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File No. 811-7436
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 (X)
Amendment No. 4 (X)
THE DFA INVESTMENT TRUST COMPANY
(Exact Name of Registrant as Specified in Charter)
1299 OCEAN AVENUE, 11TH FLOOR, SANTA MONICA, CA 90401
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(Address of Principal Executive Offices (Zip Code)
Registrant's Telephone Number, Including Area Code (310) 395-8005
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IRENE R. DIAMANT, 1299 OCEAN AVENUE, 11TH FLOOR, SANTA MONICA CA 90401
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(Name and Address of Agent for Service of Process)
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Please Send Copy of Communications to:
Stephen W. Kline, Esq.
Stradley, Ronon, Stevens & Young
Great Valley Corporate Center
30 Valley Stream Parkway
Malvern, Pennsylvania 19355
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THE DFA INVESTMENT TRUST COMPANY
The U.S. 6-10 Small Company Series
The U.S. Large Company Series
The DFA One-Year Fixed Income Series
The U.S. Small Cap Value Series
The U.S. Large Cap Value Series
The DFA International Value Series
The Emerging Markets Series
FORM N-1A, Part A:
Responses to Items 1 through 3 have been omitted pursuant to paragraph 4 of
Instruction F of the General Instructions to Form N-1A.
ITEM 4. GENERAL DESCRIPTION OF REGISTRANT
(A)(I) The DFA Investment Trust Company (the "Trust") is an open-end
management investment company organized as a Delaware business trust on October
27, 1992 and registered under the Investment Company Act of 1940. The Trust
issues seven series, each of which operates as a diversified investment company
and represents a separate class ("Series") of the Trust's shares of beneficial
interest: The U.S. 6-10 Small Company Series, The U.S. Large Company Series,
The DFA One-Year Fixed Income Series, The U.S. Small Cap Value Series, The U.S.
Large Cap Value Series, The DFA International Value Series and The Emerging
Markets Series. Dimensional Fund Advisors Inc. (the "Advisor") serves as
investment advisor to each of the Series.
The investment objectives, policies and investment limitations of each Series
are set forth below. The investment objective of a Series may not be changed
without the affirmative vote of a majority of the outstanding voting securities
of that Series. The Trust sells its shares to institutional investors only.
Shares of each Series may be issued for cash and/or securities in which a Series
is authorized to invest. In addition, when acquiring securities from an
institutional investor in consideration of the issuance of its shares, a Series
may accept securities from the transferor which it would not otherwise purchase
pursuant to its investment policies, as described below. Any such acquisition
would be very small in relation to the then total current value of the assets
acquired by a Series in any such transaction.
(A)(II)
THE U.S. 6-10 SMALL COMPANY SERIES
The investment objective of The U.S. 6-10 Small Company Series is to achieve
long-term capital appreciation.
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The Series will invest in a broad and diverse group of small U.S. companies
having readily marketable securities. References in this registration statement
to a "small U.S. company" means a company whose securities are traded in the
U.S. securities markets and whose market capitalization is not larger than the
largest of those in the smaller one half (deciles 6 through 10) of companies
listed on the New York Stock Exchange ("NYSE"). The Series will purchase common
stocks of companies whose shares are listed on the NYSE, the American Stock
Exchange ("AMEX") and traded in the over-the-counter market ("OTC"). It is the
intention of The U.S. 6-10 Small Company Series to acquire a portion of the
common stock of each eligible NYSE, AMEX and OTC company on a market
capitalization weighted basis. In the future, The U.S. 6-10 Small Company
Series may purchase common stocks of small U.S. companies which are listed on
other U.S. securities exchanges. In addition, the Series is authorized to
invest in private placements of interest-bearing debentures that are convertible
into common stock. Such investments are considered illiquid and the value
thereof together with the value of all other illiquid investments may not exceed
15% of the value of the Series' assets at the time of purchase.
SERIES STRUCTURE. The Series is structured by generally basing the amount of
each security purchased on the issuer's relative market capitalization with a
view to creating in the Series a reasonable reflection of the relative market
capitalizations of its portfolio companies. The decision to include or exclude
the shares of an issuer will be made on the basis of such issuer's relative
market capitalization determined by reference to other companies located in the
U.S. Even though a company's stock may meet the applicable market
capitalization criterion, it may not be included in the Series if, (i) in the
Advisor's judgment, the issuer is in extreme financial difficulty, (ii) the
issuer is involved in a merger or consolidation or is the subject of an
acquisition or (iii) a significant portion of the issuer's securities are
closely held. Further, securities of real estate investment trusts will not be
acquired (except as a part of a merger, consolidation or acquisition of assets).
In addition, the Advisor may exclude the stock of a company that otherwise meets
applicable market capitalization criterion if the Advisor determines in its best
judgment that other conditions exist that make the purchase of such stock for
the Series inappropriate.
Deviation from strict market capitalization weighting will also occur in the
Series because it intends to purchase round lots only. In order to retain
sufficient liquidity, the relative amount of any security held by the Series may
be reduced from time to time from the level which strict adherence to market
capitalization weighting would otherwise require. A portion, but generally not
in excess of 20%, of the Series' assets may be invested in interest-bearing
obligations, such as money-market
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instruments for this purpose, thereby causing further deviation from strict
market capitalization weighting.
The Series may make block purchases of eligible securities at opportune prices
even though such purchases exceed the number of shares which, at the time of
purchase, strict adherence to the policy of market capitalization weighting
would otherwise require. In addition, the Series may acquire eligible
securities in exchange for the issuance of its shares. While such purchases and
acquisitions might cause a temporary deviation from market capitalization
weighting, they would ordinarily be made in anticipation of further growth of
the assets of the Series.
If securities must be sold in order to obtain funds to make redemption payments,
they may be repurchased by the Series as additional cash becomes available to
it. In most instances, however, management would anticipate selling securities
which had appreciated sufficiently to be eligible for sale and, therefore, would
not need to repurchase such securities.
Changes in the composition and relative ranking (in terms of market
capitalization) of the stocks which are eligible for purchase by the Series take
place with every trade when the securities markets are open for trading due,
primarily, to price fluctuations of such securities. On a not less than semi-
annual basis, the Advisor will determine the market capitalization of the
largest small company in which the Series may invest. Common stocks whose
market capitalizations are not greater than such company will be purchased for
the Series. Additional investments will generally not be made in securities
which have appreciated in value sufficiently to be excluded from the Advisor's
then current market capitalization limit for eligible portfolio securities.
This may result in further deviation from strict market capitalization weighting
and such deviation could be substantial if a significant amount of the Series'
holdings increase in value sufficiently to be excluded from the limit for
eligible securities, but not by a sufficient amount to warrant their sale. A
further deviation from market capitalization weighting may occur if the Series
invests a portion of its assets in privately placed convertible debentures.
It is management's belief that the stocks of small companies offer, over a long
term, a prudent opportunity for capital appreciation, but, at the same time,
selecting a limited number of such issues for inclusion in the Series involves
greater risk than including a large number of them. The Series intends to
invest at least 80% of its assets in equity securities of U.S. small companies
as described above.
Generally, the Series does not seek current income as an investment objective
and investments will not be based upon an issuer's dividend payment policy or
record. However, many of the
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companies whose securities will be included in the Series do pay dividends. It
is anticipated, therefore, that the Series will receive dividend income. Also,
the Series may lend securities to qualified brokers, dealers, banks and other
financial institutions for the purpose of realizing additional income. (See
"Securities Loans" under Item 4(a)(ii).)
PORTFOLIO TRANSACTIONS. On a periodic basis, the Advisor will review the
Series' holdings and determine which, at the time of such review, are no longer
considered small U.S. companies. As of the date of this registration statement,
the Advisor has established the following standard: securities held by the
Series which have appreciated in value will be considered for sale when the
market capitalization of the issuer has increased sufficiently to rank it in the
largest 45% (deciles 4.5 through 1) based on market capitalization of securities
listed on the NYSE.
The Advisor may, from time to time, revise such standard if, in the opinion of
the Advisor, such revision is necessary to maintain appropriate market
capitalization weighting. Securities which have depreciated in value since
their acquisition will not be sold by the Series solely because prospects for
the issuer are not considered attractive, or due to an expected or realized
decline in securities prices in general. Securities may be disposed of,
however, at any time when, in the Advisor's judgment, circumstances, such as
(but not limited to) tender offers, mergers and similar transactions, or bids
made for block purchases at opportune prices, warrant their sale. Generally,
securities will not be sold to realize short-term profits, but when
circumstances warrant, they may be sold without regard to the length of time
held. Generally, securities will be purchased with the expectation that they
will be held for longer than one year and will be held until such time as they
are no longer considered an appropriate holding in light of the policy of
maintaining portfolios of companies with small market capitalizations.
THE U.S. LARGE COMPANY SERIES
The U.S. Large Company Series seeks, as its investment objective, to approximate
the investment performance of the Standard & Poor's 500 Composite Stock Index
(the "S&P 500 Index"), both in terms of the price of the Series' shares and its
total investment return. The Series intends to invest in all of the stocks that
comprise the S&P 500 Index in approximately the same proportions as they are
represented in the Index. The amount of each stock purchased for the Series,
therefore, will be based on its respective market capitalization. The S&P 500
Index is comprised of a broad and diverse group of stocks most of which are
traded on the NYSE. Generally, these are the U.S. stocks with the largest
market capitalizations and, as a group, they represent
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approximately 70% of the total market capitalization of all publicly traded U.S.
stocks. Under normal market conditions, at least 95% of the Series' assets will
be invested in the stocks that comprise the S&P 500 Index.
Ordinarily, portfolio securities will not be sold except to reflect additions or
deletions of the stocks that comprise the S&P 500 Index, including mergers,
reorganizations and similar transactions and, to the extent necessary, to
provide cash to pay redemptions of the Series' shares. The Series may lend
securities to qualified brokers, dealers, banks and other financial institutions
for the purpose of earning additional income.
The Series is not sponsored, endorsed, sold or promoted by Standard & Poor's
Corporation ("S&P"). S&P makes no representation or warranty, express or
implied, to the owners of the Series or any member of the public regarding the
advisability of investing in securities generally or in the Series particularly
or the ability of the S&P 500 Index to track general stock market performance.
S&P's only relationship to the Series is the licensing of certain trademarks and
trade names of S&P and of the S&P 500 Index which is determined, composed and
calculated by S&P without regard to the Series. S&P has no obligation to take
the needs of the Series or the owners of the Series into consideration in
determining, composing or calculating the S&P 500 Index. S&P is not responsible
for and has not participated in the determination of the timing of, prices at,
or quantities of the Series to be issued or in the determination or calculation
of the equation by which the Portfolio is to be converted into cash. S&P has no
obligation or liability in connection with the administration, marketing or
trading of the Series.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500 INDEX
OR ANY DATA INCLUDED THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO
RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE PRODUCT, OR ANY OTHER PERSON
OR ENTITY FROM THE USE OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN IN
CONNECTION WITH THE RIGHTS LICENSED HEREUNDER OR FOR ANY OTHER USE. S&P MAKES
NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO
THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE
FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE,
INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF
THE POSSIBILITY OF SUCH DAMAGES.
THE DFA ONE-YEAR FIXED INCOME SERIES
The investment objective of The DFA One-Year Fixed Income Series is to achieve
a stable real value (i.e. a return in excess of the
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rate of inflation) of invested capital with a minimum of risk. The Series will
pursue its objective by investing the assets of the Series in U.S. government
obligations, U.S. government agency obligations, dollar denominated obligations
of foreign issuers issued in the U.S., bank obligations, including U.S.
subsidiaries and branches of foreign banks, corporate obligations, commercial
paper, repurchase agreements and obligations of supranational organizations.
Generally, the Series will acquire obligations which mature within one year from
the date of settlement, but substantial investments may be made in obligations
maturing within two years from the date of settlement when greater returns are
available. It is the Series' policy that the weighted average length of
maturity of investments will not exceed one year. The Series principally
invests in certificates of deposit, commercial paper, bankers' acceptances,
notes and bonds. The Series will invest more than 25% of its total assets in
obligations of U.S. and/or foreign banks and bank holding companies when the
yield to maturity on these instruments exceeds the yield to maturity on all
other eligible portfolio investments of similar quality for a period of five
consecutive days when the NYSE is open for trading. (See "Investments in the
Banking Industry" in Item 4(a)(ii).)
The following is a description of the categories of securities and obligations
which may be acquired by the Series.
1. U.S. GOVERNMENT OBLIGATIONS - Debt securities issued by the U.S.
Treasury which are direct obligations of the U.S. government, including bills,
notes and bonds.
2. U.S. GOVERNMENT AGENCY OBLIGATIONS - Issued or guaranteed by U.S.
government-sponsored instrumentalities and federal agencies, including the
Federal National Mortgage Association, Federal Home Loan Bank and the Federal
Housing Administration.
3. CORPORATE DEBT OBLIGATIONS - Non-convertible corporate debt securities
(e.g., bonds and debentures) which are issued by companies whose commercial
paper is rated Prime-1 by Moody's Investors Services, Inc. ("Moody's") or A-1 by
S&P and dollar-denominated obligations of foreign issuers issued in the U.S. If
the issuer's commercial paper is unrated, then the debt security would have to
be rated at least AA by S&P or Aa2 by Moody's. If there is neither a commercial
paper rating nor a rating of the debt security, then the Advisor must determine
that the debt security is of comparable quality to equivalent issues of the same
issuer rated at least AA or Aa2.
4. BANK OBLIGATIONS - Obligations of U.S. banks and savings and loan
associations and dollar-denominated obligations of U.S. subsidiaries and
branches of foreign banks, such as certificates of deposit (including marketable
variable rate
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certificates of deposit) and bankers' acceptances. Bank certificates of deposit
will only be acquired if the bank has assets in excess of $1,000,000,000.
