SCHRODER CAPITAL FUNDS, POS AMI, 1997-03-13

SCHRODER CAPITAL FUNDS
POS AMI, 1997-03-13

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As filed with the Securities and Exchange Commission on March 13, 1997

File No. 811-9130
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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940

Amendment No. 4

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SCHRODER CAPITAL FUNDS
(Exact Name of Registrant as Specified in its Charter)

Two Portland Square, Portland, Maine 04101
(Address of Principal Executive Office)

Registrant's Telephone Number, including Area Code: 207-879-1900
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Thomas G. Sheehan, Esq.
Forum Financial Services, Inc.
Two Portland Square
Portland, Maine 04101
(Name and Address of Agent for Service)

Copies to:

R. Darrell Mounts, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036

Alexandra Poe, Esq.
Schroder Capital Management International Inc.
787 seventh Avenue, 34th Floor
New York, New York 10019
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EXPLANATORY NOTE

This Registration Statement is being filed by Registrant pursuant to
Section 8(b) of the Investment Company Act of 1940, as amended. Beneficial
interests in the series of Registrant are not being registered under the
Securities Act of 1933, as amended, because such interests will be issued
solely in private placement transactions that do not involve any "public
offering" within the meaning of Section 4(2) of that act. Investments in
Registrant's series may only be made by certain institutional investors,
whether organized within or without the United States (excluding individuals,
S corporations, partnerships, and grantor trusts beneficially owned by any
individuals, S corporations, or partnerships). This Registration Statement
does not constitute an offer to sell, or the solicitation of an offer to buy,
any beneficial interests in any series of Registrant.

THIS REGISTRATION STATEMENT IS INTENDED TO SUPPLEMENT THE PREVIOUSLY FILED
REGISTRATION STATEMENT OF THE SCHRODER CAPITAL FUNDS AND DOES NOT EFFECT THE
SCHRODER INTERNATIONAL SMALLER COMPANIES PORTFOLIO.

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PART A
(PROSPECTUS)

SCHRODER CAPITAL FUNDS

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INTERNATIONAL EQUITY FUND

MARCH 1, 1997

INTRODUCTION

Schroder Capital Funds (the "Trust") is registered as an open end management
investment company under the Investment Company Act of 1940 (the "1940 Act").
The Trust offers shares of beneficial interest in multiple series , each of
which has distinct investment objectives and policies. Investors may invest
their assets in a subtrust or "series" of the Trust (each a "portfolio" and
collectively the "portfolios"). The Trust currently is comprised of four
portfolios: International Equity Fund (the "Portfolio"), Schroder Emerging
Markets Fund Institutional Portfolio, Schroder U.S. Smaller Companies Portfolio
and Schroder International Smaller Companies Portfolio. This Part A relates
solely to the Portfolio. Additional portfolios may be added in the future.

The Trust does not offer its shares directly to the public; shares are offered
on a no-load basis exclusively to various institutional investors (including
other investment companies) as described in Item 4 below. An investor that is
an investment company or other collective investment vehicle typically will have
investment objectives and polices substantially similar to those of the
portfolio in which it invests and typically will seek to achieve its investment
objective by holding shares of a portfolio, instead of separately managing its
own portfolio of investment securities and related assets.

Shares of the Trust are not offered publicly and, accordingly, are not
registered under the Securities Act of 1933 (the "1933 Act"). Due to this, in
accordance with paragraph 4 of Instruction F of the General Instructions to Form
N-1A adopted by the Securities and Exchange Commission (the "Commission"),
responses to Items 1, 2, 3 and 5A of this Part A of the Trust's registration
statement on Form N-1A have been omitted.

ITEM 1. COVER PAGE.

Omitted. See "Introduction" above.

ITEM 2. SYNOPSIS.

Omitted. See "Introduction" above.

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ITEM 3. CONDENSED FINANCIAL INFORMATION.

Omitted. See "Introduction" above.

ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.

The Trust was organized as a business trust under the laws of the State of
Delaware pursuant to a Trust Instrument dated September 6, 1995. The Trust has
an unlimited number of authorized shares of beneficial interest. Beneficial
interests in the Trust are divided into four separate series (the portfolios),
the Portfolio and Schroder Emerging Markets Fund Institutional Portfolio,
Schroder U.S. Smaller Companies Portfolio and Schroder International Smaller
Companies Portfolio, each of which has a distinct investment objective and
distinct investment policies. The assets of each portfolio belong only to that
portfolio, and the assets belonging to a portfolio shall be charged with the
liabilities of that portfolio and all expenses, costs, charges and reserves
attributable to that portfolio. The Trust is empowered to establish, without
investor approval, additional portfolios which may have different investment
objectives and policies.

The Portfolio is classified as "diversified" under the 1940 Act and commenced
operations on or about November 1, 1995.

Beneficial interests in the Portfolio are offered solely in private placement
transactions which do not involve any "public offering" within the meaning of
Section 4(2) of the 1933 Act. Investments in the Portfolio may only be made by
certain institutional investors, whether organized within or without the U.S.
(excluding individuals, S corporations, partnerships, and grantor trusts
beneficially owned by any individuals, S corporations, or partnerships). This
registration statement does not constitute an offer to sell, or the solicitation
of an offer to buy, any "security" within the meaning of the 1933 Act.

INVESTMENT OBJECTIVE

The investment objective of the Portfolio is long-term capital appreciation
through investment in securities markets outside the U.S. Investment securities
are selected on the basis of their potential for capital appreciation without
regard for current income.

There can be no assurance that the Portfolio will achieve its investment
objective.

The investment objective and all investment policies of the Portfolio that are
designated as fundamental may not be changed without approval of the holders of
a majority of the outstanding voting interests (defined in the same manner as
the phrase "vote of a majority of the outstanding voting securities" is defined
in the 1940 Act) of the Portfolio.

INVESTMENT POLICIES

The investment policies of the Portfolio that are designated as fundamental may
not be changed without investor approval. Unless otherwise indicated, all other
investment policies are not

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fundamental and may be changed by the Board of Trustees of the Trust (the
"Board") without prior investor approval. Additional investment techniques,
features and restrictions concerning the Portfolio's investment programs are
described below under "Investment Restrictions" and in Part B.

The Portfolio will normally invest at least 65% of its total assets in equity
securities of companies domiciled outside the U.S. The Portfolio may also
invest in the securities of closed-end investment companies investing primarily
in foreign securities and in debt obligations of foreign governments,
international organizations and foreign corporations. Investment will be
diversified among securities of many issuers in many countries including, but
not limited to, Japan, Germany, the United Kingdom, France, Italy, Belgium,
Switzerland, the Netherlands, Hong Kong, Singapore/Malaysia, and Australia.

The Portfolio may enter into forward contracts to purchase or sell foreign
currencies in anticipation of the currency requirements of the Portfolio and to
protect against possible adverse movements in foreign exchange rates. Although
such contracts may reduce the risk of loss to the Portfolio due to a decline in
the value of the currency which is sold, they also limit any possible gain which
might result should the value of such currency rise.

For temporary defensive purposes, the Portfolio may invest without limitation in
(or enter into repurchase agreements maturing in seven days or less with U.S.
banks and broker-dealers with respect to) short-term debt securities, including
U.S. Treasury bills, other short-term U.S. Government securities, certificates
of deposit and bankers' acceptances of U.S. banks. The Portfolio may hold cash
and time deposits in foreign banks denominated in any major foreign currency.
In transactions involving repurchase agreements, the Portfolio purchases
securities from a bank or broker-dealer who agrees to repurchase the security at
the Portfolio's cost plus interest within a specified time. The securities
purchased by the Portfolio have a total value in excess of the value of the
repurchase agreement and are held by the Portfolio's custodian bank until
repurchased. See Investment Policies in Part B for further information about
all of these securities.

The Portfolio may invest up to 5% of its net assets in debt securities with
relatively high risk and high yields (as compared to other debt securities
meeting the Portfolio's investment criteria). The debt securities in which the
Portfolio invests may be unrated, but will not be in default at the time of
purchase. See "Debt Securities" and "Risk Considerations".

Countries in which the Portfolio may invest include, but are not limited
to, countries listed in the Morgan Stanley Capital International EAFE-Registered
Trademark- Index, which is a market capitalization index of companies in
developed market countries in Europe, Australia and the Far East. The Portfolio
invests in the securities of foreign issuers domiciled in at least three foreign
countries. The Portfolio may invest more than 25% of its total assets in issuers
located in any one country. See "Risk Considerations--Geographic Concentration."
The Portfolio also may invest in securities of issuers located in countries
considered by some to be emerging market countries. See "Risk Considerations C
Emerging Markets."

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The Portfolio may purchase preferred stock and convertible debt securities,
including warrants and convertible preferred stock, and may purchase American
Depository Receipts, European Depository Receipts or other similar securities of
foreign issuers. The Portfolio also may enter into foreign exchange contracts,
including forward contracts to purchase or sell foreign currencies, in
anticipation of its currency requirements and to protect against possible
adverse movements in foreign exchange rates. Although such contracts may reduce
the risk of loss to the Portfolio from adverse movements in currency values, the
contracts also limit possible gains from favorable movements. For temporary
defensive purposes, the Portfolio may invest without limitation in (or enter
into repurchase agreements maturing in seven days or less with U.S. banks and
broker-dealers with respect to) short-term debt securities, including U.S.
Government securities, certificates of deposit and bankers' acceptances of U.S.
banks. The Portfolio may also hold cash (U.S. dollars, foreign currencies or
multinational currency units) and time deposits in U.S. and foreign banks. See
"Risk Considerations" below and Investment Policies in the SAI for further
information about these types of investments.

The following specific policies and limitations are considered at the time
of any purchase; SCMI may not buy these instruments or use these techniques
unless it believes that they are consistent with the Portfolio's objective.

COMMON AND PREFERRED STOCK AND WARRANTS. The Portfolio may invest in common
and preferred stock. Common stockholders are the owners of the company issuing
the stock and, accordingly, vote on various corporate governance matters such as
mergers. They are not creditors of the company, but rather, upon liquidation of
the company, are entitled to their pro rata share of the company's assets after
creditors (including fixed income security holders) and preferred stockholders,
if any, are paid. Preferred stock is a class of stock having a preference over
common stock as to dividends and, generally, as to the recovery of investment. A
preferred stockholder is also a shareholder and not a creditor of the company.
Equity securities owned by the Portfolio may be traded in the over-the-counter
market or on a securities exchange, but may not be traded every day or in the
volume typical of securities traded on a major U.S. national securities
exchange. As a result, disposition by the Portfolio of a security to meet
withdrawals by interest holders or otherwise may require the Portfolio to sell
these securities at a discount from market prices, to sell during periods when
disposition is not desirable, or to make many small sales over a lengthy period
of time. The market value of all securities, including equity securities, is
based upon the market's perception of value and not necessarily the "book value"
of an issuer or other objective measure of a company's worth.

The Portfolio may also invest in warrants, which are options to purchase an
equity security at a specified price (usually representing a premium over the
applicable market value of the underlying equity security at the time of the
warrant's issuance) and usually during a specified period of time.

FOREIGN EXCHANGE CONTRACTS. Changes in foreign currency exchange rates will
affect the U.S. dollar values of securities denominated in currencies other than
the U.S. dollar. The rate of exchange between the U.S. dollar and other
currencies fluctuates in response to forces of supply

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and demand in the foreign exchange markets. These forces are affected by the
international balance of payments, other economic and financial conditions,
government intervention, speculation, and other factors, many of which may be
difficult if not impossible to predict. When investing in foreign securities,
the Portfolio usually effects currency exchange transactions on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign exchange market. The
Portfolio incurs foreign exchange expenses in converting assets from one
currency to another.

The Portfolio may enter into foreign currency forward contracts for the
purchase or sale of foreign currency to "lock in" the U.S. dollar price of the
securities denominated in a foreign currency or the U.S. dollar value of
interest and dividends to be paid on such securities; or to hedge against the
possibility that the currency of a foreign country in which the Portfolio has
investments may suffer a decline against the U.S. dollar. A forward currency
contract is an obligation to purchase or sell a specific currency at a future
date, which may be any fixed number of days from the date of the contract agreed
upon by the parties, at a price set at the time of the contract. This method of
attempting to hedge the value of portfolio securities against a decline in the
value of a currency does not eliminate fluctuations in the underlying prices of
the securities and may expose the Portfolio to the risk that the counterparty is
unable to perform. Although the strategy of engaging in foreign currency
transactions could reduce the risk of loss due to a decline in the value of the
hedged currency, it could also limit the potential gain from an increase in the
value of the currency. The Portfolio does not intend to maintain a net exposure
to such contracts where the fulfillment of obligations under such contracts
would obligate it to deliver an amount of foreign currency in excess of the
value of its portfolio securities or other assets denominated in the currency.
The Portfolio will not enter into these contracts for speculative purposes and
will not enter into non-hedging currency contracts. These contracts involve a
risk of loss if SCMI fails to predict currency values correctly. The Portfolio
has no present intention to enter into currency futures or options contracts,
but may do so in the future. See "Risk Considerations--Currency Fluctuations."

DEBT SECURITIES. The Portfolio may seek capital appreciation through
investment in convertible or non-convertible debt securities. Capital
appreciation in debt securities may arise as a result of a favorable change in
relative foreign exchange rates, in relative interest rate levels, or in the
creditworthiness of issuers. The receipt of income from such debt securities is
incidental to the Portfolio's objective of long-term capital appreciation. Such
income can be used, however, to offset the operating expenses of the Portfolio.
In accordance with its investment objective, the Portfolio will not seek to
benefit from anticipated short-term fluctuations in currency exchange rates. The
Portfolio also may invest to a certain extent in debt securities in order to
participate in debt-to-equity conversion programs incident to corporate
reorganizations.

Debt securities are generally subject to two kinds of risk -- credit
risk and market risk. Credit risk refers to the ability of the debtor, and any
other obligor, to pay principal and interest on the debt as it becomes due.
The Portfolio may, from time to time, invest in debt securities with high risk
and high yields (as compared to other debt securities meeting the Portfolio's
investment criteria). The debt securities in which the Portfolio invests may be
unrated, but will not be in default at the time of purchase. Market risk refers
to the tendency of

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the value of debt securities to vary inversely with interest rate changes.
Certain debt instruments may also be subject to extension risk, which refers to
change in total return on a debt instrument resulting from extension or
abbreviation of the instrument's maturity.

The Portfolio may invest in debt securities issued or guaranteed by
foreign governments (including countries, provinces and municipalities) or
their agencies and instrumentalities; debt securities issued or guaranteed by
international organizations designated or supported by multiple foreign
governmental entities (which are not obligations of foreign governments) to
promote economic reconstruction or development; and debt securities issued by
corporations or financial institutions.

INVESTMENT RESTRICTIONS

The following investment restrictions of the Portfolio were designed to reduce
the Portfolio's exposure in specific situations. Pursuant to these
restrictions, which are fundamental policies, the Portfolio will not:

(a) Invest more than 5% of its assets in the securities of any single issuer.
(This restriction does not apply to securities issued by the U.S. Government,
its agencies or instrumentalities.)

(b) Purchase more than 10% of the voting securities of any one issuer.
Moreover, the Portfolio will not purchase more than 3% of the outstanding
securities of any closed-end investment company. (Any such purchase of
securities issued by a closed-end investment company will otherwise be made in
full compliance with Sections 12(d)(1)(a)(i), (ii) and (iii) of the Act.)

(c) Invest more than 10% of its assets in "restricted securities" which include
(i) securities which are not readily marketable and (ii) securities of issuers
having a record (together with all predecessors) of less than three years of
continuous operation.

(d) Invest more than 25% of its assets in any one industry.

(e) Borrow money, except from banks for temporary emergency purposes and then
only in an amount not exceeding 5% of the value of the total assets of the
Portfolio.

(f) Pledge, mortgage or hypothecate its assets to an extent greater than 10% of
the value of the total assets of the Portfolio.

As an operating (non-fundamental) policy, which may be changed by the Board
without prior investor approval, the Portfolio will not invest in securities
which are not readily marketable. This policy does not include restricted
securities eligible for resale to qualified institutional purchasers pursuant to
Rule 144A under the 1933 Act that are determined to be liquid by the Board or
the Portfolio's investment adviser under Board-approved guidelines. Such
guidelines take into account trading activity for such securities and the
availability of reliable pricing

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information, among other factors. If there is a lack of trading interest in
particular Rule 144A securities, the Portfolio's holdings of those securities
may be illiquid.

The percentage restrictions described above and in Part B apply only at the time
of investment and require no action by the Portfolio as a result of subsequent
changes in value of the investments or the size of the Portfolio. A
supplementary list of investment restrictions is contained in Part B.

RISK CONSIDERATIONS

All investments, domestic and foreign, involve certain risks. Investment in the
securities of foreign issuers may involve risks in addition to those normally
associated with investments in the securities of U.S. issuers. In general, the
Portfolio will invest only in securities of companies and governments in
countries which the investment adviser, in its judgment, considers both
politically and economically stable. Nevertheless, all foreign investments are
subject to risks of foreign political and economic instability, adverse
movements in foreign exchange rates, the imposition or tightening of exchange
controls or other limitations on repatriation of foreign capital and changes in
foreign governmental attitudes towards private investment possibly leading to
nationalization, increased taxation or confiscation of Portfolio assets.

Moreover, dividends payable on foreign securities may be subject to foreign
withholding taxes, thereby reducing the income available for distribution to the
Portfolio's investors; commission rates payable on foreign portfolio
transactions are generally higher than in the U.S.; accounting, auditing and
financial reporting standards differ from those in the U.S. and this may mean
that less information about foreign companies may be available than is generally
available about issuers of comparable securities in the U.S.; and foreign
securities often trade less frequently and with less volume than U.S. securities
and consequently may exhibit greater price volatility.

Changes in foreign exchange rates will also affect the value in U.S. dollars of
all foreign currency-denominated securities held by the Portfolio. Exchange
rates are influenced generally by the forces of supply and demand in the foreign
currency markets and by numerous other political and economic events occurring
outside the U.S., many of which may be difficult if not impossible to predict.

Because most of the Portfolio's income will be received and realized in foreign
currencies and the Portfolio will be required to compute and distribute income
in U.S. dollars, a decline in the value of a particular foreign currency against
the U.S. dollar occurring after the Portfolio's income has been earned and
thereafter computed into U.S. dollars may require the Portfolio to liquidate
some portfolio securities to acquire sufficient U.S. dollars to make such
distributions. Similarly, if the exchange rate declines between the time the
Portfolio incurs expenses in U.S. dollars and the time such expenses are paid,
the Portfolio may be required to liquidate additional foreign securities to
purchase the U.S. dollars required to meet such expenses.

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ITEM 5. MANAGEMENT OF THE TRUST.

TRUSTEES AND OFFICERS

The business and affairs of the Trust are managed under the direction of the
Board. The Board formulates the general policies of the Portfolio and the Trust
and meets periodically to review the results of the Portfolio, monitor
investment activities and practices and discuss other matters affecting the
Portfolio and the Trust. Additional information regarding the Trustees and
executive officers of the Trust may be found in Part B.

INVESTMENT ADVISER

Schroder Capital Management International Inc. ("SCMI"), 787 Seventh Avenue, New
York, New York 10019, serves as investment adviser to the Portfolio pursuant to
an investment advisory agreement with the Trust. SCMI manages the investment
and reinvestment of the assets included in the Portfolio's investment portfolio
and continuously reviews, supervises and administers the Portfolio's
investments. In this regard, it is the responsibility of SCMI to make decisions
relating to the Portfolio's investments and to place purchase and sale orders
regarding such investments with brokers or dealers selected by it in its
discretion.

SCMI is a wholly-owned U.S. subsidiary of Schroders Incorporated, the
wholly-owned U.S. holding company subsidiary of Schroders plc. Schroders plc is
the holding company parent of a large worldwide group of banks and financial
services companies (referred to as the "Schroder Group"), with associated
companies and branch and representative offices located in seventeen countries
worldwide. The Schroder Group specializes in providing investment management
services with assets under management currently in excess of $130 billion.

The investment advisory agreement for the Portfolio provides for an advisory fee
at an annual rate of 0.45% of the Portfolio's average daily net assets.

The investment advisory agreement authorizes and directs SCMI to place orders
for the purchase and sale of the Portfolio's investments with brokers and
dealers selected by SCMI in its discretion and to seek best execution of such
portfolio transactions. The Portfolio may pay higher than the lowest available
commission rates when SCMI believes it is reasonable to do so in light of the
value of the brokerage and research services provided by the broker effecting
the transaction. Commission rates for brokerage transactions are fixed on many
foreign securities exchanges, and this may cause higher brokerage expenses to
accrue to the Portfolio than would be the case for comparable transactions
effected on U.S. securities exchanges.

Subject to the Portfolio's policy of obtaining the best price consistent with
quality of execution on transactions, SCMI may employ Schroder Securities
Limited and its affiliates (collectively, Schroder Securities ), affiliates of
SCMI, to effect transactions of the Portfolio on certain foreign securities
exchanges. Because of the affiliation between SCMI and Schroder Securities, the
Portfolio's payment of commissions to Schroder Securities is subject to
procedures adopted by the Board to provide that such commissions will not exceed
usual and customary brokers'

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commissions. No specific portion of the Portfolio's brokerage will be directed
to Schroder Securities and in no event will Schroder Securities receive such
brokerage in recognition of research services.

Although the Portfolio does not currently engage in directed brokerage
arrangements to pay expenses, it may do so in the future. These arrangements,
whereby brokers executing the Portfolio's portfolio transactions would agree to
pay designated expenses of the Portfolio if brokerage commissions generated by
the Portfolio reached certain levels, might reduce these expenses. As
anticipated, these arrangements would not materially increase the brokerage
commissions paid by the Portfolio. Because brokerage commissions are not
reflected in Portfolio expenses, however, certain expenses might not be fully
set forth in the fee table, per share table, and financial statements of
registered open-end investment companies that invest in the Portfolio and might
therefore appear lower than actual expenses incurred.

PORTFOLIO MANAGERS. The investment management team of Mark J. Smith, a Trustee
and President of the Trust, and Michael Perelstein, Vice President of the Trust
(with the assistance of an SCMI investment committee), is primarily responsible
for the day-to-day management of the Portfolio's investments. Mr. Smith, who has
managed the Portfolio's investments since its inception, has been a First Vice
President of SCMI since April 1990 and a Director thereof since April 1993. He
has been employed by various Schroder Group companies in the investment research
and portfolio management areas since 1983. Mr. Perelstein has been a Senior Vice
President of SCMI since January 2, 1997. Prior thereto, Mr. Perelstein was a
Managing Director at MacKay Shields. Mr. Perelstein has more than twelve years
of international and global investment experience.

ADMINISTRATIVE SERVICES

On behalf of the Portfolio, the Trust has entered into an administration
agreement with Schroder Advisors, 787 Seventh Avenue, New York, New York 10019.
Schroder Advisors is a wholly-owned subsidiary of SCMI. For these services,
Schroder Advisors receives an administrative services fee at an annual rate of
0.075% of the Portfolio's average daily net assets.

In addition, the Trust has entered into a sub-administration agreement with
Forum Administrative Services, Limited Liability Company ("Forum"), Two Portland
Square, Portland, Maine 04101.

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For these sub-administration services, Forum receives an administrative services
fee at an annual rate of 0.075% of the Portfolio's average daily net assets.

TRANSFER AGENT AND FUND ACCOUNTANT

Forum Financial Corp. ("FFC"), Two Portland Square, Portland, Maine 04101, is
the Trust's transfer agent and fund accountant. FFC is an affiliate of Forum.
For its transfer agent services with respect to the Portfolio, FFC receives a
fee of $12,000 per year plus $25 per interestholder account. For fund
accounting services with respect to the Portfolio, FFC receives a base fee of
$60,000 per year for the Portfolio ($36,000 plus $24,000 for international
portfolios) plus additional amounts depending on the assets of the Portfolio,
the number and type of securities held by the Portfolio and the portfolio
turnover rate of the Portfolio.

EXPENSES

The Portfolio is obligated to pay for all of its expenses. These expenses
include: governmental fees; interest charges; taxes; brokerage fees and
commissions; insurance premiums; investment advisory, custodial, administrative
and transfer agency and fund accounting fees, as described above; compensation
of certain of the Trust's Trustees, costs of membership trade associations; fee
and expenses of independent auditors and legal counsel to the Trust; and
expenses of calculating the net asset value of and the net income of the
Portfolios. The Portfolio's expenses comprise Trust expenses attributable to
the Portfolio, which are allocated to the Portfolio, and expenses not
attributable to the Portfolio, which are allocated among the portfolios in
proportion to their average net assets or as otherwise determined by the Board.

No registered open-end investment company or separate series thereof that
invests in the Portfolio incurs investment advisory fees other than that which
it incurs indirectly by investing in the Portfolio.

CUSTODIAN

The Chase Manhattan Bank, N.A., through its Global Securities Services division
located in London, England, acts as custodian of the Portfolio's assets and
employs foreign subcustodians to maintain the Portfolios' foreign assets outside
the U.S.

ITEM 5A. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE.

Omitted. See "Introduction" above.

ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.

The Trust was organized as a business trust under the laws of the State of
Delaware. Under the Trust Instrument, the Trustees are authorized to issue
beneficial interests in separate series of the Trust. The Trust currently has
four series (one being the Portfolio); the Trust reserves the right to create
and issue additional series.

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Each investor in the Portfolio is entitled to participate equally in the
Portfolio's earnings and assets and to a vote in proportion to the amount of
its investment in the Portfolio. Investments in the Portfolio may not be
transferred, but an investor may withdraw all or any portion of its investment
at any time at net asset value ("NAV").

Investments in the Portfolio have no preemptive or conversion rights and are
fully paid and non-assessable, except as set forth below. The Trust is not
required and has no current intention to hold annual meetings of investors, but
the Trust will hold special meetings of investors when in the Trustees' judgment
it is necessary or desirable to submit matters to an investor vote. Generally,
interests will be voted in the aggregate without reference to a particular
portfolio, except if the matter affects only one portfolio or portfolio voting
is required, in which case interests will be voted separately by portfolio.
Investors have the right to remove one or more Trustees without a meeting by a
declaration in writing by a specified number of investors. Upon liquidation of
the Portfolio, investors will be entitled to share pro rata in the Portfolio's
net assets available for distribution to investors.

The Portfolio's net income consists of (1) all dividends, accrued interest
(including earned discount, both original issue and market discount), and other
income, including any net realized gains on the Portfolio's assets, less (2) all
actual and accrued expenses of the Portfolio, amortization of any premium, and
net realized losses on the Portfolio's assets, all as determined in accordance
with generally accepted accounting principles. All of the Portfolio's net
income is allocated pro rata among the investors in the Portfolio. The
Portfolio's net income generally is not distributed to the investors in the
Portfolio, except as determined by the Trustees from time to time, but instead
is included in the NAV of the investors' respective beneficial interests in the
Portfolio.

The Portfolio intends to continue to comply with the provisions of Subchapter M
of the Revenue Code. As a regulated investment company, the Portfolio intends to
distribute substantially all of its net investment income and its net realized
long term capital gains at least annually and therefore intends not to be
subject to Federal income tax to the extent it distributes such income and
capital gains in the manner required under the Code.

Under the anticipated method of the Portfolio's operations, it will not be
subject to any income tax. However, each investor in the Portfolio will be taxed
on its proportionate share (as determined in accordance with the Trust's Trust
Instrument and the Code) of the Portfolio's ordinary income and capital gain, to
the extent that the investor is subject to tax on its income. It is intended
that the Portfolio's assets, income, and distributions will be managed in such a
way that an investor in the Portfolio will be able to satisfy the requirements
of Subchapter M of the Code, assuming that the investor invested all of its
assets in the Portfolio. The Trust will inform investors of the amount and
nature of such income or gain.

Investor inquiries may be directed to Forum Financial Services, Inc. (FFSI)

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ITEM 7. PURCHASE OF SECURITIES.

Beneficial interests in the Portfolio are issued solely in private placement
transactions that do not involve any "public offering" within the meaning of
Section 4(2) of the 1933 Act. See "General Description of Registrant" above.
All investments in the Portfolio are made without a sales load, at the NAV next
determined after an order is received by the Portfolio.

NAV is calculated at 4:00 p.m. (New York City time), Monday through Friday, on
each day that the New York Stock Exchange is open for trading (which excludes
the following national business holidays: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day). NAV per share is calculated by dividing the aggregate value of
the Portfolio's assets less all liabilities by the number of shares of the
Portfolio outstanding. Portfolio securities listed on the recognized stock
exchanges are valued at the last reported trade price, prior to the time when
the assets are valued, on the exchange on which the securities are principally
traded. Listed securities traded on recognized stock exchanges where last trade
prices are not available are valued at mid-market prices. Securities traded in
over-the-counter markets, or listed securities for which no trade is reported on
the valuation date, are valued at the most recent reported mid-market price.
Other securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith using methods
approved by the Board.

Trading in securities on European and Far Eastern Securities exchanges and
over-the-counter markets may not take place on every day that the New York Stock
Exchange is open for trading. Furthermore, trading takes place in various
foreign markets on days on which the Portfolio's NAV is not calculated. If
events materially affecting the value of foreign securities occur between the
time when their price is determined and the time when net asset value is
calculated, such securities will be valued at fair value as determined in good
faith by the Board.

All assets and liabilities of the Portfolio denominated in foreign currencies
are converted to U.S. dollars at the mid price of such currencies against U.S.
dollars last quoted by a major bank prior to the time when NAV of the Portfolio
is calculated.

There is no minimum initial or subsequent investment in the Portfolio. However,
since the Portfolio intends to be as fully invested at all times as is
reasonably practicable in order to enhance the return on its assets, investments
must be made in federal funds (i.e., monies credited to the account of the
Trust's custodian by a Federal Reserve Bank).

The Trust reserves the right to cease accepting investments in the Portfolio at
any time or to reject any investment order.

The exclusive placement agent for the Trust is FFSI. FFSI receives no
compensation for serving as the exclusive placement agent for the Trust.

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<PAGE>

ITEM 8. REDEMPTION OR REPURCHASE.

An investor in the Portfolio may withdraw all or any portion of its investment
in the Portfolio at the NAV next determined after a withdrawal request in proper
form is furnished by the investor to the Trust. The proceeds of a withdrawal
will be paid by the Portfolio in federal funds normally on the business day
after the withdrawal is effected, but in any event within seven days.
Investments in the Portfolio may not be transferred. The right of redemption
may not be suspended nor the payment dates postponed for more than seven days
except when the New York Stock Exchange is closed (or when trading thereon is
restricted) for any reason other than its customary weekend or holiday closings
or under any emergency or other circumstances as determined by the Commission.

Redemptions from the Portfolio may be made wholly or partially in portfolio
securities if the Board determines that payment in cash would be detrimental to
the best interests of the Portfolio. The Trust has filed an election with the
Commission pursuant to which the Portfolio will only consider effecting a
redemption in portfolio securities if the particular interestholder is redeeming
more than $250,000 or 1% of the Portfolio's NAV, whichever is less, during any
90-day period.

ITEM 9. PENDING LEGAL PROCEEDINGS.

Not applicable.

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<PAGE>

PART A
(PROSPECTUS)

SCHRODER CAPITAL FUNDS
________

SCHRODER EMERGING MARKETS FUND
INSTITUTIONAL PORTFOLIO

MARCH 1, 1997

INTRODUCTION

Schroder Capital Funds (the "Trust") is registered as an open end management
investment company under the Investment Company Act of 1940 (the "1940 Act").
The Trust offers shares of beneficial interest in multiple series , each of
which has distinct investment objectives and policies. Investors may invest
their assets in a subtrust or "series" of the Trust (each a "portfolio" and
collectively the "portfolios"). The Trust currently is comprised of four
portfolios: Schroder Emerging Markets Fund Institutional Portfolio (the
"Portfolio"), International Equity Fund, Schroder U.S. Smaller Companies
Portfolio and Schroder International Smaller Companies Portfolio. This Part A
relates solely to the Portfolio. Additional portfolios may be added in the
future.

ITEM 1. COVER PAGE.

Omitted. See "Introduction" above.

ITEM 2. SYNOPSIS.

Omitted. See "Introduction" above.

<PAGE>

ITEM 3. CONDENSED FINANCIAL INFORMATION.

Omitted. See "Introduction" above.

ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.

The Trust was organized as a business trust under the laws of the State of
Delaware pursuant to a Trust Instrument dated September 6, 1995. The Trust has
an unlimited number of authorized shares of beneficial interest. Beneficial
interests in the Trust are divided into four separate series (the portfolios),
the Portfolio, International Equity Fund, Schroder U.S. Smaller Companies
Portfolio and Schroder International Smaller Companies Portfolio, each of which
has a distinct investment objective and distinct investment policies. The
assets of each portfolio belong only to that portfolio, and the assets belonging
to a portfolio shall be charged with the liabilities of that portfolio and all
expenses, costs, charges and reserves attributable to that portfolio. The Trust
is empowered to establish, without investor approval, additional portfolios
which may have different investment objectives and policies.

The Portfolio is classified as "non-diversified" under the 1940 Act and
commenced operations on or about November 1, 1995.

INVESTMENT OBJECTIVE

The Portfolio's objective is to achieve long-term capital appreciation through
direct or indirect investment in equity and debt securities of issuers domiciled
or doing business in emerging market countries in regions such as Southeast
Asia, Latin America, and Eastern and Southern Europe. Current income is
incidental to the objective of capital appreciation.

There can be no assurance that the Portfolio will achieve its investment
objective.

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<PAGE>

INVESTMENT POLICIES

The investment policies of the Portfolio that are designated as fundamental may
not be changed without investor approval. Unless otherwise indicated, all other
investment policies are not fundamental and may be changed by the Board of
Trustees of the Trust (the "Board") without prior investor approval. Additional
investment techniques, features and restrictions concerning the Portfolio's
investment programs are described below under "Investment Restrictions" and
"Additional Investment Policies" and in Part B.

Under normal conditions, the Portfolio will invest at least 65% of its total
assets in emerging market equity and debt securities, including common stocks,
preferred stocks, convertible preferred stocks, stock rights and warrants,
convertible debt securities and non-convertible debt securities. The Portfolio
may invest up to 35% of its net assets in high-risk debt securities that unrated
or rated below investment grade. See "Certain Risks of Debt Securities" below.
Investments in stock rights and warrants will not be considered in the 65% of
total assets determination but are subject to the limitations described below in
"Warrants and Stock Rights." Under certain circumstances, the Portfolio may
invest indirectly in these securities by investing in other investment companies
or vehicles. See "Other Investment Vehicles" The Portfolio may acquire
emerging market securities that are not denominated in emerging market currency.

In recent years, many emerging market countries have begun programs of economic
reform: removing import tariffs, dismantling trade barriers, deregulating
foreign investment, privatizing state owned industries, permitting the value of
their currencies to float against the dollar and other major currencies, and
generally reducing the level of state intervention in industry and commerce.
Important intra-regional economic integration also holds the promise of greater
trade and growth. At the same time, significant progress has been made in
restructuring the heavy external debt burden that certain emerging market
countries accumulated during the 1970s and 1980s. While there is no assurance
that these trends will continue, the Portfolio's investment adviser will seek
out attractive investment opportunities in these countries.

"Emerging market" countries generally include all countries in the world other
than those contained in the Morgan Stanley Capital International World Index
("MSCI World") of major world economies. Where the investment adviser
determines that the economy of a particular country included in the MSCI World
more appropriately reflects an emerging market economy, however, the adviser may
include such country in the emerging market category. The following countries
currently are excluded from the Portfolio's emerging market category: Australia;
Austria; Belgium; Canada; Denmark; Finland; France; Germany; Hong Kong; Ireland;
Italy; Japan; Malaysia; the Netherlands; New Zealand; Norway; Singapore; Spain;
Sweden; Switzerland; the United Kingdom; and the United States of America. The
Portfolio will not necessarily seek to diversify investments on a geographic
basis within the emerging market category and, in this regard, the Portfolio may
invest more than 25% of its total assets in issuers located in any one country.
To the extent the Portfolio concentrates its investments in issuers located in
one country, the Portfolio is more susceptible to factors adversely affecting
that country. See "Geographic Concentration" below.

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<PAGE>

An issuer of a security ordinarily will be considered to be domiciled or doing
business in an emerging market when (1) it is organized under the laws of an
emerging market country; (2) its primary trading market is located in an
emerging market country; (3) in the judgment of the investment adviser, at least
50% of the issuer's revenues or profits are derived from goods produced or sold,
investments made, or services performed in emerging market countries or (4) it
has at least 50% of its assets situated in emerging market countries. The
Portfolio may acquire emerging market securities that are denominated in
currencies other than a currency of an emerging market country. The Portfolio
may consider investment companies to be located in the country or countries in
which they primarily make their portfolio investments.

In anticipation of the currency requirements of the Portfolio and to attempt to
protect against possible adverse movements in foreign exchange rates, the
Portfolio may enter into forward contracts to purchase or sell foreign
currencies. Although such contracts may reduce the risk of loss to the
Portfolio due to a decline in the value of the currency which is sold, they also
limit any possible gain which might result should the value of such currency
rise.

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<PAGE>

The following specific policies and limitations are considered at the time of
any purchase; SCMI may not buy these instruments or use these techniques unless
it believes that they are consistent with the Portfolio's objective.

COMMON AND PREFERRED STOCK AND WARRANTS. The Portfolio's investments will
consist primarily of the common or preferred stock of established emerging
market companies that are listed on recognized securities exchanges or traded in
other established markets. However, the Portfolio may make limited investment in
convertible preferred stock, warrants and stock rights.

Common stockholders are the owners of the company issuing the stock and,
accordingly, vote on various corporate governance matters such as mergers. They
are not creditors of the company, but rather, upon liquidation of the company
they would be entitled to their pro rata share of the company's assets after
creditors (including fixed income security holders) and preferred stockholders
(if any) are paid. Preferred stock is a class of stock having a preference over
common stock as to dividends and, generally, as to the recovery of investment. A
preferred stockholder is also a shareholder and not a creditor of the company.
Equity securities owned by the Portfolio may be traded in the over-the counter
market or on a securities exchange, but are not traded every day or in the
volume typical of securities traded on a major U.S. national securities
exchange. As a result, disposition by the Portfolio of a security to meet
withdrawals by interest holders may require the Portfolio to sell these
securities at a discount from market prices, to sell during periods when
disposition is not desirable, or to make many small sales over a lengthy period
of time. The market value of all securities, including equity securities, is
based upon the market's perception of value and not necessarily the "book value"
of an issuer or other objective measure of a company's worth.

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<PAGE>

investment value (its value as a fixed income security) and its conversion value
(the value of the underlying shares of common stock if the security is
converted). As a fixed income security, the value of a convertible security
generally increases when interest rates decline and generally decreases when
interest rates rise. The value of a convertible security is, however, also
influenced by the value of the underlying common stock.

AMERICAN DEPOSITORY RECEIPTS ("ADRS"). Due to the absence of established
securities markets in certain emerging market countries and restrictions in
certain countries on direct investment by foreign entities, the Portfolio may
invest in certain emerging market issuers through the purchase of sponsored and
unsponsored American Depository Receipts ("ADRs") or other similar securities,
such as American Depository Shares, Global Depository Shares or International
Depository Receipts. ADRs are receipts typically issued by U.S. banks evidencing
ownership of the underlying securities into which they are convertible. These
securities may or may not be denominated in the same currency as the underlying
securities. Unsponsored ADRs may be created without the participation of the
foreign issuer. Holders of unsponsored ADRs generally bear all the costs of the
ADR facility, whereas foreign issuers typically bear certain costs in a
sponsored ADR. The bank or trust company depository of an unsponsored ADR may be
under no obligation to distribute shareholder communications received from the
foreign issuer or to pass through voting rights.

DEBT SECURITIES. The Portfolio may seek capital appreciation through investment
in emerging market convertible or non-convertible debt securities. Capital
appreciation in debt securities may arise as a result of a favorable change in
relative foreign exchange rates, in relative interest rate levels, or in the
creditworthiness of issuers. The receipt of income from such debt securities is
incidental to the Portfolio's objective of long-term capital appreciation. Such
income can be used, however, to offset the operating expenses of the Portfolio.
In accordance with its investment objective, the Portfolio will not seek to
benefit from anticipated short-term fluctuations in currency exchange rates. The
Portfolio also may invest to a certain extent in debt securities in order to
participate in debt-to-equity conversion programs incident to corporate
reorganizations.

Debt securities are generally subject to two kinds of risk -- Credit risk
and market risk. Credit risk refers to the ability of the debtor, and any other
obligor, to pay principal and interest on the debt as it becomes due. The
Portfolio may, from time to time, invest in debt securities with high risk and
high yields (as compared to other debt securities meeting the Portfolio's
investment criteria). The debt securities in which the Portfolio invests may be
unrated, but will not be in default at the time of purchase.

