MASTER DFA AUSTRALIA LTD.
CONSULTING SERVICES AGREEMENT
This Agreement made by and between Dimensional Fund Advisors Inc., a
Delaware corporation ("DFA"), and DFA Australia Ltd., a company organized under
the laws of New South Wales, Australia ("DFAA").
W I T N E S S E T H:
WHEREAS, DFAA is engaged in the business of investment management and
administrative and trading services primarily in Asia (including Japan),
Australia and New Zealand (collectively, the "Pacific Rim countries");
WHEREAS, DFAA presently acts as sub-advisor to DFA with respect to
certain DFA investment products (the "Sub-Advisory Products") pursuant to
certain sub-advisory agreements (the "Sub-Advisory Agreements") dated as of
August 7, 1996 and also provides certain trading services for other products
to DFA pursuant to a Service Agreement dated as of December 1 1993, as
amended on December 1, 1994 (the "Service Agreement");
WHEREAS, DFA wishes to continue to engage DFAA to provide various
non-advisory services relating to certain international investment products
other than the Sub-Advisory Products managed or sponsored by DFA as set forth
in Schedule A hereto (the "Investment Products") which schedule may be
amended from time to time; and
WHEREAS, DFA wishes to modify certain provisions of the Service
Agreement further defining the overall duties and responsibilities of the
parties, and DFAA desires to so act and to provide such services as agreed to
from time to time pursuant to a consulting services agreement; and
WHEREAS, DFA and certain of its officers and directors own 100% of the
outstanding shares of DFAA;
NOW, THEREFORE, in consideration of the premises and the mutual
promises set forth herein, the parties hereto agree as follows:
1. TERMINATION OF SERVICES AGREEMENT. The parties hereto agree that
the Service Agreement is hereby terminated and shall have no further effect
and the duties and responsibilities of DFA and DFAA shall be as set forth
hereinafter.
2. APPOINTMENT. DFA hereby appoints DFAA, and DFAA hereby accepts
such appointment, to act on behalf of DFA with respect to such matters and to
provide such services with respect to the Investment Products as may from
time to time be agreed between the parties.
3. SERVICES TO BE PERFORMED. DFA hereby employs DFAA, subject to
supervision by DFA, to furnish the following services for the Investment
Products:
a. Execution of buy and sell programs generated by DFA and
transmitted to DFAA;
b. Selection of brokers or dealers to execute purchases and
sales of eligible securities for the Investment Products; including the
determination of the best and most efficient means of purchasing and selling
such portfolio securities; and the allocation of trades among brokers and
dealers, subject to constraints with respect to affiliated brokers and
dealers subject to Section 17 of the Investment Company Act of 1940. In
carrying out its obligations hereunder, DFAA will act with a view to the
objectives of each Investment Product as set forth in the respective
prospectus and otherwise communicated by DFA to DFAA, including the
objectives of receiving best price and execution for portfolio transactions
and causing as little price fluctuation as possible.
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c. DFAA may execute orders from DFA for fewer or more shares
than set forth in the buy or sell programs initiated by DFA, based on market
conditions and other factors, provided that such variances from the execution
lists are within parameters established by DFA from time to time or in
specific cases.
d. DFAA shall report the results of all trading activities, and
all other information relating to portfolio transactions for the Investment
Products, at such time and in such format as DFA may request, including
reporting to the custodians of the Investment Products, as appropriate.
e. DFAA shall review and coordinate its agency trading and
execution strategies, practices and results with DFA as frequently as
reasonably necessary.
f. DFAA may also from time to time, monitor cash balances for
the Investment products; review and bid on blocks of securities within
parameters established by DFA; handle corporate actions and vote proxies for
securities held in the Investment Products as directed by DFA; review
companies and suggest status codes; and provide DFA with data concerning
equity markets in the various countries in which the Investment Products are
invested.
g. DFAA shall furnish only statistical and other factual
information and advice regarding economic factors and trends, and it is
neither intended nor required that DFAA shall furnish advice or make
recommendations regarding the purchase or sale of securities.
These duties and responsibilities of DFAA, taken individually or
collectively, shall not constitute, or be construed as constituting,
investment advice.
4. DUTIES AND RESPONSIBILITIES. DFAA shall perform its obligations
and discharge its duties hereunder, and under any or all other agreements
that DFAA may enter into with DFA
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from time to time, (i) solely in the best interests of DFA and the clients of
DFA with respect to or in connection with which DFAA may from time to time
provide investment or other services, and (ii) with the care, skill, prudence
and diligence that a prudent man experienced in such matters would use in
providing similar services in like circumstances. Except as expressly
provided herein or directed by DFA from time to time in writing, DFAA shall
have no authority, express or implied, to bind DFA to any contract or
commitment, to otherwise act on behalf of DFA, or to hold itself out as an
agent of DFA.
