SCHRODER CAPITAL FUNDS INC, 497, 1995-11-16

SCHRODER CAPITAL FUNDS INC
497, 1995-11-16

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<PAGE>

INTERNATIONAL EQUITY FUND

Supplement dated November 1, 1995
to the Prospectus dated March 1, 1995

1. CORE AND GATEWAY-Registered Trademark- STRUCTURE

At a meeting held on October 23, 1995, shareholders of the Fund approved the
conversion of the Fund to a Core and Gateway structure. Under this structure,
which was implemented on November 1, 1995, the Fund seeks to achieve its
investment objective by investing its assets in a corresponding series (the
"Portfolio") of Schroder Capital Funds ("Core Trust"), an open-end management
investment company, rather than through direct investments in securities.
Accordingly, the Fund's investment experience corresponds directly with that of
the Portfolio. The Portfolio has the same investment objective and policies as
the Fund. Thus, references in the Prospectus to the Fund's investment objective
and policies also apply to the Portfolio. Schroder Capital Management
International Inc. ("SCMI"), the Fund's investment adviser, serves as investment
adviser to the Portfolio. Other entities that perform services for the Fund
perform substantially similar services for the Portfolio. In addition, the
Directors of Schroder Capital Funds, Inc. (the "Company"), of which the Fund is
a series, comprise the Board of Trustees of Core Trust. See "The Fund -
Investment Objective," "- Investment Policies," and "- Investment Restrictions"
in the Prospectus for a complete description of the investment objective,
policies, and restrictions of the Fund and Portfolio, and "Management of the
Fund" for information relating to management and expenses.

Shareholders continue to hold shares of the Fund which in turn holds a
beneficial interest in the Portfolio. Changing to this operating structure did
not alter the rights and privileges of shareholders of the Fund nor have any
impact on the underlying assets of the Fund, which were transferred to the
Portfolio.

EXPENSES - ANNUAL OPERATING EXPENSES. The following table replaces the "Annual
Fund Operating Expenses" table found on page 2 of the Prospectus. This table
shows the costs and expenses that an investor would incur directly or indirectly
as a shareholder of the Fund, based upon the Fund's and Portfolio's current
advisory and administrative fees ("Management Fees") and an estimate of the
Fund's and Portfolio's other expenses for the Fund's current fiscal year. The
table summarizes the expenses of the Fund and the Portfolio.

ANNUAL OPERATING EXPENSES (as a percentage of average net assets, after
estimated expense reimbursements and fee waivers)
Management Fees. . . . . . . . . . . . . 0.80%
12b-1 Fees . . . . . . . . . . . . . . . 0.00%
Other Expenses . . . . . . . . . . . . . 0.19%
-------------- -----
Total Fund Operating Expenses. . . . . . 0.99%

Management Fees includes the Portfolio's investment advisory fees paid to SCMI
of 0.45% of average daily net assets. Management Fees also includes
administrative fees paid by the Portfolio of 0.15% and by the Fund of 0.20%.
SCMI continues to serve as the Fund's investment adviser but will receive no
advisory fee from the Fund for any period when the Fund is completely invested
in the Portfolio.

The Board of Directors believes that the aggregate per share expenses of the
Fund and the Portfolio will be approximately equal to the expenses the Fund
would incur if its assets were invested directly in portfolio securities.
Absent estimated fee waivers and reimbursements, Other Expenses and Total Fund
Operating Expenses would be 0.30% and 1.10%, respectively.

<PAGE>

EXPENSES - EXAMPLE. The following table replaces the "Example" found on page 3
of the Prospectus.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1) a
5% gross annual return and (2) redemption at the end of each time period:

1 year . . . . . . . . . . . . . . . . .$10
3 years. . . . . . . . . . . . . . . . .$32
5 years. . . . . . . . . . . . . . . . .$55
10 years . . . . . . . . . . . . . . . $121

The example assumes that all dividends and distributions are reinvested and that
the percentage amounts listed under Annual Operating Expenses remain the same in
the years shown. THE EXAMPLE SHOWN SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED
5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION
OF PAST OR FUTURE ANNUAL RETURN; THE ACTUAL RETURN MAY BE GREATER OR LESS THAN
THE ASSUMED AMOUNT.

OTHER CONSIDERATIONS. Although other institutional investors (including other
mutual funds) may invest in the Portfolio, as of the date hereof, the Fund is
the only institutional investor that has invested all of its assets in the
Portfolio. Any such fund may have different expenses and, consequently,
different returns than the Fund. Information regarding any such funds in the
future will be available from Forum Financial Services, Inc., the Portfolio's
placement agent, at (207) 879-1900.

The investment objective and all fundamental investment policies of the Fund and
the Portfolio may not be changed without shareholder approval. On most issues
subject to a vote of investors in the Portfolio, the Fund will solicit proxies
from shareholders of the Fund and will vote its interest in the Portfolio in
proportion to the votes cast by its shareholders. If there are other investors
in the Portfolio, 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 investors in the Portfolio.

The Fund may withdraw its entire investment from the Portfolio at any time if
the Board determines that it is in the best interests of the Fund and its
shareholders to do so. The Fund might withdraw, for example, if the Portfolio
changed its investment objective and shareholders of the Fund did not approve a
parallel change in the Fund's objective. If the Fund withdrew its investment in
the Portfolio, the inability of the Fund to find a suitable replacement
investment, in the event the Board decided not to permit SCMI to manage the
Fund's assets, could have a significant impact on shareholders of the Fund. In
addition, the Fund's investment in the Portfolio may be affected if another
investor in the Portfolio, if any, were to make a large-scale redemption. In
that event, the Portfolio's remaining investors (including the Fund) might, as a
result, experience higher pro rata operating expenses, thereby producing lower
returns. A large-scale distribution in kind of portfolio securities either to
the Fund or to another investor could result in a less diversified or less
liquid portfolio of investments for the Fund or could result in decreased
economies of scale. Forum has only one year of experience in managing funds
that utilize its "Core and Gateway" structure.

2. REORGANIZATION TO A DELAWARE BUSINESS TRUST

Shareholders of the Company have approved the reorganization of the Company from
a Maryland corporation into a Delaware business trust under the name Schroder
Capital Funds (Delaware) (the "Trust"). It is anticipated that this
reorganization will occur on or about December 11, 1995. As a Delaware business
trust, the Trust's operations will be governed by its Trust Instrument and
applicable Delaware law rather than by the Articles of Incorporation, By-Laws
and Maryland law, which presently govern the Company's operations. The Trust
initially will have five series corresponding to the current series of the
Company, one being the Fund.

3. MANAGEMENT OF THE FUND

Effective July 5, 1995, Schroder Capital Distributors Inc., administrator of the
Fund and distributor of the Fund's shares, changed its name to Schroder Fund
Advisors Inc.

- 2 -

<PAGE>

SCHRODER U.S. EQUITY FUND

SCHRODER U.S. SMALLER COMPANIES FUND

Supplement dated November 1, 1995
to the Prospectus dated March 1, 1995

1. REORGANIZATION TO A DELAWARE BUSINESS TRUST

Shareholders of the Schroder Capital Funds, Inc. (the "Company"), of which each
Fund is a series, have approved the reorganization of the Company from a
Maryland corporation into a Delaware business trust under the name Schroder
Capital Funds (Delaware) (the "Trust"). It is anticipated that this
reorganization will occur on or about December 11, 1995. As a Delaware business
trust, the Trust's operations will be governed by its Trust Instrument and
applicable Delaware law rather than by the Articles of Incorporation, By-Laws
and Maryland law, which presently govern the Company's operations. The Trust
initially will have five series corresponding to the current series of the
Company, two being the Funds.

2. MANAGEMENT OF THE FUND

Effective July 5, 1995, Schroder Capital Distributors Inc., distributor of each
Fund's shares and administrator of Schroder U.S. Smaller Companies Fund, changed
its name to Schroder Fund Advisors Inc.

<PAGE>

SCHRODER EMERGING MARKETS FUND
INSTITUTIONAL PORTFOLIO

Supplement dated November 1, 1995
to the Prospectus dated August 23, 1994 as amended May 3, 1995

1. CORE AND GATEWAY-Registered Trademark- STRUCTURE

At a meeting held on October 23, 1995, shareholders of the Fund approved the
conversion of the Fund to a Core and Gateway structure. Under this structure,
which was implemented on November 1, 1995, the Fund seeks to achieve its
investment objective by investing its assets in a corresponding series (the
"Portfolio") of Schroder Capital Funds ("Core Trust"), an open-end management
investment company, rather than through direct investments in securities.
Accordingly, the Fund's investment experience corresponds directly with that of
the Portfolio. The Portfolio has the same investment objective and policies as
the Fund. Thus, references in the Prospectus to the Fund's investment objective
and policies also apply to the Portfolio. Schroder Capital Management
International Inc. ("SCMI"), the Fund's investment adviser, serves as investment
adviser to the Portfolio. Other entities that perform services for the Fund
perform substantially similar services for the Portfolio. In addition, the
Directors of Schroder Capital Funds, Inc. (the "Company"), of which the Fund is
a series, comprise the Board of Trustees of Core Trust. See "The Fund -
Investment Objective," "- Investment Policies," "- Investment Restrictions," and
"- Additional Investment Policies," in the Prospectus for a complete description
of the investment objective, policies, and restrictions of the Fund and
Portfolio, and "Management of the Fund" for information relating to management
and expenses.

EXPENSES. The "Annual Fund Operating Expenses" table found on page 3 of the
Prospectus now summarizes the expenses of the Fund and the Portfolio. The table
shows the costs and expenses that an investor would incur directly or indirectly
as a shareholder of the Fund, based upon the Fund's and Portfolio's current
advisory and administrative fees ("Management Fees") and an estimate of the
Fund's and Portfolio's other expenses for the Fund's current fiscal year.
Management Fees include the Portfolio's investment advisory fees paid to SCMI of
1.00% of average daily net assets as well as administrative fees paid by the
Portfolio of 0.15% and by the Fund of 0.10%. SCMI continues to serve as the
Fund's investment adviser but will receive no advisory fee from the Fund for any
period when the Fund is completely invested in the Portfolio.

<PAGE>

2. REORGANIZATION TO A DELAWARE BUSINESS TRUST

3. MANAGEMENT OF THE FUND

Effective July 5, 1995, Schroder Capital Distributors Inc., administrator of the
Fund and distributor of the Fund's shares, changed its name to Schroder Fund
Advisors Inc.

<PAGE>

INTERNATIONAL EQUITY FUND

TWO PORTLAND SQUARE
PORTLAND, MAINE 04101

- --------------------------------------------------------------------------------
GENERAL INFORMATION: (207) 879 8903
ACCOUNT INFORMATION: (800) 344 8332
FAX: (207) 879 6206
- --------------------------------------------------------------------------------

SCHRODER CAPITAL MANAGEMENT INTERNATIONAL INC. - INVESTMENT ADVISER
SCHRODER CAPITAL DISTRIBUTORS, INC. - ADMINISTRATOR & DISTRIBUTOR

International Equity Fund (the "Fund") is a separately-managed,
diversified portfolio of Schroder Capital Funds, Inc. (the "Company"), an
open-end management investment company currently consisting of five separate
portfolios, each of which has different investment objectives and policies.
The Fund's investment objective is capital appreciation through investment in
securities markets outside the United States. All international investments
involve special risks in addition to those risks associated with investments
in general and there can be no assurance that the Fund's objective will be
achieved.

Shares of the Fund are offered for sale at net asset value with no sales
charge as an investment vehicle for individuals, institutions, corporations
and fiduciaries. The Fund is authorized to pay expenses related to the
distribution of its shares. The minimum initial investment is $2,500, except
that the minimum for an Individual Retirement Account is $250. The minimum
subsequent investment is $100.

This prospectus sets forth concisely the information a prospective
investor should know before investing in the Fund. A Statement of Additional
Information (the "SAI") dated March 1, 1995 and as supplemented from time to
time containing additional and more detailed information about the Fund has
been filed with the Securities and Exchange Commission ("SEC") and is hereby
incorporated by reference into this Prospectus. It is available without
charge and may be obtained by writing or calling the Fund at the address and
telephone numbers printed above.

--------------------------------------------------------------------------
This prospectus should be read and retained for information about the Fund.
--------------------------------------------------------------------------

THE SHARES OFFERED HEREBY ARE NOT OBLIGATIONS, DEPOSITS, OR ACCOUNTS OF, OR
ENDORSED OR GUARANTEED BY, ANY BANK OR ANY AFFILIATE OF A BANK AND ARE NOT
INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE SYSTEM, OR ANY FEDERAL AGENCY.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

This Prospectus is dated March 1, 1995.

<PAGE>

INTERNATIONAL EQUITY FUND
THE FUND

INTRODUCTION

International Equity Fund is a separately-managed, diversified, no-load
portfolio of Schroder Capital Funds, Inc., which was organized as a corporation
in the State of Maryland on July 30, 1969 and is an open-end management
investment company registered under the Investment Company Act of 1940. On
February 29, 1988, the Company was recapitalized to enable the Company's Board
of Directors (the "Board of Directors") to establish series of separately
managed investment portfolios and to issue a separate class of the Company's
common stock in respect of each portfolio. The Company currently consists of
five separate portfolios, each of which has separate investment objectives and
policies. The Board of Directors may establish additional portfolios in the
future.

The Fund's Investment Adviser is Schroder Capital Management International
Inc. ("SCMI"). Schroder Capital Distributors Inc. ("Schroder Distributors")
serves as Administrator and Distributor of the Fund, and Forum Financial
Services, Inc. ("Forum") is its Sub-Administrator.

The Fund was previously organized as a separate portfolio of Fund Source
("Fund Source"), a Massachusetts business trust. Pursuant to a reorganization
which became effective August 1, 1989, all the assets and liabilities of such
portfolio were transferred to the Company in exchange for shares of the Fund.
Such shares have been distributed to the former shareholders of such
portfolio of Fund Source.

FEE TABLE

The table below shows the costs and expenses that an investor would incur
as a shareholder of the Fund, based upon the Fund's annual operating expenses
for the fiscal year ended October 31, 1994.

<TABLE>

<S> <C>

Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a percentage
of the offering price). . . . . . . . . . . . . . . . . . . . . . . None
Maximum Sales Load Imposed on Reinvested Dividends (as a
percentage of the offering price) . . . . . . . . . . . . . . . . . None
Deferred Sales Load (as a percentage of the redemption proceeds) . . None
Redemption Fees (as a percentage of the amount redeemed) . . . . . . None
Exchange Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 0.61%
12b-1 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.00%
Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.29%
Total Fund Operating Expenses. . . . . . . . . . . . . . . . . . . . 0.90%

</TABLE>

The Fund has adopted a Distribution Plan under Rule 12b-1 of the Investment
Company Act of 1940 generally authorizing it to pay directly or reimburse
Schroder Distributors for costs and expenses incurred in connection with the
distribution of Fund shares. Such payment or reimbursement is subject to a limit
of 0.50% per annum of the Fund's average daily net assets. Costs or expenses in
excess of this limit may not be carried forward to future years. See "Management
of the Fund - Distribution" below. The Fund will make no payments under the
Distribution Plan until the Board of Directors specifically further so
authorizes. No payments have been made under the Distribution Plan since the
Fund became a portfolio of the Company.

<PAGE>

In addition to and distinct from payments authorized under the Rule 12b-1
Plan, the Board has authorized the Fund generally to pay service organizations
fees at an annual rate of up to 0.25% of the Fund's daily net assets for
administrative services related to maintaining shareholder accounts. See
"Management of the Fund -- Service Organizations." The Fund will make no
payments to Service Organizations until the Board of Directors further
specifically so authorizes such payments. Some Service Organizations may impose
additional direct charges on investors, such as a direct fee for servicing. If
imposed, these charges would be in addition to any amounts which might be paid
to the Service Organization by the Fund. For a description of the other types of
expenses included in the category "Other Expenses," see "Management of the Fund
- - Other Expenses." In the event that the Board of Directors specifically
authorizes payments under the Rule 12b-1 Plan and/or payments to Service
Organizations, long term shareholders of the Fund may pay aggregate sales
charges totalling more than the economic equivalent of the maximum front-end
sales charge permitted by the Rules of Fair Practice of the National Association
of Securities Dealers, Inc.

While SCMI and Schroder Distributors have waived portions of their fees in
prior fiscal years, neither of them did so in the fiscal year ended October 31,
1994.

The purpose of this table is to assist the shareholder in understanding the
various costs and expenses that an investor in the Fund will bear.

EXAMPLE

You would pay the following expenses on a $1,000 investment, assuming (1) a
5% gross annual return and (2) redemption at the end of each time period:

1 year . . . . . $ 9
3 years. . . . . $ 29
5 years. . . . . $ 50
10 years. . . . . $111

THE EXAMPLE SHOWN SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN; THE ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.

<PAGE>

FINANCIAL HISTORY

The financial data shown below is to assist investors in evaluating the
performance of the Fund since its commencement of operations through October 31,
1994. The data shown pertains to the portfolio of Fund Source prior to the
August 1, 1989 effective date of the reorganization described above under
"Introduction," and to the portfolio of the Company thereafter. The following
financial highlights have been audited by Coopers & Lybrand L.L.P., independent
accountants to the Fund, for all periods after the year ended September 30,
1988. The information for prior periods is not presented herein as audited. The
Fund's financial statements for the year ended October 31, 1994 and independent
accountant's report thereon are contained in the Fund's Annual Report to
Shareholders and are incorporated by reference into the SAI. Further information
about the performance of the Fund is contained in the Annual Report, which may
be obtained without charge by writing or calling the Fund at the address or
telephone numbers appearing on the cover of this Prospectus.

Financial Highlights - For a Share Outstanding Throughout the Year:

Year Year Year Year Year Month Year Year Year 12/20/85
ended ended ended ended ended ended ended ended ended to
10/31/94 10/31/93 10/31/92 10/31/91 10/31/90 10/31/89 9/30/89 9/30/88 9/30/87 9/30/86
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year 20.38 15.15 16.22 17.70 18.20 18.95 14.40 18.02 14.07 10.00
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Investment Operations
Net Investment Income 0.18 0.08 0.25 0.25 0.15 0.03 0.20 0.05 (0.07) 0.02
Net Realized Income 2.69 5.27 (1.04) (0.25) (0.12) (0.78) 4.44 (2.34) 4.71 4.05
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from Investment
Operations 2.87 5.35 (0.79) 0.00 0.03 (0.75) 4.64 (2.29) 4.64 4.07
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Distributions
Dividends from Net
Investment Income (0.08) (0.12) (0.23) (0.25) (0.16) 0.00 (0.04) 0.00 (0.02) 0.00
Distribution from
Realized Capital Gains -- -- (0.05) (1.23) (0.37) 0.00 (0.05) (1.33) (0.67) 0.00
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total Distributions (0.08) (0.12) (0.28) (1.48) (0.53) 0.00 (0.09) (1.33) (0.69) 0.00
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net Asset Value,
End of Year 23.17 20.38 15.15 16.22 17.70 18.20 18.95 14.40 18.02 14.07
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total Return 14.10% 35.54% (4.93%) 0.45% (0.07%) (4.01%) 32.2% (0.12%) 34.8% 39.2%
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Ratio/Supplementary Data
Net Assets,
End of Year (Millions) 500,504 320,550 159,556 108,398 62,438 49,740 48,655 29,917 32,553 9,152
Ratio of Expenses to
Average Net Assets 0.90% 0.91% 0.93% 1.07% 1.12% 1.12%* 1.12% 1.30% 1.64% 2.47%*
Ratio of Net Investment
Income to Average
Net Assets 0.94% 0.87% 1.62% 1.59% 0.83% 2.29%* 1.27% 0.38% (0.42%)(0.12%)*
Portfolio Turnover Rate 25.17% 56.05% 49.42% 50.58% 55.91% 21.98%* 72.25% 86.19% 84.97% 77.53%*
</TABLE>

*Annualized

<PAGE>

INVESTMENT OBJECTIVE

The Fund is designed for U.S. investors who desire to achieve international
diversification of their investments by participating in foreign securities
markets. Because international investments generally involve risks in addition
to those risks associated with investments in the U.S., the Fund should be
considered only as a vehicle for international diversification and not as a
complete investment program.

The investment objective of the Fund is long-term capital appreciation
through investment in securities markets outside the U.S. Investment securities
for the Fund are selected on the basis of their potential for capital
appreciation without regard for current income. The Fund in the future may seek
to achieve its investment objective by holding, as its only investment
securities, the securities of another investment company having the same
investment objectives and policies as the Fund in accordance with the provisions
of the Investment Company Act of 1940 or any orders, rules or regulations
thereunder adopted by the SEC.

This investment objective is a fundamental policy of the Fund, and as such
cannot be changed without the approval of the holders of a majority of the
Fund's outstanding shares. Unless otherwise indicated, all other investment
policies are not fundamental and may be changed by the Board of Directors
without prior approval of the shareholders of the Fund.

Achievement of the Fund's objective cannot be assured.

INVESTMENT POLICIES

The Fund will normally invest at least 65% of its total assets in equity
securities of companies domiciled outside the U.S. The Fund may also invest in
the securities of closed-end investment companies investing primarily in foreign
securities and in debt obligations of foreign governments, international
organizations and foreign corporations. Investment will be diversified among
securities of many issuers in many countries including, but not limited to,
Japan, Germany, the United Kingdom, France, Italy, Belgium, Switzerland, the
Netherlands, Hong Kong, Singapore/Malaysia, and Australia.

The Fund may enter into forward contracts to purchase or sell foreign
currencies in anticipation of the currency requirements of the Fund and to
protect against possible adverse movements in foreign exchange rates. Although
such contracts may reduce the risk of loss to the Fund due to a decline in the
value of the currency which is sold, they also limit any possible gain which
might result should the value of such currency rise.

For temporary defensive purposes, the Fund may invest without limitation in
(or enter into repurchase agreements maturing in seven days or less with U.S.
banks and broker-dealers with respect to) short-term debt securities, including
U.S. Treasury bills, other short-term U.S. Government securities, certificates
of deposit and bankers' acceptances of U.S. banks. The Fund may hold cash and
time deposits in foreign banks denominated in any major foreign currency. In
transactions involving "repurchase agreements," the Fund purchases securities
from a bank or broker-dealer who agrees to repurchase the security at the Fund's
cost plus interest within a specified time. The securities purchases by the Fund
have a total value in excess of the value of the repurchase agreement and are
held by the Fund's custodian bank until repurchased. See "Investment Policies"
in the SAI for further information about all these securities.

INVESTMENT RESTRICTIONS

The Fund has adopted certain restrictions designed to reduce its exposure
in specific situations. Pursuant to these restrictions, which are fundamental
policies of the Fund:

a) The Fund will not invest more than 5% of its assets in the securities
of any single issuer. (This restriction does not apply to securities
issued by the U.S. Government, its agencies or instrumentalities.)

b) The Fund will not purchase more than 10% of the voting securities of
any one issuer. Moreover, the Fund will not purchase more than 3% of
the outstanding securities of any closed-end investment company. (Any
such purchase of securities issued by a closed-end investment company
will otherwise be made in full compliance with Sections
12(d)(1)(a)(i),(ii) and (iii) of the Investment Company Act of 1940.)

