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File No. 811-7436
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 (X)
Amendment No. 14 (X)
THE DFA INVESTMENT TRUST COMPANY
(Exact Name of Registrant as Specified in Charter)
1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401
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(Address of Principal Executive Offices (Zip Code)
Registrant's Telephone Number, Including Area Code (310) 395-8005
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Irene R. Diamant, 1299 Ocean Avenue, 11th Floor, Santa Monica CA 90401
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(Name and Address of Agent for Service of Process)
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Please Send Copy of Communications to:
Stephen W. Kline, Esq.
Stradley, Ronon, Stevens & Young, LLP
Great Valley Corporate Center
30 Valley Stream Parkway
Malvern, Pennsylvania 19355
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THE DFA INVESTMENT TRUST COMPANY
THE U.S. 9-10 SMALL COMPANY SERIES
THE U.S. 6-10 SMALL COMPANY SERIES
THE U.S. LARGE COMPANY SERIES
THE ENHANCED U.S. LARGE COMPANY SERIES
THE U.S. 6-10 VALUE SERIES
THE U.S. LARGE CAP VALUE SERIES
THE 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
MARCH 3, 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.
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(a)(ii)
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.
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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.")
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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.
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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.
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
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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
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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
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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
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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
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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
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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
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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").
<TABLE>
<CAPTION>
Permissible
Categories:
-----------
<S> <C>
The DFA One-Year Fixed Income Series 1-6, 8
The DFA Two-Year Global Fixed Income Series 1-10
</TABLE>
1. U.S. GOVERNMENT OBLIGATIONS - Debt securities issued by the U.S.
Treasury which are direct obligations of the U.S. government, including bills,
notes and bonds.
2. U.S. GOVERNMENT AGENCY OBLIGATIONS - Issued or guaranteed by U.S.
government-sponsored instrumentalities and federal agencies, including the
Federal National Mortgage Association, Federal Home Loan Bank and the Federal
Housing Administration.
3. CORPORATE DEBT OBLIGATIONS - Non-convertible corporate debt securities
(e.g., bonds and debentures) which are issued by companies whose commercial
paper is rated Prime-1 by Moody's Investors Services, Inc. ("Moody's") or A-1 by
S&P and dollar-denominated obligations of foreign issuers issued in the U.S. If
the issuer's commercial paper is unrated, then the debt security would have to
be rated at least AA by S&P or Aa2 by Moody's. If there is neither a commercial
paper rating nor a rating of the debt security, then the Advisor must determine
that the debt security is of comparable quality to equivalent issues of the same
issuer rated at least AA or Aa2.
4. BANK OBLIGATIONS - Obligations of U.S. banks and savings and loan
associations and dollar-denominated obligations of U.S. subsidiaries and
branches of foreign banks, such as certificates of deposit (including marketable
variable rate
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certificates of deposit) and bankers' acceptances. Bank certificates of deposit
will only be acquired 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
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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
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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.
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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.
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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, Malaysia, 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.
Under normal market conditions, at least 65% of the Series' assets will be
invested in companies organized or having a
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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
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periodic basis, the Advisor will prepare a list of eligible large companies with
high book to market ratios whose stock are eligible for investment; such list
will be revised not less than semi-annually. Only common stocks whose market
capitalizations are not less than such minimum will be purchased by the Series.
Additional investments will not be made in securities which have depreciated in
value to such an extent that they are not then considered by the Advisor to be
large companies. This may result in further deviation from market
capitalization weighting and such deviation could be substantial if a
significant amount of the Series' holdings decrease in value sufficiently to be
excluded from the then current market capitalization requirement for eligible
securities, but not by a sufficient amount to warrant their sale.
It is management's belief that the value stocks of large companies offer, over a
long term, a prudent opportunity for capital appreciation, but, at the same
time, selecting a limited number of such issues for inclusion in the Series
involves greater risk than including a large number of them. The Advisor does
not anticipate that a significant number of securities which meet the market
capitalization criteria will be selectively excluded from the Series.
The Series does not seek current income as an investment objective, and
investments will not be based upon an issuer's dividend payment policy or
record. However, many of the companies whose securities will be included in the
Series do pay dividends. It is anticipated, therefore, that the Series will
receive dividend income. The Series may lend securities to qualified brokers,
dealers, banks and other financial institutions for the purpose of realizing
additional income. (See "Securities Loans" below.)
Securities which have depreciated in value since their acquisition will not be
sold by the Series solely because prospects for the issuer are not considered
attractive, or due to an expected or realized decline in securities prices in
general. Securities may be disposed of, however, at any time when, in the
Advisor's judgment, circumstances warrant their sale, such as tender offers,
mergers and similar transactions, or bids made for block purchases at opportune
prices. Generally, securities will not be sold to realize short-term profits,
but when circumstances warrant, they may be sold without regard to the length of
time held. Generally, securities will be purchased with the expectation that
they will be held for longer than one year, and will be held until such time as
they are no longer considered an appropriate holding in light of the policy of
maintaining a portfolio of companies with large market capitalizations and high
book to market ratios.
In addition to the policies discussed in response to this Item 4(a), investment
limitations have been adopted by each Series and are noted in response to Item
13(b) of Part B.
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THE EMERGING MARKETS SERIES AND THE EMERGING MARKETS SMALL CAP SERIES
The investment objective of both The Emerging Markets Series and The Emerging
Markets Small Cap Series is to achieve long-term capital appreciation. Each
Series operates as a diversified investment company and seeks to achieve its
investment objective by investing in emerging markets designated by the
Investment Committee of the Advisor ("Approved Markets"). Each Series invests
its assets primarily in Approved Market equity securities listed on bona fide
securities exchanges or actively traded on OTC markets. These exchanges or OTC
markets may be either within or outside the issuer's domicile country, and the
securities may be listed or traded in the form of International Depository
Receipts ("IDRs") or American Depository Receipts ("ADRs").
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)
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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,
Malaysia, 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
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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,
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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 1/3% of the value of a Series' total
assets. In connection with such loans, a Series will receive collateral
consisting of cash or U.S. Government securities, which will be maintained at
all times in an amount equal to at least 100% of the current market value of the
loaned securities. In addition, the Series will be able to terminate the loan
at any time and will receive reasonable interest on the loan, as well as amounts
equal to any dividends, interest or other distributions on the loaned
securities. In the event of the bankruptcy of the borrower, the Trust could
experience delay in recovering the loaned securities. Management believes that
this risk can be controlled through careful monitoring procedures.
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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
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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
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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
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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.
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.
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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
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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
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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
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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
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trustees and officers of the Trust, and shareholders of the Advisor's
outstanding voting stock, may be deemed controlling persons of the Advisor.
(b)(ii) Pursuant to an investment management agreement with the Trust with
respect to each Series, the Advisor manages the investment and reinvestment of
their assets. The Advisor also provides the Trust with records concerning the
Advisor's activities which the Trust is required to maintain and renders regular
reports to the Trust's officers and the Board of Trustees. The Advisor also
provides all of the Series with a trading department and selects brokers and
dealers to effect securities transactions.
(b)(iii) For the fiscal year ended November 30, 1997, (i) the Advisor received
a fee for its services which, on an annual basis, equaled the following
percentage of the average net assets of each Series; and (ii) the total expenses
of each Series were the following percentages of respective average net assets:
<TABLE>
<CAPTION>
Series Management Fee Total Expenses
------ -------------- --------------
<S> <C> <C>
U.S. 6-10 Small Company 0.03% 0.11%
U.S. Large Company 0.025% 0.07%
U.S. 6-10 Value 0.20% 0.28%
U.S. Large Cap Value 0.10% 0.18%
DFA One-Year Fixed Income 0.05% 0.10%
DFA International Value 0.20% 0.32%
Emerging Markets 0.10% 0.54%
Enhanced U.S. Large 0.05% 0.25%
Company
DFA Two-Year Global Fixed 0.05% 0.18%
Income
Japanese Small Company 0.10% 0.29%
United Kingdom Small 0.10% 0.25%
Company
Pacific Rim Small Company 0.10% 0.40%
Continental Small Company 0.10% 0.29%
Emerging Markets Small 0.20% 0.90%
Cap
</TABLE>
The management fee applicable to The U.S. 9-10 Small Company 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.
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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
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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.
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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
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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 January 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%
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of the voting securities of a feeder portfolio investing its assets in the
Series:
<TABLE>
<S> <C>
THE DFA INTERNATIONAL VALUE SERIES
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309 26.09%
JAPANESE SMALL COMPANY SERIES
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309 34.73%
UNITED KINGDOM SMALL COMPANY SERIES
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309 38.48%
PACIFIC RIM SMALL COMPANY SERIES
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309 43.07%
CONTINENTAL SMALL COMPANY SERIES
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309 39.22%
EMERGING MARKETS SMALL CAP SERIES
South Dakota Retirement System
4009 W. 49th Street, Suite 300
Sioux Falls, SD 57105 99.26%
ENHANCED U.S. LARGE COMPANY SERIES
Misericordia Home Endowment Fund
6300 N. Ridge Avenue
Chicago, IL 60660 25.90%
U.S. 4-10 VALUE SERIES
Dimensional Fund Advisors Inc.
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401 100%
</TABLE>
(c) Not applicable.
(d) Not applicable.
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(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.
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If a Series of the Trust, including the Partnership Series, purchases shares in
certain foreign investment entities, called "passive foreign investment
companies" ("PFIC"), the Series (and in the case of the Partnership Series, its
investors) may be subject to U.S. federal income tax and a related interest
charge on a portion of any "excess distribution" or gain from the disposition of
such shares even if such income is distributed as a taxable dividend by the
Corporate Series to its shareholders or, in the case of the Partnership Series,
even if such income is distributed to its investors. (See below for a more
detailed discussion of the Partnership Series).
The Series of the Trust, including the Partnership Series, may be subject to
foreign withholding taxes on income from certain of their foreign securities.
If more than 50% in value of the total assets of a Corporate Series at the end
of its fiscal year are invested in securities of foreign corporations, the
Corporate Series may elect to pass-through to its shareholders their pro rata
share of foreign income taxes paid by the Corporate Series. If this election is
made, shareholders will be (i) required to include in their gross income their
pro rata share of foreign source income (including any foreign taxes paid by the
Corporate Series), and (ii) entitled to either deduct their share of such
foreign taxes in computing their taxable income or to claim a credit for such
taxes against their U.S. federal income tax, subject to certain limitations
under the Code.
Shareholders will be informed by the Corporate Series at the end of each
calendar year regarding the shareholder's proportionate share of taxes paid to
any foreign country or possession of the United States, and gross income derived
from sources within any foreign country or possession of the United States.
The Enhanced U.S. Large Company Series' investments in Index Derivatives are
subject to complex tax rules which may have the effect of accelerating income or
converting, in part, what otherwise would have been long-term capital gain into
short-term capital gain. These rules may affect both the amount, character and
timing of income distributed to shareholders of The Enhanced U.S. Large Company
Series.
For the Corporate Series with the principal investment policy of investing in
foreign equity securities and non-equity domestic investments, it is anticipated
that only a small portion of such Corporate Series' dividends will qualify for
the corporate dividends received deduction. To the extent that such Corporate
Series pay dividends which qualify for this deduction, the availability of the
deduction is subject to certain holding period and debt financing restrictions
imposed under the Code on the corporation claiming the deduction.
Since virtually all of the net investment income from The DFA One-Year Fixed
Income and Two-Year Global Fixed Income Series is expected to arise from earned
interest, it is not expected that
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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.
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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'
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<PAGE>
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
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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
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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.
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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.
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(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.
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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
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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;
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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
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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
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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
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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
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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
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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
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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.
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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).
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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.
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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.
<TABLE>
<CAPTION>
Aggregate Total Compensation
Compensation from Trust and
Trustee from Trust Fund Complex
------- ------------ ------------------
<S> <C> <C>
George M. Constantinides $5,000 $30,000
John P. Gould $5,000 $30,000
Roger G. Ibbotson $5,000 $30,000
Merton H. Miller $5,000 $30,000
Myron S. Scholes $5,000 $30,000
</TABLE>
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ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
(a) See Item 6(b).
(b) As of January 31, 1998, the following shareholders owned beneficially at
least 5% of the outstanding shares of the Series, as set forth below. Unless
otherwise indicated, the address of each shareholder is 1299 Ocean Avenue, 11th
Floor, Santa Monica, CA 90401.
<TABLE>
<S> <C>
THE U.S. 9-10 SMALL COMPANY SERIES
DFA Investment Dimensions Group Inc. -
The U.S. 9-10 Small Company Portfolio 100%
THE U.S. 6-10 SMALL COMPANY SERIES
DFA Investment Dimensions Group Inc. -
The U.S. 6-10 Small Company Portfolio 78.21%
The California Wellness Foundation
6320 Canoga Avenue, Suite 1700
Woodland Hills, CA 91367 16.70%
Dimensional Investment Group Inc. -
DFA 6-10 Institutional Portfolio 5.10%
THE U.S. LARGE COMPANY SERIES
Blackrock Funds -
Index Equity Portfolio
c/o PFPC
400 Bellevue Parkway
Wilmington, DE 19809 58.78%
DFA Investment Dimensions Group Inc. -
The U.S. Large Company Portfolio 41.22%
THE DFA ONE-YEAR FIXED INCOME SERIES
DFA Investment Dimensions Group Inc. -
The DFA One-Year Fixed Income Portfolio 95.33%
THE U.S. 6-10 VALUE SERIES
DFA Investment Dimensions Group Inc. -
The U.S. 6-10 Value Portfolio 94.33%
Dimensional Investment Group Inc. -
The U.S. 6-10 Value Portfolio II 5.67%
THE U.S. LARGE CAP VALUE SERIES
DFA Investment Dimensions Group Inc. -
The U.S. Large Cap Value Portfolio 57.38%
</TABLE>
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<TABLE>
<S> <C>
Dimensional Investment Group Inc. -
U.S. Large Cap Value Portfolio III 30.73%
Dimensional Investment Group Inc. -
RWB/DFA U.S. High Book to Market Portfolio 8.59%
THE DFA INTERNATIONAL VALUE SERIES
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309 26.09%
Dimensional Investment Group Inc. -
DFA International Value Portfolio 23.04%
Dimensional Investment Group Inc. -
RWB/DFA International Value Portfolio III 17.84%
DFA Investment Dimensions Group Inc. -
DFA International High Book to Market Portfolio 17.32%
Dimensional Investment Group Inc. -
DFA International Value Portfolio IV 6.43%
THE EMERGING MARKETS SERIES
DFA Investment Dimensions Group Inc. -
Emerging Markets Portfolio 95.77%
DFA TWO-YEAR GLOBAL FIXED INCOME SERIES
DFA Investment Dimensions Group Inc. -
DFA Two-Year Global Fixed Income Portfolio 100%
ENHANCED U.S. LARGE COMPANY SERIES
DFA Investment Dimensions Group Inc.
Enhanced U.S. Large Company Portfolio 100%
JAPANESE SMALL COMPANY SERIES
DFA Investment Dimensions Group Inc.
Japanese Small Company Portfolio 65.60%
DFA Investment Dimensions Group Inc.
International Small Company Portfolio 34.40%
UNITED KINGDOM SMALL COMPANY SERIES
DFA Investment Dimensions Group Inc.
United Kingdom Small Company Portfolio 74.36%
DFA Investment Dimensions Group Inc.
International Small Company Portfolio 25.64%
</TABLE>
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<TABLE>
<S> <C>
PACIFIC RIM SMALL COMPANY SERIES
DFA Investment Dimensions Group Inc.
Pacific Rim Small Company Portfolio 70.58%
DFA Investment Dimensions Group Inc.
International Small Company Portfolio 29.42%
CONTINENTAL SMALL COMPANY SERIES
DFA Investment Dimensions Group Inc.
Continental Small Company Portfolio 71.12%
DFA Investment Dimensions Group Inc.
International Small Company Portfolio 28.88%
EMERGING MARKETS SMALL CAP SERIES
South Dakota Retirement System
4009 W. 49th Street, Suite 300
Sioux Falls, SD 57105 99.26%
U.S. 4-10 VALUE SERIES
DFA Investment Dimensions Group Inc. -
U.S. 4-10 Value Portfolio 100%
</TABLE>
(c) As of January 31, 1998, the trustees and officers as a group owned less
than 1% of each Series' outstanding stock.
ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES
(a) The information provided in response to this item is in addition to the
information provided in response to Item 5(b) in Part A and Items 14(a) and (b)
in this Part B.
David G. Booth and Rex A. Sinquefield are shareholders of the Advisor's
outstanding voting stock and may be considered controlling persons of the
Advisor.
For the services its provides as investment advisor to each Series of the Trust,
the Advisor is paid a monthly fee calculated as a percentage of average net
assets of the Series. For the fiscal periods ended November 30, 1995, 1996 and
1997, as applicable, the Series paid management fees as set forth in the
following table:
<TABLE>
<CAPTION>
1995 1996 1997
(000) (000) (000)
<S> <C> <C> <C>
U.S. 6-10 Small Company $57 $81 $102
Japanese Small Company n/a $106 $258
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C>
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
</TABLE>
The Japanese Small Company, United Kingdom Small Company, Pacific Rim Small
Company and Continental Small Company Series commenced operations on August 10,
1996. The Emerging Markets Small Cap Series commenced operations on December 2,
1996. The U.S. 9-10 Small Company Series 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
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<PAGE>
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) Beginning February 17, 1998, Citibank, N.A. ("Citibank"), 111 Wall Street,
New York, New York, 10005, will succeed Boston Safe Deposit and Trust Company
("Boston Safe"), Princess House, 1 Suffolk Lane, London EC4R 0AN, England, 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.). To ensure an orderly
transition, the conversion to Citibank will be accomplished Series by Series and
it is expected that the conversion will take approximately two and a half months
from February 17, 1998. During the conversion process, Boston Safe will
continue to serve as global custodian for each Series until its conversion date.
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.
Coopers & Lybrand L.L.P., 2400 Eleven Penn Center, Philadelphia, Pennsylvania
19103, the Trust's independent accountant, audit the Trust's financial
statements on an annual basis.
(i) Not applicable.
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<PAGE>
ITEM 17. BROKERAGE ALLOCATION
(a) The following table depicts brokerage commissions paid by the following
Series:
<TABLE>
<CAPTION>
BROKERAGE COMMISSIONS
FISCAL YEARS ENDED NOVEMBER 30, 1995, 1996 AND 1997
1995 1996 1997
<S> <C> <C> <C>
U.S. 6-10 Small Company $ 361,784 $ 473,887 $ 855,652
Japanese Small Company n/a $ 466,795 $ 602,098
United Kingdom Small Company n/a $ 86,854 $ 68,028
Pacific Rim Small Company n/a $ 181,812 $ 485,846
Continental Small Company Series n/a $ 214,631 $ 145,195
U.S. Large Company $ 15,289 $ 72,262 $ 40,689
Enhanced U.S. Large Company n/a $ 1,650 $ 10,284
U.S. 6-10 Value $1,027,015 $2,754,009 $4,591,853
U.S. Large Cap Value $ 410,503 $ 934,452 $ 929,005
DFA International Value $ 542,306 $1,251,242 $1,133,787
Emerging Markets $ 166,601 $ 437,088 $ 559,853
Emerging Markets Small Cap n/a n/a $ 123,081
</TABLE>
The substantial increases or decreases in the amount of brokerage commissions
paid by certain Series from year to year indicated in the foregoing table
resulted from increases or decreases in the amount of securities bought and sold
by those Series.
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<PAGE>
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
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<PAGE>
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:
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<PAGE>
<TABLE>
<CAPTION>
VALUE OF
SECURITIES BROKERAGE
TRANSACTIONS COMMISSIONS
<S> <C> <C>
U.S. 6-10 Small Company $153,272,761 $ 486,637
Japanese Small Company $ 40,864,513 $ 253,707
U.S. 6-10 Value $453,009,643 $1,899,654
U.S. Large Cap Value $ 78,961,638 $ 122,527
DFA International Value $ 4,623,558 $ 13,922
Pacific Rim Small Company $ 8,885,178 $ 35,584
------------ ----------
TOTAL: $739,617,291 $2,812,031
------------ ----------
------------ ----------
</TABLE>
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<PAGE>
(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.
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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).
<TABLE>
<CAPTION>
ONE FIVE TEN
YEAR YEARS YEARS
<S> <C> <C> <C>
The U.S. 6-10 Small Company 26.47 16.39 n/a
Series (58 months)
The Japanese Small Company -51.64 -48.34 n/a
Series (15 months)
The United Kingdom Small 9.0 14.52 n/a
Company Series (15 months)
The Pacific Rim Small Company -37.75 -28.39 n/a
Series (15 months)
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<PAGE>
ONE FIVE TEN
YEAR YEARS YEARS
The Continental Small Company 13.50 12.69 n/a
Series (15 months)
The U.S. Large Company Series 28.36 19.69 n/a
(58 months)
The Enhanced U.S. Large Company 27.62 37.90 n/a
Series (16 months)
The DFA One-Year Fixed Income 5.81 5.34 n/a
Series (57 months)
The DFA Two-Year Global Fixed 5.98 6.56 n/a
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 Series 25.31 18.19 n/a
(56 months)
The DFA International Value -3.85 4.88 n/a
Series (45 months)
The Emerging Markets Series -16.88 .13 n/a
(43 months)
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<PAGE>
The Emerging Markets Small Cap -22.20 n/a n/a
Series (11 months)
</TABLE>
As the following formula indicates, the average annual total return is
determined by finding the average annual compounded rates of return over the
stated time period that would equate a hypothetical initial purchase order of
$1,000 to its redeemable value (including capital appreciation/depreciation and
dividends and distributions paid and reinvested less any fees charged to a
shareholder account) at the end of the stated time period. The calculation
assumes that all dividends and distributions are reinvested at the public
offering price on the reinvestment dates during the period. The quotation
assumes the account was completely redeemed at the end of each period and the
deduction of all applicable charges and fees. According to the SEC formula:
n
P(1 + T) = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the one-, five-, and ten-year periods at the end of the one-,
five-, and ten-year periods (or fractional portion thereof).
ITEM 23. FINANCIAL STATEMENTS
The audited financial statements and financial highlights of the Trust for its
fiscal year ended November 30, 1997, as set forth in the Trust's annual report
to shareholders, and the report of Coopers & Lybrand L.L.P., independent
accountants, also appearing therein, 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.
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<PAGE>
THE DFA INVESTMENT TRUST COMPANY
FORM N-1A
PART C: OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements*
(b) Exhibits:
The following exhibits are attached hereto, except as otherwise
noted:
(1) (i) Agreement and Declaration of Trust INCORPORATED BY
REFERENCE TO: Filing: Amendment No. 5 to the
Registration Statement of Registrant on Form N-1A
File No.: 811-7436
Filing Date: December 1, 1995
(ii) Certificate of Trust is filed herewith.
(iii) Certificate of Amendment of Certificate of Trust is
filed herewith.
(2) By-Laws is filed herewith.
(3) None
(4) Not applicable
(5) (i) Investment Management Agreement re: The U.S. 6-10 Small
Company Series is filed herewith.
(ii) Investment Management Agreement re: The U.S. Large
Company Series INCORPORATED BY REFERENCE TO: Filing:
Amendment No. 5 to the Registration Statement of
Registrant on Form N-1A
File No.: 811-7436
Filing Date: December 1, 1995
(iii) Investment Management Agreement re: The DFA One-Year
Fixed Income Series is filed herewith.
(iv) Investment Management Agreement re: The U.S. Large Cap
Value Series (formerly The U.S. Large Cap High Book to
Market Series) is filed herewith.
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<PAGE>
(v) Investment Management Agreement re: The U.S. 6-10 Value
Series (formerly The U.S. Small Cap High Book to Market
Series) is filed herewith.
(vi) Investment Management Agreement re: The DFA
International Value Series is filed herewith.
(vii) Investment Management Agreement re: The Emerging
Markets Series is filed herewith.
(viii) Investment Management Agreement re: The Enhanced U.S.
Large Company Series INCORPORATED BY REFERENCE TO:
Filing: Amendment No. 6 to the Registration Statement
of Registrant on Form N-1A
File No.: 811-7436
Filing Date: February 7, 1996
(ix) Investment Management Agreement re: The DFA Two-Year
Global Fixed Income Series INCORPORATED BY REFERENCE
TO: Filing: Amendment No. 6 to the Registration
Statement of Registrant on Form N-1A
File No.: 811-7436
Filing Date: February 7, 1996
(x) Investment Management Agreement re: The Japanese Small
Company Series INCORPORATED BY REFERENCE TO: Filing:
Amendment No. 7 to the Registration Statement of
Registrant on Form N-1A
File No.: 811-7436
Filing Date: August 7, 1996
(xi) Investment Management Agreement re: The United Kingdom
Small Company Series INCORPORATED BY REFERENCE TO:
Filing: Amendment No. 7 to the Registration Statement
of Registrant on Form N-1A
File No.: 811-7436
Filing Date: August 7, 1996
(xii) Investment Management Agreement re: The Pacific Rim
Small Company Series INCORPORATED BY REFERENCE TO:
Filing: Amendment No. 7 to the Registration Statement
of Registrant on Form N-1A
File No.: 811-7436
Filing Date: August 7, 1996
(xiii) Investment Management Agreement re: The Continental
Small Company Series
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<PAGE>
INCORPORATED BY REFERENCE TO: Filing: Amendment No. 7
to the Registration Statement of Registrant on Form
N-1A
File No.: 811-7436
Filing Date: August 7, 1996
(xiv) Sub-Advisory Agreement with DFA Australia Ltd. re: The
Japanese Small Company Series INCORPORATED BY REFERENCE
TO: Filing: Amendment No. 7 to the Registration
Statement of Registrant on Form N-1A
File No.: 811-7436
Filing Date: August 7, 1996
(xv) Sub-Advisory Agreement with Dimensional Fund Advisors
Ltd. re: The United Kingdom Small Company Series
INCORPORATED BY REFERENCE TO: Filing: Amendment No. 7
to the Registration Statement of Registrant on
Form N-1A
File No.: 811-7436
Filing Date: August 7, 1996
(xvi) Sub-Advisory Agreement with DFA Australia Ltd. re: The
Pacific Rim Small Company Series INCORPORATED BY
REFERENCE TO: Filing: Amendment No. 7 to the
Registration Statement of Registrant on Form N-1A
File No.: 811-7436
Filing Date: August 7, 1996
(xvii) Sub-Advisory Agreement with Dimensional Fund Advisors
Ltd. re: The Continental Small Company Series
INCORPORATED BY REFERENCE TO: Filing: Amendment No. 7
to the Registration Statement of Registrant on
Form N-1A
File No.: 811-7436
Filing Date: August 7, 1996
(xviii) Investment Management Agreement re: The Emerging
Markets Small Cap Series INCORPORATED BY REFERENCE TO:
Filing: Amendment No. 9 to the Registration Statement
of Registrant on Form N-1A File No.: 811-7436
Filing Date: February 24, 1997
(xix) Investment Management Agreement re: The U.S. 9-10
Small Company Series INCORPORATED BY REFERENCE TO:
Filing: Amendment No. 12 to the Registration Statement
of Registrant on Form N-1A File No.: 811-7436
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<PAGE>
Filing Date: November 28, 1997
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<PAGE>
(xx) Investment Management Agreement re: The U.S. 4-10
Value Series INCORPORATED BY REFERENCE TO: Filing:
Amendment No. 12 to the Registration Statement of
Registrant on Form N-1A File No.: 811-7436
Filing Date: November 28, 1997
(6) Agreement with DFA Securities Inc. is filed herewith.
(7) None
(8) (i) Form of Custodian Agreement between Registrant and
Provident National Bank is filed herewith.
(ii) Form of Custodian Agreement between Registrant and
Boston Safe Deposit and Trust Company is filed
herewith.
(iii) Form of Custodian Agreement between Registrant and The
Chase Manhattan Bank, N.A. is filed herewith.
(iv) Custodial Services Agreement with Citibank, N.A. is
filed herewith.
(9) (i) Form of Transfer Agency Agreement with Provident
Financial Processing Corporation is filed herewith.
(ii) Form of Administration and Accounting Services
Agreement with Provident Financial Processing
Corporation is filed herewith.
(10) Not applicable
(11) Consent of Coopers & Lybrand L.L.P. is filed herewith
(12) Not applicable
(13) Not applicable
(14) Not applicable
(15) Not applicable
(16) Not applicable
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<PAGE>
(17) Financial Data Schedules
(18) Not applicable
- --------------------
* Audited financial statements of the Trust for the fiscal year ended
November 30, 1997 were filed electronically via the EDGAR system on
February 5, 1998 as the Fund's annual report to shareholders pursuant to
Rule 30b2-1 under the 1940 Act and are incorporated in Part B by reference.
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 January 31, 1998, the following persons beneficially
owned more than 25% of the outstanding voting securities of the feeder
portfolios investing in the Trust:
<TABLE>
<CAPTION>
DFA IDG
- -------
<S> <C>
JAPANESE SMALL COMPANY PORTFOLIO
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309-3610 52.94%
UNITED KINGDOM SMALL COMPANY PORTFOLIO
BellSouth Corporation (see above address) 51.75%
CONTINENTAL SMALL COMPANY PORTFOLIO
BellSouth Corporation (see above address) 55.14%
PACIFIC RIM SMALL COMPANY PORTFOLIO
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
BellSouth Corporation (see above address) 61.03%
EMERGING MARKETS SMALL CAP PORTFOLIO
Dimensional Fund Advisors Inc. 100%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
INTERNATIONAL SMALL COMPANY PORTFOLIO
San Diego County Employees Retirement Association
1495 Pacific Highway 350
San Diego, CA 92101 26.28%
U.S. 6-10 SMALL COMPANY PORTFOLIO
McKinsey & Company Master Retirement Trust
55 E. 52nd Street
New York, NY 10055 25.87%
ENHANCED U.S. LARGE COMPANY PORTFOLIO
Misericordia Home Endowment Fund
6300 N. Ridge Avenue
Chicago, IL 60660 25.90%
U.S. 4-10 VALUE PORTFOLIO
Dimensional Fund Advisors Inc. (see above address) 100%
<CAPTION>
DIG
- ---
<S> <C>
6-10 INSTITUTIONAL PORTFOLIO
NI-GAS Trust Savings Investment and Thrift Plan
P.O. Box 190
Aurora, IL 60507 69.53%
Utah Retirement Systems
540 E. 200 South
Salt Lake City, UT 84102 27.43%
ONE-YEAR FIXED INCOME II PORTFOLIO
Home Depot Future Builders
c/o Wachovia Bank of N. Carolina
301 N. Main Street
Winston-Salem, NC 27150 65.73%
U.S. 6-10 VALUE PORTFOLIO II
BellSouth Corporation 401(k)
1155 Peachtree Street N.E.
Atlanta, GA 30309-3610 100%
</TABLE>
-80-
<PAGE>
<TABLE>
<S> <C>
U.S. LARGE CAP VALUE PORTFOLIO II
BellSouth Corporation 401(k) (see above address) 100%
DFA INTERNATIONAL VALUE PORTFOLIO II
BellSouth Corporation 401(k) (see above address) 100%
EMERGING MARKETS PORTFOLIO II
Citibank Savings Incentive Plan
153 E. 53rd Street
New York, NY 10043 100%
DFA INTERNATIONAL VALUE PORTFOLIO IV
Citibank Savings Incentive Plan
153 E. 53rd Street
New York, NY 10043 100%
</TABLE>
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
<TABLE>
<CAPTION>
Title of Class
--------------
(Shares of Beneficial Interest, Number of Record Holders
Par Value $.01) as of January 31, 1998
------------------------
<S> <C>
The U.S. 9-10 Small Company Series 2
The U.S. 6-10 Small Company Series 3
The U.S. Large Company Series 3
The DFA One-Year Fixed Income Series 3
The U.S. 6-10 Value Series 2
The U.S. 4-10 Value Series 1
The U.S. Large Cap Value Series 4
The DFA International Value Series 9
The Emerging Markets Series 3
The Emerging Markets Small Cap Series 3
The Enhanced U.S. Large Company Series 1
The DFA Two-Year Global Fixed Income Series 1
The Japanese Small Company Series 3
The United Kingdom Small Company Series 3
The Pacific Rim Small Company Series 3
The Continental Small Company Series 3
</TABLE>
ITEM 27. INDEMNIFICATION.
Reference is made to Article VII of the Registrant's Agreement and Declaration
of Trust (Exhibit 24(b)(1)(i)) and to Article X of the Registrant's By-Laws
(Exhibit 24(b)(2)), which are incorporated herein by reference. Pursuant to
Rule 484 under the Securities Act of 1933, as amended, the Registrant furnishes
the following undertaking:
"Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers
-81-
<PAGE>
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) Not applicable
(c) Not applicable
ITEM 30. LOCATIONS OF ACCOUNTS AND RECORDS.
All accounts and records are maintained by PFPC Inc., 400 Bellevue Parkway,
Wilmington, DE 19809.
ITEM 31. MANAGEMENT SERVICES.
There are no management-related service contracts not discussed in Part A
or Part B.
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<PAGE>
ITEM 32. UNDERTAKING.
(a) Not applicable
(b) Not applicable
(c) The Registrant undertakes to furnish each person to whom this
Post-Effective Amendment is delivered a copy of its latest annual report to
shareholders, upon request and without charge.
(d) The Registrant hereby undertakes to promptly call a meeting of
shareholders for the purpose of voting upon the question of removal of any
trustee or trustees when requested in writing to do so by the record holders of
not less than 10 per centum of the Registrant's outstanding shares and to assist
its shareholders in accordance with the requirements of Section 16(c) of the
Investment Company Act of 1940 relating to shareholder communications.
-83-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Investment Company Act of 1940, as
amended, the Registrant has duly caused this amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Santa Monica, the State of California, as of the 2nd
day of March, 1998.
THE DFA INVESTMENT TRUST COMPANY
By:/s/ Irene R. Diamant
----------------------------------------
Irene R. Diamant
Vice President
-84-
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
99(b)(1)(ii) Certificate of Trust
99(b)(1)(iii) Certificate of Amendment of Certificate of Trust
99(b)(2) Bylaws
99(b)(5)(i) Investment Management Agreement re: The U.S. 6-10 Small
Company Series
99(b)(5)(iii) Investment Management Agreement re: The DFA One-Year
Fixed Income Series
99(b)(5)(iv) Investment Management Agreement re: The U.S. Large Cap
Value Series (formerly The U.S. Large Cap High Book to
Market Series)
99(b)(5)(v) Investment Management Agreement re: The U.S. 6-10 Value
Series (formerly The U.S. Small Cap High Book to Market
Series)
99(b)(5)(vi) Investment Management Agreement re: The DFA International
Value Series
99(b)(5)(vii) Investment Management Agreement re: The Emerging Markets
Series
99(b)(6) Agreement with DFA Securities Inc.
99(b)(8)(ii) Form of Custodian Agreement between Registrant and Boston
Safe Deposit and Trust Company
99(b)(8)(iii) Form of Custodian Agreement between Registrant and The Chase
Manhattan Bank, N.A.
99(b)(8)(iv) Custodial Services Agreement with Citibank, N.A.
