As filed with the Securities and Exchange Commission on October 22, 1998
File No. 811-9130
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 13
SCHRODER CAPITAL FUNDS
Two Portland Square
Portland, Maine 04101
207-879-1900
Cheryl O. Tumlin, Esq.
Forum Administrative Services, LLC
Two Portland Square
Portland, Maine 04101
Copies to:
Timothy W. Diggins, Esq.
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Carin Muhlbaum, Esq.
Schroder Capital Management International Inc.
787 Seventh Avenue, 34th Floor
New York, New York 10019
EXPLANATORY NOTE
This Registration Statement is being filed by Registrant pursuant to Section 8
of the Investment Company Act of 1940, as amended. Beneficial interests in the
series of Registrant are not being registered under the Securities Act of 1933,
as amended, because such interests are issued solely in private placement
transactions that do not involve any "public offering" within the meaning of
Section 4(2) of that act. Investments in a series of the Registrant may be made
only by certain institutional investors, whether organized within or outside the
United States (excluding individuals, S corporations, partnerships, and grantor
trusts beneficially owned by any individuals, S corporations or partnerships).
This Registration Statement does not constitute an offer to sell, or the
solicitation of an offer to buy, any beneficial interests in any series of
Registrant.
<PAGE>
PART A
(PRIVATE PLACEMENT MEMORANDUM)
SCHRODER CAPITAL FUNDS
--------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
OCTOBER 22, 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 eight portfolios: International Equity Fund, Schroder EM Core
Portfolio, Schroder International Smaller Companies Portfolio, Schroder U.S.
Smaller Companies Portfolio, Schroder Emerging Markets Fund Institutional
Portfolio, Schroder Global Growth Portfolio, Schroder Japan Portfolio, and
Schroder Asian Growth Fund Portfolio. Additional portfolios may be added in the
future. This Part A relates to Schroder Emerging Markets Fund Institutional
Portfolio (the "Portfolio"). Schroder Capital Management International Inc.
("SCMI") is the Portfolio's investment adviser. The Portfolio is
"non-diversified."
Interests in the Portfolio are offered exclusively to various qualified
investors (including other investment companies) on a no-load basis as described
under "General Description of Registrant." Interests in the Portfolio 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 laws 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 the
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. The
Portfolio is a non-diversified series of an open-end management investment
company.
Interests in the 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 United States. 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.
An investor may subscribe for a beneficial interest in a Portfolio by contacting
Forum Financial Services, Inc., the Trust's placement agent, at Two Portland
Square, Portland, Maine 04101, (207) 879-1900, for a complete subscription
package, including a subscription agreement. The Trust and the placement agent
reserve the right to refuse to accept any subscription for any reason. The Trust
has filed with the Securities and Exchange Commission a second half (Part B) to
this Memorandum which contains more detailed information about the Trust and the
Portfolio. Part B, which is incorporated into this Memorandum by reference, also
is available from the placement agent.
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
<PAGE>
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 Objective and Policies 2
Investment Restrictions 8
Management of the Trust 9
Capital Stock and Other Securities 10
Purchase of Securities 11
Redemption or Repurchase 12
Pending Legal Proceedings 12
Appendix A - Description of Securities Ratings A-1
INVESTMENT OBJECTIVE AND POLICIES
Schroder Emerging Markets Fund Institutional Portfolio's investment objective is
to seek long-term capital appreciation through direct or indirect investment in
equity and debt securities of issuers domiciled or doing business in emerging
market countries in regions such as Southeast Asia, Latin America, and Eastern
and Southern Europe. The Portfolio is not intended to be a complete investment
program. There can be no assurance that the Portfolio will achieve its
investment objective.
An "emerging market" country is any country not included at the time of
investment in the Morgan Stanley Capital International World Index (the "Index")
of major world economies. Major world 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 securities of
issuers determined by SCMI to be 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 in equity or debt securities of any kind.
Equity securities include common stocks, preferred stocks, securities
convertible into common or preferred stocks, and rights and warrants, and
non-convertible debt securities. 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
Portfolio is a non-diversified mutual fund. See "Other Investment Practices and
Risk Considerations" and "Non-Diversification and Geographic Concentration."
Debt securities in which the Portfolio may invest include 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.
2
<PAGE>
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
invests a substantial portion of its assets in the securities of issuers
domiciled in a single country, it will be more susceptible to the risks of
investing in that country than would a portfolio with geographically more
diverse investments.
The Portfolio's investment objective may not be changed without interestholder
approval. The investment policies of the 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 the Portfolio's
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.
OTHER INVESTMENT PRACTICES AND RISK CONSIDERATIONS
The Portfolio may also engage in the following investment practices, each of
which involves certain special risks. Part B contains more detailed information
about these practices (some of which may be considered "derivative"
investments), including investment 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 the 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 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, the Portfolio may have limited
recourse available to it in the event of default. The laws of some foreign
countries may limit the 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 Private Placement
Memorandum, there is no limit on the amount of the Portfolio's assets that may
be invested in foreign securities.
If the 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 the
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. The Portfolio may buy or sell foreign currencies and options and
futures contracts on foreign currencies for hedging purposes in connection with
its foreign investments.
3
<PAGE>
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 interestholders. Income received by the 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 the Portfolio
will reduce its net income available for distribution to interestholders. In
certain circumstances, the Portfolio may be able to pass through to
interestholders credits for foreign taxes paid. See "Capital Stock and Other
Securities."
The Portfolio may invest in securities of issuers in emerging market countries
with respect to some or all of its assets. The securities' prices and relative
currency values of emerging market investments are subject to greater volatility
than those of issuers in 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 Portfolio
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 Portfolio may
also invest a substantial portion of its 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 Portfolio to the credit
risk of its counterparties in trading those investments. Emerging market
countries may experience extremely high rates of inflation, which may adversely
affect their economies and securities markets.
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. The
Portfolio may engage in foreign currency exchange 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, the 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"). 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, the Portfolio usually effects currency exchange
transactions on a spot (I.E., cash) basis at the spot rate prevailing in the
foreign exchange market. The Portfolio incurs foreign exchange expenses in
converting assets from one currency to another.
The Portfolio may 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 prices of underlying securities
and expose the Portfolio to the risk that the counterparty is unable to perform.
4
<PAGE>
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 the Portfolio's ability to hedge its investments in
those markets. Such 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, or other economic factors.
From time to time, the 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, the 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.
DEBT SECURITIES. The Portfolio may invest in debt securities either to earn
investment income or to benefit from changes in the market values of such
securities. Debt securities are subject to market risk (the fluctuation of
market value in response to changes in interest rates) and to credit risk (the
risk that the issuer may become unable or unwilling to make timely payments of
principal and interest).
The Portfolio also may invest in lower-quality, high-yielding debt securities
rated below investment grade and in unrated debt securities determined by SCMI
to be of comparable quality. Lower-rated debt securities (commonly called "junk
bonds") are considered to be of poor standing and are 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
the 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. The inability of (or
perceived inability) of issuers to make timely payments of interest and
principal would likely make the values of securities held by the Portfolio more
volatile and could limit the Portfolio's ability to sell its securities at
prices approximating the values the Portfolio had placed on such securities. In
the absence of a liquid trading market for securities held by it, the Portfolio
may be unable at times to establish the fair value of such securities. The
rating assigned to a security by a rating agency does not reflect an assessment
of the volatility of the security's market value or of the liquidity of an
investment in the security.
The 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, the Portfolio may invest a portion of its
assets in Brady Bonds, which are securities created through the exchange of
existing commercial bank loans to sovereign entities for new obligations in
connection with debt restructuring. Brady Bonds have been issued only recently
and, therefore, do not have a long payment history.
The 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 continued investment in the security will assist
in meeting the Portfolio's investment objective.
5
<PAGE>
OPTIONS AND FUTURES TRANSACTIONS. The Portfolio may engage in a variety of
transactions involving the use of options and futures contracts. The Portfolio
may engage in such transactions for hedging purposes or, to the extent permitted
by applicable law, to increase investment return.
The 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. The 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. The Portfolio may also buy and
sell put and call options on such securities for hedging purposes. When the
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, the 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. The 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. The 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.
The 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 the Portfolio enters into and terminates an index future transaction,
the Portfolio may realize a gain or loss. The 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.
The 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
buy 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.
The 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.
The Portfolio may purchase and sell futures contracts, options on futures
contracts, and options on securities indices for hedging purposes or, to the
extent permitted by applicable law, to increase its current return.
The 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).
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 special risks, including the risks that the 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, the Portfolio's ability to terminate options and futures positions at
times when SCMI deems it desirable to do so. Although the 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 the Portfolio will be able to effect closing transactions at any
particular time or at an acceptable price.
The Portfolio generally expects that its options and futures contract
transactions will be conducted on recognized exchanges. In certain instances,
however, the Portfolio may purchase and sell options in the over-the-counter
markets. The Portfolio's ability to terminate options in the over-the-counter
markets may be more limited than for
6
<PAGE>
exchange-traded options and may also involve the risk that securities dealers
participating in such transactions would be unable to meet their obligations to
the Portfolio. The 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. The 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 depends on the ability of SCMI to forecast
market movements correctly.
Because the markets for certain options and futures contracts in which the
Portfolio will invest (including markets located in foreign countries) are
relatively new and still developing and may be subject to regulatory restraints,
the Portfolio's ability to engage in transactions using such investments may be
limited. The Portfolio's ability to engage in hedging transactions, including
short sales "against-the-box," may be limited by certain regulatory and tax
considerations. The Portfolio's hedging transactions may adversely affect the
character or amount of its distributions.
For more information about any of the options or futures portfolio transactions
described above, see Part B.
SHORT SALES AGAINST-THE-BOX. The 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 limitations
on short sales is contained in Part B.
NON-DIVERSIFICATION AND GEOGRAPHIC CONCENTRATION. The Portfolio is a
"non-diversified" series of an investment company, and may invest its assets in
a more limited number of issuers than may other investment companies. Under the
Internal Revenue Code of 1986, as amended, however, an investment company,
including a non-diversified investment company, generally may not (i) invest
more than 25% of its total assets in obligations of any one issuer (except U.S.
Government obligations), (ii) with respect to 50% of its total assets, the
Portfolio may not invest more than 5% of its total assets in the securities of
any one issuer (except U.S. Government obligations), and (iii) with respect to
50% of its assets, the Portfolio may not purchase securities if the Portfolio
would own more than 10% of the outstanding securities of any single issuer.
Thus, the 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
the Portfolio if the market value of a security should decline or its issuer is
otherwise not to meet its obligations.
The Portfolio may invest more than 25% of its total assets in issuers located in
any one country. To the extent that it does so, the 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 the
Portfolio's assets may fluctuate more widely than the value of shares of a
comparable portfolio with a lesser degree of geographic concentration.
SECURITIES LOANS, REPURCHASE AGREEMENTS, AND FORWARD COMMITMENTS. The Portfolio
may lend portfolio securities to brokers, dealers and financial institutions
meeting specified credit conditions and may enter into repurchase agreements
without limit. Such activities may create taxable income in excess of the cash
they generate. The percentage limitation on the amount of the Portfolio's total
assets that may be loaned in accordance with the approved procedures is 25%.
Although these transactions must be fully collateralized at all times, such
transactions involve some risk to the 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. The Portfolio may also
purchase
7
<PAGE>
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. The 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. The
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, the Portfolio may pay a
premium above such investment companies' net asset value per share. As a
shareholder in an investment company, the Portfolio would bear its ratable share
of the investment company's expenses, including advisory and administrative
fees. At the same time, the Portfolio would continue to pay its own fees and
expenses.
LIQUIDITY. The Portfolio will not invest more than 15% 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 the Portfolio in accordance
with Rule 144A under the Securities Act of 1933, as amended. Such securities may
be determined by SCMI to be liquid, pursuant to guidelines adopted by the Board,
for purposes of compliance with the limitation on the Portfolio's investment in
illiquid securities. There can, however, be no assurance that the 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 the Portfolio's basic investment strategy inconsistent with the best
interests of its interestholders. 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, the
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 the Portfolio has held a particular
security is not generally a consideration in investment decisions. The
investment policies of the 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 the Portfolio is known as "portfolio turnover."
Portfolio turnover generally involves some expense to the Portfolio, including
brokerage commissions or dealer mark-ups and other transaction costs on the
sales of securities and reinvestment in other securities. Such securities sales
may result in realization of taxable capital gains.
INVESTMENT RESTRICTIONS
The following fundamental investment restrictions are designed to reduce the
Portfolio's exposure to risk in specific situations. The 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
8
<PAGE>
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 the 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.
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 the 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. SCMI, the investment adviser to the 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., served as investment manager
for over $27 billion as of June 30, 1998. 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 June 30, 1998, had under management assets of
approximately $175 billion. Schroder Fund Advisors Inc. ("Schroder Advisors") is
a wholly owned subsidiary of SCMI.
As investment adviser to the Portfolio, SCMI is entitled to monthly advisory
fees at the annual rate of 1.00% of the Portfolio's daily net assets.
PORTFOLIO MANAGERS. SCMI's investment decisions for the Portfolio are made by an
investment manager or an investment team, with the assistance of an investment
committee at SCMI. 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 the Portfolio.
PORTFOLIO TRANSACTIONS. SCMI places all orders for purchases and sales of the
Portfolio's securities. In selecting broker-dealers, SCMI may consider research
and brokerage services furnished to it and its affiliates. Schroder & Co. and
Schroder Securities Limited, affiliates of SCMI, may receive brokerage
commissions from the Portfolio in accordance with procedures adopted by the
Trustees under the 1940 Act that require periodic review of these transactions.