<PAGE>

6
such purchase of securities issued by a closed-end investment company
will otherwise be made in full compliance with Sections
12(d)(1)(a)(i),(ii) and (iii) of the Investment Company Act of 1940.)

c) The Fund will not invest more than 10% of its assets in "restricted
securities" which include (i) securities which are not readily
marketable and (ii) securities of issuers having a record (together
with all predecessors) of less than three years of continuous
operation.

d) The Fund will not invest more than 25% of its assets in any one
industry.

e) The Fund will not borrow money, except from banks for temporary
emergency purposes and then only in an amount not exceeding 5% of the
value of the total assets of the Fund.

f) The Fund will not pledge, mortgage or hypothecate its assets to an
extent greater than 10% of the value of the total assets of the Fund.

As an operating (non-fundamental) policy, which may be changed by the Board
of Directors without prior shareholder approval, the Fund will not invest in
securities which are not readily marketable. This policy does not include
restricted securities eligible for resale to qualified institutional purchasers
pursuant to Rule 144A under the Securities Act of 1933 that are determined to be
liquid by the Board of Directors or SCMI under Board-approved guidelines. Such
guidelines take into account trading activity for such securities and the
availability of reliable pricing information, among other factors. If there is a
lack of trading interest in particular Rule 144A securities, the Fund's holdings
of those securities may be illiquid.

SPECIAL CONSIDERATIONS

All investments, domestic and foreign, involve certain risks. Investment in
the securities of foreign issuers may involve risks in addition to those
normally associated with investments in the securities of U.S. issuers. In
general, the Fund will invest only in securities of companies and governments in
countries which SCMI, in its judgment, considers both politically and
economically stable. Nevertheless, all foreign investments are subject to risks
of foreign political and economic instability, adverse movements in foreign
exchange rates, the imposition or tightening of exchange controls or other
limitations on repatriation of foreign capital and changes in foreign
governmental attitudes towards private investment possibly leading to
nationalization, increased taxation or confiscation of Fund assets.

Moreover, dividends payable on foreign securities may be subject to foreign
withholding taxes, thereby reducing the income available for distribution to the
Fund's shareholders; commission rates payable on foreign portfolio transactions
are generally higher than in the U.S.; accounting, auditing and financial
reporting standards differ from those in the U.S. and this may mean that less
information about foreign companies may be available than is generally available
about issuers of comparable securities in the U.S.; and foreign securities often
trade less frequently and with less volume than U.S. securities and consequently
may exhibit greater price volatility.

Changes in foreign exchange rates will also affect the value in the U.S.
dollars of all foreign currency-denominated securities held by the Fund.
Exchange rates are influenced generally by the forces of supply and demand in
the foreign currency markets and by numerous other political and economic events
occurring outside the U.S., many of which may be difficult if not impossible to
predict.

Because most of the Fund's income will be received and realized in foreign
currencies and the Fund will be required to compute and distribute income in
U.S. dollars, a decline in the value of a particular foreign currency against
the U.S. dollar occurring after the Fund's income has been earned and thereafter
computed into U.S. dollars may require the Fund to liquidate some portfolio
securities to acquire sufficient U.S. dollars to make such distributions.
Similarly, if the exchange rate declines between the time the Fund incurs
expenses in U.S. dollars and the time such expenses are paid, the Fund may be
required to liquidate additional foreign securities to purchase the U.S. dollars
required to meet such expenses.

<PAGE>

INTERNATIONAL EQUITY FUND
MANAGEMENT OF THE FUND

BOARD OF DIRECTORS

The business and affairs of the Fund are managed under the direction of the
Board of Directors of the Company. The Directors are Peter E. Guernsey, Ralph E.
Hansmann, John I. Howell, Laura E. Luckyn-Malone, Clarence F. Michalis, Hermann
C. Schwab, Mark J. Smith and John A. Troiano. Additional information regarding
the Directors, as well as the Company's executive officers, may be found in the
SAI under the heading "Management - Officers and Directors."

INVESTMENT ADVISER AND PORTFOLIO MANAGER

Schroder Capital Management International Inc. ("SCMI"), 787 Seventh
Avenue, New York, New York 10019, serves as investment adviser to the Fund
pursuant to an Investment Advisory Contract. Through its London, England branch
SCMI manages the investment and reinvestment of the assets included in the
Fund's portfolio and continuously reviews, supervises and administers the Fund's
investments. In this regard, it is the responsibility of SCMI to make decisions
relating to the Fund's investments and to place purchase and sale orders
regarding such investments with brokers or dealers selected by it in its
discretion.

SCMI is a wholly-owned U.S. subsidiary of Schroders Incorporated, the
wholly-owned U.S. holding company subsidiary of Schroders plc. Schroders plc is
the holding company parent of a large world-wide group of banks and financial
services companies (referred to as the "Schroder Group"), with associated
companies and branch and representative offices located in seventeen countries
world-wide. The Schroder Group specializes in providing investment management
services with assets under management currently in excess of $75 billion.

For its services, the Fund pays SCMI a monthly advisory fee equal on an
annual basis to 0.50% of the first $100 million of its average daily net assets;
0.40% of the next $150 million of average daily net assets and 0.35% of average
daily net assets in excess of $250 million. For the fiscal year ended October
31,1994, the Fund paid SCMI fees of 0.41% of its average net assets.

The investment management team of Mark J. Smith, a Director and Vice
President of the Company, and Laura Luckyn-Malone, a Director and President of
the Company, with the assistance of an investment committee, is primarily
responsible for managing the day-to-day operations of the Fund's portfolio. Mr.
Smith, who has managed the Fund's portfolio since October 1989, has been a First
Vice President of SCMI since April 1990 and a Director thereof since April 1993.
He has been employed by various Schroder Group companies in the investment
research and portfolio management areas since 1983. Ms. Luckyn-Malone, who
joined the Fund's investment management team in 1995, has been a Senior Vice
President and Director of SCMI since 1990. Prior to joining the Schroder Group,
she was a Principal of Scudder, Stevens & Clark, Inc.

ADMINISTRATIVE SERVICES

On behalf of the Fund, the Company has entered into an Administrative
Services Contract with Schroder Distributors, 787 Seventh Avenue, New York, New
York 10019. The Company and Schroder Distributors have entered into a Sub-
Administration Agreement with Forum. Pursuant to their agreements, Schroder
Distributors and Forum provide certain management and administrative services
necessary for the Fund's operations, other than the investment management and
administrative services provided to the Fund by SCMI pursuant to the Investment
Advisory Contract. Schroder Distributors is a wholly-owned subsidiary of SCMI.
For these services, Schroder Distributors receives from the Fund a fee, payable
monthly, at the annual rate of 0.25% of the first $100 million of the Fund's
average daily net assets, 0.20% of the next $150 million of average daily net
assets; and 0.175% of average daily net assets in excess of $250 million.

For the fiscal year ended October 31, 1994, the Fund paid Schroder
Distributors a fee of 0.20% of its average net assets.

<PAGE>

DISTRIBUTION

Schroder Distributors acts as distributor to the Fund. Schroder
Distributors was organized in 1989 and registered as a broker-dealer to serve as
an administrator and distributor of the Fund and other mutual funds. Under the
Distribution Plan (the "Plan") adopted by the Company on behalf of the Fund, the
Company is authorized generally to pay directly or reimburse Schroder
Distributors, the "Distributor" of Fund shares, monthly for costs and expenses
incurred in connection with the distribution of Fund shares. Such payment or
reimbursement is subject to a limit of 0.50% per annum of the Fund's average
daily net assets. Payment or reimbursement may be for various types of costs,
including: (1) advertising expenses, including advertising by radio, television,
newspapers, magazines, brochures, sales literature, or direct mail, (2) costs of
printing prospectuses and other materials to be given or sent to prospective
investors, (3) expenses of sales employees or agents of the Distributor,
including salary, commissions, travel and related expenses in connection with
the distribution of Fund shares and (4) payments to broker-dealers who advise
shareholders regarding the purchase, sale, or retention of Fund shares ("trail
fees"). Such payments to broker-dealers may be in amounts up to 0.50% per annum
of the Fund's average daily net assets. The Fund will not be liable for
distribution expenditures made by the Distributor in any given year in excess of
the maximum amount (0.50% per annum of the Fund's average daily net assets)
payable under the Plan in that year. Costs or expenses in excess of the 0.50%
per annum limit may not be carried forward to future years. Salary expenses of
salesmen who are responsible for marketing shares of the Fund may be allocated
to various portfolios of the Company that have adopted a Plan similar to that of
the Fund on the basis of average net assets; travel expenses may be allocated
to, or divided among, the particular portfolios of the Company for which they
are incurred. The Fund will make no payments under the Distribution Plan until
the Board of Directors specifically further so authorizes.

CODE OF ETHICS

The Fund, the Company, SCMI, Schroder Distributors, and Schroders
Incorporated have adopted a code of ethics which contains a policy on
personal securities transactions by "access persons," including portfolio
managers and investment analysts. That policy complies in all material
respects with the recommendations set forth in the May 9, 1994 Report of the
Advisory Group on Personal Investing of the Investment Company Institute.

SERVICE ORGANIZATIONS

Various banks, trust companies, broker-dealers (other than Schroder
Distributors) or other financial organizations (collectively, "Service
Organizations") also may provide administrative services for the Fund, such
as maintaining shareholder accounts and records. The Fund may pay fees to
Service Organizations (which may vary depending upon the services provided)
in amounts up to an annual rate of 0.25% of the daily net asset value of the
Fund's shares owned by shareholders with whom the Service Organization has a
servicing relationship.

Some Service Organizations may impose additional or different conditions
on their clients, such as requiring their clients to invest more than the
minimum or subsequent investments specified by the Fund or charging a direct
fee for servicing. If imposed, these fees would be in addition to any amounts
which might be paid to the Service Organization by the Fund. Each Service
Organization has agreed to transmit to its clients a schedule of any such
fees. Shareholders using Service Organizations are urged to consult them
regarding any such fees or conditions.

The Glass-Steagall Act and other applicable laws and regulations provide
that banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks
from performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or
interpretations of such laws, as well as changes in either Federal or state
regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, could prevent a bank Service Organization from
continuing to perform all or part of its servicing activities. If a bank were
prohibited from so acting, its shareholder clients would be permitted to
remain shareholders of the Fund and alternative means for continuing the
servicing of such shareholders would be sought. It is not expected that
shareholders would suffer any adverse financial consequences as a result of
any of these occurrences.

<PAGE>

OTHER EXPENSES

The Fund bears all costs of its operations other than expenses specifically
assumed by Schroder Distributors or SCMI. The costs borne by the Fund include
legal and accounting expenses; Directors' fees and expenses; insurance premiums,
custodian and transfer agent fees and expenses; expenses incurred in acquiring
or disposing of the Fund's portfolio securities; 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 the Fund's portfolio
securities and pricing of the Fund's shares; expenses of maintaining the Fund's
legal existence and of shareholders' meetings; and expenses of preparation and
distribution to existing shareholders of reports, proxies and prospectuses. See
"Management" in the SAI. Company expenses directly attributed to the Fund are
charged to the Fund; other expenses are allocated proportionately among all the
portfolios of the Company in relation to the net assets of each portfolio. For
the fiscal year ended October 31, 1994, the Fund's expenses were 0.90% of its
average net assets. During the early part of fiscal year 1995 there was a
significant redemption from the Fund by an institutional investor, who invested
the proceeds thereof into other funds advised by SCMI. Such redemption may
increase the expense ratio for the Fund prospectively.

SCMI and Schroder Distributors have voluntarily undertaken to assume
certain expenses of the Fund. This undertaking is designed to place a maximum
limit on Fund expenses (including all fees to be paid to SCMI and Schroder
Distributors but excluding taxes, interest, brokerage commissions and other
portfolio transaction expenses and extraordinary expenses) according to the
following Schedule: 1.12% of the first $100 million of the Fund's daily net
assets; 1.00% on the next $150 million of the average daily net assets; and
0.85% of the average daily net assets in excess of $250 million. This expense
limitation will only apply so long as the Fund has at least $20 million in total
assets and may be withdrawn by a majority vote of the disinterested Directors.
If expense reimbursements are required, they will be made on a monthly basis.
SCMI will reimburse the Fund for two-thirds of the amount required and Schroder
Distributors, the remaining one-third; provided, however, that neither Schroder
Distributors nor SCMI will be required to make any reimbursements in excess of
the fees paid to them by the Fund on a monthly basis for their respective
administrative and advisory services. This undertaking to reimburse expenses
supplements any applicable state expense limitation (see "Fees and Expenses" in
the SAI).

PORTFOLIO TRANSACTIONS

Commission rates for brokerage transactions are fixed on many foreign
securities exchanges, and this may cause higher brokerage expenses to accrue to
the Fund than would be the case for comparable transactions effected on U.S.
securities exchanges. Subject to the Fund's policy of obtaining the best price
consistent with quality of execution on transactions, SCMI may employ Schroder
Securities Limited and its affiliates (collectively, "Schroder Securities"),
affiliates of SCMI, to effect transactions of the Fund on certain foreign
securities exchanges. Because of the affiliation between SCMI and Schroder
Securities, the Fund's payment of commissions to Schroder Securities is subject
to procedures adopted by the Board of Directors to provide that such commissions
will not exceed the usual and customary brokers' commissions. No specific
portion of the Fund's brokerage will be directed to Schroder Securities and in
no event will Schroder Securities receive such brokerage in recognition of
research services.

<PAGE>

INTERNATIONAL EQUITY FUND
INVESTMENT IN THE FUND

PURCHASE OF SHARES

Investors wishing to purchase shares through their accounts at a Service
Organization should contact that organization directly for appropriate
instructions. Shares of the Fund are offered at the net asset value next
determined after receipt of a Purchase Order (at the address set forth below)
without any sales charge as an investment vehicle for individuals, institutions,
corporations and fiduciaries. Prospectuses, sales material and applications can
be obtained from the Company or Forum Financial Corp., the Fund's Transfer
Agent. See "Other Information - Shareholder Inquires."

The minimum initial investment is $2,500, except that the minimum initial
investment for an Individual Retirement Account is $250. The minimum subsequent
investment is $100. All purchase payments are invested in full and fractional
shares. The Fund is authorized to reject any purchase order.

Initial and subsequent purchases may be made by mailing a check (in U.S.
dollars), payable to International Equity Fund, to:

International Equity Fund
P.O. Box 446
Portland, Maine 04112

In the case of an initial purchase, the check must be accompanied by a completed
Account Application.

Service Organizations (on behalf of customers) may transmit purchase
payments by Federal Reserve Bank wire directly to the Fund at the following
address:

Chase Manhattan Bank
New York, NY
ABA No.: 021000021
For Credit To: Forum Financial Corp.

Acct. No.: 910-2-718187
Ref.: International Equity Fund
Account of: (shareholder name)
Account Number: (shareholder account number)

The wire order must specify the name of the Fund, 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. Where the initial purchase is by wire, an account number will be assigned
and a Account Application must be completed and mailed to the Fund. Purchase
requests by wire that are received prior to 4:00 p.m. (New York City Time) will
be processed at the net asset value determined as of that day. Purchase requests
by wire that are received after 4:00 p.m. (New York City Time) will be processed
at the net asset value determined as of the next day that the New York Stock
Exchange is open for trading.

For each shareholder of record, the Fund's Transfer Agent, as the
shareholder's agent, establishes an open account to which all shares purchased
are credited, together with any dividends and capital gains distributions which
are paid in additional shares. Although most shareholders elect not to receive
share certificates, certificates for full shares can be obtained by specific
written request to the Fund's Transfer Agent. No certificates are issued for
fractional shares.

Purchases may also be made through broker-dealers who assist their
customers in purchasing shares of the Fund. Such broker-dealers may charge their
customers a service fee for processing orders to purchase or sell shares of the
Fund.

RETIREMENT PLANS

Shares of the Fund are offered in connection with tax-deferred retirement
plans. Applications forms and further information about these plans, including
applicable fees, are available upon request. The Federal Income tax treatment of
contributions to retirement plans has been substantially affected by recently
enacted Federal tax legislation. Before investing in the Fund through one of
these plans, an investor should consult his or her tax advisor.

<PAGE>
11

INDIVIDUAL RETIREMENT ACCOUNTS

Shares of the Fund may be used as a funding medium for an Individual
Retirement Account ("IRA"). An Internal Revenue Service-approved IRA plan naming
First National Bank of Boston as custodian is available from the Company or the
Fund's Transfer Agent. The minimum initial investment for an IRA is $250; the
minimum subsequent investment is $100. IRAs are available to individuals who
receive compensation or earned income, and their spouses, whether or not they
are active participants in a tax-qualified or Government-approved retirement
plan. An IRA contribution by an individual who participates, or whose spouse
participates, in a tax-qualified or Government-approved retirement plan may not
be deductible depending upon the individual's income. Individuals also may
establish an IRA to receive a "rollover" contribution of distributions from
another IRA or a qualified plan. Tax advice should be obtained before planning a
rollover.

REDEMPTION OF SHARES

Shares of the Fund will be redeemed at their next determined net asset
value following receipt by the Fund (at the address set forth above under
"Purchase of Shares") of a redemption request in proper form. See "Net Asset
Value." Redemption requests by telephone or wire may be made between the hours
of 9:00 a.m. and 6:00 p.m. (New York City Time) on each day that the New York
Stock Exchange is open for trading. Redemption requests by telephone or wire
that are received prior to 4:00 p.m. (New York City Time) will be processed at
the net asset value determined as of that day. Redemption requests by telephone
or wire that are received after 4:00 p.m. (New York City Time) will be processed
at the net asset value determined as of the next day that the New York Stock
Exchange is open for trading.

BY TELEPHONE. Redemption requests may be made by telephoning the Transfer
Agent at 800-344-8332. Shareholders must provide the Transfer Agent with the
shareholder's account number, the exact name in which the shares are registered
and some additional form of identification such as a password. A redemption by
telephone may be made only if the telephone redemption privilege option has been
elected on the Account Application. In an effort to prevent unauthorized or
fraudulent redemption requests by telephone, reasonable procedures will be
followed by Forum to confirm that such instructions are genuine. If such
procedures are followed, neither Forum nor the Company will be liable for any
losses due to unauthorized or fraudulent redemption requests. Shares for which
certificates have been issued may not be redeemed by telephone. In times of
drastic economic or market changes, it may be difficult to make redemptions by
telephone. If a shareholder cannot reach the Transfer Agent by telephone,
redemption requests may be mailed or hand-delivered to the Transfer Agent.

WRITTEN REQUESTS. Redemptions may be made by letter to the Fund, specifying
the dollar amount or number of shares to be redeemed and account number, and
sent to:

International Equity Fund
P.O. Box 446
Portland, Maine 04112

The letter must be signed in exactly the same way the account is registered (if
there is more than one owner of the shares, all must sign) and, in certain
cases, signatures must be guaranteed by an institution that is acceptable to the
Fund's Transfer Agent. Such institutions may include certain banks, broker-
dealers (including municipal and government securities brokers and dealers),
credit unions, securities exchanges and associations, clearing agencies and
savings associations. (Notaries public are not acceptable.) Further
documentation, such as copies of corporate resolutions and instruments of
authority, may be requested from corporations, administrators, executors,
personal representatives, directors or custodians to evidence the authority of
the person or entity making the redemption request. Questions concerning the
need for signature guarantees or documentation of authority should be directed
to the Fund at the above address or by calling the Account Information telephone
number appearing on the cover of this Prospectus.

<PAGE>

by the certificates), must be signed by all owners in exactly the same way the
name or names are written on the face of the certificates. Requirements for
signature guarantees and/or documentation of authority as described above could
also apply. For your protection, the Fund suggests that certificates be sent by
registered mail.

Checks for redemption proceeds will normally be mailed within seven days
but will not be mailed until all checks in payment for the purchase of the
shares to be redeemed have been cleared, which may take up to 15 calendar days.
Unless other instructions are given in proper form, a check for the proceeds of
a redemption will be sent to the shareholder's address of record.

The Fund may suspend the right of redemption during any period when (i)
trading on the New York Stock Exchange is restricted or that Exchange is closed,
other than customary weekend and holiday closings, (ii) the SEC has by order
permitted such suspension, or (iii) an emergency, as defined by rules of the
SEC, exists making disposal of portfolio investments or determination of the
value of the net assets of the Fund not reasonably practicable.

If the Board of Directors should determine that it would be detrimental to
the best interest of the remaining shareholders of the Fund to make payment
wholly or partly in cash, the Fund may pay the redemption price in whole or in
part by a distribution in kind of securities from the portfolio of the Fund, in
lieu of cash, in conformity with applicable rules of the SEC. The Fund will,
however, redeem shares solely in cash up to the lesser of $250,000 or 1% of net
assets during any 90-day period for any one shareholder. In the event that
payment for redeemed shares is made wholly or partly in portfolio securities,
the shareholder may be subject to additional risks and costs in converting the
securities to cash. See "Additional Purchase and Redemption Information -
Redemption in Kind" in the SAI.

The proceeds of a redemption may be more or less than the amount invested
and, therefore, a redemption may result in a gain or loss for Federal income tax
purposes.

Due to the relatively high cost of maintaining smaller accounts, the Fund
reserves the right to redeem shares in any account (other than an IRA) if at any
time the total investment does not have a value of at least $2,000 unless the
value of the account shall have fallen below such amount solely as a result of
market activity. An affected shareholder would be notified that the value of his
account was less than $2,000 and be allowed at least 30 days to make an
additional investment to increase the account balance to at least the $2,000
level.

NET ASSET VALUE

The net asset value per share of the Fund is calculated at 4:00 p.m. (New
York City Time), Monday through Friday, on each day that the New York Stock
Exchange is open for trading (which excludes the following national business
holidays: New Year's Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day). Net asset
value per share is calculated by dividing the aggregate value of the Fund's
assets less all liabilities by the number of shares of the Fund outstanding.
Portfolio securities listed on the recognized stock exchanges are valued at the
last reported trade price, prior to the time when the assets are valued, on the
exchange on which the securities are principally traded. Listed securities
traded on recognized stock exchanges where last trade prices are not available
are valued at mid-market prices. Securities traded in over-the-counter markets,
or listed securities for which no trade is reported on the valuation date, are
valued at the most recent reported mid-market price. Other securities and assets
for which market quotations are not readily available are valued at fair value
as determined in good faith using methods approved by the Board of Directors.

Trading in securities on European and Far Eastern Securities exchanges and
over-the-counter markets may not take place on every day that the New York Stock
Exchange is open for trading. Furthermore, trading takes place in various
foreign markets on days on which the Fund's net asset value is not calculated.
If events materially affecting the value of foreign securities occur between the
time when their price is determined and the time when net asset value is
calculated, such securities will be valued at fair value as determined in good
faith by the Board of Directors.

All assets and liabilities of the Fund denominated in foreign currencies
are converted to U.S. dollars at the mid price of such currencies against U.S.
dollars last quoted by a major bank prior to the time when the net asset value
of the Fund is calculated.

<PAGE>
13

INTERNATIONAL EQUITY FUND
DIVIDENDS, DISTRIBUTIONS AND TAXES

The Fund intends to continue to comply with the provisions of Subchapter M
of the Internal Revenue Code of 1986, as amended (the "Code") applicable to
regulated investment companies. As a regulated investment company, the Fund
intends to distribute substantially all of its net investment income and its net
realized long term capital gains at least annually and therefore intends not to
be subject to Federal income tax to the extent it distributes such income and
capital gains in the manner required under the Code.

