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Investment Company Act of 1940 File No. 811-7440
Securities And Exchange Commission
Washington, D.C. 20549
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Form N-1A
[X] Registration Statement Under The Investment Company Act Of 1940
[X] Amendment No. 6
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DIMENSIONAL EMERGING MARKETS FUND INC.
(Exact Name of Registrant as Specified in Charter)
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
(Address of Principal Executive Office)
(310) 395-8005
(Registrant's Telephone Number, including Area Code)
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Irene R. Diamant
Dimensional Fund Advisors Inc.
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
(Name and Address of Agent for Service)
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Please Send Copies of Communications to:
Stephen W. Kline, Esq.
Stradley, Ronon, Stevens & Young, LLP
Great Valley Corporate Center
30 Valley Stream Parkway
Malvern, PA 19355
(610) 640-5801
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DIMENSIONAL EMERGING MARKETS FUND INC.
PART A
NOVEMBER 26, 1997
INTRODUCTION
DIMENSIONAL EMERGING MARKETS FUND INC. (the "Fund"), 1299 Ocean Avenue,
11th Floor, Santa Monica, California 90401, (310) 395-8005, is an open-end
management investment company whose shares are offered to other investment
companies and institutional investors. The investment objective of the Fund is
to seek long-term capital growth through investment in "emerging market" equity
securities. The investment objective of the Fund is a fundamental policy and
may not be changed without the affirmative vote of a majority of the Fund's
outstanding securities.
Shares of the Fund are issued solely in private placements pursuant to
available exemptions from registration under the Securities Act of 1933, as
amended ("Securities Act"). This Part A of the Fund's registration statement
("Part A") does not constitute an offer to sell, or the solicitation of an offer
to buy, any "security" to the public within the meaning of the Securities Act.
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TABLE OF CONTENTS
Page
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DIMENSIONAL EMERGING MARKETS FUND INC. . . . . . . . . . . . . . . . . . . . 3
Investment Objective and Policies. . . . . . . . . . . . . . . . . . . . 3
Fund Characteristics and Policies. . . . . . . . . . . . . . . . . . . . 3
Portfolio Structure. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECURITIES LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Foreign Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Investing in Emerging Markets. . . . . . . . . . . . . . . . . . . . . . 5
Foreign Currencies and Related Transactions. . . . . . . . . . . . . . . 6
Borrowing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Portfolio Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Futures Contracts and Options on Futures . . . . . . . . . . . . . . . . 7
Repurchase Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . 7
MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Consulting Services. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Administrative Services. . . . . . . . . . . . . . . . . . . . . . . . . 8
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . 8
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES . . . . . . . . . . . . . . 8
PURCHASE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
In Kind Purchases. . . . . . . . . . . . . . . . . . . . . . . . . . . .10
VALUATION OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Public Offering Price. . . . . . . . . . . . . . . . . . . . . . . . . .12
DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
EXCHANGE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
REDEMPTION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
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DIMENSIONAL EMERGING MARKETS FUND INC.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to achieve long-term capital growth
by investing primarily in emerging market equity securities. The Fund operates
as a diversified investment company and seeks to achieve its investment
objective by investing in emerging markets designated by the Investment
Committee of Dimensional Fund Advisors Inc. (the "Advisor") ("Approved
Markets"). The Fund invests its assets primarily in Approved Market equity
securities listed on bona fide securities exchanges or actively traded on
over-the-counter ("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").
The Fund seeks to achieve its objective by investing in emerging market
equity securities which are deemed by the Advisor to be value stocks at the time
of purchase. Securities are considered value stocks primarily because they have
a high book value in relation to their market value (a "high 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. No
assurance can be given that the Fund's investment objective will be achieved.
FUND CHARACTERISTICS AND POLICIES
The Fund may not invest in all such companies or Approved Markets described
above for reasons which include constraints imposed within Approved Markets
(e.g., restrictions on purchases by foreigners), and the Fund's policy not to
invest more than 25% of its assets in any one industry.
Under normal market conditions, the Fund will invest at least 65% of its
assets in Approved Market equity securities that are deemed by the Advisor to be
value stocks at the time of purchase. 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.
In determining what countries have emerging markets, the Fund will consider
among other things, the data, analysis and classification of countries published
or disseminated by the International Bank for Reconstruction (commonly known as
the World Bank) and the International Finance Corporation, in addition to the
criteria described above. In determining whether to approve markets for
investment, the Advisor 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 the Fund. Approved emerging markets may not
include all such emerging markets.
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As of the date of this Part A, the following countries are designated as
Approved Markets: Argentina, Brazil, Chile, Indonesia, Israel, Malaysia, Mexico,
Philippines, Portugal, South Korea, Thailand and Turkey. Countries that may be
approved in the future include but are not limited to Colombia, Czech Republic,
Greece, Hungary, India, Jordan, Nigeria, Pakistan, Poland, Republic of China
(Taiwan), Republic of South Africa, Venezuela and Zimbabwe.
The Fund may invest up to 35% of its assets in securities of issuers that
are not Approved Markets securities, but whose issuers the Advisor believes
derive a substantial proportion, but less than 50%, of their total revenues from
either goods and services produced in, or sales made in, Approved Markets.
Pending the investment of new capital in Approved Market equity securities,
the Fund 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, the Fund 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 the Fund does not expect the aggregate
of all such amounts to exceed 10% of its net assets under normal circumstances.
The Fund also may invest in shares of other investment companies that
invest in one or more Approved Markets, although it intends to do so only where
access to those markets is otherwise significantly limited. The Fund may also
invest in money market mutual funds for temporary cash management purposes. The
Investment Company Act of 1940 limits investment by the Fund in shares of other
investment companies to no more than 10% of the value of the Fund's total
assets. If the Fund invests in another investment company, the Fund's
shareholders will bear not only their proportionate share of expenses of the
Fund (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 the Fund to establish a
wholly-owned subsidiary or a trust for the purpose of investing in the local
markets. The Fund also may invest up to 5% of its assets in convertible
debentures issued by companies organized in Approved Markets.
Until September 30, 1997, it was the Fund's policy to attempt to own shares
of companies whose aggregate overall share of the Approved Market's total public
capitalization was at least in the upper 40% of such capitalization, and could
be as large as 75%. Currently, the Fund's policy is to seek to achieve its
investment objective by investing in emerging market equity securities across
all market capitalizations, and specifically those which are deemed by the
Advisor to be value stocks at the time of purchase, as described above. The
Fund's portfolio will be adjusted gradually in an attempt to minimize the costs
incurred by sales of the portfolio's stocks not considered to be value stocks by
the Advisor. It is anticipated that the shift in policy will be accomplished by
March of 1998 so that by that time, the Fund will have at least 65% of its
portfolio invested in value securities.
PORTFOLIO STRUCTURE
Even though a company's stock may meet the Fund's criterion for investment,
it may not be included in the Fund for one or more of a number of reasons. For
example, in the Advisor's judgment, the issuer may be considered in extreme
financial difficulty, a material portion of its securities may be closely held
and not likely available to support market liquidity, or the issuer may be a
"passive foreign investment company" (as defined in the Internal Revenue Code of
1986, as amended). To this extent, there will be the exercise of discretion and
consideration by the Advisor which would not be present in the management of a
portfolio seeking to represent an established index of broadly traded domestic
securities (such as the S&P 500 Index.) The Advisor also will exercise
discretion in determining the allocation of capital as between Approved Markets.
Changes in the composition and relative ranking (in terms of book to market
ratio) of the stocks which are eligible for purchase by the Fund 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
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lists of eligible value stocks which are eligible for investment. Such list
will be revised no less than semi-annually.
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 the Fund involves greater risk
than including a large number of them.
The Fund 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
Fund do pay dividends. It is anticipated, therefore, that the Fund 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, the Fund
may enter into forward foreign exchange contracts. In addition, to hedge
against changes in the relative value of foreign currencies, the Fund may
purchase foreign currency futures contracts. The Fund will only enter into such
a futures contract if it is expected that the Fund will be able readily to close
out such contract. However, there can be no assurance that it will be able in
any particular case to do so, in which case the Fund may suffer a loss.
SECURITIES LOANS
The Fund is authorized to lend securities to qualified brokers, dealers,
banks and other financial institutions for the purpose of earning additional
income. While the Fund may earn additional income from lending securities, such
activity is incidental to the investment objective of the Fund. The value of
securities loaned may not exceed 331/3% of the value of the Fund's total assets.
In connection with such loans, the Fund 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 Fund 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 Fund could experience delay in
recovering the loaned securities. Management believes that this risk can be
controlled through careful monitoring procedures.
RISK FACTORS
FOREIGN SECURITIES
The Fund invests 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
Fund. 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. Also, there can be no assurance that
the Fund will achieve its investment objective.
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INVESTING IN EMERGING MARKETS
The investments of the Fund involve risks 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 Fund
will invest only in markets where these restrictions are considered acceptable
to the Advisor, new or additional repatriation restrictions might be imposed
subsequent to the Fund's investment. If such restrictions were imposed
subsequent to investment in the securities of a particular country, the Fund,
among other things, might discontinue the purchasing of securities in that
country. Such restrictions will be considered in relation to the Fund's
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 the Fund is the responsibility of the Fund's
Board of Directors, acting in good faith and with advice from the Advisor. (See
"VALUATION OF SHARES.") Further, some attractive equity securities may not be
available to the Fund 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 Fund may invest are relatively small, have low
trading volumes, suffer periods of illiquidity and are characterized by
significant price volatility. Such factors may be even more pronounced in
jurisdictions where securities ownership is divided into separate classes for
domestic and non-domestic owners. These risks are heightened for investments in
small company emerging markets securities.
