOLIO
Charles Schwab & Company, Inc.*(1) 89.67%
THE DFA FIVE-YEAR GOVERNMENT PORTFOLIO
Charles Schwab & Company, Inc.*(1) 73.46%
Trust Company of America*
P.O. Box 6503
Englewood, CO 80155 6.99%
THE DFA FIVE-YEAR GLOBAL FIXED INCOME PORTFOLIO
Charles Schwab & Company, Inc.*(1) 83.22%
THE DFA INTERMEDIATE GOVERNMENT FIXED INCOME PORTFOLIO
Charles Schwab & Company, Inc.*(1) 77.50%
People's Energy Corporation Pension Trust 19.72%
130 E. Randolph Drive
Chicago, IL 60601
- -------------------------------------------------
* Owner of record only.
(1) See address for shareholder previously noted above in list.
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.
PURCHASE OF SHARES
The following information supplements the information set forth in the
prospectus under the caption "PURCHASE OF SHARES."
The Funds 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 Funds will generally
be closed on
25
<PAGE>
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 Funds are closed.
The Tokyo Stock Exchange ("TSE") is closed on the following days in
2000: January 1, 3, and 10, February 11, March 20, April 29, May 3, 4 and 5,
July 20, September 15 and 23, October 9, November 3 and 23 and December 23.
Orders for the purchase and redemption of shares of the Japanese Small Company
Portfolio received on those days will be priced as of the close of the NYSE on
the next day that the TSE is open for trading. The London Stock Exchange ("LSE")
is closed on the following days in 2000: January 3, April 21 and 24, May 1 and
29, August 28, and December 25 and 26. Orders for the purchase and redemption of
shares of the United Kingdom Small Company Portfolio received on those days will
be processed as of the close of the NYSE on the next day that the London Stock
Exchange is open for trading.
The Japanese Small Company Portfolio is closed on days that the TSE is
closed. The U.K. Small Company Portfolio is closed on days that the LSE is
closed. Purchase and redemption orders for shares of such Portfolio will not be
accepted on those days. For an International Equity Portfolio or Master Fund
that invests in securities traded on a number of foreign securities exchanges,
such Portfolio or Master Fund will be closed if portfolio securities greater
than 50% of its total assets are principally traded on exchanges that are closed
that day.
The Funds reserve the right, in their sole discretion, to suspend the
offering of shares of any or all Portfolios or reject purchase orders when, in
the judgement of management, such suspension or rejection is in the best
interest of that Fund or a Portfolio. Securities accepted in exchange for shares
of a Portfolio will be acquired for investment purposes and will be considered
for sale under the same circumstances as other securities in the Portfolio.
Reimbursement fees may be charged prospectively from time to time based
upon the future experience of the Portfolios that are currently sold at net
asset value. Any such charges will be described in the prospectus.
REDEMPTION AND TRANSFER OF SHARES
The following information supplements the information set forth in the
prospectus under the caption "REDEMPTION OF SHARES."
Each Fund may suspend redemption privileges or postpone the date of
payment: (1) during any period when the NYSE is closed, or trading on the NYSE
is restricted as determined by the Commission, (2) during any period when an
emergency exists as defined by the rules of the Commission as a result of which
it is not reasonably practicable for such Fund to dispose of securities owned by
it, or fairly to determine the value of its assets and (3) for such other
periods as the Commission may permit.
Shareholders may transfer shares of any Portfolio to another person by
making a written request to the Advisor who will transmit the request to the
Transfer Agent. The request should clearly identify the account and number of
shares to be transferred, and include the signature of all registered owners and
all stock certificates, if any, which are subject to the transfer. The signature
on the letter of request, the stock certificate or any stock power must be
guaranteed in the same manner as described in the prospectus under "REDEMPTION
OF SHARES." As with redemptions, the written request must be received in good
order before any transfer can be made.
TAXATION OF THE PORTFOLIOS
The following is a summary of some of the federal income tax
consequences of investing in the Portfolios. Unless you are invested in the
Portfolios through a retirement plan, you should consider the tax implications
of investing and consult your own tax adviser.
26
<PAGE>
DISTRIBUTIONS OF NET INVESTMENT 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, constitutes 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 the 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 that 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. Some of the Master Funds intend to
qualify each year as regulated investment companies ("RIC Series"), while others
are taxable as partnerships for federal income tax purposes.
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 in 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 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.
27
<PAGE>
Special rules may apply to certain Feeder Portfolios, see "Other
Special Rules Applicable to Portfolios which invest in Master Funds," below.
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
For shareholders subject to tax, redemptions and exchanges of Portfolio
shares are taxable transactions for federal and state income tax purposes that
cause such 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 or a Master Fund 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 or Master
Fund are treated as ordinary income or capital gain, accelerate the recognition
of income to the Portfolio or Master Fund, defer a Portfolio or Master Fund's
ability to recognize losses, and, in limited cases, subject the Portfolio or
Master Fund 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.
OTHER SPECIAL RULES APPLICABLE TO PORTFOLIOS WHICH INVEST IN MASTER FUNDS
A Portfolio which invests in a Master Fund may be subject to certain
special rules depending on whether the Master Fund in which such Portfolio
invests is a RIC Series or is a Master Fund taxable as a partnership under the
Code. For example, Portfolios which invest in RIC Series will not be permitted
to passthrough foreign withholding taxes paid by such RIC Series to such
Portfolio's shareholders. These special rules may affect the amount, timing or
character of the income distributed to shareholders of such Portfolios.
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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<PAGE>
CALCULATION OF PERFORMANCE DATA
The Portfolios and the Master Funds may disseminate reports of their
investment performance from time to time. Investment performance is calculated
on a total return basis; that is by including all net investment income and any
realized and unrealized net capital gains or losses during the period for which
investment performance is reported. If dividends or capital gains distributions
have been paid during the relevant period the calculation of investment
performance will include such dividends and capital gains distributions as
though reinvested in shares of the Portfolio or Master Fund. Standard quotations
of total return, which include deductions of any applicable reimbursement fees,
are computed in accordance with Commission Guidelines and are presented whenever
any non-standard quotations are disseminated to provide comparability to other
investment companies. Non-standardized total return quotations may differ from
the Commission 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 Commission
Guideline. Performance data is based on historical earnings and is not intended
to indicate future performances. Rates of return expressed on an annual basis
will usually not equal the sum of returns expressed for consecutive interim
periods due to the compounding of the interim yields. The Funds' annual reports
to shareholders for the fiscal year ended November 30, 1999, contain additional
performance information. Copies of the annual reports are available upon request
and without charge.
With respect to the International Equity Portfolios and DFA Five-Year
Global Fixed Income Portfolio, rates of return expressed as a percentage of U.S.
dollars will reflect applicable currency exchange rates at the beginning and
ending dates of the investment periods presented. The return expressed in terms
of U.S. dollars is the return one would achieve by investing dollars in the
Portfolio at the beginning of the period and liquidating the investment in
dollars at the end of the period. Hence, the return expressed as a percentage of
U.S. dollars combines the investment performance of the Portfolio as well as the
performance of the local currency or currencies of the Portfolio. Inasmuch as
DFA Five-Year Global Fixed Income Portfolio intends to continually hedge against
the risk of variations in currency exchange rates, the Advisor believes that the
variation of the Portfolio's investment performance in relation to fluctuations
in currency exchange rates will be minimized.
Quotations of the annualized percentage total returns for the one-,
five-, and ten-year periods ended December 31, 1999 (as applicable) are set
forth in the prospectus. Such quotations utilize the standardized method of
calculation required by the Commission, which is net of the cost of any current
reimbursement fees charged to investors and paid to the Portfolios.
Reimbursement fees of 1%, 1.5% and 1.5% were in effect from the inception of the
Japanese, United Kingdom and Continental Small Company Portfolios, respectively,
until June 30, 1995. A reimbursement fee of 1% was in effect from the inception
of DFA International Small Cap Value Portfolio until June 30, 1995. Effective
June 30, 1995, the amount of the reimbursement fee was reduced with respect to
Continental Small Company, Pacific Rim Small Company, Japanese Small Company,
Emerging Markets and DFA International Small Cap Value Portfolios, and
eliminated with respect to the United Kingdom Small Company Portfolio. The
current reimbursement fee for each Portfolio, expressed as a percentage of the
net asset value of the shares of the Portfolios, is as follows: Continental
Small Company, Pacific Rim Small Company and Emerging Markets Small Cap
Portfolios- 1.00%; Japanese Small Company and Emerging Markets Portfolios- .50%;
DFA International Small Cap Value Portfolio- .675%; and International Small
Company Portfolio- .675%.
A reimbursement fee of 0.75% was charged to investors in the Large Cap
International Portfolio from the date of its inception until March 5, 1992. In
addition, for those Portfolios in effect for less than one, five, or ten years,
the time periods during which the Portfolios have been active have been
substituted for the periods stated (which in no case extends prior to the
effective dates of the Portfolios' registration statements). However, for
purposes of calculating the performance of a Feeder Portfolio, the performance
of the corresponding Master Fund may be utilized for the period prior to when
the Feeder Portfolio commenced operations, and, if applicable, restated to
reflect the Feeder Portfolio's fees and expenses.
As the following formula indicates, the average annual total return is
determined by finding the average annual compounded rates of return over the
stated time period that would equate a hypothetical initial purchase order of
$1,000 to its redeemable value (including capital appreciation/depreciation and
dividends and distributions paid and reinvested less any fees charged to a
shareholder account) at the end of the stated time period. The
29
<PAGE>
calculation assumes that all dividends and distributions are reinvested at the
public offering price on the reinvestment dates during the period. The quotation
assumes the account was completely redeemed at the end of each period and the
deduction of all applicable charges and fees. According to the Commission
formula:
In addition to the standardized method of calculating performance used
by the Commission, the Portfolios and Master Funds may disseminate other
performance data and may advertise total return performance calculated on a
monthly basis.
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).
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, 2400 Eleven Penn Center, Philadelphia, PA
19103, are the independent accountants to each of the Funds.
PricewaterhouseCoopers LLP audits the Funds' financial statements. The audited
financial statements and financial highlights of the Portfolios for their fiscal
year ended November 30, 1999, as set forth in each Fund's annual reports to
shareholders, including the report of PricewaterhouseCoopers LLP, are
incorporated by reference into this SAI.
The audited financial statements of the Master Funds (which are series
of the Trust) and the audited financial statements of Dimensional Emerging
Markets Value Fund Inc. for the fiscal year ended November 30, 1999, as set
forth in the Trust's and Dimensional Emerging Markets Value Fund Inc.'s annual
reports to shareholders, including the reports of PricewaterhouseCoopers LLP,
are incorporated by reference into this SAI.
A shareholder may obtain a copy of the annual reports, upon request and
without charge, by contacting the Funds at the address or telephone number
appearing on the cover of this SAI.
30
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
1299 OCEAN AVENUE, 11TH FLOOR, SANTA MONICA, CALIFORNIA 90401
TELEPHONE: (310) 395-8005
STATEMENT OF ADDITIONAL INFORMATION
MARCH 24, 2000
DFA Investment Dimensions Group Inc. (the "Fund") is an open-end
management investment company that offers thirty-eight series of shares. This
statement of additional information ("SAI") relates to eight series of the Fund
(individually, a "Portfolio" and collectively, the "Portfolios"):
DOMESTIC EQUITY PORTFOLIOS
Tax-Managed U.S. Marketwide
Value Portfolio Tax-Managed U.S. 5-10 Value Portfolio
(FEEDER) Tax-Managed U.S. 5-10 Value Portfolio X
Tax-Managed U.S. Marketwide
Value Portfolio X Tax-Managed U.S. 6-10 Small Company Portfolio
(FEEDER) Tax-Managed U.S. 6-10 Small Company Portfolio X
INTERNATIONAL EQUITY PORTFOLIOS
Tax-Managed DFA International Tax-Managed DFA International Value
Value Portfolio Portfolio X
This statement of additional information is not a prospectus but should
be read in conjunction with the Portfolios' prospectus dated March 24, 2000, as
amended from time to time. The audited financial statements and financial
highlights of the Portfolios (as applicable) are incorporated by reference from
the Fund's annual report to shareholders. The prospectus and the annual report
can be obtained by writing to the above address or by calling the above
telephone number.
<PAGE>
TABLE OF CONTENTS
-----------------
PORTFOLIO CHARACTERISTICS AND POLICIES.......................................3
BROKERAGE COMMISSIONS........................................................3
INVESTMENT LIMITATIONS.......................................................4
FUTURES CONTRACTS............................................................6
CASH MANAGEMENT PRACTICES....................................................7
CONVERTIBLE DEBENTURES.......................................................7
DIRECTORS AND OFFICERS.......................................................8
SERVICES TO THE FUND........................................................10
ADVISORY FEES...............................................................12
GENERAL INFORMATION.........................................................12
CODES OF ETHICS.............................................................12
SHAREHOLDER RIGHTS..........................................................12
PRINCIPAL HOLDERS OF SECURITIES.............................................13
PURCHASE OF SHARES..........................................................14
REDEMPTION AND TRANSFER OF SHARES...........................................14
TAXATION OF THE PORTFOLIOS..................................................14
CALCULATION OF PERFORMANCE DATA.............................................16
FINANCIAL STATEMENTS........................................................18
2
<PAGE>
PORTFOLIO CHARACTERISTICS AND POLICIES
Each of the Portfolios identified as a "Feeder" (a "Feeder Portfolio")
on the cover page of this SAI seeks to achieve its investment objective by
investing all of its investable assets in a corresponding series of The DFA
Investment Trust Company (the "Trust"). The series of the Trust are referred to
as the "Master Funds." Dimensional Fund Advisors Inc. (the "Advisor") serves as
investment advisor to each of the Portfolios, except the Feeder Portfolios, and
each Master Fund, and provides administrative services to the Feeder Portfolios.
Capitalized terms not otherwise defined in this SAI have the meaning assigned to
them in the prospectus.
The following information supplements the information set forth in the
prospectus. Unless otherwise indicated, the following information applies to all
of the Portfolios and Master Funds, including the Feeder Portfolios, through
their investment in the Master Funds.
Each of the Portfolios and the Master Funds are diversified under the
federal securities laws and regulations.
Because the structure of the Portfolios and Master Funds is based on
the relative market capitalizations of eligible holdings, it is possible that
the Portfolios might include at least 5% of the outstanding voting securities of
one or more issuers. In such circumstances, the 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.
The Tax-Managed U.S. Marketwide Value Portfolio (and its corresponding
Master Fund), Tax-Managed U.S. 5-10 Value Portfolio and Tax-Managed U.S. 6-10
Small Company Portfolio began operations in December 1998. The Tax-Managed DFA
International Value Portfolio began operations on April 16, 1999. The
Tax-Managed U.S. Marketwide Value Portfolio X (and its corresponding Master
Fund), Tax-Managed U.S. 5-10 Value Portfolio X, Tax-Managed U.S. 6-10 Small
Company Portfolio X and Tax-Managed DFA International Value Portfolio X have not
begun operations as of the date of this SAI, so no financial information is
shown for them.
BROKERAGE COMMISSIONS
The following table depicts brokerage commissions paid by the
designated Portfolios and Master Funds from inception through the fiscal year
ended November 30, 1999. For the Tax-Managed U.S. Marketwide Value Portfolio,
the amounts include commissions paid by its Master Fund.
