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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. 16 (X)
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THE DFA INVESTMENT TRUST COMPANY
(Exact Name of Registrant as Specified in Charter)
1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401
(Address of Principal Executive Offices (Zip Code)
Registrant's Telephone Number, Including Area Code (310) 395-8005
Irene R. Diamant, 1299 Ocean Avenue, 11th Floor, Santa Monica CA 90401
(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, LLP
Great Valley Corporate Center
30 Valley Stream Parkway
Malvern, Pennsylvania 19355
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THE DFA INVESTMENT TRUST COMPANY
THE U.S. 9-10 SMALL COMPANY SERIES
THE U.S. 6-10 SMALL COMPANY SERIES
THE U.S. LARGE COMPANY SERIES
THE ENHANCED U.S. LARGE COMPANY SERIES
THE U.S. 6-10 VALUE SERIES
THE U.S. LARGE CAP VALUE SERIES
THE TAX-MANAGED U.S. MARKETWIDE VALUE SERIES
THE U.S. 4-10 VALUE SERIES
THE JAPANESE SMALL COMPANY SERIES
THE PACIFIC RIM SMALL COMPANY SERIES
THE UNITED KINGDOM SMALL COMPANY SERIES
THE EMERGING MARKETS SERIES
THE DFA INTERNATIONAL VALUE SERIES
THE EMERGING MARKETS SMALL CAP SERIES
THE CONTINENTAL SMALL COMPANY SERIES
THE DFA ONE-YEAR FIXED INCOME SERIES
THE DFA TWO-YEAR GLOBAL FIXED INCOME SERIES
DECEMBER 7, 1998
FORM N-1A, Part A:
Responses to Items 1 through 3 have been omitted pursuant to paragraph 3 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 seventeen series which are listed above, each of which
operates as a diversified investment company and represents a separate class
("Series") of the Trust's shares of beneficial interest. 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.
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INVESTMENT OBJECTIVE AND POLICIES - SMALL COMPANY SERIES
The U.S. 6-10 Small Company, U.S. 9-10 Small Company, Japanese Small Company,
Pacific Rim Small Company, United Kingdom Small Company and Continental
Small Company Series of the Trust (the "Small Company Series"), each operate
as a diversified investment company whose investment objective is to achieve
long-term capital appreciation. The Small Company Series provide investors
with access to securities portfolios consisting of small U.S., Japanese,
United Kingdom, European and Pacific Rim companies. Company size will be
determined for purposes of these Series solely on the basis of a company's
market capitalization. "Market capitalization" for domestic securities will
be calculated by multiplying the price of a company's stock by the number of
its shares of outstanding common stock. "Market capitalization" for foreign
securities will be calculated using the number of outstanding stocks similar
to domestic common stocks.
Each Small Company Series intends to invest at least 80% of its assets in
equity securities of U.S., Japanese, United Kingdom, European and Pacific Rim
small companies, as defined herein, and as applicable to the Series. Each
Small Company Series will be structured to reflect reasonably the relative
market capitalizations of its portfolio companies. The Advisor believes that
over the long term the investment performance of small companies is superior
to large companies, not only in the U.S. but in other developed countries as
well, and that investment in the Series is an effective way to improve global
diversification. Investors which, for a variety of reasons, may choose not
to make substantial, or any, direct investment in companies whose securities
will be held by the Small Company Series, may participate in the investment
performance of these companies through ownership of a Series' stock.
THE U.S. 6-10 SMALL COMPANY SERIES
The U.S. 6-10 Small Company Series (the "U.S. 6-10 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" mean 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"). The 6-10 Series
may invest in securities of foreign issuers which are traded in the U.S.
securities markets, but such investments may not exceed 5% of the gross
assets of the Series. It is the intention of the U.S. 6-10 Series to acquire
a portion of the common stock of each eligible NYSE, AMEX and OTC company on
a market capitalization weighted basis. In the future, the U.S. 6-10 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' net assets at the time of purchase.
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THE U.S. 9-10 SMALL COMPANY SERIES
The U.S. 9-10 Small Company Series (the "U.S. 9-10 Series") will invest in a
broad and diverse segment of small U.S. companies having readily marketable
stocks, and whose market capitalization is not larger than the largest of
those in the quintile of companies listed on the NYSE having the smallest
market capitalizations (smallest 20%). The U.S. 9-10 Series will purchase
stocks of companies whose share are listed on the NYSE or AMEX or traded OTC.
The U.S. 9-10 Series may invest in securities of foreign issuers which are
traded in the U.S. securities markets, but such investments may not exceed 5%
of the gross assets of the Series. There is some overlap in the companies in
which the U.S. 9-10 Series and the U.S. 6-10 Series invest. It is the
intention of the U.S. 9-10 Series to acquire a portion of the stock of each
eligible NYSE, AMEX and OTC company on a market capitalization weighted
basis. (See INVESTMENT OBJECTIVES AND POLICIES - SMALL COMPANY SERIES -
"Portfolio Structure.") In the future, the U.S. 9-10 Series may include
stocks of small U.S. companies which are listed on other U.S. securities
exchanges. The U.S. 9-10 Series is authorized to invest in privately placed
convertible debentures and the value thereof together with the value of all
other illiquid investments may not exceed 10% of the value of the Series' net
assets at the time of purchase.
THE JAPANESE SMALL COMPANY SERIES
The Japanese Small Company Series (the "Japanese Series") will invest in a
broad and diverse group of readily marketable stocks of Japanese small
companies which are traded in the Japanese securities markets. Generally,
reference in this registration statement to the term "Japanese small company"
means a company located in Japan whose market capitalization is not larger
than the largest of those in the smaller one-half (deciles 6 through 10) of
companies whose securities are listed on the First Section of the Tokyo Stock
Exchange ("TSE").
While the Japanese Series will invest primarily in the stocks of small
companies which are listed on the TSE, it may acquire the stocks of Japanese
small companies which are traded in other Japanese securities markets as
well. It is the intention of the Japanese Series to acquire a portion of the
stock of each of these companies on a market capitalization weighted basis.
The Japanese Series also may invest up to 5% of its assets in convertible
debentures issued by Japanese small companies. (See "INVESTMENT OBJECTIVES
AND POLICIES - SMALL COMPANY SERIES -Portfolio Structure.")
THE UNITED KINGDOM SMALL COMPANY SERIES
The United Kingdom Small Company Series (the "United Kingdom Series") will
invest in a broad and diverse group of readily marketable stocks of United
Kingdom small companies which are traded principally on the International
Stock Exchange of the United Kingdom and the Republic of Ireland ("ISE").
Generally, reference in this registration statement to a "United Kingdom
small company" means a company organized in the United Kingdom, with shares
listed on the ISE whose market capitalization is not larger than the largest
of those in the smaller
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one-half (deciles 6 through 10) of companies included in the Financial
Times-Actuaries All Share Index ("FTA").
The FTA is an index of stocks traded on the ISE, which is similar to the S&P
500 Index, and is used by investment professionals in the United Kingdom for
the same purposes as investment professionals in the U.S. use the S&P 500
Index. While the FTA typically will be used by the United Kingdom Series to
determine the maximum market capitalization of any company whose stock the
Series will purchase, acquisitions by the United Kingdom Series will not be
limited to stocks which are included in the FTA. The United Kingdom Series
will not, however, purchase shares of any investment trust or of any company
whose market capitalization is less than $5,000,000.
It is the intention of the United Kingdom Series to acquire a portion of the
stock of each eligible company on a market capitalization basis. The United
Kingdom Series also may invest up to 5% of its assets in convertible
debentures issued by United Kingdom small companies. (See "INVESTMENT
OBJECTIVES AND POLICIES - SMALL COMPANY SERIES - Portfolio Structure.")
THE CONTINENTAL SMALL COMPANY SERIES
The Continental Small Company Series (the "Continental Series") is authorized
to invest in readily marketable stocks of a broad and diverse group of small
companies organized under the laws of certain European countries. As of the
date of this registration statement, the Continental Series may invest in
small companies located in Austria, Belgium, Denmark, Finland, France,
Germany, Ireland, Italy, the Netherlands, Norway, Spain, Sweden, and
Switzerland, whose shares are traded principally in securities markets
located in those countries. Company size will be determined by the Advisor in
a manner that will compare the market capitalizations of companies in all
countries in which the Continental Series invests (i.e., on a European
basis). The Advisor typically will use the appropriate country indices of
the Financial Times-Actuaries World Index ("FTW") converted to a common
currency, the United States dollar, and aggregated to define "small
companies." The FTW consists of a series of country indices which contain
generally the largest companies in the major industry sectors in proportion
to their market capitalization whose shares are available for purchase by
non-resident investors. Its constituents represent about 70% of the total
market capitalization of the respective markets. Generally, companies with
publicly traded stock whose market capitalizations are not greater than the
largest of those in the smallest 20% (9th and 10th deciles) of companies
listed in the FTW as combined for the countries in which the Continental
Series invests will be considered to be "small companies" and will be
eligible for purchase by the Continental Series.
While the Advisor typically will use the aggregated FTW indices to determine
the maximum size of eligible portfolio companies, portfolio acquisitions will
not be limited to stocks listed on the FTW for any country. The Continental
Series does not intend, however, to purchase shares of any company whose
market capitalization is less than the equivalent of $5,000,000. The
Continental Series intends to acquire a portion of the stock of each eligible
company on a market capitalization basis. The Continental Series also may
invest up to 5% of its assets in convertible debentures issued by European
small companies. The Continental Series has acquired the stocks
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of small companies located in Denmark, France, Germany, Italy, Switzerland,
the Netherlands, Belgium, Sweden and Spain. When the Advisor determines that
the investments of the Continental Series in the stocks of small companies in
those countries are sufficiently diverse, the stocks of small companies
located in other European countries may be acquired on a country-by-country
basis. In addition, the Advisor may in its discretion either limit further
investments in a particular country or divest the Continental Series of
holdings in a particular country. (See "INVESTMENT OBJECTIVES AND POLICIES -
SMALL COMPANY SERIES - Portfolio Structure.")
THE PACIFIC RIM SMALL COMPANY SERIES
The Pacific Rim Small Company Series (the "Pacific Rim Series") is authorized
to invest in stocks of a broad and diverse group of small companies located
in Australia, New Zealand and Asian countries whose shares are traded
principally on the securities markets located in those countries. As of the
date of this registration statement, the Pacific Rim Series may invest in
small companies located in Australia, Hong Kong, Malaysia, New Zealand and
Singapore. In the future, the Advisor may add small companies located in
other Asian countries as securities markets in these countries become
accessible. In addition, the Advisor may in its discretion either limit
further investments in a particular country or divest the Pacific Rim Series
of holdings in a particular country. As of September 10, 1998, the Pacific
Rim Series ceased offering its shares to new investors as a consequence of
certain restrictions imposed by the Malaysian government on the repatriation
of assets by foreign investors, such as the Pacific Rim Series. (See "Item
4(c) - Risk Factors - All Series - Investing in Emerging Markets.")
Company size will be determined by the Advisor in a manner that will compare
the market capitalizations of the companies in all countries in which the
Pacific Rim Series invests (i.e., on a Pacific Rim basis). The Advisor
typically will use the appropriate country indices of the FTW converted to a
common currency and aggregated, to define "small companies." Generally,
companies with publicly traded stock whose market capitalizations are not
greater than the largest of those in the smallest 30% of companies (8th, 9th
and 10th deciles) listed in the FTW as combined for the countries in which
the Pacific Rim Series invests will be considered to be "small companies" and
will be eligible for purchase by the Pacific Rim Series.
While the Advisor typically will use the aggregated FTW indices to determine
the maximum size of eligible portfolio companies, portfolio acquisitions will
not be limited to stocks listed on the FTW for any country. The Pacific Rim
Series does not intend to purchase shares of any company whose market
capitalization is less than $5,000,000. The Pacific Rim Series intends to
acquire a portion of the stock of each eligible company on a market
capitalization basis. The Pacific Rim Series also may invest up to 5% of its
assets in convertible debentures issued by small companies located in the
Pacific Rim. (See "INVESTMENT OBJECTIVES AND POLICIES - SMALL COMPANY
PORTFOLIOS - Portfolio Structure.")
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PORTFOLIO STRUCTURE
Each Small Company 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 each Series a reasonable reflection of the relative
market capitalizations of its portfolio companies. The following discussion
applies to the investment policies of the Small Company Series.
The decision to include or exclude the shares of an issuer will be made on
the basis of such issuer's relative market capitalization determined by
reference to other companies located in the same country; except with respect
to Continental and Pacific Rim Series, such determination shall be made by
reference to other companies located in all countries in which the Series
invest. Company size is measured in terms of local currencies in order to
eliminate the effect of variations in currency exchange rates, except that
Continental and Pacific Rim Series each will measure company size in terms of
a common currency. Even though a company's stock may meet the applicable
market capitalization criterion, it may not be purchased if (i) in the
Advisor's judgment, the issuer is in extreme financial difficulty, (ii) the
issuer is involved in a merger or consolidation or is the subject of an
acquisition or (iii) a significant portion of the issuer's securities are
closely held. Further, securities of real estate investment trusts will not
be acquired (except as a part of a merger, consolidation or acquisition of
assets). In addition, the Advisor may exclude the stock of a company that
otherwise meets applicable market capitalization criterion if the Advisor
determines in its best judgment that other conditions exist that make the
purchase of such stock inappropriate.
Deviation from strict market capitalization weighting also will occur because
the Advisor intends to purchase round lots only. Furthermore, in order to
retain sufficient liquidity, the relative amount of any security held may be
reduced from time to time from the level which strict adherence to market
capitalization weighting would otherwise require. A portion, but generally
not in excess of 20%, of assets may be invested in interest-bearing
obligations, such as money-market instruments for this purpose, thereby
causing further deviation from strict market capitalization weighting.
Block purchases of eligible securities may be made at opportune prices even
though such purchases exceed the number of shares which, at the time of
purchase, strict adherence to the policy of market capitalization weighting
would otherwise require. In addition, each Small Company Series may, in
exchange for the issuance of shares, acquire securities eligible for purchase
or otherwise represented in their portfolios at the time of the exchange.
(See "In Kind Purchases 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
assets.
If securities must be sold in order to obtain funds to make redemption
payments, they may be repurchased as additional cash becomes available. In
most instances, however, management would anticipate selling securities which
had appreciated sufficiently to be eligible for sale and, therefore, would
not need to repurchase such securities. (See "INVESTMENT OBJECTIVES AND
POLICIES - SMALL COMPANY SERIES - Portfolio Transactions.")
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Changes in the composition and relative ranking (in terms of market
capitalization) of the stocks which are eligible for purchase take place with
every trade when the securities markets are open for trading due, primarily,
to price fluctuations of such securities. On a not less than semi-annual
basis, the Advisor will determine the market capitalization of the largest
small company eligible for investment. Common stocks whose market
capitalizations are not greater than such company will be purchased.
Additional investments generally will not be made in securities which have
appreciated in value sufficiently to be excluded from the Advisor's then
current market capitalization limit for eligible portfolio securities. This
may result in further deviation from strict market capitalization weighting
and such deviation could be substantial if a significant amount of holdings
increase in value sufficiently to be excluded from the limit for eligible
securities, but not by a sufficient amount to warrant their sale. (See
"INVESTMENT OBJECTIVES AND POLICIES -SMALL COMPANY PORTFOLIOS - Portfolio
Transactions.") A further deviation from market capitalization weighting may
occur if a Series invests a portion of its assets in 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 investment involves
greater risk than investing in a large number of them.
Generally, current income is not sought as an investment objective, and
investments will not be based upon an issuer's dividend payment policy or
record. However, many of the companies whose securities will be selected for
investment do pay dividends. It is anticipated, therefore, that dividend
income will be received. Also, each Small Company 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 holdings of each of the
Small Company Series and determine which, at the time of such review, are no
longer considered small U.S., Japanese, United Kingdom, European or Pacific
Rim companies. The present policy of the Advisor (except with respect to the
U.S. 6-10 Series) is to consider portfolio securities for sale when they have
appreciated sufficiently to rank, on a market capitalization basis, more than
one full decile higher than the company with the largest market
capitalization that is eligible for purchase by the particular Small Company
Series as determined periodically by the Advisor. As of the date of this
registration statement, the Advisor has established the following policy with
respect to the U.S. 6-10 Series: 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 50% (deciles 5 through 1) based on market capitalization of
securities listed on the NYSE. The Advisor may, from time to time, revise
such policies if, in the opinion of the Advisor, such revision is necessary
to maintain appropriate market capitalization weighting.
Securities which have depreciated in value since their acquisition will not
be sold solely because prospects for the issuer are not considered
attractive, or due to an expected or realized decline in securities prices in
general. Securities may be disposed of, however, at any time when, in the
Advisor's judgment, circumstances, such as (but not limited to) tender
offers, mergers and
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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 the issuer's respective
market capitalization. The S&P 500 Index is comprised of a broad and diverse
group of stocks most of which are traded on the NYSE. Generally, these are
the U.S. stocks with the largest market capitalizations and, as a group, they
represent approximately 70% of the total market capitalization of all
publicly traded U.S. stocks. 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. For
information concerning Standard & Poor's Rating Group, a Division of The
McGraw-Hill Companies ("S&P") and disclaimers of S&P with respect to the
Series, see "STANDARD & POOR'S INFORMATION AND DISCLAIMERS," below.
THE ENHANCED U.S. LARGE COMPANY SERIES
The Enhanced U.S. Large Company Series seeks, as its investment objective, to
achieve a total return which exceeds the total return performance of the S&P
500 Index. In seeking to achieve a total return performance in excess of the
total return performance of the S&P 500 Index, the Series may invest in all
of the stocks represented in the S&P 500 Index, options on stock indices,
stock index futures, options on stock index futures, swap agreements on stock
indices and, to the extent permissible pursuant to the Investment Company Act
of 1940, shares of investment companies that invest in stock indices. The
S&P 500 Index is comprised of a broad and diverse group of stocks most of
which are traded on the NYSE. Generally, these are the U.S. stocks with the
largest market capitalizations and, as a group, they represent approximately
70% of the total market capitalization of all publicly traded U.S. stocks.
The Series may, from time to time, also invest in options on stock indices,
stock index futures, options on stock index futures and swap agreements based
on indices other than, but similar to, the S&P 500 Index (such instruments
whether or not based on the S&P 500 Index hereinafter
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collectively referred to as "Index Derivatives"). The Series may invest all
of its assets in Index Derivatives (See Item 4(c) "Risk Factors - All
Series"). Assets of the Series not invested in S&P 500 stocks or Index
Derivatives may be invested in the same types of short-term fixed income
obligations as may be acquired by The DFA Two-Year Global Fixed Income Series
and, to the extent allowed by the Investment Company Act of 1940, shares of
money market mutual funds (collectively, "Fixed Income Investments"). (See
"INVESTMENT OBJECTIVES AND POLICIES - FIXED INCOME SERIES -Description of
Investments.") Investments in the securities of other investment companies
will involve duplication of certain fees and expenses.
The percentage of assets of the Series that will be invested at any one time
in S&P 500 Index stocks, Index Derivatives and Fixed Income Investments may
vary from time to time, within the discretion of the Advisor and according to
restraints imposed by the Investment Company Act of 1940. The Series will
maintain a segregated account consisting of liquid assets (or, as permitted
by applicable regulation, enter into offsetting positions) to cover its open
positions in Index Derivatives to avoid leveraging of the Series.
The Series will enter into positions in futures and options on futures only
to the extent such positions are permissible with respect to applicable rules
of the Commodity Futures Trading Commission without registering the Series or
the Trust as a commodities pool operator. In addition, the Series may not be
able to utilize Index Derivatives to the extent otherwise permissible or
desirable because of constraints imposed by the Internal Revenue Code or by
unanticipated illiquidity in the marketplace for such instruments. For more
information about Index Derivatives, see Item 4(c) "Risk Factors - All
Series."
It is the position of the Securities and Exchange Commission that
over-the-counter options are illiquid. Accordingly, the Series will invest
in such options only to the extent consistent with its 15% limit on
investment in illiquid securities.
STANDARD AND POOR'S - INFORMATION AND DISCLAIMERS
Neither The U.S. Large Company Series or The Enhanced U.S. Large Company
Series (together, the "Large Company Series") are sponsored, endorsed, sold
or promoted by S&P. S&P makes no representation or warranty, express or
implied, to the owners of the Large Company Series or any member of the
public regarding the advisability of investing in securities generally or in
the Large Company Series particularly or the ability of the S&P 500 Index to
track general stock market performance. S&P's only relationship to the Large
Company Series is the licensing of certain trademarks and trade names of S&P
and of the S&P 500 Index which is determined, composed and calculated by S&P
without regard to the Large Company Series. S&P has no obligation to take
the needs of the Large Company Series or their respective owners into
consideration in determining, composing or calculating the S&P 500 Index.
S&P is not responsible for and has not participated in the determination of
the prices and amount of the Large Company Series or in the issuance or sale
of the Large Company Series or in the determination or calculation of the
equation by which the Large Company Series are to be converted into cash.
S&P has no obligation or liability in connection with the administration,
marketing or trading of the Large Company Series.
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S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500
INDEX OR ANY DATA INCLUDED THEREIN, AND S&P SHALL HAVE NO LIABILITY FOR ANY
ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS
OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE PRODUCT,
OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX OR ANY DATA
INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES AND EXPRESSLY
DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR USE WITH RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED
THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE
ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES
(INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
INVESTMENT OBJECTIVES AND POLICIES - FIXED INCOME SERIES
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 rate of
inflation) of invested capital with a minimum of risk. The Series will
pursue its objective by investing its assets 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
dollar-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 DFA TWO-YEAR GLOBAL FIXED INCOME SERIES
The investment objective of The DFA Two-Year Global Fixed Income Series is to
maximize total returns consistent with preservation of capital. The Series
will invest in obligations issued or guaranteed by the U.S. and foreign
governments, their agencies and instrumentalities, corporate debt
obligations, bank obligations, commercial paper, repurchase agreements,
obligations of other domestic and foreign issuers having quality ratings
meeting the minimum standards described in "Description of Investments,"
securities of domestic or foreign issuers denominated in U.S. dollars but not
trading in the United States, and obligations of supranational organizations,
such as the World Bank, the European Investment Bank, European Economic
Community and European Coal and Steel Community. At the present time, the
Advisor expects
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that most investments will be made in the obligations of issuers which are in
developed countries, such as those countries which are members of the
Organization of Economic Cooperations and Development ("OECD"). However, in
the future, the Advisor anticipates investing in issuers located in other
countries as well. Under normal market conditions, the Series will invest at
least 65% of the value of its assets in issuers organized or having a
majority of their assets in, or deriving a majority of their operating income
in, at least three different countries, one of which may be the United
States.
The Series will acquire obligations that have a dollar-weighted average
length of maturity not to exceed two years. Because many of the Series'
investments will be denominated in foreign currencies, the Series will also
enter into forward foreign currency contracts solely for the purpose of
hedging against fluctuations in currency exchange rates. The Series will
invest more than 25% of its total assets in obligations of U.S. and/or
foreign banks and bank holding companies when the yield to maturity on these
instruments exceeds the yield to maturity on all other eligible portfolio
investments of similar quality for a period of five consecutive days when the
NYSE is open for trading. (See "Investments in the Banking Industry" in Item
4(a)(ii).)
DESCRIPTION OF INVESTMENTS
The following is a description of the categories of investments which may be
acquired by The DFA One-Year Fixed Income Series and Two-Year Global Fixed
Income Series (the "Fixed Income Series").
<TABLE>
<CAPTION>
Permissible
Categories:
-----------
<S> <C>
The DFA One-Year Fixed Income Series 1-6, 8
The DFA Two-Year Global Fixed Income Series 1-10
</TABLE>
1. U.S. GOVERNMENT OBLIGATIONS - Debt securities issued by the U.S.
Treasury which are direct obligations of the U.S. government, including
bills, notes and bonds.
