BRWM - The Evidence Supporting our Investment Philosophy.

BRWM - The Evidence Supporting our Investment Philosophy

5000.1

1. Diversification

I. The Impact of Volatility

II. Growth of Wealth

III. The Randomness of Returns

IV. Balanced Strategies: Allocations

V. Balanced Strategies: Historical Returns

VI. Equity Returns of Developed Markets

VII. World Market Capitalisation

The Impact of Volatility

Year 1Return

Year 2Return

AverageReturn

CompoundReturn

Value at End of Year 2

Portfolio #1 50% -50% 0% -13.4% £75,000

Portfolio #2 10% -10% 0% -0.5% £99,000

Impact on a Hypothetical £100,000 Portfolio

For illustrative purposes only.

5010.2

Growth of Wealth 5015.2

£10

£100

£1,000

£10,000

£2,943Dimensional UK Value Index

£472FTSE All-Share Index

£52UK One Month Treasury Bills

£19UK Retail Price Index

£2,529Dimensional UK Small Cap Index

For the fifty-four years from 1956 to 2009, the compound annual growth rate of return was 15.94% for the Value Index, 15.62% for the Small Cap Index, 12.08% for the Large Cap Index, 7.60% for T-Bills, and 5.64% for Inflation (RPI) .

Value Index,1955-December 1993: data provided by the London Business School; 1994-present simulated by Dimensional from Bloomberg securities data. Small Cap Index,1970-June 1981: Hoare Govett Smaller Companies Index; July 1981-December 1993 simulated by Dimensional from StyleResearch securities data; 1994-present simulated by Dimensional from Bloomberg securities data. Large Cap Index is the FTSE All-Share Index published with the permission of FTSE. T-Bills, 1955-1974: UK Three-Month T-Bills provided by the London Share Price Database; 1975-present: UK One-Month T-Bills provided by the Financial Times. Inflation is the UK Retail Price Index provided by the Office for National Statistics.

This material has been distributed by Dimensional Fund Advisors Ltd., which is authorised and regulated by the Financial Services Authority. Past performance is not a guarantee of future results. This material is directed exclusively at professional customers as defined by the FSA.Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio.

2009

MSCI data copyright MSCI 2009, all rights reserved. FTSE data published with the permission of FTSE. Dimensional index data simulated by Dimensional from Bloomberg and StyleResearch securities data .

This material has been distributed by Dimensional Fund Advisors Ltd., which is authorised and regulated by the Financial Services Authority. Past performance is no guarantee of future results.

The Randomness of ReturnsIn British Pounds

5020.4

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

23.79 18.96 24.25 23.73 71.41 18.46 5.04 3.95 42.70 24.73 50.14 26.99 37.49 4.44 59.35

21.75 17.01 23.54 13.77 54.33 10.03 0.19 -15.03 40.72 22.88 30.17 24.98 7.33 -16.55 52.02

21.66 16.68 21.96 13.19 30.88 6.00 -0.45 -17.08 40.53 18.32 27.24 16.75 5.76 -21.91 34.86

20.90 6.03 19.85 7.38 30.16 1.16 -2.68 -22.67 39.98 17.44 26.86 16.50 5.32 -25.28 30.12

18.70 4.80 8.35 5.79 24.21 0.02 -2.75 -25.24 34.27 13.51 26.16 10.11 3.89 -29.93 26.65

9.40 1.32 6.79 1.13 23.36 -5.91 -10.23 -25.32 20.86 12.84 22.45 7.20 0.80 -35.08 21.62

6.61 -3.84 3.92 -4.70 21.50 -6.36 -13.28 -25.90 19.83 6.43 22.04 4.85 -6.96 -42.80 15.27

-4.34 -4.12 -7.89 -26.16 5.30 -24.96 -14.96 -28.09 3.67 4.53 4.82 4.39 -8.94 -49.56 0.53

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

UK One-Month Treasury Bills 6.61 6.03 6.79 7.38 5.30 6.00 5.04 3.95 3.67 4.53 4.82 4.85 5.76 4.44 0.53

FTSE All-Share Index 23.79 16.68 23.54 13.77 24.21 -5.91 -13.28 -22.67 20.86 12.84 22.04 16.75 5.32 -29.93 30.12

Dimensional UK Small Cap Index 18.70 17.01 8.35 -4.70 54.33 0.02 -10.23 -25.32 40.72 22.88 26.86 24.98 -6.96 -42.80 52.02

Dimensional UK Value Index 21.66 18.96 24.25 1.13 21.50 10.03 -0.45 -25.24 39.98 24.73 27.24 26.99 -8.94 -49.56 34.86

MSCI World ex UK Index (gross div.) 21.75 1.32 19.85 23.73 30.16 -6.36 -14.96 -28.09 19.83 6.43 22.45 4.39 7.33 -16.55 15.27

Dimensional International ex UK Small Index 9.40 -3.84 3.92 5.79 30.88 1.16 -2.75 -17.08 42.70 18.32 30.17 7.20 3.89 -21.91 26.65

Dimensional International ex UK Value Index 20.90 4.80 21.96 13.19 23.36 18.46 -2.68 -25.90 34.27 13.51 26.16 10.11 0.80 -25.28 21.62

MSCI Emerging Markets Index (gross div.) -4.34 -4.12 -7.89 -26.16 71.41 -24.96 0.19 -15.03 40.53 17.44 50.14 16.50 37.49 -35.08 59.35

Highest Return

Lowest Return

FTSE All-Share Index 20.00% 16.00% 12.00% 8.00% 4.00% –

Dimensional UK Value Index 15.00% 12.00% 9.00% 6.00% 3.00% –

Dimensional UK Small Cap Index 15.00% 12.00% 9.00% 6.00% 3.00% –

MSCI World ex UK Index 15.00% 12.00% 9.00% 6.00% 3.00% –

Dimensional International ex UK Value Index 15.00% 12.00% 9.00% 6.00% 3.00% –

Dimensional International ex UK Small Index 10.00% 8.00% 6.00% 4.00% 2.00% –

MSCI Emerging Markets Index (gross div.) 10.00% 8.00% 6.00% 4.00% 2.00% –

UK One-Month Treasury Bills – 20.00% 40.00% 60.00% 80.00% 100.00%

Total 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

FTSE published with the permission of FTSE. MSCI data copyright MSCI 2009, all rights reserved. Dimensional index data simulated by Dimensional from Bloomberg and StyleResearch securities data; not available for direct investment .

This material has been distributed by Dimensional Fund Advisors Ltd., which is authorised and regulated by the Financial Services Authority. Past performance is no guarantee of future results.

Balanced Strategies: AllocationsIn British Pounds

Fixed20/8040/6060/4080/20Equity

Model Portfolios

5030.3

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

38.58 4.98 16.98 8.15 14.92 7.12 33.40 5.74 4.78 3.69 31.94 15.70 27.21 14.98 5.50 5.18 32.30

31.37 3.56 14.85 7.74 13.36 7.07 27.37 4.51 2.55 -2.06 25.92 13.37 22.46 12.91 5.03 -3.90 25.79

24.46 2.09 12.71 7.29 11.73 6.84 21.52 3.24 0.19 -7.69 20.05 11.07 17.83 10.83 4.62 -11.62 19.31

17.84 0.59 10.59 6.81 10.04 6.41 15.85 1.94 -2.27 -13.19 14.34 8.78 13.29 8.75 4.13 -19.00 12.88

11.51 -0.95 8.46 6.30 8.31 5.77 10.36 0.59 -4.84 -18.55 8.80 6.52 8.87 6.66 3.61 -26.02 6.53

5.46 -2.52 6.35 5.76 6.52 4.92 5.04 -0.79 -7.50 -23.77 3.41 4.27 4.56 4.58 3.05 -32.67 0.28

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Annualised Return

Annual Standard Deviation

Equity 38.58 -2.52 16.98 8.15 14.92 4.92 33.40 -0.79 -7.50 -23.77 31.94 15.70 27.21 14.98 3.05 -32.67 32.30 8.40 19.98

80/20 31.37 -0.95 14.85 7.74 13.36 5.77 27.37 0.59 -4.84 -18.55 25.92 13.37 22.46 12.91 3.61 -26.02 25.79 7.91 15.93

60/40 24.46 0.59 12.71 7.29 11.73 6.41 21.52 1.94 -2.27 -13.19 20.05 11.07 17.83 10.83 4.13 -19.00 19.31 7.30 11.91

40/60 17.84 2.09 10.59 6.81 10.04 6.84 15.85 3.24 0.19 -7.69 14.34 8.78 13.29 8.75 4.62 -11.62 12.88 6.58 7.93

20/80 11.51 3.56 8.46 6.30 8.31 7.07 10.36 4.51 2.55 -2.06 8.80 6.52 8.87 6.66 5.03 -3.90 6.53 5.75 4.05

Fixed 5.46 4.98 6.35 5.76 6.52 7.12 5.04 5.74 4.78 3.69 3.41 4.27 4.56 4.58 5.50 5.18 0.28 4.88 1.53

Standard deviation is a statistical measure of risk where past performance is used to determine the range of possible future performance. Generally speaking, the higher the standard deviation, the greater the risk.

Assumes all strategies have been rebalanced monthly.All balanced strategies information is based on returns of indices with model/back-tested allocations. The returns were achieved with the benefit of hindsight and do not represent actual investment strategies. The model’s returns reflect hypothetical fund manager fees. There are limitations inherent in model allocations. In particular, model returns may not reflect the impact that economic and market factors may have had on the adviser’s decision making if the adviser were managing actual client money.This material has been distributed by Dimensional Fund Advisors Ltd., which is authorised and regulated by the Financial Services Authority. Past performance is no guarantee of future results.

