Idea Transcript
Dimensional vs. American Funds Data as of March 31, 2014
This information is provided for institutional investors and registered investment advisors, and is not intended for public use. Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission. Consider the investment objectives, risks, and charges and expenses of the Dimensional funds carefully before investing. For this and other information about the Dimensional funds, please read the prospectus carefully before investing. Prospectuses are available by calling Dimensional Fund Advisors collect at (512) 306-7400 or at www.dimensional.com. Dimensional funds are distributed by DFA Securities LLC.
Fundamental Principles A philosophy of investing based on rigorous empirical and theoretical research
In liquid markets, prices reflect all available information. • Securities are fairly priced and reflect the expectations of all market participants.
Investment strategies can be structured to add value by focusing on: • Market premiums that offer investors higher expected returns while balancing tradeoffs. • Careful strategy design and efficient execution. • Continuous rebalancing to capture desired premiums while controlling turnover.
Diversification is essential. • Diversification helps reduce uncertainty and control risk. • It adds value by enabling more efficient portfolio management and flexible trading.
Diversification does not eliminate the risk of market loss. #17867-1011
2
Structure Determines Performance Structured exposure to factors: • Market • Size • Value/Growth
•
The vast majority of the variation in returns is due to risk factor exposure.
•
After fees, traditional management typically reduces returns.
Unexplained Variation
THE DIFFERENCE BETWEEN INVESTING AND SPECULATING
average expected return [minus T-bills]
average = excess return
+
sensitivity to market [market return minus T-bills]
+
sensitivity to size [small stocks minus big stocks]
+
sensitivity to BtM [value stocks minus growth]
+
random error e(t)
Priced Risk
Unpriced Risk
• • • • •
• Random noise • Short term • Speculating
Positive expected return Systematic Economic Long term Investing
3 #17867-1011
Dimensions of Expected Returns Illustrative index performance
High Relative Price
Low Relative Price
US Large Capitalization Stocks
US Small Capitalization Stocks
Non-US Developed Markets Stocks
Emerging Markets Stocks
1927–2012
1927–2012
1975–2012
1989–2012
9.25
8.69
Fama/French US Large Growth Research Index
11.64 Fama/French US Large Value Research Index
10.31
8.79
Fama/French US Small Growth Research Index
Fama/French Emerging Markets Growth Index
Fama/French International Growth Index
14.77
14.85
Fama/French US Small Value Research Index
15.95 Fama/French Emerging Markets Value Index
Fama/French International Value Index
14.79 Small
Benchmark
Low Profitability
High Profitability
Dimensional International Small Cap Index
9.82
11.54
13.44 Fama/French Emerging Markets Small Cap Index
11.71
10.69
S&P 500 Index
CRSP 6-10 Index
MSCI World ex US Index
MSCI Emerging Markets Index
1975–2012
1975–2012
1992–2012
1996–2012
10.58
8.66
Dimensional US Large Low Profitability Index
2.81
Dimensional US Small Low Profitability Index
14.44 Dimensional US Large High Profitability Index
18.59 Dimensional US Small High Profitability Index
11.66
Benchmark S&P 500 Index
4.31
Dimensional International Low Profitability Index
8.93 Dimensional International High Profitability Index
15.19 CRSP 6-10 Index
Dimensional Emerging Markets Low Profitability Index
5.79 MSCI World ex US Index
11.15 Dimensional Emerging Markets High Profitability Index
7.70 MSCI Emerging Markets Index
Annualized compound returns (%) in US dollars. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results. Index returns are not representative of actual portfolios and do not reflect costs and fees associated with an actual investment. Actual returns may be lower. See “Index Descriptions” in the appendix for descriptions of Dimensional and Fama/French index data. The S&P data are provided by Standard & Poor’s Index Services Group. MSCI data copyright MSCI 2013, all rights reserved. #17867-1011
4
Investment Philosophy Dimensional • Believes that, in liquid markets, prices reflect all available information • Focuses strategies on the dimensions of higher expected returns • Seeks to add value through portfolio design and implementation
Traditional Active Management • Attempts to identify mispricing in securities on a consistent basis • Often relies on forecasting techniques to pick securities and/or time markets • Generates higher expenses, trading costs, and excess risk
Index Management • Allows commercial benchmarks to define strategy • Tethered to a benchmark, reducing flexibility • Accepts lower returns and increased trading costs in favor of tracking 5 #22564-0212
Dimensional vs. American Funds Equity Analysis
Domestic Equity Factor Plot: March 2000 – March 2014 MARKET ()
SIZE (SmB)
PRICE (HmL)
Adj. R2
AMERICAN FUNDS HOLDINGS 1. American Funds Washington Mutual 2. American Funds Investment Co. of America 3. American Funds American Mutual 4. American Funds Growth Fund of America 5. American Funds Fundamental Investors 6. American Funds AMCAP 7. American Funds New Economy
0.84 0.85 0.74 0.98 0.96 0.92 1.08
-0.25 -0.14 -0.17 0.03 -0.09 0.02 0.10
0.33 0.17 0.30 -0.11 0.14 0.10 -0.15
0.93 0.96 0.92 0.95 0.93 0.95 0.93
DIMENSIONAL HOLDINGS Dimensional Large Cap Value Dimensional Large Company Dimensional Micro Cap Dimensional Small Cap Dimensional Small Cap Value Dimensional Targeted Value
1.09 1.00 0.99 1.03 1.04 1.08
-0.05 -0.17 0.96 0.81 0.81 0.52
0.61 0.04 0.24 0.29 0.62 0.73
0.94 0.99 0.97 0.99 0.97 0.93
INDEXES CRSP Market Index S&P 500 Index Russell 1000 Index Russell 1000 Value Index Russell 1000 Growth Index Russell 2000 Index Russell 2000 Value Index Russell 2000 Growth Index
Small Dimensional Micro Cap
1.0 Russell 2000 Growth Index
0.00 -0.17 -0.13 -0.17 -0.13 0.78 0.66 0.83
0.00 0.04 0.03 0.42 -0.36 0.27 0.68 -0.14
1.00 0.99 1.00 0.97 0.98 0.98 0.95 0.97
Dimensional Small Value
0.8 Russell 2000 Index
Russell 2000 Value Index
0.6
0.4
CRSP Market Index
0.2 7
6
4
0.0
1.00 1.00 1.01 0.96 1.07 1.00 0.91 1.11
Dimensional Small Cap
Dimensional Large Value
5 Russell 1000 Growth Index -0.2 Russell 1000 Index
2 S&P 500 Index; Dimensional Large Company
3
Value
Russell 1000 Value Index 1
-0.4 -0.4
-0.2
0.0
0.2
0.4
0.6
Highlighted boxes indicate significant results (t-stat above/below ±2). The indices are not available for direct investment; therefore their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is no guarantee of future results, and there is always the risk that an investor may lose money. Sources: Dimensional Fund Advisors for Dimensional funds; The S&P data are provided by Standard & Poor's Index Services Group; Russell data copyright © Russell Investment Group 1995-2014, all rights reserved; CRSP data provided by the Center for Research in Security Prices, University of Chicago; Mutual fund universe statistical data provided by Morningstar, Inc.
