It is proposed that the filing will go effective on March 20, 2022 pursuant to Rule 488 under the Securities Act of 1933.
No filing fee is due because Registrant is relying on Section 24(f) of the Investment Company Act of 1940, as amended.
Dimensional Investment Group Inc.
6300 Bee Cave Road, Building One
Austin, TX 78746
March [20], 2022
Dear Shareholder:
As an investor in the Tax-Managed U.S. Marketwide Value Portfolio II (the “Tax-Managed Portfolio”), we are pleased to inform you of our plan to convert the mutual fund into
an exchange-traded fund (“ETF”), which will continue to be managed by Dimensional Fund Advisors LP (“Dimensional”).
Pursuant to an Agreement and Plan of Reorganization, the Tax-Managed Portfolio will be converted into an ETF through the reorganization of the fund into a newly-created
series of Dimensional ETF Trust that has the same investment objective and investment strategies as the mutual fund. The reorganization is expected to take place on or about May 6, 2022 and is structured to be a tax-free reorganization under the
U.S. Internal Revenue Code. In connection with the reorganization, your shares of the mutual fund will be exchanged for shares of equal value of the new ETF. Interests of shareholders will not be diluted as a result of the reorganization.
We believe the reorganization will result in multiple benefits for investors. The Board overseeing the Tax-Managed Portfolio, which also serves as the Board to the ETF,
has approved the reorganization based on its determination that it is in the best interest of the shareholders. Expected benefits include:
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1)
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Improved Efficiency: Converting to an ETF structure can provide
benefits with respect to the management of capital gains distributions allowing for potentially greater tax efficiency for shareholders.
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2)
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Same Fees: The ETF will have the same management fee and total
expense ratio as the mutual fund.
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3)
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Tax-Free Reorganization: Shareholders will not recognize a taxable gain (or loss) on the
conversion of mutual fund to ETF shares for U.S. tax purposes. An exception, albeit small, regarding fractional mutual fund shares is explained in later sections of this document.
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Shareholders of the Tax-Managed Portfolio should know the options available to them with respect to the reorganization but should also consider possible tax consequences of
options outside of the tax-free reorganization. Those include:
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1)
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Maintaining current positions in the Tax-Managed Portfolio and receiving ETF shares on the conversion date.
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2)
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Exchanging shares of the Tax-Managed Portfolio into another Dimensional mutual fund prior to the conversion.
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Redeeming shares of the Tax-Managed Portfolio.
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The Information Statement/Prospectus provides greater detail on the mechanics of the conversion and what to expect with your investment during and following the conversion.
No shareholder vote is required or being requested to complete the conversion. Shareholders will need brokerage accounts with the ability to transact in ETF shares in connection with the reorganization. The
IMPORTANT NOTICE ABOUT YOUR TARGET PORTFOLIO ACCOUNT - QUESTIONS AND ANSWERS that follows includes a description of required actions for shareholders who hold shares of the Tax-Managed Portfolio in accounts that cannot hold ETF shares and
should be read carefully. For shareholders holding the Tax-Managed Portfolio in accounts that can hold ETFs, no additional action will need to be taken prior to the conversion for the account to receive ETF shares.
We encourage you to carefully review the additional information provided in this document. If you have questions not answered, please contact your financial advisor or
Dimensional regional director.
In closing, we are excited to offer the benefits of this conversion to the Tax-Managed Portfolio’s shareholders. We view this event as a reflection of our continued
efforts to apply innovative thinking in pursuit of better investment outcomes for our investors. Thank you for your continued trust.
Sincerely,
Dave Butler and Gerard O’Reilly
Dimensional Investment Group Inc.
Dave Butler, Co-Chief Executive Officer
Gerard O’Reilly, Co-Chief Executive Officer and Chief Investment Officer
We recommend that you read the complete Information Statement/Prospectus.
This section contains a brief Q&A which will help explain the reorganization, including the reasons for the reorganization. Following this section is a more detailed
discussion.
Q. What is happening to the Tax-Managed Portfolio? Why am I receiving an Information Statement/Prospectus?
A. The Tax-Managed Portfolio (the “Target Portfolio”), which is currently
operated as a mutual fund, will be converted into an exchange-traded fund (“ETF”) through the reorganization of the Target Portfolio into a newly-created series of Dimensional ETF Trust (the “ETF Trust”), the Dimensional US Marketwide Value ETF
(the “Acquiring Portfolio”), that has the same investment objective and investment strategies as the Target Portfolio (the “Reorganization”). As an ETF, the Acquiring Portfolio’s shares will be traded on NYSE Arca, Inc. following the
Reorganization. The Reorganization will be accomplished in accordance with the Agreement and Plan of Reorganization (the “Plan”).
Under the Plan, all of the assets and liabilities of the Target Portfolio will be transferred to its newly-created Acquiring Portfolio, in exchange for shares of the
Acquiring Portfolio of equivalent aggregate net asset value (“NAV”). Your shares of the Target Portfolio will be exchanged for shares of equivalent aggregate NAV of the Acquiring Portfolio. Shares of the Acquiring Portfolio will be transferred
to each shareholder’s brokerage account, or if a shareholder does not have a brokerage account, the shares will be held by a stock transfer agent until a brokerage account is identified
or the account is converted to
cash (subject to applicable federal or state laws concerning unclaimed property).
The IMPORTANT NOTICE ABOUT YOUR TARGET PORTFOLIO ACCOUNT – QUESTIONS AND ANSWERS, beginning on page viii, provides important information about actions to take with respect
to your account in order to ensure the seamless transition from holding shares of the Target Portfolio to holding ETF shares of the Acquiring Portfolio.
Q. Has the Board of Directors approved the Reorganization?
A. Yes, the Board of Directors of the Dimensional Investment Group Inc. (the “Board”), which oversees the Target Portfolio, approved the Reorganization. The Board, including all of the Directors who are not “interested
persons” of the Target Portfolio (as defined in the Investment Company Act of 1940 (the “1940 Act”)) (the “Independent Directors”), determined that the Reorganization is in the best interests of the Target Portfolio and its shareholders and
that the Target Portfolio’s shareholders’ interests will not be diluted as a result of the Reorganization. Similarly, the Board of Trustees of the ETF Trust, which oversees the Acquiring Portfolio, including a majority of the trustees who are
not “interested persons” of the Acquiring Portfolio as defined in the 1940 Act, believes that the Reorganization is in the best interests of the Acquiring Portfolio.
Q. Why is the Reorganization occurring?
A. Dimensional proposed that the Target Portfolio be reorganized into the Acquiring Portfolio because the ETF structure of the Acquiring Portfolio may provide benefits with
respect to the management of capital gains distributions allowing for potentially greater tax efficiency, which is complementary to the investment objective of the Target
Portfolio. The Target Portfolio is managed with a view to minimize or consider the impact of the federal income taxes on returns.
While the tax treatment of ETFs and mutual funds is the same, the mechanics of the
creation and redemption process for ETFs allows ETFs to acquire securities in-kind and redeem securities in-kind and thereby often avoid the realization of capital gains by the ETFs as the result of portfolio transactions. As a result, capital
gains distributions, if any, made by an ETF typically are very small and shareholders in an ETF are largely only subject to capital gains on their investment in the ETF after they sell their ETF shares. In contrast, when portfolio securities are
sold within a mutual fund (either to rebalance the mutual fund’s holdings or to raise cash for redemptions), the sale can create capital gains within the mutual fund that impact all taxable shareholders of the mutual fund. The Acquiring Portfolio
will pursue the same investment objective and investment strategies as the Target Portfolio but in the ETF structure.
Q. How will the Reorganization affect me as a shareholder?
A. If the Reorganization is consummated, you will cease to be a shareholder of the Target Portfolio and will become a shareholder of the Acquiring Portfolio. Upon completion of the Reorganization, you will own shares
of the Acquiring Portfolio offered as an ETF having an aggregate NAV equal to the aggregate NAV of the shares of the Target Portfolio you owned when the Reorganization happened. Shares of the Acquiring Portfolio
will be transferred to your brokerage account, or if you do not have a brokerage account, the shares will be held by a stock transfer agent until a brokerage account is identified or the account is converted to cash
(subject to applicable federal or state laws concerning unclaimed property). Shares of the Acquiring Portfolio are not issued in fractional shares. As a result, some shareholders who hold fractional shares of the Target Portfolio may have
such fractional shares redeemed at NAV immediately prior to the Reorganization resulting in a small cash payment, which will be taxable.
After the Reorganization, individual shares of the Acquiring Portfolio may only be purchased and sold on NYSE Arca, Inc., other national securities exchanges, electronic
crossing networks and other alternative trading systems. Should you decide to purchase or sell shares in the Acquiring Portfolio after the Reorganization, you will need to place a trade through a broker who will execute your trade on an exchange
at prevailing market prices. Because Acquiring Portfolio shares trade at market prices rather than at NAV, Acquiring Portfolio shares may trade at a price less than (discount) or greater than (premium) the Portfolio’s NAV.
As with all ETFs, your broker may charge a commission for purchase and sales transactions, although ETFs trade with no transaction fees (NTF) on many platforms.
Q. Am I Being Asked to Vote on the Reorganization?
A. No. Votes of the shareholders of the Target Portfolio are not required to approve the Reorganization under Maryland law or the 1940 Act.
Q. Will the Reorganization affect the way my investments are managed?
A. No. Dimensional is also the investment adviser to the Acquiring Portfolio and it will be managed using the same investment objective and investment strategies currently used by the Target Portfolio.
Q. Will the fees and expenses of the Acquiring Portfolio be the same as the fees and expenses of the Target Portfolio?
A. Yes. The management fee of the Acquiring Portfolio is the same as the management fee of the Target Portfolio and, therefore, the Acquiring Portfolio is expected to experience the same overall expenses as compared to
the Target Portfolio.
Q. Are there any differences in risks between the Target Portfolio and Acquiring Portfolio?
A. Yes. While most of the risks of the Target Portfolio and Acquiring Portfolio are the same, the Acquiring Portfolio is subject to certain risks unique to operating as an ETF. The Acquiring Portfolio is subject to
market trading risk and premium/discount risk. We discuss these risks later in the Information Statement/Prospectus.
Q. What are some features of ETFs that differ from mutual funds?
A. The following are some unique features of ETFs as compared to mutual funds:
Transparency. The Acquiring Portfolio will be a transparent ETF that operates with
full transparency to its portfolio holdings. Following the Reorganization, the Acquiring Portfolio, like other transparent ETFs, will make its portfolio holdings public each day. This holdings information, along with other information about
the Acquiring Portfolio, will be found on the Dimensional website.
Tax Efficiency. In a mutual fund, when
portfolio securities are sold, either to rebalance holdings or to raise cash for redemptions, the sale can create capital gains that impact all taxable shareholders of the mutual fund. In contrast, the mechanics of the creation and redemption
process for ETFs allows ETFs to acquire securities in-kind and redeem securities in-kind generally reducing the realization of capital gains by the ETFs for the same processes. As a result, shareholders in an ETF are largely only subject to
capital gains on their investment in the ETF after they sell their ETF shares.
Sales on an Exchange throughout the Day. ETFs provide shareholders with the opportunity
to purchase and sell shares throughout the day at market-determined prices, instead of being required to wait to make a purchase or a redemption at the next calculated NAV per share at the end of the trading day. This means that when a
shareholder decides to purchase or sell shares of the ETF the shareholder can act on that decision immediately by contacting the shareholder’s broker to execute the trade. The market price of the ETF may be higher or lower than the ETF’s NAV
per share, and might not be the same as the ETF’s next calculated NAV at the close of the trading day.
Sales only through a Broker. Unlike a mutual fund’s shares, individual shares of ETFs,
like the Acquiring Portfolio, are not purchased or sold at NAV directly with the Portfolio. Individual
Acquiring Portfolio shares may only be purchased and sold through a broker at market prices. When buying and selling shares through a financial intermediary, a shareholder
may incur brokerage or other charges determined by the financial intermediary, although ETFs trade with no transaction fees (NTF) on many platforms. In addition, a shareholder of an ETF, such as the Acquiring Portfolio, may incur costs
attributable to the difference between the highest price a buyer is willing to pay to purchase shares (bid) and the lowest price a seller is willing to accept for shares (ask) when buying or selling shares in the secondary market (the “bid-ask
spread”). Because ETF shares trade at market prices rather than at NAV, shares of an ETF, like the Acquiring Portfolio, may trade at a price less than (discount) or greater than (premium) the Portfolio’s NAV. The trading prices of an ETF’s
shares in the secondary market will fluctuate continuously throughout trading hours based on the supply and demand for the ETF’s shares and shares of the underlying securities held by the ETF, economic conditions and other factors, rather than an
ETF’s NAV, which is calculated at the end of each business day.
Q. When is the Reorganization expected to occur?
A. Dimensional is anticipating a Reorganization date on or around May 6, 2022. This date could be delayed because some administrative conditions must be satisfied to implement the Reorganization. The Target Portfolio
will publicly disclose updates on material developments throughout the process.
Q. Will shareholders have to pay any sales load, commission or other similar fee in connection with the Reorganization?
A. No. Shareholders will not pay any sales load, commission or other similar fee in connection with the receipt of ETF shares from the Reorganization.
Q. Who will pay the costs in connection with the Reorganization?
A. The Reorganization is expected to benefit the Target Portfolio. As a result, the Target Portfolio will pay the costs of the Reorganization. The estimated expenses related to the Reorganization are expected to be
$120,000, which represents less than 0.01% of a Portfolio’s average net assets and less than $0.01 per share as of December 10, 2021.
Q. Will the Reorganization result in any federal tax liability to me?
A. The Reorganization is designed to be treated as a tax-free reorganization for U.S. federal income tax purposes. However, as part of the Reorganization, some shareholders may receive cash compensation for fractional
shares of the Target Portfolio that they hold. The redemption of these fractional shares will likely be a taxable event, albeit a small one. Shareholders should consult their tax advisors about possible state and local tax considerations with
respect to the Reorganization, if any, because the information about tax consequences in this document relates only to the U.S. federal income tax consequences of the Reorganization.
Q. Can I purchase, redeem or
exchange shares of the Target Portfolio before the Reorganization takes place?
A. Yes. You can purchase or exchange Target Portfolio shares until May 4, 2022. You can
redeem Target Portfolio shares until the day before the Reorganization occurs. That means
your redemption order must be received by May 5, 2022. Any shares not redeemed before the date of the Reorganization, which we expect will be May 6, 2022, will be
exchanged for shares of the Acquiring Portfolio.
Q. What do I need to do to prepare for the Reorganization?
A. It is important for you to determine that you hold your shares of the Target Portfolio
in the type of account that can accommodate the receipt of the ETF shares that will be received in the Reorganization. If you hold your shares of the Target Portfolio in an account directly with the Portfolio at the Portfolio’s transfer agent
or in a brokerage account with a financial intermediary that only allows you to hold mutual fund shares, you will need to set up a brokerage account that allows investment in ETF shares. A separate Q&A is provided to help you determine
your account type and provide information about changing your type of account if necessary.
If shares are held in an account that cannot accept ETF shares at the time of the Reorganization of the Target Portfolio, Acquiring Portfolio
shares received in the Reorganization will be held by a stock transfer agent, American Stock Transfer & Trust Company, LLC (“AST”), until a brokerage account is identified into which AST can transfer the shares. As planned, if Acquiring
Portfolio shares are not transferred into a brokerage account within a year of the date of the Reorganization, the Acquiring Portfolio shares will be converted to cash and the cash proceeds sent to the accountholder of record
(subject to applicable federal or state laws concerning unclaimed property). The conversion of Acquiring Portfolio shares to cash may be subject to fees and expenses and will be a taxable event.
Q. Whom do I contact for further information?
A. You can contact your financial advisor or other financial intermediary for further information. You also may contact Dimensional at (512) 306-7400.
Important additional information about the Reorganization is set forth in the accompanying Information Statement/Prospectus. Please read it carefully.
IMPORTANT NOTICE ABOUT YOUR TARGET PORTFOLIO ACCOUNT
QUESTIONS AND ANSWERS
This section contains a brief Q&A which provides information for you to determine if you need to take action with respect to your shareholder account prior to the
Reorganization.
Q. What do I need to do about my account prior to the Reorganization?
A. The following provides information to determine whether you will need to take action prior to the Reorganization with respect to your Target Portfolio shares based on the characteristics of your account.
Accounts that Require No Action
If you hold your shares of the Target Portfolio in a brokerage account that permits you to purchase securities traded in the stock market, such as ETFs or other types of
stocks, then you will not need to take any action with respect to your account prior to the Reorganization to receive ETF shares of the Acquiring Portfolio.
Accounts that Require Action
Transfer Agent Accounts—If you hold your shares of the Target Portfolio in an
account directly with the Portfolio at the Portfolio’s transfer agent, State Street Bank and Trust Company1 (“State Street”), you should transfer your shares of the Target Portfolio to a
brokerage account prior to the Reorganization. You have a Transfer Agent Account if you receive quarterly account statements directly from the Dimensional funds and not from a third-party broker-dealer.
Non-Accommodating Brokerage Accounts—If you hold your shares of the Target
Portfolio in a brokerage account that only allows you to hold shares of mutual funds in the account, you will need to contact your financial intermediary to set up a brokerage account that permits investment in ETF shares.
If you are unsure about the ability of your account to accept ETF shares, contact your financial advisor or other financial intermediary.
Q. How do I transfer my Target Portfolio shares from a Transfer Agent Account to a brokerage account that accepts ETF shares?
A. Transferring your shares from the Target Portfolio’s transfer agent to a brokerage account should be a simple process. If you have a brokerage account or a relationship with a brokerage firm, please talk to your
broker and inform the broker that you would like to
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State Street Bank and Trust Company, as transfer agent for the Target Portfolio, has delegated performance of certain of its duties and responsibilities as the Target Portfolio’s transfer agent to DST Asset Manager Solutions, Inc.,
doing business as SS&C.
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transfer a mutual fund position that you hold directly with the Target Portfolio into your brokerage account. Also inform your broker that such an account will need to be
set up to accept ETF shares. If you don’t have a brokerage account or a relationship with a brokerage firm, you will need to open an account.
We suggest you provide your broker with a copy of your quarterly statement from the Target Portfolio. Your broker will require your account number with the Target
Portfolio, which can be found on your statement. Your broker will help you complete a form to initiate the transfer. Once you sign that form, your broker will submit the form to the transfer agent directly, and the shares will be transferred
into your brokerage account. The sooner you initiate the transfer, the better.
Q. How do I transfer my Target Portfolio Shares from a Non-Accommodating Brokerage Account to a Brokerage Account that accepts ETF shares?
A. The broker where you hold the Target Portfolio shares should be able to assist you in changing the characteristics of your brokerage account to an account that is permitted to invest in ETF shares. Contact your
broker right away to make the necessary changes to your account.