Lowest Return

Highest Return

5040.3

Fixed20/8040/6060/4080/20Equity

Balanced Strategies: Historical ReturnsIn British Pounds

Equity Returns of Developed MarketsAnnual Return (%)In British Pounds

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Austria121.51

Spain115.61

Japan12.41

Belg.59.93

Austria130.17

UK-8.22

H.K.54.07

H.K.63.51

H.K.121.68

Norway16.88

Switz.45.41

Spain26.64

Switz. 50.29

Belg. 65.90

Sing.105.39

Switz.14.43

Austral.4.35

Austria5.36

Austria42.11

Austria59.93

Can.43.18

Spain 31.24

H.K.38.89

Japan-1.85

Norway66.52

Germ.65.12

Italy103.02

Spain7.62

Den.58.99

Germ.65.12

H.K.-9.15

Austral.37.72

Switz.44.90

Sing.71.85

Japan14.87

US38.38

Sweden24.07

Italy41.18

Italy50.84

Sweden85.15

Can.13.91

Austria-3.15

Austral.-10.82

Spain40.02

Belg.33.83

Japan40.07

Sing.28.91

Germ.32.99

Switz.-3.62

Austral.57.05

Italy85.78

Japan94.35

UK6.17

Sweden54.43

Norway64.27

Austria-11.51

US34.03

US31.50

Switz.49.12

Sweden11.93

Sweden34.59

H.K.20.32

Den.40.17

Spain48.24

Japan66.38

Den.11.87

Belg.-8.56

Norway-16.16

Germ.39.14

Norway29.04

Austria39.09

Norway27.52

Norway29.27

US-13.44

Sing.54.85

Switz.64.97

Belg.73.86

Can.-10.46

Norway48.26

Den.62.45

Norway-16.24

Sing.28.74

Sing.31.37

Norway45.31

Neth.5.66

Spain31.00

Norway16.32

US38.96

France39.97

H.K.64.29

Norway7.16

Spain-9.01

Italy-16.23

Sweden39.14

Sweden27.07

Den.38.93

Sweden 25.99

Can.27.44

Spain-17.64

Sweden46.13

France45.95

France73.83

Den.-10.99

France43.53

Sing.60.61

Den.-17.54

France21.42

France27.06

Sweden40.17

Italy5.52

Neth.28.87

Can.16.24

Spain30.69

US28.70

Can.58.35

Italy6.71

Norway-9.92

Japan-18.91

Can.38.61

Italy25.53

Norway38.66

Den. 21.94

Sing.26.25

France-21.35

H.K.42.56

Belg.41.60

Sweden61.40

Austral.-14.13

Austral.42.01

France53.67

US-19.41

Neth.21.40

Neth.26.43

Germ.38.81

Belg.2.38

Belg.27.01

Neth.15.30

Germ.29.80

Germ.28.01

Norway35.62

Neth.3.69

US-10.09

Switz.-18.92

Den.36.94

Den.21.98

Switz.29.82

Belg.20.08

Belg.36.66

Can.-24.45

Belg.40.19

Norway35.19

H.K.52.14

Belg.-15.22

Japan40.95

Neth.53.27

Neth.-19.44

Den.20.10

Belg.21.79

Neth.38.40

Sing.0.93

H.K.23.68

UK15.23

Neth.28.95

Switz.22.17

France33.13

France3.46

UK-11.81

Sing.-19.60

Austral.34.84

Austral.24.53

Austral.29.47

Austria 19.98

Den.23.54

Germ.-24.95

Can.39.03

Den.28.52

Sing.41.50

Neth.-15.85

Sing.38.84

Sweden48.80

Switz.-21.96

UK19.55

UK19.06

Austral.38.30

Austral.-0.30

UK22.36

US11.44

UK27.75

Neth.21.86

US25.57

Austral.-2.63

Den.-12.57

Can.-21.55

Norway25.35

Spain20.22

Sing.27.63

Germ.19.49

Spain21.92

Sing.-27.00

Spain27.72

Neth.27.98

Austral.38.68

Norway-16.95

H.K.33.37

US46.75

Germ.-24.58

Switz.19.27

Germ.10.89

Den.35.88

Germ.-1.00

Den.19.85

Den.10.14

Belg.18.32

UK16.52

Germ.23.63

UK-4.35

H.K.-16.47

Belg.-23.13

Italy24.27

H.K.16.53

Neth.27.05

France18.17

Neth.18.61

Den.-27.29

UK27.56

Sweden25.83

Neth.37.16

US-19.11

Germ.25.57

Switz.42.45

Belg.-25.92

Spain19.14

Austria10.45

Spain32.76

Den.-1.85

Can.19.37

France9.58

Sweden17.66

Sweden12.70

Austral.21.14

Austria-4.82

Can.-18.36

UK-23.37

France23.93

Sing.14.00

Sweden23.09

Italy16.42

France11.38

Neth.-28.20

Austria 27.47

Spain24.06

Germ.31.86

Sing.-19.59

Can.21.88

Can.40.31

Sing.-26.51

Sweden17.91

Austral.10.20

Italy31.50

Switz.-2.06

Germ.17.46

Austral.5.32

Can.17.52

Den.7.78

UK15.81

US-5.86

Switz.-19.30

Spain-23.43

Japan22.21

Can.13.95

Germ.22.66

Neth.15.45

UK6.59

UK-28.37

Neth.26.63

UK22.71

Austria31.33

Austria-19.64

US19.33

UK37.65

Can.-27.58

Belg.17.22

Can.8.60

Austria31.05

US-4.33

France15.15

Germ.2.69

France16.63

Austral.4.90

Den.15.44

H.K.-7.82

Neth.-20.07

Den.-24.11

Belg.18.99

UK11.49

France22.62

Austral.14.99

Italy4.32

Sweden-30.48

Den.21.57

H.K.21.62

Switz.29.99

Sweden-19.82

Neth.18.87

Italy34.79

Spain-28.30

Can.14.46

Sweden5.76

Japan28.35

UK-6.93

Austral.12.19

Italy1.80

Norway10.71

Japan3.87

Neth.10.08

Germ.-8.74

France-20.32

H.K.-25.69

UK18.04

France10.48

Belg.21.69

UK14.77

US3.71

Italy-30.64

France17.35

Japan14.68

UK23.74

H.K.-24.63

Spain18.22

Belg.32.40

France-28.30

Japan12.23

Japan-2.91

UK27.30

Can.-8.27

Sing.7.44

Belg.1.30

Austria5.84

Austria-0.77

Spain7.87

Spain-9.02

Germ.-20.35

Neth.-28.44

H.K.16.85

Germ.8.32

H.K.20.96

H.K.14.54

Switz. 3.57

Austral.-31.61

Italy12.67

US5.10

US13.33

Switz.-28.83

Italy16.05

Spain23.88

Austral.-31.37

Germ.11.45

Spain-3.43

Belg.26.37

Spain-9.96

Norway6.98

Austria-5.50

Austral.-6.68

H.K.-3.98

Italy2.72

Belg.-10.09

Sing.-21.41

France-28.76

Switz.16.05

Japan8.03

UK19.80

Switz.11.95

Austria0.50

H.K.-32.35

US12.39

Austral.-4.14

Can.7.14

France-32.26

Switz.10.54

Austral.23.36

Italy-32.76

Italy1.15

Italy-3.86

France23.70

France-10.31

Italy1.96

Switz.-7.53

H.K.-20.07

Can.-7.16

Switz.-7.53

Sweden-14.88

Italy-24.67

US-30.48

US15.47

Switz.7.19

US17.33

Can.3.52

Sweden-1.03

Norway-50.42

Switz.11.55

Can.-7.75

Den.-1.32

Italy-38.14

UK10.29

H.K.22.34

Sweden-34.26

Austria-9.56

Norway-3.97

Can.20.31

Austria-11.35

Japan1.61

Sing.-15.80

Japan-20.47

Sing.-13.83

Austria-6.39

Sing.-21.85

Sweden-25.26

Sweden-37.17

Sing.15.30

Neth.4.65

Spain16.51

US0.77

Belg.-4.32

Belg.-53.53

Germ.11.41

Sing.-37.61

Norway-5.00

Germ.-40.85

Austria4.27

Japan14.82

Japan-46.84

Norway-12.93

Den.-11.32

US11.67

H.K.-32.76

Austria-3.87

Japan-23.87

Sing.-27.12

Norway-30.83

Belg.-11.70

Japan-22.32

Japan-27.56

Germ.-39.61

Neth.10.43

US2.69

Italy13.71

Japan-6.64

Japan-5.80

Austria-56.20

Japan-5.42

Highest Return

Lowest Return

Source: MSCI developed markets country indices (net dividends) with at least twenty-five years of data. MSCI data copyright MSCI 2009, all rights reserved.This material has been distributed by Dimensional Fund Advisors Ltd., which is authorised and regulated by the Financial Services Authority. Past performance is no guarantee of future results.