5. COMMERCIAL PAPER - Rated, at the time of purchase, A-1 or better by
S&P or Prime-1 by Moody's, or, if not rated, issued by a corporation having an
outstanding unsecured debt issue rated Aaa by Moody's or AAA by S&P, and having
a maximum maturity of nine months.
6. REPURCHASE AGREEMENTS - Instruments through which the Series purchases
securities ("underlying securities") from a bank, or a registered U.S.
government securities dealer, with an agreement by the seller to repurchase the
security at an agreed price, plus interest at a specified rate. The underlying
securities will be limited to U.S. government and agency obligations described
in (1) and (2) above. The Series will not enter into a repurchase agreement
with a duration of more than seven days if, as a result, more than 10% of the
value of the Series' total assets would be so invested. The Series will also
only invest in repurchase agreements with a bank if the bank has at least
$1,000,000,000 in assets and has a credit rating of not less than A as
determined by Moody's or S&P. The Advisor will monitor the market value of the
securities plus any accrued interest thereon so that they will at least equal
the repurchase price.
7. SUPRANATIONAL ORGANIZATION OBLIGATIONS - Debt securities of
supranational organizations such as the European Coal and Steel Community, the
European Economic Community and the World Bank, which are chartered to promote
economic development.
INVESTMENTS IN THE BANKING INDUSTRY. The Series will invest more than 25% of
its total assets in obligations of U.S. and/or foreign banks and bank holding
companies when the yield to maturity on these investments exceeds the yield to
maturity on all other eligible portfolio investments for a period of five
consecutive days when the NYSE is open for trading. For the purpose of this
policy, which is a fundamental policy which can only be changed by a vote of
shareholders, banks and bank holding companies are considered to constitute a
single industry, the banking industry. When investment in such obligations
exceeds 25% of the total net assets of the Series, the Series will be considered
to be concentrating its investments in the banking industry.
The types of bank and bank holding company obligations in which the Series may
invest include: dollar-denominated certificates of deposit, bankers'
acceptances, commercial paper and other debt obligations issued in the United
States and which mature within two years of the date of settlement, provided
such obligations meet the Series' established credit rating criteria as stated
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above. In addition, the Series is authorized to invest more than 25% of its
total assets in Treasury bonds, bills and notes and obligations of federal
agencies and instrumentalities.
PORTFOLIO STRATEGY. The Series will be managed with a view to capturing credit
risk premiums and term or maturity premiums. As used herein, the term "credit
risk premium" means the anticipated incremental return on investment for holding
obligations considered to have greater credit risk than direct obligations of
the U.S. Treasury, and "maturity risk premium" means the anticipated incremental
return for holding securities having maturities of longer than one month
compared to securities having a maturity of one month. The Advisor believes
that credit risk premiums are available largely through investment in high grade
commercial paper, certificates of deposit and corporate obligations. The
holding period for assets of the Series will be chosen with a view to maximizing
anticipated monthly returns, net of trading costs.
While the Series acquires securities in principal transactions and, therefore,
does not pay brokerage commissions, the spread between the bid and asked prices
of a security may be considered to be a "cost" of trading. Such costs
ordinarily increase with trading activity. However, as stated above, securities
ordinarily will be sold when, in the Advisor's judgment, the monthly return of
the Series will be increased as a result of portfolio transactions after taking
into account the cost of trading. It is anticipated that securities will be
acquired in the secondary markets for short term instruments. However, as the
size of the Series increases, it is possible that Series transactions also may
be effected directly with the issuers of securities acquired for the Series.
THE U.S. LARGE CAP VALUE SERIES AND THE U.S. SMALL CAP VALUE SERIES
The investment objective of both The U.S. Large Cap Value Series (the "Large Cap
Value Series") and The U.S. Small Cap Value Series (the "Small Cap Value
Series") (collectively the "U.S. Value Series") is to achieve long-term capital
appreciation. The Series will invest in common stocks of U.S. companies with
shares that have a high book value in relation to their market value (a "book to
market ratio"). A company's shares will be considered to have a high book to
market ratio if the ratio equals or exceeds the ratios of any of the 30% of
companies with the highest positive book to market ratios whose shares are
listed on the NYSE and, except as described below under "Portfolio Structure",
will be considered eligible for investment. The Large Cap Value Series will
purchase common stocks of companies whose market capitalizations equal or exceed
that of the company having the median market capitalization of companies whose
shares are listed on the NYSE, and the Small Cap Value Series will
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purchase common stocks of companies whose market capitalizations are smaller
than such company.
PORTFOLIO STRUCTURE. Each Series will operate as a "diversified" investment
company. Further, neither Series will invest more than 25% of its total assets
in securities of companies in a single industry. Ordinarily, at least 80% of
each Series' assets will be invested in a broad and diverse group of readily
marketable common stocks of U.S. companies with high book to market ratios, as
described above. The Series may invest a portion of their assets, ordinarily
not more than 20%, in high quality, highly liquid fixed income securities such
as money market instruments, including short-term repurchase agreements. The
Series will purchase securities that are listed on the principal U.S. national
securities exchanges and traded OTC.
Each of the U.S. Value Series will be structured on a market capitalization
basis, by generally basing the amount of each security purchased on the issuer's
relative market capitalization, with a view to creating in each Series a
reasonable reflection of the relative market capitalizations of its portfolio
companies. However, the Advisor may exclude the securities of a company that
otherwise meets the applicable criteria described above if the Advisor
determines in its best judgment that other conditions exist that make the
inclusion of such security inappropriate.
Deviation from strict market capitalization weighting will also occur in the
Series because they intend to purchase round lots only. In order to retain
sufficient liquidity, the relative amount of any security held by a Series may
be reduced, from time to time, from the level which strict adherence to market
capitalization weighting would otherwise require. A portion, but generally not
in excess of 20%, of a Series' assets may be invested in interest-bearing
obligations, as described above, thereby causing further deviation from strict
market capitalization weighting. The Series may make block purchases of
eligible securities at opportune prices even though such purchases exceed the
number of shares which, at the time of purchase, strict adherence to the policy
of market capitalization weighting would otherwise require. In addition, the
Series may acquire eligible securities in exchange for the issuance of their
shares. (See "In Kind Purchases" in Item 7(a).) While such purchases and
acquisitions might cause a temporary deviation from market capitalization
weighting, they would ordinarily be made in anticipation of further growth of
the assets of a Series. On not less than a semi-annual basis, for each Series
the Advisor will calculate the book to market ratio necessary to determine those
companies whose stocks are eligible for investment.
PORTFOLIO TRANSACTIONS. The Series do not intend to purchase or sell securities
based on the prospects for the economy, the
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securities markets or the individual issuers whose shares are eligible for
purchase. As described above under "Portfolio Structure", investments will be
made in virtually all eligible securities on a market capitalization weighted
basis. This is a passive approach to investment management that does not entail
taking steps to reduce risk by replacing portfolio equity securities with other
securities that appear to have the potential to provide better investment
performance.
Generally, securities will be purchased with the expectation that they will be
held for longer than one year. The Large Cap Value Series may sell portfolio
securities when the issuer's market capitalization falls substantially below
that of the issuer with the minimum market capitalization which is then eligible
for purchase by the Series, and the Small Cap Value Series may sell portfolio
securities when the issuer's market capitalization increases to a level that
substantially exceeds that of the issuer with the largest market capitalization
which is then eligible for investment by the Series. However, securities may be
sold at any time when, in the Advisor's judgment, circumstances warrant their
sale.
In addition, the Large Cap Value Series may sell portfolio securities when their
book to market ratio falls substantially below that of the security with the
lowest such ratio that is then eligible for purchase by the Series. The Small
Cap Value Series may also sell portfolio securities in the same circumstances,
however, that Series anticipates generally to retain securities of issuers with
relatively smaller market capitalizations for longer periods, despite any
decrease in the issuer's book to market ratio.
THE DFA INTERNATIONAL VALUE SERIES
The investment objective of The DFA International Value Series is to achieve
long-term capital appreciation. The Series operates as a diversified investment
company and seeks to achieve its objective by investing in the stocks of large
non-U.S. companies that have a high book to market ratio. The shares of a
company in any given country will be considered to have a high book to market
ratio if the ratio equals or exceeds the ratios of any of the 30% of companies
in that country with the highest positive book to market ratios whose shares are
listed on a major exchange, and, except as described below, will be considered
eligible for investment. The Series intends to invest in the stocks of large
companies in countries with developed markets. Initially, the Series will
invest in the stocks of large companies in Japan, the United Kingdom, Germany,
France, Switzerland, Italy, Belgium, Spain, the Netherlands, Hong Kong,
Singapore, Australia and Sweden. As the Series' asset growth permits, it may
invest in the stocks of large companies in other developed markets.
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Under normal market conditions, at least 65% of the Series' assets will be
invested in companies organized or having a majority of their assets in or
deriving a majority of their operating income in at least three non-U.S.
countries and no more than 40% of the Series' assets will be invested in such
companies in any one country. The Series reserves the right to invest in index
futures contracts to commit funds awaiting investment or to maintain liquidity.
The Series will not purchase futures contracts if as a result more than 5% of
its total assets would then consist of initial and variation margin deposits on
such contracts. Such investments entail certain risks. (See Item 4(c).)
The Series intends to invest in companies having at least $500 million of market
capitalization and the Series will be approximately market capitalization
weighted. In determining market capitalization weights, the Advisor, using its
best judgment, will seek to eliminate the effect of cross holdings on the
individual country weights. As a result, the weighting of certain countries in
the Series may vary from their weighting in international indices such as those
published by The Financial Times, Morgan Stanley Capital International or
Salomon/Russell. The Advisor, however, will not attempt to account for cross
holding within the same country. The Advisor may exclude the stock of a company
that otherwise meets the applicable criteria if the Advisor determines in its
best judgment that other conditions exist that make the purchase of such stock
for the Series inappropriate.
Deviation from market capitalization weighting will occur because the Series
intends to purchase round lots only. In order to retain sufficient liquidity,
the relative amount of any security held by the Series may be reduced from time
to time from the level which adherence to market capitalization weighting would
otherwise require. A portion, but generally not in excess of 20%, of the
Series' assets may be invested in interest-bearing obligations, such as money-
market instruments, thereby causing further deviation from market capitalization
weighting. Such investments would be made on a temporary basis pending
investment in equity securities pursuant to the Series' investment objective.
The Series may make block purchases of eligible securities at opportune prices
even though such purchases exceed the number of shares which, at the time of
purchase, adherence to the policy of market capitalization weighting would
otherwise require. In addition, the Series may acquire eligible securities in
exchange for the issuance of its shares. (See "In Kind Purchases" in Item
7(a).) While such transactions might cause a temporary deviation from market
capitalization weighting, they would ordinarily be made in anticipation of
further growth of the assets of the Series.
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Changes in the composition and relative ranking (in terms of market
capitalization and book to market ratio) of the stocks which are eligible for
purchase by the Series take place with every trade when the securities markets
are open for trading due, primarily, to price fluctuations of such securities.
On a periodic basis, the Advisor will prepare a list of eligible large companies
with high book to market ratios whose stock are eligible for investment; such
list will be revised not less than semi-annually. Only common stocks whose
market capitalizations are not less than such minimum will be purchased by the
Series. Additional investments will not be made in securities which have
depreciated in value to such an extent that they are not then considered by the
Advisor to be large companies. This may result in further deviation from market
capitalization weighting and such deviation could be substantial if a
significant amount of the Series' holdings decrease in value sufficiently to be
excluded from the then current market capitalization requirement for eligible
securities, but not by a sufficient amount to warrant their sale.
It is management's belief that the stocks of large companies with high book to
market ratios offer, over a long term, a prudent opportunity for capital
appreciation, but, at the same time, selecting a limited number of such issues
for inclusion in the Series involves greater risk than including a large number
of them. The Advisor does not anticipate that a significant number of
securities which meet the market capitalization criteria will be selectively
excluded from the Series.
The Series does not seek current income as an investment objective and
investments will not be based upon an issuer's dividend payment policy or
record. However, many of the companies whose securities will be included in the
Series do pay dividends. It is anticipated, therefore, that the Series will
receive dividend income. The Series may lend securities to qualified brokers,
dealers, banks and other financial institutions for the purpose of realizing
additional income. (See "Securities Loans" below.)
Securities which have depreciated in value since their acquisition will not be
sold by the Series solely because prospects for the issuer are not considered
attractive, or due to an expected or realized decline in securities prices in
general. Securities may be disposed of, however, at any time when, in the
Advisor's judgment, circumstances warrant their sale, such as tender offers,
mergers and similar transactions, or bids made for block purchases at opportune
prices. Generally, securities will not be sold to realize short-term profits,
but when circumstances warrant, they may be sold without regard to the length of
time held. Generally, securities will be purchased with the expectation that
they will be held for longer than one year, and will be held until such time as
they are no longer considered an
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appropriate holding in light of the policy of maintaining a portfolio of
companies with large market capitalizations and high book to market ratios. The
annual portfolio turnover rate of the Series is not expected to exceed 20%.
In addition to the policies discussed in response to this Item 4(a), investment
limitations have been adopted by each Series and are noted in response to Item
13(b) of Part B.
THE EMERGING MARKETS SERIES
The investment objective of The Emerging Markets Series is to achieve long-term
capital appreciation. The Series operates as a diversified investment company
and seeks to achieve its investment objective by investing in emerging markets
designated by the Board of Trustees in consultation with the Advisor ("Approved
Markets"). The Series invests its assets primarily in Approved Market equity
securities listed on bona fide securities exchanges or actively traded on OTC
markets. These exchanges or OTC markets may be either within or outside the
issuer's domicile country, and the securities may be listed or traded in the
form of International Depository Receipts ("IDR's") or American Depository
Receipts ("ADR's").