The Fund intends to elect, pursuant to Section 853 of the Code if the Fund
is eligible to do so, to permit shareholders to take a credit (or a deduction)
for foreign income taxes paid by the Fund. Each shareholder should include in
his report of gross income in his Federal income tax return both cash dividends
received by him from the Fund and also the amount which the Fund advises him is
his pro rata portion of foreign income taxes paid with respect to, or withheld
from, dividends and interest paid to the Fund from its foreign investments. Each
shareholder then would be entitled, subject to certain limitations, to take a
foreign tax credit against his Federal income tax liability for the amount of
such foreign taxes or else to deduct such foreign taxes as an itemized deduction
from gross income.

The Fund intends to declare and pay as a dividend substantially all of its
net investment income annually and to distribute any net realized long-term
capital gains at least annually. Dividend and capital gains distributions will
be reinvested automatically in additional shares of the Fund at net asset value
unless the shareholder has notified the Fund in his Account Application or
otherwise in writing of his election to receive distributions in cash.

Dividend and capital gains distributions are made on a per share basis.
After every distribution the value of a share declines by the amount of the
distribution. Purchases made shortly before a distribution include in the
purchase price the amount of the distribution which will be returned to the
investor in the form of a taxable dividend or capital gains distribution.

For Federal income tax purposes, distributions of the Fund's net taxable
income will be taxable to shareholders as ordinary income whether they are
invested in additional shares or received in cash. Distributions of any net
capital gains designated by the Fund as capital gains dividends will be taxable
as long-term capital gains, regardless of how long a shareholder has held the
shares and whether they are invested in additional shares or received in cash.
Each year the Fund will notify shareholders of the tax status of dividends and
distributions.

Earnings of the Fund not distributed on a timely basis in accordance with a
calendar year distribution requirement are subject to a non-deductible 4% excise
tax. To prevent imposition of this tax, the Fund intends to comply with this
distribution requirement.

The Fund generally will be required to withhold Federal income tax at a
rate of 31% ("backup withholding") from dividends paid to shareholders if (a)
the payee fails to furnish and to certify the payee's correct taxpayer
identification number or social security number, (b) the IRS notifies the Fund
that the payee has failed to report properly certain interest and dividend
income to the IRS and to respond to notices to that effect or (c) when required
to do so, the payee fails to certify that he is not subject to backup
withholding.

Depending on the residence of the shareholder for tax purposes,
distributions may also be subject to state and local taxes, including
withholding taxes. Shareholders should consult their own tax advisors as to the
tax consequences of ownership of shares of the Fund in their particular
circumstances.

<PAGE>

INTERNATIONAL EQUITY FUND
OTHER INFORMATION

CAPITALIZATION AND VOTING

The Company's Articles of Incorporation authorize the Company's Board of
Directors to issue 100,000,000 shares of common stock, with a $0.01 par value.
The Board of Directors has the power to designate one or more classes
("Classes") of the common stock, each to pertain to a separate investment
portfolio, and to classify or reclassify any unissued shares with respect to
such Classes. Currently the Company is offering five Classes, one of which
pertains to the Fund. The Board of Directors may create one or more additional
Classes in the future.

The shares of the Company are fully paid and non-assessable, and have no
preferences as to conversion, exchange, dividends, retirement or other features.
The shares have no pre-emptive rights. They have non-cumulative voting rights,
which means that the holders of more than 50% of the shares voting for the
election of Directors can elect 100% of the Directors if they choose to do so. A
shareholder is entitled to one vote for each full share held (and a fractional
vote for each fractional share held), then standing in his name on the books of
the Company. On matters requiring shareholder approval, shareholders are
entitled to vote only with respect to matters which affect the interest of the
Class they hold, except as otherwise required by applicable law.

There will normally be no meetings of shareholders to elect Directors
unless and until such time as less than a majority of the Directors holding
office have been elected by shareholders. However, the holders of not less than
a majority of the outstanding shares of the Company may remove any person
serving as a Director and the Board of Directors will call a special meeting of
shareholders to consider removal of one or more Directors if requested in
writing to do so by the holders of not less than 10% of the outstanding shares
of the Company.

REPORTS

The Company sends to each shareholder of the Fund a semi-annual report and
an audited annual report, each of which includes a list of the investment
securities held by the Fund.

PERFORMANCE INFORMATION

The Fund may, from time to time include quotations of its total return in
advertisements or reports to shareholders or prospective investors. Quotations
of average annual total return for the Fund will be expressed in terms of the
average annual compounded rate of return of a hypothetical investment in the
Fund over a period of 1, 5 and 10 years (up to the life of the Fund). Total
return quotations reflect the deduction of a proportional share of Fund expenses
(on an annual basis), and assume that all dividends and distributions are
reinvested when paid.

Performance information for the Fund may be compared to various unmanaged
securities indices, groups of mutual funds tracked by mutual fund ratings
services, or other general economic indicators. Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.

Performance information for the Fund represents only the performance of a
hypothetical investment in the Fund during the particular time period on which
the calculations are based. Performance information should be considered in
light of the Fund's investment objectives and policies, characteristics and
quality of the Fund's portfolio, and the market conditions during the given time
period, and should not be considered as a representation of what may be achieved
in the future. For a description of the methods used to determine total return
for the Fund, see the SAI.

<PAGE>

CUSTODIAN AND TRANSFER AGENT

Securities of the Fund are held by The Chase Manhattan Bank, N.A. as
Custodian for the Fund. Forum Financial Corp. serves as the Fund's Transfer and
Dividend Disbursing Agent.

SHAREHOLDER INQUIRIES

Inquiries about the Fund's investment policies and past performance should
be directed to:

International Equity Fund
P.O. Box 446
Portland, Maine 04112

Information about specific shareholder accounts may be obtained from the
Transfer Agent by calling (800) 344-8332.

<PAGE>

INTERNATIONAL EQUITY FUND

INVESTMENT ADVISER
Schroder Capital Management International Inc.
787 Seventh Avenue
New York, New York 10019

ADMINISTRATOR & DISTRIBUTOR
Schroder Capital Distributors Inc.
787 Seventh Avenue
New York, New York 10019

SUB-ADMINISTRATOR
Forum Financial Services, Inc.
61 Broadway, Suite 2770
New York, New York 10006

CUSTODIAN
The Chase Manhattan Bank, N.A.
Global Custody Division
Woolgate House, Coleman Street
London EC2P 2HD, United Kingdom

TRANSFER AND DIVIDEND DISBURSING AGENT
Forum Financial Corp.
P.O. Box 446
Portland, Maine 04112

COUNSEL
Jacobs Persinger & Parker
77 Water Street
New York, New York 10005

INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109

Table of Contents
THE FUND. . . . . . . . . . . . . . . . . . . . . . . . 2
Introduction. . . . . . . . . . . . . . . . . . . . . . 2
Fee Table . . . . . . . . . . . . . . . . . . . . . . . 2
Financial History . . . . . . . . . . . . . . . . . . . 4
Investment Objective. . . . . . . . . . . . . . . . . . 5
Investment Policies . . . . . . . . . . . . . . . . . . 5
Investment Restrictions . . . . . . . . . . . . . . . . 5
Special Considerations. . . . . . . . . . . . . . . . . 6
MANAGEMENT OF THE FUND. . . . . . . . . . . . . . . . . 7
Board of Directrors . . . . . . . . . . . . . . . . . . 7
Investment Adviser and Portfolio Manager. . . . . . . . 7
Administrative Services . . . . . . . . . . . . . . . . 7
Distribution. . . . . . . . . . . . . . . . . . . . . . 8
Code of Ethics. . . . . . . . . . . . . . . . . . . . . 8
Service Organizations . . . . . . . . . . . . . . . . . 8
Other Expenses. . . . . . . . . . . . . . . . . . . . . 9
Portfolio Transactions. . . . . . . . . . . . . . . . . 9
INVESTMENT IN THE FUND. . . . . . . . . . . . . . . . .10
Purchase of Shares. . . . . . . . . . . . . . . . . . .10
Retirement Plans. . . . . . . . . . . . . . . . . . . .10
Individual Retirement Accounts. . . . . . . . . . . . .11
Redemption of Shares. . . . . . . . . . . . . . . . . .11
Net Asset Value . . . . . . . . . . . . . . . . . . . .12
DIVDENDS, DISTRIBUTION AND TAXES. . . . . . . . . . . .13
OTHER INFORMATION . . . . . . . . . . . . . . . . . . .14
Capitalization and Voting . . . . . . . . . . . . . . .14
Reports . . . . . . . . . . . . . . . . . . . . . . . .14
Performance Information . . . . . . . . . . . . . . . .14
Custodian and Tranafer Agent. . . . . . . . . . . . . .15
Shareholder Inquiries . . . . . . . . . . . . . . . . .15

INTERNATIONAL
EQUITY FUND

Prospectus
March 1, 1995

<PAGE>

SCHRODER U.S. EQUITY FUND
SCHRODER U.S. SMALLER COMPANIES FUND
TWO PORTLAND SQUARE
PORTLAND, MAINE 04101

SCHRODER CAPITAL MANAGEMENT INTERNATIONAL INC. - INVESTMENT ADVISER
SCHRODER CAPITAL DISTRIBUTORS INC. - DISTRIBUTOR

Schroder U.S. Equity Fund and Schroder U.S. Smaller Companies Fund (each a
"Fund" and collectively the "Funds") are separately-managed, diversified
portfolios of Schroder Capital Funds, Inc. (the "Company"), an open-end
management investment company currently consisting of five separate portfolios,
each of which has different investment objectives and policies.

Schroder U.S. Equity Fund seeks growth of capital by investing
substantially all of its assets in common stock and securities convertible into
common stock. Income, while a factor in portfolio selection, is secondary to
the principal objective of growth of capital. The Fund also may invest in
warrants or other rights to purchase common stock, and to a lesser extent in
non-convertible preferred and debt securities.

Schroder U.S. Smaller Companies Fund seeks capital appreciation through
investments in a diversified portfolio which under normal conditions will have
at least 65% of its total assets invested in equity securities of companies
having market capitalizations under $1 billion. Current income will be
incidental to the objective of capital appreciation. Investments in smaller
capitalization companies involve greater risks than those risks associated with
investments in larger capitalization companies.

This Prospectus sets forth concisely the information concerning the Funds
that a prospective investor should know before investing. A Statement of
Additional Information (the "SAI") for each Fund, dated March 1, 1995, as
supplemented from time to time and containing additional and more detailed
information about the Fund, has been filed with the Securities and Exchange
Commission ("SEC") and is hereby incorporated by reference into this Prospectus.
Each Fund's SAI is available without charge and may be obtained by writing or
calling the Funds at the address and telephone numbers printed above.

---------------------------------------------------------------------------
This prospectus should be read and retained for information about the Fund.
---------------------------------------------------------------------------

THE SHARES OFFERED HEREBY ARE NOT OBLIGATIONS, DEPOSITS, OR ACCOUNTS
OF, OR ENDORSED OR GUARANTEED BY, ANY BANK OR ANY AFFILIATE OF A BANK AND
ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE SYSTEM, OR ANY FEDERAL AGENCY.

This Prospectus is dated March 1, 1995.

<PAGE>

PROSPECTUS SUMMARY
2

THE FUNDS

The Funds are separately-managed, non-diversified no-load portfolios of Schroder
Capital Funds, Inc., which was organized as a corporation under Maryland law on
June 30, 1969, and is registered as an open-end management investment company
under the Investment Company Act of 1940 (the "Act"). On February 29, 1988, the
Company was recapitalized to enable the Company's Board of Directors (the "Board
of Directors") to establish series of separately-managed investment portfolios
and to issue a separate class of the Company's common stock with respect to each
portfolio. The Company currently consists of five separate portfolios, each of
which has separate investment objectives and policies.

INVESTMENT ADVISER

The Funds' Investment Adviser is Schroder Capital Management International Inc.
("SCMI"), 787 Seventh Avenue, New York, New York, 10019. See "Management of the
Funds - Investment Adviser and Portfolio Managers."

ADMINISTRATIVE SERVICES

The Administrator of Schroder U.S. Smaller Companies Fund is Schroder Capital
Distributors Inc. ("Schroder Distributors"), 787 Seventh Avenue, New York, New
York 10019, a wholly-owned subsidiary of SCMI. SCMI provides similar
administrative services for Schroder U.S. Equity Fund through its Investment
Advisory Contract with that Fund. The Company and SCMI, with respect to
Schroder U.S. Equity Fund, and the Company and Schroder Distributors, with
respect to Schroder U.S. Smaller Companies Fund, have entered into Sub-
Administration Agreements with Forum Financial Services, Inc. ("Forum"). In
these capacities, Schroder Distributors and Forum provide certain management and
administrative services necessary for the Funds' operations, other than the
investment management and administrative services provided to the Funds by SCMI
pursuant to its Investment Advisory Contracts with the Funds. See "Management
of the Funds - Administrative Services."

PURCHASES AND REDEMPTIONS OF SHARES

Shares of the Funds may be purchased directly through the Funds' Transfer Agent,
Forum Financial Corp., through certain broker-dealers who assist their customers
in purchasing shares of the Funds and through certain other financial
organizations. The minimum initial investment for Schroder U.S. Equity Fund is
$500 and for Schroder U.S. Smaller Companies Fund is $2,500. The minimum
subsequent investment is $100 for each Fund. See "Investment in the Funds -
Purchase of Shares." Redemptions may be made by telephone or by letter to the
Funds, specifying the dollar amount or number of shares to be redeemed and
account number. See "Investment in the Funds - Redemption of Shares."

DIVIDENDS AND DISTRIBUTIONS

The Funds intend to declare and pay as a dividend substantially all of their net
investment income annually and to distribute any net realized long-term capital
gain at least annually. Dividend and capital gain distributions will be
reinvested automatically in additional shares of a Fund unless the shareholder
has notified the Fund in the shareholder's Account Application or otherwise in
writing of the shareholder's election to receive distributions in cash. See
"Dividends, Distributions and Taxes."

SPECIAL RISK CONSIDERATIONS

There can be no assurance that either Fund will achieve its investment
objective. A Fund's net asset value and total return will fluctuate based upon
changes in the value of its portfolio securities so that, upon redemption, an
investment in a Fund may be worth more or less than its original value.

All investments by the Funds entail risk. Schroder U.S. Smaller Companies
Fund's policy of investing in smaller companies entails certain risks in
addition to those normally associated with investments in equity securities.
See "Investment Objectives and Policies - Schroder U.S. Smaller Companies Fund -
Certain Risk Considerations."
<PAGE>

FEE TABLE
3

The foregoing table shows the costs and expenses that an investor would incur as
a shareholder of a Fund, based upon that Fund's annual operating expenses for
the fiscal year ended October 31, 1994.

Schroder
Schroder U.S. U.S. Smaller
Equity Fund Companies Fund
------------- --------------
<S> <C> <C>

Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchase
(as a percentage of the offering price) None None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of the offering price) None None
Deferred Sales Load (as a percentage of the redemption proceeds) None None
Redemption Fees (as a percentage of the amount redeemed) None None
Exchange Fees None None
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees* 0.74% 0.74%
12b-1 Fees** None None
Other Expenses*** 0.57% 0.71%
----- -----
Total Fund Operating Expenses 1.31% 1.45%

</TABLE>

* Management Fees for the Funds reflect the fees paid by the Funds for
investment and administrative services. Management Fees for the Funds are
higher than those generally charged to most investment companies; they are
not necessarily higher than those charged to funds with investment
objectives similar to those of the Fund.

** Pursuant to Rule 12b-1 under the Act, Schroder U.S. Smaller Companies Fund
has adopted a Distribution Plan generally authorizing it to pay directly,
or reimburse the distributor for, costs and expenses incurred in connection
with distribution of Fund shares. These payments or reimbursements are
limited to an annual rate of 0.50% of the Fund's average daily net assets.
Costs or expenses in excess of this limit may not be carried forward to
future years. See "Management of the Funds - Distribution." The Fund has
no current intention of implementing the Distribution Plan, and in any
event will make no payments under the Distribution Plan until further
authorized by the Board of Directors. If the Distribution Plan is
implemented, long term shareholders of the Fund may pay aggregate sales
charges totalling more than the economic equivalent of the maximum front-
end sales charge permitted by the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. In the event that the Fund were to
make payments under the Distribution Plan, 12b-1 Fees and Total Operating
Expenses would be higher.

*** In addition to and distinct from payments authorized under the Distribution
Plan, the Board of Directors has authorized each Fund generally to pay
Service Organizations fees at an annual rate of up to 0.25% of the Fund's
average daily net assets for administrative services related to maintaining
shareholder accounts. See "Management of the Funds - Service
Organizations." The Funds have no intention of making any such payments,
and in any event will make no such payments until further authorized by the
Board of Directors. In the event that a Fund were to make payments to
Service Organizations, Other Expenses and Total Operating Expenses would be
higher. For a description of the other types of expenses for each Fund
included in the category "Other Expenses," see "Management of the Funds -
Other Expenses."

EXAMPLE

You would pay the following expenses on a $1,000 investment in a Fund, assuming
(1) 5% annual return and (2) redemption at the end of each time period:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Schroder U.S. Equity Fund $13 $41 $72 $158
Schroder U.S. Smaller Companies Fund $15 $46 $79 $174

THE PURPOSE OF THE FOREGOING TABLE IS TO ASSIST THE INVESTOR IN
UNDERSTANDING THE VARIOUS COSTS AND EXPENSES THAT SHAREHOLDERS IN THE FUNDS WILL
BEAR. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN; THE ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.

<PAGE>

FINANCIAL HIGHLIGHTS
4

The financial data shown below is to assist investors in evaluating the
performance of the Funds for the periods shown. This information is part of the
Funds' financial statements and has been audited by Coopers & Lybrand L.L.P.,
independent accountants. The data in the table should be read in conjunction
with the financial statements, notes thereto and report thereon of Coopers &
Lybrand L.L.P. contained in each Fund's annual report which is incorporated by
reference into the SAI. Further information about each Fund's performance also
is contained in the annual report, which may be obtained by shareholders free of
charge upon request.

SCHRODER U.S. EQUITY FUND
Year ended October 31
1994 1993 1992 1991 1990 1989
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>

NET ASSET VALUE, BEGINNING OF YEAR 11.28 10.51 9.56 7.05 8.35 7.49
---------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income 0.04 0.05 0.02 0.09 0.11 0.17
Net Realized Income and Unrealized
Gain (Loss) on Investments (0.27) 1.86 1.61 2.57 (0.77) 1.30
---------------------------------------------------------------------------------

Total from Investment Operations (0.23) 1.91 1.63 2.66 (0.66) 1.47
DISTRIBUTIONS
from Net Investment Income (0.01) (0.04) (0.04) (0.11) (0.11) (0.15)
from Realized Capital Gain (2.52) (1.10) (0.58) -- (0.53) (0.46)
from Capital Paid-In -- -- (0.06) (0.04) -- --
---------------------------------------------------------------------------------
Total Distributions (2.53) (1.14) (0.68) (0.15) (0.64) (0.61)
NET ASSET VALUE, END OF YEAR $8.52 $11.28 $10.51 $9.56 $7.05 $8.35
---------------------------------------------------------------------------------
TOTAL RETURN (2.01)% 19.49% 17.74% 38.16% (8.78%) 21.05%
---------------------------------------------------------------------------------

RATIO/SUPPLEMENTARY DATA:
Net Assets, End of Year (Thousands) 18,483 21,865 19,882 20,234 18,290 23,838
Ratio of Expenses to Average Net Assets 1.31% 1.18% 1.40% 1.39% 1.34% 1.49%
Ratio of Net Investment
Income to Average Net Assets 0.41% 0.51% 0.42% 1.30% 1.59% 1.99%
Portfolio Turnover Rate 27.43% 57.78% 31.33% 29.98% 28.31% 40.35%

Schroder U.S. Equity Fund Schroder U.S. Smaller
(continued) Companies Fund
Year ended October 31 Year ended October 31
1988 1987 1986 1985 1994 1993 (a)
--------------------------------------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>

NET ASSET VALUE, BEGINNING OF YEAR 10.15 12.55 10.86 10.49 $10.99 $10.00
--------------------------------------------------- ---------------------
INVESTMENT OPERATIONS
Net Investment Income 0.18 0.20 0.28 0.28 (0.07) (0.02)
Net Realized Income and Unrealized
Gain (Loss) on Investments 0.28 0.18 2.38 0.75 0.97 1.01
--------------------------------------------------- ---------------------
Total from Investment Operations 0.46 0.38 2.66 1.03 0.90 0.99
DISTRIBUTIONS
from Net Investment Income (0.18) (0.25) (0.24) (0.30) -- --
from Realized Capital Gain (2.94) (2.53) (0.73) (0.36) (0.08) --
from Capital Paid-In -- -- -- -- -- --
--------------------------------------------------- ---------------------
Total Distributions (3.12) (2.78) (0.97) (0.66) (0.08) --

NET ASSET VALUE, END OF YEAR $7.49 $10.15 $12.55 $10.86 $11.81 $10.99
--------------------------------------------------- ---------------------
TOTAL RETURN 7.74% 2.55% 25.43% 10.31% 8.26% 9.90%
--------------------------------------------------- ---------------------

RATIO/SUPPLEMENTARY DATA:
Net Assets, End of Year (Thousands) 25,569 29,749 46,641 51,346 13,324 12,489
Ratio of Expenses to Average Net Assets 1.60% 1.30% 1.16% 1.16% 1.45% 2.03% (b)
Ratio of Net Investment
Income to Average Net Assets 1.89% 1.60% 2.25% 2.66% (0.58%) (0.99%)(b)
Portfolio Turnover Rate 18.42% 43.11% 40.51% 58.53% 70.82% 12.58% (b)

</TABLE>

(a) The Fund commenced operations on August 6, 1993.
(b) Annualized

<PAGE>

INVESTMENT OBJECTIVES AND POLICIES
5

SCHRODER U.S. EQUITY FUND

INVESTMENT OBJECTIVES. The primary investment objective of the Fund is to
seek growth of capital. Income, while a factor in portfolio selection, is
secondary to the principal objective.

These investment objectives are fundamental policies of the Fund and as
such cannot be changed without the majority approval of the Fund's shareholders.
A non-fundamental policy could be changed by the Board of Directors without
prior shareholder approval. Unless otherwise indicated, all of the investment
policies of the Fund described below are also fundamental policies.

There can be no assurance that the Fund's objective will be achieved. The
Fund is not intended for investors whose objective is assured income or
preservation of capital.

INVESTMENT POLICIES. The Fund will normally invest substantially all of
its assets in common stock and securities convertible into common stock. As
part of this policy, the Fund may also invest in other securities with common
stock purchase warrants attached, in such warrants themselves or in other rights
to purchase common stock.

The Fund may also invest to a limited degree in non-convertible preferred
and debt securities. Such investments might be made when management believes
that greater yields could be earned on these types of securities of investment
grade than on U.S. Government securities or bank certificates of deposit. As a
non-fundamental policy, the Fund will not invest more than 15% of its total
assets in non-convertible preferred and debt securities.

The Fund will generally purchase securities which are believed to have
potential for capital appreciation. However, securities will be disposed of
when the Fund believes that such potential is no longer feasible or the risk of
decline in market price is too great.

For temporary defensive purposes, the Fund may invest all or any portion of
its assets in investment grade corporate bonds or debentures (meaning for these
purposes bonds or debentures rated "A" or better by Standard & Poor's
Corporation or the equivalent thereof), preferred stock, U.S. Government
securities or bank certificates of deposit. Management may pursue a temporary
defensive strategy when it believes that the market appears relatively fully
priced or that uncertain economic conditions indicate the advisability of
assuming a temporary defensive position.

