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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. 21 (X)
THE DFA INVESTMENT TRUST COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(310) 395-8005
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Irene R. Diamant, 1299 Ocean Avenue, 11th Floor, Santa Monica CA 90401
(NAME AND ADDRESS OF AGENT FOR SERVICE OF PROCESS)
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Please Send Copy of Communications to:
Stephen W. Kline, Esq.
Stradley, Ronon, Stevens & Young, LLP
Great Valley Corporate Center
30 Valley Stream Parkway
Malvern, Pennsylvania 19355
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THE DFA INVESTMENT TRUST COMPANY
THE U.S. LARGE COMPANY SERIES
THE ENHANCED U.S. LARGE COMPANY SERIES
THE U.S. LARGE CAP VALUE SERIES
THE TAX-MANAGED U.S. MARKETWIDE VALUE SERIES
THE TAX-MANAGED U.S. MARKETWIDE VALUE SERIES X
THE U.S. 4-10 VALUE SERIES
THE U.S. 6-10 VALUE SERIES
THE U.S. 6-10 SMALL COMPANY SERIES
THE U.S. 9-10 SMALL COMPANY SERIES
THE DFA INTERNATIONAL VALUE SERIES
THE JAPANESE SMALL COMPANY SERIES
THE PACIFIC RIM SMALL COMPANY SERIES
THE UNITED KINGDOM SMALL COMPANY SERIES
THE CONTINENTAL SMALL COMPANY SERIES
THE GLOBAL VALUE SERIES
THE GLOBAL LARGE COMPANY SERIES
THE GLOBAL SMALL COMPANY SERIES
THE EMERGING MARKETS SERIES
THE EMERGING MARKETS SMALL CAP SERIES
THE DFA ONE-YEAR FIXED INCOME SERIES
THE DFA TWO-YEAR GLOBAL FIXED INCOME SERIES
March 30, 2000
FORM N-1A, PART A:
RESPONSES TO ITEMS 1 THROUGH 3 HAVE BEEN OMITTED PURSUANT TO PARAGRAPH 2(b) OF
INSTRUCTION B OF THE GENERAL INSTRUCTIONS TO FORM N-1A
ITEM 4. INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES, AND RELATED
RISKS
(a) AND (b) INVESTMENT OBJECTIVES AND IMPLEMENTATION OF INVESTMENT OBJECTIVES.
The DFA Investment Trust Company (the "Trust") issues twenty-one 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, except The Global Value Series, The Global Large
Company Series and The Global Small Company Series (collectively the "Global
Series"). The Advisor serves as administrator of the Global 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
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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.
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-Registered Trademark- (the "S&P 500-Registered Trademark-
Index"), in terms of its total investment return. The Series intends to
invest in all of the stocks that comprise the S&P 500-Registered Trademark-
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-Registered Trademark- Index is comprised of a broad and diverse group of
stocks most of which are traded on the New York Stock Exchange ("NYSE").
Generally, these are the U.S. stocks with the largest market capitalizations
and, as a group, they represent approximately 70% of the total market
capitalization of all publicly traded U.S. stocks. Under normal market
conditions, at least 95% of the Series' assets will be invested in the stocks
that comprise the S&P 500-Registered Trademark- Index.
Ordinarily, portfolio securities will not be sold except to reflect additions
or deletions of the stocks that comprise the S&P 500-Registered Trademark-
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 Ratings 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-Registered Trademark- Index. The Series may invest in all of the stocks
represented in the S&P 500-Registered Trademark- 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-Registered Trademark- 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-Registered Trademark-
Index (such instruments whether or not based on the S&P 500-Registered
Trademark- Index hereinafter collectively referred to as "Index
Derivatives"). The Series may invest
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all of its assets in Index Derivatives (See Item 4(c) "Risks") . Assets of
the Series not invested in S&P 500-Registered Trademark- 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-Registered Trademark- Index stocks, Index Derivatives and Fixed
Income Investments may vary from time to time, within the discretion of the
Advisor and according to restraints imposed by the Investment Company Act of
1940. The Series will maintain a segregated account consisting of liquid
assets (or, as permitted by applicable regulation, enter into offsetting
positions) to cover its open positions in Index Derivatives to avoid
leveraging of the Series.
The Series will enter into positions in futures and options on futures only to
the extent such positions are permissible with respect to applicable rules of
the Commodity Futures Trading Commission without registering the Series or the
Trust as a commodities pool operator. In addition, the Series may not be able to
utilize Index Derivatives to the extent otherwise permissible or desirable
because of constraints imposed by the Internal Revenue Code of 1986, as amended
(the "Code") or by unanticipated illiquidity in the marketplace for such
instruments. For more information about Index Derivatives, see Item 4(c)
"Risks."
It is the position of the Securities and Exchange Commission ("SEC") 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 nor 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-Registered Trademark- 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-Registered
Trademark- 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-Registered Trademark-
Index. S&P is not responsible for and has not participated in the
determination of the prices and amount of the Large Company Series or in the
issuance or sale of the Large Company Series or in the determination or
calculation of the equation by which the Large Company Series are to be
converted into cash. S&P has no obligation or liability in connection with
the administration, marketing or trading of the Large Company Series.
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S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P
500-Registered Trademark-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-Registered Trademark- INDEX OR ANY DATA INCLUDED THEREIN. S&P
MAKES NO EXPRESS OR IMPLIED WARRANTIES AND EXPRESSLY DISCLAIMS ALL WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO
THE S&P 500-Registered Trademark- 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 - U.S. VALUE SERIES
The investment objective of The U.S. Large Cap Value Series (the "Large Cap
Value Series"), The Tax-Managed U.S. Marketwide Value Series (the "Tax
- -Managed Marketwide Value Series"), The Tax-Managed U.S. Marketwide Value
Series X (the "Tax-Managed Marketwide Value Series X"), 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. (The Tax-Managed Marketwide Value Series and the
Tax-Managed Marketwide Value Series X are referred to collectively, as the
"Tax-Managed Value Series" and individually, as each "Tax-Managed Value
Series.") Ordinarily, each U.S. Value Series will invest at least 80% of its
assets in a broad and diverse group of readily marketable common stocks of
U.S. companies which the Advisor believes to be value stocks at the time of
purchase. Securities are considered value stocks primarily because 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, 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. The 6-10 Value
Series will purchase common stocks of companies whose market capitalizations are
smaller than that of the company having the median market capitalization of
companies whose shares are listed on the NYSE. Each Tax-Managed Value Series
will purchase common stocks of companies whose market capitalizations are equal
to the market capitalizations of companies in the 1st through 8th deciles of
those companies listed on the NYSE. The 4-10 Value Series will purchase common
stocks of companies whose market capitalizations are equal to the market
capitalizations of companies in the 4th through 10th deciles of those companies
listed on the NYSE. With respect to the 9th and
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10th deciles, the 4-10 Value Series may limit purchases of such common stocks
to those times when it is advantageous to do so.
THE TAX-MANAGED VALUE SERIES. Except as described under "Portfolio
Structure," each Tax-Managed Value Series intends to invest in a large
portion of the universe of companies whose shares are eligible for
investment; shares of a certain number of eligible companies will be held by
both Tax-Managed Value Series. The securities portfolio of the Tax-Managed
Marketwide Value Series will not be identical to that of the Tax-Managed
Marketwide Value Series X, even though the investment criteria of each Series
are the same.
Their investment portfolios generally will be structured on a market
capitalization basis. Ordinarily, the amount of each security is purchased
based on the issuer's relative market capitalization. However, the
Tax-Managed Value Series should not be expected to adhere to their market
capitalization weightings to the same extent as the non-tax-managed Series.
The Tax-Managed Value Series seek to minimize the impact of federal taxes on
investment returns by managing their portfolios in a manner that will defer
the realization of net capital gains where possible and may minimize dividend
income.
When selling securities, each Tax-Managed Value Series, typically, will
select the highest cost shares of the specific security in order to minimize
the realization of capital gains. In certain cases, the highest cost shares
may produce a short-term capital gain. Since short-term capital gains
generally are taxed at higher tax rates than long-term capital gains, the
highest cost shares with a long-term holding period may be disposed of
instead. Each Tax-Managed Value Series, when possible, will refrain from
disposing a security until the long-term holding period for capital gains for
tax purposes has been satisfied. Additionally, each Series, when consistent
with all other tax management policies, may sell securities in order to
realize capital losses. Realized capital losses can be used to offset
realized capital gains, thus reducing capital gains distributions.
In addition to selling practices used among all Series managed by the
Advisor, securities may be sold by each Tax-Managed Value Series to a Series
having an identical investment objective and policies. Specifically, the
Tax-Managed Marketwide Value Series may sell portfolio securities to the
Tax-Managed Marketwide Value Series X (and vice versa). Such sales would be
made to realize losses on securities which would be used to offset gains on
other securities realized by the selling Series. Such transactions are
intended to benefit both Series that are parties to the transaction. The
selling Series will recognize a loss which it can use to offset realized
gains, while the purchasing Series will acquire an eligible portfolio
security, at a current market price, but without payment of brokerage
commissions.
While the Advisor believes this strategy can be both tax and cost efficient,
applicable federal tax law provides for suspension of recognition of losses
and potential disallowance of such losses incurred on the sale of securities
by one Series to another Series if, as of the date of any sale of a loss
security, five or fewer persons own or are considered for tax purposes to own
more than 50% of the outstanding shares of both the selling and purchasing
Series. For purposes of this test, shareholders of an investment company
which invests in each Tax-Managed Value Series
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(each "Tax-Managed Feeder Portfolio") are considered to own the corresponding
shares of the Series. The Advisor intends to control the number of
shareholders in each Tax-Managed Feeder Portfolio in two ways. First, as with
all portfolios that the Advisor manages, it retains the right in its
discretion to reject any initial or additional investment for any reason and
to suspend the offering of shares of any portfolio. Second, the Advisor
intends to offer the shares of each Tax-Managed Feeder Portfolio to
relatively few institutional investors and anticipates that shares will be
offered primarily to individual investors, thereby creating a substantial
number of shareholders in each Tax-Managed Feeder Portfolio. Finally, the
Advisor intends to monitor closely all purchases of shares of each
Tax-Managed Feeder Portfolio in order to increase the probability that the
five or fewer shareholder threshold is not violated.
The timing of purchases and sales of securities may be managed to minimize
the receipt of dividends when possible. With respect to dividends that are
received, the Tax-Managed Value Series may not be eligible to pass through
the dividends received deduction attributable to holdings in U.S. equity
securities to corporate shareholders if, because of timing activities, the
requisite holding period of the dividend paying stock is not met. Portfolio
investments also may be managed to emphasize low dividend-yielding securities.
The Tax-Managed Value Series are expected to deviate from their market
capitalization weightings to a greater extent than the non-tax managed
Series. For example, the Advisor may exclude the stock of a company that
meets applicable market capitalization criteria in order to avoid dividend
income, and may sell the stock of a company that meets applicable market
capitalization criteria in order to realize a capital loss. Also, while other
Series are managed with the expectation that securities generally will be
held for longer than one year, the Tax-Managed Value Series may dispose of
securities whenever the Advisor determines that disposition is consistent
with their tax management strategies or is otherwise in the best interest of
the Tax-Managed Value Series.
Although the Advisor intends to manage each Tax-Managed Value Series in a
manner to minimize the realization of capital gains and taxable dividend
income each year, the Tax-Managed Value Series may nonetheless distribute
taxable gains and dividends to shareholders. Of course, realization of
capital gains is not entirely within the Advisor's control. Capital gains
distributions may vary considerably from year to year; there will be no
capital gains distributions in years when each Tax-Managed Value Series
realizes a net capital loss. Furthermore, redeeming shareholders will be
required to pay taxes on their capital gains, if any, on a redemption of a
Series' shares, whether paid in cash or in kind, if the amount received on
redemption is greater than the amount of the shareholder's tax basis in the
shares redeemed.
PORTFOLIO STRUCTURE. The U.S. Value 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 U.S. Value Series will purchase securities that are listed on
the principal U.S. national securities exchanges and traded in the
over-the-counter market ("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
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view to creating in each Series a reasonable reflection of the relative
market capitalizations of its portfolio companies (except as described above
in "The Tax-Managed Value Series" with regard to the Tax-Managed Value
Series). 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
U.S. Value Series because they intend to purchase round lots only and, with
respect to the 4-10 Value Series and the Tax-Managed Value Series, because
they intend to purchase common stocks in the 4th through 10th deciles only
(in the case of the 4-10 Value Series) and in the 1st through 8th deciles
only (in the case of each Tax-Managed Value Series) through block trades, as
described above. Furthermore, in order to retain sufficient liquidity, the
relative amount of any security held by a Series may be reduced, from time to
time, from the level which strict adherence to market capitalization
weighting would otherwise require. A portion, but generally not in excess of
20%, of a Series' assets may be invested in interest-bearing obligations, as
described above, thereby causing further deviation from strict market
capitalization weighting. The Series may make 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(b).) 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 U.S. Value 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 generally will be
made in most of the eligible securities on a market capitalization weighted
basis.
Generally, securities will be purchased with the expectation that they will
be held for longer than one year. The Large Cap Value Series and each
Tax-Managed Value Series may sell portfolio securities when the issuer's
market capitalization falls substantially below that of the issuer with the
minimum market capitalization which is then eligible for purchase by the
Series. 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, including securities that are eligible for purchase, may be sold
at any time when, in the Advisor's judgment, circumstances warrant their sale.
In addition, the Large Cap Value Series and each Tax-Managed Value Series may
sell portfolio securities when their book to market ratio falls substantially
below that of the security with the
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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 of those 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.
INVESTMENT OBJECTIVES 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 has an
investment objective 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 NYSE. The Series will purchase common stocks of companies whose shares
are listed on the NYSE, the American Stock Exchange ("AMEX") and traded 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. Generally, it is the intention of the U.S. 6-10
Series to acquire a portion of the common stock of eligible NYSE, AMEX and
OTC company on a market capitalization weighted basis. In the future, the
U.S. 6-10 Series may purchase common stocks of small U.S. companies which are
listed on other U.S. securities exchanges. In addition, the Series is
authorized to invest in private placements of interest-bearing debentures
that are convertible into common stock. Such
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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. Generally, it is
the intention of the U.S. 9-10 Series to acquire a portion of the stock of
eligible NYSE, AMEX and OTC company on a market capitalization weighted
basis. (See "INVESTMENT OBJECTIVES AND POLICIES - SMALL COMPANY SERIES -
Portfolio Structure.") In the future, the U.S. 9-10 Series may include stocks
of small U.S. companies which are listed on other U.S. securities exchanges.
The U.S. 9-10 Series is authorized to invest in privately placed convertible
debentures and the value thereof together with the value of all other
illiquid investments may not exceed 10% of the value of the Series' net
assets at the time of purchase.
THE JAPANESE SMALL COMPANY SERIES
The Japanese Small Company Series (the "Japanese Series") will invest in a
broad and diverse group of readily marketable stocks of Japanese small
companies which are traded in the Japanese securities markets. Generally,
reference in this registration statement to the term "Japanese small company"
means a company located in Japan whose market capitalization is not larger
than the largest of those in the smaller one-half (deciles 6 through 10) of
companies whose securities are listed on the First Section of the Tokyo Stock
Exchange ("TSE") .
While the Japanese Series will invest primarily in the stocks of small
companies which are listed on the TSE, it may acquire the stocks of Japanese
small companies which are traded in other Japanese securities markets as
well. It is the intention of the Japanese Series to acquire a portion of the
stock of each of these companies on a market capitalization weighted basis.
The Japanese Series also may invest up to 5% of its assets in convertible
debentures issued by Japanese small companies. (See "INVESTMENT OBJECTIVES
AND POLICIES - SMALL COMPANY SERIES - Portfolio Structure.")
THE UNITED KINGDOM SMALL COMPANY SERIES
The United Kingdom Small Company Series (the "United Kingdom Series") will
invest in a broad and diverse group of readily marketable stocks of United
Kingdom small companies which are traded principally on the London Stock
Exchange
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("LSE"). 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 LSE 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 LSE, which is similar to the S&P
500-Registered Trademark- 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-Registered Trademark- 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. The Advisor typically will
use the appropriate country indices of the Financial Times-Actuaries World
Index ("FTW") converted to a common currency, the United States dollar, and
aggregated to define "small companies." The FTW consists of a series of
country indices which contain generally the largest companies in the major
industry sectors in proportion to their market capitalization whose shares
are available for purchase by non-resident investors. Its constituents
represent about 70% of the total market capitalization of the respective
markets. Generally, companies with publicly traded stock whose market
capitalizations are not greater than the largest of those in the smallest 20%
(9th and 10th deciles) of companies listed in the FTW as combined for the
countries in which the Continental Series invests will be considered to be
"small companies" and will be eligible for purchase by the Continental Series.
While the Advisor typically will use the aggregated FTW indices to determine
the maximum size of eligible portfolio companies, portfolio acquisitions will
not be limited to stocks listed on the FTW for any country. The Continental
Series does not intend, however, to purchase shares of
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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 Austria, Belgium, Denmark, Finland,
France, Germany, Ireland, Italy, the Netherlands, Norway, Spain, Sweden and
Switzerland. 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 Pacific Rim 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 Pacific Rim Asian countries as securities markets in these countries
become accessible. In addition, the Advisor may in its discretion either
limit further investments in a particular country or divest the Pacific Rim
Series of holdings in a particular country. As of September 10, 1998, the
Pacific Rim Series discontinued further investment in Malaysian securities
and began divesting itself of such securities as a consequence of certain
restrictions imposed by the Malaysian government on the repatriation of
assets by foreign investors, such as the Pacific Rim Series.
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. The Advisor typically will use the appropriate
country indices of the FTW converted to a common currency and aggregated, to
define "small companies." Generally, companies with publicly traded stock
whose market capitalizations are not greater than the largest of those in the
smallest 30% of companies (8th, 9th and 10th deciles) listed in the FTW as
combined for the countries in which the Pacific Rim Series invests will be
considered to be "small companies" and will be eligible for purchase by the
Pacific Rim Series.
While the Advisor typically will use the aggregated FTW indices to determine
the maximum size of eligible portfolio companies, portfolio acquisitions will
not be limited to stocks listed on the FTW for any country. The Pacific Rim
Series does not intend to purchase shares of any company whose market
capitalization is less than $5,000,000. The Pacific Rim Series intends to
acquire a portion of the stock of each eligible company on a market
capitalization basis. The
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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 SERIES - Portfolio
Structure.")
PORTFOLIO STRUCTURE
Each Small Company Series is structured by generally basing the amount of
each security purchased on the issuer's relative market capitalization with a
view to creating in each Series a reasonable reflection of the relative
market capitalizations of its portfolio companies. The following discussion
applies to the investment policies of the Small Company Series.
The decision to include or exclude the shares of an issuer will be made on
the basis of such issuer's relative market capitalization determined by
reference to other companies located in the same country; except with respect
to Continental and Pacific Rim Series, such determination shall be made by
reference to other companies located in all countries in which the Series
invest. Company size is measured in terms of local currencies in order to
eliminate the effect of variations in currency exchange rates, except that
Continental and Pacific Rim Series each will measure company size in terms of
a common currency. Even though a company's stock may meet the applicable
market capitalization criterion, it may not be purchased if (i) in the
Advisor's judgment, the issuer is in extreme financial difficulty, (ii) the
issuer is involved in a merger or consolidation or is the subject of an
acquisition or (iii) a significant portion of the issuer's securities are
closely held. Further, securities of real estate investment trusts will not
be acquired (except as a part of a merger, consolidation or acquisition of
assets). In addition, the Advisor may exclude the stock of a company that
otherwise meets applicable market capitalization criterion if the Advisor
determines in its best judgment that other conditions exist that make the
purchase of such stock inappropriate.