99(b)(9)(i) Form of Transfer Agency Agreement with Provident Financial
Processing Corporation, dated January 15, 1993
99(b)(9)(ii) Transfer Agency Agreement, Amendment Number One, dated
12/1/93
99(b)(9)(iii) Form of Administration and Accounting Services Agreement
with Provident Financial Processing Corporation, dated
12/15/93
99(b)(9)(iv) Form of Administration and Accounting Services Agreement
Amendment Number One, dated 12/1/93
-85-
<PAGE>
99(b)(11) Consent of Coopers & Lybrand L.L.P.
Exh 27.1 Financial Data Schedule for U.S. 6-10 Small Company Series
Exh 27.2 Financial Data Schedule for U.S. Small Cap Value Series
Exh 27.3 Financial Data Schedule for DFA One-Year Fixed Income Series
Exh 27.4 Financial Data Schedule for U.S. Large Company Series
Exh 27.5 Financial Data Schedule for U.S. Large Cap Value Series
Exh 27.6 Financial Data Schedule for DFA International Value Series
Exh 27.7 Financial Data Schedule for DFA Emerging Markets Series
Exh 27.8 Financial Data Schedule for DFA Two-Year Global Fixed
Income Series
Exh 27.9 Financial Data Schedule for DFA Two-Year Corporate Fixed
Income Series
Exh 27.10 Financial Data Schedule for DFA Two-Year Government Series
Exh 27.11 Financial Data Schedule for Enhanced U.S. Large Company
Series
Exh 27.12 Financial Data Schedule for Japanese Small Company Series
Exh 27.13 Financial Data Schedule for United Kingdom Small Company
Series
Exh 27.14 Financial Data Schedule for Continental Small Company Series
Exh 27.15 Financial Data Schedule for Pacific Rim Small Company Series
Exh 27.16 Financial Data Schedule for Emerging Markets Small Cap
Series
-86-
<PAGE>
CERTIFICATE OF TRUST
OF
THE DFA TRUST COMPANY
a Delaware Business Trust
This Certificate of Trust of THE DFA TRUST COMPANY (the "Trust"),
dated as of this 11th day of September, 1992, is being duly executed and filed
in order to form a business trust pursuant to the Delaware Business Trust Act
(the "Act"), Del. Code Ann. tit. 12, Sections 3801-3819.
1. NAME. The name of the business trust formed hereby is "THE DFA
TRUST COMPANY."
2. REGISTERED OFFICE AND REGISTERED AGENT. The Trust will become,
prior to the issuance of beneficial interests, a registered investment company
under the Investment Company Act of 1940, as amended. Therefore, in accordance
with section 3807(b) of the Act, the Trust has and shall maintain in the State
of Delaware a registered office and a registered agent for service of process.
(a) REGISTERED OFFICE. The registered office of the Trust in
Delaware is The Corporation Trust Company, 1209 Orange Street,
Wilmington, Delaware 19801.
(b) REGISTERED AGENT. The registered agent for service of
process on the Trust in Delaware is The Corporation Trust Company.
3. LIMITATION ON LIABILITY. Pursuant to section 3804 of the Act,
in the event that the Trust's governing instrument, as defined in section
3801(f) of the Act, creates one or more series as provided in section 3806(b)(2)
of the Act, the debts, liabilities, obligations and expenses incurred,
contracted for or otherwise existing with respect to a particular series of the
Trust shall be enforceable against the assets of such series only, and not
against the assets of the Trust generally.
<PAGE>
IN WITNESS WHEREOF, the Trustees named below do hereby make and enter
into this Declaration of Trust as of the 11th day of September, 1992.
/s/ David G. Booth /s/ Rex A. Sinquefield
- ------------------------------ ------------------------------
David G. Booth Rex A. Sinquefield
1299 Ocean Avenue, 11th Floor 1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401 Santa Monica, CA 90401
/s/ George M. Constantinides /s/ John P. Gould
- ------------------------------ ------------------------------
George M. Constantinides John P. Gould
1101 East 58th Street 1101 East 58th Street
Chicago, IL 60637 Chicago, IL 60637
/s/ Roger G. Ibbotson /s/ Merton H. Miller
- ------------------------------ ------------------------------
Roger G. Ibbotson Merton H. Miller
135 Prospect Street 1101 East 58th Street
New Haven, CT 06250 Chicago, IL 60637
/s/ Myron S. Scholes
- ------------------------------
Myron S. Scholes
7 World Trade Center
42nd Floor
New York, NY 10048
THE PRINCIPAL PLACE OF BUSINESS OF THE TRUST IS
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF TRUST
OF
THE DFA TRUST COMPANY
a Delaware Business Trust
This Certificate of Amendment to the Certificate of Trust of THE DFA
TRUST COMPANY (the "Trust"), dated as of this 15th day of January, 1993, is
being duly executed and filed pursuant to Section 3810(b) of the Delaware
Business Trust Act.
1. The name of the business trust is "THE DFA TRUST COMPANY."
2. The Trust filed a Certificate of Trust with the State of
Delaware, Office of the Secretary of State, on October 27, 1992.
3. The Certificate of Trust inadvertently omitted the future
effective date of the Certificate of Trust. This Certificate of Amendment
amends the Certificate of Trust for accounting and tax purposes only to specify
an effective date of the Certificate of Trust as January 15, 1993.
4. This Certificate of Amendment also amends the Certificate of
Trust to change the name of the Trust to the following: The DFA Investment
Trust Company.
IN WITNESS WHEREOF, the Trustee named below does hereby make and enter
into this Certificate of Amendment to the Certificate of Trust as of the 15th
day of January, 1993.
/s/ David G. Booth
--------------------------------
David G. Booth
Trustee
<PAGE>
THE DFA TRUST COMPANY
A DELAWARE BUSINESS TRUST
* * * * * * * * *
BY-LAWS
* * * * * * * * *
ARTICLE I
SECTION 1. DELAWARE OFFICE. The registered office of The DFA Trust
Company (the "Trust") in Delaware shall be located at 1209 Orange Street,
Wilmington, Delaware 19801, and the name and address of its Resident Agent for
service of process is The Corporation Trust Company.
SECTION 2. OTHER OFFICES. The Trust shall also have a place of
business in Santa Monica, California, and the Trust shall have the power to open
additional offices for the conduct of its business, either within or outside the
States of Delaware and California, at such places as the Board of Trustees may
from time to time designate.
SECTION 3. FISCAL YEAR. Unless otherwise provided by resolution of
the Board of Trustees the fiscal year of the Trust shall begin December 1 and
end on the last day of November.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 1. PLACE OF MEETING. Meetings of shareholders shall be held
at any place designated by the Board of Trustees. In the absence of any such
designation, shareholders' meetings shall be held at the principal office in
Santa Monica.
SECTION 2. CALL OF MEETINGS. Meetings of the shareholders may be
called at any time by the President, or by a majority of the Board of Trustees.
The Board of Trustees shall call a meeting of shareholders 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 ten percent of the outstanding shares.
SECTION 3. VOTING. The holders of each share of beneficial interest
of the Trust then issued and outstanding and entitled to vote, irrespective of
the series, shall be voted in the
<PAGE>
aggregate and not by series, except: (1) when otherwise expressly provided by
the Agreement and Declaration of Trust; and (2) when required by the Investment
Company Act of 1940, as amended, shares shall be voted by series.
A shareholder may cast his vote in person or by proxy, but no proxy
shall be valid after eleven months from its date, unless otherwise provided in
the proxy. At all meetings of shareholders, unless the voting is conducted by
inspectors, all questions relating to the qualification of voters and the
validity of proxies and the acceptance or rejection of votes shall be decided by
the Chairman of the meeting.
SECTION 4. INSPECTORS. At any election of Trustees, the Board of
Trustees prior thereto may, or, if they have not so acted, the Chairman of the
meeting may, and upon the request of the holders of ten percent of the shares
entitled to vote at such election shall, appoint two inspectors of election who
shall first subscribe an oath of affirmation to execute faithfully the duties of
inspectors at such election with strict impartiality and according to the best
of their ability, and shall after the election make a certificate of the result
of the vote taken. No candidate for the office of Trustee shall be appointed
such inspector. The Chairman of the meeting may cause a vote by ballot to be
taken upon any election or matter, and such vote shall be taken upon the request
of the holders of ten percent of the shares entitled to vote on such election
or matter.
ARTICLE III
TRUSTEES
SECTION 1. PLACE OF MEETING. Meetings of the Board of Trustees,
regular or special, may be held at any place in or out of the State of Delaware
as the Board may from time to time determine.
SECTION 2. TELEPHONE MEETING. Members of the Board of Trustees or a
committee of the Board of Trustees may participate in a meeting by means of a
conference telephone or similar communications equipment if all persons
participating in the meeting can hear each other at the same time.
SECTION 3. QUORUM. At all meetings of the Board of Trustees a
majority of the entire Board of Trustees shall constitute a quorum for the
transaction of business and the action of a majority of the Trustees present at
any meeting at which a quorum is present shall be the action of the Board of
Trustees unless the concurrence of a greater or different proportion is required
for such action by the Investment Company Act of 1940. If a quorum shall not be
present at any meeting of Trustees, the Trustees present thereat may by a
majority vote adjourn the meeting
-2-
<PAGE>
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
SECTION 4. REGULAR MEETINGS. Regular meetings of the Board of
Trustees may be held without notice at such time and place as shall from time to
time be determined by the Board of Trustees.
SECTION 5. SPECIAL MEETINGS. Special meetings of the Board of
Trustees may be called by the President on one day's notice to each Trustee;
special meetings shall be called by the President or Secretary in like manner
and on like notice on the written request of two Trustees.
SECTION 6. INFORMAL ACTIONS. Any action required or permitted to be
taken at any meeting of the Board of Trustees or of any Committee thereof may be
taken without a meeting if a written consent to such action is signed in one or
more counterparts by all members of the Board or of such Committee, as the case
may be, and such written consent is filed with the minutes of proceedings of the
Board or Committee.
SECTION 7. COMMITTEES. The Board of Trustees may by resolution
passed by a majority of the whole Board appoint from among its members an
executive committee and other committees composed of two or more Trustees, and
may delegate to such committees, in the intervals between meetings of the Board
of Trustees, any or all of the powers of the Board of Trustees in the management
of the business and affairs of the Trust. In the absence of any member of such
committee, the members thereof present at any meeting, whether or not they
constitute a quorum, may appoint a member of the Board of Trustees to act in the
place of such absent member.
SECTION 8. ACTION OF COMMITTEE. A committee shall report its actions
and recommendations to the Board of Trustees at the Board meeting next
succeeding the committee meeting, and any action by a committee shall be subject
to revision and alteration by the Board of Trustees, provided that no rights, of
third persons shall be affected by any such revision or alteration.
SECTION 9. COMPENSATION. Any Trustee, whether or not he is a
salaried officer or employee of the Trust, may be compensated for his services
as Trustee or as a member of a committee of Trustees, or as Chairman of the
Board or Chairman of a committee by fixed periodic payments or by fees for
attendance at meetings or by both, and may be reimbursed for transportation and
other expenses, all in such manner and amounts as the Board of Trustees may from
time to time determine.
ARTICLE IV
NOTICES
-3-
<PAGE>
SECTION 1. FORM. Notices to Trustees shall be oral or by telephone
or telegram or in writing delivered personally or mailed to the Trustees at
their addresses appearing on the books of the Trust. Notice by mail shall be
deemed to be given at the time when the same shall be mailed. Notice to
Trustees need not state the purpose of a regular or special meeting.
SECTION 2. WAIVER. Whenever any notice of the time, place or purpose
of any meeting of the Trustees or committee is required to be given under the
provisions of these By-Laws, a waiver thereof in writing, signed by the person
or persons entitled to such notice and filed with the records of the meeting,
whether before or after the holding thereof, or actual attendance at the meeting
of Trustees or committee in person, shall be deemed equivalent to the giving of
such notice to such persons.
ARTICLE V
OFFICERS
SECTION 1. NUMBER. The officers of the Trust shall be chosen by the
Board of Trustees and shall include: a President who shall be the Chief
Operating Officer of the Trust and a Trustee; a Secretary; and a Treasurer. The
Board of Trustees may, from time to time, elect or appoint a Controller, one or
more Vice Presidents, Assistant Secretaries and Assistant Treasurers. The Board
of Trustees shall also appoint two Chairmen, one of whom shall be the Chief
Executive Officer and the second shall be the Chief Investment Officer of the
Trust and who shall perform and execute such other duties and powers as the
Board of Trustees shall from time to time prescribe. Two or more offices may be
held by the same person but no officer shall execute, acknowledge or verify any
instrument in more than one capacity, if such instrument is required by law, the
Agreement and Declaration of Trust or these By-Laws to be executed, acknowledged
or verified by two or more officers.
SECTION 2. ELECTION. The Board of Trustees shall choose a President,
a Secretary and a Treasurer who shall each serve until their successors are
chosen and shall qualify.
SECTION 3. OTHER OFFICERS. The Board of Trustees from time to time
may appoint such other officers and agents as it shall deem advisable, who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the Board. The Board of
Trustees from time to time may delegate to one or more officers or agents the
power to appoint any such subordinate officers or agents and to prescribe the
respective rights, terms of office, authorities and duties.
-4-
<PAGE>
SECTION 4. COMPENSATION. The salaries or other compensation of all
officers and agents of the Trust shall be fixed by the Board of Trustees, except
that the Board of Trustees may delegate to any person or group of persons the
power to fix the salary or other compensation of any subordinate officers or
agents appointed pursuant to Section 3 of this Article V.
SECTION 5. TENURE. The officers of the Trust shall serve until their
successors are chosen and qualify. Any officer or agent may be removed by the
affirmative vote of a majority of the Board of Trustees whenever, in its
judgment, the best interests of the Trust will be served thereby. Any vacancy
occurring in any office of the Trust by death, resignation, removal or otherwise
shall be filled by the Board of Trustees.
SECTION 6. PRESIDENT-CHIEF OPERATING OFFICER. The President shall be
the chief operating officer of the Trust; he shall see that all orders and
resolutions of the Board are carried into effect. The President shall perform
such other duties and have such other powers as the Board of Trustees may from
time to time prescribe. In the absence or disability of the President the
Chairman-Chief Investment Officer shall perform the duties of the President.
SECTION 7. VICE-PRESIDENTS. The Vice-Presidents, in the order of
their seniority, shall in the absence or disability of the President and the
Chairman-Chief Investment Officer, perform the duties and exercise the powers of
the President and shall perform such other duties as the Board of Trustees may
from time to time prescribe.
SECTION 8. SECRETARY. The Secretary and/or an Assistant Secretary
shall attend such meetings of the Board of Trustees as the Trustees shall
determine and all meetings of the shareholders and record all the proceedings
thereof and shall perform like duties for any committee when required. The
Secretary shall give, or cause to be given, notice of meetings of the
shareholders and of the Board of Trustees, and shall perform such other duties
as may be prescribed by the Board of Trustees or President, under whose
supervision the Secretary shall be.
SECTION 9. ASSISTANT SECRETARIES. The Assistant Secretaries, in
order of their seniority, shall in the absence or disability of the Secretary,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties as the Board of Trustees shall prescribe.
SECTION 10. TREASURER. The Treasurer, unless another officer of the
Trust has been so designated, shall be the chief financial officer of the Trust.
He shall be responsible for the maintenance of its accounting records and shall
render to the Board of Trustees, at its regular meetings, or when the Board of
Trustees
-5-
<PAGE>
so requires, an account of all the Trust's financial transactions and a report
of the financial condition of the Trust.
SECTION 11. CONTROLLER. The Board of Trustees may designate a
Controller who shall be under the direct supervision of, or may be the same
person as, the Treasurer. He shall maintain adequate records of all assets,
liabilities and transactions of the Trust, establish and maintain internal
accounting control and, in cooperation with the independent public accountants
selected by the Board of Trustees shall supervise internal auditing. He shall
have such further powers and duties as may be conferred upon him from time to
time by the President or the Board of Trustees.
SECTION 12. ASSISTANT TREASURERS. The Assistant Treasurers, in the
order of their seniority, shall in the absence or disability of the Treasurer,
perform the duties and exercise the powers of the Treasurer and shall perform
such other duties as the Board of Trustees may from time to time prescribe.
ARTICLE VI
NET ASSET VALUE
SECTION 1. NET ASSET VALUE. The net asset value per share of
beneficial interest of each Series of the Trust shall be determined by dividing
the total current market value of the investments and other assets belonging to
each Series, less any liabilities attributable to such Series, by the total
outstanding shares of such Series. Securities which are listed on a securities
exchange for which market quotations are available shall be valued at the last
quoted sale price of the day or, if there is no such reported sale, at the mean
between the most recent quoted bid and asked prices. Price information on
listed securities will be taken from the exchange where the security is
primarily traded. Unlisted securities for which market quotations are readily
available will be valued at the mean between the most recent quoted bid and
asked prices. The value of other assets and securities for which no quotations
are readily available (including restricted securities) will be determined in
good faith at fair value using methods determined by the Board of Trustees.
The net asset value per share of each Series shall be determined
as of the close of the New York Stock Exchange on each day that the Exchange is
open for business, except as otherwise described in the registration statement
of the Trust filed under the Investment Company Act of 1940.
Securities which are traded over-the-counter and on a stock
exchange may be valued according to the broadest and most representative market
for such securities. Securities may be valued on the basis of prices provided
by a pricing service when
-6-
<PAGE>
such prices are believed to reflect the current market value of such securities.
SECTION 2. FAIR VALUE. If events which materially affect the value
of the investments of The Asia-Australia Small Company Series occur subsequent
to the close of the various foreign markets on which securities held by that
series are traded, the investments affected thereby will be valued at fair value
in good faith and in accordance with methods determined by the Board of
Trustees.
SECTION 3. OFFERING PRICE. The Board of Trustees may authorize the
sale of shares of any Series at an offering price which includes the net asset
value of the shares plus a reimbursement fee.
ARTICLE VII
SHARES OF BENEFICIAL INTEREST
SECTION 1. CERTIFICATES. A certificate or certificates which shall
certify the Series of shares and the number of shares of beneficial interest of
such Series owned by a shareholder in the Trust will not be issued except as the
Board of Trustees may otherwise determine from time to time. Any such
certificate issued shall be signed by the President or a Vice-President and
counter-signed by the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer.
SECTION 2. SIGNATURE. Where a certificate is signed (1) by a
transfer agent or an assistant transfer agent or (2) by a transfer clerk acting
on behalf of the Trust and a registrar, the signature of any such President,
Vice-President, Treasurer, Assistant Treasurer, Secretary or Assistant Secretary
may be a facsimile. In case any officer who has signed any certificate ceases
to be an officer of the Trust before the certificate is issued, the certificate
may nevertheless be issued by the Trust with the same effect as if the officer
had not ceased to be such officer as of the date of its issue.
SECTION 3. RECORDING AND TRANSFER WITHOUT CERTIFICATES. The Trust
shall have full power to participate in any program approved by the Board of
Trustees providing for the recording and transfer of ownership of shares of the
Trust's shares of beneficial interest by electronic or other means without the
issuance of certificates.
SECTION 4. LOST CERTIFICATES. The Board of Trustees may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Trust
-7-
<PAGE>
alleged to have been stolen, lost or destroyed, upon the making of an affidavit
of that fact by the person claiming the certificate of stock to be stolen, lost
or destroyed, or upon other satisfactory evidence of such loss or destruction.
When authorizing such issuance of a new certificate or certificates, the Board
of Trustees may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such stolen, lost or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and to give the Trust a bond with sufficient surety, to the
Trust to indemnify it against any loss or claim that may be made by reason of
the issuance of a new certificate.
SECTION 5. REGISTERED SHAREHOLDERS. The Trust shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by laws of Delaware.
SECTION 6. TRANSFER AGENTS AND REGISTRARS. The Board of Trustees
may, from time to time, appoint or remove transfer agents and/or registrars of
transfers of shares of beneficial interest of the Trust, and it may appoint the
same person as both transfer agent and registrar. Upon any such appointment
being made all certificates representing shares of beneficial interest
thereafter issued shall be countersigned by one of such transfer agents or by
one of such registrars of transfers or by both and shall not be valid unless so
countersigned. If the same person shall be both transfer agent and registrar,
only countersignature by such person shall be required.
SECTION 7. SHARE LEDGER. The Trust shall maintain an original share
ledger containing the names and addresses of all shareholders and the number and
Series of shares held by each shareholder. Such share ledger may be in written
form or any other form capable of being converted into written form within a
reasonable time for visual inspection.
SECTION 8. TRANSFERS OF SHARES. Upon surrender to the Trust or the
Transfer Agent of the Trust of a certificate for shares duly endorsed or
accompanied by proper evidence of succession assignment, or authority to
transfer, it shall be the duty of the Trust to issue a new certificate to the
person entitled thereto, cancel the old certificate and record the transaction
upon its books.
-8-
<PAGE>
ARTICLE IX
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. With respect to dividends (including
"dividends" designated as "short" or "long" term "capital gains" distributions
to satisfy requirements of the Investment Company Act of 1940 or the Internal
Revenue Code of 1986, as amended):
(a) All dividends and distributions on shares shall be automatically
reinvested solely in additional shares (or fractions thereof) of the Series of
shares of beneficial interest in respect of which such dividends were declared
at the net asset value on the reinvestment date; provided however, a shareholder
may elect to receive dividends and distributions in cash to the extent provided
in the Trust's registration statement filed under the Investment Company Act of
1940.
(b) Dividends or distributions on shares of beneficial interest,
whether payable in shares of beneficial interest or cash, shall be paid out of
earnings, surplus or other lawfully available assets; provided that each
dividend or distribution may be made wholly or partly from any source,
accompanied by a written statement clearly indicating what portion of such
payment per share is made from the following sources:
(i) accumulated or undistributed net income, not including
profits or losses from the sale of securities or other properties;
(ii) accumulated or undistributed net profits from the sale of
securities or other properties;
(iii) net profits from the sale of securities or other properties
during the then current fiscal year; and
(iv) paid-in surplus or other capital source.
(c) In declaring dividends and in recognition that the one goal of
the Trust is to qualify as a "regulated investment company" under the Internal
Revenue Code of 1986, as amended, the Board of Trustees shall be entitled to
rely upon estimates made in the last two months of the fiscal year (with the
advice of the Trust's auditors) as to the amounts of distribution necessary for
this purpose; and the Board of Trustees, acting consistently with good
accounting practice and with the express provisions of these By-Laws, may credit
receipts and charge payments to income or otherwise, as to it may seem proper.
(d) Anything in these By-Laws to the contrary notwithstanding, the
Board of Trustees may at any time declare and
-9-
<PAGE>
distribute pro rata among the shareholders of a record date fixed as above
provided, a "share dividend" out of either authorized but unissued or treasury
shares of a Series or both.
SECTION 2. RIGHTS IN SECURITIES. The Board of Trustees, on behalf of
the Trust, shall have the authority to exercise all of the rights of the Trust
as owner of any securities which might be exercised by any individual owning
such securities in his own right; including but not limited to, the rights to
vote by proxy for any and all purposes (including the right to authorize any
officer or the investment manager to execute proxies), to consent to the
reorganization, merger or consolidation of any company or to consent to the
sale, lease or mortgage of all or substantially all of the property and assets
of any company; and to exchange any of the shares of stock of any company for
the shares of stock issued therefor upon any such reorganization, merger,
consolidation, sale lease or mortgage.
SECTION 3. CLAIMS AGAINST SERIES ASSETS. Each Series of the Trust
shall provide in any loan agreement and any other agreement to pledge, mortgage
or hypothecate any of its assets that such loan shall be repaid solely by the
Series which borrowed funds, that to the extent such loan may be secured only by
the assets of the Series which obtained the loan, no creditor of such Series
shall have any rights to any assets of the Trust other than the specific assets
which secure such loan.
SECTION 4. REPORTS. The Trust shall furnish shareholders with
reports of its financial condition as required by Section 30(d) of the
Investment Company Act of 1940 and the rules thereunder.
SECTION 5. BONDING OF OFFICERS AND EMPLOYEES. All officers and
employees of the Trust shall be bonded to such extent, and in such manner, as
may be required by law.
ARTICLE X
INDEMNIFICATION OF TRUSTEES AND OFFICERS
SECTION 1. PROCEEDINGS AND EXPENSES. For the purpose of this
Article, "proceeding" means any threatened, pending or completed action or
proceeding, whether civil, criminal, administrative or investigative; and
"expenses" includes all expenses and costs reasonably incurred in connection
with such proceeding and any expenses of establishing a right to indemnification
under this Article.
SECTION 2. INDEMNIFICATION. The Trust may indemnify any Trustee or
officer of the Trust who was or is a party or is threatened to be made a party
to any proceeding or claim by reason
-10-
<PAGE>
of the fact that such person is a Trustee or officer of the Trust, against
expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with such proceeding, if it is determined that
such person acted in good faith and reasonably believed: (a) that his conduct
was in the Trust's best interests and (b) in the case of a criminal proceeding,
that he had no reasonable cause to believe his conduct was unlawful. The
termination of any proceeding by judgment, order, settlement, conviction or upon
a plea of nolo contendere or its equivalent shall not of itself create a
presumption that the person did not act in good faith and in a manner which the
person reasonably believed to be in the best interests of the Trust or that the
person had reasonable cause to believe that his conduct was unlawful.
SECTION 3. EXCLUSION OF INDEMNIFICATION. Notwithstanding any
provision to the contrary contained herein, the Trust shall not indemnify any
Trustee or officer for any liability arising by reason of willful misfeasance,
bad faith, gross negligence, or the reckless disregard of the duties involved in
the conduct of such person's office, or in respect of any claim or proceeding as
to which such person shall have been adjudged to be liable on the basis that
personal benefit was improperly received by him, whether or not the benefit
resulted from an action taken in the person's official capacity.
SECTION 4. SUCCESSFUL DEFENSE. Subject to Section 3 of this Article,
to the extent that a Trustee or officer has been successful on the merits in
defense of any proceeding referred to in Section 2 of this Article or in defense
of any claim, issue or matter therein, before the court or other body before
whom the proceeding was brought, such person shall be indemnified against
expenses actually and reasonably incurred by him in connection therewith.
SECTION 5. REQUIRED APPROVAL. Any indemnification under this Article
may be made by the Trust only if authorized in the specific case on a
determination that indemnification of the indemnitee is proper hereunder by:
(a) A majority vote of Trustees who are not parties to the proceeding
or subject to the claim or if there are no such Trustees;
(b) By a written opinion of independent legal counsel.
SECTION 6. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by the Trust before the final disposition of the
proceeding upon (a) receipt of a written undertaking by or on behalf of an
officer or Trustee, such undertaking being an unlimited general obligation to
repay the amount of the advance if it is ultimately determined that he or she
-11-
<PAGE>
is not entitled to indemnification hereunder. Authorizations of payments under
this Section must be made in the manner specified in Section 5 of this Article.
SECTION 7. INSURANCE. The Trust may purchase insurance for any
liability that may be incurred by the Trust, the Trustees, officers and agents
of the Trust.
ARTICLE XI
AMENDMENTS
SECTION 1. These By-Laws may be altered or repealed at any Regular
or Special Meeting of the Board of Trustees.
-12-
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this 6th day of January, 1993, by and between THE DFA
INVESTMENT TRUST COMPANY, a Delaware business trust (the "Trust") and
DIMENSIONAL FUND ADVISORS INC., a Delaware corporation (the "Manager").
1. DUTIES OF ADVISOR
The Trust hereby employs the Manager to manage the investment and
reinvestment of the assets of The U.S. 6-10 Small Company Series of the Trust
(the "Series"), to continuously review, supervise and administer the Series'
investment program, to determine in its discretion the securities to be
purchased or sold and the portion of the Series' assets to be uninvested, to
provide the Trust with records concerning the Manager's activities which the
Trust is required to maintain, and to render regular reports to the Trust's
officers and the Board of Trustees of the Trust, all in compliance with the
objectives, policies and limitations set forth in the Trust's registration
statement and applicable laws and regulations. The Manager accepts such
employment and agrees to provide, at its own expense, the office space,
furnishings and equipment and the personnel required by it to perform the
services described herein on the terms and for the compensation provided herein.
2. PORTFOLIO TRANSACTIONS
The Manager is authorized to select the brokers or dealers that will
execute the purchases and sales of portfolio securities for the Series and is
directed to use its best efforts to obtain the best available price and most
favorable execution, except as prescribed herein. It is understood that the
Manager will not be deemed to have acted unlawfully, or to have breached a
fiduciary duty to the Trust or in respect of the Series, or be in breach of any
obligation owing to the Trust or in respect of the Series under this Agreement,
or otherwise, solely by reason of its having caused the Series to pay a member
of a securities exchange, a broker or a dealer a commission for effecting a
securities transaction for the Series in excess of the amount of commission
another member of an exchange, broker or dealer would have charged if the
Manager determines in good faith that the commission paid was reasonable in
relation to the brokerage or research services provided by such member, broker
or dealer, viewed in terms of that particular transaction or the Manager's
overall responsibilities with respect to its accounts, including the Trust, as
to which it exercises investment discretion. The Manager will promptly
communicate to the officers and directors
<PAGE>
of the Trust such information relating to transactions for the Series as they
may reasonably request.
3. COMPENSATION OF THE MANAGER
For the services to be rendered by the Manager as provided in
Section 1 of this Agreement, the Trust shall pay to the Manager, at the end of
each month, a fee equal to one-twelfth of .03 percent of the net assets of the
Series. In the event that this Agreement is terminated at other than a
month-end, the fee for such month shall be prorated.
4. OTHER SERVICES
At the request of the Trust, the Manager, in its discretion, may make
available to the Trust office facilities, equipment, personnel and other
services. Such office facilities, equipment, personnel and service shall be
provided for or rendered by the Manager and billed to the Trust at the Manager's
cost and, where applicable, the cost thereof shall be apportioned among the
several Series of the Trust proportionate to their respective utilization
thereof.
5. REPORTS
The Trust and the Manager agree to furnish to each other information
with regard to their respective affairs as each may reasonably request.
6. STATUS OF THE MANAGER
The services of the Manager to the Trust or in respect of the Series,
are not to be deemed exclusive, and the Manager shall be free to render similar
services to others as long as its services to the Trust or in respect of the
Series, are not impaired thereby. The Manager shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Trust in any way or
otherwise be deemed an agent of the Trust.
7. LIABILITY OF MANAGER
No provision of this Agreement shall be deemed to protect the Manager
against any liability to the Trust or its shareholders to which it might
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or the reckless disregard of its
obligations under this Agreement.
-2-
<PAGE>
8. PERMISSIBLE INTERESTS
Subject to and in accordance with the agreement and declaration of
trust of the Trust and the charter of the Manager, trustees, officers, and
shareholders of the Trust are or may be interested in the Manager (or any
successor thereof) as directors, officers or shareholders, or otherwise;
directors, officers, agents and shareholders of the Manager are or may be
interested in the Trust as trustees, officers, shareholders or otherwise; and
the Manager (or any successor) is or may be interested in the Trust as a
shareholder or otherwise and the effect of any such interrelationships shall be
governed by said agreement and declaration of trust and charter and the
provisions of the Investment Company Act of 1940.
9. DURATION AND TERMINATION
This Agreement shall become effective on February 2, 1993 (the
"Effective Date") and shall continue in effect until December 22, 1995, and
thereafter, only if such continuance is approved at least annually by a vote of
the Trust's Board of Trustees, including the vote of a majority of the trustees
who are not parties to this Agreement or interested persons of any such party,
cast in person, at a meeting called for the purpose of voting such approval. In
addition, the question of continuance of this Agreement may be presented to the
shareholders of the Trust; in such event, such continuance shall be effected
only if approved by the affirmative vote of the holders of a majority of the
outstanding voting securities of the Series.
This Agreement may at any time be terminated without payment of any
penalty either by vote of the Board of Trustees of the Trust or by vote of the
holders of a majority of the outstanding voting securities of the Series, on
sixty days written notice to the Manager.
This Agreement shall automatically terminate in the event of its
assignment.
This Agreement may be terminated by the Manager after ninety days
written notice to the Trust.
Any notice under this Agreement shall be given in writing, addressed
and delivered, or mailed postpaid, to the other party at any office of such
party.
As used in this Section 9, the terms "assignment," "interested
persons," and a "vote of the holders of a majority of the outstanding
securities" shall have the respective meanings set forth in Section 2(a)(4),
Section 2(a)(19), Section 2(a)(42) of the Investment Company Act of 1940 and
Rule l8f-2 thereunder.
-3-
<PAGE>
10. SEVERABILITY
If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be
executed this 6th day of January, 1993.
DIMENSIONAL FUND THE DFA INVESTMENT TRUST ADVISORS INC.
COMPANY
By: /s/ Rex A. Sinquefield By: /s/ David G. Booth
--------------------------------- ----------------------------------
Chairman-Chief President
Investment Officer
-4-
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this 6th day of January, 1993, by and between THE DFA
INVESTMENT TRUST COMPANY, a Delaware business trust (the "Trust") and
DIMENSIONAL FUND ADVISORS INC., a Delaware corporation (the "Manager").
1. DUTIES OF ADVISOR
The Trust hereby employs the Manager to manage the investment and
reinvestment of the assets of The DFA One-Year Fixed Income Series of the Trust
(the "Series"), to continuously review, supervise and administer the Series'
investment program, to determine in its discretion the securities to be
purchased or sold and the portion of the Series' assets to be uninvested, to
provide the Trust with records concerning the Manager's activities which the
Trust is required to maintain, and to render regular reports to the Trust's
officers and the Board of Trustees of the Trust, all in compliance with the
objectives, policies and limitations set forth in the Trust's registration
statement and applicable laws and regulations. The Manager accepts such
employment and agrees to provide, at its own expense, the office space,
furnishings and equipment and the personnel required by it to perform the
services described herein on the terms and for the compensation provided herein.
2. PORTFOLIO TRANSACTIONS
The Manager is authorized to select the brokers or dealers that will
execute the purchases and sales of portfolio securities for the Series and is
directed to use its best efforts to obtain the best available price and most
favorable execution, except as prescribed herein. It is understood that the
Manager will not be deemed to have acted unlawfully, or to have breached a
fiduciary duty to the Trust or in respect of the Series, or be in breach of any
obligation owing to the Trust or in respect of the Series under this Agreement,
or otherwise, solely by reason of its having caused the Series to pay a member
of a securities exchange, a broker or a dealer a commission for effecting a
securities transaction for the Series in excess of the amount of commission
another member of an exchange, broker or dealer would have charged if the
Manager determines in good faith that the commission paid was reasonable in
relation to the brokerage or research services provided by such member, broker
or dealer, viewed in terms of that particular transaction or the Manager's
overall responsibilities with respect to its accounts, including the Trust, as
to which it exercises investment discretion. The Manager will promptly
communicate to the officers and directors
<PAGE>
of the Trust such information relating to transactions for the Series as they
may reasonably request.
3. COMPENSATION OF THE MANAGER
For the services to be rendered by the Manager as provided in Section
1 of this Agreement, the Trust shall pay to the Manager, at the end of each
month, a fee equal to one-twelfth of .05 percent of the net assets of the
Series. In the event that this Agreement is terminated at other than a
month-end, the fee for such month shall be prorated.
