<PAGE>
As filed with the Securities and Exchange Commission on March 4, 1996
File No. 2-34215
File No. 811-1911
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 47
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 28
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SCHRODER CAPITAL FUNDS (DELAWARE)
(FORMERLY SCHRODER CAPITAL FUNDS, INC.)
(Exact Name of Registrant as Specified in Charter)
Two Portland Square, Portland, Maine 04101
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: 207-879-1900
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Thomas G. Sheehan, Esq.
Forum Financial Services, Inc.
Two Portland Square, Portland, Maine 04101
(Name and Address of Agent for Service)
Copies of Communications to:
Scott M. Shepard, Esq.
Jacobs Persinger & Parker
77 Water Street, New York, New York 10005
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It is proposed that this filing will become effective:
immediately upon filing pursuant to Rule 485, paragraph (b)
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on [ ] 1996 pursuant to Rule 485, paragraph (b)
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60 days after filing pursuant to Rule 485, paragraph (a)(i)
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X on May 3, 1996 pursuant to Rule 485, paragraph (a)(i)
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75 days after filing pursuant to Rule 485, paragraph (a)(ii)
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on [ ] pursuant to Rule 485, paragraph (a)(ii)
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- ----- this post-effective amendment designates a new effective date for a
previously filed post-efffective amendment.
The Registrant has registered an indefinite number of shares of beneficial
interest under the Securities Act of 1933 (the "1933 Act") pursuant to Rule
24f-2 under the Investment Company Act of 1940 (the "1940 Act"). Accordingly,
no fee is payable herewith. A Rule 24f-2 Notice for the Registrant's fiscal
year ended October 31, 1995 was filed with the Commission on about December 28,
1995. INTERNATIONAL EQUITY FUND AND SCHRODER EMERGING MARKETS FUND
INSTITUTIONAL PORTFOLIO OF REGISTRANT ARE STRUCTURED AS MASTER-FEEDER FUNDS.
THIS AMENDMENT INCLUDES A MANUALLY EXECUTED SIGNATURE PAGE FOR THE MASTER FUNDS.
Effective January 9, 1995, Schroder Capital Funds, Inc. (the "Company"), a
Maryland Corporation, reorganized as Schroder Capital Funds (Delaware) (the
"Trust"), a Delaware business trust. The Trust hereby files this Post-Effective
Amendment to the Registration Statement of the Company and expressly adopts the
Registration Statement of the Company as its own for all purposes of the 1933
Act, the Securities Exchange Act of 1934, and the 1940 Act.
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<PAGE>
SCHRODER CAPITAL FUNDS (DELAWARE)
FORM N-1A
CROSS REFERENCE SHEET
PART A
Form N-1A
Item No. (Caption) Location in Prospectus (Caption)
- --------- ---------------------- --------------------------------
1. Cover Page Cover Page
2. Synopsis The Fund
3. Condensed Financial Information Not Applicable
4. General Description of The Fund - Investment Objective;
Registrant Investment Policies; Investment
Restrictions; Special Risk
Considerations; Additional
Investment Policies
5. Management of the Fund Management of the Fund - Board of
Directors; Investment Adviser and
Portfolio Manager; Administrative
Services; Service Organizations;
Other Expenses; Portfolio
Transactions; Other Information -
Custodian and Transfer Agent
5A. Management's Discussion of Not Applicable
Fund Performance
6. Capital Stock and Other Information - Capitalization
Other Securities and Voting; Shareholder Inquiries;
Dividends, Distributions and Taxes
7. Purchase of Securities Investment in the Fund - Being
Offered Purchase of Shares;
Retirement Plans; Individual
Retirement Accounts; Net Asset
Value; Management of the Fund -
Distribution
8. Redemption or Repurchase Investment in the Fund - Redemption
of Shares; Net Asset Value
9. Pending Legal Proceedings Not Applicable
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<PAGE>
PART B
Form N-1A Location in Statement of Additional
Item No. (Caption) Information (Caption)
- --------- ---------------------- ---------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Other Information - Organization
13. Investment Objectives and Investment Policies; Investment
Policies Restrictions
14. Management of the Fund Management - Officers and Directors
15. Control Persons and Principal Not Applicable
Holders of Securities
16. Investment Advisory and Management - Investment Adviser;
Other Services Officers and Directors;
Administrative Services;
Distribution of Fund Shares; Fees
and Expenses; Portfolio
Transactions - Brokerage and
Research Services; Other
Information - Custodian and
Transfer Agent; Independent
Accountants
17. Brokerage Allocation and Portfolio Transactions
Other Practices
18. Capital Stock and Other Other Information - Capitalization
Securities and Voting
19. Purchase, Redemption and Pricing Determination of Net Asset Value
of Securities Being Offered Per Share
20. Tax Status Taxation
21. Underwriters Management - Distribution of Fund
Shares; Fees and Expenses
22. Calculation of Performance Data Other Information - Performance
Information
23. Financial Statements Not Applicable
-3-
<PAGE>
INTERNATIONAL EQUITY FUND
TWO PORTLAND SQUARE
PORTLAND, MAINE 04101
____________
INSTITUTIONAL SHARES
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GENERAL INFORMATION: (207) 879-8903
ACCOUNT INFORMATION: (800) 344-8332
FAX: (207) 879-6206
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SCHRODER CAPITAL MANAGEMENT INTERNATIONAL INC. - INVESTMENT ADVISER
SCHRODER FUND ADVISORS INC. - ADMINISTRATOR & DISTRIBUTOR
This Prospectus offers Institutional Shares ("Institutional Shares") of
International Equity Fund (the "Fund"), a separately-managed, diversified
portfolio of Schroder Capital Funds (Delaware) (the "Trust"), an open-end
management investment company currently consisting of seven separate portfolios,
each of which has different investment objectives and policies. The Fund's
investment objective is long-term capital appreciation through investment in
securities markets outside the United States. Investments in foreign securities
involve special risks in addition to the risks associated with investments in
general and there can be no assurance that the Fund's objective will be
achieved.
THE FUND CURRENTLY SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY HOLDING, AS ITS
ONLY INVESTMENT SECURITIES, AN INTEREST IN INTERNATIONAL EQUITY FUND (THE
"PORTFOLIO"), A SEPARATE PORTFOLIO OF SCHRODER CAPITAL FUNDS ("CORE TRUST"), A
REGISTERED OPEN-END MANAGEMENT INVESTMENT COMPANY HAVING SUBSTANTIALLY THE SAME
INVESTMENT OBJECTIVE AND POLICIES AS THE FUND. SEE "OTHER INFORMATION -- FUND
STRUCTURE."
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 May 1, 1996 and as supplemented from time to time containing
additional 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 SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This Prospectus is dated May 1, 1996.
-4-
<PAGE>
PROSPECTUS SUMMARY
THE FUND. The Fund is a separately managed, diversified portfolio of the Trust,
a Delaware business trust registered as an open-end management investment
company under the Investment Company Act of 1940 (the "Act"). The Fund's
investment objective is long-term capital appreciation through investment in
securities markets outside the United States. Currently, the Fund seeks to
achieve its investment objective by investing exclusively in the Portfolio, a
series of Schroder Capital Funds ("Core Trust"), itself a registered open-end
management investment company. The Portfolio has substantially the same
investment objective and policies as the Fund. Accordingly, the investment
experience of the Fund will correspond directly with the investment experience
of the Portfolio. The Fund currently offers two separate classes of shares:
Institutional Shares("Institutional Shares") and Advisor Shares ("Advisor
Shares"). Only Institutional Shares are offered through this Prospectus and are
sometimes referred to herein as the "Shares."
INVESTMENT ADVISER. The Portfolio's investment adviser is Schroder Capital
Management International Inc. ("SCMI") "), 787 Seventh Avenue, New York, New
York 10019. The investment advisory fee paid to SCMI by the Portfolio is borne
indirectly by the Fund. See "Management of the Fund" -- Investment Adviser and
Portfolio Manager."
ADMINISTRATOR AND DISTRIBUTOR. Schroder Fund Advisors Inc. ("Schroder
Advisors"), formerly Schroder Capital Distributors, Inc., serves as
Administrator and Distributor of the Fund, and Forum Financial Services, Inc.
("Forum") is the Fund's Sub-Administrator.
PURCHASES AND REDEMPTIONS OF SHARES. Shares may be purchased or redeemed by
mail, by bank-wire and through an investor's broker-dealer or other financial
institution. The minimum initial investment is $____, except that the minimum
for an Individual Retirement Account is $____. The minimum subsequent
investment is $____. See "Investment in the Fund -- Purchase of Shares" and "--
Redemption of Shares."
DIVIDENDS AND DISTRIBUTIONS. The Fund declares and pays as a dividend
substantially all of its net investment income annually and distributes any net
realized long-term capital gain at least annually. Dividend and capital gain
distributions are reinvested automatically in additional shares of the Fund at
net asset value unless the shareholder has notified the Fund in a Purchase
Application or otherwise in writing of the shareholder's election to receive
distributions in cash. See "Dividends, Distributions and Taxes."
RISK CONSIDERATIONS. There can be no assurance that the Fund will achieve its
investment objective, and the Fund's net asset value and total return will
fluctuate based upon changes in the securities it invests in directly or
indirectly through the Portfolio. The Portfolio's objective of investing in the
securities of foreign issuers may involve risks in addition to those normally
-5-
<PAGE>
associated with investments in the securities of U.S. issuers, including risks
of foreign political and economic instability, adverse movements in exchange
rates, and the imposition or tightening of limitations on the repatriation of
capital. Accordingly, the Fund is not a complete investment program. See
"Additional Investment Policies and Risk Considerations." By investing solely in
the Portfolio, the Fund may achieve certain efficiencies and economies of scale.
Nonetheless, this investment could also have potential adverse effects on the
Fund. Investors in the Fund should consider these risks, as described under
"Other Information - Fund Structure."
FEE TABLE
The table below shows the costs and expenses that an investor would incur
as a holder of Institutional Shares. There are no transaction expenses
associated with purchases or redemptions of Institutional Shares.
Annual Fund Operating Expenses (as a percentage of average net
assets)(1),(2)
Management Fees. . . . . . . . . . . . . . . . . . 0.71%
(after estimated fee waivers)
12b-1 Fees . . . . . . . . . . . . . . . . . . . . 0.00%
Other Expenses . . . . . . . . . . . . . . . . . . 0.28%
(after expense reimbursements)
Total Fund Operating Expenses (3). . . . . . . . . 0.99%
(1) This expense information has been restated to reflect the Fund's
current fees.
(2) Expenses include the Fund's pro rata portion of all operating expenses
of the Portfolio, which will be borne indirectly by Fund
shareholders. The Trust's Board of Trustees 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. Investment advisory
fees are those incurred by the Portfolio; as long as the Fund's assets
are invested in the Portfolio, the Fund pays no investment advisory
fees directly.
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<PAGE>
(3) Absent estimated fee waivers and expenses reimbursements, Management
Fees, Other Expenses and Total Operating Expenses would be 0.80%,
0.30%, and 1.10%, respectively.
SCMI and Schroder Advisors 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 0.99% of the Fund's average daily net assets. This
undertaking cannot be withdrawn except by a majority vote of the Independent
Trustees of the Trust. See "Management -- Other Expenses."
EXAMPLE
Based on the expenses listed above, you would pay the following expenses on a
$1,000 investment, assuming (1) a 5% annual return, (2) redemption at the end of
each time period, and (3) reinvestment of all dividends and other distributions:
1 year $__
3 years $__
5 years $__
10 years $__
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<PAGE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
OR RETURNS, AND ACTUAL EXPENSES OR RETURNS BE MORE OR LESS THAN THOSE SHOWN.
The 5% annual return is not a prediction of the Fund's return, but is required
by the Securities and Exchange Commission for purposes of these calculations.
-8-
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights of the Fund are presented to assist Advisors
in evaluating the performance of the Fund for the periods shown. The data for
periods prior to August 1, 1989 pertains to the Fund's predecessor-in-interest,
and to the portfolio of the Trust thereafter. This information, for all periods
after the year ended September 30, 1988, has been audited by [ACCOUNTANT]
L.L.P., independent accountants to the Fund. The information for other periods
is not presented herein as audited. The Fund's financial statements for the year
ended October 31, 1995 and independent accountants' 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 on the cover of this Prospectus.
For a Share Outstanding Throughout the Year:
<TABLE>
<CAPTION>
Year Year Year Year Year Year Month Year Year Year 12/20/85
ended ended ended ended ended ended ended ended ended ended to
10/31/95 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> <C>
Net Asset Value,
Beginning of
Period 23.17 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 0.46 0.18 0.08 0.25 0.25 0.15 0.03 0.20 0.05 (0.07) 0.02
Net Realized
Income (0.18) 2.69 5.27 (1.04) (0.25) (0.12) (0.78) 4.44 (2.34) 4.71 4.05
Total from
Investment
Operations 0.28 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 (2.54) - - (0.05) (1.23) (0.37) 0.00 (0.05) (1.33) (0.67) 0.00
Total
Distributions (2.54) (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 Period 20.91 23.17 20.38 15.15 16.22 17.70 18.20 18.95 14.40 18.02 14.07
Total Return 2.08% 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 Period
(Thousands) 212,330 500,504 320,550 159,556 108,398 62,438 49,740 48,655 29,917 32,553 9,152
Ratio of Expenses
to Average Net
Assets 0.91% 0.90% 0.91% 0.93% 1.07% 1.12% 1.12%* 1.12% 1.30% 1.64% 2.47%(1)
Ratio of Net
Investment
Income to
Average
Net Assets 0.99% 0.94% 0.87% 1.62% 1.59% 0.83% 2.29%* 1.27% 0.38% (0.42%) (0.12%)(1)
-9-
<PAGE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio
Turnover
Rate 61.26% 25.17% 56.05% 49.42% 50.58% 55.91% 21.98%* 72.25% 86.19% 84.97% 77.53%(1)
</TABLE>
(1) Annualized
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<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund is designed for U.S. Investors who seek international diversification
of their investments by participating in foreign securities markets. The Fund is
not a complete investment program and investments in the securities of foreign
issuers generally involve risks in addition to risks associated with investments
in the securities of U.S. issuers.
INVESTMENT OBJECTIVE AND THE PORTFOLIO
The investment objective of the Fund is long-term capital appreciation through
investment in securities markets outside the U.S. There is no assurance that the
Fund will achieve its investment objective.
The Fund currently seeks to achieve its investment objective by investing all of
its investment assets in the Portfolio, which has substantially the same
investment objective and policies. Therefore, although the following discusses
the investment policies of the Portfolio (and the responsibilities of Core
Trust's Board of Trustees), it applies equally to the Fund (and the Trust's
Board of Trustees). Additional information concerning the investment policies
of the Fund and Portfolio, including additional fundamental policies, is
contained below and in the SAI.
INVESTMENT POLICIES
The Portfolio normally invests at least 65% of its total assets in equity
securities of companies domiciled outside the U.S. Investments by the Portfolio
are selected on the basis of their potential for capital appreciation without
regard for current income. The Portfolio may also invest in debt obligations of
foreign governments, international organizations and foreign corporations and,
subject to certain restrictions, in the securities of closed-end investment
companies investing primarily in foreign securities. The Portfolio may from time
to time invest up to 5% of its total assets in debt securities with relatively
high risk and high yields (as compared to other debt securities meeting the
Portfolio's investment criteria). The debt securities in which the Portfolio
invests may be unrated, but will not be in default at the time of purchase. The
value of debt securities generally varies inversely with interest rate changes.
See "Additional Investment Policies and Risk Considerations."
-11-
<PAGE>
Countries in which the Portfolio may invest include, but are not limited to,
Japan, Germany, the United Kingdom, France, Italy, Belgium, Switzerland, the
Netherlands, Hong Kong, Singapore/Malaysia, and Australia. The Portfolio has a
non-fundamental policy to invest in the securities of foreign issuers domiciled
in at least three foreign countries. In general, the Portfolio will invest only
in securities of companies and governments in countries that SCMI, in its
judgment, considers both politically and economically stable. The Portfolio may
invest more than 25% of its total assets in issuers located in any one country.
To the extent it invests in issuers located in one country, the Portfolio is
susceptible to factors adversely affecting that country. See "Additional
Investment Policies and Risk Considerations."
The Portfolio may purchase preferred stock and convertible debt securities,
including warrants and convertible preferred stock, and may purchase American
Depository Receipts, European Depository Receipts or other similar securities of
foreign issuers. The Portfolio may also enter into foreign exchange contracts,
including forward contracts to purchase or sell foreign currencies, in
anticipation of its currency requirements and to protect against possible
adverse movements in foreign exchange rates. Although such contracts may reduce
the risk of loss to the Portfolio from adverse movements in currency values, the
contracts also limit possible gains from favorable movements. For temporary
defensive purposes, the Portfolio 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.
Government securities, certificates of deposit and bankers' acceptances of U.S.
banks. The Portfolio may also hold cash and time deposits in foreign banks
denominated in any major foreign currency. See "Additional Investment Policies
and Risk Considerations" in the Prospectus and "Investment Policies" in the SAI
for further information about all these types of investments.
ADDITIONAL INVESTMENT POLICIES AND RISK CONSIDERATIONS
INVESTMENT RESTRICTIONS
The investment objective and all investment policies of each of the Fund and the
Portfolio that are designated as fundamental may not be changed without
approval of the holders of a majority of the outstanding voting securities of
the Fund or the Portfolio, as applicable. A majority of outstanding voting
securities means the
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<PAGE>
lesser of (i) 67% of the shares present or represented at a shareholder meeting
at which the holders of more than 50% of the outstanding shares are present or
represented, or (ii) more than 50% of outstanding shares. Unless otherwise
indicated, all investment policies are not fundamental and may be changed by the
Board without approval by shareholders of the Fund. Likewise, nonfundamental
investment policies of the Portfolio may be changed by the Board of Trustees of
Core Trust (the "Core Trust Board") without shareholder approval. For more
information concerning shareholder voting, see "Other Information --
Capitalization and Voting" and "Other Information -- Fund Structure."
FUNDAMENTAL POLICIES.
The following investment restrictions of the Portfolio are fundamental policies:
a) The Portfolio will not invest more than 5% of its assets in the securities
of any single issuer, excepting U.S. Government securities.
b) The Portfolio will not purchase more than 10% of the voting securities of
any one issuer.
c) The Portfolio will not invest more than 10% of its assets in "illiquid
securities", which are securities that cannot be disposed of within seven days
at their then current value. For purposes of this limitation, "illiquid
securities" includes, except in those circumstances described below, (i)
"restricted securities", which are securities that cannot be resold to the
public without registration under the Federal securities laws, and (ii)
securities of issuers having a record (together with all predecessors) of less
than three years of continuous operation.
d) The Portfolio will not invest 25% or more of its total assets in any one
industry.
e) The Portfolio will not pledge, mortgage or hypothecate its assets to an
extent greater than 10% of the value of the total assets of the Portfolio.
-13-
<PAGE>
As a non-fundamental policy, the Portfolio will not invest in restricted
securities. 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 SCMI pursuant to
guidelines adopted by the Core Trust Board. 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, these securities may be illiquid.
INVESTMENT TYPES
COMMON AND PREFERRED STOCK AND WARRANTS. The Portfolio may invest in common and
preferred stock. Common stockholders are the owners of the company issuing the
stock and, accordingly, vote on various corporate governance matters such as
mergers. They are not creditors of the company, but rather, upon liquidation of
the company, are entitled to their pro rata share of the company's assets after
creditors (including fixed income security holders) and, if applicable,
preferred stockholders are paid. Preferred stock is a class of stock having a
preference over common stock as to dividends and, in the alternative, as to the
recovery of investment. A preferred stockholder is a shareholder in the company
and not a creditor of the company, as is a holder of the company's fixed income
securities. Dividends paid to common and preferred stockholders are
distributions of the earnings of the company and not interest payments, which
are expenses of the company. Equity securities owned by the Portfolio may be
traded in the over-the counter market or on a securities exchange, but may not
be traded every day or in the volume typical of securities traded on a major
U.S. national securities exchange. As a result, disposition by the Portfolio of
a security to meet redemptions by interest holders or otherwise may require the
Portfolio to sell these securities at a discount from market prices, to sell
during periods when disposition is not desirable, or to make many small sales
over a lengthy period of time. The market value of all securities, including
equity securities, is based upon the market's perception of value and not
necessarily the book value of an issuer or other objective measure of a
company's worth. The Portfolio may also 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) and usually during a specified period of
time.
FOREIGN EXCHANGE CONTRACTS. Changes in foreign currency exchange rates will
affect the U.S. dollar values of securities denominated in currencies other than
the U.S dollar. The rate of exchange between the U.S. dollar and other
currencies fluctuates in response to forces of supply and demand in the foreign
exchange markets. These forces are affected by the international balance of
payments and other economic and financial conditions, government intervention,
speculation and other factors, many of which may be difficult if not impossible
to predict. When investing in foreign securities, the Portfolio usually effects
currency exchange transactions on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign exchange market. The Portfolio incurs foreign
exchange expenses in converting assets from one currency to another.
-14-
<PAGE>
The Portfolio may enter into foreign currency forward contracts or currency
futures or options contracts for the purchase or sale of foreign currency to
"lock in" the U.S. dollar price of the securities denominated in a foreign
currency or the U.S. dollar value of interest and dividends to be paid on such
securities, or to hedge against the possibility that the currency of a foreign
country in which the Portfolio has investments may suffer a decline against the
U.S. dollar. A forward currency contract is an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. This method of attempting to hedge the value of portfolio
securities against a decline in the value of a currency does not eliminate
fluctuations in the underlying prices of the securities. Although the strategy
of engaging in foreign currency transactions could reduce the risk of loss due
to a decline in the value of the hedged currency, it could also limit the
potential gain from an increase in the value of the currency. The Portfolio
does not intend to maintain a net exposure to such contracts where the
fulfillment of the Portfolio's obligations under such contracts would obligate
the Portfolio to deliver an amount of foreign currency in excess of the value of
the Portfolio's portfolio securities or other assets denominated in the
currency. The Portfolio will not enter into these contracts for speculative
purposes and will not enter into non-hedging currency contracts. These
contracts involve a risk of loss if Schroder fails to predict currency values
correctly. The Portfolio has no present intention to enter into currency
futures or options contracts but may do so in the future.
Because most of the Portfolio's income will be received and realized in foreign
currencies and the Portfolio 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 Portfolio's income has been earned and
thereafter computed into U.S. dollars may require the Portfolio 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
Portfolio incurs expenses in U.S. dollars and the time such expenses are paid,
the Portfolio may be required to liquidate additional foreign securities to
purchase the U.S. dollars required to meet such expenses.
-15-
<PAGE>
DEBT SECURITIES. The Portfolio may also seek capital appreciation through
investment in 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 Portfolio's objective of long-term capital appreciation. Such
income can be used, however, to offset the operating expenses of the Portfolio.
In accordance with its investment objective, the Portfolio will not seek to
benefit from anticipated short-term fluctuations in currency exchange rates.
The Portfolio may, from time to time, invest in debt securities with relatively
high risk and high yields (as compared to other debt securities meeting the
Portfolio's investment criteria), notwithstanding that the Portfolio may not
anticipate that such securities will experience substantial capital
appreciation. The debt securities in which the Portfolio invests may be
unrated, but will not be in default at the time of purchase. The Portfolio also
may invest to a certain extent in debt securities in order to participate in
debt-to-equity conversion programs incident to corporate reorganizations.
The Portfolio may invest in debt securities ("sovereign debt") issued or
guaranteed by foreign 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.
RISK CONSIDERATIONS
FOREIGN INVESTMENTS. 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 Portfolio 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 Portfolio assets. To the
extent the Portfolio invests substantially in issuers located in one country or
area, such investments may be subject to greater risk in the event of political
or social instability or adverse economic developments affecting that country or
area.
Moreover, (i) dividends payable on foreign securities may be subject to foreign
withholding taxes, thereby reducing the income available for distribution to the
Portfolio's, and thus the Fund's, shareholders; (ii) commission rates payable on
foreign portfolio transactions are generally higher than in the U.S.; (iii)
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.; (iv) foreign securities often trade less frequently and with less
volume than U.S. securities and consequently may exhibit greater price
volatility; and (v) foreign securities trading practices, including those
involving securities settlement, may expose the Portfolio to increased risk in
the event of a failed trade or the insolvency of a foreign broker-dealer or
registrar.
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EMERGING MARKETS. The Portfolio may invest in securities of issuers located in
countries considered by some to be emerging market countries. The risks of
investing in foreign securities may be greater with respect to securities of
issuers in, or denominated in the currencies of, emerging market countries. The
economies of emerging market countries generally are heavily dependent upon
international trade and, accordingly, have been and may continue to be adversely
affected by trade barriers, exchange controls, managed adjustments in relative
currency values and other protectionist measures imposed or negotiated by the
countries with which they trade. These economies also have been and may
continue to be adversely affected by economic conditions in the countries with
which they trade. The securities markets of emerging market countries are
substantially smaller, less developed, less liquid and more volatile than the
securities markets of the U.S. and other developed countries. Disclosure and
regulatory standards in many respects are less stringent in emerging market
countries than in the U.S. and other major markets. There also may be a lower
level of monitoring and regulation of emerging market countries than in the U.S.
and other major markets. There also may be a lower level of monitoring and
regulation of emerging markets and the activities of Advisors in such markets,
and enforcement of existing regulations may be extremely limited. Investing in
local markets, particularly in emerging market countries, may require the
Portfolio to adopt special procedures, seek local government approvals or take
other actions, each of which may involve additional costs to the Portfolio.
Certain emerging market countries may also restrict investment opportunities in
issuers in industries deemed important to national interests.
CURRENCY FLUCTUATIONS AND DEVALUATIONS. Because the Portfolio will invest
heavily in non-U.S. currency denominated securities, changes in foreign
currency exchange rates will affect the value of the Portfolio's investments. A
decline in the value of currencies in which the Portfolio's investments are
denominated against the dollar will result in a corresponding decline in the
dollar value of the Portfolio's assets. This risk tends to be heightened in the
case of investing in certain emerging market countries
GEOGRAPHIC CONCENTRATION. The Portfolio may invest more than 25% of its total
assets in issuers located in any one country. To the extent it invests in
issuers located in one country, the Portfolio is 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 Portfolio's assets may fluctuate more widely than the value of
shares of a comparable Portfolio having a lesser degree of geographic
concentration.
PORTFOLIO TURNOVER. The Portfolio 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 Portfolio to qualify as a regulated investment company for
federal income tax purposes and may cause shareholders of the Portfolio to
recognize gains for federal income tax purposes. See "Taxation" in the SAI.
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
The business and affairs of the Fund are managed under the direction of the
Board. The business and affairs of the Portfolio are managed under the
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direction of the Core Trust Board. The Trustees of both Trust and Core Trust
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 Trustees and the respective executive officers of the
Trust and Core Trust's may be found in the SAI under the heading "Management --
Trustees and Officers." The Board and the Core Trust Board have separately
adopted written procedures reasonably appropriate to deal with potential
conflicts of interest.
INVESTMENT ADVISER AND PORTFOLIO MANAGER
The Fund currently invests all of its assets in the Portfolio. SCMI serves as
investment adviser to the Portfolio pursuant to an Investment Advisory Contract.
Through its London, England branch SCMI manages the investment and reinvestment
of the assets the Portfolio and continuously reviews, supervises and administers
the Portfolio's investments. In this regard, it is the responsibility of SCMI to
make decisions relating to the Portfolio's investments and to place purchase and
sale orders regarding investments with brokers or dealers selected by it in its
discretion. For its services with respect to the Portfolio, SCMI receives a
monthly advisory fee equal on an annual basis to 0.45% of the average daily net
assets of the Portfolio, which the Fund indirectly bears through investment in
the Portfolio.
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 $90 billion.
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The investment management team of Mark J. Smith, a Trustee and Vice President of
the Trust and Core Trust, and Laura Luckyn-Malone, a Trustee and President of
the Trust and Core Trust, with the assistance of an SCMI investment committee,
is primarily responsible for the day-to-day management of the Portfolio's
investment portfolio. Mr. Smith, who has managed the Fund's portfolio since
October 1989 and the Portfolio's investments since its inception, 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 Portfolio's investment management team in ____________ 1995, has been
a Senior Vice President and Director of SCMI since 1990.
The Fund began pursuing its investment objective through investment in the
Portfolio on November 1, 1995. The Fund may withdraw its 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. See "Other Information _ Fund
Structure." Accordingly, the Fund has retained SCMI as its investment adviser
to manage the Fund's assets in the event the Fund withdraws its investment.
SCMI does not receive an investment advisory fee with respect to the Fund so
long as the Fund remains completely invested in the Portfolio or any other
investment company. If the Fund resumes directly investing in portfolio
securities, the Fund will pay SCMI a monthly advisory fee equal on an annual
basis to 0.50% of the first $100 million of the Fund's 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. The investment advisory contract
between SCMI and the Trust with respect to the Fund is the same in all material
respects as the Portfolio's Investment Advisory Contract except as to the
parties, the fees payable thereunder, the circumstances under which fees will be
paid and the jurisdiction whose laws govern the agreement. For the fiscal year
ended October 31, 1995, the Fund paid SCMI an advisory fee of 0.45% of its
average daily net assets.
ADMINISTRATIVE SERVICES
On behalf of the Fund, the Trust has entered into an Administrative Services
Contract with Schroder Advisors, 787 Seventh Avenue, New York, New York 10019.
Schroder Advisors is a wholly-owned subsidiary of SCMI. The Trust and Schroder
Advisors have entered into a Sub-Administration Agreement with Forum. Pursuant
to these agreements, Schroder Advisors and Forum provide certain management and
administrative services necessary for the Fund's operations, other than the
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investment management and administrative services provided to the Fund by SCMI
pursuant to the Investment Advisory Contract. For these services, the Fund pays
Schroder Advisors a monthly fee at the annual rate of 0.20% of the average daily
net assets of the Fund. Payment for Forum's services is made by Schroder
Advisors and is not a separate expense of the Fund. Schroder Advisors and Forum
provide similar services to the Portfolio, for which Schroder Advisors is
separately compensated at an annual rate of 0.15 % of the average daily net
assets of the Portfolio, a portion of which Forum receives for its services with
respect to the Portfolio. For the fiscal year ended October 31, 1995, the Fund
paid Schroder Advisors a fee of 0.22% of its average net assets.
DISTRIBUTION PLAN
Schroder Advisors acts as distributor of the Fund's shares. Schroder Advisors
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 Trust on behalf of the Fund, which
is in the form of a reimbursement plan, the Trust is authorized generally to pay
directly or reimburses Schroder Advisors, as distributor, for costs and expenses
incurred in connection with the distribution of Institutional Shares. Such
payment or reimbursement is subject to a limit on an annual basis to 0.50% per
annum of the Fund's average daily net assets attributable to Institutional
Shares. The Fund will make no payment under the Distribution Plan with respect
to Institutional Shares until the Board further so authorizes.
Payment or reimbursement may be for various types of costs, including: (1)
advertising expenses, (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 Schroder Advisors, including salary, commissions, travel and
related expenses in connection with the distribution of Institutional Shares,
(4) payments to broker-dealers who advise shareholders regarding the purchase,
sale, or retention of Institutional Shares, and (5) payments to banks, trust
companies, broker-dealers (other than Schroder Advisors) or other financial
organizations (collectively, "Service
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Organizations"). Payments to Service Organizations are calculated by reference
to the average daily net assets of Institutional Shares held by shareholders
who have a brokerage or other service relationship with the Service Organization
receiving such fees. The Fund will not be liable for distribution expenditures
made by Schroder Advisors in any given year in excess of the maximum amount
payable under the Plan in that year. Costs or expenses in excess of the per
annum limit may not be carried forward to future years. Salary expenses of
salesmen who are responsible for marketing various mutual funds of the Trust may
be allocated to such mutual funds, including the Institutional Shares class of
the Fund, that have adopted a plan similar to that of the Fund on the basis of
average daily net assets; travel expenses may be allocated to, or divided among,
the particular mutual funds of the Trust for which they are incurred.
Among the services provided by Service Organizations are answering customer
inquiries regarding the manner in which purchases, exchanges and redemptions of
shares of the Trust may be effected and other matters pertaining to the Trust's
services; providing necessary personnel and facilities to establish and maintain
shareholder accounts and records; assisting shareholders in arranging for
processing purchase, exchange and redemption transactions; arranging for the
wiring of funds; guaranteeing shareholder signatures in connection with
redemption orders and transfers and changes in shareholder-designated accounts;
integrating periodic statements with other customer transactions; and providing
such other related services as the shareholder may request.
Some Service Organizations may impose additional 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.
OTHER EXPENSES
The Fund bears all costs of its operations other than expenses specifically
assumed by Schroder Advisors or SCMI, including those expenses it indirectly
bears through its investment in the Portfolio. The costs borne by the Fund
include legal and accounting expenses; Trustees' fees and expenses; insurance
premiums, custodian and transfer agent fees and expenses; brokerage fees and
expenses; expenses of registering
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and qualifying the Fund's shares for sale with the SEC and with various state
securities commissions; expenses of obtaining quotations on portfolio securities
and pricing of the Fund's shares; 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. Trust expenses directly attributed
to the Fund are charged to the Fund; other expenses are allocated
proportionately among all the portfolios of the Trust in relation to the net
assets of each portfolio. See "Management - Fees and Expenses" in the SAI.
SCMI and Schroder Advisors have voluntarily undertaken to assume certain
expenses of the Fund (or waive their respective fees), which applies to fees and
expenses paid by the Fund as well as fees and expenses paid by the Portfolio.
This undertaking is designed to place a maximum limit on Fund expenses
(excluding taxes, interest, brokerage commissions and other portfolio
transaction expenses and extraordinary expenses) of 0.99% of the average daily
net assets of the Fund attributable to Institutional Shares. This expense
limitation cannot be modified or withdrawn except by a majority vote of the
Trustees of the Trust who are not affiliated with SCMI or Schroder Advisors
("Independent Trustees"). 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 Advisors, the remaining one-fifth; provided,
however, that neither SCMI nor Schroder Advisors will be required to make any
reimbursements or waive any fees in excess of the fees payable to them by the
Fund on a monthly basis for their respective advisory and administrative
services.
PORTFOLIO TRANSACTIONS
The Investment Advisory Contract authorizes and directs SCMI to place orders for
the purchase and sale of the Portfolio's investments with brokers and dealers
selected by SCMI in its discretion and to seek "best execution" of such
portfolio transactions. The Portfolio 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. Commission rates for brokerage transactions are fixed on many
foreign securities exchanges, and this may cause higher brokerage expenses to
accrue to the Portfolio than would be the case for comparable transactions
effected on U.S. securities exchanges.
Subject to the Portfolio'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 Portfolio on certain foreign securities
exchanges. Because of the affiliation between SCMI and Schroder Securities, the
Portfolio's payment of commissions to Schroder Securities is subject to
procedures adopted by Core Trust's board of trustees to provide that such
commissions will not exceed the usual and customary brokers' commissions. No
specific portion of the Portfolio's brokerage will be
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directed to Schroder Securities and in no event will Schroder Securities receive
such brokerage in recognition of research services.
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 Trustees 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 Portfolio does not currently engage in directed brokerage
arrangements to pay expenses, it may do so in the future. These arrangements,
whereby brokers executing the Portfolio's portfolio transactions would agree to
pay designated expenses of the Portfolio if brokerage commissions generated by
the Portfolio reached certain levels, might reduce these expenses. As
anticipated, these arrangements would not materially increase the brokerage
commissions paid by the Portfolio. Brokerage commissions are not reflected as
Fund expenses, however, in the Fund's fee table, per share table, and financial
statements, and such expenses might therefore appear lower than actual expenses
incurred.
CODE OF ETHICS
The Trust, Core Trust, SCMI, Schroder Advisors, and Schroders Incorporated have
adopted codes of ethics that contain 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 Report of the Advisory Group on Personal Investing of the
Investment Company Institute, of which the Trust is a member.
INVESTMENT IN THE FUND
PURCHASE OF SHARES
Investors may purchase Institutional Shares directly from the Trust.
Prospectuses, sales material and Account Applications can be obtained from the
Trust or through Forum Financial Corp., the Fund's Transfer Agent. See "Other
Information -- Shareholder Inquires." Investments may also be made through
Service Organizations that assist their customers in purchasing shares of the
Fund. Such Service Organizations may charge their customers a service fee for
processing orders to purchase or sell shares of the Fund. 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). The minimum
initial investment is $____, except that the minimum initial investment for an
Individual Retirement Account is $____. The minimum subsequent investment is
$____. All purchase payments are invested in full and fractional shares. The
Fund is authorized to reject any purchase order.
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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
For initial purchases, the check must be accompanied by a completed Account
Application in proper form.
Investors and Service Organizations (on behalf of their customers) may transmit
purchase payments by Federal Reserve Bank wire directly to the Fund as follows:
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. If the initial investment is by wire, an account number will be assigned
and an Account Application must be completed and mailed to the Fund. Wire orders
received prior to 4:00 p.m. (New York City Time) on a Fund Business Day will be
processed at the net asset value determined as of that day. Wire orders received
after 4:00 p.m. (New York City Time) will be processed at the net asset value
determined as of the next Fund Business Day.
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 that 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.
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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. Before investing in the Fund
through one of these plans, investors should consult their tax advisors.
INDIVIDUAL RETIREMENT ACCOUNTS
The Fund may be used as an investment vehicle for an Individual Retirement
Account ("IRA"). An IRA plan naming The First National Bank of Boston as
custodian is available from the Trust or the Fund's Transfer Agent. The minimum
initial investment for an IRA is $____; the minimum subsequent investment is
$____. 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 effecting a rollover.
REDEMPTION OF SHARES
Shares of the Fund are 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 may be made between 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 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 that are received after 4:00 p.m. (New York City Time) will be
processed at the net asset value determined 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 the Account Information telephone number on the cover page of this
Prospectus. A shareholder 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
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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 the Transfer Agent to confirm that
such instructions are genuine. If such procedures are followed, neither the
Transfer Agent 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 the shareholder account
number. The letter must also be signed in exactly the same way the account is
registered (if there is more than one owner of the shares, all must sign) and,
in [CERTAIN CASES], signatures must be guaranteed by an institution that is
acceptable to the Fund's Transfer Agent. Such institutions include certain
banks, brokers, dealers (including municipal and government securities brokers
and dealers), credit unions and savings associations. (Notaries public are not
acceptable.) Further documentation, 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.
If shares to be redeemed are held in certificate form, the certificates must be
enclosed with the redemption request and the assignment form on the back of the
certificates, or an assignment separate from the certificates (but accompanied
by the certificates), must be signed by all owners in exactly the same way the
owners' names are written on the face of the certificates. Requirements for
signature guarantees and/or documentation of authority as described above could
also apply. For your protection, the Fund suggests that certificates be sent by
registered mail.
ADDITIONAL REDEMPTION INFORMATION. Checks for redemption proceeds will normally
be mailed within seven days, but no check will 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
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exchange is closed, (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 Fund's NAV not reasonably
practicable.
If the Board determines that it would be detrimental to the best interest of the
remaining shareholders of the Fund to make payment wholly or partly in cash, the
Fund may redeem shares 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 account does not have a value of at least $2,000, unless the value of
the account fell below that amount solely as a result of market activity.
Shareholders will be notified that the value of the account is less than $2,000
and be allowed at least 30 days to make an additional investment to increase the
account balance to at least $2,000.
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, each day that the New York Stock Exchange is
open for trading, (a "Fund Business Day"), which excludes the following
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.
Portfolio securities listed on recognized stock exchanges are valued at the last
reported sale price, prior to the time when the securities are valued, on the
exchange on which the securities are principally traded. Listed securities
traded on recognized stock exchanges where last sale prices are not available
are valued at 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 Core Trust
Board.
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Trading in securities on European and Far Eastern 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 using
methods approved by Core Trust's Board of Trustees.
All assets and liabilities of the Portfolio denominated in foreign currencies
are valued in U.S. dollars based on the exchange rate last quoted by a major
bank prior to the time when the net asset value of the Fund is calculated.
DIVIDENDS, DISTRIBUTIONS AND TAXES
THE FUND
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. The Fund intends to distribute substantially all
of its net investment income and its net realized long term capital gain at
least annually and, therefore, intends not to be subject to Federal income tax.
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. You should include as gross income in
their Federal income tax returns both cash dividends received from the Fund and
also the amount that the Fund advises is your 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. You then would be entitled, subject to
certain limitations, to take a foreign tax credit against your 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
gain 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 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
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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 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 Trust 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 (i) the payee
fails to furnish and to certify the payee's correct taxpayer identification
number or social security number, (ii) 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 (iii) 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.
THE PORTFOLIO
The Portfolio is not required to pay Federal income taxes on its net investment
income and capital gain, as it is treated as a partnership for Federal income
tax purposes. All interest, dividends and gain and losses of the Portfolio are
deemed to have been "passed through" to the Fund in proportion to its holdings
of the Portfolio, regardless of whether such interest, dividends or gain have
been distributed by the Portfolio or losses have been realized by the Portfolio.
Investment income received by the Fund from sources within foreign countries may
be subject to foreign income or other taxes. The Fund intends to elect, if
eligible to do so, to permit its shareholders to take a credit (or a deduction)
for foreign income and other taxes paid by the Portfolio. Shareholders of the
Fund will be notified of their share of those taxes and will be required to
include that amount as income. In that event, shareholders may be entitled to
claim a credit or deduction for those taxes.
OTHER INFORMATION
CAPITALIZATION AND VOTING
The Trust was originally organized as a Maryland corporation on July 30, 1969
and on January 9, 1996 was reorganized as a Delaware business trust. The Trust
was formerly known as "Schroder Capital Funds, Inc." The Trust is registered as
an open-end management investment company
-29-
<PAGE>
under the Act and has authority to issue an unlimited number of shares of
beneficial interest. The Board may, without shareholder approval, divide the
authorized shares into an unlimited number of separate portfolios or series
(such as the Fund) and may divide portfolios or series into classes of shares
(such as the Institutional Shares class), and the costs of doing so will be
borne by the Trust. The Trust currently consists of seven separate portfolios,
each of which has separate investment objectives and policies, and 13 classes of
shares, two of which represent interests in to the Fund.
Shares are fully paid and non-assessable, and have no preferences as to
conversion, exchange, dividends, retirement or other features. 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 Trustees can
elect 100% of the Trustees if they choose to do so. A shareholder is entitled to
one vote for each full share held (and a fractional vote for each fractional
share held) standing in his name on the books of the Trust. On matters requiring
shareholder approval, shareholders of the Trust are entitled to vote only with
respect to matters that affect the interest of the Fund or class of shares they
hold, except as otherwise required by applicable law.
There will normally be no meetings of shareholders to elect Trustees unless and
until such time as less than a majority of the Trustees holding office have been
elected by shareholders. However, the holders of not less than a majority of the
outstanding shares of the Trust may remove any person serving as a Trustee and
the Board will call a special meeting of shareholders to consider removal of one
or more Trustees if requested in writing to do so by the holders of not less
than 10% of the outstanding shares of the Trust.
From time to time, certain shareholders may own a large percentage of the shares
of the Fund. Accordingly, those shareholders may be able to greatly affect (if
not determine) the outcome of a shareholder vote.
REPORTS
The Trust 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 Advisors. 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. 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
-30-
<PAGE>
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 past performance and does
not necessarily indicate future results. Performance information should be
considered in light of the Fund's investment objective and policies,
characteristics and quality of the Fund's investments, 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.
CUSTODIAN AND TRANSFER AGENT
The Chase Manhattan Bank, N.A. is custodian of the Fund's and of the Portfolio's
assets. Forum Financial Corp. serves as the Fund's Transfer and Dividend
Disbursing Agent.
SHAREHOLDER INQUIRIES
Inquiries about the Fund, including the Fund's 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.
CERTAIN SERVICE ORGANIZATION
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.
-31-
<PAGE>
FUND STRUCTURE
OTHER CLASSES OF SHARES. The Fund has two classes of shares, Institutional
Shares and Advisor Shares. Advisor Shares are offered by a separate prospectus
to individual investors, in most cases through Service Organizations. Advisor
Shares incur more expenses than Institutional Shares. Except for certain
differences, each share of each class represents an undivided, proportionate
interest in the Fund. Each share of the Fund is entitled to participate equally
in dividends and other distributions and the proceeds of any liquidation of the
Fund except that, due to the differing expenses borne by the two classes, the
amount of dividends and other distribution will differ between the classes.
Information about Advisor Shares is available from the Fund by calling Forum
Financial Corp. at (207) 879-8903.
THE PORTFOLIO. The Fund seeks to achieve its investment objective by investing
all of its investable assets in the Portfolio, which has substantially the same
investment objective and policies as the Fund. Accordingly, the Portfolio
directly acquires its own securities and the Fund acquires an indirect interest
in those securities. The Portfolio is a separate series of Core Trust, a
business trust organized under the laws of the State of Delaware in September
1995. Core Trust is registered under the Act as an open-end management
investment company and currently has four separate portfolios. The assets of the
Portfolio, a diversified portfolio, belong only to, and the liabilities of the
Portfolio are borne solely by, the Portfolio and no other portfolio of Core
Trust.
The investment objective and fundamental investment policies of the Fund and the
Portfolio can be changed only with shareholder approval. See "Investment
Objective," "Investment Policies," and "Management of the Fund" for a complete
description of the Portfolio's investment objective, policies, restrictions,
management, and expenses.
The Fund's investment in the Portfolio is in the form of a non-transferable
beneficial interest. As of the date of this Prospectus, the Fund is the only
institutional Investor that has invested all of its assets in the Portfolio. The
Portfolio may permit other investment companies or institutional investors to
invest in it. All investors in the Portfolio will invest on the same terms and
conditions as the Fund and will pay a proportionate share of the Portfolio's
expenses.
The Portfolio normally will not hold meetings of investors except as required by
the Act. Each Investor in the Portfolio will be entitled to vote in proportion
to its relative beneficial interest in the Portfolio. On most issues subject to
a vote of investors, as required by the Act and other applicable law, 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; indeed, if other
investors hold a majority interest in the Portfolio, they could hold have voting
control of the Portfolio.
The Portfolio will not sell its shares directly to members of the general
public. Another Investor in the Portfolio, such as an investment company, that
might sell its shares to members of the
-32-
<PAGE>
general public would not be required to sell its shares at the same public
offering price as the Fund, and could have different advisory and other fees and
expenses than the Fund. Therefore, Fund shareholders may have different returns
than shareholders in another investment company that invests exclusively in the
Portfolio. There is currently no such other investment company that offers its
shares to members of the general public. Information regarding any such funds in
the future will be available from Core Trust by calling Forum Financial Corp. at
(207) 879-8903.
CERTAIN RISKS OF INVESTING IN THE PORTFOLIO. The Fund's investment in the
Portfolio may be affected by the actions of other large investors in the
Portfolio, if any. For example, if the Portfolio had a large Investor other than
the Fund that redeemed its interest in the Portfolio, the Portfolio's remaining
investors (including the Fund) might, as a result, experience higher pro rata
operating expenses, thereby producing lower returns.
The Fund may withdraw its entire investment from 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 there were other
investors in the Portfolio with power to, and who did by a vote of the
shareholders of all investors (including the Fund), change the investment
objective or policies of the Portfolio in a manner not acceptable to the Board.
A withdrawal could result in a distribution in kind of portfolio securities (as
opposed to a cash distribution) by the Portfolio. That distribution could result
in a less diversified portfolio of investments for the Fund and could affect
adversely the liquidity of the Fund's portfolio. If the Fund decided to convert
those securities to cash, it usually would incur brokerage fees or other
transaction costs. If the Fund withdrew its investment from the Portfolio, the
Board would consider what action might be taken, including the management of the
Fund's assets in accordance with its investment objective and policies by the
Adviser and Schroder, the Fund's investment adviser and subadviser,
respectively, or the investment of all of the Fund's investable assets in
another pooled investment entity having substantially the same investment
objective as the Fund. The inability of the Fund to find a suitable replacement
investment, in the event the Board decided not to permit the Adviser and
Schroder to manage the Fund's assets, could have a significant impact on
shareholders of the Fund.
Each Investor in the Portfolio, including the Fund, will be liable for all
obligations of the Portfolio, but not any other portfolio of Core Trust. The
risk to an Investor in the Portfolio of incurring financial loss on account of
such liability, however, would be limited to circumstances in which the
Portfolio was unable to meet its obligations. Upon liquidation of the Portfolio,
investors would be entitled to share pro rata in the net assets of the Portfolio
available for distribution to investors.
-33-
<PAGE>
INVESTMENT ADVISER
Schroder Capital Management International Inc.
787 Seventh Avenue
New York, New York 10019
ADMINISTRATOR & DISTRIBUTOR
Schroder Fund Advisors Inc.
787 Seventh Avenue
New York, New York 10019
SUB-ADMINISTRATOR
Forum Financial Services, Inc.
Two Portland Square
Portland, Maine 04101
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
INDEPENDENT ACCOUNTANTS
[ACCOUNTANT] L.L.P.
One Post Office Square
Boston, Massachusetts 02109
-34-
<PAGE>
Table of Contents
PROSPECTUS SUMMARY................................
The Fund..........................................
Investment Adviser................................
Administrative Services...........................
Purchases and Redemptions.........................
Risk Considerations...............................
Fee Table.........................................
FINANCIAL HIGHLIGHTS..............................
