As filed with the Securities and Exchange Commission on September 28, 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. 12
SCHRODER CAPITAL FUNDS
Two Portland Square
Portland, Maine 04101
207-879-1900
Cheryl O. Tumlin, Esq.
Forum Financial Services, Inc.
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.
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PART A
(Private Placement Memorandum)
SCHRODER CAPITAL FUNDS
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International Equity Fund
Schroder EM Core Portfolio
Schroder International Smaller Companies Portfolio
Schroder U.S. Smaller Companies Portfolio
Schroder Global Growth Portfolio
October 1, 1998
Introduction
Schroder Capital Funds (the "Trust") is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended (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 all the portfolios (other than Schroder Emerging
Markets Fund Institutional Portfolio, Schroder Japan Portfolio and Schroder
Asian Growth Fund Portfolio). The portfolios herein are referred to as a
"Portfolio" and collectively, the "Portfolios". Schroder Capital Management
International Inc. ("SCMI") is each Portfolio's investment adviser. Each of the
Portfolios, except Schroder EM Core Portfolio, is "diversified".
Interests are offered on a no-load basis exclusively to various qualified
investors (including other investment companies) as described under "General
Description of Registrant". Interests of the Trust are not offered publicly and,
accordingly, are not registered under the Securities Act of 1933 (the "1933
Act").
GENERAL DESCRIPTION OF REGISTRANT
The Trust was organized as a business trust under the law of the State of
Delaware on September 7, 1995 under a Trust Instrument dated September 6, 1995.
The Trust has an unlimited number of authorized Interests. The assets of each
Portfolio, and of any other portfolios now existing or created in the future,
belong only to the Portfolio or those other portfolios, as the case may be. The
assets belonging to a Portfolio are charged with the liabilities of and all
expenses, costs, charges and reserves attributable to that Portfolio. Schroder
EM Core Portfolio is a non-diversified series of the Trust. Each of the other
Portfolios is a diversified series of the Trust.
Interests in each Portfolio are offered solely in private placement transactions
that do not involve any "public offering" within the meaning of Section 4(2) of
the 1933 Act. Investments in the Portfolio may be made only by certain qualified
investors (generally excluding S corporations, partnerships, and grantor trusts
beneficially owned by any individuals, S corporations, or partnerships).
Investors may be organized within or outside the U.S. This registration
statement does not constitute an offer to sell, or the solicitation of an offer
to buy, any "security" within the meaning of the 1933 Act.
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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
Portfolios. 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
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.
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TABLE OF CONTENTS
Page
Introduction 1
General Description of Registrant 1
Investment Objectives and Policies 3
Investment Restrictions 12
Management of the Trust 14
Capital Stock and Other Securities 15
Purchase of Securities 16
Redemption or Repurchase 17
Pending Legal Proceedings 18
Appendix A
INVESTMENT OBJECTIVES AND POLICIES
Each Portfolio has a different investment objective that it pursues
through the investment policies described below.
Because of the differences in objectives and policies among the
Portfolios, the Portfolios will achieve different investment returns and will be
subject to varying degrees of market and financial risk. There is no assurance
that any Portfolio will achieve its objective. None of the Portfolios is
intended to be a complete investment program.
A Portfolio's investment objective may not be changed without
interestholder approval. The investment policies of each Portfolio may, unless
otherwise specifically stated, be changed by the Trust's Board of Trustees
without a vote of the interestholders. All percentage limitations on investments
will apply at the time of investment and will not be considered violated unless
an excess or deficiency occurs or exists immediately after and as a result of
the investment, except that the policies stated with regard to borrowing and
liquidity will be observed at all times.
INTERNATIONAL EQUITY FUND
International Equity Fund's investment objective is long-term capital
appreciation through investment in securities markets outside the United States.
Equity securities in which the Portfolio may invest include common stocks,
preferred stocks, securities convertible into common or preferred stocks, and
rights or warrants to purchase any of the foregoing. They may also include
American Depositary Receipts, European Depositary Receipts, and other similar
instruments providing for indirect investment in securities of foreign issuers.
The Portfolio may also invest in securities of closed-end investment companies
that invest in turn primarily in foreign securities.
The Portfolio normally invests at least 65% of its assets in equity
securities of companies domiciled outside the United States and will invest in
securities of issuers domiciled in at least three countries other than the
United States. There is no limit on the amount of the Portfolio's assets that
may be invested in securities of issuers domiciled in any one country. When the
Portfolio has invested a substantial portion of its assets in the securities of
companies domiciled in a single country, it will be more susceptible to the
risks of investing in that country than would a fund investing in a
geographically more diversified portfolio. The Portfolio normally invests a
substantial portion of its assets in countries included in the Morgan Stanley
Capital International EAFE Index, which is a market capitalization index of
companies in developed countries in Europe, Australia and the Far East. Other
countries in which the Portfolio may invest may be considered "emerging markets"
and involve special risks. See "Other Investment Practices and Risk
Considerations -- Foreign Securities."
The Portfolio may invest in debt securities, including, for example,
securities of foreign governments (including provinces and municipalities) or
their agencies or instrumentalities, securities issued or guaranteed by
international organizations designated or supported by multiple foreign
governmental entities to promote economic reconstruction or development, and
debt securities of foreign corporations or financial institutions. The Portfolio
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may invest up to 5% of its net assets in lower-quality, high yielding debt
securities, which entail certain risks. See "Other Investment Practices and Risk
Considerations -- Debt Securities."
SCHRODER EM CORE PORTFOLIO
Schroder EM Core Portfolio's investment objective is to seek long-term
capital appreciation. The Portfolio invests primarily in equity securities of
issuers domiciled or doing business in emerging market countries in regions such
as Southeast Asia, Latin America, and Eastern and Southern Europe. The Portfolio
is "non-diversified".
An "emerging market" country is any country not included at the time of
investment in the Morgan Stanley Capital International World Index of major
world economies. Those economies currently include: Australia, Austria, Belgium,
Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, the
Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,
Switzerland, the United Kingdom, and the United States of America. SCMI may at
times determine based on its own analysis that an economy included in the Index
should nonetheless be considered an emerging market country; any such country
would then constitute an emerging market country for purposes of investment by
the Portfolio.
The Portfolio normally invests at least 65% of its assets in equity
securities of issuers determined by SCMI to be emerging market issuers. Equity
securities include common stocks, preferred stocks, securities convertible into
common or preferred stocks, and rights or warrants to purchase any of the
foregoing. They may also include American Depositary Receipts, European
Depositary Receipts, and other similar instruments providing for indirect
investment in securities of foreign issuers. The Portfolio may also invest in
securities of closed-end investment companies that invest in turn primarily in
foreign securities, including emerging market issuers.
The remainder of the Portfolio's assets may be invested in securities of
issuers located anywhere in the world. The Portfolio may invest up to 35% of its
assets in debt securities, including lower-quality, high-yielding debt
securities, which entail certain risks. See "Other Investment Practices and Risk
Considerations -- Debt Securities."
An issuer of a security will be considered to be an emerging market issuer
if SCMI determines that: (1) it is organized under the laws of an emerging
market country; (2) its primary securities trading market is in an emerging
market country; (3) at least 50% of the issuer's revenues or profits are derived
from goods produced or sold, investments made, or services performed in emerging
market countries; or (4) at least 50% of its assets are situated in emerging
market countries. The Portfolio may consider investment companies to be located
in the country or countries in which SCMI determines they focus their
investments.
There is no limit on the amount of the Portfolio's assets that may be
invested in securities of issuers domiciled in any one country. When the
Portfolio has invested a substantial portion of its assets in the securities of
companies domiciled in a single country, it will be more susceptible to the
risks of investing in that country than would a fund investing in a
geographically more diversified portfolio.
SCHRODER INTERNATIONAL SMALLER COMPANIES PORTFOLIO
Schroder International Smaller Companies Portfolio's investment objective
is long-term capital appreciation through investment in securities markets
outside the United States. The Portfolio normally invests at least 65% of its
assets in equity securities of companies domiciled outside the United States
that have market capitalizations of $1.5 billion or less at the time of
investment. In selecting investments for the Portfolio, SCMI considers a number
of factors, including, for example, the company's potential for long-term
growth, the company's financial condition, its sensitivity to cyclical factors,
the relative value of the company's securities (to those of other companies and
to the market as a whole), and the extent to which the company's management owns
equity in the company.
Equity securities in which the Portfolio may invest include common stocks,
preferred stocks, securities convertible into common or preferred stocks, and
rights or warrants to purchase any of the foregoing. They may also include
American Depositary Receipts, European Depositary Receipts, and other similar
instruments providing for indirect investment in securities of foreign issuers.
The Portfolio may also invest in securities of closed-end investment companies
that invest in turn primarily in foreign securities.
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The Portfolio generally invests in securities of issuers domiciled in at
least three countries other than the United States, although there is no limit
on the amount of the Portfolio's assets that may be invested in securities of
issuers domiciled in any one country. When the Portfolio has invested a
substantial portion of its assets in the securities of companies domiciled in a
single country, it will be more susceptible to the risks of investing in that
country than would a Portfolio investing in a geographically more diversified
portfolio. The Portfolio normally invests a substantial portion of its assets in
countries included in the Morgan Stanley Capital International EAFE Index, which
is a market capitalization index of companies in developed market countries in
Europe, Australia, and the Far East. Other countries in which the Portfolio may
invest may be considered "emerging markets" and involve special risks. See
"Other Investment Practices and Risk Considerations -- Foreign Securities".
Smaller companies may present greater opportunities for investment return
than do larger companies, but also involve greater risks. Smaller companies may
have limited product lines, markets, or financial resources, or may depend on a
limited management group. Their securities may trade less frequently and in
limited volume. As a result, the prices of these securities may fluctuate more
than prices of securities of larger, more widely traded companies. See "Other
Investment Practices and Risk Considerations -- Investments in Smaller
Companies".
The Portfolio may invest in debt securities, including, for example,
securities of foreign governments, international organizations, foreign
corporations, and U.S. government obligations. The Portfolio may invest up to 5%
of its total assets in lower-quality, high yielding debt securities, which
entail certain risks. See "Other Investment Practices and Risk Considerations--
Debt Securities."
SCHRODER U.S. SMALLER COMPANIES PORTFOLIO
Schroder U.S. Smaller Companies Portfolio's investment objective is to seek
capital appreciation. The Portfolio invests at least 65% of its assets in equity
securities of U.S.-domiciled companies that have at the time of purchase market
capitalizations of $1.5 billion or less. In selecting investments for the
Portfolio, SCMI seeks to identify securities of companies with strong management
that it believes can generate above average earnings growth, and are selling at
favorable prices in relation to book values and earnings. Equity securities in
which the Portfolio may invest include common stocks, preferred stocks,
securities convertible into common or preferred stocks, and rights or warrants
to purchase any of the foregoing.
The Portfolio may also invest in equity securities of larger companies and
in debt securities, if SCMI believes such investments are consistent with the
Portfolio's investment objective. The Portfolio may invest up to 5% of its
assets in lower-quality, high yielding debt securities, which entail certain
risks. See "Other Investment Practices and Risk Considerations -- Debt
Securities."
Smaller companies may present greater opportunities for investment return
than do larger companies, but also involve greater risks. They may have limited
product lines, markets, or financial resources, or may depend on a limited
management group. Their securities may trade less frequently and in limited
volume. As a result, the prices of these securities may fluctuate more than
prices of securities of larger, widely traded companies. See "Other Investment
Practices and Risk Considerations -- Investments in Smaller Companies." The
Portfolio intends to invest no more than 25% of its total assets in securities
of small companies that, together with their predecessors, have been in
operation for less than three years.
SCHRODER GLOBAL GROWTH PORTFOLIO
Schroder Global Growth Portfolio's investment objective is to seek
long-term growth of capital. It seeks to achieve this objective by investing in
common stocks of companies located anywhere in the world, including the United
States. The Portfolio invests in common stocks of companies located in
developed, newly industrialized and emerging markets. Under normal market
conditions, the Portfolio invests at least 65% of its total assets in equity
securities of companies located in at least five countries, one of which is the
United States. Equity securities include common stocks, preferred stocks,
convertible preferred stocks, stock rights and warrants, and convertible debt
securities. Investments in stock rights and warrants are not considered in the
65% of total assets determination. The Portfolio may purchase stocks without
regard to a company's market capitalization, although investments generally
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are concentrated in larger and, to a lesser extent, medium-sized companies
relative to the particular market. The percentage of the Portfolio's assets
invested in U.S. and non-U.S. stocks varies over time in accordance with the
investment adviser's outlook.
Stock selection is at the heart of SCMI's investment process. SCMI
emphasizes fundamental company analysis in seeking companies that it believes
have a sustainable competitive advantage and whose growth potential is
undervalued by investors. In selecting companies for investment, SCMI considers
historical growth rates and future growth prospects, management capability,
competitive position in both domestic and export markets, and other factors.
SCMI also seeks to add value through active geographic allocation. Its
allocation decisions are based upon its assessment of the likelihood that the
country will have a favorable long-term business environment in which corporate
growth will not be impeded materially by adverse macroeconomics or political
factors.
OTHER INVESTMENT PRACTICES AND RISK CONSIDERATIONS
The Portfolios may also engage in the following investment practices, each
of which involves certain special risks. The SAI contains more detailed
information about these practices (some of which may be considered "derivative"
investments), including limitations designed to reduce these risks.
FOREIGN SECURITIES. Investments in foreign securities entail certain
risks. There may be a possibility of nationalization or expropriation of assets,
confiscatory taxation, political or financial instability, and diplomatic
developments that could affect the value of a Portfolio's investments in certain
foreign countries. Since foreign securities are normally denominated and traded
in foreign currencies, the values of the Portfolio's assets may be affected
favorably or unfavorably by currency exchange rates, currency exchange control
regulations, foreign withholding taxes and restrictions or prohibitions on the
repatriation of foreign currencies. There may be less information publicly
available about a foreign issuer than about a U.S. issuer, and foreign issuers
are not generally subject to accounting, auditing, and financial reporting
standards and practices comparable to those in the United States. The securities
of some foreign issuers are less liquid and at times more volatile than
securities of comparable U.S. issuers. Foreign brokerage commissions and other
fees are also generally higher than in the United States. Foreign settlement
procedures and trade regulations may involve certain risks (such as delay in
payment or delivery of securities or in the recovery of a Portfolio's assets
held abroad) and expenses not present in the settlement of domestic investments.
In addition, legal remedies available to investors in certain foreign
countries may be more limited than those available with respect to investments
in the United States or in other foreign countries. The willingness and ability
of sovereign issuers to pay principal and interest on government securities
depends on various economic factors, including without limitation the issuer's
balance of payments, overall debt level, and cash-flow considerations related to
the availability of tax or other revenues to satisfy the issuer's obligations.
If a foreign governmental entity is unable or unwilling to meet its obligations
on the securities in accordance with their terms, a Portfolio may have limited
recourse available to it in the event of default. The laws of some foreign
countries may limit a Portfolio's ability to invest in securities of certain
issuers located in those foreign countries. Special tax considerations apply to
foreign securities. Except as otherwise provided in this Prospectus, there is no
limit on the amount of a Portfolio's assets that may be invested in foreign
securities.
If a Portfolio purchases securities denominated in foreign currencies,
a change in the value of any such currency against the U.S. dollar will result
in a change in the U.S. dollar value of the Portfolio's assets and the
Portfolio's income available for distribution. In addition, although at times
most of a Portfolio's income may be received or realized in these currencies,
the Portfolio will be required to compute and distribute its income in U.S.
dollars. Therefore, if the exchange rate for any such currency declines after
the Portfolio's income has been earned and translated into U.S. dollars but
before payment, the Portfolio could be required to liquidate portfolio
securities to make such distributions. Similarly, if an exchange rate declines
between the time the Portfolio incurs expenses in U.S. dollars and the time such
expenses are paid, the amount of such currency required to be converted into
U.S. dollars in order to pay such expenses in U.S. dollars will be greater than
the equivalent amount in any such currency of such expenses at the time they
were incurred. A Portfolio may buy or sell foreign currencies and options and
futures contracts on foreign currencies for hedging purposes in connection with
its foreign investments.
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In determining whether to invest in debt securities of foreign issuers,
SCMI considers the likely impact of foreign taxes on the net yield available to
the Portfolio and its shareholders. Income received by a Portfolio from sources
within foreign countries may be reduced by withholding and other taxes imposed
by such countries. Tax conventions between certain countries and the United
States may reduce or eliminate such taxes. Any such taxes paid by a Portfolio
will reduce its net income available for distribution to shareholders. In
certain circumstances, a Portfolio may be able to pass through to shareholders
credits for foreign taxes paid. See "Capital Stock and Other Securities".
Certain Portfolios may invest in securities of issuers in emerging
market countries with respect to some or all of their assets. The securities'
prices and relative currency values of emerging market investments are subject
to greater volatility than those of issuers in many more developed countries.
Investments in emerging market countries are subject to the same risks
applicable to foreign investments generally, although those risks may be
increased due to conditions in such countries. For example, the securities
markets and legal systems in emerging market countries may only be in a
developmental stage and may provide few, or none, of the advantages or
protections of markets or legal systems available in more developed countries.
Although many of the securities in which the Portfolios may invest are traded on
securities exchanges, they may trade in limited volume, and the exchanges may
not provide all of the conveniences or protections provided by securities
exchanges in more developed markets. The Portfolios may also invest a
substantial portion of their assets in securities traded in the over-the-counter
markets in such countries and not on any exchange, which may affect the
liquidity of the investment and expose the Portfolios to the credit risk of
their counterparties in trading those investments. Emerging market countries may
experience extremely high rates of inflation, which may adversely affect these
countries' economies and securities markets.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Changes in currency exchange
rates will affect the U.S. dollar values of securities denominated in foreign
currencies. Exchange rates between the U.S. dollar and other currencies
fluctuate in response to forces of supply and demand in the foreign exchange
markets. These forces are affected by the international balance of payments and
other economic and financial conditions, government intervention, speculation,
and other factors, many of which may be difficult (if not impossible) to
predict. A Portfolio may engage in foreign currency 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, a Portfolio may enter into foreign currency exchange
transactions to protect against a change in exchange ratios that may occur
between the date on which the Portfolio contracts to trade a security and the
settlement date ("transaction hedging") in anticipation of placing a trade
("anticipation hedging"); to "lock in" the U.S. dollar value of interest and
dividends to be paid in a foreign currency; or to hedge against the possibility
that a foreign currency in which portfolio securities are denominated or quoted
may suffer a decline against the U.S. dollar ("position hedging").
SCMI may seek to enhance the Portfolio's investment return through
active currency management. SCMI may buy or sell currencies of the Portfolio, on
a spot or forward basis, in an attempt to profit from inefficiencies in the
pricing of various currencies or of debt securities denominated in those
currencies. When investing in foreign securities, a Portfolio usually effects
currency exchange transactions on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign exchange market. A Portfolio incurs foreign exchange
expenses in converting assets from one currency to another.
A Portfolio may also enter into forward currency contracts. A forward
currency contract is an obligation to purchase or sell a specific currency at a
future date (which may be any fixed number of days from the date of the contract
agreed upon by the parties) at a price set at the time of the contract. Forward
contracts do not eliminate fluctuations in the underlying prices of securities
and expose the Portfolio to the risk that the counterparty is unable to perform.
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Forward contracts are not exchange traded, and there can be no
assurance that a liquid market will exist at a time when the Portfolio seeks to
close out a forward contract. Currently, only a limited market, if any, exists
for exchange transactions relating to currencies in certain emerging markets or
to securities of issuers domiciled or principally engaged in business in certain
emerging markets. This may limit a Portfolio's ability to hedge its investments
in those markets. These contracts involve a risk of loss if SCMI fails to
predict accurately changes in relative currency values, the direction of stock
prices or interest rates, and other economic factors.
From time to time, a Portfolio's currency hedging transactions may call
for the delivery of one foreign currency in exchange for another foreign
currency and may at times involve currencies in which its portfolio securities
are not then denominated ("cross hedging"). From time to time, a Portfolio may
also engage in "proxy" hedging; whereby the Portfolio would seek to hedge the
value of portfolio holdings denominated in one currency by entering into an
exchange contract on a second currency, the valuation of which SCMI believes
correlates to the value of the first currency. Cross hedging and proxy hedging
transactions involve the risk of imperfect correlation between changes in the
values of the currencies to which such transactions relate and changes in the
value of the currency or other asset or liability that is the subject of the
hedge.
INVESTMENTS IN SMALLER COMPANIES. Certain Portfolios may invest all or
a substantial portion of their assets in securities issued by small companies.
Such companies may offer greater opportunities for capital appreciation than
larger companies, but investments in such companies may involve certain special
risks. Such companies may have limited product lines, markets, or financial
resources and may be dependent on a limited management group. While the markets
in securities of such companies have grown rapidly in recent years, such
securities may trade less frequently and in smaller volume than more widely held
securities. The values of these securities may fluctuate more sharply than those
of other securities, and a Portfolio may experience some difficulty in
establishing or closing out positions in these securities at prevailing market
prices. There may be less publicly available information about the issuers of
these securities or less market interest in such securities than in the case of
larger companies, and it may take a longer period of time for the prices of such
securities to reflect the full value of their issuers' underlying earnings
potential or assets.
Some securities of smaller issuers may be restricted as to resale or
may otherwise be highly illiquid. The ability of a Portfolio to dispose of such
securities may be greatly limited, and a Portfolio may have to continue to hold
such securities during periods when SCMI would otherwise have sold the
securities. It is possible that SCMI or its affiliates or clients may hold
securities issued by the same issuers, and may in some cases have acquired the
securities at different times, on more favorable terms, or at more favorable
prices, than a Portfolio. See "Additional Information Regarding Investments --
Micro and Small Cap Companies, and -- Unseasoned Issuers" in Part B.
DEBT SECURITIES. Each Portfolio may invest in debt securities. A 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 the risk fluctuation of market value in response to
changes in interest rates) and to credit risk (risk that the issuer may become
unable or unwilling to make timely payments of principal and interest).
Each Portfolio also may invest in lower-quality, high-yielding debt
securities rated below investment grade. Lower-rated debt securities (commonly
called "junk bonds") are considered to be of poor standing and predominantly
speculative. Securities in the lowest rating categories may have extremely poor
prospects of attaining any real investment standing, and some of those
securities in which a Portfolio may invest may be in default. The rating
services' descriptions of securities in the lower rating categories, including
their speculative characteristics, are set forth in the Appendix to this Private
Placement Memorandum.
In addition, lower-rated securities reflect a greater possibility that
adverse changes in the financial condition of the issuer, or in general economic
conditions, or both, or an unanticipated rise in interest rates, may impair the
ability of the issuer to make payments of interest and principal. Changes by
recognized rating services in their ratings of any fixed-income security and in
the ability or perceived ability of an issuer to make payments of interest and
principal may also affect the value of these investments.
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Each Portfolio may at times invest in so-called "zero coupon" bonds and
"payment-in-kind" bonds. Zero-coupon bonds are issued at a significant discount
from face value and pay interest only at maturity, rather than at intervals
during the life of the security. Payment-in-kind bonds allow the issuer, at its
option, to make current interest payments on the bonds either in cash or in
additional bonds. The values of zero-coupon bonds and payment-in-kind bonds are
subject to greater fluctuation in response to changes in market interest rates
than bonds which pay interest currently, and may involve greater credit risk
than such bonds. From time to time, a Portfolio may invest a portion of its
assets in Brady Bonds, which are securities created through the exchange of
existing commercial bank loans to sovereign entities for new obligations in
connection with debt restructuring. Brady Bonds have been issued only recently
and, therefore, do not have a long payment history.
A Portfolio will not necessarily dispose of a security when its debt
rating is reduced below its rating at the time of purchase, although SCMI will
monitor the investment to determine whether continue investment in the security
will assist in meeting the Portfolio's investment objective.
OPTIONS AND FUTURES TRANSACTIONS. Each Portfolio may engage in a
variety of transactions involving the use of options and futures contracts for
purposes of increasing its investment return or hedging against market changes.
A Portfolio may engage in such transactions for hedging purposes or, to the
extent permitted by applicable law, to increase investment return.
A Portfolio may seek to increase its current return by writing covered
call options and covered put options on its portfolio securities or other
securities in which it may invest. A Portfolio receives a premium from writing a
call or put option, which increases the Portfolio's return if the option expires
unexercised or is closed out at a net profit. A Portfolio may also buy and sell
put and call options on such securities for hedging purposes. When a Portfolio
writes a call option on a portfolio security, it gives up the opportunity to
profit from any increase in the price of the security above the exercise price
of the option; when it writes a put option, a Portfolio takes the risk that it
will be required to purchase a security from the option holder at a price above
the current market price of the security. A Portfolio may terminate an option
that it has written prior to its expiration by entering into a closing purchase
transaction in which it purchases an option having the same terms as the option
written. A Portfolio may also from time to time buy and sell combinations of put
and call options on the same underlying security to earn additional income.
A Portfolio may buy and sell futures contracts. An "index future" is a
contract to buy or sell units of a particular index at an agreed price on a
specified future date. Depending on the change in value of the index between the
time when a Portfolio enters into and terminates an index future transaction,
the Portfolio may realize a gain or loss. A Portfolio may also purchase
warrants, issued by banks or other financial institutions, whose values are
based on the values from time to time of one or more securities indices.
A Portfolio may buy and sell futures contracts on U.S. government
obligations or other debt securities. A futures contract on a debt security is a
contract to by and sell a certain amount of the debt security at an agreed price
on a specified future date. Depending on the change in the value of the security
when the Portfolio enters into and terminates a futures contract, the Portfolio
realizes a gain or loss.
A Portfolio may purchase or sell options on futures contracts or on
securities indices in addition to or as an alternative to purchasing and selling
futures contracts.
A Portfolio may purchase and sell put and call options on foreign
currencies, futures contracts on foreign currencies, and options on foreign
currency futures contracts as an alternative, or in addition to, the foreign
currency exchange transactions described above. Such transactions are similar to
options and futures contracts on securities, except that they typically
contemplate that one party to a transaction will deliver one foreign currency to
the other in return for another currency (which may or may not be the U.S.
dollar).
RISK FACTORS IN OPTIONS AND FUTURES TRANSACTIONS. Options and futures
transactions involve costs and may result in losses. The use of options and
futures involves certain special risks, including the risks that a Portfolio may
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be unable at times to close out such positions, that hedging transactions may
not accomplish their purpose because of imperfect market correlations, or that
SCMI may not forecast market movements correctly.
The effective use of options and futures strategies is dependent on,
among other things, a Portfolio's ability to terminate options and futures
positions at times when SCMI deems it desirable to do so. Although a Portfolio
will enter into an option or futures contract position only if SCMI believes
that a liquid secondary market exists for that option or futures contract, there
is no assurance that a Portfolio will be able to effect closing transactions at
any particular time or at an acceptable price.
Each Portfolio generally expects that its options and futures contract
transactions will be conducted on recognized exchanges. In certain instances,
however, a Portfolio may purchase and sell options in the over-the-counter
markets. A Portfolio's ability to terminate options in the over-the-counter
markets may be more limited than for exchange-traded options and may also
involve the risk that securities dealers participating in such transactions
would be unable to meet their obligations to a Portfolio. A Portfolio will,
however, engage in over-the-counter transactions only when appropriate
exchange-traded transactions are unavailable and when, in the opinion of SCMI,
the pricing mechanism and liquidity of the over-the-counter markets are
satisfactory and the participants are responsible parties likely to meet their
contractual obligations. A Portfolio will treat over-the-counter options (and,
in the case of options sold by the Portfolio, the underlying securities held by
the Portfolio) as illiquid investments as required by applicable law.
The use of options and futures strategies also involves the risk of
imperfect correlation between movements in the prices of options and futures
contracts and movements in the value of the underlying securities or index, or
currency, or in the prices of the securities or currency that are the subject of
a hedge. The successful use of these strategies further depends on the ability
of SCMI to forecast market movements correctly.
Because the markets for certain options and futures contracts in which
a Portfolio will invest (including markets located in foreign countries) are
relatively new and still developing and may be subject to regulatory restraints,
a Portfolio's ability to engage in transactions using such investments may be
limited. A Portfolio's ability to engage in hedging transactions may be limited
by certain regulatory and tax considerations. A Portfolio's hedging transactions
may affect the character or amount of its distributions. The tax consequences of
certain hedging transactions have been modified by the Taxpayer Relief Act of
1997.
For more information about any of the options or futures portfolio
transactions described above, see the SAI.
SHORT SALES AGAINST-THE-BOX. Each Portfolio may make short sales
"against-the-box", which are transactions in which the Portfolio sells a
security that it owns in anticipation of a decline in the market value of that
security. The proceeds of the short sale are held by a broker until the
settlement date, at which time the Portfolio delivers the security to close the
short position. The Portfolio receives the net proceeds from the short sale. It
is anticipated that the Portfolio will make short sales against-the-box to
protect the value of its net assets. Further information regarding limits of
short sales is contained in the SAI.
NON-DIVERSIFICATION AND GEOGRAPHIC CONCENTRATION. Schroder EM Core
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, however, an investment company,
including a non-diversified investment company, generally may not invest more
than 25% of its total assets in obligations of any one issuer other than U.S.
Government obligations and, with respect to 50% of its total assets, a fund may
not invest more than 5% of its total assets in the securities of any one issuer
( except U.S. Government obligations). Thus, 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 were otherwise not to meet its
obligations.
A Portfolio may invest more than 25% of its total assets in issuers
located in any one country. To the extent that it does so, a Portfolio is
susceptible to a range of factors that could adversely affect that country,
including political and economic developments and foreign exchange rate
fluctuations as discussed above. As a
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<PAGE>
result of investing substantially in one country, the value of a Portfolio's
assets may fluctuate more widely than the value of shares of a comparable fund
with a lesser degree of geographic concentration.
SECURITIES LOANS, REPURCHASE AGREEMENTS, AND FORWARD COMMITMENTS. Each
Portfolio may lend portfolio securities to brokers, dealers and financial
institutions meeting specified credit conditions and may enter into repurchase
agreements without limit. The percentage limitation on the amount of a
Portfolio's total assets that may be loaned in accordance with the approved
procedures is as follows: International Equity Fund-- 10%; Schroder
International Smaller Companies Portfolio and Schroder U.S. Smaller Companies
Portfolio -- 25%; Schroder EM Core Portfolio -- 33 1/3%; and Schroder Global
Growth Portfolio -- 33 1/3%. These transactions must be fully collateralized at
all times but involve some risk to a Portfolio if the other party should default
on its obligation and the Portfolio is delayed or prevented from recovering its
assets or realizing on the collateral. Each Portfolio may also purchase
securities for future delivery, which may increase its overall investment
exposure and involves a risk of loss if the value of the securities declines
prior to the settlement date.
INVESTMENT IN OTHER INVESTMENT COMPANIES. Each Portfolio is permitted
to invest in other investment companies or pooled vehicles, including closed-end
funds, that are advised by SCMI or its affiliates or by unaffiliated parties.
Pursuant to the 1940 Act, a Portfolio may invest in the shares of other
investment companies that invest in securities in which the Portfolio is
permitted to invest, subject to the limits and conditions required under the
1940 Act or any orders, rules or regulations thereunder. When investing through
investment companies, a Portfolio may pay a premium above such investment
companies' net asset value per share. As a shareholder in an investment company,
a Portfolio would bear its ratable share of the investment company's expenses,
including its advisory and administrative fees. At the same time, the Portfolio
would continue to pay its own fees and expenses.
LIQUIDITY. A Portfolio will not invest more than 15% (10%, in the case
of International Equity Fund) of its net assets in securities determined by SCMI
to be illiquid. Certain securities that are restricted as to resale may
nonetheless be resold by a Portfolio in accordance with Rule 144A under the
Securities Act of 1933, as amended. Such securities may be determined by SCMI to
be liquid for purposes of compliance with the limitation on a Portfolio's
investment in illiquid securities. There can, however, be no assurance that a
Portfolio will be able to sell such securities at any time when SCMI deems it
advisable to do so or at prices prevailing for comparable securities that are
more widely held.
ALTERNATIVE INVESTMENTS. At times, SCMI may judge that market
conditions make pursuing a Portfolio's basic investment strategy inconsistent
with the best interests of its shareholders. At such times, SCMI may temporarily
use alternative strategies, primarily designed to reduce fluctuations in the
values of the Portfolio's assets. In implementing these "defensive" strategies,
a Portfolio may invest without limit in U.S. government obligations and other
high-quality debt instruments and any other investment SCMI considers to be
consistent with such defensive strategies, and may hold any portion of its
assets in cash.
PORTFOLIO TURNOVER. The length of time a Portfolio has held a
particular security is not generally a consideration in investment decisions.
The investment policies of a Portfolio may lead to frequent changes in the
Portfolio's investments, particularly in periods of volatile market movements. A
change in the securities held by a Portfolio is known as "portfolio turnover."
Portfolio turnover generally involves some expense to a Portfolio, including
brokerage commissions or dealer mark-ups and other transaction costs on the sale
of securities and reinvestment in other securities. Such securities sales may
result in realization of taxable capital gains.
INVESTMENT RESTRICTIONS
The following investment restrictions on the Portfolios are designed to reduce
their exposure in specific situations.
A. Under these fundamental restrictions, INTERNATIONAL EQUITY FUND
will not:
1. Invest more than 5% of its assets in the securities of any
single issuer. (This restriction does not apply to
securities issued by the U.S. Government, its agencies,
instrumentalities or government-sponsored enterprises.)
11
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2. Purchase more than 10% of the voting securities of any one
issuer. Moreover, the Portfolio will not purchase more than 3%
of the outstanding securities of any closed-end investment
company. (Any such purchase of securities issued by a
closed-end investment company will otherwise be made in full
compliance with Sections 12(d)(1)(a)(i), (ii) and (iii) of the
Act.)
3. Invest more than 10% of its assets in "restricted securities"
which include: (1) securities that are not readily marketable,
and (2) securities of issuers having a record (together with
all predecessors) of less than three years of continuous
operation.
4. Invest more than 25% of its assets in any one industry.
5. Borrow money, except from banks for temporary emergency
purposes and then only in an amount not exceeding 5% of the
value of the total assets of the Portfolio.
6. Pledge, mortgage or hypothecate its assets to an extent
greater than 10% of the value of the total assets of the
Portfolio.
B. Under these fundamental restrictions, SCHRODER EM CORE PORTFOLIO
will not:
1. Concentrate investments in any particular industry; therefore,
the Portfolio will not purchase the securities of companies in
any one industry if, thereafter, 25% or more of the
Portfolio's total assets would consist of securities of
companies in that industry. This restriction does not apply to
obligations issued or guaranteed by the U.S. Government, its
agencies, instrumentalities or
government-sponsored enterprises.
2. Although the Portfolio may borrow money, it will limit
borrowings to amounts not in excess of one third of the
value of its total assets. Borrowing for other than
temporary or emergency purpose or meeting redemption
requests is not expected to exceed 5% of the value of the
Portfolio's assets. Certain transactions, such as reverse
repurchase agreements, that are similar to borrowings are
not treated as borrowings to the extent that they are fully
collateralized.
3. Make investments for the purpose of exercising control or
management. Investments by the Portfolio in wholly-owned
investment entities created under the laws of certain
countries will not be deemed the making of investments for the
purpose of exercising control or management.
C. Under these fundamental restrictions, SCHRODER INTERNATIONAL SMALLER
COMPANIES PORTFOLIO will not:
1. With respect to 75% of its assets, purchase a security other
than a security issued or guaranteed by the U.S. Government,
its agencies or instrumentalities or a security of an
investment company if, as a result, more than 5% of the
Portfolio's total assets would be invested in the securities
of a single issuer or the Portfolio would own more than 10% of
the outstanding voting securities of any single issuer.
2. Concentrate investments in any particular industry; therefore,
the Portfolio will not purchase the securities of companies in
any one industry if, thereafter,25% or more of the Portfolio's
total assets would consist of securities of companies in that
industry. This restriction does not apply to obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. An investment of more than 25% of the
Portfolio's assets in the securities of issuers located in one
country does not contravene this policy.
3. Borrow money in excess of 33 1/3% of its total assets taken
at market value (including the amount borrowed) and then
only from a bank as a temporary measure forextraordinary or
emergency
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<PAGE>
purposes, including to meet redemptions or to settle
securitiestransactions that may otherwise require untimely
dispositions of Portfolio securities.
D. Under these fundamental restrictions, SCHRODER U.S. SMALLER
COMPANIES PORTFOLIO will not:
1. With respect to 75% of its assets, the Portfolio may not
purchase a security other than a U.S. Government Security if,
as a result, more than 5% of its total assets would be
invested in the securities of a single issuer or it would own
more than 10% of the outstanding voting securities of any
single issuer.
2. Purchase securities if, immediately after the purchase, 25% or
more of thevalue of its total assets would be invested in the
securities of issuers conducting their principal business
activities in the same industry; provided, however, that there
is no limit on investments in U.S.
Government Securities.
3. Borrow money, except that it may borrow money from banks or by
entering into reverse repurchase agreements, provided that
such borrowings do not exceed 33 1/3% of the value of the
Portfolio's total assets (computed immediately after the
borrowing).
F. Under these fundamental restrictions, SCHRODER GLOBAL GROWTH
PORTFOLIO will not:
1. With respect to 75% of its assets, purchase a security (other
than a U.S. government security or a security of an investment
company) if, as a result: (1) more than 5% of the Portfolio's
total assets would be invested in the securities of a single
issuer; or (2) the Portfolio would own more than 10% of the
outstanding voting securities of any single issuer.
2. Concentrate its assets in the securities of issuers in any one
industry; therefore the Portfolio may not purchase a security
if, as a result, more than 25% of the value of its total
assets would be invested in the securities of issuers
conducting their principal business activities in the same
industry. This limit does not apply to investments in U.S.
government securities, or repurchase agreements covering U.S.
government securities.
3. Borrow money in excess of one third of the value of its total
assets. Borrowing for other than temporary or emergency
purposes or meeting redemption requests is not expected to
exceed 5% of the value of the Portfolio's assets. Certain
transactions, such as reverse repurchase agreements, that are
similar to borrowings are not treated as borrowings to the
extent that they are fully collateralized.
The percentage restrictions described above and in Part B apply only at
the time of investment and require no action by a Portfolio as a result of
subsequent changes in value of the investments or the size of the Portfolio,
except as to liquidity and borrowing. A complete list of investment restrictions
is contained in Part B.
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS. The Board of Trustees of the Trust is
responsible for generally overseeing the conduct of the Trust's business. The
business and affairs of each Portfolio are managed under the direction of the
Board of Trustees. Information regarding the trustees and executive officers of
the Trust may be found in Part B.
INVESTMENT ADVISER. Schroder Capital Management International Inc., the
investment adviser to each Portfolio, is a wholly owned U.S. subsidiary of
Schroders U.S. Holdings Inc., which engages through its subsidiary firms in the
investment banking, asset management, and securities businesses. Affiliates of
Schroders U.S. Holdings Inc. (or their predecessors) have been investment
managers since 1927. SCMI and its United Kingdom affiliate, Schroder Capital
Management International, Ltd., have served together as investment manager for
over $27 billion as of June 30, 1998. Schroders U.S. Holdings Inc. is an
indirect, wholly owned U.S. subsidiary of
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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 Advisors is a wholly
owned subsidiary of Schroder Capital Management International Inc.
As investment adviser to each Portfolio, SCMI is entitled to monthly
advisory fees at the following annual rates (based on the assets of each
Portfolio taken separately): INTERNATIONAL EQUITY FUND -- 0.45% of the
Portfolio's average daily net assets; SCHRODER INTERNATIONAL SMALLER COMPANIES
PORTFOLIO -- 0.85% of the Portfolio's average daily net assets; SCHRODER EM CORE
PORTFOLIO -- 1.00% of the Portfolio's average daily net assets; SCHRODER U.S.
SMALLER COMPANIES PORTFOLIO -- 0.60% of the Portfolio's average daily net
assets; and SCHRODER GLOBAL GROWTH PORTFOLIO -- 0.50% of the Portfolio's average
daily net assets.
Schroder Investment Management International, Ltd. ("SIMIL"), 31 Gresham
Street London, U.K. EC2V 7QA, an affiliate of SCMI, serves as subadviser to
Schroder International Smaller Companies Portfolio. Under a Subadvisory
Agreement among SCMI, SIMIL, and the Portfolio, SIMIL is responsible for the
day-to-day portfolio management of the Portfolio, subject to the direction and
control of SCMI. SIMIL, a newly organized investment advisory firm, is a wholly
owned subsidiary of Schroders plc, and as of June 30, 1998 had under management
assets of approximately $42 billion. Under the Subadvisory Agreement, SCMI pays
SIMIL a monthly fee at the annual rate of 0.25% of the Portfolio's average daily
net assets.