2. U.S. GOVERNMENT AGENCY OBLIGATIONS - Issued or guaranteed by U.S.
government-sponsored instrumentalities and federal agencies, including the
Federal National Mortgage Association, Federal Home Loan Bank and the Federal
Housing Administration.
3. CORPORATE DEBT OBLIGATIONS - 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.
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4. BANK OBLIGATIONS - Obligations of U.S. banks and savings and loan
associations and dollar-denominated obligations of U.S. subsidiaries and
branches of foreign banks, such as certificates of deposit (including
marketable variable rate certificates of deposit) and bankers' acceptances.
Bank certificates of deposit will only be acquired from banks having assets
in excess of $1,000,000,000.
5. COMMERCIAL PAPER - Rated, at the time of purchase, 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
purchase securities ("underlying securities") from a bank, or a registered
U.S. government securities dealer, with an agreement by the seller to
repurchase the security at an agreed price, plus interest at a specified
rate. The underlying securities will be limited to U.S. government and
agency obligations described in (1) and (2) above. The 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 is approved by the
Investment Committee of the Advisor. The Advisor will monitor the market
value of the securities plus any accrued interest thereon so that they will
at least equal the repurchase price.
7. FOREIGN GOVERNMENT AND AGENCY OBLIGATIONS - Bills, notes, bonds and
other debt securities issued or guaranteed by foreign governments, or their
agencies and instrumentalities.
8. SUPRANATIONAL ORGANIZATION OBLIGATIONS - Debt securities of
supranational organizations such as the European Coal and Steel Community,
the European Economic Community and the World Bank, which are chartered to
promote economic development.
9. FOREIGN ISSUER OBLIGATIONS - Debt securities of non-U.S. issuers
rated AA or better by S&P or Aa2 or better by Moody's.
10. EURODOLLAR OBLIGATIONS - Debt securities of domestic or foreign
issuers denominated in U.S. dollars but not trading in the United States.
Investors should be aware that the net asset values of the Fixed Income
Series may change as general levels of interest rates fluctuate. When
interest rates increase, the value of a portfolio of fixed-income securities
can be expected to decline. Conversely, when interest rates decline, the
value of a portfolio of fixed-income securities can be expected to increase.
INVESTMENTS IN THE BANKING INDUSTRY
The DFA One-Year Fixed Income and Two-Year Global Fixed Income Series will
invest more than 25% of their total respective assets in obligations of U.S.
and/or foreign banks and bank holding companies when the yield to maturity on
these investments exceeds the yield to maturity on all other eligible
portfolio investments for a period of five consecutive days when the NYSE
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is open for trading. For the purpose of this policy, which is a fundamental
policy of each Series and can only be changed by a vote of the shareholders
of each Series, banks and bank holding companies are considered to constitute
a single industry, the banking industry. When investment in such obligations
exceeds 25% of the total net assets of any of these Series, such Series will
be considered to be concentrating their investments in the banking industry.
As of the date of this registration statement, The DFA One-Year Fixed Income
Series and the Two-Year Global Fixed Income Series are concentrating their
investments in this industry. The types of bank and bank holding company
obligations in which The DFA One-Year Fixed Income and Two-Year Global Fixed
Income Series may invest include: dollar-denominated certificates of deposit,
bankers' acceptances, commercial paper and other debt obligations issued in
the United States and which mature within two years of the date of
settlement, provided such obligations meet each Series' established credit
rating criteria as stated under "Description of Investments." In addition,
both Series are authorized to invest more than 25% of their total assets in
Treasury bonds, bills and notes and obligations of federal agencies and
instrumentalities.
PORTFOLIO STRATEGY
The DFA One-Year Fixed Income and Two-Year Global Fixed Income Series will be
managed with a view to capturing credit risk premiums and term or maturity
premiums. As used herein, the term "credit risk premium" means the
anticipated incremental return on investment for holding obligations
considered to have greater credit risk than direct obligations of the U.S.
Treasury, and "maturity risk premium" means the anticipated incremental
return on investment for holding securities having maturities of longer than
one month compared to securities having a maturity of one month. The Advisor
believes that credit risk premiums are available largely through investment
in high grade commercial paper, certificates of deposit and corporate
obligations. The holding period for assets of the Series will be chosen with
a view to maximizing anticipated monthly returns, net of trading costs.
The Fixed Income Series are expected to have high portfolio turnover rates
due to the relatively short maturities of the securities to be acquired. The
rate of portfolio turnover will depend upon market and other conditions; it
will not be a limiting factor when management believes that portfolio changes
are appropriate. It is anticipated that the annual turnover rate of The
Two-Year Global Fixed Income Series could be 0% to 200%. While the Fixed
Income Series acquire securities in principal transactions and, therefore, do
not pay brokerage commissions, the spread between the bid and asked prices of
a security may be considered to be a "cost" of trading. Such costs
ordinarily increase with trading activity. However, as stated above,
securities ordinarily will be sold when, in the Advisor's judgment, the
monthly return of the Fixed Income Series will be increased as a result of
portfolio transactions after taking into account the cost of trading. It is
anticipated that securities will be acquired in the secondary markets for
short term instruments.
THE U.S. LARGE CAP VALUE SERIES, THE TAX-MANAGED U.S. MARKETWIDE VALUE SERIES,
THE U.S. 4-10 VALUE SERIES AND THE U.S. 6-10 VALUE SERIES
The investment objective of The U.S. Large Cap Value Series (the "Large Cap
Value Series"), The Tax-Managed U.S. Marketwide Value Series (the
"Tax-Managed Marketwide Value Series"), U.S. 4-10 Value Series (the "4-10 Value
Series") and U.S. 6-10 Value Series (the "6-10 Value
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Series") (collectively the "U.S. Value Series") is to achieve long-term
capital appreciation. Ordinarily, each Series will invest at least 80% of
its assets in a broad and diverse group of readily marketable common stocks
of U.S. companies which the Advisor believes to be value stocks at the time
of purchase. Securities are considered value stocks primarily because a
company's shares have a high book value in relation to their market value (a
"book to market ratio"). Generally, a company's shares will be considered to
have a high book to market ratio if the ratio equals or exceeds the ratios of
any of the 30% of companies with the highest positive book to market ratios
whose shares are listed on the NYSE and, except as described 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 those of the companies having the median
market capitalization of companies whose shares are listed on the NYSE, and
the 6-10 Value Series will purchase common stocks of companies whose market
capitalizations are smaller than such companies. The Tax-Managed Marketwide
Value Series will purchase common stocks of companies whose market
capitalizations are equal to the market capitalizations of companies in the
1st through 8th deciles of those companies listed on the NYSE. The 4-10
Value Series will purchase common stocks of companies whose market
capitalizations are equal to the market capitalizations of companies in the
4th through 10th deciles of those companies listed on the NYSE. With respect
to the 9th and 10th deciles, the 4-10 Value Series will only purchase such
common stocks when it is advantageous to do so through block trades with the
Advisor's other accounts. In measuring value, the Advisor may consider
additional factors such as cash flow, economic conditions and developments in
the issuer's industry.
TAX-MANAGED MARKETWIDE VALUE SERIES. The Tax-Managed Marketwide Value Series
seeks to minimize the impact of federal taxes on returns by managing its
portfolio in a manner that will defer the realization of net capital gains and
may minimize the receipt of dividend income in order to minimize taxable
distributions to investors.
When selling securities, the Tax-Managed Marketwide Value Series typically
will select the highest cost shares of the specific security in order to
minimize the realization of capital gains. In certain cases, the highest
cost shares may produce a short-term capital gain. Since short-term capital
gains are taxed at higher tax rates than long-term capital gains, the highest
cost shares with a long-term holding period may be disposed of instead. The
Tax-Managed Marketwide Value Series will seek, when possible, not to dispose
of a security until the long-term holding period for capital gains for tax
purposes has been satisfied. Additionally, the Tax-Managed Marketwide Value
Series may, when consistent with all other tax management policies, sell
securities in order to realize capital losses. Realized capital losses can
be used to offset realized capital gains, thus reducing capital gains
distributions. However, realization of capital gains is not entirely within
the Advisor's control. Capital gains distributions may vary considerably
from year to year; there will be no capital gains distributions in years when
the Tax-Managed Marketwide Series realizes net capital losses. The timing of
purchases and sales of securities may be managed to minimize the receipt of
dividends to the extent possible. With respect to dividends that are
received, the Tax-Managed Marketwide Value Series may not be eligible to flow
through the dividends received deduction attributable to holdings in U.S.
equity securities to corporate shareholders, if because of timing activities,
the requisite holding period of the dividend paying stock is not met.
Portfolio holdings may be managed to emphasize low dividend-yielding securities.
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The Tax-Managed Marketwide Series is expected to deviate from its market
capitalization weightings to a greater extent than the non-tax managed
Series. For example, the Advisor may exclude the stock of a company that
meets applicable market capitalization criterion in order to avoid dividend
income, and the Advisor may sell the stock of a company that meets applicable
market capitalization criterion in order to realize a capital loss.
Additionally, while the U. S. Value Series are managed so that securities
will generally be held for longer than one year, the Tax-Managed Marketwide
Value Series may dispose of any securities whenever the Advisor determines
that such disposition would be consistent with the tax management strategies
of the Tax-Managed Marketwide Value Series.
Although the Advisor seeks to manage the Tax-Managed Marketwide Value Series
in order to minimize the realization of capital gains and possible taxable
dividend income during a particular year, the Tax-Managed Marketwide Value
Series may nonetheless distribute taxable gains and taxable income to
shareholders from time to time. Furthermore, shareholders may be required to
pay taxes on the Tax-Managed Marketwide Value Series' capital gains, if any,
realized upon the sale of the Tax-Managed Marketwide Value Series' assets to
meet redemptions of shares of the Tax-Managed Marketwide Value Series. The
redeeming shareholder will be required to pay taxes on the shareholder's
capital gains realized on a redemption, whether paid in cash or in kind, if
the amount realized on redemption is greater than the amount of the
shareholder's tax basis in the shares sold.
PORTFOLIO STRUCTURE. Each Series will operate as a "diversified" investment
company. Further, no Series will invest more than 25% of its total assets in
securities of companies in a single industry. 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 and
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 also will occur in the
Series because they intend to purchase round lots only and, with respect to
the 4-10 Value Series and the Tax-Managed Marketwide Value Series, because
they intend to purchase common stocks in the 9th and 10th deciles only (in
the case of the 4-10 Value Series) and in the 1st through 8th deciles only
(in the case of the Tax-Managed Marketwide Value Series) through block
trades, as described above. Furthermore, 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
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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 securities eligible for
purchase or otherwise represented in their portfolios at the time of the
exchange 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 may be eligible for investment.
PORTFOLIO TRANSACTIONS. The Series do not intend to purchase or sell
securities based on the prospects for the economy, the securities markets or
the individual issuers whose shares are eligible for purchase. As described
above under "Portfolio Structure," investments will be made in virtually all
eligible securities on a market capitalization weighted basis. Generally,
securities will be purchased with the expectation that they will be held for
longer than one year. The Large Cap Value Series and Tax-Managed Marketwide
Value Series may sell portfolio securities when the issuer's market
capitalization falls substantially below that of the issuer with the minimum
market capitalization which is then eligible for purchase by such Series, and
the 4-10 and 6-10 Value Series each may sell portfolio securities when the
issuer's market capitalization increases to a level that substantially
exceeds that of the issuer with the largest market capitalization which is
then eligible for investment 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 and Tax-Managed Marketwide Value
Series may sell portfolio securities when their book to market ratio falls
substantially below that of the security with the lowest such ratio that is
then eligible for purchase by the Series. The 4-10 and 6-10 Value Series may
also sell portfolio securities in the same circumstances, however, each
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.
With regard to the Tax-Managed Marketwide Value Series, management strategies
used to defer the realization of accrued capital gains and to minimize
dividend income might from time to time cause deviation from market
capitalization weighting. The Tax-Managed Marketwide Value Series is not
expected to adhere to its market capitalization weightings with the same
precision as the non-tax managed Series. (See "Tax-Managed Marketwide Value
Series" above.)
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 the Advisor believes to be value
stocks at the time of purchase. Securities are considered value stocks
primarily because a company's shares have a high book value in relation to
their market value (a "book to market ratio"). In measuring value, the
Advisor may consider additional factors such as cash flow, economic
conditions and developments in the issuer's industry. Generally, the shares
of a
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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. As of
the date of this registration statement, the Series may invest in the stocks
of large companies in Australia, Belgium, France, Germany, Hong Kong, Italy,
Japan, the Netherlands, New Zealand, Singapore, Spain, Sweden, Switzerland,
the United Kingdom, Denmark and Norway. As the Series' asset growth permits,
it may invest in the stocks of large companies in other developed markets,
including Austria, Finland and Ireland. As of September 10, 1998, the Series
ceased investing additional funds in Malaysia as a consequence of certain
restrictions imposed by the Malaysian government on the repatriation of
assets by foreign investors, such as the Series. (See "Item 4(c) - Risk
Factors - All Series - Investing in Emerging Markets.")
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. Such investments entail certain risks. (See Item 4(c).)
As of the date of this registration statement, the Series intends to invest
in companies having at least $800 million of market capitalization, and the
Series will be approximately market capitalization weighted. The Advisor may
reset such floor from time to time to reflect changing market conditions. In
determining market capitalization weights, the Advisor, using its best
judgment, will seek to eliminate the effect of cross holdings on the
individual country weights. As a result, the weighting of certain countries
in the 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 also will occur because the
Series intends to purchase round lots only. Furthermore, 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 securities
eligible for purchase or otherwise represented in its portfolio at the time
of the
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exchange 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.
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 value stocks of large companies offer,
over a long term, a prudent opportunity for capital appreciation, but, at the
same time, selecting a limited number of 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
appropriate holding in light of the policy of maintaining a portfolio of
companies with large market capitalizations and high book to market ratios.
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.
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THE EMERGING MARKETS SERIES AND THE EMERGING MARKETS SMALL CAP SERIES
The investment objective of both The Emerging Markets Series and The Emerging
Markets Small Cap Series is to achieve long-term capital appreciation. Each
Series operates as a diversified investment company and seeks to achieve its
investment objective by investing in emerging markets designated by the
Investment Committee of the Advisor ("Approved Markets"). Each 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 ("IDRs") or American Depository Receipts ("ADRs"). As of September 10,
1998, the Emerging Markets Series and the Emerging Markets Small Cap Series
ceased investing additional funds in Malaysia as a consequence of certain
restrictions imposed by the Malaysian government on the repatriation of assets
by foreign investors such as the Series. (See "Item 4(c) - Risk Factors - All
Series - Investing in Emerging Markets.")
SERIES' CHARACTERISTICS AND POLICIES. The Emerging Markets Series will seek a
broad market coverage of larger companies within each Approved Market. This
Series will attempt to own shares of companies whose aggregate overall share of
the Approved Market's total public market capitalization is at least in the
upper 40% of such capitalization, and can be as large as 75%. The Emerging
Markets Series may limit the market coverage in the smaller emerging markets in
order to limit purchases of small market capitalization companies.
The Emerging Markets Small Cap Series will seek a broad market coverage of
smaller companies within each Approved Market. This Series will attempt to own
shares of companies whose market capitalization is less than $1.5 billion. On a
periodic basis, the Advisor will review the holdings of the Emerging Markets
Small Cap Series and determine which, at the time of such review, are no longer
considered small emerging market companies. The present policy is to consider
portfolio securities for sale when they have appreciated sufficiently to rank,
on a market capitalization basis, 100% larger than the largest market
capitalization that is eligible for purchase as set by the Advisor for that
Approved Market.
Each Series may not invest in all such companies or Approved Markets described
above or achieve approximate market weights, for reasons which include
constraints imposed within Approved Markets (E.G., restrictions on purchases by
foreigners), and each Series' policy not to invest more than 25% of its assets
in any one industry.
Under normal market conditions, the Emerging Markets Series will invest at least
65% of its assets in Approved Market securities, and the Emerging Markets Small
Cap Series will invest at least 65% of its assets in small company (as defined
above) Approved Market Securities. Approved Market securities are defined to be
(a) securities of companies organized in a country in an Approved Market or for
which the principal trading market is in an Approved Market, (b) securities
issued or guaranteed by the government of an Approved Market country, its
agencies or instrumentalities, or the central bank of such country, (c)
securities denominated in an Approved Market currency issued by companies to
finance operations in Approved Markets, (d) securities of companies that derive
at least 50% of their revenues primarily from either goods or
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services produced in Approved Markets or sales made in Approved Markets and
(e) Approved Markets equity securities in the form of depositary shares.
Securities of Approved Markets may include securities of companies that have
characteristics and business relationships common to companies in other
countries. As a result, the value of the securities of such companies may
reflect economic and market forces in such other countries as well as in the
Approved Markets. The Advisor, however, will select only those companies
which, in its view, have sufficiently strong exposure to economic and market
forces in Approved Markets such that their value will tend to reflect
developments in Approved Markets to a greater extent than developments in
other regions. For example, the Advisor may invest in companies organized
and located in the United States or other countries outside of Approved
Markets, including companies having their entire production facilities
outside of Approved Markets, when such companies meet the definition of
Approved Markets securities so long as the Advisor believes at the time of
investment that the value of the company's securities will reflect
principally conditions in Approved Markets.
The Advisor defines the term "emerging market" to mean a country which is
considered to be an emerging market by 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 each of the Series.
As of the date of this registration statement, the following countries are
designated as Approved Markets: Argentina, Brazil, Chile, Indonesia, Israel,
Mexico, Philippines, Portugal, South Korea, Thailand and Turkey. Countries that
may be approved in the future include but are not limited to Colombia, Czech
Republic, Greece, Hungary, India, Jordan, Nigeria, Pakistan, Poland, Republic of
China (Taiwan), Republic of South Africa, Venezuela and Zimbabwe.
Each 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, each
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, each 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 neither Series expects the aggregate of
all such amounts to exceed 10% of its net assets under normal circumstances.
Both Series also may invest in shares of other investment companies that invest
in one or more Approved Markets, although they intend to do so only where access
to those markets is otherwise significantly limited. The Series may also invest
in money market mutual funds for temporary cash management purposes. The
Investment Company Act of 1940 limits investment by a Series in shares of other
investment companies as follows: (1) no more than 10% of the value of a Series'
total assets may be invested in shares of other investment companies; (2) a
Series may not own securities issued by an investment company having an
aggregate value in excess of 5% of the
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value of the total assets of the Series; and (3) a Series may not own more
than 3% of the total outstanding voting stock of an investment company. If
either 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 a Series to
establish a wholly-owned subsidiary or a trust for the purpose of investing
in the local markets. Each Series also may invest up to 5% of its assets in
convertible debentures issued by companies organized in Approved Markets.
PORTFOLIO STRUCTURE. Each Series' policy of seeking broad market
diversification means that the Advisor will not utilize "fundamental"
securities research techniques in identifying securities selections. The
decision to include or exclude the shares of an issuer will be made primarily
on the basis of such issuer's relative market capitalization determined by
reference to other companies located in the same country. Company size is
measured in terms of reference to other companies located in the same country
and in terms of local currencies in order to eliminate the effect of
variations in currency exchange rates. Even though a company's stock may
meet the applicable market capitalization criterion, it may not be included
in a 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 management's belief that equity investments offer, over a long term, a
prudent opportunity for capital appreciation, but, at the same time,
selecting a limited number of such issues for inclusion in a Series involves
greater risk than including a large number of them.
Neither Series seeks current income as an investment objective, and
investments will not be based upon an issuer's dividend payment policy or
record. However, many of the companies whose securities will be included in
a Series do pay dividends. It is anticipated, therefore, that both 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.
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 Emerging Markets Small Cap
Series ordinarily is anticipated to be low, and is not expected to exceed 20%
per year.
For the purpose of converting U.S. dollars to another currency, or vice
versa, or converting one foreign currency to another foreign currency, each
Series may enter into forward foreign exchange contracts. In addition, to
hedge against changes in the relative value of foreign currencies, each
Series may purchase foreign currency futures contracts. A Series will only
enter
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<PAGE>
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 and will receive reasonable interest on the loan, as well as amounts
equal to any dividends, interest or other distributions on the loaned
securities. In the event of the bankruptcy of the borrower, the Trust could
experience delay in recovering the loaned securities. Management believes that
this risk can be controlled through careful monitoring procedures.
ITEM 4(b) OTHER INVESTMENT PRACTICES
The U.S. 6-10 Small Company Series and U.S. 9-10 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.
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 stock index futures contracts and options thereon in
order to commit funds awaiting investment in stocks or maintain cash liquidity.
To the extent that such Series invest in futures contracts and options thereon
for other than bona fide hedging purposes, no Series will enter into such
transactions if, immediately thereafter, the sum of the amount of margin
deposits and premiums paid for open futures options would exceed 5% of the
Series' total assets, after taking into account unrealized profits and
unrealized losses on such contracts it has entered into; provided, however,
that, in the case of an option that is in-the-money at the time of purchase, the
in-the-money amount may be excluded in calculating the 5%. Such investments
entail certain risks. (See "Risk Factors - All Series" in Item 4(c).)
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ITEM 4(c) RISK FACTORS - ALL SERIES
SMALL COMPANY SECURITIES
Typically, securities of small companies are less liquid than securities of
large companies. Recognizing this factor, management will endeavor to effect
securities transactions in a manner to avoid causing significant price
fluctuations in the market for these securities. In addition, the prices of
small company securities may fluctuate more sharply than those of other
securities.
FOREIGN SECURITIES
The Japanese Small Company, United Kingdom Small Company, Continental Small
Company, Pacific Rim Small Company, Enhanced U.S. Large Company, DFA One-Year
Fixed Income, Two-Year Global Fixed Income and DFA International Value 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. (Also see "Foreign Currencies and Related Transactions" below) Further,
foreign issuers are not generally subject to uniform accounting, auditing and
financial reporting standards comparable to those of U.S. public companies and
there may be less publicly available information about such companies than
comparable U.S. companies. The Enhanced U.S. Large Company Series, DFA One-Year
Fixed Income and Two-Year Global 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 economies of many countries in which The Japanese Small Company, United
Kingdom Small Company, Continental Small Company, Pacific Rim Small Company,
Enhanced U.S. Large Company, DFA One-Year Fixed Income, Two-Year Global Fixed
Income and DFA International Value Series invest are not as diverse or resilient
as the U.S. economy, and have significantly less financial resources. Some
countries are more heavily dependent on international trade and may be affected
to a greater extent by protectionist measurers of their governments, or
dependent upon a relatively limited number of commodities and, thus, sensitive
to changes in world prices for these commodities.
In many foreign countries, stock markets are more variable than U.S. markets for
two reasons. Contemporaneous declines in both (i) foreign securities prices in
local currencies and (ii) the value of local currencies in relation to the U.S.
dollar can have a significant negative impact on the net asset value of a Series
that holds the foreign securities. The next asset value of the Series is
denominated in U.S. dollars, and therefore, declines in market price of both the
foreign securities held by a Series and the foreign currency in which those
securities are denominated will be reflected in the net asset value of the
Series' shares.
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<PAGE>
INVESTING IN EMERGING MARKETS
The investments of The Emerging Markets Series and The Emerging Markets Small
Cap Series involve risks that are in addition to the usual risks of investing in
developed foreign markets. A number of emerging securities markets restrict,
to varying degrees, foreign investment in stocks. Repatriation of investment
income, capital and the proceeds of sales by foreign investors may require
governmental registration and/or approval in some emerging countries. In some
jurisdictions, such restrictions and the imposition of taxes are intended to
discourage shorter- rather than longer-term holdings. While The Emerging
Markets Series and The Emerging Markets Small Cap 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 a Series'
investment. If such restrictions were imposed subsequent to investment in the
securities of a particular country, a 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 a
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 and The Emerging Markets
Small Cap 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. These risks are heightened for investments in small company
emerging markets securities.
In addition, many emerging markets, including most Latin American countries,
have experienced substantial, and, in some periods, extremely high, rates of
inflation for many years. Inflation and rapid fluctuations in inflation rates
have had and may continue to have very negative effects on the economies and
securities markets of certain countries. In an attempt to control inflation,
wage and price controls have been imposed at times in certain countries.