INVESTMENT OBJECTIVE
AND POLICIES ...................................
Investment Objective..............................
Investment Policies...............................
ADDITIONAL INVESTMENT POLICIES....................
RISK CONSIDERATIONS.............................
Investment Restrictions...........................
Investment Types..................................
Risk Considerations...............................
MANAGEMENT OF THE FUND............................
Board of Trustees.................................
Investment Adviser and Portfolio Manager..........
Administrative Services...........................
Distribution Plan.................................
Other Expenses....................................
Portfolio Transactions............................
Code of Ethics....................................
INVESTMENT IN THE FUND............................
Purchase of Shares................................
Retirement Plans..................................
Individual Retirement Accounts....................
Redemption of Shares..............................
Net Asset Value...................................
DIVIDENDS, DISTRIBUTIONS
AND TAXES.......................................
The Fund..........................................
The Portfolio.....................................
OTHER INFORMATION.................................
Capitalization and Voting.........................
Reports...........................................
Performance Information...........................
Custodian and Transfer Agent......................
Shareholder Inquires..............................
Certain Shareholder Servicing Organizations.......
Fund Structure....................................
-35-
<PAGE>
INTERNATIONAL EQUITY FUND
TWO PORTLAND SQUARE
PORTLAND, MAINE 04101
____________
ADVISOR SHARES
- --------------------------------------------------------------------------------
GENERAL INFORMATION: (207) 879-8903
ACCOUNT INFORMATION: (800) 344-8332
FAX: (207) 879-6206
- --------------------------------------------------------------------------------
SCHRODER CAPITAL MANAGEMENT INTERNATIONAL INC. - INVESTMENT ADVISER
SCHRODER FUND ADVISORS INC. - ADMINISTRATOR & DISTRIBUTOR
This Prospectus offers Advisor Shares ("Advisor Shares") of International Equity
Fund (the "Fund"), a separately-managed, diversified portfolio of Schroder
Capital Funds (Delaware) (the "Trust"), an open-end management investment
company currently consisting of seven separate portfolios, each of which has
different investment objectives and policies. The Fund's investment objective is
long-term capital appreciation through investment in securities markets outside
the United States. Investments in foreign securities involve special risks in
addition to the risks associated with investments in general and there can be no
assurance that the Fund's objective will be achieved.
THE FUND CURRENTLY SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY HOLDING, AS ITS
ONLY INVESTMENT SECURITIES, AN INTEREST IN INTERNATIONAL EQUITY FUND (THE
"PORTFOLIO"), A SEPARATE PORTFOLIO OF SCHRODER CAPITAL FUNDS ("CORE TRUST"), A
REGISTERED OPEN-END MANAGEMENT INVESTMENT COMPANY HAVING SUBSTANTIALLY THE SAME
INVESTMENT OBJECTIVE AND POLICIES AS THE FUND. SEE "OTHER INFORMATION -- FUND
STRUCTURE."
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 May 1, 1996 and as supplemented from time to time containing
additional 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 SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This Prospectus is dated May 1, 1996.
-36-
<PAGE>
PROSPECTUS SUMMARY
THE FUND. The Fund is a separately managed, diversified portfolio of the Trust,
a Delaware business trust registered as an open-end management investment
company under the Investment Company Act of 1940 (the "Act"). The Fund's
investment objective is long-term capital appreciation through investment in
securities markets outside the United States. Currently, the Fund seeks to
achieve its investment objective by investing exclusively in the Portfolio, a
series of Schroder Capital Funds ("Core Trust"), itself a registered open-end
management investment company. The Portfolio has substantially the same
investment objective and policies as the Fund. Accordingly, the investment
experience of the Fund will correspond directly with the investment experience
of the Portfolio. The Fund currently offers two separate classes of shares:
Advisor Shares("Advisor Shares") and Institutional Shares ("Institutional
Shares"). Only Advisor Shares are offered through this Prospectus and are
sometimes referred to herein as the "Shares."
INVESTMENT ADVISER. The Portfolio's investment adviser is Schroder Capital
Management International Inc. ("SCMI") "), 787 Seventh Avenue, New York, New
York 10019. The investment advisory fee paid to SCMI by the Portfolio is borne
indirectly by the Fund. See "Management of the Fund" -- Investment Adviser and
Portfolio Manager."
ADMINISTRATOR AND DISTRIBUTOR. Schroder Fund Advisors Inc. ("Schroder
Advisors"), formerly Schroder Capital Distributors, Inc., serves as
Administrator and Distributor of the Fund, and Forum Financial Services, Inc.
("Forum") is the Fund's Sub-Administrator.
PURCHASES AND REDEMPTIONS OF SHARES. Shares may be purchased or redeemed by
mail, by bank-wire and through an investor's broker-dealer or other financial
institution. The minimum initial investment is $____, except that the minimum
for an Individual Retirement Account is $____. The minimum subsequent
investment is $____. See "Investment in the Fund -- Purchase of Shares" and "--
Redemption of Shares."
DIVIDENDS AND DISTRIBUTIONS. The Fund declares and pays as a dividend
substantially all of its net investment income annually and distributes any net
realized long-term capital gain at least annually. Dividend and capital gain
distributions are reinvested automatically in additional shares of the Fund at
net asset value unless the shareholder has notified the Fund in a Purchase
Application or otherwise in writing of the shareholder's election to receive
distributions in cash. See "Dividends, Distributions and Taxes."
RISK CONSIDERATIONS. There can be no assurance that the Fund will achieve its
investment objective, and the Fund's net asset value and total return will
fluctuate based upon changes in the securities it invests in directly or
indirectly through the Portfolio. The Portfolio's objective of investing in the
securities of foreign issuers may involve risks in addition to those normally
associated with investments in the securities of U.S. issuers, including risks
of foreign political and economic instability, adverse movements in exchange
rates, and the imposition or tightening of limitations on the repatriation of
capital. Accordingly, the Fund is not a complete investment program. See
"Additional Investment Policies and Risk Considerations." By investing solely in
the Portfolio, the Fund may achieve certain efficiencies and economies of scale.
Nonetheless, this investment could also have potential adverse effects on the
Fund. Investors in the Fund should consider these risks, as described under
"Other Information -- Fund Structure."
-37-
<PAGE>
FEE TABLE
The table below shows the costs and expenses that an investor would incur as a
holder of Advisor Shares. There are no transaction expenses associated with
purchases or redemptions of Advisor Shares.
Annual Fund Operating Expenses (as a percentage of average net assets)(1),(2)
Management Fees . . . . . . . . . . . . . . . . . . . . . . 0.71%
(after estimated fee waivers)
12b-1 Fees. . . . . . . . . . . . . . . . . . . . . . . . . 0.50%
Other Expenses. . . . . . . . . . . . . . . . . . . . . . . 0.28%
(after expense reimbursements)
Total Fund Operating Expenses (3) . . . . . . . . . . . . . 1.49%
(1) This expense information is based on annualized estimated expenses for
the fiscal year ended October 31, 1996.
(2) Expenses include the Fund's pro rata portion of all operating expenses
of the Portfolio, which will be borne indirectly by Fund shareholders.
The Trust's Board of Trustees 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. Investment advisory fees are those incurred
by the Portfolio; as long as the Fund's assets are invested in the
Portfolio, the Fund pays no investment advisory fees directly.
(3) Absent estimated fee waivers and expenses reimbursements, Management
Fees, Other Expenses and Total Operating Expenses would be 0.80%,
0.30%, and 1.35%, respectively.
SCMI and Schroder Advisors 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 1.49% of the Fund's average daily net assets. This
undertaking cannot be withdrawn except by a majority vote of the Independent
Trustees of the Trust. See "Management -- Other Expenses."
EXAMPLE
Based on the expenses listed above, you would pay the following expenses on a
$1,000 investment, assuming (1) a 5% annual return, (2) redemption at the end of
each time period, and (3) reinvestment of all dividends and other distributions:
1 year $__
3 years $__
5 years $__
10 years $__
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
OR RETURNS, AND ACTUAL EXPENSES OR RETURNS BE MORE OR LESS THAN THOSE SHOWN.
The 5% annual return is not a prediction of the Fund's return, but is required
by the Securities and Exchange Commission for purposes of these calculations.
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<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights of the Fund are presented to assist Advisors
in evaluating the performance of the Fund for the periods shown. The data for
periods prior to August 1, 1989 pertains to the Fund's predecessor-in-interest,
and to the portfolio of the Trust thereafter. This information, for all periods
after the year ended September 30, 1988, has been audited by [ACCOUNTANT]
L.L.P., independent accountants to the Fund. The information for other periods
is not presented herein as audited. The Fund's financial statements for the year
ended October 31, 1995 and independent accountants' 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 on the cover of this Prospectus.
For a Share Outstanding Throughout the Year:
<TABLE>
<CAPTION>
Year Year Year Year Year Year Month Year Year Year 12/20/85
ended ended ended ended ended ended ended ended ended ended to
10/31/95 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> <C>
Net Asset Value,
Beginning of
Period 23.17 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 0.46 0.18 0.08 0.25 0.25 0.15 0.03 0.20 0.05 (0.07) 0.02
Net Realized Income (0.18) 2.69 5.27 (1.04) (0.25) (0.12) (0.78) 4.44 (2.34) 4.71 4.05
Total from
Investment
Operations 0.28 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 (2.54) - - (0.05) (1.23) (0.37) 0.00 (0.05) (1.33) (0.67) 0.00
Total Distributions (2.54) (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 Period 20.91 23.17 20.38 15.15 16.22 17.70 18.20 18.95 14.40 18.02 14.07
Total Return 2.08% 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 Period
(Thousands) 212,330 500,504 320,550 159,556 108,398 62,438 49,740 48,655 29,917 32,553 9,152
Ratio of Expenses
to Average Net
Assets 0.91% 0.90% 0.91% 0.93% 1.07% 1.12% 1.12%* 1.12% 1.30% 1.64% 2.47%(1)
Ratio of Net
Investment
Income to Average
Net Assets 0.99% 0.94% 0.87% 1.62% 1.59% 0.83% 2.29%* 1.27% 0.38% (0.42%) (0.12%)(1)
Portfolio Turnover
Rate 61.26% 25.17% 56.05% 49.42% 50.58% 55.91% 21.98%* 72.25% 86.19% 84.97% 77.53%(1)
</TABLE>
(1) Annualized
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<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund is designed for U.S. Investors who seek international diversification
of their investments by participating in foreign securities markets. The Fund is
not a complete investment program and investments in the securities of foreign
issuers generally involve risks in addition to risks associated with investments
in the securities of U.S. issuers.
INVESTMENT OBJECTIVE AND THE PORTFOLIO
The investment objective of the Fund is long-term capital appreciation through
investment in securities markets outside the U.S. There is no assurance that the
Fund will achieve its investment objective.
The Fund currently seeks to achieve its investment objective by investing all of
its investment assets in the Portfolio, which has substantially the same
investment objective and policies. Therefore, although the following discusses
the investment policies of the Portfolio (and the responsibilities of Core
Trust's Board of Trustees), it applies equally to the Fund (and the Trust's
Board of Trustees). Additional information concerning the investment policies
of the Fund and Portfolio, including additional fundamental policies, is
contained below and in the SAI.
INVESTMENT POLICIES
The Portfolio normally invests at least 65% of its total assets in equity
securities of companies domiciled outside the U.S. Investments by the Portfolio
are selected on the basis of their potential for capital appreciation without
regard for current income. The Portfolio may also invest in debt obligations of
foreign governments, international organizations and foreign corporations and,
subject to certain restrictions, in the securities of closed-end investment
companies investing primarily in foreign securities. The Portfolio may from time
to time invest up to 5% of its total assets in debt securities with relatively
high risk and high yields (as compared to other debt securities meeting the
Portfolio's investment criteria). The debt securities in which the Portfolio
invests may be unrated, but will not be in default at the time of purchase. The
value of debt securities generally varies inversely with interest rate changes.
See "Additional Investment Policies and Risk Considerations."
Countries in which the Portfolio may invest include, but are not limited to,
Japan, Germany, the United Kingdom, France, Italy, Belgium, Switzerland, the
Netherlands, Hong Kong, Singapore/Malaysia, and Australia. The Portfolio has a
non-fundamental policy to invest in the securities of foreign issuers domiciled
in at least three foreign countries. In general, the Portfolio will invest only
in securities of companies and governments in countries that SCMI, in its
judgment, considers both politically and economically stable. The Portfolio may
invest more than 25% of its total assets in issuers located in any one country.
To the extent it invests in issuers located in one country, the Portfolio is
susceptible to factors adversely affecting that country. See "Additional
Investment Policies and Risk Considerations."
The Portfolio may purchase preferred stock and convertible debt securities,
including warrants and convertible preferred stock, and may purchase American
Depository Receipts, European Depository Receipts or other similar securities of
foreign issuers. The Portfolio may also enter
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into foreign exchange contracts, including forward contracts to purchase or sell
foreign currencies, in anticipation of its currency requirements and to protect
against possible adverse movements in foreign exchange rates. Although such
contracts may reduce the risk of loss to the Portfolio from adverse movements in
currency values, the contracts also limit possible gains from favorable
movements. For temporary defensive purposes, the Portfolio 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. Government securities, certificates of deposit and
bankers' acceptances of U.S. banks. The Portfolio may also hold cash and time
deposits in foreign banks denominated in any major foreign currency. See
"Additional Investment Policies and Risk Considerations" in the Prospectus and
"Investment Policies" in the SAI for further information about all these types
of investments.
ADDITIONAL INVESTMENT POLICIES AND RISK CONSIDERATIONS
INVESTMENT RESTRICTIONS
The investment objective and all investment policies of each of the Fund and the
Portfolio that are designated as fundamental may not be changed without
approval of the holders of a majority of the outstanding voting securities of
the Fund or the Portfolio, as applicable. A majority of outstanding voting
securities means the lesser of (i) 67% of the shares present or represented at a
shareholder meeting at which the holders of more than 50% of the outstanding
shares are present or represented, or (ii) more than 50% of outstanding shares.
Unless otherwise indicated, all investment policies are not fundamental and may
be changed by the Board without approval by shareholders of the Fund. Likewise,
nonfundamental investment policies of the Portfolio may be changed by the Board
of Trustees of Core Trust (the "Core Trust Board") without shareholder approval.
For more information concerning shareholder voting, see "Other Information --
Capitalization and Voting" and "Other Information -- Fund Structure."
FUNDAMENTAL POLICIES
The following investment restrictions of the Portfolio are fundamental policies:
a) The Portfolio will not invest more than 5% of its assets in the securities
of any single issuer, excepting U.S. Government securities.
b) The Portfolio will not purchase more than 10% of the voting securities of
any one issuer.
c) The Portfolio will not invest more than 10% of its assets in "illiquid
securities", which are securities that cannot be disposed of within seven days
at their then current value. For purposes of this limitation, "illiquid
securities" includes, except in those circumstances described below, (i)
"restricted securities", which are securities that cannot be resold to the
public without registration under the Federal securities laws, and (ii)
securities of issuers having a record (together with all predecessors) of less
than three years of continuous operation.
d) The Portfolio will not invest 25% or more of its total assets in any one
industry.
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e) The Portfolio will not pledge, mortgage or hypothecate its assets to an
extent greater than 10% of the value of the total assets of the Portfolio.
As a non-fundamental policy, the Portfolio will not invest in restricted
securities. 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 SCMI pursuant to
guidelines adopted by the Core Trust Board. 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, these securities may be illiquid.
INVESTMENT TYPES
COMMON AND PREFERRED STOCK AND WARRANTS. The Portfolio may invest in common and
preferred stock. Common stockholders are the owners of the company issuing the
stock and, accordingly, vote on various corporate governance matters such as
mergers. They are not creditors of the company, but rather, upon liquidation of
the company, are entitled to their pro rata share of the company's assets after
creditors (including fixed income security holders) and, if applicable,
preferred stockholders are paid. Preferred stock is a class of stock having a
preference over common stock as to dividends and, in the alternative, as to the
recovery of investment. A preferred stockholder is a shareholder in the company
and not a creditor of the company, as is a holder of the company's fixed income
securities. Dividends paid to common and preferred stockholders are
distributions of the earnings of the company and not interest payments, which
are expenses of the company. Equity securities owned by the Portfolio may be
traded in the over-the counter market or on a securities exchange, but may not
be traded every day or in the volume typical of securities traded on a major
U.S. national securities exchange. As a result, disposition by the Portfolio of
a security to meet redemptions by interest holders or otherwise may require the
Portfolio to sell these securities at a discount from market prices, to sell
during periods when disposition is not desirable, or to make many small sales
over a lengthy period of time. The market value of all securities, including
equity securities, is based upon the market's perception of value and not
necessarily the book value of an issuer or other objective measure of a
company's worth. The Portfolio may also 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) and usually during a specified period of
time.
FOREIGN EXCHANGE CONTRACTS. Changes in foreign currency exchange rates will
affect the U.S. dollar values of securities denominated in currencies other than
the U.S dollar. The rate of exchange between the U.S. dollar and other
currencies fluctuates in response to forces of supply and demand in the foreign
exchange markets. These forces are affected by the international balance of
payments and other economic and financial conditions, government intervention,
speculation and other factors, many of which may be difficult if not impossible
to predict. When investing in foreign securities, the Portfolio usually effects
currency exchange transactions on a
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spot (i.e., cash) basis at the spot rate prevailing in the foreign exchange
market. The Portfolio incurs foreign exchange expenses in converting assets
from one currency to another.
The Portfolio may enter into foreign currency forward contracts or currency
futures or options contracts for the purchase or sale of foreign currency to
"lock in" the U.S. dollar price of the securities denominated in a foreign
currency or the U.S. dollar value of interest and dividends to be paid on such
securities, or to hedge against the possibility that the currency of a foreign
country in which the Portfolio has investments may suffer a decline against the
U.S. dollar. A forward currency contract is an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. This method of attempting to hedge the value of portfolio
securities against a decline in the value of a currency does not eliminate
fluctuations in the underlying prices of the securities. Although the strategy
of engaging in foreign currency transactions could reduce the risk of loss due
to a decline in the value of the hedged currency, it could also limit the
potential gain from an increase in the value of the currency. The Portfolio
does not intend to maintain a net exposure to such contracts where the
fulfillment of the Portfolio's obligations under such contracts would obligate
the Portfolio to deliver an amount of foreign currency in excess of the value of
the Portfolio's portfolio securities or other assets denominated in the
currency. The Portfolio will not enter into these contracts for speculative
purposes and will not enter into non-hedging currency contracts. These
contracts involve a risk of loss if Schroder fails to predict currency values
correctly. The Portfolio has no present intention to enter into currency
futures or options contracts but may do so in the future.
Because most of the Portfolio's income will be received and realized in foreign
currencies and the Portfolio 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 Portfolio's income has been earned and
thereafter computed into U.S. dollars may require the Portfolio 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
Portfolio incurs expenses in U.S. dollars and the time such expenses are paid,
the Portfolio may be required to liquidate additional foreign securities to
purchase the U.S. dollars required to meet such expenses.
DEBT SECURITIES. The Portfolio may also seek capital appreciation through
investment in 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 Portfolio's objective of long-term capital appreciation. Such
income can be used, however, to offset the operating expenses of the Portfolio.
In accordance with its investment objective, the Portfolio will not seek to
benefit from anticipated short-term fluctuations in currency exchange rates.
The Portfolio may, from time to time, invest in debt securities with relatively
high risk and high yields (as compared to other debt securities meeting the
Portfolio's investment criteria), notwithstanding that the Portfolio may not
anticipate that such securities will experience substantial capital
appreciation. The debt securities in which the Portfolio invests may be
unrated, but will not be in default at the time of purchase. The Portfolio also
may invest to a certain extent in debt securities in order to participate in
debt-to-equity conversion programs incident to corporate reorganizations.
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The Portfolio may invest in debt securities ("sovereign debt") issued or
guaranteed by foreign 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.
RISK CONSIDERATIONS
FOREIGN INVESTMENTS. 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 Portfolio 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 Portfolio assets. To the
extent the Portfolio invests substantially in issuers located in one country or
area, such investments may be subject to greater risk in the event of political
or social instability or adverse economic developments affecting that country or
area.
Moreover, (i) dividends payable on foreign securities may be subject to foreign
withholding taxes, thereby reducing the income available for distribution to the
Portfolio's, and thus the Fund's, shareholders; (ii) commission rates payable on
foreign portfolio transactions are generally higher than in the U.S.; (iii)
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.; (iv) foreign securities often trade less frequently and with less
volume than U.S. securities and consequently may exhibit greater price
volatility; and (v) foreign securities trading practices, including those
involving securities settlement, may expose the Portfolio to increased risk in
the event of a failed trade or the insolvency of a foreign broker-dealer or
registrar.
EMERGING MARKETS. The Portfolio may invest in securities of issuers located in
countries considered by some to be emerging market countries. The risks of
investing in foreign securities may be greater with respect to securities of
issuers in, or denominated in the currencies of, emerging market countries. The
economies of emerging market countries generally are heavily dependent upon
international trade and, accordingly, have been and may continue to be adversely
affected by trade barriers, exchange controls, managed adjustments in relative
currency values and other protectionist measures imposed or negotiated by the
countries with which they trade. These economies also have been and may
continue to be adversely affected by economic conditions in the countries with
which they trade. The securities markets of emerging market countries are
substantially smaller, less developed, less liquid and more volatile than the
securities markets of the U.S. and other developed countries. Disclosure and
regulatory standards in many respects are less stringent in emerging market
countries than in the U.S. and other major markets. There also may be a lower
level of monitoring and regulation of emerging
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market countries than in the U.S. and other major markets. There also may be a
lower level of monitoring and regulation of emerging markets and the activities
of Advisors in such markets, and enforcement of existing regulations may be
extremely limited. Investing in local markets, particularly in emerging market
countries, may require the Portfolio to adopt special procedures, seek local
government approvals or take other actions, each of which may involve additional
costs to the Portfolio. Certain emerging market countries may also restrict
investment opportunities in issuers in industries deemed important to national
interests.
CURRENCY FLUCTUATIONS AND DEVALUATIONS. Because the Portfolio will invest
heavily in non-U.S. currency denominated securities, changes in foreign
currency exchange rates will affect the value of the Portfolio's investments. A
decline in the value of currencies in which the Portfolio's investments are
denominated against the dollar will result in a corresponding decline in the
dollar value of the Portfolio's assets. This risk tends to be heightened in the
case of investing in certain emerging market countries.
GEOGRAPHIC CONCENTRATION. The Portfolio may invest more than 25% of its total
assets in issuers located in any one country. To the extent it invests in
issuers located in one country, the Portfolio is 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 Portfolio's assets may fluctuate more widely than the value of
shares of a comparable Portfolio having a lesser degree of geographic
concentration.
PORTFOLIO TURNOVER. The Portfolio 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 Portfolio to qualify as a regulated investment company for
federal income tax purposes and may cause shareholders of the Portfolio to
recognize gains for federal income tax purposes. See "Taxation" in the SAI.
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
The business and affairs of the Fund are managed under the direction of the
Board. The business and affairs of the Portfolio are managed under the
direction of the Core Trust Board. The Trustees of both Trust and Core Trust
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 Trustees and the respective executive officers of the
Trust and Core Trust's may be found in the SAI under the heading "Management --
Trustees and Officers." The Board and the Core Trust Board have separately
adopted written procedures reasonably appropriate to deal with potential
conflicts of interest.
INVESTMENT ADVISER AND PORTFOLIO MANAGER
The Fund currently invests all of its assets in the Portfolio. SCMI serves as
investment adviser to the Portfolio pursuant to an Investment Advisory Contract.
Through its London, England branch SCMI manages the investment and reinvestment
of the assets the Portfolio and continuously reviews, supervises and administers
the Portfolio's investments. In this regard, it is the
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responsibility of SCMI to make decisions relating to the Portfolio's investments
and to place purchase and sale orders regarding investments with brokers or
dealers selected by it in its discretion. For its services with respect to the
Portfolio, SCMI receives a monthly advisory fee equal on an annual basis to
0.45% of the average daily net assets of the Portfolio, which the Fund
indirectly bears through investment in the Portfolio.
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 $90 billion.
The investment management team of Mark J. Smith, a Trustee and Vice President of
the Trust and Core Trust, and Laura Luckyn-Malone, a Trustee and President of
the Trust and Core Trust, with the assistance of an SCMI investment committee,
is primarily responsible for the day-to-day management of the Portfolio's
investment portfolio. Mr. Smith, who has managed the Fund's portfolio since
October 1989 and the Portfolio's investments since its inception, 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 Portfolio's investment management team in ____________ 1995, has been
a Senior Vice President and Director of SCMI since 1990.
The Fund began pursuing its investment objective through investment in the
Portfolio on November 1, 1995. The Fund may withdraw its 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. See "Other Information _ Fund
Structure." Accordingly, the Fund has retained SCMI as its investment adviser
to manage the Fund's assets in the event the Fund withdraws its investment.
SCMI does not receive an investment advisory fee with respect to the Fund so
long as the Fund remains completely invested in the Portfolio or any other
investment company. If the Fund resumes directly investing in portfolio
securities, the Fund will pay SCMI a monthly advisory fee equal on an annual
basis to 0.50% of the first $100 million of the Fund's 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. The investment advisory contract
between SCMI and the Trust with respect to the Fund is the same in all material
respects as the Portfolio's Investment Advisory Contract except as to the
parties, the fees payable thereunder, the circumstances under which fees will be
paid and the jurisdiction whose laws govern the agreement. For the fiscal year
ended October 31, 1995, the Fund paid SCMI an advisory fee of 0.45% of its
average daily net assets.
ADMINISTRATIVE SERVICES
On behalf of the Fund, the Trust has entered into an Administrative Services
Contract with Schroder Advisors, 787 Seventh Avenue, New York, New York 10019.
Schroder Advisors is a wholly-owned subsidiary of SCMI. The Trust and Schroder
Advisors have entered into a Sub-Administration Agreement with Forum. Pursuant
to these agreements, Schroder Advisors and Forum provide certain management and
administrative services necessary for the Fund's operations, other than the
investment
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management and administrative services provided to the Fund by SCMI pursuant to
the Investment Advisory Contract. For these services, the Fund pays Schroder
Advisors a monthly fee at the annual rate of 0.20% of the average daily net
assets of the Fund. Payment for Forum's services is made by Schroder Advisors
and is not a separate expense of the Fund. Schroder Advisors and Forum provide
similar services to the Portfolio, for which Schroder Advisors is separately
compensated at an annual rate of 0.15 % of the average daily net assets of the
Portfolio, a portion of which Forum receives for its services with respect to
the Portfolio. For the fiscal year ended October 31, 1995, the Fund paid
Schroder Advisors a fee of 0.22% of its average net assets.
DISTRIBUTION PLAN
Schroder Advisors acts as distributor of the Fund's shares. Schroder Advisors
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 Trust on behalf of the Fund, which
is in the form of a reimbursement plan, each month the Trust pays directly or
reimburses Schroder Advisors, as distributor, for costs and expenses incurred in
connection with the distribution of Advisor Shares. Such payment or
reimbursement is subject to a limit on an annual basis to 0.50% per annum of the
Fund's average daily net assets attributable to Advisor Shares.
Payment or reimbursement may be for various types of costs, including: (1)
advertising expenses, (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 Schroder Advisors, including salary, commissions, travel and
related expenses in connection with the distribution of Advisor Shares, (4)
payments to broker-dealers who advise shareholders regarding the purchase, sale,
or retention of Advisor Shares, and (5) payments to banks, trust companies,
broker-dealers (other than Schroder Advisors) or other financial organizations
(collectively, "Service Organizations"). Payments to Service Organizations are
calculated by reference to the average daily net assets of Advisor Shares held
by shareholders who have a brokerage or other service relationship with the
Service Organization receiving such fees. The Fund will not be liable for
distribution expenditures made by Schroder Advisors in any given year in excess
of the maximum amount payable under the Plan in that year. Costs or expenses in
excess of the per annum limit may not be carried forward to future years. Salary
expenses of salesmen who are responsible for marketing various mutual funds of
the Trust may be allocated to such mutual funds, including the Advisor Shares
class of the Fund, that have adopted a plan similar to that of the Fund on the
basis of average daily net assets; travel expenses may be allocated to, or
divided among, the particular mutual funds of the Trust for which they are
incurred.
Among the services provided by Service Organizations are answering customer
inquiries regarding the manner in which purchases, exchanges and redemptions of
shares of the Trust may be effected and other matters pertaining to the Trust's
services; providing necessary personnel and facilities to establish and maintain
shareholder accounts and records; assisting shareholders in arranging for
processing purchase, exchange and redemption transactions; arranging for the
wiring of funds; guaranteeing shareholder signatures in connection with
redemption orders and transfers and changes in shareholder-designated accounts;
integrating periodic statements with other customer transactions; and providing
such other related services as the shareholder may request.
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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.
OTHER EXPENSES
The Fund bears all costs of its operations other than expenses specifically
assumed by Schroder Advisors or SCMI, including those expenses it indirectly
bears through its investment in the Portfolio. The costs borne by the Fund
include legal and accounting expenses; Trustees' fees and expenses; insurance
premiums, custodian and transfer agent fees and expenses; brokerage fees and
expenses; expenses of registering and qualifying the Fund's shares for sale with
the SEC and with various state securities commissions; expenses of obtaining
quotations on portfolio securities and pricing of the Fund's shares; 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. Trust
expenses directly attributed to the Fund are charged to the Fund; other expenses
are allocated proportionately among all the portfolios of the Trust in relation
to the net assets of each portfolio. See "Management - Fees and Expenses" in
the SAI.
SCMI and Schroder Advisors have voluntarily undertaken to assume certain
expenses of the Fund (or waive their respective fees), which applies to fees and
expenses paid by the Fund as well as fees and expenses paid by the Portfolio.
This undertaking is designed to place a maximum limit on Fund expenses
(excluding taxes, interest, brokerage commissions and other portfolio
transaction expenses and extraordinary expenses) of 1.49% of the average daily
net assets of the Fund attributable to Advisor Shares. This expense limitation
cannot be modified or withdrawn except by a majority vote of the Trustees of the
Trust who are not affiliated with SCMI or Schroder Advisors ("Independent
Trustees"). 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 Advisors, the remaining one-fifth; provided, however, that
neither SCMI nor Schroder Advisors will be required to make any reimbursements
or waive any fees in excess of the fees payable to them by the Fund on a monthly
basis for their respective advisory and administrative services.
PORTFOLIO TRANSACTIONS
The Investment Advisory Contract authorizes and directs SCMI to place orders for
the purchase and sale of the Portfolio's investments with brokers and dealers
selected by SCMI in its discretion and to seek "best execution" of such
portfolio transactions. The Portfolio 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. Commission rates for brokerage transactions are fixed on many
foreign securities exchanges, and this may cause higher brokerage expenses to
accrue to the Portfolio than would be the case for comparable transactions
effected on U.S. securities exchanges.
Subject to the Portfolio's policy of obtaining the best price consistent with
quality of execution on transactions, SCMI may employ Schroder Securities
Limited and its affiliates (collectively,
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"Schroder Securities"), affiliates of SCMI, to effect transactions of the
Portfolio on certain foreign securities exchanges. Because of the affiliation
between SCMI and Schroder Securities, the Portfolio's payment of commissions to
Schroder Securities is subject to procedures adopted by Core Trust's board of
trustees to provide that such commissions will not exceed the usual and
customary brokers' commissions. No specific portion of the Portfolio's brokerage
will be directed to Schroder Securities and in no event will Schroder Securities
receive such brokerage in recognition of research services.
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 Trustees 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 Portfolio does not currently engage in directed brokerage
arrangements to pay expenses, it may do so in the future. These arrangements,
whereby brokers executing the Portfolio's portfolio transactions would agree to
pay designated expenses of the Portfolio if brokerage commissions generated by
the Portfolio reached certain levels, might reduce these expenses. As
anticipated, these arrangements would not materially increase the brokerage
commissions paid by the Portfolio. Brokerage commissions are not reflected as
Fund expenses, however, in the Fund's fee table, per share table, and financial
statements, and such expenses might therefore appear lower than actual expenses
incurred.
CODE OF ETHICS
The Trust, Core Trust, SCMI, Schroder Advisors, and Schroders Incorporated have
adopted codes of ethics that contain 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 Report of the Advisory Group on Personal Investing of the
Investment Company Institute, of which the Trust is a member.
INVESTMENT IN THE FUND
PURCHASE OF SHARES
Investors may purchase Advisor Shares directly from the Trust. Prospectuses,
sales material and Account Applications can be obtained from the Trust or
through Forum Financial Corp., the Fund's Transfer Agent. See "Other Information
- -- Shareholder Inquires." Investments may also be made through Service
Organizations that assist their customers in purchasing shares of the Fund. Such
Service Organizations may charge their customers a service fee for processing
orders to purchase or sell shares of the Fund. 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). The minimum
initial investment is $____, except that the minimum initial investment for an
Individual Retirement Account is $____. The minimum
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subsequent investment is $____. 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
For initial purchases, the check must be accompanied by a completed Account
Application in proper form.
Investors and Service Organizations (on behalf of their customers) may transmit
purchase payments by Federal Reserve Bank wire directly to the Fund as follows:
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. If the initial investment is by wire, an account number will be assigned
and an Account Application must be completed and mailed to the Fund. Wire orders
received prior to 4:00 p.m. (New York City Time) on a Fund Business Day will be
processed at the net asset value determined as of that day. Wire orders received
after 4:00 p.m. (New York City Time) will be processed at the net asset value
determined as of the next Fund Business Day.
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 that 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.
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
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request. Before investing in the Fund through one of these plans, investors
should consult their tax advisors.
INDIVIDUAL RETIREMENT ACCOUNTS
The Fund may be used as an investment vehicle for an Individual Retirement
Account ("IRA"). An IRA plan naming The First National Bank of Boston as
custodian is available from the Trust or the Fund's Transfer Agent. The minimum
initial investment for an IRA is $____; the minimum subsequent investment is
$____. 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 effecting a rollover.
REDEMPTION OF SHARES
Shares of the Fund are 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 may be made between 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 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 that are received after 4:00 p.m. (New York City Time) will be
processed at the net asset value determined 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 the Account Information telephone number on the cover page of this
Prospectus. A shareholder 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 the
Transfer Agent to confirm that such instructions are genuine. If such procedures
are followed, neither the Transfer Agent 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 the shareholder account
number. The letter must also be signed in exactly the same way the account is
registered (if there is more than one owner of the shares, all must sign) and,
in [CERTAIN CASES], signatures must be guaranteed by an institution that
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is acceptable to the Fund's Transfer Agent. Such institutions include certain
banks, brokers, dealers (including municipal and government securities brokers
and dealers), credit unions and savings associations. (Notaries public are not
acceptable.) Further documentation, 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.
If shares to be redeemed are held in certificate form, the certificates must be
enclosed with the redemption request and the assignment form on the back of the
certificates, or an assignment separate from the certificates (but accompanied
by the certificates), must be signed by all owners in exactly the same way the
owners' names are written on the face of the certificates. Requirements for
signature guarantees and/or documentation of authority as described above could
also apply. For your protection, the Fund suggests that certificates be sent by
registered mail.
ADDITIONAL REDEMPTION INFORMATION. Checks for redemption proceeds will normally
be mailed within seven days, but no check will 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, (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 Fund's NAV not reasonably practicable.
If the Board determines that it would be detrimental to the best interest of the
remaining shareholders of the Fund to make payment wholly or partly in cash, the
Fund may redeem shares 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 account does not have a value of at least $2,000, unless the value of
the account fell below that amount solely as a result of
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market activity. Shareholders will be notified that the value of the account is
less than $2,000 and be allowed at least 30 days to make an additional
investment to increase the account balance to at least $2,000.
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, each day that the New York Stock Exchange is
open for trading, (a "Fund Business Day"), which excludes the following
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.
Portfolio securities listed on recognized stock exchanges are valued at the last
reported sale price, prior to the time when the securities are valued, on the
exchange on which the securities are principally traded. Listed securities
traded on recognized stock exchanges where last sale prices are not available
are valued at 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 Core Trust
Board.
Trading in securities on European and Far Eastern 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 using
methods approved by Core Trust's Board of Trustees.
All assets and liabilities of the Portfolio denominated in foreign currencies
are valued in U.S. dollars based on the exchange rate last quoted by a major
bank prior to the time when the net asset value of the Fund is calculated.
DIVIDENDS, DISTRIBUTIONS AND TAXES
THE FUND
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. The Fund intends to distribute substantially all
of its net investment income and its net realized long term capital gain at
least annually and, therefore, intends not to be subject to Federal income tax.
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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. You should include as gross income in
their Federal income tax returns both cash dividends received from the Fund and
also the amount that the Fund advises is your 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. You then would be entitled, subject to
certain limitations, to take a foreign tax credit against your 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
gain 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 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 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 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 Trust 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 (i) the payee
fails to furnish and to certify the payee's correct taxpayer identification
number or social security number, (ii) 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 (iii) 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.
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THE PORTFOLIO
The Portfolio is not required to pay Federal income taxes on its net investment
income and capital gain, as it is treated as a partnership for Federal income
tax purposes. All interest, dividends and gain and losses of the Portfolio are
deemed to have been "passed through" to the Fund in proportion to its holdings
of the Portfolio, regardless of whether such interest, dividends or gain have
been distributed by the Portfolio or losses have been realized by the Portfolio.
Investment income received by the Fund from sources within foreign countries may
be subject to foreign income or other taxes. The Fund intends to elect, if
eligible to do so, to permit its shareholders to take a credit (or a deduction)
for foreign income and other taxes paid by the Portfolio. Shareholders of the
Fund will be notified of their share of those taxes and will be required to
include that amount as income. In that event, shareholders may be entitled to
claim a credit or deduction for those taxes.
OTHER INFORMATION
CAPITALIZATION AND VOTING
The Trust was originally organized as a Maryland corporation on July 30, 1969
and on January 9, 1996 was reorganized as a Delaware business trust. The Trust
was formerly known as "Schroder Capital Funds, Inc." The Trust is registered as
an open-end management investment company under the Act and has authority to
issue an unlimited number of shares of beneficial interest. The Board may,
without shareholder approval, divide the authorized shares into an unlimited
number of separate portfolios or series (such as the Fund) and may divide
portfolios or series into classes of shares (such as the Advisor Shares class),
and the costs of doing so will be borne by the Trust. The Trust currently
consists of seven separate portfolios, each of which has separate investment
objectives and policies, and 13 classes of shares, two of which represent
interests in to the Fund.
Shares are fully paid and non-assessable, and have no preferences as to
conversion, exchange, dividends, retirement or other features. 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 Trustees can
elect 100% of the Trustees if they choose to do so. A shareholder is entitled to
one vote for each full share held (and a fractional vote for each fractional
share held) standing in his name on the books of the Trust. On matters requiring
shareholder approval, shareholders of the Trust are entitled to vote only with
respect to matters that affect the interest of the Fund or class of shares they
hold, except as otherwise required by applicable law.
There will normally be no meetings of shareholders to elect Trustees unless and
until such time as less than a majority of the Trustees holding office have been
elected by shareholders. However, the holders of not less than a majority of the
outstanding shares of the Trust may remove any person serving as a Trustee and
the Board will call a special meeting of shareholders to consider removal of one
or more Trustees if requested in writing to do so by the holders of not less
than 10% of the outstanding shares of the Trust.
From time to time, certain shareholders may own a large percentage of the shares
of the Fund. Accordingly, those shareholders may be able to greatly affect (if
not determine) the outcome of a shareholder vote.
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REPORTS
The Trust 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. 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 past performance and does
not necessarily indicate future results. Performance information should be
considered in light of the Fund's investment objective and policies,
characteristics and quality of the Fund's investments, 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.
CUSTODIAN AND TRANSFER AGENT
The Chase Manhattan Bank, N.A. is custodian of the Fund's and of the Portfolio's
assets. Forum Financial Corp. serves as the Fund's Transfer and Dividend
Disbursing Agent.
SHAREHOLDER INQUIRIES
Inquiries about the Fund, including the Fund's 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.
CERTAIN SERVICE ORGANIZATION
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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.
FUND STRUCTURE
OTHER CLASS OF SHARES. The Fund has two classes of shares, Advisor Shares and
Institutional Shares. Institutional Shares are offered by a separate prospectus
to corporations, institutions, and fiduciaries, including fiduciary, agency, and
custodial clients of bank trust departments, trust companies, and their
affiliates. Institutional Shares incur less expenses than Advisor Shares.
Except for certain differences, each share of each class represents an
undivided, proportionate interest in the Fund. Each share of the Fund is
entitled to participate equally in dividends and other distributions and the
proceeds of any liquidation of the Fund except that, due to the differing
expenses borne by the two classes, the amount of dividends and other
distribution will differ between the classes. Information about Institutional
Shares is available from the Fund by calling Forum Financial Corp. at (207) 879-
8903.
THE PORTFOLIO. The Fund seeks to achieve its investment objective by investing
all of its investable assets in the Portfolio, which has substantially the same
investment objective and policies as the Fund. Accordingly, the Portfolio
directly acquires its own securities and the Fund acquires an indirect interest
in those securities. The Portfolio is a separate series of Core Trust, a
business trust organized under the laws of the State of Delaware in September
1995. Core Trust is registered under the Act as an open-end management
investment company and currently has four separate portfolios. The assets of the
Portfolio, a diversified portfolio, belong only to, and the liabilities of the
Portfolio are borne solely by, the Portfolio and no other portfolio of Core
Trust.
The investment objective and fundamental investment policies of the Fund and the
Portfolio can be changed only with shareholder approval. See "Investment
Objective," "Investment Policies," and "Management of the Fund" for a complete
description of the Portfolio's investment objective, policies, restrictions,
management, and expenses.
The Fund's investment in the Portfolio is in the form of a non-transferable
beneficial interest. As of the date of this Prospectus, the Fund is the only
institutional Investor that has invested all of its assets in the Portfolio. The
Portfolio may permit other investment companies or institutional investors to
invest in it. All investors in the Portfolio will invest on the same terms and
conditions as the Fund and will pay a proportionate share of the Portfolio's
expenses.
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The Portfolio normally will not hold meetings of investors except as required by
the Act. Each Investor in the Portfolio will be entitled to vote in proportion
to its relative beneficial interest in the Portfolio. On most issues subject to
a vote of investors, as required by the Act and other applicable law, 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; indeed, if other
investors hold a majority interest in the Portfolio, they could hold have
voting control of the Portfolio.
The Portfolio will not sell its shares directly to members of the general
public. Another Investor in the Portfolio, such as an investment company, that
might sell its shares to members of the general public would not be required to
sell its shares at the same public offering price as the Fund, and could have
different advisory and other fees and expenses than the Fund. Therefore, Fund
shareholders may have different returns than shareholders in another investment
company that invests exclusively in the Portfolio. There is currently no such
other investment company that offers its shares to members of the general
public. Information regarding any such funds in the future will be available
from Core Trust by calling Forum Financial Corp. at (207) 879-8903.
CERTAIN RISKS OF INVESTING IN THE PORTFOLIO. The Fund's investment in the
Portfolio may be affected by the actions of other large investors in the
Portfolio, if any. For example, if the Portfolio had a large Investor other than
the Fund that redeemed its interest in the Portfolio, the Portfolio's remaining
investors (including the Fund) might, as a result, experience higher pro rata
operating expenses, thereby producing lower returns.
The Fund may withdraw its entire investment from 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 there were other
investors in the Portfolio with power to, and who did by a vote of the
shareholders of all investors (including the Fund), change the investment
objective or policies of the Portfolio in a manner not acceptable to the Board.
A withdrawal could result in a distribution in kind of portfolio securities (as
opposed to a cash distribution) by the Portfolio. That distribution could result
in a less diversified portfolio of investments for the Fund and could affect
adversely the liquidity of the Fund's portfolio. If the Fund decided to convert
those securities to cash, it usually would incur brokerage fees or other
transaction costs. If the Fund withdrew its investment from the Portfolio, the
Board would consider what action might be taken, including the management of the
Fund's assets in accordance with its investment objective and policies by the
Adviser and Schroder, the Fund's investment adviser and subadviser,
respectively, or the investment of all of the Fund's investable assets in
another pooled investment entity having substantially the same investment
objective as the Fund. The inability of the Fund to find a suitable replacement
investment, in the event the Board decided not to permit the Adviser and
Schroder to manage the Fund's assets, could have a significant impact on
shareholders of the Fund.
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Each Investor in the Portfolio, including the Fund, will be liable for all
obligations of the Portfolio, but not any other portfolio of Core Trust. The
risk to an Investor in the Portfolio of incurring financial loss on account of
such liability, however, would be limited to circumstances in which the
Portfolio was unable to meet its obligations. Upon liquidation of the Portfolio,
investors would be entitled to share pro rata in the net assets of the Portfolio
available for distribution to investors.
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INVESTMENT ADVISER
Schroder Capital Management International Inc.
787 Seventh Avenue
New York, New York 10019
ADMINISTRATOR & DISTRIBUTOR
Schroder Fund Advisors Inc.
787 Seventh Avenue
New York, New York 10019
SUB-ADMINISTRATOR
Forum Financial Services, Inc.
Two Portland Square
Portland, Maine 04101
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
INDEPENDENT ACCOUNTANTS
[ACCOUNTANT] L.L.P.
One Post Office Square
Boston, Massachusetts 02109
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Table of Contents
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . .
The Fund . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment Adviser
Administrative Services. . . . . . . . . . . . . . . . . . .
Purchases and Redemptions. . . . . . . . . . . . . . . . . .
Risk Considerations. . . . . . . . . . . . . . . . . . . . .
Fee Table. . . . . . . . . . . . . . . . . . . . . . . . . .
FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . .
INVESTMENT OBJECTIVE
AND POLICIES . . . . . . . . . . . . . . . . . . . . . . .
Investment Objective . . . . . . . . . . . . . . . . . . . .
Investment Policies. . . . . . . . . . . . . . . . . . . . .
ADDITIONAL INVESTMENT POLICIES
RISK CONSIDERATIONS. . . . . . . . . . . . . . . . . . . .
Investment Restrictions. . . . . . . . . . . . . . . . . . .
Investment Types . . . . . . . . . . . . . . . . . . . . . .
Risk Considerations. . . . . . . . . . . . . . . . . . . . .
MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . . . .
Board of Trustees. . . . . . . . . . . . . . . . . . . . . .
Investment Adviser and Portfolio Manager . . . . . . . . . .
Administrative Services. . . . . . . . . . . . . . . . . . .
Distribution Plan. . . . . . . . . . . . . . . . . . . . . .
Other Expenses . . . . . . . . . . . . . . . . . . . . . . .
Portfolio Transactions
Code of Ethics . . . . . . . . . . . . . . . . . . . . . . .
INVESTMENT IN THE FUND . . . . . . . . . . . . . . . . . . .
Purchase of Shares . . . . . . . . . . . . . . . . . . . . .
Retirement Plans . . . . . . . . . . . . . . . . . . . . . .
Individual Retirement Accounts . . . . . . . . . . . . . . .
Redemption of Shares . . . . . . . . . . . . . . . . . . . .
Net Asset Value. . . . . . . . . . . . . . . . . . . . . . .
DIVIDENDS, DISTRIBUTIONS
AND TAXES. . . . . . . . . . . . . . . . . . . . . . . . .
The Fund . . . . . . . . . . . . . . . . . . . . . . . . . .
The Portfolio. . . . . . . . . . . . . . . . . . . . . . . .
OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . .
Capitalization and Voting. . . . . . . . . . . . . . . . . .
Reports. . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance Information. . . . . . . . . . . . . . . . . . .
Custodian and Transfer Agent . . . . . . . . . . . . . . . .
Shareholder Inquires . . . . . . . . . . . . . . . . . . . .
Certain Shareholder Servicing Organizations. . . . . . . . .
Fund Structure . . . . . . . . . . . . . . . . . . . . . . .
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SCHRODER U.S. SMALLER COMPANIES FUND
TWO PORTLAND SQUARE
PORTLAND, MAINE 04101
____________
INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
GENERAL INFORMATION: (207) 879-8903
ACCOUNT INFORMATION: (800) 344-8332
FAX: (207) 879-6206
- --------------------------------------------------------------------------------
SCHRODER CAPITAL MANAGEMENT INTERNATIONAL INC. - INVESTMENT ADVISER
SCHRODER FUND ADVISORS INC. - DISTRIBUTOR
This Prospectus offers Institutional Shares ("Institutional Shares") of Schroder
U.S. Smaller Companies Fund (the "Fund"), a separately-managed, diversified
portfolio of Schroder Capital Funds (Delaware) (the "Trust"), an open-end
management investment company currently consisting of seven separate portfolios,
each of which has different investment objectives and policies. The 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 a prospective Investor
should know before investing in the Fund. A Statement of Additional Information
(the "SAI") dated May 1, 1996 and as supplemented from time to time containing
additional 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 SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
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UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus is dated January 9, 1996
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PROSPECTUS SUMMARY
THE FUND. The Fund is a separately-managed, diversified no-load portfolio of
the Trust, a Delaware business trust registered as an open-end management
investment company under the Investment Company Act of 1940 (the "Act"). The
Trust currently consists of seven separate portfolios, each of which has
separate investment objectives and policies. The Fund's primary 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 Fund's objective. The Fund
currently offers two separate classes of shares: Institutional Shares
("Institutional Shares") and Advisor Shares ("Advisor Shares"). Only
Institutional Shares are offered through this Prospectus and are sometimes
referred to herein as the "Shares."
