File No. 811-7436
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 15
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)
_______________
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
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 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
SEPTEMBER 18, 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 sixteen 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.
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.
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
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 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 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.")
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.")
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
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. 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
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.
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
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 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 which mature within
two years from the date of settlement. Because many of
the Series' investments will be denominated in foreign
currencies, the Series will also enter into forward
foreign currency contracts solely for the purpose of
hedging against fluctuations in currency exchange rates.
The Series 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").
Permissible
Categories:
The DFA One-Year Fixed Income Series
1-6, 8
The DFA Two-Year Global Fixed Income Series 1-10
1. U.S. Government Obligations - Debt securities
issued by the U.S. Treasury which are direct obligations
of the U.S. government, including bills, notes and bonds.
2. U.S. Government Agency Obligations - Issued or
guaranteed by U.S. government-sponsored instrumentalities
and federal agencies, including the Federal National
Mortgage Association, Federal Home Loan Bank and the
Federal Housing Administration.
3. Corporate Debt Obligations - Non-convertible
corporate debt securities (e.g., bonds and debentures)
which are issued by companies whose commercial paper is
rated Prime-1 by Moody's Investors Services, Inc.
("Moody's") or A-1 by S&P and dollar-denominated
obligations of foreign issuers issued in the U.S. If the
issuer's commercial paper is unrated, then the debt
security would have to be rated at least AA by S&P or Aa2
by Moody's. If there is neither a commercial paper
rating nor a rating of the debt security, then the
Advisor must determine that the debt security is of
comparable quality to equivalent issues of the same
issuer rated at least AA or Aa2.
4. Bank Obligations - Obligations of U.S. banks and
savings and loan associations and dollar-denominated
obligations of U.S. subsidiaries and branches of foreign
banks, such as certificates of deposit (including
marketable variable rate certificates of deposit) and
bankers' acceptances. Bank certificates of deposit will
only be acquired from banks 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 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 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"), U.S. 4-10 Value
Series (the "4-10 Value Series") and U.S. 6-10 Value
Series (the "6-10 Value 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 that of the
company 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 company. 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.
4-10 Value Series. Within approximately six months from
the date of this registration statement, the 4-10 Value
Series may acquire between $300-500 million of securities
in exchange for shares of the Series. These securities
would be contributed by one or more institutional
investors invested in a group trust advised by the
Advisor using an investment strategy identical to the
investment guidelines for this Series. Each investor
would deliver its pro rata share of securities from the
group trust in exchange for shares of the Series.
Management anticipates that approximately 10% of the
securities contributed would be marked for sale by the
Series, thus incurring brokerage fees. Nevertheless, the
Series would not incur brokerage commissions in
connection with acquiring those contributed securities
which are retained by the Series.
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, because it intends to purchase common
stocks in the 9th and 10th deciles only 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 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 may sell portfolio
securities when the issuer's market capitalization falls
substantially below that of the issuer with the minimum
market capitalization which is then eligible for purchase
by the Series, and the 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 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.
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 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 the date
of this registration statement, the Series has ceased
trading securities in Malaysia, as a consequence of
recent 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 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.
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 the date of
this registration statement, The Emerging Markets Series
and The Emerging Markets Small Cap Series have ceased
trading securities in Malaysia, as a consequence of
recent 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 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 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
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% 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).)
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.
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
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
stopped trading securities 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 current market
prices of the Malaysian securities and discounting the
U.S. dollar-ringgit currency exchange rate. Pending
further clarification from Malaysian regulatory
authorities regarding the controls identified above, the
Series will treat their investments in Malaysian
securities as illiquid. As of the date of this Part A,
Malaysian securities constitute approximately the
following percentages of the net asset value of the
following Series: Pacific Rim Small Company Series,
26.34%; The Emerging Markets Series, 9.60%; and The
Emerging Markets Small Cap Series, 9.45%. 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 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.
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.
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 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.
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.