5050.3

Equity Returns of Developed MarketsAnnual Return (%)

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

-4.14 38.68 -14.13 42.01 23.36 -31.37 37.72 10.20 38.30 -0.30 12.19 5.32 -6.68 4.90 21.14 -2.63 4.35 -10.82 34.84 21.53 29.47 14.99 26.23 -31.61 57.05

121.51 31.33 -19.64 4.72 130.17 -11.51 -9.56 10.45 31.05 -11.35 -3.87 -5.50 -5.84 -0.77 -6.39 -4.82 -3.15 5.36 42.11 59.93 39.09 19.98 0.50 -56.20 27.47

41.60 73.86 -15.22 59.93 32.40 -25.92 17.22 21.79 26.37 2.38 27.01 1.30 18.32 65.90 -11.70 -10.09 -8.56 -23.13 18.99 33.83 21.69 20.08 -4.32 -53.53 40.19

-7.75 7.14 -10.46 21.88 40.31 -27.58 14.46 8.60 20.31 -8.27 19.37 16.24 17.52 -7.16 58.35 13.91 -18.36 -21.55 38.61 13.95 43.18 3.52 27.44 -24.45 39.03

28.52 -1.32 -10.99 58.99 62.45 -17.54 20.10 -11.32 35.88 -1.85 19.85 10.14 40.17 7.78 15.44 11.87 -12.57 -24.11 36.94 21.98 38.93 21.94 23.54 -27.29 21.57

45.95 13.83 -32.26 43.53 53.67 -28.30 21.42 27.06 23.70 -10.31 15.15 9.58 16.63 39.97 33.13 3.46 -20.32 -28.76 23.93 10.48 22.62 18.17 11.38 -21.35 17.35

88.60 31.86 -40.85 25.57 65.12 -24.58 11.45 10.89 38.81 -1.00 17.46 2.69 29.80 28.01 23.63 -8.74 -20.35 -39.61 39.14 8.32 22.66 19.49 32.99 -24.95 11.41

21.62 52.14 -24.63 33.37 22.34 -9.15 54.07 63.51 121.68 -32.76 23.68 20.32 -20.07 -3.98 64.29 -7.82 -16.47 -25.69 16.85 16.53 20.96 14.54 38.89 -32.35 42.56

85.78 103.02 -38.14 16.05 34.79 -32.76 1.15 -3.86 31.50 5.52 1.96 1.80 41.18 50.84 2.72 6.71 -24.67 -16.23 24.27 25.53 13.71 16.42 4.32 -30.64 12.67

14.68 94.35 12.41 40.95 14.82 -46.84 12.23 -2.91 28.35 14.87 1.61 -23.59 -20.47 3.87 66.38 -22.32 -27.56 -18.91 22.21 8.03 40.07 -6.64 -5.80 -1.85 -5.42

27.98 37.16 -15.85 18.87 53.27 -19.44 21.40 26.43 38.40 5.66 28.87 15.30 28.95 21.86 10.08 3.69 -20.07 -28.44 10.43 4.65 27.05 15.45 18.61 -28.20 26.63

35.19 -5.00 -16.95 48.26 64.27 -16.24 -12.93 -3.97 45.31 16.88 6.98 16.32 10.71 -30.83 35.62 7.16 -9.92 -16.16 25.35 29.04 38.66 27.52 29.27 -50.42 66.52

-37.61 41.50 -19.59 38.84 60.61 -26.51 28.74 31.37 71.85 0.93 7.44 -15.80 -27.12 -13.83 105.39 -21.85 -21.41 -19.60 15.30 14.00 27.63 28.91 26.25 -27.00 54.85

24.06 115.61 7.62 18.22 23.88 -28.30 19.14 -3.43 32.76 -9.96 31.00 26.64 30.69 48.24 7.97 -9.02 -9.01 -23.43 40.02 20.22 16.51 31.24 21.92 -17.64 27.72

25.83 61.40 -19.82 54.43 48.80 -34.26 17.91 5.76 40.17 11.93 34.59 24.07 17.66 12.70 85.15 -14.88 -25.26 -37.17 39.14 27.07 23.09 25.99 -1.03 -30.48 46.13

64.97 29.99 -28.83 10.54 42.45 -21.96 19.27 44.90 49.12 -2.06 -45.41 -7.53 50.29 22.17 -4.25 14.43 -19.30 -18.92 16.05 7.19 29.82 11.95 3.57 -3.62 11.55

22.71 23.74 6.17 10.29 37.56 -8.22 19.55 19.06 27.30 -6.93 22.36 15.23 27.75 16.52 15.81 -4.35 -11.81 -23.37 18.04 11.49 19.80 14.77 6.59 -28.37 27.56

5.10 13.33 -19.11 19.33 46.75 -19.41 34.03 31.50 11.67 -4.33 38.38 11.44 38.96 28.70 25.57 -5.76 -10.09 -30.48 15.47 2.69 17.33 0.77 3.71 -13.44 12.39

Australia

Austria

Belgium

Canada

Denmark

France

Germany

Hong Kong

Italy

Japan

Netherlands

Norway

Singapore

Spain

Sweden

Switzerland

United Kingdom

United States

Source: MSCI developed markets country indices (net dividends) with at least twenty-five years of data. MSCI data copyright MSCI 2009, all rights reserved.This material has been distributed by Dimensional Fund Advisors Ltd., which is authorised and regulated by the Financial Services Authority. Past performance is no guarantee of future results.

Boxed Return is the highest return for the year.

5050.3

Where Dimensional Invests: Developed Markets Emerging Markets Not Invested

In British pounds. Map reflects countries in the MSCI All Country World IMI Index, and MSCI Frontier Markets Index. Market cap data is free-float adjusted. MSCI data copyright MSCI 2010, all rights reserved. Many small nations not displayed. Totals may not equal 100% due to rounding. Dimensional makes case-by-case determinations about the suitability of investing in each emerging market, making considerations that include local market accessibility, government stability and property rights before making investments. For educational purposes; should not be used as investment advice. 1. An example large cap stock provided for comparison.

United States 7,509

United Kingdom 1,528

Japan 1,504

Canada 745

France 736

Australia 600

Germany 558

Switzerland 519

China 405

Brazil 359

SCALETOP 20 NATIONS BY MARKET CAPITALISATION (£ BILLIONS)

Spain 306

South Korea 292

Taiwan 287

Italy 243

Sweden 195

Netherlands 189

India 183

Hong Kong 166

South Africa 162

Russia 131

World Market Capitalisation£17.7 Trillion as at December 31, 2009

5060.3

2. Market Efficiency

5100.2

I. Warren E. Buffett

II. Efficient Markets Hypothesis

III. UK Equity Fund Returns

IV. Actively Managed Funds: Non-Survivorship and Underperformance

Warren E. BuffettChairman and CEO, Berkshire Hathaway, Inc.

Warren E. Buffet, Chairman’s Letter, Berkshire Hathaway Corp. 1996 Annual Report, February 28, 1997. Available in www.berkshirehathaway.com/annual.html (accessed May 21, 2007)

“Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees.”

5110.1

Efficient Markets HypothesisEugene F. Fama, University of Chicago

The Hypothesis States:

• Current prices incorporate all available information and expectations.

• Current prices are the best approximation of intrinsic value.

• Price changes are due to unforeseen events.

• “Mispricings” do occur but not in predictable patterns that can lead to consistent outperformance.

Implications

• Active management strategies cannot consistently add value through security selection and market timing.

• Passive investment strategies reward investors with capital market returns.

Eugene F. Fama, “Efficient Capital Markets: A Review of Theory and Empirical Work,” Journal of Finance 25, no. 2 (May 1970): 383-417. Eugene F. Fama, “Foundations of Finance,” Journal of Finance 32, no. 3 (June 1977): 961-64.

5120.1

UK Equity Fund ReturnsJanuary 1990-December 2009

Source: Morningstar data provided by Morningstar Inc. Includes all Morningstar UK Equity funds with twenty-year returns, distinct portfolios only, as of 31 December 2009.FTSE data published with the permission of FTSE. Dimensional index data simulated by Dimensional from Bloomberg and StyleResearch securities data; not available for direct investment.This material has been distributed by Dimensional Fund Advisors Ltd., which is authorised and regulated by the Financial Services Authority. Past performance is no guarantee of future results.

Annualised Compound Return (%)

Dimensional UK Value Index 8.96

FTSE All-Share Index 8.06

Dimensional UK Small Cap Index 7.78

Morningstar Fund Average 7.67

Number of Funds

Ann

ua

lised

Co

mp

oun

d R

etu

rn (

%)

5130.3

Non-Surviving Equity FundsActively Managed US Equity Funds

2005-2009

Data provided by CRSP Survivor-Bias-Free US Mutual Fund Database. Sample includes mutual funds existing as of 12/2004. Returns analyzed for the five-year period from 2005-2009. Multiple share classes are aggregated to fund level. Index funds, inverse funds, and leveraged funds are excluded.

A benchmark is a standard against which the performance of an individual security or group of securities is measured . It is usually based on published indexes of securities of the same or similar class. However customized ones maybe used to suit a particular investment strategy. Past performance is not a guarantee of future results. Values change frequently, and past performance may not be repeated. There is always the risk that an investor may lose money.

Total Universe of2,231 Funds in 2005

Percentage of CumulativeNon-Survivors

On average, 7.0% of the actively managed equity fund universe disappeared each year.

During 2005, 6.8% of the fund universe disappeared. By the fifth year, 30.4% of the fund universe (677 funds) had disappeared.

Reasons for non-survival likely include closure due to poor investment results.

Non-Surviving Equity FundsActively Managed US Equity Funds2005-2009

5140.2


A benchmark is a standard against which the performance of an individual security or group of securities is measured. It is usually based on published indexes of securities of the same or similar class. However customized ones maybe used to suit a particular investment strategy. Past performance is not a guarantee of future results. Values change frequently, and past performance may not be repeated. There is always the risk that an investor may lose money.

Equity funds that beat their category benchmark consistently.

Few Consistent Equity Fund WinnersActively Managed US Equity Funds

2005-2009

Equity funds did not outperform their respective category benchmark in most years or over the entire five-year period.

Nearly half (46.8%) of actively managed US equity funds outperformed their benchmark in 2005.

Five years later, only 1.0% of the initial funds (23 out of 2,231) had outperformed the benchmark every year.

Few Consistent Equity Fund WinnersActively Managed US Equity Funds2005-2009

5140.2

Non-Surviving Bond FundsActively Managed US Bond Funds

2005-2009



Total Universe of911 Funds in 2005

Percentage of CumulativeNon-Survivors

On average, 6.5% of the actively managed bond fund universe disappeared each year.

During 2005, 7.8% of the funds had disappeared. By the fifth year, 28.5% of the fund universe (260 funds) had disappeared.

Poor investment results is one likely reason for non-survivorship.

Non-Surviving Bond FundsActively Managed US Bond Funds2005-2009

5140.2



Surviving bond funds that beat their category benchmark consistently.

Few Consistent Bond Fund WinnersActively Managed US Bond Funds

2005-2009

Even among survivors, few actively managed bond funds outperformed their category benchmark in most years or over the entire period.

About four out of ten actively managed bond funds beat the benchmark in 2005.

Five years later, less than 1% of the surviving funds had beat the benchmark every year.