INVESTMENT ADVISER.
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The Portfolio's investment adviser is Schroder Capital Management International
Inc. ("SCMI") "), 787 Seventh Avenue, New York, New York 10019. The investment
advisory fee paid to SCMI by the Portfolio is borne indirectly by the Fund. See
"Management of the Fund" -- Investment Adviser and Portfolio Manager."
ADMINISTRATOR AND DISTRIBUTOR. Schroder Fund Advisors Inc. ("Schroder
Advisors"), formerly Schroder Capital Distributors, Inc., serves as
Administrator and Distributor of the Fund, and Forum Financial Services, Inc.
("Forum") is the Fund's Sub-Administrator.
PURCHASES AND REDEMPTIONS OF SHARES. Shares may be purchased or redeemed by
mail, by bank-wire and through an investor's broker-dealer or other financial
institution. The minimum initial investment is $____, except that the minimum
for an Individual Retirement Account is $____. The minimum subsequent
investment is $____. See "Investment in the Fund -- Purchase of Shares" and "--
Redemption of Shares."
DIVIDENDS AND DISTRIBUTIONS. The Fund declares and pays as a dividend
substantially all of its net investment income annually and distributes any net
realized long-term capital gain at least annually. Dividend and capital gain
distributions are reinvested automatically in additional shares of the Fund at
net asset value unless the shareholder has notified the Fund in a Purchase
Application or otherwise in writing of the shareholder's election to receive
distributions in cash. See "Dividends, Distributions and Taxes."
RISK CONSIDERATIONS. There can be no assurance that the Fund will achieve its
investment objective. The 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. The Fund's policy of investing in smaller companies entails
certain risks in addition to those normally associated with investments in
equity securities. See "Additional Investment Policies -- Risk Considerations."
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FEE TABLE
The table below shows the costs and expenses that an investor would incur as a
holder of Institutional Shares. There are no transaction expenses associated
with purchases or redemptions of Institutional Shares.
Annual Fund Operating Expenses (as a percentage of average net assets)(1)
Management Fees . . . . . . . . . . . . . . . . . . . . 0.75%
(after estimated fee waivers)
12b-1 Fees. . . . . . . . . . . . . . . . . . . . . . . 0.00%
Other Expenses. . . . . . . . . . . . . . . . . . . . . 0.74%
(after expense reimbursements)
Total Fund Operating Expenses (2) . . . . . . . . . . . 1.49%
(1) Management Fees for the Fund reflect the fees paid by the Fund for
investment and administrative services. Management Fees for the Fund 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.
(3) Absent
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estimated fee waivers and expenses reimbursements, Management Fees, Other
Expenses and Total Operating Expenses would be 0.__%, 0.__%, and ____%,
respectively.
EXAMPLE
Based on the expenses listed above, you would pay the following expenses on a
$1,000 investment, assuming (1) a 5% annual return, (2) redemption at the end of
each time period, and (3) reinvestment of all dividends and other distributions:
1 year $__
3 years $__
5 years $__
10 years $__
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
OR RETURNS, AND ACTUAL EXPENSES OR RETURNS BE MORE OR LESS THAN THOSE SHOWN.
The 5% annual return is not a prediction of the Fund's return, but is required
by the Securities and Exchange Commission for purposes of these calculations.
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FINANCIAL HIGHLIGHTS
The following financial highlights are presented to assist investors in
evaluating the performance of the Fund for the periods shown. This information
is part of the Fund's financial statements and has been audited by [ACCOUNTANT]
L.L.P., independent accountants. The data in the table should be read in
conjunction with the financial statements, notes thereto and independent
accountants' report thereon contained in each Fund's annual report, which is
incorporated by reference into that Fund's 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.
<TABLE>
<CAPTION>
Year ended October 31
-------------------------
1995 1994 1993(a)
---- ---- ----
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR 11.81 10.99 10.00
INVESTMENT OPERATIONS
Net Investment Income (0.04) (0.07) (0.02)
Net Realized Income and Unrealized
Gain (Loss) on Investments 3.78 0.97 1.01
Total from Investment Operations 3.74 0.90 0.99
DISTRIBUTIONS
from Net Investment Income - -- --
from Realized Capital Gain (0.41) (0.08) --
from Capital Paid-In - -- --
Total Distributions (0.41) (0.08) --
NET ASSET VALUE, END OF YEAR $15.14 $11.81 $10.99
TOTAL RETURN 32.84% 8.26% 9.90%
RATIO/SUPPLEMENTARY DATA:
Net Assets, End of Year (Thousands) 15,287 13,324 12,489
Ratio of Expenses to Average Net Assets 1.49% 1.45% 2.03%(b)
Ratio of Net Investment
Income to Average Net Assets (0.30%) (0.58%) (0.99%)(b)
Portfolio Turnover Rate
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92.68% 70.82% 12.58%(b)
</TABLE>
(a) The Fund commenced operations on August 6, 1993.
(b) Annualized
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INVESTMENT OBJECTIVES AND POLICIES
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
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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.
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 Trustees without prior
shareholder approval. Unless otherwise indicated, all of the investment
policies of the Fund described below are also fundamental policies.
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 Act or any orders, rules or regulations thereunder
adopted by the Securities and Exchange Commission.
INVESTMENT POLICIES
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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
Trustees.
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" in the SAI.
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.
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
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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.
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. See "Investment
Policies" in the SAI for further information about all these securities.
ADDITIONAL INVESTMENT POLICIES AND RISK CONSIDERATIONS
INVESTMENT RESTRICTIONS
The investment objective and all investment policies of each of the Fund that
are designated as fundamental may not be changed without approval of the holders
of a majority of the outstanding voting securities of the Fund. A majority of
outstanding voting securities means the lesser of (i) 67% of the shares present
or represented at a shareholder meeting at which the holders of more than 50% of
the outstanding shares are present or represented, or (ii) more than 50% of
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outstanding shares. Unless otherwise indicated, all investment policies are
fundamental and may not be changed by the Board without approval by shareholders
of the Fund. For more information concerning shareholder voting, see "Other
Information -- Capitalization and Voting" and "Other Information -- Fund
Structure."
FUNDAMENTAL RESTRICTIONS
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) Pledge, mortgage or hypothecate its assets to any extent greater than 10%
of the value of the total assets of the Fund;
(5) Deviate from the percentage requirements listed under "Investment Policies"
and "Additional Investment Policies"; or
(6) 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.
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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.
INVESTMENT TYPES
REPURCHASE AGREEMENTS. The 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.
ILLIQUID AND RESTRICTED SECURITIES. As a non-fundamental policy, the 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," which are securities that cannot be disposed of within seven days
at their then current value. 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 a portion of assets used
to cover such options as well as repurchase agreements maturing in more than
seven days. The 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 or SCMI under Board-approved guidelines.
Such guidelines take into account trading activity for
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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. 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.
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 Trust's Board of Trustees.
COVERED CALLS AND HEDGING. While the 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
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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. The 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.
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.
PORTFOLIO TURNOVER. The Fund 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.
MANAGEMENT OF THE FUNDS
BOARD OF TRUSTEES
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The business and affairs of the Funds are managed under the direction of the
Board of Trustees of the Trust. The Trustees 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 Trustees, as
well as the Trust's executive officers, may be found in each SAI under the
heading "Management - Trustees and Officers."
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 $90 billion.
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. For the fiscal year ended October
31, 1995, the total advisory fees paid by Schroder U.S. Smaller Companies Fund
to SCMI represented an annual effective rate of 0.50% of the Fund's average
daily net assets.
It is the Trust'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.
The investment management team of Fariba Talebi, a Vice President of the Trust
and a First Vice President of SCMI,
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and Ira Unschuld, a Vice President of the Trust and of SCMI, with the assistance
of an investment committee, is primarily responsible for the day-to-day
management of the 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 Trust has entered into an
Administrative Services Contract with Schroder Advisors. SCMI provides similar
administrative services for Schroder U.S. Equity Fund through its Investment
Advisory Contract with that Fund. The Trust and Schroder Advisors have entered
into Sub-Administration Agreements with Forum. Schroder Advisors 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 its Investment Advisory Contracts.
Schroder Advisors is a wholly-owned subsidiary of SCMI. For its administrative
services with respect to the Fund, Schroder Advisors 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 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, 1995, the Fund paid
Schroder Advisors fees representing an effective rate of 0.25% of the Fund's
average daily net assets. Payment for Forum's services is not a separate
expense of either Fund but is made by Schroder Advisors.
DISTRIBUTION PLAN
Schroder Advisors acts as distributor of the Fund's shares. Schroder Advisors
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 Trust on behalf
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of the Fund, which is in the form of a reimbursement plan, the Trust is
authorized generally to pay directly or reimburses Schroder Advisors, as
distributor, for costs and expenses incurred in connection with the distribution
of Institutional Shares. Such payment or reimbursement is subject to a limit on
an annual basis to 0.50% per annum of the Fund's average daily net assets
attributable to Institutional Shares. The Fund will make no payment under the
Distribution Plan with respect to Institutional Shares until the Board further
so authorizes.
Payment or reimbursement may be for various types of costs, including: (1)
advertising expenses, (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 Schroder Advisors, including salary, commissions, travel and
related expenses in connection with the distribution of Institutional Shares,
(4) payments to broker-dealers who advise shareholders regarding the purchase,
sale, or retention of Institutional Shares, and (5) payments to banks, trust
companies, broker-dealers (other than Schroder Advisors) or other financial
organizations (collectively, "Service Organizations"). Payments to Service
Organizations are calculated by reference to the average daily net assets of
Institutional Shares held by shareholders who have a brokerage or other service
relationship with the Service Organization receiving such fees. The Fund will
not be liable for distribution expenditures made by Schroder Advisors in any
given year in excess of the maximum amount payable under the Plan in that year.
Costs or expenses in excess of the per annum limit may not be carried forward to
future years. Salary expenses of salesmen who are responsible for marketing
various mutual funds of the Trust may be allocated to such mutual funds,
including the Institutional Shares class of the Fund, that have adopted a plan
similar to that of the Fund on the basis of average daily net assets; travel
expenses may be allocated to, or divided among, the particular mutual funds of
the Trust for which they are incurred.
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Among the services provided by Service Organizations are answering customer
inquiries regarding the manner in which purchases, exchanges and redemptions of
shares of the Trust may be effected and other matters pertaining to the Trust's
services; providing necessary personnel and facilities to establish and maintain
shareholder accounts and records; assisting shareholders in arranging for
processing purchase, exchange and redemption transactions; arranging for the
wiring of funds; guaranteeing shareholder signatures in connection with
redemption orders and transfers and changes in shareholder-designated accounts;
integrating periodic statements with other customer transactions; and providing
such other related services as the shareholder may request.
Some Service Organizations may impose additional 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.
OTHER EXPENSES
The Fund bear all costs of their operations other than expenses specifically
assumed by Schroder Advisors or SCMI. The costs borne by the Fund include legal
and accounting expenses; Trustees' fees and expenses; insurance premiums,
custodian and transfer agent fees and expenses; expenses 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. Trust expenses directly attributed to the Fund are
charged to the Fund; other expenses are allocated proportionately among all the
portfolios of the Trust in relation to the net assets of each portfolio. See
"Management -- Fees and Expenses" in the SAI.
For the fiscal year ended October 31, 1995, Fund expenses (other than advisory
and administrative fees) as a percentage of average net assets for the Fund were
0.74%.
PORTFOLIO TRANSACTIONS
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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. 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 Wertheim & Company,
Incorporated and its affiliates (collectively, "Schroder Wertheim"), affiliates
of SCMI, to effect transactions of the Fund on certain foreign securities
exchanges. Because of the affiliation between SCMI and Schroder Wertheim, the
Fund's payment of commissions to Schroder Wertheim is subject to procedures
adopted by Core Trust's board of trustees 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 Wertheim and in no event will
Schroder Wertheim receive such brokerage in recognition of research services.
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 Trustees 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 expenses, it may do so in the future. These arrangements, whereby
brokers executing the Fund's portfolio transactions would agree to pay
designated expenses of the Fund 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. Brokerage commissions are not reflected as Fund expenses, however, in the
Fund's fee table, per share table, and financial statements, and such expenses
might therefore appear lower than actual expenses incurred.
CODE OF ETHICS
The Trust, SCMI, Schroder Advisors, and Schroders Incorporated have adopted
codes of ethics that contain 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 Report of the Advisory Group on Personal Investing of the Investment Company
Institute, of which the Trust is a member.
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INVESTMENT IN THE FUNDS
Investors may purchase Institutional Shares directly from the Trust.
Prospectuses, sales material and Account Applications can be obtained from the
Trust or through Forum Financial Corp., the Fund's Transfer Agent. See "Other
Information -- Shareholder Inquires." Investments may also be made through
Service Organizations that assist their customers in purchasing shares of the
Fund. Such Service Organizations may charge their customers a service fee for
processing orders to purchase or sell shares of the Fund. 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). The minimum
initial investment is $____, except that the minimum initial investment for an
Individual Retirement Account is $____. The minimum subsequent investment is
$____. 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:
Schroder U.S. Smaller Companies Fund
P.O. Box 446
Portland, Maine 04112
For initial purchases, the check must be accompanied by a completed Account
Application in proper form.
Investors and Service Organizations (on behalf of their customers) may transmit
purchase payments by Federal Reserve Bank wire directly to the Fund as follows:
Chase Manhattan Bank
New York, NY
ABA No.: 021000021
For Credit To: Forum Financial Corp.
Acct. No.: 910-2-718187
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Ref.: Schroder U.S. Smaller Companies 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. If the initial investment is by wire, an account number will be assigned
and an Account Application must be completed and mailed to the Fund. Wire orders
received prior to 4:00 p.m. (New York City Time) on a Fund Business Day will be
processed at the net asset value determined as of that day. Wire orders received
after 4:00 p.m. (New York City Time) will be processed at the net asset value
determined as of the next Fund Business Day.
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 that 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.
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. Before investing in the Fund
through one of these plans, investors should consult their tax advisors.
INDIVIDUAL RETIREMENT ACCOUNTS
The Fund may be used as an investment vehicle for an Individual Retirement
Account ("IRA"). An IRA plan naming The First National Bank of Boston as
custodian is available from the Trust or the Fund's Transfer Agent. The minimum
initial investment for an IRA is $____; the minimum subsequent investment is
$____. 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 effecting a rollover.
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REDEMPTION OF SHARES
Shares of the Fund are 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 may be made between 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 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 that are received after 4:00 p.m. (New York City Time) will be
processed at the net asset value determined 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 the Account Information telephone number on the cover page of this
Prospectus. A shareholder 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 the
Transfer Agent to confirm that such instructions are genuine. If such procedures
are followed, neither the Transfer Agent 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 the shareholder account
number. The letter must also be signed in exactly the same way the account is
registered (if there is more than one owner of the shares, all must sign) and,
in [CERTAIN CASES], signatures must be guaranteed by an institution that is
acceptable to the Fund's Transfer Agent. Such institutions include certain
banks, brokers, dealers (including municipal and government securities brokers
and dealers), credit unions and savings associations. (Notaries public are not
acceptable.) Further documentation, 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
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above address or by calling the Account Information telephone number appearing
on the cover of this Prospectus.
If shares to be redeemed are held in certificate form, the certificates must be
enclosed with the redemption request and the assignment form on the back of the
certificates, or an assignment separate from the certificates (but accompanied
by the certificates), must be signed by all owners in exactly the same way the
owners' names are written on the face of the certificates. Requirements for
signature guarantees and/or documentation of authority as described above could
also apply. For your protection, the Fund suggests that certificates be sent by
registered mail.
ADDITIONAL REDEMPTION INFORMATION. Checks for redemption proceeds will normally
be mailed within seven days, but no check will 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, (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 Fund's NAV not reasonably practicable.
If the Board determines that it would be detrimental to the best interest of the
remaining shareholders of the Fund to make payment wholly or partly in cash, the
Fund may redeem shares 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 account does not have a value of at least $2,000, unless the value of
the account fell below that amount solely as a result of market activity.
Shareholders will be notified that the value of the account
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is less than $2,000 and be allowed at least 30 days to make an additional
investment to increase the account balance to at least $2,000.
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, each day that the New York Stock Exchange is
open for trading, (a "Fund Business Day"), which excludes the following
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
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.
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. The Fund intends to distribute substantially all
of its net investment income and its net realized long term capital gain at
least annually and, therefore, intends not to be subject to Federal income tax.
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. You should include as gross income in
their Federal income tax returns both cash dividends received from the Fund and
also the amount that the Fund advises is your 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. You then would be entitled, subject to
certain limitations, to take a foreign tax credit against your 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
gain 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.
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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 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 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 Trust 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 (i) the payee
fails to furnish and to certify the payee's correct taxpayer identification
number or social security number, (ii) 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 (iii) 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.
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OTHER INFORMATION
CAPITALIZATION AND VOTING
The Trust was originally organized as a Maryland corporation on July 30, 1969
and on January 9, 1996 was reorganized as a Delaware business trust. The Trust
was formerly known as "Schroder Capital Funds, Inc." The Trust is registered as
an open-end management investment company under the Act and has authority to
issue an unlimited number of shares of beneficial interest. The Board may,
without shareholder approval, divide the authorized shares into an unlimited
number of separate portfolios or series (such as the Fund) and may divide
portfolios or series into classes of shares (such as the Institutional Shares
class), and the costs of doing so will be borne by the Trust. The Trust
currently consists of seven separate portfolios, each of which has separate
investment objectives and policies, and 13 classes of shares, two of which
represent interests in to the Fund.
Shares are fully paid and non-assessable, and have no preferences as to
conversion, exchange, dividends, retirement or other features. 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 Trustees can
elect 100% of the Trustees if they choose to do so. A shareholder is entitled to
one vote for each full share held (and a fractional vote for each fractional
share held) standing in his name on the books of the Trust. On matters requiring
shareholder approval, shareholders of the Trust are entitled to vote only with
respect to matters that affect the interest of the Fund or class of shares they
hold, except as otherwise required by applicable law.
There will normally be no meetings of shareholders to elect Trustees unless and
until such time as less than a majority of the Trustees holding office have been
elected by shareholders. However, the holders of not less than a majority of the
outstanding shares of the Trust may remove any person serving as a Trustee and
the Board will call a special meeting of shareholders to consider removal of one
or more Trustees if requested in writing to do so by the holders of not less
than 10% of the outstanding shares of the Trust.
From time to time, certain shareholders may own a large percentage of the shares
of the Fund. Accordingly, those shareholders may be able to greatly affect (if
not determine) the outcome of a shareholder vote.
REPORTS
The Trust 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.
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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. 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 past performance and does
not necessarily indicate future results. Performance information should be
considered in light of the Fund's investment objective and policies,
characteristics and quality of the Fund's investments, 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.
CUSTODIAN AND TRANSFER AGENT
The Chase Manhattan Bank, N.A. is custodian of the Fund's and of the Portfolio's
assets. Forum Financial Corp. serves as the Fund's Transfer and Dividend
Disbursing Agent.
SHAREHOLDER INQUIRIES
Inquiries about the Fund, including the Fund's past performance, should be
directed to:
Schroder U.S. Smaller Companies 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.
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CERTAIN SERVICE ORGANIZATION
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.
FUND STRUCTURE
The Fund has two classes of shares, Institutional Shares and Institutional
Shares. Advisor Shares are offered by a separate prospectus to individual
investors, in most cases through Service Organizations. Advisor Shares incur
more expenses than Institutional Shares. Except for certain differences, each
share of each class represents an undivided, proportionate interest in the Fund.
Each share of the Fund is entitled to participate equally in dividends and other
distributions and the proceeds of any liquidation of the Fund except that, due
to the differing expenses borne by the two classes, the amount of dividends and
other distribution will differ between the classes. Information about Advisor
Shares is available from the Fund by calling Forum Financial Corp. at
(207) 879-8903.
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INVESTMENT ADVISER
Schroder Capital Management International Inc.
787 Seventh Avenue
New York, New York 10019
ADMINISTRATOR & DISTRIBUTOR
Schroder Fund Advisors Inc.
787 Seventh Avenue
New York, New York 10019
SUB-ADMINISTRATOR
Forum Financial Services, Inc.
Two Portland Square
Portland, Maine 04101
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
INDEPENDENT ACCOUNTANTS
[ACCOUNTANT]L.L.P.
One Post Office Square
Boston, Massachusetts 02109
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Table of Contents
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . .
The Fund . . . . . . . . . . . . . . . . . . . . .
Investment Adviser . . . . . . . . . . . . . . . .
Administrative Services. . . . . . . . . . . . . .
Purchases and Redemptions. . . . . . . . . . . . .
Risk Considerations. . . . . . . . . . . . . . . .
Fee Table. . . . . . . . . . . . . . . . . . . . .
FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . .
INVESTMENT OBJECTIVE
AND POLICIES . . . . . . . . . . . . . . . . . .
Investment Objective . . . . . . . . . . . . . . .
Investment Policies. . . . . . . . . . . . . . . .
Risk Considerations. . . . . . . . . . . . . . . .
ADDITIONAL INVESTMENT POLICIES
Investment Restrictions. . . . . . . . . . . . . .
Investment Types . . . . . . . . . . . . . . . . .
MANAGEMENT OF THE FUND . . . . . . . . . . . . . .
Board of Trustees. . . . . . . . . . . . . . . . .
Investment Adviser and Portfolio Manager . . . . .
Administrative Services. . . . . . . . . . . . . .
Distribution Plan. . . . . . . . . . . . . . . . .
Other Expenses . . . . . . . . . . . . . . . . . .
Portfolio Transactions
Code of Ethics . . . . . . . . . . . . . . . . . .
INVESTMENT IN THE FUND . . . . . . . . . . . . . .
Purchase of Shares . . . . . . . . . . . . . . . .
Retirement Plans . . . . . . . . . . . . . . . . .
Individual Retirement Accounts . . . . . . . . . .
Redemption of Shares . . . . . . . . . . . . . . .
Net Asset Value. . . . . . . . . . . . . . . . . .
DIVIDENDS, DISTRIBUTIONS
AND TAXES. . . . . . . . . . . . . . . . . . . .
OTHER INFORMATION. . . . . . . . . . . . . . . . .
Capitalization and Voting. . . . . . . . . . . . .
Reports. . . . . . . . . . . . . . . . . . . . . .
Performance Information. . . . . . . . . . . . . .
Custodian and Transfer Agent . . . . . . . . . . .
Shareholder Inquires . . . . . . . . . . . . . . .
Certain Shareholder Servicing Organizations. . . .
Fund Structure . . . . . . . . . . . . . . . . . .
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SCHRODER U.S. SMALLER COMPANIES FUND
TWO PORTLAND SQUARE
PORTLAND, MAINE 04101
____________
ADVISOR SHARES
- --------------------------------------------------------------------------------
GENERAL INFORMATION: (207) 879-8903
ACCOUNT INFORMATION: (800) 344-8332
FAX: (207) 879-6206
- --------------------------------------------------------------------------------
SCHRODER CAPITAL MANAGEMENT INTERNATIONAL INC. - INVESTMENT ADVISER
SCHRODER FUND ADVISORS INC. - DISTRIBUTOR
This Prospectus offers Advisor Shares ("Advisor Shares") of Schroder U.S.
Smaller Companies Fund (the "Fund"), a separately-managed, diversified portfolio
of Schroder Capital Funds (Delaware) (the "Trust"), an open-end management
investment company currently consisting of seven separate portfolios, each of
which has different investment objectives and policies. The 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 a prospective Investor
should know before investing in the Fund. A Statement of Additional Information
(the "SAI") dated May 1, 1996 and as supplemented from time to time containing
additional 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 SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This Prospectus is dated January 9, 1996
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PROSPECTUS SUMMARY
THE FUND. The Fund is a separately-managed, diversified no-load portfolio of
the Trust, a Delaware business trust registered as an open-end management
investment company under the Investment Company Act of 1940 (the "Act"). The
Trust currently consists of seven separate portfolios, each of which has
separate investment objectives and policies. The Fund's primary 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 Fund's objective. The Fund
currently offers two separate classes of shares: Advisor Shares("Advisor
Shares") and Institutional Shares ("Institutional Shares"). Only Advisor Shares
are offered through this Prospectus and are sometimes referred to herein as the
"Shares."
INVESTMENT ADVISER. The Portfolio's investment adviser is Schroder Capital
Management International Inc. ("SCMI") "), 787 Seventh Avenue, New York, New
York 10019. The investment advisory fee paid to SCMI by the Portfolio is borne
indirectly by the Fund. See "Management of the Fund" -- Investment Adviser and
Portfolio Manager."
ADMINISTRATOR AND DISTRIBUTOR. Schroder Fund Advisors Inc. ("Schroder
Advisors"), formerly Schroder Capital Distributors, Inc., serves as
Administrator and Distributor of the Fund, and Forum Financial Services, Inc.
("Forum") is the Fund's Sub-Administrator.
PURCHASES AND REDEMPTIONS OF SHARES. Shares may be purchased or redeemed by
mail, by bank-wire and through an investor's broker-dealer or other financial
institution. The minimum initial investment is $____, except that the minimum
for an Individual Retirement Account is $____. The minimum subsequent
investment is $____. See "Investment in the Fund -- Purchase of Shares" and "--
Redemption of Shares."
DIVIDENDS AND DISTRIBUTIONS. The Fund declares and pays as a dividend
substantially all of its net investment income annually and distributes any net
realized long-term capital gain at least annually. Dividend and capital gain
distributions are reinvested automatically in additional shares of the Fund at
net asset value unless the shareholder has notified the Fund in a Purchase
Application or otherwise in writing of the shareholder's election to receive
distributions in cash. See "Dividends, Distributions and Taxes."
RISK CONSIDERATIONS. There can be no assurance that the Fund will achieve its
investment objective. The 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. The Fund's policy of investing in smaller companies entails
certain risks in addition to those normally associated with investments in
equity securities. See "Additional Investment Policies -- Risk Considerations."
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FEE TABLE
The table below shows the costs and expenses that an investor would incur
as a holder of Advisor Shares. There are no transaction expenses associated
with purchases or redemptions of Advisor Shares.
Annual Fund Operating Expenses (as a percentage of average net assets)(1),(2)
Management Fees . . . . . . . . . . . . . . . . . . . . . . 0.75%
(after estimated fee waivers)
12b-1 Fees. . . . . . . . . . . . . . . . . . . . . . . . . 0.50%
Other Expenses. . . . . . . . . . . . . . . . . . . . . . . 0.74%
(after expense reimbursements)
Total Fund Operating Expenses (3) . . . . . . . . . . . . . 1.99%
(1) This expense information is based on annualized estimated expenses for
the fiscal year ended October 31, 1996.
(2) Management Fees for the Fund reflect the fees paid by the Fund for
investment and administrative services. Management Fees for the Fund
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.
(3) Absent estimated fee waivers and expenses reimbursements, Management
Fees, Other Expenses and Total Operating Expenses would be 0.__%,
0.__%, and ____%, respectively.
EXAMPLE
Based on the expenses listed above, you would pay the following expenses on a
$1,000 investment, assuming (1) a 5% annual return, (2) redemption at the end of
each time period, and (3) reinvestment of all dividends and other distributions:
1 year.................. $__
3 years................. $__
5 years................. $__
10 years................. $__
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
OR RETURNS, AND ACTUAL EXPENSES OR RETURNS BE MORE OR LESS THAN THOSE SHOWN.
The 5% annual return is not a prediction of the Fund's return, but is required
by the Securities and Exchange Commission for purposes of these calculations.
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FINANCIAL HIGHLIGHTS
The following financial highlights are presented to assist investors in
evaluating the performance of the Fund for the periods shown. This information
is part of the Fund's financial statements and has been audited by [ACCOUNTANT]
L.L.P., independent accountants. The data in the table should be read in
conjunction with the financial statements, notes thereto and independent
accountants' report thereon contained in each Fund's annual report, which is
incorporated by reference into that Fund's 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.
<TABLE>
<CAPTION>
Year ended October 31
-------------------------
1995 1994 1993(a)
---- ---- ----
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR 11.81 10.99 10.00
INVESTMENT OPERATIONS
Net Investment Income (0.04) (0.07) (0.02)
Net Realized Income and Unrealized
Gain (Loss) on Investments 3.78 0.97 1.01
Total from Investment Operations 3.74 0.90 0.99
DISTRIBUTIONS
from Net Investment Income - -- --
from Realized Capital Gain (0.41) (0.08) --
from Capital Paid-In - -- --
Total Distributions (0.41) (0.08) --
NET ASSET VALUE, END OF YEAR $15.14 $11.81 $10.99
TOTAL RETURN 32.84% 8.26% 9.90%
RATIO/SUPPLEMENTARY DATA:
Net Assets, End of Year (Thousands) 15,287 13,324 12,489
Ratio of Expenses to Average Net Assets 1.49% 1.45% 2.03%(b)
Ratio of Net Investment
Income to Average Net Assets (0.30%) (0.58%) (0.99%)(b)
Portfolio Turnover Rate 92.68% 70.82% 12.58%(b)
</TABLE>
(a) The Fund commenced operations on August 6, 1993.
(b) Annualized
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INVESTMENT OBJECTIVES AND POLICIES
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.
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 Trustees without prior
shareholder approval. Unless otherwise indicated, all of the investment
policies of the Fund described below are also fundamental policies.
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 Act or any orders, rules or regulations thereunder
adopted by the Securities and Exchange Commission.
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
Trustees.
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" in the SAI.
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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.
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.
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. See "Investment
Policies" in the SAI for further information about all these securities.
ADDITIONAL INVESTMENT POLICIES AND RSIK CONSIDERATIONS
INVESTMENT RESTRICTIONS
The investment objective and all investment policies of each of the Fund that
are designated as fundamental may not be changed without approval of the holders
of a majority of the outstanding voting securities of the Fund. A majority of
outstanding voting securities means the lesser of (i) 67% of the shares present
or represented at a shareholder meeting at which the holders of more than 50% of
the outstanding shares are present or represented, or (ii) more than 50% of
outstanding shares. Unless otherwise indicated, all investment policies are
fundamental and may not be changed by the Board without approval by shareholders
of the Fund. For more information concerning shareholder voting, see "Other
Information -- Capitalization and Voting" and "Other Information -- Fund
Structure."
FUNDAMENTAL RESTRICTIONS
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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) Pledge, mortgage or hypothecate its assets to any extent greater than 10%
of the value of the total assets of the Fund;
(5) Deviate from the percentage requirements listed under "Investment Policies"
and "Additional Investment Policies"; or
(6) 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.
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.
INVESTMENT TYPES
REPURCHASE AGREEMENTS. The 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
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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.
ILLIQUID AND RESTRICTED SECURITIES. As a non-fundamental policy, the 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," which are securities that cannot be disposed of within seven days
at their then current value. 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 a portion of assets used
to cover such options as well as repurchase agreements maturing in more than
seven days. The 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 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. 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.
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
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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 Trust's Board of
Trustees.
COVERED CALLS AND HEDGING. While the 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. The 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.
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
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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.
PORTFOLIO TURNOVER. The Fund 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.
MANAGEMENT OF THE FUNDS
BOARD OF TRUSTEES
The business and affairs of the Funds are managed under the direction of the
Board of Trustees of the Trust. The Trustees 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 Trustees, as
well as the Trust's executive officers, may be found in each SAI under the
heading "Management - Trustees and Officers."
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 $90 billion.
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. For the fiscal year ended
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October 31, 1995, the total advisory fees paid by Schroder U.S. Smaller
Companies Fund to SCMI represented an annual effective rate of 0.50% of the
Fund's average daily net assets.
It is the Trust'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.
The investment management team of Fariba Talebi, a Vice President of the Trust
and a First Vice President of SCMI, and Ira Unschuld, a Vice President of the
Trust and of SCMI, with the assistance of an investment committee, is primarily
responsible for the day-to-day management of the 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 Trust has entered into an
Administrative Services Contract with Schroder Advisors. SCMI provides similar
administrative services for Schroder U.S. Equity Fund through its Investment
Advisory Contract with that Fund. The Trust and Schroder Advisors have entered
into Sub-Administration Agreements with Forum. Schroder Advisors 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 its Investment Advisory Contracts.
Schroder Advisors is a wholly-owned subsidiary of SCMI. For its administrative
services with respect to the Fund, Schroder Advisors 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 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, 1995, the Fund paid
Schroder Advisors fees representing an effective rate of 0.25% of the Fund's
average daily net assets. Payment for Forum's services is not a separate
expense of either Fund but is made by Schroder Advisors.
DISTRIBUTION PLAN
Schroder Advisors acts as distributor of the Fund's shares. Schroder Advisors
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 Trust on behalf of the Fund, which
is in the form of a reimbursement plan, each month the Trust pays directly or
reimburses Schroder Advisors, as distributor, for costs and expenses incurred in
connection with the distribution of Advisor Shares. Such payment or
reimbursement is subject to a limit on an annual basis to 0.50% per annum of the
Fund's average daily net assets attributable to Advisor Shares.
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Payment or reimbursement may be for various types of costs, including: (1)
advertising expenses, (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 Schroder Advisors, including salary, commissions, travel and
related expenses in connection with the distribution of Advisor Shares, (4)
payments to broker-dealers who advise shareholders regarding the purchase, sale,
or retention of Advisor Shares, and (5) payments to banks, trust companies,
broker-dealers (other than Schroder Advisors) or other financial organizations
(collectively, "Service Organizations"). Payments to Service Organizations are
calculated by reference to the average daily net assets of Advisor Shares held
by shareholders who have a brokerage or other service relationship with the
Service Organization receiving such fees. The Fund will not be liable for
distribution expenditures made by Schroder Advisors in any given year in excess
of the maximum amount payable under the Plan in that year. Costs or expenses in
excess of the per annum limit may not be carried forward to future years. Salary
expenses of salesmen who are responsible for marketing various mutual funds of
the Trust may be allocated to such mutual funds, including the Advisor Shares
class of the Fund, that have adopted a plan similar to that of the Fund on the
basis of average daily net assets; travel expenses may be allocated to, or
divided among, the particular mutual funds of the Trust for which they are
incurred.
Among the services provided by Service Organizations are answering customer
inquiries regarding the manner in which purchases, exchanges and redemptions of
shares of the Trust may be effected and other matters pertaining to the Trust's
services; providing necessary personnel and facilities to establish and
maintain shareholder accounts and records; assisting shareholders in arranging
for processing purchase, exchange and redemption transactions; arranging for the
wiring of funds; guaranteeing shareholder signatures in connection with
redemption orders and transfers and changes in shareholder-designated accounts;
integrating periodic statements with other customer transactions; and providing
such other related services as the shareholder may request.
Some Service Organizations may impose additional 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.
OTHER EXPENSES
The Fund bear all costs of their operations other than expenses specifically
assumed by Schroder Advisors or SCMI. The costs borne by the Fund include legal
and accounting expenses; Trustees' fees and expenses; insurance premiums,
custodian and transfer agent fees and expenses; expenses 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
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shareholders of reports, proxies and prospectuses. Trust expenses directly
attributed to the Fund are charged to the Fund; other expenses are allocated
proportionately among all the portfolios of the Trust in relation to the net
assets of each portfolio. See "Management _ Fees and Expenses" in the SAI.
For the fiscal year ended October 31, 1995, Fund expenses (other than advisory
and administrative fees) as a percentage of average net assets for the Fund were
0.74%.
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. 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 Wertheim & Company,
Incorporated and its affiliates (collectively, "Schroder Wertheim"), affiliates
of SCMI, to effect transactions of the Fund on certain foreign securities
exchanges. Because of the affiliation between SCMI and Schroder Wertheim, the
Fund's payment of commissions to Schroder Wertheim is subject to procedures
adopted by Core Trust's board of trustees 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 Wertheim and in no event will
Schroder Wertheim receive such brokerage in recognition of research services.
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 Trustees 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 expenses, it may do so in the future. These arrangements, whereby
brokers executing the Fund's portfolio transactions would agree to pay
designated expenses of the Fund 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. Brokerage commissions are not reflected as Fund expenses, however, in the
Fund's fee table, per share table, and financial statements, and such expenses
might therefore appear lower than actual expenses incurred.
CODE OF ETHICS
The Trust, SCMI, Schroder Advisors, and Schroders Incorporated have adopted
codes of ethics that contain a policy on personal securities transactions by
"access persons," including portfolio
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managers and investment analysts. That policy complies in all material respects
with the recommendations set forth in the Report of the Advisory Group on
Personal Investing of the Investment Company Institute, of which the Trust is a
member.
INVESTMENT IN THE FUNDS
Investors may purchase Advisor Shares directly from the Trust. Prospectuses,
sales material and Account Applications can be obtained from the Trust or
through Forum Financial Corp., the Fund's Transfer Agent. See "Other Information
- -- Shareholder Inquires." Investments may also be made through Service
Organizations that assist their customers in purchasing shares of the Fund. Such
Service Organizations may charge their customers a service fee for processing
orders to purchase or sell shares of the Fund. 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). The minimum
initial investment is $____, except that the minimum initial investment for an
Individual Retirement Account is $____. The minimum subsequent investment is
$____. 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:
Schroder U.S. Smaller Companies Fund
P.O. Box 446
Portland, Maine 04112
For initial purchases, the check must be accompanied by a completed Account
Application in proper form.
Investors and Service Organizations (on behalf of their customers) may transmit
purchase payments by Federal Reserve Bank wire directly to the Fund as follows:
Chase Manhattan Bank
New York, NY
ABA No.: 021000021
For Credit To: Forum Financial Corp.
Acct. No.: 910-2-718187
Ref.: Schroder U.S. Smaller Companies 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
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number of the person to be contacted in connection with the order. If the
initial investment is by wire, an account number will be assigned and an Account
Application must be completed and mailed to the Fund. Wire orders received prior
to 4:00 p.m. (New York City Time) on a Fund Business Day will be processed at
the net asset value determined as of that day. Wire orders received after 4:00
p.m. (New York City Time) will be processed at the net asset value determined as
of the next Fund Business Day.
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 that 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.
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. Before investing in the Fund
through one of these plans, investors should consult their tax advisors.
INDIVIDUAL RETIREMENT ACCOUNTS
The Fund may be used as an investment vehicle for an Individual Retirement
Account ("IRA"). An IRA plan naming The First National Bank of Boston as
custodian is available from the Trust or the Fund's Transfer Agent. The minimum
initial investment for an IRA is $____; the minimum subsequent investment is
$____. 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 effecting a rollover.
REDEMPTION OF SHARES
Shares of the Fund are 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 may be made between 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 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 that are received after 4:00 p.m. (New York City Time) will be
processed at the net asset value determined the next day that the New York Stock
Exchange is open for trading.
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BY TELEPHONE. Redemption requests may be made by telephoning the Transfer Agent
at the Account Information telephone number on the cover page of this
Prospectus. A shareholder 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 the
Transfer Agent to confirm that such instructions are genuine. If such procedures
are followed, neither the Transfer Agent 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 the shareholder account
number. The letter must also be signed in exactly the same way the account is
registered (if there is more than one owner of the shares, all must sign) and,
in [CERTAIN CASES], signatures must be guaranteed by an institution that is
acceptable to the Fund's Transfer Agent. Such institutions include certain
banks, brokers, dealers (including municipal and government securities brokers
and dealers), credit unions and savings associations. (Notaries public are not
acceptable.) Further documentation, 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.
If shares to be redeemed are held in certificate form, the certificates must be
enclosed with the redemption request and the assignment form on the back of the
certificates, or an assignment separate from the certificates (but accompanied
by the certificates), must be signed by all owners in exactly the same way the
owners' names are written on the face of the certificates. Requirements for
signature guarantees and/or documentation of authority as described above could
also apply. For your protection, the Fund suggests that certificates be sent by
registered mail.
ADDITIONAL REDEMPTION INFORMATION. Checks for redemption proceeds will normally
be mailed within seven days, but no check will 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, (ii)
the SEC has by order permitted
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such suspension, or (iii) an emergency, as defined by rules of the SEC, exists
making disposal of portfolio investments or determination of the Fund's NAV not
reasonably practicable.
If the Board determines that it would be detrimental to the best interest of the
remaining shareholders of the Fund to make payment wholly or partly in cash, the
Fund may redeem shares 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 account does not have a value of at least $2,000, unless the value of
the account fell below that amount solely as a result of market activity.
Shareholders will be notified that the value of the account is less than $2,000
and be allowed at least 30 days to make an additional investment to increase the
account balance to at least $2,000.
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, each day that the New York Stock Exchange is
open for trading, (a "Fund Business Day"), which excludes the following
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
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.
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. The Fund intends to distribute substantially all
of its net investment income and its net realized long term capital gain at
least annually and, therefore, intends not to be subject to Federal income tax.
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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. You should include as gross income in
their Federal income tax returns both cash dividends received from the Fund and
also the amount that the Fund advises is your 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. You then would be entitled, subject to
certain limitations, to take a foreign tax credit against your 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
gain 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 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 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 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 Trust 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 (i) the payee
fails to furnish and to certify the payee's correct taxpayer identification
number or social security number, (ii) 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 (iii) 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.
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OTHER INFORMATION
CAPITALIZATION AND VOTING
The Trust was originally organized as a Maryland corporation on July 30, 1969
and on January 9, 1996 was reorganized as a Delaware business trust. The Trust
was formerly known as "Schroder Capital Funds, Inc." The Trust is registered as
an open-end management investment company under the Act and has authority to
issue an unlimited number of shares of beneficial interest. The Board may,
without shareholder approval, divide the authorized shares into an unlimited
number of separate portfolios or series (such as the Fund) and may divide
portfolios or series into classes of shares (such as the Advisor Shares class),
and the costs of doing so will be borne by the Trust. The Trust currently
consists of seven separate portfolios, each of which has separate investment
objectives and policies, and 13 classes of shares, two of which represent
interests in to the Fund.
Shares are fully paid and non-assessable, and have no preferences as to
conversion, exchange, dividends, retirement or other features. 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 Trustees can
elect 100% of the Trustees if they choose to do so. A shareholder is entitled to
one vote for each full share held (and a fractional vote for each fractional
share held) standing in his name on the books of the Trust. On matters requiring
shareholder approval, shareholders of the Trust are entitled to vote only with
respect to matters that affect the interest of the Fund or class of shares they
hold, except as otherwise required by applicable law.
There will normally be no meetings of shareholders to elect Trustees unless and
until such time as less than a majority of the Trustees holding office have been
elected by shareholders. However, the holders of not less than a majority of the
outstanding shares of the Trust may remove any person serving as a Trustee and
the Board will call a special meeting of shareholders to consider removal of one
or more Trustees if requested in writing to do so by the holders of not less
than 10% of the outstanding shares of the Trust.
From time to time, certain shareholders may own a large percentage of the shares
of the Fund. Accordingly, those shareholders may be able to greatly affect (if
not determine) the outcome of a shareholder vote.
REPORTS
The Trust 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. Total return quotations
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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 past performance and does
not necessarily indicate future results. Performance information should be
considered in light of the Fund's investment objective and policies,
characteristics and quality of the Fund's investments, 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.
CUSTODIAN AND TRANSFER AGENT
The Chase Manhattan Bank, N.A. is custodian of the Fund's and of the Portfolio's
assets. Forum Financial Corp. serves as the Fund's Transfer and Dividend
Disbursing Agent.
SHAREHOLDER INQUIRIES
Inquiries about the Fund, including the Fund's past performance, should be
directed to:
Schroder U.S. Smaller Companies 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.
CERTAIN SERVICE ORGANIZATION
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.
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FUND STRUCTURE
OTHER CLASS OF SHARES. The Fund has two classes of shares, Advisor Shares and
Institutional Shares. Institutional Shares are offered by a separate prospectus
to corporations, institutions, and fiduciaries, including fiduciary, agency, and
custodial clients of bank trust departments, trust companies, and their
affiliates. Institutional Shares incur less expenses than Advisor Shares.
Except for certain differences, each share of each class represents an
undivided, proportionate interest in the Fund. Each share of the Fund is
entitled to participate equally in dividends and other distributions and the
proceeds of any liquidation of the Fund except that, due to the differing
expenses borne by the two classes, the amount of dividends and other
distribution will differ between the classes. Information about Institutional
Shares is available from the Fund by calling Forum Financial Corp. at
(207) 879-8903
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INVESTMENT ADVISER
Schroder Capital Management International Inc.
787 Seventh Avenue
New York, New York 10019
ADMINISTRATOR & DISTRIBUTOR
Schroder Fund Advisors Inc.
787 Seventh Avenue
New York, New York 10019
SUB-ADMINISTRATOR
Forum Financial Services, Inc.
Two Portland Square
Portland, Maine 04101
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
INDEPENDENT ACCOUNTANTS
[ACCOUNTANT]L.L.P.
One Post Office Square
Boston, Massachusetts 02109
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Table of Contents
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . .
The Fund . . . . . . . . . . . . . . . . . . . . .
Investment Adviser . . . . . . . . . . . . . . . .
Administrative Services. . . . . . . . . . . . . .
Purchases and Redemptions. . . . . . . . . . . . .
Risk Considerations. . . . . . . . . . . . . . . .
Fee Table. . . . . . . . . . . . . . . . . . . . .
FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . .
INVESTMENT OBJECTIVE
AND POLICIES . . . . . . . . . . . . . . . . . .
Investment Objective . . . . . . . . . . . . . . .
Investment Policies. . . . . . . . . . . . . . . .
Risk Considerations. . . . . . . . . . . . . . . .
ADDITIONAL INVESTMENT POLICIES
Investment Restrictions. . . . . . . . . . . . . .
Investment Types . . . . . . . . . . . . . . . . .
MANAGEMENT OF THE FUND . . . . . . . . . . . . . .
Board of Trustees. . . . . . . . . . . . . . . . .
Investment Adviser and Portfolio Manager . . . . .
Administrative Services. . . . . . . . . . . . . .
Distribution Plan. . . . . . . . . . . . . . . . .
Other Expenses . . . . . . . . . . . . . . . . . .
Portfolio Transactions
Code of Ethics . . . . . . . . . . . . . . . . . .
INVESTMENT IN THE FUND . . . . . . . . . . . . . .
Purchase of Shares . . . . . . . . . . . . . . . .
Retirement Plans . . . . . . . . . . . . . . . . .
Individual Retirement Accounts . . . . . . . . . .
Redemption of Shares . . . . . . . . . . . . . . .
Net Asset Value. . . . . . . . . . . . . . . . . .
DIVIDENDS, DISTRIBUTIONS
AND TAXES. . . . . . . . . . . . . . . . . . . .
OTHER INFORMATION. . . . . . . . . . . . . . . . .
Capitalization and Voting. . . . . . . . . . . . .
Reports. . . . . . . . . . . . . . . . . . . . . .
Performance Information. . . . . . . . . . . . . .
Custodian and Transfer Agent . . . . . . . . . . .
Shareholder Inquires . . . . . . . . . . . . . . .
Certain Shareholder Servicing Organizations. . . .
Fund Structure . . . . . . . . . . . . . . . . . .
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SCHRODER EMERGING MARKETS FUND
INSTITUTIONAL PORTFOLIO
TWO PORTLAND SQUARE
PORTLAND, MAINE 04101
____________
INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
GENERAL INFORMATION: (207) 879-8903
ACCOUNT INFORMATION: (800) 344-8332
FAX: (207) 879-6206
- --------------------------------------------------------------------------------
SCHRODER CAPITAL MANAGEMENT INTERNATIONAL INC. - INVESTMENT ADVISER
SCHRODER FUND ADVISORS INC. - ADMINISTRATOR AND DISTRIBUTOR
This Prospectus offers Institutional Shares ("Institutional Shares") of Schroder
Emerging Markets Fund Institutional Portfolio (the "Fund"), a separately-
managed, diversified portfolio of Schroder Capital Funds (Delaware) (the
"Trust"), an open-end management investment company currently consisting of
seven separate portfolios, each of which has different investment objectives and
policies. 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.
Investing in securities of emerging market issuers involves special risks in
addition to those associated with investments in securities of U.S. issuers.
See "The Fund -- Special Risk Considerations."
THE FUND CURRENTLY SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY HOLDING, AS ITS
ONLY INVESTMENT SECURITIES, THE SECURITIES OF SCHRODER EMERGING MARKETS FUND
INSTITUTIONAL PORTFOLIO (THE "PORTFOLIO"), A SEPARATE PORTFOLIO OF A REGISTERED
OPEN-END MANAGEMENT INVESTMENT COMPANY HAVING SUBSTANTIALLY THE SAME INVESTMENT
OBJECTIVE AND POLICIES AS THE FUND. SEE "OTHER INFORMATION - FUND STRUCTURE."
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 May 1, 1996 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.
_________________________
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.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
This Prospectus is dated May 1, 1996
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PROSPECTUS SUMMARY
THE FUND. The Fund is a separately managed, diversified portfolio of the Trust,
a Delaware business trust registered as an open-end management investment
company under the Investment Company Act of 1940 (the "Act").
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. Currently, the
Fund seeks to achieve its investment objective by investing exclusively in the
Portfolio, a series of Schroder Capital Funds ("Core Trust"), itself a
registered open-end management investment company. The Portfolio has
substantially the same investment objective and policies as the Fund.
Accordingly, the investment experience of the Fund will correspond directly with
the investment experience of the Portfolio. The Fund currently offers two
separate classes of shares: Institutional Shares ("Institutional Shares") and
Advisor Shares ("Advisor Shares"). Only Institutional Shares are offered
through this Prospectus and are sometimes referred to herein as the "Shares."
