SCHRODER ALL-ASIA FUND
CLASS A SHARES
This Prospectus describes Schroder All-Asia Fund, a mutual fund offered by
Schroder Series Trust II. The Fund seeks long-term capital appreciation through
investment primarily in equity securities of Asian companies. The Trust offers
Class A Shares of the Fund in this Prospectus.
The Fund seeks to achieve its investment objective by investing substantially
all of its assets in Schroder Asian Growth Fund Portfolio and Schroder Japan
Portfolio (each a "Portfolio"), which are separately managed, non-diversified
investment companies. Each Portfolio's investment objective is to seek long-term
capital appreciation. Schroder Asian Growth Fund Portfolio focuses its
investment in Asian countries other than Japan; Schroder Japan Portfolio focuses
its investment in Japan. Schroder will increase or decrease the Fund's exposure
to Japan by increasing or decreasing the amount of its assets invested in
Schroder Japan Portfolio.
Schroder Capital Management International Inc. ("Schroder") manages the Fund.
You can call the Trust at (800) 730-2932 to find out more about the Fund and
other funds in the Schroder family.
This Prospectus explains what you should know about the Fund before you invest.
Please read it carefully.
Neither the U.S. Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
Prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
PROSPECTUS
MARCH 1, 1999
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FUNDS AVAILABLE THROUGH SCHRODER FUND ADVISORS INC.
PLEASE CALL FOR COMPLETE INFORMATION AND TO OBTAIN THE RELEVANT PROSPECTUS.
PLEASE READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST.
SCHRODER SERIES TRUST II (800) 464-3108
SCHRODER ALL-ASIA FUND
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SCHRODER CAPITAL FUNDS (DELAWARE) (800) 730-2932
SCHRODER INTERNATIONAL FUND
SCHRODER EMERGING MARKETS FUND
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND
SCHRODER INTERNATIONAL BOND FUND
SCHRODER U.S. DIVERSIFIED GROWTH FUND
SCHRODER U.S. SMALLER COMPANIES FUND
SCHRODER MICRO CAP FUND
SCHRODER SERIES TRUST (800) 464-3108
SCHRODER LARGE CAPITALIZATION EQUITY FUND
SCHRODER SMALL CAPITALIZATION VALUE FUND
SCHRODER MIDCAP VALUE FUND
SCHRODER SHORT-TERM INVESTMENT FUND
SCHRODER INVESTMENT GRADE INCOME FUND
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SUMMARY INFORMATION
This summary identifies the investment objective, principal investment
strategies, and principal risks of Schroder All-Asia Fund. The Fund's investment
objective may not be changed without shareholder approval. The investment
policies of the Fund may, unless otherwise specifically stated, be changed by
the Trustees of the Trust without a vote of the shareholders.
IN REVIEWING THE FUND'S INVESTMENT OBJECTIVE AND POLICIES BELOW, YOU
SHOULD ASSUME THAT THE INVESTMENT OBJECTIVE AND POLICIES OF THE PORTFOLIOS,
TAKEN TOGETHER, ARE THE SAME IN ALL MATERIAL RESPECTS AS THOSE OF THE FUND.
SCHRODER IS THE INVESTMENT ADVISER TO THE FUND AND TO EACH PORTFOLIO.
On March 20, 1998, the Fund, which had no previous operating history,
acquired substantially all of the assets and liabilities of Schroder Asian
Growth Fund, Inc., which was a closed-end management investment company. After
the narrative describing the Fund is a chart showing the Fund's investment
returns, which includes the investment returns of Schroder Asian Growth Fund,
Inc. from its inception through March 20, 1998. Only full calendar year
performance is shown. The table following the chart shows how the Fund's average
annual returns (including the average annual returns of Schroder Asian Growth
Fund, Inc. from its inception through March 20, 1998) for the last year, for the
last five years, and for the life of the Fund compare to a broad-based
securities market index. The bar chart and table provide some indication of the
risks of investing in the Fund by showing the variability of its returns and
comparing the Fund's performance to a broad measure of market performance.
NEITHER THE PERFORMANCE OF SCHRODER ASIAN GROWTH FUND, INC. NOR THE FUND'S PAST
PERFORMANCE IS NECESSARILY AN INDICATION OF THE FUND'S FUTURE PERFORMANCE. It is
possible to lose money on investments in the Fund.
For a discussion of recent market and portfolio developments affecting the
Fund's performance, see the Fund's most recent financial reports. You can call
the Fund at (800) 464-3108 to request a free copy of the financial reports.
INVESTMENT OBJECTIVE. To seek long-term capital appreciation through
investment primarily in equity securities of Asian companies.
PRINCIPAL INVESTMENTS. 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. "Asian companies" are: (1) companies that are
organized under the laws of China, Hong Kong SAR, India, Indonesia, Japan,
Korea, Malaysia, Pakistan, the Philippines, Singapore, Sri Lanka, Taiwan,
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 investors to participate in their stock markets
(collectively, "Asian countries"); and (2) companies, wherever organized, that
Schroder determines at the time of investment 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. The Fund invests in a variety of equity securities, including
common and preferred stocks, securities convertible into common and preferred
stocks, and warrants to purchase common and preferred stocks.
INVESTMENT STRATEGIES. The Fund normally invests directly in equity
securities of companies located in at least five Asian countries.
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The Fund invests in issuers and countries that Schroder believes offer
the potential for capital growth. In identifying candidates for investment,
Schroder considers a variety of factors, including the issuer's likelihood of
above average earnings growth, the securities' attractive relative valuation,
and whether the issuer has any proprietary advantages. In addition, Schroder
takes into account the risk of local political and/or economic instability and
the liquidity of local markets. Securities generally are sold when they reach
fair valuation or when significantly more attractive investment candidates
become available.
The Fund also may do the following:
c- Invest in 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.
c- Invest indirectly in equity securities by investing in other
investment companies or similar pooled vehicles that invest
primarily in equity securities of Asian companies.
PRINCIPAL RISKS.
c- INVESTMENT IN ASIA. Because the Fund's investments are
concentrated in Asian countries, political, economic, market
and other factors affecting those countries will determine the
values of the Fund's investments. Recent significant economic
and political volatility in certain Asian countries may
continue and could have an adverse effect on the value of the
Fund's investments in those countries.
c- INVESTMENTS IN MALAYSIA. The Fund's investments include
securities issued by Malaysian companies. Currency
restrictions imposed by the Malaysian government impose a
significant exit levy on repatriated investments. In addition,
pending finalization of these restrictions by the Malaysian
government, it may be difficult for the Fund to determine the
fair value of such securities (or of the Malaysian currency in
which they are denominated) for purposes of computing the
Fund's net asset value.
c- FOREIGN SECURITIES. Investments in foreign securities entail
risks not present in domestic investments including, among
others, risks related to political or economic instability,
currency exchange, and taxation.
c- EMERGING MARKETS. The Fund may invest in "emerging market"
countries whose securities markets may experience heightened
levels of volatility. The risks of investing in emerging
markets include greater political and economic uncertainties
than in foreign developed markets, currency transfer
restrictions, a more limited number of potential buyers, and
an emerging market country's dependence on revenue from
particular commodities or international aid. Additionally, the
securities markets and legal systems in emerging market
countries may only be in a developmental stage and may provide
few, or none, of the advantages or protections of markets or
legal systems available in more developed countries. Emerging
market countries may experience extremely high levels of
inflation, which may adversely affect those countries'
economies and securities markets.
c- NON-DIVERSIFIED MUTUAL FUND. The Fund is a "non-diversified"
mutual fund, and will invest its assets in a more limited
number of issuers than may diversified investment companies.
To the extent the Fund focuses on fewer issuers, its risk of
loss increases if the market value of a security declines or
if an issuer is not able to meet its obligations.
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c- EQUITY SECURITIES. Another risk of investing in the Fund is
the risk that the value of the equity securities in the
portfolio will fall, or will not appreciate as anticipated by
Schroder, due to factors that adversely affect markets
generally or particular companies in the portfolio.
c- SMALL COMPANIES. The Fund may invest in small companies, which
tend to be more vulnerable to adverse developments than larger
companies. Small companies may have limited product lines,
markets, or financial resources, or may depend on a limited
management group. Their securities may trade infrequently and
in limited volumes. As a result, the prices of these
securities may fluctuate more than the prices of securities of
larger, more widely traded companies. Also, there may be less
publicly available information about small companies or less
market interest in their securities as compared to larger
companies, and it may take longer for the prices of the
securities to reflect the full value of their issuers'
earnings potential or assets.
The bar chart and table below provide some indication of the risks of
investing in the Fund by showing the variability of its returns and comparing
the Fund's performance to a broad measure of market performance. The bar chart
and table present performance information for the Fund's predecessor, Schroder
Asian Growth Fund, Inc. (a closed-end management investment company) through
March 20, 1998, and the Fund's performance information since March 23, 1998. The
bar chart does not reflect the sales charge imposed on purchases of the Fund's
Class A Shares. If the bar chart did reflect the sales charge, returns would be
less than those shown.
[EDGAR REPRESENTATION OF GRAPH CHART]
Calendar Year End Annual Return
- ----------------- -------------
1994 -8.42%
1995 1.40%
1996 5.61%
1997 -38.28%
1998 -9.67%
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During the periods shown above, the highest quarterly return was 25.15% for
the quarter ended December 31, 1998, and the lowest was -25.81% for the quarter
ended December 31, 1997.
<TABLE>
<S> <C> <C> <C>
AVERAGE ANNUAL TOTAL PAST ONE YEAR PAST FIVE YEARS LIFE OF FUND
RETURNS (FOR PERIODS (INCLUDES FUND'S (INCLUDES FUND'S (SINCE INCEPTION
ENDING DECEMBER 31, 1998)* PREDECESSOR THROUGH PREDECESSOR OF FUND'S
3/20/98) THROUGH 3/20/98) PREDECESSOR
ON 12/30/93)
Schroder All-Asia Fund............................... -14.41% -12.32% -12.32%
**Morgan Stanley Capital International All Country -7.79% -12.15% -10.92%
Asia Free ex-Japan Index...........................
***50% Morgan Stanley Capital International Japan 0.50% -7.05% -7.05%
Index/50% Morgan Stanley Capital International All
Country Asia Free ex-Japan Index...................
</TABLE>
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* The Fund's average annual total returns shown above reflect a maximum
sales charge of 5.25% on all purchases of the Fund's Class A Shares.
The indices to which the Fund's average annual returns are compared do
not reflect the imposition of any sales charge.
** The Morgan Stanley Capital International (MSCI) All Country Asia Free
ex-Japan Index is an unmanaged market capitalization index constructed
by aggregating the appropriate MSCI country indices; it represents 12
developed and emerging markets of the Asia region but excludes Japan.
The index reflects actual buyable opportunities for the non-domestic
investor by taking into account local market restrictions on share
ownership by foreigners.
*** The MSCI Japan Index is an unmanaged index that groups Japanese
securities by industry and the most "investable" stocks (as determined
by size, long- and short-term volume, and free float). The index
reflects actual buyable opportunities for the non-domestic investor by
taking into account local market restrictions on share ownership by
foreigners. The MSCI All Country Asia Free ex-Japan Index is described
in the preceding footnote. The 50% MSCI Japan Index/50% MSCI All
Country Asia Free ex-Japan Index used by Schroder represents an average
of the returns of each Index and is intended to reflect a hypothetical
allocation between the Portfolios in which the Fund invests its assets.
Schroder adjusts those percentages from time to time in response to
market and other factors.
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FEES AND EXPENSES
These tables describe the fees and expenses that you will pay if you
invest in Class A Shares of the Fund. The Annual Fund Operating Expenses include
the Fund's pro rata portion of all operating expenses of the two Portfolios in
which the Fund invests.
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SHAREHOLDER FEES (paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)(1)................. 5.25%
Maximum Deferred Sales Load............................................................................. None
Maximum Sales Load Imposed on Reinvested Dividends...................................................... None
Redemption Fee.......................................................................................... None
Exchange Fee............................................................................................ None
</TABLE>
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(1) The maximum sales load applies to purchases of less than $25,000.
<TABLE>
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ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)(2):
Management Fees(3)....................................................................................... 0.94%
Distribution (12b-1) Fees................................................................................ None
Other Expenses........................................................................................... 1.60%
Total Annual Fund Operating Expenses..................................................................... 2.54%
Fee Waiver and/or Expense Limitation(4).................................................................. 0.59%
Net Expenses(4).......................................................................................... 1.95%
</TABLE>
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(2) On March 20, 1998, the Fund acquired substantially all of the assets
and liabilities of Schroder Asian Growth Fund, Inc., a closed-end
management investment company. As a result, certain of the Fund's fees
and expenses changed. Annual Fund Operating Expenses have been restated
to reflect the current fees and expenses of the Fund as if they had
been in effect during the past fiscal year.
(3) Management Fees include amounts the Fund expects to pay to Schroder for
asset allocation and administrative services. The Fund pays asset
allocation fees and administration fees to Schroder at the annual rates
of 0.20% and 0.05%, respectively, of its average daily net assets.
Management Fees also include: the Fund's pro rata portion of investment
advisory fees paid by Schroder Asian Growth Fund Portfolio and Schroder
Japan Portfolio at the annual rates of 0.70% and 0.55%, respectively,
of their average daily net assets, and the Fund's pro rata portion of
administration fees paid to Schroder by those Portfolios at the annual
rate of 0.05% of their average daily net assets. The expenses shown in
the table have been calculated on the basis of the current allocation
of the Fund's assets between Schroder Asian Growth Fund Portfolio and
Schroder Japan Portfolio. Allocations of the Fund's assets between the
two Portfolios will vary.
(4) The Net Expenses shown above reflect the effect of contractually
imposed expense limitations and/or fee waivers in effect through
October 31, 1999 on Total Annual Fund Operating Expenses.
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EXAMPLE
This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in Class A Shares of the
Fund for the time periods indicated and then redeem all of your shares at the
end of those periods, and that you pay the maximum sales load of 5.25%. The
Example also assumes that your investment earns a 5% return each year and that
the Fund's Total Annual Fund Operating Expenses remain the same as those set
forth above (absent the noted Fee Waiver and/or Expense Limitation). Your actual
costs may be higher or lower. Based on these assumptions, your costs would be*:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
$769 $1,274 $1,805 $3,250
* Assuming that the Fund's operating expenses remain the same as Net Expenses
set forth above, based on the other assumptions described above, your costs
would be as follows for 1 year, 3 years, 5 years, and 10 years,
respectively: $713, $1,106, $1,524, and $2,684.
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OTHER INVESTMENT STRATEGIES AND RISKS
The Fund may not achieve its objective in all circumstances. The
following provides more detail about the Fund's principal risks and the
circumstances which could adversely affect the value of the Fund's shares or its
total return. It is possible to lose money by investing in the Fund.
RISKS OF INVESTING IN THE FUND
INVESTMENT IN ASIA. Certain Asian markets have experienced devaluation
and/or significant volatility during the past several years. Schroder cannot
predict whether, when and to what extent the Asian markets will recover.
Additionally, the Fund may invest more than 25% of its total assets in issuers
located in any one Asian country. To the extent that the Fund focuses its
investments in any Asian countries, the Fund will be susceptible to adverse
political, economic and market developments in those countries.
FOREIGN SECURITIES. Except as otherwise noted 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
a possibility of nationalization or expropriation of assets, confiscatory
taxation, political or financial instability, and diplomatic developments that
could affect the value of the Fund's investments in certain foreign countries.
Since foreign securities normally are denominated and traded in foreign
currencies, the values of the Fund's assets may be affected favorably or
unfavorably by currency exchange rates, currency exchange control regulations,
foreign withholding taxes, and restrictions or prohibitions on the repatriation
of foreign currencies. There may be less information publicly available about a
foreign issuer than about a U.S. issuer, and foreign issuers are not generally
subject to accounting, auditing, and financial reporting standards and practices
comparable to those in the United States. The securities of some foreign issuers
are less liquid and at times more volatile than securities of comparable U.S.
issuers. Foreign brokerage commissions and other fees are also generally higher
than in the United States. Foreign settlement procedures and trade regulations
may involve certain risks (such as delay in payment or delivery of securities or
in the recovery of the Fund's assets held abroad) and expenses not present in
the settlement of domestic investments.
In addition, legal remedies available to investors in certain foreign countries
may be more limited than those available to investors in the United States or in
other foreign countries. The willingness and ability of foreign governmental
entities to pay principal and interest on government securities depends on
various economic factors, including the issuer's balance of payments, overall
debt level, and cash-flow considerations related to the availability of tax or
other revenues to satisfy the issuer's obligations. If a foreign governmental
entity defaults on its obligations on the securities, the Fund may have limited
recourse available to it. The laws of some foreign countries may limit the
Fund's ability to invest in securities of certain issuers located in those
countries.
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 available
for distribution. In addition, although at times most of the Fund's income may
be received or realized in these currencies, the Fund will be required to
compute and distribute its income in U.S. dollars. As a result, if the exchange
rate for any such currency declines after the Fund's income has been earned and
translated into U.S. dollars but before payment to shareholders, the
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Fund could be required to liquidate portfolio securities to make such
distributions. Similarly, if the Fund incurs an expense in U.S. dollars and the
exchange rate declines before the expense is paid, the Fund would have to
convert a greater amount of U.S. dollars to pay for the expense at that time
than it would have had to convert at the time the Fund incurred the expense. 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, Schroder considers the likely impact of foreign
taxes on the net investment return 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 the Fund will reduce the net income
available for distribution to Fund 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 markets and legal systems in emerging market countries
may only be in a developmental stage and may provide few, or none, of the
advantages or protections of markets or legal systems available in more
developed countries. Although many of the securities in which the 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 those
countries' economies and securities markets.
DEBT SECURITIES. The Fund may invest in debt securities, which are
subject to the risk of fluctuation of market value in response to changes in
interest rates and the risk that the issuer may default on the timely payment of
principal and interest. Additionally, the Fund may invest in lower-quality,
high-yielding debt securities, commonly known as junk bonds. Lower-rated debt
securities are predominantly speculative and tend to be more susceptible than
other debt securities to adverse changes in the financial condition of the
issuer, general economic conditions, or an unanticipated rise in interest rates,
which may affect an issuer's ability to pay interest and principal. This would
likely make the values of the securities held by the Fund more volatile and
could limit the Fund's ability to liquidate its securities. Changes by
recognized rating services in their ratings of any fixed-income security and in
the perceived ability of an issuer to make payments of interest and principal
also may affect the value of these investments.