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:
Series Management Fee Total Expenses
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 0.05% 0.10%
Income
DFA International Value 0.20% 0.32%
Emerging Markets 0.10% 0.54%
Enhanced U.S. Large 0.05% 0.25%
Company
DFA Two-Year Global 0.05% 0.18%
Fixed
Income
Japanese Small Company 0.10% 0.29%
United Kingdom Small 0.10% 0.25%
Company
Pacific Rim Small 0.10% 0.40%
Company
Continental Small 0.10% 0.29%
Company
Emerging Markets Small 0.20% 0.90%
Cap
The management fee applicable to The U.S. 9-10 Small
Company and U.S. 4-10 Value Series, each of which had not
commenced operations as of November 30, 1997, is equal to
0.10% and 0.10%, 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
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
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 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 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, 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 August 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:
The DFA International Value Series
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309 26.46%
Japanese Small Company Series
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309 36.75%
United Kingdom Small Company Series
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309 39.15%
Pacific Rim Small Company Series
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309 46.47%
Continental Small Company Series
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309 40.42%
Emerging Markets Small Cap Series
South Dakota Retirement System
4009 W. 49th Street, Suite 300
Sioux Falls, SD 57105 80.89%
U.S. 4-10 Value Series
West Virginia Investment Management Board
One Cantley Drive
Charleston, WV 25314 100.00%
(c) Not applicable.
(d) Not applicable.
(e) Shareholder inquiries may be made by writing or
calling the Trust at 1299 Ocean Avenue, 11th Floor, Santa
Monica, California 90401 or (310) 395-8005.
(f) 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 and The
Emerging Markets Small Cap Series (together, the
"Partnership Series") are classified as partnerships for
U.S. federal income tax purposes.
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 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 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.
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, 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
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 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 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 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 is 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 is 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, 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;
(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 and The U.S. 4-10 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, Enhanced U.S. Large Company,
Emerging Markets, Emerging Markets Small Cap, Japanese,
United Kingdom, Pacific Rim and Continental Series may
invest its 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 and The
U.S. 4-10 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; and (b) the U.S. 4-10 Value Series is
not subject to these limitations;
(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 is not subject to this
limitation;
(15) purchase securities on margin or sell short;
provided that The U.S. 4-10 Value Series is not subject
to the limitation on selling securities short;
(16) acquire more than 10% of the voting securities of
any issuer; provided that (a) this limitation applies
only to 75% of the assets of The U.S. Value Series, The
Emerging Markets Series and The Emerging Markets Small
Cap Series; and (b) The U.S. 9-10 Small Company Series is
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, 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.
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. 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.
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 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.
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 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%.
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 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 Fund Inc.
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 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 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 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 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.
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.
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 total compensation received
from all four registered investment companies for which
the Advisor serves as investment advisor during that same
fiscal year.
Aggregate Total
Compensation Compensation from
Trustee from Trust Trust and
Fund
Complex
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
Item 15. Control Persons and Principal Holders of
Securities
(a) See Item 6(b).
(b) As of August 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.
