MASTER DIMENSIONAL FUND ADVISORS LTD.
CONSULTING SERVICES AGREEMENT
This Agreement made by and between Dimensional Fund Advisors Inc., a
Delaware corporation ("DFA"), and Dimensional Fund Advisors Ltd., a company
organized under the laws of England ("DFAL").
W I T N E S S E T H:
WHEREAS, DFAL is (i) engaged in the business of investment management
and administrative and trading services primarily in the United Kingdom and
Europe (collectively, the "European countries") and (ii) regulated in the
conduct of its investment, administrative and trading business by the
Investment Management Regulatory Organization ("IMRO"), a self-regulatory
organization;
WHEREAS, DFAL 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 January 28, 1992, as
amended on September 16, 1992 (the "Service Agreement");
WHEREAS, DFA wishes to continue to engage DFAL 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 DFAL 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 owns 100% of the outstanding shares of DFAL;
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 DFAL shall be as set forth
hereinafter.
2. APPOINTMENT. DFA hereby appoints DFAL, and DFAL 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 DFAL, 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 DFAL;
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
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Section 17 of the Investment Company Act of 1940. In carrying out its
obligations hereunder, DFAL 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 DFAL, including the objectives of receiving best price
and execution for portfolio transactions and causing as little price
fluctuation as possible.
c. DFAL 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. DFAL 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. DFAL shall review and coordinate its agency trading and
execution strategies, practices and results with DFA as frequently as
reasonably necessary.
f. DFAL 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.
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g. DFAL shall furnish only statistical and other factual
information and advice regarding economic factors and trends, and it is
neither intended nor required that DFAL shall furnish advice or make
recommendations regarding the purchase or sale of securities.
These duties and responsibilities of DFAL, taken individually or
collectively, shall not constitute, or be construed as constituting,
investment advice.
4. DUTIES AND RESPONSIBILITIES. DFAL shall perform its obligations
and discharge its duties hereunder, and under any or all other agreements
that DFAL may enter into with DFA 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 DFAL 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, DFAL 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. DFAL 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 the United Kingdom and any governmental agency,
regulatory authority or governing body thereof.
6. REPRESENTATIONS OF DFAL. DFAL hereby represents and warrants that
it is regulated in the conduct of its investment, administrative and trading
business by IMRO and that it is duly licensed under the securities laws of
the United States to engage in the activities in
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which DFAL is engaged, including without limitation registration as an
investment adviser with the United States Securities and Exchange Commission
("SEC"). DFAL 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, DFAL shall provide DFA as
promptly as practicable copy of any and all amendments filed with the SEC at
the same time any such amendments are filed.
7. FEES. During the duration of this Agreement, in consideration of
the portfolio management and other services to be performed by DFAL hereunder
and as agreed between the parties from time to time, DFA shall pay DFAL a fee
in an amount equal to 110% of pretax annual operating expenses of DFAL
inclusive of fees to be paid to DFAL pursuant to the Subadvisory Agreements.
Fees due from DFA to DFAL shall be remitted not less than quarterly.
8. DIRECTION BY DFA. In connection with any services to be provided
hereunder to be rendered by DFAL from time to time, DFAL 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 DFAL and those actions
for which DFAL 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 DFAL.
DFA shall use its best efforts to ensure that trustees, custodians,
subcustodians, subadvisors and administrative agents cooperate with DFAL thus
facilitating the provision of
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services by DFAL. DFA shall provide DFAL with copies of regulatory filings
made by DFA which are relevant to DFAL's agency and subadvisory services.
DFA shall also share with DFAL information which DFA believes to be relevant
to DFAL's services.
9. RECORDKEEPING AND RECORD RETENTION. DFAL 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 relate to DFAL'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 DFAL 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 DFAL.
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 DFAL's premises for
at least two years from the date of the record or report and in a reasonably
accessible place on or off DFAL'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 DFAL shall maintain on its
premises a means of visual review and producing hard copies of such records
and reports. DFAL's obligation hereunder to maintain and preserve records
shall survive the termination of this Agreement.