INVESTMENT ADVISER. The Portfolio's investment adviser is Schroder Capital
Management International Inc. ("SCMI") "), 787 Seventh Avenue, New York, New
York 10019. The investment advisory fee paid to SCMI by the Portfolio is borne
indirectly by the Fund. See "Management of the Fund" -- Investment Adviser and
Portfolio Manager."
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ADMINISTRATOR AND DISTRIBUTOR. Schroder Fund Advisors Inc. ("Schroder
Advisors"), formerly Schroder Capital Distributors, Inc., serves as
Administrator and Distributor of the Fund, and Forum Financial Services, Inc.
("Forum") is the Fund's Sub-Administrator.
PURCHASES AND REDEMPTIONS OF SHARES. Shares may be purchased or redeemed by
mail, by bank-wire and through an investor's broker-dealer or other financial
institution. The minimum initial investment is $____, except that the minimum
for an Individual Retirement Account is $____. The minimum subsequent
investment is $____. See "Investment in the Fund -- Purchase of Shares" and "--
Redemption of Shares." 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."
DIVIDENDS AND DISTRIBUTIONS. The Fund declares and pays as a dividend
substantially all of its net investment income annually and distributes any net
realized long-term capital gain at least annually. Dividend and capital gain
distributions are reinvested automatically in additional shares of the Fund at
net asset value unless the shareholder has notified the Fund in a Purchase
Application or otherwise in writing of the shareholder's election to receive
distributions in cash. See "Dividends, Distributions and Taxes."
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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. See "Additional Investment Policies and Risk Considerations." By
investing solely in the Portfolio, the Fund may achieve certain efficiencies and
economies of scale. Nonetheless, this investment could also have potential
adverse effects on the Fund. Investors in the Fund should consider these risks,
as described under "Other Information - Fund Structure."
FEE TABLE
The table below shows the costs and expenses that an investor would incur as a
holder of Institutional Shares, 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 (based on amount invested)(1) 0.50%
Redemption Charge (based on net asset value of shares redeemed)(1) 0.50%
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)(2),(3)
Management Fees(4) 0.36%
12b-1 Fees 0.00%
Other Expenses 1.24%
Total Fund Operating Expenses(5) 1.60%
________________
(1) 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. See
"Investment in the Fund -- Purchase of Shares" and "-- Redemption of Shares."
(2) This expense information is based on annualized estimated expenses for the
fiscal year ended October 31, 1996.
(3) Expenses include the Fund's pro rata portion of all operating expenses of
the Portfolio, which will be borne indirectly by Fund shareholders. The Trust's
Board of Trustees 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. Investment
advisory fees are those incurred by the Portfolio; as long as the Fund's assets
are invested in the Portfolio, the Fund pays no investment advisory fees
directly.
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(4) 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.
(5) Absent estimated fee waivers and expenses reimbursements, Management Fees,
Other Expenses and Total Operating Expenses are expected to be ___%,1.20% and
2.95%, respectively.
SCMI and Schroder Advisors 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. This
undertaking cannot be withdrawn except by a majority vote of the Independent
Trustees of the Trust. See "Management -- Other Expenses."
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EXAMPLE
Based on the expenses listed above, you would pay the following expenses on a
$1,000 investment, assuming (1) a 5% annual return, (2) redemption at the end of
each time period, and (3) reinvestment of all dividends and other distributions:
1 year. . . . . . . . . $__
3 years . . . . . . . . $__
5 years . . . . . . . . $__
10 years . . . . . . . . $__
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
OR RETURNS, AND ACTUAL EXPENSES OR RETURNS BE MORE OR LESS THAN THOSE SHOWN.
The 5% annual return is not a prediction of the Fund's return, but is required
by the Securities and Exchange Commission for purposes of these calculations.
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FINANCIAL HIGHLIGHTS
The following financial highlights are presented to assist investors in
evaluating the performance of the Funds for its first fiscal year. This
information is part of the Fund's financial statements and has been audited by
[ACCOUNTANT] L.L.P., independent accountants. The data in the table should be
read in conjunction with the financial statements, notes thereto and independent
accountants' report thereon contained in the Fund's annual report, which is
incorporated by reference into the Fund's SAI. Further information about the
Fund's performance also is contained in the annual report, which may be obtained
by shareholders free of charge upon request.
<TABLE>
<CAPTION>
March 31, 1995*
through
October 31, 1995
-----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF YEAR 10.00
------
INVESTMENT OPERATIONS
Net Investment Income 0.02
Net Realized and Unrealized
Gain on Investments 0.61
------
Total from Investment Operations 0.63
NET ASSET VALUE, END OF PERIOD $10.63
------
------
TOTAL RETURN 6.30%
------
------
RATIO/SUPPLEMENTARY DATA:
Net Assets, End of Year (Thousands) 18,423
Ratio of Expenses to Average Net Assets 1.58%(a)(b)
Ratio of Net Investment
Income to Average Net Assets 0.46%(a)
Portfolio Turnover Rate 44.10%
</TABLE>
* Commencement of operations
(a) Annualized
(b) During the period, various fees and expenses were reimbursed, respectively.
Had such waiver and reimbursement not occurred, the ratio of expenses to
average net assets would have been 2.45%(a)
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INVESTMENT OBJECTIVE AND POLICIES
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 is not a complete investment
program and investments in the securities of foreign issuers generally involve
risks in addition to risks associated with investments in the securities of U.S.
issuers. The Fund is not intended for investors whose objective is assured
income or preservation of capital. The Fund should be considered a means of
diversifying an investment portfolio and not in itself a balanced investment
program.
INVESTMENT OBJECTIVE AND THE PORTFOLIO
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. Current income
will be incidental to the objective of capital appreciation. This objective may
not be changed without shareholder approval. There is no assurance that the Fund
will achieve its investment objective.
The Fund currently seeks to achieve its investment objective by investing all of
its investment assets in the Portfolio, which has substantially the same
investment objective and policies. Therefore, although the following discusses
the investment policies of the Portfolio (and the responsibilities of Core
Trust's Board of Trustees), it applies equally to the Fund (and the Trust's
Board of Trustees). Additional information concerning the investment policies
of the Fund and Portfolio, including additional fundamental policies, is
contained below and in the SAI.
INVESTMENT POLICIES
Under normal conditions, the Portfolio invests 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 Portfolio
may invest up to 35% of its total assets in high risk debt securities that are
unrated or rated below investment grade.
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See "Risk Consideration -- Certain Risks of Debt Securities" below. Investments
in stock rights and warrants will not be considered for purposes of determining
compliance with the 65% of total assets requirements but are subject to the
limitations described below in the SAI under "Special Investment Methods --
Warrants and Stock Rights." Under certain circumstances, the Portfolio may
invest indirectly in emerging market securities by investing in other investment
companies or vehicles. See "Additional Investment Policies and Risk
Considerations -- 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 Portfolio's investment adviser will seek
out attractive investment opportunities in these countries.
"Emerging market" countries generally include all countries in the world other
than those included 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 Portfolio'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, and the United States of
America. The Portfolio will not necessarily seek to diversify investments on a
geographic basis within the emerging market category and, in this regard, the
Portfolio may invest more than 25% of its total assets in issuers located in any
one country. To the extent it invests in issuers located in one country or
area, the Portfolio is susceptible to factors adversely affecting that country
or area. See "Additional Investment Policies and Risk Considerations -- Risk
Considerations -- Geographic Concentration" below.
A security ordinarily will be considered to be an emerging market security when
(1) its issuer is organized under the laws of an emerging market country; (2)
the issuer's primary securities trading market is 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 Portfolio may acquire emerging
market securities that are denominated in currencies other than a currency of an
emerging market country. The Portfolio may consider investment companies to be
located in the country or countries in which they primarily make their portfolio
investments.
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In anticipation of the currency requirements of the Portfolio and to attempt to
protect against possible adverse movements in foreign exchange rates, the
Portfolio may enter into forward contracts to purchase or sell foreign
currencies. Although such contracts may reduce the risk of loss to the
Portfolio due to a decline in the value of the currency which is sold, they also
limit the gain that might result should the value of such currency rise.
ADDITIONAL INVESTMENT POLICIES AND RISK CONSIDERATIONS
INVESTMENT RESTRICTIONS
The investment objective and all investment policies of each of the Fund and the
Portfolio that are designated as fundamental may not be changed without approval
of the holders of a majority of the outstanding voting securities of the Fund or
the Portfolio, as applicable. A majority of outstanding voting securities means
the lesser of (i) 67% of the shares present or represented at a shareholder
meeting at which the holders of more than 50% of the outstanding shares are
present or represented, or (ii) more than 50% of outstanding shares. Unless
otherwise indicated, all investment policies are not fundamental and may be
changed by the Board without approval by shareholders of the Fund. Likewise,
nonfundamental investment policies of the Portfolio may be changed by the Board
of Trustees of Core Trust (the "Core Trust Board") without shareholder approval.
For more information concerning shareholder voting, see "Other Information --
Capitalization and Voting" and "Other Information -- Fund Structure."
FUNDAMENTAL POLICIES
The following investment restrictions of the Portfolio are fundamental policies:
(1) The Portfolio will not concentrate investments in any particular
industry; therefore, the Portfolio will not purchase the securities
of companies in any one industry if, thereafter, 25% or more of the
Portfolio's total assets would consist of securities of companies in
that industry. (This restriction does not apply to obligations issued or
guaranteed by the United States Government, its agencies or
instrumentalities.)
(2) The Portfolio will not issue senior securities, borrow money or
pledge its assets in excess of 10% of its total assets taken at
market value (including the amount borrowed) and then only from a bank as
a temporary measure for extraordinary or emergency purposes
including to meet redemptions or to settle securities transactions.
Usually only "leveraged" investment companies may borrow in excess
of 5% of their assets; however, the Portfolio will not borrow to increase
income but only as a temporary measure for extraordinary or
emergency purposes, including to meet redemptions or to settle securities
transactions which may otherwise require untimely
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<PAGE>
dispositions of Portfolio securities. The Portfolio will not purchase
securities while borrowings exceed 5% of total assets. (For the
purpose of this restriction, collateral arrangements with respect to
the writing of options, futures contracts, options on futures contracts,
and collateral arrangements with respect to initial and variation
margin are not 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) The Portfolio will not make investments for the purpose of
exercising control or management. Investments by the Portfolio in
wholly-owned investment entities created under the laws of certain
countries will not be deemed the making of investments for the
purpose of exercising control or management.
The percentage restrictions described above and in the SAI apply only at the
time of investment and require no action by the Portfolio as a result of
subsequent changes in value of the investments or the size of the Portfolio. A
supplementary list of investment restrictions is contained in the SAI.
INVESTMENT TYPES
EQUITY SECURITIES. The Portfolio'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
Portfolio 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 Portfolio may invest in certain
emerging market issuers exclusively or primarily through the purchase of
sponsored and unsponsored 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 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 Portfolio 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
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<PAGE>
relative interest rate levels, or in the creditworthiness of issuers. The
receipt of income from such debt securities is incidental to the Portfolio's
objective of long-term capital appreciation. Such income can be used, however,
to offset the operating expenses of the Portfolio. In accordance with its
investment objective, the Portfolio will not seek to benefit from anticipated
short-term fluctuations in currency exchange rates. The Portfolio may, from
time to time, invest in debt securities with relatively high risk and high
yields (as compared to other debt securities meeting the Portfolio's investment
criteria), notwithstanding that the Portfolio may not anticipate that such
securities will experience substantial capital appreciation. The debt
securities in which the Portfolio invests may be unrated, but will not be in
default at the time of purchase. The Portfolio 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 Portfolio 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 Portfolio 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
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
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<PAGE>
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.
TEMPORARY DEFENSIVE INVESTMENTS. For temporary defensive purposes, the Portfolio
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. Government securities, certificates of
deposit and bankers' acceptances of U.S. banks. The Portfolio may also hold
cash and time deposits in foreign banks denominated in any major foreign
currency. 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 Portfolio 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 Portfolio 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
Portfolio 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
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currencies in certain emerging markets or to securities of issuers domiciled or
principally engaged in business in certain emerging markets. This may limit the
Portfolio's ability to 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 Portfolio to hedge against a devaluation that is so
generally anticipated that the Portfolio 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.
ILLIQUID AND RESTRICTED SECURITIES. The Portfolio 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 Portfolio
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 Portfolio's
holdings of those securities may be illiquid. See "Investment Policies --
Illiquid and Restricted Securities" in the SAI for further details.
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<PAGE>
LOANS OF PORTFOLIO SECURITIES. The Portfolio 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
Portfolio's total assets. By so doing, the Portfolio 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 Portfolio could experience delays in
recovering the securities it lent. To the extent that, in the meantime, the
value of the securities the Portfolio lent has increased, the Portfolio, and
thus the Fund, could experience a loss.
The Portfolio 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 Portfolio
with respect to the loan is maintained by the Portfolio's custodian bank in a
segregated account. Any securities that the Portfolio 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 Portfolio will, if permitted by law,
dispose of such collateral except for such part thereof that is a security in
which the Portfolio is permitted to invest. During the time that the securities
are on loan, the borrower will pay the Portfolio any accrued income on those
securities, and the Portfolio 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 Portfolio 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 Portfolio will be subject to termination at the Portfolio's or
the borrower's option. The Portfolio 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 Core Trust Board. See "Loans of Portfolio
Securities" in the SAI for further information on securities loans.
OPTIONS AND HEDGING. While the Portfolio 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
Portfolio'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
Portfolio 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 Portfolio's total assets. All of the foregoing are referred to as
"Hedging Instruments."
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In general, the Portfolio may use Hedging Instruments: (1) to attempt to protect
against declines in the market value of the Portfolio's portfolio securities or
stock index futures, and the currencies in which they are denominated and thus
protect the Portfolio'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 Portfolio will not
use Hedging Instruments for speculation. The Hedging Instruments which the
Portfolio 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 Portfolio'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 Portfolio's ability to effectively hedge its investments in such
emerging market countries. The Hedging Instruments the Portfolio may use and
the risks associated with them are described in greater detail under "Options
and Hedging" in the SAI.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. From time
to time, in the ordinary course of business, the Portfolio 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 Portfolio'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 Portfolio's
assets committed to the purchase of securities on a when-issued, delayed
delivery or forward commitment basis may increase the volatility of the
Portfolio's net asset value.
WHEN, AS AND IF ISSUED SECURITIES. The Portfolio 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
Portfolio will have lost an investment opportunity. There is no overall limit
on the percentage of the Portfolio'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 Portfolio'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.
RISK CONSIDERATIONS
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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 rate, rate
of inflation, capital reinvestment, resource, self-sufficiency and balance of
payments positions. Certain foreign investments may also be subject to foreign
withholding or other governmental taxes that could reduce the return on these
investments.
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.
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 Portfolio 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 Portfolio's net assets will
comprise, in the aggregate, assets which are (i) subject to material legal
restrictions on repatriation or (ii) 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
Portfolio'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
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Portfolio 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 Portfolio will invest
heavily in non-U.S. currency denominated securities, changes in foreign currency
exchange rates will affect the value of the Portfolio's investments. A decline
in the value of currencies in which the Portfolio's investments are denominated
against the dollar will result in a corresponding decline in the dollar value of
the Portfolio'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 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 Portfolio, like 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 Portfolio 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 Portfolio's assets
may be invested in the securities of a limited number of issuers, the Portfolio
may be more susceptible to any single economic, political or regulatory
occurrence than a diversified investment company.
GEOGRAPHIC CONCENTRATION. The Portfolio may invest more than 25% of its total
assets in issuers located in any one country. To the extent it invests in
issuers located in one country, the Portfolio is 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 Portfolio's assets may fluctuate more widely than the value of
shares of a comparable Portfolio having a lesser degree of geographic
concentration.
CERTAIN RISKS OF DEBT SECURITIES.
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The Portfolio may invest without limitation in emerging market debt securities
rated investment grade. The Portfolio may also invest up to 35% of its total
assets in unrated debt securities or in debt securities rated below investment
grade. Debt securities rated Baa by Moody's Investor Services, Inc. ("Moody's")
are considered to have speculative characteristics. Below investment grade
securities, 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 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. The Portfolio 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 Portfolio 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 Portfolio and
consider their ability to assume the investment risks involved before making an
investment. The Portfolio is not authorized to purchase debt securities that
are in default, except for sovereign debt (discussed below) in which the
Portfolio 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 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 Portfolio 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 Portfolio's net asset
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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 Portfolio. If a call
were exercised by the issuer during a period of declining interest rates, the
Portfolio likely would have to replace such called securities with lower
yielding securities, thus decreasing the net investment income to the Portfolio
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 Portfolio may have difficulty in disposing
of particular issues when necessary to meet the Portfolio'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
Portfolio to obtain accurate market quotations for purposes of valuing the
Portfolio's investment 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 Portfolio may have to rely more heavily on
the judgment of the Board or SCMI under Board-approved guidelines 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 Portfolio's, and thus 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 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 Portfolio, 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.
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The sovereign debt instruments in which the Portfolio 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 Portfolio may have difficulty disposing of
certain sovereign debt obligations because there may be a thin trading market
for such securities. The Portfolio will not invest more than 5% of its total
assets in sovereign debt which is in default.
PORTFOLIO TURNOVER. The Portfolio 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 Portfolio to qualify as a regulated investment company for
federal income tax purposes and may cause shareholders of the Portfolio to
recognize gains for federal income tax purposes. See "Taxation" in the SAI.
NON-DIVERSIFICATION. The Portfolio, like the Fund, is classified as a "non-
diversified" investment company under the Act. In contrast to a "diversified"
company, a non-diversified investment company 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. However, so that the Fund may continue
to qualify as a "regulated investment company" under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), the Portfolio 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 Portfolio'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 Portfolio will not own more than 10% of
the outstanding voting securities of a single issuer. See "Dividends,
Distributions and Taxes."
MANAGEMENT OF THE FUND
The business and affairs of the Fund are managed under the direction of the
Board. The business and affairs of the Portfolio are managed under the
direction of the Core Trust Board. The Trustees of both Trust and Core Trust
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 Trustees and the respective executive officers of the
Trust and Core Trust's may be found in the SAI under the heading "Management --
Trustees and Officers." The Board and the Core Trust Board have separately
adopted written procedures reasonably appropriate to deal with potential
conflicts of interest.
INVESTMENT ADVISER AND PORTFOLIO MANAGER
The Fund currently invests all of its assets in the Portfolio.
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SCMI serves as investment adviser to the Portfolio pursuant to an Investment
Advisory Contract. Through its London, England branch SCMI manages the
investment and reinvestment of the assets the Portfolio and continuously
reviews, supervises and administers the Portfolio's investments. In this regard,
it is the responsibility of SCMI to make decisions relating to the Portfolio's
investments and to place purchase and sale orders regarding investments with
brokers or dealers selected by it in its discretion. For its services with
respect to the Portfolio, SCMI receives a monthly advisory fee equal on an
annual basis to 1.00% of the average daily net assets of the Portfolio, which
the Fund indirectly bears through investment in the Portfolio.
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 $90 billion.
The investment management team of John A. Troiana, a Vice President of the Trust
and Core Trust, and Laura Luckyn-Malone, a Trustee and President of the Trust
and Core Trust, with the assistance of an SCMI investment committee, is
primarily responsible for the day-to-day management of the Portfolio's
investment portfolio. Mr. Troiano, who has managed the Fund's portfolio since
________ 19__ and the Portfolio's investments since its inception, has been a
Senior Vice President of SCMI since ______ 1991. He has been employed by various
Schroder Group companies in the investment research and portfolio management
areas since 1988. Ms. Luckyn-Malone, who joined the Portfolio's investment
management team in ____________ 1995, has been a Senior Vice President and
Director of SCMI since February 1990.
The Fund began pursuing its investment objective through investment in the
Portfolio on November 1, 1995. The Fund may withdraw its 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. See "Other Information -- Fund
Structure." Accordingly, the Fund has retained SCMI as its investment adviser
to manage the Fund's assets in the event the Fund withdraws its investment.
SCMI does not receive an investment advisory fee with respect to the Fund so
long as the Fund remains completely invested in the Portfolio or any other
investment company. If the Fund resumes directly investing in portfolio
securities, the Fund will pay SCMI a monthly advisory fee equal on an annual
basis to 1.00% of the Fund's average daily net
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assets.
The investment advisory contract between SCMI and the Trust with respect to the
Fund is the same in all material respects as the Portfolio's Investment Advisory
Contract except as to the parties, the circumstances under which fees will be
paid and the jurisdiction whose laws govern the agreement. For the fiscal year
ended October 31, 1995, the Fund paid SCMI an advisory fee equal to ___% of its
average daily net assets.
ADMINISTRATIVE SERVICES
On behalf of the Fund, the Trust has entered into an Administrative Services
Contract with Schroder Advisors, 787 Seventh Avenue, New York, New York 10019.
Schroder Advisors is a wholly-owned subsidiary of SCMI. The Trust and Schroder
Advisors have entered into a Sub-Administration Agreement with Forum. Pursuant
to these agreements, Schroder Advisors 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. For these services, the Fund pays
Schroder Advisors a monthly fee at the annual rate of 0.10% of the average daily
net assets of the Fund. Payment for Forum's services is made by Schroder
Advisors and is not a separate expense of the Fund. Schroder Advisors and Forum
provide similar services to the Portfolio, for which Schroder Advisors is
separately compensated at an annual rate of 0.15 % of the average daily net
assets of the Portfolio, a portion of which Forum receives for its services with
respect to the Portfolio. For the fiscal year ended October 31, 1995, the Fund
paid Schroder Advisors a fee equal to ___% of its average daily net assets.
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DISTRIBUTION PLAN
Schroder Advisors acts as distributor of the Fund's shares. Schroder Advisors
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 Trust on behalf of the Fund, which
is in the form of a reimbursement plan, the Trust is authorized generally to pay
directly or reimburses Schroder Advisors, as distributor, for costs and expenses
incurred in connection with the distribution of Institutional Shares. Such
payment or reimbursement is subject to a limit on an annual basis to 0.50% per
annum of the Fund's average daily net assets attributable to Institutional
Shares. The Fund will make no payment under the Distribution Plan with respect
to Institutional Shares until the Board further so authorizes.
Payment or reimbursement may be for various types of costs, including: (1)
advertising expenses, (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 Schroder Advisors, including salary, commissions, travel and
related expenses in connection with the distribution of Institutional Shares,
(4) payments to broker-dealers who advise shareholders regarding the purchase,
sale, or retention of Institutional Shares, and (5) payments to banks, trust
companies, broker-dealers (other than Schroder Advisors) or other financial
organizations (collectively, "Service Organizations"). Payments to Service
Organizations are calculated by reference to the average daily net assets of
Institutional Shares held by shareholders who have a brokerage or other service
relationship with the Service Organization receiving such fees. The Fund will
not be liable for distribution expenditures made by Schroder Advisors in any
given year in excess of the maximum amount payable under the Plan in that year.
Costs or expenses in excess of the per annum limit may not be carried forward to
future years. Salary expenses of salesmen who are responsible for marketing
various mutual funds of the Trust may be allocated to such mutual funds,
including the Institutional Shares class of the Fund, that have adopted a plan
similar to that of the Fund on the basis of average daily net assets; travel
expenses may be allocated to, or divided among, the particular mutual funds of
the Trust for which they are incurred.
Among the services provided by Service Organizations are answering customer
inquiries regarding the manner in which purchases, exchanges and redemptions of
shares of the Trust may be effected and other matters pertaining to the Trust's
services; providing necessary personnel and facilities to establish and maintain
shareholder accounts and records; assisting shareholders
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in arranging for processing purchase, exchange and redemption transactions;
arranging for the wiring of funds; guaranteeing shareholder signatures in
connection with redemption orders and transfers and changes in shareholder-
designated accounts; integrating periodic statements with other customer
transactions; and providing such other related services as the shareholder may
request.
Some Service Organizations may impose additional 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.
OTHER EXPENSES
The Fund bears all costs of its operations other than expenses specifically
assumed by Schroder Advisors or SCMI, including those expenses it indirectly
bears through its investment in the Portfolio. The costs borne by the Fund
include legal and accounting expenses; Trustees' fees and expenses; insurance
premiums, custodian and transfer agent fees and expenses; brokerage fees and
expenses; expenses of registering and qualifying the Fund's shares for sale with
the SEC and with various state securities commissions; expenses of obtaining
quotations on portfolio securities and pricing of the Fund's shares; 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. Trust
expenses directly attributed to the Fund are charged to the Fund; other expenses
are allocated proportionately among all the portfolios of the Trust in relation
to the net assets of each portfolio. See "Management - Fees and Expenses" in
the SAI.
SCMI and Schroder Advisors have voluntarily undertaken to assume certain
expenses of the Fund (or waive their respective fees), which applies to fees and
expenses paid by the Fund as well as fees and expenses paid by the Portfolio.
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This undertaking is designed to place a maximum limit on Fund expenses
(excluding taxes, interest, brokerage commissions and other portfolio
transaction expenses and extraordinary expenses) of 1.49% of the average daily
net assets of the Fund attributable to Institutional Shares. This expense
limitation cannot be modified or withdrawn except by a majority vote of the
Trustees of the Trust who are not affiliated with SCMI or Schroder Advisors
("Independent Trustees"). 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 Advisors, the remaining one-fifth; provided,
however, that neither SCMI nor Schroder Advisors will be required to make any
reimbursements or waive any fees in excess of the fees payable to them by the
Fund on a monthly basis for their respective advisory and administrative
services.
PORTFOLIO TRANSACTIONS
The Investment Advisory Contract authorizes and directs SCMI to place orders for
the purchase and sale of the Portfolio's investments with brokers and dealers
selected by SCMI in its discretion and to seek "best execution" of such
portfolio transactions. The Portfolio 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 Portfolio will seek to achieve the best net results in
effecting such transactions.
Subject to the Portfolio's policy of obtaining the best price consistent with
quality of execution on transactions, the Portfolio may employ (a) Schroder
Wertheim & Company, Incorporated ("Schroder Wertheim"), an affiliate of SCMI, to
effect transactions of the Portfolio on the New York Stock Exchange only and (b)
Schroder Securities Limited and its affiliates (collective, "Schroder
Securities"), affiliates of SCMI, to effect transactions of the Portfolio on
certain foreign securities exchanges. Because of the affiliations between SCMI
and Schroder Wertheim and Schroder Securities, respectively, the Portfolio's
payment of commissions to them is subject to procedures adopted by Core Trust's
board of trustees to provide that such commissions will not exceed the usual and
customary brokerage commissions. No specific portion of the Portfolio's
brokerage will be directed to Schroder Wertheim or Schroder Securities and in no
event will either of them receive such brokerage in recognition of research
services.
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 Trustees 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 Portfolio does not currently engage in directed brokerage
arrangements to pay expenses, it may do so in the future. These arrangements,
whereby brokers executing the Portfolio's portfolio transactions would agree to
pay designated expenses of the Portfolio if
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brokerage commissions generated by the Portfolio reached certain levels, might
reduce these expenses. As anticipated, these arrangements would not materially
increase the brokerage commissions paid by the Portfolio. Brokerage commissions
are not reflected as Fund expenses, however, in the Fund's fee table, per share
table, and financial statements, and such expenses might therefore appear lower
than actual expenses incurred.
CODE OF ETHICS
The Trust, Core Trust, SCMI, Schroder Advisors, and Schroders Incorporated have
adopted codes of ethics that contain 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 Report of the Advisory Group on Personal Investing of the
Investment Company Institute, of which the Trust is a member.
INVESTMENT IN THE FUND
PURCHASE OF SHARES
Investors may purchase Institutional Shares directly from the Trust.
Prospectuses, sales material and Account Applications can be obtained from the
Trust or through Forum Financial Corp., the Fund's Transfer Agent. See "Other
Information -- Shareholder Inquires." Investments may also be made through
Service Organizations that assist their customers in purchasing shares of the
Fund. Such Service Organizations may charge their customers a service fee for
processing orders to purchase or sell shares of the Fund. 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). The minimum
initial investment is $____, except that the minimum initial investment for an
Individual Retirement Account is $____. The minimum subsequent investment is
$____. 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:
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Schroder Emerging Markets Fund Institutional Portfolio
P.O. Box 446
Portland, Maine 04112
For initial purchases, the check must be accompanied by a completed Account
Application in proper form.
Investors and Service Organizations (on behalf of their customers) may transmit
purchase payments by Federal Reserve Bank wire directly to the Fund as follows:
Chase Manhattan Bank
New York, NY
ABA No.: 021000021
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, amount to be wired, name of the wiring bank and
name and telephone number of the person to be contacted in connection with the
order. If the initial investment is by wire, an account number will be assigned
and an Account Application must be completed and mailed to the Fund. Wire orders
received prior to 4:00 p.m. (New York City Time) on a Fund Business Day will be
processed at the net asset value determined as of that day. Wire orders received
after 4:00 p.m. (New York City Time) will be processed at the net asset value
determined as of the next Fund Business Day.
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 that 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.
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PURCHASE CHARGE. Purchases of Fund shares are subject to a purchase charge of
0.50% of the amount invested. 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 Advisors 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.
Applications forms and further information about these plans, including
applicable fees, are available upon request. Before investing in the Fund
through one of these plans, investors should consult their tax advisors.
INDIVIDUAL RETIREMENT ACCOUNTS
The Fund may be used as an investment vehicle for an Individual Retirement
Account ("IRA"). An IRA plan naming The First National Bank of Boston as
custodian is available from the Trust or the Fund's Transfer Agent. The minimum
initial investment for an IRA is $____; the minimum subsequent investment is
$____. 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 effecting a rollover.
REDEMPTION OF SHARES
Shares of the Fund are 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 may be made between 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 that are received prior to 4:00 p.m. (New York City Time)
will be processed at the net asset value determined as
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of that day. Redemption requests that are received after 4:00 p.m. (New York
City Time) will be processed at the net asset value determined 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 the Account Information telephone number on the cover page of this
Prospectus. A shareholder 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 the
Transfer Agent to confirm that such instructions are genuine. If such procedures
are followed, neither the Transfer Agent 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 the shareholder account
number. The letter must also be signed in exactly the same way the account is
registered (if there is more than one owner of the shares, all must sign) and,
in [CERTAIN CASES], signatures must be guaranteed by an institution that is
acceptable to the Fund's Transfer Agent. Such institutions include certain
banks, brokers, dealers (including municipal and government securities brokers
and dealers), credit unions and savings associations. (Notaries public are not
acceptable.) Further documentation, 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.
If shares to be redeemed are held in certificate form, the certificates must be
enclosed with the redemption request and the assignment form on the back of the
certificates, or an assignment separate from the certificates (but accompanied
by the certificates), must be signed by
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all owners in exactly the same way the owners' names are written on the face of
the certificates. Requirements for signature guarantees and/or documentation of
authority as described above could also apply. For your protection, the Fund
suggests that certificates be sent by registered mail.
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 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 Advisors 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.
ADDITIONAL REDEMPTION INFORMATION. Checks for redemption proceeds will normally
be mailed within seven days, but no check will be mailed until all checks in
payment for the purchase of the
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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, (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 Fund's NAV not reasonably practicable.
If the Board determines that it would be detrimental to the best interest of the
remaining shareholders of the Fund to make payment wholly or partly in cash, the
Fund may redeem shares 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 account does not have a value of at least $2,000, unless the value of
the account fell below that amount solely as a result of market activity.
Shareholders will be notified that the value of the account is less than $2,000
and be allowed at least 30 days to make an additional investment to increase the
account balance to at least $2,000.
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, each day that the New York Stock Exchange is
open for trading, (a "Fund Business Day"), which excludes the following
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.
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Portfolio securities listed on recognized stock exchanges are valued at the last
reported sale price, prior to the time when the securities are valued, on the
exchange on which the securities are principally traded. Listed securities
traded on recognized stock exchanges where last sale prices are not available
are valued at 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 Core Trust
Board.
Trading in securities on European and Far Eastern 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 using
methods approved by Core Trust's Board of Trustees.
All assets and liabilities of the Portfolio denominated in foreign currencies
are valued in U.S. dollars based on the exchange rate last quoted by a major
bank prior to the time when the net asset value of the Fund is calculated.
DIVIDENDS, DISTRIBUTIONS AND TAXES
THE FUND
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. The Fund intends to distribute substantially all
of its net investment income and its net realized long term capital gain at
least annually and, therefore, intends not to be subject to Federal income tax.
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
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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 Trust 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, 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
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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 Trust 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 Trust 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 Federal, foreign, state and local tax
consequences of ownership of shares of the Fund in their particular
circumstances.
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THE PORTFOLIO
The Portfolio is not required to pay Federal income taxes on its net investment
income and capital gain, as it is treated as a partnership for Federal income
tax purposes. All interest, dividends and gains and losses of the Portfolio are
deemed to have been "passed through" to the Fund in proportion to its holdings
of the Portfolio, regardless of whether such interest, dividends or gains have
been distributed by the Portfolio or losses have been realized by the Portfolio.
Investment income received by the Fund from sources within foreign countries may
be subject to foreign income or other taxes. The Fund intends to elect, if
eligible to do so, to permit its shareholders to take a credit (or a deduction)
for foreign income and other taxes paid by the Portfolio. Shareholders of the
Fund will be notified of their share of those taxes and will be required to
include that amount as income. In that event, shareholders may be entitled to
claim a credit or deduction for those taxes.
OTHER INFORMATION
CAPITALIZATION AND VOTING
The Trust was originally organized as a Maryland corporation on July 30, 1969
and on January 9, 1996 was reorganized as a Delaware business trust. The Trust
was formerly known as "Schroder Capital Funds, Inc." The Trust is registered as
an open-end management investment company under the Act and has authority to
issue an unlimited number of shares of beneficial interest. The Board may,
without shareholder approval, divide the authorized shares into an unlimited
number of separate portfolios or series (such as the Fund) and may divide
portfolios or series into classes of shares (such as the Institutional Shares
class), and the costs of doing so will be borne by the Trust. The Trust
currently consists of seven separate portfolios, each of which has separate
investment objectives and policies, and 13 classes of shares, two of which
represent interests in to the Fund.
Shares are fully paid and non-assessable, and have no preferences as to
conversion, exchange, dividends, retirement or other features. 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 Trustees can
elect 100% of the Trustees if they choose to do so. A shareholder is entitled to
one vote for each full share held (and a fractional vote for each fractional
share held) standing in his name on the books of the Trust. On matters requiring
shareholder approval, shareholders of the Trust are entitled to vote only with
respect to matters that affect the interest of the Fund or class of shares they
hold, except as otherwise required by applicable law.
There will normally be no meetings of shareholders to elect Trustees unless and
until such time as less than a majority of the Trustees holding office have been
elected by shareholders. However, the holders of not less than a majority of the
outstanding shares of the Trust may remove any person serving as a Trustee and
the Board will call a special meeting of shareholders to consider removal of one
or more Trustees if requested in writing to do so by the holders of not less
than 10% of the outstanding shares of the Trust.
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As of December 22, 1995, the Robert Wood Johnson Foundation may be deemed to
control the Fund for purposes of the Act. From time to time, certain
shareholders may own a large percentage of the shares of a Fund. Accordingly,
those shareholders may be able to greatly affect (if not determine) the outcome
of a shareholder vote.
REPORTS
The Trust 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. 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 past performance and does
not necessarily indicate future results. Performance information should be
considered in light of the Fund's investment objective and policies,
characteristics and quality of the Fund's investments, 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.
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CUSTODIAN AND TRANSFER AGENT
The Chase Manhattan Bank, N.A. is custodian of the Fund's and of the Portfolio's
assets. Forum Financial Corp. serves as the Fund's Transfer and Dividend
Disbursing Agent.
SHAREHOLDER INQUIRIES
Inquiries about the Fund, including the Fund's 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.
CERTAIN SERVICE ORGANIZATION
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.
FUND STRUCTURE
OTHER CLASSES OF SHARES. The Fund has two classes of shares, Institutional
Shares and Advisor Shares. Advisor Shares are offered by a separate prospectus
to individual investors, in most cases through Service Organizations. Advisor
Shares incur more expenses than Institutional Shares. Except for certain
differences, each share of each class represents an undivided, proportionate
interest in the Fund. Each share of the Fund is entitled to participate equally
in dividends and other distributions and the proceeds of any liquidation of the
Fund except that, due to the differing expenses borne by the two classes, the
amount of dividends and other distribution will differ between the classes.
Information about Advisor Shares is available from the Fund by calling Forum
Financial Corp. at (207) 879-8903.
THE PORTFOLIO. The Fund seeks to achieve its investment objective by investing
all of its investable assets in the Portfolio, which has substantially the same
investment objective and
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policies as the Fund. Accordingly, the Portfolio directly acquires its own
securities and the Fund acquires an indirect interest in those securities. The
Portfolio is a separate series of Core Trust, a business trust organized under
the laws of the State of Delaware in September 1995. Core Trust is registered
under the Act as an open-end management investment company and currently has
four separate portfolios. The assets of the Portfolio, a diversified portfolio,
belong only to, and the liabilities of the Portfolio are borne solely by, the
Portfolio and no other portfolio of Core Trust.
The investment objective and fundamental investment policies of the Fund and the
Portfolio can be changed only with shareholder approval. See "Investment
Objective," "Investment Policies," and "Management of the Fund" for a complete
description of the Portfolio's investment objective, policies, restrictions,
management, and expenses.
The Fund's investment in the Portfolio is in the form of a non-transferable
beneficial interest. As of the date of this Prospectus, the Fund is the only
institutional Investor that has invested all of its assets in the Portfolio. The
Portfolio may permit other investment companies or institutional investors to
invest in it. All investors in the Portfolio will invest on the same terms and
conditions as the Fund and will pay a proportionate share of the Portfolio's
expenses.
The Portfolio normally will not hold meetings of investors except as required by
the Act. Each Investor in the Portfolio will be entitled to vote in proportion
to its relative beneficial interest in the Portfolio. On most issues subject to
a vote of investors, as required by the Act and other applicable law, 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; indeed, if other
investors hold a majority interest in the Portfolio, they could hold have voting
control of the Portfolio.
The Portfolio will not sell its shares directly to members of the general
public. Another Investor in the Portfolio, such as an investment company, that
might sell its shares to members of the general public would not be required to
sell its shares at the same public offering price as the Fund, and could have
different advisory and other fees and expenses than the Fund. Therefore, Fund
shareholders may have different returns than shareholders in another investment
company that invests exclusively in the Portfolio. There is currently no such
other investment company that offers its shares to members of the general
public. Information regarding any such funds in the future will be available
from Core Trust by calling Forum Financial Corp. at (207) 879-8903.
CERTAIN RISKS OF INVESTING IN THE PORTFOLIO. The Fund's investment in the
Portfolio may be affected by the actions of other large investors in the
Portfolio, if any. For example, if the Portfolio had a large Investor other than
the Fund that redeemed its interest in the Portfolio, the Portfolio's remaining
investors (including the Fund) might, as a result, experience higher pro rata
operating expenses, thereby producing lower returns.
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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 there were other
investors in the Portfolio with power to, and who did by a vote of the
shareholders of all investors (including the Fund), change the investment
objective or policies of the Portfolio in a manner not acceptable to the Board.
A withdrawal could result in a distribution in kind of portfolio securities (as
opposed to a cash distribution) by the Portfolio. That distribution could result
in a less diversified portfolio of investments for the Fund and could affect
adversely the liquidity of the Fund's portfolio. If the Fund decided to convert
those securities to cash, it usually would incur brokerage fees or other
transaction costs. If the Fund withdrew its investment from the Portfolio, the
Board would consider what action might be taken, including the management of the
Fund's assets in accordance with its investment objective and policies by the
Adviser and Schroder, the Fund's investment adviser and subadviser,
respectively, or the investment of all of the Fund's investable assets in
another pooled investment entity having substantially the same investment
objective as the Fund. The inability of the Fund to find a suitable replacement
investment, in the event the Board decided not to permit the Adviser and
Schroder to manage the Fund's assets, could have a significant impact on
shareholders of the Fund.
Each Investor in the Portfolio, including the Fund, will be liable for all
obligations of the Portfolio, but not any other portfolio of Core Trust. The
risk to an Investor in the Portfolio of incurring financial loss on account of
such liability, however, would be limited to circumstances in which the
Portfolio was unable to meet its obligations. Upon liquidation of the Portfolio,
investors would be entitled to share pro rata in the net assets of the Portfolio
available for distribution to investors.
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SCHRODER EMERGING MARKETS FUND
INSTITUTIONAL PORTFOLIO
INVESTMENT ADVISER
Schroder Capital Management International Inc.
787 Seventh Avenue
New York, New York 10019
ADMINISTRATOR & DISTRIBUTOR
Schroder Fund Advisors Inc.
787 Seventh Avenue
New York, New York 10019
SUB-ADMINISTRATOR
Forum Financial Services, Inc.
Two Portland Square
Portland, Maine 04101
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
INDEPENDENT ACCOUNTANTS
[ACCOUNTANT] L.L.P.
One Post Office Square
Boston, Massachusetts 02109
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TABLE OF CONTENTS
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . .
The Fund . . . . . . . . . . . . . . . . . . . . .
Investment Advise. . . . . . . . . . . . . . . . .
Administrative Services. . . . . . . . . . . . . .
Purchases and Redemptions. . . . . . . . . . . . .
Risk Considerations. . . . . . . . . . . . . . . .
Fee Table. . . . . . . . . . . . . . . . . . . . .
FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . .
INVESTMENT OBJECTIVE . . . . . . . . . . . . . . .
AND POLICIES . . . . . . . . . . . . . . . . . .
Investment Objective . . . . . . . . . . . . . . .
Investment Policies. . . . . . . . . . . . . . . .
ADDITIONAL INVESTMENT POLICIES . . . . . . . . . .
RISK CONSIDERATIONS. . . . . . . . . . . . . . .
Investment Restrictions. . . . . . . . . . . . . .
Investment Types . . . . . . . . . . . . . . . . .
Risk Considerations. . . . . . . . . . . . . . . .
MANAGEMENT OF THE FUND . . . . . . . . . . . . . .
Board of Trustees. . . . . . . . . . . . . . . . .
Investment Adviser and Portfolio Manager . . . . .
Administrative Services. . . . . . . . . . . . . .
Distribution Plan. . . . . . . . . . . . . . . . .
Other Expenses . . . . . . . . . . . . . . . . . .
Portfolio Transactions . . . . . . . . . . . . . .
Code of Ethics . . . . . . . . . . . . . . . . . .
INVESTMENT IN THE FUND . . . . . . . . . . . . . .
Purchase of Shares . . . . . . . . . . . . . . . .
Retirement Plans . . . . . . . . . . . . . . . . .
Individual Retirement Accounts . . . . . . . . . .
Redemption of Shares . . . . . . . . . . . . . . .
Net Asset Value. . . . . . . . . . . . . . . . . .
DIVIDENDS, DISTRIBUTIONS . . . . . . . . . . . . .
AND TAXES. . . . . . . . . . . . . . . . . . . .
The Fund . . . . . . . . . . . . . . . . . . . . .
The Portfolio. . . . . . . . . . . . . . . . . . .
OTHER INFORMATION. . . . . . . . . . . . . . . . .
Capitalization and Voting. . . . . . . . . . . . .
Reports. . . . . . . . . . . . . . . . . . . . . .
Performance Information. . . . . . . . . . . . . .
Custodian and Transfer Agent . . . . . . . . . . .
Shareholder Inquires . . . . . . . . . . . . . . .
Certain Shareholder Servicing Organizations. . . .
Fund Structure . . . . . . . . . . . . . . . . . .
PROSPECTUS
MAY 1, 1996
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SCHRODER EMERGING MARKETS FUND
INSTITUTIONAL PORTFOLIO
TWO PORTLAND SQUARE
PORTLAND, MAINE 04101
____________
ADVISOR SHARES
- --------------------------------------------------------------------------------
GENERAL INFORMATION: (207) 879-8903
ACCOUNT INFORMATION: (800) 344-8332
FAX: (207) 879-6206
- --------------------------------------------------------------------------------
SCHRODER CAPITAL MANAGEMENT INTERNATIONAL INC. - INVESTMENT ADVISER
SCHRODER FUND ADVISORS INC. - ADMINISTRATOR AND DISTRIBUTOR
This Prospectus offers Advisor Shares ("Advisor Shares") of Schroder Emerging
Markets Fund Institutional Portfolio (the "Fund"), a separately-managed,
diversified portfolio of Schroder Capital Funds (Delaware) (the "Trust"), an
open-end management investment company currently consisting of seven separate
portfolios, each of which has different investment objectives and policies. 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. Investing in securities
of emerging market issuers involves special risks in addition to those
associated with investments in securities of U.S. issuers. See "The Fund --
Special Risk Considerations."
THE FUND CURRENTLY SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY HOLDING, AS ITS
ONLY INVESTMENT SECURITIES, THE SECURITIES OF SCHRODER EMERGING MARKETS FUND
INSTITUTIONAL PORTFOLIO (THE "PORTFOLIO"), A SEPARATE PORTFOLIO OF A REGISTERED
OPEN-END MANAGEMENT INVESTMENT COMPANY HAVING SUBSTANTIALLY THE SAME INVESTMENT
OBJECTIVE AND POLICIES AS THE FUND. SEE "OTHER INFORMATION - FUND STRUCTURE."
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 May 1, 1996 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.
_________________________
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.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
This Prospectus is dated May 1, 1996
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PROSPECTUS SUMMARY
THE FUND. The Fund is a separately managed, diversified portfolio of the Trust,
a Delaware business trust registered as an open-end management investment
company under the Investment Company Act of 1940 (the "Act"). 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. Currently, the Fund seeks to
achieve its investment objective by investing exclusively in the Portfolio, a
series of Schroder Capital Funds ("Core Trust"), itself a registered open-end
management investment company. The Portfolio has substantially the same
investment objective and policies as the Fund. Accordingly, the investment
experience of the Fund will correspond directly with the investment experience
of the Portfolio. The Fund currently offers two separate classes of shares:
Advisor Shares("Advisor Shares") and Institutional Shares ("Institutional
Shares"). Only Advisor Shares are offered through this Prospectus and are
sometimes referred to herein as the "Shares."
INVESTMENT ADVISER. The Portfolio's investment adviser is Schroder Capital
Management International Inc. ("SCMI") "), 787 Seventh Avenue, New York, New
York 10019. The investment advisory fee paid to SCMI by the Portfolio is borne
indirectly by the Fund. See "Management of the Fund" -- Investment Adviser and
Portfolio Manager."
ADMINISTRATOR AND DISTRIBUTOR. Schroder Fund Advisors Inc. ("Schroder
Advisors"), formerly Schroder Capital Distributors, Inc., serves as
Administrator and Distributor of the Fund, and Forum Financial Services, Inc.
("Forum") is the Fund's Sub-Administrator.
PURCHASES AND REDEMPTIONS OF SHARES. Shares may be purchased or redeemed by
mail, by bank-wire and through an investor's broker-dealer or other financial
institution. The minimum initial investment is $____, except that the minimum
for an Individual Retirement Account is $____. The minimum subsequent
investment is $____. See "Investment in the Fund -- Purchase of Shares" and "--
Redemption of Shares." 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."
DIVIDENDS AND DISTRIBUTIONS. The Fund declares and pays as a dividend
substantially all of its net investment income annually and distributes any net
realized long-term capital gain at least annually. Dividend and capital gain
distributions are reinvested automatically in additional shares of the Fund at
net asset value unless the shareholder has notified the Fund in a Purchase
Application or otherwise in writing of the shareholder's election to receive
distributions in cash. See "Dividends, Distributions and Taxes."
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
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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. See "Additional Investment Policies and Risk
Considerations." By investing solely in the Portfolio, the Fund may achieve
certain efficiencies and economies of scale. Nonetheless, this investment could
also have potential adverse effects on the Fund. Investors in the Fund should
consider these risks, as described under "Other Information - Fund Structure."
FEE TABLE
The table below shows the costs and expenses that an investor would incur as a
holder of Advisor Shares, 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 (based on amount invested)(1) . . . . . . . 0.50%
Redemption Charge (based on net asset value of
shares redeemed) (1). . . . . . . . . . . . . . . . . . . 0.50%
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)(2),(3)
Management Fees(4) 0.36%
12b-1 Fees 0.50%
Other Expenses 1.24%
Total Fund Operating Expenses(5) 2.10%
________________
(1) 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. See "Investment in the Fund -- Purchase of Shares"
and "-- Redemption of Shares."
(2) This expense information is based on annualized estimated expenses for
the fiscal year ended October 31, 1996.
(3) Expenses include the Fund's pro rata portion of all operating expenses
of the Portfolio, which will be borne indirectly by Fund shareholders.
The Trust's Board of Trustees 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. Investment advisory fees are those incurred
by the Portfolio; as long as the Fund's assets are invested in the
Portfolio, the Fund pays no investment advisory fees directly.
(4) 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
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primarily in U.S. securities, they are not necessarily higher than
those charged to funds with investment objectives similar to those of
the Fund.
(5) Absent estimated fee waivers and expenses reimbursements, Management
Fees, Other Expenses and Total Operating Expenses are expected to be
___%,1.20% and 2.95%, respectively.
SCMI and Schroder Advisors 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 [2.10%] of the Fund's average daily net assets. This
undertaking cannot be withdrawn except by a majority vote of the Independent
Trustees of the Trust. See "Management -- Other Expenses."