PORTFOLIO MANAGERS. SCMI's investment decisions for each Portfolio are made
by an investment manager or an investment team, with the assistance of an
investment committee at SCMI. Mr. Michael Perelstein, Vice President of the
Trust and of Schroder Capital Funds, is primarily responsible for managing
International Equity. Ms. Jane P. Lucas, a Senior Vice President of SCMI and
investment manager of SIMIL, and Mr. Nicholas Melhuish , an investment manager
of SIMIL, is primarily responsible for managing Schroder International Smaller
Companies Portfolio. Mr. John A. Troiano, a Vice President of the Trust and of
Schroder Capital Funds, Ms. Heather Crighton, a vice president of SCMI, and Mr.
Mark Bridgeman are primarily responsible for managing Schroder EM Core
Portfolio. Mr. Ira Unschuld, a Vice President of the Trust, and a Group Vice
President of SCMI, is primarily responsible for managing Schroder U.S. Smaller
Companies Portfolio. Each of the persons named has several years of experience
in managing investment portfolios comparable to those for which each has
responsibility.
PORTFOLIO TRANSACTIONS. SCMI places all orders for purchases and sales of
the Portfolios' securities. In selecting broker-dealers, SCMI may consider
research and brokerage services furnished to it and its affiliates. Schroder &
Co. and Schroder Securities Limited, affiliates of SCMI, may receive brokerage
commissions from the Portfolios in accordance with procedures adopted by the
Trustees under the 1940 Act which require periodic review of these transactions.
Subject to seeking the most favorable price and execution available, SCMI may
consider sales of shares of the Funds as a factor in the selection of
broker-dealers.
ADMINISTRATIVE SERVICES. The Trust, on behalf of each Portfolio, has
entered into an administration agreement with Schroder Advisors, pursuant to
which Schroder Advisors is required to provide certain management and
administrative services to those Portfolios. The Trust also has entered into a
subadministration agreement with Forum Administrative Services, LLC, Two
Portland Square, Portland, Maine 04101 ("FAdS"), pursuant to which FAdS provides
certain management and administrative services necessary for the Portfolios'
operations. Schroder Advisors and FAdS monthly at the following annual rates
(based on the assets of each Portfolio taken separately): International --
0.075% and 0.075%, respectively, of the Portfolio's average daily net assets;
Schroder EM Core P -- 0.10% and 0.075%, respectively, of the Portfolio's average
daily net assets; Schroder International Smal -- 0.15% and 0.075%, respectively,
of the Portfolio's average daily net assets; Schroder U.S. Small -- 0.00% and
0.10%, respectively, of the Portfolio's average daily net assets; and Schroder
Global Growth Portfolio -- 0.15% and 0.075%, respectively, of the Portfolio's
average daily net assets.
RECORDKEEPER AND PORTFOLIO ACCOUNTANT. Forum Accounting Services, LLC
("Forum Accounting"), Two Portland Square, Portland, Maine 04101, is the
Portfolio's recordkeeper (transfer agent) and fund accountant. Forum Accounting
is an affiliate of FAdS. From time to time, Forum Accounting voluntarily may
agree to waive all or a portion of its fees.
EXPENSES. Each Portfolio is obligated to pay for all of its expenses.
These expenses include: governmental fees; interest charges; taxes; insurance
premiums; investment advisory, custodial, administrative and transfer agency and
fund accounting fees, as described above; compensation of certain of the Trust's
Trustees, costs of membership trade associations; fees and expenses of
independent auditors and legal counsel to the Trust; and expenses of calculating
the net asset value of and the net income of the Portfolios. The Portfolio's
expenses comprise Trust expenses attributable to a Portfolio, which are
allocated to that Portfolio, and expenses not
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attributable to a Portfolio, which are allocated among all portfolios of the
Trust in proportion to their average net assets or as otherwise determined by
the Board.
CUSTODIAN. The Chase Manhattan Bank, Chase MetroTech Center, Brooklyn,
New York 11245 acts as custodian of the Portfolios' assets and, for foreign
securities, through its Global Securities Services division located at 125
London Wall, London EC2Y 5AJ, United Kingdom. Chase employs foreign
subcustodians to maintain the Portfolios' foreign assets outside the U.S.
CAPITAL STOCK AND OTHER SECURITIES
The Trust was organized as a business trust under the laws of the State
of Delaware. Under the Trust Instrument, the Trustees are authorized to issue
Interests in separate series of the Trust. The Trust currently has six
portfolios (one being the Portfolio), and the Trust reserves the right to create
additional portfolios.
Each investor in the Portfolio is entitled to participate equally in
the Portfolio's earnings and assets and to a vote in proportion to the amount of
its investment in the Portfolio. Investments in the Portfolio may not be
transferred, but an investor may withdraw all or any portion of its investment
at any time at net asset value.
Investments in the Portfolio have no preemptive or conversion rights
and are fully paid and non-assessable, except as set forth below. The Trust is
not required, and has no current intention, to hold annual meetings of
investors, but the Trust will hold special meetings of investors when in the
Trustees' judgment it is necessary or desirable to submit matters for an
investor vote. Generally, Interests are voted in the aggregate without reference
to a particular portfolio, unless the Trustees determine that the matter affects
only one portfolio or portfolio voting is required, in which case Interests are
voted separately by each portfolio. Upon liquidation of the Portfolio, investors
will be entitled to share pro rata in the Portfolio's net assets available for
distribution to investors.
The Portfolio is not required to pay federal income taxes on its
ordinary income and capital gain, as it is treated as a partnership for federal
income tax purposes. All interest, dividends and gains and losses of the
Portfolio are deemed to "pass through" to its investors, regardless of whether
such interest, dividends or gains are distributed by the Portfolio or losses are
realized by the Portfolio.
Under the Portfolio's operational method, it is not subject to any
income tax. However, each investor in the Portfolio will be taxed on its
proportionate share (as determined in accordance with the Trust's Trust
Instrument and the Internal Revenue Code) of the Portfolio's ordinary income and
capital gain, to the extent that the investor is subject to tax on its income.
The Trust will inform investors of the amount and nature of such income or gain.
As of August 31, 1998, each of the following held in excess of 25% of a
Portfolio's Interests and may therefore be considered a "control person" of the
Portfolio: (1) Schroder International Fund, a series of Schroder Capital Funds
(Delaware) owned substantially all of the outstanding Interests of International
Equity Fund; (2) Norwest International Fund, Norwest Growth Equity Fund and
Norwest Diversified Equity Fund, series of Norwest Advantage Funds, a registered
open-end management investment company, each held in excess of 25%, and
collectively owned substantially all of the outstanding Interests, of Schroder
EM Core Portfolio; (3) Schroder International Smaller Companies Fund, a series
of Schroder Capital Funds (Delaware) owned substantially all of the outstanding
Interests of Schroder International Smaller Companies Portfolio; (4) Small Cap
Opportunities Fund, a series of Norwest Advantage Funds, owned a majority of the
outstanding Interests of Schroder U.S. Smaller Companies Portfolio; and (5)
Schroders Inc. and Performa Global Growth Fund, a series of Norwest Advantage
Funds, each held in excess of 25% of the outstanding Interests of Schroder
Global Growth Portfolio. In addition, Schroder Capital Funds (Delaware) may be
deemed to be a control person of the Trust.
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.
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Net asset value is calculated as of the close of the New York Stock
Exchange (the "Exchange") (normally, 4:00 p.m. Eastern time), Monday through
Friday, on each day that the Exchange is open for trading (which excludes the
following national business holidays: New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day) ("Business Day"). Net asset value per
Interest is calculated by dividing the aggregate value of the Portfolio's assets
less all liabilities by the number of Interests outstanding. Portfolio
securities listed on recognized stock exchanges are valued at the last reported
trade price, prior to the time when the assets are valued, on the exchange on
which the securities are principally traded. Listed securities traded on
recognized stock exchanges where last trade prices are not available are valued
at mid-market prices. Securities traded in over-the-counter markets, or listed
securities for which no trade is reported on the valuation date, are valued at
the most recently reported mid-market price. Other securities and assets for
which market quotations are not readily available are valued at fair value as
determined in good faith using methods approved by the Board.
Trading in securities on non-U.S. exchanges and over-the-counter
markets may not take place on every day that the New York Stock Exchange is open
for trading. Furthermore, trading takes place in various foreign markets on days
on which the Portfolio's net asset value is not calculated. If events materially
affecting the value of foreign securities occur between the time when their
price is determined and the time when net asset value is calculated, such
securities will be valued at fair value as determined in good faith by the
Board. All assets and liabilities of the Portfolio denominated in foreign
currencies are converted to U.S. dollars at the mid price of such currencies
against U.S. dollars last quoted by a major bank prior to the time when net
asset value of the Portfolio is calculated.
Registered investment companies are subject to no minimum initial or
subsequent investment amount. For other qualified investors, the minimum initial
investment amount is $2 million, and there is no minimum subsequent investment
amount. However, since the Portfolio seeks to be as fully invested at all times
as is reasonably practicable in order to enhance the return on its assets,
investments must be made in federal funds (i.e., monies credited to the account
of the Trust's custodian by a Federal Reserve Bank). Minimum investment amounts
may be waived in the discretion of the Portfolio's investment adviser, SCMI.
Qualified investors who have completed a subscription agreement may
transmit purchase payments by Federal Reserve Bank wire directly to the
Portfolio as follows:
The Chase Manhattan Bank
New York, NY
ABA No.: 021000021
For Credit To: Forum Shareholder Services, LLC.
Account No.:[ See Account Numbers below]
Ref.: [Name of Schroder Portfolio]
Account of: [interestholder name]
Account Number: [interestholder account number]
<TABLE>
<S> <C>
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Portfolio Name Account Number
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International Equity Fund 910-2-783637
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Schroder EM Core Portfolio 910-2-792281
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Schroder International Smaller Companies Portfolio 910-2-792596
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Schroder U.S. Smaller Companies Portfolio 910-2-792588
------------------------------------------------------------ -------------------------------
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Schroder Global Growth Portfolio 910-2-792492
------------------------------------------------------------ -------------------------------
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</TABLE>
The wire order must specify the name of the Portfolio, the account name
and number, address, confirmation number, amount to be wired, name of the wiring
bank, and name and telephone number of the person to be contacted in connection
with the order. If the initial investment is by wire, an account number is
assigned, and a Subscription Agreement must be completed and mailed to the
Portfolio before any account becomes active. Wire orders received prior to the
close of the Exchange (normally 4:00 p.m. Eastern time) on each Business Day are
16
<PAGE>
processed at the net asset value next determined that day. Wire orders received
after the closing of the Exchange are processed at the net asset value next
determined. The Trust reserves the right to cease accepting investments in the
Portfolio at any time or to reject any investment order.
Forum Financial Services, Inc., an affiliate of FAdS, is the placement
agent for the Trust. The placement agent receives no compensation for its
services.
REDEMPTION OR REPURCHASE
An investor may redeem all or any portion of its investment in the
Portfolio at the net asset value next determined after the investor furnishes a
redemption request in proper form to the Trust. Redemption proceeds are paid by
the Portfolio in federal funds normally on the business day after the withdrawal
is effected but, in any event, within seven days. Investments in a Portfolio may
not be transferred. The right of redemption may not be suspended nor the payment
dates postponed for more than seven days except when the Exchange is closed (or
when trading on the Exchange is restricted) for any reason other than its
customary weekend or holiday closings or under any emergency or other
circumstances as determined by the Securities and Exchange Commission.
Interests are redeemed at their next determined net asset value after
receipt by the Trust of a redemption request in proper form. Redemption requests
may be made between 9:00 a.m. and 6:00 p.m. (Eastern time) on each Business Day.
Redemption requests that are received prior to the closing of the Exchange are
processed at the net asset value next determined on that day. Redemption
requests that are received after the closing of the Exchange are processed at
the net asset value next determined. Redemption requests must include the name
of the interestholder, the Portfolio's name, the dollar amount or number of
Interests to be redeemed, interestholder account number, and the signature of
the holder designated on the account.
Written redemption requests may be sent to the Trust at the following
address:
[Name of Schroder Portfolio]
P.O. Box 446
Portland, Maine 04112
Telephone redemption requests may be made by telephoning the transfer
agent at 1-800-344-8332 or 1-207-879-8903. A telephone redemption may be made
only if the telephone redemption privilege option has been elected on the
Subscription Agreement or otherwise in writing, and the interestholder has
obtained a password from the transfer agent. In an effort to prevent
unauthorized or fraudulent redemption requests by telephone, reasonable
procedures will be followed by the transfer agent to confirm that telephone
instructions are genuine. The transfer agent and the Trust generally will not be
liable for any losses due to unauthorized or fraudulent redemption requests, but
either may be liable if it does not follow these procedures. In times of drastic
economic or market change it may be difficult to make redemptions by telephone.
If an interestholder cannot reach the transfer agent by telephone, redemption
requests may be mailed or hand-delivered to the transfer agent.
Redemption proceeds normally are paid in cash. Redemptions from the
Portfolio may be made wholly or partially in portfolio securities, however, if
the Board determines that payment in cash would be detrimental to the best
interests of the Portfolio. The Trust has filed an election with the Securities
and Exchange Commission pursuant to which a Portfolio will only consider
effecting a redemption in portfolio securities if the interestholder is
redeeming more than $250,000 or 1% of the Portfolio's net asset value, whichever
is less, during any 90-day period.
PENDING LEGAL PROCEEDINGS
None.
17
<PAGE>
APPENDIX A
RATINGS OF CORPORATE DEBT INSTRUMENTS
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.
<PAGE>
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".
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.
<PAGE>
"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.
"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.
<PAGE>
SCHRODER CAPITAL FUNDS
PART B
(PRIVATE PLACEMENT MEMORANDUM)
INTERNATIONAL EQUITY FUND
SCHRODER EM CORE PORTFOLIO
SCHRODER INTERNATIONAL SMALLER COMPANIES PORTFOLIO
SCHRODER U.S. SMALLER COMPANIES PORTFOLIO
SCHRODER GLOBAL GROWTH PORTFOLIO
OCTOBER 1, 1998
COVER PAGE
Not applicable.
TABLE OF CONTENTS
<TABLE>
<S> <C>
General Information and History.................................................................. 2
Investment Objective and Policies................................................................ 3
Investment Restrictions.......................................................................... 17
Management of the Trust.......................................................................... 25
Control Persons and Principal Holders of Securities.............................................. 27
Investment Advisory and Other Services........................................................... 28
Brokerage Allocation and Other Practices......................................................... 30
Capital Stock and Other Securities............................................................... 32
Purchase, Redemption and Pricing of Securities................................................... 33
Tax Status....................................................................................... 34
Placement Agent.................................................................................. 37
Calculations of Performance Data................................................................. 38
Financial Statements............................................................................. 38
Appendix A - Miscellaneous Tables................................................................ A-1
</TABLE>
Interests in each Portfolio are offered solely in private placement transactions
that do not involve any "public offering" within the meaning of Section 4(2) of
the 1933 Act. Investments in a Portfolio may be made only by certain qualified
investors (generally excluding S corporations, partnerships, and grantor trusts
beneficially owned by any individuals, S corporations, or partnerships).
Investors may be organized within or outside the U.S. This registration
statement does not constitute an offer to sell, or the solicitation of an offer
to buy, any "security" within the meaning of the 1933 Act.
THE TRUST'S SECURITIES DESCRIBED IN THIS PRIVATE PLACEMENT MEMORANDUM ARE NOT
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE. INTERESTS MAY NOT BE TRANSFERRED OR
RESOLD EXCEPT AS PERMITTED UNDER: (1) THE TERMS OF THE TRUST'S TRUST INSTRUMENT,
AND (2) THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE OR FOREIGN
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
<PAGE>
GENERAL INFORMATION AND HISTORY
See "General Description of Registrant", "Management of the Trust" and "Capital
Stock and Other Securities" in Part A of this Private Placement Memorandum. As
used herein the following terms have the meanings ascribed:
Board The term "Board" means of the board of trustees of the Trust.
CFTC The term "CFTC" means the United States Commodities Futures trading
Commission.
Code The term "Code" means the United States Internal
Revenue Code of 1986, as amended.
FAS The term "FAS" means Forum Accounting Services, LLC,
the Portfolios' interestholder recordkeeper and
portfolio accountant.
FAdS The term "FAdS" means Forum Administrative Services,
LLC, the Portfolios' subadministrator.
Portfolio The term "Portfolio" means each of International
Equity Fund, Schroder EM Core Portfolio,
Schroder International Smaller Companies Portfolio,
Schroder U.S. Smaller Companies
Portfolio and Schroder Global Growth Portfolio
Schroder Advisors The term "Schroder Advisors" means Schroder
Fund Advisors Inc., the Portfolios' administrator.
SCMI The term "SCMI" means Schroder Capital Management
International Inc., the Portfolios' investment
adviser.
SEC The term "SEC" means the United States Securities and Exchange Commission.
Trust The term "Trust: means Schroder Capital Funds.
U.S. Government
Securities The term "U.S. Government Securities' means
securities issued or guaranteed by the United States
government or by its agencies or instrumentalities.
1940 Act The term "1940 Act" means the United States
Investment Company Act of 1940, as amended.
2
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Part A contains information about the investment objective, policies
and restrictions of each of the portfolios named above. The Portfolios are
series of the Trust. The following discussion supplements the disclosure in Part
A concerning the Portfolios' investments, investment techniques and strategies
and the associated risks. This Part B should be read only in conjunction with
Part A. Defined terms used in this Part B have the same meaning as in Part A.
Except as otherwise noted, the policies described in Part A and in this
Part B are not "fundamental". Fundamental policies of a Portfolio cannot be
changed without the vote of a "majority" of the Portfolio's outstanding
Interests. Under the 1940 Act, a "majority" vote is defined as the vote of the
holders of the lesser of: (1) 67% of more of the shares present or represented
by proxy at a meeting of shareholders, if the holders of more than 50% of the
outstanding shares are present; or (2) more than 50% of the outstanding shares.
The Board may change any policy of a Portfolio that is not fundamental without a
vote of the interestholders of the Portfolio.
Except as otherwise noted, the following descriptions of certain
investment policies and techniques are applicable to each of the Portfolios.
OPTIONS
Each Portfolio may purchase and sell covered put and call options on
its portfolio securities to enhance investment performance and to protect
against changes in market prices.
COVERED CALL OPTIONS. A Portfolio may write covered call options on its
securities to realize a greater current return through the receipt of premiums
than it would realize on its securities alone. Such option transactions may also
be used as a limited form of hedging against a decline in the price of
securities owned by the Portfolio.
A call option gives the holder the right to purchase, and obligates the
writer to sell, a security at the exercise price at any time before the
expiration date. A call option is "covered" if the writer, at all times while
obligated as a writer, either owns the underlying securities (or comparable
securities satisfying the cover requirements of the securities exchanges), or
has the right to acquire such securities through immediate conversion of
securities.
In return for the premium received when it writes a covered call
option, a Portfolio gives up some or all of the opportunity to profit from an
increase in the market price of the securities covering the call option during
the life of the option. The Portfolio retains the risk of loss should the price
of such securities decline. If the option expires unexercised, the Portfolio
realizes a gain equal to the premium, which may be offset by a decline in price
of the underlying security. If the option is exercised, the Portfolio realizes a
gain or loss equal to the difference between the Portfolio's cost for the
underlying security and the proceeds of sale (exercise price minus commissions)
plus the amount of the premium.
A Portfolio may terminate a call option that it has written before it
expires by entering into a closing purchase transaction. A Portfolio may enter
into closing purchase transactions in order to free itself to sell the
underlying security or to write another call on the security, realize a profit
on a previously written call option, or protect a security from being called in
an unexpected market rise. Any profits from a closing purchase transaction may
be offset by a decline in the value of the underlying security. Conversely,
because increases in the market price of a call option will generally reflect
increases in the market price of the underlying security, any loss resulting
from a closing purchase
3
<PAGE>
transaction is likely to be offset in whole or in part by unrealized
appreciation of the underlying security owned by the Portfolio.
COVERED PUT OPTIONS. A Portfolio may write covered put options in order
to enhance its current return. Such options transactions may also be used as a
limited form of hedging against an increase in the price of securities that the
Portfolio plans to purchase. A put option gives the holder the right to sell,
and obligates the writer to buy, a security at the exercise price at any time
before the expiration date. A put option is "covered" if the writer segregates
cash and high-grade short-term debt obligations or other permissible collateral
equal to the price to be paid if the option is exercised.
In addition to the receipt of premiums and the potential gains from
terminating such options in closing purchase transactions, a Portfolio also
receives interest on the cash and debt securities maintained to cover the
exercise price of the option. By writing a put option, the Portfolio assumes the
risk that it may be required to purchase the underlying security for an exercise
price higher than its then current market value, resulting in a potential
capital loss unless the security later appreciates in value.
A Portfolio may terminate a put option that it has written before it
expires by a closing purchase transaction. Any loss from this transaction may be
partially or entirely offset by the premium received on the terminated option.
PURCHASING PUT AND CALL OPTIONS. A Portfolio may also purchase put
options to protect portfolio holdings against a decline in market value. This
protection lasts for the life of the put option because the Portfolio, as a
holder of the option, may sell the underlying security at the exercise price
regardless of any decline in its market price. In order for a put option to be
profitable, the market price of the underlying security must decline
sufficiently below the exercise price to cover the premium and transaction costs
that the Portfolio must pay. These costs will reduce any profit the Portfolio
might have realized had it sold the underlying security instead of buying the
put option.
A Portfolio may purchase call options to hedge against an increase in
the price of securities that the Portfolio wants ultimately to buy. Such hedge
protection is provided during the life of the call option since the Portfolio,
as holder of the call option, is able to buy the underlying security at the
exercise price regardless of any increase in the underlying security's market
price. In order for a call option to be profitable, the market price of the
underlying security must rise sufficiently above the exercise price to cover the
premium and transaction costs. These costs will reduce any profit the Portfolio
might have realized had it bought the underlying security.
A Portfolio may purchase call options to hedge against an increase in
the price of securities that the Portfolio wants ultimately to buy. Such hedge
protection is provided during the life of the call option since the Portfolio,
as holder of the call option, is able to buy the underlying security at the
exercise price regardless of any increase in the underlying security's market
price. In order for a call option to be profitable, the market price of the
underlying security must rise sufficiently above the exercise price to cover the
premium and transaction costs. These costs will reduce any profit the Portfolio
might have realized had it bought the underlying security at the time it
purchased the call option.
A Portfolio may also purchase put and call options to enhance its
current return.
OPTIONS ON FOREIGN SECURITIES. A Portfolio may purchase and sell
options on foreign securities if in SCMI's opinion the investment
characteristics of such options, including the risks of investing in such
options, are consistent with the Portfolio's investment objectives. It is
expected that risks related to such options will not differ materially from
risks related to options on U.S. securities. However, position
4
<PAGE>
limits and other rules of foreign exchanges may differ from those in the U.S. In
addition, options markets in some countries, many of which are relatively new,
may be less liquid than comparable markets in the U.S.
RISKS INVOLVED IN THE SALE OF OPTIONS. Options transactions involve
certain risks, including the risks that SCMI will not forecast interest rate or
market movements correctly, that a Portfolio may be unable at times to close out
such positions, or that hedging transactions may not accomplish their purpose
because of imperfect market correlations. The successful use of these strategies
depends on the ability of SCMI to forecast market and interest rate movements
correctly.
An exchange-listed option may be closed out only on an exchange which
provides a secondary market for an option of the same series. There is no
assurance that a liquid secondary market on an exchange will exist for any
particular option or at any particular time. If no secondary market were to
exist, it would be impossible to enter into a closing transaction to close out
an option position. As a result, a Portfolio may be forced to continue to hold,
or to purchase at a fixed price, a security on which it has sold an option at a
time when SCMI believes it is inadvisable to do so.
Higher than anticipated trading activity or order flow or other
unforeseen events might cause The Options Clearing Corporation or an exchange to
institute special trading procedures or restrictions that might restrict a
Portfolio's use of options. The exchanges have established limitations on the
maximum number of calls and puts of each class that may be held or written by an
investor or group of investors acting in concert. It is possible that the
Portfolios and other clients of SCMI may be considered such a group. These
position limits may restrict the Portfolios' ability to purchase or sell options
on particular securities.
Options that are not traded on national securities exchanges may be
closed out only with the other party to the option transaction. For that reason,
it may be more difficult to close out unlisted options than listed options.
Furthermore, unlisted options are not subject to the protection afforded
purchasers of listed options by The Options Clearing Corporation.
FUTURES CONTRACTS
In order to hedge against the effects of adverse market changes, each
Portfolio that may invest in debt securities may buy and sell futures contracts
on debt securities of the type in which the Portfolio may invest and on indexes
of debt securities. In addition, each Portfolio that may invest in equity
securities may purchase and sell stock index futures to hedge against changes in
stock market prices. Each Portfolio may also, to the extent permitted by
applicable law, buy and sell futures contracts and options on futures contracts
to increase the Portfolio's current return. All such futures and related options
will, as may be required by applicable law, be traded on exchanges that are
licensed and regulated by the CFTC.
FUTURES ON DEBT SECURITIES AND RELATED OPTIONS. A futures contract on a
debt security is a binding contractual commitment which, if held to maturity,
will result in an obligation to make or accept delivery, during a particular
month, of securities having a standardized face value and rate of return. By
purchasing futures on debt securities -- assuming a "long" position -- a
Portfolio will legally obligate itself to accept the future delivery of the
underlying security and pay the agreed price. By selling futures on debt
securities -- assuming a "short" position -- it will legally obligate itself to
make the future delivery of the security against payment of the agreed price.
5
<PAGE>
Positions taken in the futures markets are not normally held to
maturity, but are instead liquidated through offsetting transactions that may
result in a profit or a loss. While futures positions taken by a Portfolio will
usually be liquidated in this manner, a Portfolio may instead make or take
delivery of the underlying securities whenever it appears economically
advantageous to the Portfolio to do so. A clearing corporation associated with
the exchange on which futures are traded assumes responsibility for such closing
transactions and guarantees that a Portfolio's sale and purchase obligations
under closed-out positions will be performed at the termination of the contract.
Hedging by use of futures on debt securities seeks to establish more
certainly than would otherwise be possible the effective rate of return on
portfolio securities. A Portfolio may, for example, take a "short" position in
the futures market by selling contracts for the future delivery of debt
securities held by the Portfolio (or securities having characteristics similar
to those held by the Portfolio) in order to hedge against an anticipated rise in
interest rates that would adversely affect the value of the Portfolio's
portfolio securities. When hedging of this character is successful, any
depreciation in the value of portfolio securities may substantially be offset by
appreciation in the value of the futures position.
On other occasions, a Portfolio may take a "long" position by
purchasing futures on debt securities. This would be done, for example, when the
Portfolio expects to purchase particular securities when it has the necessary
cash, but expects the rate of return available in the securities markets at that
time to be less favorable than rates currently available in the futures markets.
If the anticipated rise in the price of the securities should occur (with its
concomitant reduction in yield), the increased cost to the Portfolio of
purchasing the securities may be offset, at least to some extent, by the rise in
the value of the futures position taken in anticipation of the subsequent
securities purchase.
Successful use by a Portfolio of futures contracts on debt securities
is subject to SCMI's ability to predict correctly movements in the direction of
interest rates and other factors affecting markets for debt securities. For
example, if a Portfolio has hedged against the possibility of an increase in
interest rates which would adversely affect the market prices of debt securities
held by it and the prices of such securities increase instead, the Portfolio
will lose part or all of the benefit of the increased value of its securities
which it has hedged because it will have offsetting losses in its futures
positions. In addition, in such situations, if the Portfolio has insufficient
cash, it may have to sell securities to meet daily maintenance margin
requirements. The Portfolio may have to sell securities at a time when it may be
disadvantageous to do so.
A Portfolio may purchase and write put and call options on certain debt
futures contracts, as they become available. Such options are similar to options
on securities except that options on futures contracts give the purchaser the
right, in return for the premium paid, to assume a position in a futures
contract (a long position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during the period of
the option. As with options on securities, the holder or writer of an option may
terminate his position by selling or purchasing an option of the same series.
There is no guarantee that such closing transactions can be effected. A
Portfolio will be required to deposit initial margin and maintenance margin with
respect to put and call options on futures contracts written by it pursuant to
brokers' requirements, and, in addition, net option premiums received will be
included as initial margin deposits. See "Investment Objectives and Policies -
Futures Contracts - Margin Payments". Compared to the purchase or sale of
futures contracts, the purchase of call or put options on futures contracts
involves less potential risk to a Portfolio because the maximum amount at risk
is the premium paid for the options plus transactions costs. However, there may
be circumstances when the purchase of call or put options on a futures contract
would result in a loss to a Portfolio when the purchase or sale of the futures
contracts would not, such as when there is no movement in the prices
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of debt securities. The writing of a put or call option on a futures contract
involves risks similar to those risks relating to the purchase or sale of
futures contracts.
INDEX FUTURES CONTRACTS AND OPTIONS. Certain Portfolios may invest in
debt index futures contracts and stock index futures contracts, and in related
options. A debt index futures contract is a contract to buy or sell units of a
specified debt index at a specified future date at a price agreed upon when the
contract is made. A unit is the current value of the index. Debt index futures
in which the Portfolios are presently expected to invest are not now available,
although such futures contracts are expected to become available in the future.
A stock index futures contract is a contract to buy or sell units of a stock
index at a specified future date at a price agreed upon when the contract is
made. A unit is the current value of the stock index.
The following example illustrates generally the manner in which index
futures contracts operate. The Standard & Poor's 100 Stock Index is composed of
100 selected common stocks, most of which are listed on the New York Stock
Exchange. The S&P 100 Index assigns relative weightings to the common stocks
included in the Index, and the Index fluctuates with changes in the market
values of those common stocks. In the case of the S&P 100 Index, contracts are
to buy or sell 100 units. Thus, if the value of the S&P 100 Index were $180, one
contract would be worth $18,000 (100 units x $180). The stock index futures
contract specifies that no delivery of the actual stocks making up the index
will take place. Instead, settlement in cash must occur upon the termination of
the contract, with the settlement being the difference between the contract
price and the actual level of the stock index at the expiration of the contract.
For example, if a Portfolio enters into a futures contract to buy 100 units of
the S&P 100 Index at a specified future date at a contract price of $180 and the
S&P 100 Index is at $184 on that future date, the Portfolio will gain $400 (100
units x gain of $4). If the Portfolio enters into a futures contract to sell 100
units of the stock index at a specified future date at a contract price of $180
and the S&P 100 Index is at $182 on that future date, the Portfolio will lose
$200 (100 units x loss of $2).
A Portfolio may purchase or sell futures contracts with respect to any
securities indexes. Positions in index futures may be closed out only on an
exchange or board of trade which provides a secondary market for such futures.
In order to hedge a Portfolio's investments successfully using futures
contracts and related options, a Portfolio must invest in futures contracts with
respect to indexes or sub-indexes the movements of which will, in its judgment,
have a significant correlation with movements in the prices of the Portfolio's
securities.
Options on index futures contracts are similar to options on securities
except that options on index futures contracts give the purchaser the right, in
return for the premium paid, to assume a position in an index futures contract
(a long position if the option is a call and a short position if the option is a
put) at a specified exercise price at any time during the period of the option.
Upon exercise of the option, the holder would assume the underlying futures
position and would receive a variation margin payment of cash or securities
approximating the increase in the value of the holder's option position. If an
option is exercised on the last trading day prior to the expiration date of the
option, the settlement will be made entirely in cash based on the difference
between the exercise price of the option and the closing level of the index on
which the futures contract is based on the expiration date. Purchasers of
options who fail to exercise their options prior to the exercise date suffer a
loss of the premium paid.
As an alternative to purchasing and selling call and put options on
index futures contracts, each of the Portfolios that may purchase and sell index
futures contracts may purchase and sell call and put options on the underlying
indexes themselves to the extent that such options are traded on national
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securities exchanges. Index options are similar to options on individual
securities in that the purchaser of an index option acquires the right to buy
(in the case of a call) or sell (in the case of a put), and the writer
undertakes the obligation to sell or buy (as the case may be), units of an index
at a stated exercise price during the term of the option. Instead of giving the
right to take or make actual delivery of securities, the holder of an index
option has the right to receive a cash "exercise settlement amount". This amount
is equal to the amount by which the fixed exercise price of the option exceeds
(in the case of a put) or is less than (in the case of a call) the closing value
of the underlying index on the date of the exercise, multiplied by a fixed
"index multiplier".
A Portfolio may purchase or sell options on stock indices in order to
close out its outstanding positions in options on stock indices which it has
purchased. A Portfolio may also allow such options to expire unexercised.
Compared to the purchase or sale of futures contracts, the purchase of
call or put options on an index involves less potential risk to a Portfolio
because the maximum amount at risk is the premium paid for the options plus
transactions costs. The writing of a put or call option on an index involves
risks similar to those risks relating to the purchase or sale of index futures
contracts.
MARGIN PAYMENTS. When a Portfolio purchases or sells a futures
contract, it is required to deposit with its custodian an amount of cash, U.S.
Treasury bills, or other permissible collateral equal to a small percentage of
the amount of the futures contract. This amount is known as "initial margin".
The nature of initial margin is different from that of margin in security
transactions in that it does not involve borrowing money to finance
transactions. Rather, initial margin is similar to a performance bond or good
faith deposit that is returned to a Portfolio upon termination of the contract,
assuming a Portfolio satisfies its contractual obligations.
Subsequent payments to and from the broker occur on a daily basis in a
process known as "marking to market". These payments are called "variation
margin" and are made as the value of the underlying futures contract fluctuates.
For example, when a Portfolio sells a futures contract and the price of the
underlying debt security rises above the delivery price, the Portfolio's
position declines in value. The Portfolio then pays the broker a variation
margin payment equal to the difference between the delivery price of the futures
contract and the market price of the securities underlying the futures contract.
Conversely, if the price of the underlying security falls below the delivery
price of the contract, the Portfolio's futures position increases in value. The
broker then must make a variation margin payment equal to the difference between
the delivery price of the futures contract and the market price of the
securities underlying the futures contract.
When a Portfolio terminates a position in a futures contract, a final
determination of variation margin is made, additional cash is paid by or to the
Portfolio, and the Portfolio realizes a loss or a gain. Such closing
transactions involve additional commission costs.
SPECIAL RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS
LIQUIDITY RISKS. Positions in futures contracts may be closed out only
on an exchange or board of trade which provides a secondary market for such
futures. Although each Portfolio intends to purchase or sell futures only on
exchanges or boards of trade where there appears to be an active secondary
market, there is no assurance that a liquid secondary market on an exchange or
board of trade will exist for any particular contract or at any particular time.
If there is not a liquid secondary market at a particular time, it may not be
possible to close a futures position at such time and, in the event of adverse
price movements, a Portfolio would continue to be required to make daily cash
payments of
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variation margin. However, in the event financial futures are used to hedge
portfolio securities, such securities will not generally be sold until the
financial futures can be terminated. In such circumstances, an increase in the
price of the portfolio securities, if any, may partially or completely offset
losses on the financial futures.
In addition to the risks that apply to all options transactions, there
are several special risks relating to options on futures contracts. The ability
to establish and close out positions in such options will be subject to the
development and maintenance of a liquid secondary market. It is not certain that
such a market will develop. Although a Portfolio generally will purchase only
those options for which there appears to be an active secondary market, there is
no assurance that a liquid secondary market on an exchange will exist for any
particular option or at any particular time. In the event no such market exists
for particular options, it might not be possible to effect closing transactions
in such options with the result that a Portfolio would have to exercise the
options in order to realize any profit.
HEDGING RISKS. There are several risks in connection with the use by a
Portfolio of futures contracts and related options as a hedging device. One risk
arises because of the imperfect correlation between movements in the prices of
the futures contracts and options and movements in the underlying securities or
index or movements in the prices of a Portfolio's securities which are the
subject of a hedge. SCMI will, however, attempt to reduce this risk by
purchasing and selling, to the extent possible, futures contracts and related
options on securities and indexes the movements of which will, in its judgment,
correlate closely with movements in the prices of the underlying securities or
index and a Portfolio's portfolio securities sought to be hedged.
Successful use of futures contracts and options by a Portfolio for
hedging purposes is also subject to SCMI's ability to predict correctly
movements in the direction of the market. It is possible that, where a Portfolio
has purchased puts on futures contracts to hedge its portfolio against a decline
in the market, the securities or index on which the puts are purchased may
increase in value and the value of securities held in the portfolio may decline.
If this occurred, the Portfolio would lose money on the puts and also experience
a decline in value in its portfolio securities. In addition, the prices of
futures, for a number of reasons, may not correlate perfectly with movements in
the underlying securities or index due to certain market distortions. First, all
participants in the futures market are subject to margin deposit requirements.
Such requirements may cause investors to close futures contracts through
offsetting transactions which could distort the normal relationship between the
underlying security or index and futures markets. Second, the margin
requirements in the futures markets are less onerous than margin requirements in
the securities markets in general, and as a result the futures markets may
attract more speculators than the securities markets do. Increased participation
by speculators in the futures markets may also cause temporary price
distortions. Due to the possibility of price distortion, even a correct forecast
of general market trends by SCMI may still not result in a successful hedging
transaction over a very short time period.
OTHER RISKS. The Portfolios will incur brokerage fees in connection
with their futures and options transactions. In addition, while futures
contracts and options on futures will be purchased and sold to reduce certain
risks, those transactions themselves entail certain other risks. Thus, while a
Portfolio may benefit from the use of futures and related options, unanticipated
changes in interest rates or stock price movements may result in a poorer
overall performance for the Portfolio than if it had not entered into any
futures contracts or options transactions. Moreover, in the event of an
imperfect correlation between the futures position and the portfolio position
which is intended to be protected, the desired protection may not be obtained
and the Portfolio may be exposed to risk of loss.
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REPURCHASE AGREEMENTS
Each Portfolio may enter into repurchase agreements. A repurchase
agreement is a contract under which the Portfolio acquires a security for a
relatively short period (usually not more than 7 days) subject to the obligation
of the seller to repurchase and the Portfolio to resell such security at a fixed
time and price (representing the Portfolio's cost plus interest). It is the
Trust's present intention to enter into repurchase agreements only with member
banks of the Federal Reserve System and securities dealers meeting certain
criteria as to creditworthiness and financial condition established by the
Trustees of the Trust and only with respect to obligations of the U.S.
government or its agencies or instrumentalities or other high quality short term
debt obligations. Repurchase agreements may also be viewed as loans made by a
Portfolio which are collateralized by the securities subject to repurchase. SCMI
will monitor such transactions to ensure that the value of the underlying
securities will be at least equal at all times to the total amount of the
repurchase obligation, including the interest factor. If the seller defaults, a
Portfolio could realize a loss on the sale of the underlying security to the
extent that the proceeds of sale including accrued interest are less than the
resale price provided in the agreement including interest. In addition, if the
seller should be involved in bankruptcy or insolvency proceedings, a Portfolio
may incur delay and costs in selling the underlying security or may suffer a
loss of principal and interest if a Portfolio is treated as an unsecured
creditor and required to return the underlying collateral to the seller's
estate.
FORWARD COMMITMENTS
Each Portfolio may enter into contracts to purchase securities for a
fixed price at a future date beyond customary settlement time ("forward
commitments") if the Portfolio holds, and maintains until the settlement date in
a segregated account, cash or high-grade debt obligations in an amount
sufficient to meet the purchase price, or if the Portfolio enters into
offsetting contracts for the forward sale of other securities it owns. Forward
commitments may be considered securities in themselves, and involve a risk of
loss if the value of the security to be purchased declines prior to the
settlement date, which risk is in addition to the risk of decline in the value
of the Portfolio's other assets. Where such purchases are made through dealers,
a Portfolio relies on the dealer to consummate the sale. The dealer's failure to
do so may result in the loss to the Portfolio of an advantageous yield or price.
Although a Portfolio will generally enter into forward commitments with
the intention of acquiring securities for its portfolio or for delivery pursuant
to options contracts it has entered into, a Portfolio may dispose of a
commitment prior to settlement if SCMI deems it appropriate to do so. A
Portfolio may realize short-term profits or losses upon the sale of forward
commitments.
WHEN-ISSUED SECURITIES
Each Portfolio may from time to time purchase securities on a
"when-issued" basis. Debt securities are often issued on this basis. The price
of such securities, which may be expressed in yield terms, is fixed at the time
a commitment to purchase is made, but delivery and payment for the when-issued
securities take place at a later date. Normally, the settlement date occurs
within one month of the purchase. During the period between purchase and
settlement, no payment is made by a Portfolio and no interest accrues to the
Portfolio. To the extent that assets of a Portfolio are held in cash pending the
settlement of a purchase of securities, that Portfolio would earn no income.
