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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
DIMENSIONAL EMERGING MARKETS FUND INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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PRELIMINARY PROXY MATERIAL
DIMENSIONAL EMERGING MARKETS FUND INC.
1299 OCEAN AVENUE
11TH FLOOR
SANTA MONICA, CALIFORNIA 90401
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON
OCTOBER 29, 1997
To the Shareholders of Dimensional Emerging Markets Fund Inc.:
A Special Meeting of Shareholders of Dimensional Emerging Markets Fund Inc.
(the "Fund") will be held at the offices of Dimensional Fund Advisors Inc., 1299
Ocean Avenue, 11th Floor, Santa Monica, California, at 9 a.m. Pacific Coast
time, on October 29, 1997 for the following purposes:
1. To approve or disapprove an amendment to and restatement of the
charter of the Fund which provides for the conversion of the Fund into
an open-end investment company.
2. To approve or disapprove a new investment management agreement between
Dimensional Fund Advisors Inc. and the Fund providing for a reduction
of the current investment management fee rate.
3. To approve or disapprove a restatement of the Fund's fundamental
investment restrictions.
Shareholders of record at the close of business on September 15, 1997 are
entitled to vote at the meeting or any adjournment thereof.
By Order of the Board of Directors
IRENE R. DIAMANT
Secretary
October 15, 1997
Santa Monica, California
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IMPORTANT
Whether or not you plan to attend the meeting, please mark your voting
instructions on the enclosed proxy and promptly date, sign and return it in the
enclosed envelope. No postage is required if mailed in the United States. We
ask your cooperation in helping the Fund by mailing your proxy promptly.
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DIMENSIONAL EMERGING MARKETS FUND INC.
1299 OCEAN AVENUE
11TH FLOOR
SANTA MONICA, CALIFORNIA 90401
PROXY STATEMENT - SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON
OCTOBER 29, 1997
The enclosed proxy is solicited by the Board of Directors of Dimensional
Emerging Markets Fund Inc. (the "Fund") in connection with a Special Meeting of
Shareholders of the Fund ("Meeting") and any adjournment thereof. Proxies will
be voted in accordance with the instructions contained thereon. If no
instructions are given, proxies that are signed and returned will be voted in
favor of each proposal. A shareholder may revoke his or her proxy at any time
before it is exercised by delivering a written notice to the Fund expressly
revoking such proxy, by executing and forwarding to the Fund a subsequently
dated proxy, or by voting in person at the Meeting. This proxy statement and
the accompanying form of proxy are being first sent to shareholders on
approximately October 15, 1997. In the event a quorum is not present in person
or by proxy at the Meeting or if there are insufficient votes to approve the
proposals, the persons named as proxies will consider the best interests of the
shareholders in deciding whether the Meeting should be adjourned.
As of the close of business on September 15, 1997, the record date fixed by
the Board of Directors for the determination of shareholders of the Fund
entitled to notice of and to vote at the Meeting ("Record Date"), 12,011,957.937
shares of the Fund were outstanding. EACH SHARE IS ENTITLED TO ONE VOTE. As of
the Record Date, the Directors and officers of the Fund, individually and as a
group, beneficially owned none of the Fund's outstanding shares.
With respect to Proposal 1, a favorable vote of the holders of a majority
of the Fund's shares voted at the Meeting is required for approval of the
proposal ("Majority Vote"). With respect to Proposals 2 and 3, the vote of the
holders of a "majority of the outstanding voting securities" of the Fund, as
defined in the Investment Company Act of 1940, as amended (the "1940 Act"),
represented at the meeting in person or by proxy, is required for the approval
of the proposal ("1940 Act Majority Vote"). A 1940 Act Majority Vote means the
vote of (a) at least 67% of the shares of the Fund present in person or by
proxy, if more than 50% of the shares of the Fund are represented at the
meeting, or (b) more than 50% of the outstanding shares of the Fund, whichever
is less. Under Maryland law, abstentions and broker non-votes will be included
for purposes of determining whether a
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quorum is present at the Meeting, but will be treated as votes not cast and,
therefore, would not be counted for purposes of determining whether the
Proposals have been approved. No other business may properly come before the
Meeting.
The cost of solicitation, including preparing and mailing the proxy
materials, will be borne by the Fund. In addition to solicitations through the
mails, the officers and employees of the Fund and the Fund's investment advisor
may solicit proxies by telephone, telegraph and personal interviews. It is not
anticipated that any of the foregoing persons will be specially engaged for that
purpose. The cost of such additional solicitation, if any, including out-of-
pocket disbursements, will be borne by the Fund and it is estimated to be
nominal in amount.
As of the Record Date, all of the outstanding shares of the Fund were held
by State Street Bank and Trust Company as Trustee of the BellSouth Master
Pension Trust. The BellSouth Master Pension Trust is located at 1155 Peachtree
Street, N.E., Atlanta, Georgia 30367.
PROPOSAL 1: APPROVAL OR DISAPPROVAL OF AN AMENDMENT TO AND RESTATEMENT OF THE
FUND'S CHARTER
The Board of Directors of the Fund believes that it is advisable for the
Fund to amend and restate its charter and take other actions which would have
the effect of changing the status of the Fund from a closed-end investment
company (referred to herein as a "closed-end fund" or collectively as
"closed-end funds") to an open-end investment company (referred to herein as an
"open-end fund" or collectively as "open-end funds"). Approval of the proposal
will authorize the officers of the Fund to (1) prepare, execute and file
articles of amendment and restatement to the Fund's charter ("Articles of
Restatement") incorporating the changes summarized below; and (2) take any other
acts deemed necessary to effect the change of the Fund to an open-end fund in
compliance with applicable laws. As further described below, it is also
contemplated that as an open-end fund the Fund will offer its shares only to
investment companies and institutional investors.
BACKGROUND
At the time that the Fund was incorporated in the State of Maryland on
January 9, 1991, it was expected that the Fund would best serve the investment
interests of prospective shareholders if the Fund operated as a closed-end fund.