7
Domestic Equity Characteristics Asset Allocation (%) As of March 31, 2014
Ticker
Expense Turnover Ratio (%)
Holdings
US Equity
Non-US Equity
Bonds
Cash
Other
P/B Ratio
Market Cap
DIMENSIONAL FUNDS Core Equity 1 Core Equity 2 Vector Equity
DFEOX DFQTX DFVEX
0.19 0.22 0.32
1 3 3
2,914 2,943 2,792
97.1 97.4 98.0
2.1 1.9 1.6
-
0.9 0.6 0.4
-
2.24 2.02 1.74
19,595 14,958 6,396
Large Company
DFUSX
0.08
3
503
96.7
2.5
-
0.9
-
2.51
63,632
Large Cap Equity
DUSQX
0.19
-
853
97.2
1.9
-
0.9
-
2.52
38,907
Large Cap Value
DFLVX
0.27
29
223
97.6
2.0
-
0.4
-
1.43
44,245
Large Cap Growth
DUSLX
0.20
-
318
98.3
1.1
-
0.6
-
5.34
36,520
Targeted Value
DFFVX
0.37
16
1,524
98.6
0.4
-
0.9
-
1.41
1,834
Small Cap Value
DFSVX
0.52
15
1,277
99.0
0.9
-
0.1
-
1.30
1,190
Small Cap
DFSTX
0.37
10
2,192
98.4
0.7
-
0.9
-
2.13
1,446
Small Cap Growth
DSCGX
0.40
-
491
98.6
0.6
-
0.6
0.2
3.72
1,622
Micro Cap
DFSCX
0.52
15
1,834
99.3
0.3
-
0.3
-
2.00
760
Real Estate Securities
DFREX
0.18
1
125
99.6
-
-
0.4
-
2.19
8,741
American Funds Washington Mutual
AWSHX
0.62
22
166
88.8
8.4
0.1
1.8
1.0
2.91
85,483
American Funds Investment Co. of America
AIVSX
0.61
24
220
82.5
7.0
0.2
4.3
6.1
2.81
72,015
American Funds American Mutual
AMRMX
0.61
18
237
83.3
7.0
1.4
6.9
1.5
2.74
50,326
AMERICAN FUNDS
American Funds Growth Fund of America
AGTHX
0.70
27
446
77.8
12.9
0.1
7.2
1.9
3.26
50,800
American Funds Fundamental Investor
ANCFX
0.63
34
238
79.9
15.9
-
4.0
0.3
2.90
62,689
American Funds AMCAP
AMCPX
0.74
27
242
79.3
3.9
-
10.9
6.0
3.49
33,401
American Funds New Economy
ANEFX
0.83
29
204
52.8
36.0
-
10.0
1.2
3.41
23,325
Fund holdings are subject to change. Data is supplied as of March 31, 2014; actual portfolio date for data may differ. Sources: Dimensional Fund Advisors for Dimensional expense ratios; Mutual fund universe statistical data provided by Morningstar, Inc.
8
Domestic Equity Performance (1 of 2) As of March 31, 2014 MARKET BLEND Dimensional Core Equity 1 Dimensional Core Equity 2 Dimensional Vector Equity CRSP Market Index LARGE CAP Dimensional Large Company American Funds Investment Co. of America American Funds Fundamental S&P 500 Index LARGE VALUE Dimensional Large Cap Value American Funds Washington Mutual American Funds American Mutual Russell 1000 Value Index LARGE GROWTH Dimensional Large Cap Growth American Funds Growth Fund of America American Funds AMCAP American Funds New Economy Russell 1000 Growth Index
1 Year
3 Year
5 Year
10 Year
24.69 25.24 26.27 23.36
14.73 14.65 14.34 14.88
23.27 24.05 25.36 22.02
8.15
21.78 23.96 21.42 21.86
14.54 13.83 12.47 14.66
21.08 18.81 19.87 21.16
7.43 7.23 8.95 7.42
25.61 22.61 17.92 21.57
15.53 15.04 13.54 14.80
25.95 20.26 18.74 21.75
8.63 7.21 7.59 7.58
22.69 24.39 27.67 30.88 23.22
13.71 15.82 17.46 14.62
19.48 22.28 23.62 21.68
8.04 8.02 9.68 7.86
Performance data shown represents past performance and is no guarantee of future results. Current performance may be higher or lower than the performance shown. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. To obtain performance data current to the most recent month-end, visit www.dimensional.com. Performance for periods greater than one year are annualized. The indices are not available for direct investment; therefore their performance does not reflect the expenses associated with the management of an actual portfolio. See Appendix: Standardized Performance Data and Disclosures for how to obtain complete information on performance, investment objectives, risks, advisory fees, and expenses of Dimensional's funds. Sources: The S&P data are provided by Standard & Poor's Index Services Group; CRSP data provided by the Center for Research in Security Prices, University of Chicago; Russell data copyright © Russell Investment Group 1995-2014, all rights reserved; Mutual fund universe statistical data provided by Morningstar, Inc.
9
Domestic Equity Performance (2 of 2)
As of March 31, 2014
1 Year
3 Year
5 Year
10 Year
Dimensional Small Cap
27.45
14.78
27.71
9.61
Dimensional Micro Cap
30.20
15.57
27.32
8.67
Russell 2000 Index
24.90
13.18
24.31
8.53
Dimensional Targeted Value
28.26
14.61
27.29
9.90
Dimensional Small Cap Value
26.69
14.23
27.98
9.37
Russell 2000 Value Index
22.65
12.74
23.33
8.07
Dimensional Small Cap Growth
27.17
-
-
-
Russell 2000 Growth Index
27.19
13.61
25.24
8.87
Dimensional Real Estate Securities
3.92
10.31
28.51
8.05
Dow Jones US Select REIT Index
4.35
10.27
28.92
8.05
SMALL CAP
SMALL VALUE
SMALL GROWTH
REAL ESTATE
Performance data shown represents past performance and is no guarantee of future results. Current performance may be higher or lower than the performance shown. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. To obtain performance data current to the most recent month-end, visit www.dimensional.com. Performance for periods greater than one year are annualized. The indices are not available for direct investment; therefore their performance does not reflect the expenses associated with the management of an actual portfolio. See Appendix: Standardized Performance Data and Disclosures for how to obtain complete information on performance, investment objectives, risks, advisory fees, and expenses of Dimensional's funds. Sources: Russell data copyright © Russell Investment Group 1995-2014, all rights reserved; Dow Jones data provided by Dow Jones Indexes; Mutual fund universe statistical data provided by Morningstar, Inc.
10
Non-US Equity Characteristics Asset Allocation (%) Ticker
Expense Ratio
Turnover (%)
Holdings
US Equity
Non-US Equity
Bonds
Cash
Other
P/B Ratio
Market Cap
International Core Equity
DFIEX
0.39
3
4,884
0.1
97.6
-
0.7
1.6
1.30
10,979
International Vector Equity
DFVQX
0.51
2
4,312
0.2
94.8
-
0.3
4.7
1.18
5,557
Large Cap International
DFALX
0.29
5
1,523
0.1
95.1
-
0.5
4.3
1.54
33,014
International Large Cap Growth
DILRX
0.30
-
447
0.0
96.4
-
0.6
3.0
3.10
25,993
International Value
DFIVX
0.43
15
588
0.4
97.0
-
0.4
2.2
0.97
29,858
International Small Cap Value
DISVX
0.69
9
2,027
-
92.2
-
0.4
7.3
0.88
1,448
International Small Company
DFISX
0.54
0
4,244
0.1
92.0
-
0.6
7.3
1.32
1,444
International Small Cap Growth
DISMX
0.55
-
811
-
95.7
-
1.0
3.3
2.76
1,900
Emerging Markets Core Equity
DFCEX
0.63
1
4,010
-
94.3
-
1.7
4.0
1.22
6,484
Emerging Markets
DFEMX
0.57
4
1,061
-
94.9
-
0.6
4.4
1.39
16,899
Emerging Markets Value
DFEVX
0.57
8
2,194
-
93.2
-
0.2
6.5
0.79
6,389
Emerging Markets Small Cap
DEMSX
0.75
4
3,158
-
95.8
-
0.5
3.7
1.16
809
International Real Estate Securities
DFITX
0.39
5
255
-
90.8
-
1.2
8.0
1.09
4,742
Global Real Estate Securities
DFGEX
0.32
-
3
59.0
36.8
-
1.0
3.2
1.58
6,913
Commodity Strategy
DCMSX
0.34
64
183
-
-
86.3
-14.5
28.2
-
-
American Funds New Perspective
ANWPX
0.79
30
294
45.2
45.3
0.4
4.2
4.9
2.87
54,532
American Funds Capital World G/I
CWGIX
0.80
24
399
37.7
54.5
0.8
4.9
2.2
2.16
53,145
American Funds EuroPacific Growth
AEPGX
0.86
27
409
0.9
90.9
0.3
7.6
0.4
1.83
39,657
American Funds Intl. Growth and Income
IGAAX
0.93
37
191
-
88.0
2.1
5.6
4.3
1.71
34,991
American Funds New World
NEWFX
1.06
36
523
7.9
69.6
9.0
5.8
7.6
2.42
19,638
American Funds SMALLCAP World
SMCWX
1.13
37
571
41.3
45.7
0.3
11.2
1.5
2.97
3,016
As of March 31, 2014 DIMENSIONAL FUNDS
AMERICAN FUNDS
Fund holdings are subject to change. Data is supplied as of March 31, 2014; actual portfolio date for data may differ. Sources: Dimensional Fund Advisors for Dimensional expense ratios; Mutual fund universe statistical data provided by Morningstar, Inc.