As an operating, non-fundamental policy, the Fund may also invest
temporarily in certain short-term fixed income securities. Such securities may
be used to invest uncommitted cash balances or to maintain liquidity to meet
shareholder redemptions or other Fund obligations. These securities may include
U.S. Government securities, commercial paper, bank certificates of deposit and
bankers' acceptances, and repurchase agreements collateralized by these
securities. The Fund will limit its total investment at any time in these
securities for this operating purpose to not more than 25% of its total assets.

The Fund may from time to time acquire securities which are subject to
legal or contractual restrictions on resale. The risk involved in such
investments is that a considerable period might elapse between the time a
decision is made to sell such securities and the time the Fund might be
permitted to sell all or part of such securities publicly under a registration
statement or an exemption from registration or privately to a suitable
purchaser. The delay might adversely affect the price which the Fund could
obtain for the securities and, in a registration, the Fund could be required to
pay registration expenses.

The Fund is authorized to borrow money from a bank on its promissory note
or other evidence of indebtedness. Monies borrowed would be invested and any
appreciation thereon, to the extent it exceeded interest paid on the loan, would
cause the net asset value of Fund shares to rise faster than it would otherwise.
If, however, the investment performance of additional monies failed to cover the
Fund's interest charges, the net asset value would decrease faster than would
otherwise be the case. This is the speculative feature known as "leverage".
<PAGE>
6

The Fund's authority to borrow is subject to limitations. Any borrowing
(i) would not exceed one-third of the value of the Fund's total assets after the
borrowing, (ii) if at any time it exceeded the one-third limitation, the Fund
would within three days thereafter (not including Sundays or holidays) or such
longer period as the SEC may prescribe by rules and regulations, reduce its
borrowings to the limitation, and (iii) might or might not be secured and, if
secured, all or any part of the Fund's assets could be pledged. To comply with
these limitations, the Fund might be required to dispose of certain of its
assets when it might be disadvantageous to do so. Any borrowings would be
subject to Federal Reserve Board regulations. The Fund has not borrowed for
investment or any other purpose during the last ten years and, as a non-
fundamental policy, will not borrow for investment in the future.

SCHRODER U.S. SMALLER COMPANIES FUND

INVESTMENT OBJECTIVES. The Fund's investment objective is capital
appreciation through investment in a diversified portfolio which under normal
conditions will have at least 65% of its total assets invested in equity
securities of companies having market capitalizations under $1 billion. Current
income will be incidental to the objective of capital appreciation.

There can be no assurance that the Fund's objective will be achieved. The
Fund is not intended for investors whose objective is assured income or
preservation of capital.

INVESTMENT POLICIES. The Fund is designed for the investment of that
portion of an investor's funds which can appropriately bear the special risks
associated with investment in smaller capitalization companies with the aim of
capital appreciation. In its investment approach, SCMI will attempt to identify
securities of companies which it believes can generate above average earnings
growth, selling at favorable prices in relation to book values and earnings. As
part of the investment decision the investment adviser's assessment of the
competency of an issuer's management will be an important consideration. These
criteria are not rigid, and other investments may be included in the Fund's
portfolio if they may help the Fund to attain its objective. These criteria can
be changed by the Board of Directors.

The Fund will invest principally in equity securities (common stocks,
securities convertible into common stocks or, subject to special limitations,
rights or warrants to subscribe for or purchase common stocks). However, the
Fund may also invest to a limited degree in non-convertible debt securities and
preferred stocks when, in the opinion of SCMI, such investments are warranted to
achieve the Fund's investment objective. A convertible security is a bond,
debenture, note, preferred stock or other security that may be converted into or
exchanged for a prescribed amount of common stock of the same or a different
issuer within a particular period of time at a specified price or formula.
Investments in warrants or rights to subscribe for or purchase common stocks
will not be counted in determining the 65% of total assets test set forth above
but are subject to the limitations described below in "Additional Investment
Policies - Warrants".

The Fund may invest in securities of small, unseasoned companies (which,
together with any predecessors, have been in operation for less than three
years), as well as in securities of more established companies. In view of the
volatility of price movements of the former, as a non-fundamental policy, the
Fund currently intends to invest no more than 10% of its total assets in
securities of small, unseasoned issuers, while reserving the right to invest up
to 20% of its total assets in such issuers.
<PAGE>
7

Although there is no minimum rating for debt securities (convertible or
non-convertible) in which the Fund may invest, it is the present intention of
the Fund to invest no more than 5% of its net assets in debt securities rated
below Baa by Moody's Investors Service Inc. ("Moody's") or BBB by Standard &
Poor's Corporation ("S&P"), such securities being commonly known as "high
yield/high risk" securities or "junk bonds," and it will not invest in debt
securities which are in default. High yield/high risk securities are
predominantly speculative with respect to the capacity to pay interest and repay
principal and generally involve a greater volatility of price than securities in
higher rated categories. In the event the Fund intends in the future to invest
more than 5% of its net assets in junk bonds, appropriate disclosures will be
made to existing and prospective shareholders. It should be noted that even
bonds rated Baa by Moody's or BBB by S&P are described by those rating agencies
as having speculative characteristics and that changes in economic conditions or
other circumstances are more likely to lead to a weakened capacity of issuers of
such bonds to make principal and interest payments than is the case with higher
grade bonds. The Fund is not obligated to dispose of securities due to changes
by the rating agencies. See the SAI for information about the risks associated
with investing in junk bonds.

CERTAIN RISK CONSIDERATIONS. All investments involve certain risks.
Investments in smaller capitalization companies involve greater risks than those
risks associated with investments in larger capitalization companies. Smaller
capitalization companies generally experience higher growth rates and higher
failure rates than do larger capitalization companies. The trading volume of
securities of smaller capitalization companies is normally less than that of
larger capitalization companies and, consequently, generally have a
disproportionate effect on their market price, tending to make them rise more in
response to buying demand and fall more in response to selling pressure than is
the case with larger capitalization companies.

Investments in small, unseasoned issuers generally involve greater risk
than is customarily associated with larger, more seasoned companies. Such
issuers often have products and management personnel which have not been
thoroughly tested by time or the marketplace and their financial resources may
not be as substantial as those of more established companies. Their securities,
which the Fund may purchase when they are offered to the public for the first
time, may have a limited trading market, which may adversely affect their sale
by the Fund and can result in such securities being priced lower than otherwise
might be the case. If other institutional investors engage in trading this type
of security, the Fund may be forced to dispose of its holdings at prices lower
than might otherwise be obtained.

ADDITIONAL INVESTMENT POLICIES

REPURCHASE AGREEMENTS. Each Fund may invest in repurchase agreements. A
repurchase agreement is a means of investing monies for a short period. In a
repurchase agreement, a seller - a U.S. bank or recognized broker-dealer - sells
securities to the Fund and agrees to repurchase the securities at the Fund's
cost plus interest within a specified period (normally one day). In these
transactions, the values of the underlying securities purchased by the Fund are
monitored at all times by SCMI to insure that the total value of the securities
equals or exceeds the value of the repurchase agreement, and the Fund's
custodian bank holds the securities until they are repurchased. In the event of
default by the seller under the repurchase agreement, the Fund may have
difficulties in exercising its rights to the underlying securities and may incur
costs and experience time delays in disposing of them. To evaluate potential
risks, SCMI reviews the creditworthiness of those banks and dealers with which
the Fund enters into repurchase agreements.
<PAGE>
8

WARRANTS. As a non-fundamental policy, the Funds may not invest more than
5% of their net assets (at the time of investment) in warrants (other than those
that have been acquired in units or attached to other securities). No more than
2% of a Fund's net assets (at the time of investment) may be invested in
warrants that are not listed on the New York or American Stock Exchanges.
Warrants are options to purchase equity securities at specific prices valid for
a specific period of time. Their prices do not necessarily move parallel to the
prices of the underlying securities. Warrants have no voting rights, receive no
dividends and have no rights with respect to the assets of the issuer.

ILLIQUID AND RESTRICTED SECURITIES. As a non-fundamental policy, Schroder
U.S. Equity Fund may not purchase or otherwise acquire any security if, as a
result, more than 10% of its total assets would be invested in securities that
are illiquid by virtue of the absence of a readily available market ("illiquid
securities"). Securities subject to legal or contractual restrictions on resale
("restricted securities") and evidences of indebtedness of a type distributed
privately to financial institutions are included in Schroder U.S. Equity Fund's
10% limit. As a non-fundamental policy, Schroder U.S. Smaller Companies Fund
may not purchase or otherwise acquire any security if, as a result, more than
15% of its net assets (taken at current value) would be invested in illiquid
securities. There may be undesirable delays in selling illiquid securities at
prices representing their fair value. This policy includes over-the-counter
options held by Schroder U.S. Smaller Companies Fund and a portion of assets
used to cover such options as well as repurchase agreements maturing in more
than seven days. Schroder U.S. Smaller Companies Fund's limit on investment in
illiquid securities does not include restricted securities eligible for resale
to qualified institutional purchasers pursuant to Rule 144A under the Securities
Act of 1933 that are determined to be liquid by the Board of Directors or SCMI
under Board-approved guidelines. Such guidelines take into account trading
activity for such securities and the availability of reliable pricing
information, among other factors. If there is a lack of trading interest in
particular Rule 144A securities, the Fund's holdings of those securities may be
illiquid. See "Illiquid and Restricted Securities" in the SAI for further
details.

LOANS OF PORTFOLIO SECURITIES. Schroder U.S. Smaller Companies Fund may
lend portfolio securities (other than in repurchase transactions) to brokers,
dealers and other financial institutions meeting specified credit conditions, if
the loan is collateralized in accordance with applicable regulatory requirements
and if, after any loan, the value of the securities loaned does not exceed 25%
of the value of the Fund's total assets. By so doing, the Fund attempts to earn
income through the receipt of interest on the loan. In the event of the
bankruptcy of the other party to a securities loan, the Fund could experience
delays in recovering the securities it lent. To the extent that, in the
meantime, the value of the securities the Fund lent has increased, the Fund
could experience a loss.

The Fund may lend securities from its portfolio if liquid assets in an
amount at least equal to the current market value of the securities loaned
(including accrued interest thereon) plus the interest payable to the Fund with
respect to the loan is maintained as collateral by the Fund in a segregated
account. Any securities that the Fund may receive as collateral will not become
a part of its portfolio at the time of the loan, and, in the event of a default
by the borrower, the Fund will, if permitted by law, dispose of such collateral
except for such part thereof that is a security in which the Fund is permitted
to invest. During the time that the securities are on loan, the borrower will
pay the Fund any accrued income on those securities, and the Fund may invest the
cash collateral and earn income or receive an agreed upon fee from a borrower
that has delivered cash equivalent collateral. Cash collateral received by the
Fund will be invested in U.S. Government securities and liquid high grade debt
obligations. The value of securities loaned will be marked to market daily.
Portfolio securities purchased with cash collateral are subject to possible
depreciation. Loans of securities by the Fund will be subject to termination at
the Fund's or the borrower's option. The Fund may pay reasonable negotiated
fees in connection with loaned securities, so long as such fees are set forth in
a written contract and approved by the Fund's Board of Directors.
<PAGE>
9

COVERED CALLS AND HEDGING. While Schroder U.S. Smaller Companies Fund does
not presently intend to do so, it may write covered call options and purchase
certain put and call options, stock index futures, and options on stock index
futures and broadly-based stock indices, all of which are referred to as
"Hedging Instruments". In general, the Fund may use Hedging Instruments: (1)
to attempt to protect against declines in the market value of the Fund's
portfolio securities or stock index futures, and thus protect the Fund's net
asset value per share against downward market trends, or (2) to establish a
position in the equities markets as a temporary substitute for purchasing
particular equity securities. The Fund will not use Hedging Instruments for
speculation. The Hedging Instruments which the Fund is authorized to use have
certain risks associated with them. Principal among such risks are: (a) the
possible failure of such instruments as hedging techniques in cases where the
price movements of the securities underlying the options or futures do not
follow the price movements of the portfolio securities subject to the hedge; (b)
potentially unlimited loss associated with futures transactions and the possible
lack of a liquid secondary market for closing out a futures position; and (c)
possible losses resulting from the inability of the Fund's investment adviser to
correctly predict the direction of stock prices, interests rates and other
economic factors. The Hedging Instruments the Fund may use and the risks
associated with them are described in greater detail under "Covered Calls and
Hedging" in the SAI.

SHORT SALES AGAINST-THE-BOX. Schroder U.S. Smaller Companies Fund may not
sell securities short except in "short sales against-the-box". For Federal
income tax purposes, short sales against-the-box may be made to defer
recognition of gain or loss on the sale of securities "in the box" and no income
can result and no gain can be realized from securities sold short against-the-
box until the short position is closed out. Such short sales are subject to the
limits described in "Investment Restrictions," below. See "Short Sales Against-
the-Box" in the SAI for further details.

PORTFOLIO TURNOVER. The Funds may engage in short-term trading but their
portfolio turnover rates are not expected to exceed 100%. High portfolio
turnover and short-term trading involve correspondingly greater commission
expenses and transaction costs. Also, higher portfolio turnover rates can make
it more difficult for a Fund to qualify as a regulated investment company for
federal income tax purposes and may cause shareholders of a Fund to recognize
gains for federal income tax purposes. See "Taxation" in the SAI.

INVESTMENT RESTRICTIONS

SCHRODER U.S. EQUITY FUND. The Fund has adopted certain investment
restrictions designed to reduce its exposure in specific situations which are
fundamental policies of the Fund. Under some of those restrictions the Fund
cannot:

(1) Acquire more than 10% of the voting securities of any one issuer;

(2) Invest 25% or more of its total assets in any one industry;

(3) Invest in companies for the purpose of exercising control or
management;

(4) Invest more than 10% of its total assets in "restricted securities";

(5) Make loans to other persons except that it may invest up to 10% of its
total assets in evidences of indebtedness of a type distributed
privately to financial institutions;

(6) Invest, in the aggregate, more than 10% of its total assets in
securities described in 4 and 5 above;

(7) Invest in other investment companies.

As a non-fundamental policy, the Fund will not engage in writing, buying or
selling of stock index futures, options on stock index futures, financial
futures contracts or options thereon.

The percentage restrictions described above and in the SAI apply only at
the time of investment and require no action by the Fund as a result of
subsequent changes in value of the investments or the size of the Fund. A
supplementary list of investment restrictions is contained in the SAI.
<PAGE>
10

SCHRODER U.S. SMALLER COMPANIES FUND. The Fund has adopted certain
investment restrictions designed to reduce its exposure in specific situations
which are fundamental policies of the Fund. Under some of those restrictions
the Fund cannot:

(1) Invest in securities (except those of the U.S. Government or its
agencies or instrumentalities) or any issuer if immediately thereafter
(a) more than 5% of the Fund's total assets would be invested in
securities of that issuer, or (b) the Fund would then own more than
10% of that issuer's voting securities;

(2) Make short sales of securities except "short sales against-the-box";
in such short sales, at all times during which a short position is
open, the Fund must own an equal amount of such securities, or by
virtue of ownership of securities have the right, without payment of
further consideration, to obtain an equal amount of the securities
sold short; no more than 15% of the Fund's net assets will be held as
collateral for such short sales at any one time;

(3) Concentrate investments in any particular industry; therefore the Fund
will not purchase the securities of companies in any one industry if,
thereafter, 25% or more of the Fund's total assets would consist of
securities of companies in that industry;

(4) Borrow money except from banks for temporary emergency purposes and
then only in an amount not exceeding 5% of the value of the total
assets of the Fund;

(5) Pledge, mortgage or hypothecate its assets to any extent greater than
10% of the value of the total assets of the Fund;

(6) Deviate from the percentage requirements listed under "Investment
Policies" and "Additional Investment Policies"; or

(7) Purchase securities of other investment companies, except in
connection with a merger, consolidation, acquisition or
reorganization, or by purchase of securities of closed-end investment
companies and only if immediately thereafter not more than (i) 3% of
the total outstanding voting stock of such company is owned by the
Fund, (ii) 5% of the Fund's total assets, taken at market value, would
be invested in any one such company, or (iii) 10% of the Fund's total
assets, taken at market value, would be invested in such securities.
It should be noted that as a shareholder in an investment company, the
Fund would bear its ratable share of that investment company's
expenses, including its advisory and administration fees. At the same
time, the Fund would continue to pay its own management and advisory
fees and other expenses.

MANAGEMENT OF THE FUNDS
11

BOARD OF DIRECTORS

The business and affairs of the Funds are managed under the direction of
the Board of Directors of the Company. The Directors are Peter E. Guernsey,
Ralph E. Hansmann, John I. Howell, Laura E. Luckyn-Malone, Clarence F. Michalis,
Hermann C. Schwab and Mark J. Smith. Additional information regarding the
Directors, as well as the Company's executive officers, may be found in each SAI
under the heading "Management - Officers and Directors."

INVESTMENT ADVISER AND PORTFOLIO MANAGERS

Schroder Capital Management International Inc. ("SCMI"), 787 Seventh
Avenue, New York, New York 10019, serves as investment adviser to the Funds
pursuant to separate Investment Advisory Contracts. SCMI manages the investment
and reinvestment of the assets included in each Fund's portfolio and
continuously reviews, supervises and administers the Funds' investments. In
this regard, it is the responsibility of SCMI to make decisions relating to the
Fund's investments and to place purchase and sale orders regarding such
investments with brokers or dealers selected by it in its discretion.

SCMI is a wholly-owned U.S. subsidiary of Schroders Incorporated, the
wholly-owned U.S. holding company subsidiary of Schroders plc. Schroders plc is
the holding company parent of a large worldwide group of banks and financial
services companies (referred to as the "Schroder Group"), with associated
companies and branch and representative offices located in seventeen countries
worldwide. The Schroder Group specializes in providing investment management
services with assets under management currently in excess of $75 billion.

For its advisory services with respect to Schroder U.S. Equity Fund, SCMI
receives from that Fund a fee, payable monthly, at the annual rate of 0.75% of
the Fund's average daily net assets of the first $100 million and 0.50% of the
Fund's average daily net assets in excess of $100 million. During the fiscal
year ended October 31, 1994, the total advisory fees paid by Schroder U.S.
Equity Fund to SCMI represented an annual effective rate of 0.74% of the Fund's
average daily net assets.

For its advisory services with respect to Schroder U.S. Smaller Companies
Fund, SCMI receives a monthly advisory fee equal on an annual basis to 0.50% of
the Fund's average daily net assets of the first $100 million, 0.40% of the next
$150 million the Fund's average daily net assets and 0.35% of the Fund's average
daily net assets in excess of $250 million. During the fiscal year ended
October 31, 1994, the total advisory fees paid by Schroder U.S. Smaller
Companies Fund to SCMI represented an annual effective rate of 0.49% of the
Fund's average daily net assets.

It is the Company's understanding that although other mutual funds pay
investment advisory fees at annual rates of 0.75% or more of their average net
assets (or a portion thereof), the majority of other mutual funds, regardless of
size, pay advisory fees at rates lower than 0.75% of any portion of their
average net assets.

Fariba Talebi, a Vice President of the Company and a First Vice President
of SCMI, with the assistance of an investment committee, is primarily
responsible for the day-to-day management of Schroder U.S. Equity Fund's
investment portfolio, a responsibility she has held since April, 1991. The
investment management team of Ms. Talebi and Ira Unschuld, a Vice President of
the Company and of SCMI, with the assistance of an investment committee, is
primarily responsible for the day-to-day management of Schroder U.S. Smaller
Companies Fund's investment portfolio, and has so managed the Fund since its
inception. Ms. Talebi and Mr. Unschuld have been employed by SCMI in the
investment research and portfolio management areas since 1987 and 1990,
respectively.

ADMINISTRATIVE SERVICES

On behalf of Schroder U.S. Smaller Companies Fund, the Company has entered
into an Administrative Services Contract with Schroder Capital Distributors Inc.
("Schroder Distributors"). SCMI provides similar administrative services for
Schroder U.S. Equity Fund through its Investment Advisory Contract with that
Fund. The Company and SCMI, with respect to Schroder U.S. Equity Fund, and the
Company and Schroder Distributors, with respect to Schroder U.S. Smaller
Companies Fund, have entered into Sub-Administration Agreements with Forum
Financial Services, Inc. ("Forum"). Schroder Distributors (with respect to
Schroder U.S. Smaller Companies Fund)
<PAGE>
12

and Forum (with respect to each Fund) provide certain management and
administrative services necessary for the Funds' operations, other than the
investment management and administrative services provided to the Funds by SCMI
pursuant to its Investment Advisory Contracts.

Schroder Distributors is a wholly-owned subsidiary of SCMI. For its
administrative services with respect to Schroder U.S. Smaller Companies Fund,
Schroder Distributors receives from that Fund a fee, payable monthly, at the
annual rate of 0.25% of the first $100 million of the Fund's average daily net
assets, 0.20% of the next $150 million of the Fund's average daily net assets
and 0.175% of average daily net assets in excess of $250 million. For the
fiscal year ended October 31, 1994, the Fund paid Schroder Distributors fees
representing an effective rate of 0.25% of the Fund's average daily net assets.

CODE OF ETHICS

The Funds, the Company, SCMI, Schroder Distributors, and Schroders
Incorporated have adopted a code of ethics which contains a policy on personal
securities transactions by "access persons," including portfolio managers and
investment analysts. That policy complies in all material respects with the
recommendations set forth in the May 9, 1994 Report of the Advisory Group on
Personal Investing of the Investment Company Institute.

DISTRIBUTION

Schroder Distributors acts as distributor to each Fund. Schroder
Distributors was organized in 1989 and registered as a broker-dealer to serve as
an administrator and distributor of mutual funds. Under the Distribution Plan
(the "Plan") adopted by the Company on behalf of Schroder U.S. Smaller Companies
Fund, which is in the form of a reimbursement plan, the Company is authorized to
pay directly or reimburse Schroder Distributors monthly for costs and expenses
incurred in connection with the distribution of Fund shares. Such payment or
reimbursement is subject to a limit of 0.50% per annum of the Fund's average
daily net assets. Payment or reimbursement may be for various types of costs,
including: (1) advertising expenses, including advertising by radio,
television, newspapers, magazines, brochures, sales literature, or direct mail,
(2) costs of printing prospectuses and other materials to be given or sent to
prospective investors, (3) expenses of sales employees or agents of Schroder
Distributors, including salary, commissions, travel and related expenses in
connection with the distribution of Fund shares and (4) payments to broker-
dealers who advise shareholders regarding the purchase, sale, or retention of
Fund shares ("trail fees"). Such payments to broker-dealers may be in amounts
up to 0.50% per annum of the Fund's average daily net assets. The Fund will not
be liable for distribution expenditures made by the distributor in any given
year in excess of the maximum amount (0.50% per annum of the Fund's average
daily net assets) payable under the Plan in that year. Costs or expenses in
excess of the 0.50% per annum limit may not be carried forward to future years.
Salary expense of salesmen who are responsible for marketing shares of the Fund
may be allocated to various portfolios of the Company that have adopted a Plan
similar to that of the Fund on the basis of average net assets; travel expense
may be allocated to, or divided among, the particular portfolios of the Company
for which it is incurred. The Fund will make no payments under the Distribution
Plan until the Board of Directors specifically further so authorizes.

