Dimensional Funds PLC

Transcription

1 Dimensional Funds PLC Annual Report and Audited Financial Statements 30 November 2009 Authorised and Regulated by the Financial Services Authority

2 DIMENSIONAL FUNDS PLC Table of Contents Page General Information...2 Investment Manager s Reports...3 Directors' Report...7 Custodian's Report...12 Independent Auditors' Report...13 Balance Sheet...15 Profit and Loss Account...20 Statement of Changes in s Attributable to Holders of Redeemable Shares...24 Portfolio of Investments...27 Notes to the Financial Statements...93 Statement of Portfolio Changes (Unaudited)...126

3 DIMENSIONAL FUNDS PLC General Information Board of Directors: Peter Blessing (Irish)* David G. Booth (American)* Dermot S.L. Butler (Canadian)* Richard Eustice (American)* David Martin (American)* Catherine L. Newell (American)* Garrett Quigley (Irish)* David Salisbury (British)* Investment Manager: Dimensional Fund Advisors Limited 7 Down Street London W1J 7AJ England Investment Sub-Advisor: (Emerging Markets Fund, Global Short Bond Fund, Sterling Ultra Short Fixed Income Fund and U.S. Small Companies Fund ) Dimensional Fund Advisors LP Palisades West 6300 Bee Cave Road, Building 1 Austin, TX USA Investment Sub-Advisor: (and Emerging Markets Fund and Pacific Basin Small Companies Fund ) DFA Australia Limited Level 43, Gateway 1 Macquarie Place Sydney NSW 2000 Australia Independent Auditors: PricewaterhouseCoopers One Spencer Dock North Wall Quay Dublin 1 Ireland Registered Office: 70 Sir John Rogerson s Quay Dublin 2 Ireland Administrator: PNC Global Investment Servicing (Europe) Limited Riverside Two Sir John Rogerson s Quay Grand Canal Dock Dublin 2 Ireland Custodian: PNC International Bank Limited Riverside Two Sir John Rogerson s Quay Grand Canal Dock Dublin 2 Ireland Sub-Custodian: PFPC Trust Company 8800 Tinicum Boulevard Philadelphia PA19153 USA Stockbrokers: Davy Stockbrokers 49 Dawson Street Dublin 2 Ireland Legal Advisers in Ireland: Matheson Ormsby Prentice 70 Sir John Rogerson s Quay Dublin 2 Ireland Secretary: Matsack Trust Limited 70 Sir John Rogerson s Quay Dublin 2 Ireland * Non-executive Director 2

4 DIMENSIONAL FUNDS PLC Investment Manager s Reports Emerging Markets Fund The Emerging Markets Fund was launched on 10 October 2005 with the inception of the Class B Shares which are denominated in Euro. The Class A Shares which are denominated in U.S. dollars began trading on 30 November The Class C Shares which are denominated in Sterling began trading on 8 March The Class D Shares which are denominated in Sterling began trading on 3 January The Class E Shares which are denominated in Euro began trading on 9 August The fund has been invested in a broad range of small companies with high book-to-market ratios across the Emerging Markets region and as at 30 November 2009 had holdings in 1,670 companies. This reflects our approach of delivering highly diversified exposure to the Emerging Markets companies. The weighted average book-to-market ratio of the holdings in the fund at 30 November 2009 was 0.75 compared to the 0.61 for the MSCI Emerging Markets Index. This reflects our intentional bias towards high book-to-market companies compared to the index since we believe that companies with high book-to-market ratios deliver the strongest long term returns. The weighted average market capitalisation of the holdings in the fund at 30 November 2009 was 12,064 million compared to 30,038 million for the MSCI Emerging Markets Index. The dividend yield of the fund at 30 November 2009 was 1.49% which compares to 1.95% for the MSCI Emerging Markets Index. Over one year to 30 November 2009, the total return of the fund in U.S. dollars (the base currency of the fund) was 104.5%. This compares to a total return of 86.3% for the MSCI Emerging Markets Index. Total return over six months and from inception for each class is shown in the Performance Information table. The portfolio is fully invested and is well positioned to capture the returns of Emerging Markets value companies. The Investment Committee of the Advisor, having reviewed the Russian market, has recommended that the fund invest in depository receipts of companies with exposure to Russia on approved exchanges from the second half of 2009 onwards. European Small Companies Fund The European Small Companies Fund was launched on 26 February 2004 with the inception of the Class A Shares which are denominated in U.S. Dollars. The Class B Shares which are denominated in Euro began trading on 6 April The Class C Shares which are denominated in Sterling began trading on 27 April The Class D Shares which are denominated in Sterling began trading on 7 April The fund has been invested in a broad range of small companies across the European region and as at 30 November 2009 had holdings in 1,492 companies. This reflects our approach of delivering highly diversified exposure to small companies. The weighted average market capitalisation of the holdings in the fund at 30 November 2009 was EUR1,150 million compared to EUR1,144 million for the MSCI Europe Small Cap Index. The dividend yield of the fund at 30 November 2009 was 2.60% which compares to 2.35% for the MSCI Europe Small Cap Index. The weighted average book-to-market ratio of the holdings in the fund at 30 November 2009 was 0.68 which is in line with the MSCI Europe Small Cap Index with a value of Over one year to 30 November 2009, the total return of the fund in Euro (the base currency of the fund) was 34.0%, the total return of the U.S. Dollar class was 58.6%. This compares to Euro and U.S. Dollar total returns (with net dividends reinvested) of 45.0% and 71.4% respectively, for the MSCI Europe Small Cap Index. Total return over six months and from inception for each class is shown in the Performance Information table. The portfolio is fully invested and is well positioned to capture the returns of European small companies. The Investment Committee of the Advisor, having reviewed the Russian market, has recommended that the fund invest in depositary receipts of companies with exposure to Russia on approved exchanges from the second half of 2009 onwards. Global Short Bond Fund The Global Short Bond Fund was launched on 25 January 2007 with the inception of the Class B Shares which are denominated in Euro. The fund has been invested in a broad range of high quality fixed income issues with maturities at or below five years. As of 30 November 2009, the fund was diversified across 48 unique issuers from 13 different countries as well as supranational organizations, and had an average credit rating of AA+. Investments were made in 5 different currencies. In each case, however, the foreign currency exposure was substantially hedged back into Euro. As such, the fund was insulated from currency fluctuations. At 30 November 2009, the average maturity of the Fund was 3.58 years resulting in a modified duration of The yield to maturity at this time was 2.29%. Over one year to 30 November 2009, the total return of the fund in Euro was 5.8%. This compares to a return on the WGBI 1-5 Year Hedged EUR Index of 3.9%. 3