As was common for other funds investing primarily in emerging market equity
securities, such a structure was seen as preferrable because it eased concerns
about the small size of the markets and the low volume of trading in such
securities, the resulting lack of liquidity and the potential inability of an
open-end fund to satisfy shareholder redemption requests. A closed-end fund
investing in
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emerging markets equity securities may have greater investment flexibility than
an open-end fund investing in such securities because the former does not have
to adjust its investment plans to reflect the potential effects of cash outflow
which can result from the exercise by shareholders of the statutory right of
redemption provided by the 1940 Act to open-end fund shareholders. A
shareholder of an open-end fund has the right to require that the fund redeem
shares for their net asset value on each business day. Without the need to meet
redemptions, the assets of a closed-end fund could be managed for longer term
investment considerations.
In recent years, however, emerging markets have attracted an increasing
number of investors and the liquidity of emerging market equity securities has
become less of a concern. Accordingly, now it is not unusual for investment
companies that invest in emerging markets to be structured as open-end funds.
Further, the investment advisor to the Fund, Dimensional Fund Advisors Inc. (the
"Advisor"), believes that by converting to an open-end fund, more investors will
be attracted to the Fund. Any resulting inflows of cash may permit more
frequent rebalancing of the Fund's assets.
The Advisor has proposed to the Board of Directors of the Fund that the
Fund convert from a publicly offered closed-end fund to an open-end fund which
offers its shares only to investment companies and certain institutional
investors through private placements pursuant to available exemptions under the
Securities Act of 1933, as amended ("Securities Act").
EVALUATION BY THE BOARD OF DIRECTORS
In deciding to recommend that shareholders approve Proposal No. 1, the
Board noted that many of the policies followed by the Fund are consistent with
those that would be followed by an open-end fund. The Board asked the Advisor
whether the management of the assets of the Fund would be affected by converting
the Fund to an open-end fund. The Advisor has indicated to the Board that it
believes that the impact of redemptions on an equity fund of this type, designed
for long-term investors, is not likely to have a detrimental effect on the
management of the Fund's assets.
The Board also considered the effect that the conversion would have on the
present shareholders of the Fund who wish to acquire additional shares or
liquidate any part of their present investment. The Directors considered that
the shareholders who wish to acquire additional shares will be able to do so on
each day that the New York Stock Exchange ("NYSE") is open for business at a
public offering price, which is equal to the net asset value of the Fund's
shares plus a reimbursement fee equal to 0.50% of such value, next computed
after receipt of an order for shares in proper form. Presently, shares may be
purchased from the Fund at such public offering price ordinarily as of the last
day of each month on which the NYSE is open for regular trading.
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The Board also considered that because shares of the Fund are proposed to
be offered only to investment companies and certain institutional investors
through private placements pursuant to exemptions under the Securities Act, the
Fund will not issue registered shares. Therefore, shares to be issued by the
Fund are restricted securities which may not be sold unless registered or
pursuant to an available exemption from the Securities Act. However, the
Directors concluded that, as holders of shares of an open-end fund, Fund
shareholders will benefit from the assurance that they will be able to redeem
their shares to the Fund at the net asset value next computed after the receipt
of the request to redeem. Presently, in order to liquidate an investment in the
Fund, a shareholder must identify a prospective purchaser for his/her shares.
Upon conversion of the Fund to an open-end fund, there will be no secondary
market for Fund shares and shareholders will forego any opportunity for sales of
their shares at a premium from their initial purchase price should such a
premium exist. Instead, the Fund will redeem its shares at net asset value.
The Board concluded that shareholders would benefit from restructuring the
Fund as an open-end fund, and that there will not be a significant adverse
effect on the management of the assets of the Fund as a result of the need to
meet redemption requests.
The Board also considered that the conversion of the Fund to an open-end
fund, with the corresponding statutory right of redemption provided by the 1940
Act, may attract additional assets to the Fund through investment in the Fund by
institutional investors. For example, as an open-end fund available only to
institutional investors, the Fund may serve as a master fund in a master
fund-feeder fund structure. As a master fund, the Fund would serve as the
exclusive investment for other investment companies with the same investment
objective and policies as the Fund. Such investment companies offer their
shares to investors on a public basis and are commonly known as feeder funds.
To the extent of any increase in the assets of the Fund, there is the
possibility of reductions in operating expenses due to economies of scale and
the Fund would be in a position to pass any such resulting benefits on to its
shareholders.
The Board of Directors also considered that institutional investment in the
Fund also entails the risk that economies and expense reductions might not be
achieved and additional investment opportunities, such as increased
diversification, might not be available if other institutions do not invest in
the Fund. Also, if an institutional investor were to redeem its interest in the
Fund, the remaining shareholders could experience higher pro rata operating
expenses, thereby producing lower returns, and the Fund's security holdings may
become less diverse, resulting in increased risk. Institutional investors that
have a greater pro rata ownership interest in the Fund than the Fund's existing
shareholders could have effective voting control over the operation of the Fund.
The Board believes, however, that the potential benefits to be gained by
shareholders outweigh the risks of converting the fund to an open-end fund which
offers its shares only to institutional investors through private placements.
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If Proposal 1 is approved by shareholders, it is expected that the Fund
will be converted to an open-end investment company on approximately October 31,
1997, or as soon as practical thereafter.
1. ARTICLES OF AMENDMENT AND RESTATEMENT
The change of the Fund to open-end fund status requires a number of changes
to the charter of the Fund. In addition to approving such changes, the Board of
Directors also approved amendments to the charter in order to conform its
provisions to those provisions customarily contained in charters of open-end
funds organized under the laws of the State of Maryland. The proposed
amendments to the charter are summarized below, and will be incorporated in the
Articles of Restatement. The full text of the amendments appear in the form of
Articles of Restatement attached to this Proxy Statement as Exhibit A. The
summary below is qualified by reference to the full text set forth in the
exhibit.
a. All references in the charter to "non-redeemable" securities and
"closed-end" investment company will be deleted. Where appropriate,
such references will be made to "redeemable" securities and an
"open-end" investment company.
b. Charter provisions that are permissible for a corporation that issues
shares of a closed-end fund but which are not permissible for a
corporation that issues shares of an open-end fund will be deleted.
