As filed with the Securities and Exchange Commission on December 22, 1997
File Nos. __-____
__-____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
and
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
SCHRODER SERIES TRUST II
(Exact Name of Registrant as Specified in its Charter)
Two Portland Square, Portland, Maine 04101
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code: 207-879-1900
Catherine S. Wooledge, Esq.
Forum Financial Services, Inc.
Two Portland Square
Portland, Maine 04101
(Name and Address of Agent for Service)
Copy to:
Alexandra Poe, Esq.
Schroder Capital Management International Inc.
787 Seventh Avenue, 34th Floor
New York, New York 10019
Approximate Date of Proposed Public Offering: As soon as practicable after
the effectiveness of the registration under the Securities Act of 1933.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1993 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, as
amended, Registrant hereby elects to register an indefinite number of shares of
Registrant and any series thereof hereinafter created.
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(A))
PART A
(Prospectus offering Class A Shares of Schroder All Asia Fund)
<TABLE>
<S><C> <C> <C>
Form N-1A
Item No. (Caption) Location in Prospectus (Caption)
- --------- --------- --------------------------------
1. Cover Page.Cover Page
2. Synopsis Prospectus Summary
3. Condensed Financial Information Financial Highlights; Other Information -
Performance Information
4. General Description of Investment Objective; Investment Policies;
Registrant Other Investment Practices and Risk
Considerations
5. Management of the Fund Management of the Fund - Board of
Trustees; Advisory Fees and Portfolio
Managers; Administrative Services;
Shareholder Service Plan; Expenses;
Portfolio Transactions
5A. Management's Discussion of` Not Applicable
Fund Performance
6. Capital Stock and Other Securities Other Information - Capitalization and
Voting; Shareholder Inquiries; Dividends,
Distributions and Taxes
7. Purchase of Securities Investment in the Fund - Purchase of
Shares; Retirement Plans and Individual
Retirement Accounts; Net Asset Value
8. Redemption or Repurchase Investment in the Fund - Redemption of
Shares; Net Asset Value
9. Pending Legal Proceedings Not Applicable
</TABLE>
2
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(A))
PART B
(SAI offering Class A Shares of Schroder All Asia Fund)
<TABLE>
<S><C> <C> <C>
Form N-1A Location in Statement of Additional
Item No. (Caption) Information (Caption)
- --------- --------- -----------------------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Other Information - Organization
13. Investment Objectives and Policies Investment Policies; Investment
Restrictions
14. Management of the Fund Management - Officers and Trustees
15. Control Persons and Principal Not Applicable
Holders of Securities
16. Investment Advisory and Management - Investment Adviser;
Other Services Officers and Trustees; Administrative
Services; Distribution of Fund
Shares; Shareholder Service
Plan and Service Organizations;
Portfolio Accounting; Fees and
Expenses; Portfolio Transactions -
Investment Decisions; Brokerage
and Research Services; Other
Information - Custodian;
Transfer Agent and Dividend
Disbursing Agent; Legal
Counsel; Independent Accountant
17. Brokerage Allocation and Portfolio Transactions
Other Practices
18. Capital Stock and Other Securities Other Information - Capitalization and
` Voting
19. Purchase, Redemption and Pricing of Additional Purchase and Redemption
Securities Being Offered Information -- Determination of Net Asset
Value Per Share; Redemption in Kind
20. Tax Status Taxation
21. Underwriters Management - Distribution of Fund Shares;
Fees and Expenses
22. Calculation of Performance Data Other Information - Performance Information
23. Financial Statements Not Applicable
</TABLE>
3
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SCHRODER ALL-ASIA FUND
CLASS A SHARES
The investment objective of Schroder All-Asia Fund (the "Fund") is to seek
long-term capital appreciation. The Fund seeks to achieve this objective
primarily through investment in equity securities of Asian companies, namely,
companies domiciled or doing business in established and emerging markets in
Asia. Asian markets include China, Hong Kong SAR, India, Indonesia, Japan,
Korea, Malaysia, Pakistan, the Philippines, Singapore, Sri Lanka, Taiwan,
Thailand, and others in the region that permit foreign investors to participate
in their stock markets. The Fund is intended for investors who seek the
aggressive growth potential of foreign markets and are willing to bear the
special investment risks of investing in those markets.
The Fund seeks to achieve its investment objective by allocating substantially
all of its assets to two portfolios, Schroder Asian Growth Portfolio ("Asia
Portfolio") and Schroder Japan Portfolio ("Japan Portfolio") (each, a
"Portfolio" and collectively, the "Portfolios"). The Portfolios are each a
series of Schroder Capital Funds ("Schroder Core"). Each of the Asia and Japan
Portfolios has an investment objective that is identical to that of the Fund and
substantially similar investment policies but each invests in distinctly
different markets. The Fund's investment experience is derived from its
investments in the Portfolios. See "Other Information -- Fund Structure". The
Fund is a series of Schroder Series Trust II, a Delaware business trust (the
"Trust").
This Prospectus explains concisely the information you should know before
investing in the Fund's Class A shares. Please read it carefully and keep it for
future reference. You can find more detailed information about the Trust and
Fund in the [February __,] 1998 Statement of Additional Information ("SAI"), as
amended from time to time. The SAI has been filed with the Securities and
Exchange Commission ("SEC") and is available along with other related materials
for reference on the SEC's Internet Web Site (http://www.sec.gov). A free copy
may be obtained without charge from the Trust by writing to Two Portland Square,
Portland, Maine 04101 or by calling 1-800____________. The SAI has been
incorporated into this Prospectus by reference. The Fund has not authorized
anyone to provide you with information that is different from what is contained
in this Prospectus or in other documents to which this Prospectus refers you.
FUND SHARES ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FDIC, THE
FEDERAL RESERVE SYSTEM OR ANY OTHER GOVERNMENT AGENCY AND ALSO ARE NOT
OBLIGATIONS, DEPOSITS OR ACCOUNTS OF, OR ENDORSED OR GUARANTEED BY, ANY BANK OR
ITS AFFILIATES. FUND INVESTMENTS INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PROSPECTUS [FEBRUARY __, 1998]
<PAGE>
<TABLE>
======================================================================================================
FUNDS AVAILABLE THROUGH SCHRODER FUND ADVISORS INC.
PLEASE CALL FOR COMPLETE INFORMATION AND TO OBTAIN A PROSPECTUS.
PLEASE READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST.
SCHRODER SERIES TRUST II 1-800-___-____
SCHRODER ALL-ASIA FUND
<S> <C>
SCHRODER CAPITAL FUNDS (DELAWARE) 1-800-290-9826 SCHRODER SERIES TRUST 1-800-464-3108
SCHRODER INTERNATIONAL FUND SCHRODER LARGE CAPITALIZATION EQUITY FUND
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND SCHRODER SMALL CAPITALIZATION VALUE FUND
SCHRODER INTERNATIONAL BOND FUND SCHRODER MIDCAP VALUE FUND
SCHRODER EMERGING MARKETS FUND SCHRODER INVESTMENT GRADE INCOME FUND
SCHRODER U.S. EQUITY FUND SCHRODER SHORT-TERM INVESTMENT FUND
SCHRODER U.S. SMALLER COMPANIES FUND
SCHRODER MICRO CAP FUND
======================================================================================================
</TABLE>
<PAGE>
PROSPECTUS SUMMARY
This Prospectus offers Class A shares (the "Class A Shares" or
"Shares") of the Fund, which is a separately managed, non-diversified series of
the Trust, an open-end, management investment company registered under the
Investment Company Act of 1940 (the "1940 Act"). The Fund is not a complete
investment program. The Fund is not intended for investors whose objective is
assured income or preservation of capital. The Fund is intended for investors
who seek the aggressive growth potential of the Asian markets and are willing to
bear the special investment risks of investing in those markets. THE FOLLOWING
SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION CONTAINED
IN THIS PROSPECTUS.
OBJECTIVE. The Fund's investment objective is long-term capital
appreciation. The Fund seeks its investment objective through investment
primarily in equity securities of companies domiciled or doing business in
established and emerging markets in Asia. The Fund does not currently invest in
Asian companies directly, but rather invests substantially all of its assets in
the Asia and Japan Portfolios, which are separately managed, non-diversified
series of Schroder Core, an open-end, management investment company registered
under the 1940 Act. References in the Prospectus to the investments of the Fund
usually presume investment of Fund assets through the Portfolios.
INVESTMENT ADVISER. The Fund's and the Portfolios' investment adviser
is Schroder Capital Management International Inc. ("SCMI"), 787 Seventh Avenue,
34th Floor, New York, New York 10019. The Fund (and indirectly its shareholders)
bears a pro rata portion of the investment advisory fees paid on behalf of each
Portfolio to SCMI. See "Management of the Fund -- Investment Adviser and
Portfolio Managers". The Fund pays SCMI an asset allocation fee for its services
in allocating the Fund's assets among the two Portfolios, and also, in certain
circumstances, may pay SCMI an investment advisory fee when Fund assets are not
invested in a Portfolio.
ADMINISTRATIVE SERVICES. Schroder Fund Advisors Inc. ("Schroder Advisors")
serves as administrator and distributor of the Fund, and Forum Administrative
Services, LLC ("Forum") serves as the Fund's subadministrator. See "Management
of the Fund -- Administrative Services".
PURCHASES, REDEMPTIONS, AND EXCHANGES OF SHARES. Class A Shares may be
purchased, exchanged and redeemed by mail, by bank-wire or through your
broker-dealer or other service organization. The minimum initial investment is
$2,500, and the minimum subsequent investment is $250. Class A Shares may be
exchanged for Advisor class shares of other funds in the Schroder family of
funds subject to certain conditions. See "Investment in the Fund -- Purchase of
Shares", " -- Exchanges" and " -- Redemption of Shares".
DIVIDENDS AND OTHER DISTRIBUTIONS. The Fund annually declares and pays
as a dividend substantially all of its net investment income and at least
annually distributes any net realized long-term capital gain. Dividends and
long-term capital-gain distributions are reinvested automatically in additional
Shares at net asset value ("NAV") unless you elect in your account application,
or otherwise in writing, to receive dividends and other distributions in cash.
See "Dividends, Distributions and Taxes".
RISK CONSIDERATIONS. Investments in the securities of Asian issuers,
particularly in countries with smaller capital markets, involve risks in
addition to risks associated with investments in the securities of U.S.
issuers.
Equity securities historically have shown greater growth potential than
other types of securities, but they have also shown greater volatility. Because
the Fund invests primarily in equity securities, its share price will rise and
fall and, therefore, investors may lose money. Investors in the Fund should be
able to assume the special risks of investing in Asian companies, which include
possible adverse political, social and economic developments within the Asia
Pacific region and differing characteristics of foreign economies and markets.
These risks are greater with respect to securities in emerging markets, which
includes most of the markets in Asia. Most of the securities held by the Fund
are denominated in foreign currencies, and the value of these investments thus
will be adversely affected by fluctuations in foreign currency values. The Fund
may use derivatives, such as options, futures and forward currency contracts and
interest rate or currency swaps, which may involve additional risks.
The Fund's investment in a Portfolio may be affected by the actions of
other large investors in the Portfolio, if any. For example, if a Portfolio had
a large investor other than the Fund that redeemed its interest in the
Portfolio, its remaining investors (including the Fund) might, as a result,
experience higher pro rata operating expenses, thereby producing lower returns.
Of course, as with any mutual fund, there is no assurance that the Fund
or a Portfolio will achieve its investment objective.
The Fund's NAV will change with changes in the value of the securities
in which the Fund invests and with changes in market conditions, interest rates,
currency rates, or political or economic events. The Fund is non-diversified,
which means that it may invest a greater portion of its assets in securities of
individual issuers than could a diversified fund. Consequently, changes in the
market value of a single issuer could cause greater fluctuations in the Fund's
NAV than would occur in a diversified fund. When you sell your Shares, they may
be worth more or less than what you paid for them. See "Other Investment
Practices and Risk Considerations".
<PAGE>
EXPENSES OF INVESTING IN THE FUND
FEE TABLE
Expenses are one of several factors to consider when investing in the
Fund's Class A Shares. The "Shareholder Transaction Expenses" table below
summarizes the maximum transaction costs you would incur by investing in the
Fund. The "Annual Operating Expenses" table and related "Example" estimate the
expenses that your investment in Class A Shares would incur based upon the
Fund's anticipated expenses for its first fiscal year operating as an open-end
investment company. Annual Operating Expenses include the Fund's pro rata
portion of all estimated operating expenses of the Portfolios in which the Fund
invests. The Example shows the cumulative expenses attributable to a
hypothetical $1,000 investment in the Fund over specified periods. See
"Management of the Fund -- Fees -- Expenses".
<TABLE>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchase
<S> <C> <C>
(as a percentage of offering price)(1)...........................................................5.25%
Maximum Deferred Sales Load (as a percentage)........................................................None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage).................................None
Redemption Fee (based on net asset value of shares redeemed).........................................None
Exchange Fee None
ANNUAL OPERATING EXPENSES (as a percentage of average net assets)
Management Fees(2)................................................................................. %
12b-1 Fees...........................................................................................None
OTHER EXPENSES(3)..................................................................................._____
TOTAL OPERATING EXPENSES................................................................................
</TABLE>
(1) Maximum sales charge applicable to purchases of less than $25,000 worth
of Shares.
(2) Management Fees reflect the fees to be paid by the Fund to SCMI and
Schroder Advisors for investment advisory services, asset allocation
services and administrative services if the Fund's assets are invested
in the Portfolios. Management Fees payable by the Portfolios (and borne
pro rata by the Fund's shareholders) are projected at a blended rate of
0.[00]% based on the investment advisory fee payable to each Portfolio,
assuming that 90% of the Fund's assets are invested in Asia Portfolio
and 10% in Japan Portfolio, and includes the Portfolios' administration
fees of 0.05%. Asia Portfolio bears a higher investment advisory fee
rate than Japan Portfolio. If all of the Fund's assets were invested in
Asia Portfolio at any time, the maximum aggregate Management Fees
payable to SCMI and Schroders Advisors would be 1.00%. Allocation
between the Portfolios will vary over time. SCMI does not presently
intend to allocate 100% of Fund assets to Asia Portfolio.
(3) Other Expenses of the Portfolios are projected to be at the rate of
[0.00]%.
EXAMPLE
The table below indicates how much you would pay in total expenses on a
$1,000 investment in the Fund, assuming: (1) a 5% annual return; and (2)
redemption at the end of each time period. The example is based on the expenses
listed above, assumes reinvestment of all dividends and other distributions, and
assumes both payment of the maximum sales charge and payment of no sales charge.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
OR RETURNS; ACTUAL EXPENSES OR RETURNS MAY VARY FROM THOSE SHOWN. The 5% annual
return is not a prediction of the Fund's return, but is the percentage required
by the SEC for use in this example.
<TABLE>
PERIOD ASSUMING 5.25% LOAD ASSUMING NO LOAD
------ ------------------- ----------------
<S> <C> <C> <C>
1 Year $ $
3 Years $ $
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
The table below provides condensed financial information concerning income
and capital changes for one share of Schroder Asian Growth Fund, Inc. (the
"Predecessor Fund") for the periods shown. The Predecessor Fund is a closed-end
investment company whose shares trade on the New York Stock Exchange (the
"Exchange"). On March [__, 1998], the Fund, which has no previous operating
history, will acquire the assets and assume the liabilities of the Predecessor
Fund. On that date, all shareholders of the Predecessor Fund will receive Class
A Shares of the Fund. The fees and expenses of the Fund differ from those of the
Predecessor Fund. Accordingly, the financial information below may not be
indicative of the Fund's performance as an open-end fund.
The Predecessor Fund's financial statements for the year ended October 31,
1997 and the related independent accountants' report [is being audited by its
independent accountants and, when available, will be] incorporated by reference
into the Statement of Additional Information. Further information about the
performance of the Predecessor Fund also [is] contained in Annual Report to
Shareholders, which may be obtained without charge by writing the Fund at Two
Portland Square, Portland, Maine 04101 or by calling 1-800-___-____. See
"Management of the Fund" and "Other Information -- Fund Structure".
SCHRODER ALL-ASIA FUND
<TABLE>
December 30,
For the Year Ended 1993(1) to
October 31, October 31,
--------------------------------------------
1997 1996 1995 1994
------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $13.15 $12.62 $13.84 $14.01(2)
Investment Operations:
Net investment income (loss) (0.05) (0.03) 0.02 (0.01)
Net realized and unrealized gain (loss)
on investments (net of estimated tax
liability on Indian investments) and foreign
currencies and forward currency
contracts. (3.66) 0.56 (1.24) (0.16)
------------ ------------ ------------ ---------------
Total from investment operations (3.71) 0.53 (1.22) (0.17)
------------ ------------ ------------ ---------------
Less dividends from investment income-net (0.09) - - -
------------ ------------ ------------ ---------------
Tender offer costs charged to
paid-in-capital
in excess of par (0.01) -(3) - -
------------ ------------ ------------ ---------------
Net asset value, end of period $9.34 $13.15 $12.62 $13.84
============ ============ ============ ===============
Market value, end of period $8.50 $12.00 $11.125 $12.00
============ ============ ============ ===============
Total investment return based on (4):
Market value (28.62)% 7.87% (7.29)% (20.00)%
============ ============ ============ ===============
Net asset value (28.43)% 4.20% (8.82)% (1.21)%
============ ============ ============ ===============
Ratio/Supplementary Data:
Net assets, end of period (Millions) $150.41 $257.84 $247.49 $271.42
Ratio of expenses to average net assets 1.78% 1.57% 1.65% 1.59%(5)
Ratio of expenses to average net assets
excluding conversion costs 1.59% - - -
Ratio of net investment income (loss) to
average net assets (0.31)% (0.19)% 0.12% (0.10)%(5)
Portfolio turnover rate 39.14% 34.71% 66.79% 19.76%
Average commission rate per share(6) $0.0142 $0.0224 N/A N/A
- -------------------------------------------- -- ------------ -- ------------
</TABLE>
(1) Commencement of investment operations of the Predecessor Fund.
(2) Net of $.09 offering expenses.
(3) Less than $0.01 per share.
(4) For the Predecessor Fund, total investment return is calculated assuming a
purchase of common stock on the opening of the first day and a sale on the
closing of the last day of each period reported. Dividends and
distributions, if any, are assumed for the purposes of this calculation, to
be reinvested at prices obtained under the Predecessor Fund's dividend
reinvestment plan. Total investment return does not reflect brokerage
commissions. Generally, a closed-end fund's total investment return based
on net asset value will be higher than its total investment return based on
market value in periods where there is an increase in the discount or a
decrease in the premium of the market value to the net asset value from the
beginning to the end of such periods. Conversely, a closed-end fund's total
investment return based on net asset value will be lower than total
investment return based on market value in periods where there is a
decrease in the discount or an increase in the premium of the market value
to the net asset value from the beginning to the end of such periods. Total
investment returns for periods of less than one full year are not
annualized.
(5) Annualized.
(6) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which a commission is charged.
<PAGE>
INVESTMENT OBJECTIVE
The Fund's investment objective is to seek long-term capital
appreciation. The Fund seeks to achieve this objective through investment
primarily in equity securities of companies domiciled or doing business in
established and emerging markets in Asia.
The Fund is not a complete investment program. The Fund is intended for
investors who seek the aggressive growth potential of foreign markets and are
willing to bear the special investment risks of investing in those markets.
Investments in the securities of foreign issuers generally involve risks in
addition to the risks associated with investments in the securities of U.S.
issuers. The Fund is not intended for investors whose objective is assured
income or preservation of capital. See "Other Investment Practices and Risk
Considerations."
The Fund currently seeks to achieve its investment objective by
allocating its assets between two Portfolios, Asia and Japan Portfolios. Japan
and Asia Portfolios have investment objectives that are identical to those of
the Fund and have substantially similar investment policies except that Japan
Portfolio invests primarily in securities issued by Japanese companies and Asia
Portfolio invests primarily in securities issued by companies of Asian countries
excluding Japan. There can be no assurance that the Fund or a Portfolio will
achieve its investment objective.
The long term perspective for Asia is promising. In recent years, many
Asian countries have begun programs of economic reform: removing import tariffs,
dismantling trade barriers, deregulating foreign investment, privatizing
state-owned industries, permitting the value of their currencies to float
against the U.S. dollar and other major currencies, and, generally, reducing the
level of state intervention in industry and commerce. As we have seen, the
reforms, from time to time, can produce short term periods of dislocation and
disruption, which can also present important buying opportunities. Corrections
such as these have the potential to make these markets stronger in the long run.
For this reason, investors in the Fund are advised that they need to be able to
bear special risks of these markets and, with respect to the portion of their
assets invested in the Fund, should maintain a long-term investment horizon of
at least [three to] five years.
Nevertheless, in the last nine months, Asian markets have experienced
extraordinary volatility as compared with other regions. During this period many
Asian markets have moved away from fixed currency exchange rates which has led
to higher than expected interest rates and a period of significant adjustment by
both government and corporate sectors to a new operating environment. The
resulting disruption and volatility have caused losses to investors because the
value of many Asian assets, including equity securities and real estate,
depreciated in response to identifiable incidents in currency, country and
company news.
INVESTMENT POLICIES
Although the following information describes the investment policies of
the Fund and the responsibilities of the Trust's Board of Trustees (the "Trust
Board"), it applies generally to the Portfolios and the Schroder Core's Board of
Trustees (the "Core Board"). All percentage limitations on investments apply at
the time of purchase and will not be considered violated unless an excess or a
deficiency occurs or exists immediately after and as a result of the investment.
Additional information concerning the investment policies and restrictions of
the Fund and Portfolios is contained in the SAI.
As a matter of fundamental policy, under normal market conditions the
Fund invests at least 65% of its total assets in equity securities of Asian
companies. The Fund may invest up to 10% of its total assets in debt securities,
including, for example, securities of foreign corporations or governments, or
international organizations, that are unrated or rated below investment grade.
See "Debt Securities" and "Other Investment Practices and Risk Considerations".
Under certain circumstances, the Fund may invest indirectly in equity securities
by investing in other investment companies or similar pooled vehicles. See
"Investment in Other Investment Companies". Under normal market conditions, the
Fund will be invested in at least five Asian countries.
Asian companies in which the Fund may invest include companies that:
(1) are organized under the laws of China, Hong Kong SAR, India, Indonesia,
Japan, Korea, Malaysia, Pakistan, the Philippines, Singapore, Sri Lanka, Taiwan,
or Thailand, or any other countries in the Asian region located south of the
border of the former Soviet Union, east of the borders of Afghanistan and Iran,
north of the Australian sub-continent, and west of the International Date Line
and that, in the future, permit foreign investors to participate in their stock
markets; or (2) as determined by SCMI, either: (a) derive at least 75% of their
revenues from goods produced or sold, investments made or services performed in
Asian countries; or (b) maintain at least 75% of their assets in Asian
countries.
EQUITY SECURITIES. The Fund invests primarily in equity securities,
which include: common stocks, preferred stocks, convertible preferred stocks,
convertible debt securities, and stock rights and warrants to purchase any of
the foregoing, as well as equity interests in trusts, partnerships, joint
ventures, or similar enterprises, and American or Global Depositary Receipts,
and other similar instruments providing for indirect investment in securities of
foreign issuers. Most of the equity securities purchased by the Fund are
expected to be listed on recognized securities exchanges or traded in other
established over-the-counter markets. However, Fund may invest in convertible
preferred stock, warrants and stock rights.
The Fund may also engage in the following investment practices, each of
which involves certain 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.
OTHER INVESTMENT PRACTICES AND RISK CONSIDERATIONS
FOREIGN SECURITIES. Except as otherwise provided in this Prospectus,
there is no limit on the amount of the Fund's assets that may be invested in
foreign securities. Investments in foreign securities entail certain risks.
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 in delivery of securities or
in the recovery of a Portfolio's assets held abroad) and expenses not present in
the settlement of domestic investments. 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.
In addition, there may be a possibility of nationalization or
expropriation of assets, imposition of currency exchange controls, confiscatory
taxation, political or financial instability, currency devaluations, and
diplomatic developments that could affect the value of the Fund's investments in
certain foreign countries. 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 laws of some
foreign countries may limit the Fund's ability to invest in securities of
issuers located in those countries.
Most of the Fund's assets and income are expected to be denominated in
foreign currencies. Currency values are affected by a wide variety of economic
forces and events; thus, fluctuations in values can be difficult, if not
impossible, to predict. If the Fund 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 Fund's assets and the
Fund's income. Further, if the value of a particular currency declines between
the time the Fund incurs expenses in U.S. dollars and the time such expenses are
paid, the amount of such other currency required to be converted into U.S.
dollars in order to pay such expenses will be greater than the amount that would
have been needed at the time the expenses were incurred. The Fund may buy or
sell foreign currencies and options and futures contracts on foreign currencies
for hedging purposes in connection with its foreign investments.
Special tax considerations apply to foreign securities. In determining
whether to invest in foreign securities, SCMI considers the likely impact of
foreign taxes on the net yield available to the Fund and its shareholders.
Income and/or gains received by the Fund 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 Fund will reduce the net income
available for the Fund to allocate to shareholders.
EMERGING MARKETS. The Fund intends to invest in securities of issuers
in Asian emerging market countries and may at times invest a substantial portion
of its assets in such securities. The prices of securities of issuers in
emerging market countries are subject to greater volatility than those of
issuers in more developed countries. Investments in emerging market countries
are subject to the same risks applicable to foreign investments generally,
although those risks may be increased due to conditions in such countries. For
example, the securities market 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 Fund 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 Fund may also invest a
substantial portion of its assets in securities traded in the over-the-counter
markets in Asian countries and not on any exchange, which may affect the
liquidity of the investment and expose the Fund to the credit risk of its
counterparties in trading those investments. Emerging market countries may
experience extremely high rates of inflation, which may adversely affect these
countries' economies and securities markets.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. The Fund may engage in foreign
currency exchange transactions to protect against uncertainty in the level of
future exchange rates. The Fund may engage in foreign currency exchange
transactions in connection with the purchase and sale of portfolio securities
("transaction hedging") and to protect against change in the value of specific
portfolio positions ("position hedging").
The Fund may engage in transaction hedging to protect against a change in
foreign currency exchange rates between the date on which the Fund contracts to
purchase or sell a security and the settlement date, or to "lock in" the U.S.
dollar equivalent of a dividend or interest payment in a foreign currency. The
Fund may purchase or sell a foreign currency on a spot (I.E., cash) basis at the
prevailing spot rate in connection with the settlement of transactions in
portfolio securities denominated in that foreign currency.
If conditions warrant, for transaction hedging purposes the Fund 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. A foreign currency forward contract is a negotiated agreement to
exchange currency at a future time at a rate or rates that may be higher or
lower than the spot rate. Foreign currency futures contracts are standardized
exchange-traded contracts and have margin requirements. In addition, for
transaction hedging purposes the Fund may also purchase or sell exchange-listed
and over-the-counter call and put options on foreign currency futures contracts
and on foreign currencies.
The Fund may engage in position hedging to protect against a decline in
the value relative to the U.S. dollar of the currencies in which its portfolio
securities are denominated or quoted (or an increase in the value of the
currency in which the securities the Fund intends to buy are denominated, when
the Fund holds cash or short-term investments). For position hedging purposes,
the Fund may purchase or sell foreign currency futures contracts, foreign
currency forward contracts and options on foreign currency futures contracts and
on foreign currencies on exchanges or in over-the-counter markets. In connection
with position hedging, the Fund may also purchase or sell foreign currency on a
spot basis.
The Fund's currency hedging transactions may call for the delivery of
one foreign currency in exchange for another foreign currency and may at times
not involve currencies in which its portfolio securities are then denominated.
The Fund will engage in such "cross hedging" activities when SCMI believes that
such transactions provide significant hedging opportunities for the Fund. Cross
hedging transactions by the Fund involve the risk of imperfect correlation
between changes in the values of the currencies to which such transactions
related and changes in the value of the currency or other assets or liability
which is the subject of the hedge.
The decision as to whether and to what extent the Fund will engage in
foreign currency exchange transactions will depend on a number of factors,
including prevailing market conditions, the Fund's holdings, and the
availability of suitable transactions. Accordingly, there can be no assurance
that the Fund will engage in foreign currency exchange transactions at any given
time or from time to time.
For a further discussion of the risks associated with purchasing and
selling futures contracts and options, see "Options and futures portfolio
strategies."
INVESTMENT IN SMALLER COMPANIES. The Fund may invest a portion of its
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 the Fund 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 the Fund to dispose of such securities may be greatly
limited, and the Fund may have to continue to hold such securities during
periods when SCMI would otherwise have sold the security.
DEBT SECURITIES. The Fund may seek capital appreciation through
investment in convertible or non-convertible debt securities. The Fund may
invest in debt securities issued or guaranteed by Asian governments (including
countries, provinces and municipalities) or their agencies and instrumentalities
("governmental entities"); debt securities issued or guaranteed by international
organizations designated or supported by multiple foreign governmental entities
(which are not obligations of foreign governments) to promote economic
reconstruction or development; and debt securities issued by corporations or
financial institutions.
LOWER-RATED DEBT SECURITIES. The Fund may invest in lower-quality,
high-yielding debt securities that may be 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 the Fund may invest may be in
default. The rating services' descriptions of securities in the various rating
categories, including speculative characteristics, are set forth in the SAI.
The values of lower-rated securities fluctuate in response to changes
in interest rates like those of other fixed-income securities. In addition, the
lower ratings of such 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 inability of an issuer to make payments of interest and
principal may also affect the value of these investments. See the SAI.
OPTIONS AND FUTURES PORTFOLIO STRATEGIES. The Fund 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.
The Fund may seek to increase its current return by writing covered call options
and covered put options on its portfolio securities or other securities in which
it may invest. The Fund receives a premium from writing a call or put option,
which increases its return if the option expires unexercised or is closed out at
a net profit. The Fund may also buy and sell put and call options on such
securities for hedging purposes. When the Fund writes a call option on a
portfolio security, it gives up the opportunity to profit from any increase in
the price of the security above the exercise price of the option; when it writes
a put option, the Fund takes the risk that it will be required to purchase a
security from the option holder at a price above the current market price of the
security. The Fund may terminate an option that it has written prior to its
expiration by entering into a closing purchase transaction in which it purchases
an option having the same terms as the option written. The Fund may also from
time to time buy and sell combinations of put and call options on the same
underlying security to earn additional income.
The Fund may buy and sell index futures contracts. An "index future" is
a contract to buy or sell units of a particular index at an agreed price on a
specified future date. Depending on the change in value of the index between the
time when the Fund enters into and terminates an index future transaction, the
Fund may realize a gain or loss. The Fund may also purchase warrants, issued by
banks or other financial institutions, whose values are based on the values from
time to time of one or more securities indices.
The Fund may buy and sell futures contracts on U.S. government
securities and other debt securities. A futures contract on a debt security is a
contract to buy or 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 Fund enters into and terminates a futures contract, the Fund realizes
gain or loss.
The Fund may purchase or sell options on futures contracts or on securities
indices in addition to or as an alternative to purchasing and selling futures
contracts. The Fund may purchase or sell futures contracts, options on futures
contracts, and options on securities indices for hedging purposes or, to the
extent permitted by applicable law, to increase its current return.
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 the Fund may be
unable at times to close out such positions, that hedging transactions may not
accomplish their purpose because of imperfect market correlations, or that SCMI
may not forecast market movements correctly.
The effective use of options and futures strategies is dependent on,
among other things, the Fund's ability to terminate options and futures
positions at times when SCMI deems it desirable to do so. Although the Fund will
enter into an option or futures contract position only if SCMI believes that a
liquid secondary market exists for the option and futures contract, there is no
assurance that the Fund will be able to effect closing transactions at any
particular time or at any acceptable price.
The Fund generally expects that its options and futures contract
transactions will be conducted on recognized exchanges. In certain instances,
however, the Fund may purchase and sell options in the over-the-counter markets.
The Fund'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 the Fund. The Fund will, however, 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
of the over-the-counter markets are satisfactory and the participants are
responsible parties likely to meet their contractual obligations. The Fund will
treat over-the-counter options (and, in the case of options sold by the Fund,
the underlying securities held by the Fund) 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
in the prices of the securities 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
the Fund invests are relatively new and still developing and may be subject to
regulatory restraints, the Fund's ability to engage in transactions using such
investments may be limited. The Fund's ability to engage in hedging transactions
may be limited by a certain regulatory and tax considerations. The Fund's
hedging transactions may affect the character or amount of its allocations to
interestholders.
For more information about any of the options and futures transactions
described above, see the SAI.
SECURITIES LOANS, REPURCHASE AGREEMENTS, AND FORWARD COMMITMENTS. The
Fund may lend portfolio securities amounting to not more than one-third of its
assets to brokers, dealers and financial institutions meeting specified credit
conditions, and may enter into repurchase agreements without limit. These
transactions must be fully collateralized at all times but involve some risk to
the Fund if the other party should default on its obligation and the Fund is
delayed or prevented from recovering the collateral. The Fund 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.
LIQUIDITY. The Fund will not invest more than 15% of its net assets in
securities determined by SCMI to be illiquid. Certain securities that are
restricted as to resale may nonetheless be resold by the Fund 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 the Fund's investment in illiquid securities. There can, however, be no
assurance that the Fund 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.
DEFENSIVE STRATEGIES. At times, SCMI may judge that market conditions
make pursuing the Fund'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 Fund's assets. In implementing these "defensive" strategies, the Fund may
invest without limit in U.S. government securities, other high-quality debt
instruments, and other securities SCMI believes to be consistent with the Fund's
best interests.
NON-DIVERSIFIED INVESTMENTS. Because suitable investments in Asian
countries may be limited, the Fund has classified itself as "non-diversified"
under the 1940 Act so that it may invest more than 5% of its total assets in the
securities of a single issuer. This classification may not be changed without a
shareholder vote. The Fund intends to qualify as a "regulated investment
company" under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"). In order to so qualify, at the close of each quarter of the
taxable year, based on its pro rata share of the securities in the Portfolios,
the Fund will insure that (1) not more than 25% of the market value of the
Fund's total assets will be invested in the securities of a single issuer (other
than the Portfolios); (2) with respect to 50% of the market value of its total
assets, not more than 5% will be invested in the securities of a single issuer
(other than the Portfolios); and (3) the Fund will not own more than 10% of the
outstanding voting securities of a single issuer (other than the Portfolios).
To the extent the Fund makes investments in excess of 5% of its assets
in a particular issuer, its exposure to credit and market risks associated with
that issuer is increased. Also, since a relatively high percentage of the Fund
assets may be invested in the securities of a limited number of issuers, the
Fund may be more susceptible to any single economic, political or regulatory
occurrence than a diversified investment company.
GEOGRAPHIC CONCENTRATION. The Fund may invest more than 25% of its
total assets in issuers located in any one country. To the extent that it does
so, the Fund is more exposed to factors that could adversely affect that
country, including political and economic developments and foreign exchange rate
fluctuations as discussed above. As a result of investing substantially in one
country, the value of the Fund's assets may fluctuate more widely than the value
of shares of a comparable fund with a lesser degree of geographic concentration.
TEMPORARY INVESTMENTS. For cash management purposes, pending investment
in accordance with the Fund's investment objective, or temporary defensive
purposes, the Fund may invest without limitation in (or enter into repurchase
agreements maturing in seven days or less with banks and broker-dealers with
respect to) short-term debt securities, including commercial paper, U.S.
Treasury bills, other short-term U.S. government securities, certificates of
deposit, and bankers' acceptances of U.S. or foreign banks. The Fund also may
hold cash and time deposits denominated in any major foreign currency in foreign
banks. To the extent that the Fund assumes a temporary defensive position, it
may not be pursuing its investment objective. See the SAI for further
information about these securities.
PORTFOLIO TURNOVER. The Fund may engage in short-term trading, but its
portfolio turnover rate is not expected to exceed 100%. High portfolio turnover
and short-term trading involve correspondingly greater commission expenses,
transaction costs and potentially higher amounts of taxable income. See
"Taxation" in the SAI.