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10. INSPECTION AND EXAMINATION OF RECORDS. DFAL hereby acknowledges
that DFA has certain statutory obligations to supervise the activities of
DFAL relating to DFA portfolios and agrees to cooperate fully at all times to
afford DFA access to DFAL's books and records at anytime during normal
business hours, to answer any questions with respect to DFAL's operations,
and to regularly schedule and attend meetings as requested by DFA for
purposes of reviewing DFAL'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 DFAL for the purpose of reviewing DFAL's operations as they
relate to the provision of agency and subadvisory services. DFA agrees to
use reasonable efforts to avoid causing any undue disruption to the conduct
of DFAL'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. DFAL 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 DFAL is licensed hereby to use such DFA
Software
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only for the terms of this Agreement and one year thereafter. At the
expiration or termination of this Agreement, DFAL agrees to return all copies
of the DFA Software to DFA within one year unless otherwise agreed. DFAL
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
DFAL renders services to clients other than DFA and DFA portfolios, including
clients for which DFAL 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. DFAL hereby acknowledges its fiduciary obligations to treat all
clients on a fair and equitable basis when effecting securities transactions
in accordance with DFA's policies.
13. COMPLAINTS. Complaints by DFA in its capacity as DFAL's customer and
concerning DFAL's performance of its duties should be directed to the Compliance
Officer of DFAL either orally or in writing, sent by facsimile or first class
mail to the address provided in Section 16 hereof. Complaints may also be made
directly to IMRO's Investment Ombudsman at the following address:
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IMRO
Lloyds Xxxxxxxx
0 Xxxxxxxxx Xxxxxx
Xxxxxx Xx 0XX
Xxxxxx Xxxxxxx
Tel: 0000 000 0000
Facsimile: 0171 680 0550
14. Indemnification. DFAL 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 DFAL of its duties under this Agreement or any other agreement between DFA
and DFAL, any violation by DFAL of any provision of this Agreement or any
other agreement between DFA and DFAL, or any action of DFAL 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 DFAL.
Notwithstanding the foregoing, DFAL shall not be liable to DFA or any DFA
portfolio with respect to actions taken or not taken on behalf thereof if DFAL
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 DFAL, its officers and directors, from any and all losses,
including reasonable attorney's fees, incurred by DFAL arising out of any
actions or omissions of DFAL made in accordance with the express instructions of
DFA or out of DFAL'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.
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15. 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 DFAL at any time without penalty on
sixty (60) days' written notice to the other party hereto. Any fees owing to
DFAL pursuant to Paragraph 5 hereof shall be pro rated to the date of
termination.
16. 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 DFAL:
Dimensional Fund Advisors Ltd.
00 Xxxxxxxx Xxxxxx
Xxxxxx X0X 0XX
Xxxxxxx
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Attention: Xxxxxxxx East
Compliance Office
FAX: (000) 00 000 000-0000
17. CHOICE OF LAW. This Agreement shall be administered and construed
under the laws of the State of California.
18. 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.
(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 DFAL are both parties,
such other agreement shall control.
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IN WITNESS WHEREOF, DFA and DFAL have caused this Agreement to be
executed on this ____ day of ________________, 1997, by their respective
officers or representatives thereunto duly authorized.
DIMENSION FUND ADVISORS INC.
By:_________________________________
Title:______________________________
DIMENSIONAL FUND ADVISORS 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
SCHEDULE B
Dimensional Fund Advisors Ltd. shall:
(a) On a weekly basis, provide to DFA (i) via an overnight delivery
service, DFAL's entire database(s) (MAST.DB) for all portfolios and subtrusts
("DFA portfolios") for which DFAL 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 PFPC Inc. (or by such other
custodian/administrative agent as DFA may hereafter notify DFAL);
(b) Prior to execution of any buy/sell program, obtain approval of the
DFA Investment Committee after submission by DFAL 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 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 DFAL 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. DFAL 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
DFAL (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;
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(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;
(v) Records documenting any voluntary decision or corporate actions;
(vi) Documentation of any proxy votes directed by DFAL, including the
name of the company, date voted and DFA portfolios involved.
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