For example, while closed-end funds are permitted to issue a class of
senior securities under Section 18(f) of the 1940 Act under certain
circumstances, open-end funds are generally prohibited from doing so.
Therefore, the provisions in the charter that permit the Board to
authorize the issuance of senior securities will be deleted.
c. The charter will be amended to provide that each share of each class
of the Fund shall be entitled to a fractional vote for each fractional
share held. Presently, the charter does not provide for fractional
voting.
d. A charter provision will be included clarifying that the currently
issued and outstanding shares of the Fund are considered to be shares
of one class of the Fund's common stock. In this regard, the
provisions relating to voting, consideration received for share
purchases, rights to dividends and upon liquidation will be those that
are consistent with the operation of an open-end fund which issues
classes of shares and the relative rights of the shareholders thereof.
Specifically, charter provisions will be included which provide that
(i) shareholders are entitled to vote only with respect to matters
which affect the interest of the class of shares which they hold,
except as otherwise required by applicable law; (ii) proceeds from the
issuance or sale of shares of a class shall belong to such class;
(iii) a shareholder will be entitled to a pro rata shares of all
dividends and distributions arising from the assets of the class in
which she/he invests; and (iv) if liquidation of the Fund should
occur,
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shareholders would be entitled to receive on a per class basis the
assets of the particular class whose shares they own, as well as a
proportionate share of the Fund's assets not attributable to any
particular class.
e. For purposes of simplifying the charter, provisions expressly granting
to the Board the authority to take certain actions where such
authority is not required to be expressly stated in the charter of a
Maryland corporation in order for the Board to exercise such authority
will be deleted.
f. Charter provisions relating to redemption and liquidation will be
those applicable to an open-end fund in accordance with the provisions
of the 1940 Act and in connection therewith the net asset value of the
Fund will be calculated as of the close of business on each business
day. In addition, a provision has been added which provides the (i)
Directors with the power to place restrictions on the right of
redemption, consistent with the requirements of the 1940 Act; and (ii)
Fund with the right to redeem the shares of a class at net asset value
upon such terms and conditions as the Board of Directors shall
determine.
g. Conforming amendments will be made throughout the Articles of
Restatement.
2. ADDITIONAL INVESTMENT POLICY
The investment objective of the Fund is to seek long-term capital growth
through investment in emerging market equity securities. No change in this
investment objective is proposed in connection with conversion of the Fund to an
open-end fund. The policies and restrictions of the Fund generally conform to
the limitations which apply to the operation of open-end funds, and no
significant changes are called for in order to meet the requirements applicable
to open-end funds at the present time.
One specific change will be made to conform the Fund's policies to the
current positions of the SEC applicable to open-end funds. Specifically, the
SEC seeks to assure that every open-end fund has adequate liquidity so that it
can meet redemption requests in a timely fashion. For this reason, it is the
current position of the staff of the SEC not to permit an open-end fund to
invest more than 15% of its assets in any combination of assets which are
"illiquid." Generally, an asset is considered to be illiquid if disposition of
the asset is restricted by law, if there is no readily available market for the
asset, or if the proceeds of a sale or liquidation of the asset would not be
available to the selling fund in seven days at approximately the value at which
the fund has valued the investment. This policy does not apply to closed-end
funds, such as the Fund, which do not have to provide cash to meet redemption
requests.
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Therefore, as an open-end fund, the Fund does not intend to invest more
than 15% of its total assets in illiquid securities. This investment
restriction has been designated by the Board as a non-fundamental restriction.
A change in a non-fundamental investment restriction does not require the
approval of shareholders. This new restriction will become effective when the
conversion of the Fund to open-end status becomes effective.
DIRECTORS' RECOMMENDATION
The Board of Directors of the Fund unanimously recommends that the
shareholders of the Fund vote to approve Proposal 1.
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PROPOSAL 2: TO APPROVE OR DISAPPROVE A NEW INVESTMENT MANAGEMENT AGREEMENT
BACKGROUND
Shareholders are asked to approve a new investment management agreement
("New Agreement") to replace the current investment management agreement between
the Advisor and the Fund ("Current Agreement"). The New Agreement contains the
same terms and conditions as the Current Agreement, except for a reduction in
the investment management fee rate and change in the effective and termination
dates.
Pursuant to the terms of the New Agreement, on an annual basis the fee
payable by the Fund to the Advisor would be reduced from .50% of the net asset
value of the Fund to .10% of the net assets of the Fund. The Advisor has
informed the Board of Directors that it has proposed this reduction in the rate
of the management fee because it believes that such rate is appropriate for the
level of services it provides to the Fund at the present time. Since March 1,
1994, the Advisor has voluntarily waived a portion of its management fee payable
by the Fund so that the effective fee paid by the Fund to the Advisor equaled on
an annual basis 0.10% of the net assets of the Fund.
EVALUATION OF THE NEW AGREEMENT BY THE BOARD OF DIRECTORS
The Board of Directors of the Fund, including a majority of the directors
who are not parties to the New Agreement or interested persons of any such
party, voted unanimously to approve the New Agreement and to recommend its
approval to the shareholders of the Fund.
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In determining whether to recommend the New Agreement to shareholders for
their approval, the Directors of the Fund considered that the terms of the New
Agreement did not contemplate any change in the level of services to be provided
to the Fund or in shareholder services. In addition, the Advisor informed the
Board of Directors that the proposed reduction in fee reflected in the New
Agreement would not reduce the quality of the Advisor's services and that its
obligations will remain the same in all respects.
In reaching its decision to approve the New Agreement and recommend its
approval to the Fund's shareholders, the Board of Directors of the Fund also
considered the nature and quality of the services to be rendered by the Advisor,
the fee to be received by the Advisor, and other pertinent matters. Based upon
the foregoing, the Board of Directors unanimously approved the New Agreement and
recommended its approval by shareholders.