In addition, many emerging markets, including most Latin American
countries, have experienced substantial, and, in some periods, extremely high,
rates of inflation for many years. Inflation and rapid fluctuations in
inflation rates have had and may continue to have very negative effects on the
economies and securities markets of certain countries. In an attempt to control
inflation, wage and price controls have been imposed at times in certain
countries. Certain emerging markets have recently transitioned, or are in the
process of transitioning, from centrally controlled to market-based economies.
There can be no assurance that such transitions will be successful.
Brokerage commissions, custodial services and other costs relating to
investment in foreign markets generally are more expensive than in the United
States; this is particularly true with respect to emerging markets. Such
markets have different settlement and clearance procedures. In certain markets
there have been times when settlements do not keep pace with the volume of
securities transactions, making it difficult to conduct such transactions. The
inability of the Fund to make intended securities purchases due to settlement
problems could cause the Fund to miss investment opportunities. Inability to
dispose of a portfolio security caused by settlement problems could result
either in losses to the Fund due to subsequent declines in value of the
portfolio security or, if the Fund 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 the Fund's portfolio securities in such
markets may not be readily available. The Fund's 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 Directors.
Government involvement in the private sector varies in degree among the
emerging securities markets contemplated for investment by the Fund. 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 the Fund.
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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 Fund could in the future become subject
to local tax liability that it had not reasonably anticipated in conducting its
investment activities or valuing its assets.
FOREIGN CURRENCIES AND RELATED TRANSACTIONS
Investments of the Fund 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 Fund. The Fund may purchase foreign
currency futures contracts and options thereon 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 Fund 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 the Fund's
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
interest rates and other economic factors.
BORROWING
The Fund has reserved the right to borrow amounts not exceeding 33% of its
net assets for the purpose of making redemption payments. When advantageous
opportunities to do so exist, the Fund may purchase securities when borrowings
exceed 5% of the value of its net assets. Such purchases can be considered to
be
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"leveraging" and, in such circumstances, the net asset value of the Fund may
increase or decrease at a greater rate than would be the case if the Fund had
not leveraged. The interest payable on the amount borrowed would increase the
Fund's expenses and, if the appreciation and income produced by the investments
purchased when the Fund has borrowed are less than the cost of borrowing, the
investment performance of the Fund will be reduced as a result of leveraging.
PORTFOLIO STRATEGIES
The method employed by the Advisor to manage the Fund 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.
FUTURES CONTRACTS AND OPTIONS ON FUTURES
The Fund may invest in index futures contracts and options on index
futures. 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%. Certain index
futures contracts and options on index futures may be considered to be
derivative securities.
These investments 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, and, 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 options and futures depend on the direction of securities prices, interest
rates and other economic factors, and the loss from investing in futures
transactions is potentially unlimited. Certain restrictions imposed by the
Internal Revenue Code may limit the ability of the Fund to invest in futures
contracts and options on futures contracts.
REPURCHASE AGREEMENTS
In addition, the Fund may invest in repurchase agreements. In the event of
the bankruptcy of the other party to a repurchase agreement, the Fund 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.
MANAGEMENT OF THE FUND
Dimensional Fund Advisors Inc. (the "Advisor") serves as investment advisor
to the Fund. As such, the Advisor is responsible for the management of its
assets. Investment decisions for the Fund 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. The Advisor provides the
Fund with a trading department and selects brokers and dealers to effect
securities transactions. Portfolio securities transactions are placed with a
view to obtaining best price and execution and, subject to this goal, may be
placed with brokers which have assisted in the sale of the Fund's shares.
For the fiscal year ended November 30, 1996, (i) the Advisor received a fee
for its services from the Fund which, on an annual basis, equaled 0.10% of the
average net assets of the Fund; and (ii) the total expenses of the Fund were
0.59% of the Fund's average net assets.
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For its services, the Advisor is entitled to receive from the Fund a fee,
payable monthly, at the annual rate of 0.10% of the aggregate net assets 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
the federal securities laws and the cost of any filings required under state
securities laws, reports to shareholders, and transfer and dividend disbursing
agency, administrative services and custodian fees.
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The Fund may, as is deemed necessary or appropriate, employ administrators
in other countries in which it invests. Certain emerging market countries
require a local entity to provide administrative services for all direct
investments by foreigners. Where required by local law, the Fund intends to
retain a local entity to provide such administrative services. The local
administrator will be paid a fee by the Fund for its services. Generally, such
services will be contracted for through the Custodian, or through a foreign
sub-custodian located in the particular country.
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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 $25 billion. David G. Booth and Rex A.
Sinquefield, directors and officers of both the Fund and the Advisor, and
shareholders of the Advisor's outstanding stock, may be deemed controlling
persons of the Advisor. The Advisor owns 100% of the outstanding shares of
Dimensional Fund Advisors Ltd. ("DFAL") and beneficially owns 100% of DFA
Australia Ltd. ("DFA Australia") (see "Consulting Services").
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CONSULTING SERVICES
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 the Fund.
ADMINISTRATIVE SERVICES
PFPC Inc. ("PFPC") serves as the administrative and accounting services,
dividend disbursing and transfer agent for the Fund. The services provided by
PFPC are subject to supervision by the executive officers and the Board of
Directors of the Fund and include administrative services such as day-to-day
keeping and maintenance of certain records, calculation of the offering price of
the shares, preparation of reports, liaison with its Custodian, and transfer and
dividend disbursing agency services.
DIRECTORS AND OFFICERS
The Board of Directors is responsible for establishing Fund policies and
for overseeing the management of the Fund. Information as to the Directors and
officers of the Fund is set forth in Part B of the Fund's Registration
Statement, the Statement of Additional Information, under "Directors and
Officers."
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
The Fund intends to qualify each year as a regulated investment company
under the Internal Revenue Code of 1986, as amended (the "Code") so that it will
not be liable for U.S. federal income taxes to the extent that its net
investment income and net realized capital gains are distributed. The policy of
the Fund is to distribute substantially all of its net investment income
together with any net realized capital gains in December of each year. In
addition, the Fund will distribute all net investment income earned through the
end of November each year in the month of November.
As of the date of this Part A, all outstanding shares of the Fund are owned
by State Street Bank and Trust Company as Trustee of the BellSouth Master
Pension Trust. Because of this concentrated ownership, the Fund may be
considered a "personal holding company" for Federal income tax purposes.
However, the Fund expects to distribute annually all of its investment company
taxable income and any net realized capital gains. By so doing, the Fund
intends to avoid any excise tax liability and any adverse consequences arising
as a result of its personal holding company status.
Shareholders of the Fund will automatically receive all income dividends
and capital gains distributions in additional shares of the Fund at net asset
value (as of the business date following the dividend record date).
If the Fund purchases shares in certain foreign investment entities, called
"passive foreign investment companies" ("PFIC"), the Fund 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 Fund to its shareholders.
The Fund 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
the Fund are invested in securities of foreign corporations, the Fund may elect
to pass through to its shareholders their pro rata share of foreign income taxes
paid by the Fund. If this election is made, shareholders will be required to
include in their gross income their pro rata share of foreign taxes paid by the
Fund. However, shareholders will be entitled to either deduct (as an itemized
deduction in the case of individuals) 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.
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It is anticipated that either none or only a small portion of the
distributions made by the Fund will qualify for the corporate dividends received
deduction because of the Fund's investment in foreign equity securities.
Whether paid in cash or additional shares and regardless of the length of
time the Fund's shares have been owned by shareholders who are subject to U.S.
federal income taxes, distributions from long-term capital gains are taxable as
such. Dividends from net investment income or net short-term capital gains will
be taxable as ordinary income, whether received in cash or in additional shares.
For those investors subject to tax, if purchases of shares of the Fund are made
shortly before the record date for a dividend or capital gains distribution, a
portion of the investment will be returned as a taxable distribution.
Shareholders are notified annually by the Fund as to the U.S. federal tax status
of dividends and distributions paid by the Fund.
Dividends which are declared 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 the Fund and received by the
shareholder on December 31 of the calendar year in which they are declared.
The sale of shares of the Fund is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may
be realized from an ordinary redemption of shares. Any loss incurred on the
sale of the Fund's shares, 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.
In addition to federal taxes, shareholders may be subject to state and
local taxes on distributions.
The Fund is required to withhold 31% of taxable dividends, capital gains
distributions, and redemptions paid to shareholders who have not complied with
IRS taxpayer identification regulations. You may avoid this withholding
requirement by certifying on the account registration form your proper Taxpayer
Identification Number and by certifying that you are not subject to backup
withholding.
The tax discussion set forth above is included for general information
only. Prospective investors should consult their own tax advisers concerning
the federal, state, local or foreign tax consequences of an investment in the
Fund.
PURCHASE OF SHARES
Shares issued by the Fund are not registered under the Securities Act,
which means that the Fund's shares may not be sold publicly. However, the Fund
may sell its shares through private placements pursuant to available exemptions
from registration under the Securities Act. Shares of the Fund are sold only to
other investment companies and certain institutional investors.
Investors may purchase shares of the Fund by first contacting the Advisor
at (310) 395-8005 to notify the Advisor of the proposed investment. All
investments are subject to approval of the Advisor, and all investors must
complete and submit the necessary account registration forms. The Fund reserves
the right to reject any initial or additional investment and to suspend the
offering of shares of the Fund.