Q. What will happen if I don’t have a Brokerage Account that can accept ETF shares at the time of the Reorganization?
A. If shares are held in an account that cannot accept ETF shares at the time of the Reorganization of the Target Portfolio, Acquiring Portfolio shares received in the Reorganization will be held by a stock transfer agent, AST, until
a brokerage account is identified into which AST can transfer the shares. If Acquiring Portfolio shares are not transferred into a brokerage account within a year of the date of the Reorganization, the Acquiring Portfolio shares will be
converted to cash and the cash proceeds sent to the accountholder of record (subject to applicable federal or state laws concerning unclaimed property). The conversion of Acquiring Portfolio shares to cash may be subject to fees and expenses and
will be a taxable event.
Q. What if I don’t want to hold ETF shares?
A. If you don’t want to receive ETF shares in connection with the Reorganization, you may redeem or exchange your shares of the Target Portfolio into another eligible Dimensional mutual fund prior to the
Reorganization. The last day to exchange your shares of the Target Portfolio for shares of another Dimensional mutual fund is May 4, 2022 and the last day to redeem your shares of the Target Portfolio is May 5, 2022.
INFORMATION STATEMENT/PROSPECTUS
Dated March [20], 2022
Dimensional Investment Group Inc.
6300 Bee Cave Road, Building One
Austin, TX 78746
(512) 306-7400
This Information Statement/Prospectus is being furnished to shareholders of the Tax-Managed U.S. Marketwide Value Portfolio II (the “Target Portfolio”)
in connection with the reorganization of the Target Portfolio into a newly-created series of Dimensional ETF Trust (the “ETF Trust”), the Dimensional US Marketwide Value ETF (the “Acquiring Portfolio”).
The Board of Directors (the “DIG Board”) of Dimensional Investment Group Inc. (“DIG”) approved an Agreement and Plan of Reorganization (the “Plan”) under
which:
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the Target Portfolio, a series of DIG, will transfer all of its assets and liabilities to the Acquiring Portfolio, a newly-created series of the ETF Trust, in
exchange solely for shares of the Acquiring Portfolio;
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(ii)
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the shares of the Acquiring Portfolio will be distributed to the shareholders of the Target Portfolio according to their respective interests in the Target
Portfolio; and
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the Target Portfolio will be liquidated and dissolved (the “Reorganization”).
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A copy of the Plan is provided in Exhibit A hereto.
The shares of the Acquiring Portfolio received by the shareholders of the Target Portfolio in the exchange will be equal in aggregate net asset value
(“NAV”) to the aggregate NAV of their shares of the Target Portfolio at the closing date of the Reorganization. The Reorganization is expected to be effective on or about May 6, 2022.
The DIG Board, including a majority of the Directors who are not “interested persons” as defined in the Investment Company Act of 1940, as amended (the
“1940 Act”), believes that the Reorganization is in the best interests of the Target Portfolio and that the interests of the Target Portfolio’s shareholders will not be diluted as a result of the Reorganization. Similarly, the Board of Trustees
of the ETF Trust, including a majority of the trustees who are not “interested persons” as defined in the 1940 Act, believes that the Reorganization is in the best interests of the Acquiring Portfolio. For federal income tax purposes, the
Reorganization is intended to be structured as a tax-free transaction for the Target Portfolio, the Acquiring Portfolio, and their shareholders. For some shareholders, there could be a small payment for the redemption of fractional shares of the
Target Portfolio, and that would be taxable.
THIS INFORMATION STATEMENT/PROSPECTUS IS FOR INFORMATION PURPOSES ONLY, AND NO ACTION ON YOUR PART IS REQUIRED TO EFFECT THE
REORGANIZATION. WE ARE NOT ASKING YOU FOR A PROXY, AND YOU ARE NOT REQUESTED TO SEND US A PROXY.
The Target Portfolio is a diversified portfolio of DIG, a corporation created under the laws of the state of Maryland, which
is registered with the U.S. Securities and Exchange Commission (the “Commission” or the “SEC”) as an open-end management investment company. The Acquiring Portfolio is a diversified portfolio of the ETF Trust, a statutory trust created under the
laws of the state of Delaware, which is registered with the SEC as an open-end management investment company. The Target Portfolio and Acquiring Portfolio have identical investment objectives, investment strategies and investment restrictions.
The principal offices of DIG and the ETF Trust are located at 6300 Bee Cave Road, Building One, Austin, Texas 78746. The Portfolios are sponsored by Dimensional Fund Advisors LP (“Dimensional”). The principal offices of Dimensional are located
at 6300 Bee Cave Road, Building One, Austin, Texas 78746.
Shares of the Acquiring Portfolio will be listed for trading on NYSE Arca, Inc.
In preparation for the closing of the Reorganization, the last day to purchase or exchange shares of the Target Portfolio will be May 4, 2022.
Redemption orders for Target Portfolio shares must be placed by May 5, 2022, or the Target Portfolio shares will be converted to Acquiring Portfolio shares. The Reorganization is expected to occur after the close of trading on May 6, 2022. The
Acquiring Portfolio will be open for trading on May 9, 2022.
This Information Statement/Prospectus, which you should read carefully and retain for future reference, sets forth concisely the information that you
should know before investing. A statement of additional information, dated March [20], 2022, relating to this Information Statement/Prospectus and the proposed Reorganization, is available upon request and without charge by calling collect or
writing to Dimensional at the phone number and address listed above.
Additional information is available in the following materials:
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Prospectus dated February 12, 2022 for the Target Portfolio, as supplemented to date
(“Target Portfolio Prospectus”), which is on file with the SEC ( http://sec.gov) (File Nos. 033-33980/811-06067) (Accession No. 0001193125-22-037437);
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Statement of Additional Information dated February 12, 2022 for the
Target Portfolio (“Target Portfolio SAI”) which is on file with the SEC ( http://sec.gov) (File Nos. 033-33980/811-06067) (Accession No. 0001193125-22-037437);
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Prospectus dated February 12, 2022 for the Acquiring Portfolio
(“Acquiring Portfolio Prospectus”) which is on file with the SEC ( http://sec.gov) (File Nos. 333-239440/811-23580) (Accession No. 0001193125-22-037448);
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Statement of Additional Information dated February 12, 2022 for the
Acquiring Portfolio, (“Acquiring Portfolio SAI”) which is on file with the SEC ( http://sec.gov) (File Nos. 333-239440/811-23580) (Accession No. 0001193125-22-037448); and
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The Target Portfolio’s audited financial statements and related report of the independent public accounting firm included in the Target Portfolio’s Annual Report to Shareholders for the fiscal year ended October 31, 2021 (the “Target Portfolio Annual Report”) which is on file with
the SEC ( http://sec.gov) (File Nos. 333-239440/811-23580) (Accession No. 0001193125-22-004355). |
Because the Acquiring Portfolio has not yet commenced operations, no annual report is available. The
Target Portfolio Prospectus,
as supplemented to date, and
Acquiring Portfolio Prospectus are incorporated herein by reference and are legally deemed to be part of this Information
Statement/Prospectus. A copy of the Acquiring Portfolio Prospectus accompanies this Information Statement/Prospectus. The
Statement of Additional Information to this Information Statement/Prospectus also is incorporated
herein by reference and is legally deemed to be part of this Information Statement/Prospectus. The Target Portfolio Prospectus, Target Portfolio SAI, and Target Portfolio Annual Report are available at
https://us.dimensional.com/fund-documents.
The prospectuses, statements of additional information, and the most recent annual shareholder report listed above, have been filed with the SEC and are
available, free of charge, by (i) calling Dimensional collect at 512-306-7400, (ii) accessing the documents at the Target Portfolio’s website at
https://us.dimensional.com/fund-documents, or (iii) writing to
the Target Portfolio at the address listed on the cover of this Information Statement/Prospectus. In addition, these documents may be obtained from the EDGAR database on the Commission’s Internet site at
http://www.sec.gov. You also may
obtain this information upon payment of a duplicating fee, by e-mailing the Commission at the following address:
publicinfo@sec.gov.
This Information Statement/Prospectus dated March [20], 2022, is expected to be mailed to shareholders of the Target Portfolio on or about April 1, 2022.
AN INVESTMENT IN THE PORTFOLIO IS NOT A DEPOSIT OF ANY BANK AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THE PORTFOLIO INVOLVES INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
LIKE ALL FUNDS, THE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS INFORMATION
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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SUMMARY
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What is happening to the Target Portfolio?
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How will the Reorganization work?
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Why is the Reorganization happening and did the Board approve the Reorganization?
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How will the Reorganization affect me?
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Who will bear the costs associated with the Reorganization?
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What are the federal income tax consequences of the Reorganization?
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How do the Portfolios’ investment objectives, investment strategies, and investment policies compare?
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What are the principal risks of an investment in the Portfolios?
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How will the Reorganization affect my fees and expenses?
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What are the distribution arrangements for the Portfolios?
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What are the Portfolios’ arrangements for purchases, exchanges and redemptions?
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COMPARISON OF SOME IMPORTANT FEATURES OF THE PORTFOLIOS
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How do the performance records of the Portfolios compare?
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What are the fees and expenses of the Portfolios and what might they be after the Reorganization?
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What are the Portfolios’ dividend payment policies and pricing arrangements?
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Who manages the Portfolios?
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INFORMATION ABOUT THE REORGANIZATION
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Reasons for the Reorganization
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INFORMATION ABOUT THE PLAN
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How will the Reorganization be carried out?
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Who will pay the costs of the Reorganization?
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What are the tax consequences of the Reorganization?
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CAPITAL STRUCTURE AND SHAREHOLDER RIGHTS
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21
|
|
What are the capitalizations of the Portfolios?
|
21
|
|
ADDITIONAL INFORMATION ABOUT THE ACQUIRING PORTFOLIO AND TARGET PORTFOLIO
|
22
|
|
Comparison of the Portfolios’ Investment Objectives and Principal Investment Strategies
|
22
|
|
Comparison of the Portfolios’ Principal Risks
|
24
|
|
Description of Risks
|
24
|
|
How do the fundamental investment policies of the Portfolios compare?
|
27
|
|
Where can I find more financial and performance information about the Portfolios?
|
27
|
|
PRINCIPAL SHAREHOLDERS
|
28
|
|
ADDITIONAL INFORMATION
|
29
|
|
FINANCIAL HIGHLIGHTS
|
29
|
|
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
|
A-1
|
|
COMPARISON OF MARYLAND AND DELAWARE GOVERNING INSTRUMENTS AND STATE LAW
|
B-1
|
This is only a summary of certain information contained in this Information Statement/Prospectus.
Shareholders should carefully read the more complete information in the rest of this Information Statement/Prospectus, including the Plan relating to the Reorganization, a form of which is attached to this Information Statement/Prospectus in
Exhibit A, and the Acquiring Portfolio Prospectus, which accompanies this Information Statement/Prospectus. For purposes of this Information Statement/Prospectus, the terms “shareholder”, “you”, and “your” refer to shareholders of the Target
Portfolio.
What is happening to the
Target Portfolio?
The Target Portfolio, which is currently operated as a mutual fund, will be converted into an ETF through the reorganization of the Target Portfolio into
the newly-created Acquiring Portfolio, which has the same investment objective and investment strategies as the Target Portfolio. As an ETF, the Acquiring Portfolio’s shares will be traded on NYSE Arca, Inc. The transaction between the Target
Portfolio and Acquiring Portfolio is referred to in this Information Statement/Prospectus as the “Reorganization.” The Reorganization will be accomplished in accordance with the Plan. For reference purposes, the names of the Target Portfolio
and Acquiring Portfolio are listed in the chart below.
|
Target Portfolio
|
Acquiring Portfolio
|
|
Tax-Managed U.S. Marketwide Value Portfolio II
|
Dimensional US Marketwide Value ETF
|
How will the Reorganization work?
Under the Plan, all of the assets and liabilities of the Target Portfolio will be transferred to the newly-created Acquiring
Portfolio, in exchange for shares of the Acquiring Portfolio of equivalent aggregate net asset value (“NAV”). Your shares of the Target Portfolio will be exchanged for shares of equivalent aggregate NAV of the Acquiring Portfolio.
Shares of the Acquiring Portfolio will be transferred to each shareholder’s brokerage account, or if a shareholder does not have a brokerage account, the shares will be held by a stock transfer agent until a brokerage
account is identified or the account is converted to cash (subject to applicable federal or state laws concerning unclaimed property). After shares of the Acquiring Portfolio are distributed to the Target Portfolio’s shareholders, the Target
Portfolio will be completely liquidated and dissolved. As a result of the Reorganization, you will cease to be a shareholder of the Target Portfolio and will become a shareholder of the Acquiring Portfolio. This exchange will occur on the
closing date of the Reorganization, which is the specific date on which the Reorganization takes place. The closing date of the Reorganization is expected to occur after the close of business on or about May 6, 2022.
Why is the Reorganization happening and did the Board approve the Reorganization?
Dimensional proposed that the Target Portfolio be reorganized into the Acquiring Portfolio because the
ETF structure of the Acquiring Portfolio may provide benefits with respect to the management of capital gains distributions. The Target Portfolio is managed with a view to minimize or consider the impact of the federal income taxes on investment
returns. In a mutual fund, when portfolio securities are sold, either to rebalance the mutual
fund’s holdings or to raise cash for redemptions, the sale can create capital gains that impact all taxable shareholders of the mutual fund. In
contrast, the mechanics of the creation and redemption process for ETFs allows ETFs to acquire securities in-kind and redeem securities in-kind generally reducing the realization of capital gains by the ETFs for the same process. As a result,
shareholders in an ETF are largely only subject to capital gains on their investment in the ETF after they sell their ETF shares.
The Acquiring Portfolio will pursue the same investment objective and investment strategies as the Target Portfolio but in the ETF
structure. Dimensional will continue as the investment adviser of the Acquiring Portfolio after the Reorganization and no change in portfolio managers will result from the Reorganization. In addition, the Acquiring Portfolio will experience the
same management fee rates and, therefore, an expectation of the same overall operating expenses as compared to the Target Portfolio. The Board of DIG recognizes that as shareholders of an ETF after the Reorganization, shareholders may bear
certain costs with respect to maintaining brokerage accounts and selling Portfolio shares that the shareholders did not experience as mutual fund shareholders. However, the Board of DIG believes that the benefits of the ETF structure outweigh
these costs.
The Board of DIG, including
all of the Board’s Directors who are not “interested persons” (as defined
in the Investment Company Act of 1940, as amended (the “1940 Act”)) (together, the “Independent Directors”), after careful consideration, have determined that the Reorganization is in the best interests of the Target Portfolio and will not dilute
the interests of the existing shareholders of the Target Portfolio. The Board made this determination based on various factors that are discussed in this Information Statement/Prospectus, under the discussion of the Reorganization in the section
entitled “Reasons for the Reorganization.”
Similarly, the Board of the ETF Trust, including all of the Board’s Trustees who are not “interested persons” (as defined in the
1940 Act) (together, the “Independent Trustees”), has approved the Reorganization with respect to the Acquiring Portfolio. The Board has determined that the Reorganization is in the best interests of the Acquiring Portfolio.
How will the Reorganization affect me?
If the Reorganization is consummated, you will cease to be a shareholder of the Target Portfolio and will become a shareholder of
the Acquiring Portfolio. Upon completion of the Reorganization, you will own shares of the Acquiring Portfolio offered as an ETF having an aggregate NAV equal to the aggregate NAV of the shares of the Target Portfolio you owned when the
Reorganization happened. Shares of the Acquiring Portfolio will be transferred to your brokerage account, or if you do not have a brokerage account, the shares will be held by a stock transfer agent until a brokerage account is identified or the
account is converted to cash (subject to applicable federal or state laws concerning unclaimed property). Shares of the Acquiring Portfolio are not issued in fractional shares, so for some shareholders, fractional shares of the Target Portfolio
will be redeemed at NAV immediately prior to the Reorganization resulting in a small cash payment, which will be taxable.
After the Reorganization, individual shares of the Acquiring Portfolio may only be purchased and sold on NYSE Arca, Inc., other
national securities exchanges, electronic crossing networks and other alternative trading systems through a broker-dealer at market prices. A shareholder may pay brokerage or other charges determined by the shareholder’s financial intermediary,
although ETFs do trade with no transaction fees (NTF) on many
platforms, and incur costs attributable to the difference between the highest price a buyer is willing to pay to purchase shares (bid) and the lowest
price a seller is willing to accept for shares (ask) when buying or selling shares in the secondary market (the “bid-ask spread”). Because Acquiring Portfolio shares trade at market prices rather than at NAV, Acquiring Portfolio shares may trade
at a price less than (discount) or greater than (premium) the Portfolio’s NAV.
Who will bear the costs associated with the Reorganization?
The Target Portfolio will pay all of the costs and expenses resulting from the Reorganization because the Reorganization is expected to benefit the
Target Portfolio. The estimated expenses of the Reorganization is $120,000, which is less than 0.01% of the average net assets of the Target Portfolio. The estimated expenses include professional fees, charges by service providers (excluding
charges by AST, which will be borne by the Acquiring Portfolio), and any costs related to the printing and mailing of the Information Statement/Prospectus. It is not anticipated that any holdings of the Target Portfolio will be required to be
sold in order to consummate the Reorganization, and therefore, there will not be any brokerage costs or other transaction costs as a result of the Reorganization.
What are the federal income tax consequences of the Reorganization?
As a condition to the closing of the Reorganization, the Target Portfolio and Acquiring Portfolio must receive an opinion of
Stradley Ronon Stevens & Young LLP (“Stradley Ronon”) to the effect that the Reorganization will constitute a “reorganization” within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the “Code”). Accordingly, it
is expected that neither you nor, in general, the Target Portfolio will recognize gain or loss as a direct result of the Reorganization of the Target Portfolio (except with respect to cash received by a shareholder in lieu of fractional shares,
if any), and the holding period and aggregate tax basis for the Acquiring Portfolio shares that you receive will be the same as the holding period and aggregate tax basis of the Target Portfolio shares that you surrender in the Reorganization.
Prior to the consummation of the Reorganization, you may redeem your Target Portfolio shares, generally resulting in the recognition of gain or loss for U.S. federal income tax purposes.
You should consult your tax advisor regarding the effect, if any, of the Reorganization, in light of your individual circumstances.
You should also consult your tax advisor about state and local tax consequences. For more information about the tax consequences of the Reorganization, please see the section “Information About the Plan—What are the tax consequences of the
Reorganization?”
How do the Portfolios’ investment objectives, investment strategies, and investment policies compare?
The Target Portfolio and Acquiring Portfolio
have identical investment objectives. The Target Portfolio and Acquiring Portfolio employ identical principal investment strategies in seeking to achieve their respective objectives.
Investment Objectives and Investment Strategies
The investment objective of the Target and Acquiring Portfolios is to achieve long-term capital appreciation. Dimensional’s tax management strategies for the Target and Acquiring Portfolios are designed to maximize
the after tax value of a shareholder’s investment. Generally, Dimensional buys and sells securities for each Portfolio with the goals of: (i) delaying and minimizing the realization of net capital gains (e.g., selling stocks with capital
losses to offset gains, realized or anticipated); and (ii) maximizing the extent to which any realized net capital gains are long-term in nature (i.e., taxable at lower capital gains tax rates). To achieve their investment objectives, the
Target and Acquiring Portfolios each generally purchase a broad and diverse group of securities of U.S. companies that Dimensional determines to be value stocks.