ADMINISTRATIVE SERVICES. The Trust, on behalf of the Portfolio, entered into an
administration agreement with Schroder Advisors, pursuant to which Schroder
Advisors is required to provide certain management and administrative services
to the Portfolio. The Trust also entered into a subadministration agreement with
Forum Administrative Services, LLC ("FAdS"), Two Portland Square, Portland,
Maine 04101, pursuant to which FAdS provides certain management and
administrative services necessary for the Portfolio's operations. Schroder
Advisors and FAdS are entitled to monthly fees at the annual rates of 0.05% and
0.10% (subject to a $25,000 minimum fee), respectively, of the Portfolio's
average daily net assets.
PORTFOLIO ACCOUNTANT AND INTERESTHOLDER RECORDKEEPER. Forum Accounting Services,
LLC ("FAcS"), Two Portland Square, Portland, Maine 04101, is the Portfolio's
interestholder recordkeeper (transfer agent) and fund accountant. FAcS is an
affiliate of FAdS. From time to time, FAcS voluntarily may agree to waive all or
a portion of its fees.
9
<PAGE>
EXPENSES. The 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 and fees and expenses of
independent auditors and legal counsel to the Trust. The Portfolio's expenses
comprise Trust expenses attributable to the Portfolio, which are allocated to
the Portfolio, and expenses not attributable to a specific portfolio 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 Portfolio's 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 Portfolio's foreign assets outside the United States.
YEAR 2000
The Portfolio receives services from its investment adviser, administrators,
distributor, transfer agent and custodian, all of 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 form the year 1900.
SCMI 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 the Portfolio's other major service
providers. There can be no assurance, however, that these steps will be
sufficient to avoid any adverse impact on the Portfolio from this potential
problem.
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 eight
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.
10
<PAGE>
As of September 30, 1998, each of the following held in excess of 25% of the
Portfolio's Interests and may therefore be considered a "control person" of the
Portfolio: Schroder Emerging Markets Fund Institutional Portfolio, a series of
Schroder Capital Funds (Delaware) and The California Endowment.
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
(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 of Trustees.
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 not subject to a 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 SCMI, the Portfolio's investment adviser.
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 Shareholder Services, LLC
Account No.: 910-2-783645
Ref.: Schroder Emerging Markets Fund Institutional Portfolio
Account of: [interestholder name]
Account Number: [interestholder account number]
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
11
<PAGE>
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
received by the Transfer Agent before any account becomes active. Wire orders
received prior to the close of the New York Stock 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 New York
Stock 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 calendar days. Investments in the
Portfolio may not be transferred. The right of redemption may not be suspended
nor the payment dates postponed for more than seven days except when the New
York Stock Exchange is closed (or when trading on the New York Stock 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.
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 New York Stock 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:
Schroder Emerging Markets Fund Institutional 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 the 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.
PENDING LEGAL PROCEEDINGS
None.
12
<PAGE>
APPENDIX A
DESCRIPTION OF SECURITIES RATINGS
MOODY'S INVESTORS SERVICE INC. ("MOODY'S")
Fixed-Income Security Ratings
"Aaa" Fixed-income securities which are rated "Aaa" are judged to be
of the best quality. They carry the smallest degree of
investment risk and are generally referred to as "gilt edge".
Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
"Aa" Fixed-income securities which are rated "Aa" are judged to be
of high quality by all standards. Together with the "Aaa" group
they comprise what are generally known as high grade
fixed-income securities. They are rated lower than the best
fixed-income securities because margins of protection may not
be as large as in "Aaa" securities or fluctuation of protective
elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat
larger than in "Aaa" securities.
"A" Fixed-income securities which are rated "A" possess many
favorable investment attributes and are to be considered as
upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment
sometime in the future.
"Baa" Fixed-income securities which are rated "Baa" are considered as
medium grade obligations; i.e., they are neither highly
protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable
over any great length of time. Such fixed-income securities
lack outstanding investment characteristics and in fact have
speculative characteristics as well. Fixed-income securities
rated "Aaa", "Aa", "A" and "Baa" are considered investment
grade.
"Ba" Fixed-income securities which are rated "Ba" are judged to have
speculative elements; their future cannot be considered as well
assured. Often the protection of interest and principal
payments may be very moderate, and therefore not well
safeguarded during both good and bad times in the future.
Uncertainty of position characterizes bonds in this class.
"B" Fixed-income securities which are rated "B" generally lack
characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other
terms of the contract over any long period of time may be
small.
"Caa" Fixed-income securities which are rated "Caa" are of poor
standing. Such issues may be in default or there may be present
elements of danger with respect to principal or interest.
"Ca" Fixed-income securities which are rated "Ca" present
obligations which are speculative in a high degree. Such issues
are often in default or have other marked shortcomings.
"C" Fixed-income securities which are rated "C" are the lowest
rated class of fixed-income securities, and issues so rated can
be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Rating Refinements: Moody's may apply numerical modifiers, "1", "2", and "3" in
each generic rating classification from "Aa" through "B" in its municipal
fixed-income security rating system. The modifier "1" indicates that the
security ranks in the higher end of its generic rating category; the modifier
"2" indicates a mid-range ranking; and a modifier "3" indicates that the issue
ranks in the lower end of its generic rating category.
COMMERCIAL PAPER RATINGS
Moody's Commercial Paper ratings are opinions of the ability to repay punctually
promissory obligations not having an original maturity in excess of nine months.
The ratings apply to Municipal Commercial Paper as well as taxable Commercial
Paper. Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment capacity of rated issuers:
"Prime-1", "Prime-2", "Prime-3".
A-1
<PAGE>
Issuers rated "Prime-1" have a superior capacity for repayment of short-term
promissory obligations. Issuers rated "Prime-2" have a strong capacity for
repayment of short-term promissory obligations; and Issuers rated "Prime-3" have
an acceptable capacity for repayment of short-term promissory obligations.
Issuers rated "Not Prime" do not fall within any of the Prime rating categories.
STANDARD & POOR'S RATING GROUP ("STANDARD & POOR'S")
Fixed-Income Security Ratings
A Standard & Poor's fixed-income security rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers, or
lessees.
The ratings are based on current information furnished by the issuer or obtained
by Standard & Poor's from other sources it considers reliable. The ratings are
based, in varying degrees, on the following considerations: (1) likelihood of
default-capacity and willingness of the obligor as to the timely payment of
interest and repayment of principal in accordance with the terms of the
obligation; (2) nature of and provisions of the obligation; and (3) protection
afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.
Standard & Poor's does not perform an audit in connection with any rating and
may, on occasion, rely on unaudited financial information. The ratings may be
changed, suspended or withdrawn as a result of changes in, or unavailability of,
such information, or for other reasons.
"AAA" Fixed-income securities rated "AAA" have the highest rating
assigned by Standard & Poor's. Capacity to pay interest and
repay principal is extremely strong.
"AA" Fixed-income securities rated "AA" have a very strong capacity
to pay interest and repay principal and differs from the
highest-rated issues only in small degree.
"A" Fixed-income securities rated "A" have a strong capacity to pay
interest and repay principal although they are somewhat more
susceptible to the adverse effects of changes in circumstances
and economic conditions than fixed-income securities in
higher-rated categories.
"BBB" Fixed-income securities rated "BBB" are regarded as having an
adequate capacity to pay interest and repay principal. Whereas
it normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely
to lead to a weakened capacity to pay interest and repay
principal for fixed-income securities in this category than for
fixed-income securities in higher-rated categories.
Fixed-income securities rated "AAA", "AA", "A" and "BBB" are
considered investment grade.
"BB" Fixed-income securities rated "BB" have less near-term
vulnerability to default than other speculative grade
fixed-income securities. However, it faces major ongoing
uncertainties or exposure to adverse business, financial or
economic conditions which could lead to inadequate capacity or
willingness to pay interest and repay principal.
"B" Fixed-income securities rated "B" have a greater vulnerability
to default but presently have the capacity to meet interest
payments and principal repayments. Adverse business, financial
or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
"CCC" Fixed-income securities rated "CCC" have a current identifiable
vulnerability to default, and the obligor is dependent upon
favorable business, financial and economic conditions to meet
timely payments of interest and repayments of principal. In the
event of adverse business, financial or economic conditions, it
is not likely to have the capacity to pay interest and repay
principal.
"CC" The rating "CC" is typically applied to fixed-income securities
subordinated to senior debt which is assigned an actual or
implied "CCC" rating.
"C" The rating "C" is typically applied to fixed-income securities
subordinated to senior debt which is assigned an actual or
implied "CCC-" rating.
"CI" The rating "CI" is reserved for fixed-income securities on
which no interest is being paid.
A-2
<PAGE>
"D" The rating "D" is reserved for fixed-income securities when the
issue is in payment default, or the obligor has filed for
bankruptcy. The D rating category is used when interest
payments or principal payments are not made on the date due,
even if the applicable grace period has not expired, unless
S&P believes that such payments will made during such grace
period.
"NR" Indicates that no rating has been requested, that there is
insufficient information on which to base a rating or that
Standard & Poor's does not rate a particular type of obligation
as a matter of policy.
Fixed-income securities rated "BB", "B", "CCC", "CC" and "C" are regarded as
having predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. "BB" indicates the least degree of speculation and
"C" the highest degree of speculation. While such fixed-income securities will
likely have some quality and protective characteristics, these are out-weighed
by large uncertainties or major risk exposures to adverse conditions.
Plus (+) or minus (-): The rating from "AA" TO "CCC" may be modified by the
addition of a plus or minus sign to show relative standing with the major
ratings categories.
COMMERCIAL PAPER RATINGS
Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. The commercial paper rating is not a recommendation to purchase or
sell a security. The ratings are based upon current information furnished by the
issuer or obtained by Standard & Poor's from other sources it considers
reliable. The ratings may be changed, suspended, or withdrawn as a result of
changes in or unavailability of such information. Ratings are graded into group
categories, ranging from "A" for the highest quality obligations to "D" for the
lowest. Ratings are applicable to both taxable and tax-exempt commercial paper.
Issues assigned "A" ratings are regarded as having the greatest capacity for
timely payment. Issues in this category are further refined with the designation
"1", "2", and "3" to indicate the relative degree of safety.
"A-1" Indicates that the degree of safety regarding timely payment is
very strong.
"A-2" Indicates capacity for timely payment on issues with this
designation is strong. However, the relative degree of safety
is not as overwhelming as for issues designated "A-1".
"A-3" Indicates a satisfactory capacity for timely payment.
Obligations carrying this designation are, however, somewhat
more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher
designations.
A-3
<PAGE>
PART B
(PRIVATE PLACEMENT MEMORANDUM)
SCHRODER CAPITAL FUNDS
--------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
OCTOBER 22, 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................................................. 16
Control Persons and Principal Holders of Securities..................... 18
Investment Advisory and Other Services.................................. 19
Brokerage Allocation and Other Practices................................ 21
Capital Stock and Other Securities...................................... 23
Purchase, Redemption and Pricing of Securities.......................... 24
Tax Status.............................................................. 24
Placement Agent......................................................... 27
Calculations of Performance Data........................................ 28
Financial Statements.................................................... 28
Appendix A - Miscellaneous Tables....................................... A-1
Interests in the 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.
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.
FAcS The term "FAcS" means Forum Accounting Services, LLC,
the Portfolio's portfolio accountant and
interestholder recordkeeper.
FAdS The term "FAdS" means Forum Administrative Services,
LLC, the Portfolio's subadministrator.
Portfolio The term "Portfolio" means Schroder Emerging Markets
Fund Institutional Portfolio.
Schroder Advisors The term "Schroder Advisors" means Schroder
Fund Advisors Inc., the Portfolio's administrator.
SCMI The term "SCMI" means Schroder Capital Management
International Inc., the Portfolio's 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 The term "U.S. Government Securities" means
Securities securities issued or guaranteed by the United States
Government or by its agencies or instrumentalities.
1940 Act The term "1940 Act" means the Investment Company Act
of 1940, as amended.
2
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
Part A contains information about the investment objective, policies and
restrictions of the Portfolio. The Portfolio is a series of the Trust. The
following discussion supplements the disclosure in Part A concerning the
Portfolio's 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 the Portfolio cannot be changed
without the vote of a "majority" of the Portfolio's outstanding beneficial
interests ("Interests"). Under the 1940 Act, a "majority" vote requires a vote
of the holders of the lesser of: (1) 67% of more of the Interests present or
represented by proxy at a meeting of interestholders, if the holders of more
than 50% of the outstanding Interests are present; or (2) more than 50% of the
outstanding interests. The Board may change any policy of the Portfolio that is
not fundamental without a vote of the interestholders of the Portfolio.
OPTIONS
The 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. The 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, securities 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, the
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 securities. If the option is exercised, the Portfolio realizes a gain
or loss equal to the difference between the Portfolio's cost for the underlying
securities and the proceeds of sale (exercise price minus commissions) plus the
amount of the premium.
The Portfolio may terminate a call option that it has written before it expires
by entering into a closing purchase transaction. The Portfolio may enter into
closing purchase transactions in order to free itself to sell the underlying
securities or to write another call on the securities, 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 securities. Conversely,
because increases in the market price of a call option will generally reflect
increases in the market price of the underlying securities, any loss resulting
from a closing purchase transaction is likely to be offset in whole or in part
by unrealized appreciation of the underlying securities owned by the Portfolio.
COVERED PUT OPTIONS. The 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, securities at the exercise price at any time
before the expiration date. A put option is "covered" if the writer segregates
cash or other liquid securities 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, the Portfolio also receives
interest on the cash and debt securities maintained to cover the exercise
3
<PAGE>
price of the option. By writing a put option, the Portfolio assumes the risk
that it may be required to purchase the underlying securities for an exercise
price higher than its then current market value, resulting in a potential
capital loss unless the securities later appreciates in value.
The 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. The 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 the holder of the
option, may sell the underlying securities 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 securities 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 securities instead of buying the put option.
The 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 the holder of the call option, is able to buy the underlying securities at
the exercise price regardless of any increase in the underlying securities'
market price. In order for a call option to be profitable, the market price of
the underlying securities 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 securities at the
time it purchased the call option.
