<PAGE>
File No. 33-33980
File No. 811-6067
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. 28 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 29 [X]
(Check appropriate box or boxes.)
DIMENSIONAL INVESTMENT GROUP INC.
.................................................
(Exact Name of Registrant as Specified in Charter)
1299 Ocean Avenue, 11th Floor, Santa Monica CA 90401
.............................................. .....
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code (310) 395-8005
..............
Irene R. Diamant, Vice President and Secretary
DFA Investment Dimensions Group Inc.,
1299 Ocean Avenue, 11th Floor, Santa Monica, California 90401
.............................................................
(Name and Address of Agent for Service)
Please send copies of all communications to:
Stephen W. Kline, Esquire
Stradley, Ronon, Stevens & Young, LLP
Great Valley Corporate Center
30 Valley Stream Parkway
Malvern, PA 19355
(610) 640-5801
It is proposed that this filing will become effective (check appropriate box):
..... immediately upon filing pursuant to paragraph (b).
..X.. on (September 13, 1999) pursuant to paragraph (b)
..... 60 days after filing pursuant to paragraph (a)(1)
..... on (date) pursuant to paragraph (a)(1)
..... 75 days after filing pursuant to paragraph (a)(2)
..... on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
<PAGE>
..... 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 also
have executed this registration statement.
Title of Securities Being Registered
.....................................
U.S. Large Company Institutional Index Portfolio
DFA International Value Portfolio III
U.S. Large Cap Value Portfolio III
Tax-Managed U.S. Marketwide Value Portfolio II
Tax-Managed U.S. Marketwide Value Portfolio XI
DFA International Value Portfolio
CONTENTS
This Post-Effective Amendment No. 28/29 to Registration File
Nos. 33-33980/811-6067 includes the following:
1. Facing Page (1)
2. Contents Page
3. Part A- Prospectus relating to the Registrant's U.S. Large Company
Institutional Index Portfolio series of shares
4. Part A - Prospectus relating to the Registrant's DFA International Value
Portfolio III, U.S. Large Cap Value Portfolio III, Tax-Managed U.S.
Marketwide Value Portfolio II and Tax-Managed U.S. Marketwide Value
Portfolio XI series of shares
5. Part A - Prospectus (2)
6. Part B - Statement of Additional Information relating to the Registrant's
U.S. Large Company Institutional Index Portfolio series of shares
7. Part B - Statement of Additional Information relating to the Registrant's
DFA International Value Portfolio III, U.S. Large Cap Value Portfolio III,
Tax-Managed U.S. Marketwide Value Portfolio II and Tax-Managed U.S.
Marketwide Value Portfolio XI series of shares
8. Part B - Statement of Additional Information (2)
9. Part C - Other Information
10. Signatures
(1) This Post-Effective Amendment relates to the Registrant's U.S. Large
Company Institutional Index Portfolio, DFA International Value Portfolio
III, U.S. Large Cap Value Portfolio III, Tax-Managed U.S. Marketwide Value
Portfolio II, Tax-Managed U.S. Marketwide Value Portfolio XI and DFA
International Value Portfolio series of shares.
<PAGE>
(2) The Registrant's Prospectus and Statement of Additional Information
relating to the Registrant's DFA International Value Portfolio series of
shares are incorporated into this filing by reference to the electronic
filing of 1933 Act Post-Effective Amendment No. 55/56 to the Registration
Statement of DFA Investment Dimensions Group Inc. filed September 10, 1999
(File Nos. 2-73948/811-3258).
<PAGE>
P R O S P E C T U S
SEPTEMBER 13, 1999
PLEASE CAREFULLY READ THE IMPORTANT INFORMATION IT CONTAINS BEFORE INVESTING.
DIMENSIONAL INVESTMENT GROUP INC.
---------------------------------------------
Dimensional Investment Group Inc. is a mutual fund that offers a variety of
investment portfolios. Each Portfolio
described in this Prospectus: - Has its own investment objective and policies,
and is the equivalent
of a separate mutual fund. - Is exclusively available to 401(k) plans and
clients
of registered investment advisers. - Is designed for long-term investors.
The Portfolios do not charge sales commissions or "loads."
DFA INTERNATIONAL VALUE PORTFOLIO III
U.S. LARGE CAP VALUE PORTFOLIO III
TAX-MANAGED U.S. MARKETWIDE VALUE PORTFOLIO II
TAX-MANAGED U.S. MARKETWIDE VALUE PORTFOLIO XI
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.......................................... 2
OTHER RISKS.......................................................................... 3
RISK AND RETURN BAR CHARTS AND TABLES................................................ 4
FEES AND EXPENSES...................................................................... 5
ANNUAL FUND OPERATING EXPENSES......................................................... 6
EXAMPLE................................................................................ 6
SECURITIES LENDING REVENUE............................................................. 7
HIGHLIGHTS............................................................................. 7
MANAGEMENT AND ADMINISTRATIVE SERVICES............................................... 7
DIVIDEND POLICY...................................................................... 7
PURCHASE, VALUATION AND REDEMPTION OF SHARES......................................... 7
INVESTMENT OBJECTIVES AND POLICIES..................................................... 7
DFA INTERNATIONAL VALUE PORTFOLIO III................................................ 7
PORTFOLIO CONSTRUCTION............................................................... 8
MALAYSIAN SECURITIES................................................................. 8
THE U.S. LARGE CAP VALUE PORTFOLIO................................................... 9
PORTFOLIO CONSTRUCTION............................................................... 9
TAX-MANAGED VALUE PORTFOLIOS........................................................... 9
PORTFOLIO CONSTRUCTION............................................................... 10
TAX MANAGEMENT STRATEGIES............................................................ 10
EQUITY PORTFOLIOS...................................................................... 11
DEVIATION FROM MARKET CAPITALIZATION WEIGHTING......................................... 11
SECURITIES LOANS....................................................................... 12
MANAGEMENT OF THE PORTFOLIOS........................................................... 12
CONSULTING SERVICES--INTERNATIONAL VALUE SERIES...................................... 13
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES....................................... 13
PURCHASE OF SHARES..................................................................... 15
IN KIND PURCHASES.................................................................... 15
VALUATION OF SHARES.................................................................... 16
NET ASSET VALUE...................................................................... 16
PUBLIC OFFERING PRICE................................................................ 16
EXCHANGE OF SHARES..................................................................... 16
REDEMPTION OF SHARES................................................................... 17
REDEMPTION PROCEDURES................................................................ 17
REDEMPTION OF SMALL ACCOUNTS......................................................... 18
REDEMPTION IN-KIND................................................................... 18
THE FEEDER PORTFOLIOS.................................................................. 18
FINANCIAL HIGHLIGHTS................................................................... 19
SERVICE PROVIDERS...................................................................... 23
</TABLE>
i
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RISK/RETURN SUMMARY
ABOUT THE PORTFOLIOS
- -------------------
THE PORTFOLIOS HAVE SPECIAL STRUCTURES: The Portfolios are "Feeder Portfolios"
- -- portfolios that 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 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 the
Master Funds. (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., large 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.
The U.S. Large Cap Value Portfolio III, the Tax-Managed U.S. Marketwide Value
Portfolio II and the Tax-Managed U.S. Marketwide Value Portfolio XI 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.
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.
2. Combining two or more of these deciles into a market cap segment or range.
1
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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 U.S. Large Cap Value Portfolio III buys stock with market caps
in the range defined by stocks in NYSE deciles 1 through 5.
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 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. Sell securities to other tax-managed portfolios in order to offset gains by
realized losses.
Shareholders of Tax-Managed Value 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.
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.
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
- -----------------------------------------
DFA INTERNATIONAL VALUE PORTFOLIO III
- - INVESTMENT OBJECTIVE: Long-term capital appreciation.
- - INVESTMENT STRATEGY: Purchase a Master Fund that buys Value Stocks of large
non-U.S. companies on a market capitalization weighted basis in each
applicable country.
DFA International Value Portfolio III's foreign currency risks generally are not
hedged.
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.
U.S. LARGE CAP VALUE PORTFOLIO III
TAX-MANAGED U.S. MARKETWIDE VALUE PORTFOLIO II
TAX-MANAGED U.S. MARKETWIDE VALUE PORTFOLIO XI
- - INVESTMENT OBJECTIVES:
- U.S. LARGE CAP VALUE PORTFOLIO III: Long-term capital appreciation.
- TAX-MANAGED VALUE PORTFOLIOS: Long-term capital appreciation while
minimizing federal income taxes on returns.
- - INVESTMENT STRATEGY (EACH PORTFOLIO): Purchase a Master Fund that buys value
stocks of United States companies on a market capitalization weighted basis.
"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.
2
<PAGE>
- - HOW THE PORTFOLIOS DIFFER: The Portfolios focus on different parts of the
value stocks universe:
- U.S. Large Cap Value Portfolio III -- Large capitalization stocks.
- Tax-Managed U.S. Marketwide Value Portfolios -- The full universe except
for very small stocks.
Only the Tax-Managed Value Portfolios employ the Advisor's tax management
strategies. Both Tax-Managed Portfolios will invest a large portion of the
eligible securities, buy may not have identical holdings. Thus, the Tax-Managed
Portfolios may sell securities to one another, in order to employ certain tax
management strategies.
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 Master
Fund in which DFA International Value Portfolio III invests may use long-term
foreign currency futures contracts to hedge foreign currency risks. Hedging with
derivatives may increase expenses, and there is no guarantee that a hedging
strategy will work.
INTRODUCTION OF THE EURO:
- ----------------------
On January 1, 1999, The European Monetary Union ("EMU") introduced a common
currency, the Euro, replacing its members' national currencies. This development
may affect DFA International Value Portfolio III (the Master Fund it buys may
invest in EMU countries) to the extent it changes investment practices,
opportunities, risks and investor behavior or creates administrative problems.
The Advisor and its global custodians are attempting to assure on an ongoing
basis that the Portfolio and Master Fund remain unaffected by any transition
related disruptions. However, they cannot guarantee that their efforts will
succeed completely. The relative value of the U.S. dollar and Euro will
fluctuate. Accordingly, currency risk (discussed above) will continue to apply
to any exposure the Portfolio may have (through the Master Fund) to investments
in EMU countries.
SECURITIES LENDING:
- ----------------
The Master Funds purchased by 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.
3
<PAGE>
YEAR 2000 ISSUE:
- --------------
Unless modified, many computer programs will not properly process information
from the year 2000 on. While the issue is international in scope, there is
particular concern with foreign entities. The Advisor has taken steps designed
to ensure that its computers and those of Portfolio and Master Fund service
providers (e.g., custodians) will operate properly. Portfolios and Master Funds
may be negatively affected if the Advisor's efforts prove inadequate, and/or
year 2000 problems hurt portfolio securities or economic conditions generally.
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.
RISK AND RETURN BAR CHARTS AND TABLES
- --------------------------------------
The Bar Charts and Table opposite illustrate the variability of each Portfolio's
returns and is meant to provide some indication of the risks of investing in the
Portfolios. Shown are changes in performance from year to year, and how annual
returns for 1, 5, and 10 years compare with those of a broad measure of market
performance. Past performance is not an indication of future results. The Tax-
Managed Value Portfolios have not been in operation for a full calendar year so
no information is shown for them.
4
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
U.S. LARGE CAP VALUE PORTFOLIO III
<S> <C> <C> <C>
1996 1997 1998
Total Returns (%) 20.33 28.29 12.18
March 1995 - June 1999
Highest Quarter Lowest Quarter
16.82 (10/98 - 12/98) -17.00 (7/98-9/98)
Year-to-date return as of June 30, 1999 was
15.17%.
Periods ending December 31, 1998
Since 3/95
Annualized Returns (%) One Year Inception
U.S. Large Cap Value Porfolio III 12.18 23.11
Russell 1000 Value Index 15.65 26.41
DFA INTERNATIONAL VALUE PORTFOLIO III
1996 1997 1998
Total Returns (%) 8.07 -3.03 15.08
March 1995 - June 1999
Highest Quarter Lowest Quarter
17.99 (1/98 - 3/98) -16.80 (7/98-9/98)
Year-to-date return as of June 30, 1999 was
6.60%.
Periods ending December 31, 1998
Since 3/95
Annualized Returns (%) One Year Inception
DFA International Value Portfolio III 15.08 9.26
MSCI EAFE Index 19.99 11.20
</TABLE>
FEES AND EXPENSES
Shareholder Fees (fees paid directly from your investment): None*
*Shares of the Portfolios that are purchased through omnibus accounts
maintained by securities firms may be subject to a service fee or commission on
such purchases.
5
<PAGE>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM PORTFOLIO ASSETS)
The expenses in the following tables are based on those incurred by the
Portfolios and the corresponding Master Funds for the fiscal year ended November
30, 1998 (except that for the Tax-Managed Value Portfolios, "Other Expenses" are
annualized estimates based on anticipated fees and expenses through the fiscal
year ending November 30, 1999).
<TABLE>
<S> <C>
DFA INTERNATIONAL VALUE PORTFOLIO III
Management Fee........................................................................ 0.21%
Other Expenses........................................................................ 0.13%
---
Total Operating Expenses.............................................................. 0.34%
U.S. LARGE CAP VALUE PORTFOLIO III
Management Fee........................................................................ 0.11%
Other Expenses........................................................................ 0.08%
---
Total Operating Expenses.............................................................. 0.19%
TAX-MANAGED U.S. MARKETWIDE VALUE PORTFOLIO II
Management Fee........................................................................ 0.20%
Other Expenses........................................................................ 0.13%
---
Total Operating Expenses.............................................................. 0.33%
TAX-MANAGED U.S. MARKETWIDE VALUE PORTFOLIO XI
Management Fee........................................................................ 0.20%
Other Expenses........................................................................ 0.13%
---
Total Operating Expenses.............................................................. 0.33%
</TABLE>
The "Management Fee" includes an investment management fee payable by the
Master Fund and an administration fee payable by the Portfolio. The amount set
forth in "Other Expenses" represents the aggregate amount that is payable by
both the Master Fund and the Portfolio.
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>
DFA International Value Portfolio III........................................ $ 35 $ 109 $ 191 $ 431
U.S. Large Cap Value Portfolio III........................................... $ 19 $ 61 $ 107 $ 243
Tax-Managed U.S. Marketwide Value Portfolio II............................... $ 34 $ 106 N/A N/A
Tax-Managed U.S. Marketwide Value Portfolio XI............................... $ 34 $ 106 N/A N/A
</TABLE>
The table summarizes the aggregate estimated annual operating expenses of
both the Portfolios and their Master Funds. The Tax-Managed Value Portfolios
(and their corresponding Master Funds) 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.
6
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SECURITIES LENDING REVENUE
For the fiscal year ended November 30, 1998, the following Master Funds
received the following net revenue from a securities lending program which
constituted a percentage of the average daily net assets of the Master Fund (see
"SECURITIES LOANS"):
<TABLE>
<CAPTION>
PERCENTAGE
MASTER FUND NET REVENUE OF ASSETS
- ---------------------------------------------------------------------------------------- ------------ -------------
<S> <C> <C>
DFA International Value Series.......................................................... $ 1,385,000 0.08%
U.S. Large Cap Value Series............................................................. $ 210,000 0.01%
</TABLE>
HIGHLIGHTS
MANAGEMENT AND ADMINISTRATIVE SERVICES
Dimensional Fund Advisors Inc. (the "Advisor" or "DFA") provides each
Portfolio with administrative services and also serves as investment advisor to
each Master Fund. (See "MANAGEMENT OF THE PORTFOLIOS.")
DIVIDEND POLICY
Each Portfolio distributes dividends from its net investment income in
December of each year and will distribute any realized net capital gains
annually after the end of the Fund's fiscal year in November. (See "DIVIDENDS,
CAPITAL GAINS DISTRIBUTIONS AND TAXES.")
PURCHASE, VALUATION AND REDEMPTION OF SHARES
The shares of the Portfolios are offered at net asset value, which is
calculated as of the close of the NYSE on each day that the NYSE is open for
business. The value of a Portfolio's shares will fluctuate in relation to the
investment experience of its corresponding Master Fund. The redemption price of
a share of each Portfolio is equal to its net asset value. (See "PURCHASE OF
SHARES," "VALUATION OF SHARES" and "REDEMPTION OF SHARES.")
INVESTMENT OBJECTIVES AND POLICIES
DFA INTERNATIONAL VALUE PORTFOLIO III
The investment objective of the DFA International Value Portfolio III is to
achieve long-term capital appreciation. The Portfolio pursues its objective by
investing all of its assets in the DFA International Value Series of the Trust
(the "International Value Series"), which has the same investment objective and
policies as the Portfolio. The International Value Series invests in the stocks
of large non-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, 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, as described below, 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
International Value Series intends to invest in the stocks of large companies in
countries with developed markets. As of the date of this prospectus, the
International Value Series may invest in the stocks of large companies in
Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong,
Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Singapore, Spain,
Sweden, Switzerland and the United Kingdom. As the International Value Series'
asset growth permits, it may invest in the stocks of large companies in other
developed markets.
7
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PORTFOLIO CONSTRUCTION
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. 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. The International Value
Series reserves the right to invest in futures contracts and options on futures
contracts to commit funds awaiting investment or to maintain liquidity. To the
extent that the International Value Series invests in futures contracts and
options thereon for other than bona fide hedging purposes, it 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.
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 offer,
over a long term, a prudent opportunity for capital appreciation but, at the
same time, selecting a limited number of large company stock for inclusion in
the International Value Series involves greater risk than including a large
number of them.
MALAYSIAN SECURITIES
As of September 10, 1998, the International Value Series discontinued
further investment in Malaysian securities as a consequence of certain
restrictions imposed by the Malaysian government on the repatriation of assets
by foreign investors such as the Series.
On September 1, 1998, the Malaysian government announced a series of capital
and foreign exchange controls on the Malaysian currency, the ringgit, and on
transactions on the Kuala Lumpur Stock Exchange, that operated to severely
constrain or prohibit foreign investors, including the Series, from repatriating
assets. Pursuant to these regulations, the Series was not permitted to convert
the proceeds of the sale of its Malaysian investments into U.S. dollars prior to
September 1, 1999.
As a consequence of these developments, the International Value Series
stopped trading securities in Malaysia effective September 10, 1998. On February
4, 1999, the Malaysian government announced the imposition of a levy on
repatriation of portfolio capital. The levy replaced the 12-month holding period
imposed under the September 1, 1998 exchange control rules. The amount of the
levy depends on the duration that funds have been held in Malaysia. With respect
to funds invested in Malaysia prior to February 15, 1999, which includes all the
funds so invested by the Master Funds, profits from investment made during the
12-month holding period are exempt from imposition of a levy. A levy will be
imposed, however, on the amount attributable to the cost of the investment that
is repatriated. Currently, amounts attributable to the cost of the investment
repatriated within one year of the date of their initial investment are subject
to the levy at a decreasing rate. It is anticipated that a levy will no longer
be imposed after September 1, 1999, at which time the Malaysian authorities will
implement a capital gains tax.
The International Value Series is presently valuing the Malaysian
investments at the current market prices of the securities and discounting the
U.S. dollar-ringgit currency exchange rate. The Series considers its Malaysian
investments to be liquid, as a result of transactions where Malaysian
investments have been successfully sold, and also because of changes in the
Malaysian regulatory environment. It is impossible to
8
<PAGE>
predict future events in Malaysia and what, if any, further actions the
Malaysian government may take that may impact the Malaysian investments of the
International Value Series. The Advisor is closely monitoring the situation, and
will continue to manage the Malaysian investments in the best interests of
investors. As of August 31, 1999, Malaysian securities constituted approximately
0.20% of the net asset value of the International Value Series.
THE U.S. LARGE CAP VALUE PORTFOLIO
The investment objective of the U.S. Large Cap Value Portfolio III (the
"U.S. Value Portfolio") is to achieve long-term capital appreciation. The U.S.
Value Portfolio invests all of its assets in the U.S. Large Cap Value Series III
(the "U.S. Value Series") of the Trust, which has the same investment objective
and policies as the U.S. Value Portfolio.
The U.S. Value Series invests in the common stocks of large U.S. companies
with shares that have a high book to market ratio. A company's shares will be
considered to have a high book to market ratio if the ratio equals or exceeds
the ratios of any of the 30% of companies with the highest positive book to
market ratios whose shares are listed on the NYSE and, except as described
below, will be considered eligible for investment. The U.S. Value Series will
purchase common stocks of companies whose market capitalization (i.e., the
market price of its common stock multiplied by the number of outstanding shares)
equals or exceeds that of the company having the median market capitalization of
companies whose shares are listed on the NYSE. In addition, the U.S. Value
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 U.S. Value Series' net assets at the time of purchase.
PORTFOLIO CONSTRUCTION
Ordinarily, at least 80% of the assets of the U.S. Value Series will be
invested in a broad and diverse group of readily marketable common stocks of
large U.S. companies with high book to market ratios, as described above. The
U.S. Value Series may invest in futures contracts and options on futures
contracts. To the extent that the U.S. Value Series invests in futures contracts
and options thereon for other than bona fide hedging purposes, it 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. The U.S. Value Series will purchase
securities that are listed on the principal U.S. national securities exchanges
and traded over-the-counter.
It is management's belief that the stocks of large U.S. 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 U.S. Value Series involves greater risk than including a
large number of them.
TAX-MANAGED VALUE PORTFOLIOS
The investment objective of the Tax-Managed U.S. Marketwide Value Portfolios
II and XI (the "Tax-Managed Value Portfolios") is to achieve long-term capital
appreciation. The Tax-Managed Value Portfolios will pursue their investment
objective by investing all of their assets in the Tax-Managed U.S. Marketwide
Value Series and the Tax-Managed U.S. Marketwide Value Series X (collectively,
the "Tax-Managed Value Series") of the Trust, respectively. Each Tax-Managed
Value Series has the same investment objective and policies as the corresponding
Tax-Managed Value Portfolio.
Ordinarily, each Tax-Managed Value 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
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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 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.
PORTFOLIO CONSTRUCTION
Each of the Tax-Managed Value Series will purchase securities that are
listed on the principal U.S. national securities exchanges and traded OTC. Each
such 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 in both such Series. It is intended, for example, that
the securities portfolio of the Tax-Managed U.S. Marketwide Value Series will
not be identical to that of the Tax-Managed U.S. Marketwide Value Series X even
though the investment criteria of each Series are the same.
The Tax-Managed 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.
In addition, the Series may sell portfolio securities when their book to market
ratio falls substantially below that of the security with the lowest such ratio
that is then eligible for purchase by the Series.
TAX MANAGEMENT STRATEGIES
The Tax-Managed Value Series 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 Tax-Managed Value Series, typically, will select
the highest cost shares of the specific security in order to minimize the
realization of capital gains. In certain cases, the highest cost shares may
produce a short-term capital gain. Since short-term capital gains are taxed at
higher tax rates than long-term capital gains, the highest cost shares with a
long-term holding period may be disposed of instead. Each Tax-Managed Value
Series, 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 Series, 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 and Series managed by the Advisor, the Tax-Managed U.S. Marketwide
Value Series may sell portfolio securities to the Tax-Managed U.S. Marketwide
Value Series 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 Series. Such transactions are intended to benefit both Series that
are parties to the transaction. The selling Series will recognize a loss which
it can use to offset realized gains, while the purchasing Series 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
Series to a Series 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 Series' corresponding
Tax-Managed Value Portfolios. The Advisor intends to control the number of
investors in each Tax-Managed Value 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
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shares of each Tax-Managed Value 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
Tax-Managed Value Portfolio. Finally, the Advisor intends to monitor closely all
purchases of shares of both Tax-Managed Value 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 Tax-Managed Value Series and Portfolios 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 Tax-Managed Value Series are expected to deviate from their market
capitalization weightings to a greater extent than the other Series described in
this Prospectus. 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 the stock of a company that meets applicable market
capitalization criteria in order to realize a capital loss. Also, while other
Series are managed with the expectation that securities generally will be held
for longer than one year, the Tax-Managed Value Series may dispose of securities
whenever the Advisor determines that disposition is consistent with their tax
management strategies or is otherwise in the best interests of a Tax-Managed
Value Series.