Investment Polices and Restrictions
The Target and Acquiring Portfolios have adopted identical fundamental investment restrictions, which may not be changed without
prior shareholder approval. The Acquiring Portfolio’s fundamental investment restrictions are listed in the
Acquiring Portfolio SAI,
dated February 12, 2022, which is incorporated by reference into the statement of additional information relating to this Information Statement/Prospectus, and is available upon request. The Target Portfolio’s fundamental investment restrictions
are listed in the
Target Portfolio SAI, dated February 12, 2022, which is incorporated by reference into the statement of additional
information relating to this Information Statement/Prospectus, and is available upon request.
What are the principal risks of an investment in the Portfolios?
An investment in each Portfolio involves risks common to most open-end funds. There is no guarantee against losses resulting from
investments in the Portfolios, nor that the Portfolios will achieve their investment objectives. You may lose money if you invest in the Portfolios.
The risks associated with an investment in the Target and
Acquiring Portfolios are identical, except that the Acquiring Portfolio is subject to certain risks unique to operating as an ETF. The Acquiring Portfolio is subject to the following risks for ETFs:
Market Trading Risk: Active trading markets for Portfolio
shares may not be developed or maintained by market makers or authorized participants. Authorized participants are not obligated to make a market in the Portfolio’s shares or to submit purchase or redemption orders for creation units. Trading
in shares on an exchange may be halted in certain circumstances. There can be no assurance that the requirements of the listing exchange necessary to maintain the listing of the Portfolio will continue to be met.
Premium/Discount Risk: The NAV of the Portfolio and the
value of your investment may fluctuate. Disruptions to creations and redemptions or the market price of the Portfolio’s holdings, the existence of extreme market volatility or potential lack of an active trading market for shares may widen
bid-ask spreads and result in shares trading at a significant premium or discount to NAV. If a shareholder purchases shares at a time when the market price is at a premium to the NAV or sells shares at a time when the market price is at a
discount to the NAV, the shareholder may sustain losses.
For further information about the risks of investments in the Portfolios, see “Comparison of the Portfolios’ Principal Risks” below.
How will the Reorganization affect my fees and expenses?
The
Acquiring Portfolio’s management fee is the same as the Target Portfolio’s management fee and, therefore, the Acquiring Portfolio is expected to experience the same overall expenses as compared to the Target Portfolio. A comparison of the fees
and expenses of the Target Portfolio and Acquiring Portfolio is provided below under the heading, “What are the fees and expenses of the Portfolios and what might they be after the Reorganization?”
What are the distribution arrangements for the Portfolios?
The Target and Acquiring Portfolios are distributed by DFA Securities LLC (“DFAS”), which serves as the principal underwriter for
the shares of the Portfolios. DFAS is a wholly-owned subsidiary of Dimensional. The principal business address of DFAS is 6300 Bee Cave Road, Building One, Austin, Texas 78746. Neither the Target Portfolio nor the Acquiring Portfolio have
adopted plans of distribution pursuant to Rule 12b-1 under the 1940 Act for the payment of fees by the Portfolios related to the Portfolios’ distribution.
What are the Portfolios’ arrangements for purchases, exchanges and redemptions?
The Target Portfolio and Acquiring Portfolio have different procedures for purchasing, exchanging and redeeming shares.
You may refer to the Acquiring Portfolio Prospectus, which accompanies this Information Statement/Prospectus, under the section titled “Purchase and Sale of Shares” for the procedures applicable to purchases and sales
of the shares of the Acquiring Portfolio, which are also summarized below. The Acquiring Portfolio does not provide for the exchange of shares. The Target Portfolio Prospectus provides information under the sections titled “Purchase of Shares,”
“Exchange of Shares” and “Redemption of Shares” with respect to the procedures applicable to purchases, exchanges and sales of the shares of the Target Portfolio, which are also summarized below.
Shareholders in the Target Portfolio may purchase or sell (redeem) shares of the Portfolio on each day that the New York Stock
Exchange (“NYSE”) is scheduled to be open for business by first contacting the Portfolio’s transfer agent at (888) 576-1167. Provided that shares of the Target Portfolio are available under an employer’s 401(k) plan, shares may be purchased or
redeemed by following the procedures adopted by the respective employer and approved by Dimensional for making investments. The Target Portfolio generally is available for investment only by institutional clients, clients of registered investment
advisors, clients of financial institutions, deferred compensation plans which are exempt from taxation under section 401(k) of the Code and a limited number of certain other investors as approved from time to time by Dimensional. All
investments in the Target Portfolio are subject to approval of Dimensional.
The purchase price of a share of the Target Portfolio is its NAV per share. The NAV per share of the Target Portfolio is calculated
after the close of the NYSE (normally, 4:00 p.m. Eastern Time) on each day the NYSE is open. Provided that the Target Portfolio’s transfer agent or a transfer agent sub-designee has received the investor’s Account Registration Form in good
order, shares of the Portfolio will be priced at the public offering price, which is the
NAV of the shares next determined after receipt of the investor’s order. The Target Portfolio reserves the right to reject any initial or subsequent
investment request.
Unlike the Target Portfolio, individual shares of the Acquiring Portfolio are not purchased or sold at NAV directly with the
Portfolio. The Acquiring Portfolio will issue (or redeem) shares at NAV only to certain financial institutions that have entered into agreements with the Acquiring Portfolio’s distributor in large aggregated blocks known as “Creation Units.” A
Creation Unit of the Acquiring Portfolio consists of a specified number of shares as stated in the Acquiring Portfolio Prospectus. Creation Units are issued (or redeemed) in-kind for securities (and an amount of cash) that the Acquiring Portfolio
specifies each day at the NAV next determined after receipt of an order.
Individual Acquiring Portfolio shares may only be purchased and sold on NYSE Arca, Inc., other national securities exchanges,
electronic crossing networks and other alternative trading systems through your broker-dealer at market prices. Shares of the Acquiring Portfolio can be bought and sold during the day like shares of other publicly traded companies. Buying and
selling shares of the Acquiring Portfolio on an exchange involves certain costs. When buying and selling shares through a financial intermediary, you may incur brokerage or other charges determined by your financial intermediary, although ETFs
trade with no transaction fees (NTF) on many platforms. In addition, a shareholder of the Acquiring Portfolio may incur costs attributable to the difference between the highest price a buyer is willing to pay to purchase shares (bid) and the
lowest price a seller is willing to accept for shares (ask) when buying or selling shares in the secondary market (the “bid-ask spread”). Because Acquiring Portfolio shares trade at market prices rather than at NAV, Acquiring Portfolio shares
may trade at a price less than (discount) or greater than (premium) the Acquiring Portfolio’s NAV. The trading prices of the Acquiring Portfolio’s shares in the secondary market will fluctuate continuously throughout trading hours based on the
supply and demand for Portfolio shares and shares of the underlying securities held by the Portfolio, economic conditions and other factors, rather than an Acquiring Portfolio’s NAV, which is calculated at the end of each business day.
The Target Portfolio permits its shareholders to exchange shares of the Portfolio for shares of certain other portfolios of DIG and
DFA Investment Dimensions Group Inc. An exchange involves the simultaneous redemption of shares of one portfolio and the purchase of shares of another portfolio at each portfolio’s respective closing NAV next determined after the request for
exchange has been received, and is a taxable transaction. The Acquiring Portfolio does not provide for exchanges.
COMPARISON OF SOME IMPORTANT FEATURES OF THE PORTFOLIOS
How
do the performance records of the Portfolios compare?
The Acquiring Portfolio is a newly-formed “shell” fund that has not yet commenced operations, and therefore, has no performance
history predating the Reorganization. The Acquiring Portfolio has been organized solely in connection with the Reorganization to acquire all of the assets and liabilities of the Target Portfolio and continue the business of the Target
Portfolio. Therefore, after the Reorganization, the Target Portfolio will remain the “accounting survivor.” This means that the Acquiring Portfolio will continue to show the historical investment performance and returns of the Target Portfolio
(even after liquidation).
The historical performance of the Target Portfolio, as it is to be adopted by the Acquiring Portfolio, is included in the Acquiring
Portfolio Prospectus that has accompanied this Information Statement/Prospectus.
What are the fees and
expenses of the Portfolios and what might they be after the Reorganization?
Shareholders of the Portfolios pay various fees and expenses, either directly or indirectly. The tables below show the fees
and expenses that you would pay if you were to buy, hold or sell shares of each Portfolio. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the tables and examples
below. The fees and expenses in the tables appearing below are based on the expenses of the Target Portfolio for the fiscal year ended October 31, 2021 and the anticipated expenses of the Acquiring Portfolio during its first year of operation.
The tables also show the pro forma expenses of the combined Acquiring Portfolio after giving effect to the Reorganization, based on pro forma net assets as of October 31, 2021. Pro forma numbers are estimated in good faith and are hypothetical.
Actual expenses may vary significantly. You will not pay any sales load, contingent deferred sales charge, brokerage commission, redemption fee, or other transaction fee in connection with the receipt of ETF shares from the Reorganization.
| |
Target Portfolio
|
Acquiring Portfolio
|
Pro Forma—Acquiring Portfolio after Reorganization
|
|
Shareholder Fees
(fees paid directly from your investment):
|
None
|
None
|
None
|
Annual Portfolio Operating Expenses for Target Portfolio and Acquiring Portfolio
(expenses deducted from Portfolio assets)
| |
Target Portfolio
|
Acquiring Portfolio
|
Pro Forma—Acquiring Portfolio after Reorganization
|
|
Management Fee
|
0.20%*
|
0.20%
|
0.20%
|
|
Other Expenses
|
0.03%
|
0.03%
|
0.03%**
|
|
Total Annual Fund Operating Expenses
|
0.23%
|
0.23%
|
0.23%
|
|
* Effective October 18, 2021, the Target Portfolio changed its investment structure to a stand-alone investment structure. Accordingly, the fees and expenses of the Portfolio have been restated and no longer
reflect the aggregate direct and indirect expenses of its previous master-feeder structure.
|
|
** The costs incurred in connection with the Reorganization will be borne by the Target Portfolio. These expenses have not been reflected in the table above.
|
Expense Example
This Example is meant to help you compare the cost of investing in the Acquiring Portfolio with the cost of investing in the Target Portfolio.
The Example assumes that you invest $10,000 in the Portfolios for the time periods indicated. The Example also assumes that your investment has a 5% return each year and that a
Portfolio’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions, your costs whether you redeem or hold your shares would be:
| |
1 Year
|
3 Years
|
5 Years
|
10 Years
|
|
Target Portfolio
|
$24
|
$74
|
$130
|
$293
|
|
Acquiring Portfolio
|
$24
|
$74
|
$130
|
$293
|
|
Pro Forma—Acquiring Portfolio after Reorganization
|
$24
|
$74
|
$130
|
$293
|
What are the
Portfolios’ dividend payment policies and pricing arrangements?
The dividend payment policies of the Portfolios are identical with respect to the timing of dividends. Dividends from net
investment income of the Target Portfolio and Acquiring Portfolio are generally distributed quarterly (on a calendar basis) and any net realized capital gains (after any reductions for capital loss carryforwards) are distributed annually,
typically in December. The Portfolios intend to make distributions that may be taxed as ordinary income and capital gains (which may be taxable at different rates, depending on the length of time a Portfolio holds the assets). The Portfolios
may distribute such income dividends and capital gains more frequently, if necessary, in order to reduce or eliminate federal excise or income taxes on the Portfolios.
The way that dividends are received differs between the Target Portfolio and Acquiring Portfolio. Shareholders of the Target
Portfolio automatically receive all income dividends and capital gains distributions in additional shares of the Portfolio at NAV, unless, upon written notice to Dimensional and completion of the requisite account information, another option is
selected by shareholders. Shareholders of the Acquiring Portfolio will receive all income dividends and capital gains distributions in cash, unless a shareholder’s broker provides an option for the reinvestment of dividends.
The Target Portfolio and Acquiring Portfolio have substantially the same procedures for calculating their share prices and valuing
their portfolio securities. The Portfolios determine their NAV per share after the close of the NYSE (normally, 4:00 p.m., Eastern Time). The Portfolios will not be priced on days that the NYSE is closed for trading. DIG and the ETF Trust have
adopted substantially the same policies and procedures for valuing the Portfolios’ portfolio assets
. For more information about the Acquiring Portfolio’s pricing procedures, you
may refer to the Acquiring Portfolio Prospectus, which accompanies this Information Statement/Prospectus, under the section titled “Net Asset Value.”
Who manages the Portfolios?
The management of the business of the Target Portfolio is the responsibility of the Board of DIG and the management of the business
of the Acquiring Portfolio is the responsibility of the Board of the ETF Trust. Each Board elects officers, who are responsible for the day-to-day operations of the Portfolios.
Dimensional serves as investment advisor to the Target Portfolio and Acquiring Portfolio. Pursuant to an Investment Management Agreement with each
Portfolio, Dimensional is responsible for the management of its assets. There are no material differences between the Investment Management Agreements of the Target Portfolio and Acquiring Portfolio. The Portfolios are managed using a team
approach. The investment team includes the Investment Committee of Dimensional, portfolio managers, and trading personnel.
The Investment Committee is composed primarily of certain officers and directors of Dimensional who are appointed annually. As of the date of this
Information Statement/Prospectus, the Investment Committee has fourteen members. Investment strategies for all Portfolios are set by the Investment Committee, which meets on a regular basis and also as needed to consider investment issues. The
Investment Committee also sets and reviews all investment-related policies and procedures and approves any changes in regard to approved countries, security types, and brokers.
In accordance with the team approach used to manage the Portfolios, the portfolio managers and portfolio traders implement the policies and procedures
established by the Investment Committee. The portfolio managers and portfolio traders also make daily investment decisions regarding the Portfolios based on the parameters established by the Investment Committee. Jed S. Fogdall, Joseph F. Hohn,
John A. Hertzer, and Mary T. Phillips coordinate the efforts of all other portfolio managers or trading personnel with respect to the day-to-day management of the Portfolios.
Mr. Fogdall is Global Head of Portfolio Management, Chairman of the Investment Committee, Vice President, and a Senior Portfolio Manager of Dimensional.
Mr. Fogdall has an MBA from the University of California, Los Angeles and a BS from Purdue University. Mr. Fogdall joined Dimensional as a portfolio manager in 2004, and has been responsible for the Acquiring Portfolio since inception (2022).
Mr. Fogdall has been responsible for the Target Portfolio since 2012.
Mr. Hohn is Vice President and a Senior Portfolio Manager of Dimensional. Mr. Hohn holds an MBA from the University of California, Los Angeles, an MS
from the University of Southern California and a BS from Iowa State University. Mr. Hohn joined Dimensional in 2012, has been a portfolio manager since 2015, and has been responsible for the Target Portfolio since 2022.
Mr. Hertzer is Vice President and a Senior Portfolio Manager of Dimensional. Mr. Hertzer holds an MBA from the University of California, Los Angeles and
a BA from Dartmouth
College. Mr. Hertzer joined Dimensional in 2013, has been a portfolio manager since 2016, and has been responsible for the Target Portfolio since 2022.
Ms. Phillips is Deputy Head of Portfolio Management, North America, a member of the Investment Committee, Vice President, and a Senior Portfolio Manager
of the Advisor. Ms. Phillips holds an MBA from the University of Chicago Booth School of Business and a BA from the University of Puget Sound. Ms. Phillips joined the Advisor in 2012, has been a portfolio manager since 2014, and has been
responsible for the Portfolio since 2022.
Dimensional provides the Portfolios with a trading department and selects brokers and dealers to effect securities transactions. Securities transactions
are placed with a view to obtaining the best price and execution of such transactions. Dimensional’s address is 6300 Bee Cave Road, Building One, Austin, TX 78746. Dimensional has been engaged in the business of providing investment management
services since May 1981. Dimensional is currently organized as a Delaware limited partnership and is controlled and operated by its general partner, Dimensional Holdings Inc., a Delaware corporation. As of January 31, 2022, assets under
management for all Dimensional affiliated advisors totaled approximately $659 billion.
Fee Waiver and Expense Assumption Agreement
Pursuant to a Fee Waiver and/or Expense Assumption Agreements (the “Fee Waiver and/or Expense Assumption Agreement”) for the Acquiring Portfolio,
Dimensional has agreed to waive all or a portion of its management fee and assume the ordinary expenses of the Acquiring Portfolio (excluding the expenses that the Acquiring Portfolio incurs indirectly through its investment in other investment
companies) to the extent necessary to limit the expenses of the Portfolio to 0.24% of the average net assets of the Portfolio on an annualized basis (the “Expense Limitation Amount”). The Fee Waiver and/or Expense Assumption Agreement will
remain in effect through February 28, 2024, and may only be terminated by the Portfolio’s Board prior to that date. The Fee Waiver and/or Expense Assumption Agreement shall continue in effect from year to year thereafter unless terminated by the
Board of ETF Trust or Dimensional. With respect to the Fee Waiver and/or Expense Assumption Agreement, prior year waived fees and/or assumed expenses can be recaptured only if the expense ratio following such recapture would be less than the
expense cap that was in place when such prior year fees were waived and/or expenses assumed, and less than the current expense cap in place for the Portfolio. The Acquiring Portfolio is not obligated to reimburse Dimensional for fees previously
waived or expenses previously assumed by Dimensional more than thirty-six months before the date of such reimbursement.
INFOR
MATION ABOUT THE REORGANIZATION
Reasons for the
Reorganization
Dimensional proposed that the Target Portfolio be reorganized into the Acquiring Portfolio because the
ETF structure of the Acquiring Portfolio may provide benefits with respect to the management of capital gains distributions. The Target Portfolio is managed with a view to minimize or consider the impact of the federal income taxes on investment
returns. In a mutual fund, when portfolio securities are sold, either to rebalance holdings or to raise cash for redemptions, the sale can create capital gains that impact all taxable shareholders of the mutual fund. In contrast, the mechanics
of the creation and redemption
process for ETFs allows ETFs to acquire securities in-kind and redeem securities in-kind generally reducing the realization of capital gains by the
ETFs
for the same processes. As a result, shareholders in an ETF are largely only subject to capital gains on their investment in the ETF after they sell their ETF shares.
The Acquiring Portfolio will pursue the same investment objective and investment strategies as the Target Portfolio but have the
risks and benefits of operating in the ETF structure. Dimensional will continue as the investment adviser of the Acquiring Portfolio after the Reorganization and no change in portfolio managers will result from the Reorganization. In addition,
the Acquiring Portfolio will experience the same management fee rate as the Target Portfolio and, therefore, is expected to experience the same overall expenses as the Target Portfolio.
The Board of DIG considered the Reorganization and approved the Plan with respect to the Target Portfolio. In considering the Plan,
the Board requested and received detailed information from the officers of DIG, and representatives of Dimensional regarding the Reorganization, including: (1) the specific terms of the Plan; (2) the investment objectives, investment strategies,
and investment policies of the Target Portfolio and Acquiring Portfolio; (3) comparative data analyzing the fees and expenses of the Portfolios; (4) the proposed plans for ongoing management, distribution, and operation of the Acquiring
Portfolio; (5) the management, financial position, and business of Dimensional and its affiliates; and (6) the impact of the Reorganization on the Target Portfolio and its shareholders.
