As filed with the Securities and Exchange Commission on February 27, 1998
File No. 811-9130
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No.10
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
Catherine S. Wooledge, Esq.
Forum Financial Services, Inc.
Two Portland Square, Portland, Maine 04101
(Name and Address of Agent for Service)
Copies to:
Timothy W. Diggins, Esq.
Ropes & Gray
One International Place, Boston, MA 02110-2624
Alexandra Poe, Esq.
Schroder Capital Management International Inc.
787 Seventh Avenue, 34th Floor
New York, New York 10019
This Registration Statement becomes effective immediately pursuant to Section
8(b) of the Investment Company Act of 1940, as amended.
No securities are being registered under the Securities Act of 1933.
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PART A
(PRIVATE PLACEMENT MEMORANDUM)
SCHRODER CAPITAL FUNDS
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INTERNATIONAL EQUITY PORTFOLIO
SCHRODER EM CORE PORTFOLIO
SCHRODER INTERNATIONAL SMALLER COMPANIES PORTFOLIO
SCHRODER U.S. SMALLER COMPANIES PORTFOLIO
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
MARCH 1, 1998
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 is authorized to offer beneficial interests ("Interests") in separate
series, each with a distinct investment objective and policies. The Trust
currently offers six portfolios: International Equity Fund, Schroder EM Core
Portfolio, Schroder International Smaller Companies Portfolio, Schroder U.S.
Smaller Companies Portfolio, Schroder Emerging Markets Portfolio Institutional
Portfolio, and Schroder Global Growth Portfolio. Additional portfolios may be
added in the future. This Part A relates to all the portfolios (other than
Schroder Global Growth Portfolio). The portfolios herein are referred to as a
"Portfolio" and collectively, the "Portfolios". Schroder Capital Management
International Inc. ("SCMI") is each Portfolio's investment adviser. Each of the
Portfolios, except Schroder Emerging Markets Fund and Schroder Emerging Markets
Fund Institutional Portfolio, is "diversified".
Interests are offered on a no-load basis exclusively to various qualified
investors (including other investment companies) as described under "General
Description of Registrant". Interests of the Trust are not offered publicly and,
accordingly, are not registered under the Securities Act of 1933 (the "1933
Act").
GENERAL DESCRIPTION OF REGISTRANT
The Trust was organized as a business trust under the law of the State of
Delaware on September 7, 1995 under a Trust Instrument dated September 6, 1995.
The Trust has an unlimited number of authorized Interests. The assets of each
Portfolio, and of any other portfolios now existing or created in the future,
belong only to the Portfolio or those other portfolios, as the case may be. The
assets belonging to a portfolio are charged with the liabilities of and all
expenses, costs, charges and reserves attributable to that portfolio. Each of
Schroder EM Core Portfolio and Schroder International Bond Portfolio is a
non-diversified series of an open-end management investment company. Each of the
other Portfolios is a diversified series of an open-end management investment
company.
Interests in each Portfolio are offered solely in private placement transactions
that do not involve any "public offering" within the meaning of Section 4(2) of
the 1933 Act. Investments in the Portfolio may be made only by certain qualified
investors (generally excluding S corporations, partnerships, and grantor trusts
beneficially owned by any individuals, S corporations, or partnerships).
Investors may be organized within or outside the U.S. 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.
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THE TRUST'S SECURITIES DESCRIBED IN THIS PRIVATE PLACEMENT MEMORANDUM ARE NOT
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE. INTERESTS MAY NOT BE TRANSFERRED OR
RESOLD EXCEPT AS PERMITTED UNDER: (1) THE TERMS OF THE TRUST'S TRUST INSTRUMENT,
AND (2) THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE OR FOREIGN
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
TABLE OF CONTENTS
PAGE
Introduction 1
General Description of Registrant 1
Investment Objectives and Policies 2
Investment Restrictions 10
Management of the Trust 12
Capital Stock and Other Securities 14
Purchase of Securities 14
Redemption or Repurchase 16
Pending Legal Proceedings 16
INVESTMENT OBJECTIVES AND POLICIES
Each Portfolio has a different investment objective that it pursues
through the investment policies described below.
Because of the differences in objectives and policies among the
Portfolios, the Portfolios will achieve different investment returns and will be
subject to varying degrees of market and financial risk. There is no assurance
that any Portfolio will achieve its objective. None of the Portfolios is
intended to be a complete investment program.
A Portfolio's investment objective may not be changed without
interestholder approval. The investment policies of each Portfolio may, unless
otherwise specifically stated, be changed by the Trust's Board of Trustees
without a vote of the interestholders. All percentage limitations on investments
will apply at the time of investment and will not be considered violated unless
an excess or deficiency occurs or exists immediately after and as a result of
the investment, except that the policies stated with regard to borrowing and
liquidity will be observed at all times.
INTERNATIONAL EQUITY FUND
International Equity Fund's investment objective is long-term capital
appreciation through investment in securities markets outside the United States.
Equity securities in which the Portfolio may invest include common stocks,
preferred stocks, securities convertible into common or preferred stocks, and
rights or warrants to purchase any of the foregoing. They may also include
American Depositary Receipts, European Depositary Receipts, and other similar
instruments providing for indirect investment in securities of foreign issuers.
The Portfolio may also invest in securities of closed-end investment companies
that invest in turn primarily in foreign securities.
The Portfolio normally invests at least 65% of its assets in equity
securities of companies domiciled outside the United States and will invest in
securities of issuers domiciled in at least three countries other than the
United States. There is no limit on the amount of the Portfolio's assets that
may be invested in securities of issuers domiciled in any one country. When the
Portfolio has invested a substantial portion of its assets in the securities of
companies domiciled in a single country, it will be more susceptible to the
risks of investing in that country than would a fund investing in a
geographically more diversified portfolio. The Portfolio normally invests a
substantial portion of its assets in countries included in the Morgan Stanley
Capital International EAFE Index, which is a market capitalization index of
companies in developed countries in Europe, Australia and the Far East. Other
countries in which the Portfolio may invest may be considered "emerging markets"
and involve special risks. See "Other Investment Practices and Risk
Considerations -- Foreign Securities."
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The Portfolio may invest in debt securities, including, for example,
securities of foreign governments (including provinces and municipalities) or
their agencies or instrumentalities, securities issued or guaranteed by
international organizations designated or supported by multiple foreign
governmental entities to promote economic reconstruction or development, and
debt securities of foreign corporations or financial institutions. The Portfolio
may invest up to 5% of its net assets in lower-quality, high yielding debt
securities, which entail certain risks. See "Other Investment Practices and Risk
Considerations -- Debt Securities."
SCHRODER EM CORE PORTFOLIO
Schroder EM Core Portfolio's investment objective is to seek long-term
capital appreciation. The Portfolio invests primarily in equity securities of
issuers domiciled or doing business in emerging market countries in regions such
as Southeast Asia, Latin America, and Eastern and Southern Europe. The Portfolio
is "non-diversified".
An "emerging market" country is any country not included at the time of
investment in the Morgan Stanley Capital International World Index of major
world economies. Those economies currently include: Australia, Austria, Belgium,
Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, the
Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,
Switzerland, the United Kingdom, and the United States of America. SCMI may at
times determine based on its own analysis that an economy included in the Index
should nonetheless be considered an emerging market country; any such country
would then constitute an emerging market country for purposes of investment by
the Portfolio.
The Portfolio normally invests at least 65% of its assets in equity
securities of issuers determined by SCMI to be emerging market issuers. Equity
securities include common stocks, preferred stocks, securities convertible into
common or preferred stocks, and rights or warrants to purchase any of the
foregoing. They may also include American Depositary Receipts, European
Depositary Receipts, and other similar instruments providing for indirect
investment in securities of foreign issuers. The Portfolio may also invest in
securities of closed-end investment companies that invest in turn primarily in
foreign securities, including emerging market issuers.
The remainder of the Portfolio's assets may be invested in securities of
issuers located anywhere in the world. The Portfolio may invest up to 35% of its
assets in debt securities, including lower-quality, high-yielding debt
securities, which entail certain risks. See "Other Investment Practices and Risk
Considerations -- Debt Securities."
An issuer of a security will be considered to be an emerging market issuer
if SCMI determines that: (1) it is organized under the laws of an emerging
market country; (2) its primary securities trading market is in an emerging
market country; (3) 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) at least 50% of its assets are situated in emerging
market countries. The Portfolio may consider investment companies to be located
in the country or countries in which SCMI determines they focus their
investments.
There is no limit on the amount of the Portfolio's assets that may be
invested in securities of issuers domiciled in any one country. When the
Portfolio has invested a substantial portion of its assets in the securities of
companies domiciled in a single country, it will be more susceptible to the
risks of investing in that country than would a fund investing in a
geographically more diversified portfolio.
SCHRODER INTERNATIONAL SMALLER COMPANIES PORTFOLIO
Schroder International Smaller Companies Portfolio's investment objective
is long-term capital appreciation through investment in securities markets
outside the United States. The Portfolio normally invests at least 65% of its
assets in equity securities of companies domiciled outside the United States
that have market capitalizations of $1.5 billion or less at the time of
investment. In selecting investments for the Portfolio, SCMI considers a number
of factors, including, for example, the company's potential for long-term
growth, the company's financial condition, its sensitivity to cyclical factors,
the relative value of the company's securities (to those of other companies and
to the market as a whole), and the extent to which the company's management owns
equity in the company.
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Equity securities in which the Portfolio may invest include common stocks,
preferred stocks, securities convertible into common or preferred stocks, and
rights or warrants to purchase any of the foregoing. They may also include
American Depositary Receipts, European Depositary Receipts, and other similar
instruments providing for indirect investment in securities of foreign issuers.
The Portfolio may also invest in securities of closed-end investment companies
that invest in turn primarily in foreign securities.
The Portfolio generally invests in securities of issuers domiciled in at
least three countries other than the United States, although there is no limit
on the amount of the Portfolio's assets that may be invested in securities of
issuers domiciled in any one country. When the Portfolio has invested a
substantial portion of its assets in the securities of companies domiciled in a
single country, it will be more susceptible to the risks of investing in that
country than would a Portfolio investing in a geographically more diversified
portfolio. The Portfolio normally invests a substantial portion of its assets in
countries included in the Morgan Stanley Capital International EAFE Index, which
is a market capitalization index of companies in developed market countries in
Europe, Australia, and the Far East. Other countries in which the Portfolio may
invest may be considered "emerging markets" and involve special risks. See
"Other Investment Practices and Risk Considerations -- Foreign Securities".
Smaller companies may present greater opportunities for investment return
than do larger companies, but also involve greater risks. Smaller companies may
have limited product lines, markets, or financial resources, or may depend on a
limited management group. Their securities may trade less frequently and in
limited volume. As a result, the prices of these securities may fluctuate more
than prices of securities of larger, more widely traded companies. See "Other
Investment Practices and Risk Considerations -- Investments in Smaller
Companies".
The Portfolio may invest in debt securities, including, for example,
securities of foreign governments, international organizations, foreign
corporations, and U.S. government obligations. The Portfolio may invest up to 5%
of its total assets in lower-quality, high yielding debt securities, which
entail certain risks. See "Other Investment Practices and Risk Considerations--
Debt Securities."
SCHRODER U.S. SMALLER COMPANIES PORTFOLIO
Schroder U.S. Smaller Companies Portfolio's investment objective is to seek
capital appreciation. The Portfolio invests at least 65% of its assets in equity
securities of U.S.-domiciled companies that have at the time of purchase market
capitalizations of $1.5 billion or less. In selecting investments for the
Portfolio, SCMI seeks to identify securities of companies with strong management
that it believes can generate above average earnings growth, and are selling at
favorable prices in relation to book values and earnings. Equity securities in
which the Portfolio may invest include common stocks, preferred stocks,
securities convertible into common or preferred stocks, and rights or warrants
to purchase any of the foregoing.
The Portfolio may also invest in equity securities of larger companies and
in debt securities, if SCMI believes such investments are consistent with the
Portfolio's investment objective. The Portfolio may invest up to 5% of its
assets in lower-quality, high yielding debt securities, which entail certain
risks. See "Other Investment Practices and Risk Considerations -- Debt
Securities."
Smaller companies may present greater opportunities for investment return
than do larger companies, but also involve greater risks. They may have limited
product lines, markets, or financial resources, or may depend on a limited
management group. Their securities may trade less frequently and in limited
volume. As a result, the prices of these securities may fluctuate more than
prices of securities of larger, widely traded companies. See "Other Investment
Practices and Risk Considerations -- Investments in Smaller Companies." The
Portfolio intends to invest no more than 25% of its total assets in securities
of small companies that, together with their predecessors, have been in
operation for less than three years.
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OTHER INVESTMENT PRACTICES AND RISK CONSIDERATIONS
The Portfolios may also engage in the following investment practices, each
of which involves certain special risks. The SAI contains more detailed
information about these practices (some of which may be considered "derivative"
investments), including limitations designed to reduce these risks.
FOREIGN SECURITIES. Investments in foreign securities entail certain
risks. There may be a possibility of nationalization or expropriation of assets,
confiscatory taxation, political or financial instability, and diplomatic
developments that could affect the value of a Portfolio's investments in certain
foreign countries. Since foreign securities are normally denominated and traded
in foreign currencies, the values of the Portfolio's assets may be affected
favorably or unfavorably by currency exchange rates, currency exchange control
regulations, foreign withholding taxes and restrictions or prohibitions on the
repatriation of foreign currencies. There may be less information publicly
available about a foreign issuer than about a U.S. issuer, and foreign issuers
are not generally subject to accounting, auditing, and financial reporting
standards and practices comparable to those in the United States. The securities
of some foreign issuers are less liquid and at times more volatile than
securities of comparable U.S. issuers. Foreign brokerage commissions and other
fees are also generally higher than in the United States. Foreign settlement
procedures and trade regulations may involve certain risks (such as delay in
payment or delivery of securities or in the recovery of a Portfolio's assets
held abroad) and expenses not present in the settlement of domestic investments.
In addition, legal remedies available to investors in certain foreign
countries may be more limited than those available with respect to investments
in the United States or in other foreign countries. The willingness and ability
of sovereign issuers to pay principal and interest on government securities
depends on various economic factors, including without limitation the issuer's
balance of payments, overall debt level, and cash-flow considerations related to
the availability of tax or other revenues to satisfy the issuer's obligations.
If a foreign governmental entity is unable or unwilling to meet its obligations
on the securities in accordance with their terms, and a Portfolio may have
limited recourse available to it in the event of default. The laws of some
foreign countries may limit a Portfolio's ability to invest in securities of
certain issuers located in those foreign countries. Special tax considerations
apply to foreign securities. Except as otherwise provided in this Prospectus,
there is no limit on the amount of a Portfolio's assets that may be invested in
foreign securities.
If a Portfolio purchases securities denominated in foreign currencies,
a change in the value of any such currency against the U.S. dollar will result
in a change in the U.S. dollar value of the Portfolio's assets and the
Portfolio's income available for distribution. In addition, although at times
most of a Portfolio's income may be received or realized in these currencies,
the Portfolio will be required to compute and distribute its income in U.S.
dollars. Therefore, if the exchange rate for any such currency declines after
the Portfolio's income has been earned and translated into U.S. dollars but
before payment, the Portfolio could be required to liquidate portfolio
securities to make such distributions. Similarly, if an exchange rate declines
between the time the Portfolio incurs expenses in U.S. dollars and the time such
expenses are paid, the amount of such currency required to be converted into
U.S. dollars in order to pay such expenses in U.S. dollars will be greater than
the equivalent amount in any such currency of such expenses at the time they
were incurred. A Portfolio may buy or sell foreign currencies and options and
futures contracts on foreign currencies for hedging purposes in connection with
its foreign investments.
In determining whether to invest in debt securities of foreign issuers,
SCMI considers the likely impact of foreign taxes on the net yield available to
the Portfolio and its shareholders. Income received by a Portfolio from sources
within foreign countries may be reduced by withholding and other taxes imposed
by such countries. Tax conventions between certain countries and the United
States may reduce or eliminate such taxes. Any such taxes paid by a Portfolio
will reduce its net income available for distribution to shareholders. In
certain circumstances, a Portfolio may be able to pass through to shareholders
credits for foreign taxes paid.
See "Capital Stock and Other Securities".
Certain Portfolios may invest in securities of issuers in emerging
market countries with respect to some or all of their assets. The securities'
prices and relative currency values of emerging market investments are subject
to greater volatility than those of issuers in many more developed countries.
Investments in emerging market countries are subject to the same risks
applicable to foreign investments generally, although those risks may be
increased due to conditions in such countries. For example, the securities
markets and legal systems in emerging market countries may only be in a
developmental stage and may provide few, or none, of the advantages or
protections of markets or legal systems available in more developed countries.
Although many of the securities in which the Portfolios may invest are traded on
securities exchanges, they may trade in limited volume, and the exchanges may
not provide all of the conveniences or protections provided by securities
exchanges in more developed markets. The Portfolios may also invest a
substantial portion of their assets in securities traded in the over-the-counter
markets in such countries and not on any exchange, which may affect the
liquidity of the investment and expose the Portfolios to the credit risk of
their counterparties in trading those investments. Emerging market countries may
experience extremely high rates of inflation, which may adversely affect these
countries' economies and securities markets.
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FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Changes in currency exchange
rates will affect the U.S. dollar values of securities denominated in foreign
currencies. Exchange rates between the U.S. dollar and other currencies
fluctuate 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. A Portfolio may engage in foreign currency exchanges transactions to
protect against uncertainty in the level of future exchange rates. Although the
strategy of engaging in foreign currency exchange 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.
In particular, a Portfolio may enter into foreign currency exchange
transactions to protect against a change in exchange ratios that may occur
between the date on which the Portfolio contracts to trade a security and the
settlement date ("transaction hedging") in anticipation of placing a trade
("anticipation hedging"); to "lock in" the U.S. dollar value of interest and
dividends to be paid in a foreign currency; or to hedge against the possibility
that a foreign currency in which portfolio securities are denominated or quoted
may suffer a decline against the U.S. dollar ("position hedging"). International
Bond Portfolio may also enter into forward contracts to adjust the Portfolio's
exposure to various foreign currencies, either pending anticipated investments
in securities denominated in those currencies or as a hedge against anticipated
market changes. To a limited extent, the Portfolio may purchase forward
contracts to increase exposure in foreign currencies that are expected to
appreciate and thereby increase total return.
SCMI may seek to enhance the Portfolio's investment return through
active currency management. SCMI may buy or sell currencies of the Portfolio, on
a spot or forward basis, in an attempt to profit from inefficiencies in the
pricing of various currencies or of debt securities denominated in those
currencies. When investing in foreign securities, a Portfolio usually effects
currency exchange transactions on a spot (I.E., cash) basis at the spot rate
prevailing in the foreign exchange market. A Portfolio incurs foreign exchange
expenses in converting assets from one currency to another.
A Portfolio may also enter into forward currency contracts. 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. Forward
contracts do not eliminate fluctuations in the underlying prices of securities
and expose the Portfolio to the risk that the counterparty is unable to perform.
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 exchange 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 a Portfolio's ability to hedge its investments
in those markets. These contracts involve a risk of loss if SCMI fails to
predict accurately changes in relative currency values, the direction of stock
prices or interest rates, and other economic factors.
From time to time, a Portfolio's currency hedging transactions may call
for the delivery of one foreign currency in exchange for another foreign
currency and may at times involve currencies in which its portfolio securities
are not then denominated ("cross hedging"). From time to time, a Portfolio may
also engage in "proxy" hedging; whereby the Portfolio \would seek to hedge the
value of portfolio holdings denominated in one currency by entering into an
exchange contract on a second currency, the valuation of which SCMI believes
correlates to the value of the first currency. Cross hedging and proxy hedging
transactions involve the risk of imperfect correlation between changes in the
values of the currencies to which such transactions relate and changes in the
value of the currency or other asset or liability that is the subject of the
hedge.
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INVESTMENTS IN SMALLER COMPANIES. Certain Portfolios may invest all or
a substantial portion of their assets in securities issued by small companies.
Such companies may offer greater opportunities for capital appreciation than
larger companies, but investments in such companies may involve certain special
risks. Such companies may have limited product lines, markets, or financial
resources and may be dependent on a limited management group. While the markets
in securities of such companies have grown rapidly in recent years, such
securities may trade less frequently and in smaller volume than more widely held
securities. The values of these securities may fluctuate more sharply than those
of other securities, and a Portfolio may experience some difficulty in
establishing or closing out positions in these securities at prevailing market
prices. There may be less publicly available information about the issuers of
these securities or less market interest in such securities than in the case of
larger companies, and it may take a longer period of time for the prices of such
securities to reflect the full value of their issuers' underlying earnings
potential or assets.
Some securities of smaller issuers may be restricted as to resale or
may otherwise be highly illiquid. The ability of a Portfolio to dispose of such
securities may be greatly limited, and a Portfolio may have to continue to hold
such securities during periods when SCMI would otherwise have sold the
securities. It is possible that SCMI or its affiliates or clients may hold
securities issued by the same issuers, and may in some cases have acquired the
securities at different times, on more favorable terms, or at more favorable
prices, than a Portfolio. See "Additional Information Regarding Investments --
Micro and Small Cap Companies, and -Unseasoned Issuers" in Part B.
LEVERAGE. Certain Portfolios may engage in forward commitments,
described below and in Part B, which may have the same economic effect as if the
Portfolios had borrowed money.
The use of borrowed money, known as "leverage," increases the
International Bond Portfolio's market exposure and risk and may result in
losses. When the Portfolio has borrowed money for leverage and its investments
increase or decrease in value, its net asset value will normally increase or
decrease more than if it had not borrowed money for this purpose. The interest
that the Portfolio must pay on borrowed money will reduce its net investment
income, and may also either offset any potential capital gains or increase any
losses. The Portfolio will not always borrow money for investments, and the
extent to which the Portfolio will borrow money, and the amount it may borrow,
depends on market conditions and interest rates. Successful use of leverage
depends on SCMI's ability to predict market movements correctly. The amount of
leverage that can exist at any one time will not exceed one-third of the value
of the Portfolio's total assets.
DEBT SECURITIES. Each Portfolio may invest in debt securities. Debt
securities are subject to market risk; that is, the fluctuation of market value
in response to changes in interest rates; and to credit risk; that is, the risk
that the issuer may become unable or unwilling to make timely payments of
principal and interest. A Portfolio may invest in debt securities either to earn
investment income or to benefit from changes in the market values of such
securities.
Each Portfolio also may invest in lower-quality, high-yielding debt
securities rated below investment grade. Lower-rated debt securities (commonly
called "junk bonds") are considered to be of poor standing and predominantly
speculative. Securities in the lowest rating categories may have extremely poor
prospects of attaining any real investment standing, and some of those
securities in which a Portfolio may invest may be in default. The rating
services' descriptions of securities in the lower rating categories, including
their speculative characteristics, are set forth in the Appendix to this Private
Placement Memorandum.
In addition, lower-rated securities reflect a greater possibility that
adverse changes in the financial condition of the issuer, or in general economic
conditions, or both, or an unanticipated rise in interest rates, may impair the
ability of the issuer to make payments of interest and principal. Changes by
recognized rating services in their ratings of any fixed-income security and in
the ability or perceived ability of an issuer to make payments of interest and
principal may also affect the value of these investments.
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Each Portfolio may at times invest in so-called "zero coupon" bonds and
"payment-in-kind" bonds. Zero-coupon bonds are issued at a significant discount
from face value and pay interest only at maturity, rather than at intervals
during the life of the security. Payment-in-kind bonds allow the issuer, at its
option, to make current interest payments on the bonds either in cash or in
additional bonds. The values of zero-coupon bonds and payment-in-kind bonds are
subject to greater fluctuation in response to changes in market interest rates
than bonds which pay interest currently, and may involve greater credit risk
than such bonds. From time to time, a 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. Brady Bonds have been issued only recently
and, therefore, do not have a long payment history.
A Portfolio will not necessarily dispose of a security when its debt
rating is reduced below its rating at the time of purchase, although SCMI will
monitor the investment to determine whether continues investment in the security
will assist in meeting the Portfolio's investment objective.
OPTIONS AND FUTURES TRANSACTIONS. Each Portfolio may engage in a
variety of transactions involving the use of options and futures contracts for
purposes of increasing its investment return or hedging against market changes.
A Portfolio may engage in such transactions for hedging purposes or, to the
extent permitted by applicable law, to increase investment return.
A Portfolio may seek to increase its current return by writing covered
call options and covered put options on its portfolio securities or other
securities in which it may invest. A Portfolio receives a premium from writing a
call or put option, which increases the Portfolio's return if the option expires
unexercised or is closed out at a net profit. A Portfolio may also buy and sell
put and call options on such securities for hedging purposes. When a Portfolio
writes a call option on a portfolio security, it gives up the opportunity to
profit from any increase in the price of the security above the exercise price
of the option; when it writes a put option, a Portfolio takes the risk that it
will be required to purchase a security from the option holder at a price above
the current market price of the security. A Portfolio may terminate an option
that it has written prior to its expiration by entering into a closing purchase
transaction in which it purchases an option having the same terms as the option
written. A Portfolio may also from time to time buy and sell combinations of put
and call options on the same underlying security to earn additional income.
A Portfolio may buy and sell futures contracts. An "index future" is a
contract to buy or sell units of a particular index at an agreed price on a
specified future date. Depending on the change in value of the index between the
time when a Portfolio enters into and terminates an index future transaction,
the Portfolio may realize a gain or loss. A Portfolio may also purchase
warrants, issued by banks or other financial institutions, whose values are
based on the values from time to time of one or more securities indices.
A Portfolio may buy and sell futures contracts on U.S. government
obligations or other debt securities. A futures contract on a debt security is a
contract to by and sell a certain amount of the debt security at an agreed price
on a specified future date. Depending on the change in the value of the security
when the Portfolio enters into and terminates a futures contract, the Portfolio
realizes a gain or loss.
A Portfolio may purchase or sell options on futures contracts or on
securities indices in addition to or as an alternative to purchasing and selling
futures contracts.
A Portfolio may purchase and sell put and call options on foreign
currencies, futures contracts on foreign currencies, and options on foreign
currency futures contracts as an alternative, or in addition to, the foreign
currency exchange transactions described above. Such transactions are similar to
options and futures contracts on securities, except that they typically
contemplate that one party to a transaction will deliver one foreign currency to
the other in return for another currency (which may or may not be the U.S.
dollar).
8
<PAGE>
RISK FACTORS IN OPTIONS AND FUTURES TRANSACTIONS. Options and futures
transactions involve costs and may result in losses. The use of options and
futures involves certain special risks, including the risks that a Portfolio may
be unable at times to close out such positions, that hedging transactions may
not accomplish their purpose because of imperfect market correlations, or that
SCMI may not forecast market movements correctly.
The effective use of options and futures strategies is dependent on, among
other things, a Portfolio's ability to terminate options and futures positions
at times when SCMI deems it desirable to do so. Although a Portfolio will enter
into an option or futures contract position only if SCMI believes that a liquid
secondary market exists for that option or futures contract, there is no
assurance that a Portfolio will be able to effect closing transactions at any
particular time or at an acceptable price.