EXAMPLE
Based on the expenses listed above, you would pay the following expenses on a
$1,000 investment, assuming (1) a 5% annual return, (2) redemption at the end of
each time period, and (3) reinvestment of all dividends and other distributions:
1 year . . . . . . . . . . . . . . $__
3 years. . . . . . . . . . . . . . $__
5 years. . . . . . . . . . . . . . $__
10 years . . . . . . . . . . . . . $__
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RETURNS, AND ACTUAL EXPENSES OR RETURNS BE MORE OR LESS THAN THOSE
SHOWN. The 5% annual return is not a prediction of the Fund's return, but is
required by the Securities and Exchange Commission for purposes of these
calculations.
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FINANCIAL HIGHLIGHTS
The following financial highlights are presented to assist investors in
evaluating the performance of the Funds for its first fiscal year. This
information is part of the Fund's financial statements and has been audited by
[ACCOUNTANT] L.L.P., independent accountants. The data in the table should be
read in conjunction with the financial statements, notes thereto and independent
accountants' report thereon contained in the Fund's annual report, which is
incorporated by reference into the Fund's SAI. Further information about the
Fund's performance also is contained in the annual report, which may be obtained
by shareholders free of charge upon request.
March 31, 1995*
through
October 31, 1995
----------------
NET ASSET VALUE, BEGINNING OF YEAR 10.00
-----
INVESTMENT OPERATIONS
Net Investment Income 0.02
Net Realized and Unrealized
Gain on Investments 0.61
----
Total from Investment Operations 0.63
NET ASSET VALUE, END OF PERIOD $10.63
------
------
TOTAL RETURN 6.30%
-----
-----
RATIO/SUPPLEMENTARY DATA:
Net Assets, End of Year (Thousands) 18,423
Ratio of Expenses to Average Net Assets 1.58%(a)(b)
Ratio of Net Investment
Income to Average Net Assets 0.46%(a)
Portfolio Turnover Rate 44.10%
* Commencement of operations
(a) Annualized
(b) During the period, various fees and expenses were reimbursed, respectively.
Had such waiver and reimbursement not occurred, the ratio of expenses to
average net assets would have been 2.45%(a)
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INVESTMENT OBJECTIVE AND POLICIES
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 is not a complete investment
program and investments in the securities of foreign issuers generally involve
risks in addition to risks associated with investments in the securities of U.S.
issuers. The Fund is not intended for investors whose objective is assured
income or preservation of capital. The Fund should be considered a means of
diversifying an investment portfolio and not in itself a balanced investment
program.
INVESTMENT OBJECTIVE AND THE PORTFOLIO
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. Current income
will be incidental to the objective of capital appreciation. This objective may
not be changed without shareholder approval. There is no assurance that the Fund
will achieve its investment objective.
The Fund currently seeks to achieve its investment objective by investing all of
its investment assets in the Portfolio, which has substantially the same
investment objective and policies. Therefore, although the following discusses
the investment policies of the Portfolio (and the responsibilities of Core
Trust's Board of Trustees), it applies equally to the Fund (and the Trust's
Board of Trustees). Additional information concerning the investment policies
of the Fund and Portfolio, including additional fundamental policies, is
contained below and in the SAI.
INVESTMENT POLICIES
Under normal conditions, the Portfolio invests 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 Portfolio
may invest up to 35% of its total assets in high risk debt securities that are
unrated or rated below investment grade. See "Risk Consideration -- Certain
Risks of Debt Securities" below. Investments in stock rights and warrants will
not be considered for purposes of determining compliance with the 65% of total
assets requirements but are subject to the limitations described below in the
SAI under "Special Investment Methods -- Warrants and Stock Rights." Under
certain circumstances, the Portfolio may invest indirectly in emerging market
securities by investing in other investment companies or vehicles. See
"Additional Investment Policies and Risk Considerations -- 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
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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 Portfolio's investment adviser
will seek out attractive investment opportunities in these countries.
"Emerging market" countries generally include all countries in the world other
than those included 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 Portfolio'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, and the United States of
America. The Portfolio will not necessarily seek to diversify investments on a
geographic basis within the emerging market category and, in this regard, the
Portfolio may invest more than 25% of its total assets in issuers located in any
one country. To the extent it invests in issuers located in one country or
area, the Portfolio is susceptible to factors adversely affecting that country
or area. See "Additional Investment Policies and Risk Considerations -- Risk
Considerations -- Geographic Concentration" below.
A security ordinarily will be considered to be an emerging market security when
(1) its issuer is organized under the laws of an emerging market country; (2)
the issuer's primary securities trading market is 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 Portfolio may acquire emerging
market securities that are denominated in currencies other than a currency of an
emerging market country. The Portfolio 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 Portfolio and to attempt to
protect against possible adverse movements in foreign exchange rates, the
Portfolio may enter into forward contracts to purchase or sell foreign
currencies. Although such contracts may reduce the risk of loss to the
Portfolio due to a decline in the value of the currency which is sold, they also
limit the gain that might result should the value of such currency rise.
ADDITIONAL INVESTMENT POLICIES AND RISK CONSIDERATIONS
INVESTMENT RESTRICTIONS
The investment objective and all investment policies of each of the Fund and the
Portfolio that are designated as fundamental may not be changed without approval
of the holders of a majority of the outstanding voting securities of the Fund or
the Portfolio, as applicable. A majority of outstanding voting securities means
the lesser of (i) 67% of the shares present or represented at a
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shareholder meeting at which the holders of more than 50% of the outstanding
shares are present or represented, or (ii) more than 50% of outstanding shares.
Unless otherwise indicated, all investment policies are not fundamental and may
be changed by the Board without approval by shareholders of the Fund. Likewise,
nonfundamental investment policies of the Portfolio may be changed by the Board
of Trustees of Core Trust (the "Core Trust Board") without shareholder approval.
For more information concerning shareholder voting, see "Other Information --
Capitalization and Voting" and "Other Information -- Fund Structure."
FUNDAMENTAL POLICIES
The following investment restrictions of the Portfolio are fundamental policies:
(1) The Portfolio will not concentrate investments in any particular
industry; therefore, the Portfolio will not purchase the securities of
companies in any one industry if, thereafter, 25% or more of the
Portfolio's total assets would consist of securities of companies in that
industry. (This restriction does not apply to obligations issued or
guaranteed by the United States Government, its agencies or
instrumentalities.)
(2) The Portfolio will not issue senior securities, borrow money or pledge
its assets in excess of 10% of its total assets taken at market value
(including the amount borrowed) and then only from a bank as a temporary
measure for extraordinary or emergency purposes including to meet
redemptions or to settle securities transactions. Usually only "leveraged"
investment companies may borrow in excess of 5% of their assets; however,
the Portfolio will not borrow to increase income but only as a temporary
measure for extraordinary or emergency purposes, including to meet
redemptions or to settle securities transactions which may otherwise
require untimely dispositions of Portfolio securities. The Portfolio will
not purchase securities while borrowings exceed 5% of total assets. (For
the purpose of this restriction, collateral arrangements with respect to
the writing of options, futures contracts, options on futures contracts,
and collateral arrangements with respect to initial and variation margin
are not 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) The Portfolio will not make investments for the purpose of exercising
control or management. Investments by the Portfolio in wholly-owned
investment entities created under the laws of certain countries will not be
deemed the making of investments for the purpose of exercising control or
management.
The percentage restrictions described above and in the SAI apply only at the
time of investment and require no action by the Portfolio as a result of
subsequent changes in value of the investments or the size of the Portfolio. A
supplementary list of investment restrictions is contained in the SAI.
INVESTMENT TYPES
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EQUITY SECURITIES. The Portfolio'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
Portfolio 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 Portfolio may invest in certain
emerging market issuers exclusively or primarily through the purchase of
sponsored and unsponsored 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 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 Portfolio 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 Portfolio's objective of long-term capital
appreciation. Such income can be used, however, to offset the operating
expenses of the Portfolio. In accordance with its investment objective, the
Portfolio will not seek to benefit from anticipated short-term fluctuations in
currency exchange rates. The Portfolio may, from time to time, invest in debt
securities with relatively high risk and high yields (as compared to other debt
securities meeting the Portfolio's investment criteria), notwithstanding that
the Portfolio may not anticipate that such securities will experience
substantial capital appreciation. The debt securities in which the Portfolio
invests may be unrated, but will not be in default at the time of purchase. The
Portfolio 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 Portfolio 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 Portfolio 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
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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
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.
TEMPORARY DEFENSIVE INVESTMENTS. For temporary defensive purposes, the Portfolio
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. Government securities, certificates of
deposit and bankers' acceptances of U.S. banks. The Portfolio may also hold
cash and time deposits in foreign banks denominated in any major foreign
currency. 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 Portfolio 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 Portfolio 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
Portfolio 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
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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 Portfolio'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 Portfolio to hedge against a
devaluation that is so generally anticipated that the Portfolio 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.
ILLIQUID AND RESTRICTED SECURITIES. The Portfolio 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 Portfolio
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 Portfolio'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 Portfolio 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
Portfolio's total assets. By so doing, the Portfolio 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 Portfolio could experience delays in
recovering the securities it lent. To the extent that, in the meantime, the
value of the securities the Portfolio lent has increased, the Portfolio, and
thus the Fund, could experience a loss.
The Portfolio 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 Portfolio
with respect to the loan is maintained by the Portfolio's custodian bank in a
segregated account. Any securities that the Portfolio 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 Portfolio will, if permitted by law,
dispose of such collateral except for such part thereof that is a security in
which the Portfolio is permitted to invest. During the time that the securities
are on loan, the borrower will pay the Portfolio any accrued income on
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those securities, and the Portfolio 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 Portfolio 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 Portfolio will be subject to termination at the
Portfolio's or the borrower's option. The Portfolio 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 Core Trust Board. See
"Loans of Portfolio Securities" in the SAI for further information on securities
loans.
OPTIONS AND HEDGING. While the Portfolio 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
Portfolio'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
Portfolio 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 Portfolio's total assets. All of the foregoing are referred to as
"Hedging Instruments."
In general, the Portfolio may use Hedging Instruments: (1) to attempt to protect
against declines in the market value of the Portfolio's portfolio securities or
stock index futures, and the currencies in which they are denominated and thus
protect the Portfolio'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 Portfolio will not
use Hedging Instruments for speculation. The Hedging Instruments which the
Portfolio 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 Portfolio'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 Portfolio's ability to effectively hedge its investments in such
emerging market countries. The Hedging Instruments
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the Portfolio may use and the risks associated with them are described in
greater detail under "Options and Hedging" in the SAI.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. From time
to time, in the ordinary course of business, the Portfolio 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 Portfolio'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 Portfolio's
assets committed to the purchase of securities on a when-issued, delayed
delivery or forward commitment basis may increase the volatility of the
Portfolio's net asset value.
WHEN, AS AND IF ISSUED SECURITIES. The Portfolio 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
Portfolio will have lost an investment opportunity. There is no overall limit
on the percentage of the Portfolio'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 Portfolio'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.
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 rate, rate
of inflation, capital reinvestment, resource, self-sufficiency and balance of
payments positions. Certain foreign investments may also be subject to foreign
withholding or other governmental taxes that could reduce the return on these
investments.
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
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advantageous rights (with regard to convertibility, for example) than classes
available to domiciliaries of the country.
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 Portfolio 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 Portfolio's net assets will
comprise, in the aggregate, assets which are (i) subject to material legal
restrictions on repatriation or (ii) 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
Portfolio'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 Portfolio 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 Portfolio will invest
heavily in non-U.S. currency denominated securities, changes in foreign currency
exchange rates will affect the value of the Portfolio's investments. A decline
in the value of currencies in which the Portfolio's investments are denominated
against the dollar will result in a corresponding decline in the dollar value of
the Portfolio'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
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market countries require, for companies that keep accounting records in the
local currency, that certain assets and liabilities be restated on the company's
balance sheet in order to express items in terms of 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 Portfolio, like 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 Portfolio 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 Portfolio's assets
may be invested in the securities of a limited number of issuers, the Portfolio
may be more susceptible to any single economic, political or regulatory
occurrence than a diversified investment company.
GEOGRAPHIC CONCENTRATION. The Portfolio may invest more than 25% of its total
assets in issuers located in any one country. To the extent it invests in
issuers located in one country, the Portfolio is 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 Portfolio's assets may fluctuate more widely than the value of
shares of a comparable Portfolio having a lesser degree of geographic
concentration.
CERTAIN RISKS OF DEBT SECURITIES. The Portfolio may invest without limitation
in emerging market debt securities rated investment grade. The Portfolio may
also invest up to 35% of its total assets in unrated debt securities or in debt
securities rated below investment grade. Debt securities rated Baa by Moody's
Investor Services, Inc. ("Moody's") are considered to have speculative
characteristics. Below investment grade securities, 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 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. The
Portfolio 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 Portfolio 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 Portfolio and
consider their ability to assume the investment risks involved before making an
investment. The Portfolio is not authorized to purchase debt securities that
are in default, except for sovereign debt (discussed below) in which the
Portfolio may invest no more than 5% of its total assets while such sovereign
debt securities are in default.
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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 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 Portfolio 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 Portfolio'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 Portfolio. If a call
were exercised by the issuer during a period of declining interest rates, the
Portfolio likely would have to replace such called securities with lower
yielding securities, thus decreasing the net investment income to the Portfolio
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 Portfolio may have difficulty in disposing
of particular issues when necessary to meet the Portfolio'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
Portfolio to obtain accurate market quotations for purposes of valuing the
Portfolio's investment 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 Portfolio may have to rely more heavily on
the judgment of the Board or SCMI under Board-approved guidelines 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 Portfolio's, and thus the Fund's, net asset
value.
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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 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 Portfolio, 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 Portfolio 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 Portfolio may have difficulty disposing of
certain sovereign debt obligations because there may be a thin trading market
for such securities. The Portfolio will not invest more than 5% of its total
assets in sovereign debt which is in default.
PORTFOLIO TURNOVER. The Portfolio 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 Portfolio to qualify as a regulated investment company for
federal income tax purposes and may cause shareholders of the Portfolio to
recognize gains for federal income tax purposes. See "Taxation" in the SAI.
NON-DIVERSIFICATION. The Portfolio, like the Fund, is classified as a "non-
diversified" investment company under the Act. In contrast to a "diversified"
company, a non-diversified investment company 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. However, so that the Fund may continue
to qualify as a "regulated investment company" under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), the Portfolio 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 Portfolio'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 Portfolio will not own more than 10% of
the outstanding voting securities of a single issuer. See "Dividends,
Distributions and Taxes."
MANAGEMENT OF THE FUND
The business and affairs of the Fund are managed under the direction of the
Board. The business and affairs of the Portfolio are managed under the
direction of the Core Trust Board. The
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Trustees of both Trust and Core Trust 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 Trustees and the
respective executive officers of the Trust and Core Trust's may be found in the
SAI under the heading "Management -- Trustees and Officers." The Board and the
Core Trust Board have separately adopted written procedures reasonably
appropriate to deal with potential conflicts of interest.
INVESTMENT ADVISER AND PORTFOLIO MANAGER
The Fund currently invests all of its assets in the Portfolio. SCMI serves as
investment adviser to the Portfolio pursuant to an Investment Advisory Contract.
Through its London, England branch SCMI manages the investment and reinvestment
of the assets the Portfolio and continuously reviews, supervises and administers
the Portfolio's investments. In this regard, it is the responsibility of SCMI to
make decisions relating to the Portfolio's investments and to place purchase and
sale orders regarding investments with brokers or dealers selected by it in its
discretion. For its services with respect to the Portfolio, SCMI receives a
monthly advisory fee equal on an annual basis to 1.00% of the average daily net
assets of the Portfolio, which the Fund indirectly bears through investment in
the Portfolio.
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 $90 billion.
The investment management team of John A. Troiana, a Vice President of the Trust
and Core Trust, and Laura Luckyn-Malone, a Trustee and President of the Trust
and Core Trust, with the assistance of an SCMI investment committee, is
primarily responsible for the day-to-day management of the Portfolio's
investment portfolio. Mr. Troiano, who has managed the Fund's portfolio since
________ 19__ and the Portfolio's investments since its inception, has been a
Senior Vice President of SCMI since ______ 1991. He has been employed by various
Schroder Group companies in the investment research and portfolio management
areas since 1988. Ms. Luckyn-Malone, who joined the Portfolio's investment
management team in ____________ 1995, has been a Senior Vice President and
Director of SCMI since February 1990.
The Fund began pursuing its investment objective through investment in the
Portfolio on November 1, 1995. The Fund may withdraw its 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. See "Other Information -- Fund
Structure." Accordingly, the Fund has retained SCMI as its investment adviser
to manage the Fund's assets in the event the Fund withdraws its investment.
SCMI does not receive an investment advisory fee with respect to the Fund so
long as the Fund remains completely invested in the Portfolio or any other
investment company. If the Fund resumes directly investing in portfolio
securities, the Fund will pay SCMI a monthly advisory fee equal on an annual
basis to 1.00% of the Fund's average daily net assets. The investment
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advisory contract between SCMI and the Trust with respect to the Fund is the
same in all material respects as the Portfolio's Investment Advisory Contract
except as to the parties, , the circumstances under which fees will be paid and
the jurisdiction whose laws govern the agreement. For the fiscal year ended
October 31, 1995, the Fund paid SCMI an advisory fee equal to ___% of its
average daily net assets.
ADMINISTRATIVE SERVICES
On behalf of the Fund, the Trust has entered into an Administrative Services
Contract with Schroder Advisors, 787 Seventh Avenue, New York, New York 10019.
Schroder Advisors is a wholly-owned subsidiary of SCMI. The Trust and Schroder
Advisors have entered into a Sub-Administration Agreement with Forum. Pursuant
to these agreements, Schroder Advisors 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. For these services, the Fund pays
Schroder Advisors a monthly fee at the annual rate of 0.10% of the average daily
net assets of the Fund. Payment for Forum's services is made by Schroder
Advisors and is not a separate expense of the Fund. Schroder Advisors and Forum
provide similar services to the Portfolio, for which Schroder Advisors is
separately compensated at an annual rate of 0.15 % of the average daily net
assets of the Portfolio, a portion of which Forum receives for its services with
respect to the Portfolio. For the fiscal year ended October 31, 1995, the Fund
paid Schroder Advisors a fee equal to ___% of its average daily net assets.
DISTRIBUTION PLAN
Schroder Advisors acts as distributor of the Fund's shares. Schroder Advisors
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 Trust on behalf of the Fund, which
is in the form of a reimbursement plan, each month the Trust pays directly or
reimburses Schroder Advisors, as distributor, for costs and expenses incurred in
connection with the distribution of Advisor Shares. Such payment or
reimbursement is subject to a limit on an annual basis to 0.50% per annum of the
Fund's average daily net assets attributable to Advisor Shares.
Payment or reimbursement may be for various types of costs, including: (1)
advertising expenses, (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 Schroder Advisors, including salary, commissions, travel and
related expenses in connection with the distribution of Advisor Shares, (4)
payments to broker-dealers who advise shareholders regarding the purchase, sale,
or retention of Advisor Shares, and (5) payments to banks, trust companies,
broker-dealers (other than Schroder Advisors) or other financial organizations
(collectively, "Service Organizations"). Payments to Service Organizations are
calculated by reference to the average daily net assets of Advisor Shares held
by shareholders who have a brokerage or other service relationship with the
Service Organization receiving such fees. The Fund will not be liable for
distribution expenditures made by Schroder Advisors in any given year in excess
of the maximum amount
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payable under the Plan in that year. Costs or expenses in excess of the per
annum limit may not be carried forward to future years. Salary expenses of
salesmen who are responsible for marketing various mutual funds of the Trust may
be allocated to such mutual funds, including the Advisor Shares class of the
Fund, that have adopted a plan similar to that of the Fund on the basis of
average daily net assets; travel expenses may be allocated to, or divided among,
the particular mutual funds of the Trust for which they are incurred.
Among the services provided by Service Organizations are answering customer
inquiries regarding the manner in which purchases, exchanges and redemptions of
shares of the Trust may be effected and other matters pertaining to the Trust's
services; providing necessary personnel and facilities to establish and maintain
shareholder accounts and records; assisting shareholders in arranging for
processing purchase, exchange and redemption transactions; arranging for the
wiring of funds; guaranteeing shareholder signatures in connection with
redemption orders and transfers and changes in shareholder-designated accounts;
integrating periodic statements with other customer transactions; and providing
such other related services as the shareholder may request.
Some Service Organizations may impose additional 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.
OTHER EXPENSES
The Fund bears all costs of its operations other than expenses specifically
assumed by Schroder Advisors or SCMI, including those expenses it indirectly
bears through its investment in the Portfolio. The costs borne by the Fund
include legal and accounting expenses; Trustees' fees and expenses; insurance
premiums, custodian and transfer agent fees and expenses; brokerage fees and
expenses; expenses of registering and qualifying the Fund's shares for sale with
the SEC and with various state securities commissions; expenses of obtaining
quotations on portfolio securities and pricing of the Fund's shares; 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. Trust
expenses directly attributed to the Fund are charged to the Fund; other expenses
are allocated proportionately among all the portfolios of the Trust in relation
to the net assets of each portfolio. See "Management - Fees and Expenses" in
the SAI.
SCMI and Schroder Advisors have voluntarily undertaken to assume certain
expenses of the Fund (or waive their respective fees), which applies to fees and
expenses paid by the Fund as well as fees and expenses paid by the Portfolio.
This undertaking is designed to place a maximum limit on Fund expenses
(excluding taxes, interest, brokerage commissions and other portfolio
transaction expenses and extraordinary expenses) of 1.49% of the average daily
net assets of the Fund attributable to Advisor Shares. This expense limitation
cannot be modified
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or withdrawn except by a majority vote of the Trustees of the Trust who are not
affiliated with SCMI or Schroder Advisors ("Independent Trustees"). 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 Advisors,
the remaining one-fifth; provided, however, that neither SCMI nor Schroder
Advisors will be required to make any reimbursements or waive any fees in excess
of the fees payable to them by the Fund on a monthly basis for their respective
advisory and administrative services.
PORTFOLIO TRANSACTIONS
The Investment Advisory Contract authorizes and directs SCMI to place orders for
the purchase and sale of the Portfolio's investments with brokers and dealers
selected by SCMI in its discretion and to seek "best execution" of such
portfolio transactions. The Portfolio 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 Portfolio will seek to achieve the best net results in
effecting such transactions.
Subject to the Portfolio's policy of obtaining the best price consistent with
quality of execution on transactions, the Portfolio may employ (a) Schroder
Wertheim & Company, Incorporated ("Schroder Wertheim"), an affiliate of SCMI, to
effect transactions of the Portfolio on the New York Stock Exchange only and (b)
Schroder Securities Limited and its affiliates (collective, "Schroder
Securities"), affiliates of SCMI, to effect transactions of the Portfolio on
certain foreign securities exchanges. Because of the affiliations between SCMI
and Schroder Wertheim and Schroder Securities, respectively, the Portfolio's
payment of commissions to them is subject to procedures adopted by Core Trust's
board of trustees to provide that such commissions will not exceed the usual and
customary brokerage commissions. No specific portion of the Portfolio's
brokerage will be directed to Schroder Wertheim or Schroder Securities and in no
event will either of them receive such brokerage in recognition of research
services.
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 Trustees 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 Portfolio does not currently engage in directed brokerage
arrangements to pay expenses, it may do so in the future. These arrangements,
whereby brokers executing the Portfolio's portfolio transactions would agree to
pay designated expenses of the Portfolio if brokerage commissions generated by
the Portfolio reached certain levels, might reduce these expenses. As
anticipated, these arrangements would not materially increase the brokerage
commissions paid by the Portfolio. Brokerage commissions are not reflected as
Fund expenses, however, in the Fund's fee table, per share table, and financial
statements, and such expenses might therefore appear lower than actual expenses
incurred.
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CODE OF ETHICS
The Trust, Core Trust, SCMI, Schroder Advisors, and Schroders Incorporated have
adopted codes of ethics that contain 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 Report of the Advisory Group on Personal Investing of the
Investment Company Institute, of which the Trust is a member.
INVESTMENT IN THE FUND
PURCHASE OF SHARES
Investors may purchase Advisor Shares directly from the Trust. Prospectuses,
sales material and Account Applications can be obtained from the Trust or
through Forum Financial Corp., the Fund's Transfer Agent. See "Other Information
- -- Shareholder Inquires." Investments may also be made through Service
Organizations that assist their customers in purchasing shares of the Fund. Such
Service Organizations may charge their customers a service fee for processing
orders to purchase or sell shares of the Fund. 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). The minimum
initial investment is $____, except that the minimum initial investment for an
Individual Retirement Account is $____. The minimum subsequent investment is
$____. 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:
Schroder Emerging Markets Fund Institutional Portfolio
P.O. Box 446
Portland, Maine 04112
For initial purchases, the check must be accompanied by a completed Account
Application in proper form.
Investors and Service Organizations (on behalf of their customers) may transmit
purchase payments by Federal Reserve Bank wire directly to the Fund as follows:
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Chase Manhattan Bank
New York, NY
ABA No.: 021000021
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, amount to be wired, name of the wiring bank and
name and telephone number of the person to be contacted in connection with the
order. If the initial investment is by wire, an account number will be assigned
and an Account Application must be completed and mailed to the Fund. Wire orders
received prior to 4:00 p.m. (New York City Time) on a Fund Business Day will be
processed at the net asset value determined as of that day. Wire orders received
after 4:00 p.m. (New York City Time) will be processed at the net asset value
determined as of the next Fund Business Day.
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 that 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.
PURCHASE CHARGE. Purchases of Fund shares are subject to a purchase charge of
0.50% of the amount invested. 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 Advisors 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.
Applications forms and further information about these plans, including
applicable fees, are available upon request. Before investing in the Fund
through one of these plans, investors should consult their tax advisors.
INDIVIDUAL RETIREMENT ACCOUNTS
The Fund may be used as an investment vehicle for an Individual Retirement
Account ("IRA"). An IRA plan naming The First National Bank of Boston as
custodian is available from the Trust or the Fund's Transfer Agent. The minimum
initial investment for an IRA is $____; the minimum subsequent investment is
$____. IRAs are available to individuals who receive
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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 effecting a rollover.
REDEMPTION OF SHARES
Shares of the Fund are 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 may be made between 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 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 that are received after 4:00 p.m. (New York City Time) will be
processed at the net asset value determined 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 the Account Information telephone number on the cover page of this
Prospectus. A shareholder 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 the
Transfer Agent to confirm that such instructions are genuine. If such procedures
are followed, neither the Transfer Agent 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 the shareholder account
number. The letter must also be signed in exactly the same way the account is
registered (if there is more than one owner of the shares, all must sign) and,
in [CERTAIN CASES], signatures must be guaranteed by an institution that is
acceptable to the Fund's Transfer Agent. Such institutions include certain
banks, brokers, dealers (including municipal and government securities brokers
and dealers), credit unions and savings associations. (Notaries public are not
acceptable.) Further documentation, 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.
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If shares to be redeemed are held in certificate form, the certificates must be
enclosed with the redemption request and the assignment form on the back of the
certificates, or an assignment separate from the certificates (but accompanied
by the certificates), must be signed by all owners in exactly the same way the
owners' names are written on the face of the certificates. Requirements for
signature guarantees and/or documentation of authority as described above could
also apply. For your protection, the Fund suggests that certificates be sent by
registered mail.
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 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 Advisors 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.
ADDITIONAL REDEMPTION INFORMATION. Checks for redemption proceeds will normally
be mailed within seven days, but no check will 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, (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 Fund's NAV not reasonably practicable.
If the Board determines that it would be detrimental to the best interest of the
remaining shareholders of the Fund to make payment wholly or partly in cash, the
Fund may redeem shares 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.
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Due to the relatively high cost of maintaining smaller accounts, the Fund
reserves the right to redeem shares in any account (other than an IRA) if at any
time the account does not have a value of at least $2,000, unless the value of
the account fell below that amount solely as a result of market activity.
Shareholders will be notified that the value of the account is less than $2,000
and be allowed at least 30 days to make an additional investment to increase the
account balance to at least $2,000.
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, each day that the New York Stock Exchange is
open for trading, (a "Fund Business Day"), which excludes the following
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.
Portfolio securities listed on recognized stock exchanges are valued at the last
reported sale price, prior to the time when the securities are valued, on the
exchange on which the securities are principally traded. Listed securities
traded on recognized stock exchanges where last sale prices are not available
are valued at 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 Core Trust
Board.
Trading in securities on European and Far Eastern 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 using
methods approved by Core Trust's Board of Trustees.
All assets and liabilities of the Portfolio denominated in foreign currencies
are valued in U.S. dollars based on the exchange rate last quoted by a major
bank prior to the time when the net asset value of the Fund is calculated.
DIVIDENDS, DISTRIBUTIONS AND TAXES
THE FUND
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. The Fund intends to distribute substantially all
of its net investment income and its net realized
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long term capital gain at least annually and, therefore, intends not to be
subject to Federal income tax.
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 Trust 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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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 Trust 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 Trust 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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Federal, foreign, state and local tax consequences of ownership of shares of the
Fund in their particular circumstances.
THE PORTFOLIO
The Portfolio is not required to pay Federal income taxes on its net investment
income and capital gain, as it is treated as a partnership for Federal income
tax purposes. All interest, dividends and gains and losses of the Portfolio are
deemed to have been "passed through" to the Fund in proportion to its holdings
of the Portfolio, regardless of whether such interest, dividends or gains have
been distributed by the Portfolio or losses have been realized by the Portfolio.
Investment income received by the Fund from sources within foreign countries may
be subject to foreign income or other taxes. The Fund intends to elect, if
eligible to do so, to permit its shareholders to take a credit (or a deduction)
for foreign income and other taxes paid by the Portfolio. Shareholders of the
Fund will be notified of their share of those taxes and will be required to
include that amount as income. In that event, shareholders may be entitled to
claim a credit or deduction for those taxes.
OTHER INFORMATION
CAPITALIZATION AND VOTING
The Trust was originally organized as a Maryland corporation on July 30, 1969
and on January 9, 1996 was reorganized as a Delaware business trust. The Trust
was formerly known as "Schroder Capital Funds, Inc." The Trust is registered as
an open-end management investment company under the Act and has authority to
issue an unlimited number of shares of beneficial interest. The Board may,
without shareholder approval, divide the authorized shares into an unlimited
number of separate portfolios or series (such as the Fund) and may divide
portfolios or series into classes of shares (such as the Advisor Shares class),
and the costs of doing so will be borne by the Trust. The Trust currently
consists of seven separate portfolios, each of which has separate investment
objectives and policies, and 13 classes of shares, two of which represent
interests in to the Fund.
Shares are fully paid and non-assessable, and have no preferences as to
conversion, exchange, dividends, retirement or other features. 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 Trustees can
elect 100% of the Trustees if they choose to do so. A shareholder is entitled to
one vote for each full share held (and a fractional vote for each fractional
share held) standing in his name on the books of the Trust. On matters requiring
shareholder approval, shareholders of the Trust are entitled to vote only with
respect to matters that affect the interest of the Fund or class of shares they
hold, except as otherwise required by applicable law.
There will normally be no meetings of shareholders to elect Trustees unless and
until such time as less than a majority of the Trustees holding office have been
elected by shareholders. However, the holders of not less than a majority of the
outstanding shares of the Trust may remove any person serving as a Trustee and
the Board will call a special meeting of shareholders
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to consider removal of one or more Trustees if requested in writing to do so by
the holders of not less than 10% of the outstanding shares of the Trust.
As of December 22, 1995, the Robert Wood Johnson Foundation may be deemed to
control the Fund for purposes of the Act. From time to time, certain
shareholders may own a large percentage of the shares of a Fund. Accordingly,
those shareholders may be able to greatly affect (if not determine) the outcome
of a shareholder vote.
REPORTS
The Trust 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. 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 past performance and does
not necessarily indicate future results. Performance information should be
considered in light of the Fund's investment objective and policies,
characteristics and quality of the Fund's investments, 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.
CUSTODIAN AND TRANSFER AGENT
The Chase Manhattan Bank, N.A. is custodian of the Fund's and of the Portfolio's
assets. Forum Financial Corp. serves as the Fund's Transfer and Dividend
Disbursing Agent.
SHAREHOLDER INQUIRIES
Inquiries about the Fund, including the Fund's past performance, should be
directed to:
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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.
CERTAIN SERVICE ORGANIZATION
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.
FUND STRUCTURE
OTHER CLASS OF SHARES. The Fund has two classes of shares, Advisor Shares and
Institutional Shares. Institutional Shares are offered by a separate prospectus
to corporations, institutions, and fiduciaries, including fiduciary, agency, and
custodial clients of bank trust departments, trust companies, and their
affiliates. Institutional Shares incur less expenses than Advisor Shares.
Except for certain differences, each share of each class represents an
undivided, proportionate interest in the Fund. Each share of the Fund is
entitled to participate equally in dividends and other distributions and the
proceeds of any liquidation of the Fund except that, due to the differing
expenses borne by the two classes, the amount of dividends and other
distribution will differ between the classes. Information about Institutional
Shares is available from the Fund by calling Forum Financial Corp. at (207) 879-
8903.
THE PORTFOLIO. The Fund seeks to achieve its investment objective by investing
all of its investable assets in the Portfolio, which has substantially the same
investment objective and policies as the Fund. Accordingly, the Portfolio
directly acquires its own securities and the Fund acquires an indirect interest
in those securities. The Portfolio is a separate series of Core Trust, a
business trust organized under the laws of the State of Delaware in September
1995. Core Trust is registered under the Act as an open-end management
investment company and currently has four separate portfolios. The assets of the
Portfolio, a diversified portfolio, belong only to, and the liabilities of the
Portfolio are borne solely by, the Portfolio and no other portfolio of Core
Trust.
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The investment objective and fundamental investment policies of the Fund and the
Portfolio can be changed only with shareholder approval. See "Investment
Objective," "Investment Policies," and "Management of the Fund" for a complete
description of the Portfolio's investment objective, policies, restrictions,
management, and expenses.
The Fund's investment in the Portfolio is in the form of a non-transferable
beneficial interest. As of the date of this Prospectus, the Fund is the only
institutional Investor that has invested all of its assets in the Portfolio. The
Portfolio may permit other investment companies or institutional investors to
invest in it. All investors in the Portfolio will invest on the same terms and
conditions as the Fund and will pay a proportionate share of the Portfolio's
expenses.
The Portfolio normally will not hold meetings of investors except as required by
the Act. Each Investor in the Portfolio will be entitled to vote in proportion
to its relative beneficial interest in the Portfolio. On most issues subject to
a vote of investors, as required by the Act and other applicable law, 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; indeed, if other
investors hold a majority interest in the Portfolio, they could hold have voting
control of the Portfolio.
The Portfolio will not sell its shares directly to members of the general
public. Another Investor in the Portfolio, such as an investment company, that
might sell its shares to members of the general public would not be required to
sell its shares at the same public offering price as the Fund, and could have
different advisory and other fees and expenses than the Fund. Therefore, Fund
shareholders may have different returns than shareholders in another investment
company that invests exclusively in the Portfolio. There is currently no such
other investment company that offers its shares to members of the general
public. Information regarding any such funds in the future will be available
from Core Trust by calling Forum Financial Corp. at (207) 879-8903.
CERTAIN RISKS OF INVESTING IN THE PORTFOLIO. The Fund's investment in the
Portfolio may be affected by the actions of other large investors in the
Portfolio, if any. For example, if the Portfolio had a large Investor other than
the Fund that redeemed its interest in the Portfolio, the Portfolio's remaining
investors (including the Fund) might, as a result, experience higher pro rata
operating expenses, thereby producing lower returns.
The Fund may withdraw its entire investment from 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 there were other
investors in the Portfolio with power to, and who did by a vote of the
shareholders of all investors (including the Fund), change the investment
objective or policies of the Portfolio in a manner not acceptable to the Board.
A withdrawal could result in a distribution in kind of portfolio securities (as
opposed to a cash distribution) by the Portfolio. That distribution could result
in a less diversified portfolio of investments for the Fund and could affect
adversely the liquidity of the Fund's portfolio. If the Fund decided to convert
those securities to cash, it usually would incur brokerage fees or other
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transaction costs. If the Fund withdrew its investment from the Portfolio, the
Board would consider what action might be taken, including the management of the
Fund's assets in accordance with its investment objective and policies by the
Adviser and Schroder, the Fund's investment adviser and subadviser,
respectively, or the investment of all of the Fund's investable assets in
another pooled investment entity having substantially the same investment
objective as the Fund. The inability of the Fund to find a suitable replacement
investment, in the event the Board decided not to permit the Adviser and
Schroder to manage the Fund's assets, could have a significant impact on
shareholders of the Fund.
Each Investor in the Portfolio, including the Fund, will be liable for all
obligations of the Portfolio, but not any other portfolio of Core Trust. The
risk to an Investor in the Portfolio of incurring financial loss on account of
such liability, however, would be limited to circumstances in which the
Portfolio was unable to meet its obligations. Upon liquidation of the Portfolio,
investors would be entitled to share pro rata in the net assets of the Portfolio
available for distribution to investors.
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SCHRODER EMERGING MARKETS FUND
INSTITUTIONAL PORTFOLIO
INVESTMENT ADVISER
Schroder Capital Management International Inc.
787 Seventh Avenue
New York, New York 10019
ADMINISTRATOR & DISTRIBUTOR
Schroder Fund Advisors Inc.
787 Seventh Avenue
New York, New York 10019
SUB-ADMINISTRATOR
Forum Financial Services, Inc.
Two Portland Square
Portland, Maine 04101
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
INDEPENDENT ACCOUNTANTS
[ACCOUNTANT] L.L.P.
One Post Office Square
Boston, Massachusetts 02109
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Table of Contents
PROSPECTUS SUMMARY . . . . . . . . . . .
The Fund . . . . . . . . . . . . . . . .
Investment Adviser . . . . . . . . . . .
Administrative Services. . . . . . . . .
Purchases and Redemptions. . . . . . . .
Risk Considerations. . . . . . . . . . .
Fee Table. . . . . . . . . . . . . . . .
FINANCIAL HIGHLIGHTS . . . . . . . . . .
INVESTMENT OBJECTIVE . . . . . . . . . .
AND POLICIES . . . . . . . . . . . . .
Investment Objective . . . . . . . . . .
Investment Policies. . . . . . . . . . .
ADDITIONAL INVESTMENT POLICIES . . . . .
RISK CONSIDERATIONS. . . . . . . . . .
Investment Restrictions. . . . . . . . .
Investment Types . . . . . . . . . . . .
Risk Considerations. . . . . . . . . . .
MANAGEMENT OF THE FUND . . . . . . . . .
Board of Trustees. . . . . . . . . . . .
Investment Adviser and Portfolio Manager
Administrative Services. . . . . . . . .
Distribution Plan. . . . . . . . . . . .
Other Expenses . . . . . . . . . . . . .
Portfolio Transactions . . . . . . . . .
Code of Ethics . . . . . . . . . . . . .
INVESTMENT IN THE FUND . . . . . . . . .
Purchase of Shares . . . . . . . . . . .
Retirement Plans . . . . . . . . . . . .
Individual Retirement Accounts . . . . .
Redemption of Shares . . . . . . . . . .
Net Asset Value. . . . . . . . . . . . .
DIVIDENDS, DISTRIBUTIONS . . . . . . . .
AND TAXES. . . . . . . . . . . . . . .
The Fund . . . . . . . . . . . . . . . .
The Portfolio. . . . . . . . . . . . . .
OTHER INFORMATION. . . . . . . . . . . .
Capitalization and Voting. . . . . . . .
Reports. . . . . . . . . . . . . . . . .
Performance Information. . . . . . . . .
Custodian and Transfer Agent . . . . . .
Shareholder Inquires . . . . . . . . . .
Certain Shareholder Servicing Organizations
Fund Structure . . . . . . . . . . . . .
PROSPECTUS
MAY 1, 1996
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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 FUND ADVISORS INC. - ADMINISTRATOR AND DISTRIBUTOR
STATEMENT OF ADDITIONAL INFORMATION
International Equity Fund (the "Fund") is a diversified, separately-managed
portfolio of Schroder Capital Funds (Delaware) (the "Trust"), an open-end
management investment company currently consisting of seven 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. The Fund currently seeks to achieve its investment objective by
holding, as its only investment securities, the securities of International
Equity Fund (the "Portfolio"), a separate portfolio of a registered open-end
management investment company ("Core Trust").
Institutional 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. Advisor Shares of the Fund are offered to
individual investors, in most cases through Service Organizations (as defined
herein). Advisor Shares incur more expenses than Institutional Shares.
This Statement of Additional Information ("SAI") is not a prospectus and is only
authorized for distribution when preceded or accompanied by the Prospectus for
the Fund dated May 1, 1996 (the "Prospectus"). This SAI contains additional and
more detailed information than that set forth in the Prospectus and should be
read in conjunction with the Prospectus. The Prospectus and SAI for the Fund
may be obtained without charge by writing or calling the Fund at the address and
information numbers printed above.
May 1, 1996
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TABLE OF CONTENTS
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
INVESTMENT POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . .
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Foreign Securities . . . . . . . . . . . . . . . . . . . . . . . . . 3
Depository Receipts. . . . . . . . . . . . . . . . . . . . . . . . . 3
Use of Forward Contracts in Foreign
Exchange Transactions. . . . . . . . . . . . . . . . . . . . . . . 4
U.S. Government Securities . . . . . . . . . . . . . . . . . . . . . 4
Bank Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Short-Term Debt Securities . . . . . . . . . . . . . . . . . . . . . 4
Repurchase Agreements. . . . . . . . . . . . . . . . . . . . . . . . 5
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . 5
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Officers and Trustees. . . . . . . . . . . . . . . . . . . . . . . . 6
Investment Adviser . . . . . . . . . . . . . . . . . . . . . . . . . 8
Administrative Services. . . . . . . . . . . . . . . . . . . . . . . 9
Distribution of Fund Shares. . . . . . . . . . . . . . . . . . . . .10
Service Organizations. . . . . . . . . . . . . . . . . . . . . . . .11
Portfolio Accounting . . . . . . . . . . . . . . . . . . . . . . . .12
Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . .12
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . .
Investment Decisions . . . . . . . . . . . . . . . . . . . . . . . .13
Brokerage and Research Services. . . . . . . . . . . . . . . . . . .13
ADDITIONAL PURCHASE AND
REDEMPTION INFORMATION
Redemption in Kind . . . . . . . . . . . . . . . . . . . . . . . . .15
TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . .
Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Capitalization and Voting. . . . . . . . . . . . . . . . . . . . . .17
Principal Shareholders . . . . . . . . . . . . . . . . . . . . . . .18
Custody of Fund Assets . . . . . . . . . . . . . . . . . . . . . . .19
Transfer Agent and Dividend Disbursing Agent . . . . . . . . . . . .19
Performance Information. . . . . . . . . . . . . . . . . . . . . . .19
Independent Accountants. . . . . . . . . . . . . . . . . . . . . . .20
Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Registration Statement . . . . . . . . . . . . . . . . . . . . . . .20
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . .20
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INTRODUCTION
The Fund was originally organized in 1985 as a separate portfolio of Fund Source
("Fund Source"), a Massachusetts business trust. Pursuant to a reorganization
(the "Reorganization") which became effective August 1, 1989, all the assets and
liabilities of such portfolio were transferred to the Trust in exchange for
shares of common stock of the Trust classified as the "International Equity
Fund." Such shares were distributed to the former shareholders of such
portfolio of Fund Source and it thereby became a portfolio of the Trust.
References in this SAI to the Fund with respect to periods prior to the
effective date of the Reorganization mean as it was constituted as a portfolio
of Fund Source.
INVESTMENT POLICIES
INTRODUCTION
The following information supplements the discussion found under "Investment
Objectives" and "Investment Policies" in the Prospectus. The Fund currently
seeks to achieve its investment objective by investing all of its investment
assets in the Portfolio, which has the same investment objective and policies.
As the Fund has the same investment policies as the Portfolio and currently
invests all of its assets in the Portfolio, investment policies are discussed
with respect to the Portfolio only.
The Portfolio will normally invest at least 65% of its total assets in equity
securities of companies domiciled outside the United States, including common
and preferred stock, convertible securities, depository receipts, and warrants
or rights to purchase such equity securities. Investments also may be made in
debt obligations of foreign governments, corporations and international or
supranational organizations (and their agencies or instrumentalities).
For temporary defensive purposes, to accumulate cash for investments, or to meet
anticipated redemptions, the Portfolio may invest in (or enter into repurchase
agreements with banks and broker dealers with respect to) short-term debt
securities, including Treasury bills and other U.S. Government securities, and
certificates of deposit and bankers' acceptances of U.S. banks. The Portfolio
may also hold cash and time deposits in foreign banks, denominated in any major
foreign currency.
In anticipation of foreign exchange requirements and to avoid losses due to
adverse movements in foreign currency exchange rates, the Portfolio also may
enter into forward contracts to purchase and sell foreign currencies.
FOREIGN SECURITIES
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.
There may be less publicly available information about foreign issuers than is
available for U.S. issuers, and foreign auditing, accounting and financial
reporting practices may differ from U.S. practices. Foreign securities markets
may be less active than U.S. markets, trading may be thin and consequently
securities prices may be more volatile. The Portfolio's investment adviser,
Schroder Capital Management International, Inc. ("SCMI" or "Adviser") will, in
general, invest only in securities of companies and governments of countries
which, in its judgment, are 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 the
repatriation of foreign capital and changes in foreign governmental attitudes
toward private investment, possibly leading to nationalization, increased
taxation, or confiscation of Portfolio assets.
DEPOSITORY RECEIPTS
Investments in securities of foreign issuers may on occasion be in the form of
sponsored or unsponsored American Depository Receipts ("ADRs") or European
Depository Receipts ("EDRs"), or other similar securities convertible into
securities of foreign issuers. These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs are receipts typically issued in the United States by a bank or
trust company, evidencing ownership of the underlying securities. EDRs are
typically issued in Europe under a
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similar arrangement. Generally, ADRs, in registered form, are designed for use
in the U.S. securities markets and EDRs, in bearer form, are designed for use in
European securities markets. Unsponsored ADRs may be created without the
participation of the foreign issuer. Holders of these ADRs generally bear all
the costs of the ADR facility, whereas foreign issuers typically bear certain
costs in a sponsored ADR. The bank or trust company depository of an
unsponsored ADR may be under no obligation to distribute shareholder
communications received from the foreign issuer or to pass through voting
rights.
USE OF FORWARD CONTRACTS IN FOREIGN EXCHANGE TRANSACTIONS
To protect or "hedge" against adverse movements in foreign currency exchange
rates, the Portfolio may invest in forward contracts to purchase or sell an
agreed-upon amount of a specified 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. Such contracts are traded in the
interbank market conducted directly between currency traders (usually large
commercial banks) and their customers. A forward contract generally has no
deposit requirement, and no commissions are charged at any stage for trades.
Although such contracts tend to minimize the risk of loss due to a decline in
the value of the currency which is sold, they expose the Portfolio to the risk
that the counterparty is unable to perform and they tend to limit commensurately
any potential gain which might result should the value of such currency increase
during the contract period.
U.S. GOVERNMENT SECURITIES
The Portfolio may invest in obligations issued or guaranteed by the U.S.
Government or its agencies or instrumentalities which have remaining maturates
not exceeding one year. Agencies and instrumentalities which issue or guarantee
debt securities and which have been established or sponsored by the U.S.
Government include the Bank for Cooperatives, the Export-Import Bank, the
Federal Farm Credit System, the Federal Home Loan Banks, the Federal Home Loan
Mortgage Corporation, the Federal Intermediate Credit Banks, the Federal Land
Banks, the Federal National Mortgage Association, the Government National
Mortgage Association and the Student Loan Marketing Association. Except for
obligations issued by the U.S. Treasury and the Government National Mortgage
Association, none of the obligations of the other agencies or instrumentalities
referred to above are backed by the full faith and credit of the U.S.
Government.
BANK OBLIGATIONS
The Portfolio may invest in obligations of U.S. banks (including certificates of
deposit and bankers' acceptances) having total assets at the time of purchase in
excess of $1 billion. Such banks must be members of the Federal Deposit
Insurance Corporation or the Federal Savings and Loan Insurance Corporation.
The Portfolio also may invest in certificates of deposit issued by foreign
banks, denominated in any major foreign currency. The Portfolio will invest in
instruments issued by foreign banks which, in the view of SCMI and the Trustees
of Core Trust, are of credit-worthiness and financial stature in their
respective countries comparable to U.S. banks used by the Portfolio.
A certificate of deposit is an interest-bearing negotiable certificate issued by
a bank against funds deposited in the bank. A bankers' acceptance is a short-
term draft drawn on a commercial bank by a borrower, usually in connection with
an international commercial transaction. Although the borrower is liable for
payment of the draft, the bank unconditionally guarantees to pay the draft at
its face value on the maturity date.
SHORT-TERM DEBT SECURITIES
The Portfolio may invest in commercial paper, that is short-term unsecured
promissory notes issued in bearer form by bank holding companies, corporations
and finance companies. The commercial paper purchased by the Portfolio for
temporary defensive purposes consists of direct obligations of domestic issuers
which, at the time of investment, are rated "P-1" by Moody's Investors Service,
Inc. ("Moody's") or "A-1" by Standard & Poor's Corporation ("S&P"), or
securities which, if not rated, are issued by companies having an outstanding
debt issue currently rated
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Aa by Moody's or AAA or AA by S&P. The rating "P-1" is the highest commercial
paper rating assigned by Moody's and the rating "A-1" is the highest commercial
paper ratings assigned by S&P.