<TABLE>
<CAPTION>
<S> <C>
Tax-Managed U.S. Marketwide Value Portfolio....................$ 321,580
Tax-Managed U.S. 5-10 Value Portfolio.......................... 1,213,125
Tax-Managed U.S. 6-10 Small Company Portfolio.................. 157,987
Tax-Managed DFA International Value Portfolio.................. 48,670
-----------
TOTAL $ 1,741,362
-----------
</TABLE>
Please note that while the following discussion relates to the policies
of the Portfolios with respect to brokerage commissions, it should be understood
that, with respect to a Feeder Portfolio, the discussion applies to the Master
Fund in which the Feeder Portfolio invests all of its assets.
Portfolio transactions will be placed with a view to receiving the best
price and execution. The Portfolios will seek to acquire and dispose of
securities in a manner which would cause as little fluctuation in the market
prices of stocks being purchased or sold as possible in light of the size of the
transactions being effected, and brokers will be selected with this goal in
view. The Advisor monitors the performance of brokers which effect transactions
for the Portfolios to determine the effect that their trading has on the market
prices of the securities in which they invest.
3
<PAGE>
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. 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.
The OTC companies eligible for purchase by each Portfolio or Master
Fund, other than the Tax-Managed DFA International Value Portfolio and Portfolio
X, are thinly traded securities. Therefore, the Advisor believes it needs
maximum flexibility to effect OTC trades on a best execution basis. To that end,
the Advisor places buy and sell orders with market makers, third market brokers,
Instinet and with brokers on an agency basis when the Advisor determines that
the securities may not be available from other sources at a more favorable
price. Third market brokers enable the Advisor to trade with other institutional
holders directly on a net basis. This allows the Advisor to sometimes trade
larger blocks than would be possible by going through a single market maker.
Instinet is an electronic information and communication network whose
subscribers include most market makers as well as many institutions. Instinet
charges a commission for each trade executed on its system. On any given trade,
a Portfolio or Master Fund, 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.
From inception through the fiscal year ended 1999, the Portfolios or,
in the case of the Tax-Managed U.S. Marketwide Value Portfolio, its
corresponding Master Fund, paid commissions for securities transactions to
brokers which provided market price monitoring services, market studies and
research services to the Portfolios or Master Funds as follows:
<TABLE>
<CAPTION>
VALUE OF
SECURITIES BROKERAGE
TRANSACTIONS COMMISSIONS
------------ -----------
<S> <C> <C>
Tax-Managed U.S. Marketwide Value Portfolio......................$.14,590,279 $ 32,043
Tax-Managed U.S. 5-10 Value Portfolio..............................14,773,879 85,230
Tax-Managed U.S. 6-10 Small Company Portfolio.........................462,371 2,397
Tax-Managed DFA International Value Portfolio.......................4,628,977 7,227
------------ -----------
TOTAL $ 34,455,506 $ 126,897
</TABLE>
The Tax-Managed U.S. Marketwide Value Portfolio X (and its corresponding Master
Fund), Tax-Managed U.S. 5-10 Value Portfolio X, Tax-Managed U.S. 6-10 Small
Company Portfolio X and Tax-Managed DFA International Value Portfolio X have not
begun operations as of the date of this SAI, so no information is shown for
them.
The investment advisory agreements permit the Advisor knowingly to pay
commissions on these 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
that have assisted in the sale of the Portfolios' shares.
A Feeder Portfolio will not incur any brokerage or other costs in
connection with its purchase or redemption of shares of the corresponding Master
Fund.
INVESTMENT LIMITATIONS
Each of the Portfolios has adopted certain limitations which may not be
changed with respect to any Portfolio without the approval of a majority of the
outstanding voting securities of the Portfolio. A "majority" is
4
<PAGE>
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 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;
(4) borrow, except from banks and as a temporary measure
for extraordinary or emergency purposes and then, in
no event, in excess of 33% of its net assets and
pledge not more than 33% of such assets to secure
such loans;
(5) engage in the business of underwriting securities
issued by others;
(6) 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;
(7) purchase securities on margin; or
(8) 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 limitations described in (3) and (6) above do not
prohibit each Feeder Portfolio from investing all or substantially all of its
assets in the shares of another registered, open-end investment company, such as
the Master Funds. The investment limitations of each Master Fund are the same as
those of the corresponding Feeder Portfolio.
The investment limitations described in (1) and (7) above do not
prohibit each Portfolio that may purchase or sell financial futures contracts
and options thereon from making margin deposits to the extent permitted under
applicable regulations.
Although (2) above prohibits cash loans, the Portfolios are authorized
to lend portfolio securities. Inasmuch as the Feeder Portfolios will only hold
shares of certain Master Funds, these Portfolios do not intend to lend those
shares.
Although not a fundamental policy subject to shareholder approval: (1)
the Tax-Managed U.S. 6-10 Small Company Portfolio and Portfolio X do not intend
to purchase interests in any real estate investment trust; and (2) the
Portfolios (directly or indirectly through their investment in the Master Funds)
do not intend to invest more than
5
<PAGE>
15% of their net assets in illiquid securities. 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. 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 Tax-Managed DFA International Value Portfolio and Portfolio X 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 of these Portfolios 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 Portfolios and Master Funds own, and does not
include assets which the Portfolios and Master Funds do not own but over which
they have effective control. For example, when applying a percentage investment
limitation that is based on total assets, a Portfolio or Master Fund will
exclude from its total assets those assets which represent collateral received
by the Portfolio or Master Fund for its securities lending transactions.
Unless otherwise indicated, all limitations applicable to the
Portfolios' and Master Funds' investments apply only at the time that a
transaction is undertaken. Any subsequent change in a rating assigned by any
rating service to a security or change in the percentage of a Portfolio's or
Master Funds' assets invested in certain securities or other instruments
resulting from market fluctuations or other changes in a Portfolio's or Master
Fund's total assets will not require a Portfolio or Master Fund to dispose of an
investment until the Advisor determines that it is practicable to sell or
closeout the investment without undue market or tax consequences. In the event
that ratings services assign different ratings to the same security, the Advisor
will determine which rating it believes best reflects the security's quality and
risk at that time, which may be the higher of the several assigned ratings.
FUTURES CONTRACTS
Please note that while the following discussion relates to the policies
of certain Portfolios with respect to futures contracts, it should be understood
that with respect to a Feeder Portfolio, the discussion applies to the Master
Fund in which the Feeder Portfolio invests all of its assets. 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 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 Portfolio or Master Fund will be required to make a
margin deposit in cash or government securities with a broker or custodian to
initiate and maintain positions in futures contracts. Minimal initial margin
requirements are established by the futures exchange and brokers may establish
margin requirements which are higher than the exchange requirements. After a
futures contract position is opened, the value of the contract is marked to
market daily. If the futures contract price changes to the extent that the
margin on deposit does not satisfy margin requirements, payment of additional
"variation" margin will be required. Conversely, reduction in the contract value
may reduce the required margin resulting in a repayment of excess margin to the
Portfolio or Master Fund. Variation margin payments are made to and from the
futures broker for as long as the contract remains open. The Portfolios and
Master Funds expect to earn income on their margin deposits. To the extent that
a Master Fund or Portfolio invests in futures contracts and options thereon for
other than bona fide hedging purposes, no Master Fund or Portfolio will enter
into such transactions if, immediately thereafter, the sum of the amount of
initial margin deposits and premiums required to establish such positions would
exceed 5% of the Master Fund's or Portfolio's net assets, after taking into
account unrealized profits and unrealized losses on such contracts it has
entered into; provided, however, that, in the case of an option that is
in-the-money at the time of purchase, the in-the-money amount may be excluded in
calculating the 5%. Pursuant to published positions of the Commission, the
Portfolio or Master Fund may be required to maintain segregated accounts
consisting of liquid assets, (or, as permitted under applicable
6
<PAGE>
interpretations, enter into offsetting positions) in connection with its futures
contract transactions in order to cover its obligations with respect to such
contracts.
Positions in futures contracts may be closed out only on an exchange
which provides a secondary market. However, there can be no assurance that a
liquid secondary market will exist for any particular futures contract at any
specific time. Therefore, it might not be possible to close a futures position
and, in the event of adverse price movements, the Portfolio or Master Fund would
continue to be required to make variation margin deposits. In such
circumstances, if the Portfolio or Master Fund has insufficient cash, it might
have to sell portfolio securities to meet daily margin requirements at a time
when it might be disadvantageous to do so. Management intends to minimize the
possibility that it will be unable to close out a futures contract by only
entering into futures which are traded on national futures exchanges and for
which there appears to be a liquid secondary market.
CASH MANAGEMENT PRACTICES
All Portfolios and Master Funds 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, in the case of the Emerging Markets Master Funds, cash investments
may be made for temporary defensive purposes during periods in which market,
economic or political conditions warrant.
All the Portfolios and Master Funds may invest cash in short-term
repurchase agreements. In addition, the following cash investments are
permissible:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Percentage
Portfolios and Master Funds Permissible Cash Investment Guidelines*
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Tax Managed U.S. 6-10 Small Company No limitations 20%
Portfolio and Portfolio X
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Tax-Managed U.S. Value Portfolios and Master High quality, highly liquid fixed income
Funds securities such as money market
instruments; index futures contracts and
options thereon** 20%
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Tax-Managed DFA International Value Fixed income obligations such as money
Portfolio and Portfolio X market instruments; index futures
contracts and options thereon** 20%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
*The percentage guidelines set forth above are not absolute limitations
but the Portfolios and Master Funds do not expect to exceed these guidelines
under normal circumstances.
**To the extent that such Master Funds and Portfolios invest in futures
contracts and options thereon for other than bona fide hedging purposes, no
Master Fund or Portfolio will enter into such transactions if, immediately
thereafter, the sum of the amount of initial margin deposits and premiums
required to establish such positions would exceed 5% of the Master Fund's or
Portfolio's net 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%.
CONVERTIBLE DEBENTURES
The Tax-Managed DFA International Value Portfolio and Portfolio X may
each invest up to 5% of its assets in convertible debentures issued by non U.S.
companies located in the countries where the Portfolios are permitted to invest.
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
7
<PAGE>
stream (generally higher in yield than the income derived from a common stock
but lower than that afforded by a nonconvertible debenture), a convertible
debenture also affords the investor an opportunity, through its conversion
feature, to participate in the capital appreciation of the common stock into
which it is convertible. As the market price of the underlying common stock
declines, convertible debentures tend to trade increasingly on a yield basis and
so may not experience market value declines to the same extent as the underlying
common stock. When the market price of the underlying common stock increases,
the price of a convertible debenture tends to rise as a reflection of the value
of the underlying common stock. To obtain such a higher yield, a Portfolio may
be required to pay for a convertible debenture an amount in excess of the value
of the underlying common stock. Common stock acquired by a Portfolio upon
conversion of a convertible debenture will generally be held for 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. Each of the
Directors and officers of the Fund is also a Trustee and officer of the Trust.
The Directors of the Fund, including all of the disinterested directors, have
adopted written procedures to monitor potential conflicts of interest that might
develop between the Feeder Portfolios and the Master Funds.
The names, locations and dates of birth of the Directors and officers
of the Fund and a brief statement of their present positions and principal
occupations during the past five years is set forth below.
DIRECTORS
David G. Booth*, (12/2/46), Director, President and Chairman-Chief
Executive Officer, Santa Monica, CA. President, Chairman-Chief Executive Officer
and Director of the following companies: Dimensional Fund Advisors Inc., DFA
Securities Inc., DFA Australia Limited, 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. Director, SA Funds (registered investment
company) and Assante Corporation (investment management).
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. President, Cardean University (Division of UNext.com).
Trustee, The DFA Investment Trust Company (registered investment company).
Director, DFA Investment Dimensions Group Inc., Dimensional Investment Group
Inc., Dimensional Emerging Markets Value Fund Inc. and Harbor Investment
Advisors. Member of the Boards of Milwaukee Mutual Insurance Company and
UNext.com. Principal and Executive Vice President, Lexecon Inc. (economics, law,
strategy and finance consulting). Formerly, Trustee, First Prairie Funds
(registered investment company).
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. and BIRR
Portfolio Analysis, Inc. (software products). Chairman, Ibbotson Associates,
Inc., Chicago, IL (software, data, publishing and consulting). Formerly,
Director, Hospital Fund, Inc. (investment management services).
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.
8
<PAGE>
Myron S. Scholes, (7/1/41), Director, Menlo Park, CA. Frank E. Buck
Professor Emeritus of Finance, Stanford University. Trustee, The DFA Investment
Trust Company. Director, DFA Investment Dimensions Group Inc., Dimensional
Investment Group Inc., Dimensional Emerging Markets Value Fund Inc. and American
Century (Mountain View) Investment Companies. Partner, Oak Hill Capital
Management. Formerly, Limited Partner, Long-Term Capital Management L.P. (money
manager) and Consultant, Arbor Investors.
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, (4/8/41), Vice President, Santa Monica, CA. Consultant
until October 1995 and Principal and Manager of Product Development, Wells Fargo
Nikko Investment Advisors, San Francisco, CA from 1990-1994.
Jim Davis, (11/29/56), Vice President, Santa Monica, CA. Vice
President of all DFA Entities. Kansas State University, Arthur Anderson & Co.,
Phillips Petroleum Co.
Robert Deere, (10/8/57), Vice President, Santa Monica, CA.
Irene R. Diamant, (7/16/50), Vice President and Secretary (Secretary
for all entities other than Dimensional Fund Advisors Ltd.), Santa Monica, CA.
Richard Eustice, (8/5/65), Vice President and Assistant Secretary
(Assistant Secretary for all entities other than Dimensional Fund Advisors
Ltd.), Santa Monica, CA.
Eugene Fama, Jr., (1/21/61), Vice President, Santa Monica, CA.
Kamyab Hashemi-Nejad, (1/22/61), Vice President, Controller and
Assistant Treasurer, Santa Monica, CA.
Judith Jonas, (11/27/55), Vice President, Santa Monica, CA. Vice
President of all DFA Entities. Vice President, Wells Fargo Bank, N.A. from
1989-1990. Vice President, Demko Baer & Associates, 1991.
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
(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.
9
<PAGE>
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. Vice
President, Director of Research, LPL Financial Services, Inc., Boston, MA from
1987 to 1994.
# Rex A. Sinquefield and Jeanne C. Sinquefield are husband and wife.
Directors and officers as a group own less than 1% of the Fund's
outstanding stock.
Set forth below is a table listing, for each director entitled to
receive compensation, the compensation received from the Fund during the fiscal
year ended November 30, 1999 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
Compensation From Fund
Director From the Fund and Fund Complex *
- -------- ------------- ----------------
<S> <C> <C>
George M. Constantinides.................................. $13,715 $35,000
John P. Gould............................................. $13,715 $35,000
Roger G. Ibbotson......................................... $13,715 $35,000
Merton H. Miller.......................................... $10,396 $28,000
Myron S. Scholes.......................................... $13,396 $34,000
</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 on the boards of such companies.