Each Portfolio generally expects that its options and futures contract
transactions will be conducted on recognized exchanges. In certain instances,
however, a Portfolio may purchase and sell options in the over-the-counter
markets. A Portfolio's ability to terminate options in the over-the-counter
markets may be more limited than for exchange-traded options and may also
involve the risk that securities dealers participating in such transactions
would be unable to meet their obligations to a Portfolio. A Portfolio will,
however, engage in over-the-counter transactions only when appropriate
exchange-traded transactions are unavailable and when, in the opinion of SCMI,
the pricing mechanism and liquidity of the over-the-counter markets are
satisfactory and the participants are responsible parties likely to meet their
contractual obligations. A Portfolio will treat over-the-counter options (and,
in the case of options sold by the Portfolio, the underlying securities held by
the Portfolio) as illiquid investments as required by applicable law.
The use of options and futures strategies also involves the risk of
imperfect correlation between movements in the prices of options and futures
contracts and movements in the value of the underlying securities or index, or
currency, or in the prices of the securities or currency that are the subject of
a hedge. The successful use of these strategies further depends on the ability
of SCMI to forecast market movements correctly.
Because the markets for certain options and futures contracts in which a
Portfolio will invest (including markets located in foreign countries) are
relatively new and still developing and may be subject to regulatory restraints,
a Portfolio's ability to engage in transactions using such investments may be
limited. A Portfolio's ability to engage in hedging transactions may be limited
by certain regulatory and tax considerations. A Portfolio's hedging transactions
may affect the character or amount of its distributions. The tax consequences of
certain hedging transactions have been modified by the Taxpayer Relief Act of
1997.
For more information about any of the options or futures portfolio
transactions described above, see the SAI.
SHORT SALES AGAINST-THE-BOX. Each Portfolio may make short sales
"against-the-box", which are transactions in which the Portfolio sells a
security that it owns in anticipation of a decline in the market value of that
security. The proceeds of the short sale are held by a broker until the
settlement date, at which time the Portfolio delivers the security to close the
short position. The Portfolio receives the net proceeds from the short sale. It
is anticipated that the Portfolio will make short sales against-the-box to
protect the value of its net assets. Further information regarding limits of
short sales is contained in the SAI.
NON-DIVERSIFICATION AND GEOGRAPHIC CONCENTRATION. Schroder Emerging Markets
Portfolio and Schroder Emerging Markets Fund Institutional Portfolio are
"non-diversified" series of an investment company, and each Portfolio may invest
its assets in a more limited number of issuers than may other investment
companies. Under the Internal Revenue Code, however, an investment company,
including a non-diversified investment company, generally may not invest more
than 25% of its total assets in obligations of any one issuer other than U.S.
Government obligations and, with respect to 50% of its total assets, a fund may
not invest more than 5% of its total assets in the securities of any one issuer
( except U.S. Government obligations). Thus, each Portfolio may invest up to 25%
of its total assets in the securities of each of any two issuers. This practice
involves an increased risk of loss to a Portfolio if the market value of a
security should decline or its issuer were otherwise not to meet its
obligations.
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<PAGE>
A Portfolio may invest more than 25% of its total assets in issuers located
in any one country. To the extent that it does so, a Portfolio is susceptible to
a range of factors that could adversely affect that country, including political
and economic developments and foreign exchange rate fluctuations as discussed
above. As a result of investing substantially in one country, the value of a
Portfolio's assets may fluctuate more widely than the value of shares of a
comparable fund with a lesser degree of geographic concentration.
SECURITIES LOANS, REPURCHASE AGREEMENTS, AND FORWARD COMMITMENTS. Each
Portfolio may lend portfolio securities to brokers, dealers and financial
institutions meeting specified credit conditions and may enter into repurchase
agreements without limit. The percentage limitation on the amount of a
Portfolio's total assets that may be loaned in accordance with the approved
procedures is as follows: INTERNATIONAL EQUITY PORTFOLIO -- 10%; SCHRODER
INTERNATIONAL SMALLER COMPANIES PORTFOLIO, SCHRODER EMERGING MARKETS FUND
INSTITUTIONAL PORTFOLIO, SCHRODER U.S. EQUITY PORTFOLIO, and SCHRODER U.S.
SMALLER COMPANIES PORTFOLIO -- 25%; and SCHRODER EMERGING MARKETS PORTFOLIO --
331/3% These transactions must be fully collateralized at all times but involve
some risk to a Portfolio if the other party should default on its obligation and
the Portfolio is delayed or prevented from recovering its assets or realizing on
the collateral. Each Portfolio may also purchase securities for future delivery,
which may increase its overall investment exposure and involves a risk of loss
if the value of the securities declines prior to the settlement date.
INVESTMENT IN OTHER INVESTMENT COMPANIES. Each Portfolio is permitted to
invest in other investment companies or pooled vehicles, including closed-end
funds, that are advised by SCMI or its affiliates or by unaffiliated parties.
Pursuant to the 1940 Act, a Portfolio may invest in the shares of other
investment companies that invest in securities in which the Portfolio is
permitted to invest, subject to the limits and conditions required under the
1940 Act or any orders, rules or regulations thereunder. When investing through
investment companies, a Portfolio may pay a premium above such investment
companies' net asset value per share. As a shareholder in an investment company,
a Portfolio would bear its ratable share of the investment company's expenses,
including its advisory and administrative fees. At the same time, the Portfolio
would continue to pay its own fees and expenses.
LIQUIDITY. A Portfolio will not invest more than 15% (10%, in the case of
International Portfolio and U.S. Equity Portfolio) of its net assets in
securities determined by SCMI to be illiquid. Certain securities that are
restricted as to resale may nonetheless be resold by a Portfolio in accordance
with Rule 144A under the Securities Act of 1933, as amended. Such securities may
be determined by SCMI to be liquid for purposes of compliance with the
limitation on a Portfolio's investment in illiquid securities. There can,
however, be no assurance that a Portfolio will be able to sell such securities
at any time when SCMI deems it advisable to do so or at prices prevailing for
comparable securities that are more widely held.
ALTERNATIVE INVESTMENTS. At times, SCMI may judge that market conditions
make pursuing a Portfolio's basic investment strategy inconsistent with the best
interests of its shareholders. At such times, SCMI may temporarily use
alternative strategies, primarily designed to reduce fluctuations in the values
of the Portfolio's assets. In implementing these "defensive" strategies, a
Portfolio may invest without limit in U.S. government obligations and other
high-quality debt instruments and any other investment SCMI considers to be
consistent with such defensive strategies, and may hold any portion of its
assets in cash.
PORTFOLIO TURNOVER. The length of time a Portfolio has held a particular
security is not generally a consideration in investment decisions. The
investment policies of a Portfolio may lead to frequent changes in the
Portfolio's investments, particularly in periods of volatile market movements. A
change in the securities held by a Portfolio is known as "portfolio turnover."
Portfolio turnover generally involves some expense to a Portfolio, including
brokerage commissions or dealer mark-ups and other transaction costs on the sale
of securities and reinvestment in other securities. Such securities sales may
result in realization of taxable capital gains.
INVESTMENT RESTRICTIONS
The following investment restrictions on the Portfolios are designed to reduce
their exposure in specific situations.
A. Under these fundamental restrictions, International Equity Portfolio
will not:
1. 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, instrumentalities or government-
sponsored enterprises.)
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<PAGE>
2. 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.)
3. Invest more than 10% of its assets in "restricted securities" which
include: (1) securities which are not readily marketable, and (2)
securities of issuers having a record (together with all predecessors)
of less than three years of continuous operation.
4. Invest more than 25% of its assets in any one industry.
5. 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.
6. Pledge, mortgage or hypothecate its assets to an extent greater than
10% of the value of the total assets of the Portfolio.
B. Under these fundamental restrictions, Schroder EM Core Portfolio will
not:
1. 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, instrumentalities or
government-sponsored enterprises.
2. Although the Portfolio may borrow money, it will limit borrowings to
amounts not in excess of one third of the value of its total assets.
Borrowing for other than temporary or emergency purposes or meeting
redemption requests is not expected to exceed 5% of the value of the
Portfolio's assets. Certain transactions, such as reverse repurchase
agreements, that are similar to borrowings are not treated as
borrowings to the extent that they are fully collateralized.
3. 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.
C. Under these fundamental restrictions, Schroder International Smaller
Companies Portfolio will not:
1. The Portfolio may not, with respect to 75% of its assets, purchase a
security other than a security issued or guaranteed by the U.S.
Government, its agencies or instrumentalities or a security of an
investment company if, as a result, more than 5% of the Portfolio's
total assets would be invested in the securities of a single issuer or
the Portfolio would own more than 10% of the outstanding voting
securities of any single issuer.
2. The Portfolio may not 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. An investment of more than 25% of the Portfolio's
assets in the securities of issuers located in one country does not
contravene this policy.
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<PAGE>
3. The Portfolio may not borrow money in excess of 33 1/3% 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 that may otherwise require untimely dispositions of
Portfolio securities.
D. Under these fundamental restrictions, Schroder U.S. Smaller Companies
Portfolio will not:
1. 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.
2. 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.
3. 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).
E. Under these fundamental restrictions, Schroder Emerging Markets Fund
Institutional Portfolio will not:
1. 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.)
2. 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.)
3. 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.
The percentage restrictions described above and in Part B apply only at
the time of investment and require no action by a Portfolio as a result of
subsequent changes in value of the investments or the size of the Portfolio,
except as to liquidity and borrowing. A complete list of investment restrictions
is contained in Part B.
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MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS. The Board of Trustees of the Trust is
responsible for generally overseeing the conduct of the Trust's business. The
business and affairs of each Portfolio are managed under the direction of the
Board of Trustees. Information regarding the trustees and executive officers of
the Trust may be found in Part B.
INVESTMENT ADVISER. Schroder Capital Management International Inc., the
investment adviser to each Portfolio, is a wholly owned U.S. subsidiary of
Schroders U.S. Holdings Inc., which engages through its subsidiary firms in the
investment banking, asset management, and securities businesses. Affiliates of
Schroders U.S. Holdings Inc. (or their predecessors) have been investment
managers since 1927. SCMI and its United Kingdom affiliate, Schroder Capital
Management International, Ltd., have served together as investment manager for
approximately $28 billion as of September 30, 1997. Schroders U.S. Holdings Inc.
is an indirect, wholly owned U.S. subsidiary of Schroders plc, a publicly owned
holding company organized under the laws of England. Schroders plc and its
affiliates engage in international merchant banking and investment management
businesses, and as of September 30, 1997, had under management assets of over
$175 billion. Schroder Advisors is a wholly owned subsidiary of Schroder Capital
Management International Inc.
As investment adviser to each Portfolio, SCMI is entitled to monthly
advisory fees at the following annual rates (based on the assets of each
Portfolio taken separately): INTERNATIONAL EQUITY FUND -- 0.45% of the
Portfolio's average daily net assets; SCHRODER INTERNATIONAL SMALLER COMPANIES
PORTFOLIO -- 0.85% of the Portfolio's average daily net assets; SCHRODER EM CORE
PORTFOLIO -- 1.00% of the Portfolio's daily net assets; SCHRODER U.S. SMALLER
COMPANIES PORTFOLIO -- 0.60% of the Portfolio's average daily net assets; and
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO -- 1.00% of the
Portfolio's daily net assets.
PORTFOLIO MANAGERS. SCMI's investment decisions for each Portfolio are made
by an investment manager or an investment team, with the assistance of an
investment committee at SCMI. Mr. Michael Perelstein, Vice President of the
Trust and of Schroder Capital Funds, is primarily responsible for managing
International Equity. Mr. Richard R. Foulkes, a Vice President of the Trust and
Deputy Chairman of SCMI, is primarily responsible for managing Schroder
International Smaller Companies Portfolio. Mr. John A. Troiano, a Vice President
of the Trust and of Schroder Capital Funds, Ms. Heather Crighton, a vice
president of SCMI, and Mr. Mark Bridgeman are primarily responsible for managing
Schroder EM Core Portfolio and Schroder Emerging Markets Fund Institutional
Portfolio. Ms. Fariba Talebi, a Vice President of the Trust, a Group Vice
President of SCMI and a Director of SCMI, is primarily responsible for managing
Schroder U.S. Smaller Companies Portfolio. Each of the persons named has several
years of experience in managing investment portfolios comparable to those for
which each has responsibility.
PORTFOLIO TRANSACTIONS. SCMI places all orders for purchases and sales
of the Portfolios' securities. In selecting broker-dealers, SCMI may consider
research and brokerage services furnished to it and its affiliates. Schroder &
Wertheim & Co. and Schroder Securities Limited, affiliates of SCMI, may receive
brokerage commissions from the Portfolios in accordance with procedures adopted
by the Trustees under the 1940 Act which require periodic review of these
transactions. Subject to seeking the most favorable price and execution
available, SCMI may consider sales of shares of the Funds as a factor in the
selection of broker-dealers.
ADMINISTRATIVE SERVICES. The Trust, on behalf of each Portfolio, has
entered into an administration agreement with Schroder Advisors, pursuant to
which Schroder Advisors is required to provide certain management and
administrative services to those Portfolios. The Trust also has entered into a
sub-administration agreement with Forum Administrative Services, LLC, Two
Portland Square, Portland, Maine 04101 ("FAdS"), pursuant to which FAdS provides
certain management and administrative services necessary for the Portfolios'
operations. Schroder Advisors and FAdS monthly at the following annual rates
(based on the assets of each Portfolio taken separately): INTERNATIONAL EQUITY
FUND -- 0.075% and 0.075%, respectively, of the Portfolio's average daily net
assets; SCHRODER EM CORE PORTFOLIO -- 0.10% and 0.075%, respectively, of the
Portfolio's average daily net assets; SCHRODER INTERNATIONAL SMALLER COMPANIES
FUND -- 0.15% and 0.075%, respectively, of the Portfolio's average daily net
assets; SCHRODER U.S. SMALLER COMPANIES FUND -- 0.00% and 0.10%, respectively,
of the Portfolio's average daily net assets; and SCHRODER EMERGING MARKETS FUND
INSTITUTIONAL PORTFOLIO -- 0.05% and 0.10%, respectively, of the Portfolio's
average daily net assets.
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RECORDKEEPER AND PORTFOLIO ACCOUNTANT. Forum Accounting Services, LLC
("Forum Accounting"), Two Portland Square, Portland, Maine 04101, is the
Portfolio's recordkeeper (transfer agent) and fund accountant. Forum Accounting
is an affiliate of FAdS. From time to time, Forum Accounting voluntarily may
agree to waive all or a portion of its fees.
EXPENSES. Each Portfolio is obligated to pay for all of its expenses.
These expenses include: governmental fees; interest charges; taxes; 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; fees 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 a Portfolio, which are
allocated to that Portfolio , and expenses not attributable to a Portfolio,
which are allocated among all portfolios of the Trust in proportion to their
average net assets or as otherwise determined by the Board.
CUSTODIAN. The Chase Manhattan Bank, Chase MetroTech Center, Brooklyn,
New York 11245 acts as custodian of the Portfolios' assets and, for foreign
securities, through its Global Securities Services division located at 125
London Wall, London EC2Y 5AJ, United Kingdom. Chase employs foreign
subcustodians to maintain the Portfolios' foreign assets outside the U.S.
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
Interests in separate series of the Trust. The Trust currently has six
portfolios (one being the Portfolio), and the Trust reserves the right to create
additional portfolios.
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.
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 for an
investor vote. Generally, Interests are voted in the aggregate without reference
to a particular portfolio, unless the Trustees determine that the matter affects
only one portfolio or portfolio voting is required, in which case Interests are
voted separately by each portfolio. 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 is not required to pay federal income taxes on its
ordinary income and capital gain, as it is treated as a partnership for federal
income tax purposes. All interest, dividends and gains and losses of the
Portfolio are deemed to "pass through" to its investors, regardless of whether
such interest, dividends or gains are distributed by the Portfolio or losses are
realized by the Portfolio.
Under the Portfolio's operational method, it is not 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 Internal Revenue Code) of the Portfolio's ordinary income and
capital gain, to the extent that the investor is subject to tax on its income.
The Trust will inform investors of the amount and nature of such income or gain.
As of January 30, 1998, each of the following held in excess of 25% of
a Portfolio's Interests and may therefore be considered a "control person" of
the Portfolio: (1) Schroder International Fund, a series of Schroder Capital
Funds (Delaware) owned substantial all of the outstanding Interests of
International Equity Fund; (2) three series of Norwest Advantage Funds, a
registered open-end management investment company, collectively owned
substantial all of the outstanding Interests of Schroder EM Core Portfolio; (3)
Schroder International Smaller Companies Fund, a series of Schroder Capital
Funds (Delaware) owned substantial all of the outstanding Interests of Schroder
International Smaller Companies Portfolio; and (4) Small Cap Opportunities Fund,
a series of Norwest Advantage Funds, owned a majority of the outstanding
Interests of Schroder International Smaller Companies Portfolio. In addition,
Schroder Capital Funds (Delaware) may be deemed to be a control person of the
Trust.
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PURCHASE OF SECURITIES
Portfolio Interests 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 are
made without a sales load, at the Portfolio's net asset value next determined
after an order is received.
Net asset value is calculated as of the close of the New York Stock
Exchange (the "Exchange") (normally, 4:00 p.m. Eastern time), Monday through
Friday, on each day that the Exchange is open for trading (which excludes the
following national business holidays: New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day) ("Business Day"). Net asset value per
Interest is calculated by dividing the aggregate value of the Portfolio's assets
less all liabilities by the number of Interests outstanding. Portfolio
securities listed on 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 recently 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 non-U.S. 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 net asset value 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 net
asset value of the Portfolio is calculated.
Registered investment companies are subject to no minimum initial or
subsequent investment amount. For other qualified investors, the minimum initial
investment amount is $2 million, and there is no minimum subsequent investment
amount. However, since the Portfolio seeks 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). Minimum investment amounts
may be waived in the discretion of the Portfolio's investment adviser, SCMI.
Qualified investors who have completed a subscription agreement may
transmit purchase payments by Federal Reserve Bank wire directly to the
Portfolio as follows:
The Chase Manhattan Bank
New York, NY
ABA No.: 021000021
For Credit To: Forum Financial Corp.
Account No.:[ See Account Numbers below]
Ref.: [Name of Schroder Portfolio]
Account of: [interestholder name]
Account Number: [interestholder account number]
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------ -------------------------------
PORTFOLIO NAME ACCOUNT NUMBER
- ------------------------------------------------------------ -------------------------------
- ------------------------------------------------------------ -------------------------------
International Equity Fund 910-2-783637
- ------------------------------------------------------------ -------------------------------
- ------------------------------------------------------------ -------------------------------
Schroder EM Core Portfolio 910-2-792281
- ------------------------------------------------------------ -------------------------------
- ------------------------------------------------------------ -------------------------------
Schroder International Smaller Companies Portfolio 910-2-792596
- ------------------------------------------------------------ -------------------------------
- ------------------------------------------------------------ -------------------------------
Schroder U.S. Smaller Companies Portfolio 910-2-792588
- ------------------------------------------------------------ -------------------------------
- ------------------------------------------------------------ -------------------------------
Schroder Emerging Markets Fund Institutional Portfolio 910-2-783645
- ------------------------------------------------------------ -------------------------------
</TABLE>
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The wire order must specify the name of the Portfolio, the account name
and number, address, confirmation number, amount to be wired, name of the wiring
bank, and name and telephone number of the person to be contacted in connection
with the order. If the initial investment is by wire, an account number is
assigned, and a Subscription Agreement must be completed and mailed to the
Portfolio before any account becomes active. Wire orders received prior to the
close of the Exchange (normally 4:00 p.m. Eastern time) on each Business Day are
processed at the net asset value next determined that day. Wire orders received
after the closing of the Exchange are processed at the net asset value next
determined. The Trust reserves the right to cease accepting investments in the
Portfolio at any time or to reject any investment order.
Forum Financial Services, Inc., an affiliate of Forum, is the placement
agent for the Trust. The placement agent receives no compensation for its
services.
REDEMPTION OR REPURCHASE
An investor may redeem all or any portion of its investment in the
Portfolio at the net asset value next determined after the investor furnishes a
redemption request in proper form to the Trust. Redemption proceeds are 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 a 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 Exchange is closed (or
when trading on the Exchange is restricted) for any reason other than its
customary weekend or holiday closings or under any emergency or other
circumstances as determined by the Securities and Exchange Commission.
Interests are redeemed at their next determined net asset value after
receipt by the Trust of a redemption request in proper form. Redemption requests
may be made between 9:00 a.m. and 6:00 p.m. (Eastern time) on each Business Day.
Redemption requests that are received prior to the closing of the Exchange are
processed at the net asset value next determined on that day. Redemption
requests that are received after the closing of the Exchange are processed at
the net asset value next determined. Redemption requests must include the name
of the interestholder, the Portfolio's name, the dollar amount or number of
Interests to be redeemed, interestholder account number, and the signature of
the holder designated on the account.
Written redemption requests may be sent to the Trust at the following
address:
[Name of Schroder Portfolio]
P.O. Box 446
Portland, Maine 04112
Telephone redemption requests may be made by telephoning the transfer
agent at 1-800-344-8332 or 1-207-879-8903. A telephone redemption may be made
only if the telephone redemption privilege option has been elected on the
Subscription Agreement or otherwise in writing, and the interestholder has
obtained a password from the transfer agent. In an effort to prevent
unauthorized or fraudulent redemption requests by telephone, reasonable
procedures will be followed by the transfer agent to confirm that telephone
instructions are genuine. The transfer agent and the Trust generally will not be
liable for any losses due to unauthorized or fraudulent redemption requests, but
either may be liable if it does not follow these procedures. In times of drastic
economic or market change it may be difficult to make redemptions by telephone.
If an interestholder cannot reach the transfer agent by telephone, redemption
requests may be mailed or hand-delivered to the transfer agent.
Redemption proceeds normally are paid in cash. Redemptions from the
Portfolio may be made wholly or partially in portfolio securities, however, 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 Securities
and Exchange Commission pursuant to which a Portfolio will only consider
effecting a redemption in portfolio securities if the interestholder is
redeeming more than $250,000 or 1% of the Portfolio's net asset value, whichever
is less, during any 90-day period.
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PENDING LEGAL PROCEEDINGS
None.
17
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SCHRODER CAPITAL FUNDS
PART B
(PRIVATE PLACEMENT MEMORANDUM)
INTERNATIONAL EQUITY FUND
SCHRODER EM CORE PORTFOLIO
SCHRODER INTERNATIONAL SMALLER COMPANIES PORTFOLIO
SCHRODER U.S. SMALLER COMPANIES PORTFOLIO
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
MARCH 1, 1998
COVER PAGE
Not applicable.
TABLE OF CONTENTS
General Information and History........................................... 2
Investment Objective and Policies......................................... 3
Investment Restrictions................................................... 14
Management of the Trust................................................... 20
Control Persons and Principal Holders of Securities....................... 22
Investment Advisory and Other Services.................................... 23
Brokerage Allocation and Other Practices.................................. 25
Capital Stock and Other Securities........................................ 27
Purchase, Redemption and Pricing of Securities............................ 28
Tax Status................................................................ 29
Placement Agent........................................................... 31
Calculations of Performance Data.......................................... 31
Financial Statements...................................................... 31
Appendix A - Miscellaneous Tables......................................... A-1
Interests in each Portfolio are offered solely in private placement transactions
that do not involve any "public offering" within the meaning of Section 4(2) of
the 1933 Act. Investments in a Portfolio may be made only by certain qualified
investors (generally excluding S corporations, partnerships, and grantor trusts
beneficially owned by any individuals, S corporations, or partnerships).
Investors may be organized within or outside the U.S. 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.
THE TRUST'S SECURITIES DESCRIBED IN THIS PRIVATE PLACEMENT MEMORANDUM ARE NOT
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE. INTERESTS MAY NOT BE TRANSFERRED OR
RESOLD EXCEPT AS PERMITTED UNDER: (1) THE TERMS OF THE TRUST'S TRUST INSTRUMENT,
AND (2) THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE OR FOREIGN
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
<PAGE>
GENERAL INFORMATION AND HISTORY
See "General Description of Registrant", "Management of the Trust" and "Capital
Stock and Other Securities" in Part A of this Private Placement Memorandum. As
used herein the following terms have the meanings ascribed:
Board The term "Board" means of the board of trustees of
the Trust.
CFTC The term "CFTC" means the United States Commodities
Futures trading Commission.
Code The term "Code" means the United States Internal
Revenue Code of 1986, as amended.
FAS The term "FAS" means Forum Accounting Services, LLC,
the Portfolios' interestholder recordkeeper and
portfolio accountant.
Forum The term "Forum" means Forum Administrative Services,
LLC, the Portfolios' subadministrator.
Portfolio The term "Portfolio" means each of International
Equity Fund, Schroder EM Core Portfolio, Schroder
International Smaller Companies Portfolio and
Schroder U.S.
Smaller Companies Portfolio,
Schroder Advisors The term "Schroder Advisors" means Schroder
Fund Advisors Inc., the portfolios' administrator.
SCMI The term "SCMI" means Schroder Capital Management
International Inc., the Portfolios' investment
adviser.
SEC The term "SEC" means the United States Securities and
Exchange Commission.
Trust The term "Trust: means Schroder Capital Funds.
U.S. Government
Securities The term "U.S. Government Securities' means
securities issued or guaranteed by the United States
government or by its agencies or instrumentalities.
1940 Act The term " 1940 Act " means the United States
Investment Company Act of 1940, as amended.
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INVESTMENT OBJECTIVES AND POLICIES
Part A contains information about the investment objective, policies
and restrictions of. The portfolios are series of the Trust. The following
discussion supplements the disclosure in Part A concerning the Portfolios'
investments, investment techniques and strategies and the associated risks. This
Part B should be read only in conjunction with Part A. Defined terms used in
this Part B have the same meaning as in Part A.
Except as otherwise noted, the policies described in Part A and in this
Part B are not "fundamental". Fundamental policies of a Portfolio cannot be
changed without the vote of a "majority" of the Portfolio's outstanding
Interests. Under the 1940 Act, a "majority" vote is defined as the vote of the
holders of the lesser of: (1) 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 (2) more than 50% of the outstanding shares.
The Board may change any policy of a Portfolio that is not fundamental without a
vote of the interestholders of the Portfolio.
Except as otherwise noted, the following descriptions of certain
investment policies and techniques are applicable to each of the Portfolios.
OPTIONS
Each Portfolio may purchase and sell covered put and call options on
its portfolio securities to enhance investment performance and to protect
against changes in market prices.
COVERED CALL OPTIONS. A Portfolio may write covered call options on its
securities to realize a greater current return through the receipt of premiums
than it would realize on its securities alone. Such option transactions may also
be used as a limited form of hedging against a decline in the price of
securities owned by the Portfolio.
A call option gives the holder the right to purchase, and obligates the
writer to sell, a security at the exercise price at any time before the
expiration date. A call option is "covered" if the writer, at all times while
obligated as a writer, either owns the underlying securities (or comparable
securities satisfying the cover requirements of the securities exchanges), or
has the right to acquire such securities through immediate conversion of
securities.
In return for the premium received when it writes a covered call
option, a Portfolio gives up some or all of the opportunity to profit from an
increase in the market price of the securities covering the call option during
the life of the option. The Portfolio retains the risk of loss should the price
of such securities decline. If the option expires unexercised, the Portfolio
realizes a gain equal to the premium, which may be offset by a decline in price
of the underlying security. If the option is exercised, the Portfolio realizes a
gain or loss equal to the difference between the Portfolio's cost for the
underlying security and the proceeds of sale (exercise price minus commissions)
plus the amount of the premium.