With respect to the information listed above, the Board of DIG considered that, among other information: (1) the Plan was designed
to be a tax-free reorganization and the shares of the Acquiring Portfolio that would be received by the shareholders of the Target Portfolio in the exchange will be equal in aggregate NAV to the aggregate NAV of their shares of the Target
Portfolio as of the closing date of the Reorganization; (2) the investment objectives, strategies and policies of the Target Portfolio and Acquiring Portfolio are identical; (3)
the Acquiring Portfolio’s management
fee is the same as the Target Portfolio’s management fee and, therefore, the Acquiring Portfolio is expected to experience the same overall expenses as the Target Portfolio; (4) the plans for the ongoing management, distribution, and operation of
the Acquiring Portfolio as an ETF will benefit tax conscious shareholders and contribute to the tax-management strategies of the Portfolio; and (5) Dimensional is the adviser of both the Target Portfolio and Acquiring Portfolio and the terms of
the investment management agreements are materially the same. The Board also considered that the Reorganization met the conditions under Rule 17a-8 under the 1940 Act to be consummated without the vote of shareholders of the Target Portfolio or
Acquiring Portfolio.
In approving the Reorganization with respect to the Target Portfolio, the Board of DIG, including all of the Independent Directors,
determined that (i) participation in the Reorganization is in the best interest of the Target Portfolio’s shareholders, and (ii) the interests of the Target Portfolio’s shareholders will not be diluted as a result of the Reorganization.
In making these determinations, the Board of DIG, including all of the Independent Directors, considered a number of factors,
including the potential benefits and costs of the Reorganization to the shareholders of the Target Portfolio. These considerations included the following:
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The ETF structure of the Acquiring Portfolio may provide benefits with respect to the management of capital gains distributions. Both the Target and Acquiring
Portfolio are managed with a view to minimize or consider the impact of federal income taxes on investment returns;
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The same investment adviser and portfolio managers that currently manage the Target Portfolio are expected to manage the Acquiring Portfolio following the
closing of the Reorganization;
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The Acquiring Portfolio’s management fee is the same as the Target Portfolio’s management fee and, therefore, the Acquiring Portfolio is expected to experience
the same overall expenses as the Target Portfolio;
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There are no material differences in the contractual terms of the Target Portfolio’s investment management agreement with Dimensional as compared to the
Acquiring Portfolio’s investment management agreement, and Dimensional does not anticipate that the Reorganization will result in any decline in the level of services from the level of services that historically have been provided to
the Target Portfolio;
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The investment objectives, investment strategies and investment policies of the Target Portfolio and Acquiring Portfolio are identical;
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The Target Portfolio will pay the costs of the Reorganization;
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Shareholders of the Target Portfolio must have a brokerage account that is permitted to hold ETF shares in order to receive shares of the Acquiring Portfolio and
the Acquiring Portfolio has engaged a stock transfer agent to hold the Acquiring Portfolio shares for each Target Portfolio shareholder who does not have an appropriate brokerage account at the time of the Reorganization to provide a
year from the date of the Reorganization for such shareholders to establish brokerage accounts;
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A vote of shareholders of the Target Portfolio is not required under DIG’s governing documents or the 1940 Act;
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The Reorganization is intended to be tax-free for federal income tax purposes for shareholders of the Target Portfolio;
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The Acquiring Portfolio does not issue fractional shares so for some shareholders, fractional shares of the Target Portfolio will be redeemed at NAV immediately
prior to the Reorganization and result in a small cash payment, which will be taxable; and
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Shareholders of the Target Portfolio may redeem or exchange their shares of the Target Portfolio prior to the Reorganization if the shareholders do not wish to
hold shares of an ETF.
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Based upon their evaluation of the relevant information presented to it, and in light of its fiduciary duties under federal and
state law, the Board of DIG, including all of the Independent Directors, concluded that completing the Reorganization is in the best interests
of the shareholders of the Target Portfolio and that no dilution of value would result to the shareholders of the Portfolio from the Reorganization.
INFORMATION
ABOUT THE PLAN
This is only a summary of the Plan. You should read the form of Plan, which is attached as Exhibit A to this Information
Statement/Prospectus, for complete information about the Reorganization.
How will the Reorganization be carried out?
The Reorganization will take place after various conditions are satisfied, including the preparation of certain documents. DIG and
the ETF Trust will determine a specific date, called the “closing date,” on which the Reorganization will take place. Under the Plan, the Target Portfolio will transfer all of its assets and liabilities to the Acquiring Portfolio effective on
the closing date, which is scheduled to occur after the close of trading on May 6, 2022, but which may occur on an earlier or later date as DIG and the ETF Trust may agree. In exchange, the ETF Trust will issue shares of the Acquiring Portfolio
that have an aggregate NAV equal to the dollar value of the assets delivered to the Acquiring Portfolio by the Target Portfolio. DIG will distribute the Acquiring Portfolio shares it receives to the shareholders of the Target Portfolio. Each
shareholder of the Target Portfolio will receive a number of Acquiring Portfolio shares with an aggregate NAV equal to the aggregate NAV of his or her shares of the Target Portfolio (and cash in lieu of fractional shares, if any). As soon as
reasonably practicable after the transfer of its assets, the Target Portfolio will then terminate its existence as a separate series of DIG.
The parties may agree to amend the Plan to the extent permitted by law. If DIG and the ETF Trust agree, the Plan may be terminated
or abandoned for the Reorganization at any time before the Reorganization.
DIG and the ETF Trust have made representations and warranties in the Plan that are customary in matters such as the
Reorganization. The Plan contains a number of conditions precedent that must occur before the Target Portfolio or Acquiring Portfolio is obligated to proceed with the Reorganization. One of these conditions requires that DIG and the ETF Trust
shall have received a tax opinion as described below that the consummation of the Reorganization will not result in the recognition of gain or loss for federal income tax purposes for the Target Portfolio, the Acquiring Portfolio or their
shareholders. The receipt of a tax opinion is a condition of the Reorganization that cannot be waived.
Although shareholder approval of the Reorganization is not required and Dimensional does not anticipate that the Reorganization will
be terminated, if the Reorganization is terminated, shareholders of the Target Portfolio would be notified of the change and the Target Portfolio would continue to operate as a series of DIG.
Who will pay the costs of the Reorganization?
The Target Portfolio will pay all of the costs and expenses resulting from the Reorganization because the
Reorganization is expected to benefit the Portfolio. The estimated expenses of the Reorganization are $120,000, which is less than 0.01% of the average net assets of the Target Portfolio. These costs and expenses include professional fees,
charges by service providers, and any costs related to the printing and mailing of this
Information Statement/Prospectus. It is not anticipated that any holdings of the Target Portfolio will be required to be sold in order to consummate
the Reorganization, and therefore, there will not be any brokerage costs or other transaction costs as a result of the Reorganization.
What are the tax consequences of the Reorganization?
The following is a general summary of some of the important U.S. federal income tax consequences of the
Reorganization, and is based upon the current provisions of the Code, the existing U.S. Treasury Regulations thereunder, current administrative rulings of the U.S. Internal Revenue Service (“IRS”) and published judicial decisions, all of which
are subject to change, possibly with retroactive effect. These considerations are general in nature and individual shareholders should consult their own tax advisers as to the federal, state, local, and foreign tax considerations applicable to
them and their individual circumstances. These same considerations generally do not apply to shareholders who hold their shares in a tax-advantaged account, such as an individual retirement account (“IRA”) or qualified retirement plan.
The Reorganization is intended to be a tax-free “reorganization” within the meaning of Section 368 of the Code for U.S. federal
income tax purposes. As a condition to the consummation of the Reorganization, Stradley Ronon Stevens & Young, LLP will deliver an opinion (“Tax Opinion”) to DIG and the ETF Trust to the effect that, based on the facts and assumptions stated
therein (as well as certain representations made on behalf of the Target Portfolio and Acquiring Portfolio) and the existing U.S. federal income tax law, and conditioned on the Reorganization being completed in accordance with the Plan, for U.S.
federal income tax purposes:
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The Reorganization will qualify as a “reorganization” (as defined in Section 368(a)(1)(F) of the Code), and each Portfolio will be a “party to a reorganization”
(within the meaning of Section 368(b) of the Code);
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No Portfolio will recognize any gain or loss as a direct result of the Reorganization;
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The Target Portfolio’s shareholders will not recognize any gain or loss on the exchange of their Target Portfolio shares for the Acquiring Portfolio shares,
except with respect to cash received in lieu of fractional shares, if any;
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The aggregate tax basis in Acquiring Portfolio shares that a Target Portfolio shareholder receives pursuant to the Reorganization will be the same as the
aggregate tax basis in the Target Portfolio shares the shareholder holds immediately before the Reorganization (reduced by the amount of any tax basis allocable to a fractional share for which cash is received, if any). The holding
period for Acquiring Portfolio shares that a Target Portfolio shareholder receives pursuant to the Reorganization will include the holding period for the Target Portfolio shares the shareholder holds immediately before the
Reorganization, provided that the shareholder holds the shares as capital assets at the time of the Reorganization;
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The Acquiring Portfolio’s tax basis in each asset the Target Portfolio transfers to it will be the same as the Target Portfolio’s tax basis therein immediately
before the Reorganization, and the Acquiring Portfolio’s holding period for each such asset
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will include the Target Portfolio’s holding period therefore (except where the Acquiring Portfolio’s investment activities have the
effect of reducing or eliminating an asset’s holding period) immediately after the Reorganization; and
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The Reorganization will not result in the termination of the Target Portfolio’s taxable year and the Target Portfolio’s tax attributes enumerated in Section
381(c) of the Code will be taken into account by the Acquiring Portfolio without limitation.
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Notwithstanding the foregoing, no opinion will be expressed as to the tax consequences of the Reorganization on contracts or
securities on which gain or loss is recognized upon the transfer of an asset regardless of whether such transfer would otherwise be a nonrecognition transaction under the Code. None of the Portfolios have requested or will request an advance
ruling from the IRS as to the U.S. federal income tax consequences of the Reorganization.
The Tax Opinion is not binding on the IRS or the courts and is not a guarantee that the tax consequences of the Reorganization will
be as described above. If the Reorganization were consummated but the IRS or the courts were to determine that the Reorganization did not qualify as a tax-free reorganization under the Code, and thus was taxable, the Target Portfolio would
recognize gain or loss on the transfer of its assets to the Acquiring Portfolio, and each shareholder of the Target Portfolio that held shares in a taxable account would recognize a taxable gain or loss equal to the difference between its tax
basis in its Target Portfolio shares and the fair market value of the shares of the Acquiring Portfolio it received.
The tax year of the Target Portfolio is expected to continue with the Acquiring Portfolio, and the capital gains, if any, resulting
from portfolio turnover prior to the Reorganization will be carried over to the Acquiring Portfolio. If the Reorganization were to end the tax year of the Target Portfolio (which is not the intended or expected plan as of the date of this
Information Statement/Prospectus), it would accelerate distributions to shareholders from the Target Portfolio for its short tax year ending on the Closing Date. Such distributions would be taxable and would include any capital gains resulting
from portfolio turnover prior to the Reorganization. If determined necessary by the Portfolios, the Target Portfolio will declare a distribution to shareholders, which together with all previous distributions, will have the effect of
distributing to shareholders all of its investment company taxable income (computed without regard to the deduction for dividends paid), net tax-exempt income, if any, and net realized capital gains, if any, through the closing of the
Reorganization.
General Limitation on Losses. Assuming the
Reorganization qualifies as a tax-free reorganization, as expected, the Acquiring Portfolio will succeed to the tax attributes of the Target Portfolio upon the closing of the Reorganization, including any capital loss carryovers that could have
been used by the Target Portfolio to offset its future realized capital gains, if any, for federal income tax purposes. The capital loss carryovers of the Target Portfolio will be available to offset future gains recognized by the combined
Portfolio. Capital losses of a Portfolio arising in taxable years beginning after December 22, 2010 may be carried forward indefinitely to offset future capital gains.
If, as is anticipated, at the time of the closing of the Reorganization, the Acquiring Portfolio has either no assets or de minimis
assets incident to its organization, there will be no change of ownership of the Target Portfolio as a result of the Reorganization. Thus, the
Reorganization of the Target Portfolio into the Acquiring Portfolio is not expected to result in any limitation on the use by the Acquiring Portfolio
of the Target Portfolio’s capital loss carryovers, if any. However, the capital losses of the Acquiring Portfolio, as the successor in interest to the Target Portfolio, may subsequently become subject to an annual limitation as a result of sales
of the Acquiring Portfolio shares or other reorganization transactions in which the Acquiring Portfolio might engage post-Reorganization.
The foregoing description of the U.S. federal income tax consequences of the Reorganization applies generally to shareholders who
are not tax-exempt investors and does not take into account your particular facts and circumstances. Consult your own tax adviser about the effect of state, local, foreign, and other tax laws because this discussion only relates to U.S. federal
income tax laws.
CAPITAL STRUCTURE AND SHAREHOLDER RIGHTS
The Target Portfolio is a series of DIG. DIG is an open-end, registered management investment company. DIG was organized as a
Maryland corporation on March 19, 1990. The operations of DIG are governed by its Charter, Bylaws, and Maryland law.
DIG also must adhere to the 1940 Act, the rules and regulations promulgated by the Commission
thereunder, and any applicable state securities laws. The Acquiring Portfolio is a series of the ETF Trust. The ETF Trust was organized as a Delaware statutory trust on June 16, 2020. The operations of the ETF Trust are governed by its
Charter, Bylaws and Delaware law. The ETF Trust also must adhere to the 1940 Act, the rules and regulations promulgated by the Commission thereunder, and any applicable state securities laws. A comparison of Maryland law and Delaware law and a
comparison of the governing documents of DIG and the ETF Trust is provided in Exhibit B to this Information Statement/Prospectus.
Following the Reorganization, shareholders of the Target Portfolio will receive shares of the Acquiring Portfolio of the ETF Trust
equal in value to the shares of the Target Portfolio they hold. The Acquiring Portfolio shares will be credited to the Target Portfolio shareholder’s brokerage account and the shares of the Target Portfolio will be cancelled. If a shareholder
does not have a brokerage account that can accommodate shares of an ETF at the time of the Reorganization of the Target Portfolio, the Acquiring Portfolio shares that a shareholder receives in the Reorganization will be held by a stock transfer
agent, AST, until the shareholder identifies a brokerage account into which AST can transfer the shares. If a shareholder’s Acquiring Portfolio shares are not transferred from AST into a brokerage account within a year of the date of the
Reorganization, after one year, such shares of the Acquiring Portfolio held at AST will be converted to cash (subject to applicable federal or state laws concerning unclaimed property) and the cash proceeds sent to the accountholder of record.
The conversion of the Acquiring Portfolio shares to cash may be subject to fees and expenses and will be a taxable event.
What are the
capitalizations of the Portfolios?
The following tables set forth the unaudited capitalization of the Target Portfolio and Acquiring Portfolio as of December 10, 2021, and the unaudited pro forma combined capitalization of the Acquiring
Portfolio as adjusted to give effect to the proposed Reorganization. The following are examples of the number of shares of the Acquiring Portfolio that would have been exchanged for the shares of the Target Portfolio if the
Reorganization had been consummated, and do not reflect the number of
shares or value of shares that would actually be received if the Reorganization, as described, occurs.
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Target Portfolio
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Acquiring Portfolio
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Pro Forma Adjustments+
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Pro Forma—Acquiring Portfolio after Reorganization (estimated)
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Net assets (thousands)
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$8,327,697
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$0
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($120)
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$8,327,577
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Total shares outstanding
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229,441,032
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0
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0
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229,441,032
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Net asset value per share
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$36.30
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$0
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$0
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$36.30
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+ Adjustments reflect the remaining costs of the Reorganization to be incurred by the Target Portfolio.
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The information in the capitalization table above is for informational purposes only. There is no assurance that the Reorganization
will be consummated. Moreover, if consummated, the capitalization of the Target Portfolio and Acquiring Portfolio is likely to be different at the closing date as a result of daily share purchase and redemption activity in the Target Portfolio.
Accordingly, the foregoing should not be relied upon to reflect the number of shares of the Acquiring Portfolio that actually will be received on or after such date.
ADDITIONAL
INFORMATION ABOUT THE ACQUIRING PORTFOLIO
AND TARGET PORTFOLIO
Comparison
of the Portfolios’ Investment Objectives and Principal Investment Strategies
The following summarizes the investment objectives and principal investment strategies of the Target Portfolio and Acquiring
Portfolio. Further information about the Target Portfolio’s and Acquiring Portfolio’s investment objectives and strategies are contained in prospectuses and SAIs of the Target Portfolio and Acquiring Portfolio, which are on file with the SEC.
The prospectuses and SAIs,
as supplemented to date, of the
Target Portfolio and
Acquiring Portfolio are also incorporated herein by reference.
The investment objectives of the Portfolios are identical. The investment objective of
the Target Portfolio and Acquiring Portfolio is to achieve long-term capital appreciation.
The Target Portfolio and Acquiring Portfolio employ the same principal investment strategies in seeking to achieve their respective
objectives.
Dimensional’s tax management strategies for the Target Portfolio and Acquiring Portfolio are designed to maximize the after-tax
value of a shareholder’s investment. Generally, Dimensional buys and sells securities for each Portfolio with the goals of: (i) delaying and minimizing the realization of net capital gains (e.g., selling stocks with capital
losses to offset gains, realized or anticipated); and (ii) maximizing the extent to which any realized net capital gains are long-term in nature (i.e.,
taxable at lower capital gains tax rates).
To achieve the investment objective for the Target Portfolio and Acquiring Portfolio, Dimensional implements an integrated
investment approach that combines research, portfolio design, portfolio management, and trading functions. As further described below, the design of the Target Portfolio and Acquiring Portfolio emphasizes long-term drivers of expected returns
identified by Dimensional’s research, while balancing risk through broad diversification across companies and sectors. Dimensional’s portfolio management and trading processes further balance those long-term drivers of expected returns with
shorter-term drivers of expected returns and trading costs.
To achieve their investment objectives, the Target Portfolio and Acquiring Portfolio each generally are designed to purchase a broad
and diverse group of securities of U.S. companies that Dimensional determines to be value stocks. A company’s market capitalization is the number of its shares outstanding times its price per share. Companies with higher market capitalizations
generally represent a larger proportion of the Target Portfolio and the Acquiring Portfolio than companies with relatively lower market capitalizations. Dimensional may overweight certain stocks, including smaller companies, lower relative price
stocks, and/or higher profitability stocks within the value segment of the U.S. market. An equity issuer is considered to have a low relative price (i.e., a value stock) primarily because it has a low price in relation to its book value. In
assessing relative price, Dimensional may consider additional factors such as price to cash flow or price to earnings ratios. An equity issuer is considered to have high profitability because it has high earnings or profits from operations in
relation to its book value or assets. The criteria Dimensional uses for assessing relative price and profitability are subject to change from time to time. Dimensional may decrease the amount that the Target Portfolio and Acquiring Portfolio
invest in small capitalization companies that have lower profitability and/or higher relative prices.