5 DIMENSIONAL FUNDS PLC Investment Manager s Reports (continued) Pacific Basin Small Companies Fund The Pacific Basin Small Companies Fund was launched on 26 February 2004 with the inception of the Class A Shares which are denominated in U.S. Dollars. The Class C Shares which are denominated in Sterling began trading on 27 April The Class D Shares which are denominated in Sterling began trading on 7 April The Class B Shares which are denominated in Euro began trading on 21 July The fund has been invested in a broad range of small companies across the Pacific Basin region (Australia, Hong Kong, Japan, New Zealand, Singapore, South Korea and Taiwan - South Korea and Taiwan have been included in the fund to increase diversification although they are not in the MSCI Pacific Small Cap Index) and as at 30 November 2009 had holdings in 2,347 companies. This reflects our approach of delivering highly diversified exposure to small companies. The weighted average market capitalisation of the holdings in the fund at 30 November 2009 was 787 million compared to 1,055 million for the MSCI Pacific Small Cap Index. This reflects our intentional bias towards smaller companies than simply those in the index since we believe that smaller companies deliver the best returns when small companies perform well in general. The dividend yield of the fund at 30 November 2009 was 2.29% which compares to 2.60% for the MSCI Pacific Small Cap Index. The weighted average book-to-market ratio of the holdings in the fund at 30 November 2009 was 1.05 compared to 1.02 for the MSCI Pacific Small Cap Index. Over one year to 30 November 2009, the total return of the fund in U.S. Dollars (the base currency of the fund) was 52.8%. This compares to a total return (with net dividends reinvested) of 37.3% for the MSCI Pacific Small Cap Index. Total return over six months and from inception for each class is shown in the Performance Information table. The portfolio is fully invested and is well positioned to capture the returns of small companies in the Pacific Basin. Sterling Ultra Short Fixed Income Fund The Sterling Ultra Short Fixed Income Fund was launched on the 15 May 2009 with the inception of the Class C and D Shares which are denominated in GBP. The Fund is invested in a broad range of high quality fixed income Sterling denominated issues with maturities at or below two years. As of 30 November 2009, the fund was diversified across 45 unique issuers from 15 different countries as well as supranational organisations. There were 53 unique securities, all of which were denominated in GBP. The portfolio had an average credit rating of AA+. At 30 November 2009, the average maturity of the fund was 0.94 years resulting in a modified duration of The yield to maturity at this time was 1.4%. Since inception to 30 November 2009, the total return of the fund in GBP was -0.30%. This compares to a return of the UK One-Month Treasury Bills Index of 0.2%. U.S. Small Companies Fund The U.S. Small Companies Fund was launched on 29 April 2004 with the inception of the Class B Shares which are denominated in Euro. The Class A Shares which are denominated in U.S. Dollars began trading on 22 September The Class C Shares which are denominated in Sterling began trading on 27 April The Class D Shares which are denominated in Sterling began trading on 7 April The fund has been invested in a broad range of U.S. small companies and as at 30 November 2009 had holdings in 1,985 companies. This reflects our approach of delivering highly diversified exposure to small companies. The weighted average market capitalisation of the holdings in the fund at 30 November 2009 was 698 million compared to 937 for the Russell 2000 Index. This reflects our intentional bias towards smaller companies than simply those in the index since we believe that smaller companies deliver the best returns when small companies perform well in general. The dividend yield of the fund at 30 November 2009 was 0.81% which compares to 1.27% for the Russell 2000 Index. The weighted average book-to-market ratio of the holdings in the fund at 30 November 2009 was 0.73 which compares to the weighted average book-to-market ratio of the holdings in the Russell 2000 Index of Over one year to 30 November 2009, the total return of the fund in U.S. Dollars (the base currency of the fund) was 26.1%. This compares to a total return of 24.5% for the Russell 2000 Index. Total return over six months and from inception for each class is shown in the Performance Information table. The portfolio is fully invested and is well positioned to capture the returns of U.S. small companies. 4