11
Non-US Equity Performance (1 of 2) As of March 31, 2014
1 Year
3 Year
5 Year
10 Year
Dimensional International Core Equity
20.70
6.84
18.44
-
Dimensional International Vector Equity
22.31
6.65
19.55
-
Dimensional Large Cap International
17.01
6.59
15.86
6.67
American Funds EuroPacific Growth
17.58
6.37
15.54
8.29
American Funds Intl. Growth and Income
17.17
8.13
15.85
MSCI World ex USA Index
16.46
6.27
15.88
6.71
Dimensional International Value
22.24
4.84
17.28
7.41
MSCI World ex USA Value Index
19.08
6.57
16.39
6.71
Dimensional International Large Cap Growth
19.08
-
-
-
MSCI World ex USA Growth Index
13.88
5.94
15.33
6.63
Dimensional International Small Company
25.03
8.67
21.37
9.41
Dimensional International Small Cap Value
30.16
10.31
21.88
10.13
Dimensional International Small Cap Growth
21.84
-
-
-
MSCI World ex USA Small Cap Index
21.12
7.54
21.51
8.41
MSCI World ex USA Small Cap Value Index
22.80
8.30
22.02
9.36
MSCI World ex USA Small Cap Growth Index
19.42
6.75
20.97
8.20
LARGE/MARKET
LARGE VALUE
LARGE GROWTH
SMALL
Performance data shown represents past performance and is no guarantee of future results. Current performance may be higher or lower than the performance shown. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. To obtain performance data current to the most recent month-end, visit www.dimensional.com. Performance for periods greater than one year are annualized. The indices are not available for direct investment; therefore their performance does not reflect the expenses associated with the management of an actual portfolio. See Appendix: Standardized Performance Data and Disclosures for how to obtain complete information on performance, investment objectives, risks, advisory fees, and expenses of Dimensional's funds. Sources: MSCI data copyright MSCI 2014, all rights reserved; Mutual fund universe statistical data provided by Morningstar, Inc.
12
Non-US Equity Performance (2 of 2) As of March 31, 2014 EMERGING MARKETS Dimensional Emerging Markets Core Equity Dimensional Emerging Markets Dimensional Emerging Markets Value Dimensional Emerging Markets Small Cap American Funds New World MSCI Emerging Markets Index (net div.) WORLD American Funds New Perspective American Funds Capital World G/I American Funds SMALLCAP World MSCI All Country World ex USA Index MSCI All Country World Index REAL ESTATE Dimensional International Real Estate Securities Dimensional Global Real Estate Securities S&P Global ex US REIT Index S&P Global REIT Index COMMODITIES Dimensional Commodity Strategy Dow Jones-UBS Commodity Index
1 Year
3 Year
5 Year
10 Year
-1.18 -1.28 -3.54 -0.43 8.99 -1.43
-2.35 -2.32 -5.57 0.03 4.04 -2.86
16.67 15.03 15.31 20.97 15.94 14.48
10.84 11.74 12.57 10.36 10.11
19.68 19.23 19.99 12.31 16.55
10.85 10.49 10.00 4.15 8.55
18.81 17.33 22.79 15.52 17.80
8.88 8.79 9.35 7.12 6.97
-0.23 2.22 -1.59 1.13
7.63 9.07 6.91 8.37
20.57 24.85 19.82 23.69
5.98 6.27
-0.32 -2.10
-5.81 -7.37
4.24
0.43
Performance data shown represents past performance and is no guarantee of future results. Current performance may be higher or lower than the performance shown. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. To obtain performance data current to the most recent month-end, visit www.dimensional.com. Performance for periods greater than one year are annualized. The indices are not available for direct investment; therefore their performance does not reflect the expenses associated with the management of an actual portfolio. See Appendix: Standardized Performance Data and Disclosures for how to obtain complete information on performance, investment objectives, risks, advisory fees, and expenses of Dimensional's funds. Sources: The S&P data are provided by Standard & Poor's Index Services Group; MSCI data copyright MSCI 2014, all rights reserved; Dow Jones data provided by Dow Jones Indexes; Mutual fund universe statistical data provided by Morningstar, Inc.
13
Dimensional vs. American Funds Fixed Income Analysis
Fixed Income The Sources of Return
Maturity Factor
Credit Factor
1973–2012
1976–2012
8.98
LongTerm Gov’t
7.46
Int.Term Gov’t
7.50
6.23
ShortTerm Credit
ShortTerm Gov’t
6.96
ShortTerm Gov’t/ Credit
Long-Term 6.83
ShortTerm Gov’t
Increased Expected Target Return (example) (more risk)
Investment Grade
High Yield
Global 1985–2012 8.39
6.74
5.66
Short-Term LongTerm Gov’t
Int.Term Gov’t
ShortTerm Gov’t
In US dollars. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results. Maturity Factor: Short-Term Government is BofA Merrill Lynch One-Year US Treasury Note Index; Intermediate-Term Government is Barclays Capital US Government Bond Index Intermediate; Long-Term Government is Barclays Capital US Government Bond Index. Credit Factor: Short-term Government is Barclays Capital US Government Index 1-3 Years; Short-Term Government/Credit is Barclays Capital US Government/Credit Index 1-3 Years; Short-Term Credit is Barclays Capital 1-3 Year Credit Index. Global: Short-Term Government is Citigroup World Government Bond Index 1-3 Years (hedged); Intermediate-Term Government is Citigroup World Government Bond Index 3-5 Years (hedged); Long-Term Government is Citigroup World Government Bond Index 5+ Years (hedged). Sources: Barclays indices copyright Barclays 2013; the Merrill Lynch Indices are used with permission; copyright 2013 Merrill Lynch, Pierce, Fenner & Smith Incorporated; all rights reserved.
15
Fixed Income Does it Pay to Extend Maturity & Credit?
CREDIT TRADE-OFF (Jul 1983 – Dec 2012)
MATURITY TRADE-OFF (Jan 1964 – Dec 2012)
Return Std. Dev.
Return Std. Dev. Twenty-Year US Gov’t Bonds
Five-Year US T-Notes
One-Year US T-Notes
Six-Month US T-Bills
One-Month US T-Bills
11.49
7.68
High Yield
BBB
5.95
5.22
8.59
9.44
4.94
6.14
7.17
6.16
9.18
A
7.96
5.03
AA
7.75
4.67
AAA
7.53
2.37
1.83
1.49
Gov’t
7.14
4.27
4.12
Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results. Maturity Sources: One-Month US Treasury Bills, Five-Year US Treasury Notes, and Twenty-Year (Long-Term) US Government Bonds provided by Ibbotson Associates; Six-Month US Treasury Bills provided by CRSP (1964-1977) and BofA Merrill Lynch (1978-present); One-Year US Treasury Notes provided by CRSP (1964-May 1991) and Merrill Lynch (June 1991-present). Credit Sources: Government rating is Barclays Capital US Government Bond Index Intermediate; AAA rating is Barclays Capital US Intermediate Credit Aaa Index; AA rating is Barclays Capital US Intermediate Credit Aa Index; A rating is Barclays Capital US Intermediate Credit A Index; BBB rating is Barclays Capital US Intermediate Credit Baa Index; High Yield rating is Barclays Capital High Yield Composite Bond Index Intermediate. Ibbotson data © Stocks, Bonds, Bills, and Inflation YearbookTM, Ibbotson Associates, Chicago (annually updated work by Roger G. Ibbotson and Rex A. Sinquefield). CRSP data provided by the Center for Research in Security Prices, University of Chicago. The BofA Merrill Lynch Indices are used with permission; copyright 2012 Merrill Lynch, Pierce, Fenner & Smith Incorporated; all rights reserved. Merrill Lynch, Pierce, Fenner & Smith Incorporated is a wholly owned subsidiary of Bank of America Corporation. Barclays Capital data, formerly Lehman Brothers, provided by Barclays Bank PLC.