Dimensional may also increase or reduce the exposure of the Target Portfolio or Acquiring Portfolio to an eligible company, or
exclude a company, based on shorter-term considerations, such as a company’s price momentum and investment characteristics. In assessing a company’s investment characteristics, Dimensional considers ratios such as recent changes in assets divided
by total assets. Dimensional may consider a small capitalization company’s investment characteristics as compared to other eligible companies when making investment decisions and may exclude a small capitalization company with high investment as
measured by the company’s recent asset growth. The Target Portfolio and Acquiring Portfolio will generally not exclude more than 5% of the eligible U.S. small capitalization companies based on such investment characteristics. The criteria
Dimensional uses for assessing a company’s investment characteristics are subject to change from time to time. In addition, Dimensional seeks to reduce trading costs using a flexible trading approach that looks for opportunities to participate in
the available market liquidity, while managing turnover and explicit transaction costs.
As a non-fundamental policy, under normal circumstances, each of the Target Portfolio and Acquiring Portfolio will invest at least
80% of its net assets in securities of U.S. companies. Dimensional considers companies of all market capitalizations for purchase by the Portfolios.
The Target Portfolio and Acquiring Portfolio each may purchase or sell futures contracts and options on futures contracts for U.S.
equity securities and indices, to increase or
decrease equity market exposure based on actual or expected cash inflows to or outflows from the Portfolio.
The Target Portfolio and Acquiring Portfolio each may lend its portfolio securities to generate additional income.
Comparison of the Portfolios’ Principal Risks
The risks associated with an investment in the Target Portfolio and Acquiring Portfolio are identical, except that the Acquiring
Portfolio is subject to certain risks unique to operating as an ETF. Below the principal risks for the Target Portfolio and Acquiring Portfolio are identified followed by a description of each risk.
The Target Portfolio and Acquiring Portfolio are both subject to the following risks: Equity Market
Risk, Value Investment Risk, Profitability Investment Risk, Small and Mid-Cap Company Risk, Tax-Management Strategy Risk, Derivatives Risk, Securities Lending Risk, Operational Risk, and Cyber Security Risk. Additionally, the Acquiring Portfolio
is subject to Market Trading Risk and Premium/Discount Risk.
Equity Market Risk: Even a long-term investment approach cannot guarantee a profit. Economic, market, political, and issuer-specific conditions and events will cause the value of equity securities, and a Portfolio that owns them, to
rise or fall. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. In addition, economies and financial markets throughout the world have become increasingly interconnected, which increases the
likelihood that events or conditions in one region or country will adversely affect markets or issuers in other regions or countries. Portfolio securities may be negatively impacted by inflation (or expectations for inflation), interest rates,
global demand for particular products/services or resources, natural disasters, pandemics, epidemics, terrorism, war, military confrontations, regulatory events and governmental or quasi-governmental actions, among others.
The ongoing outbreak of the novel coronavirus, COVID-19, has resulted, at times, in market closures, market volatility, liquidity constraints and
increased trading costs. Efforts to contain the spread of COVID-19 have resulted in global travel restrictions and disruptions of healthcare systems, business operations and supply chains, layoffs, reduced consumer demand, defaults and credit
rating downgrades, and other significant economic impacts. The effects of COVID-19 have impacted global economic activity and may heighten pre-existing political, social and economic risks, domestically or globally. The full impact of the
COVID-19 pandemic is unpredictable and may adversely affect the Portfolio’s performance.
Value Investment Risk: Value stocks may perform
differently from the market as a whole and an investment strategy purchasing these securities may cause the Portfolio to at times underperform equity funds that use other investment strategies. Value stocks can react differently to political,
economic, and industry developments than the market as a whole and other types of stocks. Value stocks also may underperform the market for long periods of time.
Profitability Investment Risk: High relative profitability stocks may perform differently from the market as a whole and an investment strategy purchasing these securities may cause the Portfolio to at times underperform equity funds that use
other investment strategies.
Small and Mid-Cap Company Risk: Securities of small and mid-cap companies are often less liquid than those of large companies and this could make it difficult to sell a small or mid-cap company security at a desired time or price. As a result,
small and mid-cap company stocks may fluctuate relatively more in price. In general, small and mid-capitalization companies are also more vulnerable than larger companies to adverse business or economic developments and they may have more
limited resources.
Tax-Management Strategy Risk: The tax-management strategies may alter investment decisions and affect portfolio holdings, when compared to those of non-tax managed funds. Dimensional anticipates that performance of the Portfolio may deviate from
that of non-tax managed funds. Although Dimensional intends to manage the Portfolio in a manner which considers the effects of the realization of capital gains and taxable dividend income each year, the Portfolio may nonetheless distribute
taxable gains and dividends to shareholders.
Derivatives Risk: Derivatives are instruments, such as futures, and options thereon, (collectively, “Derivative instruments”), whose value is derived from that of other assets, rates or indices. The use of derivative instruments for
non-hedging purposes may be considered to carry more risk than other types of investments. When a Portfolio uses derivative instruments, the Portfolio will be directly exposed to the risks of those derivatives. Derivative instruments expose a
Portfolio to counterparty risk (the risk that the derivative counterparty will not fulfill its contractual obligations), including credit risk of the derivative counterparty, and settlement risk (the risk faced when one party to a transaction
has performed its obligations under a contract but has not yet received value from its counterparty). The possible lack of a liquid secondary market for derivative instruments and the resulting inability of a Portfolio to sell or otherwise
close a derivatives position could expose the Portfolio to losses and could make derivative instruments more difficult for the Portfolio to value accurately. Some derivative instruments are more sensitive to interest rate changes and market
price fluctuations than other securities. A Portfolio could also suffer losses related to its derivatives positions as a result of unanticipated market movements, which losses are potentially unlimited. Dimensional may not be able to predict
correctly the direction of securities prices, interest rates, currency exchange rates and other economic factors, which could cause a Portfolio’s derivatives positions to lose value. Valuation of derivative instruments may also be more
difficult in times of market turmoil since many investors and market makers may be reluctant to purchase derivative instruments or quote prices for them. Changes in the value of a derivative instrument may not correlate perfectly with the
underlying asset, securities, rate or index, and the Portfolio could lose more than the principal amount invested.
Securities Lending Risk: Securities lending involves the risk that the borrower may fail to return the securities in a timely manner or at all. As a result, a Portfolio may lose money and there may be a delay in recovering the loaned
securities. A Portfolio could also lose money if it does not recover the securities and/or the value of the collateral falls, including the value of investments made with cash collateral. Securities lending also may have certain adverse tax
consequences.
Operational Risk: Operational risks include human error,
changes in personnel, system changes, faults in communication, and failures in systems, technology, or processes. Various
operational events or circumstances are outside Dimensional’s control, including instances at third parties. A Portfolio and Dimensional seek to
reduce these operational risks through controls and procedures. However, these measures do not address every possible risk and may be inadequate to address these risks.
Cyber Security Risk: A Portfolio’s and its service providers’ use of internet, technology and information systems may expose the Portfolio to potential risks linked to cyber security breaches of those technological or information
systems. Cyber security breaches, amongst other things, could allow an unauthorized party to gain access to proprietary information, customer data, or fund assets, or cause a Portfolio and/or its service providers to suffer data corruption or
lose operational functionality.
Market Trading Risk (Acquiring
Portfolio only): Although shares of the Portfolio are listed for trading on one or more stock exchanges, there can be no assurance that an active trading market for such shares will develop or be
maintained. There are no obligations of market makers to make a market in the Portfolio’s shares or of an authorized participant to submit purchase or redemption orders for Creation Units. Decisions by market makers or authorized participants
to reduce their role or step away from these activities in times of market stress could inhibit the effectiveness of the arbitrage process in maintaining the relationship between the underlying value of the Portfolio’s portfolio securities and
the Portfolio’s market price. This reduced effectiveness could result in Portfolio shares trading at a premium or discount to its NAV and also greater than normal intraday bid/ask spreads. Additionally, in stressed market conditions, the market
for the Portfolio’s shares may become less liquid in response to deteriorating liquidity in the markets for the Portfolio’s portfolio holdings, which may cause a significant variance in the market price of the Portfolio’s shares and their
underlying value as well as an increase in the Portfolio’s bid-ask spread.
There can be no assurance that the Portfolio’s shares will continue to trade on a stock exchange or in any market or that the Portfolio’s shares will continue to meet the
requirements for listing or trading on any exchange or in any market, or that such requirements will remain unchanged. Secondary market trading in Portfolio shares may be halted by a stock exchange because of market conditions or other reasons.
In addition, trading in Portfolio shares on a stock exchange or in any market may be subject to trading halts caused by extraordinary market volatility pursuant to “circuit breaker” rules on the stock exchange or market.
During a “flash crash,” the market prices of the Portfolio’s shares may decline suddenly and significantly. Such a decline may not reflect the performance of the portfolio
securities held by the Portfolio. Flash crashes may cause authorized participants and other market makers to limit or cease trading in the Portfolio’s shares for temporary or longer periods. Shareholders could suffer significant losses to the
extent that they sell shares at these temporarily low market prices. Shares of the Portfolio, similar to shares of other issuers listed on a stock exchange, may be sold short and are therefore subject to the risk of increased volatility
associated with short selling.
Premium/Discount Risk (Acquiring Portfolio only): Shares of the Portfolio may trade at prices other than NAV. Shares of the Portfolio trade on stock exchanges at prices at, above or below their most recent NAV. The NAV of the Portfolio is calculated at the end of
each business day and fluctuates with changes in the market value of the Portfolio’s holdings since the most recent calculation. The trading prices of the Portfolio’s shares fluctuate continuously
throughout trading hours based on market supply and demand rather than NAV. As a result, the trading prices of the Portfolio’s shares may deviate significantly from NAV
during periods of market volatility.
Any of these factors, among others, may lead to the Portfolio’s shares trading at a premium or discount to NAV. Thus, you may pay more (or less) than NAV when you buy
shares of the Portfolio in the secondary market, and you may receive less (or more) than NAV when you sell those shares in the secondary market. Dimensional cannot predict whether shares will trade above (premium), below (discount) or at NAV.
However, because shares can be created and redeemed in Creation Units at NAV, Dimensional believes that large discounts or premiums to the NAV of the Portfolio are not likely to be sustained over the long-term. While the creation/redemption
feature is designed to make it likely that the Portfolio’s shares normally will trade on stock exchanges at prices close to the Portfolio’s next calculated NAV, exchange prices are not expected to correlate exactly with the Portfolio’s NAV due to
timing reasons as well as market supply and demand factors. In addition, disruptions to creations and redemptions or extreme market volatility may result in trading prices for shares of the Portfolio that differ significantly from its NAV.
How do the fundamental investment policies of the Portfolios compare?
The fundamental investment policies of the Target Portfolio and Acquiring Portfolio are identical.
Where can I find more financial and performance
information about the Portfolios?
More information about the Target Portfolio and Acquiring Portfolio is included in: (i) the
Prospectus dated February 12, 2022, as supplemented to date, for the Target Portfolio, (“Target Portfolio Prospectus”), which is on
file with the SEC (http://sec.gov) (File Nos. 033-33980/811-06067) (Accession No. 0001193125-22-037437); (ii) the
Statement of Additional
Information dated February 12, 2022,
as supplemented to date, for the Target Portfolio (“Target Portfolio SAI”) which is on file with the SEC (http://sec.gov) (File Nos. 033-33980/811-06067) (Accession
No. 0001193125-22-037437); (iii) the
Prospectus dated February 12, 2022 for the Acquiring Portfolio (“Acquiring Portfolio
Prospectus”) which is on file with the SEC (http://sec.gov) (File Nos. 333-239440/811-23580) (Accession No. 0001193125-22-037448); (iv) the
Statement of Additional Information dated February 12, 2022 for the Acquiring Portfolio, (“Acquiring Portfolio SAI”) which is on file
with the SEC (http://sec.gov) (File Nos. 333-239440/811-23580) (Accession No. 0001193125-22-037448); (v) the Target Portfolio’s audited financial statements and related report of the independent public accounting firm included in the Target
Portfolio’s
Annual Report to Shareholders for the fiscal year ended October 31, 2021 (the “Target Portfolio Annual Report”) which is on file
with the SEC (http://sec.gov) (File Nos. 033-33980/811-06067) (Accession No. 0001193125-22-004355); (vi) the
statement of additional information, dated March [20], 2022, relating to this Information Statement/Prospectus, which
is incorporated by reference herein.
You may request free copies of the Target Portfolio Prospectus and Target Portfolio SAI (including any supplement thereto), by
calling collect at 512-306-7400, by accessing the documents at https://us.dimensional.com/fund-documents, or by writing to Dimensional Investment Group Inc., 6300 Bee Cave Road, Building One, Austin, Texas 78746. You may request free
copies of the Acquiring Portfolio SAI and the Statement of Additional Information
relating to this Information Statement/Prospectus, by calling collect at 512-306-7400, or by writing to Dimensional ETF Trust, 6300 Bee Cave Road,
Building One, Austin, Texas 78746.
This Information Statement/Prospectus, which constitutes part of a Registration Statement filed by the ETF Trust with the Commission
under the Securities Act of 1933, as amended, omits certain information contained in such Registration Statement. Reference is hereby made to the Registration Statement and to the exhibits and amendments thereto for further information with
respect to the Acquiring Portfolio and the shares offered. Statements contained herein concerning the provisions of documents are necessarily summaries of such documents.
Each Portfolio also files proxy materials, information statements, reports, and other information with the Commission in accordance
with the informational requirements of the Securities Exchange Act of 1934, as amended, and the 1940 Act. These materials can be obtained electronically from the EDGAR database on the Commission’s Internet site (http://www.sec.gov) or,
after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov.
As of January 31, 2022,
the Acquiring Portfolio was not operational and, therefore, had no shareholders. As of January 31, 2022, the officers and Directors of DIG, as a group, owned or controlled less than 1% of the outstanding shares of the Target Portfolio. As of
January 31, 2022, the following shareholders owned of record, or to the knowledge of the Target Portfolio, beneficially, 5% or more of the outstanding shares of the Target Portfolio:
|
Name and Address of Record or Beneficial Owner
|
Percentage of Target Portfolio
|
|
Charles Schwab & Co. Inc.
101 Montgomery Street
San Francisco, CA 94104
|
56.15%
|
|
TD Ameritrade, Inc.*
PO Box 2226
Omaha, NE 68103
|
18.54%
|
|
National Financial Services LLC*
200 Liberty Street
One World Financial Center
New York, NY 10281
|
16.11%
|
____________________________________
* Owner of record only (omnibus).
The Administrators and Transfer Agents. State Street Bank
and Trust Company,2 1 Lincoln Street, Boston, MA 02111, serves as the accounting and administration services, dividend disbursing, and transfer agent for the Target Portfolio. Citi Fund Services Ohio, Inc., 4400 Easton Commons, Suite
200, Columbus, OH 43219, serves as the accounting and administration services, and dividend disbursing agent for the Acquiring Portfolio. Citibank, N.A., 111 Wall Street, New York, NY, 10005, serves as the transfer
agent for the Acquiring Portfolio. American Stock Transfer & Trust Company, LLC, 6201 15th Avenue, Brooklyn, NY 11219, will serve as stock transfer agent for the Acquiring Portfolio.
Custodian. State Street Bank and
Trust Company, 1 Lincoln Street, Boston, MA 02111, is custodian of the Target Portfolio’s investments. Citibank, N.A., 111 Wall Street, New York, NY 10005, is the custodian of the Acquiring Portfolio’s investments.
Independent Registered Public Accounting Firm.
PricewaterhouseCoopers LLP, located at Two Commerce Square, Suite 1800, 2001 Market Street, Philadelphia, PA 19103-7042, serves as the independent registered public accounting firm to the Target Portfolio and Acquiring Portfolio.
Shareholders Sharing the Same Address. Normally, if two
or more shareholders share the same address, only one copy of the Information Statement/Prospectus is being delivered to that address, unless the Portfolio(s) have received contrary instructions from one or more of the shareholders at that
shared address. Upon written or oral request, the Acquiring Portfolio will deliver promptly a separate copy of the Information Statement/Prospectus to a shareholder at a shared address. Please call the transfer
agent at (888) 576-1167, if you would like to receive a separate copy of the Information Statement/Prospectus.
The Acquiring Portfolio is new and has no performance history as of the date of this Information Statement/Prospectus. The
Acquiring Portfolio will adopt the financial history, including the Financial Highlights, of the Target Portfolio following the Reorganization. The Financial Highlights information for the Target Portfolio is presented below as it will be
adopted by the Acquiring Portfolio following the Reorganization.
The Financial Highlights table is meant to help you understand the Target Portfolio’s financial performance for the past five
years. The total returns in the table represent the rate that you would have earned (or lost) on an investment in the Portfolio, assuming reinvestment of all dividends and distributions. The information has been audited by
PricewaterhouseCoopers LLP, whose report, along with the Target Portfolio’s annual financial statements, are included in the Target Portfolio’s annual report. Further information about the Target Portfolio’s performance is contained in the
annual report which is available upon request.
| 2 |
State Street Bank and Trust Company, as transfer agent for the Target Portfolio, has delegated performance of certain of its duties and responsibilities as the Target Portfolio’s transfer agent to DST Asset Manager Solutions, Inc.,
doing business as SS&C.
|
Dimensional Investment Group Inc.
Financial Highlights
(For a share outstanding throughout each period)
| |
Tax-Managed U.S. Marketwide Value Portfolio II
|
|
Year
|
Year
|
Year
|
Year
|
Year
|
|
Ended
|
Ended
|
Ended
|
Ended
|
Ended
|
|
Oct. 31,
|
Oct. 31,
|
Oct. 31,
|
Oct. 31,
|
Oct. 31,
|
|
2021
|
2020
|
2019
|
2018
|
2017
|
|
Net Asset Value, Beginning of Year
|
$ 25.06
|
$ 28.74
|
$ 28.02
|
$ 28.30
|
$ 24.36
|
|
Income from Investment Operations#
|
|
|
|
|
|
|
Net Investment Income (Loss)
|
0.54
|
0.57
|
0.60
|
0.58
|
0.54
|
|
Net Gains (Losses) on Securities (Realized and Unrealized)
|
11.26
|
(3.22)
|
1.66
|
0.63
|
4.84
|
|
Total from Investment Operations
|
11.80
|
(2.65)
|
2.26
|
1.21
|
5.38
|
|
Less Distributions:
|
|
|
|
|
|
|
Net Investment Income
|
(0.54)
|
(0.55)
|
(0.56)
|
(0.54)
|
(0.53)
|
|
Net Realized Gains
|
---
|
(0.48)
|
(0.98)
|
(0.95)
|
(0.91)
|
|
Total Distributions
|
(0.54)
|
(1.03)
|
(1.54)
|
(1.49)
|
(1.44)
|
|
Net Asset Value, End of Year
|
$ 36.32
|
$ 25.06
|
$ 28.74
|
$ 28.02
|
$ 28.30
|
|
Total Return
|
47.30%
|
(9.41)%
|
8.82%
|
4.27%
|
22.59%
|
|
Net Assets, End of Year (thousands)
|
$8,320,772
|
$1,563,787
|
$1,917,021
|
$1,841,678
|
$1,815,437
|
|
Ratio of Expenses to Average Net Assets*
|
0.23%
|
0.24%
|
0.24%
|
0.22%
|
0.22%
|
|
Ratio of Expenses to Average Net Assets (Excluding Fees Waived, Expenses Reimbursed by Dimensional)*
|
0.41%
|
0.44%
|
0.44%
|
0.42%
|
0.42%
|
|
Ratio of Net Investment Income to Average Net Assets
|
1.62%
|
2.18%
|
2.18%
|
1.98%
|
2.01%
|
|
Portfolio Turnover Rate
|
0%
|
N/A
|
N/A
|
N/A
|
N/A
|
|
# Computed using average shares outstanding.
* Represents the combined ratio for the Portfolio and its respective pro-rata share of its Master Fund through October 15, 2021.
|
|
|
|
|
|
EXHIBITS TO INFORMATION STATEMENT/PROSPECTUS
Exhibit
| A |
Form of Agreement and Plan of Reorganization
|
| B |
Comparison of Maryland and Delaware Governing Instruments and State Law
|
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (“Agreement”) is adopted as of this [___]th day of [______], 2022 by and among: (i) Dimensional
Investment Group Inc. (the “Target Entity”), on behalf of the series identified on Exhibit A hereto (the “Target Portfolio”); and (ii) Dimensional ETF Trust (the “Acquiring Entity”), on behalf of the series identified on
Exhibit A hereto (the “Acquiring Portfolio”).