Deviation from strict market capitalization weighting also will occur because
the Advisor intends to purchase round lots only. Furthermore, in order to
retain sufficient liquidity, the relative amount of any security held may be
reduced from time to time from the level which strict adherence to market
capitalization weighting would otherwise require. A portion, but generally
not in excess of 20%, of assets may be invested in interest-bearing
obligations, such as money-market instruments for this purpose, thereby
causing further deviation from strict market capitalization weighting.
Block purchases of eligible securities may be made at opportune prices even
though such purchases exceed the number of shares which, at the time of
purchase, strict adherence to the policy of market capitalization weighting
would otherwise require. In addition, each Small Company Series may, in
exchange for the issuance of shares, acquire securities eligible for purchase
or otherwise represented in their portfolios at the time of the exchange.
(See "In Kind Purchases" in Item 7(b).) 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.
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If securities must be sold in order to obtain funds to make redemption
payments, they may be repurchased as additional cash becomes available. In
most instances, however, management would anticipate selling securities which
had appreciated sufficiently to be eligible for sale and, therefore, would
not need to repurchase such securities. (See "INVESTMENT OBJECTIVES AND
POLICIES - SMALL COMPANY SERIES Portfolio Transactions.")
Changes in the composition and relative ranking (in terms of market
capitalization) of the stocks which are eligible for purchase take place with
every trade when the securities markets are open for trading due, primarily,
to price fluctuations of such securities. On a not less than semi-annual
basis, the Advisor will determine the market capitalization of the largest
small company eligible for investment. Common stocks whose market
capitalizations are not greater than such company will be purchased.
Additional investments generally will not be made in securities which have
appreciated in value sufficiently to be excluded from the Advisor's then
current market capitalization limit for eligible portfolio securities. This
may result in further deviation from strict market capitalization weighting
and such deviation could be substantial if a significant amount of holdings
increase in value sufficiently to be excluded from the limit for eligible
securities, but not by a sufficient amount to warrant their sale. (See
"INVESTMENT OBJECTIVES AND POLICIES -SMALL COMPANY PORTFOLIOS - Portfolio
Transactions.") A further deviation from market capitalization weighting may
occur if a Series invests a portion of its assets in convertible debentures.
It is management's belief that the stocks of small companies offer, over a
long term, a prudent opportunity for capital appreciation, but, at the same
time, selecting a limited number of such issues for investment involves
greater risk than investing in a large number of them.
Generally, current income is not sought as an investment objective, and
investments will not be based upon an issuer's dividend payment policy or
record. However, many of the companies whose securities will be selected for
investment do pay dividends. It is anticipated, therefore, that dividend
income will be received. Also, each Small Company Series may lend securities
to qualified brokers, dealers, banks and other financial institutions for the
purpose of realizing additional income. (See "Securities Loans" below.)
PORTFOLIO TRANSACTIONS
On a periodic basis, the Advisor will review the holdings of each 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
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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 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, Austria, Belgium, Denmark, Finland, France,
Germany, Hong Kong, Ireland, Italy, Japan, the Netherlands, New Zealand,
Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United
Kingdom. As the Series' asset growth permits, it may invest in the stocks of
large companies in other developed markets.
Under normal market conditions, at least 65% of the Series' assets will be
invested in companies organized or having a majority of their assets in or
deriving a majority of their operating income in at least three non-U.S.
countries and no more than 40% of the Series' assets will be invested in such
companies in any one country. The Series reserves the right to invest in
index futures contracts to commit funds awaiting investment or to maintain
liquidity. Such investments entail certain risks. (See "Risks" in Item 4(c).)
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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(b).) While such transactions might cause a temporary
deviation from market capitalization weighting, they would ordinarily be made
in anticipation of further growth of the assets of the Series.
Changes in the composition and relative ranking (in terms of market
capitalization and book to market ratio) of the stocks which are eligible for
purchase by the Series take place with every trade when the securities
markets are open for trading due, primarily, to price fluctuations of such
securities. On a periodic basis, the Advisor will prepare a list of eligible
large companies with high book to market ratios whose stock are eligible for
investment; such list will be revised not less than semi-annually. Only
common stocks whose market capitalizations are not less than such minimum
will be purchased by the Series. Additional investments will not be made in
securities which have depreciated in value to such an extent that they are
not then considered by the Advisor to be large companies. This may result in
further deviation from market capitalization weighting and such deviation
could be substantial if a significant amount of the Series' holdings decrease
in value sufficiently to be excluded from the then current market
capitalization requirement for eligible securities, but not by a sufficient
amount to warrant their sale.
It is management's belief that the value stocks of large companies offer,
over a long term, a prudent opportunity for capital appreciation, but, at the
same time, selecting a limited number of
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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, investment
limitations have been adopted by each Series and are noted in response to
Items 12(b) and (c) of Part B.
INVESTMENT OBJECTIVES AND POLICIES - GLOBAL SERIES
The investment objective of each of the Global Series is to achieve long-term
capital appreciation. The Global Value Series provides investors with access
to securities portfolios consisting of stocks of large U.S. and non-U.S.
companies that have high book to market ratios. The Global Large Company
Series provides investors with access to securities portfolios consisting of
stocks that comprise the S&P 500-Registered Trademark- Index and stocks of
large non-U.S. companies in Europe, Australia and the Far East. The Global
Small Company Series provides investors with access to securities portfolios
consisting of stocks of small Japanese, UK, European, Pacific Rim and U.S.
companies.
Each of the Global Series seeks to achieve its investment objective by
investing virtually all of its assets in other Series of the Trust, or in
portfolios of other registered investment companies that are managed by the
Advisor, including DFA Investment Dimensions Group Inc. ("DFAIDG") . (The
Series of the Trust, the portfolios of DFAIDG, and the series of any other
registered investment company that is advised by the Advisor in which the
Global Series may invest, from time to time, are referred to as the "Master
Series.") The Global Series sell their shares to institutional investors
located in the United States and abroad. These institutional investors may
include registered and unregistered investment companies. Investors which,
for a variety of reasons, may choose not to make substantial, or
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any, direct investment in the companies whose securities will be held by the
Master Series, may participate in the investment performance of those
companies through ownership of shares in one or more Global Series.
PORTFOLIO STRUCTURE. The Global Series will invest in the Master Series in
such relative portions as determined by the Trust's management from time to
time. As of the date of this registration statement, each Global Series
intends to invest in the shares of the following Master Series:
Global Value Series
U.S. Large Cap Value Series
The DFA International Value Series
Global Large Company Series
U.S. Large Company Series
Large Cap International Portfolio of DFAIDG
Global Small Company Series
U.S. 6-10 Small Company Series
Japanese Small Company Series
Continental Small Company Series
United Kingdom Small Company Series
Pacific Rim Small Company Series
For a complete description of the investment objectives and policies,
portfolio construction and portfolio transactions for each Master Series, see
"Investment Objectives, Principal Investment Strategies, and Related Risks -
The U.S. Large Company Series, " "INVESTMENT OBJECTIVES AND POLICIES - U.S.
VALUE SERIES" and "INVESTMENT OBJECTIVES AND POLICIES - SMALL COMPANY SERIES"
in this registration statement.
The Global Large Company Series intends to invest in shares of the Large Cap
International Portfolio of DFAIDG (the "Large Cap International Portfolio").
The investment objective of the Large Cap International Portfolio is to
achieve long-term capital appreciation by investing in the stocks of non-U.S.
large companies in Europe, Australia and the Far East. Generally, the
companies whose stocks will be selected by the Advisor for the Large Cap
International Portfolio will be in the largest 50% in terms of market
capitalization for each country. Under normal market conditions, at least 65%
of the Large Cap International Portfolio's assets will be invested in
companies organized or having a majority of their assets in or deriving a
majority of their operating income in at least three non-U.S. countries. The
Large Cap International Portfolio reserves the right to invest in index
futures contracts to commit funds awaiting investment or to maintain
liquidity. The Large Cap International Portfolio 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 Large Cap International Portfolio do pay
dividends. It is anticipated, therefore, that the Large Cap International
Portfolio will receive dividend income.
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While each Global Series currently intends to invest in the specific Master
Series identified above, each Global Series may invest in other Master
Series, in such portions as may be determined from time to time by the
Trust's management. In addition, each Global Series may invest in U.S.
government obligations, U.S. government agency obligations, bank obligations
and commercial paper. (See "INVESTMENT OBJECTIVES AND POLICIES - FIXED INCOME
SERIES -Description of Investments" in this registration statement.)
Periodically, the Trust's management will determine the allocation of the
assets by each Global Series in the Series' corresponding Master Series. In
setting the target allocations, the Trust's management will first consider
the market capitalizations of all eligible companies in each of the Master
Series. The Trust's management will calculate the market capitalizations for
each Master Series, other than The U.S. Large Company Series, in the manner
described in this registration statement. In determining the target
allocations, the Trust's management, using its best judgment, will seek to
eliminate the effect of cross holdings between companies on a portfolio by
portfolio basis and may take into account the existence of substantial
private or government ownership of the shares of a company. The Trust's
management may also consider such other factors as it deems appropriate with
respect to determining the target allocations. When the Trust's management
determines that market forces have caused fundamental changes in the relative
values of companies owned by the Master Series, the Trust's management
intends to modify the target allocations of the Global Series. To maintain
target weights during the period, adjustments may be made by applying future
purchases by the respective Global Series in proportion necessary to
rebalance the investment portfolio of the Global Series.
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
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whose market capitalization is less than $1.5 billion. On a periodic basis,
the Advisor will review the holdings of the Emerging Markets Small Cap Series
and determine which, at the time of such review, are no longer considered
small emerging market companies. The present policy is to consider portfolio
securities for sale when they have appreciated sufficiently to rank, on a
market capitalization basis, 100% larger than the largest market
capitalization that is eligible for purchase as set by the Advisor for that
Approved Market.
Each Series may not invest in all such companies or Approved Markets
described above or achieve approximate market weights, for reasons which
include constraints imposed within Approved Markets (E.G., restrictions on
purchases by foreigners), and each Series' policy not to invest more than 25%
of its assets in any one industry.
Under normal market conditions, the Emerging Markets Series will invest at
least 65% of its assets in Approved Market securities, and the Emerging
Markets Small Cap Series will invest at least 65% of its assets in small
company (as defined above) Approved Market Securities. Approved Market
securities are defined to be (a) securities of companies organized in a
country in an Approved Market or for which the principal trading market is in
an Approved Market, (b) securities issued or guaranteed by the government of
an Approved Market country, its agencies or instrumentalities, or the central
bank of such country, (c) securities denominated in an Approved Market
currency issued by companies to finance operations in Approved Markets, (d)
securities of companies that derive at least 50% of their revenues primarily
from either goods or services produced in Approved Markets or sales made in
Approved Markets and (e) Approved Markets equity securities in the form of
depositary shares. Securities of Approved Markets may include securities of
companies that have characteristics and business relationships common to
companies in other countries. As a result, the value of the securities of
such companies may reflect economic and market forces in such other countries
as well as in the Approved Markets. The Advisor, however, will select only
those companies which, in its view, have sufficiently strong exposure to
economic and market forces in Approved Markets such that their value will
tend to reflect developments in Approved Markets to a greater extent than
developments in other regions. For example, the Advisor may invest in
companies organized and located in the United States or other countries
outside of Approved Markets, including companies having their entire
production facilities outside of Approved Markets, when such companies meet
the definition of Approved Markets securities so long as the Advisor believes
at the time of investment that the value of the company's securities will
reflect principally conditions in Approved Markets.
The Advisor defines the term "emerging market" to mean a country which is
considered to be an emerging market by the International Finance Corporation.
Approved emerging markets may not include all such emerging markets. In
determining whether to approve markets for investment, the Board of Trustees
will take into account, among other things, market liquidity, investor
information, government regulation, including fiscal and foreign exchange
repatriation rules and the availability of other access to these markets by
the investors of each of the Series.
As of the date of this registration statement, the following countries are
designated as Approved Markets: Argentina, Brazil, Chile, Greece, Hungary,
Indonesia, Israel, Korea, Malaysia, Mexico, Philippines, Poland, Republic of
China (Taiwan), Thailand and
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Turkey. Countries that may be approved in the future include but are not
limited to Colombia, Czech Republic, India, Jordan, 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 not less than 50%, of their total
revenues from either goods and services produced in, or sales made in,
Approved Markets.
Pending the investment of new capital in Approved Market equity securities,
each Series will typically invest in money market instruments or other highly
liquid debt instruments denominated in U.S. dollars (including, without
limitation, repurchase agreements). In addition, each Series may, for
liquidity, or for temporary defensive purposes during periods in which market
or economic or political conditions warrant, purchase highly liquid debt
instruments or hold freely convertible currencies, although neither Series
expects the aggregate of all such amounts to exceed 10% of its net assets
under normal circumstances. Both Series also may invest in shares of other
investment companies that invest in one or more Approved Markets, although
they intend to do so only where access to those markets is otherwise
significantly limited. The Series may also invest in money market mutual
funds for temporary cash management purposes. Subject to certain exceptions,
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 Code). To this extent, there
will be the exercise of discretion and consideration by the Advisor which
would not
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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-Registered Trademark- Index). The Advisor will also exercise discretion
in determining the allocation of investments as between Approved Markets.
It is management's belief that equity investments offer, over a long term, a
prudent opportunity for capital appreciation, but, at the same time,
selecting a limited number of such issues for inclusion in a Series involves
greater risk than including a large number of them.
Neither Series seeks current income as an investment objective, and
investments will not be based upon an issuer's dividend payment policy or
record. However, many of the companies whose securities will be included in a
Series do pay dividends. It is anticipated, therefore, that both Series will
receive dividend income.
Generally, securities will be purchased with the expectation that they will
be held for longer than one year. However, securities may be disposed of at
any time when, in the Advisor's judgment, circumstances warrant their sale.
Generally, securities will not be sold to realize short-term profits, but
when circumstances warrant, they may be sold without regard to the length of
time held.
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.
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 return in excess of the rate of inflation 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
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open for trading. (See "Investments in the Banking Industry" in this Item 4
below.)
THE DFA TWO-YEAR GLOBAL FIXED INCOME SERIES
The investment objective of The DFA Two-Year Global Fixed Income Series is to
maximize total returns consistent with preservation of capital. The Series
will invest in obligations issued or guaranteed by the U.S. and foreign
governments, their agencies and instrumentalities, corporate debt
obligations, bank obligations, commercial paper, repurchase agreements,
obligations of other domestic and foreign issuers having quality ratings
meeting the minimum standards described in "Description of Investments,"
securities of domestic or foreign issuers denominated in U.S. dollars but not
trading in the United States, and obligations of supranational organizations,
such as the World Bank, the European Investment Bank, European Economic
Community and European Coal and Steel Community. At the present time, the
Advisor expects that most investments will be made in the obligations of
issuers which are in developed countries, such as those countries which are
members of the Organization of Economic Cooperations and Development
("OECD"). However, in the future, the Advisor anticipates investing in
issuers located in other countries as well. Under normal market conditions,
the Series will invest at least 65% of the value of its assets in issuers
organized or having a majority of their assets in, or deriving a majority of
their operating income in, at least three different countries, one of which
may be the United States.
The Series will acquire obligations that have a dollar-weighted average
length of maturity not to exceed two years. Because many of the Series'
investments will be denominated in foreign currencies, the Series will also
enter into forward foreign currency contracts solely for the purpose of
hedging against fluctuations in currency exchange rates. The Series will
invest more than 25% of its total assets in obligations of U.S. and/or
foreign banks and bank holding companies when the yield to maturity on these
instruments exceeds the yield to maturity on all other eligible portfolio
investments of similar quality for a period of five consecutive days when the
NYSE is open for trading. (See "Investments in the Banking Industry" in this
Item 4 below.)
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.
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2. U.S. GOVERNMENT AGENCY OBLIGATIONS - Issued or guaranteed by
U.S. government-sponsored instrumentalities and federal agencies, including
the Federal National Mortgage Association, Federal Home Loan Bank and the
Federal Housing Administration.
3. CORPORATE DEBT OBLIGATIONS - Non-convertible corporate debt
securities (e.g., bonds and debentures) which are issued by companies whose
commercial paper is rated Prime-1 by Moody's Investors Services, Inc.
("Moody's") or A-1 by S&P and dollar-denominated obligations of foreign
issuers issued in the U.S. If the issuer's commercial paper is unrated, then
the debt security would have to be rated at least AA by S&P or Aa2 by
Moody's. If there is neither a commercial paper rating nor a rating of the
debt security, then the Advisor must determine that the debt security is of
comparable quality to equivalent issues of the same issuer rated at least AA
or Aa2.
4. BANK OBLIGATIONS - Obligations of U.S. banks and savings and
loan associations and dollar-denominated obligations of U.S. subsidiaries and
branches of foreign banks, such as certificates of deposit (including
marketable variable rate certificates of deposit) and bankers' acceptances.
Bank certificates of deposit will only be acquired from banks having assets
in excess of $1,000,000,000.
5. COMMERCIAL PAPER - Rated, at the time of purchase, A-1 or
better by S&P or Prime-1 by Moody's, or, if not rated, issued by a
corporation having an outstanding unsecured debt issue rated Aaa by Moody's
or AAA by S&P, and having a maximum maturity of nine months.
6. REPURCHASE AGREEMENTS - Instruments through which the Series
purchase securities ("underlying securities") from a bank, or a registered
U.S. government securities dealer, with an agreement by the seller to
repurchase the security at an agreed price, plus interest at a specified
rate. The underlying securities will be limited to U.S. government and agency
obligations described in (1) and (2) above. The Series will not enter into a
repurchase agreement with a duration of more than seven days if, as a result,
more than 10% of the value of the Series' total assets would be so invested.
The Series will also only invest in repurchase agreements with a bank if the
bank has at least $1,000,000,000 in assets and is approved by the Investment
Committee of the Advisor. The Advisor will monitor the market value of the
securities plus any accrued interest thereon so that they will at least equal
the repurchase price.
7. FOREIGN GOVERNMENT AND AGENCY OBLIGATIONS - Bills, notes, bonds
and other debt securities issued or guaranteed by foreign governments, or
their agencies and instrumentalities.
8. SUPRANATIONAL ORGANIZATION OBLIGATIONS - Debt securities of
supranational organizations such as the European Coal and Steel Community,
the European Economic Community and the World Bank, which are chartered to
promote economic development.
9. FOREIGN ISSUER OBLIGATIONS - Debt securities of non-U.S.
issuers rated AA or better by S&P or Aa2 or better by Moody's.
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10. EURODOLLAR OBLIGATIONS - Debt securities of domestic or foreign
issuers denominated in U.S. dollars but not trading in the United States.
Investors should be aware that the net asset values of the Fixed Income
Series may change as general levels of interest rates fluctuate. When
interest rates increase, the value of a portfolio of fixed-income securities
can be expected to decline. Conversely, when interest rates decline, the
value of a portfolio of fixed-income securities can be expected to increase.