Few Consistent Bond Fund WinnersActively Managed US Bond Funds2005-2009

5140.2

3. Risk/Return

5200.1

I. Capital Asset Pricing Model

II. Fama-French Three Factor Model

III. Size and Value Effects Are Strong around the World

IV. Risk Factors Have Periods of Under- and Over-Performance

V. Precision in Portfolios

VI. Does It Pay to Extend Maturities?

VII. Distribution of US Market Returns

Capital Asset Pricing ModelWilliam Sharpe: Nobel Prize in Economics, 1990

Total Equity Risk

Unsystematic

• Specific to firm or industry (lawsuit, fraud, etc.).

• Diversifiable.

• No compensation.

Systematic

• Marketwide, affects all firms (war, recession, inflation, etc.).

• Non-diversifiable.

• Investor compensation.

• Measured by beta.

Company Risk

Industry Risk

Market Risk

Unsystematic

Systematic

Beta measures volatility relative to the total market. A beta higher than the market’s beta of 1 implies more volatility, and a beta lower than the market’s implies less volatility.

5210.1

• Over 70% of the variation in returns is due to risk factor exposure.

Source: Dimensional study (2002) of 44 institutional equity pension plans with US $452 billion total assets.Factor analysis run over various time periods, averaging nine years. Total assets based on total plan dollar amounts as of year end 2001.Average explanatory power (R2) is for the Fama/French equity benchmark universe.

70% StructuredExposure to Market Factor

30% Stock Picking, Market Timing, and NoiseSINGLE-FACTOR MODEL (CAPITAL ASSET PRICING MODEL)

R(t) - RF(t) = a + b[RM(t) - RF(t)] + e(t)

sensitivity to market[market return minus T-bills]

randomerrore(t)

++=average expected return[minus T-bills]

average excess return

Capital Asset Pricing Model 5210.1

• Over 96% of the variation in returns is due to risk factor exposure.

• After fees, traditional management typically reduces returns.

Source: Dimensional study (2002) of 44 institutional equity pension plans with $452 billion total assets. Factor analysis run over various time periods, averaging nine years. Total assets based on total plan dollar amounts as of year-end 2001. Average explanatory power (R2) is for the Fama/French equity benchmark universe.

sensitivity to market[market return minus T-bills]

sensitivity to size

[small stocksminus big stocks]

sensitivity to BtM

[value stocksminus growth]

randomerrore(t)

++ + +=average expected return[minus T-bills]

average excess return

THE MODEL TELLS THE DIFFERENCE BETWEEN INVESTING AND SPECULATING

Priced Risk

• Positive expected return.

• Systematic.

• Economic.

• Long-term.

• Investing.

Unpriced Risk

• Noise.

• Random.

• Short-term.

• Speculating.

96% Structured Exposure to Factors.

4% Stock Picking and Market Timing

• Market.• Size.• Value/Growth.

Fama-French Three Factor Model 5212.1

Value stocks are above the 30th percentile in book-to-market ratio. Growth stocks are below the 70th percentile in book-to-market ratio.Simulations are free-float weighted both within each country and across all countries. UK and Europe data provided by London Business School/StyleResearch.US value and growth data provided by Fama/French. This material has been distributed by Dimensional Fund Advisors Ltd., which is authorised and regulated by the Financial Services Authority. Past performance is no guarantee of future results.

Size and Value Effects Are Strong around the WorldAnnual Index DataPercent per Annum in £

5220.3A

nnu

alis

ed

Com

pou

nd

Re

turn

s (%

)

Standard Deviation (%)

15.81

12.0810.43

19.15

15.62

12.59 12.15

9.538.15

13.02

10.73

8.20

10.34 9.798.95

13.59

11.49

8.72

17.97

13.30

10.81

UK Large Value

UK Large

Market

UK Large

Growth

UK Small Value

UK Small

Market

UK Small

Growth

Europe Large Value

Europe Large

Market

Europe Large

Growth

Europe Small Value

Europe Small

Market

Europe Small

Growth

US Large Value

S&P 500

Index

US Large

Growth

US Small Value

CRSP 6-10 Index

US Small

Growth

Emg. Markets

Value

Emg. Markets “Market”

Emg. Markets Growth

UK LargeCapitalisation Stocks

(£) 1956-2009

UK SmallCapitalisation Stocks

(£) 1956-2009

Europe ex UK Large Capitalisation

Stocks (€) 1981-2009

Europe ex UK Small Capitalisation Stocks

(€) 1981-2009

US Large Capitalisation Stocks

($) 1927-2009

US Small Capitalisation Stocks

($) 1927-2009

Emerging Markets Capitalisation Stocks

($) 1989-2009

32.08 28.60 26.29 31.81 30.34 30.83 27.22 23.29 25.76 26.10 24.80 27.51 27.17 20.63 22.06 35.30 31.09 34.20 43.04 37.29 35.70

Risk Factors Have Periods of Under- and Over-Performance1957-2009In GBP

5230.3

Our source of share price and listing information was the London Share Price Database (LSPD) maintained at the London Business School. The master index of this database covers all listed stocks in the UK market since 1957. We selected stocks officially listed on the LSE and excluded foreign companies and investment trusts. To choose the value sectors we rank the universe by book-to-market and approximately the top 30% is the value universe. The small sectors we rank the universe by market capitalisation and approximately the bottom 10% is the small universe.Copyright © 2003 Elroy Dimson, Stefan Nagel and Garrett Quigley. UK research data provided by the London School of Business.

• From year to year, stocks with high book-to-market ratios and smaller market caps do not always produce higher returns.

• Over longer time periods, the size and value premiums are more prevalent.

• Investors that maintained disciplined size and value exposure were ultimately rewarded.

Per

cen

t pe

r Y

ear

Size Premium

Value Premium

Per

cen

t pe

r Y

ear

2009

2009

Precision in Portfolios

• Traditionally, “products” have been classified into rigid and sometimes arbitrary categories.

• Style boxes force crude strategic allocation.

Three-Factor Model

Traditional Consulting Style Box

Value Blend Growth

La

rge

Mid

Sm

all

Large

“The Market”

Small

Growth Value

• Using the three-factor model, the total portfolio is measured by factors that determine risk and expected return.

• Freedom from brittle definitions allows precisely tuned portfolios.

5240.1

Does It Pay to Extend Maturities?1900-2000

• Not all investors define risk as standard deviation. Some investors may seek to hedge long-term bonds.

• Historically, longer maturity instruments have higher standard deviations and have not provided consistently greater returns.

UK Bills US BondsUK Bonds

US Bills

US Equities UK Equities

15

10

5

0

5 10 15 20 25


5250.2

Bills Bonds Equities

UK US UK US UK US

Annualised Compound Returns (%) 5.10 4.00 6.00 5.30 11.60 11.60

Annualised Standard Deviation (%) 3.80 2.80 12.00 8.20 21.70 19.90

Dimson, Elroy, Paul Marsh and Mike Staunton, Millennium Book II: 101 Years of Investment Returns (ABN AMRO and London Business School, 2001). This publication defines the data used for the above chart and matrix as follows: UK Bills are UK One-Month Treasury Bills (FTSE). UK Bonds are the ABN AMRO Bond Index. UK Equities are the ABN AMRO/LBS Equity Index. US Bills are commercial bills 1900-1918 and One-Month US Treasury Bills (Ibbotson) 1919-2000. US Bonds are government bonds 1900-1918, the Federal Reserve Bond Index 10-15 Years 1919-1925, Long-Term Government Bonds (Ibbotson) 1926-1998, and the JP Morgan US Government Bond Index 1999-2000. US Equities are Schwert’s Index Series 1900-1925, CRSP 1-10 Deciles Index 1926-1970, and the Dow Jones Wilshire 5000 Index 1971-2000.

Ret

urn

(%

)

194920.2

195120.7

196321.0

198221.0

1970 19440.0 21.3

1953 19960.7 21.4

1960 1993 19831.2 11.1 22.0

1987 2004 19791.7 12.0 22.6

1948 1959 1998 19972.1 12.7 24.3 31.4

1939 1952 1955 2003 2.9 13.4 25.2 31.6 1947 1968 1999 1985

3.6 14.1 25.3 32.2

1973 1966 1934 1965 1976 1936-18.1 -8.7 4.3 14.5 26.8 32.3

1929 1932 1984 2006 1961 1980-14.6 -8.7 4.5 15.5 26.9 32.82000 1940 2007 1942 1938 1927-11.4 -7.1 5.8 16.0 28.1 33.4

2001 1990 2005 1964 1943 1991-11.1 -6.0 6.2 16.1 28.4 34.7

1969 1946 1978 1971 1967 1995 -10.9 -5.9 7.5 16.1 28.7 36.8

1930 1962 1977 1956 1986 2009 1945 1935 -28.5 -10.2 -4.3 8.3 16.2 28.8 38.1 44.3

2008 1974 1957 1981 1926 1972 1989 1975 1958 -36.7 -27.0 -10.1 -3.6 9.2 16.8 28.9 38.8 45.0

1931 1937 2002 1941 1994 1992 1988 1950 1928 1954 1933-43.5 -34.7 -21.1 -10.0 -0.1 9.8 18.0 29.6 38.9 50.0 57.1

-50% to -40% -40% to -30% -30% to -20% -20% to -10% -10% to 0% 0% to 10% 10% to 20% 20% to 30% 30% to 40% 40% to 50% 50% to 60%

Annual Return Range

CRSP data provided by the Center for Research in Security Prices, University of Chicago. The CRSP 1-10 Index measures the performance of the total US stock market, which it defines as the aggregate capitalization of all securities listed on the NYSE, AMEX, and NASDAQ exchanges. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results.

Positive Years: 62 (74%)

Negative Years: 22 (26%)

In 2008, the US stock market experienced its second worst performance year since 1926.

In 2009, US market performance was in the top quartile of historical calendar year returns.