4. OTHER SERVICES
At the request of the Trust, the Manager, in its discretion, may make
available to the Trust office facilities, equipment, personnel and other
services. Such office facilities, equipment, personnel and service shall be
provided for or rendered by the Manager and billed to the Trust at the Manager's
cost and, where applicable, the cost thereof shall be apportioned among the
several Series of the Trust proportionate to their respective utilization
thereof.
5. REPORTS
The Trust and the Manager agree to furnish to each other information
with regard to their respective affairs as each may reasonably request.
6. STATUS OF THE MANAGER
The services of the Manager to the Trust or in respect of the Series,
are not to be deemed exclusive, and the Manager shall be free to render similar
services to others as long as its services to the Trust or in respect of the
Series, are not impaired thereby. The Manager shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Trust in any way or
otherwise be deemed an agent of the Trust.
7. LIABILITY OF MANAGER
No provision of this Agreement shall be deemed to protect the Manager
against any liability to the Trust or its shareholders to which it might
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or the reckless disregard of its
obligations under this Agreement.
-2-
<PAGE>
8. PERMISSIBLE INTERESTS
Subject to and in accordance with the agreement and declaration of
trust of the Trust and the charter of the Manager, trustees, officers, and
shareholders of the Trust are or may be interested in the Manager (or any
successor thereof) as directors, officers or shareholders, or otherwise;
directors, officers, agents and shareholders of the Manager are or may be
interested in the Trust as trustees, officers, shareholders or otherwise; and
the Manager (or any successor) is or may be interested in the Trust as a
shareholder or otherwise and the effect of any such interrelationships shall be
governed by said agreement and declaration of trust and charter and the
provisions of the Investment Company Act of 1940.
9. DURATION AND TERMINATION
This Agreement shall become effective on February 2, 1993 (the
"Effective Date") and shall continue in effect until December 22,1995, and
thereafter, only if such continuance is approved at least annually by a vote of
the Trust's Board of Trustees, including the vote of a majority of the trustees
who are not parties to this Agreement or interested persons of any such party,
cast in person, at a meeting called for the purpose of voting such approval. In
addition, the question of continuance of this Agreement may be presented to the
shareholders of the Trust; in such event, such continuance shall be effected
only if approved by the affirmative vote of the holders of a majority of the
outstanding voting securities of the Series.
This Agreement may at any time be terminated without payment of any
penalty either by vote of the Board of Trustees of the Trust or by vote of the
holders of a majority of the outstanding voting securities of the Series, on
sixty days written notice to the Manager.
This Agreement shall automatically terminate in the event of its
assignment.
This Agreement may be terminated by the Manager after ninety days
written notice to the Trust.
Any notice under this Agreement shall be given in writing, addressed
and delivered, or mailed postpaid, to the other party at any office of such
party.
As used in this Section 9, the terms "assignment," "interested
persons," and a "vote of the holders of a majority of the outstanding
securities" shall have the respective meanings set forth in Section 2(a)(4),
Section 2(a)(19), Section 2(a)(42) of the Investment Company Act of 1940 and
Rule l8f-2 thereunder.
-3-
<PAGE>
10. SEVERABILITY
If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be
executed this 6th day of January, 1993.
DIMENSIONAL FUND THE DFA INVESTMENT TRUST
ADVISORS INC. COMPANY
By:/s/ Rex A. Sinquefield By:/s/ David G. Booth
---------------------- -------------------
Chairman-Chief President
Investment Officer
-4-
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this 6th day of January, 1993, by and between THE DFA
INVESTMENT TRUST COMPANY, a Delaware business trust (the "Trust") and
DIMENSIONAL FUND ADVISORS INC., a Delaware corporation (the "Manager").
1. DUTIES OF ADVISOR
The Trust hereby employs the Manager to manage the investment and
reinvestment of the assets of The U.S. Large Cap High Book to Market Series of
the Trust (the "Series"), to continuously review, supervise and administer the
Series' investment program, to determine in its discretion the securities to be
purchased or sold and the portion of the Series' assets to be uninvested, to
provide the Trust with records concerning the Manager's activities which the
Trust is required to maintain, and to render regular reports to the Trust's
officers and the Board of Trustees of the Trust, all in compliance with the
objectives, policies and limitations set forth in the Trust's registration
statement and applicable laws and regulations. The Manager accepts such
employment and agrees to provide, at its own expense, the office space,
furnishings and equipment and the personnel required by it to perform the
services described herein on the terms and for the compensation provided herein.
2. PORTFOLIO TRANSACTIONS
The Manager is authorized to select the brokers or dealers that will
execute the purchases and sales of portfolio securities for the Series and is
directed to use its best efforts to obtain the best available price and most
favorable execution, except as prescribed herein. It is understood that the
Manager will not be deemed to have acted unlawfully, or to have breached a
fiduciary duty to the Trust or in respect of the Series, or be in breach of any
obligation owing to the Trust or in respect of the Series under this Agreement,
or otherwise, solely by reason of its having caused the Series to pay a member
of a securities exchange, a broker or a dealer a commission for effecting a
securities transaction for the Series in excess of the amount of commission
another member of an exchange, broker or dealer would have charged if the
Manager determines in good faith that the commission paid was reasonable in
relation to the brokerage or research services provided by such member, broker
or dealer, viewed in terms of that particular transaction or the Manager's
overall responsibilities with respect to its accounts, including the Trust, as
to which it exercises investment discretion. The Manager will promptly
communicate to the officers and directors
<PAGE>
of the Trust such information relating to transactions for the Series as they
may reasonably request.
3. COMPENSATION OF THE MANAGER
For the services to be rendered by the Manager as provided in Section
1 of this Agreement, the Trust shall pay to the Manager, at the end of each
month, a fee equal to one-twelfth of .10 percent of the net assets of the
Series. In the event that this Agreement is terminated at other than a
month-end, the fee for such month shall be prorated.
4. OTHER SERVICES
At the request of the Trust, the Manager, in its discretion, may make
available to the Trust office facilities, equipment, personnel and other
services. Such office facilities, equipment, personnel and service shall be
provided for or rendered by the Manager and billed to the Trust at the Manager's
cost and, where applicable, the cost thereof shall be apportioned among the
several Series of the Trust proportionate to their respective utilization
thereof.
5. REPORTS
The Trust and the Manager agree to furnish to each other information
with regard to their respective affairs as each may reasonably request.
6. STATUS OF THE MANAGER
The services of the Manager to the Trust or in respect of the Series,
are not to be deemed exclusive, and the Manager shall be free to render similar
services to others as long as its services to the Trust or in respect of the
Series, are not impaired thereby. The Manager shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Trust in any way or
otherwise be deemed an agent of the Trust.
7. LIABILITY OF MANAGER
No provision of this Agreement shall be deemed to protect the Manager
against any liability to the Trust or its shareholders to which it might
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or the reckless disregard of its
obligations under this Agreement.
-2-
<PAGE>
8. PERMISSIBLE INTERESTS
Subject to and in accordance with the agreement and declaration of
trust of the Trust and the charter of the Manager, trustees, officers, and
shareholders of the Trust are or may be interested in the Manager (or any
successor thereof) as directors, officers or shareholders, or otherwise;
directors, officers, agents and shareholders of the Manager are or may be
interested in the Trust as trustees, officers, shareholders or otherwise; and
the Manager (or any successor) is or may be interested in the Trust as a
shareholder or otherwise and the effect of any such interrelationships shall be
governed by said agreement and declaration of trust and charter and the
provisions of the Investment Company Act of 1940.
9. DURATION AND TERMINATION
This Agreement shall become effective on February 2, 1993 (the
"Effective Date") and shall continue in effect until December 22, 1995, and
thereafter, only if such continuance is approved at least annually by a vote of
the Trust's Board of Trustees, including the vote of a majority of the trustees
who are not parties to this Agreement or interested persons of any such party,
cast in person, at a meeting called for the purpose of voting such approval. In
addition, the question of continuance of this Agreement may be presented to the
shareholders of the Trust; in such event, such continuance shall be effected
only if approved by the affirmative vote of the holders of a majority of the
outstanding voting securities of the Series.
This Agreement may at any time be terminated without payment of any
penalty either by vote of the Board of Trustees of the Trust or by vote of the
holders of a majority of the outstanding voting securities of the Series, on
sixty days written notice to the Manager.
This Agreement shall automatically terminate in the event of its
assignment.
This Agreement may be terminated by the Manager after ninety days
written notice to the Trust.
Any notice under this Agreement shall be given in writing, addressed
and delivered, or mailed postpaid, to the other party at any office of such
party.
As used in this Section 9, the terms "assignment," "interested
persons," and a "vote of the holders of a majority of the outstanding
securities" shall have the respective meanings set forth in Section 2(a)(4),
Section 2(a)(19), Section 2(a)(42) of the Investment Company Act of 1940 and
Rule l8f-2 thereunder.
-3-
<PAGE>
10. SEVERABILITY
If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be
executed this 6th day of January, 1993.
DIMENSIONAL FUND THE DFA INVESTMENT TRUST ADVISORS INC.
COMPANY
By: /s/ Rex A. Sinquefield By: /s/ David G. Booth
------------------------- -------------------------
Chairman-Chief President
Investment Officer
-4-
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this 6th day of January, 1993, by and between THE DFA
INVESTMENT TRUST COMPANY, a Delaware business trust (the "Trust") and
DIMENSIONAL FUND ADVISORS INC., a Delaware corporation (the "Manager").
1. DUTIES OF ADVISOR
The Trust hereby employs the Manager to manage the investment and
reinvestment of the assets of The U.S. Small Cap High Book to Market Series of
the Trust (the "Series"), to continuously review, supervise and administer the
Series' investment program, to determine in its discretion the securities to be
purchased or sold and the portion of the Series' assets to be uninvested, to
provide the Trust with records concerning the Manager's activities which the
Trust is required to maintain, and to render regular reports to the Trust's
officers and the Board of Trustees of the Trust, all in compliance with the
objectives, policies and limitations set forth in the Trust's registration
statement and applicable laws and regulations. The Manager accepts such
employment and agrees to provide, at its own expense, the office space,
furnishings and equipment and the personnel required by it to perform the
services described herein on the terms and for the compensation provided herein.
2. PORTFOLIO TRANSACTIONS
The Manager is authorized to select the brokers or dealers that will
execute the purchases and sales of portfolio securities for the Series and is
directed to use its best efforts to obtain the best available price and most
favorable execution, except as prescribed herein. It is understood that the
Manager will not be deemed to have acted unlawfully, or to have breached a
fiduciary duty to the Trust or in respect of the Series, or be in breach of any
obligation owing to the Trust or in respect of the Series under this Agreement,
or otherwise, solely by reason of its having caused the Series to pay a member
of a securities exchange, a broker or a dealer a commission for effecting a
securities transaction for the Series in excess of the amount of commission
another member of an exchange, broker or dealer would have charged if the
Manager determines in good faith that the commission paid was reasonable in
relation to the brokerage or research services provided by such member, broker
or dealer, viewed in terms of that particular transaction or the Manager's
overall responsibilities with respect to its accounts, including the Trust, as
to which it exercises investment discretion. The Manager will promptly
communicate to the officers and directors
<PAGE>
of the Trust such information relating to transactions for the Series as they
may reasonably request.
3. COMPENSATION OF THE MANAGER
For the services to be rendered by the Manager as provided in Section
1 of this Agreement, the Trust shall pay to the Manager, at the end of each
month, a fee equal to one-twelfth of .20 percent of the net assets of the
Series. In the event that this Agreement is terminated at other than a
month-end, the fee for such month shall be prorated.
4. OTHER SERVICES
At the request of the Trust, the Manager, in its discretion, may make
available to the Trust office facilities, equipment, personnel and other
services. Such office facilities, equipment, personnel and service shall be
provided for or rendered by the Manager and billed to the Trust at the Manager's
cost and, where applicable, the cost thereof shall be apportioned among the
several Series of the Trust proportionate to their respective utilization
thereof.
5. REPORTS
The Trust and the Manager agree to furnish to each other information
with regard to their respective affairs as each may reasonably request.
6. STATUS OF THE MANAGER
The services of the Manager to the Trust or in respect of the Series,
are not to be deemed exclusive, and the Manager shall be free to render similar
services to others as long as its services to the Trust or in respect of the
Series, are not impaired thereby. The Manager shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Trust in any way or
otherwise be deemed an agent of the Trust.
7. LIABILITY OF MANAGER
No provision of this Agreement shall be deemed to protect the Manager
against any liability to the Trust or its shareholders to which it might
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or the reckless disregard of its
obligations under this Agreement.
-2-
<PAGE>
8. PERMISSIBLE INTERESTS
Subject to and in accordance with the agreement and declaration of
trust of the Trust and the charter of the Manager, trustees, officers, and
shareholders of the Trust are or may be interested in the Manager (or any
successor thereof) as directors, officers or shareholders, or otherwise;
directors, officers, agents and shareholders of the Manager are or may be
interested in the Trust as trustees, officers, shareholders or otherwise; and
the Manager (or any successor) is or may be interested in the Trust as a
shareholder or otherwise and the effect of any such interrelationships shall be
governed by said agreement and declaration of trust and charter and the
provisions of the Investment Company Act of 1940.
9. DURATION AND TERMINATION
This Agreement shall become effective on February 2, 1993 (the
"Effective Date") and shall continue in effect until December 22, 1995, and
thereafter, only if such continuance is approved at least annually by a vote of
the Trust's Board of Trustees, including the vote of a majority of the trustees
who are not parties to this Agreement or interested persons of any such party,
cast in person, at a meeting called for the purpose of voting such approval. In
addition, the question of continuance of this Agreement may be presented to the
shareholders of the Trust; in such event, such continuance shall be effected
only if approved by the affirmative vote of the holders of a majority of the
outstanding voting securities of the Series.
This Agreement may at any time be terminated without payment of any
penalty either by vote of the Board of Trustees of the Trust or by vote of the
holders of a majority of the outstanding voting securities of the Series, on
sixty days written notice to the Manager.
This Agreement shall automatically terminate in the event of its
assignment.
This Agreement may be terminated by the Manager after ninety days
written notice to the Trust.
Any notice under this Agreement shall be given in writing, addressed
and delivered, or mailed postpaid, to the other party at any office of such
party.
As used in this Section 9, the terms "assignment," "interested
persons," and a "vote of the holders of a majority of the outstanding
securities" shall have the respective meanings set forth in Section 2(a)(4),
Section 2(a)(19), Section 2(a)(42) of the Investment Company Act of 1940 and
Rule l8f-2 thereunder.
-3-
<PAGE>
10. SEVERABILITY
If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be
executed this 6th day of January, 1993.
DIMENSIONAL FUND THE DFA INVESTMENT TRUST
ADVISORS INC. COMPANY
By: /s/ Rex A. Sinquefield By: /s/ David G. Booth
------------------------ ------------------------
Chairman-Chief President
Investment Officer
-4-
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this 1st day of December, 1993, by and between THE DFA
INVESTMENT TRUST COMPANY, a Delaware business trust (the "Trust") and
DIMENSIONAL FUND ADVISORS INC., a Delaware corporation (the "Manager").
1. DUTIES OF ADVISOR
The Trust hereby employs the Manager to manage the investment and
reinvestment of the assets of the DFA International Value Series of the Trust
(the "Series"), to continuously review, supervise and administer the Series'
investment program, to determine in its discretion the securities to be
purchased or sold and the portion of the Series' assets to be uninvested, to
provide the Trust with records concerning the Manager's activities which the
Trust is required to maintain, and to render regular reports to the Trust's
officers and the Board of Trustees of the Trust, all in compliance with the
objectives, policies and limitations set forth in the Trust's registration
statement and applicable laws and regulations. The Manager accepts such
employment and agrees to provide, at its own expense, the office space,
furnishings and equipment and the personnel required by it to perform the
services described herein on the terms and for the compensation provided herein.
2. PORTFOLIO TRANSACTIONS
The Manager is authorized to select the brokers or dealers that will
execute the purchases and sales of portfolio securities for the Series and is
directed to use its best efforts to obtain the best available price and most
favorable execution, except as prescribed herein. It is understood that the
Manager will not be deemed to have acted unlawfully, or to have breached a
fiduciary duty to the Trust or in respect of the Series, or be in breach of any
obligation owing to the Trust or in respect of the Series under this Agreement,
or otherwise, solely by reason of its having caused the Series to pay a member
of a securities exchange, a broker or a dealer a commission for effecting a
securities transaction for the Series in excess of the amount of commission
another member of an exchange, broker or dealer would have charged if the
Manager determines in good faith that the commission paid was reasonable in
relation to the brokerage or research services provided by such member, broker
or dealer, viewed in terms of that particular transaction or the Manager's
overall responsibilities with respect to its accounts, including the Trust, as
to which it exercises investment discretion. The Manager will promptly
communicate to the officers and directors
<PAGE>
of the Trust such information relating to transactions for the Series as they
may reasonably request.
3. COMPENSATION OF THE MANAGER
For the services to be rendered by the Manager as provided in Section
1 of this Agreement, the Trust shall pay to the Manager, at the end of each
month, a fee equal to one-twelfth of .20 percent of the net assets of the
Series. In the event that this Agreement is terminated at other than a
month-end, the fee for such month shall be prorated.
4. OTHER SERVICES
At the request of the Trust, the Manager, in its discretion, may make
available to the Trust office facilities, equipment, personnel and other
services. Such office facilities, equipment, personnel and service shall be
provided for or rendered by the Manager and billed to the Trust at the Manager's
cost and, where applicable, the cost thereof shall be apportioned among the
several Series of the Trust proportionate to their respective utilization
thereof.
5. REPORTS
The Trust and the Manager agree to furnish to each other information
with regard to their respective affairs as each may reasonably request.
6. STATUS OF THE MANAGER
The services of the Manager to the Trust or in respect of the Series,
are not to be deemed exclusive, and the Manager shall be free to render similar
services to others as long as its services to the Trust or in respect of the
Series, are not impaired thereby. The Manager shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Trust in any way or
otherwise be deemed an agent of the Trust.
7. LIABILITY OF MANAGER
No provision of this Agreement shall be deemed to protect the Manager
against any liability to the Trust or its shareholders to which it might
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or the reckless disregard of its
obligations under this Agreement.
-2-
<PAGE>
8. PERMISSIBLE INTERESTS
Subject to and in accordance with the agreement and declaration of
trust of the Trust and the charter of the Manager, trustees, officers, and
shareholders of the Trust are or may be interested in the Manager (or any
successor thereof) as directors, officers or shareholders, or otherwise;
directors, officers, agents and shareholders of the Manager are or may be
interested in the Trust as trustees, officers, shareholders or otherwise; and
the Manager (or any successor) is or may be interested in the Trust as a
shareholder or otherwise and the effect of any such interrelationships shall be
governed by said agreement and declaration of trust and charter and the
provisions of the Investment Company Act of 1940.
9. DURATION AND TERMINATION
This Agreement shall become effective on __________, 1993 (the
"Effective Date") and shall continue in effect until _______________, and
thereafter, only if such continuance is approved at least annually by a vote of
the Trust's Board of Trustees, including the vote of a majority of the trustees
who are not parties to this Agreement or interested persons of any such party,
cast in person, at a meeting called for the purpose of voting such approval. In
addition, the question of continuance of this Agreement may be presented to the
shareholders of the Trust; in such event, such continuance shall be effected
only if approved by the affirmative vote of the holders of a majority of the
outstanding voting securities of the Series.
This Agreement may at any time be terminated without payment of any
penalty either by vote of the Board of Trustees of the Trust or by vote of the
holders of a majority of the outstanding voting securities of the Series, on
sixty days written notice to the Manager.
This Agreement shall automatically terminate in the event of its
assignment.
This Agreement may be terminated by the Manager after ninety days
written notice to the Trust.
Any notice under this Agreement shall be given in writing, addressed
and delivered, or mailed postpaid, to the other party at any office of such
party.
As used in this Section 9, the terms "assignment," "interested
persons," and a "vote of the holders of a majority of the outstanding
securities" shall have the respective meanings set forth in Section 2(a)(4),
Section 2(a)(19), Section 2(a)(42) of the Investment Company Act of 1940 and
Rule l8f-2 thereunder.
-3-
<PAGE>
10. SEVERABILITY
If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be
executed this 1st day of December, 1993.
DIMENSIONAL FUND THE DFA INVESTMENT TRUST
ADVISORS INC. COMPANY
By: /s/ Rex A. Sinquefield By: /s/ David G. Booth
---------------------------- ----------------------------
Chairman-Chief President
Investment Officer
-4-
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of this 18th day of October, 1996, by and between THE DFA
INVESTMENT TRUST COMPANY, a Delaware business trust (the "Trust") and
DIMENSIONAL FUND ADVISORS INC., a Delaware corporation (the "Manager").
1. DUTIES OF ADVISOR
The Trust hereby employs the Manager to manage the investment and
reinvestment of the assets of THE EMERGING MARKETS SMALL CAP SERIES of the Trust
(the "Series"), to continuously review, supervise and administer the Series'
investment program, to determine in its discretion the securities to be
purchased or sold and the portion of the Series' assets to be uninvested, to
provide the Trust with records concerning the Manager's activities which the
Trust is required to maintain, and to render regular reports to the Trust's
officers and the Board of Trustees of the Trust, all in compliance with the
objectives, policies and limitations set forth in the Trust's registration
statement and applicable laws and regulations. The Manager accepts such
employment and agrees to provide, at its own expense, the office space,
furnishings and equipment and the personnel required by it to perform the
services described herein on the terms and for the compensation provided herein.
2. PORTFOLIO TRANSACTIONS
The Manager is authorized to select the brokers or dealers that will
execute the purchases and sales of portfolio securities for the Series and is
directed to use its best efforts to obtain the best available price and most
favorable execution, except as prescribed herein. It is understood that the
Manager will not be deemed to have acted unlawfully, or to have breached a
fiduciary duty to the Trust or in respect of the Series, or be in breach of any
obligation owing to the Trust or in respect of the Series under this Agreement,
or otherwise, solely by reason of its having caused the Series to pay a member
of a securities exchange, a broker or a dealer a commission for effecting a
securities transaction for the Series in excess of the amount of commission
another member of an exchange, broker or dealer would have charged if the
Manager determines in good faith that the commission paid was reasonable in
relation to the brokerage or research services provided by such member, broker
or dealer, viewed in terms of that particular transaction or the Manager's
overall responsibilities with respect to its accounts, including the Trust, as
to which it exercises investment discretion. The
<PAGE>
Manager will promptly communicate to the officers and directors of the Trust
such information relating to transactions for the Series as they may reasonably
request.
3. COMPENSATION OF THE MANAGER
For the services to be rendered by the Manager as provided in Section
1 of this Agreement, the Trust shall pay to the Manager, at the end of each
month, a fee equal to one-twelfth of .20 percent of the net assets of the
Series. In the event that this Agreement is terminated at other than a
month-end, the fee for such month shall be prorated.
4. OTHER SERVICES
At the request of the Trust, the Manager, in its discretion, may make
available to the Trust office facilities, equipment, personnel and other
services. Such office facilities, equipment, personnel and service shall be
provided for or rendered by the Manager and billed to the Trust at the Manager's
cost and, where applicable, the cost thereof shall be apportioned among the
several Series of the Trust proportionate to their respective utilization
thereof.
5. REPORTS
The Trust and the Manager agree to furnish to each other information
with regard to their respective affairs as each may reasonably request.
6. STATUS OF THE MANAGER
The services of the Manager to the Trust or in respect of the Series,
are not to be deemed exclusive, and the Manager shall be free to render similar
services to others as long as its services to the Trust or in respect of the
Series, are not impaired thereby. The Manager shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Trust in any way or
otherwise be deemed an agent of the Trust.
7. LIABILITY OF MANAGER
No provision of this Agreement shall be deemed to protect the Manager
against any liability to the Trust or its shareholders to which it might
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or the reckless disregard of its
obligations under this Agreement.
-2-
<PAGE>
8. PERMISSIBLE INTERESTS
Subject to and in accordance with the agreement and declaration of
trust of the Trust and the charter of the Manager, trustees, officers, and
shareholders of the Trust are or may be interested in the Manager (or any
successor thereof) as directors, officers or shareholders, or otherwise;
directors, officers, agents and shareholders of the Manager are or may be
interested in the Trust as trustees, officers, shareholders or otherwise; and
the Manager (or any successor) is or may be interested in the Trust as a
shareholder or otherwise and the effect of any such interrelationships shall be
governed by said agreement and declaration of trust and charter and the
provisions of the Investment Company Act of 1940.
9. DURATION AND TERMINATION
This Agreement shall become effective on October 18, 1996 (the
"Effective Date") and shall continue in effect until December 23, 1996, and
thereafter, only if such continuance is approved at least annually by a vote of
the Trust's Board of Trustees, including the vote of a majority of the trustees
who are not parties to this Agreement or interested persons of any such party,
cast in person, at a meeting called for the purpose of voting such approval. In
addition, the question of continuance of this Agreement may be presented to the
shareholders of the Trust; in such event, such continuance shall be effected
only if approved by the affirmative vote of the holders of a majority of the
outstanding voting securities of the Series.
This Agreement may at any time be terminated without payment of any
penalty either by vote of the Board of Trustees of the Trust or by vote of the
holders of a majority of the outstanding voting securities of the Series, on
sixty days written notice to the Manager.
This Agreement shall automatically terminate in the event of its
assignment.
This Agreement may be terminated by the Manager after ninety days
written notice to the Trust.
Any notice under this Agreement shall be given in writing, addressed
and delivered, or mailed postpaid, to the other party at any office of such
party.
As used in this Section 9, the terms "assignment," "interested
persons," and a "vote of the holders of a majority of the outstanding
securities" shall have the respective meanings set forth in Section 2(a)(4),
Section 2(a)(19), Section 2(a)(42) of the Investment Company Act of 1940 and
Rule l8f-2 thereunder.
-3-
<PAGE>
10. SEVERABILITY
If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be
executed as of this 18th day of October, 1996.
DIMENSIONAL FUND THE DFA INVESTMENT TRUST
ADVISORS INC. COMPANY
By: /s/ Rex A. Sinquefield By: /s/ David G. Booth
------------------------- ---------------------------
Chairman-Chief President
Investment Officer
-4-
<PAGE>
AGREEMENT
Agreement made this 6th day of January, 1993, between The DFA
Investment Trust Company (the "Trust"), a Delaware Business Trust and DFA
Securities Inc., an Illinois corporation ("DFA Securities").
In consideration of the mutual promises and undertakings herein
contained, and intending to be legally bound, the parties agree as follows:
(1) The Trust hereby authorizes DFA Securities to supervise the sale
of shares issued by the Trust pursuant to the Registration Statement filed by
the Trust with the U.S. Securities and Exchange Commission on Form N-1A
(Registration No. 811- ), as amended from time to time, during the term of
this Agreement.
(2) Sales of Trust shares shall be effected in a manner to satisfy the
exemption from registration set forth in section 4(2) of the Securities Act of
1933, as amended.
(3) In carrying out its responsibilities under this Agreement, DFA
Securities shall use its best efforts to ensure that persons engaged as Regional
Directors and Regional Representatives of DFA Securities and/or Dimensional Fund
Advisors Inc. ("DFA") comply with applicable Federal and State regulatory
requirements regarding the sale of securities, and with the applicable rules of
the National Association of Securities Dealers, Inc. ("NASD").
(4) DFA Securities will utilize its best efforts to encourage and
promote the sale of Trust shares and, to this end, at its own expense may
prepare and disseminate research and resource material as may be reasonably
necessary or desirable to promote the sale of Trust shares. Any such material
which refers to the Trust shall be approved in writing by an executive officer
of the Trust prior to dissemination.
(5) DFA Securities shall be responsible for, and shall bear the cost
of, its own registration as a securities dealer under federal and state law and
of its membership in the NASD and the cost of registration statements of the
Trust provided to persons who are not shareholders of the Trust.
(6) This Agreement shall become effective on the effective date of the
registration statement of the Trust, provided that prior to such date this
Agreement has been approved by a vote of a majority of the Trustees of the
Trust, cast in person, including a majority of those trustees who are not
parties to this Agreement or interested persons of any such party, as a meeting
called for the purpose of voting on such approval, and shall continue in
effective until December , 1993, and may be continued thereafter for
consecutive terms each of one year, provided that any such continuance is
approved in the manner provided above.
<PAGE>
(7) This Agreement shall terminate automatically in the event of its
assignment and may be terminated by either party without penalty upon sixty
days' written notice.
(8) The terms "person", "interested person" and "assignment" shall
have the meanings ascribed thereto, respectively, under the 1940 Act.
(9) Any notice required or permitted to be given by either party to
the other shall be deemed sufficient if sent by registered or certified mail,
postage prepaid, addressed by the party giving notice to the other party at the
last address furnished by the other party to the party giving notice: if to the
Fund, at 1299 Ocean Avenue, 11th Floor, Santa Monica, California 90401, and if
to DFA Securities, at 1299 Ocean Avenue, 11th Floor, Santa Monica, California
90401.
IN WITNESS WHEREOF, and Trust and DFA Securities have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the day and year above written.
THE DFA INVESTMENT TRUST COMPANY
By _________________________________
DFA SECURITIES INC.
By _________________________________
Date:
<PAGE>
[11/18/93 Draft]
CUSTODY AGREEMENT
AGREEMENT dated as of December 1, 1993, between THE DFA INVESTMENT TRUST
COMPANY (the "Client"), a Delaware business trust, having its principal office
and place of business at 1299 Ocean Avenue, 11th floor, Santa Monica, California
90401, and BOSTON SAFE DEPOSIT AND TRUST COMPANY (the "Custodian"), a
Massachusetts trust company with its principal place of business at One Boston
Place, Boston, Massachusetts 02108.
W I T N E S S E T H:
That for and in consideration of the mutual promises hereinafter set forth,
the Client and the Custodian agree as follows:
1. DEFINITIONS.
Whenever used in this Agreement or in any Schedules to
this Agreement, the following words and phrases, unless the
context otherwise requires, shall have the following meanings:
(a) "Authorized Person" shall be deemed to include the President, and
any Vice President, the Secretary, any Assistant Secretary, the Treasurer, any
Assistant Treasurer, or any other person, whether or not any such person is an
officer or employee of the Client, duly authorized by the Board of Trustees of
the Client to give Oral Instructions and Written Instructions on behalf of the
Client and listed in the certification annexed hereto as Appendix A or such
other certification as may be received by the Custodian on behalf of the Client
from time to time;
(b) "Book-Entry System" shall mean the Federal Reserve/Treasury book-
entry system for United States and Federal agency Securities, its successor or
successors and its nominee or nominees;
(c) "Certificate" shall mean any notice, instruction or other
instrument in writing, authorized or required by this Agreement, other than
Written Instructions, to be given to the Custodian, which is actually received
by the Custodian and signed on behalf of the Client by an officer of the Client;
(d) "Declaration of Trust" shall mean the Agreement and Declaration
of Trust of the Client as executed on September 11, 1992 and as it may be
amended from time to time;
<PAGE>
(e) "Depository" shall mean The Depository Trust Company ("DTC") or
any clearing agency registered with the Securities and Exchange Commission under
Section 17(a) of the Securities Exchange Act of 1934, as amended, any successor
or successors and its nominee or nominees, in which the Custodian is hereby
specifically authorized to make deposits. The term "Depository" shall further
mean and include any other person to be named in a Certificate authorized to act
as a depository or clearing agency under the 1940 Act, including pursuant to
rule 17f-5 thereunder, its successor or successors and its nominee or nominees;
(f) "Money Market Security" shall be deemed to include, without
limitation, short-term debt obligations issued or guaranteed as to interest and
principal by the government of the United States or agencies or
instrumentalities thereof, commercial paper, bank certificates of deposit,
bankers' acceptances and short-term corporate obligations, where the purchase or
sale of such securities normally requires settlement in federal funds on the
same day as such purchase or sale, and repurchase and reverse repurchase
agreements with respect to any of the foregoing types of securities;
(g) "Oral Instructions" shall mean any instructions, other than
Written Instructions, actually received by the Custodian from an Authorized
Person or a person reasonably believed by the Custodian to be an Authorized
Person;
(h) "Registration Statement" shall mean the Client's current
registration statement relating to the registration of the Client under the
Investment Company Act of 1940, as amended;
(i) "Series" refers to the Client's Series listed in Appendix C
hereto, and any such other separate and distinct Series as may from time to time
be created and designed by the Client in accordance with the provisions of the
Declaration of Trust and which becomes subject to this Agreement by the mutual
consent of the Client and the Custodian;
(j) "Put Bond" shall mean a bond, the terms of which provide that,
under certain circumstances and during certain time period, the holder of the
bond has the option to sell the bond to the issuer at a mutually agreeable
price;
(k) "Shares" refers to the shares of beneficial interest of each
Series of the Client;
(l) "Security" or "Securities" shall be deemed to include bonds,
debentures, notes, stocks, shares, evidences of indebtedness, and other
securities and investments, including Money Market Securities, from time to time
owned by each Series;
-2-
<PAGE>
(m) "Transfer Agent" shall mean the person that performs the transfer
agent, dividend disbursing agent and shareholder servicing functions for the
Client;
(n) "Written Instructions" shall mean a written communication
actually received by the Custodian from a person reasonably believed by the
Custodian to be an Authorized Person via any system, including transmissions via
personal computer and/or any other electronic means as agreed by the parties,
whereby the receiver of such communication is able to verify through codes or
otherwise with a reasonable degree of certainty the authenticity of the sender
of such communication; and
(o) The "1940 Act" refers to the Investment Company Act of 1940, and
the Rules and Regulations thereunder, all as amended from time to time.
2. APPOINTMENT OF CUSTODIAN.
(a) The Client hereby constitutes and appoints the Custodian as
custodian of all the Securities and moneys at the time owned by or in the
possession of the Series during the period of this Agreement.
(b) The Custodian hereby accepts appointment as such custodian for
each Series and agrees to perform the duties thereof as hereinafter set forth.
3. COMPENSATION.
(a) The Client will compensate the Custodian for its services
rendered under this Agreement in accordance with the fees set forth in the Fee
Schedule annexed hereto as Schedule A and incorporated herein for the existing
Series.
(b) The parties hereto will agree upon the compensation for acting as
custodian for any Series hereafter established and designated, and at the time
that the Custodian commences serving a such for said Series, such agreement
shall be reflected in a Fee Schedule for that Series, dated and signed by an
officer of each party hereto, which shall be attached to Schedule A of this
Agreement.
(c) Any compensation agreed to hereunder may be adjusted from time to
time by attaching to Schedule A of this Agreement a revised Fee Schedule, dated
and signed by a duly authorized officer of the Client and a duly authorized
officer of the Custodian.
(d) The Custodian will bill the Client for each Series
as soon as practicable after the end of each calendar month, and
-3-
<PAGE>
said billings will be detailed in accordance with the Fee
Schedule for each Series.
(e) The Custodian may charge against any moneys held on behalf of the
Client its compensation pursuant to this Agreement. The Custodian shall also be
entitled to charge against moneys held by it the amount of any loss, damage,
liability or expenses incurred, including reasonable counsel fees for which it
shall be entitled to reimbursement under the provisions of this Agreement.