Certain emerging markets have recently transitioned, or are in the process of
transitioning, from centrally controlled to market-based economies. There can
be no assurance that such transitions will be successful.
Brokerage commissions, custodial services and other costs relating to investment
in foreign markets generally are more expensive than in the United States; this
is particularly true with respect to emerging markets. Such markets have
different settlement and clearance procedures. In certain markets there have
been times when settlements do not keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. The inability
of a Series to make intended securities purchases due to settlement problems
could cause the Series to miss investment opportunities. Inability to dispose
of a portfolio security caused by settlement problems could result either in
losses to a Series due to subsequent declines in value of the
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<PAGE>
portfolio security or, if a 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 a 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 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 a Series.
On September 1, 1998, the Malaysian government announced a series of capital and
foreign exchange controls on the Malaysian currency, the ringgit, and on
transactions on the Kuala Lampur Stock Exchange, that operate to severely
constrain or prohibit foreign investors, including the Series, from repatriating
assets. While there is some confusion in the market concerning the
interpretations of these changes, it appears that the Series will not be
permitted to convert the proceeds of the sale of their Malaysian investments
into U.S. dollars prior to September 1, 1999.
As a consequence of these developments, the Series have ceased investing
additional funds in Malaysia. With respect to the current Malaysian
investments owned by the Series, the Series are presently valuing the
securities in good faith at fair value by discounting the U.S. dollar ringgit
currency exchange rate and/or in discounting the current market prices of the
Malaysian securities. Pending further clarification from Malaysian regulatory
authorities regarding the controls identified above, the Series will treat
their investments in Malaysian securities as illiquid. As of November 30,
1998, Malaysian securities constitute approximately the following percentages
of the net asset value of the following Series: Pacific Rim Small Company
Series, 26.01%; The Emerging Markets Series, 5.63%; and The Emerging Markets
Small Cap Series, 9.18%. Malaysian securities constitute less than one
percent of the net asset value of the remaining 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 and The Emerging Markets Small Cap Series
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<PAGE>
could in the future become subject to local tax liability that it had not
reasonably anticipated in conducting its investment activities or valuing its
assets.
FOREIGN CURRENCIES AND RELATED TRANSACTIONS
Investments of the Japanese, United Kingdom, Continental and Pacific Rim Series,
The DFA International Value Series, The Emerging Markets Series, The Emerging
Markets Small Cap Series, many of the investments of The DFA Two-Year Global
Fixed Income Series and, to a lesser extent, the investments of The Enhanced
U.S. Large Company Series, will be denominated in foreign currencies. Changes
in the relative values of foreign currencies and the U.S. dollar, therefore,
will affect the value of investments of 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. Such contracts involve an
agreement to purchase or sell a specific currency at a future date at a price
set in the contract and enable the 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. Gains and losses on
investments in futures and options thereon depend on the direction of securities
prices, interest rates and other economic factors.
INTRODUCTION OF THE EURO
On January 1, 1999, The European Monetary Union ("EMU") will introduce a
common currency, the Euro, replacing its members' national currencies. This
development will affect Series' investments in EMU countries to the extent the
introduction of the Euro changes investment practices, opportunities, risks
and investor behavior or creates administrative problems. The Advisor and
its global custodians are attempting to assure that the Series will be
unaffected by any transition-related disruptions. However, they cannot
guarantee that their efforts will succeed completely. The relative value of
the U.S. dollar and Euro will fluctuate. Accordingly, currency risk
(discussed above) will continue to apply to Series' investments in EMU
countries.
BORROWING
Each Series, except the U.S. 9-10 Series, Japanese 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 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.
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PORTFOLIO STRATEGIES
The method employed by the Advisor to manage each Series, except The U.S. Large
Company Series, The Enhanced U.S. Large Company Series and the 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.
FUTURES CONTRACTS AND OPTIONS ON FUTURES
The U.S. Large Company Series, The Enhanced U.S. Large Company Series, the U.S.
Value Series, The DFA International Value Series, The Emerging Markets Series
and The Emerging Markets Small Cap Series may invest in index futures contracts
and options on index futures. To the extent that such Series invest in futures
contracts and options thereon for other than bona fide hedging purposes, no
Series will enter into such transactions if, immediately thereafter, the sum of
the amount of margin deposits and premiums paid for open futures options would
exceed 5% of the Series' total assets, after taking into account unrealized
profits and unrealized losses on such contracts it has entered into; provided,
however, that, in the case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%.
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 liquidity, thereby inhibiting a Series' ability
to close a position in such investments. Gains or losses on investments in
options and futures depend on the direction of securities prices, interest rates
and other economic factors, and the loss from investing in futures transactions
is potentially unlimited. Certain restrictions imposed by the Internal Revenue
Code may limit the ability of a Series to invest in futures contracts and
options on futures contracts.
OPTIONS ON STOCK INDICES
The Enhanced U.S. Large Company Series may purchase put and call options and
write put and call options on stock indices and stock index futures listed on
national securities exchanges or traded in the over-the-counter market. The
Enhanced U.S. Large Company Series may use these techniques to hedge against
changes in securities prices or as part of its overall investment strategy. An
option on an index is a contract that gives the holder of the option, in return
for a premium, the right to buy from (in the case of a call) or sell to (in the
case of a put) the writer of
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the option the cash value of the index at a specified exercise price at any
time during the term of the option. Upon exercise, the writer of an option
on an index is obligated to pay the difference between the cash value of the
index and the exercise price multiplied by the specified multiplier for the
index option. (An index is designed to reflect specified facets of a
particular financial or securities market, a specific group of financial
instruments or securities, or certain economic indicators.) A stock index
fluctuates with changes in the market values of the stocks included in the
index.
With respect to the writing of options, the writer has no control over the time
when it may be required to fulfill its obligation. Prior to exercise or
expiration, an option may be closed out by an offsetting purchase or sale of an
option on the same series. There can be no assurance, however, that a closing
purchase or sale transaction can be effected when The Enhanced U.S. Large
Company Series desires.
The Enhanced U.S. Large Company Series may write covered straddles consisting of
a combination of a call and a put written on the same index. A straddle will be
covered when sufficient assets are deposited to meet The Enhanced U.S. Large
Company Series' immediate obligations. The Series may use the same liquid
assets to cover both the call and put options where the exercise price of the
call and the put are the same or the exercise price of the call is higher than
that of the put. In such cases, the Series will also segregate liquid assets
equivalent to the amount, if any, by which the put is "in the money."
The effectiveness of purchasing stock index options will depend upon the extent
to which price movements in The Enhanced U.S. Large Company Series' portfolio
correlate with price movements of the stock index selected. Because the value
of an index option depends upon movements in the level of the index rather than
the price of a particular stock, whether the Series will realize a gain or loss
from the purchase of options on an index depends upon movements in the level of
stock prices in the stock market generally or, in the case of certain indices,
in an industry or market segment, rather than movements in the price of a
particular stock. If The Enhanced U.S. Large Company Series takes positions in
options instruments contrary to prevailing market trends, the Series could be
exposed to the risk of a loss. Certain restrictions imposed on The Enhanced
U.S. Large Company Series by the Internal Revenue Code may limit the ability of
such Series to invest in options.
SWAPS
The Enhanced U.S. Large Company Series may enter into equity index swap
agreements for purposes of attempting to obtain a particular desired return
at a lower cost to the Series than if the Series had invested directly in an
instrument that yielded that desired return. Swap agreements are two-party
contracts entered into primarily by institutional investors for periods
ranging from a few weeks to more than one year. In a standard "swap"
transaction, two parties agree to exchange the returns (or differentials in
rates of return) earned or realized on particular predetermined investments
or instruments. The gross returns to be exchanged or "swapped" between the
parties are generally calculated with respect to a "notional amount," i.e.,
the return on or increase in value of a particular dollar amount invested in
a group of securities representing a particular index.
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<PAGE>
The "notional amount" of the swap agreement is only a fictive basis on which to
calculate the obligations which the parties to a swap agreement have agreed to
exchange. Most swap agreements entered into by The Enhanced U.S. Large Company
Series would calculate the obligations of the parties to the agreement on a "net
basis." Consequently, the Series' current obligations (or rights) under a swap
agreement will generally be equal only to the net amount to be paid or received
under the agreement based on the relative values of the positions held by each
party to the agreement (the "net amount"). The Enhanced U.S. Large Company
Series' current obligations under a swap agreement will be accrued daily (offset
against amounts owed to the Series) and any accrued but unpaid net amounts owed
to a swap counterparty will be covered by the maintenance of a segregated
account consisting of liquid assets to avoid any potential leveraging of the
Series' portfolio. The Enhanced U.S. Large Company Series will not enter into a
swap agreement with any single party if the net amount owed or to be received
under existing contracts with that party would exceed 5% of the Series' assets.
Because they are two-party contracts and because they may have terms of greater
than seven days, swap agreements may be considered to be illiquid, and,
therefore, swap agreements entered into by The Enhanced U.S. Large Company
Series and other illiquid securities will be limited to 15% of the net assets of
the Series. Moreover, The Enhanced U.S. Large Company Series bears the risk of
loss of the amount expected to be received under a swap agreement in the event
of the default or bankruptcy of a swap agreement counterparty. The Advisor will
cause The Enhanced U.S. Large Company Series to enter into swap agreements only
with counterparties that the Investment Committee of the Advisor has approved.
Certain restrictions imposed on the Enhanced U.S. Large Company Series by the
Internal Revenue Code may limit the Series' ability to use swap agreements. The
swap market is a relatively new market and is largely unregulated. It is
possible that developments in the swaps market, including potential government
regulation, could adversely affect The Enhanced U.S. Large Company Series'
ability to terminate existing swap agreements or to realize amounts to be
received under such agreements.
BANKING INDUSTRY CONCENTRATIONS
Concentrating in obligations of the banking industry may involve additional risk
by foregoing the safety of investing in a variety of industries. Changes in the
market's perception of the riskiness of banks relative to non-banks could cause
more fluctuations in the net asset value of The DFA One-Year Fixed Income and
Two-Year Global Fixed Income Series than might occur in less concentrated
portfolios.
REPURCHASE AGREEMENTS
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.
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YEAR 2000 ISSUE
Unless modified, many computers will not properly process information from
the Year 2000 on. While the issue is international in scope, there is
particular concern with foreign entities. The Advisor has taken steps to
ensure that its computers and those of the Series' service providers (e.g.,
custodians) will operate properly. The Series may be negatively affected if
the Advisor's efforts prove inadequate, and/or Year 2000 problems hurt
economic conditions generally.
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., 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 $26 billion. David G. Booth and
Rex A. Sinquefield, directors and officers of the Advisor and trustees and
officers of the Trust, and shareholders of the Advisor's outstanding voting
stock, 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, 1997, (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:
<TABLE>
<CAPTION>
Series Management Fee Total Expenses
------ -------------- --------------
<S> <C> <C>
U.S. 6-10 Small Company 0.03% 0.11%
U.S. Large Company 0.025% 0.07%
U.S. 6-10 Value 0.20% 0.28%
U.S. Large Cap Value 0.10% 0.18%
DFA One-Year Fixed Income 0.05% 0.10%
DFA International Value 0.20% 0.32%
Emerging Markets 0.10% 0.54%
Enhanced U.S. Large 0.05% 0.25%
</TABLE>
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<TABLE>
<CAPTION>
Series Management Fee Total Expenses
------ -------------- --------------
<S> <C> <C>
Company
DFA Two-Year Global Fixed 0.05% 0.18%
Income
Japanese Small Company 0.10% 0.29%
United Kingdom Small 0.10% 0.25%
Company
Pacific Rim Small Company 0.10% 0.40%
Continental Small Company 0.10% 0.29%
Emerging Markets Small 0.20% 0.90%
Cap
</TABLE>
The management fee applicable to The U.S. 9-10 Small Company, U.S. 4-10
Value, and Tax-Managed Marketwide Value Series, each of which had not
commenced operations as of November 30, 1997, is equal to 0.10%, 0.10%, and
0.20%, respectively, of the Series' average net assets on an annual basis.
INVESTMENT SERVICES - UNITED KINGDOM AND CONTINENTAL SMALL COMPANY SERIES
Pursuant to Sub-Advisory Agreements with the Advisor, Dimensional Fund
Advisors Ltd. ("DFAL"), 14 Berkeley Street, London, W1X 5AD, England, a
company that is organized under the laws of England, has the authority and
responsibility to select brokers or dealers to execute securities
transactions for the United Kingdom and Continental Series. DFAL's duties
include the maintenance of a trading desk for the Series and the
determination of the best and most efficient means of executing securities
transactions. On at least a semi-annual basis the Advisor reviews the
holdings of the United Kingdom and Continental Series and reviews the trading
process and the execution of securities transactions. The Advisor is
responsible for determining those securities which are eligible for purchase
and sale by these Series and may delegate this task, subject to its own
review, to DFAL. DFAL maintains and furnishes to the Advisor information and
reports on United Kingdom and European small companies, including its
recommendations of securities to be added to the securities that are eligible
for purchase by the Series. The Advisor pays DFAL quarterly fees of 12,500
pounds sterling for services to each Series. DFAL is a member of the
Investment Management Regulatory Organization Limited ("IMRO"), a self
regulatory organization for investment managers operating under the laws of
England. The Advisor owns 100% of the outstanding shares of DFAL.
INVESTMENT SERVICES - JAPANESE AND PACIFIC RIM SMALL COMPANY SERIES
Pursuant to Sub-Advisory Agreements with the Advisor, DFA Australia Limited
("DFA Australia"), Suite 4403 Gateway, 1 MacQuarie Place, Sydney, New South
Wales 2000, Australia, the successor to Dimensional Fund Advisors Asia Inc.,
has the authority and responsibility to select brokers and dealers to execute
securities transactions for the Japanese and Pacific Rim Series. DFA
Australia's duties include the maintenance of a trading desk for each
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Series and the determination of the best and most efficient means of
executing securities transactions. On at least a semi-annual basis, the
Advisor reviews the holdings of the Japanese and Pacific Rim Series and
reviews the trading process and the execution of securities transactions.
The Advisor is responsible for determining those securities which are
eligible for purchase and sale by these Series and may delegate this task,
subject to its own review, to DFA Australia. DFA Australia maintains and
furnishes to the Advisor information and reports on Japanese and Pacific Rim
small companies, including its recommendations of securities to be added to
the securities that are eligible for purchase by each Series. The Advisor
pays DFA Australia fees of $13,000 per year for services to each Series. The
Advisor beneficially owns 100% of DFA Australia.
CONSULTING SERVICES - DFA INTERNATIONAL VALUE SERIES, EMERGING MARKETS
SERIES AND EMERGING MARKETS SMALL CAP SERIES
The Advisor has entered into a Consulting Services Agreement with DFAL and
DFA Australia, respectively. Pursuant to the terms of each Consulting
Services Agreement, DFAL and DFA Australia provide certain trading and
administrative services to the Advisor with respect to DFA International
Value Series, Emerging Markets Series and Emerging Markets Small Cap 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 and accounting 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. 9-10 SMALL COMPANY SERIES
U.S. 6-10 SMALL COMPANY SERIES
U.S. 6-10 VALUE SERIES
U.S. LARGE CAP VALUE SERIES
TAX-MANAGED U.S. MARKETWIDE VALUE SERIES
ENHANCED U.S. LARGE COMPANY SERIES
CHARGES FOR EACH SERIES:
.1025% of the first $300 million of net assets
.0769% of the next $300 million of net assets
.0513% of the next $250 million of net assets
.0205% of net assets over $850 million
PFPC charges a minimum fee of $58,800 per year to each of the Large Cap Value,
Tax-Managed U.S. Marketwide Value and 6-10 Value Series. PFPC charges the
Enhanced U.S. Large Company Series a minimum fee of $75,000 per year which is to
be phased in over the first year
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of the Series' operation. PFPC has agreed that it may from time to time
limit the fee rates and the minimum fees for these Series.
DFA TWO-YEAR GLOBAL FIXED INCOME SERIES
.1230% of the first $150 million of net assets
.0820% of the next $150 million of net assets
.0615% of the next $300 million of net assets
.0410% of the next $250 million of net assets
.0205% of net assets over $850 million
The Series is subject to a minimum fee of $75,000 per year which is to be
phased in over the first year of the Series' operation. PFPC has agreed to
limit the minimum fee for the Series from time to time.
JAPANESE SMALL COMPANY SERIES
UNITED KINGDOM SMALL COMPANY SERIES
PACIFIC RIM SMALL COMPANY SERIES
CONTINENTAL SMALL COMPANY SERIES
DFA INTERNATIONAL VALUE SERIES
EMERGING MARKETS SERIES
EMERGING MARKETS SMALL CAP 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
The DFA International Value, Emerging Markets and Emerging Markets Small Cap
Series are each subject to minimum fees of $75,000 per year. The Pacific Rim
Small Company Series is subject to a minimum fee of $100,000 per year. PFPC
has agreed to limit the minimum fee for these Series from time to time.
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
U.S. LARGE COMPANY SERIES
.015% of net assets
U.S. 4-10 VALUE SERIES
.0160% of net assets
(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,
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administrative services and custodian fees. Expenses allocable to a
particular Series are so allocated and expenses of the Trust which are not
allocable to a particular Series are borne by each Series on the basis of its
relative net assets.
(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.
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES
(a) All sixteen 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, The Emerging Markets Small Cap, The
U.S. Large Company, Japanese, Pacific Rim, United Kingdom or Continental
Series redeems its entire interest in the Series or becomes bankrupt, a
majority in interest of the remaining shareholders in such Series must vote
within 120 days 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. Investments in
The Emerging Markets, The Emerging Markets Small Cap, The U.S. Large Company,
Japanese, Pacific Rim, United Kingdom and Continental Series may not be
transferred, but an investor may withdraw all or any portion of their
investment at any time at net asset value. 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 October 31, 1998, the following persons may be deemed to control
the following Series either by owning more than 25% of the voting securities
of such Series directly or, through the operation of pass-through voting
rights, by owning more than 25% of the voting securities of a feeder
portfolio investing its assets in the Series:
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<TABLE>
<S> <C>
THE DFA INTERNATIONAL VALUE SERIES
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309 26.62%
JAPANESE SMALL COMPANY SERIES
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309 38.53%
UNITED KINGDOM SMALL COMPANY SERIES
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309 39.44%
PACIFIC RIM SMALL COMPANY SERIES
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309 46.92%
CONTINENTAL SMALL COMPANY SERIES
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309 40.49%
EMERGING MARKETS SMALL CAP SERIES
South Dakota Retirement System
4009 W. 49th Street, Suite 300
Sioux Falls, SD 57105 77.17%
U.S. 4-10 VALUE SERIES
West Virginia Investment Management Board
One Cantley Drive
Charleston, WV 25314 100%
</TABLE>
(c) Not applicable.
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(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) Except for the Partnership Series (defined below), the Trust's policy is
to distribute substantially all net investment income not previously
distributed during the year from the Small Company Series, U.S. 4-10 Value
Series, U.S. 6-10 Value Series and the DFA International Value Series
together with any net realized capital gains in December of each year. In
addition, the Corporate Series (as defined below) will distribute all net
investment income earned through the end of November each year in the month
of November. Dividends from net investment income of The Enhanced U.S. Large
Company Series and U.S. Large Cap Value Series are distributed quarterly, and
any net capital gains are distributed annually after November 30. Net
investment income, which is accrued daily, will be distributed monthly
(except for January) by The DFA One-Year Fixed Income Series and quarterly by
The DFA Two-Year Global Fixed Income Series. Any net realized capital gains
of the Fixed Income Series will be distributed annually after the end of the
fiscal year. Shareholders of the Trust (other than shareholders of the
Partnership Series) 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, U.S. 9-10
Small Company Series, the Fixed Income 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. While
shareholders of The Enhanced U.S. Large Company Series will automatically
receive all capital gains distributions in additional shares of the Series,
upon written notice to the Transfer Agent, they may receive all income
dividends in cash.
(g) Each Series of the Trust, other than the Japanese, United Kingdom,
Pacific Rim, Continental, The U.S. Large Company, The Emerging Markets and
The Emerging Markets Small Cap Series, is classified as a separate
corporation for U.S. federal income tax purposes (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 U.S. federal income taxes to
the extent that its net investment income and net realized capital gains are
distributed.
The Japanese, United Kingdom, Pacific Rim, Continental, The U.S. Large
Company, The Emerging Markets, The Emerging Markets Small Cap and Tax-Managed
Marketwide Value Series (together, the "Partnership Series") are classified as
partnerships for U.S. federal income tax purposes.
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If a Series of the Trust, including the Partnership Series, purchases shares
in certain foreign investment entities, called "passive foreign investment
companies" ("PFIC"), the Series (and in the case of the Partnership 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
Partnership Series, even if such income is distributed to its investors.
(See below for a more detailed discussion of the Partnership Series).
The Series of the Trust, including the Partnership 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 their 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 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. federal 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.
The Enhanced U.S. Large Company Series' investments in Index Derivatives are
subject to complex tax rules which may have the effect of accelerating income
or converting, in part, what otherwise would have been long-term capital gain
into short-term capital gain. These rules may affect both the amount,
character and timing of income distributed to shareholders of The Enhanced
U.S. Large Company Series.
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 of the net investment income from The DFA One-Year Fixed
Income and Two-Year Global Fixed Income Series is expected to arise from
earned interest, it is not expected that any of such Series' distributions
will be eligible for the dividends received deduction for corporations.
For U.S. 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 a
Corporate Series are
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notified annually by the Trust as to the U.S. 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 to shareholders of record in such a month but which, for operational
reasons, may not be paid to the shareholder until the following January, will
be treated for U.S. federal income tax purposes as if paid by 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 U.S. federal income tax purposes may be
realized by investors in a Corporate Series who are subject to U.S. federal
taxation upon the exchange depending upon the cost of the securities or local
currency exchanged. (See "In Kind Purchases" in Item 7.)
The 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 31% 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
U.S. federal income taxation should consult with their 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. Series shares held by the estate of a non-U.S.
investor may also be subject to U.S. estate tax.
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 Partnership Series are series of a trust organized under Delaware law.
The Partnership Series will not be subject to any U.S. federal income tax.
Instead, each investor will be required to report separately on its own U.S.
federal income tax return its distributive share (as determined in accordance
with the governing instruments of the Partnership Series) of a Partnership
Series' income, gains, losses, deductions and credits. Each investor will be
required to report its distributive share regardless of whether it has
received a corresponding distribution of cash or property from a Partnership
Series. An allocable share of a tax-exempt investor's income will be
"unrelated business taxable income" ("UBTI") only to the extent that a
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Partnership Series borrows money to acquire property or invests in assets
that produce UBTI. In addition to U.S. federal income taxes, investors in
the Partnership Series may also be subject to state and local taxes on their
distributive share of a Partnership Series' income.
The Partnership Series' taxable year-end will be November 30. Although, as
described above, the Partnership Series will not be subject to U.S. federal
income tax, they will file appropriate U.S. federal income tax returns.
While the Partnership Series are not classified as "regulated investment
companies" under Subchapter M of the Code, the Partnership 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, assuming that the investor invested all of its assets in a Partnership
Series for such Series' entire fiscal year.
There are certain other tax issues that will be relevant to only certain of
the investors; for instance, investors that are segregated asset accounts and
investors who contribute assets rather than cash to the Partnership 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
Partnership Series.
Redemptions of shares in a Partnership Series may be taxable. In general, a
redemption of shares resulting in a distribution of cash by a Partnership
Series to an investor in excess of that investor's tax basis in its shares of
such Partnership Series is taxable to the extent of such excess.
The Partnership Series will inform investors promptly after the close of each
fiscal year of the source of dividends and distributions at the time they are
paid and will promptly advise investors of their allocable share of a
Partnership Series' income, gains, losses, deductions and credits for U.S.
federal income tax purposes.