While a Portfolio may sell its right to acquire when-issued securities prior to
the settlement date, a Portfolio intends actually to acquire such securities
unless a sale prior to settlement appears desirable for investment reasons. At
the time a Portfolio makes the commitment to purchase a security on a
when-issued basis, it will record the transaction and reflect the amount due and
the value of the security in determining the Portfolio's net asset value. The
market value of the when-issued securities may be more or less than the purchase
price
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payable at the settlement date. Each Portfolio will establish a segregated
account in which it will maintain cash and U.S. Government Securities or other
high-grade debt obligations at least equal in value to commitments for
when-issued securities. Such segregated securities either will mature or, if
necessary, be sold on or before the settlement date.
LOANS OF PORTFOLIO SECURITIES
Each Portfolio may lend its portfolio securities, provided: (1) the
loan is secured continuously by collateral consisting of U.S. government
securities, cash, or cash equivalents adjusted daily to have market value at
least equal to the current market value of the securities loaned; (2) the
Portfolio may at any time call the loan and regain the securities loaned; (3) a
Portfolio will receive any interest or dividends paid on the loaned securities;
and (4) the aggregate market value of securities of any Portfolio loaned will
not at any time exceed one-third of the total assets of the Portfolio. In
addition, it is anticipated that the Portfolio may share with the borrower some
of the income received on the collateral for the loan or that it will be paid a
premium for the loan. Before a Portfolio enters into a loan, SCMI considers all
relevant facts and circumstances including the creditworthiness of the borrower.
The risks in lending portfolio securities, as with other extensions of credit,
consist of possible delay in recovery of the securities or possible loss of
rights in the collateral should the borrower fail financially. Although voting
rights or rights to consent with respect to the loaned securities pass to the
borrower, a Portfolio retains the right to call the loans at any time on
reasonable notice, and it will do so in order that the securities may be voted
by a Portfolio if the holders of such securities are asked to vote upon or
consent to matters materially affecting the investment. A Portfolio will not
lend portfolio securities to borrowers affiliated with a Portfolio.
Each of Schroder EM Core Portfolio and Schroder Global Growth Portfolio may
not lend a security if, as a result, the amount of loaned securities would
exceed an amount equal to 33 1/3% of the Portfolio's total assets.
Each of Schroder International Smaller Companies Portfolio and Schroder
U.S. Smaller Companies Portfolio may not lend a security if, as a result, the
amount of loaned securities would exceed an amount equal to 25% of the
Portfolio's total assets.
International Equity Fund may not lend a security if, as a result, the
amount of loaned securities would exceed an amount equal to 10% of the
Portfolio's total assets.
FOREIGN SECURITIES
Each Portfolio may invest in foreign securities and in certificates of
deposit issued by United States branches of foreign banks and foreign branches
of United States banks.
Investments in foreign securities may involve considerations different
from investments in domestic securities due to limited publicly available
information, non-uniform accounting standards, lower trading volume and possible
consequent illiquidity, greater volatility in price, the possible imposition of
withholding or confiscatory taxes, the possible adoption of foreign governmental
restrictions affecting the payment of principal and interest, expropriation of
assets, nationalization, or other adverse political or economic developments.
Foreign companies may not be subject to auditing and financial reporting
standards and requirements comparable to those which apply to U.S. companies.
Foreign brokerage commissions and other fees are generally higher than in the
United States. It may be more difficult to obtain and enforce a judgment against
a foreign issuer.
In addition, to the extent that any Portfolio's foreign investments are
not United States dollar-denominated, the Portfolio may be affected favorably or
unfavorably by changes in currency exchange rates or exchange control
regulations and may incur costs in connection with conversion between
currencies.
In determining whether to invest in securities of foreign issuers, the
investment adviser of a Portfolio seeking current income will consider the
likely impact of foreign taxes on the net yield available to the Portfolio and
its shareholders. Income received by a Portfolio from sources within foreign
countries may be reduced by withholding and other taxes imposed by such
countries. Tax
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conventions between certain countries and the United States may reduce or
eliminate such taxes. It is impossible to determine the effective rate of
foreign tax in advance since the amount of a Portfolio's assets to be invested
in various countries is not known, and tax laws and their interpretations may
change from time to time and may change without advance notice. Any such taxes
paid by a Portfolio will reduce its net income available for distribution to
shareholders.
FOREIGN CURRENCY TRANSACTIONS
Each Portfolio may engage in currency exchange transactions to protect
against uncertainty in the level of future foreign currency exchange rates and
to increase current return. A Portfolio may engage in both "transaction hedging"
and "position hedging."
When it engages in transaction hedging, a Portfolio enters into foreign
currency transactions with respect to specific receivables or payables of a
Portfolio generally arising in connection with the purchase or sale of its
portfolio securities. A Portfolio will engage in transaction hedging when it
desires to "lock in" the U.S. dollar price of a security it has agreed to
purchase or sell, or the U.S. dollar equivalent of a dividend or interest
payment in a foreign currency. By transaction hedging a Portfolio will attempt
to protect against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and the applicable foreign currency during
the period between the date on which the security is purchased or sold or on
which the dividend or interest payment is declared, and the date on which such
payments are made or received.
A Portfolio may purchase or sell a foreign currency on a spot (or cash)
basis at the prevailing spot rate in connection with transaction hedging. A
Portfolio may also enter into contracts to purchase or sell foreign currencies
at a future date ("forward contracts") and purchase and sell foreign currency
futures contracts.
For transaction hedging purposes a Portfolio may also purchase
exchange-listed and over-the-counter call and put options on foreign currency
futures contracts and on foreign currencies. A put option on a futures contract
gives a Portfolio the right to assume a short position in the futures contract
until expiration of the option. A put option on currency gives a Portfolio the
right to sell a currency at an exercise price until the expiration of the
option. A call option on a futures contract gives a Portfolio the right to
assume a long position in the futures contract until the expiration of the
option. A call option on currency gives a Portfolio the right to purchase a
currency at the exercise price until the expiration of the option. A Portfolio
will engage in over-the-counter transactions only when appropriate
exchange-traded transactions are unavailable and when, in SCMI's opinion, the
pricing mechanism and liquidity are satisfactory and the participants are
responsible parties likely to meet their contractual obligations.
When it engages in position hedging, a Portfolio enters into foreign
currency exchange transactions to protect against a decline in the values of the
foreign currencies in which securities held by a Portfolio are denominated or
are quoted in their principal trading markets or an increase in the value of
currency for securities which a Portfolio expects to purchase. In connection
with position hedging, a Portfolio may purchase put or call options on foreign
currency and foreign currency futures contracts and buy or sell forward
contracts and foreign currency futures contracts. A Portfolio may also purchase
or sell foreign currency on a spot basis.
The precise matching of the amounts of foreign currency exchange
transactions and the value of the portfolio securities involved will not
generally be possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the values of
those securities between the dates the currency exchange transactions are
entered into and the dates they mature.
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It is impossible to forecast with precision the market value of a
Portfolio's portfolio securities at the expiration or maturity of a forward or
futures contract. Accordingly, it may be necessary for a Portfolio to purchase
additional foreign currency on the spot market (and bear the expense of such
purchase) if the market value of the security or securities being hedged is less
than the amount of foreign currency a Portfolio is obligated to deliver and if a
decision is made to sell the security or securities and make delivery of the
foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio security or
securities of a Portfolio if the market value of such security or securities
exceeds the amount of foreign currency a Portfolio is obligated to deliver.
To offset some of the costs to a Portfolio of hedging against
fluctuations in currency exchange rates, a Portfolio may write covered call
options on those currencies.
Transaction and position hedging do not eliminate fluctuations in the
underlying prices of the securities which a Portfolio owns or intends to
purchase or sell. They simply establish a rate of exchange which one can achieve
at some future point in time. Additionally, although these techniques tend to
minimize the risk of loss due to a decline in the value of the hedged currency,
they tend to limit any potential gain which might result from the increase in
the value of such currency.
A Portfolio may also seek to increase its current return by purchasing
and selling foreign currency on a spot basis, and by purchasing and selling
options on foreign currencies and on foreign currency futures contracts, and by
purchasing and selling foreign currency forward contracts.
CURRENCY FORWARD AND FUTURES CONTRACTS. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract as agreed by the parties, at a price set at the time of the contract.
In the case of a cancelable forward contract, the holder has the unilateral
right to cancel the contract at maturity by paying a specified fee. The
contracts are traded in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for trades. A foreign currency futures contract is a standardized contract
for the future delivery of a specified amount of a foreign currency at a future
date at a price set at the time of the contract. Foreign currency futures
contracts traded in the United States are designed by and traded on exchanges
regulated by the CFTC, such as the New York Mercantile Exchange.
Forward foreign currency exchange contracts differ from foreign
currency futures contracts in certain respects. For example, the maturity date
of a forward contract may be any fixed number of days from the date of the
contract agreed upon by the parties, rather than a predetermined date in a given
month. Forward contracts may be in any amounts agreed upon by the parties rather
than predetermined amounts. Also, forward foreign exchange contracts are traded
directly between currency traders so that no intermediary is required. A forward
contract generally requires no margin or other deposit.
At the maturity of a forward or futures contract, a Portfolio may
either accept or make delivery of the currency specified in the contract, or at
or prior to maturity enter into a closing transaction involving the purchase or
sale of an offsetting contract. Closing transactions with respect to forward
contracts are usually effected with the currency trader who is a party to the
original forward contract. Closing transactions with respect to futures
contracts are effected on a commodities exchange; a clearing corporation
associated with the exchange assumes responsibility for closing out such
contracts.
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Positions in foreign currency futures contracts and related options may
be closed out only on an exchange or board of trade which provides a secondary
market in such contracts or options. Although a Portfolio will normally purchase
or sell foreign currency futures contracts and related options only on exchanges
or boards of trade where there appears to be an active secondary market, there
is no assurance that a secondary market on an exchange or board of trade will
exist for any particular contract or option or at any particular time. In such
event, it may not be possible to close a futures or related option position and,
in the event of adverse price movements, a Portfolio would continue to be
required to make daily cash payments of variation margin on its futures
positions.
FOREIGN CURRENCY OPTIONS. Options on foreign currencies operate
similarly to options on securities, and are traded primarily in the
over-the-counter market, although options on foreign currencies have recently
been listed on several exchanges. Such options will be purchased or written only
when SCMI believes that a liquid secondary market exists for such options. There
can be no assurance that a liquid secondary market will exist for a particular
option at any specific time. Options on foreign currencies are affected by all
of those factors which influence exchange rates and investments generally.
The value of a foreign currency option is dependent upon the value of
the foreign currency and the U.S. dollar, and may have no relationship to the
investment merits of a foreign security. Because foreign currency transactions
occurring in the interbank market involve substantially larger amounts than
those that may be involved in the use of foreign currency options, investors may
be disadvantaged by having to deal in an odd lot market (generally consisting of
transactions of less than $1 million) for the underlying foreign currencies at
prices that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies and there is no regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely basis.
Available quotation information is generally representative of very large
transactions in the interbank market and thus may not reflect relatively smaller
transactions (less than $1 million) where rates may be less favorable. The
interbank market in foreign currencies is a global, around-the-clock market. To
the extent that the U.S. options markets are closed while the markets for the
underlying currencies remain open, significant price and rate movements may take
place in the underlying markets that cannot be reflected in the U.S. options
markets.
FOREIGN CURRENCY CONVERSION. Although foreign exchange dealers do not
charge a fee for currency conversion, they do realize a profit based on the
difference (the "spread") between prices at which they buy and sell various
currencies. Thus, a dealer may offer to sell a foreign currency to a Portfolio
at one rate, while offering a lesser rate of exchange should a Portfolio desire
to resell that currency to the dealer.
ZERO-COUPON SECURITIES
Zero-coupon securities in which a Portfolio may invest are debt
obligations which are generally issued at a discount and payable in full at
maturity, and which do not provide for current payments of interest prior to
maturity. Zero-coupon securities usually trade at a deep discount from their
face or par value and are subject to greater market value fluctuations from
changing interest rates than debt obligations of comparable maturities which
make current distributions of interest. As a result, the net asset value of
shares of a Portfolio investing in zero-coupon securities may fluctuate over a
greater range than shares of other Portfolios of the Trust and other mutual
funds investing in securities making current distributions of interest and
having similar maturities.
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Zero-coupon securities may include U.S. Treasury bills issued directly
by the U.S. Treasury or other short-term debt obligations, and longer-term bonds
or notes and their unmatured interest coupons which have been separated by their
holder, typically a custodian bank or investment brokerage firm. A number of
securities firms and banks have stripped the interest coupons from the
underlying principal (the "corpus") of U.S. Treasury securities and resold them
in custodial receipt programs with a number of different names, including
Treasury Income Growth Receipts ("TIGRS") and Certificates of Accrual on
Treasuries ("CATS"). The underlying U.S. Treasury bonds and notes themselves are
held in book-entry form at the Federal Reserve Bank or, in the case of bearer
securities (i.e., unregistered securities which are owned ostensibly by the
bearer or holder thereof), in trust on behalf of the owners thereof.
In addition, the Treasury has facilitated transfers of ownership of
zero-coupon securities by accounting separately for the beneficial ownership of
particular interest coupons and corpus payments on Treasury securities through
the Federal Reserve book-entry record-keeping system. The Federal Reserve
program as established by the Treasury Department is known as "STRIPS" or
"Separate Trading of Registered Interest and Principal of Securities." Under the
STRIPS program, a Portfolio will be able to have its beneficial ownership of
U.S. Treasury zero-coupon securities recorded directly in the book-entry
record-keeping system in lieu of having to hold certificates or other evidences
of ownership of the underlying U.S. Treasury securities.
When debt obligations have been stripped of their unmatured interest
coupons by the holder, the stripped coupons are sold separately. The principal
or corpus is sold at a deep discount because the buyer receives only the right
to receive a future fixed payment on the security and does not receive any
rights to periodic cash interest payments. Once stripped or separated, the
corpus and coupons may be sold separately. Typically, the coupons are sold
separately or grouped with other coupons with like maturity dates and sold in
such bundled form. Purchasers of stripped obligations acquire, in effect,
discount obligations that are economically identical to the zero-coupon
securities issued directly by the obligor.
EMERGING MARKETS COUNTRIES
The following countries are not deemed to be "emerging markets" for
Schroder EM Core Portfolio.
Australia The Netherlands
Austria New Zealand
Belgium Norway
Canada Portugal
Denmark Singapore
Finland Spain
France Sweden
Germany Switzerland
Ireland United Kingdom
Italy USA
Japan
<PAGE>
INVESTMENT RESTRICTIONS
The following investment restrictions restate or are in addition to
those described under "Investment Restrictions" and "Investment Objective and
Policies" in Part A. Except as required by the 1940 Act, if any percentage
restriction on investment or utilization of assets is adhered to at the time an
investment is made, a later change in percentage resulting from a change in the
market values of the Portfolio's assets or purchases and redemptions of
interests will not be considered a violation of the limitation.
INTERNATIONAL EQUITY FUND
FUNDAMENTAL RESTRICTIONS. The following investment restrictions are
fundamental policies of the Portfolio.
DIVERSIFICATION. The Portfolio may not invest more than 5% of its
assets in the securities of any single issuer. This restriction
does not apply to U.S.Government Securities.
PURCHASING VOTING SECURITIES. The Portfolio may not purchase more than
10% of the voting securities of any one issuer.
CLOSED-END FUNDS. The Portfolio will not purchase more than 3% of the
outstanding securities of any closed-end investment company.
UNSEASONED ISSUERS. The Portfolio may not invest in securities of
issuers having a record, together with predecessors, of less than three
years of continuous operations if, regarding all such securities, more
than 10% of its total assets would be invested in such securities.
CONCENTRATION. The Portfolio may not invest 25% or more of the value
of its total assets in any one industry.
BORROWING. The Portfolio may not borrow money, except from banks, for
temporary emergency purposes and then only in an amount not exceeding
5% of the value of the total assets of the Portfolio.
PLEDGING. The Portfolio may not pledge, mortgage or hypothecate its
assets to an extent greater than 10% of the value of the total assets
of the Portfolio.
MARGIN; SHORT SALES. The Portfolio may not purchase securities on
margin or sell short.
INVESTING FOR CONTROL. The Portfolio may not make investments for the
purpose of exercising control or management.
REAL ESTATE. The Portfolio may not purchase or sell real estate,
provided that the Portfolio may invest in securities issued by
companies which invest in real estate or interests therein.
LENDING. The Portfolio may not make loans to other persons, provided
that for purposes of this restriction, entering into repurchase
agreements, acquiring corporate debt securities and investing in U.S.
Government Securities, short-term commercial paper, certificates of
deposit and bankers' acceptances shall not be deemed to be the making
of a loan.
19
<PAGE>
COMMODITIES. The Portfolio may not invest in commodities; commodity
contracts other than foreign currency forward contracts; or oil, gas
and other mineral resource, lease, or arbitrage transactions.
OPTIONS. The Portfolio may not write, purchase or sell options or puts,
calls, straddles, spreads, or combinations thereof.
UNDERWRITING. The Portfolio may not underwrite securities issued by
other persons except to the extent that, in connection with the
disposition of its portfolio investments, it may be deemed to be an
underwriter under U.S. securities laws.
WARRANTS. The Portfolio may not invest in warrants, valued at the lower
of cost or market, more than 5% of the value of the Portfolio's net
assets (included within that amount, but not to exceed 2% of the value
of the Portfolio's net assets, may be warrants which are not listed on
the New York or American Stock Exchange. Warrants acquired by the
Portfolio in units or attached to securities may be deemed to be
without value.).
NONFUNDAMENTAL RESTRICTIONS. The following investment restrictions are
not fundamental policies of the Portfolio.
Liquidity. The Portfolio may not invest in securities which cannot be
readily resold to the public because of legal or contractual
restrictions or for which no readily available market exists. This
policy does not include restricted securities eligible for resale to
qualified institutional purchasers pursuant to Rule 144A under the
Securities Act of 1933 that are determined to be liquid by the Board or
SCMI under Board-approved guidelines. Such guidelines take into account
trading activity for such securities and the availability of reliable
pricing information, among other factors. If there is a lack of trading
interest in particular Rule 144A securities, the Portfolio's holdings
of those securities may be illiquid.
SCHRODER EM CORE PORTFOLIO
FUNDAMENTAL RESTRICTIONS. The following investment restrictions are
fundamental policies of the Portfolio.
INDUSTRY CONCENTRATION. The Portfolio may not purchase a security if,
as a result, more than 25% of the Portfolio's total assets would be
invested in securities of issuers conducting their principal business
activities in the same industry. For purposes of this limitation, there
is no limit on: (1) investments in U.S. government securities, in
repurchase agreements covering U.S. government securities, in
securities issued by the states, territories or possessions of the
United States ("municipal securities") or in foreign government
securities; or (2) investment in issuers domiciled in a single
jurisdiction. Notwithstanding anything to the contrary, to the extent
permitted by the 1940 Act, each Portfolio may invest in one or more
investment companies; provided that, except to the extent the Portfolio
invests in other investment companies pursuant to Section 12(d)(1)(A)
of the 1940 Act, the Portfolio treats the assets of the investment
companies in which it invests as its own for purposes of this policy.
20
<PAGE>
BORROWING. The Portfolio may not borrow money if, as a result,
outstanding borrowings would exceed an amount equal to one third of
the Portfolio's total assets.
REAL ESTATE. The Portfolio may not purchase or sell real estate unless
acquired as a result of ownership of securities or other instruments
(but this shall not prevent the Portfolio from investing in securities
or other instruments backed by real estate or securities of companies
engaged in the real estate business).
LENDING. The Portfolio may not make loans to other parties. For
purposes of this limitation, entering into repurchase agreements,
lending securities and acquiring any debt security are not deemed to be
the making of loans.
COMMODITIES. The Portfolio may not purchase or sell physical
commodities unless acquired as a result of ownership of securities or
other instruments (but this shall not prevent the Portfolio from
purchasing or selling options and futures contracts or from investing
in securities or other instruments backed by physical commodities).
UNDERWRITING. The Portfolio may not underwrite (as that term is defined
in the Securities Act of 1933, as amended) securities issued by other
persons except, to the extent that in connection with the disposition
of the Portfolio's assets, the Portfolio may be deemed to be an
underwriter.
SENIOR SECURITIES. The Portfolio may not issue any class of
senior securities except to the extent consistent with the 1940 Act.
NONFUNDAMENTAL RESTRICTIONS. The following investment restrictions are
not fundamental policies of the Portfolio.
DIVERSIFICATION. To the extent required to qualify as a regulated
investment company under the Code, the Portfolio may not purchase a
security (other than a U.S. government security or a security of an
investment company) if, as a result, (1) with respect to 50% of its
assets, more than 5% of the Portfolio's total assets would be invested
in the securities of any single issuer; (2) with respect to 50% of its
assets, the Portfolio would own more than 10% of the outstanding
securities of any single issuer; or (3) more than 25% of the
Portfolio's total assets would be invested in the securities of any
single issuer.
BORROWING. For purposes of the Portfolio's limitation on borrowing, the
following are not treated as borrowings to the extent they are fully
collateralized: (1) the delayed delivery of purchased securities (such
as the purchase of when-issued securities); (2) reverse repurchase
agreements; (3) dollar-roll transactions; and (5) the lending of
securities ("leverage transactions").
LIQUIDITY. The Portfolio may not invest more than 15% of its net assets
in: (1) securities that cannot be disposed of within seven days at
their then-current value; (2) repurchase agreements not entitling the
holder to payment of principal within seven days; and (3) securities
subject to restrictions on the sale of the securities to the public
without registration under the 1933 Act ("restricted securities") that
are not readily marketable.
21
<PAGE>
Exercising Control of Issuers. The Portfolio may not make investments
for the purpose of exercising control of an issuer. Investments by the
Portfolio in entities created under the laws of foreign countries
solely to facilitate investment in securities in that country will not
be deemed the making of investments for the purpose of exercising
control.
OTHER INVESTMENT COMPANIES. The Portfolio may not invest in securities
of another investment company, except to the extent permitted by the
1940 Act.
MARGIN; SHORT SALES. The Portfolio purchase securities on margin,
except that the Portfolio may use short-term credit for the clearance
of the Portfolio's transactions, and provided that initial and
variation margin payments in connection with futures contracts and
options on futures contracts shall not constitute purchasing securities
on margin. The Portfolio may not sell securities short, unless it owns
or has the right to obtain securities equivalent in kind and amount to
the securities sold short (short sales "against the box"), and provided
that transactions in futures contracts and options are not deemed to
constitute selling securities short.
SCHRODER INTERNATIONAL SMALLER COMPANIES PORTFOLIO
FUNDAMENTAL RESTRICTIONS. The following investment restrictions are
fundamental policies of the Portfolio.
DIVERSIFICATION. The Portfolio may not, with respect to 75% of its
assets, purchase a security other than a U.S. Government Security or a
security of an investment company if, as a result, more than 5% of the
Portfolio's total assets would be invested in the securities of a
single issuer or the Portfolio would own more than 10% of the
outstanding voting securities of any single issuer.
CONCENTRATION. The Portfolio may not concentrate investments in any
particular industry; therefore, the Portfolio will not purchase the
securities of companies in any one industry if, thereafter, 25% or more
of the Portfolio's total assets would consist of securities of
companies in that industry. This restriction does not apply to U.S.
Government Securities. An investment of more than 25% of the
Portfolio's assets in the securities of issuers located in one country
does not contravene this policy.
BORROWING. The Portfolio may not borrow money in excess of 33 1/3% of
its total assets taken at market value (including the amount borrowed)
and then only from a bank as a temporary measure for extraordinary or
emergency purposes, including to meet redemptions or to settle
securities transactions that may otherwise require untimely
dispositions of Portfolio securities.
REAL ESTATE. The Portfolio may not purchase or sell real estate,
provided that the Portfolio may invest in securities issued by
companies which invest in real estate or interests therein.
LENDING. The Portfolio may not make loans to other persons, provided
that for purposes of this restriction, entering into repurchase
agreements or acquiring any otherwise permissible debt securities shall
not be deemed to be the making of a loan.
COMMODITIES. The Portfolio may not invest in commodities or commodity
contracts other than foreign currency forward contracts.
UNDERWRITING. The Portfolio may not underwrite securities issued by
other persons except to the extent that, in connection with the
disposition of its portfolio investments, it may be deemed to be an
underwriter under U.S. securities laws.
22
<PAGE>
SENIOR SECURITIES. The Portfolio may not issue senior securities except
to the extent permitted by the 1940 Act.
NONFUNDAMENTAL RESTRICTIONS. The following investment restrictions are
not fundamental policies of the Portfolio.
CLOSED-END FUNDS. The Portfolio will not purchase more than 3% of the
outstanding securities of any closed-end investment company.
BORROWING. The Portfolio will not purchase securities while borrowings
exceed 5% of total assets.
LIQUIDITY. The Portfolio may not acquire a security if, as a result,
more than 15% of its net assets (taken at current value) would be
invested in illiquid securities (securities that cannot be disposed of
within seven days at their then-current value), including repurchase
agreements not entitling the holder to payment of principal within
seven days or other securities that are not readily marketable by
virtue of restrictions on the sale of such securities to the public
without registration under the Securities Act of 1933, as amended
("Restricted Securities").
This policy does not include restricted securities that can be sold to
the public in foreign markets or that may be eligible for qualified
institutional purchasers pursuant to Rule 144A under the Securities Act
of 1933 that are determined to be liquid by SCMI pursuant to guidelines
adopted by the Board.
INVESTING FOR CONTROL. The Portfolio may not make investments for the
purpose of exercising control or management. (Investments by the
Portfolio in wholly owned investment entities created under the laws of
certain countries will not be deemed the making of investments for the
purpose of exercising control or management.)
MARGIN; SHORT SALES. The Portfolio may not purchase securities on
margin, or make short sales of securities (except short sales
against-the-box), except for the use of short-term credit necessary for
the clearance of purchases and sales of portfolio securities. The
Portfolio may make margin deposits in connection with permitted
transactions in options, futures contracts and options on futures
contracts.
OIL, GAS AND MINERAL INVESTMENTS. The Portfolio may not invest in oil,
gas, or other mineral resources, lease, or arbitrage transactions.
DIVERSIFICATION. The Portfolio may not purchase a security, other than
a U.S. Government Security if, as a result, more than 5% of the
Portfolio's total assets would be invested in the securities of a
single issuer or the Portfolio would own more than 10% of the
outstanding voting securities of any single issuer.
SCHRODER U.S. SMALLER COMPANIES PORTFOLIO
FUNDAMENTAL RESTRICTIONS. The following investment restrictions are
fundamental policies of the Portfolio.
23
<PAGE>
DIVERSIFICATION. The Portfolio may not, with respect to 75% of its
assets, the Portfolio may not purchase a security other than a U.S.
Government Security if, as a result, more than 5% of its total assets
would be invested in the securities of a single issuer or it would own
more than 10% of the outstanding voting securities of any single
issuer.
CONCENTRATION. The Portfolio may not purchase securities if,
immediately after the purchase, 25% or more of the value of its total
assets would be invested in the securities of issuers conducting their
principal business activities in the same industry; provided, however,
that there is no limit on investments in U.S.
Government Securities.
BORROWING. The Portfolio may borrow money from banks or by entering
into reverse repurchase agreements, provided that such borrowings do
not exceed 33 1/3% of the value of the Portfolio's total assets
(computed immediately after the borrowing).
SENIOR SECURITIES. The Portfolio may not issue senior securities except
to the extent permitted by the 1940 Act.
UNDERWRITING. The Portfolio may not underwrite securities of other
issuers, except to the extent that it may be considered to be acting as
an underwriter in connection with the disposition of portfolio
securities.
LENDING. The Portfolio may not make loans, except it may enter into
repurchase agreements, purchase debt securities that are otherwise
permitted investments and lend portfolio securities.
REAL ESTATE. The Portfolio may not purchase or sell real estate or any
interest therein, except that it may invest in debt obligations secured
by real estate or interests therein or securities issued by companies
that invest in real estate or interests therein.
COMMODITIES. The Portfolio may not purchase or sell physical
commodities unless acquired as a result of owning securities or other
instruments, but it may purchase, sell or enter into financial options
and futures and forward currency contracts and other financial
contracts or derivative instruments.
NONFUNDAMENTAL RESTRICTIONS. The following investment restrictions are
not fundamental policies of the Portfolio.
BORROWING. The Portfolio's borrowings for other than temporary or
emergency purposes or meeting redemption requests may not exceed an
amount equal to 5% of the value of its net assets.
LIQUIDITY. The Portfolio may not acquire securities or invest in
repurchase agreements with respect to any securities if, as a result,
more than 15% of its net assets (taken at current value) would be
invested in repurchase agreements not entitling the holder to payment
of principal within seven days and in securities that are not readily
marketable by virtue of restrictions on the sale of such securities to
the public without registration under the 1933 Act ("Restricted
Securities").
OTHER FUNDS. The Portfolio may not invest in securities of another
investment company, except to the extent permitted by the 1940 Act.
24
<PAGE>
MARGIN; SHORT SALES. The Portfolio may not purchase securities on
margin, or make short sales of securities (except short sales against
the box), except for the use of short-term credit necessary for the
clearance of purchases and sales of portfolio securities. The Portfolio
may make margin deposits in connection with permitted transactions in
options, futures contracts and options on futures contracts.
UNSEASONED ISSUERS. The Portfolio may not invest in securities (other
than fully collateralized debt obligations) issued by companies that
have conducted continuous operations for less than three years,
including the operations of predecessors, unless guaranteed as to
principal and interest by an issuer in whose securities the Portfolio
could invest, if, as a result, more than 5% of the value of the
Portfolio's total assets would be so invested.
CONCENTRATION. The Portfolio may not concentrate investments in any
particular industry; therefore, the Portfolio will not purchase the
securities of companies in any one industry if, thereafter, 25% or more
of the Portfolio's total assets would consist of securities of
companies in that industry. This restriction does not apply to U.S.
Government Securities. An investment of more than 25% of the
Portfolio's assets in the securities of issuers located in one country
does not contravene this policy.
BORROWING. The Portfolio may not borrow money in excess of 33 1/3% of
its total assets taken at market value (including the amount borrowed)
and then only from a bank as a temporary measure for extraordinary or
emergency purposes, including to meet redemptions or to settle
securities transactions that may otherwise require untimely
dispositions of Portfolio securities.
REAL ESTATE. The Portfolio may not purchase or sell real estate,
provided that the Portfolio may invest in securities issued by
companies which invest in real estate or interests therein.
Lending. The Portfolio may not make loans to other persons, provided
that for purposes of this restriction, entering into repurchase
agreements or acquiring any otherwise permissible debt securities shall
not be deemed to be the making of a loan.
COMMODITIES. The Portfolio may not invest in commodities or commodity
contracts other than foreign currency forward contracts.
UNDERWRITING. The Portfolio may not underwrite securities issued by
other persons except to the extent that, in connection with the
disposition of its portfolio investments, it may be deemed to be an
underwriter under U.S. securities laws.
25
<PAGE>
SENIOR SECURITIES. The Portfolio may not issue senior securities except
to the extent permitted by the 1940 Act.
NONFUNDAMENTAL RESTRICTIONS. The following investment restrictions are
not fundamental policies of the Portfolio.
CLOSED-END FUNDS. The Portfolio will not purchase more than 3% of the
outstanding securities of any closed-end investment company.
BORROWING. The Portfolio will not purchase securities while borrowings
exceed 5% of total assets.
LIQUIDITY. The Portfolio may not acquire a security if, as a result,
more than 15% of its net assets (taken at current value) would be
invested in illiquid securities (securities that cannot be disposed of
within seven days at their then-current value), including repurchase
agreements not entitling the holder to payment of principal within
seven days or other securities that are not readily marketable by
virtue of restrictions on the sale of such securities to the public
without registration under the Securities Act of 1933, as amended
("Restricted Securities").
This policy does not include restricted securities that can be sold to
the public in foreign markets or that may be eligible for qualified
institutional purchasers pursuant to Rule 144A under the Securities Act
of 1933 that are determined to be liquid by SCMI pursuant to guidelines
adopted by the Board.
INVESTING FOR CONTROL. The Portfolio may not make investments for the
purpose of exercising control or management. (Investments by the
Portfolio in wholly owned investment entities created under the laws of
certain countries will not be deemed the making of investments for the
purpose of exercising control or management.)
MARGIN; SHORT SALES. The Portfolio may not purchase securities on
margin, or make short sales of securities (except short sales
against-the-box), except for the use of short-term credit necessary for
the clearance of purchases and sales of portfolio securities. The
Portfolio may make margin deposits in connection with permitted
transactions in options, futures contracts and options on futures
contracts.
OIL, GAS AND MINERAL INVESTMENTS. The Portfolio may not invest in oil,
gas, or other mineral resources, lease, or arbitrage transactions.
DIVERSIFICATION. The Portfolio may not purchase a security, other than
a U.S. Government Security if, as a result, more than 5% of the
Portfolio's total assets would be invested in the securities of a
single issuer or the Portfolio would own more than 10% of the
outstanding voting securities of any single issuer.
SCHRODER U.S. SMALLER COMPANIES PORTFOLIO
Fundamental Restrictions. The following investment restrictions are
fundamental policies of the Portfolio.
26
<PAGE>
DIVERSIFICATION. The Portfolio may not, with respect to 75% of its
assets, the Portfolio may not purchase a security other than a U.S.
Government Security if, as a result, more than 5% of its total assets
would be invested in the securities of a single issuer or it would own
more than 10% of the outstanding voting securities of any single
issuer.
CONCENTRATION. The Portfolio may not purchase securities if,
immediately after the purchase, 25% or more of the value of its total
assets would be invested in the securities of issuers conducting their
principal business activities in the same industry; provided, however,
that there is no limit on investments in U.S.
Government Securities.
BORROWING. The Portfolio may borrow money from banks or by entering
into reverse repurchase agreements, provided that such borrowings do
not exceed 33 1/3% of the value of the Portfolio's total assets
(computed immediately after the borrowing).
SENIOR SECURITIES. The Portfolio may not issue senior securities except
to the extent permitted by the 1940 Act.
UNDERWRITING. The Portfolio may not underwrite securities of other
issuers, except to the extent that it may be considered to be acting as
an underwriter in connection with the disposition of portfolio
securities.
LENDING. The Portfolio may not make loans, except it may enter into
repurchase agreements, purchase debt securities that are otherwise
permitted investments and lend portfolio securities.
REAL ESTATE. The Portfolio may not purchase or sell real estate or any
interest therein, except that it may invest in debt obligations secured
by real estate or interests therein or securities issued by companies
that invest in real estate or interests therein.
COMMODITIES. The Portfolio may not purchase or sell physical
commodities unless acquired as a result of owning securities or other
instruments, but it may purchase, sell or enter into financial options
and futures and forward currency contracts and other financial
contracts or derivative instruments.
NONFUNDAMENTAL RESTRICTIONS. The following investment restrictions are
not fundamental policies of the Portfolio.
BORROWING. The Portfolio's borrowings for other than temporary or
emergency purposes or meeting redemption requests may not exceed an
amount equal to 5% of the value of its net assets.
LIQUIDITY. The Portfolio may not acquire securities or invest in
repurchase agreements with respect to any securities if, as a result,
more than 15% of its net assets (taken at current value) would be
invested in repurchase agreements not entitling the holder to payment
of principal within seven days and in securities that are not readily
marketable by virtue of restrictions on the sale of such securities to
the public without registration under the 1933 Act ("Restricted
Securities").
OTHER FUNDS. The Portfolio may not invest in securities of another
investment company, except to the extent permitted by the 1940 Act.
27
<PAGE>
MARGIN; SHORT SALES. The Portfolio may not purchase securities on
margin, or make short sales of securities (except short sales against
the box), except for the use of short-term credit necessary for the
clearance of purchases and sales of portfolio securities. The Portfolio
may make margin deposits in connection with permitted transactions in
options, futures contracts and options on futures contracts.
UNSEASONED ISSUERS. The Portfolio may not invest in securities (other
than fully collateralized debt obligations) issued by companies that
have conducted continuous operations for less than three years,
including the operations of predecessors, unless guaranteed as to
principal and interest by an issuer in whose securities the Portfolio
could invest, if, as a result, more than 5% of the value of the
Portfolio's total assets would be so invested.
PLEDGING. The Portfolio may not pledge, mortgage, hypothecate or
encumber any of its assets except to secure permitted borrowings.
SECURITIES HELD BY TRUSTEES AND OFFICERS. The Portfolio may not invest
in or hold securities of any issuer if, to the Trust's knowledge,
officers and trustees of the Trust or officers and directors of the
Portfolio's investment adviser, individually owning beneficially more
than 1/2 of 1% of the securities of the issuer, in the aggregate own
more than 5% of the issuer's securities.
OIL, GAS AND MINERAL INVESTMENTS. The Portfolio may not invest in
interest in oil and gas or interests in other mineral exploration or
development programs.
REAL ESTATE PARTNERSHIPS. The Portfolio may not purchase real estate
limited partnership interests.
WARRANTS. The Portfolio may not invest in warrants if, as a result,
more than 5% of its net assets would be so invested or if, more than 2%
of its net assets would be invested in warrants that are not listed on
the New York or American Stock Exchanges.
SCHRODER GLOBAL GROWTH PORTFOLIO
FUNDAMENTAL RESTRICTIONS. The following investment restrictions are
fundamental policies of the Portfolio.
DIVERSIFICATION. With respect to 75% of its assets, the Portfolio may
not purchase a security (other than a U.S. government security or a
security of an investment company) if, as a result: (1) more than 5% of
the Portfolio's total assets would be invested in the securities of a
single issuer; or (2) the Portfolio would own more than 10% of the
outstanding voting securities of any single issuer.
INDUSTRY CONCENTRATION. The Portfolio may not purchase a security if,
as a result, more than 25% of the Portfolio's total assets would be
invested in securities of issuers conducting their principal business
activities in the same industry. For purposes of this limitation, there
is no limit on: (1) investments in U.S. government securities, in
repurchase agreements covering U.S. government securities, in
securities issued by the states, territories or possessions of the
United States ("municipal securities") or in foreign government
securities; or (2) investment in issuers domiciled in a single
jurisdiction. Notwithstanding anything to the contrary, to the extent
permitted by the 1940 Act, each Portfolio may invest in one or more
investment companies; provided that, except to the extent the Portfolio
invests in other investment companies pursuant to Section 12(d)(1)(A)
of the 1940 Act, the Portfolio treats the assets of the investment
companies in which it invests as its own for purposes of this policy.
28
<PAGE>
BORROWING. The Portfolio may not borrow money if, as a result,
outstanding borrowings would exceed an amount equal to one third of
the Portfolio's total assets.
REAL ESTATE. The Portfolio may not purchase or sell real estate unless
acquired as a result of ownership of securities or other instruments
(but this shall not prevent the Portfolio from investing in securities
or other instruments backed by real estate or securities of companies
engaged in the real estate business).
LENDING. The Portfolio may not make loans to other parties. For
purposes of this limitation, entering into repurchase agreements,
lending securities and acquiring any debt security are not deemed to be
the making of loans.
COMMODITIES. The Portfolio may not purchase or sell physical
commodities unless acquired as a result of ownership of securities or
other instruments (but this shall not prevent the Portfolio from
purchasing or selling options and futures contracts or from investing
in securities or other instruments backed by physical commodities).
UNDERWRITING. The Portfolio may not underwrite (as that term is defined
in the Securities Act of 1933, as amended) securities issued by other
persons except, to the extent that in connection with the disposition
of the Portfolio's assets, the Portfolio may be deemed to be an
underwriter.
SENIOR SECURITIES. The Portfolio may not issue any class of senior
securities except to the extent consistent with 1940 Act.
NONFUNDAMENTAL LIMITATIONS. The Portfolio has adopted the following
nonfundamental investment limitations.
BORROWING. For purposes of the limitation on borrowing, the following
are not treated as borrowings to the extent they are fully
collateralized: (1) the delayed delivery of purchased securities
(such as the purchase of when-issued securities); (2) reverse repurchase
agreements; (3) dollar-roll transactions; and (5) the lending of
securities ("leverage transactions"). (See fundamental Limitation
No. 3 "Borrowing" above.
LIQUIDITY. The Portfolio may not invest more than 15% of its net assets
in: (1) securities that cannot be disposed of within seven days at
their then-current value; (2) repurchase agreements not entitling the
holder to payment of principal within seven days; and (3) securities
subject to restrictions on the sale of the securities to the public
without registration under the 1933 Act ("restricted securities") that
are not readily marketable. Each Portfolio may treat certain restricted
securities as liquid pursuant to guidelines adopted by the Board.
EXERCISING CONTROL OF ISSUERS. The Portfolio may not make investments
for the purpose of exercising control of an issuer. Investments by a
Portfolio in entities created under the laws of foreign countries
solely to facilitate investment in securities in that country will not
be deemed the making of investments for the purpose of exercising
control.
OTHER INVESTMENT COMPANIES. The Portfolio may not invest in
securities of another investment company,
except to the extent permitted by the 1940 Act.
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SHORT SALES AND PURCHASING ON MARGIN. The Portfolio may not sell
securities short, unless it owns or has the right to obtain securities
equivalent in kind and amount to the securities sold short (short sales
"against the box"), and provided that transactions in futures contracts
and options are not deemed to constitute selling securities short.