Investors having an account with a bank that is a member or a correspondent
of a member of the Federal Reserve System may purchase shares by first calling
the Advisor at (310) 395-8005 to notify the Advisor of the proposed investment,
then requesting the bank to transmit immediately available funds (Federal Funds)
by wire to the Custodian, for the Account of Dimensional Emerging Markets Fund
Inc. Additional investments also may be made through the wire procedure by
first notifying the Advisor. Investors who wish to purchase shares of the Fund
by check should send their check to Dimensional Emerging Markets Fund Inc., c/o
PFPC Inc., 400 Bellevue Parkway, Wilmington, Delaware 19809. The Chase
Manhattan Bank serves as custodian for the Fund.
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<PAGE>
Under certain circumstances, shares also may be purchased and sold by
investors through securities firms which may charge a service fee or commission
for such transactions. No such fee or commission is charged on shares which are
purchased or redeemed directly from the Fund.
Purchases of shares will be made in full and fractional shares 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 Fund, shares may be purchased in exchange for securities
which are eligible for acquisition by the Fund or otherwise represented in its
portfolio as described in this Part A or in exchange for local currencies in
which such securities of the Fund are denominated. Purchases in exchange for
securities will not be subject to a reimbursement fee. Securities and local
currencies to be exchanged which are accepted by the Fund and Fund shares to be
issued therefore will be valued as set forth under "VALUATION OF SHARES" 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 Fund and must be delivered to the Fund by the
investor upon receipt from the issuer. Investors who desire to purchase shares
of the Fund with local currencies should first contact the Advisor for wire
instructions.
The Fund will not accept securities in exchange for shares of the Fund
unless: (1) such securities are, at the time of the exchange, eligible to be
included, or otherwise represented, in the Fund 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 Fund under the Securities Act or under the
laws of the country in which the principal market for such securities exists, or
otherwise; (3) at the discretion of the Fund, the value of any such security
(except U.S. Government Securities) being exchanged together with other
securities of the same issuer owned by the Fund may not exceed 5% of the net
assets of the Fund immediately after the transaction. The Fund will accept such
securities for investment and not for resale.
A gain or loss for federal income tax purposes will be realized by
investors who are subject to federal taxation upon the exchange depending upon
the cost of the securities or local currency exchanged. Investors interested in
such exchanges should contact the Advisor.
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<PAGE>
VALUATION OF SHARES
The net asset value per share of the Fund is calculated as of the close of
the NYSE by dividing the total market value of the Fund's investments and other
assets, less any liabilities, by the total outstanding shares of the stock of
the Fund. The value of the shares of the Fund will fluctuate in relation to its
own investment experience. Securities held by the Fund which are listed on a
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,
such securities are valued 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 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 Directors. The net asset value per share of the Fund is expressed
in U.S. dollars by translating the net assets of the Fund using the bid price
for the dollar as quoted by generally recognized reliable sources.
Provided that the Transfer Agent has received the investor's Account
Registration Form in good order and the Custodian has received the investor's
payment, shares of the Fund will be priced at the public offering price
calculated next after receipt of the investor's funds by the Custodian. The
Transfer Agent or the Fund may from time to time appoint a sub-transfer agent
for the receipt of purchase orders and funds from certain investors. With
respect to such investors, the shares of the Fund will be priced at the public
offering price calculated after receipt of the purchase order by the
sub-transfer agent. The only difference between a normal purchase and a
purchase through a sub-transfer agent is that if the investor buys shares
through a sub-transfer agent, the purchase price will be the public offering
price next calculated after the sub-transfer agent receives the order, rather
than on the day the Custodian receives the investor's payment (provided that the
Transfer Agent has received the investor's purchase order in good order). "Good
order" with respect to the purchase of shares means that (1) a fully completed
and properly signed Account Registration Form and any additional supporting
legal documentation required by the Advisor has been received in legible form
and (2) the Advisor has been notified of the purchase by telephone and, if the
Advisor so requests, also in writing, no later than the close of regular trading
on the NYSE (ordinarily 1:00 p.m. PST) on the day of the purchase. If an order
to purchase shares must be canceled due to non-payment, the purchaser will be
responsible for any loss incurred by the Fund arising out of such cancellation.
To recover any such loss, the Fund reserves the right to redeem shares owned by
any purchaser whose order is canceled, and such purchaser may be prohibited or
restricted in the manner of placing further orders.
To the extent the Fund purchases fixed income securities, 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. 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
Directors.
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 the Fund are determined as of such times for the purpose of computing
the net asset value of the Fund. If events which materially affect the value of
the investments of the Fund occur subsequent to the close of the securities
market on which such securities are primarily traded, the investments affected
thereby will be valued at "fair value" as described above.
Certain of the securities holdings of the Fund in Approved Markets may be
subject to tax, investment and currency repatriation regulations of the Approved
Markets that could have a material
23
<PAGE>
effect on the valuation of the securities. For example, the Fund 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 Fund may also be subject to
certain contractual arrangements with investment authorities in an Approved
Market which require the Fund 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 the Fund makes at that time concerning the anticipated
holding period for the securities. Absent special circumstances as determined
by the Board of Directors, 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 Fund 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 Fund.
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 the Fund are determined each day as of such close.
PUBLIC 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 Fund's 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 Fund 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 the Fund and is paid to the Fund and used by it to
defray such costs. Such costs include brokerage commissions on listed
securities and imputed commissions on OTC securities. Reinvestments of
dividends and capital gains distributions paid by the Fund and in-kind
investments are not subject to a reimbursement fee. (See "In-Kind Purchases"
and "DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES.") The Fund's shares are
sold at an offering price which is equal to the current net asset value of such
shares plus a reimbursement fee of 0.50% of such value of the shares of the
Fund.
DISTRIBUTION
The Fund distributes its own shares of stock. 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 by the Fund. No compensation is paid by the Fund to DFA
Securities Inc. under this agreement.
EXCHANGE OF SHARES
There is no exchange privilege between the Fund and any portfolio of DFA
Investment Dimensions Group Inc. or Dimensional Investment Group Inc.
REDEMPTION OF SHARES
Shares issued by the Fund are not registered under the Securities Act,
which means that the Fund's shares are restricted securities which may not be
sold unless registered or pursuant to an available exemption from that Act.
24
<PAGE>
Investors who desire to redeem shares of the Fund must first contact the
Advisor at the telephone number shown under "PURCHASE OF SHARES." The Fund will
redeem shares at the net asset value of such shares next determined, either: (1)
after receipt of a written request for redemption in good order, by the Fund's
Transfer Agent or (2) if stock certificates have been issued, after receipt of
the stock certificates in good order at the office of the Transfer Agent. "Good
order" means that the request to redeem shares must include all necessary
documentation, to be received in writing by the Advisor no later than the close
of regular trading on the NYSE (ordinarily 1:00 p.m. PST), including: the stock
certificate(s), if issued; a letter of instruction or a stock assignment
specifying the number of shares or dollar amount to be redeemed, signed by all
registered owners (or authorized representatives thereof) of the shares; and, if
the Fund does not have on file the authorized signatures for the account, a
guarantee of the signature of each registered owner by an eligible guarantor
institution; and any other required supporting legal documents.
Shareholders redeeming shares for which certificates have not been issued,
who have authorized redemption payment by wire on an authorization form filed
with the Fund, may request that redemption proceeds be paid in federal funds
wired to the bank they have designated on the authorization form. The Fund
reserves the right to send redemption proceeds by check in its discretion; a
shareholder may request overnight delivery of such check at the shareholder's
own expense. If the proceeds are wired to the shareholder's account at a bank
which is not a member of the Federal Reserve System, there could be a delay in
crediting the funds to the shareholder's bank account. The Fund reserves the
right at any time to suspend or terminate the redemption by wire procedure after
prior notification to shareholders. No charge is made by the Fund for
redemptions. The redemption of all shares in an account will result in the
account being closed. A new Account Registration Form will be required for
future investments. (See "PURCHASE OF SHARES.")
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 Fund can verify that the payments for the
purchase have been, or will be, collected, which may take up to fifteen days or
more. Investors may avoid this delay by submitting a certified check along with
the purchase order.
The Fund reserves the right to redeem a shareholder's account if the value
of the shares in the Fund is $500 or less, whether because of redemptions, a
decline in the Fund's net asset value per share or any other reason. Before the
Fund involuntarily redeems shares from such an account and sends the proceeds to
the stockholder, the Fund will give written notice of the redemption to the
stockholder at least sixty days in advance of the redemption date. The
stockholder will then have sixty days from the date of the notice to make an
additional investment in the Fund in order to bring the value of the shares in
the account to more than $500 and avoid such involuntary redemption. The
redemption price to be paid to a stockholder for shares redeemed by the Fund
under this right will be the aggregate net asset value of the shares in the
account at the close of business on the redemption date.
GENERAL INFORMATION
The Fund was incorporated under Maryland law on January 9, 1991. The
shares of the Fund, when issued and paid for in accordance with the Fund's
registration statement, will be fully paid and non-assessable shares, with
equal, non-cumulative voting rights and no preferences as to conversion,
exchange, dividends, redemption or any other feature.
With respect to matters which require shareholder approval, 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. If liquidation of the Fund should occur, 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 Fund assets not attributable to
any particular class. Ordinarily, the Fund does not intend to hold annual
meetings of its shareholders, except as required by the Investment Company Act
of 1940 or other applicable law. The Fund's bylaws provide that special
meetings of its shareholders shall be called at the written consent of 10% of
the shareholders. Such meeting may be called to consider any matter, including
the removal of
25
<PAGE>
one or more directors. Shareholders will receive shareholder communications
with respect to such matters as required by the Investment Company Act of 1940,
including semi-annual and annual financial statements of the Fund, the latter
being audited at least once each year.