4. CUSTODY OF CASH AND SECURITIES.
(a) RECEIPT AND HOLDING OF ASSETS. The Client will deliver or cause
to be delivered to the Custodian all Securities and moneys owned by the Series
at any time during the period of this Agreement and shall specify the Series to
which the Securities and moneys are to be specifically allocated. The Custodian
will not be responsible for such Securities and moneys until actually received
by it. The Client shall instruct the Custodian from time to time in its sole
discretion, by means of Written Instructions, or, in connection with the
purchase or sale of Money Market Securities, by means of Oral Instructions or
Written Instructions, as to what amounts Securities and moneys of a Series are
to be specifically allocated on the books of the Custodian to such Series;
provided, however, that prior to the deposit of Securities of a Series in the
Book-Entry System or the Depository, including a deposit in connection with the
settlement of a purchase or sale, the custodian shall have received a
Certificate specifically approving such deposits by the Custodian in the Book-
Entry System or the Depository.
(b) ACCOUNTS AND DISBURSEMENTS. The Custodian shall establish and
maintain a separate account for each Series and shall credit to the separate
account of each Series all moneys received by it for the account of such Series
and shall disburse the same only;
(1) In payment of Securities purchased for such Series, as
provided in Section 5 hereof;
(2) In payment of dividends or distributions with respect to the
Shares of such Series, as provided in Section 7 hereof;
(3) In payment of original issue or other taxes with respect to
the Shares of such Series, as provided in Section 8 hereof;
(4) In payment for Shares which have been redeemed by such
Series, as provided in Section 8 hereof;
-4-
<PAGE>
(5) Pursuant to Written Instruction, or with respect to Money
Market Securities, Oral Instructions or Written
Instructions, setting forth the name of such Series, the
name and address of the person to whom the payment is to be
made, the amount to be paid and the purpose for which
payment is to be made;
(6) In payment of fees and in reimbursement of the expenses and
liabilities of the custodian attributable to such Series, as
provided in Section 11(h) hereof; and
(7) Upon the receipt of authorized instructions, for the payment
of any expense or liability incurred by the Client or any
Series; including, but not limited to, the following
payments for the account of the Client or any Series:
interest, taxes, management, accounting, transfer agent
and legal fees and operating expenses of the Client or
any Series, whether or not such expenses are, in whole
or in part, to be capitalized or treated as deferred
expenses.
(c) CONFIRMATION AND STATEMENTS. Promptly after the close of
business on each day, the Custodian shall furnish the Client or its duly
delegated agent with confirmations and a summary of all transfers to or from the
account of each Series during said day, such confirmations or accompanying
documentation shall identify the entity, i.e. the Custodian, Subcustodian, or
Depository that has physical possession of such Securities and money of the
Series. In addition, the Custodian shall notify the Client on a timely basis of
any fails with respect to Securities that have occurred during the day. When
securities purchased by a Series are in a fungible bulk of securities registered
in the name of the Custodian (or its nominee) or shown on the custodian's
account on the books or the Depository or the Book-Entry System, the Custodian
shall by book entry or otherwise identify on its own books of account the
quantity of those securities belonging to such Series. At least monthly, the
custodian shall furnish the Client with a detailed statement of the Securities
and moneys held for each Series under this Agreement. The Custodian shall
furnish the Client with such other daily and periodic reports as may be agreed
to by the parties.
(d) REGISTRATION OF SECURITIES AND PHYSICAL SEPARATION. All
Securities held for a Series which are issued or
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issuable only in bearer form, except such Securities as are held in the Book-
Entry System, shall be held by the Custodian in that form; all other Securities
held for a Series may be registered in the name of that Series, in the name of
any duly appointed registered nominee of the Custodian as the Custodian may from
time to time determine, or in the name of the Book-Entry System or the
Depository or their successor or successors, or their nominee or nominees. The
Client reserves the right to instruct the Custodian as to the method of
registration and safekeeping of the Securities of each Series. The Client
agrees to furnish to the Custodian appropriate instruments to enable the
Custodian to hold or deliver in proper form for transfer, or to registered in
the name of its registered nominee or in the name of the Book-Entry System or
the Depository, any Securities which it may hold for the account of a Series and
which may from time to time be registered in the name of a Series. Securities
of a Series that are kept by the Custodian in an account with a Depository or
the Book-Entry System shall be kept in accounts that hold only assets belonging
to customers of the Custodian and not in any proprietary account of the
Custodian. The Custodian shall hold all such Securities specifically allocated
to a Series which are not held in the Book-Entry System or the Depository in a
separate account for such Series in the name of such Series physically
segregated at all times from those of any other person or persons.
(e) COLLECTION OF INCOME AND OTHER MATTERS AFFECTING SECURITIES.
Unless otherwise instructed to the contrary by Written Instruction, the
Custodian by itself, or through the use of the Book-Entry System or the
Depository with respect to Securities therein deposited, shall with respect to
all Securities held for a Series in accordance with this Agreement:
(1) Collect all income due or payable;
(2) Present for payment and collect the amount payable upon all
Securities which may mature or be called, redeemed or
retired, or otherwise become payable. Notwithstanding the
foregoing, the Custodian shall have no responsibility to the
Client or the Series for monitoring or ascertaining any
call, redemption or retirement dates with respect to Put
Bonds which are owned by the Client or the Series and held
by the Custodian or its nominees. Nor shall the Custodian
have any responsibility or liability to the Client or the
Series for any loss by the Client or the Series for any
missed payments or other defaults resulting therefrom;
unless the Custodian received timely notification from the
Client specifying the time, place and
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manner for the presentment of any such Put Bond owned by the
Client for the Series and held by the Custodian or its
nominee. The Custodian shall not be responsible and assumes
no liability to the Client or the Series for the accuracy or
completeness of any notification the Custodian may furnish
to the Client with respect to Put Bonds;
(3) Surrender Securities in temporary form for definitive
Securities;
(4) Execute any necessary declarations or certificates of
ownership under the Federal income tax laws or the laws or
regulations of any other taxing authority now or hereafter
in effect including filing such documents as may be
necessary to reclaim foreign withholding taxes paid by the
Series; and
(5) Hold directly, or through the Book-Entry System or the
Depository with respect to securities therein deposited, for
the account of each Series all rights and similar securities
issued with respect to any Securities held by the Custodian
hereunder for each Series.
(f) DELIVERY OF SECURITIES AND EVIDENCE OF AUTHORITY. Upon receipt
of Written Instructions and not otherwise, except for actions required by
subparagraphs 5, 6, 7, and 8 upon Written Instructions or Oral Instructions
confirmed by Written Instructions, the Custodian, directly or through the use of
the Book-Entry System or the Depository, shall:
(1) Execute and delivery or cause to be executed and delivered
to such persons as may be designated in such Written
Instruction proxies, consents, authorizations, and any other
instruments whereby the authority of the Client as owner of
any Securities may be exercised. The Custodian shall
promptly forward to the Client or its duly delegated agent
any and all proxies, proxy statements and similar documents
received by the Custodian which documents relate to
Securities held by any Series of the Client pursuant to
written operating procedures between the parties;
(2) Deliver or cause to be delivered any Securities held for a
series in exchange for
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other Securities or cash issued or paid in connection with
the liquidation, reorganization, refinancing, merger,
consolidation or recapitalization of any corporation, or the
exercise of any conversion privilege;
(3) Deliver or cause to be delivered any Securities held for a
Series to any protective committee, reorganization committee
or other person in connection with the reorganization or
sale of assets of any corporation, and receive and hold
under the terms of this Agreement in the separate account
for each Series such certificates of deposit, interim
receipts or other instruments or documents as may be issued
to it to evidence such delivery;
(4) Make or cause to be made such transfers or exchanges of the
assets specifically allocated to the separate account of a
Series and take such other steps as shall be stated in said
Written Instruction to be for the purpose of effectuating
any duly authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of the Client;
(5) Deliver Securities owned by any Series upon sale of such
Securities for the account of such Series pursuant to
Section 5;
(6) Deliver Securities owned by any Series upon the receipt of
payment in connection with any repurchase agreement related
to such securities entered into by such Series;
(7) Deliver Securities owned by any Series to the issuer thereof
or its agent when such Securities are called, redeemed,
retired or otherwise become payable; provided, however, that
in any such case the cash or other consideration is to be
delivered to the Custodian. Notwithstanding the foregoing,
the Custodian shall have no responsibility to the Client or
the Series for monitoring or ascertaining any call,
redemption or retirement dates with respect to the put bonds
which are owned by the Client or the Series and held by the
Custodian or its nominee. Nor shall the Custodian have any
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responsibility or liability to the Client or any Series for
any loss by the Client or the Series for any missed payment
or other default resulting therefrom; unless the Custodian
received timely notification from the Client specifying the
time, place and manner for the presentment of any such put
bond owned by the Client or the Series and held by the
Custodian or its nominee. The Custodian shall not be
responsible and assumes no liability to the Client or the
Series for the accuracy or completeness of any notification
the Custodian may furnish to the Client with respect to Put
Bonds;
(8) Deliver Securities owned by any Series in connection with
any loans of securities made by such Series but only against
receipt of adequate collateral as determined from time to
time by the Client which may be in the form of cash or
obligations issued by or guaranteed the United States
government, its agencies or instrumentalities, or an
irrevocable letter of credit from a bank;
(9) Deliver Securities owned by any Series as security in
connection with any borrowings by such series requiring a
pledge of Series assets, but only against receipt of amounts
borrowed;
(10) Deliver Securities owned by any Series upon receipt of
instructions from such Series to the Transfer Agent or to
the holders of Shares in connection with distributions in
kind, as may be described from time to time in the Client's
Registration Statement, in satisfaction of requests by
holders of Shares for repurchase or redemption; and
(11) Deliver Securities owned by any Series for any other proper
business purpose, but only upon receipt of, in addition to
Written Instructions, a certified copy of a resolution of
the Board of Trustees signed by an Authorized Person and
certified by the Secretary of the Client, specifying the
Securities to be delivered, setting forth the purpose for
which such delivery is to be made, declaring such purpose to
be a proper business purpose, and naming the person or
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persons to whom delivery of such Securities shall be made.
(g) ENDORSEMENT AND COLLECTION OF CHECKS, ETC. The Custodian is
hereby authorized to endorse and collect all checks, drafts or other orders for
the payment of money received by the Custodian for the account of a Series.
5. PURCHASE AND SALE OF INVESTMENT OF THE SERIES.
(a) Promptly after each purchase of Securities for a Series, the
Client shall deliver to the Custodian (i) with respect to each purchase of
Securities which are not Money Market Securities, Written Instruction, and (ii)
with respect to each purchase of Money Market Securities, either a Written or
Oral Instruction, in either case specifying with respect to each purchase: (1)
the name of the Series to which such Securities are to be specifically
allocated; (2) the name of the issuer and the title of the Securities; (3) the
number of shares or the principal amount purchased and accrued interest, in any;
(4) the date of purchase and settlement; (5) the purchase price per unit; (6)
the total amount payable upon such purchase; and (7) the name of the broker
through whom or the person to whom the sale was made. The Custodian shall
deliver or cause to be delivered the Securities to the broker or other person
designated by the Client upon receipt of the total amount payable to such Series
upon such sale, provided that the same conforms to the total amount payable to
such Series as set forth in such Written or Oral Instruction. Subject to be
foregoing, the Custodian may accept payment in such form as shall be
satisfactory to it, and may deliver Securities and arrange for payment in
accordance with the customs prevailing among dealers in Securities.
6. LENDING OF SECURITIES.
If a Series is permitted to lend Securities
specifically allocated to that Series, within 24 hours after each loan of
Securities, the Client shall deliver to the Custodian Written Instructions
specifying with respect to each such loan: (1) the Series to which the loaned
Securities are specifically allocated; (2) the name of the issuer and the title
of the Securities; (3) the number of shares or the principal amount loaned; (4)
the date of loan and delivery; (5) the total amount to be delivered to the
Custodian, and specifically allocated to such Series against the loan of the
Securities, including the amount of cash collateral and the premium, if any,
separately identified; and (6) the name of the broker, dealer or financial
institution to which the loan was made. It is understood that in connection
with loans of securities the Client may appoint an agent to effect such loans
pursuant to a written agreement, as to which the Custodian might be a party,
providing, inter alia for
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marking collateral to market, the call of such loans and such other terms as may
be agreed upon.
Promptly after each termination of a loan of Securities specifically
allocated to a Series, the Client shall deliver to the Custodian Written
Instruction specifying with respect to each such loan termination and return of
Securities: (1) the name of the Series to which such loaned Securities are
specifically allocated; (2) the name of the issuer and the title of the
Securities to be returned; (3) the number of shares or the principal amount to
be returned; (4) the date of termination; (5) the total amount to be delivered
by the Custodian (including the cash collateral for such Securities minus any
offsetting credits as described in said Written Instructions); and (6) the name
of the broker, dealer or financial institution from which the Securities will be
returned. The Custodian shall receive all Securities returned from the broker,
dealer or financial institution to which such Securities were loaned and upon
receipt thereof shall pay, out of the moneys specifically allocated to such
Series, the total amount payable upon such return of Securities as set forth in
such Written Instruction. Securities returned to the Custodian shall be held as
they were prior to such loan.
7. PAYMENT OF DIVIDENDS OR DISTRIBUTIONS.
(a) The Client shall furnish to the Custodian the resolution of
the Board of Trustees of the Client certified by the Secretary or Assistant
Secretary (i) authorizing the declaration of dividends with respect to a
Series on a specified periodic basis and authorizing the Custodian to rely on
Oral or Written Instructions specifying the date of the declaration of such
dividend or distribution, the date or payment thereof, the record date as of
which shareholders entitled to payment shall be determined, the amount
payable per share to the shareholders of record as of the record date and the
total amount payable to the Transfer Agent on the payment date, or (ii)
setting forth the date of declaration of any dividend or distribution by a
Series, the date of payment thereof, the record date as of which shareholders
entitled to payment shall be determined, the amount payable per share to the
shareholders of record as of the record date and the total amount payable to
the Transfer Agent on the payment date.
(b) Upon the payment date specified in such resolution, Oral
Instruction, or Written Instruction, as the case may be, the Custodian shall pay
out the moneys specifically allocated to and held for the account of the
appropriate Series to the Transfer Agent of the Client.
8. SALE AND REDEMPTION OF SHARES OF THE SERIES.
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(a) Whenever the Client shall sell any shares of a
Series, the Client shall deliver or cause to be delivered to the
Custodian Written Instruction duly specifying:
(1) The name of the Series whose Shares were sold;
(2) The number of Shares sold, trade date, and price; and
(3) The amount of money and/or Securities to be received by the
Custodian for the sale of such Shares and specifically
allocated to such Series.
(b) Upon receipt of such money and/or Securities from the Transfer
Agent, the Custodian shall credit such money and/or Securities to the separate
account of the Series specified in the Written Instruction specified in
subparagraph (1) of paragraph (a) of this Section 8.
(c) Upon issuance of any Shares of a series in accordance with the
foregoing provisions of this Section 8, the Custodian shall pay, out of the
moneys specifically allocated and held for the account of such Series, all
original issue or other taxes required to be paid in connection with such
issuance upon the receipt of Written Instruction specifying the amount to be
paid.
(d) Except as provided hereafter, whenever any Shares of a Series are
redeemed, the Client shall cause the Transfer Agent to promptly furnish to the
Custodian written notice, specifying:
(1) The name of the Series whose Shares were redeemed, and if
Securities are to be paid, the Client shall specify which
Securities are to be delivered in redemption of such Shares;
(2) The number of Shares redeemed; and
(3) The amount in cash and/or Securities to be paid for the
Shares redeemed.
(e) Upon receipt from the Transfer Agent of written notice setting
forth the number of Shares of a Series received by the Transfer Agent for
redemption and that such Shares are valid and in good form for redemption, the
Custodian shall make payment and/or deliver to the Transfer Agent out of the
moneys and/or Securities specifically allocated to and held for the account of
the Series specified in subparagraph (1) of paragraph (d) of this
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Section 8 of the total amount specified in the Written Instruction issued
pursuant to paragraph (d) of this Section 8.
9. INDEBTEDNESS.
(a) The Client will cause to be delivered to the Custodian by any bank
from which the Client borrows money for temporary or emergency or other purposes
using Securities as collateral for such borrowings, a notice or undertaking in
the form currently employed by any such bank setting forth the amount which such
bank will loan to the Client against delivery of a stated amount of collateral.
The Client shall promptly deliver to the Custodian Written Instruction stating
with respect to each such borrowing: (1) the name of the Series for which the
borrowing is to be made; (2) the name of the bank; (3) the amount and terms of
the borrowing, which may be set forth by incorporating by reference an attached
promissory note, duly endorsed by the Client, or other loan agreement; (4) the
time and date, if known, on which the loan is to be entered into (the "Borrowing
Date"); (5) the date on which the loan becomes due and payable; (6) the total
amount payable to the Client for the separate account of the Series on the
Borrowing Date; (7) the market value of Securities to be delivered as collateral
for such loan, including the name of the issuer, the title and the number of
shares or the principal amount of any particular Securities; and (8) a statement
that such loan is in conformance with the 1940 Act and the Client's Registration
Statement.
(b) Upon receipt of the Written Instruction referred to in
subparagraph (a) above, the Custodian shall deliver on the Borrowing Date the
specified collateral the executed promissory note, if any, against delivery by
the lending bank of the total amount of the loan payable, provided that the same
conforms to the total amount payable as set forth in the Written Instruction.
The Custodian may, at the option of the lending bank, keep such collateral in
its possession, but such collateral shall be subject to all rights therein given
the lending bank by virtue of any promissory note or loan agreement. The
Custodian shall deliver as additional collateral in the manner directed by the
Client from time to time such Securities specifically allocated to such Series
as may be specified in the Written Instruction to collateralize further any
transaction described in this Section 9. The Client shall cause all Securities
released from collateral status to be returned directly to the Custodian, and
the Custodian shall receive from time to time such return of collateral as may
be tendered to it. In the event that the Client fails to specify in Written
Instruction all of the information required by this Section 9, the Custodian
shall not be under any obligation to deliver any Securities. Collateral
returned to the Custodian shall be held hereunder as it was prior to being used
as collateral.
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10. PERSONS HAVING ACCESS TO ASSETS OF THE CLIENT.
(a) No Trustee, officer, employee or agent of the Client, and no
officer, director, employee or agent of the Client's investment adviser, shall
have physical access to the assets of the Client held by the Custodian or be
authorized or permitted to withdraw any investments of the Client, nor shall the
Custodian deliver any assets of the Client to any such person. No officer,
director, employee or agent of the Custodian who holds any similar position with
the Client or the investment adviser shall have physical access to the assets of
the Client.
(b) Nothing in this Section 10 shall prohibit any officer, employee
or agent of the Client, or any officer, director, employee or agent of the
investment adviser or sub-adviser to a Series, from giving Oral Instructions or
Written Instructions to the Custodian or executing a Certificate so long as it
does not result in delivery of or access to assets of the Client prohibited by
paragraph (a) of this Section 10.
(c) A list of the individual employees of the Custodian duly
authorized by the Custodian to have access to the assets of the Client will be
supplied to the Client from time to time. The Custodian shall advise the Client
of any change in the individuals authorized to have access to the assets of the
Client by written notice to the Client.
11. CONCERNING THE CUSTODIAN.
(a) STANDARD OF CONDUCT. Except as otherwise provided herein,
neither the Custodian nor its nominee shall be liable for any loss or damage,
including reasonable counsel fees, resulting from its action or omission to act
or otherwise, except for any such loss or damage arising out of its own
negligence or willful misconduct. The Custodian may, with respect to questions
of law, apply for and obtain the advice and opinion of counsel to the Client at
the expense of the Client, and shall be fully protected with respect to anything
done or omitted by it in good faith in conformity with such advice or opinion.
The Custodian shall be liable to the Client for any loss or damage resulting
from the use of the Book-Entry System or the Depository arising by reason of any
negligence, misfeasance or misconduct on the part of the Custodian or any of its
employees or agents.
(b) LIMIT OF DUTIES. Without limiting the generality of the
foregoing, the Custodian shall be under no duty or obligation to inquire into,
and shall not be liable for:
(1) The validity of the issue of any Securities purchased by any
Series, the legality of the purchase thereof, or the
propriety of the amount paid therefor;
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(2) The legality of the sale of any Securities by any Series, or
the propriety of the amount for which the same are sold;
(3) The legality of the issue or sale of any Shares, or the
sufficiency of the amount to be received therefor;
(4) The legality of the redemption of any Shares, or the
propriety of the amount to be paid therefor;
(5) The legality of the declaration or payment of any dividend
or other distribution of any Series;
(6) The legality of any borrowing for temporary or emergency or
other purposes.
(c) NO LIABILITY UNTIL RECEIPT. The Custodian shall not be liable
for, or considered to be the Custodian of, any money, whether or not represented
by any check, draft, or other instrument for the payment of money, received by
it on behalf of any Series until the Custodian actually receives and collects
such money directly or by the final crediting of the account representing the
Client's interest in the Book-Entry System or the Depository. The Custodian
shall exercise diligence consistent with industry practice in pursuing payment
on any such instrument, or any dividend, interest or other receivable of the
Client.
(d) AMOUNTS DUE FROM TRANSFER AGENT. Unless the Custodian and the
Dividend and Transfer Agent shall be the same person or an affiliated person of
each other as defined in the 1940 Act, action to effect collection of any amount
due to any Series from the Transfer Agent nor to take any action to effect
payment or distribution by the Transfer Agent of any amount payment by the
Custodian to the Transfer Agent in accordance with this Agreement.
(e) COLLECTION WHERE PAYMENT REFUSED. The Custodian shall not be
under any duty or obligation to take action to effect collection of any amount,
if the Securities upon which such amount is payable are in default, or if
payment is refused after due demand or presentation, unless and until (a) it
shall be directed to take such action by a Certificate and (b) it shall be
assured to its satisfaction of reimbursement of its costs and expenses in
connection with any such action. The Custodian shall promptly notify the Client
in the event of any such default.
(f) APPOINTMENT OF AGENTS AND SUB-CUSTODIANS. The
Custodian may appoint one or more banking institutions, including
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but not limited to banking or other qualified institutions located in foreign
countries, to act as Depository or Depositories or as Sub-Custodian or as Sub-
Custodians of Securities and moneys at any time owned by any Series, upon terms
and conditions specified in a certificate; provided that any such appointment
shall have been approved by a vote of the Board of Trustees of the Client. The
Custodian shall use reasonable case in selecting a Depository and/or Sub-
Custodian located in a country other than the United States ("Foreign Sub-
Custodian"), and shall oversee the maintenance of any Securities or moneys of a
Series by any Foreign Sub-Custodian. The Custodian shall be liable to the
Client for any loss or damage to the Client resulting from the negligence or
willful misconduct of any foreign Sub-Custodian to the same extent that the
Custodian would be liable to the Client if the Custodian were holding such
Securities or money in the Commonwealth of Massachusetts. Notwithstanding, the
Custodian herein agrees to pursue at the expense of the Client, any claim which
the Custodian may assert against any Foreign Sub-Custodian to recover any loss
or damage arising under such arrangement. The Client shall have, at its
election, the right to enforce Custodian's rights against any Sub-Custodian,
agent or Depository for loss, damage or expenses caused the Client or any Series
by such Sub-Custodian, agent or Depository which Custodian may have as a
consequence of any such loss, damage or expenses if and to the extent that the
Client or a Series has not been made whole for any such loss or damage. Any
selection of and form of contract with a Foreign Custodian shall be subject to
approval by the Client that such selection and contract are consistent with the
requirements of Rule 17f-5 (and Rule 17f-4, if applicable) under the 1940 Act,
and the Custodian warrants that such arrangement shall, among other things,
provide that:
(i) the Client will be adequately indemnified and its assets
adequately insured in the event of loss;
(ii) the Client's assets will not be subject to any right,
charge, security interest, lien or claim of any kind in
favor of the eligible Foreign Custodian or Sub-Custodian or
its creditors except for a claim of payment for their safe
custody or administration;
(iii) beneficial ownership of the Client's assets will be freely
transferable without the payment or value other than for
safe custody or administration;
(iv) adequate records will be maintained identifying the assets
as belonging to the Client;
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(v) the Client's independent public accountants will be given
access to those records or confirmation of the contents of
those records;
(vi) the Client will receive periodic reports with respect to
the safekeeping of its assets, including, but not
necessarily limited to, notification of any transfer to or
from the Client's account; and
(vii) only foreign securities within the meaning of Rule 17f-5
shall be held by a Foreign Sub-Custodian.
(g) The Custodian shall use its best efforts to provide the Client
with information described in the "NOTES" to Rule 17f-5 and such other similar
information as the Client may reasonably request to assist its Board of Trustees
to satisfy their obligations under such Rule. In addition, the Custodian shall
use its best efforts to provide the Client with prompt notice of any material
change in information previously provided to the Client pursuant to this
paragraph (g) or any material changes in the facts or circumstances upon which
such information is based.
(h) NO DUTY TO ASCERTAIN AUTHORITY. The Custodian shall not be under
any duty or obligation to ascertain whether any Securities at any time delivered
to or held by its for the Client and specifically allocated to a Series are such
as may properly be held by the Client and specifically allocated to such Series
under the provisions of the Declaration of Trust and the Registration Statement.
(i) RELIANCE ON CERTIFICATES AND INSTRUCTIONS. The Custodian shall
be entitled to rely upon Certificate, notice or other instrument in writing
received by the Custodian and reasonably believed by the Custodian to be
genuine. The Custodian shall be entitled to rely upon any Written Instructions
or Oral Instructions actually received by the Custodian pursuant to the
applicable Sections of this Agreement and reasonably believed by the Custodian
to be genuine and to be given by an Authorized Person. The Client agrees to
forward to the Custodian Written Instructions from an Authorized Person
confirming such Oral Instructions in such manner so that such Written
Instructions are received by the Custodian, whether by hand delivery, telex or
otherwise, by the close of business on the same day that such Oral Instructions
are given to the Custodian. The Client agrees that the fact that such
confirming instructions are not received by the Custodian shall in no way affect
the validity of the transactions or enforceability of the transactions hereby
authorized by the Client. The Client agrees
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that the Custodian shall incur no liability to the Client in acting upon Oral
Instructions given to the Custodian hereunder concerning such transactions
provided such instructions reasonably appear to have been received from an
Authorized Person.
(j) INSPECTION OF BOOKS AND RECORDS. The Custodian shall create and
maintain all records relating to its activities and obligations under this
Agreement in such manner as will meet the obligations of the Client under the
1940 Act, with particular attention to Section 31 thereof and Rule 3la-1 and
3la-2 thereunder, applicable federal and state tax laws and any other law or
administrative rules or procedures which may be applicable to the Client. All
such records shall be the property of the Client and shall be open to inspection
and audit at reasonable times by officers and auditors employed by the Client
and by employees of the Securities and Exchange Commission.
The Custodian shall promptly provide the Client with any report
obtained by the Custodian on the system of internal accounting control of the
Book-Entry System or the Depository and with copies of any report issued by any
regulatory agency concerning its own operations insofar as such report relates
to the performance of its duties as Custodian to the Client and will promptly
furnish the Client with copies of any report prepared by an independent
accountant regarding its system of internal accounting control or that of any
Subcustodian or Depository insofar as such report relates to the performance of
its duties as Custodian to the Client and any similar reports regarding the
Custodian, any Subcustodian or Depository as the Client may reasonably request.
(k) The Custodian agrees to maintain adequate insurance and fidelity
bond coverage for its operation located in New York City, New York.
12. TERM AND TERMINATION.
(a) This Agreement shall become effective after approval by the
Client's Board of Trustees and shall continue in effect from year to year
thereafter subject to the provisions of Section 12(b).
(b) Either of the parties hereto may terminate this Agreement with
respect to any Series by giving to the other party a notice in writing
specifying the date of such termination. In the event such notice is given by
the Custodian, the date of termination shall be not less than 120 days after the
date of receipt of such notice by the Client. In the event such notice is given
by the Client, the date of termination shall be not less than 30 days after the
date of receipt of such notice by the Custodian. In the event such notice is
given by the Client, it
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shall be accompanied by a certified resolution of the Board of Trustees of the
Client, electing to terminate this Agreement with respect to any Series and
designating a successor custodian or custodians, which shall be a person
qualified to so act under the 1940 Act. In the event such notice is given by
the Custodian, the Client shall, on or before the termination date, deliver to
the Custodian a certified resolution of the Board of Trustees of the Client,
designating a successor custodian or custodians. In the absence of such
designation by the Client, the Custodian may designate a successor custodian,
which shall be a person qualified to so act under the 1940 Act. If the Client
fails to designate a successor custodian for any Series, the Client shall upon
the date specified in the notice of termination of this Agreement and upon
deliver by the Custodian of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Client) and money and then
owned by such Series be deemed to be its own custodian and the Custodian shall
thereby be relieved of all duties and responsibilities pursuant to this
Agreement, other than the duty with respect to Securities held in the Book-Entry
System which cannot be delivered to the Client.
(c) Upon the date set forth in such notice under Paragraph (b) of
this Section 12, this Agreement shall terminate to the extent specified in such
notice, and the Custodian shall upon receipt of a notice of acceptance by the
successor custodian on that date deliver directly to the successor custodian all
Securities and moneys then held by the Custodian and specifically allocated to
the Series specified, after deducting all fees and other amounts for the payment
of reimbursement of which it shall then be entitled with respect to the Series
and otherwise cooperate in the transfer of its duties and responsibilities
hereunder.
(d) In the event that the Custodian terminates this Agreement the
Custodian shall not charge Transaction Fees (as described in Schedule A) to the
Client in connection with the transfer of assets to a successor custodian. In
the event that the Client terminates this Agreement for a reason other than a
breach of the Custodian's covenants under this agreement, including its fees as
set forth in Schedule A, the Client shall pay the Transaction Fees imposed on a
transfer of assets to a successor custodian.
13. MISCELLANEOUS.
(a) Annexed hereto as Appendix A is a certification signed by the
Secretary of the Client setting forth the names and the signatures of the
present Authorized Persons. The Client agrees to furnish to the Custodian a new
certification in similar form in the event that any such present Authorized
Person ceases to be such an Authorized Person. Until such new certification
-19-
<PAGE>
shall be received, the Custodian shall be fully protected in acting under the
provisions of this Agreement upon Oral Instructions or signatures of the Present
Authorized Persons as set forth in the last delivered certification.
(b) Annexed hereto as Appendix B is a certification signed by the
Secretary of the Client setting forth the names and the signatures of the
present officers of the Client. The Client agrees to furnish to the Custodian a
new certification in similar form in the event any such present officer ceases
to be an officer of the Client. Until such new certification shall be received,
the Custodian shall be fully protected in acting under the provisions of this
Agreement upon the signature of the officers as set forth in the last delivered
certification.
(c) Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Custodian, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its offices at
Princess House, Bush Lane, London, ECAR OAN, England, Attn: Paul Sarosy, or at
such other place as the Custodian may from time to time designated in writing.
(d) Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Client, shall be sufficiently given if
addressed to the Chief Administrative Officer of the Client and mailed or
delivered to it at its offices at 1299 Ocean Avenue, 1lth Floor, Santa Monica,
California 90401 or at such other place as the Client may from time to time
designate in writing.
(e) Notwithstanding any provision of this Agreement to the contrary,
as long as the Custodian and the Dividend and Transfer Agent shall be the same
person or affiliated persons of each other as defined in the 1940 Act, then
nothing contained in this Agreement shall cause the Client to be liable to the
Custodian for any loss or damage occasioned by information supplied by the
Client to the Custodian if such information was furnished to the Client or based
upon information furnished to the Client by the Dividend and Transfer Agent.
(f) This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties.
(g) The Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns; provided, however,
that this Agreement shall not be assignable by the Client without the written
consent of the Custodian, or by the Custodian without the written consent of the
Client authorized or approved by a resolution of the Board of
-20-
<PAGE>
Trustees of the Client, and any attempted assignment without such written
consent shall be null and void.
(h) This Agreement shall be construed in accordance
with the laws of the Commonwealth of Massachusetts.
(i) The captions of the Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise effect their construction or effect.
(j) This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunder duly authorized as of the
date and year first above written.
THE DFA INVESTMENT TRUST COMPANY
By: /s/ David G. Booth
-----------------------------------------
BOSTON SAFE DEPOSIT AND TRUST COMPANY
By: /s/ Vincent Nave
-----------------------------------------
-21-
<PAGE>
SCHEDULE A - FEE SCHEDULE
Following is the total fee schedule of Boston Safe Deposit and Trust
Company ("Boston Safe") for global custody services for the Series of The DFA
Investment Trust Company (the "Fund") listed in Appendix C to the Custody
Agreement between Boston Safe and the Fund. The fee schedule will be capped at
these levels for a two year period beginning with the date that Boston Safe
first earns a fee from the Series under this schedule. The fees may be
decreased by Boston Safe. After the first two years, the transaction based fees
will not increase more than 10% in total over the subsequent two year period.
The asset based fees will not increase in the first four years. Fees for any
additional Series are to be negotiated, but should not exceed the rates in this
schedule for assets similar in type and domicile.
Upon termination of the agreement for services, Boston Safe will waive
the Transaction Fees, as listed in the table below, for the transfer of assets
to a successor custodian, if Boston Safe declines to renew the terms of the
agreement or if the agreement is terminated because Boston Safe is seeking an
increase in Transaction Fees in excess of a total of 10% over a two year period.
The fees are all inclusive. They include, but are not limited to the
following services: all costs associated with online communication services to
the administrative agent for the Series, costs associated with maintenance of
demand deposit accounts associated with the Series, all dividend and income
collection, trade affirmation services, tax reclaims, subcustodian processing
charges such as corporation action, reporting, settlements and custody charges
or other out-of-pocket expenses.
Transaction Fee Asset Fee
Country (per buy-sell) (basis pts./yr)
------- --------------- ---------------
DFA International Value
Series
- -------------------------
Australia $100 6
Belgium $75 9
-22-
<PAGE>
Transaction Fee Asset Fee
Country (per buy-sell) (basis pts./yr)
------- --------------- ---------------
France $ 55 5
Germany $ 45 5
Hong Kong $120 10
Italy $ 75 5
Japan $ 45 5
Netherlands $ 25 6
Singapore $150 15
Spain $ 40 5
Sweden $ 50 7
Switzerland $ 75 6
United Kingdom $ 45 5
Transaction Repair $25
Funds Transfer $25
-23-
<PAGE>
APPENDIX C - SERIES
I, Irene R. Diamant, Secretary of The DFA Investment Trust Company, a
Delaware business trust (the "Client"), do hereby certify that:
The following Series of the Client are subject to this
Agreement:
The DFA International Value Series
/s/ Irene R. Diamant
-----------------------------------
Secretary
<PAGE>
[LOGO]CHASE
GLOBAL
CUSTODY
AGREEMENT
<PAGE>
This AGREEMENT is effective January 18, 1994, and is between THE CHASE
MANHATTAN BANK, N.A. (the "Bank") and ______________________________ (the
"Customer").
The Emerging Markets Series of The DFA Investment Trust Company
1. CUSTOMER ACCOUNTS.
The Bank agrees to establish and maintain the following accounts
("Accounts"):
(a) a custody account in the name of the Customer ("Custody Account") for
any and all stocks, shares, bonds, debentures, notes, mortgages or other
obligations for the payment of money, bullion, coin and any certificates,
receipts, warrants or other instruments representing rights to receive, purchase
or subscribe for the same or evidencing or representing any other rights or
interests therein and other similar property whether certificated or
uncertificated as may be received by the Bank or its Subcustodian (as defined in
Section 3) for the account of the Customer ("Securities"); and
(b) a deposit account in the name of the Customer ("Deposit Account") for
any and all cash in any currency received by the Bank or its Subcustodian for
the account of the Customer, which cash shall not be subject to withdrawal by
draft or check.