Under the Distribution Contract between the Fund and Schroder Distributors,
Schroder Distributors provides its services to Schroder U.S. Equity Fund without
compensation and bears all the costs and expenses associated with the
distribution of Fund shares. Under the Distribution Contract between the Fund
and Schroder Distributors, Schroder Distributors provides its services to
Schroder U.S. Smaller Companies Fund without compensation other than any
payments made pursuant to the Plan.

SERVICE ORGANIZATIONS

Various banks, trust companies, broker-dealers (other than Schroder
Distributors) or other financial organizations (collectively, "Service
Organizations") also may provide administrative services for the Funds, such as
maintaining shareholder accounts and records. Each Fund may pay fees to Service
Organizations (which may vary depending upon the services provided) in amounts
up to an annual rate of 0.25% of the daily net asset value of the Fund's shares
owned by shareholders with whom the Service Organization has a servicing
relationship.
<PAGE>
13

Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest more than the minimum
initial or subsequent investments specified by the Fund or charging a direct fee
for servicing. If imposed, these fees would be in addition to any amounts which
might be paid to the Service Organization by the Fund. Each Service
Organization has agreed to transmit to its clients a schedule of any such fees.
Shareholders using Service Organizations are urged to consult them regarding any
such fees or conditions.

The Glass-Steagall Act and other applicable laws and regulations provide
that banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state regulations relating
to the permissible activities of banks and their subsidiaries or affiliates,
could prevent a bank Service Organization from continuing to perform all or part
of its servicing activities. If a bank were prohibited from so acting, its
shareholder clients would be permitted to remain shareholders of the Fund and
alternative means for continuing the servicing of such shareholders would be
sought. It is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences.

OTHER EXPENSES

The Funds bear all costs of their operations other than expenses
specifically assumed by Schroder Distributors or SCMI. The costs borne by the
Funds include legal and accounting expenses; Directors' fees and expenses;
insurance premiums, custodian and transfer agent fees and expenses; expenses
incurred in acquiring or disposing of the Fund's portfolio securities; 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 the
Fund's portfolio securities and pricing of the Fund's shares; a portion of the
expenses of maintaining the Fund's legal existence and of shareholders'
meetings; and expenses of preparation and distribution to existing shareholders
of reports, proxies and prospectuses. Company expenses directly attributed to a
Fund are charged to that Fund; other expenses are allocated proportionately
among all the portfolios of the Company in relation to the net assets of each
portfolio. See "Management - Fees and Expenses" in the SAI.

For the fiscal year ended October 31, 1994, Fund expenses (other than
advisory and administrative fees) as a percentage of average net assets for
Schroder U.S. Equity Fund and Schroder U.S. Smaller Companies Fund were 0.57%
and 0.71%, respectively.

PORTFOLIO TRANSACTIONS

Decisions with respect to allocation of Schroder U.S. Equity Fund's
portfolio brokerage are made by the Company's President, a Vice President or
Treasurer. It is Schroder U.S. Equity Fund's policy, consistent with best
execution, to secure the highest possible price on sales and the lowest possible
price on purchases of securities. Schroder U.S. Smaller Companies Fund's
Investment Advisory Contract with SCMI authorizes and directs SCMI to place
orders for the purchase and sale of the Fund's investments with brokers and
dealers selected by SCMI in its discretion and to seek best execution of these
portfolio transactions. Each Fund may pay higher than the lowest available
commission rates when such brokerage allocation is believed reasonable in light
of the value of the brokerage and research services provided by the broker
effecting the transaction.

Subject to each Fund's policy of obtaining the best price consistent with
quality of execution on transactions, each Fund may employ Wertheim Schroder &
Company, Incorporated ("Wertheim"), an affiliate of SCMI, to effect transactions
of the Fund on the New York Stock Exchange only. Because of the affiliation
between SCMI and Wertheim, a Fund's payment of commissions to Wertheim is
subject to procedures adopted by the Company's Board of Directors to provide
that such commissions will not exceed the usual and customary brokers'
commissions. No specific portion of a Fund's brokerage will be directed to
Wertheim and in no event will Wertheim receive such brokerage in recognition of
research services.
<PAGE>

INVESTMENT IN THE FUNDS
14

PURCHASE OF SHARES

Shares of the Funds are offered at the net asset value next determined
after receipt of a Purchase Order (at the address set forth below) without any
sales charge as an investment vehicle for individuals, institutions,
corporations and fiduciaries. See "Investment in the Funds - Net Asset Value"
for a description of the times when net asset value is determined.
Prospectuses, sales material and applications can be obtained from the Company
or Forum Financial Corp., the Fund's Transfer Agent. See "Other Information -
Shareholder Inquiries".

The minimum initial investment is $500 with respect to Schroder U.S. Equity
Fund and $2,500 with respect to Schroder U.S. Smaller Companies Fund, except
that the minimum initial investment for each Fund for an Individual Retirement
Account is $250. The minimum subsequent investment for each Fund is $100. All
purchase payments are invested in full and fractional shares. The Fund is
authorized to reject any purchase order.

Initial and subsequent purchases may be made by mailing a check (in U.S.
dollars), payable to International Equity Fund, to:

International Equity Fund
P.O. Box 446
Portland, Maine 04112

In the case of an initial purchase, the check must be accompanied by a completed
Account Application.

Service Organizations (on behalf of customers) may transmit purchase
payments by Federal Reserve Bank wire directly to the Fund at the following
address:

Chase Manhattan Bank
New York, NY
ABA No.: 021000021
For Credit To: Forum Financial Corp.
Acct. No.: 910-2-718187
Ref.: (name of fund)
Account of: (shareholder name)
Account Number: (shareholder account number)

For each shareholder of record, the Fund's Transfer Agent, as the
shareholder's agent, establishes an open account to which all shares purchased
are credited, together with any dividends and capital gain distributions which
are paid in additional shares. Although most shareholders elect not to receive
share certificates, certificates for full shares can be obtained by specific
written request to the Fund's Transfer Agent. No certificates are issued for
fractional shares.

Purchases may also be made through broker-dealers who assist their
customers in purchasing shares of the Fund. Such broker-dealers may charge
their customers a service fee for processing orders to purchase or sell shares
of the Fund.

RETIREMENT PLANS

Shares of the Funds are offered in connection with tax-deferred retirement
plans. Application forms and further information about these plans, including
applicable fees, are available upon request. Before investing in a Fund through
one of these plans, an investor should consult the investor's tax adviser.
<PAGE>

INDIVIDUAL RETIREMENT ACCOUNTS
15

Shares of the Funds may be used as a funding medium for an Individual
Retirement Account ("IRA"). An Internal Revenue Service-approved IRA plan
naming The First National Bank of Boston as custodian is available from the
Company or the Funds' Transfer Agent. The minimum initial investment for an IRA
is $250; the minimum subsequent investment is $100. IRAs are available to
individuals who receive compensation or earned income, and their spouses,
whether or not they are active participants in a tax-qualified or Government-
approved retirement plan. An IRA contribution by an individual who
participates, or whose spouse participates, in a tax-qualified or Government-
approved retirement plan may not be deductible depending upon the individual's
income. Individuals also may establish an IRA to receive a "rollover"
contribution of distributions from another IRA or a qualified plan. Tax advice
should be obtained before planning a rollover.

REDEMPTION OF SHARES

Shares of the Funds will be redeemed at their next determined net asset
value following receipt by the Fund (at the address set forth below) of a
redemption request in proper form. See "Investment in the Funds - Net Asset
Value". Redemption requests by telephone or wire may be made between the hours
of 9:00 a.m. and 6:00 p.m. (New York City Time) on each day that the New York
Stock Exchange is open for trading.

WRITTEN REQUESTS. Redemptions may be made by letter to the Fund,
specifying the dollar amount or number of shares to be redeemed and account
number, and sent to:

Schroder Capital Funds, Inc.
(Name of Fund)
P.O. Box 446
Portland, Maine 04112

The letter must be signed in exactly the same way the account is registered
(if there is more than one owner of the shares, all must sign) and, in certain
cases, signatures must be guaranteed by an institution that is acceptable to the
Fund's Transfer Agent. Such institutions may include certain banks, broker-
dealers (including municipal and government securities brokers and dealers),
credit unions, securities exchanges and associations, clearing agencies and
savings associations. (Notaries public are not acceptable.) Further
documentation, such as copies of corporate resolutions and instruments of
authority, may be requested from corporations, administrators, executors,
personal representatives, directors or custodians to evidence the authority of
the person or entity making the redemption request. Questions concerning the
need for signature guarantees or documentation of authority should be directed
to the Fund at the address above or by calling (800) 344-8332.
<PAGE>
16

If shares to be redeemed are held in certificate form, the certificates
must be enclosed with the letter and the assignment form on the back of the
certificates, or an assignment separate from the certificates (but accompanied
by the certificates), must be signed by all owners in exactly the same way the
name or names are written on the face of the certificates. Requirements for
signature guarantees and/or documentation of authority as described above could
also apply. For your protection, the Fund suggests that certificates be sent by
registered mail.

Each Fund may suspend the right of redemption during any period when (i)
trading on the New York Stock Exchange is restricted or that Exchange is closed,
other than customary weekend and holiday closings, (ii) the SEC has by order
permitted such suspension, or (iii) an emergency, as defined by rules of the
SEC, exists making disposal of portfolio investments or determination of the
value of the net assets of the Fund not reasonably practicable.

If the Board of Directors should determine that it would be detrimental to
the best interest of the remaining shareholders of a Fund to make payment wholly
or partly in cash, the Fund may pay the redemption price in whole or in part by
a distribution in kind of securities from the portfolio of the Fund, in lieu of
cash, in conformity with applicable rules of the SEC. The Funds will, however,
redeem shares solely in cash up to the lesser of $250,000 or 1% of net assets
during any 90-day period for any one shareholder. In the event that payment for
redeemed shares is made wholly or partly in portfolio securities, the
shareholder may be subject to additional risks and costs in converting the
securities to cash. See "Additional Purchase and Redemption Information -
Redemption in Kind" in the SAI.

The proceeds of a redemption may be more or less than the amount invested
and, therefore, a redemption may result in a gain or loss for Federal income tax
purposes.

Due to the relatively high cost of maintaining smaller accounts, each Fund
reserves the right to redeem shares in any account (other than an IRA) if at any
time the total investment does not have a certain account value - $400 in the
case of Schroder U.S. Equity Fund and $2,000 in the case of Schroder U.S.
Smaller Companies Fund - unless the account value has fallen below such amount
solely as a result of market activity. An affected shareholder would be
notified that the value of the shareholder's account was less than the specified
amount and be allowed at least 30 days to make an additional investment to
increase the account value to at least this amount.

NET ASSET VALUE

The net asset value per share of each Fund is calculated at 4:00 p.m. (New
York City Time), Monday through Friday, on each day that the New York Stock
Exchange is open for trading (which excludes the following national business
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day). Net asset
value per share is calculated by dividing the aggregate value of the Fund's
assets less all liabilities by the number of shares of the Fund outstanding.
The Board of Directors has established procedures for the valuation of each
Fund's securities. In general, those valuations are based on market value, with
special provisions being made for securities which do not have readily available
market quotations, short-term debt securities and Hedging Instruments. For
further information, see "Determination of Net Asset Value Per Share" in the
SAI.
<PAGE>

DIVIDENDS, DISTRIBUTIONS AND TAXES
17

Each Fund intends to comply with the provisions of Subchapter M of the
Internal Revenue Code of 1986 (the "Code") applicable to regulated investment
companies. As a regulated investment company, each Fund will distribute
substantially all of its "investment company taxable income" and its "net
capital gains" at least annually, as defined in the Code, and, therefore, will
not be subject to Federal income tax to the extent the Fund distributes such
income and capital gains in the manner required under the Code.

Dividend and capital gains distributions will be reinvested automatically
in additional shares of the Fund at net asset value unless the shareholder has
notified the Fund in the shareholder's Account Application or otherwise in
writing of his selection to receive distributions in cash.

Dividend and capital gains distributions are made on a per-share basis.
After every distribution the value of a share declines by the amount of the
distribution. Purchases made shortly before a distribution include in the
purchase price the amount of the distribution which will be returned to the
investor in the form of a taxable dividend or capital gains distribution.

Earnings of a Fund not distributed on a timely basis in accordance with a
calendar year distribution requirement will subject the Fund to a nondeductible
4% excise tax. To prevent imposition of this tax, each Fund intends to comply
with this distribution requirement. A distribution will be treated as paid
during the calendar year if it is declared by the Fund in October, November or
December of that year with a record date in such month and paid by the Fund
during January of the following year. Such distributions will be taxable to
shareholders in the calendar year in which declared rather than the calendar
year in which received.

For Federal income tax purposes, distribution of each Fund's investment
company taxable income (including net short-term capital gains) will be taxable
to shareholders at ordinary income rates whether they are invested in additional
shares or received in cash. Distributions of any net capital gains designated
by the Fund as capital gain dividends will be taxable as long-term capital gain,
regardless of how long a shareholder has held the shares and whether they are
invested in additional shares or received in cash. Each year the Company will
notify shareholders of each Fund of the tax status of dividends and
distributions.

For corporate investors, dividends from investment income (not capital
gains) will generally qualify in part for the intercorporate dividends-received
deduction provided certain holding period requirements are satisfied. However,
the portion of the dividends so qualified depends on the aggregate taxable
qualifying dividend income received by each Fund from domestic (U.S.) sources.

The Company will be required to withhold Federal income tax at a rate of
31% ("backup withholding") from dividends paid to non-corporate shareholders if
(a) the payee fails to furnish the payee's correct taxpayer identification
number or social security number, (b) the Internal Revenue Service (the "IRS")
notifies the Company that the payee has failed to report properly certain
interest and dividend income to the IRS and to respond to notices to that effect
or (c) when required to do so, the payee fails to certify that he is not subject
to backup withholding.

Depending on the residence of the shareholder for tax purposes,
distributions also may be subject to state and local taxes, including
withholding taxes. Shareholders should consult their own tax advisers as to the
Federal, state and local tax consequences of ownership of shares of the Fund in
their particular circumstances.
<PAGE>

OTHER INFORMATION
18

CAPITALIZATION AND VOTING

The Company is a Maryland corporation. The Company's Articles of
Incorporation authorize the Board of Directors to issue 100,000,000 shares of
common stock, with a $.01 par value. The Board of Directors has the power to
designate one or more classes ("Classes") of the common stock, each to pertain
to a separate investment portfolio, and to classify or reclassify any unissued
shares with respect to such Classes. Currently the Company is offering five
Classes, one of which pertains to each of the Funds. The Board of Directors may
create additional Classes in the future.

The shares of the Company are fully paid and nonassessable, and have no
preferences as to conversion, exchange, dividends, retirement or other features.
The shares have no pre-emptive rights. They have non-cumulative voting rights,
which means that the holders of more than 50% of the shares voting for the
election of Directors can elect 100% of the Directors if they choose to do so.
A shareholder is entitled to one vote for each full share held (and a fractional
vote for each fractional share held), then standing in his name on the books of
the Company. On matters requiring shareholder approval, shareholders are
entitled to vote only with respect to matters which affect the interest of the
Class they hold, except as otherwise required by applicable law.

REPORTS

The Company sends to shareholders of each Fund a semi-annual report and an
audited annual report, which includes a list of the investment securities held
by the Fund.

PERFORMANCE INFORMATION

Each Fund may, from time to time include quotations of its average annual
total return in advertisements or reports to shareholders or prospective
investors. Quotations of average annual total return for each Fund will be
expressed in terms of the average annual compounded rate of return of a
hypothetical investment in the Fund over a period of 1, 5 and 10 years (up to
the life of the Fund). Average annual total return quotations reflect the
deduction of a proportional share of Fund expenses (on an annual basis), and
assume that all dividends and distributions are reinvested when paid.

Performance information for each Fund may be compared to various unmanaged
securities indices, groups of mutual funds tracked by mutual fund ratings
services, or other general economic indicators. Unmanaged indices may assume
the reinvestment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.

Performance information for each Fund represents only the performance of a
hypothetical investment in the Fund during the particular time period on which
the calculations are based. Performance information should be considered in
light of the Fund's investment objectives and policies, characteristics and
quality of the Fund's portfolio, and the market conditions during the given time
period, and should not be considered as a representation of what may be achieved
in the future. For a description of the methods used to determine total return
for each Fund, see the SAI.
<PAGE>
19

CUSTODIAN AND TRANSFER AGENT

All securities and cash of the Funds are held by The Chase Manhattan Bank,
N.A., Brooklyn, New York. Forum Financial Corp. serves as the Funds' Transfer
and Dividend Disbursing Agent.

SHAREHOLDER INQUIRIES

Inquiries about each Fund's investment policies and past performance should
be directed to:

Schroder Capital Funds, Inc.
(Name of Fund)
P.O. Box 446
Portland, Maine 04112

Information about specific shareholder accounts may be obtained from the
Funds' Transfer Agent by calling (800) 344-8332.
<PAGE>

SCHRODER U.S. EQUITY FUND
SCHRODER U.S. SMALLER COMPANIES FUND

INVESTMENT ADVISER
Schroder Capital Management International Inc.
787 Seventh Avenue
New York, New York 10019

DISTRIBUTOR
Schroder Capital Distributors Inc.
787 Seventh Avenue
New York, New York 10019

ADMINISTRATOR - SCHRODER U.S. SMALLER COMPANIES FUND
Schroder Capital Distributors Inc.
787 Seventh Avenue
New York, New York 10019

SUB-ADMINISTRATOR
Forum Financial Services, Inc.
61 Broadway, Suite 2770
New York, New York 10006

CUSTODIAN
The Chase Manhattan Bank, N.A.
Chase MetroTech Center
Brooklyn, New York 11245

TRANSFER AND DIVIDEND DISBURSING AGENT
Forum Financial Corp.
P.O. Box 446
Portland, Maine 04112

COUNSEL
Jacobs Persinger & Parker
77 Water Street
New York, New York 10005

INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109

Table of Contents
PROSPECTUS SUMMARY . . . . . . . . . . . . .2
FINANCIAL HIGHLIGHTS . . . . . . . . . . . .4
INVESTMENT OBJECTIVES AND POLICIES . . . . .5
MANAGEMENT OF THE FUNDS. . . . . . . . . . 11
INVESTMENT IN THE FUNDS. . . . . . . . . . 14
DIVIDENDS, DISTRIBUTIONS AND TAXES . . . . 17
OTHER INFORMATION. . . . . . . . . . . . . 18

SCHRODER CAPITAL FUNDS, INC.
- ----------------------------------------------

Map of United States

SCHRODER U.S. EQUITY FUND

SCHRODER U.S. SMALLER COMPANIES FUND

PROSPECTUS
MARCH 1, 1995

<PAGE>

SCHRODER EMERGING MARKETS FUND
INSTITUTIONAL PORTFOLIO
TWO PORTLAND SQUARE
PORTLAND, MAINE 04101

SCHRODER CAPITAL MANAGEMENT INTERNATIONAL INC. - INVESTMENT ADVISER
SCHRODER CAPITAL DISTRIBUTORS INC. - ADMINISTRATOR

Schroder Emerging Markets Fund - Institutional Portfolio is a separately-
managed, non-diversified portfolio of Schroder Capital Funds, Inc., an open-end
management investment company. The Fund's investment objective is to achieve
long-term capital appreciation through direct or indirect investment in equity
and debt securities of issuers domiciled or doing business in emerging market
countries in regions such as Southeast Asia, Latin America, and Eastern and
Southern Europe. There is no assurance that the Fund will achieve this
objective. Furthermore, investing in securities of emerging market issuers
involves special risks in addition to those associated with investments in
securities of wU.S. issuers. See "The Fund - Special Risk Considerations."

This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund. A Statement of Additional Information
(the "SAI") dated August 23, 1994 and as supplemented from time to time
containing additional and more detailed information about the Fund has been
filed with the Securities and Exchange Commission (the "SEC") and is hereby
incorporated by reference into this Prospectus. It is available without charge
and may be obtained by writing or calling the Fund at the address and telephone
numbers printed above.

-------------------------
This Prospectus should be read and retained for information about the Fund.
-------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

This Prospectus is dated August 23, 1994
As amended May 3, 1995
<PAGE>

PROSPECTUS SUMMARY

THE FUND. Schroder Emerging Markets Fund - Institutional Portfolio (the "Fund")
is a separately-managed, non-diversified no-load portfolio of Schroder Capital
Funds, Inc. (the "Company"), which was organized as a corporation under Maryland
law on June 30, 1969, and is registered as an open-end management investment
company under the Investment Company Act of 1940 (the "Act"). On February 29,
1988, the Company was recapitalized to enable the Company's Board of Directors
to establish series of separately-managed investment portfolios and to issue a
separate class of the Company's common stock with respect to each portfolio.
The Company currently consists of five separate portfolios, each of which has
separate investment objectives and policies.

INVESTMENT OBJECTIVE. The Fund's investment objective is to achieve long-term
capital appreciation through direct or indirect investment in equity and debt
securities of issuers domiciled or doing business in emerging market countries
in regions such as Southeast Asia, Latin America, and Eastern and Southern
Europe.

SPECIAL RISK CONSIDERATIONS. Investments in securities of foreign issuers,
particularly in countries with smaller, emerging capital markets, involve
certain risks not associated with domestic investing, including fluctuations in
foreign exchange rates, uncertain political and economic developments, and the
possible imposition of exchange controls or other foreign governmental laws or
restrictions. The Fund is not intended for investors whose objective is assured
income or preservation of capital. The Fund should be considered a means of
diversifying an investment portfolio and not in itself a balanced investment
program.

INVESTMENT ADVISER. The Fund's Investment Adviser is Schroder Capital
Management International Inc. ("SCMI"), 787 Seventh Avenue, New York, New York
10019. See "Management of the Fund - Investment Adviser and Portfolio Manager."

ADMINISTRATIVE SERVICES. The Administrator of the Fund is Schroder Capital
Distributors Inc. ("Schroder Distributors"), 787 Seventh Avenue, New York, New
York 10019, a wholly-owned subsidiary of SCMI. The Company and Schroder
Distributors have entered into a Sub-Administration Agreement with Forum
Financial Services, Inc. ("Forum"). Pursuant to their agreements, Schroder
Distributors and Forum provide certain management and administrative services
necessary for the Fund's operations, other than the investment management and
administrative services provided to the Fund by SCMI pursuant to the Investment
Advisory Contract. See "Management of the Fund - Administrative Services."

PURCHASES AND REDEMPTIONS OF SHARES. Shares of the Fund may be purchased
directly through the Fund's transfer agent, Forum Financial Corp., through
Service Organizations, or through certain broker-dealers who assist their
customers in purchasing shares of the Fund. The minimum initial investment is
$250,000. Purchases of Fund shares are subject to a purchase charge of 0.50% of
the amount invested. See "Investment In The Fund - Purchase of Shares."
Redemptions may be made by telephone or by letter to the Fund, specifying the
dollar amount or number of shares to be redeemed and account number.
Redemptions are subject to a

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<PAGE>

redemption charge of 0.50% of the net asset value of the shares redeemed. See
"Investment in the Fund - Redemption of Shares." All purchase and redemption
charges are paid to the Fund and are not sales charges.

DIVIDENDS AND DISTRIBUTIONS. The Fund intends to declare and pay as a dividend
substantially all of its net investment income annually and to distribute any
net realized long-term capital gains at least annually. Dividend and capital
gains distributions will be reinvested automatically in additional shares of the
Fund at net asset value unless the shareholder has notified the Fund in his
Purchase Application or otherwise in writing of his election to receive
distributions in cash. See "Dividends, Distributions and Taxes."