The Fund may disseminate reports of its investment performance from time to
time. Investment performance is calculated on a total return basis; that is by
including all net investment income and any realized and unrealized net capital
gains or losses during the period for which investment performance is reported.
If dividends or capital gains distributions have been paid during the relevant
period the calculation of investment performance will include such dividends and
capital gains distributions as though reinvested in shares of the Fund.
Standard quotations of total return, which include deductions of any applicable
reimbursement fees, are computed in accordance with SEC Guidelines and are
presented whenever any non-standard quotations are disseminated to provide
comparability to other investment companies. Non-standardized total return
quotations may differ from the SEC Guideline computations by covering different
time periods, excluding deduction of reimbursement fees charged to investors and
paid to the Fund which would otherwise reduce return quotations. In all cases,
disclosures are made when performance quotations differ from the SEC Guidelines
which were established effective May 1, 1988. Performance data is based on
historical earnings and is not intended to indicate future performance. Rates
of return expressed on an annual basis will usually not equal the sum of returns
expressed for consecutive interim periods due to the compounding of the interim
yields. The Fund's Annual Report to shareholders for the fiscal year ended
November 30, 1996 and Semi-Annual Report to shareholders for the six months
ended May 31, 1997 contains additional performance information. A copy of each
of the Annual Report and Semi-Annual Report is available upon request and
without charge.
Rates of return expressed as a percentage of U.S. dollars will reflect
applicable currency exchange rates at the beginning and ending dates of the
investment periods presented. The return expressed in terms of U.S. dollars is
the return one would achieve by investing dollars in the Fund at the beginning
of the period and liquidating the investment in dollars at the end of the
period. Hence, the return expressed as a percentage of U.S. dollars combines
the investment performance of the Fund as well as the performance of the local
currency or currencies of the Fund.
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<PAGE>
As of October 31, 1997, all of the voting securities of the Fund were held
by State Street Bank and Trust Company as Trustee of the BellSouth Master
Pension Trust (the "Trust"). The address of the Trust is 1155 Peachtree Street,
N.E., Atlanta, Georgia 30309-3610. On account of the fact that this investor
presently owns 100% of the outstanding voting securities of the Fund, it may be
considered to be a controlling person of the Fund in accordance with applicable
SEC rules. Under the Investment Company Act of 1940, an investor is presumed to
control a registered investment company whenever the investor owns more than 25%
of the outstanding voting securities of the company.
On November 21, 1997, the shareholders of the Fund approved the Fund's
conversion from a closed-end management investment company to an open-end
management investment company registered with the SEC.
Shareholder inquiries may be made by writing or calling the Fund at the
address or telephone number appearing on the cover of this Part A. Only those
individuals whose signatures are on file for the account in question may receive
specific account information or make changes in the account registration.
27
<PAGE>
DIMENSIONAL EMERGING MARKETS FUND INC.
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Tel. No. (310) 395-8005
INVESTMENT ADVISOR
DIMENSIONAL FUND ADVISORS INC.
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Tel. No. (310) 395-8005
CUSTODIAN
THE CHASE MANHATTAN BANK
4 Chase Metrotech Center
Brooklyn, NY 11245
TRANSFER AND DIVIDEND DISBURSING AGENT
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
LEGAL COUNSEL
STRADLEY, RONON, STEVENS & YOUNG, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, PA 19103
<PAGE>
DIMENSIONAL EMERGING MARKETS FUND INC.
1299 OCEAN AVENUE, 11TH FLOOR, SANTA MONICA, CALIFORNIA 90401
TELEPHONE: (310) 395-8005
PART B
STATEMENT OF ADDITIONAL INFORMATION
November 26, 1997
Dimensional Emerging Markets Fund Inc. is a diversified, open-end
management investment company. The investment objective of the Fund is to seek
long-term capital growth through investment in "emerging market" equity
securities.
This statement of additional information is not a prospectus but should be read
in conjunction with Part A of the Fund's registration statement dated November
26, 1997 ("Part A"), which can be obtained from the Fund by writing to the Fund
at the above address or by calling the above telephone number.
TABLE OF CONTENTS
Page
----
FUND CHARACTERISTICS AND POLICIES . . . . . . . . . . . . . . . . . . . . . 2
BROKERAGE COMMISSIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
INVESTMENT LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
FUTURES CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
FEDERAL TAX TREATMENT OF FUTURES CONTRACTS AND SIMILAR
POSITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
DIRECTORS AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ADMINISTRATIVE SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PURCHASE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
REDEMPTION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
CALCULATION OF PERFORMANCE DATA. . . . . . . . . . . . . . . . . . . . . . .10
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
<PAGE>
FUND CHARACTERISTICS AND POLICIES
The following information supplements the information set forth in Part A
under the caption "DIMENSIONAL EMERGING MARKETS FUND - Investment Objectives and
Policies," "Fund Characteristics and Policies," and "Portfolio Structure."
It is possible that the Fund might include at least 5% of the outstanding
voting securities of one or more issuers. In such circumstances, the Fund 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. However, management does not anticipate
that the Fund will include as much as 5% of the voting securities of any issuer.
The Fund may invest up to 5% of its assets in convertible debentures issued
by non-U.S. companies. Convertible debentures include corporate bonds and notes
that may be converted into or exchanged for common stock. These securities are
generally convertible either at a stated price or a stated rate (that is, for a
specific number of shares of common stock or other security). As with other
fixed income securities, the price of a convertible debenture to some extent
varies inversely with interest rates. While providing a fixed-income stream
(generally higher in yield than the income derived from a common stock but lower
than that afforded by a non-convertible debenture), a convertible debenture also
affords the investor an opportunity, through its conversion feature, to
participate in the capital appreciation of the common stock into which it is
convertible. As the market price of the underlying common stock declines,
convertible debentures tend to trade increasingly on a yield basis and so may
not experience market value declines to the same extent as the underlying common
stock. When the market price of the underlying common stock increases, the
price of a convertible debenture tends to rise as a reflection of the value of
the underlying common stock. To obtain such a higher yield, the Fund may be
required to pay for a convertible debenture an amount in excess of the value of
the underlying common stock. Common stock acquired by the Fund upon conversion
of a convertible debenture will generally be held for so long as the Advisor
anticipates such stock will provide the Fund with opportunities which are
consistent with the Fund's investment objective and policies.
For the fiscal year ended November 30, 1997, the portfolio turnover rate
for the Fund is anticipated to be approximately 20%-90%, which reflects the
purchase of value stocks and sale of non-value stocks. Generally, securities
will be purchased with the expectation that they will be held for longer than
one year.
BROKERAGE COMMISSIONS
For the fiscal years ending November 30, 1994, 1995 and 1996, the Fund paid
brokerage commissions of $10,440, $85,081, and $14,699, respectively.
Portfolio transactions will be placed with a view to receiving the best
price and execution. The Fund 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
Fund to determine the effect that their 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 Fund to its brokers to ascertain that they are competitive
with those charged by other brokers for similar services. Transactions also may
be placed with brokers
2
<PAGE>
who provide the Advisor with investment research, such as reports concerning
individual issuers, industries and general economic and financial trends and
other research services.
During the 1996 fiscal year, the Fund paid brokerage commissions of $14,699
for securities transactions to brokers which provided market price monitoring
services, market studies and research services to the Fund; the amount of such
securities transactions was $4,245,760.
The investment management agreement permits the Advisor knowingly to pay
commissions on these 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 value of 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 Fund. 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 Fund.
INVESTMENT LIMITATIONS
The Fund has adopted certain limitations which may not be changed without
the approval of a majority of the outstanding voting securities of the Fund. A
"majority" is defined as the lesser of: (1) at least 67% of the voting
securities of the Fund (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 Fund are present or represented by proxy, or (2) more than 50% of the
outstanding voting securities of the Fund.
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 forward 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;
(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;
3
<PAGE>
(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.
The investment limitations described in (1) and (8) above do not prohibit
the Fund from making margin deposits with respect to financial futures contracts
and options thereon to the extent permitted under applicable regulations.
For purposes of (4) above, the Fund 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 the
Fund's behalf in lieu of depositing initial margin in connection with currency
futures contracts, and the Fund has no present intent to engage in any other
types of borrowing transactions under this authority.
Although (2) above prohibits cash loans, the Fund is authorized to lend
portfolio securities.
Pursuant to Rule 144A under the 1933 Act, the Fund 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 Fund's 15%
limitation on holdings of illiquid securities as described below. While
maintaining oversight, the Board of Directors 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 Directors and the
Advisor will continue to monitor the liquidity of Rule 144A securities.
For the purposes of (4) above, utility companies will be divided according
to their services; e.g., gas, gas transmission, electric and gas, electric,
water and telephone will each be considered a separate industry.
Under the Investment Company Act of 1940, the Fund is not permitted to
issue senior securities. Accordingly, the Fund has a non-fundamental policy
prohibiting the issuance of senior securities. As a non-fundamental policy,
the Fund does not intend to invest more than 15% of its net assets in
illiquid securities.
The Fund 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.
Notwithstanding any of the above investment restrictions, the Fund may
establish subsidiaries or other similar vehicles for the purpose of conducting
its investment operations in Approved Markets, if such subsidiaries or vehicles
are required by local laws or regulations governing foreign investors such as
the Fund or whose use is otherwise considered by the Fund to be advisable. The
Fund would "look through" any such vehicle to determine compliance with its
investment restrictions.