SERVICES TO THE FUND
ADMINISTRATIVE SERVICES--THE FEEDER PORTFOLIOS
The Fund has entered into administration agreements with the Advisor,
on behalf of the Feeder Portfolios. Pursuant to each administration agreement,
the Advisor performs various services, including: supervision of the services
provided by the Portfolio's custodian and transfer and dividend disbursing agent
and others who provide services to the Fund for the benefit of the Portfolio;
providing shareholders with information about the Portfolio and their
investments as they or the Fund may request; assisting the Portfolio in
conducting meetings of shareholders; furnishing information as the Board of
Directors may require regarding the Master Funds, and any other administrative
services for the benefit of the Portfolio as the Board of Directors may
reasonably request. For its administrative services, the Feeder Portfolios are
obligated to pay the Advisor a monthly fee equal to one-twelfth of the
percentages listed below:
<TABLE>
<S> <C>
Tax-Managed U.S. Marketwide Value.................................. 0.15%
Tax-Managed U.S. Marketwide Value X................................ 0.15%
</TABLE>
From inception through the fiscal year ended November 30, 1999, the
Tax-Managed U.S. Marketwide Value Portfolio paid administrative fees to the
Advisor of $82,000. The Tax-Managed U.S. Marketwide Value Portfolio X has not
begun operations as of the date of this SAI, so it has not yet paid
administrative fees.
10
<PAGE>
ADMINISTRATIVE SERVICES--ALL PORTFOLIOS
PFPC Inc. ("PFPC"), 400 Bellevue Parkway, Wilmington, DE 19809, serves
as the accounting services, dividend disbursing and transfer agent for all the
Portfolios and Master Funds. The services provided by PFPC are subject to
supervision by the executive officers and the Board of Directors of the Fund,
and include day-to-day keeping and maintenance of certain records, calculation
of the offering price of the shares, preparation of reports, liaison with its
custodians, and transfer and dividend disbursing agency services. For its
services, each of the Portfolios listed below pays PFPC annual fees which are
set forth in the following table:
TAX-MANAGED U.S. MARKETWIDE VALUE PORTFOLIO
TAX-MANAGED U.S. MARKETWIDE VALUE PORTFOLIO X
These Feeder Portfolios invest in Master Funds taxed as partnerships. PFPC
charges $2,600 per month multiplied by the number of feeders investing in Master
Funds taxed as partnerships.
TAX-MANAGED U.S. 6-10 SMALL COMPANY PORTFOLIO
TAX-MANAGED U.S. 6-10 SMALL COMPANY PORTFOLIO X
TAX-MANAGED U.S. 5-10 VALUE PORTFOLIO
TAX-MANAGED U.S. 5-10 VALUE PORTFOLIO X
.1025% of the first $300 million of net assets
.0769% of the next $300 million of net assets
.0513% of the next $250 million of net assets
.0205% of net assets over $850 million
PFPC has agreed that it may from time to time limit the fee rates.
TAX-MANAGED DFA INTERNATIONAL VALUE PORTFOLIO
TAX-MANAGED DFA INTERNATIONAL VALUE PORTFOLIO X
Charges for each Portfolio:
.1230% of the first $300 million of net assets
.0615% of the next $300 million of net assets
.0410% of the next $250 million of net assets
.0205% of the net assets over $850 million
CUSTODIANS
Citibank, N.A., 111 Wall Street, New York, New York, 10005, is the
global custodian for the Tax-Managed DFA International Value Portfolio and
Portfolio X and PFPC Trust Company, 400 Bellevue Parkway, Wilmington, DE 19809,
serves as the custodian for all of the other Portfolios and the Master Funds.
DISTRIBUTOR
The Fund acts as distributor of each series of its own shares of
stock. The Fund 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 these agreements.
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.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP are the independent accountants to the Fund
and audit the financial statements of the Fund. Their address is 2400 Eleven
Penn Center, Philadelphia, PA 19103.
11
<PAGE>
ADVISORY FEES
David G. Booth and Rex A. Sinquefield, as directors and officers of
the Advisor and shareholders 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 (or, with respect to each Feeder Portfolio, the
corresponding Master Fund), the Advisor is paid a monthly fee calculated as a
percentage of average net assets of the Portfolio (or, with respect to each
Feeder Portfolio, the corresponding Master Fund). From inception through the
fiscal year ended November 30, 1999, the Portfolios (or the corresponding Master
Fund) paid management fees to the Advisor as set forth in the following table: *
<TABLE>
<CAPTION>
1999
(000)
----
<S> <C>
Tax-Managed U.S. Marketwide Value Series....................................................... $143
Tax-Managed U.S. 5-10 Value Portfolio.......................................................... 932
Tax-Managed U.S. 6-10 Small Company Portfolio.................................................. 176
Tax-Managed DFA International Value Portfolio.................................................. 72
</TABLE>
* The Tax-Managed U.S. Marketwide Value Portfolio (and its corresponding
Master Fund), Tax-Managed U.S. 5-10 Value Portfolio and Tax-Managed U.S.
6-10 Small Company Portfolio began operations in December 1998. The
Tax-Managed DFA International Value Portfolio began operations on April 16,
1999. The Tax-Managed U.S. Marketwide Value Portfolio X (and its
corresponding Master Fund), Tax-Managed U.S. 5-10 Value Portfolio X,
Tax-Managed U.S. 6-10 Small Company Portfolio X and Tax-Managed DFA
International Value Portfolio X have not begun operations as of the date of
this SAI, so they have not yet paid management fees.
GENERAL INFORMATION
The Fund was incorporated under Maryland law on June 15, 1981. Until
June 1983, the Fund was named DFA Small Company Fund Inc. The Fund commenced
offering shares of Tax-Managed U.S. Marketwide Value Portfolio, Tax-Managed U.S.
5-10 Value Portfolio and Tax-Managed U.S. 6-10 Small Company Portfolio in
December, 1998; and Tax-Managed DFA International Value Portfolio on April 16,
1999. The other Portfolios have not commenced operations as of the date of this
SAI.
The DFA Investment Trust Company was organized as a Delaware business
trust on October 27, 1992. The Trust offers shares of its Master Funds only to
institutional investors in private offerings.
CODES OF ETHICS
The Fund and the Trust have adopted a revised Code of Ethics, under
Rule 17j-1 of the 1940 Act, for certain access persons of the Portfolios and
Master Funds. In addition, the Advisor has adopted or will adopt a revised Code
of Ethics. The Codes are designed to ensure that access persons act in the
interest of the Portfolios and Master Funds, and their shareholders with respect
to any personal trading of securities. Under the Codes, access persons are
generally prohibited from knowingly buying or selling securities (except for
mutual funds, U.S. government securities and money market instruments) which are
being purchased, sold or considered for purchase or sale by a Portfolio or
Master Fund unless their proposed purchases are approved in advance. The Codes
also contain certain reporting requirements and securities trading clearance
procedures.
SHAREHOLDER RIGHTS
The shares of each Portfolio, when issued and paid for in accordance
with the Portfolio's prospectus, will be fully paid and non-assessable shares,
with equal, non-cumulative voting rights and no preferences as to conversion,
exchange, dividends, redemption or any other feature.
With respect to matters which require shareholder approval,
shareholders are entitled to vote only with respect to matters which affect the
interest of the class of shares (Portfolio) which they hold, except as otherwise
12
<PAGE>
required by applicable law. If liquidation of the Fund should occur, the Fund's
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
federal securities laws and regulations governing mutual funds, or other
applicable law. The Fund's bylaws provide that special meetings of shareholders
shall be called at the written request of at least 10% of the votes entitled to
be cast at such meeting. Such meeting may be called to consider any matter,
including the removal of one or more directors. Shareholders will receive
shareholder communications with respect to such matters as required by the
federal securities laws and regulations governing mutual funds, including
semi-annual and annual financial statements of the Fund, the latter being
audited at least once each year.
Whenever a Feeder Portfolio, as an investor in its corresponding
Master Fund, is asked to vote on a shareholder proposal, the Fund will solicit
voting instructions from the Feeder Portfolio's shareholders with respect to the
proposal. The Directors of the Fund will then vote the Feeder Portfolio's shares
in the Master Fund in accordance with the voting instructions received from the
Feeder Portfolio's shareholders. The Directors of the Fund will vote shares of
the Feeder Portfolio for which they receive no voting instructions in accordance
with their best judgment. If a majority shareholder of a Master Fund declares
bankruptcy, a majority in interest of the remaining shareholders in the Master
Fund must vote to approve the continuing existence of the Master Fund or the
Master Fund will be liquidated.
PRINCIPAL HOLDERS OF SECURITIES
As of February 29, 2000, the following persons beneficially owned 5%
or more of the outstanding stock of the Portfolios, as set forth below:
TAX-MANAGED U.S. MARKETWIDE VALUE PORTFOLIO
Charles Schwab & Company, Inc.* 83.57%
101 Montgomery Street
San Francisco, CA 94104
FTC & Co.*
P.O. Box 173736
Denver, CO 80217 5.26%
TAX-MANAGED U.S. 5-10 VALUE PORTFOLIO
Charles Schwab & Company, Inc.*(1) 70.82%
Blue Shield of California
50 Beale Street
San Francisco, CA 94105 11.73%
TAX-MANAGED U.S. 6-10 SMALL COMPANY PORTFOLIO
Charles Schwab & Company, Inc.*(1) 83.36%
FTC & Co.*(1) 7.05%
TAX-MANAGED DFA INTERNATIONAL VALUE PORTFOLIO
Charles Schwab & Company, Inc.*(1) 87.40%
- -------------------------------------------------
* Owner of record only.
(1) See address for shareholder previously noted above in list.
13
<PAGE>
Shareholder inquiries may be made by writing or calling the Fund 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.
PURCHASE OF SHARES
The following information supplements the information set forth in the
prospectus under the caption "PURCHASE OF SHARES."
The Fund will accept purchase and redemption orders on each day that
the New York Stock Exchange ("NYSE") is open for business, regardless of whether
the Federal Reserve System is closed. However, no purchases by wire may be made
on any day that the Federal Reserve System is closed. The Fund will generally be
closed on days that the NYSE is closed. The NYSE is scheduled to be open Monday
through Friday throughout the year except for days closed to recognize New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving and Christmas Day. The Federal
Reserve System is closed on the same days as the NYSE, except that 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.
The Tax-Managed DFA International Value Portfolio and Portfolio X are
each closed if portfolio securities greater than 50% of its total assets are
principally traded on exchanges that are closed that day. Purchase and
redemption orders for shares of such Portfolio will not be accepted on those
days.
The Fund reserves the right, in its sole discretion, to suspend the
offering of shares of any or all Portfolios or reject purchase orders when, in
the judgement of management, such suspension or rejection is in the best
interest of the Fund or a Portfolio. Securities accepted in exchange for shares
of a Portfolio will be acquired for investment purposes and will be considered
for sale under the same circumstances as other securities in the Portfolio.
Reimbursement fees may be charged prospectively from time to time
based upon the future experience of the Portfolios that are currently sold at
net asset value. Any such charges will be described in the prospectus.
REDEMPTION AND TRANSFER OF SHARES
The following information supplements the information set forth in the
prospectus under the caption "REDEMPTION OF SHARES."
The Fund may suspend redemption privileges or postpone the date of
payment: (1) during any period when the NYSE is closed, or trading on the NYSE
is restricted as determined by the Commission, (2) during any period when an
emergency exists as defined by the rules of the Commission as a result of which
it is not reasonably practicable for the Fund to dispose of securities owned by
it, or fairly to determine the value of its assets and (3) for such other
periods as the Commission may permit.
Shareholders may transfer shares of any Portfolio to another person by
making a written request to the Advisor who will transmit the request to the
Transfer Agent. The request should clearly identify the account and number of
shares to be transferred, and include the signature of all registered owners and
all stock certificates, if any, which are subject to the transfer. The signature
on the letter of request, the stock certificate or any stock power must be
guaranteed in the same manner as described in the prospectus under "REDEMPTION
OF SHARES." As with redemptions, the written request must be received in good
order before any transfer can be made.
TAXATION OF THE PORTFOLIOS
The following is a summary of some of the federal income tax
consequences of investing in the Portfolios. Unless you are invested in the
Portfolios through a retirement plan, you should consider the tax implications
of investing and consult your own tax adviser.
DISTRIBUTIONS OF NET INVESTMENT INCOME
14
<PAGE>
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, constitutes 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 the 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 that 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. The Master Funds intend to qualify
each year as regulated investment companies ("RIC Series").
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 in 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 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
15
<PAGE>
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 or a Master Fund 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 or Master
Fund are treated as ordinary income or capital gain, accelerate the recognition
of income to the Portfolio or Master Fund, defer a Portfolio or Master Fund's
ability to recognize losses, and, in limited cases, subject the Portfolio or
Master Fund 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.
OTHER SPECIAL RULES APPLICABLE TO PORTFOLIOS WHICH INVEST IN MASTER FUNDS
A Portfolio which invests in a RIC Series may be subject to certain
special rules. For example, Portfolios which invest in RIC Series will not be
permitted to passthrough foreign withholding taxes paid by such RIC Series to
such Portfolio's shareholders. These special rules may affect the amount, timing
or character of the income distributed to shareholders of such Portfolios.
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.
CALCULATION OF PERFORMANCE DATA
The Portfolios and the Master Funds may disseminate reports of their
investment performance from time to time. Investment performance is calculated
on a total return basis; that is by including all net investment income and any
realized and unrealized net capital gains or losses during the period for which
investment performance is reported. If dividends or capital gains distributions
have been paid during the relevant period the calculation of
16
<PAGE>
investment performance will include such dividends and capital gains
distributions as though reinvested in shares of the Portfolio or Master Fund.
Standard quotations of total return, which include deductions of any applicable
reimbursement fees, are computed in accordance with Commission Guidelines and
are presented whenever any non-standard quotations are disseminated to provide
comparability to other investment companies. Non-standardized total return
quotations may differ from the Commission 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 Commission Guideline. Performance data is based on historical
earnings and is not intended to indicate future performances. Rates of return
expressed on an annual basis will usually not equal the sum of returns expressed
for consecutive interim periods due to the compounding of the interim yields.
The Fund's annual report to shareholders for the fiscal year ended November 30,
1999 contains additional performance information. Copies of the annual report
are available upon request and without charge.
With respect to the Tax-Managed DFA International Value Portfolio and
Portfolio X, 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 the one-year
period ended December 31, 1999 (as applicable) are set forth in the prospectus.
Such quotations utilize the standardized method of calculation required by the
Commission, which is net of the cost of any current reimbursement fees charged
to investors and paid to the Portfolios.
As the following formula indicates, the average annual total return is
determined by finding the average annual compounded rates of return over the
stated time period that would equate a hypothetical initial purchase order of
$1,000 to its redeemable value (including capital appreciation/depreciation and
dividends and distributions paid and reinvested less any fees charged to a
shareholder account) at the end of the stated time period. The calculation
assumes that all dividends and distributions are reinvested at the public
offering price on the reinvestment dates during the period. The quotation
assumes the account was completely redeemed at the end of each period and the
deduction of all applicable charges and fees. According to the Commission
formula:
In addition to the standardized method of calculating performance used
by the Commission, the Portfolios and Master Funds may disseminate other
performance data and may advertise total return performance calculated on a
monthly basis.
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).
The Portfolios and Master Funds 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 and Master Funds 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 Master Funds 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.
17
<PAGE>
FINANCIAL STATEMENTS
PricewaterhouseCoopers LLP, 2400 Eleven Penn Center, Philadelphia, PA
19103, are the independent accountants to the Fund. PricewaterhouseCoopers LLP
audits the Fund's financial statements. The audited financial statements and
financial highlights of the Portfolios for the fiscal year ended November 30,
1999, as set forth in the Fund's annual reports to shareholders, including the
report of PricewaterhouseCoopers LLP, are incorporated by reference into this
SAI.
The audited financial statements of the Master Funds (which are series
of the Trust) for the fiscal year ended November 30, 1999, as set forth in the
Trust's annual report to shareholders, including the report of
PricewaterhouseCoopers LLP, are incorporated by reference into this SAI.
