Dimensional's international applied core equity strategies offer diversified coverage of developed and emerging markets, respectively, with a greater exposure to the risk factors of size and value that drive higher long-term expected returns. The strategies offer structured international asset allocation in single, integrated portfolios.

The universe for the International Core Equity Portfolio includes all companies in the twenty-two non-US developed markets defined by Dimensional, with moderate exposures away from the market toward small cap and value stocks. These exposures are achieved by overweighting stocks with higher book-to-market ratios and smaller market capitalizations on a country-by-country basis. The portfolio invests in some non-US stocks not included in the MSCI World Index, making it more representative of the total international developed market. The Emerging Markets Core Equity Portfolio mirrors the investable universe of emerging markets companies defined by Dimensional, with increased exposure to small and value stocks. Utilizing the service of an independent, third-party social screening vendor, the Emerging Markets Social Core Equity Portfolio applies a series of social issue screens designed to meet the investing needs of shareholders by excluding certain emerging markets companies. As with our asset class portfolios, we consider, among other factors, information disseminated by the International Finance Corporation in determining and approving countries that have emerging markets. Dimensional sets country weight targets in all non-US portfolios based largely on the relative sizes of the universes of eligible companies in each country. In the emerging markets, we impose a cap on the weight of any single country (currently 12.5%) in order to minimize the potential negative effects experienced by an asset class that is characterized by a higher degree of individual country volatility and political risk than developed markets. The developed markets portfolios invest in non-US countries included in the MSCI World Index. Dimensional has managed non-US small capitalization equities since 1986 when we created regional portfolios in Japan and the United Kingdom. Since then, the firm has added small company portfolios in other regions, including the International Small Company Portfolio, which provides exposure to small cap stocks in developed countries as approved by Dimensional. We invest proportionately in each region using target weights determined by Dimensional to provide adequate diversification. We define small capitalization using a "number of names" approach to determine a maximum market capitalization in each country or region. We adjust the actual size break over time based on market fluctuations. This methodology allows us to target a small cap universe in a consistent fashion, with low potential for portfolio turnover. We monitor the portfolio carefully to ensure that we maintain dedicated small cap exposure and avoid size drift. As a result, Dimensional's small cap strategies are typically smaller in market capitalization than those of competitors or market benchmarks.

We also offer both large company and small company portfolios designed to capture the value effect identified by the Fama/French research. Value in our international portfolios is defined individually by country. In the International Value Portfolio and International Small Cap Value Portfolio, country weights are primarily based on the universe of eligible companies in each country. The Tax-Managed International Value Portfolio additionally seeks to minimize the impact of federal taxes on returns by deferring the realization of net capital gains and attempting to minimize dividend income.

To capture the multiple categories of asset risk, Dimensional offers large cap, small cap, and value portfolios in emerging markets just as we do in developed markets.

Eligible emerging market countries are subject to rigorous review before being added to the list of countries approved for investment. They must meet several criteria, including a market capitalization of at least $10 billion, sufficient liquidity, and an equity settlement system that ensures simultaneous delivery vs. payment. Dimensional also applies subjective requirements, including fair treatment of foreign investors, well developed property rights, and a commitment to free markets. All of our emerging markets portfolios currently invest in companies in Brazil, Chile, China, Hungary, India, Indonesia, Israel, Malaysia, Mexico, the Philippines, Poland, South Africa, South Korea, Taiwan, Thailand, and Turkey.

As in our developed international strategies, Dimensional gains exposure to companies in emerging markets mainly by investing in the local market in ordinary common equity. Where advantageous, we may also invest in American Depository Receipts (ADRs) to gain exposure to an emerging market country. For example, we buy Chilean ADRs because they provide broad coverage of the stock market and allow US investors to avoid repatriation restrictions.

Currently, government authorities in Argentina are imposing capital constraints. The Investment Committee continues to monitor the situation and will take appropriate action on behalf of the funds. Such action has included and may continue to include establishing a fair value for those fund assets invested in Argentina. Each of the emerging markets funds holds less than 1% of fund assets in Argentina. If you have questions, please contact us. The principal risks of investing in these portfolios may include any of the following: market risk, foreign securities and currencies risk, small company risk, emerging markets risk, social investing risk, tax management strategy risk, risk of concentrating in the real estate industry, and real estate investment risk. These risks are fully described in the prospectus in the section entitled "Principal Risks."