Unless otherwise indicated, all limitations applicable to the Fund's
investments apply only at the time that a transaction is undertaken. Any
subsequent change in a rating assigned by any rating service to a security or
change in the percentage of the Fund's assets invested in certain securities or
other instruments resulting from market fluctuations or other changes in the
Fund's total assets will
4
<PAGE>
not require the Fund 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.
FUTURES CONTRACTS
The Fund may enter into futures contracts and options on futures contracts.
The Fund may enter into futures contracts and options on future contracts only
for the purpose of remaining fully invested and to maintain liquidity to pay
redemptions.
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 Fund will be required to make a margin deposit in cash or
government securities with a broker or custodian to initiate and maintain
positions in futures contracts. Minimal initial margin requirements are
established by the futures exchange and brokers may establish margin
requirements which are higher than the exchange requirements. After a futures
contract position is opened, the value of the contract is marked to market
daily. If the futures contract price changes to the extent that the margin on
deposit does not satisfy margin requirements, payment of additional "variation"
margin will be required. Conversely, reduction in the contract value may reduce
the required margin resulting in a repayment of excess margin to the Fund.
Variation margin payments are made to and from the futures broker for as long as
the contract remains open. The Fund expects to earn income on its margin
deposits. 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%. Pursuant to
published positions of the SEC, the Fund 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 Fund would continue to be required to
continue to make variation margin deposits. In such circumstances, if the Fund
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.
5
<PAGE>
FEDERAL TAX TREATMENT OF
FUTURES CONTRACTS AND SIMILAR POSITIONS
The investment by the Fund in futures contracts and options on futures
contracts is subject to many complex and special tax rules. The treatment by
the Fund of certain futures and forward contracts is generally governed by
Section 1256 of the Code. These "Section 1256" positions generally include
listed options on futures contracts, regulated futures contracts and certain
foreign currency contracts and options thereon.
Absent a tax election to the contrary, each such Section 1256 position held
by the Fund will be marked-to-market (i.e., treated as if it were sold for fair
market value) on the last business day of the Fund's fiscal year, and all gain
or loss associated with fiscal year transactions and marked-to-market positions
at fiscal year end (except certain currency gain or loss covered by Section 988
of the Code) will generally be treated as 60% long-term capital gain or loss and
40% short-term capital gain or loss. The effect of Section 1256 mark-to-market
rules may be to accelerate income or to convert what otherwise would have been
long-term capital gains into short-term capital gains or short-term capital
losses into long-term capital losses within the Fund. The acceleration of
income on Section 1256 positions may require the Fund to accrue taxable income
without the corresponding receipt of cash. In order to generate cash to satisfy
the distribution requirements of the Code, the Fund may be required to dispose
of portfolio securities that it otherwise would have continued to hold or to use
cash flows from other sources such as the sale of the Fund's shares. In these
ways, any or all of these rules may affect both the amount, character and timing
of income distributed to shareholders by the Fund.
For the Fund's fiscal year ending November 30, 1997, the Fund is subject to
the requirement that less than 30% of its annual gross income be derived from
the sale or other disposition of securities and certain other investments held
for less than three months ("short-short income"). This requirement may limit
the Fund's ability to engage in hedging transactions and forward or futures
contracts because these transactions are often consummated in less than three
months, may require the sale of portfolio securities held less than three months
and may, as in the case of short sales of portfolio securities, reduce the
holding periods of certain securities within the Fund, resulting in additional
short-short income for the Fund. For U.S. federal income tax purposes, the Fund
will not be subject to this short-short income requirement for its fiscal years
beginning on or after December 1, 1997.
The Fund will monitor its transactions in such contracts and may make
certain other tax elections in order to mitigate the effect of the above rules
and to prevent disqualification of the Fund as a regulated investment company
under Subchapter M of the Code.
DIRECTORS AND OFFICERS
The names, addresses and dates of birth of the directors and officers of
the Fund and a brief statement of their present positions and principal
occupations during the past five years is set forth below.
DIRECTORS
David G. Booth*, (12/2/46), Director, President and Chairman-Chief
Executive Officer, Santa Monica, CA. President, Chairman-Chief Executive
Officer and Director, Dimensional Fund Advisors Inc., DFA Securities Inc., DFA
Australia Limited, Dimensional Investment Group
6
<PAGE>
Inc. (registered investment company) and DFA Investment Dimensions Group Inc.
(registered investment company). Trustee, President and Chairman-Chief
Executive Officer of The DFA Investment Trust Company. Chairman and Director,
Dimensional Fund Advisors Ltd.
George M. Constantinides, (9/22/47), Director, Chicago, IL. Leo Melamed
Professor of Finance, Graduate School of Business, University of Chicago.
Trustee, The DFA Investment Trust Company. Director, Dimensional Investment
Group Inc. and DFA Investment Dimensions Group Inc.
John P. Gould, (1/19/39), Director, Chicago, IL. Steven G. Rothmeier
Distinguished Service Professor of Economics, Graduate School of Business,
University of Chicago. Trustee, The DFA Investment Trust Company and First
Prairie Funds (registered investment companies). Director, Dimensional
Investment Group Inc., DFA Investment Dimensions Group Inc. and Harbor
Investment Advisors. Executive Vice President, Lexecon Inc. (economics, law,
strategy and finance consulting).
Roger G. Ibbotson, (5/27/43), Director, New Haven, CT. Professor in
Practice of Finance, Yale School of Management. Trustee, The DFA Investment
Trust Company. Director, Dimensional Investment Group Inc., DFA Investment
Dimensions Group Inc., Hospital Fund, Inc. (investment management services) and
BIRR Portfolio Analysis, Inc. (software products). Chairman and President,
Ibbotson Associates, Inc., Chicago, IL (software, data, publishing and
consulting).
Merton H. Miller, (5/16/23), Director, Chicago, IL. Robert R. McCormick
Distinguished Service Professor Emeritus, Graduate School of Business,
University of Chicago. Trustee, The DFA Investment Trust Company. Director,
Dimensional Investment Group Inc. and DFA Investment Dimensions Group Inc.
Public Director, Chicago Mercantile Exchange.
Myron S. Scholes, (7/1/42), Director, Greenwich, CT. Limited Partner,
Long-Term Capital Management L.P. (money manager). Frank E. Buck Professor
Emeritus of Finance, Graduate School of Business and Professor of Law, Law
School, Senior Research Fellow, Hoover Institution, (all) Stanford University.
Trustee, The DFA Investment Trust Company. Director, Dimensional Investment
Group Inc., DFA Investment Dimensions Group Inc., Benham Capital Management
Group of Investment Companies and Smith Breedon Group of Investment Companies.
Rex A. Sinquefield*, (9/7/44), Director, Chairman and Chief Investment
Officer, Santa Monica, CA. Chairman-Chief Investment Officer and Director,
Dimensional Fund Advisors Inc., DFA Securities Inc., DFA Australia Limited,
Dimensional Investment Group Inc. and DFA Investment Dimensions Group Inc.
Trustee, Chairman-Chief Investment Officer of The DFA Investment Trust Company.
Chairman, Chief Executive Officer and Director, Dimensional Fund Advisors Ltd.
* Interested Director of the Fund.
OFFICERS
Each of the officers listed below hold the same office in the following
entities: Dimensional Fund Advisors Inc., DFA Securities Inc., DFA Australia
Limited, Dimensional Investment Group Inc., The DFA Investment Trust Company,
Dimensional Fund Advisors Ltd., and DFA Investment Dimensions Group Inc.
Arthur Barlow, (11/7/55), Vice President, Santa Monica, CA.
7
<PAGE>
Truman Clark, (4/8/41), Vice President, Santa Monica, CA. Consultant until
October 1995 and Principal and Manager of Product Development, Wells Fargo Nikko
Investment Advisors, San Francisco, CA from 1990-1994.
Maureen Connors, (11/17/36), Vice President, Santa Monica, CA.
Robert Deere, (10/8/57), Vice President, Santa Monica, CA.
Irene R. Diamant, (7/16/50), Vice President and Secretary (for all entities
other than Dimensional Fund Advisors Ltd.), Santa Monica, CA.
Margaret East, (3/27/41), Secretary, Dimensional Fund Advisors Ltd.
Eugene Fama, Jr., (1/21/61), Vice President, Santa Monica, CA.
Kamyab Hashemi-Nejad, (1/22/61), Vice President, Controller and Assistant
Treasurer, Santa Monica, CA.
Stephen P. Manus, (12/26/50), Vice President, Santa Monica, CA. Managing
Director, ANB Investment Management and Trust Company from 1985-1993; President,
ANB Investment Management and Trust Company from 1993-1997.
Karen McGinley, (3/10/66), Vice President, Santa Monica, CA.
Catherine L. Newell, (5/7/64), Vice President and Assistant Secretary (for
all entities other than Dimensional Fund Advisors Ltd.), Santa Monica, CA.
Associate, Morrison & Foerster, LLP from 1989 to 1996.
David Plecha, (10/26/61), Vice President, Santa Monica, CA.
George Sands, (2/8/56), Vice President, Santa Monica, CA.
Michael T. Scardina, (10/12/55), Vice President, Chief Financial Officer
and Treasurer, Santa Monica, CA.
Jeanne C. Sinquefield, Ph.D., (12/2/46), Executive Vice President, Santa
Monica, CA.
Scott Thornton, (3/1/63), Vice President, Santa Monica, CA.
Weston Wellington, (3/1/51), Vice President, Santa Monica, CA. Vice
President, Director of Research, LPL Financial Services, Inc., Boston, MA from
1989 to 1994.