Although the Advisor intends to manage each Tax-Managed Value Series in a
manner to minimize the realization of capital gains and taxable dividend income
each year, the Tax-Managed Value 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 Tax-Managed Series realizes a net capital loss. Furthermore, the
redeeming shareholders will be required to pay taxes on their capital gain, 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.
EQUITY PORTFOLIOS
With respect to the Portfolios and Master Funds, 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.
DEVIATION FROM MARKET CAPITALIZATION WEIGHTING
The Master Funds are market capitalization weighted. That is, each security
is 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. 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
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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 which meet the market capitalization criteria will be
selectively excluded.) 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.
The Tax-Managed Value Series should not be expected to adhere to their
market capitalization weightings to the same extent as the other Series. 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 with high book to market ratios whose
stock is eligible for investment by each Master Fund. Only common stocks whose
market capitalizations are at or above the minimum on such list will be
purchased. Additional investments generally will not be made in securities which
have depreciated in value sufficiently that they are not then considered by the
Advisor to be large companies. 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 decrease in value sufficiently to
be excluded from the requirement for eligible securities, but not by a
sufficient amount to warrant their sale.
SECURITIES LOANS
The Master Funds are authorized to lend securities to qualified brokers,
dealers, banks and other financial institutions for the purpose of earning
additional income. While a Master Fund may earn additional income from lending
securities, such activity is incidental to a Master Fund's investment objective.
The value of securities loaned may not exceed 33 1/3% of the value of a Master
Fund's total assets. In connection with such loans, a 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, a Master Fund 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, compensation or other
distributions on the loaned securities. In the event of the bankruptcy of the
borrower, a Master Fund could experience delay in recovering the loaned
securities. Management believes that this risk can be controlled through careful
monitoring procedures. Each Portfolio is also authorized to lend its portfolio
securities. However, as long as it holds only shares of its corresponding Master
Fund, it will not do so.
MANAGEMENT OF THE PORTFOLIOS
The Advisor serves as investment advisor to each Master Fund. As such, it is
responsible for the management of their respective assets. Investment decisions
for the 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
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who are elected annually. The Advisor provides each Master Fund with a trading
department and selects brokers and dealers to effect securities transactions.
Securities transactions are placed with a view to obtaining the best price
and execution of such transactions. The Advisor is authorized to pay a higher
commission to a broker, dealer or exchange member than another such organization
might charge if it determines, in good faith, that the commission paid is
reasonable in relation to the research or brokerage services provided by such
organization.
For the advisory fees that the Portfolios have incurred for the fiscal year,
see "ANNUAL FUND OPERATING EXPENSES." 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 $31
billion.
The Fund and the Trust bear all of their own costs and expenses, including:
services of its independent accountants, legal counsel, brokerage commissions
and transfer taxes in connection with the acquisition and disposition of
portfolio securities, taxes, insurance premiums, costs incidental to meetings of
its shareholders and directors or trustees, the cost of filing its registration
statements under 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. Expenses
which are not allocable to a particular Portfolio or Master Fund are borne by
each Portfolio and Master Fund on the basis of their relative net assets.
CONSULTING SERVICES--INTERNATIONAL VALUE SERIES
The Advisor has entered into a Consulting Services Agreement with
Dimensional Fund Advisors Ltd. ("DFAL") and DFA Australia Limited ("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 the International Value Series of the
Trust. The Advisor owns 100% of the outstanding shares of DFAL and beneficially
owns 100% of DFA Australia.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
Each Portfolio distributes substantially all of its net investment income in
December of each year. Each Portfolio will distribute any realized net capital
gains annually after the end of the Fund's fiscal year.
Special tax rules may apply in determining the income and gains that each
Master Fund earns on its investments. These rules may affect the amount of
distributions that a Portfolio pays to its shareholders.
Shareholders of the Portfolios will automatically receive all income
dividends and any 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 of the Portfolios, except the
DFA International Value Portfolio III, who do not own their shares under a
401(k) plan, may select one of the following options upon written notice to the
Advisor:
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.
Each Portfolio receives income in the form of income dividends paid by the
corresponding Master Fund. This income, less the expenses incurred in
operations, is a Portfolio's net investment income from which income dividends
are distributed as described above. A Portfolio also may receive capital gains
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distributions from the corresponding Master Fund and may realize capital gains
upon the redemption of the shares of the Master Fund. Any net realized capital
gains of a Portfolio will be distributed as described above. Dividends and
distributions paid to a 401(k) plan accumulate free of federal income taxes.
Whether paid in cash or additional shares and regardless of the length of
time a Portfolio's shares have been owned by shareholders who are subject to
federal income taxes, distributions from long-term capital gains are taxable as
such. Dividends from net investment income or net short-term capital gains will
be taxable as ordinary income, whether received in cash or in additional shares.
Dividends from net investment income of U.S. Large Cap Value Portfolio III,
Tax-Managed U.S. Marketwide Value Portfolio II and Tax-Managed U.S. Marketwide
Value Portfolio XI 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 corresponding Master Fund
from domestic (U.S.) sources. Each Tax-Managed Value Series' attempts to time
investments in order to minimize receipt of dividends could result in the Series
being unable to flow through the dividends received deduction to corporate
shareholders. This will occur if a Tax-Managed Value Series does not hold the
stock of a domestic (U.S.) corporation for the requisite holding period to be
eligible for pass-through of the dividends received deduction. It is anticipated
that either none or only a small portion of the distributions made by the DFA
International Value Portfolio III will qualify for the corporate dividends
received deduction because of its corresponding Master Fund's investment in
foreign equity securities.
For those investors subject to tax, if purchases of shares of the Portfolios
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. Dividends from net investment income or net short-term capital
gains will be taxable as ordinary income. Shareholders are notified annually by
the Fund as to the federal tax status of dividends and distributions paid by the
Portfolios.
The Advisor seeks to manage the Tax-Managed Value Series in order to
minimize the realization of net capital gains and taxable dividend income during
a particular year. However, the realization of capital gains and receipt of
income is not entirely within the Advisor's control. Thus, the Tax-Managed Value
Portfolios may nonetheless distribute taxable gains and dividends to
shareholders. Capital gains distributions may vary considerably from year to
year. There will be no capital gains distributions in years when a Tax-Managed
Value Series realizes a net capital loss. Furthermore, the realization of
capital gains by a shareholder on the sale of portfolio shares will depend on
whether his or her redemption price exceeds his or her tax basis in the shares
sold.
Dividends which are declared in November or December to shareholders of
record in such month but which, for operational reasons, may not be paid to the
shareholder until the following January, will be treated for tax purposes as if
paid by a 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 of a
Portfolio for shares of another portfolio of the Fund. Any loss incurred on sale
or exchange of a Portfolio's shares, held for six months or less, will be
treated as a long-term capital loss to the extent of capital gain dividends
received with respect to such shares.
Certain investments by the Master Funds may be subject to special rules
which may affect the amount, character and timing of the income to the Master
Fund. 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.
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In addition to federal taxes, shareholders may be subject to state and local
taxes on distributions from a Portfolio to its shareholders and on gains arising
on redemption or exchange of a Portfolio's shares.
The Portfolios are required to withhold 31% of taxable dividends, capital
gains distributions, and redemptions paid to shareholders who have not complied
with IRS taxpayer identification regulations. You may avoid this withholding
requirement by certifying on the account registration form your proper Taxpayer
Identification Number and by certifying that you are not subject to backup
withholding.
The tax discussion set forth above is included for general information only.
Prospective investors should consult their own tax advisers concerning the
federal, state, local or foreign tax consequences of an investment in the
Portfolios.
PURCHASE OF SHARES
Shares of the Portfolios are sold only (i) to fund deferred compensation
plans which are exempt from taxation under section 401(k) of the Internal
Revenue Code and (ii) to clients of financial advisers.
Provided that shares of the Portfolios are available under an employer's
401(k) plan, shares may be purchased by following the procedures adopted by the
respective employer and approved by Fund management for making investments.
Shares are available through the service agent designated under the employer's
plan. Investors who are considering an investment in the Portfolios should
contact their employer for details. The Fund does not impose a minimum purchase
requirement, but investors should determine whether their employer's plan
imposes a minimum transaction requirement.
Investors who are clients of financial advisers should contact their
financial adviser with respect to a proposed investment and then follow the
procedures adopted by the financial adviser for making purchases. Shares that
are purchased or sold through omnibus accounts maintained by securities firms
may be subject to a service fee or commission for such transactions. Clients of
financial advisers may also be subject to investment advisory fees under their
own arrangements with their financial advisers.
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.
IN KIND PURCHASES
If accepted by the Fund, shares of a Portfolio may be purchased in exchange
for securities which are eligible for acquisition by its corresponding Master
Fund or otherwise represented in the portfolios of the Master Fund as described
in this prospectus. Shares may also be purchased in exchange for local
currencies in which such securities of the International Value Series 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, interests, 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 DFA International Value Portfolio III 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 corresponding Master Fund and current
market quotations are readily available for such securities; (2) the investor
represents and agrees that all securities offered to be exchanged are not
subject to any restrictions upon their sale by the Portfolio under the
Securities Act of 1933 or under the laws of the country in which the principal
market for such securities exists or otherwise; and (3) at the discretion of the
Fund, the value of any such security (except U.S. Government securities) being
exchanged together with other securities of the same issuer owned by the
corresponding Master Fund may not exceed 5% of the net assets of the Master Fund
immediately after the transaction. The Fund will accept such securities for
investment and not for resale.
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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.
VALUATION OF SHARES
NET ASSET VALUE
The net asset value per share of each Portfolio and Master Fund is
calculated as of the close of the NYSE by dividing the total market value of its
investments and other assets, less any liabilities, by the total outstanding
shares of the stock of the Portfolio or Master Fund. The value of each
Portfolio's shares will fluctuate in relation to the investment experience of
the corresponding Master Fund. Securities held by a Master Fund 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 quoted 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 Trustees of the Trust.
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 Value Series are determined as of such times for the
purpose of computing the net asset value of the Master Fund. 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. The net asset value per share of the International Value Series is
expressed in U.S. dollars by translating the net assets of the Master Fund using
the mean between the most recent quoted bid and asked prices for the dollar as
quoted by generally recognized reliable sources.
PUBLIC OFFERING PRICE
Provided that a financial adviser or service agent designated under a 401(k)
plan has received the investor's investment instructions in good order and a
Portfolio's custodian has received the investor's payment, shares of the
Portfolio selected will be priced at the net asset value calculated next after
receipt of the order by PFPC Inc., the transfer agent for the Portfolios. If an
order to purchase shares must be canceled due to non-payment, the purchaser will
be responsible for any loss incurred by the Fund arising out of such
cancellation. The Fund reserves the right to redeem shares owned by any
purchaser whose order is canceled to recover any resulting loss to the Fund and
may prohibit or restrict the manner in which such purchaser may place further
orders.
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 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
An investor who is a client of a financial adviser may exchange shares of
one Portfolio for those of another Portfolio described in this prospectus or a
portfolio of DFA Investment Dimensions Group Inc., an open-end, management
investment company ("DFAIDG"), by first contacting its financial adviser and
completing the documentation required by the financial adviser. Exchanges are
accepted only into those
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portfolios of DFAIDG that are eligible for the exchange privilege of DFAIDG. In
addition, exchanges are not accepted into or from the DFA International Value
Portfolio III. Investors should contact their financial advisor for a list of
those portfolios of DFAIDG that accept exchanges.
An investor who has invested through an employer's 401(k) plan may exchange
shares of other Fund portfolios that are offered through the plan by completing
the necessary documentation as required by the service agent designated under
the employer's plan and the Advisor. Please contact the service agent of your
plan for further information.
The minimum amount for an exchange is $100,000. 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 or DFAIDG, the exchange privilege may be
terminated and any proposed exchange is 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 Portfolio and of the
portfolio of DFAIDG 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 the Portfolio. Excessive use of the
exchange privilege is defined as any pattern of exchanges among portfolios by an
investor that evidences market timing.
With respect to shares held by clients of financial advisers, the redemption
and purchase prices of shares redeemed and purchased by exchange, respectively,
are the net asset values next determined after the Advisor has received an
Exchange Form in good order, plus any applicable reimbursement fee on purchases
by exchange. "Good order" means a completed Exchange Form specifying the dollar
amount to be exchanged, signed by all registered owners of the shares; and if
the Fund does not have on file the authorized signatures for the account, a
guarantee of the signature of each registered owner by a commercial bank, trust
company or member of a recognized stock exchange. Exchanges will be accepted
only if the registrations of the two accounts are identical, stock certificates
have not been issued and the Fund may issue the shares of the portfolio being
acquired in compliance with the securities laws of the investor's state of
residence.
With respect to shares held under a 401(k) plan, the redemption and purchase
prices of shares redeemed and purchased by exchange, respectively, are the net
asset values next determined after the plan's service agent has received
appropriate instructions in the form required by such service agent plus any
applicable reimbursement fee on purchases by exchange, and provided that such
service agent has provided proper documentation to the Advisor.
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 loss on the transaction. The Fund reserves the right
to revise or terminate the exchange privilege, limit the amount of or reject any
exchange, or waive the minimum amount requirement as deemed necessary, at any
time.
REDEMPTION OF SHARES
REDEMPTION PROCEDURES
An investor who desires to redeem shares of a Portfolio must furnish a
redemption request to its financial adviser or to the service agent designated
under a 401(k) plan in the form required by such financial adviser or service
agent. The Portfolio will redeem shares at the net asset value of such shares
next determined after receipt of a request for redemption in good order by PFPC
Inc.
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
17
<PAGE>
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 account is $500
or less, whether because of redemptions, a decline in the Portfolio's net asset
value per share or any other reason. Before the Fund involuntarily redeems
shares from such an account and sends the proceeds to the stockholder, the Fund
will give written notice of the redemption to the stockholder at least sixty
days in advance of the redemption date. The stockholder will then have sixty
days from the date of the notice to make an additional investment in the Fund in
order to bring the value of the shares in the account for a specific Portfolio
to more than $500 and avoid such involuntary redemption. The redemption price to
be paid to a stockholder for shares redeemed by the Fund under this right will
be the aggregate net asset value of the shares in the account at the close of
business on the redemption date.
REDEMPTION IN-KIND
When in the best interest of a Portfolio, the Portfolio (except the
Tax-Managed Value Portfolios and the Tax-Managed Value Series) may make a
redemption payment, in whole or in part, by a distribution of portfolio
securities that the Portfolio receives from the Master Fund in lieu of cash in
accordance with Rule 18f-1 under the Investment Company Act of 1940. The
International Value Series reserves the right to redeem its shares in the
currencies in which its investments are denominated. Investors may incur
brokerage charges and other transaction costs selling such securities and
converting such currencies to dollars. Also, the value of currencies may be
affected by currency exchange fluctuations. The Tax-Managed Value Portfolios and
the Tax-Managed Value Series are 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 and applicable legal and
regulatory requirements.
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 Portfolios. Please contact The DFA
Investment Trust Company at 1299 Ocean Avenue, 11th Floor Santa Monica, CA
90401, (301) 395-8005 for information about the availability of investing in a
Master Fund other than through a Portfolio.
The aggregate amount of expenses for a 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 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 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 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 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
18
<PAGE>
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
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 Portfolio, it 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 Portfolio will receive written
notice thirty days prior to the effective date of any changes in the investment
objective of its corresponding Master Fund. A withdrawal by a 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 a 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 a Master
Fund to a Portfolio may constitute a taxable exchange for federal income tax
purposes resulting in gain or loss to such Portfolio. Any net capital gains so
realized will be distributed to that 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 period of that Portfolio's operations,
as indicated by the table. No Financial Highlights are shown for the Tax-Managed
U.S. Marketwide Value Portfolio XI because it has not begun operations as of May
31, 1999, so no information is available for it. 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 the six-month period ended May 31, 1999 has not been audited.
The information for each of the fiscal years has been audited by
PricewaterhouseCoopers LLP (formerly Coopers & Lybrand L.L.P.), whose report,
along with the Portfolios' financial statements (except the Tax-Managed Value
Portfolios), are included in the Fund's annual report. Further information about
each Portfolio's performance (other than the Tax-Managed U.S. Marketwide Value
Portfolio XI) is contained in the fund's annual and semi-annual reports which
are available upon request.
19
<PAGE>
DIMENSIONAL INVESTMENT GROUP INC.
DFA INTERNATIONAL VALUE PORTFOLIO III
FINANCIAL HIGHLIGHTS
------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR YEAR YEAR FEB. 3,
ENDED ENDED ENDED TO
NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1998 1997 1996 1995
SIX MONTHS ---------- ---------- ---------- ----------
ENDED
MAY 31,
1999
----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period........................... $ 12.55 $ 11.57 $ 12.39 $ 10.81 $ 10.00
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income.............. 0.05 0.29 0.21 0.21 0.17
Net Gains (Losses) on Securities
(Realized and Unrealized)........ 0.44 1.10 (0.69) 1.38 0.84
---------- ---------- ---------- ---------- ----------
Total from Investment Operations... 0.49 1.39 (0.48) 1.59 1.01
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS
Net Investment Income.............. (0.28) (0.26) (0.22) (0.01) (0.17)
Net Realized Gains................. (0.09) (0.15) (0.12) -- (0.03)
---------- ---------- ---------- ---------- ----------
Total Distributions................ (0.37) (0.41) (0.34) (0.01) (0.20)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period..... $ 12.67 $ 12.55 $ 11.57 $ 12.39 $ 10.81
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total Return....................... 4.02%# 12.36% (3.91)% 14.76% 10.04%#
---------- ---------- ---------- ---------- ----------
Net Assets, End of Period
(thousands)...................... $ 263,559 $ 287,738 $ 282,818 $ 242,371 $ 146,952
Ratio of Expenses to Average Net
Assets (1)....................... 0.34%* 0.34% 0.38% 0.45% 0.51%*
Ratio of Net Investment Income to
Average Net Assets............... 0.78%* 2.21% 1.88% 2.03% 2.29%*
Portfolio Turnover Rate............ N/A N/A N/A N/A N/A
Portfolio Turnover Rate of Master
Fund Series...................... 6.60%* 15.41% 22.55% 12.23% 9.75%(a)
</TABLE>
- ------------------------
* Annualized
# Non-Annualized
(1) Represents the respective combined ratio for the Portfolio and its
respective pro-rata share of its Master Fund Series.
(a) Master Fund Series Turnover calculated for the year ended November 30,
1995.
N/A Refer to the respective Master Fund Series.
20
<PAGE>
DIMENSIONAL INVESTMENT GROUP INC.
U.S. LARGE CAP VALUE PORTFOLIO III
FINANCIAL HIGHLIGHTS
------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR YEAR YEAR FEB. 3
ENDED ENDED ENDED TO
NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1998 1997 1996 1995
SIX MONTHS ----------- ----------- ----------- -----------
ENDED
MAY 31,
1999
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period............................ $ 19.68 $ 19.02 $ 15.76 $ 12.92 $ 10.00
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income............... 0.11 0.33 0.32 0.28 0.23
Net Gains on Securities (Realized
and Unrealized)................... 2.64 1.75 3.52 2.60 3.09
----------- ----------- ----------- ----------- -----------
Total from Investment Operations.... 2.75 2.08 3.84 2.88 3.32
----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS
Net Investment Income............... (0.33) (0.33) (0.29) (0.04) (0.23)
Net Realized Gains.................. (1.11) (1.09) (0.29) -- (0.17)
----------- ----------- ----------- ----------- -----------
Total Distributions................. (1.44) (1.42) (0.58) (0.04) (0.40)
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period...... $ 20.99 $ 19.68 $ 19.02 $ 15.76 $ 12.92
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Total Return........................ 15.19%# 11.85% 25.23% 22.34% 33.27%#
----------- ----------- ----------- ----------- -----------
Net Assets, End of Period
(thousands)....................... $ 460,145 $ 484,611 $ 471,038 $ 379,974 $ 135,043
Ratio of Expenses to Average Net
Assets (1)........................ 0.19%* 0.19% 0.23% 0.26% 0.31%*
Ratio of Net Investment Income to
Average Net Assets................ 0.92%* 1.67% 1.79% 2.29% 2.82%*
Portfolio Turnover Rate............. N/A N/A N/A N/A N/A
Portfolio Turnover Rate of Master
Fund Series....................... 37.54%* 24.70% 17.71% 20.12% 29.41%(a)
</TABLE>
- ------------------------
* Annualized
# Non-Annualized
(1) Represents the combined ratio for the Portfolio and its respective pro-rata
share of its Master Fund Series.
(a) Master Fund Series turnover calculated for the year ended November 30,
1995.
N/A Refer to the Master Fund Series
21
<PAGE>
DIMENSIONAL INVESTMENT GROUP INC.
TAX-MANAGED U.S. MARKETWIDE VALUE PORTFOLIO II
FINANCIAL HIGHLIGHTS
------------------------
FOR THE PERIOD DECEMBER 16, 1998
(COMMENCEMENT OF OPERATIONS)
TO MAY 31, 1999
(UNAUDITED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<S> <C>
Net Asset Value, Beginning of Period................... $ 10.00
---------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................................ 0.03
Net Gains on Securities (Realized and Unrealized).... 1.70
---------
Total from Investment Operations..................... 1.73
---------
Net Asset Value, End of Period......................... $ 11.73
---------
---------
Total Return........................................... 17.30%#
---------
Net Assets, End of Period (thousands).................. $ 16,903
Ratio of Expenses to Average Net Assets................ 0.86%*(a)
Ratio of Net Investment Income to Average Net Assets... 0.71%*(a)
Portfolio Turnover Rate................................ N/A
Portfolio Turnover Rate of Master Fund Series.......... 4.77%*
</TABLE>
- ------------------------
* Annualized
# Non-Annualized
N/A Refer to the Master Fund Series.
(a) Because of commencement of operations and related preliminary transaction
costs, including organization costs, these ratios are not necessarily
indicative of future ratios.
22
<PAGE>
SERVICE PROVIDERS
<TABLE>
<S> <C>
INVESTMENT ADVISOR ACCOUNTING SERVICES, DIVIDEND DISBURSING
DIMENSIONAL FUND ADVISORS INC. AND TRANSFER AGENT
1299 Ocean Avenue, 11th floor PFPC INC.
Santa Monica, CA 90401 400 Bellevue Parkway
Tel. No. (310) 395-8005 Wilmington, DE 19809
CUSTODIAN--DOMESTIC LEGAL COUNSEL
PFPC TRUST COMPANY STRADLEY, RONON, STEVENS & YOUNG, LLP
400 Bellevue Parkway 2600 One Commerce Square
Wilmington, DE 19809 Philadelphia, PA 19103-7098
CUSTODIAN--INTERNATIONAL INDEPENDENT ACCOUNTANTS
CITIBANK, N.A. PRICEWATERHOUSECOOPERS LLP
111 Wall Street 2400 Eleven Penn Center
New York, NY 10005 19th and Market Streets
Philadelphia, PA 19103
</TABLE>
23
<PAGE>
P R O S P E C T U S
SEPTEMBER 13, 1999
PLEASE CAREFULLY READ THE IMPORTANT INFORMATION IT CONTAINS BEFORE INVESTING.