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<PAGE>

Market risk refers to the tendency of the value of debt securities to vary
inversely with interest rate changes. Certain debt instruments may also be
subject to extension risk, which refers to change in total return on a debt
instrument resulting from extension or abbreviation of the instrument's
maturity.

The Portfolio may invest in debt securities issued or guaranteed by emerging
market governments (including countries, provinces and municipalities) or their
agencies and instrumentalities ("governmental entities"); debt securities issued
or guaranteed by international organizations designated or supported by multiple
foreign governmental entities (which are not obligations of foreign governments)
to promote economic reconstruction or development; and debt securities issued by
corporations or financial institutions.

BRADY BONDS. The Portfolio may invest a portion of its assets in Brady Bonds,
which are securities created through the exchange of existing commercial bank
loans to sovereign entities for new obligations in connection with debt
restructuring (under a debt restructuring plan introduced by former U.S.
Secretary of the Treasury, Nicholas F. Brady). Brady Bonds have been issued only
recently, and therefore do not have a long payment history. Brady Bonds may have
collateralized and uncollateralized components, are issued in various currencies
and are actively traded in the over-the-counter secondary market. Brady Bonds
are not considered

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<PAGE>

U.S. Government securities. In light of the residual risk associated with the
uncollateralized portions of Brady Bonds and, among other factors, the history
of defaults with respect to commercial bank loans by public and private entities
of countries issuing Brady Bonds, investments in Brady Bonds are considered
speculative.

Brady Bonds acquired by the Portfolio could be subject to restructuring
arrangements or to requests for new credit, which could cause the Portfolio to
suffer a loss of interest or principal on its holdings. (For further information
see "Brady Bonds," in the Statement of Additional Information.)

INVESTMENT IN OTHER INVESTMENT COMPANIES OR VEHICLES. The Portfolio may be
able to invest in certain emerging markets solely or primarily through
governmentally authorized investment vehicles or companies. Pursuant to the 1940
Act, the Portfolio may invest up to 10% of its total assets in the shares of
other investment companies and up to 5% of its total assets in any one
investment company, as long as each investment does not represent more than 3%
of the outstanding voting stock of the investment company at the time of such
investment.

When investing through investment companies the Fund may pay substantial
premiums above such investment companies' net asset value per share. Such
investments are subject to limitations under the 1940 Act and market
availability. The Portfolio does not intend to invest in other investment
companies unless, in the judgment of SCMI, the potential benefits of such
investment justify the payments of any applicable premiums or sales charges. As
a shareholder in an investment company, the Portfolio would bear its ratable
share of the investment company's expenses, including its advisory and
administrative fees. At the same time, the

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<PAGE>

Portfolio would continue to pay its own fees and expenses.

TEMPORARY DEFENSIVE INVESTMENTS. For temporary defensive purposes, the Portfolio
may invest without limitation in (or enter into repurchase agreements maturing
in seven days or less with U.S. banks and broker-dealers with respect to) short-
term debt securities, including commercial paper, U.S. Treasury bills, other
short-term U.S. Government securities, certificates of deposit, and bankers'
acceptances of U.S. banks. The Portfolio also may hold cash and time deposits
denominated in any major foreign currency in foreign banks. See the SAI for
further information about these securities.

REPURCHASE AGREEMENTS. The Portfolio may invest in repurchase agreements,
which are a means of investing monies for a short period, whereby a seller -- a
U.S. bank or recognized broker-dealer -- sells securities to the Portfolio and
agrees to repurchase them (at the Portfolio's cost plus interest) within a
specified period (normally one day). The value of the underlying securities
purchased by the Portfolio is monitored at all times by SCMI to ensure that the
total value of the underlying collateral equals or exceeds the value of the
repurchase agreement. The

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<PAGE>

Portfolio's custodian bank holds the collateral until the repurchase agreement
has matured. If the seller defaults under a repurchase agreement, the Portfolio
may have difficulty exercising its rights to the underlying collateral and may
incur costs and experience time delays in disposing of it. To evaluate potential
risk, SCMI reviews the creditworthiness of banks and dealers with which the
Portfolio enters into repurchase agreements.

FOREIGN EXCHANGE CONTRACTS. Changes in currency exchange rates will affect
the U.S. dollar values of securities denominated in foreign currencies. The rate
of exchange between the U.S. dollar and other currencies fluctuates in response
to forces of supply and demand in the foreign exchange markets. These forces are
affected by the international balance of payments and other economic and
financial conditions, government intervention, speculation, and other factors,
many of which may be difficult (if not impossible) to predict. When investing in
foreign securities, the Portfolio usually effects currency exchange transactions
on a spot (i.e., cash) basis at the spot rate prevailing in the foreign exchange
market. The Portfolio incurs foreign exchange expenses in converting assets from
one currency to another.

The Portfolio may enter into forward contracts for the purchase or sale of
foreign currency (i) to "lock in" the U.S. dollar price of the securities
denominated in a foreign currency or the U.S. dollar value of interest and
dividends to be paid on such securities or (ii) to hedge against the possibility
that a foreign currency may suffer a decline against the U.S. dollar. A forward
currency contract is an obligation to purchase or sell a specific currency at a
future date (which may be any fixed number of days from the date of the contract
agreed upon by the parties) at a price set at the time of the contract. This
method of attempting to hedge against a decline in the value of a currency does
not eliminate fluctuations in the underlying prices of securities and exposes
the Portfolio to the risk that the counterparty is unable to perform. Although
the strategy of engaging in foreign currency transactions could reduce the risk
of loss due to a decline in the value of the hedged currency, it could also
limit the potential gain from an increase in the value of the currency. The
Portfolio does not intend to maintain a net exposure to such contracts if the
fulfillment of obligations under such contracts would obligate it to deliver an
amount of foreign currency in excess of the value of its portfolio securities or
other assets denominated in the currency. The Portfolio will not enter into
these contracts for speculative purposes and will not enter into non-hedging
currency contracts. The Portfolio will generally not enter into a forward
contract with a term of greater than one year. Forward contracts are not
exchange traded, and there can be no assurance that a liquid market will exist
at a time when the Portfolio seeks to close out a forward contract. Currently,
only a limited market, if any, exists for hedging transactions relating to
currencies in certain emerging markets or to securities of issuers domiciled or
principally engaged in business in certain emerging markets. This may limit the
Portfolio's ability to effectively hedge its investments in those markets. These
contracts involve a risk of loss if SCMI fails to predict currency values. The
Portfolio has no

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<PAGE>

plan to enter into currency futures or options contracts, but may do so in the
future. See "Risk Considerations--Currency Fluctuations and Devaluations."

ILLIQUID AND RESTRICTED SECURITIES. The Portfolio will not purchase or otherwise
acquire any security if, as a result, more than 15% of its net assets (taken at
current value) would be invested in securities that are illiquid (i) by virtue
of the absence of a readily available market or (ii) because of legal or
contractual restrictions on resale ("restricted securities"). There may be
undesirable delays in selling illiquid securities at prices representing their
fair value. This policy includes over-the-counter options held by the Portfolio
and the portion of the assets used to cover such options. The limitation on
investing in restricted securities does not include securities that may not be
resold to the general public (pursuant to Rule 144A under the Securities Act of
1933, as amended) but may be resold to qualified institutional purchasers. If
SCMI determines that a "Rule 144A security" is liquid pursuant to guidelines
adopted by the Schroder Core Board, the security will not be deemed illiquid.
These guidelines take into account trading activity for the securities and the
availability of reliable pricing information, among other factors. If there is a
lack of trading interest in a particular Rule 144A security, that security may
become illiquid, which could affect the Portfolio's liquidity. See "Investment
Policies -- Illiquid and Restricted Securities" in the SAI for further
information.

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<PAGE>

LOANS OF PORTFOLIO SECURITIES. The Portfolio may lend portfolio securities
(otherwise than as occurs in repurchase transactions) to brokers, dealers and
other financial institutions meeting specified credit conditions if the loan is
collateralized in accordance with applicable regulatory requirements and if,
after any loan, the value of the securities loaned does not exceed 25% of the
value of the Portfolio's total assets. By so doing, the Portfolio attempts to
earn interest income. In the event of the other party's bankruptcy, the
Portfolio could experience delays in recovering the securities it lent; if, in
the meantime, the value of the securities the Portfolio lent has increased, the
Portfolio, and thus the Fund, could experience a loss.

The Portfolio may lend its securities if it maintains in a segregated account
liquid assets equal to the current market value of the securities loaned
(including accrued interest thereon) plus the loan interest payable to the
Portfolio. Any securities that the Portfolio receives as collateral will not
become part of its portfolio at the time of the loan; and, in the event of a
default by the borrower, the Portfolio will (if permitted by law) dispose of
such collateral except for such part thereof that is a security in which the
Portfolio is permitted to invest. While the securities are on loan, the borrower
will pay the Portfolio any accrued income on those securities, and the Portfolio
may invest the cash collateral and earn income or receive an agreed upon fee
from a borrower that has delivered cash equivalent collateral. Cash collateral
received by the Portfolio will be invested in U.S. Government securities and
liquid high grade debt obligations. The value of securities loaned will be
marked to market daily. Portfolio securities purchased with cash collateral are
subject to possible depreciation. Loans of securities by the Portfolio will be
subject to termination at the Portfolio's or the borrower's option. The
Portfolio may pay reasonable negotiated fees in connection with loaned
securities, so long as such fees are set forth in a written contract and
approved by the Schroder Core Board. See "Loans of Portfolio Securities" in the
SAI for further information on securities loans.

OPTIONS AND FUTURES TRANSACTIONS. Although the Portfolio does not presently
intend to do so, it may (a) write covered call options on portfolio securities,
and the U.S. dollar and emerging market currencies without limit; (b) write
covered put options on portfolio securities, the U.S. dollar and emerging market
currencies with the limitation that the aggregate value of the obligations
underlying the puts determined as of the date the options are sold will not
exceed 50% of the Portfolio's net assets; (c) purchase call and put options in
amounts up to 5% of its total assets; and (d)(i) purchase and sell futures
contracts that are traded on U.S. and foreign commodity exchanges on underlying
portfolio securities, any emerging market currency, U.S. and emerging market
fixed-income securities and such indices of U.S. or emerging market equity or
fixed-income securities as may exist or come into being and (ii) purchase and
write call and put options on such futures contracts, in all cases involving
such futures contracts or options on futures contracts for hedging purposes
only, and without limit, except that the Portfolio may not enter into futures
contracts or purchase related options if, immediately thereafter, the amount

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<PAGE>

committed to margin plus the amount paid for premiums for unexpired options on
futures contracts generally exceeds 5% of the value of the Portfolio's total
assets. All of the foregoing are referred to as "Hedging Instruments."

In general, the Portfolio may use Hedging Instruments: (1) to protect
against declines in the market value of the Portfolio's portfolio securities or
stock index futures, and the currencies in which they are denominated, or (2) to
establish a position in securities markets as a temporary substitute for
purchasing particular equity securities. The Portfolio will not use Hedging
Instruments for speculation. Hedging Instruments have certain risks associated
with them including: (a) the possible failure of such instruments as hedging
techniques in cases where the price movement of the securities underlying the
options or futures does not follow the price movements of the portfolio
securities subject to the hedge; (b) potentially unlimited loss associated with
futures transactions and the possible lack of a liquid secondary market for
closing out a futures position; and (c) possible losses resulting from the
inability of the Portfolio's investment adviser to predict the direction of
stock prices, interest rates and other economic factors. In addition, only a
limited market, if any, currently exists for hedging transactions relating to
currencies in many emerging markets or to securities of issuers domiciled or
principally engaged in business in emerging markets. This may limit the
Portfolio's ability to effectively hedge its investments in such emerging market
countries. The Hedging Instruments the Portfolio may use and the risks
associated with them are described in greater detail under "Options and Futures
Transactions" in the SAI.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. The
Portfolio may purchase securities on a when-issued or delayed delivery basis or
may purchase or sell securities on a forward commitment basis. When such
transactions are negotiated, the price is fixed at the time of the commitment,
but delivery and payment may take place a month or more after the date of the
commitment. There is no overall limit on the percentage of the Portfolio's
assets that may be committed to the purchase of securities on a when-issued,
delayed delivery or forward commitment basis. An increase in the percentage of
the Portfolio's assets committed to the purchase of securities on a when-issued,
delayed delivery or forward commitment basis may increase the volatility of the
Portfolio's net asset value.

WHEN, AS AND IF ISSUED SECURITIES. The Portfolio may purchase securities on
a "when, as and if issued" basis under which the issuance of the security
depends upon the occurrence of a subsequent event, such as approval of a merger,
corporate reorganization, leveraged buyout or debt restructuring. If the
anticipated event does not occur and the securities are not issued, the
Portfolio will have lost an investment opportunity. There is no overall limit to
the percentage of the Portfolio's assets that may be committed to the purchase
of securities on a "when, as and if issued" basis. An increase in the percentage
of the Portfolio's assets committed to the purchase of securities on a "when, as
and if issued" basis may increase the volatility of its net asset value.

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<PAGE>

INVESTMENT RESTRICTIONS

(a) Concentrate investments in any particular industry; therefore, the
Portfolio will not purchase the securities of companies in any one industry if,
thereafter, 25% or more of the Portfolio's total assets would consist of
securities of companies in that industry. (This restriction does not apply to
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.)

(b) Issue senior securities, borrow money or pledge its assets in excess of 10%
of its total assets taken at market value (including the amount borrowed) and
then only from a bank as a temporary measure for extraordinary or emergency
purposes including to meet redemptions or to settle securities transactions.
Usually only "leveraged" investment companies may borrow in excess of 5% of
their assets; however, the Portfolio will not borrow to increase income but only
as a temporary measure for extraordinary or emergency purposes, including to
meet redemptions or to settle securities transactions which may otherwise
require untimely dispositions of Portfolio securities. The Portfolio will not
purchase securities while borrowings exceed 5% of total assets. (For the purpose
of this restriction, collateral arrangements with respect to the writing of
options, futures contracts, options on futures contracts, and collateral
arrangements with respect to initial and variation margin are not deemed to be a
pledge of assets and neither such arrangements nor the purchase or sale of
futures or related options are deemed to be the issuance of a senior security.)

(c) Make investments for the purpose of exercising control or management.
Investments by the Portfolio in wholly-owned investment entities created under
the laws of certain countries will not be deemed the making of investments for
the purpose of exercising control or management.

CERTAIN RISKS OF DEBT SECURITIES. Emerging market debt securities in which the
Portfolio may invest may be rated below investment grade or may not be rated at
all. The Portfolio may invest up to 35% of its net assets in such debt
securities. Securities below investment grade, i.e. those rated in the medium
to lower rating categories of nationally recognized statistical rating
organizations such as Standard & Poor's Corporation ("S&P") and Moody's
Investors Service, Inc. ("Moody's") and unrated securities of comparable quality
("high yield/high risk securities"), are predominantly speculative with respect
to the capacity to pay interest and repay principal, and generally involve a
greater volatility of price than securities in higher rating categories. These
securities are commonly referred to as "junk" bonds.

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<PAGE>

The risks associated with high yield/high risk securities are generally greater
than those associated with higher-rated securities. It should be noted that
even bonds rated BBB by S&P or Baa by Moody's, i.e., the lowest investment-grade
categories assigned by those rating agencies, are described by them as having
speculative characteristics and that changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity of issuers of such
bonds to make principal and interest payments than is the case with higher grade
bonds. The Portfolio is not obligated to dispose of securities due to changes
by the rating agencies.

In purchasing high yield/high risk securities, the Portfolio will rely on the
investment adviser's judgment, analysis and experience in evaluating the
creditworthiness of an issuer of such securities. Nonetheless, investors should
carefully review the investment objective and policies of the Portfolio and
consider their ability to assume the investment risks involved before making an
investment. The Portfolio is not authorized to purchase debt securities that
are in default, except for sovereign debt (discussed below) in which the
Portfolio may invest no more than 5% of its total assets while such sovereign
debt securities are in default.

The market values of high yield/high risk securities tend to reflect individual
issuer developments and to exhibit sensitivity to adverse economic changes to a
greater extent than do higher-rated securities, which react primarily to
fluctuations in the general level of interest rates. Issuers of high yield/high
risk securities may be highly leveraged and may not have available to them more
traditional methods of financing. During economic downturns or substantial
periods of rising interest rates, issuers of high yield/high risk securities,
especially those which are highly leveraged, may be less able to service their
principal and interest payment obligations, meet their projected business goals
or obtain additional financing. The risk of loss due to default by the issuer
is significantly greater for holders of high yield/high risk securities because
such securities may be unsecured and may be subordinated to other creditors of
the issuer. In addition, the Portfolio may incur additional expenses to the
extent it is required to seek recovery upon a default by the issuer of such an
obligation or participate in the restructuring of such obligation.

Periods of economic uncertainty and change can be expected to result in
increased volatility of market prices of high yield/high risk securities and,
correspondingly, the Portfolio's net asset value to the extent it invests in
such securities. Further, market prices of such securities structured as zero
coupon or pay-in-kind securities are affected to a greater extent by interest
rate changes and thereby tend to be more volatile than any securities which pay
interest periodically and in cash.

High yield/high risk securities may have call or redemption features which would
permit an issuer to repurchase the securities from the Portfolio. If a call
were exercised by the issuer during a period of declining interest rates, the
Portfolio likely would have to replace such called securities with lower
yielding securities, thus decreasing the net investment income to the Portfolio
and dividends to investors.

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<PAGE>

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<PAGE>

issuer. Reduced secondary market liquidity for certain high yield/high risk
securities also may make it more difficult for the Portfolio to obtain accurate
market quotations for purposes of valuing the Portfolio's investment portfolio.
Market quotations are generally available on many high yield/high risk
securities only from a limited number of dealers and may not necessarily
represent firm bids of such dealers or prices for actual sales. Under such
conditions, the Portfolio may have to rely more heavily on the judgment of the
Board to value such securities accurately.

Adverse publicity and investor perceptions, which may not be based on
fundamental analysis, also may decrease the value and liquidity of high
yield/high risk securities, particularly in a thinly traded market. Factors
adversely affecting the market value of high yield/high risk securities are
likely to adversely affect the Portfolio's net asset value.

Investment in sovereign debt involves a high degree of risk. Certain emerging
market countries such as Argentina, Brazil and Mexico are among the largest
debtors to commercial banks and foreign governments. At times, certain emerging
market countries have declared moratoria on the payment of principal and/or
interest on outstanding debt. The governmental entity that controls the
repayment of sovereign debt may not be able or willing to repay the principal
and/or interest when due in accordance with the terms of such debt. A
governmental entity's willingness or ability to repay principal and interest
when it is due may be affected by many factors such as its cash flow situation,
the extent of its foreign reserves, the availability of sufficient foreign
exchange, the relative size of the debt service burden to the economy as a
whole, and political restraints. The Portfolio, as a holder of sovereign debt,
may be requested to participate in the rescheduling of such debt and to extend
further loans to governmental entities. There is no bankruptcy proceeding by
which defaulted sovereign debt may be collected in whole or in part.

The sovereign debt instruments in which the Portfolio may invest involve great
risk and are deemed to be the equivalent in terms of quality to high yield/high
risk securities discussed above and are subject to many of the same risks as
such securities. Similarly, the Portfolio may have difficulty disposing of
certain sovereign debt obligations because there may be a thin trading market
for such securities. The Portfolio will not invest more than 5% of its total
assets in sovereign debt which in default.

PORTFOLIO TURNOVER. The Portfolio may engage in short-term trading but its
portfolio turnover rate is not expected to exceed 100%. High portfolio turnover
and short-term trading involve correspondingly greater commission expenses and
transaction costs. Also, higher portfolio turnover rates can make it more
difficult for the Portfolio to qualify as a regulated investment company for
federal income tax purposes and a possible increase in short-term capital gains
(or losses). See "Taxation" in Part B.

NON-DIVERSIFICATION. The Portfolio is classified as "non-diversified" under the
1940 Act. In contrast to "diversified", a non-diversified fund may invest more
than 5% of its total assets in the securities of any one issuer. This
classification may not be changed without investor approval. However, so that

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<PAGE>

the Portfolio may continue to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), the
Portfolio will limit its investments so that at the close of each quarter of the
taxable year, (i) not more than 25% of the market value of the Portfolio's total
assets will be invested in the securities of a single issuer, and (ii) with
respect to 50% of the market value of its total assets not more than 5% will be
invested in the securities of a single issuer and the Portfolio will not own
more than 10% of the outstanding voting securities of a single issuer.

RISK CONSIDERATIONS

FOREIGN INVESTMENTS. All investments, domestic and foreign, involve risk.
Investment in the securities of foreign issuers may involve risks in addition to
those normally associated with investments in the securities of U.S. issuers.
While the Portfolio will generally invest only in securities of companies and
governments in countries that SCMI considers both politically and economically
stable, all foreign investments are subject to risks of foreign political and
economic instability, adverse movements in foreign exchange rates, the
imposition or tightening of exchange controls, or other limitations on
repatriation of foreign capital. Foreign investments are subject to the risk of
changes in foreign governmental attitudes towards private investment that could
lead to nationalization, increased taxation or confiscation of Portfolio assets.

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<PAGE>

Moreover, (i) dividends payable on foreign securities may be subject to foreign
withholding taxes, thereby reducing the income earned by the Portfolio; (ii)
commission rates payable on foreign portfolio transactions are generally higher
than in the United States; (iii) accounting, auditing and financial reporting
standards differ from those in the United States, which means that less
information about foreign companies may be available than is generally available
about issuers of comparable securities in the U.S.; (iv) foreign securities
often trade less frequently and with lower volume than U.S. securities and
consequently may exhibit greater price volatility; and (v) foreign securities
trading practices, including those involving securities settlement, may expose
the Portfolio to increased risk in the event of a failed trade or the insolvency
of a foreign broker-dealer or registrar.

REGULATION AND LIQUIDITY OF MARKETS. Government supervision and regulation of
exchanges and brokers in emerging market countries is typically less extensive
than in the United States. These markets may have different clearance and
settlement procedures, and in certain cases, settlements have not kept pace with
the volume of securities transactions, making them difficult to conduct. Delays
in settlement could adversely affect or interrupt the Portfolio's intended
investment program or result in investment losses due to intervening declines in
security values.

Securities markets in emerging market countries are substantially smaller than
U.S. securities markets and have substantially lower trading volume, resulting
in diminished liquidity and greater price volatility. Reduced secondary market
liquidity may make it more difficult for the Portfolio to determine the value of
its portfolio securities or dispose of particular instruments when necessary.
Brokerage commissions and other transaction costs on foreign securities
exchanges are also generally higher.

EMERGING MARKETS. In any emerging market country, there is the possibility of
expropriation of assets, confiscatory taxation, nationalization of companies or
industries, foreign exchange controls, foreign investment controls on daily
stock market movements, default in foreign government securities, political or
social instability, or diplomatic developments that could affect investments in
those countries. In the event of expropriation, nationalization or other
confiscation, the Portfolio could lose its entire investment in a country. The
economies of developing countries generally are heavily dependent upon
international trade and, accordingly, have been and may continue to be adversely
affected by trade barriers, exchange controls, managed adjustments in relative
currency values and other protectionist measures imposed or negotiated by the
countries with which they trade. There may also be less monitoring and
regulation of emerging markets and the activities of brokers there. Investing
may require that the Portfolio adopt special procedures, seek local government
approvals or take other actions that may incur costs for the Portfolio.

Certain emerging market countries may restrict investment by foreign entities by
limiting

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<PAGE>

the size of foreign investment in certain issuers; requiring prior approval of
foreign investment by the government; imposing additional tax on foreign
investors; or limiting foreign investors to specific classes of securities of an
issuer that have less advantageous rights (with regard to price or
convertibility, for example) than classes available to domiciliaries of the
country. These restrictions or controls may at times limit or preclude
investment in certain securities and may increase the costs and expenses of the
Portfolio.

CURRENCY FLUCTUATIONS AND DEVALUATIONS. Because the Portfolio will invest
heavily in non-U.S. currency-denominated securities, changes in foreign currency
exchange rates will affect the value of the Portfolio's investments. A decline
against the dollar in the value of currencies in which the Portfolio's
investments are denominated will result in a corresponding decline in the dollar
value of the Portfolio's assets. This risk is heightened in some emerging market
countries. Some emerging market countries may also have managed currencies that
do not freely float against the dollar.

The Portfolio is required to distribute substantially all of its investment
income in U.S. dollars. Because most of the Portfolio's income will be received
and realized in foreign currencies, a decline in the value of a particular
foreign currency against the U.S. dollar that occurs after the Portfolio's
income has been earned may require the Portfolio to liquidate some portfolio
securities to acquire sufficient U.S. dollars to make such distributions.
Similarly, if the exchange rate declines between the time the Portfolio incurs
expenses in U.S. dollars and the time such expenses are paid, the Portfolio may
be required to liquidate additional foreign securities to purchase the U.S.
dollars required to meet such expenses.

INFLATION. Several emerging market countries have experienced high, and in some
periods extremely high, rates of inflation in recent years. Inflation and rapid
fluctuations in inflation rates may adversely affect these countries' economies
and securities markets. Further, inflation accounting rules in some emerging
market countries require, for companies that keep accounting records in the
local currency, that certain assets and liabilities be restated on the company's
balance sheet in order to express items in terms of currency of constant
purchasing power. Inflation accounting may indirectly generate losses or profits
for certain emerging market companies.

NON-DIVERSIFIED INVESTMENTS. Because suitable investments in emerging market
countries may be limited, the Portfolio, like the Fund, has classified itself as
"non-diversified" under the 1940 Act so that it may invest more than 5% of its
total assets in the securities of a single issuer. This classification may not
be changed without a shareholder vote. However, so that the Portfolio may
continue to qualify as a "regulated investment company" under Subchapter M of
the Internal Revenue Code of 1986, as amended at the close of each quarter of
the taxable year, (i) not more than 25% of the market value of the Portfolio's
total assets will be invested in the securities of a single issuer, and (ii)

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<PAGE>

with respect to 50% of the market value of its total assets, not more than 5%
will be invested in the securities of a single issuer; and the Portfolio will
not own more than 10% of the outstanding voting securities of a single issuer.
See "Dividends, Distributions and Taxes."

To the extent the Portfolio makes investments in excess of 5% of its assets in a
particular issuer, its exposure to credit and market risks associated with that
issuer is increased. Also, since a relatively high percentage of the Portfolio's
assets may be invested in the securities of a limited number of issuers, the
Portfolio may be more susceptible to any single economic, political or
regulatory occurrence than a diversified investment company.

GEOGRAPHIC CONCENTRATION. The Portfolio may invest more than 25% of its total
assets in issuers located in any one country. To the extent it invests in
issuers of one country, the Portfolio is susceptible to factors adversely
affecting that country, including political and economic developments and
foreign exchange rate fluctuations as discussed above. The value of the
Portfolio's assets may fluctuate more widely than the value of shares of a
comparable fund with less geographic concentration.

CERTAIN RISKS OF DEBT SECURITIES. The Portfolio may invest without
limitation in investment grade emerging market debt securities; it may invest up
to 35% of its total assets in debt securities that are unrated or are rated
below investment grade (below Baa by Moody's or BBB by S&P; for a further
description of S&P's and Moody's securities ratings please see the Appendix to
the SAI). Note that even debt securities rated Baa by Moody's are considered to
have speculative characteristics. Below investment grade securities (and unrated
securities of comparable quality) ("high yield/high risk securities") are
predominantly speculative with respect to the capacity to pay interest and repay
principal, and generally involve a greater volatility of price than securities
in higher rating categories. These securities are commonly referred to as "junk"
bonds. The risks associated with junk bonds are generally greater than those
associated with higher-rated securities. The Portfolio is not obligated to
dispose of securities due to rating changes by Moody's, S&P or other rating
agencies. The Portfolio is not authorized to purchase debt securities that are
in default, except for sovereign debt (discussed below) in which the Portfolio
may invest no more than 5% of its total assets while such sovereign debt
securities are in default.

High yield/high risk securities' market values are affected more by individual
issuer developments and are more sensitive to adverse economic changes than are
higher-rated securities. Issuers of high yield/high risk securities may be
highly leveraged and may not have more traditional methods of financing
available to them. During economic downturns or substantial periods of rising
interest rates, issuers of high yield/high risk securities, especially

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<PAGE>

highly leveraged ones, may be less able to service their principal and interest
payment obligations, meet their projected business goals, or obtain additional
financing. The risk of loss due to default by the issuer is significantly
greater for holders of high yield/high risk securities because such securities
may be unsecured and may be subordinated to other creditors of the issuer. In
addition, the Portfolio may incur additional expenses if it is required to seek
recovery upon a default by the issuer of such an obligation or participate in
the restructuring of such obligation.

Periods of economic uncertainty and change will likely cause increased
volatility in the market prices of high yield/high risk securities and,
correspondingly, the Portfolio's net asset value if it invests in such
securities; market prices of such securities structured as zero coupon or pay-
in-kind securities are more affected by interest rate changes and thus tend to
be more volatile than securities that pay interest periodically and in cash.

High yield/high risk securities may have call or redemption features which
would permit an issuer to repurchase the securities from the Portfolio. If a
call were exercised by the issuer during a period of declining interest rates,
the Portfolio would likely have to replace called securities with lower yielding
securities, thus decreasing the Portfolio's net investment income and dividends
to shareholders.

While a secondary trading market for high yield/high risk securities does exist,
it is generally not as liquid as the secondary market for higher rated
securities. In periods of reduced secondary market liquidity, prices of high
yield/high risk securities may become volatile and experience sudden and
substantial price declines. The Portfolio may, therefore, have difficulty
disposing of particular issues to meet its liquidity needs or in response to a
specific economic event (such as a deterioration in the creditworthiness of the
issuer). Reduced secondary market liquidity for certain high yield/high risk
securities also may make it more difficult for the Portfolio to obtain accurate
market quotations (for purposes of valuing the Portfolio's investment
portfolio): market quotations are generally available on many high yield/high
risk securities only from a limited number of dealers and may not necessarily
represent firm bids of such dealers or prices for actual sales. Under such
conditions, high yield/high risk securities may have to be valued at fair value
as determined by the Schroder Core Board or SCMI under Board-approved
guidelines.

Adverse publicity and investor perceptions (which may not be based on
fundamental analysis) may decrease the value and liquidity of high yield/high
risk securities, particularly in a thinly traded market. Factors adversely
affecting the market value of high yield/high risk securities are likely to
adversely affect the Portfolio's, and thus the Fund's, net asset value.

SOVEREIGN DEBT. Investment in sovereign debt carries high risk. Certain emerging
market countries such as Argentina, Brazil and Mexico are among the largest
debtors to commercial banks and foreign governments. At times, certain emerging
market countries have declared moratoria on the payment of principal and/or
interest on outstanding debt. The governmental entity that controls the
repayment of sovereign debt may not be able or willing to repay the principal
and/or interest when due in accordance with the terms of such debt. A
governmental entity's willingness or ability to repay principal and interest
when it is due may

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<PAGE>

be affected by many factors, such as its cash flow situation, the extent of its
foreign reserves, the availability of sufficient foreign exchange, the relative
size of the debt service burden to the economy as a whole, and political
restraints. The Portfolio, as a holder of sovereign debt, may be asked to
participate in the rescheduling of such debt and to extend further loans to
governmental entities. There is no bankruptcy proceeding by which defaulted
sovereign debt may be collected.

The sovereign debt instruments in which the Portfolio may invest involve
great risk and are deemed to be the equivalent in terms of quality to high
yield/high risk securities discussed above and are subject to many of the same
risks as such securities. Similarly, the Portfolio may have difficulty disposing
of certain sovereign debt obligations because there may be a thin trading market
for such securities. The Portfolio will not invest more than 5% of its total
assets in sovereign debt in default.

ITEM 5. MANAGEMENT OF THE TRUST.

TRUSTEES AND OFFICERS

INVESTMENT ADVISER

Schroder Capital Management International Inc. ("SCMI"), 787 Seventh Avenue, New
York, New York 10019, serves as investment adviser to the Portfolio pursuant to
advisory agreements with the Trust. SCMI manages the investment and
reinvestment of the assets included in the Portfolio's investment portfolio and
continuously reviews, supervises and administers the Portfolio's investments.
In this regard, it is the responsibility of SCMI to make decisions relating to
the Portfolio's investments and to place purchase and sale orders regarding such
investments with brokers or dealers selected by it in its discretion.

SCMI is a wholly-owned U.S. subsidiary of Schroders Incorporated, the wholly-
owned U.S. holding company subsidiary of Schroders plc. Schroders plc is the
holding company parent of a large worldwide group of banks and financial
services companies (referred to as the "Schroder Group"), with associated
companies and branch and representative offices located in seventeen countries
worldwide. The Schroder Group specializes in providing investment management
services with assets under management currently in excess of $130 billion.

The investment advisory agreement for the Portfolio provides for an advisory fee
at an annual rate of 1.00% of the Portfolio's average daily net assets.

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<PAGE>

The Investment Advisory Contract authorizes and directs SCMI to place orders for
the purchase and sale of the Portfolio's investments with brokers and dealers
selected by SCMI in its discretion and to seek "best execution" of such
portfolio transactions. The Portfolio may pay higher than the lowest available
commission rates when SCMI believes it is reasonable to do so in light of the
value of the brokerage and research services provided by the broker effecting
the transaction. It should be noted that costs associated with transactions in
foreign securities are generally higher than with transactions in U.S.
securities. However, the Portfolio will seek to achieve the best net results in
effecting such transactions.

Subject to the Portfolio's policy of obtaining the best price consistent with
quality of execution on transactions, SCMI may employ Schroder Securities
Limited and its affiliates (collectively, "Schroder Securities"), affiliates of
SCMI, to effect transactions of the Portfolio on certain foreign securities
exchanges. Because of the affiliation between SCMI and Schroder Securities, the
Portfolio's payment of commissions to Schroder Securities is subject to
procedures adopted by the Board to provide that such commissions will not exceed
the usual and customary brokers' commissions. No specific portion of the
Portfolio's brokerage will be directed to Schroder Securities and in no event
will Schroder Securities receive such brokerage in recognition of research
services.

Although the Portfolio does not currently engage in directed brokerage
arrangements to pay expenses, it may do so in the future. These arrangements,
whereby brokers executing the Portfolio's portfolio transactions would agree to
pay designated expenses of the Portfolio if brokerage commissions generated by
the Portfolio reached certain levels, might reduce these expenses. As
anticipated, these arrangements would not materially increase the brokerage
commissions paid by a Portfolio. Because brokerage commissions are not
reflected in Portfolio expenses, however, certain expenses might not be fully
set forth in the fee table, per share table, and financial statements of
registered open-end investment companies that invest in the Portfolio and might
therefore appear lower than actual expenses incurred.

PORTFOLIO MANAGERS. John A. Troiano (with the assistance of an SCMI investment
committee) is primarily responsible for the day to day management of the
Portfolio and has so managed the Portfolio since its inception. Mr. Troiano
served in an identical capacity with respect to the Portfolio's predecessor, the
series of another open-end investment company which now invests in the
Portfolio. Mr. Troiano, a Senior Vice President of SCMI since 1991, is also a
Vice President of the Trust, and has been employed by various Schroder Group
companies in the portfolio management area since 1988.

ADMINISTRATIVE SERVICES

On behalf of the Portfolio, the Trust has entered into an administration
agreement with Schroder Advisors, 787 Seventh Avenue, New York, New York 10019.
Schroder Advisors is a

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<PAGE>

wholly-owned subsidiary of SCMI. For these services, Schroder Advisors receives
an administrative services fee at an annual rate of 0.15% of the Portfolio's
average daily net assets.

In addition, the Trust has entered into a sub-administration agreement with
Forum Administrative Services, Limited Liability Company ("Forum"), Two Portland
Square, Portland, Maine 04101. For these sub-administration services, Forum
receives an administrative services fee at an annual rate of 0.10% of the
Portfolio's average daily net assets.

TRANSFER AGENT AND FUND ACCOUNTANT

EXPENSES

CUSTODIAN

ITEM 5A. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE.

Omitted. See "Introduction" above.

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<PAGE>

ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.

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<PAGE>

investor invested all of its assets in the Portfolio. The Trust will inform
investors of the amount and nature of such income or gain.

Investor inquiries may be directed to Forum Financial Services, Inc. (FFSI).

ITEM 7. PURCHASE OF SECURITIES.

Trading in securities on European and Far Eastern Securities exchanges and over-
the-counter markets may not take place on every day that the New York Stock
Exchange is open for trading. Furthermore, trading takes place in various
foreign markets on days on which the Portfolio's NAV is not calculated. If
events materially affecting the value of foreign securities occur between the
time when their price is determined and the time when net asset value is
calculated, such securities will be valued at fair value as determined in good
faith by the Board.

The Trust reserves the right to cease accepting investments in the Portfolio at
any time or to reject any investment order.

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<PAGE>

The exclusive placement agent for the Trust is FFSI. FFSI receives no
compensation for serving as the exclusive placement agent for the Trust.

ITEM 8. REDEMPTION OR REPURCHASE.

ITEM 9. PENDING LEGAL PROCEEDINGS.

Not applicable.

<PAGE>

PART A
(PROSPECTUS)

SCHRODER CAPITAL FUNDS

----------

SCHRODER U.S. SMALLER COMPANIES PORTFOLIO

MARCH 1, 1997

INTRODUCTION

Schroder Capital Funds (the "Trust") is registered as an open-end management
investment company under the Investment Company Act of 1940 (the "1940 Act").
The Trust offers shares of beneficial interest in multiple series, each of which
has distinct investment objectives and policies. The Trust currently comprises
four series: Schroder U.S. Smaller Companies Portfolio (the "Portfolio"),
International Equity Fund, Schroder Emerging Markets Fund Institutional
Portfolio and Schroder International Smaller Companies Portfolio. This Part A
relates solely to the Portfolio.

The Trust does not offer its shares directly to the public; shares are offered
exclusively to various institutional investors (including other investment
companies) as described in Item 4 below. An investor that is an investment
company or other collective investment vehicle typically will have investment
objectives and polices substantially similar to those of the series in which it
invests and typically will seek to achieve its investment objective by holding
shares of a series, instead of separately managing its own portfolio of
investment securities and related assets.

ITEM 1. COVER PAGE.

Omitted. See "Introduction" above.

ITEM 2. SYNOPSIS.

Omitted. See "Introduction" above.
<PAGE>

ITEM 3. CONDENSED FINANCIAL INFORMATION.

Omitted. See "Introduction" above.

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<PAGE>

ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.

The Trust was organized as a business trust under the laws of the State of
Delaware pursuant to a Trust Instrument dated September 6, 1995. The Trust has
an unlimited number of authorized shares of beneficial interest. Beneficial
interests in the Trust are divided into four separate series, the Portfolio,
International Equity Fund, Schroder Emerging Markets Fund Institutional
Portfolio and Schroder International Smaller Companies Portfolio, each of which
has a distinct investment objective and distinct investment policies. The
assets of each series belong only to that series, and the assets belonging to a
series shall be charged with the liabilities of that series and all expenses,
costs, charges and reserves attributable to that series. The Trust is empowered
to establish, without investor approval, additional series which may have
different investment objectives and policies.

The Portfolio is classified as "diversified" under the 1940 Act and commenced
operations on or about August 15, 1996.

INVESTMENT OBJECTIVE

The investment objective of the Portfolio is capital appreciation. Current
income is incidental to the objective of capital appreciation. There can be no
assurance that the Portfolio will achieve its investment objective. The
investment objective of the Portfolio may not be changed without approval of the
holders of a majority of the outstanding voting interests (defined in the same
manner as the phrase "vote of a majority of the outstanding voting securities"
is defined in the 1940 Act) of the Portfolio.

INVESTMENT POLICIES

Under normal market conditions the Portfolio will seek to achieve its investment
objective by investing at least 65% of its total assets in equity securities of
U.S. domiciled companies that, at the time of purchase, have market
capitalizations of $1.5 billion or less. (Market capitalization means the
market value of a company's outstanding stock.)

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<PAGE>

In its investment approach, Schroder Capital Management International Inc.
("SCMI"), the Portfolio's Investment Adviser, will identify securities of
companies that it believes can generate above average earnings growth, selling
at favorable prices in relation to book values and earnings. As part of the
investment decision, SCMI's assessment of the competency of an issuer's
management will be an important consideration. These criteria are not rigid,
and other investments may be included in the Portfolio if they may help the
Portfolio to attain its objective. These criteria can be changed by the Trust's
Board of Trustees, without shareholder approval.