The annual reports do not contain any data regarding the Tax-Managed
U.S. Marketwide Value Portfolio X, Tax-Managed U.S. 5-10 Value Portfolio X,
Tax-Managed U.S. 6-10 Small Company Portfolio X or Tax-Managed U.S. Marketwide
Value Series X because they had not begun operations as of November 30, 1999.
A shareholder may obtain a copy of the annual reports, upon request
and without charge, by contacting the Fund at the address or telephone number
appearing on the cover of this SAI.
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
1299 OCEAN AVENUE, 11TH FLOOR, SANTA MONICA, CALIFORNIA 90401
TELEPHONE: (310) 395-8005
STATEMENT OF ADDITIONAL INFORMATION
MARCH 24, 2000
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 24, 2000, as amended from time to time. The audited financial
statements and financial highlights of the Portfolios 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 COMMISSIONS......................................................1
INVESTMENT LIMITATIONS.....................................................3
FUTURES CONTRACTS..........................................................5
CASH MANAGEMENT PRACTICES..................................................5
CONVERTIBLE DEBENTURES.....................................................6
DIRECTORS AND OFFICERS.....................................................6
SERVICES TO THE FUND.......................................................8
ADVISORY FEES.............................................................10
GENERAL INFORMATION.......................................................10
CODES OF ETHICS...........................................................11
SHAREHOLDER RIGHTS........................................................11
PRINCIPAL HOLDERS OF SECURITIES...........................................11
PURCHASE AND REDEMPTION OF SHARES.........................................12
TAXATION OF THE PORTFOLIOS................................................12
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 COMMISSIONS
The following table depicts brokerage commissions paid by the
Portfolios during the fiscal years ended November 30, 1999, 1998 and 1997.
BROKERAGE COMMISSIONS
FISCAL YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
VA Small Value $50,507 $30,163 $40,533
VA Large Value $52,101 $19,048 $18,486
VA International Value $10,432 $12,695 $12,742
VA International Small $15,823 $30,950 $39,704
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, 1999, 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 $ 874,579 $4,745
VA Large Value $3,834,672 $4,158
VA International Value $ 950,554 $1,426
VA International Small $ 174,925 $1,368
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.
4
<PAGE>
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 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%
- -----------------------------------------------------------------------------------------------------------
5
<PAGE>
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
VA International Small Portfolio Fixed income obligations such as money
market instruments 20%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
*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. Director, SA Funds (registered investment
company) and Assante Corporation (investment management).
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. President, Cardean University (Division of
UNext.com). Trustee, The DFA Investment Trust Company (registered investment
company). Director, DFA Investment Dimensions Group Inc., Dimensional Investment
Group Inc., Dimensional Emerging Markets Value Fund Inc. and Harbor Investment
Advisors. Member of the Boards of Milwaukee Mutual Insurance Company and
UNext.com. Principal and Executive Vice President, Lexecon Inc. (economics, law,
strategy and finance consulting). Formerly, Trustee, First Prairie Funds
(registered investment company).
6
<PAGE>
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. and BIRR
Portfolio Analysis, Inc. (software products). Chairman, Ibbotson Associates,
Inc., Chicago, IL (software, data, publishing and consulting). Formerly,
Director, Hospital Fund, Inc. (investment management services).
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, Menlo Park, CA. Frank E.
Buck Professor Emeritus of Finance, Stanford University. Trustee, The DFA
Investment Trust Company. Director, DFA Investment Dimensions Group Inc.,
Dimensional Investment Group Inc., Dimensional Emerging Markets Value Fund Inc.
and American Century (Mountain View) Investment Companies. Partner, Oak Hill
Capital Management. Formerly, Limited Partner, Long-Term Capital Management L.P.
(money manager) and Consultant, Arbor Investors.
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.
Jim Davis, (11/29/56), Vice President, Santa Monica, CA. Vice
President of all DFA Entities. Kansas State University, Arthur Anderson & Co.,
Phillips Petroleum Co.
Robert Deere, (10/8/57), Vice President, Santa Monica, CA.
Irene R. Diamant, (7/16/50), Vice President and Secretary
(Secretary for all entities other than Dimensional Fund Advisors Ltd.), Santa
Monica, CA.
Richard Eustice, (8/5/65), Vice President and Assistant Secretary
(Assistant Secretary for all entities other than Dimensional Fund Advisors
Ltd.), Santa Monica, CA.
Eugene Fama, Jr., (1/21/61), Vice President, Santa Monica, CA.
Kamyab Hashemi-Nejad, (1/22/61), Vice President, Controller and
Assistant Treasurer, Santa Monica, CA.
Judith Jonas, (11/27/55), Vice President, Santa Monica, CA. Vice
President of all DFA Entities. Vice President, Wells Fargo Bank, N.A. from
1989-1990. Vice President, Demko Baer & Associates, 1991.
7
<PAGE>
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 (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, 1999, 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 $13,715 $35,000
John P. Gould $13,715 $35,000
Roger G. Ibbotson $13,715 $35,000
Merton H. Miller $10,396 $28,000
Myron S. Scholes $13,396 $34,000
</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.
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
8
<PAGE>
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.
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP serves as legal counsel to
the Fund. Their address is 2600 One Commerce Square, Philadelphia, PA
19103-7098.
9
<PAGE>
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP are the independent accountants to the
Fund and audit the financial statements of the Fund. Its address is 2400 Eleven
Penn Center, Philadelphia, PA 19103.
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, 1997, 1998 and 1999, the Portfolios paid
advisory fees to the Advisor (and any sub-advisor) as set forth in the following
table:
<TABLE>
<CAPTION>
1999 1998 1997
(000) (000) (000)
----------- ----------- --------
<S> <C> <C> <C>
VA Small Value $93 $ 89 $ 65
VA Large Value $80 $ 69 $ 49
VA International Value $88 $ 81 $ 60
VA International Small $66 $ 59 $ 42
VA Short-Term Fixed $49 $ 42 $ 29
VA Global Bond $29 $ 22 $ 15
</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>
CODES OF ETHICS
The Fund has adopted a revised Code of Ethics, under Rule
17j-1 of the 1940 Act, for certain access persons of the Portfolios. In
addition, the Advisor has adopted or will adopt a revised Code of Ethics. The
Codes are designed to ensure that access persons act in the interest of the
Portfolios, and their shareholders with respect to any personal trading of
securities. Under the Codes, access persons are generally prohibited from
knowingly buying or selling securities (except for mutual funds, U.S. government
securities and money market instruments) which are being purchased, sold or
considered for purchase or sale by a Portfolio unless their proposed purchases
are approved in advance. The Codes also contain certain reporting requirements
and securities trading clearance procedures.
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 29, 2000, the following person(s) beneficially
owned 5% or more of the outstanding stock of the Portfolios:
<TABLE>
<CAPTION>
VA LARGE VALUE PORTFOLIO
<S> <C>
Peoples Benefit Insurance Company Separate Account* (formerly Providian Life and Health) 99.14%
4333 Edgewood Road NE
Cedar Rapids, IA 52499
VA GLOBAL BOND PORTFOLIO
Peoples Benefit Insurance Company Separate Account*(1) (formerly Providian Life and Health) 96.83%
VA SMALL VALUE PORTFOLIO
Peoples Benefit Insurance Company Separate Account*(1) (formerly Providian Life and Health) 99.46%
11
<PAGE>
VA INTERNATIONAL VALUE PORTFOLIO
Peoples Benefit Insurance Company Separate Account*(1) (formerly Providian Life and Health) 98.95%
VA INTERNATIONAL SMALL PORTFOLIO
Peoples Benefit Insurance Company Separate Account*(1) (formerly Providian Life and Health) 99.26%
VA SHORT-TERM FIXED PORTFOLIO
Peoples Benefit Insurance Company Separate Account*(1) (formerly Providian Life and Health) 99.72%
</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.
Each International Equity Portfolio is closed if portfolio
securities greater than 50% of its total assets are principally traded on
exchanges that are closed that day. Purchase and redemption orders for shares of
such International Equity Portfolio will not be accepted on those days.
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.
TAXATION OF THE PORTFOLIOS
The following is a summary of some of the federal income tax consequences that
may affect each Portfolio. Because shares of the Portfolios are sole only to
separate accounts of insurance companies, the tax consequences described below
are generally not applicable to an owner of a variable life or variable annuity
contract. If such contract owner should become subject to tax, such contract
owner should consider the tax implications of investing, and consult its own tax
adviser.
12
<PAGE>
SPECIAL RULES APPLICABLE TO VARIABLE CONTRACTS
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.
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.
13
<PAGE>
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 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.
14
<PAGE>
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.
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, 1999 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 December 31, 1999 (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:
n
P(1 + T) = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
15
<PAGE>
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, 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, 1999, 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.
16
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
(56/57)
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:
<TABLE>
<S> <C>
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.
</TABLE>
(2) Articles Supplementary dated December 21, 1995 as filed with the
Maryland Secretary of State on December 28, 1995.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
(3) Articles Supplementary dated May 14, 1996 as filed with the Maryland
Secretary of State on July 12, 1996.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
(4) Articles Supplementary dated October 18, 1996 as filed with the
Maryland Secretary of State on December 5, 1996.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
(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:
<TABLE>
<S> <C>
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.
</TABLE>
C-1
<PAGE>
(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:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 46/47 to Registrant's
Registration Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: September 16, 1997.
</TABLE>
(7) Articles Supplementary dated September 16, 1997 as filed with the
Maryland Secretary of State on September 17, 1997.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 46/47 to Registrant's
Registration Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: September 16, 1997.
</TABLE>
(8) Articles Supplementary dated November 11, 1998 as filed with the
Maryland Secretary of State on November 12, 1998
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
(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;
* Tax-Managed DFA International Value Portfolio; and
* Tax-Managed U.S. Marketwide Value Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
(10) Articles Supplementary as filed with the Maryland Secretary of State
on September 13, 1999 re: the addition of the:
* Tax-Managed U.S. Marketwide Value Portfolio X;
* Tax-Managed U.S. 5-10 Value Portfolio X;
* Tax-Managed U.S. 6-10 Small Company Portfolio X; and
* Tax-Managed DFA International Value Portfolio X
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 55/56 to the Registrant's
Registration Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: September 13, 1999.
</TABLE>
(b) By-Laws.
By-Laws of the Registrant, as approved through September 13, 1999.
C-2
<PAGE>
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 55/56 to the Registrant's
Registration Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: September 13, 1999.
</TABLE>
(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:
<TABLE>
<S> <C>
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.
</TABLE>
(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:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 48/49 to Registrant's
Registration Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: March 20, 1998.
</TABLE>
(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:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 48/49 to Registrant's
Registration Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: March 20, 1998.
</TABLE>
(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:
<TABLE>
<S> <C>
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.
</TABLE>
(4) Investment Advisory Agreement between the Registrant and DFA
dated April 2, 1991 re: the:
* Large Cap International Portfolio
C-3
<PAGE>
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
(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:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 48/49 to Registrant's
Registration Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: March 20, 1998.
</TABLE>
(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:
<TABLE>
<S> <C>
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.
</TABLE>
(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:
<TABLE>
<S> <C>
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.
</TABLE>
(8) Investment Advisory Agreement between the Registrant and DFA
dated September 8, 1995 re: the:
* VA Small Value Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
(9) Investment Advisory Agreement between the Registrant and DFA
dated September 8, 1995 re: the:
* VA International Value Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
(10) Investment Advisory Agreement between the Registrant and DFA
dated September 8, 1995 re: the:
* VA International Small Portfolio
C-4
<PAGE>
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
(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:
<TABLE>
<S> <C>
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.
</TABLE>
(12) Investment Advisory Agreement between the Registrant and DFA
dated August 8, 1996 re: the:
* International Small Company Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
(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
* Tax-Managed DFA International Value Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
(14) Investment Advisory Agreement between the Registrant and DFA
dated September 13, 1999 re: the:
* Tax-Managed U.S. 5-10 Value Portfolio X;
* Tax-Managed U.S. 6-10 Small Company Portfolio X; and
* Tax-Managed DFA International Value Portfolio X
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 55/56 to the Registrant's
Registration Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: September 13, 1999.
</TABLE>
(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.
C-5
<PAGE>
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
(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:
<TABLE>
<S> <C>
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.
</TABLE>
(3) Consultant Services Agreement between DFA and DFA Australia Ltd.
(formerly DFA Australia Pty Limited)
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 55/56 to the Registrant's
Registration Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: September 13, 1999.
</TABLE>
(4) Consultant Services Agreement between DFA and Dimensional Fund
Advisors Ltd.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 55/56 to the Registrant's
Registration Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: September 13, 1999.
</TABLE>
(e) Underwriting Contracts.
(1) Agreement between the Registrant and DFA Securities Inc.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 48/49 to Registrant's
Registration Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: March 20, 1998.
</TABLE>
(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:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 37/38 to Registration Statement
of the Registrant on form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: November 22, 1995.
</TABLE>
C-6
<PAGE>
(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
* 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:
<TABLE>
<S> <C>
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.
</TABLE>
b) Addendum No. 2, re: the addition of:
* Tax-Managed U.S. Marketwide Value Portfolio X;
* Tax-Managed U.S. 5-10 Value Portfolio X;
* Tax-Managed U.S. 6-10 Small Company Portfolio X; and
* Tax-Managed DFA International Value Portfolio X
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 55/56 to the Registrant's
Registration Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: September 13, 1999.
</TABLE>
(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:
<TABLE>
<S> <C>
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.
</TABLE>
a) Addendum Number One
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
b) Addendum Number Two, re: the addition of:
* Tax-Managed U.S. Marketwide Value Portfolio X;
* Tax-Managed U.S. 5-10 Value Portfolio X;
* Tax-Managed U.S. 6-10 Small Company Portfolio X; and
* Tax-Managed DFA international Value Portfolio X
C-7
<PAGE>
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 55/56 to the Registrant's
Registration Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: September 13, 1999.
</TABLE>
(2) Administration and Accounting Agreement
Administration and Accounting Services Agreement between the
Registrant and PFPC.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 48/49 to Registrant's
Registration Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: March 20, 1998.
</TABLE>
a) Addendum Number One
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
b) Addendum Number Two re the:
* Tax-Managed U.S. Marketwide Value Portfolio X;
* Tax-Managed U.S. 5-10 Value Portfolio X;
* Tax-Managed U.S. 6-10 Small Company Portfolio X; and
* Tax-Managed DFA International Value Portfolio X
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 55/56 to the Registrant's
Registration Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: September 13, 1999.
</TABLE>
(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:
<TABLE>
<S> <C>
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.
</TABLE>
(2) Dated August 8, 1996 re: the:
* Japanese Small Company Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
(3) Dated August 8, 1996 re: the
* United Kingdom Small Company Portfolio
C-8
<PAGE>
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
(4) Dated August 8, 1996 re: the
* Continental Small Company Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
(5) Dated December 1, 1995 re: the:
* U.S. Large Company Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
(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:
<TABLE>
<S> <C>
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.
</TABLE>
(7) Dated January 6, 1993 re: the
* U.S. 6-10 Small Company Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
(8) Dated January 6, 1993 re: the:
* U.S. Portfolio (formerly the U.S. Large Cap High
Book-to-Market Portfolio)
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
(9) Dated January 6, 1993 re: the:
* U.S. 6-10 Value Portfolio (formerly the U.S. Small Cap High
Book to Market Portfolio)
C-9
<PAGE>
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
(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:
<TABLE>
<S> <C>
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.