16
Fixed Income Characteristics As of March 31, 2014
Expense Ratio Duration
0-3 Yrs
Maturity (%) 3 - 5 5 - 10 10 - 20 Yrs Yrs Yrs
20 + Yrs
AAA
Credit Quality (%) Below Not AA A BBB BBB Rated
DIMENSIONAL FUNDS One-Year Fixed Short-Term Government Short-Term Extended Quality Intermediate-Term Government Intermediate-Term Extended Quality Investment Grade Two-Year Global Five-Year Global Selectively Hedged Global Inflation Protected Securities Short-Duration Real Return Short-Term Municipal Bond Intermediate-Term Municipal Bond World ex-US Government
0.17 0.19 0.22 0.12 0.22 0.22 0.18 0.28 0.18 0.12 0.24 0.22 0.23 0.20
0.97 2.41 2.77 4.91 6.71 5.65 1.42 3.96 2.65 7.68 2.97 2.31 6.00 7.55
100.0 60.7 50.7 16.4 0.1 11.5 100.0 1.8 40.8 47.1 59.8 9.5 -
39.3 49.3 29.3 6.0 18.3 98.2 59.2 17.5 49.4 23.0 11.1 -
0.1 45.0 88.7 64.0 52.5 3.4 17.2 75.9 87.6
9.3 5.3 6.2 30.0 0.2 3.5 12.4
-
65.4 100.0 16.6 100.0 11.7 47.3 57.1 43.1 17.3 100.0 18.8 48.8 29.7 48.1
33.5 20.6 13.6 8.6 42.9 57.0 23.0 17.5 50.3 70.3 52.0
1.1 36.7 37.3 22.4 32.9 37.5 0.9 -
26.1 37.4 21.8 26.8 26.2 -
-
-
NON-DIMENSIONAL HOLDINGS American Funds ST Bond Fund of America American Funds Interm. Bond Fund of America American Funds American High Income American Funds US Government Securities American Funds Bond Fund of America American Funds Capital World Bond American Funds Limited-Term Tax-Ex. Bond American Funds Tax-Exempt Bond American High-Income Municipal Bond
0.60 0.60 0.66 0.61 0.61 0.91 0.60 0.55 0.69
1.80 3.20 3.80 5.00 5.30 5.80 3.80 7.10 8.20
53.0 34.1 5.9 18.2 17.6 9.3 14.2 2.5 1.0
25.6 34.6 28.5 5.8 16.7 23.5 31.7 5.7 1.5
3.5 17.6 60.9 32.2 30.6 50.0 42.9 21.4 9.2
5.5 4.6 2.4 5.2 6.0 6.7 4.4 35.6 36.5
12.3 9.2 2.2 38.6 29.2 10.6 6.8 34.9 51.8
80.4 68.8 4.8 100.0 59.9 33.5 15.0 16.9 7.2
10.2 8.8 0.1 5.4 14.4 40.7 29.9 4.2
9.4 15.4 0.6 13.8 19.6 36.4 31.8 18.8
7.0 7.2 14.8 21.5 7.5 12.5 29.9
-0.0 -0.0 84.8 5.4 7.9 0.1 4.4 18.2
2.6 0.6 3.0 0.3 4.5 21.7
Fund holdings are subject to change. Data is supplied as of March 31, 2014; actual portfolio date for data may differ. Sources: Dimensional Fund Advisors for Dimensional funds; Mutual fund universe statistical data provided by Morningstar, Inc.
17
Fixed Income Performance (1 of 2) Annualized Return (%) As of March 31, 2014 ULTRASHORT Dimensional One-Year Fixed BofA Merrill Lynch 1-Year US Treasury Note Index SHORT Dimensional Short-Term Extended Quality American Funds ST Bond Fund of America BofA Merrill Lynch 1-5 Year US Corporate and Government Index SHORT GOVERNMENT Dimensional Short-Term Government BofA Merrill Lynch 1-5 Year US Treasury and Agency Index INTERMEDIATE Dimensional Intermediate-Term Extended Quality Dimensional Investment Grade American Funds Interm. Bond Fund of America American Funds Bond Fund of America Barclays US Aggregate Bond Index INTERMEDIATE GOVERNMENT Dimensional Intermediate Government American Funds US Government Securities Barclays US Government Bond Index
5 Year Analysis
1 Year
3 Year
5 Year
10 Year
Std. Dev.
Return/ Std. Dev.
0.33 0.26
0.61 0.33
0.94 0.56
2.16 2.03
0.43 0.21
2.20 2.62
0.72 -0.17 0.45
2.37 0.58 2.00
4.02 1.21 2.97
3.29
1.93 0.93 1.50
2.08 1.30 1.98
-0.19 -0.06
1.62 1.40
2.15 1.69
2.88 3.00
1.64 1.40
1.31 1.20
-0.75 -0.60 -0.37 0.05 -0.10
5.36 4.17 1.89 3.85 3.75
3.15 6.88 4.80
2.66 3.45 4.46
1.98 3.41 2.82
1.59 2.02 1.70
-1.90 -1.08 -1.17
3.64 2.78 3.18
3.69 3.00 2.73
4.45 3.66 3.98
3.69 2.90 3.37
1.00 1.03 0.81
Performance data shown represents past performance and is no guarantee of future results. Current performance may be higher or lower than the performance shown. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. To obtain performance data current to the most recent month-end, visit www.dimensional.com. Performance for periods greater than one year are annualized. The indices are not available for direct investment; therefore their performance does not reflect the expenses associated with the management of an actual portfolio. See Appendix: Standardized Performance Data and Disclosures for how to obtain complete information on performance, investment objectives, risks, advisory fees, and expenses of Dimensional's funds. Sources: Dimensional Fund Advisors for Dimensional funds; The BofA Merrill Lynch Indices are used with permission; copyright 2014 Merrill Lynch, Pierce, Fenner & Smith Incorporated; all rights reserved. Merrill Lynch, Pierce, Fenner & Smith Incorporated is a wholly owned subsidiary of Bank of America Corporation; Barclays indices copyright Barclays 2014; Mutual fund universe statistical data provided by Morningstar, Inc.
18
Fixed Income Performance (2 of 2) Annualized Return (%) As of March 31, 2014 WORLD Dimensional Two-Year Global Dimensional Five-Year Global Dimensional Selectively Hedged Global Dimensional World ex-US Government American Funds Capital World Bond Citigroup World Government Bond Index 1-3 Years (hedged) Citigroup World Government Bond Index 1-5 Years (hedged) Citigroup World Government Bond Index 1-3 Years (unhedged) Citigroup World Government Bond Index ex USA 1-30 Years (hedged) INFLATION PROTECTED Dimensional Inflation Protected Securities Barclays US TIPS Index MUNICIPAL SHORT Dimensional Short-Term Municipal Bond Dimensional California Short-Term Municipal Bond Barclays Municipal Bond Index 3 Years BofA Merrill Lynch 1-3 Year California Municipal Securities Index MUNICIPAL Dimensional Intermediate-Term Municipal Bond Dimensional California Intermediate-Term Municipal Bond American Funds Limited-Term Tax-Ex. Bond American Funds Tax-Exempt Bond American High-Income Municipal Bond Barclays Municipal Bond Index S&P Intermediate Term California AMT-Free Municipal Bond Index HIGH YIELD American Funds American High Income Barclays U.S. Corporate High Yield Index
5 Year Analysis Std. Return/ Dev. Std. Dev.
1 Year
3 Year
5 Year
10 Year
0.37 0.02 0.38 0.13 1.46 0.82 0.93 0.89 2.55
0.73 3.12 1.31 3.07 1.30 1.94 -0.54 4.79
1.18 3.80 4.07 6.23 1.29 1.82 1.93 3.64
2.15 3.38 4.85 2.70 3.12 2.81 4.33
0.46 2.54 5.10 5.94 0.56 0.94 4.91 2.60
2.57 1.50 0.80 1.05 2.32 1.93 0.39 1.40
-7.31 -6.49
3.69 3.50
5.12 4.91
4.53
5.62 5.30
0.91 0.93
0.40 0.52 1.09 0.57
1.04 1.23 2.06 1.24
1.41 1.59 2.43 1.76
1.94 2.97 2.50
1.04 1.17 1.22 0.77
1.36 1.36 1.99 2.29
-0.27 0.66 0.20 0.10 0.18 0.39 1.67
3.96 6.48 8.64 5.79 5.40
4.53 6.46 9.40 5.71 -
3.34 4.10 4.29 4.45 -
3.18 4.67 5.85 4.34 -
1.42 1.38 1.61 1.32 -
6.44 7.54
7.07 9.00
16.25 18.25
7.21 8.68
8.18 8.76
1.99 2.08
Performance data shown represents past performance and is no guarantee of future results. Current performance may be higher or lower than the performance shown. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. To obtain performance data current to the most recent month-end, visit www.dimensional.com. Performance for periods greater than one year are annualized. The indices are not available for direct investment; therefore their performance does not reflect the expenses associated with the management of an actual portfolio. See Appendix: Standardized Performance Data and Disclosures for how to obtain complete information on performance, investment objectives, risks, advisory fees, and expenses of Dimensional's funds. Sources: Dimensional Fund Advisors for Dimensional funds; Citigroup bond indices copyright 2014 by Citigroup; Barclays indices copyright Barclays 2014; Mutual fund universe statistical data provided by Morningstar, Inc.