Rex A. Sinquefield and Jeanne C. Sinquefield are husband and wife.
No director or officer currently owns shares of the Fund.
Set forth below is a table listing, for each director entitled to receive
compensation, the compensation received from the Fund during the fiscal year
ended November 30, 1996, and the total compensation received from all four
registered investment companies for which the Advisor serves as investment
advisor during that same fiscal year.
8
<PAGE>
Aggregate Total Compensation
Compensation from Fund
Director from Fund and Fund Complex
- -------- -------------- ---------------------
George M. Constantinides $ 5,000 $ 30,000
John P. Gould $ 5,000 $ 30,000
Roger G. Ibbotson $ 5,000 $ 30,000
Merton H. Miller $ 5,000 $ 30,000
Myron S. Scholes $ 5,000 $ 30,000
ADMINISTRATIVE SERVICES
PFPC Inc. ("PFPC") serves as the administrative and accounting services,
dividend disbursing and transfer agent for the Fund. The services provided by
PFPC are subject to supervision by the executive officers and the Board of
Directors of the Fund, 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 custodian, and transfer and dividend disbursing agency
services. For its services, the Fund pays PFPC annual fees which are set forth
below:
.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 the net assets over $850 million
The Fund is subject to a $75,000 per year minimum fee. PFPC has agreed to limit
the minimum fee for the Fund from time to time.
OTHER INFORMATION
For the services it provides as investment advisor to the Fund, the Advisor
is entitled to receive from the Fund a fee, payable monthly, at the annual rate
of 0.10% of the aggregate net assets of the Fund. For the fiscal years ending
November 30, 1994, 1995 and 1996, the Fund paid management fees to the Advisor
for its services of $146,260, $145,564 and $173,017, respectively.
Coopers and Lybrand L.L.P., the Fund's independent accountants, audits the
Fund's financial statements.
PURCHASE OF SHARES
The following information supplements the information set forth in Part A
under the caption "PURCHASE OF SHARES."
The Fund will accept purchase and redemption orders on each day that the
New York Stock Exchange ("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 Fund will generally be
closed on days that the NYSE is closed. The New York Stock Exchange 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
9
<PAGE>
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 Fund is closed.
The Fund reserves the right, in its sole discretion, to suspend the
offering of shares of the Fund or reject purchase orders when, in the judgment
of management, such suspension or rejection is in the best interest of the Fund.
Securities accepted in exchange for shares of the Fund will be acquired for
investment purposes and will be considered for sale under the same circumstances
as other securities in the Fund.
REDEMPTION OF SHARES
The following information supplements the information set forth in Part A
under the caption "REDEMPTION OF SHARES."
The Fund may suspend redemption privileges or postpone the date of payment:
(1) during any period when the NYSE is closed, or trading on the NYSE 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 Fund 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.
If the Board of Directors determines that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment wholly
or partly in cash, the Fund may pay the redemption price in whole or in part by
a distribution of portfolio securities from the Fund in lieu of cash. Investors
may incur brokerage charges and other transaction costs selling securities that
were received in payment of redemptions. The Fund reserves the right to redeem
its shares in the currencies in which its investments are denominated.
Investors may incur charges in converting such securities to dollars and the
value of the securities may be affected by currency exchange fluctuations.
CALCULATION OF PERFORMANCE DATA
Following are quotations of the annualized percentage total returns over
the one-, five-, and ten-year periods (or fractional portion thereof) ended May
31, 1997, using the standardized method of calculation required by the SEC,
which is net of the cost of the current reimbursement fee charged to investors
and paid to the Fund. A reimbursement fee of 0.50% has been in effect from the
inception of the Fund.
One Year 51 Months Ten Years
14.73 16.97 n/a
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
10
<PAGE>
during the period. The quotation assumes the account was completely redeemed at
the end of each period and the deduction of all applicable charges and fees.
According to the SEC formula:
n
P(1 + T) = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the one-, five-, and ten-year periods at the end of the one-,
five-, and ten-year periods (or fractional portion thereof).
The Fund may compare its investment performance to appropriate market and
mutual fund indices and investments for which reliable performance data is
available. Such indices are generally unmanaged and are prepared by entities
and organizations which track the performance of investment companies or
investment advisors. Unmanaged indices often do not reflect deductions for
administrative and management costs and expenses. The performance of the Fund
may also be compared in publications to averages, performance rankings, or other
information prepared by recognized mutual fund statistical services. Any
performance information, whether related to the Fund or to the Advisor, should
be considered in light of the Fund's investment objectives and policies,
characteristics and the quality of the portfolio and market conditions during
the time period indicated and should not be considered to be representative of
what may be achieved in the future.
FINANCIAL STATEMENTS
The audited financial statements and financial highlights of the Fund for
its fiscal year ended November 30, 1996, as set forth in the Fund's Annual
Report to shareholders, and the report thereon of Coopers & Lybrand L.L.P.,
independent accountants, also appearing therein, are incorporated herein by
reference.
The unaudited financial statements and financial highlights of the Fund for
the six months ended May 31, 1997, as set forth in the Fund's Semi-Annual Report
to shareholders, are incorporated herein by reference.
A shareholder may obtain a copy of the reports, upon request and without
charge, by contacting the Fund at the address or telephone number appearing on
the cover of the Statement of Additional Information.
11
<PAGE>
Part C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS:
Part A: Not Applicable
Part B:
(1) Schedule of Investments*
(2) Statement of Assets and Liabilities*
(3) Statement of Operations*
(4) Statement of Changes in Net Assets*
(5) Financial Highlights*
(6) Notes to Financial Statements*
(7) Report of Independent Accountants*
(B) EXHIBITS:
(1) CHARTER, AS NOW IN EFFECT.
(a) Articles of Amendment and Restatement dated November 21,
1997 is filed herewith.
(2) EXISTING BY-LAWS.
By-Laws of the Registrant: on file January 19, 1993.
(3) VOTING TRUST AGREEMENT.
None.
(4) INSTRUMENTS DEFINING RIGHTS OF HOLDERS OF SECURITIES BEING
REGISTERED.
(a) See Article Fifth of Registrant's Articles of Amendment and
Restatement dated November 21, 1997.
--------------------
* The audited financial statements were filed via the EDGAR system on
February 4, 1997 with the SEC as DIMENSIONAL EMERGING MARKETS FUND
INC. Annual Report to shareholders for the year ended November 30,
1996 pursuant to Rule 30b2-1 under the Investment Company Act of 1940
("1940 Act") and are incorporated by reference into PART B, the
Statement of Additional Information, dated November 26, 1997.
The unaudited financial statements were filed via the EDGAR system on
July 31, 1997, with the SEC as DIMENSIONAL EMERGING MARKETS FUND INC.
Semi-Annual Report to shareholders for the six months ended May 31,
1997, pursuant to Rule 30b2-1 under the 1940 Act and are incorporated
by reference into PART B, the Statement of Additional Information,
dated November 26, 1997.
<PAGE>
(5) (a) INVESTMENT ADVISORY AGREEMENT:
Investment Management Agreement between the Registrant and
Dimensional Fund Advisors Inc. ("DFA") dated November 26,
1997 is filed herewith.
(6) UNDERWRITING OR DISTRIBUTION CONTRACT:
Not applicable.
(7) COPIES OF BONUS OR PROFIT SHARING, PENSION OR OTHER SIMILAR
CONTRACTS:
Not applicable.
(8) CUSTODIAN AGREEMENT:
Agreement between the Registrant and The Chase Manhattan Bank: on
file January 19, 1993.
(9) (a) FORM OF TRANSFER AGENCY AGREEMENT BETWEEN THE REGISTRANT AND
PFPC INC.: on file January 19, 1993.
(b) FORM OF ADMINISTRATION AND ACCOUNTING SERVICES AGREEMENT
BETWEEN THE REGISTRANT AND PFPC INC.: on file January 19,
1993.
(c) FORM OF FOREIGN ADMINISTRATION AGREEMENTS: on file January
19, 1993.
(10) OPINION AND CONSENT OF COUNSEL.
Not applicable.
(11) OTHER OPINIONS OR CONSENTS.
Not applicable.
(12) FINANCIAL STATEMENTS OMITTED FROM ITEM 23.
Not applicable.
(13) AGREEMENTS OR UNDERSTANDINGS MADE IN CONSIDERATION FOR PROVIDING
INITIAL CAPITAL: on file January 19, 1993
(14) MODEL PLAN USED IN THE ESTABLISHMENT OF ANY RETIREMENT PLAN.
Not applicable.
(15) PLANS ENTERED INTO PURSUANT TO RULE 12b-1.
Not applicable.
(16) SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATION.
Not applicable.
-2-
<PAGE>
(17) FINANCIAL DATA SCHEDULES.
Financial Data Schedules dated May 31, 1997.
(18) PLANS PURSUANT TO RULE 18f-3.
Not Applicable.
(19) POWERS-OF-ATTORNEY.
(a) Power-of-Attorney dated July 18, 1997, appointing David G.
Booth, Rex A. Sinquefield, Michael T. Scardina, Irene R.
Diamant, Catherine L. Newell and Stephen W. Kline, Esq. as
attorney-in-fact for the Registrant and certified resolution
relating thereto is filed herewith.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
(1) (2)
Number of Record
Holders as of
Title of Class September 15, 1997
-------------- -------------------
(Par Value $.01)
Dimensional Emerging Markets Fund Shares 1
ITEM 27. INDEMNIFICATION
Reference is made to Article Seventh of the Registrant's Articles of
Amendment and Restatement and Article 5, Section 5.08 of the
Registrant's Bylaws.