U.S. GOVERNMENT SECURITIES. U.S. Government securities include a variety of
securities that differ in their interest rates, maturities, and dates of issue.
Securities issued or
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guaranteed by agencies or instrumentalities of the U.S. Government may or may
not be supported by the full faith and credit of the United States or by the
right of the issuer to borrow from the U.S. Treasury.
RISKS OF SMALLER CAPITALIZATION COMPANIES. The Fund may invest in
companies which are smaller and less well-known than larger, more widely held
companies. Small and mid-cap companies may offer greater opportunities for
capital appreciation than larger companies, but may also involve certain special
risks. They are more likely than larger companies to have limited product lines,
markets or financial resources, or to depend on a small, inexperienced
management group. Securities of smaller companies may trade less frequently and
in lesser volume than more widely held securities and their values may fluctuate
more sharply than other securities. They may also trade in the over-the-counter
market or on a regional exchange, or may otherwise have limited liquidity. These
securities may therefore be more vulnerable to adverse developments than
securities of larger companies and the Fund may have difficulty establishing or
closing out its securities positions in smaller companies at prevailing market
prices. Also, there may be less publicly available information about smaller
companies or less market interest in their securities as compared to larger
companies, and it may take longer for the prices of the securities to reflect
the full value of their issuers' earnings potential or assets.
OTHER INVESTMENT STRATEGIES AND TECHNIQUES
In addition to the principal investment strategies described in the
Summary Information section above, the Fund may at times use the strategies and
techniques described below, which involve certain special risks. This Prospectus
does not attempt to disclose all of the various investment techniques and types
of securities that Schroder might use in managing the Fund. As in any mutual
fund, investors must rely on the professional investment judgment and skill of
the Fund's adviser.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Changes in currency exchange
rates will affect the U.S. dollar value of Fund assets, including securities
denominated in foreign currencies. Exchange rates between the U.S. dollar and
other currencies fluctuate in response to forces of supply and demand in the
foreign exchange markets. These forces are affected by the international balance
of payments and other political, economic and financial conditions, which may be
difficult to predict. The Fund may engage in currency exchange transactions to
protect against unfavorable fluctuations in exchange rates.
In particular, the Fund may enter into foreign currency exchange
transactions to protect against a change in exchange rates that may occur
between the date on which the Fund contracts to trade a security and the
settlement date ("transaction hedging") or in anticipation of placing a trade
("anticipatory hedging"); to "lock in" the U.S. dollar value of interest and
dividends to be paid in a foreign currency; or to hedge against the possibility
that a foreign currency in which portfolio securities are denominated or quoted
may suffer a decline against the U.S. dollar ("position hedging").
From time to time, 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 involve currencies in which its portfolio securities
are not then denominated ("cross hedging"). The Fund may also engage in "proxy"
hedging, whereby the Fund would seek to hedge the value of portfolio holdings
denominated in one currency by entering
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into an exchange contract on a second currency, the valuation of which Schroder
believes correlates to the value of the first currency.
The Fund may buy or sell currencies in "spot" or forward transactions.
"Spot" transactions are executed contemporaneously on a cash basis at the then-
prevailing market rate. A forward currency contract is an obligation to purchase
or sell a specific currency at a future date (which may be any fixed number of
days from the date of the contract agreed upon by the parties) at a price set at
the time of the contract. Forward contracts do not eliminate fluctuations in the
underlying prices of securities and expose the Fund to the risk that the
counterparty is unable to perform.
The Fund incurs foreign exchange expenses in converting assets from one
currency to another. Although there is no limit on the amount of the Fund's
assets that may be invested in foreign currency exchange and foreign currency
forward contracts, the Fund may engage in foreign currency exchange transactions
only to the extent necessary to effect the hedging transactions described above.
Suitable foreign currency hedging transactions may not be available in all
circumstances and there can be no assurance that the Fund will utilize hedging
transactions at any time.
SECURITIES LOANS, REPURCHASE AGREEMENTS, AND FORWARD COMMITMENTS. The
Fund may lend portfolio securities to broker-dealers up to one-third of the
Fund's total assets. The Fund may also 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 enter into contracts to purchase securities for a fixed price at a future
date beyond customary settlement time, which may increase its overall investment
exposure and involves a risk of loss if the value of the securities declines
prior to the settlement date.
INVESTMENT IN OTHER INVESTMENT COMPANIES. The Fund may invest in other
investment companies or pooled vehicles, including closed-end funds, that are
advised by Schroder or its affiliates or by unaffiliated parties. When investing
in another investment company, the Fund may pay a premium above such investment
company's 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 advisory and administrative fees, and would at the same time continue
to pay its own fees and expenses.
DERIVATIVE INVESTMENTS. Instead of investing directly in the types of
portfolio securities described in the Summary Information, the Fund may buy or
sell a variety of "derivative" investments to gain exposure to particular
securities or markets, in connection with hedging transactions, and to increase
total return. These may include options, futures, and indices, for example.
Derivatives involve the risk that they may not work as intended due to
unanticipated developments in market conditions or other causes. Also,
derivatives often involve the risk that the other party to the transaction will
be unable to meet its obligations or that the Fund will be unable to close out
the position at any particular time or at an acceptable price.
PORTFOLIO TURNOVER. The length of time the Fund has held a particular
security is not generally a consideration in investment decisions. The
investment policies of the Fund may lead to frequent changes in the Fund's
investments, particularly in periods of volatile market movements. A change in
the securities held by the Fund is known as "portfolio
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turnover." Portfolio turnover generally involves some expense to the Fund,
including brokerage commissions or dealer mark-ups and other transaction costs
on the sale of securities and reinvestment in other securities. Such sales may
increase the amount of capital gains (and, in particular, short-term gains)
realized by the Fund, on which shareholders pay tax.
TEMPORARY DEFENSIVE STRATEGIES. At times, Schroder may judge that
conditions in the securities markets make pursuing the Fund's basic investment
strategy inconsistent with the best interests of its shareholders. At such
times, Schroder may temporarily use alternate investment strategies primarily
designed to reduce fluctuations in the value of the Fund's assets. In
implementing these "defensive" strategies, the Fund would invest in high-quality
debt securities, cash, or money market instruments to any extent Schroder
considers consistent with such defensive strategies. It is impossible to predict
when, or for how long, the Fund will use these alternate strategies. One risk of
taking such temporary defensive positions is that the Fund may not achieve its
investment objective.
OTHER INVESTMENTS. The Fund may also invest in other types of
securities and utilize a variety of investment techniques and strategies which
are not described in this Prospectus. These securities and techniques may
subject the Fund to additional risks. Please see the Statement of Additional
Information for additional information about the securities and investment
techniques described in this Prospectus and about additional techniques and
strategies that may be used by the Fund.
MANAGEMENT OF THE FUND
The Trust is governed by a Board of Trustees which has retained
Schroder to manage the investments of the Fund. Subject to the control of the
Trustees, Schroder also manages the Fund's other affairs and business. Schroder
has served as investment adviser to the Fund since inception.
Each of Schroder Asian Growth Fund Portfolio and Schroder Japan
Portfolio is managed under the direction of a board of trustees of Schroder
Capital Funds. Schroder has served as investment adviser to each of the
Portfolios since inception.
Schroder has been an investment manager since 1962, and currently
serves as investment adviser to the Fund, the Portfolios, and a broad range of
institutional investors. As of December 31, 1998, Schroder, together with its
United Kingdom affiliate, Schroder Capital Management International Limited, had
approximately $27.1 billion in assets under management. Schroder's address is
787 Seventh Avenue, 34th floor, New York, New York 10019, and its telephone
number is (212) 641-3900.
INVESTMENT ADVISORY FEES. On March 20, 1998, the Fund acquired
substantially all of the assets and liabilities of Schroder Asian Growth Fund,
Inc., which paid Schroder an investment advisory fee at an annual rate of 1.00%
(based on that fund's average net assets). The Portfolios pay investment
advisory fees to Schroder at the following annual rates (based on the average
net assets of each Portfolio taken separately): SCHRODER ASIAN GROWTH FUND
PORTFOLIO -0.70%; SCHRODER JAPAN PORTFOLIO -0.55%. The Fund, because of its
investment in the Portfolios, bears a proportionate part of the investment
advisory fees (and other expenses) paid by each Portfolio (based on the
percentage of the Portfolio's assets attributable to the Fund). For the fiscal
year ended October 31, 1998, the Fund (taking into account the fees paid to
Schroder by Schroder Asian Growth Fund, Inc. and also by the Portfolios after
March 20, 1998) paid Schroder an investment advisory fee of 0.83% (based on the
Fund's average net assets).
13
<PAGE>
The Trust has entered into an investment advisory and asset allocation
agreement with Schroder under which Schroder is entitled to receive a monthly
investment advisory fee for asset allocation services at the annual rate of
0.20% of the Fund's average daily net assets with respect to assets invested in
the Portfolios (or another registered investment company). Schroder does not
receive an additional investment advisory fee directly from the Fund for any of
the Fund's assets invested in the Portfolios. The investment advisory and asset
allocation agreement also provides that Schroder would manage the Fund's assets
directly if the Fund were to cease investing substantially all of its assets in
the Portfolios. In that event, the Fund would pay Schroder a monthly fee at an
annual rate of 0.90% of the Fund's average daily net assets managed by Schroder
directly at the Fund level. The investment advisory and asset allocation
agreement is the same in all material respects as the advisory agreements under
which Schroder acts as investment adviser to the Portfolios. Schroder will not
receive any fees under the agreement so long as the Fund continues to invest
substantially all of its assets in the Portfolios or in another investment
company.
EXPENSE LIMITATIONS AND WAIVERS. In order to limit the Fund's expenses,
Schroder is contractually obligated to reduce its compensation (and, if
necessary, to pay certain other Fund expenses) until October 31, 1999 to the
extent that the Fund's total operating expenses attributable to its Class A
Shares exceed an annual rate of 1.95%.
PORTFOLIO MANAGERS. Schroder's investment decisions for the Fund (or
for the Portfolios) are generally made by an investment manager or an investment
team, with the assistance of an investment committee. The following portfolio
managers have had primary responsibility for making investment decisions for the
Portfolios or the Fund, as the case may be, since the years shown below. Their
recent professional experience is also shown.
<TABLE>
<S> <C> <C>
PORTFOLIO MANAGER SINCE RECENT PROFESSIONAL EXPERIENCE
- ----------------- ----- ------------------------------
Louise Croset 1997 Employed as an investment professional at Schroder since 1993. Ms. Croset is
also a Trustee and President of the Trust, and a Senior Vice President and a
Director of Schroder.
Heather Crighton Inception (1993) Employed as an investment professional at Schroder since 1992. Ms. Crighton is
also a Vice President of the Trust, and a Director and a First Vice President
of Schroder.
Donald M. Farquharson 1998 Employed as an investment professional at Schroder since 1988. Mr. Farquharson
is a First Vice President of Schroder.
</TABLE>
HOW THE FUND'S SHARES
ARE PRICED
The Fund calculates the net asset value of its Class A Shares by
dividing the total value of its assets attributable to its Class A Shares, less
its liabilities attributable to those shares, by the number of Class A Shares
outstanding. Shares are valued as of the close of trading on the New York Stock
Exchange (normally 4:00 p.m., Eastern time) each day the Exchange is open. The
Trust expects that days, other than weekend days, that the Exchange will not be
open are New Years Day, Martin Luther King, Jr. Day, Presidents Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. Generally, securities that are
14
<PAGE>
listed on recognized stock exchanges are valued at the last reported sale price,
on the day 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. The Fund values all other
securities and assets at their fair values as determined in accordance with
procedures adopted by the Board of Trustees. 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 net asset
value of the Fund's shares is calculated. Because certain of the securities in
which the Fund may invest may trade on days when the Fund does not price its
Class A Shares, the net asset value of the Fund's Class A Shares may change on
days when shareholders will not be able to purchase or redeem their Class A
Shares.
HOW TO BUY SHARES
You may purchase Class A Shares of the Fund directly from the Trust by
completing an Account Application and sending payment by check or wire as
described below. You may obtain an Account Application from the Trust or from
Boston Financial Data Services, Inc. (BFDS), the Trust's Transfer Agent, P.O.
Box 8507, Boston, Massachusetts 02266-8507, or by calling (800) 464-3108.
You also may purchase Class A Shares of the Fund through broker-dealers
and other financial institutions (Service Organizations). Service Organizations
may charge you a fee for processing orders to purchase or sell shares. If you
would like to purchase Class A Shares of the Fund through your account at a
Service Organization, you should contact that Service Organization directly for
appropriate instructions.
Class A Shares of the Fund are sold at their net asset value next
determined after the Trust receives your order, plus an initial sales charge. No
sales charge applies to the reinvestment of dividends or distributions. In order
for you to receive the Fund's next determined net asset value, the Trust must
receive your order before the close of trading on the New York Stock Exchange.
INVESTMENT MINIMUMS
The minimum investment for initial and additional purchases of Class A
Shares investment is as follows:
<TABLE>
<S> <C> <C>
INITIAL ADDITIONAL
INVESTMENT INVESTMENTS
---------- -----------
Regular Accounts................................................... $2,500 $250
Traditional IRAs................................................... $2,000 $250
</TABLE>
The Trust is authorized to reject any purchase order.
PURCHASES BY CHECK
You may purchase shares of the Fund by mailing a check (in U.S. dollars)
payable to the Fund. Third-party checks will not be accepted.
For initial purchases, your check must be accompanied by a completed
Account Application in proper form. The Trust may request additional
documentation to evidence the authority of the person or entity making the
purchase request.
You should mail your check and your completed Account Application to:
Schroder All-Asia Fund - Class A Shares Schroder Series Trust II Boston
Financial Data Services, Inc.
P.O. Box 8507
Boston, Massachusetts 02266-8507
Your payments should clearly indicate the shareholder's name and
account number, if applicable.
15
<PAGE>
PURCHASES BY BANK WIRE
If you make your initial investment by wire, your order must be
preceded by a completed Account Application. Upon receipt of the Application,
the Trust will assign you an account number and your account will become active.
Wire orders received prior to the close of trading on the New York Stock
Exchange (normally 4:00 p.m., Eastern Time) on each day the Exchange is open for
trading will be processed at the net asset value determined as of that day. Wire
orders received after that time will be processed at the net asset value next
determined thereafter.
Investors and Service Organizations (on behalf of their customers) may
transmit purchase payments by Federal Reserve Bank wire directly to the Fund as
follows:
State Street Bank and Trust Company
225 Franklin Street
Boston, MA
ABA No.: 011000028
Ref.: Schroder All-Asia Fund -
Class A Shares
DDA No.: 9904-650-0
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.
SALES CHARGES
The offering price of the Fund's Class A Shares is the net asset value next
determined after the Trust receives your order plus an initial sales charge
assessed as follows:
<TABLE>
<S> <C> <C> <C>
SALES CHARGE AS A
PERCENTAGE OF
---------------------------
OFFERING NET AMOUNT BROKER-DEALERS'
PRICE INVESTED* REALLOWANCE
AS A
PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE
- ----------------------------------------------------------------------------------------------------------------------
Less than $25,000 5.25% 5.54% 5.00%
At least $25,000 but less than $50,000 4.75% 4.99% 4.50%
At least $50,000 but less than $100,000 4.00% 4.17% 3.75%
At least $100,000 but less than $250,000 3.00% 3.09% 2.75%
At least $250,000 but less than $1,000,000 2.00% 2.04% 1.80%
$1,000,000 and over 1.00% 1.01% 1.00%
</TABLE>
* Rounded to the nearest one-hundredth percent.
16
<PAGE>
REDUCED INITIAL SALES CHARGES
If you notify BFDS 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. Additionally, you may
obtain reduced sales charges based on cumulative purchases by executing a
Statement of Intention to invest $25,000 or more in the Fund's Class A Shares
within a 13- month period. To do so, complete the Statement of Intention form
that is part of the Account Application, or call BFDS at (800) 464-3108 to
obtain a form.
Certain classes of investors may purchase Class A Shares of the Fund at
net asset value without any sales charge. Additionally, you may be eligible to
purchase Class A Shares at net asset value without any sales charge if you are
investing the proceeds from a redemption of the Fund's Class A Shares or shares
of another open-end investment company on which you paid an initial sales
charge, and you make your investment within 60 days of that redemption. Call the
Trust at (800) 464-3108 to find out whether you are eligible to purchase Class
Shares without any sales charge.
To qualify for a reduced sales charge, you or your Service Organization
must notify BFDS at the time of purchase of your intention to qualify and must
provide BFDS with sufficient information to verify that your 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. For purposes of
calculating your eligibility for sales charge break points, you will be credited
with the number of Class A Shares you hold as a result of the conversion of
Schroder Asian Growth Fund, Inc., the Fund's predecessor.
BROKER-DEALERS' REALLOWANCE. Schroder Fund Advisors Inc. (Schroder
Advisors), the Fund's distributor, 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 for which orders are placed with
BFDS. The broker-dealers' reallowance may be changed from time to time.
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. Schroder and/or Schroder Advisors may make additional payments
(out of their respective resources) to selected broker-dealers or other Service
Organizations. 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 to their
clients (whether or not they have a fiduciary relationship with their clients).
OTHER PURCHASE INFORMATION
Class A Shares of the Fund may be purchased for cash or in exchange for
securities held by the investor, subject to the determination by Schroder that
the securities are acceptable. (For purposes of determining whether securities
will be acceptable, Schroder will consider, among other things, whether they are
liquid securities of a type consistent with the investment objectives and
policies of the Fund and have a readily ascertainable value.) If the Fund
receives securities from an investor in exchange for shares
17
<PAGE>
of the Fund, the Fund will under some circumstances have the same tax basis in
the securities as the investor had prior to the exchange (and the Fund's gain
for tax purposes would be calculated with regard to the investor's tax basis).
Any gain on the sale of those securities would be subject to distribution as
capital gain to all of the Fund's shareholders. Schroder reserves the right to
reject any particular investment. Securities accepted by Schroder will be valued
in the same manner as are the Trust's portfolio securities as of the time of the
next determination of the Fund's net asset value. All dividend, subscription, or
other rights which are reflected in the market price of accepted securities at
the time of valuation become the property of the Fund and must be delivered to
the Fund upon receipt by the investor. Investors may realize a gain or loss upon
the exchange for federal income tax purposes. Investors interested in purchases
through exchange should call the Trust at (800) 464-3108.