INFORMATION CONCERNING THE CURRENT AGREEMENT AND THE NEW AGREEMENT
Pursuant to the terms of the Current Agreement, the Advisor manages the
investment and reinvestment of the assets of the Fund, and continuously reviews,
supervises and administers the Fund's investment program. The Advisor provides
the Fund with a trading department and selects brokers and dealers to effect
securities transactions. Under the Current Agreement, the Advisor also
determines the securities to be purchased or sold and provides the Fund with
records concerning the Advisor's activities and renders regular reports to the
Board of Directors and officers of the Fund.
The Fund 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 directors, the cost of filing its registration statements under
applicable federal and state securities laws, reports to shareholders, and
transfer and dividend disbursing agency, administrative services and custodian
fees.
The terms of the Current and New Agreements are identical except for the
investment management fee rate and change in the effective and termination
dates, as described below.
The date of the Current Agreement is February 28, 1994, and it was last
submitted to the Fund's sole shareholder on February 25, 1994 for the purpose of
approving an increase in the management fee. The Board of Directors unanimously
approved the continuance of the Current Agreement at a meeting held on December
20, 1996. Pursuant to the Current Agreement, the Fund is obligated to pay the
Advisor a monthly fee equal to .04167% (representing an annual rate of .50%) of
the net asset value of the Fund. For the fiscal year ended November 30, 1996,
the Advisor waived a portion of its fee such that the effective fee paid to the
Advisor by the Fund equaled the annual rate of 0.10% of the net assets of the
Fund. For the fiscal year ended November 30, 1996, $173,017 in total management
fees were paid by the Fund to the Advisor. Under the terms of the New
Agreement, the Fund
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would pay a monthly fee equal to one-twelfth of .10% of the net assets of the
Fund. If the New Agreement had been in effect during the Fund's 1996 fiscal
year, the Fund also would have paid $173,017 in management fees to the Advisor.
There is no difference between these dollar amounts expressed as a percentage of
the amount paid to the Advisor under the Current Agreement for the Fund's 1996
fiscal year.
It is anticipated that the New Agreement will become effective on or about
October 31, and will continue in effect until December 31, 1997, and,
thereafter, only if such continuance is approved at least annually by a vote of
the Fund's Board of Directors who are not parties to the New Agreement or
interested persons of any such party, cast in person at a meeting called for
such purpose. In addition, continuance of the New Agreement may be effected if
approved by the affirmative vote of the holders of a majority of the outstanding
voting securities of the Fund.
The New Agreement may at any time be terminated without payment of any
penalty either by vote of the Board of Directors of the Fund or by vote of a
majority of the outstanding voting securities of the Fund, on sixty days'
written notice to the Advisor. In addition, the New Agreement may be terminated
by the Advisor after ninety days' written notice to the Fund. It will
automatically terminate in the event of its assignment.
The Current and New Agreements each permit the Advisor to knowingly pay
commissions on securities transactions which are greater than another broker
might charge if the Advisor determines in good faith that the commission paid
was reasonable in relation to the value of the brokerage and research services
provided by such broker, viewed in terms of that specific transaction or the
Advisor's overall responsibilities with respect to its accounts, including the
Fund, as to which it exercises investment discretion.
INFORMATION REGARDING THE ADVISOR
The Advisor, located at 1299 Ocean Avenue, 11th Floor, Santa Monica,
California 90401, was organized in May 1981 and is engaged in the business of
providing investment management services to institutional investors.
David G. Booth and Rex A. Sinquefield, directors and officers of both the
Fund and the Advisor, together own approximately 52.15% of the Advisor's
outstanding stock. The name, address and principal occupation of each director
and principal executive officer of the Advisor is set forth below. The officers
of the Advisor and the Fund are also listed below.
DIRECTORS AND PRINCIPAL EXECUTIVE OFFICERS OF THE ADVISOR
David G. Booth, Santa Monica, CA, is Chairman - Chief Executive Officer,
President and a Director of the Advisor and the Fund. He is also
President, Chairman - Chief Executive Officer and a Trustee of The DFA
Investment Trust Company (the "Trust") (registered investment company).
Mr. Booth is also Chairman - Chief Executive
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Officer, President and a Director of DFA Securities Inc., DFA Investment
Dimensions Group Inc. (registered investment company), Dimensional
Investment Group Inc. (registered investment company) and DFA Australia
Limited ("DFA Australia"). He is Chairman and Director of Dimensional Fund
Advisors Ltd. ("DFAL").
Rex A. Sinquefield, Santa Monica, CA, is Chairman - Chief Investment
Officer and a Director of the Advisor and the Fund. He is also Chairman -
Chief Investment Officer and a Director of DFA Securities Inc., DFA
Investment Dimensions Group Inc., Dimensional Investment Group Inc. and DFA
Australia. He is Trustee and Chairman - Chief Investment Officer of the
Trust, and Chairman, Chief Executive Officer and Director of DFAL.
Eugene Francis Fama, Chicago, IL, Director, is the Robert R. McCormick
Distinguished Service Professor of Finance, and has been engaged in
teaching and research in finance and economics at the Graduate School of
Business, University of Chicago, Chicago, Illinois since September, 1963.
Mr. Fama also is a Director of DFA Securities Inc.
John Andrew McQuown, Mill Valley, CA, Director, has been self employed
since 1974 as an entrepreneur, financier and consultant to major financial
institutions. He is also a Director of Mortgage Information Corporation,
KMV Corporation and Microsource, Inc. Mr. McQuown also is a Director of
DFA Securities Inc.
Lloyd Stockel, Los Angeles, CA, Director, is a private investor and a
retired general partner of Goldman Sachs & Co. Mr. Stockel also is a
Director of DFA Securities Inc.
OFFICERS OF THE ADVISOR AND THE FUND
Arthur Barlow, Vice President, Santa Monica, CA.