WHEREAS, the parties hereto intend for the Acquiring Portfolio and Target Portfolio to enter into a transaction pursuant to which: (i) the Acquiring
Portfolio will acquire the Assets and Liabilities (as each such term is defined in Section 1.1) of the Target Portfolio in exchange for shares of the Acquiring Portfolio of equal value to the net assets of the Target Portfolio being acquired, and
(ii) the Target Portfolio will distribute such shares of the Acquiring Portfolio to shareholders of the Target Portfolio, in connection with the liquidation of the Target Portfolio, all upon the terms and conditions hereinafter set forth in this
Agreement (the “Reorganization”). The Acquiring Portfolio is, and will be immediately prior to Closing (defined in Section 3.1), a shell series, without assets (other than seed capital) or liabilities, created for the purpose of acquiring
the Assets and Liabilities (as defined in Section 1.1) of the Target Portfolio;
WHEREAS, the Target Entity and Acquiring Entity are each open-end, registered investment companies of the management type; and
WHEREAS, this Agreement is intended to be and is adopted as a plan of reorganization and liquidation with respect to the Reorganization within the
meaning of Section 368(a)(1) of the United States Internal Revenue Code of 1986, as amended (“Code”).
NOW, THEREFORE, in consideration of the premises and of the covenants and agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
|
1.
|
DESCRIPTION OF THE REORGANIZATION
|
1.1. Provided that all conditions precedent to the
Reorganization set forth herein have been satisfied or, to the extent legally permissible, waived as of the Closing Time (defined in Section 3.1), and based on the representations and warranties each party provides to the others, the Target
Entity and Acquiring Entity agree to take the following steps with respect to the Reorganization, the parties to which are set forth in Exhibit A:
(a) The Target Portfolio shall transfer all of its
Assets, as defined and set forth in Section 1.1(b), to the Acquiring Portfolio, and the Acquiring Portfolio in exchange therefor shall assume the Liabilities, as defined and set forth in Section 1.1(c), and deliver to the Target Portfolio
the number of Acquiring Portfolio shares, plus cash in lieu of fractional shares, all as determined in the manner set forth in Section 2.
(b) The assets of the Target Portfolio to be
transferred to the Acquiring Portfolio shall consist of all property, goodwill, and assets of every description and all interests, rights, privileges and powers of the Target Portfolio that are shown as an asset on the books and records of
the Target Portfolio as of the Closing Time (collectively, “Assets”). The Assets of the Target Portfolio shall be delivered to the
Acquiring Portfolio free and clear of all liens, encumbrances, hypothecations and claims whatsoever, and there shall be no restrictions on the full
transfer thereof.
(c) The Acquiring Portfolio shall assume and pay
when due all obligations and liabilities of the Target Portfolio, existing on or after the Closing Date, whether absolute, accrued, contingent or otherwise (collectively, the “Liabilities”), and such Liabilities shall become the obligations
and liabilities of the Acquiring Portfolio. The Target Portfolio will use its reasonable best efforts to discharge all known Liabilities prior to or at the Valuation Date (as defined in Section 2.1(a)) to the extent permissible and
consistent with its own investment objectives and policies. The Assets minus the Liabilities of the Target Portfolio shall be referred to herein as the Target Portfolio’s “Net Assets.”
(d) As soon as is reasonably practicable after the
Closing, the Target Portfolio will distribute to its shareholders of record (“Target Portfolio Shareholders”) the shares of the Acquiring Portfolio received by the Target Portfolio pursuant to Section 1.1(a), as set forth in Exhibit
A, on a pro rata basis, and without further notice the outstanding shares of the Target Portfolio will be redeemed and cancelled as permitted by its Governing Documents (as defined in Section 4.1) and applicable law, and the Target
Portfolio will as promptly as practicable completely liquidate and dissolve as permitted by its Governing Documents and applicable law. Such distribution to the Target Portfolio Shareholders and liquidation of the Target Portfolio will be
accomplished by the transfer of the Acquiring Portfolio’s shares then credited to the account of the Target Portfolio on the books of the Acquiring Portfolio to open accounts on the share records of the Acquiring Portfolio in the names of
the Target Portfolio Shareholders. The aggregate net asset value of the Acquiring Portfolio’s shares to be so credited to the Target Portfolio Shareholders shall be equal to the aggregate net asset value of the Target Portfolio’s shares
owned by the Target Portfolio Shareholders on the Valuation Date, plus cash in lieu of fractional shares. The Acquiring Portfolio shall not issue certificates representing shares in connection with such exchange.
(e) Ownership of the Acquiring Portfolio’s shares
will be shown on its books, as such are maintained by the Acquiring Portfolio’s transfer agent.
(f) Beginning at least fifteen (15) business days
prior to the Valuation Date, the Target Portfolio will provide the Acquiring Portfolio with a daily schedule of the Assets then held by the Target Portfolio. At least ten (10) business days prior to the Valuation Date, Dimensional, on
behalf of the Acquiring Portfolio, will advise the Target Portfolio of any investments of the Target Portfolio shown on the Target Portfolio’s schedule of Assets that the Acquiring Portfolio would not be permitted to hold (i) under its
investment restrictions; (ii) under applicable law; or (iii) because the transfer of such investments would result in material operational or administrative difficulties (including relating to valuation matters) to the Acquiring Portfolio
in connection with facilitating the orderly transition of the Target Portfolio’s Assets to the Acquiring Portfolio. Under such circumstances, to the extent practicable, the Target Portfolio will, if requested by the Acquiring Portfolio
and, to the extent permissible and consistent with its own investment objectives and policies and the fiduciary duties of the investment adviser responsible for the portfolio management of the Target
Portfolio, dispose of such investments prior to the Valuation Date. Notwithstanding the foregoing, nothing herein will permit or require the Target Portfolio to dispose of any Assets, if, in the reasonable
judgment of the Target Entity’s board of directors or the Target Portfolio’s investment adviser, such disposition would adversely affect the tax-free nature of the Reorganization for U.S. federal income tax purposes, or would adversely affect the
Target Portfolio’s status as a “regulated investment company” under the Code or would otherwise not be in the best interests of the Target Portfolio.
(g) Any transfer taxes payable upon issuance of the
Acquiring Portfolio’s shares in a name other than the registered holder of the Target Portfolio’s shares on the books and records of the Target Portfolio as of that time shall, as a condition of such issuance and transfer, be paid by the
person to whom the Acquiring Portfolio’s shares are to be issued and transferred.
(h) Immediately after the Closing Time, the share
transfer books relating to the Target Portfolio shall be closed and no transfer of shares shall thereafter be made on such books.
2.1. With respect to the Reorganization:
(a) The value of the Target Portfolio’s Assets shall
be the value of such Assets computed as of immediately after the close of regular trading on the New York Stock Exchange (“NYSE”), which shall reflect the declaration of any dividends, on the Closing Date (the “Valuation Date”),
using the valuation procedures set forth in the then-current prospectus for the Target Portfolio and the valuation procedures established by the Target Entity’s board of directors. On the Valuation Date, the Target Portfolio shall record
the value of the Assets, as valued pursuant to this Section 2.1(a), on a valuation report (the “Valuation Report”) and deliver a copy of the Valuation Report to the Acquiring Portfolio by 7:00 p.m. (Eastern time) on the Valuation
Date, or as soon as practicable thereafter.
(b) The net asset value per share of the Acquiring
Portfolio shares issued in connection with the Reorganization shall be the net asset value per share of the Target Portfolio as of the close of business on the Valuation Date.
(c) The number of Acquiring Portfolio shares issued
in exchange for the Target Portfolio’s Net Assets shall equal the number of shares of the Target Portfolio outstanding as of the Valuation Date. All Acquiring Portfolio shares delivered to the Target Portfolio will be delivered at net
asset value without the imposition of a sales load, commission, transaction fee or other similar fee.
(d) All computations of value
shall be made by the Target Portfolio or its designated recordkeeping agent using the valuation procedures described in this Section 2 and shall be subject to review by the Acquiring Portfolio and/or its recordkeeping agent, and, if
requested by either the Target Entity or the Acquiring Entity, by the independent registered public accountant of the requesting party.
|
3.
|
CLOSING AND CLOSING DATE
|
3.1. The Reorganization shall close on ________,
2022, or such other date as the parties may agree (the “Closing Date”). All acts taking place at the closing of the Reorganization (“Closing”) shall, subject to the satisfaction or waiver of the conditions in this Agreement,
be deemed to take place simultaneously as of the later of 7:01 p.m. Eastern time or the finalization of the Target Portfolio’s net asset value on the Closing Date of the Reorganization, unless otherwise agreed to by the parties (the “Closing
Time”). The Closing of the Reorganization shall be held in person, by facsimile, email or such other communication means as the parties may reasonably agree. The Target Portfolio shall notify the Acquiring Portfolio of any portfolio
security held by the Target Portfolio in other than book-entry form at least five (5) business days prior to the Closing Date.
3.2. With respect to the Reorganization:
(a) The Target Portfolio’s portfolio securities,
investments or other assets that are represented by a certificate or other written instrument shall be transferred and delivered by the Target Portfolio as of the Closing Time to the Acquiring Portfolio’s custodian for the account of the
Acquiring Portfolio duly endorsed in proper form for transfer and in such condition as to constitute good delivery thereof. The Target Portfolio shall direct the Target Portfolio’s custodian (the “Target Custodian”) to deliver to
the Acquiring Portfolio’s custodian as of the Closing Date by book entry, in accordance with the customary practices of the Target Custodian and any securities depository (as defined in Rule 17f-4 under the 1940 Act), in which the Assets
are deposited, the Target Portfolio’s portfolio securities and instruments so held. The Target Portfolio’s portfolio securities represented by a certificate or other written instrument shall be presented by the Target Custodian to the
Acquiring Portfolio’s custodian. Such presentation shall be made for examination no later than five (5) business days preceding the Closing Date, and such certificates and other written instruments shall be transferred and delivered by the
Target Portfolio as of the Closing Time for the account of the Acquiring Portfolio duly endorsed in proper form for transfer in such condition as specified by the Acquiring Portfolio’s custodian so as to constitute good delivery thereof.
The cash to be transferred by the Target Portfolio shall be delivered to the Acquiring Portfolio’s custodian by wire transfer of federal funds or other appropriate means on the Closing Date. If
the Target Portfolio is unable to make such delivery on the Closing Date in the manner contemplated by this Section for the reason that any of such securities or other investments purchased prior to the Closing Date have not yet been
delivered to the Target Portfolio or its broker, then the Acquiring Portfolio may, in its sole discretion, waive the delivery requirements of this Section with respect to said undelivered securities or other investments if the Target
Portfolio has, by or on the Closing Date, delivered to the Acquiring Portfolio or its custodian executed copies of an agreement of assignment and escrow and due bills executed on behalf of said broker or brokers, together with such other
documents as may be required by the Acquiring Portfolio or its custodian, such as brokers’ confirmation slips.
(b) The Target Entity shall direct the Target
Custodian for the Target Portfolio to deliver, at the Closing or soon as practicable thereafter, a certificate of an authorized officer stating that (i) except as permitted by Section 3.2(a), the Assets have been delivered in proper form to
the Acquiring Portfolio no later than the Closing Time on the Closing Date, and (ii) all necessary taxes in connection with the delivery of the Assets, including all applicable federal, state and foreign stock transfer stamps, if any, have
been paid or provision for payment has been made. At the Closing, or as soon as practicable thereafter, the Acquiring Entity will cause the custodian for the Acquiring Portfolio to deliver a certificate of an authorized officer
acknowledging that the Acquiring Portfolio has received the Target Portfolio portfolio securities, cash and any other Assets as of the final settlement date for such transfers.
(c) At such time prior to the Closing Date as the
parties mutually agree, the Target Portfolio shall provide instructions and related information to the Acquiring Portfolio or its transfer agent with respect to the Target Portfolio Shareholders, including names, addresses, dividend
reinvestment elections, if any, and tax withholding status of the Target Portfolio Shareholders as of the date agreed upon (such information to be updated as of the Closing Date, as necessary). The Acquiring Portfolio and its transfer
agent shall have no obligation to inquire as to the validity, propriety or correctness of any such instruction, information or documentation, but shall, in each case, assume that such instruction, information or documentation is valid,
proper, correct and complete.
(d) The Target Entity shall direct the transfer
agent for the Target Portfolio (the “Target Transfer Agent”) to deliver to the Acquiring Portfolio at the Closing a certificate of an authorized officer stating that its records, as provided to the Acquiring Portfolio, contain the
names and addresses of the Target Portfolio Shareholders and the number of outstanding shares owned by each such shareholder immediately prior to the Closing. The Acquiring Portfolio shall issue and deliver to the Secretary of the Target
Portfolio a confirmation evidencing the Acquiring Portfolio shares to be credited on the Closing Date, or provide other evidence satisfactory to the Target Entity that the Acquiring Portfolio’s shares have been credited to the Target
Portfolio Shareholders’ accounts on the books of the Acquiring Portfolio. At the Closing, each party shall deliver to the other such bills of sale, checks, assignments, certificates, if any, receipts or other documents as such other party
or its counsel may reasonably request.
(e) In the event that on the Valuation Date or the
Closing Date (i) the NYSE or another primary trading market for portfolio securities of the Target Portfolio (each, an “Exchange”) shall be closed to trading or trading thereupon shall be restricted, or (ii) trading or the reporting
of trading on such Exchange or elsewhere shall be disrupted so that, in the judgment of the board of trustees/directors of the Acquiring Entity or the Target Entity, or the authorized officers of such entities, accurate appraisal of the
value of the net assets of the Acquiring Portfolio or the Target Portfolio, respectively, is impracticable, the Valuation Date and the Closing Date shall be postponed until the first business day after the day when trading shall have been
fully resumed and reporting shall have been restored or such later dates as may be mutually agreed in writing by an authorized officer of each party.
|
4.