19
10-Year Annualized Returns Dimensional’s US funds relative to benchmark and Morningstar category March 2004 – March 2014
10-YEAR ANNUALIZED RETURN (%) Dimensional Funds
Morningstar Category
Benchmark
9.61
9.37 8.80
8.63
8.53
8.67
8.80
8.53
8.66 8.07
7.43
7.06
7.42
7.58 7.15
Large Blend
Large Value
Small Blend
Small Blend
Small Value
Dimensional US Large Company Portfolio; S&P 500 Index
Dimensional US Large Cap Value Portfolio; Russell 1000 Value Index
Dimensional US Small Cap Portfolio; Russell 2000 Index
Dimensional US Micro Cap Portfolio; Russell 2000 Index
Dimensional US Small Cap Value Portfolio; Russell 2000 Value Index
Performance data shown represents past performance and is no guarantee of future results. Current performance may be higher or lower than the performance shown. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. To obtain the most current month-end performance data, visit www.dimensional.com. Total number of funds ranked reflects oldest share class and funds reporting a 10-year annualized return for each respective Morningstar category. Only Dimensional Institutional (I) class funds were included in this analysis. The indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. See “Appendix: Standardized Performance Data & Disclosures” to obtain complete information on performance, investment objectives, risks, advisory fees, and expenses of Dimensional’s funds. Sources: Dimensional Fund Advisors for Dimensional funds; Mutual fund universe statistical data provided by Morningstar, Inc.; MSCI data copyright MSCI 2014, all rights reserved. #17624-1011
20
10-Year Annualized Returns Dimensional’s International funds relative to benchmark and Morningstar category March 2004 – March 2014
10-YEAR ANNUALIZED RETURN (%) Dimensional Funds
Morningstar Category
Benchmark
12.57 11.74 10.84 10.13 9.41
9.75
9.61 8.41
8.58
10.11
9.75
10.11
9.75
10.11
8.41
7.41 6.67
6.53
6.71
6.64
6.71
Foreign Large Blend
Foreign Large Value
Foreign Small/Mid Blend
Foreign Small/Mid Value
Diversified Emerging Markets
Dimensional Large Cap Intl Portfolio; MSCI World ex US Index
Dimensional Intl Value Portfolio; MSCI World ex US Value Index
Dimensional Intl Small Portfolio; MSCI World ex US Small Index
Dimensional Intl Small Value Portfolio; MSCI World ex US Small Index
Dimensional Emg Mkts Portfolio; MSCI Emg Mkts Index
Diversified Emerging Markets
Diversified Emerging Markets
Dimensional Emg Mkts Dimensional Emg Mkts Small Cap Portfolio; Value Portfolio; MSCI Emg Mkts MSCI Emg Mkts Index Index
Performance data shown represents past performance and is no guarantee of future results. Current performance may be higher or lower than the performance shown. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. To obtain the most current month-end performance data, visit www.dimensional.com. Total number of funds ranked reflects oldest share class and funds reporting a 10-year annualized return for each respective Morningstar category. Only Dimensional Institutional (I) class funds were included in this analysis. Indices are net dividends.The indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. See “Appendix: Standardized Performance Data & Disclosures” to obtain complete information on performance, investment objectives, risks, advisory fees, and expenses of Dimensional’s funds. Sources: Dimensional Fund Advisors for Dimensional funds; Mutual fund universe statistical data provided by Morningstar, Inc.; MSCI data copyright MSCI 2014, all rights reserved. #17624-1011
21
The Randomness of Returns
Annualized Return S&P 500 Index Fama/French US Large Value
Index1
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
16.5
Highest
74.5
35.1
34.0
36.0
39.4
8.8
78.5
34.6
9.4
28.0
14.4
Returns
69.2
33.2
24.1
33.0
8.2
6.6
70.2
29.5
3.4
21.2
Fama/French US Small Cap Index
12.8
66.8
32.1
22.6
32.2
8.0
4.7
48.6
28.1
2.3
20.3
Fama/French US Small Value Index1
12.4
60.2
30.6
15.1
27.5
6.3
-26.5
47.8
20.7
2.1
18.2
Dow Jones US Select REIT Index
12.1
57.8
27.3
13.8
26.3
6.3
-37.0
47.0
20.2
0.6
18.2
Fama/French International Value Index
11.5
55.8
25.6
9.7
21.9
6.2
-38.6
44.8
19.2
-4.6
17.4
Dimensional International Small Cap Index
11.4
36.4
19.1
8.4
21.7
5.9
-39.2
37.5
18.9
-5.4
17.1
Dimensional International Small Cap Value Index
7.9
36.2
17.7
5.6
17.1
5.5
-42.5
28.5
15.1
-10.8
16.8
MSCI Emerging Markets Index
7.1
28.7
14.0
4.9
15.9
2.4
-44.5
27.2
14.1
-15.1
16.0
4.1
28.0
10.9
4.5
15.8
-2.6
-45.1
26.5
13.3
-15.6
12.5
3.3
2.0
2.7
3.1
4.3
-12.2
-47.1
2.3
3.7
-17.1
2.1
BofA Merrill Lynch 1-Year US Treasury Note Index Citigroup World Government Bond Index 1-5
Years2
Barclays Treasury Bond Index 1-5 Years
3.3
Lowest
1.9
1.3
2.4
4.1
-17.6
-53.1
0.8
2.0
-18.4
0.9
Balanced 60/40 Allocation
2.2
Returns
1.5
0.8
1.3
3.8
-18.4
-53.3
0.2
0.8
-19.9
0.2
1: ex utilities 2: hedged Annualized return is the ten year period 2003-2012. Please see page 36 in the Appendix for Hypothetical Balanced 60/40 Allocation information. In US dollars. The performance information for the Balanced 60/40 Allocation is based on performance of indexes with model/back-tested asset allocations and assumes all strategies have been rebalanced monthly. The allocation’s performance reflects the reinvestment of dividends and other earnings, and is gross of fees. The performance was achieved with the benefit of hindsight; it does not represent actual investment strategies. There are limitations inherent in model allocations. In particular, model performance may not reflect the impact that economic and market factors may have had on the advisor’s decision making if the advisor were actually managing client money. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results. Sources: The S&P data are provided by Standard & Poor's Index Services Group; Fama/French and multifactor data provided by Fama/French; Dow Jones data provided by Dow Jones Indexes; Dimensional Index data compiled by Dimensional; MSCI data copyright MSCI 2012, all rights reserved; The Merrill Lynch Indices are used with permission; copyright 2012 Merrill Lynch, Pierce, Fenner & Smith Incorporated; all rights reserved; Barclays indices copyright Barclays 2013; Citigroup bond indices copyright 2012 by Citigroup.