5. CONDUCT OF BUSINESS. DFAA shall at all times conduct its
business in compliance with any and all applicable laws, rules and
regulations including, without limitation, the applicable laws, rules and
regulations of the United States and Australia and any governmental agency,
regulatory authority or governing body thereof.
6. REPRESENTATIONS OF DFAA. DFAA hereby represents and warrants
that it is duly licensed under the securities laws of Australia and that it
is duly licensed under the securities laws of the United States to engage in
the activities in which DFAA is engaged, including without limitation
registration as an investment adviser with the United States Securities and
Exchange Commission ("SEC"). DFAA hereby covenants to maintain in good
standing all licenses and registrations required for the conduct of its
business and performance of its duties and obligations hereunder and under
any and all agreements entered into with DFA from time to time. In addition,
DFAA shall provide DFA as promptly as practicable a copy of any and all
amendments filed with the SEC at the same time any such amendments are filed.
7. COMPENSATION. During the duration of this Agreement, in
consideration of the portfolio management and other services to be performed
by DFAA hereunder and as agreed between the parties from time to time, DFA
shall pay DFAA as follows:
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a. A fee in an amount equal to 110% of pretax annual operating
expenses of DFAA inclusive of fees to be paid to DFAA pursuant to the
Subadvisory Agreements subject to the following adjustment;
b. The fee due to DFAA pursuant to Section 7.a. hereof shall be
reduced by an amount equal to the revenue that DFAA earns for its investment
advisory, administrative and similar services that it performs for products
that it sponsors in Australia other than the Investment Products ("DFAA
Products").
c. Fees due from DFA to DFAA shall be remitted not less than
quarterly.
8. DIRECTION BY DFA. In connection with any services to be provided
hereunder to be rendered by DFAA from time to time, DFAA shall at all times
act in accordance with the instructions of DFA as communicated from time to
time and shall prepare and provide all information and reports reasonably
requested by DFA. Attached hereto as Schedule B is a description of the
reports currently required to be furnished to DFA by DFAA and those actions
for which DFAA must obtain specific approval by DFA, which Schedule B may be
amended from time to time by DFA in its sole discretion upon reasonable
notice to DFAA.
DFA shall use its best efforts to ensure that trustees, custodians,
subcustodians, subadvisors and administrative agents cooperate with DFAA thus
facilitating the provision of services by DFAA. DFA shall provide DFAA with
copies of regulatory filings made by DFA which are relevant to DFAA's agency
and subadvisory services. DFA shall also share with DFAA information which
DFA believes to be relevant to DFAA's services.
9. RECORDKEEPING AND RECORD RETENTION. DFAA shall maintain and
preserve in a safe and accessible place and shall afford representatives of
DFA access to all customer, corporate and other business records customarily
maintained by investment managers as they
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relate to DFAA's provision of agency and subadvisory services to DFA, all
records and reports required to be maintained by applicable laws, rules and
regulations, including, without limitation, the United States Investment
Advisers Act of 1940, and any and all such other records or reports as DFA
may from time to time reasonably require DFAA to prepare, including such
records and reports set forth on Schedule B hereto, as may be amended from
time to time by DFA in its sole discretion upon reasonable notice to DFAA.
Except as otherwise required by law or as otherwise agreed to by the
parties, all records and reports required to be prepared and preserved
hereunder shall be kept in a readily accessible place on DFAA's premises for
at least two years from the date of the record or report and in a reasonably
accessible place on or off DFAA's premises for at least four more years. If
records or reports are preserved in a form other than paper originals they
shall be kept in duplicate, stored separately, and DFAA shall maintain on its
premise a means of visual review and producing hard copies of such records
and reports. DFAA's obligation hereunder to maintain and preserve records
shall survive the termination of this Agreement.
10. INSPECTION AND EXAMINATION OF RECORDS. DFAA hereby acknowledges
that DFA has certain statutory obligations to supervise the activities of
DFAA relating to DFA portfolios and agrees to cooperate fully at all times to
afford DFA access to DFAA's books and records at anytime during normal
business hours, to answer any questions with respect to DFAA's operations,
and to regularly schedule and attend meetings as requested by DFA for
purposes of reviewing DFAA's performance under its agreements with DFA,
reviewing operational matters with trustees, custodians, subcustodians and
administrative agents. DFA or its agents or representatives may, from time
to time, visit DFA for the purpose of reviewing DFAA's operations as they
relate to the provision of agency and subadvisory services. DFA agrees to
use
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reasonable efforts to avoid causing any undue disruption to the conduct
of DFAA's day-to-day business affairs.