|
REPRESENTATIONS AND WARRANTIES
|
4.1. The
Target Entity, on behalf of itself or, where applicable the Target Portfolio, represents and warrants to the Acquiring Entity and Acquiring Portfolio as follows:
(a) The
Target Entity is a corporation organized under the laws of the State of Maryland, validly existing and in good standing and with power under the Target Entity’s governing documents (including bylaws), as applicable (“Governing Documents”),
to own all of its Assets, to carry on its business as it is now being conducted and to enter into this Agreement and perform its obligations hereunder. The Target Portfolio is a duly
established and designated separate series of the Target Entity;
(b) The Target Entity is a registered investment
company classified as a management company of the open-end type, and its registration with the U.S. Securities and Exchange Commission (the “Commission”) as an investment company under the 1940 Act, and the registration of the shares
of the Target Portfolio under the Securities Act of 1933, as amended (“1933 Act”), are in full force and effect, and will be in full force and effect on the Closing Date, and no action or proceeding to revoke or suspend such
registrations is pending, or to the knowledge of the Target Portfolio, threatened. All issued and outstanding shares of the Target Portfolio have been offered for sale in conformity in all material respects with applicable federal and
state securities laws;
(c) No consent, approval, authorization, or order of
any court or governmental authority or the Financial Industry Regulatory Authority (“FINRA”) is required for the consummation by the Target Portfolio and the Target Entity of the transactions contemplated herein, except such as have
been obtained or will be obtained prior to the Closing Date under the 1933 Act, the Securities Exchange Act of 1934, as amended (“1934 Act”), the 1940 Act, state securities or blue sky laws (which term as used herein shall include
the laws of the District of Columbia and of Puerto Rico) and the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “Hart-Scott-Rodino Act”), each of which, as required, shall have been obtained on or prior to the Closing
Date. No consent of or notice to any other third party or entity is required for the consummation by the Target Portfolio of the transactions contemplated by this Agreement;
(d) The prospectus and statement of additional
information and current shareholder reports of the Target Portfolio, and each prospectus and statement of additional information and shareholder reports of the Target Portfolio used at all times during the three (3) years prior to the date
of this Agreement, conform or conformed at the time of its use in all material respects to the applicable requirements of the 1933 Act and the 1940 Act and the rules and regulations of the Commission thereunder and does not or did not at
the time of its use include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not
materially misleading;
(e) The Target Portfolio is in compliance in all
material respects with, and during the three (3) years prior to the date of this Agreement was in compliance in all material respects with, the requirements of, and the rules and regulations under, the
1933 Act, the 1934 Act and the 1940 Act, state securities laws and all other applicable federal and state laws or regulations. The Target Portfolio is in compliance in all material respects with, and during the
three (3) years prior to the date of this Agreement was in compliance in all material respects with, its investment objectives, policies, guidelines and restrictions and compliance procedures, and the value of the Net Assets of the Target
Portfolio is, and during such period was, determined using portfolio valuation methods that, in the reasonable judgment of the Target Portfolio, comply in all material respects with the requirements of the 1940 Act and the rules and regulations
of the Commission thereunder and the pricing and valuation policies of the Target Portfolio and there have been no material miscalculations of the net asset value of the Target Portfolio or the net asset value per share of the Target Portfolio
during the twelve (12) month period preceding the date hereof that have not been remedied or will not be remedied prior to the Closing Date in accordance with industry practice that, individually or in the aggregate, would have a material adverse
effect on the Target Portfolio or its Assets, and all such calculations have been made in accordance with the applicable provisions of the 1940 Act. All advertising and sales material used by the Target Portfolio during the twelve (12) months
prior to the date of this Agreement complied in all material respects, at the time such material was used, with applicable law and the rules and regulations of the FINRA;
(f) Except as otherwise disclosed to and accepted,
in writing, by or on behalf of the Acquiring Portfolio, the Target Portfolio will as of the Closing Time have good and marketable title to the Assets and full right, power, and authority to sell, assign, transfer and deliver such Assets
free of adverse claims, including any liens or other encumbrances, and upon delivery and payment for such Assets, the Acquiring Portfolio will acquire good and marketable title thereto, free of adverse claims and subject to no restrictions
on the full transfer thereof, including, without limitation, such restrictions as might arise under the 1933 Act, provided that the Acquiring Portfolio will, as applicable, acquire assets that are segregated as collateral for the Target
Portfolio’s derivative positions, including without limitation as collateral for swap positions and as margin for futures positions, subject to such segregation and liens that apply to such Assets;
(g) Except as otherwise disclosed to and accepted,
in writing, by or on behalf of the Acquiring Portfolio, the Target Portfolio is not engaged currently, and the execution, delivery and performance of this Agreement will not result, in (i) a material violation of the Target Entity’s
Governing Documents or of any agreement, indenture, instrument, contract, lease or other undertaking to which the Target Portfolio or the Target Entity is a party or by which it is bound, or (ii) the acceleration of any obligation, or the
imposition of any lien, encumbrance, penalty or additional fee under any agreement, indenture, instrument, contract, lease, judgment or decree to which the Target Portfolio or Target Entity is a party or by which it is bound;
(h) Except as otherwise disclosed to and accepted,
in writing, by or on behalf of the Acquiring Portfolio, all material contracts or other commitments of the Target Portfolio (other than this Agreement and certain investment contracts, including swap agreements, options, futures and forward
contracts) will terminate or be terminated with respect to the Target Portfolio without liability to the Target Portfolio or may otherwise be assigned to the Acquiring Portfolio without the payment of any
fee (penalty or otherwise) or acceleration of any obligations of the Target Portfolio on or prior to the Closing Date;
(i) Except as otherwise disclosed to and accepted,
in writing, by or on behalf of the Acquiring Portfolio, no litigation or administrative proceeding or investigation of or before any court, tribunal, arbitrator, governmental body, regulatory agency or FINRA is presently pending or, to the
Target Portfolio’s knowledge, threatened against the Target Portfolio that, if adversely determined, would materially and adversely affect the Target Portfolio’s financial condition or the conduct of its business or the Target Portfolio’s
ability to consummate the transactions contemplated by this Agreement. The Target Portfolio and the Target Entity, without any special investigation or inquiry, know of no facts that might form the basis for the institution of such
proceedings and neither the Target Entity nor the Target Portfolio is a party to or subject to the provisions of any order, decree or judgment of any court, governmental body, regulatory agency or FINRA that materially and adversely affects
its business or its ability to consummate the transactions herein contemplated. Neither the Target Entity nor the Target Portfolio is in violation of, or has violated, nor, to the knowledge of the Target Entity, is under investigation with
respect to or has been threatened to be charged with or given notice of any violation of, any applicable law or regulation. The Target Portfolio (i) does not have outstanding any option to purchase or other right to acquire shares of the
Target Portfolio issued or granted by or on behalf of the Target Portfolio to any person; (ii) has not entered into any contract or agreement or amendment of any contract or agreement or terminated any contract or agreement, in each case
material to the operation of the Target Portfolio, except as otherwise contemplated by this Agreement or as disclosed to the Acquiring Portfolio; (iii) has not incurred any indebtedness, other than in the ordinary course of business
consistent with the investment objective and policies of the Target Portfolio; (iv) has not entered into any amendment of its Governing Documents that has not been disclosed to the Acquiring Portfolio; (v) does not have outstanding any
grant or imposition of any lien, claim, charge or encumbrance (other than encumbrances arising in the ordinary course of business) upon any asset of the Target Portfolio other than a lien for taxes not yet due and payable; and (vi) has not
entered into any agreement or made any commitment to do any of the foregoing except as disclosed to the Acquiring Portfolio;
(j) The financial statements of the Target Portfolio
for the Target Portfolio’s most recently completed fiscal year have been audited by the independent registered public accounting firm identified in the Target Portfolio’s prospectus or statement of additional information included in the
Target Portfolio’s registration statement on Form N-1A. Such statements, as well as the unaudited, semi-annual financial statements for the semi-annual period next succeeding the Target Portfolio’s most recently completed fiscal year, if
any, were prepared in accordance with GAAP consistently applied, and such statements (copies of which have been furnished or made available to the Acquiring Portfolio) present fairly, in all material respects, the financial condition of the
Target Portfolio as of such date in accordance with GAAP, and there are no known contingent liabilities of the Target Portfolio required to be reflected on a balance sheet (including the notes thereto) in accordance with GAAP as of such
date not disclosed therein. No significant deficiency, material weakness, fraud, significant change or other factor that could significantly affect the internal controls of the Target Portfolio has been disclosed or is required to be
disclosed in the Target Portfolio’s reports on Form
N-CSR and, to the knowledge of the Target Portfolio, no such disclosure will be required as of the Closing Date;
(k) Since the last day of the Target Portfolio’s
most recently completed fiscal year, there has not been any material adverse change in the Target Portfolio’s financial condition, assets, liabilities or business, other than changes occurring in the ordinary course of business, except as
otherwise disclosed to and accepted by the Acquiring Portfolio in writing. For the purposes of this subparagraph, a decline in net asset value due to declines in market values of securities held by the Target Portfolio, the redemption of
the Target Portfolio’s shares by shareholders of the Target Portfolio or the discharge of the Target Portfolio’s ordinary course liabilities shall not constitute a material adverse change;
(l) On the Closing Date, all material Tax Returns
(as defined below) of the Target Portfolio required by law to have been filed by such date (including any extensions) shall have been filed and are or will be true, correct and complete in all material respects, and all Taxes (as defined
below) shown as due or claimed to be due by any government entity shall have been paid or provision has been made for the payment thereof. To the Target Portfolio’s knowledge, no such Tax Return is currently under audit by any federal,
state, local or foreign Tax authority; no assessment has been asserted with respect to such Tax Returns; there are no levies, liens or other encumbrances on the Target Portfolio or its assets resulting from the non-payment of any Taxes; no
waivers of the time to assess any such Taxes are outstanding nor are any written requests for such waivers pending; and adequate provision has been made in the Target Portfolio financial statements for all Taxes in respect of all periods
ended on or before the date of such financial statements. The Target Portfolio is in compliance in all material respects with applicable regulations of the Internal Revenue Service pertaining to the reporting of distributions on and
redemptions of its shares of beneficial interest and to withholding in respect of distributions to shareholders, and is not liable for any material penalties that could be imposed thereunder. As used in this Agreement, “Tax” or “Taxes”
means any tax, governmental fee or other like assessment or charge of any kind whatsoever (including, but not limited to, excise tax and withholding on amounts paid to or by any person), together with any interest, penalty, addition to tax
or additional amount imposed by any governmental authority (domestic or foreign) responsible for the imposition of any such tax. “Tax Return” means reports, returns, information returns, dividend reporting forms, elections,
agreements, declarations, or other documents or reports of any nature or kind (including any attached schedules, supplements and additional or supporting material) filed or required to be filed or furnished or required to be furnished with
respect to Taxes, including any claim for refund, amended return or declaration of estimated Taxes (and including any amendments with respect thereto);
(m) The Target
Portfolio: (i) is not (and will not be as of the Closing Date) classified as a partnership, and instead is (and will be as of the Closing Date) classified as an association that is subject to tax as a corporation for federal tax purposes
and either has elected the latter classification by filing Form 8832 with the Internal Revenue Service (the “Service”) or is a “publicly traded partnership” (as defined in Section 7704(b) of the Code) that is treated as a corporation for
federal tax purposes, (ii) has elected to be a regulated investment company under Subchapter M of the Code, and
(iii) is a “fund,” as defined in Section 851(g)(2) of the Code, that is treated as a separate corporation under Section 851(g)(1) of the Code. The Target Portfolio has qualified for treatment as a regulated investment company for each taxable
year since inception that has ended prior to the Closing Date and will have satisfied the requirements of Part I of Subchapter M of the Code to maintain such qualification for the period beginning on the first day of its current taxable year and
ending on the Closing Date, and for each such taxable year (or portion thereof), the Target Portfolio has been eligible to compute its federal income tax under Section 852 of the Code. The Target Portfolio will satisfy the diversification
requirements of Section 851(b)(3) of the Code without regard to the last sentence of Section 851(d)(1) of the Code as of the last taxable year quarter end of the Target Portfolio closing on or before the Closing Date. The Target Portfolio has not
had at any time since its inception (and will not have as of the Closing Date) any material tax liability under Sections 852 or 4982 of the Code for any period ended on or before the Closing Date. The Target Portfolio has no earnings or profits
accumulated with respect to any taxable year in which the provisions of Subchapter M of the Code did not apply to the Target Portfolio
;
(n) The Target Portfolio has not changed its taxable
year end within the most recent 48-month period ending on the last day of the month immediately preceding the Closing Date of the Reorganization, and it does not intend to change its taxable year end prior to the Closing Date;
(o) The Target Portfolio has not undergone, has not
agreed to undergo, nor is required to undergo (nor will it be required as a result of the transactions contemplated in this Agreement to undergo) a change in its method of accounting resulting in an adjustment to its taxable income pursuant
to Section 481 of the Code. The Target Portfolio (including the Acquiring Portfolio as its successor) will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or
portion thereof) ending after the Closing Date as a result of any (i) change in method of accounting for a taxable period ending on or prior to the Closing Date; (ii) “closing agreement” as described in Section 7121 of the Code (or any
corresponding or similar provision of state, local or foreign income tax law) executed on or prior to the Closing Date; (iii) installment sale or open transaction disposition made on or prior to the Closing Date; or (iv) prepaid amount
received on or prior to the Closing Date;
(p) The Target Portfolio has not been notified in
writing that any examinations of the Tax Returns of the Target Portfolio are currently in progress or threatened, and, to the knowledge of the Target Portfolio, no such examinations are currently in progress or threatened, and no
deficiencies have been asserted or assessed against the Target Portfolio as a result of any audit by the Service or any state, local or foreign taxing authority, and, to the knowledge of the Target Portfolio, no such deficiency has been
proposed or threatened, and there are no levies, liens or other encumbrances related to Taxes existing or known to the Target Portfolio to be threatened or pending with respect to the Assets of the Target Portfolio;
(q) The Target Portfolio has no actual or potential
liability for any Tax obligation of any taxpayer other than itself. The Target Portfolio is not currently and has never been a member of a group of corporations with which it has filed (or been
required to file) consolidated, combined or unitary tax returns. The Target Portfolio is not a party to any Tax allocation, sharing, or indemnification agreement;
(r) All issued and outstanding shares of the Target
Portfolio are, and on the Closing Date will be, duly and validly issued and outstanding, fully paid and non-assessable by the Target Entity, and are not, and on the Closing Date will not be, subject to preemptive or objecting shareholder
rights. In every state where offered or sold, such offers and sales have been in compliance in all material respects with applicable registration and/or notice requirements of the 1933 Act and state and District of Columbia securities
laws. All of the issued and outstanding shares of the Target Portfolio will, at the time of Closing, be held by the persons and in the amounts set forth in the records of the Target Transfer Agent, on behalf of the Target Portfolio. The
Target Portfolio does not have outstanding any options, warrants or other rights to subscribe for or purchase any of the shares of the Target Portfolio, nor is there outstanding any security convertible into any of the Target Portfolio’s
shares;
(s) The Target Entity, on behalf of the Target
Portfolio, has all requisite power and authority to enter into this Agreement and to consummate the transactions contemplated herein. The execution, delivery and performance of this Agreement has been duly authorized by all necessary
action, if any, on the part of the trustees of the Target Entity and, subject to the approval of the shareholders of the Target Portfolio (only with respect to those obligations under this Agreement that are contingent on such shareholder
approval) and the due authorization, execution and delivery of this Agreement by the other parties hereto, this Agreement will constitute a valid and binding obligation of the Target Portfolio, enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors’ rights and to general equity principles;
(t) The information relating to the Target Portfolio
furnished by the Target Portfolio for use in no-action letters, applications for orders, registration statements, proxy materials and other documents filed or to be filed with any federal, state or local regulatory or self-regulatory
authority that are necessary in connection with the transactions contemplated hereby is and will be accurate and complete in all material respects and will comply in all material respects with federal securities laws and regulations
thereunder and other applicable laws and regulations applicable thereto;
(u) As of the date of this Agreement or within a
certain time thereafter as mutually agreed by the parties, the Target Portfolio has provided the Acquiring Portfolio with all information relating to the Target Portfolio reasonably necessary for the preparation of the N-14 Registration
Statement (as defined in Section 5.1(b) hereof), in compliance with the 1933 Act, the 1934 Act and the 1940 Act in connection with the meeting of shareholders of the Target Portfolio to approve this Agreement and the transactions
contemplated hereby. As of the effective date of the N-14 Registration Statement, the date of the meeting of shareholders of the Target Portfolio and the Closing Date, such information provided by the Target Portfolio will not contain any
untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which such statements were made, not misleading; provided,
however, that the representations and warranties in this subparagraph shall not apply
to statements in or omissions from the N-14 Registration Statement made in reliance upon and in conformity with information that was furnished by the Acquiring Portfolio for use therein;
(v) The books and records of the Target Portfolio
are true and correct in all material respects and contain no material omissions with respect to information required to be maintained under the laws, rules and regulations applicable to the Target Portfolio;
(w) The Target Entity has adopted and implemented
written policies and procedures in accordance with Rule 38a-1 under the 1940 Act relating to the Target Portfolio;
(x) The Target Entity has adopted and implemented
written policies and procedures related to insider trading and a code of ethics that complies with all applicable provisions of Section 17(j) of the 1940 Act and Rule 17j-1 thereunder;
(y) The Target Entity and the Target Portfolio have
maintained any material license, permit, franchise, authorization, certification and approval required by any governmental entity in the conduct of its business (the “Licenses and Permits”). Each License and Permit has been duly
obtained, is valid and in full force and effect, and is not subject to any pending or, to the knowledge of the Target Entity, threatened administrative or judicial proceeding to revoke, cancel, suspend or declare such License and Permit
invalid;
(z) The Target Entity is not under the jurisdiction
of a court in a Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code; and
(aa) The Target Portfolio has no unamortized or
unpaid organizational fees or expenses.
4.2. The
Acquiring Entity, on behalf of the Acquiring Portfolio, represents and warrants to the Target Entity and Target Portfolio as follows:
(a) The Acquiring Entity a statutory trust duly
formed, validly existing, and in good standing under the laws of the State of Delaware, with power under its Governing Documents to own all of its properties and assets and to carry on its business as it is now being, and as it is
contemplated to be, conducted and to enter into this Agreement and perform its obligations hereunder. The Acquiring Portfolio is a duly established and designated separate series of the Acquiring Entity;
(b) The Acquiring Entity is a registered investment
company classified as a management company of the open-end type, and its registration with the Commission as an investment company under the 1940 Act and the registration of shares of the Acquiring Portfolio under the 1933 Act are in full
force and effect, and will be in full force and effect on the Closing Date, and no action or proceeding to revoke or suspend such registrations is pending, or to the knowledge of the Acquiring Portfolio, threatened;
(c) No consent, approval, authorization, or order of
any court, governmental authority or FINRA is required for the consummation by the Acquiring Portfolio of the transactions contemplated herein, except such as have been or will be (at or prior to the Closing Date) obtained under the 1933
Act, the 1934 Act, the 1940 Act and state securities or blue sky laws (which term as used herein shall include the laws of the District of Columbia and of Puerto Rico) and the Hart-Scott-Rodino Act, each of which, as required, shall have
been obtained on or prior to the Closing Date. No consent of or notice to any other third party or entity is required for the consummation by the Acquiring Portfolio of the transactions contemplated by this Agreement;
(d) The prospectus and statement of additional
information of the Acquiring Portfolio to be used in connection with the Reorganization will conform at the time of their use in all material respects to the applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and will not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(e) The Acquiring Portfolio is not engaged
currently, and the execution, delivery and performance of this Agreement will not result, in (i) a material violation of the Acquiring Entity’s Governing Documents or of any agreement, indenture, instrument, contract, lease or other
undertaking to which the Acquiring Portfolio or the Acquiring Entity is a party or by which it is bound, or (ii) the acceleration of any obligation, or the imposition of any lien, encumbrance, penalty, or additional fee under any agreement,
indenture, instrument, contract, lease, judgment or decree to which the Acquiring Portfolio or the Acquiring Entity is a party or by which it is bound;
(f) Except as otherwise disclosed in writing to and
accepted by or on behalf of the Target Portfolio, no litigation or administrative proceeding or investigation of or before any court, tribunal, arbitrator, governmental body, regulatory agency or FINRA is presently pending or, to the
Acquiring Portfolio’s knowledge, threatened against the Acquiring Portfolio that, if adversely determined, would materially and adversely affect the Acquiring Portfolio’s financial condition or the conduct of its business or the Acquiring
Portfolio’s ability to consummate the transactions contemplated by this Agreement. The Acquiring Portfolio and the Acquiring Entity, without any special investigation or inquiry, know of no facts that might form the basis for the
institution of such proceedings and neither the Acquiring Entity nor the Acquiring Portfolio is a party to or subject to the provisions of any order, decree or judgment of any court, governmental body, regulatory agency or FINRA that
materially and adversely affects its business or its ability to consummate the transactions herein contemplated;
(g) The Acquiring Portfolio has not yet commenced
operations. The Reorganization will be structured as a “shell reorganization” subject to U.S. federal income tax treatment under Section 368(a)(1)(F) of the Code. The Acquiring Portfolio is, and will be at the time of Closing, a new
series portfolio of the Acquiring Entity created within the last twelve (12) months, without assets (other than seed capital) or liabilities, formed for the purpose of receiving the Assets and assuming the Liabilities of the Target
Portfolio in connection with the Reorganization and, accordingly, the
Acquiring Portfolio has not prepared books of account and related records or financial statements or issued any shares except those issued in a private placement to Dimensional or its affiliate to secure any
required initial shareholder approvals;
(h) On the Closing Date, all material Tax Returns of
the Acquiring Portfolio required by law to have been filed by such date (including any extensions) shall have been filed and are or will be true, correct and complete in all material respects, and all Taxes shown as due or claimed to be due
by any government entity shall have been paid or provision has been made for the payment thereof. To the Acquiring Portfolio’s knowledge, no such Tax Return is currently under audit by any federal, state, local or foreign Tax authority; no
assessment has been asserted with respect to such Tax Returns; there are no levies, liens or other encumbrances on the Acquiring Portfolio or its assets resulting from the non-payment of any Taxes; and no waivers of the time to assess any
such Taxes are outstanding nor are any written requests for such waivers pending;
(i) The Acquiring Portfolio: (i) was formed for the
purpose of the Reorganization, (ii) is not (and will not be as of the Closing Date) classified as a partnership, and instead is (and will be as of the Closing Date) classified as an association that is subject to tax as a corporation for
federal tax purposes and either has elected (or will timely elect) the latter classification by filing Form 8832 with the Service or is (or will be as of the Closing Date) a “publicly traded partnership” (as defined in Section 7704(b) of
the Code) that is treated as a corporation for federal tax purposes, (iii) has not filed any income tax return, and intends to qualify to be a regulated investment company under Subchapter M of the Code for its taxable year which includes
the Closing Date, holds and has held no property other than de minimis assets related to its formation or maintenance of its legal status and has and has had no tax attributes other than attributes
related to such de minimis assets, and (iv) is a “fund,” as defined in Section 851(g)(2) of the Code, that is treated as a separate corporation under Section 851(g)(1) of the Code. The Acquiring
Portfolio has no earnings or profits accumulated in any taxable year in which the provisions of Subchapter M of the Code did not apply to it;
(j) The Acquiring Entity, on behalf of the Acquiring
Portfolio, has all requisite power and authority to enter into this Agreement and to consummate the transactions contemplated herein. The execution, delivery and performance of this Agreement will have been duly authorized prior to the
Closing Date by all necessary action, if any, on the part of the trustees of the Acquiring Entity, on behalf of the Acquiring Portfolio, and the due authorization, execution and delivery of the Agreement by the other parties thereto, this
Agreement will constitute a valid and binding obligation of the Acquiring Portfolio, enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or
affecting creditors’ rights and to general equity principles;
(k) The shares of the Acquiring Portfolio to be
issued and delivered to the Target Portfolio, for the account of the Target Portfolio Shareholders, pursuant to the terms of this Agreement, have been duly authorized and, when so issued and delivered, will be duly and validly issued
Acquiring Portfolio shares, and, upon receipt
of the Target Portfolio’s Assets in accordance with the terms of this Agreement, will be fully paid and non-assessable by the Acquiring Entity;
(l) The
Acquiring Entity has adopted and implemented written policies and procedures in accordance with Rule 38a-1 under the 1940 Act relating to the Acquiring Portfolio;
(m) The Acquiring Entity and the Acquiring Portfolio
have adopted and implemented written policies and procedures related to insider trading and a code of ethics that complies with all applicable provisions of Section 17(j) of the 1940 Act and Rule 17j-1 thereunder;
(n) The Acquiring Entity is not under the
jurisdiction of a court in a Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code;
(o) The Acquiring Portfolio has no unamortized or
unpaid organizational fees or expenses for which it does not expect to be reimbursed by Dimensional or its affiliates; and
(p) As of the effective date of the N-14
Registration Statement, the date of the meeting of shareholders of the Target Portfolio and the Closing Date, the information provided by the Acquiring Portfolio for use in the N-14 Registration Statement, including the documents contained
or incorporated therein by reference will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under
which such statements were made, not misleading; provided, however, that the representations and warranties in this subparagraph shall not apply to statements in or omissions from the N-14 Registration Statement made in reasonable reliance
upon and in conformity with information that was furnished by the Target Portfolio for use therein.