Under normal market conditions, the Series will invest at least 65% of its
assets in Approved Market securities. Approved Market securities include (a)
securities of companies organized in a country in an Approved Market or for
which the principal trading market is in an Approved Market, (b) securities
issued or guaranteed by the government of an Approved Market country, its
agencies or instrumentalities, or the central bank of such country, (c)
securities denominated in an Approved Market currency issued by companies to
finance operations in Approved Markets, (d) securities of companies that derive
at least 50% of their revenues primarily from either goods or services produced
in Approved Markets or sales made in Approved Markets and (e) Approved Markets
equity securities in the form of depositary shares. Securities of Approved
Markets may include securities of companies that have characteristics and
business relationships common to companies in other countries. As a result, the
value of the securities of such companies may reflect economic and market forces
in such other countries as well as in the Approved Markets. The Advisor,
however, will select only those companies which, in its view, have sufficiently
strong exposure to economic and market forces in Approved Markets such that
their value will tend to reflect developments in Approved Markets to a greater
extent than developments in other regions. For example, the Advisor may invest
in companies organized and located in the United States or other countries
outside of Approved Markets, including companies having their entire production
facilities outside of Approved Markets, when such companies meet the definition
of Approved Markets securities so long as the Advisor
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believes at the time of investment that the value of the company's securities
will reflect principally conditions in Approved Markets.
The Advisor defines the term "emerging market" to mean a country which, in its
opinion is generally considered to be an emerging market by the international
financial community, including the International Finance Corporation. Approved
emerging markets may not include all such emerging markets. In determining
whether to approve markets for investment, the Board of Trustees will take into
account, among other things, market liquidity, investor information, government
regulation, including fiscal and foreign exchange repatriation rules and the
availability of other access to these markets by the investors of the Series.
The following countries are currently designated as Approved Markets:
Argentina, Brazil, Indonesia, Malaysia, Mexico, Portugal, Thailand, and Turkey.
Countries that may be approved in the future include but are not limited to
Republic of China (Taiwan), which is effectively closed to foreign investors at
present, and Colombia, Greece, India, Jordan, Nigeria, Pakistan, Philippines,
Venezuela and Zimbabwe.
The Series may invest up to 35% of its assets in securities of issuers that are
not Approved Markets securities, but whose issuers the Advisor believes derive a
substantial proportion, but less than 50%, of their total revenues from either
goods and services produced in, or sales made in, Approved Markets.
Pending the investment of new capital in Approved Market equity securities, the
Series will typically invest in money market instruments or other highly liquid
debt instruments denominated in U.S. dollars (including, without limitation,
repurchase agreements). In addition, the Series may, for liquidity, or for
temporary defensive purposes during periods in which market or economic or
political conditions warrant, purchase highly liquid debt instruments or hold
freely convertible currencies, although the Series does not expect the aggregate
of all such amounts to exceed 10% of its net assets under normal circumstances.
The Series also may invest in shares of other investment companies that invest
in one or more Approved Markets, although it intends to do so only where access
to those markets is otherwise significantly limited. The Series may also invest
in money-market mutual funds for temporary cash management purposes. The
Investment Company Act of 1940 limits investment by the Series in shares of
other investment companies as follows: (1) no more than 10% of the value of the
Series' total assets may be invested in shares of other investment companies;
(2) the Series may not own securities issued by an investment company having an
aggregate value in excess of 5% of the value of the total assets of the Series;
and (3) the Series may not own more than 3% of the
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total outstanding voting stock of an investment company. If the Series invests
in another investment company, the Series' shareholders will bear not only their
proportionate share of expenses of the Series (including operating expenses and
the fees of the Advisor), but also will bear indirectly similar expenses of the
underlying investment company. In some Approved Markets it will be necessary or
advisable for the Series to establish a wholly-owned subsidiary or a trust for
the purpose of investing in the local markets.
PORTFOLIO STRUCTURE. The Series will seek a broad market coverage of larger
companies within each Approved Market. The Series will attempt to own shares of
companies whose aggregate overall share of the Approved Market's total public
market capitalization is at least the upper 40% of such capitalization, and can
be as large as 75%. The Series may not invest in all such companies or achieve
approximate market weights, due to constraints imposed within Approved Markets
(E.G., restrictions on purchases by foreigners), or by the Series' policy not to
invest more than 25% of its assets in any one industry. The Series may also
further limit the market coverage in the smaller emerging markets in order to
limit purchases of small market capitalization companies.
The policy of seeking broad market diversification means that the Advisor will
not utilize "fundamental" securities research techniques in identifying
securities selections. The decision to include or exclude the shares of an
issuer will be made primarily on the basis of such issuer's relative market
capitalization determined by reference to other companies located in the same
country. Company size is measured in terms of reference to other companies
located in the same country and in terms of local currencies in order to
eliminate the effect of variations in currency exchange rates. Even though a
company's stock may meet the applicable market capitalization criterion, it may
not be included in the Series for one or more of a number of reasons. For
example, in the Advisor's judgment, the issuer may be considered in extreme
financial difficulty, a material portion of its securities may be closely held
and not likely available to support market liquidity, or the issuer may be a
"passive foreign investment company" (as defined in the Internal Revenue Code of
1986, as amended). To this extent, there will be the exercise of discretion and
consideration by the Advisor which would not be present in the management of a
portfolio seeking to represent an established index of broadly traded domestic
securities (such as the S&P 500 Index). The Advisor will also exercise
discretion in determining the allocation of capital as between Approved Markets.
It is the management's belief that equity investments offer, over a long term, a
prudent opportunity for capital appreciation, but, at the same time, selecting a
limited number of such issues for
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inclusion in the Series involves greater risk than including a large number of
them.
The Series does not seek current income as an investment objective and
investments will not be based upon an issuer's dividend payment policy or
record. However, many of the companies whose securities will be included in the
Series do pay dividends. It is anticipated, therefore, that the Series will
receive dividend income.
Generally, securities will be purchased with the expectation that they will be
held for longer than one year. However, securities may be disposed of at any
time when, in the Advisor's judgment, circumstances warrant their sale. For the
purpose of converting U.S. dollars to another currency, or vice versa, or
converting one foreign currency to another foreign currency, the Series may
enter into forward foreign exchange contracts. In addition, to hedge against
changes in the relative value of foreign currencies, the Series may purchase
foreign currency futures contracts. The Series will only enter into such a
futures contract if it is expected that the Series will be able readily to close
out such contract. There can, however, be no assurance that it will be able in
any particular case to do so, in which case the Series may suffer a loss.
SECURITIES LOANS
Each Series of the Trust may lend securities to qualified brokers, dealers,
banks and other financial institutions for the purpose of earning additional
income. While a Series may earn additional income from lending securities, such
activity is incidental to the investment objective of a Series. The value of
securities loaned may not exceed 33 1/3% of the value of a Series' total assets.
In connection with such loans, a Series will receive collateral consisting of
cash or U.S. Government securities, which will be maintained at all times in an
amount equal to at least 100% of the current market value of the loaned
securities. In addition, the Series will be able to terminate the loan at any
time, will receive reasonable interest on the loan, as well as amounts equal to
any dividends, interest or other distributions on the loaned securities. In the
event of the bankruptcy of the borrower, the Trust could experience delay in
recovering the loaned securities. Management believes that this risk can be
controlled through careful monitoring procedures.
ITEM 4(b)
The U.S. 6-10 Small Company Series may invest in securities of foreign issuers
that are traded in the U.S. securities markets, but such investments may not
exceed 5% of the gross assets of the Series.
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The U.S. Large Company Series may invest generally not more than 5% of its net
assets in the same types of short-term fixed income obligations as may be
acquired by The DFA One-Year Fixed Income Series, in order to maintain liquidity
or to invest temporarily uncommitted cash balances. (See "The DFA One-Year
Fixed Income Series" in Item 4(a)(ii).)
The U.S. Large Company Series, the U.S. Value Series and The DFA International
Value Series may acquire index futures contracts and options thereon in order to
commit funds awaiting investment in stocks or maintain cash liquidity. However,
each Series will not purchase index futures contracts or options if as a result
more than 5% of its total assets would then consist of initial and variation
margin deposits on such contracts or options. Such investments entail certain
risks. (See "Risk Factors - All Series" in Item 4(c).)
ITEM 4(c) RISK FACTORS - ALL SERIES
Typically, securities of small companies are less liquid than securities of
large companies. Recognizing this factor, The U.S. 6-10 Small Company Series
and The U.S. Small Cap Value Series will endeavor to effect securities
transactions in a manner to avoid causing significant price fluctuations in the
market for these securities.
The DFA One-Year Fixed Income Series, The DFA International Value Series and The
Emerging Markets Series invest in foreign issuers. Such investments involve
risks that are not associated with investments in U.S. public companies. Such
risks may include legal, political and or diplomatic actions of foreign
governments, such as imposition of withholding taxes on interest and dividend
income payable on the securities held, possible seizure or nationalization of
foreign deposits, establishment of exchange controls or the adoption of other
foreign governmental restrictions which might adversely affect the value of the
assets held by the Series. Further, foreign issuers are not generally subject
to uniform accounting, auditing and financial reporting standards comparable to
those of U.S. public companies and there may be less publicly available
information about such companies than comparable U.S. companies. The DFA One-
Year Fixed Income Series also may invest in obligations of supranational
organizations. The value of the obligations of these organizations may be
adversely affected if one or more of their supporting governments discontinue
their support. Also, there can be no assurance that any of the Series will
achieve its investment objective.
The investments of the Emerging Markets Series involve risks in addition to the
usual risks of investing in developed foreign markets. A number of emerging
securities markets restrict, to varying degrees, foreign investment in stocks.
Repatriation of
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investment income, capital and the proceeds of sales by foreign investors may
require governmental registration and/or approval in some emerging countries.
In some jurisdictions, such restrictions and the imposition of taxes are
intended to discourage shorter- rather than longer-term holdings. While the
Emerging Markets Series will invest only in markets where these restrictions are
considered acceptable to the Advisor, new or additional repatriation
restrictions might be imposed subsequent to the Series' investment. If such
restrictions were imposed subsequent to investment in the securities of a
particular country, the Series might, among other things, discontinue the
purchasing of securities in that country. Such restrictions will be considered
in relation to the Series' liquidity needs and other factors and may make it
particularly difficult to establish the fair market value of particular
securities from time to time. The valuation of securities held by the Series is
the responsibility of the Board of Trustees, acting in good faith and with
advice from the Advisor. (See Item 7(b).) Further, some attractive equity
securities may not be available to the Series because foreign shareholders hold
the maximum amount permissible under current laws.
Relative to the U.S. and to larger non-U.S. markets, many of the emerging
securities markets in which the Emerging Markets Series may invest are
relatively small, have low trading volumes, suffer periods of illiquidity and
are characterized by significant price volatility. Such factors may be even
more pronounced in jurisdictions where securities ownership is divided into
separate classes for domestic and non-domestic owners.
In addition, many emerging markets, including most Latin American countries,
have experienced substantial, and, in some periods, extremely high, rates of
inflation for many years. Inflation and rapid fluctuations in inflation rates
have had and may continue to have very negative effects on the economies and
securities markets of certain countries. In an attempt to control inflation,
wage and price controls have been imposed at times in certain countries.
Certain emerging markets have recently transitioned, or are in the process of
transitioning, from centrally controlled economies. There can be no assurance
that such transitions will be successful.
Brokerage commissions, custodial services and other costs relating to investment
in foreign markets generally are more expensive than in the United States; this
is particularly true with respect to emerging markets. Such markets have
different settlement and clearance procedures. In certain markets there have
been times when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions. The
inability of the Emerging Markets Series to make intended securities purchases
due to settlement problems could cause the Series to miss investment
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opportunities. Inability to dispose of a portfolio security caused by
settlement problems could result either in losses to the Series due to
subsequent declines in value of the portfolio security or, if the Series has
entered into a contract to sell the security, could result in possible liability
to the purchaser.
The risk also exists that an emergency situation may arise in one or more
emerging markets as a result of which trading of securities may cease or may be
substantially curtailed and prices for the Emerging Markets Series' portfolio
securities in such markets may not be readily available. The Series' portfolio
securities in the affected markets will be valued at fair value determined in
good faith by or under the direction of the Board of Trustees.
Government involvement in the private sector varies in degrees among the
emerging securities markets contemplated for investment by the Emerging Markets
Series. Such involvement may, in some cases, include government ownership of
companies in certain commercial business sectors, wage and price controls or
imposition of trade barriers and other protectionist measures. With respect to
any developing country, there is no guarantee that some future economic or
political crisis will not lead to price controls, forced mergers of companies,
expropriation, the creation of government monopolies, or other measures which
could be detrimental to the investments of the Emerging Markets Series.
Taxation of dividends and capital gains received by non-residents varies among
countries with emerging markets and, in some cases, is high in relation to
comparable U.S. rates. Particular tax structures may have the intended or
incidental effect of encouraging long holding periods for particular securities
and/or the reinvestment of earnings and sales proceeds in the same jurisdiction.
In addition, emerging market jurisdictions typically have less well-defined tax
laws and procedures than is the case in the United States, and such laws may
permit retroactive taxation so that the Emerging Markets Series could in the
future become subject to local tax liability that it had not reasonably
anticipated in conducting its investment activities or valuing its assets.