The Portfolio may also purchase put and call options to enhance its current
return.
OPTIONS ON FOREIGN SECURITIES. The 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 objective. 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 United States. In addition, options markets in some
countries, many of which are relatively new, may be less liquid than comparable
markets in the United States.
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 the 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.
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, the Portfolio may be forced to continue to hold, or to purchase at
a fixed price, securities 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 the 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 Portfolio and
other clients of SCMI may be considered such a group. These position limits may
restrict the Portfolio's 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.
4
<PAGE>
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, the Portfolio
may buy and sell futures contracts on debt securities of the type in which the
Portfolio may invest and on indices of debt securities. In addition, the
Portfolio may purchase and sell stock index futures to hedge against changes in
stock market prices. The 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 debt
securities 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 -- the Portfolio will
legally obligate itself to accept the future delivery of the underlying
securities 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 securities 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 the Portfolio will usually be
liquidated in this manner, the 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 the Portfolio's sale and purchase obligations under closed-out
positions will be performed upon 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. The 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, the 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.
Successful use by the 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 the 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.
The 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 debt 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
5
<PAGE>
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 options. 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. The 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 the 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 the Portfolio when the purchase or sale of the futures contracts would not
result in a loss, 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. The Portfolio 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 Portfolio is 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 ("S & P 100 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 the 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).
The Portfolio may purchase or sell futures contracts with respect to any
securities indices. 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 the Portfolio's investments successfully using futures
contracts and related options, the Portfolio must invest in futures contracts
with respect to indices or sub-indices the movements of which will, in SCMI's
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, the Portfolio may purchase and sell call and put options on
the underlying indices themselves to the extent that such options are traded
6
<PAGE>
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."
The 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. The 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 the 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 the 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 securities 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 the Portfolio upon termination of the contract, assuming the
Portfolio satisfies its contractual obligations.
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 the Portfolio sells a futures contract and the price of the
underlying debt securities 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 securities 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 the Portfolio terminates a position in a futures contract, a final
determination of variation margin is made, additional cash is then 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 the 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, the 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 the Portfolio generally will purchase only
those options for which there appears to be an active secondary market, there
7
<PAGE>
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 the 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 the
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 the 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 indices the movements of which will, in its judgment,
correlate closely with movements in the prices of the underlying securities or
index and the Portfolio's portfolio securities sought to be hedged.
Successful use of futures contracts and options by the Portfolio for hedging
purposes is also subject to SCMI's ability to predict correctly market
movements. It is possible that, when the 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 occurs, the Portfolio
loses money on the puts and also experiences a decline in value of 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. For example, 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 securities or index and
the futures markets. Also, 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 do the
securities markets. Increased participation by speculators in the futures
markets may cause temporary price distortions as well. Due to the possibility of
price distortion, even a correct forecast of general market trends by SCMI may
not result in a successful hedging transaction over a very short time period.
See also "Tax Status -- Other Portfolio Investments."
OTHER RISKS. The Portfolio will incur brokerage fees in connection with its
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 the 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.
REPURCHASE AGREEMENTS
The Portfolio may enter into repurchase agreements. A repurchase agreement is a
contract under which the Portfolio acquires securities 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 securities 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 the Portfolio which
are collateralized by the securities subject to repurchase. SCMI will monitor
such transactions to ensure that at all times the value of the underlying
securities will be at least equal to the total amount of the repurchase
obligation, including the interest factor. If the seller defaults, the Portfolio
could realize a loss on the sale of the underlying securities to the extent that
the proceeds of sale, including accrued interest, are less than the resale
price, including interest, provided in the agreement. In addition, if the seller
should be involved in bankruptcy or insolvency proceedings, the Portfolio may
incur delay and costs in selling the underlying securities or it may suffer a
loss of principal and interest if the Portfolio is treated as an unsecured
creditor which is required to return the underlying collateral to the seller's
estate.
8
<PAGE>
FORWARD COMMITMENTS
The 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 such transactions involve a risk of loss if the
value of the securities to be purchased declines prior to the settlement date;
this risk is in addition to the risk of decline in the value of the Portfolio's
other assets. When such purchases are made through dealers, the 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 the 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, the Portfolio may dispose of a commitment
prior to settlement if SCMI deems it appropriate to do so. The Portfolio may
realize short-term profits or losses upon the sale of forward commitments.
WHEN-ISSUED SECURITIES
The 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 the Portfolio and no interest accrues to the
Portfolio. To the extent that assets of the Portfolio are held in cash pending
the settlement of a purchase of securities, that Portfolio would earn no income.
While the Portfolio may sell its right to acquire when-issued securities prior
to the settlement date, the Portfolio intends actually to acquire such
securities unless a sale prior to settlement appears desirable for investment
reasons. At the time the Portfolio makes the commitment to purchase securities
on a when-issued basis, it will record the transaction and reflect the amount
due and the value of the securities 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. The 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.
LOANS OF PORTFOLIO SECURITIES
The Portfolio may lend its portfolio securities, provided that: (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) the Portfolio will
receive any interest or dividends paid on the loaned securities; and (4) the
aggregate market value of securities of the 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 the 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, the 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 the Portfolio if the holders of such securities are asked to vote upon or
consent to matters materially affecting the investment. The Portfolio will not
lend portfolio securities to borrowers affiliated with the Portfolio.
The Portfolio may not lend securities if, as a result, the amount of loaned
securities would exceed an amount equal to 25% of the Portfolio's total assets.
9
<PAGE>
FOREIGN SECURITIES
The 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 factors such as 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 United States companies. Foreign brokerage commissions and other fees are
generally higher than in the United States. It may also be more difficult to
obtain and enforce a judgment against a foreign issuer.
In addition, to the extent that the Portfolio's foreign investments are not U.S.
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 when seeking
current income, the investment adviser of the Portfolio will consider the likely
impact of foreign taxes on the net yield available to the Portfolio and its
interestholders. Income received by the 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 the 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 the Portfolio will reduce its net income.
FOREIGN CURRENCY TRANSACTIONS
The 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. The Portfolio may engage in both "transaction hedging"
and "position hedging."
When it engages in transaction hedging, the Portfolio enters into foreign
currency transactions with respect to specific receivables or payables generally
arising in connection with the purchase or sale of its portfolio securities. The
Portfolio will engage in transaction hedging when it desires to "lock in" the
U.S. dollar price of securities 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 the 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 securities 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.
The Portfolio may purchase or sell a foreign currency on a spot (or cash) basis
at the prevailing spot rate in connection with transaction hedging. The
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 the 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 the
Portfolio the right to assume a short position in the futures contract until
expiration of the option. A put option on currency gives the 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 the Portfolio the right to assume a long
position in the futures contract until the expiration of the option. A call
option on currency gives the Portfolio the right to purchase a currency at the
exercise price until the expiration of the option. The Portfolio will engage in
over-the-counter transactions only when appropriate exchange-traded transactions
are unavailable and when, in SCMI's opinion, the pricing
10
<PAGE>
mechanism and liquidity are satisfactory and the participants are responsible
parties likely to meet their contractual obligations.
When it engages in position hedging, the Portfolio enters into foreign currency
exchange transactions to protect against a decline in the values of the foreign
currencies in which securities held by the Portfolio are denominated or are
quoted in their principal trading markets or an increase in the value of
currency for securities which the Portfolio expects to purchase. In connection
with position hedging, the 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. The 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 the Portfolio's
portfolio securities at the expiration or maturity of a forward or futures
contract. Accordingly, it may be necessary for the 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 the 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 the Portfolio if the market value of such security or securities
exceeds the amount of foreign currency the Portfolio is obligated to deliver.
To offset some of the costs to the Portfolio of hedging against fluctuations in
currency exchange rates, the 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 the Portfolio owns or intends to purchase or
sell. These techniques simply establish a rate of exchange which the Portfolio
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.
The 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.
11
<PAGE>
At the maturity of a forward or futures contract, the 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 the 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, the 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 markets,
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 the
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.
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 the Portfolio at one
rate, while offering a lesser rate of exchange should the Portfolio desire to
resell that currency to the dealer.
WARRANTS AND STOCK RIGHTS
The Portfolio may invest in warrants, which are options to purchase an equity
security at a specified price (usually representing a premium over the
applicable market value of the underlying equity security at the time of the
warrant's issuance). The Portfolio may not invest more than 5% of its net assets
(at the time of investment) in warrants (other than those that have been
acquired in units or attached to other securities). No more than 2% of the
Portfolio's net assets (at the time of investment) may be invested in warrants
that are not listed on the New York or American Stock Exchanges. Investments in
warrants involve certain risks, including the possible lack of a liquid market
for the resale of the warrants, potential price fluctuations as a result of
speculation or other factors and failure of the price of the underlying security
to reach a level at which the warrant can be prudently exercised (in which case
the warrant may expire without being exercised, resulting in the loss of the
Portfolio's entire
12
<PAGE>
investment therein). The prices of warrants do not necessarily move parallel to
the prices of the underlying securities. Warrants have no voting rights, receive
no dividends and have no rights with respect to the assets of the issuer.
In addition, the Portfolio may invest up to 5% of its assets (at the time of
investment) in stock rights. A stock right is an option given to a
interestholder to buy additional shares at a predetermined price during a
specified time period.
ZERO-COUPON SECURITIES
Zero-coupon securities in which the Portfolio may invest are debt obligations
which are generally issued at a discount, are payable in full at maturity, and
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 due to changing interest rates than
debt obligations of comparable maturities which make current distributions of
interest. As a result, the net asset value of interests of the Portfolio if it
invests in zero-coupon securities may fluctuate more widely than interests 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 U.S. 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,
the 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.
CONVERTIBLE SECURITIES
The Portfolio may invest in convertible preferred stocks and convertible debt
securities ("convertible securities"). A convertible security is a bond,
debenture, note, preferred stock or other security that may be converted into or
exchanged for a prescribed amount of common stock of the same or a different
issuer within a particular period of time at a specified price or formula.
Convertible securities rank senior to common stocks in a corporation's capital
structure and, therefore, carry less risk than the corporation's common stock.
The value of a convertible security is a function of its "investment value" (its
value as if it did not have a conversion privilege), and its "conversion value"
(the security's worth if it were to be exchanged for the underlying security, at
market value, pursuant to its
13
<PAGE>
conversion privilege). Because convertible debt is convertible into stock under
specified conditions, the value of convertible debt also is affected normally by
changes in the value of the issuer's equity securities.
DEBT-TO-EQUITY CONVERSIONS
The Portfolio may invest up to 5% of its net assets in debt-to-equity
conversions. Debt-to-equity conversion programs are sponsored in varying degrees
by certain foreign countries and permit investors to use external debt of a
country to make equity investments in local companies. Many conversion programs
relate primarily to investments in transportation, communication, utilities and
similar infrastructure-related areas. The terms of the programs vary from
country to country but include significant restrictions on the application of
proceeds received in the conversion and on the repatriation of investment
profits and capital. When inviting conversion applications by holders of
eligible debt, a government usually specifies the minimum discount from par
value that it will accept for conversion. SCMI believes that debt-to-equity
conversion programs may offer opportunities to invest in otherwise restricted
equity securities that have a potential for significant capital appreciation.
SCMI, therefore, may invest the Portfolio's assets to a limited extent in such
programs under appropriate circumstances. There can be no assurance that
debt-to-equity conversion programs will continue to be successful or that the
Portfolio will be able to convert all or any of its emerging market debt
portfolio into equity investments.
BRADY BONDS
The Portfolio may invest a portion of its assets in Brady Bonds, which are
securities created through the exchange of existing commercial bank loans to
sovereign entities for new obligations in connection with debt restructurings.
Brady Bonds have been issued only recently and, therefore, do not have a long
payment history. Brady Bonds may have collateralized and uncollateralized
components, are issued in various currencies, and are actively traded in the
over-the-counter secondary market. Brady Bonds are not considered U.S.
Government securities. In light of the residual risk associated with the
uncollateralized portions of Brady Bonds and, among other factors, the history
of defaults with respect to commercial bank loans by public and private entities
of countries issuing Brady Bonds, investments in Brady Bonds are considered
speculative. Brady Bonds acquired by the Portfolio could be subject to
restructuring arrangements or to requests for new credit, which could cause the
Portfolio to suffer a loss of interest or principal on its holdings
INDEXED SECURITIES
The Portfolio may invest in indexed securities, the values of which are linked
to currencies, interest rates, commodities, indices, or other financial
indicators. Investment in indexed securities involves certain risks. In addition
to the credit risk of the securities issuer and normal risks of price changes in
response to changes in interest rates, the principal amount of indexed
securities may decrease as a result of changes in the value of the reference
instruments. Also, in the case of certain indexed securities where the interest
rate is linked to a reference instrument, the interest rate may be reduced to
zero and any further declines in the value of the security may then reduce the
principal amount payable on maturity. Further, indexed securities may be more
volatile than the reference instruments underlying indexed securities.
EMERGING MARKETS COUNTRIES
The following countries are not currently deemed to be "emerging markets" in
which the Portfolio typically invests.
Australia The Netherlands
Austria New Zealand
Belgium Norway
Canada Portugal
Denmark Singapore
Finland Spain
France Sweden
Germany Switzerland
14
<PAGE>
Ireland United Kingdom
Italy United States
Japan
INVESTMENT RESTRICTIONS
The following investment restrictions 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.
FUNDAMENTAL RESTRICTIONS. The following investment restrictions are
fundamental policies of the Portfolio and cannot be changed without
interestholder approval. Under these restrictions, the Portfolio will not:
(1) Underwrite securities of other companies (except insofar as
the Portfolio might be deemed to be acting as an
underwriter in the resale of any securities held in its
portfolio);
(2) Invest in commodities or commodity contracts (other than a
Hedging Instrument 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);
(3) 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;
(4) Purchase or write puts or calls except as permitted by any
of its other fundamental policies;
(5) 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,
however, make loans of portfolio securities (see "Loans of
Portfolio Securities") and enter into repurchase agreements
(see "Repurchase Agreements");
(6) Make short sales of securities;
(7) Invest in interests in oil, gas or other mineral
exploration or development programs (but the Portfolio may
purchase readily marketable securities of companies which
operate, invest in, or sponsor such programs); and
(8) Invest in real estate or in interests in real estate (but
the Portfolio may purchase readily marketable securities of
companies holding real estate or interests therein).