INVESTMENTS IN THE BANKING INDUSTRY
The DFA One-Year Fixed Income and Two-Year Global Fixed Income Series will
invest more than 25% of their total respective assets in obligations of U.S.
and/or foreign banks and bank holding companies when the yield to maturity on
these investments exceeds the yield to maturity on all other eligible
portfolio investments for a period of five consecutive days when the NYSE is
open for trading. For the purpose of this policy, which is a fundamental
policy of each Series and can only be changed by a vote of the shareholders
of each Series, banks and bank holding companies are considered to constitute
a single industry, the banking industry. When investment in such obligations
exceeds 25% of the total net assets of any of these Series, such Series will
be considered to be concentrating their investments in the banking industry.
As of the date of this registration statement, The DFA One-Year Fixed Income
Series is not concentrating its investments in this industry and the Two-Year
Global Fixed Income Series is concentrating its 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: certificates of deposit, bankers' acceptances, commercial paper and
other debt obligations 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. 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
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
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market and other conditions; it will not be a limiting factor when management
believes that portfolio changes are appropriate. While the Fixed Income
Series acquire securities in principal transactions and, therefore, do not
pay brokerage commissions, the spread between the bid and asked prices of a
security may be considered to be a "cost" of trading. Such costs ordinarily
increase with trading activity. However, as stated above, securities
ordinarily will be sold when, in the Advisor's judgment, the monthly return
of the Fixed Income Series will be increased as a result of portfolio
transactions after taking into account the cost of trading. It is anticipated
that securities will be acquired in the secondary markets for short term
instruments.
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. While
the Global Series are authorized to lend securities, it is not presently
anticipated that the Series will do so, in light of their investment
strategies.
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
"Investment Objectives and Policies - Fixed Income Series - The DFA One-Year
Fixed Income Series" in Items 4(a) and (b).)
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
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in-the-money amount may be excluded in calculating the 5%. Such investments
entail certain risks. (See "Risks" in Item 4(c).)
4(c) RISKS
Please note that while the following discussion relates to the risks of
certain investments by certain Series, it should be understood that, with
respect to the Global Series, the discussion applies to the Master Series in
which the Global Series invest.
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, DFA International Value, Global
Value, Global Large Company and Global Small Company Series (in the case of
the Global Series, through their investments in the Master Series), and the
Large Cap International Portfolio, invest in foreign issuers. Such
investments involve risks that are not associated with investments in U.S.
public companies. Such risks may include legal, political and or diplomatic
actions of foreign governments, such as imposition of withholding taxes on
interest and dividend income payable on the securities held, possible seizure
or nationalization of foreign deposits, establishment of exchange controls or
the adoption of other foreign governmental restrictions which might adversely
affect the value of the assets held by the Series. (Also see "Foreign
Currencies and Related Transactions" below.) Further, foreign issuers are not
generally subject to uniform accounting, auditing and financial reporting
standards comparable to those of U.S. public companies and there may be less
publicly available information about such companies than comparable U.S.
companies. The Enhanced U.S. Large Company, 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, DFA International Value, Global Value, Global Large Company and
Global Small Company Series and Large Cap International Portfolio 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
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governments, or dependent upon a relatively limited number of commodities
and, thus, sensitive to changes in world prices for these commodities.
In many foreign countries, stock markets are more variable than U.S. markets
for two reasons. Contemporaneous declines in both (i) foreign securities
prices in local currencies and (ii) the value of local currencies in relation
to the U.S. dollar can have a significant negative impact on the net asset
value of a Series that holds the foreign securities. The next asset value of
the Series is denominated in U.S. dollars, and therefore, declines in market
price of both the foreign securities held by a Series and the foreign
currency in which those securities are denominated will be reflected in the
net asset value of the Series' shares.
INVESTING IN EMERGING MARKETS
The investments of The Emerging Markets Series and The Emerging Markets Small
Cap Series involve risks that are in addition to the usual risks of investing
in developed foreign markets. A number of emerging securities markets
restrict, to varying degrees, foreign investment in stocks. Repatriation of
investment income, capital and the proceeds of sales by foreign investors may
require governmental registration and/or approval in some emerging countries.
In some jurisdictions, such restrictions and the imposition of taxes are
intended to discourage shorter- rather than longer-term holdings. While The
Emerging Markets Series and The Emerging Markets Small Cap Series will invest
only in markets where these restrictions are considered acceptable to the
Advisor, new or additional repatriation restrictions might be imposed
subsequent to a Series' investment. If such restrictions were imposed
subsequent to investment in the securities of a particular country, a Series
might, among other things, discontinue the purchasing of securities in that
country. Such restrictions will be considered in relation to the Series'
liquidity needs and other factors and may make it particularly difficult to
establish the fair market value of particular securities from time to time.
The valuation of securities held by a Series is the responsibility of the
Board of Trustees, acting in good faith and with advice from the Advisor.
(See "Pricing of Fund Shares" in Item 7(a).) 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
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controlled to market-based economies. There can be no assurance that such
transitions will be successful.
Brokerage commissions, custodial services and other costs relating to
investment in foreign markets generally are more expensive than in the United
States; this is particularly true with respect to emerging markets. Such
markets have different settlement and clearance procedures. In certain
markets there have been times when settlements do not keep pace with the
volume of securities transactions, making it difficult to conduct such
transactions. The inability of a Series to make intended securities purchases
due to settlement problems could cause the Series to miss investment
opportunities. Inability to dispose of a portfolio security caused by
settlement problems could result either in losses to a Series due to
subsequent declines in value of the portfolio security or, if a Series has
entered into a contract to sell the security, could result in possible
liability to the purchaser.
The risk also exists that an emergency situation may arise in one or more
emerging markets as a result of which trading of securities may cease or may
be substantially curtailed and prices for a Series' portfolio securities in
such markets may not be readily available. The Series' portfolio securities
in the affected markets will be valued at fair value determined in good faith
by or under the direction of the Board of Trustees.
Government involvement in the private sector varies in degrees among the
emerging securities markets contemplated for investment by the Series. Such
involvement may, in some cases, include government ownership of companies in
certain commercial business sectors, wage and price controls or imposition of
trade barriers and other protectionist measures. With respect to any
developing country, there is no guarantee that some future economic or
political crisis will not lead to price controls, forced mergers of
companies, expropriation, the creation of government monopolies, or other
measures which could be detrimental to the investments of a Series.
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.
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FOREIGN CURRENCIES AND RELATED TRANSACTIONS
Investments of the Japanese, United Kingdom, Continental and Pacific Rim
Series, The DFA International Value Series, Large Cap International
Portfolio, 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-Registered Trademark- 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-Registered
Trademark- Index, which tends to be cyclical in nature, reflecting periods
when stock prices generally rise or fall.
FUTURES CONTRACTS AND OPTIONS ON FUTURES
All Series except The U.S. 9-10 and 6-10 Small Company Series and The DFA
One-Year Fixed Income 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, as a result, more than 5% of its
net assets
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would then consist of margin deposits and premiums required to establish such
positions, after taking into account unrealized profits and unrealized losses
on such contracts it has entered into; provided, however, that, in the case
of an option that is in-the-money at the time of purchase, the in-the-money
amount may be excluded in calculating the 5%.
These investments entail the risk that an imperfect correlation may exist
between changes in the market value of the stocks owned by the Series and the
prices of such futures contracts and options, and, at times, the market for
such contracts and options might lack liquidity, thereby inhibiting a Series'
ability to close a position in such investments. Gains or losses on
investments in options and futures depend on the direction of securities
prices, interest rates and other economic factors, and the loss from
investing in futures transactions is potentially unlimited. Certain
restrictions imposed by the 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 OTC. The Enhanced U.S. Large Company
Series may use these techniques to hedge against changes in securities prices
or as part of its overall investment strategy. An option on an index is a
contract that gives the holder of the option, in return for a premium, the
right to buy from (in the case of a call) or sell to (in the case of a put)
the writer of the option the cash value of the index at a specified exercise
price at any time during the term of the option. Upon exercise, the writer of
an option on an index is obligated to pay the difference between the cash
value of the index and the exercise price multiplied by the specified
multiplier for the index option. (An index is designed to reflect specified
facets of a particular financial or securities market, a specific group of
financial instruments or securities, or certain economic indicators.) A stock
index fluctuates with changes in the market values of the stocks included in
the index.
With respect to the writing of options, the writer has no control over the
time when it may be required to fulfill its obligation. Prior to exercise or
expiration, an option may be closed out by an offsetting purchase or sale of
an option on the same series. There can be no assurance, however, that a
closing purchase or sale transaction can be effected when The Enhanced U.S.
Large Company Series desires.
The Enhanced U.S. Large Company Series may write covered straddles consisting
of a combination of a call and a put written on the same index. A straddle
will be covered when sufficient assets are deposited to meet The Enhanced
U.S. Large Company Series' immediate obligations. The Series may use the same
liquid assets to cover both the call and put options where the exercise price
of the call and the put are the same or the exercise price of the call is
higher than that of the put. In such cases, the Series will also segregate
liquid assets equivalent to the amount, if any, by which the put is "in the
money."
The effectiveness of purchasing stock index options will depend upon the
extent to which price movements in The Enhanced U.S. Large Company Series'
portfolio correlate with price movements of the stock index selected. Because
the value of an index option depends upon
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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 Code may limit the ability of such Series to
invest in options.
SWAPS
The Enhanced U.S. Large Company Series may enter into equity index swap
agreements for purposes of attempting to obtain a particular desired return
at a lower cost to the Series than if the Series had invested directly in an
instrument that yielded that desired return. Swap agreements are two-party
contracts entered into primarily by institutional investors for periods
ranging from a few weeks to more than one year. In a standard "swap"
transaction, two parties agree to exchange the returns (or differentials in
rates of return) earned or realized on particular predetermined investments
or instruments. The gross returns to be exchanged or "swapped" between the
parties are generally calculated with respect to a "notional amount," i.e.,
the return on or increase in value of a particular dollar amount invested in
a group of securities representing a particular index.
The "notional amount" of the swap agreement is only a fictive basis on which
to calculate the obligations which the parties to a swap agreement have
agreed to exchange. Most swap agreements entered into by The Enhanced U.S.
Large Company Series would calculate the obligations of the parties to the
agreement on a "net basis." Consequently, the Series' current obligations (or
rights) under a swap agreement will generally be equal only to the net amount
to be paid or received under the agreement based on the relative values of
the positions held by each party to the agreement (the "net amount"). The
Enhanced U.S. Large Company Series' current obligations under a swap
agreement will be accrued daily (offset against amounts owed to the Series)
and any accrued but unpaid net amounts owed to a swap counterparty will be
covered by the maintenance of a segregated account consisting of liquid
assets to avoid any potential leveraging of the Series' portfolio. The
Enhanced U.S. Large Company Series will not enter into a swap agreement with
any single party if the net amount owed or to be received under existing
contracts with that party would exceed 5% of the Series' assets.
Because they are two-party contracts and because they may have terms of
greater than seven days, swap agreements may be considered to be illiquid,
and, therefore, swap agreements entered into by The Enhanced U.S. Large
Company Series and other illiquid securities will be limited to 15% of the
net assets of the Series. Moreover, The Enhanced U.S. Large Company Series
bears the risk of loss of the amount expected to be received under a swap
agreement in the event of the default or bankruptcy of a swap agreement
counterparty. The Advisor will cause The Enhanced U.S. Large Company Series
to enter into swap agreements only with counterparties that the Investment
Committee of the Advisor has approved. Certain restrictions imposed on the
Enhanced U.S. Large Company Series by the Code may limit the Series' ability
to use swap
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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.
RESPONSES TO ITEM 5 HAVE BEEN OMITTED PURSUANT TO PARAGRAPH 2(b) OF
INSTRUCTION B OF THE GENERAL INSTRUCTIONS TO FORM N-1A
ITEM 6. MANAGEMENT, ORGANIZATION, AND CAPITAL STRUCTURE
(a)(1) INVESTMENT ADVISER.
(i) Dimensional Fund Advisors Inc., 1299 Ocean Avenue, 11th Floor, Santa
Monica, California 90401, serves as investment advisor to each of the Series,
except the Global Series, for which it serves as the administrator. 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 $36 billion.
Pursuant to an investment management agreement with the Trust with respect to
each Series except the Global 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.
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
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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. 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 2001 Gateway, 1 MacQuarie Place, Sydney, New South
Wales 2000, Australia, the successor to Dimensional Fund Advisors Asia Inc.,
has the authority and responsibility to select brokers and dealers to execute
securities transactions for the Japanese and Pacific Rim Series. DFA
Australia's duties include the maintenance of a trading desk for each Series
and the determination of the best and most efficient means of executing
securities transactions. On at least a semi-annual basis, the Advisor reviews
the holdings of the Japanese and Pacific Rim Series and reviews the trading
process and the execution of securities transactions. The Advisor is
responsible for determining those securities which are eligible for purchase
and sale by these Series and may delegate this task, subject to its own
review, to DFA Australia. DFA Australia maintains and furnishes to the
Advisor information and reports on Japanese and Pacific Rim small companies,
including its recommendations of securities to be added to the securities
that are eligible for purchase by each Series. The Advisor 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.
6(a)(1)(ii) For the fiscal year ended November 30, 1999, 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:
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<TABLE>
<CAPTION>
SERIES MANAGEMENT FEE
<S> <C>
U.S. Large Company 0.025%
Enhanced U.S. Large Company 0.05%
U.S. Large Cap Value 0.10%
Tax-Managed U.S. Marketwide Value 0.20%
U.S. 4-10 Value 0.10%
U.S. 6-10 Value 0.20%
U.S. 6-10 Small Company 0.03%
U.S. 9-10 Small Company 0.10%
DFA International Value 0.20%
Japanese Small Company 0.10%
Pacific Rim Small Company 0.10%
United Kingdom Small Company 0.10%
Continental Small Company 0.10%
Emerging Markets 0.10%
Emerging Markets Small Cap 0.20%
DFA One-Year Fixed Income 0.05%
DFA Two-Year Global Fixed Income 0.05%
</TABLE>
The management fee applicable to The Tax-Managed U.S. Marketwide Value Series
X, which had not commenced operations as of the date of this registration
statement, is equal to 0.20% of the Series' average net assets on an annual
basis. While The Global Value Series, The Global Large Company Series and The
Global Small Company Series are not subject to a management fee, investments
by the Global Series in the Master Series are subject to the management fees
charged by the respective Master Series. The Large Cap International
Portfolio pays a management fee equal to 0.25% of its average net assets on
an annual basis.
6(a)(2) PORTFOLIO MANAGER. Investment decisions for all Series (except the
Global 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.
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6(a)(3) LEGAL PROCEEDINGS. Not applicable.
6(b) CAPITAL STOCK. Not applicable.
ITEM 7. SHAREHOLDER INFORMATION
(a) PRICING OF FUND 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. The
value of the shares of the Global Series will fluctuate in relation to the
investment experience of the Master Series in which the Global Series invest.
Securities held by the Series which are listed on the securities exchange and
for which market quotations are available are valued at the last quoted sale
price of the day or, if there is no such reported sale, The U.S. 6-10 Small
Company, The U.S. 9-10 Small Company, The U.S. Large Company, The DFA
International Value, the U.S. Value, The Emerging Markets and The Emerging
Markets Small Cap Series value such securities at the mean between the most
recent quoted bid and asked prices. Price information on listed securities is
taken from the exchange where the security is primarily traded. Securities
issued by open-end investment companies, such as the Series, are valued using
their respective net asset values for purchase orders placed at the close of
the NYSE. Unlisted securities for which market quotations are readily
available are valued at the mean between the most recent bid and asked
prices. The value of other assets and securities for which no quotations are
readily available (including restricted securities) are determined in good
faith at fair value in accordance with procedures adopted by the Board of
Trustees. The net asset values per share of the Japanese, Pacific Rim,
Continental, United Kingdom, The DFA International Value, The DFA Two-Year
Global Fixed Income, The Emerging Markets and The Emerging Markets Small Cap
and the Large Cap International Portfolio are expressed in U.S. dollars by
translating the net assets of each Series using the mean 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
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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. Since The Japanese Small Company,
Pacific Rim Small Company, United Kingdom Small Company, Continental Small
Company, DFA International Value, Emerging Markets and Emerging Markets Small
Cap Series own securities that are primarily listed on foreign exchanges
which may trade on days when the Series do not price their shares, the net
asset value of such Series and the Global Series may change on days when
shareholders will not be able to purchase or redeem shares.
The Japanese Small Company, Pacific Rim Small Company, United Kingdom Small
Company, Continental Small Company, DFA International Value, Emerging Markets
and Emerging Markets Small Cap Series are closed on days that the foreign
securities exchange on which their portfolio securities are principally
traded is closed. For a Series that invests in securities traded on a number
of foreign securities exchanges, such Series will be closed if portfolio
securities greater than 50% of its total assets are principally traded on
exchanges that are closed that day. Purchase and redemption orders for shares
of such Series will not be accepted on those days.
Certain of the securities holdings of The Emerging Markets Series and The
Emerging Markets Small Cap Series in Approved Markets may be subject to tax,
investment and currency repatriation regulations of the Approved Markets that
could have a material effect on the valuation of the securities. For example,
a Series might be subject to different levels of taxation on current income
and realized gains depending upon the holding period of the securities. In
general, a longer holding period (E.G., 5 years) may result in the imposition
of lower tax rates than a shorter holding period (E.G., 1 year). The Series
may also be subject to certain contractual arrangements with investment
authorities in an Approved Market which require a Series to maintain minimum
holding periods or to limit the extent of repatriation of income and realized
gains. As a result, the valuation of particular securities at any one time
may depend materially upon the assumptions that a Series makes at that time
concerning the anticipated holding period for the securities. Absent special
circumstances as determined by the Board of Trustees, it is presently
intended that the valuation of such securities will be based upon the
assumption that they will be held for at least the amount of time necessary
to avoid higher tax rates or penalties and currency repatriation
restrictions. However, the use of such valuation standards will not prevent
the Series from selling such securities in a shorter period of time if the
Advisor considers the earlier sale to be a more prudent course of action.
Revision in valuation of those securities will be made at the time of the
transaction to reflect the actual sales proceeds inuring to the Series.
Futures contracts are valued using the settlement price established each day
on the exchange on which they are traded. The value of such futures contracts
held by a Series are determined each day as of such close.
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Offering Price
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, Continental and Global
Small Company 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.
In the case of the Global Small Company Series, the reimbursement fee is
equal to a blended rate of the reimbursement fees of its underlying Master
Series. The blended rate is determined on a quarterly basis and is based upon
the target allocations for the Master Series then in effect at the end of
each quarter. The blended rate will be calculated by multiplying the rate of
reimbursement fee of each Master Series by a fraction equal to the portion of
the assets of the Global Small Company Series which, at such time, is being
allocated to each Master Series and adding the results thereof. If there is a
change to the reimbursement fee of a Master Series during a quarter, the
blended rate will be recalculated to reflect such change in the Master
Series' reimbursement fee.
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.
7(b) PURCHASE OF FUND SHARES. 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
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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, Continental and Global Small Company Series
are sold at a price which is equal to the net asset value of such shares plus
a reimbursement fee. (See Item 7(a).) 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.