The Portfolio may not purchase securities on margin, except that a
Portfolio may use short-term credit for the clearance of the
Portfolio's transactions, and provided that initial and variation
margin payments in connection with futures contracts and options on
futures contracts shall not constitute purchasing securities on margin.
LENDING. The Portfolio may not lend a security if, as a result,
the amount of loaned securities would
exceed an amount equal to one third of the Portfolio's total assets.
Except as required by the 1940 Act, if any percentage restriction on investment
or utilization of assets is adhered to at the time an investment is made, a
later change in percentage resulting from a change in the market values of the
Portfolio's assets or purchases and redemptions of interests will not be
considered a violation of the limitation.
MANAGEMENT OF THE TRUST
OFFICERS AND TRUSTEES
The following information relates to the principal occupations during
the past five years of each Trustee and executive officer of the Trust and shows
the nature of any affiliation with SCMI. Except as noted, each of these
individuals currently serves in the same capacity for Schroder Capital Funds
(Delaware), Schroder Capital Funds II and Schroder Series Trust, other
registered investment companies in the Schroder family of funds. If no address
is shown, the person's address is that of the Trust, Two Portland Square.
Portland, Maine 04101.
PETER E. GUERNSEY, 75 - Trustee of the Trust; Insurance Consultant
since August 1986; prior thereto Senior Vice President, Marsh &
McLennan, Inc., insurance brokers.
JOHN I. HOWELL, 80 - Trustee of the Trust; Private Consultant since
February 1987; Honorary Director, American International Group, Inc.;
Director, American International Life Assurance Company of New York.
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.
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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.
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; Assistant Vice President of SCM and SCMI
from April 1997 to September 1997; Associate, SCMI, from August 1995 to
March 1997; and 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, parent Forum Accounting Services, LLC and Forum
Administrative Services, LLC.
JANE P. LUCAS, 35, 787 Seventh Avenue, New York, New York - Vice
President of the Trust; Director and Senior Vice President SCMI;
Director of SCM since September 1995; Director of Schroder Advisors
since September 1996; Assistant Director Schroder Investment Management
Ltd. since June 1991.
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.
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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.
CATHERINE A. MAZZA, 37, 787 Seventh Avenue, New York, New York - Vice
President of the Trust; President of Schroder Advisors since 1997;
First Vice President of SCMI and SCM since 1996; prior thereto, held
various marketing positions at Alliance Capital, an investment adviser,
since July 1985.
MICHAEL PERELSTEIN, 41, 787 Seventh Avenue, New York, New York - Vice
President of the Trust; Director since May 1997 and Senior Vice
President of SCMI since January 1997; prior thereto, Managing Director
of MacKay - Shields Financial Corp.
ALEXANDRA POE, 37, 787 Seventh Avenue, New York, New York - Secretary
and Vice President of the Trust; Vice President of SCMI since August
1996; Fund Counsel and Senior Vice President of Schroder Advisors since
August 1996; Secretary of Schroder Advisors; prior thereto, an
investment management attorney with Gordon Altman Butowsky Weitzen
Shalov & Wein since July 1994; prior thereto counsel and Vice President
of Citibank, N.A. since 1989.
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.
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, Two Portland Square, Portland, Maine - 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; 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.
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In addition to the Trust, the term "Fund Complex" includes three other
registered investment companies -- Schroder Capital Funds II, an open-end
management investment company; Schroder Capital Funds (Delaware), an open-end
management investment company; and Schroder Series Trust, an open-end company --
for which SCMI serves as investment adviser for each series.
Officers and Trustees who are interested persons of the Trust receive
no salary, fees or compensation from the Trust. Independent Trustees of the
Trust receive an annual retainer from the Fund Complex of $11,000 and additional
fees of $1,250 per meeting attended in person or $500 per meeting attended by
telephone. Members of an Audit Committee for one or more of the investment
companies receive an additional $1,000 per year. Payment of the annual retainer
is allocated among the various investment companies based on their relative net
assets. Payment of meeting fees is allocated only among those investment
companies to which the meeting relates. None of the registered investment
companies in the Fund Complex has any bonus, profit sharing, pension or
retirement plans.
The following table provides the fees paid to each independent Trustee
of the Trust for the year ended May 31, 1998.
<TABLE>
<S> <C> <C> <C> <C>
Pension or Total
Retirement Compensation From
Aggregate Benefits Accrued Estimated Annual Fund Complex Paid
Compensation From As Part of Trust Benefits Upon To Trustees ($)
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 August 31, 1998, the officers and Trustees of the Trust owned,
in the aggregate, less than 1% of the Trust's outstanding shares.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
The control persons and principal shareholders in the Trust's
Portfolios are set forth in Table 3 in Appendix A.
Both Schroder Capital Funds (Delaware) and Norwest Advantage Funds have
informed the Trust that whenever one of their series is requested to vote on
matters pertaining to a Portfolio, they will either: (1) solicit voting
instructions from fund shareholders with regard to the voting of all proxies
with respect to a fund's shares in a Portfolio and vote such proxies in
accordance with such instructions, or (2) vote the interests held by a fund in
the same proportion as the vote of all other holders of the Portfolio's
interests.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISORY SERVICES
SCMI, 787 Seventh Avenue, New York, New York, 10019, serves as
investment adviser to each Portfolio pursuant to an investment advisory
agreement. SCMI (as well as SCM) is a wholly owned U.S. subsidiary of Schroders
Incorporated (doing business in New York State as Schroders Holdings), the
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wholly owned U.S. holding company subsidiary of Schroders plc. Schroders plc is
the holding company parent of a large worldwide group of banks and financial
service companies (referred to as the "Schroder Group"), with associated
companies and branch and representative offices located in seventeen countries
worldwide. The Schroder Group specializes in providing investment management
services, with funds under management in excess of 175 billion as of September
30, 1997.
Under the investment advisory agreements, SCMI is responsible for
managing the investment and reinvestment of the assets included in each
Portfolio and for continuously reviewing, supervising and administering the
Portfolios' investments. In this regard, SCMI is responsible for making
decisions relating to the Portfolios' investments and placing purchase and sale
orders regarding such investments with brokers or dealers selected by it in its
discretion. SCMI also furnishes to the Board, which has overall responsibility
for the business and affairs of the Trust, periodic reports on the investment
performance of the Portfolios.
Under the terms of the investment advisory agreements, SCMI is required
to manage the Portfolios' investment portfolio in accordance with applicable
laws and regulations. In making its investment decisions, SCMI does not use
material inside information that may be in its possession or in the possession
of its affiliates.
The investment advisory agreements each continue in effect provided
such continuance is approved annually: (1) by the vote of a majority of the
outstanding voting securities of the Portfolio (as defined by the 1940 Act) or
by the Board and (2) by a majority of the Trustees who are not parties to the
agreement or "interested persons" (as defined in the 1940 Act) of any party to
the agreement. The investment advisory agreement with respect to a Portfolio may
be terminated without penalty by vote of the Trustees or the interestholders of
the Portfolio, in each case on 60 days' written notice to SCMI, or by SCMI on 60
days' written notice to the Trust. The agreements terminate automatically if
assigned. Each agreement also provides that, with respect to the Portfolio,
neither SCMI nor its personnel shall be liable for any error of judgment or
mistake of law or for any act or omission in the performance of its or their
duties to the Portfolio, except for willful misfeasance, bad faith or gross
negligence in the performance of SCMI's 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 each Fund 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. The advisory fee rates are set forth in Part A. This information
is provided for the past three years or such shorter terms as a Portfolio has
been operational.
Schroder Investment Management International, Ltd. ("SIMIL"), 31 Gresham
Street, London, U.K. EC2V 7QA, an affiliate of SCMI, serves as subadviser to
Schroder International Smaller Companies Portfolio. Under a Subadvisory
Agreement among SCMI, SIMIL, and the Portfolio, SIMIL is responsible for the
day-to-day portfolio management of the Portfolio, subject to the direction and
control of SCMI. SIMIL, a newly organized investment advisory firm, is a
wholly-owned subsidiary of Schroders plc, and as of June 30, 1998 had under
management assets of approximately $42 billion. Under the Subadvisory Agreement,
SCMI pays SIMIL a monthly fee at the annual rate of 0.25% of the Portfolio's
average daily net assets.
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Under the terms of the investment sub-advisory agreement, SIMIL is required
to manage the investment portfolio of Schroder International Smaller Companies
Portfolio in accordance with applicable laws and regulations. In making its
investment decisions, SIMI does not use material inside information that may be
in its possession or in the possession of its affiliates.
The investment sub-advisory agreement continues in effect provided such
continuance is approved annually: (1) by the vote of a majority of the
outstanding voting securities of the Portfolio (as defined by the 1940 Act) or
by the Board and (2) by a majority of the Trustees who are not parties to the
agreement or "interested persons" (as defined in the 1940 Act) of any party to
the agreement. The investment sub-advisory agreement may be terminated without
penalty (i) by a vote of the Board or by a vote of a majority of the outstanding
voting interests of the Portfolio on 60 days' written notice to SIMIL; (ii) by
the SCMI on 60 days' written notice to the SIMIL; or (iii) by SIMIL on 60 days'
written notice to the Trust. The agreement shall terminate automatically if
assigned. The agreement also provides that, with respect to the Portfolio,
neither SIMIL 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 SIMIL's or their duties or by reason of
reckless disregard of its or their obligations and duties under the agreement.
ADMINISTRATIVE SERVICES
On behalf of each Portfolio, the Trust has entered into an
administration agreement with Schroder Advisors, 787 Seventh Avenue, New York,
New York 10019, and a subadministration agreement FAdS. Under these agreements,
Schroder Advisors and FAdS provide certain management and administrative
services necessary for the Portfolios' operations, other than the investment
management and administrative services provided to the Portfolios by SCMI
pursuant SCMI's investment advisory agreements. These services include, among
other things: (1) preparation of shareholder reports and communications; (2)
regulatory compliance, such as reports to and filings with the SEC and state
securities commissions; and (3) general supervision of the operation of the
Portfolios, including coordination of the services performed by SCMI and the
interestholder recordkeeper and portfolio accountant, custodian, independent
accountants, legal counsel and others. Schroder Advisors is a wholly owned
subsidiary of SCMI, and is a registered broker-dealer organized to act as
administrator and distributor of mutual funds.
The administration and subadministration agreements are terminable with
respect to each Portfolio without penalty, at any time, by the Board on 60 days'
written notice to Schroder Advisors or 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 each Portfolio had certain
waivers not been in place, together with the dollar amount of fees waived and
the dollar amount of net fees paid. The fee rates are set forth in Part A. This
information is provided for the past three years or such shorter terms as a
Portfolio has been operational.
INTERESTHOLDER RECORDKEEPING AND PORTFOLIO ACCOUNTING
FAS, an affiliate of FAdS, performs interestholder recordkeeping and
portfolio accounting services for each Portfolio pursuant to an agreement with
the Trust. The agreement is terminable with respect to each Portfolio without
penalty, at any time, by the Board upon 60 days' written notice to FAS or by FAS
upon 60 days' written notice to the Trust.
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Under its agreement, FAS prepares and maintains the interestholder and
accounting books and records of each Portfolio that are required to be
maintained under the 1940 Act, calculates the net asset value of each Portfolio,
calculates the distributive share of the Portfolios' income, expense, gain and
loss allocable to each interestholder and prepares periodic reports to
interestholders and the SEC. For its services to each Portfolio, FAS is entitled
to receive from the Trust a fee of $48,000 per year. FAS is entitled to an
additional $24,000 per year with respect to global and international portfolios.
In addition, FAS also is entitled to an additional $12,000 per year with respect
to tax-free money market portfolios, portfolios with more than 25% of their
total assets invested in asset-backed securities, portfolios that have more than
100 security positions, or portfolios that have a monthly portfolio turnover
rate of 10% or greater.
FAS is required to use its best judgment and efforts in rendering its
services and is not liable to the Trust for any action or inaction in the
absence of bad faith, willful misconduct or gross negligence. FAS is not
responsible or liable for any failure or delay in performance of its obligations
arising out of or caused, directly or indirectly, by circumstances beyond its
reasonable control. The Trust has agreed to indemnify and hold harmless FAS and
its employees, agents, officers and directors against and from any and all
claims, demands, actions, suits, judgments, liabilities, losses, damages, costs,
charges, counsel fees and all other expenses arising out of or in any way
related to FAS's actions taken or failures to act with respect to a Portfolio or
based, if applicable, upon information, instructions or requests with respect to
a Portfolio given or made to FAS by an officer of the Trust duly authorized.
This indemnification does not apply to FAS's actions taken or failures to act in
cases of FAS's own bad faith, willful misconduct or gross negligence.
CUSTODIAN
The Chase Manhattan Bank, through its Global Securities Services
division located in London, England, acts as custodian of the Portfolios' assets
but plays no role in making decisions as to the purchase or sale of portfolio
securities for the Portfolios. Under rules adopted under the 1940 Act, the
Portfolios may maintain their foreign securities and cash in the custody of
certain eligible foreign banks and securities depositories. Selection of these
foreign custodial institutions is made by the Board following a consideration of
a number of factors, including (but not limited to) the reliability and
financial stability of the institution; the ability of the institution to
perform capably custodial services for the Portfolio; the reputation of the
institution in its national market; the political and economic stability of the
country in which the institution is located; and further risks of potential
nationalization or expropriation of Portfolio assets.
INDEPENDENT AUDITORS
PricewaterhouseCoopers, LLP, One Post Office Square, Boston,
Massachusetts 02109, serves as independent auditors for each Portfolio.
YEAR 2000 DISCLOSURE
The Portfolios receive services from SCMI, Schroder Advisors, FAdS,
FAS, The Chase Manhatten Bank and others which rely on the smooth functioning of
their respective systems and the systems of others to perform those services. It
is generally recognized that certain systems in use today may not perform their
intended functions adequately after the Year 1999 because of the inability of
the software to distinguish the year 2000 from the year 1900. Schroder Advisors
is taking steps that it believes are reasonably designed to address this
potential "Year 2000" problem and to obtain satisfactory assurances that
comparable steps are being taken by each of the Portfolios other major service
providers. There can be no assurance, however, that these steps will be
sufficient to avoid any adverse impact on the Portfolios from this problem.
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BROKERAGE ALLOCATION AND OTHER PRACTICES
INVESTMENT DECISIONS
Investment decisions for the Portfolios and for SCMI's other investment
advisory clients are made with a view to achieving their respective investment
objectives. Investment decisions are the product of many factors in addition to
basic suitability for the particular client involved, and a particular security
may be bought or sold for other clients at the same time. Likewise, a particular
security may be bought for one or more clients when one or more other clients
are selling the security. In some instances, one client may sell a particular
security to another client. It also sometimes happens that two or more clients
simultaneously purchase or sell the same security, in which event each day's
transactions in such security are, insofar as is possible, averaged as to price
and allocated between such clients in a manner that, in SCMI's opinion, is
equitable to each and in accordance with the amount being purchased or sold by
each. There may be circumstances when purchases or sales of portfolio securities
for one or more clients will have an adverse effect on other clients.
BROKERAGE AND RESEARCH SERVICES
Transactions on U.S. stock exchanges and other agency transactions
involve the payment of negotiated brokerage commissions. Such commissions vary
among brokers. Also, a particular broker may charge different commissions
according to the difficulty and size of the transaction; for example,
transactions in foreign securities generally involve the payment of fixed
brokerage commissions, which are generally higher than those in the U.S. Since
most brokerage transactions for a Portfolio are placed with foreign
broker-dealers, certain portfolio transaction costs for a Portfolio may be
higher than fees for similar transactions executed on U.S. securities exchanges.
However, SCMI seeks to achieve the best net results in effecting its portfolio
transactions. There is generally less governmental supervision and regulation of
foreign stock exchanges and brokers than in the U.S. There is generally no
stated commission in the case of securities traded in the over-the-counter
markets, but the price paid usually includes an undisclosed dealer commission or
mark-up. In underwritten offerings, the price paid includes a disclosed, fixed
commission or discount retained by the underwriter or dealer.
Each Portfolio's advisory agreement authorizes and directs SCMI to
place orders for the purchase and sale of the Portfolio's investments with
brokers or dealers SCMI selects and to seek "best execution" of portfolio
transactions. SCMI places all such orders for the purchase and sale of portfolio
securities and buys and sells securities through a substantial number of brokers
and dealers. In so doing, SCMI uses its best efforts to obtain the most
favorable price and execution available. A Portfolio may, however, pay higher
than the lowest available commission rates when SCMI believes it is reasonable
to do so in light of the value of the brokerage and research services provided
by the broker effecting the transaction. In seeking the most favorable price and
execution, SCMI considers all factors it deems relevant, including price,
transaction size, the nature of the market for the security, the commission
amount, the timing of the transaction (taking into account market prices and
trends), the reputation, experience and financial stability of the
broker-dealers involved, and the quality of service rendered by the
broker-dealers in other transactions.
Historically, investment advisers, including advisers of investment
companies and other institutional investors, have received research services
from broker-dealers that execute portfolio transactions for the advisers'
clients. Consistent with this practice, SCMI may receive research services from
broker-dealers with which it places portfolio transactions. These services,
which in some cases may also be purchased for cash, include such items as
general economic and security market reviews,
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<PAGE>
industry and company reviews, evaluations of securities and recommendations as
to the purchase and sale of securities. Some of these services are of value to
SCMI in advising various of its clients (including other Portfolios), although
not all of these services are necessarily useful and of value in managing a
Portfolio. The investment advisory fee paid by a Portfolio is not reduced
because SCMI and its affiliates receive such services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934,
as amended, SCMI may cause a Portfolio to pay a broker-dealer that provides SCMI
with "brokerage and research services" (as defined in that Section) an amount of
disclosed commission for effecting a securities transaction in excess of the
commission which another broker-dealer would have charged for effecting that
transaction. In addition, although it does not do so currently SCMI may allocate
brokerage transactions to broker-dealers who have entered into arrangements
under which the broker-dealer allocates a portion of the commissions paid by a
Portfolio toward payment of Portfolio expenses, such as custodian fees.
Subject to the general policies of a Portfolio regarding allocation of
portfolio brokerage as set forth above, the Board has authorized SCMI to employ:
(1) Schroder & Co. Inc., an affiliate of SCMI, to effect securities transactions
of a Portfolio on the New York Stock Exchange only; and (2) Schroder Securities
Limited and its affiliates (collectively, "Schroder Securities"), affiliates of
SCMI, to effect securities transactions of a Portfolio on various foreign
securities exchanges on which Schroder Securities has trading privileges,
provided certain other conditions are satisfied as described below.
Payment of brokerage commissions to Schroder & Co. Inc. or Schroder
Securities for effecting brokerage transactions is subject to Section 17(e) of
the 1940 Act, which requires, among other things, that commissions for
transactions on a securities exchange paid by a Portfolio to a broker that is an
affiliated person of such investment company (or an affiliated person of another
person so affiliated) not exceed the usual and customary broker's commissions
for such transactions. It is the policy of each Portfolio that commissions paid
to Schroder & Co. Inc. or Schroder Securities will, in SCMI's opinion, be: (1)
at least as favorable as commissions contemporaneously charged by Schroder & Co.
Inc. or Schroder Securities, as the case may be, on comparable transactions for
their most favored unaffiliated customers; and (2) at least as favorable as
those which would be charged on comparable transactions by other qualified
brokers having comparable execution capability. The Board, including a majority
of the non-interested Trustees, has adopted procedures pursuant to Rule 17e-1
under the 1940 Act to ensure that commissions paid to Schroder & Co. Inc. or
Schroder Securities by a Portfolio satisfy these standards. Such procedures are
reviewed periodically by the Board, including a majority of the non-interested
Trustees. The Board also reviews all transactions at least quarterly for
compliance with such procedures.
It is further a policy of the Portfolios that all such transactions
effected by Schroder & Co. Inc. on the New York Stock Exchange be in accordance
with Rule 11a2-2(T) promulgated under the Securities Exchange Act of 1934, as
amended, which requires in substance that a member of such exchange not
associated with Schroder & Co. Inc. actually execute the transaction on the
exchange floor or through the exchange facilities. Thus, while Schroder & Co.
Inc. will bear responsibility for determining important elements of execution
such as timing and order size, another firm will actually execute the
transaction.
Schroder & Co. Inc. pays a portion of the brokerage commissions it receives
from a Portfolio to the brokers executing the transactions on the New York Stock
Exchange. In accordance with Rule 11a2-2(T), the Trust has entered into an
agreement with Schroder & Co. Inc. permitting it to retain a portion of the
brokerage commissions paid to it by a Portfolio. The Board, including a majority
of the non-interested Trustees, hasve approved this agreement.
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None of the Portfolios has any understanding or arrangement to direct any
specific portion of its brokerage to Schroder & Co. Inc. or Schroder Securities,
and none will direct brokerage to Schroder & Co. Inc. or Schroder Securities in
recognition of research services.
From time to time, a Portfolio may purchase securities of a broker or
dealer through which it regularly engages in securities transactions.
Table 4 in Appendix A shows the dollar amount of brokerage commissions
paid by each Portfolio for the past three years or such shorter terms as a
Portfolio has been operational. In addition, the table also indicates the dollar
amount of brokerage commissions, percentage of brokerage commissions and
percentage of commission transactions executed through each of Schroder & Co.
Inc. and Schroder Securities.
CAPITAL STOCK AND OTHER SECURITIES
Under the Trust's Trust Instrument, the Trustees are authorized to
issue beneficial interests in one or more separate and distinct series.
Investments in the Portfolios have no preference, preemptive, conversion or
similar rights and are fully paid and nonassessable, except as set forth below.
Each investor in a Portfolio is entitled to a vote in proportion to the amount
of its investment therein. Investors in a Portfolio and other series of the
Trust will all vote together in certain circumstances (e.g., election of the
Trustees) as required by the 1940 Act. One or more portfolios of the Trust could
control the outcome of these votes. Investors do not have cumulative voting
rights, and investors holding more than 50% of the aggregate interests in the
Trust or in a Portfolio, as the case may be, may control the outcome of votes.
The Trust is not required and has no current intention to hold annual meetings
of investors, but the Trust will hold special meetings of investors when: (1) a
majority of the Trustees determines to do so, or (2) investors holding at least
10% of the interests in the Trust (or a Portfolio) request in writing a meeting
of investors in the Trust (or Portfolio). Except for certain matters
specifically described in the Trust Instrument, the Trustees may amend the Trust
Instrument without the vote of investors.
The Trust, with respect to a Portfolio, may enter into a merger or
consolidation, or sell all or substantially all of its assets, if approved by
the Board. A Portfolio may be terminated: (1) upon liquidation and distribution
of its assets, if approved by the vote of a majority of the Portfolio's
outstanding voting securities (as defined in the 1940 Act), or (2) by the
Trustees on written notice to the Portfolio's investors. Upon liquidation or
dissolution of a Portfolio, the investors therein would be entitled to share pro
rata in its net assets available for distribution to investors.
The Trust is organized as a business trust under the laws of the State
of Delaware. The Trust's interestholders are not personally liable for the
obligations of the Trust under Delaware law. The Delaware Business Trust Act
provides that an interestholder of a Delaware business trust shall be entitled
to the same limitation of liability extended to shareholders of private
corporations for profit. However, no similar statutory or other authority
limiting business trust interestholder liability exists in many other states. As
a result, to the extent that the Trust or an interestholder is subject to the
jurisdiction of courts in those states, the courts may not apply Delaware law,
and may thereby subject the Trust to liability. To guard against this risk, the
Trust Instrument disclaims liability for acts or obligations of the Trust and
requires that notice of such disclaimer be given in each agreement, obligation
and instrument entered into by the Trust or its Trustees, and provides for
indemnification out of Trust property of any interestholder held personally
liable for the obligations of the Trust. Thus, the risk of an interestholder
incurring financial loss beyond his investment because of shareholder liability
is limited to circumstances in which: (1) a court refuses to apply Delaware law;
(2) no contractual limitation of liability is in effect; and (3) the Trust
itself is unable to meet its obligations. In light of Delaware law, the nature
of the Trust's business, and the nature of its assets, SCMI believes that the
risk of personal liability to a Trust interestholder is remote.
39
<PAGE>
Under federal securities law, any person or entity that signs a
registration statement may be liable for a misstatement or omission of a
material fact in the registration statement. The Trust, the Trustees and certain
officers are required to sign the registration statement and amendments thereto
of certain registered investment companies that invest in a Portfolio. In
addition, under federal securities law, the Trust may be liable for
misstatements or omissions of a material fact in any proxy soliciting material
of a publicly offered investment company investor in the Trust. Each such
investor in a Portfolio has agreed to indemnify the Trust, the Trustees and
officers ("Indemnitees") against certain claims.
Indemnified claims are those brought against Indemnitees based on a
misstatement or omission of a material fact in the investor's registration
statement or proxy materials. No indemnification need be made, however, if such
alleged misstatement or omission relates to information about the Trust and was
supplied to the investor by the Trust. Similarly, the Trust will indemnify each
investor in a Portfolio, for any claims brought against the investor with
respect to the investor's registration statement or proxy materials, to the
extent the claim is based on a misstatement or omission of a material fact
relating to information about the Trust that is supplied to the investor by the
Trust. In addition, certain registered investment company investors in the
Portfolio will indemnify each Indemnitee against any claim based on a
misstatement or omission of a material fact relating to information about a
series of the registered investment company that did not invest in the Trust.
The purpose of these cross-indemnity provisions is principally to limit the
liability of the Trust to information that it knows or should know and can
control.
PURCHASE, REDEMPTION AND PRICING OF SECURITIES
PRIVATE SALE OF INTERESTS
Interests in the Portfolios are issued solely in private placement
transactions that do not involve any "public offering" within the meaning of
section 4(2) of the 1933 Act. All investments in a Portfolio are made and
withdrawn at the net asset value per Interest next determined after an order is
received by the Portfolio. Net asset value per Interest is calculated by
dividing the aggregate value of the Portfolio's assets less all liabilities by
the number of shares of the Portfolio outstanding.
Each investment in a Portfolio is in the form of a non-transferable
beneficial interest.
DETERMINATION OF NET ASSET VALUE
The Board has established the time for (see Part A) and the procedures
for the valuation of the Portfolios' securities: (1) equity securities listed or
traded on the New York or American Stock Exchange or other domestic or foreign
stock exchange are valued at their latest sale prices on such exchange that day
prior to the time when assets are valued; in the absence of sales that day, such
securities are valued at the mid-market prices (in cases where securities are
traded on more than one exchange, the securities are valued on the exchange
designated as the primary market by the Portfolio's investment adviser); (2)
unlisted equity securities for which over-the-counter market quotations are
readily available are valued at the latest available mid-market prices prior to
the time of valuation; (3) securities (including restricted securities) not
having readily-available market quotations are valued at fair value under the
Board's procedures; (4) debt securities having a maturity in excess of 60 days
are valued at the mid-market prices determined by a portfolio pricing service or
obtained from active market makers on the basis of reasonable inquiry; and (5)
short-term debt securities (having a remaining maturity of 60 days or less) are
valued at cost, adjusted for amortization of premiums and accretion of discount.
40
<PAGE>
When an option is written, an amount equal to the premium received is
recorded in the books as an asset, and an equivalent deferred credit is recorded
as a liability. The deferred credit is adjusted ("marked-to-market") to reflect
the current market value of the option. Options are valued at their mid-market
prices in the case of exchange-traded options or, in the case of options traded
in the over-the-counter market, the average of the last bid price as obtained
from two or more dealers unless there is only one dealer, in which case that
dealer's price is used. Futures contracts and related options are stated at
market value.
Open futures positions on debt securities will be valued at the most
recent settlement price, unless that price does not, in the judgment of the
Board (or SCMI under the Board's procedures), reflect the fair value of the
contract, in which case the positions will be valued under the Board's
procedures.
REDEMPTIONS IN-KIND
In the event that payment for redeemed interests is made wholly or
partly in portfolio securities, interestholders may incur brokerage costs in
converting the securities to cash. An in-kind distribution of portfolio
securities is generally less liquid than cash. The interestholder may have
difficulty finding a buyer for portfolio securities received in payment for
redeemed shares. Portfolio securities may decline in value between the time of
receipt by the interestholder and conversion to cash. A redemption in-kind of
portfolio securities could result in a less diversified portfolio of investments
for a Portfolio and could affect adversely the liquidity of its investment
portfolio.
TAX STATUS
PORTFOLIOS AS PARTNERSHIPS
Each Portfolio is classified for federal income tax purposes as a
partnership that is not a "publicly traded partnership". As a result, each
Portfolio is not subject to federal income tax; instead, each investor in a
Portfolio is required to take into account in determining its federal income tax
liability its share of the Portfolio's income, gains, losses, deductions, and
credits, without regard to whether it has received any cash distributions from
the Portfolio. The Portfolios' also are not subject to Delaware income or
franchise tax.
Each investor in a Portfolio is deemed to own a proportionate share of
the Portfolio's assets and to earn a proportionate share of the Portfolio's
income, for, among other things, purposes of determining whether the investor
satisfies the requirements to qualify as a regulated investment company ("RIC").
Accordingly, each Portfolio intends to conduct its operations so that its
investors that invest substantially all of their assets in the Portfolio and
intend to qualify as RICs should be able to satisfy all those requirements.
Distributions to an investor from a Portfolio (whether pursuant to a
partial or complete withdrawal or otherwise) will not result in the investor's
recognition of any gain or loss for federal income tax purposes, except that:
(1) gain will be recognized to the extent any cash that is distributed exceeds
the investor's basis for its interest in the Portfolio before the distribution;
(2) income or gain will be recognized if the distribution is in liquidation of
the investor's entire interest in the Portfolio and includes a disproportionate
share of any unrealized receivables held by the Portfolio; (3) loss will be
recognized if a liquidation distribution consists solely of cash and/or
unrealized receivables; and (4) gain or loss may be recognized on a distribution
to an investor that contributed property to the Portfolio. An investor's basis
for its interest in the Portfolio generally will equal the amount of cash and
the basis of any property it invests in the Portfolio, increased by the
investor's share of the Portfolio's net income and gains and decreased by: (a)
the amount of cash and the basis of any property the Portfolio distributes to
the investor and (b) the investor's share of the Portfolio's losses.
41
<PAGE>
INVESTMENTS IN FOREIGN SECURITIES
Dividends and interest received by a Portfolio may be subject to
income, withholding, or other taxes imposed by foreign countries and U.S.
possessions that would reduce the return on the security respect to which the
dividend or interest is paid. Tax conventions between certain countries and the
United States may reduce or eliminate these foreign taxes, however, and many
foreign countries do not impose taxes on capital gains in respect of investments
by foreign investors.
The Portfolios may invest in the stock of "passive foreign investment
companies" ("PFICs"). A PFIC is a foreign corporation that, in general, meets
either of the following tests: (1) at least 75% of its gross income is passive;
or (2) an average of at least 50% of its assets produce, or are held for the
production of, passive income. Under certain circumstances, RICs and certain
other investors that hold stock of a PFIC (including indirect holding through an
interest in a Portfolio) will be subject to federal income tax on a portion of
any "excess distribution" received on the stock or of any gain on disposition of
the stock (collectively "PFIC income"), plus interest thereon, even if the RIC
distributes the PFIC income as a taxable dividend to its shareholders. The
balance of the PFIC income will be included in the RIC's investment company
taxable income and, accordingly, will not be taxable to it to the extent that
income is distributed to its shareholders.
If a Portfolio invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund," then in lieu of the foregoing tax and interest
obligation, the Portfolio would be required to include in income each year its
pro rata share of the qualified electing fund's annual ordinary earnings and net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) - which most likely would have to be distributed by the
Portfolio's RIC investors to satisfy the distribution requirements applicable to
them - even if those earnings and gain were not received by the portfolio. In
most instances it will be very difficult, if not impossible, to make this
election because of certain requirements thereof.
A Portfolio's transactions in foreign currencies, foreign
currency-denominated debt securities and certain foreign currency options,
futures contracts and forward contracts (and similar instruments)Under Code
Section 988, special rules are provided for certain transactions in a foreign
currency other than the taxpayer's functional currency (i.e., unless certain
special rules apply, currencies other than the U.S. dollar). In general, foreign
currency gain or loss from certain forward contracts not traded in the interbank
market, from futures contracts that are not "regulated futures contracts," and
from unlisted options will be treated as ordinary income or loss under Code
Section 988. In certain circumstances, a Fund may elect capital gain or loss
treatment for such transactions. In general, however, Code Section 988 gain or
loss will increase or decrease the amount of a Fund's investment company taxable
income available to be distributed to shareholders as ordinary income.
Additionally, if the Code Section 988 loss exceeds other investment company
taxable income during a taxable year, a Fund would not be able to make any
ordinary dividend distributions, and any distributions made before the loss was
realized but in the same taxable year would be recharacterized as a return of
capital to shareholders, thereby reducing each shareholder's basis in his or her
Fund shares.
42
<PAGE>
OTHER PORTFOLIO INVESTMENTS
If a Portfolio engages in hedging transactions, including hedging
transactions in options, futures contracts, and straddles, or other similar
transactions, it will be subject to special tax rules (including constructive
sale, mark-to-market, straddle, wash sale, and short sale rules), the effect of
which may be to accelerate income to the Portfolio, defer losses to the
Portfolio, cause adjustments in the holding periods of the Portfolio's
securities, or convert short-term capital losses into long-term capital losses.
These rules could therefore affect the amount, timing and character of
interestholder income. Each Portfolio will endeavor to make any available
elections pertaining to such transactions in a manner believed to be in the best
interests of the Portfolio.
"Constructive sale" provisions apply to activities by a Portfolio which
lock-in gain on an "appreciated financial position". Generally, a "position" is
defined to include stock, a debt instrument, or partnership interest, or an
interest in any of the foregoing, including through a short sale, a swap
contract, or a future or forward contract. The entry into a short sale, a swap
contract or a future or forward contract relating to an appreciated direct
position in any stock or debt instrument, or the acquisition of stock or debt
instrument at a time when a Portfolio occupies an offsetting (short) appreciated
position in the stock or debt instrument, is treated as a "constructive sale"
that gives rise to the immediate recognition of gain (but not loss). The
application of these provisions may cause a Portfolio to recognize taxable
income from these offsetting transactions in excess of the cash generated by
such activities.
WITHHOLDING
Ordinary income paid to interestholders who are nonresident aliens are
subject to a 30% U.S. withholding tax under existing provisions of the Code
applicable to foreign individuals and entities unless a reduced rate of
withholding or a withholding exemption is provided under applicable treaty law.
Nonresident interestholders are urged to consult their own tax advisors
concerning the applicability of the U.S. withholding tax.
Each Portfolio may write, purchase or sell options or futures contracts. Unless
a 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
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 Portfolio's transactions in options and futures contracts. Under Section
1092, a Portfolio may be required to postpone recognition for tax purposes of
losses incurred in certain closing transactions in options and futures.
43
<PAGE>
The Trust is required to report to the Internal Revenue Service ("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.
In some circumstances, new federal tax regulations (effective for
payments made on or after January 1, 1999 although transition rules will apply)
will increase the 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 a Portfolio is "effectively connected" with a U.S. trade
or business carried on by such interestholder. Ordinarily, income from a
Portfolio will not be treated as so "effectively connected."
If the income from a Portfolio is not treated as "effectively connected" with a
U.S. trade or business carried on by the non-U.S. interestholder 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 Portfolio's election (described above) to "pass through"
the amount of non-U.S. taxes paid by a 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 Portfolio which are designated as undistributed capital gains and gain from
the sale of 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, a 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 a 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 a Portfolio which are
designated as undistributed capital gains and any gains realized upon the sale
of shares of a 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 a 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 a
Portfolio held by such a interestholder at death will be includable in the
interestholder's gross estate for U.S. federal income tax purposes.
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 shares of
the Portfolio.
The foregoing discussion relates only to federal income tax law as applicable to
U.S. persons (I.E., U.S. citizens and residents and U.S. domestic corporations,
partnerships, trusts and estates). Distributions by the Portfolio also may be
subject to state and local taxes, and their treatment under 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.
GENERAL
The income tax and estate tax consequences to a non-U.S. interestholder
entitled to claim the benefits of an applicable tax treaty may be different from
those described herein. Non-U.S. interestholders may be required to provide
appropriate documentation to establish their entitlement to the benefits of such
a treaty. Non-U.S. interestholders are advised to consult their own tax advisers
with respect to the particular tax consequences to them of an investment in a
Portfolio.
44
<PAGE>
The foregoing discussion relates only to federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and U.S. domestic
corporations, partnerships, trusts and estates). Income from a Portfolio also
may be subject to foreign, state and local taxes, and their treatment under
foreign, state and local income tax laws may differ from the federal income tax
treatment. Interestholders should consult their tax advisors with respect to
particular questions of federal, foreign, state and local taxation.
PLACEMENT AGENT
Forum Financial Services, Inc., Two Portland Square, Portland, Maine
04101, serves as the Trust's placement agent (underwriter). The placement agent
receives no compensation for such placement agent services.
CALCULATIONS OF PERFORMANCE DATA
Each Portfolio calculates its yields and returns in accordance with SEC
prescribed formulas. The Portfolios may also calculate performance information
using other methodologies.
FINANCIAL STATEMENTS
The fiscal year end of International Equity Fund and Schroder
International Smaller Companies Portfolio is October 31. The fiscal year end of
Schroder EM Core Portfolio, Schroder U.S. Smaller Companies Portfolio and
Schroder Global Growth Portfolio is May 31.
Financial statements for each Portfolio's semi-annual period and fiscal
year will be distributed to interestholders. The Board in the future may change
the fiscal year end of a Portfolio; the tax year end of a Portfolio may change
due to the year ends of the interestholders under certain circumstances.
The annual reports for the year ended October 31, 1997 and the semi-annual
reports for the period ended April 30, 1998 for International Equity Fund and
Schroder International Smaller Companies Portfolio, including , in the case of
the annual reports, the independent auditors' reports thereon, and the annual
report for Schroder EM Core Portfolio, Schroder U.S. Smaller Companies Portfolio
and Schroder Global Growth Portfolio for the year ended is May 31, 1998,
including the independent auditors' report thereon, are included along with this
Part B.
45
<PAGE>
APPENDIX A
MISCELLANEOUS TABLES
Table 1 - Investment Advisory Fees
<TABLE>
<S> <C> <C> <C>
Gross
Advisory Fee ($) Fee Waived ($) Net Fee Paid ($)
---------------- -------------- ----------------
International Equity Fund
Year ended October 31, 1997 892,167 47,471 844,696
Year ended October 31, 1996 978,697 51,971 926,726
Schroder EM Core Portfolio
Year Ended May 31, 1998 155,546 142,195 13,351
Schroder International Smaller Companies Portfolio
Year ended October 31, 1997 60,033 60,033 0
Schroder U.S. Smaller Companies Portfolio
Year ended May 31, 1998 1,419,439 0 1,419,439
Period ended May 31, 1997 211,277 35,396 175,881
Period ended October 31, 1996 26,334 20,260 6,074
Schroder Global Growth Portfolio
Year ended May 31, 1998 8,177 8,177 0
Table 2(a) - Administration Fees
Gross
Admin, Fee ($) Fee Waived ($) Net Fee Paid ($)
-------------- -------------- ----------------
International Equity Fund
Year ended October 31, 1997 159,378 0 159,378
Year ended October 31, 1996 326,232 0 326,232
Schroder EM Core Portfolio
Year Ended May 31, 1998 15,555 0 15,555
Schroder International Smaller Companies Portfolio
Year ended October 31, 1997 10,882 10,594 288
Schroder U.S. Smaller Companies Portfolio
Year Ended May 31, 1998 0 0 0
Period ended May 31, 1997 0 0 0
Period ended October 31, 1996 0 0 0
Schroder Global Growth Portfolio
Year Ended May 31, 1998 2,453 2,453 0
A-1
<PAGE>
Table 2(b) - Subadministration Fees
Gross
Subadmin Fee ($) Fee Waived ($) Net Fee Paid ($)
---------------- -------------- ----------------
International Equity Fund
Year ended October 31, 1997 138,010 0 138,010
Year ended October 31, 1996 N/A N/A N/A
Schroder EM Core Portfolio
Year ended May 31, 1998 14,658 2,992 11,666
Schroder International Smaller Companies Portfolio
Year ended October 31, 1997 5,009 0 5,009
Schroder U.S. Smaller Companies Portfolio
Year ended May 31, 1998 177,430 0 177,430
Period ended May 31, 1997 26,410 0 26,410
Period ended October 31, 1996 3,292 0 3,292
Schroder Global Growth Portfolio
Year ended May 31, 1998 15,685 14,459 1,226
</TABLE>
A-2
<PAGE>
Table 3: Control Persons and Principal Interestholders
As of September 1, 1998, there were no interestholders holding more than 25% of
the shares of the Trust. The following are the and principal interestholder each
of the Portfolios as of September 1, 1998:
<TABLE>
<S> <C> <C>
Number of Units of Percentage of
Beneficial Interest Portfolio Owned
International Equity Fund
Schroder International Fund, a series of Schroder
Capital Funds (Delaware)
Two Portland Square
Portland, Maine 04101 11,081,444.339 84.04%
Sealaska Corporation --Permanent Fund
One Sealaska Plaza
Juneau, AK 99801 1,286,462.312 9.76%
EM Core Portfolio
Norwest Advantage Funds Diversified Equity Fund, 377,150.745 25.25%
Norwest Advantage Growth Equity Fund, 422,545.694 28.29%
Norwest Advantage Funds Growth Balanced Fund, 103,746.419 6.94%
Norwest Advantage Funds International Fund, each
a series of Norwest Advantage Funds,
Two Portland Square
Portland, Maine 04101 464,126.791 31.07
International Smaller Companies Portfolio
Schroder International Smaller Companies Fund, a
series of Schroder Capital Funds (Delaware)
Two Portland Square
Portland, Maine 04101 413,448.38 100%
U.S. Smaller Companies Portfolio
Schroder U.S. Smaller Companies Fund, a
series of Schroder Capital Funds (Delaware)
Two Portland Square
Portland, Maine 04101 2,979,618.209 19.26%
Norwest Advantage Funds Small Cap Opportunities
Fund, a series of Norwest Advantage Funds,
Two Portland Square
Portland, Maine 04101 12,385,037.127 80.06%
Global Growth Portfolio
Schroders Incorporated
787 Seventh Avenue
New York, NY 10019 200,00.00 59.44%
Performa Global Growth Fund
c/o Forum Financial Corp.