DIMENSIONAL INVESTMENT GROUP INC.
---------------------------------------------
Dimensional Investment Group Inc. is a mutual fund that offers a variety of
investment portfolios. The Portfolio described in this Prospectus: - Has
its own investment objective and policies, and is the equivalent of
a separate mutual fund. - Is generally only available to
institutional investors, retirement plans and clients of
registered investment advisors. - Does not charge a
sales commission or "load". - Is designed for
long-term investors. - Requires a
minimum initial purchase of $100
million.
U.S. LARGE COMPANY INSTITUTIONAL INDEX 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................................................................... 1
ABOUT THE PORTFOLIO................................................................. 1
MANAGEMENT.......................................................................... 1
INVESTMENT OBJECTIVE, STRATEGY AND RISKS............................................ 1
OTHER RISKS......................................................................... 1
RISK AND RETURN BAR CHART AND TABLE................................................. 2
FEES AND EXPENSES..................................................................... 3
ANNUAL FUND OPERATING EXPENSES........................................................ 3
EXAMPLE............................................................................... 3
SECURITIES LENDING REVENUE............................................................ 3
HIGHLIGHTS............................................................................ 4
MANAGEMENT AND ADMINISTRATIVE SERVICES.............................................. 4
DIVIDEND POLICY..................................................................... 4
PURCHASE, VALUATION AND REDEMPTION OF SHARES........................................ 4
INVESTMENT OBJECTIVE AND POLICIES..................................................... 4
STANDARD & POOR'S INFORMATION AND DISCLAIMERS......................................... 4
PORTFOLIO TRANSACTIONS................................................................ 5
SECURITIES LOANS...................................................................... 5
MANAGEMENT OF THE PORTFOLIO........................................................... 6
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES...................................... 6
PURCHASE OF SHARES.................................................................... 7
IN-KIND PURCHASES................................................................... 8
VALUATION OF SHARES................................................................... 8
NET ASSET VALUE..................................................................... 8
PUBLIC OFFERING PRICE............................................................... 8
EXCHANGE OF SHARES.................................................................... 9
REDEMPTION OF SHARES.................................................................. 10
REDEMPTION PROCEDURE................................................................ 10
REDEMPTION OF SMALL ACCOUNTS........................................................ 10
IN-KIND REDEMPTIONS................................................................. 11
THE FEEDER PORTFOLIO.................................................................. 11
SERVICE PROVIDERS..................................................................... 12
</TABLE>
i
<PAGE>
RISK/RETURN SUMMARY
ABOUT THE PORTFOLIO
- ------------------
THE PORTFOLIO HAS A SPECIAL STRUCTURE: The Portfolio is a "Feeder Portfolio"-- a
portfolio that does not buy individual securities directly. Instead, it invests
in a corresponding mutual fund, or "Master Fund", that in turn purchases stocks,
and 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, the Portfolio might encounter operational or other complications.
The Master Fund buys securities directly. The 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 the
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. S&P 500-Registered Trademark- stocks) selection, not
stock picking. It places priority on limiting expenses, portfolio turnover and
trading costs. The Portfolio buys a Master Fund that is an index fund. Its
criteria for holding a stock is whether the stock is in the S&P 500
Index-Registered Trademark-.
NO MARKET TIMING OR STOCK PICKING: Because the Master Fund is an index fund, the
Advisor does not take defensive positions in anticipation of negative investment
conditions, or try to pick potentially outperforming securities.
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 Portfolio that owns them to rise or fall.
INVESTMENT OBJECTIVE, STRATEGY AND RISKS
- ---------------------------------------
INVESTMENT OBJECTIVE: Produce returns similar to those of S&P 500
Index-Registered Trademark-.
INVESTMENT STRATEGY: Buy shares of a Master Fund that invests in S&P 500
Index-Registered Trademark- stocks in about the same proportions as they are
found in the S&P 500 Index-Registered Trademark-.
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.
OTHER RISKS
- -----------
SECURITIES LENDING:
- ----------------
The Master Fund purchased by the Portfolio may lend its portfolio securities to
generate additional income. If it does so, it will use various strategies (for
example, only making fully collateralized and bank guaranteed loans) to reduce
related risks.
1
<PAGE>
YEAR 2000 ISSUE:
- --------------
Unless modified, many computer programs will not properly process information
from the year 2000 on. The Advisor has taken steps designed to ensure that its
computers and those of Portfolio and Master Fund service providers (e.g.,
custodians) will operate properly. The Portfolio and Master Fund may be
negatively affected if the Advisor's efforts prove inadequate, and/or year 2000
problems hurt portfolio securities or economic conditions generally.
RISK AND RETURN BAR CHART AND TABLE
- ------------------------------------
The Bar Chart and Table below illustrate the variability of the Master Fund's
returns and is meant to provide some indication of the risks of investing in the
Portfolio. Because the Portfolio is new, the returns shown in the Bar Chart and
Table are for the Master Fund and have been adjusted to reflect the anticipated
expenses of the Portfolio. Shown are changes in the Master Fund's performance
from year to year, and how annualized one year, five year and since inception
returns of the Master Fund 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>
U.S. LARGE COMPANY
INSTITUTIONAL INDEX
PORTFOLIO
<S> <C> <C> <C>
Total Returns (%)
1994 -5.82
1995 27.64
1996 13.94
1997 23.79
1998 19.55
February 1993-June 1999
Highest Quarter Lowest Quarter
-5.59
19.31 (10/98-12/98) (1/94-3/94)
Year-to-date return as of June 30, 1999 was
12.14%.
Periods ending December 30, 1998
One Five Since 2/93
Annualized Returns (%) Year Years Inception
U.S. Large Company
Institutional Index Portfolio 19.55 15.18 12.55
S&P 500 Index 28.58 24.06 21.78
</TABLE>
2
<PAGE>
FEES AND EXPENSES
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT): None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM PORTFOLIO ASSETS)
<TABLE>
<S> <C>
Management Fee....................................................................... 0.075%*
Other Expenses....................................................................... 0.093%**
Total Operating Expenses............................................................. 0.168%***
</TABLE>
- ------------------------
* The "Management Fee" includes an investment management fee payable by the
Master Fund and an administration fee payable by the Portfolio.
** "Other Expenses" is an annualized estimate based on anticipated fees and
expenses payable by both the Master Fund and the Portfolio through the
fiscal year ending November 30, 1999.
*** The Advisor and other service providers to the Portfolio and Master Fund
have agreed to waive certain fees and to assume expenses of the Portfolio to
the extent necessary to keep the cumulative expenses to not more than .10%
of the average net assets of the Portfolio on an annualized basis. For
purposes of this waiver and assumption, the expenses are those expenses
incurred in any period consisting of thirty-six consecutive months. Any fees
that may be waived or expenses that may be reimbursed may be subject to
recoupment for a period of 36 months. The Advisor and service providers
retain the right in their sole discretion to change or eliminate such waiver
and assumption of expenses in the future. Such change will be set forth in
the prospectus.
EXAMPLE
This Example is meant to help you compare the cost of investing in the
Portfolio 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
- ----------- -----------
<S> <C>
$ 17 $ 54
</TABLE>
The Example summarizes the aggregate estimated annual operating expenses
before any waivers of both the Portfolio and Master Fund. Because the Portfolio
is new, the Example is based on anticipated 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, 1998, the Master Fund received the
following net revenue from a securities lending program which constituted a
percentage of the average daily net assets of the Master Fund (see "SECURITIES
LOANS"):
<TABLE>
<CAPTION>
PERCENTAGE
MASTER FUND NET REVENUE OF ASSETS
- ---------------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
U.S. Large Company Series............................................................... $ 85,000 0.01%
</TABLE>
3
<PAGE>
HIGHLIGHTS
MANAGEMENT AND ADMINISTRATIVE SERVICES
Dimensional Fund Advisors Inc. (the "Advisor" or "DFA") provides the
Portfolio with administrative services and serves as investment advisor to the
Master Fund. (See "MANAGEMENT OF THE PORTFOLIO.")
DIVIDEND POLICY
The Portfolio distributes dividends from its net investment income quarterly
and any realized net capital gains are distributed annually after November 30.
(See "DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES.")
PURCHASE, VALUATION AND REDEMPTION OF SHARES
The shares of the Portfolio are offered at net asset value, which is
calculated as of the close of the New York Stock Exchange ("NYSE") on each day
that the NYSE is open for business. The minimum initial purchase requirement for
the Portfolio's shares is $100,000,000. There is no minimum purchase requirement
for subsequent purchases. The value of the Portfolio's shares will fluctuate in
relation to the investment experience of the Master Fund. The redemption price
of a share of the Portfolio is equal to its net asset value. (See "PURCHASE OF
SHARES," "VALUATION OF SHARES" and "REDEMPTION OF SHARES.")
INVESTMENT OBJECTIVE AND POLICIES
U.S. Large Company Institutional Index Portfolio seeks, as its investment
objective, to approximate the investment performance of the S&P 500
Index-Registered Trademark-, in terms of its total investment return. The
Portfolio invests all of its assets in the U.S. Large Company Series of the
Trust (the "Master Fund"), which has the same investment objective and policies
as the Portfolio. The Master Fund intends to invest in all of the stocks that
comprise the S&P 500 Index-Registered Trademark- in approximately the same
proportions as they are represented in the Index. The amount of each stock
purchased for the Master Fund, therefore, will be based on the issuer's
respective market capitalization. The S&P 500 Index-Registered Trademark- 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 Master Fund's assets will be
invested in the stocks that comprise the S&P 500-Registered Trademark- Index.
The Master Fund 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 it invests in stock index futures contracts and
options thereon for other than bona fide hedging purposes, it 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
Index-Registered Trademark-, including mergers, reorganizations and similar
transactions and, to the extent necessary, to provide cash to pay redemptions of
the Master Fund's shares.
STANDARD & POOR'S INFORMATION AND DISCLAIMERS
Neither the Portfolio nor Master Fund is sponsored, endorsed, sold or
promoted by standard & Poor's Rating Group, a Division of The McGraw Hill
Companies ("S&P"). S&P makes no representation or warranty, express or implied,
to the owners of the Portfolio or the Master Fund or any member of the public
regarding the advisability of investing in securities generally or in the
Portfolio or the Master Fund particularly or the ability of the S&P 500
Index-Registered Trademark- to track general stock market performance. S&P's
only
4
<PAGE>
relationship to the Portfolio or the Master Fund is the licensing of certain
trademarks and trade names of S&P and of the S&P 500 Index-Registered Trademark-
which is determined, composed and calculated by S&P without regard to the
Portfolio or the Master Fund. S&P has no obligation to take the needs of the
Portfolio, the Master Fund or their respective owners into consideration in
determining, composing or calculating the S&P 500 Index-Registered Trademark-.
S&P, is not responsible for and has not participated in the determination of the
prices and amount of the Portfolio or the Master Fund or the issuance or sale of
the Portfolio or the Master Fund or in the determination or calculation of the
equation by which the Portfolio or the Master Fund is to be converted into cash.
S&P has no obligation or liability in connection with the administration,
marketing or trading of the Portfolio or the Master Fund.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500
INDEX-Registered Trademark- OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO
LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO
WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS
OF THE PRODUCT, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500
INDEX-Registered Trademark- OR ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS
OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P 500
INDEX-Registered Trademark- 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.
PORTFOLIO TRANSACTIONS
For both the Portfolio and the Master Fund, 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 judgement, 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 the
Portfolio.
SECURITIES LOANS
The Master Fund is authorized to lend securities to qualified brokers,
dealers, banks and other financial institutions for the purpose of earning
additional income. While the Master Fund may earn additional income from lending
securities, such activity is incidental to the Master Fund's investment
objective. The value of securities loaned may not exceed 33 1/3% of the value of
the Master Fund's total assets. In connection with such loans, the 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 Master Fund will
be able to terminate the loan at any time and 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 Master Fund could experience delay in recovering the loaned
securities. Management
5
<PAGE>
believes that this risk can be controlled through careful monitoring procedures.
The Portfolio is also authorized to lend its portfolio securities. However, as
long as it holds only shares of the Master Fund, it will not do so.
MANAGEMENT OF THE PORTFOLIO
The Advisor serves as investment advisor to the Master Fund. As such, it is
responsible for the management of its assets. The Advisor provides the Master
Fund with a trading department and selects brokers and dealers to effect
securities transactions.
Securities transactions are placed with a view to obtaining the best price
and execution of such transactions. The Advisor is authorized to pay a higher
commission to a broker, dealer or exchange member than another such organization
might charge if it determines, in good faith, that the commission paid is
reasonable in relation to the research or brokerage services provided by such
organization.
For the advisory fees the Portfolio will incur as a percentage of average
net assets, see "ANNUAL FUND OPERATING EXPENSES." 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
$31 billion.
The Portfolio and the Master Fund each bears all of its own costs and
expenses, including: services of its independent accountants, legal counsel,
brokerage commissions and transfer taxes in connection with the acquisition and
disposition of portfolio securities, taxes, insurance premiums, costs incidental
to meetings of its shareholders and directors or trustees, the cost of filing
its registration statements under federal securities laws and the costs 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 the Portfolio or the Master Fund are so allocated
and expenses which are not allocable to the Portfolio and the Master Fund are
borne by the Portfolio and the Master Fund on the basis of their relative net
assets.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
The Portfolio distributes substantially all net investment income quarterly
and any realized net capital gains are distributed annually after November 30.
Shareholders of the Portfolio will automatically receive all income
dividends and any capital gains distributions in additional shares of the
Portfolio at net asset value (as of the business date following the dividend
record date), unless upon written notice to the Advisor, the shareholder selects
one of the following options:
Income Option--to receive income dividends in cash and capital
gains distributions in additional shares at net asset value.
Capital Gains Option--to receive capital gains distributions in
cash and income dividends in additional shares at net asset value.
Cash Option--to receive both income dividends and capital gains
distributions in cash.
Whether paid in cash or additional shares and regardless of the length of
time the Portfolio's shares have been owned by shareholders who are subject to
federal income taxes, distributions from long-term capital gains are taxable as
such. Dividends from net investment income or net short-term capital gains will
be taxable as ordinary income, whether received in cash or in additional shares.
Dividends from net investment income will generally qualify in part for the
corporate dividends received deduction. The portion of dividends so qualified
depends on the aggregate qualifying dividend income received by the Master Fund
from domestic (U.S.) sources.
6
<PAGE>
For those investors subject to tax, if purchases of shares of the Portfolio
are made shortly before the record date for a dividend or capital gains
distribution, a portion of the investment will be returned as a taxable
distribution. Shareholders are notified annually by the Fund as to the federal
tax status of dividends and distributions paid by the Portfolio.
Dividends which are declared in November or December to shareholders of
record but which, for operational reasons, may not be paid to the shareholder
until the following January, will be treated for tax purposes as if paid by the
Portfolio and received by the shareholder on December 31 of the calendar year in
which they are declared.
The sale of shares of the 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 of the
Portfolio for shares of another portfolio of the Fund. Any loss incurred on sale
or exchange of the 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.
Certain investments by the Master Fund may be subject to special rules which
may affect the amount, character and timing of the income to the Master Fund.
Some of these rules are referenced in the statement of additional information.
In addition to federal taxes, shareholders may be subject to state and local
taxes on distributions from the Portfolio and on gains arising on redemption or
exchange of Portfolio shares.
The 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 the
Portfolio.
PURCHASE OF SHARES
Investors may purchase shares of the 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 an Account Registration Form.
The minimum initial purchase requirement for the Portfolio's shares is
$100,000,000. Once the minimum purchase requirement is satisfied, further
investments in the Portfolio are not subject to any minimum purchase
requirement. The Fund reserves the right to reduce or waive the minimum
investment requirement, to reject any initial or additional investment and to
suspend the offering of shares of the Portfolio.
Investors having an account with a bank that is a member or a correspondent
of a member of the Federal Reserve System may purchase shares by first calling
the Advisor at (310) 395-8005 to notify the Advisor of the proposed investment,
then requesting the bank to transmit immediately available funds (Federal Funds)
by wire to the custodian, for the account of Dimensional Investment Group Inc.
(U.S. Large Company Institutional Index Portfolio). Additional investments also
may be made through the wire procedure by first notifying the Advisor. Investors
who wish to purchase shares by check should send their check to Dimensional
Investment Group Inc., c/o PFPC Inc., 400 Bellevue Parkway, Wilmington, Delaware
19809.
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
7
<PAGE>
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.
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.
IN-KIND PURCHASES
If accepted by the Fund, shares of the Portfolio may be purchased in
exchange for securities which are eligible for acquisition by the Master Fund or
otherwise represented in its portfolio as described in this prospectus.
Securities to be exchanged which are accepted by the Fund and shares of the
Portfolio 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 and must be delivered
to the Fund by the investor upon receipt from the issuer.
The Fund will not accept securities in exchange for shares of the Portfolio
unless: (1) such securities are, at the time of the exchange, eligible to be
included, or otherwise represented, in the 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 Master Fund under the
Securities Act of 1933 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 Master Fund may
not exceed 5% of the net assets of the 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 exchanged. Investors interested in such exchanges
should contact the Advisor.
VALUATION OF SHARES
NET ASSET VALUE
The net asset values per share of the Portfolio and the Master Fund are
calculated as of the close of the NYSE by dividing the total market value of
their respective investments and other assets, less any liabilities, by the
total outstanding shares of the stock of the Portfolio and the Master Fund,
respectively. The net asset values will not be calculated on days the NYSE is
closed, including national holidays. The value of the Portfolio's shares will
fluctuate in relation to the investment experience of the Master Fund.
Securities held by the Master Fund 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, the Master Fund values such
securities at the mean between the most recent quoted bid and asked prices.
Price information on listed securities is taken from the exchange where the
security is primarily traded. Unlisted securities for which market quotations
are readily available are valued at the mean between the most recent quoted 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 Trustees of the Trust.
PUBLIC OFFERING PRICE
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 will be priced at the net asset value
calculated next after receipt of the investor's funds by the custodian. "Good
order" with respect to the purchase of shares means that (1) a fully completed
and properly signed Account Registration form
8
<PAGE>
and any additional supporting legal documentation required by the Advisor have
been received in legible form and (2) the Advisor has been notified of the
purchase by telephone and, if the Advisor so requests, also in writing, no later
than the close of regular trading on the NYSE (ordinarily 1:00 p.m. PST) on the
day of the purchase. If an order to purchase shares must be canceled due to
non-payment, the purchaser will be responsible for any loss incurred by the Fund
arising out of such cancellation. The Fund reserves the right to redeem shares
owned by any purchaser whose order is canceled to recover any resulting loss to
the Fund and may prohibit or restrict the manner in which such purchaser may
place further orders.
Management believes that any dilutive effect of the cost of investing the
proceeds of the sale of the shares of the Portfolio will be minimal and,
therefore, the shares of the Portfolio are currently sold at net asset value,
without imposition of a fee that would be used to reimburse the Portfolio for
such cost (a "reimbursement fee"). However, a reimbursement fee may be charged
prospectively from time to time based upon the future experience of the
Portfolio and the Master Fund. A reimbursement fee would be used to defray the
costs of investing in securities (such as brokerage commissions, taxes and other
transaction costs). Any such charge will be described in the prospectus.
EXCHANGE OF SHARES
Investors may exchange shares of the Portfolio for those of another
portfolio in the Fund or a portfolio of DFA Investment Dimensions Group Inc., an
open-end, management investment company ("DFAIDG"). Investors should first
contact the Advisor at (310) 395-8005 to notify the Advisor of the proposed
exchange and then complete an Exchange Form and mail it to:
Dimensional Investment Group Inc.
Attn: Client Operations
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
The minimum amount for an exchange into a portfolio of DFAIDG is $100,000.
Exchanges are accepted only into those portfolios of DFAIDG that are eligible
for the exchange privilege of DFAIDG. Investors may contact the Advisor at the
above-listed phone number for a list of those portfolios of DFAIDG that accept
exchanges.
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 Portfolio or otherwise adversely affect the Fund or DFAIDG,
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 Portfolio and of the portfolio of the
Fund or DFAIDG 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 the 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 an Exchange Form in good order, plus any applicable
reimbursement fee on purchases by exchange. "Good order" means a completed
Exchange Form specifying the dollar amount to be exchanged, signed by all
registered owners of the shares; and if the Fund does not have on file the
authorized signatures for the account, a guarantee of the signature of each
registered owner by an "eligible guarantor institution." Such institutions
generally include national or state banks, savings associations, savings and
loan associations, trust companies, savings banks, credit unions and members of
a recognized stock exchange. Exchanges will be accepted only if the
registrations of
9
<PAGE>
the two accounts are identical, stock certificates have not been issued and the
Fund or DFAIDG may issue the shares of the portfolio being acquired in
compliance with the securities laws of the investor's state of residence.
There is no fee imposed on an exchange. However, the Fund reserves the right
to impose an administrative fee in order to cover the costs incurred in
processing an exchange. Any such fee will be disclosed in the prospectus. An
exchange is treated as a redemption and a purchase. Therefore, an investor could
realize a taxable gain or a loss on the transaction. The Fund reserves the right
to revise or terminate the exchange privilege, waive the minimum amount
requirement, limit the amount of or reject any exchange, as deemed necessary, at
any time.
REDEMPTION OF SHARES
REDEMPTION PROCEDURE
Investors who desire to redeem shares of the Portfolio must first contact
the Advisor at (310) 395-8005. The Portfolio will redeem shares at the net asset
value of such shares next determined after receipt of a written request for
redemption in good order by the Portfolio's transfer agent. "Good order" means
that the request to redeem shares must include all necessary documentation, to
be received in writing by the Advisor no later than the close of regular trading
on the NYSE (ordinarily 1:00 p.m. PST), including: the stock certificate(s), if
issued; a letter of instruction or a stock assignment specifying the number of
shares or dollar amount to be redeemed, signed by all registered owners (or
authorized representatives thereof) of the shares; if the Fund does not have on
file the authorized signatures for the account, a guarantee of the signature of
each registered owner by an eligible guarantor institution; and any other
required supporting legal documents.
Redeeming shareholders who have authorized redemption payment by wire on an
authorization form filed with the Fund, may request that redemption proceeds be
paid in federal funds wired to the bank they have designated on the
authorization form. If the proceeds are wired to the shareholder's account at a
bank which is not a member of the Federal Reserve System, there could be a delay
in crediting the funds to the shareholder's bank account. The Fund reserves the
right at any time to suspend or terminate the redemption by wire procedure after
notification to shareholders. No charge is made by the Fund for redemptions. The
redemption of all shares in an account will result in the account being closed.
A new Account Registration Form will be required for further investments. (See
"PURCHASE OF SHARES.")
Although the redemption payments will ordinarily be made within seven days
after receipt, payment to investors redeeming shares which were purchased by
check will not be made until the Fund can verify that the payments for the
purchase have been, or will be, collected, which may take up to fifteen days or
more. Investors may avoid this delay by submitting a certified check along with
the purchase order.
REDEMPTION OF SMALL ACCOUNTS
The Fund reserves the right to redeem a shareholder's account if the value
of the shares in the account is $500 or less, whether because of redemptions, a
decline in the Portfolio's net asset value per share or any other reason. Before
the Fund involuntarily redeems shares from such an account and sends the
proceeds to the stockholder, the Fund will give written notice of the redemption
to the stockholder at least sixty days in advance of the redemption date. The
stockholder will then have sixty days from the date of the notice to make an
additional investment in the Portfolio in order to bring the value of the shares
in the account 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.