MANAGEMENT OF THE FUND
[NEW SCHRODER GRAPHIC OF WORLD MAP]
BOARDS OF TRUSTEES
The business and affairs of the Fund are managed under the direction of
the Trust Board. The business and affairs of the Portfolios are managed under
the direction of the Core Board. Information regarding the trustees and
executive officers of the Trust, as well as Core's trustees and executive
officers, is contained in the SAI under "Management, Trustees and Officers."
ADVISORY FEES AND PORTFOLIO MANAGERS
SCMI, the Fund's and the Portfolios' investment adviser, is a wholly
owned U.S. subsidiary of Schroders Incorporated (doing business in New York as
Schroders Holdings), the wholly owned U.S. holding company subsidiary of
Schroders plc. Schroders plc is the holding company parent of a large world-wide
group of banks and financial services companies.
SCMI also serves as investment adviser to the Fund under an investment
advisory and asset allocation agreement with the Trust (the "Fund Advisory
Agreement"). Under the Fund Advisory Agreement, SCMI is entitled to receive an
investment advisory fee for asset allocation services of 0.20% of the Fund's
average daily net assets, on an annual basis, with respect to assets invested in
the Fund (or another registered investment company). The Fund Advisory
Agreement, however, provides that with respect to assets invested in the Fund,
SCMI is not entitled to receive an investment advisory fee from the Fund for
investment management services. The Fund's investment may be withdrawn from the
Fund at any time if the Trust Board determines that it is in the best interests
of the Fund and its shareholders to do so. In that event, under the Fund
Advisory Agreement, SCMI would be entitled to receive a monthly fee at an annual
rate of 0.90% of the Fund's average daily net assets, on assets managed directly
at the Fund level. The Fund Advisory Agreement between the Trust and SCMI is the
same in all material respects as the Portfolios' Core Advisory Agreement (except
as to the parties and the circumstances under which fees will be paid).
Subject to such policies as the Core Board may determine, SCMI also
furnishes a continuous investment program for each Portfolio and makes
investment decisions on its behalf. For these services, the Investment Advisory
Agreement between SCMI and Schroder Core provides that SCMI is entitled to
receive monthly advisory fees at the annual rates of 0.70% and 0.55% of Asia
Portfolio's and Japan Portfolio's respective average daily net assets.
The Fund currently pursues its investment objective through investment
in Asia and Japan Portfolios. The Fund's investments may be withdrawn from the
Portfolios at any time if the Trust Board determines that it is in the best
interests of the Fund and its shareholders to do so. See "Other Information --
Fund Structure".
The Fund's and the Portfolios' current investment management team includes
Louise Croset, a Trustee and President of the Trust, and Heather F. Crighton,
Vice President of the Trust and Donald M. Farquharson, a Vice President of the
Trust. Ms. Croset and Ms. Crighton are primarily responsible for the day-to-day
management of the investment portfolios, in each case with the assistance of
SCMI's Asian or Japanese investment management teams. Donald H. M. Farquharson,
who is responsible for investment management in the Japanese market, assists Ms.
Croset and Ms. Crighton. Ms. Croset and Ms. Crighton are primarily responsible
for management of Asian securities excluding Japan, while Mr. Farquharson is
primarily responsible for management of Japanese securities.
Ms. Croset has managed the assets of Schroder Asian Growth Fund, Inc. (the
predecessor closed-end fund) since January 1997 and has managed the Fund's and
Portfolios' assets since inception. She has been a First Vice President and
Director of SCMI [since 1993.] She served as a Vice President at Wellington
Management Co. from 1987 to 1993. Ms. Crighton is a Vice President of SCMI and
has been employed by SCMI in the investment research and portfolio management
areas since 1992. Mr. Farquharson is a First Vice President of SCMI. He
originally joined SCMI as an equity analyst in 1988, served as the head of
SCMI's Japanese Equity Research group in Tokyo from 1993 to 1995, and thereafter
has served as fund manager.
ADMINISTRATIVE SERVICES
On behalf of the Fund, the Trust has entered into an administration
agreement with Schroder Advisors and a subadministration agreement with Forum.
Under these agreements, Schroder Advisors and Forum provide certain management
and administrative services necessary for the Fund's operations. For providing
services to the Fund, Schroder Advisors and Forum are each entitled to a monthly
fee at the annual rate of 0.05% of the Fund's average daily net assets. Schroder
Advisors and Forum provide similar services to each Portfolio, for which each is
entitled to a monthly fee at the annual rate of 0.05% of each Portfolio's
average daily net assets.
DISTRIBUTION PLAN
Schroder Advisors, 787 Seventh Avenue, New York, New York 10019, serves
as Distributor of Fund shares under a Distribution Agreement. Schroder Advisors
is a wholly owned subsidiary of Schroders Incorporated, the parent company of
SCMI, and is a registered broker-dealer organized to act as administrator and/or
distributor of mutual funds.
Under the Distribution Agreement, Schroder Advisors has agreed to use
its best efforts to secure purchases of Fund shares in jurisdictions in which
such shares may be legally offered for sale. Schroder Advisors is not obligated
to sell any specific amount of Fund shares. Further, Schroder Advisors has
agreed in the Distribution Agreement to serve without compensation and to pay
from its own resources all costs and expenses incident to the sale and
distribution of Fund shares including expenses for printing and distributing
prospectuses and other sales materials to prospective investors, advertising
expenses, and the salaries and expenses of its employees or agents in connection
with the distribution of Fund shares.
SHAREHOLDER SERVICE PLAN
The Trust has adopted a shareholder service plan (the "Plan"), for the
Fund's Class A Shares. Under the Plan, the Fund may pay Schroder Advisors or
other Service Organizations a servicing fee. Payments under the Plan may be for
various types of services, including: (1) answering customer inquiries regarding
the manner in which purchases, exchanges and redemptions of shares of the Fund
may be effected and other matters pertaining to the Fund's services; (2)
providing necessary personnel and facilities to establish and maintain
shareholder accounts and records; (3) assisting shareholders in arranging for
processing purchase, exchange and redemption transactions; (4) arranging for the
wiring of funds; (5) guaranteeing shareholder signatures in connection with
redemption orders and transfers and changes in shareholder-designated accounts;
(6) integrating periodic statements with other customer transactions; and (7)
providing such other related services as the shareholder may request. Fees are
payable under the Plan at the annual rate of 0.25% of the Fund's average daily
net assets attributable to the Class A Shares.
Payments to a particular Service Organization under the Plan are
calculated by reference to the average daily net assets of Class A Shares owned
beneficially by investors who have a service relationship with the Service
Organization. Some Service Organizations may impose additional or different
conditions on their clients, such as requiring their clients to invest more than
the minimum or subsequent investments specified by the Fund or charging a direct
fee for servicing. If imposed, these fees would be in addition to any amounts
which might be paid to the Service Organization by Schroder Advisors.
Shareholders using Service Organizations are urged to consult them regarding any
such fees or conditions.
EXPENSES
The Fund bears all costs of its operations other than expenses
specifically assumed by SCMI or Schroder Advisors. The costs borne by the Fund
include legal and accounting expenses; Trustees' fees and expenses; insurance
premiums, custodian and transfer agent fees and expenses; expenses of
registering and qualifying the Fund's shares for sale with the SEC and with
various state securities commissions; expenses of obtaining quotations on
portfolio securities and pricing of the Fund's shares; expenses of maintaining
the Trust's and the Fund's legal existence and of shareholders' meetings; and
expenses of preparation and distribution to existing shareholders of reports,
proxies and prospectuses. For assets invested in a Portfolio, the Fund also
bears its ratable share of the Portfolio's expenses, including any investment
advisory fees payable to SCMI. From time to time, SCMI, Schroder Advisors or
Forum may waive voluntarily all or a portion of its fees.
PORTFOLIO TRANSACTIONS
SCMI places orders for the purchase and sale of the Fund's investments
with brokers and dealers it selects and seeks "best execution" of such portfolio
transactions. The Fund may pay brokers 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. Commission rates for
brokerage transactions are fixed on many foreign securities exchanges, which may
cause higher brokerage expenses to accrue to the Fund than would be the case for
comparable transactions effected on U.S. securities exchanges.
Subject to the Fund's policy of obtaining the best price consistent
with quality of execution on transactions, SCMI may employ Schroder Securities
Limited and its affiliates (collectively, "Schroder Securities"), affiliates of
Schroder, to effect transactions of the Fund or a Portfolio on certain foreign
securities exchanges. Because of the affiliation between SCMI and Schroder
Securities, payment of commissions by the Fund or a Portfolio to Schroder
Securities is subject to procedures adopted by the Schroder Core Board designed
to ensure that commissions will not exceed the usual and customary brokers'
commissions. No specific portion of the Fund's brokerage will be directed to
Schroder Securities, and in no event will Schroder Securities receive any
brokerage in recognition of research services.
INVESTMENT IN THE FUND
PURCHASE OF SHARES
Investors may purchase Class A Shares directly from the Trust.
Prospectuses, sales material and account applications can be obtained from the
Trust or through Boston Financial Data Services, Inc., the Fund's transfer agent
(the "Transfer Agent"). See "Other Information -- Shareholder Inquiries".
Investments also may be made through broker-dealers and other financial
institutions that assist their customers in purchasing Class A Shares ("Service
Organizations"). Service Organizations may charge their customers a service fee
for processing orders to purchase or sell shares. Investors wishing to purchase
Class A Shares through their accounts at a Service Organization should contact
that organization directly for appropriate instructions.
The Fund's Class A Shares are offered at the applicable offering price
(the next-determined NAV plus an initial sales charge assessed as described
below) after receipt of a completed account application (at the address set
forth below). The minimum initial investment is $2,500, and the minimum
subsequent investment is $250. All purchase payments are invested in full and
fractional shares. The Fund is authorized to reject any purchase order.
Purchases may be made by mailing a check (in U.S. dollars), payable to
Schroder All-Asia Fund to:
Schroder All-Asia Fund -- Class A Shares
[P.O. Box ____]
Quincy, Massachusetts 02171
For initial purchases, the check must be accompanied by a completed
account application in proper form. Further documentation, such as corporate
resolutions and instruments of authority, may be requested from corporations,
administrators, executors, personal representatives, directors or custodians to
evidence the authority of the person or entity making the subscription request.
Subsequent purchases may be made by mailing a check, by sending a bank
wire, or through a shareholder's Service Organization, as indicated above. All
payments should clearly indicate the shareholder's name and account number.
Investors and Service Organizations (on behalf of their customers) may
transmit purchase payments by Federal Reserve Bank wire directly to the Fund as
follows:
The Chase Manhattan Bank
New York, NY
ABA No.: 021000021
For Credit To: Boston Financial Data Services, Inc.
Account. No.: [__________]
Ref.: Schroder All-Asia Fund -- Class A Shares
Account of: (shareholder name)
Account No.: (shareholder account number)
The wire order must specify the name of the Fund, the shares' class
(I.E., Class A Shares), 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 will be assigned and a
completed account application must be mailed to the Fund before any transaction
will be effected. Wire orders received prior to the close of trading on the New
York Stock Exchange (the "Exchange") on each day that the Exchange is open for
trading (a "Fund Business Day") are processed at the net asset value determined
as of that day. Wire orders received after the close of the Exchange are
processed at the net asset value determined as of the next Fund Business Day.
See "Net Asset Value".
The Fund's Transfer Agent establishes for each shareholder of record an
open account to which all shares purchased and all reinvested dividends and
other distributions are credited. Although most shareholders elect not to
receive share certificates, certificates for full shares can be obtained by
written request to the Fund's Transfer Agent. No certificates are issued for
fractional shares.
The Transfer Agent will deem an account lost if six months have passed
since correspondence to the shareholder's address of record is returned, unless
the Transfer Agent determines the shareholder's new address. When an account is
deemed lost, dividends and other distributions will automatically be reinvested.
In addition, the amount of any outstanding checks for dividends and other
distributions that have been returned to the Transfer Agent will be reinvested
and the checks will be canceled.
SALES CHARGES AND DISCOUNTS
The public offering price of the Fund's Class A Shares is their
next-determined net asset value plus an initial sales charge assessed as follows
(no sales charge is assessed on the reinvestment of dividends or distributions):
<TABLE>
------------------------------------------------------------------------------------------------------------------------
BROKER-
DEALERS'
REALLOWANCE
SALES CHARGE AS A
AS A PERCENTAGE OF PERCENTAGE OF
-------------------------------------------------
AMOUNT OF PURCHASE OFFERING PRICE NET ASSET VALUE* OFFERING PRICE
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $25,000............... 5.25% 5.54% 5.00%
$25,000 but less than $50,000 4.75% 4.99% 4.50%
$50,000 but less than $100,000 4.00% 4.17% 3.75%
$100,000 but less than $250,000 3.00% 3.09% 2.75%
$250,000 but less than $1,000,000 2.00% 2.04% 1.80%
$1,000,000 and over 0.00% 0.00% [1.00%]
-----------------------------------------------------------------------------------------------------------------------
*Rounded to the nearest one-hundredth percent.
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
Schroder Advisors may pay a broker-dealers' reallowance to selected
broker-dealers purchasing Class A Shares as principal or agent, which may
include Service Organizations. Normally, Schroder Advisors reallows discounts to
selected broker-dealers in the amounts indicated in the table above. In
addition, Schroder Advisors may elect to reallow the entire sales charge to
selected broker-dealers for all sales wherein orders are placed with the
Transfer Agent. The broker-dealers' reallowance may be changed from time to
time. SCMI and/or Schroder Advisors may make additional payments (out of their
respective resources) to selected broker-dealers on shares purchased at net
asset value.
In addition, from time to time and at its own expense, Schroder
Advisors may provide compensation, including financial assistance, to dealers in
connection with conferences, sales or training programs for their employees,
seminars for the public, advertising campaigns or other dealer-sponsored special
events. Compensation may include: (1) the provision of travel arrangements and
lodging; (2) tickets for entertainment events; and (3) merchandise.
In some instances, this compensation may be made available only to
certain dealers or other financial intermediaries who have sold or are expected
to sell significant amounts of Class A Shares or who charge an asset based fee
(whether or not they have a fiduciary relationship with their clients).
WAIVERS FOR CERTAIN PARTIES. The sales charge may be waived on
purchases: (1) by any bank, trust company or other institution acting on behalf
of its fiduciary customer accounts or any other account maintained by its trust
department (including a pension, profit sharing or other employee benefit trust
created pursuant to a plan qualified under Section 401 of the Internal Revenue
Code of 1986, as amended); (2) by present and retired trustees and officers of
the Trust; directors, officers and full-time employees of SCMI, Forum, or their
affiliates (and their spouses, parents, children and siblings); (3) by any
registered investment adviser with whom Schroder Advisors has entered into a
share purchase agreement and which is acting on behalf of its fiduciary customer
accounts; or (4) of the Fund's Shares acquired through dividends and
distributions.
REINSTATEMENT PRIVILEGE. If you have redeemed the Fund's Class A
Shares, you may, within 60 days after the redemption, repurchase them without
paying additional sales charges. You or your Service Organization should contact
the Transfer Agent for further information if you wish to exercise this
reinstatement privilege.
INVESTORS IN OTHER FUND FAMILIES. You may make purchases at NAV
(without a sales charge) if: (1) you are investing the proceeds from a
redemption of shares of another [open-end] investment company; (2) on which you
paid a front-end sales charge; and (3) the redemption occurred within [60] days
prior to the date of your purchase of Class A Shares. You or your Service
Organization should contact the Transfer Agent for further information.
REDUCED INITIAL SALES CHARGES. To qualify for a reduced sales charge,
you or your Service Organization must notify the Transfer Agent at the time of
purchase of the your intention to qualify and must provide the Transfer Agent
with sufficient information to verify that the purchase qualifies for a reduced
sales charge. Reduced sales charges may be modified or terminated at any time
and are subject to confirmation of your holdings.
RIGHTS OF ACCUMULATION. If you notify the Transfer Agent or your
Service Organization, you may include the Class A Shares you already own (valued
at the maximum offering price) in calculating the price applicable to your
current purchase.
STATEMENT OF INTENTION. You may obtain reduced sales charges based on
cumulative purchases by executing a written Statement of Intention that
expresses your intent to invest $25,000 or more in the Fund's Class A Shares
within a period of 13 months. Each share purchase under a Statement of Intention
is made at the applicable price for the aggregate shares actually purchased
during the period. If you wish to enter into a Statement of Intention in
conjunction with your initial investment in the Fund's Class A Shares, please
complete the appropriate portion of the account application form. Current Fund
shareholders may obtain a Statement of Intention form by contacting the Transfer
Agent.
RETIREMENT PLANS AND INDIVIDUAL RETIREMENT ACCOUNTS
Fund Class A Shares are offered in connection with tax-deferred
retirement plans. Application forms and further information about these plans,
including applicable fees, are available upon request. Before investing in the
Fund through one of these plans, investors should consult their tax advisors.
The Fund may be used as an investment vehicle for an IRA including
SEP-IRA. An IRA naming State Street Bank and Trust Company as custodian is
available from the Trust or the Transfer Agent. The minimum initial investment
for an IRA is $2,000; the minimum subsequent investment is $250. Under certain
circumstances contributions to an IRA may be tax deductible. IRAs are available
to individuals (and their spouses) who receive compensation or earned income
whether or not they are active participants in a tax-qualified or
government-approved retirement plan. An IRA contribution by an individual or
spouse who participates in a tax-qualified or government-approved retirement
plan may not be deductible, depending upon the individual's income. Individuals
also may establish an IRA to receive a "rollover" contribution of distributions
from another IRA or qualified plan. Tax advice should be obtained before
effecting a rollover.
EXCHANGES
You may exchange the Fund's Class A Shares for "Advisor" class shares
of any fund offered by the Schroder family of funds so long as your investment
meets the initial investment minimum of the fund being purchased and you
maintain the respective minimum account balance in each fund in which you own
shares.
Exchanges between each fund are at net asset value.
For federal income tax purposes an exchange is considered to be a sale
of shares on which you may realize a capital gain or loss. If you hold Class A
Shares through a Service Organization, you must make an exchange through your
Servicing Organization. If you hold Class A , by calling the Transfer Agent at
1-800-___-____ (see "Redemption of Shares -- By Telephone") or by mailing
written instructions to Schroder Series Trust II, P.O. Box [___], Quincy,
Massachusetts 02171. Exchange privileges may be exercised only in those states
where shares of the other funds of the Schroder family of funds may legally be
sold. Exchange privileges may be amended or terminated at any time upon sixty
(60) days' notice.
REDEMPTION OF SHARES
Class A Shares are redeemed at their next determined net asset value
after receipt by the Fund (see the address set forth under "Purchase of Shares")
of a redemption request in proper form. Redemption requests that are received
prior to the close of the Exchange are processed at the net asset value
determined as of that day. Redemption requests that are received after the close
of the Exchange are processed at the net asset value determined the next Fund
Business Day. See "Net Asset Value".
BY TELEPHONE. Redemption requests may be made by telephoning the
Transfer Agent at the telephone number on the cover page of this Prospectus. A
shareholder must provide the Transfer Agent with the class of shares, the dollar
amount or number of shares to be redeemed, shareholder account number, and some
additional form of identification such as a password. A redemption by telephone
may be made only if the telephone redemption privilege option has been elected
on the account application or otherwise in writing. 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 or both may be liable if they do not follow these procedures. Shares for
which certificates have been issued may not be redeemed by telephone. In times
of drastic economic or market change it may be difficult to make redemptions by
telephone. If a shareholder cannot reach the Transfer Agent by telephone,
redemption requests may be mailed or hand-delivered to the Transfer Agent.
WRITTEN REQUESTS. Redemptions may be made by letter to the Fund
specifying the class of Shares, the dollar amount or number of Shares to be
redeemed, and the shareholder account number. The letter must also be signed in
exactly the same way the account is registered (if there is more than one owner
of the Shares, all must sign) and, in certain cases, signatures must be
guaranteed by an institution that is acceptable to the Transfer Agent. Such
institutions include certain banks, brokers, dealers (including municipal and
government securities brokers and dealers), credit unions and savings
associations. Notaries public are not acceptable. Further documentation may be
requested to evidence the authority of the person or entity making the
redemption request. Questions concerning the need for signature guarantees or
documentation of authority should be directed to the Fund at the above address
or by calling the telephone number appearing on the cover of this Prospectus.
If Class A Shares to be redeemed are held in certificate form, the
certificates must be enclosed with the redemption request and the assignment
form on the back of the certificates (or an assignment separate from the
certificates but accompanied by the certificates) must be signed by all owners
in exactly the same way the owners' names are written on the face of the
certificates. Requirements for signature guarantees and/or documentation of
authority as described above could also apply. For your protection, the Trust
suggests that certificates be sent by registered mail.
ADDITIONAL REDEMPTION INFORMATION. Checks for redemption proceeds
normally are mailed within seven days. No redemption proceeds are mailed until
checks in payment for the purchase of the Class A Shares to be redeemed have
been cleared, which may take up to 15 calendar days from the purchase date.
Unless other instructions are given in proper form, a check for the proceeds of
a redemption are sent to the shareholder's address of record.
The Fund may suspend the right of redemption during any period when:
(1) trading on the Exchange is restricted or that exchange is closed; (2) the
SEC has by order permitted such suspension; or (3) an emergency (as defined by
rules of the SEC) exists making disposal of portfolio investments or
determination of the Fund's net asset value not reasonably practicable.
If the Trust Board determines that it would be detrimental to the best
interest of the remaining shareholders of the Fund to make payment wholly or
partly in cash, the Fund may redeem Class A Shares in whole or in part by a
distribution in kind of portfolio securities in lieu of cash. The Fund will,
however, redeem Class A Shares solely in cash up to the lesser of $250,000 or 1%
of net assets during any 90-day period for any one shareholder. In the event
that payment for redeemed Class A Shares is made wholly or partly in portfolio
securities, the shareholder may be subject to additional risks and costs in
converting the securities to cash.
See "Additional Purchase and Redemption Information" in the SAI.
The proceeds of a redemption may be more or less than the amount
invested and, therefore, a redemption may result in a gain or loss for federal
income tax purposes.
Due to the relatively high cost of maintaining smaller accounts, the
Fund reserves the right to redeem shares in any account (other than an IRA) if
at any time the account does not have a value of at least $2,000, unless the
value of the account falls below that amount solely as a result of market
activity. Shareholders will be notified that the value of the account is less
than the required minimum and be allowed at least 30 days to make an additional
investment to increase the account balance to at least the required minimum
amount.
NET ASSET VALUE
The NAV per share of the Fund is calculated for Class A Shares as of
the close of trading on the Exchange, Monday through Friday, each Fund Business
Day, which excludes the following U.S. 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. NAV per share is calculated by
dividing the aggregate value of the Fund's assets, less the liabilities charged
to the Fund, if any, by the number of outstanding shares of the Fund.
Generally, securities that are listed on recognized stock exchanges are
valued at the last reported sale price, on the day when the securities are
valued (the "Valuation Day"), on the primary exchange on which the securities
are principally traded. Listed securities traded on recognized stock exchanges
for which there were no sales on the Valuation Day are valued at the last sale
price on the preceding trading day or at closing mid-market prices. Securities
traded in over-the-counter markets are valued at the most recent reported
mid-market price. 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 Core Board.
Trading in securities on non-U.S. exchanges and over-the-counter
markets may not take place on every day that the Exchange is open for trading.
Furthermore, trading takes place in various foreign markets on days on which the
Fund's NAV is not calculated. If events materially affecting the value of
foreign securities occur between the time when their price is determined and the
time when NAV is calculated, such securities may be valued at fair value as
determined in good faith by using methods approved by the Core Board.
All assets and liabilities of the Fund denominated in foreign
currencies are valued in U.S. dollars based on the exchange rate last quoted by
a major bank prior to the time when the Fund's NAV is calculated.
DIVIDENDS, DISTRIBUTIONS AND TAXES
THE FUND
The Fund intends to comply with the provisions of the Internal Revenue
Code of 1986, as amended, applicable to regulated investment companies. By
complying therewith, the Fund will not have to pay federal income tax on that
part of its income or net realized capital gain that is distributed to
shareholders. The Fund intends to distribute substantially all of its income and
net realized capital gain, and therefore, intends not to be subject to federal
income tax.
Dividends and capital-gain distributions on Class A Shares are
reinvested automatically in additional Class A Shares at net asset value unless
the shareholder has elected in the account application, or otherwise in writing,
to receive dividends and other distributions in cash.
After every dividend and other distribution, the value of a Class A
Share declines by the amount of the distribution. Purchases made shortly before
a dividend or other distribution include in the purchase price the amount of the
distribution, which will be returned to the investor in the form of a taxable
distribution.
Dividends from the Fund's income generally will be taxable to
shareholders as ordinary income, whether the dividends are invested in
additional Class A Shares or received in cash. Distributions by the Fund of any
net long-term capital gain will be taxable to a shareholder as long-term capital
gain regardless of how long the shareholder has held the Class A Shares. Such
distributions will qualify for the new reduced rates for capital gains on assets
held for more than 18 months to the extent they represent gains on the sale of
such assets. Each year the Trust will notify shareholders of the tax status of
dividends and other distributions.
Dividends from the Fund are generally not expected to qualify for the
dividends-received deduction for corporate shareholders because the Fund does
not generally expect to receive dividends from domestic corporations.
A redemption of Class A Shares may result in taxable gain or loss to
the redeeming shareholder, depending on whether the redemption proceeds are more
or less than the shareholder's basis in the redeemed Class A Shares. If Class A
Shares are redeemed at a loss after being held for six months or less, the loss
will be treated as a long-term, rather than a short-term, capital loss to the
extent of any capital gain distributions received on those Class A Shares.
The Fund must withhold 31% from dividends, capital gain distributions
and redemption proceeds payable to any individuals and certain other
noncorporate shareholders who do not furnish the Fund with a correct taxpayer
identification number. Withholding at that rate also is required from dividends
and capital gain distributions payable to such shareholders who otherwise are
subject to backup withholding. Depending on the residence of a shareholder for
tax purposes, distributions from the Fund may also be subject to state and local
taxes, including withholding taxes.
In an effort to adhere to certain tax requirements, the Fund may have
to limit its investment activity in some types of instruments.
If the Fund's dividends exceed its taxable income in any year, all or a
portion of the Fund's dividends may be treated as a return of capital to
shareholders for tax purposes. Any return of capital will reduce the cost basis
of your shares, which will result in a higher reported capital gain or a lower
reported capital loss when you sell your shares. Shareholders will be notified
by the Trust if a distribution included a return of capital.
EFFECT OF FOREIGN TAXES. Foreign governments may impose taxes on the Fund
and its investments, which generally reduce the Fund's income.
If the Fund is eligible to do so, it ordinarily expects to elect to
permit its shareholders to take a credit (or a deduction), subject to certain
limitations, for the Fund's share of foreign income taxes paid by the Fund. If
the Fund does make such an election, its shareholders would include as gross
income in their federal income tax returns both: (1) distributions received from
the Fund; and (2) the amount that the Fund advises is their pro rata portion of
foreign income taxes paid with respect to or withheld from, dividends and
interest paid to the Fund from its foreign investments. Shareholders then would
be entitled, subject to certain limitations, to take a foreign tax credit
against their federal income tax liability for the amount of such foreign taxes
or else to deduct such foreign taxes as an itemized deduction from gross income.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting the Fund and its U.S. shareholders; see the
SAI for further information. Shareholders should consult their own tax advisors
as to the tax consequences of their ownership of Class A Shares, including with
respect to the applicability of state, local and non-U.S. taxes.
THE PORTFOLIOS
Neither Portfolio is required to pay federal income tax because it is
classified as a partnership for federal income tax purposes. All interest,
dividends, gains and losses of a Portfolio will be deemed to have been "passed
through" to the Fund in proportion to the Fund's holdings in the Portfolio,
regardless of whether such interest, dividends or gains have been distributed by
the Portfolio.
Each Portfolio intends to conduct its operations so as to enable the
Fund, if it invests all of its assets in the Portfolios, to qualify as a
regulated investment company.
OTHER INFORMATION
CAPITALIZATION AND VOTING
The Trust was organized on December 4, 1997, as a Delaware business
trust, and is the successor to Schroder Asian Growth Fund, Inc., a Maryland
corporation. The Trust has authority to issue an unlimited number of shares of
beneficial interest. The Trust Board may, without shareholder approval, divide
the authorized shares into an unlimited number of separate portfolios or series
(such as the Fund) and may divide such portfolios or series into classes of
shares (such as the Class A Shares), and the costs of doing so are borne by the
Trust or series in accordance with the Trust Instrument. The Trust currently
consists of one separate Fund.
When issued in accordance with the terms of the prospectus, Class A
Shares are fully paid, non-assessable, and have no preemptive rights.
Shareholders have non-cumulative voting rights, which means that the holders of
more than 50% of the Trust's outstanding shares voting for the election of
Trustees can elect 100% of the Trustees if they choose to do so. A shareholder
is entitled to one vote for each full share held (and a fractional vote for each
fractional share held). Each Class A Share has equal voting rights.
There normally are no meetings of shareholders to elect Trustees unless
and until such time as less than a majority of the Trustees holding office have
been elected by shareholders. However, the holders of not less than a majority
of the outstanding Shares of the Trust may remove any person serving as a
Trustee.
REPORTS
The Trust will send each Fund shareholder a semi-annual report and an
audited annual report, when available, containing the Fund's financial
statements.
PERFORMANCE
The Fund may include quotations of average annual total return,
cumulative total return and other performance measures for shares in
advertisements or reports to shareholders or prospective investors. Average
annual total return is based upon the overall dollar or percentage change in
value of a hypothetical investment each year over specified periods. Average
annual total returns reflect the deduction of the Fund's expenses (on an annual
basis) and assumes investment and reinvestment of all dividends and
distributions at NAV. Cumulative total returns are calculated similarly except
that the total return is aggregated over the relevant period instead of
annualized.
Performance calculations may also be compared to various unmanaged
securities indices, groups of mutual funds tracked by mutual fund ratings
services, or other general economic indicators. Unmanaged indices may assume the
reinvestment of dividends but do not reflect deductions for administrative and
management costs and expenses.
Performance information represents only past performance and does not
necessarily indicate future results. For a description of the methods used to
determine total return and other performance measures for the Fund, see the SAI.
CUSTODIAN AND TRANSFER AGENT
The Chase Manhattan Bank, Global Custody Division, is custodian of the
Fund's and of the Portfolios' assets. Boston Financial Data Services, Inc.
serves as the Fund's transfer agent and dividend disbursing agent.
SHAREHOLDER INQUIRIES
Inquiries about the Fund should be directed to:
Schroder All-Asia Fund
[P.O. Box ____]
Quincy, Massachusetts 02171
Information about specific shareholder accounts may be obtained from
the Transfer Agent by calling 1-800-___-____ or 1-617-___-____.
FUND STRUCTURE
The Fund's predecessor is Schroder Asian Growth Fund, Inc., a
closed-end fund whose conversion to open-end status was approved by its
shareholders October 24, 1997. Conversion of Schroder Asian Growth Fund, Inc.
becomes complete with the Trust's issuance of Class A Shares to the shareholders
of the predecessor closed-end fund on a one-to-one basis.
CLASSES OF SHARES. The Fund has one class of shares, Class A Shares.
Class A Shares are offered to individual investors, in most cases through
service organizations. Another class of shares may be issued in the future with
different investment minimums, sales load (if any) and expenses. Each Share is
entitled to participate equally in dividends and other distributions and the
proceeds of any liquidation of the Fund.
THE PORTFOLIOS. The Fund currently seeks to achieve its investment
objective by allocating all of its investable assets in two Portfolios.
Accordingly, each Portfolio directly acquires its own securities, and the Fund
acquires an indirect interest in those securities. Each Portfolio is a separate
series of Schroder Core, a business trust organized under the laws of the State
of Delaware in September 1995. Schroder Core is registered under the 1940 Act as
an open-end, management investment company and currently has eight separate
series. The assets of each Portfolio, belong only to, and the liabilities of the
Portfolio are borne solely by, the Portfolio and no other portfolio of Schroder
Core.
The Fund's investment in a Portfolio is in the form of a
non-transferable beneficial interest. As of [February __], 1998, the Fund was
the only institutional investor in either Portfolio. A Portfolio may permit
other investment companies or other qualified investors to invest in it. All
investors in a Portfolio invest at the net asset value per interest of the
Portfolio and generally on the same terms and conditions as the Fund (except as
described below regarding indemnification of the Portfolio and Schroder Core's
trustees by certain investors including registered investment companies, under
certain circumstances). All investors in a Portfolio bear a proportionate share
of the Portfolio's expenses.
Neither Portfolio normally holds meetings of investors except as
required by the 1940 Act. Each investor in a Portfolio is entitled to vote in
proportion to its relative beneficial interest in the Portfolio. On issues
subject to a vote of investors, as permitted under the 1940 Act and other
applicable law, the Board may solicit proxies from the Fund's shareholders and
vote the Fund's interest in a Portfolio based upon the vote of its shareholders
or the Board may determine to vote the Fund's interests in a Portfolio in the
same proportion as the vote of all other interestholders in the Portfolio. If
there are other investors in a Portfolio, there can be no assurance that any
issue that receives a majority of the votes cast by Fund shareholders would
receive a majority of votes cast by all investors in the Portfolio; indeed, if
other investors hold a majority interest in the Portfolio, they would have
voting control of the Portfolio.
Neither Portfolio sells its shares directly to members of the general
public. Another investor in the Portfolios, such as an investment company, that
would offer its shares to members of the general public would not be required to
sell its shares at the same public offering price as the Fund and could have a
different asset allocation in the Portfolios and different expenses and other
fees than the Fund. Fund shareholders, therefore, are likely to have different
returns than shareholders in another investment company that invests in the
Portfolios. There are currently no such other investment companies that offers
shares to the general public. Information regarding any such funds in the future
will be available from Schroder Core by calling Forum Financial Corp. at
1-800-730-2932.
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. Schroder Core, its trustees and
certain of its officers are required to sign the registration statement and any
amendments of the Trust and may be required to sign the registration statements
of certain other investors in the Portfolio. In addition, under federal
securities law, Schroder Core may be liable for misstatements or omissions of a
material fact in any proxy soliciting material of a publicly offered investor in
Schroder Core, including the Fund. Each registered investment company or series
thereof, that invests in a Portfolio, including the Trust, is required to
indemnify Schroder Core and its trustees and officers ("Schroder Core
Indemnitees") against certain claims.
Indemnified claims are those brought against Schroder Core 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
Schroder Core and was supplied to the investor by Schroder Core. Similarly,
Schroder Core will indemnify each investor in a Portfolio, including the Fund,
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
Schroder Core that is supplied to the investor by Schroder Core. In addition,
each registered investment company investor in a Portfolio will indemnify each
Schroder Core 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 Schroder Core. The purpose of
these cross-indemnity provisions is principally to limit the liability of
Schroder Core to information that it knows or should know and can control. With
respect to other prospectuses and other offering documents and proxy materials
of investors in Schroder Core, its liability is similarly limited to information
about and supplied by it.
CERTAIN RISKS OF INVESTING IN A PORTFOLIO. The Fund's investment in a
Portfolio may be affected by the actions of other large investors in the
Portfolio, if any. For example, if a Portfolio had a large investor other than
the Fund that redeemed its interest in the Portfolio, its remaining investors
(including the Fund) might, as a result, experience higher pro rata operating
expenses, thereby producing lower returns.
The Fund may withdraw its entire investment from a Portfolio at any
time, if the Trust Board determines that it is in the best interests of the Fund
and its shareholders to do so. The Fund might withdraw, for example, if there
were other investors in a Portfolio with power to, and who did by a vote of the
shareholders of all investors (including the Fund), change the investment
objective or policies of the Portfolio in a manner not acceptable to the Trust
Board. A withdrawal could result in a distribution in kind of portfolio
securities (as opposed to a cash distribution) by a Portfolio. That distribution
could result in a less diversified portfolio of investments for the Fund and
could affect adversely the liquidity of the Fund's investment portfolio. If the
Fund decided to convert those securities to cash, it would likely incur
brokerage fees or other transaction costs. If the Fund withdrew its investment
from a Portfolio, the Trust Board would consider appropriate alternatives,
including the management of the Fund's assets in accordance with its investment
objective and policies by Schroder or the investment of all of the Fund's
investable assets in another pooled investment entity having substantially the
same investment objective as the Fund. The inability of the Fund to find a
suitable replacement investment, if the Board decided not to permit SCMI to
manage the Fund's assets, could have a significant impact on shareholders of the
Fund.