HOW TO SELL SHARES
You may sell your Class A Shares back to the Fund on any business day
by sending a letter of instruction or stock power form to the Trust, or by
calling BFDS at (800) 464-3108. The price you will receive is the net asset
value next determined after receipt of your redemption request in good order. A
redemption request is in good order if it includes the exact name in which the
shares are registered, the investor's account number, and the number of shares
or the dollar amount of shares to be redeemed, and, for written requests, if it
is signed exactly in accordance with the registration form. If you hold your
Class A Shares in certificate form, you must submit the certificates and sign
the assignment form on the back of the certificates. Signatures must be
guaranteed by a bank, broker-dealer, or certain other financial institutions.
You may redeem your Class A Shares by telephone only if you elected the
telephone redemption privilege option on your Account Application or otherwise
in writing. Shares for which certificates have been issued may not be redeemed
by telephone. The Trust may require additional documentation from shareholders
that are corporations, partnerships, agents, fiduciaries, or surviving joint
owners.
In an effort to prevent unauthorized or fraudulent redemption requests
by telephone, BFDS will follow reasonable procedures to confirm that telephone
instructions are genuine. BFDS 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.
The Trust will pay you for your redemptions as promptly as possible and
in any event within seven days after the request for redemption is received in
writing in good order. (The Trust generally sends payment for shares the
business day after a request is received.) Under unusual circumstances, the
Trust may suspend redemptions or postpone payment for more than seven days, as
permitted by law.
If, because of your redemptions, your account balance falls below a
minimum amount set by the Trustees (presently $2,000) of the Fund, the Trust may
choose to redeem your shares in the Fund and pay you for them. You will receive
at least 30 days written notice before the Trust redeems your shares, and you
may purchase additional shares at any time to avoid a redemption. The Trust may
also redeem shares if you own shares of the Fund above a maximum amount set by
the Trustees. There is currently no maximum, but the Trustees may establish one
at any time, which could apply to both present and future shareholders.
18
<PAGE>
The Fund may suspend the right of redemption during any period when:
(1) trading on the New York Stock Exchange is restricted or the New York Stock
Exchange is closed; (2) the Securities and Exchange Commission has by order
permitted such suspension; or (3) an emergency (as defined by the SEC rules)
exists making disposal of portfolio investments or determination of the Fund's
net asset value not reasonably practicable.
EXCHANGES
You can exchange your Class A Shares of the Fund for Advisor Shares of
any other fund in the Schroder family at any time at their respective net asset
values, as long as your investment meets the investment minimum and account
balance minimum of the Fund whose Advisor Shares you are purchasing. To exchange
shares, please call (800) 464-3108.
DIVIDENDS AND DISTRIBUTIONS
The Fund distributes any net investment income and any net realized
capital gain at least annually. Distributions from net capital gain are made
after applying any available capital loss carryovers.
You can choose from four distribution options:
- Reinvest all distributions in additional Class A Shares of the
Fund;
- Receive distributions from net investment income in cash while
reinvesting capital gains distributions in additional Class A
Shares of the Fund;
- Receive distributions from net investment income in additional
Class A Shares of the Fund while receiving capital gain
distributions in cash; or
- Receive all distributions in cash.
You can change your distribution option by notifying BFDS in writing.
If you do not select an option when you open your account, all distributions by
the Fund will be reinvested in Class A Shares of the Fund. You will receive a
statement confirming reinvestment of distributions in additional Fund shares
promptly following the period in which the reinvestment occurs.
TAXES
TAXES ON DIVIDENDS AND DISTRIBUTIONS. For federal income tax purposes,
distributions of investment income are taxable as ordinary income. Taxes on
distributions of capital gains are determined by how long the Fund owned the
investments that generated the gains, rather than how long you have owned your
shares. Distributions are taxable to you even if they are paid from income or
gains earned by the Fund before you invested (and thus were included in the
price you paid for your shares). Distributions of gains from investments that
the Fund owned for more than 12 months will be taxable as capital gains.
Distributions of gains from investments that the Fund owned for 12 months or
less will be taxable as ordinary income. Distributions are taxable whether you
received them in cash or reinvested them in additional shares of the Fund.
TAXES WHEN YOU SELL OR EXCHANGE YOUR SHARES. Any gain resulting from
the sale or exchange of your shares in the Fund will also generally be subject
to federal income or capital gains tax, depending on your holding period.
THE PORTFOLIOS. Neither Portfolio is required to pay federal income tax
because each 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
19
<PAGE>
the Fund in proportion to the Fund's holdings in the Portfolio, regardless of
whether such interest, dividends, gains or losses have been distributed by the
Portfolio. Each Portfolio intends to conduct its operations so that the Fund, if
it invests all of its assets in the Portfolios, may qualify as a regulated
investment company.
CONSULT YOUR TAX ADVISOR ABOUT OTHER POSSIBLE TAX CONSEQUENCES. This is
a summary of certain federal tax consequences of investing in the Fund. You
should consult your tax advisor for more information on your own tax situation,
including possible state and local taxes.
YEAR 2000 DISCLOSURE
The Fund receives services from its investment adviser, administrator,
subadministrator, distributor, transfer agent, custodian and other providers
which rely on the smooth functioning of their respective systems and the systems
of others to perform those services. It is generally recognized that certain
systems in use today may not perform their intended functions adequately after
the Year 1999 because of the inability of the software to distinguish the Year
2000 from the Year 1900. Schroder is taking steps that it believes are
reasonably designed to address this potential "Year 2000" problem and to obtain
satisfactory assurances that comparable steps are being taken by the Fund's
other major service providers. There can be no assurance, however, that these
steps will be sufficient to avoid any adverse impact on the Fund from this
problem. In addition, there can be no assurance that the Year 2000 problem will
not have an adverse impact on companies and other issuers in which the Fund
invests or on the securities markets generally, which may reduce the value of
the Fund's portfolio investments.
20
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
financial performance of the Fund for the past 5 years or since the Fund
commenced operations. Certain information reflects financial results for a
single Fund share. The total returns represent the rate that an investor would
have earned or lost on an investment in Class A Shares of the Fund, assuming
reinvestment of all dividends and distributions. This information has been
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is included in the Fund's Annual Report to shareholders
and incorporated by reference into the Statement of Additional Information. The
Annual Report is available without charge, upon request, by writing the Fund at
P.O. Box 8507, Boston, MA 02266-8507 or by calling (800) 464-3108.
Schroder All-Asia Fund & Class A Shares
<TABLE>
<S> <C> <C> <C> <C> <C>
FOR THE PERIOD
FOR THE YEAR ENDED DECEMBER 30,
OCTOBER 31 1993(2) TO
---------------------------------------------------- OCTOBER 31,
1998(1) 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $9.34 $13.15 $12.62 $13.84 $14.01(3)
Investment Operations:
Net Investment Income (Loss) 0.02(4) (0.05) (0.03) 0.02 (0.01)
Net Gains or Losses on Securities (both (2.57) (3.66) 0.56 (1.24) (0.16)
realized and unrealized)
Total From Investment Operations (2.55) (3.71) 0.53 (1.22) (0.17)
Less Distributions from Net Investment Income - (0.09) - - -
Tender offer costs charged to paid-in-capital in - (0.01) - - -
excess of par
Redemption Fee 0.16 - - - -
Net Asset Value, End of Period $6.95 $9.34 $13.15 $12.62 $13.84
N/A $8.50 $12.00 $11.13 $12.00
Market Value, End of Period
Total investment return based on (5):
Market Value - (28.62)% 7.87% (7.29)% (20.00)%
(25.59)%(6) (28.43)% 4.20% (8.82)% (1.21)%
Net Asset Value
$42,787 $150,406 $257,840 $247,490 $271,420
Net Assets, End of Period (in thousands)
Ratios to Average Net Assets:
Expenses including reimbursement/waiver of fees 1.90%(4) 1.78% 1.57% 1.65% 1.59%(7)
Expenses excluding reimbursement/waiver of fees 2.13%(4) 1.78% 1.57% 1.65% 1.59%(7)
Ratio of Net Income to Average Net Assets 0.28%(4) (0.31)% (0.19)% 0.12% (0.10)%(7)
Portfolio Turnover Rate N/A (8) 39% 35% 67% 20%
</TABLE>
- ----------
(1) The Fund converted from Schroder Asian Growth Fund, Inc., a closed-end
fund, on March 20, 1998.
(2) Commencement of operations.
(3) Net of $.09 offering expenses.
(4) Includes the Fund's proportionate share of income and expenses of the Core
Portfolios, which commenced operations on March 23, 1998.
(5) Total returns would have been lower had certain expenses not been reduced
during the periods shown.
(6) Total return does not include sales charge.
(7) Annualized.
(8) Investment securities were not held directly by the Fund. Portfolio
turnover rate is not applicable.
21
<PAGE>
INVESTMENT ADVISER
Schroder Capital Management International Inc.
787 Seventh Avenue, 34th Floor
New York, New York 10019
TRANSFER AND DIVIDEND DISBURSING AGENT
Boston Financial Data Services, Inc.
P.O. Box 8507
Boston, Massachusetts 02266-8507
ADMINISTRATOR AND DISTRIBUTOR
Schroder Fund Advisors Inc.
787 Seventh Avenue, 34th Floor
New York, New York 10019
SUBADMINISTRATOR
Forum Administrative Services, LLC
Two Portland Square
Portland, Maine 04101
CUSTODIAN
The Chase Manhattan Bank
Global Custody Division
126 London Wall
London EC2Y 5AJ, United Kingdom
COUNSEL
Ropes & Gray
One International Place
Boston, Massachusetts 02110
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109
<PAGE>
(This page has been left blank intentionally.)
Schroder All-Asia Fund's statement of additional information (SAI) and annual
and semi-annual reports to shareholders include additional information about the
Fund. The SAI and the financial statements included in the Fund's most recent
annual report to shareholders are incorporated by reference into this
prospectus, which means they are part of this prospectus for legal purposes. The
Fund's annual report discusses the market conditions and investment strategies
that significantly affected the Fund's performance during its last fiscal year.
You may get free copies of these materials, request other information about the
Fund, or make shareholder inquiries by calling (800) 464-3108.
You may review and copy information about the Trust and the Fund, including the
SAI, at the Securities and Exchange Commission's public reference room in
Washington, D.C. You may call the Commission at (800) SEC-0330 for information
about the operation of the public reference room. You may also access reports
and other information about the Trust and the Fund on the Commission's Internet
site at WWW.SEC.GOV. You may get copies of this information, with payment of a
duplication fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009. You may need to refer to the Trust's file number
under the Investment Company Act, which is 811-08567.
TABLE OF CONTENTS
SUMMARY INFORMATION............................ 3
FEES AND EXPENSES.............................. 7
OTHER INVESTMENT STRATEGIES AND RISKS.......... 9
MANAGEMENT OF THE FUND......................... 13
HOW THE FUND'S SHARES ARE PRICED............... 14
HOW TO BUY SHARES.............................. 15
HOW TO SELL SHARES............................. 18
EXCHANGES...................................... 19
DIVIDENDS AND DISTRIBUTIONS.................... 19
TAXES.......................................... 19
YEAR 2000 DISCLOSURE........................... 20
FINANCIAL HIGHLIGHTS........................... 21
Schroder Series Trust II
P.O. Box 8507
Boston, MA 02266-8507
(800) 464-3108
0399SAAFP
File No. 811-08567
<PAGE>
[LOGO]Schroders
Schroder
All-Asia
Fund
Class A Shares
PROSPECTUS
March 1, 1999
Schroder Series Trust II
<PAGE>
SCHRODER SERIES TRUST II
SCHRODER ALL-ASIA FUND
FORM N-1A
PART B
STATEMENT OF ADDITIONAL INFORMATION
MARCH 1, 1999
This Statement of Additional Information (SAI) is not a prospectus and is only
authorized for distribution when accompanied or preceded by a Prospectus for
Schroder All-Asia Fund, as amended or supplemented from time to time. This SAI
relates to the Fund's Class A Shares, which are offered through a Prospectus
dated March 1, 1999. This SAI contains information which may be useful to
investors but which is not included in the Prospectus. Investors may obtain free
copies of the Prospectus by calling the Trust at 1-800-464-3108.
Certain disclosure has been incorporated by reference into this SAI from the
Fund's annual report. For a free copy of the annual report, please call
1-800-464-3108.
<PAGE>
TABLE OF CONTENTS
TRUST HISTORY................................................................2
CAPITALIZATION AND SHARE CLASSES.............................................2
MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS....................2
INVESTMENT RESTRICTIONS.....................................................18
TRUSTEES AND OFFICERS.......................................................21
SCHRODER AND ITS AFFILIATES.................................................24
INVESTMENT ADVISORY AGREEMENT...............................................24
DISTRIBUTOR.................................................................27
EXPENSES ...................................................................29
DETERMINATION OF NET ASSET VALUE............................................32
SALES AT NET ASSET VALUE....................................................33
REDEMPTIONS IN KIND.........................................................33
TAXES ...................................................................34
PRINCIPAL HOLDERS OF SECURITIES.............................................35
PERFORMANCE INFORMATION.....................................................36
CUSTODIAN...................................................................39
INDEPENDENT ACCOUNTANTS.....................................................39
SHAREHOLDER LIABILITY.......................................................39
FINANCIAL STATEMENTS........................................................39
APPENDIX....................................................................A-1
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SCHRODER SERIES TRUST II
STATEMENT OF ADDITIONAL INFORMATION
TRUST HISTORY
Schroder Series Trust II was organized as a Delaware business trust on
December 5, 1997. The Trust's Trust Instrument, which is governed by Delaware
law, is on file with the Secretary of State of the State of Delaware.
FUND CLASSIFICATION
The Trust currently offers shares of beneficial interest of Schroder
All-Asia Fund, which are offered pursuant to the Prospectus and this SAI. The
Fund is a "non-diversified" investment company under the 1940 Act, and therefore
may invest its assets in a more limited number of issuers than may diversified
investment companies. To the extent the Fund invests a significant portion of
its assets in the securities of a particular issuer, it will be subject to an
increased risk of loss if the market value of the issuer's securities declines.
CAPITALIZATION AND SHARE CLASSES
The Trust has an unlimited number of shares of beneficial interest that
may, without shareholder approval, be divided into an unlimited number of series
of such shares, which, in turn, may be divided into an unlimited number of
classes of such shares. The Trust currently consists of one series, the Fund.
The Fund has one class of shares, Class A Shares.
The Fund may suspend the sale of shares at any time and may refuse any
order to purchase shares. Under unusual circumstances, the Trust may suspend
redemption of Fund shares, or postpone redemption payments for more than seven
days, as permitted by law. If your account balance falls below a minimum amount
set by the Trustees (presently $2,000), the Trust may choose to redeem your
shares in the Fund and pay you for them. You will receive at least 30 days'
written notice before the Trust redeems your shares, and you may purchase
additional shares at any time to avoid a redemption. The Trust may also redeem
shares if you own Fund shares above a maximum amount set by the Trustees. There
is currently no maximum, but the Trustees may establish one at any time, which
could apply to both present and future shareholders.
Shares entitle their holders to one vote per share, with fractional
shares voting proportionally. Shares have noncumulative voting rights. Although
the Trust is not required to hold annual meetings of its shareholders,
shareholders have the right to call a meeting to elect or remove Trustees or to
take other actions as provided in the Trust Instrument. Shares have no
preemptive or subscription rights, and are transferable. Shares are entitled to
dividends as declared by the Trustees, and if the Fund were liquidated, each
class of shares of the Fund (if there were more than one class) would receive
the net assets of the Fund attributable to the class. The Trust may suspend the
sale of shares at any time and may refuse any order to purchase shares.
MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS
In addition to the principal investment strategies and the principal
risks of the Fund described in the Prospectus, the Fund may employ other
investment practices and may be subject to additional risks, which are described
below.
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CERTAIN DERIVATIVE INSTRUMENTS
Derivative instruments are financial instruments whose value depends
upon, or is derived from, the value of an underlying asset, such as a security,
index or currency. As described below, the Fund may engage in a variety of
transactions involving the use of derivative instruments, including options and
futures contracts on securities and securities indices and options on futures
contracts. These transactions may be used by the Fund for hedging purposes or,
to the extent permitted by applicable law, to increase its current return. The
Fund may also engage in derivative transactions involving foreign currencies.
See "Foreign Currency Transactions."
OPTIONS
The Fund may purchase and sell covered put and call options on its
portfolio securities to enhance investment performance and to protect against
changes in market prices.
COVERED CALL OPTIONS. The Fund may write covered call options on its
securities to realize a greater current return through the receipt of premiums
than it would realize on its securities alone. Such option transactions may also
be used as a limited form of hedging against a decline in the price of
securities owned by the Fund.
A call option gives the holder the right to purchase, and obligates the
writer to sell, a security at the exercise price at any time before the
expiration date. A call option is "covered" if the writer, at all times while
obligated as a writer, either owns the underlying securities (or comparable
securities satisfying the cover requirements of the securities exchanges), or
has the right to acquire such securities through immediate conversion of
securities.
In return for the premium received when it writes a covered call
option, the Fund gives up some or all of the opportunity to profit from an
increase in the market price of the securities covering the call option during
the life of the option. The Fund retains the risk of loss should the price of
such securities decline. If the option expires unexercised, the Fund realizes a
gain equal to the premium, which may be offset by a decline in price of the
underlying security. If the option is exercised, the Fund realizes a gain or
loss equal to the difference between the Fund's cost for the underlying security
and the proceeds of the sale (exercise price minus commissions) plus the amount
of the premium.
The Fund may terminate a call option that it has written before it
expires by entering into a closing purchase transaction. The Fund may enter into
closing purchase transactions in order to free itself to sell the underlying
security or to write another call on the security, realize a profit on a
previously written call option, or protect a security from being called in an
unexpected market rise. Any profits from a closing purchase transaction may be
offset by a decline in the value of the underlying security. Conversely, because
increases in the market price of a call option will generally reflect increases
in the market price of the underlying security, any loss resulting from a
closing purchase transaction is likely to be offset in whole or in part by
unrealized appreciation of the underlying security owned by the Fund.