10
<PAGE>
IN-KIND REDEMPTIONS
When in the best interests of the 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 Master Fund in lieu of cash.
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 FEEDER PORTFOLIO
Other institutional investors, including other mutual funds, may invest in
the Master Fund. The expenses of such other funds and, correspondingly, their
returns may differ from those of the Portfolio. Please contact the DFA
Investment Trust Company at 1299 Ocean Avenue, 11th Floor Santa Monica, CA
90401, (301) 395-8005 for information about the availability of investing in the
Master Fund other than through the Portfolio.
The aggregate amount of expenses for the Portfolio and the Master Fund may
be greater than it would be if the Portfolio were to invest directly in the
securities held by the Master Fund. However, the total expense ratios for the
Portfolio and the Master Fund are expected to be less over time than such ratios
would be if the Portfolio were to invest directly in the underlying securities.
This arrangement enables various institutional investors, including the
Portfolio, 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 the
Master Fund, including the Portfolio, will pay its proportionate share of the
expenses of the Master Fund.
The shares of the Master Fund 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 the Master Fund by other
institutional investors offers potential benefits to the Master Fund and,
through its investment in the Master Fund, the Feeder Portfolio 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 Fund. Also, if an
institutional investor were to redeem its interest in the Master Fund, the
remaining investors in the 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 the
Master Fund than the 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 the Portfolio, it may withdraw its investment in the 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 the Portfolio will receive written
notice thirty days prior to the effective date of any changes in the investment
objective of the Master Fund. A withdrawal by the Portfolio of its investment in
the 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 a 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 to the Portfolio may
constitute a taxable exchange for federal income tax purposes resulting in gain
or loss to the Portfolio. Any net capital gains so realized will be distributed
to the Portfolio's shareholders as described in "DIVIDENDS, CAPITAL GAINS
DISTRIBUTIONS AND TAXES."
11
<PAGE>
SERVICE PROVIDERS
<TABLE>
<S> <C>
INVESTMENT ADVISOR ACCOUNTING SERVICES, DIVIDEND DISBURSING AND
DIMENSIONAL FUND ADVISORS INC. TRANSFER AGENT
1299 Ocean Avenue, 11th floor PFPC INC.
Santa Monica, CA 90401 400 Bellevue Parkway
Tel. No. (310) 3958005 Wilmington, DE 19809
CUSTODIAN LEGAL COUNSEL
PFPC TRUST COMPANY STRADLEY, RONON, STEVENS & YOUNG, LLP
400 Bellevue Parkway 2600 One Commerce Square
Wilmington, DE 19809 Philadelphia, PA 191037098
</TABLE>
<TABLE>
<S> <C> <C>
INDEPENDENT ACCOUNTANTS
PRICEWATERHOUSECOOPERS LLP
2400 Eleven Penn Center
19th and Market Streets
Philadelphia, PA 19103
</TABLE>
12
<PAGE>
OTHER AVAILABLE INFORMATION
You can find more information about the Fund and Portfolio 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 Portfolio
in its last fiscal year.
How to get these and other materials:
- - Request free copies from:
-- Your plan administrator--if you are a participant in a 401(k) plan
offering the Portfolio.
-- Your account service provider--if you are a client or member of an
institution offering the Portfolio.
-- The Fund--if you represent a 401(k) plan sponsor or qualifying
institution. Call collect at (310) 395-8005.
- - 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.--REGISTRATION NO. 811-6067
13
<PAGE>
DFA INTERNATIONAL VALUE PORTFOLIO III
U.S. LARGE CAP VALUE PORTFOLIO III
TAX-MANAGED U.S. MARKETWIDE VALUE PORTFOLIO II
TAX-MANAGED U.S. MARKETWIDE VALUE PORTFOLIO XI
DIMENSIONAL INVESTMENT GROUP INC.
1299 OCEAN AVENUE, 11TH FLOOR, SANTA MONICA, CALIFORNIA 90401
TELEPHONE: (310) 395-8005
STATEMENT OF ADDITIONAL INFORMATION
September 13, 1999
This statement of additional information ("SAI") is not a prospectus but
should be read in conjunction with the prospectus of DFA International Value
Portfolio III, Tax-Managed U.S. Marketwide Value Portfolio II, Tax-Managed
U.S. Marketwide Value Portfolio XI and U.S. Large Cap Value Portfolio III
(individually, a "Portfolio" and collectively, the "Portfolios") of
Dimensional Investment Group Inc. (the "Fund"), dated September 13, 1999, as
amended from time to time.
The audited financial statements and financial highlights of the Fund
are incorporated by reference from the Fund's annual report to shareholders
and the unaudited financial information for the period ended May 31, 1999 is
incorporated by reference from the Fund's semi-annual report to shareholders.
The prospectus and the annual and semi-annual reports can be obtained by
writing to the Fund at the above address or by calling the above telephone
number.
TABLE OF CONTENTS
PORTFOLIO CHARACTERISTICS AND POLICIES . . . . . . . . . . . . . . . . . . . . 2
BROKERAGE COMMISSIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
INVESTMENT LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
FUTURES CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
CASH MANAGEMENT PRACTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
CONVERTIBLE DEBENTURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
DIRECTORS AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SERVICES TO THE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ADVISORY FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
SHAREHOLDER RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
PRINCIPAL HOLDERS OF SECURITIES. . . . . . . . . . . . . . . . . . . . . . . .11
PURCHASE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
REDEMPTION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
TAXATION OF THE PORTFOLIOS . . . . . . . . . . . . . . . . . . . . . . . . . .12
CALCULATION OF PERFORMANCE DATA. . . . . . . . . . . . . . . . . . . . . . . .14
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
<PAGE>
PORTFOLIO CHARACTERISTICS AND POLICIES
The following information supplements the information set forth in the
prospectus. Unless otherwise indicated, it applies to the DFA International
Value Series (the "International Value Series"), the DFA U.S. Large Cap Value
Series (the "Large Cap Value Series"), the Tax-Managed U.S. Mareketwide Value
Series and the Tax-Managed U.S. Marketwide Value Series X (collectively, the
"Master Funds") of The DFA Investment Trust Company (the "Trust") and the
Portfolios through their investment in the Master Funds. Capitalized terms
not otherwise defined in this SAI have the meaning assigned to them in the
prospectus. The Tax-Managed U.S. Marketwide Value Series and the Tax-Managed
U.S. Marketwide Value Series X are collectively called the "Tax-Managed Value
Series."
Dimensional Fund Advisors Inc. (the "Advisor") serves as investment advisor
to each Master Fund and provides administrative services to the Portfolios.
Each of the Portfolios and the Master Funds are diversified under the
federal securities laws and regulations.
Because the structures of the Master Funds are based on the relative
market capitalizations of eligible holdings, it is possible that a Master
Fund might include at least 5% of the outstanding voting securities of one or
more issuers. In such circumstances, the Master Fund 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
Master Funds and the anticipated amount of the assets intended to be invested
in such securities, management does not anticipate that a Master Fund 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
Master Funds.
BROKERAGE COMMISSIONS
FISCAL YEARS ENDED NOVEMBER 30, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
International Value Series $763,022 $1,133,787 $1,251,242
Large Cap Value Series 1,116,421 929,005 934,452
</TABLE>
The substantial increases or decreases in the amount of brokerage
commissions paid by the International Value Series from year to year resulted
from increases or decreases in the amount of securities that were bought and
sold by the International Value Series. The Tax-Managed Value Series had not
begun operations by November 30, 1998.
Portfolio transactions of each Master Fund will be placed with a view to
receiving the best price and execution. In addition, the Advisor 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 these goals in view. The Advisor monitors the performance of
brokers which effect transactions for the Master Funds 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 Master
Funds 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
Investment Management Agreement of each Master Fund permits 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
2
<PAGE>
brokerage services provided by the broker or dealer when viewed in terms of
either a particular transaction or the Advisor's overall responsibilities to
assets under its management. 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 Master Funds.
During fiscal year 1998, the following Master Funds paid commissions for
securities transactions to brokers which provided market price monitoring
services, market studies and research services to the Master Funds as follows:
<TABLE>
<CAPTION>
VALUE OF BROKERAGE
SECURITIES TRANSACTIONS COMMISSIONS
----------------------- -----------
<S> <C> <C>
International Value Series $ 2,427,926 $15,569
Large Cap Value Series $ 71,611,201 65,046
------------ -------
</TABLE>
The over-the-counter market companies eligible for purchase by the Large
Cap Value Series and each Tax-Managed Value Series 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 dealers 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
sometimes to trade larger blocks than would be possible by going through a
single market maker.
The Advisor places buy and sell orders on Instinet when the Advisor
determines that the securities may not be available from other sources at a more
favorable price. 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 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
Master Fund can effect transactions at the best available prices.
The Portfolios will not incur any brokerage or other costs in connection
with its purchase or redemption of shares of its Master Fund, except if a
Portfolio receives securities or currencies from the Master Fund to satisfy the
Portfolio's redemption request.
INVESTMENT LIMITATIONS
Each of the Portfolios has adopted certain limitations which may not be
changed with respect to any Portfolio without the approval of the holders 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 effected 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 investment limitations of each Master
Fund are the same as those of the corresponding 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
<PAGE>
(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 agencies and
instrumentalities) if, as a result of more than 5% of the Portfolio's total
assets, at market, would be invested in the securities of such issuer;
(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
Tax-Managed Value Portfolios are not subject to this limitation;
(5) borrow, except from banks as a temporary measure for extraordinary or
emergency purposes and, then, in no event, in excess of 33% of its net assets,
or pledge 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; provided that the Tax-Managed Value Portfolios are
not subject to this limitation;
(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; provided that the Tax-Managed Value Portfolios are not
subject to this limitation;
(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 Tax-Managed Value Portfolios 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 each Tax-Managed Value 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; provided that the Tax-Managed Value Portfolios are not subject to
this limitation;
(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;
(13) write or acquire options (except as described in (1) above) or
interests in oil, gas or other mineral exploration, leases or development
programs; provided that the Tax-Managed Value Portfolios may write or acquire
options;
(14) purchase warrants, except that the Portfolios may acquire warrants
as a result of corporate actions involving their holdings of equity
securities; provided that the Tax-Managed Value Portfolios are not subject to
this limitation;
(15) purchase securities on margin or sell short; provided that the
Tax-Managed 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 U.S.
Large Cap Value Portfolio III; and (b) provided that the Tax-Managed Value
Portfolios are not subject to this limitation; or
(17) issue senior securities (as such term is defined in Section 18(f) of
the 1940 Act), except to the extent permitted by the 1940 Act.
4
<PAGE>
The investment limitations described in (3), (4), (7), (9), (10), (11),
(12) and (16) above do not prohibit each 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 described in (1) and (15) above do not prohibit
each Portfolio 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. Inasmuch as the Portfolios will only hold shares of
a corresponding Master Fund, the Portfolios do not intend to lend those shares.
Although not a fundamental policy subject to shareholder approval, each
Tax-Managed Value Portfolio, indirectly through its investment in its
corresponding Master Fund, does not intend to invest more than 15% of its net
assets in illiquid securities.
Pursuant to Rule 144A under the Securities Act of 1933 (the "1933 Act"),
the Master Funds 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 Trustees of the
Trust 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 Trustees and the Advisor will continue to monitor the liquidity of Rule
144A securities.
The International Value Series may acquire and sell forward foreign
currency exchange contracts in order to hedge against changes in the level of
future currency rates. Such contracts involve an obligation to purchase or sell
a specific currency at a future date at a price set in the contract. While the
Master Funds have 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 Master Fund owns, and does not include assets
which the Master Fund 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 Master Fund will exclude from its total assets those assets which
represent collateral received by the 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 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 Funds' 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 close out the
investment without undue market or tax consequences. With respect to illiquid
securities, if a fluctuation in value causes a Portfolio or Master Fund to go
above its limitations on investments in illiquid securities, the Board of
Directors will consider what action, if any, should be taken to reduce the
percentage to the applicable limitation.
FUTURES CONTRACTS
The Master Funds each 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. A 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
5
<PAGE>
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 a Master Fund. Variation margin
payments are made to and from the futures broker for as long as the contract
remains open. The Master Funds expect to earn income on their margin deposits.
To the extent that a Master Fund invests in futures contracts and options
thereon for other than bona fide hedging purposes, no Master Fund will enter
into such transactions if, immediately thereafter, the sum of the amount of
initial margin deposits and premiums paid for open futures options would exceed
5% of the Master Fund's 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 Securities and Exchange Commission (the "SEC"), the
Master Funds 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 their
futures contract transactions in order to cover their 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, a Master Fund would continue to be
required to make variation margin deposits. In such circumstances, if a 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
The 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. 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 Series Permissible Cash Investment Guidelines*
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. Value Series and High quality, highly liquid 20%
Tax-Managed Value Series fixed income securities such
as money market instruments;
index futures contracts and
options thereon**
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
International Value Series Fixed income obligations such 20%
as money market instruments;
index futures contracts and
options thereon**
- --------------------------------------------------------------------------------
</TABLE>
*The percentage guidelines set forth above are not absolute limitations but
the Portfolios and Master Fund do not expect to exceed these guidelines under
normal circumstances.
**To the extent that such Master Funds or Portfolios invest in futures
contracts and options thereon for other than bona fide hedging purposes, no
Master Fund or Portfolio will enter into such transactions if, immediately
thereafter, the sum of the amount of initial margin deposits and premiums paid
for open futures options would exceed 5% of its 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%.
6
<PAGE>
CONVERTIBLE DEBENTURES
The International Value Series may invest up to 5% of its assets in
convertible debentures issued by non-U.S. companies located in countries where
it is 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 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 International Value Series 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 International Value Series upon conversion of a
convertible debenture will generally be held for as long as the Advisor
anticipates such stock will provide the International Value Series with
opportunities which are consistent with its 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 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 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. (registered investment company) and Dimensional Emerging Markets
Value Fund Inc. (registered investment company). Trustee, President and
Chairman-Chief Executive Officer of The DFA Investment Trust Company. Chairman
and Director, Dimensional Fund Advisors Ltd. Director, SA Funds.
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. and Dimensional Emerging Markets Value Fund Inc.
John P. Gould, (1/19/39), Director, Chicago, IL. Steven G. Rothmeier
Distinguished Service Professor of Economics, Graduate School of Business,
University of Chicago. Trustee, The DFA Investment Trust Company (registered
investment company). Director, DFA Investment Dimensions 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
Emerging Markets Value Fund Inc., Hospital Fund, Inc. (investment management
services) and BIRR Portfolio Analysis, Inc. (software products). Chairman,
Ibbotson Associates, Inc., Chicago, IL (software, data, publishing and
consulting).
7
<PAGE>
Merton H. Miller, (5/16/23), Director, Chicago, IL. Robert R. McCormick
Distinguished Service Professor Emeritus, Graduate School of Business,
University of Chicago. Trustee, The DFA Investment Trust Company. Director,
DFA Investment Dimensions Group Inc., 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 Emerging Markets Value Fund Inc., Benham Capital Management Group of
Investment Companies and Smith Breeden Group of Investment Companies.
Consultant, Arbor Investors and Oak Hill Capital Management. Formerly, Limited
Partner, Long-Term Capital Management L.P. (Money Manager).
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. 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.,
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.
James L. Davis, (11/29/56), Vice President, Santa Monica, CA. Vice
President of all DFA entities, Kansas State University, Arthur Andersen &
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, 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 A. 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. 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.
8
<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 each Portfolio's
outstanding stock.
Set forth below is a table listing, for each director entitled to receive
compensation, the compensation received from the Fund during the fiscal year
ended November 30, 1998, and the total compensation received from all four
registered investment companies for which the Advisor serves as investment
advisor during that same fiscal year.
<TABLE>
<CAPTION>
AGGREGATE TOTAL COMPENSATION FROM
COMPENSATION FUND
DIRECTOR FROM FUND AND FUND COMPLEX*
- ------------------------ ------------ -----------------------
<S> <C> <C>
George M. Constantinides $5,000 $30,000
John P. Gould $5,000 $30,000
Roger G. Ibbotson $5,000 $30,000
Merton H. Miller $5,000 $30,000
Myron S. Scholes $5,000 $30,000
</TABLE>
* The term Fund Complex refers to all registered investment companies for
which the Advisor performs advisory or administrative services and for
which the individuals listed above serve as directors.
SERVICES TO THE FUND
ADMINISTRATIVE SERVICES
The Fund has entered into an administration agreement with the Advisor
on behalf of each Portfolio. Pursuant to the administration agreement, the
Advisor will perform 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; assisting the Fund to comply with the provisions of
federal, state, local and foreign securities, tax and other laws applicable
to the Portfolio; providing shareholders of record with information about the
Portfolio and their investments as they or the Fund may request; assisting
the Fund to conduct 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. The Advisor also provides the Fund with
office space and personnel. For its administrative services, the Portfolios
each pay the Advisor a monthly fee equal to one-twelfth of 0.01% of their
respective average net assets, except for the Tax-Managed Value Portfolios,
which pay no fee.
PFPC Inc. ("PFPC"), 400 Bellevue Parkway, Wilmington, DE 19809, serves as
the accounting services, dividend disbursing and transfer agent for the
Portfolios and the 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 net asset value of the shares, preparation of reports, liaison with the
custodians, and transfer and dividend disbursing agency services. PFPC's
charges for its services to each Portfolio are based on the number of feeder
portfolios investing in the corresponding Master Fund and whether the Master
Fund is organized to be taxed as a corporation or partnership. PFPC's charges
are allocated among the
9
<PAGE>
feeder portfolios investing in the Master Fund based on their relative net
assets. PFPC charges a group of feeder portfolios investing in a Master Fund
which is taxed as a corporation $1,000 per month multiplied by the number of
feeder portfolios. This applies to the DFA International Value Portfolio III
and the U.S. Large Cap Value Portfolio III. Each Tax-Managed Value
Portfolio's corresponding Master Fund is taxed as a partnership, and each
Tax-Managed Value Portfolio will pay PFPC a monthly fee of $2,600.
CUSTODIANS
PFPC Trust Company, 400 Bellevue Parkway, Wilmington, DE 19809, serves as
the custodian for the Portfolios and Master Funds. Citibank, N.A., 111 Wall
Street, New York, New York 10005, is the global custodian for the International
Value Series. The custodians maintain a separate account or accounts for the
Portfolios and the Master Funds; receive, hold and release portfolio securities
on account of the Portfolios and the Master Funds; make receipts and
disbursements of money on behalf of the Portfolios and the Master Funds; and
collect and receive income and other payments and distributions on account of
the Portfolios' and the Master Funds' portfolio securities.
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 this agreement.
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP serves as legal counsel to the Fund.
Its address is 2600 One Commerce Square, Philadelphia, PA 19103-7098.
ADVISORY FEES
David G. Booth and Rex A. Sinquefield, as directors and officers of the
Advisor and 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 Master Fund, the Advisor is paid a monthly fee
calculated as a percentage of average net assets of the Master Fund. For the
fiscal years ended November 30, 1998, 1997 and 1996, the Master Funds paid
advisory fees as set forth in the following table (the Tax-Managed Value
Series had not begun operating as of November 30, 1998):
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
International Value Series* $3,466,000 $2,997,000 $2,124,000
Large Cap Value Series* $1,667,000 $1,255,000 $699,000
</TABLE>
* Each of these Master Funds have more than one investor; this dollar amount
represents the total dollar amount of advisory fees paid by the Master Fund
to the Advisor.
GENERAL INFORMATION
The Fund was incorporated under Maryland law on March 19, 1990. The Fund
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 series only to institutional investors in private offerings.
10
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SHAREHOLDER RIGHTS
The shares of each Portfolio, when issued and paid for in accordance with
the Fund's prospectus, will be fully paid and non-assessable shares, with equal,
non-cumulative voting rights and no preferences as to conversion, exchange,
dividends, redemption or any other feature.
With respect to matters which require shareholder approval, shareholders
are entitled to vote only with respect to matters which affect the interest of
the class of shares (Portfolio) which they hold, except as otherwise required by
applicable law. If liquidation of the Fund should occur, shareholders would be
entitled to receive on a per class basis the assets of the particular Portfolio
whose shares they own, as well as a proportionate share of Fund assets not
attributable to any particular Portfolio. 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.
Whenever a 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 Portfolio's shareholders with respect to the proposal.
The Directors of the Fund will then vote the Portfolio's shares in the Master
Fund in accordance with the voting instructions received from the Portfolio's
shareholders. The Directors of the Fund will vote shares of the Portfolio for
which they receive no voting instructions in accordance with their best
judgment.
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.
PRINCIPAL HOLDERS OF SECURITIES
As of August 31, 1999, the following person(s) beneficially owned 5% or
more of the outstanding stock of each Portfolio (prior to the date of this
SAI, the Tax-Managed U.S. Marketwide Value Portfolio XI had no operations
and had no shareholders):
[Principal Holders as of August 31, 1999 will be included in the filing of
485(b) prior to the effective date.]
DFA INTERNATIONAL VALUE PORTFOLIO III
Charles Schwab & Co. Inc.* 100.00%
101 Montgomery Street
San Francisco, CA 94104
U.S. LARGE CAP VALUE PORTFOLIO III
Charles Schwab & Co. Inc.*
(see address above) 95.94%
TAX-MANAGED U.S. MARKETWIDE VALUE PORTFOLIO II
Charles Schwab & Co., Inc*
(see address above) 100.00%
*Owner of record only.
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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 (12/24/99).
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 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. 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.
REDEMPTION OF SHARES
The following information supplements the information set forth in the
prospectus under the caption "REDEMPTION OF SHARES."
The Fund may suspend redemption privileges or postpone the date of payment:
(1) during any period when the NYSE is closed, or trading on the NYSE is
restricted as determined by the SEC, (2) during any period when an emergency
exists as defined by the rules of the SEC as a result of which it is not
reasonably practicable for the Fund to dispose of securities owned by it, or
fairly to determine the value of its assets, and (3) for such other periods as
the SEC may permit.
TAXATION OF THE PORTFOLIOS
The following is a summary of some of the federal income tax consequences
that may affect each Portfolio. Unless your investment in a Portfolio is
through a retirement plan, you should consider the tax implications of investing
and consult your own tax adviser.
DISTRIBUTION OF NET INCOME
Each Portfolio receives income generally in the form of dividends and
interest on its investments. This income, less expenses incurred in the
operation of a Portfolio, 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
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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 such course of action to be beneficial to
shareholders. In such case, a Portfolio will be subject to federal, and
possibly state, corporate taxes on its taxable income and gains, and
distributions to shareholders will be taxed as ordinary dividend income to the
extent of a Portfolio's available earnings and profits.
EXCISE TAX DISTRIBUTION REQUIREMENT
The Code requires a Portfolio to distribute at least 98% of its taxable
ordinary income earned during the calendar year and 98% of its capital gain net
income earned during the twelve month period ending October 31 (in addition to
undistributed amounts from the prior year) to you by December 31 of each year in
order to avoid federal excise taxes. Each Portfolio intends to declare and pay
sufficient dividends in December (or January that are treated by you as received
in December) but does not guarantee and can give no assurances that its
distributions will be sufficient to eliminate all such taxes.
EFFECT OF FOREIGN INVESTMENTS ON DISTRIBUTIONS
Most foreign exchange gains realized on the sale of debt instruments are
treated as ordinary income by a Portfolio. Similarly, foreign exchange losses
realized by a Portfolio on the sale of debt instruments are generally treated as
ordinary losses by such Portfolio. These gains when distributed will be taxable
to shareholders as ordinary dividends, and any losses will reduce a Portfolio's
ordinary income otherwise available for distribution to shareholders. This
treatment could increase or reduce a Portfolio's ordinary income distributions
to shareholders, and may cause some or all of a Portfolio's previously
distributed income to be classified as a return of capital.