Each investor in a Portfolio, including the Fund, may be liable for all
obligations of the Portfolio. The risk to an investor in a Portfolio of
incurring financial loss on account of such liability, however, is limited to
circumstances in which the Portfolio is unable to meet its obligations, the
occurrence of which Schroder considers to be quite remote. Upon liquidation of a
Portfolio, investors would be entitled to share pro rata in the net assets of
the Portfolio available for distribution to investors.
<PAGE>
INVESTMENT ADVISER
Schroder Capital Management International Inc.
787 Seventh Avenue, 34th Floor
New York, New York 10019
ADMINISTRATOR & DISTRIBUTOR
Schroder Fund Advisors Inc.
787 Seventh Avenue, 34th Floor
New York, New York 10019
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY ANY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE A
PROSPECTUS.
SCHRODER ALL-ASIA FUND
STATEMENT OF ADDITIONAL INFORMATION
[FEBRUARY __,] 1998
[GRAPHIC OMITTED]
INVESTMENT ADVISER
Schroder Capital Management International Inc. ("SCMI")
ADMINISTRATOR AND DISTRIBUTOR
Schroder Fund Advisors Inc. ("Schroder Advisors")
SUBADMINISTRATOR
Forum Administrative Services, LLC ("Forum")
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Boston Financial Data Services, Inc. ("BFDS")
GENERAL INFORMATION: 1-800-
ACCOUNT INFORMATION: 1-800-
FAX:
Class A Shares of Schroder All-Asia Fund (the "Fund") are offered for sale at
the offering price (net asset value plus the applicable sales charge) as an
investment vehicle for individual investors, in most cases through Service
Organizations (as defined in the prospectus).
This Statement of Additional Information ("SAI") is not a prospectus and is
authorized for distribution only when preceded or accompanied by the Fund's
current prospectus dated [February __,] 1998, as may be amended from time to
time (the "Prospectus"). This SAI contains additional and more detailed
information than that set forth in the Prospectus and should be read in
conjunction with the Prospectus and retained for future reference. The
Prospectus and this SAI are available along with other related materials for
reference on the SEC's Internet Web Site (http://www.sec.gov). All terms used in
this SAI that are defined in the Prospectus have the meaning assigned in the
Prospectus. You may obtain an additional copy of the Prospectus without charge
by writing to the Fund at Two Portland Square, Portland, Maine 04101 or calling
the numbers listed above.
<PAGE>
TABLE OF CONTENTS
INTRODUCTION........................................3
INVESTMENT POLICIES.................................3
Warrants and Stock Rights...........................3
American Depositary Receipts ("ADRs")...............3
Debt Securities.....................................4
Convertible Securities..............................4
Debt-to-Equity Conversions..........................4
Brady Bonds.........................................5
Zero-coupon and Payment in Kind Bonds...............5
Indexed Securities..................................5
Forward Foreign Currency Exchange Contracts.........5
Options and Futures Transactions....................6
Options on Foreign Currencies.......................7
Covered Call Writing................................8
Covered Put Writing.................................9
Purchasing Call and Put Options.....................9
Risks of Options Transactions.......................9
Futures Contracts..................................10
Interest-Rate Futures Contracts....................11
Currency Futures Contracts.........................11
Index Futures Contracts............................12
Options on Futures Contracts.......................12
Limitations on Futures Contracts and
Options on Futures Contracts.....................13
Risks of Transactions in Futures Contracts
and Related Options..............................13
Interest-Rate Transactions.........................14
When-Issued and Delayed Delivery Securities
and Forward Commitments..........................15
When, As and If Issued Securities..................15
Investment in Other Investment
Companies or Vehicles............................15
Temporary Investments..............................15
Short-Term Debt Securities.........................16
Repurchase Agreements..............................16
Restricted Securities..............................16
Rule 144A Securities...............................17
U.S. Government Securities.........................17
Bank Obligations...................................17
Loans of Portfolio Securities......................17
RISK CONSIDERATIONS................................18
INVESTMENT RESTRICTIONS............................20
MANAGEMENT.........................................23
Officers and Trustees..............................23
Investment Adviser.................................25
Administrative Services............................26
Distribution of Fund Shares........................26
Shareholder Service Plan and
Service Organizations............................27
Fund Accounting....................................27
Fees and Expenses..................................28
PORTFOLIO TRANSACTIONS.............................28
Investment Decisions...............................28
Brokerage and Research Services....................29
ADDITIONAL PURCHASE AND
REDEMPTION INFORMATION........................30
Determination of NAV Per Share.....................30
Redemption In-Kind.................................31
TAXATION...........................................31
OTHER INFORMATION..................................34
Organization.......................................34
Capitalization and Voting..........................35
Performance Information............................35
Principal Shareholders.............................36
Custodian..........................................36
Transfer Agent and Dividend Disbursing Agent.......36
Legal Counsel......................................36
Independent Accountant.............................36
Registration Statement.............................37
Financial Statements...............................37
APPENDIX..........................................A-1
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INTRODUCTION
Schroder All-Asia Fund is a non-diversified, separately managed series
of Schroder Series Trust II (the "Trust"), an open-end management investment
company currently consisting of one separate series.
The Fund's investment objective is to seek to achieve long-term capital
appreciation. It seeks to achieve its objective through investment primarily in
equity securities of companies domiciled or doing business in established and
emerging markets in Asia. Currently, the Fund seeks to achieve its objective
through allocation of substantially all of its investments to Schroder Asian
Growth Portfolio ("Asia Portfolio") and Schroder Japan Portfolio ("Japan
Portfolio", together with Asia Portfolio, the "Portfolios"). Each Portfolio has
the same investment objective as the Fund and substantially similar investment
policies, except that Japan Portfolio invests primarily in securities issued by
Japan companies and Asia Portfolio invests primarily in securities issued by
Asian companies (as defined in the Prospectus) excluding Japan. There is no
assurance that the Fund or a Portfolio will achieve its objective. Furthermore,
investing in foreign securities issuers involves special risks in addition to
those associated with investments in securities of U.S. issuers.
INVESTMENT POLICIES
The Fund's investment objective and policies authorize it to invest in
certain types of securities and to engage in certain investment techniques as
identified under "Investment Objective" and "Investment Policies" in the
Prospectus. The following information supplements the discussion found in those
sections by providing additional information or elaborating upon the discussion
there. Each of Asia and Japan Portfolios has an investment objective identical
to that of the Fund and substantially similar investment policies but each
invests in distinctly different markets. Accordingly, investment policies are
discussed with respect to the Fund only. The fundamental investment restrictions
applicable to the Fund are set forth in " Investment Restrictions " in this SAI.
As described in the Prospectus, Asia Portfolio invests primarily in
equity securities of Asian companies excluding Japan, and Japan Portfolio
invests primarily in equity securities of Japan companies. Asian Companies are
those companies domiciled or doing business in established and emerging markets
in Asia. Equity securities include: common stocks, preferred stocks, convertible
preferred stocks, convertible debt securities, and stock rights and warrants to
purchase any of the foregoing, as well as equity interests in trusts,
partnerships, joint ventures, or similar enterprises, and American, Global, and
other types of Depositary Receipts, and other similar instruments providing for
indirect investment in securities of foreign issuers.
WARRANTS AND STOCK RIGHTS. The Fund may invest in warrants, which are
options to purchase an equity security at a specified price (usually
representing a premium over the applicable market value of the underlying equity
security at the time of the warrant's issuance). Investments in warrants involve
certain risks, including the possible lack of a liquid market for the resale of
the warrants, potential price fluctuations as a result of speculation or other
factors and failure of the price of the underlying security to reach a level at
which the warrant can be prudently exercised (in which case the warrant may
expire without being exercised, resulting in the loss of the Fund's entire
investment therein). The prices of warrants do not necessarily move parallel to
the prices of the underlying securities. Warrants have no voting rights, receive
no dividends and have no rights with respect to the assets of the issuer.
In addition, the Fund may invest to a limited degree in stock rights. A
stock right is an option given to a shareholder to buy additional shares at a
predetermined price during a specified time period. Currently, the Fund does not
intend to invest more than 5% of its total net assets (at the time of
investment) in stock rights.
AMERICAN DEPOSITARY RECEIPTS ("ADRS"). As described in the Prospectus,
the Fund may invest in American Depositary Receipts, European Depositary
Receipts, and other similar instruments providing for indirect investment in
securities of foreign issuers. Due to the absence of established securities
markets in certain foreign countries and restrictions in certain countries on
direct investment by foreign entities, the Fund may invest in certain issuers
through the purchase of sponsored and unsponsored ADRs or other similar
securities, such as American Depositary Shares, Global Depositary Shares or
International Depositary Receipts. ADRs are receipts typically issued by U.S.
banks evidencing ownership of the underlying securities into which they are
convertible. These securities may or may not be denominated in the same currency
as the underlying securities. Unsponsored ADRs may be created without the
participation of the foreign issuer. Holders of unsponsored ADRs generally bear
all the costs of the ADR facility, whereas foreign issuers typically bear
certain costs in a sponsored ADR. The bank or trust company depository of an
unsponsored ADR may be under no obligation to distribute shareholder
communications received from the foreign issuer or to pass through voting
rights.
DEBT SECURITIES. The Fund may seek capital appreciation through
investment in foreign non-convertible or convertible debt securities. See
"Convertible Securities". Capital appreciation in debt securities may arise as a
result of a favorable change in relative foreign exchange rates, in relative
interest-rate levels, or in the creditworthiness of issuers. The receipt of
income from debt securities is incidental to the Fund's objective of long-term
capital appreciation. Such income can be used, however, to offset the operating
expenses of the Fund. In accordance with its investment objective, the Fund will
not seek to benefit from anticipated short-term fluctuations in currency
exchange rates. The Fund also may invest to a certain extent in debt securities
in order to participate in debt-to-equity conversion programs incident to
corporate reorganizations.
The Fund may invest in debt securities issued or guaranteed by (i)
governments (including countries, provinces and municipalities) or their
agencies ("governmental entities")of Asian Countries; or (ii) Asian Companies;
or (iii) international organizations designated or supported by multiple foreign
governmental entities (which are not obligations of foreign governments) to
promote economic reconstruction or development.
The Fund may invest up to 10% of its total assets in debt securities,
including securities that are unrated or rated below investment grade (below
"Baa" by Moody's or "BBB" by S&P. (For a further description of S&P's and
Moody's securities ratings, please see the Appendix). Note that even debt
securities rated "Baa" by Moody's are considered to have speculative
characteristics. Below investment-grade securities (and unrated securities of
comparable quality) ("high yield/high risk securities") are predominantly
speculative with respect to the capacity to pay interest and repay principal,
and generally involve a greater volatility of price than securities in higher
rating categories. These securities are commonly referred to as "junk" bonds.
The risks associated with junk bonds are generally greater than those associated
with higher-rated securities. (See "Risk Considerations -- High Yield/High Risk
Securities".) The Fund is not obligated to dispose of securities due to rating
changes by Moody's, S&P or other rating agencies. Neither Portfolio is
authorized to purchase debt securities that are in default.
CONVERTIBLE SECURITIES. The Fund may invest in convertible preferred
stocks and convertible debt securities ("convertible securities"). A convertible
security is a bond, debenture, note, preferred stock or other security that may
be converted into or exchanged for a prescribed amount of common stock of the
same or a different issuer within a particular period of time at a specified
price or formula. Convertible securities rank senior to common stocks in a
corporation's capital structure and, therefore, carry less risk than the
corporation's common stock. The value of a convertible security is a function of
its "investment value" (its value as if it did not have a conversion privilege),
and its "conversion value" (the security's worth if it were to be exchanged for
the underlying security, at market value, pursuant to its conversion privilege).
Because convertible debt is convertible into stock under specified conditions,
the value of convertible debt also is affected normally by changes in the value
of the issuer's equity securities.
DEBT-TO-EQUITY CONVERSIONS. The Fund may invest up to 5% of its net
assets in debt-to-equity conversions. Debt-to-equity conversion programs are
sponsored in varying degrees by certain foreign countries and permit investors
to use external debt of a country to make equity investments in local companies.
Many conversion programs relate primarily to investments in transportation,
communication, utilities and similar infrastructure-related areas. The terms of
the programs vary from country to country but include significant restrictions
on the application of proceeds received in the conversion and on the
repatriation of investment profits and capital. When inviting conversion
applications by holders of eligible debt, a government usually specifies the
minimum discount from par value that it will accept for conversion. SCMI
believes that debt-to-equity conversion programs may offer opportunities to
invest in otherwise restricted equity securities that have a potential for
significant capital appreciation. SCMI, therefore, may invest the Fund's assets
to a limited extent in such programs under appropriate circumstances. There can
be no assurance that debt-to-equity conversion programs will continue to be
successful or that the Fund will be able to convert all or any of its emerging
market debt portfolio into equity investments.
BRADY BONDS. The Fund may invest a portion of its assets in Brady
Bonds, which are securities created through the exchange of existing commercial
bank loans to sovereign entities for new obligations in connection with debt
restructurings. Brady Bonds have been issued only recently and, therefore, do
not have a long payment history. Brady Bonds may have collateralized and
uncollateralized components, are issued in various currencies, and are actively
traded in the over-the-counter secondary market. Brady Bonds are not considered
U.S. government securities. In light of the residual risk associated with the
uncollateralized portions of Brady Bonds and, among other factors, the history
of defaults with respect to commercial bank loans by public and private entities
of countries issuing Brady Bonds, investments in Brady Bonds are considered
speculative. Brady Bonds acquired by the Fund could be subject to restructuring
arrangements or to requests for new credit, which could cause the Fund to suffer
a loss of interest or principal on its holdings.
ZERO-COUPON AND PAYMENT IN KIND BONDS. The Fund may at times invest in
" 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.
The Fund will not necessarily dispose of a security when its debt
rating is reduced below its rating at the time of purchase, although SCMI will
monitor the investment to determine whether continued investment in the security
will assist in meeting the Fund's investment objective. If a security's rating
is reduced below investment grade, an investment in that security may entail the
risks of lower-rated securities described below.
INDEXED SECURITIES. The Fund may invest in indexed securities, the
values of which are linked to currencies, interest rates, commodities, indices,
or other financial indicators. Investment in indexed securities involves certain
risks. In addition to the credit risk of the securities issuer and normal risks
of price changes in response to changes in interest rates, the principal amount
of indexed securities may decrease as a result of changes in the value of the
reference instruments. Also, in the case of certain indexed securities where the
interest rate is linked to a reference instrument, the interest rate may be
reduced to zero and any further declines in the value of the security may then
reduce the principal amount payable on maturity. Further, indexed securities may
be more volatile than the reference instruments underlying indexed securities.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. To hedge against adverse
price movements in the securities held in its portfolio and the currencies in
which they are denominated (as well as in the securities it might wish to
purchase and their denominated currencies), the Fund may engage in transactions
in forward foreign currency exchange contracts. A forward foreign currency
exchange contract ("forward contract") is an obligation to purchase or sell a
currency at a future date (which may be any fixed number of days from the date
of the contract agreed upon by the parties) at a price set at the time of the
contract. The Fund may enter into forward contracts as a hedge against
fluctuations in future foreign exchange rates.
Currently, only a limited market, if any, exists for hedging
transactions relating to currencies in many emerging market countries or to
securities of issuers domiciled or principally engaged in business in emerging
market countries. This may limit the Fund's ability to hedge its investments
effectively in those emerging markets. Hedging against a decline in the value of
a currency does not eliminate fluctuations in the prices of portfolio securities
or prevent losses if the prices of such securities decline. Such transactions
also limit the opportunity for gain if the value of the hedged currencies should
rise. In addition, it may not be possible for the Fund to hedge against a
devaluation that is so generally anticipated that the Fund is not able to
contract to sell the currency at a price above the devaluation level it
anticipates.
The Fund will enter into forward contracts under certain instances.
When the Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may, for example, wish to secure the price
of the security in U.S. dollars or some other foreign currency with. By entering
into a forward contract for the purchase or sale (for a fixed amount of dollars
or other currency) of the amount of foreign currency involved in the underlying
security transactions, the Fund will be able to protect itself against possible
loss (resulting from adverse changes in the relationship between the U.S. dollar
or other currency being used for the security purchase and the foreign currency
in which the security is denominated) during the period between the date on
which the security is purchased or sold and the date on which payment is made or
received. In addition, when the Fund anticipates purchasing securities at some
future date, and wishes to secure the current exchange rate of the currency in
which those securities are denominated against the U.S. dollar or some other
foreign currency, it may enter into a forward contract to purchase an amount of
currency equal to part or all of the value of the anticipated purchase, for a
fixed amount of U.S. dollars or other currency.
In all of the above instances, if the currency in which the Fund's
portfolio securities (or anticipated portfolio securities) are denominated rises
in value with respect to the currency which is being purchased, then the Fund
will have realized less gain than if it had not entered into the forward
contracts. Furthermore, the precise matching of the forward contract amounts and
the value of the securities involved is not generally possible, since the future
value of such securities in foreign currencies changes as a consequence of
market movements in the value of those securities between the date the forward
contract is entered into and the date it matures.
To the extent that the Fund enters into forward contracts to hedge
against a decline in the value of portfolio holdings denominated in a particular
foreign currency resulting from currency fluctuations, there is a risk that the
Fund may nevertheless realize a gain or loss as a result of currency
fluctuations after such portfolio holdings are sold should the Fund be unable to
enter into an "offsetting" forward foreign currency contract with the same party
or another party. The Fund may be limited in its ability to enter into hedging
transactions involving forward contracts by the Internal Revenue Code
requirements relating to qualifications as a regulated investment company (see
"Taxation").
The Fund is not required to enter into such transactions with regard to
its foreign currency-denominated securities and will not do so unless deemed
appropriate by the investment adviser. Generally, the Fund will not enter into a
forward contract with a term of greater than one year.
OPTIONS AND FUTURES TRANSACTIONS. As discussed in the Prospectus, the
Fund may write covered call options against securities held in its portfolio and
covered put options on eligible portfolio securities and may purchase options of
the same series to effect closing transactions The Fund also may hedge against
potential changes in the market value of its investments (or anticipated
investments), by purchasing put and call options on portfolio (or eligible
portfolio) securities (and the currencies in which they are denominated) and
engaging in transactions involving futures contracts and options on such
contracts.
Call and put options on U.S. Treasury notes, bonds and bills and on
various foreign currencies are listed on several U.S. and foreign securities
exchanges and are written in over-the-counter transactions ("OTC Options").
Listed options are issued or guaranteed by the exchange on which they trade or
by a clearing corporation such as the Options Clearing Corporation ("OCC").
Ownership of a listed call option gives the Fund the right to buy from the OCC
(in the U.S.) or other clearing corporation or exchange, the underlying security
or currency covered by the option at the stated exercise price (the price per
unit of the underlying security or currency) by filing an exercise notice prior
to the expiration date of the option. The writer (seller) of the option would
then have the obligation to sell, to the OCC (in the U.S.) or other clearing
corporation or exchange, the underlying security or currency at that exercise
price prior to the expiration date of the option, regardless of its then current
market price. Ownership of a listed put option would give the Fund the right to
sell the underlying security or currency to the OCC (in the U.S.) or other
clearing corporation or exchange at the stated exercise price. Upon notice of
exercise of the put option, the writer of the option would have the obligation
to purchase the underlying security or currency from the OCC (in the U.S.) or
other clearing corporation or exchange at the exercise price.
The OCC or other clearing corporation or exchange that issues listed
options ensures that all transactions in such options are properly executed. OTC
options are purchased from or sold (written) to dealers or financial
institutions that have entered into direct agreements with the Fund. With OTC
options, variables such as expiration date, exercise price and premium are
agreed between the Fund and the transacting dealer. If the transacting dealer
fails to make or take delivery of the securities or amount of foreign currency
underlying an option it has written, the Fund would lose the premium paid for
the option as well as any anticipated benefit of the transaction. The Fund will
engage in OTC option transactions only with member banks of the Federal Reserve
System or primary dealers in U.S. government securities or with affiliates of
such banks or dealers which have capital of at least $50 million or whose
obligations are guaranteed by an entity having capital of at least $50 million.
OPTIONS ON FOREIGN CURRENCIES. The Fund may purchase and write options
on foreign currencies for purposes similar to those involved with investing in
forward foreign currency exchange contracts. For example, in order to protect
against declines in the dollar value of portfolio securities that are
denominated in a foreign currency, the Fund may purchase put options on an
amount of such foreign currency equivalent to the current value of the portfolio
securities involved. As a result, the Fund would be able to sell the foreign
currency for a fixed amount of U.S. dollars, thereby securing the dollar value
of the portfolio securities (less the amount of the premiums paid for the
options). Conversely, the Fund may purchase call options on foreign currencies
in which securities it anticipates purchasing are denominated to secure a set
U.S. dollar price for such securities and protect against a decline in the value
of the U.S. dollar against such foreign currency. The Fund may also purchase
call and put options to close out written option positions.
The Fund also may write covered call options on foreign currency to
protect against potential declines in its portfolio securities that are
denominated in foreign currencies. If the U.S. dollar value of the portfolio
securities falls as a result of a decline in the exchange rate between the
foreign currency in which it is denominated and the U.S. dollar, then a loss to
the Fund occasioned by such value decline would be ameliorated by receipt of the
premium on the option sold. At the same time, however, the Fund gives up the
benefit of any rise in value of the relevant portfolio securities above the
exercise price of the option and, in fact, only receives a benefit from the
writing of the option to the extent that the value of the portfolio securities
falls below the price of the premium received. The Fund also may write options
to close out long call option positions. A covered put option on a foreign
currency would be written by the Fund for the same reason it would purchase a
call option, namely, to hedge against an increase in the U.S. dollar value of a
foreign security that the Fund anticipates purchasing. In this case, the receipt
of the premium would offset, to the extent of the size of the premium, any
increased cost to the Fund resulting from an increase in the U.S. dollar value
of the foreign security. However, the Fund could not benefit from any decline in
the cost of the foreign security that is greater than the price of the premium
received. The Fund also may write options to close out long put option
positions.
Markets in foreign currency options are relatively new, and the Fund's
ability to establish and close out positions on such options is subject to the
maintenance of a liquid secondary market. Although the Fund will not purchase or
write such options unless and until, in the opinion of the SCMI, the market for
them has developed sufficiently to ensure that their risks are not greater than
the risks in connection with the underlying currency, there can be no assurance
that a liquid secondary market will exist for a particular option at any
specific time. In addition, options on foreign currencies are affected by all of
those factors that influence foreign exchange rates and investments generally.
The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar, with the result that the price
of the option position may vary with changes in the value of either or both
currencies and may have no relationship to the investment merits of a foreign
security, including foreign securities held in a "hedged" investment portfolio.
Because foreign currency transactions occurring in the interbank market involve
substantially larger amounts than those that may be involved in the use of
foreign currency options, investors may be disadvantaged by having to deal in an
odd lot market (generally consisting of transactions of less than $1 million)
for the underlying foreign currencies at prices that are less favorable than for
round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information available is generally representative of very large transactions in
the interbank market and, thus, may not reflect relatively smaller transactions
(i.e., less than $1 million) where rates may be less favorable. The interbank
market in foreign currencies is a global, around-the-clock market. To the extent
that the U.S. options markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements may take place in
the underlying markets that are not reflected in the options market.
COVERED CALL WRITING. The Fund is permitted to write covered call
options on portfolio securities, and on the U.S. dollar and foreign currencies
in which they are denominated, without limit. Generally, a call option is
"covered" if the Fund owns (or has the right to acquire without additional cash
consideration (or for additional cash consideration held for the Fund by its
custodian in a segregated account) the underlying security (currency) subject to
the option. In the case of call options on U.S. Treasury Bills, however, the
Fund might own U.S. Treasury Bills of a different series from those underlying
the call option but with a principal amount and value corresponding to the
exercise price and a maturity date no later than that of the security (currency)
deliverable under the call option. A call option is also covered if the Fund
holds a call on the same security as the underlying security (currency) of the
written option, where the exercise price of the call used for coverage is equal
to or less than the exercise price of the call or greater than the exercise
price of the call written if the mark-to-market difference is maintained by the
Fund in cash, U.S. government or other high-grade debt obligations, or other
high-quality liquid securities, held by the Fund in a segregated account
maintained with its custodian.
The Fund receives a premium from the purchaser in return for a call it
has written. Receipt of such premiums may enable the Fund to earn a higher level
of current income than it would earn from only holding the underlying securities
(currencies). Moreover, the premium received offsets a portion of the potential
loss incurred by the Fund if the securities (currencies) underlying the option
are ultimately sold (exchanged) by the Fund at a loss. Furthermore, a premium
received on a call written on a foreign currency ameliorates any potential loss
of value on the portfolio security due to a decline in the value of the
currency. However, during the option period, the covered call writer has, in
return for the premium, given up the opportunity for capital appreciation above
the exercise price should the market price of the underlying security (or the
exchange rate of the currency in which it is denominated) increase but has
retained the risk of loss should the price of the underlying security (or the
exchange rate of the currency in which it is denominated) decline. The premium
received fluctuates with varying economic market conditions. If the market value
of the portfolio securities (or the currencies in which they are denominated)
upon which call options have been written increases, the Fund may receive a
lower total return from the portion of its portfolio upon which calls have been
written than it would have received had such calls not been written.
With respect to listed options and certain OTC options, during the
option period the Fund may be required, at any time, to deliver the underlying
security (currency) against payment of the exercise price on any calls it has
written (exercise of certain listed and OTC options may be limited to specific
expiration dates). This obligation terminates upon the expiration of the option
period or at such earlier time when the writer effects a closing purchase
transaction. A closing purchase transaction is accomplished by purchasing an
option of the same series as the option previously written. However, once the
Fund has been assigned an exercise notice, the Fund is unable to effect a
closing purchase transaction.
Closing purchase transactions are ordinarily effected to realize a
profit on an outstanding call option, to prevent an underlying security
(currency) from being called, to permit the sale of an underlying security (or
the exchange of the underlying currency) or to enable the Fund to write another
call option on the underlying security (currency) with either a different
exercise price or expiration date or both. The Fund may realize a net gain or
loss from a closing purchase transaction depending upon whether the amount of
the premium received on the call option is more or less than the cost of
effecting the closing purchase transaction. Any loss incurred in a closing
purchase transaction may be wholly or partially offset by unrealized
appreciation in the market value of the underlying security (currency).
Conversely, a gain resulting from a closing purchase transaction could be offset
in whole or in part or exceeded by a decline in the market value of the
underlying security (currency).
If a call option expires unexercised, the Fund realizes a gain in the
amount of the premium on the option less the commission paid. Such a gain,
however, may be offset by depreciation in the market value of the underlying
security (currency) during the option period. If a call option is exercised, the
Fund realizes a gain or loss from the sale of the underlying security (currency)
equal to the difference between the purchase price of the underlying security
(currency) and the proceeds of the sale of the security (currency) plus the
premium received on the option less the commission paid.
Options written by the Fund normally have expiration dates of up to
eighteen months from the date written. The exercised price of a call option may
be below, equal to or above the current market value of the underlying security
at the time the option is written.
COVERED PUT WRITING. As a writer of a covered put option, the Fund
would incur an obligation to buy the security underlying the option from the
purchaser of the put, at the option's exercise price at any time during the
option period, at the purchaser's election (certain listed and OTC put options
written by the Fund will be exercisable by the purchaser only on a specific
date). A put is "covered" if at all times the Fund maintains with its custodian
(in a segregated account) cash, U.S. government or other high-grade obligations,
or other high-quality liquid securities, in an amount equal to at least the
exercise price of the option. Similarly, a short put position could be covered
by the Fund by its purchase of a put option on the same security (currency) as
the underlying security of the written option, where the exercise price of the
purchased option is equal to or more than the exercise price of the put written
or less than the exercise price of the put written if the marked to market
difference is maintained by the Fund in cash, U.S. government or other
high-grade debt obligations, or other high-quality liquid securities, that the
Fund holds in a segregated account maintained at its custodian. In writing puts,
the Fund assumes the risk of loss should the market value of the underlying
security (currency) decline below the exercise price of the option (any loss
being decreased by the receipt of the premium on the option written). In the
case of listed options, during the option period the Fund may be required, at
any time, to make payment of the exercise price against delivery of the
underlying security (currency). The operation of and limitations on covered put
options in other respects are substantially identical to those of call options.
The Fund will write put options for three purposes: (1) to receive the
income derived from the premiums paid by purchasers; (2) when SCMI wishes to
purchase the security (or a security denominated in the currency underlying the
option) underlying the option at a price lower than its current market price (in
which case it will write the covered put at an exercise price reflecting the
lower purchase price sought); and (3) to close out a long put option position.
The potential gain on a covered put option is limited to the premium received on
the option (less the commissions paid on the transaction) while the potential
loss equals the differences between the exercise price of the option and the
current market price of the underlying securities (currencies) when the put is
exercised, offset by the premium received (less the commissions paid on the
transaction).
PURCHASING CALL AND PUT OPTIONS. The Fund may purchase listed and OTC
call and put options in amounts equaling up to 5% of its total assets. The Fund
may purchase a call option in order to close out a covered call position (see
"Covered Call Writing"), to protect against an increase in price of a security
it anticipates purchasing or, in the case of a call option on foreign currency,
to hedge against an adverse exchange rate move of the currency in which the
security it anticipates purchasing is denominated vis-a-vis the currency in
which the exercise price is denominated. The purchase of the call option to
effect a closing transaction on a call written over-the-counter may be a listed
or an OTC option. In either case, the call purchased is likely to be on the same
securities (currencies) and have the same terms as the written option. If
purchased over-the-counter, the option would generally be acquired from the
dealer or financial institution that purchased the call written by the Fund.
The Fund may purchase put options on securities (currencies) that it
holds in its portfolio to protect itself against a decline in the value of the
security and to close out written put option positions. If the value of the
underlying security (currency) were to fall below the exercise price of the put
purchased in an amount greater then the premium paid for the option, the Fund
would incur no additional loss. In addition, the Fund may sell a put option it
has previously purchased prior to the sale of the securities (currencies)
underlying such option. Such a sale would result in a net gain or loss depending
upon whether the amount received on the sale is more or less than the premium
and other transaction costs paid on the put option that is sold. Any such gain
or loss could be offset in whole or in part by a change in the market value of
the underlying security (currency). If a put option purchased by the Fund
expired without being sold or exercised, the premium would be lost.
RISKS OF OPTIONS TRANSACTIONS. During the option period, the covered
call writer has, in return for the premium on the option, given up the
opportunity for capital appreciation above the exercise price if the market
price of the underlying security (or the value of its denominated currency)
increases, but the writer has retained the risk of loss if the price of the
underlying security (or the value of its denominated currency) declines. The
writer has no control over the time when it may be required to fulfill its
obligation as a writer of the option. Once an option writer has received an
exercise notice, it cannot effect a closing purchase transaction in order to
terminate its obligation under the option and must deliver or receive the
underlying securities at the exercise price.
Prior to exercise or expiration, an option position can only be
terminated by entering into a closing purchase or sale transaction. If a covered
call option writer is unable to effect a closing purchase transaction or to
purchase an offsetting OTC option, it cannot sell the underlying security until
the option expires or the option is exercised. Accordingly, a covered call
option writer may not be able to sell an underlying security at a time when it
might otherwise be advantageous to do so. A covered put option writer who is
unable to effect a closing purchase transaction or to purchase an offsetting OTC
option would continue to bear the risk of decline in the market price of the
underlying security until the option expires or is exercised. In addition, a
covered put writer would be unable to utilize the amount held in cash, U.S.
government or other high-grade short-term obligations, or other high-quality
liquid securities, as security for the put option for other investment purposes
until the exercise or expiration of the option.
The Fund's ability to close out its position as a writer of an option
is dependent upon the existence of a liquid secondary market on option
exchanges. There is no assurance that such a market will exist, particularly in
the case of OTC options, since such options will generally only be closed out by
entering into a closing purchase transaction with the purchasing dealer.
However, the Fund may be able to purchase an offsetting option that does not
close out its position as a writer but constitutes an asset of equal value to
the obligation under the option written. If the Fund is not able to either enter
into a closing purchase transaction or purchase an offsetting position, it will
be required to maintain the securities subject to the call, or the collateral
underlying the put, even though it might not be advantageous to do so, until a
closing transaction can be entered into (or the option is exercised or expires).
Among the possible reasons for the absence of a liquid secondary market
on an exchange are: (1) insufficient trading interest in certain options; (2)
restrictions on transactions imposed by an exchange; (3) trading halts,
suspensions or other restrictions imposed with respect to particular classes or
series of options or underlying securities; (4) interruption of the normal
operations on an exchange; (5) inadequacy of the facilities of an exchange or
the OCC to handle current trading volume; or (6) a decision by one or more
exchanges to discontinue the trading of options (or a particular class or series
of options), in which event the secondary market on that exchange (or in that
class or series of options) would cease to exist.
In the event of the bankruptcy of a broker through which the Fund
engages in transactions in options, the Fund could experience delays and/or
losses in liquidating open positions purchased or sold through the broker and/or
incur a loss of all or part of its margin deposits with the broker. Similarly,
in the event of the bankruptcy of the writer of an OTC option purchased by the
Fund, the Fund could experience a loss of all or part of the value of the
option. Transactions will be entered into by the Fund only with brokers or
financial institutions deemed creditworthy by SCMI.
Exchanges have established limitations governing the maximum number of
options on the same underlying security or futures contract (whether or not
covered) that may be written by a single investor, whether acting alone or in
concert with others (regardless of whether such options are written on the same
or different exchanges or are held or written on one or more accounts or through
one or more brokers). An exchange may order the liquidation of positions found
to be in violation of these limits and it may impose other sanctions or
restrictions. These position limits may restrict the number of listed options
which the Fund may write.
The hours of trading for options may not conform to the hours during
which the underlying securities are traded. If the option markets close before
the markets for the underlying securities, significant price and rate movements
can take place in the underlying markets that cannot be reflected in the option
markets.
The extent to which the Fund may enter into transactions involving
options may be limited by the Internal Revenue Code's requirements for
qualification as a regulated investment company and the Portfolio's intention to
operate in such a manner as to permit a fund invested in the Portfolio to
qualify as such (see "Taxation").
FUTURES CONTRACTS. The Fund may purchase and sell interest-rate,
currency, and index futures contracts ("futures contracts") that are traded on
U.S. and foreign commodity exchanges, on such underlying securities as U.S.
Treasury bonds, notes and bills, and/or any foreign government fixed-income
security ("interest-rate futures contracts"), on various currencies ("currency
futures contracts"), and on such indices of U.S. and foreign securities as may
exist or come into being ("index futures contracts").
The Fund may purchase or sell interest-rate futures contracts for the
purpose of hedging some or all of the value of its portfolio securities (or
anticipated portfolio securities) against changes in prevailing interest rates.
If SCMI anticipates that interest rates may rise and, concomitantly, that the
price of certain of its portfolio securities fall, the Fund may sell an
interest-rate futures contract. If declining interest rates are anticipated, the
Fund may purchase an interest-rate futures contract to protect against a
potential increase in the price of securities the Fund intends to purchase.
Subsequently, appropriate securities may be purchased by the Fund in an orderly
fashion; as securities are purchased, corresponding futures positions would be
terminated by offsetting sales of contracts.
The Fund may purchase or sell currency futures contracts on currencies
in which its portfolio securities (or anticipated portfolio securities) are
denominated for the purposes of hedging against anticipated changes in currency
exchange rates. The Fund may enter into currency futures contracts for the same
reasons as set forth above for entering into forward foreign currency exchange
contracts; namely, to secure the value of a security purchased or sold in a
given currency vis-a-vis a different currency or to hedge against an adverse
currency exchange rate movement of a portfolio security's (or anticipated
portfolio security's) denominated currency vis-a-vis a different currency.
The Fund may purchase or sell index futures contracts for the purpose
of hedging some or all of its portfolio (or anticipated portfolio) securities
against changes in their prices. If SCMI anticipates that the prices of
securities the Fund holds may fall, the Fund may sell an index futures contract.