The Portfolio invests principally in equity securities, namely, common stocks,
securities convertible into common stocks or, subject to special limitations,
rights or warrants to subscribe for or purchase common stocks. The Portfolio
may also invest to a limited degree in non-convertible debt securities and
preferred stocks when, in the opinion of SCMI, such investments are warranted to
achieve the Portfolio's investment objective. A convertible security is a bond,
debenture, note, preferred stock or other security that may be converted into or
exchanged for a prescribed amount of common stock of the same or a different
issuer within a particular period of time at a specified price or formula.

The Portfolio may invest in securities of small, unseasoned companies (which,
together with any predecessors, have been in operation for less than three
years), as well as in securities of more established companies. The Portfolio
currently intends to invest no more than 25% of its total assets in securities
of small, unseasoned issuers.

Although there is no minimum rating for debt securities (convertible or non-
convertible) in which the Portfolio may invest, it is the present intention of
the Portfolio to invest no more than 5% of its net assets in debt securities
rated below "Baa" by Moody's Investors Service, Inc. ("Moody's") or "BBB" by
Standard & Poor's Ratings Group ("S&P"), such securities being commonly known as
"high yield/high risk" securities or "junk bonds," and it will not invest in
debt securities that are in default. High yield/high risk securities are
predominantly speculative with respect to the capacity to pay interest and repay
principal and generally involve a greater volatility of price than securities in
higher rated categories. It should be noted that even bonds rated "Baa" by
Moody's or "BBB" by S&P are described by those rating agencies as having
speculative characteristics and that changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity of issuers of such
bonds to make principal and interest payments than is the case with higher grade
bonds. The Portfolio is not obligated to dispose of securities due to changes
by the rating agencies. See Part B for information about the risks associated
with investing in junk bonds.

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The investment policies of the Portfolio that are designated as fundamental may
not be changed without investor approval. Unless otherwise indicated, all other
investment policies are not fundamental and may be changed by the Trust's Board
of Trustees without prior investor approval. Additional investment techniques,
features and restrictions (including a list of fundamental investment
restrictions) concerning the Portfolio's investment programs are described in
Part B.

INVESTMENT TYPES

COMMON AND PREFERRED STOCK AND WARRANTS. The Portfolio may invest in common and
preferred stock. Common stockholders are the owners of the company issuing the
stock and, accordingly, vote on various corporate governance matters such as
mergers. They are not creditors of the company, but rather, upon liquidation of
the company, are entitled to their pro rata share of the company's assets after
creditors (including fixed income security holders) and, if applicable,
preferred stockholders are paid. Preferred stock is a class of stock having a
preference over common stock as to dividends and, generally, as to the recovery
of investment. A preferred stockholder is a shareholder in a company and not a
creditor of the company, as is a holder of the company's fixed income
securities. Dividends paid to common and preferred stockholders are
distributions of the earnings of the company and not interest payments (which
are expenses of the company). Equity securities owned by the Portfolio may be
traded in the over-the counter market or on a securities exchange but may not be
traded every day or in the volume typical of securities traded on a major U.S.
national securities exchange. As a result, disposition by the Portfolio of a
security to meet redemptions by interest holders or otherwise may require the
Portfolio to sell these securities at a discount from market prices, to sell
during periods when disposition is not desirable, or to make many small sales
over a lengthy period of time. The market value of all securities, including
equity securities, is based upon the market's perception of value and not
necessarily the book value of an issuer or other objective measure of a
company's worth.

Convertible preferred stock generally may be converted at a stated price within
a specific amount of time into a specified number of shares of common stock. A
convertible security entitles the holder to receive the dividend paid on
preferred stock until the convertible security is converted or exchanged. Before
conversion, convertible securities have characteristics similar to non-
convertible debt securities in that they ordinarily provide a stream of income
with generally higher yields than those of common stocks of the same or similar
issuers. These securities are usually senior to common stock in a company's
capital structure, but are usually subordinated to non-convertible debt
securities. In general, the value of a convertible security is the higher of its
investment value (its value as a fixed income security) and its conversion value
(the value of the underlying shares of common stock if the security is
converted). As a fixed income security, the value of a convertible security
generally increases when interest rates decline and generally decreases when
interest rates rise. The value of a convertible security is, however, also
influenced by the value of the underlying common stock.

The Portfolio may also invest in warrants, which are options to purchase an
equity

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security at a specified price (usually representing a premium over the
applicable market value of the underlying equity security at the time of the
warrant's issuance) and usually during a specified period of time.

REPURCHASE AGREEMENTS. The Portfolio may invest in repurchase agreements, which
are a means of investing monies for a short period whereby a seller - a U.S.
bank or recognized broker-dealer sells securities to the Portfolio and agrees to
repurchase the securities at the Portfolio's cost plus interest within a
specified period (normally one day). In these transactions, the values of the
underlying collateral held by the Portfolio are monitored at all times by SCMI
to insure that the total value of the collateral equals or exceeds the value of
the repurchase agreement, and the Portfolio's custodian bank holds the
collateral until it is repurchased. In the event of default by the seller under
the repurchase agreement, the Portfolio may have difficulties in exercising its
rights to the underlying collateral and may incur costs and experience time
delays in disposing of it. To evaluate potential risks, SCMI reviews the
creditworthiness of those banks and dealers with which the Portfolio enters into
repurchase agreements.

ILLIQUID AND RESTRICTED SECURITIES. The Portfolio will not purchase or
otherwise acquire any security if, as a result, more than 15% of its net assets
(taken at current value) would be invested in securities that are illiquid by
virtue of the absence of a readily available market or because of legal or
contractual restrictions on resale ("restricted securities"). There may be
undesirable delays in selling illiquid securities at prices representing their
fair value. This policy includes over-the-counter options held by the Portfolio
and the "in the money" portion of the assets used to cover such options. As
stated above, this policy also includes assets that are subject to material
legal restrictions on repatriation. The limitation on investing in restricted
securities does not include securities that may not be resold to the general
public but may be resold to qualified institutional purchasers pursuant to Rule
144A under the Securities Act of 1933. If SCMI determines that a "Rule 144A
security" is liquid pursuant to guidelines adopted by the Trust's Board of
Trustees it will not be deemed illiquid. These guidelines take into account
trading activity for the securities and the availability of reliable pricing
information, among other factors. If there is a lack of trading interest in a
particular Rule 144A security, that security may become illiquid, which could
affect the Portfolio's liquidity. See Part B for further details.

LOANS OF PORTFOLIO SECURITIES. The Portfolio may lend portfolio securities
(other than in repurchase transactions) to brokers, dealers and other financial
institutions meeting specified credit conditions, if the loan is collateralized
in accordance with applicable regulatory requirements and if, after any loan,
the value of the securities loaned does not exceed 25% of the value of the
Portfolio's total assets. By so doing, the Portfolio attempts to earn income
through the receipt of interest on the loan. In the event of the bankruptcy of
the other party to a securities loan, the Portfolio could experience delays in
recovering the securities it lent. To the extent that, in the meantime, the
value of the securities the Portfolio lent has increased, the Portfolio could
experience a loss.

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The Portfolio may lend securities from its portfolio if liquid assets in an
amount at least equal to the current market value of the securities loaned
(including accrued interest thereon) plus the interest payable to the Portfolio
with respect to the loan is maintained as collateral by the Portfolio in a
segregated account. Any securities that the Portfolio may receive as collateral
will not become a part of its portfolio at the time of the loan, and, in the
event of a default by the borrower, the Portfolio will, if permitted by law,
dispose of such collateral except for such part thereof that is a security in
which the Portfolio is permitted to invest. During the time that the securities
are on loan, the borrower will pay the Portfolio any accrued income on those
securities, and the Portfolio may invest the cash collateral and earn income or
receive an agreed-upon fee from a borrower that has delivered cash equivalent
collateral. Cash collateral received by the Portfolio will be invested in U.S.
Government securities and liquid high-grade debt obligations. The value of
securities loaned will be marked to market daily. Portfolio securities
purchased with cash collateral are subject to possible depreciation. Loans of
securities by the Portfolio will be subject to termination at the Portfolio's or
the borrower's option. The Portfolio may pay reasonable negotiated fees in
connection with loaned securities, so long as such fees are set forth in a
written contract and approved by the Schroder Core Board of Trustees.

OPTIONS AND FUTURES TRANSACTIONS. While the Portfolio does not presently intend
to do so, it may write covered call options and purchase certain put and call
options, stock index futures, and options on stock index futures and broadly
based stock indices, all of which are referred to as "Hedging Instruments". In
general, the Portfolio may use Hedging Instruments (1) to attempt to protect
against declines in the market value of the Portfolio's securities and thus
protect the Fund's net asset value per share against downward market trends or
(2) to establish a position in the equity markets as a temporary substitute for
purchasing particular equity securities. The Portfolio will not use Hedging
Instruments for speculation. The Hedging Instruments that the Portfolio is
authorized to use have certain risks associated with them. Principal among such
risks are (a) the possible failure of such instruments as hedging techniques in
cases where the price movements of the securities underlying the options or
futures do not follow the price movements of the portfolio securities subject to
the hedge; (b) potentially unlimited loss associated with futures transactions
and the possible lack of a liquid secondary market for closing out a futures
position; and (c) possible losses resulting from the inability of SCMI to
correctly predict the direction of stock prices, interests rates and other
economic factors. The Hedging Instruments the Portfolio may use and the risks
associated with them are described in greater detail under in Part B.

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<PAGE>

SHORT SALES AGAINST-THE-BOX. The Portfolio may not sell securities short except
in "short sales against-the-box". For federal income tax purposes, short sales
against-the-box may be made to defer recognition of gain or loss on the sale of
securities "in the box;" and no income can result and no gain can be realized
from securities sold short against-the-box until the short position is closed
out. Such short sales are subject to the limits described under "Fundamental
Restrictions" above closed out. See "Short Sales Against-the-Box" in Part B for
further details.

Risk Considerations

SMALLER COMPANIES. While all investments have risks, investments in smaller
capitalization companies carry greater risk than investments in larger
capitalization companies. Smaller capitalization companies generally experience
higher growth rates and higher failure rates than do larger capitalization
companies; and the trading volume of smaller capitalization companies'
securities is normally lower than that of larger capitalization companies and,
consequently, generally has a disproportionate effect on market price (tending
to make prices rise more in response to buying demand and fall more in response
to selling pressure).

UNSEASONED ISSUERS. Investments in small, unseasoned issuers generally involve
greater risk than is customarily associated with larger, more seasoned
companies. Such issuers often have products and management personnel that have
not been thoroughly tested by time or the marketplace, and their financial
resources may not be as substantial as those of more established companies.
Their securities, which the Portfolio may purchase when they are offered to the
public for the first time, may have a limited trading market, which may
adversely affect their sale by the Portfolio and may result in such securities
being priced lower than otherwise might be the case. If other institutional
investors engage in trading this type of security, the Portfolio may be forced
to dispose of its holdings at prices lower than might otherwise be obtained.

ITEM 5. MANAGEMENT OF THE TRUST.

Boards of Trustees

The business and affairs of the Portfolio are managed under the direction of the
Schroder Core Board. The Board formulates the general policies of the Portfolio
and the Trust and meets periodically to review the results of the Portfolio,
monitor investment activities and practices and discuss other matters affecting
the Portfolio and the Trust. Additional information regarding the Trustees and
executive officers of the Trust may be found in Part B.

Investment Adviser and Portfolio Managers

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Schroder Capital Management International Inc. ("SCMI"), 787 Seventh Avenue, New
York, New York 10019, serves as Investment Adviser to the Portfolio. SCMI
manages the investment and reinvestment of the assets in the Portfolio and
continuously reviews, supervises and administers the Portfolio's investments. In
this regard, it is the responsibility of SCMI to make decisions relating to the
Portfolio's investments and to place purchase and sale orders regarding
investments with brokers or dealers selected by it in its discretion. For its
services with respect to the Portfolio, SCMI is entitled to receive a monthly
advisory fee at the annual rate of 0.60% of the Portfolio's average daily net
assets.

SCMI is a wholly owned U.S. subsidiary of Schroders Incorporated, the wholly
owned U.S. holding company subsidiary of Schroders plc. Schroders plc is the
holding company parent of a large world-wide group of banks and financial
services companies (referred to as the "Schroder Group"), with associated
companies and branch and representative offices in eighteen countries. The
Schroder Group specializes in providing investment management services.

The investment management team of Fariba Talebi, a Vice President of the Trust
and a Group Vice President of SCMI, and Ira Unschuld, a Vice President of the
Trust and of SCMI, with the assistance of an investment committee, is primarily
responsible for the day-to-day management of the Portfolio's investments and has
so managed the Portfolio since its inception. Ms. Talebi and Mr. Unschuld have
been employed by SCMI in the investment research and portfolio management areas
since 1987 and 1990, respectively.

Administrative Services

On behalf of the Portfolio, the Trust has entered into an administration
agreement with Schroder Fund Advisors Inc. ("Schroder Advisors"), 787 Seventh
Avenue, New York, New York 10019. Schroder Advisors is a wholly owned
subsidiary of SCMI. On behalf of the Portfolio, the Trust has also entered into
an administrative services agreement with Forum Administrative Services, Limited
Liability Company ("Forum"), Two Portland Square, Portland, Maine 04101.
Pursuant to these agreements, Schroder Advisors and Forum provide certain
management and administrative services necessary for the Portfolio's operations,
other than the administrative services provided to the Portfolio by SCMI. Forum
receives a monthly fee at the annual rate of 0.075% of the Portfolio's average
daily net assets. Schroder Advisors receives no fee from the Portfolio for the
administrative services it provides the Portfolio.

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<PAGE>

Transfer Agent and Portfolio Accountant

Forum Financial Corp. (FFC), P.O. Box 446, Portland, Maine 04112, acts as the
Portfolio's transfer agent and portfolio accountant. FFC is an affiliate of
Forum. For its transfer agent services with respect to the Portfolio, FFC
receives a fee of $12,000 per year plus $25 per interestholder account. For
fund accounting services with respect to the Portfolio, FFC receives a base fee
of $36,000 per year for the Portfolio plus additional amounts depending on the
assets of the Portfolio, the number and type of securities held by the Portfolio
and the portfolio turnover rate of the Portfolio.

Expenses

The Portfolio is obligated to pay all of its expenses. These expenses include:
governmental fees; interest charges; taxes; brokerage fees and commissions;
insurance premiums; investment advisory, custodial, administrative and transfer
agency and fund accounting fees, as described above; compensation of certain of
the Trust's Trustees, costs of membership trade associations; fee and expenses
of independent auditors and legal counsel to the Trust; and expenses of
calculating the net asset value of and the net income of the Portfolio. The
Portfolio's expenses comprise Trust expenses attributable to the Portfolio,
which are allocated to the Portfolio, and expenses not attributable to the
Portfolio, which are allocated among the series in proportion to their average
net assets or as otherwise determined by the Board of Trustees.

Portfolio Transactions

SCMI places orders for the purchase and sale of the Portfolio's investments with
brokers and dealers selected by SCMI in its discretion and seeks "best
execution" of such portfolio transactions. The Portfolio may pay higher than
the lowest available commission rates when SCMI believes it is reasonable to do
so in light of the value of the brokerage and research services provided by the
broker effecting the transaction. SCMI may also consider sales of shares of the
Fund or any other entity that invests in the Portfolio as a factor in the
selection of broker-dealers to execute portfolio transactions for the Portfolio.

Subject to the Portfolio's policy of obtaining the best price consistent with
quality of execution on transactions, SCMI may employ: (i) Schroder Wertheim &
Company, Incorporated and its affiliates ("Schroder Wertheim"), affiliates of
SCMI, to effect transactions of the Portfolio on the New York Stock Exchange,
and (ii) Schroder Securities Limited and its affiliates ("Schroder Securities"),
affiliates of SCMI, to effect transactions of the Portfolio, if any, on certain
foreign securities exchanges. Because of the affiliation between SCMI and
Schroder Wertheim and Schroder Securities, the Portfolio's payment of
commissions to them is subject to procedures adopted by the Trust's Board of
Trustees designed to ensure that such commissions will not exceed the usual and
customary brokers' commissions. No specific portion of the

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<PAGE>

Portfolio's brokerage is directed to Schroder Wertheim or Schroder Securities,
and in no event will either receive any brokerage in recognition of research
services.

Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc., and subject to seeking the most favorable price and execution
available and such other policies as the Schroder Core Board may determine, SCMI
may consider sales of shares of the Fund or any other entity that invests in the
Portfolio as a factor in the selection of broker-dealers to execute portfolio
transactions for the Portfolio.

Although the Portfolio does not currently engage in directed brokerage
arrangements to pay expenses, it may do so in the future. These arrangements,
whereby brokers executing the Portfolio's transactions would agree to pay
designated expenses of the Portfolio if brokerage commissions generated by the
Portfolio reached certain levels, might reduce the Portfolio's expenses (and,
indirectly, the Fund's expenses). As anticipated, these arrangements would not
materially increase the brokerage commissions paid by the Portfolio. Brokerage
commissions are not deemed to be Fund expenses

Custodian

The Chase Manhattan Bank, N.A., Chase MetroTech Center, Brooklyn, New York
11245, acts as custodian of the Portfolio's assets.

ITEM 5A. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE.

Omitted. See "Introduction" above.

ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.

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Investments in the Portfolio have no preemptive or conversion rights and are
fully paid and non-assessable, except as set forth below. The Trust is not
required and has no current intention to hold annual meetings of investors, but
the Trust will hold special meetings of investors when in the Trustees' judgment
it is necessary or desirable to submit matters to an investor vote. Generally,
interests will be voted in the aggregate without reference to a particular
series, except if the matter affects only one series or series voting is
required, in which case interests will be voted separately by series. Investors
have the right to remove one or more Trustees without a meeting by a declaration
in writing by a specified number of investors.

Each investor in the Portfolio will be liable for all obligations of the
Portfolio, but not any other series of the Trust. The risk to an investor in
the Portfolio of incurring financial loss on account of such liability, however,
would be limited to circumstances in which the Portfolio was unable to meet its
obligations. Upon liquidation of the Portfolio, investors will be entitled to
share pro rata in the net assets of the Portfolio available for distribution to
investors.

Under the Federal securities laws, any person or entity that signs a
registration statement may be liable for a misstatement or omission of a
material fact in the registration statement. The Trust, its Trustees and
certain of its officers are required to sign the registration statement of
certain publicly-offered investors in the Portfolio. In addition, under the
Federal securities laws, the Trust could be liable for misstatements or
omissions of a material fact in any proxy soliciting material of a publicly-
offered investor in the Trust. Under the Trust's Trust Instrument, each
investor in the Portfolio indemnifies the Trust and its Trustees and officers
(the "Trust Indemnitees") against certain claims. Indemnified claims are those
brought against Trust Indemnitees but based on a misstatement or omission of a
material fact in the investor's registration statement or proxy materials,
except to the extent such claim is based on a misstatement or omission of a
material fact relating to information about the Trust in the investor's
registration statement or proxy materials that was supplied to the investor by
the Trust. Similarly, the Trust indemnifies each investor in the Portfolio for
any claims brought against the investor with respect to the investor's
registration statement or proxy materials, to the extent the claim is based on a
misstatement or omission of a material fact relating to information about a
series of the registered investment company that did not invest in the Trust.
The purpose of these cross-indemnity provisions is principally to limit the
liability of the Trust to information that it knows or should know and can
control. With respect to other prospectuses and other offering documents and
proxy materials of investors in the Trust, the Trust's liability is similarly
limited to information about and supplied by the Trust.

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The Portfolio intends to comply with the provisions of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). As a regulated
investment company, the Portfolio intends to distribute substantially all of its
net investment income and its net realized long term capital gains at least
annually and therefore intends not to be subject to Federal income tax to the
extent it distributes such income and capital gains in the manner required under
the Code.

Investor inquiries may be directed to FFC.

ITEM 7. PURCHASE OF SECURITIES.

The net asset value is calculated separately for each class of Shares of the
Fund at 4:00 p.m. (eastern time), Monday through Friday, each day that the New
York Stock Exchange is open for trading (a "Fund Business Day"), which excludes
the following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Net asset
value per Share is calculated by dividing the aggregate value of the Portfolio's
assets less all Portfolio liabilities, if any, by the number of Shares of the
Fund outstanding.

Securities held by the Portfolio that are listed on recognized stock exchanges
are valued at the last reported sale price, prior to the time when the
securities are valued, on the exchange on which the securities are principally
traded. Listed securities traded on recognized stock exchanges where last sale
prices are not available are valued at mid-market prices. Securities traded in
over-the-counter markets, or listed securities for which no trade is reported on
the valuation date, are valued at the most recent reported mid-market price.
Other securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith using methods
approved by the Trust's Board of Trustees.

The Trust reserves the right to cease accepting investments in the Portfolio at
any time or to reject any investment order.

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The exclusive placement agent for the Trust is FFSI. FFSI receives no
compensation for serving as the exclusive placement agent for the Trust.

ITEM 8. REDEMPTION OR REPURCHASE.

ITEM 9. PENDING LEGAL PROCEEDINGS.

Not applicable.

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PART B
(STATEMENT OF ADDITIONAL INFORMATION)

SCHRODER CAPITAL FUNDS
________

INTERNATIONAL EQUITY FUND

MARCH 1, 1997

ITEM 10. COVER PAGE.

Not applicable.

ITEM 11. TABLE OF CONTENTS.

General Information and History. . . . . . . . . . . . . . . . . B-1
Investment Objectives and Policies . . . . . . . . . . . . . . . B-1
Management of the Trust. . . . . . . . . . . . . . . . . . . . . B-5
Control Persons and Principal Holders of Securities. . . . . . . B-7
Investment Advisory and Other Services . . . . . . . . . . . . . B-7
Brokerage Allocation and Other Practices . . . . . . . . . . . . B-9
Capital Stock and Other Securities . . . . . . . . . . . . . . . B-10
Purchase, Redemption and Pricing of Securities . . . . . . . . . B-11
Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . B-11
Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . B-13
Calculations of Performance Data . . . . . . . . . . . . . . . . B-13
Financial Statements . . . . . . . . . . . . . . . . . . . . . . B-13

ITEM 12. GENERAL INFORMATION AND HISTORY.

Not applicable.

ITEM 13. INVESTMENT OBJECTIVES AND POLICIES.

INVESTMENT POLICIES

INTRODUCTION

Part A contains information about the investment objectives, policies and
restrictions of International Equity Fund (the "Portfolio"), a series of
Schroder Capital Funds (the "Trust"). The following discussion is intended to
supplement the disclosure in Part A concerning the Portfolio's investments,
investment techniques and strategies and the risks associated therewith. This
Part B should be read only in conjunction with Part A.

DEFINITIONS

As used in Part B, the following terms shall have the meanings listed:

"Board" shall mean the Board of Trustees of the Trust.

"1933 Act" shall mean the Securities Act of 1933, as amended.

<PAGE>

"1940 Act" shall mean the Investment Company Act of 1940, as amended.

"Commission" shall mean the U.S. Securities and Exchange Commission.

FOREIGN SECURITIES

Investment in the securities of foreign issuers may involve risks in addition to
those normally associated with investments in the securities of U.S. issuers.
There may be less publicly available information about foreign issuers than is
available for U.S. issuers, and foreign auditing, accounting and financial
reporting practices may differ from U.S. practices. Foreign securities markets
may be less active than U.S. markets, trading may be thin and consequently
securities prices may be more volatile. The Portfolio's investment adviser,
Schroder Capital Management International, Inc. ("SCMI" or "Adviser") will, in
general, invest only in securities of companies and governments of countries
which, in its judgment, are both politically and economically stable.
Nevertheless, all foreign investments are subject to risks of foreign political
and economic instability, adverse movements in foreign exchange rates, the
imposition or tightening of exchange controls or other limitations on the
repatriation of foreign capital and changes in foreign governmental attitudes
toward private investment, possibly leading to nationalization, increased
taxation, or confiscation of Portfolio assets.

DEPOSITORY RECEIPTS

Investments in securities of foreign issuers may on occasion be in the form of
sponsored or unsponsored American Depository Receipts ("ADRs") or European
Depository Receipts ("EDRs"), or other similar securities convertible into
securities of foreign issuers. These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs are receipts typically issued in the United States by a bank or
trust company, evidencing ownership of the underlying securities. EDRs are
typically issued in Europe under a similar arrangement. Generally, ADRs, in
registered form, are designed for use in the U.S. securities markets and EDRs,
in bearer form, are designed for use in European securities markets.
Unsponsored ADRs may be created without the participation of the foreign issuer.
Holders of these ADRs generally bear all the costs of the ADR facility, whereas
foreign issuers typically bear certain costs in a sponsored ADR. The bank or
trust company depository of an unsponsored ADR may be under no obligation to
distribute shareholder communications received from the foreign issuer or to
pass through voting rights.

USE OF FORWARD CONTRACTS IN FOREIGN EXCHANGE TRANSACTIONS

To protect or "hedge" against adverse movements in foreign currency exchange
rates, the Portfolio may invest in forward contracts to purchase or sell an
agreed-upon amount of a specified currency at a future date, which may be any
fixed number of days from the date of the contract agreed upon by the parties,
at a price set at the time of the contract. Such contracts are traded in the
interbank market conducted directly between currency traders (usually large
commercial banks) and their customers. A forward contract generally has no
deposit requirement, and no commissions are charged at any stage for trades.
Although such contracts tend to minimize the risk of loss due to a decline in
the value of the currency which is sold, they expose the Portfolio to the risk
that the counterparty is unable to perform and they tend to limit commensurately
any potential gain which might result should the value of such currency increase
during the contract period.

U.S. GOVERNMENT SECURITIES

The Portfolio may invest in obligations issued or guaranteed by the U.S.
Government or its agencies, instrumentalities or government-sponsored entities
that have remaining maturates not exceeding one year. Agencies and
instrumentalities which issue or guarantee debt securities and which have been
established or sponsored by the U.S. Government include the Bank for
Cooperatives, the Export-Import Bank, the Federal Farm Credit System, the
Federal Home Loan Banks, the Federal Home Loan Mortgage Corporation, the Federal
Intermediate Credit Banks, the Federal Land Banks, the Federal National Mortgage
Association, the Government National Mortgage Association and the Student Loan
Marketing Association. Except for obligations issued by the U.S. Treasury and
the Government National Mortgage Association, none of the obligations of the
other agencies,

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<PAGE>

instrumentalities or government-sponsored entities referred to above are backed
by the full faith and credit of the U.S. Government. There can be no assurance
that the U.S. Government will provide financial support to these obligations if
it is not obligated to do so.

BANK OBLIGATIONS

The Portfolio may invest in obligations of U.S. banks (including certificates of
deposit and bankers' acceptances) having total assets at the time of purchase in
excess of $1 billion. Such banks must be members of the Federal Deposit
Insurance Corporation or the Federal Savings and Loan Insurance Corporation.

The Portfolio also may invest in certificates of deposit issued by foreign
banks, denominated in any major foreign currency. The Portfolio will invest in
instruments issued by foreign banks which, in the view of SCMI and the Board,
are of credit-worthiness and financial stature in their respective countries
comparable to U.S. banks used by the Portfolio. The Portfolio may also hold
cash and time deposits denominated in any major currency in foreign banks.

A certificate of deposit is an interest-bearing negotiable certificate issued by
a bank against funds deposited in the bank. A bankers' acceptance is a short-
term draft drawn on a commercial bank by a borrower, usually in connection with
an international commercial transaction. Although the borrower is liable for
payment of the draft, the bank unconditionally guarantees to pay the draft at
its face value on the maturity date. A time deposit is a non-negotiable receipt
issued by a bank in exchange for the deposit of funds. Similar to a certificate
of deposit, a time deposit earns a specified rate of interest over a definite
time period; however, it cannot be traded in the secondary markets.

SHORT-TERM DEBT SECURITIES

The Portfolio may invest in commercial paper, that is short-term unsecured
promissory notes issued in bearer form by bank holding companies, corporations
and finance companies. The commercial paper purchased by the Portfolio for
temporary defensive purposes consists of direct obligations of domestic issuers
which, at the time of investment, are rated "P-1" by Moody's Investors Service,
Inc. ("Moody's") or "A-1" by Standard & Poor's Ratings Group ("S&P"), or
securities that, if not rated, are issued by companies having an outstanding
debt issue currently rated "Aa" by Moody's or "AAA" or "AA" by S&P. The rating
"P-1" is the highest commercial paper rating assigned by Moody's and the rating
"A-1" is the highest commercial paper ratings assigned by S&P.

REPURCHASE AGREEMENTS

The Portfolio may invest in securities subject to repurchase agreements that
mature or may be terminated by notice in seven days or less with U.S. banks or
broker-dealers. In a typical repurchase agreement the seller of a security
commits itself at the time of the sale to repurchase that security from the
buyer at a mutually agreed-upon time and price. The repurchase price exceeds
the sale price, reflecting an agreed-upon interest rate effective for the period
the buyer owns the security subject to repurchase. The agreed-upon rate is
unrelated to the interest rate on that security. SCMI monitors the value of the
underlying security at the time the transaction is entered into and at all times
during the term of the repurchase agreement to insure that the value of the
security always equals or exceeds the repurchase price. In the event of default
by the seller under the repurchase agreement, the Portfolio may have
difficulties in exercising its rights to the underlying securities and may incur
costs and experience time delays in connection with the disposition of such
securities. To evaluate potential risks, SCMI reviews the credit-worthiness of
those banks and dealers with which the Portfolio enters into repurchase
agreements.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

- B3 -
<PAGE>

To hedge against adverse price movements in the securities held in its portfolio
and the currencies in which they are denominated (as well as in the securities
it might wish to purchase and their denominated currencies), the Portfolio may
engage in transactions in forward foreign currency exchange contracts.

A forward foreign currency exchange contract ("forward contract") is an
obligation to purchase or sell a currency at a future date (which may be any
fixed number of days from the date of the contract agreed upon by the parties)
at a price set at the time of the contract. The Portfolio may enter into
forward contracts as a hedge against fluctuations in future foreign exchange
rates.

Currently, only a limited market, if any, exists for hedging transactions
relating to currencies in many emerging market countries or to securities of
issuers domiciled or principally engaged in business in emerging market
countries. This may limit the Portfolio's ability to hedge its investments
effectively in those emerging markets. Hedging against a decline in the value
of a currency does not eliminate fluctuations in the prices of portfolio
securities or prevent losses if the prices of such securities decline. Such
transactions also limit the opportunity for gain if the value of the hedged
currencies should rise. In addition, it may not be possible for the Portfolio
to hedge against a devaluation that is so generally anticipated that the
Portfolio is not able to contract to sell the currency at a price above the
devaluation level it anticipates.

The Portfolio will enter into forward contracts under certain instances. When
the Portfolio enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may, for example, wish to secure the price
of the security in U.S. dollars or some other foreign currency which the
Portfolio is temporarily holding in its portfolio. By entering into a forward
contract for the purchase or sale (for a fixed amount of dollars or other
currency) of the amount of foreign currency involved in the underlying security
transactions, the Portfolio will be able to protect itself against possible loss
(resulting from adverse changes in the relationship between the U.S. dollar or
other currency being used for the security purchase and the foreign currency in
which the security is denominated) during the period between the date on which
the security is purchased or sold and the date on which payment is made or
received. In addition, when the Portfolio anticipates purchasing securities at
some future date, and wishes to secure the current exchange rate of the currency
in which those securities are denominated against the U.S. dollar or some other
foreign currency, it may enter into a forward contract to purchase an amount of
currency equal to part or all of the value of the anticipated purchase, for a
fixed amount of U.S. dollars or other currency.

In all of the above instances, if the currency in which the Portfolio's
portfolio securities (or anticipated portfolio securities) are denominated rises
in value with respect to the currency which is being purchased, then the
Portfolio will have realized fewer gains than if the Portfolio had not entered
into the forward contracts. Furthermore, the precise matching of the forward
contract amounts and the value of the securities involved is not generally
possible, since the future value of such securities in foreign currencies
changes as a consequence of market movements in the value of those securities
between the date the forward contract is entered into and the date it matures.

To the extent that the Portfolio enters into forward contracts to hedge against
a decline in the value of portfolio holdings denominated in a particular foreign
currency resulting from currency fluctuations, there is a risk that the
Portfolio may nevertheless realize a gain or loss as a result of currency
fluctuations after such portfolio holdings are sold should the Portfolio be
unable to enter into an "offsetting" forward foreign currency contract with the
same party or another party. The Portfolio may be limited in its ability to
enter into hedging transactions involving forward contracts by the Internal
Revenue Code requirements relating to qualifications as a regulated investment
company (see "Taxation").

The Portfolio is not required to enter into such transactions with regard to its
foreign currency-denominated securities and will not do so unless deemed
appropriate by the Adviser. Generally, the Portfolio will not enter into a
forward contract with a term of greater than one year.

OPTIONS AND FUTURES TRANSACTIONS

As discussed in the Prospectus, the Portfolio may write covered call options
against securities held in its portfolio and covered put options on eligible
portfolio securities and may purchase options of the same series to effect
closing

- B4 -
<PAGE>

transactions, and may hedge against potential changes in the market value of its
investments (or anticipated investments), by purchasing put and call options on
portfolio (or eligible portfolio) securities (and the currencies in which they
are denominated) and engaging in transactions involving futures contracts and
options on such contracts.

Call and put options on U.S. Treasury notes, bonds and bills and on various
foreign currencies are listed on several U.S. and foreign securities exchanges
and are written in over-the-counter transactions ("OTC Options"). Listed
options are issued or guaranteed by the exchange on which they trade or by a
clearing corporation such as the Options Clearing Corporation ("OCC").
Ownership of a listed call option gives the Portfolio the right to buy from the
OCC (in the U.S.) or other clearing corporation or exchange, the underlying
security or currency covered by the option at the stated exercise price (the
price per unit of the underlying security or currency) by filing an exercise
notice prior to the expiration date of the option. The writer (seller) of the
option would then have the obligation to sell, to the OCC (in the U.S.) or other
clearing corporation or exchange, the underlying security or currency at that
exercise price prior to the expiration date of the option, regardless of its
then current market price. Ownership of a listed put option would give the
Portfolio the right to sell the underlying security or currency to the OCC (in
the U.S.) or other clearing corporation or exchange at the stated exercise
price. Upon notice of exercise of the put option, the writer of the option
would have the obligation to purchase the underlying security or currency from
the OCC (in the U.S.) or other clearing corporation or exchange at the exercise
price.

The OCC or other clearing corporation or exchange that issues listed options
ensures that all transactions in such options are properly executed. OTC
options are purchased from or sold (written) to dealers or financial
institutions that have entered into direct agreements with the Portfolio. With
OTC options, variables such as expiration date, exercise price and premium are
agreed between the Portfolio and the transacting dealer. If the transacting
dealer fails to make or take delivery of the securities or amount of foreign
currency underlying an option it has written, the Portfolio would lose the
premium paid for the option as well as any anticipated benefit of the
transaction. The Portfolio will engage in OTC option transactions only with
member banks of the Federal Reserve System or primary dealers in U.S. Government
securities or with affiliates of such banks or dealers which have capital of at
least $50 million or whose obligations are guaranteed by an entity having
capital of at least $50 million.

OPTIONS ON FOREIGN CURRENCIES. The Portfolio may purchase and write options on
foreign currencies for purposes similar to those involved with investing in
forward foreign currency exchange contracts. For example, in order to protect
against declines in the dollar value of portfolio securities that are
denominated in a foreign currency, the Portfolio may purchase put options on an
amount of such foreign currency equivalent to the current value of the portfolio
securities involved. As a result, the Portfolio would be able to sell the
foreign currency for a fixed amount of U.S. dollars, thereby securing the dollar
value of the portfolio securities (less the amount of the premiums paid for the
options). Conversely, the Portfolio may purchase call options on foreign
currencies in which securities it anticipates purchasing are denominated to
secure a set U.S. dollar price for such securities and protect against a decline
in the value of the U.S. dollar against such foreign currency. The Portfolio
may also purchase call and put options to close out written option positions.

The Portfolio also may write covered call options on foreign currency to protect
against potential declines in its portfolio securities that are denominated in
foreign currencies. If the U.S. dollar value of the portfolio securities falls
as a result of a decline in the exchange rate between the foreign currency in
which it is denominated and the U.S. dollar, then a loss to the Portfolio
occasioned by such value decline would be ameliorated by receipt of the premium
on the option sold. At the same time, however, the Portfolio gives up the
benefit of any rise in value of the relevant portfolio securities above the
exercise price of the option and, in fact, only receives a benefit from the
writing of the option to the extent that the value of the portfolio securities
falls below the price of the premium received. The Portfolio also may write
options to close out long call option positions. A covered put option on a
foreign currency would be written by the Portfolio for the same reason it would
purchase a call option, namely, to hedge against an increase in the U.S. dollar
value of a foreign security that the Portfolio anticipates purchasing. In this
case, the receipt of the premium would offset, to the extent of the size of the
premium, any increased cost to the Portfolio resulting from an increase in the
U.S. dollar value of the foreign security. However, the Portfolio could not
benefit from any decline in the cost of the foreign security that is greater
than the price of the premium received. The Portfolio also may write options to
close out long put option positions.

- B5 -
<PAGE>

Markets in foreign currency options are relatively new, and the Portfolio's
ability to establish and close out positions on such options is subject to the
maintenance of a liquid secondary market. Although the Portfolio will not
purchase or write such options unless and until, in the opinion of the SCMI, the
market for them has developed sufficiently to ensure that their risks are not
greater than the risks in connection with the underlying currency, there can be
no assurance that a liquid secondary market will exist for a particular option
at any specific time. In addition, options on foreign currencies are affected
by all of those factors that influence foreign exchange rates and investments
generally.

The value of a foreign currency option depends upon the value of the underlying
currency relative to the U.S. dollar, with the result that the price of the
option position may vary with changes in the value of either or both currencies
and may have no relationship to the investment merits of a foreign security,
including foreign securities held in a "hedged" investment portfolio. Because
foreign currency transactions occurring in the interbank market involve
substantially larger amounts than those that may be involved in the use of
foreign currency options, investors may be disadvantaged by having to deal in an
odd lot market (generally consisting of transactions of less than $1 million)
for the underlying foreign currencies at prices that are less favorable than for
round lots.

There is no systematic reporting of last sale information for foreign currencies
or any regulatory requirement that quotations available through dealers or other
market sources be firm or revised on a timely basis. Quotation information
available is generally representative of very large transactions in the
interbank market and, thus, may not reflect relatively smaller transactions
(i.e., less than $1 million) where rates may be less favorable. The interbank
market in foreign currencies is a global, around-the-clock market. To the
extent that the U.S. options markets are closed while the markets for the
underlying currencies remain open, significant price and rate movements may take
place in the underlying markets that are not reflected in the options market.

COVERED CALL WRITING. The Portfolio is permitted to write covered call options
on portfolio securities, and on the U.S. dollar and foreign currencies in which
they are denominated, without limit. Generally, a call option is "covered" if
the Portfolio owns (or has the right to acquire without additional cash
consideration (or for additional cash consideration held for the Portfolio by
its custodian in a segregated account) the underlying security (currency)
subject to the option. In the case of call options on U.S. Treasury Bills,
however, the Portfolio might own U.S. Treasury Bills of a different series from
those underlying the call option, but with a principal amount and value
corresponding to the exercise price and a maturity date no later than that of
the security (currency) deliverable under the call option. A call option is
also covered if the Portfolio holds a call on the same security as the
underlying security (currency) of the written option, where the exercise price
of the call used for coverage is equal to or less than the exercise price of the
call or greater than the exercise price of the call written if the mark-to-
market difference is maintained by the Portfolio in cash, U.S. Government
securities or other high-grade debt obligations held by the Portfolio in a
segregated account maintained with its custodian.

The Portfolio receives a premium from the purchaser in return for a call it has
written. Receipt of such premiums may enable the Portfolio to earn a higher
level of current income than it would earn from holding the underlying
securities (currencies) alone. Moreover, the premium received offsets a portion
of the potential loss incurred by the Portfolio if the securities (currencies)
underlying the option are ultimately sold (exchanged) by the Portfolio at a
loss. Furthermore, a premium received on a call written on a foreign currency
ameliorates any potential loss of value on the portfolio security due to a
decline in the value of the currency. However, during the option period, the
covered call writer has, in return for the premium, given up the opportunity for
capital appreciation above the exercise price should the market price of the
underlying security (or the exchange rate of the currency in which it is
denominated) increase but has retained the risk of loss should the price of the
underlying security (or the exchange rate of the currency in which it is
denominated) decline. The premium received fluctuates with varying economic
market conditions. If the market value of the portfolio securities (or the
currencies in which they are denominated) upon which call options have been
written increases, the Portfolio may receive a lower total return from the
portion of its portfolio upon which calls have been written than it would have
had such calls not been written.