Investors may wish to contact their tax advisors to determine the
applicability of state and local taxes to their distributive share of a
Partnership Series' income, gains, losses, deductions, and credits.
Investors in the Partnership Series who are not U.S. persons for purposes of
U.S. federal income taxation should consult with their tax advisors to
determine the applicability of U.S. withholding by a Partnership Series on
interest, dividends and any other items of fixed or determinable annual or
periodical gains, profits and income included in such investors' distributive
share of a Partnership Series' income. Non-U.S. investors may also wish to
contact their tax advisors to determine the applicability of foreign tax
laws. Series shares held by the estate of a non-U.S. investor may be subject
to U.S. estate tax.
The Tax-Managed Marketwide Value Series may time investments to minimize the
receipt of dividends. These actions could result in the Tax-Managed
Marketwide Value Series being unable to flow through the dividends received
deduction to corporate shareholders. This will occur if the Tax-Managed
Marketwide Value Series does not hold the stock of a domestic (U.S.)
corporation for the requisite holding period to be eligible for pass-through
of the dividends received deduction.
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The Advisor seeks to manage the Tax-Managed Marketwide Series in order to
minimize the realization of net capital gains where possible and may minimize
taxable dividend distributions during a particular year. However, the
realization of capital gains and receipt of income is not entirely within the
Advisor's control. Thus, capital gains distributions may vary considerably
from year to year. There will be no capital gains distributions in years
when the Tax-Managed Marketwide Value Series realizes net capital losses.
Furthermore, the realization of capital gains by a shareholder on the sale of
portfolio shares will depend on whether a shareholder's redemption price
exceeds his or her tax basis in the shares sold. If a shareholder elects to
receive capital gains distributions in cash, instead of reinvesting them in
additional shares, the capital at work in the Tax-Managed Marketwide Value
Series will be reduced. Also, purchases of shares in the Tax-Managed
Marketwide Value Series shortly before the record date for a dividend or
capital gains distribution may cause of portion of the investment to be
returned to the shareholder as a taxable distribution, regardless of whether
the distribution is being reinvested or paid in cash.
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, Emerging Markets Small
Cap, Japanese, Pacific Rim and Continental Series are sold at a price which is
equal to the net asset value of such shares plus a reimbursement fee. (See Item
7(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 purchase or otherwise represented in
the Series' portfolios at the time of the exchange as described in this
registration statement or in exchange for local currencies in which such
securities of the Japanese, United Kingdom, Pacific Rim, Continental, The DFA
International Value, The Emerging Markets, The Emerging Markets Small Cap,
The DFA Two-Year Global Fixed Income and The Enhanced U.S. Large Company
Series 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,
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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 Japanese, United Kingdom, Pacific Rim,
Continental, The DFA International Value or DFA Two-Year Global Fixed Income
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) such securities are eligible to be included, or otherwise
represented, in the Series' portfolios at the time of exchange and current
market quotations are readily available for such securities; (2) the investor
represents and agrees that all securities offered to be exchanged are not
subject to any restrictions upon their sale by the 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. (See Item 4(a)(i).) Investors
interested in such exchanges should contact the Advisor. Investors should
also know that an in-kind purchase of shares of a Series may result in
taxable income; an investor desiring to make an in-kind purchase should
consult its tax 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. 9-10
Small Company, The U.S. Large Company, The DFA International Value, the U.S.
Value, The Emerging Markets and The Emerging Markets Small Cap 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. Securities issued by open-end
investment companies, such as the Series, are valued using their respective
net asset values for purchase orders placed at the close of the NYSE.
Unlisted securities for which market quotations are readily available are
valued at the mean between the most recent bid and asked prices. The value
of other assets and securities for which no quotations are readily available
(including restricted securities) are determined in good faith at fair value
in accordance with procedures adopted by the Board of Trustees. The net asset
values per share of the Japanese, Pacific Rim, Continental, United Kingdom,
The DFA International Value, The DFA Two-Year Global Fixed Income, The
Emerging Markets and The Emerging Markets Small Cap 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 Fixed Income Series will tend to fluctuate
with interest rates because, unlike money-market funds, such Series do not
seek to stabilize the value of their 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
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exchange will be valued according to the broadest and most representative
market, and it is expected that for bonds and other fixed-income securities
this ordinarily will be the OTC market. Securities held by the Fixed Income
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 those Series that invest in such securities 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 and The
Emerging Markets Small Cap 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, a 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 a 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 a
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 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.
Futures contracts are valued using the settlement price established each day
on the exchange on which they are traded. The value of such futures
contracts held by a Series are determined each day as of such close.
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 the Series' shares to such investors, will eliminate
a dilutive effect such costs would otherwise have on the net asset value of
shares held by existing investors. Therefore, the shares of The Emerging
Markets, Emerging Markets Small Cap, Japanese, Pacific Rim and Continental
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
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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 and the
Japanese Series, expressed as a percentage of the net asset value of each
Series' shares, is 0.50%. The reimbursement fee for The Emerging Markets
Small Cap, Pacific Rim and Continental Series, expressed as a percentage of
the net assets of each Series' shares, is 1.00%. 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,
Emerging Markets Small Cap, Japanese, Pacific Rim, and Continental 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.
(g) 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 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.
When in the best interests of a Series, the 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
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payment of redemptions. The Japanese Small Company, United Kingdom Small
Company, Continental Small Company, Pacific Rim Small Company, Emerging
Markets, Emerging Markets Small Cap, Two-Year Global Fixed Income and DFA
International Value Series reserve the right to redeem their shares in the
currencies in which their investments are denominated. Investors may incur
charges in converting such currencies to dollars and the value of the
securities may be affected by currency exchange fluctuations.
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.
Part B:
ITEM 10. COVER PAGE
Not applicable.
ITEM 11. TABLE OF CONTENTS
Not applicable.
ITEM 12. GENERAL INFORMATION AND HISTORY
Until August 1, 1997, The U.S. 6-10 Value Series was named The U.S. Small
Cap Value Series.
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
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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. 9-10 and 6-10 Small
Company Series and The DFA One-Year Fixed Income Series may purchase or sell
financial futures contracts and options thereon; and The Enhanced U.S. Large
Company Series may purchase, sell and enter into indices-related futures
contracts, options on such futures contracts, securities-related swap
agreements and other derivative instruments;
(2) make loans of cash, except through the acquisition of repurchase
agreements and obligations customarily purchased by institutional investors;
(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; provided that
this limitation applies to 100% of the total assets of The U.S. 9-10 Small
Company Series;
(4) purchase or retain securities of an issuer if those officers and trustees
of the Trust or officers and directors of the Advisor owning more than 1/2
of 1% of such securities together own more than 5% of such securities;
provided that The U.S. 4-10 Value Series and The Tax-Managed U.S. Marketwide
Value Series are not subject to this limitation;
(5) borrow, except from banks and as a temporary measure for extraordinary or
emergency purposes and then, in no event, in excess of 5% of a Series' gross
assets valued at the lower of market or cost; provided that each Series,
except The DFA One-Year Fixed Income Series, U.S. 9-10 Small Company Series
and the Japanese 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; provided that The U.S. 4-10 Value Series and The Tax-Managed U.S.
Marketwide Value Series are not subject to this limitation;
(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 U.S. 4-10 Value, The Tax-Managed U.S.
Marketwide Value Series, Enhanced U.S. Large Company, The DFA Two-Year Global
Fixed Income and The Emerging Markets Small Cap Series are not subject to
this limitation, and The DFA International Value Series, The U.S. 6-10 Value
Series, The U.S. Large Cap Value Series, The U.S. 6-10 Small Company Series
and The Emerging Markets Series may invest not more than 15% of their total
assets in illiquid securities;
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(8) engage in the business of underwriting securities issued by others;
(9) invest for the purpose of exercising control over management of any
company; provided that The U.S. 9-10 Small Company Series, The U.S. 4-10
Value Series and The Tax-Managed U.S. Marketwide Value Series are not subject
to this limitation;
(10) invest its assets in securities of any investment company, except in
connection with a merger, acquisition of assets, consolidation or
reorganization; provided that (a) The Emerging Markets, Emerging Markets
Small Cap, Japanese, United Kingdom, Pacific Rim and Continental Series are
not subject to this limitation; (b) each of the U.S. 4-10 Value, Tax-Managed
U.S. Marketwide Value, Enhanced U.S. Large Company, Emerging Markets,
Emerging Markets Small Cap, Japanese, United Kingdom, Pacific Rim and
Continental Series may invest their assets in securities of investment
companies and units of such companies such as, but not limited to, S & P
Depository Receipts; and (c) the U.S. 9-10 Small Company 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; provided that The U.S. 9-10 Small Company Series, The U.S. 4-10 Value
Series and The Tax-Managed U.S. Marketwide Value Series are not subject to this
limitation;
(12) acquire any securities of companies within one industry if, as a result
of such acquisition, more than 25% of the value of the Series' total assets
would be invested in securities of companies within such industry; except The
DFA One-Year Fixed Income and Two-Year Global Fixed Income Series shall
invest more than 25% of their 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
except that (a) the Enhanced U.S. Large Company Series may write or acquire
options; (b) the U.S. 4-10 Value Series is not subject to these limitations;
and (c) The Tax-Managed U.S. Marketwide Value Series may write or acquire
options;
(14) purchase warrants; however, each Series, except The DFA One-Year Fixed
Income Series and Two-Year Global Fixed Income Series (the "Fixed Income
Series"), may acquire warrants as a result of corporate actions involving its
holdings of other equity securities; and The U.S. 4-10 Value Series and The
Tax-Managed U.S. Marketwide Value Series are not subject to this limitation;
(15) purchase securities on margin or sell short; provided that The U.S. 4-10
Value Series and The Tax-Managed U.S. Marketwide Value Series are not subject
to the limitation on selling securities short;
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(16) acquire more than 10% of the voting securities of any issuer; provided
that (a) this limitation applies only to 75% of the assets of The U.S. Value
Series, The Emerging Markets Series and The Emerging Markets Small Cap
Series; and (b) The U.S. 9-10 Small Company Series and The Tax-Managed U.S.
Marketwide Value Series are not subject to this limitation; or
(17) issue senior securities (as such term is defined in Section 18(f) of the
Investment Company Act of 1940), except to the extent permitted under the Act.
The investment limitations described in (1) and (15) above do not prohibit
each Series that may purchase or sell financial futures contracts and options
thereon from making margin deposits to the extent permitted under applicable
regulations; and the investment limitations described in (1), (13) and (15)
above do not prohibit The Enhanced U.S. Large Company Series from (i) making
margin deposits in connection with transactions in options; and (ii)
maintaining a short position, or purchasing, writing or selling puts, calls,
straddles, spreads or combinations thereof in connection with transactions in
options, futures, and options on futures and transactions arising under swap
agreements or other derivative instruments.
For purposes of (5) above, The Emerging Markets Series and The Emerging
Markets Small Cap Series may borrow in connection with a foreign currency
transaction or the settlement of a portfolio trade. The only type of
borrowing contemplated thereby is the use of a letter of credit issued on
such Series' behalf in lieu of depositing initial margin in connection with
currency futures contracts, and the Series have no present intent to engage
in any other types of borrowing transactions under this authority. 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 and Two-Year
Global 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 Rule 144A securities to be considered
liquid, there must be at least two dealers making a market in such
securities. After purchase, the Board of Trustees and the Advisor will
continue to monitor the liquidity of Rule 144A securities.
(c) Although not a fundamental policy subject to shareholder approval: (1)
The U.S. 6-10 Series, Japanese Series, United Kingdom Series, Pacific Rim
Series and Continental Series, will not purchase interests in any real estate
investment trust; and (2) The Enhanced U.S. Large Company, U.S. 4-10 Value,
Tax-Managed U.S. Marketwide Value Series, Two-Year Global Fixed Income and
Emerging Markets Small Cap Series do not intend to invest more than 15% of
their net assets in illiquid securities.
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The Japanese, United Kingdom, Pacific Rim, Continental, DFA International
Value, The DFA Two-Year Global Fixed Income, The Emerging Markets and The
Emerging Markets Small Cap 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.
Notwithstanding any of the above investment restrictions, The Emerging
Markets Series and The Emerging Markets Small Cap Series may establish
subsidiaries or other similar vehicles for the purpose of conducting their
investment operations in Approved Markets, if such subsidiaries or vehicles
are required by local laws or regulations governing foreign investors such as
the Series or whose use is otherwise considered by the Series to be
advisable. Such Series would "look through" any such vehicle to determine
compliance with their investment restrictions.
Subject to future regulatory guidance, for purposes of those investment
limitations identified above that are based on total assets, "total assets"
refers to the assets that the Series owns, and does not include assets which
the Series does not own but over which it has effective control. For
example, when applying a percentage investment limitation that is based on
total assets, the Series will exclude from its total assets those assets
which represent collateral received by the Series for its securities lending
transactions.
Unless otherwise indicated, all limitations applicable to the Series'
investments apply only at the time that a transaction is undertaken. With
respect to illiquid securities, if a fluctuation in value causes a Series to
go above its limitation on investment in illiquid securities, the Board will
consider what action, if any, should be taken to reduce the percentage to the
applicable limitation. Any subsequent change in a rating assigned by any
rating service to a security or change in the percentage of a Series' assets
invested in certain securities or other instruments resulting from market
fluctuations or other changes in a Series' total assets will not require a
Series to dispose of an investment until the Advisor determines that it is
practicable to sell or closeout the investment without undue market or tax
consequences. In the event that ratings services assign different ratings to
the same security, the Advisor will determine which rating it believes best
reflects the security's quality and risk at that time, which may be the
higher of the several assigned ratings.
Because the structure of each Series, except the 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.
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OPTIONS ON STOCK INDICES
The Enhanced U.S. Large Company Series may purchase and sell options on stock
indices. With respect to the sale of call options on stock indices, pursuant
to published positions of the Securities and Exchange Commission ("SEC"),
The Enhanced U.S. Large Company Series will either (1) maintain with its
custodian liquid assets equal to the contract value (less any margin
deposits); (2) hold a portfolio of stocks substantially replicating the
movement of the index underlying the call option; or (3) hold a separate call
on the same index as the call written where the exercise price of the call
held is (a) equal to or less than the exercise price of the call written, or
(b) greater than the exercise price of the call written, provided the
difference is maintained by the Series in liquid assets in a segregated
account with its custodian. With respect to the sale of put options on stock
indices, pursuant to published SEC positions, The Enhanced U.S. Large Company
Series will either (1) maintain liquid assets equal to the exercise price
(less any margin deposits) in a segregated account with its custodian; or (2)
hold a put on the same index as the put written where the exercise price of
the put held is (a) equal to or greater than the exercise price of the put
written, or (b) less than the exercise price of the put written, provided an
amount equal to the difference is maintained by the Series in liquid assets
in a segregated account with its custodian.
Prior to the earlier of exercise or expiration, an option may be closed out
by an offsetting purchase or sale of an option of the same series (type,
exchange, underlying index, exercise price, and expiration). There can be no
assurance, however, that a closing purchase or sale transaction can be
effected when The Enhanced U.S. Large Company Series desires. The Enhanced
U.S. Large Company Series will realize a gain from a closing purchase
transaction if the cost of the closing option is less than the premium
received from writing the option, or, if it is more, the Series will realize
a loss. The principal factors affecting the market value of a put or a call
option include supply and demand, interest rates, the current market price of
the underlying index in relation to the exercise price of the option, the
volatility of the underlying index, and the time remaining until the
expiration date.
If an option written by The Enhanced U.S. Large Company Series expires, the
Series realizes a gain equal to the premium received at the time the option
was written. If an option purchased by the Series expires unexercised, the
Series realizes a loss equal to the premium paid.
The premium paid for a put or call option purchased by The Enhanced U.S.
Large Company Series is an asset of the Series. The premium received for an
option written by the Series is recorded as a deferred credit. The value of
an option purchased or written is marked to market daily and is valued at the
closing price on the exchange on which it is traded or, if not traded on an
exchange or no closing price is available, at the mean between the last bid
and asked prices.
RISKS ASSOCIATED WITH OPTIONS ON INDICES
There are several risks associated with transactions in options on indices.
For example, there are significant differences between the securities and
options markets that could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its objectives. The
value of an option position will reflect, among other things, the current
market
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price of the underlying index, the time remaining until expiration, the
relationship of the exercise price, the term structure of interest rates,
estimated price volatility of the underlying index and general market
conditions. A decision as to whether, when and how to use options involves
the exercise of skill and judgment, and even a well-conceived transaction may
be unsuccessful to some degree because of market behavior or unexpected
events.
Options normally have expiration dates of up to 90 days. The exercise price
of the options may be below, equal to or above the current market value of
the underlying index. Purchased options that expire unexercised have no
value. Unless an option purchased by The Enhanced U.S. Large Company Series
is exercised or unless a closing transaction is effected with respect to that
position, The Enhanced U.S. Large Company Series will realize a loss in the
amount of the premium paid and any transaction costs.
A position in an exchange-listed option may be closed out only on an exchange
that provides a secondary market for identical options. Although The
Enhanced U.S. Large Company Series intends to purchase or write only those
options for which there appears to be an active secondary market, there is no
assurance that a liquid secondary market will exist for any particular option
at any specific time. Closing transactions may be effected with respect to
options traded in the over-the-counter markets only by negotiating directly
with the other party to the option contract, or in a secondary market for the
option if such a market exists. There can be no assurance that The Enhanced
U.S. Large Company Series will be able to liquidate an over-the-counter
option at a favorable price at any time prior to expiration. In the event of
insolvency of the counter-party, the Series may be unable to liquidate an
over-the-counter option. Accordingly, it may not be possible to effect
closing transactions with respect to certain options, with the result that
The Enhanced U.S. Large Company Series would have to exercise those options
which they have purchased in order to realize any profit. With respect to
options written by The Enhanced U.S. Large Company Series, the inability to
enter into a closing transaction may result in material losses to the Series.
Index prices may be distorted if trading of a substantial number of
securities included in the index is interrupted causing the trading of
options on that index to be halted. If a trading halt occurred, The Enhanced
U.S. Large Company Series would not be able to close out options which it had
purchased and may incur losses if the underlying index moved adversely before
trading resumed. If a trading halt occurred and restrictions prohibiting the
exercise of options were imposed through the close of trading on the last day
before expiration, exercises on that day would be settled on the basis of a
closing index value that may not reflect current price information for
securities representing a substantial portion of the value of the index.
The Enhanced U.S. Large Company Series' activities in the options markets may
result in higher fund turnover rates and additional brokerage costs; however,
the Series may also save on commissions by using options as a hedge rather
than buying or selling individual securities in anticipation or as a result
of market movements.
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INVESTMENT LIMITATIONS ON OPTIONS TRANSACTIONS
The ability of The Enhanced U.S. Large Company Series to engage in options
transactions is subject to certain limitations. The Enhanced U.S. Large
Company Series will only invest in over-the-counter options to the extent
consistent with the 15% limit on investments in illiquid securities.
FUTURES CONTRACTS
All Series except The U.S. 9-10 and 6-10 Small Company Series and The DFA
One-Year Fixed Income Series may enter into index futures contracts and
options on index futures contracts for the purpose of remaining fully
invested and to maintain liquidity to pay redemptions. In addition, The
Enhanced U.S. Large Company Series may use futures contracts and options
thereon to hedge against securities prices or as part of its overall
investment strategy. Futures contracts provide for the future sale by one
party and purchase by another party of a specified amount of defined
securities at a specified future time and at a specified price. Futures
contracts which are standardized as to maturity date and underlying financial
instrument are traded on national futures exchanges. The 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. To the extent that a Series invests in futures contracts
and options thereon for other than bona fide hedging purposes, no Series will
enter into such transactions if, immediately thereafter, the sum of the
amount of initial margin deposits and premiums paid for open futures options
would exceed 5% of the Series' total assets, after taking into account
unrealized profits and unrealized losses on such contracts it has entered
into; provided, however, that, in the case of an option that is in-the-money
at the time of purchase, the in-the-money amount may be excluded in
calculating the 5%. Pursuant to published positions of the SEC, the Series
may be required to maintain segregated accounts consisting of liquid assets
(or, as permitted under applicable regulation, enter into offsetting
positions) in connection with its futures contract transactions in order to
cover its obligations with respect to such contracts.
Positions in futures contracts may be closed out only on an exchange which
provides a secondary market. However, there can be no assurance that a
liquid secondary market will exist for any particular futures contract at any
specific time. Therefore, it might not be possible to close a futures
position and, in the event of adverse price movements, the 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
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which are traded on national futures exchanges and for which there appears to
be a liquid secondary market.
(d) The portfolio turnover rate of each of the Small Company Series
ordinarily is anticipated to be low and is not expected to exceed 35% 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.
The portfolio turnover rate for The U.S. 4-10 Value Series is anticipated to
be approximately 35%. The portfolio turnover rate for The Tax-Managed U.S.
Marketwide Value Series is anticipated to be approximately 60%.
For a discussion of The Emerging Markets Small Cap Series' policy with
respect to portfolio turnover, see Item 4(a)(ii) in Part A under "The
Emerging Markets Series and The Emerging Markets Small Cap Series - Portfolio
Structure."
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.
ITEM 14. MANAGEMENT OF THE REGISTRANT
(a) AND (b) TRUSTEES AND OFFICERS
The names, addresses and dates of birth of the trustees and officers of the
Trust and a brief statement of 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 Limited, DFA Investment
Dimensions Group Inc. (Registered Investment Company), Dimensional Emerging
Markets Value Fund Inc. (Registered Investment Company), Dimensional
Investment Group Inc. (Registered Investment Company) and DFA Securities Inc.
TRUSTEES
David G. Booth*, 12/2/46, 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, 9/22/47, Trustee, Chicago, IL. Leo Melamed
Professor of Finance, Graduate School of Business, University of Chicago.
Director, DFA Investment Dimensions Group Inc., Dimensional Investment Group
Inc. and Dimensional Emerging Markets Value Fund Inc.
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John P. Gould, 1/19/39, Trustee, Chicago, IL. Steven G. Rothmeier
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 Value Fund Inc. and
Harbor Investment Advisors. Executive Vice President, Lexecon Inc.
(economics, law, strategy and finance consulting).
Roger G. Ibbotson, 5/27/43, 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
Value Fund Inc., Hospital Fund, Inc. (investment management services) and
BIRR Portfolio Analysis, Inc. (software products). Chairman and President,
Ibbotson Associates, Inc. (software, data, publishing and consulting).
Merton H. Miller, 5/16/23, 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 Value Fund
Inc. Public Director, Chicago Mercantile Exchange.
Myron S. Scholes, 7/1/42, Trustee, Greenwich, CT. Limited Partner, Long-Term
Capital Management L.P. (money manager). Frank E. Buck Professor Emeritus of
Finance, Graduate School of Business and Professor of Law, Law School, Senior
Research Fellow, Hoover Institution, (all) Stanford University. Director,
DFA Investment Dimensions Group Inc., Dimensional Investment Group Inc.,
Dimensional Emerging Markets Value Fund Inc., Benham Capital Management Group
of Investment Companies and Smith Breeden Group of Investment Companies.
Rex A. Sinquefield*, 9/7/44, Trustee, Chairman-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.
* Interested Trustee of the Trust.
OFFICERS
Arthur Barlow, 11/7/55, Vice President, Santa Monica, CA. Vice President of
all DFA Entities.
Truman Clark, 4/8/41, Vice President, Santa Monica, CA. Vice President of
all DFA Entities. Consultant until October 1995 and Principal and Manager of
Product Development, Wells Fargo Nikko Investment Advisors, San Francisco, CA
from 1990-1994.
Maureen Connors, 11/17/36, Vice President and Assistant Secretary, Santa
Monica, CA. Vice President of all DFA Entities.
Robert Deere, 10/8/57, Vice President, Santa Monica, CA. Vice President of
all DFA Entities.
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<PAGE>
Irene R. Diamant, 7/16/50, Vice President and Secretary, Santa Monica, CA.
Vice President and Secretary of all DFA Entities except Dimensional Fund
Advisors Ltd. for which she is Vice President.