Investments of The DFA International Value Series and The Emerging Markets
Series will be denominated in foreign currencies. Changes in the relative
values of foreign currencies and the U.S. dollar, therefore, will affect the
value of investments of the Series. The Series may purchase foreign currency
futures contracts and options in order to hedge against changes in the level of
foreign currency exchange rates, provided not more than 5% of the Series' assets
are then invested as initial or variation margin deposits on such contracts or
options. Such contracts involve an agreement to purchase or sell
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a specific currency at a future date at a price set in the contract and enable
the Series to protect against losses resulting from adverse changes in the
relationship between the U.S. dollar and foreign currencies occurring between
the trade and settlement dates of Series securities transactions, but they also
tend to limit the potential gains that might result from a positive change in
such currency relationships.
Each Series, except The U.S. Large Company Series and The DFA One-Year Fixed
Income Series, has reserved the right to borrow amounts not exceeding 33% of its
net assets for the purposes of making redemption payments. When advantageous
opportunities to do so exist, the Series may also purchase securities when
borrowings exceed 5% of the value of the Series' net assets. Such purchases can
be considered to be "leveraging", and in such circumstances, the net asset value
of the Series may increase or decrease at a greater rate than would be the case
if the Series had not leveraged. The interest payable on the amount borrowed
would increase the Series' expenses and if the appreciation and income produced
by the investments purchased when the Series has borrowed are less than the cost
of borrowing, the investment performance of the Series will be reduced as a
result of leveraging.
The method employed by the Advisor to manage each Series, except The U.S. Large
Company Series and The DFA One-Year Fixed Income Series, will differ from the
process employed by many other investment advisors in that the Advisor will rely
on fundamental analysis of the investment merits of securities to a limited
extent to eliminate potential portfolio acquisitions rather than rely on this
technique to select securities. Further, because securities generally will be
held long-term and will not be eliminated based on short-term price
fluctuations, the Advisor generally will not act upon general market movements
or short-term price fluctuations of securities to as great an extent as many
other investment advisors. The U.S. Large Company Series will operate as an
index fund and, therefore, represents a passive method of investing in all
stocks that comprise the S&P 500 Index which does not entail selection of
securities based on the individual investment merits of their issuers. The
investment performance of The U.S. Large Company Series is expected to
approximate the investment performance of the S&P 500 Index, which tends to be
cyclical in nature, reflecting periods when stock prices generally rise or fall.
The U.S. Large Company Series, the U.S. Value Series, The DFA International
Value Series and The Emerging Markets Series may invest in index futures
contracts and index options. These investments entail the risk that an
imperfect correlation may exist between changes in the market value of the
stocks owned by the Series and the prices of such futures contracts and options
and at times the market for such contracts and options might lack
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liquidity, thereby inhibiting a Series' ability to close a position in such
investments.
Concentrating in obligations of the banking industry may involve additional risk
by foregoing the safety of investing in a variety of industries. Changes in the
market's perception of the riskiness of banks relative to non-banks could cause
more fluctuations in the net asset value of The DFA One-Year Fixed Income Series
than might occur in less concentrated portfolios.
In addition, all of the Series may invest in repurchase agreements. In the
event of the bankruptcy of the other party to a repurchase agreement, the Trust
could experience delay in recovering the securities underlying such agreements.
Management believes that this risk can be controlled through stringent security
selection criteria and careful monitoring procedures.
ITEM 5. MANAGEMENT OF THE TRUST
(a) The Trust has a Board of Trustees, which is responsible for establishing
Trust policies and for overseeing the management of the Trust.
(b)(i) Dimensional Fund Advisors Inc. (the "Advisor"), 1299 Ocean Avenue,
11th Floor, Santa Monica, California 90401, serves as investment advisor to each
of the Series. 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 $11 billion. David G. Booth and Rex
A. Sinquefield, directors and officers of the Advisor and trustees and officers
of the Trust, together own approximately 55% of the Advisor's outstanding stock
and may be deemed controlling persons of the Advisor.
(b)(ii) Pursuant to an investment management agreement with the Trust with
respect to each Series, the Advisor manages the investment and reinvestment of
their assets. The Advisor also provides the Trust with records concerning the
Advisor's activities which the Trust is required to maintain and renders regular
reports to the Trust's officers and the Board of Trustees. The Advisor also
provides all of the Series with a trading department and selects brokers and
dealers to effect securities transactions.
(b)(iii) For the fiscal year ended November 30, 1994, (i) the Advisor received
a fee for its services which, on an annual basis, equaled the following
percentage of the average net assets of each Series and (ii) the total expenses
of each Series were the following percentages of respective average net assets:
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<TABLE>
<CAPTION>
SERIES MANAGEMENT FEE TOTAL EXPENSES
------ -------------- --------------
<S> <C> <C>
U.S. 6-10 Small Company 0.03% 0.17%
U.S. Large Company 0.025% 0.025%
U.S. Small Cap Value 0.20% 0.32%
U.S. Large Cap Value 0.10% 0.22%
DFA One-Year Fixed Income 0.05% 0.10%
</TABLE>
The investment advisory fees applicable to The DFA International Value Series
and The Emerging Markets Series, which commenced operations after November 30,
1993, are equal to .20% and .10%, respectively, of the average net assets of
each Series on an annual basis. Beginning December 1, 1993, the Advisor agreed
to waive its fee under the Investment Management Agreement with respect to The
DFA International Value Series to the extent necessary to keep the cumulative
annual expenses of the Series to not more than .45% of average net assets of the
Series on an annualized basis. The Advisor may eliminate this waiver at any
time in its discretion.
The Advisor has agreed to bear all of the ordinary operating expenses of The
U.S. Large Company Series, except the investment advisory fee of the Series.
These expenses are not subject to reimbursement by the Series.
(c) Investment decisions for all Series are made by the Investment Committee of
the Advisor which meets on a regular basis and also as needed to consider
investment issues. The Investment Committee is composed of certain officers and
directors of the Advisor who are elected annually.
(d) AND (e) PFPC Inc. ("PFPC"), 400 Bellevue Parkway , Wilmington, Delaware
19809, serves as the administrative services, dividend disbursing and transfer
agent for all Trust Series. The services provided by PFPC are subject to
supervision by the executive officers and the Board of Trustees of the Trust,
and include day-to-day keeping and maintenance of certain records, calculation
of the offering price of the shares, preparation of reports, liaison with its
custodians, and transfer and dividend disbursing agency services. For its
services, each Series pays PFPC annual fees which are set forth in the following
table:
U.S. 6-10 Small Company Series
U.S. Small Cap Value Series
U.S. Large Cap Value Series
Charges For Each Series:
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.1025% of the first $300 million of net assets
.0769% of the next $300 million of net assets
.0513% of the next $250 million of net assets
.0205% of net assets over $850 million
Except for a minimum fee of $58,800 per year that PFPC charges to each of the
Large Cap Value and Small Cap Value Series, PFPC has agreed that it may from
time to time limit the fee rates for these Series.
DFA INTERNATIONAL VALUE SERIES
EMERGING MARKETS SERIES
CHARGES FOR EACH SERIES:
.123% of the first $300 million of net assets
.0615% of the next $300 million of net assets
.0410% of the next $250 million of net assets
.0205% of net assets over $850 million
Each Series is subject to a minimum fee of $75,000 per year.
DFA ONE-YEAR FIXED INCOME SERIES
.0513% of the first $100 million of net assets
.0308% of net assets
.0205% of net assets over $200 million
The Advisor will pay PFPC's fees with respect to The U.S. Large Company Series.
(f) The Trust bears all of its own costs and expenses, including: services of
its independent accountants, legal counsel, brokerage fees, commissions and
transfer taxes in connection with the acquisition and disposition of portfolio
securities, taxes, insurance premiums, costs incidental to meetings of its
shareholders and trustees, the cost of filing its registration statement under
federal securities law, reports to shareholders, and transfer and dividend
disbursing agency, administrative services and custodian fees, except the
Advisor will pay the ordinary operating expenses (other than the advisory fee)
of The U.S. Large Company Series. Expenses of The U.S. Large Company Series,
which are determined by the Board of Trustees to be extraordinary, would be
borne by that Series. Expenses allocable to a particular Series are so
allocated and expenses which are not allocable to a particular Series are borne
by each Series on the basis of the fees of the Trust's administrative agent.
(g) The Advisor places portfolio securities transactions with a view to
obtaining best price and execution. Subject to that goal, transactions may be
placed with securities firms that are affiliated with an affiliate of the
Advisor.
Response to Item 5A has been omitted pursuant to paragraph 4 of Instruction F of
the General Instructions to Form N-1A.
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ITEM 6. CAPITAL STOCK AND OTHER SECURITIES
(a) All seven Series issue shares of beneficial interest with a par value of
$.01 per share without a sales load. The shares of each Series, when issued and
paid for in accordance with this registration statement, will be fully paid and
nonassessable shares, with equal, non-cumulative voting rights, except as
described below, and no preferences as to conversion, exchange, dividends,
redemptions or any other feature. Shareholders shall have the right to vote
only (i) for removal of Trustees, (ii) with respect to such additional matters
relating to the Trust as may be required by the applicable provisions of the
1940 Act, including Section 16(a) thereof, and (iii) on such other matters as
the Trustees may consider necessary or desirable. In addition, the shareholders
of each Series will be asked to vote on any proposal to change a fundamental
investment policy (i.e. a policy that may be changed only with the approval of
shareholders) of that Series. If a shareholder of The Emerging Markets Series
redeems its entire interest in the Series, a majority of the remaining
shareholders in the Series must vote to approve the continuing existence of the
Series or the Series will be liquidated. All shares of the Trust entitled to
vote on a matter shall vote without differentiation between the separate Series
on a one-vote-per-share basis; provided however, if a matter to be voted on
affects only the interests of not all Series, then only the shareholders of such
affected Series shall be entitled to vote on the matter. If liquidation of the
Trust should occur, shareholders would be entitled to receive on a per class
basis the assets of the particular Series whose shares they own, as well as a
proportionate share of Trust assets not attributable to any particular class.
Ordinarily, the Trust does not intend to hold annual meetings of shareholders,
except as required by the Investment Company Act of 1940 or other applicable
law. The Trust's by-laws provide that meetings of shareholders shall be called
for the purpose of voting upon the question of removal of one or more Trustees
upon the written request of the holders of not less than 10% of the outstanding
shares.
(b) As of May 31, 1995, the following persons beneficially own more than 25% of
the voting securities of the following Series:
The U.S. 6-10 Small Company Series
DFA Investment Dimensions Group Inc. -
The U.S. 6-10 Small Company Portfolio 82.02%
The U.S. Large Company Series
DFA Investment Dimensions Group Inc. -
The U.S. Large Company Portfolio 100.00%
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The DFA One-Year Fixed Income Series
DFA Investment Dimensions Group Inc. -
The DFA One-Year Fixed Income Portfolio 99.95%
The U.S. Small Cap Value Series
DFA Investment Dimensions Group Inc. -
The U.S. Small Cap Value Portfolio 97.74%
The U.S. Large Cap Value Series
DFA Investment Dimensions Group Inc. -
The U.S. Large Cap Value Portfolio 67.76%
Dimensional Investment Group Inc. -
U.S. Large Cap Value Portfolio III 31.41%
The DFA International Value Series
Dimensional Investment Group Inc. -
DFA International Value Portfolio 43.29%
DFA Investment Dimensions Group Inc. -
DFA International High Book to Market Portfolio 30.67%
The Emerging Markets Series
DFA Investment Dimensions Group Inc. -
Emerging Markets Portfolio 99.96%
Each of those Portfolios of DFA Investment Dimensions Group Inc. ("DFA
IDG") and Dimensional Investment Group Inc. ("DIG") are deemed to control the
corresponding Series, as "control" is defined in the Investment Company Act of
1940. DFA IDG and DIG are both Maryland corporations and are located at the
same address as the Trust.
(c) Not applicable.
(d) Not applicable.
(e) Shareholder inquiries may be made by writing or calling the Trust at 1299
Ocean Avenue, 11th Floor, Santa Monica, California 90401 or (310) 395-8005.
(f) The Trust's policy is to distribute substantially all net investment income
from each Series, except The U.S. Large Company Series and The DFA One-Year
Fixed Income Series, together with any net realized capital gains in November
and December of each year. Dividends from investment income of The U.S. Large
Company Series are distributed quarterly and any net capital gains are
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distributed annually after November 30. Net investment income, which is accrued
daily, will be distributed monthly (except January) by The DFA One-Year Fixed
Income Series and any net realized capital gains of will be distributed annually
after the end of the fiscal year. Shareholders of the Trust will automatically
receive all income dividends and capital gains distributions in additional
shares of the Series whose shares they hold at net asset value (as of the
business date following the dividend record date), unless as to The U.S. 6-10
Small Company Series, The DFA One-Year Fixed Income Series, The U.S. Large
Company Series and the U.S. Value Series upon written notice to PFPC, the
shareholder selects one of the following options: (i) Income Option -- to
receive income dividends in cash and capital gains distributions in additional
shares at net asset value; (ii) Capital Gains Option -- to receive capital gains
distributions in cash and income dividends in additional shares at net asset
value; or (iii) Cash Option -- to receive both income dividends and capital
gains distributions in cash.
(g) Each Series of the Trust, other than The Emerging Markets Series, is a
separate corporation for federal income tax purposes (hereinafter the Series
other than The Emerging Markets Series are collectively referred to as the
"Corporate Series").
Each Corporate Series intends to qualify each year as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), so that it will not be liable for federal income taxes to the extent
that its net investment income and net realized capital gains are distributed.
If a Series of the Trust, including The Emerging Markets Series, purchases
shares in certain foreign investment entities, called "passive foreign
investment companies" ("PFIC"), the Series (and in the case of The Emerging
Markets Series, its investors) may be subject to U.S. federal income tax and a
related interest charge on a portion of any "excess distribution" or gain from
the disposition of such shares even if such income is distributed as a taxable
dividend by the Corporate Series to its shareholders or, in the case of The
Emerging Markets Series, even if such income is distributed to its investors
(which may or may not be taxable). (See below for a more detailed discussion of
The Emerging Markets Series).