REPURCHASE AGREEMENTS
The Portfolio may invest in securities subject to repurchase agreements with
U.S. banks or broker-dealers maturing in seven days or less. In a typical
repurchase agreement the seller of a security commits itself at the time of the
sale to repurchase that security from the buyer at a mutually agreed-upon time
and price. The repurchase price exceeds the sale price, reflecting an agreed-
upon interest rate effective for the period the buyer owns the security subject
to repurchase. The agreed-upon rate is unrelated to the interest rate on that
security. SCMI will monitor the value of the underlying security at the time
the transaction is entered into and at all times during the term of the
repurchase agreement to insure that the value of the security always equals or
exceeds the repurchase price. In the event of default by the seller under the
repurchase agreement, the Portfolio may have difficulties in exercising its
rights to the underlying securities and may incur costs and experience time
delays in connection with the disposition of such securities. To evaluate
potential risks, SCMI reviews the credit-worthiness of those banks and dealers
with which the Portfolio enters into repurchase agreements.
INVESTMENT RESTRICTIONS
The following investment restrictions restate or are in addition to those
described under "Investment Restrictions" and "Investment Policies" in the
Prospectus. Under the following restrictions, which, unless otherwise indicated
(see in particular the discussion below regarding restriction c(i)), may not be
changed without the approval of the holders of a majority of the Portfolio's
outstanding shares, the Portfolio will not:
(a) 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) Purchase more than 10% of the voting securities of any one issuer.
Moreover, the Portfolio will not purchase more than 3% of the outstanding
securities of any closed-end investment company. (Any such purchase of
securities issued by a closed-end investment company will otherwise be made
in full compliance with Sections 12(d)(1)(a)(i), (ii) and (iii) of the
Investment Company Act of the 1940 Act.)
(c) The Portfolio will not invest more than 10% of its assets in "illiquid
securities", which are securities that cannot be disposed of within seven
days at their then current value. For purposes of this limitation,
"illiquid securities" includes, except in those circumstances described
below, (i) "restricted securities", which are securities that cannot be
resold to the public without registration under the Federal securities
laws, and (ii) securities of issuers having a record (together with all
predecessors) of less than three years of continuous operation.
(d) Invest 25% or more of the value of its total assets in any one industry.
(e) Borrow money, except from banks, for temporary emergency purposes and then
only in an amount not exceeding 5% of the value of the total assets of the
Portfolio.
(f) Pledge, mortgage or hypothecate its assets to an extent greater than 10% of
the value of the total assets of the Portfolio.
(g) Purchase securities on margin or sell short.
(h) Make investments for the purpose of exercising control or management.
(i) Purchase or sell real estate, provided that the Portfolio may invest in
securities issued by companies which invest in real estate or interests
therein.
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(j) Make loans to other persons, provided that for purposes of this
restriction, entering into repurchase agreements, acquiring corporate debt
securities and investing in U.S. Government obligations, short-term
commercial paper, certificates of deposit and bankers' acceptances shall
not be deemed to be the making of a loan.
(k) Invest in commodities; commodity contracts other than foreign currency
forward contracts; or oil, gas and other mineral resource, lease, or
arbitrage transactions.
(l) Write, purchase or sell options or puts, calls, straddles, spreads, or
combinations thereof.
(m) Underwrite securities issued by other persons except to the extent that, in
connection with the disposition of its portfolio investments, it may be
deemed to be an underwriter under U.S. securities laws.
(n) Invest in warrants, valued at the lower of cost or market, more than 5% of
the value of the Portfolio's net assets (included within that amount, but
not to exceed 2% of the value of the Portfolio's net assets, may be
warrants which are not listed on the New York or American Stock Exchange.
Warrants acquired by the Portfolio in units or attached to securities may
be deemed to be without value.).
(o) As a non-fundamental policy, invest in or hold securities of any issuer if
officers or Trustees of the Company or SCMI individually owning more than
0.5% of the securities of such issuer together own more than 5% of the
securities of such issuer;
As a non-fundamental policy, the Portfolio will not invest in restricted
securities. 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 SCMI pursuant to
guidelines adopted by the Core Trust Board. 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, these securities may be illiquid.
MANAGEMENT
OFFICERS AND TRUSTEES
The following information relates to the principal occupations of each Trustee
and executive officer of the Trust during the past five years and shows the
nature of any affiliation with SCMI. Each of these individuals currently serves
in the same capacity for Core Trust.
PETER E. GUERNSEY, Oyster Bay, New York - a Trustee of the Trust - Insurance
Consultant since August 1986; prior thereto Senior Vice President, Marsh &
McLennan, Inc., insurance brokers.
RALPH E. HANSMANN, 40 Wall Street, New York, New York - a Trustee of the Trust -
Private investor; Director, First Eagle Fund of America, Inc.; Director, Verde
Exploration, Ltd.; Trustee Emeritus, Institute for Advanced Study; Trustee and
Treasurer, New York Public Library; Life Trustee, Hamilton College.
JOHN I. HOWELL, 7 Riverside Road, Greenwich, Connecticut - a Trustee of the
Trust - Private Consultant since February 1987; Director, American International
Group, Inc.; Director, American International Life Assurance Company of New
York.
LAURA E. LUCKYN-MALONE(a) (b) (c), 787 Seventh Avenue, New York, New York -
President and a Trustee of the Trust - Managing Director of SCMI since October
1995; Director of SWIS since July 1995; prior thereto, Director and Senior Vice
President of SCMI since February 1990; Director and President, Schroder
Advisors.
CLARENCE F. MICHALIS, 44 East 64th Street, New York, New York - a Trustee of the
Trust - Chairman of the Board of Directors, Josiah Macy, Jr. Foundation
(charitable foundation).
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HERMANN C. SCHWAB, 787 Seventh Avenue, New York, New York - Chairman (Honorary)
and a Trustee of the Trust - retired since March, 1988; prior thereto,
consultant to SCMI since February 1, 1984.
MARK J. SMITH(a) (b), 33 Gutter Lane, London, England - a Vice President and a
Trustee of the Trust - First Vice President of SCMI since April 1990; Director
and Vice President, Schroder Advisors.
ROBERT G. DAVY, 787 Seventh Avenue, New York, New York - a Vice-President of the
Trust - Director of SCMI and Schroder Capital Management International Ltd.
since 1994; First Vice President of SCMI since July, 1992; prior thereto,
employed by various affiliates of Schroders plc in various positions in the
investment research and portfolio management areas since 1986.
RICHARD R. FOULKES, 787 Seventh Avenue, New York, New York - a Vice President of
the Trust; Deputy Chairman of SCMI since October 1995; Director of SCMI since
1979, Director of Schroder Capital Management International Ltd. since 1989, and
Executive Vice President of both of these entities.
JOHN Y. KEFFER, 2 Portland Square, Portland, Maine - a Vice President of the
Trust. President of Forum Financial Services, Inc., the Fund's sub-
administrator, and Forum Financial Corp., the Fund's transfer and dividend
disbursing agent and fund accountant.
JANE P. LUCAS, (c) 787 Seventh Avenue, New York, New York - Vice President of
the Trust - Director and Senior Vice President SCMI; Director of SWIS since
September 1995; Assistant Director Schroder Investment Management Ltd. since
June 1991.
CATHERINE A. MAZZA, 787 Seventh Avenue, New York, New York - a Vice President of
the Trust - Senior Vice President Schroder Advisors since December 1995; Vice
President of SCMI since October 1994; prior thereto, held various marketing
positions at Alliance Capital, an investment adviser, since July 1985.
FARIBA TALEBI, 787 Seventh Avenue, New York, New York - a Vice President of the
Trust - First Vice President of SCMI since April 1993, employed in various
positions in the investment research and portfolio management areas since 1987.
JOHN A. TROIANO(b), 787 Seventh Avenue, New York, New York - a Vice President of
the Trust - Managing Director of SCMI since October 1995; Director of Schroder
Advisors since October 1992, Director and Senior Vice President of SCMI since
1991; prior thereto, employed by various affiliates of SCMI in various positions
in the investment research and portfolio management areas since 1981.
IRA L. UNSCHULD, 787 Seventh Avenue, New York, New York - a Vice President of
the Trust - a Vice President of SCMI since April, 1993 and an Associate from
July, 1990 to April, 1993; prior to July, 1990, employed by various financial
institutions as a securities or financial analyst.
ROBERT JACKOWITZ(b) (c), 787 Seventh Avenue, New York, New York - Treasurer of
the Trust - Vice President of SWIS since September 1995; Treasurer of SWIS and
Schroder Advisers since July 1995; Vice President of SCMI since June 1995; and
Assistant Treasurer of Schroders Incorporated since January 1993.
MARGARET H. DOUGLAS-HAMILTON(b) (c), 787 Seventh Avenue, New York, New York -
Secretary of the Trust - Secretary of SWIS since July 1995; Secretary of
Schroder Advisers since April 1990; First Vice President and General Counsel of
Schroders Incorporated(b) since May 1987; prior thereto, partner of Sullivan &
Worcester, a law firm.
DAVID I. GOLDSTEIN, 2 Portland Square, Portland, Maine - Assistant Treasurer and
Assistant Secretary of the Trust - Counsel, Forum Financial Services, Inc. Since
1991; prior thereto, associate at Kirkpatrick & Lockhart, Washington, D.C.
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THOMAS G. SHEEHAN, 2 Portland Square, Portland, Maine - Assistant Treasurer and
Assistant Secretary of the Trust - Counsel, Forum Financial Services, Inc. since
1993; prior thereto, Special Counsel, U.S. Securities and Exchange Commission,
Division of Investment Management, Washington, D.C.
BARBARA GOTTLIEB(c), 787 Seventh Avenue, New York, New York - Assistant
Secretary of the Trust - Assistant Vice President of SWIS since July 1995 prior
thereto held various positions with SWIS affiliates.
GERARDO MACHADO, 787 Seventh Avenue, New York, New York - Assistant Secretary of
the Trust - Associate, SCMI.
(a) Interested Trustee of the Trust within the meaning of the 1940 Act.
(b) Schroder Fund Advisors, Inc. ("Schroder Advisors") is a wholly-owned
subsidiary of SCMI, which is a wholly-owned subsidiary of Schroders
Incorporated, which in turn is an indirect, wholly-owned U.S. subsidiary of
Schroders plc.
(c) Schroder Wertheim Investment Services, Inc. ("SWIS") is a wholly-owned
subsidiary of Schroder Wertheim Holdings Incorporated which is a wholly-owned
subsidiary of Schroders, Incorporated, which in turn is an indirect wholly-owned
U.S. subsidiary of Schroders plc.
Officers and Trustees who are interested persons of the Trust receive no salary,
fees or compensation from the Fund. Independent Trustees of the Trust receive
an annual fee of $1,000 and a fee of $250 for each meeting of the Board attended
by them except in the case of Mr. Schwab, who receives an annual fee of $1,500
and a fee of $500 for each meeting attended. The Fund has no bonus, profit
sharing, pension or retirement plans.
The following table provides the fees paid to each Trustee of the Trust for the
fiscal year ended October 31, 1995.
<TABLE>
<CAPTION>
Name of Trustee Aggregate Pension or Estimated Annual Total
Compensation Retirement Benefits Upon Compensation
From Trust Benefits Accrued Retirement From Trust And
As Part of Trust Fund Complex
Expenses Paid To Trustees
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mr. Guernsey $4,000 $0 $0 $4000
Mr. Hansmann 3,500 0 0 3,500
Mr. Howell 4,000 0 0 4,000
Ms. Luckyn-Malone 0 0 0 0
Mr. Michalis 3,000 0 0 3,000
Mr. Schwab 7,000 0 0 7,000
Mr. Smith 0 0 0 0
</TABLE>
As of April ___, 1996 the officers and Trustees of the Trust owned, in the
aggregate, less than 1% of the Fund's outstanding shares.
Although the Trust is a Delaware business trust, certain of its Trustees or
officers are residents of the United Kingdom and substantially all of their
assets may be located outside of the U.S. As a result it may be difficult for
U.S. investors to effect service upon such persons within the U.S., or to
realize judgments of courts of the U.S. predicated upon civil liabilities of
such persons under the Federal securities laws of the U.S. The Trust has been
advised that there is substantial doubt as to the enforceability in the United
Kingdom of such civil remedies and criminal penalties as are afforded by the
Federal securities laws of the U.S. Also it is unclear if extradition treaties
now in effect between the U.S. and the United Kingdom would subject such persons
to effective enforcement of the criminal penalties of such acts.
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INVESTMENT ADVISER
SCMI, 787 Seventh Avenue, New York, New York, 10019, serves as Adviser to the
Portfolio pursuant to an Investment Advisory Contract dated August 1, 1989.
SCMI is a wholly-owned U.S. subsidiary of Schroders Incorporated, the wholly-
owned U.S. holding company subsidiary of Schroders plc. Schroders plc is the
holding company parent of a large worldwide group of banks and financial service
companies (referred to as the "Schroder Group"), with associated companies and
branch and representative offices located in seventeen countries worldwide. The
Schroder Group specializes in providing investment management services, with
Group funds under management currently in excess of $100 billion.
Pursuant to the Investment Advisory Contract, SCMI is responsible for managing
the investment and reinvestment of the assets included in the Fund and for
continuously reviewing, supervising and administering 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 also
furnishes to the Board of Trustees, which has overall responsibility for the
business and affairs of the Trust, periodic reports on the investment
performance of the Fund.
Under the terms of the Investment Advisory Contract, SCMI is required to manage
the Fund's investment portfolio in accordance with applicable laws and
regulations. In making its investment decisions, SCMI does not use material
information that may be in its possession or in the possession of its
affiliates.
The Investment Advisory Contract will continue in effect provided such
continuance is approved annually (i) by the holders of a majority of the
outstanding voting securities of the Fund or by the Board and (ii) by a majority
of the Trustees who are not parties to such Contract or "interested persons" (as
defined in the 1940 Act) of any such party. The Investment Advisory Contract
may be terminated without penalty by vote of the Trustees or the shareholders of
the Fund on 60 days' written notice to the Adviser, or by the Adviser on 60
days' written notice to the Trust and it will terminate automatically if
assigned. The Investment Advisory Contract also provides that, with respect to
the Fund, neither SCMI nor its personnel shall be liable for any error of
judgment or mistake of law or for any act or omission in the performance of its
or their duties to the Fund, except for willful misfeasance, bad faith or gross
negligence in the performance of the SCMI's or their duties or by reason of
reckless disregard of its or their obligations and duties under the Investment
Advisory Contract.
For its services, the Fund pays SCMI a fee of 0.45% of its average daily net
assets for the first $100 million of the Fund's net assets, 0.40% of the next
$150 million of average daily assets, and 0.35% of the Fund's average daily net
assets in excess of $250 million. For the fiscal years ended October 31, 1993,
1994 and 1995, SCMI received advisory fees of $990,419, $1,665,176 and $893,082,
respectively.
The Fund currently invests all of its assets in the Portfolio. SCMI will not
receive an investment advisory fee with respect to the Fund so long as the Fund
remains completely invested in the Portfolio or any other investment company.
The Fund may withdraw its 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. Accordingly, the Fund retains SCMI as its investment adviser to manage
the Fund's assets in the event the Fund so withdraws its investment.
The investment advisory contract between Core Trust and SCMI with respect to the
Portfolio is the same in all material respects as the Fund's Investment Advisory
Contract except as to the parties, the circumstances under which fees will be
paid, the jurisdiction whose laws govern the agreement and fees payable
thereunder. For its investment advisory services under the Investment Advisory
Contract with respect to the Portfolio, SCMI receives an advisory fee of 0.45%
of the Portfolio's average daily net assets.
ADMINISTRATIVE SERVICES
On behalf of the Fund, the Trust has entered into an Administrative Services
Contract with Schroder Fund Advisors Inc. ("Schroder Advisors"), 787 Seventh
Avenue, New York, New York 10019. The Trust and Schroder Advisors have entered
into a Sub-Administration Agreement with Forum Financial Services, Inc.
("Forum"). Pursuant to their agreements, Schroder Advisors and Forum provide
certain management and administrative services necessary for the
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Fund's operations, other than the investment management and administrative
services provided to the Fund by SCMI pursuant to the Investment Advisory
Contract, including among other things, (i) preparation of shareholder reports
and communications, (ii) regulatory compliance, such as reports to and filings
with the Securities and Exchange Commission and state securities commissions,
and (iii) general supervision of the operation of the Fund, including
coordination of the services performed by the Fund's investment adviser,
transfer agent, custodian, independent accountants, legal counsel and others.
Schroder Advisors is a wholly-owned subsidiary of SCMI, and is a registered
broker-dealer organized to act as administrator and distributor of mutual funds.
Effective July 5, 1995, Schroder Advisors changed its name from Schroder Capital
Distributors Inc.
For these services, Schroder Advisors receives from the Fund a fee, payable
monthly, at the annual rate of 0.20% of the Fund's average daily net assets.
For the fiscal years ended October 31, 1993, 1994 and 1995, Schroder Advisors
received administrative fees of $495,210, $832,588 and $446,541, respectively.
Payment for Forum's services is made by Schroder Advisors and is not a separate
expense of the Fund.
The Administrative Services Contract and Sub-Administration Agreement are
terminable with respect to the Fund without penalty, at any time, by vote of a
majority of the Trustees who are not "interested persons" of the Trust and who
have no direct or indirect financial interest in the operation of the Fund's
Distribution Plan or in the Administrative Services Contract or Sub-
Administration Agreement, upon not more than 60 days' written notice to Schroder
Advisors or Forum, as appropriate, or by vote of the holders of a majority of
the shares of the Fund, or, upon 60 days' notice, by Schroder Advisors or Forum.
The Administrative Services Contract will terminate automatically in the event
of its assignment.
The Sub-Administration Agreement is terminable with respect to the Fund without
penalty, at any time, by the Board, Schroder Advisors and the Adviser upon 60
days' written notice to Forum or by Forum upon 60 days' written notice to the
Fund and Schroder Advisors, and the Adviser, as appropriate.
Schroder Advisors and Forum provide similar services to the Portfolio pursuant
to administrative services agreements between Core Trust and each of these
entities, for which Schroder Advisors is separately compensated at an annual
rate of 0.15% of the average daily net assets of the Portfolio, a portion of
which Forum receives for its services with respect to the Portfolio. The fees
paid by the Fund to SCMI and Schroder Advisors therefore may equal up to 0.80%
of the Fund's average daily net assets. The administrative services agreements
are the same in all material respects as the Fund's respective agreements except
as to the parties, the circumstances under which fees will be paid, the fees
payable thereunder and the jurisdiction whose laws govern the agreement.
DISTRIBUTION OF FUND SHARES
Under a Distribution Plan (the "Plan") adopted by the Fund, the Trust will pay
directly or will reimburse the Adviser or a broker-dealer registered under the
Securities Exchange Act of 1934 (the Adviser or such registered broker-dealer,
if so designated, to be a "Distributor" of the Fund shares) monthly (subject to
a limit of 0.50% per annum of the Fund's average daily net assets) for the sum
of (a) advertising expenses including advertising by radio, television,
newspapers, magazines, brochures, sales literature or direct mail, (b) costs of
printing prospectuses and other materials to be given or sent to prospective
investors, (c) 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 (d) payments to broker-dealers (other than
the Distributor) or other organizations (other than banks) for services rendered
in the distribution of the Fund's shares, including payments in amounts based on
the average daily value of Fund shares owned by shareholders in respect of which
the broker-dealer or organization has a distributing relationship. The Fund
will make no payments or reimbursements under the Distribution Plan until the
Board specifically further so authorizes. 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. Salary expense of salesmen who are
responsible for marketing shares of the Fund may be allocated to various
portfolios of the Trust that have adopted a Plan similar to that of the Fund on
the basis of average net assets; travel expense is allocated to, or divided
among, the particular portfolios of the Trust for which it is incurred. The
Board of Trustees has concluded that there is a reasonable likelihood that the
Plan will benefit the Fund and its shareholders.
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The Plan provides that it may not be amended to increase materially the costs
which the Fund may bear pursuant to the Plan without shareholder approval and
that other material amendments of the Plan must be approved by the Board, and by
the Trustees who are neither "interested persons" (as defined in the 1940 Act)
of the Trust nor have any direct or indirect financial interest in the operation
of the Plan or in any related agreement, by vote cast in person at a meeting
called for the purpose of considering such amendments. The selection and
nomination of the Trustees of the Trust has been committed to the discretion of
the Trustees who are not "interested persons" of the Trust. The Plan has been
approved, and is subject to annual approval, by the Board and by the Trustees
who are neither "interested persons" nor have any direct or indirect financial
interest in the operation of the Plan, by vote cast in person at a meeting
called for the purpose of voting on the Plan. 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. The Plan is terminable with respect to the
Fund at any time by a vote of a majority of the Trustees who are not "interested
persons" of the Trust and who have no direct or indirect financial interest in
the operation of the Plan or by vote of the holders of a majority of the shares
of the Fund.
Schroder Advisors acts as Distributor of the Fund's shares.
During the fiscal year ended October 31, 1995, the Fund spent, respectively,
pursuant to the Plan, the following amounts on:
Year Ended
10/31/95
--------
advertising $-0-
printing and mailing of
prospectuses to other
than current shareholders $-0-
compensation to underwriters $-0-
compensation to dealers $-0-
compensation to sales personnel $-0-
interest, carrying or other
financing charge $-0-
SERVICE ORGANIZATIONS
The Fund may also contracts with banks, trust companies, broker-dealers or other
financial organizations ("Service Organizations") to provide certain
administrative services for the Fund. The Fund may pay fees to Service
Organizations (which 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.
Services provided by Service Organization may include, among other things:
providing necessary personnel and facilities to establish and maintain certain
shareholder accounts and records; assisting in processing purchase and
redemption transactions; arranging for the wiring of funds; transmitting and
receiving funds in connection with client orders to purchase or redeem shares;
verifying and guaranteeing client signatures in connection with redemption
orders, transfers among and changes in client-designated accounts; providing
periodic statements showing a client's account balances and, to the extent
practicable, integrating such information with other client transactions;
furnishing periodic and annual statements and confirmations of all purchases and
redemption's of shares in a client's account; transmitting proxy statements,
annual reports, and updating prospectuses and other communications from the Fund
to clients; and such other services as the Fund or a client reasonably may
request, to the extent permitted by applicable statute, rule or regulation.
Neither SCMI nor
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Schroder Advisors will be a Service Organization or receive fees for servicing.
The Fund will make no such payments to service organizations until the Board
specifically further so authorizes.
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 provide that banks may not
engage in the business of underwriting, selling or distributing securities.
There currently is no precedent prohibiting banks from performing administrative
and shareholder servicing functions as Service Organizations. However, judicial
or administrative decisions or interpretations of such laws, as well as changes
in either federal or state statutes or regulations relating to the permissible
activities of banks and their subsidiaries or affiliates, could prevent a bank
service organization from continuing to perform all or a part of its servicing
activities. If a bank were prohibited from so acting, its shareholder clients
would be permitted to remain shareholders of the Fund and alternative means for
continuing the servicing of such shareholders would be sought. In that event,
changes in the operation of the Fund might occur and a shareholder serviced by
such a bank might no longer be able to avail itself of any services then being
provided by the bank. It is not expected that shareholders would suffer any
adverse financial consequences as a result of any of these occurrences.
PORTFOLIO ACCOUNTING
Forum Financial Corp. ("FFC"), an affiliate of Forum, performs portfolio
accounting services for the Fund pursuant to a Fund Accounting Agreement with
the Trust. The Fund Accounting Agreement will continue in effect only if such
continuance is specifically approved at least annually by the Board of Trustees
or by a vote of the shareholders of the Trust and in either case by a majority
of the Trustees who are not parties to the Fund Accounting Agreement or
interested persons of any such party, at a meeting called for the purpose of
voting on the Fund Accounting Agreement.
Under its agreement, FFC prepares and maintains books and records of the Fund on
behalf of the Trust that are required to be maintained under the 1940 Act,
calculates the net asset value per share of the Fund and dividends and capital
gain distributions and prepares periodic reports to shareholders and the
Securities and Exchange Commission. For its services, FFC receives from the
Trust with respect to the Fund a fee of $36,000 per year plus, for each class of
the Fund above one, $12,000 per year. FFC is paid an additional $24,000 per
year with respect to global and international funds. In addition, FFC is paid
an additional $12,000 per year with respect to tax-free money market funds and
funds with more than 25% of their total assets invested in asset backed
securities, that have more than 100 security positions or that have a monthly
portfolio turnover rate of 10% or greater.
FFC is required to use its best judgment and efforts in rendering fund
accounting services and is not be liable to the Trust for any action or inaction
in the absence of bad faith, willful misconduct or gross negligence. FFC is not
responsible or liable for any failure or delay in performance of its fund
accounting obligations arising out of or caused, directly or indirectly, by
circumstances beyond its reasonable control and the Trust has agreed to
indemnify and hold harmless FFC, its employees, agents, officers and directors
against and from any and all claims, demands, actions, suits, judgments,
liabilities, losses, damages, costs, charges, counsel fees and other expenses of
every nature and character arising out of or in any way related to FFC's actions
taken or failures to act with respect to a Fund or based, if applicable, upon
information, instructions or requests with respect to a Fund given or made to
FFC by an officer of the Trust duly authorized. This indemnification does not
apply to FFC's actions taken or failures to act in cases of FFC's own bad faith,
willful misconduct or gross negligence.
FFC assumed responsibility for fund accounting on August 15, 1994. Previously,
these services were performed by SCMI. For the fiscal years ended October 31,
1994 and October 31, 1995, the Fund paid fund accounting fees of $114,325 and
$72,000, respectively.
FEES AND EXPENSES
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As compensation for the advisory, administrative and management services
rendered to the Fund, SCMI and Schroder Advisors each earn (before waivers)
monthly fees at the following annual rates:
Fee Rate
Portion of average daily value Advisory Administrative
of the Fund's net assets Fee Fee
------------------------ --- ---
100% 0.45% 0.35%
SCMI and Schroder Advisors 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 Advisors but
excluding taxes, interest, brokerage commissions and other portfolio transaction
expenses and extraordinary expenses) of 0.99% of the Fund's daily net assets.
This expense limitation will apply for the Fund's first year of operations, and
may be withdrawn by a majority vote of the disinterested Trustees. 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 Advisors,
the remaining one-fifth; provided, however, that neither SCMI nor Schroder
Advisors 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. For the fiscal year ended October 31,
1995, the Fund's expenses were 0.91% 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 that invested the proceeds thereof into other funds
advised by SCMI, which increased the Fund's expense ratio. Absent expenses
reimbursements and fee waivers, Management Fees, Other Expenses and Total
Operating Expenses for the fiscal year ended October 31, 1995 would be 0.80%,
0.30%, and 1.10%, respectively.
Certain of the states in which the shares of the Fund are qualified for sale
impose limitations on the expenses of the Fund. If, in any fiscal year, the
total expenses of the Fund (excluding taxes, interest, expenses under the Plan,
brokerage commissions and other portfolio transaction expenses, other
expenditures which are capitalized in accordance with generally accepted
accounting principles and extraordinary expenses, but including the advisory and
administrative fees) exceed the expense limitations applicable to the Fund
imposed by the securities regulations of any state, SCMI will reimburse the Fund
for four-fifths of the excess, and Schroder Advisors, the remaining one-fifth of
the excess. For the years ended October 31, 1993, 1994, and 1995, no payments
pursuant to these limitations were required.
Except for the expenses paid by SCMI or Schroder Advisors, the Fund bears all
costs of its operations.
PORTFOLIO TRANSACTIONS
INVESTMENT DECISIONS
Investment decisions for the Fund and for the other investment advisory clients
of SCMI are made with a view to achieving their respective investment
objectives. Investment decisions are the product of many factors in addition to
basic suitability for the particular client involved. Thus, a particular
security may be bought or sold for certain clients even though it could have
been bought or sold for other clients at the same time. Likewise, a particular
security may be bought for one or more clients when one or more clients are
selling the security. In some instances, one client may sell a particular
security to another client. It also sometimes happens that two or more clients
simultaneously purchase or sell the same security, in which event each day's
transactions in such security are, insofar as is possible, averaged as to price
and allocated between such clients in a manner which in SCMI's opinion is
equitable to each and in accordance with the amount being purchased or sold by
each. There may be circumstances when purchases or sales of portfolio
securities for one or more clients will have an adverse effect on other clients.
BROKERAGE AND RESEARCH SERVICES
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Transactions on U.S. stock exchanges and other agency transactions involve the
payment by the Fund of negotiated brokerage commissions. Such commissions vary
among different brokers. Also, a particular broker may charge different
commissions according to such factors as the difficulty and size of the
transaction. Transactions in foreign securities generally involve the payment
of fixed brokerage commissions, which are generally higher than those in the
United States. Since most brokerage transactions for the Fund will be placed
with foreign broker-dealers, certain portfolio transaction costs for the Fund
may be higher than fees for similar transactions executed on U.S. securities
exchanges. There is generally no stated commission in the case of securities
traded in the over-the-counter markets, but the price paid by the Fund usually
includes an undisclosed dealer commission or mark-up. In underwritten
offerings, the price paid by the Fund includes a disclosed, fixed commission or
discount retained by the underwriter or dealer. For the years ended October 31,
1993, 1994, and 1995, the Fund paid a total of $506,672, $653,234 and $584,429,
respectively, in brokerage commissions.
The Investment Advisory Contract authorizes and directs SCMI to place orders for
the purchase and sale of the Fund's investments with brokers or dealers selected
by SCMI in its discretion and to seek "best execution" of such portfolio
transactions. SCMI places all such orders for the purchase and sale of
portfolio securities and buys and sells securities for the Fund through a
substantial number of brokers and dealers. In so doing, SCMI uses its best
efforts to obtain for the Fund the most favorable price and execution available.
The Fund may, however, pay higher than the lowest available commission rates
when SCMI believes it is reasonable to do so in light of the value of the
brokerage and research services provided by the broker effecting the
transaction. In seeking the most favorable price and execution, SCMI, having in
mind the Fund's best interests, considers all factors it deems relevant,
including, by way of illustration, price, the size of the transaction, the
nature of the market for the security, the amount of the commission, the timing
of the transaction taking into account market prices and trends, the reputation,
experience and financial stability of the broker-dealers involved and the
quality of service rendered by the broker-dealers in other transactions.
It has for many years been a common practice in the investment advisory business
as conducted in certain countries, including the United States, for advisers of
investment companies and other institutional investors to receive research
services from broker-dealers which execute portfolio transactions for the
clients of such advisers. Consistent with this practice, SCMI may receive
research services from broker-dealers with which SCMI places the Fund's
portfolio transactions. These services, which in some cases may also be
purchased for cash, include such items as general economic and security market
reviews, industry and company reviews, evaluations of securities and
recommendations as to the purchase and sale of securities. Some of these
services are of value to SCMI in advising various of its clients (including the
Fund), although not all of these services are necessarily useful and of value in
managing the Fund. The management fee paid by the Fund is not reduced because
SCMI and its affiliates receive such services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934 (the
"Act"), SCMI may cause the Fund to pay a broker-dealer which provides "brokerage
and research services" (as defined in the Act) to SCMI an amount of disclosed
commission for effecting a securities transaction for the Fund in excess of the
commission which another broker-dealer would have charged for effecting that
transaction.
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 Trustees 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.
Subject to the general policies regarding allocation of portfolio brokerage as
set forth above, the Board of Trustees of the Trust has authorized SCMI to
employ Schroder Securities Limited and its affiliates (collectively, "Schroder
Securities"), which are affiliated with SCMI, to effect securities transactions
of the Fund on various foreign securities exchanges on which Schroder Securities
has trading privileges, provided certain other conditions are satisfied as
described below.
Payment of brokerage commissions to Schroder Securities for effecting such
transactions is subject to Section 17(e) of the 1940 Act, which requires, among
other things, that commissions for transactions on securities exchanges paid by
a registered investment company to a broker which is an affiliated person of
such investment company or an
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affiliated person of another person so affiliated not exceed the usual and
customary broker's commissions for such transactions. It is the Fund's policy
that commissions paid to Schroder Securities will in the judgment of the
officers of SCMI responsible for making portfolio decisions and selecting
brokers, be (i) at least as favorable as commissions contemporaneously charged
by Schroder Securities on comparable transactions for its most favored
unaffiliated customers and (ii) at least as favorable as those which would be
charged on comparable transactions by other qualified brokers having comparable
execution capability. The Board of Trustees of the Trust, including a majority
of the non-interested Trustees, has adopted procedures pursuant to Rule 17e-1
promulgated by the Securities and Exchange Commission under Section 17(e) to
ensure that commissions paid to Schroder Securities by the Fund satisfy the
foregoing standards. The Board will review all transactions at least quarterly
for compliance with these procedures.
The Fund has no understanding or arrangement to direct any specific portion of
its brokerage to Schroder Securities and will not direct brokerage to Schroder
Securities in recognition of research services. The Fund paid no commissions to
Schroder Securities in any of the Fund's fiscal years ended October 31, 1993, or
1994. For the fiscal year ended October 31, 1995, the Fund paid $1,829 in
brokerage commissions to Schroder, Munchmeyer, Hengst & Co., an affiliate of
Schroder Securities Limited, representing 0.003% of the Fund's aggregate
brokerage commissions and 0.005% of the Fund's aggregate dollar amount of
transactions involving the payment of commissions.
The annual portfolio turnover rate of the Fund may exceed 50% but will not
ordinarily exceed 100%.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Detailed information pertaining to the purchase of shares of the Fund,
redemption of shares and the determination of the net asset value of Fund shares
is set forth in the Prospectus under "Investment in the Fund".
REDEMPTION IN KIND
In the event that payment for redeemed shares is made wholly or partly in
portfolio securities, brokerage costs may be incurred by the shareholder in
converting the securities to cash. An in kind distribution of portfolio
securities will be less liquid than cash. The shareholder may have difficulty
in finding a buyer for portfolio securities received in payment for redeemed
shares. Portfolio securities may decline in value between the time of receipt
by the shareholder and conversion to cash. A redemption in kind of the Fund's
portfolio securities could result in a less diversified portfolio of investments
for the Fund and could affect adversely the liquidity of the Fund's portfolio.
TAXATION
The Fund intends to continue to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). To
qualify as a regulated investment company the Fund intends to distribute to
shareholders at least 90% of its net investment income (which includes, among
other items, dividends, interest and the excess of any net short-term capital
gains over net long-term capital losses), and to meet certain diversification of
assets, source of income, and other requirements of the Code. By so doing, the
Fund will not be subject to Federal income tax on its net investment income and
net realized capital gains (the excess of net long-term capital gains over net
short-term capital losses) distributed to shareholders. If the Fund does not
meet all of these Code requirements, it will be taxed as an ordinary
corporation, and its distributions will be taxable to shareholders as ordinary
income.
Amounts not distributed on a timely basis in accordance with a calendar year
distribution requirement are subject to a 4% nondeductible excise tax. To
prevent imposition of the excise tax, the Fund must distribute for each calendar
year an amount equal to the sum of (1) at least 98% its ordinary income
(excluding any capital gains or losses) for the calendar year, (2) at least 98%
of the excess of its capital gains over capital losses realized during the one-
year period ending October 31, of such year, and (3) all such ordinary income
and capital gains for previous years that were not distributed during such
years. A distribution will be treated as paid during the calendar year if it is
declared by the Fund in October, November or December of the year with a record
date in such month and paid by the Fund during January of the following year.
Such distributions will be taxable to shareholders in the calendar year in which
the distributions are declared, rather than the calendar year in which the
distributions are received.
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Under the Code, gains or losses attributable to fluctuations in exchange rates
which occur between the time the Fund accrues interest or other receivable or
accrues expenses or other liabilities denominated in a foreign currency and the
time the Fund actually collects such receivable or pays such liabilities
generally are treated as ordinary income or ordinary loss. Similarly, gains or
losses on disposition of debt securities denominated in a foreign currency
attributable to fluctuations in the value of the foreign currency between the
date of acquisition of the security and the date of disposition as well as gains
or losses from certain foreign currency transactions and options on certain
foreign currency transactions, generally are treated as ordinary gain or loss.
These gains or losses, referred to under the Code as "Section 988" gains or
losses, may increase or decrease the amount of the Fund's net investment income
to be distributed to its shareholders as ordinary income.
Generally, the hedging transactions undertaken by the Fund may be deemed
"straddles" for Federal income tax purposes. The straddle rules may affect the
character of gains (or losses) realized by the Fund. In addition, losses
realized by the Fund on positions that are part of a straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which the losses are realized.
Because only a few regulations implementing the straddle rules have been
promulgated, the tax consequences to the Fund of hedging transactions are not
entirely clear. The hedging transactions may increase the amount of short-term
capital gain realized by the Fund which is taxed as ordinary income when
distributed to shareholders.
The Fund may make one or more of the elections available under the Code which
are applicable to straddles. If the Fund makes any of the elections, the
amount, character and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the elections
may operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because application of the straddle rules may affect the character of gains or
losses, defer losses and/or accelerate the recognition of gains or losses from
the affected straddle positions, the amount which must be distributed to
shareholders and which will be taxed to shareholders as ordinary income or long-
term capital gain, may be increased or decreased as compared to a fund that did
not engage in such hedging transactions.
The requirements applicable to regulated investment companies such as the Fund
may limit the extent to which the Fund will be able to engage in transactions in
options and forward contracts.
Distributions of net investment income (including realized net short-term
capital gain) are taxable to shareholders as ordinary income. It is not
expected that such distributions will be eligible for the dividends received
deduction available to corporations.
Distributions of net long-term capital gain are taxable to shareholders as long-
term capital gain, regardless of the length of time the Fund shares have been
held by a shareholder, and are not eligible for the dividends received
deduction. A loss realized by a shareholder on the sale of shares of the Fund
with respect to which capital gain dividends have been paid will, to the extent
of such capital gain dividends, be treated as long-term capital loss although
such shares may have been held by the shareholder for one year or less.
Further, a loss realized on a disposition will be disallowed to the extent the
shares disposed of are replaced (whether by reinvestment or distributions or
otherwise) within a period of 61 days beginning 30 days before and ending 30
days after the shares are disposed of. In such a case, the basis of the shares
acquired will be adjusted to reflect the disallowed loss.
All distributions are taxable to the shareholder whether reinvested in
additional shares or received in cash. Shareholders receiving distributions in
the form of additional shares will have a cost basis for Federal income tax
purposes in each share received equal to the net asset value of a share of the
Fund on the reinvestment date. Shareholders will be notified annually as to the
Federal tax status of distributions.
Distributions by the Fund reduce the net asset value of the Fund's shares.
Should a distribution reduce the net asset value below a shareholder's cost
basis, such distribution nevertheless would be taxable to the shareholder as
ordinary income or capital gain as described above, even though, from an
investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implications of
buying shares just prior
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to a distribution. The price of shares purchased at that time includes the
amount of the forthcoming distribution. Those purchasing just prior to a
distribution will receive a distribution which will nevertheless be taxable to
them.
Upon redemption or sale of his shares, a shareholder will realize a taxable gain
or loss depending upon his basis in his shares. Such gain or loss generally
will be treated as capital gain or loss if the shares are capital assets in the
shareholder's hands. Such gain or loss generally will be long-term or short-
term depending upon the shareholder's holding period for the shares.
The Fund intends to minimize foreign income and withholding taxes by investing
in obligations the payments with respect to which will be subject to minimal or
no such taxes insofar as this objective is consistent with the Fund's income
objective. However, since the Fund may incur foreign taxes, it intends, if it
is eligible to do so, to elect under Section 853 of the Code to treat each
shareholder as having received an additional distribution from the Fund, in the
amount indicated in a notice furnished to him, as his pro rata portion of income
taxes paid to or withheld by foreign governments with respect to interest,
dividends and gain on the Fund's foreign portfolio investments. The shareholder
then may take the amount of such foreign taxes paid or withheld as a credit
against his Federal income tax, subject to certain limitations. If the
shareholder finds it more to his advantage to do so, he may, in the alternative,
deduct the foreign tax withheld as an itemized deduction, in computing his
taxable income. Each shareholder is referred to his tax adviser with respect to
the availability of the foreign tax credit.
The Fund will be required to report to the Internal Revenue Service (the "IRS")
all distributions as well as gross proceeds from the redemption of the Fund
shares, except in the case of certain exempt shareholders. All such
distributions and proceeds generally will be subject to withholding of Federal
income tax at a rate of 31% ("backup withholding") in the case of nonexempt
shareholders if (1) the shareholder fails to furnish the Fund with and to
certify the shareholder's correct taxpayer identification number or social
security number, (2) the IRS notifies the Fund that the shareholder has failed
to report properly certain interest and dividend income to the IRS and to
respond to notices to that effect, or (3) when required to do so, the
shareholder fails to certify that he is not subject to backup withholding. If
the withholding provisions are applicable, any such distributions or proceeds,
whether reinvested in additional shares or taken in cash, will be reduced by the
amount required to be withheld. Any amounts withheld may be credited against
the shareholder's Federal income tax liability. Investors may wish to consult
their tax advisers about the applicability of the backup withholding provisions.
The foregoing discussion relates only to Federal income tax law as applicable to
U.S. persons (i.e., U.S. citizens and residents and U.S. domestic corporations,
partnerships, trusts and estates). Distributions by the Fund also may be
subject to state and local taxes, and their treatment under state and local
income tax laws may differ from the Federal income tax treatment. Shareholders
should consult their tax advisors with respect to particular questions of
Federal, state and local taxation. Shareholders who are not U.S. persons should
consult their tax advisors regarding U.S. and foreign tax consequences of
ownership of shares of the Fund including the likelihood that distributions to
them would be subject to withholding of U.S. tax at a rate of 30% (or a lower
rate under a tax treaty).
OTHER INFORMATION
ORGANIZATION
The Trust was originally organized as a Maryland corporation on July 30, 1969.
On February 29, 1988, the Trust was recapitalized to enable the Board to
establish a series of separately managed investment portfolios, each having
different investment objectives and policies. At the time of the
recapitalization, the Trust's name was changed from "The Cheapside Dollar Fund
Limited" to "Schroder Capital Funds, Inc." On January 9, 1996, the Trust was
reorganized as a Delaware business trust. At that time, the Trust's name was
changed from "Schroder Capital Funds, Inc." to its present name. The Trust is
registered as an open-end management investment company under the Act.
Delaware law provides that shareholders shall be entitled to the same
limitations of personal liability extended to stockholders of private
corporations for profit. The securities regulators of some states, however,
have indicated that they and the courts in their state may decline to apply
Delaware law on this point. To guard against this risk, the Trust Instrument
contains an express disclaimer of shareholder liability for the debts,
liabilities, obligations, and expenses of the Trust. The Trust Instrument
provides for indemnification out of each series' property of any
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shareholder or former shareholder held personally liable for the obligations of
the series. The Trust Instrument also provides that each series shall, upon
request, assume the defense of any claim made against any shareholder for any
act or obligation of the series and satisfy any judgment thereon. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which Delaware law does not apply (or
no contractual limitation of liability was in effect) and the portfolio is
unable to meet its obligations. Forum believes that, in view of the above,
there is no risk of personal liability to shareholders.
CAPITALIZATION AND VOTING
The Trust has an unlimited number of authorized shares of beneficial interest.
The Board may, without shareholder approval, divide the authorized shares into
an unlimited number of separate portfolios or series (such as the Fund) and may
divide portfolios or series into classes of shares, and the costs of doing so
will be borne by the Trust. The Trust currently consists of five separate
portfolios, each of which has separate investment objectives and policies, and
five classes, one of which pertains to the Fund.
The shares of the Trust 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 Trustees can elect 100% of the Trustees if they choose to do so. A
shareholder is entitled to one vote for each full share held (and a fractional
vote for each fractional share held), then standing in his name on the books of
the Trust. Shares of each class would vote separately to approve investment
advisory agreements or changes in investment objectives and other fundamental
policies affecting the portfolio to which they pertain, but all classes would
vote together in the election of Trustees and ratification of the selection of
independent accountants. Shareholders of any particular class would not be
entitled to vote on any matters as to which such class were not affected.
The Trust will not hold annual meetings of shareholders. The matters considered
at an annual meeting typically include the reelection of Trustees, approval of
an investment advisory agreement, and the ratification of the selection of
independent accountants. These matters will not be submitted to shareholders
unless a meeting of shareholders is held for some other reason, such as those
indicated below. Each of the Trustees will serve until death, resignation or
removal. Vacancies will be filled by the remaining Trustees, subject to the
provisions of the 1940 Act requiring a meeting of shareholders for election of
Trustees to fill vacancies when less than a majority of Trustees then in office
have been elected by shareholders. Similarly, the selection of accountants and
renewal of investment advisory agreements for future years will be performed
annually by the Board. Future shareholder meetings will be held to elect
Trustees if required by the 1940 Act, to obtain shareholder approval of changes
in fundamental investment policies, to obtain shareholder approval of material
changes in investment advisory agreements, to select new accountants if the
employment of the Trust's accountants has been terminated, and to seek any other
shareholder approval required under the 1940 Act. The Board has the power to
call a meeting of shareholders at any time when it believes it is necessary or
appropriate. In addition, Trust Instrument provides that a special meeting of
shareholders may be called at any time for any purpose by the holders of at
least 10% of the outstanding shares entitled to be voted at such meeting.
In addition to the foregoing rights, the Trust Instrument provides that holders
of at least two-thirds of the outstanding shares of the Trust may remove any
person serving as a Trustee either by declaration in writing or at a meeting
called for such purpose. Further, the Board is required to call a shareholders
meeting for the purpose of considering the removal of one or more Trustees if
requested in writing to do so by the holders of not less than 10% of the
outstanding shares of the Trust. In addition, the Board is required to provide
certain assistance if requested in writing to do so by ten or more shareholders
of record (who have been such for at least six months), holding in the aggregate
the lesser of shares of the Trust having a total net asset value of at least
$25,000 or 1% of the outstanding shares of the Trust, for the purpose of
enabling such holders to communicate with other shareholders of the Trust with a
view to obtaining the requisite signatures to request a special meeting to
consider such removal.
PRINCIPAL SHAREHOLDERS
As of April __, 1996, the following persons owned of record or beneficially 5%
or more of the Fund's shares:
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SHAREHOLDER SHARE BALANCE PERCENT OF FUND
- ----------- ------------- ---------------
Norwest Bank Denver, N.A. 1,036,784.781 9.31%
Stout & Co.
1740 Broadway
Denver, CO 80274
Union College Pooled Investments 655,695.792 5.88%
Fiduciary Trust Company International
P.O. Box 3199, Church Street Station
New York, NY 10008
MAC & CO 648,519.293 5.82%
Mellon Bank, N.A.
P.O. Box 320
Pittsburgh, PA 15230
CUSTODY OF FUND ASSETS
The Chase Manhattan Bank, N.A., through its Global Custody Division located in
London, England, acts as custodian of the Fund's assets, but plays no role in
making decisions as to the purchase or sale of portfolio securities for the
Fund. Pursuant to rules adopted under the 1940 Act, the Fund may maintain its
foreign securities and cash in the custody of certain eligible foreign banks and
securities depositories. Selection of these foreign custodial institutions is
made by the Board of Trustees following a consideration of a number of factors,
including (but not limited to) the reliability and financial stability of the
institution; the ability of the institution to perform capably custodial
services for the Fund; the reputation of the institution in its national market;
the political and economic stability of the country in which the institution is
located; and further risks of potential nationalization or expropriation of Fund
assets.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Forum Financial Corp., Portland, Maine, serves as the Fund's Transfer and
Dividend Disbursing Agent.
PERFORMANCE INFORMATION
The Fund may, from time to time, include quotations of its average annual total
return in advertisement or reports to shareholders or prospective investors.
Quotations of average annual total return will be expressed in terms of the
average annual compounded rate of return of a hypothetical investment in the
Fund over periods of 1, 5 and 10 years, calculated pursuant to the following
formula:
P(1+T)TO THE POWER OF n=ERV
(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n= the number of years, and ERV = the ending redeemable value of a
hypothetical $1,000 payment made at the beginning of the period). All total
return figures will reflect the deduction of Fund expenses (net of certain
reimbursed expenses) on an annual basis, and will assume that all dividends and
distributions are reinvested when paid.
For the one year, five year and nine year, ten month periods ended October 31,
1995, respectively, the average annual total return of the Fund was 2.08%, 8.56%
and 12.51%.
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Quotations of total return will reflect only the performance of a hypothetical
investment in the Fund during the particular time period shown. Total return
for the Fund will vary based on changes in market conditions and the level of
the Fund's expenses, and no reported performance which may be expected in the
future.
In connection with communicating total return to current or prospective
investors, the Fund also may compare these figures to the performance of other
mutual funds tracked by mutual fund rating services or to other unmanaged
indexes which may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs.