The Articles and Bylaws of Registrant provide for indemnification of
officers and directors to the full extent permitted by the General
Laws of the State of Maryland. Registrant's charter provides that the
directors and officers shall not be personally liable to the
Registrant or its stockholders for money damages, except as otherwise
required under the Investment Company Act of 1940.
Insofar as indemnification for liability arising under the Securities
Act of 1933, as amended ("Act"), may be permitted to the directors,
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
-3-
<PAGE>
for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director, an
officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISOR
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.,
The DFA Investment Trust Company and Dimensional Investment Group Inc.
The Advisor also serves as sub-advisor for certain other registered
investment companies. For additional information, please see
"Management" in PART A and PART B of this Registration Statement.
Additional information as to the Advisor and the directors and
officers of the Advisor is included in the Advisor's Form ADV filed
with the Commission (File No. 801-16283) which is incorporated herein
by reference and sets forth the officers and directors of the Advisor
and information as to any business, profession, vocation or employment
of a substantial nature engaged in by those officers and directors
during the past two years.
ITEM 29. PRINCIPAL UNDERWRITERS.
NAMES OF INVESTMENT COMPANIES FOR WHICH THE REGISTRANT'S PRINCIPAL
UNDERWRITER ALSO ACTS AS PRINCIPAL UNDERWRITER.
(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,
California 90401, will supervise the sale of Registrant's shares.
(c) Not applicable.
-4-
<PAGE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts and records of the Registrant will be located at the
office of the Registrant and at additional locations, as follows:
NAME ADDRESS
Dimensional Emerging Markets 1299 Ocean Avenue, 11th Floor
Fund Inc. Santa Monica, California
90401
PFPC Inc. 103 Bellevue Parkway
Wilmington, DE 19809
The Chase Manhattan Bank 4 Chase MetroTech Center
Brooklyn, New York 11245
ITEM 31. MANAGEMENT SERVICES.
None.
ITEM 32. UNDERTAKINGS.
Not applicable.
-5-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant has duly caused this Amendment to its Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Santa Monica and the State of California on the 26th day of November, 1997.
DIMENSIONAL EMERGING MARKETS FUND INC.
By: /s/ David G. Booth*
-------------------------------------
David G. Booth
President and Chairman - Chief
Executive Officer
*By: /s/ Catherine L. Newell
--------------------------
Catherine L. Newell
Attorney-in-Fact
(Pursuant to a Power-of-Attorney filed as an exhibit herewith).
-6-
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
Ex-99b.1 Articles of Amendment and Restatement dated November
21, 1997
Ex-99b.5a Investment Management Agreement dated November 26,
1997
Ex-27.1 Financial Data Schedule
Ex-99.b19a and 99.b19b Power of Attorney dated July 18, 1997 and certified
resolution relating thereto
E-1
<PAGE>
Exhibit No. 99b.1
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 300 E. Lombard St., Baltimore,
MD 21202. The name and post office address of the resident agent of
the Corporation in the State of Maryland is The Corporation Trust
Incorporated, 300 E. Lombard St., Baltimore, MD 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.
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,
<PAGE>
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.
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
-2-
<PAGE>
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
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
-3-
<PAGE>
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.
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.
-4-
<PAGE>
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 Assistant
Secretary on this 21st day of November, 1997.
ATTEST: DIMENSIONAL EMERGING MARKETS
FUND INC.
Catherine L. Newell By:David G. Booth
- ---------------------------------- ---------------------------
Catherine L. Newell, Assistant Secretary David G. Booth, President
<PAGE>
Exhibit No. 99b.5a
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the 26th day of November, 1997 by and between
DIMENSIONAL EMERGING MARKETS FUND INC., a Maryland corporation (the "Fund"), and
DIMENSIONAL FUND ADVISORS INC., a Delaware corporation (the "Advisor").
1. DUTIES OF ADVISOR
(a) The Fund retains the Advisor to manage the investment and
reinvestment of the assets of the Fund, to continuously review, supervise and
administer the Fund's investment program, to determine in its discretion the
securities to be purchased or sold and the portion of the Fund's assets to be
held uninvested, to provide the Fund with records concerning the Advisor's
activities which the Fund is required to maintain, and to render regular reports
to the Fund's officers and Board of Directors concerning the Advisor's discharge
of the foregoing responsibilities. The Advisor shall discharge the foregoing
responsibilities subject to the control of the officers and the Board of
Directors of the Fund, and in compliance with the objectives, policies and
limitations set forth in the Fund's prospectus. The Advisor agrees to render
such services on the terms and for the compensation provided herein.
(b) The Advisor may enter into one or more agreements
("Sub-Advisory Contract") with a sub-advisor in which the Advisor delegates to
such sub-advisor the performance of any or all of the services specified above,
provided that: (i) each Sub-Advisory Contract imposes on the sub-advisor bound
thereby all the duties and conditions to which the Advisor is subject with
respect to the delegated services under this Agreement; (ii) each Sub-Advisory
Contract meets all requirements of the 1940 Act and rules thereunder; and
(iii) the Advisor shall not enter into a Sub-Advisory Contract unless it is
approved by the Board of Directors of the Fund prior to implementation.
2. PORTFOLIO TRANSACTIONS
(a) All orders for the purchase and sale of securities for the
Fund shall be placed in such markets and through such brokers as in the
Advisor's best judgment shall offer the most favorable price and market for the
execution of each transaction. In selecting a broker or dealer for any
transaction or series of transactions, the Advisor may consider a number of
factors, including, for example, net price, reputation, financial strength and
stability, efficiency of execution, block trading and block positioning
capabilities, willingness to execute related or unrelated difficult transactions
in the future, research services provided to the Advisor, and other matters
ordinarily involved in the receipt of brokerage services generally. In no event
shall the Advisor be under any duty to obtain the lowest commission or best net
price for the Fund on any particular transaction, nor is the Advisor under any
duty to execute any order in a fashion either preferential to the Fund relative
to other like accounts managed by the Advisor or otherwise materially adverse to
such other accounts.
(b) The Advisor may effect securities transactions which cause
the Fund to pay to a broker an amount of commission in excess of the amount of
commission another broker/dealer would have charged, provided, however, that the
Advisor determines in good faith that such amount of commission is reasonable in
relation to the value of brokerage and research services provided by such
broker, viewed in terms of either the specific transaction or the Advisor's
overall responsibilities to the accounts for which the Advisor exercises
investment discretion. The receipt and use of such services will not reduce the
Advisor's customary and normal research activities.
(c) Provided the investment objectives of the Fund are adhered
to, the Advisor may aggregate sales and purchase orders of securities held in
the Fund with similar orders being made simultaneously for other funds managed
by the Advisor if, in the Advisor's reasonable judgment, such aggregation shall
result in an overall economic benefit to the Fund, taking into consideration the
advantageous selling or purchase price, brokerage commission and other expenses,
and trading requirements. In accounting for such
1
<PAGE>
aggregated order, price and commission shall be averaged on a per bond or share
basis daily. The Advisor's determination of such economic benefit to the Fund
is based on an evaluation that the Fund is benefitted by relatively better
purchase or sales prices, lower commission expenses and beneficial timing of
transactions, or a combination of these and other like or unlike factors.
3. EXPENSES
(a) During the term of this Agreement, the Fund will bear all
expenses, not specifically assumed by the Advisor, incurred in its operations.
(b) Expenses borne by the Fund will include, but not be limited
to, the following: (i) all direct charges relating to the purchase and sale of
fund securities, including the cost (including brokerage commissions, if any) of
securities purchased or sold by the Fund and any losses incurred in connection
therewith; (ii) fees payable to and expenses incurred on behalf of the Fund by
the Advisor under this Agreement; (iii) investment consulting fees and related
costs; (iv) expenses of organizing the Fund; (v) costs incurred in connection
with the issuance, sale or repurchase of the Fund's shares; (vi) filing fees and
expenses relating to the registration and qualification of the Fund and its
shares under federal and/or state securities laws and maintaining such
registrations and qualifications; (vii) expenses of preparing and filing reports
and other documents with governmental and regulatory agencies; (viii) fees and
salaries payable to the Fund's directors who are not parties to this Agreement
or interested persons of any such party ("Independent Directors"); (ix) all
expenses incurred in connection with the Independent Directors' services,
including travel expenses; (x) taxes (including any income or franchise taxes)
and governmental fees; (xi) costs of any liability, uncollectible items of
deposit and other insurance and fidelity bonds; (xii) any costs, expenses or
losses arising out of a liability of or claim for damages or other relief
asserted against the Fund for violation of any law; (xiii) interest charges;
(xiv) legal, accounting and auditing expenses; (xv) charges of administrators,
custodians, transfer agents, pricing agents and other agents; (xvi) expenses of
disbursing dividends and distributions; (xvii) costs of preparing share
certificates; (xviii) expenses of publishing and mailing reports, notices and
proxy materials for shareholders; (xix) expenses of obtaining and maintaining
securities exchange listings of the Fund's shares; (xx) any extraordinary
expenses (including fees and disbursements of counsel, costs of actions, suits
or proceedings to which the Fund is a party and the expenses the Fund may incur
as a result of its legal obligation to provide indemnification to its officers,
directors, employees and agents) incurred by the Fund; (xxi) fees, voluntary
assessments and other expenses incurred in connection with membership in
investment company organizations; (xxii) costs of mailing and tabulating proxies
and costs of meetings of shareholders, the Board and any committees thereof;
(xxiii) the cost of investment company literature and other publications
provided by the Fund to its Directors and officers; and (xxiv) costs of mailing,
stationery and communications equipment.