A Portfolio which invests in foreign securities may be subject to foreign
withholding taxes on income from certain of their foreign securities. If more
than 50% in value of the total assets of a Portfolio are invested in securities
of foreign corporations, such Portfolio may elect to pass through to its
shareholders their pro 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.
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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 or Master Fund.
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 Master Fund may invest in derivatives 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's or a 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 or Master Fund.
OTHER SPECIAL RULES APPLICABLE TO FEEDER 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 taxable as a registered investment company ("RIC") or as a
partnership under the Code. For example, Portfolios which invest in RIC Master
Funds will not be permitted to passthrough foreign withholding taxes paid by
such Master Funds 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 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 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. 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 and semi-annual reports to shareholders of the Portfolios
for the fiscal year ended November 30, 1998 and the period ended May 31,
1999, contain additional performance information. A copy of the annual and
semi-annual reports are available upon request and without charge.
14
<PAGE>
With respect to the DFA International Value Portfolio III, 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 (and its corresponding Master Fund) 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, 1998 (as
applicable) are set forth in the prospectus. Such quotations use the
standardized method of calculation required by the SEC.
For purposes of calculating the performance of the Portfolios, the
performance of the corresponding Master Fund will be utilized for the period
prior to when each Portfolio commenced operations and, if applicable, restated
to reflect a Portfolio's fees and expenses. As the following formula indicates,
each Portfolio and Master Fund 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
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 and the Master Funds 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, 1998,
15
<PAGE>
as set forth in the Fund's annual report to shareholders, including the
report of PricewaterhouseCoopers LLP, and the unaudited financial information
for the period ended May 31, 1999, as set forth in the semi-annual report to
shareholders, are incorporated by reference into this SAI.
The audited financial statements of the Master Funds for the Trust's
fiscal year ended November 30, 1998, as set forth in the Trust's annual
report to shareholders, including the report of PricewaterhouseCoopers LLP,
and the unaudited financial information for the period ended May 31, 1999, as
set forth in the semi-annual report to shareholders, are incorporated by
reference into this SAI.
The annual and semi-annual reports do not contain any data regarding the
Tax-Managed U.S. Marketwide Value Portfolio XI or the Tax-Managed U.S.
Marketwide Value Series X because they had not begun operations as of May 31,
1999. The annual reports do not contain any data regarding the Tax-Managed
U.S. Marketwide Value Portfolio II or the Tax-Managed U.S. Marketwide Value
Series because they had not commenced operations as of November 30, 1998. A
shareholder may obtain a copy of the reports upon request and without charge,
by contacting the Fund at the address or telephone number appearing on the
cover of this SAI.
16
<PAGE>
U.S. LARGE COMPANY INSTITUTIONAL INDEX PORTFOLIO
DIMENSIONAL INVESTMENT GROUP INC.
1299 OCEAN AVENUE, 11TH FLOOR, SANTA MONICA, CALIFORNIA 90401
TELEPHONE: (310) 395-8005
STATEMENT OF ADDITIONAL INFORMATION
SEPTEMBER 13, 1999
This statement of additional information ("SAI") is not a
prospectus but should be read in conjunction with the prospectus of U.S.
Large Company Institutional Index Portfolio (the "Portfolio") of Dimensional
Investment Group Inc. (the "Fund"), dated September 13, 1999, as amended from
time to time. The audited financial statements and financial highlights of
the Master Fund are incorporated by reference from the Trust's annual report
to shareholders and the unaudited financial information for the period ended
May 31, 1999 is incorporated by reference from the Trust's semi-annual report
to shareholders. The prospectus and annual and semi-annual reports can be
obtained by writing to the Fund at the above address or by calling the above
telephone number.
TABLE OF CONTENTS
<TABLE>
<S> <C>
PORTFOLIO CHARACTERISTICS AND POLICIES......................................2
BROKERAGE COMMISSIONS.......................................................2
INVESTMENT LIMITATIONS......................................................3
FUTURES CONTRACTS...........................................................5
CASH MANAGEMENT PRACTICES...................................................5
DIRECTORS AND OFFICERS......................................................6
SERVICES TO THE FUND........................................................8
ADVISORY FEES...............................................................9
GENERAL INFORMATION.........................................................9
SHAREHOLDER RIGHTS..........................................................9
PRINCIPAL HOLDERS OF SECURITIES............................................10
PURCHASE OF SHARES.........................................................10
REDEMPTION OF SHARES.......................................................10
TAXATION OF THE PORTFOLIO..................................................11
CALCULATION OF PERFORMANCE DATA............................................12
FINANCIAL STATEMENTS.......................................................14
</TABLE>
<PAGE>
PORTFOLIO CHARACTERISTICS AND POLICIES
The following information supplements the information set forth in the
prospectus. Unless otherwise indicated, it applies to the U.S. Large Company
Series (the "Master Fund") of The DFA Investment Trust Company (the "Trust") and
the Portfolio through its investment in the Master Fund. Capitalized terms not
otherwise defined in this SAI have the meaning assigned to them in the
prospectus.
Dimensional Fund Advisors Inc. (the "Advisor") serves as investment
advisor to the Master Fund and provides administrative services to the
Portfolio.
The Portfolio and the Master Fund are diversified under the federal
securities laws and regulations.
Because the structure of the Master Fund is based on the relative
market capitalizations of eligible holdings, it is possible that the Master Fund
might include at least 5% of the outstanding voting securities of one or more
issuers. In such circumstances, the Master Fund 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 Master Fund and the
anticipated amount of the Master Fund's assets intended to be invested in such
securities, management does not anticipate that the Master Fund will include as
much as 5% of the voting securities of any issuer.
BROKERAGE COMMISSIONS
During the fiscal years ended November 30, 1998, 1997 and 1996, the
Master Fund paid total brokerage commissions of $15,841, $40,689 and $72,262,
respectively. The substantial increases or decreases in the amount of brokerage
commissions paid by the Master Fund from year to year resulted from increases or
decreases in the amount of securities that were bought and sold by the Master
Fund.
Portfolio transactions of the Master Fund will be placed with a view
to receiving the best price and execution. In addition, the Advisor 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 these goals in view. The Advisor monitors the performance of
brokers which effect transactions for the Master Fund to determine the effect
that their trading has on the market prices of the securities in which it
invests. The Advisor also checks the rate of commission being paid by the Master
Fund to its 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 Investment Management Agreement of the Master Fund permits 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 assets under management. During fiscal year 1998, the
Master Fund did not pay any commissions for securities transactions to brokers
which provided market price monitoring services, market studies and research
services to the Master 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 Master Fund.
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<PAGE>
The over-the-counter market companies eligible for purchase by the
Master Fund 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 dealers 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
sometimes to trade larger blocks than would be possible by going through a
single market maker.
The Advisor places buy and sell orders on Instinet when the Advisor
determines that the securities may not be available from other sources at a more
favorable price. 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 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 Master Fund can effect
transactions at the best available prices.
The Portfolio will not incur any brokerage or other costs in
connection with its purchase or redemption of shares of the Master Fund, except
if the Portfolio receives securities from the Master Fund to satisfy the
Portfolio's redemption request.
INVESTMENT LIMITATIONS
The Portfolio and Master Fund have adopted certain limitations
which may not be changed without the approval of the holders 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
or Master Fund (to be effected by the proposed change) present at a meeting,
if the holders of more than 50% of the outstanding voting securities of the
Portfolio or Master Fund are present or represented by proxy, or (2) more
than 50% of the outstanding voting securities of the Portfolio or Master Fund.
The Portfolio and Master Fund will not:
(1) invest in commodities or real estate, including limited partnership
interests therein, although it 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 its total assets, invest in the securities of any issuer
(except obligations of the U.S. Government and its agencies and
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, or pledge more than 33% of such assets to secure such
loans;
3
<PAGE>
(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 sell short; or
(8) issue senior securities (as such term is defined in Section 18(f) of
the Investment Company Act of 1940 ("1940 Act")), except to the extent
permitted by the 1940 Act.
In addition to the above investment limitations, the Master Fund has adopted
the following investment limitations, which may not be changed without
shareholder approval, as discussed above, The Master Fund will not:
(9) purchase or retain securities of an issuer, if those officers and
directors of the Trust or the Advisor owning more than 1/2 of 1% of
such securities together own more than 5% of such securities;
(10) 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 (9) above;
(11) invest more than 15% of the value of the Master Fund's total assets in
illiquid securities, which include certain restricted securities,
repurchase agreements with maturities of greater than seven days, and
other illiquid investments;
(12) invest for the purpose of exercising control over management of any
company;
(13) invest its assets in securities of any investment company, except in
connection with a merger, acquisition of assets, consolidation or
reorganization;
(14) 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;
(15) write or acquire options or interests in oil, gas or other mineral
exploration, leases or development programs;
(16) purchase warrants, except that the Master Fund may acquire warrants
as a result of corporate actions involving its holdings of equity
securities; or
(17) acquire more than 10% of the voting securities of any issuer.
The investment limitations described in (3) and (6) above do not
prohibit the Portfolio from investing all or substantially all of its assets
in the shares of another registered open-end investment company, such as the
Master Fund.
The investment limitations described in (1) and (7) above do not
prohibit the Portfolio or Master Fund 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 Portfolio and Master
Fund are authorized to lend portfolio securities. Inasmuch as the Portfolio
will only hold shares of the Master Fund, the Portfolio does not intend to
lend those shares.
Pursuant to Rule 144A under the Securities Act of 1933 (the "1933
Act"), the Master Fund 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 Master Fund's limitations on holdings
of illiquid securities stated in (11) above. While maintaining oversight, the
Board of Trustees of the Trust 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 Trustees and the Advisor will
continue to monitor the liquidity of Rule 144A securities.
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 or Master Fund owns, and does
not include assets which the Portfolio or Master Fund 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 or Master
4
<PAGE>
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
Portfolio's and Master Fund's investments apply only at the time that a
transaction is undertaken. Any subsequent change in the percentage of the
Portfolio's or Master Fund's assets invested in certain securities or other
instruments resulting from market fluctuations or other changes in the
Portfolio's or Master Fund's total assets will not require the Portfolio or
Master Fund 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.
FUTURES CONTRACTS
The Master Fund 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 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 Master Fund. Variation margin payments are made to and from
the futures broker for as long as the contract remains open. The Master Fund
expects to earn income on its margin deposits. To the extent that the Master
Fund invests in futures contracts and options thereon for other than bona fide
hedging purposes, the Master Fund will not enter into such transactions if,
immediately thereafter, the sum of the amount of initial margin deposits and
premiums paid for open futures options would exceed 5% of the Master Fund's 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
Securities and Exchange Commission (the "SEC"), the Portfolio or Master Fund may
be required to maintain segregated accounts consisting of liquid assets such as
cash, U.S. government securities, or other high grade debt obligations (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 Master Fund would continue to
be required to make variation margin deposits. In such circumstances, if the
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
The Portfolio and Master Fund 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. The Portfolio and Master Fund may invest cash in short-term
repurchase agreements. In addition, the Master Fund may invest a
5
<PAGE>
portion of its assets, generally not more than 5% of its net assets, in
short-term fixed income obligations, index futures contracts and options
thereon.
The Master Fund may invest in futures contracts and options on futures
contracts. To the extent that the Master Fund or Portfolio invests in futures
contracts and options thereon for other than bona fide hedging purposes, it will
not enter into such transactions if, immediately thereafter, the sum of the
amount of initial margin deposits and premiums paid for open futures options
would exceed 5% of its 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%.
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 Portfolio and the Master 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.
(registered investment company) and Dimensional Emerging Markets Value Fund Inc.
(registered investment company). Trustee, President and Chairman-Chief Executive
Officer of The DFA Investment Trust Company. Chairman and Director, Dimensional
Fund Advisors Ltd. Director, SA Funds.
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. and Dimensional Emerging Markets Value Fund Inc.
John P. Gould, (1/19/39), Director, Chicago, IL. Steven G. Rothmeier
Distinguished Service Professor of Economics, Graduate School of Business,
University of Chicago. Trustee, The DFA Investment Trust Company (registered
investment company). Director, DFA Investment Dimensions 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
Emerging Markets Value Fund Inc., Hospital Fund, Inc. (investment management
services) and BIRR Portfolio Analysis, Inc. (software products). Chairman,
Ibbotson Associates, Inc., Chicago, IL (software, data, publishing and
consulting).
Merton H. Miller, (5/16/23), Director, Chicago, IL. Robert R.
McCormick Distinguished Service Professor Emeritus, Graduate School of Business,
University of Chicago. Trustee, The DFA Investment Trust Company. Director, DFA
Investment Dimensions Group Inc., Dimensional 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 Emerging Markets Value Fund Inc., Benham Capital Management Group
of Investment companies and Smith Breeden Group of Investment companies.
Consultant, Arbor Investors and Oak Hill Capital Management. Formerly,
Limited Partner, Long-Term Capital Management L.P. (money manager).
6
<PAGE>
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. 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.,
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.
James L. Davis, (11/29/56), Vice President, Santa Monica, CA. Vice
President of all DFA entities, Kansas State University, Arthur Andersen &
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,
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 A. 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.
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.
7
<PAGE>
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 Portfolio's
outstanding stock.
Set forth below is a table listing, for each director entitled to
receive compensation, the compensation received from the Fund during the fiscal
year ended November 30, 1998, and the total compensation received from all four
registered investment companies for which the Advisor serves as investment
advisor during that same fiscal year.
<TABLE>
<CAPTION>
AGGREGATE TOTAL COMPENSATION FROM
COMPENSATION FUND
DIRECTOR FROM FUND AND FUND COMPLEX*
- -------- ------------------------- ----------------------
<S> <C> <C>
George M. Constantinides $5,000 $30,000
John P. Gould $5,000 $30,000
Roger G. Ibbotson $5,000 $30,000
Merton H. Miller $5,000 $30,000
Myron S. Scholes $5,000 $30,000
</TABLE>
*The term Fund Complex refers to all registered investment companies for which
the Advisor performs advisory or administrative services and for which the
individuals listed above serve as directors.
SERVICES TO THE FUND
ADMINISTRATIVE SERVICES
The Fund has entered into an administration agreement with the Advisor
on behalf of the Portfolio. Pursuant to the administration agreement, the
Advisor will perform various services, including: supervision of the services
provided by the Portfolio's custodian and dividend disbursing agent and others
who provide services to the Fund for the benefit of the Portfolio; assisting the
Fund in complying with the provisions of federal, state, local and foreign
securities, tax and other laws applicable to 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 of record; furnishing information as the Board of Directors may
require regarding the Master Fund; and any other administrative services for the
benefit of the Portfolio as the Board of Directors may reasonably request. The
Advisor also provides the Fund with office space and personnel. For its
administrative services, the Portfolio pays the Advisor a monthly fee equal to
one-twelfth of 0.025% of the average net assets of the Portfolio. The Advisor,
in conjunction with other service providers to the Portfolio and Master Fund,
has agreed to waive its fee under the administration agreement and, to the
extent that such waiver is insufficient, to assume expenses of the Portfolio to
the extent necessary to keep the cumulative annual expenses to not more than
0.10% of the average net assets of the Portfolio on an annualized basis. The
Advisor retains the right in its sole discretion to modify or eliminate the
waiver of a portion of its fees and assumption of expenses in the future.
The Advisor may recoup such amounts going forward for thirty-six months.
PFPC Inc. ("PFPC"), 400 Bellevue Parkway, Wilmington, DE 19809, serves
as the accounting services, dividend disbursing and transfer agent for the
Portfolio and the Master Fund. 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
custodian, and transfer and dividend disbursing agency services. For its
services, the Portfolio pays PFPC a monthly fee of $2,600. PFPC has agreed to
limit the monthly fee for their Portfolio from time to time.
8
<PAGE>
CUSTODIAN
PFPC Trust Company, 400 Bellevue Parkway, Wilmington, DE 19809, serves
as a custodian for the Portfolio and the Master Fund. The custodian maintains a
separate account or accounts for the Portfolio and the Master Fund; receives,
holds and releases portfolio securities on account of the Portfolio and the
Master Fund; makes receipts and disbursements of money on behalf of the
Portfolio and the Master Fund; and collects and receives income and other
payments and distributions on account of the Portfolio's and Master Fund's
portfolio securities.
DISTRIBUTOR
The Fund acts as distributor of the Portfolio's shares. It
has, however, entered into an agreement with DFA Securities Inc., a wholly owned
subsidiary of DFA, pursuant to which DFA Securities Inc. is responsible for
supervising the sale of the Portfolio's 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. Its address is 2600 One Commerce Square, Philadelphia, PA 19103-7098.
ADVISORY FEES
David G. Booth and Rex A. Sinquefield, as directors and officers of
the Advisor and shareholders of the Advisor's outstanding stock, may be deemed
controlling persons of the Advisor. For the services it provides as investment
advisor to the Master Fund, the Advisor is paid a monthly fee calculated as a
percentage of average net assets of the Master Fund. For the fiscal years ended
November 30, 1996, 1997 and 1998, the Master Fund paid advisory fees of $62,000,
$160,000 and $293,000, respectively. The Master Fund has more than one investor;
this dollar amount represents the total dollar amount of advisory fees paid by
the Master Fund to the Advisor.
GENERAL INFORMATION
The Fund was incorporated under Maryland law on March 19, 1990. The
Fund 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 series only to institutional investors in private offerings.
SHAREHOLDER RIGHTS
The shares of the 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 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
portfolio. 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
9
<PAGE>
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.
Whenever the Portfolio, as an investor in the Master Fund, is asked to
vote on a shareholder proposal, the Fund will solicit voting instructions from
the Portfolio's shareholders with respect to the proposal. The Directors of the
Fund will then vote the Portfolio's shares in the Master Fund in accordance with
the voting instructions received from the Portfolio's shareholders. The
Directors of the Fund will vote shares of the Portfolio for which they receive
no voting instructions in accordance with their best judgment.
Shareholder inquiries may be made by writing or calling the Fund at
the address or telephone number appearing on the cover of this prospectus. Only
those individuals whose signatures are on file for the account in question may
receive specific account information or make changes in the account
registration.
PRINCIPAL HOLDERS OF SECURITIES
As of August 31, 1999, no persons beneficially owned 5% or more of
the outstanding stock of the Portfolio because it had not yet begun operations.
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 (the "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 (12/24/99). 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 Fund reserves the right, in its sole discretion, to suspend the
offering of shares of the Portfolio or reject purchase orders when, in the
judgment of management, such suspension or rejection is in the best interest of
the Fund or the Portfolio. Securities accepted in exchange for shares of the
Portfolio will be acquired for investment purposes and will be considered for
sale under the same circumstances as other securities in the Portfolio.
REDEMPTION 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 U.S. Securities and Exchange Commission
("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.
10
<PAGE>
Shareholders may transfer shares of the Portfolio to another person by
making a written request therefore to the Advisor who will transmit the request
to the Fund's Transfer Agent. The request should clearly identify the account
and number of shares to be transferred, and include the signature of all
registered owners. The signature on the letter of request 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 PORTFOLIO
The following is a summary of some of the federal income tax
consequences of investing in the Portfolio. Unless your investment in the
Portfolio is through a retirement plan, you should consider the tax implications
of investing, and consult your own tax adviser.
DISTRIBUTION OF NET INCOME
The Portfolio receives income generally in the form of dividends and
interest on its investments. This income, less expenses incurred in the
operation of the Portfolio, constitutes its net investment income from which
dividends may be paid to its shareholders. Any distributions by the 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
The 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 the 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 the 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
The Portfolio intends to qualify each year as a regulated investment
company by satisfying certain distribution and asset diversification
requirements under the Internal Revenue Code. As a regulated investment company,
the Portfolio generally pays 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 the Portfolio as a regulated investment company, if it
determines such course of action to be beneficial to shareholders. In such case,
the 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 the Portfolio's available earnings and
profits.
EXCISE TAX DISTRIBUTION REQUIREMENT
The Internal Revenue Code requires the 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. The 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.
11
<PAGE>
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 or Master Fund.
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
The Portfolio or Master Fund may invest in derivatives such as futures
contracts and options thereon and such investments may be subject to special and
complicated tax rules. These rules could affect whether gains or losses
recognized by the Portfolio or Master Fund are treated as ordinary income or
capital gain, accelerate the recognition of income to the Portfolio or Master
Fund, defer the Portfolio's or the 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 the Portfolio or Master Fund.
OTHER SPECIAL RULES APPLICABLE TO FEEDER PORTFOLIOS WHICH INVEST IN MASTER FUNDS
The Portfolio may be subject to certain special rules since the Master
Fund in which the Portfolio invests is taxable as a registered investment
company ("RIC"). For example, the Portfolio will not be permitted to passthrough
foreign withholding taxes paid by the Master Fund to the Portfolio's
shareholders. These special rules may affect the amount, timing or character of
the income distributed to shareholders of the Portfolio.
INFORMATION ON THE TAX CHARACTER OF DISTRIBUTIONS
The Portfolio 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 the
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 Portfolio and the Master Fund 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 are computed in accordance
12
<PAGE>
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. 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.
For purposes of calculating the performance of the Portfolio, the
performance of the Master Fund will be utilized for the period prior to when the
Portfolio commenced operations, and, if applicable, restated to reflect the
Portfolio's fees and expenses. Quotations of the annualized percentage total
returns of the Master Fund for the one-, five-, and ten-year periods ended
December 31, 1998 (as applicable) are set forth in the prospectus. Such
quotations use the standardized method of calculation required by the SEC. The
Trust's annual and semi-annual reports to shareholders of the Master Fund for
the fiscal year ended November 30, 1998 and the period ended May 31, 1999,
contain additional performance information. A copy of the annual and semi-annual
reports are available upon request and without charge.
As the following formula indicates, the Portfolio and Master Fund each
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
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 Portfolio and Master Fund may disseminate other
performance data and may advertise total return calculated on a monthly basis.
The Portfolio may compare its 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
Portfolio 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 Portfolio or to
the Advisor, should be considered in light of the 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.
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<PAGE>
FINANCIAL STATEMENTS
PricewaterhouseCoopers LLP, 2400 Eleven Penn Center, Philadelphia, PA
19103, are the Fund's and the Trust's independent accountants.
The audited financial statements of the Master Fund for the Trust's
fiscal year ended November 30, 1998, as set forth in the Trust's annual report
to shareholders, including the report of PricewaterhouseCoopers LLP, and the
unaudited financial information for the period ended May 31, 1999, as set forth
in the semi-annual report to shareholders, are incorporated by reference into
this SAI.
A shareholder may obtain a copy of the reports upon request and
without charge, by contacting the Fund at the address or telephone number
appearing on the cover of this SAI.
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DIMENSIONAL INVESTMENT GROUP INC. (28/29)
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS.
(a) Articles of Incorporation.
(1) Form of Articles of Restatement.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No.
11/12 to the Registrant's
Registration Statement on Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: December 15, 1995.
(2) Form of Articles Supplementary.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No.
16/17 to the Registrant's
Registration Statement on Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: June 20, 1997.
(3) Articles Supplementary as filed with the Maryland
Secretary of State on December 7, 1998 re: the
addition of the:
* Tax-Managed U.S. Marketwide Value Portfolio
II
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 21/22 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: January 22, 1999.
(4) 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
XI
* U.S. Large Company Institutional Index
Portfolio
IS ELECTRONICALLY FILED HEREWITH AS EXHIBIT EX-99.b1.
(b) By-Laws.
By-Laws of the Registrant, as approved through September 13,
1999.