Distribution of US Market ReturnsCRSP 1-10 Index Returns by Year1926-2009

5251.1

4. Long-Term Discipline

5300.1

I. The Importance of Long-Term Discipline

II. The Stock Market’s Reaction

III. Performance of the FTSE All-Share Index

IV. Comparison of Market Returns, Fund Returns and Investor Returns

V. UK Value vs. UK Market

VI. UK Small vs. UK Market

VII. UK One-Month T-Bills vs. UK Market

VIII. Subsequent Performance of Top Equity Managers

IX. Bull and Bear Markets

The Importance of Long-Term Discipline

For illustrative purposes only. UK One-Month T-Bills provided by Datastream; prior to January 1975, UK Three-Month T-Bills provided by London Share Price Database. FTSE data published with the permission of FTSE. This material has been distributed by Dimensional Fund Advisors Ltd. which is authorised and regulated by the Financial Services Authority. Past performance is no guarantee of future results.

5310.3

Annualised Compound Returns (%) 2/1955-12/2009 1/1960-12/1974 1/1975-12/2009

FTSE All-Share Index 12.03 1.25 16.08

UK One-Month Treasury Bills 7.54 6.40 8.48

The Stock Market’s ReactionAs Measured by the Dow Jones Industrial Average

Date Event

First Trading Session Response Subsequent Market Behaviour

Prior Day Close Close Change

Percent Change

One Month

Six Months One Year

11 September 2001 World Trade Center towers destroyed 9,605.51 8,920.70 -684.81 -7.13% -3.66% 11.12% -8.71%

16 January 1991 US launches bombing attack on Iraq 2,508.91 2,623.51 114.60 4.57% 16.97% 18.93% 29.52%

2 August 1990 Iraq invades Kuwait 2,899.26 2,864.60 -34.66 -1.20% -8.74% -4.67% 4.95%

30 March 1981 President Reagan shot by John Hinckley Jr. 994.78 992.16 -2.62 -0.26% 1.95% -14.33% -16.90%

9 August 1974 President Nixon resigns 784.89 777.30 -7.59 -0.97% -14.71% -8.87% 5.98%

22 November 1963 President Kennedy assassinated in Dallas 732.64 711.48 -21.16 -2.89% 6.57% 15.37% 24.99%

22 October 1962 Cuban missile crisis 568.60 558.06 -10.54 -1.85% 15.55% 27.41% 33.89%

24 September 1955 President Eisenhower heart attack 487.44 455.55 -31.89 -6.54% 0.04% 12.48% 5.72%

25 June 1950 North Korea invades South Korea 224.30 213.90 -10.40 -4.64% -4.49% 7.34% 15.13%

7 December 1941 Japan attacks Pearl Harbor, Hawaii 115.90 112.52 -3.38 -2.92% -0.86% -6.19% 2.88%

Dow Jones data provided by Dow Jones Indexes.This material has been distributed by Dimensional Fund Advisors Ltd., which is authorised and regulated by the Financial Services Authority. Past performance is no guarantee of future results.

5320.1

FTSE data published with the permission of FTSE.Long-Term Govt. Bonds are the Citigroup World Government Bond Index UK 1-30+ Years, copyright 2009 by Citigroup.This material has been distributed by Dimensional Fund Advisors Ltd., which is authorised and regulated by the Financial Services Authority. Past performance is no guarantee of future results.

Gro

wth

of

£1,0

00

Annualised Compound

Return

One-Month T-Bills

7.03%

Missed 25 Best Days

4.41%

Missed 15 Best Days

6.17%

Missed 5 Best Days

8.30%

Missed 1 Best Day

9.60%

Total Period

10.00%

Long-TermGovt. Bonds

8.70%

Performance of the FTSE All-Share IndexJanuary 1986-December 2009

5330.3

US study in US dollars. Estimated Equity Fund Investor Return calculation based on a comparison of time-weighted returns with the dollar-weighted returns earned by the fund investors for 600 general equity funds during 1983-2003. Source: John C. Bogle, “The Mutual Fund Industry 60 Years Later: For Better or Worse,” Financial Analysts Journal 61, no. 1 (2005): 15-24. UK study in GBP sterling. Source: Lukas Schneider, An Examination of the Difference Between UK Fund Returns and UK Fund Investors’ Returns , July 2007.

US: 1983-2003

Measure Annual Return Growth of $1

Stock Market Return 13.00% $11.50

Average Equity Fund Return 10.30% $7.10

Estimated Equity Fund Investor Return 7.90% $4.57

UK: 1992-2003

Measure Annual Return Growth of £1

FTSE All Share 8.99% £2.81

Average Fund 6.93% £2.23

Average Fund Investor 4.91% £1.78

Comparison of Market Returns, Fund Returns, and Investor Returns

5331.1

Source: UK Market is the FTSE All-Share Index. FTSE data published with the permission of FTSE. UK Value simulated by Dimensional from Bloomberg securities data, prior to 1994 data provided by London Business School. This material has been distributed by Dimensional Fund Advisors Ltd which is authorised and regulated by the Financial Services Authority. Past performance is no guarantee of future results.

Rolling Time Periods 1 Year 3 Years 5 Years 10 Years 15 Years 20 Years 30 Years 40 Years

Number of Periods 643 619 595 535 475 415 295 175

Periods UK Value > UK Market 452 498 514 528 472 415 295 175

UK Value vs. UK MarketMonthly: July 1955-December 2009

5340.4

70%

80%86%

99% 99% 100% 100% 100%

Percentage of All Rolling Periods Where UK Value Outperformed UK Market

66% 70% 73% 77% 78% 77%

100% 100%

Source: UK Small simulated by Dimensional from StyleResearch securities data; prior to July 1981, Hoare Govett Smaller Companies Index, provided by the London School of Business. UK Market is the FTSE All-Share Index. FTSE data published with the permission of FTSE. This material has been distributed by Dimensional Fund Advisors Ltd., which is authorised and regulated by the Financial Services Authority. Past performance is no guarantee of future results.

Percentage of All Rolling Periods Where UK Small Outperformed UK Market



Periods UK Small > UK Market 425 435 440 417 376 323 298 179

UK Small vs. UK MarketMonthly: March 1955-December 2009

5350.3

62%71% 75%

90%96% 100% 100% 100%

Source: UK One-Month T-Bills provided by Datastream; prior to January 1975, UK Three-Month T-Bills. UK Market is the FTSE All-Share Index. FTSE data published with the permission of FTSE. This material has been distributed by Dimensional Fund Advisors Ltd., which is authorised and regulated by the Financial Services Authority. Past performance is no guarantee of future results.

Percentage of All Rolling Periods Where UK Market Outperformed UK One-Month T-Bills



Periods UK Market > UK One-Month T-Bills 403 440 451 486 461 420 300 180

UK One-Month T-Bills vs. UK MarketMonthly: February 1955-December 2009

5360.3

Subsequent PeriodJanuary 1985-December 1989 January 1990-December 1994

Fund Name Rank Quartile RankAverage Annual

Total Return Rank Quartile RankAverage Annual

Total Return

Ignis Balanced Growth Inc 1 1 37.70 38 3 7.71Fidelity Special Situations 2 1 33.05 50 3 6.21M&G Recovery A Acc 3 1 28.61 13 1 10.79Premier UK Thematic A 4 1 23.90 5 1 12.28Premier Castlefield UK Alpha General Acc 5 1 23.40 66 4 2.58Fidelity Growth + Income 6 1 22.79 61 4 4.80Allianz RCM UK Equity C 7 1 22.27 25 2 8.61Aviva Investors UK Income & Gr SC1 8 1 22.21 31 2 8.01Family Charities Ethical Tr Inc 9 1 21.71 14 1 10.41CF Canlife Growth 10 2 20.68 36 3 7.83Schroder UK Equity Inc 11 2 20.01 9 1 11.44F&C Stewardship Growth 1 Inc 12 2 19.90 44 3 6.59TU British Trust Inc 13 2 19.72 28 2 8.57L&G (Barclays) 500 Inc 14 2 19.03 39 3 7.08Reliance British Life A/I 15 2 18.94 42 3 6.74SLTM UK Equity General Inc 16 2 18.90 32 2 8.01M&G UK Select A Acc 17 2 18.81 12 1 10.81Scottish Mutual UK Equity Acc 18 2 18.77 54 4 5.73Scottish Widows UK Select Gr C 19 3 18.73 60 4 4.83Henderson UK Equity A 20 3 18.56 46 3 6.31SWIP UK Advantage A Inc 21 3 18.09 30 2 8.08Santander N&P UK Growth 22 3 17.95 51 4 6.18M&G UK Growth A Acc 23 3 17.87 29 2 8.53Lincoln Growth Trust 24 3 17.36 37 3 7.79Aviva Investors UK Equity SC1 25 3 17.09 1 1 18.84Threadneedle UK Overseas Earnings IN Inc 26 3 16.77 40 3 7.00Pru UK Growth Trust Inc A 27 3 16.50 63 4 4.07CF Canlife General Inc 28 4 16.18 49 3 6.24Threadneedle UK Inst Inst Net GBP 29 4 16.02 20 2 9.07SWIP UK Opportunities A 30 4 15.46 59 4 5.21Top 30 Funds Average Return 20.57 7.88All Funds Average Return 19.70 7.99FTSE All-Share Index 20.22 9.68Number of Funds 35 68Number of Top 30 Funds > FTSE All-Share Index 10 6Number of All Funds > FTSE All Share Index 10 16

Do Winners Repeat?Subsequent Performance of Top Thirty FundsFive-Year Period: January 1985-December 1989

5370.3

Source: Morningstar Direct (IMA UK All Companies sector, only funds with five year history used, in GBP, net returns).Source and copyright ©1996-2008 Morningstar Limited. All rights therein are reserved, (http://www.funds.morningstar.com).This material has been distributed by Dimensional Fund Advisors Ltd., which is authorised and regulated by the Financial Services Authority.Past performance is no guarantee of future results.