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COVERED PUT OPTIONS. The Fund may write covered put options in order to
enhance its current return. Such options transactions may also be used as a
limited form of hedging against an increase in the price of securities that the
Fund plans to purchase. A put option gives the holder the right to sell, and
obligates the writer to buy, a security at the exercise price at any time before
the expiration date. A put option is "covered" if the writer segregates cash and
high-grade short-term debt obligations or other permissible collateral equal to
the price to be paid if the option is exercised.
In addition to the receipt of premiums and the potential gains from
terminating such options in closing purchase transactions, the Fund also
receives interest on the cash and debt securities maintained to cover the
exercise price of the option. By writing a put option, the Fund assumes the risk
that it may be required to purchase the underlying security for an exercise
price higher than its then current market value, resulting in a potential
capital loss unless the security later appreciates in value.
The Fund may terminate a put option that it has written before it
expires by a closing purchase transaction. Any loss from this transaction may be
partially or entirely offset by the premium received on the terminated option.
PURCHASING PUT AND CALL OPTIONS. The Fund may also purchase put options
to protect portfolio holdings against a decline in market value. This protection
lasts for the life of the put option because the Fund, as a holder of the
option, may sell the underlying security at the exercise price regardless of any
decline in its market price. In order for a put option to be profitable, the
market price of the underlying security must decline sufficiently below the
exercise price to cover the premium and transaction costs that the Fund must
pay. These costs will reduce any profit the Fund might have realized had it sold
the underlying security instead of buying the put option.
The Fund may purchase call options to hedge against an increase in the
price of securities that the Fund wants ultimately to buy. Such hedge protection
is provided during the life of the call option since the Fund, as holder of the
call option, is able to buy the underlying security at the exercise price
regardless of any increase in the underlying security's market price. In order
for a call option to be profitable, the market price of the underlying security
must rise sufficiently above the exercise price to cover the premium and
transaction costs. These costs will reduce any profit the Fund might have
realized had it bought the underlying security at the time it purchased the call
option.
The Fund may also purchase put and call options to enhance its current
return. The Fund may also buy and sell combinations of put and call options on
the same underlying security to earn additional income.
OPTIONS ON FOREIGN SECURITIES. The Fund may purchase and sell options
on foreign securities if in Schroder's opinion the investment characteristics of
such options, including the risks of investing in such options, are consistent
with the Fund's investment objectives. It is expected that risks related to such
options will not differ materially from risks related to options on U.S.
securities. However, position limits and other rules of foreign exchanges may
differ from those in the U.S. In addition, options markets in some countries,
many of which are relatively new, may be less liquid than comparable markets in
the U.S.
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RISKS INVOLVED IN THE SALE OF OPTIONS. Options transactions involve
certain risks, including the risks that Schroder will not forecast interest rate
or market movements correctly, that the Fund may be unable at times to close out
such positions, or that hedging transactions may not accomplish their purpose
because of imperfect market correlations. The successful use of these strategies
depends on the ability of Schroder to forecast market and interest rate
movements correctly.
An exchange-listed option may be closed out only on an exchange that
provides a secondary market for an option of the same series. Although the Fund
will enter into an option position only if Schroder believes that a liquid
secondary market exists, there is no assurance that a liquid secondary market on
an exchange will exist for any particular option or at any particular time. If
no secondary market were to exist, it would be impossible to enter into a
closing transaction to close out an option position. As a result, the Fund may
be forced to continue to hold, or to purchase at a fixed price, a security on
which it has sold an option at a time when Schroder believes it is inadvisable
to do so.
Higher than anticipated trading activity or order flow or other
unforeseen events might cause The Options Clearing Corporation or an exchange to
institute special trading procedures or restrictions that might restrict the
Fund's use of options. The exchanges have established limitations on the maximum
number of calls and puts of each class that may be held or written by an
investor or group of investors acting in concert. It is possible that the Fund
and other clients of Schroder may be considered such a group. These position
limits may restrict the Fund's ability to purchase or sell options on particular
securities.
As described below, the Fund generally expects that its options
transactions will be conducted on recognized exchanges. In certain instances,
however, the Fund may purchase and sell options in the over-the-counter markets.
Options that are not traded on national securities exchanges may be closed out
only with the other party to the option transaction. For that reason, it may be
more difficult to close out over-the-counter options than exchange-traded
options. Options in the over-the-counter market may also involve the risk that
securities dealers participating in such transactions would be unable to meet
their obligations to the Fund. Furthermore, over-the-counter options are not
subject to the protection afforded purchasers of exchange-traded options by The
Options Clearing Corporation. The Fund will, however, engage in over-the-counter
options transactions only when appropriate exchange-traded options transactions
are unavailable and when, in the opinion of Schroder, 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.
Government regulations, particularly the requirements for qualification
as a "regulated investment company" under the Internal Revenue Code, may also
restrict the Trust's use of options.
FUTURES CONTRACTS
In order to hedge against the effects of adverse market changes, the
Fund may buy and sell futures contracts on U.S. Government securities and other
debt securities in which the Fund may invest, and on indices of debt securities.
In addition, the Fund may purchase and sell stock
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index futures to hedge against changes in stock market prices. The Fund may
also, to the extent permitted by applicable law, buy and sell futures contracts
and options on futures contracts to increase the Fund's current return. All such
futures and related options will, as may be required by applicable law, be
traded on exchanges that are licensed and regulated by the Commodity Futures
Trading Commission (the "CFTC"). Depending upon the change in the value of the
underlying security or index when the Fund enters into or terminates a futures
contract, the Fund may realize a gain or loss.
FUTURES ON DEBT SECURITIES AND RELATED OPTIONS. A futures contract on a
debt security is a binding contractual commitment which, if held to maturity,
will result in an obligation to make or accept delivery, during a particular
month, of securities having a standardized face value and rate of return. By
purchasing futures on debt securities -- assuming a "long" position -- the Fund
will legally obligate itself to accept the future delivery of the underlying
security and pay the agreed price. By selling futures on debt securities --
assuming a "short" position -- it will legally obligate itself to make the
future delivery of the security against payment of the agreed price. Open
futures positions on debt securities will be valued at the most recent
settlement price, unless that price does not, in the judgment of persons acting
at the direction of the Trustees as to the valuation of the Fund's assets,
reflect the fair value of the contract, in which case the positions will be
valued by the Trustees or such persons.
Positions taken in the futures markets are not normally held to
maturity, but are instead liquidated through offsetting transactions that may
result in a profit or a loss. While futures positions taken by the Fund will
usually be liquidated in this manner, the Fund may instead make or take delivery
of the underlying securities whenever it appears economically advantageous to
the Fund to do so. A clearing corporation associated with the exchange on which
futures are traded assumes responsibility for such closing transactions and
guarantees that the Fund's sale and purchase obligations under closed-out
positions will be performed at the termination of the contract.
Hedging by use of futures on debt securities seeks to establish more
certainly than would otherwise be possible the effective rate of return on
portfolio securities. The Fund may, for example, take a "short" position in the
futures market by selling contracts for the future delivery of debt securities
held by the Fund (or securities having characteristics similar to those held by
the Fund) in order to hedge against an anticipated rise in interest rates that
would adversely affect the value of the Fund's portfolio securities. When
hedging of this character is successful, any depreciation in the value of
portfolio securities may substantially be offset by appreciation in the value of
the futures position.
On other occasions, the Fund may take a "long" position by purchasing
futures on debt securities. This would be done, for example, when the Fund
expects to purchase particular securities when it has the necessary cash, but
expects the rate of return available in the securities markets at that time to
be less favorable than rates currently available in the futures markets. If the
anticipated rise in the price of the securities should occur (with its
concomitant reduction in yield), the increased cost to the Fund of purchasing
the securities may be offset, at least to some extent, by the rise in the value
of the futures position taken in anticipation of the subsequent securities
purchase.
Successful use by the Fund of futures contracts on debt securities is
subject to Schroder's ability to predict correctly movements in the direction of
interest rates and other factors affecting
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markets for debt securities. For example, if the Fund has hedged against the
possibility of an increase in interest rates which would adversely affect the
market prices of debt securities held by it and the prices of such securities
increase instead, the Fund will lose part or all of the benefit of the increased
value of its securities which it has hedged because it will have offsetting
losses in its futures positions. In addition, in such situations, if the Fund
has insufficient cash, it may have to sell securities to meet daily maintenance
margin requirements. The Fund may have to sell securities at a time when it may
be disadvantageous to do so.
The Fund may purchase and write put and call options on certain debt
futures contracts, as they become available. Such options are similar to options
on securities except that options on futures contracts give the purchaser the
right, in return for the premium paid, to assume a position in a futures
contract (a long position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during the period of
the option. As with options on securities, the holder or writer of an option may
terminate his position by selling or purchasing an option of the same series.
There is no guarantee that such closing transactions can be effected. The Fund
will be required to deposit initial margin and maintenance margin with respect
to put and call options on futures contracts written by it pursuant to brokers'
requirements, and, in addition, net option premiums received will be included as
initial margin deposits. See "Margin Payments" below. Compared to the purchase
or sale of futures contracts, the purchase of call or put options on futures
contracts involves less potential risk to the Fund because the maximum amount at
risk is the premium paid for the options plus transactions costs. However, there
may be circumstances when the purchase of call or put options on a futures
contract would result in a loss to the Fund when the purchase or sale of the
futures contracts would not, such as when there is no movement in the prices of
debt securities. The writing of a put or call option on a futures contract
involves risks similar to those risks relating to the purchase or sale of
futures contracts.
INDEX FUTURES CONTRACTS AND OPTIONS. The Fund may invest in debt index
futures contracts and stock index futures contracts, and in related options. A
debt index futures contract is a contract to buy or sell units of a specified
debt index at a specified future date at a price agreed upon when the contract
is made. A unit is the current value of the index. A stock index futures
contract is a contract to buy or sell units of a stock index at a specified
future date at a price agreed upon when the contract is made. A unit is the
current value of the stock index.
Depending on the change in the value of the index between the time when
the Fund enters into and terminates an index futures transaction, the Fund may
realize a gain or loss. The following example illustrates generally the manner
in which index futures contracts operate. The Standard & Poor's 100 Stock Index
is composed of 100 selected common stocks, most of which are listed on the New
York Stock Exchange. The S&P 100 Index assigns relative weightings to the common
stocks included in the Index, and the Index fluctuates with changes in the
market values of those common stocks. In the case of the S&P 100 Index,
contracts are to buy or sell 100 units. Thus, if the value of the S&P 100 Index
were $180, one contract would be worth $18,000 (100 units x $180). The stock
index futures contract specifies that no delivery of the actual stocks making up
the index will take place. Instead, settlement in cash must occur upon the
termination of the contract, with the settlement being the difference between
the contract price and the actual level of the stock index at the expiration of
the contract. For example, if the Fund enters into a futures contract to buy 100
units of the S&P 100 Index at a specified future date at a contract price of
$180 and the S&P 100 Index is at $184 on that future date, the Fund will gain
$400 (100 units x gain of $4). If the Fund enters into a futures contract to
sell 100 units
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of the stock index at a specified future date at a contract price of $180 and
the S&P 100 Index is at $182 on that future date, the Fund will lose $200 (100
units x loss of $2).
The Fund may purchase or sell futures contracts with respect to any
securities indices. Positions in index futures may be closed out only on an
exchange or board of trade that provides a secondary market for such futures.
In order to hedge the Fund's investments successfully using futures
contracts and related options, the Fund must invest in futures contracts with
respect to indices or sub-indices the movements of which will, in Schroder's
judgment, have a significant correlation with movements in the prices of the
Fund's securities.
Options on index futures contracts are similar to options on securities
except that options on index futures contracts give the purchaser the right, in
return for the premium paid, to assume a position in an index futures contract
(a long position if the option is a call and a short position if the option is a
put) at a specified exercise price at any time during the period of the option.
Upon exercise of the option, the holder would assume the underlying futures
position and would receive a variation margin payment of cash or securities
approximating the increase in the value of the holder's option position. If an
option is exercised on the last trading day prior to the expiration date of the
option, the settlement will be made entirely in cash based on the difference
between the exercise price of the option and the closing level of the index on
which the futures contract is based on the expiration date. Purchasers of
options who fail to exercise their options prior to the exercise date suffer a
loss of the premium paid.
As an alternative to purchasing and selling call and put options on
index futures contracts, the Fund that may purchase and sell index futures
contracts may purchase and sell call and put options on the underlying indices
themselves to the extent that such options are traded on national securities
exchanges. Index options are similar to options on individual securities in that
the purchaser of an index option acquires the right to buy (in the case of a
call) or sell (in the case of a put), and the writer undertakes the obligation
to sell or buy (as the case may be), units of an index at a stated exercise
price during the term of the option. Instead of giving the right to take or make
actual delivery of securities, the holder of an index option has the right to
receive a cash "exercise settlement amount". This amount is equal to the amount
by which the fixed exercise price of the option exceeds (in the case of a put)
or is less than (in the case of a call) the closing value of the underlying
index on the date of the exercise, multiplied by a fixed "index multiplier".
The Fund may purchase or sell options on stock indices in order to
close out its outstanding positions in options on stock indices that it has
purchased. The Fund may also allow such options to expire unexercised.
Compared to the purchase or sale of futures contracts, the purchase of
call or put options on an index involves less potential risk to the Fund because
the maximum amount at risk is the premium paid for the options plus transactions
costs. The writing of a put or call option on an index involves risks similar to
those risks relating to the purchase or sale of index futures contracts.
The Fund may also purchase warrants, issued by banks and other
financial institutions, whose values are based on the values from time to time
of one or more securities indices.
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MARGIN PAYMENTS. When the Fund purchases or sells a futures contract,
it is required to deposit with its custodian an amount of cash, U.S. Treasury
bills, or other permissible collateral equal to a small percentage of the amount
of the futures contract. This amount is known as "initial margin". The nature of
initial margin is different from that of margin in security transactions in that
it does not involve borrowing money to finance transactions. Rather, initial
margin is similar to a performance bond or good faith deposit that is returned
to the Fund upon termination of the contract, assuming the Fund satisfies its
contractual obligations.
Subsequent payments to and from the broker occur on a daily basis in a
process known as "marking to market". These payments are called "variation
margin" and are made as the value of the underlying futures contract fluctuates.
For example, when the Fund sells a futures contract and the price of the
underlying debt security rises above the delivery price, the Fund's position
declines in value. The Fund then pays the broker a variation margin payment
equal to the difference between the delivery price of the futures contract and
the market price of the securities underlying the futures contract. Conversely,
if the price of the underlying security falls below the delivery price of the
contract, the Fund's futures position increases in value. The broker then must
make a variation margin payment equal to the difference between the delivery
price of the futures contract and the market price of the securities underlying
the futures contract.
When the Fund terminates a position in a futures contract, a final
determination of variation margin is made, additional cash is paid by or to the
Fund, and the Fund realizes a loss or a gain. Such closing transactions involve
additional commission costs.
SPECIAL RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS
LIQUIDITY RISKS. Positions in futures contracts may be closed out only
on an exchange or board of trade that provides a secondary market for such
futures. Although the Fund intends to purchase or sell futures only on exchanges
or boards of trade where there appears to be an active secondary market, there
is no assurance that a liquid secondary market on an exchange or board of trade
will exist for any particular contract or at any particular time. If there is
not a liquid secondary market at a particular time, it may not be possible to
close a futures position at such time and, in the event of adverse price
movements, the Fund would continue to be required to make daily cash payments of
variation margin. However, in the event financial futures are used to hedge
portfolio securities, such securities will not generally be sold until the
financial futures can be terminated. In such circumstances, an increase in the
price of the portfolio securities, if any, may partially or completely offset
losses on the financial futures.
In addition to the risks that apply to all options transactions, there
are several special risks relating to options on futures contracts. The ability
to establish and close out positions in such options will be subject to the
development and maintenance of a liquid secondary market. It is not certain that
such a market will develop. Although the Fund generally will purchase only those
options for which there appears to be an active secondary market, there is no
assurance that a liquid secondary market on an exchange will exist for any
particular option or at any particular time. In the event no such market exists
for particular options, it might not be possible to effect closing transactions
in such options with the result that the Fund would have to exercise the options
in order to realize any profit.
HEDGING RISKS. There are several risks in connection with the use by
the Fund of futures contracts and related options as a hedging device. One risk
arises because of the imperfect
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correlation between movements in the prices of the futures contracts and options
and movements in the underlying securities or index or in the prices of the
Fund's securities that are the subject of a hedge. Schroder will, however,
attempt to reduce this risk by purchasing and selling, to the extent possible,
futures contracts and related options on securities and indices the movements of
which will, in its judgment, correlate closely with movements in the prices of
the underlying securities or index and the Fund's portfolio securities sought to
be hedged.
Successful use of futures contracts and options by the Fund for hedging
purposes is also subject to Schroder's ability to predict correctly movements in
the direction of the market. It is possible that, where the Fund has purchased
puts on futures contracts to hedge its portfolio against a decline in the
market, the securities or index on which the puts are purchased may increase in
value and the value of securities held in the portfolio may decline. If this
occurred, the Fund would lose money on the puts and also experience a decline in
value in its portfolio securities. In addition, the prices of futures, for a
number of reasons, may not correlate perfectly with movements in the underlying
securities or index due to certain market distortions. First, all participants
in the futures market are subject to margin deposit requirements. Such
requirements may cause investors to close futures contracts through offsetting
transactions that could distort the normal relationship between the underlying
security or index and futures markets. Second, the margin requirements in the
futures markets are less onerous than margin requirements in the securities
markets in general, and as a result the futures markets may attract more
speculators than the securities markets do. Increased participation by
speculators in the futures markets may also cause temporary price distortions.
Due to the possibility of price distortion, even a correct forecast of general
market trends by Schroder may still not result in a successful hedging
transaction over a very short time period.
LACK OF AVAILABILITY. Because the markets for certain options and
futures contracts and other derivative instruments in which the Fund may invest
(including markets located in foreign countries) are relatively new and still
developing and may be subject to regulatory restraints, the Fund's ability to
engage in transactions using such instruments may be limited. Suitable
derivative transactions may not be available in all circumstances and there is
no assurance that the Fund will engage in such transactions at any time or from
time to time. The Fund's ability to engage in hedging transactions may also be
limited by certain regulatory and tax considerations.