IN KIND PURCHASES
If accepted by the Trust, shares of the Series may be purchased in exchange
for securities which are eligible for purchase or otherwise represented in
the Series' portfolios at the time of the exchange as described in this
registration statement or in exchange for local currencies in which such
securities of the Japanese, United Kingdom, Pacific Rim, Continental, The DFA
International Value, The Emerging Markets, The Emerging Markets Small Cap,
The DFA Two-Year Global Fixed Income and The Enhanced U.S. Large Company
Series are denominated. Subject to approval by the Advisor, shares of The
Global Value Series, The Global Large Company Series and The Global Small
Company Series may be purchased in any freely convertible currency and the
necessary foreign exchange transactions will be arranged on behalf of, and at
the expense of, the investor. Investors settling in any currency other than
U.S. dollars are advised that a delay in processing a purchase of shares of a
Global Series may occur to allow for currency conversion. 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 "Pricing of
Fund Shares" in Item 7(a), 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, Global
Value, Global Large Company, Global Small Company, The DFA International
Value or DFA Two-Year Global Fixed Income Series with local currencies should
first contact the Advisor 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 Items 4(a) and (b) above.)
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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.
7(c) REDEMPTION OF FUND SHARES. As stated above in response to Item 7(b),
"Purchase of Fund Shares," 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 Investment Company Act of 1940. 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 (other than the
Tax-Managed Marketwide Value Series, the Tax-Managed Marketwide Value Series
X, The Global Value Series, The Global Large Company Series and The Global
Small Company 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. Each Global Series is authorized to make redemption
payments solely by a distribution of portfolio securities that the Global
Series receives from a Master Series (or to pay the redemption price with a
combination of securities and cash), when it is determined by the Advisor, in
its capacity as administrator to the Global Series, to be in the best
interests of the Global Series. The Tax-Managed U.S. Marketwide Value Series
is authorized to make redemption payments solely by a distribution of
portfolio securities (or to pay the redemption price with a combination of
securities or cash) when it is determined by the Advisor to be in the best
interests of the Series. 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. The Global Series
reserve the right to redeem their shares in the currencies in which their
respective Master Funds' 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.
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
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may take up to fifteen days or more. Investors may avoid this delay by
submitting a certified check along with the purchase order.
For additional information about redemption of Trust shares, see Item 18 in
Part B.
7(d) DIVIDENDS AND DISTRIBUTIONS. Except for the Partnership Series (defined
below) and The DFA One-Year Fixed Income Series, the Trust's policy is to
distribute in December of each year all ordinary income undistributed during
the calendar year together with any investment company taxable income
(determined without regard to the deduction for dividends paid) and capital
gain net income earned through November 30. Dividends from ordinary income of
The Enhanced U.S. Large Company Series, U.S. Large Cap Value Series, and DFA
International Value Series are distributed quarterly, and any investment
company taxable income and capital gain net income are distributed annually
in December. Ordinary income 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. The DFA One-Year Fixed Income Series will
distribute annually in December any capital gain net income. The DFA Two-Year
Global Fixed Income Series will distribute annually in December any
investment company taxable income and capital gain net income.
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, The U.S. Large Company Series, and the U.S.
Value Series, upon written notice to the Advisor, 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 such Series, upon written notice to Advisor, they may
receive all income dividends in cash. Shareholders of the Global Series may
select the Cash Option described in clause (iii) in the preceding sentence.
7(e) TAX CONSEQUENCES. Each Series of the Trust, other than the Japanese
Series, United Kingdom Series, Pacific Rim Series, Continental Series, The
U.S. Large Company Series, The Emerging Markets Series, The Emerging Markets
Small Cap Series, the Tax-Managed Marketwide Value Series and the Tax-Managed
Marketwide Value Series X, is classified as a separate corporation for U.S.
federal income tax purposes (collectively, referred to as the "Corporate
Series").
The Japanese Series, United Kingdom Series, Pacific Rim Series, Continental
Series, The U.S. Large Company Series, The Emerging Markets Series, The
Emerging Markets Small Cap Series, the Tax-Managed Marketwide Value Series
and the Tax-Managed Marketwide Value Series X (together, the "Partnership
Series") are classified as partnerships for U.S. federal income tax purposes.
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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 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 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' taxable year-end will be November 30, but may be
subject to change depending on the tax years of the investors in such Series.
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.
Redemptions of shares in a Partnership Series may be taxable. In general, a
redemption of shares resulting in a distribution of cash by a Partnership
Series to an investor in excess of that investor's tax basis in its shares of
such Partnership Series is taxable to the extent of such excess.
The Partnership Series will inform investors promptly after the close of each
fiscal year of the source of dividends and distributions at the time they are
paid and will promptly advise investors of their allocable share of a
Partnership Series' income, gains, losses, deductions and credits for U.S.
federal income tax purposes.
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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.
ITEM 8. DISTRIBUTION ARRANGEMENTS
(a) SALES LOADS. Not applicable.
(b) RULE 12b-1 FEES. Not applicable.
(c) MASTER-FEEDER FUNDS. Certain shareholders of the Series are open-end
investment companies and unregistered investment companies that seek to
achieve their investment objectives by investing all of their investable
assets in one or more corresponding Series of the Trust (the "Feeder
Portfolios"). Each Feeder Portfolio has the same investment objective,
policies and limitations as the corresponding Series in which it invests. The
master-feeder structure is unlike many other investment companies that
directly acquire and manage their own portfolio of securities. The investment
experience of each Feeder Portfolio will correspond directly with the
investment experience of its corresponding Series, and the investment
experience of each Global Series will correspond directly with the investment
experience of its corresponding Master Series.
RESPONSES TO ITEM 9 HAVE BEEN OMITTED PURSUANT TO PARAGRAPH 2(b) OF
INSTRUCTION B OF THE GENERAL INSTRUCTIONS TO FORM N-1A
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PART B:
ITEM 10. COVER PAGE AND TABLE OF CONTENTS Not applicable.
ITEM 11. FUND HISTORY
(a) The Trust was organized as a Delaware business trust on October 27,
1992. Until August 1, 1997, The U.S. 6-10 Value Series was named The U.S.
Small Cap Value Series.
(b) Not applicable.
ITEM 12. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
(a) CLASSIFICATION. The Trust is an open-end, management investment company
registered under the Investment Company Act of 1940. Each Series operates 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,
except for the DFA One-Year Fixed Income and Two-Year Global Fixed Income
Series' investments in obligations of banks and bank holding companies, as
otherwise noted in this registration statement.
(b) AND (c) INVESTMENT STRATEGIES AND RISKS AND FUND POLICIES. In addition to
the policies stated in response to Item 4 of Part A, each of the Series has
adopted certain limitations which
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may not be changed with respect to any Series without the approval of a
majority of the outstanding voting securities of the Series. A "majority" is
defined as the lesser of: (1) at least 67% of the voting securities of the
Series (to be affected by the proposed change) present at a meeting, if the
holders of more than 50% of the outstanding voting securities of the Series
are present or represented by proxy, or (2) more than 50% of the outstanding
voting securities of such Series.
The Series will not:
(1) invest in commodities or real estate, including limited partnership
interests therein, although they may purchase and sell securities of
companies which deal in real estate and securities which are secured by
interests in real estate, and all Series except The U.S. 9-10 and 6-10 Small
Company Series and The DFA One-Year Fixed Income Series may purchase or sell
financial futures contracts and options thereon; and The Enhanced U.S. Large
Company Series may purchase, sell and enter into indices-related futures
contracts, options on such futures contracts, securities-related swap
agreements and other derivative instruments;
(2) make loans of cash, except through the acquisition of repurchase
agreements and obligations customarily purchased by institutional investors;
(3) as to 75% of the total assets of a Series, invest in the securities of
any issuer (except obligations of the U.S. Government and its
instrumentalities) if, as a result, more than 5% of the Series' total assets,
at market, would be invested in the securities of such issuer; provided that
this limitation applies to 100% of the total assets of The U.S. 9-10 Small
Company Series;
(4) purchase or retain securities of an issuer if those officers and trustees
of the Trust or officers and directors of the Advisor owning more than 1/2 of
1% of such securities together own more than 5% of such securities; provided
that The U.S. 4-10 Value Series, The Global Value Series, The Global Large
Company Series, The Global Small Company Series, The Tax-Managed U.S.
Marketwide Value Series and The Tax-Managed U.S. Marketwide Value Series X
are not subject to this limitation;
(5) borrow, except from banks and as a temporary measure for extraordinary or
emergency purposes and then, in no event, in excess of 5% of a Series' gross
assets valued at the lower of market or cost; provided that each Series,
except The DFA One-Year Fixed Income Series, U.S. 9-10 Small Company Series
and the Japanese Series, may borrow amounts not exceeding 33% of their net
assets from banks and pledge not more than 33% of such assets to secure such
loans;
(6) pledge, mortgage, or hypothecate any of its assets to an extent greater
than 10% of its total assets at fair market value, except as described in (5)
above; provided that The U.S. 4-10 Value Series, The Global Value Series, The
Global Large Company Series, The Global Small Company Series, The Tax-Managed
U.S. Marketwide Value Series and The Tax-Managed U.S. Marketwide Value Series
X are not subject to this limitation;
(7) invest more than 10% of the value of the Series' total assets in illiquid
securities, which include certain restricted securities, repurchase
agreements with maturities of greater than seven
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days, and other illiquid investments; provided that The U.S. 4-10 Value
Series, The Tax-Managed U.S. Marketwide Value Series, The Tax-Managed U.S.
Marketwide Value Series X, Enhanced U.S. Large Company Series, The DFA
Two-Year Global Fixed Income Series, 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
Global Value Series, The Global Large Company Series, The Global Small
Company 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, The U.S. 4-10
Value Series, The Global Value Series, The Global Large Company Series, The
Global Small Company Series, The Tax-Managed U.S. Marketwide Value Series and
The Tax-Managed U.S. Marketwide Value Series X 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 Series, Emerging
Markets Small Cap Series, Japanese Series, United Kingdom Series, Pacific Rim
Series and Continental Series are not subject to this limitation; (b) each of
the U.S. 4-10 Value Series, Tax-Managed U.S. Marketwide Value Series,
Enhanced U.S. Large Company Series, Emerging Markets Series, Emerging Markets
Small Cap Series, Japanese Series, United Kingdom Series, Pacific Rim Series,
Continental Series, The Global Value Series, The Global Large Company Series
and The Global Small Company Series may invest assets in securities of
investment companies and units of such companies such as, but not limited to,
S&P Depository Receipts; and (c) the U.S. 9-10 Small Company Series is not
subject to this limitation;
(11) invest more than 5% of its total assets in securities of companies which
have (with predecessors) a record of less than three years' continuous
operation; provided that The U.S. 9-10 Small Company Series, The U.S. 4-10
Value Series, The Global Value Series, The Global Large Company Series, The
Global Small Company Series, The Tax-Managed U.S. Marketwide Value Series and
The Tax-Managed U.S. Marketwide Value Series X 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 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 Global Value Series, The Global Large Company Series,
The Global Small Company Series and The U.S. 4-10 Value Series are
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not subject to these limitations; and (c) The Tax-Managed U.S. Marketwide
Value Series may write or acquire options;
(14) purchase warrants; however, each Series, except The DFA One-Year Fixed
Income Series and Two-Year Global Fixed Income Series (the "Fixed Income
Series"), may acquire warrants as a result of corporate actions involving
its holdings of other equity securities; and The U.S. 4-10 Value Series, The
Global Value Series, The Global Large Company Series, The Global Small
Company Series, The Tax-Managed U.S. Marketwide Value Series and The
Tax-Managed U.S. Marketwide Value Series X are not subject to this limitation;
(15) purchase securities on margin or sell short; provided that The U.S. 4-10
Value Series, The Global Value Series, The Global Large Company Series, The
Global Small Company Series, The Tax-Managed U.S. Marketwide Value Series and
The Tax-Managed U.S. Marketwide Value Series X are not subject to the
limitation on selling securities short;
(16) acquire more than 10% of the voting securities of any issuer; provided
that (a) this limitation applies only to 75% of the assets of The U.S. Value
Series, The Emerging Markets Series and The Emerging Markets Small Cap
Series; and (b) The U.S. 9-10 Small Company Series, The Tax-Managed U.S.
Marketwide Value Series, The Tax-Managed U.S. Marketwide Value Series X, The
Global Value Series, The Global Large Company Series and The Global Small
Company Series are not subject to this limitation; or
(17) issue senior securities (as such term is defined in Section 18(f) of the
Investment Company Act of 1940), except to the extent permitted under the Act.
The investment limitations described in (3), (4), (7), (9), (10), (11), (12)
and (16) above do not prohibit The Global Value Series, The Global Large
Company Series and The Global Small Company Series from investing all or
substantially all of their assets in the shares of other registered, open-end
investment companies, such as the Master Series. The investment limitations
of the Master Series are the same as those of the corresponding Global Series.
The investment limitations described in (1) and (15) above do not prohibit
each Series that may purchase or sell financial futures contracts and options
thereon from making margin deposits to the extent permitted under applicable
regulations; and the investment limitations described in (1), (13) and (15)
above do not prohibit The Enhanced U.S. Large Company Series from (i) making
margin deposits in connection with transactions in options; and (ii)
maintaining a short position, or purchasing, writing or selling puts, calls,
straddles, spreads or combinations thereof in connection with transactions in
options, futures, and options on futures and transactions arising under swap
agreements or other derivative instruments.
For purposes of (5) above, The Emerging Markets Series and The Emerging
Markets Small Cap Series may borrow in connection with a foreign currency
transaction or the settlement of a portfolio trade. The only type of
borrowing contemplated thereby is the use of a letter of credit issued on
such Series' behalf in lieu of depositing initial margin in connection with
currency futures contracts, and the Series have no present intent to engage
in any other types of borrowing transactions under this authority. Although
(2) above prohibits cash loans, the Series are
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authorized to lend portfolio securities. (See "Securities Loans" in Item 4 of
Part A.)
Although (2) above prohibits cash loans, the Global Series are authorized to
lend portfolio securities. Inasmuch as the Global Series will only hold
shares of the Master Series, the Global Series do not intend to lend those
shares.
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.
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 and The Global Small Company Series (indirectly,
through its investment in the Master Series), will not purchase interests in
any real estate investment trust; and (2) The Enhanced U.S. Large Company
Series, U.S. 4-10 Value Series, Tax-Managed U.S. Marketwide Value Series,
Tax-Managed U.S. Marketwide Value Series X, Two-Year Global Fixed Income
Series, Emerging Markets Small Cap Series, The Global Small Company Series,
The Global Value Series and The Global Large Company 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, The Global Small Company Series, The
Global Value Series, and The Global Large Company Series (indirectly, through
its investment in the Master Series) may acquire and sell forward foreign
currency exchange contracts in order to hedge against changes in the level of
future currency rates. Such contracts involve an obligation to purchase or
sell a specific currency at a future date at a price set in the contract.
While the U.S. Value Series and The DFA International Value Series have
retained authority to buy and sell financial futures contracts and options
thereon, they have no present intention to do so.
Notwithstanding any of the above investment restrictions, The Emerging
Markets Series and The Emerging Markets Small Cap Series may establish
subsidiaries or other similar vehicles for the purpose of conducting their
investment operations in Approved Markets, if such subsidiaries or vehicles
are required by local laws or regulations governing foreign investors such as
the Series or whose use is otherwise considered by the Series to be
advisable. Such Series would "look through" any such vehicle to determine
compliance with their investment restrictions.
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Subject to future regulatory guidance, for purposes of those investment
limitations identified above that are based on total assets, "total assets"
refers to the assets that the Series owns, and does not include assets which
the Series does not own but over which it has effective control. For example,
when applying a percentage investment limitation that is based on total
assets, the Series will exclude from its total assets those assets which
represent collateral received by the Series for its securities lending
transactions.
Unless otherwise indicated, all limitations applicable to the Series'
investments apply only at the time that a transaction is undertaken. With
respect to illiquid securities, if a fluctuation in value causes a Series to
go above its limitation on investment in illiquid securities, the Board will
consider what action, if any, should be taken to reduce the percentage to the
applicable limitation. Any subsequent change in a rating assigned by any
rating service to a security or change in the percentage of a Series' assets
invested in certain securities or other instruments resulting from market
fluctuations or other changes in a Series' total assets will not require a
Series to dispose of an investment until the Advisor determines that it is
practicable to sell or closeout the investment without undue market or tax
consequences. In the event that ratings services assign different ratings to
the same security, the Advisor will determine which rating it believes best
reflects the security's quality and risk at that time, which may be the
higher of the several assigned ratings.
Because the structure of each Series, except the Fixed Income Series, is
based on the relative market capitalizations of eligible holdings, it is
possible that the Series might include at least 5% of the outstanding voting
securities of one or more issuers. In such circumstances, the Trust and the
issuer would be deemed "affiliated persons" under the Investment Company Act
of 1940 and certain requirements of the Act regulating dealings between
affiliates might become applicable.
OPTIONS ON STOCK INDICES
The Enhanced U.S. Large Company Series may purchase and sell options on stock
indices. With respect to the sale of call options on stock indices, pursuant
to published positions of the Securities and Exchange Commission ("SEC"),
The Enhanced U.S. Large Company Series will either (1) maintain with its
custodian liquid assets equal to the contract value (less any margin
deposits); (2) hold a portfolio of stocks substantially replicating the
movement of the index underlying the call option; or (3) hold a separate call
on the same index as the call written where the exercise price of the call
held is (a) equal to or less than the exercise price of the call written, or
(b) greater than the exercise price of the call written, provided the
difference is maintained by the Series in liquid assets in a segregated
account with its custodian. With respect to the sale of put options on stock
indices, pursuant to published SEC positions, The Enhanced U.S. Large Company
Series will either (1) maintain liquid assets equal to the exercise price
(less any margin deposits) in a segregated account with its custodian; or (2)
hold a put on the same index as the put written where the exercise price of
the put held is (a) equal to or greater than the exercise price of the put
written, or (b) less than the exercise price of the put written, provided an
amount equal to the difference is maintained by the Series in liquid assets
in a segregated account with its custodian.
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Prior to the earlier of exercise or expiration, an option may be closed out
by an offsetting purchase or sale of an option of the same series (type,
exchange, underlying index, exercise price, and expiration). There can be no
assurance, however, that a closing purchase or sale transaction can be
effected when The Enhanced U.S. Large Company Series desires.
The Enhanced U.S. Large Company Series will realize a gain from a closing
purchase transaction if the cost of the closing option is less than the
premium received from writing the option, or, if it is more, the Series will
realize a loss. The principal factors affecting the market value of a put or
a call option include supply and demand, interest rates, the current market
price of the underlying index in relation to the exercise price of the
option, the volatility of the underlying index, and the time remaining until
the expiration date.
If an option written by The Enhanced U.S. Large Company Series expires, the
Series realizes a gain equal to the premium received at the time the option
was written. If an option purchased by the Series expires unexercised, the
Series realizes a loss equal to the premium paid.
The premium paid for a put or call option purchased by The Enhanced U.S.
Large Company Series is an asset of the Series. The premium received for an
option written by the Series is recorded as a deferred credit. The value of
an option purchased or written is marked to market daily and is valued at the
closing price on the exchange on which it is traded or, if not traded on an
exchange or no closing price is available, at the mean between the last bid
and asked prices.
RISKS ASSOCIATED WITH OPTIONS ON INDICES
There are several risks associated with transactions in options on indices.
For example, there are significant differences between the securities and
options markets that could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its objectives. The value
of an option position will reflect, among other things, the current market
price of the underlying index, the time remaining until expiration, the
relationship of the exercise price, the term structure of interest rates,
estimated price volatility of the underlying index and general market
conditions. A decision as to whether, when and how to use options involves
the exercise of skill and judgment, and even a well-conceived transaction may
be unsuccessful to some degree because of market behavior or unexpected
events.