Truman Clark, Vice President, Santa Monica, CA.
Maureen Connors, Vice President, Santa Monica, CA.
Robert Deere, Vice President, Santa Monica, CA.
Irene R. Diamant, Vice President and Secretary, Santa Monica, CA.
Eugene Fama, Jr., Vice President, Santa Monica, CA.
Kamyab Hashemi-Nejad, Vice President, Controller and Assistant Treasurer,
Santa Monica, CA.
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Stephen P. Manus, Vice President, Santa Monica, CA.
Karen McGinley, Vice President, Santa Monica, CA.
Catherine L. Newell, Vice President, Santa Monica, CA.
David Plecha, Vice President, Santa Monica, CA.
George Sands, Vice President, Santa Monica, CA.
Michael T. Scardina, Vice President, Chief Financial Officer and Treasurer,
Santa Monica, CA.
Jeanne C. Sinquefield, Ph.D., Executive Vice President, Santa Monica, CA.
Scott Thornton, Vice President, Santa Monica, CA.
Weston Wellington, Vice President, Santa Monica, CA.
Each of the officers listed above, other than Michael T. Scardina, owns
stock of the Advisor in an amount not exceeding 1% of the Advisor's total
outstanding stock. Mr. Scardina owns 3.31% of the Advisor's total outstanding
stock.
At the present time, the Advisor serves as investment advisor to the
investment companies listed below, each of which has as its investment objective
to seek long-term capital appreciation and seeks to achieve its objective by
investing in emerging markets designated by the Investment Committee of the
Advisor. With respect to such investment companies, the table below also sets
forth the net assets as of August 31, 1997, and the rate of the Advisor's
compensation.
INVESTMENT
NET ASSETS MANAGEMENT FEE AS
AS OF A PERCENTAGE OF
NAME OF INVESTMENT COMPANY AUGUST 31, 1997 AVERAGE NET ASSETS
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Emerging Markets Series* $259 million 0.10%
Emerging Markets Small Cap Series* $23 million 0.20%
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* The Series is a separate series of The DFA Investment Trust Company, a
registered investment company, and serves as a master fund in a master
fund-feeder fund structure.
DIRECTORS' RECOMMENDATION
The Board of Directors of the Fund unanimously recommends that the
shareholders of the Fund vote to approve the New Agreement.
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* * * * * *
PROPOSAL 3: TO APPROVE OR DISAPPROVE REVISIONS TO THE FUND'S FUNDAMENTAL
INVESTMENT POLICIES
The Fund's fundamental investment policies, as set forth as "Investment
Restrictions," in the Fund's prospectus, currently contain numerous restrictions
against making certain types of investments based upon prohibitions in the 1940
Act as well as various state blue sky laws. On October 11, 1996, President
Clinton signed the National Securities Markets Improvement Act of 1996. This
new legislation created a national system of regulating mutual funds by
pre-empting state blue sky laws that require the registration or qualification
of such securities. As a result of this legislation investment companies need
not comply with state blue sky laws restricting an investment company's
investments, and the Fund desires to eliminate all such restrictions other than
those also mandated by the 1940 Act. Accordingly, it is proposed that the
following restrictions on the Fund's investment activities be eliminated:
(1) the writing or acquiring of options;
(2) in connection with the purchase or sale of foreign currency futures
contracts, investing no more than 5% of the Fund's assets as initial
or variation margin deposits;
(3) purchasing or retaining securities of an issuer if those officers and
directors of the Fund or the Advisor owning more than 1/2 of 1% of
such securities together own more than 5% of such securities;
(4) pledging, mortgaging or hypothecating any of the Fund's assets to an
extent greater than 10% of its total assets at fair market value,
except to secure borrowings;
(5) investing more than 5% of the Fund's total assets in securities of
companies which have (with predecessors) a record of less than three
years' continuous operation;
(6) acquiring interests in oil, gas or other mineral exploration, leases
or development programs;
(7) purchasing warrants;
(8) selling securities short; and
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(9) as to 100% of the Fund's assets, acquiring no more than 10% of the
voting securities of any issuer.
None of the restrictions that are proposed to be deleted are expected to
have any material impact upon the Fund's continued operations.
With respect to commodities and options, the Fund's current investment
limitations provide that it will not invest in commodities or write or acquire
options, except the Fund may purchase or sell foreign currency futures contracts
and options, provided that not more than 5% of the Fund's assets are then
invested as initial or variation margin deposits. As set forth above, it is
proposed that the Fund's restriction on writing or acquiring options and the 5%
restriction with respect to margin deposits be eliminated as fundamental
policies. In addition, it is proposed that the Fund's limitation on commodities
be amended to state that the Fund is permitted to purchase or sell "financial
futures contracts and options thereon." While the Fund is currently permitted
to invest in foreign currency futures contracts and options, this amended policy
would provide the Fund with the flexibility to invest in additional types of
futures and options contracts, such as stock index futures contracts and options
thereon. For example, it is anticipated that the Fund could engage in such
transactions for the purpose of remaining fully invested and to maintain
liquidity to pay redemptions. This proposed change is not expected to
materially affect the operations of the Fund.
To the extent that the Fund invests in futures contracts and options
thereon for other than bona fide hedging purposes, the Fund will not enter into
such transactions if, immediately thereafter, the sum of the amount of initial
margin deposits and premiums paid for open futures options would exceed 5% of
the Fund's total assets, after taking into account unrealized profits and
unrealized losses on such contracts it has entered into; provided, however,
that, in the case of an option that is in-the-money at the time of purchase, the
in-the-money amount may be excluded in calculating the 5%.
Futures and option transactions entail the risk that an imperfect
correlation may exist between changes in the market value of the stocks owned by
the Fund and the prices of such futures contracts and options. At times, the
market for such contracts and options might lack liquidity, thereby inhibiting
the Fund's ability to close a position in such investments. Gains or losses on
investments in futures and options depend on the direction of securities prices,
interest rates and other economic factors, and the loss from investing in
futures transactions is potentially unlimited.