OTHER RISKS. The Fund will incur brokerage fees in connection with its
futures and options transactions. In addition, while futures contracts and
options on futures will be purchased and sold to reduce certain risks, those
transactions themselves entail certain other risks. Thus, while the Fund may
benefit from the use of futures and related options, unanticipated changes in
interest rates or stock price movements may result in a poorer overall
performance for the Fund than if it had not entered into any futures contracts
or options transactions. Moreover, in the event of an imperfect correlation
between the futures position and the portfolio position which is intended to be
protected, the desired protection may not be obtained and the Fund may be
exposed to risk of loss.
FORWARD COMMITMENTS
The Fund may enter into contracts to purchase securities for a fixed
price at a future date beyond customary settlement time ("forward commitments")
if the Fund holds, and maintains until the settlement date in a segregated
account, cash or liquid securities in an amount sufficient to meet the purchase
price, or if the Fund enters into offsetting contracts for the forward sale of
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other securities it owns. Forward commitments may be considered securities in
themselves, and involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in addition to
the risk of decline in the value of the Fund's other assets. Where such
purchases are made through dealers, the Fund relies on the dealer to consummate
the sale. The dealer's failure to do so may result in the loss to the Fund of an
advantageous yield or price.
Although the Fund will generally enter into forward commitments with
the intention of acquiring securities for its portfolio or for delivery pursuant
to options contracts it has entered into, the Fund may dispose of a commitment
prior to settlement if Schroder deems it appropriate to do so. The Fund may
realize short-term profits or losses upon the sale of forward commitments.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements. A repurchase agreement
is a contract under which the Fund acquires a security for a relatively short
period (usually not more than one week) subject to the obligation of the seller
to repurchase and the Fund to resell such security at a fixed time and price
(representing the Fund's cost plus interest). It is the Trust's present
intention to enter into repurchase agreements only with member banks of the
Federal Reserve System and securities dealers meeting certain criteria as to
creditworthiness and financial condition established by the Trustees of the
Trust, and only with respect to obligations of the U.S. government or its
agencies or instrumentalities or other high quality short-term debt obligations.
Repurchase agreements may also be viewed as loans made by the Fund which are
collateralized by the securities subject to repurchase. Schroder will monitor
such transactions to ensure that the value of the underlying securities will be
at least equal at all times to the total amount of the repurchase obligation,
including the interest factor. If the seller defaults, the Fund could realize a
loss on the sale of the underlying security to the extent that the proceeds of
sale including accrued interest are less than the resale price provided in the
agreement including interest. In addition, if the seller should be involved in
bankruptcy or insolvency proceedings, the Fund may incur delay and costs in
selling the underlying security or may suffer a loss of principal and interest
if the Fund is treated as an unsecured creditor and required to return the
underlying collateral to the seller's estate.
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WHEN-ISSUED SECURITIES
The Fund may from time to time purchase securities on a "when-issued"
basis. Debt securities are often issued on this basis. The price of such
securities, which may be expressed in yield terms, is fixed at the time a
commitment to purchase is made, but delivery and payment for the when-issued
securities take place at a later date. Normally, the settlement date occurs
within one month of the purchase. During the period between purchase and
settlement, no payment is made by the Fund and no interest accrues to the Fund.
To the extent that assets of the Fund are held in cash pending the settlement of
a purchase of securities, the Fund would earn no income. While the Fund may sell
its right to acquire when-issued securities prior to the settlement date, the
Fund intends actually to acquire such securities unless a sale prior to
settlement appears desirable for investment reasons. At the time the Fund makes
the commitment to purchase a security on a when-issued basis, it will record the
transaction and reflect the amount due and the value of the security in
determining the Fund's net asset value. The market value of the when-issued
securities may be more or less than the purchase price payable at the settlement
date. The Fund will establish a segregated account in which it will maintain
cash and U.S. government securities or other liquid securities at least equal in
value to commitments for when-issued securities. Such segregated securities
either will mature or, if necessary, be sold on or before the settlement date.
LOANS OF FUND PORTFOLIO SECURITIES
The Fund may lend its portfolio securities, provided: (1) the loan is
secured continuously by collateral consisting of U.S. government securities,
cash, or cash equivalents adjusted daily to have market value at least equal to
the current market value of the securities loaned; (2) the Fund may at any time
call the loan and regain the securities loaned; (3) the Fund will receive any
interest or dividends paid on the loaned securities; and (4) the aggregate
market value of the Fund's portfolio securities loaned will not at any time
exceed one-third of the total assets of the Fund. In addition, it is anticipated
that the Fund may share with the borrower some of the income received on the
collateral for the loan or that it will be paid a premium for the loan. Before
the Fund enters into a loan, Schroder considers all relevant facts and
circumstances, including the creditworthiness of the borrower. The risks in
lending portfolio securities, as with other extensions of credit, consist of
possible delay in recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially. Although voting rights or
rights to consent with respect to the loaned securities pass to the borrower,
the Fund retains the right to call the loans at any time on reasonable notice,
and it will do so in order that the securities may be voted by the Fund if the
holders of such securities are asked to vote upon or consent to matters
materially affecting the investment. The Fund will not lend portfolio securities
to borrowers affiliated with the Fund.
FOREIGN SECURITIES
The Fund may invest without limit in securities principally traded in
foreign markets. The Fund may also invest without limit in Eurodollar
certificates of deposit and other certificates of deposit issued by United
States branches of foreign banks and foreign branches of United States banks.
Investments in foreign securities may involve risks and considerations
different from or in addition to investments in domestic securities. There may
be less information publicly
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<PAGE>
available about a foreign company than about a U.S. company, and foreign
companies 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 companies are less liquid and at times more volatile
than securities of comparable U.S. companies. Foreign brokerage commissions and
other fees are also generally higher than in the United States. Foreign
settlement procedures and trade regulations may involve certain risks (such as
delay in payment or delivery of securities or in the recovery of the Fund's
assets held abroad) and expenses not present in the settlement of domestic
investments. Also, because foreign securities are normally denominated and
traded in foreign currencies, the values of the Fund's assets may be affected
favorably or unfavorably by currency exchange rates and exchange control
regulations, and the Fund may incur costs in connection with conversion between
currencies.
In addition, with respect to certain foreign countries, there is a
possibility of nationalization or expropriation of assets, imposition of
currency exchange controls, adoption of foreign governmental restrictions
affecting the payment of principal and interest, imposition of withholding or
confiscatory taxes, political or financial instability, and adverse political,
diplomatic or economic developments which could affect the values of investments
in those countries. In certain countries, legal remedies available to investors
may be more limited than those available with respect to investments in the
United States or other countries and it may be more difficult to obtain and
enforce a judgment against a foreign issuer. Also, the laws of some foreign
countries may limit the Fund's ability to invest in securities of certain
issuers located in those countries.
Special tax considerations apply to foreign securities. In determining
whether to invest in securities of foreign issuers, Schroder will consider the
likely impact of foreign taxes on the net yield available to the Fund and its
shareholders. Income 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. It is impossible to determine the effective rate of
foreign tax in advance since the amount of the Fund's assets to be invested in
various countries is not known, and tax laws and their interpretations may
change from time to time and may change without advance notice. Any such taxes
paid by the Fund will reduce its net income available for distribution to
shareholders.
FOREIGN CURRENCY TRANSACTIONS
The Fund may engage in currency exchange transactions to protect
against uncertainty in the level of future foreign currency exchange rates and
to increase current return. The Fund may engage in both "transaction hedging"
and "position hedging".
When it engages in transaction hedging, the Fund enters into foreign
currency transactions with respect to specific receivables or payables of the
Fund generally arising in connection with the purchase or sale of its portfolio
securities. The Fund will engage in transaction hedging when it desires to "lock
in" the U.S. dollar price of a security it has agreed to purchase or sell, or
the U.S. dollar equivalent of a dividend or interest payment in a foreign
currency. By transaction hedging, the Fund will attempt to protect against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the applicable foreign currency during the period between the
date on which the security is purchased or sold or
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<PAGE>
on which the dividend or interest payment is declared, and the date on which
such payments are made or received.
The Fund may purchase or sell a foreign currency on a spot (or cash)
basis at the prevailing spot rate in connection with transaction hedging. 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.
For transaction hedging purposes, the Fund may also purchase
exchange-listed and over-the-counter call and put options on foreign currency
futures contracts and on foreign currencies. A put option on a futures contract
gives the Fund the right to assume a short position in the futures contract
until expiration of the option. A put option on currency gives the Fund the
right to sell a currency at an exercise price until the expiration of the
option. A call option on a futures contract gives the Fund the right to assume a
long position in the futures contract until the expiration of the option. A call
option on currency gives the Fund the right to purchase a currency at the
exercise price until the expiration of the option. The Fund will engage in
over-the-counter transactions only when appropriate exchange-traded transactions
are unavailable and when, in Schroder's opinion, the pricing mechanism and
liquidity are satisfactory and the participants are responsible parties likely
to meet their contractual obligations.
When it engages in position hedging, the Fund enters into foreign
currency exchange transactions to protect against a decline in the values of the
foreign currencies in which securities held by the Fund are denominated or are
quoted in their principal trading markets or an increase in the value of
currency for securities which the Fund expects to purchase. In connection with
position hedging, the Fund may purchase put or call options on foreign currency
and foreign currency futures contracts and buy or sell forward contracts and
foreign currency futures contracts. The Fund may also purchase or sell foreign
currency on a spot basis.
The precise matching of the amounts of foreign currency exchange
transactions and the value of the portfolio securities involved will not
generally be possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the values of
those securities between the dates the currency exchange transactions are
entered into and the dates they mature.
It is impossible to forecast with precision the market value of the
Fund's portfolio securities at the expiration or maturity of a forward or
futures contract. Accordingly, it may be necessary for the Fund to purchase
additional foreign currency on the spot market (and bear the expense of such
purchase) if the market value of the security or securities being hedged is less
than the amount of foreign currency the Fund is obligated to deliver and if a
decision is made to sell the security or securities and make delivery of the
foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio security or
securities of the Fund if the market value of such security or securities
exceeds the amount of foreign currency the Fund is obligated to deliver.
To offset some of the costs to the Fund of hedging against fluctuations
in currency exchange rates, the Fund may write covered call options on those
currencies.
Transaction and position hedging do not eliminate fluctuations in the
underlying prices of the securities that the Fund owns or intends to purchase or
sell. They simply establish a rate of
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<PAGE>
exchange which one can achieve at some future point in time. Additionally,
although these techniques tend to minimize the risk of loss due to a decline in
the value of the hedged currency, they tend to limit any potential gain which
might result from the increase in the value of such currency. Also, suitable
foreign currency hedging transactions may not be available in all circumstances
and there can be no assurance that the Fund will utilize hedging transactions at
any time or from time to time.
The Fund may also seek to increase its current return by purchasing and
selling foreign currency on a spot basis, and by purchasing and selling options
on foreign currencies and on foreign currency futures contracts, and by
purchasing and selling foreign currency forward contracts.
CURRENCY FORWARD AND FUTURES CONTRACTS. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract as agreed by the parties, at a price set at the time of the contract.
In the case of a cancelable forward contract, the holder has the unilateral
right to cancel the contract at maturity by paying a specified fee. The
contracts are traded in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for trades. A foreign currency futures contract is a standardized contract
for the future delivery of a specified amount of a foreign currency at a future
date at a price set at the time of the contract. Foreign currency futures
contracts traded in the United States are designed by and traded on exchanges
regulated by the CFTC, such as the New York Mercantile Exchange.
Forward foreign currency exchange contracts differ from foreign
currency futures contracts in certain respects. For example, the maturity date
of a forward contract may be any fixed number of days from the date of the
contract agreed upon by the parties, rather than a predetermined date in a given
month. Forward contracts may be in any amounts agreed upon by the parties rather
than predetermined amounts. Also, forward foreign exchange contracts are traded
directly between currency traders so that no intermediary is required. A forward
contract generally requires no margin or other deposit.
At the maturity of a forward or futures contract, the Fund may either
accept or make delivery of the currency specified in the contract, or at or
prior to maturity enter into a closing transaction involving the purchase or
sale of an offsetting contract. Closing transactions with respect to forward
contracts are usually effected with the currency trader who is a party to the
original forward contract. Closing transactions with respect to futures
contracts are effected on a commodities exchange; a clearing corporation
associated with the exchange assumes responsibility for closing out such
contracts.
Positions in foreign currency futures contracts and related options may
be closed out only on an exchange or board of trade which provides a secondary
market in such contracts or options. Although the Fund will normally purchase or
sell foreign currency futures contracts and related options only on exchanges or
boards of trade where there appears to be an active secondary market, there is
no assurance that a secondary market on an exchange or board of trade will exist
for any particular contract or option or at any particular time. In such event,
it may not be possible to close a futures or related option position and, in the
event of adverse price
15
<PAGE>
movements, the Fund would continue to be required to make daily cash payments of
variation margin on its futures positions.
FOREIGN CURRENCY OPTIONS. Options on foreign currencies operate
similarly to options on securities, and are traded primarily in the
over-the-counter market, although options on foreign currencies have recently
been listed on several exchanges. Such options will be purchased or written only
when Schroder believes that a liquid secondary market exists for such options.
There can be no assurance that a liquid secondary market will exist for a
particular option at any specific time. Options on foreign currencies are
affected by all of those factors which influence exchange rates and investments
generally.
The value of a foreign currency option is dependent upon the value of
the foreign currency and the U.S. dollar, and may have no relationship to the
investment merits of a foreign security. Because foreign currency transactions
occurring in the interbank market involve substantially larger amounts than
those that may be involved in the use of foreign currency options, investors may
be disadvantaged by having to deal in an odd lot market (generally consisting of
transactions of less than $1 million) for the underlying foreign currencies at
prices that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies and there is no regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely basis.
Available quotation information is generally representative of very large
transactions in the interbank market and thus may not reflect relatively smaller
transactions (less than $1 million) where rates may be less favorable. The
interbank market in foreign currencies is a global, around-the-clock market. To
the extent that the U.S. options markets are closed while the markets for the
underlying currencies remain open, significant price and rate movements may take
place in the underlying markets that cannot be reflected in the U.S.
options markets.
FOREIGN CURRENCY CONVERSION. Although foreign exchange dealers do not
charge a fee for currency conversion, they do realize a profit based on the
difference (the "spread") between prices at which they buy and sell various
currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer.
ZERO-COUPON SECURITIES
Zero-coupon securities in which the Fund may invest are debt
obligations which are generally issued at a discount and payable in full at
maturity, and which do not provide for current payments of interest prior to
maturity. Zero-coupon securities usually trade at a deep discount from their
face or par value and are subject to greater market value fluctuations from
changing interest rates than debt obligations of comparable maturities which
make current distributions of interest. As a result, the net asset value of
shares of the Fund investing in zero-coupon securities may fluctuate over a
greater range than shares of other mutual funds investing in securities making
current distributions of interest and having similar maturities.
Zero-coupon securities may include U.S. Treasury bills issued directly
by the U.S. Treasury or other short-term debt obligations, and longer-term bonds
or notes and their unmatured interest coupons which have been separated by their
holder, typically a custodian bank
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<PAGE>
or investment brokerage firm. A number of securities firms and banks have
stripped the interest coupons from the underlying principal (the "corpus") of
U.S. Treasury securities and resold them in custodial receipt programs with a
number of different names, including Treasury Income Growth Receipts ("TIGRS")
and Certificates of Accrual on Treasuries ("CATS"). CATS and TIGRS are not
considered U.S. government securities. The underlying U.S. Treasury bonds and
notes themselves are held in book-entry form at the Federal Reserve Bank or, in
the case of bearer securities (i.e., unregistered securities which are owned
ostensibly by the bearer or holder thereof), in trust on behalf of the owners
thereof.
In addition, the Treasury has facilitated transfers of ownership of
zero-coupon securities by accounting separately for the beneficial ownership of
particular interest coupons and corpus payments on Treasury securities through
the Federal Reserve book-entry record-keeping system. The Federal Reserve
program as established by the Treasury Department is known as "STRIPS" or
"Separate Trading of Registered Interest and Principal of Securities." Under the
STRIPS program, the Fund will be able to have its beneficial ownership of U.S.
Treasury zero-coupon securities recorded directly in the book-entry
record-keeping system in lieu of having to hold certificates or other evidences
of ownership of the underlying U.S. Treasury securities.
When debt obligations have been stripped of their unmatured interest
coupons by the holder, the stripped coupons are sold separately. The principal
or corpus is sold at a deep discount because the buyer receives only the right
to receive a future fixed payment on the security and does not receive any
rights to periodic cash interest payments. Once stripped or separated, the
corpus and coupons may be sold separately. Typically, the coupons are sold
separately or grouped with other coupons with like maturity dates and sold in
such bundled form. Purchasers of stripped obligations acquire, in effect,
discount obligations that are economically identical to the zero-coupon
securities issued directly by the obligor.
TEMPORARY DEFENSIVE STRATEGIES
As described in the Prospectus, Schroder may at times judge that
conditions in the securities markets make pursuing the Fund's basic investment
strategies inconsistent with the best interests of its shareholders and may
temporarily use alternate investment strategies primarily designed to reduce
fluctuations in the value of the Fund's assets. In implementing these
"defensive" strategies, the Fund would invest in high-quality debt securities,
cash, or money market instruments to any extent Schroder considers consistent
with such defensive strategies. It is impossible to predict when, or for how
long, the Fund will use these alternate strategies.
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<PAGE>
INVESTMENT RESTRICTIONS
The Trust has adopted the following fundamental and non-fundamental
investment restrictions for the Fund. The Fund's fundamental investment
restrictions may not be changed without the affirmative vote of a "majority of
the outstanding voting securities" of the Fund, which is defined in the 1940 Act
to mean the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares and (2) 67% or more of the shares present at a meeting if
more than 50% of the outstanding shares are represented at the meeting in person
or by proxy. The non-fundamental investment policies described in the Prospectus
and this SAI are not fundamental and may be changed by the Trustees, without
shareholder approval.
THE PORTFOLIOS IN WHICH SCHRODER ALL-ASIA FUND INVESTS HAVE
SUBSTANTIALLY THE SAME INVESTMENT RESTRICTIONS AS THE FUND. IN REVIEWING THE
DESCRIPTION OF THE FUND'S INVESTMENT RESTRICTIONS BELOW, YOU SHOULD ASSUME THAT
THE INVESTMENT RESTRICTIONS OF THE PORTFOLIOS ARE THE SAME IN ALL MATERIAL
RESPECTS AS THOSE OF THE FUND.