</TABLE>
(11) Dated March 30, 1994 re:
* Emerging Markets Portfolios
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
(12) Dated February 8, 1996 re: the:
* Enhanced U.S. Large Company Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
(13) Dated February 8, 1996 re: the:
* DFA Two-Year Corporate Fixed Income Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
(14) Dated February 8, 1996 re: the
* DFA Two-Year Global Fixed Income Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
(15) Dated February 8, 1996 re: the:
* DFA Two-Year Government Portfolio
C-10
<PAGE>
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
(16) Dated August 8, 1996 re: the:
* International Small Company Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
(17) Dated December 19, 1996 re: the:
* Emerging Markets Small Cap Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
(18) Dated November 30, 1997 re: the:
* U.S. 9-10 Small Company Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
(19) Dated November 30, 1997 re: the:
* U.S. 4-10 Value Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
(20) Dated November 30, 1997 re: the:
* Emerging Markets Value Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
(21) Dated December 8, 1998 re: the:
* Tax-Managed U.S. Marketwide Value Portfolio;
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
C-11
<PAGE>
(22) Dated September 13, 1999 re the:
* Tax-Managed U.S. Marketwide Value Portfolio X
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 55/56 to the Registrant's
Registration Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: September 13, 1999.
</TABLE>
(4) Other.
(a) Marketing Agreement dated June 29, 1994 between DFA and National
Home Life Assurance Company.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
(b) Participation Agreement between DFA Investment Dimensions Group,
Inc., DFA, DFA Securities, Inc. and National Home Life Assurance
Company.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
(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:
<TABLE>
<S> <C>
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.
</TABLE>
(i) Legal Opinion.
(1) Opinion of Stradley, Ronon, Stevens & Young, LLP.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
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.
</TABLE>
(2) Opinion of Stradley, Ronon, Stevens & Young, LLP.
ELECTRONICALLY FILED HEREWITH AS EXHIBIT EX-99.i.
(j) Other Opinions.
Consent of PricewaterhouseCoopers LLP.
ELECTRONICALLY FILED HEREWITH AS EXHIBIT EX-99.j.
(k) Omitted Financial Statements.
Not applicable.
C-12
<PAGE>
(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
(n) Plans pursuant to Rule 18f-3.
Not Applicable.
(o) 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:
<TABLE>
<S> <C>
Filing: Post-Effective amendment No. 31/32 to the Registrant's
Registration Statement on Form N-1A.
File Nos.: 2-73948 and 811-3258.
Filing Date: October 3, 1994.
</TABLE>
(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:
<TABLE>
<S> <C>
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.
</TABLE>
(3) Powers-of-Attorney appointing David G. Booth, Rex A. Sinquefield,
Michael T. Scardina, Irene R. Diamant, Catherine L. Newell and
Stephen W. Kline as attorney-in-fact for Registrant, DFA/ITC and
Dimensional Emerging Markets Value Fund Inc. (formerly, Dimensional
Emerging Markets Fund Inc.) each dated July 18, 1997.
ELECTRONICALLY FILED HEREWITH
AS EXHIBIT EX-99.o.
(p) Codes of Ethics.
(1) Code of Ethics of Registrant.
ELECTRONICALLY FILED HEREWITH
AS EXHIBIT EX-99.p.1.
(2) Code of Ethics of DFA Investment Trust Company.
ELECTRONICALLY FILED HEREWITH
AS EXHIBIT EX-99.p.2.
(3) Code of Ethics of Dimensional Emerging Markets Value Fund Inc.
ELECTRONICALLY FILED HEREWITH
AS EXHIBIT EX-99.p.3.
(4) Code of Ethics of Advisor.
ELECTRONICALLY FILED HEREWITH
AS EXHIBIT EX-99.p.4.
C-13
<PAGE>
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 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 Value Fund 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.
C-14
<PAGE>
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
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:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
DFA Investment Dimensions Group Inc. 1299 Ocean Avenue
11th Floor
Santa Monica, CA
90401
PFPC Inc. 400 Bellevue Parkway,
Wilmington, DE 19809
</TABLE>
ITEM 29. MANAGEMENT SERVICES.
None.
ITEM 30. UNDERTAKINGS.
Not Applicable.
C-15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused Post-Effective
Amendment No. 56/57 to 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 20th day of March, 2000.
<TABLE>
<S> <C> <C>
DFA INVESTMENT DIMENSIONS GROUP INC.
(Registrant)
By: /s/ DAVID G. BOOTH*
-----------------------------------------
David G. Booth
PRESIDENT
(Signature and Title)
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, Post-Effective
Amendment No. 56/57 to this Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DAVID G. BOOTH* Director and
- ---------------------------------------- Chairman-Chief Executive March 20, 2000
David G. Booth Officer
/s/ REX A. SINQUEFIELD* Director and
- ---------------------------------------- Chairman-Chief March 20, 2000
Rex A. Sinquefield Investment Officer
/s/ MICHAEL T. SCARDINA* Chief Financial Officer,
- ---------------------------------------- Treasurer and Vice March 20, 2000
Michael T. Scardina President
/s/ GEORGE M. CONSTANTINIDES*
- ---------------------------------------- Director March 20, 2000
George M. Constantinides
/s/ JOHN P. GOULD*
- ---------------------------------------- Director March 20, 2000
John P. Gould
/s/ ROGER G. IBBOTSON*
- ---------------------------------------- Director March 20, 2000
Roger G. Ibbotson
/s/ MERTON H. MILLER*
- ---------------------------------------- Director March 20, 2000
Merton H. Miller
/s/ MYRON S. SCHOLES*
- ---------------------------------------- Director March 20, 2000
Myron S. Scholes
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ CATHERINE L. NEWELL
-------------------------
Catherine L. Newell
ATTORNEY-IN-FACT
(PURSUANT TO A
POWER-OF-ATTORNEY)
</TABLE>
C-16
<PAGE>
THE DFA INVESTMENT TRUST COMPANY consents to the filing of this Amendment to
the Registration Statement of DFA Investment Dimensions Group Inc. which is
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Santa Monica and State of California on the 20th day of March, 2000.
<TABLE>
<S> <C> <C>
THE DFA INVESTMENT TRUST COMPANY INC.
(Registrant)
By: /s/ DAVID G. BOOTH*
-----------------------------------------
David G. Booth
PRESIDENT
(Signature and Title)
</TABLE>
The undersigned Directors and principal officers of THE DFA INVESTMENT TRUST
COMPANY consent to the filing of this Post-Effective Amendment No. 56/57 to the
Registration Statement of DFA Investment Dimensions Group Inc. on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DAVID G. BOOTH* Director and
- ---------------------------------------- Chairman-Chief Executive March 20, 2000
David G. Booth Officer
/s/ REX A. SINQUEFIELD* Director and
- ---------------------------------------- Chairman-Chief March 20, 2000
Rex A. Sinquefield Investment Officer
/s/ MICHAEL T. SCARDINA* Chief Financial Officer,
- ---------------------------------------- Treasurer and Vice March 20, 2000
Michael T. Scardina President
/s/ GEORGE M. CONSTANTINIDES*
- ---------------------------------------- Director March 20, 2000
George M. Constantinides
/s/ JOHN P. GOULD*
- ---------------------------------------- Director March 20, 2000
John P. Gould
/s/ ROGER G. IBBOTSON*
- ---------------------------------------- Director March 20, 2000
Roger G. Ibbotson
/s/ MERTON H. MILLER*
- ---------------------------------------- Director March 20, 2000
Merton H. Miller
/s/ MYRON S. SCHOLES*
- ---------------------------------------- Director March 20, 2000
Myron S. Scholes
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ CATHERINE L. NEWELL
-------------------------
Catherine L. Newell
ATTORNEY-IN-FACT
(PURSUANT TO A
POWER-OF-ATTORNEY)
</TABLE>
C-17
<PAGE>
DIMENSIONAL EMERGING MARKETS VALUE FUND INC. consents to the filing of this
Amendment to the Registration Statement of DFA Investment Dimensions Group Inc.
which is signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Santa Monica and State of California on the 20th day of March, 2000.
<TABLE>
<S> <C> <C>
DFA INVESTMENT DIMENSIONS GROUP INC.
(Registrant)
By: /s/ DAVID G. BOOTH*
-----------------------------------------
David G. Booth
PRESIDENT
(Signature and Title)
</TABLE>
The undersigned Directors and principal officers of DIMENSIONAL EMERGING
MARKETS VALUE FUND INC. consent to the filing of this Post-Effective Amendment
No. 56/57 to the Registration Statement of DFA Investment Dimensions Group Inc.
on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DAVID G. BOOTH* Director and
- ---------------------------------------- Chairman-Chief Executive March 20, 2000
David G. Booth Officer
/s/ REX A. SINQUEFIELD* Director and
- ---------------------------------------- Chairman-Chief March 20, 2000
Rex A. Sinquefield Investment Officer
/s/ MICHAEL T. SCARDINA* Chief Financial Officer,
- ---------------------------------------- Treasurer and Vice March 20, 2000
Michael T. Scardina President
/s/ GEORGE M. CONSTANTINIDES*
- ---------------------------------------- Director March 20, 2000
George M. Constantinides
/s/ JOHN P. GOULD*
- ---------------------------------------- Director March 20, 2000
John P. Gould
/s/ ROGER G. IBBOTSON*
- ---------------------------------------- Director March 20, 2000
Roger G. Ibbotson
/s/ MERTON H. MILLER*
- ---------------------------------------- Director March 20, 2000
Merton H. Miller
/s/ MYRON S. SCHOLES*
- ---------------------------------------- Director March 20, 2000
Myron S. Scholes
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ CATHERINE L. NEWELL
-------------------------
Catherine L. Newell
ATTORNEY-IN-FACT
(PURSUANT TO A
POWER-OF-ATTORNEY)
</TABLE>
C-18
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EDGAR
EXHIBIT NO. DESCRIPTION
----------- ------------------------------------------------------------
<S> <C>
EX-99.i Legal Opinion of Stradley, Ronon, Stevens & Young, LLP
EX-99.j Consent of PricewaterhouseCoopers, LLP
EX-99.o Powers-of-Attorney
EX-99.p.1 Code of Ethics of Registrant
EX-99.p.2 Code of Ethics of DFA Investment Trust Company
EX-99.p.3 Code of Ethics of Dimensional Emerging Markets Value Fund
Inc.
EX-99.p.4 Code of Ethics of Advisor
</TABLE>
C-19
<PAGE>
Law Office
STRADLEY, RONON, STEVENS & YOUNG, LLP
30 Valley Stream Parkway
Malvern, Pennsylvania 19355-1481
(640) 640-5800
Direct Dial: (610) 640-5801
March 20, 2000
Board of Directors
DFA Investment Dimensions Group Inc.
1199 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Gentlemen:
We have examined the Articles of Incorporation ("Articles") of DFA
Investment Dimensions Group Inc. (the "Fund"), a corporation organized under
Maryland law, and its by-laws, both as amended to date, the registration
statement filed by the Fund under the Securities Act of 1933, as amended
("Registration Statement"), and such records of the corporate proceedings as we
deem material to this opinion.
As of the date hereof: (i) the Fund is authorized to issue an
aggregate of Six Billion (6,000,000,000) shares of common stock, of a par value
of $0.01 per share and an aggregate par value of Sixty Million Dollars
($60,000,000); and (ii) in accordance with authority provided in the Articles,
the board of directors has divided the authorized shares of common stock into
the following thirty-eight (38) classes, and has authorized each such class to
issue the number of shares as set forth below.
<TABLE>
<S> <C>
The U.S. 9-10 Small Company Portfolio Shares 300,000,000 shares;
The Japanese Small Company Portfolio Shares 50,000,000 shares;
The United Kingdom Small Company Portfolio Shares 20,000,000 shares;
The DFA Five-Year Government Portfolio Shares 100,000,000 shares;
The Continental Small Company Portfolio Shares 50,000,000 shares;
The U.S. Large Company Portfolio Shares 200,000,000 shares;
The DFA Intermediate Government Fixed Income
Portfolio Shares 100,000,000 shares;
The DFA Global Fixed Income Portfolio Shares 100,000,000 shares;
The Large Cap International Portfolio Shares 150,000,000 shares;
The Pacific Rim Small Company Portfolio Shares 50,000,000 shares;
The U.S. 6-10 Small Company Portfolio Shares 100,000,000 shares;
The DFA Real Estate Securities Portfolio Shares 100,000,000 shares;
The U.S. Large Cap Value Portfolio Shares 200,000,000 shares;
</TABLE>
<PAGE>
<TABLE>
<S> <C>
The U.S. 6-10 Value Portfolio Shares 300,000,000 shares;
RWB/DFA International High Book to Market
Portfolio Shares 100,000,000 shares;
The DFA One-Year Fixed Income Portfolio Shares 300,000,000 shares;
The Emerging Markets Portfolio Shares 100,000,000 shares;
VA Large Value Portfolio Shares 50,000,000 shares;
VA Global Bond Portfolio Shares 50,000,000 shares;
DFA International Small Cap Value
Portfolio Shares 200,000,000 shares;
VA Small Value Portfolio Shares 50,000,000 shares;
VA International Value Portfolio Shares 50,000,000 shares;
VA International Small Portfolio Shares 50,000,000 shares;
The VA Short-Term Fixed Portfolio Shares 50,000,000 shares;
DFA Two-Year Global Fixed Income
Portfolio Shares 200,000,000 shares;
Enhanced U.S. Large Company Portfolio Shares 100,000,000 shares;
International Small Company Portfolio Shares 100,000,000 shares;
Emerging Markets Small Cap Portfolio Shares 100,000,000 shares;
U.S. 4-10 Value Portfolio Shares 100,000,000 shares;
Emerging Markets Value Portfolio Shares 100,000,000 shares;
Tax-Managed U.S. 5-10 Value Portfolio Shares 100,000,000 shares;
Tax-Managed U.S. 6-10 Small Company
Portfolio Shares 100,000,000 shares;
Tax-Managed U.S. Marketwide Value
Portfolio Shares 100,000,000 shares;
Tax-Managed DFA International Value
Portfolio Shares 100,000,000 shares;
Tax-Managed U.S. 5-10 Value Portfolio X Shares 100,000,000 shares;
Tax-Managed U.S. 6-10 Small Company
Portfolio X Shares 100,000,000 shares;
Tax-Managed U.S. Marketwide Value
Portfolio X Shares 100,000,000 shares; and
Tax-Managed DFA International Value
Portfolio X Shares 100,000,000 shares.
</TABLE>
Based upon the above-described examination, it is our opinion that as
long as the Fund remains a corporation in good standing under the laws of the
state of Maryland, the authorized but unissued shares of each class of stock
listed above, when issued for the consideration established by the board of
directors, as described in the Registration Statement, will be, under the law of
the state of Maryland, legally issued, fully-paid, non-assessable outstanding
shares of common stock of the Fund.
<PAGE>
DFA Investment Dimensions Group Inc.
March 20, 2000
Page 3
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to reference therein to us as counsel who have
rendered this opinion.
Very truly yours,
STRADLEY, RONON, STEVENS & YOUNG, LLP
By: /s/ Stephen W. Kline
------------------------------------
Stephen W. Kline
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form N-1A of our report dated January 14, 2000, relating to the
financial statements and financial highlights which appears in the November 30,
1999 Annual Report to Shareholders of The U.S. Large Company Series, The
Enhanced U.S. Large Company Series, The U.S. Large Cap Value Series, The
Tax-Managed U.S. Marketwide Value Series, The U.S. 4-10 Value Series, The U.S.