IS ELECTRONICALLY FILED HEREWITH AS EXHIBIT EX-
<PAGE>
99.b2.
(c) Instruments Defining Rights of Security Holders.
(1) See Article Fifth of the Registrant's Articles of
Restatement.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 11/12 to the
Registrant's Registration Statement
on Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: December 15, 1995.
(d) Investment Advisory Contracts.
(1) Form of Investment Advisory Agreement between the
Registrant and DFA re: the:
* RWB/DFA Two-Year Corporate Fixed Income
Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 17/18 to the
Registration Statement of the
registrant on Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: October 1, 1997.
(2) Form of Investment Advisory Agreement between the
Registrant and DFA re: the:
* RWB/DFA Two-Year Government Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 17/18 to the
Registration Statement of the
Registrant on Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: October 1, 1997.
(e) Underwriting Contracts.
(1) Distribution Agreement dated April 16, 1993 between
the Registrant and DFA Securities Inc.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 19/20 to the
Registrant's Registration Statement
on Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: March 3, 1998.
(f) Bonus or Profit Sharing Contracts.
<PAGE>
Not applicable.
(g) Custodian Agreements.
(1) Form of Custodian Agreement between the Registrant
and PNC Bank, N.A. (formerly Provident National Bank)
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 19/20 to the
Registrant's Registration Statement
on Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: March 3, 1998.
(i) Addendum Number One
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 21/22
to the Registrant's
Registration Statement on
Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: January 22, 1999.
(ii) Addendum Number Two
re: the addition of:
* Tax-Managed U.S. Marketwide Value
Portfolio XI
* U.S. Large Company Institutional
Index Portfolio
IS ELECTRONICALLY FILED HEREWITH AS
EXHIBIT EX-99.b8.
(h) Other Material Contracts.
(1) Form of Transfer Agency Agreement between the
Registrant and PFPC Inc. (formerly Provident
Financial Processing Corporation) (the "Transfer
Agency Agreement")
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 19/20 to the
Registrant's Registration Statement
on Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: March 3, 1998.
(i) Addendum Number One
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 21/22
to the Registrant's
Registration Statement
<PAGE>
on Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: January 22, 1999.
(ii) Addendum Number Two
re: the addition of:
* Tax-Managed U.S. Marketwide Value
Portfolio XI
* U.S. Large Company Institutional
Index Portfolio
IS ELECTRONICALLY FILED HEREWITH AS
EXHIBIT EX-99.b9.1.
(2) Form of Administration and Accounting Services
Agreement between the Registrant and PFPC Inc.
(formerly with Provident Financial Processing
Corporation) (the "Administration and Accounting
Services Agreement")
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 19/20 to the
Registrant's Registration Statement
on Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: March 3, 1998.
(i) Addendum Number One
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 21/22
to the Registrant's
Registration Statement on
Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: January 22, 1999.
(ii) Addendum Number Two
re: the addition of:
* Tax-Managed U.S. Marketwide Value
Portfolio XI
* U.S. Large Company Institutional
Index Portfolio
IS ELECTRONICALLY FILED HEREWITH AS
EXHIBIT EX-99.b9.2.
(3) Administration Agreements between the Registrant and
DFA.
(i) Form of Dated May 3, 1993 re: the:
* DFA 6-10 Institutional Portfolio
<PAGE>
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 19/20
to the Registration Statement of
Registrant on Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: March 3, 1998.
(ii) Form of Dated December 1, 1993 re: the:
* DFA International Value Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 19/20
to the Registration
Statement of Registrant on
Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: March 3, 1998.
(iii) Form of Dated July 1, 1994 re: the:
* DFA International Value Portfolio II
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 19/20
to the Registration
Statement of Registrant on
Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: March 3, 1998.
(iv) Form of Dated January 1, 1994 re: the:
* U.S. 6-10 Value Portfolio II
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 19/20
to the Registration
Statement of Registrant on
Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: March 3, 1998.
(v) Form of Dated July 1, 1994 re: the:
* U.S. Large Cap Value Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 19/20
to the Registration
Statement of Registrant on
Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: March 3, 1998.
(vi) Form of Dated September 30, 1994 re: the:
* DFA One-Year Fixed Income Portfolio
II
<PAGE>
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 19/20
to the Registration
Statement of Registrant on
Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: March 3, 1998.
(vii) Form of Dated December 20, 1994 re: the:
* U.S. Large Cap Value Portfolio III
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 19/20
to the Registration
Statement of Registrant on
Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: March 3, 1998.
(viii) Form of Dated December 20, 1994 re: the:
* DFA International Value Portfolio
III
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 19/20
to the Registration
Statement of Registrant on
Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: March 3, 1998.
(ix) Form of Dated March 1, 1996 re: the:
* RWB/DFA U.S. High Book-to-Market
Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 12/13/
to the Registration
Statement of Registrant on
Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: December 15, 1995.
(x) Form of Dated March 1, 1996 re: the:
* RWB/DFA Two-Year Corporate Fixed
Income Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 12/13
to the Registration
Statement of Registrant on
Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: December 15, 1995.
<PAGE>
(xi) Form of Dated March 1, 1996 re: the:
* RWB/DFA Two-Year Government
Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 12/13
to the Registration
Statement of Registrant on
Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: December 15, 1995.
(xii) Form of Dated July, 1997 re: the:
* DFA International Value Portfolio IV
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 16/17
to the Registration
Statement on Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: June 20, 1997.
(xiii) Form of Dated July, 1997 re: the:
* Emerging Markets Portfolio II.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 16/17
to the Registration
Statement on Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: June 20, 1997.
(xiv) Dated December 8, 1998 re: the:
* Tax-Managed U.S. Marketwide Value
Portfolio II
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 21/22
to the Registrant's
Registration Statement on
Form N-1A.
File Nos.: 33-33980 and 811-6067.
(xv) Dated September 13, 1999 re: the:
* Tax-Managed U.S. Marketwide Value
Portfolio XI
IS ELECTRONICALLY FILED HEREWITH AS EXHIBIT
EX-99.b9.3.
(xvi) Dated September 13, 1999 re: the:
* U.S. Large Company Institutional
Index
<PAGE>
Portfolio
IS ELECTRONICALLY FILED HEREWITH AS EXHIBIT
EX-99.b9.4.
(4) Client Service Agreements.
(i) Form of re: the:
* RWB/DFA Two-Year Corporate Fixed
Income Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 2/13
Registrant's Registration
Statement on Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: December 15, 1995.
(ii) Form of re: the:
* RWB/DFA Two-Year Government
Portfolio.
INCORPORATED BY REFERENCE TO:
Filing: Post-Effective Amendment No. 12/13
Registrant's Registration
Statement on Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: December 15, 1995.
(iii) Form of re: the:
* RWB/DFA U.S. High Book-to-Market
Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 12/13
to the Registrant's
Registration Statement on
Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: December 15, 1995.
(5) Form of Facility Agreement with DFA.
Previously filed with this registration statement and
incorporated herein by reference.
(6) Form of Services Agreement, dated as of July 1, 1994
between Charles Schwab & Co., Inc. and the Registrant
re: the:
* U.S. Small Cap Portfolio II;
* U.S. Large Cap Portfolio II; and
* DFA International Value Portfolio II
<PAGE>
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 19/20 to
Registrant's Registration Statement
on Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: March 3, 1998.
(7) Form of Client Service Agreements between Reinhardt,
Werba, Bowen, Inc. ("RWB") and the Registrant.
(i) Dated March 13, 1996 re: the:
* RWB/DFA Two-Year Government Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 19/20
to Registrant's
Registration Statement on
Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: March 3, 1998.
(ii) Dated March 13, 1996 re: the:
* RWB/DFA Two-Year Corporate Fixed
Income Portfolio
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 19/20
to Registrant's
Registration Statement on
Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: March 3, 1998.
(iii) Dated March 13, 1996 re: the:
* RWB/DFA U.S. High Book to Market
Portfolio.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 19/20
to Registrant's
Registration Statement on
Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: March 3, 1998.
(i) Legal Opinion.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 21/22 to the
Registrant's Registration Statement on Form
N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: January 22, 1999.
<PAGE>
(j) Other Opinions.
(1) Consent of PricewaterhouseCoopers LLP
IS FILED HEREWITH AS EXHIBIT EX-99.b11
(k) Omitted Financial Statements.
Not applicable.
(l) Initial Capital Agreements.
Form of Subscription Agreement under Section 14(a)(3) of the
Investment of Investment Company Act of 1940, previously filed
with this registration statement and incorporated herein by
reference.
(m) Rule 12b-1 Plan.
Not applicable.
(n) Rule 18f-3 Plan.
Not Applicable.
(o) Powers-of-Attorney.
(1) On behalf of the Registrant, dated July 18, 1997,
appointing David G. Booth, Rex A. Sinquefield,
Michael T. Scardina, Irene R. Diamant, Catherine L.
Newell and Stephen W. Kline, Esquire as
attorneys-in-fact.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 7/18 to the
Registrant's Registration Statement
on Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: October 1, 1997.
(2) On behalf of DFA Investment Trust Company, dated July
18, 1997, appointing David G. Booth, Rex A.
Sinquefield, Michael T. Scardina, Irene R. Diamant,
Catherine L. Newell and Stephen W. Kline, Esquire as
attorneys-in-fact.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 17/18 to the
Registrant's Registration Statement
on Form N-1A.
File Nos.: 33-33980 and 811-6067.
Filing Date: October 1, 1997.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
<PAGE>
ITEM 25. INDEMNIFICATION.
(a) Reference is made to Section 1 of Article Ten of the
Registrant's By-Laws (as approved through 12/20/95),
incorporated herein by reference, which provides for
indemnification, as set forth below, with respect to
Officers and Directors of the Corporation:
(1) 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.
(2) 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.
(3) 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.
(b) Registrant's Articles of Incorporation, which are
incorporated herein by reference, provide the
following under Article Seventh:
(1) To the fullest extent that limitations on the
liability of directors and officers are permitted by
the Maryland General Corporation Law, as amended from
time to time, no director or officer of the
Corporation shall have any liability to the
Corporation or its stockholders for money damages.
This limitation on liability applies to liabilities
occurring for acts or omissions occurring at the time
a person serves as a director or officer of the
Corporation, whether or not such person is a director
or officer at the
<PAGE>
time of any proceeding in which liability is
asserted.
(2) Notwithstanding the foregoing, this Article
SEVENTH shall not operate to protect any
director or officer of the Corporation
against any liability to the Corporation or
its stockholders to which such person would
otherwise be subject by reason or willful
misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in
the conduct of such person's office.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISOR.
(a) Dimensional Fund Advisors Inc., with a principal
place of business located at 1299 Ocean Drive, 11th
Floor, Santa Monica, CA 90401, the investment manager
for the Registrant, is also the investment manager
for three other registered open-end investment
companies, The DFA Investment Trust Company,
Dimensional Emerging Markets Funds Inc. and DFA
Investment Dimensions 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.
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) Names of investment companies for which the
Registrant's principal underwriter also acts as
principal underwriter. Not applicable.
(b) Registrant distributes its own shares. It has entered
into an agreement with DFA Securities Inc. dated
April 16, 1993, which provides that DFA Securities
Inc., 1299 Ocean Avenue, 11th Floor, Santa Monica, CA
90401, will supervise the sale of Registrant's
shares. This agreement is subject to the requirements
of Section 15(b) of the Investment Company Act of
1940.
<PAGE>
(c) Commissions and other compensation received by each
principal underwriter who is not an affiliated person
of the Registrant. Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
The accounts and records of the Registrant are located at the
office of the Registrant and at additional locations, as
follows:
Name Address
---- -------
DFA Investment Dimensions Group Inc. 1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
PFPC Inc. 400 Bellevue Parkway,
Wilmington, DE 19809.
ITEM 29. MANAGEMENT SERVICES.
None.
ITEM 30. UNDERTAKINGS.
Not applicable.
<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.
27/28 to this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Santa Monica and State of
California on the 13th day of September, 1999.
DIMENSIONAL INVESTMENT GROUP INC.
(Registrant)
By: David G. Booth*
David G. Booth, President
(Signature and Title)
Pursuant to the requirements of the Securities Act of 1933, Post-Effective
Amendment No. 28/29 to this Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
David G. Booth* Director and Chairman-Chief September 13, 1999
Executive Officer
David G. Booth
Rex A. Sinquefield* Director and Chairman-Chief September 13, 1999
Investment Officer
Rex A. Sinquefield
Michael T. Scardina* Chief Financial Officer; September 13, 1999
Treasurer and Vice President
Michael T. Scardina
George M. Constantinides* Director September 13, 1999
George M. Constantinides
John P. Gould* Director September 13, 1999
John P. Gould
Roger G. Ibbotson* Director September 13, 1999
Roger G. Ibbotson
Merton H. Miller* Director September 13, 1999
Merton H. Miller
Myron S. Scholes* Director September 13, 1999
Myron S. Scholes
* By: Catherine L. Newell
Catherine L. Newell
Attorney-in-Fact (Pursuant to a Power of Attorney)
<PAGE>
THE DFA INVESTMENT TRUST COMPANY consents to the filing of this Amendment to the
Registration Statement of Dimensional Investment 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 13th day of September, 1999.
THE DFA INVESTMENT TRUST COMPANY
(Registrant)
By: David G. Booth*
David G. Booth, President
(Signature and Title)
The undersigned Directors and principal officers of THE DFA INVESTMENT TRUST
COMPANY consent to the filing of this Post-Effective Amendment No. 28/29 to the
Registration Statement of DFA Investment Dimensions Group Inc. on the dates
indicated.
Signature Title Date
- --------- ----- ----
David G. Booth* Director and Chairman-Chief September 13, 1999
Executive Officer
David G. Booth
Rex A. Sinquefield* Director and Chairman-Chief September 13, 1999
Investment Officer
Rex A. Sinquefield
Michael T. Scardina* Chief Financial Officer;
Treasurer and Vice President September 13, 1999
Michael T. Scardina
George M. Constantinides* Director September 13, 1999
George M. Constantinides
John P. Gould* Director September 13, 1999
John P. Gould
Roger G. Ibbotson* Director September 13, 1999
Roger G. Ibbotson
Merton H. Miller* Director September 13, 1999
Merton H. Miller
Myron S. Scholes* Director September 13, 1999
Myron S. Scholes
<PAGE>
*By: Catherine L. Newell
Catherine L. Newell
Attorney-in-Fact (Pursuant to a Power of Attorney)
<PAGE>
EXHIBIT INDEX
N-1A EDGAR
Exhibit No. Exhibit No. Description
23(a)(4) EX-99.b1 Articles Supplementary
23(b) EX-99.b2 By-Laws
23(g)(1)(ii) EX-99.b8 Addendum Number Two to Custodian Agreement
23(h)(1)(ii) EX-99.b9.1 Addendum Number Two to Transfer Agency
Agreement
23(h)(2)(ii) EX-99.b9.2 Addendum Number Two to Administration and
Accounting Services Agreement
23(h)(3)(xv) EX-99.b9.3 Administration Agreement
23(h)(3)(xvi) EX-99.b9.4 Administration Agreement
23(j) EX-99.b11 Consent of PricewaterhouseCoopers LLP
<PAGE>
DIMENSIONAL INVESTMENT GROUP INC.
ARTICLES SUPPLEMENTARY TO THE CHARTER
DIMENSIONAL INVESTMENT GROUP INC., a Maryland corporation having its
principal office in Baltimore, Maryland (hereinafter called the "Corporation")
and registered under the Investment Company Act of 1940 as an open-end company,
hereby certifies, in accordance with the requirements of Section 2-208 and
2-208.1 of the Maryland General Corporation Law, to the State Department of
Assessments and Taxation of Maryland that:
FIRST: The Corporation has authority to issue a total of
Four Billion (4,000,000,000) shares of stock, with a par value of One Cent
($.01) per share, having an aggregate par value of Forty Million Dollars
($40,000,000), all of which shall be considered common stock. The allocation of
shares of common stock to each of its thirteen existing Classes is as follows:
<TABLE>
<CAPTION>
Class Designation Number of Shares of Common Stock
----------------- (par value $.01 per share)
Allocated
--------------------------------
<S> <C>
The DFA 6-10 Institutional 200,000,000
Portfolio Shares
The DFA International Value 200,000,000
Portfolio Shares
U.S. Large Cap Value 200,000,000
Portfolio II Shares
U.S. 6-10 Value 200,000,000
Portfolio II Shares
DFA International Value 200,000,000
Portfolio II Shares
DFA International Value 200,000,000
Portfolio III Shares
U.S. Large Cap Value 200,000,000
Portfolio III Shares
<PAGE>
RWB/DFA U.S. High Book to 200,000,000
Market Portfolio Shares
RWB/DFA Two-Year Corporate 200,000,000
Fixed Income Portfolio Shares
RWB/DFA Two-Year Government 200,000,000
Portfolio Shares
DFA International Value 200,000,000
Portfolio IV Shares
Emerging Markets Portfolio II 200,000,000
Shares
Tax-Managed U.S. Marketwide Value 200,000,000
Portfolio II Shares
</TABLE>
The Board of Directors of the Corporation has adopted a resolution
classifying unallocated and unissued common stock (par value $.01 per share) of
the Corporation as follows: two hundred million (200,000,000) shares were
allocated to a new class of common stock designated "Tax Managed U.S. Marketwide
Value Portfolio XI Shares" and two hundred million (200,000,000) shares were
allocated to a new class of common stock designated "U.S. Large Company
Institutional Index Portfolio Shares".
SECOND: Following the aforesaid classifications, the total number of
shares of common stock which the Corporation is authorized to issue is Four
Billion (4,000,000,000) shares, with a par value of One Cent ($.01) per share
and an aggregate par value of Forty Million Dollars ($40,000,000). The
allocation of shares of common stock to each of the fifteen classes of the
common stock (each a "Class" and, collectively, the "Classes") is as follows:
<TABLE>
<CAPTION>
Class Designation Number of Shares of Common Stock
----------------- (par value $.01 per share)
Allocated
--------------------------------
<S> <C>
The DFA 6-10 Institutional 200,000,000
Portfolio Shares
The DFA International Value 200,000,000
Portfolio Shares
U.S. Large Cap Value 200,000,000
Portfolio II Shares
<PAGE>
U.S. 6-10 Value 200,000,000
Portfolio II Shares
DFA International Value 200,000,000
Portfolio II Shares
DFA International Value 200,000,000
Portfolio III Shares
U.S. Large Cap Value 200,000,000
Portfolio III Shares
RWB/DFA U.S. High Book to 200,000,000
Market Portfolio Shares
RWB/DFA Two-Year Corporate 200,000,000
Fixed Income Portfolio Shares
RWB/DFA Two-Year Government 200,000,000
Portfolio Shares
DFA International Value 200,000,000
Portfolio IV Shares
Emerging Markets Portfolio II 200,000,000
Shares
Tax-Managed U.S. Marketwide Value 200,000,000
Portfolio II Shares
Tax-Managed U.S. Marketwide Value 200,000,000
Portfolio XI Shares
U.S. Large Company Institutional Index 200,000,000
Portfolio Shares
</TABLE>
THIRD: A description of the shares of each Class, with the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption as set or changed by the Board of Directors of the Corporation, is as
follows:
The holder of each share of each Class shall be entitled to one vote
for each full share,
<PAGE>
and a fractional vote for each fractional share of stock then standing in his or
her name on the books of the Corporation. All shares of the Classes then issued
and outstanding and entitled to vote, irrespective of Class, shall be voted in
the aggregate and not by Class, except: (1) when otherwise expressly provided by
the Maryland General Corporation Law; (2) when required by the Investment
Company Act of 1940, as amended, shares shall be voted by Class; and (3) when a
matter to be voted upon does not affect any interest of a particular Class then
only shareholders of the affected Class or Classes shall be entitled to vote
thereon.
Each share of each Class shall have the following preferences and
special rights, restrictions, and limitations:
(1) All consideration received by the Corporation for the issue
or sale of stock of a Class, together with all assets, income and
proceeds derived from the sale, exchange, or liquidation of assets of
such Class, and any funds or payments derived from any reinvestment
thereof, shall belong to such Class and shall be so recorded upon the
books of account of the Corporation.
(2) The assets of any Class shall be charged with the liabilities
of such Class, and with such share of the general liabilities of the
Corporation as the Board of Directors may determine.
(3) Dividends or distributions on shares of a Class shall be paid
only out of earnings, surplus, or other legally available assets of
such Class.
(4) In the event of the liquidation or dissolution of the
Corporation, stockholders of a Class shall be entitled to receive, as a
Class, out of the assets of the Corporation available for distribution
to stockholders, but other than general assets not belonging to any
particular Class, the asset belonging to such Class; and the assets so
distributable to the stockholders of any Class shall be distributed
among such stockholders in proportion to the number of shares of such
Class held by them and recorded on the books of the Corporation. In the
event that there are any general assets of the Corporation not
belonging to any particular Class and available for distribution, such
assets shall be distributed to the holders of stock of all Classes in
proportion to the relative net asset value of the respective Classes
determined as provided in the charter of the Corporation.
(5) The holders of the shares of stock of the Corporation shall
have no preemptive rights to subscribe to new or additional shares of
its stock or other securities.
FOURTH: The shares aforesaid have been duly classified by the Board
of Directors pursuant to authority contained in the charter of the Corporation.
FIFTH: The undersigned Vice President hereby acknowledges these
Articles Supplementary to the charter to be the corporate act of the Corporation
and, as to all matters or
<PAGE>
facts required to be verified under oath, the undersigned Vice President
acknowledges that, to the best of his knowledge, information and belief, these
matters and facts are true in all material respects, and that this statement is
made under the penalties of perjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles to be
signed in its name and on its behalf by its Vice President and attested to by
its Secretary on this 9th day of September, 1999.
ATTEST: DIMENSIONAL INVESTMENT GROUP
INC.
By:
Catherine L. Newell Michael T. Scardina, Vice President,
Assistant Secretary Chief Financial Officer and Treasurer
<PAGE>
Exhibit 24(b)(2)
DIMENSIONAL INVESTMENT GROUP INC.
* * * * * * * * *
BY-LAWS
* * * * * * * * *
ARTICLE I
SECTION 1. FISCAL YEAR. Unless otherwise provided by resolution of the
Board of Directors, the fiscal year of the Corporation shall begin December 1
and end on the last day of November.
SECTION 2. REGISTERED OFFICE. The registered office of the Corporation
in Maryland shall be located at 32 South Street, Baltimore, Maryland 21202. The
name of its Resident Agent is The Corporation Trust Incorporated, whose address
is the same as above.
SECTION 3. OTHER OFFICES. The Corporation shall also have a place of
business in Santa Monica, California, and the Corporation shall have the power
to open additional offices for the conduct of its business, either within or
outside the States of Maryland and California, at such places as the Board of
Directors may from time to time designate.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE OF MEETING. Annual Meetings, if held, shall be held in
such place as the Board of Directors may by resolution establish. In the absence
of any specific resolution, Annual Meetings of Stockholders shall be held at the
Corporation's principal office in Santa Monica, California. Meetings of
stockholders for any other purpose may be held at such place as shall be stated
in the Notice of the Meeting, or in a duly executed Waiver of Notice thereof.
SECTION 2. ANNUAL MEETINGS. The Corporation is not required to hold an
Annual Meeting in any year in which the Corporation is not required to convene a
meeting under the Investment Company Act of 1940 (the "Act"). If the Corporation
is required by the Act to hold a meeting of stockholders to elect directors, the
meeting shall be designated an Annual Meeting of Stockholders for that year and
shall be held no later than 60 days after the occurrence of the event requiring
the meeting; except if an Order is granted by the Securities and Exchange
Commission exempting the Corporation from the operation of Section 16(a) of the
Act or a no-action position of similar effect is obtained, in which event such
meeting shall be held no later than 120 days after the occurrence of the event
requiring the meeting. Otherwise, Annual Meetings shall be held only if called
by the Board of Directors of the Corporation and, if called, shall be held
during the month of May on such date as fixed by the Board of Directors by
resolution.