Richard Eustice, 8/5/65, Vice President and Assistant Secretary, Santa
Monica, CA. Vice President of all DFA entities.
Eugene Fama, Jr., 1/21/61, Vice President, Santa Monica, CA. Vice President
of all DFA Entities.
Kamyab Hashemi-Nejad, 1/22/61, Vice President, Controller and Assistant
Treasurer of all DFA Entities.
Stephen P. Manus, 12/26/50, Vice President, Santa Monica, CA. Managing
Director, ANB Investment Management and Trust Company from 1985-1993;
President, ANB Investment Management and Trust Company from 1993-1997. Vice
President of all DFA Entities.
Karen McGinley, 3/10/66, Vice President, Santa Monica, CA. Vice President of
all DFA Entities.
Catherine L. Newell, 5/7/64, Vice President and Assistant Secretary, Santa
Monica, CA. Associate, Morrison & Foerster, LLP from 1989-1996. Vice
President and Assistant Secretary of all DFA Entities except Dimensional Fund
Advisors Ltd. for which she is Vice President.
David Plecha, 10/26/61, Vice President, Santa Monica, CA. Vice President of
all DFA Entities.
George Sands, 2/8/56, Vice President, Santa Monica, CA. Vice President of
all DFA Entities.
Michael T. Scardina, 10/12/55, Vice President, Chief Financial Officer and
Treasurer, Santa Monica, CA. Vice President, Chief Financial Officer and
Treasurer of all DFA Entities.
Jeanne C. Sinquefield, Ph.D., 12/2/46, Executive Vice President, Santa
Monica, CA. Executive Vice President of all DFA Entities.
Scott Thornton, 3/1/63, Vice President, Santa Monica, CA. Vice President of
all DFA Entities.
Weston Wellington, 3/1/51, Vice President, Santa Monica, CA. Vice President
of all DFA Entities. Vice President, Director of Research, LPL Financial
Services, Inc., Boston, MA 1987-1994.
Rex A. Sinquefield, Trustee, Chairman-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, 1997, and the
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<PAGE>
total compensation received from all four registered investment companies for
which the Advisor serves as investment advisor during that same fiscal year.
<TABLE>
<CAPTION>
Aggregate Total Compensation from
Compensation Trust and
Trustee from Trust Fund Complex
- ------- ---------- ------------
<S> <C> <C>
George M. Constantinides $5,000 $30,000
John P. Gould $5,000 $30,000
Roger G. Ibbotson $5,000 $30,000
Merton H. Miller $5,000 $30,000
Myron S. Scholes $5,000 $30,000
</TABLE>
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
(a) See Item 6(b).
(b) As of October 31, 1998, the following shareholders owned beneficially at
least 5% of the outstanding shares of the Series, as set forth below. Unless
otherwise indicated, the address of each shareholder is 1299 Ocean Avenue, 11th
Floor, Santa Monica, CA 90401.
<TABLE>
<S> <C>
THE U.S. 9-10 SMALL COMPANY SERIES
DFA Investment Dimensions Group Inc. -
The U.S. 9-10 Small Company Portfolio 100%
THE U.S. 6-10 SMALL COMPANY SERIES
DFA Investment Dimensions Group Inc. -
The U.S. 6-10 Small Company Portfolio 59.24%
The California Wellness Foundation
6320 Canoga Avenue, Suite 1700
Woodland Hills, CA 91367 22.74%
Dimensional Investment Group Inc. -
DFA 6-10 Institutional Portfolio 18.02%
THE U.S. LARGE COMPANY SERIES
Blackrock Funds -
Index Equity Portfolio
c/o PFPC
400 Bellevue Parkway
Wilmington, DE 19809 64.45%
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
DFA Investment Dimensions Group Inc. -
The U.S. Large Company Portfolio 35.55%
THE DFA ONE-YEAR FIXED INCOME SERIES
DFA Investment Dimensions Group Inc. -
The DFA One-Year Fixed Income Portfolio 87.25%
Gateway 2000
610 Gateway Drive
North Sioux City, SD 57049 11.89%
THE U.S. 6-10 VALUE SERIES
DFA Investment Dimensions Group Inc. -
The U.S. 6-10 Value Portfolio 95.96%
THE U.S. LARGE CAP VALUE SERIES
DFA Investment Dimensions Group Inc. -
The U.S. Large Cap Value Portfolio 61.08%
Dimensional Investment Group Inc. -
U.S. Large Cap Value Portfolio III 27.93%
Dimensional Investment Group Inc. -
RWB/DFA U.S. High Book to Market Portfolio 8.31%
THE DFA INTERNATIONAL VALUE SERIES
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309 26.62%
Dimensional Investment Group Inc. -
DFA International Value Portfolio 24.98%
Dimensional Investment Group Inc. -
RWB/DFA International Value Portfolio III 16.87%
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
DFA Investment Dimensions Group Inc. -
DFA International High Book to Market Portfolio 16.74%
Dimensional Investment Group Inc. -
DFA International Value Portfolio IV 5.73%
THE EMERGING MARKETS SERIES
DFA Investment Dimensions Group Inc. -
Emerging Markets Portfolio 97.58%
DFA TWO-YEAR GLOBAL FIXED INCOME SERIES
DFA Investment Dimensions Group Inc. -
DFA Two-Year Global Fixed Income Portfolio 100%
ENHANCED U.S. LARGE COMPANY SERIES
DFA Investment Dimensions Group Inc.
Enhanced U.S. Large Company Portfolio 100%
JAPANESE SMALL COMPANY SERIES
DFA Investment Dimensions Group Inc.
Japanese Small Company Portfolio 62.74%
DFA Investment Dimensions Group Inc.
International Small Company Portfolio 37.26%
UNITED KINGDOM SMALL COMPANY SERIES
DFA Investment Dimensions Group Inc.
United Kingdom Small Company Portfolio 62.95%
DFA Investment Dimensions Group Inc.
International Small Company Portfolio 37.05%
PACIFIC RIM SMALL COMPANY SERIES
DFA Investment Dimensions Group Inc.
Pacific Rim Small Company Portfolio 64.29%
DFA Investment Dimensions Group Inc.
International Small Company Portfolio 35.70%
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
CONTINENTAL SMALL COMPANY SERIES
DFA Investment Dimensions Group Inc.
Continental Small Company Portfolio 65.79%
DFA Investment Dimensions Group Inc.
International Small Company Portfolio 34.21%
EMERGING MARKETS SMALL CAP SERIES
South Dakota Retirement System
4009 W. 49th Street, Suite 300
Sioux Falls, SD 57105 77.17%
DFA Investment Dimensions Group Inc.
Emerging Markets Small Cap Portfolio 22.26%
U.S. 4-10 VALUE SERIES
West Virginia Investment Management Board
One Cantley Drive
Charleston, WV 25314 100%
</TABLE>
(c) As of October 31, 1998, the trustees and officers as a group owned less
than 1% of each Series' outstanding stock.
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 and Items 14(a) and (b)
in this Part B.
David G. Booth and Rex A. Sinquefield are shareholders 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 periods ended November 30, 1995, 1996 and
1997, as applicable, the Series paid management fees as set forth in the
following table:
<TABLE>
<CAPTION>
1995 1996 1997
(000) (000) (000)
<S> <C> <C> <C>
U.S. 6-10 Small Company $57 $81 $102
Japanese Small Company n/a $106 $258
United Kingdom Small Company n/a $52 $180
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
1995 1996 1997
(000) (000) (000)
<S> <C> <C> <C>
Pacific Rim Small Company n/a $65 $230
Continental Small Company n/a $100 $351
U.S. Large Company $19 $62 $160
Enhanced U.S. Large Company n/a $386 $17
DFA One-Year Fixed Income $310 $82 $392
DFA Two-Year Global Fixed
Income n/a $69 $185
U.S. 6-10 Value $976 $699 $3,534
U.S. Large Cap Value $306 $699 $1,255
DFA International Value $937 $2,124 $2,997
Emerging Markets $30 $111 $226
Emerging Markets Small Cap n/a n/a $47
</TABLE>
The Japanese Small Company, United Kingdom Small Company, Pacific Rim Small
Company and Continental Small Company Series commenced operations on August 10,
1996. The Emerging Markets Small Cap Series commenced operations on December 2,
1996. The U.S. 9-10 Small Company Series, The U.S. 4-10 Value Series, and The
Tax-Managed U.S. Marketwide Value Series had not commenced operations as of
November 30, 1997.
From December 1, 1993 through August 8, 1996, 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.
(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.
Initially, 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.
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<PAGE>
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(g) Not applicable.
(h) Citibank, N.A. ("Citibank"), 111 Wall Street, New York, New York, 10005,
serves as the global custodian for The DFA International Value, Japanese Small
Company, United Kingdom Small Company, Pacific Rim Small Company, Continental
Small Company, The DFA Two-Year Global Fixed Income and The Enhanced U.S. Large
Company Series (co-custodian with PNC Bank, N.A.). The Chase Manhattan Bank, 4
Chase Metrotech Center, Brooklyn, NY 11245, serves as custodian for The Emerging
Markets Series and The Emerging Markets Small Cap Series. PNC Bank, N.A., 200
Stevens Drive, Airport Business Center, Lester, PA 19113, serves as custodian
for all other Series. The custodians maintain separate accounts for the Series;
make receipts and disbursements of money on behalf of the Series; and collect
and receive income and other payments and distributions on account of the
Series' portfolio securities. The custodians do not participate in decisions
relating to the purchase and sale of portfolio securities.
PricewaterhouseCoopers LLP, 2400 Eleven Penn Center, Philadelphia, Pennsylvania
19103, the Trust's independent accountant, audits the Trust's financial
statements on an annual basis.
(i) Not applicable.
ITEM 17. BROKERAGE ALLOCATION
(a) The following table depicts brokerage commissions paid by the following
Series:
BROKERAGE COMMISSIONS
FISCAL YEARS ENDED NOVEMBER 30, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
1995 1996 1997
<S> <C> <C> <C>
U.S. 6-10 Small Company $ 361,784 $ 473,887 $ 855,652
Japanese Small Company n/a $ 466,795 $ 602,098
United Kingdom Small
Company n/a $ 86,854 $ 68,028
Pacific Rim Small Company n/a $ 181,812 $ 485,846
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
1995 1996 1997
<S> <C> <C> <C>
Continental Small Company
Series n/a $ 214,631 $ 145,195
U.S. Large Company $ 15,289 $ 72,262 $ 40,689
Enhanced U.S. Large
Company n/a $ 1,650 $ 10,284
U.S. 6-10 Value $1,027,015 $2,754,009 $4,591,853
U.S. Large Cap Value $ 410,503 $ 934,452 $ 929,005
DFA International Value $ 542,306 $1,251,242 $1,133,787
Emerging Markets $ 166,601 $ 437,088 $ 559,853
Emerging Markets Small Cap n/a n/a $ 123,081
</TABLE>
The substantial increases or decreases in the amount of brokerage commissions
paid by certain Series from year to year indicated in the foregoing table
resulted from increases or decreases in the amount of securities bought and
sold by those Series.
No commissions were paid to affiliates or affiliates of affiliates during
fiscal years 1995, 1996 or 1997.
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.
The OTC companies eligible for purchase by The U.S. 6-10 Small Company
Series, The U.S. 9-10 Small Company Series, The U.S. 4-10 Value Series and
The U.S. 6-10 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
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<PAGE>
executed on its system. On any given trade, The U.S. 6-10 Small Company
Series, The U.S. 9-10 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.
Brokerage commissions for transactions in securities listed on the Tokyo
Stock Exchange ("TSE") and other Japanese securities exchanges are fixed.
Under the current regulations of the TSE and the Japanese Ministry of
Finance, member and non-member firms of Japanese exchanges are required to
charge full commissions to all customers other than banks and certain
financial institutions, but members and licensed non-member firms may confirm
transactions to banks and financial institution affiliates located outside
Japan with institutional discounts on brokerage commissions. The Japanese
Small Company Series has been able to avail itself of institutional
discounts. The Series' ability to effect transactions at a discount from
fixed commission rates depends on a number of factors, including the size of
the transaction, the relation between the cost to the member or the licensed
non-member firm of effecting such transaction and the commission receivable,
and the law, regulation and practice discussed above. There can be no
assurance that the Series will continue to be able to realize the benefit of
discounts from fixed commissions.
(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.
Dimensional Fund Advisors Ltd. performs these services for the United Kingdom
and Continental Small Company Series and DFA Australia Limited performs these
services for the Japanese and Pacific Rim Small Company Series. Transactions
also may be placed with brokers who provide the Advisor or sub-advisors 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. Research
services furnished by brokers through whom securities transactions are
effected may be used by the Advisor in servicing all of its accounts and not
all such services may be used by the Advisor with respect to the Trust.
Brokerage transactions may be placed with securities firms that are
affiliated with an affiliate of the Advisor. Commission paid on such
transactions would be commensurate with the rate of commissions paid on
similar transactions to brokers that are not so affiliated.
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<PAGE>
(d) During the fiscal year ended November 30, 1997, the Series paid
commissions for securities transactions to brokers which provided market
price monitoring services, market studies and research services to the Series
as follows:
<TABLE>
<CAPTION>
VALUE OF
SECURITIES BROKERAGE
TRANSACTIONS COMMISSIONS
<S> <C> <C>
U.S. 6-10 Small Company $153,272,761 $ 486,637
Japanese Small Company $ 40,864,513 $ 253,707
U.S. 6-10 Value $453,009,643 $1,899,654
U.S. Large Cap Value $ 78,961,638 $ 122,527
DFA International Value $ 4,623,558 $ 13,922
Pacific Rim Small Company $ 8,885,178 $ 35,584
TOTAL: $739,617,291 $2,812,031
</TABLE>
(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.
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<PAGE>
(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, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas Day.
The Federal Reserve System is closed on the same days as the NYSE, except
that it is open on Good Friday and closed on Columbus Day and Veterans' Day.
Orders for redemptions and purchases will not be processed if the Trust is
closed. The TSE is closed on the following days in 1998: January 1, 2, 3
and 15, February 11, March 21, April 29, May 3, 4 and 5, July 20, September
15 and 23, October 10, November 3 and 23 and December 23 and 31. Orders for
the purchase and redemption of shares of the Japanese Series received on
those days will be priced as of the close of the NYSE on the next day that
the TSE is open for trading.
The 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
judgment 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 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 SEC, (2) during any period when an emergency
exists as defined by the rules of the SEC as a result of which it is not
reasonably practicable for the 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 SEC 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 Items 6(f) and (g) in Part A.
FEDERAL TAX TREATMENT OF OPTIONS, FUTURES CONTRACTS AND SIMILAR POSITIONS
The investment by a Series in options, futures contracts and options on
futures contracts are subject to many complex and special tax rules. For
example, options on stock and on narrowed-based stock indexes will generally
produce long-term or short-term capital gain or loss upon the exercise,
lapse, or closing out of the option or sale of the underlying stock or
security. By contrast, the treatment by a Series of certain other options,
futures and forward contracts is generally governed by Section 1256 of the
Code. These "Section 1256" positions generally include listed options on
debt securities, options on broad-based stock indexes, options on
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<PAGE>
futures contracts, regulated futures contracts and certain foreign currency
contracts and options thereon.
Absent a tax election to the contrary, each such Section 1256 position held
by a Series will be marked-to-market (i.e., treated as if it were sold for
fair market value) on the last business day of a Series' fiscal year, and all
gain or loss associated with fiscal year transactions and mark-to-market
positions at fiscal year end (except certain currency gain or loss covered by
Section 988 of the Code) will generally be treated as 60% long-term capital
gain or loss and 40% short-term capital gain or loss. The effect of Section
1256 mark-to-market rules may be to accelerate income or to convert what
otherwise would have been long-term capital gains into short-term capital
gains or short-term capital losses into long-term capital losses within a
Series. The acceleration of income on Section 1256 positions may require a
Series to accrue taxable income without the corresponding receipt of cash.
In order to generate cash to satisfy the distribution requirements of the
Code, a Series may be required to dispose of portfolio securities that it
otherwise would have continued to hold or to use cash flows from other
sources such as the sale of a Series' shares. In these ways, any or all of
these rules may affect both the amount, character and timing of income
distributed to shareholders by a Series.
When a Series holds an option or contract which substantially diminishes a
Series' risk of loss with respect to another position of a Series (as might
occur in some hedging transactions), this combination of positions could be
treated as a "straddle" for tax purposes, resulting in possible deferral of
losses, adjustments in the holding periods of a Series' securities and
conversion of short-term capital losses into long-term capital losses.
Certain tax elections exist for mixed straddles (i.e., straddles comprised of
at least one Section 1256 position and at least one non-Section 1256
position) which may reduce or eliminate the operation of these straddle
rules. The Taxpayer Relief Act of 1997 has added new provisions for dealing
with transactions that are generally called "Constructive Sale Transactions."
Under these rules, a Series must recognize gain (but not loss) on any
constructive sale of an appreciated financial position in stock, a
partnership interest or certain debt instruments. A Series will generally be
treated as making a constructive sale when it: 1) enters into a short sale
on the same property, 2) enters into an offsetting notional principal
contract, or 3) enters into a futures or forward contract to deliver the same
or substantially similar property. Other transactions (including certain
financial instruments called collars) will be treated as constructive sales
as provided in Treasury regulations to be published. There are also certain
exceptions that apply for transactions that are closed before the end of the
30th day after the close of the taxable year.
ITEM 21. UNDERWRITERS
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
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<PAGE>
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, 1997 (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 date of the registration statement
relating to a particular Series).
<TABLE>
<CAPTION>
ONE FIVE TEN
YEAR YEARS YEARS
<S> <C> <C> <C>
The U.S. 6-10 Small Company Series 26.47 16.39 n/a
(58 months)
The Japanese Small Company Series -51.64 -48.34 n/a
(15 months)
The United Kingdom Small Company Series 9.0 14.52 n/a
(15 months)
The Pacific Rim Small Company Series -37.75 -28.39 n/a
(15 months)
The Continental Small Company Series 13.50 12.69 n/a
(15 months)
The U.S. Large Company Series 28.36 19.69 n/a
(58 months)
The Enhanced U.S. Large Company Series 27.62 37.90 n/a
(16 months)
The DFA One-Year Fixed Income Series 5.81 5.34 n/a
(57 months)
The DFA Two-Year Global Fixed Income Series 5.98 6.56 n/a
(22 months)
The U.S. 6-10 Value Series 33.96 20.99 n/a
(56 months)
The U.S. Large Cap Value Series 25.31 18.19 n/a
(56 months)
</TABLE>
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<TABLE>
<CAPTION>
ONE FIVE TEN
YEAR YEARS YEARS
<S> <C> <C> <C>
The DFA International Value Series - 3.85 4.88 n/a
(45 months)
The Emerging Markets Series -16.88 .13 n/a
(43 months)
The Emerging Markets Small Cap Series -22.20 n/a n/a
(11 months)
</TABLE>
As the following formula indicates, the average annual total return is
determined by finding the average annual compounded rates of return over the
stated time period that would equate a hypothetical initial purchase order of
$1,000 to its redeemable value (including capital appreciation/depreciation and
dividends and distributions paid and reinvested less any fees charged to a
shareholder account) at the end of the stated time period. The calculation
assumes that all dividends and distributions are reinvested at the public
offering price on the reinvestment dates during the period. The quotation
assumes the account was completely redeemed at the end of each period and the
deduction of all applicable charges and fees. According to the SEC formula:
n
P(1 + T) = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the one-, five-, and ten-year periods at the end of the one-,
five-, and ten-year periods (or fractional portion thereof).
ITEM 23. FINANCIAL STATEMENTS
The audited financial statements and financial highlights of the Trust for
its fiscal year ended November 30, 1997, as set forth in the Trust's annual
report to shareholders, and the report of Coopers & Lybrand L.L.P.,
independent accountants, also appearing therein, and the unaudited financial
information for the period ended May 31, 1998, as set forth in the Trust's
semi-annual report to shareholders, are incorporated herein by reference.
The audited annual report does not contain any data regarding The U.S. 9-10
Small Company Series and The U.S. 4-10 Value Series because such Series had
not commenced operations as of November 30, 1997. The annual and semi-annual
reports do not contain any data regarding the Tax-Managed U.S. Marketwide
Value Series because it had not commenced operations as of May 31, 1998.
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THE DFA INVESTMENT TRUST COMPANY
(THE "REGISTRANT")
PART C: OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS*.
PART A: Not Applicable.
PART B:
(1) Schedule of Investments*.
(2) Statement of Assets and Liabilities*.
(3) Statement of Operations*.
(4) Statement of Changes in Net Assets*.
(5) Financial Highlights*.
(6) Notes to Financial Statements*.
(7) Report of Independent Accountants*.
(B) EXHIBITS:
(1) COPIES OF THE CHARTER, AS NOW IN EFFECT.
(a) Agreement and Declaration of Trust.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 5 to the Registrant's
Registration Statement on
Form N-1A.
File No.: 811-07436.
Filing Date: December 1, 1995.
(b) Certificate of Trust dated September 11, 1992.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 14 to the Registrant's
Registration Statement on
Form N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
(1) Certificate of Amendment to Certificate
of Trust dated January 15, 1993.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 14 to the Registrant's
Registration Statement on
Form N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
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(2) COPIES OF THE EXISTING BYLAWS OR INSTRUMENTS
CORRESPONDING THERETO.
(A) BY-LAWS.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 14 to the Registrant's
Registration Statement on
Form N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
(3) COPIES OF ANY VOTING TRUST AGREEMENT WITH RESPECT TO
MORE THAN 5 PERCENT OF ANY CLASS OF EQUITY SECURITIES OF
THE REGISTRANT.
Not applicable.
(4) COPIES OF ALL INSTRUMENTS DEFINING THE RIGHTS OF HOLDERS
OF THE SECURITIES BEING REGISTERED INCLUDING WHERE
APPLICABLE, THE RELEVANT PORTION OF THE ARTICLES OR
INCORPORATION OR BYLAWS OF THE REGISTRANT.
Not applicable.
(5) COPIES OF ALL INVESTMENT ADVISORY CONTRACTS RELATING TO
THE MANAGEMENT OF THE ASSETS OF THE REGISTRANT.
(a) Investment Management Agreements.
(1) Investment Management Agreement dated January 6,
1993 between the Registrant and Dimensional Fund
Advisors Inc. ("DFA") on behalf of The U.S. 6-10
Small Company Series.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 14 to the
Registrant's Registration
Statement on Form N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
(2) Investment Management Agreement dated _______
between the Registrant and DFA on behalf of
The U.S. Large Company Series.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 5 to the Registrant's
Registration Statement on
Form N-1A.
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<PAGE>
File No.: 811-07436.
Filing Date: December 1, 1995.
(3) Investment Management Agreement dated January 6,
1993 between the Registrant and DFA on behalf of
the DFA One-Year Fixed Income Series.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 14 to the Registrant's
Registration Statement on
Form N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
(4) Investment Management Agreement dated January 6,
1993 between the Registrant and DFA on behalf of
The U.S. Large Cap Value Series (formerly The U.S.
Large Cap High Book to Market Series).
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 14 to the Registrant's
Registration Statement on
Form N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
(5) Investment Management Agreement dated January 6,
1993 between the Registrant and DFA on behalf of
The U.S. 6-10 Value Series (formerly The U.S.
Small Cap High Book to Market Series).
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 14 to the Registrant's
Registration Statement on
Form N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
(6) Investment Management Agreement dated December 1,
1993 between the Registrant and DFA on behalf of
The DFA International Value Series.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
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<PAGE>
No. 14 to the Registrant's
Registration Statement on
Form N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
(7) Investment Management Agreement dated October 18,
1996 between the Registrant and DFA on behalf of
The Emerging Markets Series.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 14 to the Registrant's
Registration Statement on
Form N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
(8) Investment Management Agreement dated February 8,
1996 between the Registrant and DFA on behalf of
The Enhanced U.S. Large Company Series.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 6 to the Registrant's
Registration Statement on
Form N-1A.