Subsequent Period

January 1990-December 1994 January 1995-December 1999

Fund Name Rank Quartile Rank

Average Annual


Total Return

Aviva Investors UK Equity SC1 1 1 18.84 2 1 31.07

Artemis Capital 2 1 15.52 4 1 28.89

IP UK Growth Acc 3 1 13.80 77 4 16.08

Newton Income GBP 4 1 13.58 31 2 20.38

Fidelity UK Growth 6 1 12.28 32 2 20.34

Premier UK Thematic A 5 1 12.28 59 3 17.98

Martin Currie IF UK Growth A 7 1 11.96 78 4 15.98

Investec UK Special Situations A Acc Net 8 1 11.88 69 4 16.99

Schroder UK Equity Inc 9 1 11.44 36 2 19.85

Old Mutual UK Select Eq Acc 10 1 11.15 21 1 21.76

CIS UK Growth 11 1 10.84 27 2 21.09

M&G UK Select A Acc 12 1 10.81 84 4 12.57

M&G Recovery A Acc 13 1 10.79 81 4 13.89

Family Charities Ethical Tr Inc 14 1 10.41 12 1 23.41

Jupiter UK Growth fund 15 1 10.16 11 1 23.56

NFU UK Growth A 16 1 9.78 50 3 19.19

Aviva Investors UK Idx Tracking SC1 17 1 9.63 39 2 19.66

UBS UK Equity Exempt 18 2 9.63 87 4 –

F&C FTSE All-Share Tracker 1 Inc 19 2 9.10 34 2 20.16

Threadneedle UK Inst Inst Net GBP 20 2 9.07 49 3 19.29

Standard Life UK Equity Growth R 21 2 8.89 19 1 22.43

Thornhill Cap Trust 22 2 8.68 18 1 22.44

Premier Alpha Growth A 23 2 8.66 41 2 19.64

Investec UK Blue Chip A Acc Net 24 2 8.62 60 3 17.91

Allianz RCM UK Equity C 25 2 8.61 10 1 23.74

Royal London UK Growth 26 2 8.61 13 1 23.22

Insight Inv UK Discretionary A 27 2 8.58 14 1 23.04

TU British Trust Inc 28 2 8.57 38 2 19.69

M&G UK Growth A Acc 29 2 8.53 53 3 18.86

SWIP UK Advantage A Inc 30 2 8.08 44 2 19.58

Top 30 Funds Average Return 10.63 20.44

All Funds Average Return 7.99 19.79

FTSE All-Share Index 9.68 20.32

Number of Funds 68 86

Number of Top 30 Funds > FTSE All Share Index 16 13

Number of All Funds > FTSE All Share Index 16 32


5370.3

Source: Morningstar Direct (IMA UK All Companies sector, only funds with five year history used, in GBP, net returns).Source and copyright ©1996-2008 Morningstar Limited. All rights therein are reserved, (http://www.funds.morningstar.com).This material has been distributed by Dimensional Fund Advisors Ltd which is authorised and regulated by the Financial Services Authority.Past performance is no guarantee of future results.

Subsequent Period

January 1995-December 1999 January 2000-December 2004



Total Return

Jupiter UK Alpha 1 1 33.21 108 3 -4.32

Aviva Investors UK Equity SC1 2 1 31.07 83 3 -3.41

Allianz RCM UK Mid Cap A 3 1 29.86 134 4 -5.24

Artemis Capital 4 1 28.89 29 1 0.21

Allianz RCM UK Growth A 5 1 26.45 159 4 -6.67

Liontrust First Growth 6 1 25.37 93 3 -3.77

Family Asset Trust 7 1 25.04 132 4 -5.17

Sovereign Ethical Inc 8 1 24.83 105 3 -4.27

New Star UK Strategic Capital 9 1 23.99 32 1 -0.11

Allianz RCM UK Equity C 10 1 23.74 137 4 -5.27


Family Charities Ethical Tr Inc 12 1 23.41 155 4 -6.53

Royal London UK Growth 13 1 23.22 118 3 -4.66

Insight Inv UK Discretionary A 14 1 23.04 53 2 -1.98

Baring UK Growth 15 1 22.89 142 4 -5.82

JPMorgan Premier Equity Growth A Acc 16 1 22.68 76 2 -3.09

Aviva Investors UK Growth SC1 Acc 17 1 22.57 113 3 -4.42

Thornhill Cap Trust 18 1 22.44 130 4 -5.11

Standard Life UK Equity Growth R 19 1 22.43 63 2 -2.45

Smith & Williamson UK Equity Gr Trust 20 1 21.92 146 4 -5.91

Old Mutual UK Select Eq Acc 21 1 21.76 124 4 -4.82

BlackRock UK Special Situations A Acc 22 1 21.38 9 1 5.93

Rensburg UK Blue Chip Growth 23 2 21.36 36 1 -0.46

Cavendish Opportunities Retail 25 2 21.21 7 1 7.74

F&C UK Equity 1 24 2 21.21 87 3 -3.47

Aberdeen UK Opportunities A Inc 26 2 21.18 152 4 -6.13

CIS UK Growth 27 2 21.09 100 3 -4.04

Ignis Balanced Growth Inc 28 2 20.99 131 4 -5.16

Fidelity Special Situations 29 2 20.66 4 1 13.41

Fidelity Growth + Income 30 2 20.42 33 1 -0.13

Top 30 Funds Average Return 23.73 -2.49

All Funds Average Return 19.79 -2.35

FTSE All-Share Return 20.32 -2.96

Number of Funds 86 162

Number of Top 30 Funds > FTSE All-Share 30 10

Number of All funds > FTSE All share 32 71



5370.3

5370.3

Subsequent PeriodJanuary 2000-December 2004 January 2005-December 2009



Total Return

Rathbone Recovery Fd Acc 1 1 16.68 225 4 -7.12

GAM UK Diversified Acc 2 1 14.16 118 3 6.45

Saracen Growth Beta 3 1 13.66 36 1 9.1

Fidelity Special Situations 4 1 13.41 14 1 10.31

Schroder UK Mid 250 Acc 5 1 10.52 59 2 8.17

IP UK Growth Acc 6 1 7.85 170 4 5.3

Cavendish Opportunities Retail 7 1 7.74 210 4 3.61

MFM Bowland 8 1 6.27 169 3 5.32

BlackRock UK Special Situations A Acc 9 1 5.93 21 1 9.88

Investec UK Special Situations A Acc Net 10 1 5.92 29 1 9.5

Artemis UK Growth fund 11 1 4.93 182 4 4.81

CF Walker Crips Uk Growth Inc 12 1 3.7 8 1 10.8

Rensburg UK Mid Cap Growth 13 1 2.52 1 1 15.47

HSBC FTSE 250 Index Retail Acc 14 1 1.99 22 1 9.87

BlackRock UK A Acc 15 1 1.97 56 1 8.29

Ecclesiastical UK Equity Growth A 16 1 1.75 151 3 5.89

Lazard UK Alpha Retail Inc 17 1 1.48 146 3 5.95

Mirabaud Mir GB Income 18 1 1.22 66 2 7.91

Insight Inv UK Dynamic Mgd A 19 1 1.15 140 3 6.04

Fidelity UK Aggressive 20 1 1.14 39 1 9.06

Ecclesiastical Amity UK A 21 1 1.05 162 3 5.46

M&G Recovery A Acc 22 1 0.86 5 1 12.35

GLG UK Growth Instl 23 1 0.85 205 4 3.93

Newton Income GBP 24 1 0.81 62 2 8.05


Jupiter Environmental Income Acc 26 1 0.49 150 3 5.9

Investec UK Alpha A Acc Net 27 1 0.39 78 2 7.34

HSBC UK Growth & Income Retail Acc 28 1 0.26 155 3 5.73

Artemis Capital 29 1 0.21 187 4 4.62

Martin Currie IF UK Growth A 30 1 0 203 4 4.1

Top 30 Funds Average Return 4.31 7.04All Funds Average Return -2.35 6.70FTSE All-Share Return -2.96 6.47Number of Funds 162 225Number of Top 30 Funds > FTSE All-Share 30 15Number of All funds > FTSE All share 71 117



Bull and Bear MarketsFTSE All-Share Index (GBP)February 1955-March 2010

Average Duration:

Bull Market: 23 Months

Bear Market: 10 Months

FTSE data published with the permission of FTSE. Bull and bear markets are defined in hindsight using cumulative monthly returns. A bear market: (1) begins with a negative monthly return, (2) must achieve a cumulative return less than or equal to -10%, and (3) ends at the most negative cumulative return prior to achieving a positive cumulative return. All data points that are not considered part of a bear market are designated as a bull market.This material has been distributed by Dimensional Fund Advisors Ltd., which is authorised and regulated by the Financial Services Authority. Past performance is no guarantee of future results.

Months = Duration of Bull/Bear Market % = Total Return for the Bull/Bear Market

6 mos.14%

7 mos.29%

38 months172%

26 mos.38%

12 mos.25%

27 months122%

23 months103%

6 months126%

11 mos.98%

14 mos.54%

20 mos.61%

31 months120%

40 months191%

25 mos.67%

29 months

57 months135%

29 months-43%

4 months-16%

23 months43%

47 months123%

5 months-15%

3 mos.-15%

9 mos.-17%

2 mos.-34%

1 mos.-10%1 mos.

-16%

8 mos.-14%

5 mos.-12%

9 mos.-27%

31 mos.-66%

16 mos.-30%

4 mos.-18%

9 mos.-11%15 mos.

-22%

8 mos.-21%

16 mos.-18%

20 mos.48%

17 mos.68%

5380.4

6 mos.43%

2 mos.-13%

1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

March 2010-7%

Feb 2009-41%

Bull and Bear MarketsMSCI Europe Index, Net Dividends (DEM/EUR)Monthly Returns: January 1970-March 2010

Average Duration:



MSCI Europe Index: 1970-1998, denominated in deutsche marks; 1999-present, denominated in euros. MSCI data copyright MSCI 2008, all rights reserved. Bull and bear markets are defined in hindsight using cumulative monthly returns. A bear market: (1) begins with a negative monthly return, (2) must achieve a cumulative return less than or equal to -10%, and (3) ends at the most negative cumulative return prior to achieving a positive cumulative return. All data points that are not considered part of a bear market are designated as a bull market. This material has been distributed by Dimensional Fund Advisors Ltd., which is authorised and regulated by the Financial Services Authority. Past performance is no guarantee of future results.