11. CONFIDENTIAL AND PROPRIETARY INFORMATION. Each party
acknowledges and agrees that any and all information emanating from the
other's business, in any form, is confidential and proprietary information.
Each party agrees that it will not, during or after the term of this
Agreement, permit the duplication or disclosure of any such confidential and
proprietary information to any person (other than an employee, agent or
representative of the other party who must have such information for the
performance of its obligations under its agreements with the other party)
except as required by law, unless such duplication, use or disclosure is
specifically authorized by the other party in writing. DFAA acknowledges and
agrees that all computer programs provided by DFA ("DFA Software"), including
all copyright rights therein, are owned by and are the property of DFA and
that DFAA is licensed hereby to use such DFA Software only for the terms of
this Agreement and one year thereafter. At the expiration or termination of
this Agreement, DFAA agrees to return all copies of the DFA Software to DFA
within one year unless otherwise agreed. DFAA may, with the written consent
of DFA which shall not be unreasonably withheld, substitute other computer
programs to perform the activities covered by this Agreement, provided such
programs produce information and reports comparable to those produced by the
DFA Software in a magnetic machine-readable form which is compatible with the
DFA Software.
12. ALLOCATION OF CLIENT TRANSACTIONS. DFA hereby acknowledges that
DFAA renders services to clients other than DFA and DFA portfolios, including
clients for which DFAA may purchase or sell the same securities as those that
may be listed from time to time on an approved buy/sell program for a DFA
portfolio. DFAA hereby acknowledges its fiduciary obligations to
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treat all clients on a fair and equitable basis when effecting securities
transactions in accordance with DFA's policies.
13. INDEMNIFICATION. DFAA shall indemnify and hold harmless DFA, its
officers and directors, from any and all losses, including reasonable
attorney's fees, incurred by DFA as a result of or arising out of any breach
by DFAA of its duties under this Agreement or any other agreement between DFA
and DFAA, any violation by DFAA of any provision of this Agreement or any
other agreement between DFA and DFAA, or any action of DFAA taken on behalf
of DFA or any DFA portfolio which falls outside the scope of express
authority granted hereunder or under any other agreement between DFA and DFAA.
Notwithstanding the foregoing, DFAA shall not be liable to DFA or any
DFA portfolio with respect to actions taken or not taken on behalf thereof if
DFAA has acted pursuant to and in strict compliance with express instructions
of DFA or failed to take an action which required specific approval or
direction by DFA in the absence of such approval or direction, and DFA agrees
to indemnify and hold harmless DFAA, its officers and directors, from any and
all losses, including reasonable attorney's fees, incurred by DFAA arising
out of any actions or omissions of DFAA made in accordance with the express
instructions of DFA or out of DFAA's failure to act with respect to a matter
which requires the specific approval or direction of DFA in the absence of
such approval or direction.
14. TERM. This Agreement shall be effective as of ---------, 1997
shall remain in effect until terminated as hereinafter provided. This
Agreement may be terminated by DFA or by DFAA at any time without penalty on
sixty (60) days' written notice to the other party hereto. Any fees owing to
DFAA pursuant to paragraph 5 hereof shall be pro rated to the date of
termination.
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15. NOTICE. Any notice or other communication required to be
delivered by a party to the other party to this Agreement, by this or any
other agreement between the parties, shall be in writing and shall be deemed
duly given upon delivery via facsimile transmission or overnight delivery by
Federal Express, DHL Worldwide, or such other courier having comparable
qualifications, to the following fax number or address or such other fax
number or address as shall be communicated to the other party from time to
time in accordance with the notice requirement thereof:
IF TO DFA:
Dimensional Fund Advisors Inc.
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx
Vice President
FAX: (000) 000-0000
IF TO DFAA:
XXX Xxxxxxxxx Xxx.
Xxxxx 0000 - Xxxxx 44,
Gateway
0 Xxxxxxxxx Xxxxx
Xxxxxx, XXX 0000
Attention: Xxxxxx Xxxx
Chief Operations Manager
FAX: (000) 000 0 000-0000
16. CHOICE OF LAW. This Agreement shall be administered and
construed under the laws of the State of California.