NONFUNDAMENTAL RESTRICTIONS. The following investment restrictions are not
fundamental policies of the Portfolio:
(1) Invest in or hold securities of any issuer if officers or
Trustees of the Trust or SCMI individually owning more
than 0.5% of the securities of such issuer together own
more than 5% of the securities of such issuer;
15
<PAGE>
(2) Invest more than 5% of the value of its total assets in
securities of issuers having a record, together with
predecessors, of less than three years of continuous
operation; and
(3) Purchase or otherwise acquire any security if, as a
result, more than 15% of the Portfolio's net assets (taken
at current value) would be invested in securities that are
illiquid (i) by virtue of the absence of a readily
available market or (ii) because of legal or contractual
restrictions on resale ("restricted securities"). This
limitation on investing in restricted securities does not
include securities that may not be resold to the general
public (pursuant to Rule 144A under the Securities Act of
1933, as amended) but may be resold to qualified
institutional purchasers.
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, each of which is a
registered investment company in the Schroder family of funds (with the Trust,
the "Fund Complex"). SCMI serves as investment adviser to each series in the
Fund Complex. 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.
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.
16
<PAGE>
FERGAL CASSIDY, 29, 787 Seventh Avenue, New York, New York - Treasurer
of the Trust; Acting Controller and Assistant Vice President of SCM and
SCMI since September 1997; Associate, SCMI, from August 1995 to March
1997; prior thereto Senior Accountant of Concurrency Mgt., Greenwich,
Connecticut from November 1994 to August 1995, and Senior Accountant,
Schroder Properties, London, September 1990 to November 1993.
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.
JOHN Y. KEFFER, 54 - Vice President of the Trust; President of Forum
Financial Group, LLC which is the indirect parent of 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.
ALAN MANDEL, 41, 787 Seventh Avenue, New York, New York - Assistant
Treasurer of the Trust; Vice President of SCMI since September 1998;
prior thereto Director of Mutual Fund Administration for Salomon
Brothers Asset Management since 1995; prior thereto Chief Financial
Officer and Vice President of Mutual Capital Management since 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.
CARIN MUHLBAUM, 36, 787 Seventh Avenue, New York, New York - Assistant
Secretary of the Trust; Vice President of SCMI since 1998; prior
thereto an investment management attorney with Seward & Kissel since
1998; prior thereto an investment management attorney with Gordon
Altman Butowsky Weitzen Shalov & Wein since 1989.
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.
ALEXANDRA POE, 37, 787 Seventh Avenue, New York, New York - General
Counsel since June 1998; 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.
NICHOLAS ROSSI, 35, 787 Seventh Avenue, New York, New York - Assistant
Secretary of the Trust, Associate of SCMI since October 1997 and
Assistant Vice President Schroder Advisors since March 1998; prior
thereto Mutual Fund Specialist, Willkie Farr & Gallagher since May
1996; prior thereto, Fund Administrator with Furman Selz LLC since
1992.
17
<PAGE>
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.
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.
CHERYL O. TUMLIN, 32, Assistant Treasurer and Assistant Secretary of
the Trust; Assistant Counsel, Forum Administrative Services, LLC since
July 1996, prior thereto, attorney with the U.S. Securities and
Exchange Commission, Division of Market Regulation since 1995; prior
thereto, attorney with Robinson Silverman Pearce Aronsohn & Berman
since 1991.
IRA L. UNSCHULD, 31, 787 Seventh Avenue, New York, New York - Vice
President of the Trust; Group Vice President of SCMI since April, 1993
and an Associate from July, 1990 to April, 1993.
* Interested Trustee of the Trust within the meaning of the 1940 Act.
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 $1,000 per year. Payment of the annual retainer is
allocated among the various investment companies based on their relative net
assets. Payment of meeting fees is allocated only among those investment
companies to which the meeting relates. None of the registered investment
companies in the Fund Complex has any bonus, profit sharing, pension or
retirement plans.
The following table provides the fees paid to each independent Trustee for the
Trust's most recently completed fiscal year ended May 31, 1998.
<TABLE>
<S> <C> <C> <C> <C>
Pension or Total
Retirement Compensation From
Aggregate Benefits Accrued Estimated Annual Fund Complex Paid
Compensation From As Part of Trust Benefits Upon To Trustees ($)
Name of Trustee the Trust ($) Expenses ($) Retirement ($)
- -------------------------------- -------------------- -------------------- --------------------- -------------------
Mr. Guernsey 4,073 0 0 7,000
Mr. Howell 3,043 0 0 7,000
Mr. Michalis 4,073 0 0 7,000
Mr. Schwab 4,573 0 0 7,750
Mr. Dinkins 2,543 0 0 5,000
Mr. Knight 2,543 0 0 6,250
</TABLE>
As of September 30, 1998, the officers and Trustees of the Trust owned, in the
aggregate, less than 1% of the Trust's outstanding shares.
18
<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of September 30, 1998, the following are the principal interestholders in the
Portfolio:
<TABLE>
<S> <C> <C>
Number of Units of Percentage of
Beneficial Interest Portfolio Owned
------------------- ---------------
(1) Schroder Emerging Markets Fund Institutional
Portfolio, a series of Schroder Capital Funds 19,178,000 73.08%
(Delaware)
Two Portland Square
Portland, Maine 04101
(2) The California Endowment 7,063,000 26.92%
21550 Oxnard Street
Woodland Hills, CA 91367
</TABLE>
Schroder Capital Funds (Delaware) has informed the Trust that whenever any of
its series investing in the Portfolio is requested to vote on matters pertaining
to the Portfolio, it will either: (1) solicit voting instructions from
shareholders of that series with regard to the voting of all proxies with
respect to the fund's shares in the Portfolio and vote such proxies in
accordance with such instructions, or (2) vote the interests held by the
Portfolio 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 the 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 of approximately 175 billion as of June 30, 1998.
Under the investment advisory agreement, SCMI is responsible for managing the
investment and reinvestment of the Portfolio's assets and for continuously
reviewing, supervising and administering the Portfolio's investments. In this
regard, SCMI is responsible for making decisions relating to the Portfolio's
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 Portfolio.
Under the terms of the investment advisory agreement, SCMI is required to manage
the Portfolio's investment portfolio in accordance with applicable laws and
regulations. In making its investment decisions, SCMI does not use material
inside information that may be in its possession or in the possession of its
affiliates.
The investment advisory agreement continues in effect provided such continuance
is approved annually: (1) by the vote of a majority of the outstanding voting
interests 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 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
agreement
19
<PAGE>
terminates automatically if assigned. The 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.
Table 1 in Appendix A shows the dollar amount of advisory fees payable as a
percentage of daily net assets by the Portfolio to SCMI, as well as the dollar
amount of fees that would have been payable had certain waivers not been in
place, together with the dollar amount of fees waived and the dollar amount of
net fees paid. This information is provided for the past three years or such
shorter term as the Portfolio has been operational. The advisory fee rate is set
forth in Part A.
ADMINISTRATIVE SERVICES
On behalf of the Portfolio, the Trust has entered into an administration
agreement with Schroder Advisors, 787 Seventh Avenue, New York, New York 10019,
and a subadministration agreement with FAdS. Under these agreements, Schroder
Advisors and FAdS provide certain management and administrative services
necessary for the Portfolio's operations, other than the investment management
and administrative services provided to the Portfolio by SCMI pursuant SCMI's
investment advisory agreements. These services include, among other things: (1)
preparation of interestholder 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 Portfolio,
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 the Portfolio without penalty, at any time, by the Board on 60 days' written
notice to Schroder Advisors or FAdS, as applicable, or by Schroder Advisors or
FAdS 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 the 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 the Portfolio has
been operational.
PORTFOLIO ACCOUNTANT AND INTERESTHOLDER RECORDKEEPER
FAcS, an affiliate of FAdS, performs interestholder recordkeeping and portfolio
accounting services for the Portfolio pursuant to an agreement with the Trust.
The agreement is terminable with respect to the Portfolio without penalty, at
any time, by the Board upon 60 days' written notice to FAcS, or by FAcS upon 60
days' written notice to the Trust.
Under its agreement, FAcS prepares and maintains the interestholder and
accounting books and records of the Portfolio that are required to be maintained
under the 1940 Act, calculates the net asset value of the Portfolio, calculates
the distributive share of the Portfolio's income, expense, gain and loss
allocable to each interestholder and prepares periodic reports to
interestholders and the SEC. For its services to the Portfolio, FAcS is entitled
to receive from the Trust a fee of $48,000 per year. FAcS is entitled to an
additional $24,000 per year with respect to global and international portfolios.
In addition, FAcS also is entitled to an additional $12,000 per year with
respect to the Portfolios if it has more than 100 security positions or a
monthly portfolio turnover rate of 10% or greater.
FAcS 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. FAcS 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 FAcS and its employees,
agents, officers and directors against and from any and all claims, demands,
actions, suits, judgments,
20
<PAGE>
liabilities, losses, damages, costs, charges, counsel fees and all other
expenses arising out of or in any way related to FAcS's actions taken or
failures to act with respect to the Portfolio or based, if applicable, upon
information, instructions or requests with respect to the Portfolio given or
made to FAcS by an officer of the Trust duly authorized. This indemnification
does not apply to FAcS's actions taken or failures to act in cases of FAcS's own
bad faith, willful misconduct or gross negligence.
CUSTODIAN
The Chase Manhattan Bank, through its Global Securities Services division
located in London, England, acts as custodian of the Portfolio's assets but
plays no role in making decisions as to the purchase or sale of portfolio
securities for the Portfolio. Pursuant to rules adopted under the 1940 Act, the
Portfolio may maintain its foreign securities and cash in the custody of certain
eligible foreign banks and securities depositories. Selection of these foreign
custodial institutions is made by the Board following a consideration of a
number of factors, including (but not limited to) the reliability and financial
stability of the institution; the ability of the institution to perform capably
custodial services for the Portfolio; the reputation of the institution in its
national market; the political and economic stability of the country in which
the institution is located; and further risks of potential nationalization or
expropriation of Portfolio assets.
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP, One Post Office Square, Boston, Massachusetts 02109,
serves as independent auditors for the Portfolio.
BROKERAGE ALLOCATION AND OTHER PRACTICES
INVESTMENT DECISIONS
Investment decisions for the Portfolio 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 for transactions in domestic securities. Since
most brokerage transactions for the Portfolio are placed with foreign
broker-dealers, certain portfolio transaction costs for the Portfolio may be
higher than fees for similar transactions executed on U.S. securities exchanges.
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 of those in the United States. 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.
The 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
it selects and to seek "best execution" of portfolio transactions.
21
<PAGE>
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. The Portfolio may, however, pay higher than the
lowest available commission rates when SCMI believes it is reasonable to do so
in light of the value of the brokerage and research services provided by the
broker effecting the transaction. In seeking the most favorable price and
execution, SCMI 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 the Portfolio. The investment
advisory fee paid by the Portfolio is not reduced because SCMI and its
affiliates receive such services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934, as
amended, SCMI may cause the 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 the Portfolio toward payment of Portfolio expenses, such as
custodian fees.
Subject to the general policies of the 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 the 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 the Portfolio on
various foreign securities exchanges on which Schroder Securities has trading
privileges, provided certain other conditions are satisfied as described below.
Payment of brokerage commissions to Schroder & 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 the 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 the 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 the 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 Portfolio 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 &
22
<PAGE>
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
the 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 the Portfolio. The Board, including a
majority of the non-interested Trustees, has approved this agreement.
The Portfolio does not have 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, the 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
the Portfolio for the past three years or such shorter terms as the 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 Portfolio have no preference, preemptive, conversion or similar rights and
are fully paid and nonassessable, except as set forth below. Each investor in
the Portfolio is entitled to a vote in proportion to the amount of its
investment therein. Investors in the Portfolio and other series 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
the Portfolio, as the case may be, may control the outcome of votes. The Trust
is not required and has no current intention to hold annual meetings of
investors, but the Trust will hold special meetings of investors when: (1) a
majority of the Trustees determines to do so, or (2) investors holding at least
10% of the interests in the Trust (or the Portfolio) request in writing a
meeting of investors in the Trust (or Portfolio). Except for certain matters
specifically described in the Trust Instrument, the Trustees may amend the Trust
Instrument without the vote of investors.
The Trust, with respect to the Portfolio, may enter into a merger or
consolidation, or sell all or substantially all of its assets, if approved by
the Board. The Portfolio may be terminated: (1) upon liquidation and
distribution of its assets, if approved by the vote of a majority of the
Portfolio's outstanding voting interests (as defined in the 1940 Act), or (2) by
the Trustees on written notice to the Portfolio's investors. Upon liquidation or
dissolution of the 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 interestholders 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 interestholders of the Trust to liability. To guard
against this risk, the Trust Instrument disclaims interestholder 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 interestholder 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
23
<PAGE>
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.
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 the 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 the 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 the Portfolio for any claims brought against the investor with respect to the
investor's registration statement or proxy materials, to the extent the claim is
based on a misstatement or omission of a material fact relating to information
about 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 Portfolio are issued solely in private placement transactions
that do not involve any "public offering" within the meaning of section 4(2) of
the 1933 Act. All investments in the Portfolio are made and withdrawn at the net
asset value 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 the 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 following procedures
for the valuation of the Portfolio's 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.
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. In the case of options traded in
the over-the-counter market, the average of the last bid price as obtained
24
<PAGE>
from two or more dealers, is used, if there is only one dealer, 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 as stated
above.