FUNDAMENTAL RESTRICTIONS
The Fund will not:
1. INDUSTRY CONCENTRATION
purchase any securities which would cause 25% or more of the
value of its total assets, taken at market value at the time
of such purchase, to be invested in securities of one or more
issuers conducting their principal business activities in the
same industry, provided that there is no limitation with
respect to investment in obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities. For
purposes of this restriction, a foreign government is deemed
to be an "industry."
2. 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: (1) any borrowing permitted by
this restriction or any pledge or encumbrance to secure such
borrowing; (2) any collateral arrangements with respect to
options, futures contracts, options on futures contracts or
other financial instruments; or (3) any purchase, sale or
other permitted transaction in options, forward contracts,
futures contracts, options on futures contracts or other
financial instruments. (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 (4) the lending
of securities.)
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3. 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)
4. LENDING
make loans to other parties, except that the Fund may: (a)
purchase and hold debt instruments (including bonds,
debentures or other obligations and 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.
5. COMMODITIES
purchase or sell commodities or commodity contracts, including
futures contracts and options thereon, except that the Fund
may purchase or sell financial futures contracts and related
options, and futures contracts, forward contracts, and options
with respect to foreign currencies, and may enter into swaps
or other financial transactions.
6. 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
portfolio securities, it may be deemed to be an underwriter.
7. EXERCISING CONTROL OF ISSUERS
invest for the purpose of exercising control over the
management of any company.
8. 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)
and other financial transactions.
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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, except 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. (The
foregoing investment policy is fundamental.)
NONFUNDAMENTAL LIMITATIONS
The Fund will not:
1. NON-DIVERSIFICATION
Under these additional restrictions, the Fund may not invest
more than 25% of its total assets in obligations of any one
issuer other than U.S. Government securities and, with
respect to 50% of its total assets, the Fund may not invest
more than 5% of its total assets in the securities of any
one issuer (except U.S. Government securities). Thus, the
Fund may invest up to 25% of its total assets in the
securities of each of any two issuers.
2. LIQUIDITY
The Fund may not invest more than 15% of its net assets in:
(1) securities that cannot be disposed of within seven days
at their then-current value; (2) repurchase agreements not
entitling the holder to payment of principal within seven
days; and (3) securities subject to restrictions on the sale
of the securities to the public without registration under
the Securities Act of 1933, as amended ("restricted
securities") that are not readily marketable. The Fund may
treat certain restricted securities as liquid pursuant to
guidelines adopted by the Board.
3. LENDING
The Fund may not lend a security if, as a result, the amount
of loaned securities would exceed an amount equal to one
third of the Fund's total assets.
-------------------
All percentage limitations on investments (other than limitations on
borrowing and illiquid securities) will apply at the time of investment and
shall not be considered violated unless an excess or deficiency occurs or exists
immediately after and as a result of such investment.
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TRUSTEES AND OFFICERS
The Trustees of the Trust are responsible for the general oversight of
the Trust's business. Subject to such policies as the Trustees may determine,
Schroder furnishes a continuing investment program for each Fund and makes
investment decisions on its behalf. Subject to the control of the Trustees,
Schroder also manages the Fund's other affairs and business.
The Trustees and executive officers of the Trust and their principal
occupations during the last five years are set forth below.
(*) I. Peter Sedgwick, Chairman and Trustee. 62. 33 Gutter Lane, London,
England. Group Managing Director, Schroders plc. Chairman and Director, Schroder
Capital Management International Inc. and Schroder Capital Management
International Ltd. Chief Executive and Director, Schroder Investment Management
Limited . Director, various offshore funds for which a member of the Schroder
group of companies serves as manager.
(*) David M. Salisbury, Vice Chairman and Trustee. 46. 33 Gutter Lane,
London, England. Chairman, Schroder Capital Management International Inc. and
Schroder Capital Management International Limited. Director, Schroders plc.
Peter E. Guernsey, Trustee, 77. c/o the Trust, Two Portland Square,
Portland, Maine. Trustee, Schroder Capital Funds, Schroder Capital Funds II,
Schroder Capital Funds (Delaware), and Schroder Series Trust. Formerly, Senior
Vice President, Marsh & McLennan, Inc.
John I. Howell, Trustee. 82. c/o the Trust, Two Portland Square, Portland,
Maine. Trustee, Schroder Capital Funds, Schroder Capital Funds II, Schroder
Capital Funds (Delaware), and Schroder Series Trust. Director, American
International Life Assurance Company of New York. Private consultant since 1987.
William L. Means, Trustee. 59. c/o the Trust, Two Portland Square,
Portland, Maine. Trustee, Schroder Capital Funds (Delaware). Formerly, Chief
Investment Officer, Alaska Permanent Fund Corporation.
(*) Louise Croset, Trustee and President of the Trust. 42. 33 Gutter Lane,
London, England. Senior Vice President and Director of Schroder Capital
Management International Inc.
Mark J. Smith, Vice President of the Trust. 35. 33 Gutter Lane, London,
England. Director and Senior Vice President, Schroder Capital Management
International Limited and Schroder Capital Management International Inc.
Director, Schroder Investment Management Limited, Schroder Fund Advisors Inc.,
and Schroder Japanese Warrant Fund Ltd. Trustee, Schroder Capital Funds,
Schroder Capital Funds II, Schroder Capital Funds (Delaware), and Schroder
Series Trust.
Heather F. Crighton, Vice President of the Trust. 32. 33 Gutter Lane,
London, England. Vice President of Schroder Capital Management International
Inc. and Schroder Capital Management International Ltd.
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<PAGE>
Donald H.M. Farquharson, Vice President of the Trust. 35. 33 Gutter Lane,
London, England. First Vice President and Assistant Director of Schroder Capital
Management International Inc.
Fergal Cassidy, Treasurer and Chief Financial Officer of the Trust. 29. 787
Seventh Avenue, 34th Floor, New York, New York. Vice President and Treasurer,
Schroder Capital Management Inc. Vice President and Comptroller, Schroder
Capital Management International Inc. Treasurer and Chief Financial Officer,
Schroder Fund Advisors Inc. Assistant Treasurer, Schroder Series Trust.
Formerly, Senior Accountant, Concurrency Management Corp.
Margaret H. Douglas-Hamilton, Secretary of the Trust. 57. 787 Seventh
Avenue, 34th Floor, New York, New York. Vice President of Schroder Capital Funds
(Delaware). Senior Vice President and General Counsel of Schroders U.S. Holdings
Inc. Director and Secretary of Schroder Capital Management Inc.
Alan Mandel, Assistant Treasurer of the Trust. 41. 787 Seventh Avenue, New
York, New York. First Vice President of Schroder Capital Management
International Inc. since September 1998. Formerly, Director of Mutual Fund
Administration for Salomon Brothers Asset Management; Chief Financial Officer
and Vice President of Mutual Capital Management.
Catherine A. Mazza, Vice President and Assistant Secretary of the Trust.
39. 787 Seventh Avenue, 34th Floor, New York, New York. First Vice President,
Schroder Capital Management International Inc. and Schroder Capital Management
Inc. President, Schroder Fund Advisors Inc. Vice President, Schroder Capital
Funds, Schroder Capital Funds II, Schroder Capital Funds (Delaware), and
Schroder Series Trust. Formerly, Vice President, Alliance Capital Management
L.P.
Carin Muhlbaum, Assistant Secretary of the Trust. 36. Vice President of
Schroder Capital Management International Inc. since 1998. Formerly, an
investment management attorney with Seward & Kissel and prior thereto, with
Gordon Altman Butowsky Weitzen Shalov & Wein.
Alexandra Poe, Assistant Secretary of the Trust. 38. 787 Seventh Avenue,
34th Floor, New York, New York. Vice President, Schroder Capital Management
International Inc. Senior Vice President, Secretary, and General Counsel,
Schroder Fund Advisors Inc. Vice President and Secretary, Schroder Capital
Funds, Schroder Capital Funds II, Schroder Capital Funds (Delaware), and
Schroder Series Trust. Formerly, Attorney, Gordon, Altman, Butowsky, Weitzen,
Shalov & Wein; Vice President and Counsel, Citibank, N.A.
Nicholas Rossi, Assistant Secretary of the Trust. 35. 787 Seventh Avenue,
New York, New York. Associate of Schroder Capital Management International Inc.
since October 1997 and Assistant Vice President of Schroder Fund Advisors Inc.
since March 1998. Formerly, Mutual Fund Specialist, Wilkie Farr & Gallagher;
Fund Administrator, Furman Selz LLC since 1992.
Thomas G. Sheehan, Assistant Treasurer and Assistant Secretary of the
Trust. 44. Two Portland Square, Portland, Maine. Relationship Manager and
Counsel, Forum Financial Services, Inc. since 1993. Formerly, Special Counsel,
U.S. Securities and Exchange Commission, Division of Investment Management,
Washington, D.C.
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(*) Interested Trustee of the Trust within the meaning of the 1940 Act.
Except as otherwise noted, the principal occupations of the Trustees
and officers for the last five years have been with the employers shown above,
although in some cases they have held different positions with such employers or
their affiliates.
TRUSTEE COMPENSATION
Trustees who are not "interested persons" (as defined in the 1940 Act) of
the Trust, Schroder, or Schroder Fund Advisors Inc. received the following
compensation for the fiscal year ended October 31, 1998:
COMPENSATION TABLE
- -------------------------------------------------------------------------
(1)
(2) (3)
NAME OF
TRUSTEE AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM TRUST AND
FROM TRUST FUND COMPLEX PAID TO
TRUSTEES*
- -------------------------------------------------------------------------
Peter E. Guernsey $9,500 $23,750
- -------------------------------------------------------------------------
John I. Howell $9,500 $25,000
- -------------------------------------------------------------------------
William L. Means $9,500 $9,500
- -------------------------------------------------------------------------
* The Total Compensation listed in column (3) for each
Trustee includes compensation for services as a Trustee of
the Trust, Schroder Capital Funds ("SCF"), Schroder Capital
Funds II ("SCF II"), Schroder Capital Funds (Delaware)
("SCFD") and Schroder Series Trust ("SST"). The Trust,
SCF, SCF II, SCFD, and SST are considered part of the same
"Fund Complex" for these purposes.
23
<PAGE>
As of February 1, 1999, the Trustees of the Trust as a group owned less
than 1% of the outstanding shares of each Fund.
The Trust's Trust Instrument provides that the Trust will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with litigation in which they may be involved because of their offices with the
Trust, except if it is determined in the manner specified in the Trust
Instrument that they have not acted in good faith in the reasonable belief that
their actions were in the best interests of the Trust or that such
indemnification would relieve any officer or Trustee of any liability to the
Trust or its Shareholders by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of his or her duties. The Trust, at its
expense, provides liability insurance for the benefit of its Trustees and
officers.
SCHRODER AND ITS AFFILIATES
Schroder has served as the investment adviser for the Fund and the
Portfolios since their inception. Schroder is a wholly-owned subsidiary of
Schroder U.S. Holdings Inc., which engages through its subsidiary firms in the
investment banking, asset management, and securities businesses. Affiliates of
Schroder U.S. Holdings Inc. (or their predecessors) have been investment
managers since 1927. Schroder itself has been an investment manager since 1962,
and, together with its United Kingdom affiliate, Schroder Capital Management
International Limited, served as investment manager for approximately $27.1
billion as of December 31, 1998. Schroder U.S. Holdings Inc. is an indirect,
wholly-owned U.S. subsidiary of Schroders plc, a publicly owned holding company
organized under the laws of England. Schroders plc and its affiliates engage in
international merchant banking and investment management businesses, and as of
December 31, 1998, had under management assets of approximately $195 billion.
Schroder Fund Advisors Inc., an affiliate of Schroder that serves as the
Trust's distributor, is a wholly-owned subsidiary of Schroder Capital Management
International Inc. Schroder Capital Management International Inc. is also a
wholly-owned subsidiary of Schroder U.S. Holdings Inc.
INVESTMENT ADVISORY AGREEMENT
Under an Investment Advisory Agreement between the Trust and Schroder
(the "Advisory Agreement"), Schroder, at its expense, provides the Fund with
investment advisory services and advises and assists the officers of the Trust
in taking such steps as are necessary or appropriate to carry out the decisions
of its Trustees regarding the conduct of business of the Trust and each Fund.
The fees to be paid under the Advisory Agreement are set forth in the
Prospectus. As long as the Fund invests all of its assets in the Portfolios (or
another investment company), Schroder is not entitled to receive any advisory
fees pursuant to the Advisory Agreement. In the event that the Fund did not
invest all of its assets in the Portfolios or another investment company,
Schroder would be entitled to receive advisory fees monthly at the annual rate
of 0.90% of the Fund's average daily net assets managed by Schroder directly at
the Fund level.
Under the Advisory Agreement, Schroder is required to regularly provide
the Fund with investment research, advice, and supervision and furnishes
continuously investment programs consistent with the investment objectives and
policies of the Fund, and determines what securities shall be purchased, what
securities shall be held or sold, and what portion of the Fund's assets shall be
held uninvested, subject always to the provisions of the Trust's Trust
Instrument and By-
24
<PAGE>
laws, and of the 1940 Act, and to the Fund's investment objectives, policies,
and restrictions, and subject further to such policies and instructions as the
Trustees may from time to time establish.
Schroder makes available to the Trust, without expense to the Trust,
the services of such of its directors, officers, and employees as may duly be
elected Trustees or officers of the Trust, subject to their individual consent
to serve and to any limitations imposed by law. Schroder pays the compensation
and expenses of officers and executive employees of the Trust. Schroder also
provides investment advisory research and statistical facilities and all
clerical services relating to such research, statistical, and investment work.
Schroder pays the Trust's office rent.
Under the Advisory Agreement, the Trust is responsible for all its
other expenses, including clerical salaries not related to investment
activities; fees and expenses incurred in connection with membership in
investment company organizations; brokers' commissions; payment for portfolio
pricing services to a pricing agent, if any; legal expenses; auditing expenses;
accounting expenses; taxes and governmental fees; fees and expenses of the
transfer agent and investor servicing agent of the Trust; the cost of preparing
share certificates or any other expenses, including clerical expenses, incurred
in connection with the issue, sale, underwriting, redemption, or repurchase of
shares; the expenses of and fees for registering or qualifying securities for
sale; the fees and expenses of the Trustees of the Trust who are not affiliated
with Schroder; the cost of preparing and distributing reports and notices to
shareholders; public and investor relations expenses; and fees and disbursements
of custodians of the Fund's assets. The Trust is also responsible for its
expenses incurred in connection with litigation, proceedings, and claims and the
legal obligation it may have to indemnify its officers and Trustees with respect
thereto.
Schroder's compensation under the Advisory Agreement may be reduced in
any year if the Fund's expenses exceed the limits on investment company expenses
imposed by any statute or regulatory authority of any jurisdiction in which
shares of the Fund are qualified for offer or sale.
The Advisory Agreement may be terminated without penalty by vote of the
Trustees, by the shareholders of the Fund, or by Schroder on 60 days' written
notice. The Advisory Agreement also terminates without payment of any penalty in
the event of its assignment. In addition, the Advisory Agreement may be amended
only by a vote of the shareholders of the Fund, and the Advisory Agreement
provides that it will continue in effect from year to year only so long as such
continuance is approved at least annually with respect to the Fund by vote of
either the Trustees or the shareholders of the Fund, and, in either case, by a
majority of the Trustees who are not "interested persons" of Schroder. In each
of the foregoing cases, the vote of the shareholders is the affirmative vote of
a "majority of the outstanding voting securities" as defined in the Investment
Company Act of 1940.
THE PORTFOLIOS
The Fund currently invests all of its assets in the Portfolios, which
together have substantially the same investment objective and substantially the
same investment policies as the Fund. The Fund may withdraw its investment from
either Portfolio at any time if the Trust's Board of Trustees determines that it
is in the best interests of the Fund and its shareholders to do so. In that
event, the Fund would pay Schroder 0.90% of the Fund's average daily net assets
managed by Schroder directly at the Fund level.
25
<PAGE>
Schroder is the investment advisor to the Portfolios pursuant to an
investment advisory agreement (the "Portfolio Advisory Agreement") between
Schroder and Schroder Capital Funds, on behalf of the Portfolios. The Portfolio
Advisory Agreement provides that Schroder is entitled to receive monthly
advisory fees at the annual rates of 0.70% and 0.55%, respectively, of Schroder
Asian Growth Fund Portfolio and Schroder Japan Portfolio. The Portfolio Advisory
Agreement is the same in all material respects as the Investment Advisory
Agreement between the Trust on behalf of the Fund and Schroder. The Fund bears a
proportionate part of the management fees paid by each Portfolio (based on the
percentage of each Portfolio's assets attributable to the Fund).
RECENT INVESTMENT ADVISORY FEES. Of the total investment advisory fees paid
by the Portfolios to Schroders, the portion borne indirectly by the Fund during
the three most recent fiscal years is set forth in the following table. For
periods prior to the Fund's March 20, 1998 conversion from a closed-end fund,
the table lists the fees paid by the Fund's predecessor. The fees listed in the
table reflect reductions pursuant to expense limitations in effect during such
periods.
<TABLE>
<S> <C> <C>
- ------------------------------ ---------------------------- ---------------------------
Investment Advisory Fees Paid for Investment Advisory Fees Paid for Investment Advisory Fees Paid for
Fiscal Year Ended 10/31/98* Fiscal Year Ended 10/31/97 Fiscal Year Ended
(closed-end fund) 10/31/96 (closed-end fund)
- ------------------------------ ---------------------------- ---------------------------
- ------------------------------ ---------------------------- ---------------------------
$746,544 $2,301,847 $2,681,822
- ------------------------------ ---------------------------- ---------------------------
</TABLE>
*Prior to March 20, 1998, the Fund's predecessor had a similar investment
advisory agreement with Schroder which provided for a monthly fee at the annual
rate of (1) 1.00% of the predecessor's average weekly net assets up to and
including $300 million, and (2) 0.85% of the predecessor's average weekly net
assets in excess of $300 million. The Fund's predecessor paid or accrued fees to
Schroder of $536,538 for the period November 1, 1997 to March 20, 1998
conversion of the Fund from a closed-end fund.