6-10 Value Series, The U.S. 6-10 Small Company Series, The U.S. 9-10 Small
Company Series, The DFA International Value Series, The Japanese Small Company
Series, The Pacific Rim Small Company Series, The United Kingdom Small Company
Series, The Continental Small Company Series, The Global Value Series, The
Emerging Markets Series, The Emerging Markets Small Cap Series, The DFA One-Year
Fixed Income Series, and The DFA Two-Year Global Fixed Income Series,
(constituting portfolios within the DFA Investment Trust Company), which is also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the headings, "Service Providers" and "Financial
Statements" in such Registration Statement.
PricewaterhouseCoopers LLP
Philadelphia, PA
March 24, 2000
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form N-1A of our report dated January 14, 2000, relating to the
financial statements and financial highlights which appears in the November 30,
1999 Annual Report to Shareholders of U.S. Large Company Portfolio, Enhanced
U.S. Large Company Portfolio, U.S. Large Cap Value Portfolio, U.S. 6-10 Value
Portfolio, U.S. 6-10 Small Company Portfolio, U.S. 9-10 Small Company Portfolio,
DFA Real Estate Securities Portfolio, Large Cap International Portfolio,
International Small Company Portfolio, Japanese Small Company Portfolio, Pacific
Rim Small Company Portfolio, United Kingdom Small Company Portfolio, Continental
Small Company Portfolio, DFA International Small Cap Value Portfolio, Emerging
Markets Portfolio, Emerging Markets Value Portfolio, Emerging Markets Small Cap
Portfolio, DFA One-Year Fixed Income Portfolio, DFA Two-Year Global Fixed Income
Portfolio, DFA Five-Year Government Portfolio, DFA Five-Year Global Fixed Income
Portfolio, and DFA Intermediate Government Fixed Income Portfolio (constituting
portfolios within the DFA Investment Dimensions Group Inc.), and DFA
International Value Portfolio (constituting a portfolio within the Dimensional
Investment Group Inc.) which is also incorporated by reference into the
Registration Statement. We also consent to the references to us under the
headings "Financial Highlights", "Independent Accountants" and "Financial
Statements" in such Registration Statement.
PricewaterhouseCoopers LLP
Philadelphia, PA
March 24, 2000
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form N-1A of our report dated January 14, 2000, relating to the
financial statements and financial highlights which appears in the November 30,
1999 Annual Report to Shareholders of Dimensional Emerging Markets Value Fund
Inc., which is also incorporated by reference into the Registration Statement.
We also consent to the references to us under the headings, "Independent
Accountants" and "Financial Statements" in such Registration Statement.
PricewaterhouseCoopers LLP
Philadelphia, PA
March 24, 2000
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form N-1A of our report dated January 14, 2000, relating to the
financial statements and financial highlights which appears in the November 30,
1999 Annual Report to Shareholders of 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 (constituting
portfolios within the DFA Investment Dimensions Group Inc.), which is also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the headings "Financial Highlights", "Independent
Accountants" and "Financial Statements" in such Registration Statement.
PricewaterhouseCoopers LLP
Philadelphia, PA
March 24, 2000
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form N-1A of our report dated January 14, 2000, relating to the
financial statements and financial highlights which appears in the November 30,
1999 Annual Report to Shareholders of Tax-Managed U.S. Marketwide Value
Portfolio, Tax-Managed U.S. 5-10 Value Portfolio, Tax-Managed U.S. 6-10 Small
Company Portfolio and Tax-Managed DFA International Value (constituting
portfolios within the DFA Investment Dimensions Group Inc.), which is also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the headings "Financial Highlights", "Independent
Accountants" and "Financial Statements" in such Registration Statement.
PricewaterhouseCoopers LLP
Philadelphia, PA
March 24, 2000
<PAGE>
Exhibit No. EX-99.o
DFA INVESTMENT DIMENSIONS GROUP INC.
POWER OF ATTORNEY
The undersigned officers and directors of DFA INVESTMENT DIMENSIONS
GROUP INC. (the "Fund") hereby appoint DAVID G. BOOTH, REX A. SINQUEFIELD,
MICHAEL T. SCARDINA, IRENE R. DIAMANT, CATHERINE L. NEWELL and STEPHEN W.
KLINE, ESQUIRE (with full power to any one of them to act) as
attorney-in-fact and agent, in all capacities, to execute, and to file any of
the documents referred to below relating to the Fund's Registration Statement
on Form N-1A under the Investment Company Act of 1940 and under the
Securities Act of 1933, including any and all amendments thereto, covering
the registration of the Fund as an investment company and the sale of shares
by the Fund, including all exhibits and any and all documents required to be
filed with respect thereto with any regulatory authority, including
applications for exemptive order rulings. Each of the undersigned grants to
each of said attorneys full authority to do every act necessary to be done in
order to effectuate the same as fully, to all intents and purposes, as he
could do if personally present, thereby ratifying all that said
attorneys-in-fact and agents may lawfully do or cause to be done by virtue
hereof.
The undersigned officers and directors hereby execute this Power of
Attorney as of this 18th day of July, 1997.
/s/ David G. Booth /s/ Rex A. Sinquefield
- ---------------------------- -----------------------------
David G. Booth, Rex A. Sinquefield, Chairman-
Chairman-Chief Executive Chief Investment Officer and
Officer, President and Director
Director
/s/ George M. Constantinides /s/ John P. Gould
- ---------------------------- -----------------------------
George M. Constantinides, John P. Gould, Director
Director
/s/ Roger G. Ibbotson /s/ Merton H. Miller
- ---------------------------- -----------------------------
Roger G. Ibbotson, Director Merton H. Miller, Director
/s/ Myron S. Scholes /s/ Michael T. Scardina
- ---------------------------- -----------------------------
Myron S. Scholes, Director Michael T. Scardina, Chief
Financial Officer, Treasurer
and Vice President
<PAGE>
THE DFA INVESTMENT TRUST COMPANY
POWER OF ATTORNEY
The undersigned officers and trustees of THE DFA INVESTMENT TRUST
COMPANY (the "Fund") hereby appoint DAVID G. BOOTH, REX A. SINQUEFIELD,
MICHAEL T. SCARDINA, IRENE R. DIAMANT, CATHERINE L. NEWELL AND STEPHEN W.
KLINE, ESQUIRE (with full power to any of them to act) as attorney-in-fact
and agent, in all capacities, to execute, and to file any of the documents
referred to below relating to a Registration Statement under the Securities
Act of 1933 and/or the Investment Company Act of 1940, including any and all
amendments thereto, covering the registration of any registered investment
company for which any Series of the Fund serves as a master fund in a master
fund-feeder fund structure, including all exhibits and any and all documents
required to be filed with respect thereto with any regulatory authority. Each
of the undersigned grants to each of said attorneys full authority to do
every act necessary to be done in order to effectuate the same as fully, to
all intents and purposes, as he could do if personally present, thereby
ratifying all that said attorneys-in-fact and agents may lawfully do or cause
to be done by virtue hereof.
The undersigned officers and trustees hereby execute this Power of
Attorney as of the 18th day of July, 1997.
/s/ David G. Booth /s/ Rex A. Sinquefield
- ---------------------------- -----------------------------
David G. Booth, Rex A. Sinquefield, Chairman-
Chairman-Chief Executive Chief Investment Officer and
Officer, President and Trustee Trustee
/s/ George M. Constantinides /s/ John P. Gould
- ---------------------------- -----------------------------
George M. Constantinides, John P. Gould, Trustee
Trustee
/s/ Roger G. Ibbotson /s/ Merton H. Miller
- ---------------------------- -----------------------------
Roger G. Ibbotson, Trustee Merton H. Miller, Trustee
/s/ Myron S. Scholes /s/ Michael T. Scardina
- ---------------------------- -----------------------------
Myron S. Scholes, Trustee Michael T. Scardina, Chief
Financial Officer, Treasurer
and Vice President
<PAGE>
DIMENSIONAL EMERGING MARKETS FUND INC.
POWER OF ATTORNEY
The undersigned officers and directors of DIMENSIONAL EMERGING MARKETS
FUND INC. (the "Fund") hereby appoint DAVID G. BOOTH, REX A. SINQUEFIELD,
MICHAEL T. SCARDINA, IRENE R. DIAMANT, CATHERINE L. NEWELL and STEPHEN W.
KLINE, ESQUIRE (with full power to any one of them to act) as
attorney-in-fact and agent, in all capacities, to execute, and to file any of
the documents referred to below relating to the Fund's Registration
Statement, including any and all amendments thereto, covering the
registration of the Fund as an investment company, including all exhibits and
any and all documents required to be filed with respect thereto with any
regulatory authority, including applications for exemptive order rulings.
Each of the undersigned grants to each of said attorneys full authority to do
every act necessary to be done in order to effectuate the same as fully, to
all intents and purposes, as he could do if personally present, thereby
ratifying all that said attorneys-in-fact and agents may lawfully do or cause
to be done by virtue hereof.
The undersigned officers and directors hereby execute this Power of
Attorney as of this 18th day of July, 1997.
/s/ David G. Booth /s/ Rex A. Sinquefield
- ---------------------------- -----------------------------
David G. Booth, Rex A. Sinquefield, Chairman-
Chairman-Chief Executive Chief Investment Officer and
Officer, President and Director
Director
/s/ George M. Constantinides /s/ John P. Gould
- ---------------------------- -----------------------------
George M. Constantinides, John P. Gould, Director
Director
/s/ Roger G. Ibbotson /s/ Merton H. Miller
- ---------------------------- -----------------------------
Roger G. Ibbotson, Director Merton H. Miller, Director
/s/ Myron S. Scholes /s/ Michael T. Scardina
- ---------------------------- -----------------------------
Myron S. Scholes, Director Michael T. Scardina, Chief
Financial Officer, Treasurer
and Vice President
<PAGE>
Exhibit No. EX-99.p.1
DFA INVESTMENT DIMENSIONS GROUP INC.
AMENDMENT TO THE
CODE OF ETHICS
This amendment to the Code of Ethics of DFA Investment Dimensions Group
Inc. (the "Fund," formerly DFA Small Company Fund Inc.) is adopted on March
31, 1988 pursuant to the requirements of Rule 17j-1 under the Investment
Company Act o f 1940, as amended (the "Act").
The Articles of Incorporation of the Fund have been amended to provide
for the issuance of seven diversified series of shares, each of which
represents a separate class ("Portfolio") of the Fund's common stock, each
having a different investment objective and different investment policies.
4. GENERAL
All the provisions of the Code of Ethics shall apply to each of the
Portfolios of the Fund as if each fund were a separate and distinct
investment company under the Act. Each reference to "Fund" in the Code of
Ethics shall be deemed to apply to each of the Portfolios of the Fund, in
addition to the Fund itself.
5. PORTFOLIOS
The Fund is made up of the following Portfolios:
THE U.S. 9-10 SMALL COMPANY PORTFOLIO -- Invests in readily
marketable stocks of small companies which are traded in the U.S. securities
markets.
THE JAPANESE SMALL COMPANY PORTFOLIO -- Invests in readily
marketable stocks of small Japanese companies.
THE UNITED KINGDOM SMALL COMPANY PORTFOLIO -- Invests in readily
marketable stocks of small United Kingdom companies.
THE CONTINENTAL SMALL COMPANY PORTFOLIO -- Invests in readily
marketable stocks of small companies organized and traded in the European
continent.
THE U.S. LARGE COMPANY PORTFOLIO -- Invests in the stocks of
companies that comprise Standard & Poor's 500 Composite Stock Index.
THE DFA ONE-YEAR FIXED INCOME PORTFOLIO - The investment objective
of The DFA One-Year Fixed Income Portfolio is to achieve stable real value of
the capital with a minimum of risk by investing in high quality obligations.
<PAGE>
THE DFA FIVE-YEAR FIXED INCOME PORTFOLIO -- The investment
objective of The DFA Five-Year Fixed Income Portfolio is to maximize total
returns available from the universe of high quality debt obligations which
mature within five years from the .date of settlement.
THE DFA FIVE-YEAR GOVERNMENT PORTFOLIO -- The investment objective
of The DFA Five-Year Government Portfolio is to maximize total returns
available from the universe of U.S. Government and U.S. Government Agency
debt obligations which mature within five years from the date of settlement.
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
AMENDMENT TO THE
CODE OF ETHICS
This amendment to the Code of Ethics of DFA Investment Dimensions Group
Inc. (the "Fund," formerly DFA Small Company Fund Inc.) is adopted on March
31, 1988 pursuant to the requirements of Rule 17j-1 under the Investment
Company Act of 1940, as amended (the "Act").
The Articles of Incorporation of the Fund have been amended to provide
for the issuance of seven diversified series of shares, each of which
represents a separate class ("Portfolio") of the Fund's common stock, each
having a different investment objective and different investment policies.
1. GENERAL
All the provisions of the Code of Ethics shall apply to each of the
Portfolios of the Fund as if each fund were a separate and distinct
investment company under the Act. Each reference to "Fund" in the Code of
Ethics shall be deemed to apply to each of the Portfolios of the Fund, in
addition to the Fund itself.
2. PORTFOLIOS
The Fund is made up of the following Portfolios:
THE SMALL COMPANY PORTFOLIO--Invests in readily marketable stocks of
small companies which are traded in the U.S. securities markets.
THE JAPANESE SMALL COMPANY PORTFOLIO--Invests in readily marketable
stocks of small Japanese companies.
THE UNITED KINGDOM SMALL COMPANY PORTFOLIO--Invests in readily
marketable stocks of small United Kingdom companies.
THE CONTINENTAL SMALL COMPANY PORTFOLIO--Invests in readily marketable
stocks of small companies organized and traded on the European continent.
THE DFA FIXED INCOME PORTFOLIO--The investment objective of The DFA
Fixed Income Portfolio is to achieve stable real value of capital with a
minimum of risk by investing in high quality obligations.
THE DFA FIVE-YEAR FIXED INCOME PORTFOLIO--The investment objective of
The DFA Five-Year Fixed Income Portfolio is to maximize total returns
available from the universe of high quality debt obligations which mature
within five years from the date of settlement.
<PAGE>
THE DFA FIVE-YEAR GOVERNMENT PORTFOLIO--The investment objective of The
DFA Five-Year Government Portfolio is to maximize total returns available
from the universe of U.S. Government and U.S. Government Agency debt
obligations which mature within five years from the date of settlement.
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
AMENDMENT TO THE
CODE OF ETHICS
This amendment to the Code of Ethics of DFA Investment Dimensions Group
Inc. (the "Fund," formerly DFA Small Company Fund Inc.) is adopted on March
31, 1988 pursuant to the requirements of Rule 17j-1 under the Investment
Company Act of 1940, as amended (the "Act").
The Articles of Incorporation of the Fund have been amended to provide
for the issuance of seven diversified series of shares, each of which
represents a separate class ("Portfolio") of the Fund's common stock, each
having a different investment objective and different investment policies.
1. GENERAL
All the provisions of the Code of Ethics shall apply to each of the
Portfolios of the Fund as if each fund were a separate and distinct
investment company under the Act. Each reference to "Fund" in the Code of
Ethics shall be deemed to apply to each of the Portfolios of the Fund, in
addition to the Fund itself.
2. PORTFOLIOS
The Fund is made up of the following Portfolios:
THE SMALL COMPANY PORTFOLIO--Invests in readily marketable stocks of
small companies which are traded in the U.S. securities markets.
THE JAPANESE SMALL COMPANY PORTFOLIO--Invests in readily marketable
stocks of small Japanese companies.