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 58.66%
The California Wellness Foundation
6320 Canoga Avenue, Suite 1700
Woodland Hills, CA 91367 23.24%
Dimensional Investment Group Inc. -
DFA 6-10 Institutional Portfolio 18.10%
The U.S. Large Company Series
Blackrock Funds -
Index Equity Portfolio
c/o PFPC
400 Bellevue Parkway
Wilmington, DE 19809 63.91%
DFA Investment Dimensions Group Inc. -
The U.S. Large Company Portfolio 36.09%
The DFA One-Year Fixed Income Series
DFA Investment Dimensions Group Inc. -
The DFA One-Year Fixed Income Portfolio 89.87%
Gateway 2000
610 Gateway Drive
North Sioux City, SD 57049 9.41%
The U.S. 6-10 Value Series
DFA Investment Dimensions Group Inc. -
The U.S. 6-10 Value Portfolio 95.86%
The U.S. Large Cap Value Series
DFA Investment Dimensions Group Inc. -
The U.S. Large Cap Value Portfolio 61.22%
Dimensional Investment Group Inc. -
U.S. Large Cap Value Portfolio III 27.35%
Dimensional Investment Group Inc. -
RWB/DFA U.S. High Book to Market Portfolio 8.57%
The DFA International Value Series
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309 26.46%
Dimensional Investment Group Inc. -
DFA International Value Portfolio 24.28%
DFA Investment Dimensions Group Inc. -
DFA International High Book to Market Portfolio 17.00%
Dimensional Investment Group Inc. -
RWB/DFA International Value Portfolio III 16.93%
Dimensional Investment Group Inc. -
DFA International Value Portfolio IV 6.04%
The Emerging Markets Series
DFA Investment Dimensions Group Inc. -
Emerging Markets Portfolio 96.97%
DFA Two-Year Global Fixed Income Series
DFA Investment Dimensions Group Inc. -
DFA Two-Year Global Fixed Income Portfolio 100.00%
Enhanced U.S. Large Company Series
DFA Investment Dimensions Group Inc. -
Enhanced U.S. Large Company Portfolio 100.00%
Japanese Small Company Series
DFA Investment Dimensions Group Inc. -
Japanese Small Company Portfolio 60.72%
DFA Investment Dimensions Group Inc. -
International Small Company Portfolio 39.28%
United Kingdom Small Company Series
DFA Investment Dimensions Group Inc. -
United Kingdom Small Company Portfolio 64.04%
DFA Investment Dimensions Group Inc. -
International Small Company Portfolio 35.96%
Pacific Rim Small Company Series
DFA Investment Dimensions Group Inc. -
Pacific Rim Small Company Portfolio 64.67%
DFA Investment Dimensions Group Inc. -
International Small Company Portfolio 35.33%
Continental Small Company Series
DFA Investment Dimensions Group Inc. -
Continental Small Company Portfolio 65.54%
DFA Investment Dimensions Group Inc. -
International Small Company Portfolio 34.46%
Emerging Markets Small Cap Series
South Dakota Retirement System
4009 W. 49th Street, Suite 300
Sioux Falls, SD 57105 80.89%
DFA Investment Dimensions Group Inc. -
Emerging Markets Small Cap Portfolio 18.52%
U.S. 4-10 Value Series
West Virginia Investment Management Board
One Cantley Drive
Charleston, WV 25314 100.00%
(c) As of August 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:
1995 1996 1997
(000) (000) (000)
U.S. 6-10 Small Company $57 $81 $102
Japanese Small Company n/a $106 $258
United Kingdom Small Company n/a $52 $180
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
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 and
The U.S. 4-10 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.
(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
1995 1996 1997
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
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
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 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.
(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:
VALUE OF
SECURITIES BROKERAGE
TRANSACTIONS COMMISSIONS
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
(e) Not applicable.
Item 18. Capital Stock and Other Securities
(a) The information provided in response to this item is
in addition to the information provided in response to
Item 6(a) in Part A.
The Trust does not intend to hold annual meetings; it
may, however, hold a meeting for such purposes as
changing fundamental investment limitations, approving a
new investment management agreement or any other matters
which are required to be acted on by shareholders under
the 1940 Act. Shareholders may receive assistance in
communicating with other shareholders in connection with
the election or removal of Trustees similar to the
provisions contained in Section 16(c) of the 1940 Act.
(b) Not applicable.
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered
The information provided in response to this item is in
addition to the information provided in response to Items
7 and 8 in Part A.
(a) and (b) The Trust will accept purchase and
redemption orders on each day that the NYSE is open for
business, regardless of whether the Federal Reserve
System is closed. However, no purchases by wire may be
made on any day that the Federal Reserve System is
closed. The Trust will generally be closed on days that
the NYSE is closed. The NYSE is scheduled to be open
Monday through Friday throughout the year except for days
closed to recognize New Year's Day, 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 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.
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).