A change in the Fund's current investment limitation concerning borrowing
is also being proposed. The Fund's current limitation in this regard states
that the Fund will not "borrow, except in connection with a foreign currency
transaction, the settlement of a portfolio trade, or as a temporary measure for
extraordinary or emergency purposes and, in no event, in excess of 33% of the
Fund's gross assets valued at the lower of market or cost." It is proposed that
the Fund's current borrowing policy be amended in two respects. First,
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the Fund wishes to clarify that when it borrows for extraordinary or emergency
purposes, such borrowing is deemed to include meeting redemption requests.
Second, it is proposed that with respect to permissible borrowings, the Fund not
borrow in excess of 33% of its "net assets valued at market," rather than 33% of
its "gross assets valued at the lower of cost or market." This latter change is
being proposed so that the Fund's limitation on borrowing is consistent with the
limitations on borrowing for open-end funds imposed by the 1940 Act.
The Fund is currently subject to an investment limitation which states that
it will not "acquire more than 10% of the voting securities of any issuer."
This limitation applies to 100% of the Fund's assets. It is proposed that this
limitation be eliminated and replaced with a restriction which provides that the
Fund will not, as to 75% of its assets, acquire more than 10% of the voting
securities of any issuer. This change is being proposed so that the Fund's
limitation with respect to its investment in the voting securities of any one
issuer is consistent with the requirement under the 1940 Act for a diversified
investment company, such as the Fund. The proposed change in this limitation is
not expected to materially affect the operations of the Fund.
In light of the foregoing, it is proposed that the Fund's investment
restrictions be restated as follows:
The Fund will not:
(1) invest in commodities or purchase or sell real estate (including
limited partnership interests), although it may purchase and sell
securities of companies which deal in real estate and may purchase and
sell securities which are secured by interests in real estate and may
purchase or sell financial futures contracts and options thereon, such
as foreign currency futures contracts and options and index futures
contracts and options;
(2) make loans of cash, except through the acquisition of publicly-traded
debt securities and short-term money market instruments;
(3) 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 Fund's total assets, at market, would be invested in the
securities of such issuer, provided that this limitation applies only
to 75% of the total assets of the Fund;
(4) borrow, except in connection with a foreign currency transaction, the
settlement of a portfolio trade, or as a temporary measure for
extraordinary or emergency purposes, including to meet redemption
requests, and, in no event, in excess of 33% of the Fund's net assets
valued at market;
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(5) engage in the business of underwriting securities issued by others,
except to the extent that the sale of securities originally acquired
for investment purposes may be deemed an underwriting;
(6) invest for the purpose of exercising control over management of any
company;
(7) acquire any securities of companies within one industry if, as a
result of such acquisition, more than 25% of the value of the Fund's
total assets would be invested in securities of companies within such
industry;
(8) purchase securities on margin; or
(9) as to 75% of the Fund's assets, acquire more than 10% of the voting
securities of any issuer.
DIRECTORS' RECOMMENDATION
The Board of Directors of the Fund unanimously recommends that the
shareholders of the Fund vote to approve the revisions to the Fund's investment
policies.
* * * * * *
OTHER MATTERS
CHANGE IN POLICY REGARDING VALUE SECURITIES
The emerging markets in which the Fund invests are those approved by the
Investment Committee of the Advisor to the Fund ("Approved Markets"). Since it
commenced operations, the Fund has sought to achieve its investment objective by
attempting to own shares of companies whose aggregate overall share of the
Approved Market's total public capitalization is at least the upper 40% of such
capitalization, and can be as large as 75%. Each of the members of the
Investment Committee of the Advisor and the Board of Directors of the Fund has
approved a change in policy of the Fund which provides that the Fund will seek
to achieve its investment objective by investing in emerging market equity
securities which are deemed by the Advisor to be value stocks at the time of
purchase ("value securities"). Securities are considered value securities
primarily because they have a high book value in relation to their market value.
In measuring value, the Advisor may consider additional factors such as cash
flow, economic conditions and developments in the issuer's industry.
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The Fund's portfolio will be adjusted to include value stocks gradually and
in an orderly fashion consistent with an attempt to minimize the costs incurred
by sales of the portfolio's stocks not considered to be value securities by the
Advisor. It is anticipated that the shift in policy will be accomplished
by March of 1998 so by that time the Fund will have at least 65% of its
portfolio invested in value securities.
This change in the Fund's investment policy is not a change in a fundamental
policy of the Fund and, therefore, the 1940 Act does not require approval by the
Fund's shareholders.
OTHER INFORMATION
PFPC Inc. serves as the accounting services, dividend disbursing and
transfer agent for the Fund and is located at 400 Bellevue Parkway, Wilmington,
DE 19809. The Fund acts as distributor of each series of its own shares of
stock. The Fund has 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 the shares of the Fund. No compensation
is paid by the Fund to DFA Securities Inc. under this agreement.
Coopers & Lybrand L.L.P. serve as the Fund's independent accountants. A
representative of Coopers & Lybrand L.L.P. is not expected to be present at the
Meeting.
SHAREHOLDER REPORTS
The most recent Annual Report and the Semi-Annual Report for the Fund is
available at no cost to shareholders upon request by contacting the Fund at 1299
Ocean Avenue, 11th Floor, Santa Monica, CA 90401 or returning the enclosed
postage-paid card.
SHAREHOLDER PROPOSALS
Any shareholder who desires to submit a shareholder proposal may do so by
submitting such proposal in writing, addressed to the Secretary of the Fund, at
1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401. Ordinarily, the Fund
does not hold shareholders' meetings.
By Order of the Board of Directors
IRENE R. DIAMANT
Secretary
October 15, 1997
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EXHIBIT A
FORM OF ARTICLES OF AMENDMENT AND RESTATEMENT
DIMENSIONAL EMERGING MARKETS FUND INC.