FEE TABLE

The table below shows the costs and expenses that an investor would incur as a
shareholder of the Fund, based upon the Fund's projected annual operating
expenses.

SHAREHOLDER TRANSACTION EXPENSES

Maximum Sales Load Imposed on Purchase . . . . . . . . . . . . . . .None
Maximum Sales Load Imposed on Reinvested Dividends. . . . . . . . . .None
Deferred Sales Load . . . . . . . . . . . . . . . . . . . . . . . . .None
Purchase Charge (as a percentage of amount invested)* . . . . . . . .0.50%
Redemption Charge (as a percentage of amount redeemed)* . . . . . . .0.50%
Exchange Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . .None

ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets, after fee
waivers and expense reimbursements)

Management Fees** 1.25%
12b-1 Fees*** 0.00%
Other Expenses**** 0.35%
-----
Total Fund Operating Expenses**** 1.60%
-----
-----

----------------

* The Purchase Charge and the Redemption Charge are imposed on all purchases
and redemptions of Fund shares, respectively, other than with respect to
shares purchased through the reinvestment of dividends or distributions.
These charges, which are paid to the Fund, are not sales charges but are
designed to help compensate the Fund for transaction costs it incurs in
issuing and redeeming Fund shares. See "Investment in the Fund - Purchase
of Shares" and "- Redemption of Shares."

** Management Fees for the Fund reflect the annual fee rate that the Fund pays
for investment advisory (1.00%) and administrative (0.25%) services.
Management Fees charged to the Fund are higher than those charged to most
other mutual funds. However, the Fund's investment adviser believes that
while such fees are higher than those charged to most funds which invest
primarily in U.S. securities, they are not necessarily higher than those
charged to funds with investment objectives similar to those of the Fund.

*** Pursuant to Rule 12b-1 under the Act, the Fund has adopted a Distribution
Plan generally authorizing it to pay directly, or reimburse the distributor
for, costs and expenses incurred in connection with distribution of Fund
shares. These payments or reimbursements are limited to an annual rate of
0.50% of

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<PAGE>

the Fund's average daily net assets. Costs or expenses in excess of this
limit may not be carried forward to future years. See "Management of the
Fund - Distribution." The Fund has no current intention of implementing
the Distribution Plan, and in any event will make no payments under the
Distribution Plan until further authorized by the Board. If the
Distribution Plan is implemented, long term shareholders of the Fund may
pay aggregate sales charges totalling more than the economic equivalent of
the maximum front-end sales charge permitted by the Rules of Fair Practice
of the National Association of Securities Dealers, Inc.

**** Other Expenses are based on estimated amounts for the Fund's first fiscal
year ending October 31, 1995. SCMI and Schroder Distributors have
voluntarily undertaken to waive a portion of their fees and assume certain
expenses of the Fund to the extent that the Fund's total expenses exceed
1.60% of the Fund's average daily net assets. In the absence of estimated
expense reimbursements and fee waivers, Other Expenses and Total Fund
Operating Expenses are expected to be 1.20% and 2.45%, respectively. For a
further description of the various expenses incurred in the operation of
the Fund, see "Management of the Fund."

In addition to and distinct from payments authorized under the Distribution
Plan, the Board has authorized the Fund generally to pay Service
Organizations fees at an annual rate of up to 0.25% of the Fund's average
daily net assets for administrative services related to maintaining
shareholder accounts. See "Management of the Fund - Service
Organizations." The Fund has no intention of making any such payments, and
in any event will make no such payments until further authorized by the
Board. In the event that the Fund were to make payments under the
Distribution Plan or to Service Organizations, 12b-1 Fees, Other Expenses
and Total Operating Expenses would be higher.

EXAMPLE

You would pay the following expenses on a $1,000 investment, assuming (1) a 5%
gross annual return and (2) redemption at the end of each time period:

1 Year 3 Years

Assuming redemption at the end of the period $26 $61
Assuming no redemption $21 $55

THE PURPOSE OF THE FOREGOING TABLE IS TO ASSIST THE SHAREHOLDER IN UNDERSTANDING
THE VARIOUS COSTS AND EXPENSES THAT AN INVESTOR IN THE FUND WILL BEAR. THE
EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN; THE ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.

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<PAGE>

THE FUND

INVESTMENT OBJECTIVE

The Fund is designed for investors who seek the aggressive growth potential of
emerging world markets and are willing to bear the special risks of investing a
portion of their assets in those markets. The Fund's fundamental objective is
to achieve long-term capital appreciation through direct or indirect investment
in equity and debt securities of issuers domiciled or doing business in emerging
market countries in regions such as Southeast Asia, Latin America, and Eastern
and Southern Europe. This objective may not be changed without shareholder
approval. Current income will be incidental to the objective of capital
appreciation. There is no assurance that the Fund will achieve its objective.
The Fund is not intended for investors whose objective is assured income or
preservation of capital. The Fund should be considered a means of diversifying
an investment portfolio and not in itself a balanced investment program. The
Fund in the future may seek to achieve its investment objective by holding, as
its only investment securities, the securities of another investment company
having identical investment objectives and policies as the Fund in accordance
with the provisions of the Investment Company Act of 1940 or any orders, rules
or regulations thereunder adopted by the Securities and Exchange Commission.

INVESTMENT POLICIES

Under normal conditions, the Fund will invest at least 65% of its total assets
in emerging market equity and debt securities, including common stocks,
preferred stocks, convertible preferred stocks, stock rights and warrants,
convertible debt securities and non-convertible debt securities. The Fund may
invest less than 35% of its net assets in high risk debt securities which are
unrated or rated below investment grade. See "Certain Risks of Debt Securities"
below. Investments in stock rights and warrants will not be considered in the
65% of total assets determination but are subject to the limitations described
below in "Special Investment Methods - Warrants and Stock Rights." Under
certain circumstances, the Fund may invest indirectly in these securities by
investing in other investment companies or vehicles. See "Other Investment
Vehicles" below.

In recent years, many emerging market countries have begun programs of economic
reform: removing import tariffs, dismantling trade barriers, deregulating
foreign investment, privatizing state owned industries, permitting the value of
their currencies to float against the dollar and other major currencies, and
generally reducing the level of state intervention in industry and commerce.
Important intra-regional economic integration also holds the promise of greater
trade and growth. At the same time, significant progress has been made in
restructuring the heavy external debt burden that certain emerging market
countries accumulated during the 1970s and 1980s. While there is no assurance
that these trends will continue, the Fund's investment adviser will seek out
attractive investment opportunities in these countries.

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<PAGE>

"Emerging market" countries generally include all countries in the world other
than those contained in the Morgan Stanley Capital International World Index
("MSCI World") of major world economies. Where the investment adviser
determines that the economy of a particular country included in the MSCI World
more appropriately reflects an emerging market economy, however, the adviser may
include such country in the emerging market category. The following countries
currently are excluded from the Fund's emerging market category: Australia;
Austria; Belgium; Canada; Denmark; Finland; France; Germany; Hong Kong; Ireland;
Italy; Japan; Malaysia; Netherlands; New Zealand; Norway; Singapore; Spain;
Sweden; Switzerland; United Kingdom; United States of America. The Fund will
not necessarily seek to diversify investments on a geographic basis within the
emerging market category and, in this regard, the Fund may invest more than 25%
of its total assets in issuers located in any one country. To the extent the
Fund concentrates its investments in issuers located in one country, the Fund is
more susceptible to factors adversely affecting that country. See "Special Risk
Considerations - Geographic Concentration" below.

A security ordinarily will be considered to be an emerging market security when
(1) its issuer is organized in an emerging market country; (2) the issuer's
primary trading market is located in an emerging market country; or (3) in the
judgment of the investment adviser, at least 50% of the issuer's revenues or
profits are derived from goods produced or sold, investments made, or services
performed in emerging market countries or which have at least 50% of their
assets situated in such countries. The Fund may acquire emerging market
securities that are denominated in currencies other than a currency of an
emerging market country. The Fund may consider investment companies to be
located in the country or countries in which they primarily make their portfolio
investments.

In anticipation of the currency requirements of the Fund and to attempt to
protect against possible adverse movements in foreign exchange rates, the Fund
may enter into forward contracts to purchase or sell foreign currencies.
Although such contracts may reduce the risk of loss to the Fund due to a decline
in the value of the currency which is sold, they also limit any possible gain
which might result should the value of such currency rise.

INVESTMENT RESTRICTIONS

The Fund has adopted certain restrictions designed to reduce its exposure in
specific situations. Pursuant to these restrictions, which are fundamental
policies of the Fund, the Fund will not:

(1) Concentrate investments in any particular industry; therefore, the
Fund will not purchase the securities of companies in any one industry if,
thereafter, 25% or more of the Fund's total assets would consist of
securities of companies in that industry. (This restriction does not apply
to obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities.)

(2) Issue senior securities, borrow money or pledge its assets in excess
of 10% of its total assets taken at market value (including the amount
borrowed) and then only from a bank as a temporary measure for
extraordinary or emergency purposes including to

-6-
<PAGE>

meet redemptions or to settle securities transactions. Usually only
"leveraged" investment companies may borrow in excess of 5% of their
assets; however, the Fund will not borrow to increase income but only as a
temporary measure for extraordinary or emergency purposes, including to
meet redemptions or to settle securities transactions which may otherwise
require untimely dispositions of Fund securities. The Fund will not
purchase securities while borrowings exceed 5% of total assets. (For the
purpose of this restriction, collateral arrangements with respect to the
writing of options, futures contracts, options on futures contracts, and
collateral arrangements with respect to initial and variation margin are
not deemed to be a pledge of assets and neither such arrangements nor the
purchase or sale of futures or related options are deemed to be the
issuance of a senior security.)

(3) Make investments for the purpose of exercising control or management.
Investments by the Fund in wholly-owned investment entities created under
the laws of certain countries will not be deemed the making of investments
for the purpose of exercising control or management.

The percentage restrictions described above and in the SAI apply only at the
time of investment and require no action by the Fund as a result of subsequent
changes in value of the investments or the size of the Fund. A supplementary
list of investment restrictions is contained in the SAI.

SPECIAL RISK CONSIDERATIONS

All investments, domestic and foreign, involve certain risks. Investments in
securities of foreign issuers, particularly in countries with smaller, emerging
capital markets, involve certain risks not associated with domestic investing,
including fluctuations in foreign exchange rates, uncertain political and
economic developments, and the possible imposition of exchange controls or other
foreign governmental laws or restrictions.

POLITICAL AND ECONOMIC RISKS. In any emerging market country, there is the
possibility of expropriation of assets, confiscatory taxation, political or
social instability or diplomatic developments which could affect investments in
those countries. Moreover, individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as economic growth rates,
rates of inflation, capital reinvestment, resources, self-sufficiency and
balance of payments positions. Certain foreign investments may also be subject
to foreign withholding taxes.

Certain emerging market countries may restrict investment by foreign entities.
For example, some of these countries may limit the size of foreign investment in
certain issuers, require prior approval of foreign investment by the government,
impose additional tax on foreign investors or limit foreign investors to
specific classes of securities of an issuer that have less advantageous rights
(with regard to convertibility, for example) than classes available to
domiciliaries of the country.

-7-
<PAGE>

Substantial limitations may also exist in certain countries with respect to a
foreign investor's ability to repatriate investment income, capital or the
proceeds of sales of securities. The Fund could be adversely affected by delays
in, or refusals to grant, any required governmental approvals for repatriation
of capital. No more than 15% of the Fund's net assets will comprise, in the
aggregate, assets which are (i) subject to material legal restrictions on
repatriation or (ii) invested in illiquid securities.

FINANCIAL INFORMATION AND STANDARDS. Often the regulation of, and available
information about, issuers and their securities is less extensive in emerging
market countries than in the United States. Foreign companies may not be
subject to uniform accounting, auditing and financial reporting standards or to
requirements or practices comparable to those applicable to U.S. companies.

REGULATION AND LIQUIDITY OF MARKETS. Government supervision and regulation of
exchanges and brokers in emerging market countries is frequently less extensive
than in the United States. These markets may have different clearance and
settlement procedures. In certain cases, settlements have not kept pace with
the volume of securities transactions, making it difficult to conduct such
transactions. Delays in settlement could adversely affect or interrupt the
Fund's intended investment program or result in investment losses due to
intervening declines in security values.

Securities markets in emerging market countries are substantially smaller than
U.S. securities markets and have substantially less trading volume, resulting in
diminished liquidity and greater price volatility. Reduced secondary market
liquidity may make it more difficult for the Fund to determine the value of its
portfolio securities or dispose of particular instruments when necessary.
Brokerage commissions and other transaction costs on foreign securities
exchanges are generally higher as well.

CURRENCY FLUCTUATIONS AND DEVALUATIONS. Because the Fund will invest heavily in
non-U.S. currency denominated securities, changes in foreign currency exchange
rates will affect the value of the Fund's investments. A decline in the value
of currencies in which the Fund's investments are denominated against the dollar
will result in a corresponding decline in the dollar value of the Fund's assets.
This risk tends to be heightened in the case of investing in certain emerging
market countries. For example, some currencies of emerging market countries
have experienced steady devaluations relative to the U.S. dollar, and major
adjustments have been made in certain of such currencies periodically. Some
emerging market countries may also have managed currencies which do not freely
float against the dollar.

INFLATION. Several emerging market countries have experienced substantial, and
in some periods extremely high, rates of inflation in recent years. Inflation
and rapid fluctuations in inflation rates may have very negative effects on the
economies and securities markets of certain emerging market countries. Further,
inflation accounting rules in some emerging market countries require, for
companies that keep accounting records in the local currency, that certain
assets and liabilities be restated on the company's balance sheet in order to
express

-8-
<PAGE>

items in terms of currency of constant purchasing power. Inflation accounting
may indirectly generate losses or profits for certain emerging market companies.

NON-DIVERSIFIED INVESTMENTS. Because suitable investments in emerging market
countries may be limited, the Fund has classified itself as a "non-diversified
investment company" under the Act so that it may invest more than 5% of its
total assets in the securities of any one issuer. To the extent the Fund makes
investments in excess of 5% of its assets in a particular issuer, its exposure
to credit and market risks associated with that issuer is increased. Also,
since a relatively high percentage of the Fund's assets may be invested in the
securities of a limited number of issuers, the Fund may be more susceptible to
any single economic, political or regulatory occurrence than a diversified
investment company.

GEOGRAPHIC CONCENTRATION. The Fund may invest more than 25% of its total assets
in issuers located in any one country. To the extent the Fund concentrates its
investments in issuers located in one country, the Fund is more susceptible to
factors adversely affecting that country. In particular, these factors may
include the political and economic developments and foreign exchange rate
fluctuations discussed above. As a result of investing substantially in one
country, the value of the Fund's assets may fluctuate more widely than the value
of shares of a comparable fund having a lesser degree of geographic
concentration.

ADDITIONAL INVESTMENT POLICIES

All investment policies of the Fund that are designated as fundamental, and the
Fund's investment objective, may not be changed without approval of the holders
of a majority of the Fund's outstanding voting securities. A majority of the
Fund's outstanding voting securities means the lesser of 67 percent of the
shares of the Fund present or represented at a shareholders' meeting at which
the holders of more than 50 percent of the shares are present or represented, or
more than 50 percent of the outstanding shares of the Fund. Except as otherwise
indicated, investment policies of the Fund are not fundamental and may be
changed by the Board without shareholder approval.

EQUITY SECURITIES. The Fund's emerging market investments will comprise
primarily equity securities. Such investments will consist predominantly of
common stock or preferred stock of established companies listed on recognized
securities exchanges or traded in other established markets. However, the Fund
may invest to a limited extent in convertible preferred stock, warrants and
stock rights. Due to the absence of established securities markets in certain
emerging market countries and restrictions in certain countries on direct
investment by foreign entities, the Fund may invest in certain emerging market
issuers exclusively or primarily through the purchase sponsored and unsponsored
of American Depository Receipts ("ADRs") or other similar securities, such as
American Depository Shares, Global Depository Shares or International Depository
Receipts; or through investment in government approved investment companies or
other vehicles. ADRs are receipts typically issued by U.S. banks evidencing
ownership of the underlying securities, into which they are convertible. These
securities may or may not be denominated in the same currency as the underlying
securities. Unsponsored ADRs may be created without the participation of the
foreign issuer. Holders of these ADRs

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<PAGE>

generally bear all the costs of the ADR facility, whereas foreign issuers
typically bear certain costs in a sponsored ADR. The bank or trust company
depository of an unsponsored ADR may be under no obligation to distribute
shareholder communications received from the foreign issuer or to pass through
voting rights.

DEBT SECURITIES. The Fund may also seek capital appreciation through investment
in emerging market convertible or non-convertible debt securities. Capital
appreciation in debt securities may arise as a result of a favorable change in
relative foreign exchange rates, in relative interest rate levels, or in the
creditworthiness of issuers. The receipt of income from such debt securities is
incidental to the Fund's objective of long-term capital appreciation. Such
income can be used, however, to offset the operating expenses of the Fund. In
accordance with its investment objective, the Fund will not seek to benefit from
anticipated short-term fluctuations in currency exchange rates. The Fund may,
from time to time, invest in debt securities with relatively high risk and high
yields (as compared to other debt securities meeting the Fund's investment
criteria), notwithstanding that the Fund may not anticipate that such securities
will experience substantial capital appreciation. The debt securities in which
the Fund invests may be unrated, but will not be in default at the time of
purchase. The Fund also may invest to a certain extent in debt securities in
order to participate in debt-to-equity conversion programs sponsored by certain
emerging market countries or corporate reorganizations.

The Fund may invest in debt securities ("sovereign debt") issued or guaranteed
by emerging market governments (including countries, provinces and
municipalities) or their agencies and instrumentalities ("governmental
entities"), debt securities issued or guaranteed by international organizations
designated or supported by multiple foreign governmental entities (which are not
obligations of foreign governments) to promote economic reconstruction or
development, and debt securities issued by corporations or financial
institutions.

The Fund may invest a portion of its assets in certain debt obligations known as
"Brady Bonds." Brady Bonds are created through the exchange of existing
commercial bank loans to sovereign entities for new obligations in connection
with debt restructurings implemented pursuant to a plan introduced by Nicholas
F. Brady, former U.S. Secretary of the Treasury. To date, debt restructurings
utilizing Brady Bonds have been undertaken in Mexico, Venezuela, Argentina,
Costa Rica, Brazil, Nigeria, and the Philippines. Other countries, including
Ecuador, Panama, Peru, Bulgaria and Poland, are expected to implement Brady Bond
debt restructurings in the future.

Brady Bonds are of recent origin, and accordingly do not have a long payment
history. Brady Bonds are actively traded in the over-the-counter secondary
market, and may be collateralized or uncollateralized. Although most Brady
Bonds are denominated in U.S. dollars, they are issued in various currencies.
U.S. dollar denominated Brady Bonds may be fixed rate par bonds or floating rate
discount bonds. They are generally collateralized in full as to principal by
U.S. Treasury zero coupon bonds having the same maturity as the Brady Bonds.
Interest payments on U.S. dollar denominated Brady Bonds generally are
collateralized on a one year or longer rolling forward basis by cash or
securities in an amount, in the case of fixed rate bonds, that is equal to at
least one year of interest payments or, in the case of floating rate bonds, that

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is initially equal to at least one years interest payments based on the current
interest rate and is thereafter adjusted at regular intervals. Certain Brady
Bonds are entitled to "value recovery payments" in certain circumstances, which
in effect are supplemental interest payments but are not generally
collateralized. Brady Bonds are often viewed as having three or four valuation
components: (i) the collateralized repayment of principal at final maturity;
(ii) collateralized interest payments; (iii) any uncollateralized repayment of
principal at maturity; and (iv) any uncollateralized interest payments. These
uncollateralized amounts are referred to as "residual risk." Because of their
residual risk and, among other factors, the history of defaults in commercial
bank loans in countries issuing Brady Bonds, investments in Brady Bonds are
considered speculative.

CERTAIN RISKS OF DEBT SECURITIES. Emerging market debt securities in which the
Fund may invest may be rated below investment grade or may not be rated at all.
The Fund may invest up to 35% of its net assets in such debt securities.
Securities below investment grade, i.e. those rated in the medium to lower
rating categories of nationally recognized statistical rating organizations such
as Standard & Poor's Corporation ("S&P") and Moody's Investors Service, Inc.
("Moody's") and unrated securities of comparable quality ("high yield/high risk
securities"), are predominantly speculative with respect to the capacity to pay
interest and repay principal, and generally involve a greater volatility of
price than securities in higher rating categories. These securities are
commonly referred to as "junk" bonds.

The risks associated with high yield/high risk securities are generally greater
than those associated with higher-rated securities. It should be noted that
even bonds rated BBB by S&P or Baa by Moody's, i.e., the lowest investment-grade
categories assigned by those rating agencies, are described by them as having
speculative characteristics and that changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity of issuers of such
bonds to make principal and interest payments than is the case with higher grade
bonds. The Fund is not obligated to dispose of securities due to changes by the
rating agencies. A description of S&P's and Moody's fixed-income securities
ratings is contained in the Appendix to the SAI.

In purchasing high yield/high risk securities, the Fund will rely on the
investment adviser's judgment, analysis and experience in evaluating the
creditworthiness of an issuer of such securities. Nonetheless, investors should
carefully review the investment objective and policies of the Fund and consider
their ability to assume the investment risks involved before making an
investment. The Fund is not authorized to purchase debt securities that are in
default, except for sovereign debt (discussed below) in which the Fund may
invest no more than 5% of its total assets while such sovereign debt securities
are in default.

The market values of high yield/high risk securities tend to reflect individual
issuer developments and to exhibit sensitivity to adverse economic changes to a
greater extent than do higher-rated securities, which react primarily to
fluctuations in the general level of interest rates. Issuers of high yield/high
risk securities may be highly leveraged and may not have available to them more
traditional methods of financing. During economic downturns or substantial
periods of rising interest rates, issuers of high yield/high risk securities,
especially

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<PAGE>

those which are highly leveraged, may be less able to service their principal
and interest payment obligations, meet their projected business goals or obtain
additional financing. The risk of loss due to default by the issuer is
significantly greater for holders of high yield/high risk securities because
such securities may be unsecured and may be subordinated to other creditors of
the issuer. In addition, the Fund may incur additional expenses to the extent
it is required to seek recovery upon a default by the issuer of such an
obligation or participate in the restructuring of such obligation.

Periods of economic uncertainty and change can be expected to result in
increased volatility of market prices of high yield/high risk securities and,
correspondingly, the Fund's net asset value to the extent it invests in such
securities. Further, market prices of such securities structured as zero coupon
or pay-in-kind securities are affected to a greater extent by interest rate
changes and thereby tend to be more volatile than any securities which pay
interest periodically and in cash.

High yield/high risk securities may have call or redemption features which would
permit an issuer to repurchase the securities from the Fund. If a call were
exercised by the issuer during a period of declining interest rates, the Fund
likely would have to replace such called securities with lower yielding
securities, thus decreasing the net investment income to the Fund and dividends
to shareholders.

While a secondary trading market for high yield/high risk securities does exist,
it is generally not as liquid as the secondary market for higher rated
securities. In periods of reduced secondary market liquidity, prices of high
yield/high risk securities may become volatile and experience sudden and
substantial price declines, and the Fund may have difficulty in disposing of
particular issues when necessary to meet the Fund's liquidity needs or in
response to a specific economic event such as a deterioration in the
creditworthiness of the issuer. Reduced secondary market liquidity for certain
high yield/high risk securities also may make it more difficult for the Fund to
obtain accurate market quotations for purposes of valuing the Fund's portfolio.
Market quotations are generally available on many high yield/high risk
securities only from a limited number of dealers and may not necessarily
represent firm bids of such dealers or prices for actual sales. Under such
conditions, the Fund may have to rely more heavily on the judgment of the Board
to value such securities accurately.