6 DIMENSIONAL FUNDS PLC Investment Manager s Reports (continued) Fund Class & Index ** Share Class/ Index Denomination Class Inception Date Total Return for year ended 30 November 2009 Total Annualised Return from inception to 30 November 2009 Emerging Markets Fund Class A Shares 30-Nov % 13.7% MSCI Emerging Markets Index 86.3% 14.2% Emerging Markets Fund Class B Shares EUR 10-Oct % 7.9% MSCI Emerging Markets Index EUR 57.6% 8.7% Emerging Markets Fund Class C Shares GBP 8-Mar % 12.1% MSCI Emerging Markets Index GBP 74.2% 13.2% Emerging Markets Fund Class D Shares GBP 3-Jan % 13.5% MSCI Emerging Markets Index GBP 74.2% 14.1% Emerging Markets Fund Class E Shares EUR 9-Aug % (8.1%) MSCI Emerging Markets Index EUR 57.6% (3.7%) European Small Companies Fund Class A Shares 26-Feb % 7.4% MSCI Europe Small Cap Index 71.4% 8.3% European Small Companies Fund Class B Shares EUR 6-Apr % 4.3% MSCI Europe Small Cap Index EUR 45.0% 4.7% European Small Companies Fund Class C Shares GBP 27-Apr % 8.5% MSCI Europe Small Cap Index GBP 60.2% 9.2% European Small Companies Fund Class D Shares GBP 7-Apr % 7.3% MSCI Europe Small Cap Index GBP 60.2% 7.7% Global Short Bond Fund Class A Shares 28-Nov % 5.1% Citigroup WGBI Currency Hedged 1-5 Year EUR Index 3.9% 3.9% Global Short Bond Fund Class B Shares EUR 25-Jan % 4.7% Citigroup WGBI Currency Hedged 1-5 Year EUR Index EUR 3.9% 5.3% Global Short Bond Fund Class N Shares NOK 2-Jan % 6.5% Citigroup WGBI Currency Hedged 1-5 Year EUR Index NOK (0.1%) 9.6% Global Short Bond Fund Class S Shares * CHF 6-May-09 N/A 4.0% Citigroup WGBI Currency Hedged 1-5 Year EUR Index CHF N/A 1.9% 5

7 DIMENSIONAL FUNDS PLC Investment Manager s Reports (continued) Fund Class & Index ** Share Class/ Index Denomination Class Inception Date Total Return for year ended 30 November 2009 Total Annualised Return from inception to 30 November 2009 Pacific Basin Small Companies Fund Class A Shares 26-Feb % 8.8% MSCI Pacific Small Cap Index 37.3% 4.8% Pacific Basin Small Companies Fund Class B Shares EUR 21-Jul % 0.2% MSCI Pacific Small Cap Index EUR 16.2% (5.2%) Pacific Basin Small Companies Fund Class C Shares GBP 27-Apr % 9.2% MSCI Pacific Small Cap Index GBP 28.4% 3.8% Pacific Basin Small Companies Fund Class D Shares GBP 7-Apr % 8.0% MSCI Pacific Small Cap Index GBP 28.4% 2.9% Sterling Ultra Short Fixed Income Fund Class C Shares * GBP 15-May-09 N/A (0.3%) UK One-Month Treasury Bills GBP N/A 0.2% Sterling Ultra Short Fixed Income Fund Class D Shares * GBP 15-May-09 N/A (0.3%) UK One-Month Treasury Bills GBP N/A 0.2% U.S. Small Companies Fund Class A Shares 22-Sep % 0.3% Russell 2000 Index 24.5% 1.8% U.S. Small Companies Fund Class B Shares EUR 29-Apr % (4.2%) Russell 2000 Index EUR 5.4% (2.4%) U.S. Small Companies Fund Class C Shares GBP 27-Apr % 2.8% Russell 2000 Index GBP 16.4% 4.4% U.S. Small Companies Fund Class D Shares GBP 7-Apr % 1.0% Russell 2000 Index GBP 16.4% 2.7% * Returns for periods of less than one year are not annualised. ** All historic distributions have been adjusted for in calculating the return of Class C, Class D, Class E, Class N and Class S to ensure the Class return is comparable to the index. Dimensional Fund Advisors Limited 22 February