With respect to listed options and certain OTC options, during the option period
the Portfolio may be required, at any time, to deliver the underlying security
(currency) against payment of the exercise price on any calls it has written
(exercise of certain listed and OTC options may be limited to specific
expiration dates). This obligation

- B6 -
<PAGE>

terminates upon the expiration of the option period or at such earlier time when
the writer effects a closing purchase transaction. A closing purchase
transaction is accomplished by purchasing an option of the same series as the
option previously written. However, once the Portfolio has been assigned an
exercise notice, the Portfolio is unable to effect a closing purchase
transaction.

Closing purchase transactions are ordinarily effected to realize a profit on an
outstanding call option, to prevent an underlying security (currency) from being
called, to permit the sale of an underlying security (or the exchange of the
underlying currency) or to enable the Portfolio to write another call option on
the underlying security (currency) with either a different exercise price or
expiration date or both. The Portfolio may realize a net gain or loss from a
closing purchase transaction depending upon whether the amount of the premium
received on the call option is more or less than the cost of effecting the
closing purchase transaction. Any loss incurred in a closing purchase
transaction may be wholly or partially offset by unrealized appreciation in the
market value of the underlying security (currency). Conversely, a gain
resulting from a closing purchase transaction could be offset in whole or in
part or exceeded by a decline in the market value of the underlying security
(currency).

If a call option expires unexercised, the Portfolio realizes a gain in the
amount of the premium on the option less the commission paid. Such a gain,
however, may be offset by depreciation in the market value of the underlying
security (currency) during the option period. If a call option is exercised,
the Portfolio realizes a gain or loss from the sale of the underlying security
(currency) equal to the difference between the purchase price of the underlying
security (currency) and the proceeds of the sale of the security (currency) plus
the premium received on the option less the commission paid.

Options written by the Portfolio normally have expiration dates of up to
eighteen months from the date written. The exercised price of a call option may
be below, equal to or above the current market value of the underlying security
at the time the option is written.

COVERED PUT WRITING. As a writer of a covered put option, the Portfolio would
incur an obligation to buy the security underlying the option from the purchaser
of the put, at the option's exercise price at any time during the option period,
at the purchaser's election (certain listed and OTC put options written by the
Portfolio will be exercisable by the purchaser only on a specific date). A put
is "covered" if at all times the Portfolio maintains with its custodian (in a
segregated account) cash, U.S. Government securities or other high-grade
obligations in an amount equal to at least the exercise price of the option.
Similarly, a short put position could be covered by the Portfolio by its
purchase of a put option on the same security (currency) as the underlying
security of the written option, where the exercise price of the purchased option
is equal to or more than the exercise price of the put written or less than the
exercise price of the put written if the marked to market difference is
maintained by the Portfolio in cash, U.S. Government securities or other high-
grade debt obligations which the Portfolio holds in a segregated account
maintained at its custodian. In writing puts, the Portfolio assumes the risk of
loss should the market value of the underlying security (currency) decline below
the exercise price of the option (any loss being decreased by the receipt of the
premium on the option written). In the case of listed options, during the
option period the Portfolio may be required, at any time, to make payment of the
exercise price against delivery of the underlying security (currency). The
operation of and limitations on covered put options in other respects are
substantially identical to those of call options.

The Portfolio will write put options for three purposes: (i) to receive the
income derived from the premiums paid by purchasers; (ii) when the investment
adviser wishes to purchase the security (or a security denominated in the
currency underlying the option) underlying the option at a price lower than its
current market price (in which case it will write the covered put at an exercise
price reflecting the lower purchase price sought); and (iii) to close out a long
put option position. The potential gain on a covered put option is limited to
the premium received on the option (less the commissions paid on the
transaction) while the potential loss equals the differences between the
exercise price of the option and the current market price of the underlying
securities (currencies) when the put is exercised, offset by the premium
received (less the commissions paid on the transaction).

- B7 -
<PAGE>

position (see "Covered Call Writing" above), to protect against an increase in
price of a security it anticipates purchasing or, in the case of a call option
on foreign currency, to hedge against an adverse exchange rate move of the
currency in which the security it anticipates purchasing is denominated vis-a-
vis the currency in which the exercise price is denominated. The purchase of
the call option to effect a closing transaction on a call written over-the-
counter may be a listed or an OTC option. In either case, the call purchased is
likely to be on the same securities (currencies) and have the same terms as the
written option. If purchased over-the-counter, the option would generally be
acquired from the dealer or financial institution which purchased the call
written by the Portfolio.

The Portfolio may purchase put options on securities (currencies) that it holds
in its portfolio to protect itself against a decline in the value of the
security and to close out written put option positions. If the value of the
underlying security (currency) were to fall below the exercise price of the put
purchased in an amount greater then the premium paid for the option, the
Portfolio would incur no additional loss. In addition, the Portfolio may sell a
put option it has previously purchased prior to the sale of the securities
(currencies) underlying such option. Such a sale would result in a net gain or
loss depending upon whether the amount received on the sale is more or less than
the premium and other transaction costs paid on the put option that is sold.
Any such gain or loss could be offset in whole or in part by a change in the
market value of the underlying security (currency). If a put option purchased
by the Portfolio expired without being sold or exercised, the premium would be
lost.

RISKS OF OPTIONS TRANSACTIONS. During the option period, the covered call
writer has, in return for the premium on the option, given up the opportunity
for capital appreciation above the exercise price if the market price of the
underlying security (or the value of its denominated currency) increases but has
retained the risk of loss if the price of the underlying security (or the value
of its denominated currency) declines. The writer has no control over the time
when it may be required to fulfill its obligation as a writer of the option.
Once an option writer has received an exercise notice, it cannot effect a
closing purchase transaction in order to terminate its obligation under the
option and must deliver or receive the underlying securities at the exercise
price.

Prior to exercise or expiration, an option position can only be terminated by
entering into a closing purchase or sale transaction. If a covered call option
writer is unable to effect a closing purchase transaction or to purchase an
offsetting OTC option, it cannot sell the underlying security until the option
expires or the option is exercised. Accordingly, a covered call option writer
may not be able to sell an underlying security at a time when it might otherwise
be advantageous to do so. A covered put option writer who is unable to effect a
closing purchase transaction or to purchase an offsetting OTC option would
continue to bear the risk of decline in the market price of the underlying
security until the option expires or is exercised. In addition, a covered put
writer would be unable to utilize the amount held in cash or U.S. Government or
other high grade short-term obligations as security for the put option for other
investment purposes until the exercise or expiration of the option.

The Portfolio's ability to close out its position as a writer of an option is
dependent upon the existence of a liquid secondary market on option exchanges.
There is no assurance that such a market will exist, particularly in the case of
OTC options, since such options will generally only be closed out by entering
into a closing purchase transaction with the purchasing dealer. However, the
Portfolio may be able to purchase an offsetting option that does not close out
its position as a writer but constitutes an asset of equal value to the
obligation under the option written. If the Portfolio is not able to either
enter into a closing purchase transaction or purchase an offsetting position, it
will be required to maintain the securities subject to the call, or the
collateral underlying the put, even though it might not be advantageous to do
so, until a closing transaction can be entered into (or the option is exercised
or expires).

Among the possible reasons for the absence of a liquid secondary market on an
exchange are: (i) insufficient trading interest in certain options;
(ii) restrictions on transactions imposed by an exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes or
series of options or underlying securities; (iv) interruption of the normal
operations on an exchange; (v) inadequacy of the facilities of an exchange or
the OCC to handle current trading volume; or (vi) a decision by one or more
exchanges to discontinue the trading of options (or a particular class or series
of options), in which event the secondary market on that exchange (or in that
class or series of options) would cease to exist.

- B8 -
<PAGE>

In the event of the bankruptcy of a broker through which the Portfolio engages
in transactions in options, the Portfolio could experience delays and/or losses
in liquidating open positions purchased or sold through the broker and/or incur
a loss of all or part of its margin deposits with the broker. Similarly, in the
event of the bankruptcy of the writer of an OTC option purchased by the
Portfolio, the Portfolio could experience a loss of all or part of the value of
the option. Transactions will be entered into by the Portfolio only with
brokers or financial institutions deemed creditworthy by SCMI.

Exchanges have established limitations governing the maximum number of options
on the same underlying security or futures contract (whether or not covered)
that may be written by a single investor, whether acting alone or in concert
with others (regardless of whether such options are written on the same or
different exchanges or are held or written on one or more accounts or through
one or more brokers). An exchange may order the liquidation of positions found
to be in violation of these limits and it may impose other sanctions or
restrictions. These position limits may restrict the number of listed options
which the Portfolio may write.

The hours of trading for options may not conform to the hours during which the
underlying securities are traded. If the option markets close before the markets
for the underlying securities, significant price and rate movements can take
place in the underlying markets that cannot be reflected in the option markets.

The extent to which the Portfolio may enter into transactions involving options
may be limited by the Internal Revenue Code's requirements for qualification as
a regulated investment company and the Portfolio's intention to qualify as such
(see "Taxation").

FUTURES CONTRACTS. The Portfolio may purchase and sell interest rate, currency,
and index futures contracts ("futures contracts") that are traded on U.S. and
foreign commodity exchanges, on such underlying securities as U.S. Treasury
bonds, notes and bills, and/or any foreign government fixed-income security
("interest rate futures contracts"), on various currencies ("currency futures
contracts") and on such indices of U.S. and foreign securities as may exist or
come into being ("index futures contracts").

The Portfolio may purchase or sell interest rate futures contracts for the
purpose of hedging some or all of the value of its portfolio securities (or
anticipated portfolio securities) against changes in prevailing interest rates.
If the investment adviser anticipates that interest rates may rise and,
concomitantly, that the price of certain of its portfolio securities fall, the
Portfolio may sell an interest rate futures contract. If declining interest
rates are anticipated, the Portfolio may purchase an interest rate futures
contract to protect against a potential increase in the price of securities the
Portfolio intends to purchase. Subsequently, appropriate securities may be
purchased by the Portfolio in an orderly fashion; as securities are purchased,
corresponding futures positions would be terminated by offsetting sales of
contracts.

The Portfolio may purchase or sell currency futures contracts on currencies in
which its portfolio securities (or anticipated portfolio securities) are
denominated for the purposes of hedging against anticipated changes in currency
exchange rates. The Portfolio may enter into currency futures contracts for the
same reasons as set forth above for entering into forward foreign currency
exchange contracts; namely, to secure the value of a security purchased or sold
in a given currency vis-a-vis a different currency or to hedge against an
adverse currency exchange rate movement of a portfolio security's (or
anticipated portfolio security's) denominated currency vis-a-vis a different
currency.

The Portfolio may purchase or sell index futures contracts for the purpose of
hedging some or all of its portfolio (or anticipated portfolio) securities
against changes in their prices. If it anticipates that the prices of
securities it holds may fall, the Portfolio may sell an index futures contract.
Conversely, if the Portfolio wishes to hedge against anticipated price rises in
those securities which it intends to purchase, the Portfolio may purchase an
index futures contract.

In addition to the above, interest rate, currency and index futures contracts
will be bought or sold in order to close out short or long positions maintained
by the Portfolio in corresponding futures contracts.

- B9 -
<PAGE>

Although most interest rate futures contracts call for actual delivery or
acceptance of securities, the contracts usually are closed out before the
settlement date without making or taking delivery. A futures contract sale is
closed out by effecting a futures contract purchase for the same aggregate
amount of the specific type of security (currency) and the same delivery date.
If the sale price exceeds the offsetting purchase price, the seller would be
paid the difference and would realize a gain. If the offsetting purchase price
exceeds the sale price, the seller would pay the difference and would realize a
loss. Similarly, a futures contract purchase is closed out by effecting a
futures contract sale for the same aggregate amount of the specific type of
security (currency) and the same delivery date. If the offsetting sale price
exceeds the purchase price, the purchaser would realize a gain, whereas if the
purchase price exceeds the offsetting sale price, the purchaser would realize a
loss. There is no assurance that the Portfolio will be able to enter into a
closing transaction.

INTEREST RATE FUTURES CONTRACTS. When the Portfolio enters into an interest
rate futures contract, it is initially required to deposit with the Portfolio's
custodian (in a segregated account in the name of the broker performing the
transaction) an "initial margin" of cash or U.S. Government securities or other
high grade short-term obligations equal to approximately 2% of the contract
amount. Initial margin requirements are established by the exchanges on which
futures contracts trade and may change. In addition, brokers may establish
margin deposit requirements in excess of those required by the exchanges.

Initial margin in futures transactions is different from margin in securities
transactions in that initial margin does not involve the borrowing of money by a
brokers' client but is, rather, a good faith deposit on the futures contract
that will be returned to the Portfolio upon the proper termination of the
futures contract. The margin deposits made are marked to market daily, and the
Portfolio may be required to make subsequent deposits with the Portfolio's
futures contract clearing broker of cash or U.S. Government securities (called
"variation margin") that are reflective of price fluctuations in the futures
contract.

CURRENCY FUTURES CONTRACTS. Generally, foreign currency futures contracts
provide for the delivery of a specified amount of a given currency, on the
exercise date, for a set exercise price denominated in U.S. dollars or other
currency. Foreign currency futures contracts would be entered into for the same
reason and under the same circumstances as forward foreign currency exchange
contracts. SCMI assesses such factors as cost spreads, liquidity and transaction
costs in determining whether to use futures contracts or forward contracts in
its foreign currency transactions and hedging strategy.

Purchasers and sellers of foreign currency futures contracts are subject to the
same risks that apply generally to the buying and selling of futures contracts.
In addition, there are risks associated with foreign currency futures contracts
and their use as a hedging device similar to those associated with options on
foreign currencies described above. Further, settlement of a foreign currency
futures contract must occur within the country issuing the underlying currency.
Thus, the Portfolio must accept or make delivery of the underlying foreign
currency in accordance with any U.S. or foreign restrictions or regulations
regarding the maintenance of foreign banking arrangements by U.S. residents and
may be required to pay any fees, taxes or charges associated with such delivery
that are assessed in the issuing country.

INDEX FUTURES CONTRACTS. The Portfolio may invest in index futures contracts.
An index futures contract sale creates an obligation by the Portfolio, as
seller, to deliver cash at a specified future time. An index futures contract
purchase would create an obligation by the Portfolio, as purchaser, to take
delivery of cash at a specified future time. Futures contracts on indices do
not require the physical delivery of securities but provide for a final cash
settlement on the expiration date that reflects accumulated profits and losses
credited or debited to each party's account.

The Portfolio is required to maintain margin deposits with brokerage firms
through which it effects index futures contracts in a manner similar to that
described above for interest rate futures contracts. In addition, due to
current industry practice, daily variations in gains and losses on open
contracts are required to be reflected in cash in the form of variation margin
payments. The Portfolio may be required to make additional margin payments
during the term of the contract.

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<PAGE>

At any time prior to expiration of the futures contract, the Portfolio may elect
to close the position by taking an opposite position, which will operate to
terminate the Portfolio's position in the futures contract. A final
determination of variation margin is then made, additional cash may be required
to be paid by or released to the Portfolio and the Portfolio realizes a loss or
gain.

OPTIONS ON FUTURES CONTRACTS. The Portfolio may purchase and write call and put
options on futures contracts traded on an exchange and may enter into closing
transactions with respect to such options to terminate an existing position. An
option on a futures contract gives the purchaser the right (in return for the
premium paid) to assume a position in a futures contract (a long position if the
option is a call and a short position if the option is a put) at a specified
exercise price at any time during the term of the option. Upon exercise of the
option, the delivery of the position in the futures contract by the writer of
the option to the holder of the option is accompanied by delivery of the
accumulated balance in the writer's futures margin account, which represents the
amount by which the market price of the futures contract at the time of exercise
exceeds, in case of a call, or is less than, in the case of a put, the exercise
price of the option on the futures contract.

The Portfolio may purchase and write options on futures contracts for purposes
identical to those set forth above for the purchase of a futures contract
(purchase of a call option or sale of a put option) and the sale of a futures
contract (purchase of a put option or sale of a call option), or to close out a
long or short position in futures contracts. If, for example, the investment
adviser wished to protect against an increase in interest rates and the
resulting negative impact on the value of a portion of its fixed-income
portfolio, it might write a call option on an interest rate futures contract,
the underlying security of which correlates with the portion of the portfolio
the investment adviser seeks to hedge. Any premiums received in the writing of
options on futures contracts may provide a further hedge against losses
resulting from price declines in portions of the Portfolio's investment
portfolio.

Options on foreign currency futures contracts may involve certain additional
risks. Trading options on foreign currency futures contracts is relatively new.
The ability to establish and close out positions on such options is subject to
the maintenance of a liquid secondary market. To reduce this risk, the
Portfolio will not purchase or write options on foreign currency futures
contracts unless and until, in SCMI's opinion, the market for such options has
developed sufficiently that the risks in connection with them are not greater
than the risks in connection with transactions in the underlying foreign
currency futures contracts.

LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The
Portfolio may not enter into futures contracts or purchase related options
thereon if, immediately thereafter, the amount committed to margin plus the
amount paid for premiums for unexpired options on futures contracts exceeds 5%
of the value of the Portfolio's total assets, after taking into account
unrealized gains and unrealized losses on such contracts it has entered into,
provided, however, that in the case of an option that is in-the-money (the
exercise price of the call (put) option is less (more) than the market price of
the underlying security) at the time of purchase, the in-the-money amount may be
excluded in calculating the 5%. However, there is no overall limitation on the
percentage of the Portfolio's assets that may be subject to a hedge position.
In addition, in accordance with the regulations of the Commodity Futures Trading
Commission ("CFTC") under which the Portfolio is exempted from registration as a
commodity pool operator, the Portfolio may only enter into futures contracts and
options on futures contracts transactions for purposes of hedging a part or all
of its portfolio. Except as described above, there are no other limitations on
the use of futures and options thereon by the Portfolio.

The writer of an option on a futures contract is required to deposit initial and
variation margin pursuant to requirements similar to those applicable to futures
contracts. Premiums received from the writing of an option on a futures
contract are included in initial margin deposits.

RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS. The Portfolio
may sell a futures contract to protect against the decline in the value of
securities (or the currency in which they are denominated) held by the
Portfolio. However, it is possible that the futures market may advance and the
value of the Portfolio's securities (or the currency in which they are
denominated) may decline. If this occurs, the Portfolio will lose money on the
futures contract and also experience a decline in value of its portfolio
securities. While this might occur for only a

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<PAGE>

very brief period or to a very small degree, over time the value of a
diversified portfolio will tend to move in the same direction as the futures
contracts.

If the Portfolio purchases a futures contract to hedge against the increase in
value of securities it intends to buy (or the currency in which they are
denominated) and the value of such securities (currencies) decreases, then the
Portfolio may determine not to invest in the securities as planned and will
realize a loss on the futures contract that is not offset by a reduction in the
price of the securities.

If the Portfolio has sold a call option on a futures contract, it will cover
this position by holding (in a segregated account maintained at its custodian)
cash, U.S. Government securities or other high-grade debt obligations equal in
value (when added to any initial or variation margin on deposit) to the market
value of the securities (currencies) underlying the futures contract or the
exercise price of the option. Such a position may also be covered by owning the
securities (currencies) underlying the futures contract or by holding a call
option permitting the Portfolio to purchase the same contract at a price no
higher than the price at which the short position was established.

In addition, if the Portfolio holds a long position in a futures contract, it
will hold cash, U.S. Government securities or other high-grade debt obligations
equal to the purchase price of the contract (less the amount of initial or
variation margin on deposit) in a segregated account maintained for the
Portfolio by its custodian. Alternatively, the Portfolio could cover its long
position by purchasing a put option on the same futures contract with an
exercise price as high or higher than the price of the contract held by the
Portfolio.

Exchanges limit the amount by which the price of a futures contract may move on
any day. If the price moves equal the daily limit on successive days, then it
may prove impossible to liquidate a futures position until the daily limit moves
have ceased. In the event of adverse price movements, the Portfolio would
continue to be required to make daily cash payments of variation margin on open
futures contract positions. In such situations, if the Portfolio has
insufficient cash, it may have to sell portfolio securities to meet daily
variation margin requirements at a time when it may be disadvantageous to do so.
In addition, the Portfolio may be required to take or make delivery of the
instruments underlying interest rate futures contracts it holds at a time when
it is disadvantageous to do so. The inability to close out options and futures
contract positions could also have an adverse impact on the Portfolio's ability
to effectively hedge its portfolio.

Futures contracts and options thereon that are purchased or sold on foreign
commodities exchanges may have greater price volatility than their U.S.
counterparts. Furthermore, foreign commodities exchanges may be less regulated
and under less governmental scrutiny than U.S. exchanges, and brokerage
commissions, clearing costs and other transaction costs may be higher. Greater
margin requirements may limit the Portfolio's ability to enter into certain
commodity transactions on foreign exchanges. Moreover, differences in clearance
and delivery requirements on foreign exchanges may cause delays in the
settlement of the Portfolio's foreign exchange transactions.

In the event of the bankruptcy of a broker through which the Portfolio engages
in transactions in futures or options thereon, the Portfolio could experience
delays and/or losses in liquidating open positions purchased or sold through the
broker and/or incur a loss of all or part of its margin deposits with the
broker. Similarly, in the event of the bankruptcy of the writer of an OTC
option purchased by the Portfolio, the Portfolio could experience a loss of all
or part of the value of the option. Transactions are entered into by the
Portfolio only with brokers or financial institutions deemed creditworthy by
SCMI.

While the futures contracts and options transactions in which the Portfolio
engages for the purpose of hedging its portfolio securities are not speculative
in nature, there are risks inherent in the use of such instruments. One such
risk that may arise in employing futures contracts to protect against the price
volatility of portfolio securities (and the currencies in which they are
denominated) is that the prices of securities and indices subject to futures
contracts (and thereby the futures contract prices) may correlate imperfectly
with the behavior of the cash prices of the Portfolio's portfolio securities
(and the currencies in which they are denominated). Another such risk is that
prices of interest rate futures contracts may not move in tandem with the
changes in prevailing interest rates against which the Portfolio seeks a hedge.
A correlation may also be distorted by the fact that the futures market is
dominated by

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<PAGE>

short-term traders seeking to profit from the difference between a contract or
security price objective and their cost of borrowed funds. Such distortions are
generally minor and are expected to diminish as the contract approaches
maturity.

There may exist an imperfect correlation between the price movements of futures
contracts purchased by the Portfolio and the movements in the prices of the
securities (currencies) which are the subject of the hedge. If participants in
the futures market elect to close out their contracts through offsetting
transactions rather than meet margin deposit requirements, distortions in the
normal relationship between the debt securities or currency markets and futures
markets could result. Price distortions could also result if investors in
futures contracts choose to make or take delivery of underlying securities
rather than engage in closing transactions due to the resultant reduction in the
liquidity of the futures market. In addition, because the deposit requirements
in the futures markets are less onerous than margin requirements in the cash
market, increased participation by speculators in the futures market can be
anticipated with the resulting speculation causing temporary price distortions.
Due to the possibility of price distortions in the futures contracts market and
because of the imperfect correlation between movements in the prices of
securities and movements in the prices of futures contracts, a correct forecast
of interest rate trends may still not result in a successful hedging
transaction.

There is no assurance that a liquid secondary market will exist for futures
contracts and related options in which the Portfolio may invest. In the event a
liquid market does not exist, it may not be possible to close out a futures
position, and in the event of adverse price movements, the Portfolio would
continue to be required to make daily cash payments of variation margin. In
addition, limitations imposed by an exchange or board of trade on which futures
contracts are traded may compel the Portfolio to or prevent it from closing out
a contract, which may result in reduced gain or increased loss to the Portfolio.
The absence of a liquid market in futures contracts might cause the Portfolio to
make or take delivery of the underlying securities (currencies) at a time when
it may be disadvantageous to do so.

The extent to which the Portfolio may enter into transactions involving futures
contracts and options thereon may be limited by the Internal Revenue Code's
requirements for qualification as a regulated investment company and the
Portfolio's intention to qualify as such (see "Taxation").

WARRANTS AND STOCK RIGHTS. The Portfolio may invest in warrants, which are
options to purchase an equity security at a specified price (usually
representing a premium over the applicable market value of the underlying equity
security at the time of the warrant's issuance). Investments in warrants
involve certain risks, including the possible lack of a liquid market for the
resale of the warrants, potential price fluctuations as a result of speculation
or other factors and failure of the price of the underlying security to reach a
level at which the warrant can be prudently exercised (in which case the warrant
may expire without being exercised, resulting in the loss of the Portfolio's
entire investment therein). The prices of warrants do not necessarily move
parallel to the prices of the underlying securities. Warrants have no voting
rights, receive no dividends and have no rights with respect to the assets of
the issuer.

In addition, the Portfolio may invest up to 5% of its assets (at the time of
investment) in stock rights. A stock right is an option given to a shareholder
to buy additional shares at a predetermined price during a specified time
period.

INVESTMENT RESTRICTIONS

The following investment restrictions restate or are in addition to those
described under "Investment Restrictions" and "Investment Policies" in Part A.
These restrictions, unless otherwise indicated (see in particular the discussion
below regarding restriction c(i)), are fundamental policies of the Portfolio and
cannot be changed without the vote of a "majority" of the Portfolio's
outstanding shares. Under the 1940 Act, such a "majority" vote is defined as
the vote of the holders of the lesser of: (i) 67% of more of the shares present
or represented by proxy at a meeting of shareholders, if the holders of more
than 50% of the outstanding shares are present, or (ii) more than 50% of the
outstanding shares. Under these additional restrictions, the Portfolio will
not:

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<PAGE>

(a) Invest more than 5% of its assets in the securities of any single
issuer. This restriction does not apply to securities issued by the
U.S. Government, its agencies or instrumentalities.

(b) Purchase more than 10% of the voting securities of any one issuer.
Moreover, the Portfolio will not purchase more than 3% of the
outstanding securities of any closed-end investment company. (Any
such purchase of securities issued by a closed-end investment company
will otherwise be made in full compliance with Sections
12(d)(1)(a)(i), (ii) and (iii) of the Investment Company Act of the
1940 Act.)

(c) Invest in (i) securities which cannot be readily resold to the public
because of legal or contractual restrictions or for which no readily
available market exists, or in (ii) securities of issuers having a
record, together with predecessors, of less than three years of
continuous operations if, regarding all such securities, more than 10%
of its total assets would be invested in such securities.

(d) Invest 25% or more of the value of its total assets in any one
industry.

(e) Borrow money, except from banks, for temporary emergency purposes and
then only in an amount not exceeding 5% of the value of the total
assets of the Portfolio.

(f) Pledge, mortgage or hypothecate its assets to an extent greater than
10% of the value of the total assets of the Portfolio.

(g) Purchase securities on margin or sell short.

(h) Make investments for the purpose of exercising control or management.

(i) Purchase or sell real estate, provided that the Portfolio may invest
in securities issued by companies which invest in real estate or
interests therein.

(j) Make loans to other persons, provided that for purposes of this
restriction, entering into repurchase agreements, acquiring corporate
debt securities and investing in U.S. Government obligations, short-
term commercial paper, certificates of deposit and bankers'
acceptances shall not be deemed to be the making of a loan.

(k) Invest in commodities; commodity contracts other than foreign currency
forward contracts; or oil, gas and other mineral resource, lease, or
arbitrage transactions.

(l) Write, purchase or sell options or puts, calls, straddles, spreads, or
combinations thereof.

(m) Underwrite securities issued by other persons except to the extent
that, in connection with the disposition of its portfolio investments,
it may be deemed to be an underwriter under U.S. securities laws.

(n) Invest in warrants, valued at the lower of cost or market, more than
5% of the value of the Portfolio's net assets (included within that
amount, but not to exceed 2% of the value of the Portfolio's net
assets, may be warrants which are not listed on the New York or
American Stock Exchange. Warrants acquired by the Portfolio in units
or attached to securities may be deemed to be without value.).

The Portfolio's restrictions on investing in the securities described in (c)(i)
above is an operating (non-fundamental) policy, which may be changed by the
Board without prior shareholder approval. This policy does not include
restricted securities eligible for resale to qualified institutional purchasers
pursuant to Rule 144A under the 1933 Act that are determined to be liquid by the
Board or SCMI under Board-approved guidelines. Such guidelines take into
account trading activity for such securities and the availability of reliable
pricing information, among other factors. If there is a lack of trading
interest in particular Rule 144A securities, the Portfolio's holdings of those
securities may be illiquid.

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<PAGE>

Except as required by the 1940 Act, if any percentage restriction on investment
or utilization of assets is adhered to at the time an investment is made, a
later change in percentage resulting from a change in the market values of the
Portfolio's assets or purchases and redemptions of interests will not be
considered a violation of the limitation.

ITEM 14. MANAGEMENT OF THE TRUST.

The following information relates to the principal occupations of each Trustee
and executive officer of the Trust during the past five years and shows the
nature of any affiliation with SCMI. Each of these individuals currently serves
in the same capacity for Schroder Capital Funds (Delaware), an investment
company with a series that invests all of its assets in the Portfolio.

PETER E. GUERNSEY, Oyster Bay, New York - Trustee of the Trust - Insurance
Consultant since August 1986; prior thereto Senior Vice President, Marsh &
McLennan, Inc., insurance brokers.

RALPH E. HANSMANN (Honorary), 40 Wall Street, New York, New York - Honorary
Trustee of the Trust - Private investor; Director, First Eagle Fund of America,
Inc.; Director, Verde Exploration, Ltd.; Trustee Emeritus, Institute for
Advanced Study; Trustee and Treasurer, New York Public Library; Life Trustee,
Hamilton College.

JOHN I. HOWELL, Greenwich, Connecticut - Trustee of the Trust - Private
Consultant since February 1987; Honorary Director, American International Group,
Inc.; Director, American International Life Assurance Company of New York.

CLARENCE F. MICHALIS, 44 East 64th Street, New York, New York - Trustee of the
Trust - Chairman of the Board of Directors, Josiah Macy, Jr. Foundation
(charitable foundation).

HERMANN C. SCHWAB, 787 Seventh Avenue, New York, New York - Chairman (Honorary)
and Trustee of the Trust - retired since March, 1988; prior thereto, consultant
to SCMI since February 1, 1984.

MARK J. SMITH, (b), 33 Gutter Lane, London, England - President and Trustee of
the Trust - First Vice President of SCMI since April 1990; Director and Vice
President, Schroder Advisors.

ROBERT G. DAVY, 787 Seventh Avenue, New York, New York - a Vice-President of the
Trust - Director of SCMI and Schroder Capital Management International Ltd.
since 1994; First Vice President of SCMI since July, 1992; prior thereto,
employed by various affiliates of Schroders plc in various positions in the
investment research and portfolio management areas since 1986.

MARGARET H. DOUGLAS-HAMILTON(b) (c), 787 Seventh Avenue, New York, New York -
Vice President of the Trust - Secretary of SCM since July 1995; Secretary of
Schroder Advisers since April 1990; First Vice President and General Counsel of
Schroders Incorporated(b) since May 1987; prior thereto, partner of Sullivan &
Worcester, a law firm.

RICHARD R. FOULKES, 787 Seventh Avenue, New York, New York - a Vice President of
the Trust; Deputy Chairman of SCMI since October 1995; Director and Executive
Vice President of Schroder Capital Management International Ltd. since 1989.

CATHERINE S. WOOLEDGE, 2 Portland Square, Portland, Maine - Assistant Treasurer
and Assistant Secretary of the Trust - Counsel, Forum Financial Services, Inc.
Prior thereto, associate at Morrison & Foerster since September 1994, prior
thereto associate corporate counsel at Franklin Resources, Inc. since September
1993, and prior thereto associate at Drinker Biddle & Reath, Washington, D.C.

BARBARA GOTTLIEB(c), 787 Seventh Avenue, New York, New York - Assistant
Secretary of the Trust - Assistant Vice President of SWIS since July 1995 prior
thereto held various positions with SWIS affiliates.

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<PAGE>

ROBERT JACKOWITZ(b) (c), 787 Seventh Avenue, New York, New York - Treasurer of
the Trust - Vice President of SCM since September 1995; Treasurer of SCM and
Schroder Advisers since July 1995; Vice President of SCMI since June 1995; and
Assistant Treasurer of Schroders Incorporated since January 1993.

JOHN Y. KEFFER, 2 Portland Square, Portland, Maine - Vice President of the
Trust. President of Forum Financial Services, Inc., the Fund's sub-
administrator, and Forum Financial Corp., the Fund's transfer and dividend
disbursing agent and fund accountant.

JANE P. LUCAS, (c) 787 Seventh Avenue, New York, New York - Vice President of
the Trust - Director and Senior Vice President SCMI; Director of SCM since
September 1995; Assistant Director Schroder Investment Management Ltd. since
June 1991.

GERARDO MACHADO, 787 Seventh Avenue, New York, New York - Assistant Secretary of
the Trust - Associate, SCMI.

CATHERINE A. MAZZA, 787 Seventh Avenue, New York, New York - Vice President of
the Trust - President of Schroder Advisors since 1997; First Vice President of
SCMI and SCM since 1996; prior thereto, held various marketing positions at
Alliance Capital, an investment adviser, since July 1985.

THOMAS G. SHEEHAN, 2 Portland Square, Portland, Maine - Assistant Treasurer and
Assistant Secretary of the Trust - Counsel, Forum Financial Services, Inc. since
1993; prior thereto, Special Counsel, U.S. Securities and Exchange Commission,
Division of Investment Management, Washington, D.C.

FARIBA TALEBI, 787 Seventh Avenue, New York, New York - Vice President of the
Trust - First Vice President of SCMI since April 1993, employed in various
positions in the investment research and portfolio management areas since 1987.

JOHN A. TROIANO(b), 787 Seventh Avenue, New York, New York - Vice President of
the Trust - Managing Director and Senior Vice President of SCMI since October
1995; Director of Schroder Advisors since October 1992; Director of SCMI since
1991; prior thereto, employed by various affiliates of SCMI in various positions
in the investment research and portfolio management areas since 1981.

IRA L. UNSCHULD, 787 Seventh Avenue, New York, New York - Vice President of the
Trust - Vice President of SCMI since April, 1993 and an Associate from July,
1990 to April, 1993; prior to July, 1990, employed by various financial
institutions as a securities or financial analyst.

ALEXANDRA POE, 787 Seventh Avenue, New York, New York - Secretary and Vice
President of the Trust - Vice President of SCMI since August 1996; Fund Counsel
and Senior Vice President of Schroder Advisors since August 1996; prior thereto
an investment management attorney with Gordon Altman Butowsky Weitzen Shalov &
Wein since July 1994; prior thereto counsel and Vice President of Citibank, N.A.
since 1989.

MARY KUNKEMUELLER, 787 Seventh Avenue, New York, New York - Assistant
Secretary of the Trust.

(a) Interested Trustee of the Trust within the meaning of the 1940 Act.

(b) Schroder Fund Advisors, Inc. ("Schroder Advisors") is a wholly owned
subsidiary of SCMI, which is a wholly owned subsidiary of Schroders
Incorporated, which in turn is an indirect, wholly owned U.S. subsidiary of
Schroders plc.
(c) Schroder Capital Management, Inc. ("SCM") is a wholly owned subsidiary
of Schroder Wertheim Holdings Incorporated which is a wholly owned
subsidiary of Schroders, Incorporated, which in turn is an indirect wholly
owned U.S. subsidiary of Schroders plc.

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<PAGE>

of the Board attended by them except in the case of Mr. Schwab, who receives an
annual fee of $3,000 and a fee of $1,000 for each meeting attended. The
Portfolio has no bonus, profit sharing, pension or retirement plans.

The following table provides the aggregate compensation paid to the Trustees of
the Trust by the Trust and Schroder Asian Growth Fund, Inc., combined.
Information is presented for the fiscal year ended October 31, 1996.

Name of Trustee Aggregate Pension or Estimated Total
Compensation Retirement Annual Compensation
From Trust Benefits Benefits Upon From Trust
Accrued As Retirement And Fund
Part of Complex Paid
Portfolio To Trustees*
Expenses

Mr. Guernsey $1,750 $0 $0 $14,750
Mr. Hansmann 1,375 0 0 1,375
Mr. Howell 1,750 0 0 14,750
Mr. Michalis 1,750 0 0 1,750
Mr. Schwab 3,000 0 0 3,000
Mr. Smith 0 0 0 0

* In addition to the Trust, "Fund Complex" includes Schroder Capital Funds
(Delaware), an open-end investment company for which SCMI serves as investment
adviser, and Schroder Asian Growth Fund, Inc., a closed-end investment company
for which SCMI serves as investment adviser.

As of October 31, 1996, the officers and Trustees of the Trust owned, in the
aggregate, less than 1% of the Portfolio's outstanding shares.

While the Trust is a Delaware business trust, certain of its Trustees or
officers are residents of the United Kingdom and substantially all of their
assets may be located outside of the U.S. As a result it may be difficult for
U.S. investors to effect service upon such persons within the U.S., or to
realize judgments of courts of the U.S. predicated upon civil liabilities of
such persons under the Federal securities laws of the U.S. The Trust has been
advised that there is substantial doubt as to the enforceability in the United
Kingdom of such civil remedies and criminal penalties as are afforded by the
Federal securities laws of the U.S. Also it is unclear if extradition treaties
now in effect between the U.S. and the United Kingdom would subject such persons
to effective enforcement of the criminal penalties of such acts.

ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.

As of October 31, 1996, Schroder International Fund (the "Fund"), a series of
Schroder Capital Funds (Delaware), a Delaware business trust registered with the
SEC as an open-end management investment company, invests all of its investable
assets in the Portfolio and may be deemed to control the Portfolio for purposes
of the 1940 Act.

Schroder Capital Funds (Delaware) has informed the Trust that whenever the Fund
is requested to vote on matters pertaining to the Portfolio, the Fund will hold
a meeting of its shareholders and will cast its vote as instructed by its
shareholders. This only applies to matters for which the Fund would be required
to have a shareholder meeting if it directly held investment securities rather
than invested in the Portfolio. It is anticipated that any other registered
investment company (or series thereof) that may in the future invest in the
Portfolio will follow the same or a similar practice.

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<PAGE>

ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES.

INVESTMENT ADVISORY SERVICES

SCMI, 787 Seventh Avenue, New York, New York, 10019, serves as Adviser to the
Portfolio pursuant to an investment advisory agreement. SCMI is a wholly owned
U.S. subsidiary of Schroders Incorporated, the wholly owned U.S. holding company
subsidiary of Schroders plc. Schroders plc is the holding company parent of a
large worldwide group of banks and financial service companies (referred to as
the "Schroder Group"), with associated companies and branch and representative
offices located in seventeen countries worldwide. The Schroder Group
specializes in providing investment management services, with Group funds under
management currently in excess of $130 billion.

Pursuant to the investment advisory agreement, SCMI is responsible for managing
the investment and reinvestment of the assets included in the Portfolio and for
continuously reviewing, supervising and administering the Portfolio's
investments. In this regard, it is the responsibility of SCMI to make decisions
relating to the Portfolio's investments and to place purchase and sale orders
regarding such investments with brokers or dealers selected by it in its
discretion. SCMI also furnishes to the Board, which has overall responsibility
for the business and affairs of the Trust, periodic reports on the investment
performance of the Portfolio.

Under the terms of the investment advisory agreement, SCMI is required to manage
the Portfolio's investment portfolio in accordance with applicable laws and
regulations. In making its investment decisions, SCMI does not use material
information that may be in its possession or in the possession of its
affiliates.

The investment advisory agreement will continue in effect provided such
continuance is approved annually (i) by the holders of a majority of the
outstanding voting securities of the Portfolio (as defined by the 1940 Act) or
by the Board and (ii) by a majority of the Trustees who are not parties to such
agreement or "interested persons" (as defined in the 1940 Act) of any such
party. The investment advisory agreement may be terminated without penalty by
vote of the Trustees or the interestholders of the Portfolio on 60 days' written
notice to the Adviser, or by the Adviser on 60 days' written notice to the Trust
and it will terminate automatically if assigned. The investment advisory
agreement also provides that, with respect to the Portfolio, neither SCMI nor
its personnel shall be liable for any error of judgment or mistake of law or for
any act or omission in the performance of its or their duties to the Portfolio,
except for willful misfeasance, bad faith or gross negligence in the performance
of the SCMI's or their duties or by reason of reckless disregard of its or their
obligations and duties under the investment advisory agreement.

For its services, the Portfolio pays SCMI a fee at an annual rate of 0.45% of
its average daily net assets.

ADMINISTRATIVE SERVICES

On behalf of the Portfolio, the Trust has entered into an administration
agreement with Schroder Fund Advisors Inc. ("Schroder Advisors"), 787 Seventh
Avenue, New York, New York 10019. The Trust has also entered into a sub-
administration agreement with Forum Administrative Services, Limited Liability
Company ("Forum"). Pursuant to their agreements, Schroder Advisors and Forum
provide certain management and administrative services necessary for the
Portfolio's operations, other than the investment management and administrative
services provided to the Portfolio by SCMI pursuant to the investment advisory
agreement, including among other things, (i) preparation of shareholder reports
and communications, (ii) regulatory compliance, such as reports to and filings
with the Securities and Exchange Commission and state securities commissions,
and (iii) general supervision of the operation of the Portfolio, including
coordination of the services performed by the Portfolio's investment adviser,
transfer agent, custodian, independent accountants, legal counsel and others.
Schroder Advisors is a wholly owned subsidiary of SCMI, and is a registered
broker-dealer organized to act as administrator and distributor of mutual funds.
Effective July 5, 1995, Schroder Advisors changed its name from Schroder Capital
Distributors Inc.