One Five Ten
Year Years Years
The U.S. 6-10 Small 26.47 16.39 n/a
Company Series (58 months)
The Japanese Small -51.64 -48.34 n/a
Company Series (15 months)
The United Kingdom Small 9.0 14.52 n/a
Company Series (15 months)
The Pacific Rim Small -37.75 -28.39 n/a
Company Series (15 months)
The Continental Small 13.50 12.69 n/a
Company Series (15 months)
The U.S. Large Company 28.36 19.69 n/a
Series (58 months)
The Enhanced U.S. Large 27.62 37.90 n/a
Company Series (16 months)
The DFA One-Year Fixed 5.81 5.34 n/a
Income Series (57 months)
The DFA Two-Year Global 5.98 6.56 n/a
Fixed Income Series (22 months)
The U.S. 6-10 Value Series 33.96 20.99 n/a
(56 months)
The U.S. Large Cap Value 25.31 18.19 n/a
Series (56 months)
The DFA International - 3.85 4.88 n/a
Value Series (45 months)
The Emerging Markets -16.88 .13 n/a
Series (43 months)
The Emerging Markets -22.20 n/a n/a
Small Cap Series (11 months)
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:
P(1 + T)n = 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 PricewaterhouseCoopers
LLP (formerly 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 DFA INVESTMENT TRUST COMPANY
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.: 811-7436.
Filing Date: December 1, 1995.
(b) Certificate of Trust.
Incorporated herein by reference to:
Filing: Post-Effective
Amendment
No. 14 to the Registrant's
Registration Statement on
Form N-1A.
File No.: 811-7436.
Filing Date: March 3, 1998.
(1) Certificate of Amendment to Certificate
of Trust.
Incorporated herein by reference to:
Filing: Post-Effective Amendment
No. 14 to the Registrant's
Registration
Statement on
Form N-1A.
File No.: 811-7436.
Filing Date: March 3, 1998.
(2) Copies of the existing bylaws or instruments
corresponding thereto.
Incorporated herein by reference to:
Filing: Post-Effective Amendment
No. 14 to the Registrant's
Registration Statement on
Form N-1A.
File No.: 811-7436.
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 re:
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.: 811-7436.
Filing Date: March 3, 1998.
(2) Investment Management Agreement re:
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.
File No.: 811-7436.
Filing Date: December 1, 1995.
(3) Investment Management Agreement re:
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.: 811-7436.
Filing Date: March 3, 1998.
(4) Investment Management Agreement re:
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.: 811-7436.
Filing Date: March 3, 1998.
(5) Investment Management Agreement re:
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.: 811-7436.
Filing Date: March 3, 1998.
(6) Investment Management Agreement re:
The DFA 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.: 811-7436.
Filing Date: March 3, 1998.
(7) Investment Management Agreement re:
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.: 811-7436.
Filing Date: March 3, 1998.
(8) Investment Management Agreement re:
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.: 811-7436.
Filing Date: February 7, 1996.
(9) Investment Management Agreement re:
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.: 811-7436.
Filing Date: February 7, 1996.
(10)Investment Management Agreement re:
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.: 811-7436.
Filing Date: August 7, 1996.
(11)Investment Management Agreement re:
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.: 811-7436.
Filing Date: August 7, 1996.
(12)Investment Management Agreement re:
The Pacific Rim Small Company Series.
Incorporated herein by reference to:
Filing: Post-Effective Amendment
No. 7 to Registrant's
Registration Statement on
Form N-1A.
File No.: 811-7436.
Filing Date: August 7, 1996.
(13)Investment Management Agreement re:
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.: 811-7436.
Filing Date: August 7, 1996.
(14)Investment Management Agreement re:
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.: 811-7436.
Filing Date: February 24, 1997.
(15)Investment Management Agreement re:
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.: 811-7436.
Filing Date: November 28, 1997.
(16)Investment Management Agreement re:
The U.S. 4-10 Value Series.
Incorporated herein by reference to:
Filing: Post-Effective Amendment
No. 12 to the
Registrant's
Registration Statement
on Form N-1A.
File No.: 811-7436.
Filing Date: November 28, 1997.
(b) Sub-Advisory Agreements.
(1) Sub-Advisory Agreement with DFA
Australia Ltd. re:
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.: 811-7436.
Filing Date: August 7, 1996.