ARTICLES OF AMENDMENT AND RESTATEMENT
THIS IS TO CERTIFY THAT:
FIRST: Dimensional Emerging Markets Fund Inc., a Maryland corporation (the
"Corporation"), desires to amend and restate its charter as currently in effect
and as hereinafter amended.
SECOND: The following provisions are all the provisions of the charter
currently in effect and as hereinafter amended:
"SECOND: The name of the Corporation is Dimensional Emerging Markets
Fund Inc.
THIRD: The purpose for which the Corporation is formed is to act as
an open-end management investment company. The Corporation may exercise
all of the powers provided in these Articles or granted by law.
FOURTH: The post office address of the principal office of the
Corporation in the State of Maryland is 32 South Street, Baltimore,
Maryland 21202. The name and post office address of the resident agent of
the Corporation in the State of Maryland is The Corporation Trust
Incorporated, 32 South Street, Baltimore, Maryland 21202.
FIFTH: The total number of shares of stock which the Corporation
shall have the authority to issue is 200,000,000 shares of a par value of
one cent ($.01) per share and having an aggregate par value of $2,000,000,
all of which shall be considered common stock and are allocated to the
following class or classes (each a "Class" and collectively the "Classes"):
"Dimensional Emerging Markets Fund Shares."
Subject to the provisions of these Articles of Amendment and
Restatement, the Board of Directors shall have the power to authorize the
issuance of shares of stock of the Corporation for such consideration as
may be fixed by the Board of Directors.
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The Board of Directors of the Corporation shall have the power to
classify and reclassify any unissued shares of stock of the
Corporation, from time to time, into one or more Classes, by setting or
changing the preferences, conversion, or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, terms, and
conditions of redemption and other characteristics as the Board may
determine. At any time when there are no shares outstanding of a
Class, such Class may be terminated by the Board of Directors.
The holder of each share of each Class shall be entitled to one vote
for each full share and a fractional vote for each fractional share. On
any matter submitted to a vote of stockholders, all shares of all Classes
then issued and outstanding shall be voted in the aggregate, and not by
Class, except (1) when otherwise expressly provided by the Maryland General
Corporation Law, or (2) when required by the Investment Company Act of
1940, as amended (the "1940 Act"), shares shall be voted by Class, or (3)
when the matter to be voted does not affect any interest of a Class, then
only stockholders of the affected Class shall be entitled to vote thereon.
There shall be no cumulative voting.
Notwithstanding any provision of the Maryland General Corporation Law
requiring more than a majority of the votes of all Classes, or any Class,
entitled to vote on a matter, including but not limited to amending the
Articles of Incorporation, the Corporation may take or authorize corporate
action upon the favorable vote of a majority of the shares of stock of all
Classes, or the Class or Classes entitled to vote thereon, as provided in
the preceding paragraph.
The Class known as Dimensional Emerging Markets Fund Shares shall have
the following powers, preferences, rights, and the characteristics,
restrictions, and limitations thereof shall be as follows:
1. All consideration received by the Corporation for the issue or
sale of stock of the Class, together with all assets, income and proceeds
derived from the sale, exchange, or liquidation of assets of such Class,
and any funds or payments derived from any reinvestment thereof, shall
belong to such Class and shall be so recorded upon the books of account of
the Corporation.
2. The assets of the Class shall be charged with the liabilities of
such Class, and with such share of the general liabilities of the
Corporation as the Board of Directors may determine.
3. Dividends or distributions on shares of the Class shall be paid
only out of earnings, surplus, or other legally available assets of such
Class.
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4. In the event of the liquidation or dissolution of the
Corporation, stockholders of the Class shall be entitled to receive out
of the assets of the Corporation available for distribution to
stockholders, but other than general assets not belonging to any
particular Class, the assets belonging to such Class, and the assets so
distributable to the stockholders of the Class shall be distributed
among such stockholders in proportion to the number of shares of such
Class held by them and recorded on the books of the Corporation. In
the event that there are any general assets of the Corporation not
belonging to any particular Class and available for distribution, such
assets shall be distributed to the holders of stock of all Classes in
proportion to the relative net asset value of the respective Classes
determined as hereinafter provided.
5. The holders of the shares of stock of the Corporation shall have
no preemptive rights to subscribe to new or additional shares of its stock
or other securities.
6. The shares of the Class shall be redeemable at the net asset value
thereof, calculated as provided by the Board of Directors, and the proceeds
of redemption shall be payable in cash or in other assets lawfully
available therefore, or a combination thereof, as determined by the Board
of Directors. The Board of Directors may, from time to time, place such
restrictions on the right of redemption and the manner of effecting
redemptions as, in their judgment, is necessary and desirable, provided,
however, that no such restriction may be imposed which is not consistent
with the requirements of the 1940 Act. Subject to the foregoing, the
shares of the Class shall be redeemable by the holders thereof upon
request. In addition, the Corporation shall have the right to redeem the
shares of the Class at the net asset value of such shares upon such terms
and in such manner, and at such time, as the Board of Directors shall
determine.
SIXTH: The number of Directors of the Corporation shall be seven
(7), which number may be increased or decreased pursuant to the Bylaws of
the Corporation, but shall never be less than the minimum number permitted
by the Maryland General Corporation Law, as amended from time to time. The
names of the current directors who shall act until the next following
annual meeting and until their successors are duly chosen and qualify are:
David G. Booth Rex A. Sinquefield
George M. Constantinides John P. Gould
Roger G. Ibbotson Merton H. Miller
Myron S. Scholes
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SEVENTH: (a) Subject to any limitation imposed by the 1940 Act,
shall indemnify (A) its directors and officers, whether serving the
Corporation or at its request any other entity, to the full extent required
or permitted by the General Laws of the State of Maryland now or hereafter
in force, including the advance of expenses under the procedures and to the
full extent permitted by law, and (B) other employees and agents to such
extent as shall be authorized by the Board of Directors or the Bylaws and
as permitted by law. The foregoing rights of indemnification shall not be
exclusive of any other rights to which those seeking indemnification may be
entitled. The Board of Directors may take such action as is necessary to
carry out these indemnification provisions and is expressly empowered to
adopt, approve and amend from time to time such bylaws, resolutions or
contracts implementing such provisions or such further indemnification
arrangements as may be permitted by law. No amendment of the charter of
the Corporation or repeal of any of its provisions shall limit or eliminate
the right of indemnification provided hereunder with respect to acts or
omissions occurring prior to such amendment or repeal.