The Customer warrants its authority to: 1) deposit the cash and Securities
("Assets") received in the Accounts and 2) give Instructions (as defined in
Section 11) concerning the Accounts. The Bank may deliver securities of the
same class in place of those deposited in the Custody Account.
Upon written agreement between the Bank and the Customer, additional
Accounts may be established and separately accounted for as additional Accounts
under the terms of this Agreement.
2. MAINTENANCE OF SECURITIES AND CASH AT BANK AND SUBCUSTODIAN LOCATIONS.
Unless Instructions specifically require another location acceptable to the
Bank:
(a) Securities will be held in the country or other jurisdiction in which
the principal trading market for such Securities is located, where such
Securities are to be presented for payment or where such Securities are
acquired; and
(b) cash will be credited to an account in a country or other
jurisdiction in which such cash may be legally deposited or is the legal
currency for the payment of public or private debts.
Cash may be held pursuant to Instructions in either interest or non-
interest bearing accounts as may be available for the particular currency. To
the extent Instructions are issued and the Bank can comply with such
Instructions, the Bank is authorized to maintain cash balances on deposit for
the Customer with itself or one of its affiliates at such reasonable rates of
interest as may from time to time be paid on such accounts, or in non-interest
bearing accounts as the Customer may direct, if acceptable to the Bank.
If the Customer wishes to have any of its Assets held in the custody of an
institution other than the established Subcustodians or their securities
depositories, such arrangement must be authorized by a written agreement, signed
by the Bank and the Customer.
3. SUBCUSTODIANS AND SECURITIES DEPOSITORIES.
The Bank may act under this Agreement through the subcustodians listed in
Schedule A of this Agreement with which the Bank has entered into subcustodial
agreements ("Subcustodians"). The Customer authorizes the Bank to hold Assets
in the Accounts in accounts which the Bank has established with one or more of
its branches or Subcustodians. The Bank and Subcustodians are authorized to
hold any of the Securities in their account with any securities depository in
which they participate.
The Bank reserves the right to add new, replace or remove Subcustodians.
The Customer will be given reasonable notice by the Bank of any amendment to
Schedule A. Upon request by the Customer, the Bank will identify the name,
address and principal place of business of any Subcustodian of the Customer's
Assets and the name and address of the governmental agency or other regulatory
authority that supervises or regulates such Subcustodian.
4. USE OF SUBCUSTODIAN.
(a) The Bank will identify Assets on its books as belonging to the
Customer.
(b) A Subcustodian will hold Assets together with assets belonging to other
customers of the Bank in accounts identified on such Subcustodian's books as
special custody accounts for the exclusive benefit of customers of the Bank.
(c) Any Assets in the Accounts held by a Subcustodian will be subject only
to the instructions of the Bank or its agent. Any Securities held in a
securities depository for the account of a Subcustodian will be subject only to
the instructions of such Subcustodian.
(d) Any agreement the Bank enters into with a Subcustodian for holding its
customer's assets shall provide that such assets will not be subject to any
right, charge, security interest, lien or claim of any kind in favor of such
Subcustodian except for safe custody or administration, and that the beneficial
ownership of such assets will be freely transferable without the payment of
money or value other than for safe custody or administration. The foregoing
shall not apply to the extent of any special agreement or arrangement made by
the Customer with any particular Subcustodian.
<PAGE>
5. DEPOSIT ACCOUNT TRANSACTIONS.
(a) The Bank or its Subcustodians will make payments from the Deposit
Account upon receipt of Instructions which include
all information required by the Bank.
(b) In the event that any payment to be made under this Section 5 exceeds
the funds available in the Deposit Account, the Bank, in its discretion, may
advance the Customer such excess amount which shall be deemed a loan payable on
demand, bearing interest at the rate customarily charged by the Bank on similar
loans.
(c) If the Bank credits the Deposit Account on a payable date, or at
any time prior to actual collection and reconciliation to the Deposit
Account, with interest, dividends, redemptions or any other amount due, the
Customer will promptly return any such amount upon oral or written
notification: (i) that such amount has not been received in the ordinary
course of business or (ii) that such amount was incorrectly credited. If the
Customer does not promptly return any amount upon such notification, the Bank
shall be entitled, upon oral or written notification to the Customer, to
reverse such credit by debiting the Deposit Account for the amount previously
credited. The Bank or its Subcustodian shall have no duty or obligation to
institute legal proceedings, file a claim or a proof of claim in any
insolvency proceeding or take any other action with respect to the collection
of such amount, but may act for the Customer upon Instructions after
consultation with the Customer.
6. CUSTODY ACCOUNT TRANSACTIONS.
(a) Securties will be transferred, exchanged or delivered by the Bank
or its Subcustodian upon recreipt by the Bank of Instructions which include
all information required by the Bank. Settlement and payment for Securities
received for, and delivery of Securities out of, the Custody Account may be
made in accordance with the customary or established securities trading or
securities processing practices and procedures in the jurisdiction or market
in which the transaction occurs, including, without limitation, delivery of
Securities to a purchaser, dealer or their agents against a receipt with the
expectation of receiving later payment and free delivery. Delivery of
Securities out of the Custody Account may also be made in any manner
specifically required by Instructions acceptable to the Bank.
(b) The Bank, in its discretion, may credit or debit the Accounts on a
contractual settlement date with cash or Securities with respect to any sale,
exchange or purchase of Securities. Otherwise, such transactions will be
credited or debited to the Accounts on the date cash or Securities are actually
received by the Bank and reconciled to the Accounts.
(i) The Bank may reverse credits or debits made to the Accounts in
its discretion if the related transaction fails to settle within a
reasonable period, determined by the Bank in its discretion, after the
contractual settlement date for the related transaction.
(ii) If any Securities delivered pursuant to this Section 6 are
returned by the recipient thereof, the Bank may reverse the credits
and debits of the particular transaction at any time.
7. ACTIONS OF THE BANK.
The Bank shall follow Instructions received regarding Assets held in the
Accounts. However, until it receives Instructions to the contrary, the Bank
will perform the following functions.
(a) Present for payment any Securities which are called, redeemed or
retired or otherwise become payable and all coupons and other income items which
call for payment upon presentation, to the extent that the Bank or Subcustodian
is actually aware of such opportunities.
(b) Execute in the name of the Customer such ownership and other
certificates as may be required to obtain payments in respect of Securities.
(c) Exchange interim receipts or temporary Securities for definitive
Securities.
(d) Appoint brokers and agents for any transaction involving the
Securities, including, without limitation, affiliates of the Bank
or any Subcustodian.
(e) Issue statements to the Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
The Bank will send the Customer an advice or notification of any transfers
of Assets to or from the Accounts. Such statements,advices or notifications
shall indicate the identity of the entity having custody of the Assets. Unless
the Customer sends the Bank a written exception or objection to any Bank
statement within sixty days of receipt, the Customer shall be deemed to have
approved such statement. In such event, or where the Customer has otherwise
approved any such statement, the Bank shall, to the extent permitted by law, be
released, relieved and discharged with respect to all matters set forth in such
statement or reasonably implied therefrom as though it had been settled by the
decree of a court of competent jurisdiction in an action where the Customer and
all persons having or claiming an interest in the Customer or the Customer's
Accounts were parties.
<PAGE>
All collections of funds or other property paid or distributed in
respect of Securities in the Custody Account shall be made at the risk of the
Customer. The Bank shall have no liability for any loss occasioned by delay
in the actual receipt of notice by the Bank or by its Subcustodians of any
payment, redemption or other transaction regarding Securities in the Custody
Account in respect of which the Bank has agreed to take any action under this
Agreement.
8. CORPORATE ACTIONS; PROXIES.
Whenever the Bank receives information concerning the Securities which
requires discretionary action by the beneficial owner of the Securities
(other than a proxy), such as subscription rights, bonus issues, stock
repurchase plans and rights offerings, or legal notices or other material
intended to be transmitted to securities holders ("Corporate Actions"), the
Bank will give the Customer notice of such Corporate Actions to the extent
that the Bank's central corporate actions department has actual knowledge of
a Corporate Action in time to notify its customers.
When a rights entitlement or a fractional interest resulting from a rights
issue, stock dividend, stock split or similar Corporate Action is received which
bears an expiration date, the Bank will endeavor to obtain Instructions from the
Customer or its Authorized Person, as defined in Section 10, but if Instructions
are not received in time for the Bank to take timely action, or actual notice of
such Corporate Action was received too late to seek Instructions, the Bank is
authorized to sell such rights entitlement or fractional interest and to credit
the Deposit Account with the proceeds or take any other action it deems, in good
faith, to be appropriate in which case it shall be held harmless for any such
action.
The Bank will deliver proxies to the Customer or its designated agent
pursuant to special arrangements which may have been agreed to in writing. Such
proxies shall be executed in the appropriate nominee name relating to Securities
in the Custody Account registered in the name of such nominee but without
indicating the manner in which such proxies are to be voted; and where bearer
Securities are involved, proxies will be delivered in accordance with
Instructions.
9. NOMINEES.
Securities which are ordinarily held in registered form may be registered
in a nominee name of the Bank, Subcustodian or securities depository, as the
case may be. The Bank may, without notice to the Customer, cause any such
Securities to cease to be registered in the name of any such nominee and to be
registered in the name of the Customer. In the event that any Securities
registered in a nominee name are called for partial redemption by the issuer,
the Bank may allot the called portion to the respective beneficial holders of
such class of security in any manner the Bank deems to be fair and equitable.
The Customer agrees to hold the Bank, Subcustodians, and their respective
nominees harmless from any liability arising directly or indirectly from their
status as a mere record holder of Securities in the Custody Account.
10. AUTHORIZED PERSONS.
As used in this Agreement, the term "Authorized Person" means employees
or agents including investment managers as have been designated by written
notice from the Customer or its designated agent to act on behalf of the
Customer under this Agreement. Such persons shall continue to be Authorized
Persons until such time as the Bank receives Instructions from the Customer
or its designated agent that any such employee or agent is no longer an
Authorized Person.
11. INSTRUCTIONS.
The term "Instructions" means instructions of any Authorized Person
received by the Bank, via telephone, telex, TWX, facsimile transmission, bank
wire or other teleprocess or electronic instruction or trade information
system acceptable to the Bank which the Bank believes in good faith to have
been given by Authorized Persons or which are transmitted with proper testing
or authentication pursuant to terms and conditions which the Bank may
specify. Unless otherwise expressly provided, all Instructions shall
continue in full force and effect until cancelled or superseded.
Any Instructions delivered to the Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which
confirmation may bear the facsimile signature of such Person), but the
Customer will hold the Bank harmless for the failure of an Authorized Person
to send such confirmation in writing, the failure of such confirmation to
conform to the telephone instructions received or the Bank's failure to
produce such confirmation at any subsequent time. Either Party may
electronically record any Instructions given by telephone, and any other
telephone discussions with respect to the Custody Account. The Customer
shall be responsible for safeguarding any testkeys, identification codes or
other security devices which the Bank shall make available to the Customer or
its Authorized Persons.
<PAGE>
12. STANDARD OF CARE; LIABILITIES.
(a) The Bank shall be responsible for the performance of only such
duties as are set forth in this Agreement or expressly contained in
Instructions which are consistent with the provisions of this Agreement.
(i) The Bank will use reasonable care with respect to its
obligations under this Agreement and the safekeeping of Assets. The
Bank shall be liable to the Customer for any loss which shall occur as
the result of the failure of a Subcustodian to exercise reasonable
care with respect to the safekeeping of such Assets to the same extent
that the Bank would be liable to the Customer if the Bank were holding
such Assets in New York. In the event of any loss to the Customer by
reason of the failure of the Bank or its Subcustodian to utilize
reasonable care, the Bank shall be liable to the Customer only to the
extent of the Customer's direct damages, to be determined based on the
market value of the property which is the subject of the loss at the
date of discovery of such loss and without reference to any special
conditions or circumstances.
(ii) The Bank will not be responsible for any act, omission,
default or for the solvency of any broker or agent which it or a
Subcustodian appoints unless such appointment was made negligently or
in bad faith.
(iii) The Bank shall be indemnified by, and without liability to the
Customer for any action taken or omitted by the Bank whether pursuant
to Instructions or otherwise within the scope of this Agreement if
such act or omission was in good faith, without negligence. In
performing its obligations under this Agreement, the Bank may rely on
the genuineness of any document which it believes in good faith to
have been validly executed.
(iv) The Customer agrees to pay for and hold the Bank harmless from
any liability or loss resulting from the imposition or assessment of
any taxes or other governmental charges, and any related expenses with
respect to income from or Assets in the Accounts.
(v) The Bank shall be entitled to rely, and may act upon the
advice of counsel (who may be counsel for the Customer) on all
matters, and shall be without liability for any action reasonably
taken or omitted pursuant to such advice.
(vi) The Bank need not maintain any insurance for the benefit of
the Customer.
(vii) Without limiting the foregoing, the Bank shall not be liable
for any loss which results from: 1) the general risk of investing, or
2) investing or holding Assets in a particular country including, but
not limited to, losses resulting from nationalization, expropriation
or other governmental actions; regulation of the banking or securities
industry; currency restrictions, devaluations or fluctuations; and
market conditions which prevent the orderly execution of securities
transactions or affect the value of Assets.
(viii) Neither party shall be liable to the other for any loss due to
forces beyond their control including, but not limited to strikes or
work stoppages, acts of war or terrorism, insurrection, revolution,
nuclear fusion, fission or radiation, or acts of God.
(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that the Bank shall have no duty
or responsibility to:
(i) question instructions or make any suggestions to the Customer
or an Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to investments
or the retention of Securities;
(iii) advise the Customer or an Authorized Person regarding any
default in the payment of principal or income of any security other
than as provided in Section 5(c) of this Agreement;
(iv) evaluate or report to the Customer or an Authorized Person
regarding the financial condition of any broker, agent or other party
to which Securities are delivered or payments are made pursuant to
this Agreement; or
(v) review or reconcile trade confirmations received from brokers.
The Customer or its Authorized Persons issuing Instructions shall bear
any responsibility to review such confirmations against Instructions
issued to and statements issued by the Bank.
(c) The Customer authorizes the Bank to act under this Agreement
notwithstanding that the Bank or any of its divisions or affiliates may have a
material interest in a transaction, or circumstances are such that the Bank may
have a potential conflict of duty or interest including the fact that the Bank
or any of its affiliates may provide brokerage services to other customers, act
as financial advisor to the issuer of Securities, act as a lender to the issuer
of Securities, act in the same transaction as agent for more than one customer,
have a material interest in the issue of Securities, or earn profits from any of
the activities listed herein.
<PAGE>
13. FEES AND EXPENSES.
The Customer agrees to pay the Bank for its services under this
Agreement such amount as may be agreed upon in writing, together with the
Bank's reasonable out-of-pocket or incidental expenses, including, but not
limited to legal fees. The Bank shall have a lien on and is authorized to
charge any Accounts of the Customer for any amount owing to the Bank under
any provision of this Agreement.
14. MISCELLANEOUS.
(a) FOREIGN EXCHANGE TRANSACTIONS. To facilitate the administration of
the Customer's trading and investment activity, the Bank is authorized to enter
into spot or forward foreign exchange contracts with the Customer or an
Authorized Person for the Customer and may also provide foreign exchange through
its subsidiaries, affiliates or Subcustodians. Instructions, including standing
instructions, may be issued with respect to such contracts but the Bank may
establish rules or limitations concerning any foreign exchange facility made
available. In all cases where the Bank, its subsidiaries, affiliates or
Subcustodians enter into a foreign exchange contract related to Accounts, the
terms and conditions of the then current foreign exchange contract of the Bank,
its subsidiary, affiliate or Subcustodian and, to the extent not inconsistent,
this Agreement, shall apply to such transaction.
(b) CERTIFICATION OF RESIDENCY, ETC. The Customer certifies that it is a
resident of the United States and agrees to notify the Bank of any changes in
residency. The Bank may rely upon this certification or the certification of
such other facts as may be required to administer the Bank's obligations under
this Agreement. The Customer will indemnify the Bank against all losses,
liability, claims or demands arising directly or indirectly from any such
certifications.
(c) ACCESS TO RECORDS. The Bank shall allow the Customer's independent
public accountants reasonable access to the records of the Bank relating to the
Assets as is required in connection with their examination of books and records
pertaining to the Customer's affairs. Subject to restrictions under applicable
law, the Bank shall also obtain an undertaking to permit the Customer's
independent public accountants reasonable access to the records of any
Subcustodian which has physical possession of any Assets as may be required in
connection with the examination of the Customer's books and records.
(d) GOVERNING LAW; SUCCESSORS AND ASSIGNS. This Agreement shall be
governed by the laws of the State of New York and shall not be assignable by
either party, but shall bind the successors in interest of the Customer and
the Bank.
(e) ENTIRE AGREEMENT; APPLICABLE RIDERS. Customer represents that the
Assets deposited in the Accounts are (check one):
employee benefit plan or other assets subject to the Employee
---- Retirement Income Security Act of 1974, as amended ("ERISA");
X mutual fund assets subject to Securities and Exchange Commission
---- ("SEC") rules and regulations;
neither of the above.
----
This Agreement consists exclusively of this document together with Schedule
A, Exhibits I - _______ and the following rider(s)
[check applicable rider(s)]:
ERISA
----
X MUTUAL FUND
----
X SPECIAL TERMS AND CONDITIONS
----
There are no other provisions of this Agreement and this Agreement
supersedes any other agreements, whether written or oral, between the
parties. Any amendment to this Agreement must be in writing, executed by
both parties.
(f) SEVERABILITY. In the event that one or more provisions of this
Agreement are held invalid, illegal or unenforceable in any respect on the basis
of any particular circumstances or in any jurisdiction, the validity, legality
and enforceability of any such provision and the remaining provisions, under
other circumstances or in other jurisdictions will not in any way be affected or
impaired.
<PAGE>
(g) WAIVER. Except as otherwise provided in this Agreement, no failure or
delay on the part of either party in exercising any power or right under this
Agreement operates as a waiver, nor does any single or partial exercise of any
power or right preclude any other or further exercise thereof, or the exercise
of any other power or right. No waver by a party of any provision of this
Agreement, or waiver of any breach or default, is effective unless in writing
and signed by the party against whom the waiver is to be enforced.
(h) NOTICES. All notices under this Agreement shall be effective when
actually received. Any notices or other communications which may be required
under this Agreement are to be sent to the parties at the following addresses or
such other addresses as may subsequently be given to the other party in writing:
Bank: The Chase Manhattan Bank
3 Chase MetroTech Center - 6th Floor
Brooklyn, NY 11245
Attn: Global Custody Division
Customer: The Emerging Markets Series of the DFA Investment Trust Co.
---------------------------------------------------------------
1299 Ocean Avenue, 11th Floor
---------------------------------------------------------------
Santa Monica, CA 90401
---------------------------------------------------------------
---------------------------------------------------------------
(i) TERMINATION. This Agreement may be terminated by the Customer or
the Bank by giving sixty days written notice to the other, provided that such
notice to the Bank shall specify the names of the persons to whom the Bank
shall deliver the Assets in the Accounts. If notice of termination is given
by the Bank, the Customer shall, within sixty days following receipt of the
notice, deliver to the Bank Instructions specifying the names of the persons
to whom the Bank shall deliver the Assets. In either case the Bank will
deliver the Assets to the persons so specified, after deducting any amounts
which the Bank determines in good faith to be owed to it under Section 13.
If within sixty days following receipt of a notice of termination by the
Bank, the Bank does not receive Instructions from the Customer specifying the
names of the persons to whom the Bank shall deliver the Assets, the Bank, at
its election, may deliver the Assets to a bank or trust company doing
business in the State of New York to be held and disposed of pursuant to the
provisions of this Agreement, or to Authorized Persons, or may continue to
hold the Assets until Instructions are provided to the Bank.
CUSTOMER - The DFA Investment Trust Company
By: /s/ Irene R. Diamant
-----------------------------------------
Vice President
-----------------------------------------
Title
THE CHASE MANHATTAN BANK, N.A.
By: /s/ Jennifer Royes
-----------------------------------------
Second Vice President
-----------------------------------------
Title
<PAGE>
STATE OF CALIFORNIA )
: SS.
COUNTY OF LOS ANGELES )
On this 24th day of January, 1994, before me personally came Irene R.
Diamant, to me known, who being by me duly sworn, did depose and say that she
resides in Pacific Palisades at California; that she is V.P. and Director of
Operations of the Emerging Markets Series of the DFA Investment Trust Company
("Customer"), the Customer which executed the foregoing Agreement; that she
knows the seal of the Customer; that the seal affixed to the Agreement is
such seal; that it was affixed by order of the Customer, and that she signed
her name thereto by like order.
/s/ Irene R. Diamant
-------------------------------
Sworn to before me this 24th
day of January, 1994.
/s/ Christine Wai-Ling Ho
- ------------------------- [SEAL]
Notary
STATE OF NEW YORK )
: SS.
COUNTY OF KINGS )
On this 19th day of January, 1994, before me personally came Jennifer
Royes, to me known, who being by me duly sworn, did depose and say that
he/she resides in Manhattan at _________________; that he/she is a Vice
President of THE CHASE MANHATTAN BANK, N.A. ("Bank"), the Bank which executed
the foregoing Agreement; that he/she knows the seal of the Bank; that the
seal affixed to the Agreement is such corporate seal; that it was so affixed
by order of the Board of Directors of the Bank, and that he/she signed
his/her name thereto by like order.
/s/ Jennifer Royes
-------------------------------
Sworn to before me this 19th
day of January, 1994.
/s/ Laiyee Ng
- ----------------- [SEAL]
Notary
<PAGE>
Mutual Fund Rider to Global Custody Agreement
Between The Chase Manhattan Bank, N.A. and
The Emerging Markets Series of The DFA Investment Trust Company
_____________, effective January 18, 1994
Customer represents that the Assets being placed in the Bank's custody
are subject to the Investment Company Act of 1940 (the "Act"), as the same
may be amended from time to time.
Except to the extent that the Bank has specifically agreed to comply with a
condition of a rule, regulation or interpretation promulgated by or under the
authority of the SEC or the Exemptive Order applicable to accounts of this
nature issued to the Bank (Investment Company Act of 1940, Release No. 12053,
November 20, 1981), as amended, or unless the Bank has otherwise specifically
agreed, the Customer shall be solely responsible to assure that the maintenance
of Assets under this Agreement complies with such rules, regulations,
interpretations or exemptive order promulgated by or under the authority of the
Securities Exchange Commission.
The following modifications are made to the Agreement:
SECTION 3. SUBCUSTODIANS AND SECURITIES DEPOSITORIES.
Add the following language to the end of Section 3:
The terms Subcustodian and securities depositories as used in this
Agreement shall mean a branch of a qualified U.S. bank, an eligible foreign
custodian or an eligible foreign securities depository, which are further
defined as follows:
(a) "qualified U.S. Bank" shall mean a qualified U.S. bank as defined
in Rule 17f-5 under the Act;
(b) "eligible foreign custodian" shall mean (i) a banking institution
or trust company incorporated or organized under the laws of a country other
than the United States that is regulated as such by that country's government
or an agency thereof and that has shareholders' equity in excess of $200
million in U.S. currency (or a foreign currency equivalent thereof), (ii) a
majority owned direct or indirect subsidiary of a qualified U.S. bank or bank
holding company that is incorporated or organized under the laws of a country
other than the United States and that has shareholders' equity in excess of
$100 million in U.S. currency (or a foreign currency equivalent thereof),
(iii) a banking institution or trust company incorporated or organized under
the laws of a country other than the United States or a majority owned
direct or indirect subsidiary of a qualified U.S. bank or bank holding company
that is incorporated or organized under the laws of a country other than the
United States which has such other qualifications as shall be specified in
Instructions and approved by the Bank or (iv) any other entity that shall
have been so qualified by exemptive order, rule or other appropriate action
of the SEC; and
(c) "eligible foreign securities depository" shall mean a securities
depository or clearing agency, incorporated or organized under the laws of a
country other than the United States, which operates (i) the central system for
handling securities or equivalent book-entries in that country or (ii) a
transnational system for the central handling of securities or equivalent
book-entries.
The Customer represents that its Board of Directors has approved each of
the Subcustodians listed in Schedule A to this Agreement and the terms of the
subcustody agreements between the Bank and each Subcustodian, which are attached
as Exhibits I through ___ of Schedule A, and further represents that its Board
has determined that the use of each Subcustodian and the terms of each
subcustody agreement are consistent with the best interests of the Customer's
fund(s) and its (their) shareholders. The Bank will supply the Customer with
any amendment to Schedule A for approval. The Customer has supplied or will
supply the Bank with certified copies of its Board of Directors resolution(s)
with respect to the foregoing prior to placing Assets with any Subcustodian
so approved.
SECTION 11. INSTRUCTIONS.
Add the following language to the end of Section 11:
Account transactions made pursuant to Sections 5 and 6 of this Agreement
may be made only for the purposes listed below. Instructions must specify the
purpose for which any transaction is to be made and the Customer shall be solely
responsible to assure that Instructions are in accord with any limitations or
restrictions applicable to the Customer by law or as may be set forth in its
prospectus.
<PAGE>
(a) In connection with the purchase or sale of Securities at prices as
confirmed by Instructions.
(b) When Securities are called, redeemed or retired, or otherwise become
payable.
(c) In exchange for or upon conversion into other securities alone or
other securities and cash pursuant to any plan or merger, consolidation,
reorganization, recapitalization or readjustment.
(d) Upon conversion of Securities pursuant to their terms into other
securities.
(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities.
(f) For the payment of interest, taxes, management or supervisory fees,
distributions or operating expenses.
(g) In connection with any borrowings by the Customer requiring a
pledge of Securities, but only against receipt of amounts borrowed.
(h) In connection with any loans, but only against receipt of adequate
collateral as specified in Instructions which shall reflect any restrictions
applicable to the Customer.
(i) For the purpose of redeeming shares of the capital stock of the
Customer and the delivery to, or the crediting to the account of the Bank, its
Subcustodian or the Customer's transfer agent, such shares to be purchased or
redeemed.
(j) For the purpose of redeeming in kind shares of the Customer against
delivery of the shares to be redeemed to the Bank, its Subcustodian or the
Customer's transfer agent.
(k) For delivery in accordance with the provisions of any agreement among
the Customer, the Bank and a broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a member of the National
Association of Securities Dealers, Inc., relating to compliance with the rules
of The Options Clearing Corporation and of any registered national securities
exchange, or of any similar organization or organizations, regarding escrow or
other arrangements in connection with transactions by the Customer.
(l) For release of Securities to designated brokers under covered call
options, provided, however, that such Securities shall be released only upon
payment to the Bank of monies for the premium due and a receipt for the
Securities which are to be held in escrow. Upon exercise of the option, or at
expiration, the Bank will receive the Securities previously deposited from
brokers. The Bank will act strictly in accordance with Instructions in the
delivery of Securities to be held in escrow and will have no responsibility or
liability for any such Securities which are not returned promptly when due other
than to make proper request for such return.
(m) For spot or forward foreign exchange transactions to facilitate
security trading, receipt of income from Securities or related transactions.
(n) For other proper purposes as may be specified in Instructions issued
by an officer of the Customer which shall include a statement of the purpose for
which the delivery or payment is to be made, the amount of the payment or
specific Securkies to be delivered, the name of the person or persons to whom
delivery or payment is to be made, and a certification that the purpose is a
proper purpose under the instruments governing the Customer.
(o) Upon the termination of this Agreement as set forth in Section 14(i).
SECTION 12. STANDARD OF CARE; LIABILITIES.
Add the following subsection (d) to Section 12:
(d) The Bank hereby warrants to the Customer that in its opinion,
after due inquiry, the established procedures to be followed by each of its
branches, each branch of a qualified U.S. bank, each eligible foreign
custodian and each eligible foreign securities depository holding the
Customer's Securities pursuant to this Agreement afford protection for such
Securities at least equal to that afforded by the Bank's established
procedures with respect to similar securities held by the Bank and its
securities depositories in New York.
SECTION 14. ACCESS TO RECORDS.
Add the following language to the end of Section 14(c):
Upon reasonable request from the Customer, the Bank shall furnish the
Customer such reports (or portions thereof) of the Bank's system of internal
accounting controls applicable to the Bank's duties under this Agreement. The
Bank shall endeavor to obtain and furnish the Customer with such similar reports
as it may reasonably request with respect to each Subcustodian and securities
depository holding the Customer's assets.
<PAGE>
CHASE
[LOGO]CHASE
GLOBAL CUSTODY AGREEMENT
with The Emerging Markets Series of
The DFA Investment Trust Company
--------------------------------
(Customer)
dated January 18, 1994
----------------
SPECIAL TERMS AND CONDITIONS
These Special Terms and Conditions amend and supplement the global custody
agreement between The Chase Manhattan Bank, N.A. ("Bank") and The Emerging
Markets Series of the DFA Investment Trust Company ("Fund"), dated January 18,
1994 ("Agreement"), as amended by the mutual fund rider ("Rider") thereto. To
the extent any term or provision of the Agreement or Rider is inconsistent with
these Special Terms and conditions shall govern.
It is agreed as follows:
(1) Add the following as a new subparagraph (c) at the end of
Section l of the Agreement: "When instructed by the Customer, the Bank is
authorized to maintain accounts in the name of, and on behalf of,
wholly-owned or substantially wholly-owned subsidiaries of the Customer (or
on behalf of other entities established and wholly-owned by the Customer)
(collectively "Entities") for the purpose of conducting the Customer's
investment operations. The Customer acknowledges and agrees that the
establishment of any such account is contingent upon: (i) the Entity
executing such agreements, account opening documentation, powers of
attorney and proof of authority (collectively "Documentation") as Chase may
require for the establishment of the account; and (ii) the Entity meeting
such criteria as Chase may establish from time to time in connection with
opening and maintaining such an account. The Customer shall cooperate to
assure that Chase obtains Documentation from an Entity."
(2) On line 3 of the second subparagraph of Section 7 of the
Agreement, delete the word "sixty" and insert, in lieu thereof, the word
"ninety".
(3) On line 4 of the first subparagraph of Section 8 of the
Agreement, insert the word "prompt" before the word "notice".
(4) On line 2 of Section 13 of the Agreement, insert the phrase
"incurred on behalf of Customer" after the word "fees".
<PAGE>
[LOGO]CHASE
GLOBAL CUSTODY AGREEMENT
with The Emerging Markets Series of
The DFA Investment Trust Company
--------------------------------
(Customer)
dated January 18, 1994
----------------
SPECIAL TERMS AND CONDITIONS
(5) Add the following at the end of Section l4(c) of the Agreement: "At
the request of the Fund, the Bank shall deliver to the Fund a written report
prepared by the Bank's independent certified public accountants with respect to
the services provided by the Bank under this Agreement, including, without
limitation, the Bank's accounting system, internal accounting control and
procedures for safeguarding cash, securities and other assets, including cash,
securities and other assets deposited and/or maintained with a Subcustodian.
Such report shall be of sufficient scope and in sufficient detail as may
reasonably be required by the Fund and as may reasonably be obtained by the
Bank. At Fund's reasonable request in connection with Fund's compliance with
Securities and Exchange Commission Rule 17f-5, the Bank shall request from any
Subcustodian holding Fund assets a similar report with respect to the practices
of such Subcustodian, it being understood that the Bank may not in any given
case be successful in obtaining such a report and that the Bank shall have no
liability in any such events."
(6) Add the following as a new subparagraph at the end of Section 3 of the
Rider: "The Bank shall furnish annually to the Customer information concerning
the Subcustodians employed by the Bank. Such information shall be similar in
kind and scope to that furnished to the Customer in connection with the initial
approval of Subcustodians by the Customer. The Bank shall promptly inform the
Customer in the event that the Bank learns of any material adverse change in the
condition of a Subcustodian that could result or has resulted in a Subcustodian
not being an eligible foreign custodian. Nothing contained in this subparagraph
shall be construed to impose on the Bank any fiduciary duty imposed upon the
Customer by law, regulation or otherwise. The Bank shall supply periodically,
as mutually agreed upon, a statement in respect of any Securities and cash,
including identification of the foreign entities having custody of the
Securities and cash and descriptions thereof."
page 2 of 2
<PAGE>
CITIBANK SECURITIES SERVICES---------------------------------------------------
- --------------------------------------------------------------------------------
CUSTODIAL SERVICES AGREEMENT
CUSTODIAL SERVICES AGREEMENT, dated as of January 13, 1998 between CITIBANK,
N.A., a national banking association, having an office at 111 Wall Street, New
York, New York, 10005 and acting through such office in New York (the "Bank"),
and The DFA Investment Trust Company, a Delaware business trust, having an
office at 1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401 (the
"Customer").
W I T N E S S E T H:
THAT WHEREAS, the Customer represents that it is authorized to (a) open and
maintain custody accounts (the "Custody Accounts") with the Bank to hold certain
property ("Property") including, but not limited to, stocks, bonds, or other
securities ("Securities"), funds and other property owned or held by the
Customer, (b) enter into this Agreement, and (c) direct all actions and
transactions contemplated hereunder. The Customer further represents that it is
duly organized and in good standing under the laws of the state or country of
its organization and the consummation of transactions contemplated hereby or
directed by it hereunder will not violate any applicable laws, regulations or
orders.
NOW, THEREFORE, in consideration of the premises and of the agreements
hereinafter set forth, the parties hereby agree as follows:
1. APPOINTMENT AND ACCEPTANCE.
The Customer hereby appoints the Bank as custodian of the Property and as
its agent hereunder, and the Bank agrees to act as such upon the terms and
conditions hereinafter provided.
2. DELIVERY; SAFEKEEPING.
The Customer has heretofore delivered, or will deliver or cause to be
delivered, Property to the Bank, which Property the Bank agrees to keep safely
as custodian for the Customer. The Bank shall not surrender possession of
Property except upon properly authorized Instructions (as hereinafter defined)
of the Customer or as may be required by due process of applicable law.
3. IDENTIFICATION AND SEGREGATION OF ASSETS.
WITH RESPECT TO PROPERTY IN THE CUSTODY ACCOUNT:
(a) Except as otherwise provided in this Agreement, the Bank will
separately identify on its books and segregate all Property held pursuant to
this Agreement by the Bank or any other entity authorized to hold Property in
accordance with Section 6 or 7 hereof. The Bank understands that the Customer
is an open-end management investment company, registered with the SEC under the
Investment Company Act of 1940 ("1940 Act"). The Customer issues several
separate series of shares and the Customer's Property, as well as its
liabilities, are, and shall be, allocated to each such series in accordance with
the Customer's instructions. "Series", as used herein, refers to the Customer's
Series listed in Appendix X hereto, and any other separate Series that may be
created, from time to time, under the Customer's Declaration of Trust, and which
become subject to this Agreement by the mutual consent of the Customer and the
Bank. The Bank shall establish and maintain a separate Custody Account for each
Series and shall credit the Custody Account of each Series with
-1-
<PAGE>
CITIBANK SECURITIES SERVICES---------------------------------------------------
- --------------------------------------------------------------------------------
all Property received by it for the account of such Series and shall charge such
account with the liabilities of such Series. No Series shall be charged with
any liability of another Series.