Options normally have expiration dates of up to 90 days. The exercise price
of the options may be below, equal to or above the current market value of
the underlying index. Purchased options that expire unexercised have no
value. Unless an option purchased by The Enhanced U.S. Large Company Series
is exercised or unless a closing transaction is effected with respect to that
position, The Enhanced U.S. Large Company Series will realize a loss in the
amount of the premium paid and any transaction costs.
A position in an exchange-listed option may be closed out only on an exchange
that provides a secondary market for identical options. Although The Enhanced
U.S. Large Company Series intends to purchase or write only those options for
which there appears to be an active secondary market, there is no assurance
that a liquid secondary market will exist for any particular option at any
specific time. Closing transactions may be effected with respect to options
traded OTC only
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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 OTC 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 OTC option. Accordingly, it may not be possible to effect
closing transactions with respect to certain options, with the result that
The Enhanced U.S. Large Company Series would have to exercise those options
which they have purchased in order to realize any profit. With respect to
options written by The Enhanced U.S. Large Company Series, the inability to
enter into a closing transaction may result in material losses to the Series.
Index prices may be distorted if trading of a substantial number of
securities included in the index is interrupted causing the trading of
options on that index to be halted. If a trading halt occurred, The Enhanced
U.S. Large Company Series would not be able to close out options which it had
purchased and may incur losses if the underlying index moved adversely before
trading resumed. If a trading halt occurred and restrictions prohibiting the
exercise of options were imposed through the close of trading on the last day
before expiration, exercises on that day would be settled on the basis of a
closing index value that may not reflect current price information for
securities representing a substantial portion of the value of the index.
The Enhanced U.S. Large Company Series' activities in the options markets may
result in higher fund turnover rates and additional brokerage costs; however,
the Series may also save on commissions by using options as a hedge rather
than buying or selling individual securities in anticipation or as a result
of market movements.
INVESTMENT LIMITATIONS ON OPTIONS TRANSACTIONS
The ability of The Enhanced U.S. Large Company Series to engage in options
transactions is subject to certain limitations. The Enhanced U.S. Large
Company Series will only invest in OTC options to the extent consistent with
the 15% limit on investments in illiquid securities.
FUTURES CONTRACTS
Please note that while the following discussion relates to the policies of
certain Series with respect to futures contracts, it should be understood
that, with respect to the Global Series, the discussion applies to the Master
Series in which the Global Series invest.
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
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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, as a result, more than 5% of its net assets
would then consist of initial margin deposits and premiums required to
establish such positions, after taking into account unrealized profits and
unrealized losses on such contracts it has entered into; provided, however,
that, in the case of an option that is in-the-money at the time of purchase,
the in-the-money amount may be excluded in calculating the 5%. Pursuant to
published positions of the SEC, the Series may be required to maintain
segregated accounts consisting of liquid assets (or, as permitted under
applicable regulation, enter into offsetting positions) in connection with
its futures contract transactions in order to cover its obligations with
respect to such contracts. Positions in futures contracts may be closed out
only on an exchange which provides a secondary market. However, there can be
no assurance that a liquid secondary market will exist for any particular
futures contract at any specific time. Therefore, it might not be possible to
close a futures position and, in the event of adverse price movements, the
Series would continue to be required to continue to make variation margin
deposits. In such circumstances, if the Series has insufficient cash, it
might have to sell portfolio securities to meet daily margin requirements at
a time when it might be disadvantageous to do so. Management intends to
minimize the possibility that it will be unable to close out a futures
contract by only entering into futures which are traded on national futures
exchanges and for which there appears to be a liquid secondary market.
REPURCHASE AGREEMENTS
In addition, all of the Series (directly or indirectly through the Master
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.
12(d) TEMPORARY DEFENSIVE POSITION. The information required by this item
is provided in response to Item 4(b) of Part A.
12(e) PORTFOLIO TURNOVER. Generally, securities will be purchased by the
Equity Series 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.
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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-Registered Trademark- Index, including mergers, reorganizations and
similar transactions and, to the extent necessary, to provide cash to pay
redemptions of the Series' shares.
The One-Year Fixed Income Series and Two-Year Global Fixed Income Series are
expected to have high portfolio turnover rates due to the relatively short
maturities of the securities to be acquired. The portfolio turnover rates for
Two-Year Global Fixed Income Series have varied from year to year due to
market and other conditions. In addition, variations in turnover rates occur
because securities are sold when, in the Advisor's judgment, the return will
be increased as a result of portfolio transactions after taking into account
the cost of trading. There was no significant variation in any other Series'
portfolio turnover rate from that reported last fiscal year.
ITEM 13. MANAGEMENT OF THE FUND
(a), (b) AND (c) The Trust has a Board of Trustees, which is responsible for
establishing Trust policies and for overseeing the management of the Trust.
The names, locations 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 are set forth below. As used below,
"DFA Entities" refers to the following: Dimensional Fund Advisors Inc.,
Dimensional Fund Advisors Ltd., DFA Australia Limited, DFA Investment
Dimensions Group Inc. (Registered Investment Company), Dimensional Emerging
Markets Value Fund Inc. (Registered Investment Company), Dimensional
Investment Group Inc. (Registered Investment Company) and DFA Securities Inc.
TRUSTEES
David G. Booth*, 12/2/46, Trustee, President and Chairman-Chief Executive
Officer, Santa Monica, CA. President, Chairman-Chief Executive Officer and
Director of the following companies: Dimensional Fund Advisors Inc., DFA
Securities Inc., DFA Australia Limited, DFA Investment Dimensions Group Inc.,
Dimensional Investment Group Inc. and Dimensional Emerging Markets Value Fund
Inc. Chairman and Director, Dimensional Fund Advisors Ltd. Director, SA Funds
(registered investment company) and Assante Corporation (investment
management).
George M. Constantinides, 9/22/47, Trustee, Chicago, IL. Leo Melamed
Professor of Finance, Graduate School of Business, University of Chicago.
Director, DFA Investment Dimensions Group Inc., Dimensional Investment Group
Inc. and Dimensional Emerging Markets Value Fund Inc.
John P. Gould, 1/19/39, Trustee, Chicago, IL. Steven G. Rothmeier Professor
and Distinguished Service Professor of Economics, Graduate School of
Business, University of Chicago. President, Cardean University (Division of
UNext.com). Director, DFA Investment Dimensions Group Inc., Dimensional
Investment Group Inc., Dimensional Emerging Markets Value Fund Inc. and
Harbor Investment Advisors. Member of the Boards of Milwaukee Mutual
Insurance Company and UNext.com. Principal and Executive Vice President,
Lexecon Inc.
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(economics, law, strategy and finance consulting). Formerly, Trustee, First
Prairie Funds (registered investment company).
Roger G. Ibbotson, 5/27/43, Trustee, New Haven, CT. Professor in Practice of
Finance, Yale School of Management. Director, DFA Investment Dimensions Group
Inc., Dimensional Investment Group Inc., Dimensional Emerging Markets Value
Fund Inc. and BIRR Portfolio Analysis, Inc. (software products). Chairman,
Ibbotson Associates, Inc., Chicago, IL (software, data, publishing and
consulting). Formerly, Director Hospital Fund, Inc. (investment management
services).
Merton H. Miller, 5/16/23, Trustee, Chicago, IL. Robert R. McCormick
Distinguished Service Professor Emeritus, Graduate School of Business,
University of Chicago. Director, DFA Investment Dimensions Group Inc.,
Dimensional Investment Group Inc. and Dimensional Emerging Markets Value Fund
Inc. Public Director, Chicago Mercantile Exchange.
Myron S. Scholes, 7/1/41, Trustee, Menlo Park, CA. Frank E. Buck Professor
Emeritus of Finance, Stanford University. Director, DFA Investment Dimensions
Group Inc., Dimensional Investment Group Inc., Dimensional Emerging Markets
Value Fund Inc. and American Century (Mount View) Investment Companies.
Partner, Oak Hill Capital Management. Formerly, Limited Partner, Long-Term
Capital Management L.P. (money manager). Consultant, Arbor Investors.
Rex A. Sinquefield*, 9/7/44, Trustee, Chairman-Chief Investment Officer,
Santa Monica, CA. Chairman-Chief Investment Officer and Director, Dimensional
Fund Advisors Inc., DFA Securities Inc., DFA Australia Limited, DFA
Investment Dimensions Group Inc., Dimensional Investment Group Inc. and
Dimensional Emerging Markets Value Fund Inc. Chairman, Chief Executive
Officer and Director, Dimensional Fund Advisors Ltd.
* 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.
Jim Davis , 11/29/56, Vice President, Santa Monica, CA. Vice President of all
DFA Entities. Kansas State University, Arthur Anderson & Co., Phillips
Petroleum Co.
Robert Deere, 10/8/57, Vice President, Santa Monica, CA. Vice President of
all DFA Entities.
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Irene R. Diamant, 7/16/50, Vice President and Secretary, Santa Monica, CA. Vice
President and Secretary of all DFA Entities except Dimensional Fund Advisors
Ltd. for which she is Vice President.
Richard Eustice, 8/5/65, Vice President and Assistant Secretary, Santa
Monica, CA. Vice President and Assistant Secretary of all DFA Entities other
than Dimensional Fund Advisors Ltd. for which he is Vice President.
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
Secretary, Santa Monica, CA. Vice President, Controller and Assistant
Treasurer of all DFA Entities.
Judith Jonas, 11/27/55, Vice President, Santa Monica, CA. Vice President of
all DFA Entities. Vice President, Wells Fargo Bank, N.A. from 1989-1990. Vice
President, Demko Baer & Associates, 1991.
Stephen P. Manus, 12/26/50, Vice President, Santa Monica, CA. President, ANB
Investment Management and Trust Company from 1993-1997. Vice President of all
DFA Entities.
Karen McGinley, 3/10/66, Vice President, Santa Monica, CA. Vice President of
all DFA Entities.
Catherine L. Newell, 5/7/64, Vice President and Assistant Secretary, Santa
Monica, CA. Associate, Morrison & Foerster, LLP from 1989-1996. Vice
President and Assistant Secretary of all DFA Entities except Dimensional Fund
Advisors Ltd. for which she is Vice President.
David Plecha, 10/26/61, Vice President, Santa Monica, CA. Vice President of
all DFA Entities.
George Sands, 2/8/56, Vice President, Santa Monica, CA. Vice President of all
DFA Entities.
Michael T. Scardina, 10/12/55, Vice President, Chief Financial Officer and
Treasurer, Santa Monica, CA. Vice President, Chief Financial Officer and
Treasurer of all DFA Entities.
Jeanne C. Sinquefield, Ph.D., 12/2/46, Executive Vice President, Santa
Monica, CA. Executive Vice President of all DFA Entities.
Scott Thornton, 3/1/63, Vice President, Santa Monica, CA. Vice President of
all DFA Entities.
Weston Wellington, 3/1/51, Vice President, Santa Monica, CA. Vice President
of all DFA Entities. Vice President, Director of Research, LPL Financial
Services, Inc., Boston, MA 1987-1994.
Rex A. Sinquefield, Trustee, Chairman-Chief Investment Officer of the Trust,
and Jeanne C. Sinquefield, Executive Vice President of the Trust, are husband
and wife.
56
<PAGE>
13(d) COMPENSATION. 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, 1999, 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 Fund
Trustee from Trust Complex
------- ------------ -------------------
<S> <C> <C>
George M. Constantinides $12,739 $35,000
John P. Gould $12,739 $35,000
Roger G. Ibbotson $12,739 $35,000
Merton H. Miller $11,243 $28,000
Myron S. Scholes $12,243 $34,000
</TABLE>
13(e) SALES LOADS. Not applicable.
13(f) Codes of Ethics. The Trust has adopted a revised Code of Ethics, under
rule 17j-1 of the 1940 Act, for certain access persons of the Series. In
addition, the Advisor has adopted or will adopt a revised Code of Ethics. The
Codes are designed to ensure that access persons act in the interest of the
Series, and their shareholders with respect to any personal trading of
securities. Under the Codes, access persons are generally prohibited from
knowingly buying or selling securities (except for mutual funds, U.S.
government securities and money market instruments) which are being purchased,
sold or considered for purchase or sale by a Series unless their proposed
purchases are approved in advance. The Codes also contain certain reporting
requirements and securities trading clearance procedures.
ITEM 14. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
(a) CONTROL PERSONS. As of February 29, 2000, the following persons may be
deemed to control the following Series either by owning more than 25% of the
voting securities of such Series directly or, through the operation of
pass-through voting rights, by owning more than 25% of the voting securities
of a feeder portfolio investing its assets in the Series:
57
<PAGE>
<TABLE>
<S> <C>
U.S. 4-10 VALUE SERIES
West Virginia Investment Management Board
One Cantley Drive
Charleston, WV 25314 50.94%
Missouri Local Government Employees' Retirement System
P.O. Box 1665
Jefferson City, MO 65102 25.86%
THE DFA INTERNATIONAL VALUE SERIES
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309 27.74%
JAPANESE SMALL COMPANY SERIES
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309 36.82%
PACIFIC RIM SMALL COMPANY SERIES
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309 45.60%
UNITED KINGDOM SMALL COMPANY SERIES
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309 28.11%
CONTINENTAL SMALL COMPANY SERIES
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309 31.08%
EMERGING MARKETS SMALL CAP SERIES
South Dakota Retirement System
4009 W. 49th Street, Suite 300
Sioux Falls, SD 57105 69.80%
</TABLE>
14(b) PRINCIPAL HOLDERS. As of February 29, 2000, the following shareholders
owned beneficially at least 5% of the outstanding shares of the Series, as
set forth
58
<PAGE>
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. LARGE COMPANY SERIES
Blackrock Funds -
Index Equity Portfolio
c/o PFPC
400 Bellevue Parkway
Wilmington, DE 19809 62.23%
DFA Investment Dimensions Group Inc. -
The U.S. Large Company Portfolio 32.42%
Dimensional Investment Group Inc. -
U.S. Large Company Institutional
Index Portfolio 5.14%
ENHANCED U.S. LARGE COMPANY SERIES
DFA Investment Dimensions Group Inc.
Enhanced U.S. Large Company Portfolio 100.00%
THE U.S. LARGE CAP VALUE SERIES
DFA Investment Dimensions Group Inc. -
The U.S. Large Cap Value Portfolio 66.23%
Dimensional Investment Group Inc. -
U.S. Large Cap Value Portfolio III 21.08%
Dimensional Investment Group Inc. -
RWB/DFA U.S. High Book to Market Portfolio 8.69%
TAX-MANAGED U.S. MARKETWIDE VALUE SERIES
DFA Investment Dimensions Group Inc.
Tax-Managed U.S. Marketwide Value Portfolio 76.69%
Dimensional Investment Group Inc.
Tax-Managed U.S. Marketwide Value Portfolio II 23.31%
GLOBAL VALUE SERIES
Global Value Trust 100.00%
U.S. 4-10 VALUE SERIES
West Virginia Investment Management Board
One Cantley Drive
Charleston, WV 25314 50.94%
</TABLE>
59
<PAGE>
<TABLE>
<S> <C>
Missouri Local Government Employees' Retirement System
P.O. Box 1665
Jefferson City, MO 65102 25.86%
Mac & Co.*
P.O. Box 3198
Pittsburgh, PA 15230-3198 23.02%
THE U.S. 6-10 VALUE SERIES
DFA Investment Dimensions Group Inc. -
The U.S. 6-10 Value Portfolio 97.28%
THE U.S. 6-10 SMALL COMPANY SERIES
DFA Investment Dimensions Group Inc. -
The U.S. 6-10 Small Company Portfolio 64.21%
Dimensional Investment Group Inc. -
DFA 6-10 Institutional Portfolio 26.80%
The California Wellness Foundation
6320 Canoga Avenue, Suite 1700
Woodland Hills, CA 91367 8.99%
THE U.S. 9-10 SMALL COMPANY SERIES
DFA Investment Dimensions Group Inc. -
The U.S. 9-10 Small Company Portfolio 99.99%
THE DFA INTERNATIONAL VALUE SERIES
Dimensional Investment Group Inc. -
DFA International Value Portfolio 29.18%
BellSouth Corporation 1155 Peachtree Street N.E.
Atlanta, GA 30309 27.74%
DFA Investment Dimensions Group Inc. -
RWB/DFA International High Book to Market Portfolio 15.33%
Dimensional Investment Group Inc. -
DFA International Value Portfolio III 14.86%
Dimensional Investment Group Inc. -
DFA International Value Portfolio IV 7.80%
JAPANESE SMALL COMPANY SERIES
</TABLE>
60
<PAGE>
<TABLE>
<S> <C>
DFA Investment Dimensions Group Inc.
Japanese Small Company Portfolio 55.65%
DFA Investment Dimensions Group Inc.
International Small Company Portfolio 44.34%
PACIFIC RIM SMALL COMPANY SERIES
DFA Investment Dimensions Group Inc.
Pacific Rim Small Company Portfolio 58.86%
DFA Investment Dimensions Group Inc.
International Small Company Portfolio 41.14%
UNITED KINGDOM SMALL COMPANY SERIES
DFA Investment Dimensions Group Inc.
International Small Company Portfolio 54.38%
DFA Investment Dimensions Group Inc.
United Kingdom Small Company Portfolio 45.62%
CONTINENTAL SMALL COMPANY SERIES
DFA Investment Dimensions Group Inc.
International Small Company Portfolio 52.70%
DFA Investment Dimensions Group Inc.
Continental Small Company Portfolio 47.30%
THE EMERGING MARKETS SERIES
DFA Investment Dimensions Group Inc. -
Emerging Markets Portfolio 96.84%
EMERGING MARKETS SMALL CAP SERIES
South Dakota Retirement System
4009 W. 49th Street, Suite 300
Sioux Falls, SD 57105 69.80%
DFA Investment Dimensions Group Inc.
Emerging Markets Small Cap Portfolio 29.68%
THE DFA ONE-YEAR FIXED INCOME SERIES
</TABLE>
61
<PAGE>
<TABLE>
<S> <C>
DFA Investment Dimensions Group Inc. -
The DFA One-Year Fixed Income Portfolio 86.36%
Gateway 2000, Inc.
610 Gateway Drive
North Sioux City, SD 57049 13.64%
DFA TWO-YEAR GLOBAL FIXED INCOME SERIES
DFA Investment Dimensions Group Inc. -
DFA Two-Year Global Fixed Income Portfolio 100.00%
</TABLE>
- ---------------
*Owner of record only.
14(c) MANAGEMENT OWNERSHIP. As of February 29, 2000, the trustees and
officers as a group owned less than 1% of each Series' outstanding stock.
ITEM 15. INVESTMENT ADVISORY AND OTHER SERVICES
(a) INVESTMENT ADVISERS. The information provided in response to this item is
in addition to the information provided in response to Items 6(a)(1) and (2)
in Part A and Items 13(a), (b) and (c) in this Part B.
David G. Booth and Rex A. Sinquefield, directors and officers of the Advisor
and Trustees and officers of the Trust, and shareholders of the Advisor's
outstanding voting stock, may be considered controlling persons of the
Advisor.