(b) Subject to any limitations imposed by the 1940 Act, to the
fullest extent permitted by Maryland statutory or decisional law, as
amended or interpreted, and the 1940 Act, no director or officer of this
Corporation shall be personally liable to the Corporation or its
stockholders for money damages. No amendment of the charter of the
Corporation or repeal of any of its provisions shall limit or eliminate the
limitation of liability provided to directors and officers hereunder with
respect to any act or omission occurring prior to such amendment or repeal.
EIGHTH: The Corporation reserves the right to amend, alter, change,
or repeal any provision contained in these Articles of Incorporation, and
all rights, contract and otherwise, conferred herein upon the stockholders
are granted subject to such reservation."
THIRD: The amendment to and restatement of the charter of the Corporation
has been duly advised by the board of directors and approved by the stockholders
of the Corporation as required by law.
FOURTH: The current address of the principal office of the Corporation in
the State of Maryland is set forth in Article Fourth of the foregoing amendment
and restatement of the charter.
FIFTH: The name and address of the Corporation's current resident agent is
set forth in Article Fourth of the foregoing amendment and restatement of the
charter.
SIXTH: The number of directors of the Corporation and the names of those
currently in office are set forth in Article Sixth of the foregoing amendment
and restatement of the charter.
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<PAGE>
SEVENTH: The undersigned President acknowledges these Articles of
Amendment and Restatement to be the corporate act of the Corporation and as to
all matters or facts required to be verified under oath, the undersigned
President acknowledges that to the best of his knowledge, information and
belief, these matters and facts are true in all material respects and that this
statement is made under the penalties of perjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles to be signed
in its name and on its behalf by its President and attested to by its Secretary
on this 29th day of October, 1997.
ATTEST: DIMENSIONAL EMERGING MARKETS
FUND INC.
/s/ Irene R. Diamant By: /s/ David G. Booth
- --------------------------- ----------------------
Irene R. Diamant, Secretary David G. Booth, President
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<PAGE>
BY SIGNING AND DATING THE LOWER PORTION OF THIS CARD, YOU AUTHORIZE THE PROXIES
TO VOTE EACH PROPOSAL AS MARKED, OR IF NOT MARKED TO VOTE "FOR" EACH PROPOSAL,
AND TO USE THEIR DISCRETION TO VOTE ANY OTHER MATTER AS MAY PROPERLY COME BEFORE
THE MEETING. IF YOU DO NOT INTEND TO PERSONALLY ATTEND THE MEETING, PLEASE
COMPLETE AND MAIL THIS CARD AT ONCE IN THE ENCLOSED ENVELOPE.
DIMENSIONAL EMERGING MARKETS FUND INC. PROXY IS SOLICITED
ON BEHALF OF THE BOARD OF DIRECTORS
THE UNDERSIGNED HEREBY APPOINTS MICHAEL T. SCARDINA, IRENE R. DIAMANT AND
CATHERINE L. NEWELL, OR ANY ONE OF THEM, WITH THE RIGHT OF SUBSTITUTION, PROXIES
OF THE UNDERSIGNED AT THE SPECIAL MEETING OF SHAREHOLDERS OF DIMENSIONAL
EMERGING MARKETS FUND INC. ("FUND") TO BE HELD AT 1299 OCEAN AVENUE, 11TH FLOOR,
SANTA MONICA, CALIFORNIA, 90401 AT 9 A.M., PACIFIC COAST TIME, ON OCTOBER 29,
1997 OR AT ANY POSTPONEMENT OR ADJOURNMENT THEREOF, WITH ALL THE POWERS WHICH
THE UNDERSIGNED WOULD POSSESS, IF PERSONALLY PRESENT, AND INSTRUCTS THEM TO VOTE
UPON ANY MATTERS WHICH MAY PROPERLY BE ACTED UPON AT THIS MEETING, AND
SPECIFICALLY AS INDICATED ON THE LOWER PORTION OF THIS FORM.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE SHAREHOLDER WHOSE SIGNATURE APPEARS BELOW. IF PROPERLY EXECUTED BUT NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" EACH PROPOSAL.
PLEASE REFER TO THE PROXY STATEMENT DISCUSSION OF EACH OF THESE MATTERS.
TO VOTE MARK AN /X/ IN BLUE OR BLACK INK BELOW PLEASE FOLD HERE
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
1. TO APPROVE AN AMENDMENT TO AND RESTATEMENT / / / / / /
OF THE CHARTER OF THE FUND WHICH PROVIDES
FOR THE CONVERSION OF THE FUND INTO AN
OPEN-END INVESTMENT COMPANY.
FOR AGAINST ABSTAIN
2. TO APPROVE OR DISAPPROVE A NEW INVESTMENT / / / / / /
MANAGEMENT AGREEMENT.
FOR AGAINST ABSTAIN
3. TO APPROVE OR DISAPPROVE A RESTATEMENT OF / / / / / /
THE FUND'S FUNDAMENTAL INVESTMENT POLICIES.
----------------- --------------------------- ---------
SIGNATURE SIGNATURE (JOINT OWNER) DATE
PLEASE DATE AND SIGN NAME OR NAMES AS PRINTED ABOVE TO
AUTHORIZE THE VOTING OF YOUR SHARES AS INDICATED ABOVE.
WHERE SHARES ARE REGISTERED WITH JOINT OWNERS, ALL JOINT
OWNERS SHOULD SIGN. PERSONS SIGNING AS AN EXECUTOR,
ADMINISTRATOR, TRUSTEE OR OTHER REPRESENTATIVE SHOULD GIVE
FULL TITLE AS SUCH.