3 Canal Plaza, 3rd Fl.
Portland, ME 04101 136,448.413 40.56%
</TABLE>
A-3
<PAGE>
Table 4 - Brokerage Commissions
<TABLE>
<S> <C> <C> <C> <C>
Schroder & Co. Inc.
------------------------------------------------------------
Total Brokerage Total Brokerage Percentage of Percentage of
Commissions ($) Commissions ($) Commissions Transactions
International Equity Fund
Year ended October 31, 1997 421,189 4,716 0.99 1.11
Year ended October 31, 1996 756,181
Schroder EM Core Portfolio
Year ended May 31, 1998 92,986 0 0 0
Schroder International Smaller
Companies Portfolio
Year ended October 31, 1997 37,223 0 0 0
Schroder U.S. Smaller Companies
Portfolio
Year ended May 31, 1998 491,278 0 0 0
Period ended May 31, 1997 167,043 0 0 0
Period ended October 31, 1996 37,589 0 0 0
Schroder Global Growth Portfolio
Year ended May 31, 1998 7,259 0 0 0
Schroder Securities
------------------------------------------------------------
Total Brokerage Total Brokerage Percentage of Percentage of
Commissions ($) Commissions ($) Commissions Transactions
International Equity Fund
Year ended October 31, 1997 421,189 0 0 0
Year ended October 31, 1996 756,181 0 0 0
Schroder EM Core Portfolio
Year ended May 31, 1998 92,986 0 0 0
Schroder International Smaller
Companies Portfolio
Year ended October 31, 1997 37,223 0 0 0
Schroder U.S. Smaller Companies
Portfolio
Year ended May 31, 1998 491,278 0 0 0
Period ended May 31, 1997 167,043 0 0 0
Period ended October 31, 1996 37,589 0 0 0
Schroder Global Growth Portfolio
Year ended May 31, 1998 7,259 0 0 0
</TABLE>
A-4
<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 International Equity Fund and
Schroder International Smaller Companies Portfolio (Annual
Reports filed via EDGAR on January 6, 1998 accession numbers
0000889812-98-000005 and 0000889812-98-000006).
Audited Financial Statements for the fiscal year ended May
31, 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 U.S. Smaller Companies Portfolio,
Schroder Global Growth Portfolio Schroder and EM Core
Portfolio are filed herewith as Exhibit (12) under Item
24(b).
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, Financial Highlights, Notes to
Financial Statements for Schroder International Smaller
Companies Portfolio and Schroder International Equity Fund
(Semi-Annual Reports filed via EDGAR on June 30, 1998,
accession numbers 0000889812-98-001656 and
0000889812-98-001655, respectively
(b) Exhibits:
(1) Trust Instrument of Registrant dated September 6,1995
as amended November 30, 1995 and restated January 9,
1998 (filed herewith).
(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 1).
(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 2).
(c) Investment Advisory Agreement between
Registrant and SCMI dated as of September
18, 1997 with respect to Schroder Global
Growth Portfolio (see Note 2).
(d) Investment Advisory Agreement between
Registrant and Schroder Capital Management
International Inc. ("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 3).
(e) Investment Subadvisory Agreement Between
Registrant, SCMI and Schroder Investment
Management International, Ltd. dated as of
June 15, 1998 with respect to Schroder
International Smaller Companies Portfolio
(filed herewith).
(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 2)
(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 3).
(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 3).
(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 2).
(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 2).
(10) Not applicable.
(11) Not applicable.
(12) Audited Financial Statements for the fiscal year
ended May 31, 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
U.S. Smaller Companies Portfolio, Schroder Global
Growth Portfolio Schroder and EM Core Portfolio
(filed herewith).
(13) Not applicable.
(14) Not applicable.
(15) Not applicable.
(16) Not required.
(17) Financial Data Schedules (filed herewith).
(18) Not applicable.
---------------
Notes:
(1) Exhibit incorporated by reference as filed on PEA No. 4 via
EDGAR on March 13, 1997, accession number
0000912057-97-008728.
(2) Exhibit incorporated by reference as filed on PEA No. 9 via
EDGAR on February 12, 1998, accession number
0001004402-98-000117.
(3) Exhibit incorporated by reference as filed on PEA No. 11 via
EDGAR on March 19, 1998, accession number
001004402-98-000199.
(4) Exhibit incorporated by reference as filed on PEA No. 10 via
EDGAR on February 27, 1998, accession number
001004402-98-000148.
<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 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
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.
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 Investment Company Act of 1940 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 (fund 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 (interestholder records).
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 28th day of September, 1998.
SCHRODER CAPITAL FUNDS
By:/s/ Catherine A. Mazza
Catherine A. Mazza
Vice President
<PAGE>
INDEX TO EXHIBITS
Exhibit
(1) Trust Instrument of Registrant dated September 6, 1995 as amended
November 30, 1995 and restated January 9, 1998.
(5)(e) Investment Subadvisory Agreement Between Registrant, SCMI and
Schroder Investment Management International, Ltd. dated as of June
15, 1998 with respect to Schroder International Smaller Companies
Portfolio.
(12) Audited Financial Statements for the fiscal year ended May 31, 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 U.S. Smaller Companies Portfolio,
Schroder Global Growth Portfolio Schroder and EM Core Portfolio.
(17) Financial Data Schedules.
Exhibit (1)
SCHRODER CAPITAL FUNDS
TRUST INSTRUMENT
DATED SEPTEMBER 6, 1995,
AS AMENDED NOVEMBER 30, 1995
AND RESTATED AS OF JANUARY 9, 1998
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Page
ARTICLE I -- THE TRUST
Section 1.1 Name........................................................................... 1
Section 1.2 Definitions.................................................................... 1
ARTICLE II -- TRUSTEES AND OFFICERS
Section 2.1 Number and Qualification....................................................... 3
Section 2.2 Term and Election.............................................................. 3
Section 2.3 Resignation and Removal........................................................ 3
Section 2.4 Vacancies...................................................................... 3
Section 2.5 Meetings....................................................................... 3
Section 2.6 Committees..................................................................... 4
Section 2.7 By-Laws........................................................................ 5
Section 2.8 Officers of the Trust.......................................................... 5
Section 2.9 Election, Tenure and Removal of Officers....................................... 5
Section 2.10 Chairman, President and Vice Presidents....................................... 6
Section 2.11 Secretary..................................................................... 6
Section 2.12 Treasurer..................................................................... 6
Section 2.13 Other Officers and Duties..................................................... 6
ARTICLE III -- POWERS OF TRUSTEES
Section 3.1 General........................................................................ 6
Section 3.2 Investments.................................................................... 6
Section 3.3 Legal Title.................................................................... 7
Section 3.4 Sale of Interests.............................................................. 7
Section 3.5 Borrow Money................................................................... 7
Section 3.6 Delegation..................................................................... 7
Section 3.7 Collection and Payment......................................................... 7
Section 3.8 Expenses....................................................................... 7
Section 3.9 Miscellaneous Powers........................................................... 7
Section 3.10 Further Powers................................................................ 8
Section 3.11 Principal Transactions........................................................ 8
ARTICLE IV -- INVESTMENT MANAGEMENT, CUSTODIAL AND PRIVATE
PLACEMENT ARRANGEMENTS
Section 4.1 Investment Management and Other Arrangements................................... 8
Section 4.2 Custodial Arrangements......................................................... 9
Section 4.3 Parties to Contract............................................................ 9
Section 4.4 Compliance with 1940 Act....................................................... 9
ARTICLE V -- LIMITATIONS OF LIABILITY
Section 5.1 No Personal Liability of Trustees, Holders..................................... 9
Section 5.2 Indemnification................................................................ 10
Section 5.3 No Bond Required of Trustees................................................... 11
Section 5.4 No Duty of Investigation; Notice in Trust Instruments, etc..................... 11
Section 5.5 Reliance on Experts, etc....................................................... 11
Section Holder Offering Documents......................................................... 12
ARTICLE VI -- INTERESTS OF THE TRUST
Section 6.1 Interests...................................................................... 14
Section 6.2 Rights of Holders.............................................................. 14
Section 6.3 Purchase of or Increase in Interests........................................... 14
Section 6.4 Register of Interests.......................................................... 14
Section 6.5 Non-Transferability............................................................ 14
Section 6.6 Notices........................................................................ 14
Section 6.7 Assent to Trust Instrument..................................................... 14
Section 6.8 Establishment of Series........................................................ 14
Section 6.9 Assets and Liabilities of Series............................................... 15
ARTICLE VII -- DECREASES AND WITHDRAWALS
Section 7.1 Decreases and Withdrawals...................................................... 15
ARTICLE VIII -- DETERMINATION OF BOOK CAPITAL ACCOUNT
BALANCES, NET ASSET VALUE, ALLOCATIONS
AND DISTRIBUTIONS
Section 8.1 Book Capital Account Balances.................................................. 16
Section 8.2 Net Asset Value................................................................ 16
Section 8.3 Allocation of Net Profits and Net Losses....................................... 16
Section 8.4 Distributions.................................................................. 17
Section 8.5 Power to Modify Foregoing Procedures........................................... 17
ARTICLE IX -- HOLDERS
Section 9.1 Meetings of Holders............................................................ 17
Section 9.2 Notice of Meetings............................................................. 18
Section 9.3 Record Date for Meetings....................................................... 18
Section 9.4 Proxies, etc................................................................... 18
Section 9.5 Inspectors of Election......................................................... 18
Section 9.6 Inspection of Records.......................................................... 19
Section 9.7 Holder Action by Written Consent............................................... 19
Section 9.8 Voting Powers.................................................................. 19
ARTICLE X -- DURATION; TERMINATION; DISSOLUTION; AMENDMENT;
MERGERS; ETC.
Section 10.1 Termination of Trust or any Series............................................ 19
Section 10.2 Dissolution................................................................... 20
Section 10.3 Amendment Procedure........................................................... 20
Section 10.4 Merger or Consolidation....................................................... 20
Section 10.5 Incorporation................................................................. 20
ARTICLE XI -- MISCELLANEOUS
Section 11.1 Governing Law................................................................. 21
Section 11.2 Counterparts.................................................................. 21
Section 11.3 Reliance by Third Parties..................................................... 21
Section 11.4 Provisions in Conflict with Law on Regulations................................ 21
Section 11.5 Signatures.................................................................... 22
Section 11.6 Seal.......................................................................... 22
Section 11.7 Fiscal Year................................................................... 22
Section 11.8 Waivers of Notice............................................................. 22
Section 11.9 Reports....................................................................... 22
</TABLE>
<PAGE>
SCHRODER CAPITAL FUNDS
This TRUST INSTRUMENT of SCHRODER CAPITAL FUNDS is executed as of the
6th day of September, 1995 by the parties signatory hereto, as Trustees.
WHEREAS, the Trustees desire to form a business trust under the law of
Delaware for the investment and reinvestment of the Trust's assets; and
WHEREAS, it is proposed that the trust assets be composed of money and
property contributed hereto by the holders of interests in the trust entitled to
ownership rights in the trust;
NOW, THEREFORE, the Trustees hereby declare that they will hold in
trust all money and property contributed to the trust fund to manage and dispose
of the same for the benefit of the holders of interests in the trust and subject
to the provisions hereof, to wit:
ARTICLE I
The Trust
1.1. Name. The name of the trust created hereby (the "Trust") shall be
"Schroder Capital Funds" and so far as may be practicable the Trustees shall
conduct the Trust's activities, execute all documents and sue or be sued under
that name, which name (and the word "Trust" wherever hereinafter used) shall
refer to the Trustees as Trustees, and not individually, and shall not refer to
the officers, agents, employees or holders of interests in the Trust. However,
should the Trustees determine that the use of the name of the Trust is not
advisable, they may select such other name for the Trust as they deem proper and
the Trust may hold its property and conduct its activities under such other
name.
1.2. Definitions. As used in this Trust Instrument, the following
terms shall have the following meanings:
The terms "Affiliated Person," "Assignment" and "Interested Person"
shall have the meanings given them in the 1940 Act, as modified by any
applicable order or orders of the Commission or interpretive releases of the
Commission thereunder.
"Book Capital Account" shall mean, for any Holder of Interests in a
particular Series at any time, the Book Capital Account of the Holder with
respect to that Series for such day, determined in accordance with Article VIII
of this Instrument.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the Securities and Exchange Commission.
"Delaware Act" shall mean Chapter 38 of Title 12 of the Delaware Code
entitled "Treatment of Delaware Business Trusts," as it may be amended from time
to time.
"Fiscal Year" shall mean, with respect to any Series, an annual period
as determined by the Trustees.
"Holders" shall mean as of any particular time all holders of record of
Interests of a Series of the Trust at such time.
"Instrument" shall mean this Trust Instrument as amended from time to
time. References in this Instrument to "Instrument," "hereof," "herein" and
"hereunder" shall be deemed to refer to the Instrument rather than the article
or section in which such words appear.
"Interest(s)" shall mean, with respect to each Series or the Trust, the
interest of a Holder in that Series or the Trust, as applicable, including all
rights, powers and privileges accorded to such Holders in this Instrument, which
interest (i) in a Series, may be expressed as a percentage, determined by
calculating, at such times and on such basis, as the Trustees shall from time to
time determine, the ratio of each Holder's Book Capital Account balance to the
total of all Holders' Book Capital Account balances in that Series and (ii) in
the Trust, may be expressed as a percentage, determined by calculating, at such
times and on such basis, as the Trustees shall from time to time determine, the
ratio of each Holder's aggregate capital account balance in all Series of the
Trust to the total of all Holders' capital account balances in all Series of the
Trust. Reference herein to a specified percentage in, or fraction of, Interests
of the Holders in a Series means Holders whose combined Book Capital Accounts
represent such specified percentage or fraction of the Book Capital Accounts of
all Holders in that Series.
"Investment Manager" shall mean any person furnishing services to the
Trust or any Series pursuant to any investment management contract as described
in Section 4.1 hereof.
"Majority Interests Vote" shall mean, with respect to the Trust or a
Series thereof, the vote, at a meeting of the Holders of the Trust or Series, as
the case may be, of (i) 67% or more of the Interests present or represented at
such meeting, if the Holders of more than 50% of the Interests of the Trust or
Series, as the case may be, are present or represented by proxy or (ii) more
than 50% of the Interests of the Trust or Series, as the case may be, whichever
is less.
"Net Asset Value" shall have the meaning assigned to that term in
Section 8.2 hereof.
"Person" shall mean and include individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities, whether
or not legal entities, and governments and agencies and political subdivisions
thereof.
"Registration Statement" shall mean the Registration Statement of the
Trust under the 1940 Act, as amended from time to time.
"Series" shall mean a series of Interests of the Trust established in
accordance with the provisions of Article VI, Section 6.8 hereof.
"Trustees" shall mean the signatories to this Instrument, so long as
they shall continue in office in accordance with the terms hereof, and all other
persons who at the time in question have been duly elected or appointed and have
qualified as trustees in accordance with the provisions hereof and are then in
office, who are herein referred to as the "Trustees," and reference in this
Instrument to a Trustee or Trustees shall refer to such person or persons in
their capacity as trustees hereunder.
"Trust Property" shall mean as of any particular time any and all
property, real or personal, tangible or intangible, which at such time is owned
or held by or for the account of the Trust or any Series, or the Trustees on
behalf of the Trust or any Series.
The "1940 Act" refers to the Investment Company Act of 1940, as amended
from time to time, and the rules and regulations thereunder.
ARTICLE II
Trustees and Officers
2.1. Number and Qualification. The number of Trustees shall be fixed
from time to time by the Trustees then in office, provided, however, that the
number of Trustees shall in no event be less than three or more than twelve. Any
vacancy created by an increase in Trustees may be filled by the appointment of
an individual having the qualifications described in this Article. Any such
appointment shall not become effective, however, until the individual appointed
shall have accepted such appointment and agreed to be bound by the terms of this
Instrument. No reduction in the number of Trustees shall have the effect of
removing any Trustee from office. Whenever a vacancy in the number of Trustees
shall occur, until such vacancy is filled as provided in Section 2.4 hereof, the
Trustees in office, regardless of their number, shall have all the powers
granted to the Trustees and shall discharge all the duties imposed upon the
Trustees by this Instrument.
2.2. Term and Election. Each Trustee named herein, or elected or
appointed hereunder, shall (except in the event of resignations or removals or
vacancies pursuant to Section 2.3 or 2.4 hereof) hold office until the Trustee's
successor has been elected and has qualified to serve as Trustee. Beginning with
the Trustees elected at the first meeting of Holders, each Trustee shall hold
office during the lifetime of this Trust and until its termination as
hereinafter provided unless such Trustee resigns or is removed as provided in
Section 2.3 below.
2.3. Resignation and Removal. Any Trustee may resign their trust
(without need for prior or subsequent accounting) by an instrument in writing
signed by him and delivered or mailed to the Chairman, if any, the President or
the Secretary and such resignation shall be effective upon such delivery, or at
a later date according to the terms of the instrument. Any of the Trustees may
be removed by the affirmative vote of the Holders of two-thirds (2/3) of the
Interests or (provided the aggregate number of Trustees, after such removal and
after giving effect to any appointment made to fill the vacancy created by such
removal, shall not be less than the number required by Section 2.1 hereof) with
cause, by the action of two-thirds of the remaining Trustees. Removal with cause
includes, but is not limited to, the removal of a Trustee due to physical or
mental incapacity. Upon the resignation or removal of a Trustee, or the
Trustee's otherwise ceasing to be a Trustee, the Trustee shall execute and
deliver such documents as the remaining Trustees shall require for the purpose
of conveying to the Trust or the remaining Trustees any Trust Property held in
the name of the resigning or removed Trustee. Upon the death of any Trustee or
upon removal or resignation due to any Trustee's incapacity to serve as trustee,
the Trustee's legal representative shall execute and deliver on the Trustee's
behalf such documents as the remaining Trustees shall require as provided in the
preceding sentence.
2.4. Vacancies. The term of office of a Trustee shall terminate and a
vacancy shall occur in the event of the death, resignation, adjudicated
incompetence or other incapacity to perform the duties of the office, or
removal, of a Trustee or increase in the number of Trustees. No such vacancy
shall operate to annul this Instrument or to revoke any existing agency created
pursuant to the terms of this Instrument. In the case of a vacancy, the Holders
of at least a majority of the Interests entitled to vote, acting at any meeting
of the Holders held in accordance with Section 9.1 hereof, or a majority vote of
the Trustees continuing in office, may fill such vacancy, and any Trustee so
elected by the Trustees or the Holders shall hold office as provided in this
Instrument.
2.5. Meetings.
(a) Meetings of the Trustees shall be held from time to time upon the
call of the Chairman, if any, the President, the Secretary, or any two Trustees.
The Trustees may act with or without a meeting. A quorum for all meetings of the
Trustees shall be a majority of the Trustees. Unless provided otherwise in this
Instrument, any action of the Trustees may be taken by vote of a majority of the
Trustees present (a quorum being present) at a meeting duly called or by
unanimous written consent of the Trustees without a meeting. In the absence of a
quorum, a majority of the Trustees present may adjourn the meeting from time to
time until a quorum shall be present. Notice of an adjourned meeting need not be
given. The Trustees by majority vote may delegate to any one or more of their
number their authority to approve particular matters or take particular actions
on behalf of the Trust.
(b) Regular meetings of the Trustees may be held without call or notice
at a time and place fixed by the Trustees. Notice of any other meeting shall be
given by mail, facsimile or telegram (which term shall include a cablegram) or
delivered personally, which shall include by telephone. Notice of a meeting
designating the time, date and place of such meeting shall be mailed not less
than 72 hours or otherwise given not less than 24 hours before the meeting but
may be waived in writing by any Trustee either before or after such meeting. The
attendance of a Trustee at a meeting shall constitute a waiver of notice of such
meeting except where a Trustee attends a meeting for the express purpose of
objecting, at the commencement of such meeting, to the transaction of any
business on the ground that the meeting has not been lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
meeting of the Board of Trustees need be stated in the notice or waiver of
notice of such meeting, and no notice need be given of action proposed to be
taken by unanimous written consent.
(c) All or any one or more Trustees may participate in a meeting of the
Trustees or any committee thereof by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other and participation in a meeting pursuant to such
communications system shall constitute presence in person at such meeting.
(d) The Chairman, if any, shall act as chairman at all meetings of the
Trustees; in the Chairman's absence the President shall act as chairman; and, in
the absence of the Chairman and the President, the Trustees present shall elect
one of their number to act as temporary chairman. The results of all actions
taken at a meeting of the Trustees, or by unanimous written consent of the
Trustees, shall be recorded by the Secretary.
(e) With respect to actions of the Trustees and any committee of the
Trustees, Trustees who are Interested Persons of the Trust or otherwise
interested in any action to be taken may be counted for quorum purposes under
this Section 2.5, or with respect to committees, Section 2.6 of this Instrument,
and shall be entitled to vote to the extent permitted by the 1940 Act.
2.6. Committees.
(a) Any committee of the Trustees may act with or without a meeting. A
quorum for all meetings of any committee shall be a majority of the members
thereof or such lesser number as determined by the Trustees. Unless provided
otherwise in this Instrument, any action of any committee may be taken by a vote
of a majority of the members present (a quorum being present) at a meeting or by
unanimous written consent of the members without a meeting or by telephone
meeting.
(b) The Trustees by vote of a majority of all the Trustees may elect
from their own number an Executive Committee to consist of not less than two (2)
to hold office at the pleasure of the Trustees, which shall have the power to
conduct the current and ordinary business of the Trust while the Trustees are
not in session, including the purchase and sale of securities and the
designation of securities to be delivered upon decrease or withdrawal of
Interests of the Trust or any Series, and such other powers of the Trustees as
the Trustees may, from time to time, delegate to them except those powers which
by law or this Instrument they are prohibited from delegating. The Trustees may
also elect from their own number other Committees from time to time, the number
composing such Committees, the powers conferred upon the same (subject to the
same limitations as with respect to the Executive Committee) and the term of
membership on such Committees to be determined by the Trustees. The Trustees may
designate a Chairman of any such Committee. In the absence of such designation,
the Committee may elect its own Chairman. Each Committee shall keep regular
minutes of its meetings and records of decisions taken without a meeting and
cause them to be recorded in a book designated for that purpose and kept in the
Office of the Trust.
(c) The Trustees may (1) provide for stated meetings of any Committee;
(2) specify the manner of calling and notice required for special meetings of
any Committee; (3) specify the number of members of a Committee required to
constitute a quorum and the number of members of a Committee required to
exercise specified powers delegated to such Committee; (4) authorize the making
of decisions to exercise specified powers by written assent of the requisite
number of members of a Committee without a meeting; and (5) authorize the
members of a Committee to meet by means of a telephone conference circuit.
2.7. By-Laws. The Trustees may, but need not, adopt By-Laws for
the conduct of the business of the Trust and may from
time to time amend or repeal any By-Laws.
2.8. Officers of the Trust. The Trustees shall, from time to time,
elect a President, a Secretary and a Treasurer. The Trustees may elect or
appoint, from time to time, a Chairman of the Board. The Trustees may elect or
appoint such other officers or assistant officers, including Vice Presidents, as
the business of the Trust may require. The Trustees may delegate to any officer
or committee the power to appoint any subordinate officers or agents. Any two or
more of the offices may be held by the same person, except that the same person
may not be both President and Secretary. The Trustees may designate a Vice
President as an Executive Vice President and may designate the order in which
the other Vice Presidents may act. The Chairman and the President shall be
Trustees, but no other officer of the Trust need be a Trustee. Any officer may
be required by the Trustees to be bonded for the faithful performance of the
officer's duties in such amount and with such sureties as the Trustees may
determine.
2.9. Election, Tenure and Removal of Officers. At the initial
organization meeting and thereafter at each annual meeting of the Trustees, the
Trustees shall elect the Chairman, if any, President, Secretary, Treasurer. The
Trustees may from time to time elect or appoint such other officers as the
Trustees shall deem necessary or appropriate in order to carry out the business
of the Trust and such officers shall hold office until the next annual meeting
of the Trustees and until their successors have been duly elected and qualified.
The Trustees also may authorize or appoint the President to appoint such other
officers as the Trustees shall deem necessary or appropriate in order to carry
out the business of the Trust. The Trustees may fill any vacancy in office or
add any additional officers at any time. Any officer may be removed at any time,
with or without cause, by action of a majority of the Trustees. This provision
shall not prevent the making of a contract of employment for a definite term
with any officer and shall have no effect upon any cause of action which any
officer may have as a result of removal in breach of a contract of employment.
Any officer may resign at any time by notice in writing signed by such officer
and delivered or mailed to the Chairman, if any, President, or Secretary, and
such resignation shall take effect immediately, or at a later date according to
the terms of such notice in writing.
2.10. Chairman, President, and Vice Presidents. The Chairman, if any,
shall, if present, preside at all meetings of the Holders and of the Trustees
and shall exercise and perform such other powers and duties as may be from time
to time assigned to him by the Trustees. Subject to such supervisory powers, if
any, as may be given by the Trustees to the Chairman, if any, the President
shall be the chief executive officer of the Trust and, subject to the control of
the Trustees, shall have general supervision, direction and control of the
business of the Trust and of its employees and shall exercise such general
powers of management as are usually vested in the office of President of a
corporation. In the absence of the Chairman, if any, the President shall preside
at all meetings of the Holders and the Trustees. Subject to direction of the
Trustees, the Chairman, if any, and the President shall each have power in the
name and on behalf of the Trust to execute any and all loan documents,
contracts, agreements, deeds, mortgages, and other instruments in writing, and
to employ and discharge employees and agents of the Trust. Unless otherwise
directed by the Trustees, the Chairman, if any, and the President shall each
have full authority and power, on behalf of all of the Trustees, to attend and
to act and to vote, on behalf of the Trust, at any meetings of business
organizations in which the Trust holds an interest, or to confer such powers
upon any other persons, by executing any proxies duly authorizing such persons.
The Chairman, if any, and the President shall have such further authorities and
duties as the Trustees shall from time to time determine. In the absence or
disability of the President, the Vice Presidents in order of their rank or the
Vice President designated by the Trustees, shall perform all of the duties of
President, and when so acting shall have all the powers of and be subject to all
of the restrictions upon the President. Subject to the direction of the
President, each Vice President shall have the power in the name and on behalf of
the Trust to execute any and all loan documents, contracts, agreements, deeds,
mortgages and other instruments in writing, and, in addition, shall have such
other duties and powers as shall be designated from time to time by the Trustees
or by the President.
2.11. Secretary. The Secretary shall keep the minutes of all meetings
of, and record all votes of, Holders, Trustees and the Executive Committee, if
any. The Secretary shall be custodian of the seal of the Trust, if any, and the
Secretary (and any other person so authorized by the Trustees) shall affix the
seal or, if permitted, a facsimile thereof, to any instrument executed by the
Trust which would be sealed by a Delaware corporation executing the same or a
similar instrument and shall attest the seal and the signature or signatures of
the officer or officers executing such instrument on behalf of the Trust. The
Secretary shall also perform any other duties commonly incident to such office
in a Delaware business corporation, and shall have such other authorities and
duties as the Trustees shall from time to time determine.
2.12. Treasurer. Except as otherwise directed by the Trustees, the
Treasurer shall have the general supervision of the monies, funds, securities,
notes receivable and other valuable papers and documents of the Trust, and shall
have and exercise under the supervision of the Trustees and of the President all
powers and duties normally incident to the President's office. The Treasurer may
endorse for deposit or collection all notes, checks and other instruments
payable to the Trust or to its order. The Treasurer shall deposit all funds of
the Trust as may be ordered by the Trustees or the Treasurer. The Treasurer
shall deliver all funds of the Trust which may come into the Treasurer's hands
to such Custodian as the Trustees may employ pursuant to Article V of these
By-Laws. The Treasurer shall keep accurate account of the books of the Trust's
transactions which shall be the property of the Trust, and which together with
all other property of the Trust in the Treasurer's possession, shall be subject
at all times to the inspection and control of the Trustees. Unless the Trustees
shall otherwise determine, the Treasurer shall be the principal accounting
officer of the Trust and shall also be the principal financial officer of the
Trust. The Treasurer shall have such other duties and authorities as the
Trustees or President shall from time to time determine. Notwithstanding
anything to the contrary herein contained, the Trustees may authorize any
investment adviser, administrator or manager to maintain bank accounts and
deposit and disburse funds on behalf of the Trust.
2.13. Other Officers and Duties. The Trustees may elect such other
officers and assistant officers as they shall from time to time determine to be
necessary or desirable in order to conduct the business of the Trust. Assistant
officers shall act generally in the absence of the officer whom they assist and
shall assist that officer in the duties of their office. Each officer, employee
and agent of the Trust shall have such other duties and authority as may be
conferred upon him by the Trustees or delegated to him by the President.
ARTICLE III
Powers of Trustees
3.1. General. The Trustees shall have exclusive and absolute control
over the Trust Property and over the business of the Trust to the same extent as
if the Trustees were the sole owners of the Trust Property and business in their
own right, but with such powers of delegation as may be permitted by this
Instrument. The Trustees may perform such acts as in their sole discretion are
proper for conducting the business of the Trust. The enumeration of any specific
power herein shall not be construed as limiting the aforesaid power. Such powers
of the Trustees may be exercised without order of or resort to any court.
3.2. Investments. The Trustees shall have power to:
(a) Conduct, operate and carry on the business of an investment
company;
(b) Subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, assign, transfer, exchange, distribute or otherwise
deal in or dispose of any form of property including United States and foreign
currencies and related instruments including forward contracts, and securities,
including common and preferred stocks, warrants, bonds, debentures, time notes
and all other evidences of indebtedness, negotiable or non-negotiable
instruments, obligations, certificates of deposit or indebtedness, commercial
paper, repurchase agreements, reverse repurchase agreements, convertible
securities, forward contracts, options, futures contracts, and other securities,
including, without limitation, those issued, guaranteed or sponsored by any
state, territory or possession of the United States and the District of Columbia
and their political subdivisions, agencies and instrumentalities, or by the
United States Government, any foreign government, or any agency, instrumentality
or political subdivision of the United States Government or any foreign
government, or international instrumentalities, or by any bank, savings
institution, corporation or other business entity organized under the laws of
the United States or under foreign laws; and to exercise any and all rights,
powers and privileges of ownership or interest in respect of any and all such
investments of every kind and description, including, without limitation, the
right to consent and otherwise act with respect thereto, with power to designate
one or more persons, firms, associations or corporations to exercise any of said
rights, powers and privileges in respect of any of said instruments; and the
Trustees shall be deemed to have the foregoing powers with the respect to any
additional securities in which the Trustees may determine to invest.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries.
3.3. Legal Title. Legal title to all the Trust Property shall be vested
in the Trustees as joint tenants except that the Trustees shall have the power
to cause legal title to any Trust Property to be held by or in the name of one
or more of the Trustees, or in the name of the Trust, or in the name of any
other Person on behalf of the Trust, on such terms as the Trustees may
determine.
The right, title and interest of the Trustees in the Trust Property
shall vest automatically in each person who may hereafter become a Trustee upon
the Trustee's due election and qualification. Upon the resignation, removal or
death of a Trustee, the Trustee shall automatically cease to have any right,
title or interest in any of the Trust Property, and the right, title and
interest of such Trustee in the Trust Property shall vest automatically in the
remaining Trustees. Such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered.
3.4. Sale of Interests. Subject to the more detailed provisions set
forth in Articles VII and VIII, the Trustees shall have the power to permit
persons to purchase Interests and to add to or reduce, in whole or in part,
their Interest in the Trust or any Series thereof.
3.5. Borrow Money. The Trustees shall have power to borrow money or
otherwise obtain credit and to secure the same by mortgaging, pledging or
otherwise subjecting as security the assets of the Trust, including the lending
of portfolio securities, and to endorse, guarantee or undertake the performance
of any obligation, contract or engagement of any other person, firm, association
or corporation.
3.6. Delegation. The Trustees shall have power, consistent with their
continuing exclusive authority over the management of the Trust and the Trust
Property, to delegate from time to time to such of their number or to officers,
employees or agents of the Trust the doing of such things and the execution of
such instruments either in the name of the Trust or the names of the Trustees or
otherwise as the Trustees may deem expedient.
3.7. Collection and Payment. The Trustees shall have power to collect
all property due to the Trust; and to pay all claims, including taxes, against
the Trust Property; to prosecute, defend, compromise or abandon any claims
relating to the Trust Property; to foreclose any security interest securing any
obligations, by virtue of which any property is owed to the Trust; and to enter
into releases, agreements and other instruments.
3.8. Expenses. The Trustees shall have power to incur and pay all
expenses which in the opinion of the Trustees are necessary or incidental to
carry out any of the purposes of this Instrument, and to pay reasonable
compensation from the funds of the Trust or the assets of the appropriate Series
to themselves as Trustees. The Trustees shall fix the compensation of all
officers, employees and Trustees. The Trustees may pay themselves such
compensation for special services, including legal and brokerage services, as
they in good faith may deem reasonable, and reimbursement for expenses
reasonably incurred by themselves on behalf of the Trust or any Series thereof.
3.9. Miscellaneous Powers. The Trustees shall have the power to: (a)
employ or contract with such Persons as the Trustees may deem desirable for the
transaction of the business of the Trust and terminate such employees or
contractual relationships as they consider appropriate; (b) enter into joint
ventures, partnerships and any other combinations or associations; (c) purchase,
and pay for out of Trust Property or the assets of the appropriate Series,
insurance policies insuring the Investment Manager, placement agent, Holders,
Trustees, officers, employees, agents, or independent contractors of the Trust
against all claims arising by reason of holding any such position or by reason
of any action taken or omitted by any such Person in such capacity, whether or
not the Trust would have the power to indemnify such Person against such
liability; (d) establish pension, profit-sharing and other retirement, incentive
and benefit plans for any Trustees, officers, employees and agents of the Trust;
(e) make donations, irrespective of benefit to the Trust, for charitable,
religious, educational, scientific, civic or similar purposes; (f) to the extent
permitted by law, indemnify any Person with whom the Trust has dealings,
including the Investment Manager, placement agent, Holders, Trustees, officers,
employees, agents or independent contractors of the Trust, to such extent as the
Trustees shall determine; (g) guarantee indebtedness or contractual obligations
of others; (h) determine and change the Fiscal Year of each Series of the Trust
and the method in which its accounts shall be kept; (i) adopt a seal for the
Trust, but the absence of such seal shall not impair the validity of any
instrument executed on behalf of the Trust; (j) establish separate and distinct
Series with separately defined investment objectives and policies and distinct
investment purposes in accordance with the provisions of Article VI hereof; (k)
subject to the provisions of Section 3804 of the Delaware Act, allocate assets,
liabilities and expenses of the Trust to a particular Series or apportion the
same between or among two or more Series, provided that any liabilities or
expenses incurred by a particular Series shall be payable solely out of the
assets belonging to that Series as provided for in Article VI hereof; (l)
establish, from time to time, a minimum investment for Holders in the Trust or
in one or more Series, and require the withdrawal of any Holder whose investment
is less than such minimum upon giving notice to such Holder and; (m) appoint, or
authorize any officer or officers to appoint, one or more registrars of the
Trust.
3.10. Further Powers. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices, whether within or without the State of Delaware, in any
and all states of the United States of America, in the District of Columbia, and
in any and all commonwealths, territories, dependencies, colonies, possessions,
agencies or instrumentalities of the United States of America and of foreign
governments, and to do all such other things and execute all such instruments as
they deem necessary, proper or desirable in order to promote the interests of
the Trust although such things are not herein specifically mentioned. Any
determination as to what is in the interests of the Trust made by the Trustees
in good faith shall be conclusive. In construing the provisions of this
Instrument, the presumption shall be in favor of a grant of power to the
Trustees. The Trustees will not be required to obtain any court order to deal
with Trust Property.
3.11. Principal Transactions. The Trustees may, on behalf of the Trust,
buy any securities from or sell any securities to, or lend any assets of the
Trust or any Series to, any Trustee or officer of the Trust or any firm of which
any such Trustee or officer is a member acting as principal, or have any such
dealings with any investment manager, placement agent or transfer agent for the
Trust or with any Interested Person of such person; and the Trust may employ any
such person, or firm or company in which such person is an Interested Person, as
broker, legal counsel, registrar, investment manager, placement agent, transfer
agent, dividend disbursing agent, custodian or in any other capacity upon
customary terms.
ARTICLE IV
Investment Management, Custodial
and Placement Agent Arrangements
4.1. Investment Management and Other Arrangements. The Trustees may in
their discretion, from time to time, enter into investment management contracts
or placement agent agreements with respect to the Trust or any Series whereby
the other party to such contract or agreement shall undertake to furnish the
Trustees such investment management, placement agent and/or other services as
the Trustees shall, from time to time, consider desirable and all upon such
terms and conditions as the Trustees may in their discretion determine.
Notwithstanding any provisions of this Instrument, the Trustees may authorize
any Investment Manager (subject to such general or specific instruments as the
Trustees may, from time to time, adopt) to effect purchases, sales, loans or
exchanges of Trust Property on behalf of the Trustees or may authorize any
officer, employee or Trustee to effect such purchases, sales, loans or exchanges
pursuant to recommendations of any such Investment Manager (and all without
further action by the Trustees). Any such purchases, sales, loans and exchanges
shall be deemed to have been authorized by all of the Trustees.
4.2. Custodial Arrangements.
(a) The Trustees shall at all times employ a bank, a company that is a
member of a national securities exchange, or a trust company, each having
capital, surplus and undivided profits of at least two million dollars
($2,000,000) as custodian with authority as the Trust's agent, but subject to
such restrictions, limitations and other requirements as the Trustees shall
determine (i) to hold the securities owned by the Trust and deliver the same
upon written order or oral order confirmed in writing; (ii) to receive and
receipt for any monies due to the Trust and deposit the same in its own banking
department or elsewhere as the Trustees may direct; and (iii) to disburse such
funds upon orders or vouchers.
(b) The Trustees may direct the custodian to deposit all or any part of
the securities owned by the Trust in a system for the central handling of
securities established by a national securities exchange or a national
securities association registered with the Commission under the Securities
Exchange Act of 1934, as amended, or such other person as may be permitted by
the Commission, or otherwise in accordance with the 1940 Act, pursuant to which
system all securities of any particular class or series of any issuer deposited
within the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of such securities, provided that
all such deposits shall be subject to withdrawal only upon the order of the
Trust or its custodians, subcustodians or other agents.
(c) The funds of the Trust shall be deposited in such depositories as
the Trustees shall designate and shall be drawn out on checks, drafts or other
orders signed by such officer, officers, agent or agents (including any
investment adviser, administrator or manager), as the Trustees may from time to
time authorize.
4.3. Parties to Contract. Any contract may be entered into with any
corporation, firm, trust or association, although one or more of the Trustees or
officers of the Trust may be an officer, director, trustee, shareholder, or
member of such other party to the contract, and no such contract shall be
invalidated or rendered void or voidable by reason of the existence of any such
relationship, nor shall any person holding such relationship be disqualified
from voting on or executing the same in the Holder's and/or Trustee's capacity
as Holder and/or Trustee, nor shall any person holding such relationship be
liable merely by reason of such relationship for any loss or expense to the
Trust under or by reason of said contract or accountable for any profit realized
directly or indirectly therefrom. The same person (including a firm,
corporation, trust, or association) may be the other party to contracts entered
into pursuant to Sections 4.1 or 4.2 above or otherwise, and any person may be
financially interested or otherwise affiliated with persons who are parties to
any or all of the contracts mentioned in this Section 4.3.