Conversely, if SCMI wishes to hedge the portfolio against anticipated price
rises in those securities that the Fund intends to purchase, the Fund may
purchase an index futures contract.
In addition to the above, interest-rate, currency and index futures
contracts will be bought or sold in order to close out short or long positions
maintained by the Fund in corresponding futures contracts.
Although most interest-rate futures contracts call for actual delivery
or acceptance of securities, the contracts usually are closed out before the
settlement date without making or taking delivery. A futures contract sale is
closed out by effecting a futures contract purchase for the same aggregate
amount of the specific type of security (currency) and the same delivery date.
If the sale price exceeds the offsetting purchase price, the seller would be
paid the difference and would realize a gain. If the offsetting purchase price
exceeds the sale price, the seller would pay the difference and would realize a
loss. Similarly, a futures contract purchase is closed out by effecting a
futures contract sale for the same aggregate amount of the specific type of
security (currency) and the same delivery date. If the offsetting sale price
exceeds the purchase price, the purchaser would realize a gain, whereas if the
purchase price exceeds the offsetting sale price, the purchaser would realize a
loss. There is no assurance that the Fund will be able to enter into a closing
transaction.
INTEREST-RATE FUTURES CONTRACTS. When the Fund enters into an
interest-rate futures contract, it is initially required to deposit with its
custodian (in a segregated account in the name of the broker performing the
transaction) an "initial margin" of cash, U.S. government or other high-grade
short-term obligations, or other high-quality liquid securities, equal to
approximately 2% of the contract amount. Initial margin requirements are
established by the exchanges on which futures contracts trade and may change. In
addition, brokers may establish margin deposit requirements in excess of those
required by the exchanges.
Initial margin in futures transactions is different from margin in
securities transactions in that initial margin does not involve the borrowing of
money by a brokers' client but is, rather, a good faith deposit on the futures
contract that will be returned to the Fund upon the proper termination of the
futures contract. The margin deposits made are marked to market daily, and the
Fund may be required to make subsequent deposits with its futures contract
clearing broker of cash or U.S. government securities (called "variation
margin") that are reflective of price fluctuations in the futures contract.
CURRENCY FUTURES CONTRACTS. Generally, foreign currency futures
contracts provide for the delivery of a specified amount of a given currency, on
the exercise date, for a set exercise price denominated in U.S. dollars or other
currency. Foreign currency futures contracts would be entered into for the same
reason and under the same circumstances as forward foreign currency exchange
contracts. SCMI assesses such factors as cost spreads, liquidity and transaction
costs in determining whether to use futures contracts or forward contracts in
its foreign currency transactions and hedging strategy.
Purchasers and sellers of foreign currency futures contracts are
subject to the same risks that apply generally to the buying and selling of
futures contracts. In addition, there are risks associated with foreign currency
futures contracts and their use as a hedging device similar to those associated
with options on foreign currencies described above. Further, settlement of a
foreign currency futures contract must occur within the country issuing the
underlying currency. Thus, the Fund must accept or make delivery of the
underlying foreign currency in accordance with any U.S. or foreign restrictions
or regulations regarding the maintenance of foreign banking arrangements by U.S.
residents and may be required to pay any fees, taxes or charges associated with
such delivery that are assessed in the issuing country.
INDEX FUTURES CONTRACTS. The Fund may invest in index futures
contracts. An index futures contract sale creates an obligation by the Fund, as
seller, to deliver cash at a specified future time. An index futures contract
purchase creates an obligation by the Fund, as purchaser, to take delivery of
cash at a specified future time. Futures contracts on indices do not require the
physical delivery of securities but provide for a final cash settlement on the
expiration date that reflects accumulated profits and losses credited or debited
to each party's account.
The Fund is required to maintain margin deposits with brokerage firms
through which it effects index futures contracts in a manner similar to that
described above for interest-rate futures contracts. In addition, due to current
industry practice, daily variations in gain and loss on open contracts are
required to be reflected in cash in the form of variation margin payments. The
Fund may be required to make additional margin payments during the term of the
contract.
At any time prior to expiration of the futures contract, the Fund may
elect to close the position by taking an opposite position, which will operate
to terminate the Fund's position in the futures contract. A final determination
of variation margin is then made, additional cash may be required to be paid by
or released to the Fund, and it realizes a loss or gain.
OPTIONS ON FUTURES CONTRACTS. The Fund may purchase and write call and
put options on futures contracts traded on an exchange and may enter into
closing transactions with respect to such options to terminate an existing
position. An option on a futures contract gives the purchaser the right (in
return for the premium paid) to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the term of the option. Upon
exercise of the option, the delivery of the position in the futures contract by
the writer of the option to the holder of the option is accompanied by delivery
of the accumulated balance in the writer's futures margin account, which
represents the amount by which the market price of the futures contract at the
time of exercise exceeds, in case of a call, or is less than, in the case of a
put, the exercise price of the option on the futures contract.
The Fund may purchase and write options on futures contracts for
purposes identical to those set forth above for the purchase of a futures
contract (purchase of a call option or sale of a put option) and the sale of a
futures contract (purchase of a put option or sale of a call option), or to
close out a long or short position in futures contracts. If, for example, SCMI
wished to protect against an increase in interest rates and the resulting
negative impact on the value of a portion of its fixed-income portfolio, the
Fund might write a call option on an interest-rate futures contract, the
underlying security of which correlates with the portion of the portfolio that
SCMI seeks to hedge. Any premiums received in the writing of options on futures
contracts may provide a further hedge against losses resulting from price
declines in portions of the Fund's investment portfolio.
Options on foreign currency futures contracts may involve certain
additional risks. Trading options on foreign currency futures contracts is
relatively new. The ability to establish and close out positions on such options
is subject to the maintenance of a liquid secondary market. To reduce this risk,
the Fund will not purchase or write options on foreign currency futures
contracts unless and until, in SCMI's opinion, the market for such options has
developed sufficiently that the risks in connection with them are not greater
than the risks in connection with transactions in the underlying foreign
currency futures contracts.
LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The
Fund may not enter into futures contracts or purchase related options thereon
if, immediately thereafter, the amount committed to margin plus the amount paid
for premiums for unexpired options on futures contracts exceeds 5% of the value
of the Fund's total assets, after taking into account unrealized gain and
unrealized loss on such contracts it has entered into, provided, however, that
in the case of an option that is in-the-money (the exercise price of the call
(put) option is less (more) than the market price of the underlying security) at
the time of purchase, the in-the-money amount may be excluded in calculating the
5%. However, there is no overall limitation on the percentage of the Fund's
assets that may be subject to a hedge position. In addition, in accordance with
the regulations of the Commodity Futures Trading Commission under which each
Portfolio is excluded from registration as a commodity pool operator, the Fund
may only enter into futures contracts and options on futures contracts
transactions for purposes of hedging a part or all of its portfolio. Except as
described above, there are no other limitations on the use of futures and
options thereon by the Fund.
The writer of an option on a futures contract is required to deposit
initial and variation margin pursuant to requirements similar to those
applicable to futures contracts. Premiums received from the writing of an option
on a futures contract are included in initial margin deposits.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS. The
Fund may sell a futures contract to protect against the decline in the value of
securities (or the currency in which they are denominated) it holds. However, it
is possible that the futures market may advance and the value of the Fund's
securities (or the currency in which they are denominated) may decline. If this
occurs, the Fund will lose money on the futures contract and also experience a
decline in value of its portfolio securities. While this might occur for only a
very brief period or to a very small degree, over time the value of a
diversified portfolio will tend to move in the same direction as the futures
contracts.
If the Fund purchases a futures contract to hedge against the increase
in value of securities it intends to buy (or the currency in which they are
denominated) and the value of such securities (currencies) decreases, then the
Fund may determine not to invest in the securities as planned and will realize a
loss on the futures contract that is not offset by a reduction in the price of
the securities.
If the Fund has sold a call option on a futures contract, it will cover
this position by holding (in a segregated account maintained by its custodian)
cash, U.S. government securities or other high-grade debt obligations, or other
high-quality liquid securities, equal in value (when added to any initial or
variation margin on deposit) to the market value of the securities (currencies)
underlying the futures contract or the exercise price of the option. Such a
position may also be covered by owning the securities (currencies) underlying
the futures contract or by holding a call option permitting the Fund to purchase
the same contract at a price no higher than the price at which the short
position was established.
In addition, if the Fund holds a long position in a futures contract,
it will hold cash, U.S. government or other high-grade debt obligations, or
other high-quality liquid securities, equal to the purchase price of the
contract (less the amount of initial or variation margin on deposit) in a
segregated account maintained by the Fund's custodian. Alternatively, the Fund
could cover its long position by purchasing a put option on the same futures
contract with an exercise price as high or higher than the price of the contract
held by the Fund.
Exchanges limit the amount by which the price of a futures contract may
move on any day. If the price moves equal the daily limit on successive days,
then it may prove impossible to liquidate a futures position until the daily
limit moves have ceased. In the event of adverse price movements, the Fund would
continue to be required to make daily cash payments of variation margin on open
futures contract positions. In such situations, if the Fund has insufficient
cash, it may have to sell portfolio securities to meet daily variation margin
requirements at a time when it may be disadvantageous to do so. In addition, the
Fund may be required to take or make delivery of the instruments underlying
interest-rate futures contracts it holds at a time when it is disadvantageous to
do so. The inability to close out options and futures contract positions could
also have an adverse impact on the Fund's ability to effectively hedge its
portfolio.
Futures contracts and options thereon that are purchased or sold on
foreign commodities exchanges may have greater price volatility than their U.S.
counterparts. Furthermore, foreign commodities exchanges may be less regulated
and under less governmental scrutiny than U.S. exchanges, and brokerage
commissions, clearing costs and other transaction costs may be higher. Greater
margin requirements may limit the Fund's ability to enter into certain commodity
transactions on foreign exchanges. Moreover, differences in clearance and
delivery requirements on foreign exchanges may cause delays in the settlement of
the Fund's foreign exchange transactions.
In the event of the bankruptcy of a broker through which the Fund
engages in transactions in futures or options thereon, the Fund could experience
delays and/or losses in liquidating open positions purchased or sold through the
broker and/or incur a loss of all or part of its margin deposits with the
broker. Similarly, in the event of the bankruptcy of the writer of an OTC option
purchased by the Fund, the Fund could experience a loss of all or part of the
value of the option. Transactions are entered into by the Fund only with brokers
or financial institutions deemed creditworthy by SCMI.
While the futures contracts and options transactions in which the Fund
engages for the purpose of hedging its portfolio securities are not speculative
in nature, there are risks inherent in the use of such instruments. One such
risk that may arise in employing futures contracts to protect against the price
volatility of portfolio securities (and the currencies in which they are
denominated) is that the prices of securities and indices subject to futures
contracts (and thereby the futures contract prices) may correlate imperfectly
with the behavior of the cash prices of the Fund's portfolio securities (and the
currencies in which they are denominated). Another such risk is that prices of
interest-rate futures contracts may not move in tandem with the changes in
prevailing interest rates against which the Fund seeks a hedge. A correlation
may also be distorted by the fact that the futures market is dominated by
short-term traders seeking to profit from the difference between a contract or
security price objective and their cost of borrowed funds. Such distortions are
generally minor and are expected to diminish as the contract approaches
maturity.
There may exist an imperfect correlation between the price movements of
futures contracts purchased by the Fund and the movements in the prices of the
securities (currencies) that are the subject of the hedge. If participants in
the futures market elect to close out their contracts through offsetting
transactions rather than meet margin deposit requirements, distortions in the
normal relationship between the debt securities or currency markets and futures
markets could result. Price distortions could also result if investors in
futures contracts choose to make or take delivery of underlying securities
rather than engage in closing transactions due to the resultant reduction in the
liquidity of the futures market. In addition, because the deposit requirements
in the futures markets are less onerous than margin requirements in the cash
market, increased participation by speculators in the futures market can be
anticipated with the resulting speculation causing temporary price distortions.
Due to the possibility of price distortions in the futures contracts market and
because of the imperfect correlation between movements in the prices of
securities and movements in the prices of futures contracts, a correct forecast
of interest-rate trends may still not result in a successful hedging
transaction.
There is no assurance that a liquid secondary market will exist for
futures contracts and related options in which the Fund may invest. In the event
a liquid market does not exist, it may not be possible to close out a futures
position, and, in the event of adverse price movements, the Fund would continue
to be required to make daily cash payments of variation margin. In addition,
limitations imposed by an exchange or board of trade on which futures contracts
are traded may compel the Fund to close, or prevent it from closing, out a
contract, which may result in reduced gain or increased loss to the Fund. The
absence of a liquid market in futures contracts might cause the Fund to make or
take delivery of the underlying securities (currencies) at a time when it may be
disadvantageous to do so.
The extent to which the Fund may enter into transactions involving
futures contracts and options thereon may be limited by the Internal Revenue
Code's requirements for qualification as a regulated investment company and the
Fund's intention to operate in such a manner as to permit a fund invested in the
Fund to qualify as such (see "Taxation").
INTEREST-RATE TRANSACTIONS. In order to attempt to protect the value of
its portfolio from interest-rate fluctuations and to adjust the interest-rate
sensitivity of its portfolio, each Portfolio may enter into interest-rate swaps
and other interest-rate transactions, such as interest-rate caps, floors, and
collars. Interest-rate swaps involve the exchange by the Fund with another party
of different types of interest-rate streams (E.G., an exchange of floating-rate
payments for fixed-rate payments with respect to a notional amount of
principal). The purchase of an interest-rate cap entitles the purchaser to
receive payments on a notional principal amount from the party selling the cap
to the extent that a specified index exceeds a predetermined interest rate or
amount. The purchase of a floor entitles the purchaser to receive payments on a
notional principal amount from the party selling the floor to the extent that a
specified index falls below a predetermined interest rate or amount. A collar is
a combination of a cap and a floor that preserves a certain return within a
predetermined rate of interest rates or values. The Portfolios intend to use
these interest-rate transactions as a hedge and not as a speculative investment.
The Fund's ability to engage in certain interest rate transactions is a highly
specialized activity which involves investment techniques and risks different
from those associated with ordinary portfolio securities transactions. If SCMI
were incorrect in its forecasts of market values, interest rates, or other
applicable factors, the Fund's investment performance would be less favorable
than it would have been if this investment technique were not used.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS.
The Fund may purchase securities on a when-issued or delayed delivery basis or
may purchase or sell securities on a forward commitment basis. When such
transactions are negotiated, the price is fixed at the time of the commitment,
but delivery and payment may take place a month or more after the date of the
commitment. There is no overall limit on the percentage of the Fund's assets
that may be committed to the purchase of securities on a when-issued, delayed
delivery or forward commitment basis. An increase in the percentage of the
Fund's assets committed to the purchase of securities on a when-issued, delayed
delivery or forward commitment basis may increase the volatility of the Fund's
net asset value.
WHEN, AS AND IF ISSUED SECURITIES. The Fund may purchase securities on
a "when, as and if issued" basis under which the issuance of the security
depends upon the occurrence of a subsequent event, such as approval of a merger,
corporate reorganization, leveraged buyout or debt restructuring. If the
anticipated event does not occur and the securities are not issued, the Fund
will have lost an investment opportunity. There is no overall limit to the
percentage of the Fund's assets that may be committed to the purchase of
securities on a "when, as and if issued" basis. An increase in the percentage of
the Fund's assets committed to the purchase of securities on a "when, as and if
issued" basis may increase the volatility of its net asset value.
INVESTMENT IN OTHER INVESTMENT COMPANIES OR VEHICLES. Pursuant to the
1940 Act, the Fund may invest in the shares of other investment companies that
invest in securities that the Fund is permitted to purchase subject to the
limits permitted under the 1940 Act or any orders, rules or regulations
thereunder. From time to time, such investment funds may be the sole means by
which the Fund may invest in equity securities of certain Asian Companies. When
investing through investment companies, the Fund may pay substantial premiums
above such investment companies' net asset value per share. As a shareholder in
an investment company, the Fund 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.
TEMPORARY INVESTMENTS. As described in the Prospectus, the Fund may
hold and/or invest its assets without limitation in cash and/or Temporary
Investments (as defined below) for cash management purposes, pending initial
investment in accordance with the Fund's investment objective and policies. In
addition, the Fund may hold these investments for temporary defensive purposes.
The Fund may assume a temporary defensive posture when, owing to political,
market or other factors broadly affecting markets in one or more Asian
Countries, SCMI determines either that opportunities for capital appreciation in
those markets may be significantly limited or that significant diminution in
value of the securities traded in those markets may occur. The Fund may invest
without limitation in (or enter into repurchase agreements maturing in seven
days or less with banks and broker-dealers with respect to) short-term debt
securities, including commercial paper, U.S. Treasury bills, other short-term
U.S. government securities, certificates of deposit, and bankers' acceptances of
U.S. or foreign banks. The Fund also may hold cash and time deposits denominated
in any major foreign currency in foreign banks. To the extent that the Fund
invests in Temporary Investments, it may not achieve its investment objective.
Temporary Investments are high quality debt securities (rated "AA" or
above by Standard & Poor's Corporation ("S&P") or "Aa" or above by Moody's
Investors Services, Inc. ("Moody's") or with an equivalent rating by other
nationally recognized securities rating organizations) denominated in U.S.
dollars or in another freely convertible currency including: (1) short-term
(less than 12 months to maturity) and medium-term (not more than five years to
maturity) obligations issued or guaranteed by (a) the U.S. Government, its
agencies instrumentalities, or government-sponsored enterprises; or (b)
international organizations designated or supported by multiple foreign
governmental entities to promote economic reconstruction or development
("supranational entities"); (2) U.S. finance company obligations, corporate
commercial paper and other short-term commercial obligations; (3) obligations
(including certificates of deposit, time deposits, demand deposits and bankers'
acceptances) of banks; and (4) repurchase agreements with respect to securities
in which the Fund may invest. The banks whose obligations may be purchased by
the Fund and the banks and broker-dealers with which the Fund may enter into
repurchase agreements include any member bank of the Federal Reserve System and
any U.S. broker-dealer or any foreign bank that has been determined by the
investment adviser to be creditworthy.
SHORT-TERM DEBT SECURITIES. For cash management, pending investment or
other temporary purposes, the Fund may invest in commercial paper -- short-term
unsecured promissory notes issued in bearer form by bank holding companies,
corporations and finance companies. The commercial paper purchased by the Fund
for temporary defensive purposes consists of direct obligations of domestic
issuers that at the time of investment are rated "P-1" by Moody's Investors
Service ("Moody's") or "A-1" by Standard & Poor's ("S&P"), or securities that,
if not rated, are issued by companies having an outstanding debt issue currently
rated "Aaa" or "Aa" by Moody's or "AAA" or "AA" by S&P. The rating "P-1" is the
highest commercial paper rating assigned by Moody's, and the rating "A-1" is the
highest commercial paper rating assigned by S&P. The Fund also may invest in
variable rate master demand notes, which are obligations that permit the
investment of fluctuating amounts at varying market rates of interest pursuant
to arrangements between the issuer and a commercial bank acting as agent for the
payer of such notes. Generally both parties have the right to vary the amount of
the outstanding indebtedness on the notes.
REPURCHASE AGREEMENTS. The Fund may invest in securities subject to
repurchase agreements that mature or may be terminated by notice in seven days
or less with banks or broker-dealers. In a typical repurchase agreement, the
seller of a security commits itself at the time of the sale to repurchase that
security from the buyer at a mutually agreed-upon time and price. The repurchase
price exceeds the sale price, reflecting an agreed-upon interest rate effective
for the period the buyer owns the security subject to repurchase. The
agreed-upon rate is unrelated to the interest rate on that security. SCMI
monitors the value of the underlying security at the time the transaction is
entered into and at all times during the term of the repurchase agreement to
insure that the value of the security always equals or exceeds the repurchase
price. If a seller defaults under a repurchase agreement, the Fund may have
difficulty exercising its rights to the underlying securities and may incur
costs and experience time delays in connection with the disposition of such
securities. To evaluate potential risks, SCMI reviews the credit-worthiness of
banks and dealers with which the Fund enters into repurchase agreements.
RESTRICTED SECURITIES. "Liquidity" under "Investment Policies" in the
Prospectus sets forth the circumstances in which the Fund may invest in
"restricted securities". In connection with the Fund's original purchase of
restricted securities, SCMI may negotiate rights with the issuer to have such
securities registered for sale at a later time. Further, the registration
expenses of illiquid restricted securities may also be negotiated by the Fund
with the issuer at the time such securities are purchased by the Portfolio. When
registration is required, however, a considerable period may elapse between the
decision to sell the securities and the time the Fund would be permitted to sell
such securities. A similar delay might be experienced in attempting to sell such
securities pursuant to an exemption from registration. Thus, the Fund may not be
able to obtain as favorable a price as that prevailing at the time of the
decision to sell.
If SCMI determines that a "restricted security" is liquid pursuant to
guidelines adopted by the Schroder Core Board ( the " Core Board ), the security
is not deemed illiquid. These guidelines take into account trading activity for
the securities and the availability of reliable pricing information, among other
factors. If there is a lack of trading interest in a particular restricted
security, that security may become illiquid, which could affect the Fund's
liquidity.
RULE 144A SECURITIES. The Fund may purchase certain restricted
securities ("Rule 144A securities") for which there is a secondary market of
qualified institutional buyers, as contemplated by rule 144A under the
Securities Act of 1933 (the "Securities Act"). Rule 144A provides an exemption
from the registration requirements of the Securities Act for resale of certain
restricted securities to qualified institutional buyers. One effect of Rule 144A
is that certain restricted securities may now be deemed to be liquid, though
there is no assurance that a liquid market for any particular Rule 144A security
will develop or be maintained. SCMI will make liquidity determinations subject
to guidelines approved by the Schroder Core Board. If any Rule 144A security
previously determined to be liquid is later determined to be illiquid, such
security will be subject to the Fund's 15% limitation on illiquid securities.
U.S. GOVERNMENT SECURITIES. The Fund may invest in securities issued or
guaranteed by the U.S. Government (or its agencies, instrumentalities or
government-sponsored enterprises). Agencies, instrumentalities and
government-sponsored enterprises that have been established or sponsored by the
U.S. Government and issue or guarantee debt securities include the Bank for
Cooperatives, the Export-Import Bank, the Federal Farm Credit System, the
Federal Home Loan Banks, the Federal Home Loan Mortgage Corporation, the Federal
Intermediate Credit Banks, the Federal Land Banks, the Federal National Mortgage
Association, the Government National Mortgage Association and the Student Loan
Marketing Association. Except for obligations issued by the U.S. Treasury and
the Government National Mortgage Association, none of the obligations of the
other agencies, instrumentalities or government-sponsored enterprises referred
to above are backed by the full faith and credit of the U.S. Government. There
can be no assurance that the U.S. Government will provide financial support to
these obligations where it is not obligated to do so.
BANK OBLIGATIONS. The Fund may invest in obligations of U.S. and
foreign banks (including certificates of deposit and bankers' acceptances) whose
total assets at the time of purchase exceed $1 billion. The Fund also may hold
cash and time deposits denominated in any major currency in foreign banks. A
certificate of deposit is an interest-bearing negotiable certificate issued by a
bank against funds deposited in the bank. A bankers' acceptance is a short-term
draft drawn on a commercial bank by a borrower, usually in connection with an
international commercial transaction. Although the borrower is liable for
payment of the draft, the bank unconditionally guarantees to pay the draft at
its face value on the maturity date. A time deposit is a non-negotiable receipt
issued by a bank in exchange for the deposit of funds. Similar to a certificate
of deposit, a time deposit earns a specified rate of interest over a definite
time period; however, it cannot be traded in the secondary markets.
LOANS OF FUND SECURITIES. The Fund may lend its portfolio securities
subject to the restrictions stated in the Prospectus. Under applicable
regulatory requirements (which are subject to change), the loan collateral must:
(1) on each business day, at least equal the market value of the loaned
securities; and (2) consist of cash, bank letters of credit, U.S. government
securities, other cash equivalents or liquid securities in which the Fund is
permitted to invest. To be acceptable as collateral, letters of credit must
obligate a bank to pay amounts demanded by the Fund if the demand meets the
terms of the letter. Such terms and the issuing bank must be satisfactory to the
Fund. When lending portfolio securities, the Fund receives from the borrower an
amount equal to the interest paid or the dividends declared on the loaned
securities during the term of the loan plus the interest on the collateral
securities (less any finders' or administrative fees the Fund pays in arranging
the loan). The Fund may share the interest it receives on the collateral
securities with the borrower if it realizes at least a minimum amount of
interest required by the lending guidelines established by the Schroder Core
Board. The Fund will not lend its portfolio securities to any officer, trustee,
employee or affiliate of the Fund or SCMI. The terms of the Fund's loans must
meet certain tests under the Internal Revenue Code and permit the Fund to
reacquire loaned securities on five business days' notice or in time to vote on
any important matter.
The market value of portfolio securities purchased with cash collateral
may decline. Loans of securities by the Fund are subject to termination at the
Fund's or the borrower's option. The Fund may pay reasonable negotiated fees in
connection with loaned securities, so long as such fees are set forth in a
written contract and approved by the Schroder Core Board.
RISK CONSIDERATIONS
FOREIGN INVESTMENTS. All investments, domestic and foreign, involve
risk. Investment in the securities of foreign issuers may involve risks in
addition to those normally associated with investments in the securities of U.S.
issuers. All foreign investments are subject to risks of foreign political and
economic instability, adverse movements in foreign exchange rates, the
imposition or tightening of exchange controls, or other limitations on
repatriation of foreign capital. Foreign investments are subject to the risk of
changes in foreign governmental attitudes towards private investment that could
lead to nationalization, increased taxation or confiscation of the Fund's
assets.
Moreover: (1) dividends payable on foreign securities may be subject to
foreign withholding taxes, thereby reducing the income earned by the Fund; (2)
commission rates payable on foreign portfolio transactions are generally higher
than in the U. S.; (3) accounting, auditing and financial reporting standards
differ from those in the U. S., which means that less information about foreign
companies may be available than is generally available about issuers of
comparable securities in the U.S.; (4) foreign securities often trade less
frequently and with lower volume than U.S. securities and consequently may
exhibit greater price volatility; and (5) foreign securities trading practices,
including those involving securities settlement, may expose the Fund to
increased risk in the event of a failed trade or the insolvency of a foreign
broker-dealer or registrar.
REGULATION AND LIQUIDITY OF MARKETS. Government supervision and
regulation of exchanges and brokers in foreign market countries, especially
emerging market countries, generally is less extensive than in the U. S. These
markets may have different clearance and settlement procedures, and, in certain
cases, settlements have not kept pace with the volume of securities
transactions, making them difficult to conduct. Delays in settlement could
adversely affect or interrupt the Fund's intended investment program or result
in investment losses due to intervening declines in security values.
Securities markets in foreign market countries generally are smaller
than U.S. securities markets and may have lower trading volume, resulting in
diminished liquidity and greater price volatility. Reduced secondary market
liquidity may make it more difficult for the Fund to determine the value of its
portfolio securities or dispose of particular instruments when necessary.
Brokerage commissions and other transaction costs on foreign securities
exchanges also are generally higher.
EMERGING MARKETS. In any emerging market country, there is the
possibility of expropriation of assets, confiscatory taxation, nationalization
of companies or industries, foreign exchange controls, foreign investment
controls on daily stock market movements, default in foreign government
securities, political or social instability, or diplomatic developments that
could affect investments in those countries. In the event of expropriation,
nationalization or other confiscation, the Fund could lose its entire investment
in a country. The economies of developing countries generally are heavily
dependent upon international trade and, accordingly, have been and may continue
to be adversely affected by trade barriers, exchange controls, managed
adjustments in relative currency values and other protectionist measures imposed
or negotiated by the countries with which they trade. There also may be less
monitoring and regulation of emerging markets and the activities of brokers
there. Investing may require that the Fund adopt special procedures, seek local
government approvals or take other actions that may incur costs for the Fund.
Certain emerging market countries may restrict investment by foreign
entities by limiting the size of foreign investment in certain issuers,
requiring prior approval of foreign investment by the government, imposing
additional tax on foreign investors, or limiting foreign investors to specific
classes of securities of an issuer that have less advantageous rights (with
regard to price or convertibility, for example) than classes available to
domiciliaries of the country. These restrictions or controls may at times limit
or preclude investment in certain securities and may increase the costs and
expenses of the Fund.
CURRENCY FLUCTUATIONS AND DEVALUATIONS. The Fund invests heavily in
securities denominated in non-U.S. currencies. A decline against the dollar in
the value of currencies in which the Fund's investments are denominated will
result in a corresponding decline in the dollar value of its assets. This risk
may be heightened in some emerging market countries.
The Fund may, at times, have to liquidate some portfolio securities to
acquire sufficient U.S. dollars to fund redemptions or pay its expenses. Changes
in foreign currency exchange rates may contribute to the need to liquidate
portfolio securities. The Fund incurs foreign exchange expenses in converting
assets from one currency to another.
INFLATION. Several emerging market countries have experienced high, and
in some periods extremely high, rates of inflation in recent years. Inflation
and rapid fluctuations in inflation rates may adversely affect these countries'
economies and securities markets. Further, inflation accounting rules in some
emerging market countries require, for companies that keep accounting records in
the local currency, that certain assets and liabilities be restated on the
company's balance sheet in order to express items in terms of current currency
purchasing power. Inflation accounting may indirectly generate losses or profits
for certain emerging market companies.
NON-DIVERSIFIED INVESTMENTS. Because suitable investments in Asian
Companies may be limited, the Fund and each Portfolio is classified as
"non-diversified" under the 1940 Act. This classification may be changed without
a shareholder vote. However, so that investors in the Fund may continue to
qualify as a "regulated investment company" under Subchapter M of the Internal
Revenue Code of 1986, as amended, at the close of each quarter of the taxable
year: (1) not more than 25% of the market value of the Fund's total assets will
be invested in the securities of a single issuer (other than the Portfolios);
(2) with respect to 50% of the market value of its total assets, not more than
5% will be invested in the securities of a single issuer ( other than the
Portfolios); and (3) the Fund will not own more than 10% of the outstanding
voting securities of a single issuer ( other than the Portfolios). (See
"Dividends, Distributions and Taxes".)
To the extent the Fund makes investments in excess of 5% of its assets
in a particular issuer, its exposure to credit and market risks associated with
that issuer is increased. Also, since a relatively high percentage of the Fund's
assets may be invested in the securities of a limited number of issuers, the
Fund may be more susceptible to any single economic, political or regulatory
occurrence than a diversified investment company.
GEOGRAPHIC CONCENTRATION. The Fund and each Portfolio may invest more
than 25% of its total assets in issuers located in any one country. To the
extent that it does so, the Fund is susceptible to a range of factors that could
adversely affect that country, including political and economic developments and
foreign exchange rate fluctuations as discussed above. As a result of investing
substantially in one country, the value of the Fund's assets may fluctuate more
widely than the value of shares of a comparable fund with a lesser degree of
geographic concentration.
DEBT SECURITIES. Debt securities generally are subject to two kinds of
risk -- Credit risk and market risk. Credit risk refers to the ability of the
debtor, and any other obligor, to pay principal and interest on the debt as it
becomes due. The Fund may, from time to time, invest in debt securities with
high risk and high yields (as compared to other debt securities meeting the
Fund's investment criteria). Debt securities in which the Fund invests may be
unrated but will not be in default at the time of purchase. Market risk refers
to the tendency of the value of debt securities to vary inversely with
interest-rate changes. Certain debt instruments may also be subject to extension
risk, which refers to a change in total return on a debt instrument resulting
from extension or abbreviation of the instrument's maturity.
HIGH YIELD/HIGH RISK SECURITIES. High yield/high risk securities'
market values are affected more by individual issuer developments and are more
sensitive to adverse economic changes than are higher-rated securities. Issuers
of high yield/high risk securities may be highly leveraged and may not have more
traditional methods of financing available to them. During economic downturns or
substantial periods of rising interest rates, issuers of high yield/high risk
securities, especially highly leveraged ones, may be less able to service their
principal and interest payment obligations, meet their projected business goals,
or obtain additional financing. The risk of loss due to default by the issuer is
significantly greater for holders of high yield/high risk securities because
such securities may be unsecured and may be subordinated to other creditors of
the issuer. In addition, the Fund may incur additional expenses if it is
required to seek recovery upon a default by the issuer of such an obligation or
participate in the restructuring of such obligation.
Periods of economic uncertainty and change are likely to cause
increased volatility in the market prices of high yield/high risk securities
and, correspondingly, in the Fund's net asset value if it invests in such
securities. Market prices of such securities structured as zero coupon or
pay-in-kind securities are more affected by interest-rate changes and, thus,
tend to be more volatile than securities that pay interest periodically and in
cash.
High yield/high risk securities may have call or redemption features
that would permit an issuer to repurchase the securities from the Fund. If a
call were exercised by the issuer during a period of declining interest rates,
the Fund would likely have to replace called securities with lower yielding
securities, thus decreasing the Fund's net investment income and dividends to
shareholders.
While a secondary trading market for high yield/high risk securities
does exist, it is generally not as liquid as the secondary market for
higher-rated securities. In periods of reduced secondary market liquidity,
prices of high yield/high risk securities may become volatile and experience
sudden and substantial price declines. The Fund may, therefore, have difficulty
disposing of particular issues to meet its liquidity needs or in response to a
specific economic event (such as a deterioration in the creditworthiness of the
issuer). Reduced secondary market liquidity for certain high yield/high risk
securities also may make it more difficult for the Fund to obtain accurate
market quotations (for purposes of valuing the Fund's investment portfolio):
market quotations generally are available on many high yield/high risk
securities only from a limited number of dealers and may not necessarily
represent firm bids of such dealers or prices for actual sales. Under such
conditions, high yield/high risk securities may have to be valued at fair value
as determined by the Schroder Core Board or SCMI under Board-approved
guidelines.
Adverse publicity and investor perceptions (which may not be based on
fundamental analysis) may decrease the value and liquidity of high yield/high
risk securities, particularly in a thinly traded market. Factors adversely
affecting the market value of high yield/high risk securities are likely to
adversely affect the Fund's, and thus the Fund's, net asset value.
SOVEREIGN DEBT. Investment in sovereign debt carries high risk. Certain
foreign countries are large debtors to commercial banks and foreign governments.
At times, certain foreign countries have declared moratoria on the payment of
principal and/or interest on outstanding debt. The governmental entity that
controls the repayment of sovereign debt may not be able or willing to repay the
principal and/or interest when due in accordance with the terms of such debt. A
governmental entity's willingness or ability to repay principal and interest
when it is due may be affected by many factors, such as its cash flow situation,
the extent of its foreign reserves, the availability of sufficient foreign
exchange, the relative size of the debt service burden to the economy as a
whole, and political restraints. The Fund, as a holder of sovereign debt, may be
asked to participate in the rescheduling of such debt and to extend further
loans to governmental entities. There is no bankruptcy proceeding by which
defaulted sovereign debt may be collected.
The sovereign debt instruments in which the Fund may invest involve
great risk, are deemed to be the equivalent in terms of quality to high
yield/high risk securities discussed above and are subject to many of the same
risks as such securities. Similarly, the Fund may have difficulty disposing of
certain sovereign debt obligations because there may be a thin trading market
for such securities. The Fund will not invest in sovereign debt that is in
default.
INVESTMENT RESTRICTIONS
The following investment restrictions restate or are in addition to
those described under "Investment Restrictions" and "Investment Policies" in the
Prospectus. These restrictions, unless otherwise indicated, are fundamental
policies of the Fund and cannot be changed without the vote of a "majority" of
the Fund's outstanding shares. Except as noted, these restrictions also are
fundamental investment restrictions of each Portfolio and cannot be changed
without the vote of a "majority" of its outstanding interests. Under the 1940
Act, such 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. Under these additional
restrictions, the Fund will not:
1. DIVERSIFICATION
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 total assets
would be invested in the securities of any single issuer; (2)
with respect to 50% of its assets, it would own more than 10%
of the outstanding securities of any single issuer; or (3)
more than 25% of its total assets would be invested in the
securities of any single issuer.