8 DIMENSIONAL FUNDS PLC Directors Report The Directors of Dimensional Funds plc (the Company ) submit this Annual Report together with the audited financial statements for the year ended 30 November As at 30 November 2009 there are six active Funds (30 November 2008: five). The Company is established as an umbrella investment company with variable capital incorporated in Ireland as a public limited company. The Company is constituted as an umbrella fund insofar as the share capital of the Company will be divided into different portfolios of assets which will comprise separate Funds. In accordance with the requirements of the Financial Regulatory Notices, shares may be divided into different classes to accommodate different subscription and/or redemption charges and/or dividend and/or fee arrangements. The portfolio of assets maintained and comprising a separate sub-fund (each a Fund ) will be invested in accordance with the investment objectives and policies applicable to such Fund. The Directors of the Company (the Directors ) have established sixteen Funds (30 November 2008: fifteen). Sterling Ultra Short Fixed Income Fund was approved by the Financial Regulator on 16 April 2009 and commenced trading on 15 May Emerging Markets Fund Emerging Markets Targeted Fund Emerging Markets Fund European ex-uk Targeted Fund European Small Companies Fund European Fund Global Short Bond Fund Japanese Targeted Fund Pacific Basin ex-japan Targeted Fund Pacific Basin Small Companies Fund Pacific Basin Fund Sterling Ultra Short Fixed Income Fund U.S. Small Companies Fund U.S. Targeted Fund U.S. Fund As of 30 November 2009, Shares had been issued to investors in respect of six such Funds: Emerging Markets Fund, European Small Companies Fund, Global Short Bond Fund, Pacific Basin Small Companies Fund, Sterling Ultra Short Fixed Income Fund and U.S. Small Companies Fund (the Funds ). The remaining funds have not issued any Shares to investors and have remained dormant from the date of their approval. Fund and Class Commencement of Operations Emerging Markets Fund U.S. Dollar Class A 30 November 2005 Euro Class B 10 October 2005 Sterling Class C 8 March 2006 Sterling Class D 3 January 2006 Euro Class E 9 August 2007 European Small Companies Fund U.S. Dollar Class A 26 February 2004 Euro Class B 6 April 2004 Sterling Class C 27 April 2005 Sterling Class D 7 April 2005 Global Short Bond Fund U.S. Dollar Class A 28 November 2008 Euro Class B 25 January 2007 Norwegian Krone Class N 2 January 2008 Swiss Franc Class S 6 May 2009 Pacific Basin Small Companies Fund U.S Dollar Class A 26 February 2004 Euro Class B 21 July 2005 Sterling Class C 27 April 2005 Sterling Class D 7 April 2005 Sterling Ultra Short Fixed Income Fund Sterling Class C 15 May 2009 Sterling Class D 15 May

9 DIMENSIONAL FUNDS PLC Directors Report (continued) U.S. Small Companies Fund U.S. Dollar Class A 22 September 2004 Euro Class B 29 April 2004 Sterling Class C 27 April 2005 Sterling Class D 7 April 2005 Statement of Directors Responsibilities The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable Irish Law and Generally Accepted Accounting Practice in Ireland including accounting standards issued by the Accounting Standards Board and published by the Institute of Chartered Accountants in Ireland. Irish company law requires the Directors to prepare financial statements for each financial period which give a true and fair view of the state of affairs of the Company and of its results of operations for that period. In preparing those financial statements, the Directors are required to: select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; and prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors confirm that they have complied with the above requirements in preparing the financial statements. The Directors are responsible for keeping proper books of account which disclose, with reasonable accuracy at any time, the financial position of the Company and to enable them to ensure that the financial statements are prepared in accordance with accounting standards generally accepted in Ireland and that they comply with the Companies Acts, 1963 to 2009 and the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 2003, as amended. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Under the European Communities (Undertaking for Collective Investment in Transferable Securities) Regulations, 2003, as amended, the Directors are required to entrust the assets of the Company to the Custodian for safe-keeping. In carrying out this duty, the Directors have delegated custody of the Company s assets to PNC International Bank Limited. The measures taken by the Directors to secure compliance with the Company s obligations to keep proper books of accounts include the use of appropriate systems and procedures and employment of competent persons. The books of accounts are retained at the offices of the Administrator, PNC Global Investment Servicing (Europe) Limited, Riverside Two, Sir John Rogerson s Quay, Grand Canal Dock, Dublin 2, Ireland. Principal Activities and Review of the Business The Company has been formed to provide investors with an opportunity to purchase shares in a series of investment subfunds. As at 30 November 2009 shares had been issued in six sub-funds of the Company: Emerging Markets Fund, European Small Companies Fund, Global Short Bond Fund, Pacific Basin Small Companies Fund, Sterling Ultra Short Fixed Income Fund and U.S. Small Companies Fund (each a Fund and collectively, the Funds ). The investment objective of each Fund, except Global Short Bond Fund and Sterling Ultra Short Fixed Income Fund, is to achieve longterm total return. The investment objective of Global Short Bond Fund and Sterling Ultra Fixed Income Fund is to seek to maximise current income while preserving capital. A review of the business development and performance of the Company together with an analysis of key financial and non financial performance indicators are available in the Investment Manager s Reports. Risk Management Objectives and Policies Information in relation to the Company s Risk Management Objectives and Policies are included in note 9 to the financial statements. Cross-liability The Company is an umbrella fund, and where the assets of a Fund or a class are insufficient to meet the liabilities of that Fund or class, any liabilities which remain undischarged will attach to the Company as a whole and be allocated amongst the other Funds or classes. To date, the Directors are not aware of any such existing or contingent liability. 8