4.3. With
respect to the Reorganization, the Target Entity, on behalf of the Target Portfolio, and the Acquiring Entity, on behalf of the Acquiring Portfolio, represents and warrants as follows:
(a) The fair market value of the Acquiring
Portfolio’s shares that each Target Portfolio shareholder receives will be approximately equal to the fair market value of the Target Portfolio shares it actually or constructively surrenders in exchange therefor;
(b) The fair market value of the Assets will equal
or exceed the Liabilities to be assumed by the Acquiring Portfolio and those to which the Assets are subject;
(c) No expenses incurred by the Target Portfolio or
on its behalf in connection with the Reorganization will be paid or assumed by the Acquiring Portfolio or any other third party unless those expenses are solely and directly related to the Reorganization (determined in accordance with the
guidelines set forth in Rev. Rul. 73-54, 1973-1 C.B. 187) (“Reorganization Expenses”), and no cash or property other than Acquiring Portfolio shares will be transferred to the Target Portfolio or any of its
shareholders with the intention that it be used to pay any expenses (even Reorganization Expenses) thereof; and
(d) Immediately following consummation of the
Reorganization, other than shares of the Acquiring Portfolio issued to Dimensional or its affiliate representing de minimis assets related to the Acquiring Portfolio’s formation or maintenance of
its legal status, (1) the shareholders of the Acquiring Portfolio will own all the Acquiring Portfolio shares and will own those shares solely by reason of their ownership of the Target Portfolio shares immediately before the
Reorganization; (2) the Acquiring Portfolio will hold the same assets and will be subject to the Liabilities that the Target Portfolio held or was subject to immediately before the Reorganization; and (3) the amount of all distributions
(other than regular, normal dividends) Target Portfolio will make immediately preceding the Reorganization, will, in the aggregate, constitute less than 1% of its net assets.
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5.
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COVENANTS OF THE ACQUIRING ENTITY AND THE TARGET ENTITY
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5.1. With respect to the Reorganization:
(a) The Target Portfolio will (i) operate its
business in the ordinary course and substantially in accordance with past practice between the date hereof and the Closing Date, it being understood that, with respect to the Target Portfolio, such ordinary course of business may include
purchases and sales of portfolio securities and other instruments, sales and redemptions of the Target Portfolio’s shares, and the declaration and payment of customary dividends and distributions, and any other distribution that may be
advisable, and (ii) use its reasonable best efforts to preserve intact its business organization and material assets and maintain the rights, franchises and business and customer relations necessary to conduct the business operations of the
Target Portfolio in the ordinary course in all material respects. The Acquiring Portfolio shall take such actions as are customary to the organization of a new series prior to its commencement of operations. No party shall take any action
that would, or would reasonably be expected to, result in any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect.
(b) The parties hereto shall cooperate in preparing,
and the Acquiring Entity shall file with the Commission, a registration statement on Form N-14 under the 1933 Act, which shall properly register the Acquiring Portfolio shares to be issued in connection with the Reorganization and include
an information statement with respect to notification to the shareholders of the Target Portfolio of the Reorganization (the “N-14 Registration Statement”). If at any time prior to the Closing Date a party becomes aware of any
untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements made not misleading in light of the circumstances under which they were made in respect of the N-14
Registration Statement, such party shall notify each other party, and the parties shall cooperate in promptly preparing and filing with the Commission and, if appropriate, distributing to shareholders appropriate disclosure with respect to
the item. The Target Portfolio agrees to mail or otherwise deliver (e.g., by electronic means consistent with applicable regulations governing their use) to its respective shareholders of record entitled to receipt of the information
statement, in sufficient
time to comply with requirements of the 1934 Act, the prospectus/information statement contained in the N-14 Registration Statement and other documents as are necessary, which each comply in all material respects
with the applicable provisions of Section 14(a) of the 1934 Act and Section 20(a) of the 1940 Act, and the rules and regulations, respectively, thereunder.
(c) The Target Portfolio covenants that the
Acquiring Portfolio’s shares to be issued pursuant to this Agreement are not being acquired for the purpose of making any distribution thereof, other than in accordance with the terms of this Agreement.
(d) The Target Entity will assist the Acquiring
Portfolio in obtaining such information as the Acquiring Portfolio reasonably requests concerning the beneficial ownership of the Target Portfolio’s shares, and will assist the Acquiring Portfolio in obtaining copies of any books and
records of the Target Portfolio from its service providers reasonably requested by the Acquiring Entity.
(e) The Target Entity will provide the Acquiring
Portfolio with (i) a statement of the respective tax basis and holding period as of the most recent Tax year end of the Target Portfolio of all investments to be transferred by the Target Portfolio to the Acquiring Portfolio, (ii) a copy
(which may be in electronic form) of the shareholder ledger accounts including, without limitation, the name, address and taxpayer identification number of each shareholder of record, the number of shares of beneficial interest held by each
shareholder, the backup withholding and nonresident alien withholding certifications, and notices or records on file with the Target Portfolio with respect to each shareholder, for all of the shareholders of record of the Target Portfolio
as of the close of business on the Valuation Date, who are to become holders of the Acquiring Portfolio as a result of the transfer of Assets (the “Target Portfolio Shareholder Documentation”), certified by the Target Transfer Agent or its
President or Vice-President to the best of their knowledge and belief, (iii) FASB ASC 740-10 (formerly FIN 48) work papers and supporting statements pertaining to the Target Portfolio relating to any taxable years of the Target Portfolio
not closed by the applicable Tax statute of limitations (the “ASC 740-10 Workpapers”), and (iv) the Tax books and records of the Target Portfolio for purposes of preparing any Tax returns required by law to be filed for Tax periods ending
after the Closing Date. The information shall be provided at or prior to the Closing.
(f) The Target Portfolio will prepare and deliver to
the Acquiring Portfolio at least five (5) business days prior to the Closing Date a statement of the assets and the liabilities of the Target Portfolio as of such date for review and agreement by the parties to determine that the Assets and
the Liabilities of the Target Portfolio are being correctly determined in accordance with the terms of this Agreement. The Target Portfolio will deliver at the Closing a statement of Assets and Liabilities of the Target Portfolio as of the
Valuation Date, certified by the Treasurer of the Target Entity.
(g) Subject to the provisions of this Agreement, the
Acquiring Portfolio and the Target Portfolio will each take, or cause to be taken, all action, and do or cause to be done all things, reasonably necessary, proper or advisable to consummate and make effective the transactions contemplated
by this Agreement.
(h) As soon as is reasonably practicable after the
Closing, the Target Portfolio will make one or more distributions to its shareholders consisting of the shares of the Acquiring Portfolio received at the Closing (and any cash in lieu of fractional shares), as set forth in Section 1.1(d)
hereof.
(i) The Acquiring Portfolio and the Target Portfolio
shall each use their reasonable best efforts prior to Closing to fulfill or obtain the fulfillment of the conditions precedent to effect the transactions contemplated by this Agreement.
(j) The Target Portfolio shall, from time to time,
as and when reasonably requested by the Acquiring Portfolio, execute and deliver or cause to be executed and delivered all such assignments and other instruments, and will take or cause to be taken such further action, as the Acquiring
Portfolio may reasonably deem necessary or desirable in order to vest in and confirm the Acquiring Portfolio’s title to and possession of all the Assets and otherwise to carry out the intent and purpose of this Agreement.
(k) The Acquiring Portfolio shall, from time to
time, as and when reasonably requested by the Target Portfolio, execute and deliver or cause to be executed and delivered all such assumption agreements and other instruments, and will take or cause to be taken such further action, as the
Target Portfolio may reasonably deem necessary or desirable in order for the Acquiring Portfolio to assume the Target Portfolio’s Liabilities and otherwise to carry out the intent and purpose of this Agreement.
(l) The Acquiring Portfolio will use all reasonable
efforts to obtain the approvals and authorizations required by the 1933 Act, the 1940 Act and such of the state blue sky or securities laws as may be necessary in order to continue its operations after the Closing Date.
(m) A statement of any capital loss carryovers, for
U.S. federal income tax purposes, of the Target Portfolio, as of the most recent Tax year end of the Target Portfolio, along with supporting workpapers providing information regarding any limitations on the use of such capital loss
carryovers including information on any built-in gains and built-in losses of the Target Portfolio for purposes of applying applicable limitations on the use of such items under the Code, will be provided by the Target Entity on behalf of
the Target Portfolio to the Acquiring Portfolio within sixty (60) days after the Closing Date.
(n) It is the intention of the parties that the Reorganization will qualify as a reorganization with the
meaning of Section 368(a) of the Code. None of the parties to this Agreement shall take any action or cause any action to be taken (including, without limitation the filing of any Tax Return) that is inconsistent with such treatment or results
in the failure of the Reorganization to qualify as a reorganization with the meaning of Section 368(a) of the Code.
(o) At or prior to the Closing, the Target Portfolio shall have delivered to the Acquiring Portfolio copies of: (i) the federal, state and local income Tax returns filed by or on behalf of the Target Portfolio
for the prior three (3) taxable years; and (ii)any of the following that have been issued to or for the benefit of the Target Portfolio and which have continuing relevance: (a) rulings, determinations, holdings or opinions issued by any federal,
state, local or foreign Tax authority and (b) legal opinions.
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6.
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CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TARGET ENTITY
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6.1. With respect to the Reorganization, the
obligations of the Target Entity, on behalf of the Target Portfolio, to consummate the transactions provided for herein shall be subject to the performance, or to the extent legally permissible, the Target Entity’s waiver, of the
obligations to be performed by the Acquiring Portfolio hereunder on or before the Closing Date and, in addition thereto, the following conditions:
(a) All representations and warranties of the
Acquiring Portfolio and the Acquiring Entity contained in this Agreement shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of
the Closing Time, with the same force and effect as if made on and as of the Closing Time;
(b) The Acquiring Entity shall have delivered to the
Target Portfolio as of the Closing Time a certificate executed in its name by its President or Vice President and Treasurer, in form and substance reasonably satisfactory to Target Portfolio and dated as of the Closing Date, to the effect
that the representations and warranties of or with respect to the Acquiring Portfolio made in this Agreement are true and correct at and as of the Closing Time, except as they may be affected by the transactions contemplated by this
Agreement;
(c) The Acquiring Entity and the Acquiring Portfolio
shall have performed all of the covenants and complied with all of the provisions required by this Agreement to be performed or complied with by the Acquiring Entity and the Acquiring Portfolio, on or before the Closing Time;
(d) The Target Portfolio and the Acquiring Portfolio
shall have agreed on the number of shares of the Acquiring Portfolio to be issued in connection with the Reorganization after such number has been calculated in accordance with Section 1.1 hereto;
(e) As of the Closing Date, there shall have been no
material change in the investment objectives, policies and restrictions or any increase in the investment management fee rate or other fee rates that the Acquiring Portfolio is contractually obligated to pay for services provided to the
Acquiring Portfolio from those described in the N-14 Registration Statement;
(f) The Target Entity shall have received from the
Target Transfer Agent a certificate stating that it has received from the Acquiring Entity the number of shares of the Acquiring Portfolio equal in value to the value of the shares of the Target Portfolio as of the time and date set forth
in Section 3; and
(g) The Target Entity shall have received on the
Closing Date the opinion of Stradley Ronon Stevens & Young, LLP (“Stradley Ronon”), counsel to the Acquiring
Entity (which may rely
on certificates of officers or trustees of the Acquiring Entity),
dated as of the
Closing Date, covering the following points:
(i) The Acquiring Entity is a statutory trust duly formed, validly existing and in good standing under the laws of the State of Delaware, and has the trust power to own all of the Acquiring Portfolio’s properties and assets and to carry on its business, including that of the Acquiring Portfolio, as a registered
investment company;
(ii) The Acquiring Entity is a registered investment company classified as a management company of the open-end type with respect to each series of shares it offers, including the
Acquiring Portfolio, under the 1940 Act, and its registration with the Commission as an investment company under the 1940 Act is in full force and effect;
(iii) The Agreement has been duly authorized by the Acquiring Entity on behalf of the Acquiring Portfolio and, assuming due
authorization, execution and delivery of the Agreement by the Target Entity, the Target Portfolio, and Dimensional, is a valid and binding obligation of the Acquiring Entity, on behalf of the
Acquiring Portfolio, enforceable against it in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, fraudulent conveyance, reorganization, receivership, moratorium
and other similar laws relating to or affecting creditors’ rights generally, general equity principles (whether considered in a proceeding in equity or at law) and to an implied covenant of good faith and fair dealing;
(iv) The Acquiring Portfolio shares to be issued to the Target Portfolio as provided by this Agreement are duly authorized, upon such
delivery will be validly issued and upon receipt of the Target Portfolio’s Assets will be fully paid and non-assessable by the Acquiring Entity and no shareholder of the Acquiring Portfolio has
any preemptive rights to subscription or purchase in respect thereof; and
(v) The execution and delivery of the Agreement did not, and the consummation of the transactions contemplated hereby will not, result in a violation of the Acquiring Entity’s Governing Documents or a breach or default under any material contract, agreement, instrument or other document pertaining to, or
material to the business or financial condition of, the Acquiring Portfolio, or, to the knowledge of such counsel, result in the acceleration of any obligation or the imposition of any penalty
under any such agreement.
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7.
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CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING ENTITY
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7.1. With
respect to the Reorganization, the obligations of the Acquiring Entity, on behalf of the Acquiring Portfolio, to consummate the transactions provided for herein shall be subject to the performance, or to the extent legally permissible, the
Acquiring Portfolio’s waiver, of the obligations to be performed by the Target Portfolio hereunder on or before the Closing Date and, in addition thereto, the following conditions:
(a) All
representations and warranties of the Target Entity and the Target Portfolio contained in this Agreement shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Time, with the same force and effect as if made on and as of the Closing Time;
(b) The
Target Entity, on behalf of the Target Portfolio, shall have delivered to the Acquiring Entity (i) a statement of the Target Portfolio’s Assets and Liabilities, as of the Valuation Date, certified by the Treasurer of the Target Entity, (ii)
the Target Portfolio Shareholder Documentation, (iii) in electronic form, to the extent permitted by applicable law, all information pertaining to, or necessary or useful in the calculation or demonstration of, the investment performance of
the Target Portfolio, (iv) the ASC 740-10 Workpapers, and (v) a statement of any capital loss carryovers as of the most recent Tax year end of the Target Portfolio along with supporting workpapers providing information regarding any
limitations on the use of such capital loss carryovers including information on any built-in gains and built-in losses of the Target Portfolio for purposes of applying applicable limitations on the use of such items under the Code. The
information shall be provided on the Closing Date;
(c) The
Target Entity shall have delivered to the Acquiring Entity as of the Closing Time a certificate executed in its name by its President or Vice President and Treasurer, in form and substance satisfactory to the Acquiring Portfolio and dated
as of the Closing Date, to the effect that the representations and warranties of or with respect to the Target Portfolio made in this Agreement are true and correct at and as of the Closing Time;
(d) The
Target Custodian and the Target Transfer Agent shall have delivered the certificates contemplated by Sections 3.2(b), 3.2(d) of this Agreement, respectively, and the Target Transfer Agent or the Target Portfolio’s President or Vice
President shall have delivered the certificate contemplated by Section 5.1(e) of this Agreement, each duly executed by an authorized officer of the Target Custodian, the Target Transfer Agent, the Target Portfolio’s President or the Target
Portfolio’s Vice President, as applicable;
(e) The
Target Entity and the Target Portfolio shall have performed all of the covenants and complied with all of the provisions required by this Agreement to be performed or complied with by the Target Entity and the Target Portfolio, on or before
the Closing Time;
(f) The
Target Portfolio and the Acquiring Portfolio shall have agreed on the number of shares of the Acquiring Portfolio to be issued in connection with the Reorganization after such number has been calculated in accordance with Section 1.1
hereto;
(g) Unless the Target Portfolio has been advised by the Acquiring Portfolio that the Acquiring Portfolio will deliver an opinion of counsel that the Reorganization qualifies as a “reorganization”
under Section 368(a)(1)(F) of the Code, the Target Portfolio shall have declared and paid a distribution or distributions prior to the Closing that, together with all previous distributions, shall have the effect of distributing to its
shareholders (A) all of Target Portfolio’s investment company taxable income (determined without regard to any deductions for dividends paid) for the taxable year ended prior to
the Closing Date and all of such investment company taxable income for the short taxable year beginning on the first day of its current taxable year and ending on the Closing Date and (B) all of Target Portfolio’s net capital gain recognized in
its taxable year ended prior to the Closing Date and all of any such net capital gain recognized in the short taxable year beginning on the first day of its current taxable year and ending on the Closing Date (in each case after reduction for
any capital loss carryover);