Notwithstanding any other investment policy or restriction to
the contrary, the Fund may seek to achieve its investment
objective by investing some or all of its assets in the
securities of one or more investment companies to the extent
permitted by the 1940 Act or an applicable exemptive order
under such Act; provided that, to the extent the Fund invests
in other investment companies pursuant to Section 12(d)(1)(A)
of the 1940 Act, the Fund treats the assets of the investment
companies in which it invests as its own.
2. INDUSTRY CONCENTRATION
purchase a security if, as a result, more than 25% of the
Fund's or the Fund'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, its agencies
or instrumentalities. For purposes of this restriction, a
foreign government is deemed to be an " industry."
Notwithstanding anything to the contrary, to the extent
permitted by the 1940 Act, the Fund or the Portfolio may
invest in one or more investment companies; provided that,
except to the extent the it invests in other investment
companies pursuant to Section 12(d)(1)(A) of the 1940 Act, the
Fund or Portfolio treats the assets of the investment
companies in which it invests as its own for purposes of this
policy.
3. BORROWING AND SENIOR SECURITIES
borrow money except that the Fund may borrow from banks up to
33 1/3% of its total assets ( including the amount borrowed )
for temporary or emergency purposes or to meet redemption
requests. The Fund may not issue any class of securities which
is senior to the Fund's shares of beneficial interest;
provided, however, that none of the following shall be deemed
to create senior securities: (a) any borrowing permitted by
this restriction or any pledge or encumbrance to secure such
borrowing; (b) any collateral arrangements with respect to
options, futures contracts, options on future contracts or
other financial instruments; or (c) any purchase, sale or
other permitted transaction in options, forward contracts,
futures contracts, options on future contracts or other
financial instruments.
4. REAL ESTATE
purchase or sell real estate, real estate mortgage loans or
real estate limited partnership interests ( other than
securities secured by real estate or interests therein or
securities issued by companies that invest in real estate or
interests therein )
5. LENDING
make loans to other parties, except that the Fund may (a)
purchase and hold debt instruments ( including bonds,
debentures or other certificates of deposit, bankers'
acceptances and fixed time deposits) in accordance with its
investment objective and policies, (b) enter into repurchase
agreements with respect to portfolio securities, and (c) make
loans of portfolio securities, as described under " Other
Investment Practices and Risk Considerations ---Securities
loans, repurchase agreements, and forward commitments " in the
Prospectus.
6. COMMODITIES
purchase or sell commodities or commodity contracts, including
futures contracts and options thereon, except that the Fund
may engage in Hedging as described in the Prospectus and this
SAI.
7. UNDERWRITING
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 its
assets, the Fund or the Fund may be deemed to be an
underwriter.
8. EXERCISING CONTROL OF ISSUERS
invest for the purpose of exercising control over the
management of any company.
9. SHORT SALES AND PURCHASING ON MARGIN
make short sales of securities or maintain a short position;or
purchase securities on margin, ( except for delayed delivery
or when-issued transactions or such short-term credits as are
necessary for the clearance of transactions and for Hedging
purposes and margin deposits in connection with transactions
in futures contracts, options on futures contracts, options on
securities and securities indices, and currency transactions).
NONFUNDAMENTAL LIMITATIONS
The Fund and the Portfolios have each adopted the following
nonfundamental investment limitations. A nonfundamental policy does not override
a fundamental limitation. The policies of a Portfolio may be changed by the
Schroder Core Board without approval of its interestholders or Fund
shareholders.
1. 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
and Senior Securities" above.)
2. LIQUIDITY
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. The Fund or a
Portfolio may treat certain restricted securities as liquid
pursuant to guidelines adopted by the Board or Schroder Core
Board, as the case may be.
3. OTHER INVESTMENT COMPANIES
invest in securities of another investment company,
Notwithstanding any other investment policy or restriction to
the contrary, the Fund may seek to achieve its investment
objective by investing some or all of its assets in the
securities of one or more investment companies to the extent
permitted by the 1940 Act or an applicable exemptive order
under such Act; provided that, to the extent the Fund invests
in other investment companies pursuant to Section 12(d)(1)(A)
of the 1940 Act, the Fund treats the assets of the investment
companies in which it invests as its own.
4. LENDING
lend a security if, as a result, the amount of loaned
securities would exceed an amount equal to one third of the
Fund's or a Portfolio's total assets.
MANAGEMENT
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 Core, Schroder Capital Funds II and Schroder Series Trust, other
registered investment companies in the Schroder family of funds.
I. PETER SEDGWICK*,__, 33 Gutter Lane, London, England - Chairman and Trustee of
the Trust; Group Managing Director, Schroders plc; Chairman and Director, SCMI
and Schroder Capital Management International Ltd.; Chief Executive and
Director, Schroder Investment Management Ltd.; Director, various offshore funds
for which a member of the Schroder group of companies serves as manager.
DAVID M. SALISBURY*, __, 33 Gutter Lane, London, England - Vice Chairman and
Trustee of the Trust; Chief Executive and Director, SCMI and Schroder Capital
Management International Ltd.
PETER E. GUERNSEY, 75, c/o the Trust, Two Portland Square, Portland, Maine -
Trustee of the Trust; Insurance Consultant since August 1986; prior thereto
Senior Vice President, Marsh & McLennan, Inc., insurance brokers.
JOHN I. HOWELL, 80, c/o the Trust, Two Portland Square, Portland, Maine -
Trustee of the Trust; Private Consultant since February 1987; Honorary Director,
American International Group, Inc.; Director, American International Life
Assurance Company of New York.
WILLIAM L. MEANS,__________ - Trustee of the Trust;
LOUISE CROSET,* ____, 767 Seventh Avenue, 34th Floor, New York, New York,
Trustee and President of the Trust; First Vice President and Director of SCMI
since 1993. Vice President, Wellington Management, from 1987 to 1993.
MARK J. SMITH, 35, [33 Gutter Lane], London, England - Vice President of the
Trust; Senior Vice President and Director of SCMI since April 1990; Director and
Senior Vice President, Schroder Advisors.]
HEATHER F. CRIGHTON, ___,Vice President of the Trust; Vice President of SCMI
since _____. Prior thereto,____
DONALD H.M. FARQUHARSON, _____, Vice President of the Trust_________
FERGAL CASSIDY____, Treasurer of the Trust, _____________
MARGARET H. DOUGLAS-HAMILTON, 55, 787 Seventh Avenue, 34th Floor, New York, New
York - Secretary of the Trust; Secretary of SCM since July 1995; Senior Vice
President (since April 1997) and General Counsel of Schroders Incorporated since
May 1987; prior thereto, partner of Sullivan & Worcester, a law firm.
CATHERINE A. MAZZA, 37, 787 Seventh Avenue, 34th Floor, New York, New York -
Vice President and Assistant Secretary 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.
ALEXANDRA POE, 36, 787 Seventh Avenue, 34th Floor, New York, New York -
Assistant Secretary of the Trust; Vice President of SCMI since August 1996; Fund
Counsel and Senior Vice President of Schroder Advisors since August 1996;
Secretary of Schroder Advisors; prior thereto, an investment management attorney
with Gordon Altman Butowsky Weitzen Shalov & Wein since July 1994; prior thereto
counsel and Vice President of Citibank, N.A. since 1989.
THOMAS G. SHEEHAN, 42, Two Portland Square, Portland, Maine - Assistant
Treasurer and Assistant Secretary of the Trust; ------------of Forum, the
Trust's subadministrator; Counsel, Forum Financial Services, Inc. since 1993;
prior thereto, Special Counsel, U.S. Securities and Exchange Commission,
Division of Investment Management, Washington, D.C.
CATHERINE S. WOOLEDGE, 55, Two Portland Square, Portland, Maine - Assistant
Secretary of the Trust - Counsel, Forum Financial Services, Inc. since November
1996. Prior thereto, associate at Morrison & Foerster, Washington, D.C. from
October 1994 to November 1996, associate corporate counsel at Franklin
Resources, Inc. from September 1993 to September 1994, and prior thereto
associate at Drinker Biddle & Reath, Philadelphia, PA.
* Interested Trustee of the Trust within the meaning of the 1940 Act.
Schroder Advisors is a wholly owned subsidiary of SCMI, which is a wholly
owned subsidiary of Schroders Incorporated, which in turn is an indirect, wholly
owned U.S. subsidiary of Schroders plc. Schroder Capital Management Inc. ("SCM")
is also a wholly owned subsidiary of Schroders Incorporated.
Officers and Trustees who are interested persons of the Trust receive
no salary, fees or compensation directly from the Trust or Fund. The Trust's
independent Trustees of the Trust receive an annual fee of $1,000 and a fee of
$250 for each meeting of the Trust Board attended by them. The Fund has no
bonus, profit sharing, pension or retirement plans.
The following table provides the fees paid to each of the Trust's
independent Trustees by Schroder Asian Growth Fund, Inc. (the predecessor
closed-end fund) and the other funds in the Schroder family of funds for the
fiscal year ended October 31, 1997 (the most recent fiscal year of the
predecessor fund and many of the other funds in the Schroder family).
<TABLE>
Pension or Total
Retirement Compensation From
Aggregate Benefits Accrued Estimated Annual Trust And Fund
Compensation From As Part of Trust Benefits Upon Complex Paid To
Name of Trustee Trust Expenses Retirement Trustees
- -------------------------------- -------------------- -------------------- --------------------- -------------------
<S> <C> <C> <C> <C>
Mr. Guernsey [_____] [0] [0] $[______]
Mr. Howell [_____] [0] [0] [______]
Mr. Means [_____] [0] [0] [______]
</TABLE>
As of December __, 1997, the Fund had no outstanding shares.
Although the Trust is a Delaware business trust, certain of its Trustees or
officers are residents of the United Kingdom, and substantially all of their
assets may be located outside of the U.S. As a result it may be difficult for
U.S. investors to effect service upon such persons within the U.S. or to realize
U.S. civil judgments against them. Civil remedies and criminal penalties under
U.S. federal securities law may be unenforceable in the United Kingdom.
Extradition treaties now in effect between the U.S. and the United Kingdom might
not subject such persons to effective enforcement of the criminal penalties of
such acts.
INVESTMENT ADVISER
SCMI, 787 Seventh Avenue, New York, New York 10019, serves as
investment adviser to each Portfolio under an investment advisory agreement
between Schroder Core and SCMI (the "Core Advisory Agreement"). SCMI is a wholly
owned U.S. subsidiary of Schroders Incorporated, the wholly owned U.S. holding
company subsidiary of Schroders plc. Schroders plc is the holding company parent
of a large worldwide group of banks and financial service companies (referred to
as the "Schroder Group"), with associated companies and branch and
representative offices in eighteen countries. The Schroder Group specializes in
providing investment management services, with funds under management currently
in excess of $1750 billion as of September 30, 1997.
Under the Core Advisory Agreement, SCMI is responsible for managing the
investment program for each Portfolio. In this regard, it is SCMI's
responsibility to make decisions relating to the Portfolios' investments and to
place purchase and sale orders regarding such investments with brokers or
dealers it selects. SCMI also furnishes Schroder Core and the Trust Board, which
has overall responsibility for the business and affairs of the Trust, with
periodic reports on the investment performance of the Portfolios and Fund.
Under the terms of the Core Advisory Agreement, SCMI is required to
manage the Portfolio's investment portfolio in accordance with applicable laws
and regulations. In making its investment decisions, SCMI does not use material
inside information that may be in its possession or in the possession of its
affiliates.
The Core Advisory Agreement continues in effect provided such
continuance is approved annually: (1) by the holders of a majority of the
outstanding voting securities of the Fund or by Schroder Core 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 such party. The Core Advisory
Agreement may be terminated without penalty by vote of the Trustees or the
shareholders of the Fund on 60 days' written notice to the investment adviser,
or by the investment adviser on 60 days' written notice to the Trust, and it
terminates automatically if assigned. The Core Advisory Agreement also provides
that, with respect to the Portfolios, 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 duties to the Portfolio, except for willful misfeasance, bad
faith or gross negligence in the performance of duties or by reason of reckless
disregard of any obligations and duties under the Agreement. Under the terms of
the Core Advisory Agreement, SCMI is entitled to receive monthly fees on an
annual basis equal to 0.70% and 0.55% of the respective average daily net assets
of Asia Portfolio and Japan Portfolio.
SCMI also serves as investment adviser to the Fund under an investment
advisory and asset allocation agreement with the Trust (the "Fund Advisory
Agreement"). Under the Fund Advisory Agreement, SCMI is entitled to receive an
investment advisory fee for asset allocation services of 0.20% of the Fund's
average daily net assets, on an annual basis, with respect to assets invested in
the Fund (or another registered investment company). The Fund Advisory
Agreement, however, provides that with respect to assets invested in the Fund,
SCMI is not entitled to receive an investment advisory fee from the Fund for
investment management services. The Fund's investment may be withdrawn from the
Fund at any time if the Trust Board determines that it is in the best interests
of the Fund and its shareholders to do so. In that event, under the Fund
Advisory Agreement, SCMI would be entitled to receive a monthly fee at an annual
rate of 0.90% of the Fund's average daily net assets, on assets managed directly
at the Fund level. The Fund Advisory Agreement between the Trust and SCMI is the
same in all material respects as the Portfolios' Core Advisory Agreement (except
as to the parties and the circumstances under which fees will be paid).
ADMINISTRATIVE SERVICES
On behalf of the Fund, the Trust has entered into an Administration
Agreement with Schroder Advisors, under which Schroder Advisors provides
management and administrative services necessary for the operation of the Fund,
including: (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
Fund, including coordination of the services performed by the Fund's investment
adviser, transfer agent, custodian, independent accountants, legal counsel and
others. Schroder Advisors is a wholly owned subsidiary of SCMI and is a
registered broker-dealer organized to act as administrator and distributor of
mutual funds.
For providing administrative services Schroder Advisors is entitled to
receive from the Fund a fee, payable monthly, at the annual rate of 0.05% of the
Fund's average daily net assets. The Administration Agreement is terminable with
respect to the Fund without penalty, at any time, by the Trust Board, upon 60
days' written notice to Schroder Advisors or by Schroder Advisors upon 60 days'
written notice to the Trust.
The Trust has entered into a Subadministration Agreement with Forum.
Under its Agreement, Forum assists Schroder Advisors with certain of its
responsibilities under the Administration Agreement, including shareholder
reporting and regulatory compliance. For providing its services, Forum is
entitled to receive a monthly fee from the Fund at the annual rate of 0.05% of
the average daily net assets. The Subadministration Agreement is terminable with
respect to the Fund without penalty, at any time, by the Trust Board, upon 60
days' written notice to Forum or by Forum upon 60 days' written notice to the
Fund.
Schroder Advisors and Forum provide similar services to the Portfolios
pursuant to administration and subadministration agreements between Schroder
Core and each of these entities, for which Schroder Advisors and Forum are each
compensated at the annual rate of 0.05% of the Fund's average daily net assets.
The administration and subadministration agreements are the same in all material
respects as the Fund's respective agreements except as to the parties and the
fees payable thereunder).
The fees paid by the Fund and Portfolios to SCMI and Schroder Advisors
may equal up to 1.00% of the Fund's average daily net assets. Such fees as a
whole are higher than advisory and management fees charged to mutual funds which
invest primarily in U.S. securities but not necessarily higher than those
charged to funds with investment objectives similar to that of the Fund.
DISTRIBUTION OF FUND SHARES
Schroder Advisors, 787 Seventh Avenue, New York, New York 10019, serves
as Distributor of Fund shares under a Distribution Agreement. Schroder Advisors
is a wholly owned subsidiary of Schroders Incorporated, the parent company of
SCMI, and is a registered broker-dealer organized to act as administrator and/or
distributor of mutual funds.
Under the Distribution Agreement, Schroder Advisors has agreed to use
its best efforts to secure purchases of Fund shares in jurisdictions in which
such shares may be legally offered for sale. Schroder Advisors is not obligated
to sell any specific amount of Fund shares. Further, Schroder Advisors has
agreed in the Distribution Agreement to serve without compensation and to pay
from its own resources all costs and expenses incident to the sale and
distribution of Fund shares including expenses for printing and distributing
prospectuses and other sales materials to prospective investors, advertising
expenses, and the salaries and expenses of its employees or agents in connection
with the distribution of Fund shares.
SHAREHOLDER SERVICE PLAN AND SERVICE ORGANIZATIONS
Under the Shareholder Service Plan approved by the Board for the Fund's
A Shares, the Trust may also contract with banks, trust companies,
broker-dealers or other financial organizations ("Service Organizations") to
provide certain administrative services for shareholders of the Fund's A Shares.
The Fund may pay fees (which may vary depending upon the services provided) to
Service Organizations in amounts up to an annual rate of 0.25% of the daily net
asset value of the Fund's A Shares owned by shareholders with whom the Service
Organization has a servicing relationship. Services provided by Service
Organizations may include: (1) providing personnel and facilities necessary to
establish and maintain certain shareholder accounts and records; (2) assisting
in processing purchase, exchange and redemption transactions; (3) arranging for
the wiring of funds or transmitting and receiving funds in connection with
client orders to purchase or redeem shares; (4) verifying and guaranteeing
client signatures in connection with redemption orders, transfers among, and
changes in client-designated accounts; (5) providing periodic statements of a
client's account balances and, to the extent practicable, integrating such
information with other client transactions; (6) furnishing periodic and annual
statements and confirmations of all purchases and redemptions of shares in a
client's account; (7) transmitting proxy statements, annual reports, and
updating prospectuses and other communications from the Fund to clients; and (8)
such other services as the Fund or a client reasonably may request, to the
extent permitted by applicable statute, rule or regulation. Neither SCMI nor
Schroder Advisors will be a Service Organization or receive fees for servicing.
The Fund has no intention of making any such payments to Service Organizations
with respect to accounts of institutional investors and, in any event, would
make no such payments until the Trust Board specifically so authorizes.
Some Service Organizations may impose additional or different
conditions on their clients, such as requiring them to invest more than the
minimum investments specified by the Fund or charging a direct fee for
servicing. If imposed, these fees would be in addition to any amounts that might
be paid to the Service Organization by the Fund. Each Service Organization
agrees to transmit to its clients a schedule of any such fees. Shareholders
using Service Organizations are urged to consult them regarding any such fees or
conditions.
The Glass-Steagall Act and other applicable laws provide that banks may
not engage in the business of underwriting, selling or distributing securities.
There currently is no precedent prohibiting banks from performing administrative
and shareholder servicing functions as Service Organizations. However, judicial
or administrative decisions or interpretations of such laws, as well as changes
in either federal or state statutes or regulations relating to the permissible
activities of banks and their subsidiaries or affiliates, could prevent a bank
service organization from continuing to perform all or a part of its servicing
activities. If a bank were prohibited from so acting, its shareholder clients
would be permitted to remain Fund shareholders, and alternative means for
continuing the servicing of such shareholders would be sought. In that event,
changes in the operation of the Fund might occur, and a shareholder serviced by
such a bank might no longer be able to avail itself of any services then being
provided by the bank. It is not expected that shareholders would suffer any
adverse financial consequences as a result of any of these occurrences.
FUND ACCOUNTING
Forum Accounting Services, LLC ("Forum Accounting"), an affiliate of
Forum, performs fund accounting services for the Fund pursuant to an agreement
with the Trust. The Accounting Agreement is terminable with respect to the Fund
without penalty, at any time, by the Trust Board upon 60 days' written notice to
Forum Accounting or by Forum Accounting upon 60 days' written notice to the
Trust.
Under its agreement, Forum Accounting prepares and maintains the books
and records of the Fund that are required to be maintained under the 1940 Act,
calculates the net asset value per share of the Fund, calculates dividends and
capital-gain distributions, and prepares periodic reports to shareholders and
the SEC. For its services to the Fund, Forum Accounting is entitled to receive
from the Trust a fee of $36,000 per year plus $12,000 per year for each class of
the Fund above one. Forum Accounting is entitled to an additional $24,000 per
year with respect to global and international funds. In addition, Forum
Accounting also is entitled to an additional $12,000 per year with respect to
tax-free money market funds, funds with more than 25% of their total assets
invested in asset-backed securities, funds that have more than 100 security
positions, or funds that have a monthly portfolio turnover rate of 10% or
greater.
Forum Accounting is required to use its best judgment and efforts in
rendering fund accounting services and is not liable to the Trust for any action
or inaction in the absence of bad faith, willful misconduct or gross negligence.
Forum Accounting is not responsible or liable for any failure or delay in
performance of its fund accounting obligations arising out of or caused,
directly or indirectly, by circumstances beyond its reasonable control. The
Trust has agreed to indemnify and hold harmless Forum Accounting 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 Forum Accounting's actions taken or failures to act with respect to a
Fund or based, if applicable, upon information, instructions or requests with
respect to a Fund given or made to Forum Accounting by an officer of the Trust
duly authorized. This indemnification does not apply to Forum Accounting's
actions taken or failures to act in cases of Forum Accounting's own bad faith,
willful misconduct or gross negligence.
FEES AND EXPENSES
The Fund bears all costs of its operations other than expenses
specifically assumed by SCMI or Schroder Advisors, including those expenses it
indirectly bears through its investment in the Portfolio. The costs borne by the
Fund include legal and accounting expenses; Trustees' fees and expenses;
insurance premiums, custodian and transfer agent fees and expenses; expenses of
registering and qualifying the Fund's shares for sale with the SEC and with
various state securities commissions; expenses of obtaining quotations on
portfolio securities, if any, and pricing of the Fund's shares; the expenses of
maintaining the Fund's legal existence and of shareholders' meetings; expenses
of preparation and distribution to existing shareholders of reports, proxies and
prospectuses; and a proportionate amount of the total operating expenses of the
Portfolio, including advisory fees paid to SCMI. A Shares also bear any
class-specific expenses, such as fees payable to Service Organizations. Trust
expenses are charged to the Fund.
PORTFOLIO TRANSACTIONS
INVESTMENT DECISIONS
Investment decisions for the Fund or 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. Each Portfolio's portfolio transaction costs are borne prorata by
its investors, including the Fund.
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 the Fund are placed with foreign broker-dealers,
certain portfolio transaction costs for the Fund 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.
The Fund and Core Advisory Agreements authorize and direct SCMI to
place orders for the purchase and sale of the Fund's or a Portfolio's
investments with brokers or dealers it selects and to seek "best execution" of
such portfolio transactions. SCMI places all such orders for the purchase and
sale of portfolio securities and buys and sells securities through a substantial
number of brokers and dealers. In so doing, SCMI uses its best efforts to obtain
the most favorable price and execution available. The Fund or a Portfolio may,
however, pay higher than the lowest available commission rates when SCMI
believes it is reasonable to do so in light of the value of the brokerage and
research services provided by the broker effecting the transaction. In seeking
the most favorable price and execution, SCMI considers all factors it deems
relevant (including price, transaction size, the nature of the market for the
security, the commission amount, the timing of the transaction (taking into
account market prices and trends), the reputation, experience and financial
stability of the broker-dealers involved, and the quality of service rendered by
the broker-dealers in other transactions).
Historically, investment advisers, including advisers of investment
companies and other institutional investors, have received research services
from broker-dealers that execute portfolio transactions for the advisers'
clients. Consistent with this practice, SCMI may receive research services from
broker-dealers with which it places portfolio transactions. These services,
which in some cases may also be purchased for cash, include such items as
general economic and security market reviews, industry and company reviews,
evaluations of securities and recommendations as to the purchase and sale of
securities. Some of these services are of value to SCMI in advising various of
its clients (including the Fund or a Portfolio), although not all of these
services are necessarily useful and of value in managing the Fund or a
Portfolio. The investment advisory fee paid by the Fund or a Portfolio is not
reduced because SCMI and its affiliates receive such services.
As permitted by Section 28(e) of the 1934 Act, SCMI may cause the Fund
or a Portfolio to pay a broker-dealer that provides SCMI with "brokerage and
research services" (as defined in the 1934 Act) an amount of disclosed
commission for effecting a securities transaction in excess of the commission
which another broker-dealer would have charged for effecting that transaction.
In addition, although it does not do so currently SCMI may allocate brokerage
transactions to broker-dealers who have entered into arrangements under which
the broker-dealer allocates a portion of the commissions paid by the Fund or a
Portfolio toward payment of Fund or Portfolio expenses, such as custodian fees.
Subject to the general policies of the Fund or a Portfolio regarding
allocation of portfolio brokerage as set forth above, the Core Board has
authorized SCMI to employ: (1) Schroder Wertheim & Company, Incorporated
("Schroder Wertheim") an affiliate of SCMI, to effect securities transactions of
the Fund or 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 the Fund or 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 Wertheim or Schroder
Securities for effecting such transactions is subject to Section 17(e) of the
1940 Act, which requires, among other things, that commissions for transactions
on a securities exchange paid by a registered investment company 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 Fund's and Portfolios' policy that
commissions paid to Schroder Wertheim or Schroder Securities will, in SCMI's
opinion, be: (1) at least as favorable as commissions contemporaneously charged
by Schroder Wertheim 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 Trust Board and
Core Board, including a majority of the respective non-interested Trustees, have
each adopted procedures pursuant to Rule 17e-1 under the 1940 Act to ensure that
commissions paid to Schroder Wertheim or Schroder Securities by the Fund or a
Portfolio satisfy the foregoing standards. Such procedures are reviewed
periodically by the applicable Board, including a majority of the non-interested
Trustees. Each Board also reviews all transactions at least quarterly for
compliance with such procedures.
It is further a policy of the Fund and Portfolios that all such
transactions effected by Schroder Wertheim on the New York Stock Exchange be in
accordance with Rule 11a2-2(T) promulgated under the 1934 Act, which requires in
substance that a member of such exchange not associated with Schroder Wertheim
actually execute the transaction on the exchange floor or through the exchange
facilities. Thus, while Schroder Wertheim will bear responsibility for
determining important elements of execution such as timing and order size,
another firm will actually execute the transaction.
Schroder Wertheim pays a portion of the brokerage commissions it
receives from the Fund or a Portfolio to the brokers executing the transactions
on the New York Stock Exchange. In accordance with Rule 11a2-2(T), Schroder Core
has entered into an agreement with Schroder Wertheim permitting it to retain a
portion of the brokerage commissions paid to it by the Fund or a Portfolio. Each
Board, including a majority of the non-interested Trustees, have approved this
agreement.
Neither the Fund nor a Portfolio has any understanding or arrangement
to direct any specific portion of its brokerage to Schroder Wertheim or Schroder
Securities, and neither will direct brokerage to Schroder Wertheim or Schroder
Securities in recognition of research services.
From time to time, the Fund or a Portfolio may purchase securities of a
broker or dealer through which it regularly engages in securities transactions.
[During the fiscal year ended October 31, 1997, the Asian Growth Fund, Inc., the
predecessor closed-end fund, purchased securities of [__________], one of its
regular broker-dealers, having a value of $[__________].]
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
DETERMINATION OF NAV PER SHARE
The NAV per share of the Fund is determined as of the close of trading
on the New York Stock Exchange each day that the Exchange is open. Any assets or
liabilities initially expressed in terms of non-U.S. dollar currencies are
translated into U.S. dollars at the prevailing market rates as quoted by one or
more banks or dealers on the afternoon of valuation. The Exchange's most recent
holiday schedule (which is subject to change) states that it will close on New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The Core Board has established procedures for the valuation of the
Portfolio's securities: (1) equity securities listed or traded on the New York
or American Stock Exchange or other domestic or foreign stock exchange are
valued at their latest sale prices on such exchange that day prior to the time
when assets are valued; in the absence of sales that day, such securities are
valued at the mid-market prices (in cases where securities are traded on more
than one exchange, the securities are valued on the exchange designated as the
primary market by the Fund'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 Core Board's procedures; (4) debt
securities having a maturity in excess of 60 days are valued at the mid-market
prices determined by a portfolio pricing service or obtained from active market
makers on the basis of reasonable inquiry; and (5) short-term debt securities
(having a remaining maturity of 60 days or less) are valued at cost, adjusted
for amortization of premiums and accretion of discount.
When an option is written, an amount equal to the premium received is
recorded in the books as an asset, and an equivalent deferred credit is recorded
as a liability. The deferred credit is adjusted ("marked-to-market") to reflect
the current market value of the option. Options are valued at their mid-market
prices in the case of exchange-traded options 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.
REDEMPTIONS IN-KIND
In the event that payment for redeemed shares is made wholly or partly
in portfolio securities, shareholders may incur brokerage costs in converting
the securities to cash. An in-kind distribution of portfolio securities is
generally less liquid than cash. The shareholder 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
shareholder and conversion to cash. A redemption in-kind of portfolio securities
could result in a less diversified portfolio of investments for the Fund and
could affect adversely the liquidity of its investment portfolio.
TAXATION
Under the Internal Revenue Code of 1986, as amended (the "Code"), the
Fund and each other series established from time to time by the Trust Board is
treated as a separate taxpayer for federal income tax purposes with the result
that: (1) each such series must meet separately the income and distribution
requirements for qualification as a regulated investment company; and (2) the
amounts of investment income and capital gain earned are determined on a
series-by-series (rather than on a Trust-wide) basis.
The Fund qualified for its last fiscal year as a regulated investment
company under Subchapter M of the Code and intends to so qualify each year so
long as such qualification is in the best interests of its shareholders. To do
so, the Fund intends to distribute to shareholders at least 90% of its
"investment company taxable income" as defined in the Code (which includes,
among other items, dividends, interest and the excess of any net short-term
capital gain over net long-term capital loss), and to meet certain
diversification of assets, source of income, and other requirements of the Code.
By so doing, the Fund will not be subject to federal income tax on its
investment company taxable income and "net capital gain" (the excess of net
long-term capital gain over net short-term capital loss) distributed to
shareholders. If the Fund does not meet all of these Code requirements, it will
be taxed as an ordinary corporation, and its distributions will be taxable to
shareholders as ordinary income.
Amounts not distributed on a timely basis (in accordance with a
calendar year distribution requirement) are subject to a 4% nondeductible excise
tax. To prevent this, the Fund must distribute for each calendar year an amount
equal to the sum of: (1) at least 98% of its ordinary income (excluding any
capital gain or loss) for the calendar year; (2) at least 98% of the excess of
its capital gain over capital loss realized during the one-year period ending
October 31 of such year; and (3) all such ordinary income and capital gain for
previous years that were not distributed during such years. A distribution will
be treated as paid during the calendar year if it is declared by the Fund in
October, November or December of the year with a record date in such month and
paid by the Fund during January of the following year. Such distributions will
be taxable to shareholders in the calendar year in which the distributions are
declared, rather than the calendar year in which the distributions are received.
Distributions of investment company taxable income (including net
realized short-term capital gain) are taxable to shareholders as ordinary
income. Generally, it is not expected that such distributions will be eligible
for the dividends received deduction available to corporations. However, if the
Fund acquires at least 10% of the stock of a foreign corporation that has U.S.
source income, a portion of the Fund's ordinary income dividends attributable to
such income may be eligible for such deduction, if certain requirements are met.
Distributions of net long-term capital gain are taxable to shareholders
as long-term capital gain, regardless of the length of time Fund shares have
been held by a shareholder and are not eligible for the dividends received
deduction. Such distributions will qualify for the new reduced rates for capital
gains on assets held for more than 18 months to the extent they represent gains
on the sale of such assets. A loss realized by a shareholder on the sale of Fund
shares with respect to which capital-gain distributions have been paid will, to
the extent of such capital-gain distributions, be treated as long-term capital
loss (even though such shares may have been held by the shareholder for one year
or less). Further, a loss realized on a disposition will be disallowed to the
extent the shares disposed of are replaced (whether by reinvestment or
distribution or otherwise) within a period of 61 days beginning 30 days before
and ending 30 days after the shares are disposed of. In such a case, the basis
of the shares acquired will be adjusted to reflect the disallowed loss.
All distributions to shareholders are taxable whether reinvested in
additional shares or received in cash. Shareholders that reinvest distributions
will have for federal income tax purposes a cost basis in each share received
equal to the net asset value of a share of the Fund on the reinvestment date.
Shareholders will be notified annually as to the federal tax status of
distributions.
Distributions by the Fund reduce the net asset value of the Fund's
shares. If a distribution reduces the net asset value below a shareholder's cost
basis, such distribution nevertheless would be taxable to the shareholder as
ordinary income or capital gain as described above, even though, from an
investment standpoint, it may constitute a partial return of capital. In
particular, investors should consider the tax implications of buying shares just
prior to a distribution. The price of shares purchased at that time includes the
amount of the forthcoming distribution, which will be returned to the investor
in the form of a taxable distribution.
Upon redemption or sale of shares, a shareholder will realize a taxable
gain or loss, which will be treated as capital gain or loss if the shares are
capital assets in the shareholder's hands. Such gain or loss generally will be
long-term or short-term depending upon the shareholder's holding period for the
shares, and generally will qualify for the new reduced rates for capital gains
if the shares have been held for more than 18 months.
Ordinary income dividends paid to Fund shareholders 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 shareholders are urged to consult their own tax advisors concerning
the applicability of the U.S. withholding tax.
Dividends and interest received (and, in certain circumstances,
realized capital gain) by the Fund may give rise to withholding and other taxes
imposed by foreign countries. Tax conventions between certain countries and the
U.S. may reduce or eliminate such taxes. If more than 50% in value of the Fund's
total assets at the close of its taxable year consists of securities of foreign
corporations, the Fund will be eligible, and ordinarily expects, to file an
election with the Internal Revenue Service ("IRS") pursuant to which
shareholders of the Fund will be required to include their proportionate share
of such withholding taxes in their U.S. income tax returns as gross income;
treat such proportionate share as taxes paid by them; and, subject to certain
limitations, deduct such proportionate share in computing their taxable incomes
or, alternatively, use them as foreign tax credits against their U.S. income
taxes. No deductions for foreign taxes, however, may be claimed by noncorporate
shareholders who do not itemize deductions. A shareholder that is a nonresident
alien individual or a foreign corporation may be subject to U.S. withholding tax
on the income resulting from the Fund's election described in this paragraph but
may not be able to claim a credit or deduction against such U.S. tax for the
foreign taxes treated as having been paid by such shareholder. The Fund will
report annually to its shareholders the amount per share of such withholding
taxes.
Due to investment laws in certain emerging market countries, it is
anticipated that the Fund's investments in equity securities in such countries
will consist primarily of shares of investment companies (or similar investment
entities) organized under foreign law or of ownership interests in special
accounts, trusts or partnerships. If the Fund purchases shares of an investment
company (or similar investment entity) organized under foreign law, the Fund
will be treated as owning shares in a passive foreign investment company
("PFIC") for U.S. federal income tax purposes. The Fund may be subject to U.S.
federal income tax, and an additional tax in the nature of interest, on a
portion of distributions from such company and on gain from the disposition of
such shares (collectively referred to as "excess distributions"), even if such
excess distributions are paid by the Fund as a dividend to its shareholders.
The Fund may make an election with respect to PFICs in which it owns
shares that will allow it to avoid the taxes on excess distributions. However,
such election may cause the Fund to recognize income in a particular year in
excess of the distributions received from such PFICs.
The Fund may write, purchase or sell options or futures contracts.
Unless the Fund 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 the Fund's transactions in options and futures contracts. Under
Section 1092, the Fund may be required to postpone recognition for tax purposes
of losses incurred in certain closing transactions in options and futures.
In general, gain from "foreign currencies" and from foreign currency
options, foreign currency futures contracts and forward foreign exchange
contracts relating to investments in stock, securities or foreign currencies
will be qualifying income for purposes of determining whether the Fund qualifies
as a regulated investment company. It is currently unclear, however, who will be
treated as the issuer of a foreign currency instrument or how foreign currency
options, futures contracts or forward foreign currency contracts will be valued
for purposes of the regulated investment company diversification requirements
applicable to the Fund.
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, the
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
the 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, the 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.
The Trust is required to report to the Internal Revenue Service ("IRS")
all distributions and gross proceeds from the redemption of Fund shares (except
in the case of certain exempt shareholders). All such distributions and proceeds
generally will be subject to the withholding of federal income tax at a rate of
31% ("backup withholding") in the case of non-exempt shareholders if: (1) the
shareholder fails to furnish the Trust with and to certify the shareholder's
correct taxpayer identification number or social security number; (2) the IRS
notifies the Trust that the shareholder 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 shareholder fails to certify that it
is not subject to backup withholding. If the withholding provisions are
applicable, any such distributions or proceeds, whether reinvested in additional
shares or taken in cash, will be reduced by the amount required to be withheld.