22
Appendix
Domestic Equity Regression Report: March 2000 – March 2014 AMERICAN FUNDS HOLDINGS 1. American Funds Washington Mutual 2. American Funds Investment Co. of America 3. American Funds American Mutual 4. American Funds Growth Fund of America 5. American Funds Fundamental Investors 6. American Funds AMCAP 7. American Funds New Economy DIMENSIONAL HOLDINGS Dimensional Large Cap Value Dimensional Large Company Dimensional Micro Cap Dimensional Small Cap Dimensional Small Cap Value Dimensional Targeted Value INDEXES CRSP Market Index S&P 500 Index Russell 1000 Index Russell 1000 Value Index Russell 1000 Growth Index Russell 2000 Index Russell 2000 Value Index Russell 2000 Growth Index
Expected Premium
Alpha (α)
t (α)
MARKET ()
t ()
SIZE (SmB) t (SmB)
PRICE (HmL) t (HmL)
-0.58 -0.87 -1.30 -0.59 0.09 -0.10 0.27
0.13 0.08 0.19 0.09 0.13 0.10 0.04
1.48 1.24 2.33 1.13 1.40 1.24 0.38
0.84 0.85 0.74 0.98 0.96 0.92 1.08
44.16 62.01 41.42 52.77 46.84 51.64 42.74
-0.25 -0.14 -0.17 0.03 -0.09 0.02 0.10
-8.48 -6.66 -6.02 1.09 -2.77 0.66 2.59
0.33 0.17 0.30 -0.11 0.14 0.10 -0.15
3.66 -0.45 4.57 4.56 6.39 6.16
0.07 0.00 0.00 0.02 0.05 0.15
0.73 -0.09 0.05 0.29 0.58 1.20
1.09 1.00 0.99 1.03 1.04 1.08
48.03 166.79 55.81 81.15 53.87 39.23
-0.05 -0.17 0.96 0.81 0.81 0.52
-1.42 -18.52 34.99 41.25 27.14 12.16
-0.05 -0.44 -0.23 1.14 -1.64 4.13 5.04 3.19
0.01 0.00 0.01 0.02 0.01 -0.13 -0.03 -0.19
3.01 0.01 0.77 0.39 0.21 -1.80 -0.32 -1.94
1.00 1366.88 1.00 164.44 1.01 240.05 0.96 69.70 1.07 75.79 1.00 64.01 0.91 43.69 1.11 52.36
0.00 -0.17 -0.13 -0.17 -0.13 0.78 0.66 0.83
-2.68 -18.02 -20.21 -8.10 -6.07 32.30 20.45 25.38
s (e)
Adj. R2
12.43 8.79 12.00 -4.06 4.85 3.80 -4.34
1.09 0.79 1.02 1.06 1.18 1.02 1.45
0.93 0.96 0.92 0.95 0.93 0.95 0.93
0.61 0.04 0.24 0.29 0.62 0.73
19.17 4.63 9.48 16.03 22.78 18.69
1.30 0.34 1.02 0.73 1.11 1.58
0.94 0.99 0.97 0.99 0.97 0.93
0.00 0.04 0.03 0.42 -0.36 0.27 0.68 -0.14
-2.31 4.47 5.24 21.37 -17.83 12.15 23.18 -4.58
0.04 0.35 0.24 0.79 0.81 0.89 1.20 1.21
1.00 0.99 1.00 0.97 0.98 0.98 0.95 0.97
Highlighted boxes indicate significant results (t-stat above/below ±2). Expected premium over the market computed using historical research premiums (1927 – 2013): Market, 8.35%; Size, 3.58%; Price 4.99%. Expected premium is not a guarantee of future return. The performance information for the Hypothetical Allocation is based on performance of funds with model/back-tested asset allocations and assumes all strategies have been rebalanced monthly. The allocations’ performance reflects the reinvestment of dividends and other earnings, and is net of fees for the allocations. The performance was achieved with the benefit of hindsight; it does not represent actual investment strategies. There are limitations inherent in model allocations. In particular, model performance may not reflect the impact that economic and market factors may have had on the advisor’s decision making if the advisor were actually managing client money. The indices are not available for direct investment; therefore their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is no guarantee of future results, and there is always the risk that an investor may lose money. Sources: Dimensional Fund Advisors for Dimensional funds; The S&P data are provided by Standard & Poor's Index Services Group; Russell data copyright © Russell Investment Group 1995-2014, all rights reserved; CRSP data provided by the Center for Research in Security Prices, University of Chicago; Mutual fund universe statistical data provided by Morningstar, Inc.
24
Hypothetical Balanced 60/40 Allocation
WEIGHT (%)
Index DOMESTIC
36.0
S&P 500 Index Fama/French US Large Value
12.0 Index1
12.0
Fama/French US Small Cap Index
6.0
Fama/French US Small Value Index1
6.0
INTERNATIONAL DEVELOPED
12.0
Fama/French International Value Index
6.0
Dimensional International Small Cap Index
3.0
Dimensional International Small Cap Value Index
3.0
EMERGING MARKETS
6.0
MSCI Emerging Markets Index
6.0
REAL ESTATE
6.0
Dow Jones US Select REIT Index
6.0
FIXED INCOME
40.0
Merrill Lynch 1-Year US Treasury Note Index
13.4
Barclays Capital Treasury Bond Index 1-5 Years Citigroup World Government Bond Index 1-5
1: ex utilities 2: hedged Hypothetical Balanced 60/40 Allocation is for illustrative purposes only.
Years2
13.3 13.3
25
Index Descriptions Dimensional US Small Low Profitability Index was created by Dimensional in January 2013 and represents an index consisting of US small cap companies. It is compiled by Dimensional. Small is defined as the bottom 10% of the US total market capitalization. Within small cap companies, Dimensional sorts stocks into three profitability groups from high to low. Each group represents 1/3 of the market cap of small caps. The index represents the returns of the low profitability group. It is rebalanced once per year. Dimensional US Small High Profitability Index was created by Dimensional in January 2013 and represents an index consisting of US small cap companies. It is compiled by Dimensional. Small is defined as the bottom 10% of the US total market capitalization. Within small cap companies, Dimensional sorts stocks into three profitability groups from high to low. Each group represents 1/3 of the market cap of small caps. The index represents the returns of the high profitability group. It is rebalanced once per year. Dimensional US Large Low Profitability Index was created by Dimensional in January 2013 and represents an index consisting of US large cap companies. It is compiled by Dimensional. Large is defined as the top 90% of the US total market capitalization. Within large cap companies, Dimensional sorts stocks into three profitability groups from high to low. Each group represents 1/3 of the market cap of large caps. The index represents the returns of the low profitability group. It is rebalanced once per year. Dimensional US Large High Profitability Index was created by Dimensional in January 2013 and represents an index consisting of US large cap companies. It is compiled by Dimensional. Large is defined as the top 90% of the US total market capitalization. Within large cap companies, Dimensional sorts stocks into three profitability groups from high to low. Each group represents 1/3 of the market cap of large caps. The index represents the returns of the high profitability group. It is rebalanced once per year.
Dimensional International Small Cap Index was created in 2004 and is compiled by Dimensional. The bottom 10% of market capitalization is included from each Country. Countries are market cap weighted subject to a 50% cap. Before 1970, the index is 50% UK and 50% Japan. Dimensional International Low Profitability Index was created by Dimensional in January 2013 and represents a portfolio consisting of non-US Developed companies. It is compiled by Dimensional. Dimensional sorts stocks into three profitability groups from high to low (each representing one-third of the market capitalization). The index represents the returns of the low-profitability group. The index is rebalanced twice per year. Dimensional International High Profitability Index was created by Dimensional in January 2013 and represents a portfolio consisting of non-US Developed companies. It is compiled by Dimensional. Dimensional sorts stocks into three profitability groups from high to low (each representing one-third of the market capitalization). The index represents the returns of the high-profitability group. The index is rebalanced twice per year. Dimensional Emerging Markets Low Profitability Index was created by Dimensional in April 2013 and represents a portfolio consisting of emerging markets companies and is compiled by Dimensional. Dimensional sorts stocks into three profitability groups from high to low(each representing one-third of the market capitalization). The index represents the returns of the low profitability group. It is rebalanced twice per year. Dimensional Emerging Markets High Profitability Index was created by Dimensional in April 2013 and represents a portfolio consisting of emerging markets companies and is compiled by Dimensional. Dimensional sorts stocks into three profitability groups from high to low (each representing one-third of the market capitalization). The index represents the returns of the high profitability group. It is rebalanced twice per year.
The Dimensional Indices have been retrospectively calculated by Dimensional Fund Advisors LP and did not exist prior to their index inceptions dates. Accordingly, the results shown during the periods prior to each Index’s index inception date do not represent actual returns of the Index. Other periods selected may have different results, including losses. Backtested index performance is hypothetical and is provided for informational purposes only to indicate historical performance had the index been calculated over the relevant time periods. Backtested performance results assume the reinvestment of dividends and capital gains. Methodology used for computing profitability premiums: Dimensional controls for relative price (BtM) and size (market cap) when computing the annualized compound returns for high and low profitability stocks in US and non-US developed markets and controls only for relative price in emerging markets. Profitability is measured as operating income before depreciation and amortization minus interest expense, scaled by book. Dimensional Index Data compiled by Dimensional from CRSP, Compustat, and Bloomberg.