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<PAGE>

For these services, Schroder Advisors is entitled to receive from the Portfolio
a fee at the annual rate of 0.075% of the Portfolio's average daily net assets.
Forum is entitled to receive from the Portfolio a fee at the annual rate of
0.075% of the Portfolio's average daily net assets for its services.

The administrative services agreement and sub-administration agreement are
terminable with respect to the Portfolio without penalty, at any time, by vote
of a majority of the Trustees who are not "interested persons" of the Trust and
who have no direct or indirect financial interest in the operation of the
Portfolio's Distribution Plan or in the administrative services agreement or
sub-administration agreement, upon not more than 60 days' written notice to
Schroder Advisors or Forum, as appropriate, or by vote of the holders of a
majority of the shares of the Portfolio, or, upon 60 days' notice, by Schroder
Advisors or Forum. The administrative services agreement will terminate
automatically in the event of its assignment.

The sub-administration agreement is terminable with respect to the Portfolio
without penalty, at any time, by the Board and the Adviser upon 60 days' written
notice to Forum or by Forum upon 60 days' written notice to the Portfolio and
the Adviser, as appropriate.

CUSTODIAN

The Chase Manhattan Bank, N.A., through its Global Securities Services division
located in London, England, acts as custodian of the Portfolio's assets, but
plays no role in making decisions as to the purchase or sale of portfolio
securities for the Portfolio. Pursuant to rules adopted under the 1940 Act, the
Portfolio may maintain its foreign securities and cash in the custody of certain
eligible foreign banks and securities depositories. Selection of these foreign
custodial institutions is made by the Board following a consideration of a
number of factors, including (but not limited to) the reliability and financial
stability of the institution; the ability of the institution to perform capably
custodial services for the Portfolio; the reputation of the institution in its
national market; the political and economic stability of the country in which
the institution is located; and further risks of potential nationalization or
expropriation of Portfolio assets.

INDEPENDENT AUDITORS

Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts 02109,
serves as independent auditors for the Trust.

ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES.

INVESTMENT DECISIONS

Investment decisions for the Portfolio and for the other investment advisory
clients of SCMI are made with a view to achieving their respective investment
objectives. Investment decisions are the product of many factors in addition to
basic suitability for the particular client involved. Thus, a particular
security may be bought or sold for certain clients even though it could have
been bought or sold for other clients at the same time. Likewise, a particular
security may be bought for one or more clients when one or more clients are
selling the security. In some instances, one client may sell a particular
security to another client. It also sometimes happens that two or more clients
simultaneously purchase or sell the same security, in which event each day's
transactions in such security are, insofar as is possible, averaged as to price
and allocated between such clients in a manner which in SCMI's opinion is
equitable to each and in accordance with the amount being purchased or sold by
each. There may be circumstances when purchases or sales of portfolio
securities for one or more clients will have an adverse effect on other clients.

BROKERAGE AND RESEARCH SERVICES

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<PAGE>

charge different commissions according to such factors as the difficulty and
size of the transaction. Transactions in foreign securities generally involve
the payment of fixed brokerage commissions, which are generally higher than
those in the United States. Since most brokerage transactions for the Portfolio
will be placed with foreign broker-dealers, certain portfolio transaction costs
for the Portfolio may be higher than fees for similar transactions executed on
U.S. securities exchanges. There is generally no stated commission in the case
of securities traded in the over-the-counter markets, but the price paid by the
Portfolio usually includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid by the Portfolio includes a disclosed,
fixed commission or discount retained by the underwriter or dealer.

The Investment Advisory Contract authorizes and directs SCMI to place orders for
the purchase and sale of the Portfolio's investments with brokers or dealers
selected by SCMI in its discretion and to seek "best execution" of such
portfolio transactions. SCMI places all such orders for the purchase and sale
of portfolio securities and buys and sells securities for the Portfolio through
a substantial number of brokers and dealers. In so doing, SCMI uses its best
efforts to obtain for the Portfolio the most favorable price and execution
available. The Portfolio may, however, pay higher than the lowest available
commission rates when SCMI believes it is reasonable to do so in light of the
value of the brokerage and research services provided by the broker effecting
the transaction. In seeking the most favorable price and execution, SCMI,
having in mind the Portfolio's best interests, considers all factors it deems
relevant, including, by way of illustration, price, the size of the transaction,
the nature of the market for the security, the amount of the commission, the
timing of the transaction taking into account market prices and trends, the
reputation, experience and financial stability of the broker-dealers involved
and the quality of service rendered by the broker-dealers in other transactions.

It has for many years been a common practice in the investment advisory business
as conducted in certain countries, including the United States, for advisers of
investment companies and other institutional investors to receive research
services from broker-dealers which execute portfolio transactions for the
clients of such advisers. Consistent with this practice, SCMI may receive
research services from broker-dealers with which SCMI places the Portfolio's
portfolio transactions. These services, which in some cases may also be
purchased for cash, include such items as general economic and security market
reviews, industry and company reviews, evaluations of securities and
recommendations as to the purchase and sale of securities. Some of these
services are of value to SCMI in advising various of its clients (including the
Portfolio), although not all of these services are necessarily useful and of
value in managing the Portfolio. The investment advisory fee paid by the
Portfolio is not reduced because SCMI and its affiliates receive such services.

As permitted by Section 28(e) of the Securities Exchange Act of 1934 (the
"Act"), SCMI may cause the Portfolio to pay a broker-dealer which provides
"brokerage and research services" (as defined in the Act) to SCMI an amount of
disclosed commission for effecting a securities transaction for the Portfolio in
excess of the commission which another broker-dealer would have charged for
effecting that transaction.

Subject to the general policies regarding allocation of portfolio brokerage as
set forth above, the Board has authorized SCMI to employ Schroder Securities
Limited and its affiliates (collectively, "Schroder Securities"), which are
affiliated with SCMI, to effect securities transactions of the Portfolio on
various foreign securities exchanges on which Schroder Securities has trading
privileges, provided certain other conditions are satisfied as described below.

Payment of brokerage commissions to Schroder Securities for effecting such
transactions is subject to Section 17(e) of the 1940 Act, which requires, among
other things, that commissions for transactions on securities exchanges paid by
a registered investment company to a broker which is an affiliated person of
such investment company or an affiliated person of another person so affiliated
not exceed the usual and customary broker's commissions for such transactions.
It is the Portfolio's policy that commissions paid to Schroder Securities will
in the judgment of the officers of SCMI responsible for making portfolio
decisions and selecting brokers, be (i) at least as favorable as commissions
contemporaneously charged by Schroder Securities on comparable transactions for
its most favored unaffiliated customers and (ii) at least as favorable as those
which would be charged on comparable transactions by other qualified brokers
having comparable execution capability. The Board of Trustees, including a
majority of the non-interested Trustees, has adopted procedures pursuant to Rule
17e-1 promulgated by the Securities and

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<PAGE>

Exchange Commission under Section 17(e) to ensure that commissions paid to
Schroder Securities by the Portfolio satisfy the foregoing standards. The Board
will review all transactions at least quarterly for compliance with these
procedures.

The Portfolio has no understanding or arrangement to direct any specific portion
of its brokerage to Schroder Securities and will not direct brokerage to
Schroder Securities in recognition of research services. Schroder Securities
commenced operations in 1990.

ITEM 18. CAPITAL STOCK AND OTHER SECURITIES.

Under the Trust Instrument, the Trustees are authorized to issue beneficial
interest in one or more separate and distinct series. Investments in the
Portfolio have no preference, preemptive, conversion or similar rights and are
fully paid and nonassessable, except as set forth below. Each investor in the
Portfolio is entitled to a vote in proportion to the amount of its investment
therein. Investors in the Portfolio and other series (collectively, the
"portfolios") of the Trust will all vote together in certain circumstances
(e.g., election of the Trustees and ratification of auditors, as required by the
1940 Act and the rules thereunder). One or more portfolios could control the
outcome of these votes. Investors do not have cumulative voting rights, and
investors holding more than 50% of the aggregate interests in the Trust or in
the Portfolio, as the case may be, may control the outcome of votes. The Trust
is not required and has no current intention to hold annual meetings of
investors, but the Trust will hold special meetings of investors when (1) a
majority of the Trustees determines to do so or (2) investors holding at least
10% of the interests in the Trust (or the Portfolio) request in writing a
meeting of investors in the Trust (or Portfolio). Except for certain matters
specifically described in the Trust Instrument, the Trustees may amend the
Trust's Trust Instrument without the vote of investors.

The Trust, with respect to the Portfolio, may enter into a merger or
consolidation, or sell all or substantially all of its assets, if approved by
the Trust's Board. The Portfolio may be terminated (1) upon liquidation and
distribution of its assets, if approved by the vote of a majority of the
Portfolio's outstanding voting securities (as defined in the 1940 Act) or (2) by
the Trustees on written notice to the Portfolio's investors. Upon liquidation
or dissolution of any Portfolio, the investors therein would be entitled to
share pro rata in its net assets available for distribution to investors.

The Trust is organized as a business trust under the laws of the State of
Delaware. The Trust's interestholders are not personally liable for the
obligations of the Trust under Delaware law. The Delaware Business Trust Act
provides that an interestholder of a Delaware business trust shall be entitled
to the same limitation of liability extended to shareholders of private
corporations for profit. However, no similar statutory or other authority
limiting business trust interestholder liability exists in many other states,
including Texas. As a result, to the extent that the Trust or an interestholder
is subject to the jurisdiction of courts in those states, the courts may not
apply Delaware law, and may thereby subject the Trust to liability. To guard
against this risk, the Trust Instrument of the Trust disclaims liability for
acts or obligations of the Trust and requires that notice of such disclaimer be
given in each agreement, obligation and instrument entered into by the Trust or
its Trustees, and provides for indemnification out of Trust property of any
interestholder held personally liable for the obligations of the Trust. Thus,
the risk of an interestholder incurring financial loss beyond his investment
because of shareholder liability is limited to circumstances in which (1) a
court refuses to apply Delaware law, (2) no contractual limitation of liability
is in effect, and (3) the Trust itself is unable to meet its obligations. In
light of Delaware law, the nature of the Trust's business, and the nature of its
assets, the Board believes that the risk of personal liability to a Trust
interestholder is remote.

ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES.

Interests in the Portfolio are issued solely in private placement transactions
that do not involve any "public offering" within the meaning of section 4(2) of
the 1933 Act. All investments in the Portfolio are made and withdrawn at the
net asset value ("NAV") next determined after an order is received by the
Portfolio. NAV per share is calculated by dividing the aggregate value of the
Portfolio's assets less all liabilities by the number of shares of the Portfolio
outstanding. See Items 6, 7 and 8 in Part A.

ITEM 20. TAX STATUS.

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<PAGE>

The Portfolio will be classified for federal income tax purposes as a
partnership that will not be a "publicly traded partnership." As a result, the
Portfolio will not be subject to federal income tax; instead, each investor in
the Portfolio will be required to take into account in determining its federal
income tax liability its share of the Portfolio's income, gains, losses,
deductions, and credits, without regard to whether it has received any cash
distributions from the Portfolio. The Portfolio also will not be subject to
Delaware income or franchise tax.

Each investor in the Portfolio will be deemed to own a proportionate share of
the Portfolio's assets, and to earn a proportionate share of the Portfolio's
income, for, among other things, purposes of determining whether the investor
satisfies the requirements to qualify as a regulated investment company ("RIC").
Accordingly, the Portfolio intends to conduct its operations so that its
investors that intend to qualify as RICs ("RIC investors") will be able to
satisfy all those requirements.

Distributions to an investor from the Portfolio (whether pursuant to a partial
or complete withdrawal or otherwise) will not result in the investor's
recognition of any gain or loss for federal income tax purposes, except that (1)
gain will be recognized to the extent any cash that is distributed exceeds the
investor's basis for its interest in the Portfolio before the distribution, (2)
income or gain will be recognized if the distribution is in liquidation of the
investor's entire interest in the Portfolio and includes a disproportionate
share of any unrealized receivables held by the Portfolio, (3) loss will be
recognized if a liquidation distribution consists solely of cash and/or
unrealized receivables, and (4) gain or loss may be recognized on a distribution
to an investor that contributed property to the Portfolio. An investor's basis
for its interest in the Portfolio generally will equal the amount of cash and
the basis of any property it invests in the Portfolio, increased by the
investor's share of the Portfolio's net income and gains and decreased by (a)
the amount of cash and the basis of any property the Portfolio distributes to
the investor and (b) the investor's share of the Portfolio's losses.

Dividends and interest received by the Portfolio may be subject to income,
withholding, or other taxes imposed by foreign countries and; U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors.

The Portfolio may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation that, in general, meets either of
the following tests: (1) at least 75% of its gross income is passive or (2) an
average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, a RIC that holds stock of a
PFIC (including a RIC investor's indirect holding thereof through its interest
in the Portfolio) will be subject to federal income tax on a portion of any
"excess distribution" received on the stock or of any gain on disposition of the
stock (collectively "PFIC income"), plus interest thereon, even if the RIC
distributes the PFIC income as a taxable dividend to its shareholders. The
balance of the PFIC income will be included in the RIC's investment company
taxable income and, accordingly, will not be taxable to it to the extent that
income is distributed to its shareholders.

If the Portfolio invests in a PFIC and elects to treat the PFIC as a "qualified
electing fund," then in lieu of the foregoing tax and interest obligation, the
Portfolio would be required to include in income each year its pro rata share of
the qualified electing fund's annual ordinary earnings and net capital gain (the
excess of net long-term capital gain over net short-term capital loss) - which
most likely would have to be distributed by the Portfolio's RIC investors to
satisfy the distribution requirements applicable to them - even if those
earnings and gain were not received by it. In most instances it will be very
difficult, if not impossible, to make this election because of certain
requirements thereof.

Three bills passed by Congress in 1991 and 1992 and vetoed by President Bush
would have substantially modified the taxation of U.S. shareholders of foreign
corporations, including eliminating the provisions described above dealing with
PFICs and replacing them (and other provisions) with a regulatory scheme
involving entities called "passive foreign corporations." The "Tax
Simplification and Technical Corrections Bill of 1993," passed in May 1994 by
the House of Representatives, contains the same modifications. It is unclear at
this time whether, and in what form, the proposed modifications may be enacted
into law.

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<PAGE>

year the excess, as of the end of that year, of the fair market value of each
such PFIC's stock over the adjusted basis in that stock (including marked-to-
market gain for each prior year for which an election was in effect).

The Portfolio's use of hedging strategies, such as writing (selling) and
purchasing options and futures and entering into forward contracts, involves
complex rules that will determine for income tax purposes the character and
timing of recognition of the gains and losses the Portfolio realizes in
connection therewith. The Portfolio's income from foreign currencies (except
certain gains therefrom that may be excluded by future regulations), and income
from transactions in hedging instruments derived by it with respect to its
business of investing in securities or foreign currencies, will qualify as
permissible income for its RIC investors under the requirement that at least 90%
of a RIC's gross income each taxable year consist of specified types of income.
However, income from the disposition by the Portfolio of hedging instruments
(other than those on foreign currencies) held for less than three months will be
subject to the requirement applicable to its RIC investors that less than 30% of
a RIC's gross income each taxable year consist of certain short-term gains
("Short-Short Limitation"). Income from the disposition of foreign currencies,
and hedging instruments on foreign currencies, that are not directly related to
the Portfolio's principal business of investing in securities (or options and
futures with respect thereto) also will be subject to the Short-Short Limitation
for its RIC investors if they are held for less than three months.

If the Portfolio satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease in
value (whether realized or not) of the offsetting hedging position during the
period of the hedge for purposes of determining whether its RIC investors
satisfy the Short-Short Limitation. Thus, only the net gain (if any) from the
designated hedge will be included in gross income for purposes of that
limitation. The Portfolio will consider whether it should seek to qualify for
this treatment for its hedging transactions. To the extent the Portfolio does
not so qualify, it may be forced to defer the closing out of certain hedging
instruments beyond the time when it otherwise would be advantageous to do so, in
order for its RIC investors to qualify or continue to qualify as RICs.

ITEM 21. UNDERWRITERS.

Forum Financial Services, Inc. ("FFSI"), Two Portland Square, Portland, Maine
04101 serves as the Trust's placement agent. Forum will receive no compensation
for such placement agent services.

ITEM 22. CALCULATIONS OF PERFORMANCE DATA.

Not applicable.

ITEM 23. FINANCIAL STATEMENTS.

The statement of assets and liabilities for each Portfolio and the note thereto
at October 31, 1996, and the report of Coopers & Lybrand L.L.P., independent
accountants, are included herein, given on the authority of such firm as experts
in auditing and accounting.

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<PAGE>

PART B
(STATEMENT OF ADDITIONAL INFORMATION)

SCHRODER CAPITAL FUNDS
________

SCHRODER EMERGING MARKETS FUND
INSTITUTIONAL PORTFOLIO

MARCH 1, 1997

ITEM 10. COVER PAGE.

Not applicable.

ITEM 11. TABLE OF CONTENTS.

General Information and History. . . . . . . . . . . . . . . . . . . . . B-1
Investment Objectives and Policies . . . . . . . . . . . . . . . . . . . B-1
Management of the Trust. . . . . . . . . . . . . . . . . . . . . . . . . B-14
Control Persons and Principal Holders of Securities. . . . . . . . . . . B-16
Investment Advisory and Other Services . . . . . . . . . . . . . . . . . B-17
Brokerage Allocation and Other Practices . . . . . . . . . . . . . . . . B-18
Capital Stock and Other Securities . . . . . . . . . . . . . . . . . . . B-18
Purchase, Redemption and Pricing of Securities . . . . . . . . . . . . . B-21
Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-21
Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-22
Calculations of Performance Data . . . . . . . . . . . . . . . . . . . . B-22
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . B-22

ITEM 12. GENERAL INFORMATION AND HISTORY.

Not applicable.

ITEM 13. INVESTMENT OBJECTIVES AND POLICIES.

INVESTMENT POLICIES

INTRODUCTION

Part A contains information about the investment objectives, policies and
restrictions of Schroder Emerging Markets Fund Institutional Portfolio (the
"Portfolio"), a series of Schroder Capital Funds (the "Trust"). The following
discussion is intended to supplement the disclosure in Part A concerning the
Portfolio's investments, investment techniques and strategies and the risks
associated therewith. This Part B should be read only in conjunction with Part
A.

DEFINITIONS

As used in Part B, the following terms shall have the meanings listed:

"Board" shall mean the Board of Trustees of the Trust.
<PAGE>

"1933 Act" shall mean the Securities Act of 1933, as amended.

"1940 Act" shall mean the Investment Company Act of 1940, as amended.

"Commission" shall mean the U.S. Securities and Exchange Commission.

CONVERTIBLE SECURITIES

The Portfolio may invest in convertible preferred stocks and convertible debt
securities. A convertible security is a bond, debenture, note, preferred stock
or other security that may be converted into or exchanged for a prescribed
amount of common stock of the same or a different issuer within a particular
period of time at a specified price or formula. Convertible securities rank
senior to common stocks in a corporation's capital structure and, therefore,
entail less risk than the corporation's common stock. The value of a
convertible security is a function of its "investment value" (its value as if it
did not have a conversion privilege), and its "conversion value" (the security's
worth if it were to be exchanged for the underlying security, at market value,
pursuant to its conversion privilege).

DEBT-TO-EQUITY CONVERSIONS

The Portfolio may participate in up to 5% of its net assets in debt-to-equity
conversions. Debt-to-equity conversion programs are sponsored in varying
degrees by certain emerging market countries, particularly in Latin America, and
permit investors to use external debt of a country to make equity investments in
local companies. Many conversion programs relate primarily to investments in
transportation, communication, utilities and similar infrastructure related
areas. The terms of the programs vary from country to country, but include
significant restrictions on the application of the proceeds received in the
conversion and on the repatriation of investment profits and capital. In
inviting conversion applications by holders of eligible debt, a government will
usually specify a minimum discount from par value that it will accept for
conversion. The Adviser believes that debt-to-equity conversion programs may
offer investors opportunities to invest in otherwise restricted equity
securities with a potential for significant capital appreciation and, to a
limited extent, intends to invest assets of the Portfolio in such programs in
appropriate circumstances. There can be no assurance that debt-to-equity
conversion programs will continue or be successful or that the Portfolio will be
able to convert all or any of its emerging market debt portfolio into equity
investments.

U.S. GOVERNMENT SECURITIES

The Portfolio may invest in obligations issued or guaranteed by the U.S.
government or its agencies, instrumentalities or government-sponsored
enterprises that have remaining maturities not exceeding one year. Agencies and
instrumentalities which issue or guarantee debt securities and which have been
established or sponsored by the U.S. Government include the Bank for
Cooperatives, the Export-Import Bank, the Federal Farm Credit System, the
Federal Home Loan Banks, the Federal Home Loan Mortgage Corporation, the Federal
Intermediate Credit Banks, the Federal Land Banks, the Federal National Mortgage
Association, the Government National Mortgage Association and the Student Loan
Marketing Association. Except for obligations issued by the U.S. Treasury and
the Government National Mortgage Association, none of the obligations of the
other agencies, instrumentalities or government-sponsored enterprises referred
to above are backed by the full faith and credit of the U.S. Government. There
can be no assurance that the U.S. Government will provide financial support to
these obligations if it is not obligated to do so.

BANK OBLIGATIONS

The Portfolio may invest in obligations of U.S. banks (including certificates of
deposit and bankers' acceptances) having total assets at the time of purchase in
excess of $1 billion. Such banks must be members of the Federal Deposit
Insurance Corporation. The portfolio may also hold cash and time deposits
denominated in any major currency in foreign banks.

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<PAGE>

SHORT-TERM DEBT SECURITIES

The Portfolio may invest in commercial paper, that is short-term unsecured
promissory notes issued in bearer form by bank holding companies, corporations
and finance companies. The commercial paper purchased by the Portfolio for
temporary defensive purposes consists of direct obligations of domestic issuers
which, at the time of investment, are rated "P-1" by Moody's Investors Service,
Inc. ("Moody's") or "A-1" by Standard & Poor's Ratings Services ("S&P"), or
securities which, if not rated, are issued by companies having an outstanding
debt issue currently rated Aaa or Aa by Moody's or AAA or AA by S&P. The rating
"P-1" is the highest commercial paper rating assigned by Moody's and the rating
"A-1" is the highest commercial paper rating assigned by S&P.

REPURCHASE AGREEMENTS

The Portfolio may invest in securities subject to repurchase agreements with
U.S. banks or broker-dealers maturing in seven days or less. In a typical
repurchase agreement the seller of a security commits itself at the time of the
sale to repurchase that security from the buyer at a mutually agreed-upon time
and price. The repurchase price exceeds the sale price, reflecting an agreed-
upon interest rate effective for the period the buyer owns the security subject
to repurchase. The agreed-upon rate is unrelated to the interest rate on that
security. SCMI will monitor the value of the underlying collateral held at all
times during the term of the repurchase agreement to insure that the value of
the collateral always equals or exceeds the repurchase price. In the event of
default by the seller under the repurchase agreement, the Portfolio may have
difficulties in exercising its rights to the underlying collateral and may incur
costs and experience time delays in connection with the disposition of such
collateral. To evaluate potential risks, SCMI reviews the credit-worthiness of
those banks and dealers with which the Portfolio enters into repurchase
agreements.

ILLIQUID AND RESTRICTED SECURITIES

"Illiquid and Restricted Securities" under "Additional Investment Policies" in
the Part A sets forth the circumstances in which the Portfolio may invest in
"restricted securities." In connection with the Portfolio's original purchase
of restricted securities it may negotiate rights with the issuer to have such
securities registered for sale at a later time. Further, the expenses of
registration of restricted securities that are illiquid may also be negotiated
by the Portfolio with the issuer at the time such securities are purchased by
the Portfolio. When registration is required, however, a considerable period
may lapse between a decision to sell the securities and the time the Portfolio
would be permitted to sell such securities. A similar delay might be
experienced in attempting to sell such securities pursuant to an exemption from
registration. Thus, the Portfolio may not be able to obtain as favorable a
price as that prevailing at the time of the decision to sell.

LOANS OF PORTFOLIO SECURITIES

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<PAGE>

finders' or administrative fees the Portfolio pays in arranging the loan. The
Portfolio may share the interest it receives on the collateral securities with
the borrower as long as it realizes at least a minimum amount of interest
required by the lending guidelines established by the Board. The Portfolio will
not lend its portfolio securities to any officer, director, employee or
affiliate of the Portfolio or SCMI. The terms of the Portfolio's loans must
meet certain tests under the Internal Revenue Code and permit the Portfolio to
reacquire loaned securities on five business days' notice or in time to vote on
any important matter.

Portfolio securities purchased with cash collateral are subject to possible
depreciation. Loans of securities by the Portfolio will be subject to
termination at the Portfolio's or the borrower's option. The Portfolio may pay
reasonable negotiated fees in connection with loaned securities, so long as such
fees are set forth in a written contract and approved by the Board.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

To hedge against adverse price movements in the securities held in its portfolio
and the currencies in which they are denominated (as well as in the securities
it might wish to purchase and their denominated currencies) the Portfolio may
engage in transactions in forward foreign currency contracts.

A forward foreign currency exchange contract ("forward contract") involves an
obligation to purchase or sell a currency at a future date, which may be any
fixed number of days from the date of the contract agreed upon by the parties,
at a price set at the time of the contract. The Portfolio may enter into
forward contracts as a hedge against fluctuations in future foreign exchange
rates.

Currently, only a limited market, if any, exists for hedging transactions
relating to currencies in many emerging market countries or to securities of
issuers domiciled or principally engaged in business in emerging market
countries. This may limit the Portfolio's ability to effectively hedge its
investments in those emerging markets. Hedging against a decline in the value
of a currency does not eliminate fluctuations in the prices of portfolio
securities or prevent losses if the prices of such securities decline. Such
transactions also limit the opportunity for gain if the value of the hedged
currencies should rise. In addition, it may not be possible for the Portfolio
to hedge against a devaluation that is so generally anticipated that the
Portfolio is not able to contract to sell the currency at a price above the
devaluation level it anticipates.

In addition, when the Portfolio anticipates purchasing securities at some future
date, and wishes to secure the current exchange rate of the currency in which
those securities are denominated against the U.S. dollar or some other foreign
currency, it may enter into a forward contract to purchase an amount of currency
equal to part or all of the value of the anticipated purchase, for a fixed
amount of U.S. dollars or other currency.

In all of the above instances, if the currency in which the Portfolio's
portfolio securities (or anticipated portfolio securities) are denominated rises
in value with respect to the currency which is being purchased, then the
Portfolio will have realized fewer gains than if the Portfolio had not entered
into the forward contracts. Furthermore, the precise matching of the forward
contract amounts and the value of the securities involved will not generally be
possible, since the future value of such securities in foreign currencies will
change as a consequence of market movements in the value of those securities
between the date the forward contract is entered into and the date it matures.

- B4 -
<PAGE>

To the extent that the Portfolio enters into forward foreign currency contracts
to hedge against a decline in the value of portfolio holdings denominated in a
particular foreign currency resulting from currency fluctuations, there is a
risk that the Portfolio may nevertheless realize a gain or loss as a result of
currency fluctuations after such portfolio holdings are sold should the
Portfolio be unable to enter into an "offsetting" forward foreign currency
contract with the same party or another party. The Portfolio may be limited in
its ability to enter into hedging transactions involving forward contracts by
the Internal Revenue Code requirements relating to qualifications as a regulated
investment company (see "Taxation").

OPTIONS AND FUTURES TRANSACTIONS

As discussed in Part A, the Portfolio may write covered call options against
securities held in its portfolio and covered put options on eligible portfolio
securities and purchase options of the same series to effect closing
transactions, and may hedge against potential changes in the market value of its
investments (or anticipated investments) by purchasing put and call options on
portfolio (or eligible portfolio) securities (and the currencies in which they
are denominated) and engaging in transactions involving futures contracts and
options on such contracts.

The OCC or other clearing corporation or exchange which issues listed options
assures that all transactions in such options are properly executed. OTC
options are purchased from or sold (written) to dealers or financial
institutions which have entered into direct agreements with the Portfolio. With
OTC options, such variables as expiration date, exercise price and premium will
be agreed between the Portfolio and the transacting dealer. If the transacting
dealer fails to make or take delivery of the securities or amount of foreign
currency underlying an option it has written, the Portfolio would lose the
premium paid for the option as well as any anticipated benefit of the
transaction. The Portfolio will engage in OTC option transactions only with
member banks of the Federal Reserve System or primary dealers in U.S. Government
securities or with affiliates of such banks or dealers which have capital of at
least $50 million or whose obligations are guaranteed by an entity having
capital of at least $50 million.

OPTIONS ON FOREIGN CURRENCIES. The Portfolio may purchase and write options on
foreign currencies for purposes similar to those involved with investing in
forward foreign currency exchange contracts. For example, in order to protect
against declines in the dollar value of portfolio securities which are
denominated in a foreign currency, the Portfolio may purchase put options on an
amount of such foreign currency equivalent to the current value of the portfolio
securities involved. As a result, the Portfolio would be able to sell the
foreign currency for a fixed amount of U.S. dollars, thereby securing the dollar
value of the portfolio securities (less the amount of the premiums paid for the
options). Conversely, the Portfolio may purchase call options on foreign
currencies in which securities it anticipates purchasing are denominated to
secure a set U.S. dollar price for such securities and protect against a

- B5 -
<PAGE>

decline in the value of the U.S. dollar against such foreign currency. The
Portfolio may also purchase call and put options to close out written option
positions.

The Portfolio may also write covered call options on foreign currency to protect
against potential declines in its portfolio securities which are denominated in
foreign currencies. If the U.S. dollar value of the portfolio securities falls
as a result of a decline in the exchange rate between the foreign currency in
which it is denominated and the U.S. dollar, then a loss to the Portfolio
occasioned by such value decline would be ameliorated by receipt of the premium
on the option sold. At the same time, however, the Portfolio gives up the
benefit of any rise in value of the relevant portfolio securities above the
exercise price of the option and, in fact, only receives a benefit from the
writing of the option to the extent that the value of the portfolio securities
falls below the price of the premium received. The Portfolio may also write
options to close out long call option positions. A covered put option on a
foreign currency would be written by the Portfolio for the same reason it would
purchase a call option, namely, to hedge against an increase in the U.S. dollar
value of a foreign security which the Portfolio anticipates purchasing. Here,
the receipt of the premium would offset, to the extent of the size of the
premium, any increased cost to the Portfolio resulting from an increase in the
U.S. dollar value of the foreign security. However, the Portfolio could not
benefit from any decline in the cost of the foreign security which is greater
than the price of the premium received. The Portfolio may also write options to
close out long put option positions.

The markets in foreign currency options are relatively new and the Portfolio's
ability to establish and close out positions on such options is subject to the
maintenance of a liquid secondary market. Although the Portfolio will not
purchase or write such options unless and until, in the opinion of the Adviser,
the market for them has developed sufficiently to ensure that the risks in
connection with such options are not greater than the risks in connection with
the underlying currency, there can be no assurance that a liquid secondary
market will exist for a particular option at any specific time. In addition,
options on foreign currencies are affected by all of those factors which
influence foreign exchange rates and investments generally.

The value of a foreign currency option depends upon the value of the underlying
currency relative to the U.S. dollar. As a result, the price of the option
position may vary with changes in the value of either or both currencies and
have no relationship to the investment merits of a foreign security, including
foreign securities held in a "hedged" investment portfolio. Because foreign
currency transactions occurring in the interbank market involve substantially
larger amounts than those that may be involved in the use of foreign currency
options, investors may be disadvantaged by having to deal in an odd lot market
(generally consisting of transactions of less than $1 million) for the
underlying foreign currencies at prices that are less favorable than for round
lots.

There is no systematic reporting of last sale information for foreign currencies
or any regulatory requirement that quotations available through dealers or other
market sources be firm or revised on a timely basis. Quotation information
available is generally representative of very large transactions in the
interbank market and thus may not reflect relatively smaller transactions (i.e.,
less than $1 million) where rates may be less favorable. The interbank market
in foreign currencies is a global, around-the-clock market. To the extent that
the U.S. options markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements may take place in
the underlying markets that are not reflected in the options market.

COVERED CALL WRITING. The Portfolio is permitted to write covered call options
on portfolio securities and on the U.S. dollar and foreign currencies in which
they are denominated, without limit. Generally, a call option is "covered" if
the Portfolio owns, or has the right to acquire, without additional cash
consideration (or for additional cash consideration held for the Portfolio by
its custodian in a segregated account) the underlying security (currency)
subject to the option except that in the case of call options on U.S. Treasury
Bills, the Portfolio might own U.S. Treasury Bills of a different series from
those underlying the call option, but with a principal amount and value
corresponding to the exercise price and a maturity date no later than that of
the security (currency) deliverable under the call option. A call option is
also covered if the Portfolio holds a call on the same security as the
underlying security (currency) of the written option, where the exercise price
of the call used for coverage is equal to or less than the exercise price of the
call or greater than the exercise price of the call written if the mark to
market difference is maintained by the Portfolio in cash, U.S. Government
securities or other high grade debt obligations which the Portfolio holds in a
segregated account maintained with its custodian.

- B6 -
<PAGE>

The Portfolio will receive from the purchaser, in return for a call it has
written, a premium. Receipt of such premiums may enable the Portfolio to earn a
higher level of current income than it would earn from holding the underlying
securities (currencies) alone. Moreover, the premium received will offset a
portion of the potential loss incurred by the Portfolio if the securities
(currencies) underlying the option are ultimately sold (exchanged) by the
Portfolio at a loss. Furthermore, a premium received on a call written on a
foreign currency will ameliorate any potential loss of value on the portfolio
security due to a decline in the value of the currency. However, during the
option period, the covered call writer has, in return for the premium, given up
the opportunity for capital appreciation above the exercise price should the
market price of the underlying security (or the exchange rate of the currency in
which it is denominated) increase, but has retained the risk of loss should the
price of the underlying security (or the exchange rate of the currency in which
it is denominated) decline. The premium received will fluctuate with varying
economic market conditions. If the market value of the portfolio securities (or
the currencies in which they are denominated) upon which call options have been
written increases, the Portfolio may receive a lower total return from the
portion of its portfolio upon which calls have been written than it would have
had such calls not been written.

With respect to listed options and certain OTC options, during the option
period, the Portfolio may be required, at any time, to deliver the underlying
security (currency) against payment of the exercise price on any calls it has
written (exercise of certain listed and OTC options may be limited to specific
expiration dates). This obligation is terminated upon the expiration of the
option period or at such earlier time when the writer effects a closing purchase
transaction. A closing purchase transaction is accomplished by purchasing an
option of the same series as the option previously written. However, once the
Portfolio has been assigned an exercise notice, the Portfolio will be unable to
effect a closing purchase transaction.

Options written by the Portfolio will normally have expiration dates of up to
eighteen months from the date written. The exercised price of a call option may
be below, equal to or above the current market value of the underlying security
at the time the option is written.

- B7 -
<PAGE>

difference is maintained by the Portfolio in cash, U.S. Government securities or
other high grade debt obligations which the Portfolio holds in a segregated
account maintained at its custodian. In writing puts, the Portfolio assumes the
risk of loss should the market value of the underlying security (currency)
decline below the exercise price of the option (any loss being decreased by the
receipt of the premium on the option written). In the case of listed options,
during the option period, the Portfolio may be required, at any time, to make
payment of the exercise price against delivery of the underlying security
(currency). The operation of and limitations on covered put options in other
respects are substantially identical to those of call options.

The Portfolio will write put options for three purposes: (1) to receive the
income derived from the premiums paid by purchasers; (2) when the Adviser wishes
to purchase the security (or a security denominated in the currency underlying
the option) underlying the option at a price lower than its current market
price, in which case it will write the covered put at an exercise price
reflecting the lower purchase price sought; and (3) to close out a long put
option position. The potential gain on a covered put option is limited to the
premium received on the option (less the commissions paid on the transaction)
while the potential loss equals the differences between the exercise price of
the option and the current market price of the underlying securities
(currencies) when the put is exercised, offset by the premium received (less the
commissions paid on the transaction).

PURCHASING CALL AND PUT OPTIONS. The Portfolio may purchase listed and OTC call
and put options in amounts equaling up to 5% of its total assets. The Portfolio
may purchase a call option in order to close out a covered call position (see
"Covered Call Writing" above), to protect against an increase in price of a
security it anticipates purchasing or, in the case of a call option on foreign
currency, to hedge against an adverse exchange rate move of the currency in
which the security it anticipates purchasing is denominated vis-a-vis the
currency in which the exercise price is denominated. The purchase of the call
option to effect a closing transaction on a call written over-the-counter may be
a listed or an OTC option. In either case, the call purchased is likely to be
on the same securities (currencies) and have the same terms as the written
option. If purchased over-the-counter, the option would generally be acquired
from the dealer or financial institution which purchased the call written by the
Portfolio.

The Portfolio may purchase put options on securities (currencies) which it holds
in its portfolio to protect itself against a decline in the value of the
security and to close out written put option positions. If the value of the
underlying security (currency) were to fall below the exercise price of the put
purchased in an amount greater then the premium paid for the option, the
Portfolio would incur no additional loss. In addition, the Portfolio may sell a
put option which it has previously purchased prior to the sale of the securities
(currencies) underlying such option. Such a sale would result in a net gain or
loss depending on whether the amount received on the sale is more or less than
the premium and other transaction costs paid on the put option which is sold.
Any such gain or loss could be offset in whole or in part by a change in the
market value of the underlying security (currency). If a put option purchased
by the Portfolio expired without being sold or exercised, the premium would be
lost.

RISKS OF OPTIONS TRANSACTIONS. During the option period, the covered call
writer has, in return for the premium on the option, given up the opportunity
for capital appreciation above the exercise price should the market price of the
underlying security (or the value of its denominated currency) increase, but has
retained the risk of loss should the price of the underlying security (or the
value of its denominated currency) decline. The writer has no control over the
time when it may be required to fulfill its obligation as a writer of the
option. Once an option writer has received an exercise notice, it cannot effect
a closing purchase transaction in order to terminate its obligation under the
option and must deliver or receive the underlying securities at the exercise
price.

- B8 -
<PAGE>

The Portfolio's ability to close out its position as a writer of an option is
dependent upon the existence of a liquid secondary market on option exchanges.
There is no assurance that such a market will exist, particularly in the case of
OTC options, as such options will generally only be closed out by entering into
a closing purchase transaction with the purchasing dealer. However, the
Portfolio may be able to purchase an offsetting option which does not close out
its position as a writer but constitutes an asset of equal value to the
obligation under the option written. If the Portfolio is not able to either
enter into a closing purchase transaction or purchase an offsetting position, it
will be required to maintain the securities subject to the call, or the
collateral underlying the put, even though it might not be advantageous to do
so, until a closing transaction can be entered into (or the option is exercised
or expires).

Among the possible reasons for the absence of a liquid secondary market on an
exchange are: (I) insufficient trading interest in certain options; (ii)
restrictions on transactions imposed by an exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes or
series of options or underlying securities; (iv) interruption of the normal
operations on an exchange; (v) inadequacy of the facilities of an exchange or
the OCC to handle current trading volume; or (vi) a decision by one or more
exchanges to discontinue the trading of options (or a particular class or series
of options), in which event the secondary market on that exchange (or in that
class or series of options) would cease to exist.

Exchanges have established limitations governing the maximum number of options
on the same underlying security or futures contract (whether or not covered)
which may be written by a single investor, whether acting alone or in concert
with others (regardless of whether such options are written on the same or
different exchanges or are held or written on one or more accounts or through
one or more brokers). An exchange may order the liquidation of positions found
to be in violation of these limits and it may impose other sanctions or
restrictions. These position limits may restrict the number of listed options
which the Portfolio may write.

The hours of trading for options may not conform to the hours during which the
underlying securities are traded. To the extent that the option markets close
before the markets for the underlying securities, significant price and rate
movements can take place in the underlying markets that cannot be reflected in
the option markets.

FUTURES CONTRACTS. The Portfolio may purchase and sell interest rate, currency,
and index futures contracts ("futures contracts") that are traded on U.S. and
foreign commodity exchanges, on such underlying securities as U.S. Treasury
bonds, notes and bills, and/or any foreign government fixed-income security
("interest rate" futures), on various currencies ("currency futures") and on
such indices of U.S. and foreign securities as may exist or come into being
("index futures").