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 the
Portfolio and could affect adversely the liquidity of its investment portfolio.
TAX STATUS
THE PORTFOLIO AS A PARTNERSHIP
The Portfolio is classified for federal income tax purposes as a partnership
that is not a "publicly traded partnership." As a result, the Portfolio is not
subject to federal income tax; instead, each investor in the 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 Portfolio also is not subject to Delaware income or franchise
tax.
Each investor in the 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, the 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 the Portfolio (whether pursuant to a partial
or complete withdrawal or otherwise) will not result in the investor's
recognition of any gain or loss for federal income tax purposes, except that:
(1) gain will be recognized to the extent any cash that is distributed exceeds
the investor's basis for its interest in the Portfolio before the distribution;
(2) income or gain will be recognized if the distribution is in liquidation of
the investor's entire interest in the Portfolio and includes a disproportionate
share of any unrealized receivables held by the Portfolio; (3) loss will be
recognized to the extent that a liquidation distribution consisting solely of
cash and/or unrealized receivables is less than the investor's basis for its
interest in the Portfolio prior to the distribution; 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.
INVESTMENTS IN FOREIGN SECURITIES
Dividends and interest received by the Portfolio may be subject to income,
withholding, or other taxes imposed by foreign countries and U.S. possessions
that would reduce the return on the security with 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. If, however, more than 50% in value of the Portfolio's total
assets at the close of its taxable year consists of securities of foreign
corporations, the Portfolio will be eligible, and ordinarily expects to file an
election with the Internal Revenue Service ("IRS") pursuant to which
interestholders of the Portfolio will be required to include their proportionate
share of such withholding taxes in their U.S. income tax returns as gross
income; treat such proportionate
25
<PAGE>
share as taxes paid by them; and, subject to certain limitations (including a
holding period requirement imposed at both the Portfolio and interestholder
levels), deduct such proportionate share in computing their taxable incomes or,
alternatively, use them as foreign tax credits against their U.S. income taxes.
No deductions for foreign taxes, however, may be claimed by noncorporate
interestholders who do not itemize deductions. An interestholder that is a
nonresident alien individual or a foreign corporation may be subject to U.S.
withholding tax on the income resulting from the Portfolio's election described
in this paragraph but will not be able to claim a credit or deduction against
such U.S. tax for the foreign taxes treated as having been paid by such
interestholder. The Portfolio will report annually to its interestholders their
proportionate shares of such withholding taxes.
The Portfolio may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation that, in general, meets either of the
following tests: (1) at least 75% of its gross income is passive; or (2) an
average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, RICs and certain other
investors that hold stock of a PFIC indirectly, through an interest in the
Portfolio, will be subject to federal income tax on a portion of any "excess
distribution" received on the stock or of any gain on disposition of the stock
(collectively "PFIC income"), plus interest thereon, even if the RIC distributes
the PFIC income as a taxable dividend to its shareholders. The balance of the
PFIC income will be included in the RIC's investment company taxable income and,
accordingly, will not be taxable to it to the extent that income is distributed
to its shareholders.
If the Portfolio invests in a PFIC and elects to mark such investment to market
annually or 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.
The 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 the 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, adversely affect the amount, timing and character of
interestholder income. The 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 the 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 swap contract, or a future
or forward contract. The entry into 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 the
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 the Portfolio to recognize taxable income from these
offsetting transactions in excess of the cash generated by such activities.
The Portfolio may write, purchase or sell options or futures contracts. Unless
the Portfolio is eligible to, and does, make a special election, such options
and futures contracts that are "Section 1256 contracts" will be "marked to
market" for federal income tax purposes at the end of each taxable year (I.E.,
each option or futures contract will be treated as sold for its fair market
value on the last day of the taxable year). In general, unless such special
election is
26
<PAGE>
made, gain or loss from transactions in options and futures contracts will be
60% long-term and 40% short-term capital gain or loss.
Code Section 1092, which applies to certain "straddles," may affect the taxation
of a fund's transactions in options and futures contracts. Under Section 1092,
the Portfolio may be required to postpone recognition for tax purposes of losses
incurred in certain closing transactions in options and futures.
WITHHOLDING
Ordinary income paid to interestholders who are nonresident aliens is 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
interestholders). 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 interestholders if: (1) the interestholder 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.
Whether the new federal tax regulations (effective for payments made on or after
January 1, 1999, although transition rules will apply) will increase the U.S.
federal income taxation of a interestholder who, under the Code, is a
non-resident alien individual, a foreign trust or estate, foreign corporation or
foreign partnership ("non-U.S. interestholder") depends on whether the income
from the Portfolio is "effectively connected" with a U.S. trade or business
carried on by such interestholder. Ordinarily, income from the Portfolio will
not be treated as so "effectively connected."
If the income from the Portfolio is not treated as "effectively connected" with
a U.S. trade or business carried on by the non-U.S. interestholders, dividends
of net investment income (which includes short-term capital gains), whether
received in cash or reinvested in shares, will be subject to a U.S. federal
income tax of 30% (or lower treaty rate), which tax is generally withheld from
such dividends. Furthermore, such non-U.S. interestholders may be subject to
U.S. federal income tax at the rate of 30% (or lower treaty rate) on their
income resulting from a Fund's election (described above) to "pass through" the
amount of non-U.S. taxes paid by the Portfolio, but may not be able to claim a
credit or deduction with respect to the non-U.S. income taxes treated as having
been paid by them.
A non-U.S. interestholder whose income is not treated as "effectively connected"
with a U.S. trade or business generally will not be subject to U.S. federal
income taxation on distributions of net long-term capital gains and any gain
realized upon the sale of Portfolio shares. If the non-U.S. interestholder is
treated as a non-resident alien individual but is physically present in the
United States for more than 182 days during the taxable year, then in certain
circumstances such distributions of net long-term capital gains amounts retained
by the Portfolio which is designated as undistributed capital gains and gain
from the sale of the Portfolio shares will be subject to a U.S. federal income
tax of 30% (or lower treaty rate). In the case of a non-U.S. interestholder who
is a non-resident alien individual, the Portfolio may be required to withhold
U.S. federal income tax at a rate of 31% of distributions (including
distributions of net long-term capital gains) unless IRS Form W-8 is provided.
If the income from the Portfolio is "effectively connected" with a U.S. trade or
business carried on by a non-U.S. interestholder, then distributions of net
investment income (which includes short-term capital gains) whether received in
cash or reinvested in shares, net long-term capital gains and amounts otherwise
includable in income (such as amounts retained by the Portfolio which are
designated as undistributed capital gains and any gains realized
27
<PAGE>
upon the sale of shares of the Portfolio), will be subject to U.S. federal
income tax at the graduated rates applicable to U.S. taxpayers. Non-U.S.
interestholders that are corporations may also be subject to the branch profits
tax.
Transfers of shares of the Portfolio by gift by a non-U.S. interestholder will
generally not be subject to U.S. federal gift tax, but the value of shares of
the Portfolio held by such an interestholder at death will be includable in the
interestholder's gross estate for U.S. federal income tax purposes.
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 the
Portfolio.
The foregoing discussion relates only to federal income tax law. Income from the
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 its services.
CALCULATIONS OF PERFORMANCE DATA
The Portfolio calculates its yields and returns in accordance with SEC
prescribed formulas. The Portfolio may also calculate performance information
using other methodologies.
FINANCIAL STATEMENTS
The fiscal year end of Schroder Emerging Markets Fund Institutional Portfolio is
October 31.
Financial statements for the 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 the Portfolio; the tax year end of the Portfolio may change due to
the year ends of the interestholders under certain circumstances.
The annual report for the Portfolio for the year ended October 31, 1997,
including the independent auditors' reports thereon, and the semi-annual report
for the Portfolio for the period ended April 30, 1998 may be obtained, free of
charge, by calling the interestholder recordkeeker (transfer agent) at
1-800-344-8332.
28
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements:
Part A: None.
Part B:
Audited Financial Statements for the fiscal year
ended October 31, 1997 including Schedule of
Investments, Statement of Assets and Liabilities,
Statement of Operations, Statements of Changes in Net
Assets, Financial Highlights, Notes to Financial
Statements and Report of Independent Accountants for
Schroder Emerging Markets Fund Institutional
Portfolio (Annual Report filed via EDGAR on January
9, 1998 accession number 0001004402-98-00018).
Unaudited financial statements for the period ended
April 30, 1998 including Schedule of Investments,
Statement of Assets and Liabilities, Statement of
Operations, Statement of Changes in Net Assets,
Fianancial Highlights, Notes to Financial Statements
for Schroder Emerging Markets Fund Institutional
Portfolio (Semi-Annual Reports filed via EDGAR on
July 9, 1998, accession number 0001004402-98-000377).
(b) Exhibits:
(1) Trust Instrument of Registrant dated September 6,
1995 as amended November 30, 1995
and restated March 13, 1998 (see Note 1).
(2) Not applicable.
(3) Not applicable.
(4) See the following Articles and Sections in the Trust
Instrument filed as Exhibit (1): Article II, Section
2.3, 2.4; Article V; Article VI; Article VII; Article
IX; and Article X.
(5) (a) Investment Advisory Agreement between
Registrant and Schroder Capital Management
International Inc. ("SCMI") dated as of
March 15, 1996 with respect to Schroder
International Smaller Companies Portfolio
and Schroder Global Asset Allocation
Portfolio (see Note 2).
(b) Investment Advisory Agreement between
Registrant and SCMI dated as of September
13, 1995 with respect to International
Equity Fund and Schroder Emerging Markets
Fund Institutional Portfolio (see Note 3).
(c) Investment Advisory Agreement between
Registrant and SCMI dated as of September
18, 1997 with respect to Schroder Global
Growth Portfolio (see Note 3).
(d) Investment Advisory Agreement between
Registrant and SCMI dated as of May 16, 1996
with respect to Schroder U.S. Smaller
Companies Portfolio, Schroder EM Core
Portfolio, Schroder Asian Growth Fund
Portfolio, and Schroder Japan Portfolio (see
Note 4).
<PAGE>
(e) Investment Subadvisory Agreement between
Registrant, SCMI and Schroder Investment
Management International Ltd. ("SIMIL")
dated as of June 15, 1998 with respect to
Schroder International Smaller Companies
Portfolio (see Note 1).
(6) Not applicable.
(7) Not applicable.
(8) Global Custody Agreement between Registrant and The
Chase Manhattan Bank, N.A. dated as of September 13,
1995 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 Fund Portfolio, Schroder United Kingdom
Portfolio, and Schroder Global Growth Portfolio (see
Note 3).
(9) (a) Administration Agreement between Registrant
and Schroder Fund Advisors Inc. ("Schroder
Advisors") dated as of November 26, 1996
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, Schroder Global Growth Portfolio,
Schroder Asian Growth Fund Portfolio, and
Schroder Japan Portfolio (see Note 4).
(b) Subadministration Agreement between
Registrant and Forum Administrative
Services, LLC dated as of February 1, 1997
with respect to International Equity Fund,
Schroder Emerging Markets Fund Institutional
Portfolio, Schroder U.S. Smaller Companies
Portfolio, Schroder International Smaller
Companies Portfolio, Schroder Global Growth
Portfolio, Schroder EM Core Portfolio,
Schroder Asian Growth Fund Portfolio, and
Schroder Japan Portfolio (see Note 4).
(c) Transfer Agency and Fund Accounting
Agreement between Registrant and Forum
Financial Corp. dated as of September 13,
1995 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 Fund
Portfolio, Schroder United Kingdom
Portfolio, and Schroder Global Growth
Portfolio (see Note 3).
(d) Placement Agent Agreement between Registrant
and Forum Financial Services, Inc. dated as
of September 13, 1995 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 Fund
Portfolio, Schroder United Kingdom
Portfolio, and Schroder Global Growth
Portfolio (see Note 3).
(10) Not applicable.
<PAGE>
(11) Not applicable.
(12) Audited Financial Statements for the fiscal year
ended October 31, 1997 including Report of
Independent Accountants, Statements of Assets and
Liabilities, Statements of Operations, Statement of
Changes in Net Assets, Financial Highlights, Notes
to Fianncial Statements and Schedules of Investments
for Schroder Emerging Markets Fund Institutional
Portfolio (filed herewith).
Unaudited Financial Statements for the fiscal year
ended April 30, 1998 including Report of Independent
Accountants, Statements of Assets and Liabilities,
Statements of Operations, Statement of Changes in Net
Assets, Financial Highlights, Notes to Fianncial
Statements and Schedules of Investments for Schroder
Emerging Markets Fund Institutional Portfolio (filed
herewith).
(13) Not applicable.
(14) Not applicable.
(15) Not applicable.
(16) Not applicable.
(17) Financial Data Schedules (see Note 5).
(18) Not applicable.
---------------
Notes:
(1) Exhibit incorporated by reference as filed in Amendment No. 12
via EDGAR on September 28, 1998 accession number
0001004402-98-000531.
(2) Exhibit incorporated by reference as filed in Amendment No. 4 via
EDGAR on March 13, 1997, accession number 0000912057-97-008728.
(3) Exhibit incorporated by reference as filed in Amendment No. 9 via
EDGAR on February 12, 1998, accession number
0001004402-98-000117.
(4) Exhibit incorporated by reference as filed in Amendment No. 11
via EDGAR on March 19, 1998, accession number
001004402-98-000199.
(5) Exhibit incorporated by reference as filed in Amendment No. 12
via EDGAR on September 28, 1998, accession number
0001004402-98-000526.