Any amounts withheld may be credited against the shareholder's federal income
tax liability. Investors may wish to consult their tax advisors about the
applicability of the backup withholding provisions.
U.S. federal income taxation of a shareholder who, under the Code, is a
non-resident alien individual, a foreign trust or estate, foreign corporation or
foreign partnership ("non-U.S. shareholder") depends on whether the income form
the Fund is "effectively connected" with a U.S. trade or business carried on by
such shareholder. Ordinarily, income from the Fund will not be treated as so
"effectively connected."
If the income from the Fund is not treated as "effectively connected"
with a U.S. trade or business carried on by the non-U.S. shareholder 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. shareholders may be subject to U.S.
federal income tax at the rate of 30% (or lower treaty rate) on their income
resulting from the Fund's election (described above) to "pass through" the
amount of non-U.S. taxes paid by the Fund, 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. shareholder 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 Fund shares. If the non-U.S. shareholder is
treated as a non-resident alien individual but is physically present in the
United States for more than 182 days during the taxable year, then in certain
circumstances such distributions of net long-term capital gains amounts retained
by the Fund which are designated as undistributed capital gains and grain from
the sale of Fund 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. shareholder who is a non-resident
alien individual, the Fund 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. See ________????? "backup
withholding," above.
If the income from the Fund is "effectively connected" with a U.S. trade or
business carried on by a non-U.S. shareholder, then distributions of net
investment income (which includes short-term capital gains) whether received in
cash or reinvested in shares net long-term capital gains and amounts otherwise
includable in income, such as amounts retained by the Fund which are designated
as undistributed capital gains and any gains realized upon the sale of shares of
the Fund will be subject to U.S. federal income tax at the graduated rates
applicable to U.S. taxpayers. Non-U.S. shareholders that are corporations may
also be subject to the branch profits tax.
Transfers of shares of the Fund by gift by a non-U.S. shareholder will
generally not be subject to U.S. federal gift tax, but the value of shares of
the Fund held by such a shareholder at death will be includable in the
shareholder's gross estate for U.S. federal income tax purposes.
The income tax and estate tax consequences to a non-U.S. shareholder
entitled to claim the benefits of an applicable tax treaty may be different from
those described herein. Non-U.S. shareholders may be required to provide
appropriate documentation to establish their entitlement to the benefits of such
a treaty.
Non-U.S. shareholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in shares of
the Fund.
* * * * * *
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 Fund 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.
Shareholders should consult their tax advisors with respect to particular
questions of federal, foreign, state and local taxation.
OTHER INFORMATION
ORGANIZATION
The Trust was organized as a Delaware business trust on December 4,
1997. The Trust is registered as an open-end management investment company under
the 1940 Act.
Delaware law provides that shareholders shall be entitled to the same
limitations of personal liability extended to stockholders of private
corporations for profit. Securities regulators of some states, however, have
indicated that they and the courts in their state may decline to apply Delaware
law on this point. To guard against this risk, the Trust Instrument contains an
express disclaimer of shareholder liability for the debts, liabilities,
obligations, and expenses of the Trust. The Trust Instrument provides for
indemnification out of each series' property of any shareholder or former
shareholder held personally liable for the obligations of the series. The Trust
Instrument also provides that each series shall, upon request, assume the
defense of any claim made against any shareholder for any act or obligation of
the series and satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which Delaware law does not apply (or no contractual limitation
of liability was in effect) and the series is unable to meet its obligations.
Forum believes that, in view of the above, there is no risk of personal
liability to shareholders.
CAPITALIZATION AND VOTING
The Trust has authorized an unlimited number of shares of beneficial
interest. The Trust Board may, without shareholder approval, divide the
authorized shares into an unlimited number of separate series (such as the Fund)
and may divide series into classes of shares, and the costs of doing so may be
borne by a series or a class or the Trust in accordance with the Trust
Instrument. The Trust currently consists of one series. The Fund offers one
class of shares, A Shares.
When issued for the consideration described in the Prospectus or under
the dividend reinvestment plan, shares are fully paid, nonassessable, and have
no preferences as to conversion, exchange, dividends, retirement or other
features. Shares have no preemptive rights and have non-cumulative voting
rights, which means that the holders of more than 50% of the shares voting for
the election of Trustees can elect 100% of the Trustees if they choose to do so.
Each shareholder of record is entitled to one vote for each full share held (and
a fractional vote for each fractional share held).
The Trust does not hold annual meetings of shareholders. The matters
considered at an annual meeting typically include the reelection of Trustees,
approval of an investment advisory agreement, and the ratification of the
selection of independent accountants. These matters are not submitted to
shareholders unless a meeting of shareholders is held for some other reason,
such as those indicated below. Each Trustee serves until death, resignation or
removal. Vacancies are filled by the remaining Trustees, subject to the
provisions of the 1940 Act requiring a meeting of shareholders for election of
Trustees to fill vacancies. Similarly, the selection of independent accountants
and renewal of investment advisory agreements for future years is performed
annually by the Trust Board. Future shareholder meetings will be held to elect
Trustees if required by the 1940 Act, to obtain shareholder approval of changes
in fundamental investment policies, to obtain shareholder approval of material
changes in investment advisory agreements, to select new independent accountants
if the employment of the Trust's independent accountants has been terminated,
and to seek any other shareholder approval required under the 1940 Act. The
Trust Board has the power to call a meeting of shareholders at any time when it
believes it is necessary or appropriate.
In addition to the foregoing rights, the Trust Instrument provides that
holders of at least two-thirds of the outstanding shares of the Trust may remove
any person serving as a Trustee at any meeting of the shareholders. [In
addition, the Trust Board is required, if requested in writing to do so by ten
or more shareholders of record (who have been such for at least six months),
holding in the aggregate the lesser of: (1) shares of the Trust having a total
net asset value of at least $25,000; or (2) 1% of the outstanding shares of the
Trust, to help such holders communicate with other shareholders of the Trust
with a view to obtaining the requisite signatures to request a special meeting
to consider Trustee removal.] Check statute
PERFORMANCE INFORMATION
Performance quotations of the average annual total return and
cumulative total return of the Fund is provided in advertisements or reports to
shareholders or prospective investors.
Quotations of average annual total return are expressed in terms of the
average annual compounded rate of return of a hypothetical investment in a fund
or class over periods of 1, 5 and 10 years (or since commencement of operations
if any of these periods are not available), calculated pursuant to the following
formula:
P (1+T)n = ERV
(where P = a hypothetical initial payment of $1,000, T = the average
annual total return, n = the number of years, and ERV = the ending redeemable
value of a hypothetical $1,000 payment made at the beginning of the period). All
total return figures reflect the deduction of fund and any class expenses (net
of any reimbursed expenses) on an annual basis and generally assume that all
dividends and distributions, when paid, are reinvested in shares of the same
class.
Quotations of cumulative total return reflect only the performance of a
hypothetical investment in a fund or a class during the particular time period
shown. Cumulative total returns vary based on changes in market conditions and
the level of a fund's and any applicable class's expenses, and no reported
performance figure should be considered an indication of performance which may
be expected in the future.
In communications to current or prospective shareholders, performance
figures such as cumulative total return, also may be compared with the
performance of other mutual funds tracked by mutual fund rating services or to
unmanaged indexes that may assume reinvestment of dividends but generally do not
reflect deductions for administrative and management costs.
Investors who purchase and redeem shares through a customer account
maintained at a financial institution or a Service Organization may be charged
one or more of the following types of fees as agreed upon by the financial
institution or Service Organization and the investor, with respect to the
customer services provided: (1) account fees (a fixed amount per month or per
year); (2) transaction fees (a fixed amount per transaction processed); (3)
compensating balance requirements (a minimum dollar amount a customer must
maintain in order to obtain the services offered); or (4) account maintenance
fees (a periodic charge based upon a percentage of the assets in the account or
of the dividends paid on these assets). Such fees have the effect of reducing
the average annual or cumulative total returns for those investors.
PRINCIPAL SHAREHOLDERS
As of [December __,] 1997, the Fund had no outstanding shares.
CUSTODIAN
The Chase Manhattan Bank, through its Global Custody Division located
in London, England, acts as custodian of the Fund's and the Portfolios' assets
but plays no role in making decisions as to the purchase or sale of portfolio
securities for the Fund or the Portfolios. Pursuant to rules adopted under the
1940 Act, the Fund may maintain its foreign securities and cash in the custody
of certain eligible foreign banks and securities depositories. Selection of
these foreign custodial institutions is made currently by the Core Trust 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 Fund; 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.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
BFDS, Two Heritage Drive, North Quincy, Massachusetts 02171, acts as the Fund's
transfer agent and dividend disbursing agent.
LEGAL COUNSEL
ROPES & GRAY, One International Place, Boston, Massachusetts 02110-2624, counsel
to the Trust, passes upon certain legal matters in connection with the shares
offered by the Fund.
INDEPENDENT ACCOUNTANT
__________________________ serves as independent accountants for the Trust.
________________________ provides audit services and consultation in connection
with review of U.S. SEC filings. Their address is One Post Office Square,
Boston, Massachusetts 02109.
REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information included in the
Trust's registration statement filed with the SEC under the Securities Act of
1933 with respect to the securities offered hereby, certain portions of which
have been omitted pursuant to the rules and regulations of the SEC. The
registration statement, including the exhibits filed therewith, may be examined
at the office of the SEC in Washington, D.C.
Statements contained herein and in the Prospectus as to the contents of any
contract or other documents referred to are not necessarily complete, and, in
each instance, reference is made to the copy of such contract or other documents
filed as an exhibit to the registration statement, each such statement being
qualified in all respects by such reference.
FINANCIAL STATEMENTS
The fiscal year end of the Fund is October 31. Financial statements for the
Fund's semi-annual period and fiscal year will be distributed to shareholders of
record. The Board in the future may change the fiscal year end of the Fund.
<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.
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.
"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.
"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>
APPENDIX B
Statement of Assets and Liabilities
October 31, 1997
<TABLE>
ASSETS:
<S> <C> <C>
Investments in securities, at value (cost $173,241,618) $127,522,463
Repurchase agreement 19,000,000
Cash 3,514,982
Foreign currency, at value (cost $14,556) 14,556
Receivable for securities sold 1,755,433
Receivable for dividends 225,566
Receivable for interest 19,383
Unrealized appreciation on forward foreign currency contracts 1,260
Deferred organization expenses 39,567
Prepaid expenses 9,924
------
Total Assets 152,103,134
-----------
LIABILITIES:
Payable for securities purchased 991,206
Estimated tax liability on Indian investments (Note 5) 209,820
Investment advisory fee payable 142,321
Administration fee payable 35,580
Unrealized depreciation on forward foreign currency contracts 205
Accrued expenses payable and other liabilities 318,427
-------
Total Liabilities 1,697,559
---------
Net Assets $150,405,575
============
NET ASSETS WERE COMPOSED OF:
Capital Stock, par value ($.01 per share, applicable to 19,607,100 shares issued: $196,071
authorized 100,000,000 shares)
Paid-in-capital in excess of par 270,878,538
Treasury Stock at cost (3,500,000 shares_Note 6) (45,640,000)
Net investment loss (245,643)
Accumulated
Accumulated net realized losses from investments (28,751,991)
Net unrealized depreciation of investments (net of estimated tax liability on Indian (45,928,975)
investments of $209,820 - Note 5)
Net realized losses from foreign forward currency contract transactions and forward (103,513)
currency contracts
Net unrealized appreciation on translation of assets and liabilities in foreign 1,088
currencies and forward foreign currency contracts -----
Net Assets $150,405,575
============
Net asset value per share ($150,405,575
divided by 16,107,100 shares outstanding) $9.34
=====
</TABLE>
<PAGE>
<TABLE>
Statement of Operations
For the Year Ended October 31, 1997
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $133,393) $2,597,793
Interest and discount earned 784,509
----------
Total Investment Income 3,382,302
----------
EXPENSES:
Investment advisory fee 2,301,847
Administration fee 575,461
Legal fees and expenses 385,107
Custodian's fees and expenses 282,580
Transfer agent's fees and expenses 183,596
Reports to shareholders 138,858
Directors' fees and expenses 72,116
Insurance expense 53,295
Independent accountants' fees and expenses 35,791
Amortization of deferred organization expenses 33,981
Registration fees 24,260
Miscellaneous expenses 12,235
------
Total Expenses 4,099,127
---------
NET INVESTMENT LOSS (716,825)
---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investments (net of taxes paid on Indian Investments of $212,364) 3,269,878
Foreign currency transactions and forward foreign currency contracts (160,676)
Net change in unrealized appreciation (depreciation) on:
Investments (net of change in estimated tax liability on Indian investments of (62,130,824)
$56,530 - Note 5)
Translation of assets and liabilities in foreign currencies and forward foreign 3,541
currency contracts -----
NET REALIZED AND UNREALIZED LOSS FROM INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS (59,018,081)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(59,734,906)
=============
</TABLE>
<PAGE>
Statements of Changes in Net Assets
<TABLE>
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
INCREASE(DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C>
Net investment loss $(716,825) $(508,543)
Net realized gain from investment transactions 3,269,878 21,946
Net realized gain (loss) from foreign currency (160,676) 2,568,860
transactions and forward foreign currency contracts
Net change in unrealized appreciation (depreciation) (62,130,824) 8,574,019
on investments (net of estimated tax liability on
Indian investments of $209,820 and $266,350, respectively - Note 5)
Net change in unrealized appreciation (depreciation) 3,541 (245,390)
on translation of assets and liabilities in --------- ---------
foreign currencies and forward foreign currency
contracts
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM (59,734,906) 10,410,892
OPERATIONS ----------- ----------
DIVIDENDS TO SHAREHOLDERS:
Investment income-net (1,826,573) -
---------- -----------
CAPITAL STOCK TRANSACTIONS (NOTE 6):
Cost of shares redeemed pursuant to tender offer (45,640,000) -
Tender offer costs charged to paid-in-capital in (237,658) (53,304)
excess of par ---------- ----------
TOTAL CAPITAL STOCK TRANSACTIONS: (45,877,658) (53,304)
----------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS (107,439,137) 10,357,588
------------ ----------
NET ASSETS:
Beginning of year 257,844,712 247,487,124
------------ -----------
End of year (including undistributed (accumulated) $150,405,575 $257,844,712
net investment income (loss) of $(245,643) and =========== ============
$1,826,585 for the years ended 1997 and 1996,
respectively)
</TABLE>
<PAGE>
Financial Highlights
<TABLE>
Selected Per Share Data and Ratios:
FOR THE YEAR FOR THE YEAR FOR THE YEAR DECEMBER 30,
ENDED ENDED ENDED 1993* TO
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1995 1994
<S> <C> <C> <C> <C>
Net asset value, beginning of period $13.15 $12.62 $13.84 $14.01**
Investment Operations:
Net investment income (loss) (0.05) (0.03) 0.02 (0.01)
Net realized and unrealized gain (loss) on investments (3.66) 0.56 (1.24) (0.16)
(net of estimated tax liability on Indian ------ ----- ------ ------
investments) and foreign currencies and foreign
currency contracts
Total from investment operations (3.71) 0.53 (1.22) (0.17)
----- ------ ------ ------
Less dividends from investment income-net (0.09) - - -
----- ------ ------ ------
Tender offer costs charged to paid-in-capital in (0.01) - + - -
excess of par ----- ------ ------ ------
Net asset value, end of period $9.34 $13.15 $12.62 $13.84
====== ===== ====== =======
$8.50 $12.00 $11.125 $12.00
Market value, end of period
====== ===== ====== ======
Total investment return based on (1):
Market value (28.62)% 7.87% (7.29)% (20.00)%
======= ===== ======== ========
Net asset value (28.43)% 4.20% (8.82)% (1.21)%
====== ===== ======== =======
Ratio/Supplementary Data:
Net assets, end of period (Millions) $150.41 $257.84 $247.49 $271.42
Ratio of expenses to average net assets 1.78% 1.57% 1.65% 1.59%***
Ratio of expenses to average net assets excluding 1.59% - - -
conversion costs (Note 7)
Ratio of net investment income (loss) to average net (0.31)% (0.19)% 0.12% (0.10)%***
assets
Portfolio turnover rate 39.14% 34.71% 66.79% 19.76%
Average commission rate per share**** $0.0142 $0.0224 N/A N/A
</TABLE>
* Commencement of investment operations.
** Net of $.09 offering expenses.
*** Annualized.
**** For fiscal years beginning on or after September 1, 1995, a fund
is required to disclose its average commission rate per share for
trades on which a commission is charged.
+ Less than $0.01 per share.
(1) Total investment return is calculated assuming a purchase of
common stock on the opening of the first day and a sale on the closing
of the last day of each period reported. Dividends and distributions,
if any, are assumed for the purposes of this calculation, to be
reinvested at prices obtained under the Fund's dividend reinvestment
plan. Total investment return does not reflect brokerage commissions
paid to purchase shares of the Fund. Generally, total investment
return based on net asset value will be higher than total investment
return based on market value in periods where there is an increase in
the discount or a decrease in the premium of the market value to the
net asset value from the beginning to the end of such periods.
Conversely, total investment return based on net asset value will be
lower than total investment return based on market value in periods
where there is a decrease in the discount or an increase in the
premium of the market value to the net asset value from the beginning
to the end of such periods. Total investment returns for periods of
less than one full year are not annualized.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997
1. SIGNIFICANT ACCOUNTING POLICIES:
Schroder Asian Growth Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940 (the "Act"), as amended, as a
non-diversified, closed-end management investment company. The Fund was
incorporated in Maryland on November 5, 1993 and investment operations
commenced on December 30, 1993. The following is a summary of
significant accounting policies consistently followed by the Fund in
the preparation of its financial statements.
SECURITY VALUATION
Portfolio securities listed or traded on a recognized stock
exchange or NASDAQ National Market System are valued at the last
reported sales price on the exchange on which the securities are
principally traded. Other securities for which market quotations are
readily available are valued at the last sales price prior to the time
of determination. If there is no sales price on such date, and if bid
and asked quotations are available, such securities are valued at the
mean between the last current bid and asked prices. The value of a
foreign security is determined in its national currency as of 9:00
a.m., New York time, and that value is then converted into its U.S.
dollar equivalent on the day of valuation as of 11:30 a.m., New York
time. Securities for which market quotations are not readily available,
and securities for which, in the judgment of the Investment Adviser,
the prices or values available do not represent the fair value of the
instrument, are valued at fair value, pursuant to the Fund's pricing
procedures as determined by the Adviser and approved in good faith by
the Board of Directors. In determining the fair value of such
securities, the Adviser and the Board consider all relevant
information, including but not limited to types of securities, current
financial and market information and restrictions on dispositions. The
values assigned to the securities holdings do not necessarily represent
amounts which might ultimately be realized upon their sale or other
disposition, since such amounts depend on future circumstances and
cannot reasonably be determined until the actual disposition occurs.
However, because of the inherent uncertainty of such valuations, those
estimated values may differ significantly from the values that would
have been used had a ready market for the investments existed, and the
differences could be material. At October 31, 1997, the portfolio
contained three securities for which market quotations were not readily
available and which were fair valued pursuant to the Fund's procedures.
These securities had a total value of $2,453,134 representing 1.6% of
the Fund's net assets.
The Fund may enter into repurchase agreements whereby the
Fund, through its custodian, receives delivery of the underlying
securities. The underlying collateral is valued daily on a
marked-to-market basis to assure that the value, including accrued
interest, is at least equal to the repurchase price.
In the event of a default of the obligation to repurchase, the
Fund has the right to liquidate the collateral and apply the proceeds
in satisfaction of the obligation. If the seller defaults and the value
of the collateral declines, realization of the collateral by the Fund
may be delayed or limited.
SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are recorded on trade date. Dividend
income is recorded on the ex-dividend date except for certain dividends
from foreign securities which are recorded as soon as the Fund is
informed of the ex-dividend date. Interest income (including accretion
of discount) is recorded on the accrual basis. Realized gains and
losses from security transactions are determined on the identified cost
basis.
FOREIGN CURRENCY TRANSLATION
Foreign currency amounts denominated in or expected to settle
in foreign currencies ("FC") are translated into U.S. dollars on the
following basis: market value of investment securities and other assets
and liabilities at the rate of exchange at the end of the respective
period, purchases and sales of investment securities and income and
expenses at the rate of exchange prevailing on the respective dates of
such transactions.
<PAGE>
The Fund does not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices
of securities held. Such fluctuations are included with the net
realized and unrealized gain or loss from the investment.
Reported net realized foreign exchange gains or losses arise
from sales of portfolio securities, sales and maturities of short-term
securities, sales of FCs, currency gains or losses realized between the
trade and settlement dates on securities transactions, the difference
between the amounts of dividends, interest, and foreign withholding
taxes recorded on the Fund's books, and the U.S. dollar equivalent of
the amounts actually received or paid. Net unrealized foreign exchange
gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end,
resulting from changes in the exchange rate.
DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions payable by the Fund, if any, are
accrued on the ex-dividend date. Dividends from net investment income
and capital gain distributions are determined in accordance with U.S.
Federal income tax regulations, which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments for foreign currency transactions, passive foreign
investment companies and net investment losses. As a result of these
differences, at October 31, 1997, the Fund decreased paid-in-capital by
$549,102, decreased accumulated net investment by $471,170, decreased
accumulated net realized losses on investments by $20,769 and decreased
accumulated net realized losses from foreign currency transactions and
forward foreign currency contracts by $57,163.
Net assets were not affected by the reclassification.
FORWARD FOREIGN CURRENCY CONTRACTS
The Fund may enter into forward contracts to purchase or sell
FCs to protect against the effect of possible adverse movements in
foreign exchange rates on the U.S. dollar value of the underlying
portfolio. Risks associated with such contracts include the movement in
value of the FC relative to the U.S. dollar and the ability of the
counterparty to perform. Forward currency contracts are valued at the
forward rate and are marked-to-market weekly. Fluctuations in the value
of such contracts are recorded as unrealized gains or losses; realized
gains or losses include net gains or losses on contracts which have
terminated by settlement.
ORGANIZATIONAL COSTS
Costs incurred by the Fund in connection with its organization
and initial registration are being amortized on a straight line basis
over a five- year period from the commencement of investment
operations.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of
revenue and expenses during the reporting period. Actual results could
differ from those estimates.
2. PURCHASES AND SALES OF SECURITIES:
The aggregate cost of securities purchased and the proceeds
from sales of securities, excluding short-term investments, for the
year ended October 31, 1997 were $83,156,326 and $149,297,647,
respectively.
3. FORWARD FOREIGN CURRENCY CONTRACTS AS OF OCTOBER 31, 1997:
<TABLE>
CONTRACTS TO SETTLEMENT IN EXCHANGE FOR VALUE ($) UNREALIZED
DELIVER/RECEIVE DATE APPRECIATION/(DEPRECIATION)$
<S> <C> <C> <C> <C> <C>
CONTRACTS TO BUY:
Hong Kong Dollar USD 331,191 11/03/97 HKD 2,560,505 $331,242 $51
Hong Kong Dollar USD 273,378 11/03/97 HKD 2,113,543 273,420 42
Japanese Yen USD 48,201 11/04/97 JPY 5,815,412 48,377 176
Japanese Yen USD 13,864 11/06/97 JPY 1,664,057 13,843 (21)
Malaysian Ringit USD 177,931 11/06/97 MYR 596,995 178,474 543
Malaysian Ringit USD 145,401 11/07/97 MYR 487,865 145,849 448
Total 1,239
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
CONTRACTS TO SELL:
Hong Kong Dollar HKD 2,403,436 11/03/97 USD (310,875) (310,923) (48)
Malaysian Ringit MYR 149,715 11/06/97 USD (44,622) (44,758) (136)
Total ($184)
</TABLE>
4. INVESTMENT ADVISORY AND ADMINISTRATIVE AGREEMENTS AND OTHER TRANSACTIONS
WITH AFFILIATES:
The Fund retains Schroder Capital Management International,
Inc. as Investment Adviser (the "Adviser"). The Investment A dvisory
Agreement, as amended on May 16, 1996, provides for a monthly fee at
the annual rate of (1) 1.00% of the Fund's average weekly net assets up
to and including $300 million, and (2) 0.85% of the Fund's average
weekly net assets in excess of $300 million. The Fund paid or accrued
fees to the Investment Adviser of $2,301,847 for the year ended October
31, 1997.
The Fund retains Princeton Administrators, L.P. as the
Administrator. Pursuant to the administration agreement, as amended on
May 16, 1996, the Administrator receives a monthly fee equal to the
greater of (a) $150,000 per annum or (b) an annual rate of (1) 0.25% of
the Fund's average weekly net assets up to and including $300 million,
and (2) 0.22% of the Fund's average weekly net assets in excess of $300
million.The Fund paid or accrued fees to the Administrator of $575,461
for the year ended October 31, 1997.
Several individuals who are directors and/or officers of the
Fund are also directors or officers of the Investment Advisor or its
affiliates.
5. FEDERAL INCOME TAXES:
Since it is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to
its stockholders, no Federal income tax provision is required.
For Federal income tax purposes, the tax basis of investment
securities owned is $192,677,619. At October 31, 1997, net unrealized
depreciation on investments was $(46,155,156). This consisted of
aggregate gross unrealized appreciation for all securities in which
there was an excess of market value over tax cost was $11,066,940 and
aggregate gross unrealized depreciation for all securities in which
there was an excess of tax cost over market value was $57,222,096.
For Federal income tax purposes, the Fund had a capital loss
carry forward as of October 31, 1997 of $28,664,146 ($ 2,615,657
expiring in 2002 and $26,048,489 expiring in 2003) which is available
to offset future capital gains, subject to limitations imposed under
the Internal Revenue Code.
<PAGE>
Under the applicable foreign tax law, a withholding tax may be
imposed on interest, dividends, and capital gains at various rates.
Indian tax regulations require that taxes be paid on capital gains
realized by the Fund. At October 31, 1997, the Fund decreased net
unrealized appreciation by the estimated tax liability attributable to
Indian investments of $209,820.
6. CAPITAL STOCK:
There are 100,000,000 shares of $.01 par value common stock
authorized. There are 16,107,100 shares outstanding as of October 31,
1997.
On February 18, 1997, the Fund's Board of Directors approved a
tender offer (the "Tender Offer") to shareholders to purchase up to 3.5
million shares of outstanding common stock. The offer commenced on
February 19, 1997 and expired on March 20, 1997. The Fund received
tenders representing 13,268,062 shares of common stock. Pursuant to the
terms of the offer, the Fund determined to accept 3.5 million common
shares. As a result of the Tender Offer, the Fund purchased 3.5 million
shares for a total of $45,640,000.
As of October 31,1997 and October 31, 1996, costs incurred in
connection with the tender offer in the amount of $237,658 and $53,304,
respectively, have been charged to paid-in-capital in excess of par.
7. SUBSEQUEST EVENT:
On October 24, 1997, the stockholders of the Fund approved
management's proposal to convert the Fund from a closed-end to an
open-end investment company (the "Conversion"). Following the
conversion, stockholders will be able to buy and sell at a price based
on net asset value, subject for the first six months to a redemption
fee of 2.00%. In the course of converting to an open-end fund, the Fund
will also (a) convert from a Maryland corporation to a Delaware
business trust; and (b) commence operating in a Core-and-Gateway
fund-of-funds structure. There will be no change in the Fund's
investment objective and strategy will continue to serve as investment
adviser for the Fund's investments.
As of October 31, 1997, costs incurred in connection with the
Conversion amounted to $429,166, the majority of which related to legal and
transfer agent fees.
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS
Financial Statements Included in Part A:
Not applicable.
Financial Statements Included in Part B:
Unaudited financial statements for the period ended
October 31, 1997 including Statements of Assets and
Liabilities, Statements of Operations, Statements of
Changes in Net Assets, Financial Highlights and
Notes to Financial Statements for Schroder Asian
Growth Fund, Inc. are set forth in Appendix B to the
SAI.
(B) EXHIBITS:
(1) Trust Instrument of Schroder Series Trust II.
(4) Sections 2.04 and 2.06 of Registrant's Trust Instrument provide as
follows:
SECTION 2.04 TRANSFER OF SHARES. Except as otherwise provided by
the Trustees, Shares shall be transferable on the records of the
Trust only by the record holder thereof or by that holder's agent
thereunto duly authorized in writing, upon delivery to the Trustees
or the Transfer Agent of a duly executed instrument of transfer and
such evidence of the genuineness of such execution and
authorization and of such other matters as may be required by the
Trustees or Transfer Agent. Upon such delivery the transfer shall
be recorded on the register of the Trust. Until such record is
made, the Shareholder of record shall be deemed to be the holder of
such Shares for all purposes hereunder and neither the Trustees nor
the Trust, nor any Transfer Agent or registrar nor any officer,
employee or agent of the Trust shall be affected by any notice of
the proposed transfer.
SECTION 2.06 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 may divide the Shares of any Series into Classes. The
Trustees shall have full power and authority, in their sole
discretion, and without obtaining any prior authorization or vote
of the Shareholders of any Series, to establish and designate and
to change in any manner any such Series or Class and to fix such
preferences, voting powers, rights and privileges of such Series or
Classes as the Trustees may from time to time determine, to divide
or combine the Shares or any Series or Classes into a greater or
lesser number, to classify or reclassify any issued Shares or any
Series or Classes into one or more Series or Classes, and to take
such other action with respect to the Shares as the Trustees may
deem desirable. The establishment and designation of any Series or
Class shall be effective upon the adoption of a resolution by the
Trustees setting forth such establishment and designation and the
relative rights and preferences of the Shares of such Series or
Class.
All references to Shares in this Trust Instrument shall be
deemed to be Shares of any or all Series or Classes, as the context
may require. All provisions herein relating to the Trust shall
apply equally to each Series and each Class, except as the context
otherwise requires.
Each Share of a Series of the Trust shall represent an
equal beneficial interest in the net assets of such Series. Each
holder of Shares of a Series or Class thereof shall be entitled to
receive the holder's pro rata share of all distributions made with
respect to such Series or Class thereof. Upon redemption of Shares,
such Shareholder shall be paid solely out of the
<PAGE>
funds and property of such Series of the Trust.
The current Series and Classes thereof of the Trust, and
the characteristics of those Series and Classes are set forth in
Annex A to this Trust Instrument.
* (5) Investment Advisory and Asset Allocation Agreement between the
Registrant and Schroder Capital Management International Inc.
* (6) Form of Distribution Agreement between the Registrant and Schroder
Fund Advisors Inc.
* (8) Form of Global Custody Agreement between the Registrant and The
Chase Manhattan Bank
* (9)(a) Administration Agreement between the Registrant and Schroder Fund
Advisors Inc.
* (9)(b) Subadministration Agreement between the Registrant and Forum
Administrative Services, LLC.
* (9)(c) Transfer Agency Agreement between the Registrant and State Street
Bank and Trust Company.
* (9)(d) Fund Accounting Agreement between the Registrant and Forum
Accounting Services, LLC.
* (10) Opinion and Consent of [_____________], Counsel of Registrant.
* (11) Consent of independent auditors of the Registrant.
* (13) Agreement and Plan of Reorganization between Schroder Asian
Growth Fund, Inc. and the Registrant.
(25) Powers of Attorney for the Registrant.
- --------------------------------------------------------------------------------
* To be filed by amendment.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Not applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES AS OF NOVEMBER 30, 1997.
Title of Class of Shares of Beneficial Interest Number of Holders
----------------------------------------------- -----------------
Class A Shares 0
ITEM 27. INDEMNIFICATION.
<PAGE>
(a) Subject to the exceptions and limitations contained in Subsection
10.02(b): (1) 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 in connection with any claim, action,
suit or proceeding in which he or she becomes involved as a party or otherwise
by virtue of his or her being or having been a Trustee or officer and against
amounts paid or incurred in the settlement thereof; and (2) 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:
(1) 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 Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office; or (B) not to have
acted in good faith in the reasonable belief that his or her action was in the
best interest of the Trust; or (2) 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 his or her office: (x) by the court or other body
approving the settlement; (y) 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 (z) 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 Shareholder 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
Subsection 10.02(a) of this Section 10.02 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 or her to the Trust or Series if it is ultimately determined that he
or she is not entitled to indemnification under this Section 10.02; provided,
however, that either: (1) such Covered Person shall have provided appropriate
security for such undertaking; (2) the Trust is insured against losses arising
out of any such advance payments; or (3) 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 Section 10.02.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
The following are the directors and principal officers of SCMI, including its
business connections of a substantial nature. The address of each company
listed, unless otherwise noted, is 33 Gutter Lane, London EC2V 8AS, United
Kingdom. Schroder Capital Management International Limited ("Schroder Ltd.") is
a United Kingdom affiliate of SCMI that provides investment management services
to international clients located principally in the United States.
David M. Salisbury. Director and Chairman of SCMI; Chief
Executive and Director of Schroder Ltd.
Richard R. Foulkes. Deputy Chairman/Executive Vice President of SCMI.
John A. Troiano. Chief Executive Officer and Director of SCMI. Mr.
Troiano is also a Director of Schroder Ltd.
<PAGE>
David Gibson. Senior Vice President and Director of SCMI. Director of
Schroder Capital Management.
John S. Ager. Senior Vice President and Director of SCMI.
Sharon L. Haugh. Executive Vice President and Director of SCMI,
Director and Chairman of Schroder Advisors Inc.
Gavin D. L. Ralston. Senior Vice President and Managing Director of
SCMI.
Mark J. Smith. Senior Vice President and Director of SCMI.
Robert G. Davy. Director and Senior Vice President. Mr. Davy is also a
Director of Schroder Ltd. and an officer of open end investment
companies for which SCMI and/or its affiliates provide investment
services.
Jane P. Lucas. Senior Vice President and Director of SCMI; Director of
Schroder Advisors Inc.; Director of Schroder Capital Management.
C. John Govett. Director of SCMI; Group Managing Director of Schroder
Ltd. and Director of Schroders plc.
Phillipa J. Gould. Senior Vice President and Director of SCMI.
Louise Croset. First Vice President and Director of SCMI.
Abdallah Nauphal. Group Vice President and Director of SCMI.
ITEM 29. PRINCIPAL UNDERWRITERS.
(A) Schroder Fund Advisors Inc., the Registrant's principal underwriter,
also serves as principal underwriter for Schroder Capital Funds
(Delaware).
(B) Following is information with respect to each officer and director of
Schroder Fund Advisors Inc., the Distributor of the shares of Schroder
All Asia Fund (sole series of the Registrant):
Catherine A. Mazza, President.
Mark J. Smith, Director and Senior Vice President.
Sharon L. Haugh, Chairman and Director.
Fergal Cassidy, Treasurer and Chief Financial Officer.
Alexandra Poe. Secretary and Senior Vice President.
Jane E. Lucas. Director.
* Address for each is 787 Seventh Avenue, 34th Floor, New York, New York 10019
except for Mark J. Smith, whose address is 33 Gutter Lane, London, England,
EC2V 8AS.
(C) Inapplicable.
<PAGE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
The accounts, books and other documents required to be maintained by Registrant
with respect to its series under Section 31(a) of the Investment Company Act of
1940, and the Rules thereunder, are maintained at the offices of Schroder
Capital Management International Inc. (investment management records) and
Schroder Fund Advisors Inc. (administrator and distributor records), 787 Seventh
Avenue, New York, New York 10019, except that certain items will be 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) Boston Financial Data Services, Inc., Two Heritage Drive, North Quincy,
Massachusetts 02171 (transfer agent records).
ITEM 31. MANAGEMENT SERVICES.
None.
ITEM 32. UNDERTAKINGS.
(a) Registrant undertakes to file a pre-effective amendment with certified
financial statements showing the initial capitalization of the
Registrant resulting from the transfer of assets upon completion of the
conversion of Schroder Asian Growth Fund, Inc., a closed-end fund.