13 months59%

9 months-28%

5 months-15%

27 months38%

54 months87%

4 months19%

16 mos.59%

5 months-18%

21 months70%

2 months-31%

40 months188%

23 months71%

50 months146%

2 months-21%

2 mos.-11% 14 months

-19%3 mos.-22%

20 mos.35%8 mos.

14%

28 months-50%

72 months268%

1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

31 months-53%

34 months

5380.4

March 2010-28%

Feb 2009-54%

Bull and Bear MarketsMCSI World Index, Net Dividends (USD)Monthly Returns: January 1970-March 2010


Average Duration:



1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

9 mos.44%

6 months-19%

33 months75%

18 months-41%

53 months72%

3 mos.-11%

8 mos.36%

19 mos.56%

20 mos.60%

1 mos.-11%

37 months214%

20 months-19%

25 months50%

4 months-10% 3 months

-20%

93 months193%

9 months-24%

61 months149%

29 months

2 mos.-14%

30 months-47%

MSCI data copyright MSCI 2008, all rights reserved. Bull and bear markets are defined in hindsight using cumulative monthly returns. A bear market: (1) begins with a negative monthly return, (2) must achieve a cumulative return less than or equal to -10%, and (3) ends at the most negative cumulative return prior to achieving a positive cumulative return. All data points which are not considered part of a bear market are designated as a bull market. This material has been distributed by Dimensional Fund Advisors Ltd., which is authorised and regulated by the Financial Services Authority. Past performance is no guarantee of future results.

5380.4

March 2010-25%

Feb 2009-54%

5. Investment Considerations

5400.2

I. Investment Considerations

II. Equity Fund Expenses

III. Fees Matter

IV. The Limits of Fund Rating Services

Investment Considerations 5410.1

• Reduce expenses.

• Diversify systematically.

• Minimise taxes and turnover.

• Think long term.

• Apply discipline.

• Hold low-cost funds.

• Maintain asset allocation.

Equity Fund Expenses

1.61%

0.90%0.57%

1.65%

0.98%

0.67%

“After costs, the return on the average actively managed dollar will be less than the return on the average passively managed dollar for any time period.”

—William F. Sharpe, 1990 Nobel Laureate

William F. Sharpe, “The Arithmetic of Active Management,” Financial Analysts Journal 47, no. 1 (January/February 1991): 7-9.Data source: Lipper UK Fund Charges, January 2010; Dimensional OEIC TERs per Report and Accounts, December 2009, audited; Dimensional UCIT TERs per Report and Accounts, November 2009, audited.This material has been distributed by Dimensional Fund Advisors Ltd., which is authorised and regulated by the Financial Services Authority. Past performance is no guarantee of future results.

UK Equity

UK Equity Fund Expense Ratios Global Equity Fund Expense Ratios

UK IndexTracking Equity

DimensionalUK Equity

Global Equity Global IndexTracking Equity

DimensionalInternational Equity

5420.3

Fees Matter

£4,983,951

£3,745,318

£2,806,794

£ 1,000,000

£2,000,000

£3,000,000

£4,000,000

£5,000,000

1 Year 3 Years 5 Years 10 Years 20 Years 30 Years

Time

1% Fee

2% Fee

3% Fee

Bri

tis

h P

ou

nd

s

Assumed 6.5% Annualised Return over 30 Years

• Fees matter.

• Over long time periods, high management fees and related expenses can be a significant drag on wealth creation.

• Passive investments generally maintain lower fees than the average actively managed investment by minimising trading costs and eliminating the costs of researching stocks.


5430.1

Fund A Fund B Fund C Fund D

Morningstar (Dec 2000)

Forbes (Dec 2000) C A A+ D

US News & World Report (Dec 2000) 34 50 10 93

Wall Street Journal (Jan 2001) E C A B

BusinessWeek (Jan 2001) A No Rating B+ C

Funds A, B, C and D are actual funds. They are not identified because the purpose of this illustration is to emphasise that ratings, by themselves, do not provide enough information to make a sound investment decision.

Morningstar: Five stars is highest rating; one star is lowest rating.US News & World Report: 100 is highest rating; 1 is lowest rating.

The Limits of Fund Rating Services 5440.1

6. Investment Theory

5500.1

I. Innovations in Finance

II. Fixed Interest Investing

Innovations in Finance

The Birth of Index Funds

John McQuown,Wells Fargo Bank, 1971;Rex Sinquefield,American National Bank, 1973

Banks develop the first passive S&P 500 Index funds.

Efficient Markets Hypothesis

Eugene F. Fama,University of Chicago

Extensive research on stock price patterns.

Develops Efficient Markets Hypothesis, which asserts that prices reflect values and information accurately and quickly. It is difficult if not impossible to capture returns in excess of market returns without taking greater than market levels of risk.

Investors cannot identify superior stocks using fundamental information or price patterns.

Single-Factor Asset Pricing Risk/Return Model

William SharpeNobel Prize in Economics, 1990

Capital Asset Pricing Model: Theoretical model defines risk as volatility relative to market.

A stock’s cost of capital (the investor’s expected return) is proportional to the stock’s risk relative to the entire stock universe.

Theoretical model for evaluating the risk and expected return of securities and portfolios.

The Role of Stocks

James TobinNobel Prize in Economics, 1981

Separation Theorem:1. Form portfolio of risky assets.2. Temper risk by lending and borrowing.

Shifts focus from security selection to portfolio structure.

“Liquidity Preference as Behavior Toward Risk,” Review of Economic Studies, February 1958.

Conventional Wisdom circa 1950

“Once you attain competency, diversification is undesirable. One or two, or at most three or four, securities should be bought. Competent investors will never be satisfied beating the averages by a few small percentage points.”

Gerald M. Loeb, The Battle for Investment Survival, 1935

Analyse securities one by one. Focus on picking winners. Concentrate holdings to maximise returns.

Broad diversification is considered undesirable.

Diversification and Portfolio Risk

Harry MarkowitzNobel Prize in Economics, 1990

Diversification reduces risk.

Assets evaluated not by individual characteristics but by their effect on a portfolio. An optimal portfolio can be constructed to maximise return for a given standard deviation.

Investments and Capital Structure

Merton Miller and Franco ModiglianiNobel Prizes in Economics,1990 and 1985

Theorem relating corporate finance to returns.

A firm’s value is unrelated to its dividend policy.

Dividend policy is an unreliable guide for stock selection.

Behaviour of Securities Prices

Paul Samuelson, MITNobel Prize in Economics, 1970

Market prices are the best estimates of value.

Price changes follow random patterns. Future share prices are unpredictable.

“Proof That Properly Anticipated Prices Fluctuate Randomly,” Industrial Management Review, Spring 1965.

First Major Study of Manager Performance

Michael Jensen, 1965A.G. Becker Corporation, 1968

First studies of mutual funds (Jensen) and of institutional plans (A.G. Becker Corp.) indicate active managers underperform indices.

Becker Corp. gives rise to consulting industry with creation of “Green Book” performance tables comparing results to benchmarks.

Options Pricing Model

Fischer Black, University of Chicago;Myron Scholes, University of Chicago;Robert Merton, Harvard UniversityNobel Prize in Economics, 1997

The development of the Options Pricing Model allows new ways to segment, quantify and manage risk.

The model spurs the development of a market for alternative investments.

5510.2

1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974

Innovations in Finance

Nobel Prize Recognises Modern Finance

Economists who shaped the way we invest are recognised, emphasising the role of science in finance.

William Sharpe for the Capital Asset Pricing Model.

Harry Markowitz for portfolio theory.

Merton Miller for work on the effect of firms’ capital structure and dividend policy on their prices.

Variable Maturity Strategy Implemented

Eugene F. Fama

With no prediction of interest rates, Eugene Fama develops a method of shifting maturities that identifies optimal positions on the fixed interest yield curve.

“The Information in the Term Structure,” Journal of Financial Economics 13, no. 4 (December 1984): 509-28.

Multifactor Asset Pricing Model and Value Effect

Eugene Fama and Kenneth French,University of Chicago

Improves on the single-factor asset pricing model (CAPM).

Identifies market, size, and “value” factors in returns.

Develops the three-factor asset pricing model, an invaluable asset allocation and portfolio analysis tool.

“Common Risk Factors in the Returns on Stocks and Bonds,” Journal of Financial Economics 33, no. 1 (February 1993): 3-56.

Database of Securities Prices since 1926

Roger Ibbotson andRex Sinquefield,Stocks, Bonds, Bills, and Inflation

An extensive returns database for multiple asset classes is first developed and will become one of the most widely used investment databases.

The first extensive, empirical basis for making asset allocation decisions changes the way investors build portfolios.

A Major Plan First Commits to Indexing

New York Telephone Companyinvests $40 million in an S&P 500Index fund.

The first major plan to index.

Helps launch the era of indexed investing.

“Fund spokesmen are quick to point out you can’t buy the market averages. It’s time the public could.”

Burton G. Malkiel, A Random Walk Down Wall Street, 1973 ed.

International Size Effect

Steven L. Heston, K. Geert Rouwenhorst and Roberto E. Wessels

Find evidence of higher average returns to small companies in twelve international markets.

“The Structure of International Stock Returns and the Integration of Capital Markets,” Journal of Empirical Finance 2, no. 3 (September 1995): 173-97.

The Size Effect

Rolf Banz, University of Chicago

Analyzed NYSE stocks,1926-1975.

Finds that, in the long term, small companies have higher expected returns than large companies and behave differently.

Integrated Equity

Eugene F. Fama and Kenneth R. French

Increasing exposure to small and value companies relative to their market weights and integrating the portfolio across the full range of securities may reduce the turnover and transaction costs normally associated with forming an asset allocation from multiple components.

“Migration” CRSP Working Paper No. 614, February 2007).

5510.2

1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Fixed Interest Investing

One aspect of fixed interest’s role in a portfolio is to reduce volatility. This may be accomplished by employing:

• Shorter maturities with lower equity correlations.

• High-quality issues.

• A global approach that hedges all currencies.