10 DIMENSIONAL FUNDS PLC Directors Report (continued) Results and Dividends The Directors may declare dividends in respect of any Shares out of net income (including dividend and interest income) and the excess of realised and unrealised capital gains over realised and unrealised losses in respect of investments of the Company. Currently the Directors anticipate that there will be no dividend distributions in respect of the Class A Shares and Class B Shares of the Funds. Accordingly, income and capital gains arising in respect of the Class A Shares and Class B Shares of the Funds will be re-invested in the relevant Fund and reflected in the per Share of the relevant Fund. Currently the Directors anticipate making dividend distributions in respect of the Class C Shares, Class D Shares, Class E Shares, Class N Shares and Class S Shares of the Funds. Accordingly, any income arising in respect of the Class C Shares, Class D Shares, Class E Shares, Class N Shares or Class S Shares of the Funds will be distributed to investors in the relevant Fund in accordance with their respective shareholdings. Dividends of the Class C Shares and Class D Shares will be declared by the Directors for the periods ending 31 May and 30 November. Dividends of the Class E Shares, Class N Shares and Class S Shares will be declared by the Directors for the period ending 30 November. Dividends declared and paid during the year are disclosed in note 12 to the Financial Statements. Post Balance Sheet Events There were no material post balance sheet events which have a material bearing on the understanding of these financial statements. Directors The names of the persons who were Directors during the year ended 30 November 2009 are set out on page 3. Directors and Secretary s Interests in Shares and Contracts As at 30 November 2009 David Salisbury owned Class D Shares in each of the following Funds: Emerging Markets Fund 1,080 shares, European Small Companies Fund 1,092 shares, Pacific Basin Small Companies Fund 50,000 shares, Sterling Ultra Short Fixed Income Fund 1,060 shares and U.S. Small Companies Fund 1,005 shares, respectively. As at 30 November 2008 David Salisbury owned Class D Shares in each of the following Funds: Emerging Markets Fund 1,039 shares, European Small Companies Fund 1,050 shares, Pacific Basin Small Companies Fund 1,032 shares and U.S. Small Companies Fund 1,000 shares, respectively. The authorised share capital of the Company was 500,000,030,000 shares of no par value divided into 30,000 subscriber shares of no par value, and 500,000,000,000 shares of no par value, initially designated as unclassified shares. As at 30 November 2009 and 30 November 2008, Dimensional Fund Advisors Limited, Mr. Peter Blessing, Mr. David Booth, Mr. Dermot Butler, Ms. Catherine Newell and Mr. Garrett Quigley held one Share each (fully paid-up) in the Company. David Booth, Richard Eustice, David Martin, Catherine Newell, Garrett Quigley and David Salisbury, as employees of Dimensional Fund Advisors Limited or the Sub-Advisors, have waived their rights to Directors' fees from the Company. Aside from the information disclosed above, the Directors and Secretary and their families had no other interest in the shares of the Funds as at 30 November 2009 or 30 November No Director had a material interest in any other contract of significance, during or at the end of the year, in relation to the business of the Company. Independent Auditors The Auditors, PricewaterhouseCoopers, will be re-appointed in accordance with section 160(2) of the Companies Act,

11 DIMENSIONAL FUNDS PLC Directors Report (continued) Corporate Governance Statement The Company is subject to and complies with Irish Statute comprising the Companies Acts, 1963 to 2009 and with the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 2003, as amended, and the Listing Rules of the Irish Stock Exchange, as applicable to investment funds, and with the Business Plan of the Company. Although there is no specific statutory corporate governance code applicable to Irish collective investment schemes whose shares are admitted to trading on the Irish Stock Exchange, the Company is subject to corporate governance practices imposed by: 1. The Irish Companies Acts 1963 to 2009 and the UCITS Regulations which are available for inspection at the registered office of the Company and may also be obtained at 2. The Articles of Association of the Company which are available for inspection at the registered office of the Company and at the Companies Registration Office in Ireland. 3. The Financial Regulator in their UCITS Notices and Guidance Notes which can be obtained from the Financial Regulator s website at: and are available for inspection at the registered office of the Company. 4. The Irish Stock Exchange ( ISE ) through the ISE Code of Listing Requirements and Procedures which can be obtained from the ISE s website at 5. The Business Plan in respect of the Company which is available for inspection at the registered office of the Company. The Company does not apply additional corporate governance requirements beyond those required by the above. Financial Reporting Process - description of main features The Board of Directors (the Board ) is ultimately responsible for overseeing the establishment and maintenance of adequate internal control and risk management systems of the Company in relation to the financial reporting process. As the Company has no employees and all directors serve in a non executive capacity all functions including the preparation of the financial statements have been outsourced. The Company has appointed PNC Global Investment Servicing (Europe) Limited as its Administrator consistent with the regulatory framework applicable to investment fund companies such as the Company. The Administrator has functional responsibility for the preparation of the Company s interim and annual financial statements and the maintenance of its books and records. On appointing the Administrator the Board noted that it was regulated by the Irish Financial Services Regulatory Authority (the Financial Regulator ) and, in the Board s opinion, had significant experience as an administrator. The Board also noted the independence of the Administrator from the Company s investment manager. Subject to the supervision of the Board, the appointment of the Administrator is intended to manage rather than eliminate the risk of failure to achieve the Company s financial reporting objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. The annual and interim financial statements of the Company are required to be approved by the Board of the Company and filed with the Financial Regulator and the Irish Stock Exchange. The statutory financial statements are required to be audited by independent auditors who report annually to the Board on their findings. The Board evaluates and discusses significant accounting and reporting issues as the need arises. Risk Assessment The Board is responsible for assessing the risk of irregularities whether caused by fraud or error in financial reporting and for ensuring that processes are in place for the timely identification of internal and external matters with a potential effect on financial reporting. The Board is advised by the Administrator as to changes in accounting rules and provides recommendations as to how these changes are best reflected in the Company s financial statements. The Board s appointment of an administrator independent of the investment manager to the Company and which is regulated by Financial Regulator is intended to mitigate though not eliminate the risk of fraud or irregularities which may impact the financial statements of the Company. Monitoring The Board receives regular presentations and reviews reports from the Custodian, Investment Manager and Administrator. The Board also has an annual process to ensure that appropriate measures are taken to consider and address any control weaknesses identified and measures recommended by the independent auditors. 10