The Series of the Trust, including The Emerging Markets Series, may be subject
to foreign withholding taxes on income from certain of their foreign securities.
If more than 50% in value of the total assets of a Corporate Series at the end
of its fiscal year are invested in securities of foreign corporations, the
Corporate Series may elect to pass-through to its shareholders the pro rata
share of foreign income taxes paid by the Corporate Series. If this election is
made, shareholders will be (i) required to include in their gross income their
pro
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rata share of foreign source income (including any foreign taxes paid by the
Corporate Series), and (ii) entitled to either deduct their share of such
foreign taxes in computing their taxable income or to claim a credit for such
taxes against their U.S. income tax, subject to certain limitations under the
Code. Shareholders will be informed by the Corporate Series at the end of each
calendar year regarding the shareholder's proportionate share of taxes paid to
any foreign country or possession of the United States, and gross income derived
from sources within any foreign country or possession of the United States.
For the Corporate Series with the principal investment policy of investing in
foreign equity securities and non-equity domestic investments, it is anticipated
that only a small portion of such Corporate Series' dividends will qualify for
the corporate dividends received deduction. To the extent that such Corporate
Series pay dividends which qualify for this deduction, the availability of the
deduction is subject to certain holding period and debt financing restrictions
imposed under the Code on the corporation claiming the deduction. Since
virtually all the net investment income from The DFA One-Year Fixed Income
Series is expected to arise from earned interest, it is not expected that any of
that Series' distributions will be eligible for the dividends received deduction
for corporations.
For federal income tax purposes, any income dividends which the shareholder
receives from a Corporate Series, as well as any distributions derived from the
excess of net short-term capital gain over net long-term capital loss, are
treated as ordinary income whether the shareholder has elected to receive them
in cash or in additional shares. Shareholders of Corporate Series are notified
annually by the Trust as to the federal tax status of dividends and
distributions paid by the Corporate Series whose shares they own.
Dividends which are declared by a Corporate Series in October, November or
December 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
Corporate Series and received by the shareholder on December 31 of the calendar
year in which they are declared.
The sale of shares of a Corporate Series by redemption is a taxable event and
may result in a capital gain or loss. Any loss incurred on sale or exchange of
shares of the Corporate Series, 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.
The Trust may accept securities or local currencies in exchange for shares of a
Series. A gain or loss for federal income tax purposes will be realized by
investors in a Corporate Series who
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are subject to federal taxation upon the exchange depending upon the cost of the
securities or local currency exchanged. (See "In Kind Purchases" in Item 7.)
The Corporate Series may be required to report to the Internal Revenue Service
("IRS") any taxable dividend or other reportable payment (including share
redemption proceeds) and withhold 20% of any such payments made to individuals
and other non-exempt shareholders who have not provided a correct taxpayer
identification number and made certain required certifications that appear in
the Shareholder Application form. A shareholder may also be subject to backup
withholding if the IRS or a broker notifies the Corporate Series that the number
furnished by the shareholder is incorrect or that the shareholder is subject to
backup withholding for previous under-reporting of interest or dividend income.
Shareholders of the Corporate Series who are not U.S. persons for purposes of
federal income taxation, should consult with their financial or tax advisors
regarding the applicability of U.S. withholding and other taxes to distributions
received by them from the Corporate Series and the application of foreign tax
laws to these distributions.
Shareholders should also consult their tax advisors with respect to the
applicability of any state and local intangible property or income taxes to
their shares of the Corporate Series and distributions and redemption proceeds
received from the Corporate Series.
The Emerging Markets Series has obtained a ruling from the Internal Revenue
Service ("IRS") holding, in part, that it is taxable as a partnership. The
Emerging Markets Series is a series of a trust organized under Delaware law.
Under the anticipated method of operation of The Emerging Markets Series as a
partnership, it will not be subject to any income tax. However, each investor
in The Emerging Markets Series will be taxable on its share (as determined in
accordance with the governing instruments of The Emerging Markets Series) of The
Emerging Markets Series' ordinary income and capital gain in determining its
income tax liability. The determination of such share will be made in
accordance with the Code and regulations promulgated thereunder.
The Emerging Markets Series' taxable year-end will be November 30. Although, as
described above, The Emerging Markets Series will not be subject to federal
income tax, it will file appropriate income tax returns.
The Emerging Markets Series' assets, income and distributions will be managed in
such a way that an investor in the Series will be able to satisfy the
requirements of Subchapter M of the Code,
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assuming that the investor invested all of its assets in The Emerging Markets
Series.
There are certain tax issues that will be relevant to only certain of the
investors; specifically, investors that are segregated asset accounts and
investors who contribute assets rather than cash to The Emerging Markets Series.
It is intended that contributions of assets will not be taxable provided certain
requirements are met. Such investors are advised to consult their own tax
advisors as to the tax consequences of an investment in The Emerging Markets
Series.
The Emerging Markets Series will inform investors of the source of dividends and
distributions at the time they are paid and will promptly after the close of
each fiscal year advise investors of the tax status for federal income tax
purposes of such dividends and distributions.
ITEM 7. PURCHASE OF SECURITIES BEING OFFERED
(a) The Trust's shares have not been registered under the Securities Act of
1933, which means that its shares may not be sold publicly. However, the Trust
may sell its shares through private placements pursuant to available exemptions
from registration under that Act.
Shares of the Trust are sold only to other investment companies and certain
institutional investors. Shares of The Emerging Markets Series are sold at a
price which is equal to the net asset value of such shares plus a reimbursement
fee. (SEE Item 8(b).) Shares of the other Series are sold at net asset value
without a sales charge. Shares are purchased at the net asset value next
determined after the Trust receives the order in proper form. All investments
are credited to the shareholder's account in the form of full and fractional
shares of the Series calculated to three decimal places. In the interest of
economy and convenience, certificates for shares will not be issued.
The Trust distributes its own shares. It has, however, entered into an
agreement with DFA Securities Inc., a wholly owned subsidiary of the Advisor,
pursuant to which DFA Securities Inc. is responsible for supervising the sale of
shares of each Series. No compensation is paid by the Trust to DFA Securities
Inc. under this agreement.
IN KIND PURCHASES
If accepted by the Trust, shares of the Series may be purchased in exchange for
securities which are eligible for acquisition by the Series as described in this
registration statement or in exchange for local currencies in which eligible
securities of The DFA International Value Series and The Emerging Markets Series
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are denominated. Securities and local currencies to be exchanged which are
accepted by the Trust and Trust shares to be issued therefore will be valued, as
set forth under "Valuation of Shares" in Item 7(b), 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 Series whose shares are being acquired and must be
delivered to the Trust by the investor upon receipt from the issuer. Investors
who desire to purchase shares of The DFA International Value Series with local
currencies should first contact the Adviser for wire instructions.
The Trust will not accept securities in exchange for shares of a Series unless:
(1) 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 Series 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 Series, the value of any such security (except U.S. Government Securities)
being exchanged together with other securities of the same issuer owned by the
Series will not exceed 5% of the net assets of the Series immediately after the
transaction. In addition, nearly all of the securities accepted in an exchange
will be, at the time of the exchange, eligible to be included in the Series
whose shares are issued. (See Item 4(a)(i).) Investors interested in such
exchanges should contact the Advisor.
(b) VALUATION OF SHARES
The net asset value per share of each Series is calculated as of the close of
the NYSE by dividing the total market value of the Series' investments and other
assets, less any liabilities, by the total outstanding shares of the stock of
the Series. The value of the shares of each Series will fluctuate in relation
to its own investment experience. Securities held by the Series which are
listed on the securities exchange and for which market quotations are available
are valued at the last quoted sale price of the day or, if there is no such
reported sale, The U.S. 6-10 Small Company, The U.S. Large Company, The DFA
International Value, the U.S. Value Series and The Emerging Markets Series value
such securities at the mean between the most recent quoted bid and asked prices.
Price information on listed securities is taken from the exchange where the
security is primarily traded. Unlisted securities for which market quotations
are readily available are valued at the mean between the most recent bid and
asked prices. The value of other assets and securities for which no quotations
are readily available (including restricted securities) are determined in good
faith at fair value in accordance with procedures adopted by the Board of
Trustees. The net asset values per share of The DFA International Value Series
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and The Emerging Markets Series are expressed in U.S. dollars by translating the
net assets of each Series using the bid price for the dollar as quoted by
generally recognized reliable sources.
The value of the shares of The DFA One-Year Fixed Income Series will tend to
fluctuate with interest rates because, unlike money-market funds, this Series
does not seek to stabilize the value of its shares by use of the "amortized
cost" method of asset valuation. Net asset value includes interest on fixed
income securities which is accrued daily. Securities which are traded OTC and
on a stock exchange will be valued according to the broadest and most
representative market, and it is expected that for bonds and other fixed-income
securities this ordinarily will be the OTC market. Securities held by The DFA
One-Year Fixed Income Series may be valued on the basis of prices provided by a
pricing service when such prices are believed to reflect the current market
value of such securities. Other assets and securities for which quotations are
not readily available will be valued in good faith at fair value using methods
determined by the Board of Trustees.
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 DFA International Value Series and The Emerging Markets Series are
determined as of such times for the purpose of computing the net asset value of
the Series. If events which materially affect the value of the investments of
the Series occur subsequent to the close of the securities market on which such
securities are primarily traded, the investments affected thereby will be valued
at "fair value" as described above.
Certain of the securities holdings of The Emerging Markets Series in Approved
Markets may be subject to tax, investment and currency repatriation regulations
of the Approved Markets that could have a material effect on the valuation of
the securities. For example, the Series might be subject to different levels of
taxation on current income and realized gains depending upon the holding period
of the securities. In general, a longer holding period (E.G., 5 years) may
result in the imposition of lower tax rates than a shorter holding period (E.G.,
1 year). The Series may also be subject to certain contractual arrangements
with investment authorities in an Approved Market which require the Series to
maintain minimum holding periods or to limit the extent of repatriation of
income and realized gains. As a result, the valuation of particular securities
at any one time may depend materially upon the assumptions that the Series makes
at that time concerning the anticipated holding period for the securities.
Absent special circumstances as determined by the Board of Trustees, it is
presently intended that the valuation of such securities will be based upon the
assumption that they will be held for at least the amount of time necessary to
avoid higher
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tax rates or penalties and currency repatriation restrictions. However, the use
of such valuation standards will not prevent the Series from selling such
securities in a shorter period of time if the Advisor considers the earlier sale
to be a more prudent course of action. Revision in valuation of those
securities will be made at the time of the transaction to reflect the actual
sales proceeds inuring to the Series.
It is management's belief that payment of a reimbursement fee by each investor,
which is used to defray significant costs associated with investing proceeds of
the sale of their shares to such investors, will eliminate a dilutive effect
such costs would otherwise have on the net asset value of shares held by
previous investors. Therefore, the shares of The Emerging Markets Series are
sold at an offering price which is equal to the current net asset value of such
shares plus a reimbursement fee. The amount of the reimbursement fee represents
management's estimate of the costs reasonably anticipated to be associated with
the purchase of securities by that Series, and is paid to the Series and used by
it to defray such costs. Such costs include brokerage commissions on listed
securities and imputed commissions on OTC securities. The reimbursement fee for
The Emerging Markets Series, expressed as a percentage of the net asset value of
its shares, is .50%. Reinvestments of dividends and capital gains distributions
paid by the Series and in-kind investments are not subject to a reimbursement
fee.
The offering price of shares of each Series, except for The Emerging Markets
Series, is the net asset value thereof next determined after the receipt of the
investor's funds by the Custodian, provided that the purchase order in good
order has been received by the Transfer Agent; no sales charge or reimbursement
fee is imposed.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
ITEM 8. REDEMPTION OR REPURCHASE
(a) As stated above in response to Item 7(a), "Purchase of Securities Being
Offered," the Trust's shares have not been registered under the Securities Act
of 1933, which means that its shares are restricted securities which may not be
sold unless registered or pursuant to an available exemption from that Act.
Investors who desire to redeem shares of a Series must first contact the Advisor
at (310) 395-8005. Redemptions are processed
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on any day on which the Trust is open for business and are effected at the
Series' net asset value next determined after the Series receives a redemption
request in good form.
Redemption payments in cash will ordinarily be made within seven days after
receipt of the redemption request in good form. However, the right of
redemption may be suspended or the date of payment postponed in accordance with
the 1940 Act. The amount received upon redemption may be more or less than the
amount paid for the shares depending upon the fluctuations in the market value
of the assets owned by the Series.
If the Board of Trustees determines that it would be detrimental to the best
interests of the remaining shareholders of any Series to make payment wholly or
partly in cash, a Series may pay the redemption price in whole or in part by a
distribution of portfolio securities from the Series of the shares being
redeemed in lieu of cash in accordance with Rule 18f-1 under the Investment
Company Act of 1940. Investors may incur brokerage charges and other
transaction costs selling securities that were received in payment of
redemptions.
For additional information about redemption of Trust shares, see Items 19(a) and
(b) in Part B.
(b) Not applicable.
(c) Not applicable.
(d) 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 Trust 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.
ITEM 9. PENDING LEGAL PROCEEDINGS
Not applicable.
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Part B:
ITEM 10. COVER PAGE
Not applicable.
ITEM 11. TABLE OF CONTENTS
Not applicable.
ITEM 12. GENERAL INFORMATION AND HISTORY
Not applicable.
ITEM 13. INVESTMENT OBJECTIVES AND POLICIES
(a) SEE Item 4(a)(ii) of Part A for a discussion of the investment policies of
each Series of the Trust.