Investors who purchase and redeem shares of the Fund through a customer account
maintained at a Service Organization may be charged one or more of the following
types of fees as agreed upon by the Services Organization and the investor, with
respect to the customer services provided by the Service Organization: account
fees (a fixed amount per month or per year); transaction fees (a fixed amount
per transaction processed); compensating balance requirements (a minimum dollar
amount a customer must maintain in order to obtain the services offered); or
account maintenance fees (a periodic charge based upon a percentage of the
assets in the account or of the dividends paid on these assets). Such fees will
have the effect of reducing the average annual total return of the Fund for
those investors.
COUNSEL
[LAW FIRM], 77 Water Street, New York, New York 10005, counsel to the Fund,
passes upon certain legal matters in connection with the shares offered by the
Fund.
INDEPENDENT ACCOUNTANTS
[ACCOUNTANT] L.L.P. ("ACCOUNTANT") serves as independent accountants for the
Fund. ACCOUNTANT provides audit services and consultation in connection with
review of U.S. Securities and Exchange Commission filings. ACCOUNTANT'S address
is One Post Office Square, Boston, Massachusetts 02109.
REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information included in the
Fund's registration statement filed with the Securities and Exchange Commission
under the Securities Act of 1933 with respect to the securities offered hereby,
certain portions of which have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. The registration
statement, including the exhibits filed therewith, may be examined at the office
of the Securities and Exchange Commission in Washington, D.C.
Statements contained herein and in the Prospectus as to the contents of any
contract or other documents referred to are not necessarily complete, and, in
each instance, reference is made to the copy of such contract or other documents
filed as an exhibit to the registration statement, each such statement being
qualified in all respects by such reference.
FINANCIAL STATEMENTS
The audited Statement of Assets and Liabilities, Statement of Operations,
Statements of Changes in Net Assets, Statement of Investments, notes thereto,
and Financial Highlights of the Fund for the fiscal year ended October 31, 1995
and the Report of Independent Accountants thereon (included in the Annual Report
to shareholders), which are delivered along with this SAI, are incorporated
herein by reference.
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SCHRODER U.S. SMALLER COMPANIES 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 ("SCMI" OR THE "ADVISER")
SCHRODER FUND ADVISORS INC.
- ADMINISTRATOR AND DISTRIBUTOR ("SCHRODER ADVISORS")
STATEMENT OF ADDITIONAL INFORMATION
Schroder U.S. Smaller Companies Fund (the "Fund") is a diversified, separately-
managed portfolio of Schroder Capital Funds (Delaware) (the "Trust"), an open-
end management investment company currently consisting of seven separate
portfolios, each of which has different investment objectives and policies.
Schroder U.S. Smaller Companies Fund is described in this Statement of
Additional Information ("SAI").
Institutional 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. Advisor Shares of the Fund are offered to
individual investors, in most cases through Service Organizations (as defined
herein). Advisor Shares incur more expenses than Institutional Shares.
This SAI is not a prospectus and is only authorized for distribution when
preceded or accompanied by the Prospectus for the Fund dated May 1, 1996 (the
"Prospectus"). This SAI contains additional and more detailed information than
that set forth in the Prospectus and should be read in conjunction with the
Prospectus. The Prospectus and SAI for the Fund may be obtained without charge
by writing or calling the Fund at the address and information numbers printed
above.
May 1, 1996
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TABLE OF CONTENTS
INVESTMENT POLICIES
Introduction
U.S. Government Securities
Bank Obligations
Short-Term Debt Securities
Repurchase Agreements
High Yield/Junk Bonds
Illiquid and Restricted Securities
Loans of Portfolio Securities
Covered Calls and Hedging
Short Sales Against-the-Box
INVESTMENT RESTRICTIONS
MANAGEMENT
Trustees and Officers
Investment Adviser
Administrative Services
Distribution of Fund Shares
Service Organizations
Fees and Expenses
Portfolio Accounting
PORTFOLIO TRANSACTIONS
Investment Decisions
Brokerage and Research Services
ADDITIONAL PURCHASE AND
REDEMPTION INFORMATION
Determination of Net Asset Value Per Share
Redemption in Kind
TAXATION
OTHER INFORMATION
Organization
Capitalization and Voting
Principal Shareholders
Performance Information
Custodian
Transfer Agent and Dividend Disbursing Agent
Legal Counsel
Independent Accountants
FINANCIAL STATEMENTS
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INVESTMENT POLICIES
INTRODUCTION
The Fund's investment objective and policies authorize it to invest in certain
types of securities and to engage in certain investment techniques as identified
in "The Fund-Investment Objective and Policies; and Special Investment Methods"
in the Prospectus. The following supplements the discussion found in those
sections by providing additional information or elaborating upon the discussion
with respect to certain of those securities and techniques.
U.S. GOVERNMENT SECURITIES
The Fund may invest in obligations issued or guaranteed by the United States
government or its agencies or instrumentalities which have remaining maturities
not exceeding one year. Agencies and instrumentalities which issue or guarantee
debt securities and which have been established or sponsored by the United
States government include the Bank for Cooperatives, the Export-Import Bank, the
Federal Farm Credit System, the Federal Home Loan Banks, the Federal Home Loan
Mortgage Corporation, the Federal Intermediate Credit Banks, the Federal Land
Banks, the Federal National Mortgage Association, the Government National
Mortgage Association and the Student Loan Marketing Association. Except for
obligations issued by the United States Treasury and the Government National
Mortgage Association, none of the obligations of the other agencies or
instrumentalities referred to above are backed by the full faith and credit of
the United States government.
BANK OBLIGATIONS
The Fund may invest in obligations of U.S. banks (including certificates of
deposit and bankers' acceptances) having total assets at the time of purchase in
excess of $1 billion. Such banks must be members of the Federal Deposit
Insurance Corporation.
A certificate of deposit is an interest-bearing negotiable certificate issued by
a bank against funds deposited in the bank. A bankers' acceptance is a short-
term draft drawn on a commercial bank by a borrower, usually in connection with
an international commercial transaction. Although the borrower is liable for
payment of the draft, the bank unconditionally guarantees to pay the draft at
its face value on the maturity date.
SHORT-TERM DEBT SECURITIES
The Fund may invest in commercial paper, that is short-term unsecured promissory
notes issued in bearer form by bank holding companies, corporations and finance
companies. The commercial paper purchased by the Fund for temporary defensive
purposes consists of direct obligations of domestic issuers which, at the time
of investment, are rated "P-1" by Moody's Investors Service, Inc. ("Moody's") or
"A-1" by Standard & Poor's Corporation ("S&P"), or securities which, if not
rated, are issued by companies having an outstanding debt issue currently rated
Aa by Moody's or AAA or AA by S&P. The rating "P-1" is the highest commercial
paper rating assigned by Moody's and the rating "A-1" is the highest commercial
paper rating assigned by S&P.
REPURCHASE AGREEMENTS
The Fund may invest in securities subject to repurchase agreements with U.S.
banks or broker-dealers maturing in seven days or less. In a typical repurchase
agreement the seller of a security commits itself at
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the time of the sale to repurchase that security from the buyer at a mutually
agreed-upon time and price. The repurchase price exceeds the sale price,
reflecting an agreed-upon interest rate effective for the period the buyer owns
the security subject to repurchase. The agreed-upon rate is unrelated to the
interest rate on that security. SCMI will monitor the value of the underlying
security at the time the transaction is entered into and at all times during the
term of the repurchase agreement to insure that the value of the security always
equals or exceeds the repurchase price. 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 connection with the disposition of such securities. To evaluate
potential risks, SCMI reviews the credit-worthiness of those banks and dealers
with which the Fund enters into repurchase agreements.
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.
HIGH YIELD/JUNK BONDS
The Fund may invest up to 5% of its assets in bonds rated below Baa by Moody's
or BBB by S&P (commonly known as "high yield/high risk securities" or "junk
bonds"). Securities rated less than Baa by Moody's or BBB by S&P are classified
as non-investment grade securities and are considered speculative by those
rating agencies. Junk bonds may be issued as a consequence of corporate
restructurings, such as leveraged buyouts, mergers, acquisitions, debt
recapitalizations, or similar events or by smaller or highly leveraged
companies. Although the growth of the high yield securities market in the
1980's had paralleled a long economic expansion, recently many issuers have been
affected by adverse economic and market conditions. It should be recognized
that an economic downturn or increase in interest rates is likely to have a
negative effect on (i) the high yield bond market, (ii) the value of high yield
securities and (iii) the ability of the securities' issuers to service their
principal and interest payment obligations, to meet their projected business
goals or to obtain additional financing. In addition, the market for high yield
securities, which is concentrated in relatively few market makers, may not be as
liquid as the market for investment grade securities. Under adverse market or
economic conditions, the market for high yield securities could contract
further, independent of any specific adverse changes in the condition of a
particular issuer. As a result, the Fund could find it more difficult to sell
these securities or may be able to sell the securities only at prices lower than
if such securities were widely traded. Prices realized upon the sale of such
lower rated or unrated securities, under these circumstances, may be less than
the prices used in calculating the Fund's net asset value.
In periods of reduced market liquidity, junk bond prices may become more
volatile and may experience sudden and substantial price declines. Also, there
may be significant disparities in the prices quoted for junk bonds by various
dealers. Under such conditions, a Fund may have to use subjective rather than
objective criteria to value its junk bond investments accurately and rely more
heavily on the judgment of the Fund's investment adviser.
Prices for junk bonds also may be affected by legislative and regulatory
developments. For example, new federal laws require the divestiture by
federally insured savings and loans associations of their investments in high
yield bonds. Also, from time to time, Congress has considered legislation to
restrict or eliminate the corporate tax deduction for interest payments or to
regulate corporate restructurings such as takeovers, mergers or leveraged
buyouts. These laws could adversely affect the Fund's net asset value
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and investment practices, the market for high yield securities, the financial
condition of issuers of these securities and the value of outstanding high yield
securities.
Lower rated or unrated debt obligations also present risks based on payment
expectations. If an issuer calls the obligation for redemption, the Fund may
have to replace the security with a lower yielding security, resulting in a
decreased return for investors. If the Fund experiences unexpected net
redemptions, it may be forced to sell its higher rated securities, resulting in
a decline in the overall credit quality of the Fund's portfolio and increasing
the exposure of the Fund to the risks of high yield securities.
ILLIQUID AND RESTRICTED SECURITIES
"Illiquid and Restricted Securities" under "Investment Objectives and Policies -
Additional Investment Policies" in the Prospectus sets forth the circumstances
in which the Fund may invest in "restricted securities". In connection with the
Fund's original purchase of restricted securities it may negotiate rights with
the issuer to have such securities registered for sale at a later time.
Further, the expenses of registration of restricted securities that are illiquid
may also be negotiated by the Fund with the issuer at the time such securities
are purchased by the Fund. When registration is required, however, a
considerable period may elapse between a decision to sell the securities and the
time the Fund would be permitted to sell such securities. A similar delay might
be experienced in attempting to sell such securities pursuant to an exemption
from registration. Thus, the Fund may not be able to obtain as favorable a
price as that prevailing at the time of the decision to sell.
LOANS OF PORTFOLIO SECURITIES
The Fund may lend its portfolio securities subject to the restrictions stated in
the Prospectus. Under applicable regulatory requirements (which are subject to
change), the loan collateral must, on each business day, at least equal the
market value of the loaned securities and must consist of cash, bank letters of
credit, U.S. Government securities, or other cash equivalents in which the Fund
is permitted to invest. To be acceptable as collateral, letters of credit must
obligate a bank to pay amounts demanded by the Fund if the demand meets the
terms of the letter. Such terms and the issuing bank must be satisfactory to
the Fund. In a portfolio securities lending transaction, the Fund receives from
the borrower an amount equal to the interest paid or the dividends declared on
the loaned securities during the term of the loan as well as the interest on the
collateral securities, less any finders' or administrative fees the Fund pays in
arranging the loan. The Fund may share the interest it receives on the
collateral securities with the borrower as long as it realizes at least a
minimum amount of interest required by the lending guidelines established by the
Trust's Board of Trustees. The Fund will not lend its portfolio securities to
any officer, director, employee or affiliate of the Fund or SCMI. The terms of
the Fund's loans must meet certain tests under the Internal Revenue Code and
permit the Fund to reacquire loaned securities on five business days' notice or
in time to vote on any important matter.
COVERED CALLS AND HEDGING
As described in the Prospectus, the Fund may write covered calls on up to 100%
of its total assets or employ one or more types of Hedging Instruments. When
hedging to attempt to protect against declines in the market value of the Fund's
portfolio, to permit the Fund to retain unrealized gains in the value of
portfolio securities which have appreciated, or to facilitate selling securities
for investment reasons, the Fund would: (i) sell Stock Index Futures;
(ii) purchase puts on such Futures or securities; or (iii) write covered calls
on securities or on Stock Index Futures. When hedging to establish a position
in the equities markets as a temporary substitute for purchasing particular
equity securities (which the Fund will
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normally purchase and then terminate the hedging position), the Fund would:
(i) purchase Stock Index Futures, or (ii) purchase calls on such Futures or on
securities. The Fund's strategy of hedging with Stock Index Futures and options
on such Futures will be incidental to the Fund's activities in the underlying
cash market.
WRITING COVERED CALL OPTIONS. The Fund may write (i.e., sell) call options
("calls") if: (i) the calls are listed on a domestic securities or commodities
exchange, and (ii) the calls are "covered" (i.e., the Fund owns the securities
subject to the call or other securities acceptable for applicable escrow
arrangements) while the call is outstanding. A call written on a Stock Index
Future must be covered by deliverable securities or segregated liquid assets.
If a call written by the Fund is exercised, the Fund forgoes any profit from any
increase in the market price above the call price of the underlying investment
on which the call was written.
When the Fund writes a call on a security, it receives a premium and agrees to
sell the underlying securities to a purchaser of a corresponding call on the
same security during the call period (usually not more than 9 months) at a fixed
exercise price (which may differ from the market price of the underlying
security), regardless of market price changes during the call period. The risk
of loss will have been retained by the Fund if the price of the underlying
security should decline during the call period, which may be offset to some
extent by the premium.
To terminate its obligation on a call it has written, the Fund may be purchase a
corresponding call in a "closing purchase transaction". A profit or loss will
be realized, depending upon whether the net of the amount of option transaction
costs and the premium previously received on the call written was more or less
than the price of the call subsequently purchased. A profit may also be
realized if the call lapses unexercised, because the Fund retains the underlying
security and the premium received. Any such profits are considered short-term
capital gains for Federal income tax purposes, and when distributed by the Fund
are taxable as ordinary income. If the Fund could not effect a closing purchase
transaction due to the lack of a market, it would have to hold the callable
securities until the call lapsed or was exercised.
The Fund may also write calls on Stock Index Futures without owning a futures
contract or a deliverable bond, provided that at the time the call is written,
the Fund covers the call by segregating in escrow an equivalent dollar amount of
liquid assets. The fund will segregate additional liquid assets if the value of
the escrowed assets drops below 100% of the current value of the Stock Index
Future. In no circumstances would an exercise notice require the Fund to
deliver a futures contract; it would simply put the Fund in a short futures
position, which is permitted by the Fund's hedging policies.
PURCHASING CALLS AND PUTS. The Fund may purchase put options ("puts") which
relate to: (i) securities held by it, (ii) Stock Index Futures (whether or not
it holds such Stock Index Futures in its portfolio), or (iii) broadly-based
stock indices. The Fund may not sell puts other than those it previously
purchased, nor purchase puts on securities it does not hold. The fund may
purchase calls: (a) as to securities, broadly-based stock indices or Stock
Index Futures, or (b) to effect a "closing purchase transaction" to terminate
its obligation on a call it has previously written. A call or put may be
purchased only if, after such purchase, the value of all put and call options
held by the Fund would not exceed 5% of the Fund's total assets.
When the Fund purchases a call (other than in a closing purchase transaction),
it pays a premium and, except as to calls on stock indices, has the right to buy
the underlying investment from a seller of a corresponding call on the same
investment during the call period at a fixed exercise price. The Fund benefits
only if the call is sold at a profit or if, during the call period, the market
price of the underlying
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investment is above the sum of the call price plus the transaction costs and the
premium paid for the call and the call is exercised. If the call is not
exercised or sold (whether or not at a profit), it will become worthless at its
expiration date and the Fund will lose its premium payments and the right to
purchase the underlying investment. When the Fund purchases a call on a stock
index, it pays a premium, but settlement is in cash rather than by delivery of
an underlying investment.
When the Fund purchases a put, it pays a premium and, except as to puts on stock
indices, has the right to sell the underlying investment to a seller of a
corresponding put on the same investment during the put period at a fixed
exercise price. Buying a put on a security or Stock Index Future the Fund owns
enables the Fund to attempt to protect itself during the put period against a
decline in the value of the underlying investment below the exercise price by
selling the underlying investment at the exercise price to a seller of a
corresponding put. If the market price of the underlying investment is equal to
or above the exercise price and, as a result, the put is not exercised or
resold, the put will become worthless at its expiration date and the Fund will
lose its premium payment and the right to sell the underlying investment; the
put may, however, be sold prior to expiration (whether or not at a profit).
Purchasing a put on either a stock index or on a Stock Index Future not held by
the Fund permits the Fund either to resell the put or to buy the underlying
investment and sell it at the exercise price. The resale price of the put will
vary inversely with the price of the underlying investment. If the market price
of the underlying investment is above the exercise price and, as a result, the
put is not exercised, the put will become worthless on its expiration date. In
the event of a decline in price of the underlying investment, the Fund could
exercise or sell the put at a profit to attempt to offset some or all of its
loss on its portfolio securities. When the Fund purchases a put on a stock
index, or on a Stock Index Future not held by it, the put protects the Fund to
the extent that the index moves in a similar pattern to the securities held. In
the case of a put on a stock index or Stock Index Future, settlement is in cash
rather than by the Fund's delivery of the underlying investment.
STOCK INDEX FUTURES. The Fund may buy and sell futures contracts only if they
relate to broadly-based stock indices ("Stock Index Futures"). A stock index is
"broadly-based" if it includes stocks that are not limited to issuers in any
particular industry or group of industries. Stock Index Futures obligate the
seller to deliver (and the purchaser to take) cash to settle the futures
transaction, or to enter into an offsetting contract. No physical delivery of
the underlying stocks in the index is made.
No price is paid or received upon the purchase or sale of a Stock Index Future.
Upon entering into a Futures transaction, the Fund will be required to deposit
an initial margin payment in cash or U.S. Treasury bills with a futures
commission merchant (the "futures broker"). The initial margin will be
deposited with the Fund's Custodian in an account registered in the futures
broker's name; however the futures broker can gain access to that account only
under specified conditions. As the Future is marked to market to reflect
changes in its market value, subsequent margin payments, called variation
margin, will be paid to or by the futures broker on a daily basis. Prior to
expiration of the Future, if the Fund elects to close out its position by taking
an opposite position, a final determination of variation margin is made,
additional cash is required to be paid by or released to the Fund, and any loss
or gain is realized for tax purposes. Although Stock Index Futures by their
terms call for settlement by the delivery of cash, in most cases the obligation
is fulfilled without such delivery, by entering into an offsetting transaction.
All futures transactions are effected through a clearinghouse associated with
the exchange on which the contracts are traded.
Puts and calls on broadly-based stock indices or Stock Index Futures are similar
to puts and calls on securities or futures contracts except that all settlements
are in cash and gain or loss depends on changes
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in the index in question (and thus on price movements in the stock market
generally) rather than on price movements in individual securities or futures
contracts. When the Fund buys a call on a stock index or Stock Index Future, it
pays a premium. During the call period, upon exercise of a call by the Fund, a
seller of a corresponding call on the same index will pay the Fund an amount of
cash to settle the call if the closing level of the stock index or Stock Index
Future upon which the call is based is greater than the exercise price of the
call; that cash payment is equal to the difference between the closing price of
the index and the exercise price of the call times a specified multiple (the
"multiplier") which determines the total dollar value for each point of
difference. When the Fund buys a put on a stock index or Stock Index Future, it
pays a premium and has the right during the put period to require a seller of a
corresponding put, upon the Fund's exercise of its put, to deliver to the Fund
an amount of cash to settle the put if the closing level of the stock index or
Stock Index Future upon which the put is based is less than the exercise price
of the put; that cash payment is determined by the multiplier, in the same
manner as described above as to calls.
ADDITIONAL INFORMATION ABOUT HEDGING INSTRUMENTS AND THEIR USE. The Fund's
Custodian, or a securities depository acting for the Custodian, will act as the
Fund's escrow agent, through the facilities of the Options Clearing Corporation
("OCC"), as to the securities on which the Fund has written options, or as to
other acceptable escrow securities, so that no margin will be required for such
transactions. OCC will release the securities on the expiration of the option
or upon the Fund's entering into a closing transaction. An option position may
be closed out only on a market which provides secondary trading for options of
the same series, and there is no assurance that a liquid secondary market will
exist for any particular option.
The Fund's option activities may affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Fund may cause the
Fund to sell related portfolio securities, thus increasing its turnover rate in
a manner beyond the Fund's control. The exercise by the Fund of puts on
securities or Stock Index Futures may cause the sale of related investments,
also increasing portfolio turnover. Although such exercise is within the Fund's
control, holding a put might cause the Fund to sell the underlying investment
for reasons which would not exist in the absence of the put. The Fund will pay
a brokerage commission each time it buys or sells a call, a put or an underlying
investment in connection with the exercise of a put or call. Such commissions
may be higher than those which would apply to direct purchases or sales of the
underlying investments. Premiums paid for options are small in relation to the
market value of such investments and consequently, put and call options offer
large amounts of leverage. The leverage offered by trading in options could
result in the Fund's net asset value being more sensitive to changes in the
value of the underlying investment.
REGULATORY ASPECTS OF HEDGING INSTRUMENTS AND COVERED CALLS. The Fund must
operate within certain restrictions as to its long and short positions in Stock
Index Futures and options thereon under a rule (the "CFTC Rule") adopted by the
Commodity Futures Trading Commission (the "CFTC") under the Commodity Exchange
Act (the "CEA"), which excludes the Fund from registration with the CFTC as a
"commodity pool operator" (as defined in the CEA) if it complies with the CFTC
Rule. Under these restrictions the Fund will not, as to any positions, whether
short, long or a combination thereof, enter into Stock Index Futures and options
thereon for which the aggregate initial margins and premiums exceed 5% of the
fair market value of its total assets, with certain exclusions as defined in the
CFTC Rule. Under the restrictions, the Fund also must, as to its short
positions, use Stock Index Futures and options thereon solely for bona-fide
hedging purposes within the meaning and intent of the applicable provisions
under the CEA.
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Transactions in options by the Fund are subject to limitations established by
each of the exchanges governing the maximum number of options which may be
written or held by a single investor or group of investors acting in concert,
regardless of whether the options were written or purchased on the same or
different exchanges or are held in one or more accounts or through one or more
exchanges or brokers. Thus, the number of options which the Fund may write or
hold may be affected by options written or held by other entities, including
other investment companies having the same or an affiliated investment adviser.
Position limits also apply to Stock Index Futures. An exchange may order the
liquidation of positions found to be in violation of those limits and may impose
certain other sanctions. Due to requirements under the Investment Company Act,
when the Fund purchases a Stock Index Future, the Fund will maintain, in a
segregated account or accounts with its custodian bank, cash or readily-
marketable, short-term (maturing in one year or less) debt instruments in an
amount equal to the market value of the securities underlying such Stock Index
Future, less the margin deposit applicable to it.
TAX ASPECTS OF HEDGING INSTRUMENTS. The Fund intends to qualify as a "regulated
investment company" under the Internal Revenue Code of 1986 (the "Code"). One
of the tests for such qualification is that less than 30% of its gross income
must be derived from gains realized on the sale of securities held for less than
three months. Due to this limitation, the Fund will limit the extent to which
it engages in the following activities, but will not be precluded from them: (i)
selling investments, including Stock Index Futures, held for less than three
months, whether or not they were purchased on the exercise of a call held by the
Fund; (ii) purchasing calls or puts which expire in less than three months;
(iii) effecting closing transactions with respect to calls or puts purchased
less than three months previously; (iv) exercising puts held by the Fund for
less than three months; and (v) writing calls on investments held for less than
three months.
POSSIBLE RISK FACTORS IN HEDGING. In addition to the risks discussed above,
there is a risk in using short hedging by selling Stock Index Futures or
purchasing puts on stock indices that the prices of the applicable index (thus
the prices of the Hedging Instruments) will correlate imperfectly with the
behavior of the cash (i.e., market value) prices of the Fund's equity
securities. The ordinary spreads between prices in the cash and futures markets
are subject to distortions due to differences in the natures of those markets.
First, all participants in the futures markets are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures markets depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures markets could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit requirements in the futures
markets are less onerous than margin requirements in the securities markets.
Therefore, increased participation by speculators in the futures markets may
cause temporary price distortions.
The risk of imperfect correlation increases as the composition of the Fund's
portfolio diverges from the securities included in the applicable index. To
compensate for the imperfect correlation of movements in the price of the equity
securities being hedged and movements in the price of the Hedging Instruments,
the Fund may use Hedging Instruments in a greater dollar amount than the dollar
amount of equity securities being hedged if the historical volatility of the
prices of such equity securities being hedged is more than the historical
volatility of the applicable index. It is also possible that where the Fund has
used Hedging Instruments in a short hedge, the market may advance and the value
of equity securities held in the Fund's portfolio may decline. If this
occurred, the Fund would lose money on the Hedging Instruments and also
experience a decline in value in its equity securities. However, while this
could occur for a very brief period or to a very small degree, the value of a
diversified portfolio of equity
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securities will tend to move over time in the same direction as the indices upon
which the Hedging Instruments are based.
If the Fund uses Hedging Instruments to establish a position in the equities
markets as a temporary substitute for the purchase of individual equity
securities (long hedging) by buying Stock Index Futures and/or calls on such
Futures, on securities or on stock indices, it is possible that the market may
decline; if the Fund then concludes not to invest in equity securities at that
time because of concerns as to possible further market decline or for other
reasons, the Fund will realize a loss on the Hedging Instruments that is not
offset by a reduction in the price of the equity securities purchased.
SHORT SALES AGAINST-THE-BOX
After the Fund makes a short sale against-the-box, while the short position is
open, the Fund must own an equal amount of the securities sold short, 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. Short
sales against-the-box may be made to defer, for Federal income tax purposes,
recognition of gain or loss on the sale of securities "in the box" until the
short position is closed out.
INVESTMENT RESTRICTIONS
The Fund's significant investment restrictions are described in the Prospectus.
The following investment restrictions, except where stated to be non-fundamental
policies, are also fundamental policies of the Fund and, together with the
fundamental policies and investment objective described in the Prospectus,
cannot be changed without the vote of a "majority" of the Fund's outstanding
shares. Under the Investment Company Act of 1940 (the "1940 Act"), such a
"majority" vote is defined as the vote of the holders of the lesser of: (i) 67%
or more of the shares present or represented by proxy at a meeting of
shareholders, if the holders of more than 50% of the outstanding shares are
present, or (ii) more than 50% of the outstanding shares. Under these
additional restrictions, the Fund cannot:
(a) Underwrite securities of other companies except insofar as the Fund
might be deemed to be an underwriter in the resale of any securities
held in its portfolio;
(b) Invest in commodities or commodity contracts other than Hedging
Instruments which it may use as permitted by any of its other
fundamental policies, whether or not any such Hedging Instrument is
considered to be a commodity or a commodity contract;
(c) Purchase securities on margin; however, the Fund may make margin
deposits in connection with any Hedging Instruments which it may use
as permitted by any of its other fundamental policies;
(d) Purchase or write puts or calls except as permitted by any of its
other fundamental policies;
(e) Lend money except in connection with the acquisition of that portion
of publicly-distributed debt securities which the Fund's investment
policies and restrictions permit it to purchase (see "Investment
Objective and Policies" and "Special Investment Methods" in the
Prospectus); the Fund may also make loans of portfolio securities (see
"Loans of Portfolio Securities") and enter into repurchase agreements
(see "Repurchase Agreements");
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(f) Pledge, mortgage or hypothecate its assets to an extent greater than
10% of the value of the total assets of the Fund; however, this does
not prohibit the escrow arrangements contemplated by the put and call
activities of the Fund or other collateral or margin arrangements in
connection with any of the Hedging Instruments which it may use as
permitted by any of its other fundamental policies;
(g) 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;
(h) As a non-fundamental policy, invest in or hold securities of any
issuer if officers or Trustees of the Company or SCMI individually
owning more than 0.5% of the securities of such issuer together own
more than 5% of the securities of such issuer;
(i) Invest in companies for the purpose of acquiring control or management
thereof;
(j) Invest in interests in oil, gas or other mineral exploration or
development programs but may purchase readily marketable securities of
companies which operate, invest in, or sponsor such programs; or
(k) Invest in real estate or in interests in real estate, but may purchase
readily marketable securities of companies holding real estate or
interests therein.
MANAGEMENT
TRUSTEES AND OFFICERS
The following information relates to the principal occupations of each Trustee
and executive officer of the Company during the past five years and shows the
nature of any affiliation with SCMI.
PETER E. GUERNSEY, Oyster Bay, New York - a Trustee of the Trust - Insurance
Consultant since August 1986; prior thereto Senior Vice President, Marsh &
McLennan, Inc., insurance brokers.
RALPH E. HANSMANN, 40 Wall Street, New York, New York - a Trustee of the Trust -
Private investor; Director, First Eagle Fund of America, Inc.; Director, Verde
Exploration, Ltd.; Trustee Emeritus, Institute for Advanced Study; Trustee and
Treasurer, New York Public Library; Life Trustee, Hamilton College.
JOHN I. HOWELL, 7 Riverside Road, Greenwich, Connecticut - a Trustee of the
Trust - Private Consultant since February 1987; Director, American International
Group, Inc.; Director, American International Life Assurance Company of New
York.
LAURA E. LUCKYN-MALONE(a) (b) (c), 787 Seventh Avenue, New York, New York -
President and a Trustee of the Trust - Managing Director of SCMI since October
1995; Director of SWIS since July 1995; prior thereto, Director and Senior Vice
President of SCMI since February 1990; Director and President, Schroder
Advisors.
CLARENCE F. MICHALIS, 44 East 64th Street, New York, New York - a Trustee of the
Trust - Chairman of the Board of Directors, Josiah Macy, Jr. Foundation
(charitable foundation).
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HERMANN C. SCHWAB, 787 Seventh Avenue, New York, New York - Chairman (Honorary)
and a Trustee of the Trust - retired since March, 1988; prior thereto,
consultant to SCMI since February 1, 1984.
MARK J. SMITH(a) (b), 33 Gutter Lane, London, England - a Vice President and a
Trustee of the Trust - First Vice President of SCMI since April 1990; Director
and Vice President, Schroder Advisors.
ROBERT G. DAVY, 787 Seventh Avenue, New York, New York - a Vice-President of the
Trust - Director of SCMI and Schroder Capital Management International Ltd.
since 1994; First Vice President of SCMI since July, 1992; prior thereto,
employed by various affiliates of Schroders plc in various positions in the
investment research and portfolio management areas since 1986.
RICHARD R. FOULKES, 787 Seventh Avenue, New York, New York - a Vice President of
the Trust; Deputy Chairman of SCMI since October 1995; Director of SCMI since
1979, Director of Schroder Capital Management International Ltd. since 1989, and
Executive Vice President of both of these entities.
JOHN Y. KEFFER, 2 Portland Square, Portland, Maine - a Vice President of the
Trust. President of Forum Financial Services, Inc., the Fund's sub-
administrator, and Forum Financial Corp., the Fund's transfer and dividend
disbursing agent and fund accountant.
JANE P. LUCAS, (c) 787 Seventh Avenue, New York, New York - Vice President of
the Trust - Director and Senior Vice President SCMI; Director of SWIS since
September 1995; Assistant Director Schroder Investment Management Ltd. since
June 1991.
CATHERINE A. MAZZA, 787 Seventh Avenue, New York, New York - a Vice President of
the Trust - Senior Vice President Schroder Advisors since December 1995; Vice
President of SCMI since October 1994; prior thereto, held various marketing
positions at Alliance Capital, an investment adviser, since July 1985.
FARIBA TALEBI, 787 Seventh Avenue, New York, New York - a Vice President of the
Trust - First Vice President of SCMI since April 1993, employed in various
positions in the investment research and portfolio management areas since 1987.
JOHN A. TROIANO(b), 787 Seventh Avenue, New York, New York - a Vice President of
the Trust - Managing Director of SCMI since October 1995; Director of Schroder
Advisors since October 1992, Director and Senior Vice President of SCMI since
1991; prior thereto, employed by various affiliates of SCMI in various positions
in the investment research and portfolio management areas since 1981.
IRA L. UNSCHULD, 787 Seventh Avenue, New York, New York - a Vice President of
the Trust - a Vice President of SCMI since April, 1993 and an Associate from
July, 1990 to April, 1993; prior to July, 1990, employed by various financial
institutions as a securities or financial analyst.
ROBERT JACKOWITZ(b) (c), 787 Seventh Avenue, New York, New York - Treasurer of
the Trust - Vice President of SWIS since September 1995; Treasurer of SWIS and
Schroder Advisers since July 1995; Vice President of SCMI since June 1995; and
Assistant Treasurer of Schroders Incorporated since January 1993.
MARGARET H. DOUGLAS-HAMILTON(b) (c), 787 Seventh Avenue, New York, New York -
Secretary of the Trust - Secretary of SWIS since July 1995; Secretary of
Schroder Advisers since April 1990; First Vice
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President and General Counsel of Schroders Incorporated(b) since May 1987; prior
thereto, partner of Sullivan & Worcester, a law firm.
DAVID I. GOLDSTEIN, 2 Portland Square, Portland, Maine - Assistant Treasurer and
Assistant Secretary of the Trust - Counsel, Forum Financial Services, Inc. Since
1991; prior thereto, associate at Kirkpatrick & Lockhart, Washington, D.C.
THOMAS G. SHEEHAN, 2 Portland Square, Portland, Maine - Assistant Treasurer and
Assistant Secretary of the Trust - Counsel, Forum Financial Services, Inc. since
1993; prior thereto, Special Counsel, U.S. Securities and Exchange Commission,
Division of Investment Management, Washington, D.C.
BARBARA GOTTLIEB(c), 787 Seventh Avenue, New York, New York - Assistant
Secretary of the Trust - Assistant Vice President of SWIS since July 1995 prior
thereto held various positions with SWIS affiliates.
GERARDO MACHADO, 787 Seventh Avenue, New York, New York - Assistant Secretary of
the Trust - Associate, SCMI.
(a) Interested Trustee of the Trust within the meaning of the 1940 Act.
(b) Schroder Fund Advisors, Inc. ("Schroder Advisors") is a wholly-owned
subsidiary of SCMI, which is a wholly-owned subsidiary of Schroders
Incorporated, which in turn is an indirect, wholly-owned U.S. subsidiary of
Schroders plc.
(c) Schroder Wertheim Investment Services, Inc. ("SWIS") is a wholly-owned
subsidiary of Schroder Wertheim Holdings Incorporated which is a wholly-owned
subsidiary of Schroders, Incorporated, which in turn is an indirect wholly-owned
U.S. subsidiary of Schroders plc.
Officers and Trustees who are interested persons of the Trust receive no salary,
fees or compensation from the Fund. Independent Trustees of the Trust receive
an annual fee of $1,000 and a fee of $250 for each meeting of the Board attended
by them except in the case of Mr. Schwab, who receives an annual fee of $1,500
and a fee of $500 for each meeting attended. The Fund has no bonus, profit
sharing, pension or retirement plans.
The following table provides the fees paid to each Trustee of the Trust for the
fiscal year ended October 31, 1995.
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<TABLE>
<CAPTION>
Name of Trustee Aggregate Pension or Estimated Annual Total
Compensation Retirement Benefits Upon Compensation
From Trust Benefits Accrued Retirement From Trust And
As Part of Trust Fund Complex
Expenses Paid To Trustees
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mr. Guernsey $4,000 $0 $0 $4000
Mr. Hansmann 3,500 0 0 3,500
Mr. Howell 4,000 0 0 4,000
Ms. Luckyn-Malone 0 0 0 0
Mr. Michalis 3,000 0 0 3,000
Mr. Schwab 7,000 0 0 7,000
Mr. Smith 0 0 0 0
</TABLE>
As of April ___, 1996, the officers and Trustees of the Trust owned, in the
aggregate, less than 1% of the Fund's outstanding shares.
Although the Trust is a Delaware business trust, certain of its Trustees or
officers are residents of the United Kingdom and substantially all of their
assets may be located outside of the U.S. As a result it may be difficult for
U.S. investors to effect service upon such persons within the U.S., or to
realize judgments of courts of the U.S. predicated upon civil liabilities of
such persons under the Federal securities laws of the U.S. The Trust has been
advised that there is substantial doubt as to the enforceability in the United
Kingdom of such civil remedies and criminal penalties as are afforded by the
Federal securities laws of the U.S. Also it is unclear if extradition treaties
now in effect between the U.S. and the United Kingdom would subject such persons
to effective enforcement of the criminal penalties of such acts.
INVESTMENT ADVISER
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 dated July 27, 1993. SCMI is a wholly-owned United
States subsidiary of Schroders Incorporated, the wholly-owned United States
holding company subsidiary of Schroders plc. Schroders plc is the holding
company parent of a large worldwide group of banks and financial service
companies (referred to as the "Schroder Group"), with associated companies and
branch and representative offices located in seventeen countries worldwide. The
Schroder Group specializes in providing investment management services, with
Group funds under management currently in excess of $100 billion.
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 also furnishes to the Board of Trustees, which has overall
responsibility for the business and affairs of the Trust, periodic reports on
the investment performance of the Fund.
Under the terms of the Investment Advisory Contract, SCMI is required to manage
the Fund's portfolio in accordance with applicable laws and regulations. In
making its investment decisions, SCMI does not use material inside information
that may be in its possession or in the possession of its affiliates.
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The Investment Advisory Contract will continue in effect provided such
continuance is approved annually (i) by the holders of a majority of the
outstanding voting securities of the Fund or by the Board and (ii) by a majority
of the Trustees who are not parties to such Contract or "interested persons" (as
defined in the 1940 Act) of any such party. The Investment Advisory Contract
may be terminated without penalty by vote of the Trustees or the shareholders of
the Fund on 60 days' written notice to the Adviser, or by the Adviser on 60
days' written notice to the Trust and it will terminate automatically if
assigned. The Investment Advisory Contract also provides that, with respect to
the Fund, neither SCMI nor its personnel shall be liable for any error of
judgment or mistake of law or for any act or omission in the performance of its
or their duties to the Fund, except for willful misfeasance, bad faith or gross
negligence in the performance of the SCMI's or their duties or by reason of
reckless disregard of its or their obligations and duties under the Investment
Advisory Contract.
For its services, the Fund pays SCMI a monthly fee equal on an annual basis to
0.50% of its average daily net assets for the first $100 million of the Fund's
net assets, 0.40% of the next $150 million of average daily assets, and 0.35% of
the Fund's average daily net assets in excess of $250 million. For the period
from commencement of operations through October 31, 1993, SCMI received fees of
$11,958. For the fiscal years ended October 31, 1994 and 1995, SCMI received
fees of $63,210 and $71,188, respectively.
ADMINISTRATIVE SERVICES
On behalf of the Fund, the Trust has entered into an Administrative Services
Contract with Schroder Fund Advisors Inc. ("Schroder Advisors"), 787 Seventh
Avenue, New York, New York 10019. The Trust and Schroder Advisors have entered
into a Sub-Administration Agreement with Forum Financial Services, Inc.
("Forum"). Pursuant to their agreements, Schroder Advisors 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,
including among other things, (i) preparation of shareholder reports and
communications, (ii) regulatory compliance, such as reports to and filings with
the Securities and Exchange Commission and state securities commissions, and
(iii) general supervision of the operation of the Fund, including coordination
of the services performed by the Fund's investment adviser, transfer agent,
custodian, independent accountants, legal counsel and others. Schroder Advisors
is a wholly-owned subsidiary of SCMI, and is a registered broker-dealer
organized to act as administrator and distributor of mutual funds. Effective
July 5, 1995, Schroder Advisors changed its name from Schroder Capital
Distributors Inc.
For these services, Schroder Advisors will receive from the Fund a fee, payable
monthly, at the annual rate of 0.25% of the Fund's average daily net assets for
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 the Fund's average daily
net assets in excess of $250 million. The fees paid by the Fund to SCMI and
Schroder Advisors therefore may equal up to 0.75% of the Fund's average daily
net assets. For the period from commencement of operations through October 31,
1993, Schroder Advisors received fees of $5,979. For the fiscal years ended
October 31, 1994 and 1995, Schroder Advisors received fees of $31,690 and
$35,594, respectively. Payment for Forum's services is made by Schroder
Advisors and is not a separate expense of the Fund.
The Administrative Services Contract and Sub-Administration Agreement are
terminable with respect to the Fund without penalty, at any time, by vote of a
majority of the Trustees who are not "interested persons" of the Trust and who
have no direct or indirect financial interest in the operation of the Fund's
Distribution Plan or in the Administrative Services Contract or Sub-
Administration Agreement, upon not
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more than 60 days' written notice to Schroder Advisors or Forum, as appropriate,
or by vote of the holders of a majority of the shares of the Fund, or, upon 60
days' notice, by Schroder Advisors or Forum. The Administrative Services
Contract will terminate automatically in the event of its assignment.
DISTRIBUTION OF FUND SHARES
Under a Distribution Plan (the "Plan") adopted by the Fund, the Trust may pay
directly or may reimburse the Investment Adviser or a broker-dealer registered
under the Securities Exchange Act of 1934 (the Investment Adviser or such
registered broker-dealer, if so designated, to be a "Distributor" of the Fund's
shares) monthly (subject to a limit of 0.50% per annum of the Fund's average
daily net assets) for the sum of (a) advertising expenses including advertising
by radio, television, newspapers, magazines, brochures, sales literature or
direct mail, (b) costs of printing prospectuses and other materials to be given
or sent to prospective investors, (c) 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 (d) payments to broker-
dealers (other than the Distributor) or other organizations (other than banks)
for services rendered in the distribution of the Fund's shares, including
payments in amounts based on the average daily value of Fund shares owned by
shareholders in respect of which the broker-dealer or organization has a
distributing relationship. Any payment or reimbursement made pursuant to the
Plan is contingent upon the Board of Trustees' approval. 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. Salary expense of salesmen who are
responsible for marketing shares of the Fund may be allocated to various
portfolios of the Trust that have adopted a Plan similar to that of the Fund on
the basis of average net assets; travel expense is allocated to, or divided
among, the particular portfolios of the Trust for which it is incurred. The
Board of Trustees has concluded that there is a reasonable likelihood that the
Plan will benefit the Fund and its shareholders.
Schroder Advisors was appointed Distributor of the Fund's shares under the Plan
pursuant to an agreement approved by the Board of Trustees of the Trust at a
meeting held on November 2, 1992. Under such agreement, Schroder Advisors is
not obligated to sell any specific amount of Fund shares.
The Plan provides that it may not be amended to increase materially the costs
which the Fund may bear pursuant to the Plan without shareholder approval and
that other material amendments of the Plan must be approved by the Board of
Trustees, and by the Trustees who are neither "interested persons" (as defined
in the 1940 Act) of the Trust nor have any direct or indirect financial interest
in the operation of the Plan or in any related agreement, by vote cast in person
at a meeting called for the purpose of considering such amendments. The
selection and nomination of the Trustees of the Trust has been committed to the
discretion of the Trustees who are not "interested persons" of the Trust. The
Plan has been approved, and is subject to annual approval, by the Board of
Trustees and by the Trustees who are neither "interested persons" nor have any
direct or indirect financial interest in the operation of the Plan, by vote cast
in person at a meeting called for the purpose of voting on the Plan. The Board
of Trustees and the Trustees who are not "interested persons" and who have no
direct or indirect financial interest in the operation of the Plan voted to
approve the Plan at a meeting held on November 2, 1992. The Plan was approved
by the initial shareholders of the Fund at a meeting held on July 27, 1993. At
a meeting held on November 21, 1994, the Board of Trustees and the Trustees who
are not "interested persons" and who have no direct or indirect financial
interest in the operation of the Plan voted to continue the Plan for the one-
year period ending February 1, 1996. The Plan is terminable with respect to the
Fund at any time by a vote of a majority of the Trustees who are not "interested
persons" of the Trust and who have no direct or indirect financial interest in
the operation of the Plan or by vote of the holders of a majority of the shares
of the Fund.
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During the period from commencement of operations through October 31, 1995, the
Fund spent, respectively, pursuant to the Plan, the following amounts on:
Period Ended
10/31/95
------------
advertising $ -0-
printing and mailing of prospectuses to other than $ -0-
current shareholders
compensation to underwriters $ -0-
compensation to dealers $ -0-
compensation to sales personnel $ -0-
interest, carrying, or other financing charges $ -0-
SERVICE ORGANIZATIONS
The Fund may also contract with banks, trust companies, broker-dealers or other
financial organizations ("Service Organizations") to provide certain
administrative services for the Fund. The Fund could pay fees to Service
Organizations (which 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 had a servicing
relationship. Services provided by Service Organizations may include, among
other things: providing necessary personnel and facilities to establish and
maintain certain shareholder accounts and records; assisting in processing
purchase and redemption transactions; arranging for the wiring of funds;
transmitting and receiving funds in connection with client orders to purchase or
redeem shares; verifying and guaranteeing client signatures in connection with
redemption orders, transfers among and changes in client-designated accounts;
providing periodic statements showing a client's account balances and, to the
extent practicable, integrating such information with other client transactions;
furnishing periodic and annual statements and confirmations of all purchases and
redemptions of shares in a client's account; transmitting proxy statements,
annual reports, and updating prospectuses and other communications from the Fund
to clients; and such other services as the Fund or a client reasonably may
request, to the extent permitted by applicable statute, rule or regulation.
Neither SCMI nor Schroder Advisors will be a Service Organization or receive
fees for servicing.
Some Service Organizations could 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 would agree to transmit to its clients a schedule of any such fees.
Shareholders using Service Organizations would be urged to consult them
regarding any such fees or conditions.
The Glass-Steagall Act and other applicable laws provide that banks may not
engage in the business of underwriting, selling or distributing securities.
There currently is no precedent prohibiting banks from performing administrative
and shareholder servicing functions as Service Organizations. However, judicial
or administrative decisions or interpretations of such laws, as well as changes
in either federal or
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state statutes or regulations relating to the permissible activities of banks
and their subsidiaries or affiliates, could prevent a bank service organization
from continuing to perform all or a part of its servicing activities. If a bank
were prohibited from so acting, its shareholder clients would be permitted to
remain shareholders of the Fund and alternative means for continuing the
servicing of such shareholders would be sought. In that event, changes in the
operation of the Fund might occur and a shareholder serviced by such a bank
might no longer be able to avail itself of any services then being provided by
the bank. It is not expected that shareholders would suffer any adverse
financial consequences as a result of any of these occurrences.
PORTFOLIO ACCOUNTING
Forum Financial Corp. ("FFC"), an affiliate of Forum, performs portfolio
accounting services for the Fund pursuant to a Fund Accounting Agreement with
the Trust. The Fund Accounting Agreement will continue in effect only if such
continuance is specifically approved at least annually by the Board of Trustees
or by a vote of the shareholders of the Trust and in either case by a majority
of the Trustees who are not parties to the Fund Accounting Agreement or
interested persons of any such party, at a meeting called for the purpose of
voting on the Fund Accounting Agreement.
Under its agreement, FFC prepares and maintains books and records of the Fund on
behalf of the Trust that are required to be maintained under the 1940 Act,
calculates the net asset value per share of the Fund and dividends and capital
gain distributions and prepares periodic reports to shareholders and the
Securities and Exchange Commission. For its services, FFC receives from the
Trust with respect to the Fund a fee of $36,000 per year plus, for each class of
the Fund above one, $12,000 per year. FFC is paid an additional $24,000 per
year with respect to global and international funds. In addition, FFC is paid
an additional $12,000 per year with respect to tax-free money market funds and
funds with more than 25% of their total assets invested in asset backed
securities, that have more than 100 security positions or that have a monthly
portfolio turnover rate of 10% or greater.
FFC is required to use its best judgment and efforts in rendering fund
accounting services and is not be liable to the Trust for any action or inaction
in the absence of bad faith, willful misconduct or gross negligence. FFC is not
responsible or liable for any failure or delay in performance of its fund
accounting obligations arising out of or caused, directly or indirectly, by
circumstances beyond its reasonable control and the Trust has agreed to
indemnify and hold harmless FFC, its employees, agents, officers and directors
against and from any and all claims, demands, actions, suits, judgments,
liabilities, losses, damages, costs, charges, counsel fees and other expenses of
every nature and character arising out of or in any way related to FFC's actions
taken or failures to act with respect to a Fund or based, if applicable, upon
information, instructions or requests with respect to a Fund given or made to
FFC by an officer of the Trust duly authorized. This indemnification does not
apply to FFC's actions taken or failures to act in cases of FFC's own bad faith,
willful misconduct or gross negligence.
FFC assumed responsibility for fund accounting on August 15, 1994. Previously,
these services were performed by Schroders Incorporated, the parent company of
SCMI. For the fiscal years ended October 31, 1994 and October 31, 1995, the
Fund paid fund accounting fees of $28,797 and $36,000, respectively.