The Portfolio will purchase or sell interest rate futures contracts for the
purpose of hedging some or all of the value of its portfolio securities (or
anticipated portfolio securities) against changes in prevailing interest rates.
If the Adviser anticipates that interest rates may rise and, concomitantly, the
price of certain of its portfolio securities fall, the Portfolio may sell an
interest rate futures contract. If declining interest rates are anticipated,
the Portfolio may purchase an interest rate futures contract to protect against
a potential increase in the price of securities the Portfolio intends to
purchase. Subsequently, appropriate securities may be purchased by the
Portfolio in an orderly fashion; as securities are purchased, corresponding
futures positions would be terminated by offsetting sales of contracts.

- B9 -
<PAGE>

The Portfolio will purchase or sell index futures contracts for the purpose of
hedging some or all of its portfolio (or anticipated portfolio) securities
against changes in their prices. If the Adviser anticipates that the prices of
securities held by the Portfolio may fall, the Portfolio may sell an index
futures contract. Conversely, if the Portfolio wishes to hedge against
anticipated price rises in those securities which the Portfolio intends to
purchase, the Portfolio may purchase an index futures contract.

The Portfolio will purchase or sell currency futures on currencies in which its
portfolio securities (or anticipated portfolio securities) are denominated for
the purposes of hedging against anticipated changes in currency exchange rates.
The Portfolio will enter into currency futures contracts for the same reasons as
set forth above for entering into forward foreign currency exchange contracts;
namely, to secure the value of a security purchased or sold in a given currency
vis-a-vis a different currency or to hedge against an adverse currency exchange
rate movement of a portfolio security's (or anticipated portfolio security's)
denominated currency vis-a-vis a different currency.

In addition to the above, interest rate, index and currency futures will be
bought or sold in order to close out short or long positions maintained by the
Portfolio in corresponding futures contracts.

INTEREST RATE FUTURES CONTRACTS. When the Portfolio enters into an interest
rate futures contract, it is initially required to deposit with the Portfolio's
custodian, in a segregated account in the name of the broker performing the
transaction, an "initial margin" of cash or U.S. Government securities or other
high grade short-term obligations equal to approximately 2% of the contract
amount. Initial margin requirements are established by the exchanges on which
futures contracts trade and may, from time to time, change. In addition,
brokers may establish margin deposit requirements in excess of those required by
the exchanges.

Initial margin in futures transactions is different from margin in securities
transactions in that initial margin does not involve the borrowing of funds by a
brokers' client but is, rather, a good faith deposit on the futures contract
which will be returned to the Portfolio upon the proper termination of the
futures contract. The margin deposits made are marked to market daily and the
Portfolio may be required to make subsequent deposits of cash or U.S. Government
securities called "variation margin," with the Portfolio's futures contract
clearing broker, which are reflective of price fluctuations in the futures
contract.

CURRENCY FUTURES CONTRACTS. Generally, foreign currency futures provide for the
delivery of a specified amount of a given currency, on the exercise date, for a
set exercise price denominated in U.S. dollars or other currency. Foreign
currency futures contracts would be entered into for the same reason and under
the same circumstances as forward foreign currency exchange contracts. The
Adviser will assess such factors as cost spreads, liquidity and transaction
costs in determining whether to utilize futures contracts or forward contracts
in its foreign currency transactions and hedging strategy.

Purchasers and sellers of foreign currency futures contracts are subject to the
same risks that apply to the buying and selling of futures generally. In
addition, there are risks associated with foreign currency futures contracts and
their use as a hedging device similar to those associated with options on
foreign currencies described above. Further, settlement of a foreign currency
futures contract must occur within the country issuing the underlying currency.
Thus, the Portfolio must accept or make delivery of the underlying foreign
currency in accordance with any U.S. or foreign restrictions or regulations
regarding the maintenance of foreign banking arrangements by U.S. residents and

- B10 -
<PAGE>

may be required to pay any fees, taxes or charges associated with such delivery
which are assessed in the issuing country.

INDEX FUTURES CONTRACTS. The Portfolio may invest in index futures contracts.
An index futures contract sale creates an obligation by the Portfolio, as
seller, to deliver cash at a specified future time. An index futures contract
purchase would create an obligation by the Portfolio, as purchaser, to take
delivery of cash at a specified future time. Futures contracts on indices do
not require the physical delivery of securities, but provide for a final cash
settlement on the expiration date which reflects accumulated profits and losses
credited or debited to each party's account.

At any time prior to expiration of the futures contract, the Portfolio may elect
to close the position by taking an opposite position which will operate to
terminate the Portfolio's position in the futures contract. A final
determination of variation margin is then made, additional cash is required to
be paid by or released to the Portfolio and the Portfolio realizes a loss or
gain.

OPTIONS ON FUTURES CONTRACTS. The Portfolio may purchase and write call and put
options on futures contracts which are traded on an exchange and enter into
closing transactions with respect to such options to terminate an existing
position. An option on a futures contract gives the purchaser the right (in
return for the premium paid) to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the term of the option. Upon
exercise of the option, the delivery of the futures position by the writer of
the option to the holder of the option is accompanied by delivery of the
accumulated balance in the writer's futures margin account, which represents the
amount by which the market price of the futures contract at the time of exercise
exceeds, in case of a call, or is less than, in the case of a put, the exercise
price of the option on the futures contract.

The Portfolio may purchase and write options on futures contracts for identical
purposes to those set forth above for the purchase of a futures contract
(purchase of a call option or sale of a put option) and the sale of a futures
contract (purchase of a put option or sale of a call option), or to close out a
long or short position in futures contracts. If, for example, the Adviser
wished to protect against an increase in interest rates and the resulting
negative impact on the value of a portion of its fixed-income portfolio, it
might write a call option on an interest rate futures contract, the underlying
security of which correlates with the portion of the portfolio the Adviser seeks
to hedge. Any premiums received in the writing of options on futures contracts
may provide a further hedge against losses resulting from price declines in
portions of the Portfolio's investment portfolio.

Options on foreign currency futures contracts may involve certain additional
risks. Trading options on foreign currency futures contracts is relatively new.
The ability to establish and close out positions on such options is subject to
the maintenance of a liquid secondary market. To reduce this risk, the
Portfolio will not purchase or write options on foreign currency futures
contracts unless and until, in the Adviser's option, the market for such option
has developed sufficiently that the risks in connection with such options are
not greater than the risks in connection with transactions in the underlying
foreign currency futures contracts.

- B11 -
<PAGE>

assets which may be subject to a hedge position. In addition, in accordance
with the regulations of the Commodity Futures Trading Commission ("CFTC") under
which the Portfolio is exempted from registration as a commodity pool operator,
the Portfolio may only enter into futures contracts and options on futures
contracts transactions for purposes of hedging a part or all of its portfolio.
Except as described above, there are no other limitations on the use of futures
and options thereon by the Portfolio.

RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS. The Portfolio
may sell a futures contract to protect against the decline in the value of
securities (or the currency in which they are denominated) held by the
Portfolio. However, it is possible that the futures market may advance and the
value of securities (or the currency in which they are denominated) held in the
portfolio of the Portfolio may decline. If this occurred, the Portfolio would
lose money on the futures contract and also experience a decline in value of its
portfolio securities. While this might occur for only a very brief period or to
a very small degree, over time the value of a diversified portfolio will tend to
move in the same direction as the futures contracts.

If the Portfolio purchases a futures contract to hedge against the increase in
value of securities it intends to buy (or the currency in which they are
denominated), and the value of such securities (currencies) decreases, then the
Portfolio may determine not to invest in the securities as planned and will
realize a loss on the futures contract that is not offset by a reduction in the
price of the securities.

If the Portfolio has sold a call option on a futures contract, it will cover
this position by holding in a segregated account maintained at its custodian,
cash, U.S. Government Securities or other high grade debt obligations equal in
value (when added to any initial or variation margin on deposit) to the market
value of the securities (currencies) underlying the futures contract or the
exercise price of the option. Such a position may also be covered by owning the
securities (currencies) underlying the futures contract, or by holding a call
option permitting the Portfolio to purchase the same contract at a price no
higher than the price at which the short position was established.

In addition, if the Portfolio holds a long position in a futures contract it
will hold cash, U.S. Government Securities or other high grade debt obligations
equal to the purchase price of the contract (less the amount of initial or
variation margin on deposit) in a segregated account maintained for the
Portfolio by its custodian. Alternatively, the Portfolio could cover its long
position by purchasing a put option on the same futures contract with an
exercise price as high or higher than the price of the contract held by the
Portfolio.

Exchanges limit the amount by which the price of a futures contract may move on
any day. If the price moves equal the daily limit on successive days, then it
may prove impossible to liquidate a futures position until the daily limit moves
have creased. In the event of adverse price movements, the Portfolio would
continue to be required to make daily cash payments of variation margin on open
futures positions. In such situations, if the Portfolio has insufficient cash,
it may have to sell portfolio securities to meet daily variation margin
requirements at a time when it may be disadvantageous to do so. In addition,
the Portfolio may be required to take or make delivery of the instruments
underlying interest rate futures contracts it holds at a time when it is
disadvantageous to do so. The inability to close out options and futures
positions could also have an adverse impact on the Portfolio's ability to
effectively hedge its portfolio.

Futures contracts and options thereon which are purchased or sold on foreign
commodities exchanges may have greater price volatility than their U.S.
counterparts. Furthermore, foreign commodities exchanges may be less regulated
and under less governmental scrutiny than U.S. exchanges. Brokerage
commissions, clearing costs and other transaction costs may be higher on foreign
exchanges. Greater margin requirements may limit the Portfolio's ability to
enter into certain commodity transactions on foreign exchanges. Moreover,
differences in clearance and delivery requirements on foreign exchanges may
occasion delays in the settlement of the Portfolio's transactions effected on
foreign exchanges.

- B12 -
<PAGE>

In the event of the bankruptcy of a broker through which the Portfolio engages
in transactions in futures or options thereon, the Portfolio could experience
delays and/or losses in liquidating open positions purchased or sold through the
broker and/or incur a loss of all or part of its margin deposits with the
broker. Similarly in the event of the bankruptcy of the writer of an OTC option
purchased by the Portfolio, the Portfolio could experience a loss of all or part
of the value of the option. Transactions are entered into by the Portfolio only
with brokers or financial institutions deemed creditworthy by the Adviser.

While the futures contracts and options transactions to be engaged in by the
Portfolio for the purpose of hedging the Portfolio's portfolio securities are
not speculative in nature, there are risks inherent in the use of such
instruments. One such risk which may arise in employing futures contracts to
protect against the price volatility of portfolio securities (and the currencies
in which they are denominated) is that the prices of securities and indices
subject to futures contracts (and thereby the futures contract prices) may
correlate imperfectly with the behavior of the cash prices of the Portfolio's
portfolio securities (and the currencies in which they are denominated).
Another such risk is that prices of interest rate futures contracts may not move
in tandem with the changes in prevailing interest rates against which the
Portfolio seeks a hedge. A correlation may also be distorted by the fact that
the futures market is dominated by short-term traders seeking to profit from the
difference between a contract or security price objective and their cost of
borrowed funds. Such distortions are generally minor and would diminish as the
contract approached maturity.

There may exist an imperfect correlation between the price movements of futures
contracts purchased by the Portfolio and the movements in the prices of the
securities (currencies) which are the subject of the hedge. If participants in
the futures market elect to close out their contracts through offsetting
transactions rather than meet margin deposit requirements, distortions in the
normal relationship between the debt securities or currency markets and futures
markets could result. Price distortions could also result if investors in
futures contracts choose to make or take delivery of underlying securities
rather than engage in closing transactions due to the resultant reduction in the
liquidity of the futures market. In addition, because the deposit requirements
in the futures markets are less onerous than margin requirements in the cash
market, increased participation by speculators in the futures market can be
anticipated with the resulting speculation causing temporary price distortions.
Due to the possibility of price distortions in the futures market and because of
the imperfect correlation between movements in the prices of securities and
movements in the prices of futures contracts, a correct forecast of interest
rate trends may still not result in a successful hedging transaction.

There is no assurance that a liquid secondary market will exist for futures
contracts and related options in which the Portfolio may invest. In the event a
liquid market does not exist, it may not be possible to close out a futures
position, and in the event of adverse price movements, the Portfolio would
continue to be required to make daily cash payments of variation margin. In
addition, limitations imposed by an exchange or board of trade on which futures
contracts are traded may compel or prevent the Portfolio from closing out a
contract which may result in reduced gain or increased loss to the Portfolio.
The absence of a liquid market in futures contracts might cause the Portfolio to
make or take delivery of the underlying securities (currencies) at a time when
it may be disadvantageous to do so.

- B13 -
<PAGE>

underlying securities. Warrants have no voting rights, receive no dividends and
have no rights with respect to the assets of the issuer.

INVESTMENT RESTRICTIONS

The following investment restrictions restate or are in addition to those
described under "Investment Restrictions" and "Investment Policies" in Part A.
These restrictions, unless otherwise indicated, are fundamental policies of the
Portfolio and cannot be changed without the vote of a "majority" of the
Portfolio's outstanding shares. Under the 1940 Act, such a "majority" vote is
defined as the vote of the holders of the lesser of: (i) 67% of more of the
shares present or represented by proxy at a meeting of shareholders, if the
holders of more than 50% of the outstanding shares are present, or (ii) more
than 50% of the outstanding shares. Under these additional restrictions, the
Portfolio will not:

(a) Underwrite securities of other companies except insofar as the
Portfolio might be deemed to be an underwriter in the resale of any securities
held in its portfolio.

(b) Invest in commodities or commodity contracts other than Hedging
Instruments which it may use as permitted by any of its other fundamental
policies, whether or not any such Hedging Instrument is considered to be a
commodity or a commodity contract.

(c) Purchase securities on margin; however, the Portfolio may make margin
deposits in connection with any Hedging Instruments which it may use as
permitted by any of its other fundamental policies.

(d) Purchase or write puts or calls except as permitted by any of its
other fundamental policies.

(e) Lend money except in connection with the acquisition of debt
securities which the Portfolio's investment policies and restrictions permit it
to purchase (see "Investment Objective and Policies" in Part A); the Portfolio
may also make loans of portfolio securities (see "Loans of Portfolio
Securities") and enter into repurchase agreements (see "Repurchase Agreements").

(f) As a non-fundamental policy, invest in or hold securities of any
issuer if officers or Trustees of the Trust or SCMI individually owning more
than 0.5% of the securities of such issuer together own more than 5% of the
securities of such issuer.

(g) As a non-fundamental policy, invest more than 5% of the value of its
total assets in securities of issuers having a record, together with
predecessors, of less than three years of continuous operation.

(h) Make short sales of securities.

(i) Invest in interests in oil, gas or other mineral exploration or
development programs but may purchase readily marketable securities of companies
which operate, invest in, or sponsor such programs.

(j) Invest in real estate or in interests in real estate, but may purchase
readily marketable securities of companies holding real estate or interests
therein.

ITEM 14. MANAGEMENT OF THE TRUST.

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<PAGE>

PETER E. GUERNSEY, Oyster Bay, New York - Trustee of the Trust - Insurance
Consultant since August 1986; prior thereto Senior Vice President, Marsh &
McLennan, Inc., insurance brokers.

CLARENCE F. MICHALIS, 44 East 64th Street, New York, New York - Trustee of the
Trust - Chairman of the Board of Directors, Josiah Macy, Jr. Foundation
(charitable foundation).

HERMANN C. SCHWAB, 787 Seventh Avenue, New York, New York - Chairman (Honorary)
and Trustee of the Trust - retired since March, 1988; prior thereto, consultant
to SCMI since February 1, 1984.

MARK J. SMITH, (b), 33 Gutter Lane, London, England - President and Trustee of
the Trust - First Vice President of SCMI since April 1990; Director and Vice
President, Schroder Advisors.

- B15 -
<PAGE>

GERARDO MACHADO, 787 Seventh Avenue, New York, New York - Assistant Secretary
of the Trust - Associate, SCMI.

THOMAS G. SHEEHAN, 2 Portland Square, Portland, Maine - Assistant Treasurer
and Assistant Secretary of the Trust - Counsel, Forum Financial Services, Inc.
since 1993; prior thereto, Special Counsel, U.S. Securities and Exchange
Commission, Division of Investment Management, Washington, D.C.

MARY KUNKEMUELLER, 787 Seventh Avenue, New York, New York - Assistant
Secretary of the Trust.

- B16 -
<PAGE>

(a) Interested Trustee of the Trust within the meaning of the 1940 Act.

(c) Schroder Capital Management, Inc. ("SCM") is a wholly owned subsidiary of
Schroder Wertheim Holdings Incorporated which is a wholly owned subsidiary of
Schroders, Incorporated, which in turn is an indirect wholly owned U.S.
subsidiary of Schroders plc.

Officers and Trustees who are interested persons of the Trust receive no salary,
fees or compensation from the Portfolio. Independent Trustees of the Portfolio
receive an annual fee of $2,000 and a fee of $500 for each meeting of the Board
attended by them except in the case of Mr. Schwab, who receives an annual fee of
$3,000 and a fee of $1,000 for each meeting attended. The Portfolio has no
bonus, profit sharing, pension or retirement plans.

Mr. Guernsey $1,750 $0 $0 $14,750
Mr. Hansmann 1,375 0 0 1,375

Mr. Howell 1,750 0 0 14,750
Mr. Michalis 1,750 0 0 1,750
Mr. Schwab 3,000 0 0 3,000
Mr. Smith 0 0 0 0

As of October 31, 1996, the officers and Trustees of the Trust owned, in the
aggregate, less than 1% of the Portfolio's outstanding shares.

- B17 -
<PAGE>

ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.

As of October 31, 1996, Schroder Emerging Markets Fund Institutional Portfolio
(the "Fund"), a series of Schroder Capital Funds (Delaware), a Delaware business
trust registered with the SEC as an open-end management investment company,
invests all of its investable assets in the Portfolio and may be deemed to
control the Portfolio for purposes of the 1940 Act.

ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES.

INVESTMENT ADVISORY SERVICES

- B18 -
<PAGE>

advisory agreement also provides that, with respect to the Portfolio, neither
SCMI nor its personnel shall be liable for any error of judgment or mistake of
law or for any act or omission in the performance of its or their duties to the
Portfolio, except for willful misfeasance, bad faith or gross negligence in the
performance of the SCMI's or their duties or by reason of reckless disregard of
its or their obligations and duties under the investment advisory agreement.

For its services, the Portfolio pays SCMI a fee at an annual rate of 1.00% of
its average daily net assets.

ADMINISTRATIVE SERVICES

On behalf of the Portfolio, the Trust has entered into an administration
agreement with Schroder Fund Advisors Inc. ("Schroder Advisors"), 787 Seventh
Avenue, New York, New York 10019. The Trust has also entered into a
subadministration agreement with Forum Administrative Services, Limited
Liability Company ("Forum"). Pursuant to their agreements, Schroder Advisors and
Forum provide certain management and administrative services necessary for the
Portfolio's operations, other than the investment management and administrative
services provided to the Portfolio by SCMI pursuant to the investment advisory
agreement, including among other things: (i) preparation of shareholder reports
and communications; (ii) regulatory compliance, such as reports to and filings
with the Securities and Exchange Commission and state securities commissions;
and (iii) general supervision of the operation of the Portfolio, including
coordination of the services performed by the Portfolio's investment adviser,
transfer agent, custodian, independent accountants, legal counsel and others.
Schroder Advisors is a wholly owned subsidiary of SCMI and is a registered
broker-dealer organized to act as administrator and distributor of mutual funds.

For these services, Schroder Advisors is entitled to receive from the Portfolio
a fee at the annual rate of 0.05% of the Portfolio's average daily net assets.
Forum is entitled to receive from the Portfolio a fee at the annual rate of
0.10% of the Portfolio's average daily net assets for its services.

CUSTODIAN

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<PAGE>

INDEPENDENT AUDITORS

Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts 02109,
serves as independent auditors for the Trust.

ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES.

INVESTMENT DECISIONS

BROKERAGE AND RESEARCH SERVICES

Transactions on U.S. stock exchanges and other agency transactions involve the
payment by the Portfolio of negotiated brokerage commissions. Such commissions
vary among different brokers. Also, a particular broker may charge different
commissions according to such factors as the difficulty and size of the
transaction. Transactions in foreign securities generally involve the payment
of fixed brokerage commissions, which are generally higher than those in the
United States. Since most brokerage transactions for the Portfolio will be
placed with foreign broker-dealers, certain portfolio transaction costs for the
Portfolio may be higher than fees for similar transactions executed on U.S.
securities exchanges. There is generally no stated commission in the case of
securities traded in the over-the-counter markets, but the price paid by the
Portfolio usually includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid by the Portfolio includes a disclosed,
fixed commission or discount retained by the underwriter or dealer.

- B20 -

<PAGE>

various of its clients (including the Portfolio), although not all of these
services are necessarily useful and of value in managing the Portfolio. The
investment advisory fee paid fee paid by the Portfolio is not reduced because
SCMI and its affiliates receive such services.

Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc. and subject to seeking the most favorable price and execution
available and such other policies as the Trustees may determine, SCMI may
consider sales of shares of the Portfolio as a factor in the selection of
broker-dealers to execute portfolio transactions for the Portfolio.

It is further a policy of the Portfolio that all such transactions effected for
the Portfolio by Schroder Wertheim on the New York Stock Exchange be in
accordance with Rule 11a2-2(T) promulgated under the 1934 Act, which requires in
substance that a member of such exchange not associated with Schroder Wertheim
actually execute the transaction on the exchange floor or through the exchange
facilities. Thus, while Schroder Wertheim will bear responsibility for
determining important elements of execution such as timing and order size,
another firm will actually execute the transaction.

Schroder Wertheim pays a portion of the brokerage commissions it receives from
the Portfolio to the brokers executing the Portfolio's transactions on the New
York Stock Exchange. In accordance with Rule 11a2-2(T), Schroder Core has
entered into an agreement with Schroder Wertheim permitting it to retain a
portion of the brokerage commissions paid to it by the Portfolio. This
agreement has been approved by the Schroder Core Board, including a majority of
the non-interested Trustees.

- B21 -
<PAGE>

From time to time, the Portfolio may purchase securities of a broker or dealer
through which its regularly engages in securities transactions. During the
fiscal year ended October 31, 1996, the purchased securities of Global
Securities, one of its regular broker-dealers. Such securities had a value of
$110,979 as of the end of the Fund's fiscal year.

ITEM 18. CAPITAL STOCK AND OTHER SECURITIES.

The Trust, with respect to the Portfolio, may enter into a merger or
consolidation, or sell all or substantially all of its assets, if approved by
the Board. The Portfolio may be terminated (1) upon liquidation and
distribution of its assets, if approved by the vote of a majority of the
Portfolio's outstanding voting securities (as defined in the 1940 Act) or (2) by
the Trustees on written notice to the Portfolio's investors. Upon liquidation
or dissolution of any Portfolio, the investors therein would be entitled to
share pro rata in its net assets available for distribution to investors.

ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES.

ITEM 20. TAX STATUS.

- B22 -
<PAGE>

gains, losses, deductions, and credits, without regard to whether it has
received any cash distributions from the Portfolio. The Portfolio also will not
be subject to Delaware income or franchise tax.

Proposed regulations have been published pursuant to which certain RICs would be
entitled to elect to "mark to market" their stock in certain PFICs. "Marking to
market," in this context, means recognizing as gain for each taxable year the
excess, as of the end of that year, of the fair market value of each such PFIC's
stock over the adjusted basis in that stock (including marked-to-market gain for
each prior year for which an election was in effect).

- B23 -
<PAGE>

ITEM 21. UNDERWRITERS.

Forum Financial Services, Inc. ("FFSI"), Two Portland Square, Portland, Maine
04101, serves as the Trust's placement agent. Forum will receive no
compensation for such placement agent services.

ITEM 22. CALCULATIONS OF PERFORMANCE DATA.

Not applicable.

ITEM 23. FINANCIAL STATEMENTS.

- B24 -
<PAGE>

PART B

(STATEMENT OF ADDITIONAL INFORMATION)

SCHRODER CAPITAL FUNDS

SCHRODER U.S. SMALLER COMPANIES FUND

MARCH 1 1997

ITEM 10. COVER PAGE.

Not applicable.

ITEM 11. TABLE OF CONTENTS.

General Information and History. . . . . . . . . . . . . . . . . . . . . . B-1
Investment Objectives and Policies . . . . . . . . . . . . . . . . . . . . B-1
Management of the Trust. . . . . . . . . . . . . . . . . . . . . . . . . . B-13
Control Persons and Principal Holders of Securities. . . . . . . . . . . . B-16
Investment Advisory and Other Services . . . . . . . . . . . . . . . . . . B-17
Brokerage Allocation and Other Practices . . . . . . . . . . . . . . . . . B-19
Capital Stock and Other Securities . . . . . . . . . . . . . . . . . . . . B-21
Purchase, Redemption and Pricing of Securities . . . . . . . . . . . . . . B-22
Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-22
Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-23
Calculations of Performance Data . . . . . . . . . . . . . . . . . . . . . B-24
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . B-24

ITEM 12. GENERAL INFORMATION AND HISTORY.

Not applicable.

ITEM 13. INVESTMENT OBJECTIVES AND POLICIES.

<PAGE>

INVESTMENT POLICIES

INTRODUCTION

Part A contains information about the investment objective and policies of the
Schroder U.S. Smaller Companies Portfolio (the "Portfolio"), a series of
Schroder Capital Funds (the "Trust"). The following discussion is intended to
supplement the disclosure in Part A concerning the Portfolio's investments,
investment techniques and strategies and the risks associated therewith. This
Part B should be read only in conjunction with Part A.

DEFINITIONS

As used in Part B, the following terms shall have the meanings listed:

"Board" shall mean the Board of Trustees of the Trust.

"1933 Act" shall mean the Securities Act of 1933, as amended.

"1940 Act" shall mean the Investment Company Act of 1940, as amended.

"Commission" shall mean the U.S. Securities and Exchange Commission.

U.S. GOVERNMENT SECURITIES

The Portfolio may invest in obligations issued or guaranteed by the U.S.
Government or its agencies or instrumentalities that have remaining maturities
not exceeding one year. Agencies and instrumentalities that issue or guarantee
debt securities and that have been established or sponsored by the U.S.
Government include the Bank for Cooperatives, the Export-Import Bank, the
Federal Farm Credit System, the Federal Home Loan Banks, the Federal Home Loan
Mortgage Corporation, the Federal Intermediate Credit Banks, the Federal Land
Banks, the Federal National Mortgage Association, the Government National
Mortgage Association and the Student Loan Marketing Association. Except for
obligations issued by the U.S. Treasury and the Government National Mortgage
Association, none of the obligations of the other agencies or instrumentalities
referred to above is backed by the full faith and credit of the U.S. Government.

BANK OBLIGATIONS

The Portfolio may invest in obligations of U.S. banks (including certificates of
deposit, bankers' acceptances and time deposits) having total assets at the time
of purchase in excess of $1 billion. Such banks must be insured by the Federal
Deposit Insurance Corporation.

A certificate of deposit is an interest-bearing negotiable certificate issued by
a bank against funds deposited in the bank. A bankers' acceptance is a short-
term draft drawn on a commercial bank by a borrower, usually in connection with
an international commercial transaction. Although the borrower is liable for
payment of the draft, the bank unconditionally guarantees to pay the draft at
its face value on the maturity date. A time deposit earns a specified rate of
interest over a definite time period; however, unlike certificates of deposit, a
time deposit cannot be traded in the secondary market.

SHORT-TERM DEBT SECURITIES

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<PAGE>

Group ("S&P"), or securities that, if not rated, are issued by companies
having an outstanding debt issue currently rated "Aa" by Moody's or "AAA" or
"AA" by S&P. The rating "P-1" is the highest commercial paper rating
assigned by Moody's and the rating "A-1" is the highest commercial paper
rating assigned by S&P.

REPURCHASE AGREEMENTS

The Portfolio may enter into repurchase agreements that mature or may be
terminated by notice in seven days or less with U.S. banks or broker-dealers.
In a typical repurchase agreement the seller of a security commits itself at the
time of the sale to repurchase that security from the buyer at a mutually
agreed-upon time and price. The repurchase price exceeds the sale price,
reflecting an agreed-upon interest rate effective for the period the buyer owns
the security subject to repurchase. The agreed-upon rate is unrelated to the
interest rate on that security. Schroder Capital Management Inc. ("SCMI"), the
Portfolio's Investment Adviser, will monitor the value of the underlying
collateral at all times during the term of the repurchase agreement to insure
that the value of the collateral always equals or exceeds the repurchase price.
In the event of default by the seller under the repurchase agreement, the
Portfolio may have difficulties in exercising its rights to the underlying
collateral and may incur costs and experience time delays in connection with the
disposition of such collateral. To evaluate potential risks, SCMI reviews the
creditworthiness of those banks and dealers with which the Portfolio enters into
repurchase agreements.

WARRANTS

The Portfolio may invest in warrants. Warrants are options to purchase equity
securities at specific prices valid for a specific period of time. Their prices
do not necessarily move parallel to the prices of the underlying securities.
Warrants have no voting rights, receive no dividends and have no rights with
respect to the assets of the issuer. The Portfolio may not invest in warrants
if, as a result, more than 5% of its net assets would be so invested or if, more
than 2% of its net assets would be so invested in warrants that are not listed
on the New York or American Stock Exchanges.

HIGH YIELD/JUNK BONDS

The Portfolio may invest up to 5% of its assets in bonds rated below Baa by
Moody's or BBB by S&P (commonly known as "high yield/high risk securities" or
"junk bonds"). Ratings of bonds represents the rating agencies' opinion
regarding their quality, are not a guarantee of quality and may be reduced after
the Portfolio has acquired the security. Credit ratings attempt to evaluate the
safety of principal and interest payments and do not reflect an assessment of
the volatility of the security's market value or the liquidity of an investment
in the security. In addition, a rating agency may fail to make timely changes
in credit ratings in response to subsequent events, so that an issuer's
financial condition may be better or worse than the rating indicates.

Securities rated less than Baa by Moody's or BBB by S&P are classified as non-
investment grade securities and securities rated Baa and BB respectively, are
considered speculative by those rating agencies. Changes in economic condition
or other circumstances are more likely to lead to a weakened capacity for such
securities to make principal and interest payments than is the case for higher
grade debt securities. Debt securities rated below investment grade are deemed
by these agencies to be predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal and may involve substantial risk
exposure to adverse conditions. Junk bonds includes securities that are in
default or face the risk of default with respect to the payment of principal or
interest. Such securities are generally unsecured and are often subordinated to
other creditors of the issuer. To the extent the Portfolio is required to seek
recovery upon a default in the payment of principal or interest on its portfolio
holdings, the Portfolio may incur additional expenses and have limited legal
recourse in the event of a default.

- 3 -
<PAGE>

Lower rated debt securities generally offer a higher current yield than that
available from higher grade issuers, but they involve higher risks, in that they
are especially subject to adverse changes in general economic conditions and in
the industries in which the issuers are engaged, to changes in the financial
condition of the issuers and to price fluctuations in response to changes in
interest rates. During periods of economic downturn or rising interest rates,
highly leveraged issuers may experience financial stress, which could adversely
effect their ability to make payments of principal and interest and increase the
possibility of default. In addition, such issuers may not have more traditional
methods of financing available to them, and may be unable to repay debt at
maturity by refinancing. The risk of loss due to default by such issuers is
significantly greater because such securities frequently are unsecured and
subordinated to the prior payment of senior indebtedness.

The market for lower rated securities has expanded rapidly in recent years, and
its growth paralleled a long economic expansion. In the past, the prices of
many lower rated debt securities declined substantially, reflecting an
expectation that many issuers of such securities might experience financial
difficulties. As a result, the yields on lower rated debt securities rose
dramatically. However, such higher yields did not reflect the value of the
income stream that holders of such securities could lose a substantial portion
of their value as a result of the issuers' financial restructuring or default.
There can be no assurance that such declines will not recur. The market for
lower rated debt securities generally is thinner and less active than that for
higher quality securities, which may limit the Portfolio's ability to sell such
securities at fair value in response to changes in the economy or the financial
markets. Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may also decrease the values and liquidity of lower rated
securities, especially in a thinly traded market.

ILLIQUID AND RESTRICTED SECURITIES

"Illiquid and Restricted Securities" under Part A sets forth the circumstances
in which the Portfolio may invest in illiquid and restricted securities. In
connection with the Portfolio's original purchase of restricted securities it
may negotiate rights with the issuer to have such securities registered for sale
at a later time. Further, the expenses of registration of restricted securities
that are illiquid may also be negotiated by the Portfolio with the issuer at the
time such securities are purchased by the Portfolio. When registration is
required, however, a considerable period may elapse between a decision to sell
the securities and the time the Portfolio would be permitted to sell such
securities. A similar delay might be experienced in attempting to sell such
securities pursuant to an exemption from registration. Thus, the Portfolio may
not be able to obtain as favorable a price as that prevailing at the time of the
decision to sell.

LOANS OF PORTFOLIO SECURITIES

The Portfolio may lend its portfolio securities subject to the restrictions
stated in Part A. Under applicable regulatory requirements (which are subject
to change), the loan collateral must, on each business day, at least equal the
market value of the loaned securities and must consist of cash, bank letters of
credit, U.S. Government securities, or other cash equivalents in which the
Portfolio is permitted to invest. To be acceptable as collateral, letters of
credit must obligate a bank to pay amounts demanded by the Portfolio if the
demand meets the terms of the letter. Such terms and the issuing bank must be
satisfactory to the Portfolio. In a portfolio securities lending transaction,
the Portfolio receives from the borrower an amount equal to the interest paid or
the dividends declared on the loaned securities during the term of the loan as
well as the interest on the collateral securities, less any finders' or
administrative fees the Portfolio pays in arranging the loan. The Portfolio may
share the interest it receives on the collateral securities with the borrower as
long as it realizes at least a minimum amount of interest required by the
lending guidelines established by the Board. The Portfolio will not lend its
portfolio securities to any officer, director, employee or affiliate of the
Portfolio or SCMI. The terms of the Portfolio's loans must meet certain tests
under the Internal Revenue Code of 1986, as amended (the "Code") and permit the
Portfolio to reacquire loaned securities on five business days' notice or in
time to vote on any important matter.

COVERED CALLS AND HEDGING

As described in Part A, the Portfolio may write covered calls on up to 100% of
its total assets or employ one or more types of Hedging Instruments (as defined
in Part A). When hedging to attempt to protect against declines in

- 4 -
<PAGE>

the market value of the Portfolio's securities, to permit the Portfolio to
retain unrealized gains in the value of portfolio securities that have
appreciated, or to facilitate selling securities for investment reasons, the
Portfolio would (i) sell Stock Index Futures (as defined below), (ii) purchase
puts on such futures or on securities, or (iii) write covered calls on
securities or such futures. When hedging to establish a position in the
equities markets as a temporary substitute for purchasing particular equity
securities (which the Portfolio will normally purchase and then terminate the
hedging position), the Portfolio would (i) purchase Stock Index Futures or
(ii) purchase calls on such futures or on securities. The Portfolio's strategy
of hedging with Stock Index Futures and options on such futures will be
incidental to the Portfolio's activities in the underlying cash market.

WRITING COVERED CALL OPTIONS. The Portfolio may write (i.e., sell) call options
("calls") if (i) the calls are listed on a domestic securities or commodities
exchange and (ii) the calls are "covered" (i.e., the Portfolio owns the
securities subject to the call or other securities acceptable for applicable
escrow arrangements) while the call is outstanding. A call written on a Stock
Index Future must be covered by deliverable securities or segregated liquid
assets. If a call written by the Portfolio is exercised, the Portfolio forgoes
any profit from any increase in the market price above the call price of the
underlying investment on which the call was written.

When the Portfolio writes a call on a security, it receives a premium and agrees
to sell the underlying securities to a purchaser of a corresponding call on the
same security during the call period (usually not more than nine months) at a
fixed exercise price (which may differ from the market price of the underlying
security), regardless of market price changes during the call period. The risk
of loss will have been retained by the Portfolio if the price of the underlying
security should decline during the call period, which may be offset to some
extent by the premium.

To terminate its obligation on a call it has written, the Portfolio may purchase
a corresponding call in a "closing purchase transaction." A profit or loss will
be realized, depending upon whether the net of the amount of option transaction
costs and the premium previously received on the call written was more or less
than the price of the call subsequently purchased. A profit may also be
realized if the call lapses unexercised because the Portfolio retains the
underlying security and the premium received. If the Portfolio could not effect
a closing purchase transaction due to the lack of a market, it would have to
hold the callable securities until the call lapsed or was exercised.

The Portfolio may also write calls on Stock Index Futures without owning a
futures contract or a deliverable bond, provided that at the time the call is
written, the Portfolio covers the call by segregating in escrow an equivalent
dollar amount of liquid assets. The Portfolio will segregate additional liquid
assets if the value of the escrowed assets drops below 100% of the current value
of the Stock Index Future. In no circumstances would an exercise notice require
the Portfolio to deliver a futures contract; it would simply put the Portfolio
in a short futures position, which is permitted by the Portfolio's hedging
policies.

PURCHASING CALLS AND PUTS. The Portfolio may purchase put options ("puts") that
relate to (i) securities held by it, (ii) Stock Index Futures (whether or not it
holds such futures in its portfolio), or (iii) broadly-based stock indices. The
Portfolio may not sell puts other than those it previously purchased nor
purchase puts on securities it does not hold. The Portfolio may purchase calls
(i) as to securities, broadly based stock indices or Stock Index Futures or
(ii) to effect a "closing purchase transaction" to terminate its obligation on a
call it has previously written. A call or put may be purchased only if, after
such purchase, the value of all put and call options held by the Portfolio would
not exceed 5% of its total assets.

When the Portfolio purchases a call (other than in a closing purchase
transaction), it pays a premium and, except as to calls on stock indices, has
the right to buy the underlying investment from a seller of a corresponding call
on the same investment during the call period at a fixed exercise price. The
Portfolio benefits only if the call is sold at a profit or if, during the call
period, the market price of the underlying investment is above the sum of the
call price plus the transaction costs and the premium paid for the call and the
call is exercised. If the call is not exercised or sold (whether or not at a
profit), it will become worthless at its expiration date and the Portfolio will
lose its premium payments and the right to purchase the underlying investment.
When the Portfolio purchases a call on a stock index, it pays a premium, but
settlement is in cash rather than by delivery of an underlying investment.

- 5 -
<PAGE>

When the Portfolio purchases a put, it pays a premium and, except as to puts on
stock indices, has the right to sell the underlying investment to a seller of a
corresponding put on the same investment during the put period at a fixed
exercise price. Buying a put on a security or Stock Index Future the Portfolio
owns enables it to attempt to protect itself during the put period against a
decline in the value of the underlying investment below the exercise price by
selling the underlying investment at the exercise price to a seller of a
corresponding put. If the market price of the underlying investment is equal to
or above the exercise price and, as a result, the put is not exercised or
resold, the put will become worthless at its expiration date and the Portfolio
will lose its premium payment and the right to sell the underlying investment;
the put may, however, be sold prior to expiration (whether or not at a profit).

Purchasing a put on either a stock index or on a Stock Index Future not held by
the Portfolio permits it either to resell the put or to buy the underlying
investment and sell it at the exercise price. The resale price of the put will
vary inversely with the price of the underlying investment. If the market price
of the underlying investment is above the exercise price and, as a result, the
put is not exercised, the put will become worthless on its expiration date. In
the event of a decline in price of the underlying investment, the Portfolio
could exercise or sell the put at a profit to attempt to offset some or all of
its loss on its portfolio securities. When the Portfolio purchases a put on a
stock index, or on a Stock Index Future not held by it, the put protects the
Portfolio to the extent that the index moves in a similar pattern to the
securities held. In the case of a put on a stock index or Stock Index Future,
settlement is in cash rather than by the Portfolio's delivery of the underlying
investment.

STOCK INDEX FUTURES. The Portfolio may buy and sell futures contracts only if
they relate to broadly based stock indices ("Stock Index Futures"). A stock
index is "broadly based" if it includes stocks that are not limited to issuers
in any particular industry or group of industries. Stock Index Futures obligate
the seller to deliver (and the purchaser to take) cash to settle the futures
transaction or to enter into an offsetting contract. No physical delivery of
the underlying stocks in the index is made.