(b) In addition to the policies stated in response to Item 4(a)(ii) of Part A,
each of the Series has adopted certain limitations which may not be changed with
respect to any Series without the approval of a majority of the outstanding
voting securities of the Series. A "majority" is defined as the lesser of: (1)
at least 67% of the voting securities of the Series (to be affected by the
proposed change) present at a meeting if the holders of more than 50% of the
outstanding voting securities of the Series are present or represented by proxy,
or (2) more than 50% of the outstanding voting securities of such Series.
The Series will not:
(1) invest in commodities or real estate, including limited partnership
interests therein, although they may purchase and sell securities of companies
which deal in real estate and securities which are secured by interests in real
estate, and all Series except The U.S. 6-10 Small Company Series and The DFA
One-Year Fixed Income Series may purchase or sell financial futures contracts
and options thereon;
(2) make loans of cash, except through the acquisition of repurchase agreements
and obligations customarily purchased by institutional investors;
(3) as to 75% of the total assets of a Series, invest in the securities of any
issuer (except obligations of the U.S. Government and its instrumentalities) if,
as a result more than 5% of the Series' 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 trustees of
the Trust or officers and directors of the
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Advisor owning more than 1/2 of 1% of such securities together own more than 5%
of such securities;
(5) borrow, except from banks and as a temporary measure for extraordinary or
emergency purposes and then, in no event, in excess of 5% of a Series' gross
assets valued at the lower of market or cost; provided that each Series, except
The DFA One-Year Fixed Income Series and The U.S. 6-10 Small Company Series, may
borrow amounts not exceeding 33% of their net assets from banks and pledge not
more than 33% of such assets to secure such loans;
(6) pledge, mortgage, or hypothecate any of its assets to an extent greater than
10% of its total assets at fair market value, except as described in (5) above;
(7) invest more than 10% of the value of the Series' 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 DFA International Value Series, the U.S. Value Series and The
Emerging Markets Series may invest not more than 15% of their total assets in
illiquid securities;
(8) engage in the business of underwriting securities issued by others;
(9) invest for the purpose of exercising control over management of any company;
(10) invest its assets in securities of any investment company, except in
connection with a merger, acquisition of assets, consolidation or
reorganization, provided that The Emerging Markets Series is not subject to this
limitation;
(11) invest more than 5% of its total assets in securities of companies which
have (with predecessors) a record of less than three years' continuous
operation;
(12) acquire any securities of companies within one industry if, as a result of
such acquisition, more than 25% of the value of the Series' total assets would
be invested in securities of companies within such industry, except The DFA One-
Year Fixed Income Series shall invest more than 25% of its total assets in
obligations of banks and bank holding companies in the circumstances described
in this registration statement in "Investments in the Banking Industry" under
Item 4(a)(ii) of Part A;
(13) write or acquire options (except as described in (1) above) or interests in
oil, gas or other mineral exploration, leases or development programs;
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(14) purchase warrants; however, each Series, except The DFA One-Year Fixed
Income Series, may acquire warrants as a result of corporate actions involving
its holdings of other equity securities;
(15) purchase securities on margin or sell short; or
(16) acquire more than 10% of the voting securities of any issuer, provided that
this limitation applies only to 75% of the assets of the U.S. Value Series and
The Emerging Markets Series.
Although (2) above prohibits cash loans, the Series are authorized to lend
portfolio securities. (See "Securities Loans" in Item 4(a)(ii) of Part A.)
For the purposes of (7) above, The DFA One-Year Fixed Income Series may invest
in commercial paper that is exempt from the registration requirements of the
Securities Act of 1933 (the "1933 Act") subject to the requirements regarding
credit ratings stated in this registration statement under Item 4. Further,
pursuant to Rule 144A under the 1933 Act, the Series may purchase certain
unregistered (i.e. restricted) securities upon a determination that a liquid
institutional market exists for the securities. If it is decided that a liquid
market does exist, the securities will not be subject to the 10% or 15%
limitation on holdings of illiquid securities stated in (7) above. While
maintaining oversight, the Board of Trustees has delegated the day-to-day
function of making liquidity determinations to the Advisor. For 144A securities
to be considered liquid, there must be at least two dealers making a market in
such securities. After purchase, the Board of Trustees and the Advisor will
continue to monitor the liquidity of Rule 144A securities.
For the purposes of (12) above, utility companies will be divided according to
their services; e.g., gas, gas transmission, electric and gas, electric, water
and telephone will each be considered a separate industry.
Because the structure of each Series, except The DFA One-Year Fixed Income
Series, is based on the relative market capitalizations of eligible holdings, it
is possible that the Series might include at least 5% of the outstanding voting
securities of one or more issuers. In such circumstances, the Trust and the
issuer would be deemed "affiliated persons" under the Investment Company Act of
1940 and certain requirements of the Act regulating dealings between affiliates
might become applicable.
Notwithstanding any of the above investment restrictions, The Emerging Markets
Series may establish subsidiaries or other similar vehicles for the purpose of
conducting its investment operations in Approved Markets, if such subsidiaries
or vehicles
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are required by local laws or regulations governing foreign investors such as
the Series or whose use is otherwise considered by the Series to be advisable.
The Emerging Markets Series would "look through" any such vehicle to determine
compliance with its investment restrictions.
(c) Although not a fundamental policy subject to shareholder approval, The U.S.
6-10 Small Company Series will not purchase interests in any real estate
investment trust.
The DFA International Value Series and The Emerging Markets 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 U.S. Value Series and The DFA International
Value Series have retained authority to buy and sell financial futures contracts
and options thereon, they have no present intention to do so.
FUTURES CONTRACTS
All Series except The U.S. 6-10 Small Company Series and The DFA One-Year Fixed
Income Series may enter into financial futures contracts and options on
financial 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 Series will be
required to make a margin deposit in cash or government securities with a broker
or custodian to initiate and maintain positions in futures contracts. Minimal
initial margin requirements are established by the futures exchange and brokers
may establish margin requirements which are higher than the exchange
requirements. After a futures contract position is opened, the value of the
contract is marked to market daily. If the futures contract price changes to
the extent that the margin on deposit does not satisfy margin requirements,
payment of additional "variation" margin will be required. Conversely,
reduction in the contract value may reduce the required margin resulting in a
repayment of excess margin to the Series. Variation margin payments are made to
and from the futures broker for as long as the contract remains open. The
Series expect to earn income on their margin deposits. A Series will not enter
into futures contract transactions if immediately thereafter, the sum of its
initial and variation margin deposits on open contracts exceeds 5% of the market
value of the Series' total assets.
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Positions in futures contracts may be closed out only on an exchange which
provides a secondary market. However, there can be no assurance that a liquid
secondary market will exist for any particular futures contract at any specific
time. Therefore, it might not be possible to close a futures position and, in
the event of adverse price movements, the Series would continue to be required
to continue to make variation margin deposits. In such circumstances, if the
Series has insufficient cash, it might have to sell portfolio securities to meet
daily margin requirements at a time when it might be disadvantageous to do so.
Management intends to minimize the possibility that it will be unable to close
out a futures contract by only entering into futures which are traded on
national futures exchanges and for which there appears to be a liquid secondary
market.
(d) Because the relative market capitalizations of small companies compared
with larger companies generally do not change substantially over short periods
of time, the portfolio turnover rate of The U.S. 6-10 Small Company Series
ordinarily is anticipated to be low and is not expected to exceed 25% per year.
Generally, securities will be purchased with the expectation that they will be
held for longer than one year. Generally, securities will be held until such
time as, in the Advisor's judgment, they are no longer considered an appropriate
holding in light of the policy of maintaining portfolios of companies with small
market capitalization.
Ordinarily, portfolio securities in The U.S. Large Company Series will not be
sold except to reflect additions or deletions of the stocks that comprise the
S&P 500 Index, including mergers, reorganizations and similar transactions and,
to the extent necessary, to provide cash to pay redemptions of the Series'
shares.
The DFA One-Year Fixed Income Series is expected to have a high portfolio
turnover rate due to the relatively short maturities of the securities to be
acquired. The rate of portfolio turnover will depend upon market and other
conditions; it will not be a limiting factor when management believes that
portfolio changes are appropriate. It is anticipated that the annual turnover
rate of the Series could be 0% to 200%.
The U.S. Large Cap Value Series may sell portfolio securities when their book to
market ratio falls substantially below that of the security with the lowest such
ratio that is then eligible for purchase by the Series. The U.S. Small Cap
Value Series may also sell portfolio securities in the same circumstances,
however, that Series anticipates generally to retain securities of issuers with
relatively smaller market capitalizations for longer periods, despite any
decrease in the issuer's book to market ratio. The annual portfolio turnover
rates of The U.S. Large Cap
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Value Series and The U.S. Small Cap Value Series are not expected to exceed 15%
and 10%, respectively.
Securities which have depreciated in value since their acquisition will not be
sold by The DFA International Value Series solely because prospects for the
issuer are not considered attractive, or due to an expected or realized decline
in securities prices in general. Securities may be disposed of, however, at any
time when, in the Advisor's judgment, circumstances warrant their sale, such as
tender offers, mergers and similar transactions, or bids made for block
purchases at opportune prices. Generally, securities will not be sold to
realize short-term profits, but when circumstances warrant, they may be sold
without regard to the length of time held. Generally, securities will be
purchased with the expectation that they will be held for longer than one year,
and will be held until such time as they are no longer considered an appropriate
holding in light of the policy of maintaining a portfolio of companies with
large market capitalizations and high book to market ratios. The annual
portfolio turnover rate of the Series is not expected to exceed 20%.
Securities will be held by The Emerging Markets Series until such time as they
are no longer considered an appropriate holding in light of the investment
objective and policies of the Series. Generally, securities will be purchased
with the expectation that they will be held for longer than one year. However,
securities may be disposed of at any time when, in the Advisor's judgment,
circumstances warrant their sale. Generally, securities will not be sold to
realize short-term profits, but when circumstances warrant, they may be sold
without regard to the length of time held. The portfolio turnover rate of the
Series ordinarily is anticipated to be low, and not expected to exceed 20% per
year.
ITEM 14. MANAGEMENT OF THE REGISTRANT
(a) AND (b) TRUSTEES AND OFFICERS
The names, ages and addresses of the trustees and officers of the Trust and a
brief statement or their present positions and principal occupations during the
past five years is set forth below. As used below, "DFA Entities" refers to the
following: Dimensional Fund Advisors Inc., Dimensional Fund Advisors Ltd., DFA
Australia Pty. Limited, DFA Investment Dimensions Group Inc. (Registered
Investment Company), Dimensional Emerging Markets Fund Inc. (Registered
Investment Company), Dimensional Investment Group Inc. (Registered Investment
Company) and DFA Securities Inc.
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Trustees
David G. Booth*, 48, Trustee, President and Chairman-Chief Executive Officer,
Santa Monica, CA. President, Chairman-Chief Executive Officer and Director of
all DFA Entities, except Dimensional Fund Advisors Ltd., of which he is Chairman
and Director.
George M. Constantinides, 47, Trustee, Chicago, IL. Leon Carroll Marshall
Professor of Finance, Graduate School of Business, University of Chicago.
Director, DFA Investment Dimensions Group Inc., Dimensional Investment Group
Inc. and Dimensional Emerging Markets Fund Inc.
John P. Gould, 56, Trustee, Chicago, IL. Distinguished Service Professor of
Economics, Graduate School of Business, University of Chicago. Trustee, First
Prairie Funds (Registered Investment Company). Director, DFA Investment
Dimensions Group Inc., Dimensional Investment Group Inc., Dimensional Emerging
Markets Fund Inc. and Harbor Investment Advisors.
Roger G. Ibbotson, 52, Trustee, New Haven, CT. Professor in Practice of
Finance, Yale School of Management. Director, DFA Investment Dimensions Group
Inc., Dimensional Investment Group Inc., Dimensional Emerging Markets Fund Inc.,
Hospital Fund, Inc. (investment management services) and Birr Portfolio
Analysis, Inc. (software products). Chairman, Institute Study of Securities
Markets. Chairman and President, Ibbotson Associates, Inc., Chicago, IL
(software, data, publishing and consulting).
Merton H. Miller, 72, Trustee, Chicago, IL. Robert R. McCormick Distinguished
Service Professor Emeritus, Graduate School of Business, University of Chicago.
Director, DFA Investment Dimensions Group Inc., Dimensional Investment Group
Inc. and Dimensional Emerging Markets Fund Inc.
Myron S. Scholes, 54, Trustee, Greenwich, CT. Frank E. Buck Professor of
Finance, Graduate School of Business and Professor of Law, Law School, Senior
Research Fellow, Hoover Institution, (all) Stanford University. Director, DFA
Investment Dimensions Group Inc., Dimensional Investment Group Inc., Dimensional
Emerging Markets Fund Inc., Benham Capital Management Group of Investment
Companies and Smith Breedon Group of Investment Companies. Limited Partner,
Long-Term Capital Management L.P. (money manager).
Rex A. Sinquefield*, 50, Trustee, Chairman and Chief Investment Officer, Santa
Monica, CA. Chairman-Chief Investment Officer and Director of all DFA Entities,
except Dimensional Fund Advisors Ltd., of which he is Chairman, Chief Executive
Officer and Director.
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<PAGE>
* Interested Trustee of the Trust.
Officers
Arthur Barlow, 39, Vice President, Santa Monica, CA. Vice President of all DFA
Entities.
Maureen Connors, 58, Vice President, Santa Monica, CA. Vice President of all
DFA Entities.
Robert Deere, 37, Vice President, Santa Monica, CA. Vice President of all DFA
Entities.
