• US Small Cap Portfolio
• US Large Cap Value Portfolio
• US Large Cap Value Portfolio II
• US Large Cap Value Portfolio III
• LWAS/DFA US High Book-to-Market Portfolio
• Enhanced US Large Company Portfolio
• International Value Portfolio
• International Value Portfolio II
• International Value Portfolio III
• Two-Year Global Fixed Income Portfolio
• Global 25/75 Portfolio Institutional Class

A portion of the full-year 2004 income distribution will be characterized for tax purposes as a Return of Capital (ROC) rather than ordinary income. The ROC characterization is purely an accounting issue: it has no effect on total investment return or net asset value and is not considered a taxable event. What are the tax consequences of a Return of Capital distribution?

Tax-Deferred Accounts:

• No tax consequences

Taxable Accounts:

• ROC will be reported in Box 3 of Form 1099-DIV as a "Nontaxable Distribution."
• A shareholders cost basis should be reduced by the amount of the ROC distribution.
• The ROC distribution will be allocated on a per-quarter basis. Therefore, shareholders receiving distributions earlier in the year will have a pro-rata portion deemed ROC even if they sell their shares prior to the December distribution.

For long-term shareholders, the practical effect of ROC is tax deferral. The ROC characterization reduces or eliminates current-year income tax liability, exchanging it for a future tax liability at capital gains rates once the shares are sold and their proceeds reflect the adjusted basis.

The estimated amount of characterization from ordinary income to Return of Capital is as follows (per share):

Return of Capital
US Small Cap Portfolio	$0.014
US Large Cap Value Portfolio	$0.008
US Large Cap Value Portfolio II	$0.002
US Large Cap Value Portfolio III	$0.001
LWAS/DFA US High Book-to-Market Portfolio	$0.005
Enhanced US Large Company Portfolio	$0.004
International Value Portfolio	$0.008
International Value Portfolio II	$0.002
International Value Portfolio III	$0.001
Two-Year Global Fixed Income Portfolio	$0.002
Global 25/75 Portfolio Institutional Class	$0.027