No price is paid or received upon the purchase or sale of a Stock Index Future.
Upon entering into a futures transaction, the Portfolio will be required to
deposit an initial margin payment in cash or U.S. Treasury bills with a futures
commission merchant (the "futures broker"). The initial margin will be
deposited with the Portfolio's custodian in an account registered in the futures
broker's name; however the futures broker can gain access to that account only
under specified conditions. As the future is marked to market to reflect
changes in its market value, subsequent margin payments, called variation
margin, will be paid to or by the futures broker on a daily basis. Prior to
expiration of the future, if the Portfolio elects to close out its position by
taking an opposite position, a final determination of variation margin is made,
additional cash is required to be paid by or released to the Portfolio, and any
loss or gain is realized for tax purposes. Although Stock Index Futures by
their terms call for settlement by the delivery of cash, in most cases the
obligation is fulfilled without such delivery, by entering into an offsetting
transaction. All futures transactions are effected through a clearinghouse
associated with the exchange on which the contracts are traded.

Puts and calls on broadly based stock indices or Stock Index Futures are similar
to puts and calls on securities or other futures contracts except that all
settlements are in cash and gain or loss depends on changes in the index in
question (and thus on price movements in the stock market generally) rather than
on price movements in individual securities or futures contracts. When the
Portfolio buys a call on a stock index or Stock Index Future, it pays a premium.
During the call period, upon exercise of a call by the Portfolio, a seller of a
corresponding call on the same index will pay the Portfolio an amount of cash to
settle the call if the closing level of the stock index or Stock Index Future
upon which the call is based is greater than the exercise price of the call;
that cash payment is equal to the difference between the closing price of the
index and the exercise price of the call times a specified multiple (the
"multiplier") that determines the total dollar value for each point of
difference. When the Portfolio buys a put on a stock index or Stock Index
Future, it pays a premium and has the right during the put period to require a
seller of a corresponding put, upon the Portfolio's exercise of its put, to
deliver to the Portfolio an amount of cash to settle the put if the closing
level of the stock index or Stock Index Future upon which the put is based is
less than the exercise price of the put; that cash payment is determined by the
multiplier, in the same manner as described above as to calls.

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<PAGE>

ADDITIONAL INFORMATION ABOUT HEDGING INSTRUMENTS AND THEIR USE. The Portfolio's
custodian, or a securities depository acting for the custodian, will act as the
Portfolio's escrow agent, through the facilities of the Options Clearing
Corporation ("OCC"), as to the securities on which the Portfolio has written
options, or as to other acceptable escrow securities, so that no margin will be
required for such transactions. OCC will release the securities on the
expiration of the option or upon the Portfolio's entering into a closing
transaction. An option position may be closed out only on a market that
provides secondary trading for options of the same series, and there is no
assurance that a liquid secondary market will exist for any particular option.

The Portfolio's option activities may affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Portfolio may cause
it to sell related portfolio securities, thus increasing its turnover rate in a
manner beyond its control. The exercise by the Portfolio of puts on securities
or Stock Index Futures may cause the sale of related investments, also
increasing portfolio turnover. Although such exercise is within the Portfolio's
control, holding a put might cause the Portfolio to sell the underlying
investment for reasons that would not exist in the absence of the put. The
Portfolio will pay a brokerage commission each time it buys or sells a call, a
put or an underlying investment in connection with the exercise of a put or
call. Such commissions may be higher than those that would apply to direct
purchases or sales of the underlying investments. Premiums paid for options are
small in relation to the market value of such investments, and, consequently,
put and call options offer large amounts of leverage. The leverage offered by
trading in options could result in the Portfolio's net asset value being more
sensitive to changes in the value of the underlying investments.

REGULATORY ASPECTS OF HEDGING INSTRUMENTS AND COVERED CALLS. The Portfolio must
operate within certain restrictions as to its long and short positions in Stock
Index Futures and options thereon under a rule (the "CFTC Rule") adopted by the
Commodity Futures Trading Commission (the "CFTC") under the Commodity Exchange
Act (the "CEA"), which excludes the Portfolio from registration with the CFTC as
a "commodity pool operator" (as defined in the CEA) if it complies with the CFTC
Rule. Under these restrictions the Portfolio will not, as to any positions,
whether short, long or a combination thereof, enter into Stock Index Futures and
options thereon for which the aggregate initial margins and premiums exceed 5%
of the fair market value of its total assets, with certain exclusions as defined
in the CFTC Rule. Under the restrictions, the Portfolio also must, as to its
short positions, use Stock Index Futures and options thereon solely for bona-
fide hedging purposes within the meaning and intent of the applicable provisions
under the CEA.

Transactions in options by the Portfolio are subject to limitations established
by each of the exchanges governing the maximum number of options that may be
written or held by a single investor or group of investors acting in concert,
regardless of whether the options were written or purchased on the same or
different exchanges or are held in one or more accounts or through one or more
exchanges or brokers. Thus, the number of options which the Portfolio may write
or hold may be affected by options written or held by other entities, including
other investment companies having the same or an affiliated investment adviser.
Position limits also apply to Stock Index Futures. An exchange may order the
liquidation of positions found to be in violation of those limits and may impose
certain other sanctions. Due to requirements under the 1940 Act, as amended,
when the Portfolio purchases a Stock Index Future, the Portfolio will maintain,
in a segregated account or accounts with its custodian bank, cash or readily-
marketable, short-term (maturing in one year or less) debt instruments in an
amount equal to the market value of the securities underlying such Stock Index
Future, less the margin deposit applicable to it.

LIMITS ON USE OF HEDGING INSTRUMENTS. Due to the Short-Short Limitation
described under "Taxation," the Portfolio will limit the extent to which it
engages in the following activities but will not be precluded from them: (i)
selling investments, including Stock Index Futures, held for less than three
months, whether or not they were purchased on the exercise of a call held by the
Portfolio; (ii) purchasing calls or puts that expire in less than three months;
(iii) effecting closing transactions with respect to calls or puts purchased
less than three months previously; (iv) exercising puts held for less than three
months; and (v) writing calls on investments held for less than three months.

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<PAGE>

POSSIBLE RISK FACTORS IN HEDGING. In addition to the risks discussed above,
there is a risk in using short hedging by selling Stock Index Futures or
purchasing puts on stock indices that the prices of the applicable index (thus
the prices of the Hedging Instruments) will correlate imperfectly with the
behavior of the cash (i.e., market value) prices of the Portfolio's equity
securities. The ordinary spreads between prices in the cash and futures markets
are subject to distortions due to differences in the natures of those markets.
First, all participants in the futures markets are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions that could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures markets depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures markets could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit requirements in the futures
markets are less onerous than margin requirements in the securities markets.
Therefore, increased participation by speculators in the futures markets may
cause temporary price distortions.

The risk of imperfect correlation increases as the composition of the Portfolio
diverges from the securities included in the applicable index. To compensate
for the imperfect correlation of movements in the price of the equity securities
being hedged and movements in the price of the Hedging Instruments, the
Portfolio may use Hedging Instruments in a greater dollar amount than the dollar
amount of equity securities being hedged if the historical volatility of the
prices of such equity securities being hedged is more than the historical
volatility of the applicable index. It is also possible that where the
Portfolio has used Hedging Instruments in a short hedge, the market may advance
and the value of equity securities held in the Portfolio may decline. If this
occurred, the Portfolio would lose money on the Hedging Instruments and also
experience a decline in value in its equity securities. However, while this
could occur for a very brief period or to a very small degree, the value of a
diversified portfolio of equity securities will tend to move over time in the
same direction as the indices upon which the Hedging Instruments are based.

If the Portfolio uses Hedging Instruments to establish a position in the
equities markets as a temporary substitute for the purchase of individual equity
securities (long hedging) by buying Stock Index Futures and/or calls on such
futures, on securities or on stock indices, it is possible that the market may
decline. If the Portfolio then concluded not to invest in equity securities at
that time because of concerns as to possible further market decline or for other
reasons, it would realize a loss on the Hedging Instruments that is not offset
by a reduction in the price of the equity securities purchased.

SHORT SALES AGAINST-THE-BOX

After the Portfolio makes a short sale against-the-box, while the short position
is open, it must own an equal amount of the securities sold short or by virtue
of ownership of securities have the right, without payment of further
consideration, to obtain an equal amount of the securities sold short. Short
sales against-the-box may be made to defer recognition of gain or loss, for
federal income tax purposes, on the sale of securities "in the box" until the
short position is closed out.

INVESTMENT RESTRICTIONS

The following investment restrictions, except where stated to be fundamental
policies, are non-fundamental policies of the Portfolio. The policies defined
as fundamental, together with the fundamental policies and investment objective
described in the Part A, cannot be changed without the vote of a "majority" of
the Portfolio's outstanding voting interests. Under the 1940 Act, such a
"majority" vote is defined as the vote of the holders of the lesser of (i) 67%
or more of the interests present or represented by proxy at a meeting of
interestholders, if the holders of more than 50% of the outstanding interests
are present, or (ii) more than 50% of the outstanding interests.

The following investment restrictions of the Portfolio are fundamental policies:

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<PAGE>

(a) With respect to 75% of its assets, the Portfolio may not purchase a
security other than a U.S. Government Security if, as a result, more than
5% of its total assets would be invested in the securities of a single
issuer or it would own more than 10% of the outstanding voting securities
of any single issuer.

(b) The Portfolio may not purchase securities if, immediately after the
purchase, 25% or more of the value of its total assets would be invested in
the securities of issuers conducting their principal business activities in
the same industry; provided, however, that there is no limit on investments
in U.S. Government Securities.

(c) The Portfolio may borrow money from banks or by entering into reverse
repurchase agreements, provided that such borrowings do not exceed 33 1/3%
of the value of the Portfolio's total assets (computed immediately after
the borrowing).

(d) The Portfolio may not issue senior securities except to the extent
permitted by the 1940 Act.

(e) The Portfolio may not underwrite securities of other issuers, except to the
extent that it may be considered to be acting as an underwriter in
connection with the disposition of portfolio securities.

(f) The Portfolio may not make loans, except it may enter into repurchase
agreements, purchase debt securities that are otherwise permitted
investments and lend portfolio securities.

(g) The Portfolio may not purchase or sell real estate or any interest therein,
except that it may invest in debt obligations secured by real estate or
interests therein or securities issued by companies that invest in real
estate or interests therein.

(h) The Portfolio may not purchase or sell physical commodities unless acquired
as a result of owning securities or other instruments, but it may purchase,
sell or enter into financial options and futures and forward currency
contracts and other financial contracts or derivative instruments.

The following investment restrictions of the Portfolio are non-fundamental
policies:

(a) The Portfolio's borrowings for other than temporary or emergency purposes
or meeting redemption requests may not exceed an amount equal to 5% of the
value of its net assets.

(b) The Portfolio may not acquire securities or invest in repurchase agreements
with respect to any securities if, as a result, more than 15% of its net
assets (taken at current value) would be invested in repurchase agreements
not entitling the holder to payment of principal within seven days and in
securities that are not readily marketable by virtue of restrictions on the
sale of such securities to the public without registration under the 1933
Act ("Restricted Securities").

(c) The Portfolio may not invest in securities of another investment company,
except to the extent permitted by the 1940 Act.

(d) The Portfolio may not purchase securities on margin, or make short sales of
securities (except short sales against the box), except for the use of
short-term credit necessary for the clearance of purchases and sales of
portfolio securities. The Portfolio may make margin deposits in connection
with permitted transactions in options, futures contracts and options on
futures contracts.

(e) The Portfolio may not invest in securities (other than fully collateralized
debt obligations) issued by companies that have conducted continuous
operations for less than three years, including the operations of
predecessors, unless guaranteed as to principal and interest by an issuer
in whose

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<PAGE>

securities the Portfolio could invest, if, as a result, more than 5%
of the value of the Portfolio's total assets would be so invested.

(f) The Portfolio may not pledge, mortgage, hypothecate or encumber any of
its assets except to secure permitted borrowings.

(g) The Portfolio may not invest in or hold securities of any issuer if,
to the Trust's knowledge, officers and trustees of the Trust or
officers and directors of the Portfolio's investment adviser,
individually owning beneficially more than 1/2 of 1% of the securities
of the issuer, in the aggregate own more than 5% of the issuer's
securities.

(h) The Portfolio may not invest in interest in oil and gas or interests
in other mineral exploration or development programs.

(i) The Portfolio may not lend portfolio securities if the total value of
all loaned securities would exceed 25% of its total assets.

(j) The Portfolio may not purchase real estate limited partnership
interests.

(k) The Portfolio may not invest in warrants if, as a result, more than 5%
of its net assets would be so invested or if, more than 2% of its net
assets would be invested in warrants that are not listed on the New
York or American Stock Exchanges.

Item 14. Management of the Trust.

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<PAGE>

PETER E. GUERNSEY, Oyster Bay, New York - Trustee of the Trust - Insurance
Consultant since August 1986; prior thereto Senior Vice President, Marsh &
McLennan, Inc., insurance brokers.

CLARENCE F. MICHALIS, 44 East 64th Street, New York, New York - Trustee of the
Trust - Chairman of the Board of Directors, Josiah Macy, Jr. Foundation
(charitable foundation).

HERMANN C. SCHWAB, 787 Seventh Avenue, New York, New York - Chairman (Honorary)
and Trustee of the Trust - retired since March, 1988; prior thereto, consultant
to SCMI since February 1, 1984.

MARK J. SMITH, (b), 33 Gutter Lane, London, England - President and Trustee of
the Trust - First Vice President of SCMI since April 1990; Director and Vice
President, Schroder Advisors.

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<PAGE>

GERARDO MACHADO, 787 Seventh Avenue, New York, New York - Assistant Secretary of
the Trust - Associate, SCMI.

- 12 -
<PAGE>

MARY KUNKEMUELLER, 787 Seventh Avenue, New York, New York - Assistant
Secretary of the Trust.

(a) Interested Trustee of the Trust within the meaning of the 1940 Act.

(b) Schroder Fund Advisors, Inc. ("Schroder Advisors") is a wholly-owned
subsidiary of SCMI, which is a wholly-owned subsidiary of Schroders
Incorporated, which in turn is an indirect, wholly-owned U.S. subsidiary of
Schroders plc.

(c) Schroder Capital Management, Inc. ("SCM") is a wholly-owned subsidiary of
Schroder Wertheim Holdings Incorporated which is a wholly-owned subsidiary
of Schroders, Incorporated, which in turn is an indirect wholly-owned U.S.
subsidiary of Schroders plc.

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<PAGE>

Name of Trustee Aggregate Pension or Estimated Annual Total
- --------------- Compensation Retirement Benefits Upon Compensation
From Trust Benefits Accrued Retirement From Trust And
---------- As Part of ---------- Fund Complex
Portfolio Expenses Paid to Trustees*
------------------ -----------------

Mr. Guernsey $1,750 $0 $0 $14,750
Mr. Hansmann 1,375 0 0 1,375
Mr. Howell 1,750 0 0 14,750

Mr. Michalis 1,750 0 0 1,750
Mr. Schwab 3,000 0 0 3,000
Mr. Smith 0 0 0 0

</TABLE>

As of October 31, 1996, the officers and Trustees of the Trust owned, in the
aggregate, less than 1% of the Portfolio's outstanding shares.

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<PAGE>

the U.S. predicated upon civil liabilities of such persons under the Federal
securities laws of the U.S. The Trust has been advised that there is
substantial doubt as to the enforceability in the United Kingdom of such civil
remedies and criminal penalties as are afforded by the Federal securities laws
of the U.S. Also it is unclear if extradition treaties now in effect between
the U.S. and the United Kingdom would subject such persons to effective
enforcement of the criminal penalties of such acts.

ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.

As of October 31, 1996, Schroder U.S. Smaller Companies Fund (the "Fund"), a
series of Schroder Capital Funds (Delaware), a Delaware business trust
registered with the SEC as an open-end management investment company, invests
all of its investable assets in the Portfolio and may be deemed to control the
Portfolio for purposes of the 1940 Act.

ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES.

INVESTMENT ADVISORY SERVICES

Schroder Capital Management International Inc. ("SCMI"), 787 Seventh Avenue, New
York, New York 10019, serves as investment adviser to the Portfolio pursuant to
an Investment Advisory Contract. SCMI is a wholly owned U.S. subsidiary of
Schroders Incorporated, the wholly-owned United States holding subsidiary of
Schroders plc. Schroders plc is the holding company parent of a large worldwide
group of banks and financial service companies (referred to as the "Schroder
Group"), with associated companies and branch and representative offices located
in seventeen countries worldwide. The Schroder Group specializes in providing
investment management services, with Group funds under management currently in
excess of $130 billion.

Pursuant to the Investment Advisory Contract, SCMI is responsible for managing
the investment and reinvestment of the Portfolio's assets and for continuously
reviewing, supervising and administering the Portfolio's investments. In this
regard, it is the responsibility of SCMI to make decisions relating to the
Portfolio's investments and to place purchase and sale orders regarding such
investments with brokers or dealers selected by it in its discretion. SCMI also
furnishes to the Board periodic reports on the investment performance of the
Portfolio.

Under the terms of the Investment Advisory Contract, SCMI is required to manage
the Portfolio's investment portfolio in accordance with applicable laws and
regulations. In making its investment decisions, SCMI does not use material
inside information that may be in its possession or in the possession of its
affiliates.

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<PAGE>

The Investment Advisory Contract will continue in effect provided such
continuance is approved annually (i) by the holders of a majority of the
outstanding voting securities of the Portfolio or by the Board and (ii) by a
majority of the Trustees who are not parties to such contract or "interested
persons" (as defined in the 1940 Act) of any such party. The Investment
Advisory Contract may be terminated without penalty by vote of the Trustees or
the shareholders of the Portfolio on 60 days' written notice to SCMI, or by SCMI
on 60 days' written notice to the Trust and it will terminate automatically if
assigned. The Investment Advisory Contract also provides that, with respect to
the Portfolio, neither SCMI nor its personnel shall be liable for any error of
judgment or mistake of law or for any act or omission in the performance of its
or their duties to the Portfolio, except for willful misfeasance, bad faith or
gross negligence in the performance of the SCMI's or their duties or by reason
of reckless disregard of its or their obligations and duties under the
Investment Advisory Contract.

For its investment advisory services under the Investment Advisory Contract with
respect to the Portfolio, SCMI receives an annual advisory fee of 0.60% of the
Portfolio's average daily net assets.

ADMINISTRATIVE SERVICES

On behalf of the Portfolio, the Trust has entered into an administration
agreement with Schroder Fund Advisors Inc. ("Schroder Advisors"), 787 Seventh
Avenue, New York, New York 10019. Schroder Advisors is a wholly-owned
subsidiary of SCMI. The Trust has also entered into a sub-administration
agreement with Forum Administrative Services, Limited Liability Company
("Forum"). Pursuant to these agreements, Schroder Advisors and Forum provide
certain management and administrative services necessary for the Portfolio's
operations, other than the investment management and administrative services
provided to the Portfolio by SCMI pursuant to the investment advisory agreement,
including among other things, (i) preparation of shareholder reports and
communications, (ii) regulatory compliance, such as reports to and filings with
the Commission and state securities commissions, and (iii) general supervision
of the operation of the Portfolio, including coordination of the services
performed by the Portfolio's investment adviser, transfer agent, custodian,
independent accountants, legal counsel and others. Forum receives a monthly fee
at the annual rate of 0.075% of the Portfolio's average daily net assets.
Schroder Advisors receives no fee from the Portfolio for the administrative
services it provides the Portfolio.

The administrative services agreements are terminable with respect to the
Portfolio without penalty, at any time, by vote of a majority of the Trustees of
the Trust, upon not more than 60 days' written notice to Schroder or Forum, or,
upon 60 days' notice by Schroder or Forum. The administrative services
agreements will terminate automatically in the event of their assignment.

CUSTODIAN

All securities and cash of the Portfolio are held by The Chase Manhattan Bank,
N.A., Chase MetroTech Center, Brooklyn, New York 11245.

INDEPENDENT AUDITORS

Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts 02109,
serves as independent accountants for the Trust.

PORTFOLIO ACCOUNTANT

On behalf of the Portfolio, the Trust has entered into a Transfer Agency and
Fund Accounting Agreement with Forum Financial Corp. ("FFC"), an affiliate of
Forum. Pursuant to this agreement, FFC performs transfer agency

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<PAGE>

and portfolio accounting services. FFC receives a base fee per year, plus
additional amounts depending upon the assets of the Portfolio, the number and
type of securities held by the Portfolio and the portfolio turnover rate of the
Portfolio.

ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES.

INVESTMENT DECISIONS

BROKERAGE AND RESEARCH SERVICES

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<PAGE>

items as general economic and security market reviews, industry and company
reviews, evaluations of securities and recommendations as to the purchase and
sale of securities. Some of these services are of value to SCMI in advising
various of its clients (including the Portfolio), although not all of these
services are necessarily useful and of value in managing the Portfolio. The
investment advisory fee paid by the Portfolio is not reduced because SCMI and
its affiliates receive such services.

Subject to the general policies regarding allocation of portfolio brokerage as
set forth above, the Board has authorized SCMI to employ Schroder Wertheim &
Company, Incorporated ("Schroder Wertheim") an affiliate of SCMI, to effect
securities transactions of the Portfolio, on the New York Stock Exchange only,
provided certain other conditions are satisfied as described below.

Payment of brokerage commissions to Schroder Wertheim for effecting such
transactions is subject to Section 17(e) of the 1940 Act, which requires, among
other things, that commissions for transactions on a national securities
exchange paid by a registered investment company to a broker which is an
affiliated person of such investment company or an affiliated person of another
person so affiliated not exceed the usual and customary broker's commissions for
such transactions. It is the Portfolio's policy that commissions paid to
Schroder Wertheim will in the judgment of the officers of the Trust responsible
for making portfolio decisions and selecting brokers, be (i) at least as
favorable as commissions contemporaneously charged by Schroder Wertheim on
comparable transactions for its most favored unaffiliated customers and (ii) at
least as favorable as those which would be charged on comparable transactions by
other qualified brokers having comparable execution capability. The Board,
including a majority of the non-interested Trustees, has adopted procedures
pursuant to Rule 17e-1 promulgated by the Securities and Exchange Commission
under Section 17(e) to ensure that commissions paid to Schroder Wertheim by the
Portfolio satisfy the foregoing standards. The Board will review all
transactions at least quarterly for compliance with such procedures.

The Portfolio has no understanding or arrangement to direct any specific portion
of its brokerage to Schroder Wertheim and will not direct brokerage to Schroder
Wertheim in recognition of research services.

ITEM 18. CAPITAL STOCK AND OTHER SECURITIES.

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<PAGE>

assets, if approved by the vote of a majority of the Portfolio's outstanding
voting securities (as defined in the 1940 Act) or (2) by the Trustees on written
notice to the Portfolio's investors. Upon liquidation or dissolution of any
Portfolio, the investors therein would be entitled to share pro rata in its net
assets available for distribution to investors.

ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES.

ITEM 20. TAX STATUS.

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<PAGE>

receivables, and (4) gain or loss may be recognized on a distribution to an
investor that contributed property to the Portfolio. An investor's basis for
its interest in the Portfolio generally will equal the amount of cash and the
basis of any property it invests in the Portfolio, increased by the investor's
share of the Portfolio's net income and gains and decreased by (a) the amount of
cash and the basis of any property the Portfolio distributes to the investor and
(b) the investor's share of the Portfolio's losses.

ITEM 21. UNDERWRITERS.

Forum Financial Services, Inc. ("FFSI"), Two Portland Square, Portland, Maine
04101, serves as the Trust's placement agent. Forum receives no compensation
for such placement agent services.

ITEM 22. CALCULATIONS OF PERFORMANCE DATA.

Not applicable.

ITEM 23. FINANCIAL STATEMENTS.

Not applicable.

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<PAGE>

PART C
OTHER INFORMATION

Item 24. Financial Statements and Exhibits.

(a) Financial Statements.

(1) Included in Part A

Not applicable

(2) Included in Part B

For International Equity Fund, Schroder Emerging Markets Fund Institutional
Portfolio and Schroder U.S. Smaller Companies Portfolio (each a "Portfolio"
and collectively the "Portfolios"):

Audited financial statements for the fiscal year ended October 31, 1996,
including: statements of assets and liabilities, statements of operations,
statements of changes in net assets, notes to financial statements,
schedules of investments and independent auditor's report thereon. (the
Schroder Capital Funds Annual Report with respect to the Portfolios as
filed with the Securities and Exchange Commission on January 6, 1997 as
part of the Annual Report of certain series of Schroder Capital Funds
(Delaware) Funds that invest in the Portfolios pursuant to Rule 30b2-1
under the Investment Company Act of 1940, as amended) are incorporated
herein by reference.

(b) Exhibits:

(1) Trust Instrument of Schroder Capital Funds (the "Trust") (filed as
Exhibit 1 to the Trust's Initial Registration Statement and
incorporated herein by reference).

(2) Not applicable.

(3) Not applicable.

(4) Not applicable.

(5) (a) Form of Investment Advisory Agreement between the Trust and
Schroder Capital Management International Inc. ("SCMI") with
respect to International Equity Fund, Schroder Emerging Markets
Fund Institutional Portfolio and Schroder U.S. Smaller Companies
Portfolio (filed as Exhibit 5 to the Trust's Amendment No. 1 and
incorporated herein by reference).
<PAGE>

(b) Investment Advisory Agreement between the Trust and SCMI with
respect to Schroder International Smaller Companies Portfolio
(filed herewith).

(6) Not required.

(7) Not applicable.

(8) Form of Custodian Agreement between the Trust and The Chase Manhattan
Bank, N.A. with respect to International Equity Fund and Schroder
Emerging Markets Fund Institutional Portfolio and Schroder (filed as
Exhibit 8 to the Trust's Initial Registration Statement and
incorporated herein by reference).

(9) (a) Administration Agreement between the Trust and Schroder Fund
Advisors Inc. with respect to International Equity Fund,
Schroder Emerging Markets Fund Institutional Portfolio,
Schroder U.S. Smaller Companies Portfolio, Schroder
International Smaller Companies Portfolio and Schroder
Global asset Allocation Portfolio (filed herewith).

(b) Sub-administration Agreement between the Trust and Forum
Administrative Services, Limited Liability Company with
respect to International Equity Fund, Schroder Emerging
Markets Fund Institutional Portfolio, Schroder U.S. Smaller
Companies Portfolio, Schroder International Smaller
Companies Portfolio and Schroder Global asset Allocation
Portfolio (filed herewith).

(e) Form of Transfer Agency and Portfolio Accounting Agreement
between the Trust and Forum Financial Corp. with respect to
International Equity Fund and Schroder Emerging Markets Fund
Institutional Portfolio (filed as Exhibit 9(c) to the
Trust's Initial Registration Statement and incorporated
herein by reference).

(f) Form of Placement Agent Agreement between the Trust and
Forum with respect to International Equity Fund and Schroder
Emerging Markets Fund Institutional Portfolio (filed as
Exhibit 9(d) to the Trust's Initial Registration Statement
and incorporated herein by reference).

(10) Not required.

(11) Not required.

(12) Not required.

(13) Not applicable.

(14) Not applicable.

- 2 -
<PAGE>

(15) Not applicable.

(16) Not applicable.

Item 25. Persons Controlled by or Under Common Control with Registrant.

None

Item 26. Number of Holders of Securities as of March 1, 1997.

Title of Class of Shares Number of
of Beneficial Interest Holders
- ---------------------- -----------
International Equity Fund 2
Schroder Emerging Markets Fund Institutional Portfolio 2
Schroder U.S. Smaller Companies Portfolio 2

Item 27. Indemnification.

The Trust does not currently hold any directors' and officers' or errors
and omissions insurance policies. The Trust's trustees and officers are insured
under the Trust's fidelity bond purchased pursuant to Rule 17j-1 under the
Investment Company Act of 1940, as amended (the "Act").

The general effect of Article 5 of Registrant's Trust Instrument is to
indemnify existing or former trustees and officers of the Trust to the fullest
extent permitted by law against liability and expenses. There is no
indemnification if, among other things, any such person is adjudicated liable to
the Registrant or its shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office. This description is modified in its entirety by the provisions of
Article 5 of Registrant's Trust Instrument contained in this Registration
Statement as Exhibit 1 and incorporated herein by reference.

Provisions of Registrant's investment advisory agreements provide that the
respective investment adviser shall not be liable for any mistake of judgment or
in any event whatsoever, except for lack of good faith, provided that nothing
shall be deemed to protect, or purport to protect, the investment adviser
against any liability to Registrant or to Registrant's interestholders to which
the investment adviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of the investment
adviser's duties, or by reason of the investment adviser's reckless disregard of
its obligations and duties hereunder. This description is modified in its
entirety by the provisions of Registrant's Investment Advisory Agreement
contained in this Registration Statement as Exhibit 5 and incorporated herein by

- 3 -
<PAGE>

reference. Likewise, Registrant has agreed to indemnify (1) Forum Financial
Services, Inc. in the Administration and Sub-Administration Agreements, (2)
Forum Financial Corp. in the Transfer Agency and Fund Accounting Agreement, and
(3) Forum Financial Services, Inc. in the Placement Agent Agreement for certain
liabilities and expenses arising out of their acts or omissions under the
respective agreements.

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.

The following are the directors and principal officers of SCMI, including their
business connections of a substantial nature. The address of each company
listed, unless otherwise noted, is 33 Gutter Lane, London EC2V 8AS, United
Kingdom. Schroder Capital Management International Limited ("Schroder Ltd.") is
a United Kingdom affiliate of SCMI which provides investment management services
international clients located principally in the United States.

David M. Salisbury. Chief Executive Officer, Director and Chairman of
Schroder Capital; Joint Chief Executive and Director of Schroder.

Richard R. Foulkes. Senior Vice President and Managing Director of
Schroder Capital.

John A. Troiano. Managing Director and Senior Vice President. Mr.
Troiano is also a Director of Schroder Ltd.

David Gibson. Senior Vice President and Director of Schroder Capital.
Director of Schroder Wertheim Investment Services Inc.

John S. Ager. Senior Vice President and Director of Schroder Capital.

Sharon L. Haugh. Senior Vice President and Director of Schroder
Capital, Director and Chairman of Schroder Advisors Inc.

Gavin D.L. Ralston. Senior Vice President and Director of Schroder
Capital.

Mark J. Smith. Senior Vice President and Director of Schroder Capital.

Robert G. Davy. Senior Vice President. Mr. Davy is also a Director of
Schroder Ltd. and an officer of open end investment companies for
which SCMI and/or its affiliates provide investment services.

Jane P. Lucas. Senior Vice President and Director of Schroder Capital;
Director of Schroder Advisors Inc.; Director of Schroder Wertheim
Investment Services, Inc.

C. John Govett. Director of Schroder Capital; Group Managing Director
of Schroder Investment Management Ltd. And Director of Schroders plc.

Phillipa J. Gould. Senior Vice President and Director of Schroder
Capital.
<PAGE>

Louise Croset. First Vice President and Director of Schroder Capital.

Abdallah Nauphal, Group Vice President and Director.

ITEM 29. PRINCIPAL UNDERWRITERS.

(A) Schroder Fund Advisors Inc., the Registrant's principal underwriter, also
serves as principal underwriter for Schroder Series Trust.

(B) Following is information with respect to each officer and director of
Schroder Fund Advisors Inc., the Distributor of the shares of Schroder
International Fund, Schroder U.S. Equity Fund, Schroder U.S. Smaller Companies
Fund, Schroder Emerging Markets Fund Institutional Portfolio, Schroder
International Smaller Companies Fund, Schroder International Bond Fund, Schroder
Cash Reserves Fund and Schroder Latin America Fund (each a series of the
Registrant):

Catherine A. Mazza, President

Mark J. Smith, Director and Vice President.

John A. Troiano, Director and Vice President

Sharon L. Haugh, Director

Robert Jackowitz, Treasurer

Margaret H. Douglas-Hamilton, Secretary

* Address for each is 787 Seventh Avenue, New York, New York 10019 except for
John A. Troiano and Mark J. Smith each of whose address is 33 Gutter Lane,
London, England.

Item 30. Location of Books and Records.

The majority of the accounts, books and other documents required to be
maintained by Section 31(a) of the Act and the Rules thereunder are maintained
at the offices of Forum Administrative Services, Limited Liability Company and
Forum Financial Corp., Two Portland Square, Portland, Maine 04104. The records
required to be maintained under Rule 31a-1(b)(1) with respect to journals of
receipts and deliveries of securities and receipts and disbursements of cash are
maintained at the offices of the Registrant's custodian, which is named under
"Custodian" in Part B to this Registration Statement. The records required to
be maintained
<PAGE>

under Rule 31a-1(b)(5), (6) and (9) are maintained at the offices of
Registrant's investment adviser, which is named in Item 28 hereof.

Item 31. Management Services.

Not applicable.

Item 32. Undertakings.

Registrant undertakes to contain in its Trust Instrument provisions for
assisting shareholder communications and for the removal of trustees
substantially similar to those provided for in Section 16(c) of the Act, except
to the extent such provisions are mandatory or prohibited under applicable
Delaware law.
<PAGE>

SIGNATURES

Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of New York and
the State of New York on the 17th day of January, 1997.

SCHRODER CAPITAL FUNDS

By: /s/ Mark J. Smith
--------------------------
Mark J. Smith
President
<PAGE>

INDEX TO EXHIBITS

Sequential
Exhibit Page Number
- ------- -----------

(5) (b) Investment Advisory Agreement between the Trust
and SCMI with respect to Schroder International Smaller
Companies Portfolio.

(9) (a) Administration Agreement between the Trust and Schroder
Fund Advisors Inc. with respect to International Equity Fund,
Schroder Emerging Markets Fund Institutional Portfolio,
Schroder U.S. Smaller Companies Portfolio, Schroder
International Smaller Companies Portfolio and Schroder
Global asset Allocation Portfolio.

(9) (b) Sub-administration Agreement between the Trust and Forum
Administrative Services, Limited Liability Company with
respect to International Equity Fund, Schroder Emerging
Markets Fund Institutional Portfolio, Schroder U.S. Smaller
Companies Portfolio, Schroder International Smaller Companies
Portfolio and Schroder Global asset Allocation Portfolio.

<PAGE>

EXHIBIT (5) (b)

SCHRODER CAPITAL FUNDS
INVESTMENT ADVISORY AGREEMENT

AGREEMENT made this 15th day of March, 1996, between Schroder Capital Funds
(the "Trust"), a business trust organized under the laws of the State of
Delaware with its principal place of business at Two Portland Square, Portland,
Maine 04101, and Schroder Capital Management International Inc. (the "Adviser"),
a corporation organized under the laws of the State of New York with its
principal place of business at One State Street, New York, New York.

WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended, (the "Act") as an open-end management investment company and is
authorized to issue interests (as defined in the Trust's Trust Instrument) in
separate series;

WHEREAS, the Adviser provides investment advice and is registered with the
Securities and Exchange Commission (the "SEC") as an investment adviser under
the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and is
registered with the United Kingdom Investment Management Regulatory Organization
("IMRO");

WHEREAS, the Trust desires that the Adviser perform investment advisory
services for Schroder International Smaller Companies Portfolio and Schroder
Global Asset Allocation Portfolio (each a "Portfolio," and collectively the
"Portfolios"), and the Adviser is willing to provide those services on the terms
and conditions set forth in this Agreement; and

WHEREAS, the Adviser is willing to render such investment advisory services
to the Portfolios;

NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:

SECTION 1. THE TRUST; DELIVERY OF DOCUMENTS

The Trust is engaged in the business of investing and reinvesting its
assets in securities of the type and in accordance with the limitations
specified in its Trust Instrument and Registration Statement filed with the
Securities and Exchange Commission (the "Commission") under the Act, as may be
supplemented from time to time, all in such manner and to such extent as may
from time to time be authorized by the Trust's Board of Trustees (the "Board").
The Trust is currently authorized to issue four series of interests and the
Board is authorized to issue interests in any number of additional series. The
Trust has delivered to the Adviser copies of the Trust's Trust Instrument and
Registration Statement and will from time to time furnish Adviser with any
amendments thereof.
<PAGE>

SECTION 2. INVESTMENT ADVISER; APPOINTMENT

The Trust hereby employs Adviser, subject to the direction and control of
the Board, to manage the investment and reinvestment of the assets in each
Portfolio and, without limiting the generality of the foregoing, to provide
other services specified in Section 3 hereof.

SECTION 3. DUTIES OF THE ADVISER

(a) The Adviser shall make decisions with respect to all purchases and
sales of securities and other investment assets in the Portfolios. To carry out
such decisions, the Adviser is hereby authorized, as agent and attorney-in-fact
for the Trust, for the account of, at the risk of and in the name of the Trust,
to place orders and issue instructions with respect to those transactions of the
Portfolios. In all purchases, sales and other transactions in securities for
the Portfolios, the Adviser is authorized to exercise full discretion and act
for the Trust in the same manner and with the same force and effect as the Trust
might or could do with respect to such purchases, sales or other transactions,
as well as with respect to all other things necessary or incidental to the
furtherance or conduct of such purchases, sales or other transactions.

(b) The Adviser will report to the Board at each meeting thereof all
changes in the Portfolios since the prior report, and will also keep the Board
informed of important developments affecting the Trust, the Portfolios and the
Adviser, and on its own initiative, will furnish the Board from time to time
with such information as the Adviser may believe appropriate for this purpose,
whether concerning the individual companies whose securities are included in a
Portfolio's holdings, the industries in which they engage, or the economic,
social or political conditions prevailing in each country in which the Portfolio
maintains investments. The Adviser will also furnish the Board with such
statistical and analytical information with respect to securities in the
Portfolios as the Adviser may believe appropriate or as the Board reasonably may
request. In making purchases and sales of securities for a Portfolio, the
Adviser will bear in mind the policies set from time to time by the Board as
well as the limitations imposed by the Trust's Trust Instrument and Registration
Statement under the Act, the limitations in the Act and in the Internal Revenue
Code of 1986, as amended, in respect of regulated investment companies and the
investment objectives, policies and restrictions of the Portfolios.

(c) The Adviser will from time to time employ or associate with such
persons as the Adviser believes to be particularly fitted to assist in the
execution of the Adviser's duties hereunder, the cost of performance of such
duties to be borne and paid by the Adviser. No obligation may be incurred on
the Trust's behalf in any such respect.

(d) The Adviser shall maintain records for each Portfolio relating to
portfolio transactions and the placing and allocation of brokerage orders as are
required to be maintained by the Trust under the Act. The Adviser shall prepare
and maintain, or cause to be prepared and maintained, in such form, for such
periods and in such locations as may be required by applicable law, all
documents and records relating to the services provided by the Adviser pursuant
to this Agreement required to be prepared and maintained by the Trust pursuant
to the rules and regulations of any national, state, or local government entity
with jurisdiction over the Trust,
<PAGE>

including the Commission and the Internal Revenue Service. The books and
records pertaining to the Trust which are in possession of the Adviser shall be
the property of the Trust. The Trust, or the Trust's authorized
representatives, shall have access to such books and records at all times during
the Adviser's normal business hours. Upon the reasonable request of the Trust,
copies of any such books and records shall be provided promptly by the Adviser
to the Trust or the Trust's authorized representatives.

SECTION 4. EXPENSES

The Trust hereby confirms that the Trust shall be responsible and shall
assume the obligation for payment of all the Trust's expenses, including:
interest charges, taxes, brokerage fees and commissions; certain insurance
premiums; fees, interest charges and expenses of the Trust's custodian and
transfer agent; telecommunications expenses; auditing, legal and compliance
expenses; costs of the Trust's formation and maintaining its existence; costs of
preparing the Trust's registration statement, account application forms and
interestholder reports and delivering them to existing and prospective
interestholders; costs of maintaining books of original entry for portfolio and
fund accounting and other required books and accounts and of calculating the net
asset value of interests in the Trust; costs of reproduction, stationery and
supplies; compensation of the Trust's trustees, officers and employees and costs
of other personnel performing services for the Trust who are not officers of the
Adviser or of Forum Financial Services, Inc. or affiliated persons of either;
costs of Trust meetings; registration fees and related expenses for registration
with the Commission and the securities regulatory authorities of other countries
in which the Trust's interests are sold; state securities law registration fees
and related expenses; and fees and out-of-pocket expenses payable to Forum
Financial Services, Inc. under any placement agent, management or similar
agreement.

SECTION 5. STANDARD OF CARE

(a) The Trust shall expect of the Adviser, and the Adviser will give the
Trust the benefit of, the Adviser's best judgment and efforts in rendering its
services to the Trust, and as an inducement to the Adviser's undertaking these
services the Adviser shall not be liable hereunder for any mistake of judgment
or in any event whatsoever, except for lack of good faith, provided that nothing
herein shall be deemed to protect, or purport to protect, the Adviser against
any liability to the Trust or to the Trust's interestholders to which the
Adviser would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of the Adviser's duties hereunder, or by
reason of the Adviser's reckless disregard of its obligations and duties
hereunder. As used in this Section 5, the term "Adviser" shall include any
affiliates of the Adviser performing services for the Portfolios contemplated
hereby and directors, officers and employees of the Adviser as well as the
Adviser itself.