Irene R. Diamant, 45, Vice President and Secretary, Santa Monica, CA. Vice
President and Secretary of all DFA Entities. Associate attorney, Cahill Gordon
& Reindel, from 1987 to 1991.
Eugene Fama, Jr., 34, Vice President, Santa Monica, CA. Vice President of all
DFA Entities.
David Plecha, 33, Vice President, Santa Monica, CA. Vice President of all DFA
Entities.
George Sands, 39, Vice President, Santa Monica, CA. Vice President of all DFA
Entities. Managing Director, Assets Strategy Consulting, Los Angeles, CA from
1991 to 1992 and previously Vice President of Wilshire Associates, Santa Monica,
CA.
Michael T. Scardina, 39, Vice President, Chief Financial Officer, Controller and
Treasurer, Santa Monica, CA. Vice President, Chief Financial Officer,
Controller and Treasurer of all DFA Entities.
Cem Severoglu, 32, Vice President, Santa Monica, CA. Vice President of all DFA
Entities.
Jeanne C. Sinquefield, Ph.D., 48, Executive Vice President, Santa Monica, CA.
Executive Vice President of all DFA Entities.
Rex A. Sinquefield, Trustee, Chairman and Chief Investment Officer of the Trust,
and Jeanne C. Sinquefield, Executive Vice President of the Trust, are husband
and wife.
(c) Set forth below is a table listing, for each Trustee entitled to receive
compensation, the compensation received from the Trust during the fiscal year
ended November 30, 1994 and the total compensation received from all four
registered investment companies for which the Advisor serves as investment
advisor during that same fiscal year.
-42-
<PAGE>
<TABLE>
<CAPTION>
Aggregate Total Compensation from
Compensation Trust and
Trustee from Trust Fund Complex
- ------- ----------- -------------
<S> <C> <C>
George M. Constantinides $ 5,125 $ 30,750
John P. Gould $ 5,125 $ 30,750
Roger G. Ibbotson $ 5,125 $ 30,750
Merton H. Miller $ 5,000 $ 30,000
Myron S. Scholes $ 4,000 $ 24,000
</TABLE>
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
(a) See Item 6(b).
(b) As of May 31, 1995, the following stockholders own beneficially at least 5%
of the outstanding shares of the Series, as set forth below. Unless otherwise
indicated, the address of each stockholder is 1299 Ocean Avenue, 11th Floor,
Santa Monica, CA 90401.
The U.S. 6-10 Small Company Series
DFA Investment Dimensions Group Inc. -
The U.S. 6-10 Small Company Portfolio 82.02%
Dimensional Investment Group Inc. -
U.S. 6-10 Institutional Portfolio 9.16%
The California Wellness Foundation 8.82%
6320 Canoga Avenue, Suite 1700
Woodland Hills, CA 91367
The U.S. Large Company Series
DFA Investment Dimensions Group Inc. -
The U.S. Large Company Portfolio 100.00%
The DFA One-Year Fixed Income Series
DFA Investment Dimensions Group Inc. -
The DFA One-Year Fixed Income Portfolio 99.95%
The U.S. Small Cap Value Series
DFA Investment Dimensions Group Inc. -
The U.S. Small Cap Value Portfolio 97.74%
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<PAGE>
The U.S. Large Cap Value Series
DFA Investment Dimensions Group Inc. -
The U.S. Large Cap Value Portfolio 67.76%
Dimensional Investment Group Inc. -
U.S. Large Cap Value Portfolio III 31.41%
The DFA International Value Series
Dimensional Investment Group Inc.
DFA International Value Portfolio 43.29%
DFA International Value Portfolio III 23.72%
DFA Investment Dimensions Group Inc. -
DFA International High Book to Market Portfolio 30.67%
The Emerging Markets Series
DFA Investment Dimensions Group Inc. -
Emerging Markets Portfolio 99.96%
(c) Trustees and officers as a group own less than 1% of the Trust's
outstanding stock.
-44-
<PAGE>
ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES
(a) The information provided in response to this item is in addition to the
information provided in response to Item 5(b) in Part A.
David G. Booth and Rex A. Sinquefield together own 55% of the Advisor's
outstanding voting stock and may be considered controlling persons of the
Advisor.
For the services its provides as investment advisor to each Series of the Trust,
the Advisor is paid a monthly fee calculated as a percentage of average net
assets of the Series. For the fiscal years ending November 30, 1993 and 1994,
the Portfolios paid advisory fees as set forth in the following table:
<TABLE>
<CAPTION>
1993 1994
(000) (000)
<S> <C> <C>
U.S. 6-10 Small Company $ 40,083 $ 46,313
U.S. Large Company $ 7,231 $ 10,833
DFA One-Year Fixed Income $240,817 $310,614
U.S. Small Cap Value $ 93,745 $458,698
U.S. Large Cap Value $ 45,346 $142,564
DFA International Value n/a $379,620
Emerging Markets n/a $ 5,771
</TABLE>
(b) The information provided in response to this item is in addition to the
information provided in response to Item 5(a) of Part A.
The investment management agreement with respect to each Series is in effect for
a period of two years. Thereafter, each agreement may continue in effect for
successive annual periods, provided such continuance is specifically approved at
least annually by a vote of the Trust's Board of Trustees or, by a vote of the
holders of a majority of the Series' outstanding voting securities, and in
either event by a majority of the trustees who are not parties to the agreement
or interested persons of any such party (other than as trustees of the Trust),
cast in person at a meeting called for that purpose. An investment management
agreement may be terminated without penalty at any time by the Series or by the
Advisor on 60 days' written notice and will automatically terminate in the event
of its assignment as defined in the 1940 Act.
-45-
<PAGE>
(c) Beginning with the effective date of the Investment Management Agreement
with respect to The DFA International Value Series, the Advisor has agreed to
waive its fee under that Agreement to the extent necessary to keep the
cumulative annual expenses of the Series to not more than .45% of average net
assets of the Series on an annualized basis. The Advisor may eliminate its
waiver at any time in its discretion.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(g) Not applicable.
(h) Boston Safe Deposit and Trust Company, Princess House, 1 Suffolk Lane,
London EC4R 0AN, England, serves as custodian for The DFA International Value
Series. Chase Manhattan Bank, N.A., 4 Chase Metrotech Center, Brooklyn, NY
11245, serves as custodian for The Emerging Markets Series. PNC Bank, N.A., 200
Stevens Drive, Airport Business Center, Lester, PA 19113, acts as custodian for
all other Series. The custodians do not participate in decisions relating to
the purchase and sale of portfolio securities.
Coopers & Lybrand L.L.P., 2400 Eleven Penn Center, Philadelphia, Pennsylvania
19103, is the Trust's independent accountant.
(i) Not applicable.
-46-
<PAGE>
ITEM 17. BROKERAGE ALLOCATION
(a) The following table depicts brokerage commissions paid by the following
Series:
<TABLE>
<CAPTION>
BROKERAGE COMMISSIONS
FISCAL YEARS ENDED NOVEMBER 30, 1993 AND 1994
1993 1994
<S> <C> <C>
U.S. 6-10 Small Company $274,151 $ 247,096
U.S. Large Company $ 41,393 $ 10,610
U.S. Small Cap Value $328,869 $1,471,320
U.S. Large Cap Value $134,312 $ 361,154
DFA International Value n/a $ 623,031
Emerging Markets n/a $ 79,105
</TABLE>
The substantial increases or decreases in the amount of brokerage commissions
paid by certain Series from 1993 to 1994 indicated in the foregoing table
resulted from increases or decreases in the amount of securities bought and sold
by those Series.
During fiscal year 1993, The U.S. 6-10 Small Company Series paid commissions of
$9,793 to Kemper Capital Markets, Inc., a securities firm which has been
succeeded by Kemper Securities, Inc., an affiliate of Kemper Financial Services,
Inc., which owns approximately 15.6% of the Advisor's outstanding stock. Such
commissions represented .0126% of the total commissions paid by the Trust for
1993 and the total value of transactions as to which such commissions relate
were $1,381,561 or .0071% of the Fund's total value of transactions involving
payment of commissions during the fiscal year ended November 30, 1993. No
commissions were paid to affiliates or affiliates of affiliates during fiscal
year 1994.
The DFA One-Year Fixed Income Series acquires and sells securities on a net
basis with dealers which are major market markers in such securities. The
Investment Committee of the Advisor selects dealers on the basis of their size,
market making and credit analysis ability. When executing portfolio
transactions, the Advisor seeks to obtain the most favorable price for the
securities being traded among the dealers with whom such Series effects
transactions.
Portfolio transactions will be placed with a view to receiving the best price
and execution.
-47-
<PAGE>
The OTC companies eligible for purchase by The U.S. 6-10 Small Company Series
and The U.S. Small Cap Value Series are thinly traded securities. Therefore,
the Advisor believes it needs maximum flexibility to effect OTC trades on a best
execution basis. To that end, the Advisor places buy and sell orders with
market makers, third market brokers, Instinet and with brokers on an agency
basis when the Advisor determines that the securities may not be available from
other sources at a more favorable price. Third market brokers enable the
Advisor to trade with other institutional holders directly on a net basis. This
allows the Advisor to sometimes trade larger blocks than would be possible by
going through a single market maker.
Instinet is an electronic information and communication network whose
subscribers include most market makers as well as many institutions. Instinet
charges a commission for each trade executed on its system. On any given trade,
The U.S. 6-10 Small Company Series and the U.S. Value Series, 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 Series can effect transactions at the best available prices.
(b) Not applicable.
(c) The Series will seek to acquire and dispose of securities in a manner which
would cause as little fluctuation in the market prices of stocks being purchased
or sold as possible in light of the size of the transactions being effected, and
brokers will be selected with this goal in view. The Advisor monitors the
performance of brokers which effect transactions for the Series to determine the
effect that the Series' 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 Series 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 Agreements permit
the Advisor knowingly to pay commissions on such transactions which are greater
than another broker might charge if the Advisor, in good faith, determines that
the commissions paid are reasonable in relation to the research or brokerage
services provided by the broker or dealer when viewed in terms of either a
particular transaction or the Advisor's overall responsibilities to the Trust.
Brokerage transactions may be placed with securities firms that are affiliated
with an affiliate of the Advisor. Commission paid on such transactions
-48-
<PAGE>
would be commensurate with the rate of commissions paid on similar transactions
to brokers that are not so affiliated.
(d) Not applicable.
(e) Not applicable.
ITEM 18. CAPITAL STOCK AND OTHER SECURITIES
(a) The information provided in response to this item is in addition to the
information provided in response to Item 6(a) in Part A.
The Trust does not intend to hold annual meetings; it may, however, hold a
meeting for such purposes as changing fundamental investment limitations,
approving a new investment management agreement or any other matters which are
required to be acted on by shareholders under the 1940 Act. Shareholders may
receive assistance in communicating with other shareholders in connection with
the election or removal of Trustees similar to the provisions contained in
Section 16(c) of the 1940 Act.
(b) Not applicable.
ITEM 19. PURCHASE, REDEMPTION AND PRICING OF
SECURITIES BEING OFFERED
The information provided in response to this item is in addition to the
information provided in response to Items 7 and 8 in Part A.
(a) AND (b) The Trust will accept purchase and redemption orders on each day
that 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 Trust 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,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas Day. The Federal Reserve System is closed on the
same days as the NYSE, except that it is open on Good Friday and closed on
Martin Luther King, Jr. Day, Columbus Day and Veterans' Day. Orders for
redemptions and purchases will not be processed if the Trust is closed.
The Trust reserves the right, in its sole discretion, to suspend the offering of
shares of any or all Series or reject purchase orders when, in the judgement of
management, such suspension or rejection is in the best interest of the Trust or
a Series. Securities accepted in exchange for shares of a Series will be
acquired for investment purposes and will be considered for sale
-49-
<PAGE>
under the same circumstances as other securities in the Portfolio.
The Trust may suspend redemption privileges or postpone the date of payment:
(1) during any period when the NYSE is closed, or trading on the Exchange is
restricted as determined by the Securities and Exchange Commission (the
"Commission"), (2) during any period when an emergency exists as defined by the
rules of the Commission as a result of which it is not reasonably practicable
for the Trust to dispose of securities owned by it, or fairly to determine the
value of its assets and (3) for such other periods as the Commission may permit.
(c) The Trust has filed a notice of election pursuant to Rule 18f-1 under the
1940 Act. (SEE Item 8(a) of Part A.)
ITEM 20. TAX STATUS
The information provided in response to this item is in addition to the
information provided in response to Item 6 in Part A.
FEDERAL TAX TREATMENT OF FUTURES CONTRACTS
Except for transactions a Series has identified as hedging transactions, the
Series is required for federal income tax purposes to recognize as income for
each taxable year its net unrealized gains and losses on certain futures
contracts as of the end of the year as well as those actually realized during
the year. In most cases, any gain or loss recognized with respect to a futures
contract is considered to be 60% long-term gain or loss and 40% short-term
capital gain or loss, without regard to the holding period of the contract.
Furthermore, sales of futures contracts which are intended to hedge against a
change in the value of securities held by the Series may affect the holding
period of such securities and, consequently, the nature of the gain or loss on
such securities upon disposition.
In order for a Series to continue to qualify for federal income tax treatment as
a regulated investment company, at least 90% of its gross income for a taxable
year must be derived from qualifying income; i.e., dividends, interest, income
derived from loans of securities, gains from the sale of securities and other
income derived with respect to the Series' business of investing in securities.