For the services its provides as investment advisor to each Series of the
Trust, the Advisor is paid a monthly fee calculated as a percentage of
average net assets of the Series. For the fiscal years ended November 30,
1997, 1998 and 1999, as applicable, the Series paid management fees as set
forth in the following table:
<TABLE>
<CAPTION>
1997 1998 1999
(000) (000) (000)
------- ------- -------
<S> <C> <C> <C>
U.S. Large Company $ 160 $ 293 $ 558
Enhanced U.S. Large Company $ 17 $ 26 $ 40
U.S. Large Cap Value $ 1,255 $ 1,667 $ 1,831
Tax-Managed U.S. Marketwide Value $ 143
U.S. 4-10 Value n/a $ 86 $ 291
</TABLE>
62
<PAGE>
<TABLE>
<S> <C> <C> <C>
U.S. 6-10 Value $ 3,534 $ 4,743 $ 5,217
U.S. 6-10 Small Company $ 102 $ 150 $ 167
U.S. 9-10 Small Company n/a $ 1,458 $ 1,361
DFA International Value $ 2,997 $ 3,466 $ 3,481
Japanese Small Company $ 258 $ 181 $ 201
1997 1998 1999
(000) (000) (000)
Pacific Rim Small Company $ 230 $ 133 $ 162
United Kingdom Small Company $ 180 $ 157 $ 135
Continental Small Company $ 351 $ 334 $ 270
Emerging Markets $ 226 $ 220 $ 284
Emerging Markets Small Cap $ 47 $ 37 $ 62
DFA One-Year Fixed Income $ 392 $ 420 $ 444
DFA Two-Year Global Fixed Income $ 185 $ 214 $ 238
</TABLE>
The U.S. 9-10 Small Company Series commenced operations on December 1, 1997,
and The U.S. 4-10 Value Series commenced operations on February 6, 1998. The
Tax-Managed U.S. Marketwide Value Series commenced operations on December 14,
1998 and Tax-Managed U.S. Marketwide Value Series X had not commenced
operations as of the date of this registration statement.
While The Global Value Series, The Global Large Company Series and The Global
Small Company Series are not subject to a management fee, investments by the
Global Series in the Master Series are subject to the management fees charged
by the respective Master Series. As of August 16, 1999, the Advisor agreed to
waive certain fees and to assume expenses to the extent necessary to keep the
cumulative expenses of each of these Series to not more than .50% of average
net assets of each of these Series on an annualized basis. For purposes of
this waiver and assumption, the expenses are those expenses incurred in any
period consisting of thirty-six consecutive months. Any fees that may be
waived or expense that may be reimbursed may be subject to recoupment for a
period of 36 months. The Advisor retains the right in its sole discretion to
change or eliminate such waiver and assumption of expense in the future.
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<PAGE>
The Advisor pays DFAL quarterly fees of 12,500 pounds sterling for services
to each of the United Kingdom and Continental Series. The Advisor pays DFA
Australia fees of $13,000 per year for services to each of the Japanese and
Pacific Rim Series.
15(b) PRINCIPAL UNDERWRITER. 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.
15(c) SERVICES PROVIDED BY EACH INVESTMENT ADVISER AND EXPENSES PAID BY
THIRD PARTIES. The information provided in response to this item is in
addition to the information provided in response to Item 6(a)(1) and (2) of
Part A.
Initially, the investment management agreement with respect to each Series is
in effect for a period of two years. Thereafter, each agreement may continue
in effect for successive annual periods, provided such continuance is
specifically approved at least annually by a vote of the Trust's Board of
Trustees or, by a vote of the holders of a majority of the Series'
outstanding voting securities, and in either event by a majority of the
trustees who are not parties to the agreement or interested persons of any
such party (other than as trustees of the Trust), cast in person at a meeting
called for that purpose. An investment management agreement may be terminated
without penalty at any time by the Series or by the Advisor on 60 days'
written notice and will automatically terminate in the event of its
assignment as defined in the Investment Company Act of 1940.
15(d) SERVICE AGREEMENTS. Not applicable.
15(e) OTHER INVESTMENT ADVICE. Not applicable.
15(f) DEALER REALLOWANCES. Not applicable.
15(g) RULE 12b-1 PLANS. Not applicable.
15(h) OTHER SERVICE PROVIDERS.
(1) AND (2) 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
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<PAGE>
U.S. 6-10 SMALL COMPANY SERIES
U.S. 6-10 VALUE SERIES
U.S. LARGE CAP VALUE SERIES
TAX-MANAGED U.S. MARKETWIDE VALUE SERIES
TAX-MANAGED U.S. MARKETWIDE VALUE SERIES X
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
Series, the Tax-Managed Marketwide Value Series, the Tax-Managed Marketwide
Value Series X and 6-10 Value Series. PFPC charges the Enhanced U.S. Large
Company Series a minimum fee of $75,000 per year. PFPC has agreed that it may
from time to time limit the fee rates and the minimum fees for these Series.
DFA TWO-YEAR GLOBAL FIXED INCOME SERIES
.1230% of the first $150 million of net assets
.0820% of the next $150 million of net assets
.0615% of the next $300 million of net assets
.0410% of the next $250 million of net assets
.0205% of net assets over $850 million
The Series is subject to a minimum fee of $75,000 per year. 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
LARGE CAP INTERNATIONAL PORTFOLIO
EMERGING MARKETS SERIES
EMERGING MARKETS SMALL CAP SERIES
CHARGES FOR EACH SERIES:
.1230% 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, Large Cap International, 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
65
<PAGE>
.0513% of the first $100 million of net assets
.0308% of the next $100 million of net assets
.0205% of net assets over $200 million
U.S. LARGE COMPANY SERIES
.0150% of net assets
U.S. 4-10 VALUE SERIES
.0160% of net assets
THE GLOBAL VALUE SERIES
$2,600 (includes custodian fees)
THE GLOBAL LARGE COMPANY SERIES
$2,600 (includes custodian fees)
THE GLOBAL SMALL COMPANY SERIES
$2,950 per month (includes custodian fees)
15(h)(3) Citibank, N.A. ("Citibank"), 111 Wall Street, New York, New York,
10005, is the global custodian for the following Series: DFA International
Value Series, the Japanese Small Company Series, the Pacific Rim Small
Company Series, the United Kingdom Small Company Series, the Continental
Small Company Series, DFA Two-Year Global Fixed Income Series, and Enhanced
U.S. Large Company Series (co-custodian with PFPC Trust Company). The Chase
Manhattan Bank, 4 Chase Metrotech Center, Brooklyn, NY 11245, serves as the
custodian for the Emerging Markets Series and Emerging Markets Small Cap
Series, and PFPC Trust Company, 400 Bellevue Parkway, Wilmington, DE 19809,
serves as the custodian for all other Series of the Trust. The custodians
maintain separate accounts for the Series; make receipts and disbursements of
money on behalf of the Series; and collect and receive income and other
payments and distributions on account of the Series' portfolio securities.
The custodians do not participate in decisions relating to the purchase and
sale of portfolio securities.
PricewaterhouseCoopers LLP, 2400 Eleven Penn Center, Philadelphia,
Pennsylvania 19103, the Trust's independent accountant, audits the Trust's
financial statements on an annual basis.
15(h)(4) Not applicable.
ITEM 16. BROKERAGE ALLOCATION AND OTHER PRACTICES
16(a) AND (c) BROKERAGE TRANSACTIONS AND BROKERAGE SELECTION. The following
table depicts brokerage commissions paid by the following Series:
66
<PAGE>
BROKERAGE COMMISSIONS
FISCAL YEARS ENDED NOVEMBER 30, 1997, 1998 and 1999
<TABLE>
<CAPTION>
1997 1998 1999
---------- ------------ ------------
<S> <C> <C> <C>
U.S. Large Company $ 40,689 $ 15,841 $ 1,250
Enhanced U.S. Large
Company $ 2,233 $ 2,210 $ 2,758
U.S. Large Cap Value $ 929,005 $ 1,116,421 $ 2,492,821
Tax-Managed U.S. Marketwide Value n/a n/a $ 321,580
U.S. 4-10 Value n/a $ 717,873 $ 1,164,028
U.S. 6-10 Value $4,591,853 $ 4,289,226 $ 4,440,807
U.S. 6-10 Small Company $ 855,652 $ 1,022,535 $ 733,337
U.S. 9-10 Small Company $1,641,020 $ 1,541,534 $ 1,429,817
DFA International Value $1,133,787 $ 763,022 $ 480,344
Japanese Small Company $ 602,098 $ 300,862 $ 335,177
Pacific Rim Small Company $ 485,846 $ 316,644 $ 606,240
United Kingdom Small
Company $ 68,028 $ 116,482 $ 85,725
Continental Small Company
Series $ 145,195 $ 278,568 $ 304,874
Emerging Markets $ 559,853 $ 375,895 $ 246,534
Emerging Markets Small Cap $ 123,081 $ 40,579 $ 96,921
</TABLE>
67
<PAGE>
During the fiscal year ended November 30 1999, the Large Cap International
Portfolio, a portfolio of DFAIDG, paid brokerage commissions of $32,512. The
Global Value Series, The Global Large Company Series and The Global Small
Company Series will not incur any brokerage costs in connection with their
purchases and redemptions of shares of the Master Series. The U.S. 9-10 Small
Company Series commenced operations on December 1, 1997 and The U.S. 4-10
Value Series commenced operations on February 6, 1998. The Tax-Managed U.S.
Marketwide Value Series commenced operations as of December 14, 1998. The
Tax-Managed U.S. Marketwide Value Series X had not commenced operations as of
the date of this registration statement.
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.
The DFA One-Year Fixed Income and Two-Year Global Fixed Income Series acquire
and sell 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, The U.S. 6-10
Value Series, the Tax-Managed U.S. Marketwide Value Series and the Tax-Managed
U.S. Marketwide Value Series X 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 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
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<PAGE>
charge full commissions to all customers other than banks and certain
financial institutions, but members and licensed non-member firms may confirm
transactions to banks and financial institution affiliates located outside
Japan with institutional discounts on brokerage commissions. The Japanese
Small Company Series has been able to avail itself of institutional
discounts. The Series' ability to effect transactions at a discount from
fixed commission rates depends on a number of factors, including the size of
the transaction, the relation between the cost to the member or the licensed
non-member firm of effecting such transaction and the commission receivable,
and the law, regulation and practice discussed above. There can be no
assurance that the Series will continue to be able to realize the benefit of
discounts from fixed commissions.
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. DFAL performs these services for
the United Kingdom and Continental Small Company Series and DFA Australia
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.
16(b) COMMISSIONS. No commissions were paid to affiliates or affiliates of
affiiates during fiscal years 1997, 1998 or 1999.
16(d) DIRECTED BROKERAGE. During the fiscal year ended November 30, 1999, the
following Series paid commissions for securities transactions to brokers which
provided market price monitoring services, market studies and research
services to the Series as follows:
69
<PAGE>
<TABLE>
<CAPTION> VALUE OF
SECURITIES BROKERAGE
TRANSACTIONS COMMISSIONS
<S> <C> <C>
U.S. Large Cap Value $164,462,095 $ 179,980
U.S. 4-10 Value $ 60,217,214 $ 214,638
U.S. 6-10 Value $ 43,205,767 $ 224,108
U.S. 6-10 Small Company $ 15,502,174 $ 79,379
U.S. 9-10 Small Company $ 5,524,765 $ 32,224
DFA International Value $ 83,584,091 $ 138,304
Japanese Small Company $ 29,185,623 $ 181,880
Pacific Rim Small Company $ 5,770,950 $ 23,086
============ ============
TOTAL: $407,452,679 $1,073,599
============ ==========
</TABLE>
16(e) REGULAR BROKER DEALERS. Not applicable.
ITEM 17. CAPITAL STOCK AND OTHER SECURITIES
(a) CAPITAL STOCK. All twenty-one Series issue shares of beneficial interest
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. In addition, the Trust has arranged with the
Feeder Portfolios for voting rights as provided in Section 12(d)(1)(E)(iii)(a)
of the Investment Company Act of 1940. If a shareholder of a Series which is
taxed as a partnership 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
70
<PAGE>
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 Series may not be transferred, except upon exemption from the
registration requirements of the Securities Act of 1933, 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. 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.
The Trust does not intend to hold annual meetings; it may, however, hold a
meeting if called by the Board. 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
Investment Company Act of 1940.
17(b) OTHER SECURITIES. Not applicable.
ITEM 18. PURCHASE, REDEMPTION AND PRICING OF SHARES
The information provided in response to this item is in addition to the
information provided in response to Item 7 in Part A.
(a) AND (c) PURCHASE OF SHARES AND OFFERING PRICE. 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 Tokyo Stock Exchange ("TSE") is closed on
the following days in 2000: January 1, 3 and 10, February 11, March 20, April
29, May 3, 4 and 5, July 20, September 15 and 23, October 9, November 3 and 23
and December 23. Orders for the purchase and redemption of shares of the
Japanese Series received on those days will be priced as of the close of the
NYSE on the next day that the TSE is open for trading.
The London Stock Exchange ("LSE") is closed on the following days in 2000:
January 3, April 21 and 24, May 1 and 29, August 28, and December 25 and 26.
Orders for the purchase and redemption of shares of the United Kingdom Small
Company Series received on those days will be processed as of the close of the
NYSE on the next day that the LSE is open for trading.
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<PAGE>
The Pacific Rim Small Company, Continental Small Company, DFA International
Value, Emerging Markets and Emerging Markets Small Cap Series, which invest in
securities traded on a number of foreign securities exchanges, will be closed if
portfolio securities greater than 50% of its total assets are principally traded
on exchanges that are closed that day. Purchase and redemption orders for shares
of such Series will not be accepted on those days.
Since The Japanese Small Company, Pacific Rim Small Company, United Kingdom
Small Company, Continental Small Company, DFA International Value, Emerging
Markets and Emerging Markets Small Cap Series own securities that are primarily
listed on foreign exchanges which may trade on days when the Series do not price
their shares, the net asset value of such Series and the Global Series may
change on days when shareholders will not be able to purchase or redeem shares.
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.
18(b) FUND REORGANIZATIONS. Not applicable.
18(d) REDEMPTION IN KIND. The Trust has filed a notice of election pursuant to
Rule 18f-1 under the Investment Company Act of 1940. However, the Tax-Managed
Marketwide Value Series, the Tax-Managed Marketwide Value Series X, The Global
Value Series, The Global Large Company Series and The Global Small Company
Series have opted out of this election. (See Item 7(c) of Part A.)
ITEM 19. TAXATION OF THE FUND
The information provided in response to this item is in addition to the
information provided in response to Items 7(d) and (e) in Part A.
Each Corporate Series intends to qualify each year as a regulated investment
company under Subchapter M of 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.
If a Series of the Trust, including the Partnership Series, purchases shares in
certain foreign investment entities, called "passive foreign investment
72
<PAGE>
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.
The Series of the Trust, including the Partnership Series, may be subject to
foreign withholding taxes on income from certain of their foreign securities. If
more than 50% in value of the total assets of a Corporate Series at the end of
its fiscal year are invested in securities of foreign corporations, the
Corporate Series may elect to pass-through to its shareholders their pro rata
share of foreign income taxes paid by the Corporate Series. If this election is
made, shareholders will be (i) required to include in their gross income their
pro rata share of foreign source income (including any foreign taxes paid by the
Corporate Series), and (ii) entitled to either deduct their share of such
foreign taxes in computing their taxable income or to claim a credit for such
taxes against their U.S. federal income tax, subject to certain limitations
under the Code.
Shareholders will be informed by the Corporate Series at the end of each
calendar year regarding the shareholder's proportionate share of taxes paid to
any foreign country or possession of the United States, and gross income derived
from sources within any foreign country or possession of the United States.
The Enhanced U.S. Large Company Series' investments in Index Derivatives are
subject to complex tax rules which may have the effect of accelerating income or
converting, in part, what otherwise would have been long-term capital gain into
short-term capital gain. These rules may affect both the amount, character and
timing of income distributed to shareholders of The Enhanced U.S. Large Company
Series.
For the Corporate Series with the principal investment policy of investing in
foreign equity securities and non-equity domestic investments, it is anticipated
that only a small portion of such Corporate Series' dividends will qualify for
the corporate dividends received deduction. To the extent that such Corporate
Series pay dividends which qualify for this deduction, the availability of the
deduction is subject to certain holding period and debt financing restrictions
imposed under the Code on the corporation claiming the deduction.
Since virtually all of the net investment income from The DFA One-Year Fixed
Income and Two-Year Global Fixed Income Series is expected to arise from earned
interest, it is not expected that any of such Series' distributions will be
eligible for the dividends received deduction for corporations.
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(b).)
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.
73
<PAGE>
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.
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.
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.
Investors in the Partnership Series who are not U.S. persons for purposes of
U.S. federal income taxation should consult with their tax advisors to determine
the applicability of U.S. withholding by a Partnership Series on interest,
dividends and any other items of fixed or determinable annual or periodical
gains, profits and income included in such investors' distributive share of a
Partnership Series' income. Non-U.S. investors may also wish to contact their
tax advisors to determine the applicability of foreign tax laws. Series shares
held by the estate of a non-U.S. investor may be subject to U.S. estate tax.
The Tax-Managed Marketwide Value Series and Tax-Managed Marketwide Value Series
X may time investments to minimize the receipt of dividends. These actions could
result in the Tax-Managed Value Series being unable to flow through the
dividends received deduction to corporate shareholders. This will occur if a
Tax-Managed Value Series does not hold the stock of a domestic (U.S.)
corporation for the requisite holding period to be eligible for pass-through of
the dividends received deduction.
If a shareholder elects to receive capital gains distributions in cash, instead
of reinvesting them in additional shares, the capital at work in a Series will
be reduced. Also, purchases of shares in a
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<PAGE>
Corporate Series shortly before the record date for a dividend or capital
gains distribution may cause of portion of the investment to be returned to
the shareholder as a taxable distribution, regardless of whether the
distribution is being reinvested or paid in cash.
ITEM 20. UNDERWRITERS. Not applicable.
ITEM 21. CALCULATION OF PERFORMANCE DATA
(a) MONEY MARKET FUNDS. Not applicable.
(b) OTHER FUNDS. Following are quotations of the annualized percentage total
returns for the one-, five-, and ten-year periods ended November 30, 1999 (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), and are indicated by
an asterisk.
75
<PAGE>
<TABLE>
<CAPTION> ONE FIVE TEN
YEAR YEARS YEARS
<S> <C> <C> <C>
The U.S. Large Company Series -20.84 27.32 20.90*
The Enhanced U.S. Large Company Series 20.56 28.30* n/a
The U.S. Large Cap Value Series 4.63 20.14 15.10*
The Tax-Managed U.S. Marketwide Value Series 4.28*
The U.S. 4-10 Value Series -6.39 -5.93* n/a
The U.S. 6-10 Value Series 9.77 16.04 14.24*
The U.S. 6-10 Small Company Series -18.62 16.02 13.28*
The U.S. 9-10 Small Company Series 20.08 3.49* n/a
The DFA International Value Series 13.25 8.56 7.59*
The Japanese Small Company Series 22.99 -17.86* n/a
The Pacific Rim Small Company Series 53.26 -7.67* n/a
The United Kingdom Small Company Series 36.76 11.07* n/a
The Continental Small Company Series -6.83 8.33* n/a
The Global Value Series -3.30* n/a
The Emerging Markets Series 53.02 3.25 5.30*
The Emerging Markets Small Cap Series 69.75 4.52* n/a
</TABLE>
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<TABLE>
<S> <C> <C> <C>
The DFA One-Year Fixed Income Series 4.81 6.09 5.35*
The DFA Two-Year Global Fixed Income Series 4.84 6.23* n/a
</TABLE>
The Global Large Company Series, The Global Small Company Series and the
Tax-Managed U.S. Marketwide Value Series X had not commenced operations as of
November 30, 1999.