(b) The Bank shall supply to the Customer from time to time as mutually
agreed upon a written statement with respect to all Property in the Custody
Accounts. In the event that the Customer or its agent does not inform the Bank
in writing of any exceptions or objections within ninety (90) days after the
date of such statement, the Customer shall be deemed to have approved such
statement with respect to the information contained therein but not with respect
to any omission; provided, however, that if the Customer or its agent sends such
written exception or objection more than ninety (90) days from the statement
date, the Bank's obligations to the Customer in regard to any transactions
covered thereby shall be reduced to the extent that the Bank's ability to
mitigate any damages in connection with such transaction is compromised.
Further, in no event shall the Bank be responsible after such 90 days for any
subsequent increase in the fair market value of any Property or any interest
with regard to any Property where the Customer reasonably should have informed
the Bank of any exception or objection based on the information contained in any
statement.
4. STANDARD OF CARE.
The Bank shall exercise the same standard of care that it exercises over
its own assets in the safekeeping, handling, servicing and disposition of
Property in accordance with this Agreement. The Bank will exercise the due care
expected of a professional custodian for hire with respect to Property in its
possession or control. Except as otherwise provided in this Agreement, the Bank
shall not be responsible for any loss or damage suffered by the Customer unless
such loss or damage results from an act of negligence or willful misconduct on
the part of the Bank or on the part of (i) a branch, affiliate or subsidiary of
the Bank acting as its agent or as a foreign custodian hereunder pursuant to the
terms of this Agreement or (ii) any other foreign custodian appointed by the
Bank pursuant to the terms of this Agreement; PROVIDED THAT, the liability of
the Bank in connection with any Property shall not exceed the market value of
the Property, to which such loss or damage relates, at the time such negligence
or willful misconduct was discovered or should reasonably have been discovered,
plus compensatory interest at prevailing rates. In no event shall the Bank be
liable to the Customer for indirect, special or consequential damages.
In selecting and appointing U.S. depositories, foreign securities
depositories and clearing agencies, the Bank shall exercise reasonable care,
prudence and diligence. Subject to compliance with the obligations stated in
the preceding sentence, the Bank shall not be responsible for any loss or damage
suffered by the Customer for any act or omission of a U.S. Depository, a foreign
securities depository or clearing agent not caused by the act or omission of the
Bank or its agent or a foreign custodian appointed by the Bank.
Any Property held by a foreign custodian or a foreign securities depository
or clearing agency shall be subject to applicable laws, regulations, decrees,
order, government acts, restrictions, customs, procedures and market practices
("Laws") (i) to which such a foreign custodian or securities depository or
clearing agency, is subject (ii) as exist in the country in which such Property
is held and (iii) of the country of the currency in which the Property is
denominated. In the event the Law change in a way that would prevent or limit
the performance of duties and obligations by a foreign custodian or securities
depository or clearing agency, such duties and obligations shall be superseded
and neither the Bank nor its
-2-
<PAGE>
CITIBANK SECURITIES SERVICES---------------------------------------------------
- --------------------------------------------------------------------------------
parent nor any other of its branches, subsidiaries or affiliates shall be liable
therefor or for any damages in any way resulting from such prevented or limited
performance; provided, however, the Bank shall give prompt notice to the
Customer of any such event.
Notwithstanding the above, neither (i) the Bank or its parent or any of its
branches, subsidiaries nor affiliates nor (ii) the Customer is responsible for
any losses or damages resulting from reasons or causes beyond its control,
including, without limitation, nationalization, expropriation, currency
restrictions, acts of war, terrorism, insurrection, revolution, civil unrest,
riots or strikes, nuclear fusion or fission or acts of God.
The Bank is not under any duty to supervise the investments of the
Customer, or to advise or make any recommendation to the Customer with respect
to the purchase or sale of any Securities or the investment of any funds. The
Customer shall have the sole and exclusive responsibility for the investment of
Property held hereunder.
The Bank agrees to maintain insurance and fidelity bond coverage as
appropriate for its activities located in New York City; provided, however,
nothing in this Section 4 shall require the Bank to insure any Property.
5. PERFORMANCE BY THE BANK.
(a) GENERAL:
The Bank's performance of its duties hereunder and the day-to-day
operations of the Custody Accounts shall be in accordance with written service
standards as may be furnished to the Customer by the Bank from time to time.
Such service standards, as may be amended from time to time, are incorporated
herein by reference; provided, however, no amendment shall be effective until
the Customer shall have received thirty (30) days prior written notice thereof.
(b) RECEIPT, DELIVERY AND DISPOSAL OF SECURITIES:
The Bank shall, or shall instruct any other entity authorized to hold
Property in accordance with Section 6 or 7 hereof to, receive or deliver
Securities and the Bank shall credit or debit the appropriate Custody Accounts,
in accordance with properly authorized Instructions from the Customer. The Bank
or such authorized entity shall also receive in custody all stock dividends,
rights and similar securities issued in connection with Securities held
hereunder, shall surrender for payment, in a timely manner, all items maturing
or called for redemption and shall take such other action as the Customer may
direct in properly authorized Instructions.
(c) TRADE EXECUTION:
Promptly after each purchase of securities, the Customer shall deliver to
the Bank with respect to each purchase: (i) the name of the issuer and the title
of the Securities; (ii) the number of shares or the principal amount purchased
and accrued interest, if any; (iii) the date of purchase settlement; (iv) the
purchase price per unit; (v) the total amount payable upon such purchase; (vi)
the name of the broker through whom or the person to whom the sale was made; and
(vii) the Series to which such Securities are allocated. The Bank shall deliver
or cause to be delivered the Securities to the broker or other person designated
by the Customer upon receipt of the total amount payable to the Custodian upon
such sale; provided that, the same conforms to the total amount payable as set
forth in Instructions from the Customer. Subject to the foregoing, the Bank may
accept payment in such form as shall be satisfactory to it, and may deliver
Securities and arrange for payment in accordance with the customs prevailing
among dealers in securities. All transactions in regard to Securities will be
settled upon actual receipt or in accordance with best market practices.
-3-
<PAGE>
CITIBANK SECURITIES SERVICES---------------------------------------------------
- --------------------------------------------------------------------------------
The Bank shall send the Customer a written confirmation of any transfer of
Property to or from the Custody Accounts.
(d) REGISTRATION:
Securities held hereunder may be registered in the name of the Bank, any
entity authorized to hold Property in accordance with Section 6 or 7 hereof or a
nominee of the Bank or any such authorized entity, and the Customer shall be
informed upon request of all such registrations. Securities in registered form
will be transferred upon request of the Customer into such names or
registrations as it may specify in properly authorized Instructions.
(e) CASH ACCOUNTS:
(i) All cash received or held by the Bank or by any entity authorized to
hold Property in accordance with Section 7 hereof as interest, dividends,
proceeds from transfer, and other payments for or with respect to Securities or
in consideration of the sale of Series shares shall be (x) held in the cash
account of each Series and paid out in accordance with properly authorized
Instructions of the Customer received by the Bank or (y) if specified in the
Customer's Instructions, converted to or from U.S. dollars and held by the Bank
hereunder or remitted to the Customer. The Customer shall bear any foreign
exchange risk in connection with such conversion. In effecting any currency
conversions hereunder, the Bank or such entity may use such methods or agencies
as it may see fit including the Bank's facilities, to the extent allowed by law,
at customary rates.
(ii) The Customer agrees, with respect to the payment for all purchases of
Securities for a Series to be deposited in the Custody Account of such Series,
that funds of such Series for settlement will be on deposit by the settlement
date at the location of settlement, in good available funds and in the currency
of settlement. The Customer acknowledges that nothing in this Agreement shall
obligate the Bank to extend credit, grant financial accommodation or otherwise
advance moneys to the Customer for the purpose of making any such payments or
part thereof or otherwise carrying out any Instructions.
(iii) The Customer authorizes the Bank from time to time to cause the
branch of the Bank located in London, England ("Citibank London") to establish
multicurrency cash accounts reflecting cash received by any Foreign Custodian on
the Customer's behalf. Citibank London will maintain such cash accounts in
accordance with the requirements of Section 7 hereof applicable to an entity
authorized to hold Property hereunder.
(f) REPORTS:
(i) If the Bank has in place a system for providing telecommunication
access or other means of electronic access by customers to the Bank's reporting
system for Property in a Custody Account, then, at the Customer's election, the
Bank may agree to provide the Customer with such instructions and passwords as
may be necessary in order for the Customer to have such direct access through
the Customer's terminal device. Such electronic access shall be restricted to
information relating to the Custody Account. If electronic access to such
reporting system is requested by the Customer, the Customer agrees to assume
full responsibility for the consequences of the use, including any misuse or
unauthorized use of the terminal device, instructions or passwords referred to
above by the Customer or any of its employees or agents, but not for the
unauthorized use resulting from negligent or wrongful acts of the Bank or its
employees or agents, and agrees to defend and indemnify the Bank and hold the
Bank harmless from and against any and all liabilities, losses, damages, costs,
counsel fees, and other expenses of every nature suffered or incurred by the
Bank by reason of, or in connection with, such use by the Customer or
-4-
<PAGE>
CITIBANK SECURITIES SERVICES---------------------------------------------------
- --------------------------------------------------------------------------------
losses, damages, costs, counsel fees, and other expenses of every nature
suffered or incurred by the Bank by reason of, or in connection with, such use
by the Customer or others of such terminal device, unless such liabilities,
losses, damages, costs, counsel fees and other expenses can be shown to be the
result of negligent or wrongful acts of the Bank. Further, in the event the
Customer elects to have electronic access, the Bank shall provide the Customer
on each business day a report of the preceding business day's transactions
relating to the Custody Account and of the closing or net balances of each
business day. If the Customer should not choose to have electronic access, the
Bank shall provide the Customer with such reports of transactions in the Custody
Account by such means as may be mutually agreed upon.
(ii) The Bank agrees to use reasonable efforts to furnish the Customer with
such information regarding Property held hereunder as the Customer may
reasonably request in connection with its complying with requests of any
regulatory authorities having jurisdiction over the Customer. The Bank shall
maintain and keep current all records, books and other documents relating to its
activities and obligations under this Agreement to fully record all transactions
effected with regard to the Custody Accounts and any relevant cash accounts and
in each instance sufficient to provide to the Customer the information or
reports specified on Schedule 1, annexed hereto. All such records shall be the
property of Customer; provided, however, the Bank may retain duplicate originals
which shall be the property of the Bank. The Bank shall preserve such records
as provided in Rule 31a-2 under the 1940 Act. All such records shall be open to
inspection and audit at reasonable times by offices and auditors employed by
Customer and by employees of the SEC.
(iii) The Bank shall also, subject to restrictions under applicable
law, seek to obtain from any entity with which the Bank maintains the physical
possession of any Property in a Custody Account such records of such entity
relating to the Custody Account as may be required by the Customer or its agents
in connection with an internal examination by the Customer of its own affairs or
requests of regulatory authorities. Upon a reasonable request from the
Customer, the Bank shall use its best efforts to furnish to the Customer such
reports (or portions thereof) of the external auditors of each such entity as
relate directly to such entity's system of internal accounting controls
applicable to its duties under its agreement with the Bank. The Bank shall
promptly send to the Customer reports the Bank receives from any depository or
clearing agency on its respective system of internal accounting control and
shall sent to the Customer such reports on the Bank's own systems of internal
accounting control as the Customer may reasonably request from time to time.
(g) ACCESS:
During the Bank's regular banking hours and upon receipt of reasonable
notice directly from the Customer, any officer or employee of the Customer, any
independent accountant(s) selected by the Customer, and any person designated by
any regulatory authority having jurisdiction over the Customer shall be entitled
to examine on the Bank's premises Property held by the Bank on its premises and
the Bank's records regarding Property held hereunder or deposited with entities
authorized to hold Property in accordance with Section 6 or 7 hereof, but only
upon furnishing the Bank with properly authorized Instructions to that effect,
PROVIDED, such examination shall be consistent with the Bank's obligations of
confidentiality to other parties.
(h) VOTING AND OTHER ACTION:
(i) The Bank will transmit to the Customer upon receipt, and will instruct
any entities authorized to hold Property in accordance with Section 6 or 7
hereof to transmit to the
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<PAGE>
CITIBANK SECURITIES SERVICES---------------------------------------------------
- --------------------------------------------------------------------------------
Customer upon receipt, all financial reports, stockholder communications,
notices, proxies and proxy soliciting materials received from issuers of
Securities, and all information relating to exchanges or tender offers or other
corporate actions received from offerors with respect to Securities. Proxies
will be executed by the registered holder if the registered holder is other than
the Customer, but the manner in which the Securities are to be voted will be
indicated by the Customer. Neither the Bank nor any such authorized entity
shall vote any Securities or authorize the voting of any Securities or give any
consent or take any other action with respect thereto, except as otherwise
provided herein.
(ii) In the event of tender offers, the Customer shall hand deliver,
telecopy or transmit via tested telex Instructions to the Bank as to the action
to be taken with respect thereto designating such Instructions as being related
to a tender offer. The Customer shall hold the Bank harmless from any adverse
consequences of the Customer's use of any other method of transmitting
Instructions relating to a tender offer.
(iii) The Customer agrees that if it gives an Instruction for the
performance of an act on the last permissible date of a period established by
the tender offer or to otherwise act, the Customer shall hold the Bank harmless
from any adverse consequences in connection with acting upon or failing to act
upon such Instructions unless the Bank negligently delayed delivering such
materials to the Customer.
(iv) The Bank is authorized to accept and open on the Customer's behalf all
mail or communications received by it or directed in its care.
6. AUTHORIZED USE OF U.S. DEPOSITORIES.
The Customer authorizes the Bank, either directly or through one or more
agents which, under the 1940 Act, are qualified to act as custodians for
registered investment companies for any U.S. Securities held hereunder, to use
the services of any United States central securities depository authorized under
Rule 17f-4 under the 1940 Act including, but not limited to, The Depository
Trust Company, The Participants Trust Company and the Federal Reserve Book Entry
System ("U.S. Depositories"). The Bank will deposit Securities held hereunder
with a U.S. Depository only in an account which holds exclusively the assets of
customers of the Bank. The Bank shall promptly provide the Customer with any
report obtained by Bank on the system of internal accounting control of any U.S.
Depository in which Property is deposited, and with copies of any report
regarding its own system of internal accounting control or that of any agent
through which it deposits Property in any U.S. Depository, as Customer may
reasonably request. The Bank shall send the Customer a notice or advice of any
transfers of Securities to or from the Custody Account of a Series. Where
Securities are transferred to the Custody Account of a Series, the Bank shall
also, by book-entry or otherwise, identify as belonging to such Series a
quantity of Securities in a fungible bulk of securities (i) registered in the
name of the Bank (or its nominee) or (ii) shown on the Bank's account on the
books of the U.S. Depository.
7. AUTHORIZED USE OF FOREIGN CUSTODIANS.
(a) Authorization:
In carrying out its duties with respect to non-U.S. Securities and foreign
currencies ("foreign investments") the Bank shall place and maintain the
Customer's foreign investments with, and use the services of, (i) any branch of
the Bank or (ii) any other person that is an Eligible Foreign Custodian (as
defined in Rule 17f-5(a)(1) under the 1940 Act) selected by the Bank as provided
in Section 7(b).
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(b) Foreign Custody Manager:
(i) The Customer's board of trustees (hereinafter "Board") hereby
delegates to the Bank, and the Bank hereby accepts the delegation to it, of the
obligation to serve as the Customer's "Foreign Custody Manager" (as that term is
defined in Rule 17f-5(a)(2), as amended from time to time, under the 1940 Act).
(ii) As Foreign Custody Manager, the Bank shall:
(1) select Eligible Foreign Custodians as defined in Rule 17f-5(a)(1)
under the 1940 Act, to serve as foreign custodians and place and maintain the
Customer's foreign investments with such foreign custodians;
(2) in selecting a foreign custodian, first determine that foreign
investments placed and maintained in the safekeeping of each Eligible Foreign
Custodian shall be subject to reasonable care, based on the standards applicable
to custodians in the relevant market, after having considered all factors
relevant to the safekeeping of such investments, including, without limitation,
those factors set forth in Rule 17f-5(c)(1)(i)-(iv) under the 1940 Act;
(3) enter into written agreements with each Eligible Foreign Custodian
selected by the Bank hereunder;
(4) determine that the written contract with each Eligible Foreign
Custodian (or, in the case of an Eligible Foreign Custodian that is a securities
depository or clearing agency such contract [which may be between the Bank and
the securities depository or clearing agency or between an Eligible Foreign
Custodian selected by the Bank and the securities depository or clearing
agency], the rules or established practices or procedures of the depository, or
any combination of the foregoing) requires that the Eligible Foreign Custodian
will provide reasonable care for the foreign investments, based on the standards
applicable to custodians in the relevant market, and that all such contracts,
rules, practices and procedure satisfy the requirements of Rule 17f-5(c)(2)
under the 1940 Act;
(5) provide written reports (x) notifying the Board of the placement of
foreign investments with each Eligible Foreign Custodian, such reports to be
provided at such time as they deem reasonable and appropriate, but not less than
quarterly, and (y) promptly notifying the Board of the occurrence of any
material change in the arrangements with a Eligible Foreign Custodians;
(6) monitor the continued appropriateness of (x) maintaining the foreign
investments with Eligible Foreign Custodians selected hereunder and (y) the
governing contractual arrangements; it being understood, however, that in the
event the Bank shall determine that any Eligible Foreign Custodian would no
longer afford the foreign investments reasonable care, the Bank shall promptly
so advise the Customer and shall then act in accordance with the Instructions of
the Customer with respect to the disposition of the affected foreign
investments; and
(7) exercise such reasonable care, prudence and diligence in serving as
the Foreign Custody Manager as a person having responsibility for the
safekeeping of the Customer's assets would exercise.
(iii) Nothing in this paragraph shall relieve the Bank of any
responsibility otherwise provided in this Agreement for loss or damage suffered
by the Customer from an act of negligence or willful misconduct on the part of
the Bank, or any of its agents or any foreign custodian as provided in Section 4
of this Agreement.
(iv) Nothing in this Agreement shall require the Bank to make any selection
on behalf to the Customer that would entail consideration of any factor
reasonably related to the
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CITIBANK SECURITIES SERVICES---------------------------------------------------
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systemic risk of holding assets in a particular country including, but not
limited to, such country's financial infrastructure and prevailing settlement
practices. The Bank agrees to provide to the Customer such information relating
to such risk as the Customer shall reasonably request from time to time and such
other information as the Bank generally makes available to customers with regard
to such countries and risk.
(c) Compulsory Depositories:
(i) Notwithstanding the provisions of Section 7(b) above, the Bank shall
not serve as Foreign Custody Manager in respect of any Compulsory Depository, as
defined below. The Bank, throught its branches or an Eligible Foreign Custodian
shall be entitled to deposit and maintain the foreign investments in Compulsory
Depositories as the Bank deems prudent and appropriate, unless otherwise
instructed by the Customer or its delegate;
(ii) Prior to depositing the foreign investments in any Compulsory
Depository, the Bank shall notify the Customer that such Depository will be used
and provide the Customer, in respect of such Depository, with current
information of the type the Bank provided to the Customer in the Bank's booklets
entitled, "SEC Rule 17f-5 Package". The Bank, upon request, shall make its
representatives available to consult, in good faith, with such of the Customer's
delegates as the Customer shall designate regarding the advisability of
depositing the Customer's foreign investments with any Compulsory Depository;
(iii) The Bank shall provide the Customer with reports regarding Compulsory
Depositories as provided in Section 7(b)(5), above and shall provide the
Customer with such other information with regard to any Compulsory Depository as
the Customer shall reasonably request; and
(iv) A "Compulsory Depository" shall mean a non-U.S. securities depository
or clearing agency the use of which is mandatory (x) by law or regulation (y)
because securities cannot be withdrawn from the depository or clearing agency or
(z) because maintaining securities outside the securities depository or clearing
agency is not consistent with prevailing local custodial practices.
(d) SEGREGATION AND IDENTIFICATION OF ASSETS:
The Bank will deposit Property of the Customer with a foreign custodian or
a non-U.S. depository or clearing agency only in an account which holds
exclusively the assets of customers of the Bank. In the event that the Bank
authorizes a foreign custodian to hold any foreign investments placed in its
care in a non-U.S. depository or clearing agency, the Bank will direct such
foreign custodian to identify on its books such foreign investments as being
held for the account of the Bank as custodian for its customers.
(e) INSTRUCTIONS TO FOREIGN CUSTODIANS:
Any Property in a Custody Account deposited by the Bank with a foreign
custodian or non-U.S. depository or clearing agency will be subject only to the
instructions of the Bank or its agents; and any foreign investments held in a
non-U.S. depository or clearing agency for the account of a foreign custodian
will be subject only to the instructions of such foreign custodian as
subcustodian for the Bank.
(f) PROCEDURES OF FOREIGN CUSTODIANS:
In utilizing any foreign custodian, the Bank warrants that the established
procedures to be followed by each foreign custodian holding Property pursuant to
this Agreement address relevant control issues for such Property and provide
internal controls and procedures that are adequate to provide reasonable
protection of the Property. In addition to, and not in amplification of, the
provisions of Section 4 and the last sentence of Section 7(c) of this Agreement,
in utilizing any non-U.S. depository or clearing agency, the Bank
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complies with the guidelines of OCC Banking Circular BC - 235 with respect to
such non-U.S. depository or clearing agency and has in place and utilizes its
own internal controls and procedures to assess whether the non-U.S. depository
or clearing agency is appropriately safekeeping the Property.
8. USE OF AGENTS.
The Bank may, subject to applicable laws, rules and regulations and the
provisions of this Agreement, appoint agents, whether in its name or that of the
Customer, to perform any of the duties of the Bank hereunder, and the Bank may
delegate to any such agent so appointed any of its functions under this
Agreement; provided, however, no such delegation shall relieve the Bank of any
obligation hereunder.
9. INSTRUCTIONS.
(a) The Bank is authorized to rely and act upon written instructions
("Instructions") which are signed by persons ("Authorized Persons") named in a
list provided to the Bank from time to time, which list must be certified by the
Customer's Secretary or Assistant Secretary and include authenticated specimen
signatures of all Authorized Persons. Such list shall separately designate
those Authorized Persons who may authorize the withdrawal of Securities free of
payment, those Authorized Persons who may authorize the unconditional transfer
of funds and those Authorized Persons who may give Instructions by electronic
access as provided hereunder.
(b) The Customer agrees that the Bank is authorized to rely and act upon
such Instructions in accordance with this Section 9 and the Manual Transmission
Authorization attached hereto and incorporated herein by reference (including
each Manual Transmission Procedures attached thereto) to this Agreement and to
debit or credit the applicable account(s) of the Customer accordingly and that
such Manual Transmission Authorization and method(s) of transmission are
commercially reasonable.
(c) The Bank shall be entitled to rely upon the continued authority of any
Authorized Person to give Instructions until the Bank receives notice from the
Customer to the contrary; and the Bank shall be entitled to rely upon any
Instructions it reasonably believes in good faith to have been given by an
Authorized Person.
(d) The Bank is further authorized to rely upon any Instructions received
by any other means and identified as having been given or authorized by any
Authorized Person, regardless of whether such Instructions shall in fact have
been authorized or given by any of such Authorized Persons, PROVIDED that the
Bank and the Customer shall have agreed upon the means of transmission and the
method of identification for such Instructions and such means of transmissions
is actually used. Instructions received by any other means shall include but
shall not be limited to verbal Instructions only in connection with delivery
against payment or receipt against payment transactions and transfers from one
account within a Custody Account to another account within a Custody Account and
provided that such verbal Instructions are promptly confirmed in writing by the
Customer. Notwithstanding the foregoing in the event that verbal Instructions
are not subsequently confirmed in writing as provided above, the Customer agrees
to hold the Bank harmless and without liability for any claims or losses in
connection with such verbal Instructions except as may arise from the Bank's own
negligence, bad faith or willful misconduct in carrying out the same.
(e) The Customer agrees to be bound by any Instruction, whether or not
authorized, given to the Bank in its name and accepted by the Bank in accordance
with the provisions hereof (including but not limited to the Funds Transfer
Procedures and each Schedule A
-9-
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CITIBANK SECURITIES SERVICES---------------------------------------------------
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hereto) and further agrees to indemnify and hold the Bank harmless from and
against any loss, liability, claim or expense (including legal fees and
expenses) associated with the Bank's acting upon such Instructions as provided
herein, except such as may arise from the Bank's own negligence, bad faith or
willful misconduct.
(f) The Customer may appoint one or more investment managers ("Investment
Managers") with respect to the Custody Accounts. The Bank is authorized to act
upon instructions received from any Investment Manager to the same extent that
the Bank would act upon the Instructions of an Authorized Person, PROVIDED that
the Bank has received written evidence of the Investment Manager's appointment,
written confirmation from the Investment Manager evidencing his acceptance of
such appointment and written certification from the Investment Manager of the
names of individuals together with specimen signatures of those authorized to
give Instructions hereunder.
(g) If the Customer should choose to have telecommunication or other means
of electronic access to the Bank's reporting system for Property in the Custody
Accounts, pursuant to paragraph (f) of Section 5, the Bank is also authorized to
rely and act upon any Instructions received by it through a terminal device,
PROVIDED that such Instructions are accompanied by code words which the Bank has
furnished to the Customer or an Authorized Person by any method mutually agreed
to by the Bank and the Customer, and PROVIDED that the Bank has not been
notified by the Customer or any such Authorized Person to cease to recognize
such code words, regardless of whether such Instructions shall in fact have been
given or authorized by the Customer or any such Authorized Person.
10. ASSURED INCOME PAYMENT SERVICE.
The Bank may, at its absolute discretion, offer the Customer an Assured
Income Payment Service in respect of specific Securities, as may be notified by
the Bank to the Customer from time to time. In relation to any such Securities,
the Bank may, at its absolute discretion, cause the Customer's cash account to
be credited with an Assured Payment on the Assured Payment Date relevant
thereto; PROVIDED that the Bank shall be entitled to reverse any credit on
notice to Customer (in whole or in part) made in respect of that Assured Payment
if the Bank fails to receive the full amount corresponding to such Assured
Payment within a reasonable time, as determined by the Bank in its absolute
discretion, after the relevant Assured Payment Date, for any reason whatsoever
other than as a result of the negligence or willful default of the Bank. The
Assured Income Payment Service shall be provided by the Bank in accordance with
the Assured Income Payment Standards.
"Assured Income Payment Service" means the Bank's services in which
interest, dividends or other such periodic income, to which the Customer is
entitled, on Securities specified by the Bank from time to time at its absolute
discretion, are credited to the Customer's cash account in respect of such
Securities.
"Assured Income Payment Standards" means the terms and conditions governing
the Assured Income Payment Service, as such terms and conditions are amended
and/or supplemented from time to time by, and at the absolute discretion of, the
Bank.
"Assured Payment" means, in relation to those Securities specified by the
Bank under the Assured Income Payment Service, an amount equal to the interest,
dividends or periodic income that is due to the Customer in respect of such
Securities less any taxes, duties, levies, charges or any other withholding
payments payable in respect of such interest, dividends or periodic income.
"Assured Payment Date" means, in relation to the payment of any interest,
dividend or periodic income of any particular Securities specified by the Bank
under the Assured
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Income Payment Service, the date on which such interest, dividend or periodic
income is normally payable in respect of such Securities or such other date as
may be notified by the Bank to the Customer from time to time.
11. MEETINGS.
Representatives of the Bank will meet with the Customer at Customer's
headquarters in Santa Monica, California at least semi-annually, and at other
offices as requested from time to time by the Customer.
12. FEES AND EXPENSES.
Fees and expenses for the services rendered under this Agreement shall be
mutually agreed upon by the parties in writing and attached hereto as a fee
schedule. The Bank shall be entitled to debit the Custody Account of the
appropriate Series for such fees and expenses.
13. LIENS.
The Bank shall have a lien on the Property in the Custody Account of each
Series to secure payment of such fees and expenses for the services rendered
under this Agreement in respect of such Series. If the Bank advances cash or
Securities for the benefit of a Series for any purpose or in the event that the
Bank or its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance of its
duties for a Series hereunder, except such as may arise from its or its
nominee's negligent action, negligent failure to act or willful misconduct, any
Property at any time held for such Series shall be security therefor and the
Customer hereby grants to the Bank a security interest therein. The Customer
shall promptly reimburse the Bank from the Property allocated to such Series for
any such advance of cash or Securities or any such taxes, charges, expenses,
assessments, claims or liabilities upon request for payment, but should the
Customer fail to so reimburse the Bank, the Bank shall be entitled to dispose of
such Property to the extent necessary to obtain reimbursement. The Bank shall
be entitled to debit and/or charge the Custody Account of a Series, in
connection with any such advance and any interest on such advance made to a
Series as the Bank deems reasonable.
14. TAX STATUS/WITHHOLDING TAXES.
(a) The Customer's U.S. Tax Identification Number of each Series is listed
in Appendix X. If the Series does not have a U.S. Tax Identification Number,
the Customer will provide the Bank with information as to its tax status as
reasonably requested by the Bank from time to time.
(b) The Customer may be required from time to time to file such proof of
taxpayer status or residence, to execute such certificates and to make such
representations and warranties, or to provide any other information or
documents, as the Bank and/or a Foreign Custodian may deem necessary or proper
to fulfill the Bank's and/or Foreign Custodian's obligations under applicable
law. The Customer shall provide the Bank and/or Foreign Custodian, in a timely
manner, with copies of originals if necessary and appropriate, or any such
proofs of residence, taxpayer status, beneficial ownership and any other
information or documents which the Bank and/or a Foreign Custodian may
reasonably request.
(c) If any tax or other governmental charge or assessment shall become
payable with respect to any payment due to the Customer ("Taxes"), such Taxes
shall be withheld from such payment in accordance with applicable law. The Bank
and/or a Foreign Custodian may withhold any interest, any dividends or other
distributions or securities receivable in respect of Securities, proceeds from
the sale or distribution of Securities ("Payments"), or may sell for the account
of the Customer any part thereof or all of the Securities, and may apply
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CITIBANK SECURITIES SERVICES---------------------------------------------------
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such Payment in satisfaction of such Taxes, the Customer/s appropriate Series
remaining liable for any deficiency. If any Taxes shall become payable with
respect to any payment made to the Customer by the Bank or a Foreign Custodian
in a prior year, the Bank and the Foreign Custodian may withhold Payments in
satisfaction of such prior year's Taxes. The Customer shall indemnify and hold
harmless the Bank and the Foreign Custodian, its officers, employees, agents and
affiliated companies against any Taxes, penalties, additions to tax, and
interest, and costs and expenses related thereto, arising out of claims against
the Bank and/or the Foreign Custodian by any governmental authority for failure
to withhold Taxes or arising out of any reclaim or refund of taxes or other tax
benefit obtained by the Bank or the Foreign Custodian for the Customer.
(d) The Bank shall apply for a reduction of withholding tax and refund of
any tax paid or tax credits which apply in each foreign country in respect of
income payments on Securities for the benefit of a Series which the Bank
believes may be available to such Customer.
(i) The provision of tax reclaim services by Bank is conditional upon the
Bank receiving from the beneficial owner of Securities (A) a declaration of its
identity and place of residence and (B) certain other documentation (pro forma)
copies of which are available from the Bank. The Customer shall provide the
Bank with such documentation and information as the Bank may require in
connection with taxation, and warrants that, when given, this information shall
be true and correct and contain all material information requested. The
Customer undertakes to update any such information which requires updating or
amendment as the Bank may request;
(ii) Except to the extent caused by the Bank's own negligence or willful
misconduct, the Bank shall not be liable to Customer or any third party for any
taxes, fines, or penalties payable by the Bank on behalf of the Customer, and
shall by indemnified accordingly, whether these result from (x) inaccurate
completion of documents, provision to the Bank or any third party of inaccurate
or misleading information or the withholding of material information, in any of
the foregoing cases by the Customer or a third party on behalf of Customer, (y)
as a result of any delay of any revenue authority, or (z) any other matter
beyond the control of Bank;
(iii) Customer confirms that Bank is authorized to deduct from any cash
received or credited to a Series' cash account any taxes or levies required by
any revenue or governmental authority for whatever reason in respect of the
Securities of such Custody Account and the Customer shall be furnished periodic
reports of such deductions. In connection with the foregoing, the Customer
shall, to the extent of any such payment by the Bank, be subrogated to, and the
Bank shall assign and be deemed to have assigned to the Customer, all of its
rights in, to and against any such revenue or governmental authority in respect
of such payment;
(iv) The Bank shall perform tax reclaim services only with respect to
taxation levied by the revenue authorities of the countries notified to the
Customer from time to time and the Bank may, by notification in writing, at its
absolute discretion, change the countries in which the tax reclaim services are
offered; provided that the Bank shall afford the Customer advance notice of any
such change where reasonably practicable. Other than as expressly provided in
this Agreement, Bank shall have no responsibility with regard to Customer's tax
position or status in any such jurisdiction;
(v) The Customer confirms that the Bank is authorized to disclose any
information requested by any revenue authority or any governmental body in
relation to the Customer or
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the Securities and/or cash held for a Series which Bank, in good faith,
concludes is in connection with the tax services contemplated hereby. Bank
shall furnish Customer with notice of such requests where the same are, in the
Bank's reasonable judgment, not made in the ordinary course; and
(vi) Tax reclaim services may be provided by the Bank or, in whole or in
part, by one or more third parties appointed by the Bank (which may be
affiliates of Bank); provided that the Bank shall be liable for the performance
of any such third party to the same extent as the Bank would have been if it
performed such services itself.
(e) This Section 14 shall survive the termination of this Agreement and
continue in force until the time for assessment of all Taxes expires.
15. AMENDMENT.
This Agreement may not be amended except by mutual written agreement
between both parties hereto.
16. TERMINATION.
Either of the parties hereto may terminate this Agreement by giving to the
other party a notice in writing specifying the date of such termination. In the
event such notice is given by the Bank, the date of termination shall be not
less than 120 days after the date of receipt of such notice by the Customer. In
the event such notice is given by the Customer the date of termination shall be
not less than 30 days after the date of receipt of such notice by the Bank.
17. CONFIDENTIALITY.
Subject to the foregoing provisions of this Agreement and subject to any
applicable law, the Customer and the Bank shall each use best efforts to
maintain the confidentiality of matters concerning Property in the Custody
Account.
18. NOTICES.
All notices and other communications hereunder, except for Instructions and
reports relating to the Property which are transmitted through the Bank's
reporting system for Property in the Custody Account, shall be in writing, or if
oral shall be promptly confirmed in writing, and shall be hand-delivered,
telexed, faxed, telecopied or mailed by prepaid first class mail (except that
notice of termination, if mailed, shall be by prepaid registered or certified
mail) to each party at its address set forth above, if to the Customer, marked
"Attention: LEGAL DEPARTMENT " and if to the Bank, marked "Citibank as Custodian
for The DFA Investment Trust Company", or at such other address as each party
may give written notice of to the other party.