A Portfolio may terminate a call option that it has written before it
expires by entering into a closing purchase transaction. A Portfolio may enter
into closing purchase transactions in order to free itself to sell the
underlying security or to write another call on the security, realize a profit
on a previously written call option, or protect a security from being called in
an unexpected market rise. Any profits from a closing purchase transaction may
be offset by a decline in the value of the underlying security. Conversely,
because increases in the market price of a call option will generally reflect
increases in the market price of the underlying security, any loss resulting
from a closing purchase transaction is likely to be offset in whole or in part
by unrealized appreciation of the underlying security owned by the Portfolio.
COVERED PUT OPTIONS. A Portfolio may write covered put options in order
to enhance its current return. Such options transactions may also be used as a
limited form of hedging against an increase in the price of securities that the
Portfolio plans to purchase. A put option gives the holder the right to sell,
and obligates the writer to buy, a security at the exercise price at any time
before the expiration date. A put option is "covered" if the writer
3
<PAGE>
segregates cash and high-grade short-term debt obligations or other permissible
collateral equal to the price to be paid if the option is exercised.
In addition to the receipt of premiums and the potential gains from
terminating such options in closing purchase transactions, a Portfolio also
receives interest on the cash and debt securities maintained to cover the
exercise price of the option. By writing a put option, the Portfolio assumes the
risk that it may be required to purchase the underlying security for an exercise
price higher than its then current market value, resulting in a potential
capital loss unless the security later appreciates in value.
A Portfolio may terminate a put option that it has written before it
expires by a closing purchase transaction. Any loss from this transaction may be
partially or entirely offset by the premium received on the terminated option.
PURCHASING PUT AND CALL OPTIONS. A Portfolio may also purchase put
options to protect portfolio holdings against a decline in market value. This
protection lasts for the life of the put option because the Portfolio, as a
holder of the option, may sell the underlying security at the exercise price
regardless of any decline in its market price. In order for a put option to be
profitable, the market price of the underlying security must decline
sufficiently below the exercise price to cover the premium and transaction costs
that the Portfolio must pay. These costs will reduce any profit the Portfolio
might have realized had it sold the underlying security instead of buying the
put option.
A Portfolio may purchase call options to hedge against an increase in
the price of securities that the Portfolio wants ultimately to buy. Such hedge
protection is provided during the life of the call option since the Portfolio,
as holder of the call option, is able to buy the underlying security at the
exercise price regardless of any increase in the underlying security's market
price. In order for a call option to be profitable, the market price of the
underlying security must rise sufficiently above the exercise price to cover the
premium and transaction costs. These costs will reduce any profit the Portfolio
might have realized had it bought the underlying security.
A Portfolio may purchase call options to hedge against an increase in
the price of securities that the Portfolio wants ultimately to buy. Such hedge
protection is provided during the life of the call option since the Portfolio,
as holder of the call option, is able to buy the underlying security at the
exercise price regardless of any increase in the underlying security's market
price. In order for a call option to be profitable, the market price of the
underlying security must rise sufficiently above the exercise price to cover the
premium and transaction costs. These costs will reduce any profit the Portfolio
might have realized had it bought the underlying security at the time it
purchased the call option.
A Portfolio may also purchase put and call options to enhance its
current return.
OPTIONS ON FOREIGN SECURITIES. A Portfolio may purchase and sell
options on foreign securities if in SCMI's opinion the investment
characteristics of such options, including the risks of investing in such
options, are consistent with the Portfolio's investment objectives. It is
expected that risks related to such options will not differ materially from
risks related to options on U.S. securities. However, position limits and other
rules of foreign exchanges may differ from those in the U.S. In addition,
options markets in some countries, many of which are relatively new, may be less
liquid than comparable markets in the U.S.
RISKS INVOLVED IN THE SALE OF OPTIONS. Options transactions involve
certain risks, including the risks that SCMI will not forecast interest rate or
market movements correctly, that a Portfolio may be unable at times to close out
such positions, or that hedging transactions may not accomplish their purpose
because of imperfect market correlations. The successful use of these strategies
depends on the ability of SCMI to forecast market and interest rate movements
correctly.
4
<PAGE>
An exchange-listed option may be closed out only on an exchange which
provides a secondary market for an option of the same series. There is no
assurance that a liquid secondary market on an exchange will exist for any
particular option or at any particular time. If no secondary market were to
exist, it would be impossible to enter into a closing transaction to close out
an option position. As a result, a Portfolio may be forced to continue to hold,
or to purchase at a fixed price, a security on which it has sold an option at a
time when SCMI believes it is inadvisable to do so.
Higher than anticipated trading activity or order flow or other
unforeseen events might cause The Options Clearing Corporation or an exchange to
institute special trading procedures or restrictions that might restrict a
Portfolio's use of options. The exchanges have established limitations on the
maximum number of calls and puts of each class that may be held or written by an
investor or group of investors acting in concert. It is possible that the
Portfolios and other clients of SCMI may be considered such a group. These
position limits may restrict the Portfolios' ability to purchase or sell options
on particular securities.
Options that are not traded on national securities exchanges may be
closed out only with the other party to the option transaction. For that reason,
it may be more difficult to close out unlisted options than listed options.
Furthermore, unlisted options are not subject to the protection afforded
purchasers of listed options by The Options Clearing Corporation.
FUTURES CONTRACTS
In order to hedge against the effects of adverse market changes, each
Portfolio that may invest in debt securities may buy and sell futures contracts
on debt securities of the type in which the Portfolio may invest and on indexes
of debt securities. In addition, each Portfolio that may invest in equity
securities may purchase and sell stock index futures to hedge against changes in
stock market prices. Each Portfolio may also, to the extent permitted by
applicable law, buy and sell futures contracts and options on futures contracts
to increase the Portfolio's current return. All such futures and related options
will, as may be required by applicable law, be traded on exchanges that are
licensed and regulated by the CFTC.
FUTURES ON DEBT SECURITIES AND RELATED OPTIONS. A futures contract on a
debt security is a binding contractual commitment which, if held to maturity,
will result in an obligation to make or accept delivery, during a particular
month, of securities having a standardized face value and rate of return. By
purchasing futures on debt securities -- assuming a "long" position -- a
Portfolio will legally obligate itself to accept the future delivery of the
underlying security and pay the agreed price. By selling futures on debt
securities --assuming a "short" position -- it will legally obligate itself to
make the future delivery of the security against payment of the agreed price.
Positions taken in the futures markets are not normally held to
maturity, but are instead liquidated through offsetting transactions that may
result in a profit or a loss. While futures positions taken by a Portfolio will
usually be liquidated in this manner, a Portfolio may instead make or take
delivery of the underlying securities whenever it appears economically
advantageous to the Portfolio to do so. A clearing corporation associated with
the exchange on which futures are traded assumes responsibility for such closing
transactions and guarantees that a Portfolio's sale and purchase obligations
under closed-out positions will be performed at the termination of the contract.
Hedging by use of futures on debt securities seeks to establish more
certainly than would otherwise be possible the effective rate of return on
portfolio securities. A Portfolio may, for example, take a "short" position in
the futures market by selling contracts for the future delivery of debt
securities held by the Portfolio (or securities having characteristics similar
to those held by the Portfolio) in order to hedge against an anticipated rise in
interest rates that would adversely affect the value of the Portfolio's
portfolio securities. When hedging of this character is successful, any
depreciation in the value of portfolio securities may substantially be offset by
appreciation in the value of the futures position.
On other occasions, a Portfolio may take a "long" position by
purchasing futures on debt securities. This would be done, for example, when the
Portfolio expects to purchase particular securities when it has the necessary
cash, but expects the rate of return available in the securities markets at that
time to be less favorable than rates currently available in the futures markets.
If the anticipated rise in the price of the securities should occur (with its
concomitant reduction in yield), the increased cost to the Portfolio of
purchasing the securities may be offset, at least to some extent, by the rise in
the value of the futures position taken in anticipation of the subsequent
securities purchase.
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<PAGE>
Successful use by a Portfolio of futures contracts on debt securities
is subject to SCMI's ability to predict correctly movements in the direction of
interest rates and other factors affecting markets for debt securities. For
example, if a Portfolio has hedged against the possibility of an increase in
interest rates which would adversely affect the market prices of debt securities
held by it and the prices of such securities increase instead, the Portfolio
will lose part or all of the benefit of the increased value of its securities
which it has hedged because it will have offsetting losses in its futures
positions. In addition, in such situations, if the Portfolio has insufficient
cash, it may have to sell securities to meet daily maintenance margin
requirements. The Portfolio may have to sell securities at a time when it may be
disadvantageous to do so.
A Portfolio may purchase and write put and call options on certain debt
futures contracts, as they become available. Such options are similar to options
on securities except that options on futures contracts give 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 period of
the option. As with options on securities, the holder or writer of an option may
terminate his position by selling or purchasing an option of the same series.
There is no guarantee that such closing transactions can be effected. A
Portfolio will be required to deposit initial margin and maintenance margin with
respect to put and call options on futures contracts written by it pursuant to
brokers' requirements, and, in addition, net option premiums received will be
included as initial margin deposits. See "Investment Objectives and Policies -
Futures Contracts - Margin Payments". Compared to the purchase or sale of
futures contracts, the purchase of call or put options on futures contracts
involves less potential risk to a Portfolio because the maximum amount at risk
is the premium paid for the options plus transactions costs. However, there may
be circumstances when the purchase of call or put options on a futures contract
would result in a loss to a Portfolio when the purchase or sale of the futures
contracts would not, such as when there is no movement in the prices of debt
securities. The writing of a put or call option on a futures contract involves
risks similar to those risks relating to the purchase or sale of futures
contracts.
INDEX FUTURES CONTRACTS AND OPTIONS. Certain Portfolios may invest in
debt index futures contracts and stock index futures contracts, and in related
options. A debt index futures contract is a contract to buy or sell units of a
specified debt index at a specified future date at a price agreed upon when the
contract is made. A unit is the current value of the index. Debt index futures
in which the Portfolios are presently expected to invest are not now available,
although such futures contracts are expected to become available in the future.
A stock index futures contract is a contract to buy or sell units of a stock
index at a specified future date at a price agreed upon when the contract is
made. A unit is the current value of the stock index.
The following example illustrates generally the manner in which index
futures contracts operate. The Standard & Poor's 100 Stock Index is composed of
100 selected common stocks, most of which are listed on the New York Stock
Exchange. The S&P 100 Index assigns relative weightings to the common stocks
included in the Index, and the Index fluctuates with changes in the market
values of those common stocks. In the case of the S&P 100 Index, contracts are
to buy or sell 100 units. Thus, if the value of the S&P 100 Index were $180, one
contract would be worth $18,000 (100 units x $180). The stock index futures
contract specifies that no delivery of the actual stocks making up the index
will take place. Instead, settlement in cash must occur upon the termination of
the contract, with the settlement being the difference between the contract
price and the actual level of the stock index at the expiration of the contract.
For example, if a Portfolio enters into a futures contract to buy 100 units of
the S&P 100 Index at a specified future date at a contract price of $180 and the
S&P 100 Index is at $184 on that future date, the Portfolio will gain $400 (100
units x gain of $4). If the Portfolio enters into a futures contract to sell 100
units of the stock index at a specified future date at a contract price of $180
and the S&P 100 Index is at $182 on that future date, the Portfolio will lose
$200 (100 units x loss of $2).
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A Portfolio may purchase or sell futures contracts with respect to any
securities indexes. Positions in index futures may be closed out only on an
exchange or board of trade which provides a secondary market for such futures.
In order to hedge a Portfolio's investments successfully using futures
contracts and related options, a Portfolio must invest in futures contracts with
respect to indexes or sub-indexes the movements of which will, in its judgment,
have a significant correlation with movements in the prices of the Portfolio's
securities.
Options on index futures contracts are similar to options on securities
except that options on index futures contracts give the purchaser the right, in
return for the premium paid, to assume a position in an index 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 period of the option.
Upon exercise of the option, the holder would assume the underlying futures
position and would receive a variation margin payment of cash or securities
approximating the increase in the value of the holder's option position. If an
option is exercised on the last trading day prior to the expiration date of the
option, the settlement will be made entirely in cash based on the difference
between the exercise price of the option and the closing level of the index on
which the futures contract is based on the expiration date. Purchasers of
options who fail to exercise their options prior to the exercise date suffer a
loss of the premium paid.
As an alternative to purchasing and selling call and put options on
index futures contracts, each of the Portfolios that may purchase and sell index
futures contracts may purchase and sell call and put options on the underlying
indexes themselves to the extent that such options are traded on national
securities exchanges. Index options are similar to options on individual
securities in that the purchaser of an index option acquires the right to buy
(in the case of a call) or sell (in the case of a put), and the writer
undertakes the obligation to sell or buy (as the case may be), units of an index
at a stated exercise price during the term of the option. Instead of giving the
right to take or make actual delivery of securities, the holder of an index
option has the right to receive a cash "exercise settlement amount". This amount
is equal to the amount by which the fixed exercise price of the option exceeds
(in the case of a put) or is less than (in the case of a call) the closing value
of the underlying index on the date of the exercise, multiplied by a fixed
"index multiplier".
A Portfolio may purchase or sell options on stock indices in order to
close out its outstanding positions in options on stock indices which it has
purchased. A Portfolio may also allow such options to expire unexercised.
Compared to the purchase or sale of futures contracts, the purchase of
call or put options on an index involves less potential risk to a Portfolio
because the maximum amount at risk is the premium paid for the options plus
transactions costs. The writing of a put or call option on an index involves
risks similar to those risks relating to the purchase or sale of index futures
contracts.
MARGIN PAYMENTS. When a Portfolio purchases or sells a futures
contract, it is required to deposit with its custodian an amount of cash, U.S.
Treasury bills, or other permissible collateral equal to a small percentage of
the amount of the futures contract. This amount is known as "initial margin".
The nature of initial margin is different from that of margin in security
transactions in that it does not involve borrowing money to finance
transactions. Rather, initial margin is similar to a performance bond or good
faith deposit that is returned to a Portfolio upon termination of the contract,
assuming a Portfolio satisfies its contractual obligations.
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Subsequent payments to and from the broker occur on a daily basis in a
process known as "marking to market". These payments are called "variation
margin" and are made as the value of the underlying futures contract fluctuates.
For example, when a Portfolio sells a futures contract and the price of the
underlying debt security rises above the delivery price, the Portfolio's
position declines in value. The Portfolio then pays the broker a variation
margin payment equal to the difference between the delivery price of the futures
contract and the market price of the securities underlying the futures contract.
Conversely, if the price of the underlying security falls below the delivery
price of the contract, the Portfolio's futures position increases in value. The
broker then must make a variation margin payment equal to the difference between
the delivery price of the futures contract and the market price of the
securities underlying the futures contract.
When a Portfolio terminates a position in a futures contract, a final
determination of variation margin is made, additional cash is paid by or to the
Portfolio, and the Portfolio realizes a loss or a gain. Such closing
transactions involve additional commission costs.
SPECIAL RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS
LIQUIDITY RISKS. Positions in futures contracts may be closed out only
on an exchange or board of trade which provides a secondary market for such
futures. Although each Portfolio intends to purchase or sell futures only on
exchanges or boards of trade where there appears to be an active secondary
market, there is no assurance that a liquid secondary market on an exchange or
board of trade will exist for any particular contract or at any particular time.
If there is not a liquid secondary market at a particular time, it may not be
possible to close a futures position at such time and, in the event of adverse
price movements, a Portfolio would continue to be required to make daily cash
payments of variation margin. However, in the event financial futures are used
to hedge portfolio securities, such securities will not generally be sold until
the financial futures can be terminated. In such circumstances, an increase in
the price of the portfolio securities, if any, may partially or completely
offset losses on the financial futures.
In addition to the risks that apply to all options transactions, there
are several special risks relating to options on futures contracts. The ability
to establish and close out positions in such options will be subject to the
development and maintenance of a liquid secondary market. It is not certain that
such a market will develop. Although a Portfolio generally will purchase only
those options for which there appears to be an active secondary market, there is
no assurance that a liquid secondary market on an exchange will exist for any
particular option or at any particular time. In the event no such market exists
for particular options, it might not be possible to effect closing transactions
in such options with the result that a Portfolio would have to exercise the
options in order to realize any profit.
HEDGING RISKS. There are several risks in connection with the use by a
Portfolio of futures contracts and related options as a hedging device. One risk
arises because of the imperfect correlation between movements in the prices of
the futures contracts and options and movements in the underlying securities or
index or movements in the prices of a Portfolio's securities which are the
subject of a hedge. SCMI will, however, attempt to reduce this risk by
purchasing and selling, to the extent possible, futures contracts and related
options on securities and indexes the movements of which will, in its judgment,
correlate closely with movements in the prices of the underlying securities or
index and a Portfolio's portfolio securities sought to be hedged.
Successful use of futures contracts and options by a Portfolio for
hedging purposes is also subject to SCMI's ability to predict correctly
movements in the direction of the market. It is possible that, where a Portfolio
has purchased puts on futures contracts to hedge its portfolio against a decline
in the market, the securities or index on which the puts are purchased may
increase in value and the value of securities held in the portfolio may decline.
If this occurred, the Portfolio would lose money on the puts and also experience
a decline in value in its portfolio securities. In addition, the prices of
futures, for a number of reasons, may not correlate perfectly with movements in
the underlying securities or index due to certain market distortions. First, all
participants in the futures market are subject to margin deposit requirements.
Such requirements may cause investors to close futures contracts through
offsetting transactions which could distort the normal relationship between the
underlying security or index and futures markets. Second, the margin
requirements in the futures markets are less onerous than margin requirements in
the securities markets in general, and as a result the futures markets may
attract more speculators than the securities markets do. Increased participation
by speculators in the futures markets may also cause temporary price
distortions. Due to the possibility of price distortion, even a correct forecast
of general market trends by SCMI may still not result in a successful hedging
transaction over a very short time period.
OTHER RISKS. The Portfolios will incur brokerage fees in connection
with their futures and options transactions. In addition, while futures
contracts and options on futures will be purchased and sold to reduce certain
risks, those transactions themselves entail certain other risks. Thus, while a
Portfolio may benefit from the use of futures and related options, unanticipated
changes in interest rates or stock price movements may result in a poorer
overall performance for the Portfolio than if it had not entered into any
futures contracts or options transactions. Moreover, in the event of an
imperfect correlation between the futures position and the portfolio position
which is intended to be protected, the desired protection may not be obtained
and the Portfolio may be exposed to risk of loss.
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REPURCHASE AGREEMENTS
Each Portfolio may enter into repurchase agreements. A repurchase
agreement is a contract under which the Portfolio acquires a security for a
relatively short period (usually not more than 7 days) subject to the obligation
of the seller to repurchase and the Portfolio to resell such security at a fixed
time and price (representing the Portfolio's cost plus interest). It is the
Trust's present intention to enter into repurchase agreements only with member
banks of the Federal Reserve System and securities dealers meeting certain
criteria as to creditworthiness and financial condition established by the
Trustees of the Trust and only with respect to obligations of the U.S.
government or its agencies or instrumentalities or other high quality short term
debt obligations. Repurchase agreements may also be viewed as loans made by a
Portfolio which are collateralized by the securities subject to repurchase. SCMI
will monitor such transactions to ensure that the value of the underlying
securities will be at least equal at all times to the total amount of the
repurchase obligation, including the interest factor. If the seller defaults, a
Portfolio could realize a loss on the sale of the underlying security to the
extent that the proceeds of sale including accrued interest are less than the
resale price provided in the agreement including interest. In addition, if the
seller should be involved in bankruptcy or insolvency proceedings, a Portfolio
may incur delay and costs in selling the underlying security or may suffer a
loss of principal and interest if a Portfolio is treated as an unsecured
creditor and required to return the underlying collateral to the seller's
estate.
FORWARD COMMITMENTS
Each Portfolio may enter into contracts to purchase securities for a
fixed price at a future date beyond customary settlement time ("forward
commitments") if the Portfolio holds, and maintains until the settlement date in
a segregated account, cash or high-grade debt obligations in an amount
sufficient to meet the purchase price, or if the Portfolio enters into
offsetting contracts for the forward sale of other securities it owns. Forward
commitments may be considered securities in themselves, and involve a risk of
loss if the value of the security to be purchased declines prior to the
settlement date, which risk is in addition to the risk of decline in the value
of the Portfolio's other assets. Where such purchases are made through dealers,
a Portfolio relies on the dealer to consummate the sale. The dealer's failure to
do so may result in the loss to the Portfolio of an advantageous yield or price.
Although a Portfolio will generally enter into forward commitments with
the intention of acquiring securities for its portfolio or for delivery pursuant
to options contracts it has entered into, a Portfolio may dispose of a
commitment prior to settlement if SCMI deems it appropriate to do so. A
Portfolio may realize short-term profits or losses upon the sale of forward
commitments.
WHEN-ISSUED SECURITIES
Each Portfolio may from time to time purchase securities on a
"when-issued" basis. Debt securities are often issued on this basis. The price
of such securities, which may be expressed in yield terms, is fixed at the time
a commitment to purchase is made, but delivery and payment for the when-issued
securities take place at a later date. Normally, the settlement date occurs
within one month of the purchase. During the period between purchase and
settlement, no payment is made by a Portfolio and no interest accrues to the
Portfolio. To the extent that assets of a Portfolio are held in cash pending the
settlement of a purchase of securities, that Portfolio would earn no income.
While a Portfolio may sell its right to acquire when-issued securities prior to
the settlement date, a Portfolio intends actually to acquire such securities
unless a sale prior to settlement appears desirable for investment reasons. At
the time a Portfolio makes the commitment to purchase a security on a
when-issued basis, it will record the transaction and reflect the amount due and
the value of the security in determining the Portfolio's net asset value. The
market value of the when-issued securities may be more or less than the purchase
price payable at the settlement date. Each Portfolio will establish a segregated
account in which it will maintain cash and U.S. Government Securities or other
high-grade debt obligations at least equal in value to commitments for
when-issued securities. Such segregated securities either will mature or, if
necessary, be sold on or before the settlement date.
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LOANS OF PORTFOLIO SECURITIES
Each Portfolio may lend its portfolio securities, provided: (1) the
loan is secured continuously by collateral consisting of U.S. government
securities, cash, or cash equivalents adjusted daily to have market value at
least equal to the current market value of the securities loaned; (2) the
Portfolio may at any time call the loan and regain the securities loaned; (3) a
Portfolio will receive any interest or dividends paid on the loaned securities;
and (4) the aggregate market value of securities of any Portfolio loaned will
not at any time exceed one-third of the total assets of the Portfolio. In
addition, it is anticipated that the Portfolio may share with the borrower some
of the income received on the collateral for the loan or that it will be paid a
premium for the loan. Before a Portfolio enters into a loan, SCMI considers all
relevant facts and circumstances including the creditworthiness of the borrower.
The risks in lending portfolio securities, as with other extensions of credit,
consist of possible delay in recovery of the securities or possible loss of
rights in the collateral should the borrower fail financially. Although voting
rights or rights to consent with respect to the loaned securities pass to the
borrower, a Portfolio retains the right to call the loans at any time on
reasonable notice, and it will do so in order that the securities may be voted
by a Portfolio if the holders of such securities are asked to vote upon or
consent to matters materially affecting the investment. A Portfolio will not
lend portfolio securities to borrowers affiliated with a Portfolio.
Schroder EM Core Portfolio may not lend a security if, as a result, the
amount of loaned securities would exceed an amount equal to 33 1/3% of the
Portfolio's total assets.
Schroder Smaller Companies Portfolio may not lend a security if, as a
result, the amount of loaned securities would exceed an amount equal to 25% of
the Portfolio's total assets.
FOREIGN SECURITIES
Each Portfolio may invest in foreign securities and in certificates of
deposit issued by United States branches of foreign banks and foreign branches
of United States banks.
Investments in foreign securities may involve considerations different
from investments in domestic securities due to limited publicly available
information, non-uniform accounting standards, lower trading volume and possible
consequent illiquidity, greater volatility in price, the possible imposition of
withholding or confiscatory taxes, the possible adoption of foreign governmental
restrictions affecting the payment of principal and interest, expropriation of
assets, nationalization, or other adverse political or economic developments.
Foreign companies may not be subject to auditing and financial reporting
standards and requirements comparable to those which apply to U.S. companies.
Foreign brokerage commissions and other fees are generally higher than in the
United States. It may be more difficult to obtain and enforce a judgment against
a foreign issuer.
In addition, to the extent that any Portfolio's foreign investments are
not United States dollar-denominated, the Portfolio may be affected favorably or
unfavorably by changes in currency exchange rates or exchange control
regulations and may incur costs in connection with conversion between
currencies.
In determining whether to invest in securities of foreign issuers, the
investment adviser of a Portfolio seeking current income will consider the
likely impact of foreign taxes on the net yield available to the Portfolio and
its shareholders. Income received by a Portfolio from sources within foreign
countries may be reduced by withholding and other taxes imposed by such
countries. Tax conventions between certain countries and the United States may
reduce or eliminate such taxes. It is impossible to determine the effective rate
of foreign tax in advance since the amount of a Portfolio's assets to be
invested in various countries is not known, and tax laws and their
interpretations may change from time to time and may change without advance
notice. Any such taxes paid by a Portfolio will reduce its net income available
for distribution to shareholders.
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FOREIGN CURRENCY TRANSACTIONS
Each Portfolio may engage in currency exchange transactions to protect
against uncertainty in the level of future foreign currency exchange rates and
to increase current return. A Portfolio may engage in both "transaction hedging"
and "position hedging."
When it engages in transaction hedging, a Portfolio enters into foreign
currency transactions with respect to specific receivables or payables of a
Portfolio generally arising in connection with the purchase or sale of its
portfolio securities. A Portfolio will engage in transaction hedging when it
desires to "lock in" the U.S. dollar price of a security it has agreed to
purchase or sell, or the U.S. dollar equivalent of a dividend or interest
payment in a foreign currency. By transaction hedging a Portfolio will attempt
to protect against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and the applicable foreign currency during
the period between the date on which the security is purchased or sold or on
which the dividend or interest payment is declared, and the date on which such
payments are made or received.
A Portfolio may purchase or sell a foreign currency on a spot (or cash)
basis at the prevailing spot rate in connection with transaction hedging. A
Portfolio may also enter into contracts to purchase or sell foreign currencies
at a future date ("forward contracts") and purchase and sell foreign currency
futures contracts.
For transaction hedging purposes a Portfolio may also purchase
exchange-listed and over-the-counter call and put options on foreign currency
futures contracts and on foreign currencies. A put option on a futures contract
gives a Portfolio the right to assume a short position in the futures contract
until expiration of the option. A put option on currency gives a Portfolio the
right to sell a currency at an exercise price until the expiration of the
option. A call option on a futures contract gives a Portfolio the right to
assume a long position in the futures contract until the expiration of the
option. A call option on currency gives a Portfolio the right to purchase a
currency at the exercise price until the expiration of the option. A Portfolio
will engage in over-the-counter transactions only when appropriate
exchange-traded transactions are unavailable and when, in SCMI's opinion, the
pricing mechanism and liquidity are satisfactory and the participants are
responsible parties likely to meet their contractual obligations.