In addition, gains realized on the sale or other disposition of securities held
for less than three months must be limited to less than 30% of the Series'
annual gross income. It is anticipated that any net gain realized from closing
futures contracts will be considered gain from the sale of securities and,
therefore, constitute qualifying income for purposes of the 90% requirement. In
order to avoid realizing excessive gains on securities held less than three
months, the Series may be required to defer the closing out of futures contracts
beyond the
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<PAGE>
time when it would otherwise be advantageous to do so. It is anticipated that
unrealized gains on futures contracts which have been open for less than three
months as of the end of the Series' fiscal year and which are recognized for tax
purposes, will not be considered gains on sales of securities held less than
three months for the purpose of the 30% test. The Series will distribute to
shareholders annually any net capital gains which have been recognized for
federal income tax purposes (including unrealized gains at the end of each
Series' fiscal year) on futures transactions. Such distributions will be
combined with distributions of capital gains realized on each Series' other
investments.
ITEM 21. UNDERWRITERS
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
ITEM 22. CALCULATION OF PERFORMANCE DATA
(a) Not applicable.
(b) Following are quotations of the annualized percentage total returns for the
one-, five-, and ten-year periods ended November 30, 1994 (as applicable) using
the standardized method of calculation required by the SEC. For those Series in
effect for less than one, five or ten years, the time periods during which the
Series have been active have been substituted for the periods stated (which in
no case extends prior to the effective dates of the Series' registration
statements).
<TABLE>
<CAPTION>
ONE TEN
YEAR FIVE YEARS YEARS
---- ---------- -----
<S> <C> <C> <C>
The U.S. 6-10 Small Company .59 20 MONTHS n/a
Series ----------
4.63
The U.S. Large Company 1.30 20 MONTHS n/a
Series ---------
3.18
The DFA One-Year Fixed Income 2.59 20 MONTHS n/a
Series ---------
3.11
The U.S. Small Cap Value 2.53 20 MONTHS n/a
Series ---------
9.00
The U.S. Large Cap Value -3.15 20 MONTHS n/a
Series ---------
1.22
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<PAGE>
The DFA International Value 9 n/a n/a
Series MONTHS
------
1.33
The Emerging Markets 7 n/a n/a
Series MONTHS
------
24.63
</TABLE>
As the following formula indicates, the annualized total return is
determined by finding the annualized total return over the stated time period
that would equate a hypothetical initial purchase order of $1,000 to its
redeemable value (including capital appreciation/
depreciation and dividends and distributions paid and reinvested less any fees
charged to a shareholder account) at the end of the stated time period. The
calculation assumes that all dividends and distributions are reinvested at the
public offering price on the reinvestment dates during the period. The
quotation assumes the account was completely redeemed at the end of each period
and the deduction of all applicable charges and fees. According to the
Securities and Exchange Commission formula:
P(1 + T)(n) = ERV
where:
P = a hypothetical initial payment of $1,000
T = annualized compound rate of 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).
ITEM 23. FINANCIAL STATEMENTS
The audited financial statements and financial highlights of the Trust for its
fiscal year ended November 30, 1994, as set forth in the Trust's annual report
to stockholders, and the report thereon of Coopers & Lybrand L.L.P., independent
accountants, also appearing therein, are incorporated herein by reference.
-52-
<PAGE>
THE DFA INVESTMENT TRUST COMPANY
FORM N-1A
PART C: OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements**
(b) Exhibits:
The following exhibits are attached hereto, except as otherwise
noted:
(1) (i) Agreement and Declaration of Trust*
(ii) Certificate of Trust*
(iii) Certificate of Amendment of Certificate of Trust*
(2) By-Laws*
(3) None
(4) Not applicable
(5) (i) Investment Management Agreement re The U.S. 6-10 Small
Company Series*
(ii) Investment Management Agreement re The U.S. Large
Company Series*
(iii) Investment Management Agreement re The DFA One-Year
Fixed Income Series*
(iv) Investment Management Agreement re The U.S. Large Cap
High Book to Market Series*
(v) Investment Management Agreement re The U.S. Small Cap
High Book to Market Series*
(vi) Investment Management Agreement re The DFA
International Value Series***
(vii) Investment Management Agreement re The Emerging Markets
Series****
(6) Agreement with DFA Securities Inc.*
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<PAGE>
(7) None
(8) (i) Form of Custodian Agreement between Registrant and
Provident National Bank*
(ii) Form of Custodian Agreement between Registrant and
Boston Safe Deposit and Trust Company***
(iii) Form of Custodian Agreement between Registrant and
Chase Manhattan Bank, N.A.****
(9) (i) Form of Transfer Agency Agreement with Provident
Financial Processing Corporation*
(ii) Form of Administration and Accounting Services
Agreement with Provident Financial Processing
Corporation*
(10) Not applicable
(11) Not applicable
(12) Not applicable
(13) Not applicable
(14) Not applicable
(15) Not applicable
(16) Not applicable
(17) Financial Data Schedule
(18) Inapplicable
_________________________
* Filed with initial registration statement on January 15, 1993.
** Filed on February 3, 1995 as the Fund's annual report to stockholders for
the fiscal year ending November 30, 1994 pursuant to Rule 30b2-1 under the
1940 Act and incorporated in Part B by reference.
*** Filed with Amendment Number 1 to the registration statement on December 1,
1993.
**** Filed with Amendment Number 2 to the registration statement on January 11,
1994.
-54-
<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
As disclosed in Items 6(b) and 15(b), as of May 31, 1995, each Series is
each controlled by one or more corresponding Portfolios of DFA IDG and DIG, each
a Maryland corporation registered under the Investment Company Act of 1940. If
a person beneficially owns more than 25% of the outstanding voting securities of
a DFA IDG or DIG Portfolio that invests all of its investable assets in a
corresponding Series of the Trust, then that Portfolio and the Series in which
it invests may be deemed to be under common control by such person. As of May
31, 1995, the Washington University Endowment Fund of St. Louis, Missouri
beneficially owned 75.40% of the outstanding shares of The DFA 6-10
Institutional Portfolio of DIG and 33.91% of the outstanding shares of The U.S.
6-10 Small Company Portfolio of DFAIDG, BellSouth Corporation of Atlanta,
Georgia beneficially owned 51.47% of the outstanding shares of The DFA
International Value Portfolio of DIG and Hewitt Associates of Lincolnshire,
Illinois beneficially owned 75.61% of The DFA One-Year Fixed Income Portfolio II
of DIG.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
Title of Class
--------------
(Shares of Beneficial Interest, Number of Record Holders
Par Value $.01) as of May 31, 1995
------------------------
The U.S. 6-10 Small Company Series 3
The U.S. Large Company Series 1
The DFA One-Year Fixed Income Series 2
The U.S. Small Cap Value Series 2
The U.S. Large Cap Value Series 3
The DFA International Value Series 4
The Emerging Markets Series 2
ITEM 27. INDEMNIFICATION.
Reference is made to Article VII of the Registrant's Agreement and
Declaration of Trust (Exhibit 24(b)(1)(i)) and to Article X of the Registrant's
By-Laws (Exhibit 24(b)(2)), which are incorporated herein by reference.
Pursuant to Rule 484 under the Securities Act of 1933, as amended, the
Registrant furnishes the following undertaking:
"Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
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<PAGE>
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue."
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Registrant's Investment Advisor (the "Advisor") was organized in May, 1981. The
principal place of business of the Advisor is 1299 Ocean Avenue, 11th Floor,
Santa Monica, California 90401. The Advisor is engaged in the business of
providing investment advice primarily to institutional investors.
The business, profession, vocation or employment of a substantial nature in
which each director and officer of the Advisor and DFAL is or has been, during
the past two fiscal years, engaged for his own account in the capacity of
director, officer, employee, partner or trustee is set forth below. As used
below, "DFA Entities" refers to the following: Dimensional Fund Advisors Inc.,
Dimensional Fund Advisors Ltd., DFA Australia Pty Limited, DFA Investment
Dimensions Group Inc. (Registered Investment Company), Dimensional Emerging
Markets Fund Inc. (Registered Investment Company), Dimensional Investment Group
Inc. (Registered Investment Company) and DFA Securities Inc.
David G. Booth is Chairman - Chief Executive Officer, President and a Director
of the Advisor and DFA Investment Dimensions Group Inc. Mr. Booth is President,
Chairman - Chief Executive Officer and a Trustee of the Registrant. Mr. Booth
is also Chairman - Chief Executive Officer and a Director of Dimensional
Investment Group Inc., Dimensional Emerging Markets Fund Inc., DFA Securities
Inc. and DFA Australia Pty Limited ("DFA Australia"). He is Chairman and
Director of Dimensional Fund Advisors Ltd. ("DFAL").
-56-
<PAGE>
Rex A. Sinquefield is Chairman - Chief Investment Officer and a Director of the
Advisor and Chairman - Chief Investment Officer and a Trustee of the Registrant.
He is also Chairman - Chief Investment Officer and a Director of DFA Investment
Dimensions Group Inc., Dimensional Investment Group Inc., Dimensional Emerging
Markets Fund, Inc., DFA Securities Inc. and DFA Australia and Chairman, Chief
Executive Officer and Director of DFAL.
Eugene Francis Fama, a Director of the Advisor, is the Robert R. McCormick
Distinguished Service Professor of Finance, and has been engaged in teaching and
research in finance and economics at the Graduate School of Business, University
of Chicago, Chicago, Illinois since September, 1963. Mr. Fama also is a
Director of DFA Securities Inc.
John Andrew McQuown, a Director of the Advisor, has been self employed since
1974 as an entrepreneur, financier and consultant to major financial
institutions. He is also a Director of Chalone Wine Group, Inc., Mortgage
Information Corporation, KMV Corporation, Microsource, Inc. and DFA Securities
Inc.
Lloyd Stockel, a Director of the Advisor, is the Chairman of Sand County
Ventures, Inc., a Trustee of Muir Investment Trust and a Director of DFA
Securities Inc.
David Salisbury, a Director of the Advisor, is Chief Executive Officer of
Schroder Capital Management International Inc. and a Director of DFA Securities
Inc.
Arthur Barlow is a Vice President of Registrant and all DFA Entities.
Maureen Connors is a Vice President of Registrant and all DFA Entities.
Robert Deere is a Vice President of the Registrant and all DFA Entities.
Irene R. Diamant is a Vice President and Secretary of Registrant and all DFA
Entities. Ms. Diamant was an associate attorney with Cahill, Gordon and Reindel
in New York, NY from 1987 to 1991.
Eugene Fama, Jr. is a Vice President of Registrant and all DFA Entities.
David Plecha is a Vice President of Registrant and all DFA Entities.
George Sands is a Vice President of Registrant and DFA Entities. Mr. Sands was
a Managing Director of Asset Strategy Consulting in Los Angeles, CA from March
1991 to August 1992 and a Vice President of Wilshire Associates in Santa Monica,
CA from 1985 to February 1991.
Michael T. Scardina is a Vice President, Chief Financial Officer, Controller and
Treasurer of the Registrant and all DFA Entities.
-57-
<PAGE>
Cem Severoglu is a Vice President of Registrant and all DFA Entities.
Jeanne C. Sinquefield is Executive Vice President of the Registrant and all DFA
Entities.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Not applicable
(b) Registrant distributes its own shares. It has entered
into an agreement, filed as Exhibit No. 6 to the Registration
Statement, which provides that DFA Securities Inc., 1299 Ocean Avenue,
11th Floor, Santa Monica, California 90401, will supervise the sale of
Registrant's shares.
(c) Not applicable
ITEM 30. LOCATIONS OF ACCOUNTS AND RECORDS.
All accounts and records are maintained by PFPC Inc., 400 Bellevue Parkway,
Wilmington, DE 19809.
ITEM 31. MANAGEMENT SERVICES.
There are no management-related service contracts not discussed in Part A
or Part B.
ITEM 32. UNDERTAKING.
(a) Not applicable
(b) Not applicable
(c) The Registrant undertakes to furnish each person to whom this Post-
Effective Amendment is delivered a copy of its latest annual report to
shareholders, upon request and without charge.
(d) The Registrant hereby undertakes to promptly call a meeting of
shareholders for the purpose of voting upon the question of removal of any
trustee or trustees when requested in writing to do so by the record holders of
not less than 10 per centum of the Registrant's outstanding shares and to assist
its shareholders in accordance with the requirements of Section 16(c) of the
Investment Company Act of 1940 relating to shareholder communications.
-58-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Investment Company Act of 1940, as
amended, the Registrant has duly caused this amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Santa Monica, the State of California, on the 29th
day of June, 1995.
THE DFA INVESTMENT TRUST COMPANY
By: DAVID G. BOOTH
---------------------------
David G. Booth
President
-59-
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT NO. DESCRIPTION
- ---------- ------------
27.1 Financial Data Schedule
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1994
<PERIOD-END> NOV-30-1994
<INVESTMENTS-AT-COST> 14,411,938
<INVESTMENTS-AT-VALUE> 14,865,866
<RECEIVABLES> 2,378,296
<ASSETS-OTHER> 12,672
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 17,256,834
<PAYABLE-FOR-SECURITIES> 1,494,902
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 37,793
<TOTAL-LIABILITIES> 1,532,695
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15,224,115
<SHARES-COMMON-STOCK> 1,383,022
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 25,980
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 20,116
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 453,928
<NET-ASSETS> 15,724,139
<DIVIDEND-INCOME> 60,815
<INTEREST-INCOME> 55,490
<OTHER-INCOME> 0
<EXPENSES-NET> 84,431
<NET-INVESTMENT-INCOME> 31,874
<REALIZED-GAINS-CURRENT> 14,222
<APPREC-INCREASE-CURRENT> 453,928
<NET-CHANGE-FROM-OPS> 500,024
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,389,855
<NUMBER-OF-SHARES-REDEEMED> (6,833)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 15,724,139
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,771
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 84,431
<AVERAGE-NET-ASSETS> 9,604,342
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> 1.35
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.37
<EXPENSE-RATIO> 1.49
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