<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
ITEM 26. NUMBER OF HOLDERS OF INTERESTS
<TABLE>
<S> <C>
-------------------------------------------------------------------------- ------------------------------
Title of Series Number of Interestholders
as of September 1, 1998
-------------------------------------------------------------------------- ------------------------------
-------------------------------------------------------------------------- ------------------------------
International Equity Fund 4
-------------------------------------------------------------------------- ------------------------------
Schroder EM Core Portfolio 10
-------------------------------------------------------------------------- ------------------------------
Schroder International Smaller Companies Portfolio 2
-------------------------------------------------------------------------- ------------------------------
Schroder U.S. Smaller Companies Portfolio 5
-------------------------------------------------------------------------- ------------------------------
Schroder Emerging Markets Fund Institutional Portfolio 2
-------------------------------------------------------------------------- ------------------------------
Schroder Global Growth Portfolio 4
-------------------------------------------------------------------------- ------------------------------
Schroder Asian Growth Fund Portfolio 1
-------------------------------------------------------------------------- ------------------------------
Schroder Japan Portfolio 1
-------------------------------------------------------------------------- ------------------------------
</TABLE>
ITEM 27. INDEMNIFICATION
Registrant currently holds a joint directors' and officers'/errors and
omissions insurance policy pursuant to Rule 17d-1(d)(7).
The general effect of Article 5 of Registrant's Trust Instrument (filed
as Exhibit (1) and incorporated herein by reference) 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 interestholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
(a) Schroder Capital Management International Inc.
The following is a description of any business, profession, vocation or
employment of a substantial nature in which the investment adviser of
the registrant, Schroder Capital Management International Inc.
("SCMI"), and each trustee or officer of the investment adviser is or
has been, at any time during the past two years, engaged for his or her
own account or in the capacity of trustee, officer or employee. The
address of each company listed, unless otherwise noted, is 787 Seventh
Avenue, 34th Floor, New York, NY 10019. 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.
<TABLE>
<S> <C> <C>
---------------------------------- ------------------------------------ ----------------------------------
Name Title Business Connections
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
David M. Salisbury Chairman, Director SCMI
------------------------------------ ----------------------------------
Chief Executive, Director Schroder Ltd.*
------------------------------------ ----------------------------------
Director Schroders plc.*
------------------------------------ ----------------------------------
Trustee and Officer Schroder Series Trust II
---------------------------------- ------------------------------------ ----------------------------------
<PAGE>
---------------------------------- ------------------------------------ ----------------------------------
Name Title Business Connections
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Richard R. Foulkes Deputy Chairman, Director SCMI
------------------------------------ ----------------------------------
Deputy Chairman Schroder Ltd.*
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Officer Certain open end management
investment companies for which
SCMI and/or its affiliates
provide investment services
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
John A. Troiano Chief Executive, Director SCMI
------------------------------------
----------------------------------
Chief Executive, Director Schroder Ltd.*
------------------------------------ ----------------------------------
----------------------------------
Officer Certain open end management
investment companies for which
SCMI and/or its affiliates
provide investment services
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Sharon L. Haugh Executive Vice President, Director SCMI
----------------------------------
------------------------------------ ----------------------------------
Director, Chairman Schroder Fund Advisors Inc.
------------------------------------ ----------------------------------
Director Schroder Ltd.*
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Chairman, Director Schroder Capital Management Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee Certain open end management
investment companies for which
SCMI and/or its affiliates
provide investment services
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Gavin D. L. Ralston Senior Vice President, Managing SCMI
Director
------------------------------------ ----------------------------------
Director Schroder Ltd.*
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Mark J. Smith Senior Vice President, Director SCMI
------------------------------------ ----------------------------------
Senior Vice President, Director Schroder Ltd.*
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Fund Advisors Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee and Officer Certain open end management
investment companies for which
SCMI and/or its affiliates
provide investment services
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Robert G. Davy Senior Vice President, Director SCMI
------------------------------------ ----------------------------------
Director Schroder Ltd.*
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Officer Certain open end management
investment companies for which
SCMI and/or its affiliates
provide investment services
---------------------------------- ------------------------------------ ----------------------------------
<PAGE>
---------------------------------- ------------------------------------ ----------------------------------
Name Title Business Connections
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Jane P. Lucas Senior Vice President, Director SCMI
------------------------------------ ----------------------------------
Director Schroder Fund Advisors Inc.
------------------------------------ ----------------------------------
Director Schroder Capital Management Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Officer Certain open end management
investment companies for which
SCMI and/or its affiliates
provide investment services
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
David R. Robertson Group Vice President SCMI
------------------------------------ ----------------------------------
Senior Vice President Schroder Fund Advisors Inc.
----------------------------------
------------------------------------
Director of Institutional Business Oppenheimer Funds, Inc.
resigned 2/98
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Michael M. Perelstein Senior Vice President, Director SCMI
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Senior Vice President, Director Schroders Ltd.*
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Managing Director MacKay Shields Financial
Corporation
resigned 11/96
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Louise Croset First Vice President, Director SCMI
------------------------------------ ----------------------------------
First Vice President Schroder Ltd.*
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee and Officer Schroder Series Trust II
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Ellen B. Sullivan Group Vice President, Director SCMI
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Capital Management Inc.
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Catherine A. Mazza Group Vice President SCMI
------------------------------------ ----------------------------------
President, Director Schroder Fund Advisors Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Capital Management Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee and Officer Certain open end management
investment companies for which
SCMI and/or its affiliates
provide investment services
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Heather F. Crighton First Vice President, Director SCMI
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
First Vice President, Director Schroder Ltd.*
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Ira Unschuld Group Vice President SCMI
------------------------------------ ----------------------------------
Officer Certain open end management
investment companies for which
SCMI and/or its affiliates
provide investment services
---------------------------------- ------------------------------------ ----------------------------------
<PAGE>
---------------------------------- ------------------------------------ ----------------------------------
Name Title Business Connections
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Paul M. Morris Senior Vice President SCMI
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Capital Management Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Principal, Senior Portfolio Manager Weiss, Peck & Greer LLC
resigned 12/96
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Susan B. Kenneally First Vice President, Director SCMI
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
First Vice President, Director Schroder Ltd.*
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Jennifer A. Bonathan First Vice President, Director SCMI
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
First Vice President, Director Schroder Ltd.*
---------------------------------- ------------------------------------ ----------------------------------
</TABLE>
*Schroder Ltd. and Schroders plc. are located at 31 Gresham St., London
EC2V 7QA, United Kingdom.
(b) Schroder Investment Management International Ltd.
The following is a description of any business, profession, vocation or
employment of a substantial nature in which the investment subadviser of
Schroder International Smaller Companies Portfolio, Schroder Investment
Management International Ltd. ("SIMIL"), and each trustee or officer of the
investment subadviser is or has been, at any time during the past two years,
engaged for his or her own account or in the capacity of trustee, officer or
employee. The address of each company listed below is set forth in the note
following the table. 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.
<TABLE>
<S> <C> <C>
---------------------------------- ------------------------------------ ----------------------------------
Name Title Business Connections*
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Hugh Westrope Bolland Director SIMIL
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroders (C.I.) Limited
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Investment Management
(Hong Kong)
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Properties Limited
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Personal Investment
Management
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director, Chief Executive Officer Schroder Investment Management
Limited
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Chairman Schroder Investment Management
(Australasia) Limited
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Chairman Schroder Investment Management
(UK) Limited
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Jennifer A. Bonathan Director SIMIL
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
First Vice President, Director Schroder Capital Management
International Limited
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
First Vice President, Director SCMI
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
First Vice President, Director Schroder Ltd.
---------------------------------- ------------------------------------ ----------------------------------
<PAGE>
---------------------------------- ------------------------------------ ----------------------------------
Name Title Business Connections*
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Nigel J. Burnham Director SIMIL
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Finance Officer, First Vice SCMI
President
------------------------------------ ----------------------------------
Finance Officer, First Vice Schroder Capital Management
President International Limited
------------------------------------ ----------------------------------
Assistant Vice President Schroder Fund Advisors, Inc.
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Denis H. Clough Director SIMIL
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Capital Management
International Limited
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Investment Management
(UK) Limited
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Robert G. Davy Director SIMIL
------------------------------------ ----------------------------------
Senior Vice President, Director SCMI
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Ltd.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Officer Certain open end management
investment companies for which
SCMI and/or its affiliates
provide investment services
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Richard R. Foulkes Deputy Chairman, Director SIMIL
------------------------------------ ----------------------------------
Deputy Chairman, Director SCMI
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Deputy Chairman Schroder Ltd.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Officer Certain open end management
investment companies for which
SCMI and/or its affiliates
provide investment services
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Phillipa J. Gould Director SIMIL
------------------------------------
----------------------------------
Director, Senior Vice President SCMI
------------------------------------ ----------------------------------
----------------------------------
Director Schroder Capital Management
International Limited
------------------------------------ ----------------------------------
----------------------------------
Director Schroder Investment Management
International Inc.
------------------------------------ ----------------------------------
----------------------------------
Director Schroder Investment Management
International (Europe) Limited
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Madeleine S. Hall Director SIMIL
----------------------------------
------------------------------------ ----------------------------------
Director Schroder Investment Management
(UK) Limited
------------------------------------ ----------------------------------
Assistant Director Schroder Investment Management
Limited
---------------------------------- ------------------------------------ ----------------------------------
<PAGE>
---------------------------------- ------------------------------------ ----------------------------------
Name Title Business Connections*
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Jeremy A. Hill Chairman, Director SIMIL
------------------------------------ ----------------------------------
Commissioner PT Schroder Investment
Management Indonesia
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Chairman Schroder Investment Management
(Hong Kong) Limited
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Chairman Schroder Investment Management
(Japan) Limited
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Chairman Korea Schroder Fund Management
Limited
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Investment Management
Limited
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director/Chairman Certain open end management
investment companies for which
SCMI and/or its affiliates
provide investment services
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Ian Johnson Secretary SIMIL
------------------------------------ ----------------------------------
Secretary Schroder Capital Management
International Limited
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Assistant Secretary J. Henry Schroder & Co., Limited
---------------------------------- ------------------------------------ ----------------------------------
--------------------------------- ------------------------------------- ----------------------------------
Jan Anthony Kingzett Director SIMIL
------------------------------------- ----------------------------------
Deputy Chairman Schroder Investment Management
(Japan) Limited
------------------------------------- ----------------------------------
Chairman Schroder Investment Trust
Management Limited
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Schroder Investment Management
(Singapore) Limited
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Schroder Investment Management
Limited
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Certain open end management
investment companies for which
SCMI and/or its affiliates
provide investment services
--------------------------------- ------------------------------------- ----------------------------------
--------------------------------- ------------------------------------- ----------------------------------
Maggie Lay Wah Lee Director SIMIL
------------------------------------- ----------------------------------
Director Schroder Investment Management
(Singapore) Limited
----------------------------------
-------------------------------------
Director Schroder Investment Management
Limited
--------------------------------- ------------------------------------- ----------------------------------
<PAGE>
---------------------------------- ------------------------------------ ----------------------------------
Name Title Business Connections*
---------------------------------- ------------------------------------ ----------------------------------
--------------------------------- ------------------------------------- ----------------------------------
Richard A. Mountford Chief Executive Officer, Chief SIMIL
Operating Officer, Director
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director, Deputy Chairman Schroder Investment Management
(Singapore) Limited
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Schroder Investment Management
(UK) Limited
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Schroder Investment Management
Limited
--------------------------------- ------------------------------------- ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Nicola Ralston Deputy Chairman, Director SIMIL
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Nicola Jane Richards Director SIMIL
------------------------------------ ----------------------------------
Division Director Schroder Investment Management
Limited
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Christopher N. Rodgers Director SIMIL
------------------------------------ ----------------------------------
Director Schroder Investment Management
Limited
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Investment Management
(UK) Limited
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
David M. Salisbury Director SIMIL
------------------------------------ ----------------------------------
Chairman, Director SCMI
------------------------------------ ----------------------------------
Chief Executive, Director Schroder Ltd.
------------------------------------ ----------------------------------
Director Schroders plc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee and Officer Schroder Series Trust II
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Daniele Serruya Director SIMIL
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Assistant Director, Investment Schroder Investment Management
Manager Limited
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Olaf N. Siedler Director SIMIL
------------------------------------ ----------------------------------
Director Schroder Investment Management
(UK) Limited
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Investment Manager Schroder Investment Management
Limited
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Hugh M. Stewart Director SIMIL
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Investment Management
(UK) Limited
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Investment Manager Schroder Investment Management
Limited
---------------------------------- ------------------------------------ ----------------------------------
<PAGE>
---------------------------------- ------------------------------------ ----------------------------------
Name Title Business Connections*
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Thomas J. Willoughby Chief Compliance Officer SIMIL
------------------------------------ ----------------------------------
Schroder Unit Trust Limited Director
---------------------------------- ------------------------------------ ----------------------------------
</TABLE>
Each of SCMI, Schroder Capital Management International Limited, Schroder
Investment Management Limited, Schroder Investment Management (UK) Limited,
Schroder Investment Management (Europe), Korea Schroder Fund Management Limited
and Schroder Personal Investment Management, are located at 33 Gutter Lane,
London EC2V 8AS United Kingdom.
Schroder Investment Management (Singapore) Limited is located at #47-01 OCBC
Centre, Singapore.
Schroder Investment Management (Hong Kong) Limited is located at 8 Connaight
Place, Hong Kong.
Schroder Investment Management (Australasia) Limited is located at 225 George
Place, Sydney Australia.
PT Schroder Investment Management Indonesia is located at Lippo Plaza Bldg., 25
Jakarta, 12820.
Schroders (C.I.) Limited is located at St. Peter Port, Guernsey, Channel
Islands, GY1 3UF.
Schroder Properties Limited is located at Senator House, 85 Queen Victoria
Street, London EC4V 4EJ, United Kingdom.
Schroder Fund Advisors Inc. is located at 787 Seventh Avenue, 34th Floor, New
York, NY 10019.
Schroder Ltd. and Schroders plc. are located at 31 Gresham St., London EC2V 7QA,
United Kingdom.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Forum Financial Services, Inc. is the Registrant's
placement agent. Registrant has no
underwriters.