When it engages in position hedging, a Portfolio enters into foreign
currency exchange transactions to protect against a decline in the values of the
foreign currencies in which securities held by a Portfolio are denominated or
are quoted in their principal trading markets or an increase in the value of
currency for securities which a Portfolio expects to purchase. In connection
with position hedging, a Portfolio may purchase put or call options on foreign
currency and foreign currency futures contracts and buy or sell forward
contracts and foreign currency futures contracts. A Portfolio may also purchase
or sell foreign currency on a spot basis.
The precise matching of the amounts of foreign currency exchange
transactions and the value of the portfolio 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 values of
those securities between the dates the currency exchange transactions are
entered into and the dates they mature.
It is impossible to forecast with precision the market value of a
Portfolio's portfolio securities at the expiration or maturity of a forward or
futures contract. Accordingly, it may be necessary for a Portfolio to purchase
additional foreign currency on the spot market (and bear the expense of such
purchase) if the market value of the security or securities being hedged is less
than the amount of foreign currency a Portfolio is obligated to deliver and if a
decision is made to sell the security or securities and make delivery of the
foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio security or
securities of a Portfolio if the market value of such security or securities
exceeds the amount of foreign currency a Portfolio is obligated to deliver.
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To offset some of the costs to a Portfolio of hedging against
fluctuations in currency exchange rates, a Portfolio may write covered call
options on those currencies.
Transaction and position hedging do not eliminate fluctuations in the
underlying prices of the securities which a Portfolio owns or intends to
purchase or sell. They simply establish a rate of exchange which one can achieve
at some future point in time. Additionally, although these techniques tend to
minimize the risk of loss due to a decline in the value of the hedged currency,
they tend to limit any potential gain which might result from the increase in
the value of such currency.
A Portfolio may also seek to increase its current return by purchasing
and selling foreign currency on a spot basis, and by purchasing and selling
options on foreign currencies and on foreign currency futures contracts, and by
purchasing and selling foreign currency forward contracts.
CURRENCY FORWARD AND FUTURES CONTRACTS. A forward foreign currency
exchange contract involves 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 as agreed by the parties, at a price set at the time of the contract.
In the case of a cancelable forward contract, the holder has the unilateral
right to cancel the contract at maturity by paying a specified fee. The
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. A foreign currency futures contract is a standardized contract
for the future delivery of a specified amount of a foreign currency at a future
date at a price set at the time of the contract. Foreign currency futures
contracts traded in the United States are designed by and traded on exchanges
regulated by the CFTC, such as the New York Mercantile Exchange.
Forward foreign currency exchange contracts differ from foreign
currency futures contracts in certain respects. For example, the maturity date
of a forward contract may be any fixed number of days from the date of the
contract agreed upon by the parties, rather than a predetermined date in a given
month. Forward contracts may be in any amounts agreed upon by the parties rather
than predetermined amounts. Also, forward foreign exchange contracts are traded
directly between currency traders so that no intermediary is required. A forward
contract generally requires no margin or other deposit.
At the maturity of a forward or futures contract, a Portfolio may
either accept or make delivery of the currency specified in the contract, or at
or prior to maturity enter into a closing transaction involving the purchase or
sale of an offsetting contract. Closing transactions with respect to forward
contracts are usually effected with the currency trader who is a party to the
original forward contract. Closing transactions with respect to futures
contracts are effected on a commodities exchange; a clearing corporation
associated with the exchange assumes responsibility for closing out such
contracts.
Positions in foreign currency futures contracts and related options may
be closed out only on an exchange or board of trade which provides a secondary
market in such contracts or options. Although a Portfolio will normally purchase
or sell foreign currency futures contracts and related options only on exchanges
or boards of trade where there appears to be an active secondary market, there
is no assurance that a secondary market on an exchange or board of trade will
exist for any particular contract or option or at any particular time. In such
event, it may not be possible to close a futures or related option position and,
in the event of adverse price movements, a Portfolio would continue to be
required to make daily cash payments of variation margin on its futures
positions.
FOREIGN CURRENCY OPTIONS. Options on foreign currencies operate
similarly to options on securities, and are traded primarily in the
over-the-counter market, although options on foreign currencies have recently
been listed on several exchanges. Such options will be purchased or written only
when SCMI believes that a liquid secondary market exists for such options. There
can be no assurance that a liquid secondary market will exist for a particular
option at any specific time. Options on foreign currencies are affected by all
of those factors which influence exchange rates and investments generally.
The value of a foreign currency option is dependent upon the value of
the foreign currency and the U.S. dollar, and may have no relationship to the
investment merits of a foreign security. 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.
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There is no systematic reporting of last sale information for foreign
currencies and there is no regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely basis.
Available quotation information is generally representative of very large
transactions in the interbank market and thus may not reflect relatively smaller
transactions (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 cannot be reflected in the U.S. options
markets.
FOREIGN CURRENCY CONVERSION. Although foreign exchange dealers do not
charge a fee for currency conversion, they do realize a profit based on the
difference (the "spread") between prices at which they buy and sell various
currencies. Thus, a dealer may offer to sell a foreign currency to a Portfolio
at one rate, while offering a lesser rate of exchange should a Portfolio desire
to resell that currency to the dealer.
ZERO-COUPON SECURITIES
Zero-coupon securities in which a Portfolio may invest are debt
obligations which are generally issued at a discount and payable in full at
maturity, and which do not provide for current payments of interest prior to
maturity. Zero-coupon securities usually trade at a deep discount from their
face or par value and are subject to greater market value fluctuations from
changing interest rates than debt obligations of comparable maturities which
make current distributions of interest. As a result, the net asset value of
shares of a Portfolio investing in zero-coupon securities may fluctuate over a
greater range than shares of other Portfolios of the Trust and other mutual
funds investing in securities making current distributions of interest and
having similar maturities.
Zero-coupon securities may include U.S. Treasury bills issued directly
by the U.S. Treasury or other short-term debt obligations, and longer-term bonds
or notes and their unmatured interest coupons which have been separated by their
holder, typically a custodian bank or investment brokerage firm. A number of
securities firms and banks have stripped the interest coupons from the
underlying principal (the "corpus") of U.S. Treasury securities and resold them
in custodial receipt programs with a number of different names, including
Treasury Income Growth Receipts ("TIGRS") and Certificates of Accrual on
Treasuries ("CATS"). The underlying U.S. Treasury bonds and notes themselves are
held in book-entry form at the Federal Reserve Bank or, in the case of bearer
securities (I.E., unregistered securities which are owned ostensibly by the
bearer or holder thereof), in trust on behalf of the owners thereof.
In addition, the Treasury has facilitated transfers of ownership of
zero-coupon securities by accounting separately for the beneficial ownership of
particular interest coupons and corpus payments on Treasury securities through
the Federal Reserve book-entry record-keeping system. The Federal Reserve
program as established by the Treasury Department is known as "STRIPS" or
"Separate Trading of Registered Interest and Principal of Securities." Under the
STRIPS program, a Portfolio will be able to have its beneficial ownership of
U.S. Treasury zero-coupon securities recorded directly in the book-entry
record-keeping system in lieu of having to hold certificates or other evidences
of ownership of the underlying U.S. Treasury securities.
When debt obligations have been stripped of their unmatured interest
coupons by the holder, the stripped coupons are sold separately. The principal
or corpus is sold at a deep discount because the buyer receives only the right
to receive a future fixed payment on the security and does not receive any
rights to periodic cash interest payments. Once stripped or separated, the
corpus and coupons may be sold separately. Typically, the coupons are sold
separately or grouped with other coupons with like maturity dates and sold in
such bundled form. Purchasers of stripped obligations acquire, in effect,
discount obligations that are economically identical to the zero-coupon
securities issued directly by the obligor.
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EMERGING MARKETS COUNTRIES
The following countries are not deemed to be "emerging markets" for EM
Core Portfolio and Emerging Markets Fund Institutional Portfolio.
Australia The Netherlands
Austria New Zealand
Belgium Norway
Canada Portugal
Denmark Singapore
Finland Spain
France Sweden
Germany Switzerland
Ireland United Kingdom
Italy USA
Japan
INVESTMENT RESTRICTIONS
The following investment restrictions restate or are in addition to
those described under "Investment Restrictions" and "Investment Objective and
Policies" in Part A. 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.
INTERNATIONAL EQUITY FUND
FUNDAMENTAL RESTRICTIONS. The following investment restrictions are
fundamental policies of the Portfolio.
DIVERSIFICATION. The Portfolio may not invest more than 5% of its assets in
the securities of any single issuer. This restriction does not apply to
U.S. Government Securities.
PURCHASING VOTING SECURITIES. The Portfolio may not purchase more than 10%
of the voting securities of any one issuer.
CLOSED-END FUNDS. The Portfolio will not purchase more than 3% of the
outstanding securities of any closed-end investment company.
UNSEASONED ISSUERS. The Portfolio may not invest in 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.
CONCENTRATION. The Portfolio may not invest 25% or more of the value of its
total assets in any one industry.
BORROWING. The Portfolio may not 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.
PLEDGING. The Portfolio may not pledge, mortgage or hypothecate its assets
to an extent greater than 10% of the value of the total assets of the
Portfolio.
MARGIN; SHORT SALES. The Portfolio may not purchase securities on margin or
sell short.
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INVESTING FOR CONTROL. The Portfolio may not make investments for the
purpose of exercising control or management.
REAL ESTATE. The Portfolio may not purchase or sell real estate, provided
that the Portfolio may invest in securities issued by companies which
invest in real estate or interests therein.
LENDING. The Portfolio may not 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
Securities, short-term commercial paper, certificates of deposit and
bankers' acceptances shall not be deemed to be the making of a loan.
COMMODITIES. The Portfolio may not invest in commodities; commodity
contracts other than foreign currency forward contracts; or oil, gas and
other mineral resource, lease, or arbitrage transactions.
OPTIONS. The Portfolio may not write, purchase or sell options or puts,
calls, straddles, spreads, or combinations thereof.
UNDERWRITING. The Portfolio may not 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.
WARRANTS. The Portfolio may not 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.).
NONFUNDAMENTAL RESTRICTIONS. The following investment restrictions are not
fundamental policies of the Portfolio.
LIQUIDITY. The Portfolio may not invest in securities which cannot be
readily resold to the public because of legal or contractual restrictions
or for which no readily available market exists. This policy does not
include restricted securities eligible for resale to qualified
institutional purchasers pursuant to Rule 144A under the Securities Act of
1933 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.
SCHRODER EM CORE PORTFOLIO
FUNDAMENTAL RESTRICTIONS. The following investment restrictions are
fundamental policies of the Portfolio.
INDUSTRY CONCENTRATION. The Portfolio may not purchase a security if, as a
result, more than 25% of the Portfolio's total assets would be invested in
securities of issuers conducting their principal business activities in the
same industry. For purposes of this limitation, there is no limit on: (1)
investments in U.S. government securities, in repurchase agreements
covering U.S. government securities, in securities issued by the states,
territories or possessions of the United States ("municipal securities") or
in foreign government securities; or (2) investment in issuers domiciled in
a single jurisdiction. Notwithstanding anything to the contrary, to the
extent permitted by the 1940 Act, each Portfolio may invest in one or more
investment companies; provided that, except to the extent the Portfolio
invests in other investment companies pursuant to Section 12(d)(1)(A) of
the 1940 Act, the Portfolio treats the assets of the investment companies
in which it invests as its own for purposes of this policy.
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BORROWING. The Portfolio may not borrow money if, as a result, outstanding
borrowings would exceed an amount equal to one third of the Portfolio's
total assets.
REAL ESTATE. The Portfolio may not purchase or sell real estate unless
acquired as a result of ownership of securities or other instruments (but
this shall not prevent the Portfolio from investing in securities or other
instruments backed by real estate or securities of companies engaged in the
real estate business).
LENDING. The Portfolio may not make loans to other parties. For purposes of
this limitation, entering into repurchase agreements, lending securities
and acquiring any debt security are not deemed to be the making of loans.
COMMODITIES. The Portfolio may not purchase or sell physical commodities
unless acquired as a result of ownership of securities or other instruments
(but this shall not prevent the Portfolio from purchasing or selling
options and futures contracts or from investing in securities or other
instruments backed by physical commodities).
UNDERWRITING. The Portfolio may not underwrite (as that term is defined in
the Securities Act of 1933, as amended) securities issued by other persons
except, to the extent that in connection with the disposition of the
Portfolio's assets, the Portfolio may be deemed to be an underwriter.
SENIOR SECURITIES. The Portfolio may not issue any class of senior
securities except to the extent consistent with the 1940 Act.
NONFUNDAMENTAL RESTRICTIONS. The following investment restrictions are not
fundamental policies of the Portfolio.
DIVERSIFICATION. To the extent required to qualify as a regulated
investment company under the Code, the Portfolio may not purchase a
security (other than a U.S. government security or a security of an
investment company) if, as a result, (1) with respect to 50% of its assets,
more than 5% of the Portfolio's total assets would be invested in the
securities of any single issuer; (2) with respect to 50% of its assets, the
Portfolio would own more than 10% of the outstanding securities of any
single issuer; or (3) more than 25% of the Portfolio's total assets would
be invested in the securities of any single issuer.
BORROWING. For purposes of the Portfolio's limitation on borrowing, the
following are not treated as borrowings to the extent they are fully
collateralized: (1) the delayed delivery of purchased securities (such as
the purchase of when-issued securities); (2) reverse repurchase agreements;
(3) dollar-roll transactions; and (5) the lending of securities ("leverage
transactions").
LIQUIDITY. The Portfolio may not invest more than 15% of its net assets in:
(1) securities that cannot be disposed of within seven days at their
then-current value; (2) repurchase agreements not entitling the holder to
payment of principal within seven days; and (3) securities subject to
restrictions on the sale of the securities to the public without
registration under the 1933 Act ("restricted securities") that are not
readily marketable.
EXERCISING CONTROL OF ISSUERS. The Portfolio may not make investments for
the purpose of exercising control of an issuer. Investments by the
Portfolio in entities created under the laws of foreign countries solely to
facilitate investment in securities in that country will not be deemed the
making of investments for the purpose of exercising control.
OTHER INVESTMENT COMPANIES. The Portfolio may not invest in securities of
another investment company, except to the extent permitted by the 1940 Act.
MARGIN; SHORT SALES. The Portfolio purchase securities on margin, except
that the Portfolio may use short-term credit for the clearance of the
Portfolio's transactions, and provided that initial and variation margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin. The
Portfolio may not sell securities short, unless it owns or has the right to
obtain securities equivalent in kind and amount to the securities sold
short (short sales "against the box"), and provided that transactions in
futures contracts and options are not deemed to constitute selling
securities short.
SCHRODER INTERNATIONAL SMALLER COMPANIES PORTFOLIO
FUNDAMENTAL RESTRICTIONS. The following investment restrictions are
fundamental policies of the Portfolio.
DIVERSIFICATION. The Portfolio may not, with respect to 75% of its assets,
purchase a security other than a U.S. Government Security or a security of
an investment company if, as a result, more than 5% of the Portfolio's
total assets would be invested in the securities of a single issuer or the
Portfolio would own more than 10% of the outstanding voting securities of
any single issuer.
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CONCENTRATION. The Portfolio may not 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 U.S. Government
Securities. An investment of more than 25% of the Portfolio's assets in the
securities of issuers located in one country does not contravene this
policy.
BORROWING. The Portfolio may not borrow money in excess of 33 1/3% 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 that may otherwise require untimely dispositions of Portfolio
securities.
REAL ESTATE. The Portfolio may not purchase or sell real estate, provided
that the Portfolio may invest in securities issued by companies which
invest in real estate or interests therein.
LENDING. The Portfolio may not make loans to other persons, provided that
for purposes of this restriction, entering into repurchase agreements or
acquiring any otherwise permissible debt securities shall not be deemed to
be the making of a loan.
COMMODITIES. The Portfolio may not invest in commodities or commodity
contracts other than foreign currency forward contracts.
UNDERWRITING. The Portfolio may not 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.
SENIOR SECURITIES. The Portfolio may not issue senior securities except to
the extent permitted by the 1940 Act.
NONFUNDAMENTAL RESTRICTIONS. The following investment restrictions are not
fundamental policies of the Portfolio.
CLOSED-END FUNDS. The Portfolio will not purchase more than 3% of the
outstanding securities of any closed-end investment company.
BORROWING. The Portfolio will not purchase securities while borrowings
exceed 5% of total assets.
LIQUIDITY. The Portfolio may not acquire a security if, as a result, more
than 15% of its net assets (taken at current value) would be invested in
illiquid securities (securities that cannot be disposed of within seven
days at their then-current value), including repurchase agreements not
entitling the holder to payment of principal within seven days or other
securities that are not readily marketable by virtue of restrictions on the
sale of such securities to the public without registration under the
Securities Act of 1933, as amended ("Restricted Securities").
17
<PAGE>
This policy does not include restricted securities that can be sold to the
public in foreign markets or that may be eligible for qualified
institutional purchasers pursuant to Rule 144A under the Securities Act of
1933 that are determined to be liquid by SCMI pursuant to guidelines
adopted by the Board.
INVESTING FOR CONTROL. The Portfolio may not 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.)
MARGIN; SHORT SALES. 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.
OIL, GAS AND MINERAL INVESTMENTS. The Portfolio may not invest in oil, gas,
or other mineral resources, lease, or arbitrage transactions.
DIVERSIFICATION. The Portfolio may not purchase a security, other than a
U.S. Government Security if, as a result, more than 5% of the Portfolio's
total assets would be invested in the securities of a single issuer or the
Portfolio would own more than 10% of the outstanding voting securities of
any single issuer.
SCHRODER U.S. SMALLER COMPANIES PORTFOLIO
FUNDAMENTAL RESTRICTIONS. The following investment restrictions are
fundamental policies of the Portfolio.
DIVERSIFICATION. The Portfolio may not, 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.
CONCENTRATION. 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.
BORROWING. 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).
SENIOR SECURITIES. The Portfolio may not issue senior securities except to
the extent permitted by the 1940 Act.
UNDERWRITING. 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.
LENDING. 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.
18
<PAGE>
REAL ESTATE. 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.
COMMODITIES. 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.
NONFUNDAMENTAL RESTRICTIONS. The following investment restrictions are not
fundamental policies of the Portfolio.
BORROWING. 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.
LIQUIDITY. 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").
OTHER FUNDS. The Portfolio may not invest in securities of another
investment company, except to the extent permitted by the 1940 Act.
MARGIN; SHORT SALES. 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.
UNSEASONED ISSUERS. 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 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.
PLEDGING. The Portfolio may not pledge, mortgage, hypothecate or encumber
any of its assets except to secure permitted borrowings.
SECURITIES HELD BY TRUSTEES AND OFFICERS. 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.
OIL, GAS AND MINERAL INVESTMENTS. The Portfolio may not invest in interest
in oil and gas or interests in other mineral exploration or development
programs.
REAL ESTATE PARTNERSHIPS. The Portfolio may not purchase real estate
limited partnership interests.
WARRANTS. 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.
19
<PAGE>
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
FUNDAMENTAL RESTRICTIONS. The following investment restrictions are
fundamental policies of the Portfolio.
UNDERWRITING. 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.
COMMODITIES. 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.
MARGIN.. 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.
OPTIONS. Purchase or write puts or calls except as permitted by any of its
other fundamental policies.
LENDING. 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").
SHORT SALES. Make short sales of securities.
OIL, GAS AND MINERAL INVESTMENTS. 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.
REAL ESTATE. Invest in real estate or in interests in real estate, but may
purchase readily marketable securities of companies holding real estate or
interests therein.
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.
MANAGEMENT OF THE TRUST
OFFICERS AND TRUSTEES
The following information relates to the principal occupations during
the past five years of each Trustee and executive officer of the Trust and shows
the nature of any affiliation with SCMI. Except as noted, each of these
individuals currently serves in the same capacity for Schroder Capital Funds
(Delaware), Schroder Capital Funds II and Schroder Series Trust, other
registered investment companies in the Schroder family of funds. If no address
is shown, the person's address is that of the Trust, Two Portland Square.
Portland, Maine 04101.
PETER E. GUERNSEY, 75 - Trustee of the Trust; Insurance Consultant since
August 1986; prior thereto Senior Vice President, Marsh & McLennan, Inc.,
insurance brokers.
JOHN I. HOWELL, 80 - Trustee of the Trust; Private Consultant since
February 1987; Honorary Director, American International Group, Inc.;
Director, American International Life Assurance Company of New York.
20
<PAGE>
CLARENCE F. MICHALIS, 75 - Trustee of the Trust; Chairman of the Board of
Directors, Josiah Macy, Jr. Foundation (charitable foundation).
HERMANN C. SCHWAB, 77 - Chairman and Trustee of the Trust; retired since
March, 1988; prior thereto, consultant to SCMI since February 1, 1984.
HON. DAVID N. DINKINS, 69 - Trustee of the Trust; Professor, Columbia
University School of International and Public Affairs; Director, American
Stock Exchange, Carver Federal Savings Bank, Transderm Laboratory
Corporation, and The Cosmetic Center, Inc.; formerly, Mayor, The City of
New York.
PETER S. KNIGHT, 46 - Trustee of the Trust; Partner, Wunder, Knight,
Levine, Thelen & Forcey; Director, Comsat Corp., Medicis Pharmaceutical
Corp., and Whitman Education Group Inc., Formerly, Campaign Manager,
Clinton/Gore `96.
SHARON L. HAUGH*, 51, 787 Seventh Avenue, New York, New York - Trustee of
the Trust; Chairman, Schroder Capital Management Inc. ("SCM"), Executive
Vice President and Director, SCMI; Chairman and Director, Schroder
Advisors.
MARK J. SMITH*, 35, 33 Gutter Lane, London, England - President and Trustee
of the Trust; Senior Vice President and Director of SCMI since April 1990;
Director and Senior Vice President, Schroder Advisors.
MARK ASTLEY, 33, 787 Seventh Avenue, New York, New York - Vice President of
the Trust; First Vice President of SCMI, prior thereto, employed by various
affiliates of SCMI in various positions in the investment research and
portfolio management areas since 1987.
ROBERT G. DAVY, 36, 787 Seventh Avenue, New York, New York - 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 SCMI in various
positions in the investment research and portfolio management areas since
1986.
MARGARET H. DOUGLAS-HAMILTON, 55, 787 Seventh Avenue, New York, New York -
Vice President of the Trust; Secretary of SCM since July 1995; Senior Vice
President (since April 1997) and General Counsel of Schroders U.S. Holdings
Inc. since May 1987; prior thereto, partner of Sullivan & Worcester, a law
firm.
RICHARD R. FOULKES, 51, 787 Seventh Avenue, New York, New York - 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.
FERGAL CASSIDY, 28, 787 Seventh Avenue, New York, New York - Treasurer of
the Trust.
JOHN Y. KEFFER, 54 - Vice President of the Trust; President of Forum
Financial Group, LLC, parent Forum Accounting Services, LLC and Forum
Administrative Services, LLC.
JANE P. LUCAS, 35, 787 Seventh Avenue, New York, New York - Vice President
of the Trust; Director and Senior Vice President SCMI; Director of SCM
since September 1995; Director of Schroder Advisors since September 1996;
Assistant Director Schroder Investment Management Ltd. since June 1991.
CATHERINE A. MAZZA, 37, 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.
MICHAEL PERELSTEIN, 41, 787 Seventh Avenue, New York, New York - Vice
President of the Trust; Director since May 1997 and Senior Vice President
of SCMI since January 1997; prior thereto, Managing Director of MacKay -
Shields Financial Corp.
21
<PAGE>
ALEXANDRA POE, 37, 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;
Secretary of Schroder Advisors; 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.
THOMAS G. SHEEHAN, 42 - Assistant Treasurer and Assistant Secretary of the
Trust; Relationship Manager and Counsel, Forum Administrative Services, LLC
since 1993; prior thereto, Special Counsel, U.S. Securities and Exchange
Commission, Division of Investment Management, Washington, D.C.
FARIBA TALEBI, 36, 787 Seventh Avenue, New York, New York - Vice President
of the Trust; Group Vice President of SCMI since April 1993, employed in
various positions in the investment research and portfolio management areas
since 1987; Director of SCM since April 1997.
JOHN A. TROIANO, 38, 787 Seventh Avenue, New York, New York - Vice
President of the Trust; Director of SCM since April 1997; Chief Executive
Officer, since July 1, 1997, of SCMI and Managing Director and Senior Vice
President of SCMI since October 1995; prior thereto, employed by various
affiliates of SCMI in various positions in the investment research and
portfolio management areas since 1981.
IRA L. UNSCHULD, 31, 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.
CATHERINE S. WOOLEDGE, 55 - Assistant Treasurer and Assistant Secretary of
the Trust; Counsel, Forum Administrative Services, LLC since November 1996.
Prior thereto, associate at Morrison & Foerster, Washington, D.C. from
October 1994 to November 1996, associate corporate counsel at Franklin
Resources, Inc. from September 1993 to September 1994, and prior thereto
associate at Drinker Biddle & Reath, Philadelphia, PA.
* Interested Trustee of the Trust within the meaning of the 1940 Act.
In addition to the Trust, the term "Fund Complex" includes three other
registered investment companies -- Schroder Capital Funds II, an open-end
management investment company; Schroder Capital Funds (Delaware), an open-end
management investment company; and Schroder Series Trust, an open-end company --
for which SCMI serves as investment adviser for each series.
Officers and Trustees who are interested persons of the Trust receive
no salary, fees or compensation from the Trust. Independent Trustees of the
Trust receive an annual retainer from the Fund Complex of $11,000 and additional
fees of $1,250 per meeting attended in person or $500 per meeting attended by
telephone. Members of an Audit Committee for one or more of the investment
companies receive an additional $1,000 per year. Payment of the annual retainer
is allocated among the various investment companies based on their relative net
assets. Payment of meeting fees is allocated only among those investment
companies to which the meeting relates. None of the registered investment
companies in the Fund Complex has any bonus, profit sharing, pension or
retirement plans.
22
<PAGE>
The following table provides the fees paid to each independent Trustee
of the Trust for the year ended December 31, 1997.