Adverse publicity and investor perceptions, which may not be based on
fundamental analysis, also may decrease the value and liquidity of high
yield/high risk securities, particularly in a thinly traded market. Factors
adversely affecting the market value of high yield/high risk securities are
likely to adversely affect the Fund's net asset value.

Investment in sovereign debt involves a high degree of risk. Certain emerging
market countries such as Argentina, Brazil and Mexico are among the largest
debtors to commercial banks and foreign governments. At times, certain emerging
market countries have declared moratoria on the payment of principal and/or
interest on outstanding debt. The governmental entity that controls the
repayment of sovereign debt may not be able or willing to repay the principal
and/or interest when due in accordance with the terms of such debt. A
governmental entity's

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<PAGE>

willingness or ability to repay principal and interest when it is due may be
affected by many factors such as its cash flow situation, the extent of its
foreign reserves, the availability of sufficient foreign exchange, the relative
size of the debt service burden to the economy as a whole, and political
restraints. The Fund, as a holder of sovereign debt, may be requested to
participate in the rescheduling of such debt and to extend further loans to
governmental entities. There is no bankruptcy proceeding by which defaulted
sovereign debt may be collected in whole or in part.

The sovereign debt instruments in which the Fund may invest involve great risk
and are deemed to be the equivalent in terms of quality to high yield/high risk
securities discussed above and are subject to many of the same risks as such
securities. Similarly, the Fund may have difficulty disposing of certain
sovereign debt obligations because there may be a thin trading market for such
securities. The Fund will not invest more than 5% of its total assets in
sovereign debt which in default.

DEBT-TO-EQUITY CONVERSIONS. The Fund may participate in up to 5% of its net
assets in debt-to-equity conversions. Debt-to-equity conversion programs are
sponsored in varying degrees by certain emerging market countries, particularly
in Latin America, and permit investors to use external debt of a country to make
equity investments in local companies. The terms of the programs vary from
country to country, but include significant restrictions on the application of
the proceeds received in the conversion and on the repatriation of investment
profits and capital. In inviting conversion applications by holders of eligible
debt, a government will usually specify a minimum discount from par value that
it will accept for conversion. The investment adviser believes that debt-to-
equity conversion programs may offer investors opportunities to invest in
otherwise restricted equity securities with a potential for significant capital
appreciation and, to a limited extent, intends to invest assets of the Fund in
such programs in appropriate circumstances. There can be no assurance that
debt-to-equity conversion programs will continue or be successful or that the
Fund will be able to convert all or any of its emerging market debt portfolio
into equity investments.

OTHER INVESTMENT VEHICLES. Under the 1940 Act, the Fund generally may invest up
to 10% of its total assets in the aggregate in shares of other investment
companies and up to 5% of its total assets in any one investment company, as
long as that investment does not represent more than 3% of the voting stock of
the acquired investment company at the time such shares are purchased. As
indicated above, investment in other investment companies or vehicles may be the
sole or most practical means for the Fund to invest in certain emerging market
issuers, particularly in Latin America. Such investment may involve the payment
of substantial premiums above the value of a fund's portfolio securities, and is
subject to limitations under the 1940 Act and market availability. There can be
no assurance that vehicles or funds for investing in certain emerging market
countries will be available for investment. In addition, special tax
considerations may apply. The Fund does not intend to invest in such vehicles
or funds unless, in the judgment of the Fund's investment adviser, the potential
benefits of such investment outweigh the payment of any applicable premium or
sales charge. As a shareholder in an investment company, the fund would bear
its ratable share of that investment company's

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<PAGE>

expenses, including its advisory and administration fees. At the same time, the
Fund would continue to pay its own management and advisory fees and other
expenses.

TEMPORARY DEFENSIVE INVESTMENTS. For temporary defensive purposes, the Fund may
invest without limitation in (or enter into repurchase agreements maturing in
seven days or less with U.S. banks and broker-dealers with respect to) short-
term debt securities, including commercial paper, U.S. Treasury bills, other
short-term U.S. Government securities, certificates of deposit and bankers'
acceptances of U.S. banks. The Fund also may hold cash and time deposits in
U.S. banks. In transactions involving "repurchase agreements," the Fund
purchases securities from a bank or broker-dealer who agrees to repurchase the
security at the Fund's cost plus interest within a specified time. The
securities purchased by the Fund have a total value in excess of the value of
the repurchase agreement and are held by the Fund's custodian bank until
repurchased. See "Investment Policies" in the SAI for further information about
all these securities.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. To hedge against adverse price
movements in the securities held in its portfolio and the currencies in which
they are denominated (as well as in the securities it might wish to purchase and
their denominated currencies), the Fund may engage in transactions in forward
foreign currency contracts. A forward foreign currency exchange contract
("forward contract") involves an obligation to purchase or sell a currency at a
future date, which may be any fixed number of days from the date of the contract
agreed upon by the parties, at a price set at the time of the contract. The Fund
will generally not enter into a forward contract with a term of greater than one
year. Forward contracts are not exchange traded, and there can be no assurance
that a liquid market will exist at a time when the Fund seeks to close out a
forward contract. Nor is there any assurance that a counterparty in an over-
the-counter transaction will be able to perform its obligations. Currently,
only a limited market, if any, exists for hedging transactions relating to
currencies in certain emerging markets or to securities of issuers domiciled or
principally engaged in business in certain emerging markets. This may limit the
Fund's ability to effectively hedge its investments in those markets. Hedging
against a decline in the value of a currency does not eliminate fluctuations in
the prices of portfolio securities or prevent losses if the prices of such
securities decline. Such transactions also limit the opportunity for gain if
the value of the hedged currencies should rise. In addition, it may not be
possible for the Fund to hedge against a devaluation that is so generally
anticipated that the Fund is not able to contract to sell the currency at a
price above the devaluation level it anticipates. See "Investment Policies -
Forward Foreign Currency Exchange Contracts" in the SAI.

WARRANTS AND STOCK RIGHTS. The Fund may invest in warrants, which are options
to purchase an equity security at a specified price (usually representing a
premium over the applicable market value of the underlying equity security at
the time of the warrant's issuance). The Fund may not invest more than 5% of
its net assets (at the time of investment) in warrants (other than those that
have been acquired in units or attached to other securities). No more than 2%
of the Fund's net assets (at the time of investment) may be invested in warrants
that are not listed on the New York or American Stock Exchanges. Investments in
warrants involve certain risks, including the possible lack of a liquid market
for the resale of the warrants, potential price

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<PAGE>

fluctuations as a result of speculation or other factors and failure of the
price of the underlying security to reach a level at which the warrant can be
prudently exercised (in which case the warrant may expire without being
exercised, resulting in the loss of the Fund's entire investment therein). The
prices of warrants do not necessarily move parallel to the prices of the
underlying securities. Warrants have no voting rights, receive no dividends and
have no rights with respect to the assets of the issuer.

In addition, the Fund may invest up to 5% of its assets (at the time of
investment) in stock rights. A stock right is an option given to a shareholder
to buy additional shares at a predetermined price during a specified time
period.

ILLIQUID AND RESTRICTED SECURITIES. The Fund will not purchase or otherwise
acquire any security if, as a result, more than 15% of its net assets (taken at
current value) would be invested in securities that are illiquid by virtue of
the absence of a readily available market or because of legal or contractual
restrictions on resale ("restricted securities"). There may be undesirable
delays in selling illiquid securities at prices representing their fair value.
This policy includes over-the-counter options held by the Fund and the "in the
money" portion of the assets used to cover such options. As stated above, this
policy also includes assets which are subject to material legal restrictions on
repatriation. This policy does not include restricted securities eligible for
resale to qualified institutional purchasers pursuant to Rule 144A under the
Securities Act of 1933 that are determined to be liquid by the Board or the
investment adviser under Board-approved guidelines. Such guidelines take into
account trading activity for such securities and the availability of reliable
pricing information, among other factors. If there is a lack of trading
interest in particular Rule 144A securities, the Fund's holdings of those
securities may be illiquid. See "Investment Policies - Illiquid and Restricted
Securities" in the SAI for further details.

LOANS OF PORTFOLIO SECURITIES. The Fund may lend portfolio securities (other
than in repurchase transactions) to brokers, dealers and other financial
institutions meeting specified credit conditions, if the loan is collateralized
in accordance with applicable regulatory requirements and if, after any loan,
the value of the securities loaned does not exceed 25% of the value of the
Fund's total assets. By so doing, the Fund attempts to earn income through the
receipt of interest on the loan. In the event of the bankruptcy of the other
party to a securities loan, the Fund could experience delays in recovering the
securities it lent. To the extent that, in the meantime, the value of the
securities the Fund lent has increased, the Fund could experience a loss.

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<PAGE>

earn income or receive an agreed upon fee from a borrower that has delivered
cash equivalent collateral. Cash collateral received by the Fund will be
invested in U.S. Government securities and liquid high grade debt obligations.
The value of securities loaned will be marked to market daily. Portfolio
securities purchased with cash collateral are subject to possible depreciation.
Loans of securities by the Fund will be subject to termination at the Fund's or
the borrower's option. The Fund may pay reasonable negotiated fees in
connection with loaned securities, so long as such fees are set forth in a
written contract and approved by the Fund's Board of Directors. See "Loans of
Portfolio Securities" in the SAI for further information on securities loans.

OPTIONS AND HEDGING. While the Fund does not presently intend to do so, it may
(a) write covered call options on portfolio securities and the U.S. dollar and
emerging market currencies, without limit; (b) write covered put options on
portfolio securities and the U.S. dollar and emerging market currencies with the
limitation that the aggregate value of the obligations underlying the puts
determined as of the date the options are sold will not exceed 50% of the Fund's
net assets; (c) purchase call and put options in amounts equaling up to 5% of
its total assets; and (d)(i) purchase and sell futures contracts that are
currently traded, or may in the future be traded, on U.S. and foreign commodity
exchanges on underlying portfolio securities, any emerging market currency, U.S.
and emerging market fixed-income securities and such indices of U.S. or emerging
market equity or fixed-income securities as may exist or come into being and
(ii) purchase and write call and put options on such futures contracts, in all
cases involving such futures contracts or options on futures contracts for
hedging purposes only, and without limit, except that the Fund may not enter
into futures contracts or purchase related options if, immediately thereafter,
the amount committed to margin plus the amount paid for premiums for unexpired
options on futures contracts generally exceeds 5% of the value of the Fund's
total assets. All of the foregoing are referred to as "Hedging Instruments."

In general, the Fund may use Hedging Instruments: (1) to attempt to protect
against declines in the market value of the Fund's portfolio securities or stock
index futures, and the currencies in which they are denominated and thus protect
the Fund's net asset value per share against downward market trends, or (2) to
establish a position in securities markets as a temporary substitute for
purchasing particular equity securities. The Fund will not use Hedging
Instruments for speculation. The Hedging Instruments which the Fund is
authorized to use have certain risks associated with them. Principal among such
risks are: (a) the possible failure of such instruments as hedging techniques
in cases where the price movement of the securities underlying the options or
futures do not follow the price movements of the portfolio securities subject to
the hedge; (b) potentially unlimited loss associated with futures transactions
and the possible lack of a liquid secondary market for closing out a futures
position; and (c) possible losses resulting from the inability of the Fund's
investment adviser to correctly predict the direction of stock prices, interest
rates and other economic factors. In addition, currently only a limited market,
if any, exists for hedging transactions relating to currencies in many emerging
markets or to securities of issuers domiciled or principally engaged in business
in emerging markets. This may limit the Fund's ability to effectively hedge its
investments in such emerging market countries. The Hedging Instruments the Fund
may use and the risks associated with them are described in greater detail under
"Options and Hedging" in the SAI.

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<PAGE>

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. From time
to time, in the ordinary course of business, the Fund may purchase securities on
a when-issued or delayed delivery basis or may purchase or sell securities on a
forward commitment basis. When such transactions are negotiated, the price is
fixed at the time of the commitment, but delivery and payment can take place a
month or more after the date of the commitment. There is no overall limit on
the percentage of the Fund's assets which may be committed to the purchase of
securities on a when-issued, delayed delivery or forward commitment basis. An
increase in the percentage of the Fund's assets committed to the purchase of
securities on a when-issued, delayed delivery or forward commitment basis may
increase the volatility of the Fund's net asset value.

WHEN, AS AND IF ISSUED SECURITIES. The Fund may purchase securities on a "when,
as and if issued" basis under which the issuance of the security depends upon
the occurrence of a subsequent event, such as approval of a merger, corporate
reorganization, leveraged buyout or debt restructuring. If the anticipated
event does not occur and the securities are not issued, the Fund will have lost
an investment opportunity. There is no overall limit on the percentage of the
Fund's assets which may be committed to the purchase of securities on a "when,
as and if issued" basis. An increase in the percentage of the Fund's assets
committed to the purchase of securities on a "when, as and if issued" basis may
increase the volatility of its net asset value.

PORTFOLIO TURNOVER. The Fund may engage in short-term trading but its portfolio
turnover rate is not expected to exceed 100%. High portfolio turnover and
short-term trading involve correspondingly greater commission expenses and
transaction costs. Also, higher portfolio turnover rates can make it more
difficult for the Fund to qualify as a regulated investment company for federal
income tax purposes and may cause shareholders of the Fund to recognize gains
for federal income tax purposes. See "Taxation" in the SAI.

NON-DIVERSIFICATION. The Fund is classified as a "non-diversified" investment
company under the Act. In contrast to a "diversified" company, the Fund may
invest more than 5% of its total assets in the securities of any one issuer.
This classification may not be changed without a shareholder vote. The Fund
intends to conduct its operations, however, so as to qualify as a "regulated
investment company" under Subchapter M of the Internal Revenue Code. See "Taxes
and Distributions." To do so, among other requirements, the Fund will limit its
investments so that at the close of each quarter of the taxable year, (i) not
more than 25% of the market value of the Fund's total assets will be invested in
the securities of a single issuer, and (ii) with respect to 50% of the market
value of its total assets not more than 5% will be invested in the securities of
a single issuer and the Fund will not own more than 10% of the outstanding
voting securities of a single issuer.

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<PAGE>

MANAGEMENT OF THE FUND

BOARD OF DIRECTORS

The business and affairs of the Fund are managed under the direction of the
Board of Directors of the Company. The Directors are Peter E. Guernsey, Ralph
E. Hansmann, John I. Howell, Laura E. Luckyn-Malone, Clarence F. Michalis,
Hermann C. Schwab, Mark J. Smith and John A. Troiano. Additional information
regarding the Directors, as well as the Company's executive officers, may be
found in the SAI under the heading "Management - Officers and Directors."

INVESTMENT ADVISER AND PORTFOLIO MANAGER

Schroder Capital Management International Inc. ("SCMI"), 787 Seventh Avenue, New
York, New York 10019, serves as investment adviser to the Fund pursuant to an
Investment Advisory Contract. SCMI manages the investment and reinvestment of
the assets included in the Fund's portfolio and continuously reviews, supervises
and administers the Fund's investments. In this regard, it is the
responsibility of SCMI to make decisions relating to the Fund's investments and
to place purchase and sale orders regarding such investments with brokers or
dealers selected by it in its discretion.

SCMI is a wholly-owned U.S. subsidiary of Schroders Incorporated, the wholly-
owned U.S. holding company subsidiary of Schroders plc. Schroders plc is the
holding company parent of a large worldwide group of banks and financial
services companies (referred to as the "Schroder Group"), with associated
companies and branch and representative offices located in seventeen countries
worldwide. The Schroder Group specializes in providing investment management
services with assets under management currently in excess of $75 billion.

For its services, the Fund pays SCMI a monthly advisory fee equal on an annual
basis to 1.00% of the average daily net assets of the Fund. The investment
advisory fee, in combination with the administrative services fees set forth in
"Administrative Services" below, is higher than advisory and management fees
charged to mutual funds which invest primarily in U.S. securities but not
necessarily higher than those charged to funds with investment objectives
similar to those of the Fund.

The portfolio management team will consist of John A. Troiano and Laura E.
Luckyn-Malone. Mr. Troiano, a Senior Vice President of SCMI since 1991, is also
a Director and President of the Company, and has been employed by various
Schroder Group companies in the portfolio management area since 1988. Ms.
Luckyn-Malone has been a Senior Vice-President and Director of SCMI since
February, 1990. Prior to joining the Schroder Group, she was a Principal with
Scudder, Stevens and Clark, Inc., which she joined in 1985.

ADMINISTRATIVE SERVICES

On behalf of the Fund, the Company has entered into an Administrative Services
Contract with Schroder Distributors, 787 Seventh Avenue, New York, New York
10019. The Company and

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<PAGE>

Schroder Distributors have entered into a Sub-Administration Agreement with
Forum. Pursuant to their agreements, Schroder Distributors and Forum provide
certain management and administrative services necessary for the Fund's
operations, other than the investment management and administrative services
provided to the Fund by SCMI pursuant to the Investment Advisory Contract.
Schroder Distributors is a wholly-owned subsidiary of SCMI. For these services,
Schroder Distributors receives from the Fund a fee, payable monthly, at the
annual rate of 0.25% of the average daily net assets of the Fund.

CODE OF ETHICS

The Fund, the Company, SCMI, Schroder Distributors, and Schroder Incorporated
have adopted a code of ethics which contains a policy on personal securities
transactions by "access persons," including portfolio managers and investment
analysts. That policy complies in all material respects with the recommendations
set forth in the May 9, 1994 Report of the Advisory Group on Personal Investing
of the Investment Company Institute.

DISTRIBUTION

Schroder Distributors acts as distributor to the Fund. Schroder Distributors
was organized in 1989 and registered as a broker-dealer to serve as an
administrator and distributor of the Fund and other mutual funds. Under the
Distribution Plan (the "Plan") adopted by the Company on behalf of the Fund,
which is in the form of a reimbursement plan, the Company is generally
authorized to pay directly or reimburse Schroder Distributors monthly for costs
and expenses incurred in connection with the distribution of Fund shares. Such
payment or reimbursement is subject to a limit of 0.50% per annum of the Fund's
average daily net assets. Payment or reimbursement may be for various types of
costs, including: (1) advertising expenses, including advertising by radio,
television, newspapers, magazines, brochures, sales literature, or direct mail,
(2) costs of printing prospectuses and other materials to be given or sent to
prospective investors, (3) expenses of sales employees or agents of Schroder
Distributors, including salary, commissions, travel and related expenses in
connection with the distribution of Fund shares and (4) payments to broker-
dealers who advise shareholders regarding the purchase, sale, or retention of
Fund shares ("trail fees"). Such payments to broker-dealers may be in amounts
up to 0.50% per annum of the Fund's average daily net assets. The Fund will not
be liable for distribution expenditures made by Schroder Distributors in any
given year in excess of the maximum amount (0.50% per annum of the Fund's
average daily net assets) payable under the Plan in that year. Costs or
expenses in excess of the 0.50% per annum limit may not be carried forward to
future years. Salary expense of salesmen who are responsible for marketing
shares of the Fund may be allocated to various portfolios of the Company that
have adopted a Plan similar to that of the Fund on the basis of average net
assets; travel expense may be allocated to, or divided among, the particular
portfolios of the Company for which it is incurred. The Fund has no intention
of implementing the Distribution Plan with respect to institutional investors,
and in any event will make no payments under the Distribution Plan until the
Board specifically further so authorizes.

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<PAGE>

Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and subject to seeking the most favorable price and
execution available and such other policies as the Directors may determine, SCMI
may consider sales of shares of the Fund as a factor in the selection of broker-
dealers to execute portfolio transactions for the Fund.

Although the Fund does not currently engage in directed brokerage arrangements
to pay Fund expenses, it may do so in the future. These arrangements, whereby
brokers executing Fund portfolio transactions would agree to pay designated Fund
expenses if brokerage commissions generated by the Fund reached certain levels,
might reduce these expenses. As anticipated, these arrangements would not
materially increase the brokerage commissions paid by the Fund. Because
brokerage commissions are not reflected in Fund expenses, however, certain
expenses might not be fully set forth in the Fund's fee table, per share table,
and financial statements, and might therefore appear lower than actual expenses
incurred.

SERVICE ORGANIZATIONS

Various banks, trust companies, broker-dealers (other than Forum) or other
financial organizations (collectively, "Service Organizations") also may provide
administrative services for the Fund, such as maintaining shareholder accounts
and records. In addition to and distinct from payments authorized under the
Rule 12b-1 Plan, the Fund is generally authorized to pay fees to Service
Organizations (which may vary depending upon the services provided) in amounts
up to an annual rate of 0.25% of the daily net asset value of the Fund's shares
owned by shareholders with whom the Service Organization has a servicing
relationship. The Fund has no intention of making any such payments to service
organizations with respect to accounts of institutional investors, and in any
event will make no such payments until the Board specifically further so
authorizes.

The Glass-Steagall Act and other applicable laws and regulations provide that
banks may not engage in the business of underwriting, selling or distributing
securities. There is currently no precedent prohibiting banks from performing
administrative and shareholder servicing functions as Service Organizations.
However, judicial or administrative decisions or interpretations of such laws,
as well as changes in either Federal or state regulations relating to the
permissible activities of banks and their subsidiaries or affiliates, could
prevent a bank Service Organization from continuing to perform all or part of
its servicing activities. If a bank were prohibited from so acting, its
shareholder clients would be permitted to remain shareholders of the Fund and
alternative means for continuing the servicing of such

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<PAGE>

shareholders would be sought. It is not expected that shareholders would suffer
any adverse financial consequences as a result of any of these occurrences.

OTHER EXPENSES

The Fund bears all costs of its operations other than expenses specifically
assumed by Schroder Distributors or SCMI. The costs borne by the Fund include
legal and accounting expenses; Directors' fees and expenses; insurance premiums,
custodian and transfer agent fees and expenses; expenses incurred in acquiring
or disposing of the Fund's portfolio securities; 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 the Fund's portfolio
securities and pricing of the Fund's shares; a portion of the expenses of
maintaining the Fund's legal existence and of shareholders' meetings; and
expenses of preparation and distribution to existing shareholders of reports,
proxies and prospectuses. See "Management" in the SAI. Company expenses
directly attributed to the Fund are charged to the Fund; other expenses are
allocated proportionately among all the portfolios of the Company in relation to
the net assets of each portfolio. See "Management - Fees and Expenses" in the
SAI.

SCMI and Schroder Distributors have voluntarily undertaken to assume certain
expenses of the Fund. This undertaking is designed to place a maximum limit on
Fund expenses (including all fees to be paid to SCMI and Schroder Distributors
but excluding taxes, interest, brokerage commissions and other portfolio
transaction expenses and extraordinary expenses) of 1.60% of the Fund's daily
net assets. This expense limitation cannot be withdrawn except by a majority
vote of the disinterested Directors. If expense reimbursements are required,
they will be made on a monthly basis. SCMI will reimburse the Fund for four-
fifths of the amount required and Schroder Distributors, the remaining one-
fifth; provided, however, that neither SCMI nor Schroder Distributors nor will
be required to make any reimbursements in excess of the fees paid to them by the
Fund on a monthly basis for their respective administrative and advisory
services. This undertaking to reimburse expenses supplements any applicable
state expense limitation (see "Fees and Expenses" in the SAI).