19. ASSIGNMENT.
Neither party may assign, transfer or change all or any of its rights and
benefits hereunder without the written consent of the other. Any purported
assignments made in contravention of this Section shall be null and void and of
no effect whatsoever.
20. GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED ACCORDING TO, THE
LAWS OF THE STATE OF NEW YORK AND THE PARTIES AGREE THAT THE COURTS OF THE STATE
OF NEW YORK, EXCEPT TO THE EXTENT PREEMPTED BY APPLICABLE FEDERAL LAW, SHALL
HAVE JURISDICTION TO HEAR AND DETERMINE ANY SUIT, ACTION OR PROCEEDING AND TO
SETTLE ANY DISPUTES WHICH MAY ARISE OUT OF OR IN CONNECTION WITH THIS AGREEMENT,
AND, FOR SUCH PURPOSES, EACH IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF SUCH COURTS.
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21. MISCELLANEOUS.
(a) This Agreement may be executed in several counterparts, each of which
shall be an original, but all of which shall constitute one and the same
instrument.
(b) This Agreement contains the entire agreement between the Customer and
the Bank relating to custody of Property and supersedes all prior agreements on
this subject.
(c) The captions of the various sections and subsections of this Agreement
have been inserted only for the purposes of convenience, and shall not be deemed
in any manner to modify, explain, enlarge or restrict any of the provisions of
this Agreement.
22. TRANSFER OF PROPERTY
The Bank agrees that it shall be responsible for the reasonable costs that
the Customer incurs to effect transfer of the Property from the Customer's
current custodian and no fee will be charged by the Bank in receipt of the
Property.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized.
CITIBANK, N.A.: CLIENT NAME: THE DFA INVESTMENT TRUST
COMPANY
By: /s/ Joe Linhares By: /s/ Michael T. Scardina
------------------------------ ------------------------------------
Name: Joe Linhares Name: Michael T. Scardina
---------------------------- ----------------------------------
Title: V.P. Title: VP & CFO
--------------------------- ---------------------------------
Attest: /s/ [ILLEGIBLE] Attest: /s/ Irene R. Diamant, VP & Sec'y
-------------------------- --------------------------------
JOSEPH M. LINHARES, VP
Worldwide Securities Services
111 Wall Street, 20th Fl./Zone 2
New York, NY 10043
(212) 657-9586
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SCHEDULE 1
Asset Statement
Settled Transactions
Pending and Failed Transactions
Corporate Action Notice Board
Corporate Actions New and Amended Events
Projected Income
Paid Income
Ledger Balance
Account Statement
Transaction
Payment Incoming
Payment Outgoing
Available & Ledger Balance
Consolidated Available Balance
Consolidated Projected Balances
Projected Balances
Projected Account Statement
Projected Transaction
Interest Accrued
<PAGE>
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<TABLE>
<CAPTION>
APPENDIX X
THE DFA INVESTMENT TRUST COMPANY
- --------------------------------------------------------------------------------
SERIES TAX IDENTIFICATION NUMBER
- --------------------------------------------------------------------------------
<S> <C>
The Enhanced U.S. Large Company Series 95-4563143
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The Japanese Small Company Series 95-4592098
- --------------------------------------------------------------------------------
The Pacific Rim Small Company Series 95-4592104
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The United Kingdom Small Company Series 95-4592101 [SEAL]
- --------------------------------------------------------------------------------
The DFA International Value Series 95-4452730
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The Continental Small Company Series 95-4592105
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The DFA Two-Year Global Fixed Income Series 95-4563632
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</TABLE>
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MANUAL TRANSMISSION AUTHORIZATION
Customer Name: The DFA Investment Trust Company, a Delaware business trust
-----------------------------------------------------------
Relationship Name and/or Account Number(s):
------------------------------------
Citibank Entity accepting instructions: Citibank, N.A. New York (the "Bank")
---------------------------------------
1. The Bank will offer the Customer an automated electronic access
transmission method with security procedures for transmitting information,
instructions, orders and other communications, including communications
with respect to the delivery of securities (each, a "Communication") from
the Customer's officers, employees, investment managers or other agents
("Authorized Persons") to the Bank or to an entity designated by the Bank
as authorized to receive Communications on its behalf. The Customer and
the Bank acknowledge the risk associated with transmitting Communications
by a non-automated transmission method and, fully aware of the associated
risk, the Customer has requested the Bank to accept Communications
transmitted by the methods and in accordance with the procedures attached
hereto (the "Procedures"). The Customer accepts the Procedures as
commercially reasonable and will comply with them in connection with each
Communication sent by an Authorized Person to the Bank or its designees
using a non-automated transmission method. If the Bank takes any action
not provided in the Procedures to verify the authenticity or content of any
Communication, such additional action shall not be deemed to become part of
the Procedures no matter how often the Bank takes such additional action.
2. If the Bank complies with the Procedures in respect of a Communication, the
Bank shall be entitled to act on that Communication and shall not be
obliged to verify the accuracy of the information contained in such
Communication. The Customer agrees to be bound by any Communication,
whether or not authorized, issued in its name and acted on by the Bank in
compliance with the Procedures, unless the Bank reasonably believes that
such communication was not authorized. The Bank is not obliged to act on a
Communication which is not transmitted in accordance with the Procedures.
3. Notwithstanding any other provision, the Bank shall have the right, in its
sole discretion, to refuse to execute any Communication, provided the Bank,
acting in good faith, doubts its authorization or authenticity. The Bank
shall provide prompt notice, which may be by telephone, to an Authorized
Person (as set forth in the Procedures) of any such rejected Communication.
<PAGE>
CITIBANK SECURITIES SERVICES---------------------------------------------------
- --------------------------------------------------------------------------------
4. If the Bank acts on any Communication sent by telephone, telex or telefax,
the Bank shall not, provided it complies with the Procedures, be
responsible if that Communication is not an authorized or authentic
Communication of the Customer or is not in the form the Customer sent or
intended to send (whether due to fraud, distortion or otherwise) unless
Bank reasonably believes that such communication was not authorized, and
the Customer shall indemnify the Bank against any loss, liability, claim or
expense (including legal fees) it may incur in connection with its acting
in accordance with that Communication.
5. Nothing contained herein shall require the Bank to violate any applicable
laws, rules or regulations on the transfer of funds or data transmission.
6. This Authorization may be terminated by either party hereto upon ten (10)
days' prior written notice to the other; provided, however, that the Bank's
agreement may be terminated immediately without notice in the event the
Bank deems that the security of the Procedures established hereby have been
compromised or breached; and provided, further, that termination by the
Bank shall not affect the Bank's rights or the Customer's obligations with
respect to communications and instructions received by the Bank prior to
termination.
7. The unenforceability or invalidity of any provision of this Authorization
shall not render any other provision unenforceable or invalid. This
Authorization may not be amended except in a writing executed by the
Customer and accepted by the Bank.' This Authorization shall in all
respects be construed in accordance with and governed by the laws of the
State of New York.
The DFA Investment Trust Company
By: /s/ Michael T. Scardina
----------------------------
(Authorized Signature)
Name and Title: Michael T. Scardina VP & CFO
----------------------------
Date: January 13, 1998
----------------------------
Address for Notices: 1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Attention: Legal Department
ACCEPTED:
Citibank, N.A.
By: /s/ Joseph M. Linhares
------------------------- JOSEPH M. LINHARES, VP
(Authorized Signature) Worldwide Securities Services
111 Wall Street, 20th Fl./Zone 2
Name and Title: Joe Linhares, VP New York, NY 10043
----------------------- (212) 657-9586
Date: 1/16/98
-----------------------
Address for Notices:
-----------------------
111 Wall Street
-----------------------
New York, New York 10043
-----------------------
Attention:
-----------------------
<PAGE>
CITIBANK SECURITIES SERVICES---------------------------------------------------
- --------------------------------------------------------------------------------
MANUAL TRANSMISSION PROCEDURES
dated 1/13, 1998
Customer: The DFA Investment Trust Company
---------------------------------------------------------------------
Legal Name
Name and date of Customer Agreement or Authorization (if applicable)
-----------
- -------------------------------------------------------------------------------
List each account number included in the authorization:
Account Number Account Name
-------------- ------------
--------------- --------------------------
--------------- --------------------------
--------------- --------------------------
--------------- --------------------------
--------------- --------------------------
<PAGE>
CITIBANK SECURITIES SERVICES---------------------------------------------------
- --------------------------------------------------------------------------------
The Bank is hereby authorized to act upon instructions transmitted in the name
of each Authorized Person listed below in accordance with the following
Procedures (please indicate each primary transmission method):
<TABLE>
<CAPTION>
Courier Phone US Mail Fax Other (e.g. Telex, Electronic Mail) Authorized Persons
- ------- ----- ------- --- ----------------------------------- ------------------
<S> <C> <C> <C> <C> <C>
-specify
Printed Name & Title:
------------------
Specimen Signature:
- ------ ----- ------ --- ---------------- --------------------
Printed Name & Title:
------------------
Specimen Signature:
- ------ ----- ------ --- ---------------- --------------------
Printed Name & Title:
------------------
Specimen Signature:
- ------ ----- ----- --- ---------------- ------------------
Printed Name & Title:
------------------
Specimen Signature:
- ------ ----- ----- --- ---------------- --------------------
</TABLE>
Security Procedures:
Transactions requiring a Security Procedure: Security Procedure: Select One:
- ------------------------------------------- ------------------------------
- - Funds Transfer or other Payment -Telephone callback
Instructions (mandatory)
- - Deliver Free (mandatory) - Standing or Pre-defined
Instructions
- - Other (Please specify): - Other (Please specify):
-------------- ---
If telephone callback is chosen, instructions for the transactions noted
above received by the Bank pursuant to these Procedures, will be acted upon by
the Bank only after a confirming telephone call to one of the telephone numbers
listed below:
NAME TELEPHONE
---- ---------
---------------- -------------------
---------------- -------------------
---------------- -------------------
<PAGE>
CITIBANK SECURITIES SERVICES---------------------------------------------------
- --------------------------------------------------------------------------------
*If additional space is required, please attach a separate page, label, sign and
date it.
<PAGE>
CITIBANK SECURITIES SERVICES---------------------------------------------------
- --------------------------------------------------------------------------------
The Bank shall be entitled to rely on the names as set forth above until
receipt by the Bank, at least ____ days prior to the effective date thereof, of
written notice of revocation or modification of these Procedures, dated and
signed by an authorized signatory.
Executed this 13th day of January, 1998
DFA Investment Trust Company
------------------------------------------
(Customer)
By: /s/ Michael T. Scardina
---------------------------------
(Authorized Signature)
Name and Title: Michael T. Scardina, VP & CFO
----------------------------------
<PAGE>
TRANSFER AGENCY AGREEMENT
THIS AGREEMENT is made as of the 15th day of January 1993, between THE DFA
INVESTMENT TRUST COMPANY, a Delaware business trust (the "Fund"), and PROVIDENT
FINANCIAL PROCESSING CORPORATION, a Delaware corporation which is an indirect
wholly-owned subsidiary of PNC Financial Corp (the "Transfer Agent" or "PFPC").
W I T N E S S E T H
WHEREAS, the Fund is registered as a management investment company under
the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund desires to retain the Transfer Agent to serve as the
Fund's transfer agent, registrar, and dividend disbursing agent, and the
Transfer Agent is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Fund hereby appoints the Transfer Agent to serve as
transfer agent, registrar and dividend disbursing agent for the Fund with
respect to the Fund's shares of beneficial interest, $.01 par value ("Shares"),
for the period and on the terms set forth in this Agreement. The Fund presently
issues five
<PAGE>
separate series of Shares which are described in the registration statement
delivered to the Transfer Agent herewith and the Fund may from time to time
issue additional series of Shares. Hereinafter each such series shall be
referred to as a "Series." The Transfer Agent shall identify to each Series
property belonging to such Series and in such reports, records, confirmations
and notices to the Fund and other services provided hereunder shall promptly
identify the Series to which such property, record, report, confirmation or
service pertains and shall issue shares on a per Series basis as provided in the
registration statement of the Fund. The Transfer Agent accepts such appointment
and agrees to furnish the services herein set forth in return for the
compensation as provided in Paragraph 16 of this Agreement. Any Series of
Shares created by the Fund after the date hereof shall be included hereunder
upon the mutual agreement of the Fund and the Transfer Agent.
2. DELIVERY OF DOCUMENTS. The Fund has furnished the Transfer Agent with
copies properly certified or authenticated of each of the following:
(a) Resolutions of the Fund's Board of Trustees authorizing the
appointment of the Transfer Agent as transfer agent and registrar and dividend
disbursing agent for the Fund and approving this Agreement;
(b) Appendix A identifying and containing the signatures of the
Fund's officers and other persons authorized to issue Oral Instructions and to
sign Written Instructions, as hereinafter
<PAGE>
defined, on behalf of the Fund and to execute share certificates representing
Shares;
(c) The Fund's Certificate of Trust filed with the Delaware Secretary
of State on October 17, 1992 and all amendments thereto;
(d) The Fund's Agreement and Declaration of Trust and all amendments
thereto (such Agreement and Declaration of Trust, as presently in effect and as
it shall from time to time be amended, is herein called the "Declaration of
Trust");
(e) The Fund's By-Laws and all amendments thereto (such By-Laws, as
presently in effect and as they shall from time to time be amended, are herein
called "By-Laws");
(f) The Custodian Agreement between Provident National Bank and the
Fund dated as of January 15, 1993;
(g) The Administration and Accounting Services Agreement between the
Transfer Agent and the Fund dated as of January 15, 1993; and
(h) The Fund's most recent registration statement on Form N-1A under
the 1940 Act (File No. 811-7436), as filed with the U.S. Securities and Exchange
Commission (the "SEC") on January 15, 1993 and all amendments thereto
(hereinafter the "Registration Statement").
The Fund will furnish the Transfer Agent from time to time with copies,
properly certified or authenticated, of all amendments of or supplements to the
foregoing, if any.
3
<PAGE>
3. DEFINITIONS.
(a) "AUTHORIZED PERSON". As used in this Agreement, the term
"Authorized Person" means any officer of the Fund and any other person, whether
or not any such person is an officer or employee of the Fund, duly authorized by
the Board of Trustees of the Fund to give Oral and Written Instructions on
behalf of the Fund and listed on the Certificate annexed hereto as Appendix A or
any amendment thereto as may be received by the Transfer Agent from time to
time.
(b) "AFFILIATE". As used herein, "Affiliate" means any company that
controls, is controlled by, or is under common control with PFPC.
(c) "ORAL INSTRUCTIONS". As used in this Agreement, the term "Oral
Instructions" means oral instructions actually received by the Transfer Agent
from an Authorized Person or from a person reasonably believed by the Transfer
Agent to be an Authorized Person. The Fund agrees to deliver to the Transfer
Agent, at the time and in the manner specified in Paragraph 4(b) of this
Agreement, Written Instructions confirming Oral Instructions.
(d) "PFPC". As used in this Agreement "PFPC" means Provident
Financial Processing Corporation.
(e) "WRITTEN INSTRUCTIONS". As used in this Agreement, the term
"Written Instructions" means written instructions delivered by hand, mail,
tested telegram, cable, telex or facsimile sending device, and received by the
Transfer Agent and signed by an
4
<PAGE>
Authorized Person. Written Instructions include an electronic transmission
properly originated and confirmed by the Fund.
(f) "SHARES". As used in this Agreement the term "Shares" means each
separate Series of shares of beneficial interest issued by the Fund that are
subject to this Agreement and as to which the services provided hereunder
relate.
4. INSTRUCTIONS CONSISTENT WITH DECLARATION OF TRUST, ETC.
(a) Unless otherwise provided in this Agreement, the Transfer Agent
shall act only upon Oral or Written Instructions. Although the Transfer Agent
may know of the provisions of the Declaration of Trust and By-Laws of the Fund,
the Transfer Agent may assume that any Oral or Written Instructions received
hereunder are not in any way inconsistent with any provisions of such
Declaration of Trust or By-Laws or any vote, resolution or proceeding of the
Fund's shareholders, or of the Board of Trustees, or of any committee thereof.
(b) The Transfer Agent shall be entitled to rely upon any Oral
Instructions and any Written Instructions actually received by the Transfer
Agent pursuant to this Agreement. The Fund agrees to forward to the Transfer
Agent Written Instructions confirming Oral Instructions in such manner that the
Written Instructions are received by the Transfer Agent by the close of business
of the same day that such Oral Instructions are given to the Transfer Agent.
The Fund agrees that the fact that such confirming Written Instructions are not
received by the Transfer Agent shall in no way affect the validity of the
transactions or
5
<PAGE>
enforceability of the transactions authorized by the Fund by giving Oral
Instructions. The Fund agrees that the Transfer Agent shall incur no liability
to the Fund in acting upon Oral Instructions given to the Transfer Agent
hereunder concerning such transactions, provided such instructions reasonably
appear to have been received from an Authorized Person and provided further, if
such Oral or Written Instructions were received from an Affiliate, that such
Affiliate has acted without negligence (unless such Affiliate has received and
transmitted erroneous instructions received from an Authorized Person that is
not an Affiliate).
(c) In the case of any action by the Fund requiring a change in the
form of Share certificates, the Transfer Agent will, at the Fund's expense,
issue Share certificates in the new form in exchange for, or upon transfer of,
outstanding Share certificates in the old form, upon receiving:
(i) A Certificate authorizing the issuance of Share certificates
in the new form;
(ii) A certified copy of any amendment to the Declaration of
Trust with respect to the change;
(iii) Specimen Share certificates for each Series of Shares in the
new form approved by the Board of Trustees of the Fund, with a Certificate
signed by the Secretary of the Fund as to such approval; and
(iv) An opinion of counsel for the Fund with respect to the
validity of the Shares in the new form and the status of such Shares under
the Securities Act of 1933, as amended
6
<PAGE>
(the "1933 Act"), the 1940 Act and any other applicable federal law or
regulation (i.e., if subject to registration, that the Shares have been
registered and that the Registration Statement has become effective or, if
exempt, the specific grounds therefor).
5. TRANSACTIONS NOT REQUIRING INSTRUCTIONS. In the absence of contrary
Written Instructions, the Transfer Agent is authorized to take the following
actions:
(a) ISSUANCE OF SHARES. Upon receipt of (i) a purchase order from
the Fund, an investor or in accordance with Written or Oral Instructions for the
purchase of Shares and (ii) sufficient information to enable the Transfer Agent
to establish a shareholder account, and after confirmation of receipt or
crediting of Federal funds for such order or receipt of such other consideration
for such Shares as may be described in the Registration Statement from the
Fund's Custodian, the Transfer Agent shall issue and credit the account of such
investor with Shares based on the current net asset value or offering price of
such Shares as described in the Registration Statement.
(b) TRANSFER OF SHARES; UNCERTIFICATED SECURITIES. Where a
shareholder does not hold a certificate representing the number of Shares in his
account and does provide the Transfer Agent with instructions for the transfer
of such Shares which include appropriate documentation to permit a transfer,
then the Transfer Agent shall register such Shares and shall deliver them
pursuant to instructions received from the transferor, pursuant to
7
<PAGE>
applicable law relating to the transfer of shares of beneficial interest.
(c) SHARE CERTIFICATES. If at any time the Fund decides to issue
share certificates, the following provisions will apply:
(i) The Fund will supply the Transfer Agent with a sufficient
supply of share certificates representing Shares, in the form approved from
time to time by the Board of Trustees of the Fund, and, from time to time,
shall replenish such supply upon request of the Transfer Agent. Such share
certificates shall be properly signed, manually or by facsimile signature,
by the duly authorized officers of the Fund, whose names and positions
shall be set forth as indicated on Appendix A, and notwithstanding the
death, resignation or removal of any officer of the Fund, such executed
certificates bearing the manual or facsimile signature of such officer
shall remain valid and may be issued to shareholders until the Transfer
Agent is otherwise directed by Written Instructions.
(ii) In the case of the loss or destruction of any certificate
representing Shares, no new certificate shall be issued in lieu thereof,
unless there shall first have been furnished an appropriate bond of
indemnity issued by the surety company approved by the Transfer Agent,
except upon the receipt by the Transfer Agent of Written Instructions from
the Fund.
8
<PAGE>
(iii) Upon receipt of signed share certificates in proper form
for transfer, and upon cancellation or destruction thereof, the Transfer
Agent shall countersign, register and issue new certificates for the same
number of Shares in the name of the transferee and shall deliver them
pursuant to instructions received from the transferor.
(iv) Upon receipt of the share certificates, which shall be in
proper form for transfer, together with the shareholder's instructions to
hold such share certificates for safekeeping, the Transfer Agent shall
reduce such Shares to uncertificated status, while retaining the
appropriate registration in the name of the shareholder upon the transfer
books.
(v) Upon receipt of written instructions from a shareholder of
uncertificated securities for a certificate in the number of Shares in his
account, the Transfer Agent will issue such share certificates and deliver
them to the shareholder or other appropriate party in accordance with
applicable law.
(d) REDEMPTION OF SHARES. Upon receipt of a redemption order from a
shareholder in a Series that is an open-end investment company and/or in
accordance with Written Instructions, the Transfer Agent shall promptly notify
PFPC, in its capacity as administration and accounting services agent, and the
custodian of that Series of the amount necessary to pay such redemption and
shall redeem the number of Shares indicated thereon from the
9
<PAGE>
redeeming shareholder's account pursuant to the procedures set forth in the
Registration Statement or pursuant to Written Instruction amending such
procedures of the Fund. When the Transfer Agent receives funds from the
custodian of that Series, it shall disburse to the redeeming shareholder the
redemption proceeds therefor, or arrange for direct payment of redemption
proceeds to such shareholder by such custodian, by wire transfer or otherwise as
provided in Written Instructions, all in accordance with such procedures and
controls as are provided in the Registration Statement or as may be mutually
agreed upon from time to time by and among the Fund, the Transfer Agent and the
Fund's custodians.
6. AUTHORIZED SHARES. The Fund and the Series have an unlimited number
of authorized Shares. The Transfer Agent shall record issues of all Shares.
7. DIVIDENDS AND DISTRIBUTIONS. The Fund shall furnish the Transfer Agent
with appropriate evidence of action by the Fund's Board of Trustees authorizing
the declaration and payment of dividends and distributions as described in the
Registration Statement. The Transfer Agent shall notify the custodians of the
amount of cash necessary to pay such dividend or distribution and, after
deducting any amount required to be withheld by any applicable tax laws, rules
and regulations or other applicable laws, rules and regulations, the Transfer
Agent shall in accordance with the instructions in proper form from a
shareholder, the provisions of the Fund's Declaration of Trust and the
procedures set forth in the Registration Statement or Written Instructions
10
<PAGE>
amending such procedures, issue and credit the account of the shareholder with
Shares, or, if the shareholder so elects, pay such dividends or distribution in
cash to the shareholder and in either case, in accordance with the procedures
set forth in the Registration Statement or Written Instructions amending such
procedures. In lieu of receiving from the custodian for a Series and paying to
shareholders cash dividends or distributions, the Transfer Agent may arrange for
the direct payment of cash dividends and distributions to shareholders by the
custodian for that Series, in accordance with such procedures and controls as
are mutually agreed upon from time to time by and among the Fund, the Transfer
Agent and such custodian.
The Transfer Agent shall prepare, file with the Internal Revenue Service
and other appropriate taxing authorities, and address and mail to shareholders
such returns and information relating to dividends and distributions paid by the
Fund as are required to be so prepared, filed and mailed by applicable laws,
rules and regulations, or such substitute form of notice as may from time to
time be permitted or required by the Internal Revenue Service. On behalf of the
Fund, the Transfer Agent shall process and confirm shareholder address changes,
recording new addresses, and shall mail certain requests for shareholders'
certifications under penalties of perjury and pay on a timely basis to the
appropriate Federal authorities any taxes to be withheld on dividends and
distributions paid by the Fund, all as required by applicable Federal tax laws
and regulations.
11
<PAGE>
In accordance with the procedures set forth in the Registration Statement
or Written Instructions amending such procedures, and such procedures and
controls as are mutually agreed upon from time to time by and among the Fund,
the Transfer Agent and the Fund's custodians, the Transfer Agent shall (a)
arrange for issuance of Shares obtained through (1) transfers of funds from
shareholders' accounts at financial institutions, including securities brokers
and dealers and (2) exchange of Shares for eligible portfolio securities.
8. COMMUNICATIONS WITH SHAREHOLDERS.
(a) COMMUNICATIONS TO SHAREHOLDERS. The Transfer Agent will address
and mail all communications by the Fund to its shareholders, with copies to such
persons as may be designated in Written Instructions from the Fund. Without
limiting the foregoing, PFPC will prepare, address and mail confirmations of
purchases and sales of Fund Shares, account changes, dividends and
distributions, 1099's and other tax information, and monthly statements, and
will address and mail dividend and distribution notices, reports to shareholders
and proxy material for meetings of shareholders. The Transfer Agent will
receive and tabulate the proxy cards for the meetings of the Fund's shareholders
and notify the Fund of the results of such tabulations.
(b) CORRESPONDENCE. The Transfer Agent will answer such
correspondence from shareholders, securities brokers and others relating to its
duties hereunder and such other correspondence as
12
<PAGE>
may from time to time be mutually agreed upon between the Transfer Agent and
the Fund.
9. RECORDS. The Transfer Agent shall maintain records of the accounts for
each shareholder showing the following information:
(a) name, address and United States Tax Identification or Social
Security number;
(b) number and Series of Shares held and number and Series of Shares
for which certificates, if any, have been issued, including certificate numbers
and denominations;
(c) historical information regarding the account of each shareholder,
including dividends and distributions paid and the date and price for all
transactions on a shareholder's account;
(d) any stop or restraining order placed against a shareholder's
account;
(e) any correspondence relating to the current maintenance of a
shareholder's account;
(f) information with respect to withholdings; and,
(g) any information required in order for the Transfer Agent to
perform any calculations contemplated or required by this Agreement.
The books and records pertaining to the Fund which are in the possession of
the Transfer Agent shall be the property of the Fund and shall be returned to
the Fund or its designee upon request. Such books and records shall be prepared
and maintained as required by the 1940 Act and other applicable laws and rules
and regulations. The Fund, or the Fund's authorized representatives,
13
<PAGE>
shall have access to such books and records at all times during the Transfer
Agent's normal business hours. Upon the request of the Fund, copies of any such
books and records shall be provided by the Transfer Agent to the Fund or the
Fund's authorized representative or designee at the Fund's expense.
10. ONGOING FUNCTIONS. The Transfer Agent will perform the following
functions on an ongoing basis:
(a) provide the Fund with duplicate confirmations of
shareholder activity, whether executed through a dealer or directly with the
Transfer Agent;
(b) provide shareholder lists and statistical information concerning
accounts to the Fund; and
(c) provide timely notification of Fund activity and such other
information as may be agreed upon from time to time between the Transfer Agent
and the Fund's custodians, to the Fund or the custodians and such reports to the
Fund as provided in Schedule A hereto.
11. COOPERATION WITH ACCOUNTANTS. The Transfer Agent shall cooperate with
the Fund's independent public accountants and shall take all reasonable action
in the performance of its obligations
under this Agreement to assure that the necessary information is made available
to such accountants for the expression of their opinion as such may be required
by the Fund from time to time.
12. CONFIDENTIALITY. The Transfer Agent agrees on behalf of itself and
its employees to treat confidentially all records and other information relative
to the Fund and its prior, present or
14
<PAGE>
potential shareholders, except after prompt prior notification to and approval
in writing by the Fund, which approval may not be withheld where the Transfer
Agent reasonably believes that it may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Fund.
13. EQUIPMENT FAILURES. In the event of equipment failures beyond the
Transfer Agent's control, the Transfer Agent shall, at no additional expense
to the Fund, promptly notify the Fund and take prompt, reasonable steps to
minimize service interruptions but shall have no liability with respect thereto
except, at its own expense, to reconstruct any records of the Fund that PFPC is
required to prepare and maintain hereunder. The foregoing obligation shall not
extend to computer terminals located outside of premises maintained by the
Transfer Agent; provided, that this exception shall not apply to equipment
dedicated solely for use of PFPC and that PFPC has agreed to maintain as long as
such equipment has not been altered by the Fund, or any of its affiliates. The
Transfer Agent shall enter into and shall maintain in effect with appropriate
parties one or more agreements making reasonable provision for emergency use of
electronic data processing equipment to the extent appropriate equipment is
available. An equipment failure shall be beyond PFPC's control if it results
from one or more of the events described in the last sentence of the first
paragraph of Paragraph 18 hereunder.
15
<PAGE>
14. RIGHT TO RECEIVE ADVICE. PFPC shall be protected in any action or
inaction PFPC takes in reliance on PFPC's counsel. PFPC shall notify the Fund
of the receipt of such advice within a reasonable time.
15. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS. PFPC agrees to
perform its duties hereunder in accordance with applicable law; however, PFPC
assumes no responsibility for ensuring that the Fund complies with the
applicable requirements of the 1933 Act, the Securities Exchange Act of 1934, as
amended (the "1934 Act"), the 1940 Act, the Commodities Exchange Act, as amended
(the "CEA") and any laws, rules and regulations of governmental authorities
having jurisdiction.
16. COMPENSATION. As compensation for the services rendered by PFPC
during the term of this Agreement, the Fund will pay to PFPC an annual fee
calculated daily and payable monthly, as may be agreed to in writing from time
to time by the Fund and PFPC.
17. INDEMNIFICATION.
(a) The Fund agrees to indemnify and hold harmless the Transfer Agent
from all taxes, charges, expenses (except expenses that are inherent to its
duties hereunder), assessments, claims and liabilities (including, without
limitation, liabilities arising under the 1933 Act, the 1934 Act, the 1940 Act,
the CEA, and any state or foreign securities laws, all as or to be amended from
time to time) including (without limitation) reasonable attorneys' fees and
disbursements, arising directly or indirectly from any action or thing which the
Transfer Agent takes or does or omits to take or
16
<PAGE>
do (i) at the request or on the direction of or in reliance on the advice of the
Fund or the Fund's counsel on behalf of the Fund or (ii) upon Oral or Written
Instructions provided by the Fund, the Advisor or any Sub-Advisor designated in
writing by the Advisor and any Affiliate, provided that such Affiliate has not
acted negligently (unless such Affiliate has received and transmitted erroneous
instructions received from an Authorized Person that is not an Affiliate), and
provided further, that the Transfer Agent shall not be indemnified against any
liability (or any expenses incident to such liability) arising out of the
Transfer Agent's own misfeasance, bad faith or negligence or disregard of its
duties or responsibilities described in this Agreement.
(b) PFPC shall not pay or settle any claim, demand, expense or
liability to which it may seek indemnity pursuant to paragraph (a) above an
("Indemnifiable Claim") without the express written consent of the Fund. The
Transfer Agent shall notify the Fund promptly of receipt of notification of an
Indemnifiable Claim. Unless the Fund notifies PFPC within 30 days of receipt of
Written Notice of such Indemnifiable Claim that the Fund does not intend to
defend such Indemnifiable Claim, the Fund shall defend PFPC from such
Indemnifiable Claim. The Fund shall have the right to defend any Indemnifiable
Claim at its own expense, such defense to be conducted by counsel selected by
the Fund. Further, the Transfer Agent may join the Fund in such defense at the
Transfer Agent's own expense, but to the extent that it shall so desire, the
Fund shall direct such defense. If the Fund shall fail or refuse to defend,
17
<PAGE>
pay or settle an Indemnifiable Claim, the Transfer Agent, at the Fund's expense
consistent with limitations concerning attorney's fees expressed in Paragraph
17(a) hereof, may provide its own defense.
18. RESPONSIBILITY OF THE TRANSFER AGENT. PFPC hereby represents that it
is experienced in the provision of the services covered by this Agreement. In
the performance of its duties hereunder, the Transfer Agent shall be obligated
to exercise due care and diligence and to act in a timely manner and in good
faith to assure the accuracy and completeness of all services performed under
this Agreement. PFPC shall be under no duty to take any action on behalf of the
Fund except as specifically set forth herein or as may be specifically agreed to
by PFPC in writing. PFPC shall be responsible for its own negligent failure to
perform its duties under this Agreement. In assessing negligence for purposes
of this Agreement, the parties agree that the standard of care applied to PFPC's
conduct shall be the care that would be exercised by a similarly situated
service provider, supplying substantially the same services under substantially
similar circumstances. Notwithstanding the foregoing, PFPC shall not be
responsible for losses beyond its control, provided that PFPC has acted in
accordance with the provisions of this Agreement and the standard of care set
forth above; and provided further that the Transfer Agent shall only be
responsible for that portion of losses or damages suffered by the Fund
attributable to the negligence of PFPC. Losses shall be beyond PFPC's control
if they result from or
18
<PAGE>
occur because of delays or errors or loss of data provided by persons other than
the Transfer Agent, its Affiliates or their respective employees or agents, or
acts of civil or military authority, national emergencies, labor difficulties
(other than those of PFPC or its Affiliates), fire, equipment failure caused
from forces external to the premises of PFPC or its Affiliates, flood or
catastrophe, acts of God, insurrection, war, riots or failure of the mails,
transportation, communication or power supply and such other circumstances
beyond PFPC's control.
Without limiting the generality of the foregoing or of any other provision
of this Agreement, PFPC in connection with its duties under this Agreement shall
not be under any duty or obligation to inquire into and shall not be liable for
or in respect of the validity or invalidity or authority or lack thereof of any
Oral or Written Instruction received from the Fund, or an Affiliate, provided
such Affiliate has not acted without negligence (unless such Affiliate has
received and transmitted erroneous instructions received from an Authorized
Person that is not an Affiliate), notice or other instrument which conforms to
the applicable requirements of this Agreement, and which PFPC reasonably
believes to be genuine.
PFPC shall have no liability to the Fund for any losses or damages the
nature of which is or was remote, unforeseen, unforeseeable or beyond the scope
of reasonable anticipation at the time this Agreement was executed.
19
<PAGE>
19. DURATION AND TERMINATION. This Agreement shall continue in effect
from the date hereof until terminated by either party upon not less than 180
days prior written notice to the other party. The foregoing provision
notwithstanding, either party may terminate this Agreement in the event of a
material breach of the terms hereof after written notice to the other party of
such breach and a reasonable time for cure of such breach, unless such breach is
not curable and, in such circumstances, this Agreement shall terminate, at the
option of the injured party, three months after the date such notice is given.
20. REGISTRATION AS A TRANSFER AGENT. The Transfer Agent represents that
it is currently registered with the appropriate Federal agency for the
registration of transfer agents, and that it will remain so registered for the
duration of this Agreement. The Transfer Agent agrees that it will promptly
notify the Fund in the event of any material change in its status as a
registered transfer agent. Should the Transfer Agent fail to be registered with
the appropriate Federal agency as a transfer agent at any time during this
Agreement, the Fund may, on written notice to the Transfer Agent, immediately
terminate this Agreement.
21. NOTICES. All notices and other communications, including Written
Instructions (collectively referred to as "Notice" or "Notices" in this
Paragraph), hereunder shall be in writing or by confirming telegram, cable,
telex or facsimile sending device. Notices shall be addressed (a) if to the
Transfer Agent at Provident Financial Processing Corporation, 103 Bellevue
Parkway,
20
<PAGE>
Wilmington, Delaware 19809; (b) if to the Fund, at the address of the Fund; or
(c) if to neither of the foregoing, at such other address as shall have been
notified to the sender of any such Notice or other communication. All postage,
cable, telegram, telex and facsimile sending device charges arising from the
sending of a Notice hereunder shall be paid by the sender.
22. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
23. AMENDMENTS. This Agreement or any part hereof may be changed or
waived only by an instrument in writing signed by the party against which
enforcement of such change or waiver is sought.
24. DELEGATION OF DUTIES. On thirty (30) days prior written notice to the
Fund, the Transfer Agent may assign its rights and delegate its duties hereunder
to any wholly-owned direct or indirect subsidiary of Provident National Bank or
PNC Financial Corp, provided that (i) the delegate agrees with the Transfer
Agent to comply with all relevant provisions of this Agreement and applicable
law; and (ii) the Transfer Agent and such delegate shall promptly provide such
information as the Fund may request, and respond to such questions as the Fund
may ask, relative to the delegation, including (without limitation) the
capabilities of the delegate. In the event of such delegation, PFPC shall
remain liable under this Agreement.
21
<PAGE>
25. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
26. MISCELLANEOUS. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings, relating to the subject matter hereof, provided that the
parties hereto may embody in one or more separate documents their agreement, if
any, any agreements with respect to Written and/or Oral Instructions. The
captions in this Agreement are included for convenience of reference only and in
no way define or delimit any of the provisions hereof of otherwise affect their
construction or effect. This Agreement shall be deemed to be a contract made in
Delaware and governed by Delaware law. If any provision of this Agreement shall
be held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby. This Agreement shall
be binding and shall inure to the benefit of the parties hereto and their
respective successors.
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.
THE DFA INVESTMENT TRUST COMPANY
By: /s/ Michael T. Scardina, VP & CFO
-------------------------------------
PROVIDENT FINANCIAL
PROCESSING CORPORATION
By: /s/ Joseph Gramlich
-------------------------------------
23
<PAGE>
INDEX
Paragraph Page
- --------- ----
1. Appointment
2. Delivery of Documents
3. Definitions
4. Instructions Consistent with
Declaration of Trust, etc.
5. Transactions Not Requiring Instructions
6. Authorized Shares
7. Dividends and Distributions
8. Communications with Shareholders
9. Records
10. Ongoing Functions
11. Cooperation with Accountants
12. Confidentiality
13. Equipment Failures
14. Right to Receive Advice
15. Compliance with Government Rules and
Regulations
16. Compensation
17. Indemnification
18. Responsibility of the Transfer Agent
19. Duration and Termination
20. Registration as a Transfer Agent
21. Notices
22. Further Actions
23. Amendments
24. Delegation of Duties
25. Counterparts
26. Miscellaneous
24
<PAGE>
APPENDIX A
I, Irene R. Diamant, Secretary of The DFA Emerging Markets Fund Inc.,
a Maryland Corporation (the "Fund") do hereby certify that:
The following individuals are duly authorized as Authorized Persons to
give Oral Instructions and Written Instructions on behalf of the Fund:
NAME SIGNATURE
- ---- ---------
David G. Booth /s/ David G. Booth
-----------------------------
Rex A. Sinquefield /s/ Rex A. Sinquefield
-----------------------------
Jeanne C. Sinquefield /s/ Jeanne C. Sinquefield
-----------------------------
Michael T. Scardina /s/ Michael T. Scardina
-----------------------------
Irene R. Diamant /s/ Irene R. Diamant
-----------------------------
Deborah J. Ferris /s/ Deborah J. Ferris
-----------------------------
Richard Eustice /s/ Richard Eustice
-----------------------------
Yvette Horne /s/ Yvette Horne
-----------------------------
Jeffrey Cieslak /s/ Jeffrey Cieslak
-----------------------------
/s/ Irene R. Diamant
-----------------------------
Secretary
25
<PAGE>
SCHEDULE A
PURSUANT TO PARAGRAPH 10(c) OF THE AGREEMENT, THE TRANSFER AGENT WILL
PROVIDE THE FOLLOWING REPORTS TO THE FUND:
Statistic or Special Request Frequency
---------------------------- ---------
a. Prepare mailing labels As requested
b. Data transmission of transactions, Monthly
new clients, address changes, etc.
c. Statistical package
1. By Series - purchase and redemption Monthly
statistics
2. By Series - analysis of type and size Monthly
of investor
3. Listing of 5% shareholders for proxy As requested
and registration statement purposes
4. Listing of purchases and redemptions by Daily
Series
5. Shareholder listing Monthly
6. Sales report Monthly
7. Year to date daily net asset value per Monthly
share listing by Series
26
<PAGE>
APPENDIX A
I, Irene R. Diamant, Secretary of The DFA Investment Trust Company, a
Delaware business trust (the "Fund"), do hereby certify that:
The following individuals are duly authorized as Authorized Persons to
give Oral Instructions and Written Instructions on behalf of the Fund:
NAME SIGNATURE
---- ---------
David G. Booth
-----------------------------
Rex A. Sinquefield
-----------------------------
Jeanne C. Sinquefield
-----------------------------
Michael T. Scardina
-----------------------------
Irene R. Diamant
-----------------------------
Deborah J. Ferris
-----------------------------
Ramakrishnan Chandraseker
-----------------------------
Cem Severoglu
-----------------------------
Carl Snyder
-----------------------------
Byron B. Snider
-----------------------------
David Plecha
-----------------------------
Arthur Barlow /s/ Arthur Barlow
-----------------------------
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<PAGE>
Christopher Sullivan
-----------------------------
Robert Deere
-----------------------------
Scott Thorton
-----------------------------
David Price
-----------------------------
Kamyab Hashemi-Nejad
-----------------------------
Richard Eustice
-----------------------------
With respect to any international equity Series of the Fund:
Garrett Quigley /s/ Garrett Quigley
-----------------------------
-----------------------------
Secretary
-21-
<PAGE>
TRANSFER AGENCY AGREEMENT
AMENDMENT NUMBER ONE
THIS AGREEMENT is made as of the 1st day of December, 1993 by and between
THE DFA INVESTMENT TRUST COMPANY, a Delaware business trust (the "Fund"), and
PFPC INC., formerly "Provident Financial Processing Corporation" ("PFPC"), a
Delaware corporation, which is an indirect wholly-owned subsidiary of PNC
Financial Corp.
W I T N E S S E T H :
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund has retained PFPC to provide certain transfer agency
services pursuant to a Transfer Agency Agreement dated as of January 15, 1993
(the "Agreement") which, as of the date hereof, is in full force and effect; and
WHEREAS, PFPC presently provides such services to the five Series of the
Fund that were in existence on January 15, 1993; and
WHEREAS, the Fund has since organized a new series, designated "The DFA
International Value Series" (the "New Series") , and the parties hereto desire
that PFPC shall provide the New Series with the same services that PFPC provides
to the other five
<PAGE>
Series of the Fund pursuant to the Agreement; and
WHEREAS, Section 1 of the Agreement provides that PFPC shall provide such
services to any Series organized by the Fund after the date of the Agreement as
agreed to in writing by PFPC and the Fund.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound, the parties hereto agree as
follows:
1. The Fund has delivered to PFPC copies of:
(a) Amendment Number 1 to the registration statement of the Fund, as
effective with the U.S. Securities and Exchange Commission on December 1, 1993,
wherein the New Series is described;
(b) The exhibits to such amendment consisting of the form of
investment management agreement which pertains to the New Series; and
(c) Amendment Number One dated December 1, 1993 of the Administration
and Accounting Services Agreement between the parties dated as of January 15,
1993.
2. The Agreement hereby is amended effective December 1, 1993 by:
(a) adding the following sentence immediately after the second
sentence of Section 1 therein, "As of December 1, 1993, the Fund delivered to
PFPC a registration statement dated December
-2-
<PAGE>
1, 1993 wherein a new series of Fund shares designated "The DFA International
Value Series" is described and the parties agree that the terms of this
Agreement shall apply to the six Series described in such registration
statement."; and
(b) adding a new Section 2(i) as follows: "The Custodian Agreement
between Boston Safe Deposit and Trust Company and the Fund dated as of December
1, 1993.".
3. The Fee Schedule of PFPC applicable to the New
Series shall be as agreed in writing from time to time.
4 . In all other respects the Agreement shall
remain unchanged and in full force and effect.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment Number
one to the Agreement to be executed by their duly authorized officers designated
below on the day and year first above written.
THE DFA INVESTMENT TRUST COMPANY
By: /s/ Irene R. Diamant, VP
-----------------------------
PFPC INC.
By: /s/ Joseph Gramlich
-----------------------------
<PAGE>
ADMINISTRATION AND
ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made as of the 15th day of January 1993, by and between
THE DFA INVESTMENT TRUST COMPANY, a Delaware business trust (the "Fund"), and
PROVIDENT FINANCIAL PROCESSING CORPORATION ("PFPC"), a Delaware corporation
which is an indirect wholly-owned subsidiary of PNC Financial Corp.
W I T N E S S E T H
WHEREAS, the Fund is registered as a management investment company under
the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund wishes to retain PFPC to provide certain administrative
and accounting services, and PFPC is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Fund hereby appoints PFPC to provide certain
administrative and accounting services to the Fund for the period and on the
terms set forth in this Agreement. PFPC accepts such appointment and agrees to
furnish the services herein set forth in return for the compensation as provided
in Paragraph
<PAGE>
12 of this Agreement. The Fund presently issues five series of shares
("Shares") which are described in the registration statement delivered to PFPC
herewith, and may from time to time issue additional series of shares.
Hereinafter each such series shall be referred to as a "Series". The records,
notices, reports and services provided by PFPC hereunder shall be prepared,
kept, maintained and furnished by PFPC in respect of each Series of the Fund
existing on the date hereof, and any Series organized by the Fund after the date
hereof as agreed in writing by the Fund and PFPC.
2. DELIVERY OF DOCUMENTS. The Trustee has furnished PFPC with copies
properly certified or authenticated of each of the following:
(a) Resolutions of the Fund's Board of Trustees authorizing the
appointment of PFPC to provide certain administration and accounting services
for the Fund and approving this Agreement;
(b) Appendix A identifying and containing the signatures of the
Fund's officers and other persons authorized to issue Oral Instructions and to
sign Written Instructions, as hereinafter defined, on behalf of the Fund;
(c) The Fund's Certificate of Trust filed with the Delaware Secretary
of State on October 17, 1992 and all amendments thereto;
(d) The Fund's Agreement and Declaration of Trust and all amendments
thereto (such Agreement and Declaration of Trust as
-2-
<PAGE>
presently in effect and as it may from time to time be amended, is herein called
the "Declaration of Trust");
(e) The Fund's By-Laws and all amendments thereto (such By-Laws, as
presently in effect and as they shall from time to time be amended, are herein
called "By-Laws");
(f) The current investment advisory agreements between Dimensional
Fund Advisors Inc. (the "Advisor") and the Fund;
(g) The Custodian Agreement between Provident National Bank and the
Fund dated as of January 15, 1993;
(h) The Transfer Agency Agreement between Provident Financial
Processing Corporation and the Fund dated as of January 15, 1993; and
(i) The Fund's most recent registration statement on Form N-1A under
the 1940 Act (File No. 811-7436), as filed with the U.S. Securities and Exchange
Commission ("the SEC") on January 15, 1993 and all amendments thereto (such
registration statement as presently effective and as it shall from time to time
be amended, is herein called the "Registration Statement").
The Fund will furnish PFPC from time to time with copies, properly
certified or authenticated, of all amendments of or supplements to the
foregoing, if any.
3. DEFINITIONS.
(a) "AUTHORIZED PERSON". As used in this Agreement, the term
"Authorized Person" means any officer of the Fund and any other person, whether
or not any such person is an officer or employee of the Fund, duly authorized by
the Board of Trustees of
-3-
<PAGE>
the Fund to give Oral and Written Instructions on behalf of the Fund and listed
on Appendix A listing persons duly authorized to give Oral or Written
Instructions on behalf of the Fund as may be received by PFPC from time to time.
(b) "ORAL INSTRUCTIONS". As used in this Agreement, the term "Oral
Instructions" means oral instructions actually received by PFPC from an
Authorized Person or from a person reasonably believed by PFPC to be an
Authorized Person. The Fund agrees to deliver to PFPC, at the time and in the
manner specified in Paragraph 4(b) of this Agreement, Written Instructions
confirming Oral Instructions.
(c) "WRITTEN INSTRUCTIONS". As used in this Agreement, the term
"Written Instructions" means written instructions delivered by hand, mail,
tested telegram, cable, telex or facsimile sending device, and received by PFPC,
signed by two Authorized Persons. Written Instructions include electronic
transmissions properly originated and confirmed by the Fund.
(d) "AFFILIATE". As used herein, "Affiliate" means any company that
controls, is controlled by, or is under common control with PFPC.
4. INSTRUCTIONS CONSISTENT WITH DECLARATION OF TRUST, ETC.
(a) Unless otherwise provided in this Agreement, PFPC shall act only
upon Oral or Written Instructions. Although PFPC may know of the provisions of
the Declaration of Trust and By-Laws of the Fund, PFPC may assume that any Oral
or Written Instructions received hereunder are not in any way inconsistent with
any
-4-
<PAGE>
provisions of such Declaration of Trust or By-Laws, or any vote, resolution or
proceeding of the Shareholders, or of the Board of Trustees, or of any committee
thereof.
(b) PFPC shall be entitled to rely upon any Oral Instructions and any
Written Instructions actually received by PFPC from the Fund and any Affiliate,
provided such Affiliate has not acted negligently (unless such an Affiliate has
received and transmitted erroneous instructions received from an Authorized
Person who is not an Affiliate) pursuant to this Agreement. The Fund agrees to
forward to PFPC Written Instructions confirming Oral Instructions in such manner
that the Written Instructions are received by PFPC, whether by hand delivery,
telex, facsimile sending device or otherwise, by the close of business of the
same day that such Oral Instructions are given to PFPC. The Fund agrees that
the fact that such confirming Written Instructions are not received by PFPC
shall in no way affect the validity of the transactions or enforceability of the
transactions authorized by the Fund by giving Oral Instructions. The Fund
agrees that PFPC shall incur no liability to the Fund in acting upon Oral
Instructions given to PFPC by the Fund hereunder concerning such transactions,
provided such instructions reasonably appear to have been received from an
Authorized Person.
5. SERVICES ON A CONTINUING BASIS.
(a) In preparing the accounting records of the Fund, PFPC shall
comply with generally accepted accounting principles (GAAP) or with an
alternative method described in Written
-5-
<PAGE>
Instructions provided that such alternative method is not unreasonable and would
not be burdensome to PFPC. PFPC will perform the following accounting services
for the Fund on an ongoing or a daily basis, as appropriate, it being understood
that the services provided hereunder shall be provided on a per Series basis in
a manner that properly identifies the Series as to which such services relate:
(1) On a daily basis, journalize the Fund's investment, capital
Share and income and expense activities and post to the
general ledger;
(2) Verify with the Fund's custodians, investment buy/sell trade
tickets which may be sent electronically via modem from the
Advisor and which may include securities acquired for Fund
shares when received from the Advisor, transmit verified
trades to the Fund's custodians for proper settlement, and
PFPC shall promptly notify the Advisor of any trades
received which have not been so verified;
(3) Maintain individual ledgers for investment securities;
(4) Maintain historical tax lots for each security;
-6-
<PAGE>
(5) Reconcile cash and investment balances with the custodian of
each Series, and provide the Advisor with the beginning cash
balances available for investment purposes;
(6) Update the cash availability and projected receivables/
payables throughout the day as required by the Advisor and
direct the custodians to invest idle cash in repurchase
agreements and/or in other liquid investments as mutually
agreed upon in accordance with the Written Instructions
of the Advisor;
(7) Post to and prepare the Statement of Assets and Liabilities
and the Statement of Operations;
(8) Calculate various contractual expenses (e.g., advisory and
custody fees) and confirm to the Fund the amounts paid by
the Fund in respect of such contracts as provided for
therein;
(9) Monitor the expense accruals and notify Fund management of
any proposed adjustments;
(10) Control all disbursements and authorize such disbursements
upon Written Instructions;
(11) Calculate capital gains and losses;
(12) Determine net income;
(13) Obtain security market quotes from independent pricing
services approved by the Fund, or if
-7-
<PAGE>
such quotes are unavailable, then obtain such prices from,
or in accordance with the directions of, the Advisor, and in
either case calculate the market value of the Fund's
investments;
(14) Transmit or mail a copy of the daily portfolio valuations
and a listing of acquisitions and dispositions of securities
of the Fund and, as of each month-end, transmit or mail a
floppy diskette reflecting securities holdings to the
Advisor;
(15) Consistent with the requirements of the Registration
Statement or Written Instructions which change those
requirements, compute the net asset values and, where
applicable, the offering prices of the Series and promptly
report thereon to the transfer agent of each Series;
(16) Compute, and report to the Fund, each Series' yields,
expense ratios, portfolio turnover rate, and portfolio
average dollar-weighted maturity; and
(17) Compute amounts of foreign currency needed to settle foreign
securities transactions, and in accordance with Written
Instructions, enter into forward currency contracts with
banks and brokers.
-8-
<PAGE>
(b) In addition to the accounting services described in the foregoing
Paragraph 5(a), PFPC will:
(1) Prepare monthly financial statements, which will include the
following items (the form and content of such statements shall be in
accordance with GAAP):
Statement of Assets and Liabilities
Statement of Shareholders' Equity
Statement of Operations
Statement of Changes in Net Assets
Cash Statement
Schedule of Capital Gains and Losses;
PFPC will also prepare a Schedule of Investments for those
Series and at those times designated by the parties upon mutual agreement
(the form and content of such schedule shall be in accordance with GAAP).
(2) Prepare quarterly broker security transactions summaries,
including monthly reports of brokerage commissions paid setting forth such
information as the Fund may reasonably request and as to which the parties
may agree;
(3) Prepare monthly security transaction listings;
(4) Supply various Fund statistical data and reports as
requested by the Fund on an ongoing basis including the reports set forth
on Schedule A hereto;
(5) Prepare for execution and file the Fund's Federal and state
income tax returns, Federal Excise Tax returns, tax returns for the States
of Delaware and California and any supporting schedules to such returns and
assist the Fund in determining the amount, types and timing of dividend and
capital gains distributions necessary for each Series to
-9-
<PAGE>
avoid being required to pay Federal Income or Excise taxes on its income
and gains;
(6) Assist in the preparation of and file the Fund's Semi-Annual
Reports with the SEC on Form N-SAR;
(7) Assist in the preparation of and file with the SEC the
Fund's annual and semi-annual Shareholder reports;
(8) Assist in the preparation of registration statements on Form
N-1A and other filings relating to the registration of
the Fund;
(9) Monitor each Series' status as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as
amended, and if there is a change in such status, alert the Fund as soon as
practicable of such change;
(10) In the event that any securities transaction of the Fund
fails to settle in accordance with Written or Oral Instructions, PFPC shall
promptly notify the Fund; and
(11) Monitor each Series' securities positions to determine
whether, with respect to 75 percent of the value of each Series' total
assets, more than 5 percent of the value of each Series' total assets are
invested in any one issuer and, if so, alert the Fund as soon as
practicable of such circumstances.
6. RECORDS. PFPC shall keep the following records:
(a) all books and records with respect to the Fund's books of
account, including without limitation those required by
-10-
<PAGE>
rule 31a-1 under the 1940 Act (except paragraphs b(4) and (9)) and records
necessary to support each Series' tax returns; and
(b) records of the Fund's securities and exchange listed financial
futures and forward currency transactions.
The books and records pertaining to the Fund which are in the possession of
PFPC shall be the property of the Fund and shall be returned to the Fund or its
designee upon request. Such books and records shall be prepared and maintained
as required by the 1940 Act and other applicable laws and rules and regulations.
The Fund, or the Fund's authorized representatives, shall have access to such
books and records at all times during PFPC's normal business hours. Upon the
reasonable request of the Fund, copies of any such books and records shall be
provided by PFPC to the Fund or the Fund's authorized designee or representative
at the Fund's expense.
7. LIAISON WITH ACCOUNTANTS. PFPC shall act as liaison with the Fund's
independent public accountants and shall provide them with account analyses,
fiscal year summaries, and such other information, including audit related
schedules, as may be necessary to assure that the necessary information is made
available to such accountants for the expression of their opinion, as such may
be required by the Fund from time to time.
8. CONFIDENTIALITY. PFPC agrees on behalf of itself and its employees to
treat confidentially all records and other information relative to the Fund and
its prior, present or potential Shareholders or relative to the Advisor, except,
after prior notification to and approval in writing by the Fund, which approval
-11-
<PAGE>
may not be withheld where PFPC may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Fund.
9. EQUIPMENT FAILURES. In the event of equipment failures beyond PFPC's
control, PFPC shall, at no additional expense to the Fund, promptly notify the
Fund and take prompt, reasonable steps to minimize service interruptions but
shall have no liability with respect thereto except, at its own expense, to
reconstruct any records of the Fund that PFPC is required to prepare and
maintain hereunder. PFPC shall enter into and shall maintain in effect with
appropriate parties one or more agreements making reasonable provision for
emergency use of electronic data processing equipment to theextent appropriate
equipment is available. An equipment failure shall be beyond PFPC's control if
it results from one or more of the events described in the last sentence of the
first paragraph of Paragraph 14 hereunder.
10. RIGHT TO RECEIVE ADVICE.
PFPC shall be protected in any action or inaction PFPC takes in reliance on
advice of PFPC's counsel. PFPC shall promptly notify the Fund of the receipt of
such advice within reasonable time.
11. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS. PFPC agrees to
perform its duties hereunder in accordance with applicable law; however, PFPC
assumes no responsibility for ensuring that the Fund complies with the
applicable requirements of
-12-
<PAGE>
the Securities Act of 1933, as amended (the "1933 Act"), the Securities Exchange
Act of 1934, as amended (the "1934 Act"), the 1940 Act, the Commodities Exchange
Act, as amended (the "CEA"), and any laws, rules and regulations of governmental
authorities having jurisdiction.
12. COMPENSATION. As compensation for the services rendered by PFPC
during the term of this Agreement, the Fund will pay to PFPC an annual fee
calculated daily and payable monthly, as may be agreed to in writing from time
to time by the Fund and PFPC.
13. INDEMNIFICATION. (a) The Fund agrees to indemnify and hold harmless
PFPC and its sub-contractors from all taxes, charges, expenses (except expenses
that are inherent to its duties hereunder), assessments, claims and liabilities
(including, without limitation, liabilities arising under the 1933 Act, the 1934
Act, the 1940 Act, the CEA, and any state or foreign securities laws, all as or
to be amended from time to time) including (without limitation) reasonable
attorneys' fees and disbursements, arising directly or indirectly from any
action or thing which PFPC takes or does or omits to take or do (i) at the
request or on the direction of or in reliance on the advice of the Fund or the
Fund's counsel on behalf of the Fund or (ii) upon Oral or Written Instructions
provided by the Fund, or an Affiliate, provided such Affiliate has not acted
negligently (unless such Affiliate has received and transmitted erroneous
instructions received from an Authorized Person that is not an Affiliate)
PROVIDED, that neither PFPC nor any of its sub-contractors shall be indemnified
against any
-13-
<PAGE>
liability (or any expenses incident to such liability) arising out of PFPC's own
misfeasance, bad faith, negligence or disregard of its duties or
responsibilities described in this Agreement.
(b) PFPC shall not pay or settle any claim, demand, expense or
liability in respect of which PFPC is entitled to be indemnified pursuant to
paragraph (a) above an ("Indemnifiable Claim") without the express written
consent of the Fund. PFPC shall notify the Fund promptly of receipt of
notification of an Indemnifiable Claim. Unless the Fund notifies PFPC within 30
days of receipt of Written Notice of such Indemnifiable Claim that the Fund does
not intend to defend such Indemnifiable Claim, the Fund shall defend PFPC from
such Indemnifiable Claim. The Fund shall have the right to defend any
Indemnifiable Claim at its own expense, such defense to be conducted by counsel
selected by the Fund. Further, PFPC may join the Fund in such defense at PFPC's
own expense, but to the extent that it shall so desire, the Fund shall direct
such defense. If the Fund shall fail or refuse to defend, pay or settle an
Indemnifiable Claim, PFPC, at the Fund's expense consistent with limitations
concerning attorney's fees expressed in Paragraph 13(a) hereof, may provide its
own defense.
14. RESPONSIBILITY OF PFPC. PFPC hereby represents that it is experienced
in the provision of the services covered by this Agreement. In the performance
of its duties hereunder, PFPC shall be obligated to exercise due care and
diligence and to act in a timely manner and in good faith to assure the accuracy
and completeness of all services performed under this Agreement. PFPC
-14-
<PAGE>
shall be under no duty to take any action on behalf of the Fund except as
specifically set forth herein or as may be specifically agreed to by PFPC in
writing. PFPC shall be responsible for its own negligent failure to perform its
duties under this Agreement. In assessing negligence for purposes of this
Agreement, the parties agree that the standard of care applied to PFPC's conduct
shall be the care that would be exercised by a similarly situated service
provider, supplying substantially the same services under substantially similar
circumstances. Notwithstanding the foregoing, PFPC shall not be responsible for
losses beyond its control, provided that PFPC has acted in accordance with the
provisions of this Agreement and the standard of care set forth above and
provided further that PFPC shall only be responsible for that portion of losses
or damages suffered by the Fund attributable to the negligence of PFPC. Losses
shall be beyond PFPC's control if they result from or occur because of delays or
errors or loss of data provided by a person other than PFPC or its Affiliates,
or their respective employees or agents, or acts of civil or military authority,
national emergencies, labor difficulties (other than those of PFPC or its
Affiliates), fire, equipment failure resulting from forces external to the
premises of PFPC or its Affiliates, flood or catastrophe, acts of God,
insurrection, war, riots or failure of the mails, transportation, communication
or power supply external to the premises of PFPC or its Affiliates and such
other circumstances beyond PFPC's control.
-15-
<PAGE>
Without limiting the generality of the foregoing or of any other provision
of this Agreement, PFPC in connection with its duties under this Agreement shall
not be under any duty or obligation to inquire into and shall not be liable for
or in respect of the validity or invalidity or authority or lack thereof of any
Oral or Written Instruction received from the Fund, or an Affiliate, provided
such Affiliate has not acted negligently (unless such an Affiliate has received
and transmitted erroneous instructions received from an Authorized Person that
is not an Affiliate), notice or other instrument which conforms to the
applicable requirements of this Agreement, and which PFPC reasonably believes to
be genuine.
PFPC shall have no liability to the Fund for any losses or damages, the
nature of which is or was remote, unforeseen, unforeseeable or beyond the scope
of reasonable anticipation at the time this Agreement was executed.
15. DURATION AND TERMINATION. This Agreement shall continue in effect
from the date hereof until terminated by either party upon not less than 180
days prior written notice to the other party. The foregoing provision
notwithstanding, either party may terminate this Agreement in the event of a
material breach of the terms hereof after written notice to the other party of
such breach and a reasonable time for cure of such breach, unless such breach is
not curable and, in such circumstances, this Agreement shall terminate, at the
option of the injured party, three months after the date such notice is given.
-16-
<PAGE>
16. NOTICES. All notices and other communications, including Written
Instructions (collectively referred to as "Notice" or "Notices" in this
Paragraph), hereunder shall be in writing or by confirming telegram, cable,
telex or facsimile sending device. Notices shall be addressed (a) if to PFPC at
PFPC's address, Bellevue Corporate Center, 103 Bellevue Parkway, Wilmington,
Delaware 19809; (b) if to the Fund, at the address of the Fund; or (c) if to
neither of the foregoing, at such other address as shall have been notified to
the sender of any such Notice or other communication. All postage, cable, telex
and facsimile sending device charges arising from the sending of a Notice
hereunder shall be paid by the sender.
17. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
18. AMENDMENTS. This Agreement or any part hereof may be changed or
waived only by an instrument in writing signed by the party against which
enforcement of such change or waiver is sought.
19. DELEGATION. On thirty (30) days prior written notice to the Fund,
PFPC may assign its rights and delegate its duties hereunder to any wholly-owned
direct or indirect subsidiary of PFPC National Bank or PNC Financial Corp
provided that (i) the delegate agrees with PFPC to comply with all relevant
provisions of this Agreement and applicable law; and (ii) PFPC and such delegate
shall promptly provide such information as the Fund may request, and respond to
such questions as the Fund may ask, relative to the
-17-
<PAGE>
delegation, including (without limitation) the capabilities of the delegate. In
the event of such delegation, PFPC shall remain liable under this Agreement.
20. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
21. MISCELLANEOUS. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings, relating to the subject matter hereof, provided that the
parties hereto may embody in one or more separate documents their agreement, if
any, with respect to Written and/or Oral Instructions. The captions in this
Agreement are included for convenience of reference only and in no way define or
delimit any of the provisions hereof of otherwise affect their construction or
effect. This Agreement shall be deemed to be a contract made in Delaware and
governed by Delaware law. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby. This Agreement shall be binding
and shall inure to the benefit of the parties hereto and their respective
successors.
-18-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.
THE DFA INVESTMENT TRUST COMPANY
By: /s/ Michael T. Scardina, VP & CFO
----------------------------------
PROVIDENT FINANCIAL PROCESSING
CORPORATION
By: /s/ Joseph Gramlich
----------------------------------
-19-
<PAGE>
APPENDIX A
I, Irene R. Diamant, Secretary of The DFA Emerging Markets Fund Inc.,
a Maryland Corporation (the "Fund"), do hereby certify that:
The following individuals are duly authorized as Authorized
Persons to give Oral Instructions and Written Instructions on behalf
of the Fund:
NAME SIGNATURE
David G. Booth /s/ David G. Booth
-----------------------------
Rex A. Sinquefield /s/ Rex A. Sinquefield
-----------------------------
Jeanne C. Sinquefield /s/ Jeanne C. Sinquefield
-----------------------------
Michael T. Scardina /s/ Michael T. Scardina
-----------------------------
Irene R. Diamant /s/ Irene R. Diamant
-----------------------------
Deborah J. Ferris /s/ Deborah J. Ferris
-----------------------------
Ramakrishnan Chandraseker /s/ Ramakrishnan Chandraseker
-----------------------------
Cem Severoglu /s/ Cem Severoglu
-----------------------------
Carl Snyder /s/ Carl Snyder
-----------------------------
Byron B. Snider /s/ Byron B. Snider
-----------------------------
David Plecha /s/ David Plecha
-----------------------------
Arthur Barlow /s/ Arthur Barlow
-----------------------------
-20-
<PAGE>
Christopher Sullivan /s/ Christopher Sullivan
-----------------------------
Robert Deere /s/ Robert Deere
-----------------------------
Scott Thorton /s/ Scott Thorton
-----------------------------
David Price /s/ David Price
-----------------------------
Kamyab Hashemi-Nejad /s/ Kamyab Hashemi-Nejad
-----------------------------
Richard Eustice /s/ Richard Eustice
-----------------------------
With respect to any international equity Series of the Fund:
Garrett Quigley /s/ Garrett Quigley
-----------------------------
/s/ Irene R. Diamant
-----------------------------
Secretary
-21-
<PAGE>
SCHEDULE A
PURSUANT TO PARAGRAPH (5) (b) (4) OF THE AGREEMENT, PFPC WILL PROVIDE
THE FOLLOWING REPORTS:
REPORT OR STATISTIC FREQUENCY
a. Expense ratio analysis Monthly
b. Brokerage commission report and affiliated Quarterly/
brokerage report Annually
c. Listing of securities for which quotations Quarterly
are not readily available (for Board meetings)
d. Split bill report Quarterly
e. Information necessary for completion of N-SAR Semi-annually
-22-
<PAGE>
ADMINISTRATION AND ACCOUNTING SERVICES AGREEMENT
AMENDMENT NUMBER ONE
THIS AGREEMENT is made as of the 1st day of December, 1993 by and between
THE DFA INVESTMENT TRUST COMPANY, a Delaware business trust (the "Fund"), and
PFPC INC., formerly "Provident Financial Processing Corporation" ("PFPC"), a
Delaware corporation, which is an indirect wholly-owned subsidiary of PNC
Financial Corp.
W I T N E S S E T H :
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund has retained PFPC to provide certain administration and
accounting services pursuant to an Administration and Accounting Services
Agreement dated as of January 15, 1993 (the "Agreement") which, as of the date
hereof, is in full force and effect; and
WHEREAS, PFPC presently provides such services to the five Series of the
Fund that were in existence on January 15, 1993,
WHEREAS, the Fund has since organized one new Series, designated "The DFA
International Value Series" (the "New Series"),
<PAGE>
and the parties hereto desire that PFPC shall provide the New Series with the
same services that PFPC provides to the other five Series of the Fund pursuant
to the Agreement; and
WHEREAS, Section 1 of the Agreement provides that PFPC shall provide such
services to any Series organized by the Fund after the date of the Agreement as
agreed to in writing by PFPC and the Fund.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound, the parties hereto agree to
follows:
1. The Fund has delivered to PFPC copies of:
(a) Amendment Number 1 of the registration statement of the Fund, as
effective with the U.S. Securities and Exchange Commission on December 1, 1993
wherein the New Series is described;
(b) The exhibits to such amendment consisting of the form of
investment management agreement which pertains to the New Series; and
(c) Amendment Number One dated December 1, 1993 of the Transfer
Agency Agreement between the parties dated as of January 15, 1993.
-2-
<PAGE>
2. The Agreement hereby is amended effective December1, 1993 by:
(a) adding the following sentence immediately after the third
sentence of Section 1 therein, "As of December 1, 1993, the Fund delivered to
PFPC a Registration Statement dated December 1, 1993 wherein one new series of
shares designated "The DFA International Value Series" are described and the
parties agree that the terms of this Agreement shall apply to the six series
described in such Registration Statement."; and
(b) adding a new Section 2(j) as follows: "The Custodian Agreement
between Boston Safe Deposit and Trust Company and the Fund dated as of December
1, 1993.";
3. The Fee Schedule of PFPC applicable to the New Series shall be as
agreed in writing from time to time.
4. In all other respects the Agreement shall remain unchanged and in full
force and effect.
IN WITNESS WHEREOF, the parties hereto have caused
this Amendment Number One to the Agreement to be executed by their
-3-
<PAGE>
duly authorized officers designated below on the day and year first
above written.
THE DFA INVESTMENT TRUST COMPANY
By: /s/ Irene R. Diamant, VP
----------------------------------
PFPC INC.
By: /s/ Joseph Gramlich
----------------------------------
-4-
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Post-Effective Amendment No. 14
under the Securities Act of 1940 to the Registration Statement of The DFA
Investment Trust Company on Form N-1A (File No. 811-7436) of our report dated
February 26, 1998 on our audits of the financial statements and financial
highlights of The DFA Investment Trust Company, which report is included in the
Annual Report to Shareholders for the year ended November 30, 1997 which is
incorporated by reference in the Post-Effective Amendment to the Registration
Statement. We also consent to the reference to our firm under the heading
"Financial Statements" in Form N-1A.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 26, 1998
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<NAME> THE DFA INVESTMENT TRUST COMPANY
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<NAME> EMERGING MARKETS SMALL CAP SERIES
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