File No.: 811-07436.
Filing Date: February 7, 1996.
(9) Investment Management Agreement dated February 8,
1996 between the Registrant and DFA on behalf of
The DFA Two-Year Global Fixed Income Series.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 6 to the Registrant's
Registration Statement
on Form N-1A.
File No.: 811-07436.
Filing Date: February 7, 1996.
(10) Investment Management Agreement dated February 8,
1996 between the Registrant and DFA on behalf of
The DFA Two-Year Corporate Fixed Income Series.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
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<PAGE>
No. 6 to the Registrant's
Registration Statement
on Form N-1A.
File No.: 811-07436.
Filing Date: February 7, 1996.
(11) Investment Management Agreement dated February 8,
1996 between the Registrant and DFA on behalf of
The DFA Two-Year Government Series.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 6 to the Registrant's
Registration Statement
on Form N-1A.
File No.: 811-07436.
Filing Date: February 7, 1996.
(12) Investment Management Agreement dated August 7,
1996 between the Registrant and DFA on behalf of
The Japanese Small Company Series.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 7 to the Registrant's
Registration Statement
on Form N-1A.
File No.: 811-07436.
Filing Date: August 7, 1996.
(13) Investment Management Agreement dated August 7,
1996 between the Registrant and DFA on behalf of
The United Kingdom Small Company Series.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 7 to the Registrant's
Registration Statement on
Form N-1A.
File No.: 811-07436.
Filing Date: August 7, 1996.
(14) Investment Management Agreement dated August 7,
1996 between the Registrant and DFA on behalf of
The Pacific Rim Small Company Series.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 7 to Registrant's
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<PAGE>
Registration Statement on
Form N-1A.
File No.: 811-07436.
Filing Date: August 7, 1996.
(15) Investment Management Agreement dated August 7,
1996 between the Registrant and DFA on behalf of
The Continental Small Company Series.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 7 to the Registrant's
Registration Statement on
Form N-1A.
File No.: 811-07436.
Filing Date: August 7, 1996.
(16) Investment Management Agreement dated October 18,
1996 between the Registrant and DFA on behalf of
The Emerging Markets Small Cap Series.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 9 to the Registrant's
Registration Statement
on Form N-1A.
File No.: 811-07436.
Filing Date: February 24, 1997.
(17) Investment Management Agreement dated November 28,
1996 between the Registrant and DFA on behalf of
The U.S. 9-10 Small Company Series.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 12 to the Registrant's
Registration Statement
on Form N-1A.
File No.: 811-07436.
Filing Date: November 28, 1997.
(18) Investment Management Agreement dated November 28,
1996 between the Registrant and DFA on behalf of
The U.S. 4-10 Value Series.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 12 to the Registrant's
Registration Statement
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<PAGE>
on Form N-1A.
File No.: 811-07436.
Filing Date: November 28, 1997.
(19) FORM OF INVESTMENT MANAGEMENT AGREEMENT DATED
DECEMBER 7, 1998 BETWEEN THE REGISTRANT AND DFA
ON BEHALF OF THE TAX-MANAGED U.S. MARKETWIDE
VALUE SERIES IS ELECTRONICALLY FILED HEREWITH AS
EXHIBIT EX-99.B5(a)(1).
(b) Sub-Advisory Agreements.
(1) Sub-Advisory Agreement among the Registrant, DFA
and Australia Pty Ltd. ("DFA-Australia") dated
August 7, 1996 The Japanese Small Company Series.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 7 to the Registrant's
Registration Statement on
Form N-1A.
File No.: 811-07436.
Filing Date: August 7, 1996.
(2) Sub-Advisory Agreement among the Registrant, DFA
and Dimensional Fund Advisors Ltd. ("DFAL") dated
August 7, 1996 on behalf of The United Kingdom
Small Company Series.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 7 to the Registrant's
Registration Statement on
Form N-1A.
File No.: 811-07436.
Filing Date: August 7, 1996.
(3) Sub-Advisory Agreement among the Registrant, DFA
and DFA-Australia dated August 7, 1996 on behalf
of The Pacific Rim Small Company Series.
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<PAGE>
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 7 to the Registrant's
Registration Statement on
Form N-1A.
File No.: 811-07436.
Filing Date: August 7, 1996.
(4) Sub-Advisory Agreement among the Registrant, DFA
and DFAL dated August 7, 1996 on behalf of The
Continental Small Company Series
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment
No. 7 to the Registrant's
Registration Statement on
Form N-1A.
File No.: 811-07436.
Filing Date: August 7, 1996.
(5) CONSULTANT SERVICES AGREEMENT BETWEEN DIMENSIONAL
FUND ADVISORS INC. AND DIMENSIONAL FUND ADVISORS
LTD. ON BEHALF OF:
THE DFA INVESTMENT TRUST COMPANY
* DFA INTERNATIONAL VALUE SERIES
* EMERGING MARKETS SMALL CAP SERIES
* EMERGING MARKETS SERIES
* TAX-MANAGED U.S. MARKETWIDE VALUE SERIES
DFA INVESTMENT DIMENSIONS GROUP INC.
* DFA INTERNATIONAL SMALL CAP VALUE PORTFOLIO
* VA INTERNATIONAL VALUE PORTFOLIO
* LARGE CAP INTERNATIONAL PORTFOLIO
* TAX-MANAGED DFA INTERNATIONAL VALUE PORTFOLIO;
AND
DIMENSIONAL EMERGING MARKETS FUND, INC.
IS ELECTRONICALLY FILED HEREWITH
AS EXHIBIT EX-99.B5(b)(1).
(6) CONSULTANT SERVICES AGREEMENT BETWEEN DIMENSIONAL
FUND ADVISORS INC. AND DFA AUSTRALIA LTD. ON
BEHALF OF:
THE DFA INVESTMENT TRUST COMPANY
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<PAGE>
* DFA INTERNATIONAL VALUE SERIES
* EMERGING MARKETS SMALL CAP SERIES
* EMERGING MARKETS SERIES
* TAX-MANAGED U.S. MARKETWIDE VALUE SERIES
DFA INVESTMENT DIMENSIONS GROUP INC.
* DFA INTERNATIONAL SMALL CAP VALUE PORTFOLIO
* VA INTERNATIONAL VALUE PORTFOLIO
* LARGE CAP INTERNATIONAL PORTFOLIO
* TAX-MANAGED DFA INTERNATIONAL VALUE
PORTFOLIO; AND
DIMENSIONAL EMERGING MARKETS
FUND, INC.
IS ELECTRONICALLY FILED HEREWITH
AS EXHIBIT EX-99.B5(b)(2).
(6) COPIES OF EACH UNDERWRITING OR DISTRIBUTION CONTRACT BETWEEN THE
REGISTRANT AND A PRINCIPAL UNDERWRITER, AND SPECIMENS OR COPIES
OF ALL AGREEMENTS BETWEEN PRINCIPAL UNDERWRITERS AND DEALERS.
Agreement dated January 6, 1993 between the Registrant and DFA
Securities Inc.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 14 to the
Registrant's Registration Statement on Form
N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
(7) COPIES OF ALL BONUS, PROFIT SHARING, PENSION OR OTHER SIMILAR
CONTRACTS OR ARRANGEMENTS WHOLLY OR PARTLY FOR THE BENEFIT OF
DIRECTORS OR OFFICERS OF THE REGISTRANT IN THEIR CAPACITY AS
SUCH; ANY SUCH PLAN THAT IS NOT SET FORTH IN A FORMAL DOCUMENT,
FURNISH A REASONABLY DETAILED DESCRIPTION THEREOF.
Not applicable.
(8) COPIES OF ALL CUSTODIAN AGREEMENTS AND DEPOSITORY CONTRACTS
UNDER SECTION 17(f) OF THE INVESTMENT COMPANY ACT OF 1940,
AS AMENDED (THE "1940 ACT") [15 U.S.C. 80A 17(f)] WITH
RESPECT TO SECURITIES AND SIMILAR INVESTMENTS OF THE REGISTRANT,
INCLUDING THE SCHEDULE OF REMUNERATION.
(a) Custodian Agreements.
(1) Custodian Agreement dated ________between the
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<PAGE>
Registrant
and Provident National Bank, N.A. ("PNC")
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 14 to the
Registrant's Registration Statement on
Form N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
(2) Custodian Agreement dated December 1, 1993 between
Registrant and Boston Safe Deposit and Trust Company.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 14 to the
Registrant's Registration Statement on
Form N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
(3) ADDENDUM TO THE CUSTODIAN AGREEMENTS.
(a) ADDENDUM NUMBER 1 DATED _______ BETWEEN THE
REGISTRANT AND PNC ON BEHALF OF EACH SERIES OF THE
REGISTRANT WILL BE FILED BY AMENDMENT.
(c) Sub-Custody Agreements.
(1) Global Custody Agreement dated January 18, 1994
between the Registrant and The Chase Manhattan Bank,
N.A. on behalf of The Emerging Markets Series.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 14 to the
Registrant's Registration Statement on
Form N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
(2) Custodial Services Agreement dated January 13, 1998
between the Registrant and Citibank, N.A.
INCORPORATED HEREIN BY REFERENCE TO
Filing: Post-Effective Amendment No. 14 to the
Registrant's Registration Statement on
Form N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
(i) Manual Transmission Authorization.
(ii) Manual Transmission Procedures.
(9) (a) Transfer Agency Agreement.
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<PAGE>
(1) Transfer Agency Agreement dated January 15, 1993
between the Registrant and PFPC Inc. (formerly
known as Provident Financial Processing Corporation.)
("PFPC").
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 14 to the
Registrant's Registration Statement on
Form N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
(i) Appendix A: Authorized Persons to Give Oral
and Written Instructions
(ii) Schedule A: Listing of Statistical Reports
(2) Amendments to the Transfer Agency Agreement.
(a) Amendment Number 1 dated December 1, 1993 between
the Registrant and PFPC on behalf of The
International Value Series.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 14
to the Registrant's Registration
Statement on Form N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
(3) ADDENDUM TO THE TRANSFER AGENCY AGREEMENT.
(a) ADDENDUM NUMBER 1 DATED _______ BETWEEN THE
REGISTRANT AND PFPC ON BEHALF OF EACH SERIES OF
THE REGISTRANT WILL BE FILED BY AMENDMENT.
(b) (1) Administration and Accounting Services Agreement.
(a) Administration and Accounting Services Agreement
dated January 15, 1993 between the Registrant and
PFPC.
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 14
to the Registrant's Registration
Statement on Form N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
(2) Amendments to the Administration and Accounting
Services Agreement.
(a) Amendment Number 1 dated December 1, 1993
between the Registrant and PFPC on behalf of
The DFA International Value Series.
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<PAGE>
INCORPORATED HEREIN BY REFERENCE TO:
Filing: Post-Effective Amendment No. 14
to the Registrant's Registration
Statement on Form N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
(3) ADDENDUM TO THE ADMINISTRATION AND ACCOUNTING
SERVICES AGREEMENT.
(a) ADDENDUM NUMBER 1 DATED _______ BETWEEN THE
REGISTRANT AND PFPC ON BEHALF OF EACH SERIES OF
THE REGISTRANT WILL BE FILED BY AMENDMENT.
(10) AN OPINION AND CONSENT OF COUNSEL AS TO THE LEGALITY OF THE
SECURITIES BEING REGISTERED, INDICATING WHETHER THEY WILL, WHEN
SOLD, BE LEGALLY ISSUED, FULLY PAID AND NON-ASSESSABLE.
Not applicable.
(11) COPIES OF ANY OTHER OPINIONS, APPRAISALS OR RULINGS AND
CONSENTS TO THE USE, THEREOF RELIED ON IN THE PREPARATION OF THIS
REGISTRATION STATEMENT AND REQUIRED BY SECTION 7 OF THE 1933
ACT [15 U.S.C. 77g].
Consent of PriceWaterhouseCoopers LLP dated December 7,
1998 is electronically filed herewith as Exhibit EX-99.B11.
(12) ALL FINANCIAL STATEMENTS OMITTED FROM ITEM 23.
Not applicable.
(13) COPIES OF ANY AGREEMENTS OR UNDERSTANDINGS MADE IN CONSIDERATION
FOR PROVIDING THE INITIAL CAPITAL BETWEEN OR AMONG THE
REGISTRANT, THE UNDERWRITER, ADVISER, PROMOTER OR INITIAL
STOCKHOLDERS AND WRITTEN ASSURANCES FROM PROMOTERS OF INITIAL
STOCKHOLDERS THAT THEIR PURCHASES WERE MADE FOR INVESTMENT
PURPOSES WITHOUT ANY PRESENT INTENTION OF REDEEMING OR RESELLING.
Not applicable.
(14) COPIES OF THE MODEL PLAN USED WITH ESTABLISHMENT OF ANY
RETIREMENT PLAN IN CONJUNCTION WITH WHICH REGISTRANT OFFERS ITS
SECURITIES, ANY INSTRUCTIONS THERETO AND ANY OTHER DOCUMENTS
MAKING UP THE MODEL PLAN. SUCH FORM(S) SHOULD DISCLOSE THE
COSTS AND FEES CHARGED IN CONNECTION THEREWITH.
Not applicable.
(15) COPIES OF ANY PLAN ENTERED INTO BY REGISTRANT PURSUANT TO RULE
12b-1 UNDER THE 1940 ACT, WHICH DESCRIBES ALL MATERIAL ASPECTS
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OF THE FINANCING OF DISTRIBUTION OF REGISTRANT'S SHARES, AND ANY
AGREEMENTS WITH ANY PERSON RELATING TO IMPLEMENTATION OF SUCH
PLAN.
Not applicable.
(16) SCHEDULE FOR COMPUTATION OF EACH PERFORMANCE QUOTATION
PROVIDED IN THE REGISTRATION STATEMENT IN RESPONSE TO ITEM 22
(WHICH NEED NOT BE AUDITED).
Not applicable.
(17) ELECTRONIC FILERS. A FINANCIAL DATA SCHEDULE MEETING THE
REQUIREMENTS OF RULE 483 UNDER THE SECURITIES ACT OF 1933.
(a) Financial Data Schedules containing information as of May
31, 1998 and November 30, 1998 as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
24(b)(17) EX-27.1 U.S. 6-10 Small Company Series at November 30, 1997
EX-27.2 U.S. Large Company Series at November 30, 1997
EX-27.3 U.S. 6-10 Value Series at November 30, 1997
EX-27.4 U.S. Large Cap Value Series at November 30, 1997
EX-27.5 DFA One-Year Fixed Income Series at November 30, 1997
EX-27.6 DFA International Value Series at November 30, 1997
EX-27.7 DFA Emerging Markets Series at November 30, 1997
EX-27.8 DFA Two-Year Global Fixed Income Series at November 30, 1997
EX-27.9 DFA Enhanced U.S. Large Company Series at November 30, 1997
EX-27.10 DFA Japanese Small Company Series at November 30, 1997
EX-27.11 DFA United Kingdom Small Company Series at November 30, 1997
EX-27.12 DFA Pacific Rim Small Company Series at November 30, 1997
EX-27.13 DFA Continental Small Company Series at November 30, 1997
EX-27.14 DFA Emerging Markets Small Cap Series at November 30, 1997
EX-27.15 DFA Two-Year Government Series at November 30, 1997
EX-27.16 DFA Two-Year Corporate Fixed Income Series at November 30, 1997
EX-27.17 U.S. 9-10 Small Company Series
EX-27.18 U.S. 4-10 Value Series
EX-27.19 U.S. Small Cap Value Series at November 30, 1997
EX-27.20 U.S. 6-10 Small Company Series at May 31, 1998
EX-27.21 U.S. Large Company Series at May 31, 1998
EX-27.22 U.S. 6-10 Value Series at May 31, 1998
EX-27.23 U.S. Large Cap Value Series at May 31, 1998
EX-27.24 DFA One-Year Fixed Income Series at May 31, 1998
EX-27.25 DFA International Value Series at May 31, 1998
EX-27.26 Emerging Markets Series at May 31, 1998
EX-27.27 DFA Two-Year Global Fixed Income Series at May 31, 1998
EX-27.28 Enhanced U.S. Large Company Series at May 31, 1998
EX-27.29 Japanese Small Company Series at May 31, 1998
EX-27.30 United Kingdom Small Company Series at May 31, 1998
EX-27.31 Pacific Rim Small Company Series at May 31, 1998
EX-27.32 Continental Small Company Series at May 31, 1998
EX-27.33 Emerging Markets Small Cap Series at May 31, 1998
EX-27.34
EX-27.35
EX-27.36 9-10 Small Company Series at May 31, 1998
EX-27.37 4-10 Value Series at May 31, 1998
</TABLE>
(18) COPIES OF ANY PLAN ENTERED INTO BY REGISTRANT PURSUANT TO RULE
18f-3 UNDER THE 1940 ACT, ANY AGREEMENT WITH ANY PERSON
RELATING TO THE IMPLEMENTATION OF A PLAN, ANY AMENDMENT TO A
PLAN OR AGREEMENT, AND A COPY OF THE PORTION OF THE MINUTES OF
A MEETING OF THE REGISTRANT'S DIRECTORS DESCRIBING ANY ACTION
TAKEN TO REVOKE A PLAN.
Not Applicable.
_____
* Audited financial statements of THE DFA INVESTMENT TRUST COMPANY
(the "Registrant") are contained with the Registrant's Annual Report to
Shareholders dated November 30, 1997, and were filed electronically on
February 5, 1998 via the Securities and Exchange Commission's EDGAR system
pursuant to Rule 30b2-1 under the 1940 Act and are herein incorporated by
reference in Part B, the Statement of Additional Information.
Unaudited financial statements of the Registrant are contained with
the Registrant's Semi-Annual Report to Shareholders dated May 31, 1998, and
were also filed electronically on August 6, 1998 via the Securities and
Exchange Commission's EDGAR system pursuant to Rule 30b2-1 under the 1940 Act
and are herein incorporated herein be reference into PART B, the Statement of
Additional Information.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
If an investor beneficially owns more than 25% of the outstanding
voting securities of a feeder fund that invests all of its
investable assets in a Series of the Trust, then the feeder fund
and its corresponding Series may be deemed to be under the common
control of such investor. Accordingly, certain feeder portfolios
of DFA Investment Dimensions Group ("DFA IDG") and Dimensional
Investment Group ("DIG"), both Maryland corporations and registered
investment companies, may be deemed to be under common control with
their corresponding Series of the Trust. As of October 31, 1998,
the following persons beneficially owned more than 25% of the
outstanding voting securities of the feeder portfolios investing in
the Trust:
<TABLE>
<S> <C>
DFA IDG
JAPANESE SMALL COMPANY PORTFOLIO
</TABLE>
- 81 -
<PAGE>
<TABLE>
<S> <C>
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309-3610 61.41%
UNITED KINGDOM SMALL COMPANY PORTFOLIO
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309-3610 62.66%
CONTINENTAL SMALL COMPANY PORTFOLIO
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309-3610 61.55%
PACIFIC RIM SMALL COMPANY PORTFOLIO
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309-3610 72.98%
INTERNATIONAL SMALL COMPANY PORTFOLIO
San Diego County Employees
Retirement Association
1495 Pacific Highway 350
San Diego, CA 92101 27.15%
U.S. 6-10 SMALL COMPANY PORTFOLIO
McKinsey & Company Master Retirement Trust
55 E. 52nd Street
New York, NY 10055 27.42%
U.S. 4-10 VALUE PORTFOLIO
Dimensional Fund Advisors Inc.
(see above address) 100%
DIG
6-10 INSTITUTIONAL PORTFOLIO
BAYCARE Health System
323 Jefford Street
Clearwater, FL 34617 49.21%
ONE-YEAR FIXED INCOME II PORTFOLIO
Home Depot Future Builders
c/o Wachovia Bank of N. Carolina
301 N. Main Street
Winston-Salem, NC 27150 65.63%
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
U.S. 6-10 VALUE PORTFOLIO II
BellSouth Corporation 401(k)
1155 Peachtree Street N.E.
Atlanta, GA 30309-3610 100%
U.S. LARGE CAP VALUE PORTFOLIO II
BellSouth Corporation 401(k)
1155 Peachtree Street N.E.
Atlanta, GA 30309-3610 100%
DFA INTERNATIONAL VALUE PORTFOLIO II
BellSouth Corporation 401(k)
(see above address) 100%
EMERGING MARKETS PORTFOLIO II
Citibank Savings Incentive Plan
153 E. 53rd Street
New York, NY 10043 100%
DFA INTERNATIONAL VALUE PORTFOLIO IV
Citibank Savings Incentive Plan
153 E. 53rd Street
New York, NY 10043 100%
</TABLE>
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
<TABLE>
<CAPTION>
Title of Class
--------------
Shares of Beneficial Interest Number of Record Holders
Par Value $.01 as of October 31, 1998
------------------------
<S> <C>
The U.S. 9-10 Small Company Series 2
The U.S. 6-10 Small Company Series 3
The U.S. Large Company Series 3
The DFA One-Year Fixed Income Series 3
The U.S. 6-10 Value Series 2
The U.S. 4-10 Value Series 2
The U.S. Large Cap Value Series 4
The DFA International Value Series 9
The Emerging Markets Series 3
The Emerging Markets Small Cap Series 3
The Enhanced U.S. Large Company Series 1
The DFA Two-Year Global Fixed Income Series 1
The Japanese Small Company Series 3
The United Kingdom Small Company Series 3
The Pacific Rim Small Company Series 3
The Continental Small Company Series 3
</TABLE>
- 83 -
<PAGE>
ITEM 27. INDEMNIFICATION.
Reference is made to Article VII of the Registrant's Agreement and
Declaration of Trust and to Article X of the Registrant's By-Laws,
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 liability arising under the Securities Act of
1933 (the "Act") 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 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.
Dimensional Fund Advisors Inc., the investment manager for the
Registrant, is also the investment manager for three other registered
open-end investment companies, DFA Investment Dimensions Group Inc.,
Dimensional Emerging Markets Funds Inc. and Dimensional Investment
Group Inc. The Advisor also serves as sub-advisor for certain other
registered investment companies. For additional information, please
see "Management of the Trust" in PART A and "Management of the
Registrant" in PART B of this Registration Statement. Additional
information as to the Advisor and the directors and officers of the
Advisor is included in the Advisor's Form ADV filed with the
Commission (File No. 801-16283), which is incorporated herein by
reference and sets forth the officers and directors of the Advisor
and information as to any business, profession, vocation or
employment of a substantial nature engaged in by those officers and
directors during the past two years.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Not applicable.
(b) Registrant distributes its own shares. It has entered into an
agreement with DFA Securities Inc. which provides that DFA
- 84 -
<PAGE>
Securities Inc., 1299 Ocean Avenue, 11th Floor, Santa
Monica, CA 90401, will supervise the sale of Registrant's
shares.
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts and records of the Registrant will be located at the
office of the Registrant and at additional locations, as follows:
NAME ADDRESS
The DFA Investment Trust Company 1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
PFPC Inc. 400 Bellevue Parkway
Wilmington, DE 19809
The Chase Manhattan Bank 4 Chase MetroTech Center
Brooklyn, NY 11245
ITEM 31. MANAGEMENT SERVICES.
There are no management-related service contracts not discussed in
Part A or Part B.
ITEM 32. UNDERTAKINGS.
(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.
- 85 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, as
amended, the Registrant has duly caused this Post-Effective Amendment No. 16
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, as of the 7th day of December, 1998.
THE DFA INVESTMENT TRUST COMPANY
(REGISTRANT)
BY: ------------------------------------
CATHERINE L. NEWELL
VICE PRESIDENT
(NAME AND TITLE)
- 86 -
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
N-1A EDGAR
EXHIBIT NO. EXHIBIT NO. DESCRIPTION
<S> <C> <C>
24(b)(5) EX-99.B5(a)(1) FORM OF
Investment Management Agreement
dated December 7, 1998 between
the Registrant and DFA on behalf
of The Tax-Managed U.S.
Marketwide Value Series.