(b) The Adviser shall not be liable for any losses caused by disturbances
of its operations by virtue of force majeure, war, riot, or damage caused by
nature or due to other events for which the Adviser is not responsible (e.g.,
strike, lock-out or losses caused by the imposition of foreign exchange
controls, expropriation of assets or other acts of domestic or foreign
authorities) except under the circumstances provided for in Section 5(a).
<PAGE>

The presence of exculpatory language in this Agreement shall not in any way
limit or be deemed by anyone to limit the Trust, the Trustees of the Trust,
the Portfolios, the Adviser, or any other party appointed pursuant to this
Agreement, including without limitation any custodian, as in any way limiting
causes of action and remedies which may, notwithstanding such language, be
available to the Trust, the Trustees of the Trust, Portfolios or any other party
appointed pursuant to this Agreement, either under common law or statutory law
principles applicable to fiduciary relationships or under the Federal securities
laws.

SECTION 6. COMPENSATION

In consideration of the foregoing, the Trust shall pay the Adviser, with
respect to each of the Portfolios, a fee at an annual rate as listed in Appendix
A hereto. Such fees shall be accrued by the Trust based on average daily net
assets and shall be payable monthly in arrears on the first day of each calendar
month for services performed hereunder during the prior calendar month.

SECTION 7. EFFECTIVENESS, DURATION, AND TERMINATION

(a) This Agreement shall become effective with respect to a Portfolio
immediately upon approval by a majority of the outstanding voting interests of
that Portfolio.

(b) This Agreement shall remain in effect with respect to a Portfolio for
a period of two years from the date of its effectiveness and shall continue in
effect for successive twelve-month periods (computed from each anniversary date
of the approval) with respect to the Portfolio, provided that such continuance
is specifically approved at least annually (i) by the Board or by the vote of a
majority of the outstanding voting interests of the Portfolio, and, in either
case, (ii) by a majority of the Trust's trustees who are not parties to this
Agreement or interested persons of any such party (other than as trustees of the
Trust); provided further, however, that if this Agreement or the continuation of
this Agreement is not approved as to a Portfolio, the Adviser may continue to
render to that Portfolio the services described herein in the manner and to the
extent permitted by the Act and the rules and regulations thereunder.

(c) This Agreement may be terminated with respect to a Portfolio at any
time, without the payment of any penalty, (i) by the Board or by a vote of a
majority of the outstanding voting interests of a Portfolio on 60 days' written
notice to the Adviser or (ii) by the Adviser on 60 days' written notice to the
Trust. This agreement shall terminate upon assignment.

SECTION 8. ACTIVITIES OF THE ADVISER

Except to the extent necessary to perform its obligations hereunder,
nothing herein shall be deemed to limit or restrict the Adviser's right, or the
right of any of the Adviser's officers, directors or employees who may also be a
trustee, officer or employee of the Trust, or persons otherwise affiliated
persons of the Trust to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of a
similar or dissimilar nature, or to render services of any kind to any other
corporation, trust, firm,
<PAGE>

individual or association. It is specifically understood that officers,
directors and employees of the Adviser and its affiliates may continue to engage
in providing portfolio management services and advice to other investment
companies, whether or not registered, and to other investment advisory clients.
When other clients of the Adviser desire to purchase or sell a security at the
same time such security is purchased or sold for the Portfolios, such purchases
and sales will, to the extent feasible, be allocated among the Portfolios and
such clients in a manner believed by the Adviser to be equitable to the
Portfolios and such clients.

SECTION 9. LIMITATION OF INTERESTHOLDER AND TRUSTEE LIABILITY

The Trustees of the Trust and the interestholders of the Portfolios shall
not be liable for any obligations of the Trust or of the Portfolios under this
Agreement, and the Adviser agrees that, in asserting any rights or claims under
this Agreement, it shall look only to the assets and property of the Trust or
the Portfolios to which the Adviser's rights or claims relate in settlement of
such rights or claims, and not to the Trustees of the Trust or the
interestholders of the Portfolios.

SECTION 10. NOTICE

Any notice or other communication required to be given pursuant to this
Agreement shall be in writing or by telex and shall be effective upon receipt.
Notices and communications shall be given, if to the Trust, at:

Schroder Capital Funds
Two Portland Square
Portland, Maine 04101
Attention: Thomas G. Sheehan

and if to the Adviser, at:

Schroder Capital Management International Inc.
787 Seventh Avenue, 29th Floor
New York, New York 10019
Attention: Laura Luckyn-Malone

SECTION 11. MISCELLANEOUS

(a) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties hereto and, if required by the Act, by a vote of a majority of the
outstanding voting interests of the Portfolios thereby affected. No amendment
to this Agreement or the termination of this Agreement with respect to a
Portfolio shall effect this Agreement as it pertains to any other Portfolio.
<PAGE>

(b) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.

(c) This Agreement may be executed by the parties hereto on any number of
counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.

(d) Section headings in this Agreement are included for convenience only
and are not to be used to construe or interpret this Agreement.

(e) This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the State of Delaware.

(f) The Adviser confirms that each Portfolio is a "Non-private Customer"
as defined in the rules of IMRO.

(g) The terms "vote of a majority of the outstanding voting interests,"
"interested person," "affiliated person" and "assignment" shall have the
meanings ascribed thereto in the Act to the terms "vote of a majority of the
outstanding voting securities," "interested person," "affiliated person" and
"assignment," respectively.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.

SCHRODER CAPITAL FUNDS

------------------------
Laura E. Luckyn-Malone
President

SCHRODER CAPITAL MANAGEMENT
INTERNATIONAL INC.

------------------------
Mark J. Smith
Director
<PAGE>

SCHRODER CAPITAL FUNDS
INVESTMENT ADVISORY AGREEMENT

Appendix A

Annual Fee as a % of
the Average Daily
Portfolios of the Trust Net Assets of the Portfolio
- ----------------------- ---------------------------

Schroder International Smaller Companies Portfolio 0.85%

Schroder Global Asset Allocation Portfolio 0.75%

<PAGE>

EXHIBIT (9) (a)

SCHRODER CAPITAL FUNDS
ADMINISTRATION AGREEMENT

AGREEMENT made this 26th day of November, 1996, between Schroder Capital
Funds (the "Trust"), a business trust organized under the laws of the State of
Delaware with its principal place of business at Two Portland Square, Portland,
Maine 04101, and Schroder Fund Advisors Inc. ("Schroder"), a corporation
organized under the laws of the State of Maryland.

WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended, (the "1940 Act") as an open-end management investment company and is
authorized to issue shares of beneficial interest ("Shares") in separate series;

WHEREAS, the Trust has entered into various Investment Advisory Agreements
with Schroder Capital Management International Inc. (the "Adviser"), pursuant to
which the Adviser provides investment advisory services for the Trust;

WHEREAS, the Trust desires that Schroder perform certain administrative
services for each of the series of the Trust as listed in Appendix A hereto
(each a "Series," and collectively the "Portfolios") other than any
administrative services required to be performed by the Adviser, and Schroder is
willing to provide those services on the terms and conditions set forth in this
Agreement;

NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the Trust and Schroder agree as follows:

SECTION 1. APPOINTMENT. The Trust hereby appoints Schroder as
administrator of the Trust and of each Series and Schroder hereby accepts such
appointment, all in accordance with the terms and conditions of this Agreement.
In connection therewith, the Trust has delivered to Schroder copies of its Trust
Instrument, the Trust's Registration Statement and all amendments thereto filed
pursuant to the 1940 Act (the "Registration Statement"), and the current Parts A
and B of each Series (collectively, as currently in effect and as amended or
supplemented, the "Prospectus"), all in such manner and to such extent as may
from time to time be authorized by the Trust's Board of Trustees (the "Board"),
and shall promptly furnish Schroder with all amendments of or supplements to the
foregoing.

SECTION 2. FURNISHING OF EXISTING ACCOUNTS AND RECORDS. The Trust shall
promptly turn over to Schroder such of the accounts and records previously
maintained by or for it as are necessary for Schroder to perform its functions
under this Agreement. The Trust authorizes Schroder to rely on such accounts
and records turned over to it and hereby indemnifies and will hold Schroder, its
successors and assigns, harmless of and from any and all expenses, damages,
claims, suits, liabilities, actions, demands and losses whatsoever arising out
of or in connection with any error, omission, inaccuracy or other deficiency of
such
<PAGE>

accounts and records or in the failure of the Trust to provide any portion of
such or to provide any information needed by Schroder to knowledgeably perform
its functions.

SECTION 3. ADMINISTRATIVE DUTIES

(a) Subject to the direction and control of the Board and in cooperation
with the Adviser, Schroder shall provide, or oversee, as applicable,
administrative services necessary for the Trust's operations with respect to
each Series except those services that are the responsibility of the Adviser or
the Series' custodian or transfer agent, all in such manner and to such extent
as may be authorized by the Board.

(b) With respect to the Trust and each Series, as applicable, Schroder
shall:

(i) oversee (A) the preparation and maintenance by the Adviser and the
Trust's sub-administrator, custodian, interestholder record keeper and
fund accountant (or if appropriate, prepare and maintain) in such
form, for such periods and in such locations as may be required by
applicable law, of all documents and records relating to the operation
of the Trust required to be prepared or maintained by the Trust or its
agents pursuant to applicable law; (B) the reconciliation of account
information and balances among the Adviser and the Trust's custodian,
interestholder record keeper and fund accountant; (C) the transmission
of purchase and redemption orders for Shares; (D) the notification to
the Adviser of available funds for investment; and (E) the performance
of fund accounting, including the calculation of the net asset value
of the Shares;

(ii) oversee the performance of administrative and professional services
rendered to the Trust by others, including its sub-administrator,
custodian, interestholder record keeper and fund accountant as well as
legal, auditing and shareholder servicing and other services performed
for each Series;

(iii) oversee the preparation and the printing of the periodic updating of
the Registration Statement and Prospectus, tax returns, and reports to
interestholders, the Securities and Exchange Commission and state
securities commissions;

(iv) oversee the preparation of proxy and information statements and any
other communications to interestholders;

(v) at the request of the Board, provide the Trust with adequate general
office space and facilities and provide persons suitable to the Board
to serve as officers of the Trust;

(vi) provide the Trust, at the Trust's request, with the services of
persons who are competent to perform such supervisory or
administrative functions as are necessary for effective operation of
the Trust;
<PAGE>

(vii) oversee the preparation, filing and maintenance the Trust's governing
documents, including the Trust Instrument and minutes of meetings of
Trustees and interestholders;

(viii) oversee with the cooperation of the Trust's counsel, the Adviser and
other relevant parties, preparation and dissemination of materials for
meetings of the Board;

(ix) oversee, and if required, monitor sales of Shares and ensure that such
Shares are properly and duly registered with the Securities and
Exchange Commission and applicable state securities commissions;

(x) oversee the calculation of performance data for dissemination to
information services covering the investment company industry, for
sales literature of the Trust and other appropriate purposes;

(xi) oversee the determination of the amount of, and supervise
distributions to interestholders; and

(xii) advise the Trust and its Board on matters concerning the Trust and its
affairs.

(c) Schroder shall oversee the preparation and maintenance, or cause to be
prepared and maintained, records in such form for such periods and in such
locations as may be required by applicable regulations, all documents and
records relating to the services provided to the Trust pursuant to this
Agreement required to be maintained pursuant to the 1940 Act, rules and
regulations of the Securities and Exchange Commission, the Internal Revenue
Service and any other national, state or local government entity with
jurisdiction over the Trust. The accounts and records pertaining to the Trust
which are in possession of Schroder, or an entity subcontracted by Schroder,
shall be the property of the Trust. The Trust, or the Trust's authorized
representatives, shall have access to such accounts and records at all times
during Schroder's, or its subcontractor's, normal business hours. Upon the
reasonable request of the Trust, copies of any such accounts and records shall
be provided promptly by Schroder to the Trust or the Trust's authorized
representatives. In the event the Trust designates a successor to any of
Schroder's obligations under this agreement, Schroder shall, at the expense and
direction of the Trust, transfer to such successor all relevant books, records
and other data established or maintained by Schroder, or its subcontractor,
under this Agreement.

SECTION 4. STANDARD OF CARE

(a) Schroder, in performing under the terms and conditions of this
Agreement, shall use its best judgment and efforts in rendering the services
described herein, and shall incur no liability for its status under this
agreement or for any reasonable actions taken or omitted in good faith. As an
inducement to Schroder's undertaking to render these services, the Trust hereby
agrees to indemnify and hold harmless Schroder, its employees, agents, officers
and directors, from any and all loss, liability and expense, including any legal
expenses, arising out of
<PAGE>

Schroder's performance under this Agreement, or status, or any act or omission
of Schroder, its employees, agents, officers and directors; provided that this
indemnification shall not apply to Schroder's actions taken or failures to act
in cases of Schroder's own bad faith, willful misconduct or gross negligence in
the performance of its duties under this Agreement; and further provided, that
Schroder shall give the Trust notice and reasonable opportunity to defend
against any such loss, claim, damage, liability or expense in the name of the
Trust or Schroder, or both. The Trust will be entitled to assume the defense of
any suit brought to enforce any such claim or demand, and to retain counsel of
good standing chosen by the Trust and approved by Schroder, which approval shall
not be withheld unreasonably. In the event the Trust does elect to assume the
defense of any such suit and retain counsel of good standing approved by
Schroder, the defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by any of them; but in case the
Trust does not elect to assume the defense of any such suit, or in case Schroder
does not approve of counsel chosen by the Trust or Schroder has been advised
that it may have available defenses or claims which are not available or
conflict with those available to the Trust, the Trust will reimburse Schroder,
its employees, agents, officers and directors for the fees and expenses of any
one law firm retained as counsel by Schroder or them. Schroder may, at any
time, waive its right to indemnification under this agreement and assume its own
defense. The provisions of paragraphs (b) through (d) of this Section 4 should
not in any way limit the foregoing:

(a) Schroder may rely upon the advice of the Trust or of counsel, who may
be counsel for the Trust or counsel for Schroder, and upon statements of
accountants, brokers and other persons believed by it in good faith to be expert
in the matters upon which they are consulted, and Schroder shall not be liable
to anyone for any actions taken in good faith upon such statements.

(b) Schroder may act upon any oral instruction which it receives and which
it believes in good faith was transmitted by the person or persons authorized by
the Board of the Trust to give such oral instruction. Schroder shall have no
duty or obligation to make any inquiry or effort of certification of such oral
instruction.

(c) Schroder shall not be liable for any action taken in good faith
reliance upon any written instruction or certified copy of any resolution of the
Board of the Trust, and Schroder may rely upon the genuineness of any such
document or copy thereof reasonably believed in good faith by Schroder to have
been validly executed.

(d) Schroder may rely and shall be protected in acting upon any signature,
instruction, request, letter of transmittal, certificate, opinion of counsel,
statement, instrument, report, notice, consent, order, or other paper document
believed by it to be genuine and to have been signed or presented by the
purchaser, Trust or other proper party or parties.

SECTION 5. EXPENSES Subject to any agreement by Schroder or other person
to reimburse any expenses of the Trust that relate to any Series, the Trust
shall be responsible for and assume the obligation for payment of all of its
expenses, including: (a) the fee payable under Section 6 hereof; (b) any fees
payable to the Adviser; (c) interest charges, taxes and brokerage
<PAGE>

fees and commissions; (d) premiums of insurance for the Trust, its Trustees and
officers and fidelity bond premiums; (e) fees, interest charges and expenses of
third parties, including the Trust's custodian, transfer agent, dividend
disbursing agent and fund accountant; (f) telecommunications expenses; (g)
auditing, legal and compliance expenses; (h) costs of forming the Trust and
maintaining its existence; (i) to the extent permitted by the 1940 Act, costs of
preparing the Trust's registration statement, subscription application forms and
interestholder reports and delivering them to existing and prospective
interestholders; (j) costs of maintaining books of original entry for portfolio
and fund accounting and other required books and accounts, of calculating the
net asset value of shares of the Trust and of preparing tax returns; (k) costs
of reproduction, stationery and supplies; (l) fees and expenses of the Trust's
Trustees; (m) compensation of the Trust's officers and employees who are not
employees of the Adviser or Schroder or their respective affiliated persons and
costs of other personnel (who may be employees of the Adviser, Schroder or their
respective affiliated persons) performing services for the Trust; (n) costs of
Trustee meetings; (o) Securities and Exchange Commission registration fees and
related expenses; (p) state or foreign securities laws registration fees and
related expenses; and (q) fees and out-of-pocket expenses payable to each
investment adviser under any investment advisory or similar agreement.

SECTION 6. COMPENSATION

(a) In consideration of the services performed by Schroder under this
Agreement, the Trust will pay Schroder, with respect to each Series, a fee at
the annual rate, as listed in Appendix B hereto. Such fee shall be accrued by
the Trust daily and shall be payable monthly in arrears on the first day of each
calendar month for services performed under this agreement during the prior
calendar month. If the fees payable pursuant to this provision begin to accrue
before the end of any month or if this Agreement terminates before the end of
any month, the fees for the period from that date to the end of that month or
from the beginning of that month to the date of termination, as the case may be,
shall be prorated according to the proportion that the period bears to the full
month in which the effectiveness or termination occurs. Upon the termination of
this Agreement, the Trust shall pay to Schroder such compensation as shall be
payable prior to the effective date of such termination.

(b) In the event that this agreement is terminated, Schroder shall be
reimbursed for reasonable charges and disbursements associated with promptly
transferring to its successor as designated by the Trust the original or copies
of all accounts and records maintained by Schroder under this agreement, and
cooperating with, and providing reasonable assistance to its successor in the
establishment of the accounts and records necessary to carry out the successor's
or other person's responsibilities.

(c) Notwithstanding anything in this Agreement to the contrary, Schroder
and its affiliated persons may receive compensation or reimbursement from the
Trust with respect to (i) the provision of services on behalf of the Series in
accordance with any distribution plan adopted by the Trust pursuant to Rule 12b-
1 under the 1940 Act or (ii) the provision of shareholder support or other
services, including fund accounting services.
<PAGE>

SECTION 7. EFFECTIVENESS, DURATION AND TERMINATION

(a) This Agreement shall become effective on the date first above written
with respect to each Series of the Trust then existing and shall relate to every
other Series as of the later of the date on which the Trust's Registration
Statement relating to the shares of such Series becomes effective or the Series
commences operations.

(b) This Agreement shall continue in effect for twelve months and,
thereafter, shall be automatically renewed each year for an additional term of
one year.

(c) This Agreement may be terminated with respect to a Series at any time,
without the payment of any penalty, (i) by the Board on 60 days' written notice
to Schroder or (ii) by Schroder on 60 days' written notice to the Trust. Upon
receiving notice of termination by Schroder, the Trust shall use its best
efforts to obtain a successor administrator. Upon receipt of written notice
from the Trust of the appointment of a successor, and upon payment to Schroder
of all fees owed through the effective termination date, and reimbursement for
reasonable charges and disbursements, Schroder shall promptly transfer to the
successor administrator the original or copies of all accounts and records
maintained by Schroder under this agreement including, in the case of records
maintained on computer systems, copies of such records in machine-readable form,
and shall cooperate with, and provide reasonable assistance to, the successor
administrator in the establishment of the accounts and records necessary to
carry out the successor administrator's responsibilities. For so long as
Schroder continues to perform any of the services contemplated by this Agreement
after termination of this Agreement as agreed to by the Trust and Schroder, the
provisions of Sections 4 and 6 hereof shall continue in full force and effect.

SECTION 8. ACTIVITIES OF SCHRODER

(a) Except to the extent necessary to perform Schroder's obligations under
this Agreement, nothing herein shall be deemed to limit or restrict the right of
Schroder, or any affiliate of Schroder, or any employee of the Schroder, to
engage in any other business or to devote time and attention to the management
or other aspects of any other business, whether of a similar or dissimilar
nature, or to render services of any kind to any other corporation, firm,
individual or association.

(b) Schroder may subcontract any or all of its functions or
responsibilities pursuant to this Agreement to one or more corporations, trusts,
firms, individuals or associations, which may be affiliates of Schroder, who
agree to comply with the terms of this Agreement. Schroder may pay those
persons for their services, but no such payment will increase Schroder's
compensation from the Trust.

SECTION 9. COOPERATION WITH INDEPENDENT ACCOUNTANTS.
Schroder shall cooperate, if applicable, with the Trust's independent public
accountants and shall take reasonable action to make all necessary information
available to such accountants for the performance of their duties.
<PAGE>

SECTION 10. SERVICE DAYS. Nothing contained in this Agreement is intended
to or shall require Schroder, in any capacity under this agreement, to perform
any functions or duties on any day other than a business day of the Trust or of
a Series. Functions or duties normally scheduled to be performed on any day
which is not a business day of the Trust or of a Series shall be performed on,
and as of, the next business day, unless otherwise required by law.

SECTION 11. NOTICES. Any notice or other communication required by or
permitted to be given in connection with this Agreement shall be in writing and
shall be delivered in person, or by first-class mail, postage prepaid, or by
overnight or two-day private mail service to the respective party. Notice to
the Trust shall be given as follows or at such other address as the Trust may
designate in writing:

Schroder Capital Funds
787 Seventh Avenue
New York, New York 10019

Notice to Schroder shall be given as follows or at such other address as
Schroder may designate in writing:

Schroder Fund Advisors Inc.
787 Seventh Avenue
New York, New York 10019

Notices and other communications received by the parties at the addresses
listed above shall be deemed to have been properly given.

SECTION 12. LIMITATION OF INTERESTHOLDER AND TRUSTEE LIABILITY

The Trustees of the Trust and the shareholders of each Series shall not be
liable for any obligations of the Trust or of the Series under this Agreement,
and Schroder agrees that, in asserting any rights or claims under this
Agreement, it shall look only to the assets and property of the Trust or the
Series to which Schroder's rights or claims relate in settlement of such rights
or claims, and not to the Trustees of the Trust or the shareholders of the
Series.

SECTION 13. MISCELLANEOUS

(a) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties hereto.

(b) This Agreement may be executed in two or more counterparts, each of
which, when so executed shall be deemed to be an original, but such counterparts
shall together constitute but one and the same instrument.
<PAGE>

(c) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.

(d) Section and Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this Agreement.

(e) This Agreement shall extend to and shall be binding upon the parties
hereto and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable by the Trust without the written consent of
Schroder, or by Schroder, without the written consent of the Trust authorized or
approved by a resolution of the Board.

(f) This Agreement shall be governed by the laws of the State of New York.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.

SCHRODER CAPITAL FUNDS

--------------------

SCHRODER FUND ADVISORS INC.

--------------------
<PAGE>

SCHRODER CAPITAL FUNDS
ADMINISTRATION AGREEMENT

APPENDIX A
SERIES OF THE TRUST

International Equity Fund
Schroder U.S. Smaller Companies Portfolio
Schroder Emerging Markets Fund Institutional Portfolio
Schroder International Smaller Companies Portfolio
Schroder Global Asset Allocation Portfolio
<PAGE>

SCHRODER CAPITAL FUNDS
ADMINISTRATION AGREEMENT

APPENDIX B
ADMINISTRATION FEES

Fee As % of the Average Annual
Series of the Trust Daily Net Assets of the Series
- ------------------- ------------------------------

International Equity Fund 0.075%

Schroder U.S. Smaller Companies Portfolio 0.00%

Schroder Emerging Markets Fund Institutional
Portfolio 0.05%

Schroder International Smaller Companies
Portfolio 0.15%

Schroder Global Asset Allocation Portfolio 0.075%

<PAGE>

EXHIBIT (9) (b)

SCHRODER CAPITAL FUNDS
SUBADMINISTRATION AGREEMENT

AGREEMENT made this 1st day of February, 1997, between Schroder Capital
Funds ("Trust"), a business trust organized under the laws of the State of
Delaware with its principal place of business at Two Portland Square, Portland,
Maine 04101, and Forum Administrative Services, Limited Liability Company
("Subadministrator"), a limited liability company organized under the laws of
the State of Delaware.

WHEREAS, the Trust is registered under the Investment Company Act of 1940
as amended ("1940 Act") as an open-end management investment company and is
authorized to issue shares of beneficial interest ("Shares") in separate series;

WHEREAS, the Trust has entered into various Investment Advisory Agreements
with Schroder Capital Management International Inc. (the "Adviser") and
Administrative Services Agreement with Schroder Fund Advisers Inc. (the
"Administrator"), pursuant to which the Adviser and Administrator provide
certain management and administrative services for the Trust.

WHEREAS, the Trust desires that the Subadministrator perform certain
administrative services for each of the series of the Trust as listed in
Appendix A hereto (each a "Series") other than any administrative services
required to be performed by the Adviser or the Administrator, and the
Subadministrator is willing to provide those services on the terms and
conditions set forth in this Agreement;

NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the Trust and the Subadministrator agree as
follows:

SECTION 1. APPOINTMENT. The Trust hereby appoints the Subadministrator as
subadministrator of the Trust and of each Series and the Subadministrator hereby
accepts such appointment, all in accordance with the terms and conditions of
this Agreement. In connection therewith, the Trust has delivered to the
Subadministrator copies of its Trust Instrument, the Trust's Registration
Statement and all amendments thereto filed pursuant to the 1940 Act (the
"Registration Statement"), and the current Parts A and B of each Series
(collectively, as currently in effect and as amended or supplemented, the
"Prospectus"), all in such manner and to such extent as may from time to time be
authorized by the Trust's Board of Trustees (the "Board"), and shall promptly
furnish the Subadministrator with all amendments of or supplements to the
foregoing.

SECTION 2. FURNISHING OF EXISTING ACCOUNTS AND RECORDS. The Trust shall
promptly turn over to the Subadministrator such of the accounts and records
previously maintained by or for it as are necessary for the Subadministrator to
perform its functions under this Agreement. The Trust authorizes the
Subadministrator to rely on such accounts and records turned over to it and
hereby indemnifies and will hold the
<PAGE>

Subadministrator, its successors and assigns, harmless of and from any and all
expenses, damages, claims, suits, liabilities, actions, demands and losses
whatsoever arising out of or in connection with any error, omission, inaccuracy
or other deficiency of such accounts and records or in the failure of the Trust
to provide any portion of such or to provide any information needed by the
Subadministrator to knowledgeably perform its functions.

SECTION 3. ADMINISTRATIVE DUTIES

(a) Subject to the direction and control of the Board and in cooperation
with the Adviser and the Administrator, the Subadministrator shall provide
administrative services necessary for the Trust's operations with respect to
each Series except those services that are the responsibility of the Adviser,
the Administrator or the Series' custodian or transfer agent, all in such manner
and to such extent as may be authorized by the Board and requested by the
Administrator.

(b) With respect to the Trust and each Series, as applicable, the
Subadministrator shall:

(i) oversee (A) the preparation and maintenance by the Adviser and the
Trust's custodian, interestholder record keeper and fund accountant
(or if appropriate, prepare and maintain) in such form, for such
periods and in such locations as may be required by applicable law, of
all documents and records relating to the operation of the Trust
required to be prepared or maintained by the Trust or its agents
pursuant to applicable law; (B) the reconciliation of account
information and balances among the Adviser and the Trust's custodian,
interestholder record keeper and fund accountant; (C) the transmission
of purchase and redemption orders for Shares; (D) the notification to
the Adviser of available funds for investment; and (E) the performance
of fund accounting, including the calculation of the net asset value
of the Shares;

(ii) oversee the performance of administrative and professional services
rendered to the Trust by others, including its custodian and
interestholder record keeper as well as legal, auditing and
shareholder servicing and other services performed for each Series;

(iii) be responsible for the preparation and the printing of the periodic
updating of the Registration Statement and Prospectus, tax returns,
and reports to interestholders, the Securities and Exchange Commission
and state securities commissions;

(iv) be responsible for the preparation of proxy and information statements
and any other communications to interestholders;

(v) at the request of the Board, provide the Trust with adequate general
office space and facilities and provide persons suitable to the Board
to serve as officers of the Trust;
<PAGE>

(vii) prepare, file and maintain the Trust's governing documents, including
the Trust Instrument and minutes of meetings of Trustees and
shareholders;

(viii) with the cooperation of the Trust's counsel, the Administrator, the
Adviser, and other relevant parties, prepare and disseminate materials
for meetings of the Board;

(ix) if required, monitor sales of Shares and ensure that such Shares are
properly and duly registered with the Securities and Exchange
Commission and applicable state securities commissions;

(x) oversee the calculation of performance data for dissemination to
information services covering the investment company industry, for
sales literature of the Trust and other appropriate purposes;

(xi) oversee the determination of the amount of, and prepare and distribute
to appropriate parties notices announcing the distributions to
interestholders; and

(xii) advise the Trust and its Board on matters concerning the Trust and its
affairs.

(c) The Subadministrator shall prepare and maintain or cause to be
prepared and maintained records in such form for such periods and in such
locations as may be required by applicable regulations, all documents and
records relating to the services provided to the Trust pursuant to this
Agreement required to be maintained pursuant to the 1940 Act, rules and
regulations of the Securities and Exchange Commission, the Internal Revenue
Service and any other national, state or local government entity with
jurisdiction over the Trust. The accounts and records pertaining to the Trust
which are in possession of the Subadministrator shall be the property of the
Trust. The Trust, or the Trust's authorized representatives, shall have access
to such accounts and records at all times during the Subadministrator's normal
business hours. Upon the reasonable request of the Trust, copies of any such
accounts and records shall be provided promptly by the Subadministrator to the
Trust or the Trust's authorized representatives. In the event the Trust
designates a successor to any of the Subadministrator's obligations under this
agreement, the Subadministrator shall, at the expense and direction of the
Trust, transfer to such successor all relevant books, records and other data
established or maintained by the Subadministrator under this Agreement.

SECTION 4. STANDARD OF CARE.

(a) The Subadministrator, in performing under the terms and conditions of
this Agreement, shall use its best judgment and efforts in rendering the
services described herein, and
<PAGE>

shall incur no liability for its status under this agreement or for any
reasonable actions taken or omitted in good faith. As an inducement to the
Subadministrator's undertaking to render these services, the Trust hereby agrees
to indemnify and hold harmless the Subadministrator, its employees, agents,
officers and directors, from any and all loss, liability and expense, including
any legal expenses, arising out of the Subadministrator's performance under this
Agreement, or status, or any act or omission of the Subadministrator, its
employees, agents, officers and directors; provided that this indemnification
shall not apply to the Subadministrator's actions taken or failures to act in
cases of the Subadministrator's own bad faith, willful misconduct or gross
negligence in the performance of its duties under this Agreement; and further
provided, that the Subadministrator shall give the Trust notice and reasonable
opportunity to defend against any such loss, claim, damage, liability or expense
in the name of the Trust or the Subadministrator, or both. The Trust will be
entitled to assume the defense of any suit brought to enforce any such claim or
demand, and to retain counsel of good standing chosen by the Trust and approved
by the Subadministrator, which approval shall not be withheld unreasonably. In
the event the Trust does elect to assume the defense of any such suit and retain
counsel of good standing approved by the Subadministrator, the defendant or
defendants in such suit shall bear the fees and expenses of any additional
counsel retained by any of them; but in case the Trust does not elect to assume
the defense of any such suit, or in case the Subadministrator does not approve
of counsel chosen by the Trust or the Subadministrator has been advised that it
may have available defenses or claims which are not available or conflict with
those available to the Trust, the Trust will reimburse the Subadministrator, its
employees, agents, officers and directors for the fees and expenses of any one
law firm retained as counsel by the Subadministrator or them. The
Subadministrator may, at any time, waive its right to indemnification under this
agreement and assume its own defense. The provisions of paragraphs (b) through
(d) of this Section 4 should not in any way limit the foregoing:

(a) The Subadministrator may rely upon the advice of the Trust or of
counsel, who may be counsel for the Trust or counsel for the Subadministrator,
and upon statements of accountants, brokers and other persons believed by it in
good faith to be expert in the matters upon which they are consulted, and the
Subadministrator shall not be liable to anyone for any actions taken in good
faith upon such statements.

(b) The Subadministrator may act upon any oral instruction which it
receives and which it believes in good faith was transmitted by the person or
persons authorized by the Board of the Trust to give such oral instruction. The
Subadministrator shall have no duty or obligation to make any inquiry or effort
of certification of such oral instruction.

(c) The Subadministrator shall not be liable for any action taken in good
faith reliance upon any written instruction or certified copy of any resolution
of the Board of the Trust, and the Subadministrator may rely upon the
genuineness of any such document or copy thereof reasonably believed in good
faith by the Subadministrator to have been validly executed.

(d) The Subadministrator may rely and shall be protected in acting upon
any signature, instruction, request, letter of transmittal, certificate, opinion
of counsel, statement,
<PAGE>

instrument, report, notice, consent, order, or other paper document believed by
it to be genuine and to have been signed or presented by the purchaser, Trust or
other proper party or parties.

SECTION 5. EXPENSES. Subject to any agreement by the Subadministrator or
other person to reimburse any expenses of the Trust that relate to any Series,
the Trust shall be responsible for and assume the obligation for payment of all
of its expenses, including: (a) the fee payable under Section 6 hereof; (b) any
fees payable to the Adviser; (c) any fees payable to the Administrator; (d)
expenses of issue, repurchase and redemption of Shares; (e) interest charges,
taxes and brokerage fees and commissions; (f) premiums of insurance for the
Trust, its Trustees and officers and fidelity bond premiums; (g) fees, interest
charges and expenses of third parties, including the Trust's custodian,
interestholder and record keeper and fund accountant; (h) fees of pricing,
interest, dividend, credit and other reporting services; (i) costs of membership
in trade associations; (j) telecommunications expenses; (l) funds transmission
expenses; (m) auditing, legal and compliance expenses; (n) costs of forming the
Trust and maintaining its existence; (o) to the extent permitted by the 1940
Act, costs of preparing and printing the Series' Prospectuses, subscription
application forms and shareholder reports and delivering them to existing
shareholders; (p) expenses of meetings of interestholders and proxy
solicitations therefore; (q) costs of maintaining books of original entry for
portfolio and fund accounting and other required books and accounts, of
calculating the net asset value of shares of the Trust and of preparing tax
returns; (r) costs of reproduction, stationery and supplies; (s) fees and
expenses of the Trust's Trustees; (t) compensation of the Trust's officers and
employees who are not employees of the Adviser or Subadministrator or their
respective affiliated persons and costs of other personnel (who may be employees
of the Adviser, the Administrator, the Subadministrator or their respective
affiliated persons) performing services for the Trust; (u) costs of Trustee
meetings; (v) Securities and Exchange Commission registration fees and related
expenses; (w) state or foreign securities laws registration fees and related
expenses; and (x) all fees and expenses paid by the Trust in accordance with any
distribution plan adopted pursuant to Rule 12b-1 under the 1940 Act or under any
shareholder service plan or agreement.

SECTION 6. COMPENSATION.

(a) In consideration of the services performed by the Subadministrator
under this Agreement, the Trust will pay the Subadministrator, with respect to
each Series, a fee at the annual rate, as listed in Appendix B hereto. Such fee
shall be accrued by the Trust daily and shall be payable monthly in arrears on
the first day of each calendar month for services performed under this agreement
during the prior calendar month. If the fees payable pursuant to this provision
begin to accrue before the end of any month or if this Agreement terminates
before the end of any month, the fees for the period from that date to the end
of that month or from the beginning of that month to the date of termination, as
the case may be, shall be prorated according to the proportion that the period
bears to the full month in which the effectiveness or termination occurs. Upon
the termination of this Agreement, the Trust shall pay to the Subadministrator
such compensation as shall be payable prior to the effective date of such
termination.
<PAGE>

(b) In the event that this agreement is terminated, the Subadministrator
shall be reimbursed for reasonable charges and disbursements associated with
promptly transferring to its successor as designated by the Trust or the
Administrator the original or copies of all accounts and records maintained by
the Subadministrator under this agreement, and cooperating with, and providing
reasonable assistance to its successor in the establishment of the accounts and
records necessary to carry out the successor's or other person's
responsibilities.

(c) Notwithstanding anything in this Agreement to the contrary, the
Subadministrator and its affiliated persons may receive compensation or
reimbursement from the Trust with respect to (i) the provision of services on
behalf of the Series in accordance with any distribution plan adopted by the
Trust pursuant to Rule 12b-1 under the 1940 Act or (ii) the provision of
shareholder support or other services, including fund accounting services.

SECTION 7. EFFECTIVENESS, DURATION AND TERMINATION

(b) This Agreement shall continue in effect for twelve months and,
thereafter, shall be automatically renewed each year for an additional term of
one year.

(c) This Agreement may be terminated with respect to a Series at any time,
without the payment of any penalty, (i) by the Board on 60 days' written notice
to the Subadministrator or (ii) by the Subadministrator on 60 days' written
notice to the Trust. Upon receiving notice of termination by the
Subadministrator, the Trust shall use its best efforts to obtain a successor
subadministrator. Upon receipt of written notice from the Trust of the
appointment of a successor, and upon payment to the Subadministrator of all fees
owed through the effective termination date, and reimbursement for reasonable
charges and disbursements, the Subadministrator shall promptly transfer to the
successor subadministrator the original or copies of all accounts and records
maintained by the Subadministrator under this agreement including, in the case
of records maintained on computer systems, copies of such records in machine-
readable form, and shall cooperate with, and provide reasonable assistance to,
the successor sub-administrator in the establishment of the accounts and records
necessary to carry out the successor sub-administrator's responsibilities. For
so long as the Subadministrator continues to perform any of the services
contemplated by this Agreement after termination of this Agreement as agreed to
by the Trust and the Subadministrator, the provisions of Sections 4 and 6 hereof
shall continue in full force and effect.

SECTION 8. ACTIVITIES OF SUB-ADMINISTRATOR. Except to the extent
necessary to perform its obligations under this Agreement, nothing herein shall
be deemed to limit or restrict the Subadministrator's right, or the right of any
of its officers, directors or employees (whether or not they are a Trustee,
officer, employee or other affiliated person of the Trust) to engage in any
other business or to devote time and attention to the management or other
<PAGE>

aspects of any other business, whether of a similar or dissimilar nature, or to
render services of any kind to any other corporation, trust, fund, firm,
individual or association.

SECTION 9. COOPERATION WITH INDEPENDENT ACCOUNTANTS. The Subadministrator
shall cooperate with the Trust's independent public accountants and shall take
reasonable action to make all necessary information available to such
accountants for the performance of their duties.

SECTION 10. SERVICE DAYS. Nothing contained in this Agreement is intended
to or shall require the Subadministrator, in any capacity under this agreement,
to perform any functions or duties on any day other than a business day of the
Trust or of a Series. Functions or duties normally scheduled to be performed on
any day which is not a business day of the Trust or of a Series shall be
performed on, and as of, the next business day, unless otherwise required by
law.

Schroder Capital Funds
787 Seventh Avenue
New York, New York 10019

Notice to the Subadministrator shall be given as follows or at such other
address as a party may have designated in writing, shall be deemed to have been
properly given:

Forum Administrative Services, Limited Liability Company
Two Portland Square
Portland, Maine 04101

Notices and other communications received by the parties at the addresses
listed above.

SECTION 12. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY.

The Trustees of the Trust and the shareholders of each Series shall not be
liable for any obligations of the Trust or of the Series under this Agreement,
and the Subadministrator agrees that, in asserting any rights or claims under
this Agreement, it shall look only to the assets and property of the Trust or
the Series to which the Subadministrator's rights or claims relate in settlement
of such rights or claims, and not to the Trustees of the Trust or the
shareholder of the Series.
<PAGE>

SECTION 13. MISCELLANEOUS

(a) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties hereto.

(d) Section and Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this Agreement.

(e) This Agreement shall extend to and shall be binding upon the parties
hereto and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable by the fund without the written consent of the
Subadministrator, or by the Subadministrator, without the written consent of the
Trust authorized or approved by a resolution of the Board.

(f) This Agreement shall be governed by the laws of the State of New York.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.

SCHRODER CAPITAL FUNDS

------------------------------

FORUM ADMINISTRATIVE SERVICES,
LIMITED LIABILITY COMPANY

------------------------------
<PAGE>

SCHRODER CAPITAL FUNDS
SUBADMINISTRATION AGREEMENT

APPENDIX A
SERIES OF THE FUND

SCHRODER CAPITAL FUNDS
SUBADMINISTRATION AGREEMENT

APPENDIX B
SUBADMINISTRATION FEES

Fee As % of the Average Annual
Series of the Trust Daily Net Assets of the Series
- ------------------- ------------------------------

International Equity Fund
Schroder International Smaller Companies
Portfolio and Schroder Global Asset Allocation
Portfolio 0.075%

Schroder U.S. Smaller Companies Portfolio and
Schroder Emerging Markets Fund
Institutional Portfolio 0.10%

The minimum administration fee per Series is $25,000.