THE UNITED KINGDOM SMALL COMPANY PORTFOLIO--Invests in readily
marketable stocks of small United Kingdom companies.
THE CONTINENTAL SMALL COMPANY PORTFOLIO--Invests in readily marketable
stocks of small companies organized and traded on the European continent.
THE DFA FIXED INCOME PORTFOLIO--The investment objective of The DFA
Fixed Income Portfolio is to achieve stable real value of capital with a
minimum of risk by investing in high quality obligations.
THE DFA FIVE-YEAR FIXED INCOME PORTFOLIO--The investment objective of
The DFA Five-Year Fixed Income Portfolio is to maximize total returns
available from the universe of high quality debt obligations which mature
within five years from the date of settlement.
<PAGE>
THE DFA FIVE-YEAR GOVERNMENT PORTFOLIO--The investment objective of The
DFA Five-Year Government Portfolio is to maximize total returns available
from the universe of U.S. Government and U.S. Government Agency debt
obligations which mature within five years from the date of settlement.
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
AMENDMENT TO THE
CODE OF ETHICS
This amendment to the Code of Ethics of DFA Investment Dimensions Group
Inc (the "Fund," formerly DFA Small Company Fund Inc.) is adopted on June 8,
1983 pursuant to the requirements of Rule 17j-1 under the Investment Company
Act of 1940, as amended (the "Act").
The Articles of Incorporation of the Fund have been amended to provide
for the issuance of three diversified series of shares, each of which
represents a separate class ("Portfolio") of the Fund's common stock, each
having a different investment objective and different investment policies.
1. GENERAL
All the provisions of the Code of Ethics shall apply to each of the
Portfolios of the Fund as if each fund were a separate and distinct
investment company under the Act. Each reference to "Fund" in the Code of
Ethics shall be deemed to apply to each of the Portfolios of the Fund, in
addition to the Fund itself.
2. PORTFOLIOS
The Fund is made up of the following Portfolios:
The Small Company Portfolio, which has an investment objective of
achieving capital appreciation by investing in readily marketable stocks of
small companies;
Inflation Hedge Portfolio A, which has the investment objective of
achieving stable real value of capital with a minimum of risk by investing in
high quality obligations, such as U.S. Government obligations, high quality
commercial paper and corporate obligations and obligations issued by U.S.
banks and U.S. branches and subsidiaries of foreign banks;
Inflation Hedge Portfolio B, which has the investment objective of
achieving stable real value of capital without assuming undue risk by
investing in Eurodollar obligations, obligations issued by U.S. banks and
U.S. branches and subsidiaries of foreign banks, commercial paper, U.S. and
foreign corporate obligations and U.S. Government obligations to the extent
necessary to meet redemptions.
<PAGE>
DFA INVESTMENT DIMENSIONS GROUP INC.
AMENDMENT TO THE
CODE OF ETHICS
This amendment to the Code of Ethics of DFA Investment Dimensions Group
Inc (the "Fund," formerly DFA Small Company Fund Inc.) is adopted on June 8,
1983 pursuant to the requirements of Rule 17j-1 under the Investment Company
Act of 1940, as amended (the "Act").
The Articles of Incorporation of the Fund have been amended to provide
for the issuance of three diversified series of shares, each of which
represents a separate class ("Portfolio") of the Fund's common stock, each
having a different investment objective and different investment policies.
1. GENERAL
All the provisions of the Code of Ethics shall apply to each of the
Portfolios of the Fund as if each fund were a separate and distinct
investment company under the Act. Each reference to "Fund" in the Code of
Ethics shall be deemed to apply to each of the Portfolios of the Fund, in
addition to the Fund itself.
2. PORTFOLIOS
The Fund is made up of the following Portfolios:
The Small Company Portfolio, which has an investment objective of
achieving capital appreciation by investing in readily marketable stocks of
small companies;
<PAGE>
Inflation Hedge Portfolio A, which has the investment objective of
achieving stable real value of capital with a minimum of risk by investing in
high quality obligations, such as U.S. Government obligations, high quality
commercial paper and corporate obligations and obligations issued by U.S.
banks and U.S. branches and subsidiaries of foreign banks;
Inflation Hedge Portfolio B, which has the investment objective of
achieving stable real value of capital without assuming undue risk by
investing in Eurodollar obligations, obligations issued by U.S. banks and
U.S. branches and subsidiaries of foreign banks, commercial paper, U.S. and
foreign corporate obligations and U.S. Government obligations to the extent
necessary to meet redemptions.
<PAGE>
DFA SMALL COMPANY FUND INC.
CODE OF ETHICS
GENERAL
This Code of Ethics of DFA Small Company Fund Inc. is adopted on
December 11, 1981 pursuant to the requirements of Rule 17j-l under the
Investment Company Act of 1940, as amended.
1. DEFINITIONS
(1) "Access Person" means each officer and director of the Fund
and its investment adviser and any employee of these
organizations, who, in connection with his regular functions or
duties, makes, participates in, or obtains information regarding
the purchase or sale of a security by the Fund, or whose
functions relate to the making of any recommendations with
respect to such purchases or sales; and any natural person in a
control relationship to the Fund or its investment adviser who
obtains information with respect to the Fund with regard to the
purchase or sale of a security.
(2) "Security" means all securities except securities issued by the
Government of the United States, bankers acceptances,
certificates of deposit, commercial paper and shares of
registered open-end investment companies.
(3) A "security held or to be acquired" means a security which,
within the most recent 15 days (i) is or has been held by the
Fund; or (ii) is being or
<PAGE>
has been considered by the Fund or its investment adviser for
purchase by the Fund.
(4) "Beneficial Ownership" shall have the meaning. ascribed thereto
under Section 16 of the Securities Exchange Act of 1934.
2. PROHIBITIONS
No Access Person of the Fund:
(a) In connection with the purchase or sale by such person of a
Security held or to be acquired by the Fund:
(i) shall employ any device, scheme or artifice to defraud
the Fund;
(ii) make to the any untrue statement of a material fact or
omit to state to the Fund a material fact necessary in
order to make the statements made, in light of the
circumstances under which they are made, not misleading;
(iii) engage in any act, practice, or course of business
which operates or would operate as a fraud or deceit
upon the Fund; or
(iv) engage in any manipulative practice with respect to the
Fund.
(b) Shall purchase or sell, directly or indirectly, any security
in which he has, or by reason of such transaction acquires,
any direct or indirect Beneficial Ownership and which to his
actual knowledge at the time of such purchase or sale:
(i) is being considered for purchase or sale by the Fund; or
(ii) is then being purchased or sold by the Fund.
3. EXEMPTED TRANSACTIONS
The prohibitions of Section 2 of this Code shall not apply to:
<PAGE>
(a) Purchases or sales effected in any account over which the
Access Person has no direct or in-direct influence or
control.
(b) Purchases or sales of securities which are not eligible for
purchase or sale by the Fund.
(c) Purchases or sales which are non-volitional on the part of
either the Access Person or the Fund.
(d) Purchases which are part of an automatic dividend
reinvestment plan.
(e) Purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of its securities,
to the extent such rights were acquired from such issuer, and
sales of such rights so acquired.
(f) Purchases or sales which receive the prior approval of the
President or an Executive Vice President of the Fund because
there exists only a remote potential for a conflict of
interest with the Fund because they would be very unlikely to
affect a highly institutional market, or because they clearly
are not related economically to the securities to be
purchased, sold or held by the Fund. The secretary of the
Fund shall record "any action taken pursuant to this
subsection 3(f).
4. PROCEDURAL MATTERS
(a) The Secretary of the Fund shall:
(i) Furnish a copy of this Code to each Access Person of
the Fund.
(ii) Notify each such Access Person of his obligation to
file reports as provided by Section 5 of this Code.
<PAGE>
(iii) Report to the Board of Directors the facts contained in
any reports filed with the Secretary pursuant to
Section 5 of this Code when any such report indicates
that an Access Person engaged in a transaction in a
security held or to be acquired by the Fund.
(iv) Maintain the records required by paragraph (d) of Rule
17j-1.
(v) Maintain any records furnished to him pursuant to
Section 3(f) herein.
5. REPORTING
(a) Every Access Person shall report to the Fund the information
described in Section 5(c) of this Code with respect to
transactions in any security in which such Access Person has,
or by reason of such transaction acquires, any direct or
indirect Beneficial ownership in the security; provided,
however, that an Access Person shall not be required to make
a report with respect to transactions effected for any
account over which such person does not have any direct or
indirect influence.
(b) A disinterested director of the Fund need only report a
transaction in a security if such director, at the time of
that transaction, knew or, in the ordinary course of
fulfilling his official duties as a director of the Fund,
should have known that, during the 15-day period immediately
preceding the date of the transaction by the director, such
security was purchased or sold by the Fund or was being
considered for purchase or sale by its investment adviser.
(c) Every report shall be made not later than 10 days after the
end of the calendar quarter in which the transaction to which
the report relates was effected, and shall contain the
following information:
<PAGE>
(i) The date of the transaction, the title and the number
of shares, and the principal amount of each security
involved;
(ii) The nature of the transaction (i.e., purchase, sale or
any other type of acquisition or disposition);
(iii) The price at which the transaction was effected; and,
(iv) The name of the broker, dealer or bank with or through
whom the transaction was effected.
(d) Any such report may contain a statement that the report shall
not be construed as an admission by the person making such
report that he has any direct or indirect Beneficial
Ownership in the security to which the report relates.
6. VIOLATIONS
Upon being apprised of facts which indicate that a violation of
Code may have occurred, the Board of Directors of the Fund shall determine
whether, in their judgment, the conduct being considered did in fact violate
the provisions of this Code. If the Board of Directors determines that a
violation of the Code has occurred, the Board may impose such sanctions as it
deems appropriate in the circumstances. If the person whose conduct is being
considered by the Board is a director of the Fund, he shall not be eligible
to participate in the judgment of the Board as to whether a violation exists
or in whether, or to what extent, sanctions should be imposed.
<PAGE>
Exhibit No. EX-99.p.2
THE DFA INVESTMENT TRUST COMPANY
CODE OF ETHICS
This Code of Ethics of THE DFA INVESTMENT TRUST COMPANY (the "Fund") was
adopted on September 11, 1992 pursuant to the requirements of Rule 17j-1
under the Investment Company Act of 1940, as amended (the "Act").
7. DEFINITIONS
(a) "Access Person" means each officer and trustee of the Fund and its
investment advisor and any employee of these organizations, who, in
connection with his or her regular functions or duties, makes,
participates in, or obtains information regarding the purchase or
sale of a security by the Fund, or whose functions relate to the
making of any recommendations with respect to such purchases or sales;
and any natural person in a control relationship to the Fund who
obtains information with respect to the Fund with regard to the
purchase or sale of a security.
(b) "Security" means all securities except securities issued by the
Government of the United States, bankers acceptances, certificates of
deposit, commercial paper, and shares of registered open-end
investment companies.
(c) A "security held or to be acquired" means a security which, within
the most recent 15 days (i) is or has been held by the Fund; or (ii)
is being or has been considered by the Fund for purchase by the Fund
or its investment adviser for purchase by the Fund.
(d) "Beneficial Ownership" shall have the meaning ascribed thereto under
Section 16 of the Securities Exchange Act of 1934.
8. PROHIBITIONS
No Access Person of the Fund:
(a) In connection with the purchase or sale by such person of a Security
held or to be acquired by the Fund:
(i) shall employ any device, scheme, or artifice to defraud the
Fund;
(ii) make to the Fund any untrue statement of a material fact or
omit to state to the Fund a material fact necessary in order
to make the statements made, in light of the circumstances under
which they are made, not misleading;
<PAGE>
(iii) engage in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon the Fund;
or
(iv) engage in any manipulative practice with respect to the Fund.
(b) Shall purchase or sell, directly or indirectly, any security in which
he has, or by reason of such transaction acquires, any direct or
indirect Beneficial Ownership and which to his or her actual knowledge
at the time of such purchase or sale:
(i) is being considered for purchase or sale by the Fund; or
(ii) is then being purchased or sold by the Fund.
9. EXEMPTED TRANSACTIONS
The prohibitions of Section 2 of this Code shall not apply to:
(a) Purchases or sales effected in any account over which the Access
Person has no direct or indirect influence or control.
(b) Purchases or sales of securities which are not eligible for purchase
or sale by the Fund.
(c) Purchases or sales which are non-volitional on the part of either the
Access Person or the Fund.
(d) Purchases which are part of an automatic dividend reinvestment plan.
(e) Purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of a class of its securities, to the extent such
rights were acquired from such issuer, and sales of such rights so
acquired.
(f) Purchases or sales which receive the prior approval of the President
or Vice President-Chief Administrative Officer of the Fund because
there exists only a remote potential for a conflict of interest with
the Fund because they would be very unlikely to affect a highly
institutional market, or because they clearly are not related
economically to the securities to be purchased, sold or held by the
Fund. The Secretary of the Fund shall record any action taken pursuant
to this Subsection 3(f).
10. PROCEDURAL MATTERS
(a) The Secretary of the Fund shall:
(i) Furnish a copy of this Code to each Access Person of the Fund.
<PAGE>
(ii) Notify each Access Person of that person's obligation to file
reports as provided by Section 5 of this Code.
(iii) Report to the Board of Trustees the facts contained in any
reports filed with the Secretary pursuant to Section 6 of this
Code when any such report indicates that an Access Person
engaged in a transaction in a security held or to be acquired by
the Fund.
(iv) Maintain the records required by paragraph (d) of Rule 17j-1
under the Act.
(v) Maintain any records furnished to him or her pursuant to
Section 2(f) herein.
11. REPORTING
(a) Every Access Person shall report to the Fund the information described
in Section 5(c) of this Code, with respect to transactions in any
security in which such Access Person has, or by reason of such
transaction acquires, any direct or indirect Beneficial Ownership in
the security; provided, however, that an Access Person shall not be
required to make a report with respect to transactions effected for
any account over which such person does not have any direct or
indirect influence.
(b) A disinterested trustee of the Fund need only report a transaction in
a security if such trustee, at the time of that transaction, knew or,
in the ordinary course of fulfilling his or her official duties as a
trustee of the Fund, should have known that during the 15-day period
immediately preceding the date of the transaction by the trustee such
security was purchased or sold by the Fund or was being considered for
purchase or sale by its investment adviser.
(c) Every report shall be made not later than ten days after the end of
the calendar quarter in which the transaction to which the report
relates was effected, and shall contain the following information:
(i) The date of the transaction, the title and the number of shares,
and the principal amount of each security involved;
(ii) The nature of the transaction (i.e., purchase, sale, or any
other type of acquisition or disposition);
(iii) The price at which the transaction was effected; and
(iv) The name of the broker, dealer, or bank with or through whom the
transaction was effected.
<PAGE>
(d) Any such report may contain a statement that the report shall not be
construed as an admission by the person making such report that he or
she has any direct or indirect Beneficial Ownership in the security to
which the report relates.
12. VIOLATIONS
Upon being apprised of facts which indicate that a violation of this
Code may have occurred, the Board of Trustees of the Fund shall determine
whether, in its judgment, the conduct being considered did in fact violate
the provisions of this Code. If the Board of Trustees determines that a
violation of the Code has occurred, the Board may impose such sanctions as it
deems appropriate under the circumstances. If the person whose conduct is
being considered by the Board is a trustee of the Fund, he shall not be
eligible to participate in the judgment of the Board as to whether a
violation exists or in whether, or to what extent, sanctions should be
imposed.