24(b)(5) EX-99.B5(b)(1) Consultant Services Agreement
between DFA
and Dimensional Fund Advisors
Ltd. on behalf of the
Tax-Managed U.S. Marketwide
Value Series.
24(b)(5) EX-99.B5(b)(2) Consultant Services Agreement
between DFA and DFA Australia Ltd.
on behalf of the Tax-Managed
U.S. Marketwide Value Series.
24(b)(11) EX-99.B11 Consent of PriceWaterhouseCoopers LLP.
24(b)(17) EX-27.1 U.S. 6-10 Small Company Series at November 30, 1997
EX-27.2 U.S. Large Company Series at November 30, 1997
EX-27.4 U.S. Large Cap Value Series at November 30, 1997
EX-27.5 DFA One-Year Fixed Income Series at November 30, 1997
EX-27.6 DFA International Value Series at November 30, 1997
EX-27.7 DFA Emerging Markets Series at November 30, 1997
EX-27.8 DFA Two-Year Global Fixed Income Series at November 30, 1997
EX-27.9 DFA Enhanced U.S. Large Company Series at November 30, 1997
EX-27.10 DFA Japanese Small Company Series at November 30, 1997
EX-27.11 DFA United Kingdom Small Company Series at November 30, 1997
EX-27.12 DFA Pacific Rim Small Company Series at November 30, 1997
EX-27.13 DFA Continental Small Company Series at November 30, 1997
- 87 -
<PAGE>
EX-27.14 DFA Emerging Markets Small Cap Series at November 30, 1997
EX-27.15 DFA Two-Year Government Series at November 30, 1997
EX-27.16 DFA Two-Year Corporate Fixed Income Series at November 30, 1997
EX-27.17 U.S. 9-10 Small Company Series
EX-27.18 U.S. 4-10 Value Series
EX-27.19 U.S. Small Cap Value Series at November 30, 1997
EX-27.20 U.S. 6-10 Small Company Series at May 31, 1998
EX-27.21 U.S. Large Company Series at May 31, 1998
EX-27.22 U.S. 6-10 Value Series at May 31, 1998
EX-27.23 U.S. Large Cap Value Series at May 31, 1998
EX-27.24 DFA One-Year Fixed Income Series at May 31, 1998
EX-27.25 DFA International Value Series at May 31, 1998
EX-27.26 Emerging Markets Series at May 31, 1998
EX-27.27 DFA Two-Year Global Fixed Income Series at May 31, 1998
EX-27.28 Enhanced U.S. Large Company Series at May 31, 1998
EX-27.29 Japanese Small Company Series at May 31, 1998
EX-27.30 United Kingdom Small Company Series at May 31, 1998
EX-27.31 Pacific Rim Small Company Series at May 31, 1998
EX-27.32 Continental Small Company Series at May 31, 1998
EX-27.33 Emerging Markets Small Cap Series at May 31, 1998
EX-27.36 9-10 Small Company Series at May 31, 1998
EX-27.37 4-10 Value Series at May 31, 1998
</TABLE>
- 88 -
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of this 7th day of December, 1998, by and between THE
DFA INVESTMENT TRUST COMPANY, a Delaware business trust (the "Trust") and
DIMENSIONAL FUND ADVISORS INC., a Delaware corporation (the "Manager").
1. DUTIES OF ADVISOR.
The Trust hereby employs the Manager to manage the investment and
reinvestment of the assets of the:
TAX-MANAGED U.S. MARKETWIDE VALUE SERIES of the Trust (the
"Series"), to continuously review, supervise and administer the Series'
investment program, to determine in its discretion the securities to be
purchased or sold and the portion of the Series' assets to be uninvested, to
provide the Trust with records concerning the Manager's activities which the
Trust is required to maintain, and to render regular reports to the Trust's
officers and the Board of Trustees of the Trust, all in compliance with the
objectives, policies and limitations set forth in the Trust's registration
statement and applicable laws and regulations. The Manager accepts such
employment and agrees to provide, at its own expense, the office space,
furnishings and equipment and the personnel required by it to perform the
services described herein on the terms and for the compensation provided
herein.
2. PORTFOLIO TRANSACTIONS.
The Manager is authorized to select the brokers or dealers that will
execute the purchases and sales of portfolio securities for the Series and is
directed to use its best efforts to obtain the best available price and most
favorable execution, except as prescribed herein. It is understood that the
Manager will not be deemed to have acted unlawfully, or to have breached a
fiduciary duty to the Trust or in respect of the Series, or be in breach of
any obligation owing to the Trust or in respect of the Series under this
Agreement, or otherwise, solely by reason of its having caused the Series to
pay a member of a securities exchange, a broker or a dealer a commission for
effecting a securities transaction for the Series in excess of the amount of
commission another member of an exchange, broker or dealer would have charged
if the Manager determines in good faith that the commission paid was
reasonable in relation to the brokerage or research services provided by such
member, broker or dealer, viewed in terms of that particular transaction or
the Manager's overall responsibilities with respect to its accounts,
including the Trust, as to which it exercises investment discretion. The
Manager will promptly communicate to the officers and directors of the Trust
such information relating to transactions for the Series as they may
reasonably request.
3. COMPENSATION OF THE MANAGER.
For the services to be rendered by the Manager as provided in
Section 1 of this Agreement, the Trust shall pay to the Manager, at the end
of each month, a fee equal to one-twelfth of 0.20% of the net assets of the
Series. In the event that this Agreement is terminated at other than a
month-end, the fee for such month shall be prorated.
<PAGE>
4. OTHER SERVICES.
At the request of the Trust, the Manager, in its discretion,
may make available to the Trust office facilities, equipment, personnel and
other services. Such office facilities, equipment, personnel and service
shall be provided for or rendered by the Manager and billed to the Trust at
the Manager's cost and, where applicable, the cost thereof shall be
apportioned among the several Series of the Trust proportionate to their
respective utilization thereof.
5. REPORTS.
The Trust and the Manager agree to furnish to each other information
with regard to their respective affairs as each may reasonably request.
6. STATUS OF THE MANAGER.
The services of the Manager to the Trust or in respect of the
Series, are not to be deemed exclusive, and the Manager shall be free to
render similar services to others as long as its services to the Trust or in
respect of the Series, are not impaired thereby. The Manager shall be deemed
to be an independent contractor and shall, unless otherwise expressly
provided or authorized, have no authority to act for or represent the Trust
in any way or otherwise be deemed an agent of the Trust.
7. LIABILITY OF MANAGER.
No provision of this Agreement shall be deemed to protect the
Manager against any liability to the Trust or its shareholders to which it
might otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties or the reckless disregard
of its obligations under this Agreement.
8. PERMISSIBLE INTERESTS.
Subject to and in accordance with the agreement and declaration of
trust of the Trust and the charter of the Manager, trustees, officers, and
shareholders of the Trust are or may be interested in the Manager (or any
successor thereof) as directors, officers or shareholders, or otherwise;
directors, officers, agents and shareholders of the Manager are or may be
interested in the Trust as trustees, officers, shareholders or otherwise; and
the Manager (or any successor) is or may be interested in the Trust as a
shareholder or otherwise and the effect of any such interrelationships shall
be governed by said agreement and declaration of trust and charter and the
provisions of the Investment Company Act of 1940.
9. DURATION AND TERMINATION.
This Agreement shall become effective on December ___, 1998 (the
"Effective Date") and shall continue in effect until December ___, 2000,
and thereafter, only if such continuance is approved at least annually by a
vote of the Trust's Board of Trustees, including the vote of a majority of
the trustees who are not parties to this Agreement or interested persons of
any such party, cast in person, at a meeting called for the purpose of voting
such approval. In addition, the question of continuance of this Agreement
may be presented to the shareholders of
<PAGE>
the Trust; in such event, such continuance shall be effected only if approved
by the affirmative vote of the holders of a majority of the outstanding
voting securities of the Series.
This Agreement may at any time be terminated without payment of any
penalty either by vote of the Board of Trustees of the Trust or by vote of
the holders of a majority of the outstanding voting securities of the Series,
on sixty days written notice to the Manager.
This Agreement shall automatically terminate in the event of its
assignment.
This Agreement may be terminated by the Manager after ninety days
written notice to the Trust.
Any notice under this Agreement shall be given in writing, addressed
and delivered, or mailed postpaid, to the other party at any office of such
party. As used in this Section 9, the terms "assignment," "interested
persons," and a "vote of the holders of a majority of the outstanding
securities" shall have the respective meanings set forth in Section 2(a)(4),
Section 2(a)(19), Section 2(a)(42) of the Investment Company Act of 1940 and
Rule 18f-2 thereunder.
10. SEVERABILITY.
If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be
executed as of this 7th day of December, 1998.
DIMENSIONAL FUND THE DFA INVESTMENT TRUST
ADVISORS INC. COMPANY
By: ---------------------- By: ----------------------
Rex A. Sinquefield David G. Booth
Chairman-Chief President
Investment Officer
<PAGE>
MASTER DIMENSIONAL FUND ADVISORS LTD.
CONSULTING SERVICES AGREEMENT
This Agreement made by and between Dimensional Fund Advisors Inc., a
Delaware corporation ("DFA"), and Dimensional Fund Advisors Ltd., a company
organized under the laws of England ("DFAL").
W I T N E S S E T H:
WHEREAS, DFAL is (i) engaged in the business of investment management
and administrative and trading services primarily in the United Kingdom and
Europe (collectively, the "European countries") and (ii) regulated in the
conduct of its investment, administrative and trading business by the
Investment Management Regulatory Organization ("IMRO"), a self-regulatory
organization;
WHEREAS, DFAL presently acts as sub-advisor to DFA with respect to
certain DFA investment products (the "Sub-Advisory Products") pursuant to
certain sub-advisory agreements (the "Sub-Advisory Agreements") dated as of
August 7, 1996 and also provides certain trading services for other products
to DFA pursuant to a Service Agreement dated as of January 28, 1992, as
amended on September 16, 1992 (the "Service Agreement");
WHEREAS, DFA wishes to continue to engage DFAL to provide various
non-advisory services relating to certain international investment products
other than the Sub-Advisory Products managed or sponsored by DFA as set forth
in Schedule A hereto (the "Investment Products") which schedule may be
amended from time to time; and
<PAGE>
WHEREAS, DFA wishes to modify certain provisions of the Service
Agreement further defining the overall duties and responsibilities of the
parties, and DFAL desires to so act and to provide such services as agreed to
from time to time pursuant to a consulting services agreement; and
WHEREAS, DFA owns 100% of the outstanding shares of DFAL;
NOW, THEREFORE, in consideration of the premises and the mutual promises
set forth herein, the parties hereto agree as follows:
1. TERMINATION OF SERVICES AGREEMENT. The parties hereto agree that
the Service Agreement is hereby terminated and shall have no further effect
and the duties and responsibilities of DFA and DFAL shall be as set forth
hereinafter.
2. APPOINTMENT. DFA hereby appoints DFAL, and DFAL hereby accepts
such appointment, to act on behalf of DFA with respect to such matters and to
provide such services with respect to the Investment Products as may from
time to time be agreed between the parties.
3. SERVICES TO BE PERFORMED. DFA hereby employs DFAL, subject to
supervision by DFA, to furnish the following services for the Investment
Products:
a. Execution of buy and sell programs generated by DFA and
transmitted to DFAL;
b. Selection of brokers or dealers to execute purchases and sales
of eligible securities for the Investment Products; including the
determination of the best and most efficient means of purchasing and selling
such portfolio securities; and the allocation of trades among brokers and
dealers, subject to constraints with respect to affiliated brokers and
dealers subject to
2
<PAGE>
Section 17 of the Investment Company Act of 1940. In carrying out its
obligations hereunder, DFAL will act with a view to the objectives of each
Investment Product as set forth in the respective prospectus and otherwise
communicated by DFA to DFAL, including the objectives of receiving best price
and execution for portfolio transactions and causing as little price
fluctuation as possible.
c. DFAL may execute orders from DFA for fewer or more shares than
set forth in the buy or sell programs initiated by DFA, based on market
conditions and other factors, provided that such variances from the execution
lists are within parameters established by DFA from time to time or in
specific cases.
d. DFAL shall report the results of all trading activities, and all
other information relating to portfolio transactions for the Investment
Products, at such time and in such format as DFA may request, including
reporting to the custodians of the Investment Products, as appropriate.
e. DFAL shall review and coordinate its agency trading and
execution strategies, practices and results with DFA as frequently as
reasonably necessary.
f. DFAL may also from time to time, monitor cash balances for the
Investment Products; review and bid on blocks of securities within parameters
established by DFA; handle corporate actions and vote proxies for securities
held in the Investment Products as directed by DFA; review companies and
suggest status codes; and provide DFA with data concerning equity markets in
the various countries in which the Investment Products are invested.
3
<PAGE>
g. DFAL shall furnish only statistical and other factual
information and advice regarding economic factors and trends, and it is
neither intended nor required that DFAL shall furnish advice or make
recommendations regarding the purchase or sale of securities.
These duties and responsibilities of DFAL, taken individually or
collectively, shall not constitute, or be construed as constituting,
investment advice.
4. DUTIES AND RESPONSIBILITIES. DFAL shall perform its obligations
and discharge its duties hereunder, and under any or all other agreements
that DFAL may enter into with DFA from time to time, (i) solely in the best
interests of DFA and the clients of DFA with respect to or in connection with
which DFAL may from time to time provide investment or other services, and
(ii) with the care, skill, prudence and diligence that a prudent man
experienced in such matters would use in providing similar services in like
circumstances. Except as expressly provided herein or directed by DFA from
time to time in writing, DFAL shall have no authority, express or implied, to
bind DFA to any contract or commitment, to otherwise act on behalf of DFA, or
to hold itself out as an agent of DFA.
5. CONDUCT OF BUSINESS. DFAL shall at all times conduct its business
in compliance with any and all applicable laws, rules and regulations
including, without limitation, the applicable laws, rules and regulations of
the United States and the United Kingdom and any governmental agency,
regulatory authority or governing body thereof.
6. REPRESENTATIONS OF DFAL. DFAL hereby represents and warrants that
it is regulated in the conduct of its investment, administrative and trading
business by IMRO and that it is duly licensed under the securities laws of
the United States to engage in the activities in
4
<PAGE>
which DFAL is engaged, including without limitation registration as an
investment adviser with the United States Securities and Exchange Commission
("SEC"). DFAL hereby covenants to maintain in good standing all licenses and
registrations required for the conduct of its business and performance of its
duties and obligations hereunder and under any and all agreements entered
into with DFA from time to time. In addition, DFAL shall provide DFA as
promptly as practicable copy of any and all amendments filed with the SEC at
the same time any such amendments are filed.
7. FEES. During the duration of this Agreement, in consideration of
the portfolio management and other services to be performed by DFAL hereunder
and as agreed between the parties from time to time, DFA shall pay DFAL a fee
in an amount equal to 110% of pretax annual operating expenses of DFAL
inclusive of fees to be paid to DFAL pursuant to the Subadvisory Agreements.
Fees due from DFA to DFAL shall be remitted not less than quarterly.
8. DIRECTION BY DFA. In connection with any services to be provided
hereunder to be rendered by DFAL from time to time, DFAL shall at all times
act in accordance with the instructions of DFA as communicated from time to
time and shall prepare and provide all information and reports reasonably
requested by DFA. Attached hereto as Schedule B is a description of the
reports currently required to be furnished to DFA by DFAL and those actions
for which DFAL must obtain specific approval by DFA, which Schedule B may be
amended from time to time by DFA in its sole discretion upon reasonable
notice to DFAL.
DFA shall use its best efforts to ensure that trustees, custodians,
subcustodians, subadvisors and administrative agents cooperate with DFAL thus
facilitating the provision of
5
<PAGE>
services by DFAL. DFA shall provide DFAL with copies of regulatory filings
made by DFA which are relevant to DFAL's agency and subadvisory services.
DFA shall also share with DFAL information which DFA believes to be relevant
to DFAL's services.
9. RECORDKEEPING AND RECORD RETENTION. DFAL shall maintain and
preserve in a safe and accessible place and shall afford representatives of
DFA access to all customer, corporate and other business' records customarily
maintained by investment managers as they relate to DFAL's provision of
agency and subadvisory services to DFA, all records and reports required to
be maintained by applicable laws, rules and regulations, including, without
limitation, the United States Investment Advisers Act of 1940, and any and
all such other records or reports as DFA may from time to time reasonably
require DFAL to prepare, including such records and reports set forth on
Schedule B hereto, as may be amended from time to time by DFA in its sole
discretion upon reasonable notice to DFAL.
Except as otherwise required by law or as otherwise agreed to by the
parties, all records and reports required to be prepared and preserved
hereunder shall be kept in a readily accessible place on DFAL's premises for
at least two years from the date of the record or report and in a reasonably
accessible place on or off DFAL's premises for at least four more years. If
records or reports are preserved in a form other than paper originals they
shall be kept in duplicate, stored separately, and DFAL shall maintain on its
premises a means of visual review and producing hard copies of such records
and reports. DFAL's obligation hereunder to maintain and preserve records
shall survive the termination of this Agreement.
6
<PAGE>
10. INSPECTION AND EXAMINATION OF RECORDS. DFAL hereby acknowledges
that DFA has certain statutory obligations to supervise the activities of
DFAL relating to DFA portfolios and agrees to cooperate fully at all times to
afford DFA access to DFAL's books and records at anytime during normal
business hours, to answer any questions with respect to DFAL's operations,
and to regularly schedule and attend meetings as requested by DFA for
purposes of reviewing DFAL's performance under its agreements with DFA,
reviewing operational matters with trustees, custodians' subcustodians and
administrative agents. DFA or its agents or representatives may, from time
to time, visit DFAL for the purpose of reviewing DFAL's operations as they
relate to the provision of agency and subadvisory services. DFA agrees to
use reasonable efforts to avoid causing any undue disruption to the conduct
of DFAL's day-to-day business affairs.
11. CONFIDENTIAL AND PROPRIETARY INFORMATION. Each party acknowledges and
agrees that any and all information emanating from the other's business, in any
form, is confidential and proprietary information. Each party agrees that it
will not, during or after the term of this agreement, permit the duplication or
disclosure of any such confidential and proprietary information to any person
(other than an employee, agent or representative of the other party who must
have such information for the performance of its obligations under its
agreements with the other party) except as required by law, unless such
duplication, use or disclosure is specifically authorized by the other party in
writing. DFAL acknowledges and agrees that all computer programs provided by
DFA ("DFA Software"), including all copyright rights therein, are owned by and
are the property of DFA and that DFAL is licensed hereby to use such DFA
Software
7
<PAGE>
only for the terms of this Agreement and one year thereafter. At the
expiration or termination of this Agreement, DFAL agrees to return all copies
of the DFA Software to DFA within one year unless otherwise agreed. DFAL
may, with the written consent of DFA which shall not be unreasonably
withheld, substitute other computer programs to perform the activities
covered by this agreement, provided such programs produce information and
reports comparable to those produced by the DFA Software in a magnetic
machine-readable form which is compatible with the DFA Software.
12. ALLOCATION OF CLIENT TRANSACTIONS. DFA hereby acknowledges that
DFAL renders services to clients other than DFA and DFA portfolios, including
clients for which DFAL may purchase or sell the same securities as those that
may be listed from time to time on an approved buy/sell program for a DFA
portfolio. DFAL hereby acknowledges its fiduciary obligations to treat all
clients on a fair and equitable basis when effecting securities transactions
in accordance with DFA's policies.
13. COMPLAINTS. Complaints by DFA in its capacity as DFAL's customer and
concerning DFAL's performance of its duties should be directed to the Compliance
Officer of DFAL either orally or in writing, sent by facsimile or first class
mail to the address provided in Section 16 hereof. Complaints may also be made
directly to IMRO's Investment Ombudsman at the following address:
8
<PAGE>
IMRO
Lloyds Chambers
1 Portsoken Street
London El 8BT
United Kingdom
Tel: 0171 390 5000
Facsimile: 0171 680 0550
14. Indemnification. DFAL shall indemnify and hold harmless DFA, its
officers and directors, from any and all losses, including reasonable
attorney's fees, incurred by DFA as a result of or arising out of any breach
by DFAL of its duties under this Agreement or any other agreement between DFA
and DFAL, any violation by DFAL of any provision of this Agreement or any
other agreement between DFA and DFAL, or any action of DFAL taken on behalf
of DFA or any DFA portfolio which falls outside the scope of express
authority granted hereunder or under any other agreement between DFA and DFAL.
Notwithstanding the foregoing, DFAL shall not be liable to DFA or any DFA
portfolio with respect to actions taken or not taken on behalf thereof if DFAL
has acted pursuant to and in strict compliance with express instructions of DFA
or failed to take an action which required specific approval or direction by DFA
in the absence of such approval or direction, and DFA agrees to indemnify and
hold harmless DFAL, its officers and directors, from any and all losses,
including reasonable attorney's fees, incurred by DFAL arising out of any
actions or omissions of DFAL made in accordance with the express instructions of
DFA or out of DFAL's failure to act with respect to a matter which requires the
specific approval or direction of DFA in the absence of such approval or
direction.
9
<PAGE>
15. TERM. This Agreement shall be effective as of ____________, 1997
shall remain in effect until terminated as hereinafter provided. This
Agreement may be terminated by DFA or by DFAL at any time without penalty on
sixty (60) days' written notice to the other party hereto. Any fees owing to
DFAL pursuant to Paragraph 5 hereof shall be pro rated to the date of
termination.
16. NOTICE. Any notice or other communication required to be delivered
by a party to the other party to this Agreement, by this or any other
agreement between the parties, shall be in writing and shall be deemed duly
given upon delivery via facsimile transmission or overnight delivery by
Federal Express, DHL Worldwide, or such other courier having comparable
qualifications, to the following fax number or address or such other fax
number or address as shall be communicated to the other party from time to
time in accordance with the notice requirement thereof:
IF TO DFA:
Dimensional Fund Advisors Inc.
1299 Ocean Avenue, Suite 650
Santa Monica, California 90401
Attention: Irene R. Diamant
Vice President
FAX: (310) 395-6140
IF TO DFAL:
Dimensional Fund Advisors Ltd.
14 Berkeley Street
London W1X 5AD
England
10
<PAGE>
Attention: Margaret East
Compliance Office
FAX: (011) 44 171 495-2354
17. CHOICE OF LAW. This Agreement shall be administered and construed
under the laws of the State of California.
18. MISCELLANEOUS.
(a) This Agreement may be executed in two counterparts, each of
which shall be deemed an original and both of which together shall constitute
one agreement.
(b) This Agreement may be amended from time to time by the mutual
agreement of the parties.
(c) The captions used herein are for reference purposes only and
shall not be construed to affect the meaning or interpretation of the
provisions of this Agreement.
(d) This Agreement may not be assigned by either party.
(e) In the event any provisions of this Agreement, including any and
all schedules or exhibits hereto as in effect from time to time, conflict or
are inconsistent with, rather than being supplemental to, any terms or
provisions of any other agreement to which DFA and DFAL are both parties,
such other agreement shall control.
11
<PAGE>
IN WITNESS WHEREOF, DFA and DFAL have caused this Agreement to be
executed on this ____ day of ________________, 1997, by their respective
officers or representatives thereunto duly authorized.
DIMENSION FUND ADVISORS INC.
By:_________________________________
Title:______________________________
DIMENSIONAL FUND ADVISORS LTD.
By:_________________________________
Title:______________________________
12
<PAGE>
SCHEDULE A
INVESTMENT PRODUCTS
The DFA Investment Trust Company
DFA International Value Series
Emerging Markets Small Cap Series
Emerging Markets Series
Tax-Managed U.S. Marketwide Value Series
DFA Investment Dimensions Group Inc.