As the following formula indicates, the average annual total return is
determined by finding the average annual compounded rates of return over the
stated time period that would equate a hypothetical initial purchase order of
$1,000 to its redeemable value (including capital appreciation/depreciation and
dividends and distributions paid and reinvested less any fees charged to a
shareholder account) at the end of the stated time period. The calculation
assumes that all dividends and distributions are reinvested at the public
offering price on the reinvestment dates during the period. The quotation
assumes the account was completely redeemed at the end of each period and the
deduction of all applicable charges and fees. According to the SEC formula:
P(1 + T)to the power of n = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the one-, five-, and ten-year periods at the end of the one-,
five-, and ten-year periods (or fractional portion thereof).
ITEM 22. FINANCIAL STATEMENTS.
(a)-(c) The audited financial statements and financial highlights of the
Trust for its fiscal year ended November 30, 1999 as set forth in the Trust's
annual reports to shareholders, including the report of
PricewaterhouseCoopers LLP, independent accountants, are incorporated herein
by reference. The annual reports do not contain any data regarding The
Tax-Managed U.S. Marketwide Value Series X, The Global Large Company Series
and
77
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The Global Small Company Series because they had not commenced operations as
of November 30, 1999.
78
<PAGE>
THE DFA INVESTMENT TRUST COMPANY
(AMEND. NO. 21)
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS.
(a) Charter, as now in effect.
(1) Agreement and Declaration of Trust.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 5 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: December 1, 1995.
</TABLE>
(2) Certificate of Trust dated September 11, 1992.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 14 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
</TABLE>
(3) Certificate of Amendment to Certificate of Trust dated January 15,
1993.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 14 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
</TABLE>
(b) Existing bylaws or instruments corresponding thereto.
(1) By-Laws.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 14 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
</TABLE>
(c) Instruments defining the rights of holders of the securities being
registered including where applicable, the relevant portion of the
articles or incorporation or bylaws of the Registrant.
Not applicable.
(d) Investment advisory contracts relating to the management of the assets
of the Registrant.
(1) Investment Management Agreement dated January 6, 1993 between the
Registrant and Dimensional Fund Advisors Inc. ("DFA") on behalf of
The U.S. 6-10 Small Company Series.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 14 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
</TABLE>
C-1
<PAGE>
(2) Investment Management Agreement between the Registrant and DFA on
behalf of The U.S. Large Company Series.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 5 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: December 1, 1995.
</TABLE>
(3) Investment Management Agreement dated January 6, 1993 between the
Registrant and DFA on behalf of The DFA One-Year Fixed Income Series.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 14 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
</TABLE>
(4) Investment Management Agreement dated January 6, 1993 between the
Registrant and DFA on behalf of The U.S. Large Cap Value
Series (formerly The U.S. Large Cap High Book to Market Series).
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 14 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
</TABLE>
(5) Investment Management Agreement dated January 6, 1993 between the
Registrant and DFA on behalf of The U.S. 6-10 Value Series (formerly
The U.S. Small Cap High Book to Market Series).
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 14 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
</TABLE>
(6) Investment Management Agreement dated December 1, 1993 between the
Registrant and DFA on behalf of The DFA International Value Series.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 14 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
</TABLE>
(7) Investment Management Agreement dated October 18, 1996 between the
Registrant and DFA on behalf of The Emerging Markets Series.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 14 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
</TABLE>
(8) Investment Management Agreement dated February 8, 1996 between the
Registrant and DFA on behalf of The Enhanced U.S. Large Company
Series.
C-2
<PAGE>
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 6 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: February 7, 1996.
</TABLE>
(9) Investment Management Agreement dated February 8, 1996 between the
Registrant and DFA on behalf of The DFA Two-Year Global Fixed Income
Series.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 6 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: February 7, 1996.
</TABLE>
(10) Investment Management Agreement dated February 8, 1996 between the
Registrant and DFA on behalf of The DFA Two-Year Corporate Fixed
Income Series.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 6 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: February 7, 1996.
</TABLE>
(11) Investment Management Agreement dated February 8, 1996 between the
Registrant and DFA on behalf of The DFA Two-Year Government Series.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 6 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: February 7, 1996.
</TABLE>
(12) Investment Management Agreement dated August 7, 1996 between the
Registrant and DFA on behalf of The Japanese Small Company Series.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 7 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: August 7, 1996.
</TABLE>
(13) Investment Management Agreement dated August 7, 1996 between the
Registrant and DFA on behalf of The United Kingdom Small Company
Series.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 7 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: August 7, 1996.
</TABLE>
(14) Investment Management Agreement dated August 7, 1996 between the
Registrant and DFA on behalf of The Pacific Rim Small Company
Series.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 7 to Registrant's Registration
Statement on Form N-1A.
File No.: 811-07436.
Filing Date: August 7, 1996.
</TABLE>
C-3
<PAGE>
(15) Investment Management Agreement dated August 7, 1996 between the
Registrant and DFA on behalf of The Continental Small Company
Series.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 7 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: August 7, 1996.
</TABLE>
(16) Investment Management Agreement dated October 18, 1996 between the
Registrant and DFA on behalf of The Emerging Markets Small Cap
Series.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 9 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: February 24, 1997.
</TABLE>
(17) Investment Management Agreement dated November 28, 1996 between the
Registrant and DFA on behalf of The U.S. 9-10 Small Company Series.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 12 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: November 28, 1997.
</TABLE>
(18) Investment Management Agreement dated November 28, 1996 between the
Registrant and DFA on behalf of The U.S. 4-10 Value Series.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 12 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: November 28, 1997.
</TABLE>
(19) Form of Investment Management Agreement dated December 7, 1998
between the Registrant and DFA on behalf of the Tax-Managed U.S.
Marketwide Value Series.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 16 to the Registrant's
Registration Statement on Form N-1A.
File No: 811-07436.
Filing Date: December 7, 1998.
</TABLE>
(20) Form of Investment Management Agreement dated September 13, 1999,
between the Registrant and DFA on behalf of The Tax-Managed U.S.
Marketwide Value Series X.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 20 to the Registrant's
Registration Statement on Form N-1A.
File No: 811-07436.
Filing Date: September 13, 1999.
</TABLE>
(21) Sub-Advisory Agreement among the Registrant, DFA and Australia Pty
Ltd. ("DFA-Australia") dated August 7, 1996 on behalf of The
Japanese Small Company Series.
C-4
<PAGE>
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 7 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: August 7, 1996.
</TABLE>
(22) Sub-Advisory Agreement among the Registrant, DFA and Dimensional
Fund Advisors Ltd. ("DFAL") dated August 7, 1996 on behalf of The
United Kingdom Small Company Series.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 7 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: August 7, 1996.
</TABLE>
(23) Sub-Advisory Agreement among the Registrant, DFA and DFA-Australia
dated August 7, 1996 on behalf of The Pacific Rim Small Company
Series.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 7 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: August 7, 1996.
</TABLE>
(24) Sub-Advisory Agreement among the Registrant, DFA and DFAL dated
August 7, 1996 on behalf of The Continental Small Company Series.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 7 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: August 7, 1996.
</TABLE>
(25) Consultant Services Agreement between Dimensional Fund Advisors Inc.
and Dimensional Fund Advisors Ltd. on behalf of:
THE DFA INVESTMENT TRUST COMPANY
* DFA International Value Series
* Emerging Markets Small Cap Series
* Emerging Markets Series
DFA INVESTMENT DIMENSIONS GROUP INC.
* DFA International Small Cap Value Portfolio
* VA International Value Portfolio
* Large Cap International Portfolio
* Tax-Managed DFA International Value Portfolio; and
DIMENSIONAL EMERGING MARKETS VALUE FUND, INC.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 16 to the Registrant's
Registration Statement on Form N-1A.
File No: 811-07436.
Filing Date: December 7, 1998.
</TABLE>
(26) Consultant Services Agreement between Dimensional Fund Advisors Inc.
and DFA Australia Ltd. on behalf of:
THE DFA INVESTMENT TRUST COMPANY
* DFA International Value Series
C-5
<PAGE>
* Emerging Markets Small Cap Series
* Emerging Markets Series
DFA INVESTMENT DIMENSIONS GROUP INC.
* DFA International Small Cap Value Portfolio
* VA International Value Portfolio
* Large Cap International Portfolio
* Tax-Managed DFA International Value Portfolio; and
DIMENSIONAL EMERGING MARKETS VALUE FUND, INC.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 16 to the Registrant's
Registration Statement on Form N-1A.
File No: 811-07436.
Filing Date: December 7, 1998.
</TABLE>
(e) Underwriting or distribution contract between the Registrant and a
principal underwriter, and specimens or copies of all agreements between
principal underwriters and dealers.
Agreement dated January 6, 1993 between the Registrant and DFA
Securities Inc.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 14 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
</TABLE>
(f) Bonus, profit sharing, pension or similar contracts or arrangements
wholly or partly for the benefit of directors or officers of the
Registrant in their official capacity. Describe in detail any such plan
not included in a formal document.
Not applicable.
(g) Custodian agreements and depository contracts under Section 17(f) of the
Investment Company Act of 1940, as amended [15 U.S.C. 80a
17(f)]concerning the Registrant's securities and similar investments
including the schedule of remuneration.
(1) Custodian Agreement between the Registrant and PNC Bank, N.A.
(formerly Provident National Bank N.A.).
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 14 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
</TABLE>
(2) Addenda to the Custodian Agreement.
(a) Addendum Number 1 dated December 8, 1998 between PNC and the
Registrant on behalf of each series of the Registrant.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 17 to the Registrant's
Registration statement on Form N-1A.
File No.: 811-07436.
Filing Date: March 24, 1999.
</TABLE>
(b) Addendum Number 2 dated May 28, 1999 between PFPC Trust Company
and the Registrant on behalf of each series of the Registrant.
C-6
<PAGE>
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 18 to the Registrant's
Registration statement on Form N-1A.
File No.: 811-07436.
Filing Date: May 28, 1999.
</TABLE>
(c) Addendum Number 3 dated September 13, 1999 between PFPC Trust
Company and the Registrant on behalf of each series of the
Registrant.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 20 to the Registrant's
Registration statement on Form N-1A.
File No.: 811-07436.
Filing Date: September 13, 1999.
</TABLE>
(3) Global Custody Agreement dated January 18, 1994 between the
Registrant and The Chase Manhattan Bank, N.A. on behalf of The
Emerging Markets Series.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 14 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
</TABLE>
(4) Custodial Services Agreement dated January 13, 1998 between the
Registrant and Citibank, N.A.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 14 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
</TABLE>
(i) Manual Transmission Authorization.
(ii) Manual Transmission Procedures.
(h) Other material contracts not made in the ordinary course of business to
be performed in whole or in part on or after the filing date of the
Registration Statement.
(1) Transfer Agency Agreement dated January 15, 1993 between the
Registrant and PFPC Inc. (formerly known as Provident Financial
Processing Corporation.) ("PFPC").
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 14 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
</TABLE>
(i) Appendix A: Authorized Persons to Give Oral and Written
Instructions
(ii) Schedule A: Listing of Statistical Reports
(2) Amendments to the Transfer Agency Agreement.
(a) Amendment Number 1 dated December 1, 1993 between the Registrant
and PFPC on behalf of The International Value Series.
C-7
<PAGE>
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 14 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
</TABLE>
(3) Addendum to the Transfer Agency Agreement.
(a) Addendum Number 1 dated December 8, 1998 between PFPC and the
Registrant on behalf of each series of the Registrant.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 17 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: March 24, 1999.
</TABLE>
(b) Addendum Number 2 dated May 28, 1999 between PFPC and the
Registrant on behalf of each series of the Registrant.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 18 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: May 28, 1999.
</TABLE>
(c) Addendum Number 3 dated September 13, 1999 between PFPC and the
Registrant on behalf of each series of the Registrant.
Incorporated herein by reference to:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 20 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: September 13, 1999.
</TABLE>
(4) Administration and Accounting Services Agreement dated January 15,
1993 between the Registrant and PFPC.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 14 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Date: March 3, 1998.
</TABLE>
(5) Amendments to the Administration and Accounting Services Agreement.
(a) Amendment Number 1 dated December 1, 1993 between PFPC and the
Registrant on behalf of The DFA International Value Series.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 14 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: March 3, 1998.
</TABLE>
(6) Addenda to the Administration and Accounting Services Agreement.
(a) Addendum Number 1 dated December 8, 1998 between PFPC and the
Registrant on behalf of each series of the Registrant.
C-8
<PAGE>
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 17 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: March 24, 1999.
</TABLE>
(b) Addendum Number 2 dated May 28, 1999 between PFPC and the
Registrant on behalf of each series of the Registrant.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 18 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: May 28, 1999.
</TABLE>
(c) Addendum Number 3 dated September 13, 1999 between PFPC and the
Registrant on behalf of each series of the Registrant.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 20 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: September 13, 1999.
</TABLE>
(7) Administration Agreement dated May 28, 1999 between DFA and the
Registrant on behalf of The Global Value Series, The Global Large
Company Series and The Global Small Company Series.
INCORPORATED HEREIN BY REFERENCE TO:
<TABLE>
<S> <C>
Filing: Post-Effective Amendment No. 18 to the Registrant's
Registration Statement on Form N-1A.
File No.: 811-07436.
Filing Date: May 28, 1999.
</TABLE>
(i) An opinion and consent of counsel regarding the legality of the
securities being registered, stating whether the securities will, when
sold, be legally issued, fully paid and non-assessable.
Not applicable.
(j) Any other opinions, appraisals or rulings and related consents relied on
in preparing this Registration Statement and required by Section 7 of the
1933 Act [15 U.S.C. 77g].
Consent of PricewaterhouseCoopers LLP
ELECTRONICALLY FILED HEREWITH AS EXHIBIT EX-99.j.
(k) All Financial statements omitted from Item 23.
Not applicable.
(l) Any agreements or understandings made in consideration for providing the
initial capital between or among the Registrant, the underwriter,
adviser, promoter or initial stockholders and written assurances from
promoters or initial stockholders that purchases were made for investment
purposes and not with the intention of redeeming or reselling.
Not applicable.
(m) Any plan entered into by Registrant under Rule 12b-1, and any agreements
with any person relating to the Plan's implementation.
Not applicable.
C-9
<PAGE>
(n) Any plan entered into by Registrant under Rule 18f-3, any agreement with
any person relating to the plan's implementation, and any amendment to
the plan or agreement.
Not applicable.
(o) Power-of-Attorney appointing David G. Booth, Rex. A. Sinquefield,
Michael T. Scardina, Irene R. Diamant, Catherine L. Newell and Stephen W.
Kline as attorney-in-fact for the Registrant, dated July 18, 1997.
ELECTRONICALLY FILED HEREWITH AS EXHIBIT EX-99.o.
(p) Codes of Ethics adopted under rule 17j-1 of the Investment Company Act
and currently applicable to the Trust.
(1) Code of Ethics of the Registrant.
ELECTRONICALLY FILED HEREWITH AS EXHIBIT EX.99.p.1.
(2) Code of Ethics of the Advisor.
ELECTRONICALLY FILED HEREWITH AS EXHIBIT EX.99.p.2.
ITEM 24. 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 February 29, 2000, the
following persons beneficially owned more than 25% of the outstanding voting
securities of the feeder portfolios investing in the Trust:
<TABLE>
<S> <C>
DFA IDG
U.S. 4-10 VALUE PORTFOLIO
Ferris State University
420 Oak Street
Big Rapids, MI 49307 100%
JAPANESE SMALL COMPANY PORTFOLIO
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309-3610 66.17%
UNITED KINGDOM SMALL COMPANY PORTFOLIO
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309-3610 61.61%
CONTINENTAL SMALL COMPANY PORTFOLIO
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309-3610 65.70%
PACIFIC RIM SMALL COMPANY PORTFOLIO
BellSouth Corporation
1155 Peachtree Street N.E.
Atlanta, GA 30309-3610 77.48%
DIG
6-10 INSTITUTIONAL PORTFOLIO
Baycare Health Master Custody
323 Jefford Street
Clearwater, FL 33757 38.00%
</TABLE>
C-10
<PAGE>
<TABLE>
<S> <C>
Utah Retirement System
540 E. 200 South
Salt Lake City, UT 84102 30.05%
U.S. 6-10 VALUE PORTFOLIO II
BellSouth Corporation
Bankers Trust Company as Trustee
34 Exchange Place
Jersey City, NJ 07302 100.00%
U.S. LARGE CAP VALUE PORTFOLIO II
BellSouth Corporation
Bankers Trust Company as Trustee
34 Exchange Place
Jersey City, NJ 07302 100.00%
DFA INTERNATIONAL VALUE PORTFOLIO II
BellSouth Corporation
Bankers Trust Company as Trustee
34 Exchange Place
Jersey City, NJ 07302 100.00%
EMERGING MARKETS PORTFOLIO II
Citibank Savings Incentive Plan
One Court Square
Long Island City, NY 11120 100.00%
DFA INTERNATIONAL VALUE PORTFOLIO IV
Citibank Savings Incentive Plan
One Court Square
Long Island City, NY 11120 100.00%
</TABLE>
ITEM 25. INDEMNIFICATION.
Reference is made to Article VII of the Registrant's Agreement and
Declaration of Trust and to Article X of the Registrant's By-Laws, which are
incorporated herein by reference.
Pursuant to Rule 484 under the Securities Act of 1933, as amended, the
Registrant furnishes the following undertaking: "Insofar as indemnification
for liability arising under the Securities Act of 1933 (the "Act") may be
permitted to trustees, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that, in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a trustee, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue."
ITEM 26. 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 Value Fund 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
C-11
<PAGE>
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 27. PRINCIPAL UNDERWRITERS.
(a) Not applicable.
(b) Registrant distributes its own shares. It has entered into an agreement
with DFA Securities Inc. which provides that DFA Securities Inc., 1299
Ocean Avenue, 11th Floor, Santa Monica, CA 90401, will supervise the sale
of Registrant's shares.
(c) Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
The accounts and records of the Registrant will be located at the office
of the Registrant and at additional locations, as follows:
<TABLE>
<CAPTION>
NAME ADDRESS
<S> <C>
The DFA Investment Trust Company 1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
PFPC Inc. 400 Bellevue Parkway
Wilmington, DE 19809
The Chase Manhattan Bank 4 Chase MetroTech Center
Brooklyn, NY 11245
</TABLE>
ITEM 29. MANAGEMENT SERVICES.
There are no management-related service contracts not discussed in Part
A or Part B.
ITEM 30. UNDERTAKINGS.
(a) Not applicable
(b) Not applicable
(c) The Registrant undertakes to furnish each person to whom this
Post-Effective Amendment is delivered a copy of its latest annual report
to shareholders, upon request and without charge.
(d) The Registrant hereby undertakes to promptly call a meeting of
shareholders for the purpose of voting upon the question of removal of
any trustee or trustees when requested in writing to do so by the record
holders of not less than 10 per centum of the Registrant's outstanding
shares and to assist its shareholders in accordance with the requirements
of Section 16(c) of the Investment Company Act of 1940 relating to
shareholder communications.
C-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, as
amended, the Registrant has duly caused this Post-Effective Amendment No. 21 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 29th day of March, 2000.