<TABLE>
Pension or Total
Retirement Compensation From
Aggregate Benefits Accrued Estimated Annual Fund Complex Paid
Compensation From As Part of Trust Benefits Upon To Trustees ($)
Name of Trustee the Trust ($) Expenses ($) Retirement ($)
- -------------------------------- -------------------- -------------------- --------------------- -------------------
<S> <C> <C> <C> <C>
Mr. Guernsey 2,586.53 0 0 3,983.42
Mr. Howell 2,586.53 0 0 14,983.42
Mr. Michalis 1,595.89 0 0 2,483.42
Mr. Schwab 4,570.23 0 0 7,983.42
Mr. Dinkins 0.00 0 0 11,000.00
Mr. Knight 602.83 0 0 11,983.42
</TABLE>
As of January 30, 1998, the officers and Trustees of the Trust owned, in
the aggregate, less than 1% of the Trust's outstanding shares.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of January 30, 1998, the following are the control persons and
principal shareholders in the Trust's Portfolios:
<TABLE>
Number of Units of %age of Portfolio
BENEFICIAL INTEREST OWNED
INTERNATIONAL EQUITY FUND
<S> <C> <C>
Schroder International ( need name) 13,876,000 88%
Sealaska Corporation --Permanent Fund 1,558,000 9.9%
EM CORE PORTFOLIO
Norwest Advantage Funds Diversified Equity Fund 702,000 25.83%
Norwest Advantage Growth Equity Fund 933,000 34.32%
Norwest Advantage Funds Growth Balanced Fund 187,000 6.88%
Norwest Advantage Funds International Fund 780,000 28.70%
INTERNATIONAL SMALLER COMPANIES PORTFOLIO
Schroder International Smaller Companies Fund 694,000 100%
U.S. SMALLER COMPANIES PORTFOLIO
Schroder U.S. Smaller Companies Fund 2,220,000 17.34%
Norwest Advantage Funds Small Cap Opportunities
Fund 10,545,000 82.38%
23
EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
Schroder Emerging Markets Fund Institutional
Portfolio 19,178,000 73.08%
California Endowment (name needed) 7,063,000 26.92%
</TABLE>
Both Schroder Capital Funds (Delaware) and Norwest Advantage Funds have
informed the Trust that whenever one of their series is requested to vote on
matters pertaining to a Portfolio, they will either: (1) solicit voting
instructions from fund shareholders with regard to the voting of all proxies
with respect to a fund's shares in a Portfolio and vote such proxies in
accordance with such instructions, or (2) vote the interests held by a fund in
the same proportion as the vote of all other holders of the Portfolio's
interests.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISORY SERVICES
SCMI, 787 Seventh Avenue, New York, New York, 10019, serves as
investment adviser to each Portfolio pursuant to an investment advisory
agreement. SCMI (as well as SCM) is a wholly owned U.S. subsidiary of Schroders
Incorporated (doing business in New York State as Schroders Holdings), 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 funds under management in excess of 175 billion as of September
30, 1997.
Under the investment advisory agreements, SCMI is responsible for
managing the investment and reinvestment of the assets included in each
Portfolio and for continuously reviewing, supervising and administering the
Portfolios' investments. In this regard, SCMI is responsible for making
decisions relating to the Portfolios' investments and placing 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 Portfolios.
Under the terms of the investment advisory agreements, SCMI is required
to manage the Portfolios' 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.
The investment advisory agreements each continue in effect provided
such continuance is approved annually: (1) by the vote of a majority of the
outstanding voting securities of the Portfolio (as defined by the 1940 Act) or
by the Board and (2) by a majority of the Trustees who are not parties to the
agreement or "interested persons" (as defined in the 1940 Act) of any party to
the agreement. The investment advisory agreement with respect to a Portfolio may
be terminated without penalty by vote of the Trustees or the interestholders of
the Portfolio, in each case on 60 days' written notice to SCMI, or by SCMI on 60
days' written notice to the Trust. The agreements terminate automatically if
assigned. Each 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 SCMI's or their duties or by reason of reckless
disregard of its or their obligations and duties under the agreement.
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<PAGE>
Table 1 in Appendix A shows the dollar amount of advisory fees payable
had certain waivers not been in place, together with the dollar amount of fees
waived and the dollar amount of net fees paid. The advisory fee rates are set
forth in Part A. This information is provided for the past three years or such
shorter terms as a Portfolio has been operational.
ADMINISTRATIVE SERVICES
On behalf of each Portfolio, the Trust has entered into an
administration agreement with Schroder Advisors, 787 Seventh Avenue, New York,
New York 10019, and a subadministration agreement Forum. Under these agreements,
Schroder Advisors and Forum provide certain management and administrative
services necessary for the Portfolios' operations, other than the investment
management and administrative services provided to the Portfolios by SCMI
pursuant SCMI's investment advisory agreements. These services include, among
other things: (1) preparation of shareholder reports and communications; (2)
regulatory compliance, such as reports to and filings with the SEC and state
securities commissions; and (3) general supervision of the operation of the
Portfolios, including coordination of the services performed by SCMI and the
interestholder recordkeeper and portfolio accountant, 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.
The administration and subadministration agreements are terminable with
respect to each Portfolio without penalty, at any time, by the Board on 60 days'
written notice to Schroder Advisors or Forum, as applicable, or by Schroder
Advisors or Forum on 60 days' written notice to the Trust.
Table 2 in Appendix A shows the dollar amount of administration and
subadministration fees payable with respect to each Portfolio had certain
waivers not been in place, together with the dollar amount of fees waived and
the dollar amount of net fees paid. The fee rates are set forth in Part A. This
information is provided for the past three years or such shorter terms as a
Portfolio has been operational.
INTERESTHOLDER RECORDKEEPING AND PORTFOLIO ACCOUNTING
FAS, an affiliate of Forum, performs interestholder recordkeeping and
portfolio accounting services for each Portfolio pursuant to an agreement with
the Trust. The agreement is terminable with respect to each Portfolio without
penalty, at any time, by the Board upon 60 days' written notice to FAS or by FAS
upon 60 days' written notice to the Trust.
Under its agreement, FAS prepares and maintains the interestholder and
accounting books and records of each Portfolio that are required to be
maintained under the 1940 Act, calculates the net asset value of each Portfolio,
calculates the distributive share of the Portfolios' income, expense, gain and
loss allocable to each interestholder and prepares periodic reports to
interestholders and the SEC. For its services to each Portfolio, FAS is entitled
to receive from the Trust a fee of $48,000 per year. FAS is entitled to an
additional $24,000 per year with respect to global and international portfolios.
In addition, FAS also is entitled to an additional $12,000 per year with respect
to tax-free money market portfolios, portfolios with more than 25% of their
total assets invested in asset-backed securities, portfolios that have more than
100 security positions, or portfolios that have a monthly portfolio turnover
rate of 10% or greater.
FAS is required to use its best judgment and efforts in rendering its
services and is not liable to the Trust for any action or inaction in the
absence of bad faith, willful misconduct or gross negligence. FAS is not
responsible or liable for any failure or delay in performance of its obligations
arising out of or caused, directly or indirectly, by circumstances beyond its
reasonable control. The Trust has agreed to indemnify and hold harmless FAS and
its employees, agents, officers and directors against and from any and all
claims, demands, actions, suits, judgments, liabilities, losses, damages, costs,
charges, counsel fees and all other expenses arising out of or in any way
related to FAS's actions taken or failures to act with respect to a Portfolio or
based, if applicable, upon information, instructions or requests with respect to
a Portfolio given or made to FAS by an officer of the Trust duly authorized.
This indemnification does not apply to FAS's actions taken or failures to act in
cases of FAS's own bad faith, willful misconduct or gross negligence.
25
<PAGE>
CUSTODIAN
The Chase Manhattan Bank, through its Global Securities Services
division located in London, England, acts as custodian of the Portfolios' assets
but plays no role in making decisions as to the purchase or sale of portfolio
securities for the Portfolios. Under rules adopted under the 1940 Act, the
Portfolios may maintain their 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 each Portfolio.
YEAR 2000 DISCLOSURE
The Portfolios receive services from SCMI, Schroder Advisors, Forum,
FAS, The Chase Manhatten Bank and others which rely on the smooth functioning of
their respective systems and the systems of others to perform those services. It
is generally recognized that certain systems in use today may not perform their
intended functions adequately after the Year 1999 because of the inability of
the software to distinguish the year 2000 from the year 1900. Schroder Advisors
is taking steps that it believes are reasonably designed to address this
potential "Year 2000" problem and to obtain satisfactory assurances that
comparable steps are being taken by each of the Portfolios other major service
providers. There can be no assurance, however, that these steps will be
sufficient to avoid any adverse impact on the Portfolios from this problem.
BROKERAGE ALLOCATION AND OTHER PRACTICES
INVESTMENT DECISIONS
Investment decisions for the Portfolios and for SCMI's other investment
advisory clients 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, and a particular security
may be 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 other 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 that, 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
Transactions on U.S. stock exchanges and other agency transactions
involve the payment of negotiated brokerage commissions. Such commissions vary
among brokers. Also, a particular broker may charge different commissions
according to the difficulty and size of the transaction; for example,
transactions in foreign securities generally involve the payment of fixed
brokerage commissions, which are generally higher than those in the U.S. Since
most brokerage transactions for a Portfolio are placed with foreign
broker-dealers, certain portfolio transaction costs for a Portfolio may be
higher than fees for similar transactions executed on U.S. securities exchanges.
However, SCMI seeks to achieve the best net results in effecting its portfolio
transactions. There is generally less governmental supervision and regulation of
foreign stock exchanges and brokers than in the U.S. There is generally no
stated commission in the case of securities traded in the over-the-counter
markets, but the price paid usually includes an undisclosed dealer commission or
mark-up. In underwritten offerings, the price paid includes a disclosed, fixed
commission or discount retained by the underwriter or dealer.
26
<PAGE>
Each Portfolio's advisory agreement authorizes and directs SCMI to
place orders for the purchase and sale of the Portfolio's investments with
brokers or dealers SCMI selects and to seek "best execution" of portfolio
transactions. SCMI places all such orders for the purchase and sale of portfolio
securities and buys and sells securities through a substantial number of brokers
and dealers. In so doing, SCMI uses its best efforts to obtain the most
favorable price and execution available. A 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 considers all factors it deems relevant, including price,
transaction size, the nature of the market for the security, the commission
amount, 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.
Historically, investment advisers, including advisers of investment
companies and other institutional investors, have received research services
from broker-dealers that execute portfolio transactions for the advisers'
clients. Consistent with this practice, SCMI may receive research services from
broker-dealers with which it places 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 other Portfolios), although not all of these services are
necessarily useful and of value in managing a Portfolio. The investment advisory
fee paid by a 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,
as amended, SCMI may cause a Portfolio to pay a broker-dealer that provides SCMI
with "brokerage and research services" (as defined in that Section) an amount of
disclosed commission for effecting a securities transaction in excess of the
commission which another broker-dealer would have charged for effecting that
transaction. In addition, although it does not do so currently SCMI may allocate
brokerage transactions to broker-dealers who have entered into arrangements
under which the broker-dealer allocates a portion of the commissions paid by a
Portfolio toward payment of Portfolio expenses, such as custodian fees.
Subject to the general policies of a Portfolio regarding allocation of
portfolio brokerage as set forth above, the Board has authorized SCMI to employ:
(1) Schroder & Co. Inc., an affiliate of SCMI, to effect securities transactions
of a Portfolio on the New York Stock Exchange only; and (2) Schroder Securities
Limited and its affiliates (collectively, "Schroder Securities"), affiliates of
SCMI, to effect securities transactions of a Portfolio on various foreign
securities exchanges on which Schroder Securities has trading privileges,
provided certain other conditions are satisfied as described below.
27
<PAGE>
Payment of brokerage commissions to Schroder & Co. Inc. or Schroder
Securities for effecting brokerage transactions is subject to Section 17(e) of
the 1940 Act, which requires, among other things, that commissions for
transactions on a securities exchange paid by a Portfolio to a broker that 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 policy of each Portfolio that commissions paid
to Schroder & Co. Inc. or Schroder Securities will, in SCMI's opinion, be: (1)
at least as favorable as commissions contemporaneously charged by Schroder & Co.
Inc. or Schroder Securities, as the case may be, on comparable transactions for
their most favored unaffiliated customers; and (2) 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
under the 1940 Act to ensure that commissions paid to Schroder & Co. Inc. or
Schroder Securities by a Portfolio satisfy these standards. Such procedures are
reviewed periodically by the Board, including a majority of the non-interested
Trustees. The Board also reviews all transactions at least quarterly for
compliance with such procedures.
It is further a policy of the Portfolios that all such transactions
effected by Schroder & Co. Inc. on the New York Stock Exchange be in accordance
with Rule 11a2-2(T) promulgated under the Securities Exchange Act of 1934, as
amended, which requires in substance that a member of such exchange not
associated with Schroder & Co. Inc. actually execute the transaction on the
exchange floor or through the exchange facilities. Thus, while Schroder & Co.
Inc. will bear responsibility for determining important elements of execution
such as timing and order size, another firm will actually execute the
transaction.
Schroder & Co. Inc. pays a portion of the brokerage commissions it receives
from a Portfolio to the brokers executing the transactions on the New York Stock
Exchange. In accordance with Rule 11a2-2(T), the Trust has entered into an
agreement with Schroder & Co. Inc. permitting it to retain a portion of the
brokerage commissions paid to it by a Portfolio. The Board, including a majority
of the non-interested Trustees, has approved this agreement.
None of the Portfolios has any understanding or arrangement to direct any
specific portion of its brokerage to Schroder & Co. Inc. or Schroder Securities,
and none will direct brokerage to Schroder & Co. Inc. or Schroder Securities in
recognition of research services.
From time to time, a Portfolio may purchase securities of a broker or
dealer through which it regularly engages in securities transactions.
Table 3 in Appendix A shows the dollar amount of brokerage commissions
paid by each Portfolio for the past three years or such shorter terms as a
Portfolio has been operational. In addition, the table also indicates the dollar
amount of brokerage commissions, percentage of brokerage commissions and
percentage of commission transactions executed through each of Schroder & Co.
Inc. and Schroder Securities.
CAPITAL STOCK AND OTHER SECURITIES
Under the Trust's Trust Instrument, the Trustees are authorized to
issue beneficial interests in one or more separate and distinct series.
Investments in the Portfolios have no preference, preemptive, conversion or
similar rights and are fully paid and nonassessable, except as set forth below.
Each investor in a Portfolio is entitled to a vote in proportion to the amount
of its investment therein. Investors in a Portfolio and other series of the
Trust will all vote together in certain circumstances (e.g., election of the
Trustees) as required by the 1940 Act. One or more portfolios of the Trust 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 a 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 a 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
Instrument without the vote of investors.
The Trust, with respect to a Portfolio, may enter into a merger or
consolidation, or sell all or substantially all of its assets, if approved by
the Board. A 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 a 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. 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 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, SCMI believes that the
risk of personal liability to a Trust interestholder is remote.
28
<PAGE>
Under federal securities law, 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, the Trustees and certain
officers are required to sign the registration statement and amendments thereto
of certain registered investment companies that invest in a Portfolio. In
addition, under federal securities law, the Trust may be liable for
misstatements or omissions of a material fact in any proxy soliciting material
of a publicly offered investment company investor in the Trust. Each such
investor in a Portfolio has agreed to indemnify the Trust, the Trustees and
officers ("Indemnitees") against certain claims.
Indemnified claims are those brought against Indemnitees based on a
misstatement or omission of a material fact in the investor's registration
statement or proxy materials. No indemnification need be made, however, if such
alleged misstatement or omission relates to information about the Trust and was
supplied to the investor by the Trust. Similarly, the Trust will indemnify each
investor in a 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 the Trust that is supplied to the investor by the
Trust. In addition, certain registered investment company investors in the
Portfolio will indemnify each Indemnitee against any claim 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.
PURCHASE, REDEMPTION AND PRICING OF SECURITIES
PRIVATE SALE OF INTERESTS
Interests in the Portfolios 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 a Portfolio are made and
withdrawn at the net asset value per Interest next determined after an order is
received by the Portfolio. Net asset value per Interest is calculated by
dividing the aggregate value of the Portfolio's assets less all liabilities by
the number of shares of the Portfolio outstanding.
Each investment in a Portfolio is in the form of a non-transferable
beneficial interest.
DETERMINATION OF NET ASSET VALUE
The Board has established the time for (see Part A) and the procedures
for the valuation of the Portfolios' securities: (1) equity securities listed or
traded on the New York or American Stock Exchange or other domestic or foreign
stock exchange are valued at their latest sale prices on such exchange that day
prior to the time when assets are valued; in the absence of sales that day, such
securities are valued at the mid-market prices (in cases where securities are
traded on more than one exchange, the securities are valued on the exchange
designated as the primary market by the Portfolio's investment adviser); (2)
unlisted equity securities for which over-the-counter market quotations are
readily available are valued at the latest available mid-market prices prior to
the time of valuation; (3) securities (including restricted securities) not
having readily-available market quotations are valued at fair value under the
Board's procedures; (4) debt securities having a maturity in excess of 60 days
are valued at the mid-market prices determined by a portfolio pricing service or
obtained from active market makers on the basis of reasonable inquiry; and (5)
short-term debt securities (having a remaining maturity of 60 days or less) are
valued at cost, adjusted for amortization of premiums and accretion of discount.
29
<PAGE>
When an option is written, an amount equal to the premium received is
recorded in the books as an asset, and an equivalent deferred credit is recorded
as a liability. The deferred credit is adjusted ("marked-to-market") to reflect
the current market value of the option. Options are valued at their mid-market
prices in the case of exchange-traded options or, in the case of options traded
in the over-the-counter market, the average of the last bid price as obtained
from two or more dealers unless there is only one dealer, in which case that
dealer's price is used. Futures contracts and related options are stated at
market value.
Open futures positions on debt securities will be valued at the most
recent settlement price, unless that price does not, in the judgment of the
Board (or SCMI under the Board's procedures), reflect the fair value of the
contract, in which case the positions will be valued under the Board's
procedures.
REDEMPTIONS IN-KIND
In the event that payment for redeemed interests is made wholly or
partly in portfolio securities, interestholders may incur brokerage costs in
converting the securities to cash. An in-kind distribution of portfolio
securities is generally less liquid than cash. The interestholder may have
difficulty finding a buyer for portfolio securities received in payment for
redeemed shares. Portfolio securities may decline in value between the time of
receipt by the interestholder and conversion to cash. A redemption in-kind of
portfolio securities could result in a less diversified portfolio of investments
for a Portfolio and could affect adversely the liquidity of its investment
portfolio.
TAX STATUS
PORTFOLIOS AS PARTNERSHIPS
Each Portfolio is classified for federal income tax purposes as a
partnership that is not a "publicly traded partnership". As a result, each
Portfolio is not subject to federal income tax; instead, each investor in a
Portfolio is 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 Portfolios' also are not subject to Delaware income or
franchise tax.
Each investor in a Portfolio is 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, each Portfolio intends to conduct its operations so that its
investors that invest substantially all of their assets in the Portfolio and
intend to qualify as RICs should be able to satisfy all those requirements.
Distributions to an investor from a 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.
30
<PAGE>
INVESTMENTS IN FOREIGN SECURITIES
Dividends and interest received by a Portfolio may be subject to
income, withholding, or other taxes imposed by foreign countries and U.S.
possessions that would reduce the return on the security respect to which the
dividend or interest is paid. 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 Portfolios 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, RICs and certain
other investors that hold stock of a PFIC (including indirect holding through an
interest in a 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 a 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 the portfolio. In
most instances it will be very difficult, if not impossible, to make this
election because of certain requirements thereof.
A Portfolio's transactions in foreign currencies, foreign
currency-denominated debt securities and certain foreign currency options,
futures contracts and forward contracts (and similar instruments) may give rise
to ordinary income or loss to the extent such income or loss results from
fluctuations in the value of the foreign currency concerned.
OTHER PORTFOLIO INVESTMENTS
If a Portfolio engages in hedging transactions, including hedging
transactions in options, futures contracts, and straddles, or other similar
transactions, it will be subject to special tax rules (including constructive
sale, mark-to-market, straddle, wash sale, and short sale rules), the effect of
which may be to accelerate income to the Portfolio, defer losses to the
Portfolio, cause adjustments in the holding periods of the Portfolio's
securities, or convert short-term capital losses into long-term capital losses.
These rules could therefore affect the amount, timing and character of
interestholder income. Each Portfolio will endeavor to make any available
elections pertaining to such transactions in a manner believed to be in the best
interests of the Portfolio.
"Constructive sale" provisions apply to activities by a Portfolio which
lock-in gain on an "appreciated financial position". Generally, a "position" is
defined to include stock, a debt instrument, or partnership interest, or an
interest in any of the foregoing, including through a short sale, a swap
contract, or a future or forward contract. The entry into a short sale, a swap
contract or a future or forward contract relating to an appreciated direct
position in any stock or debt instrument, or the acquisition of stock or debt
instrument at a time when a Portfolio occupies an offsetting (short) appreciated
position in the stock or debt instrument, is treated as a "constructive sale"
that gives rise to the immediate recognition of gain (but not loss). The
application of these provisions may cause a Portfolio to recognize taxable
income from these offsetting transactions in excess of the cash generated by
such activities.
31
<PAGE>
WITHHOLDING
Ordinary income paid to interestholders who are nonresident aliens are
subject to a 30% U.S. withholding tax under existing provisions of the Code
applicable to foreign individuals and entities unless a reduced rate of
withholding or a withholding exemption is provided under applicable treaty law.
Nonresident interestholders are urged to consult their own tax advisors
concerning the applicability of the U.S. withholding tax.
The Trust is required to report to the IRS all distributions and gross
proceeds from the redemption of Interests (except in the case of certain exempt
shareholders). All such distributions and proceeds generally will be subject to
the withholding of federal income tax at a rate of 31% ("backup withholding") in
the case of non-exempt shareholders if: (1) the shareholder fails to furnish the
Trust with and to certify the interestholder's correct taxpayer identification
number; (2) the IRS notifies the Trust that the interestholder has failed to
report properly certain interest and dividend income to the IRS and to respond
to notices to that effect; or (3) when required to do so, the interestholder
fails to certify that it is not subject to backup withholding. If the
withholding provisions are applicable, any such distributions or proceeds will
be reduced by the amount required to be withheld. Any amounts withheld may be
credited against the interestholder's federal income tax liability.
In some circumstances, new federal tax regulations (effective for
payments made on or after January 1, 1999 although transition rules will apply)
will increase the certification and filing requirements imposed on foreign
investors in order to qualify for exemption from the 31% back-up withholding tax
and for reduced withholding tax rates under income tax treaties. Foreign
investors in each Portfolio should consult their tax advisors with respect to
the potential application of these new regulations.
GENERAL
The income tax and estate tax consequences to a non-U.S. interestholder
entitled to claim the benefits of an applicable tax treaty may be different from
those described herein. Non-U.S. interestholders may be required to provide
appropriate documentation to establish their entitlement to the benefits of such
a treaty. Non-U.S. interestholders are advised to consult their own tax advisers
with respect to the particular tax consequences to them of an investment in a
Portfolio.
The foregoing discussion relates only to federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and U.S. domestic
corporations, partnerships, trusts and estates). Income from a Portfolio also
may be subject to foreign, state and local taxes, and their treatment under
foreign, state and local income tax laws may differ from the federal income tax
treatment. Interestholders should consult their tax advisors with respect to
particular questions of federal, foreign, state and local taxation.
PLACEMENT AGENT
Forum Financial Services, Inc., Two Portland Square, Portland, Maine
04101, serves as the Trust's placement agent (underwriter). The placement agent
receives no compensation for such placement agent services.
CALCULATIONS OF PERFORMANCE DATA
Each Portfolio calculates its yields and returns in accordance with SEC
prescribed formulas. The Portfolios may also calculate performance information
using other methodologies.
FINANCIAL STATEMENTS
The fiscal year end of International Equity Fund, Schroder
International Smaller Companies Portfolio, and Schroder Emerging Markets Fund
Institutional Portfolio is October 31. The fiscal year end of Schroder EM Core
Portfolio and Schroder U.S. Smaller Companies Portfolio is May 31.
32
<PAGE>
Financial statements for each Portfolio's semi-annual period and fiscal
year will be distributed to interestholders. The Board in the future may change
the fiscal year end of a Portfolio; the tax year end of a Portfolio may change
due to the year ends of the interestholders under certain circumstances.
The annual reports for International Equity Fund, Schroder
International Smaller Companies Portfolio, and Schroder Emerging Markets Fund
Institutional Portfolio for the year ended October 31, 1997, including the
independent auditors' reports thereon, and the annual report for Schroder U.S.
Smaller Companies Portfolio for the year ended is May 31, 1997, including the
independent auditors' report thereon, are included along with this Part B.
As Schroder EM Core Portfolio commenced operations in October 1997, no
audited financial statements are available as of the date hereof.
<PAGE>
APPENDIX A
MISCELLANEOUS TABLES
TABLE 1 - INVESTMENT ADVISORY FEES
<TABLE>
GROSS
ADVISORY FEE ($) FEE WAIVED ($) NET FEE PAID ($)
---------------- -------------- ----------------
INTERNATIONAL EQUITY FUND
<S> <C> <C> <C>
Year ended October 31, 1997 892,167 47,471 844,696
Year ended October 31, 1996 978,697 51,971 926,726
SCHRODER EM CORE PORTFOLIO
N/A N/A N/A
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL
PORTFOLIO
Year ended October 31, 1997 2,548,282 534,861 2,013,421
Year ended October 31, 1996 1,166,884 51,560 1,115,324
SCHRODER INTERNATIONAL SMALLER COMPANIES PORTFOLIO
Year ended October 31, 1997 60,033 60,033 0
SCHRODER U.S. SMALLER COMPANIES PORTFOLIO
Period ended May 31, 1997 211,277 35,396 175,881
Period ended October 31, 1996 26,334 20,260 6,074
TABLE 2(A) - ADMINISTRATION FEES
GROSS
ADMIN, FEE ($) FEE WAIVED ($) NET FEE PAID ($)
-------------- -------------- ----------------
INTERNATIONAL EQUITY FUND
Year ended October 31, 1997 159,378 0 159,378
Year ended October 31, 1996 326,232 0 326,232
SCHRODER EM CORE PORTFOLIO
N/A N/A N/A
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL
PORTFOLIO
Year ended October 31, 1997 139,234 0 139,234
Year ended October 31, 1996 175,032 12,742 162,290
SCHRODER INTERNATIONAL SMALLER COMPANIES PORTFOLIO
Year ended October 31, 1997 10,882 10,594 288
SCHRODER U.S. SMALLER COMPANIES PORTFOLIO
Period ended May 31, 1997 0 0 0
Period ended October 31, 1996 0 0 0
</TABLE>
A-1
<PAGE>
TABLE 2(B) - SUBADMINISTRATION FEES
<TABLE>
GROSS
SUBADMIN FEE ($) FEE WAIVED ($) NET FEE PAID ($)
---------------- -------------- ----------------
INTERNATIONAL EQUITY FUND
<S> <C> <C> <C>
Year ended October 31, 1997 138,010 0 138,010
Year ended October 31, 1996 N/A N/A N/A
SCHRODER EM CORE PORTFOLIO
N/A N/A N/A
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL
PORTFOLIO
Year ended October 31, 1997 243,007 0 243,007
Year ended October 31, 1996 N/A N/A N/A
SCHRODER INTERNATIONAL SMALLER COMPANIES PORTFOLIO
Year ended October 31, 1997 5,009 0 5,009
SCHRODER U.S. SMALLER COMPANIES PORTFOLIO
Period ended May 31, 1997 26,410 0 26,410
Period ended October 31, 1996 3,292 0 3,292
</TABLE>
<PAGE>
TABLE 3 - BROKERAGE COMMISSIONS
<TABLE>
SCHRODER & CO. INC.