<PAGE>
SECTION 3. SPECIAL MEETINGS. Special Meetings of the stockholders may
be called at any time by the President, or by a majority of the Board of
Directors, and shall be called by the President or Secretary upon written
request of the holders of shares entitled to cast not less than ten per cent of
all the votes entitled to be cast at such meeting.
SECTION 4. NOTICE. Not less than 10 or more than 90 days before the
date of every Annual or Special Meeting of Stockholders, the Secretary shall
give to each stockholder entitled to vote at such meeting written notice stating
the time and place of the meeting and, in the case of a Special Meeting, the
purpose or purposes for which the meeting is called. Business transacted at any
Special Meeting of Stockholders shall be limited to the purposes stated in the
Notice.
SECTION 5. RECORD DATE FOR MEETINGS. The Board of Directors may fix in
advance a date not more than 90 days, nor less than 10 days, prior to the date
of any Annual or Special Meeting of Stockholders as a record date for the
determination of the stockholders entitled to receive notice of the meeting, and
to vote at any meeting and any adjournment thereof. If an Annual Meeting is held
to elect directors pursuant to the requirements of the Act, the Board shall fix
the record date within the time required for holding such Annual Meeting as
provided in Section 2 of this Article but not more than 90 nor less than 10 days
prior to such meeting. Only those stockholders who are stockholders of record on
the date so fixed shall be entitled to receive notice of and to vote at such
meeting and any adjournment thereof as the case may be, notwithstanding any
transfer of any stock on the books of the Corporation after any such record date
fixed as aforesaid.
SECTION 6. QUORUM. At any meeting of stockholders, the presence in
person or by proxy of stockholders entitled to cast a majority of all the votes
entitled to be cast at the meeting shall constitute a quorum. If, however, such
quorum shall not be present or represented at any meeting of the stockholders,
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting, until a time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might have been transacted at
the meeting as originally notified.
SECTION 7. MAJORITY. Except as otherwise provided by applicable law or
the Articles of Incorporation, a majority of all votes cast at a meeting at
which a quorum is present is sufficient to approve any matter which properly
comes before the meeting.
SECTION 8. VOTING. The holders of each share of stock of the
Corporation then issued and outstanding and entitled to vote, irrespective of
the class, shall be voted in the aggregate and not by class, except: (1) when
otherwise expressly provided by the Maryland General Corporation Law; (2) when
required by the Act, shares shall be voted by class; and (3) when a matter to be
voted upon does not affect any interest of a particular class, then only
stockholders of the affected class or classes shall be entitled to vote thereon.
A stockholder may vote in person or by proxy, but no proxy shall be
valid after 11 months from its date, unless otherwise provided in the proxy. At
all meetings of stockholders, unless the voting is conducted by inspectors, all
questions relating to the qualification of voters and the validity of proxies
and the acceptance or rejection of votes shall be decided by the Chairman of the
meeting.
SECTION 9. INSPECTORS. At any election of Directors, the Board of
Directors prior thereto may, or, if they have not so acted, the Chairman of the
meeting may, and upon the request of the holders of
<PAGE>
10% of the shares entitled to vote at such election shall, appoint an inspector
of election who shall first subscribe an oath of affirmation to execute
faithfully the duties of inspector at such election with strict impartiality and
according to the best of their ability, and shall after the election make a
certificate of the result of the vote taken. No candidate for the office of
Director shall be appointed an inspector of election. The Chairman of the
meeting may cause a vote by ballot to be taken upon any election or matter, and
such vote shall be taken upon the request of the holders of 10% of the stock
entitled to vote on such election or matter.
ARTICLE III
DIRECTORS
SECTION 1. GENERAL POWERS. The business of the Corporation shall be
managed by its Board of Directors, which may exercise all powers of the
Corporation, except such as are by statute, or the Articles of Incorporation, or
by these By-Laws conferred upon or reserved to the stockholders.
SECTION 2. NUMBER AND TERM OF OFFICE. The number of Directors which
shall constitute the whole Board shall be determined from time to time by the
Board of Directors, but shall not be fewer than three, nor more than fifteen,
except when there are less than three stockholders of the Corporation, when
there may be two Directors. Each Director shall hold office until his successor
is elected and qualified. Directors need not be stockholders.
SECTION 3. ELECTION. Directors shall be elected by the stockholders
except that any vacancy in the Board of Directors may be filled by a majority
vote of the entire Board of Directors if immediately after filling such vacancy
at least two-thirds of the Board of Directors have been elected by the
stockholders. In the event that at any time less than a majority of the
Directors of the Corporation were elected by the stockholders, the Corporation
shall cause a meeting of stockholders to be held for the purpose of electing
Directors, as provided in Article II, Section 2 hereof.
SECTION 4. PLACE OF MEETING. Meetings of the Board of Directors,
regular or special, may be held at any place in or out of the State of Maryland
as the Board may from time to time determine.
SECTION 5. QUORUM. At all meetings of the Board of Directors a majority
of the entire Board of Directors shall constitute a quorum for the transaction
of business and the action of a majority of the Directors present at any meeting
at which a quorum is present shall be the action of the Board of Directors,
except as otherwise provided by applicable law. If a quorum shall not be present
at any meeting of Directors, the Directors present thereat may by a majority
vote adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
SECTION 6. REGULAR MEETINGS. Regular meetings of the Board of Directors
may be held without notice at such time and place as shall from time to time be
determined by the Board of Directors.
SECTION 7. SPECIAL MEETINGS. Special Meetings of the Board of Directors
may be called by the President on one day's notice to each Director; Special
Meetings shall be called by the President or Secretary in like manner and on
like notice on the written request of two Directors.
SECTION 8. INFORMAL ACTIONS. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof may
be taken without a meeting, if a written consent to such action is signed in one
or more counterparts by all members of the Board or of such committee, as the
case may be, and such written consent is filed with the minutes of proceedings
of the
<PAGE>
Board or committee.
SECTION 9. COMMITTEES. The Board of Directors may by resolution passed
by a majority of the whole Board appoint from among its members an executive
committee and other committees composed of two or more Directors, and may
delegate to such committees, in the intervals between meetings of the Board of
Directors, any or all of the powers of the Board of Directors in the management
of the business and affairs of the Corporation, except the power to declare
dividends, to issue stock or to recommend to stockholders any action requiring
stockholders' approval. In the absence of any member of a committee, the members
thereof present at any meeting, whether or not they constitute a quorum, may
appoint a member of the Board of Directors to act in the place of such absent
member.
SECTION 10. ACTION OF COMMITTEES. Each committee shall report the same
to the Board of Directors at the meeting next succeeding, and any action by the
committee shall be subject to revision and alteration by the Board of Directors,
provided that no rights of third persons shall be affected by any such revision
or alteration.
SECTION 11. COMPENSATION. Any Director, whether or not a salaried
officer or employee of the Corporation, may be compensated for services as
Director or as a member of a committee of Directors, or as Chairman of the Board
or Chairman of a committee by fixed periodic payments or by fees for attendance
at meetings or by both, and may be reimbursed for transportation and other
expenses, all in such manner and amounts as the Board of Directors may from time
to time determine.
ARTICLE IV
NOTICES
SECTION 1. FORM. Notices to stockholders shall be in writing and
delivered personally or mailed to the stockholders at their addresses appearing
on the books of the Corporation. Notices to Directors shall be oral or by
telephone or telegram or in writing delivered personally or mailed to the
Directors at their addresses appearing on the books of the Corporation. Notice
by mail shall be deemed to be given at the time when the same shall be mailed.
Notice to Directors need not state the purpose of a Regular or Special Meeting.
SECTION 2. WAIVER. Whenever any notice of the time, place or purpose of
any meeting of the stockholders, the Board of Directors or a committee is
required to be given under the provisions of Maryland law or under the
provisions of the Articles of Incorporation or these By-Laws, a waiver thereof
in writing, signed by the person or persons entitled to such notice and filed
with the records of the meeting, whether before or after the holding thereof, or
actual attendance at the meeting of stockholders in person or by proxy, or at
the meeting of the Board of Directors or committee in person, shall be deemed
equivalent to the giving of such notice to such persons.
ARTICLE V
OFFICERS
SECTION 1. NUMBER. The officers of the Corporation shall be chosen by
the Board of Directors and shall include: (1) a President, who shall be the
Chief Operating Officer of the Corporation and a Director; (2) a Secretary; and
(3) a Treasurer. The Board of Directors may, from time to time, elect or
<PAGE>
appoint a Controller, one or more Vice Presidents, Assistant Secretaries and
Assistant Treasurers. The Board of Directors shall also appoint two Chairmen,
one of whom shall be the Chief Executive Officer and the second shall be the
Chief Investment Officer of the Corporation and who shall perform and execute
such other duties and powers as the Board of Directors shall from time to time
prescribe. Two or more offices may be held by the same person but no officer
shall execute, acknowledge or verify any instrument in more than one capacity,
if such instrument is required by law, the Articles of Incorporation or these
By-Laws to be executed, acknowledged or verified by two or more officers.
SECTION 2. OTHER OFFICERS. The Board of Directors from time to time may
appoint such other officers and agents as it shall deem advisable, who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the Board. The Board of
Directors from time to time may delegate to one or more officers or agents the
power to appoint any such subordinate officers or agents and to prescribe the
respective rights, terms of office, authorities and duties.
SECTION 3. COMPENSATION. The salaries or other compensation of all
officers and agents of the Corporation shall be fixed by the Board of Directors,
except that the Board of Directors may delegate to any person or group of
persons the power to fix the salary or other compensation of any subordinate
officers or agents appointed pursuant to Section 2 of this Article V.
SECTION 4. TENURE. The officers of the Corporation shall serve at the
pleasure of Board of Directors and until their successors are elected and
qualify. Any officer may be removed by the affirmative vote of a majority of the
Board of Directors whenever, in its judgment, the best interests of the
Corporation will be served thereby. Any vacancy occurring in any office of the
Corporation by death, resignation, removal, or otherwise shall be filled by the
Board of Directors.
SECTION 5. PRESIDENT-CHIEF OPERATING OFFICER. The President shall be
the chief operating officer of the Corporation; he shall see that all orders and
resolutions of the Board are carried into effect. The President shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe. In the absence or disability of the President the
Chairman-Chief Investment Officer shall perform the duties of the President.
SECTION 6. VICE-PRESIDENTS. The Vice-Presidents, in the order of their
seniority, shall in the absence or disability of the President, perform the
duties and exercise the powers of the President and shall perform such other
duties as the Board of Directors may from time to time prescribe; provided that
the Vice President-Chief Administrative Officer, if any person has been elected
to such office by the Board of Directors and then holds such office, shall be
the chief administrative officer of the Corporation.
SECTION 7. SECRETARY. The Secretary and/or an Assistant Secretary shall
attend all meetings of the Board of Directors and all meetings of the
stockholders and record all the proceedings thereof and shall perform like
duties for any committee when required. The Secretary shall give, or cause to be
given, notice of meetings of the stockholders, the Board of Directors and each
committee, and shall perform such other duties as may be prescribed by the Board
of Directors or President, under whose supervision the Secretary shall be. The
Secretary shall keep in safe custody the seal of the Corporation and, when
authorized by the Board of Directors, affix and attest the same to any
instrument requiring it. The Board of Directors may give general authority to
any other officer to affix the seal of the Corporation and to attest the
affixing by such officer's signature.
<PAGE>
SECTION 8. ASSISTANT SECRETARIES. The Assistant Secretaries, in order
of their seniority, shall in the absence or disability of the Secretary, perform
the duties and exercise the powers of the Secretary and shall perform such other
duties as the Board of Directors shall prescribe.
SECTION 9. TREASURER. The Treasurer, unless another officer of the
Corporation has been so designated, shall be the chief financial officer of the
Corporation. He shall supervise the general activities of the Controller, if
any, and shall also perform those acts as the Board of Directors may from time
to time determine by resolution.
SECTION 10. CONTROLLER. The Board of Directors may designate a
Controller who shall be under the direct supervision of the Treasurer. He shall
maintain adequate records of all assets, liabilities and transactions of the
Corporation, establish and maintain internal accounting controls and, in
cooperation with the independent public accountants selected by the Board of
Directors, supervise internal auditing. He shall have such further powers and
duties as may be conferred upon him from time to time by the President or the
Board of Directors.
SECTION 11. ASSISTANT TREASURERS. The Assistant Treasurers, in the
order of their seniority, shall in the absence or disability of the Treasurer,
perform the duties and exercise the powers of the Treasurer and shall perform
such other duties as the Board of Directors may from time to time prescribe.
ARTICLE VI
NET ASSET VALUE
SECTION 1. NET ASSET VALUE. The net asset value per share of each class
of stock of the Corporation (each a "Portfolio" and, collectively, the
"Portfolios") shall be determined by dividing the total current market value of
the investments and other assets belonging to each Portfolio, less any
liabilities attributable to such Portfolio, by the total outstanding shares of
such Portfolio. Securities which are listed on a securities exchange for which
market quotations are available shall be valued at the last quoted sale price of
the day or, if there is no such reported sale, at the mean between the most
recent quoted bid and asked prices. Price information on listed securities will
be taken from the exchange where the security is primarily traded. Unlisted
securities for which market quotations are readily available will be valued at
the mean between the most recent quoted bid and asked prices. The value of other
assets and securities for which no quotations are readily available (including
restricted securities) will be determined in good faith at fair value using
methods determined by the Board of Directors.
The net asset value per share of each Portfolio shall be determined as
of the close of the New York Stock Exchange on each day that the Exchange is
open for business, except as otherwise described in the registration statement
of the Corporation.
ARTICLE VII
FUNDAMENTAL POLICIES
SECTION 1. INVESTMENT LIMITATIONS. The following restrictions shall
apply to the Portfolios and may not be changed with respect to any Portfolio
without the approval of the lesser of (i) 67% or more of the shares entitled to
vote thereon present or represented by proxy at a meeting if the holders of
<PAGE>
more that 50% of the shares entitled to vote thereon are present or represented
by proxy, or (ii) more than 50% of the shares entitled to vote thereon:
The Portfolios shall not:
(a) Invest in commodities or purchase or sell real
estate, including limited partnership interests
therein, although they may purchase and sell
securities of companies which deal in real estate and
may purchase and sell securities which are secured by
interests in real estate, and DFA International Value
Portfolio, DFA International Value Portfolio II, DFA
International Value Portfolio III, DFA International
Value Portfolio IV (collectively, the "International
Value Portfolios") and Emerging Markets Portfolio II
may purchase or sell foreign currency futures
contracts and options and the International Value
Portfolios, Emerging Markets Portfolio II, U.S. Large
Cap Portfolio II, U.S. Large Cap Value Portfolio III,
U.S. Small Cap Value Portfolio II, RWB/DFA U.S. High
Book to Market Portfolio, RWB/DFA Two-Year Corporate
Fixed Income Portfolio, RWB/DFA Two-Year Government
Portfolio, U.S. Large Company Institutional Index
Portfolio, Tax-Managed U.S. Marketwide Value
Portfolio II and Tax-Managed U.S. Marketwide Value
Portfolio XI may purchase or sell financial futures
contracts and options thereon;
(b) Make loans of cash, except through the acquisition of
repurchase agreements and obligations customarily
purchased by institutional investors;
(c) As to 75% of a Portfolio's total assets, invest in
the securities of any issuer (except obligations of
the United States Government, its agencies and
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;
(d) Purchase or retain securities of an issuer if those
officers and directors of the Corporation or its
investment advisor owning more than 1/2 of 1% of such
securities together own more than 5% of such
securities, provided that the Tax-Managed Value
Portfolios are not subject to this limitation;
(e) Issue senior securities or borrow, except from banks
and as a temporary measure for extraordinary or
emergency purposes and then, in no event, in excess
of 33% of a Portfolio's net assets, provided that DFA
One-Year Fixed Income Portfolio II may borrow no more
than 5% of its net assets, or pledge in excess of 33%
of a Portfolio's net assets to secure such loans;
(f) 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 paragraph
(e) of this section, provided that the Tax-Managed
Value Portfolios are not subject to this limitation;
(g) Invest more than 15% of the value of a Portfolio's
total assets in illiquid securities, which include
certain restricted securities, repurchase agreements
with maturities of greater than seven days and other
illiquid investments; provided, however, that DFA
One-Year Fixed Income Portfolio II may invest
<PAGE>
not more than 10% of its total assets in illiquid
securities and provided that the Tax-Managed Value
Portfolios are not subject to this limitation;
(h) Engage in the business of underwriting securities
issued by others;
(i) Invest for the purpose of exercising control over
management of any company, provided that the
Tax-Managed Value Portfolios are not subject to this
limitation;
(j) Invest its assets in securities of any investment
company, except in connection with a merger,
acquisition of assets, consolidation or
reorganization; provided that the Emerging Markets
Portfolio II and each Tax-Managed Value 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;
(k) Invest more than 5% of its total assets in securities
of companies which have (with predecessors) a record
of less than three years' continuous operation,
provided that the Tax-Managed Value Portfolios are
not subject to this limitation;
(l) Acquire any securities of companies within one
industry if, as a result of such acquisition, more
than 25% of the value of the total assets of the
Portfolio would be invested in securities of
companies within such industry; provided, however,
that the foregoing restriction shall not apply to
obligations issued or guaranteed by banks and bank
holding companies or government securities as defined
in Section 2(a)(16) of the Act acquired by DFA
One-Year Fixed Income Portfolio II or RWB/DFA
Two-Year Corporate Fixed Income Portfolio;
(m) Write or acquire options (except as described in
paragraph (a) of this section) or interests in oil,
gas or other mineral exploration, leases or
development programs, provided that the Tax-Managed
Value Portfolios may write or acquire options;
(n) Purchase warrants, provided, however, that the
Portfolios, except DFA One-Year Fixed Income
Portfolio II, RWB/DFA Two-Year Corporate Fixed Income
Portfolio and RWB/DFA Two-Year Government Portfolio,
may each acquire warrants as a result of corporate
actions involving their respective holdings of equity
securities and provided that the Tax-Managed Value
Portfolios are not subject to this limitation;
(o) Purchase securities on margin or sell short, provided
that the Tax-Managed Value Portfolios are not subject
to the limitation on selling securities short; or
(p) Acquire more than 10% of the voting securities of any
issuer, provided that this limitation applies only to
75% of the assets of U.S. Small Cap Value Portfolio
II, U.S. Large Cap Value Portfolio II, U.S. Large Cap
Value Portfolio III, RWB/DFA U.S. High Book to Market
Portfolio and Emerging Markets Portfolio II and
provided that the Tax-Managed Value Portfolios are
not subject to this limitation; or
<PAGE>
(q) Issue senior securities (as such term is defined in
Section 18(f) of the Investment Company Act of 1940),
except to the extent permitted under the Act.
Notwithstanding the investment limitations described in (c), (g), (i),
(j), (k), (l) and (p) above, all or substantially all of the assets of each
Portfolio may be invested in another registered, open-end investment company
having the same investment objective, policies and limitations as the Portfolio.
SECTION 2. LENDING OF SECURITIES. Each of the Portfolios is authorized
to lend its portfolio securities to brokers, dealers and other institutional
borrowers, provided that a Portfolio shall not make any such loan if when made
more than one-third of the then current market value of such Portfolio's assets
would consist of lent securities.
ARTICLE VIII
STOCK
SECTION 1. ISSUANCE WITHOUT CERTIFICATES; STOCK LEDGER. The issuance of
shares of stock in the Corporation shall be recorded by electronic or other
means without the issuance of certificates, provided that shares of stock in the
Corporation represented by certificates shall not be affected until such
certificates are surrendered to the Corporation. The Corporation shall maintain
an original stock ledger containing the names and addresses of all stockholders
and the number and Portfolio of shares held by each stockholder. Such stock
ledger may be in written form or any other form capable of being converted into
written form within a reasonable time for visual inspection.
SECTION 2. LOST CERTIFICATES. If any stockholder alleges that such
stockholder's certificates or certificates for shares of stock in the
Corporation have been stolen, lost or destroyed, upon the making of an affidavit
of that fact by such stockholder or upon other satisfactory evidence of such
loss or destruction, the Board of Directors may direct that the Corporation's
stock ledger be marked to cancel such certificates and record the ownership of
such shares in accordance with Section 1 of this Article. When authorizing such
cancellation and recordation of ownership, the Board of Directors may, in its
discretion and as a condition precedent to such action, require the stockholder,
or his legal representative, to advertise the same in such manner as it shall
require and to give the Corporation a bond with sufficient surety to indemnify
the Corporation against any loss or claim that may be made by reason of such
action.
SECTION 3. REGISTERED STOCKHOLDERS. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends and vote such shares.
SECTION 4. TRANSFER AGENTS AND REGISTRARS. The Board of Directors may,
from time to time, appoint or remove transfer agents and/or registrars of
transfers of shares of stock of the Corporation, and it may appoint the same
person as both transfer agent and registrar.
<PAGE>
ARTICLE IX
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. With respect to "dividends" (including dividends
designated as "short" or "long" term "capital gains" distributions to satisfy
requirements of the Internal Revenue Code of 1986, as amended from time to
time):
(a) Such dividends shall be automatically reinvested solely in
additional shares (or fractions thereof) of the Portfolio in respect of which
such dividends were declared at the net asset value on the reinvestment date,
provided that a stockholder may notify the Corporation in writing of an election
to receive dividends in cash.
(b) The Board of Directors, in declaring any dividend, may fix a record
date not earlier than the date of declaration or more than 90 days after the
date of declaration, as of which the stockholders entitled to receive such
dividend shall be determined, notwithstanding any transfer or the repurchase or
issue (or sale) of any shares occurring after such record date.
(c) Dividends on shares of stock, whether payable in stock or cash,
shall be paid out of earnings, capital surplus or other lawfully available
assets. All dividend payments, or distributions in the nature of a dividend
payment, may be made wholly or partly from any source other than accumulated,
undistributed net income, and such payment shall be accompanied by a written
statement clearly indicating what portion of such payment per share is made from
the following sources:
(i) Accumulated or undistributed net income, not including profits or
losses from the sale of securities or other properties;
(ii) Accumulated or undistributed net profits from the sale of
securities or other properties;
(iii) Paid-in capital.
(d) Anything in these By-Laws to the contrary notwithstanding, the
Board of Directors may at any time declare and distribute pro rata among the
stockholders of a Portfolio, as of a record date fixed as above provided, a
"stock dividend" of additional shares of such Portfolio issuable out of either
authorized but unissued stock of the Corporation, or both.
SECTION 2. RIGHTS IN SECURITIES. The Board of Directors, on behalf of
the Corporation, shall have the authority to exercise all of the rights of the
Corporation as owner of any securities which might be exercised by any
individual owning such securities in his own right; including but not limited
to, the right to vote by proxy for any and all purposes and the right to
authorize any officer of the investment adviser or other delegate to execute
proxies.
SECTION 3. CLAIMS AGAINST PORTFOLIO ASSETS. In any loan agreement by
which funds are borrowed for a Portfolio and each related agreement to pledge,
mortgage or hypothecate any of the assets of such Portfolio, the Corporation
shall provide that such loan shall be repaid solely out of the assets of such
Portfolio and that, to the extent such loan may be secured only by the assets of
such Portfolio, no creditor of such Portfolio shall have any rights to any
assets of the Corporation other than the specific assets which secure the
agreement.