12 DIMENSIONAL FUNDS PLC Directors Report (continued) Capital structure No person has a significant direct or indirect holding of securities in the Company. No person has any special rights of control over the Company s share capital. There are no restrictions on voting rights. For the appointment and replacement of Directors, the Company is governed by its Articles of Association, Irish Statute comprising the Companies Acts, 1963 to 2009 and with the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 2003, as amended, and the Listing Rules of the Irish Stock Exchange as applicable to investment funds. The Articles of Association themselves may be amended by special resolution of the shareholders. Composition and operation of the board of directors There are eight Directors currently, all of whom are non-executive and two of whom are independent of the Investment Manager as required by the Irish Stock Exchange Listing Rules for investment funds. None of the Directors have entered into an employment or service contract with the Company. All related party transactions during the year are detailed in Note 8 to the financial statements. The Articles of Association do not provide for retirement of Directors by rotation. However, the Directors may be removed by the shareholders by ordinary resolution in accordance with the procedures established under the Irish Companies Acts 1963 to The Board meets at least quarterly. There are no subcommittees of the Board. The Board is responsible for managing the business affairs of the Company in accordance with the Articles of Association. Subject to its supervision and direction the Board has delegated the day to day administration of the Company to the Administrator and the investment management and distribution functions to Dimensional Fund Advisors Limited as the Investment Manager. The Company has appointed PNC International Bank Limited as the Custodian to the Company with responsibility for the safekeeping of the assets of the Company. Consequently none of the Directors is an executive director. Shareholder meetings The Annual General Meeting of the Company will usually be held in Dublin, normally during the month of February or such other date as the Directors may determine. Notice convening the Annual General Meeting in each year at which the audited financial statements of the Company will be presented (together with the Directors' and Auditors' Reports of the Company) will be sent to Shareholders at their registered addresses not less than 21 days before the date fixed for the meeting. Other general meetings may be convened from time to time by the Directors in such manner as provided by Irish law. Each of the shares entitles the holder to attend and vote at meetings of the Company and of the Sub-Fund represented by those shares. Matters will be determined by a meeting of shareholders on a poll. Each share gives the holder one vote in relation to any matters relating to the Company which are submitted to shareholders for a vote by poll. No business shall be transacted at any shareholder meeting unless a quorum is present. Two shareholders present either in person or by proxy shall be a quorum for a general meeting. If within half an hour after the time appointed for a meeting a quorum is not present, the meeting, if convened on the requisition of or by Shareholders, shall be dissolved. In any other case it shall stand adjourned to the same day in the next week, at the same time and place or to such other day and at such other time and place as the Directors may determine. One Shareholder present either in person or by proxy shall be a quorum for any such adjourned meeting. Approved on behalf of the Board of Directors Director Garrett Quigley 22 February 2010 Director Richard Eustice 11

13 DIMENSIONAL FUNDS PLC Custodian s Report to the Shareholders of Dimensional Funds plc We have enquired into the conduct of the Dimensional Funds plc (the Company ) for the year ended 30 November 2009 in our capacity as Custodian to the Company. This report including the opinion has been prepared for and solely for the shareholders in the Company as a body, in accordance with the Financial Regulator s UCITS Notice 4, and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown. Responsibilities of the Custodian Our duties and responsibilities are outlined in the Financial Regulator s UCITS Notice 4. One of those duties is to enquire into the conduct of the Company in each annual accounting period and report thereon to the shareholders. Our report shall state whether, in our opinion, the Company has been managed in that period, in accordance with the provisions of the Company s Memorandum and Articles of Association and the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2003, as amended, (the UCITS Regulations ). It is the overall responsibility of the Company to comply with these provisions. If the Company has not so complied, we as Custodian must state why this is the case and outline the steps which we have taken to rectify the situation. Basis of Custodian Opinion The Custodian conducts such reviews as it, in its reasonable opinion, considers necessary in order to comply with its duties as outlined in UCITS Notice 4 and to ensure that, in all material respects, the Company has been managed (i) in accordance with the limitations imposed on its investment and borrowing powers by the provisions of its constitutional documentation and the appropriate regulations and (ii) otherwise in accordance with the Company s constitutional documentation and the appropriate regulations. Opinion In our opinion, the Company has been managed during the year in all material respects: a) in accordance with the limitations imposed on the investment and borrowing powers of the Company by the Memorandum and Articles of Association and by the UCITS Regulations; and b) otherwise in accordance with the provisions of the Memorandum and Articles of Association and the UCITS Regulations. Yours faithfully, For & on behalf of PNC International Bank Limited 22 February