(2) Sub-Advisory Agreement with
Dimensional Fund Advisors Ltd.
re: 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.: 811-7436.
Filing Date: August 7, 1996.
(3) Sub-Advisory Agreement with DFA
Australia Ltd. re: The Pacific Rim 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.: 811-7436.
Filing Date: August 7, 1996.
(4) Sub-Advisory Agreement with Dimensional
Fund Advisors Ltd. re:
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.: 811-7436.
Filing Date: August 7, 1996.
(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 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.: 811-7436.
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) FORM OF Custodian Agreement between
Registrant and
Provident National Bank.
Incorporated herein by reference to:
Filing: Post-Effective Amendment
No. 14 to the
Registrant's Registration
Statement on Form
N-1A.
File No.: 811-7436.
Filing Date: March 3, 1998.
(b) FORM OF Custodian Agreement 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.: 811-7436.
Filing Date: March 3, 1998.
(c) FORM OF Custodian Agreement between
Registrant and The Chase Manhattan Bank, N.A. is filed
herewith.
Incorporated herein by reference to:
Filing: Post-Effective Amendment
No. 14 to the
Registrant's Registration
Statement on Form
N-1A.
File No.: 811-7436.
Filing Date: March 3, 1998.
(d) Custodial Services Agreement with
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.: 811-7436.
Filing Date: March 3, 1998.
(9) (a) FORM OF Transfer Agency Agreement with Provident
Financial Processing Corporation.
Incorporated herein by reference to:
Filing: Post-Effective Amendment
No. 14 to the
Registrant's Registration
Statement on Form N-1A.
File No.: 811-7436.
Filing Date: March 3, 1998.
(b)FORM OF Administration and Accounting Services
Agreement with Provident Financial
Processing Corporation.
Incorporated herein by reference to:
Filing: Post-Effective Amendment
No. 14 to the
Registrant's Registration
Statement on Form
N-1A.
File No.: 811-7436.
Filing Date: March 3, 1998.
(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 September 18,
1998 is electronically filed herewith as Exhibits EX-99.11.1.
(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
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 dated May 31, 1998 are
electronically filed herewith as Exhibits EX-27.
(b) Financial Data Schedules dated November 30, 1997 are
electronically filed herewith as Exhibits EX-27
(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 20, 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 Shareholder 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 August 31, 1998, the following persons beneficially
owned more than 25% of the outstanding voting securities of the feeder
portfolios investing in the Trust:
DFA IDG
Japanese Small Company Portfolio
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309-3610 60.53%
United Kingdom Small Company Portfolio
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309-3610 61.13%
Continental Small Company Portfolio
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309-3610 61.67%
Pacific Rim Small Company Portfolio
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309-3610 71.86%
International Small Company Portfolio
San Diego County Employees
Retirement Association
1495 Pacific Highway 350
San Diego, CA 92101 26.65%
U.S. 6-10 Small Company Portfolio
McKinsey & Company Master Retirement Trust
55 E. 52nd Street
New York, NY 10055 30.64%
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 50.09%
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 64.75%
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%
Item 26. Number of Holders of Securities.
Title of Class
Number
Shares of Beneficial Interest of Record Holders
Par Value $.01 as of August 31, 1998
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
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
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.
SIGNATURES
Pursuant to the requirements of the Investment
Company Act of 1940, as amended, the Registrant has duly
caused this Post-Effective Amendment No. 15 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 19th day
of September, 1998.
THE DFA INVESTMENT TRUST COMPANY
(Registrant)
By: Irene R. Diamant
Irene R. Diamant
Vice President
(Name and Title)
EXHIBIT INDEX
N-1A EDGAR
EXHIBIT NO. EXHIBIT NO. DESCRIPTION
24(b)(11) EX-99.11.1. Consent of
PriceWaterhouseCoopers
LLP.
EX-99.11.2 Consent of
PriceWaterhouseCoopers
LLP.
24(b)(17) EX-27. Financial Data Schedules.
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this
Post-Effective Amendment No. 15 (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. 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 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 Reports 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
PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, PA
September 18, 1998
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