17. MISCELLANEOUS.
(a) This Agreement may be executed in two counterparts, each of
which shall be deemed an original and both of which together shall constitute
one agreement.
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(b) This Agreement may be amended from time to time by the
mutual agreement of the parties.
(c) The captions used herein are for reference purposes only and
shall not be construed to affect the meaning or interpretation of the
provisions of this Agreement.
(d) This Agreement may not be assigned by either party.
(e) In the event any provisions of this Agreement, including any
and all schedules or exhibits hereto as in effect from time to time, conflict
or are inconsistent with, rather than being supplemental to, any terms or
provisions of any other agreement to which DFA and DFAA are both parties,
such other agreement shall control.
IN WITNESS WHEREOF, DFA and DFAA have caused this Agreement to be
executed on this ----- day of ------------, 1997, by their respective
officers or representatives thereunto duly authorized.
DIMENSIONAL FUND ADVISORS, INC.
By:-------------------------------
Title:------------------------
DFA Australia Ltd.
By:-------------------------------
Title:------------------------
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SCHEDULE A
INVESTMENT PRODUCTS
The DFA Investment Trust Company
DFA International Value Series
Emerging Markets Small Cap Series
Emerging Markets Series
Tax-Managed U.S. Marketwide Value Series
DFA Investment Dimensions Group Inc.
DFA International Small Cap Value Portfolio
VA International Value Portfolio
Large Cap International Portfolio
Tax-Managed DFA International Value Portfolio
Dimensional Emerging Markets Fund Inc.
------
SCHEDULE B
DFA Australia Ltd. shall:
(a) On a weekly basis, provided to DFA (i) via an overnight delivery
service, FAA's entire database(s) (MAST.DB) for all portfolios and subtracts
("DFA portfolios") for which DFAA is acting as a subadvisor or agent pursuant
to agreements with DFA, and (ii) via facsimile transmission, cash sheets for
those DFA portfolios not administered by Provident Financial Processing
Corporation (or by such other custodian/administrative agent as DFA may
hereafter notify DFAA);
(b) Prior to execution of any buy/sell program, obtain approval of
the DFA Investment Committee after submission by DFAA of the proposed
program, including a statement of the assumptions used in generating the
original list of orders and the final list with brokers allocated;
(c) Before purchasing, for any DFA portfolio, securities of any
company not previously included on the appropriate buylist, obtain approval
of the DFA Investment Committee to add such company to the approved buy list;
any such request for approval of a new company shall be made by providing the
Investment Committee the following: (i) company name, (ii) sedol number,
(iii) local symbol, (iv) exchange, (v) current market price and (vi) number
of shares outstanding;
(d) Place buy and sell orders for execution on behalf of any DFA
portfolios only with those brokers approved for trading by the DFA Investment
Committee.
(e) Obtain approval of the DFA Investment Committee before permitting
any director or employee of DFAA to be directly involved with authorizing
trades, directing corporate actions or making comparable investment decisions
on behalf of DFA portfolios;
(f) Prior to the placement of any sell order on behalf of a DFA
portfolio, confirm with the appropriate custodian the availability of the
shares intended to be sold;
(g) On a monthly basis, reconcile all share positions and prices with
the appropriate custodian for each DFA portfolio; and
(h) Maintain appropriate back-ups of all systems and records and
notify DFA on a periodic basis of any changes to the system. DFAA shall, in
addition to any other required records or reports maintain the following:
(i) Buy/sell programs, all of which must be signed and dated by an
authorized person;
(ii) Documentation of all bids and offers that are not initiated by
DFAA (i.e., blocks), including the date, broker involved, name of the stock,
sedol or local symbol, bid/offer price and the number of shares; completed
trades must also be documented as to the time of the transaction, actual
shares completed and the allocation of those shares among portfolios;
(iii) A record of each brokerage order given by or on behalf of a DFA
portfolio for, or in connection with, the purchase or sale of securities,
whether executed or unexecuted, including the name of the broker, the name of
the person who placed the order, the terms and conditions of the order and,
if any modification or cancellation thereof, the time of entry or
cancellation, the price at which executed, and the time of receipt of report
of execution;
(iv) A record of all other portfolio purchases or sales (daily trade
logs and where applicable, broker confirmations) showing details comparable
to those described in (c) above;
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(v) Records documenting any voluntary decision or corporate actions;
(vi) Documentation of any proxy votes directed by DFAA, including the
name of the company, date voted and DFA portfolios involved.
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