------------------------------------------------------------
TOTAL BROKERAGE TOTAL BROKERAGE PERCENTAGE OF PERCENTAGE OF
COMMISSIONS ($) COMMISSIONS ($) COMMISSIONS TRANSACTIONS
INTERNATIONAL EQUITY FUND
<S> <C> <C> <C> <C>
Year ended October 31, 1997 421,189 4,716 0.99 1.11
Year ended October 31, 1996 756,181
SCHRODER EM CORE PORTFOLIO
N/A N/A N/A N/A
SCHRODER EMERGING MARKETS FUND
INSTITUTIONAL PORTFOLIO
Year ended October 31, 1997 1,413,998
Year ended October 31, 1996 101.087
SCHRODER INTERNATIONAL SMALLER
COMPANIES PORTFOLIO
Year ended October 31, 1997 37,223
SCHRODER U.S. SMALLER COMPANIES
PORTFOLIO
Period ended May 31, 1997 167,043
Period ended October 31, 1996 37,589
SCHRODER SECURITIES
------------------------------------------------------------
TOTAL BROKERAGE TOTAL BROKERAGE PERCENTAGE OF PERCENTAGE OF
COMMISSIONS ($) COMMISSIONS ($) COMMISSIONS TRANSACTIONS
INTERNATIONAL EQUITY FUND
Year ended October 31, 1997 421,189
Year ended October 31, 1996 756,181
SCHRODER EM CORE PORTFOLIO
N/A N/A N/A N/A
SCHRODER EMERGING MARKETS FUND
INSTITUTIONAL PORTFOLIO
Year ended October 31, 1997 1,413,998
Year ended October 31, 1996 101.087
SCHRODER INTERNATIONAL SMALLER
COMPANIES PORTFOLIO
Year ended October 31, 1997 37,223
SCHRODER U.S. SMALLER COMPANIES
PORTFOLIO
Period ended May 31, 1997 167,043
Period ended October 31, 1996 37,589
</TABLE>
<PAGE>
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements: None
(b) Exhibits:
NOTE: * INDICATES THAT THE EXHIBIT IS INCORPORATED HEREIN BY REFERENCE.
(1)* Trust Instrument of Registrant (filed as Exhibit (1) to Registrant's
Initial Registration Statement filed on November 1, 1995).
(2) Not applicable.
(3) Not applicable.
(4) Not applicable.
(5) (a)* Investment Advisory Agreement between Registrant and Schroder
Capital Management International Inc. ("SCMI") with respect to
Schroder International Smaller Companies Portfolio and Schroder Global
Asset Allocation Portfolio (filed as Exhibit 5(b) to Amendment No. 4
via EDGAR on March 13, 1997, accession number 0000912057-97-008728).
(b) Investment Advisory Agreement between Registrant and SCMI with
respect to International Equity Fund and Schroder Emerging
Markets Fund Institutional Portfolio (filed as Exhibit 5(b) to
Amendment No. 9 via EDGAR on February 12, 1998, accession number
0001004402-98-000117).
(c) Investment Advisory Agreement between Registrant and SCMI with
respect to Schroder U.S. Smaller Companies Portfolio and Schroder
EM Core Portfolio (filed as Exhibit 5(c) to Amendment No. 9 via
EDGAR on February 12, 1998, accession number
0001004402-98-000117).
(d) Investment Advisory Agreement between Registrant and SCMI with
respect to Schroder Global Growth Portfolio (filed as Exhibit
5(d) to Amendment No. 9 via EDGAR on February 12, 1998, accession
number 0001004402-98-000117).
(6) Not required.
(7) Not applicable.
(8) Global Custody Agreement between Registrant and The Chase Manhattan
Bank, N.A. with respect to International Equity Fund, Schroder
Emerging Markets Fund Institutional Portfolio, Schroder International
Smaller Companies Portfolio, Schroder Global Asset Allocation
Portfolio, Schroder U.S. Smaller Companies Portfolio, Schroder EM Core
Portfolio, Schroder Japan Portfolio, Schroder European Growth
Portfolio, Schroder Asian Growth Portfolio, Schroder United Kingdom
Portfolio, and Schroder Global Growth Portfolio (filed as Exhibit 8 to
Amendment No. 9 via EDGAR on February 12, 1998, accession number
0001004402-98-000117).
<PAGE>
(9) (a)* Administration Agreement between Registrant and Schroder Fund
Advisors Inc. ("Schroder Advisors") with respect to International
Equity Fund, Schroder Emerging Markets Fund Institutional Portfolio,
Schroder U.S. Smaller Companies Portfolio, Schroder International
Smaller Companies Portfolio, Schroder EM Core Portfolio and Schroder
Global Growth Portfolio (filed as Exhibit 9(a) to Amendment No. 4 via
EDGAR on March 13, 1997, accession number 0000912057-97-008728).
(b)* Subadministration Agreement between Registrant and Forum
Administrative Services, LLC 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 as Exhibit 9(b) to Amendment No. 4 via EDGAR on
March 13, 1997, accession number 0000912057-97-008728).
(c) Transfer Agency and Fund Accounting Agreement between Registrant
and Forum Financial Corp. with respect to International Equity
Fund, Schroder Emerging Markets Fund Institutional Portfolio,
Schroder International Smaller Companies Portfolio, Schroder
Global Asset Allocation Portfolio, Schroder U.S. Smaller
Companies Portfolio, Schroder EM Core Portfolio, Schroder Japan
Portfolio, Schroder European Growth Portfolio, Schroder Asian
Growth Portfolio, Schroder United Kingdom Portfolio, and Schroder
Global Growth Portfolio (filed as Exhibit 9(c) to Amendment No. 9
via EDGAR on February 12, 1998, accession number
0001004402-98-000117).
(d) Placement Agent Agreement between Registrant and Forum Financial
Services, Inc. with respect to International Equity Fund,
Schroder Emerging Markets Fund Institutional Portfolio, Schroder
International Smaller Companies Portfolio, Schroder Global Asset
Allocation Portfolio, Schroder U.S. Smaller Companies Portfolio,
Schroder EM Core Portfolio, Schroder Japan Portfolio, Schroder
European Growth Portfolio, Schroder Asian Growth Portfolio,
Schroder United Kingdom Portfolio, and Schroder Global Growth
Portfolio (filed as Exhibit 9(d) to Amendment No. 9 via EDGAR on
February 12, 1998, accession number 0001004402-98-000117).
(10) Not required.
(11) Not required.
(12) (a) For International Equity Fund:
Audited financial statements for the fiscal period ended October
31, 1997, including: Schedule of Investments as of October 31,
1997; Statement of Assets and Liabilities -- October 31, 1997;
Statement of Operations; Statement of Changes in Net Assets;
Financial Highlights; Notes to Financial Statements; and Report
of Independent Accountants dated December 19, 1997 (filed
herewith).
(b) For Schroder Emerging Markets Fund Institutional Portfolio:
Audited financial statements for the fiscal period ended October
31, 1997, including: Schedule of Investments as of October 31,
1997; Statement of Assets and Liabilities -- October 31, 1997;
Statement of Operations; Statement of Changes in Net Assets;
Financial Highlights; Notes to Financial Statements; and Report
of Independent Accountants dated December 19, 1997 (filed
herewith).
(c) * For Schroder International Smaller Companies Portfolio:
Audited financial statements for the fiscal period ended October
31, 1997, including: Schedule of Investments as of October 31,
1997; Statement of Assets and Liabilities -- October 31, 1997;
Statement of Operations; Statement of Changes in Net Assets;
Financial Highlights; Notes to Financial Statements; and Report
of Independent Accountants dated December 19, 1997 (filed as
Exhibit 24(a) to Amendment No. 9 via EDGAR on February 12, 1998,
accession number 0001004402-98-000117).
<PAGE>
(13) Not applicable.
(14) Not applicable.
(15) Not applicable.
(16) Not applicable.
(17) Financial Data Schedules for Schroder EM Core Portfolio, Schroder
Global Growth Portfolio, Schroder U.S. Smaller Companies Portfolio,
International Equity Fund and Schroder International Smaller Companies
Portfolio (filed herewith).
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES AS OF JANUARY 30, 1998.
Title of Class of Shares Number
OF BENEFICIAL INTEREST OF HOLDERS
---------------------- ----------
International Equity Fund 5
Schroder EM Core Portfolio 11
Schroder Emerging Markets Fund Institutional Portfolio 4
Schroder Global Growth Portfolio 4
Schroder International Smaller Companies Portfolio 3
Schroder U.S. Smaller Companies Portfolio 7
ITEM 27. INDEMNIFICATION.
Registrant currently holds a joint directors' and officers'/errors and
omissions insurance policy pursuant to Rule 17d-1(d)(7). Registrant is covered
under a joint 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 Registrant 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 or her 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.
Article 5 of the Registrant's Trust Instrument has been amended as of
November 30, 1995 to incorporate Section 5.6 as set forth below. This section
provides that covered trustees and officers of the Trust shall be indemnified by
purchasers of interests in series of the Trust in the circumstances and to the
extent provided for in said Section 5.6:
SECTION 5.6
"(a) Each Holder of an Interest shall indemnify and hold harmless the
Trust and each Covered Person against any losses, claims, damages or
liabilities, joint or several, to which the Trust or such Covered
Person may become subject, under the 1933 Act or otherwise,
specifically including, but not limited to losses, claims, damages or
liabilities related to negligence on the part of the Trust or any
Covered Person, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any
Misstatement in a Holder Statement; and agrees to reimburse the Trust
and each Covered Person for any legal or other expenses reasonably
incurred by it in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however that the
Holder of an Interest shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or
is based upon any Misstatement made in such Holder Statement in
reliance upon and in conformity with written information furnished to
such Holder by the Trust or such Covered Person for use in the
preparation thereof. The foregoing proviso shall not apply to exculpate
a Holder under this Section 5.6(a) with respect to any losses, claims,
damages or liabilities to which the Trust or any such Covered Person
may become subject, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon any Misstatement in any Holder Statement or portion thereof of
such Holder, if such Misstatement only relates to: (1) any investment
company or series thereof that does not and does not propose, as of the
time the Misstatement is made, to invest all or a portion of its assets
in a Series of the Trust or (2) to an offering of securities (as
defined under the 1933 Act) of such Holder or its affiliates the
proceeds from which are not and are not proposed, as of the time the
Misstatement is made, to be invested in a Series of the Trust.
<PAGE>
"The indemnity provisions of this Section 5.6(a) shall inure to the
benefit of each person, if any, who controls the Trust or any Covered
Person within the meaning of the 1933 Act.
"(b) The Trust shall indemnify and hold harmless each Holder against
any losses, claims, damages or liabilities, joint or several, to which
such Holder may become subject under the 1933 Act or otherwise,
specifically including but not limited to losses, claims, damages or
liabilities (or actions in respect thereof) which arise out of or are
based upon any Misstatement in the Holder Statement of such Holder, in
each case to the extent, but only to the extent, that such Misstatement
was made in reliance upon and in conformity with written information
furnished to such Holder by the Trust for inclusion therein, and will
reimburse such Holder for any legal or other expenses reasonably
incurred by such Holder in connection with investigating or defending
any such loss, claim, damage, liability or action.
"This indemnity provision in this Section 5.6(b) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each
officer and director of each Holder and each person, if any, who
controls such Holder within the meaning of the 1933 Act.
"(c) Promptly after receipt by an indemnified party under this Section
5.6 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the
indemnifying party under Section 5.6(a) or 5.6(b), notify the
indemnifying party in writing of the commencement thereof, but the
omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than
under Section 5.6(a) or 5.6(b). In case any such action is brought
against any indemnified party, and it notified the indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate therein, and to the extent that it may elect by written
notice delivered to the indemnified party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified
party; provided, however, if the defendants in any such action include
both the indemnified parties and the indemnifying party and the
indemnified party shall have reasonably concluded that there are legal
defenses available to it and/or other indemnified parties that are
different from or additional to those available to the indemnifying
party and that as a result thereof, the indemnified party shall
reasonably conclude that it is inadvisable for it to be represented by
counsel for the indemnifying party, the indemnified party or parties
shall have the right to select separate counsel to assume such legal
defenses and to otherwise participate in the defense of such action on
behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of the
indemnifying party's election so to assume the defense of such action
and approval by the indemnified party of counsel (or the unreasonable
withholding of such approval), the indemnifying party will not be
liable to such indemnified party under Section 5.6(a) or 5.6(b) for any
legal or other expenses subsequently incurred by such indemnified party
in connection with the defense thereof unless: (1) the indemnified
party shall have employed separate counsel in accordance with the
proviso to the immediately preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the
expenses of more than one separate counsel approved by the indemnifying
party, representing all the indemnified parties under Section 5.6(a) or
5.6(b) hereof who are parties to such action); (2) the indemnifying
party shall not have employed counsel reasonably satisfactory to the
indemnified party to represent the indemnified party within a
reasonable time after notice of commencement of the action; or (3) the
indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party. In no event
shall any indemnifying party be liable in respect of any amounts paid
in settlement of any action unless the indemnifying party shall
approved the terms of such settlement; provided, however, that such
consent shall not be unreasonably withheld or delayed.
<PAGE>
"(d) In order to provide for just and equitable contribution in any
action in which a claim for indemnification is made pursuant to Section
5.6(a) or 5.6(b) but is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case
notwithstanding the fact that Section 5.6(a) or 5.6(b) provides for
indemnification in such case, all the parties hereto shall contribute
to the aggregate losses, claims, damages or liabilities to which they
may be subject (after contribution from others) in such proportion so
that,
(i) if such losses, claims, damages or liabilities arise out of or are
based upon a Misstatement described in the final sentence of Section
5.6(a), the Holder shall contribute the entire amount of such claims,
damages or liabilities; and
(ii) in all other circumstances, (A) the Holder and (B) the Trust and
the Covered Persons shall contribute to such claims, damages and
liabilities based on their respective fault or negligence with respect
to such Misstatement, as determined by arbitration according to the
procedural and substantive rules of the American Arbitration
Association; provided, however, that no person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act)
shall be entitled to a contribution from any person who is not guilty
of such fraudulent misrepresentation.
"(e) For purposes of this Section 5.6, the following terms shall have
the following meanings:
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"Holder Statement" shall mean any registration statement or prospectus,
as such terms are defined under the 1933 Act, or any other material or
information, written or oral, distributed or communicated to
shareholders or partners, or prospective shareholders or partners, of a
Holder by or at the direction of such Holder, including, without
limitation, proxies and proxy statements, as such terms are defined
under the 1940 Act and the Exchange Act.
"Misstatement" shall mean, with respect to any Holder Statement, any
untrue statement or alleged untrue statement of any material fact, or
any omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements therein, in light
of the circumstances in which they were made, not misleading.
"1933 Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
<PAGE>
"(f) The provisions of this Section 5.6 shall apply to each Holder
effective on the date such Holder becomes a shareholder of the Trust
and shall survive after such Holder no longer holds an interest in the
Trust."
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
reference. Likewise, Schroder Fund Advisors Inc., Registrant has agreed to
indemnify: (1) Schroder Fund Advisors, Inc. and Forum Financial Services, Inc.
in the Administration and Subadministration Agreements, respectively; (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."), a United Kingdom affiliate of SCMI, provides investment management
services to international clients located principally in the United Kingdom.
David M. Salisbury. Chief Executive Officer, Director and Chairman; Joint
Chief Executive and Director of Schroder.
Richard R. Foulkes. Senior Vice President and Managing Director.
John A. Troiano. Managing Director and Senior Vice President; Director of
Schroder Ltd.
David Gibson. Senior Vice President and Director; Director of Schroder
Wertheim Investment Services Inc.
John S. Ager. Senior Vice President and Director.
Sharon L. Haugh. Senior Vice President and Director; Director and Chairman
of Schroder Advisors.
Gavin D.L. Ralston. Senior Vice President and Director.
Mark J. Smith. Senior Vice President and Director.
Robert G. Davy. Senior Vice President; 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; Director of Schroder
Advisors Inc.; Director of Schroder Wertheim Investment Services, Inc.
C. John Govett. Director; Group Managing Director of Schroder Investment
Management Ltd. And Director of Schroders plc.
Phillipa J. Gould. Senior Vice President and Director.
<PAGE>
Louise Croset. First Vice President and Director.
Abdallah Nauphal. Group Vice President and Director.
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) Forum Financial Services, Inc. is the Registrant's placement agent.
Registrant has no underwriters.
(b) Inapplicable.
(c) Inapplicable.
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, LLC and its affiliates, Two
Portland Square, Portland, Maine 04101. 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 Registrant's custodian, which is named under "Custodian" in Part B to this
Registration Statement. The records required to be maintained 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.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant has duly caused this Amendment to its 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 27th day of February, 1998.
SCHRODER CAPITAL FUNDS
By: /s/ Catherine A. Mazza
---------------------------
Catherine A. Mazza
Vice President
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
(12) (a) For International Equity Fund:
Audited financial statements for the fiscal period ended October 31,
1997, including: Schedule of Investments as of October 31, 1997;
Statement of Assets and Liabilities -- October 31, 1997; Statement of
Operations; Statement of Changes in Net Assets; Financial Highlights;
Notes to Financial Statements; and Report of Independent Accountants
dated December 19, 1997 (filed herewith).
(b) For Schroder Emerging Markets Fund Institutional Portfolio:
Audited financial statements for the fiscal period ended October 31,
1997, including: Schedule of Investments as of October 31, 1997;
Statement of Assets and Liabilities -- October 31, 1997; Statement of
Operations; Statement of Changes in Net Assets; Financial Highlights;
Notes to Financial Statements; and Report of Independent Accountants
dated December 19, 1997 (filed herewith).
(c) * For Schroder International Smaller Companies Portfolio:
Audited financial statements for the fiscal period ended October 31,
1997, including: Schedule of Investments as of October 31, 1997;
Statement of Assets and Liabilities -- October 31, 1997; Statement of
Operations; Statement of Changes in Net Assets; Financial Highlights;
Notes to Financial Statements; and Report of Independent Accountants
dated December 19, 1997 (filed as Exhibit 24(a) to Amendment No. 9 via
EDGAR on February 12, 1998, accession number 0001004402-98-000117).
(17) Financial Data Schedules for Schroder EM Core Portfolio, Schroder
Global Growth Portfolio, Schroder U.S. Smaller Companies Portfolio,
International Equity Fund and Schroder International Smaller Companies
Portfolio (filed herewith).
- - ------------------------------------------------------------------------------
International Equity Fund
- - ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1997
STOCKS AND WARRANTS - 82.6%
SHARES VALUE US$
- - ------- ------------
ARGENTINA - 0.4%
COMMON STOCK
23,400 YPF Sociedad Anonima ADR
Energy $ 748,800
------------
AUSTRALIA - 2.4%
COMMON STOCK
213,000 Australia & New Zealand Banking
Group Ltd.
Finance 1,489,363
79,000 Brambles Industries Ltd.
Materials 1,522,422
116,000 Broken Hill Proprietary Co. Ltd.
Multi-Industry 1,152,886
108,000 Woodside Petroleum Ltd.
Energy 914,274
------------
5,078,945
------------
AUSTRIA - 0.3%
PREFERRED STOCK
11,440 Bank Austria AG
Finance 538,286
------------
BELGIUM - 0.2%
COMMON STOCK
36,000 Xeikon N.V. (a)
Services 490,500
------------
CHILE - 0.8%
COMMON STOCK
61,950 Compania de Telecomunicacion de
Chile SA ADR
Services 1,719,113
------------
DENMARK - 0.6%
COMMON STOCK
40,300 International Service
System A/S (a)
Services 1,224,213
------------
FINLAND - 0.3%
COMMON STOCK
33,200 The Rauma Group
Capital Equipment 623,227
------------
FRANCE - 7.7%
COMMON STOCK
12,340 Accor SA
Services 2,302,495
8,790 Canal Plus
Services 1,533,210
14,409 Compagnie Generale des Eaux
Multi-Industry 1,684,721
28,500 Elf Aquitaine
Energy 3,535,268
9,300 Legrand SA
Capital Equipment 1,735,268
SHARES VALUE US$
- - ------- ------------
FRANCE (CONCLUDED)
39,000 METALEUROP SA (a)
Materials $ 410,598
38,727 Michelin (Cie Gle Des Etabl.)
Capital Equipment 1,990,848
12,120 Primagaz (Cie Des Gaz Petrole)
Energy 905,420
15,914 Societe Generale
Finance 2,184,166
WARRANTS
14,156 Compagnie Generale de Eaux (a)
Multi-Industry 7,501
1,256 Primagaz (Cie Des Gaz Petrole)
(a)
Energy 13,529
------------
16,303,024
------------
GERMANY - 5.3%
COMMON STOCK
13,080 Adidas AG
Consumer Non-Durables 1,896,038
53,500 Bayer AG
Materials 1,880,519
3,500 Mannesmann AG
Capital Equipment 1,480,363
49,870 Tarkett AG
Materials 1,327,007
43,235 Veba AG
Multi-Industry 2,413,946
62 Wella AG
Consumer Non-Durables 39,804
PREFERRED STOCK
7,400 SAP AG
Services 2,207,704
------------
11,245,381
------------
HONG KONG - 1.4%
COMMON STOCK
105,100 Cheung Kong Holdings Ltd.
Finance 730,852
135,000 Citic Pacific Ltd.
Multi-Industry 646,226
147,400 Hutchison Whampoa Ltd.
Finance 1,020,235
139,000 New World Development Co. Ltd.
Finance 489,139
------------
2,886,452
------------
INDONESIA - 0.3%
COMMON STOCK
197,520 PT Indofoods Sukses Makmur
Consumer Non-Durables 197,246
126,000 PT Telekomunikasi Indonesia
Services 117,087
- - ------------------------------------------------------------------------------
15
<PAGE>
- - ------------------------------------------------------------------------------
International Equity Fund
- - ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF OCTOBER 31, 1997
SHARES VALUE US$
- - ------- ------------
INDONESIA (CONCLUDED)
42,490 PT Unilever Indonesia
Services $ 330,019
------------
644,352
------------
ITALY - 2.9%
COMMON STOCK
55,410 Gucci Group
Consumer Non-Durables 2,015,539
652,585 Telecom Italia SpA
Energy 4,096,607
------------
6,112,146
------------
JAPAN - 18.6%
COMMON STOCK
106,000 Amada Metrecs Co. Ltd.
Capital Equipment 779,996
61,000 Arcland Sakamoto
Services 532,551
118,000 Bridgestone Corp.
Materials 2,550,927
68,100 Credit Saison Co., Ltd.
Finance 1,828,909
60,000 Dai-Dan Co., Ltd.
Capital Equipment 444,001
321,000 Dai-Tokyo Fire & Marine
Insurance Co.
Finance 1,377,201
85,000 Daiwa House Industry Co., Ltd.
Capital Equipment 819,822
54,000 Daiwa Securities Co., Ltd.
Finance 326,864
300 East Japan Railway Co.
Services 1,459,217
74,000 Fuji Photo Film Co.
Capital Equipment 2,682,630
29,000 Glory Ltd.
Capital Equipment 475,015
264,000 Hanshin Electric Railway
Services 893,392
243,000 Hitachi Ltd.
Capital Equipment 1,868,920
29,000 Ito-Yokado Co. Ltd.
Services 1,441,922
62,000 Japan Airport Terminal Co.
Services 608,299
907,000 Kobe Steel Ltd. (a)
Materials 1,093,498
15,000 Kyocera Corp.
Capital Equipment 859,316
25,000 Mabuchi Motor Co.
Capital Equipment 1,392,700
18,000 Meiko Shokai
Capital Equipment 553,754
130,000 Mitsubishi Corp.
Services 1,113,329
SHARES VALUE US$
- - ------- ------------
JAPAN (CONCLUDED)
391,000 Mitsubishi Electric Corp.
Capital Equipment $ 1,303,659
30,000 Murata Manufacturing Co., Ltd.
Capital Equipment 1,217,262
26,000 Nagaileben Co., Ltd.
Consumer Durables 745,820
159,000 Oji Paper Co., Ltd.
Materials 806,436
82,000 Omron Corp.
Capital Equipment 1,390,871
29,100 SMC Corp.
Capital Equipment 2,516,339
11,000 Secom
Services 711,566
82,000 Showa Shell Sekiyu
Energy 574,757
58,000 Takeda Chemical Inds.
Consumer Durables 1,581,775
10,230 Toho Co.
Services 1,343,927
81,000 Tokio Marine & Fire Insurance
Co.
Finance 808,182
94,000 Toppan Printing Co., Ltd.
Services 1,180,178
9,000 Tostem Corp.
Capital Equipment 124,969
70,000 Toyota Motor Corp.
Capital Equipment 1,949,780
------------
39,357,784
------------
KOREA, REPUBLIC OF - 0.3%
COMMON STOCK
10,500 Korea Electric Power Corp.
Energy 149,098
4,250 Pohang Iron & Steel Co., Ltd.
Materials 186,800
318 SK Telecom Co. Ltd.
Services (b) 107,307
4,066 Samsung Electronics Co.
Capital Equipment 160,123
14,957 Shinhan Bank
Finance 114,720
------------
718,048
------------
MALAYSIA - 0.4%
COMMON STOCK
33,400 RHB Sakura Merchant Bankers
Berhad (a)
Finance 20,937
203,000 Sime Darby Berhad
Multi-Industry 290,866
193,000 Tenaga Nasional Berhad
Energy 414,806
- - ------------------------------------------------------------------------------
16
<PAGE>
- - ------------------------------------------------------------------------------
International Equity Fund
- - ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF OCTOBER 31, 1997
SHARES VALUE US$
- - ------- ------------
MALAYSIA (CONCLUDED)
64,000 United Engineers (Malaysia)
Berhad
Capital Equipment $ 150,925
------------
877,534
------------
MEXICO - 0.4%
COMMON STOCK
88,000 Desc SA de CV
Multi-Industry 762,946
------------
NETHERLANDS - 9.5%
COMMON STOCK
123,000 Elsevier NV
Services 1,933,065
17,100 Heineken NV
Consumer Non-Durables 2,782,594
183,509 Internationale Nederlanden Group
NV
Finance 7,706,490
17,438 Oce-Van Der Grinten NV
Capital Equipment 1,990,270
72,190 Philips Electronics NV
Capital Equipment 5,654,084
PREFERRED STOCK
4,800 Internationale Nederlanden Group
NV
Finance 24,115
------------
20,090,618
------------
PHILIPPINES - 0.1%
COMMON STOCK
7,431 Manila Electric Co. GDR
Energy 131,906
------------
PORTUGAL - 1.5%
COMMON STOCK
49,720 Portugal Telecom
Services 2,041,253
50,770 Semapa - Sociedade de
Investimento e Gestao SGPS SA
Materials 1,172,903
------------
3,214,156
------------
SINGAPORE - 1.9%
COMMON STOCK
182,000 City Developments Ltd.
Finance 763,636
99,750 Development Bank of Singapore
Ltd.
Finance 932,184
143,000 Keppel Corp. Ltd.
Services 452,727
85,420 Singapore Press Holdings Ltd.
Services 1,178,394
129,000 United Overseas Bank Ltd.
Finance 713,478
------------
4,040,419
------------
SHARES VALUE US$
- - ------- ------------
SPAIN - 0.9%
COMMON STOCK
23,200 Banco Popular Espanol SA
Finance $ 1,370,996
35,800 Centros Comerciales Pryca SA
Services 568,918
------------
1,939,914
------------
SWEDEN - 2.3%
COMMON STOCK
96,800 Atlas Copco AB
Capital Equipment 2,877,796
46,790 Telefonaktiebolaget LM Ericsson
'B' Shares
Services 2,063,106
------------
4,940,902
------------
SWITZERLAND - 9.4%
COMMON STOCK
2,400 Asea Brown Boveri Ltd.
Capital Equipment 3,136,637
4,370 Adecco SA
Multi-Industry 1,392,617
1,690 Alusuisse-Lonza Holding AG
Materials 1,500,558
5,663 Novartis
Consumer Durables 8,893,553
290 Roche Holding AG
Consumer Non-Durables 2,555,464
5,250 The Selectra Group (a)
Consumer Non-Durables 736,895
4,080 Zurich
Versicherungs-Gesellschaft
Finance 1,688,800
------------
19,904,524
------------
THAILAND - 0.0%
COMMON STOCK
32,368 Land & House Public Co., Ltd.