14 DIMENSIONAL FUNDS PLC Independent Auditors Report to the Shareholders of Dimensional Funds plc (the Company ) We have audited the Company s financial statements for the year ended 30 November 2009 which comprise the Company s Combined Balance Sheet, Combined Profit and Loss Account, Combined Statement of Changes in s Attributable to holders of Redeemable Shares and related notes and, for each of the Company s sub-funds, the Balance Sheet, Profit and Loss Account, Statement of Changes in s Attributable to holders of Redeemable Shares, the Portfolio of Investments and the related notes. These financial statements have been prepared under the accounting policies set out therein. Respective responsibilities of Directors and Auditors The Directors responsibilities for preparing the Annual Report and the financial statements in accordance with applicable Irish law and the accounting standards issued by the Accounting Standards Board and published by the Institute of Chartered Accountants in Ireland (Generally Accepted Accounting Practice in Ireland) are set out in the Statement of Directors Responsibilities. Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). This report, including the opinion, has been prepared for and only for the company s members as a body in accordance with Section 193 of the Companies Act, 1990 and Regulations 9 and 13 of the European Communities (Directive 2006/46/EC) Regulations, 2009 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. We report to you our opinion as to whether the financial statements give a true and fair view in accordance with Generally Accepted Accounting Practice in Ireland, and are properly prepared in accordance with Irish statute comprising the Companies Acts, 1963 to 2009 and the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 2003, as amended. We state whether we have obtained all the information and explanations we consider necessary for the purposes of our audit, and whether the financial statements are in agreement with the books of account. We also report to you our opinion as to: whether the Company has kept proper books of account; and whether the Directors Report is consistent with the financial statements. We also report to you if, in our opinion, any information specified by law regarding Directors remuneration and Directors transactions is not disclosed and where practicable, include such information in our report. In relation to the corporate governance statement (the statement ) we are required to: establish whether the statement contains the information required by law; and report whether, in our opinion, the information given in the statement with respect to internal control and risk management systems in relation to financial reporting processes, including those systems used for preparing the financial statements, is consistent with our evaluation and testing of the relevant systems which we considered necessary for the purposes of our audit report under Section 193 of the Companies Act, 1990 We are not required to consider whether the information given in the corporate governance statement on internal control and risk management systems cover all risks and controls, or to evaluate and test the main features of the internal control and risk management systems as described in the corporate governance statement, or form an opinion on the effectiveness of the corporate governance procedures or its risk and control procedures.. 13

15 DIMENSIONAL FUNDS PLC Independent Auditors Report to the Shareholders of Dimensional Funds plc (the Company ) (continued) We read the other information contained in the Annual Report, and consider whether it is consistent with the audited financial statements. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information. Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Company's circumstances, consistently applied and adequately disclosed. The audit procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate to form an opinion on whether the financial statements give a true and fair view and not for the purpose of expressing an opinion on the effectiveness of the internal control and risk management systems. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. Opinion In our opinion the financial statements: give a true and fair view in accordance with Generally Accepted Accounting Practice in Ireland, of the state of the Company's affairs at 30 November 2009 and of its results for the year then ended; and have been properly prepared in accordance with the requirements of the Companies Acts, 1963 to 2009 and the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 2003, as amended. We have obtained all the information and explanations we consider necessary for the purposes of our audit. In our opinion proper books of account have been kept by the Company. The Company s financial statements are in agreement with the books of account. In our opinion the information given in the directors' report is consistent with the financial statements. In our opinion the information given in the corporate governance statement with respect to internal control and risk management systems in relation to financial reporting processes, including those systems used for preparing the financial statements, is consistent with our evaluation and testing of the relevant systems which we considered necessary for the purposes of our audit report under Section 193 of the Companies Act, 1990 on the financial statements. PricewaterhouseCoopers Chartered Accountants and Registered Auditors Dublin 22 February

16 DIMENSIONAL FUNDS PLC Balance Sheet as at 30 November 2009 Emerging European Small Pacific Basin Small Sterling Ultra U.S. Small Markets Companies Global Short Companies Short Fixed Companies Note Fund Fund Bond Fund Fund Income Fund Fund EUR EUR GBP s Financial assets at fair value through profit or loss Cash and cash equivalents 2(b),13 1,198,182, ,045,932 2(i), 5 30,875, ,454 73,657, ,664,894 1,662, ,554 22,933, ,267 96,036,318 15,281,469 Unrealised gain on forward contracts 9 198,576 Receivable for shares sold 55,123 62, ,653 57, ,276 Receivable for securities sold 110, ,352 11,054 88,470 Interest receivable 1,136, ,371 Dividends and tax receivable 448, , ,122 65,920 Prepaid fees 6, Other assets 62,101 7,363 11, ,546 Total s 1,229,740, ,029,759 77,393, ,796,784 24,378, ,677,980 Liabilities Unrealised loss on forward contracts 9 (462,916) Payable under securities loan agreements Management fee 2(i) 4 (478,150) (46,961) (13,573) (48,668) (14,936,065) (39,195) Payable for shares repurchased (222,365) (75,990) (103,176) (126,610) (1,163) (121,811) Payable for securities purchased (23,794,693) (39,367) (1,361,201) (18,177) (484,331) Distributions payable (2,010,041) (545,376) (62,073) (540,375) (112,261) (55,224) Accrued expenses (923,077) (70,581) (36,468) (92,042) (30,997) (61,194) Total Liabilities (excluding net assets attributable to holders of redeemable shares) (27,428,326) (778,275) (2,039,407) (825,872) (628,752) (15,213,489) assets attributable to holders of redeemable shares at bid market value 1,202,312, ,251,484 75,354, ,970,912 23,749,897 96,464,491 Adjustment from bid market value to fair value 2(b) 2,466, , , ,177 18, ,680 assets attributable to holders of redeemable shares 1,204,778, ,721,434 75,464, ,246,089 23,768,866 96,645,171 * Sterling Ultra Short Fixed Income Fund launched on 15 May