PORTFOLIO TRANSACTIONS

The Investment Advisory Contract authorizes and directs SCMI to place orders for
the purchase and sale of the Fund's investments with brokers and dealers
selected by SCMI in its discretion and to seek "best execution" of such
portfolio transactions. The Fund may pay higher than the lowest available
commission rates when SCMI believes it is reasonable to do so in light of the
value of the brokerage and research services provided by the broker effecting
the transaction. It should be noted that costs associated with transactions in
foreign securities are generally higher than with transactions in United States
securities. However, the Fund will seek to achieve the best net results in
effecting such transactions.

Subject to the Fund's policy of obtaining the best price consistent with quality
of execution on transactions, the Fund may employ (a) Wertheim Schroder &
Company, Incorporated ("Wertheim"), an affiliate of SCMI, to effect transactions
of the Fund on the New York Stock

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<PAGE>

Exchange only and (b) Schroder Securities Limited and its affiliates
(collective, "Schroder Securities"), affiliates of SCMI, to effect transactions
of the Fund on certain foreign securities exchanges. Because of the
affiliations between SCMI and Wertheim and Schroder Securities, respectively,
the Fund's payment of commissions to them is subject to procedures adopted by
the Board to provide that such commissions will not exceed the usual and
customary brokerage commissions. No specific portion of the Fund's brokerage
will be directed to Wertheim or Schroder Securities and in no event will either
of them receive such brokerage in recognition of research services.

INVESTMENT IN THE FUND

PURCHASE OF SHARES

The Fund offers its shares at their next determined net asset value, subject to
the purchase charge described below, after receipt of a Purchase Order at the
address set forth below without any sales charge as an investment vehicle for
individuals, institutions, corporations and fiduciaries. The net asset value
per share of the Fund is calculated at 4:00 p.m. New York City time. See "Net
Asset Value." Prospectuses, sales material and applications can be obtained
from the Company or Forum Financial Corp., the Fund's Transfer Agent. See
"Other Information - Shareholder Inquiries."

The minimum initial investment is $250,000. The Fund and the Administrator each
reserves the right to waive the minimum investment requirement. All purchase
payments are invested in full and fractional shares. The Fund is authorized to
reject any purchase order.

Initial and subsequent purchases may be made by mailing a check (in U.S.
dollars), payable to Schroder Emerging Markets Fund - Institutional Portfolio,
to:

Schroder Emerging Markets Fund - Institutional Portfolio
P.O. Box 446
Portland, Maine 04112

In the case of an initial purchase, the check must be accompanied by a completed
Purchase Application.

Investors wishing to purchase shares through their accounts at a Service
Organization should contact that organization directly for appropriate
instructions.

Service Organizations (on behalf of customers) may transmit purchase payments by
Federal Reserve Bank wire directly to the Fund at the following address:

Chase Manhattan Bank
New York, NY
ABA. No.: 021000021

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<PAGE>

For Credit To: Forum Financial Corp.
Acct. No.: 910-2-718187
Ref: Schroder Emerging Markets Fund - Institutional Portfolio
Account of: (shareholder name)
Account Number: (shareholder account number)

The wire order must specify the name of the Fund, the account name and number,
address, confirmation number, social security and tax identification number
(where applicable), 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.
Where the initial purchase is by wire, an account number will be assigned and a
Purchase Application must be completed and mailed to the Fund. Purchase
requests by wire that are received prior to 4:00 p.m. (New York City Time) will
be processed at the net asset value determined as of that day. Purchase requests
by wire that are received after 4:00 p.m. (New York City Time) will be processed
at the net asset value determined as of the next day that the New York Stock
Exchange is open for trading.

For each shareholder of record, the Fund's Transfer Agent, as the shareholder's
agent, will establish an open account to which all shares purchased are
credited, together with any dividends and capital gain distributions which are
paid in additional shares. Although most shareholders elect not to receive
share certificates, certificates for full shares may be obtained by specific
written request to the Transfer Agent. No certificates are issued for
fractional shares.

Purchases may also be made through broker-dealers who assist their customers in
purchasing shares of the Fund. Such broker-dealers may charge their customers a
service fee for processing orders to purchase or sell shares of the Fund.

PURCHASE CHARGE. Purchases of Fund shares are subject to a purchase charge of
0.50% of the net asset value of the shares purchased. This charge is designed
to help compensate the Fund for transaction costs it incurs in accepting
investment in the Fund, including brokerage commissions in acquiring portfolio
securities, currency transaction costs and transfer agent costs, and to protect
the interests of shareholders. This charge, which is not a sales charge, is
paid to the Fund, not to Schroder Distributors or any other entity. The
purchase charge is not assessed on the reinvestment of dividends or
distributions or shares purchased through a subscription in kind.

RETIREMENT PLANS

Shares of the Fund are offered in connection with tax-deferred retirement plans.
Application forms and further information about these plans, including
applicable fees, are available upon request. Before investing in the Fund
through one of these plans, an investor should consult his or her tax adviser.

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<PAGE>

REDEMPTION OF SHARES

Shares of the Fund will be redeemed at their next determined net asset value,
subject to the redemption charge described below, following receipt by the Fund
(at the address set forth below) of a redemption request in proper form. See
"Net Asset Value." Redemption requests by telephone or wire may be made between
the hours of 9:00 a.m. and 6:00 p.m. (New York City time) on each day that the
New York Stock Exchange is open for trading. Redemption requests by telephone
or wire that are received prior to 4:00 p.m. (New York City Time) will be
processed at the net asset value determined as of that day. Redemption requests
by telephone or wire that are received after 4:00 p.m. (New York City Time) will
be processed at the net asset value determined as of the next day that the New
York Stock Exchange is open for trading.

BY TELEPHONE. Redemption requests may be made by telephoning the Transfer Agent
at 800-344-8332. Shareholders must provide the Transfer Agent with the
shareholder's account number, the exact name in which the shares are registered
and some additional form of identification such as a password. A redemption by
telephone may be made only if the telephone redemption privilege option has been
elected on the Account Registration Form. In an effort to prevent unauthorized
or fraudulent redemption requests by telephone, reasonable procedures will be
followed by Forum to confirm that such instructions are genuine. If such
procedures are followed, neither Forum nor the Trust will be liable for any
losses due to unauthorized or fraudulent redemption requests. Shares for which
certificates have been issued may not be redeemed by telephone. In times of
drastic economic or market changes, it may be difficult to make redemptions by
telephone. If a shareholder cannot reach the Transfer Agent by telephone,
redemption requests may be mailed or hand-delivered to the Transfer Agent.

WRITTEN REQUESTS. Redemptions may be made by letter to the Fund, specifying the
dollar amount or number of shares to be redeemed and account number, and sent
to:

Schroder Emerging Markets Fund - Institutional Portfolio
P.O. Box 446
Portland, Maine 04112

The letter must be signed in exactly the same way the account is registered. If
there is more than one owner of the shares, all must sign. In certain cases,
signatures must be guaranteed by an institution acceptable to the Transfer
Agent. Such institutions may include certain banks, broker-dealers (including
municipal and government securities brokers and dealers), credit unions,
securities exchanges and associations, clearing agencies and savings
associations. Signature guarantees by notaries public are not acceptable.
Further documentation, such as copies of corporate resolutions and instruments
of authority, may be requested from corporations, administrators, executors,
personal representatives, directors or custodians to evidence the authority of
the person or entity making the redemption request. Questions concerning the
need for signature guarantees or documentation of authority should be directed
to the Transfer Agent, at the address set forth for the Fund under "Purchase of
Shares" or by calling the Account Information telephone number appearing on the
cover of this Prospectus.

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<PAGE>

If shares to be redeemed are held in certificate form, the certificates must be
enclosed with the letter and the assignment form on the back of the
certificates, or an assignment separate from the certificates (but accompanied
by the certificates), must be signed by all owners in exactly the same way the
name or names are written on the face of the certificates. Requirements for
signature guarantees and/or documentation of authority as described above could
also apply. For your protection, the Fund suggests that certificates be sent by
registered mail.

Checks for redemption proceeds will normally be mailed within seven days but
will not be mailed until all checks in payment for the purchase of the shares to
be redeemed have been cleared, which may take up to 15 calendar days from
purchase date. Unless other instructions are given in proper form, a check for
the proceeds of a redemption will be sent to the shareholder's address of
record.

The Fund may suspend the right of redemption during any period when (i) trading
on the New York Stock Exchange is restricted or that Exchange is closed, other
than customary weekend and holiday closings, (ii) the SEC has by order permitted
such suspension, or (iii) an emergency, as defined by rules of the SEC, exists
making disposal of portfolio investments or determination of the value of the
net assets of the Fund not reasonably practicable.

Proceeds of redemptions normally are paid in cash. If the Board should
determine that it would be detrimental to the best interests of the remaining
shareholders of the Fund to make payment wholly or partly in cash, the Fund may
pay the redemption price in whole or in part by an in-kind distribution of
securities from the portfolio of the Fund. The Fund has filed a formal election
with the SEC pursuant to which the Fund will redeem shares solely in cash up to
the lesser of $250,000 or 1% of net assets during any 90-day period for any one
shareholder of record. It is the Fund's policy, however, to redeem shares
solely in cash up to the greater of $5,000,000 or 5% of net assets during any
90-day period. This policy may involve the sale of certain portfolio securities
before the time the investment adviser might otherwise deem appropriate and
therefore may reduce the diversification and liquidity of the Fund's portfolio.
For further information about redemption in kind, see "Redemption in Kind" in
the SAI.

The proceeds of a redemption may be more or less than the amount invested and,
therefore, a redemption may result in a gain or loss for Federal income tax
purposes.

Due to the relatively high cost of maintaining smaller accounts, the Fund
reserves the right to redeem, upon not less than 30 days' notice, shares in any
account if at any time the total investment does not have a value of at least
$2,000, unless the value of the account shall have fallen below such amount
solely as a result of market activity. However, an affected shareholder would
be allowed to make an additional investment prior to the date fixed for
redemption to avoid liquidation of the account.

REDEMPTION CHARGE. Redemptions of Fund shares are subject to a redemption
charge of 0.50% of the net asset value of the shares redeemed. This charge is
designed to help compensate the Fund for the transaction costs it incurs in
redeeming Fund shares, including brokerage commissions in selling portfolio
securities, currency transaction costs and transfer

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<PAGE>

agent costs, and to protect the interests of shareholders. This charge, which
is not a sales charge, is paid to the Fund, not to Schroder Distributors or any
other entity. The redemption charge is not assessed on shares acquired through
the reinvestment of dividends or distributions or on redemptions in kind. For
purposes of computing the redemption charge, redemptions by a shareholder are
deemed to be made in the following order: (i) shares purchased through the
reinvestment of dividends and distributions and (ii) shares for which the
redemption charge is applicable, on a first purchased, first redeemed basis.

NET ASSET VALUE

The net asset value per share of the Fund is calculated at 4:00 p.m. New York
City time, Monday through Friday, on each day that the New York Stock Exchange
is open for trading (which excludes the following national business holidays:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day). Net asset value per share is
calculated by subtracting the Fund's liabilities from the aggregate value of its
assets and dividing the remainder by the number of shares of the Fund
outstanding.

The Board has established procedures for the valuation of the Fund's securities.
In general, those valuations are based on market value, with special provisions
being made for securities which do not have readily available market quotations,
short-term debt securities and Hedging Instruments. Trading in securities on
some non-U.S. exchanges and over-the-counter markets may not occur every day
that the Fund calculates its net asset value. Furthermore, trading in some non-
U.S. markets may take place on days on which the Fund does not calculate its net
asset value. If events materially affecting the value of foreign securities
occur between the time when their price is determined and the time when net
asset value is calculated, such securities will be valued at far value as
determined in good faith by the Board. Portfolio securities listed on
recognized stock exchanges are valued at the last reported trade price, prior to
the time when the assets are valued, on the exchange on which the securities are
principally listed. Listed securities traded on recognized stock exchanges
where last trade prices are not available are valued at mid-market prices.
Securities traded in over-the-counter markets, or listed securities for which no
trade is reported on the valuation date, are valued at the most recent reported
mid-market price. For further information, see "Determination of Net Asset
Value Per Share" in the SAI.

All assets or liabilities denominated in non-U.S. 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.

DIVIDENDS, DISTRIBUTIONS, AND TAXES

The Fund intends to comply with the provisions of Subchapter M of the Internal
Revenue Code of 1986 (the "Code") applicable to regulated investment companies.
As a regulated investment company, the Fund will distribute substantially all of
its "investment company taxable income" and its "net capital gains" at least
annually, as defined in the Code, and, therefore, the Fund will

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<PAGE>

not be subject to Federal income tax to the extent it distributes such income
and capital gains in the manner required under the Code.

The Fund intends to declare and pay as a dividend substantially all of its net
investment income annually and to distribute any net realized long-term capital
gains at least annually. Dividend and capital gains distributions will be
reinvested automatically in additional shares of the Fund at net asset value
unless the shareholder has notified the Fund in his Purchase Application or
otherwise in writing of his election to receive distributions in cash.

Dividend and capital gain distributions are made on a per-share basis. After
every distribution the value of a share declines by the amount of the
distribution. Purchases made shortly before a distribution include in the
purchase price the amount of the distribution which will be returned to the
investor in the form of a taxable dividend or capital gain distribution.

Earnings of the Fund not distributed on a timely basis in accordance with a
calendar year distribution requirement will subject the Fund to a nondeductible
4% excise tax. To prevent imposition of this tax, the Fund intends to comply
with this distribution requirement. A distribution will be treated as paid
during the calendar year if it is declared by the Fund in October, November or
December of that year with a record date in such month and paid by the Fund
during January of the following year. Such distributions will be taxable to
shareholders in the calendar year in which declared rather than the calendar
year in which received.

For Federal income tax purposes, distribution of the Fund's investment company
taxable income (including net short-term capital gains) will be taxable to
shareholders at ordinary income rates whether they are invested in additional
shares or received in cash. Distributions of any net capital gains designated
by the Fund as capital gain dividends will be taxable as long-term capital gain,
regardless of how long a shareholder has held the shares and whether they are
invested in additional shares or received in cash. Each year the Company will
notify Fund shareholders of the tax status of dividends and distributions.

Ordinary income dividends paid by the Fund to shareholders who are non-resident
aliens will be subject to a 30% United States withholding tax under existing
provisions of the Code applicable to foreign individuals and entities unless a
reduced rate of withholding or a withholding exemption is provided under
applicable treaty law. Non-resident shareholders are urged to consult their own
tax advisers concerning the applicability of the United States withholding tax.

Dividends and interest received, and, in certain circumstances, capital gains
realized, by the Fund may give rise to withholding and other taxes imposed by
foreign countries. Tax conventions between certain countries and the United
States may reduce or eliminate such taxes. If more than 50% in value of the
Fund's total assets at the close of its taxable year consists of securities of
foreign corporations, the Fund will be eligible, and intends, to file an
election with the Internal Revenue Service ("IRS") pursuant to which
shareholders of the Fund will be required to include their proportionate share
of such withholding taxes in their United States income tax returns as gross
income, treat such proportionate share as taxes paid by them,

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<PAGE>

and, subject to certain limitations, deduct such proportionate share in
computing their taxable incomes or, alternatively, use them as foreign tax
credits against their United States income taxes. No deductions for foreign
taxes, however, may be claimed by noncorporate shareholders who do not itemize
deductions. A shareholder that is a nonresident alien individual or a foreign
corporation may be subject to United States withholding tax on the income
resulting from the Fund's election described in this paragraph but may not be
able to claim a credit or deduction against such United States tax for the
foreign taxes treated as having been paid by such shareholder. The Fund will
report annually to its shareholders the amount per share of such withholding
taxes.

Due to investment laws in certain emerging market countries, it is anticipated
that the Fund's investments in equity securities in such countries will consist
primarily of shares of investment companies (or similar investment entities)
organized under foreign law or of ownership interests in special accounts,
trusts or partnerships. If the Fund purchases shares of an investment company
(or similar investment entity) organized under foreign law, the Fund will be
treated as owning shares in a passive foreign investment company ("PFIC") for
United States Federal income tax purposes. The Fund may be subject to United
States Federal income tax, and an additional tax in the nature of interest, on a
portion of distributions from such company and on gain from the disposition of
such shares (collectively referred to as "excess distributions"), even if such
excess distributions are paid by the Fund as a dividend to its shareholders.
The Fund may be eligible to make an election with respect to certain PFICs in
which it owns shares that will allow it to avoid the taxes on excess
distributions. However, such election may cause the Fund to recognize income in
a particular year in excess of the distribution received from such PFICs.

Under Code Section 988, foreign currency gains or losses from forward contracts,
from futures contracts that are not "regulated futures contracts," and from
unlisted options will generally be treated as ordinary income or loss. In
certain circumstances the Fund may elect capital gain or loss treatment for such
transactions. In general, however, Code Section 988 gains or losses will
increase or decrease the amount of the Fund's investment company taxable income
available to be distributed to shareholders as ordinary income. Additionally,
if Code Section 988 losses exceed other investment company taxable income during
a taxable year, the Fund would not be able to make any ordinary dividend
distributions, and any distributions made before the losses were realized but in
the same taxable year would be recharacterized as a return of the capital to
shareholders, thereby reducing each shareholder's basis in his Fund shares.

The Company will be required to withhold Federal income tax at a rate of 31%
("backup withholding") from dividends paid to non-corporate shareholders if (a)
the payee fails to furnish the payee's correct taxpayer identification number or
social security number, (b) the IRS notifies the Company that the payee has
failed to report properly certain interest and dividend income to the IRS and to
respond to notices to that effect or (c) when required to do so, the payee fails
to certify that he is not subject to backup withholding.

Depending on the residence of the shareholder for tax purposes, distributions
also may be subject to state and local taxes. Shareholders should consult their
own tax advisers as to the

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<PAGE>

Federal, foreign, state and local tax consequences of ownership of shares of the
Fund in their particular circumstances.

OTHER INFORMATION

CAPITALIZATION AND VOTING

The Company is a Maryland corporation. The Company's Articles of Incorporation
authorize the Board to issue 100,000,000 shares of common stock, with a $.01 par
value. The Board has the power to designate one or more classes ("Classes") of
the common stock, each to pertain to a separate investment portfolio, and to
classify or reclassify any unissued shares with respect to such Classes.
Currently the Company is offering five Classes, one of which pertains to the
Fund. The Board may create additional Classes in the future.

The shares of the Company are fully paid and nonassessable, and have no
preferences as to conversion, exchange, dividends, retirement or other features.
The shares have no preemptive rights. They have non-cumulative voting rights,
which means that the holders of more than 50% of the shares voting for the
election of Directors can elect 100% of the Directors if they choose to do so.
A shareholder is entitled to one vote for each full share held (and a fractional
vote for each fractional share held), then standing in his name on the books of
the Company. On matters requiring shareholder approval, shareholders are
entitled to vote only with respect to matters which affect the interest of the
Class they hold, except as otherwise required by applicable law.

There will normally be no meetings of shareholders to elect Directors unless and
until such time as less than a majority of the Directors holding office have
been elected by shareholders. However, the holders of not less than a majority
of the outstanding shares of the Company may remove any person serving as a
Director and the Board will call a special meeting of shareholders to consider
removal of one or more Directors if requested in writing to do so by the holders
of not less than 10% of the outstanding shares of the Company.

REPORTS

The Company sends to each shareholder of the Fund a semi-annual report and an
audited annual report, each of which includes a list of the investment
securities held by the Fund.

PERFORMANCE INFORMATION

The Fund from time to time may include quotations of its average annual total
return in advertisements or reports to shareholders or prospective investors.
Quotations of average annual total return for the Fund will be expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in the Fund over a period of 1, 5 and 10 years (up to the life of the
Fund). Average annual total return quotations reflect the deduction of a
proportional share of Fund expenses (on an annual basis), and assume that all
dividends and distributions are reinvested when paid.

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<PAGE>

Performance information for the Fund may be compared to various unmanaged
securities indices, groups of mutual funds tracked by mutual fund ratings
services, or other general economic indicators. Unmanaged indices may assume
the reinvestment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.

CUSTODIAN AND TRANSFER AGENT

Securities of the Fund will be held by The Chase Manhattan Bank, N.A. as
Custodian for the Fund. Forum Financial Corp. serves as the Fund's Transfer and
Dividend Disbursing Agent. The Transfer Agent maintains an account for each
shareholder of the Company (unless such accounts are maintained by sub-transfer
agents), performs other transfer agency functions and acts as dividend
disbursing agent for the Company. In addition, under a separate agreement,
Forum Financial Corp. performs portfolio accounting services for the Fund,
including determination of the Fund's net asset value.

SHAREHOLDER INQUIRIES

Inquiries about the Fund's investment policies and past performance should be
directed to:

Schroder Emerging Markets Fund - Institutional Portfolio
P.O. Box 446
Portland, Maine 04112

Information about specific stockholder accounts may be obtained from the
Transfer Agent by calling (800) 344-8332.

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<PAGE>

SCHRODER EMERGING MARKETS FUND
INSTITUTIONAL PORTFOLIO

INVESTMENT ADVISER
Schroder Capital Management International Inc.
787 Seventh Avenue
New York, New York 10019

ADMINISTRATOR & DISTRIBUTOR
Schroder Capital Distributors Inc.
787 Seventh Avenue
New York, New York 10019

SUB-ADMINISTRATOR
Forum Financial Services, Inc.
61 Broadway
New York, New York 10006

CUSTODIAN
The Chase Manhattan Bank, N.A.
Global Custody Division
Woolgate House, Coleman Street
London, EC2P 2HD
United Kingdom

TRANSFER AND DIVIDEND DISBURSING AGENT
Forum Financial Corp.
P.O. Box 446
Portland, Maine 04112

COUNSEL
Jacobs Persinger & Parker
77 Water Street
New York, New York 10005

INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109

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<PAGE>

-------------

TABLE OF CONTENTS
-------------

PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . 2

THE FUND
Investment Objective . . . . . . . . . . . . . . . . . . . . . . . . 5
Investment Policies. . . . . . . . . . . . . . . . . . . . . . . . . 5
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . . 6
Special Risk Considerations. . . . . . . . . . . . . . . . . . . . . 7
Additional Investment Policies . . . . . . . . . . . . . . . . . . . 9

MANAGEMENT OF THE FUND
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . .18
Investment Adviser and Portfolio Manager . . . . . . . . . . . . . .18
Administrative Services. . . . . . . . . . . . . . . . . . . . . . .18
Code of Ethics . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Service Organizations. . . . . . . . . . . . . . . . . . . . . . . .20
Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . .21

INVESTMENT IN THE FUND
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . .22
Retirement Plans . . . . . . . . . . . . . . . . . . . . . . . . . .23
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . .24
Net Asset Value. . . . . . . . . . . . . . . . . . . . . . . . . . .26

DIVIDENDS, DISTRIBUTIONS, AND TAXES. . . . . . . . . . . . . . . . .26

OTHER INFORMATION
Capitalization and Voting. . . . . . . . . . . . . . . . . . . . . .29
Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
Performance Information. . . . . . . . . . . . . . . . . . . . . . .29
Custodian and Transfer Agent . . . . . . . . . . . . . . . . . . . .30
Shareholder Inquiries. . . . . . . . . . . . . . . . . . . . . . . .30

PROSPECTUS
AUGUST 23, 1994
AS AMENDED MAY 3, 1995

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