Finance 27,615
------------
UNITED KINGDOM - 14.7%
COMMON STOCK
126,700 Airtours plc
Services 2,512,540
110,000 Allied Domecq plc
Consumer Non-Durables 890,072
214,000 Asda Group plc
Services 556,264
39,200 Barclays plc
Finance 981,479
95,831 Blue Circle Industries plc
Materials 563,286
79,360 British Airways plc
Services 775,233
127,800 British Land Co. plc
Finance 1,476,675
- - ------------------------------------------------------------------------------
17
<PAGE>
- - ------------------------------------------------------------------------------
International Equity Fund
- - ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONCLUDED)
AS OF OCTOBER 31, 1997
SHARES VALUE US$
- - ------- ------------
UNITED KINGDOM (CONCLUDED)
118,400 Cable & Wireless plc
Services $ 940,171
96,260 Cadbury Schweppes plc
Consumer Non-Durables 968,573
381,000 David S. Smith Holdings plc
Services 1,456,784
58,000 De La Rue plc
Services 411,437
130,000 EMI Group plc
Consumer Non-Durables 1,050,810
100,773 Enterprise Oil plc
Energy 1,125,521
53,000 Johnson Matthey plc
Capital Equipment 520,845
68,070 Kingfisher plc
Services 979,441
303,640 LASMO plc
Energy 1,400,319
143,400 Lloyds TSB Group plc
Finance 1,791,599
226,400 Lucas Varity plc
Capital Equipment 774,537
312,400 MFI Furniture plc
Services 623,438
9,490 National Westminster Bank plc
Finance 137,186
284,000 Pilkington Brothers plc
Materials 719,169
131,555 Prudential Corp. plc
Finance 1,402,033
137,000 Rank Group plc
Services 762,771
58,180 Rio Tinto plc
Materials 749,325
100,000 Rolls-Royce plc
Capital Equipment 348,520
SHARES VALUE US$
- - ------- ------------
UNITED KINGDOM (CONCLUDED)
90,000 Standard Chartered plc
Finance $ 975,765
74,175 Tesco plc
Services 593,661
91,150 Tibbett and Britten Group plc
Services 871,298
119,082 United News & Media plc
Services 1,497,761
291,390 Vodafone Group plc
Services 1,588,156
116,100 Williams Holdings plc
Multi-Industry 686,805
29,500 Zeneca Group plc
Consumer Durables 935,016
------------
31,066,490
------------
Total Stocks and Warrants (cost
$147,466,525) 174,687,295
REPURCHASE AGREEMENTS - 17.4%
Chase Securities, Inc., 5.55%,
11/3/97 to be repurchased at
$37,017,113. Collateralized by
Par $34,825,000 U.S. Treasury
Notes, 6.88%, 5/15/06. 37,000,000
------------
Total Investments - 100.0%
(cost $184,466,525) 211,687,295
Other Assets Less
Liabilities - 0.0% (3,438)
------------
Total Net Assets - 100.0% $211,683,857
------------
------------
- - ------------------
(a) Non-income producing security.
(b) Valued pursuant to methodology
approved by the Board of Trustees.
ADR - American Depositary Receipts
GDR - Global Depositary Receipts
- - ------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS
CONTRACTS TO SELL
CONTRACT DATE CURRENCY UNITS US DOLLARS UNREALIZED GAIN
- - -------------- --------- ------------ ----------- ----------------
Japanese
12/19/97 Yen 740,000,000 $6,329,249 $136,485
The accompanying notes are an integral part of the financial statements.
- - ------------------------------------------------------------------------------
18
<PAGE>
- - ------------------------------------------------------------------------------
International Equity Fund
- - ------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments (Note 2):
Investments at cost $147,466,525
Repurchase agreement at cost 37,000,000
Net unrealized appreciation (depreciation) 27,220,770
------------
Total Investments at value 211,687,295
Cash 4,091,154
Net receivable for forward foreign currency contracts 136,485
Receivable for dividends, tax reclaims and interest 398,907
Receivable for investments sold 2,777,611
Organization costs, net of amortization (Note 2) 7,420
------------
Total Assets
------------
LIABILITIES:
Payable for investments purchased 7,252,086
Payable to investment adviser (Note 3) 75,200
Payable to administrator (Note 3) 12,769
Payable to subadministrator (Note 3) 12,769
Accrued expenses and other liabilites 62,191
------------
Total Liabilities 7,415,015
------------
Net Assets $211,683,857
------------
------------
COMPONENTS OF NET ASSETS:
Investors' capital $184,278,074
Net unrealized appreciation (depreciation) on investments 27,405,783
------------
Net Assets $211,683,857
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- - ------------------------------------------------------------------------------
19
<PAGE>
- - ------------------------------------------------------------------------------
International Equity Fund
- - ------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Year
Ended
October 31, 1997
----------------
<S> <C>
INVESTMENT INCOME:
Dividend income (net of foreign withholding taxes of $421,654) $ 2,858,125
Interest income 422,524
----------------
Total Investment Income 3,280,649
----------------
EXPENSES:
Investment advisory (Note 3) 892,167
Administration (Note 3) 159,379
Subadministration (Note 3) 138,011
Transfer agency (Note 3) 12,029
Custody 139,728
Accounting (Note 3) 72,000
Legal 10,473
Audit 46,189
Pricing 24,809
Trustees 9,970
Amortization of organization costs (Note 2) 2,473
Miscellaneous 27,740
----------------
Total Expenses 1,534,968
Fees waived (Note 6) (47,471)
----------------
Net Expenses 1,487,497
----------------
NET INVESTMENT INCOME (LOSS) 1,793,152
----------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) on investments sold 15,496,728
Net realized gain (loss) on forward foreign currency contracts and foreign
currency transactions 1,772,188
----------------
Net realized gain (loss) on investments, forward
foreign currency contracts and foreign currency
transactions 17,268,916
----------------
Net change in unrealized appreciation (depreciation) on investments (3,724,486)
Net change in unrealized appreciation (depreciation) on forward foreign
currency contracts and foreign currency transactions 140,011
----------------
Net change in unrealized appreciation (depreciation) on
investments, forward foreign currency contracts and
foreign currency transactions (3,584,475)
----------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS 13,684,441
----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 15,477,593
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- - ------------------------------------------------------------------------------
20
<PAGE>
- - ------------------------------------------------------------------------------
International Equity Fund
- - ------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Year Ended October 31,
------------------------------------
1997 1996
---------------- ----------------
<S> <C>
NET ASSETS, BEGINNING OF PERIOD $ 202,743,299 -
---------------- ----------------
OPERATIONS:
Net investment income (loss) 1,793,152 2,401,723
Net realized gain (loss) on investments sold 17,268,916 29,130,258
Net change in unrealized appreciation (depreciation) on investments (3,584,475) 30,990,258
---------------- ----------------
Net increase (decrease) in net assets resulting from operations 15,477,593 62,522,457
---------------- ----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST:
Contributions 70,336,827 201,091,364
Withdrawals (76,873,862) (60,870,522)
---------------- ----------------
Net increase (decrease) in net assets from transactions in investors'
beneficial interest (6,537,035) 140,220,842
---------------- ----------------
Net increase (decrease) in net assets 8,940,558 202,743,299
---------------- ----------------
NET ASSETS, END OF PERIOD $ 211,683,857 $ 202,743,299
---------------- ----------------
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- - ------------------------------------------------------------------------------
21
<PAGE>
- - -----------------------------------------------------------------------------
International Equity Fund
- - -----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Portfolio performance for the following periods:
<TABLE>
<CAPTION>
For the Year Ended October 31,
------------------------------
1997 1996
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Ratio to Average Net Assets:
Expenses including waiver of fees 0.75% 0.75%
Expenses excluding waiver of fees 0.77% 0.77%
Net investment income including waiver of fees 0.90% 1.10%
Average Commission Rate Per Share (a) $ 0.0280 $0.0256
Portfolio Turnover Rate 36.22% 56.20%
</TABLE>
- - ------------------
(a) Amount represents the average commission per share paid to brokers on the
purchase and sale of equity securities on which commissions are charged.
The accompanying notes are an integral part of the financial statements.
- - -----------------------------------------------------------------------------
22
<PAGE>
- - -----------------------------------------------------------------------------
International Equity Fund
- - -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
Schroder Capital Funds ('Schroder Core') was organized as a Delaware
business trust on September 7, 1995. Schroder Core, which is registered as an
open-end, management investment company under the Investment Company Act of
1940, currently has six investment portfolios. Included in this report is
International Equity Fund (the 'Portfolio'), a diversified portfolio that
commenced operations on November 1, 1995. Under the Trust Instrument,
Schroder Core is authorized to issue an unlimited number of interests without
par value. Interests in the Portfolio are sold in private placement
transactions without any sales charges to qualified investors, including
open-end, management investment companies.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with generally
accepted accounting principles, which require management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increase and decrease in net assets
from operations during the fiscal period. Actual results could differ from
those estimates.
The following represent significant accounting policies of the
Portfolio:
SECURITY VALUATION
Portfolio securities listed on recognized stock exchanges are valued at
the last reported sale price 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 the last sale price on
the proceeding trading day or at closing 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. Short-term investments having a maturity of 60 days or less
are valued at amortized cost, which approximates market value. 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 Schroder Core's Board of Trustees. Fair valued securities represented
approximately 0.05% of total investments at October 31, 1997.
SECURITY TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on the trade date. Dividend
income is recorded on the ex-dividend date except that certain dividends from
foreign securities where the ex-dividend date may have passed are recorded as
soon as the Portfolio is informed of the ex-dividend date. Dividend income is
recorded net of withholding tax. Interest income, including amortization of
discount or premium, is recorded as earned. Identified cost of investments
sold is used to determine realized gain and loss for both financial statement
and federal income tax purposes. Foreign dividend and interest income amounts
and realized capital gain and loss are converted to U.S. dollar equivalents
using foreign exchange rates in effect at the date of the transactions.
Foreign currency amounts are translated into U.S. dollars at the mean
of the bid and asked prices of such currencies against U.S. dollars as
follows: (i) assets and liabilities at the rate of exchange at the end of the
respective period; and (ii) purchases and sales of securities and income and
expenses at the rate of exchange prevailing on the dates of such
transactions. The portion of the results of operations arising from changes
in the exchange rates and the portion due to fluctuations arising from
changes in the market prices of securities are not isolated. Such
fluctuations are included with the net realized and unrealized gain or loss
on investments.
The Portfolio may enter into forward contracts to purchase or sell
foreign currencies to protect against the effect on the U.S. dollar value of
the underlying portfolio of possible adverse movements in foreign exchange
rates. Risks associated with such contracts include the movement in value of
the foreign currency relative to the
- - -----------------------------------------------------------------------------
23
<PAGE>
- - -----------------------------------------------------------------------------
International Equity Fund
- - -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
U.S. dollar and the ability of the counterparty to perform. Fluctuations in
the value of such contracts are recorded daily as unrealized gain or loss;
realized gain or loss include net gain or loss on contracts that have
terminated by settlement or by the Portfolio entering into offsetting
commitments.
REPURCHASE AGREEMENTS
The Portfolio may invest in repurchase agreements. The Portfolio,
through its custodian, receives delivery of the underlying collateral, whose
market value must always equal or exceed the repurchase price. The investment
adviser is responsible for determining the value of the underlying collateral
at all times. In the event of default, the Portfolio may have difficulties
with the disposition of any securities held as collateral.
EXPENSE ALLOCATION
Schroder Core accounts separately for the assets and liabilities and
operation of each Portfolio. Expenses that are directly attributable to more
than one Portfolio are allocated among the respective Portfolios.
ORGANIZATIONAL COSTS
Costs incurred by the Portfolio in connection with this organization
and initial registration are being amortized on a straight line basis over a
five-year period.
NOTE 3. INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
Schroder Capital Management International Inc. ('SCMI') is the
investment adviser to the Portfolio. Pursuant to an Investment Advisory
Agreement, SCMI is entitled to receive an annual fee, payable monthly, of
0.45% of the average daily net assets of the Portfolio.
ADMINISTRATOR AND SUBADMINISTRATOR
Effective November 26, 1996 and February 1, 1997, Schroder Core, on
behalf of the Portfolio, entered into Administration and Subadministration
Agreements with Schroder Fund Advisors Inc. ('Schroder Advisors') and Forum
Administrative Services, LLC ('Forum'). From November 26, 1996 through
January 31, 1997, the Portfolio has a Subadministration Agreement with Forum
Financial Services, Inc.(Registered) ('FFSI') that was identical in all
material terms to the February 1, 1997 Agreement with Forum. For its
services, Schroder Advisors is entitled to receive compensation at an annual
rate, payable monthly, of 0.075% of average daily net assets of the
Portfolio. For its services, Forum is entitled to receive compensation at an
annual rate, payable monthly, of 0.075% of average daily net assets of the
Portfolio. Prior to November 26, 1996, Schroder Advisors was entitled to
compensation at an annual rate of 0.15% and was obligated to pay a fee to
FFSI.
TRANSFER AGENT
Forum Financial Corp.(Registered) ('FFC') serves as the Portfolio's
transfer agent and is entitled to compensation for those services from
Schroder Core with respect to the Portfolio in the amount of $12,000 per year
plus certain other fees and expenses.
- - -----------------------------------------------------------------------------
24
<PAGE>
- - ------------------------------------------------------------------------------
International Equity Fund
- - ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
OTHER SERVICE PROVIDERS
FFC also performs portfolio accounting for the Portfolio and is
entitled to receive compensation for those services in the amount of $60,000
per year, plus certain amounts based upon the number and types of portfolio
transactions.
NOTE 4. PURCHASES AND SALES OF SECURITIES
The cost of securities purchased and the proceeds from sales of
securities (excluding short-term securities) for the year ended October 31,
1997 aggregated $65,465,859 and $96,564,229, respectively.
For federal income tax purposes, the tax basis of investment securities
owned as of October 31, 1997 was $184,561,193 and the net unrealized
appreciation of investment securities was $27,126,302. The aggregate gross
unrealized appreciation for all securities in which there was an excess of
market value over tax cost was $43,321,244, and the aggregate gross
unrealized depreciation for all securities in which there was an excess of
tax cost over market value was $16,194,942.
NOTE 5. FEDERAL TAXES
The Portfolio is not required to pay federal income taxes on its net
investment income and net capital gain as it is treated as a partnership for
federal income tax purposes. All interest, dividends, gain and loss of the
Portfolio are deemed to have been 'passed through' to the partners in
proportion to their holdings of the Portfolio regardless of whether such
interest, dividends or gain have been distributed by the Portfolio.
NOTE 6. WAIVER OF FEES
SCMI voluntarily has waived a portion of its advisory fees so that the
Portfolio's total expenses would not exceed 0.75% of the Portfolio's average
daily net assets. Schroder Advisors, Forum and FFC may waive voluntarily all
or a portion of their fees from time to time. For the years ended October 31,
1997 and 1996, SCMI waived fees of $47,471 and $51,971, respectively.
- - ------------------------------------------------------------------------------
25
<PAGE>
- - ------------------------------------------------------------------------------
International Equity Fund
- - ------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Schroder Capital Funds and Investors of International Equity
Fund:
We have audited the accompanying statement of assets and liabilities of the
International Equity Fund (a separate portfolio of Schroder Capital Funds),
including the schedule of investments, as of October 31, 1997, and the related
statement of operations for the year then ended and the statement of changes in
net assets and the financial highlights for each of the two years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
International Equity Fund as of October 31, 1997, the results of its operations
for the year then ended and the changes in its net assets and the financial
highlights for each of the two years in the period then ended, in conformity
with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
December 19, 1997
- - ------------------------------------------------------------------------------
26
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1997
<TABLE>
<S> <S> <C> <C>
STOCKS AND WARRANTS - 91.6%
SHARES VALUE US$
------ ---------
ARGENTINA - 4.2%
COMMON STOCK
59,246 Banco de Galicia y Buenos Aires SA de CV ADR
Finance $ 1,436,139
251,520 CIADEA SA
Capital Equipment 495,791
165,114 Compania Naviera Perez Companc SA
Multi-Industry 1,030,930
252,300 IRSA Inversiones y Representaciones SA
Finance 848,237
259,200 Telecom Argentina Stet - Fran Tel SA
Telecommunications 1,322,713
489,000 Telefonica de Argentina SA
Telecommunications 1,335,771
30,300 Telefonica de Argentina SA ADR
Telecommunications 852,188
107,900 YPF Sociedad Anonima ADR
Energy 3,452,800
------------------
10,774,569
------------------
BOTSWANA - 0.5%
COMMON STOCK
195,000 Sechaba Ord
Services 1,395,616
------------------
BRAZIL - 12.5%
COMMON STOCK
1,850,000 Centrais Eletricas Brasileiras SA - Eletrobras
Energy 780,272
1,927,000 Companhia Cervejaria Brahma
Services 1,221,744
37,000,000 Companhia Energetica de Minas Gerais
Services 1,476,644
16,440,000 Companhia Paulista de Forca e Luz - CPFL
Energy 2,408,217
3,680,000 Light - Servicos de Electricidade SA
Energy 1,218,322
30,383,000 Telecomunicacoes Brasileiras SA - Telebras
Telecommunications 2,742,049
</TABLE>
16
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF OCTOBER 31, 1997
<TABLE>
<S> <C> <C> <C>
SHARES VALUE US$
------ ---------
BRAZIL (CONCLUDED)
PREFERRED STOCK
76,662,800 Banco Brasileiro de Decontos SA
Finance $ 564,298
19,000,000 Banco Nacional SA(a)(b)
Finance 0
6,551,000 Centrais Eletricas Brasileiras SA - Eletrobras
Energy 2,852,137
65,300 Companhia Vale Rio Doce
Finance 1,279,346
1,180,250 IKPC - Industrias Klabin de Papel e Celulose SA
Services 909,945
1,915,000 Itausa Investimentos Itau SA
Multi-Industry 1,302,721
1,558,055 Multibras Eletrodomesticos SA
Capital Equipment 847,921
23,190,000 Petrol Brasileiro - Petrobras
Energy 4,606,450
23,700 Telecomunicacoes Brasileiras SA Telebras ADR
Telecommunications 2,405,550
10,418,070 Telecomunicacoes de Sao Paulo SA - TELESP
Telecommunications 2,778,152
2,464,858 Telecomunicacoes do Parana SA-Telepar
Telecommunications 1,296,707
8,389,194 Telecomunicacoes do Rio de Janeiro SA-Telerj
Capital Equipment 806,581
24,900,000 Unibanco-Uniao Bco(b)
Finance 1,987,483
115,530 Usinas Siderurgicas de Minas Gerais SA
Capital Equipment 864,510
47,200 Vale Rio Doce B shares(a)(b)
Materials 0
RIGHTS
325,282 Telecomunicacoes Do Rio De Janeiro(a)
Capital Equipment 4,426
120,223 Telecomunicacoes do Parana SA-Telepar - Rights(a)
Telecommunications 0
482,097 Telesp Tel Sao(a)
Telecommunications 437
------------------
32,353,912
------------------
CHILE - 4.4%
COMMON STOCK
23,500 Administradora de Fondos de Pensiones Provida SA ADR
Materials 393,625
</TABLE>
17
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF OCTOBER 31, 1997
<TABLE>
<S> <C> <C> <C>
SHARES VALUE US$
------ ---------
CHILE (CONCLUDED)
120,000 Banco Santander Chile ADR
Finance $ 1,560,000
41,400 Chilectra SA
Energy 1,118,387
61,841 Chilgener SA
Energy 1,685,167
27,700 Compania Cervecerias Unidas SA
Services 675,188
107,925 Compania de Telecomunicacion de Chile SA ADR
Telecommunications 2,994,918
63,300 Maderas y Sinteticos Sociedad Anonima SA ADR
Multi-Industry 775,425
26,800 Quimica y Minera Chile SA ADR
Materials 1,390,253
38,900 Santa Isabel SA ADR
Services 719,650
------------------
11,312,613
------------------
CHINA, PEOPLES REPUBLIC OF - 1.8%
COMMON STOCK
3,750,000 Beijing Datang Power Gen H(a)
Energy 1,892,101
56,000 Huaneng Power International Inc. ADR(a)
Energy 1,232,000
2,434,000 Qingling Motors Co.
Services 1,590,232
------------------
4,714,333
------------------
CROATIA - 0.3%
COMMON STOCK
60,060 Pliva DD GDR
Consumer Goods 873,870
------------------
CZECH REPUBLIC - 0.8%
COMMON STOCK
13,630 SPT Telekom AS(a)
Energy 1,569,754
2,430 Tabak AS
Consumer Goods 612,601
------------------
2,182,355
------------------
</TABLE>
18
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF OCTOBER 31, 1997
<TABLE>
<S> <C> <C> <C>
SHARES VALUE US$
------ ---------
EGYPT - 1.0%
COMMON STOCK
122,000 Commercial International Bank GDR
Finance $ 2,653,500
------------------
GREECE - 1.1%
COMMON STOCK
58,930 Hellenic Bottling Co. SA
Consumer Goods 2,437,226
6,440 Titan Cement Co. SA
Materials 315,116
------------------
2,752,342
------------------
HONG KONG - 3.6%
COMMON STOCK
676,000 Anhui Expressway Co. Ltd.
Capital Equipment 118,068
518,000 Cheung Kong Infrastructure Holdings
Capital Equipment 1,340,319
1,748,000 China Resources Beijing Land
Finance 712,361
409,000 China Resources Enterprise Ltd.
Finance 1,121,780
391,000 Citic Pacific Ltd.
Multi-Industry 1,871,661
772,000 Cosco Pacific Ltd.
Services 898,894
864,000 Guangnan Holdings
Services 793,635
685,000 New World Infrastructure(a)
Finance 1,355,909
164,000 Shanghai Industrial Holdings
Multi-Industry 729,880
2,105,000 Tingyi (Cayamn Islands) Holding Co.
Consumer Goods 354,034
Warrants
121,428 Guangnan Holdings(a)
Services 18,852
------------------
9,315,393
------------------
HUNGARY - 2.3%
COMMON STOCK
10,600 OTP Bank GDR(a)
Finance 328,600
</TABLE>
19
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF OCTOBER 31, 1997
<TABLE>
<S> <C> <C> <C>
SHARES VALUE US$
------ ---------
HUNGARY (CONCLUDED)
40,460 BorsodChem RT
Materials $ 1,426,215
18,200 Gedeon Richter RT
Consumer Goods 1,692,600
53,230 MOL Magyar Olaj GDR
Energy 1,155,091
25,599 Pannonplast RT
Materials 1,408,686
------------------
6,011,192
------------------
INDIA - 9.8%
COMMON STOCK
166,000 BSES Ltd.
Energy 829,658
90,000 Bajaj Auto Ltd.
Capital Equipment 1,426,908
283,000 Bharat Heavy Electricals Ltd.
Capital Equipment 2,916,383
275,000 Bharat Petroleum
Energy 3,297,127
98,700 Hindustan Petroleum Corp. Ltd.
Energy 1,297,092
114,000 ITC Ltd.
Consumer Goods 1,763,372
68,000 Indian Hotels Co. Ltd.
Services 1,100,454
523,000 Mahanagar Telephone Nigam Ltd.
Telecommunications 3,646,546
85,000 Mahindra & Mahindra Ltd.
Capital Equipment 850,117
48,000 Ranbaxy Laboratories Ltd.
Consumer Goods 935,647
630,000 Reliance Industries Ltd.
Materials 3,140,038
322,000 State Bank of India
Finance 2,323,464
3,200 Steel Authority of India Ltd.
Materials 1,311
125,000 Tata Engineering and Locomotive Co.
Capital Equipment 1,096,177
30,300 Videsh Sanchar Nigam Ltd.
Telecommunications 708,236
------------------
25,332,530
------------------
</TABLE>
20
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF OCTOBER 31, 1997
<TABLE>
<S> <C> <C> <C>
SHARES VALUE US$
------ --------
INDONESIA - 2.8%
COMMON STOCK
276,480 Astra
Capital Equipment $ 205,155
164,500 Daya Guna Samudera
Consumer Goods 212,185
15,500 Gulf Indonesia Resources Ltd.(a)
Energy 325,500
1,110,200 London Sumatra Indonesia
Energy 1,193,349
376,000 PT Gudang Garam
Capital Equipment 1,063,854
519,200 PT Indofoods Sukses Makmur
Consumer Goods 518,479
255,500 PT Indostat ADR
Telecommunications 575,851
816,500 PT Jaya Real Property
Finance 141,557
2,923,000 PT Telekomunikasi Indonesia
Telecommunications 2,716,238
31,500 PT Unilever Indonesia
Services 244,660
WARRANTS
253,682 PT Bank International Indonesia(a)
Finance 14,355
------------------
7,211,183
------------------
ISRAEL - 2.6%
COMMON STOCK
579,900 Bank Leumi Le-Israel
Finance 888,824
88,900 Blue Square-Israel Ltd.(a)
Services 1,033,463
88,290 Osem Investment Ltd.
Consumer Goods 471,384
403,800 Supersol Ltd.
Services 1,157,891
65,000 Tadiran Telecommunications Ltd.
Telecommunications 1,470,626
36,950 Teva Pharmaceutical Industries Ltd. ADR
Consumer Goods 1,727,413
WARRANTS
107,500 Bank Leumi 3(a)
Finance 6,749
</TABLE>
21
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF OCTOBER 31, 1997
<TABLE>
<S> <C> <C> <C>
SHARES VALUE US$
------ ---------
ISRAEL (CONCLUDED)
107,500 Bank Leumi 4(a)
Finance $ 16,872
------------------
6,773,222
------------------
KOREA, REPUBLIC OF - 4.2%
COMMON STOCK
72,000 Daewoo Securities(a)
Finance 888,060
6,795 Kookmin Bank GDR
Finance 54,935
77,010 Korea Electric Power Corp.
Energy 1,093,530
168,000 L.G. Electronics
Capital Equipment 2,263,684
10,173 L.G. Information and Communication Ltd.
Capital Equipment 582,038
17,000 L.G. Semiconductor Co.(a)
Capital Equipment 280,162
28,000 Pohang Iron & Steel Co. Ltd.
Materials 1,230,683
2,239 SK Telecom Co. Ltd.(b)
Telecommunications 755,535
25,044 Samsung Electronics Co.
Capital Equipment 986,256
42,000 Shinhan Bank
Finance 322,140
57,750 Ssangyong Oil Refining Co. Ltd.
Energy 784,127
118,000 Yukong Ltd.
Energy 1,589,968
------------------
10,831,118
------------------
MAURITIUS - 0.5%
COMMON STOCK
2,250,000 State Bank of Mauritius Ltd.