(b) Registrant undertakes to file a post-effective amendment, using
financial statements that need not be certified, within four to six
months from the latter of the effective date of Registrant's Securities
Act of 1933 Registration Statement relating to the prospectus offering
those shares or the commencement of the public offering of the
respective shares; and,
(c) Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest annual report to
shareholders, if any, relating to the series or class thereof to which
the prospectus relates upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 with respect to rule 485(a) under the Securities Act of
1933, the Registrant has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereto duly authorized, in the City of New York,
and State of New York on the 19th day of December, 1997.
SCHRODER SERIES TRUST II
By: /s/ Catherine A. Mazza
------------------------
Catherine A. Mazza
Vice President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons on the 19th day of
December, 1997.
SIGNATURES TITLE
(a) Principal Executive Officer
/s/ Louise Croset
--------------------------
Louise Croset President
(b) Principal Financial and
Accounting Officer
/s/ Fergal Cassidy
--------------------------
Fergal Cassidy Treasurer
(c) The Trustees
/s/ Peter E. Guernsey
--------------------------
Peter E. Guernsey Trustee
/s/ John I. Howell
--------------------------
John I. Howell Trustee
/s/ William L. Means
--------------------------
William L. Means Trustee
/s/ David M. Salisbury
--------------------------
David M. Salisbury Trustee
/s/ Louise Croset
--------------------------
Louise Croset Trustee
/s/ I. Peter Sedgwick
--------------------------
I. Peter Sedgwick Trustee
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 with respect to rule 485(a) under the Securities Act of
1933, the Registrant has duly caused this Registration Statement of Schroder
Series Trust II to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of New York, and State of New York on the 19th day of
December, 1997.
SCHRODER CAPITAL FUNDS
By: /s/ Catherine A. Mazza
-----------------------
Catherine A. Mazza
Vice President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement of Schroder Series Trust II has been signed below by the following
persons on the 19th day of December, 1997.
SIGNATURES TITLE
(a) Principal Executive Officer
Mark J. Smith President and Trustee
* By: /s/ Thomas G. Sheehan
-------------------------
Thomas G. Sheehan, Attorney-in-Fact
(b) Principal Financial and
Accounting Officer
/s/ Thomas G. Sheehan
----------------------------
Thomas G. Sheehan Treasurer
(c) The Trustees
Peter E. Guernsey* Trustee
John I. Howell* Trustee
Clarence F. Michalis* Trustee
Hermann C. Schwab* Trustee
* By: /s/ Thomas G. Sheehan
-------------------------
Thomas G. Sheehan, Attorney-in-Fact
/s/ Sharon L. Haugh
----------------------------
Sharon L. Haugh Trustee
/s/ The Hon. David N. Dinkins
-----------------------------
The Hon. David N. Dinkins Trustee
/S/ Peter S. Knight
----------------------------
Peter S. Knight Trustee
<PAGE>
INDEX TO EXHIBITS
Exhibits:
(1) Trust Instrument of Schroder Series Trust II.
(25) Other Exhibits: Copy of Powers of Attorney pursuant to which
certain Trustees and the President have signed this Registration
Statement.
EXHIBIT (1)
SCHRODER SERIES TRUST II
TRUST INSTRUMENT
DATED
DECEMBER 4, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I NAME AND DEFINITIONS
Section 1.01 Name
Section 1.02 Definitions
ARTICLE II BENEFICIAL INTEREST
Section 2.01 Shares of Beneficial Interest
Section 2.02 Issuance of Shares
Section 2.03 Register of Shares and Share Certificates
Section 2.04 Transfer of Shares
Section 2.05 Treasury Shares
Section 2.06 Establishment of Series or Class
Section 2.07 Investment in the Trust
Section 2.08 Assets and Liabilities of Series
Section 2.09 No Preemptive Rights
Section 2.10 No Personal Liability of Shareholders
Section 2.11 Assent to Trust Instrument
ARTICLE III THE TRUSTEES
Section 3.01 Management of the Trust
Section 3.02 Initial Trustees
Section 3.03 Term of Office
Section 3.04 Vacancies and Appointments
Section 3.05 Temporary Absence
Section 3.06 Number of Trustees
Section 3.07 Effect of Ending of a Trustee's Service
Section 3.08 Ownership of Assets of the Trust
Section 3.09 Meetings of Trustees
Section 3.10 Quorum
Section 3.11 Meeting Actions
ARTICLE IV
POWERS OF THE TRUSTEES
Section 4.01 Powers
Section 4.02 Issuance and Repurchase of Shares
Section 4.03 Trustees and Officers as Shareholders
Section 4.04 Action by the Trustees
Section 4.05 Principal Transactions
Section 4.06 Committees
ARTICLE V
NET ASSET VALUE AND EXPENSES
Section 5.01 Determination of Net Asset Value
Section 5.02 Expenses
ARTICLE VI
INVESTMENT ADVISER, PRINCIPAL UNDERWRITER
AND OTHER SERVICE PROVIDERS
Section 6.01 Investment Adviser
Section 6.02 Principal Underwriter
Section 6.03 Administrator
Section 6.04 Transfer Agent
Section 6.05 Parties to Contract
Section 6.06 Provisions and Amendments
ARTICLE VII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 7.01 Voting Powers
Section 7.02 Meetings
Section 7.03 Notices
Section 7.04 Quorum and Required Vote
Section 7.05 Voting-Proxies
Section 7.06 Action Without a Meeting
ARTICLE VIII
CUSTODIANS
Section 8.01 Appointment and Duties
Section 8.02 Central Certificate System
ARTICLE IX
DISTRIBUTIONS AND REDEMPTIONS
Section 9.01 Distributions
Section 9.02 Redemptions
Section 9.03 Suspension of the Right of Redemption
Section 9.04 Redemption of Shares in Order to
Qualify as Regulated Investment Company
ARTICLE X
LIMITATION OF
LIABILITY AND INDEMNIFICATION
Section 10.01 Limitation of Liability
Section 10.02 Indemnification
Section 10.03 Shareholders
Section 10.04 Insurance
ARTICLE XI
OFFICERS
Section 11.01 Officers and Appointment
Section 11.02 Resignations
Section 11.03 Surety Bonds
Section 11.04 Removal
ARTICLE XII
MISCELLANEOUS
Section 12.01 Trust Not a Partnership
Section 12.02 Trustee's Good Faith Action,
Expert Advice, No Bond or Surety
Section 12.03 Establishment of Record Dates
Section 12.04 Termination of Trust or Series
Section 12.05 Reorganization
Section 12.06 Filing of Copies, References, Headings
Section 12.07 Applicable Law
Section 12.08 Amendments
Section 12.09 Fiscal Year
Section 12.10 Provisions in Conflict with Law
Section 12.11 Execution via Facsimile
Section 12.12 Principal Office
Section 12.13 Inspection of Books
<PAGE>
SCHRODER SERIES TRUST II
TRUST INSTRUMENT, made by Thomas G. Sheehan, Catherine S. Wooledge, and
Priscilla F. Gray, as Trustees.
WHEREAS, the Trustees desire to establish a business trust for the
investment and reinvestment of funds contributed thereto;
NOW THEREFORE, the Trustees declare that all money and property contributed
to the trust hereunder shall be held and managed in trust under this Trust
Instrument as herein set forth below.
ARTICLE I
NAME AND DEFINITIONS
SECTION 1.01 NAME. The name of the trust created hereby is "Schroder Series
Trust II."
SECTION 1.02 DEFINITIONS. Wherever used herein, unless otherwise required
by the context or specifically provided:
(a) "AFFILIATED PERSON" shall have the meaning given it in the 1940
Act, as modified by or interpreted by any applicable order or orders of the
Commission or any rules or regulations adopted by or interpretive releases of
the Commission thereunder.
(b) "BYLAWS" means the Bylaws of the Trust as adopted by the Trustees,
if any;
(c) "CLASS" shall mean the class of Shares of a Series established in
accordance with the provisions of Article II, Section 2.06 hereof.
(d) "COMMISSION" shall have the meaning given it in the 1940 Act.
(e) "DELAWARE ACT" refers to Chapter 38 of Title 12 of the Delaware
Code entitled "Treatment of Delaware Business Trusts," as amended from time to
time.
(f) "INTERESTED PERSON" shall have the meaning given it in the 1940
Act, as modified by or interpreted by any applicable order or orders of the
Commission or any rules or regulations adopted by or interpretive releases of
the Commission thereunder.
<PAGE>
(g) "MAJORITY SHAREHOLDER VOTE" shall have the same meaning as the term
"vote of a majority of the outstanding voting securities" is given in the 1940
Act, as modified by or interpreted by any applicable order or orders of the
Commission or any rules or regulations adopted by or interpretive releases of
the Commission thereunder.
(h) "NET ASSET VALUE" means the net asset value of each Series, or
Class thereof, of the Trust determined in the manner provided in Article V,
Section 5.01 hereof;
(i) "OUTSTANDING SHARES" means those Shares shown from time to time in
the books of the Trust or a Transfer Agent as then issued and outstanding, but
shall not include Shares which have been redeemed or repurchased by the Trust
and which are at the time held in the treasury of the Trust;
(j) "PERSON" shall have the meaning given it in the 1940 Act, as
modified by or interpreted by any applicable order or orders of the Commission
or any rules or regulations adopted by or interpretive releases of the
Commission thereunder.
(k) "SERIES" means a series of Shares of the Trust established in
accordance with the provisions of Article II, Section 2.06 hereof.
(l) "SHAREHOLDER" means a record owner of Outstanding Shares of the
Trust;
(m) "SHARES" means the equal proportionate transferable shares of
beneficial interest into which the beneficial interest of each Series of the
Trust or Class thereof shall be divided and may include fractions of Shares as
well as whole Shares;
(n) "TRANSFER AGENT" shall mean the transfer agent or such officer or
agent of the Trust as shall maintain the register of a Series.
(o) "TRUST" means Schroder Series Trust II and reference to the Trust,
when applicable to one or more Series of the Trust, shall refer to any such
Series;
(p) "TRUSTEES" means the person or persons who has or have signed this
Trust Instrument, so long as each such person shall continue in office in
accordance with the terms hereof, and all other Persons who may from time to
time be duly qualified and serve as Trustees in accordance with the provisions
of Article III hereof, and reference herein to a Trustee or to the Trustees
shall refer to the individual Trustees in their capacity as Trustees hereunder;
(q) "TRUST PROPERTY" means any and all property, real or personal,
tangible or intangible, that is owned or held by or for the account of one or
more of the Trust or any Series, or the Trustees on behalf of the Trust or any
Series.
(r) "1940 ACT" means the Investment Company Act of 1940, as amended
from time to time.
<PAGE>
ARTICLE II
BENEFICIAL INTEREST
SECTION 2.01 SHARES OF BENEFICIAL INTEREST. The beneficial interest in
the Trust shall be divided into such transferable Shares of one or more separate
and distinct Series or Classes of a Series as the Trustees shall from time to
time create and establish. The number of Shares of each Series, and Class
thereof, authorized hereunder is unlimited. All Shares issued hereunder,
including without limitation, Shares issued in connection with a distribution in
Shares or a split or reverse split of Shares, shall be fully paid and
nonassessable. Each Share shall have no par value.
SECTION 2.02 ISSUANCE OF SHARES. Subject to applicable law, the
Trustees in their discretion may, from time to time, without vote of the
Shareholders, issue Shares, in addition to the then issued and Outstanding
Shares and Shares held in the treasury, to such party or parties and for such
amount and type of consideration, including cash or securities, at such time or
times and on such terms as the Trustees may deem appropriate, 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. In connection
with any issuance of Shares, the Trustees may issue fractional Shares and Shares
held in the treasury. The Trustees may from time to time divide or combine the
Shares into a greater or lesser number without thereby changing the
proportionate beneficial interests in the Trust. Contributions to the Trust may
be accepted for, and Shares shall be redeemed as, whole Shares and/or 1/1,000th
of a Share or integral multiples thereof.
SECTION 2.03 REGISTER OF SHARES AND SHARE CERTIFICATES.
(a) A register shall be kept at the principal office of the Trust or an
office of the Trust's Transfer Agent that shall contain the names and addresses
of the Shareholders of each Series and Class thereof, the number of Shares of
that Series and any Classes thereof held by each Shareholder and a record of all
transfers thereof. As to Shares for which no certificate has been issued, each
Shareholder shall be entitled to receive distributions or otherwise to exercise
or enjoy the rights of Shareholders. No Shareholder shall be entitled to receive
payment of any distribution, nor to have notice given to the Shareholder as
herein provided, until the Shareholder has given its address to the Transfer
Agent.
(b) No certificates certifying the ownership of Shares shall be issued
except as the Trustees may otherwise authorize. The Trustees may issue
certificates to a Shareholder of any Series or Class thereof for any purpose and
the issuance of a certificate to one or more Shareholders shall not require the
issuance of certificates generally. In the event that the Trustees authorize the
issuance of Share certificates, such certificate shall be in the form prescribed
from time to time by the Trustees and shall be signed by the President or a Vice
President and by the Treasurer, Assistant Treasurer, Secretary or Assistant
Secretary. Such signatures may be facsimiles if the certificate is signed by a
Transfer Agent or shareholder services agent or by a registrar, other than a
Trustee, officer or employee of the Trust. In case any officer who has signed or
whose facsimile signature has been placed on certificate shall have
<PAGE>
ceased to be such officer before such certificate is issued, it may be issued by
the Trust with the same effect as if the person were such officer at the time of
its issue.
(c) In the case of the alleged loss or destruction or the mutilation of
a Share certificate, a duplicate certificate may be issued in place thereof,
upon such terms as the Trustees may prescribe or upon the terms generally
employed by the Transfer Agent. The Trustees may at any time discontinue the
issuance of Share certificates and may, by written notice to each Shareholder,
require the surrender of Share certificates to the Trust for cancellation. Such
surrender and cancellation shall not affect the ownership of Shares in the
Trust.
SECTION 2.04 TRANSFER OF SHARES. Except as otherwise provided by the
Trustees, Shares shall be transferable on the records of the Trust only by the
record holder thereof or by that holder's agent thereunto duly authorized in
writing, upon delivery to the Trustees or the Transfer Agent of a duly executed
instrument of transfer and such evidence of the genuineness of such execution
and authorization and of such other matters as may be required by the Trustees
or Transfer Agent. Upon such delivery the transfer shall be recorded on the
register of the Trust. Until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereunder, and
neither the Trustees nor the Trust, nor any Transfer Agent or registrar nor any
officer, employee or agent of the Trust shall be affected by any notice of the
proposed transfer.
SECTION 2.05 TREASURY SHARES. Shares held in the treasury shall, until
reissued pursuant to Section 2.02 hereof, not confer any voting rights on the
Trustees, nor shall such Shares be entitled to any distributions declared with
respect to the Shares.
SECTION 2.06 ESTABLISHMENT OF SERIES OR CLASS. 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 may divide the Shares of any Series into
Classes. The Trustees shall have full power and authority, in their sole
discretion, and without obtaining any prior authorization or vote of the
Shareholders of any Series, to establish and designate and to change in any
manner any such Series or Class and to fix such preferences, voting powers,
rights and privileges of such Series or Classes as the Trustees may from time to
time determine, to divide or combine the Shares or any Series or Classes into a
greater or lesser number, to classify or reclassify any issued Shares or any
Series or Classes into one or more Series or Classes, and to take such other
action with respect to the Shares as the Trustees may deem desirable. The
establishment and designation of any Series or Class shall be effective upon the
adoption of a resolution by the Trustees setting forth such establishment and
designation and the relative rights and preferences of the Shares of such Series
or Class.
All references to Shares in this Trust Instrument shall be deemed to be
Shares of any or all Series or Classes, as the context may require. All
provisions herein relating to the Trust shall apply equally to each Series and
each Class, except as the context otherwise requires.
<PAGE>
Each Share of a Series of the Trust shall represent an equal beneficial
interest in the net assets of such Series. Each holder of Shares of a Series or
Class thereof shall be entitled to receive the holder's pro rata share of all
distributions made with respect to such Series or Class thereof. Upon redemption
of Shares, such Shareholder shall be paid solely out of the funds and property
of such Series of the Trust.
The current Series and Classes thereof of the Trust, and the
characteristics of those Series and Classes are set forth in Annex A to this
Trust Instrument.
SECTION 2.07 INVESTMENT IN THE TRUST. The Trustees shall accept
investments in any Series or Class from such Persons and on such terms as they
may from time to time authorize. At the Trustees' discretion, such investments
may be in the form of cash, securities or other assets in which the affected
Series is authorized to invest, valued as provided in Article V, Section 5.01
hereof. Investments in a Series shall be credited to each Shareholder's account
in the form of full and fractional Shares at the Net Asset Value per Share next
determined after the investment is received or accepted as may be determined by
the Trustees; provided, however, that the Trustees may, in their sole
discretion: (1) fix the Net Asset Value per Share of the initial capital
contribution; or (2) impose a sales or other charge upon investments in the
Trust in such manner and at such time determined by the Trustees.
SECTION 2.08 ASSETS AND LIABILITIES OF SERIES. All consideration
received by the Trust for the issue or sale of Shares 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 from 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, that
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 Shareholders 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 Shares of that Series. The assets belonging to a
Series shall be charged with the liabilities of that Series and all expenses,
costs, charges and reserves attributable to that Series, except that
liabilities, expenses, costs, charges and reserves allocated to a particular
Class shall be borne by that Class. Any general liabilities, expenses, costs,
charges or reserves of the Trust which are not readily identifiable as belonging
to any particular Series or Class shall be allocated and charged by the Trustees
between or among any one or more of the Series or Classes in such manner as the
Trustees in their sole discretion deem fair and equitable. Each such allocation
shall be conclusive and binding upon all Shareholders for all purposes. Without
limitation of the foregoing provisions of this Section 2.08, but subject
<PAGE>
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 the
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 setting
forth such notice in the certificate of trust) shall become applicable to the
Trust and each Series.
All Persons extending credit to, contracting with or having any claim
against the Trust or the Trustees shall look only to the assets of the
appropriate Series or (if the Trustees shall have yet to have established
Series) of the Trust for payment under such credit, contract or claim; and
neither the Shareholders nor the Trustees, nor any of their agents, whether
past, present or future, shall be personally liable therefor. No Shareholder or
former Shareholder of any Series shall have a claim on or any right to any
assets allocated or belonging to any other Series.
SECTION 2.09 NO PREEMPTIVE RIGHTS. Shareholders shall have no
preemptive or other right to subscribe to any additional Shares or other
securities issued by the Trust or the Trustees, whether of the same or other
Series.
SECTION 2.10 NO PERSONAL LIABILITY OF SHAREHOLDER. No Shareholder of
the Trust or of any Series shall be personally liable for the debts,
liabilities, obligation and expenses incurred by, contracted for, or otherwise
existing with respect to, the Trust or by or on behalf of any Series. The
Trustees shall have no power to bind any Shareholder personally or to call upon
any Shareholder for the payment of any sum of money or assessment whatsoever
other than such as the Shareholder may at any time personally agree to pay by
way of subscription for any Shares or otherwise. Every note, bond, contract or
other undertaking issued by or on behalf of the Trust or the Trustees relating
to the Trust or to a Series shall include a recitation limiting the obligation
represented thereby to the Trust or to one or more Series and its or their
assets (but the omission of such a recitation shall not operate to bind any
Shareholder or Trustee of the Trust).
SECTION 2.11 ASSENT TO TRUST INSTRUMENT. Every Shareholder, by virtue
of having purchased a Share shall become a Shareholder and shall be held to have
expressly assented and agreed to be bound by the terms hereof.
<PAGE>
ARTICLE III
THE TRUSTEES
SECTION 3.01 MANAGEMENT OF THE TRUST. 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 unlimited powers of delegation to the
extent not inconsistent with applicable law. The Trustees shall have full power
and authority to conduct the business of the Trust and carry on its operations
in any and all of its branches and maintain offices both within and without the
State of Delaware, in any and all states, commonwealths, territories,
dependencies, colonies or possessions of the United States of America and in any
foreign jurisdiction. The Trustees shall have full power and authority to do any
and all acts and to make and execute any and all contracts and instruments that
they may consider necessary, proper, desirable or appropriate in connection with
the management 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 Trust Instrument, the presumption shall be in favor of a grant of power to
the Trustees.
The enumeration of any specific power in this Trust Instrument shall
not be construed as limiting the aforesaid power. The powers of the Trustees may
be exercised without order of or resort to any court.
Each Trustee and each committee member may receive such compensation
for his or her services and reimbursement for his or her expenses as may be
fixed from time to time by the Trustees.
Except for the Trustees named herein or appointed to fill vacancies
pursuant to Section 3.04 of this Article III, the Trustees shall be elected by
the Shareholders owning a plurality of the Shares voting at a meeting of
Shareholders. Such a meeting shall be held on a date fixed by the Trustees. In
the event that less than a majority of the Trustees holding office has been
elected by Shareholders, if required by applicable law, the Trustees then in
office will call a Shareholders' meeting for the election of Trustees.
SECTION 3.02 INITIAL TRUSTEES. The initial Trustees shall be the
persons named herein. On a date fixed by the Trustees, the Shareholders shall
elect at least one (1) but not more than fifteen (15) Trustees, as specified by
the Trustees pursuant to Section 3.06 of this Article III.
SECTION 3.03 TERM OF OFFICE. The Trustees shall hold office during the
lifetime of this Trust, and until its termination as herein provided; except
that: (1) any Trustee may resign his or her trust by written instrument signed
by the Trustee and delivered to the other Trustees, which shall take effect upon
such delivery or upon such later date as is specified therein; (2) any Trustee
may be removed at any time by written instrument, signed by at least two-thirds
of the number of Trustees prior to such removal, specifying the date when such
removal shall become effective; (3) any Trustee who requests in writing to be
retired or who has become physically or mentally incapacitated by reason of
disease or otherwise, or is otherwise unable to serve, may be retired by written
instrument
<PAGE>
signed by a majority of the other Trustees, specifying the date of his or her
retirement; and (4) that a Trustee may be removed at any meeting of the
Shareholders of the Trust by a vote of Shareholders owning at least two-thirds
of the Outstanding Shares.
SECTION 3.04 VACANCIES AND APPOINTMENTS. In case of the declination to
serve, death, resignation, retirement, removal, physical or mental incapacity by
reason of disease or otherwise, or a Trustee is otherwise unable to serve, or an
increase in the number of Trustees, a vacancy shall occur. Whenever a vacancy in
the Board of Trustees shall occur, until such vacancy is filled, the other
Trustees shall have all the powers hereunder. In the case of an existing
vacancy, the remaining Trustees shall fill such vacancy by appointing such other
Person as they in their discretion shall see fit consistent with the limitations
of applicable law. Such appointment shall take effect upon the execution of a
written instrument signed by a majority of the Trustees in office or by
resolution of the Trustees, duly adopted.
An appointment of a Trustee may be made by the Trustees then in office
in anticipation of a vacancy to occur by reason of retirement, resignation or
increase in number of Trustees effective at a later date, provided that said
appointment shall become effective only at or after the effective date of said
retirement, resignation or increase in number of Trustees. As soon as any
Trustee appointed pursuant to this Section 3.04 shall have accepted this trust,
the trust estate shall vest in the new Trustee or Trustees, together with the
continuing Trustees, without any further act or conveyance, and he or she shall
be deemed a Trustee hereunder.
SECTION 3.05 TEMPORARY ABSENCE. Any Trustee may, by power of attorney,
delegate his or her power for a period not exceeding six months at any time to
any other Trustee or Trustees, provided that at least one Trustee must
personally exercise the other powers hereunder except as herein otherwise
expressly provided.
SECTION 3.06 NUMBER OF TRUSTEES. The number of Trustees shall be at
least one (1), and otherwise shall be such number as shall be fixed from time to
time by the Trustees, provided, however, that the number of Trustees shall in no
event be more than fifteen (15).
SECTION 3.07 EFFECT OF ENDING OF A TRUSTEE'S SERVICE. The declination
to serve, death, resignation, retirement, removal, incapacity, or inability of
the Trustees, or any one of them, shall not operate to terminate the trust or to
revoke any existing agency created pursuant to the terms of this Trust
Instrument.
SECTION 3.08 OWNERSHIP OF ASSETS OF THE TRUST. The assets of the Trust
and of each Series shall be held separate and apart from any assets now or
hereafter held in any capacity other than as Trustee hereunder by the Trustees
or any successor Trustees. Legal title in all of the assets of the Trust and the
right to conduct any business shall at all times be considered as vested in the
Trustees on behalf of the Trust, except that the Trustees may cause legal title
to any Trust Property to be held by, or in the name of the Trust, or in the name
of any Person as nominee. No Shareholder shall be deemed to have a severable
ownership in any individual asset of the Trust or of any Series or any right of
partition or possession thereof, but each Shareholder shall have, except as
otherwise provided for herein, a proportionate undivided beneficial interest
<PAGE>
in the Trust or Series. The Shares shall be personal property giving only the
rights specifically set forth in this Trust Instrument.
SECTION 3.09 MEETINGS OF TRUSTEES. Regular meetings of the Trustees may
be held at such places and at such times as the Trustees may from time to time
determine; each Trustee present at such determination shall be deemed a party
calling the meeting, and no call or notice will be required to such Trustee
provided that any Trustee who is absent when such determination is made shall be
given notice of the determination by the Chairman or any two other Trustees, as
provided for in the Trust Instrument. Any meeting may adjourn to any place.
Special meetings of the Trustees may be held at such places and at such
times as the Trustees may from time to time determine; meetings of the Trustees
may be called orally or in writing by the Chairman or any two other Trustees.
Except as otherwise provided, notice of any special meeting of the Trustees
shall be given by the party calling the meeting to each Trustee, as provided for
in the Trust Instrument. A written notice may be mailed, postage prepaid,
addressed to the Trustee at his or her address as registered on the books of the
Trust or, if not so registered, at his or her last known address. Any meeting
may adjourn to any place.
SECTION 3.10 QUORUM. A majority of the Trustees shall constitute a
quorum for the transaction of business, and an action of a majority of the
quorum shall constitute action of the Trustees.
SECTION 3.11 MEETING ACTIONS. When all the Trustees shall be present at
any meeting, however called or wherever held, or shall assent to the holding of
the meeting without notice, or shall sign a written assent thereto filed with
the record of such meeting, the acts of such meeting shall be valid as if such
meeting had been regularly held. Any action by the Trustees may be taken without
a meeting if a written consent thereto is signed by a majority of the Trustees
and filed with the records of the Trustees' meeting. Such consent shall be
treated, for all purposes, as a vote at a meeting of the Trustees held at the
principal place of business of the Trustees. Trustees may participate in a
meeting of Trustees by conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and such participation shall constitute presence in person at such meeting. Any
meeting conducted by telephone shall be deemed to take place at and from the
principal office of the Trust.
ARTICLE IV
POWERS OF THE TRUSTEES
SECTION 4.01 POWERS. The Trustees in all instances shall act as
principals, free from the control of the Shareholders. The Trustees shall not in
any way be bound or limited by present or future laws or customs in regard to
trust investments but shall have full power and authority to make any and all
investments that they, in their sole discretion, shall deem proper to accomplish
the purpose of this Trust without recourse to any court or other authority.
Subject to any applicable limitation in this Trust Instrument or any Bylaws, the
Trustees shall have the power and authority:
<PAGE>
(a) To invest and reinvest cash and other property, to hold cash or
other property uninvested, and to sell, exchange, lend, pledge, mortgage,
hypothecate, write options on, lease and otherwise dispose of or act with
respect to any or all of the assets of the Trust;
(b) To operate as and carry on the business of an investment company,
and exercise all the powers necessary and appropriate to the conduct of such
operations;
(c) To borrow money and in this connection issue notes or other
evidence of indebtedness; to secure borrowings by mortgaging, pledging or
otherwise subjecting as security the Trust Property; to endorse, guarantee, or
undertake the performance of an obligation or engagement of any other Person and
to lend Trust Property;
(d) To provide for the distribution of interests of the Trust either
through a principal underwriter in the manner hereinafter provided for or by the
Trust itself, or both, or otherwise pursuant to a plan of distribution of any
kind;
(e) To adopt Bylaws not inconsistent with this Trust Instrument
providing for the conduct of the business of the Trust and to amend and repeal
them to the extent that they do not reserve that right to the Shareholders; such
Bylaws, if any, shall be deemed incorporated and included in this Trust
Instrument;
(f) To elect and remove such officers and appoint and terminate such
agents as they consider appropriate;
(g) To employ one or more custodians of any assets of the Trust and to
retain one or more Transfer Agents and shareholder servicing agents, or both;
(h) To consent to, execute or participate in any agreement or plan of
merger, reorganization or consolidation or certificate of merger or similar
document with respect to the Trust or any Series or Class;
(i) To delegate such authority as they consider desirable to any
officers of the Trust and to any investment adviser, manager, custodian,
underwriter or other agent or independent contractor;
(j) To sell or exchange any or all of the assets of the Trust, subject
to the provisions of Article XII, subsections 12.04(b) and (c) hereof;
(k) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
powers of attorney to such Person or Persons as the Trustees shall deem proper,
granting to such Person or Persons such power and discretion with relation to
securities or property as the Trustees shall deem proper;
<PAGE>
(l) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities;
(m) To hold any security or property in a form not indicating any
trust, whether in bearer, book entry, unregistered or other negotiable form; or
either in the name of the Trust or in the name of a custodian or a nominee or
nominees, subject in either case to proper safeguards according to the usual
practice of Delaware business trusts or investment companies;
(n) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes in
accordance with the provisions of Article II hereof and to establish Classes of
such Series having relative rights, powers and duties as they may provide;
(o) Subject to the provisions of Section 3804 of the Delaware Act, to
allocate assets, liabilities and expenses of the Trust to a particular Series or
Class thereof or to apportion the same between or among two or more Series or
Classes, provided that any liabilities or expenses incurred by a particular
Series or Class shall be payable solely out of the assets belonging to that
Series or Class as provided for in Article II hereof;
(p) To consent to or participate in any plan for the reorganization,
consolidation or merger of any Person or concern or any security of which is
held in the Trust; to consent to any contract, lease, mortgage, purchase, or
sale of property by such corporation or concern; and to pay calls or
subscriptions with respect to any security held in the Trust;
(q) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust or any matter in controversy including, but not limited to,
claims for taxes;
(r) To make distributions of income and of capital gain to
Shareholders;
(s) To establish, from time to time, a minimum investment for
Shareholders in the Trust or in one or more Series or Class, and to require the
redemption of the Shares of any Shareholders whose investment is less than such
minimum upon giving notice to such Shareholder;
(t) To interpret the investment policies, practices or limitations of
any Series;
(u) To establish a registered office and have a registered agent in the
state of Delaware; and
(v) In general to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary, suitable
or proper for the accomplishment of any purpose or the attainment of any object
or the furtherance of any power set forth herein, either alone or in association
with others, and to do every other act or thing incidental or appurtenant to or
arising out of or connected with the aforesaid business or purposes, objects or
powers.
<PAGE>
The foregoing clauses shall be construed as objects and powers, and the
foregoing enumeration of specific powers shall not be held to limit or restrict
in any manner the general powers of the Trustees. Any action by one or more of
the Trustees in their capacity as such hereunder shall be deemed an action on
behalf of the Trust or the applicable Series, and not an action in an individual
capacity.
No Trustee hereunder shall have any power to bind personally the
Trust's officers.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust.
No one dealing with the Trustees shall be under any obligation to make
any inquiry concerning the authority of the Trustees, or to oversee the
application of any payments made or property transferred to the Trustees or upon
their order.
SECTION 4.02 ISSUANCE AND REPURCHASE OF SHARES. The Trustees shall have
the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, and otherwise deal in Shares and, subject to the
provisions set forth in Article II and Article IX, to apply to any such
repurchase, redemption, retirement, cancellation or acquisition of Shares any
funds or property of the Trust, or the particular Series of the Trust, with
respect to which such Shares are issued.
SECTION 4.03 TRUSTEES AND OFFICERS AS SHAREHOLDERS. Any Trustee,
officer or other agent of the Trust may acquire, own and dispose of Shares to
the same extent as if the Trustee, officer or other agent were not a Trustee,
officer or agent; and the Trustees may issue and sell or cause to be issued and
sold Shares to and buy such Shares from any such trustee, officer or other agent
or any Person in which the trustee, officer or other agent is interested,
subject only to the general limitations herein contained as to the sale and
purchase of such Shares.
SECTION 4.04 ACTION BY THE TRUSTEES. The Trustees shall act by majority
vote (unless a greater amount is specified in this Trust Instrument or
applicable law) at a meeting duly called or by majority written consent without
a meeting or by telephone meeting provided a quorum of Trustees participate in
any such telephone meeting, unless applicable law requires that a particular
action be taken only at a meeting at which the Trustees are present in person.
At any meeting of the Trustees, a majority of the Trustees shall constitute a
quorum. Meetings of the Trustees may be called orally or in writing by the
Chairman of the Board of Trustees or by any two other Trustees. Notice of the
time, date and place of all meetings of the Trustees shall be given by the party
calling the meeting to each Trustee by telephone, facsimile or other electronic
mechanism sent to his or her home or business address at least twenty-four hours
in advance of the meeting or by written notice mailed to his or her home or
business address at least seventy-two hours in advance of the meeting. Notice
need not be given to any Trustee who attends the meeting without objecting to
the lack of notice or who executes a written waiver of notice with respect to
the meeting. Any meeting conducted by telephone shall be deemed to take place at
the principal office of the Trust. Subject to the requirements of applicable
law, the Trustees by
<PAGE>
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.
Written consents or waivers of the Trustees may be executed in one or more
counterparts
SECTION 4.05 PRINCIPAL TRANSACTIONS. Except to the extent prohibited by
applicable law, the Trustees may, on behalf of the Trust, buy any securities
from, sell any securities to, lend any assets of the Trust to, or contract in
any way, whether orally or written, with any Trustee or officer of the Trust or
any other Person, however related to the Trust; or have any dealings of any kind
with any Person.
SECTION 4.06 COMMITTEES. The Trustees may establish one or more
committees, delegate any of the powers of the Trustees to any committee and
adopt a committee charter providing for the responsibilities, membership
(including Trustees, officers or other agents of the Trust therein) and any
other characteristics of a committee as the Trustees may deem proper. The
Trustees may by resolution appoint a committee consisting of less than the whole
number of Trustees then in office, which committee may be empowered to act for
and bind the Trustees and the Trust, as if the acts of such committee were the
acts of all the Trustees then in office, with respect to any and all matters as
the Trustees may deem proper.
The Trustees may elect from their own number an executive committee,
which shall have any or all the powers of the Trustees while the Trustees are
not in session. All members of each committee shall hold such offices at the
pleasure of the Trustees. The Trustees may abolish any committee at any time.
Any committee to which the Trustees delegate any of their powers or duties shall
keep records of its meetings and shall report its actions to the Trustees. The
Trustees shall have power to rescind any action of any committee, but no such
rescission shall have retroactive effect.
ARTICLE V
NET ASSET VALUE AND EXPENSES
SECTION 5.01 DETERMINATION OF NET ASSET VALUE. The term "Net Asset
Value" of any Series shall mean that amount by which the assets of that Series
exceed its liabilities, all as determined by or under the direction of the
Trustees in any manner the Trustees deem appropriate in accordance with the
applicable law. The Net Asset Value of any Class shall be the amount as
determined by or under the direction of the Trustees in any manner the Trustees
deem appropriate in accordance with applicable law. The valuation of any
securities or other assets for purposes of calculating a Series (or Class ) Net
Asset Value shall be determined by the Trustees or officers from time to time.