SECTION 4. REPORTS. The Corporation shall furnish stockholders with
reports of its financial condition as required by Section 30(d) of the Act and
the rules thereunder.
<PAGE>
SECTION 5. BONDING OF OFFICERS AND EMPLOYEES. All officers and
employees of the Corporation shall be bonded to such extent, and in such manner,
as may be required by law.
SECTION 6. SEAL. The Corporate seal shall have inscribed thereon the
name of the Corporation, the year of its organization and the words "Corporate
Seal, Maryland." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed, or otherwise reproduced.
ARTICLE X
INDEMNIFICATION OF
OFFICERS AND DIRECTORS
SECTION 1. With respect to the indemnification of the officers and
Directors of the Corporation:
(a) The Corporation shall indemnify each officer and Director made
party to a proceeding, by reason of service in such capacity, to the fullest
extent, and in the manner provided, under section 2-418 of the Maryland General
Corporation Law: (i) unless it is proved that the person seeking indemnification
did not meet the standard of conduct set forth in subsection (b)(1) of such
section; and (ii) provided, that the Corporation shall not indemnify any officer
or Director for any liability to the Corporation or its security holders arising
from the willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such person's office.
(b) The provisions of clause (i) of paragraph (a) herein
notwithstanding, the Corporation shall indemnify each officer and Director
against reasonable expenses incurred in connection with the successful defense
of any proceeding to which such officer or Director is a party by reason of
service in such capacity.
(c) The Corporation, in the manner and to the extent provided by
applicable law, shall advance to each officer and Director who is made party to
a proceeding by reason of service in such capacity the reasonable expenses
incurred by such person in connection therewith.
ARTICLE XI
AMENDMENTS
SECTION 1. These By-Laws may be altered or repealed at any meeting of
the Board of Directors, except that the fundamental investment limitations of
the Corporation, set forth in Article VII, Section 1 of these By-Laws, may only
be amended by the stockholders of the Corporation in the manner specified in
said Article.
<PAGE>
DIMENSIONAL INVESTMENT GROUP INC.
CUSTODIAN AGREEMENT
ADDENDUM NUMBER TWO
THIS AGREEMENT is made as of the 13th day of September, 1999 by and
between DIMENSIONAL INVESTMENT GROUP INC., formerly known as the "DFA U.S. Large
Cap Portfolio, Inc.," a Maryland corporation (the "Fund"), and PFPC TRUST
COMPANY ("PFPC Trust").
W I T N E S S E T H:
WHEREAS, the Fund is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended, and its shares are
registered under the Securities Act of 1933, as amended; and
WHEREAS, the Fund has retained PFPC Trust to provide certain custodian
services pursuant to a Custodian Agreement dated July 12, 1991, as amended (the
"Agreement") which as of the date hereof, is in full force and effect; and
WHEREAS, PFPC Trust presently provides such services to the existing
portfolios of the Fund and has agreed to provide such services to two (2) new
portfolios of the Fund, designated as Tax-Managed U.S. Marketwide Value
Portfolio XI, and U.S. Large Company Institutional Index Portfolio which are
listed on Schedule A, attached hereto; and
WHEREAS, Paragraph 1 of the Agreement provides that PFPC Trust shall
provide such services to any portfolio organized by the Fund after the date of
the Agreement as agreed to in writing by PFPC Trust and the Fund;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound, the parties hereto agree as
follows:
1. The Agreement is hereby amended to provide that all those
portfolios set forth on "Schedule A, Amended and Restated September 13, 1999,"
which is attached hereto, shall be "Portfolios" under the Agreement.
2. The fee schedules of PFPC Trust applicable to the Portfolios
shall be as agreed in writing from time to time.
3. In all other respects, the Agreement shall remain unchanged and
in full force and effect.
4. This Addendum may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Addendum Number
Two to the Agreement to be executed by their duly authorized officers designated
below on the day and year first above written.
DIMENSIONAL INVESTMENT GROUP INC.
By:
------------------------------
Catherine L. Newell
Vice President
PFPC TRUST COMPANY
By:
------------------------------
Joseph Gramlich
Senior Vice President
<PAGE>
AMENDED AND RESTATED
SEPTEMBER 13, 1999
SCHEDULE A
SERIES OF
DIMENSIONAL INVESTMENT GROUP INC.
DFA 6-10 INSTITUTIONAL PORTFOLIO (4/93)
U.S. LARGE CAP VALUE PORTFOLIO II (7/94)
U.S. 6-10 VALUE PORTFOLIO II (7/94)
THE DFA INTERNATIONAL VALUE PORTFOLIO (12/93)
DFA INTERNATIONAL VALUE PORTFOLIO II (7/94)
DFA INTERNATIONAL VALUE PORTFOLIO III (12/94)
DFA ONE-YEAR FIXED INCOME PORTFOLIO II (10/94)
U.S. LARGE CAP VALUE PORTFOLIO III (12/94)
RWB/DFA U.S. HIGH BOOK TO MARKET PORTFOLIO (3/96)
RWB/DFA TWO-YEAR CORPORATE FIXED INCOME PORTFOLIO (3/96)
RWB/DFA TWO-YEAR GOVERNMENT PORTFOLIO (3/96)
EMERGING MARKETS PORTFOLIO II (8/97)
DFA INTERNATIONAL VALUE PORTFOLIO IV (8/97)
TAX-MANAGED U.S. MARKETWIDE VALUE PORTFOLIO II (12/98)
TAX-MANAGED U.S. MARKETWIDE VALUE PORTFOLIO XI (9/99)
U.S. LARGE COMPANY INSTITUTIONAL INDEX PORTFOLIO (9/99)
<PAGE>
DIMENSIONAL INVESTMENT GROUP INC.
TRANSFER AGENCY AGREEMENT
ADDENDUM NUMBER TWO
THIS AGREEMENT is made as of the 13th day of September, 1999 by and
between DIMENSIONAL INVESTMENT GROUP INC., formerly known as the "DFA U.S. Large
Cap Portfolio Inc.," a Maryland corporation (the "Fund"), and PFPC INC.,
formerly known as "Provident Financial Processing Corporation" (the "Transfer
Agent" or "PFPC").
W I T N E S S E T H :
WHEREAS, the Fund is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended, and its securities
are registered under the Securities Act of 1933, as amended; and
WHEREAS, the Fund has retained PFPC to serve as the Fund's transfer
agent, registrar and dividend disbursing agent, pursuant to a Transfer Agency
Agreement dated July 12, 1991, as amended, (the "Agreement") which, as of the
date hereof, is in full force and effect; and
WHEREAS, PFPC presently provides such services to the existing series
of shares of the Fund and has agreed to provide such services to two (2) new
series of the Fund, designated as Tax-Managed U.S. Marketwide Value Portfolio
XI, and U.S. Large Company Institutional Index Portfolio which are listed on
Schedule A attached hereto; and
WHEREAS, Paragraph 1 of the Agreement provides that PFPC shall provide
such services to any class of shares created by the Fund after the date of the
Agreement upon mutual agreement of the Fund and Transfer Agent;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound thereby, the parties agree:
1. The Agreement hereby is amended to provide that all those series
set forth on "Schedule A, Amended and Restated September 13, 1999," which is
attached hereto, shall be "Shares" under the Agreement.
2. The fee schedules of the Transfer Agent applicable to the Shares
shall be agreed to in writing, from time to time.
3. In all other respects, the Agreement shall remain unchanged and
in full force and effect.
4. This Addendum may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Addendum Number
Two
<PAGE>
to the Agreement to be executed by their duly authorized officers designated
below on the day and year first above written.
DIMENSIONAL INVESTMENT GROUP INC.
By:
------------------------------
Catherine L. Newell
Vice President
PFPC INC.
By:
------------------------------
Joseph Gramlich
Senior Vice President
<PAGE>
AMENDED AND RESTATED
SEPTEMBER 13, 1999
SCHEDULE B
SERIES OF
DIMENSIONAL INVESTMENT GROUP INC.
DFA 6-10 INSTITUTIONAL PORTFOLIO
U.S. LARGE CAP VALUE PORTFOLIO II
U.S. 6-10 VALUE PORTFOLIO II
THE DFA INTERNATIONAL VALUE PORTFOLIO
DFA INTERNATIONAL VALUE PORTFOLIO II
DFA INTERNATIONAL VALUE PORTFOLIO III
DFA ONE-YEAR FIXED INCOME PORTFOLIO II
U.S. LARGE CAP VALUE PORTFOLIO III
RWB/DFA U.S. HIGH BOOK TO MARKET PORTFOLIO
RWB/DFA TWO-YEAR CORPORATE FIXED INCOME PORTFOLIO
RWB/DFA TWO-YEAR GOVERNMENT PORTFOLIO
EMERGING MARKETS PORTFOLIO II
DFA INTERNATIONAL VALUE PORTFOLIO IV
TAX-MANAGED U.S. MARKETWIDE VALUE PORTFOLIO II
TAX-MANAGED U.S. MARKETWIDE VALUE PORTFOLIO XI
U.S. LARGE COMPANY INSTITUTIONAL INDEX PORTFOLIO
<PAGE>
DIMENSIONAL INVESTMENT GROUP INC.
ADMINISTRATION AND ACCOUNTING SERVICES AGREEMENT
ADDENDUM NUMBER TWO
THIS AGREEMENT is made as of the 13th day of September, 1999 by and
between DIMENSIONAL INVESTMENT GROUP INC., formerly known as the "DFA U.S. Large
Cap Portfolio, Inc.," a Maryland corporation (the "Fund"), and PFPC INC.,
formerly known as "Provident Financial Processing Corporation," a Delaware
corporation Corp." ("PFPC").
W I T N E S S E T H:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended ("1940 Act") and
its shares are registered under the Securities Act of 1933, as amended ("1933
Act");
WHEREAS, the Fund has retained PFPC to provide certain administration
and accounting services pursuant to an Administration and Accounting Services
Agreement dated July 12, 1991 (the "Agreement") which, as of the date hereof, is
in full force and effect; and
WHEREAS, PFPC presently provides such services to the existing
portfolios of the Fund and has agreed to provide such services to two (2) new
portfolios of the Fund, designated as Tax-Managed U.S. Marketwide Value
Portfolio XI, and U.S. Large Company Institutional Index Portfolio which are
listed on Schedule B, attached hereto; and
WHEREAS, Paragraph 1 of the Agreement provides that PFPC shall provide
such services to any portfolio organized by the Fund after the date of the
Agreement as agreed to in writing by PFPC and the Fund;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and intending to be legally bound thereby, the parties agree:
1. The Agreement is hereby amended to provide that all those
portfolios set forth on "Schedule B, Amended and Restated September 13, 1999,"
which is attached hereto shall be "Portfolios" under the Agreement.
2. The fee schedules of PFPC applicable to the Portfolios shall be
as agreed in writing, from time to time.
3. In all other respects, the Agreement shall remain unchanged and
in full force and effect.
4. This Addendum may be executed in two or more counterparts, each
of which shall
<PAGE>
be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Addendum Number
Two to the Agreement to be executed by their duly authorized officers designated
below on the day and year first above written.
DIMENSIONAL INVESTMENT GROUP INC.
By:
Catherine L. Newell
Vice President
PFPC INC.
By:
Joseph Gramlich
Senior Vice President
<PAGE>
AMENDED AND RESTATED
SEPTEMBER 13, 1999
SCHEDULE B
SERIES OF
DIMENSIONAL INVESTMENT GROUP INC.
DFA 6-10 INSTITUTIONAL PORTFOLIO
U.S. LARGE CAP VALUE PORTFOLIO II
U.S. 6-10 VALUE PORTFOLIO II
DFA INTERNATIONAL VALUE PORTFOLIO
DFA INTERNATIONAL VALUE PORTFOLIO II
DFA INTERNATIONAL VALUE PORTFOLIO III
DFA ONE-YEAR FIXED INCOME PORTFOLIO II
U.S. LARGE CAP VALUE PORTFOLIO III
RWB/DFA U.S. HIGH BOOK-TO-MARKET PORTFOLIO
RWB/DFA TWO-YEAR CORPORATE FIXED INCOME PORTFOLIO
RWB/DFA TWO-YEAR GOVERNMENT PORTFOLIO
EMERGING MARKETS PORTFOLIO II
DFA INTERNATIONAL VALUE PORTFOLIO IV
TAX-MANAGED U.S. MARKETWIDE VALUE PORTFOLIO II
TAX-MANAGED U.S. MARKETWIDE VALUE PORTFOLIO XI
U.S. LARGE COMPANY INSTITUTIONAL INDEX PORTFOLIO
<PAGE>
DIMENSIONAL INVESTMENT GROUP INC.
TAX-MANAGED U.S. MARKETWIDE VALUE PORTFOLIO XI
ADMINISTRATION AGREEMENT
THIS AGREEMENT made this 13th day of September, 1999, by and between
DIMENSIONAL INVESTMENT GROUP INC., formerly known as the "DFA U.S. Large Cap
Value Portfolio," Inc., a Maryland corporation (the "Fund"), on behalf of the:
TAX-MANAGED U.S. MARKETWIDE VALUE PORTFOLIO XI
(the "Tax-Managed Portfolio"), a separate series of the Fund, and DIMENSIONAL
FUND ADVISORS INC., a Delaware corporation (the "Administrator").
WHEREAS, the Fund is registered as an investment company under the
Investment Company Act of 1940, as amended, and its securities are registered
under the Securities Act of 1933, as amended;
WHEREAS, the Tax-Managed Portfolio, as a separate series of the Fund,
desires to avail itself of the services, assistance and facilities of an
administrator and to have an administrator perform various administrative and
other services for it; and
WHEREAS, the Administrator desires to provide such services to the
Tax-Managed Portfolio.
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
1. EMPLOYMENT OF THE ADMINISTRATOR. The Fund hereby employs
the Administrator to supervise the administrative affairs of the Tax-Managed
Portfolio, subject to the direction of the Board of Directors and the officers
of the Fund on the terms hereinafter set forth. The Administrator hereby accepts
such employment and agrees to render the services described herein for the
compensation herein provided.
2. SERVICES TO BE PROVIDED BY THE ADMINISTRATOR.
A. The Administrator shall supervise the administrative
affairs of the Fund as they pertain to the Tax-Managed Portfolio. Specifically,
the Administrator shall:
(1) supervise the services provided to the Fund for the
benefit of the Tax-Managed Portfolio by the Tax-Managed
Portfolio's custodian, transfer and dividend disbursing
agent, printers, insurance carriers (as well as agents
and brokers), independent accountants, legal counsel
and other persons who provide services to the Fund for
the benefit of the Tax-Managed Portfolio;
(2) assist the Fund to comply with the provisions of
applicable federal, state, local and foreign
securities, tax, organizational and other laws that:
<PAGE>
(i) govern the business of the Fund in respect of
the Tax-Managed Portfolio (except those that
govern investment of the Tax-Managed
Portfolio's assets);
(ii) regulate the offering of the Tax-Managed
Portfolio's shares; and
(iii) provide for the taxation of the Tax-Managed
Portfolio;
(3) provide the shareholders of the Tax-Managed Portfolio
with such information regarding the operation and
affairs of the Tax-Managed Portfolio, and their
investment in its shares, as they or the Fund may
reasonably request;
(4) assist the Tax-Managed Portfolio to conduct meetings of
its shareholders if and when called by the Board of
Directors of the Fund;
(5) furnish such information as the Board of Directors of
the Fund may require regarding any investment company
in whose shares the Tax-Managed Portfolio may invest;
and
(6) provide such other administrative services for the
benefit of the Tax-Managed Portfolio as the Board of
Directors may reasonably request.
B. In carrying out its responsibilities under Section A herein,
to the extent the Administrator deems necessary or desirable and at the expense
of the Tax-Managed Portfolio, the Administrator shall be entitled to consult
with, and obtain the assistance of, the persons described in Section A,
paragraph (1) herein who provide services to the Fund.
C. The Administrator, at its own expense, shall provide the Fund
with such office facilities and equipment as may be necessary to conduct the
administrative affairs of the Fund with respect to the Tax-Managed Portfolio.
3. EXPENSES OF THE FUND. It is understood that the Tax-Managed
Portfolio will pay all of its own expenses incurred to conduct its
administrative affairs.
4. COMPENSATION OF THE ADMINISTRATOR. The services to be rendered by
the Administrator as provided in Section 2 of this Agreement will be at no cost
to the Tax-Managed Portfolio; such fee arrangement may be amended, from time to
time, as applicable.
5. ACTIVITIES OF THE ADMINISTRATOR. The services of the Administrator
to the Fund or in respect of the Tax-Managed Portfolio are not to be deemed
exclusive, and the Administrator shall be free to render similar services to
others as long as its services to the Fund or with respect to the Portfolio are
not impaired thereby.
6. LIABILITY OF THE ADMINISTRATOR. No provision of this Agreement
shall be deemed
<PAGE>
to protect the Administrator against any liability to the Fund or its
shareholders to which it might otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
the reckless disregard of its obligations under this Agreement.
7. DURATION AND TERMINATION.
A. This Agreement shall become effective on the date written
below, provided that prior to such date it shall have been approved by the Board
of Directors of the Fund, and shall continue in effect until terminated by the
Fund or the Administrator on 60 days written notice to the other.
B. Any notice under this Agreement shall be given in writing
addressed and delivered, or mailed postage-paid, to the other party at the
principal business office of such party.
8. SEVERABILITY. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
9. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and effective on the 13th day of September, 1999.
DIMENSIONAL FUND DIMENSIONAL INVESTMENT
ADVISORS INC. GROUP INC.
By: By:
-------------------------------- -----------------------------
David G. Booth Catherine L. Newell
Chief Executive Officer Vice President
<PAGE>
DIMENSIONAL INVESTMENT GROUP INC.
U.S. LARGE COMPANY INSTITUTIONAL INDEX PORTFOLIO
ADMINISTRATION AGREEMENT
THIS AGREEMENT made this 13th day of September, 1999, by and between
DIMENSIONAL INVESTMENT GROUP INC., formerly known as the "DFA U.S. Large Cap
Value Portfolio," Inc., a Maryland corporation (the "Fund"), on behalf of the:
U.S. LARGE COMPANY INSTITUTIONAL INDEX PORTFOLIO
(the "Large Company Portfolio"), a separate series of the Fund, and DIMENSIONAL
FUND ADVISORS INC., a Delaware corporation (the "Administrator").
WHEREAS, the Fund is registered as an investment company under the
Investment Company Act of 1940, as amended, and its securities are registered
under the Securities Act of 1933, as amended;
WHEREAS, the Large Company Portfolio, as a separate series of the Fund,
desires to avail itself of the services, assistance and facilities of an
administrator and to have an administrator perform various administrative and
other services for it; and
WHEREAS, the Administrator desires to provide such services to the
Large Company Portfolio.
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
1. EMPLOYMENT OF THE ADMINISTRATOR. The Fund hereby employs
the Administrator to supervise the administrative affairs of the Large Company
Portfolio, subject to the direction of the Board of Directors and the officers
of the Fund on the terms hereinafter set forth. The Administrator hereby accepts
such employment and agrees to render the services described herein for the
compensation herein provided.
2. SERVICES TO BE PROVIDED BY THE ADMINISTRATOR.
A. The Administrator shall supervise the administrative
affairs of the Fund as they pertain to the Large Company Portfolio.
Specifically, the Administrator shall:
(1) supervise the services provided to the Fund for the
benefit of the Large Company Portfolio by the Large
Company Portfolio's custodian, transfer and dividend
disbursing agent, printers, insurance carriers (as
well as agents and brokers), independent accountants,
legal counsel and other persons who provide services
to the Fund for the benefit of the Large Company
Portfolio;
(2) assist the Fund to comply with the provisions of
applicable federal, state, local and foreign
securities, tax, organizational and other laws that:
<PAGE>
(i) govern the business of the Fund in respect of
the Large Company Portfolio (except those that
govern investment of the Large Company
Portfolio's assets);
(ii) regulate the offering of the Large Company
Portfolio's shares; and
(iii) provide for the taxation of the Large Company
Portfolio;
(3) provide the shareholders of the Large Company
Portfolio with such information regarding the
operation and affairs of the Large Company Portfolio,
and their investment in its shares, as they or the
Fund may reasonably request;
(4) assist the Large Company Portfolio to conduct meetings
of its shareholders if and when called by the Board of
Directors of the Fund;
(5) furnish such information as the Board of Directors of
the Fund may require regarding any investment company
in whose shares the Large Company Portfolio may
invest; and
(6) provide such other administrative services for the
benefit of the Large Company Portfolio as the Board of
Directors may reasonably request.
B. In carrying out its responsibilities under Section A herein,
to the extent the Administrator deems necessary or desirable and at the expense
of the Large Company Portfolio, the Administrator shall be entitled to consult
with, and obtain the assistance of, the persons described in Section A,
paragraph (1) herein who provide services to the Fund.
C. The Administrator, at its own expense, shall provide the
Fund with such office facilities and equipment as may be necessary to conduct
the administrative affairs of the Fund with respect to the Large Company
Portfolio.
3. EXPENSES OF THE FUND. It is understood that the Large Company
Portfolio will pay all of its own expenses incurred to conduct its
administrative affairs.
4. COMPENSATION OF THE ADMINISTRATOR. For the services to be rendered
by the Administrator as provided in Section 2 of this Agreement, the Large
Company Portfolio shall pay to the Administrator, at the end of each month, a
fee equal to one-twelfth of 0.05% of the average daily net assets of the
Portfolio during the month. If this Agreement is terminated prior to the end of
any month, the fee for such month shall be prorated.
5. ACTIVITIES OF THE ADMINISTRATOR. The services of the Administrator
to the Fund or in respect of the Large Company Portfolio are not to be deemed
exclusive, and the Administrator shall be free to render similar services to
others as long as its services to the Fund or with respect to the Portfolio are
not impaired thereby.
<PAGE>
6. LIABILITY OF THE ADMINISTRATOR. No provision of this Agreement
shall be deemed to protect the Administrator against any liability to the Fund
or its shareholders to which it might otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
the reckless disregard of its obligations under this Agreement.
7. DURATION AND TERMINATION.
A. This Agreement shall become effective on the date written
below, provided that prior to such date it shall have been approved by the Board
of Directors of the Fund, and shall continue in effect until terminated by the
Fund or the Administrator on 60 days written notice to the other.
B. Any notice under this Agreement shall be given in writing
addressed and delivered, or mailed postage-paid, to the other party at the
principal business office of such party.
8. SEVERABILITY. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
9. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and effective on the 13th day of September, 1999.
DIMENSIONAL FUND DIMENSIONAL INVESTMENT
ADVISORS INC. GROUP INC.
By: By:
------------------------------ ---------------------------
David G. Booth Catherine L. Newell
Chief Executive Officer Vice President
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective Amendment
No. 28 (File No. 33-33980) under the Securities Act of 1933 and
Post-Effective Amendment No. 29 (File No. 811-6067) under the Investment
Company Act of 1940 to the Registration Statement on Form N-1A of Dimensional
Investment Group Inc. of our reports for the DFA International Value
Portfolio III and U.S. Large Cap Value Portfolio III, collectively, the
Portfolios, dated January 15, 1999, on our audits of the financial statements
and financial highlights of the Portfolios of the Dimensional Investment
Group Inc. and The DFA Investment Trust Company as of November 30, 1998 and
for the respective periods then ended, which reports are included in the
Annual Reports to Shareholders.
We also consent to the reference to our firm under the captions "Other
Information" and "Financial Statements" in the Statements of Additional
Information.
PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, PA
September 10, 1999