Finance
------------------
MEXICO - 12.3%
COMMON STOCK
40,200 Bufete Industrial SA ADR(a)
Capital Equipment 592,950
781,720 Cemex SA de CV(a)
Materials 3,063,749
</TABLE>
22
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF OCTOBER 31, 1997
<TABLE>
<S> <C> <C> <C>
SHARES VALUE US$
------ ----------
MEXICO (CONCLUDED)
110,048 Cifra SA - Ser A
Services $ 198,660
1,963,000 Cifra SA de CV
Services 3,450,404
586,000 Consorcio ARA SA(a)
Capital Equipment 2,167,922
246,000 Desc SA de CV
Multi-Industry 2,132,779
623,000 Fomento Economico Mexicano SA de CV
Services 4,372,838
286,400 Grupo Carso SA de CV
Multi-Industry 1,819,761
2,050,000 Grupo Financiero Bancomer(a)
Services 988,480
191,800 Hylsamex SA
Capital Equipment 1,234,628
381,000 Industrias Penoles
Materials 1,502,282
332,500 Kimberly-Clark de Mexico SA de CV
Services 1,425,565
263,300 Sanluis Corporacion SA de CV
Multi-Industry 2,004,457
111,900 Telefonos de Mexico SA ADR
Telecommunications 4,839,675
102,600 Tubos de Acero de Mexico SA ADR(a)
Materials 2,071,239
------------------
31,865,389
------------------
PAKISTAN - 0.7%
COMMON STOCK
41,000 Hub Power Co. Ltd.(a)(b)
Multi-Industry 1,311,180
6,000 Pakistan Telecommunications Corp.(a)
Services 488,812
------------------
1,799,992
------------------
PERU - 0.3%
COMMON STOCK
40,500 CPT Telefonica del Peru SA ADR
Telecommunications 799,875
------------------
</TABLE>
23
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF OCTOBER 31, 1997
<TABLE>
<S> <C> <C> <C>
SHARES VALUE US$
------ ---------
PHILIPPINES - 2.9%
COMMON STOCK
3,735,843 Ayala Land Inc.
Finance $ 1,452,094
9,880,000 Belle Corp.(a)
Materials 893,739
3,727,000 Digital Telecommunications Phils., Inc.(a)
Telecommunications 181,213
443,280 Manila Electric Co. "B" Shares
Energy 1,353,335
128,540 Philippine Long Distance Telephone Co.
Telecommunications 3,179,435
1,840,000 SM Prime Holdings
Finance 322,488
18,000 Universal Robina Corp.
Consumer Goods 2,290
WARRANTS
1,529,000 Belle Corp.(a)(b)
Materials 281
------------------
7,384,875
------------------
POLAND - 2.2%
COMMON STOCK
33,080 Bank Rozwoju Eksportu SA
Finance 598,003
208,330 Bydgoska Fabryka Kabli SA(a)
Capital Equipment 1,703,705
59,410 Gorazdze
Materials 1,679,164
48,850 Krosno SA(a)
Materials 483,593
14,000 Wedel SA
Consumer Goods 674,892
34,004 Zaklandy Metali Lekkich Kety(a)
Materials 459,566
------------------
5,598,923
------------------
PORTUGAL - 3.6%
COMMON STOCK
28,750 Banco Espirito Santo e Comercial de Lisboa
Finance 834,329
38,894 Estabelecimentos Jeronimo Martins & Filho
Retail 2,545,128
32,640 Portugal Telecom
Energy 1,340,032
</TABLE>
24
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF OCTOBER 31, 1997
<TABLE>
<S> <C> <C> <C>
SHARES VALUE US$
------ ---------
PORTUGAL (CONCLUDED)
135,100 Semapa - Sociedade de Investimento e Gestao SGPS SA
Materials $ 3,121,117
17,000 Telecel-Comunicacaoes Pessoais SA(a)
Energy 1,538,066
------------------
9,378,672
------------------
RUSSIA - 0.7%
COMMON STOCK
36,000 Gazprom ADR
Energy 805,500
11,300 Lukoil Holding
Energy 987,301
------------------
1,792,801
------------------
SLOVAK REPUBLIC - 0.1%
COMMON STOCK
9,076 Nafta Gbely AS
Services 354,362
------------------
SOUTH AFRICA - 7.2%
COMMON STOCK
215,800 Amalgamated Banks of South Africa
Finance 1,277,989
57,800 Anglo American Corp. of South Africa Ltd.
Materials 2,498,161
220,854 Barlow Ltd.
Multi-Industry 2,225,750
325,000 Billiton plc(a)
Materials 952,208
219,400 Dimension Data Holdings Ltd.(a)
Capital Equipment 911,793
85,000 Dorbyl Ltd.
Capital Equipment 868,987
101,776 Ellerine Holdings Ltd.
Services 771,912
140,100 Fedsure Holdings Ltd.
Finance 1,513,808
128,649 Foodcorp Ltd.
Services 735,137
596,000 Malbak Ltd.
Multi-Industry 696,004
369,000 Nampak Ltd.
Services 1,150,130
</TABLE>
25
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF OCTOBER 31, 1997
<TABLE>
<S> <C> <C> <C>
SHARES VALUE US$
------ ---------
SOUTH AFRICA (CONCLUDED)
186 New Clicks Holdings Ltd.
Services $ 243
184,000 Sasol Ltd.
Energy 2,217,558
78,368 South African Breweries Ltd.
Services 2,077,871
105,114 South African Druggists Ltd.
Consumer Goods 658,532
------------------
18,556,083
------------------
TAIWAN - 4.1%
COMMON STOCK
100,000 Acer Inc. GDR(a)
Capital Equipment 649,000
79,559 Asia Cement Corp. GDR
Capital Equipment 873,159
43,000 Asustek Computer, Inc.(a)
Multi-Industry 497,080
138,600 China Steel Corp. GDR
Materials 2,033,955
50,397 Evergreen Marine Corp.
Capital Equipment 519,089
116,500 ROC Taiwan Fund
Finance 1,027,734
104,200 Siliconware Precision Industries Co.(a)
Capital Equipment 1,002,925
10,000 Taiwan Fund Inc.
Finance 189,743
99,000 Taiwan Semiconductor Manufacturing Co.(a)
Capital Equipment 1,961,435
139,345 Teco Electric & Mach GDR(a)
Capital Equipment 1,833,301
------------------
10,587,421
------------------
THAILAND - 0.9%
COMMON STOCK
256,000 Electricity Generating Public Co. Ltd.
Energy 418,087
173,789 Land & House Public Co. Ltd.
Finance 148,267
108,000 PTT Exploration and Production Public Co. Ltd.
Materials 1,079,345
699,000 TelecomAsia Corp. Public Co. Ltd.(a)
Telecommunications 302,430
</TABLE>
26
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONCLUDED)
AS OF OCTOBER 31, 1997
<TABLE>
<S> <C> <C> <C>
SHARES VALUE US$
------ ---------
THAILAND (CONCLUDED)
258,000 Total Access Communication Public Co. Ltd.
Telecommunications $ 492,780
------------------
2,440,909
------------------
TURKEY - 2.6%
COMMON STOCK
4,946,640 Migros Turk
Services 5,189,250
5,223,720 Netas Telekomunik(a)
Energy 1,565,690
------------------
6,754,940
------------------
VENEZUELA - 1.5%
COMMON STOCK
2,918,823 Electricidad De Caracas
Energy 3,833,162
------------------
ZIMBABWE - 0.1%
COMMON STOCK
153,000 Meikles Africa Ltd.
Materials 306,000
------------------
PAR
---
CORPORATE BONDS - 0.2%
428,000 Delta Electronic, 0.05%, 3/6/04
Capital Equipment 470,800
------------------
REPURCHASE AGREEMENTS - 4.2%
11,000,000 Chase Securities, Inc., 5.55%, 11/3/97, to be
repurchased at $11,005,087. Collateralized by
$10,355,000 U.S. Treasury Notes, 6.88%, 5/15/06. 11,000,000
------------------
Total Investments - 96.0% (cost $249,810,879) 248,721,720
Other Assets Less Liabilities - 4.0% 10,354,172
------------------
Total Net Assets - 100% $ 259,075,892
==================
</TABLE>
- - ------------------------------------
(a) Non-income producing security.
(b) Valued pursuant to methodology approved by the Board of Trustees.
ADR - American Depository Receipts
GDR - Global Depository Receipts
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments (Note 2)
Investments at cost $ 249,810,879
Net unrealized appreciation (depreciation) (1,089,159)
--------------------
Total Investments at value 248,721,720
Cash 7,802,685
Receivable for investments sold 4,428,593
Receivable for dividends, tax reclaims and interest 294,672
Organization costs, net of amortization (Note 2) 7,420
--------------------
Total Assets 261,255,090
--------------------
LIABILITIES:
Payable for investments purchased 1,551,192
Payable to investment adviser (Note 3) 147,396
Payable to administrator (Note 3) 12,476
Payable to subadministrator (Note 3) 24,951
Accrued foreign taxes payable (Note 5) 303,077
Accrued expenses and other liabilities 140,106
--------------------
Total Liabilities 2,179,198
--------------------
Net Assets $ 259,075,892
====================
COMPONENTS OF NET ASSETS:
Investors' capital $ 260,212,052
Net unrealized appreciation (depreciation) on investments (1,136,160)
--------------------
Net Assets $ 259,075,892
====================
</TABLE>
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
FOR THE
YEAR ENDED
OCTOBER 31, 1997
--------------------
INVESTMENT INCOME:
Dividend income (net of foreign withholding taxes of $301,502) $ 4,379,899
Interest income 510,880
--------------------
Total Investment Income 4,890,779
--------------------
EXPENSES:
Investment advisory ( Note 3) 2,548,282
Administration (Note 3) 139,234
Subadministration (Note 3) 243,008
Transfer agency (Note 3) 12,038
Custody 520,856
Accounting (Note 3) 73,000
Audit 47,144
Legal 12,893
Trustees 9,216
Amortization of organization costs (Note 2) 2,474
Miscellaneous 46,982
--------------------
Total Expenses 3,655,127
Fees waived (Note 6) (534,861)
--------------------
Net Expenses 3,120,266
--------------------
NET INVESTMENT INCOME (LOSS) 1,770,513
--------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized gain (loss) on investments sold (A) (9,939,119)
Net realized gain (loss) on foreign currency transactions (324,841)
--------------------
Net realized gain (loss) on investments and foreign currency
transactions (10,263,960)
--------------------
Net change in unrealized appreciation (depreciation) on investments (B) (2,807,672)
Net change in unrealized appreciation (depreciation) on foreign currency
transactions transactions (2,842)
--------------------
Net change in unrealized appreciation (depreciation) on
investments and foreign currency transactions (2,810,514)
--------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS (13,074,474)
--------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (11,303,961)
====================
- - ------------------------------
</TABLE>
(A) Net of Indian capital gain tax of $430,959. (B) Net of deferred Indian
capital gain tax of $210,969.
The accompanying notes are an integral part of the financial statements.
29
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended October 31,
--------------------------------------------
1997 1996
-------------------- --------------------
NET ASSETS, BEGINNING OF PERIOD $ 167,549,528 $ -
-------------------- --------------------
OPERATIONS:
Net investment income (loss) 1,770,513 605,321
Net realized gain (loss) on investments (10,263,960) (6,759,042)
Net change in unrealized appreciation (depreciation) on investments (2,810,514) 1,674,354
-------------------- --------------------
Net increase (decrease) in net assets resulting from operations (11,303,961) (4,479,367)
-------------------- --------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST (A):
Contributions 129,110,600 173,679,036
Withdrawals (26,280,275) (1,650,141)
-------------------- --------------------
Net increase (decrease) in net assets from
transactions from investors' beneficial interest 102,830,325 172,028,895
-------------------- --------------------
Net increase (decrease) in net assets 91,526,364 167,549,528
-------------------- --------------------
NET ASSETS, END OF PERIOD $ 259,075,892 $ 167,549,528
==================== ====================
(A) Includes purchase and redemption fees (Note 7).
</TABLE>
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Portfolio performance for the following periods:
<TABLE>
<S> <C> <C>
For the Year Ended October 31,
---------------------------------------
1997 1996
- - -------------------------------------------------------------------------------------------------------------------------
Ratio to Average Net Assets:
Expenses including reimbursement/waiver of fees 1.22% 1.45%
Expenses excluding reimbursement/waiver of fees 1.43% 1.51%
Net investment income including reimbursement/waiver of fees 0.69% 0.52%
Average Commission Rate Per Share (a) $0.0020 $0.0008
Portfolio Turnover Rate 43.13% 102.70%
</TABLE>
- - ---------------------------------------------------
(a) Amount represents the average commission per share paid by the Portfolio to
brokers on the purchase and sale of equity securities on which commissions
are charged.
The accompanying notes are an integral part of the financial statements.
31
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
Schroder Capital Funds ("Schroder Core") was organized as a Delaware business
trust by on September 7, 1995. Schroder Core, which is registered as an
open-end, management investment company under the Investment Company Act of 1940
(the "Act"), currently has six investment portfolios. Included in this report is
Schroder Emerging Markets Fund Institutional Portfolio (the "Portfolio"), a
non-diversified portfolio that commenced operations on November 1, 1995. Under
its Trust Instrument, Schroder Core is authorized to issue an unlimited number
of interests without par value. Interests in the Portfolio are sold in private
placement transactions without any sales charges to qualified investors,
including open-end, management investment companies. Purchases and redemptions
are subject to a subscription transactions charge of 0.50% payable to the
Portfolio to reimburse transaction costs incurred with respect to the
Portfolio's purchase or sale of portfolio investments.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with generally accepted
accounting principles, which require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of increase and decrease in net assets from
operations during the fiscal period. Actual results could differ from those
estimates.
The following represent significant accounting policies of the Portfolio:
SECURITY VALUATION - Portfolio securities listed on recognized stock exchanges
are valued at the last reported sale price 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 the last sale
price on the preceding trading day or at closing mid-market prices. Securities
traded in over-the-counter markets are valued at the most recent reported
mid-market price. Short-term investments having a maturity of 60 days or less
are valued at amortized cost, which approximates market value. 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 Schroder Core's
Board of Trustees. Fair valued securities represented approximately 1.63% of
total investments at October 31, 1997.
SECURITY TRANSACTIONS AND INVESTMENT INCOME - Investment transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date except that certain dividends from foreign securities where the ex-dividend
date may have passed are recorded as soon as the Portfolio is informed of the
ex-dividend date. Dividend income is recorded net of withholding tax. Interest
income, including amortization of discount or premium, is recorded as earned.
Identified cost of investments sold is used to determine realized gain and loss
for both financial statement and federal income tax purposes. Foreign dividend
and interest income amounts and realized capital gain and loss are converted to
U.S. dollar equivalents using foreign exchange rates in effect at the date of
the transactions.
Foreign currency amounts are translated into U.S. dollars at the mean of the bid
and asked prices of such currencies against U.S. dollars as follows: (i) assets
and liabilities at the rate of exchange at the end of the respective period; and
(ii) purchases and sales of securities and income and expenses at the rate of
exchange prevailing on the dates of such transactions. The portion of the
results of operations arising from changes in the exchange rates and the portion
due to fluctuations arising from changes in the market prices of securities are
not isolated. Such fluctuations are included with the net realized and
unrealized gain or loss on investments.
32
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Portfolio may enter into forward contracts to purchase or sell foreign
currencies to protect against the effect on the U.S. dollar value of the
underlying portfolio of possible adverse movements in foreign exchange rates.
Risks associated with such contracts include the movement in value of the
foreign currency relative to the U.S. dollar and the ability of the counterparty
to perform. Fluctuations in the value of such contracts are recorded daily as
unrealized gain or loss; realized gain or loss include net gain or loss on
contracts that have terminated by settlement or by the Portfolio entering into
offsetting commitments.
REPURCHASE AGREEMENTS - The Portfolio may invest in repurchase agreements. The
Portfolio, through its custodian, receives delivery of the underlying
collateral, whose market value must always equal or exceed the repurchase price.
The investment adviser is responsible for determining the value of the
underlying collateral at all times. In the event of default, the Portfolio may
have difficulties with the disposition of any securities held as collateral.
EXPENSE ALLOCATION - Schroder Core accounts separately for the assets and
liabilities and operation of each Portfolio. Expenses that are directly
attributable to more than one Portfolio are allocated among the respective
Portfolios.
ORGANIZATIONAL COSTS - Costs incurred by the Portfolio in connection with this
organization and initial registration are being amortized on a straight line
basis over a five-year period.
NOTE 3. INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER - Schroder Capital Management International Inc. ("SCMI"), is
the investment adviser. Pursuant to an Investment Advisory Agreement, SCMI is
entitled to receive an annual fee, payable monthly, of 1.00% of the average
daily net assets of the Portfolio. SCMI voluntarily has undertaken to waive a
portion of its fees in order to limit fees paid for the Portfolio's investment
advisory services to 0.85% of its average daily net assets. This fee waiver
cannot be withdrawn except by a majority vote of the Trustees of the Trust who
are not affiliated persons (as defined in the Act) of the Trust. Prior to
February 1, 1997, the total advisory fees paid by the Portfolio to SCMI
represented an annual effective rate of 1.00% of the Portfolio's average daily
net assets.
ADMINISTRATOR AND SUBADMINISTRATOR - Effective February 1, 1997, the
administrator of the Portfolio is Schroder Fund Advisors Inc. ("Schroder
Advisors"). In addition, the Portfolio has entered into a Subadministration
Agreement with Forum Administrative Services, LLC ("Forum"). For its services,
Schroder Advisors and Forum are entitled to receive compensation at annual
rates, payable monthly, of 0.05% and 0.10%, respectively of the average daily
net assets of the Portfolio. Prior to February 1, 1997, Schroder Advisors was
entitled to compensation at an annual rate of 0.15% of the average daily net
assets and obligated to make subadministration payment to Forum Financial
Services, Inc.(R) ("FFSI").
TRANSFER AGENT - Forum Financial Corp.(R) ("FFC") serves as the Portfolio's
transfer agent and is entitled to receive compensation for those services from
Schroder Core with respect to the Portfolio in the amount of $12,000 per year
plus certain other fees and expenses.
OTHER SERVICE PROVIDERS - FFC also performs portfolio accounting for the
Portfolio and is entitled to receive compensation for those services in the
amount of $60,000 per year, plus certain amounts based upon the number and types
of portfolio transactions.
NOTE 4. PURCHASES AND SALES OF SECURITIES
The cost of securities purchased and the proceeds from sales of securities
(excluding short-term investments) for the year ended October 31, 1997
aggregated $191,338,159 and $103,179,104, respectively.
33
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
For federal income tax purposes, the tax basis of investment securities owned as
of October 31, 1997 was $250,930,132 and the net unrealized depreciation of
investment securities was $2,208,412. The aggregate gross unrealized
appreciation for all securities in which there was an excess of market value
over tax cost was $37,582,316, and aggregate gross unrealized depreciation for
all securities in which there was an excess of tax cost over market value was
$39,790,728.
NOTE 5. FEDERAL TAXES
The Portfolio is not required to pay federal income taxes on its net investment
income and net capital gain as it is treated as a partnership for federal income
tax purposes. All interest, dividends, gain and loss of the Portfolio are deemed
to have been "passed through" to the partners in proportion to their holdings of
the Portfolio regardless of whether such interest, dividends or gain have been
distributed by the Portfolio.
Under the applicable foreign tax law, a withholding tax may be imposed on
interest, dividends, and capital gains at various rates. Indian tax regulations
require that taxes be paid on capital gains realized by the Portfolio. At
October 31, 1997, the Portfolio decreased net unrealized appreciation on
investments by the estimated tax liability attributable to Indian investments of
$210,969 and decreased net realized gains on investments by $430,959 for taxes
incurred on gains realized from Indian investments.
NOTE 6. WAIVER OF FEES
Effective May 5, 1997, SCMI voluntarily waived a portion of its advisory fee so
that the Portfolio's total expenses would not exceed 1.18% of the Portfolio's
average daily net assets. Prior to May 5, 1997, the expense ratio cap ranged
between 1.30% and 1.45% of total expenses of the Portfolio's average daily net
assets. Schroder Advisors, Forum and FFC may waive voluntarily all or a portion
of their fees from time to time. For the year ended October 31, 1997, SCMI
waived fees of $534,861 and for the year ended October 31, 1996, SCMI and
Schroder Advisors waived fees of $51,560 and $12,743, respectively.
NOTE 7. PURCHASE AND REDEMPTION FEE
Purchases and redemptions of interest in the Portfolio are subject to a charge
of 0.50% of the net asset value of the interests purchased or redeemed. This
charge is designed to cover the transaction costs incurred by the Portfolio
(either directly or indirectly) as a result of a purchases or redemptions of
interests in the Portfolio, including brokerage commissions in acquiring or
selling portfolio securities; currency transactions costs; interest recordkeeper
costs; and to protect the interests of other interestholders. These charges,
which are not sales charges, are paid to the Portfolio, not SCMI, Forum or any
other entity. The purchase and redemption fees for the year ended October 31,
1997 were $644,942 and $131,930, respectively. The purchase and redemption fees
are included in the Statement of Changes in Net Assets contributions and
withdrawal amounts, respectively, and are included in the Investors' Capital in
the Statement of Assets and Liabilities.
NOTE 8. CONCENTRATION OF RISK
The Portfolio's investments in countries with limited or developing capital
markets may involve greater risks than investments in more developed markets and
the prices of such investments may be volatile. The consequences of political,
social or economic events in these markets may have disruptive effects on the
market prices of the Portfolio's investments.
34
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Schroder Capital Funds and Investors of Schroder Emerging
Markets Fund Institutional Portfolio:
We have audited the accompanying statement of assets and liabilities of the
Schroder Emerging Markets Fund Institutional Portfolio (a separate portfolio of
Schroder Capital Funds), including the schedule of investments, as of October
31, 1997, and the related statement of operations for the year then ended, and
the statements of changes in net assets and the financial highlights for each of
the two years in the period then ended. These financial statements and financial
highlights are the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Schroder Emerging Markets Fund Institutional Portfolio as of October 31, 1997,
the results of its operations for the year then ended, and the changes in its
net assets and the financial highlights for each of the two years in the period
then ended, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
December 19, 1997
35
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM SCHRODER EM CORE PORTFOLIO DATED 11/30/97 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 005
<NAME> SCHRODER EM CORE PORTFOLIO
<S> <C>
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 19,724,127
<INVESTMENTS-AT-VALUE> 18,879,656
<RECEIVABLES> 31,689
<ASSETS-OTHER> 5,956,513
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 24,867,858
<PAYABLE-FOR-SECURITIES> 489,642
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 37,744
<TOTAL-LIABILITIES> 527,386
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25,184,974
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (844,502)
<NET-ASSETS> 24,340,472
<DIVIDEND-INCOME> 9,381
<INTEREST-INCOME> 78,681
<OTHER-INCOME> 0
<EXPENSES-NET> 32,236
<NET-INVESTMENT-INCOME> 55,826
<REALIZED-GAINS-CURRENT> (5,678)
<APPREC-INCREASE-CURRENT> (844,502)
<NET-CHANGE-FROM-OPS> (794,354)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 33,435,944
<NUMBER-OF-SHARES-REDEEMED> 8,301,118
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 24,340,472
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 22,219
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 46,177
<AVERAGE-NET-ASSETS> 25,343,131
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 1.45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
SCHRODER GLOBAL GROWTH PORTFOLIO DATED 11/30/97 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 006
<NAME> SCHRODER GLOBAL GROWTH PORTFOLIO
<S> <C>
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 1,602,796
<INVESTMENTS-AT-VALUE> 1,483,663
<RECEIVABLES> 16,847
<ASSETS-OTHER> 5,895
<OTHER-ITEMS-ASSETS> 715,728
<TOTAL-ASSETS> 2,222,133
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 20,654
<TOTAL-LIABILITIES> 20,654
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,320,612
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (119,133)
<NET-ASSETS> 2,201,479
<DIVIDEND-INCOME> 1,182
<INTEREST-INCOME> 2,706
<OTHER-INCOME> 0
<EXPENSES-NET> 2,362
<NET-INVESTMENT-INCOME> 1,526
<REALIZED-GAINS-CURRENT> (30,399)
<APPREC-INCREASE-CURRENT> (119,133)
<NET-CHANGE-FROM-OPS> (148,006)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,350,040
<NUMBER-OF-SHARES-REDEEMED> 555
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,201,479
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,803
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 17,497
<AVERAGE-NET-ASSETS> 2,153,921
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
U.S. SMALLER COMPANIES PORTFOLIO DATED 11/30/97 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 003
<NAME> U.S. SMALLER COS. PORT.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 170,633,649
<INVESTMENTS-AT-VALUE> 192,042,694
<RECEIVABLES> 1,905,486
<ASSETS-OTHER> 18,586
<OTHER-ITEMS-ASSETS> 29,153,751
<TOTAL-ASSETS> 223,120,517
<PAYABLE-FOR-SECURITIES> 2,209,562
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 169,372
<TOTAL-LIABILITIES> 2,378,934
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 199,332,538
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 21,409,045
<NET-ASSETS> 220,741,583
<DIVIDEND-INCOME> 449,403
<INTEREST-INCOME> 300,663
<OTHER-INCOME> 0
<EXPENSES-NET> 671,280
<NET-INVESTMENT-INCOME> 78,786
<REALIZED-GAINS-CURRENT> 6,149,644
<APPREC-INCREASE-CURRENT> 10,377,117
<NET-CHANGE-FROM-OPS> 16,605,547
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 103,197,618
<NUMBER-OF-SHARES-REDEEMED> 2,446,840
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 117,356,325
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 510,390
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 671,280
<AVERAGE-NET-ASSETS> 169,665,127
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .79
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM SCHRODER INTERNATIONAL SMALLER COMPANIES
PORTFOLIO DATED OCTOBER 31, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 004
<NAME> SCHRODER INTERNATIONAL SMALLER COMPANIES PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 7,555,878
<INVESTMENTS-AT-VALUE> 6,602,443
<RECEIVABLES> 52,512
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 207,856
<TOTAL-ASSETS> 6,862,811
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 37,260
<TOTAL-LIABILITIES> 37,260
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,778,786
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (953,235)
<NET-ASSETS> 6,825,551
<DIVIDEND-INCOME> 100,427
<INTEREST-INCOME> 20,623
<OTHER-INCOME> 0
<EXPENSES-NET> 84,784
<NET-INVESTMENT-INCOME> 36,266
<REALIZED-GAINS-CURRENT> 377,647
<APPREC-INCREASE-CURRENT> (953,235)
<NET-CHANGE-FROM-OPS> (539,322)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,554,417
<NUMBER-OF-SHARES-REDEEMED> (189,544)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 6,825,551
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 60,033
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 192,009
<AVERAGE-NET-ASSETS> 7,141,036
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 1.20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM INTERNATIONAL EQUITY FUND ANNUAL REPORT
DATED OCTOBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 001
<NAME> INTERNATIONAL EQUITY FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 184,466,525
<INVESTMENTS-AT-VALUE> 211,687,295
<RECEIVABLES> 3,313,003
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 4,098,574
<TOTAL-ASSETS> 219,098,872
<PAYABLE-FOR-SECURITIES> 7,252,086
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 162,929
<TOTAL-LIABILITIES> 7,415,015
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 184,278,074
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 27,405,783
<NET-ASSETS> 211,683,857
<DIVIDEND-INCOME> 2,858,125
<INTEREST-INCOME> 422,524
<OTHER-INCOME> 0
<EXPENSES-NET> 1,487,497
<NET-INVESTMENT-INCOME> 1,793,152
<REALIZED-GAINS-CURRENT> 17,268,916
<APPREC-INCREASE-CURRENT> (3,584,475)
<NET-CHANGE-FROM-OPS> 15,477,593
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 70,336,827
<NUMBER-OF-SHARES-REDEEMED> (76,873,862)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 8,940,558
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 892,167
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,534,968
<AVERAGE-NET-ASSETS> 198,259,366
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