5520.1

7. Limitations of Indexing

5600.1

I. Tracking an Index Can Be Costly

II. The Effect of Index Reconstitution on Stock Prices

Tracking an Index Can Be Costly

• Tracking an index may result in significant trading costs.

• Index replication requires executing with pre-specified transactions, stocks, amounts and trade dates.

• Timing lag between reconstitution announcement and effective date enables non-indexers to buy additions and sell deletions before tracking-sensitive investors, when prices are often more attractive.

5610.1

The Effect of Index Reconstitution on Stock Prices


S&P 500 data source: Anthony Lynch and Richard Mendenhall, “New Evidence on Stock Price Effects Associated with Changes in the S&P 500 Index,” Journal of Business 70, no. 3 (July 1997): 351-83. MSCI EAFE Index data provided by Rajesh Chakrabarti, Wei Huang, Narayanan Jayaraman and Jinsoo Lee, “Price and Volume Effects of Changes in MSCI Indices: Nature and Causes,” Journal of Banking and Finance 29, no. 5 (May 2005): 1237-64.FTSE 100 Index data provided by Brian Moore, “The Impact of Changes in the FTSE 100 Index.”

FTSE-100Index

S&P 500 Index

MSCI EAFE Index

One-Day Return after Announcement (%) 0.3 3.2 3.4

Run-Up to Effective Date (%) 4.7 3.8 4.5

Decay after Effective Date (%) -2.4 -2.1 -2.6

Announcement Effective

Price

Time

• Stocks rise on announcement of inclusion.

• Index funds are forced to buy high on effective date.

• Buying and selling to track index changes reduces tracking error but generates transaction costs.

5620.1

This material has been distributed by Dimensional Fund Advisors Ltd., registered address 7 Down Street, London W1J 7AJ, Company Number 02569601, which is authorised and regulated by the Financial Services Authority - Firm Reference No.150100. It is provided for information purposes and intended for your use only and does not constitute an invitation or offer to subscribe for or purchase any of the products or services mentioned. The information provided is not intended to provide a sufficient basis on which to make an investment decision. Information and opinions presented in this material have been obtained or derived from sources believed by Dimensional Fund Advisors Ltd. to be reliable, but Dimensional Fund Advisors Ltd makes no representation as to their accuracy or completeness. Dimensional Fund Advisors Ltd. accepts no liability for loss arising from the use of this material. This material is directed exclusively at persons who are experienced or existing investors in the products described in this document, who are professional customers as defined by the rules of the Financial Services Authority or are otherwise eligible under these rules. It is not intended for retail customers and such persons should not rely on this material. Moreover, any investment or service to which this material may relate, will not be made available to such retail customers. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is no guarantee of future results.

Client Presentation

5700.1

The Basic Institutional PortfolioMonthly: 1988-2009Passively InvestedPortfolio 1

AnnualisedCompound Return (%)

Annualised Standard

Deviation (%)

Portfolio 1 9.36 11.60

Citigroup UK Govt.Bond Index

1-30+ Years (hedged)

FTSE All-Share

Index

Portfolio 1 40% 60%

On average, portfolios of institutional investors are about 60% stocks and 40% bonds.

Data sourced internally at Dimensional Fund Advisors from Dimensional’s Returns Program 2.0. This material has been distributed by Dimensional Fund Advisors Ltd., which is authorised and regulated by the Financial Services Authority. Past performance is no guarantee of future results.

5710.3

Does It Pay to Extend Maturities?1900-2000

• Not all investors define risk as standard deviation. Some investors may seek to hedge long-term bonds.

• Historically, longer maturity instruments have higher standard deviations and have not provided consistently greater returns.

UK Bills US BondsUK Bonds

US Bills

US Equities UK Equities

15

10

5

0

5 10 15 20 25


5720.1

Bills Bonds Equities

UK US UK US UK US

Annualised Compound Returns (%) 5.10 4.00 6.00 5.30 11.60 11.60

Annualised Standard Deviation (%) 3.80 2.80 12.00 8.20 21.70 19.90

Dimson, Elroy, Paul Marsh and Mike Staunton, Millennium Book II: 101 Years of Investment Returns (ABN AMRO and London Business School, 2001). This publication defines the data used for the above chart and matrix as follows: UK Bills are UK One-Month Treasury Bills (FTSE). UK Bonds are the ABN AMRO Bond Index. UK Equities are the ABN AMRO/LBS Equity Index. US Bills are commercial bills 1900-1918 and One-Month US Treasury Bills (Ibbotson) 1919-2000. US Bonds are government bonds 1900-1918, the Federal Reserve Bond Index 10-15 Years 1919-1925, Long-Term Government Bonds (Ibbotson) 1926-1998, and the JP Morgan US Government Bond Index 1999-2000. US Equities are Schwert’s Index Series 1900-1925, CRSP 1-10 Deciles Index 1926-1970, and the Dow Jones Wilshire 5000 Index 1971-2000.

Ret

urn

(%

)

The Basic Institutional PortfolioMonthly: 1988-2009Portfolio 2

Annualised Compound Return (%)

Annualised Standard

Deviation (%)





FTSE All-Share

Index

Global Short-Dated

Bonds

Portfolio 1 40% 60%

Portfolio 2 60% 40%

Data sourced internally at Dimensional Fund Advisors from Dimensional’s Returns Program 2.0. This material has been distributed by Dimensional Fund Advisors Ltd., which is authorised and regulated by the Financial Services Authority. Past performance is no guarantee of future results.

5730.3

Where Dimensional Invests: Developed Markets Emerging Markets Not Invested

In British pounds. Map reflects countries in the MSCI All Country World IMI Index, and MSCI Frontier Markets Index. Market cap data is free-float adjusted. MSCI data copyright MSCI 2010, all rights reserved. Many small nations not displayed. Totals may not equal 100% due to rounding. Dimensional makes case-by-case determinations about the suitability of investing in each emerging market, making considerations that include local market accessibility, government stability and property rights before making investments. For educational purposes; should not be used as investment advice. 1. An example large cap stock provided for comparison.

United States 7,509

United Kingdom 1,528

Japan 1,504

Canada 745

France 736

Australia 600

Germany 558

Switzerland 519

China 405

Brazil 359

SCALETOP 20 NATIONS BY MARKET CAPITALIZATION (£ BILLIONS)

Spain 306

South Korea 292

Taiwan 287

Italy 243

Sweden 195

Netherlands 189

India 183

Hong Kong 166

South Africa 162

Russia 131

World Market Capitalisation£17.7 Trillion as at December 31, 2009

5735.3

A Diversified PortfolioMonthly: 1988-2009Portfolio 3


Annualised Standard

Deviation (%)



Portfolio 3 10.16 12.44



FTSEAll-Share

Index

GlobalShort-Dated

Bonds

MSCI World ex UK Index

Emerging Markets

Companies

Portfolio 1 40% 60%

Portfolio 2 60% 40%

Portfolio 3 25% 40% 25% 10%

Data sourced internally at Dimensional Fund Advisors from Dimensional’s Returns Program. 2.0. This material has been distributed by Dimensional Fund Advisors Ltd., which is authorised and regulated by the Financial Services Authority. Past performance is no guarantee of future results.

5750.3

Value stocks are above the 30th percentile in book-to-market ratio. Growth stocks are below the 70th percentile in book-to-market ratio.Simulations are free-float weighted both within each country and across all countries. UK and Europe data provided by London Business School/StyleResearch.US value and growth data provided by Fama/French. This material has been distributed by Dimensional Fund Advisors Ltd., which is authorised and regulated by the Financial Services Authority. Past performance is no guarantee of future results.

Size and Value Effects Are Strong around the WorldAnnual Index DataPercent per Annum in £

15.81

12.0810.43

19.15

15.62

12.59 12.15

9.538.15

13.02

10.73

8.20

10.34 9.798.95

13.59

11.49

8.72

17.97

13.30

10.81

UK Large Value

UK Large

Market

UK Large

Growth

UK Small Value

UK Small

Market

UK Small

Growth

Europe Large Value

Europe Large

Market

Europe Large

Growth

Europe Small Value

Europe Small

Market

Europe Small

Growth

US Large Value

S&P 500

Index

US Large

Growth

US Small Value

CRSP 6-10 Index

US Small

Growth

Emg. Markets

Value

Emg. Markets “Market”

Emg. Markets Growth

UK LargeCapitalisation Stocks

(£) 1956-2009

UK SmallCapitalisation Stocks

(£) 1956-2009

Europe ex UK Large Capitalisation

Stocks (€) 1981-2009

Europe ex UK Small Capitalisation Stocks

(€) 1981-2009

US Large Capitalisation Stocks

($) 1927-2009

US Small Capitalisation Stocks

($) 1927-2009

Emerging Markets Capitalisation Stocks

($) 1989-2009

32.08 28.60 26.29 31.81 30.34 30.83 27.22 23.29 25.76 26.10 24.80 27.51 27.17 20.63 22.06 35.30 31.09 34.20 43.04 37.29 35.70

Ann

ua

lised

C

omp

oun

d R

etu

rns

(%)


5760.3

Data sourced internally at Dimensional Fund Advisors from Dimensional’s Returns Program 2.0.This material has been distributed by Dimensional Fund Advisors Ltd., which is authorised and regulated by the Financial Services Authority. Past performance is no guarantee of future results.

A Diversified PortfolioMonthly: 1988-2009Portfolio 4


Annualised Standard

Deviation (%)



Portfolio 3 10.16 12.44

Portfolio 4 10.74 13.04



FTSEAll-Share

Index

GlobalShort-Dated

Bonds

MSCI World ex UK Index

Emerging Markets

CompaniesUK Value

CompaniesUK Small

Companies

International Value

Companies

International Small

Companies

Portfolio 1 40% 60%

Portfolio 2 60% 40%

Portfolio 3 25% 40% 25% 10%

Portfolio 4 10% 40% 10% 10% 7.5% 7.5% 7.5% 7.5%

5770.3

BRWM - The Evidence Supporting our Investment Philosophy.

Documents

Transcript of BRWM - The Evidence Supporting our Investment Philosophy.