4.4. Compliance with 1940 Act. Any contract entered into pursuant to
Section 4.1 shall be consistent with and subject to the requirements of Section
15 of the 1940 Act, as modified by any applicable order or orders of the
Commission or interpretive releases of the Commission thereunder, with respect
to its continuance in effect, its termination and the method of authorization
and approval of such contract or renewal thereof.
ARTICLE V
Limitations of Liability
5.1. No Personal Liability of Trustees, Holders. No Trustee, when
acting in such capacity, shall be subject to any personal liability whatsoever
to any Person, other than the Trust or its Holders, in connection with Trust
Property or the affairs of the Trusts. No Trustee, when acting in such capacity,
shall be subject to any personal liability whatsoever, provided that nothing
contained herein or in the Delaware Act shall protect any Trustee against any
liability to the Trust or its Holders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of the office of Trustees hereunder. No
Holder shall be subject to any personal liability whatsoever to any Person in
connection with Trust Property or the affairs of the Trust. The Trustees shall
have no power to bind any Holder personally or to call upon any Holder for the
payment of any sum of money or assessment whatsoever other than such as the
Holder may at any time personally agree to pay by way of purchase of or increase
in Interests or otherwise.
5.2. Indemnification.
(a) Subject to the exceptions and limitations contained in Section
(b) below:
(i) Every Person who is, or has been, a Trustee or officer of
the Trust (hereinafter referred to as a "Covered Person") shall be
indemnified by the Trust to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid by him
in connection with any claim, action, suit or proceeding in which he
becomes involved as a party or otherwise by virtue of being or having
been a Trustee or officer and against amounts paid or incurred by him
in the settlement thereof;
(ii) The words "claim," "action," "suit," or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil,
criminal or other, including appeals), actual or threatened while in
office or thereafter, and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments, amounts
paid in settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) Who shall have been adjudicated by a court or body before
which the proceeding was brought (A) to be liable to the Trust or its
Holders by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of the
Covered Person's office or (B) not to have acted in good faith in the
reasonable belief that Covered Person's action was in the best interest
of the Trust; or
(ii) In the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the Trustee's or officer's office,
(A) By the court or other body approving the settlement;
(B) By at least a majority of those Trustees who are
neither Interested Persons of the Trust nor are parties to the
matter based upon a review of readily available facts (as
opposed to a full trial-type inquiry); or
(C) By written opinion of independent legal counsel
based upon a review of readily available facts (as opposed to
a full trial-type inquiry);
provided, however, that any Holder may, by appropriate legal
proceedings, challenge any such determination by the Trustees or by
independent counsel.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now or
hereafter be entitled, shall continue as to a person who has ceased to be a
Covered Person and shall inure to the benefit of the heirs, executors and
administrators of such a person. Nothing contained herein shall affect any
rights to indemnification to which Trust personnel, other than Covered Persons,
and other persons may be entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character described in
paragraph (a) of this Section 5.2 may be paid by the Trust or Series from time
to time prior to final disposition thereof upon receipt of an undertaking by or
on behalf of such Covered Person that such amount will be paid over by him to
the Trust or Series if it is ultimately determined that he is not entitled to
indemnification under this Section 5.2; provided, however, that either (a) such
Covered Person shall have provided appropriate security for such undertaking,
(b) the Trust is insured against losses arising out of any such advance payments
or (c) either a majority of the Trustees who are neither Interested Persons of
the Trust nor parties to the matter, or independent legal counsel in a written
opinion, shall have determined, based upon a review of readily available facts
(as opposed to a trial-type inquiry or full investigation), that there is reason
to believe that such Covered Person will be found entitled to indemnification
under this Section 5.2.
(e) Conditional advancing of indemnification monies under this Section
5.2 for actions based upon the 1940 Act may be made only on the following
conditions: (i) the advances must be limited to amounts used, or to be used, for
the preparation or presentation of a defense to the action, including costs
connected with the preparation of a settlement; (ii) advances may be made only
upon receipt of a written promise by, or on behalf of, the recipient to repay
that amount of the advance which exceeds that amount which it is ultimately
determined that he is entitled to receive from the Trust by reason of
indemnification; and (iii) (a) such promise must be secured by a surety bond,
other suitable insurance or an equivalent form of security which assures that
any repayments may be obtained by the Trust without delay or litigation, which
bond, insurance or other form of security must be provided by the recipient of
the advance, or (b) a majority of a quorum of the Trust's disinterested,
non-party Trustees, or an independent legal counsel in a written opinion, shall
determine, based upon a review of readily available facts, that the recipient of
the advance ultimately will be found entitled to indemnification.
(f) In case any Holder or former Holder of any Series shall be held to
be personally liable solely by reason of the Holder or former Holder being or
having been a Holder of that Series and not because of the Holder or former
Holder acts or omissions or for some other reason, the Holder or former Holder
(or the Holder or former Holder's heirs, executors, administrators or other
legal representatives, or, in the case of a corporation or other entity, its
corporate or other general successor) shall be entitled out of the assets
belonging to the applicable Series to be held harmless from and indemnified
against all loss and expense arising from such liability. The Trust, on behalf
of the affected Series, shall, upon request by the Holder, assume the defense of
any claim made against the Holder for any act or obligation of the Series and
satisfy any judgment thereon from the assets of the Series.
5.3. No Bond Required of Trustees. No Trustee shall, as such, be
obligated to give any bond or surety or other security for the performance of
any of the Trustee's duties hereunder.
5.4. No Duty of Investigation; Notice in Trust Instruments, etc. No
purchaser, lender, or other person dealing with the Trustees or any officer,
employee or agent of the Trust shall be bound to make any inquiry concerning the
validity of any transaction purporting to be made by the Trustees or by said
officer, employee or agent or be liable for the application of money or property
paid, loaned, or delivered to or on the order of the Trustees or of said
officer, employee or agent. Every obligation, contract, instrument, certificate
or other interest or undertaking of the Trust or any Series, and every other act
or thing whatsoever executed in connection with the Trust or any Series, shall
be conclusively taken to have been executed or done by the executors thereof
only in their capacity as Trustees, officers, employees or agents of the Trust.
Every written obligation, contract, instrument, certificate or other interest or
undertaking of the Trust or any Series made or sold by the Trustees or by any
officer, employee or agent of the Trust, in their capacity as such, shall
contain an appropriate recital to the effect that the Trustee, officer, employee
and agent of the Trust shall not personally be bound by or liable thereunder,
nor shall resort be had to their private property for the satisfaction of any
obligation or claim thereunder, and appropriate references shall be made therein
to the Instrument, and may contain any further recital which they may deem
appropriate, but the omission of such recital shall not operate to impose
personal liability on any of the Trustees, officers, employees or agents of the
Trust. The Trustees may maintain insurance for the protection of the Trust
Property, its Holders, Trustees, officers, employees and agents in such amount
as the Trustees shall deem adequate to cover possible tort liability, and such
other insurance as the Trustees in their sole judgment shall deem advisable.
5.5. Reliance on Experts, etc. Each Trustee and officer or employee of
the Trust shall, in the performance of the Trustee's, officer's and employee's
duties, be fully and completely justified and protected with regard to any act
or any failure to act resulting from reliance in good faith upon the books of
account or other records of the Trust or any Series, upon an opinion of counsel,
or upon reports made to the Trust or any Series by any of its officers or
employees or by any Investment Manager, accountant, appraiser or other experts
or consultants selected with reasonable care by the Trustees, officers or
employees of the Trust, regardless of whether such counsel or expert may also be
a Trustee.
5.6 Holder Offering Documents. (a) Each Holder of an Interest shall
indemnify and hold harmless the Trust and each Covered Person against any
losses, claims, damages or liabilities, joint or several, to which the Trust or
such Covered Person may become subject, under the 1933 Act or otherwise,
specifically including but not limited to losses, claims, damages or liabilities
related to negligence on the part of the Trust or any Covered Person, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any Misstatement in a Holder Statement; and
agrees to reimburse the Trust and each Covered Person for any legal or other
expenses reasonably incurred by it in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however that the
Holder of an Interest shall not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based upon any
Misstatement made in such Holder Statement in reliance upon and in conformity
with written information furnished to such Holder by the Trust or such Covered
Person for use in the preparation thereof. The foregoing proviso shall not apply
to exculpate a Holder under this Section 5.6(a) with respect to any losses,
claims, damages or liabilities to which the Trust or any such Covered Person may
become subject, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any Misstatement in
any Holder Statement or portion thereof of such Holder, if such Misstatement
only relates to (i) any investment company or series thereof that does not and
does not propose, as of the time the Misstatement is made, to invest all or a
portion of its assets in a Series of the Trust or (ii) to an offering of
securities (as defined under the 1933 Act) of such Holder or its affiliates the
proceeds from which are not and are not proposed, as of the time the
Misstatement is made, to be invested in a Series of the Trust.
The indemnity provisions of this Section 5.6(a) shall inure to the
benefit of each person, if any, who controls the Trust or any Covered Person
within the meaning of the 1933 Act.
(b) The Trust shall indemnify and hold harmless each Holder against any
losses, claims, damages or liabilities, joint or several, to which such Holder
may become subject under the 1933 Act or otherwise, specifically including but
not limited to losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any Misstatement in the Holder Statement
of such Holder, in each case to the extent, but only to the extent, that such
Misstatement was made in reliance upon and in conformity with written
information furnished to such Holder by the Trust for inclusion therein, and
will reimburse such Holder for any legal or other expenses reasonably incurred
by such Holder in connection with investigating or defending any such loss,
claim, damage, liability or action.
This indemnity provision in this Section 5.6(b) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each officer
and director of each Holder and each person, if any, who controls such Holder
within the meaning of the 1933 Act.
(c) Promptly after receipt by an indemnified party under this Section
5.6 of notice of the commencement of any action, such indemnified party will, if
a claim in respect thereof is to be made against the indemnifying party under
Section 5.6(a) or 5.6(b), notify the indemnifying party in writing of the
commencement thereof, but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under Section 5.6(a) or 5.6(b). In case any such action is
brought against any indemnified party, and it notified the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent that it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; provided, however, if the defendants in
any such action include both the indemnified parties and the indemnifying party
and the indemnified party shall have reasonably concluded that there are legal
defenses available to it and/or other indemnified parties that are different
from or additional to those available to the indemnifying party and that as a
result thereof, the indemnified party shall reasonably conclude that it is
inadvisable for it to be represented by counsel for the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of the indemnifying
party's election so to assume the defense of such action and approval by the
indemnified party of counsel (or the unreasonable withholding of such approval),
the indemnifying party will not be liable to such indemnified party under
Section 5.6(a) or 5.6(b) for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the immediately preceding sentence (it being understood, however,
that the indemnifying party shall not be liable for the expenses of more than
one separate counsel approved by the indemnifying party, representing all the
indemnified parties under Section 5.6(a) or 5.6(b) hereof who are parties to
such action), (ii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of commencement of the action, or
(iii) the indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party. In no event shall
any indemnifying party be liable in respect of any amounts paid in settlement of
any action unless the indemnifying party shall approved the terms of such
settlement; provided, however, that such consent shall not be unreasonably
withheld or delayed.
(d) In order to provide for just and equitable contribution in any
action in which a claim for indemnification is made pursuant to Section 5.6(a)
or 5.6(b) but is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that Section 5.6(a) or 5.6(b)
provides for indemnification in such case, all the parties hereto shall
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (after contribution from others) in such proportion so that,
(i) if such losses, claims, damages or liabilities arise out
of or are based upon a Misstatement described in the final sentence of
Section 5.6(a), the Holder shall contribute the entire amount of such
claims, damages or liabilities; and
(ii) in all other circumstances, (A) the Holder and (B) the
Trust and the Covered Persons shall contribute to such claims, damages
and liabilities based on their respective fault or negligence with
respect to such Misstatement, as determined by arbitration according to
the procedural and substantive rules of the American Arbitration
Association; provided, however, that no person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act)
shall be entitled to a contribution from any person who is not guilty
of such fraudulent misrepresentation.
(e) For purposes of this Section 5.6, the following terms shall have
the following meanings:
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder.
"Holder Statement" shall mean any registration statement or
prospectus, as such terms are defined under the 1933 Act, or any other
material or information, written or oral, distributed or communicated
to shareholders or partners, or prospective shareholders or partners,
of a Holder by or at the direction of such Holder, including, without
limitation, proxies and proxy statements, as such terms are defined
under the 1940 Act and the Exchange Act.
"Misstatement" shall mean, with respect to any Holder
Statement, any untrue statement or alleged untrue statement of any
material fact, or any omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not
misleading.
"1933 Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
(f) The provisions of this Section 5.6 shall apply to each Holder
effective on the date such Holder becomes a shareholder of the Trust and shall
survive after such Holder no longer holds an interest in the Trust.
ARTICLE VI
Interests of the Trust
6.1. Interests. The beneficial interest in the property of the Trust
shall be divided into Interests of one or more separate and distinct Series as
the Trustees shall from time to time create and establish. The Trustees may
permit the purchase of Interests in any Series by any number of Persons. Subject
to applicable law and to such restrictions as may be adopted by the Trustees, a
Holder may increase or decrease its Interest in any Series without limitation.
6.2. Rights of Holders. The ownership of the Trust Property of every
description and the right to conduct any business hereinbefore described are
vested exclusively in the Trustees, and the Holders shall have no right or title
therein other than the beneficial interest conferred by their Interests and they
shall have no right to call for any partition or division of any property,
profits or rights of the Trust. The Interests shall be personal property giving
only the rights specifically set forth in this Instrument.
6.3. Purchase of or Increase in Interests. The Trustees, in their
discretion, may, from time to time, without a vote of the Holders, permit the
purchase of Interests of any Series by such party or parties (or increase in the
Interest of a Holder in any Series) and for such type of consideration,
including cash or property, at such time or times (including, without
limitation, each business day), and on such terms as the Trustees may deem best,
and may in such manner acquire other assets (including the acquisition of assets
subject to, and in connection with the assumption of, liabilities) and
businesses; provided, however, that the Trustees may not permit the purchase of
Interests of any Series if any Series would have more than 500 Holders. The
Trustees may make such additional rules and regulations, not inconsistent with
this Instrument, as they may deem expedient concerning the purchase or increase
of Interests.
6.4. Register of Interests. A register shall be kept at the principal
office of the Trust under the direction of the Trustees which shall contain the
names and addresses of the Holders of each Series and the Book Capital Account
balances of each Holder of each Series. Each such register shall be conclusive
as to who are the Holders of each Series of the Trust and who shall be entitled
to payments of distributions or otherwise to exercise or enjoy the rights of
Holders. No Holder shall be entitled to receive payment of any distribution, or
to have notice given to it as herein provided, until it has given its address to
such officer or agent of the Trustees as shall keep the said register for entry
thereon.
6.5. Non-Transferability. Interests of a Series shall not be
transferable, unless the prospective transferor obtains the prior unanimous
consent of the Holders of that Series to the transfer. Except as otherwise
provided by law, the Trust shall be entitled to recognize the exclusive right of
a person in whose name any Interest stands on the record of Holders as the
holder of such Interest for all purposes, including, without limitation, the
rights to receive distributions, and to vote as such holder, and the Trust shall
not be bound to recognize any equitable or legal claim to or interest in any
such Interest on the part of any other person.
6.6. Notices. Any and all notices to which any Holder hereunder may be
entitled and any and all communications shall be deemed duly served or given if
mailed, postage prepaid, addressed to any Holder of record at its last known
address as recorded on the register of the Trust.
6.7. Assent to Trust Instrument. Every Holder, by virtue of having
become a Holder, shall be held to have expressly assented and agreed to the
terms hereof and to have become a party hereto.
6.8. Establishment of Series. The Trust created hereby shall consist of
one or more Series and separate and distinct records shall be maintained by the
Trust for each Series and the assets associated with any such Series shall be
held and accounted for separately from the assets of the Trust or any other
Series. The Trustees shall have full power and authority, in their sole
discretion, and without obtaining any prior authorization or vote of the Holders
of any Series of the Trust, to establish and designate and to change in any
manner any such Series of Interests and to fix such preferences, voting powers,
right and privileges of such Series as the Trustees may from time to time
determine, to classify or reclassify any unissued Interests or any Series into
one or more Series, and to take such other action with respect to the Interests
as the Trustees may deem desirable. The establishment and designation of any
Series shall be effective upon the adoption of a resolution by a majority of the
Trustees setting forth such establishment and designation and the relative
rights and preferences of the Interests of such Series. At any time that there
are no Interests outstanding of any particular Series previously established and
designated, the Trustees may by a majority vote abolish that Series and the
establishment and designation thereof.
All references to Interests in this Trust Instrument shall be deemed to
be Interests of any or all Series, as the context may require. All provisions
herein relating to the Trust shall apply equally to each Series of the Trust,
except as the context otherwise requires.
6.9. Assets and Liabilities of Series. All consideration received by
the Trust for the issuance or sale of Interests of a particular Series, together
with all assets in which such consideration is invested or reinvested, all
income, earnings, profits and proceeds thereof, including any proceeds derived
from the sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same may be,
shall be held and accounted for separately from the other assets of the Trust
and of every other Series and may be referred to herein as "assets belonging to"
that Series. The assets belonging to a particular Series shall belong to that
Series for all purposes, and to no other Series, subject only to the rights of
creditors of that Series. In addition, any assets, income, earnings, profits or
funds, or payments and proceeds with respect thereto, which are not readily
identifiable as belonging to any particular Series shall be allocated by the
Trustees between and among one or more of the Series in such manner as the
Trustees, in their sole discretion, deem fair and equitable. Each such
allocation shall be conclusive and binding upon the Holders of all Series for
all purposes, and such assets, income, earnings, profits or funds, or payments
and proceeds with respect thereto shall be assets belonging to that Series. The
assets belonging to a particular Series shall be so recorded upon the books of
the Trust, and shall be held by the Trustees in trust for the benefit of the
Holders of Interests of that Series. The assets belonging to each particular
Series shall be charged with the liabilities of that Series and all expenses,
costs, charges and reserves attributable to that Series. Any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular Series shall be allocated
and charged by the Trustees between or among any one or more of the Series in
such manner as the Trustees in their sole discretion deem fair and equitable.
Each such allocation shall be conclusive and binding upon the Holders of all
Series for all purposes. Without limitation of the foregoing provisions of this
Section 6.9, but subject to the right of the Trustees in their discretion to
allocate general liabilities, expenses, costs, changes or reserves as herein
provided, the debts, liabilities, obligations and expenses incurred, contracted
for or otherwise existing with respect to a particular Series shall be
enforceable against assets of such Series only, and not against the assets of
the Trust generally. Notice of this contractual limitation on inter-Series
liabilities may, in the Trustee's sole discretion, be set forth in the
certificate of trust of the Trust (whether originally or by amendment) as filed
or to be filed in the Office of the Secretary of State of the State of Delaware
pursuant to the Delaware Act, and upon the giving of such notice in the
certificate of trust, the statutory provisions of Section 3804 of the Delaware
Act relating to limitations on inter-Series liabilities (and the statutory
effect under Section 3804 of the Delaware Act setting forth such notice in the
certificate of trust) shall become applicable to the Trust and each Series. Any
person extending credit to, contracting with or having any claim against any
Series may look only to the assets of that Series to satisfy or enforce any debt
with respect to that Series. No Holder or former Holder of any Series shall have
a claim on or any right to any assets allocated or belonging to any other
Series.
ARTICLE VII
Decreases and Withdrawals
7.1. Decreases and Withdrawals. A Holder shall have the authority to
decrease or withdraw its Interest in any Series of the Trust, at such Holder's
option, subject to the terms and conditions provided in this Article VII. The
Trust shall, upon application of any Holder or pursuant to authorization from
any Holder, and subject to this Article VII, decrease or withdraw such Holder's
Interest for an amount (which shall be treated as a distribution for purposes of
Section 8.1) determined by the application of a formula adopted for such purpose
by resolution of the Trustees; provided that (a) such amount shall not exceed
the positive balance in such Holder's Book Capital Account (determined after
taking into account such adjustments as are required by Treasury Department
Regulation ss. 1.704-1(b) (2) (ii) (b) (2) but before reduction thereof to
reflect the distribution of such amount) and (b) if so authorized by the
Trustees, the Trust may, at any time and from time to time, charge fees for
effecting such decrease or withdrawal, at such rates as the Trustees may
establish, and may, at any time and from time to time, suspend such right of
decrease or withdrawal. The procedures for effecting decreases or withdrawals
shall be as determined by the Trustees from time to time.
ARTICLE VIII
Determination of Book Capital Account
Balances, Net Asset Value, Allocations and Distributions
8.1. Book Capital Account Balances. A Book Capital Account shall be
maintained for each Holder of each Series. With respect to each Series, each
Book Capital Account shall be credited with the amounts of consideration paid by
the Holder to purchase or increase its Interest in the Series and with its share
of the Series' Net Profits (defined below), shall be charged with such Holder's
share of the Series' Net Losses (defined below), distributions and withholding
taxes (if any) and shall otherwise appropriately reflect transactions of the
Series and the Holders. No interest shall be paid on any amount of consideration
paid to the Trust to purchase or increase Interests.
"Net Profits" of a Series for any given time period shall mean the
excess of the Net Asset Value of the Series (defined in Section 8.2) at the
close of business on the last day of the period, prior to any distribution being
made with respect to such period, over the Net Asset Value of the Series as of
the opening of business on the first day of such period, after any additional
contributions made on such date.
"Net Losses" of a Series for any given time period shall mean the
excess of the Net Asset Value of the Series as of the opening of business on the
first day of the period, after any additional contributions made on such date,
over the Net Asset Value of the Series at the close of business on the last day
of such period, prior to any distribution being made with respect to such
period.
The Book Capital Account balances of Holders of each Series shall be
determined periodically at such time or times as the Trustees may determine. The
power and duty to make calculations necessary to determine these balances may be
delegated by the Trustees to the Investment Manager, custodian, or such other
person as the Trustees may determine.
Notwithstanding anything herein to the contrary, the Book Capital
Accounts and any related accounts (including without limitation tax capital
accounts, gross appreciation [unrealized gain] accounts, and gross depreciation
[unrealized loss] accounts) of the Holders and of any series shall at all times
during the full term of such Series be determined and maintained in accordance
with the rules of Treasury Department Regulation ss. 1.704-1 (b) (2) (iv). The
Trustees are authorized to prescribe, in their absolute discretion, such
policies for the establishment and maintenance of such accounts ("Policies") as
they, in consultation with the Trust's professional advisers, consider to be in
accordance with the requirements of such rules.
8.2. Net Asset Value. The term "Net Asset Value" shall mean, with
respect to any Series, that amount by which the assets of the Series exceed its
liabilities, all as determined by or under the direction of the Trustees. In
making this determination, the Trustees, without Holder approval, may alter the
method of valuing portfolio securities insofar as permitted under the 1940 Act
and the rules, regulations and interpretations thereof promulgated or issued by
the Commission or insofar as permitted by any order of the Commission applicable
to the Series. The Trustees may delegate any of their powers and duties under
this Section 8.2 with respect to valuation of assets and liabilities.
8.3. Allocation of Net Profits and Net Losses.
(a) Net Profits and Net Losses of each Series shall be determined and
allocated daily as of the close of business to and among the Holders of that
Series in proportion to their respective Interests in the Series, determined as
of the opening of business on such day.
(b) Except as otherwise provided in this Section 8.3, for each fiscal
year, items of income, deduction, gain, loss or credit that are recognized by a
Series for tax purposes shall be allocated pursuant to Treasury Department
Regulations ss. 1.704-1(b) in such manner as to equitably reflect amounts
credited or debited to the Book Capital Account of each Holder of that Series
for such year. Allocations of such items also shall be made, where appropriate,
in accordance with section 704(c) of the Code and the regulations thereunder, as
may be provided in any Policies adopted by the Trustees pursuant to Section 8.1.
(c) Expenses of a Series, if any, which are borne by any Holder of that
Series in its individual capacity shall be specially allocated to that Holder.
(d) Notwithstanding anything in Section 8.3(b) or (c) to the contrary,
in the event any Holder of a Series unexpectedly receives any adjustments,
allocations or distributions described in Treasury Department Regulations
ss.1.704-1(b)(2)(ii)(d)(4), ss.1.704-1(b)(2)(ii)(d)(5) or
ss.1.704-1(b)(2)(ii)(d)(6), items of income (including gross income) and gain of
that Series shall be specially allocated to such Holder in an amount and manner
sufficient to eliminate the deficit balance in the Holder's Book Capital Account
(as determined in accordance with Treasury Department Regulation ss. 1.704-1
(b)(2)(ii)(d)) created by such adjustments, allocations or distributions as
quickly as possible. Any special allocations of income and gain of a Series
pursuant to this Section 8.3(d) shall be taken into account in computing
subsequent allocations of income and gain of that Series pursuant to this
Article VIII, so that the net amount of any items of that Series so allocated
and the income, gain, loss, deduction and all other items of that Series
allocated to each Holder pursuant to this Article VIII shall, to the extent
possible, equal the net amount that would have been allocated to each such
Holder pursuant to the provisions of this Article VIII if such special
allocations had not been made.
8.4. Distributions. The Trustees may from time to time agree to the
payment of distributions to Holders of a Series. The amount of such
distributions and the payment of them and whether they are in cash or in any
other assets of the Series shall be wholly in the discretion of the Trustees.
8.5. Power to Modify Foregoing Procedures. Notwithstanding any of the
foregoing provisions of this Article VIII, the Trustees may prescribe, in their
absolute discretion, such other bases and times for determining, for financial
reporting and/or tax accounting purposes, (a) the Net Profits, Net Losses,
taxable income, tax loss, and/or net assets of any Series (or, where appropriate
in the Trustees' judgment, of the Trust as a whole), and/or (b) the allocation
of the Net profits or Net Losses and taxable income or tax loss so determined
among, or the payment of distributions to, the Holders of any Series as they
deem necessary or desirable to enable the Trust or any Series to comply with any
provision of the 1940 Act, the Code, any rule or regulation thereunder, or any
order of exemption issued by the Commission, all as in effect now or as
hereafter amended or modified.
ARTICLE IX
Holders
9.1. Meetings of Holders. Meetings of the Holders of any Series may be
called at any time by a majority of the Trustees and shall be called by any
Trustee upon written request of Holders holding, in the aggregate, not less than
10% of the Interests of that Series, such request specifying the purpose or
purposes for which such meeting is to be called. Any such meeting shall be held
within or without the State of Delaware on such day and at such time as the
Trustees shall designate. Holders of one-third of the Interests entitled to
vote, present in person or by proxy, shall constitute a quorum for the
transaction of any business, except as may otherwise be required by law or by
this Instrument. The Chairman, if any, shall act as chairman at all meetings of
the Holders; in the Chairman's absence, the President shall act as chairman; and
in the absence of the Chairman and the President, the Trustee or Trustees
present at each meeting may elect a temporary chairman for the meeting, who may
be one of themselves. Holders may vote either in person or by duly executed
proxy and each Holder shall be entitled to vote proportionate to the Holder's
Interest in the Trust or affected Series. If a quorum is present at a meeting, a
Majority Interests Vote of the Holders present and entitled to vote thereon,
either in person or by proxy, at such meeting constitutes the action of the
Holders, unless law or this Instrument requires a greater number of affirmative
votes.
9.2. Notice of Meetings. Notice of all meetings of the Holders of any
Series, stating the time, place and purposes of the meeting, shall be given by
the Trustees by mail to each Holder of that Series, at the Holder's registered
address, mailed at least 10 days and not more than 90 days before the meeting.
At any such meeting, any business properly before the meeting may be considered
whether or not stated in the notice of the meeting. Any adjourned meeting may be
held as adjourned without further notice. No notice need be given to any Holder
who shall have failed to inform the Trust of the Holder's current address or if
a written waiver of notice, executed before or after the meeting by the Holder
or the Holder's attorney thereunto authorized, is filed with the records of the
meeting.
9.3. Record Date for Meetings. For the purpose of determining the
Holders who are entitled to notice of and to vote at any meeting, including any
adjournment thereof, or to participate in any distribution, or for the purpose
of any other action, the Trustees may from time to time fix a date, not more
than 90 days prior to the date of any meeting of the Holders or payment of
distributions or other action, as the case may be, as a record date for the
determination of the Persons to be treated as Holders of record for such
purposes. If the Trustees do not, prior to any meeting of Holders, so fix a
record date, then the date of mailing notice of the meeting shall be the record
date.
9.4. Proxies, etc. At any meeting of Holders, any Holder entitled to
vote thereat may vote by proxy, provided that no proxy shall be voted at any
meeting unless it shall have been placed on file with the Secretary, or with
such other officer or agent of the Trust as the Secretary may direct, for
verification prior to the time at which such vote shall be taken. A proxy may be
given in writing, by any electronic or telecommunications device or in any other
manner. Pursuant to a resolution of a majority of the Trustees, proxies may be
solicited in the name of one or more Trustees or one or more of the officers of
the Trust. Only Holders of record shall be entitled to vote. Each Holder shall
be entitled to a vote proportionate to its Interest in the Trust or applicable
Series, as the case may be. When Interests are held jointly by several persons,
any one of them may vote at any meeting in person or by proxy in respect of such
Interest, but if more than one of them shall be present at such meeting in
person or by proxy, and such joint owners or their proxies so present disagree
as to any vote to be cast, such vote shall not be received in respect of such
Interest. A proxy purporting to be executed by or on behalf of a Holder shall be
deemed valid unless challenged at or prior to its exercise, and the burden of
proving invalidity shall rest on the challenger. If the Holder is a minor or a
person of unsound mind, and subject to guardianship or to the legal control of
any other person as regards the charge or management of its Interest, the Holder
may vote by the Holder's guardian or such other person appointed or having such
control, and such vote may be given in person or by proxy. No proxy shall be
valid after eleven (11) months from the date of its execution, unless a longer
period is expressly stated in such proxy.
9.5. Inspectors of Election. In advance of any meeting of Holders, the
Trustees may appoint Inspectors of Election to act at the meeting or any
adjournment thereof. If Inspectors of Election are not so appointed, the
Chairman, if any, of any meeting of Holders may, and on the request of any
Holder or the Holder's proxy shall, appoint Inspectors of Election of the
meeting. The number of Inspectors shall be either one or three. If appointed at
the meeting on the request of one or more Holders or proxies, a majority of the
Interests present shall determine whether one or three Inspectors are to be
appointed, but failure to allow such determination by the Holders shall not
affect the validity of the appointment of Inspectors of Election. In case any
person appointed as Inspector fails to appear or fails or refuses to act, the
vacancy may be filled by appointment made by the Trustees in advance of the
convening of the meeting or at the meeting by the person acting as Chairman. The
Inspectors of Election shall determine the percentage of the total Interests
represented at the meeting, the existence of a quorum, the authenticity,
validity and effect of proxies, shall receive votes, ballots or consents, shall
hear and determine all challenges and questions in any way arising in connection
with the right to vote, shall count and tabulate all votes or consents,
determine the results, and do such other acts as may be proper to conduct the
election or vote with fairness to all Holders. If there are three Inspectors of
Election, the decision, act or certificate of a majority is effective in all
respects as the decision, act or certificate of all. On request of the Chairman,
if any, of the meeting, or of any Holder or a Holder's proxy, the Inspectors of
Election shall make a report in writing of any challenge or question or matter
determined by them and shall execute a certificate of any facts found by them.
9.6. Inspection of Records. The records of the Trust shall be open to
inspection by Holders during normal business hours for any purpose not harmful
to the Trust. At each meeting of the Holders of the Trust or any Series there
shall be open for inspection the minutes of the last previous meeting of Holders
of the Trust or Series, as the case may be, and a list of the Holders of the
Trust or Series, certified to be true and correct by the Secretary or other
proper agent of the Trust, as of the record date of the meeting. Such list of
Holders shall contain the name of each Holder and the address and the percentage
of the total Interests owned by such Holder.
9.7. Holder Action by Written Consent. Any action which may be taken by
Holders may be taken without a meeting if Holders shall unanimously consent to
the action in writing and the written consents are filed with the records of the
meetings of Holders. Such consent shall be treated for all purposes as a vote
taken at a meeting of Holders.
9.8. Voting Powers. The Holders shall have power to vote only (i) for
the election of Trustees as provided in Sections 2.2 and 2.4; (ii) for the
removal of Trustees as provided in Section 2.3; (iii) with respect to any
investment management contract entered into pursuant to Section 4.1; (iv) with
respect to termination of the Trust as provided in Section 10.1; and (v) with
respect to any such additional matters relating to the Trust as may be required
by this Instrument or any registration of the Trust as an investment company
under the 1940 Act with the Commission (or any successor agency) or as the
Trustees may consider necessary or desirable. On any matter submitted to a vote
of the Holders, all Interests shall be voted separately by individual Series,
except (i) when required by the 1940 Act, Interests shall be voted in the
aggregate and not by individual Series; and (ii) when the Trustees have
determined that the matter affects the interests of more than one Series, then
the Holders of all such Series shall be entitled to vote thereon. There shall be
no cumulative voting in the election of Trustees. Until Interests are issued and
at any time wherein no Interests are outstanding, the Trustees may exercise all
rights of Holders and may take any action required by law or this Instrument to
be taken by Holders.
ARTICLE X
Duration; Termination; Dissolution;
Amendment; Mergers; Etc.
10.1. Termination of Trust or any Series.
(a) The Trust or any Series may be terminated by (i) a Majority
Interests Vote of each Series affected by the matter or, if applicable, a
Majority Interests vote of the Trust, or (ii) the Trustees by written notice to
the Holders. Upon any such termination,
(i) The Trust or any affected Series shall carry on no
business except for the purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the
Trust or any affected Series and all of the powers of the Trustees
under this Instrument with respect to the Trust or any affected Series
shall continue until the affairs of the Trust or any such Series shall
have been wound up, including the power to fulfill or discharge the
contracts of the Trust or any such Series, collect its assets, sell,
convey, assign, exchange, or otherwise dispose of all or any part of
the remaining assets of the Trust or any such Series to one or more
persons at public or private sale for consideration which may consist
in whole or in part of cash, securities or other property of any kind,
discharge or pay its liabilities, and do all other acts appropriate to
liquidate its business.
(iii) After paying or adequately providing for the payment of
all liabilities, and upon receipt of such releases, indemnities and
refunding agreements, as they deem necessary for their protection, the
Trustees shall distribute the remaining assets of the Trust or any
affected Series, in cash or in kind or partly each, among the Holders
of the Trust or the affected Series in proportion to their respective
Interests in the Trust or Series (that is, in accordance with the
positive Book Capital Account balances of the Holders), after taking
into account such adjustments as are required by Treasury Department
Regulation ss. 1.704-1(b) (2) (ii) (b) (2).
(b) Upon termination of the Trust or any Series and distribution to the
Holders as herein provided, a majority of the Trustees shall execute and lodge
among the records of the Trust an instrument in writing setting forth the fact
of such termination. Upon termination of the Trust or any Series, the Trustees
shall thereupon be discharged from all further liabilities and duties hereunder
with respect to the Trust or Series, and the rights and interests of all Holders
of the Trust or Series shall thereupon cease.
10.2. Dissolution. Any Series shall be dissolved 120 days after a
Holder of an Interest in such Series either (a) makes an assignment for the
benefit of creditors, (b) files a voluntary petition in bankruptcy, (c) is
adjudicated a bankrupt or insolvent, (d) files any pleading admitting or failing
to contest the material allegations of a petition filed against it in any
bankruptcy or insolvency proceeding, or (e) seeks, consents to, or acquiesces in
the appointment of a trustee, receiver, or liquidator of such Holder or of all
or any substantial part of its assets, unless, within such 120 days, Holders
(excluding the Holder with respect to whom such event occurs) owning a majority
of the Interests in such Series vote to continue the Series. Upon any
dissolution pursuant to this section, the provisions of Section 10.1(a) (i),
(ii), and (iii) shall apply as if such dissolution were a termination described
in Section 10.1.
10.3. Amendment Procedure.
(a) Except as specifically provided herein, the Trustees may, without
the vote or consent of Holders, amend or otherwise supplement this Instrument by
making an amendment, a trust instrument supplemental hereto or an amended and
restated trust instrument. Holders shall have the right to vote (i) on any
amendment which would affect their right to vote granted in Section 9.8, (ii) on
any amendment to this Section 10.3, (iii) on any amendment as may be required by
law or by the Trust's registration statement filed with the Commission, and (iv)
on any amendment submitted to them by the Trustees. Any amendment required or
permitted to be submitted to Holders which, as the Trustees determine, shall
affect the Holders of one or more Series shall be authorized by vote of the
Holders of each Series affected, and no vote of Holders of a Series not affected
shall be required.
(b) Notwithstanding anything else herein, any Amendment to Article 5
hereof shall not limit the rights to indemnification or insurance provided
therein with respect to action or omission of Covered Persons prior to such
amendment. Nothing contained in this Instrument shall permit the amendment of
this Instrument to impair the exemption from personal liability of the Holders
or Trustees of the Trust.
(c) A certification signed by a majority of the Trustees setting forth
an amendment and reciting that it was duly adopted by the Holders or by the
Trustees as aforesaid or a copy of the Instrument, as amended, executed by a
majority of the Trustees, shall be conclusive evidence of such amendment when
lodged among the records of the Trust.
Notwithstanding any other provision hereof, until such time as
Interests are first sold, this Instrument may be terminated or amended in any
respect by the affirmative vote of a majority of the Trustees or by an
instrument signed by a majority of the Trustees.
10.4. Merger or Consolidation. Notwithstanding anything else herein,
the Trustees may, without the prior consent or vote of the Holders, cause the
Trust or any Series to merge or consolidate with any other partnership, trust or
other organization. Pursuant to and in accordance with the provisions of Section
3815(f) of the Delaware Act, and notwithstanding anything to the contrary
contained in this Instrument, any such agreement of merger or consolidation may
effect any amendment to the Instrument or effect the adoption of a new trust
instrument of the Trust if the Trust or Series is the surviving or resulting
entity in the merger or consolidation.
10.5. Incorporation. Notwithstanding anything else herein, the Trustees
may, without the prior consent or vote of the Holders, cause to be organized or
assist in organizing a corporation or corporations under the laws of any
jurisdiction or any other trust, partnership, association or other organization
to take over all of the Trust Property or the assets of any Series or to carry
on any business in which the Trust or any Series shall directly or indirectly
have any interest, and to sell, convey and transfer the Trust Property or the
assets of any Series to any such corporation, trust, association or organization
in exchange for the equity interests thereof or otherwise, and to lend money to,
subscribe for the equity interests of, and enter into any contracts with any
such corporation, trust, partnership, association or organization, or any
corporation, partnership, trust, association or organization in which the Trust
or any Series holds or is about to acquire equity interests. The Trustees may
also cause a merger or consolidation between the Trust or any Series or any
successor thereto and any such corporation, trust, partnership, association or
other organization if and to the extent permitted by law, as provided under the
law then in effect. In addition, nothing contained herein shall be construed as
requiring approval of the Holders for the Trustees to organize or assist in
organizing one or more corporations, trusts, partnerships, associations or other
organizations and selling, conveying or transferring a portion of the Trust
Property or the assets of any Series to such organizations or entities.
ARTICLE XI
Miscellaneous
11.1. Governing Law. The trust set forth in this instrument is made in
the State of Delaware, and the Trust and this Instrument, and the rights and
obligations of the Trustees and Holders hereunder, are to be governed by and
construed and administered according to the Delaware Act and the laws of said
State; provided, however, that there shall not be applicable to the Trust, the
Trustees or this Instrument (a) the provisions of Section 3540 of Title 12 of
the Delaware Code or (b) any provisions of the laws (statutory or common) of the
State of Delaware (other than the Delaware Act) pertaining to trusts which
relate to or regulate (i) the filing with any court or governmental body or
agency of trustee accounts or schedules of trustee fees and charges, (ii)
affirmative requirements to post bonds for trustees, officers, agents or
employees of a trust, (iii) the necessity for obtaining court or other
governmental approval concerning the acquisition, holding or disposition of real
or personal property, (iv) fees or other sums payable to trustees, officers,
agents or employees of a trust, (v) the allocation of receipts and expenditures
to income or principal, (vi) restrictions or limitations on the permissible
nature, amount or concentration of trust investments or requirements relating to
the titling, storage or other manner of holding of trust assets, or (vii) the
establishment of fiduciary or other standards or responsibilities or limitations
on the acts or powers of trustees, which are inconsistent with the limitations
or liabilities or authorities and powers of the Trustees set forth or referenced
in this Instrument. The Trust shall be of the type commonly called a "business
trust," and without limiting the provisions hereof, the Trust may exercise all
powers which are ordinarily exercised by such a trust under Delaware law. The
trust specifically reserves the right to exercise any of the powers or
privileges afforded to trusts or actions that may be engaged in by trusts under
the Delaware Act, and the absence of a specific reference herein to any such
power, privilege or action shall not imply that the Trust may not exercise such
power or privilege or take such actions.
