4th QTR 2005 - News & Events

As mentioned in last quarter’s communication, we’ve been working through the transition of preparing quarterly statements in-house rather than having a supplier create them for us.  Through this transition we’ve made a significant investment in technology and software, but feel that this was necessary in order to better provide our services at less cost over the long-haul.  We have now reached the point of preparing your quarterly reports (see enclosed).  As this is the first time we have prepared the reports in-house, and while we are making the effort to check each account, investment balance and transaction, we ask that you please review your statements closely and alert us to any items or questions that you may identify.

Enclosed are following two reports:
1. Statement of Assets – shows the cost and current value of each investment security and identifies the asset classes of your investments. 
2. Executive Summary – shows the performance of your accounts. 

If you have multiple accounts with us (i.e., IRA, Roth IRA, and Joint), all of these accounts are included in this single Statement of Assets and Executive Summary.  Additionally, if we track a retirement account that is not held at Fidelity, this too is included in the Statement of Assets (however, based on your individual needs, there are some exceptions). 

The reporting capability in our new system is fairly extensive, but we are trying to keep things simple.  If you believe that there are additional reports that you would find helpful, or would like us to consider including in the future, please do not hesitate to let us know.

Following is a representative sample, as of December 31, 2005, of DFA funds currently recommended for use in our client portfolios. This is not a complete list of all DFA funds, and your portfolio may or may not contain all of these funds.  Also below are returns of two indexes, giving you an idea of how the US (S&P 500) and International (MSCI EAFE) markets have performed.  As you can see, most asset classes outperformed the S&P 500 (which is the asset class most closely resembling DFA US Large Company).  If many of your friends and acquaintances experienced only a 4% - 5% return in their portfolio, it is very likely that they may not be quite as diversified as they should be.  As a reminder, most of you hold 9 or 10 asset classes, which we feel, provides you a very good level of diversification.  If you know of someone that may benefit from our assistance, please have them give us a call.

Fund Name/Ticker 4th Quarter One-Year Three-Year Five-Year
DFA US Large Co. Institutional Index (DFUSX) 2.12 4.99 14.33 0.44
DFA Tax-Managed US Equity (DTMEX) 1.88 6.26 15.64 N/A
DFA US Large Cap Value III (DFUVX) 1.37 10.36 20.69 9.27
DFA Tax-Managed US Mktwide Value II (DFMVX) 1.95 13.29 22.46 6.37
DFA US Micro Cap (DFSCX) 1.78 5.69 26.22 16.44
DFA Tax-Managed US Small Cap (DFTSX) 1.65 7.64 24.68 10.93
DFA US Small Cap Value (DFSVX) 1.51 7.79 29.15 19.11
DFA Tax-Managed US Small Cap Value (DTMVX) 1.92 8.20 27.34 15.10
DFA International Value III (DFVIX) 5.12 15.47 30.77 11.71
DFA Tax-Managed International Value (DTMIX) 4.97 16.56 30.08 10.93
DFA International Small Company (DFISX) 6.58 21.96 36.35 18.25
DFA International Small Cap Value (DISVX) 5.90 23.24 40.36 22.79
DFA Emerging Markets (DFEMX) 7.70 29.85 39.28 17.93
DFA Emerging Markets Value (DFEVX) 6.97 30.80 47.60 25.63
DFA Two-Year Global Fixed (DFGFX) 0.67 1.89 1.51 3.16

S&P 500 Index 2.09 4.90 14.39 0.54
MSCI EAFE Index 4.08 13.56 23.69 4.56

Notes: Returns for more than one year are annualized. “N/A” appears where returns data did not exist for the entire period. We hope you will find the above information of interest, and that you will use it in the spirit it is provided. While not meant to serve as a basis for your portfolio assessment, results from one year or less are useful as a tool to better understand how frequently such short-term market fluctuations occur, and yet how unpredictable they are. Likewise, three- and five-year returns demonstrate that different asset classes can be in or out of favor for longer periods, but again without a reliable basis for prediction. This in turn provides further evidence that clients should build entire portfolios and focus on their portfolio’s total return rather than on individual asset classes.

We look forward to any feedback you have on the new quarterly reports.  If you have any comments or questions, please feel free to call me at 248-305-5572 ext. 101, or if I am unavailable, please contact my associate, Becky Stroud at 248-305-5572 ext. 107.

Best Regards,

Wayne B. Titus III, CPA / PFS, CISA

Posted by Wayne Titus
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