26
Index Descriptions Fama/French US Large Growth Research Index: Provided by Fama/French from CRSP securities data. Includes the upper-half range in market cap and the lower 30% in book-to-market of NYSE securities (plus NYSE Amex equivalents since July 1962 and Nasdaq equivalents since 1973). Fama/French US Large Value Research Index: Provided by Fama/French from CRSP securities data. Includes the upper-half range in market cap and the upper 30% in book-to-market of NYSE securities (plus NYSE Amex equivalents since July 1962 and Nasdaq equivalents since 1973). Fama/French US Small Growth Research Index: Provided by Fama/French from CRSP securities data. Includes the lower-half range in market cap and the lower 30% in book-to-market of NYSE securities (plus NYSE Amex equivalents since July 1962 and Nasdaq equivalents since 1973). Fama/French US Small Value Research Index: Provided by Fama/French from CRSP securities data. Includes the lower-half range in market cap and the upper 30% in book-to-market of NYSE securities (plus NYSE Amex equivalents since July 1962 and Nasdaq equivalents since 1973). Fama/French International Growth Index: 2008–present: Provided by Fama/French from Bloomberg securities data. Simulated strategy of MSCI EAFE countries in the lower 30% book-to-market range. 1975–2007: Provided by Fama/French from MSCI securities data.
Fama/French Emerging Markets Growth Index : 2009–present: Provided by Fama/French from Bloomberg securities data. Simulated strategy using IFC investable universe countries. Companies in the lower 30% book-to-market range; companies weighted by float-adjusted market cap; countries weighted by country float-adjusted market cap; rebalanced monthly. 1989–2008: Provided by Fama/French from IFC securities data. IFC data provided by International Finance Corporation. Fama/French Emerging Markets Value Index: 2009–present: Provided by Fama/French from Bloomberg securities data. Simulated strategy using IFC investable universe countries. Companies in the upper 30% book-to-market range; companies weighted by float-adjusted market cap; countries weighted by country float-adjusted market cap; rebalanced monthly. 1989–2008: Provided by Fama/French from IFC securities data. IFC data provided by International Finance Corporation. Fama/French Emerging Markets Small Cap Index: 2009–present: Provided by Fama/French from Bloomberg securities data. Simulated strategy using IFC investable universe countries. Companies in the bottom 30% of aggregate market cap; companies weighted by float-adjusted market cap; countries weighted by country float-adjusted market cap; rebalanced monthly. 1989–2008: Provided by Fama/French from IFC securities data. IFC data provided by International Finance Corporation.
Fama/French International Value Index: 2008–present: Provided by Fama/French from Bloomberg securities data. Simulated strategy of MSCI EAFE countries in the upper 30% book-to-market range. 1975–2007: Provided by Fama/French from MSCI securities data.
The results shown during the periods prior to each Index’s index inception date do not represent actual returns of the Index. Other periods selected may have different results, including losses. Backtested index performance is hypothetical and is provided for informational purposes only to indicate historical performance had the index been calculated over the relevant time periods. Backtested performance results assume the reinvestment of dividends and capital gains.
27
Standardized Performance Data & Disclosures Performance data shown represents past performance. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. To obtain performance data current to the most recent month end, access our website at www.dimensional.com. Consider the investment objectives, risks, and charges and expenses of the Dimensional funds carefully before investing. For this and other information about the Dimensional funds, please read the prospectus carefully before investing. Prospectuses are available by calling Dimensional Fund Advisors collect at (512) 306–7400 or at www.dimensional.com. Dimensional funds are distributed by DFA Securities LLC. Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.
Risks include loss of principal and fluctuating value. Investment value will fluctuate, and shares, when redeemed, may be worth more or less than original cost. Small and micro cap securities are subject to greater volatility than those in other asset categories. International and emerging markets investing involves special risks such as currency fluctuation and political instability. Investing in emerging markets may accentuate these risks. Sector-specific investments focus on a specific segment of the market, which can increase investment risks. Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed income investments are subject to various other risks, including changes in credit quality, liquidity, prepayments, call risk and other factors. Municipal securities are subject to the risks of adverse economic and regulatory changes in their issuing states. Real estate investment risks include changes in real estate values and property taxes, interest rates, cash flow of underlying real estate assets, supply and demand, and the management skill and creditworthiness of the issuer. Sustainability funds use environmental and social screens that may limit investment opportunities for the fund. Commodities include increased risks, such as political, economic, and currency instability, and may not be suitable for all investors. The Portfolio may be more volatile than a diversified fund because the Portfolio invests in a smaller number of issuers and commodity sectors. The fund prospectuses contain more information about investment risks. 28
#28230-0912
Standardized Performance Data & Disclosures As of March 31, 2014 Average Annual Total Returns (%) US Equity Portfolios US Core Equity 1 Portfolio2 US Core Equity 2 Portfolio2 US Vector Equity Portfolio2 US Micro Cap Portfolio US Small Cap Portfolio US Small Cap Value Portfolio
Net Expense Ratio1 (%)
Total (Gross) Expense Ratio1 (%)
Management Fee
Inception Date
Symbol
1 Year
5 Years
10 Years
Since Inception
DFEOX DFQTX DFVEX DFSCX DFSTX DFSVX
24.69 25.24 26.27 30.20 27.45 26.69
23.27 24.05 25.36 27.32 27.71 27.98
— — — 8.67 9.61 9.37
8.12 8.09 8.18 12.50 11.11 12.80
0.19 0.22 0.32 0.52 0.37 0.52
0.19 0.22 0.32 0.52 0.37 0.52
0.17 0.20 0.30 0.50 0.35 0.50
9/15/2005 9/15/2005 12/30/2005 12/23/1981 3/19/1992 3/2/1993
US Small Cap Growth Portfolio2 US Targeted Value Portfolio2 US Large Cap Value Portfolio US Large Cap Growth Portfolio2 US Large Company Portfolio2,3 Enhanced US Large Company Portfolio
DSCGX DFFVX DFLVX DUSLX DFUSX DFELX
27.17 28.26 25.61 22.69 21.78 21.68
— 27.29 25.95 — 21.08 21.89
— 9.90 8.63 — 7.43 7.34
32.15 12.98 10.48 26.28 4.58 8.13
0.40 0.37 0.27 0.20 0.08 0.24
0.50 0.37 0.27 0.29 0.09 0.24
0.35 0.35 0.25 0.17 0.06 0.20
12/20/2012 2/23/2000 2/19/1993 12/20/2012 9/23/1999 7/2/1996
Non-US Equity Portfolios International Core Equity Portfolio2 International Vector Equity Portfolio2 International Small Company Portfolio2 International Small Cap Value Portfolio International Small Cap Growth Portfolio2 International Value Portfolio International Large Cap Growth Portfolio2 Large Cap International Portfolio Emerging Markets Core Equity Portfolio2 Emerging Markets Small Cap Portfolio Emerging Markets Value Portfolio Emerging Markets Portfolio World ex US Value Portfolio2 World ex US Targeted Value Portfolio 2 World ex US Core Equity Portfolio2