FEE WAIVERS
Schroder voluntarily waived its fees in the following amounts during the
three most recent fiscal years pursuant to voluntary expense limitations and/or
waivers in effect during such periods. The portion of the amounts waived with
respect to the investment advisory fees indirectly borne by the Fund (or paid by
the Fund's predecessor prior to March 20, 1998) are as follows:
- ------------------------------
Fees Waived During Fiscal
Year Ended 10/31/98
- ------------------------------
- ------------------------------
$107,720
- ------------------------------
ADMINISTRATIVE SERVICES
On behalf of the Fund, the Trust has entered into an administration
agreement with Schroder Fund Advisors Inc., under which Schroder Fund Advisors
Inc. 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 its
investment
26
<PAGE>
adviser, transfer agent, custodian, independent accountants, legal counsel and
others. Schroder Fund Advisors Inc. is a wholly owned subsidiary of Schroder and
is a registered broker-dealer organized to act as administrator and distributor
of mutual funds.
For providing administrative services Schroder Fund Advisors Inc. is
entitled to receive a monthly fee 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 Trustees upon 60 days'
written notice to Schroder Fund Advisors Inc. or by Schroder Fund Advisors Inc.
upon 60 days' written notice to the Trust.
The Trust has entered into a subadministration agreement with FAdS. Under
its agreement, FAdS assists Schroder Fund Advisors Inc. with certain of its
responsibilities under the administration agreement, including shareholder
reporting and regulatory compliance. For providing its services, FAdS is
entitled to receive a monthly fee from the Fund at the annual rate of 0.05% of
the Fund's average daily net assets subject to an annual minimum charge of
$25,000. The subadministration agreement is terminable with respect to the Fund
without penalty, at any time, by the Trust upon 60 days' written notice to FAdS
or by FAdS upon 60 days' written notice to the Trust.
Schroder Fund Advisors Inc. and FAdS 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 subject to an annual minimum
charge of $25,000.
During the three most recent fiscal years, the Fund (or the Fund's
predecessor) paid the following fees to Schroder Fund Advisors Inc. and FAdS
pursuant to the administration agreement and the subadministration agreement.
The fees listed in the following table reflect reductions pursuant to fee
waivers and expense limitations in effect during such periods.
<TABLE>
<S> <C> <C>
- ------------------------------ ---------------------------- ---------------------------
Administrative Fees Paid for Administrative Fees Paid Administrative Fees Paid
Fiscal Year Ended 10/31/98* for Fiscal Year Ended for Fiscal Year Ended
10/31/97 (closed-end Fund) 10/31/96 (closed-end Fund)
- ------------------------------ ---------------------------- ---------------------------
Princeton Administrators, Princeton Administrators, Princeton Administrators
L.P. $134,135 L.P. $575,461 L.P. $670,455
Schroder Fund Advisors Inc.
$19,058
FAdS $37,564
- ------------------------------ ---------------------------- ---------------------------
</TABLE>
Prior to March 20, 1998, the Fund's predecessor retained Princeton
Administrators, L.P. ("Princeton") as administrator. Pursuant to its
administration agreement with the Fund's predecessor, Princeton received a
monthly fee equal to the greater of (a) $150,000 per annum or (b) an annual rate
of (1) 0.25% of the predecessor's average weekly net assets up to and including
$300 million, and (2) 0.22% of the predecessor's average weekly net assets in
excess of $300 million. The Fund's predecessor paid or accrued fees to Princeton
of $134,135 for the period November 1, 1998 through March 20, 1998.
DISTRIBUTOR
Pursuant to a Distribution Agreement with the Trust, Schroder Fund
Advisors Inc. (the "Distributor"), 787 Seventh Avenue, New York, New York 10019,
serves as the
27
<PAGE>
distributor for the Trust's continually offered shares. The Distributor pays all
of its own expenses in performing its obligations under the Distribution
Agreement. The Distributor is not obligated to sell any specific amount of
shares of the Fund. See "Administrative Services" for ownership information
regarding the Distributor.
SHAREHOLDER SERVICING PLAN FOR CLASS A SHARES. The Fund has also
adopted a Shareholder Servicing Plan (the "Service Plan") for its Class A
Shares. Under the Service Plan, the Fund pays fees to the Distributor at an
annual rate of up to 0.25% of the average daily net assets of the Fund
attributable to its Class A Shares. The Distributor may enter into shareholder
service agreements with Service Organizations pursuant to which the Service
Organizations provide administrative support services to their customers who are
Fund shareholders.
In return for providing these support services, a Service Organization
may receive payments from the Distributor at a rate not exceeding 0.25% of the
average daily net assets of the Class A Shares of the Fund for which the Service
Organization is the Service Organization of record. These administrative
services may include, but are not limited to, the following functions:
establishing and maintaining accounts and records relating to clients of the
Service Organization; answering shareholder inquiries regarding the manner in
which purchases, exchanges, and redemptions of Class A Shares of the Trust may
be effected and other matters pertaining to the Trust's services; providing
necessary personnel and facilities to establish and maintain shareholder
accounts and records; assisting shareholders in arranging for processing
purchase, exchange, and redemption transactions; arranging for the wiring of
funds; guaranteeing shareholder signatures in connection with redemption orders
and transfers and changes in shareholder-designated accounts; integrating
periodic statements with other customer transactions; and providing such other
related services as the shareholder may request. Some Service Organizations may
impose additional conditions or fees, such as requiring clients to invest more
than the minimum amounts required by the Trust for initial or subsequent
investments or charging a direct fee for services. Such fees would be in
addition to any amounts which might be paid to the Service Organization by the
Distributor. Please contact your Service Organization for details.
The following table shows the aggregate amounts paid after waivers and/or
expense limitations by the Trust to the Distributor under the Service Plan
during the three most recent fiscal years. All of such amounts were, in turn,
repaid by the Distributor to Service Organizations.
<TABLE>
<S> <C> <C>
- ------------------------------ ---------------------------- ---------------------------
Fees Paid Pursuant to Fees Paid Pursuant to Fees Paid Pursuant to
Service Plan During Fiscal Service Plan During Fiscal Service Plan During
Year Ended 10/31/98 Year Ended 10/31/97 Fiscal Year Ended 10/31/96
(closed-end Fund) (closed-end Fund)
- ------------------------------ ---------------------------- ---------------------------
$50,048 N/A N/A
- ------------------------------ ---------------------------- ---------------------------
</TABLE>
FUND ACCOUNTING
Forum Accounting Services, LLC ("Forum Accounting"), an affiliate of
FAdS, performs fund accounting services for the Fund pursuant to an agreement
with the Trust. Under the Accounting 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
28
<PAGE>
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 each
Fund above one. Forum Accounting is entitled to an additional $24,000 per year
for global and international funds, and 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, and funds that have a monthly turnover rate of 10% or more.
In the event that the Fund invests all or substantially all of its investment
assets in a Portfolio, the annual fee payable by the Fund to Forum Accounting
will be $12,000, which will be in addition to the Fund's proportion of the fees
payable by a Portfolio to Forum Accounting (which will, with the exception of
the class-based fees, be similar to those described above with respect to the
Fund).
The tables below show the amount of fees paid after waivers and/or expense
limitations by the Fund to Forum Accounting during the three most recent fiscal
years (or such shorter time the Fund has been operational).
<TABLE>
<S> <C> <C>
- ------------------------------ ------------------------------- -------------------------------
Accounting Fees Paid During Accounting Fees Paid During Accounting Fees Paid During
Fiscal Year Ended 10/31/98 Fiscal Year Ended 10/31/97 Fiscal Year Ended 10/31/96
- ------------------------------ ------------------------------- --------------------------------
- ------------------------------ ------------------------------- --------------------------------
$59,242 $0 $0
- ------------------------------ ------------------------------- --------------------------------
</TABLE>
EXPENSES
The Fund bears all costs of its operations other than expenses
specifically assumed by Schroder, Schroder Fund Advisors Inc. or FAdS. 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 shares payable to Schroder. From time to time, Schroder,
Schroder Fund Advisors Inc. or FAdS may waive voluntarily all or a portion of
its fees.
BROKERAGE ALLOCATION AND OTHER PRACTICES
Schroder may place portfolio transactions with broker-dealers which
furnish, without cost, certain research, statistical, and quotation services of
value to Schroder and its affiliates in advising the Trust and other clients,
provided that it shall always seek best price and execution with respect to
transactions. Certain investments may be appropriate for the Trust and for other
clients advised by Schroder. Investment decisions for the Trust and other
clients are made with a view to achieving their respective investment objectives
and after consideration of such factors as their current holdings, availability
of cash for investment, and the size of their investments generally. Frequently,
a particular security may be bought or sold for only one client or in different
amounts and at different times for more than one but less than all clients.
Likewise, a particular security may be bought for one or more clients when one
or more other clients are selling the security. In addition, purchases or sales
of the same security may be made for two or more clients of Schroder on the same
day. In such event, such transactions will be allocated among the clients in a
manner believed by Schroder to be equitable to each. In some cases, this
29
<PAGE>
procedure could have an adverse effect on the price or amount of the securities
purchased or sold by the Trust. Purchase and sale orders for the Trust may be
combined with those of other clients of Schroder in the interest of achieving
the most favorable net results for the Trust.
BROKERAGE AND RESEARCH SERVICES. Transactions on U.S. stock exchanges
and other agency transactions involve the payment by the Trust of negotiated
brokerage commissions. Such commissions vary among different brokers. Also, a
particular broker may charge different commissions according to such factors as
the difficulty and size of the transaction. Transactions in foreign securities
often involve the payment of fixed brokerage commissions, which are generally
higher than those in the United States, and therefore certain portfolio
transaction costs may be higher than the costs for similar transactions executed
on U.S. securities exchanges. There is generally no stated commission in the
case of securities traded in the over-the-counter markets, but the price paid by
the Trust usually includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid by the Trust includes a disclosed, fixed
commission or discount retained by the underwriter or dealer.
Schroder places all 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, it uses its best efforts to obtain the best price and
execution available. In seeking the best price and execution, Schroder considers
all factors it deems relevant, including price, the size of the transaction, the
nature of the market for the security, the amount of the commission, the timing
of the transaction (taking into account market prices and trends), the
reputation, experience, and financial stability of the broker-dealer involved,
and the quality of service rendered by the broker-dealer in other transactions.
It has for many years been a common practice in the investment advisory
business for advisers of investment companies and other institutional investors
to receive research, statistical, and quotation services from broker-dealers
that execute portfolio transactions for the clients of such advisers. Consistent
with this practice, Schroder receives research, statistical, and quotation
services from many broker-dealers with which it places the Trust's portfolio
transactions. These services, which in some cases may also be purchased for
cash, include such matters 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
Schroder and its affiliates in advising various of their clients (including the
Trust 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 the Portfolios is not reduced because Schroder and its
affiliates receive such services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934,
as amended, and by the Advisory Agreements and the Portfolio Advisory Agreement,
Schroder may cause the Fund or the Portfolios to pay a broker that provides
brokerage and research services to Schroder an amount of disclosed commission
for effecting a securities transaction for the Fund or the Portfolios in excess
of the commission which another broker would have charged for effecting that
transaction. Schroder's authority to cause the Fund or the Portfolios to pay any
such greater commissions is also subject to such policies as the Trustees (or
the Trustees of Schroder Capital Funds, in the case of the Portfolio) may adopt
from time to time.
To the extent permitted by law, the Fund or the Portfolios may engage
in brokerage transactions with Schroder & Co. Inc. ("Schroder & Co."), an
affiliate of Schroder, to effect
30
<PAGE>
securities transactions on the New York Stock Exchange only or Schroder
Securities Limited and its affiliates (collectively, "Schroder Securities"),
affiliates of Schroder, to effect securities transactions on various foreign
securities exchanges on which Schroder Securities has trading privileges.
Consistent with regulations under the 1940 Act, the Fund and the Portfolios have
adopted procedures which are reasonably designed to provide that any commissions
or other remuneration the Fund or the Portfolios pay to Schroder & Co. and
Schroder Securities do not exceed the usual and customary broker's commission.
In addition, the Fund and the Portfolios will adhere to the rule, under the
Securities Exchange Act of 1934, governing floor trading. This rule permits the
Fund and the Portfolios to effect, but not execute, exchange listed securities
transactions with Schroder & Co. Schroder & Co. pays a portion of the brokerage
commissions it receives from the Fund or a Portfolios to the brokers executing
the transactions. Also, due to securities law limitations, the Fund or the
Portfolios may be required to limit purchases of securities in a public offering
if Schroder & Co. or Schroder Securities or one of their affiliates is a member
of the syndicate for that offering.
Neither the Fund nor either Portfolio has any understanding or
arrangement to direct any specific portion of its brokerage to Schroder & Co. or
Schroder Securities, and none will direct brokerage to Schroder & Co. or
Schroder Securities in recognition of research services.
The following table shows the aggregate brokerage commissions paid for
the three most recent fiscal years with respect to the Fund. The amounts listed
represent aggregate brokerage commissions paid by the Portfolios.
<TABLE>
<S> <C> <C>
- ------------------------------ ---------------------------- ---------------------------
Brokerage Commissions Paid Brokerage Commissions Paid Brokerage Commissions
During Fiscal Year Ended During Fiscal Year Ended Paid During Fiscal Year
10/31/98 10/31/97 Ended 10/31/96
- ------------------------------ ---------------------------- ---------------------------
$ 356,032 N/A N/A
- ------------------------------ ---------------------------- ---------------------------
</TABLE>
For the fiscal year ended October 31, 1998, the Fund paid $46,068 in
brokerage commissions to brokers and dealers in transactions in the amount of
$12,278,501 identitfied for execution on the basis of research and other
services provided to the Fund.
This amount represents aggregate brokerage commissions paid by the
Portfolios.
The Fund paid no brokerage commissions to
Schroder & Co. or Schroder Securities in the three most recent fiscal years.
31
<PAGE>
DETERMINATION OF NET ASSET VALUE
The net asset value per share of each class of shares of each Fund is
determined daily as of the close of trading on the New York Stock Exchange
(normally 4:00 p.m., Eastern Time) on each day the Exchange is open for trading.
Any assets or liabilities initially expressed in terms of foreign 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 New York Stock Exchange
is normally closed on the following national holidays: New Years Day, Martin
Luther King, Jr. Day, Presidents Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving, and Christmas.
The Trustees have established procedures for the valuation of a Fund's
securities, as follows:
Equities listed or traded on a domestic or foreign stock exchange for which
last sales information is regularly reported, are valued at their last reported
sales prices on such exchange on that day or, in the absence of sales that
day,at values based on the closing mid-market price, or, if none, the last sales
price on the preceding trading day. (Where the securities are traded on more
than one exchange, they are valued on the exchange on which the security is
primarily traded. Unlisted securities for which over-the-counter market
quotations are readily available generally are valued at the most recently
reported mid-market prices. Securities that do not have readily available market
quotations are valued at fair value pursuant to procedures established by the
Trustees. Fixed income securities are valued based on quotations provided by the
pricing services approved by the Trustees. Money market instruments having a
remaining maturity of 60 days or less may be valued at amortized cost unless
Schroder believes another valuation is more appropriate.
Reliable market quotations are not considered to be readily available
for long-term corporate bonds and notes, certain preferred stocks, tax-exempt
securities, or certain foreign securities. These investments are stated at fair
value on the basis of valuations furnished by pricing services approved by the
Trustees, which determine valuations for normal, institutional-size trading
unites of such securities using methods based on market transactions for
comparable securities and various relationships between securities which are
generally recognized by institutional traders.
If any securities held by a Fund are restricted as to resale, Schroder will
obtain a valuation based on the current bid for the restricted security from one
or more independent dealers or other parties reasonably familiar with the facts
and circumstances of the security. If Schroder is unable to obtain a fair
valuation for a restricted security from an independent dealer or other
independent party, a pricing committee (comprised of certain directors and
officers at Schroder) shall determine the bid value of such security. The
valuation procedures applied in any specific instance are likely to vary from
case to case. However, consideration is generally given to the financial
position of the issuer and other fundamental analytical data relating to the
investment and to the nature of the restrictions on disposition of the
securities (including any registration expenses that might be borne by the Trust
in connection with such disposition). In addition, specific factors are also
generally considered, such as the cost of the investment, the market value of
any unrestricted securities of the same class (both at the time of purchase and
at the time of valuation), the size of the holding, the prices of any recent
transactions or offers with respect to such securities, and any available
analysts' reports regarding the issuer.
Generally, trading in certain securities (such as foreign securities)
is substantially completed each day at various times prior to the close of the
New York Stock Exchange. The values of these securities used in determining the
net asset value of the Trust's shares are computed as of such times. Also,
because of the amount of time required to collect and process trading
information as to large numbers of securities issues, the values of certain
securities (such as convertible bonds and U.S. Government Securities) are
determined based on market quotations collected earlier in the day at the latest
practicable time prior to the close of the Exchange. Occasionally, events
affecting the value of such securities may occur between such times and the
close of the Exchange which will not be reflected in the computation of the
Trust's net asset value. If events materially affecting the value of such
securities occur during such period, then these securities will be valued at
their fair value, in the manner described above.
32
<PAGE>
The proceeds received by the Fund for each issue or sale of its shares,
and all income, earnings, profits, and proceeds thereof, subject only to the
rights of creditors, will be specifically allocated to the Fund, and constitute
the underlying assets of the Fund. The underlying assets of the Fund will be
segregated on the Trust's books of account, and will be charged with the
liabilities in respect of the Fund and with a share of the general liabilities
of the Trust. The Fund's assets will be further allocated among its constituent
classes of shares on the Trust's books of account.