(b) Not applicable.
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books and other documents required to be maintained by Section
31(a) of the 1940 Act and the Rules thereunder are maintained at the offices of
SCMI (investment management records) and Schroder Fund Advisors, Inc.
(administrator records), 787 Seventh Avenue, New York, New York, 10019, except
that certain items are maintained at the following locations:
(a) Forum Accounting Services, LLC, Two Portland Square, Portland,
Maine 04101 (portfolio accounting records).
(b) Forum Administrative Services, LLC, Two Portland Square,
Portland, Maine 04101 (corporate minutes and all other records
required under the Subadministration Agreement).
(c) Forum Shareholder Services, LLC, Two Portland Square,
Portland, Maine 04101 (unitholder records).
<PAGE>
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, as amended,
the Registrant has duly caused this amendment to its Registration Statement to
be signed on its behalf by the undersigned, duly authorized, in the City of New
York and State of New York on the 22nd day of October, 1998.
SCHRODER CAPITAL FUNDS
By:/s/ Catherine A. Mazza
-----------------------------
Catherine A. Mazza
Vice President
<PAGE>
INDEX TO EXHIBITS
(12) Audited Financial Statements and Unaudited Financial Statements
APPENDIX A
MISCELLANEOUS TABLES
TABLE 1 - INVESTMENT ADVISORY FEES
<TABLE>
<S> <C> <C> <C>
GROSS
ADVISORY FEE ($) FEE WAIVED ($) NET FEE PAID ($)
---------------- -------------- ----------------
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
TABLE 2(A) - ADMINISTRATION FEES
GROSS
ADMIN. FEE ($) FEE WAIVED ($) NET FEE PAID ($)
-------------- -------------- ----------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL
PORTFOLIO
Year ended October 31, 1997 139,234 0 139,234
Year ended October 31, 1996 175,032 12,742 162,290
TABLE 2(B) - SUBADMINISTRATION FEES
GROSS
SUBADMIN FEE ($) FEE WAIVED ($) NET FEE PAID ($)
---------------- -------------- ----------------
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
</TABLE>
A-1
<PAGE>
TABLE 3 - BROKERAGE COMMISSIONS
<TABLE>
<S> <C> <C> <C> <C>
SCHRODER & CO. INC.
------------------------------------------------------------
TOTAL BROKERAGE TOTAL BROKERAGE PERCENTAGE OF PERCENTAGE OF
COMMISSIONS ($) COMMISSIONS ($) COMMISSIONS TRANSACTIONS
SCHRODER EMERGING MARKETS FUND
INSTITUTIONAL PORTFOLIO
Year ended October 31, 1997 1,413,998
Year ended October 31, 1996 101.087
SCHRODER SECURITIES
------------------------------------------------------------
TOTAL BROKERAGE TOTAL BROKERAGE PERCENTAGE OF PERCENTAGE OF
COMMISSIONS ($) COMMISSIONS ($) COMMISSIONS TRANSACTIONS
SCHRODER EMERGING MARKETS FUND
INSTITUTIONAL PORTFOLIO
Year ended October 31, 1997 1,413,998
Year ended October 31, 1996 101.087
</TABLE>
A-2
<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 1,309,768
------------------
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
<PAGE>
- --------------------------------------------------------------------------------
Schroder Emerging Markets Fund Institutional Portfolio (Portfolio)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
AS OF APRIL 30, 1998 (UNAUDITED)
STOCKS AND WARRANTS - 97.5%
<TABLE>
<S> <C> <C>
SHARES VALUE US$
------ ---------
ARGENTINA - 4.2%
COMMON STOCK
360,000 Astra Cia Argentina De Petrolo SA
ENERGY $ 648,065
33,957 Banco de Galicia y Buenos Aires SA de CV ADR
FINANCE 831,949
279,500 IRSA Inversiones y Representaciones SA
FINANCE 1,084,568
165,114 Compania Naviera Perez Companc SA
MULTI-INDUSTRY 999,039
48,000 Quilmes Industrial SA ADR
CONSUMER NON-DURABLE 531,001
259,200 Telecom Argentina Stet - Fran Tel SA
TELECOMMUNICATIONS 1,845,688
258,000 Telefonica de Argentina SA
TELECOMMUNICATIONS 990,819
30,300 Telefonica de Argentina SA ADR
TELECOMMUNICATIONS 1,168,444
110,200 YPF Sociedad Anonima ADR
ENERGY 3,843,226
-------------------
11,942,799
-------------------
BOTSWANA - 0.5%
COMMON STOCK
1,003,000 Sechaba Ord(a)
SERVICES 1,604,220
-------------------
BRAZIL - 15.9%
COMMON STOCK
99,200,000 Centrais Eletricas Brasileiras SA - Eletrobras(a)
ENERGY 4,118,881
1,927,000 Companhia Cervejaria Brahma
SERVICES 1,254,910
37,000,000 Companhia Energetica de Minas Gerais
SERVICES 1,778,846
88,000 Companhia Paranaense de Energia-Cope
ENERGY 1,254,000
16,440,000 Companhia Paulista de Forca e Luz - CPFL
ENERGY 2,112,485
3,680,000 Light - Servicos de Electricidade SA
ENERGY 1,407,345
</TABLE>
13
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF APRIL 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
SHARES VALUE US$
------ ---------
BRAZIL (CONCLUDED)
COMMON STOCK
40,423,000 Telecomunicacoes Brasileiras SA - Telebras
TELECOMMUNICATIONS $ 3,985,764
51,000 Telecomunicacoes Brasileiras SA Telebras ADR
TELECOMMUNICATIONS 6,212,438
41,000 Unibanco-Uniao Bco(b)
FINANCE 1,629,750
PREFERRED STOCK
176,753,836 Banco Brasileiro de Decontos SA
FINANCE 1,622,304
19,000,000 Banco Nacional SA(a)(b)
FINANCE 0
65,510,000 Centrais Eletricas Brasileiras SA - Eletrobras
ENERGY 2,943,369
108,300 Companhia Vale Rio Doce
FINANCE 2,603,365
1,180,250 IKPC - Industrias Klabin de Papel e Celulose SA
SERVICES 753,132
1,345,000 Itausa Investimentos Itau SA
MULTI-INDUSTRY 1,128,672
23,790,000 Petrol Brasileiro - Petrobras
ENERGY 6,020,284
8,607,062 Telecomunicacoes de Sao Paulo SA - TELESP
TELECOMMUNICATIONS 2,911,654
2,464,858 Telecomunicacoes do Parana SA-Telepar
TELECOMMUNICATIONS 1,368,168
6,789,194 Telecomunicacoes do Rio de Janeiro SA-Telerj
CAPITAL EQUIPMENT 1,023,720
115,530 Usinas Siderurgicas de Minas Gerais SA
CAPITAL EQUIPMENT 797,804
47,200 Vale Rio Doce B shares(b)
MATERIALS 0
-------------------
44,926,891
-------------------
CHILE - 3.8%
COMMON STOCK
23,500 Administradora de Fondos de Pensiones Provida SA ADR
MATERIALS 420,063
29,700 Banco de A Edwards SP ADR
FINANCE 477,058
78,400 Banco Santander Chile ADR
FINANCE 1,097,600
</TABLE>
14
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF APRIL 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
SHARES VALUE US$
------ ---------
CHILE (CONCLUDED)
52,200 Chilectra SA
ENERGY $ 1,415,825
27,700 Compania Cervecerias Unidas SA
SERVICES 765,212
116,925 Compania de Telecomunicacion de Chile SA ADR
TELECOMMUNICATIONS 2,930,434
24,400 Distribucion y Servico D&S SA ADR
RETAIL 430,050
61,841 Gener SA
ENERGY 1,383,693
2,800 Maderas y Sinteticos Sociedad Anonima SA ADR
MULTI-INDUSTRY 26,775
26,800 Quimica y Minera Chile SA ADR
MATERIALS 1,164,125
32,000 Quinenco SA ADR
MULTI-INDUSTRY 330,001
12,928 Santa Isabel SA ADR
SERVICES 213,312
-------------------
10,654,148
-------------------
CHINA, PEOPLES REPUBLIC OF - 0.4%
COMMON STOCK
1,742,000 Beijing Datang Power Gen H
ENERGY 708,395
1,163,000 Qingling Motors Co.
SERVICES 502,969
-------------------
1,211,364
-------------------
CROATIA - 0.4%
COMMON STOCK
60,060 Pliva DD GDR
CONSUMER GOODS 1,076,575
-------------------
CZECH REPUBLIC - 0.8%
COMMON STOCK
11,850 SPT Telekom AS(a)
ENERGY 1,723,734
2,430 Tabak AS
CONSUMER GOODS 639,522
-------------------
2,363,256
-------------------
</TABLE>
15
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF APRIL 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
SHARES VALUE US$
------ ---------
EGYPT - 0.7%
COMMON STOCK
122,000 Commercial International Bank GDR
FINANCE $ 2,067,900
-------------------
GREECE - 3.4%
COMMON STOCK
18,680 Alpha Credit Bank
FINANCE 1,969,675
5,000 Delta Informatics SA
SERVICES 190,812
117,860 Hellenic Bottling Co. SA
CONSUMER GOODS 4,385,382
105,240 Hellenic Telecom Organization
SERVICES 3,012,164
-------------------
9,558,033
-------------------
HONG KONG - 2.9%
COMMON STOCK
676,000 Anhui Expressway Co. Ltd.
CAPITAL EQUIPMENT 107,341
366,000 Cheung Kong Infrastructure Holdings
CAPITAL EQUIPMENT 928,454
1,849,000 China Resources Beijing Land
FINANCE 978,674
411,000 China Telecom (Hong Kong)(a)
SERVICES 779,967
113,000 Citic Pacific Ltd.
MULTI-INDUSTRY 347,194
336,000 Cosco Pacific Ltd.
SERVICES 227,728
316,000 Founder Hong Kong Ltd.
SERVICES 263,126
426,000 Guangnan Holdings
SERVICES 274,977
1,139,000 Guangnan Railway
SERVICES 213,211
71,400 Huaneng Power International Inc. ADR(a)
ENERGY 1,570,921
630,000 Legend Holdings Ltd.(a)
SERVICES 270,426
441,000 New World Infrastructure(a)
FINANCE 947,916
</TABLE>
16
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF APRIL 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
SHARES VALUE US$
------ ---------
HONG KONG (CONCLUDED)
COMMON STOCK
126,000 Ng Fung Hong Ltd.
SERVICES $ 113,864
4,412,000 Yanzhou Coal Mining Co., Ltd.(a)
SERVICES 1,153,393
-------------------
8,177,192
-------------------
HUNGARY - 3.3%
COMMON STOCK
30,460 BorsodChem RT
MATERIALS 1,155,809
18,200 Gedeon Richter RT
CONSUMER GOODS 1,942,850
72,848 Matav RT ADR(a)
SERVICES 1,999,016
53,230 MOL Magyar Olaj GDR
ENERGY 1,624,846
19,720 Magyar Olag-Es Gazipare GDR(a)
OTHER 601,953
23,770 OTP Bank GDR
FINANCE 1,143,337
25,599 Pannonplast RT
MATERIALS 1,086,067
-------------------
9,553,878
-------------------
INDIA - 8.5%
COMMON STOCK
16,000 Associated Cement Co.(a)
MATERIALS 629,888
16,000 BSES Ltd.
ENERGY 74,209
90,000 Bajaj Auto Ltd.(a)
CAPITAL EQUIPMENT 1,350,057
283,000 Bharat Heavy Electricals Ltd.
CAPITAL EQUIPMENT 2,800,429
275,000 Bharat Petroleum
ENERGY 2,769,734
1,075,000 Great Eastern Shipping Co.
MULTI-INDUSTRY 1,123,317
13,000 Hindustan lever Ltd.
MULTI-INDUSTRY 516,203
</TABLE>
17
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF APRIL 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
SHARES VALUE US$
------ ---------
INDIA (CONCLUDED)
COMMON STOCK
98,700 Hindustan Petroleum Corp. Ltd.
ENERGY $ 1,006,386
113,992 ITC Ltd.
CONSUMER GOODS 2,272,090
37,900 Indian Hotels Co. Ltd.
SERVICES 505,541
478,000 Mahanagar Telephone Nigam Ltd.
TELECOMMUNICATIONS 3,033,012
51,000 Mahindra & Mahindra Ltd.
CAPITAL EQUIPMENT 371,247
94,000 Ranbaxy Laboratories Ltd.
CONSUMER GOODS 1,570,415
500,000 Reliance Industries Ltd.
MATERIALS 2,421,629
420,000 State Bank of India
FINANCE 3,050,988
30,300 Videsh Sanchar Nigam Ltd.
TELECOMMUNICATIONS 591,275
-------------------
24,086,420
-------------------
INDONESIA - 1.1%
COMMON STOCK
35,000 Gulf Indonesia Resources Ltd.(a)
ENERGY 538,126
183,000 PT Gudang Garam
CAPITAL EQUIPMENT 216,427
904,000 PT Indofoods Sukses Makmur
CONSUMER GOODS 380,631
351,500 PT Indostat ADR
TELECOMMUNICATIONS 509,292
933,000 PT Hanjaya Mandala Sampoerna
CONSUMER NON-DURABLES 603,704
152,000 PT Tambang Timah
MATERIALS 125,647
1,792,000 PT Telekomunikasi Indonesia
TELECOMMUNICATIONS 699,045
-------------------
3,072,872
-------------------
</TABLE>
18
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF APRIL 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
SHARES VALUE US$
------ ---------
ISRAEL - 3.3%
COMMON STOCK
1,940,900 Bank Leumi Le-Israel
FINANCE $ 3,542,343
88,900 Blue Square-Israel Ltd.
SERVICES 1,422,400
59,210 ECI Telecommunications Ltd.
CAPITAL EQUIPMENT 1,805,905
88,290 Osem Investment Ltd.