DFIEX DFVQX DFISX DISVX DISMX DFIVX DILRX DFALX DFCEX DEMSX DFEVX DFEMX DFWVX DWUSX DFWIX
20.70 22.31 25.03 30.16 21.84 22.24 19.08 17.01 -1.18 -0.43 -3.54 -1.28 16.58 18.85 —
18.44 19.55 21.37 21.88 — 17.28 — 15.86 16.67 20.97 15.31 15.03 — — —
— — 9.41 10.13 — 7.41 — 6.67 — 12.57 11.74 10.84 — — —
6.07 6.71 7.75 8.51 24.11 7.20 18.72 6.24 9.83 12.98 11.92 7.61 8.37 23.07 13.09
0.39 0.51 0.54 0.69 0.55 0.43 0.30 0.29 0.63 0.75 0.57 0.57 0.60 0.79 0.47
0.39 0.51 0.54 0.69 1.00 0.43 0.65 0.29 0.63 0.75 0.57 0.57 0.76 1.27 0.97
0.35 0.45 0.40 0.65 0.50 0.40 0.25 0.25 0.55 0.65 0.50 0.50 0.47 0.58 0.40
9/15/2005 8/14/2008 9/30/1996 12/29/1994 12/20/2012 2/15/1994 12/20/2012 7/17/1991 4/5/2005 3/5/1998 4/1/1998 4/25/1994 8/23/2010 11/1/2012 4/9/2013
Global Portfolios 2 Global Allocation 25/75 Portfolio 2 Global Allocation 60/40 Portfolio 2 Global Equity Portfolio Selectively Hedged Global Equity Portfolio2
DGTSX DGSIX DGEIX DSHGX
4.50 12.31 21.23 18.05
7.89 14.91 21.55 —
4.76 6.72 8.21 —
4.93 6.95 8.68 18.08
0.27 0.29 0.31 0.40
0.44 0.52 0.61 0.72
0.20 0.25 0.30 0.30
12/24/2003 12/24/2003 12/24/2003 11/14/2011
1. Actual fees as of October 31, 2013. 2. The net expense ratio applies to the indicated funds and takes into account a contractual management fee waiver and expense reimbursement agreement that currently is scheduled to remain in place through 2/28/2015. Please refer to the prospectus for more complete information on advisory fees, expense reimbursements, and other expenses. 3. Effective August 1, 2013, the administrative fee payable by the Portfolio to the Advisor decreased from 0.05% to 0.035% of the Portfolio’s average daily net assets on an annualized basis. As a result, the Total Operating Expense Ratio has been adjusted to reflect the estimated management fee to be paid by the portfolio through 10/31/2014. The Advisor has contractually agreed to reduce the fee waiver expense limit from 0.10% to 0.08% of the Portfolio’s average daily net assets on an annualized basis. #28230-0912
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Standardized Performance Data & Disclosures As of March 31, 2014 Average Annual Total Returns (%) Tax Managed Portfolios3 Tax-Managed US Small Cap Portfolio After Taxes on Distributions After Taxes on Distributions and Sale of Fund Shares Tax-Managed US Targeted Value Portfolio After Taxes on Distributions After Taxes on Distributions and Sale of Fund Shares Tax-Managed US Equity Portfolio2 After Taxes on Distributions After Taxes on Distributions and Sale of Fund Shares Tax-Managed US Marketwide Value Portfolio After Taxes on Distributions After Taxes on Distributions and Sale of Fund Shares Tax-Managed International Value Portfolio After Taxes on Distributions After Taxes on Distributions and Sale of Fund Shares TA US Core Equity 2 Portfolio2,3 After Taxes on Distributions After Taxes on Distributions and Sale of Fund Shares TA World ex US Core Equity Portfolio2,3 After Taxes on Distributions After Taxes on Distributions and Sale of Fund Shares
Net Expense Ratio1 (%)
Total (Gross) Expense Ratio1 (%)
Management Fee
Inception Date
Symbol
1 Year
5 Years
10 Years
Since Inception
DFTSX
28.40 28.16 16.20
25.94 25.76 21.53
8.42 8.16 6.89
10.14 9.93 8.66
0.52
0.52
0.50
12/15/1998
DTMVX
27.75 26.70 16.42
27.73 27.30 23.10
8.71 8.05 7.14
11.09 10.59 9.52
0.44
0.44
0.42
12/11/1998
DTMEX
22.92 22.36 13.25
21.11 20.72 17.31
7.64 7.34 6.21
7.49 7.21 6.16
0.22
0.22
0.20
9/25/2001
DTMMX
24.72 24.22 14.23 21.73 20.35 12.94 25.06 24.27 14.63 14.81 14.05 8.96
26.33 25.97 21.85 16.97 16.48 13.99 23.85 23.46 19.69 17.78 17.39 14.64
8.89 8.58 7.28 7.55 6.93 6.48 — — — — — —
7.42 7.10 6.11 6.89 6.35 5.88 6.68 6.36 5.26 3.21 2.86 2.62
0.37
0.37
0.35
12/14/1998
0.53
0.53
0.50
4/16/1999
0.24
0.24
0.22
10/4/2007
0.46
0.46
0.40
3/6/2008
DTMIX
DFTCX
DFTWX
Real Estate Portfolios Real Estate Securities Portfolio2 International Real Estate Securities Portfolio2 Global Real Estate Securities Portfolio2
DFREX DFITX DFGEX
3.92 -0.23 2.22
28.51 20.57 24.85
8.05 — —
10.18 -1.26 4.19
0.18 0.39 0.32
0.19 0.39 0.55
0.17 0.35 0.27
1/5/1993 3/1/2007 6/4/2008
Social and Sustainability Portfolios US Sustainability Core 1 Portfolio2 International Sustainability Core 1 Portfolio2 US Social Core Equity 2 Portfolio2 International Social Core Equity Portfolio2 Emerging Markets Social Core Equity Portfolio2
DFSIX DFSPX DFUEX DSCLX DFESX
24.41 19.41 24.04 20.29 -1.84
23.29 17.23 23.75 — 16.41
— — — — —
9.74 2.72 5.82 21.47 6.83
0.33 0.52 0.30 0.60 0.66
0.33 0.50 0.30 0.68 0.66
0.29 0.42 0.25 0.37 0.55
3/12/2008 3/12/2008 10/1/2007 11/1/2012 8/31/2006
1. Actual fees as of October 31, 2013. 2. The net expense ratio applies to the indicated funds and takes into account a contractual management fee waiver and expense reimbursement agreement that currently is scheduled to remain in place through 2/28/2015. Please refer to the prospectus for more complete information on advisory fees, expense reimbursements, and other expenses. 3. Assumed highest marginal tax rate in effect for capital gains and ordinary income. Income from funds managed for tax efficiency may be subject to an alternative minimum tax and/or any applicable state and local taxes. #28230-0912
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Standardized Performance Data & Disclosures 10 Years
Since Inception
Net Expense Ratio1 (%)
Total (Gross) Expense Ratio1 (%)
Management Fee
Inception Date
0.94 1.18 2.15 3.80 3.69 5.12 1.41 — 1.59 — 4.07 — 4.02 — —
2.16 2.16 2.88 3.38 4.45 — 1.94 — — — — — — — —
5.12 3.60 5.53 5.78 6.73 5.34 2.03 0.48 2.16 2.24 1.71 3.57 4.02 4.38 4.21
0.17 0.18 0.19 0.28 0.12 0.12 0.22 0.23 0.23 0.23 0.18 0.20 0.22 0.22 0.22
0.17 0.18 0.19 0.28 0.12 0.12 0.23 0.27 0.24 0.26 0.18 0.23 0.23 0.23 0.41
0.15 0.15 0.17 0.25 0.10 0.10 0.20 0.20 0.20 0.20 0.15 0.18 0.20 0.20 0.20
7/25/1983 2/9/1996 6/1/1987 11/6/1990 10/19/1990 9/18/2006 8/20/2002 3/1/2012 4/2/2007 11/29/2011 1/9/2008 12/6/2011 3/4/2009 7/20/2010 3/7/2011
—
—
-2.43
0.34
0.34
0.30
11/9/2010
As of March 31, 2014 Average Annual Total Returns (%)
Symbol
1 Year
5 Years
Fixed Income Portfolios One-Year Fixed Income Portfolio Two-Year Global Fixed Income Portfolio 2 Short-Term Government Portfolio Five-Year Global Fixed Income Portfolio Intermediate Government Fixed Income Portfolio 2 Inflation-Protected Securities Portfolio 2 Short-Term Municipal Bond Portfolio 2 Intermediate-Term Municipal Bond Portfolio 2 California Short-Term Municipal Bond Portfolio 2 California Intermediate-Term Municipal Bond Portfolio 2 Selectively Hedged Global Fixed Income Portfolio 2 World ex US Government Fixed Income Portfolio 2 Short-Term Extended Quality Portfolio 2 Intermediate-Term Extended Quality Portfolio 2 Investment Grade Portfolio
DFIHX DFGFX DFFGX DFGBX DFIGX DIPSX DFSMX DFTIX DFCMX DCIBX DFSHX DWFIX DFEQX DFTEX DFAPX
0.33 0.37 -0.19 0.02 -1.90 -7.31 0.40 -0.27 0.52 0.66 0.38 0.13 0.72 -0.75 -0.60
Commodities Portfolio Commodity Strategy Portfolio2
DCMSX
-0.32
1. Actual fees as of October 31, 2013. 2. The net expense ratio applies to the indicated funds and takes into account a contractual management fee waiver and expense reimbursement agreement that currently is scheduled to remain in place through 2/28/2015. Please refer to the prospectus for more complete information on advisory fees, expense reimbursements, and other expenses. #28230-0912
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