<PAGE>
Exhibit No. EX-99.p.3
DFA EMERGING MARKETS FUND INC.
CODE OF ETHICS
This Code of Ethics of DFA EMERGING MARKETS FUND INC. (the "Fund") was
adopted pursuant to the requirements of Rule 17j-1 under the Investment Company
Act of 1940, as amended (the "Act").
13. DEFINITIONS
(a) "Access Person" means each officer and director of the Fund
and its investment advisor and any employee of these
organizations, who, in connection with his or her regular
functions or duties, makes, participates in, or obtains
information regarding the purchase or sale of a security by
the Fund, or whose functions relate to the making of any
recommendations with respect to such purchases or sales; and
any natural person in a control relationship to the Fund who
obtains information with respect to the Fund with regard to
the purchase or sale of a security.
(b) "Security" means all securities except securities issued by
the Government of the United States, bankers acceptances,
certificates of deposit, commercial paper, and shares of
registered open-end investment companies.
(c) A "security held or to be acquired" means a security which,
within the most recent 15 days (i) is or has been held by the
Fund; or (ii) is being or has been considered by the Fund for
purchase by the Fund or its investment adviser for purchase by
the Fund.
(d) "Beneficial Ownership" shall have the meaning ascribed thereto
under Section 16 of the Securities Exchange Act of 1934.
14. PROHIBITIONS
No Access Person of the Fund:
(a) In connection with the purchase or sale by such person of a
Security held or to be acquired by the Fund:
(i) shall employ any device, scheme, or artifice to
defraud the Fund;
(ii) make to the Fund any untrue statement of a material
fact or omit to state to the Fund a material fact
necessary in order to make the statements made, in
light of the circumstances under which they are made,
not misleading;
<PAGE>
(iii) engage in any act, practice, or course of business
which operates or would operate as a fraud or deceit
upon the Fund; or
(iv) engage in any manipulative practice with respect to
the Fund.
(b) Shall purchase or sell, directly or indirectly, any security
in which he has, or by reason of such transaction acquires,
any direct or indirect Beneficial Ownership and which to his
or her actual knowledge at the time of such purchase or sale:
(i) is being considered for purchase or sale by the Fund;
or
(ii) is then being purchased or sold by the Fund.
15. EXEMPTED TRANSACTIONS
The prohibitions of Section 2 of this Code shall not apply to:
(a) Purchases or sales effected in any account over which the
Access Person has no direct or indirect influence or control.
(b) Purchases or sales of securities which are not eligible for
purchase or sale by the Fund.
(c) Purchases or sales which are non-volitional on the part of
either the Access Person or the Fund.
(d) Purchases which are part of an automatic dividend reinvestment
plan.
(e) Purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of its securities,
to the extent such rights were acquired from such issuer, and
sales of such rights so acquired.
(f) Purchases or sales which receive the prior approval of the
President or Vice President-Chief Administrative Officer of
the Fund because there exists only a remote potential for a
conflict of interest with the Fund because they would be very
unlikely to affect a highly institutional market, or because
they clearly are not related economically to the securities to
be purchased, sold or held by the Fund. The Secretary of the
Fund shall record any action taken pursuant to this Subsection
3(f).
16. PROCEDURAL MATTERS
(a) The Secretary of the Fund shall:
(i) Furnish a copy of this Code to each Access Person of
the Fund.
<PAGE>
(ii) Notify each Access Person of that person's obligation
to file reports as provided by Section 5 of this
Code.
(iii) Report to the Board of Directors the facts contained
in any reports filed with the Secretary pursuant to
Section 6 of this Code when any such report indicates
that an Access Person engaged in a transaction in a
security held or to be acquired by the Fund.
(iv) Maintain the records required by paragraph (d) of
Rule 17j-1 under the Act.
(v) Maintain any records furnished to him or her pursuant
to Section 2(f) herein.
17. REPORTING
(a) Every Access Person shall report to the Fund the information
described in Section 5(c) of this Code, with respect to
transactions in any security in which such Access Person has,
or by reason of such transaction acquires, any direct or
indirect Beneficial Ownership in the security; provided,
however, that an Access Person shall not be required to make a
report with respect to transactions effected for any account
over which such person does not have any direct or indirect
influence.
(b) A disinterested director of the Fund need only report a
transaction in a security if such director, at the time of
that transaction, knew or, in the ordinary course of
fulfilling his or her official duties as a director of the
Fund, should have known that during the 15-day period
immediately preceding the date of the transaction by the
director such security was purchased or sold by the Fund or
was being considered for purchase or sale by its investment
adviser.
(c) Every report shall be made not later than ten days after the
end of the calendar quarter in which the transaction to which
the report relates was effected, and shall contain the
following information:
(i) The date of the transaction, the title and the number
of shares, and the principal amount of each security
involved;
(ii) The nature of the transaction (i.e., purchase, sale,
or any other type of acquisition or disposition) ;
(iii) The price at which the transaction was effected; and
(iv) The name of the broker, dealer, or bank with or
through whom the transaction was effected.
<PAGE>
(d) Any such report may contain a statement that the report shall
not be construed as an admission by the person making such
report that he or she has any direct or indirect Beneficial
Ownership in the security to which the report relates.
18. VIOLATIONS
Upon being apprised of facts which indicate that a violation of this
Code may have occurred, the Board of Directors of the Fund shall
determine whether, in its judgment, the conduct being considered did in
fact violate the provisions of this Code. If the Board of Directors
determines that a violation of the Code has occurred, the Board may
impose such sanctions as it deems appropriate under the circumstances.
If the person whose conduct is being considered by the Board is a
director of the Fund, he shall not be eligible to participate in the
judgment of the Board as to whether a violation exists or in whether,
or to what extent, sanctions should be imposed.
<PAGE>
Exhibit No. EX-99.p.4
REVISED
DIMENSIONAL FUND ADVISORS INC.
DFA SECURITIES INC.
DFA AUSTRALIA LTD.
CODE OF ETHICS
DATED APRIL 24, 1998
GENERAL
This amended and restated Code of Ethics is adopted by Dimensional Fund
Advisors Inc. ("DFA"), DFA Securities Inc. ("DFAS') and DFA Australia Ltd.
("DFAL") this 24th day of April, 1998 pursuant to the requirements of Rule 17j-1
under the Investment Company Act of 1940, as amended. It is the policy of DFA,
DFAS and DFAL (hereinafter referred to as "Employers") in connection with
personal securities investments of access persons1, that such persons at all
times shall place the interests of Employers' clients first. All personal
securities transactions of access persons shall be conducted in a manner
consistent with this Code of Ethics and to avoid any actual or potential
conflict of interest and any abuse of an access person's position of trust and
responsibility. An access person may not take inappropriate advantage of his or
her position with Employers.
1. PROHIBITIONS
No access person of Employers
- --------
1 For the meaning of all terms marked with a footnote, see section 6 of the Code
"Definitions."
<PAGE>
(a) In connection with the purchase or sale by such person of a
security held or to be acquired by a registered investment company for which DFA
or DFAL act as investment adviser or DFAS acts as the principal underwriter.
(i) shall employ any device, scheme or artifice to defraud such
registered investment company;
(ii) shall make to such registered investment company any untrue
statement of a material fact or omit to state to such registered investment
company a material fact necessary in order to make the statements made, in light
of the circumstances under which they are made, not misleading;
(iii) shall engage in any act, practice, or course of business
which operates or would operate as a fraud-or deceit upon such registered
investment company; or
(iv) shall engage in any manipulative practice with respect to
such registered investment company.
(b) Shall purchase or sell, directly or indirectly, any security in
which he has, or by reason of such transaction acquires, any direct or indirect
beneficial ownership and which to his actual knowledge at the rime of such
purchase or sale:
(i) is being considered for purchase or sale by such registered
investment company; or
(ii) is then being purchased or sold by such registered investment
company.
(c) Shall, in addition to the above-stated prohibitions:
(i) acquire any securities in an initial public offering;
PROVIDED, HOWEVER, that such prohibition shall not apply to a purchase of
securities in the retail tranche of a new issue
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where such securities are acquired through a retail application form which
does not disclose, and where allotment is not dependent on, the applicants
affiliation with Employers;
(ii) acquire securities in a private placement, except as provided
in section 2(f) herein;
(iii) accept any personal gift of more than DE MINIMIS value from
any person or entity that does business with, or on behalf of an Employers'
account of any client, or (iv) serve on the board of directors of a publicly
traded company, except as provided in section 2(g) herein.
2. EXEMPTED TRANSACTIONS
The prohibitions of Section 1 of this Code shall not apply to:
(a) Purchases or sales effected in any account over which the access
person has no direct or indirect influence or control.
(b) Purchases or sales of securities which are not eligible for
purchase or sale by a registered investment company for which DFA or DFAL act as
the investment adviser or DFAS acts as the principal underwriter.
(c) Purchases or sales which are non-volitional on the part of either
the access person or a registered investment company for which DFA or DFAL act
as the investment adviser or DFAS acts as the principal underwriter.
(d) Purchases which are part of an automatic dividend reinvestment
plan.
(e) Purchases effected upon the exercise of rights issued by an issuer
PRO RATA to all holders of a class of its securities, to the extent such rights
were acquired from such issuer, and sales of such rights so acquired.
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(f) Purchase or sale requests which receive the prior approval of the
President or the Executive Vice President of a registered investment company for
which DFA or DFAL act as the investment adviser or DFAS acts as the principal
underwriter because there exists only a remote potential for a conflict of
interest with such registered investment company because they would be very
unlikely to affect a highly institutional market, or when they clearly are not
related economically to the securities to be purchased, sold or held by such
registered investment company. The Secretary of Employers, as the case may be,
shall record any action taken pursuant to this subsection 2(f).
(g) Service by an access person on the board of directors of a
publicly traded company. Such access person shall, however, inform the President
or Chief Investment Officer of each Employer of such appointment. In the event
that the President or Chief Investment Officer, in consultation with outside
counsel, should decide that the potential for conflicts of interests exists with
respect to such person's obligations as a director and Employees duties to its
clients, the President or Chief Investment Officer may, acting upon the
recommendations of outside counsel, place restrictions on the activities of, or
information received by, such access person.
3. PROCEDURAL MATTERS
(a) The Secretary of Employers shall:
(1) Furnish a copy of this Code to each access person of Employers
and obtain from each such person a written acknowledgment of the receipt
thereof. Each access person shall provide the Secretary, on an annual basis,
with an executed certificate stating that he or she has read and understood each
Employees Code of Ethics, respectively, and recognize that he or she is subject
to the Code. In addition, each access person shall certify to the Secretary on
an annual
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basis that he or she has complied with the requirements of each Employees
Code of Ethics and has disclosed or reported all personal securities
transactions required to be disclosed or reported pursuant to the
requirements of this Code.
(2) Notify each such access person of his/her obligation to file
reports as provided by Section 4 of this Code.
(3) Report to the Board of Directors at the next occurring regular
meeting the facts contained in any reports filed with the Secretary pursuant to
Section 4 of this Code when any such report indicates that an access person
engaged in a transaction in a security held or to be acquired by the Fund.
(4) Maintain any records required by paragraph (d) of Rule 17j-1.
(5) Maintain any records pursuant to Section 2(f) of this Code.
(6) Maintain the records of any violation of this Code, and/or any
action taken as a result of such violation in an easily accessible place for a
period of not less than five years following the end of the fiscal year in which
the violation occurs.
4. REPORTING
(a) Every access person of Employers shall report to such Employers, as
the case may be, the information described in Section 4(b) of this Code with
respect to transactions in any security in which such access person has, or by
reason of such transaction acquires, any direct or indirect beneficial ownership
in the security; provided, however, that an access person shall not be required
to make a report with respect to transactions effected for any account over
which such person does not have any direct or indirect influence; and, provided,
further, no access person of DFA or DFAL shall be required to make a report with
respect to information which
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would be duplicative of information recorded pursuant to Rule 204-2(a)(12) or
204-2(a)(13) under the Investment Advisers Act of 1940.
(b) Every report shall be made not later than 10 days after the end of
the calendar quarter in which the transaction to which the report relates was
effected, and may be on the form provided by DFA or DFAL, a copy of which is
attached hereto, the report shall contain the following information:
(i) The date of the transaction, the title and the number of
shares, and the principal amount of each security involved;
(ii) The nature of the transaction (i.e., purchase, sale or any
other type of acquisition or disposition);
(iii) The price at which the transaction was effected; and,
(iv) The name of the broker, dealer or bank with or through
whom the transaction was effected.
(c) Any such report may contain a statement that the report shall not
be construed as an admission by the person making such report that he/she has
any direct or indirect beneficial ownership in the security to which the report
relates.
5. VIOLATIONS
Upon being apprised of facts which indicate that a violation of this
Code may have occurred, the Board of Directors of Employers, as the case may be,
shall determine whether, in its judgment, the conduct being considered did in
fact violate the provisions of this Code. If the Board of Directors determines
that a violation of this Code has occurred, the Board may impose such sanctions
as it deems appropriate in the circumstances. If the person whose conduct is
being considered by the Board is a member of such Board, he/she shall not be
eligible to
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participate in the judgment of the Board as to whether a violation exists or
in whether, or to what extent, sanctions should be imposed.
6. DEFINITIONS
(a) For purposes of this Code, the words appearing below in quotation
marks shall have the meanings ascribed thereto; provided however, that all such
terms shall be construed in a manner consistent with the definitions thereof
contained in Rule 17j-1.
(1) "Access person" means (A) with respect to DFA or DFAL, each
officer and director of such Employers and each employee of such Employers who,
in connection with his regular functions or duties, makes, participates in, or
obtains information regarding the purchase or sale of a security by a registered
investment company for which such Employers act as investment adviser, or whose
functions relate to the making of any recommendations with respect to such
purchases or sales, and any natural person in a control relationship to such
Employers who obtain information concerning recommendations made to such company
with regard to the purchase or sale of a security, and (B) with respect to DFAS,
each officer and director of DFAS who in the ordinary course of his business
makes, participates in or obtains information regarding the purchase or sale of
securities for any registered investment company for which DFAS acts as the
principal underwriter or whose functions or duties as part of the ordinary
course of his business relate to the making of any recommendation to such
investment company regarding the purchase or sale of securities.
(2) "Security" means all securities except securities issued by
the Government of the United States, bankers' acceptances, certificates of
deposit, commercial paper and shares of registered open-end investment
companies.
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(3) A "security held or to be acquired" by a registered investment
company means any security which, within the most recent 15 days (i) is or has
been held by such company; or (ii) is being or has been considered by such
company or its investment advisor for purchase by such company.
(4) "Beneficial ownership" of a security by an access person shall
be interpreted in the same manner as it would be in determining whether a person
is subject to the provisions of Section 16 of the Securities Exchange Act of
1934 and the rules and regulations thereunder, except that the determination of
direct or indirect beneficial ownership shall apply to all securities which such
access person has or acquires. In general, a person may be regarded as having
beneficial ownership of securities held in the name of:
(a) a husband, wife, registered domestic partner or minor child;
(b) a relative sharing the same house;
(c) anyone else if the access person:
(i) obtains benefits substantially equivalent to ownership of the
securities, or
(ii) can obtain ownership of the securities immediately or at some
future time. The requirements of this Code are not applicable to transactions
for any account over which the access person has no influence or control. If in
doubt, the amass person may state on any form required to be completed under the
provisions of this Code that he/she disclaims any beneficial ownership in the
securities involved.