SECTION 5.02 EXPENSES. Subject to the provisions of Article II, Section
2.08 hereof, the Trustees shall be reimbursed from the estate or the assets
belonging to the appropriate Series for their expenses and disbursements,
including, without limitation, interest charges, taxes, brokerage fees and
commissions; expenses of issue, repurchase and redemption of shares; insurance
premiums; applicable fees, interest charges and expenses of third parties,
including the Trust's investment advisers, managers, administrators,
distributors, custodian, transfer agent and
<PAGE>
fund accountant; fees of pricing, interest, dividend, credit and other reporting
services; costs of membership in trade associations; telecommunications
expenses; funds transmission expenses; auditing, legal and compliance expenses;
costs of forming the Trust and maintaining its existence; costs of preparing and
printing the Trust's prospectuses, statements of additional information and
shareholder reports and delivering them to Shareholders or others; expenses of
meetings of Shareholders and proxy solicitations therefore; costs of maintaining
books and accounts; costs of reproduction, stationery and supplies; fees and
expenses of the Trust; compensation of the Trust's officers and employees and
costs of other personnel performing services for the Trust; costs of Trustee
meetings; registration fees and related expenses; for such non-recurring items
as may arise, including litigation to which the Trust (or a Trustee acting as
such) is a party, and for all losses and liabilities by them incurred in
administering the Trust; and, for the payment of such expenses, disbursements,
losses and liabilities, the Trustees shall have a lien on the assets belonging
to the appropriate Series, or in the case of an expense allocable to more than
one Series, on the assets of each such Series, prior to any rights or interests
of the Shareholders thereto. This section shall not preclude the Trust from
directly paying any of the aforementioned fees and expenses.
ARTICLE VI
INVESTMENT ADVISER, PRINCIPAL UNDERWRITER
AND OTHER SERVICE PROVIDERS
SECTION 6.01 INVESTMENT ADVISER. The Trustees may in their discretion,
from time to time, enter into an investment advisory contract or contracts on
behalf of the Trust or any Series whereby the other party or parties to such
contract or contracts shall undertake to furnish the Trustees with such
investment advisory, statistical and research facilities and services and such
other facilities and services, if any, all upon such terms and conditions as may
be prescribed by the Trustees. Notwithstanding any other provision of this Trust
Instrument, the Trustees may authorize any investment adviser to effect
purchases, sales or exchanges of portfolio securities, other investment
instruments of the Trust, or other Trust Property on behalf of the Trustees, or
may authorize any officer, agent, or Trustee to effect such purchases, sales or
exchanges pursuant to recommendations of the investment adviser. Any such
purchases, sales and exchanges shall be deemed to have been authorized by all of
the Trustees.
The Trustees may authorize the investment adviser to employ, from time
to time, one or more sub-advisers to perform such of the acts and services of
the investment adviser, and upon such terms and conditions, as may be agreed
upon between the investment adviser and sub-adviser. Any reference in this Trust
Instrument to the investment adviser shall be deemed to include such
sub-advisers, unless the context otherwise requires.
SECTION 6.02 PRINCIPAL UNDERWRITER. The Trustees may in their
discretion from time to time enter into an exclusive or non-exclusive
underwriting contract or contracts providing for the sale of Shares, whereby the
Trust may either agree to sell Shares to the other party to the contract or
appoint such other party its sales agent for such Shares. In either case, the
contract shall be on such terms and conditions as may be prescribed by the
Trustees; and such contracts may also
<PAGE>
provide for the repurchase or sale of Shares by such other party as principal or
as agent of the Trust.
SECTION 6.03 OTHER SERVICE PROVIDERS. The Trustees may in their
discretion from time to time enter into one or more contracts whereby the other
party or parties shall undertake to provide the Trustees with services. The
contract or contracts shall be on such terms and conditions as may be prescribed
by the Trustees.
SECTION 6.04 PARTIES TO CONTRACT. Any contract of the character
described in Sections 6.01, 6.02 and 6.03 of this Article VI or any contract of
the character described in Article VIII hereof may be entered into with any
Person, although one or more of the Trustees or officers of the Trust may be an
officer, director, trustee, shareholder, or member of such other Person, and no
such contract shall be invalidated or rendered void or voidable by reason of the
existence of any relationship, nor shall any Person holding such relationship be
disqualified from voting on or executing the same in his or her capacity as
Shareholder 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, provided that the contract when entered into
was not inconsistent with the provisions of this Article VI or Article VIII
hereof or of any Bylaws. The same Person may be the other party to contracts
entered into pursuant to Sections 6.01, 6.02, and 6.03 of this Article VI or
pursuant to Article VIII hereof, 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 6.04.
SECTION 6.05 PROVISIONS AND AMENDMENTS. Any contract entered into by
the Trust pursuant to this Article VI shall be consistent with applicable law.
No amendment to any contract entered into by the Trust pursuant to this Article
VI shall be effective unless assented to in a manner consistent applicable law.
ARTICLE VII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
SECTION 7.01 VOTING POWERS. The Shareholders shall have power to vote
only: (1) for the election of Trustees as provided in Article III, Sections 3.01
and 3.02 hereof; (2) for the removal of Trustees as provided in Article III,
Section 3.03(4) hereof; and (3) with respect to such additional matters relating
to the Trust as may be required by law, by this Trust Instrument, or any Bylaws
or any registration of the Trust with the Commission or any qualification with
any State, or as the Trustees may consider desirable.
On any matter submitted to a vote of the Shareholders, all Shares shall
be voted separately by individual Series, except: (1) when required by
applicable law, Shares shall be voted in the aggregate and not by individual
Series; and (2) when the Trustees have determined that the matter affects the
interests of more than one Series, then the Shareholders of all such Series
shall be entitled to vote thereon. The Trustees may also determine that a matter
affects only the interests of one or more Classes, in which case any such matter
shall be voted on only
<PAGE>
by such Class or Classes. Each whole Share shall be entitled to one vote as to
any matter on which a Shareholder is entitled to vote, and each fractional Share
shall be entitled to a proportionate fractional vote. There shall be no
cumulative voting in the election of Trustees. Notwithstanding anything else
herein or in any Bylaws, in the event that a proposal, including a proposal by
anyone other than the officers or Trustees of the Trust, is submitted to a vote
of the Shareholders of one or more Classes, one or more Series or of the Trust,
or in the event of any proxy contest or proxy solicitation or proposal in
opposition to any proposal by the officers or Trustees of the Trust, Shares may
be voted by (1) anyone authorized to do so who is present at a meeting in person
or by conference telephone or similar communications equipment by menas of which
all persons participating in the meeting can hear each other, or (2) by
electronic or other similar means or (3) by proxy or (4) in any other manner not
prohibited under Delaware law. Until Shares are issued, the Trustees may
exercise all rights of Shareholders and may take any action required or
permitted by law, this Trust Instrument or any Bylaws to be taken by
Shareholders.
SECTION 7.02 MEETINGS. Meetings of Shareholders may be held within or
without the State of Delaware as specified by the Trustees. A meeting of
Shareholders shall be called by the Secretary whenever: (1) ordered by the
Trustees; or (2) requested in writing by the holder or holders of at least
one-third of the Outstanding Shares entitled to vote. If the Secretary, when so
ordered or requested, refuses or neglects for more than 30 days to call such
special meeting, the Trustees or the Shareholders so requesting, may, in the
name of the Secretary, call the meeting by giving notice thereof in the manner
required when notice is given by the Secretary. If the meeting is a meeting of
the Shareholders of one or more Series or Classes, but not a meeting of all
Shareholders of the Trust, then only special meetings of the Shareholders of
such one or more Series or Classes shall be called and only the shareholders of
such one or more Series or Classes shall be entitled to notice of and to vote at
such meeting.
SECTION 7.03 NOTICES. Except as provided in Section 7.02, notices of
any meeting of the Shareholders shall be given by the Secretary by delivering or
mailing, postage prepaid, to each Shareholder entitled to vote at said meeting,
written or printed notification of such meeting at least ten (10) days before
the meeting, to such address as may be registered with the Trust by the
Shareholder. Notice of any Shareholder meeting need not be given to any
Shareholder if a written waiver of notice, executed before or after such
meeting, is filed with the record of such meeting, or to any Shareholder who
shall attend such meeting in person or by proxy. Notice of adjournment of a
Shareholder's meeting to another time or place need not be given, if such time
and place are announced at the meeting or reasonable notice is given to Persons
present at the meeting and the adjourned meeting is held within a reasonable
time after the date set for the original meeting.
SECTION 7.04 QUORUM AND REQUIRED VOTE. One-third (or such higher
proportion as the Trustees, in their sole discretion, may determine with respect
to a meeting) of Shares entitled to vote shall be a quorum for the transaction
of business at a Shareholders' meeting, except that where any provision of law
or of this Trust Instrument permits or requires that holders of any Series shall
vote as a Series (or that holders of a Class shall vote as a Class), then
one-third (or such higher proportion as the Trustees, in their sole discretion,
may determine with respect to a
<PAGE>
meeting) of the aggregate number of Shares of that Series (or that Class)
entitled to vote shall be necessary to constitute a quorum for the transaction
of business by that Series (or that Class). Any lesser number shall be
sufficient only for holding a vote to adjourn the meeting. Any adjourned session
or sessions may be held, within a reasonable time after the date set for the
original meeting, without the necessity of further notice. Except when a larger
vote is required by law or by any provision of this Trust Instrument or any
Bylaws, a majority of the Shares voted in person or by proxy shall decide any
questions and a plurality shall elect a Trustee, provided that where any
provision of law or of this Trust Instrument permits or requires that the
holders of any Series shall vote as a Series (or that the holders of any Class
shall vote as a Class), then a majority of the Shares present in person or by
proxy of that Series (or Class), voted on the matter in person or by proxy shall
decide that matter insofar as that Series (or Class) is concerned. Shareholders
may act by majority written consent. Actions taken by a Series (or Class) may be
consented to in writing by a majority of the Shareholders of that Series (or
Class).
SECTION 7.05 VOTING-PROXIES. Shares may be voted in person present at a
meeting or by electronic or telephonic or other similar means or by proxy or in
any manner provided for in any Bylaws or any means not prohibited by Delaware
law and approved by the Trusteesexcept as otherwise required by Section 7.01.
Shareholders may vote by proxy, provided that either: (1) an instrument
authorizing such proxy to act is executed by the Shareholder in writing and
dated not more than eleven (11) months before the meeting, unless the instrument
specifically provides for a longer period; or (2) the Trustees or President
authorize an electronic, telephonic, computerized or other alternative to
execution of a written instrument authorizing the proxy to act which
authorization is received not more than eleven (11) months before the meeting.
Written proxies shall be delivered to the Secretary of the Trust or other person
responsible for recording the proceedings before being voted. A proxy with
respect to Shares held in the name of two or more Persons shall be valid if
executed by one of them unless at or prior to exercise of such proxy the Trust
receives a specific written notice to the contrary from any one of them. Unless
otherwise specifically limited by their terms, proxies shall entitle the holder
thereof to vote at any adjournment of a meeting. A proxy purporting to be
exercised by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise and the burden or proving invalidity
shall rest on the challenger. At all meetings of the Shareholders, unless the
voting is conducted by inspectors, all questions relating to the qualifications
of voters, the validity of proxies, and the acceptance or rejection of votes
shall be decided by the Chairman of the meeting. Except as otherwise provided
herein, all matters relating to the giving, voting or validity of proxies shall
be governed by the General Corporation Law of the State of Delaware relating to
proxies, and judicial interpretations thereunder, as if the Trust were a
Delaware corporation and the Shareholders were shareholder of a Delaware
corporation.
SECTION 7.06 ACTION WITHOUT A MEETING. Any action to be taken by
Shareholders may be taken without a meeting if a majority of the Shareholders
entitled to vote on the matter consent to the action in writing and the written
consents are filed with the records of meetings of Shareholders of the Trust.
Such consent shall be treated for all purposes as a vote at a meeting of the
Shareholders held at the principal place of business of the Trust.
<PAGE>
ARTICLE VIII
CUSTODIANS
SECTION 8.01 APPOINTMENT AND DUTIES. The Trustees shall at all times
employ one or more banks, companies that are members of a national securities
exchange, trust companies organized under the laws of the United States or one
of the states thereof, or such other Persons as may be permitted to act as
custodian for assets of the Trust under applicable law as custodian with
authority as the Trust's agent, but subject to such restrictions, limitations
and other requirements, if any, as may be contained in any Bylaws: (1) to hold
the securities owned by the Trust and deliver the same upon written order or
oral order confirmed in writing; (2) to receive and receipt for any moneys due
to the Trust and deposit the same in its own banking department or elsewhere as
the Trustees may direct; and (3) to disburse such funds upon orders or vouchers.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian, and upon such terms and conditions as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees, provided that in
every case such sub-custodian shall be a bank, a company that is a member of a
national securities exchange, a trust company organized under the laws of the
United States or one of the states or such other Persons as may be permitted to
act as custodian for assets of the Trust under applicable law.
SECTION 8.02 CENTRAL CERTIFICATE SYSTEM. Subject to the requirements of
applicable law, the Trustees may direct a 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 to
act as custodian for assets of the Trust under applicable law, 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, sub-custodians or other agents.
ARTICLE IX
DISTRIBUTIONS AND REDEMPTIONS
SECTION 9.01 DISTRIBUTIONS.
(a) The Trustees may from time to time declare and pay distributions
with respect to any Series or Class. The amount of such distributions and the
payment of them and whether they are in cash or any other Trust Property shall
be wholly in the discretion of the Trustees.
(b) Distributions may be paid or made to Shareholders at the time of
declaring a distribution or among the Shareholders of record at such other date
or time or dates or times as the Trustees shall determine, which distributions,
at the election of the Trustees, may be paid pursuant to a standing resolution
or resolutions adopted only once or with such frequency as the
<PAGE>
Trustees may determine. The Trustees may adopt and offer to Shareholders such
reinvestment plans, cash payout plans or related plans with respect to
distributions as the Trustees shall deem appropriate.
(c) Anything in this Trust Instrument to the contrary notwithstanding,
the Trustees may at any time declare and distribute Shares pro rata among the
Shareholders of a particular Series, or Class thereof, as of the record date of
that Series or Classified as provided in Subsection 9.01(b) hereof.
SECTION 9.02 REDEMPTIONS. In case any Shareholder of a particular
Series desires to dispose of the Shareholder's Shares or any portion thereof,
the Shareholder may deposit at the office of the Transfer Agent or other
authorized agent of that Series a written request or such other form of request
as the Trustees may from time to time authorize, requesting that the Series
purchase the Shares in accordance with this Section 9.02; and the Shareholder so
requesting shall be entitled to require the Series to purchase, and the Series
or the principal underwriter of the Series shall purchase the Shares, but only
at the Net Asset Value thereof (as described in Section 5.01 of Article V hereof
) reduced by the amount of any sales or other charges applicable to the Shares.
The Series shall make payment for any such Shares to be redeemed, as aforesaid,
in cash or property from the assets of that Series, and payment for such Shares
shall be made by the Series or the principal underwriter of the Series to the
Shareholder within seven (7) days after the date upon which the request is
effective. Upon redemption, Shares shall become Treasury Shares and may be
re-issued from time to time.
SECTION 9.03 SUSPENSION OF THE RIGHT OF REDEMPTION. The Trustees may
declare a suspension of the right of redemption or postpone the date of payment
as permitted under applicable law. Such suspension shall take effect at such
time as the Trustees shall specify but not later than the close of business on
the business day next following the declaration of suspension, and thereafter
there shall be no right of redemption or payment until the Trustees shall
declare the suspension at an end. In the case of a suspension of the right of
redemption, a Shareholder may either withdraw his or her request for redemption
or receive payment based on the Net Asset Value per Share next determined after
the termination of the suspension. In the event that any Series is divided into
Classes, the provisions of this Section 9.03, to the extent applicable as
determined in the discretion of the Trustees and consistent with applicable law,
may be equally applied to each such Class.
SECTION 9.04 REDEMPTION OF SHARES IN ORDER TO QUALIFY AS REGULATED
INVESTMENT COMPANY. If the Trustees shall, at any time and in good faith, be of
the opinion that direct or indirect ownership of Shares of any Series has or may
become concentrated in any Person to an extent which would disqualify any Series
as a regulated investment company under the Internal Revenue Code of 1986, as
amended, then the Trustees shall have the power (but not the obligation) by lot
or other means deemed equitable by them: (1) to call for redemption by any such
Person of a number, or principal amount, of Shares sufficient to maintain or
bring the direct or indirect ownership of Shares into conformity with the
requirements for such qualification; and (2) to refuse to transfer or issue
Shares to any Person whose acquisition of Shares in question
<PAGE>
would result in such disqualification. The redemption shall be effected at the
redemption price and in the manner provided in this Article IX.
The holders of Shares shall upon demand disclose to the Trustees in
writing such information with respect to direct and indirect ownership of Shares
as the Trustees deem necessary to comply with the requirements of any taxing
authority.
ARTICLE X
LIMITATION OF LIABILITY AND INDEMNIFICATION
SECTION 10.01 LIMITATION OF LIABILITY. A Trustee, when acting in such
capacity, shall not be personally liable to any Person other than the Trust or
beneficial owner for any act, omission or obligation of the Trust or any
Trustee. A Trustee shall not be liable for any act or omission or any conduct
whatsoever in his or her capacity as Trustee, provided that nothing contained
herein or in the Delaware Act shall protect any Trustee against any liability to
the Trust or to Shareholders to which he or she 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 Trustee hereunder.
SECTION 10.02 INDEMNIFICATION.
(a) Subject to the exceptions and limitations contained in Subsection
10.02(b): (1) 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 in connection with any claim, action,
suit or proceeding in which he or she becomes involved as a party or otherwise
by virtue of his or her being or having been a Trustee or officer and against
amounts paid or incurred in the settlement thereof; and (2) 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:
(1) 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 Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office; or (B) not to have
acted in good faith in the reasonable belief that his or her action was in the
best interest of the Trust; or (2) 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 his or her office: (x) by the court or other body
approving the settlement; (y) 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 (z) by written opinion of independent legal counsel based upon a review of
readily available facts (as opposed to a full trial-type
<PAGE>
inquiry); provided, however, that any Shareholder 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
Subsection 10.02(a) of this Section 10.02 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 or her to the Trust or Series if it is ultimately determined that he
or she is not entitled to indemnification under this Section 10.02; provided,
however, that either: (1) such Covered Person shall have provided appropriate
security for such undertaking; (2) the Trust is insured against losses arising
out of any such advance payments; or (3) 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 Section 10.02.
SECTION 10.03 SHAREHOLDERS. In case any Shareholder of any Series shall
be held to be personally liable solely by reason of the Shareholder being or
having been a Shareholder of such Series and not because of the Shareholder's
acts or omissions or for some other reason, the Shareholder or former
Shareholder (or the Shareholder's heirs, executors, administrators or other
legal representatives, or, in the case of Shareholder other than an individual,
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 Shareholder, assume the
defense of any claim made against the Shareholder for any act or obligation of
the Series and satisfy any judgment thereon from the assets of the Series.
SECTION 10.04 INSURANCE. The Trust may purchase and maintain insurance
on behalf of any Covered Person or employee of the Trust, including any Covered
Person or employee of the Trust who is or was serving at the request of the
Trust as a Trustee, officer or employee of another Person against any liability
asserted against him or her and incurred in any such capacity or arising out of
his or her status as such, whether or not the Trustees would have the power to
indemnify him or her against such liability.
<PAGE>
ARTICLE XI
OFFICERS
SECTION 11.01 OFFICERS AND APPOINTMENT. The officers of the Trust shall
be a Chairman of the Board of Trustees, a President, a Treasurer and a
Secretary, each to be elected by the Trustees, and such other officers as the
Trustees may from time to time elect. The Trustees may delegate to one or more
officers or committees the power to elect any subordinate officers or agents and
to prescribe their respective terms of office, authorities and duties. It shall
not be necessary for any Trustee or officer to be a holder of Shares. Two or
more offices may be held by a single person except the offices of President and
Secretary. Subject to the provisions of Section 11.04 hereof, the Chairman, the
President, the Treasurer and the Secretary shall each hold office until their
successors are chosen and qualified and all other officers shall hold office at
the pleasure of the Trustees. Each officer may receive such compensation for
services provided and reimbursement for expenses incurred as may be fixed from
time to time by the Trustees.
(a) The Trustees shall appoint from among their number a Chairman of
the Board of Trustees. When present, the Chairman shall preside at all meetings
of the Shareholders and the Trustees and may appoint a Trustee to preside at
such meetings in his or her absence. The Chairman shall be responsible for the
execution of policies established by the Trustees and the administration of the
Trust. The Chairman shall perform such other duties as the Trustees may from
time to time designate.
(b) The President shall be the chief executive officer of the Trust
and, subject to the direction of the Trustees, shall have general administration
of the business and policies of the Trust. Except as the Trustees may otherwise
order, the President shall have the power to grant, issue, execute or sign such
powers of attorney, proxies, agreements or other documents as may be deemed
advisable or necessary in the furtherance of the interests of the Trust or any
Series. The President shall also have the power to employ attorneys, accountants
and other advisors and agents and counsel for the Trust. The President shall
perform such duties additional to all of the foregoing as the Trustees may from
time to time designate.
(c) The Treasurer shall be the principal financial and accounting
officer of the Trust. The Treasurer shall deliver all funds and securities of
the Trust which may come into his or her hands to such Person as the Trustees
shall employ as Custodian. The Treasurer shall make annual reports regarding the
business and condition of the Trust, which reports shall be preserved in Trust
records and shall furnish such other reports regarding the business and
condition of the Trust as the Trustees may from time to time require. The
Treasurer shall perform such additional duties as the Trustees may from time to
time designate.
(d) The Secretary shall record in books kept for the purpose all votes
and proceedings of the Trustees and the Shareholders at their respective
meetings. The Secretary shall perform such additional duties as the Trustees may
from time to time designate.
<PAGE>
(e) Any Vice President of the Trust shall perform such duties as the
Trustees or the President may from time to time designate. At the request or in
the absence or disability of the President, the Vice President (or, if there are
two or more Vice Presidents, then the senior of the Vice Presidents present and
able to act) may perform all the duties of the President and, when so acting,
shall have all the powers of and be subject to all the restrictions upon the
President.
(f) Any Assistant Treasurer of the Trust shall perform such duties as
the Trustees or the Treasurer may from time to time designate, and, in the
absence of the Treasurer, the senior Assistant Treasurer, present and able to
act, may perform all the duties of the Treasurer.
(g) Any Assistant Secretary of the Trust shall perform such duties as
the Trustees or the Secretary may from time to time designate, and, in the
absence of the Secretary, the senior Assistant Secretary, present and able to
act, may perform all the duties of the Secretary.
(h) The Trustees from time to time may appoint such officers or agents
as they may deem advisable, each of whom shall have such title, hold office for
such period, have such authority and perform such duties as the Trustees may
determine.
SECTION 11.02 RESIGNATIONS. Any officer of the Trust may resign,
notwithstanding Section 11.01 hereof, by filing a written resignation with the
President, the Trustees or the Secretary, which resignation shall take effect on
being so filed or at such time as may be therein specified.
SECTION 11.03 SURETY BONDS. The Trustees may require any officer or
agent of the Trust to execute a bond (including without limitation, any bond
required by the 1940 Act and the rules and regulations of the Commission) to the
Trust in such sum and with such surety or sureties as the Trustees may
determine, conditioned upon the faithful performance of his or her duties to the
Trust including responsibility for negligence and for the accounting of any of
the Trust's property, funds or securities that may come into his or her hands.
SECTION 11.04 REMOVAL. Any officer may be removed from office by the
Trustees at any regular or special meeting whenever in the judgment of the
Trustees the best interest of the Trust will be served thereby. In addition, any
officer or agent appointed in accordance with the provisions of Section 11.01(h)
hereof may be removed, either with or without cause, by any officer upon whom
such power of removal shall have been conferred by the Trustees.
ARTICLE XII
MISCELLANEOUS
SECTION 12.01 TRUST NOT A PARTNERSHIP. It is hereby expressly declared
that a trust and not a partnership is created hereby.
SECTION 12.02 TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR
SURETY. The exercise by the Trustees of their powers and discretion hereunder in
good faith and with reasonable care under the circumstances then prevailing
shall be binding. Subject to the
<PAGE>
provisions of Article X hereof, the Trustees shall not be liable for errors of
judgment or mistakes of fact or law. The Trustees may take advice of counsel or
other experts with respect to the meaning and operation of this Trust Instrument
or any other matter, and subject to the provisions of Article X hereof shall be
under no liability for any act or omission in accordance with such advice or for
failing to follow such advice. The Trustees shall not be required to give any
bond as such, nor any surety if a bond is obtained.
SECTION 12.03 ESTABLISHMENT OF RECORD DATES. The Trustees may close the
Share transfer books of the Trust for a period not exceeding one hundred twenty
(120) days preceding the date of any meeting of Shareholders, or the date for
the payment of any distributions, or the date for the allotment of rights, or
the date when any change or conversion or exchange of Shares shall go into
effect; or in lieu of closing the stock transfer books as aforesaid, the
Trustees may fix in advance a date, not exceeding one hundred, twenty (120) days
preceding the date of any meeting of Shareholders, or the date for payment of
any distribution, or the date for the allotment of rights, or the date when any
change or conversion or exchange of Shares shall go into effect, as a record
date for the determination of the Shareholders entitled to notice of, and to
vote at, any such meeting, or entitled to receive payment of any such
distribution, or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of Shares, and in such case
such Shareholders and only those Shareholders as shall be Shareholders on the
date so fixed shall be entitled to such notice of, and to vote at, such meeting,
or to receive payment of such distribution, or to receive such allotment or
rights, or to exercise such rights, as the case may be, notwithstanding any
transfer of any Shares on the books of the Trust after any such record date
fixed as aforesaid.
SECTION 12.04 TERMINATION OF TRUST OR SERIES.
(a) This Trust shall continue without limitation of time but subject to
the provisions of Subsections 12.04(b) and (c).
(b) The Trustees may at any time, in contemplation of the termination
of the Trust or of a Series, subject to a vote of a majority of the Outstanding
Shares of each Series affected by the matter or, if applicable, to a vote of a
majority of the Outstanding Shares of the Trust: (1) sell and convey all or any
portion of the assets of the Trust or the affected Series to another trust,
partnership, association or corporation, or to a separate series of shares
thereof, organized under the laws of any jurisdiction, for adequate
consideration which may include the assumption of all outstanding obligations,
taxes and other liabilities, accrued or contingent, of the Trust of any affected
Series, and which may include shares of beneficial interest, stock or other
ownership interest of such trust, partnership, association or corporation or of
a series thereof; or (2) sell and convert into money all or any portion of the
assets of the Trust or the affected Series.
Upon paying or making reasonable provision for the payment of all known
liabilities of all Series or any affected Series in either (1) or (2), by such
assumption or otherwise, the Trustees shall distribute the remaining proceeds or
assets (as the case may be) ratably among the Shareholders of all Series or the
affected Series; however, the payment to any particular Class may be reduced by
any fees, expenses or charges allocated to that Class.
<PAGE>
(c) The Trustees may take any of the actions specified in subsection
(b) above without approval of the Shareholders of the Trust or any affected
Series if the Trustees, in their sole discretion, determine that the
continuation of the Trust or the Series is not in the best interests of the
Trust, the Series, or their respective Shareholders. In reaching such
determination, the Trustees may consider any factors the Trustees, in their sole
discretion, deem to be appropriate.
(d) At any time that there are no Shares outstanding of any particular
Series or Class previously established and designated, the Trustees may abolish
that Series and the establishment and designation thereof.
(e) Upon completion of the distribution of the remaining proceeds or
the remaining assets as provided in Subsection 12.04(b) or (c), the Trust or any
affected Series shall terminate, and the Trustees and the Trust shall be
discharged of any and all further liabilities and duties hereunder, and the
right, title and interest of all parties with respect to the Trust or Series
shall be canceled and discharged. Upon termination of the Trust, following
completion of winding up of its business, the Trustees shall cause a certificate
of cancellation of the Trust's certificate of trust to be filed in accordance
with the Delaware Act, which certificate of cancellation may be signed by any
one Trustee.
SECTION 12.05 REORGANIZATION. Notwithstanding anything else herein, the
Trustees may, without Shareholder approval: (1) cause the Trust or any Series to
merge or consolidate with or into one or more entities, if the surviving or
resulting entity is the Trust or another company registered as an open-end,
management investment company under the 1940 Act, or a series thereof; (2) cause
any or all Shares to be exchanged under or pursuant to any state of federal
statute to the extent permitted by law; or (3) cause the Trust to incorporate or
organize under the laws of any state, commonwealth, territory, dependency,
colony or possession of the United States of America or in any foreign
jurisdiction.
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
Trust Instrument, an agreement of merger or consolidation approved by the
Trustees in accordance with this Section 12.05 may effect any amendment to the
Trust Instrument or effect the adoption of a new trust instrument of the Trust
if it is the surviving or resulting trust in the merger or consolidation.
SECTION 12.06 FILING OF COPIES, REFERENCES, HEADINGS. The original or a
copy of this Trust Instrument and of each amendment hereof or Trust Instrument
supplemental hereto shall be kept at the office of the Trust where it may be
inspected by any Shareholder. Anyone dealing with the Trust may rely on a
certificate by an officer or Trustee of the Trust as to whether or not any such
amendments or supplements have been make and as to any matters in connection
with the Trust hereunder, and with the same effect as if it were the original,
may rely on a copy certified by an officer or Trustee of the Trust to be a copy
of this Trust Instrument or of any such amendment or supplemental Trust
Instrument. In this Trust Instrument or in any such amendment or supplemental
Trust Instrument, references to this Trust Instrument, and all
<PAGE>
expressions like "herein," "hereof' and "hereunder," shall be deemed to refer to
this Trust Instrument as amended or affected by any such supplemental Trust
Instrument. Headings are placed herein for convenience of reference only and in
case of any conflict, the text of this Trust Instrument, rather than the
headings, shall control. This Trust Instrument may be executed in any number of
counterparts each of which shall be deemed an original.
SECTION 12.07 GOVERNING LAW. The trust set forth in this instrument is
made in the State of Delaware, and the Trust and this Trust Instrument, and the
rights and obligations of the Trustees and Shareholders 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 Trust Instrument: (1) the provisions of Section 3540
of Title 12 of the Delaware Code; or (2) 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: (a) the filing with any court or
governmental body or agency of trustee accounts or schedules of trustee fees and
charges; (b) affirmative requirements to post bonds for trustees, officers,
agents or employees of a trust; (c) the necessity for obtaining court or other
governmental approval concerning the acquisition, holding or disposition of real
or personal property; (d) fees or other sums payable to trustees, officers,
agents or employees of a trust; (e) the allocation of receipts and expenditures
to income or principal; (f) 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 (g) the
establishment of fiduciary or other standards of 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 Trust 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.
SECTION 12.08 AMENDMENTS. Except as specifically provided herein, the
Trustees may, without shareholder vote, amend or otherwise supplement this Trust
Instrument by making an amendment, a Trust Instrument supplemental hereto or an
amended and restated trust instrument. Shareholders shall have the right to
vote: (1) on any amendment that would affect their right to vote granted in
Section 7.01 of Article VII hereof; (2) on any amendment to this Section 12.08;
(3) on any amendment as may be required by law or by the Trust's registration
statement filed with the Commission; and (4) on any amendment submitted to them
by the Trustees. Any amendment required or permitted to be submitted to
Shareholders that, as the Trustees determine, shall affect the Shareholders of
one or more Series shall be authorized by vote of the Shareholders of each
Series affected, and no vote of shareholders of a Series not affected shall be
required. Notwithstanding anything else herein, any amendment to Article X
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.
<PAGE>
SECTION 12.09 FISCAL YEAR. The fiscal year of the Trust's Series shall
end on a specified date as determined from time to time by the Trustees.
SECTION 12.10 PROVISIONS IN CONFLICT WITH LAW. The provisions of this
Trust Instrument are severable, and if the Trustees shall determine that any of
such provisions is in conflict with any applicable law or regulation, the
conflicting provision shall be deemed never to have constituted a part of this
Trust Instrument; provided, however, that such determination shall not affect
any of the remaining provisions of this Trust Instrument or render invalid or
improper any action taken or omitted prior to such determination. If any
provision of this Trust 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 matter affect such
provisions in any other jurisdiction or any other provision of this Trust
Instrument in any jurisdiction.
SECTION 12.11 EXECUTION VIA FACSIMILE. Execution and delivery of any
consent, waiver, certificate, proxy or other document by Trustees, officers or
Shareholders of the Trust or parties contracting with the Trust may be
accomplished by facsimile or other similar electronic mechanism.
SECTION 12.12 PRINCIPAL OFFICE. The principal office of the Trust shall
be located in Portland, Maine, or such other location as the Trustees may, from
time to time, determine.
SECTION 12.13 INSPECTION OF BOOKS. The Trustees shall from time to time
determine whether and to what extent, and at what times and places, and under
what conditions and regulations the accounts and books of the Trust or any of
them shall be open to the inspection of the Shareholders; and no Shareholder
shall have any right to inspect any account or book or document of the Trust
except as conferred by law or otherwise by the Trustees or by resolution of the
Shareholders.
<PAGE>
IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the
Trust, have executed this instrument as of date first written above.
_______________________________
Thomas G. Sheehan, as Trustee
and not individually
_______________________________
Catherine S. Wooledge, as Trustee
and not individually
_______________________________
Priscilla F. Gray, as Trustee
and not individually
<PAGE>
ANNEX A
As of December 4, 1997
SERIES CLASS THEREOF DATE CREATED
- ----- ------------- ------------
Schroder All Asia Fund Class A Shares December 4, 1997
EXHIBIT (25)
SCHRODER CAPITAL FUNDS
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Peter E. Guernsey constitutes and
appoints Thomas G. Sheehan, Catherine S. Wooledge, Mark J. Smith, and Catherine
A. Mazza and each of them, as true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities to sign the Registration Statement on Form
N-1A and any or all amendments thereto of Schroder Capital Funds, and, to the
extent that another registered investment company is or seeks to become an
investor in one or more series of Schroder Capital Funds, to sign the
Registration Statement of the registered investment company on Form N-1A and any
or all amendments thereto, and to file the same, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/S/ Peter E. Guernsey
-------------------------
Peter E. Guernsey
Dated: June 4, 1997
<PAGE>
SCHRODER CAPITAL FUNDS
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that John I. Howell constitutes and
appoints Thomas G. Sheehan, Catherine S. Wooledge, Mark J. Smith, and Catherine
A. Mazza and each of them, as true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities to sign the Registration Statement on Form
N-1A and any or all amendments thereto of Schroder Capital Funds, and, to the
extent that another registered investment company is or seeks to become an
investor in one or more series of Schroder Capital Funds, to sign the
Registration Statement of the registered investment company on Form N-1A and any
or all amendments thereto, and to file the same, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/S/ John I. Howell
--------------------------
John I. Howell
Dated: June 4, 1997
<PAGE>
SCHRODER CAPITAL FUNDS
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Hermann C. Schwab constitutes and
appoints Thomas G. Sheehan, Catherine S. Wooledge, Mark J. Smith, and Catherine
A. Mazza and each of them, as true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities to sign the Registration Statement on Form
N-1A and any or all amendments thereto of Schroder Capital Funds, and, to the
extent that another registered investment company is or seeks to become an
investor in one or more series of Schroder Capital Funds, to sign the
Registration Statement of the registered investment company on Form N-1A and any
or all amendments thereto, and to file the same, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/S/ Hermann C. Schwab
------------------------
Hermann C. Schwab
Dated: June 4, 1997
<PAGE>
SCHRODER CAPITAL FUNDS
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Clarence F. Michalis constitutes
and appoints Thomas G. Sheehan, Catherine S. Wooledge, Mark J. Smith, and
Catherine A. Mazza and each of them, as true and lawful attorneys-in-fact and
agents with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities to sign the Registration
Statement on Form N-1A and any or all amendments thereto of Schroder Capital
Funds, and, to the extent that another registered investment company is or seeks
to become an investor in one or more series of Schroder Capital Funds, to sign
the Registration Statement of the registered investment company on Form N-1A and
any or all amendments thereto, and to file the same, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Clarence F. Michalis
---------------------------
Clarence F. Michalis
Dated: June 4, 1997
<PAGE>
SCHRODER CAPITAL FUNDS
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Mark J. Smith constitutes and
appoints Thomas G. Sheehan, Catherine S. Wooledge, and Catherine A. Mazza and
each of them, as true and lawful attorneys-in-fact and agents with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities to sign the Registration Statement on Form N-1A and any
or all amendments thereto of Schroder Capital Funds, and, to the extent that
another registered investment company is or seeks to become an investor in one
or more series of Schroder Capital Funds, to sign the Registration Statement of
the registered investment company on Form N-1A and any or all amendments
thereto, and to file the same, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
---------------------------
Mark J. Smith
Dated: June 4, 1997