11.2. Counterparts. This Instrument may be simultaneously executed in
several counterparts, each of which shall be deemed to be an original, and such
counterparts, together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any such original counterpart.
11.3. Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust or of any recording office
in which this Instrument may be recorded, appears to be a Trustee hereunder,
certifying to: (a) the number or identity of Trustees or Holders; (b) the due
authorization of the execution of any instrument or writing; (c) the form of any
vote passed at a meeting of Trustees or Holders; (d) the fact that the number of
Trustees or Holders present at any meeting or executing any written instrument
satisfies the requirements of this Instrument; (e) the form of any By-Laws
adopted by or the identity of any officers elected by the Trustees, or; (f) the
existence of any fact or facts which in any manner relate to the affairs of the
Trust, shall be conclusive evidence as to the matters so certified in favor of
any person dealing with the Trustees and their successors.
11.4. Provisions in Conflict With Law or Regulations.
(a) The provisions of this Instrument are severable, and if the
Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with any applicable laws or regulations, the
conflicting provision shall be deemed never to have constituted a part of this
Instrument; provided, however, that such determination shall not affect any of
the remaining provisions of this Instrument or render invalid or improper any
action taken or omitted prior to such determination.
(b) If any provision of this Instrument shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Instrument in any jurisdiction.
(c) It is intended that each Series of the Trust be classified as a
partnership for federal income tax purposes. The Trustees, in their sole
discretion and without the vote or consent of the Holders, may amend this
Instrument and do whatever else they determine to be necessary to ensure that
this objective is achieved.
11.5. Signatures. All contracts and other instruments shall be executed
on behalf of the Trust by such officer, officers, agent or agents, as provided
in this Instrument or as the Trustees may from time to time by resolution
provide.
11.6. Seal. The seal of the Trust, if any, may be affixed to any
document, and the seal and its attestation may be lithographed, engraved or
otherwise printed on any document with the same force and effect as if it had
been imprinted and attested manually in the same manner and with the same effect
as if done by a Delaware business corporation.
11.7. Fiscal Year. The fiscal year of the Trust and each Series shall
begin on November 1, provided, however, that the Trustees may from time to time
change the fiscal year of the Trust or of any Series.
11.8. Waivers of Notice. Whenever any notice whatever is required to be
given by law or this Instrument, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto. A notice shall be deemed to
have been telegraphed, cabled or wirelessed for the purposes of this Instrument
when it has been delivered to a representative of any telegraph, cable or
wireless company with instructions that it be telegraphed, cabled or wirelessed.
11.9. Reports. The Trustees shall cause to be prepared, at least
annually, a report of operations containing those financial statements as may be
required by laws or as the Trustees may direct for each Series prepared in
conformity with generally accepted accounting principles and an opinion of an
independent public accountant on such financial statements. The Trustees shall,
in addition, furnish to the Holders of each Series at least semi-annually
interim reports containing unaudited financial statements as may be required by
laws or as the Trustees may direct.
IN WITNESS WHEREOF, the undersigned have caused this amended and
restated Trust Instrument to be executed as of the day and year first above
written.
John Y. Keffer
as Trustee and not individually
Thomas G. Sheehan
as Trustee and not individually
David I. Goldstein
as Trustee and not individually
<PAGE>
APPENDIX A
Established Portfolios
The following Series have been created by the Trustees in accordance
with section 6.8 of the Trust Instrument:
<TABLE>
<S> <C> <C>
Portfolio Date Established
1. International Equity Fund 9/13/95
2. Schroder Emerging Markets Fund Institutional Portfolio 9/13/95
3. Schroder International Smaller Companies Portfolio 3/15/96
4. Schroder Global Asset Allocation Portfolio 3/15/96
5. Schroder U.S. Smaller Companies Portfolio 5/16/96
6. Schroder EM Core Portfolio 11/26/96
7. Schroder European Growth Portfolio 11/26/96
8. Schroder Japan Portfolio 11/26/96
9. Schroder Asian Growth Fund Portfolio 11/26/96
10. Schroder United Kingdom Portfolio 11/26/96
11. Schroder Global Growth Portfolio 9/18/97
</TABLE>
Exhibit (5)(e)
SCHRODER CAPITAL FUNDS
INVESTMENT SUBADVISORY AGREEMENT
June 15, 1998
AGREEMENT made this 15th day of June, 1998, among Schroder Capital
Funds (the "Trust"), a business trust organized under the laws of the State of
Delaware with its principal place of business at Two Portland Square, Portland,
Maine 04101, Schroder Capital Management International Inc. (the "Adviser"), a
corporation organized under the laws of the State of New York with its principal
place of business at One State Street, New York, New York and Schroder
Investment Management, Ltd. with its principal office and place of business at
31 Gresham Street, London, U.K. EC2V 7QA (the "Subadviser").
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company and
is authorized to issue its shares of beneficial interest, no par value, in
separate series and classes;
WHEREAS, the Subadviser provides investment advice and is registered
with the Securities and Exchange Commission (the "SEC") as an investment adviser
under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and
is registered with the United Kingdom Investment Management Regulatory
Organization ("IMRO");
WHEREAS, the Trust and the Adviser desire that the Subadviser perform
investment advisory services for Schroder International Smaller Companies
Portfolio (the "Portfolio") and the Subadviser is willing to provide those
services on the terms and conditions set forth in this Agreement; and
WHEREAS, the Subadviser is willing to render such investment advisory
services to the Portfolio; and
NOW THEREFORE, in consideration for the promises and covenants
contained herein, the Trust, the Adviser and the Subadviser hereby agree as
follows:
SECTION 1. THE TRUST; DELIVERY OF DOCUMENTS
The Trust is engaged in the business of investing and reinvesting its
assets in securities of the type and in accordance with the limitations
specified in its Trust Instrument, By-Laws and Registration Statement filed with
the Securities and Exchange Commission (the "Commission") under the Act and the
Securities Act of 1933 (the "Securities Act"), including any representations
made in the prospectus and statement of additional information relating to the
Portfolio contained therein and as may be supplemented from time to time, all in
such manner and to such extent as may from time to time be authorized by the
Trust's Board of Trustees (the "Board"). The Trust is currently authorized to
issue thirty-one series of shares and the Board is authorized to issue any
unissued shares in any number of additional classes or series. The Trust has
delivered to the Adviser copies of the documents listed in this Section 1 and
will from time to time furnish Subadviser with any amendments thereof.
SECTION 2. INVESTMENT SUBADVISER; APPOINTMENT
Subject to the direction and control of the Board, the Adviser manages
the investment and reinvestment of the assets of the Portfolio and provides for
certain management and services as specified in the Investment Advisory
Agreements between the Trust and the Adviser with respect to the Portfolio.
The Adviser hereby employs Subadviser, subject to the direction and
control of the Adviser and the Board, to manage the investment and reinvestment
of the assets in each Portfolio and, without limiting the generality of the
foregoing, to provide other services as specified herein, all in such manner and
to such extent as may be directed from time to time by the Adviser. The
Subadviser accepts this employment and agrees to render its services for the
compensation set forth herein.
SECTION 3. DUTIES OF THE SUBADVISER
(a) The Subadviser is authorized to make decisions with respect to
purchases and sales of securities and other investment assets in the Portfolio.
To carry out such decisions, the Subadviser is hereby authorized, as agent and
attorney-in-fact for the Trust, for the account of, at the risk of and in the
name of the Trust, to place orders and issue instructions with respect to those
transactions of the Portfolio. In all purchases, sales and other transactions in
securities for the Portfolio, the Subadviser is authorized to exercise full
discretion and act for the Trust in the same manner and with the same force and
effect as the Trust might or could do with respect to such purchases, sales or
other transactions, as well as with respect to all other things necessary or
incidental to the furtherance or conduct of such purchases, sales or other
transactions.
(b) The Subadviser will report to the Board at each meeting thereof all
changes in the Portfolio since the prior report, and will also keep the Board
informed of important developments affecting the Trust, the Portfolio and the
Subadviser, and on its own initiative, will furnish the Board from time to time
with such information as the Subadviser may believe appropriate for this
purpose, whether concerning the individual companies whose securities are
included in a Portfolio's holdings, the industries in which they engage, or the
economic, social or political conditions prevailing in each country in which the
Portfolio maintains investments. The Subadviser will also furnish the Board with
such statistical and analytical information with respect to securities in the
Portfolio as the Subadviser may believe appropriate or as the Board reasonably
may request. In making purchases and sales of securities for a Portfolio, the
Subadviser will bear in mind the policies set from time to time by the Board as
well as the limitations imposed by the Trust's Trust Instrument, By-Laws and
Registration Statement under the Act and the Securities Act, the limitations in
the Act and in the Internal Revenue Code of 1986, as amended in respect of
regulated investment companies and the investment objectives, policies and
restrictions of the Portfolio.
(c) The Subadviser will from time to time employ or associate with such
persons as the Subadviser believes to be particularly fitted to assist in the
execution of the Subadviser's duties hereunder, the cost of performance of such
duties to be borne and paid by the Subadviser. No obligation may be incurred on
the Trust's behalf in any such respect.
(d) The Subadviser shall maintain records for each Portfolio relating
to portfolio transactions and the placing and allocation of brokerage orders as
are required to be maintained by the Trust under the Act. The Subadviser shall
prepare and maintain, or cause to be prepared and maintained, in such form, for
such periods and in such locations as may be required by applicable law, all
documents and records relating to the services provided by the Subadviser
pursuant to this Agreement required to be prepared and maintained by the Trust
pursuant to the rules and regulations of any national, state, or local
government entity with jurisdiction over the Trust, including the Securities and
Exchange Commission and the Internal Revenue Service. The books and records
pertaining to the Trust which are in possession of the Subadviser shall be the
property of the Trust. The Trust, or the Trust's authorized representatives,
shall have access to such books and records at all times during the Subadviser's
normal business hours. Upon the reasonable request of the Trust, copies of any
such books and records shall be provided promptly by the Subadviser to the Trust
or the Trust's authorized representatives.
SECTION 4. EXPENSES
Subject to any expense reimbursement arrangements between the Adviser
or others and the Trust, the Trust shall be responsible and shall assume the
obligation for payment of all of the Trust's expenses. The Subadviser shall pay
for maintaining its staff and personnel necessary to perform its obligations
under this Agreement and shall, at its own expense maintain the office space,
facilities, equipment and personnel that are reasonably necessary to carry out
its obligations hereunder.
SECTION 5. STANDARD OF CARE
The Trust shall expect of the Subadviser, and the Subadviser will give
the Trust the benefit of, the Subadviser's best judgment and efforts in
rendering its services to the Trust, and as an inducement to the Subadviser's
undertaking these services the Subadviser shall not be liable hereunder for any
mistake of judgment or in any event whatsoever, except for lack of good faith,
provided that nothing herein shall be deemed to protect, or purport to protect,
the Subadviser against any liability to the Trust or to the Trust's interest
holders to which the Subadviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of the
Subadviser's duties hereunder, or by reason of the Subadviser's reckless
disregard of its obligations and duties hereunder. As used in this Section 5,
the term "Subadviser" shall include any affiliates of the Subadviser performing
services for the Portfolio contemplated hereby and directors, officers and
employees of the Subadviser as well as the Subadviser itself.
The Subadviser shall not be liable for any losses caused by
disturbances of its operations by virtue of force majeure, war, riot, or damage
caused by nature or due to other events for which the Subadviser is not
responsible (e.g., strike, lock-out or losses caused by the imposition of
foreign exchange controls, expropriation of assets or other acts of domestic or
foreign authorities).
The presence of exculpatory language in this Agreement shall not be
deemed by the Trust, the Portfolio, the Adviser, the Subadviser, or any other
party appointed pursuant to this Agreement, including without limitation any
custodian, as in any way limiting causes of action and remedies which may,
notwithstanding such language, be available to the Portfolio either under common
law or statutory law principles applicable to fiduciary relationships or under
the Federal securities laws.
SECTION 6. COMPENSATION
In consideration of the foregoing, the Adviser shall pay the
Subadviser, with respect to the Portfolio, a fee at an annual rate as listed in
Appendix A hereto. Such fees shall be accrued by the Adviser daily and shall be
payable monthly in arrears on the first day of each calendar month for services
performed hereunder during the prior calendar month.
SECTION 7. EFFECTIVENESS, DURATION, AND TERMINATION
(a) This Agreement shall become effective with respect to the Portfolio
immediately upon the later of approval by a majority of the Trust's trustees who
are not parties to this Agreement or interested persons of any such party (other
than as trustees of the Trust) and, if required by applicable law, by a vote of
a majority of the outstanding voting securities of the Portfolio.
(b) This Agreement shall remain in effect with respect to the Portfolio
for a period of one year from the date of its effectiveness and shall continue
in effect for successive twelve-month periods (computed from each anniversary
date of the approval) with respect to the Portfolio; provided that such
continuance is specifically approved at least annually (i) by the Board or by
the vote of a majority of the outstanding voting securities of the Portfolio,
and, in either case, (ii) by a majority of the Trust's trustees who are not
parties to this Agreement or interested persons of any such party (other than as
trustees of the Trust); provided further, however, that if this Agreement or the
continuation of this Agreement is not approved as to a Portfolio, the Subadviser
may continue to render to that Portfolio the services described herein in the
manner and to the extent permitted by the Act and the rules and regulations
thereunder.
(c) This Agreement may be terminated at any time, without the payment
of any penalty, (i) by the Board or by a vote of a majority of the outstanding
voting interests of a Portfolio on 60 days' written notice to the Subadviser;
(ii) by the Adviser on 60 days' written notice to the Subadvisor; or (iii) by
the Subadviser on 60 days' written notice to the Trust. This Agreement shall
terminate upon assignment.
SECTION 8. ACTIVITIES OF THE SUBADVISER
Except to the extent necessary to perform its obligations hereunder,
nothing herein shall be deemed to limit or restrict the Subadviser's right, or
the right of any of the Subadviser's officers, directors or employees who may
also be a trustee, officer or employee of the Trust, or persons otherwise
affiliated persons of the Trust to engage in any other business or to devote
time and attention to the management or other aspects of any other business,
whether of a similar or dissimilar nature, or to render services of any kind to
any other corporation, trust, firm, individual or association. It is
specifically understood that officers, directors and employees of the Subadviser
and its affiliates may continue to engage in providing portfolio management
services and advice to other investment companies, whether or not registered,
and to other investment advisory clients. When other clients of the Subadviser
desire to purchase or sell a security at the same time such security is
purchased or sold for the Portfolio, such purchases and sales will, to the
extent feasible, be allocated among the Portfolio and such clients in a manner
believed by the Subadviser to be equitable to the Portfolio and such clients.
SECTION 9. LIMITATION OF INTERESTHOLDER AND TRUSTEE LIABILITY
The Trustees of the Trust and the interestholders of the Portfolio
shall not be liable for any obligations of the Trust or of the Portfolio under
this Agreement, and the Subadviser agrees that, in asserting any rights or
claims under this Agreement, it shall look only to the assets and property of
the Trust or the Portfolio to which the Subadviser's rights or claims relate in
settlement of such rights or claims, and not to the Trustees of the Trust or the
interestholders of the Portfolio.
SECTION 10. NOTICE
Any notice or other communication required to be given pursuant to this
Agreement shall be in writing or by telex and shall be effective upon receipt.
Notices and communications shall be given, if to the Trust, at:
Schroder Capital Funds (Delaware)
Two Portland Square
Portland, ME 04101
if to the Adviser, at:
Schroder Capital Management International Inc.,
787 Seventh Avenue, 29th Floor
New York, New York 10019
and if to the Subadviser, at:
Schroder Investment Management International, Ltd.
31 Gresham Street
London, U.K. EC2V 7QA
SECTION 11. MISCELLANEOUS
(a) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by all
parties hereto and, if required by applicable law, by a vote of a majority of
the outstanding voting securities of the Portfolio.
(b) This Agreement shall be governed by and shall be construed in
accordance with the laws of the State of Delaware.
(c) This Agreement may be executed by the parties hereto on any number
of counterparts, and all of the counterparts taken together shall be deemed to
constitute one and the same instrument.
(d) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.
(e) Section headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
(f) The terms "vote of a majority of the outstanding voting
securities," "interested person," "affiliated person" and "assignment" shall
have the meanings ascribed thereto in the Act.
(g) The Subadviser confirms that the Portfolio is a "Non-private
customer" as defined in the rules of the IMRO.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
SCHRODER CAPITAL FUNDS
SCHRODER CAPITAL MANAGEMENT
INTERNATIONAL, INC.
SCHRODER INVESTMENT MANAGEMENT
INTERNATIONAL, LTD
Exhibit 12
<PAGE>
SCHRODER CAPITAL FUNDS
ANNUAL REPORT
MAY 31, 1998
SCHRODER U.S. SMALLER COMPANIES PORTFOLIO
SCHRODER GLOBAL GROWTH PORTFOLIO
SCHRODER EM CORE PORTFOLIO
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS MAY 31, 1998
- - ------------------------------------------------------------------------------
To Trustees and Investors of Schroder Capital Funds
In our opinion, the accompanying statements of assets and
liabilities, including the schedules of investments, and
related statements of operations and of changes in net assets
and the financial highlights present fairly, in all material
respects, the financial position of three portfolios of
Schroder Capital Funds: Schroder U.S. Smaller Companies
Portfolio, Schroder Global Growth Portfolio and Schroder EM
Core Portfolio (collectively the "Portfolios"), at May 31,
1998, the results of their operations, the changes in their
net assets and the financial highlights for each of the
periods indicated therein, in conformity with generally
accepted accounting principles. These financial statements and
financial highlights (herein referred to as "financial
statements") are the responsibility of the Portfolios'
management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted
our audits of these financial statements in accordance with
generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at May
31, 1998, by correspondence with the custodian and brokers,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
July 21, 1998
SCHRODER CAPITAL FUNDS
152
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES MAY 31, 1998
- - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SCHRODER SCHRODER
U.S. SMALLER GLOBAL SCHRODER
COMPANIES GROWTH EM CORE
PORTFOLIO PORTFOLIO PORTFOLIO
------------- ----------- ------------
<S> <C> <C> <C>
ASSETS:
Investments (Note 2):
Investments at cost........................... $292,812,680 $2,333,587 $ 26,482,507
Net unrealized appreciation (depreciation).... 39,290,499 216,577 (2,346,374)
------------- ----------- ------------
TOTAL INVESTMENTS AT VALUE........................ 332,103,179 2,550,164 24,136,133
Cash and cash equivalents (Note 2).............. 19,665,550 604,726 2,606,408
Receivable for securities sold.................. 5,128,850 - 71,010
Receivable for forward foreign currency
contracts, net (Note 2)....................... - 6,062 -
Receivable from administrator (Notes 3 and 6)... - 71,973
Receivable for dividends, tax reclaims and
interest...................................... 140,278 7,886 139,532
Organization costs, net of amortization (Note
2)............................................ 16,078 851 859
------------- ----------- ------------
TOTAL ASSETS...................................... 357,053,935 3,241,662 26,953,942
------------- ----------- ------------
LIABILITIES:
Payable for securities purchased................ 975,262 8,947 131,306
Payable to adviser (Note 3)..................... 184,522 - 13,351
Payable to other related parties (Note 3)....... 90,730 69,209 78,277
Accrued expenses and other liabilities.......... - 974 973
------------- ----------- ------------
TOTAL LIABILITIES................................. 1,250,514 79,130 223,907
------------- ----------- ------------
NET ASSETS........................................ $355,803,421 $3,162,532 $ 26,730,035
------------- ----------- ------------
------------- ----------- ------------
</TABLE>
See Notes to Financial Statements. SCHRODER CAPITAL FUNDS
153
<PAGE>
STATEMENTS OF OPERATIONS FOR THE PERIOD ENDED MAY 31, 1998
- - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SCHRODER U.S.
SMALLER SCHRODER SCHRODER
COMPANIES GLOBAL GROWTH EM CORE
PORTFOLIO PORTFOLIO(a) PORTFOLIO(b)
------------- ------------- -------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividend income(c).................... $ 1,309,477 $ 15,815 $ 282,910
Interest income....................... 709,293 17,416 153,053
------------- ------------- -------------
TOTAL INVESTMENT INCOME................. 2,018,770 33,231 435,963
------------- ------------- -------------
EXPENSES:
Advisory (Note 3)..................... 1,419,439 8,177 155,546
Administration (Note 3)............... -- 2,453 15,555
Subadministration (Note 3)............ 177,430 15,685 14,658
Interestholder recordkeeping (Note
3).................................. 12,241 7,614 7,208
Custody............................... 30,609 17,419 105,578
Accounting (Note 3)................... 40,000 37,742 40,323
Legal................................. 31,723 342 3,435
Audit................................. 34,169 17,550 20,250
Trustees' fees........................ 6,999 60 599
Amortization of organization costs
(Note 2)............................ 5,017 123 115
Miscellaneous......................... 26,575 3,783 7,532
------------- ------------- -------------
TOTAL EXPENSES.......................... 1,784,202 110,948 370,799
Fees waived and expenses reimbursed
(Note 6)............................ - (97,061) (145,187)
------------- ------------- -------------
NET EXPENSES............................ 1,784,202 13,887 225,612
------------- ------------- -------------
NET INVESTMENT INCOME (LOSS)............ 234,568 19,344 210,351
------------- ------------- -------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
FROM INVESTMENTS:
Net Realized Gain (Loss) from:
Securities............................ 6,355,034 (34,123) (490,158)
Foreign currency...................... - 3,791 (28,826)
------------- ------------- -------------
Net Realized Gain (Loss) from
Investments...................... 6,355,034 (30,332) (518,984)
Net Change in Unrealized Appreciation
(Depreciation) from:
Securities............................ 28,258,572 216,577 (2,346,374)
Foreign currency...................... - 6,630 (188)
------------- ------------- -------------
Net Change in Unrealized
Appreciation (Depreciation) from
Investments...................... 28,258,572 223,207 (2,346,562)
------------- ------------- -------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
FROM INVESTMENTS....................... 34,613,606 192,875 (2,865,546)
------------- ------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.............. $ 34,848,174 $ 212,219 $ (2,655,195)
------------- ------------- -------------
------------- ------------- -------------
(a) Commenced operations on October 15, 1997.
(b) Commenced operations on October 30, 1997.
(c) Net of unrecoverable foreign
withholding taxes of................... $ - $ 2,363 $ 24,069
</TABLE>
See Notes to Financial Statements. SCHRODER CAPITAL FUNDS
154
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SCHRODER U.S. SCHRODER
SMALLER COMPANIES GLOBAL GROWTH
PORTFOLIO (a) PORTFOLIO (b)
------------------- ---------------
<S> <C> <C>
NET ASSETS, AUGUST 15, 1996.......................................................... $ - $ -
------------------- ---------------
------------------- ---------------
OPERATIONS:
Net investment income (loss)....................................................... 22,137 -
Net realized gain (loss) from investments sold..................................... 735,049 -
Net change in unrealized appreciation (depreciation) from investments.............. 2,952,095 -
------------------- ---------------
Net increase (decrease) in net assets resulting from operations.................... 3,709,281 -
------------------- ---------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS:
Contributions...................................................................... 26,247,304 -
Withdrawals........................................................................ (1,027,108) -
------------------- ---------------
Net increase (decrease) from transactions in investors' beneficial interests....... 25,220,196 -
------------------- ---------------
Net increase (decrease) in net assets.............................................. 28,929,477 -
------------------- ---------------
NET ASSETS, OCTOBER 31, 1996......................................................... 28,929,477 -
------------------- ---------------
OPERATIONS:
Net investment income (loss)....................................................... 77,349 -
Net realized gain (loss) from investments sold..................................... 2,311,789 -
Net change in unrealized appreciation (depreciation) from investments.............. 8,079,833 -
------------------- ---------------
Net increase (decrease) in net assets resulting from operations.................... 10,468,971 -
------------------- ---------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS:
Contributions...................................................................... 69,106,539 -
Withdrawals........................................................................ (5,119,729) -
------------------- ---------------
Net increase (decrease) from transactions in investors' beneficial interests....... 63,986,810 -
------------------- ---------------
Net increase (decrease) in net assets.............................................. 74,455,781 -
------------------- ---------------
NET ASSETS, MAY 31, 1997............................................................. 103,385,258 -
------------------- ---------------
OPERATIONS:
Net investment income (loss)....................................................... 234,568 19,344
Net realized gain (loss) from investments sold..................................... 6,355,034 (30,332)
Net change in unrealized appreciation (depreciation) from investments.............. 28,258,572 223,207
------------------- ---------------
Net increase (decrease) in net assets resulting from operations.................... 34,848,174 212,219
------------------- ---------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS:
Contributions...................................................................... 228,163,060 3,070,201
Withdrawals........................................................................ (10,593,071) (119,888)
------------------- ---------------
Net increase (decrease) from transactions in investors' beneficial interests....... 217,569,989 2,950,313
------------------- ---------------
Net increase (decrease) in net assets.............................................. 252,418,163 3,162,532
------------------- ---------------
NET ASSETS, MAY 31, 1998............................................................. $ 355,803,421 $ 3,162,532
------------------- ---------------
------------------- ---------------
<CAPTION>
SCHRODER
EM CORE
PORTFOLIO(c)
-------------
<S> <C>
NET ASSETS, AUGUST 15, 1996.......................................................... $ -
-------------
-------------
OPERATIONS:
Net investment income (loss)....................................................... -
Net realized gain (loss) from investments sold..................................... -
Net change in unrealized appreciation (depreciation) from investments.............. -
-------------
Net increase (decrease) in net assets resulting from operations.................... -
-------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS:
Contributions......................................................................
Withdrawals........................................................................ -
-------------
Net increase (decrease) from transactions in investors' beneficial interests....... -
-------------
Net increase (decrease) in net assets.............................................. -
-------------
NET ASSETS, OCTOBER 31, 1996......................................................... -
-------------
OPERATIONS:
Net investment income (loss)....................................................... -
Net realized gain (loss) from investments sold..................................... -
Net change in unrealized appreciation (depreciation) from investments.............. -
-------------
Net increase (decrease) in net assets resulting from operations.................... -
-------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS:
Contributions......................................................................
Withdrawals........................................................................
-------------
Net increase (decrease) from transactions in investors' beneficial interests....... -
-------------
Net increase (decrease) in net assets.............................................. -
-------------
NET ASSETS, MAY 31, 1997............................................................. -
-------------
OPERATIONS:
Net investment income (loss)....................................................... 210,351
Net realized gain (loss) from investments sold..................................... (518,984)
Net change in unrealized appreciation (depreciation) from investments.............. (2,346,562)
-------------
Net increase (decrease) in net assets resulting from operations.................... (2,655,195)
-------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS:
Contributions...................................................................... 39,419,804
Withdrawals........................................................................ (10,034,574)
-------------
Net increase (decrease) from transactions in investors' beneficial interests....... 29,385,230
-------------
Net increase (decrease) in net assets.............................................. 26,730,035
-------------
NET ASSETS, MAY 31, 1998............................................................. $26,730,035
-------------
-------------
</TABLE>
(a) Commenced operations on August 15, 1996.
(b) For the period October 15, 1997 (commencement of operations) through May 31,
1998.
(c) For the period October 30, 1997 (commencement of operations) through May 31,
1998.
See Notes to Financial Statements. SCHRODER CAPITAL FUNDS
155
<PAGE>
FINANCIAL HIGHLIGHTS
- - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIO TO AVERAGE
NET ASSETS (a)
---------------------------------------------
NET AVERAGE
INVESTMENT GROSS PORTFOLIO COMMISSION
INCOME (LOSS) NET EXPENSES EXPENSES TURNOVER RATE RATE (b)
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
SCHRODER U.S. SMALLER COMPANIES PORTFOLIO
- - -----------------------------------------------------------------------------------------------------------------------
June 1, 1997 to May 31, 1998.......... 0.10% 0.75% 0.75% 54.98% $0.0582
November 1, 1996 to May 31, 1997...... 0.22% 0.85% 0.95% 34.45% 0.0584
August 15, 1996(c) to October 31,
1996................................ 0.50% 0.85% 1.31% 17.30% 0.0562
SCHRODER GLOBAL GROWTH PORTFOLIO
- - -----------------------------------------------------------------------------------------------------------------------
October 15, 1997(c) to May 31, 1998... 1.18% 0.85% 6.81% 13.82% $0.0355
SCHRODER EM CORE PORTFOLIO
- - -----------------------------------------------------------------------------------------------------------------------
October 30, 1997(c) to May 31, 1998... 1.35% 1.45% 2..38% 22.97% $0.0039
</TABLE>
(a) Annualized.
(b) Amount represents the average commission per share paid to brokers on the
purchase and sale of equity securities on which commissions are charged.
(c) Commencement of operations.
See Notes to Financial Statements. SCHRODER CAPITAL FUNDS
156
<PAGE>
NOTES TO FINANCIAL STATEMENTS MAY 31, 1998
- - ------------------------------------------------------------------------------
NOTE 1. ORGANIZATION
Schroder Capital Funds ("Schroder Core") was organized as a Delaware business
trust on September 7, 1995. Schroder Core, which is registered as an open-end,
management investment company under the Investment Company Act of 1940 (the
"Act"), currently has eight investment portfolios. Included in this report are
Schroder U.S. Smaller Companies Portfolio, Schroder Global Growth Portfolio and
Schroder EM Core Portfolio (each a "Portfolio" and collectively the
"Portfolios"). Schroder U.S. Smaller Companies Portfolio is a diversified
portfolio that commenced operations on August 15, 1996. Schroder Global Growth
Portfolio and Schroder EM Core Portfolio are non-diversified portfolios that
commenced operations on October 15, 1997 and October 30, 1997, respectively.
Under its Trust Instrument, Schroder Core is authorized to issue an unlimited
number of interests without par value. Interests in the Portfolios are sold in
private placement transactions without any sales charges to qualified investors,
including open-end, management investment companies.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with generally accepted
accounting principles, that require management to make certain estimates and
assumptions which 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 summarizes the significant accounting policies of the
Portfolios:
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, or listed securities for which no trade is
reported on the valuation date, are valued at the most recent reported
mid-market price. Prices used for valuations generally are provided by
independent pricing services. Domestic short-term investments, having a maturity
of 60 days or less, generally are valued at amortized cost which approximates
market value. Foreign currency denominated short-term investments are valued at
local amortized cost and then translated into U.S. dollars. 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 Schroder Core
Board of Trustees. Fair valued securities represented approximately 1.07% of the
Schroder EM Core Portfolio's total investments at May 31, 1998.
CASH EQUIVALENTS--The Portfolios consider all balances and the related interest
income in money market sweep vehicles to be cash equivalents.
SECURITY TRANSACTIONS AND INVESTMENT INCOME--Investment transactions are
accounted for on trade date. Dividend income is recorded on ex-dividend date.
With respect to dividends on foreign securities, certain instances may arise
where a Portfolio is not notified of a dividend until after the ex-dividend date
has passed. In these instances a dividend is recorded as soon as the Portfolio
is informed of the dividend. Dividend income is recorded net of unrecoverable
withholding tax. Interest income, including amortization of discount or premium,
is recorded as earned. Identified cost of investments sold is used to determine
realized gain and loss for both financial statement and federal income tax
purposes. Foreign dividend and interest income amounts and realized capital gain
and loss are converted to U.S. dollar equivalents using foreign exchange rates
in effect at the date of the transactions.
Foreign currency amounts are translated into U.S. dollars at the mean of the bid
and asked prices of such currencies against U.S. dollars as follows: (i) assets
and liabilities at the rate of exchange at the end of the respective period; and
(ii) purchases and sales of securities and income and expenses at the rate of
exchange prevailing on the dates of such transactions. The portion of the
results of operations arising from changes in the exchange rates and the portion
due to fluctuations arising from changes in the market prices of securities are
not isolated. Such fluctuations are included with the net realized and
unrealized gain or loss on investments.
The Schroder Global Growth Portfolio and Schroder EM Core Portfolio may enter
into forward contracts to purchase or sell foreign currencies to protect 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 Portfolios entering into offsetting commitments.
REPURCHASE AGREEMENTS--The Portfolios may invest in repurchase agreements. The
Portfolios through their custodian, receive 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 Portfolios 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 in proportion to each Portfolio's net assets.
ORGANIZATIONAL COSTS--Costs incurred by each 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 to each of the Portfolios. Pursuant to an Investment
Advisory Agreement, SCMI is entitled to receive from Schroder U.S. Smaller
Companies Portfolio, Schroder Global Growth Portfolio and Schroder EM Core
Portfolio an annual fee, payable monthly, of 0.60%, 0.50% and 1.00%,
respectively, of each Portfolio's average daily net assets.
SCHRODER CAPITAL FUNDS
157
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) MAY 31, 1998
- - ------------------------------------------------------------------------------
NOTE 3. INVESTMENT ADVISORY AND OTHER SERVICES (CONCLUDED)
ADMINISTRATOR AND SUBADMINISTRATOR--On behalf of the Portfolios, Schroder Core
has entered into an Administration Agreement with Schroder Fund Advisors Inc.
("SFA") which entitles SFA to receive from Schroder Global Growth Portfolio and
Schroder EM Core Portfolio an annual fee, payable monthly, at a rate of 0.15%
and 0.10%, respectively, of each Portfolio's average daily net assets. In
addition, Schroder Core has entered into a Subadministration Agreement with
Forum Administrative Services, LLC ("FAdS") under which FAdS is entitled to
receive from Schroder U.S. Smaller Companies Portfolio, Schroder Global Growth
Portfolio and Schroder EM Core Portfolio an annual fee, payable monthly, of
0.075% of each Portfolio's average daily net assets subject to an annual minimum
of $25,000.
OTHER SERVICE PROVIDERS--Forum Accounting Services, LLC ("FAcS") performs
portfolio accounting services for the Schroder U.S. Smaller Companies Portfolio,
Schroder Global Growth Portfolio and Schroder EM Core Portfolio and is entitled
to receive compensation for those services in the amounts of $36,000, $60,000
and $60,000 per year, respectively, plus certain other charges, based upon the
number and types of portfolio transactions. FAcS also provides interestholder
recordkeeping services to the Portfolios for which it receives, from Schroder
Core, $12,000 per year per Portfolio plus certain other charges.
NOTE 4. PURCHASES AND SALES OF SECURITIES
The cost of securities purchased and the proceeds from sales of securities
(excluding short-term securities) for the period ended May 31, 1998 were as
follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
------------------ ------------------
<S> <C> <C>
Schroder U.S. Smaller Companies
Portfolio.............................. $ 321,269,356 $ 118,490,742
Schroder Global Growth Portfolio........ 2,816,305 448,595
Schroder EM Core Portfolio.............. 31,575,645 4,697,232
</TABLE>
For federal income tax purposes, the tax basis of investment securities owned,
the aggregate gross unrealized appreciation and the aggregate gross unrealized
depreciation as of May 31, 1998 were as follows:
<TABLE>
<CAPTION>
TAX UNREALIZED UNREALIZED NET APPRECIATION
BASIS APPRECIATION DEPRECIATION (DEPRECIATION)
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Schroder U.S. Smaller Companies
Portfolio.............................. $ 292,802,767 $ 54,156,312 $ 14,855,900 $ 39,300,412
Schroder Global Growth Portfolio........ 2,333,656 359,016 142,508 216,508
Schroder EM Core Portfolio.............. 26,526,803 1,321,048 3,711,718 (2,390,670)
</TABLE>
NOTE 5. FEDERAL TAXES
The Portfolios are not required to pay federal income taxes on their net
investment income and net capital gain as they are treated as partnerships for
federal income tax purposes. All interest, dividends, gain and loss of the
Portfolios are deemed to have been "passed through" to the interestholders in
proportion to their holdings of the Portfolios, regardless of whether such
interest, dividends or gain have been distributed by the Portfolios.
Under the applicable foreign tax law, a withholding tax may be imposed on
interest, dividends, and capital gains at various rates.
SCHRODER CAPITAL FUNDS
158
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONCLUDED) MAY 31, 1998
- - ------------------------------------------------------------------------------
NOTE 6. WAIVER OF FEES AND REIMBURSEMENT OF EXPENSES
For the period ended May 31, 1998, Schroder Core's service providers voluntarily
waived and/or reimbursed the following fees or expenses:
<TABLE>
<CAPTION>
EXPENSES
FEES WAIVED REIMBURSED
------------------------------- ------------------
SCMI SFA FAdS SFA
-------- ------ ------- ------------------
<S> <C> <C> <C> <C>
Schroder Global Growth Portfolio........ $ 8,177 $ 2,453 $ 14,458 $ 71,973
Schroder EM Core Portfolio.............. 142,195 -- 2,992 --
</TABLE>
NOTE 7. CONCENTRATION OF RISK
Schroder Global Growth Portfolio and Schroder EM Core Portfolio may invest more
than 25% of their total assets in issuers located in any one country. To the
extent that they do so, the Portfolios are susceptible to a range of factors
that could adversely affect that country, including political and economic
developments and foreign exchange-rate fluctuations. As a result of investing
substantially in one country, the value of a Portfolio's assets may fluctuate
more widely than the value of shares of a comparable fund with a lesser degree
of geographic concentration. Schroder Global Growth Portfolio and Schroder EM
Core Portfolio invest in countries with limited or developing capital markets.
Investments in these markets may involve greater risks than investments in more
developed markets.