(c) To the extent the Advisor incurs any cost or performs any
services which are an obligation of the Fund, as set forth herein, the Fund
shall promptly reimburse the Advisor for such costs and expenses. The payment
or assumption by the Advisor of any expense of the Fund that the Advisor is not
required by this Agreement to pay or assume shall not obligate the Advisor to
pay or assume the same or any similar expense of the Fund on any subsequent
occasion.
4. COMPENSATION OF THE ADVISOR
For the services to be rendered by the Advisor hereunder, the
Fund shall pay to the Advisor at the end of each month, a fee equal to
one-twelfth of .10 percent of the net assets of the Fund as of the last business
day of each month (excluding purchases and redemptions made on the last day of
the month). In the event that this Agreement is terminated at other than a
month-end, the fee for such month shall be prorated.
5. OTHER SERVICES
The Advisor shall provide oversight on behalf of the Fund of the
administrative services necessary to the operation of the Fund provided by
Provident Financial Processing Corporation ("PFPC") and by any other third party
service providers in accordance with written agreements approved by the Board of
2
<PAGE>
Directors of the Fund. The Advisor shall periodically report to the Board of
Directors concerning such services. The fees charged by such providers for
furnishing such services shall be paid by the Fund.
6. REPORTS
The Fund and the Advisor agree to furnish to each other
information with regard to their respective affairs as each may reasonably
request. In compliance with the requirements of Rule 31a-3 under the 1940 Act,
the Advisor hereby agrees that all records which it maintains for the Fund, or
which are maintained by other persons under the Advisor's oversight, are the
property of the Fund, agrees to preserve, or require persons acting under the
Advisor's oversight to preserve, for the periods prescribed by Rule 31a-2 under
the 1940 Act, any records which the Advisor maintains, or which are maintained
by other persons under the Advisor's oversight, for the Fund and which are
required to be maintained by Rule 31a-1 under the 1940 Act, and further agrees
to surrender promptly, or require persons acting under the Advisor's oversight
to surrender, to the Fund any records which it maintains for the Fund, or which
are maintained by other persons under the Advisor's oversight, upon request by
the Fund. The Fund has received copies of Part II of the Advisor's Form ADV to
date, or a separate brochure which the Advisor represents contains the same
information as in such Part II.
7. STATUS OF THE ADVISOR
(a) The Advisor performs investment management services for
various clients and may take action with respect to any of its other clients
which may differ from action taken or from the timing or nature of action taken
with respect to the Fund, so long as it is the Advisor's policy, to the extent
practical, to allocate investment opportunities to the Fund over a period of
time on a fair and equitable basis relative to other clients.
(b) The Advisor shall have no obligation to purchase or sell for
the Fund any security which the Advisor, or its directors or employees, may
purchase or sell for its or their own accounts or the account of any other
client, if in the opinion of the Advisor such transaction or investment appears
unsuitable, impractical or undesirable for the Fund.
8. LIABILITY OF ADVISOR
(a) It is understood that any and all investment recommendations
made by the Advisor constitute an expression of investment opinion only,
prepared by the Advisor on the basis of sources and information believed to be
reliable but for which the Advisor cannot warrant as to accuracy. It is
understood that the Advisor shall assume no responsibility hereunder other than
to render the services contemplated herein in good faith and the Advisor shall
not be liable or held accountable for any mistakes of fact or law.
(b) The Fund agrees not to hold the Advisor, or any of its
directors or employees (collectively, the "Covered Parties"), liable for:
(i) any act or omission of any broker/dealer selected by the
Advisor in good faith and in a commercially reasonable manner,
unless the Advisor (1) knowingly participates in such act or
omission, (2) has actual knowledge of such act or omission and
fails to take reasonable remedial action, or (3) through gross
negligence in performing its own specific responsibilities
hereunder, has enabled the broker/dealer to commit such an act or
omission; or
(ii) any failure to cause the purchase or sale of any security
on the basis of any information known to the Advisor or its
directors or employees where the utilization of such information
might, in the Advisor's sole opinion, constitute a violation of
any Federal or state laws, rules, or regulations or a breach of
any fiduciary or confidential relationship between the Advisor,
its employees and any other person or persons.
3
<PAGE>
(c) The Fund agrees (i) not to hold the Covered Parties liable
for, and (ii) to indemnify or insure the Covered Parties against, any costs and
liabilities (including, e.g., attorneys' fees and disbursements) the Covered
Parties may incur as a result of any claim against any of the Covered Parties
arising out of an investment decision or other action taken or omitted by the
Advisor in good faith exercise of its powers hereunder or otherwise related to
this Agreement, excepting matters as to which the Advisor shall be finally
adjudged to have been guilty of willful misconduct or gross negligence.
9. DURATION AND TERMINATION
(a) This Agreement shall become effective on the 26th day of
November, 1997, and continue in effect until December 26, 1997, and thereafter,
only so long as such continuance is approved at least annually by a vote of the
Fund's Board of Directors, including the vote of a majority of the directors who
are not parties to such Agreement or interested persons of any such party, cast
in person, at a meeting called for the purpose of voting such approval, or by
vote of a majority of the outstanding voting securities of the Fund.
(b) This 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. This Agreement may be terminated by the Advisor
on ninety days' written notice to the Fund. This Agreement shall automatically
terminate in the event of its assignment. All rights and obligations under
Section 8 of this Agreement shall survive any termination of this Agreement.
(c) As used in this Section 9, the terms "assignment,"
"interested persons," and a "vote of a majority of the outstanding voting
securities" shall have the respective meanings set forth in the Investment
Company Act of 1940, subject to such exemption as may be granted by the
Securities and Exchange Commission by any rule, regulation or order. Where the
effect of a requirement of the 1940 Act reflected in any provision of this
Agreement is made less restrictive by a rule, regulation or order of the
Securities and Exchange Commission, whether of special or general application,
such provision shall be deemed to incorporate the effect of such rule,
regulation or order.
10. NOTICES
Any notice under this Agreement shall be given in writing,
addressed and delivered, or mailed postpaid, to the other party at any office of
such party.
11. SEVERABILITY
If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
12. GOVERNING LAW
This Agreement shall be construed in accordance with the laws of
the State of California and the 1940 Act. To the extent that the applicable
laws of the State of California conflict with the applicable provisions of the
1940 Act, the latter shall control.
13. INTERPRETATION OF AGREEMENT.
(a) This Agreement has been negotiated at arm's length and
between persons sophisticated and knowledgeable in the matters dealt with in
this Agreement. In addition, each party has been represented by experienced and
knowledgeable legal counsel. Accordingly, any rule of law (including California
Civil Code section 1654) or legal decision that would require interpretation of
any ambiguities in this Agreement
4
<PAGE>
against the party that has drafted it is not applicable and is waived. The
provisions of this Agreement shall be interpreted in a reasonable manner to
effect the purpose of the parties and this Agreement.
(b) Should any litigation be commenced by any party hereto
concerning any provision of this Agreement or the rights and duties of any party
hereto, then the prevailing party in such litigation shall be entitled, in
addition to such other relief as may be granted, to reasonable attorney's fees,
expert witness expenses, and other costs.
DIMENSIONAL EMERGING MARKETS FUND INC.
By: /s/Rex A. Sinquefield
-------------------------------------
Chairman and Chief Investment Officer
DIMENSIONAL FUND ADVISORS INC.
By: /s/David G. Booth
-------------------------------------
Chairman and Chief Executive Officer
5
<PAGE>
Exhibit No. 99.b19a
DIMENSIONAL EMERGING MARKETS FUND INC.
POWER OF ATTORNEY
The undersigned officers and directors of DIMENSIONAL EMERGING MARKETS
FUND INC. (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 one 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 the Fund's Registration Statement, including any and all
amendments thereto, covering the registration of the Fund as an investment
company, including all exhibits and any and all documents required to be filed
with respect thereto with any regulatory authority, including applications for
exemptive order rulings. 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 directors hereby execute this Power of
Attorney as of this 18th day of July, 1997.
/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 Director
Director
/s/ George M. Constantinides /s/ John P. Gould
- ----------------------------------- -----------------------------------
George M. Constantinides, John P. Gould, Director
Director
/s/ Roger G. Ibbotson /s/ Merton H. Miller
- ----------------------------------- -----------------------------------
Roger G. Ibbotson, Director Merton H. Miller, Director
/s/ Myron S. Scholes /s/ Michael T. Scardina
- ----------------------------------- -----------------------------------
Myron S. Scholes, Director Michael T. Scardina, Chief
Financial Officer, Treasurer
and Vice President
<PAGE>
Exhibit No. 99.b19b
CERTIFICATE OF SECRETARY
I, Irene R. Diamant, certify that I am the Secretary of Dimensional
Emerging Markets Fund Inc. ("DEM").
As Secretary of DEM, I further certify that the following resolution was
adopted by a majority of Directors of DEM.
RESOLVED, that the Powers of Attorney presented to this
meeting in respect of DFAITC, DFAIDG, DIG and DEM are hereby
approved.
I declare under penalty of perjury that the matters set forth in this
certificate are true and correct of my own knowledge.
/s/ Irene R. Diamant
-------------------------------
Irene R. Diamant
Secretary
Dated: October 29, 1997
<TABLE> <S> <C>
<PAGE>
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<CIK> 0000896163
<NAME> DIMENSIONAL EMERGING MARKETS FUND INC.
<S> <C>
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<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 139232398
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<DISTRIBUTIONS-OF-INCOME> 506125
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