SALES AT NET ASSET VALUE
As noted in the Prospectus, certain investors may purchase Class A
Shares at net asset value without imposition of sales charges. The following
classes of investors qualify to do so: (1) trustees or other fiduciaries
purchasing shares for employee benefit plans which are sponsored by
organizations with at least 100 employees; (2) current or retired Trustees,
directors, and officers of the investment companies for which Schroder serves as
investment adviser; employees or retired employees of Schroder or its
affiliates; the spouses, children, siblings, and parents of the persons listed
in this clause (2); and trusts primarily for the benefit of such persons; (3)
registered representatives or full-time employees of broker-dealers that have
entered into dealer or shareholder servicing agreements with Schroder Fund
Advisors Inc., and the spouses, children, siblings, and parents of such persons;
and full-time employees of financial institutions that directly, or indirectly
through their affiliates, have entered into dealer agreements with Schroder Fund
Advisors Inc. (or that otherwise have an arrangement with respect to sales of
Fund shares with a broker-dealer that has entered into a dealer agreement with
Schroder Fund Advisors Inc.) and the spouses, children, siblings, and parents of
such employees; (4) companies exchanging shares with or selling assets to the
Fund pursuant to a merger, acquisition, or exchange offer (or similar
transaction); (5) registered investment advisers and bank trust departments
exercising discretionary investment authority with respect to the assets
invested in the Fund; (6) persons participating in a "wrap account" or similar
fee-based program sponsored and maintained by a registered broker-dealer which
has entered into an agreement with Schroder Fund Advisors Inc.; (7) clients of
administrators of tax-qualified employee benefit plans which have entered into
agreements with Schroder Fund Advisors Inc.; and (8) retirement plan
participants who borrow from their retirement accounts by redeeming shares of
the Fund and subsequently repay such loans by purchasing Fund shares.
REDEMPTIONS IN KIND
The Trust has agreed to redeem shares of the Fund solely in cash up to
the lesser of $250,000 or 1% of the Fund's net assets during any 90-day period
for any one shareholder. In consideration of the best interests of the remaining
shareholders, the Trust may pay certain redemption proceeds exceeding this
amount in whole or in part by a distribution in kind of securities held by the
Fund in lieu of cash. The Trust does not expect to redeem shares in kind under
normal circumstances. If your shares are redeemed in kind, you should expect to
incur transaction costs upon the disposition of the securities received in the
distribution.
33
<PAGE>
TAXES
The Fund intends to qualify each year and elect to be taxed as a
regulated investment company under Subchapter M of the United States Internal
Revenue Code of 1986, as amended (the "Code").
As a regulated investment company qualifying to have its tax liability
determined under Subchapter M, the Fund will not be subject to federal income
tax on any of its net investment income or net realized capital gains that are
distributed to shareholders.
In order to qualify as a "regulated investment company," the Fund must,
among other things, (a) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, gains from the sale or
other dispositions of stock, securities, or foreign currencies, and other income
(including gains from options, futures, or forward contracts) derived with
respect to its business of investing in such stock, securities, or currencies,
and (b) diversify its holdings so that, at the close of each quarter of its
taxable year, (i) at least 50% of the value of its total assets consists of
cash, cash items, U.S. Government Securities, and other securities limited
generally with respect to any one issuer to not more than 5% of the total assets
of the Fund and not more than 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its assets is invested in the
securities of any issuer (other than U.S. Government Securities).
If the Fund fails to distribute in a calendar year substantially all of
its ordinary income for such year and substantially all of its capital gain net
income for the one-year period ending October 31 (or later if the Fund is
permitted so to elect and so elects), plus any retained amount from the prior
year, that Fund will be subject to a 4% excise tax on the undistributed amounts.
A dividend paid to shareholders by the Fund in January of a year generally is
deemed to have been paid by the Fund on December 31 of the preceding year, if
the dividend was declared and payable to shareholders of record on a date in
October, November, or December of that preceding year. The Fund intends
generally to make distributions sufficient to avoid imposition of the 4% excise
tax. In order to receive the favorable tax treatment accorded regulated
investment companies and their shareholders, moreover, the Fund must in general
distribute with respect to each taxable year at least 90% of the sum of its
taxable net investment income, its net tax-exempt income, and, the excess, if
any, of net short-term capital gains over net long-term capital losses for such
year.
The Fund's distributions will be taxable to you as ordinary income to
the extent derived from the Fund's investment income and net short-term gains
(that is, net gains from capital assets held for no more than one year).
Distributions designated by the Fund as deriving from net gains on capital
assets held for more than one year will be taxable to you as long-term capital
gains (generally subject to a 20% tax rate), regardless of how long you have
held the shares. Distributions will be taxable to you as described above whether
received in cash or in shares through the reinvestment of distributions. Early
in each year the Trust will notify each shareholder of the amount and tax status
of distributions paid to the shareholder by the Fund for the preceding year.
34
<PAGE>
Upon the disposition of shares of the Fund (whether by sale, exchange,
or redemption), a shareholder will realize a gain or loss. Such gain or loss
will be capital gain or loss if the shares are capital assets in the
shareholder's hands, and will be long-term or short-term generally depending
upon the shareholder's holding period for the shares. Long-term capital gains
will generally be taxed at a federal income tax rate of 20%. Any loss realized
by a shareholder on a disposition of shares held by the shareholder for six
months or less will be treated as a long-term capital loss to the extent of any
distributions of capital gain dividends received by the shareholder with respect
to such shares. In general, any loss realized upon a taxable disposition of
shares will be treated as long-term capital loss if the shares have been held
for more than one year, and otherwise as short-term capital loss. With respect
to investment income and gains received by the Fund from sources outside the
United States, such income and gains may be subject to foreign taxes which are
withheld at the source. The effective rate of foreign taxes in which the Fund
will be subject depends on the specific countries in which its assets will be
invested and the extent of the assets invested in each such country and,
therefore, cannot be determined in advance.
The Fund's ability to use options, futures, and forward contracts and
other hedging techniques, and to engage in certain other transactions, may be
limited by tax considerations. The Fund's transactions in
foreign-currency-denominated debt instruments and its hedging activities will
likely produce a difference between its book income and its taxable income. This
difference may cause a portion of the Fund's distributions of book income to
constitute returns of capital for tax purposes or require the Fund to make
distributions exceeding book income in order to permit the Trust to continue to
qualify, and be taxed under Subchapter M of the Code, as a regulated investment
company. The tax consequences of certain hedging transactions have been modified
by the Taxpayer Relief Act of 1997.
Under federal income tax law, a portion of the difference between the
purchase price of zero-coupon securities in which the Fund has invested and
their face value ("original issue discount") is considered to be income to the
Fund each year, even though the Fund will not receive cash interest payments
from these securities. This original issue discount (imputed income) will
comprise a part of the net investment income of the Fund which must be
distributed to shareholders in order to maintain the qualification of the Fund
as a regulated investment company and to avoid federal income tax at the level
of the Fund.
This discussion of the federal income tax and state tax treatment of
the Trust and its shareholders is based on the law as of the date of this SAI.
PRINCIPAL HOLDERS OF SECURITIES
As of February 1, 1999, the Trustees of the Trust and, except a noted
below, the officers of the Trust, as a group owned less than 1% of the
outstanding shares of either class of each Fund.
35
<PAGE>
The following table lists those shareholders that owned 5% or more of
the shares of each Fund as of February 1, 1999, and therefore are controlling
persons of such Fund. Because these shareholders hold a substantial number of
shares, they may be able to require that the Trust hold special shareholder
meetings and may be able to determine the outcome of any shareholder vote.
<TABLE>
<S> <C> <C>
NUMBER OF % OF SHARES
A SHARES OF FUND
CLASS OWNED
SCHRODER ALL-ASIA FUND
- --------------------------------------------------- ----------------- --- ------------------
- --------------------------------------------------- ----------------- --- ------------------
Merrill Lynch Pierce Fenner & Smith
101 Hudson Street
Jersey City, New Jersey 07302-3915 1,810,250.469 34.11%
</TABLE>
PERFORMANCE INFORMATION
Average annual total return of a class of shares of the Fund for one-,
five-, and ten-year periods (or for such shorter periods as shares of that class
of shares of the Fund have been offered) is determined by calculating the actual
dollar amount of investment return on a $1,000 investment in that class of
shares at the beginning of the period, and then calculating the annual
compounded rate of return which would produce that amount. Total return for a
period of one year or less is equal to the actual return during that period.
Total return calculations assume reinvestment of all Fund distributions at net
asset value on their respective reinvestment dates. Total return may be
presented for other periods.
ALL PERFORMANCE DATA IS BASED ON PAST INVESTMENT RESULTS AND DOES NOT
PREDICT FUTURE PERFORMANCE. The Fund is the successor to Schroder Asian Growth
Fund, Inc., a closed-end management investment company that commenced operations
on December 23, 1993. Total return data relating to the Fund includes data
relating to Schroder Asian Growth Fund, Inc. for periods prior to the
commencement of the Fund's operations. The Fund's investment performance will be
affected by a number of factors, including its investment objective and
policies, fees, expenses, applicable sales charges, the size of the Fund, cash
flows into and out of the Fund, and market conditions. Investment performance
for a mutual fund also often reflects the risks associated with the fund's
investment objectives and policies. Quotations of total return for any period
when an expense limitation is in effect will be greater than if the limitation
had not been in effect. These factors should be considered when comparing the
investment results of the Fund's Class A shares to those of various classes of
other mutual funds and other investment vehicles. The Fund's performance may be
compared to various indices.
Although the investment objectives and policies of Schroder Asian
Growth Fund Inc. were substantially the same of those of the Fund, there can be
no assurance that the investment performance of Schroder Asian Growth Fund, Inc.
is indicative of the investment performance the Fund will achieve, and
differences among the factors outlined above and other factors will affect the
performance of the Fund relative to the historical performance of Schroder Asian
Growth Fund, Inc. For example:
36
<PAGE>
o As an open-end investment company, the Fund must invest
most of its assets in liquid securities in order to
meet possible shareholder redemption requests.
Schroder's investment decisions for the Fund may at
times be affected by the cash flows, or anticipated
cash flows, into or out of the Fund. As a closed-end
company, Schroder Asian Growth Fund, Inc. was not
subject to this factor.
o The performance data listed in the table below reflects
the deduction at the beginning of each period of an
initial sales load of 5.25%, the maximum sales load
applicable to the Fund, and does not reflect the
underwriting discount applicable to the initial
offering of shares by Schroder Asian Growth Fund, Inc.
o The operating expenses incurred by Schroder Asian
Growth Fund, Inc. for the period prior to its
reorganization into the Fund were less than those the
Fund expects to incur during its current fiscal year.
For example, total fund operating expenses of Schroder
Asian Growth Fund, Inc. for its fiscal year ended
October 31, 1997 were 1.78%; the Fund's total fund
operating expenses for the current fiscal year will be
1.95% (or, in the absence of applicable fee waivers,
are currently expected to be 2.49%). The performance
information of Schroder Asian Growth Fund, Inc. has not
been restated to reflect differences in the operating
expenses incurred by it and those expected to be
incurred by the Fund. If Schroder Asian Growth Fund,
Inc. had incurred operating expenses at the same rate
as the Fund is expected to incur expenses during the
current fiscal year, its total return would have been
lower than that shown above.
The table below sets forth the total return of Class A Shares of the Fund
for most recent fiscal year (which includes data relating to Schroder Asian
Growth Fund, Inc. for the period prior to March 23, 1998, the Fund's inception
date) and for the period from the commencement of the Schroder Asian Growth
Fund, Inc.'s operations until October 31, 1998. The table also sets forth total
return information for the Fund's Class A Shares since inception of the Fund.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN FOR PERIODS ENDED OCTOBER 31, 1998
<S> <C> <C> <C> <C> <C>
- -------------------- ------------ ----------- ------------------------- ------------------ ----------------
SINCE INCEPTION
OF SCHRODER ASIAN INCEPTION DATE INCEPTION DATE
CLASS 1 YEAR 5 YEARS GROWTH FUND, INC. OF FUND OF CLASS
(12/23/93)
(ANNUALIZED)
- -------------------- ------------ ----------- ------------------------- ------------------ ----------------
- -------------------- ------------ ----------- ------------------------- ------------------ ----------------
Class A Shares -29.51% N/A% -14.45% 3/23/98 3/23/98
- -------------------- ------------ ----------- ------------------------- ------------------ ----------------
</TABLE>
From time to time, Schroder, FAdS or any of their affiliates that
provide services to the Fund may reduce their compensation or assume expenses of
the Fund in order to reduce the
37
<PAGE>
Fund's expenses, as described in the Trust's current Prospectus. Any such waiver
or assumption would increase the Fund's total return for each class of shares
during the period of the waiver or assumption.
THE PORTFOLIOS
Each of the Portfolios is a separate series of Schroder Capital Funds,
an open-end management investment company. Schroder Capital Funds is a business
trust organized under the laws of the State of Delaware.
The Fund's investment in the Portfolios is in the form of a
non-transferable beneficial interest. The Portfolios may have other investors,
each of whom will invest on the same conditions as the related Fund and will pay
a proportionate share of the Portfolio's expenses.
The Portfolios normally will not hold 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. If the
Portfolio has investors other than the Fund, there can be no assurance that any
issue that receives a majority of the votes cast by Fund shareholders will
receive a majority of votes cast by all Portfolio shareholders. If other
investors hold a majority interest of a Portfolio, they could have voting
control of the Portfolio.
The Portfolios do not sell their shares directly to the public. Another
investor (such as an investment company) in a Portfolio that might sell its
shares to the public would not be required to sell its shares at the same
offering price as the Fund, and could have different fees and expenses than the
Fund. Therefore, the Fund's shareholders may have different returns than
shareholders of another investment company that invests in the Portfolio.
The investors in each Portfolio, including the related Fund, have
agreed to indemnify Schroder Capital Funds, and such trust's trustees and
officers, against certain claims.
CERTAIN RISKS OF INVESTING IN THE PORTFOLIOS. The Fund's investment in
the Portfolios may be affected by the actions of other large investors in the
Portfolios, if any. For example, if a Portfolio has a large investor other than
the Fund and that investor redeems its interests in the Portfolio, the
Portfolio's remaining investors (including the Fund) might bear a larger portion
of the Portfolio's operating expenses. This would result in lower returns for
the Fund.
The Fund may withdraw its entire investment from the Portfolios at any
time, if the Trustees determine that it is in the best interests of the Fund and
its shareholders to do so. Such a withdrawal may result in a distribution in
kind of portfolio securities by a Portfolio, which could adversely affect the
liquidity of the Fund's assets. If the Fund converted those securities to cash,
it would likely incur brokerage fees or other transaction costs. In the event
that the Fund withdraws its entire investment from a Portfolio, the Fund's
inability to find a suitable replacement investment could have a significant
negative impact on the Fund's shareholders.
Each investor in a Portfolio, including the Fund, may be liable for all
obligations of the Portfolio. The risk that this would cause an investor
financial loss, however, is limited to circumstances in which the Portfolio
would be unable to meet its obligations. Schroder considers this risk to be
remote. Upon liquidation of the Portfolio, investors in the Portfolio (including
the
38
<PAGE>
Fund) would be entitled to share pro rata in the Portfolio's net assets
available for distribution to investors.
CUSTODIAN
The Chase Manhattan Bank, through its Global Custody Division located
at 125 London Wall, London EC2Y 5AJ, United Kingdom, acts as custodian of the
assets of the Fund and the Portfolios. The custodian's responsibilities include
safeguarding and controlling the Fund's cash and securities, handling the
receipt and delivery of securities, and collecting interest and dividends on the
Fund's investments. The custodian does not determine the investment policies of
the Fund or decide which securities the Fund will buy or sell.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Boston Financial Data Services, Inc., P.O. Box 8507, Boston,
Massachusetts 02266-8507, is the Fund's transfer agent and dividend disbursing
agent.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, the Trust's independent accountants,
provide audit services and tax return preparation services. Their address is One
Post Office Square, Boston, Massachusetts 02109.
LEGAL COUNSEL
Ropes & Gray, One International Place, Boston, Massachusetts
02110, serves as counsel to the Trust.
SHAREHOLDER LIABILITY
Under Delaware law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Trust. However, the Trust's
Trust Instrument disclaims shareholder liability for acts or obligations of the
Trust and requires that notice of such disclaimer be given in each agreement,
obligation, or instrument entered into or executed by the Trust or the Trustees.
The Trust's Trust Instrument provides for indemnification out of the Fund's
property for all loss and expense of any shareholder held personally liable for
the obligations of the Fund. Thus the risk of a shareholder's incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Fund would be unable to meet its obligations.
FINANCIAL STATEMENTS
The fiscal year end of the Fund is October 31.
The required Financial Statements and the related Report of Independent
Accountants are incorporated herein by reference to the Trust's Annual Report,
dated October 31, 1998, which was filed electronically with the Securities and
Exchange Commission on January 22, 1999 (Accession Number:
0000889812-99-000184).
39
<PAGE>
APPENDIX
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.
A-1
<PAGE>
"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.
A-2
<PAGE>
"BBB" Fixed-income securities rated "BBB" are regarded as having an adequate
capacity to pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal for fixed-income securities in this category than for
fixed-income securities in higher-rated categories.
Fixed-income securities rated "AAA", "AA", "A" and "BBB" are considered
investment grade.
"BB" Fixed-income securities rated "BB" have less near-term vulnerability to
default than other speculative grade fixed-income securities. However, it faces
major ongoing uncertainties or exposure to adverse business, financial or
economic conditions which could lead to inadequate capacity or willingness to
pay interest and repay principal.
"B" Fixed-income securities rated "B" have a greater vulnerability to default
but presently have the capacity to meet interest payments and principal
repayments. Adverse business, financial or economic conditions would likely
impair capacity or willingness to pay interest and repay principal.
"CCC" Fixed-income securities rated "CCC" have a current identifiable
vulnerability to default, and the obligor is dependent upon favorable business,
financial and economic conditions to meet timely payments of interest and
repayments of principal. In the event of adverse business, financial or economic
conditions, it is not likely to have the capacity to pay interest and repay
principal.
"CC" The rating "CC" is typically applied to fixed-income securities
subordinated to senior debt which is assigned an actual or implied "CCC" rating.
"C" The rating "C" is typically applied to fixed-income securities subordinated
to senior debt which is assigned an actual or implied "CCC-" rating.
"CI" The rating "CI" is reserved for fixed-income securities on which no
interest is being paid.
"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.
A-3
<PAGE>
Issues assigned "A" ratings are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined with
the designation "1", "2", and "3" to indicate the relative degree of safety.
"A-1" Indicates that the degree of safety regarding timely payment is very
strong.
"A-2" Indicates capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as overwhelming as for
issues designated "A-1".
"A-3" Indicates a satisfactory capacity for timely payment. Obligations carrying
this designation are, however, somewhat more vulnerable to the adverse effects
of changes in circumstances than obligations carrying the higher designations.
A-4