SCHRODER CAPITAL FUNDS
159
<PAGE>
SCHEDULES OF INVESTMENTS MAY 31, 1998
- - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SCHRODER U.S. SMALLER COMPANIES PORTFOLIO
- - -----------------------------------------------------------------
COMMON STOCK (93.3%)
BASIC MATERIALS (3.1%)
98,250 AMCOL International Corp. $ 1,350,938
110,200 Ball Corp. 4,346,013
87,500 Ferro Corp. 2,504,688
118,300 Galey & Lord, Inc.(a) 2,927,925
---------------
11,129,564
---------------
CAPITAL GOODS/CONSTRUCTION (6.8%)
69,800 Aeroquip-Vickers, Inc. 4,310,150
159,200 Aftermarket Technology Corp.(a) 2,726,300
128,600 Donaldson Co., Inc. 2,805,088
58,800 Essex International, Inc.(a) 1,444,275
92,200 Harsco Corp. 4,022,225
97,000 Tracor, Inc.(a) 3,831,500
111,400 Triangle Pacific Corp.(a) 4,915,530
---------------
24,055,068
---------------
CONSUMER CYCLICAL (22.7%)
126,000 800-JR CIGAR, Inc.(a) 2,504,250
96,300 American Italian Pasta Co.(a) 3,454,763
140,500 Bally Total Fitness Holding Corp.(a) 4,531,125
102,900 Blyth Industries, Inc.(a) 3,157,744
39,200 Ethan Allen Interiors, Inc. 1,972,250
175,950 Fossil, Inc.(a) 3,403,540
83,300 Furniture Brands International, Inc.(a) 2,457,350
124,600 Interface, Inc. 4,882,763
121,900 Knoll, Inc.(a) 3,847,472
138,600 Media Arts Group, Inc.(a) 2,694,038
217,900 Musicland Stores Corp.(a) 3,145,931
54,000 Pier 1 Imports, Inc. 1,299,375
196,200 Pillowtex Corp. 9,172,350
51,337 Promus Hotel Corp.(a) 2,220,325
174,600 ResortQuest International, Inc.(a) 2,651,738
52,450 Robert Half International, Inc.(a) 2,655,281
84,300 Ross Stores, Inc. 3,719,738
188,475 Sonic Corp.(a) 3,899,077
92,400 Stage Stores, Inc.(a) 4,308,150
138,000 Stanley Furniture Co., Inc.(a) 2,794,500
106,200 Trans World Entertainment Corp.(a) 3,836,475
102,500 Trendwest Resorts, Inc.(a) 1,819,375
188,200 WestPoint Stevens, Inc.(a) 6,163,550
---------------
80,591,160
---------------
CONSUMER STAPLES (5.9%)
80,800 Earthgrains Co. 4,267,250
57,200 Henry Schein, Inc.(a) 2,202,200
76,900 International Home Foods, Inc.(a) 2,085,913
142,200 Keebler Foods Co.(a) 4,132,687
93,600 Landry's Seafood Restaurants, Inc.(a) 2,120,630
80,100 Richfood Holdings, Inc. 1,957,444
69,300 Suiza Foods Corp.(a) 4,049,717
---------------
20,815,841
---------------
ENERGY (6.2%)
32,600 Atwood Oceanics, Inc.(a) 1,687,050
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SCHRODER U.S. SMALLER COMPANIES PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
COMMON STOCK (continued)
ENERGY (continued)
<TABLE>
<C> <S> <C>
94,700 B.J. Service Co.(a) $ 3,095,506
50,800 Cooper Cameron Corp.(a) 3,022,600
85,000 Kuhlman Corp. 3,591,250
178,672 Ocean Energy, Inc.(a) 3,584,607
99,300 Tosco Corp. 3,152,775
148,900 Varco International, Inc.(a) 3,880,705
---------------
22,014,493
---------------
FINANCIAL (11.8%)
182,900 Allied Capital Corp. 4,435,325
116,400 AmerUs Life Holdings, Inc. 3,724,800
34,600 Annuity & Life Re Holdings(a) 789,312
73,800 Bank United Corp. 3,690,000
58,200 CMAC Investment Corp. 3,521,100
73,975 Commercial Federal Corp. 2,464,292
50,200 Cullen/Frost Bankers, Inc. 2,720,213
47,200 Duff & Phelps Credit Rating Co. 2,714,000
77,700 FBL Financial Group, Inc. 2,180,455
65,500 Fremont General Corp. 3,745,781
62,600 HealthCare Financial Partners, Inc.(a) 3,075,225
80,600 Mutual Risk Management Ltd. 2,826,038
89,150 North Fork BanCorp, Inc. 2,145,172
82,639 Patriot American Hospitality, Inc. 1,978,176
99,900 Waddell & Reed Financial, Inc. 2,310,187
---------------
42,320,076
---------------
HEALTH CARE (6.1%)
142,100 Centennial HealthCare Corp.(a) 2,966,337
112,500 Coventry Health Care, Inc.(a) 1,631,250
32,000 Express Scripts, Inc.(a) 2,462,000
156,700 Haemonetics Corp.(a) 2,389,675
69,600 Health Care & Retirement Corp.(a) 2,692,650
135,500 Invacare Corp. 3,573,813
74,500 Matria Healthcare, Inc.(a) 302,656
43,800 PSS World Medical, Inc.(a) 547,500
85,300 Protein Design Labs, Inc.(a) 2,143,163
106,400 Wesley Jessen VisionCare, Inc.(a) 2,872,800
---------------
21,581,844
---------------
TECHNOLOGY (9.6%)
171,900 Antec Corp.(a) 3,292,966
100,300 EG&G, Inc. 3,159,450
70,900 Dallas Semiconductor Corp. 2,388,443
112,700 Evans & Sutherland Computer Corp.(a) 2,831,588
151,600 INTERSOLV(a) 2,179,250
270,100 MAPICS, Inc.(a) 4,760,513
149,500 MicroTouch Systems, Inc.(a) 2,392,000
205,900 Pairgain Technologies, Inc.(a) 3,217,188
31 Structural Dynamics Research Corp.(a) 785
118,500 Symbol Technologies, Inc. 4,169,718
60,500 Thomas & Betts Corp. 3,232,969
108,400 Wang Laboratories, Inc.(a) 2,601,600
---------------
34,226,470
---------------
</TABLE>
See Notes to Financial Statements SCHRODER CAPITAL FUNDS
160
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1998
- - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -------------------------------------------------------------------------
SCHRODER U.S. SMALLER COMPANIES PORTFOLIO (concluded)
- - -------------------------------------------------------------------------
</TABLE>
COMMON STOCK (continued)
<TABLE>
<C> <S> <C>
TRANSPORTATION/SERVICES/MISCELLANEOUS (21.1%)
99,300 Alexandria Real Estate Equities, Inc. $ 3,146,567
100,400 Atlas Air, Inc.(a) 3,551,650
102,500 C.H. Robinson Worldwide, Inc. 2,370,312
71,300 CNF Transportation, Inc. 2,927,756
7,700 CORT Business Services Corp.(a) 301,261
161,400 Career Education Corp.(a) 4,014,824
20,000 Cavanaughs Hospitality Corp.(a) 273,750
121,950 Comair Holdings, Inc. 3,246,919
128,800 Cornell Corrections, Inc.(a) 2,833,600
102,400 Eastern Environmental Services, Inc.(a) 2,918,400
177,800 Group Maintenance America Corp.(a) 3,333,750
181,100 Ha-Lo Industries, Inc.(a) 5,602,780
112,400 INSpire Insurance Solutions, Inc.(a) 3,674,075
161,800 Ivex Packaging Corp.(a) 3,751,737
80,900 Jacor Communications, Inc.(a) 4,277,588
942,600 Laidlaw Environmental Services, Inc.(a) 3,652,575
83,800 Mac-Gray Corp.(a) 1,204,625
134,700 Manufactured Home Communities, Inc. 3,359,081
161,700 Mesaba Holdings, Inc.(a) 3,516,975
168,800 RCM Technologies, Inc.(a) 3,502,600
83,900 RemedyTemp, Inc.(a) 2,443,588
161,300 Select Appointments Holdings Public Ltd.
Co. 4,657,537
107,300 StaffMark, Inc.(a) 3,943,275
93,500 Superior Services, Inc.(a) 2,863,438
---------------
75,368,663
---------------
TOTAL INVESTMENTS (93.3%)
(COST $292,812,680) 332,103,179
OTHER ASSETS LESS LIABILITIES (6.7%) 23,700,242
---------------
TOTAL NET ASSETS (100.0%) $ 355,803,421
---------------
---------------
- - -----------------------------------------------------------------
SCHRODER GLOBAL GROWTH PORTFOLIO
- - -----------------------------------------------------------------
AUSTRALIA (2.1%)
COMMON STOCK
3,000 Australia & New Zealand Banking Group
Ltd.
FINANCE $ 21,308
1,000 Brambles Industries Ltd.
SERVICES 20,293
6,000 Foster's Brewing Group Ltd.
CONSUMER NON-DURABLES 13,040
2,000 Woodside Petroleum Ltd.
MATERIALS 11,499
---------------
66,140
---------------
BELGIUM (0.3%)
COMMON STOCK
41 Grupo Bruxelles Lambert
FINANCE 9,016
---------------
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SCHRODER GLOBAL GROWTH PORTFOLIO (continued)
- - -----------------------------------------------------------------
CANADA (4.8%)
COMMON STOCK
1,690 Amber Energy, Inc.
ENERGY $ 16,551
2,000 Inco Ltd.
MATERIALS 20,550
1,310 National Bank of Canada
FINANCE 26,740
640 Northern Telecom Ltd.
SERVICES 41,039
930 Precision Drilling Corp.
ENERGY 19,495
3,530 Stelco, Inc.
MATERIALS 28,871
---------------
153,246
---------------
CHILE, REPUBLIC OF (0.5%)
COMMON STOCK
670 Compania de Telecomunicacion de Chile SA
ADR
SERVICES 14,866
---------------
FRANCE (11.0%)
COMMON STOCK
200 Accor SA
SERVICES 54,857
125 Alcatel Alsthom
CAPITAL EQUIPMENT 26,744
320 Canal Plus
SERVICES 58,087
220 Elf Aquitaine
ENERGY 30,558
250 Groupe Danone
CONSUMER NON-DURABLES 67,318
350 Suez Lyonnaise des Eaux
MULTI-INDUSTRY 59,730
250 Vivendi
MULTI-INDUSTRY 50,228
---------------
347,522
---------------
GERMANY (8.3%)
COMMON STOCK
145 Allianz AG
FINANCE 45,872
640 Deutsche Bank AG
FINANCE 55,140
500 Fresenius Medical Care AG
MATERIALS 33,206
1,220 Hoechst AG
MATERIALS 60,904
69 Mannesmann AG
CAPITAL EQUIPMENT 67,537
---------------
262,659
---------------
</TABLE>
See Notes to Financial Statements SCHRODER CAPITAL FUNDS
161
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1998
- - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SCHRODER GLOBAL GROWTH PORTFOLIO (continued)
- - -----------------------------------------------------------------
ITALY (3.7%)
COMMON STOCK
35,040 Banca di Roma(a)
FINANCE $ 72,302
5,920 Telecom Italia SpA
SERVICES 44,767
---------------
117,069
---------------
JAPAN (7.8%)
COMMON STOCK
1,000 Bridgestone Corp.
MATERIALS 22,805
1,000 Credit Saison Co. Ltd.
FINANCE 20,063
1,000 Fuji Photo Film Co.
CAPITAL EQUIPMENT 33,847
2,000 Matsushita Electric Industrial Co. Ltd.
CAPITAL EQUIPMENT 31,321
2,000 Mitsui Fudosan Co. Ltd.
FINANCE 16,180
2,000 Sekisui House Ltd.
SERVICES 14,795
2,000 Takeda Chemical Industries
CONSUMER DURABLES 51,673
8,000 Teijin Ltd.
MATERIALS 24,133
1,000 Yamatake-Honeywell Co. Ltd.
CAPITAL EQUIPMENT 10,104
5,000 Yasuda Fire & Marine Insurance
SERVICES 21,578
---------------
246,499
---------------
KOREA, REPUBLIC OF (1.0%)
COMMON STOCK
3,000 Daewoo Heavy Industries
CAPITAL EQUIPMENT 10,295
1,100 LG Electronics
CONSUMER DURABLES 10,317
325 Samsung Electronics Co.
CONSUMER DURABLES 12,353
---------------
32,965
---------------
MEXICO (0.8%)
COMMON STOCK
5,000 Grupo Carso SA de CV
MULTI-INDUSTRY 25,323
---------------
NETHERLANDS (7.2%)
COMMON STOCK
2,870 ABN Amro Holdings NV
SERVICES 69,568
460 Aegon NV
FINANCE 36,862
560 Baan Co. NV(a)
SERVICES 25,950
1,340 Gucci Group NV-NY Shares
CONSUMER NON-DURABLES 60,803
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SCHRODER GLOBAL GROWTH PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
NETHERLANDS (continued)
COMMON STOCK (continued)
<TABLE>
<C> <S> <C>
350 Philips Electronics NV
CAPITAL EQUIPMENT $ 33,290
---------------
226,473
---------------
SINGAPORE (0.9%)
COMMON STOCK
2,600 Development Bank of Singapore Ltd.(a)
FINANCE 15,687
1,552 Singapore Press Holdings Ltd.
SERVICES 12,702
---------------
28,389
---------------
SPAIN (3.6%)
COMMON STOCK
3,110 Endesa SA
ENERGY 74,608
851 Telefonica SA
SERVICES 38,075
---------------
112,683
---------------
SWEDEN (1.5%)
COMMON STOCK
1,130 Svenska Handelsbanken
SERVICES 47,619
RIGHTS
1,130 Fastighets AB Balder(a)
SERVICES 1,097
---------------
48,716
---------------
SWITZERLAND (2.8%)
COMMON STOCK
41 Nestle SA
CONSUMER NON-DURABLES 87,984
---------------
UNITED KINGDOM (9.1%)
COMMON STOCK
4,950 British Energy plc
ENERGY 45,609
3,590 Cable & Wireless plc
SERVICES 40,572
4,140 EMI Group plc
CONSUMER NON-DURABLES 34,972
3,570 Enterprise Oil plc
ENERGY 33,039
3,140 Lloyds TSB Group plc
FINANCE 45,548
5,510 LucasVarity plc
CAPITAL EQUIPMENT 24,261
8,600 Rolls-Royce plc(a)
CAPITAL EQUIPMENT 40,917
595 Zeneca Group plc
CONSUMER DURABLES 24,151
---------------
289,069
---------------
</TABLE>
See Notes to Financial Statements SCHRODER CAPITAL FUNDS
162
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1998
- - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -------------------------------------------------------------------------
SCHRODER GLOBAL GROWTH PORTFOLIO (concluded)
- - -------------------------------------------------------------------------
UNITED STATES OF AMERICA (15.2%)
COMMON STOCK
240 Allstate Corp.
SERVICES $ 22,590
320 American Home Products Corp.
CONSUMER NON-DURABLES 15,460
275 American International Group, Inc.
FINANCE 34,048
260 BankAmerica Corp.
FINANCE 21,499
230 Bristol-Myers Squibb Co.
CONSUMER NON-DURABLES 24,725
375 Cisco Systems, Inc.
CONSUMER DURABLES 28,359
503 Federal Home Loan Mortgage Corp.
FINANCE 22,887
585 Gap, Inc.
CONSUMER DURABLES 31,590
290 General Electric Co.
CONSUMER DURABLES 24,179
420 McGraw-Hill Cos., Inc.
SERVICES 32,838
200 Merck & Co., Inc.
CONSUMER NON-DURABLES 23,413
370 Procter & Gamble Co.
CONSUMER NON-DURABLES 31,057
700 Rite Aid Corp.
CONSUMER NON-DURABLES 25,068
430 Sun Microsystems, Inc.
CONSUMER DURABLES 17,227
310 Textron, Inc.
CAPITAL EQUIPMENT 22,998
405 Travelers Group, Inc.
SERVICES 24,705
325 United Technologies Corp.
CAPITAL EQUIPMENT 30,550
420 Wal-Mart Stores, Inc.
CONSUMER NON-DURABLES 23,178
245 Xerox Corp.
CAPITAL EQUIPMENT 25,174
---------------
481,545
---------------
TOTAL INVESTMENTS (80.6%)
(COST $2,333,587) 2,550,164
OTHER ASSETS LESS LIABILITIES (19.4%) 612,368
---------------
TOTAL NET ASSETS (100.0%) $ 3,162,532
---------------
---------------
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
CONTRACT TO SELL
</TABLE>
<TABLE>
<CAPTION>
CONTRACT UNDERLYING FACE UNREALIZED
DATE CURRENCY UNITS AMOUNT OF VALUE APPRECIATION
- - --------- ------------ --------- --------------- ------------
<S> <C> <C> <C> <C>
6/19/98 Japanese Yen 11,500,000 $(82,990) $6,740
</TABLE>
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SCHRODER EM CORE PORTFOLIO
- - -----------------------------------------------------------------
ARGENTINA (3.7%)
COMMON STOCK
40,100 Astra Cia Argentina de Petroleo SA
ENERGY $ 65,797
3,877 Banco de Galicia y Buenos Aires SA de CV
ADR
FINANCE 79,478
8,500 Compania Naviera Perez Companc SA
ENERGY 47,113
3,200 Cresud SA ADR(a)
CONSUMER NON-DURABLES 57,000
900 Disco SA ADR(a)
CONSUMER NON-DURABLES 31,163
17,100 IRSA Inversiones y Representaciones S.A.
FINANCE 60,905
3,500 Telecom Argentina ADR
SERVICES 108,500
5,700 Telefonica de Argentina SA ADR
SERVICES 185,607
11,100 YPF Sociedad Anonima ADR
ENERGY 344,794
---------------
980,357
---------------
BOTSWANA (0.5%)
COMMON STOCK
90,000 Sechaba Ord
CONSUMER NON-DURABLES 144,860
---------------
BRAZIL (14.5%)
COMMON STOCK
7,800 Aracruz Celulose SA ADR
SERVICES 105,300
24,300 Centrais Electricas Brasileiras SA
Electrobras
ENERGY 433,104
200,000 Cia Cimento Portland Itau
MATERIALS 36,515
10,769 Cia Ener de Minas Gerais ADR
ENERGY 352,525
11,200 Companhia Brasileira de Distribuicao
Grupo Pao de Acucar
CONSUMER NON-DURABLES 261,800
7,800 Companhia Paranaense de Energia-Copel
ENERGY 77,512
12,400 Petrol Brasileiro SA--Petrobas
ENERGY 242,570
8,400 Telecomunicacoes Brasileiras SA Telebras
ADR
SERVICES 895,650
1,040,000 Telecomunicacoes de Sao Paulp SA--Telesp
SERVICES 153,712
590,000 Telecomunicacoes do Parana SA--Telepar
SERVICES 212,875
590,000 Telepar Tel Parana(a)
SERVICES 80,021
1,040,000 Telesp Tel Sao(a)
SERVICES 62,380
8,300 Unibanco-Uniao Banco
FINANCE 259,894
</TABLE>
See Notes to Financial Statements SCHRODER CAPITAL FUNDS
163
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1998
- - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SCHRODER EM CORE PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
BRAZIL (continued)
<TABLE>
<C> <S> <C>
PREFERRED STOCK
108,000 Banco Itau SA PN
FINANCE $ 64,789
5,540,000 Centrais Eletricas Brasileiras SA
Electrobras
ENERGY 184,474
15,000 Companhia Vale do Rio Doce
ENERGY 306,473
770,000 Petrol Brasileiro--Petrobras
ENERGY 150,626
---------------
3,880,220
---------------
CHILE, REPUBLIC OF (3.9%)
COMMON STOCK
10,200 Banco BHIF
FINANCE 154,275
10,800 Chilectra SA
ENERGY 263,026
5,500 Compania Cervecerias Unidas SA
CONSUMER NON-DURABLES 132,000
13,200 Compania de Telecomunicacion de Chile SA
ADR
SERVICES 292,875
9,900 Distribucion y Servico
SERVICES 156,544
5,100 Quinenco SA ADR
SERVICES 48,450
---------------
1,047,170
---------------
CHINA, PEOPLES REPUBLIC OF (0.7%)
COMMON STOCK
6,000 Huaneng Power International, Inc. ADR(a)
ENERGY 104,250
120,000 Qingling Motors Co.
CAPITAL EQUIPMENT 47,232
9,000 Shanghai Industrial Holdings
MULTI-INDUSTRY 25,261
---------------
176,743
---------------
CZECH REPUBLIC (1.4%)
COMMON STOCK
2,970 SPT Telekom AS
SERVICES 381,976
---------------
EGYPT (0.6%)
COMMON STOCK
11,200 Commercial International Bank GDR
FINANCE 159,040
---------------
GREECE (4.1%)
COMMON STOCK
2,250 Alfa Credit Bank
FINANCE 234,937
2,430 Delta Informatics SA
SERVICES 106,936
9,400 Hellenic Bottling Co. SA
CONSUMER NON-DURABLES 314,876
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SCHRODER EM CORE PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
GREECE (continued)
COMMON STOCK (continued)
<TABLE>
<C> <S> <C>
10,880 Hellenic Telecommunication Organization
SA
SERVICES $ 319,790
864 National Bank of Greece
FINANCE 124,407
---------------
1,100,946
---------------
HONG KONG (3.2%)
COMMON STOCK
244,000 Anhui Expressway Co. Ltd.
SERVICES 30,543
223,000 Beijing Datang Power
MULTI-INDUSTRY 78,420
38,000 Cheung Kong Infrastructure Holdings
CAPITAL EQUIPMENT 84,346
191,000 China Resources Beijing Land
FINANCE 88,735
18,000 China Resources Enterprise Ltd.
FINANCE 21,022
43,000 China Telecom (Hong Kong)(a)
SERVICES 76,855
10,000 Citic Pacific Ltd.
FINANCE 24,325
36,000 Cosco Pacific Ltd.
FINANCE 18,699
82,400 Founder Hong Kong Ltd.
CAPITAL EQUIPMENT 51,307
57,000 Guangdong Kelon Electrical Holdings Co.
Ltd.
CONSUMER DURABLES 54,434
44,000 Guangnan Holdings
CONSUMER NON-DURABLES 22,003
62,000 Guangshen Railway
SERVICES 8,561
64,000 Legend Holdings Ltd.(a)
CAPITAL EQUIPMENT 22,505
22,000 New World Development Co. Ltd.
MULTI-INDUSTRY 51,955
44,000 New World Infrastructure(a)
CAPITAL EQUIPMENT 77,790
29,000 Ng Fung Hong Ltd.
CONSUMER NON-DURABLES 24,700
460,000 Yanzhou Coal Mining Co. Ltd.(a)
ENERGY 94,980
125,000 Zhejiang Expressway Co. Ltd.
SERVICES 28,392
---------------
859,572
---------------
HUNGARY (3.4%)
COMMON STOCK
2,600 Gedeon Richter
CONSUMER NON-DURABLES 219,830
9,260 MOL Magyar Olaj GDR
ENERGY 211,822
10,460 Matav RT ADR
SERVICES 292,880
</TABLE>
See Notes to Financial Statements SCHRODER CAPITAL FUNDS
164
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1998
- - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SCHRODER EM CORE PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
HUNGARY (continued)
COMMON STOCK (continued)
<TABLE>
<C> <S> <C>
4,600 OTP Bank GDR
FINANCE $ 192,050
---------------
916,582
---------------
INDIA (6.7%)
COMMON STOCK
4,000 BSES Ltd. GDR(a)
ENERGY 53,500
14,000 Grasim Industries Ltd. GDR
MATERIALS 108,850
23,500 Great Eastern Shipping Co. GDR
MULTI-INDUSTRY 131,013
8,000 Indian Hotels Co. Ltd. GDR(a)
SERVICES 88,500
9,000 Indian Petrochemicals GDR
MATERIALS 38,250
7,000 Larsen & Toubro GDR
MULTI-INDUSTRY 88,375
25,700 Mahanagar Telephone GDR(a)
SERVICES 326,070
18,000 Mahindra & Mahindra Ltd. GDR
CAPITAL EQUIPMENT 90,000
5,000 Ranbaxy Laboratories Ltd. GDR
MATERIALS 81,500
27,900 Reliance Industries Ltd. GDS
MATERIALS 207,157
22,000 State Bank of India GDR
FINANCE 305,250
550 Tata Electric Co. GDR(b)
ENERGY 126,445
11,500 Videsh Sanchar Nigam Ltd. GDR(a)
SERVICES 135,125
---------------
1,780,035
---------------
INDONESIA (1.2%)
COMMON STOCK
3,500 Gulf Indonesia Resources Ltd.(a)
ENERGY 43,532
15,000 PT Gudang Garam
CONSUMER NON-DURABLES 11,018
44,000 PT HM Sampoerna
CONSUMER NON-DURABLES 14,795
94,000 PT Indofoods Sukses Makmur
CONSUMER NON-DURABLES 13,102
29,000 PT Indostat ADR
SERVICES 38,367
149,000 PT Telekomunikasi Indonesia
SERVICES 49,447
TREASURY BILLS
138,994 Bank Indonesia Treasury Bill, 5.05%, due
6/1/98 138,994
---------------
309,255
---------------
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SCHRODER EM CORE PORTFOLIO (continued)
- - -----------------------------------------------------------------
ISRAEL (4.9%)
COMMON STOCK
14,930 Bank Hapoalim Ltd.
FINANCE $ 45,880
290,300 Bank Leumi Le-Israel
FINANCE 586,256
18,970 Blue Square-Israel Ltd.
CONSUMER NON-DURABLES 275,065
9,600 Teva Pharmaceutical Industries Ltd. ADR
MATERIALS 393,600
---------------
1,300,801
---------------
KOREA, REPUBLIC OF (4.8%)
COMMON STOCK
17,000 Daewoo Heavy Industries
CAPITAL EQUIPMENT 58,337
26,323 Kookmin Bank(a)
FINANCE 129,978
6,000 Korea Electric Power Corp.
ENERGY 60,107
19,210 LG Electronics
CONSUMER DURABLES 180,158
3,000 LG Information & Communication Ltd.
CAPITAL EQUIPMENT 70,338
1,500 Pohang Iron & Steel Co. Ltd.(b)
MATERIALS 61,725
123 SK Telecom Co. Ltd.(b)
SERVICES 56,700
7,440 Samsung Display Devices Co.
CAPITAL EQUIPMENT 263,770
7,850 Samsung Electronics Co.
CONSUMER DURABLES 298,383
8,000 Samsung Heavy Industries(a)
CAPITAL EQUIPMENT 48,085
16,000 Shinhan Bank(a)
FINANCE 62,523
---------------
1,290,104
---------------
LUXEMBOURG (0.3%)
COMMON STOCK
9,400 Quilmes Industrial SA ADR
CONSUMER NON-DURABLES 90,475
---------------
MALAYSIA (0.7%)
COMMON STOCK
7,000 Berjaya Sports Toto Berhad
SERVICES 14,672
34,000 Magnum Corp. Berhad
SERVICES 17,884
18,000 Resorts World Berhad
SERVICES 27,887
18,000 Tanjong PLC
SERVICES 29,762
11,000 Telekom Malaysia Berhad
SERVICES 25,205
</TABLE>
See Notes to Financial Statements SCHRODER CAPITAL FUNDS
165
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MAY 31, 1998
- - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SCHRODER EM CORE PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
MALAYSIA (continued)
COMMON STOCK (continued)
<TABLE>
<C> <S> <C>
37,000 Tenaga Nasional Berhad
ENERGY $ 61,176
---------------
176,586
---------------
MAURITIUS (0.3%)
COMMON STOCK
135,000 State Bank of Mauritius Ltd.(a)
FINANCE 90,320
---------------
MEXICO (12.4%)
COMMON STOCK
120,000 Cemex SA
de CV
MATERIALS 494,782
228,000 Cifra SA de CV
SERVICES 318,104
37,000 Consorcio ARA S.A.(a)
CAPITAL EQUIPMENT 142,275
245,000 Controladora Comercial Mexicana SA de CV
SERVICES 240,108
20,200 Desc SA de CV
MULTI-INDUSTRY 113,648
9,600 Fomento Economico Mexica SA
de CV
CONSUMER NON-DURABLES 319,056
22,500 Grupo Carso SA de CV
MULTI-INDUSTRY 113,955
17,700 Grupo Financiero Banamax Accivl SA de
CV(a)
FINANCE 44,170
243,000 Grupo Financiero Bancomer
FINANCE 121,830
94,222 Grupo Industrial Bimbo SA
CONSUMER NON-DURABLES 207,340
35,000 Grupo Industrial Saltillo SA de CV
MATERIALS 127,043
6,400 Grupo Televisa SA(a)
SERVICES 250,000
66,000 Sistema Argos SA de CV
CONSUMER NON-DURABLES 63,335
8,400 TV Azteca SA de CV
SERVICES 121,275
11,300 Telefonos de Mexico SA ADS
SERVICES 536,044
6,000 Tubos de Acero de Mexico SA ADR
MATERIALS 89,625
RIGHTS
3,600 Cemex SA de CV(a)
MATERIALS 1,232
---------------
3,303,822
---------------
PAKISTAN (0.2%)
COMMON STOCK
4,800 Hub Power Co. Ltd.
ENERGY 45,600
---------------
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SCHRODER EM CORE PORTFOLIO (continued)
- - -----------------------------------------------------------------
PERU (0.9%)
COMMON STOCK
5,800 CPT Telefonica del Peru SA ADS
SERVICES $ 125,425
7,370 Credicorp Ltd.
FINANCE 116,999
---------------
242,424
---------------
PHILIPPINES (1.8%)
COMMON STOCK
322,000 Ayala Land, Inc.
SERVICES 109,538
1,155,000 Digital Telecommunications Philippines,
Inc.(a)
SERVICES 46,853
37,000 Manila Electric Company
"B" Shares
ENERGY 109,242
8,000 Philippine Long Distance Telephone Co.
SERVICES 205,391
---------------
471,024
---------------
POLAND (2.3%)
COMMON STOCK
800 Bank Przemslowo-Handlowy SA
FINANCE 59,353
35,000 Elektrim Spolka Akcyjna SA
MULTI-INDUSTRY 460,183
14,000 WBK Ord
FINANCE 100,258
---------------
619,794
---------------
RUSSIA (2.4%)
COMMON STOCK
13,210 Gazprom ADR
ENERGY 184,611
4,010 Lukoil Holding ADR
ENERGY 165,118
8,200 Pliva DD GDR
MATERIALS 134,890
8,720 Unified Energy Systems
ENERGY 153,356
---------------
637,975
---------------
SOUTH AFRICA (9.2%)
COMMON STOCK
10,900 ABSA Group Ltd.
FINANCE 85,619
4,400 Anglo American Corp. of South Africa
Ltd.
FINANCE 210,784
3,000 Anglo American Industrial Corp.
MULTI-INDUSTRY 88,441
28,463 Barlow Ltd.
MULTI-INDUSTRY 233,236
7,180 Dimension Data Holdings Ltd.(a)
FINANCE 48,043
13,000 Ellerine Holdings Ltd.
CONSUMER DURABLES 111,191
</TABLE>
See Notes to Financial Statements SCHRODER CAPITAL FUNDS
166
<PAGE>
SCHEDULES OF INVESTMENTS (CONCLUDED) MAY 31, 1998
- - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -----------------------------------------------------------------
SCHRODER EM CORE PORTFOLIO (continued)
- - -----------------------------------------------------------------
</TABLE>
SOUTH AFRICA (continued)
COMMON STOCK (continued)
<TABLE>
<C> <S> <C>
15,000 Fedsure Holdings Ltd.
FINANCE $ 230,993
180,900 FirstRand Ltd.
FINANCE 352,608
27,000 Ingwe Coal Corp.
ENERGY 95,306
26,700 LA Retail Stores Ltd.
CONSUMER DURABLES 84,408
78,000 Malbak Ltd.
MATERIALS 70,345
39,300 Nampak Ltd.
MATERIALS 137,200
22,800 Rembrandt Group Ltd.
MULTI-INDUSTRY 187,714
24,600 Sasol Ltd.
MULTI-INDUSTRY 195,617
9,200 South African Breweries Ltd.
MULTI-INDUSTRY 259,441
15,000 South African Druggists Ltd.
MATERIALS 78,549
---------------
2,469,495
---------------
TAIWAN (3.8%)
COMMON STOCK
26,000 Acer, Inc. GDR(a)
SERVICES 188,500
6,000 Asustek Computer, Inc.(a)
CAPITAL EQUIPMENT 110,251
7,000 Fubon Insurance Co. Ltd. GDR(a)
FINANCE 127,750
13,000 ROC Taiwan Fund
FINANCE 93,438
9,520 Siliconware Precision Industries Co.(a)
ENERGY 78,064
6,500 Taiwan Fund, Inc.
FINANCE 91,406
13,300 Taiwan Semiconductor Manufacturing
Co.(a)
ENERGY 251,038
8,000 Teco Electric & Machinery GDR
MULTI-INDUSTRY 86,800
---------------
1,027,247
---------------
THAILAND (1.1%)
COMMON STOCK
7,000 Advanced Info Service
Public Co. Ltd.
SERVICES 38,129
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- - -------------------------------------------------------------------------
SCHRODER EM CORE PORTFOLIO (concluded)
- - -------------------------------------------------------------------------
</TABLE>
THAILAND (continued)
COMMON STOCK (continued)
<TABLE>
<C> <S> <C>
28,000 Bangkok Bank Public Co. Ltd.
FINANCE $ 57,192
26,000 Electricity Generating
Public Co. Ltd.
ENERGY 41,843
12,000 PTT Exploration & Production Public Co.
Ltd.
ENERGY 103,987
31,000 Thai Farmers Bank Public Co. Ltd.
FINANCE 47,202
---------------
288,353
---------------
TURKEY (0.6%)
COMMON STOCK
3,324,675 Akbank T.A.S.
FINANCE 97,814
234,000 Netas Telekomunik(a)
CAPITAL EQUIPMENT 68,844
15,200 Turkiye Is Bankasi (Isbank)
FINANCE 617
---------------
167,275
---------------
VENEZUELA (0.5%)
COMMON STOCK
4,100 Compania Anonima
SERVICES 126,332
---------------
ZIMBABWE (0.2%)
COMMON STOCK
69,000 NMBZ Holdings Ltd.
FINANCE 51,750
---------------
TOTAL INVESTMENTS (90.3%)
(COST $26,482,507) 24,136,133
OTHER ASSETS LESS LIABILITIES (9.7%) 2,593,902
---------------
TOTAL NET ASSETS (100.0%) $ 26,730,035
---------------
---------------
</TABLE>
(a) Non-income producing security.
(b) Valued pursuant to methodology approved by the Board of Trustees.
ADR--American Depositary Receipts
GDR--Global Depositary Receipts
GDS--Global Depositary Shares
See Notes to Financial Statements SCHRODER CAPITAL FUNDS
<TABLE> <S> <C>
<ARTICLE>6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SCHRODER
ASIAN GROWTH FUND PORTFOLIO SEMI-ANNUAL REPORT DATED 4/30/98 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 008
<NAME> SCHRODER ASIAN GROWTH FUND PORTFOLIO
<S> <C>
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 63,300,545
<INVESTMENTS-AT-VALUE> 54,234,367
<RECEIVABLES> 1,456,657
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 369,267
<TOTAL-ASSETS> 56,060,291
<PAYABLE-FOR-SECURITIES> 250,796
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 215,724
<TOTAL-LIABILITIES> 466,520
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 64,660,290
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (9,096,376)
<NET-ASSETS> 55,593,771
<DIVIDEND-INCOME> 229,198
<INTEREST-INCOME> 73,661
<OTHER-INCOME> 0
<EXPENSES-NET> 86,943
<NET-INVESTMENT-INCOME> 215,916
<REALIZED-GAINS-CURRENT> (251,384)
<APPREC-INCREASE-CURRENT> (9,096,376)
<NET-CHANGE-FROM-OPS> (9,131,844)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 94,612,178
<NUMBER-OF-SHARES-REDEEMED> (29,886,563)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 55,593,771
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 52,310
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 88,556
<AVERAGE-NET-ASSETS> 69,938,893
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 1.16
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE NORWEST
ADVANTAGE ANNUAL REPORT DATED MAY 31, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0001003159
<NAME> SCHRODER CAPITAL FUNDS
<SERIES>
<NUMBER>05
<NAME>EM CORE PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 26,482,507
<INVESTMENTS-AT-VALUE> 24,136,133
<RECEIVABLES> 211,401
<ASSETS-OTHER> 2,606,408
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 26,953,942
<PAYABLE-FOR-SECURITIES> 131,306
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 92,601
<TOTAL-LIABILITIES> 223,907
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 26,730,035
<DIVIDEND-INCOME> 282,910
<INTEREST-INCOME> 153,053
<OTHER-INCOME> 0
<EXPENSES-NET> 225,612
<NET-INVESTMENT-INCOME> 210,351
<REALIZED-GAINS-CURRENT> (518,984)
<APPREC-INCREASE-CURRENT> (2,346,562)
<NET-CHANGE-FROM-OPS> (2,655,195)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 39,419,804
<NUMBER-OF-SHARES-REDEEMED> 10,034,574
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 26,730,035
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 155,546
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 370,799
<AVERAGE-NET-ASSETS> 26,530,010
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 1.45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SCHRODER
EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO SEMI-ANNUAL REPORT DATED 4/30/98
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 002
<NAME> SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 253,061,789
<INVESTMENTS-AT-VALUE> 280,527,284
<RECEIVABLES> 2,396,473
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 4,826,673
<TOTAL-ASSETS> 287,752,430
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,488,799
<TOTAL-LIABILITIES> 4,488,799
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 255,875,581
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 27,388,050
<NET-ASSETS> 283,263,631
<DIVIDEND-INCOME> 2,678,231
<INTEREST-INCOME> 583,785
<OTHER-INCOME> 0
<EXPENSES-NET> 1,555,084
<NET-INVESTMENT-INCOME> 1,706,932
<REALIZED-GAINS-CURRENT> (20,370,914)
<APPREC-INCREASE-CURRENT> 28,524,210
<NET-CHANGE-FROM-OPS> 9,860,228
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 45,340,326
<NUMBER-OF-SHARES-REDEEMED> (31,012,815)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 24,187,739
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,318,762
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,879,412
<AVERAGE-NET-ASSETS> 265,938,276
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 1.18
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE NORWEST
ADVANTAGE ANNUAL REPORT DATED MAY 31, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0001003159
<NAME> SCHRODER CAPITAL FUNDS
<SERIES>
<NUMBER>06
<NAME>GLOBAL GROWTH PORTFOLIO
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 2,333,587
<INVESTMENTS-AT-VALUE> 2,550,164
<RECEIVABLES> 86,772
<ASSETS-OTHER> 604,726
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,241,662
<PAYABLE-FOR-SECURITIES> 8,947
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 70,183
<TOTAL-LIABILITIES> 79,130
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,162,532
<DIVIDEND-INCOME> 15,815
<INTEREST-INCOME> 17,416
<OTHER-INCOME> 0
<EXPENSES-NET> 13,887
<NET-INVESTMENT-INCOME> 19,344
<REALIZED-GAINS-CURRENT> (30,332)
<APPREC-INCREASE-CURRENT> 223,207
<NET-CHANGE-FROM-OPS> 212,219
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,070,201
<NUMBER-OF-SHARES-REDEEMED> 119,888
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3,162,532
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 8,177
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 110,948
<AVERAGE-NET-ASSETS> 2,606,482
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SCHRODER
INTERNATIONAL FUND SEMI-ANNUAL REPORT DATED 4/30/98 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 001
<NAME> SCHRODER INTERNATIONAL EQUITY FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 155,280,836
<INVESTMENTS-AT-VALUE> 204,580,856
<RECEIVABLES> 2,039,854
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 4,444,983
<TOTAL-ASSETS> 211,065,693
<PAYABLE-FOR-SECURITIES> 2,151,166
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 151,825
<TOTAL-LIABILITIES> 2,302,991
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 159,174,667
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 49,588,035
<NET-ASSETS> 208,762,702
<DIVIDEND-INCOME> 1,170,484
<INTEREST-INCOME> 590,686
<OTHER-INCOME> 0
<EXPENSES-NET> 754,292
<NET-INVESTMENT-INCOME> 1,006,878
<REALIZED-GAINS-CURRENT> 6,086,633
<APPREC-INCREASE-CURRENT> 22,182,252
<NET-CHANGE-FROM-OPS> 29,275,763
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 21,783,475
<NUMBER-OF-SHARES-REDEEMED> (53,980,393)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (2,921,155)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 453,251
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 767,479
<AVERAGE-NET-ASSETS> 203,114,301
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SCHRODER
INTERNATIONAL SMALLER COMPANIES FUND SEMI-ANNUAL REPORT DATED 4/30/98 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 004
<NAME> SCHRODER INTERNATIONAL SMALLER COMPANIES PORTFOLIO
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 6,249,768
<INVESTMENTS-AT-VALUE> 6,154,297
<RECEIVABLES> 111,888
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 168,725
<TOTAL-ASSETS> 6,434,910
<PAYABLE-FOR-SECURITIES> 25,922
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,524
<TOTAL-LIABILITIES> 31,446
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,499,321
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (95,857)
<NET-ASSETS> 6,403,464
<DIVIDEND-INCOME> 43,437
<INTEREST-INCOME> 2,670
<OTHER-INCOME> 0
<EXPENSES-NET> 38,104
<NET-INVESTMENT-INCOME> 8,003
<REALIZED-GAINS-CURRENT> 130,622
<APPREC-INCREASE-CURRENT> 857,378
<NET-CHANGE-FROM-OPS> 996,003
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 153,354
<NUMBER-OF-SHARES-REDEEMED> (1,571,444)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (422,087)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 27,031
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 108,368
<AVERAGE-NET-ASSETS> 6,412,879
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 1.20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
SCHRODER JAPAN PORTFOLIO SEMI-ANNUAL REPORT DATED 4/30/98 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 007
<NAME> SCHRODER JAPAN PORTFOLIO
<S> <C>
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 36,419,108
<INVESTMENTS-AT-VALUE> 29,717,755
<RECEIVABLES> 1,067,450
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1,755,690
<TOTAL-ASSETS> 32,540,895
<PAYABLE-FOR-SECURITIES> 52,926
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 37,089
<TOTAL-LIABILITIES> 90,015
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 39,155,421
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (6,704,541)
<NET-ASSETS> 32,450,880
<DIVIDEND-INCOME> 125,628
<INTEREST-INCOME> 48,713
<OTHER-INCOME> 0
<EXPENSES-NET> 40,139
<NET-INVESTMENT-INCOME> 134,202
<REALIZED-GAINS-CURRENT> (243,188)
<APPREC-INCREASE-CURRENT> (6,704,541)
<NET-CHANGE-FROM-OPS> (6,813,527)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 57,144,099
<NUMBER-OF-SHARES-REDEEMED> (17,879,692)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 32,450,880
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 22,313
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 48,595
<AVERAGE-NET-ASSETS> 37,968,509
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE NORWEST
ADVANTAGE ANNUAL REPORT DATED MAY 31, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0001003159
<NAME> SCHRODER CAPITAL FUNDS
<SERIES>
<NUMBER>03
<NAME>U.S. SMALLER COMPANIES PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 292,812,680
<INVESTMENTS-AT-VALUE> 332,103,179
<RECEIVABLES> 5,285,206
<ASSETS-OTHER> 19,665,550
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 357,053,935
<PAYABLE-FOR-SECURITIES> 975,262
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 275,252
<TOTAL-LIABILITIES> 1,250,514
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 355,803,421
<DIVIDEND-INCOME> 1,309,477
<INTEREST-INCOME> 709,293
<OTHER-INCOME> 0
<EXPENSES-NET> 1,784,202
<NET-INVESTMENT-INCOME> 234,568
<REALIZED-GAINS-CURRENT> 6,355,034
<APPREC-INCREASE-CURRENT> 28,258,572
<NET-CHANGE-FROM-OPS> 34,848,174
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 228,163,060
<NUMBER-OF-SHARES-REDEEMED> 10,593,071
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 252,418,163
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,419,439
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,784,202
<AVERAGE-NET-ASSETS> 236,573,133
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