17 DIMENSIONAL FUNDS PLC Balance Sheet as at 30 November 2009 (continued) Emerging Markets Fund European Small Companies Fund Global Short Bond Fund Pacific Basin Small Companies Fund Sterling Ultra Short Fixed Income Fund* U.S. Small Companies Fund Redeemable shares in issue* U.S. Dollar Class A 41,085,410 3,983,174 3,275,733 3,336, ,561 Euro Class B 15,789,834 2,048,716 4,241, ,693 2,338,392 Sterling Class C 367, , ,840 1,040,137 1,400,125 Sterling Class D 990,196 2,153,010 1,388,299 1,343,748 2,316,191 Euro Class E 13,468,468 Norwegian Krone Class N 2,247,985 Swiss Franc Class S 193,187 asset value per redeemable share* U.S. Dollar Class A $16.73 $15.11 $10.51 $16.27 $10.16 Euro Class B Sterling Class C Sterling Class D Euro Class E 7.88 Norwegian Krone Class N kr10.80 Swiss Franc Class S * Global Short Bond Fund, Swiss Franc Class S launched on 6 May Sterling Ultra Short Fixed Income Fund launched on 15 May Approved on behalf of the Board of Directors Garrett Quigley Director Richard Eustice Director 22 February

18 DIMENSIONAL FUNDS PLC Balance Sheet as at 30 November 2008 Note European Small Companies Global Short Pacific Basin Small Companies U.S. Small Companies Fund Bond Fund Fund Fund EUR EUR Emerging Markets Fund s Financial assets at fair value through profit or loss 2(b),13 314,270,698 71,616,135 32,444,165 70,273,038 70,125,421 Investment in money market instruments Cash and cash equivalents 5 2(i), 5 1,306, ,969 11, , , ,932 9, ,682 4,294,800 Unrealised gain on forward contracts 9 308,177 Receivable for shares sold 63,750 64, ,828 49,165 76,296 Receivable for securities sold 16, ,455 2,886 1,659,825 18,437 Interest receivable 44,876 10, ,109 18,158 22,462 Dividends and tax receivable 282, , ,655 71,401 Prepaid fees 6,207 2, ,201 4,741 Other assets Total s 316,183,359 73,179,961 34,173,890 73,258,813 75,136,240 Liabilities Unrealised loss on forward contracts 9 (1,953) Payable under securities loan agreements Management fee 2(i) 4 (133,065) (31,466) (1,819) (30,472) (4,270,682) (28,741) Payable for shares repurchased (29,583) (10,383) (21,223) (154,848) Payable for securities purchased (40,612) (1,512,168) Distributions payable (4,319,391) (902,881) (53,799) (686,743) (177,765) Accrued expenses (370,097) (55,979) (28,874) (84,065) (51,703) Total Liabilities (excluding net assets attributable to holders of redeemable shares) (4,852,136) (1,041,321) (86,445) (2,334,671) (4,683,739) assets attributable to holders of redeemable shares at bid market value 311,331,223 72,138,640 34,087,445 70,924,142 70,452,501 Adjustment from bid market value to fair value 2(b) 3,387, ,218 19, , ,378 assets attributable to holders of redeemable shares 314,719,134 72,730,858 34,107,071 71,819,636 70,752,879 17

19 DIMENSIONAL FUNDS PLC Balance Sheet as at 30 November 2008 (continued) Emerging Markets Fund European Small Companies Fund Global Short Bond Fund* Pacific Basin Small Companies Fund U.S. Small Companies Fund Redeemable shares in issue* U.S. Dollar Class A 10,283,896 3,718,064 5,003 3,071, ,011 Euro Class B 13,062,736 1,724,784 2,974, ,542 2,187,500 Sterling Class C 365, , ,705 1,214,268 Sterling Class D 1,603,437 1,891,242 1,283,025 2,123,521 Euro Class E 12,848,410 Norwegian Krone Class N 1,713,230 asset value per redeemable share* U.S. Dollar Class A $8.18 $9.53 $10.00 $10.65 $8.06 Euro Class B Sterling Class C Sterling Class D Euro Class E 4.60 Norwegian Krone Class N kr10.29 * Global Short Bond Fund, Norwegian Krone Class N launched on 2 January 2008 and U.S. Dollar Class A launched on 28 November

20 DIMENSIONAL FUNDS PLC Combined Balance Sheet Total Note 2009 Total 2008 EUR EUR s Financial assets at fair value through profit or loss 2(b),13 1,147,449, ,925,847 Investment in money market instruments 5 2,081,021 Cash and cash equivalents 2(i), 5 34,324,640 5,214,789 Unrealised gain on forward contracts 9 198, ,224 Receivable for shares sold 362, ,953 Receivable for securities sold 879,064 1,943,524 Interest receivable 1,936, ,122 Dividends and tax receivable 728, ,162 Prepaid fees 5,182 14,561 Other assets 56, Total s 1,185,940, ,016,921 Liabilities Unrealised loss on forward contracts 9 (462,916) Payable under securities loan agreements 2(i) (9,947,121) (3,361,411) Management fee 4 (437,488) (184,625) Payable for shares repurchased (493,974) (172,251) Payable for securities purchased (17,790,094) (1,230,824) Distributions payable (2,465,746) (5,036,875) Accrued expenses (857,812) (483,015) Total Liabilities (excluding net assets attributable to holders of redeemable shares) (32,455,151) (10,469,001) assets attributable to holders of redeemable shares at bid market value 1,153,485, ,547,920 Adjustment from bid market value to fair value 2(b) 2,547,602 4,219,694 assets attributable to holders of redeemable shares 1,156,033, ,767,614 Approved on behalf of the Board of Directors Garrett Quigley Director 22 February 2010 Richard Eustice Director 19