THE DFA INVESTMENT TRUST COMPANY
(Registrant)
By: /s/ Catherine L. Newell
-----------------------------------
Catherine L. Newell
Vice President
(Name and Title)
C-13
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
N-1A EDGAR
EXHIBIT NO. EXHIBIT NO. DESCRIPTION
<S> <C> <C>
23(j) EX-99.j Consent of PricewaterhouseCoopers LLP
23(o) EX-99.o Power-of-Attorney
23(p) EX-99.p.1 Code of Ethics of Registrant
EX-99.p.2 Code of Ethics of Advisor
</TABLE>
C-14
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form N-1A of our report dated January 14, 2000, relating to the
financial statements and financial highlights which appears in the November 30,
1999 Annual Report to Shareholders of The U.S. Large Company Series, The
Enhanced U.S. Large Company Series, The U.S. Large Cap Value Series, The
Tax-Managed U.S. Marketwide Value Series, The U.S. 4-10 Value Series, The U.S.
6-10 Value Series, The U.S. 6-10 Small Company Series, The U.S. 9-10 Small
Company Series, The DFA International Value Series, The Japanese Small Company
Series, The Pacific Rim Small Company Series, The United Kingdom Small Company
Series, The Continental Small Company Series, The Global Value Series, The
Emerging Markets Series, The Emerging Markets Small Cap Series, The DFA One-Year
Fixed Income Series, and The DFA Two-Year Global Fixed Income Series,
(constituting portfolios within the DFA Investment Trust Company), which is also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the headings, "Other Service Providers" and
"Financial Statements" in such Registration Statement.
PricewaterhouseCoopers LLP
Philadelphia, PA
March 30, 2000
<PAGE>
Exhibit No. EX-99.o
THE DFA INVESTMENT TRUST COMPANY
POWER OF ATTORNEY
-----------------
The undersigned officers and trustees of THE DFA INVESTMENT
TRUST COMPANY (the "Fund") hereby appoint DAVID G. BOOTH, REX A. SINQUEFIELD,
MICHAEL T. SCARDINA, IRENE R. DIAMANT, CATHERINE L. NEWELL AND STEPHEN W. KLINE,
ESQUIRE (with full power to any of them to act) as attorney-in-fact and agent,
in all capacities, to execute, and to file any of the documents referred to
below relating to a Registration Statement under the Securities Act of 1933
and/or the Investment Company Act of 1940, including any and all amendments
thereto, covering the registration of any registered investment company for
which any Series of the Fund serves as a master fund in a master fund-feeder
fund structure, including all exhibits and any and all documents required to be
filed with respect thereto with any regulatory authority. Each of the
undersigned grants to each of said attorneys full authority to do every act
necessary to be done in order to effectuate the same as fully, to all intents
and purposes, as he could do if personally present, thereby ratifying all that
said attorneys-in-fact and agents may lawfully do or cause to be done by virtue
hereof.
The undersigned officers and trustees hereby execute this
Power of Attorney as of the 18th day of July, 1997.
<TABLE>
<CAPTION>
<S> <C>
/S/ DAVID G. BOOTH /S/ REX A. SINQUEFIELD
- ------------------------------ ----------------------------
David G. Booth, Rex A. Sinquefield, Chairman-
Chairman-Chief Executive Chief Investment Officer and
Officer, President and Trustee Trustee
/S/ GEORGE M. CONSTANTINIDES /S/ JOHN P. GOULD
- ---------------------------- ----------------------
George M. Constantinides, John P. Gould, Trustee
Trustee
/S/ ROGER G. IBBOTSON /S/ MERTON H. MILLER
- -------------------------- -------------------------
Roger G. Ibbotson, Trustee Merton H. Miller, Trustee
/S/ MYRON S. SCHOLES /S/ MICHAEL T. SCARDINA
- ------------------------- --------------------------
Myron S. Scholes, Trustee Michael T. Scardina, Chief
Financial Officer, Treasurer
and Vice President
</TABLE>
<PAGE>
Exhibit No. EX-99.p.1
THE DFA INVESTMENT TRUST COMPANY
CODE OF ETHICS
This Code of Ethics of THE DFA INVESTMENT TRUST COMPANY (the "Fund")
was adopted on September 11, 1992 pursuant to the requirements of Rule 17j-1
under the Investment Company Act of 1940, as amended (the "Act").
1. DEFINITIONS
(a) "Access Person" means each officer and trustee of the Fund and
its investment advisor and any employee of these
organizations, who, in connection with his or her regular
functions or duties, makes, participates in, or obtains
information regarding the purchase or sale of a security by
the Fund, or whose functions relate to the making of any
recommendations with respect to such purchases or sales; and
any natural person in a control relationship to the Fund who
obtains information with respect to the Fund with regard to
the purchase or sale of a security.
(b) "Security" means all securities except securities issued by
the Government of the United States, bankers acceptances,
certificates of deposit, commercial paper, and shares of
registered open-end investment companies.
(c) A "security held or to be acquired" means a security which,
within the most recent 15 days (i) is or has been held by the
Fund; or (ii) is being or has been considered by the Fund for
purchase by the Fund or its investment adviser for purchase by
the Fund.
(d) "Beneficial Ownership" shall have the meaning ascribed thereto
under Section 16 of the Securities Exchange Act of 1934.
2. PROHIBITIONS
No Access Person of the Fund:
(a) In connection with the purchase or sale by such person of a
Security held or to be acquired by the Fund:
(i) shall employ any device, scheme, or artifice to
defraud the Fund;
(ii) make to the Fund any untrue statement of a material
fact or omit to state to the Fund a material fact
necessary in order to make the statements made, in
light of the circumstances under which they are made,
not misleading;
1
<PAGE>
(iii) engage in any act, practice, or course of business
which operates or would operate as a fraud or deceit
upon the Fund; or
(iv) engage in any manipulative practice with respect to
the Fund.
(b) Shall purchase or sell, directly or indirectly, any security
in which he has, or by reason of such transaction acquires,
any direct or indirect Beneficial Ownership and which to his
or her actual knowledge at the time of such purchase or sale:
(i) is being considered for purchase or sale by the Fund;
or
(ii) is then being purchased or sold by the Fund.
3. EXEMPTED TRANSACTIONS
The prohibitions of Section 2 of this Code shall not apply to:
(a) Purchases or sales effected in any account over which the
Access Person has no direct or indirect influence or control.
(b) Purchases or sales of securities which are not eligible for
purchase or sale by the Fund.
(c) Purchases or sales which are non-volitional on the part of
either the Access Person or the Fund.
(d) Purchases which are part of an automatic dividend reinvestment
plan.
(e) Purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of its securities,
to the extent such rights were acquired from such issuer, and
sales of such rights so acquired.
(f) Purchases or sales which receive the prior approval of the
President or Vice President-Chief Administrative Officer of
the Fund because there exists only a remote potential for a
conflict of interest with the Fund because they would be very
unlikely to affect a highly institutional market, or because
they clearly are not related economically to the securities to
be purchased, sold or held by the Fund. The Secretary of the
Fund shall record any action taken pursuant to this
Subsection 3(f).
4. PROCEDURAL MATTERS
(a) The Secretary of the Fund shall:
(i) Furnish a copy of this Code to each Access Person of
the Fund.
2
<PAGE>
(ii) Notify each Access Person of that person's obligation
to file reports as provided by Section 5 of this
Code.
(iii) Report to the Board of Trustees the facts contained
in any reports filed with the Secretary pursuant to
Section 6 of this Code when any such report indicates
that an Access Person engaged in a transaction in a
security held or to be acquired by the Fund.
(iv) Maintain the records required by paragraph (d) of
Rule 17j-1 under the Act.
(v) Maintain any records furnished to him or her pursuant
to Section 2(f) herein.
5. REPORTING
(a) Every Access Person shall report to the Fund the information
described in Section 5(c) of this Code, with respect to
transactions in any security in which such Access Person has,
or by reason of such transaction acquires, any direct or
indirect Beneficial Ownership in the security; provided,
however, that an Access Person shall not be required to make a
report with respect to transactions effected for any account
over which such person does not have any direct or indirect
influence.
(b) A disinterested trustee of the Fund need only report a
transaction in a security if such trustee, at the time of that
transaction, knew or, in the ordinary course of fulfilling his
or her official duties as a trustee of the Fund, should have
known that during the 15-day period immediately preceding the
date of the transaction by the trustee such security was
purchased or sold by the Fund or was being considered for
purchase or sale by its investment adviser.
(c) Every report shall be made not later than ten days after the
end of the calendar quarter in which the transaction to which
the report relates was effected, and shall contain the
following information:
(i) The date of the transaction, the title and the number
of shares, and the principal amount of each security
involved;
(ii) The nature of the transaction (i.e., purchase, sale,
or any other type of acquisition or disposition) ;
(iii) The price at which the transaction was effected; and
(iv) The name of the broker, dealer, or bank with or
through whom the transaction was effected.
3
<PAGE>
(d) Any such report may contain a statement that the report shall
not be construed as an admission by the person making such
report that he or she has any direct or indirect Beneficial
Ownership in the security to which the report relates.
6. VIOLATIONS
Upon being apprised of facts which indicate that a violation of this
Code may have occurred, the Board of Trustees of the Fund shall
determine whether, in its judgment, the conduct being considered did in
fact violate the provisions of this Code. If the Board of Trustees
determines that a violation of the Code has occurred, the Board may
impose such sanctions as it deems appropriate under the circumstances.
If the person whose conduct is being considered by the Board is a
trustee of the Fund, he shall not be eligible to participate in the
judgment of the Board as to whether a violation exists or in whether,
or to what extent, sanctions should be imposed.
4
<PAGE>
Exhibit No. EX-99.p.2
REVISED
DIMENSIONAL FUND ADVISORS INC.
DFA SECURITIES INC.
DFA AUSTRALIA LTD.
CODE OF ETHICS
--------------
DATED APRIL 24, 1998
GENERAL
This amended and restated Code of Ethics is adopted by Dimensional Fund
Advisors Inc. ("DFA"), DFA Securities Inc. ("DFAS") and DFA Australia Ltd.
("DFAL") this 24th day of April, 1998 pursuant to the requirements of Rule 17j-1
under the Investment Company Act of 1940, as amended. It is the policy of DFA,
DFAS and DFAL (hereinafter referred to as "Employers") in connection with
personal securities investments of access persons1, that such persons at all
times shall place the interests of Employers' clients first. All personal
securities transactions of access persons shall be conducted in a manner
consistent with this Code of Ethics and to avoid any actual or potential
conflict of interest and any abuse of an access person's position of trust and
responsibility. An access person may not take inappropriate advantage of his or
her position with Employers.
1. PROHIBITIONS
No access person of Employers
- --------
1 For the meaning of all terms marked with a footnote, see section 6 of the Code
"Definitions."[TOWHOM] March 15, 2000 Page 2
1
<PAGE>
(a) In connection with the purchase or sale by such person of a
security held or to be acquired by a registered investment company for which DFA
or DFAL act as investment adviser or DFAS acts as the principal underwriter.
(i) shall employ any device, scheme or artifice to
defraud such registered investment company;
(ii) shall make to such registered investment company any
untrue statement of a material fact or omit to state to such registered
investment company a material fact necessary in order to make the statements
made, in light of the circumstances under which they are made, not misleading;
(iii) shall engage in any act, practice, or course of business
which operates or would operate as a fraud-or deceit upon such registered
investment company; or
(iv) shall engage in any manipulative practice with
respect to such registered investment company.
(b) Shall purchase or sell, directly or indirectly, any security in
which he has, or by reason of such transaction acquires, any direct or indirect
beneficial ownership and which to his actual knowledge at the rime of such
purchase or sale:
(i) is being considered for purchase or sale by such
registered investment company; or (ii) is then being purchased or sold by
such registered investment company.
(c) Shall, in addition to the above-stated prohibitions:
(i) acquire any securities in an initial public offering;
PROVIDED, HOWEVER, that such prohibition shall not apply to a purchase of
securities in the retail tranche of a new issue
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where such securities are acquired through a retail application form which
does not disclose, and where allotment is not dependent on, the applicants
affiliation with Employers;
(ii) acquire securities in a private placement, except as
provided in section 2(f) herein;
(iii) accept any personal gift of more than DE MINIMIS
value from any person or entity that does business with, or on behalf of an
Employers' account of any client, or
(iv) serve on the board of directors of a publicly traded
company, except as provided in section 2(g) herein.
2. EXEMPTED TRANSACTIONS
The prohibitions of Section 1 of this Code shall not apply to:
(a) Purchases or sales effected in any account over which the access
person has no direct or indirect influence or control.
(b) Purchases or sales of securities which are not eligible for
purchase or sale by a registered investment company for which DFA or DFAL act as
the investment adviser or DFAS acts as the principal underwriter.
(c) Purchases or sales which are non-volitional on the part of either
the access person or a registered investment company for which DFA or DFAL act
as the investment adviser or DFAS acts as the principal underwriter.
(d) Purchases which are part of an automatic dividend reinvestment
plan.
(e) Purchases effected upon the exercise of rights issued by an issuer
PRO RATA to all holders of a class of its securities, to the extent such rights
were acquired from such issuer, and sales of such rights so acquired.
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(f) Purchase or sale requests which receive the prior approval of the
President or the Executive Vice President of a registered investment company for
which DFA or DFAL act as the investment adviser or DFAS acts as the principal
underwriter because there exists only a remote potential for a conflict of
interest with such registered investment company because they would be very
unlikely to affect a highly institutional market, or when they clearly are not
related economically to the securities to be purchased, sold or held by such
registered investment company. The Secretary of Employers, as the case may be,
shall record any action taken pursuant to this subsection 2(f).
(g) Service by an access person on the board of directors of a publicly
traded company. Such access person shall, however, inform the President or Chief
Investment Officer of each Employer of such appointment. In the event that the
President or Chief Investment Officer, in consultation with outside counsel,
should decide that the potential for conflicts of interests exists with respect
to such person's obligations as a director and Employees duties to its clients,
the President or Chief Investment Officer may, acting upon the recommendations
of outside counsel, place restrictions on the activities of, or information
received by, such access person.
3. PROCEDURAL MATTERS
(a) The Secretary of Employers shall:
(1) Furnish a copy of this Code to each access person of
Employers and obtain from each such person a written acknowledgment of the
receipt thereof. Each access person shall provide the Secretary, on an annual
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basis, with an executed certificate stating that he or she has read and
understood each Employees Code of Ethics, respectively, and recognize that he or
she is subject to the Code. In addition, each access person shall certify to the
Secretary on an annual basis that he or she has complied with the requirements
of each Employees Code of Ethics and has disclosed or reported all personal
securities transactions required to be disclosed or reported pursuant to the
requirements of this Code.
(2) Notify each such access person of his/her obligation to
file reports as provided by Section 4 of this Code.
(3) Report to the Board of Directors at the next occurring
regular meeting the facts contained in any reports filed with the Secretary
pursuant to Section 4 of this Code when any such report indicates that an access
person engaged in a transaction in a security held or to be acquired by the
Fund.
(4) Maintain any records required by paragraph (d) of Rule
17j-1.
(5) Maintain any records pursuant to Section 2(f) of this
Code.
(6) Maintain the records of any violation of this Code,
and/or any action taken as a result of such violation in an easily
accessible place for a period of not less than five years following the end
of the fiscal year in which the violation occurs.
4. REPORTING
(a) Every access person of Employers shall report to such
Employers, as the case may be, the information described in Section 4(b) of
this Code with respect to transactions in any security in which such access
person has, or by reason of such transaction acquires, any direct or indirect
beneficial ownership in the security; provided, however, that an access
person shall not be required to make a report with respect to transactions
effected for any account over which such person does not have any direct or
indirect influence; and, provided, further, no access person of DFA or DFAL
shall be required to make a report with respect to information which
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would be duplicative of information recorded pursuant to Rule 204-2(a)(12) or
204-2(a)(13) under the Investment Advisers Act of 1940.
(b) Every report shall be made not later than 10 days after the
end of the calendar quarter in which the transaction to which the report
relates was effected, and may be on the form provided by DFA or DFAL, a copy
of which is attached hereto, the report shall contain the following
information:
(i) The date of the transaction, the title and the
number of shares, and the principal amount of each security involved;
(ii) The nature of the transaction (i.e., purchase, sale or
any other type of acquisition or disposition);
(iii) The price at which the transaction was effected; and,
(iv) The name of the broker, dealer or bank with or through
whom the transaction was effected.
(c) Any such report may contain a statement that the report
shall not be construed as an admission by the person making such report that
he/she has any direct or indirect beneficial ownership in the security
to which the report relates.
5. VIOLATIONS
Upon being apprised of facts which indicate that a violation of this
Code may have occurred, the Board of Directors of Employers, as the case may be,
shall determine whether, in its judgment, the conduct being considered did in
fact violate the provisions of this Code. If the Board of Directors determines
that a violation of this Code has occurred, the Board may impose such sanctions
as it deems appropriate in the circumstances. If the person whose conduct is
being considered by the Board is a member of such Board, he/she shall not be
eligible to
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participate in the judgment of the Board as to whether a violation
exists or in whether, or to what extent, sanctions should be imposed.
6. DEFINITIONS
(a) For purposes of this Code, the words appearing below in
quotation marks shall have the meanings ascribed thereto; provided however,
that all such terms shall be construed in a manner consistent with the
definitions thereof contained in Rule 17j-1.
(1) "Access person" means (A) with respect to DFA or DFAL,
each officer and director of such Employers and each employee of such Employers
who, in connection with his regular functions or duties, makes, participates in,
or obtains information regarding the purchase or sale of a security by a
registered investment company for which such Employers act as investment
adviser, or whose functions relate to the making of any recommendations with
respect to such purchases or sales, and any natural person in a control
relationship to such Employers who obtain information concerning recommendations
made to such company with regard to the purchase or sale of a security, and (B)
with respect to DFAS, each officer and director of DFAS who in the ordinary
course of his business makes, participates in or obtains information regarding
the purchase or sale of securities for any registered investment company for
which DFAS acts as the principal underwriter or whose functions or duties as
part of the ordinary course of his business relate to the making of any
recommendation to such investment company regarding the purchase or sale of
securities.
(2) "Security" means all securities except securities issued
by the Government of the United States, bankers' acceptances, certificates of
deposit, commercial paper and shares of registered open-end investment
companies.
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(3) A "security held or to be acquired" by a registered
investment company means any security which, within the most recent 15 days (i)
is or has been held by such company; or (ii) is being or has been considered by
such company or its investment advisor for purchase by such company.
(4) "Beneficial ownership" of a security by an access person
shall be interpreted in the same manner as it would be in determining whether a
person is subject to the provisions of Section 16 of the Securities Exchange Act
of 1934 and the rules and regulations thereunder, except that the determination
of direct or indirect beneficial ownership shall apply to all securities which
such access person has or acquires. In general, a person may be regarded as
having beneficial ownership of securities held in the name of:
(a) a husband, wife, registered domestic partner or minor child;
(b) a relative sharing the same house;
(c) anyone else if the access person:
(i) obtains benefits substantially equivalent to ownership of
the securities, or
(ii) can obtain ownership of the securities immediately or at
some future time. The requirements of this Code are not applicable to
transactions for any account over which the access person has no influence or
control. If in doubt, the amass person may state on any form required to be
completed under the provisions of this Code that he/she disclaims any
beneficial ownership in the securities involved.
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