CONSUMER GOODS 371,858
49,470 Teva Pharmaceutical Industries Ltd. ADR
CONSUMER GOODS 2,114,843
WARRANTS
107,500 Bank Leumi 4(a)
FINANCE 24,699
-------------------
9,282,048
-------------------
KOREA, REPUBLIC OF - 3.9%
COMMON STOCK
171,000 Daewoo Heavy Industries
FINANCE 845,724
184,376 Kookmin Bank GDR(a)
FINANCE 1,165,715
63,010 Korea Electric Power Corp.
ENERGY 858,049
173,090 L.G. Electronics
CAPITAL EQUIPMENT 2,059,209
29,173 L.G. Information and Communication Ltd.
CAPITAL EQUIPMENT 886,214
10,000 Pohang Iron & Steel Co. Ltd.
MATERIALS 535,446
1,327 SK Telecom Co. Ltd.(b)
TELECOMMUNICATIONS 792,536
6,296 Samsung Display Devices Co.
CAPITAL EQUIPMENT 313,269
50,944 Samsung Electronics Co.
CAPITAL EQUIPMENT 2,820,694
39,000 Samsung Heavy Industries(a)
CAPITAL EQUIPMENT 275,466
55,250 Ssangyong Oil Refining Co. Ltd.
ENERGY 411,166
</TABLE>
19
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF APRIL 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
SHARES VALUE US$
------ ---------
KOREA, REPUBLIC OF (CONCLUDED)
RIGHTS - 0.0%
4,053 Samsung Electronics America, Inc.
CONSUMER DURABLES $ 78,240
-------------------
11,041,728
-------------------
MALYAYSIA - 0.8%
COMMON STOCK
68,000 Berjaya Sports Toto Berhad
SERVICES 160,909
327,000 Magnum Corp Berhad
SERVICES 218,583
189,000 Resorts World Berhad
SERVICES 363,850
174,000 Tanjong plc
OTHER 395,455
127,000 Telekom Malaysia Berhad
SERVICES 380,321
350,000 Tenaga Nasional Berhad
ENERGY 697,193
-------------------
2,216,311
-------------------
MAURITIUS - 0.5%
COMMON STOCK
2,250,000 State Bank of Mauritius Ltd.(a)
FINANCE 1,531,508
-------------------
MEXICO - 12.8%
COMMON STOCK
17,600 Bufete Industrial SA ADR(a)
CAPITAL EQUIPMENT 96,800
963,720 Cemex SA de CV
MATERIALS 4,807,533
2 Cifra SA - Ser A
SERVICES 3
2,343,000 Cifra SA de CV
SERVICES 4,045,984
438,000 Consorcio ARA SA(a)
CAPITAL EQUIPMENT 2,182,390
1,108,000 Controladora Comercial Mexicana SA de CV
SERVICES 1,359,958
219,000 Desc SA de CV
MULTI-INDUSTRY 1,503,940
</TABLE>
20
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF APRIL 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
SHARES VALUE US$
------ ---------
MEXICO (CONCLUDED)
COMMON STOCK
523,000 Fomento Economico Mexicano SA de CV
SERVICES $ 4,029,000
286,400 Grupo Carso SA de CV
MULTI-INDUSTRY 1,821,732
2,050,000 Grupo Financiero Bancomer
SERVICES 1,415,042
367,000 Grupo Industrial Bimbo SA
RETAIL 964,028
267,000 Grupo Industrial Saltillo SA de CV
MULTI-INDUSTRY 1,132,222
47,600 Grupo Televisa SA(a)
SERVICES 1,951,600
158,800 Hylsamex SA
CAPITAL EQUIPMENT 733,255
332,500 Kimberly-Clark de Mexico SA de CV
SERVICES 1,619,515
760,000 Sistema Argos SA de CV
CONSUMER NON-DURABLES 866,576
109,500 Telefonos de Mexico SA ADR
TELECOMMUNICATIONS 6,200,439
47,600 Tubos de Acero de Mexico SA ADR(a)
MATERIALS 874,651
37,000 TV Azteca SA de CV
SERVICES 689,125
-------------------
36,293,793
-------------------
PAKISTAN - 0.8%
COMMON STOCK
68,000 Hub Power Co. Ltd.(b)
MULTI-INDUSTRY 1,751,000
6,000 Pakistan Telecommunications Corp.
SERVICES 414,000
-------------------
2,165,000
-------------------
PERU - 0.3%
COMMON STOCK
40,500 CPT Telefonica del Peru SA ADR
TELECOMMUNICATIONS 896,063
-------------------
</TABLE>
21
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF APRIL 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
SHARES VALUE US$
------ ---------
PHILIPPINES - 1.8%
COMMON STOCK
3,253,012 Ayala Land Inc.
FINANCE $ 1,276,084
11,134,000 Digital Telecommunications Phils., Inc.(a)
TELECOMMUNICATIONS 482,519
9,000 Far East Bank & Trust Co.
FINANCE 10,199
350,280 Manila Electric Co. "B" Shares
ENERGY 994,566
81,540 Philippine Long Distance Telephone Co.
TELECOMMUNICATIONS 2,183,195
-------------------
4,946,563
-------------------
POLAND - 2.6%
COMMON STOCK
7,850 Bank Przemslowo-Handlowy SA
FINANCE 693,361
67,280 Bank Rozwoju Eksportu SA
FINANCE 1,931,341
208,330 Bydgoska Fabryka Kabli SA(a)
CAPITAL EQUIPMENT 1,901,436
46,260 Gorazdze
MATERIALS 1,280,270
48,850 Krosno SA(a)
MATERIALS 401,271
35,000 WBK Ord
FINANCE 271,015
81,004 Zaklandy Metali Lekkich Kety(a)
MATERIALS 1,133,134
-------------------
7,611,828
-------------------
PORTUGAL - 4.8%
COMMON STOCK
28,750 Banco Espirito Santo e Comercial de Lisboa
FINANCE 1,375,373
32,550 Compania de Seguros Mundial Confianc(a)
FINANCE 1,124,612
71,540 Estabelecimentos Jeronimo Martins & Filho
RETAIL 3,344,392
32,640 Portugal Telecom
ENERGY 1,753,988
</TABLE>
22
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF APRIL 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
SHARES VALUE US$
------ ---------
PORTUGAL (CONCLUDED)
COMMON STOCK
131,780 Semapa - Sociedade de Investimento e Gestao SGPS SA
MATERIALS $ 3,854,179
12,830 Telecel-Comunicacaoes Pessoais SA(a)
ENERGY 2,301,657
-------------------
13,754,201
-------------------
RUSSIA - 2.5%
COMMON STOCK
96,470 Gazprom ADR
ENERGY 1,777,461
23,695 Lukoil Holding
ENERGY 1,561,666
128,000 Surgutneftegaz ADR
ENERGY 943,845
88,650 Unified Energy System(a)
ENERGY 2,789,888
-------------------
7,072,860
-------------------
SLOVAK REPUBLIC - 0.1%
COMMON STOCK
9,076 Nafta Gbely AS
SERVICES 204,904
-------------------
SOUTH AFRICA - 9.2%
COMMON STOCK
263,800 Amalgamated Banks of South Africa
FINANCE 2,282,458
57,800 Anglo American Corp. of South Africa Ltd.
MATERIALS 3,417,818
288,829 Barlow Ltd.
MULTI-INDUSTRY 2,790,328
325,000 Billiton plc
MATERIALS 919,115
89,716 Dimension Data Holdings Ltd.(a)
CAPITAL EQUIPMENT 622,769
85,000 Dorbyl Ltd.
CAPITAL EQUIPMENT 571,542
101,776 Ellerine Holdings Ltd.
SERVICES 1,056,707
140,100 Fedsure Holdings Ltd.
FINANCE 2,341,235
</TABLE>
23
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONCLUDED)
AS OF APRIL 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
SHARES VALUE US$
------ ---------
SOUTH AFRICA (CONCLUDED)
COMMON STOCK
119,000 First National Bank Holdings
SERVICES $ 1,553,250
594,200 Malbak Ltd.
MULTI-INDUSTRY 564,060
635,000 NMBZ Holdings Ltd.(a)
FINANCE 444,500
369,000 Nampak Ltd.
SERVICES 1,590,865
186 New Clicks Holdings Ltd.
SERVICES 294
189,800 Rembrandt Group Ltd.
FINANCE 1,726,649
238,000 Sasol Ltd.
ENERGY 2,400,475
89,168 South African Breweries Ltd.
SERVICES 2,990,782
115,314 South African Druggists Ltd.
CONSUMER GOODS 638,543
-------------------
25,911,390
-------------------
TAIWAN - 4.4%
COMMON STOCK
100,000 Acer Inc. GDR(a)
CAPITAL EQUIPMENT 865,000
681 Asia Cement Corp. GDR
CAPITAL EQUIPMENT 7,304
58,000 Asustek Computer, Inc.(a)
MULTI-INDUSTRY 1,196,250
66,000 Fubon Insurance Co. Ltd. GDR(a)
FINANCE 1,321,650
158,500 ROC Taiwan Fund
FINANCE 1,347,250
67,200 Siliconware Precision Industries Co.(a)
CAPITAL EQUIPMENT 1,013,040
92,000 Taiwan Fund Inc.
FINANCE 1,518,000
145,000 Taiwan Semiconductor Manufacturing Co.(a)
CAPITAL EQUIPMENT 3,561,565
139,345 Teco Electric & Mach GDR
CAPITAL EQUIPMENT 1,724,394
-------------------
12,554,453
-------------------
</TABLE>
24
<PAGE>
- - -----------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONCLUDED)
AS OF APRIL 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
SHARES VALUE US$
------ ---------
THAILAND - 1.4%
COMMON STOCK
93,000 Advanced Info Service Public Co., Ltd.
SERVICES $ 649,255
271,000 Bangkok Bank Public Co., Ltd.
FINANCE 679,688
256,000 Electricity Generating Public Co. Ltd.
ENERGY 496,443
135,000 PTT Exploration and Production Public Co. Ltd.
MATERIALS 1,424,172
298,000 Thai Farmers Bak Public Co. Ltd.
FINANCE 681,912
-------------------
3,931,470
-------------------
TURKEY - 1.7%
COMMON STOCK
12,774,470 Akbank TAS
FINANCE 1,085,721
1,750,640 Migros Turk
SERVICES 1,715,455
5,223,720 Netas Telekomunik(a)
ENERGY 1,943,030
-------------------
4,744,206
-------------------
VENEZUELA - 0.6%
COMMON STOCK
2,955,293 Electricidad De Caracas
ENERGY 1,878,335
-------------------
ZIMBABWE - 0.1%
COMMON STOCK
153,000 Meikles Africa Ltd.(a)
MATERIALS 195,075
-------------------
</TABLE>
25
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONCLUDED)
AS OF APRIL 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
PAR VALUE US$
--- ---------
REPURCHASE AGREEMENTS - 1.4%
4,000,000 Chase Securities, Inc., 5.45%, 5/1/98, to be
repurchased at $4,000,606. Collateralized by
$2,565,000 U.S. Treasury Notes, 5.66%, 11/15/11 $ 4,000,000
-------------------
595,658,370 Total Investments - 98.9% (cost $253,061,789) 280,527,284
Other Assets Less Liabilities - 1.1% 2,736,347
-------------------
Total Net Assets - 100% $ 283,263,631
===================
</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
26
<PAGE>
- - ------------------------------------------------------------------------------
Schroder Emerging Markets Fund Institutional Portfolio (Portfolio)
- - ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 eight 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. Domestic short-term investments having a maturity of 60 days
or less are valued at amortized cost, which approximates market value. Foreign
short-term investments are valued at the current market price then marked to
market to recognize any gain or loss on the transaction. 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. As of April 30, 1998, the Portfolio had did not hold a
position in Fair valued securities.
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 on 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.
31
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
The Portfolio may enter into forward contracts to purchase or sell foreign
currencies to protect on the U.S. dollar value of the underlying portfolio
against the effect 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 includes 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 of its portfolios. Expenses that are directly
attributable to more than one portfolio are allocated among the respective
portfolios in proportion to each portfolio's net assets.
ORGANIZATIONAL COSTS - Costs incurred by the Portfolio in connection with its
organization are 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.
ADMINISTRATOR AND SUBADMINISTRATOR - 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 ("FAdS"). For its services, Schroder Advisors and FAdS 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, subject to
an annual minimum fee of $25,000, payable to FAdS for subadministration
servieces.
OTHER SERVICE PROVIDERS - Forum Accounting Services, LLC ("FAcS") 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. FAcS also 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.
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 period ended April 30, 1998
aggregated $95,528,708 and $65,080,261, respectively.
32
<PAGE>
- - ------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- - ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONCLUDED)
For federal income tax purposes, the tax basis of investment securities owned as
of April 30, 1998 was $280,139,637 and the net unrealized appreciation of
investment securities was $27,212,915. The aggregate gross unrealized
appreciation for all securities in which there was an excess of market value
over tax cost was $54,016,428, and aggregate gross unrealized depreciation for
all securities in which there was an excess of tax cost over market value was
$26,803,513.
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 in
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 April
30, 1998, the Portfolio decreased net unrealized appreciation on investments by
the estimated tax liability attributable to Indian investments of $58,476 and
decreased net realized losses on investments by $85,301 for taxes incurred on
losses 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. SCMI, Schroder Advisors, FAdS and FAcS may waive
voluntarily all or a portion of their fees from time to time. SCMI waived fees
of $324,328 and $534,861 for the period ended April 30, 1998 and the year ended
October 31, 1997, respectively.
NOTE 7. PURCHASE AND REDEMPTION FEE
Purchases and redemptions of interest in the Portfolio are subject to a
transaction 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, FAdS
or any other entity. The purchase and redemption fees for the period ended April
30, 1998 were $225,926 and $155,064, 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.
33