DFA International Small Cap Value Portfolio
VA International Value Portfolio
Large Cap International Portfolio
Tax-Managed DFA International Value Portfolio
<PAGE>
SCHEDULE B
Dimensional Fund Advisors Ltd. shall:
(a) On a weekly basis, provide to DFA (i) via an overnight delivery
service, DFAL's entire database(s) (MAST.DB) for all portfolios and subtrusts
("DFA portfolios") for which DFAL is acting as a subadvisor or agent pursuant
to agreements with DFA, and (ii) via facsimile transmission, cash sheets for
those DFA portfolios not administered by PFPC Inc. (or by such other
custodian/administrative agent as DFA may hereafter notify DFAL);
(b) Prior to execution of any buy/sell program, obtain approval of the
DFA Investment Committee after submission by DFAL of the proposed program,
including a statement of the assumptions used in generating the original list
of orders and the final list with brokers allocated;
(c) Before purchasing, for any DFA portfolio, securities of any company
not previously included on the appropriate buylist, obtain approval of the
DFA Investment Committee to add such company to the approved buy list; any
such request for approval of a new company shall be made by providing the
Investment Committee the following: (i) company name, (ii) sedol number,
(iii) local symbol, (iv) exchange, (v) current market price and (vi) number
of shares outstanding;
(d) Place buy and sell orders for execution on behalf of any DFA
portfolios with those brokers approved for trading by the DFA Investment
Committee.
(e) Obtain approval of the DFA Investment Committee before permitting
any director or employee of DFAL to be directly involved with authorizing
trades, directing corporate actions or making comparable investment decisions
on behalf of DFA portfolios;
<PAGE>
(f) Prior to the placement of any sell order on behalf of a DFA
portfolio, confirm with the appropriate custodian the availability of the
shares intended to be sold;
(g) On a monthly basis, reconcile all share positions and prices with
the appropriate custodian for each DFA portfolio; and
(h) Maintain appropriate back-ups of all systems and records and notify
DFA on a periodic basis of any changes to the system. DFAL shall, in
addition to any other required records or reports maintain the following:
(i) Buy/sell programs, all of which must be signed and dated by an
authorized person;
(ii) Documentation of all bids and offers that are not initiated by
DFAL (i.e., blocks), including the date, broker involved, name of the stock,
sedol or local symbol, bid/offer price and the number of shares; completed
trades must also be documented as to the time of the transaction, actual
shares completed and the allocation of those shares among portfolios;
(iii) A record of each brokerage order given by or on behalf of a
DFA portfolio for, or in connection with, the purchase or sale of securities,
whether executed or unexecuted, including the name of the broker, the name
of-the person who placed the order, the terms and conditions of the order
and, if any modification or cancellation thereof, the time of entry or
cancellation, the price at which executed, and the time of receipt of report
of execution;
2
<PAGE>
(iv) A record of all other portfolio purchases or sales (daily trade
logs and where applicable, broker confirmations) showing details comparable
to those described in (c) above;
(v) Records documenting any voluntary decision or corporate actions;
(vi) Documentation of any proxy votes directed by DFAL, including the
name of the company, date voted and DFA portfolios involved.
3
<PAGE>
MASTER DFA AUSTRALIA LTD.
CONSULTING SERVICES AGREEMENT
This Agreement made by and between Dimensional Fund Advisors Inc., a
Delaware corporation ("DFA"), and DFA Australia Ltd., a company organized under
the laws of New South Wales, Australia ("DFAA").
W I T N E S S E T H:
WHEREAS, DFAA is engaged in the business of investment management and
administrative and trading services primarily in Asia (including Japan),
Australia and New Zealand (collectively, the "Pacific Rim countries");
WHEREAS, DFAA presently acts as sub-advisor to DFA with respect to
certain DFA investment products (the "Sub-Advisory Products") pursuant to
certain sub-advisory agreements (the "Sub-Advisory Agreements") dated as of
August 7, 1996 and also provides certain trading services for other products
to DFA pursuant to a Service Agreement dated as of December 1 1993, as
amended on December 1, 1994 (the "Service Agreement");
WHEREAS, DFA wishes to continue to engage DFAA to provide various
non-advisory services relating to certain international investment products
other than the Sub-Advisory Products managed or sponsored by DFA as set forth
in Schedule A hereto (the "Investment Products") which schedule may be
amended from time to time; and
WHEREAS, DFA wishes to modify certain provisions of the Service
Agreement further defining the overall duties and responsibilities of the
parties, and DFAA desires to so act and to provide such services as agreed to
from time to time pursuant to a consulting services agreement; and
<PAGE>
WHEREAS, DFA and certain of its officers and directors own 100% of the
outstanding shares of DFAA;
NOW, THEREFORE, in consideration of the premises and the mutual
promises set forth herein, the parties hereto agree as follows:
1. TERMINATION OF SERVICES AGREEMENT. The parties hereto agree that
the Service Agreement is hereby terminated and shall have no further effect
and the duties and responsibilities of DFA and DFAA shall be as set forth
hereinafter.
2. APPOINTMENT. DFA hereby appoints DFAA, and DFAA hereby accepts
such appointment, to act on behalf of DFA with respect to such matters and to
provide such services with respect to the Investment Products as may from
time to time be agreed between the parties.
3. SERVICES TO BE PERFORMED. DFA hereby employs DFAA, subject to
supervision by DFA, to furnish the following services for the Investment
Products:
a. Execution of buy and sell programs generated by DFA and
transmitted to DFAA;
b. Selection of brokers or dealers to execute purchases and
sales of eligible securities for the Investment Products; including the
determination of the best and most efficient means of purchasing and selling
such portfolio securities; and the allocation of trades among brokers and
dealers, subject to constraints with respect to affiliated brokers and
dealers subject to Section 17 of the Investment Company Act of 1940. In
carrying out its obligations hereunder, DFAA will act with a view to the
objectives of each Investment Product as set forth in the respective
prospectus and otherwise communicated by DFA to DFAA, including the
objectives of receiving best price and execution for portfolio transactions
and causing as little price fluctuation as possible.
- 2 -
<PAGE>
c. DFAA may execute orders from DFA for fewer or more shares
than set forth in the buy or sell programs initiated by DFA, based on market
conditions and other factors, provided that such variances from the execution
lists are within parameters established by DFA from time to time or in
specific cases.
d. DFAA shall report the results of all trading activities, and
all other information relating to portfolio transactions for the Investment
Products, at such time and in such format as DFA may request, including
reporting to the custodians of the Investment Products, as appropriate.
e. DFAA shall review and coordinate its agency trading and
execution strategies, practices and results with DFA as frequently as
reasonably necessary.
f. DFAA may also from time to time, monitor cash balances for
the Investment products; review and bid on blocks of securities within
parameters established by DFA; handle corporate actions and vote proxies for
securities held in the Investment Products as directed by DFA; review
companies and suggest status codes; and provide DFA with data concerning
equity markets in the various countries in which the Investment Products are
invested.
g. DFAA shall furnish only statistical and other factual
information and advice regarding economic factors and trends, and it is
neither intended nor required that DFAA shall furnish advice or make
recommendations regarding the purchase or sale of securities.
These duties and responsibilities of DFAA, taken individually or
collectively, shall not constitute, or be construed as constituting,
investment advice.
4. DUTIES AND RESPONSIBILITIES. DFAA shall perform its obligations
and discharge its duties hereunder, and under any or all other agreements
that DFAA may enter into with DFA
- 3 -
<PAGE>
from time to time, (i) solely in the best interests of DFA and the clients of
DFA with respect to or in connection with which DFAA may from time to time
provide investment or other services, and (ii) with the care, skill, prudence
and diligence that a prudent man experienced in such matters would use in
providing similar services in like circumstances. Except as expressly
provided herein or directed by DFA from time to time in writing, DFAA shall
have no authority, express or implied, to bind DFA to any contract or
commitment, to otherwise act on behalf of DFA, or to hold itself out as an
agent of DFA.
5. CONDUCT OF BUSINESS. DFAA shall at all times conduct its
business in compliance with any and all applicable laws, rules and
regulations including, without limitation, the applicable laws, rules and
regulations of the United States and Australia and any governmental agency,
regulatory authority or governing body thereof.
6. REPRESENTATIONS OF DFAA. DFAA hereby represents and warrants
that it is duly licensed under the securities laws of Australia and that it
is duly licensed under the securities laws of the United States to engage in
the activities in which DFAA is engaged, including without limitation
registration as an investment adviser with the United States Securities and
Exchange Commission ("SEC"). DFAA hereby covenants to maintain in good
standing all licenses and registrations required for the conduct of its
business and performance of its duties and obligations hereunder and under
any and all agreements entered into with DFA from time to time. In addition,
DFAA shall provide DFA as promptly as practicable a copy of any and all
amendments filed with the SEC at the same time any such amendments are filed.
7. COMPENSATION. During the duration of this Agreement, in
consideration of the portfolio management and other services to be performed
by DFAA hereunder and as agreed between the parties from time to time, DFA
shall pay DFAA as follows:
- 4 -
<PAGE>
a. A fee in an amount equal to 110% of pretax annual operating
expenses of DFAA inclusive of fees to be paid to DFAA pursuant to the
Subadvisory Agreements subject to the following adjustment;
b. The fee due to DFAA pursuant to Section 7.a. hereof shall be
reduced by an amount equal to the revenue that DFAA earns for its investment
advisory, administrative and similar services that it performs for products
that it sponsors in Australia other than the Investment Products ("DFAA
Products").
c. Fees due from DFA to DFAA shall be remitted not less than
quarterly.
8. DIRECTION BY DFA. In connection with any services to be provided
hereunder to be rendered by DFAA from time to time, DFAA shall at all times
act in accordance with the instructions of DFA as communicated from time to
time and shall prepare and provide all information and reports reasonably
requested by DFA. Attached hereto as Schedule B is a description of the
reports currently required to be furnished to DFA by DFAA and those actions
for which DFAA must obtain specific approval by DFA, which Schedule B may be
amended from time to time by DFA in its sole discretion upon reasonable
notice to DFAA.
DFA shall use its best efforts to ensure that trustees, custodians,
subcustodians, subadvisors and administrative agents cooperate with DFAA thus
facilitating the provision of services by DFAA. DFA shall provide DFAA with
copies of regulatory filings made by DFA which are relevant to DFAA's agency
and subadvisory services. DFA shall also share with DFAA information which
DFA believes to be relevant to DFAA's services.
9. RECORDKEEPING AND RECORD RETENTION. DFAA shall maintain and
preserve in a safe and accessible place and shall afford representatives of
DFA access to all customer, corporate and other business records customarily
maintained by investment managers as they
- 5 -
<PAGE>
relate to DFAA's provision of agency and subadvisory services to DFA, all
records and reports required to be maintained by applicable laws, rules and
regulations, including, without limitation, the United States Investment
Advisers Act of 1940, and any and all such other records or reports as DFA
may from time to time reasonably require DFAA to prepare, including such
records and reports set forth on Schedule B hereto, as may be amended from
time to time by DFA in its sole discretion upon reasonable notice to DFAA.
Except as otherwise required by law or as otherwise agreed to by the
parties, all records and reports required to be prepared and preserved
hereunder shall be kept in a readily accessible place on DFAA's premises for
at least two years from the date of the record or report and in a reasonably
accessible place on or off DFAA's premises for at least four more years. If
records or reports are preserved in a form other than paper originals they
shall be kept in duplicate, stored separately, and DFAA shall maintain on its
premise a means of visual review and producing hard copies of such records
and reports. DFAA's obligation hereunder to maintain and preserve records
shall survive the termination of this Agreement.
10. INSPECTION AND EXAMINATION OF RECORDS. DFAA hereby acknowledges
that DFA has certain statutory obligations to supervise the activities of
DFAA relating to DFA portfolios and agrees to cooperate fully at all times to
afford DFA access to DFAA's books and records at anytime during normal
business hours, to answer any questions with respect to DFAA's operations,
and to regularly schedule and attend meetings as requested by DFA for
purposes of reviewing DFAA's performance under its agreements with DFA,
reviewing operational matters with trustees, custodians, subcustodians and
administrative agents. DFA or its agents or representatives may, from time
to time, visit DFA for the purpose of reviewing DFAA's operations as they
relate to the provision of agency and subadvisory services. DFA agrees to
use
- 6 -
<PAGE>
reasonable efforts to avoid causing any undue disruption to the conduct
of DFAA's day-to-day business affairs.
11. CONFIDENTIAL AND PROPRIETARY INFORMATION. Each party
acknowledges and agrees that any and all information emanating from the
other's business, in any form, is confidential and proprietary information.
Each party agrees that it will not, during or after the term of this
Agreement, permit the duplication or disclosure of any such confidential and
proprietary information to any person (other than an employee, agent or
representative of the other party who must have such information for the
performance of its obligations under its agreements with the other party)
except as required by law, unless such duplication, use or disclosure is
specifically authorized by the other party in writing. DFAA acknowledges and
agrees that all computer programs provided by DFA ("DFA Software"), including
all copyright rights therein, are owned by and are the property of DFA and
that DFAA is licensed hereby to use such DFA Software only for the terms of
this Agreement and one year thereafter. At the expiration or termination of
this Agreement, DFAA agrees to return all copies of the DFA Software to DFA
within one year unless otherwise agreed. DFAA may, with the written consent
of DFA which shall not be unreasonably withheld, substitute other computer
programs to perform the activities covered by this Agreement, provided such
programs produce information and reports comparable to those produced by the
DFA Software in a magnetic machine-readable form which is compatible with the
DFA Software.
12. ALLOCATION OF CLIENT TRANSACTIONS. DFA hereby acknowledges that
DFAA renders services to clients other than DFA and DFA portfolios, including
clients for which DFAA may purchase or sell the same securities as those that
may be listed from time to time on an approved buy/sell program for a DFA
portfolio. DFAA hereby acknowledges its fiduciary obligations to
- 7 -
<PAGE>
treat all clients on a fair and equitable basis when effecting securities
transactions in accordance with DFA's policies.
13. INDEMNIFICATION. DFAA shall indemnify and hold harmless DFA, its
officers and directors, from any and all losses, including reasonable
attorney's fees, incurred by DFA as a result of or arising out of any breach
by DFAA of its duties under this Agreement or any other agreement between DFA
and DFAA, any violation by DFAA of any provision of this Agreement or any
other agreement between DFA and DFAA, or any action of DFAA taken on behalf
of DFA or any DFA portfolio which falls outside the scope of express
authority granted hereunder or under any other agreement between DFA and DFAA.
Notwithstanding the foregoing, DFAA shall not be liable to DFA or any
DFA portfolio with respect to actions taken or not taken on behalf thereof if
DFAA has acted pursuant to and in strict compliance with express instructions
of DFA or failed to take an action which required specific approval or
direction by DFA in the absence of such approval or direction, and DFA agrees
to indemnify and hold harmless DFAA, its officers and directors, from any and
all losses, including reasonable attorney's fees, incurred by DFAA arising
out of any actions or omissions of DFAA made in accordance with the express
instructions of DFA or out of DFAA's failure to act with respect to a matter
which requires the specific approval or direction of DFA in the absence of
such approval or direction.
14. TERM. This Agreement shall be effective as of ---------, 1997
shall remain in effect until terminated as hereinafter provided. This
Agreement may be terminated by DFA or by DFAA at any time without penalty on
sixty (60) days' written notice to the other party hereto. Any fees owing to
DFAA pursuant to paragraph 5 hereof shall be pro rated to the date of
termination.
- 8 -
<PAGE>
15. NOTICE. Any notice or other communication required to be
delivered by a party to the other party to this Agreement, by this or any
other agreement between the parties, shall be in writing and shall be deemed
duly given upon delivery via facsimile transmission or overnight delivery by
Federal Express, DHL Worldwide, or such other courier having comparable
qualifications, to the following fax number or address or such other fax
number or address as shall be communicated to the other party from time to
time in accordance with the notice requirement thereof:
IF TO DFA:
Dimensional Fund Advisors Inc.
1299 Ocean Avenue, Suite 650
Santa Monica, California 90401
Attention: Irene R. Diamant
Vice President
FAX: (310) 395-6140
IF TO DFAA:
DFA Australia Ltd.
Suite 4403 - Level 44,
Gateway
1 Macquerie Place
Sydney, NSW 2000
Attention: Andrew Cain
Chief Operations Manager
FAX: (011) 612 9 247-7165
16. CHOICE OF LAW. This Agreement shall be administered and
construed under the laws of the State of California.
17. MISCELLANEOUS.
(a) This Agreement may be executed in two counterparts, each of
which shall be deemed an original and both of which together shall constitute
one agreement.
- 9 -
<PAGE>
(b) This Agreement may be amended from time to time by the
mutual agreement of the parties.
(c) The captions used herein are for reference purposes only and
shall not be construed to affect the meaning or interpretation of the
provisions of this Agreement.
(d) This Agreement may not be assigned by either party.
(e) In the event any provisions of this Agreement, including any
and all schedules or exhibits hereto as in effect from time to time, conflict
or are inconsistent with, rather than being supplemental to, any terms or
provisions of any other agreement to which DFA and DFAA are both parties,
such other agreement shall control.
IN WITNESS WHEREOF, DFA and DFAA have caused this Agreement to be
executed on this ----- day of ------------, 1997, by their respective
officers or representatives thereunto duly authorized.
DIMENSIONAL FUND ADVISORS, INC.
By:-------------------------------
Title:------------------------
DFA Australia Ltd.
By:-------------------------------
Title:------------------------
- 10 -
<PAGE>
SCHEDULE A
INVESTMENT PRODUCTS
The DFA Investment Trust Company
DFA International Value Series
Emerging Markets Small Cap Series
Emerging Markets Series
Tax-Managed U.S. Marketwide Value Series
DFA Investment Dimensions Group Inc.
DFA International Small Cap Value Portfolio
VA International Value Portfolio
Large Cap International Portfolio
Tax-Managed DFA International Value Portfolio
Dimensional Emerging Markets Fund Inc.
------
<PAGE>
SCHEDULE B
DFA Australia Ltd. shall:
(a) On a weekly basis, provided to DFA (i) via an overnight delivery
service, FAA's entire database(s) (MAST.DB) for all portfolios and subtracts
("DFA portfolios") for which DFAA is acting as a subadvisor or agent pursuant
to agreements with DFA, and (ii) via facsimile transmission, cash sheets for
those DFA portfolios not administered by Provident Financial Processing
Corporation (or by such other custodian/administrative agent as DFA may
hereafter notify DFAA);
(b) Prior to execution of any buy/sell program, obtain approval of
the DFA Investment Committee after submission by DFAA of the proposed
program, including a statement of the assumptions used in generating the
original list of orders and the final list with brokers allocated;
(c) Before purchasing, for any DFA portfolio, securities of any
company not previously included on the appropriate buylist, obtain approval
of the DFA Investment Committee to add such company to the approved buy list;
any such request for approval of a new company shall be made by providing the
Investment Committee the following: (i) company name, (ii) sedol number,
(iii) local symbol, (iv) exchange, (v) current market price and (vi) number
of shares outstanding;
(d) Place buy and sell orders for execution on behalf of any DFA
portfolios only with those brokers approved for trading by the DFA Investment
Committee.
(e) Obtain approval of the DFA Investment Committee before permitting
any director or employee of DFAA to be directly involved with authorizing
trades, directing corporate actions or making comparable investment decisions
on behalf of DFA portfolios;
<PAGE>
(f) Prior to the placement of any sell order on behalf of a DFA
portfolio, confirm with the appropriate custodian the availability of the
shares intended to be sold;
(g) On a monthly basis, reconcile all share positions and prices with
the appropriate custodian for each DFA portfolio; and
(h) Maintain appropriate back-ups of all systems and records and
notify DFA on a periodic basis of any changes to the system. DFAA shall, in
addition to any other required records or reports maintain the following:
(i) Buy/sell programs, all of which must be signed and dated by an
authorized person;
(ii) Documentation of all bids and offers that are not initiated by
DFAA (i.e., blocks), including the date, broker involved, name of the stock,
sedol or local symbol, bid/offer price and the number of shares; completed
trades must also be documented as to the time of the transaction, actual
shares completed and the allocation of those shares among portfolios;
(iii) A record of each brokerage order given by or on behalf of a DFA
portfolio for, or in connection with, the purchase or sale of securities,
whether executed or unexecuted, including the name of the broker, the name of
the person who placed the order, the terms and conditions of the order and,
if any modification or cancellation thereof, the time of entry or
cancellation, the price at which executed, and the time of receipt of report
of execution;
(iv) A record of all other portfolio purchases or sales (daily trade
logs and where applicable, broker confirmations) showing details comparable
to those described in (c) above;
- 2 -
<PAGE>
(v) Records documenting any voluntary decision or corporate actions;
(vi) Documentation of any proxy votes directed by DFAA, including the
name of the company, date voted and DFA portfolios involved.
- 3 -
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective Amendment
No. 16 (File No. 811-7436) under the Investment Company Act of 1940 to the
Registration Statement on Form N-1A of The DFA Investment Trust Company of our
report for The U.S. 9-10 Small Company Series, The U.S. 6-10 Small Company
Series, The U.S. Large Company Series, The Enhanced U.S. Large Company Series,
The U.S. 6-10 Value Series, The U.S. Large Cap Value Series, The U.S. 4-10 Value
Series, The Japanese Small Company Series, The Pacific Rim Small Company Series,
The United Kingdom Small Company Series, The Emerging Markets Series, The DFA
International Value Series, The Emerging Markets Small Cap Series, The
Continental Small Company Series, The DFA One-Year Fixed Income Series, and The
DFA Two-Year Global Fixed Income Series (collectively, the "Portfolios"), dated
January 16, 1998 on our audits of the financial statements and financial
highlights of the Portfolios of The DFA Investment Trust Company as of November
30, 1997 and for the respective periods then ended, which report is included in
the Annual Report to Shareholders.
We also consent to the reference to our firm under the captions "Investment
Advisory and Other Services" and "Financial Statements" in the Statement of
Additional Information.
PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, PA
December 7, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000896162
<NAME> THE DFA INVESTMENT TRUST COMPANY
<SERIES>
<NUMBER> 01
<NAME> U.S. 6-10 SMALL COMPANY SERIES
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 346796115
<INVESTMENTS-AT-VALUE> 438993893
<RECEIVABLES> 1474858
<ASSETS-OTHER> 915
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 440469666
<PAYABLE-FOR-SECURITIES> 7556963
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 79859
<TOTAL-LIABILITIES> 7636822
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 308440070
<SHARES-COMMON-STOCK> 31308841
<SHARES-COMMON-PRIOR> 21373173
<ACCUMULATED-NII-CURRENT> 410431
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 31784565
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 92197778
<NET-ASSETS> 432832844
<DIVIDEND-INCOME> 3000322
<INTEREST-INCOME> 369463
<OTHER-INCOME> 250263
<EXPENSES-NET> 361067
<NET-INVESTMENT-INCOME> 3258981
<REALIZED-GAINS-CURRENT> 31886153
<APPREC-INCREASE-CURRENT> 42884851
<NET-CHANGE-FROM-OPS> 78029985
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2965724
<DISTRIBUTIONS-OF-GAINS> 30079946
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12630470
<NUMBER-OF-SHARES-REDEEMED> 5446193
<SHARES-REINVESTED> 2751391
<NET-CHANGE-IN-ASSETS> 164431520
<ACCUMULATED-NII-PRIOR> 117174
<ACCUMULATED-GAINS-PRIOR> 29978358
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 102004
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 361067
<AVERAGE-NET-ASSETS> 340015151
<PER-SHARE-NAV-BEGIN> 12.56
<PER-SHARE-NII> .11
<PER-SHARE-GAIN-APPREC> 2.81
<PER-SHARE-DIVIDEND> (.10)
<PER-SHARE-DISTRIBUTIONS> (1.56)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.82
<EXPENSE-RATIO> .11
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000896162
<NAME> THE DFA INVESTMENT TRUST COMPANY
<SERIES>
<NUMBER> 04
<NAME> U.S. LARGE COMPANY SERIES
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 529757685
<INVESTMENTS-AT-VALUE> 824986309
<RECEIVABLES> 1481274
<ASSETS-OTHER> 4392
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 826471975
<PAYABLE-FOR-SECURITIES> 3724306
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 254846
<TOTAL-LIABILITIES> 3979152
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