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FEES AND EXPENSES
As compensation for the advisory, administrative and management services
rendered to the Fund, SCMI and Schroder Advisors will each earn monthly fees at
the following annual rates:
Portion of average daily value Fee Rate
of the Fund's net assets SCMI Schroder Advisors
- ------------------------- ---- -----------------
up to $100 million 0.50% 0.25%
$100 million to $250 million 0.40% 0.20%
over $250 million 0.35% 0.175%
However, certain of the states in which the shares of the Fund may be qualified
for sale impose limitations on the expenses of the Fund. If, in any fiscal
year, the total expenses of the Fund (excluding taxes, interest, expenses under
the Plan, brokerage commissions and other portfolio transaction expenses, other
expenditures which are capitalized in accordance with generally accepted
accounting principles and extraordinary expenses, but including the advisory and
administrative fees) exceed the expense limitations applicable to the Fund
imposed by the securities regulations of any such state, SCMI will reimburse the
Fund for 2/3 of the excess, and Schroder Advisors, the remaining 1/3 of the
excess. As of the date of this SAI, the Fund believes that the most restrictive
state expense limitation which might be applicable to the Fund requires
reimbursement of expenses in any year that applicable Fund expenses exceed 2
1/2% of the first $30 million of the average daily value of Fund net assets, 2%
of the next $70 million of the average daily value of Fund net assets and 1 1/2%
of the remaining average daily value of Fund net assets. For the period from
commencement of operations through October 31, 1995, no payments pursuant to
these limitations were required.
Except for the expenses paid by SCMI or Schroder Advisors, the Fund bears all
costs of its operations.
PORTFOLIO TRANSACTIONS
INVESTMENT DECISIONS
Investment decisions for the Fund and for the other investment advisory clients
of SCMI are made with a view to achieving their respective investment
objectives. Investment decisions are the product of many factors in addition to
basic suitability for the particular client involved. Thus, a particular
security may be bought or sold for certain clients even though it could have
been bought or sold for other clients at the same time. Likewise, a particular
security may be bought for one or more clients when one or more clients are
selling the security. In some instances, one client may sell a particular
security to another client. It also sometimes happens that two or more clients
simultaneously purchase or sell the same security, in which event each day's
transactions in such security are, insofar as is possible, averaged as to price
and allocated between such clients in a manner which in SCMI's opinion is
equitable to each and in accordance with the amount being purchased or sold by
each. There may be circumstances when purchases or sales of portfolio
securities for one or more clients will have an adverse effect on other clients.
BROKERAGE AND RESEARCH SERVICES
Transactions on U.S. stock exchanges and other agency transactions involve the
payment by the Fund of negotiated brokerage commissions. Such commissions vary
among different brokers. Also, a particular broker may charge different
commissions according to such factors as the difficulty and size of the
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transaction. There is generally no stated commission in the case of securities
traded in the over-the-counter markets, but the price paid by the Fund usually
includes an undisclosed dealer commission or mark-up. In underwritten
offerings, the price paid by the Fund includes a disclosed, fixed commission or
discount retained by the underwriter or dealer. For fiscal years ended October
31, 1993, 1994 and 1995, the Fund paid total brokerage commissions of $13,174,
$29,224 and $34,391, respectively.
The Investment Advisory Contract authorizes and directs SCMI to place orders for
the purchase and sale of the Fund's investments with brokers or dealers selected
by SCMI in its discretion and to seek "best execution" of such portfolio
transactions. SCMI places all such orders for the purchase and sale of
portfolio securities and buys and sells securities for the Fund through a
substantial number of brokers and dealers. In so doing, SCMI uses its best
efforts to obtain for the Fund the most favorable price and execution available.
The Fund may, however, pay higher than the lowest available commission rates
when SCMI believes it is reasonable to do so in light of the value of the
brokerage and research services provided by the broker effecting the
transaction. In seeking the most favorable price and execution, SCMI, having in
mind the Fund's best interests, considers all factors it deems relevant,
including, by way of illustration, price, the size of the transaction, the
nature of the market for the security, the amount of the commission, the timing
of the transaction taking into account market prices and trends, the reputation,
experience and financial stability of the broker-dealers involved and the
quality of service rendered by the broker-dealers in other transactions.
It has for many years been a common practice in the investment advisory business
for advisers of investment companies and other institutional investors to
receive research services from broker-dealers which execute portfolio
transactions for the clients of such advisers. Consistent with this practice,
SCMI may receive research services from broker-dealers with which SCMI places
the Fund's portfolio transactions. These services, which in some cases may also
be purchased for cash, include such items as general economic and security
market reviews, industry and company reviews, evaluations of securities and
recommendations as to the purchase and sale of securities. Some of these
services are of value to SCMI in advising various of its clients (including the
Fund), although not all of these services are necessarily useful and of value in
managing the Fund. The management fee paid by the Fund is not reduced because
SCMI and its affiliates receive such services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934 (the "1934
Act"), SCMI may cause the Fund to pay a broker-dealer which provides "brokerage
and research services" (as defined in the Act) to SCMI an amount of disclosed
commission for effecting a securities transaction for the Fund in excess of the
commission which another broker-dealer would have charged for effecting that
transaction.
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 Trustees 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.
Subject to the general policies of the Fund regarding allocation of portfolio
brokerage as set forth above, the Board of Trustees of the Trust has authorized
the Fund to employ Schroder Wertheim & Company, Incorporated ("Schroder
Wertheim") an affiliate of SCMI, to effect securities transactions of the Fund,
on the New York Stock Exchange only, provided certain other conditions are
satisfied as described below.
Payment of brokerage commissions to Schroder Wertheim for effecting such
transactions is subject to Section 17(e) of the 1940 Act, which requires, among
other things, that commissions for transactions on
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a national securities exchange paid by a registered investment company to a
broker which is an affiliated person of such investment company or an affiliated
person of another person so affiliated not exceed the usual and customary
broker's commissions for such transactions. It is the Fund's policy that
commissions paid to Schroder Wertheim will in the judgment of the officers of
the Trust responsible for making portfolio decisions and selecting brokers, be
(i) at least as favorable as commissions contemporaneously charged by Schroder
Wertheim on comparable transactions for its most favored unaffiliated customers
and (ii) at least as favorable as those which would be charged on comparable
transactions by other qualified brokers having comparable execution capability.
The Board of Trustees of the Trust, including a majority of the non-interested
Trustees, has adopted procedures pursuant to Rule 17e-1 promulgated by the
Securities and Exchange Commission under Section 17(e) to ensure that
commissions paid to Schroder Wertheim by the Fund satisfy the foregoing
standards. The Board will review all transactions at least quarterly for
compliance with such procedures.
The Fund has no understanding or arrangement to direct any specific portion of
its brokerage to Schroder Wertheim and will not direct brokerage to Schroder
Wertheim in recognition of research services. The Fund paid no commissions to
Schroder Wertheim during the fiscal years ended October 31, 1993, 1994 and 1995.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
DETERMINATION OF NET ASSET VALUE PER SHARE
The net asset value per share of the Fund is determined each day the New York
Stock Exchange (the "Exchange") is open as of 4:00 P.M. New York time that day,
by dividing the value of the Fund's net assets by the total number of Fund
shares outstanding. The Exchange's most recent holiday schedule (which is
subject to change) states that it will close on New Year's Day, President's Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. It may also close on other days.
The Trust's Board of Trustees has established procedures for the valuation of
the Fund's securities: (i) equity securities traded on a securities exchange or
on the NASDAQ National Market System for which last sale information is
regularly reported are valued at the last reported sales prices on their primary
exchange or the NASDAQ National Market System that day (or, in the absence of
sales that day, at values based on the last sale prices on the preceding trading
day or closing mid-market prices); (ii) NASDAQ and other unlisted equity
securities for which last sale prices are not regularly reported but for which
over-the-counter market quotations are readily available are valued at the most
recently reported mid-market prices; (iii) securities (including restricted
securities) not having readily-available market quotations are valued at fair
value under the Board's procedures; (iv) debt securities having a maturity in
excess of 60 days are valued at the mid-market prices determined by a portfolio
pricing service or obtained from active market makers on the basis of reasonable
inquiry; and (v) short-term debt securities (having a remaining maturity of 60
days or less) are valued at cost, adjusted for amortization of premiums and
accretion of discount.
Puts, calls and Stock Index Futures are valued at the last sales price on the
principal exchange on which they are traded, or, if there are no transactions,
in accordance with (i) above. When the Fund writes an option, an amount equal
to the premium received by the Fund is recorded in the Fund's books as an asset,
and an equivalent deferred credit is recorded as a liability. The deferred
credit is adjusted ("marked-to-market") to reflect the current market value of
the option.
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REDEMPTION IN KIND
In the event that payment for redeemed shares is made wholly or partly in
portfolio securities, brokerage costs may be incurred by the shareholder in
converting the securities to cash. An in kind distribution of portfolio
securities will be less liquid than cash. The shareholder may have difficulty
in finding a buyer for portfolio securities received in payment for redeemed
shares. Portfolio securities may decline in value between the time of receipt
by the shareholder and conversion to cash. A redemption in kind of the Fund's
portfolio securities could result in a less diversified portfolio of investments
for the Fund and could affect adversely the liquidity of the Fund's portfolio.
TAXATION
Under the Internal Revenue Code of 1986, as amended (the "Code"), the Fund and
each other portfolio established from time to time by the Board of Trustees of
the Trust will be treated as a separate taxpayer for Federal income tax purposes
with the result that: (a) each such portfolio must meet separately the income
and distribution requirements for qualification as a regulated investment
company, and (b) the amounts of investment income and capital gains earned will
be determined on a portfolio-by-portfolio (rather than on Trust-wide) basis.
The Fund intends to qualify as a regulated investment company under Subchapter M
of the Code. To qualify as a regulated investment company the Fund intends to
distribute to shareholders at least 90% of its "investment company taxable
income" as defined in the Code (which includes, among other items, dividends,
interest and the excess of any net short-term capital gains over net long-term
capital losses), and to meet certain diversification of assets, source of
income, and other requirements of the Code. By so doing, the Fund will not be
subject to Federal income tax on its investment company taxable income and "net
capital gains" (the excess of net long-term capital gains over net short-term
capital losses) distributed to shareholders. If the Fund does not meet all of
these Code requirements, it will be taxed as an ordinary corporation, and its
distributions will be taxable to shareholders as ordinary income.
Amounts not distributed on a timely basis in accordance with a calendar year
distribution requirement are subject to a 4% nondeductible excise tax. To
prevent imposition of the excise tax, the Fund must distribute for each calendar
year an amount equal to the sum of (1) at least 98% of its ordinary income
(excluding any capital gains or losses) for the calendar year, (2) at least 98%
of the excess of its capital gains over capital losses realized during the one-
year period ending October 31 of such year, and (3) all such ordinary income and
capital gains for previous years that were not distributed during such years. A
distribution will be treated as paid during the calendar year if it is declared
by the Fund in October, November or December of the year with a record date in
such month and paid by the Fund during January of the following year. Such
distributions will be taxable to shareholders in the calendar year in which the
distributions are declared, rather than the calendar year in which the
distributions are received.
Distributions of investment company taxable income (including realized net
short-term capital gain) are taxable to shareholders as ordinary income.
Generally, dividends of investment income (but not capital gain) from the Fund
will qualify for the Federal dividends-received deduction for corporate
shareholders to the extent such dividends do not exceed the aggregate amount of
dividends received by the Fund from domestic corporations, provided the Fund
shares are held by said shareholders for more than 45 days. If securities held
by the Fund are considered to be "debt-financed" (generally, acquired with
borrowed funds), are held by the Fund for less than 46 days (91 days in the case
of certain preferred stock), or are subject to certain forms of hedges or short
sales, the portion of the dividends paid by the Fund which corresponds to the
dividends paid with respect to such securities will not be eligible for the
corporate dividends-received deduction.
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Distributions of net long-term capital gain are taxable to shareholders as long-
term capital gain, regardless of the length of time the Fund shares have been
held by a shareholder, and are not eligible for the dividends received
deduction. A loss realized by a shareholder on the sale of shares of the Fund
with respect to which capital gain dividends have been paid will, to the extent
of such capital gain dividends, be treated as long-term capital loss although
such shares may have been held by the shareholder for one year or less.
Further, a loss realized on a disposition will be disallowed to the extent the
shares disposed of are replaced (whether by reinvestment of distributions or
otherwise) within a period of 61 days beginning 30 days before and ending 30
days after the shares are disposed of. In such a case, the basis of the shares
acquired will be adjusted to reflect the disallowed loss.
All distributions are taxable to the shareholder whether reinvested in
additional shares or received in cash. Shareholders receiving distributions in
the form of additional shares will have a cost basis for Federal income tax
purposes in each share received equal to the net asset value of a share of the
Fund on the reinvestment date. Shareholders will be notified annually as to the
Federal tax status of distributions.
Distributions by the Fund reduce the net asset value of the Fund's shares.
Should a distribution reduce the net asset value below a shareholder's cost
basis, such distribution nevertheless would be taxable to the shareholder as
ordinary income or capital gain as described above, even though, from an
investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implications of
buying shares just prior to a distribution. The price of shares purchased at
that time includes the amount of the forthcoming distribution. Those purchasing
just prior to a distribution will receive a distribution which will nevertheless
be taxable to them.
Upon redemption or sale of his shares, a shareholder will realize a taxable gain
or loss depending upon his basis in his shares. Such gain or loss generally
will be treated as capital gain or loss if the shares are capital assets in the
shareholder's hands. Such gain or loss generally will be long-term or short-
term depending upon the shareholder's holding period for the shares.
The Trust will be required to report to the Internal Revenue Service (the "IRS")
all distributions as well as gross proceeds from the redemption of Fund shares,
except in the case of certain exempt shareholders. All such distributions and
proceeds generally will be subject to the withholding of Federal income tax at a
rate of 31% ("backup withholding") in the case of non-exempt shareholders if (1)
the shareholder fails to furnish the Trust with and to certify the shareholder's
correct taxpayer identification number or social security number, (2) the IRS
notifies the Trust that the shareholder has failed to report properly certain
interest and dividend income to the IRS and to respond to notices to that
effect, or (3) when required to do so, the shareholder fails to certify that he
is not subject to backup withholding. If the withholding provisions are
applicable, any such distributions or proceeds, whether reinvested in additional
shares or taken in cash, will be reduced by the amount required to be withheld.
Any amounts withheld may be credited against the shareholder's Federal income
tax liability. Investors may wish to consult their tax advisers about the
applicability of the backup withholding provisions.
The foregoing discussion relates only to Federal income tax law as applicable to
U.S. persons (i.e., U.S. citizens and residents and U.S. domestic corporations,
partnerships, trusts and estates). Distributions by the Fund also may be
subject to state and local taxes, and their treatment under state and local
income tax laws may differ from the Federal income tax treatment. Shareholders
should consult their tax advisers with respect to particular questions of
Federal, state and local taxation. Shareholders who are not U.S. persons should
consult their tax advisers regarding U.S. and foreign tax consequences of
ownership of shares of the Fund including the likelihood that distributions to
them would be subject to withholding of U.S. tax at a rate of 30% (or a lower
rate under a tax treaty).
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OTHER INFORMATION
ORGANIZATION
The Trust was originally organized as a Maryland corporation on July 30, 1969.
On February 29, 1988, the Trust was recapitalized to enable the Board to
establish a series of separately managed investment portfolios, each having
different investment objectives and policies. At the time of the
recapitalization, the Trust's name was changed from "The Cheapside Dollar Fund
Limited" to "Schroder Capital Funds, Inc." On January 9, 1996, the Trust was
reorganized as a Delaware business trust. At that time, the Trust's name was
changed from "Schroder Capital Funds, Inc." to its present name. The Trust is
registered as an open-end management investment company under the Act.
Delaware law provides that shareholders shall be entitled to the same
limitations of personal liability extended to stockholders of private
corporations for profit. The securities regulators of some states, however,
have indicated that they and the courts in their state may decline to apply
Delaware law on this point. To guard against this risk, the Trust Instrument
contains an express disclaimer of shareholder liability for the debts,
liabilities, obligations, and expenses of the Trust. The Trust Instrument
provides for indemnification out of each series' property of any shareholder or
former shareholder held personally liable for the obligations of the series.
The Trust Instrument also provides that each series shall, upon request, assume
the defense of any claim made against any shareholder for any act or obligation
of the series and satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which Delaware law does not apply (or no contractual limitation
of liability was in effect) and the portfolio is unable to meet its obligations.
Forum believes that, in view of the above, there is no risk of personal
liability to shareholders.
CAPITALIZATION AND VOTING
The Trust has an unlimited number of authorized shares of beneficial interest.
The Board may, without shareholder approval, divide the authorized shares into
an unlimited number of separate portfolios or series (such as the Fund) and may
divide portfolios or series into classes of shares, and the costs of doing so
will be borne by the Trust. The Trust currently consists of five separate
portfolios, each of which has separate investment objectives and policies, and
five classes, one of which pertains to the Fund.
The shares of the Trust 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 Trustees can elect 100% of the Trustees if they choose to do so. A
shareholder is entitled to one vote for each full share held (and a fractional
vote for each fractional share held), then standing in his name on the books of
the Trust. Shares of each class would vote separately to approve investment
advisory agreements or changes in investment objectives and other fundamental
policies affecting the portfolio to which they pertain, but all classes would
vote together in the election of Trustees and ratification of the selection of
independent accountants. Shareholders of any particular class would not be
entitled to vote on any matters as to which such class were not affected.
The Trust will not hold annual meetings of shareholders. The matters considered
at an annual meeting typically include the reelection of Trustees, approval of
an investment advisory agreement, and the ratification of the selection of
independent accountants. These matters will not be submitted to shareholders
unless a meeting of shareholders is held for some other reason, such as those
indicated below. Each of the Trustees will serve until death, resignation or
removal. Vacancies will be filled by the remaining Trustees, subject to the
provisions of the 1940 Act requiring a meeting of shareholders for
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election of Trustees to fill vacancies when less than a majority of Trustees
then in office have been elected by shareholders. Similarly, the selection of
accountants and renewal of investment advisory agreements for future years will
be performed annually by the Board. Future shareholder meetings will be held to
elect Trustees if required by the 1940 Act, to obtain shareholder approval of
changes in fundamental investment policies, to obtain shareholder approval of
material changes in investment advisory agreements, to select new accountants if
the employment of the Trust's accountants has been terminated, and to seek any
other shareholder approval required under the 1940 Act. The Board has the power
to call a meeting of shareholders at any time when it believes it is necessary
or appropriate. In addition, Trust Instrument provides that a special meeting
of shareholders may be called at any time for any purpose by the holders of at
least 10% of the outstanding shares entitled to be voted at such meeting.
In addition to the foregoing rights, the Trust Instrument provides that holders
of at least two-thirds of the outstanding shares of the Trust may remove any
person serving as a Trustee either by declaration in writing or at a meeting
called for such purpose. Further, the Board is required to call a shareholders
meeting for the purpose of considering the removal of one or more Trustees if
requested in writing to do so by the holders of not less than 10% of the
outstanding shares of the Trust. In addition, the Board is required to provide
certain assistance if requested in writing to do so by ten or more shareholders
of record (who have been such for at least six months), holding in the aggregate
the lesser of shares of the Trust having a total net asset value of at least
$25,000 or 1% of the outstanding shares of the Trust, for the purpose of
enabling such holders to communicate with other shareholders of the Trust with a
view to obtaining the requisite signatures to request a special meeting to
consider such removal.
PRINCIPAL SHAREHOLDERS
As of April __, 1996 the following persons owned of record or beneficially 5% or
more of the Fund's shares:
SHAREHOLDER SHARE BALANCE PERCENT OF FUND
- ----------- ------------- ---------------
Schroder Nominees Limited 967,861.834 86.66%
120 Cheapside
London EC2V 6DS England
Gracechurch Co. 145,548.345 13.04%
75 Wall Street
New York, NY 10265
PERFORMANCE INFORMATION
The 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 will be expressed in terms of the
average annual compounded rate of return of a hypothetical investment in the
Fund over periods of 1, 5 and 10 years (up to the life of the Fund), calculated
pursuant to the following formula:
P (1+T)TO THE POWER OF n = ERV
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(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n = the number of years, and ERV = the ending redeemable value of
a hypothetical $1,000 payment made at the beginning of the period). All total
return figures will reflect the deduction of Fund expenses (net of certain
reimbursed expenses) on an annual basis, and will assume that all dividends and
distributions are reinvested when paid.
For the period from commencement of operations on August 6, 1993 through October
31, 1995, the average annual total return of the Fund was 22.57%. For the
fiscal year ended October 31, 1995, the average annual total return of the Fund
was 32.84%.
Quotations of total return will reflect only the performance of a hypothetical
investment in the Fund during the particular time period shown. Total return
for the Fund will vary based on changes in market conditions and the level of
the Fund's expenses, and no reported performance figure should be considered an
indication of performance which may be expected in the future.
In connection with communicating total return to current or prospective
investors, the Fund also may compare these figures to the performance of other
mutual funds tracked by mutual fund rating services or to other unmanaged
indexes which may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs.
Investors who purchase and redeem shares of the Fund through a customer account
maintained at a Service Organization may be charged one or more of the following
types of fees as agreed upon by the Service Organization and the investor, with
respect to the customer services provided by the Service Organization: account
fees (a fixed amount per month or per year); transaction fees (a fixed amount
per transaction processed); compensating balance requirements (a minimum dollar
amount a customer must maintain in order to obtain the services offered); or
account maintenance fees (a periodic charge based upon a percentage of the
assets in the account or of the dividends paid on these assets). Such fees will
have the effect of reducing the average annual total return of the Fund for
those investors.
CUSTODIAN
All securities and cash of the Fund are held by The Chase Manhattan Bank, N.A.,
Chase MetroTech Center, Brooklyn, New York 11245.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Forum Financial Corp., Portland, Maine, acts as the Fund's transfer agent and
dividend disbursing agent.
LEGAL COUNSEL
[LAW FIRM], 77 Water Street, New York, New York 10005, counsel to the Fund,
passes upon certain legal matters in connection with the shares offered by the
Fund.
INDEPENDENT ACCOUNTANTS
[ACCOUNTANT] L.L.P. ("ACCOUNTANT") serves as independent accountants for the
Fund. [ACCOUNTANT] provides audit services and consultation in connection with
review of U.S. Securities and Exchange Commission filings. ACCOUNTANT'S address
is One Post Office Square, Boston, Massachusetts 02109.
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REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information included in the
Fund's registration statement filed with the Securities and Exchange Commission
under the Securities Act of 1933 with respect to the securities offered hereby,
certain portions of which have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. The registration
statement, including the exhibits filed therewith, may be examined at the office
of the Securities and Exchange Commission in Washington, D.C.
Statements contained herein and in the Prospectus as to the contents of any
contract or other documents referred to are not necessarily complete, and, in
each instance, reference is made to the copy of such contract or other documents
filed as an exhibit to the registration statement, each such statement being
qualified in all respects by such reference.
FINANCIAL STATEMENTS
The audited Statement of Assets and Liabilities, Statement of Operations,
Statements of Changes in Net Assets, Statement of Investments, notes thereto,
and Financial Highlights of the Fund for the fiscal year ended October 31, 1995
and the Report of Independent Accountants thereon (included in the Annual Report
to shareholders), which are delivered along with this SAI, are incorporated
herein by reference.
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SCHRODER EMERGING MARKETS FUND
INSTITUTIONAL PORTFOLIO
TWO PORTLAND SQUARE
PORTLAND, MAINE 04101
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GENERAL INFORMATION: (207) 879-8903
ACCOUNT INFORMATION: (800) 344-8332
FAX: (207) 879-6206
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SCHRODER CAPITAL MANAGEMENT INTERNATIONAL INC. - INVESTMENT ADVISER
SCHRODER FUND ADVISORS INC. - ADMINISTRATOR AND DISTRIBUTOR
STATEMENT OF ADDITIONAL INFORMATION
Schroder Emerging Markets Fund Institutional Portfolio (the "Fund") is a non-
diversified, separately-managed portfolio of Schroder Capital Funds (Delaware)
(the "Trust"), an open-end management investment company currently consisting of
seven separate portfolios, each of which has different investment objectives and
policies.
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 U.S. issuers. See "The Fund
- - Special Risk Considerations." The Fund currently seeks to achieve its
investment objective by holding, as its only investment securities, the
securities of Schroder Emerging Markets Fund Institutional Portfolio (the
"Portfolio"), a separate portfolio of a registered open-end management
investment company ("Core Trust").
Institutional 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. Advisor Shares of the Fund are offered to
individual investors, in most cases through Service Organizations (as defined
herein). Advisor Shares incur more expenses than Institutional Shares.
This Statement of Additional Information ("SAI") is not a prospectus and is only
authorized for distribution when preceded or accompanied by the Prospectus for
the Fund dated May 1, 1996 (the "Prospectus"). This SAI contains additional and
more detailed information than that set forth in the Prospectus and should be
read in conjunction with the Prospectus. The Prospectus and SAI for the Fund
may be obtained without charge by writing or calling the Fund at the address and
information numbers printed above.
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May 1, 1996
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TABLE OF CONTENTS
INVESTMENT POLICIES
Introduction
Convertible Securities
Debt-to-Equity Conversions
U.S. Government Securities
Bank Obligations
Short-Term Debt Securities
Repurchase Agreements
Illiquid and Restricted Securities
Loans of Portfolio Securities
Forward Foreign Currency
Exchange Contracts
Options and Hedging
Warrants and Stock Rights
INVESTMENT RESTRICTIONS
MANAGEMENT
Officers and Trustees
Investment Adviser
Administrative Services
Distribution of Fund Shares
Service Organizations
Fees and Expenses
PORTFOLIO TRANSACTIONS
Investment Decisions
Brokerage and Research Services
ADDITIONAL PURCHASE AND
REDEMPTION INFORMATION
Determination of Net Asset Value
Per Share
Redemption in Kind
TAXATION
OTHER INFORMATION
Organization
Capitalization and Voting
Custodian
Transfer Agent and Dividend Disbursing Agent
Performance Information
Legal Counsel
Independent Accountant
APPENDIX - Ratings of
Corporate Debt Instruments
and Countries Excluded from
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Emerging Markets Category A-1
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INVESTMENT POLICIES
INTRODUCTION
The Fund's investment objective and policies authorize it to invest in certain
types of securities and to engage in certain investment techniques as identified
in "Investment Objective," "Investment Policies" and "Additional Investment
Policies" in the Prospectus. The following supplements the discussion found in
those sections by providing additional information or elaborating upon the
discussion with respect to certain of those securities and techniques. The Fund
currently seeks to achieve its investment objective by investing all of its
investment assets in the Portfolio, which has the same investment objective and
policies. As the Fund has the same investment policies as the Portfolio and
currently invests all of its assets in the Portfolio, investment policies are
discussed with respect to the Portfolio only.
CONVERTIBLE SECURITIES
The Portfolio may invest in convertible preferred stocks and convertible debt
securities. A convertible security is a bond, debenture, note, preferred stock
or other security that may be converted into or exchanged for a prescribed
amount of common stock of the same or a different issuer within a particular
period of time at a specified price or formula. Convertible securities rank
senior to common stocks in a corporation's capital structure and, therefore,
entail less risk than the corporation's common stock. The value of a
convertible security is a function of its "investment value" (its value as if it
did not have a conversion privilege), and its "conversion value" (the security's
worth if it were to be exchanged for the underlying security, at market value,
pursuant to its conversion privilege).
DEBT-TO-EQUITY CONVERSIONS
The Portfolio 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. Many conversion programs relate primarily to investments in
transportation, communication, utilities and similar infrastructure related
areas. The terms of the programs vary from country to country, but include
significant restrictions on the application of 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 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 Portfolio 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 Portfolio will be
able to convert all or any of its emerging market debt portfolio into equity
investments.
U.S. GOVERNMENT SECURITIES
The Portfolio may invest in obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities which have remaining maturities
not exceeding one year. Agencies and instrumentalities which issue or guarantee
debt securities and which have been established or sponsored by the U.S.
Government include the Bank for Cooperatives, the Export-Import Bank, the
Federal Farm Credit System, the Federal Home Loan Banks, the Federal Home Loan
Mortgage Corporation, the Federal Intermediate Credit Banks, the Federal Land
Banks, the Federal National Mortgage Association, the Government National
Mortgage Association and the Student Loan Marketing Association. Except
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for obligations issued by the U.S. Treasury and the Government National Mortgage
Association, none of the obligations of the other agencies or instrumentalities
referred to above are backed by the full faith and credit of the U.S.
Government.
BANK OBLIGATIONS
The Portfolio may invest in obligations of U.S. banks (including certificates of
deposit and bankers' acceptances) having total assets at the time of purchase in
excess of $1 billion. Such banks must be members of the Federal Deposit
Insurance Corporation.
A certificate of deposit is an interest-bearing negotiable certificate issued by
a bank against Portfolios deposited in the bank. A bankers' acceptance is a
short-term draft drawn on a commercial bank by a borrower, usually in connection
with an international commercial transaction. Although the borrower is liable
for payment of the draft, the bank unconditionally guarantees to pay the draft
at its face value on the maturity date.
SHORT-TERM DEBT SECURITIES
The Portfolio may invest in commercial paper, that is short-term unsecured
promissory notes issued in bearer form by bank holding companies, corporations
and finance companies. The commercial paper purchased by the Portfolio for
temporary defensive purposes consists of direct obligations of domestic issuers
which, at the time of investment, are rated "P-1" by Moody's Investors Service,
Inc. ("Moody's") or "A-1" by Standard & Poor's Corporation ("S&P"), or
securities which, if not rated, are issued by companies having an outstanding
debt issue currently rated Aaa or Aa by Moody's or AAA or AA by S&P. The rating
"P-1" is the highest commercial paper rating assigned by Moody's and the rating
"A-1" is the highest commercial paper rating assigned by S&P.
REPURCHASE AGREEMENTS
The Portfolio may invest in securities subject to repurchase agreements with
U.S. banks or broker-dealers maturing in seven days or less. In a typical
repurchase agreement the seller of a security commits itself at the time of the
sale to repurchase that security from the buyer at a mutually agreed-upon time
and price. The repurchase price exceeds the sale price, reflecting an agreed-
upon interest rate effective for the period the buyer owns the security subject
to repurchase. The agreed-upon rate is unrelated to the interest rate on that
security. SCMI will monitor the value of the underlying security at the time
the transaction is entered into and at all times during the term of the
repurchase agreement to insure that the value of the security always equals or
exceeds the repurchase price. In the event of default by the seller under the
repurchase agreement, the Portfolio may have difficulties in exercising its
rights to the underlying securities and may incur costs and experience time
delays in connection with the disposition of such securities. To evaluate
potential risks, SCMI reviews the credit-worthiness of those banks and dealers
with which the Portfolio enters into repurchase agreements.
ILLIQUID AND RESTRICTED SECURITIES
"Illiquid and Restricted Securities" under "Additional Investment Policies" in
the Prospectus sets forth the circumstances in which the Portfolio may invest in
"restricted securities." In connection with the Portfolio's original purchase
of restricted securities it may negotiate rights with the issuer to have such
securities registered for sale at a later time. Further, the expenses of
registration of restricted securities that are illiquid may also be negotiated
by the Portfolio with the issuer at the time such securities are purchased by
the Portfolio. When registration is required, however, a considerable period
may lapse
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between a decision to sell the securities and the time the Portfolio would be
permitted to sell such securities. A similar delay might be experienced in
attempting to sell such securities pursuant to an exemption from registration.
Thus, the Portfolio may not be able to obtain as favorable a price as that
prevailing at the time of the decision to sell.
LOANS OF PORTFOLIO SECURITIES
The Portfolio may lend its portfolio securities subject to the restrictions
stated in the Prospectus. Under applicable regulatory requirements (which are
subject to change), the loan collateral must, on each business day, at least
equal the market value of the loaned securities and must consist of cash, bank
letters of credit, U.S. Government securities, or other cash equivalents in
which the Portfolio is permitted to invest. To be acceptable as collateral,
letters of credit must obligate a bank to pay amounts demanded by the Portfolio
if the demand meets the terms of the letter. Such terms and the issuing bank
must be satisfactory to the Portfolio. In a portfolio securities lending
transaction, the Portfolio receives from the borrower an amount equal to the
interest paid or the dividends declared on the loaned securities during the term
of the loan as well as the interest on the collateral securities, less any
finders' or administrative fees the Portfolio pays in arranging the loan. The
Portfolio may share the interest it receives on the collateral securities with
the borrower as long as it realizes at least a minimum amount of interest
required by the lending guidelines established by the Trust's Board of Trustees
(the "Board"). The Portfolio will not lend its portfolio securities to any
officer, director, employee or affiliate of the Portfolio or SCMI. The terms of
the Portfolio's loans must meet certain tests under the Internal Revenue Code
and permit the Portfolio to reacquire loaned securities on five business days'
notice or in time to vote on any important matter.
Portfolio securities purchased with cash collateral are subject to possible
depreciation. Loans of securities by the Portfolio will be subject to
termination at the Portfolio's or the borrower's option. The Portfolio 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 Core Trust's Board of
Trustees.
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 Portfolio 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 Portfolio may enter into
forward contracts as a hedge against fluctuations in future foreign exchange
rates.
Currently, only a limited market, if any, exists for hedging transactions
relating to currencies in many emerging market countries or to securities of
issuers domiciled or principally engaged in business in emerging market
countries. This may limit the Portfolio's ability to effectively hedge its
investments in those emerging markets. Hedging against a decline in the value
of a currency does not eliminate fluctuations in the prices of portfolio
securities or prevent losses if the prices of such securities decline. Such
transactions also limit the opportunity for gain if the value of the hedged
currencies should rise. In addition, it may not be possible for the Portfolio
to hedge against a devaluation that is so generally anticipated that the
Portfolio is not able to contract to sell the currency at a price above the
devaluation level it anticipates.
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The Portfolio will enter into forward contracts under certain instances. When
the Portfolio enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may, for example, wish to secure the price
of the security in U.S. dollars or some other foreign currency which the
Portfolio is temporarily holding in its portfolio. By entering into a forward
contract for the purchase or sale, for a fixed amount of dollars or other
currency, of the amount of foreign currency involved in the underlying security
transactions, the Portfolio will be able to protect itself against a possible
loss resulting from an adverse change in the relationship between the U.S.
dollar or other currency which is being used for the security purchase and the
foreign currency in which the security is denominated during the period between
the date on which the security is purchased or sold and the date on which
payment is made or received.
In addition, when the Portfolio anticipates purchasing securities at some future
date, and wishes to secure the current exchange rate of the currency in which
those securities are denominated against the U.S. dollar or some other foreign
currency, it may enter into a forward contract to purchase an amount of currency
equal to part or all of the value of the anticipated purchase, for a fixed
amount of U.S. dollars or other currency.
In all of the above instances, if the currency in which the Portfolio's
portfolio securities (or anticipated portfolio securities) are denominated rises
in value with respect to the currency which is being purchased, then the
Portfolio will have realized fewer gains than if the Portfolio had not entered
into the forward contracts. Furthermore, the precise matching of the forward
contract amounts and the value of the securities involved will not generally be
possible, since the future value of such securities in foreign currencies will
change as a consequence of market movements in the value of those securities
between the date the forward contract is entered into and the date it matures.
To the extent that the Portfolio enters into forward foreign currency contracts
to hedge against a decline in the value of portfolio holdings denominated in a
particular foreign currency resulting from currency fluctuations, there is a
risk that the Portfolio may nevertheless realize a gain or loss as a result of
currency fluctuations after such portfolio holdings are sold should the
Portfolio be unable to enter into an "offsetting" forward foreign currency
contract with the same party or another party. The Portfolio may be limited in
its ability to enter into hedging transactions involving forward contracts by
the Internal Revenue Code requirements relating to qualifications as a regulated
investment company (see "Taxation").
The Portfolio is not required to enter into such transactions with regard to its
foreign currency-denominated securities and will not do so unless deemed
appropriate by the Adviser. Generally, the Portfolio will not enter into a
forward contract with a term of greater than one year.
OPTIONS AND HEDGING
As discussed in the Prospectus, the Portfolio may write covered call options
against securities held in its portfolio and covered put options on eligible
portfolio securities and purchase options of the same series to effect closing
transactions, and may hedge against potential changes in the market value of its
investments (or anticipated investments) by purchasing put and call options on
portfolio (or eligible portfolio) securities (and the currencies in which they
are denominated) and engaging in transactions involving futures contracts and
options on such contracts.
Call and put options on U.S. Treasury notes, bonds and bills and on various
foreign currencies are listed on several U.S. and foreign securities exchanges
and are written in over-the-counter transactions ("OTC Options"). Listed
options are issued or guaranteed by the exchange on which they trade or by a
clearing
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corporation such as the Options Clearing Corporation ("OCC"). Ownership of a
listed call option gives the Portfolio the right to buy from the OCC (in the
U.S.) or other clearing corporation or exchange, the underlying security or
currency covered by the option at the stated exercise price (the price per unit
of the underlying security or currency) by filing an exercise notice prior to
the expiration date of the option. The writer (seller) of the option would then
have the obligation to sell, to the OCC (in the U.S.) or other clearing
corporation or exchange, the underlying security or currency at that exercise
price prior to the expiration date of the option, regardless of its then current
market price. Ownership of a listed put option would give the Portfolio the
right to sell the underlying security or currency to the OCC (in the U.S.) or
other clearing corporation or exchange at the stated exercise price. Upon
notice of exercise of the put option, the writer of the option would have the
obligation to purchase the underlying security or currency from the OCC (in the
U.S.) or other clearing corporation or exchange at the exercise price.
The OCC or other clearing corporation or exchange which issues listed options
assures that all transactions in such options are properly executed. OTC
options are purchased from or sold (written) to dealers or financial
institutions which have entered into direct agreements with the Portfolio. With
OTC options, such variables as expiration date, exercise price and premium will
be agreed between the Portfolio and the transacting dealer. If the transacting
dealer fails to make or take delivery of the securities or amount of foreign
currency underlying an option it has written, the Portfolio would lose the
premium paid for the option as well as any anticipated benefit of the
transaction. The Portfolio will engage in OTC option transactions only with
member banks of the Federal Reserve System or primary dealers in U.S. Government
securities or with affiliates of such banks or dealers which have capital of at
least $50 million or whose obligations are guaranteed by an entity having
capital of at least $50 million.
OPTIONS ON FOREIGN CURRENCIES. The Portfolio may purchase and write options on
foreign currencies for purposes similar to those involved with investing in
forward foreign currency exchange contracts. For example, in order to protect
against declines in the dollar value of portfolio securities which are
denominated in a foreign currency, the Portfolio may purchase put options on an
amount of such foreign currency equivalent to the current value of the portfolio
securities involved. As a result, the Portfolio would be able to sell the
foreign currency for a fixed amount of U.S. dollars, thereby securing the dollar
value of the portfolio securities (less the amount of the premiums paid for the
options). Conversely, the Portfolio may purchase call options on foreign
currencies in which securities it anticipates purchasing are denominated to
secure a set U.S. dollar price for such securities and protect against a decline
in the value of the U.S. dollar against such foreign currency. The Portfolio
may also purchase call and put options to close out written option positions.
The Portfolio may also write covered call options on foreign currency to protect
against potential declines in its portfolio securities which are denominated in
foreign currencies. If the U.S. dollar value of the portfolio securities falls
as a result of a decline in the exchange rate between the foreign currency in
which it is denominated and the U.S. dollar, then a loss to the Portfolio
occasioned by such value decline would be ameliorated by receipt of the premium
on the option sold. At the same time, however, the Portfolio gives up the
benefit of any rise in value of the relevant portfolio securities above the
exercise price of the option and, in fact, only receives a benefit from the
writing of the option to the extent that the value of the portfolio securities
falls below the price of the premium received. The Portfolio may also write
options to close out long call option positions. A covered put option on a
foreign currency would be written by the Portfolio for the same reason it would
purchase a call option, namely, to hedge against an increase in the U.S. dollar
value of a foreign security which the Portfolio anticipates purchasing. Here,
the receipt of the premium would offset, to the extent of the size of the
premium, any increased cost to the Portfolio resulting from an increase in the
U.S. dollar value of the foreign security. However, the Portfolio could not
benefit from any decline in the cost of the foreign
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security which is greater than the price of the premium received. The Portfolio
may also write options to close out long put option positions.
The markets in foreign currency options are relatively new and the Portfolio's
ability to establish and close out positions on such options is subject to the
maintenance of a liquid secondary market. Although the Portfolio will not
purchase or write such options unless and until, in the opinion of the Adviser,
the market for them has developed sufficiently to ensure that the risks in
connection with such options are not greater than the risks in connection with
the underlying currency, there can be no assurance that a liquid secondary
market will exist for a particular option at any specific time. In addition,
options on foreign currencies are affected by all of those factors which
influence foreign exchange rates and investments generally.
The value of a foreign currency option depends upon the value of the underlying
currency relative to the U.S. dollar. As a result, the price of the option
position may vary with changes in the value of either or both currencies and
have no relationship to the investment merits of a foreign security, including
foreign securities held in a "hedged" investment portfolio. Because foreign
currency transactions occurring in the interbank market involve substantially
larger amounts than those that may be involved in the use of foreign currency
options, investors may be disadvantaged by having to deal in an odd lot market
(generally consisting of transactions of less than $1 million) for the
underlying foreign currencies at prices that are less favorable than for round
lots.
There is no systematic reporting of last sale information for foreign currencies
or any regulatory requirement that quotations available through dealers or other
market sources be firm or revised on a timely basis. Quotation information
available is generally representative of very large transactions in the
interbank market and thus may not reflect relatively smaller transactions (i.e.,
less than $1 million) where rates may be less favorable. The interbank market
in foreign currencies is a global, around-the-clock market. To the extent that
the U.S. options markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements may take place in
the underlying markets that are not reflected in the options market.
COVERED CALL WRITING. The Portfolio is permitted to write covered call options
on portfolio securities and on the U.S. dollar and foreign currencies in which
they are denominated, without limit. Generally, a call option is "covered" if
the Portfolio owns, or has the right to acquire, without additional cash
consideration (or for additional cash consideration held for the Portfolio by
its Custodian in a segregated account) the underlying security (currency)
subject to the option except that in the case of call options on U.S. Treasury
Bills, the Portfolio might own U.S. Treasury Bills of a different series from
those underlying the call option, but with a principal amount and value
corresponding to the exercise price and a maturity date no later than that of
the security (currency) deliverable under the call option. A call option is
also covered if the Portfolio holds a call on the same security as the
underlying security (currency) of the written option, where the exercise price
of the call used for coverage is equal to or less than the exercise price of the
call or greater than the exercise price of the call written if the mark to
market difference is maintained by the Portfolio in cash, U.S. Government
securities or other high grade debt obligations which the Portfolio holds in a
segregated account maintained with its custodian.
The Portfolio will receive from the purchaser, in return for a call it has
written, a premium. Receipt of such premiums may enable the Portfolio to earn a
higher level of current income than it would earn from holding the underlying
securities (currencies) alone. Moreover, the premium received will offset a
portion of the potential loss incurred by the Portfolio if the securities
(currencies) underlying the option are ultimately sold (exchanged) by the
Portfolio at a loss. Furthermore, a premium received on a call
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written on a foreign currency will ameliorate any potential loss of value on the
portfolio security due to a decline in the value of the currency. However,
during the option period, the covered call writer has, in return for the
premium, given up the opportunity for capital appreciation above the exercise
price should the market price of the underlying security (or the exchange rate
of the currency in which it is denominated) increase, but has retained the risk
of loss should the price of the underlying security (or the exchange rate of the
currency in which it is denominated) decline. The premium received will
fluctuate with varying economic market conditions. If the market value of the
portfolio securities (or the currencies in which they are denominated) upon
which call options have been written increases, the Portfolio may receive a
lower total return from the portion of its portfolio upon which calls have been
written than it would have had such calls not been written.
With respect to listed options and certain OTC options, during the option
period, the Portfolio may be required, at any time, to deliver the underlying
security (currency) against payment of the exercise price on any calls it has
written (exercise of certain listed and OTC options may be limited to specific
expiration dates). This obligation is terminated upon the expiration of the
option period or at such earlier time when the writer effects a closing purchase
transaction. A closing purchase transaction is accomplished by purchasing an
option of the same series as the option previously written. However, once the
Portfolio has been assigned an exercise notice, the Portfolio will be unable to
effect a closing purchase transaction.
Closing purchase transactions are ordinarily effected to realize a profit on an
outstanding call option, to prevent an underlying security (currency) from being
called, to permit the sale of an underlying security (or the exchange of the
underlying currency) or to enable the Portfolio to write another call option on
the underlying security (currency) with either a different exercise price or
expiration date or both. The Portfolio may realize a net gain or loss from a
closing purchase transaction depending upon whether the amount of the premium
received on the call option is more or less than the cost of effecting the
closing purchase transaction. Any loss incurred in a closing purchase
transaction may be wholly or partially offset by unrealized appreciation in the
market value of the underlying security (currency). Conversely, a gain
resulting from a closing purchase transaction could be offset in whole or in
part or exceeded by a decline in the market value of the underlying security
(currency).
If a call option expires unexercised, the Portfolio realizes a gain in the
amount of the premium on the option less the commission paid. Such a gain,
however, may be offset by depreciation in the market value of the underlying
security (currency) during the option period. If a call option is exercised,
the Portfolio realizes a gain or loss from the sale of the underlying security
(currency) equal to the difference between the purchase price of the underlying
security (currency) and the proceeds of the sale of the security (currency) plus
the premium received on the option less the commission paid.
Options written by the Portfolio will normally have expiration dates of up to
eighteen months from the date written. The exercised price of a call option may
be below, equal to or above the current market value of the underlying security
at the time the option is written.
COVERED PUT WRITING. As a writer of a covered put option, the Portfolio would
incur an obligation to buy the security underlying the option from the purchaser
of the put, at the option's exercise price at any time during the option period,
at the purchaser's election (certain listed and OTC put options written by the
Portfolio will be exercisable by the purchaser only on a specific date). A put
is "covered" if, at all times, the Portfolio maintains with its custodian, in a
segregated account, cash, U.S. Government securities or other high grade
obligations in an amount equal to at least the exercise price of the option, at
all times during the option period. Similarly, a short put position could be
covered by the Portfolio by its
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purchase of a put option on the same security (currency) as the underlying
security of the written option, where the exercise price of the purchased option
is equal to or more than the exercise price of the put written or less than the
exercise price of the put written if the marked to market difference is
maintained by the Portfolio in cash, U.S. Government securities or other high
grade debt obligations which the Portfolio holds in a segregated account
maintained at its custodian. In writing puts, the Portfolio assumes the risk of
loss should the market value of the underlying security (currency) decline below
the exercise price of the option (any loss being decreased by the receipt of the
premium on the option written). In the case of listed options, during the
option period, the Portfolio may be required, at any time, to make payment of
the exercise price against delivery of the underlying security (currency). The
operation of and limitations on covered put options in other respects are
substantially identical to those of call options.
The Portfolio will write put options for three purposes: (1) to receive the
income derived from the premiums paid by purchasers; (2) when the Adviser wishes
to purchase the security (or a security denominated in the currency underlying
the option) underlying the option at a price lower than its current market
price, in which case it will write the covered put at an exercise price
reflecting the lower purchase price sought; and (3) to close out a long put
option position. The potential gain on a covered put option is limited to the
premium received on the option (less the commissions paid on the transaction)
while the potential loss equals the differences between the exercise price of
the option and the current market price of the underlying securities
(currencies) when the put is exercised, offset by the premium received (less the
commissions paid on the transaction).
PURCHASING CALL AND PUT OPTIONS. The Portfolio may purchase listed and OTC call
and put options in amounts equaling up to 5% of its total assets. The Portfolio
may purchase a call option in order to close out a covered call position (see
"Covered Call Writing" above), to protect against an increase in price of a
security it anticipates purchasing or, in the case of a call option on foreign
currency, to hedge against an adverse exchange rate move of the currency in
which the security it anticipates purchasing is denominated vis-a-vis the
currency in which the exercise price is denominated. The purchase of the call
option to effect a closing transaction on a call written over-the-counter may be
a listed or an OTC option. In either case, the call purchased is likely to be
on the same securities (currencies) and have the same terms as the written
option. If purchased over-the-counter, the option would generally be acquired
from the dealer or financial institution which purchased the call written by the
Portfolio.
The Portfolio may purchase put options on securities (currencies) which it holds
in its portfolio to protect itself against a decline in the value of the
security and to close out written put option positions. If the value of the
underlying security (currency) were to fall below the exercise price of the put
purchased in an amount greater then the premium paid for the option, the
Portfolio would incur no additional loss. In addition, the Portfolio may sell a
put option which it has previously purchased prior to the sale of the securities
(currencies) underlying such option. Such a sale would result in a net gain or
loss depending on whether the amount received on the sale is more or less than
the premium and other transaction costs paid on the put option which is sold.
Any such gain or loss could be offset in whole or in part by a change in the
market value of the underlying security (currency). If a put option purchased
by the Portfolio expired without being sold or exercised, the premium would be
lost.
RISKS OF OPTIONS TRANSACTIONS. During the option period, the covered call
writer has, in return for the premium on the option, given up the opportunity
for capital appreciation above the exercise price should the market price of the
underlying security (or the value of its denominated currency) increase, but has
retained the risk of loss should the price of the underlying security (or the
value of its denominated currency) decline. The writer has no control over the
time when it may be required to fulfill its
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obligation as a writer of the option. Once an option writer has received an
exercise notice, it cannot effect a closing purchase transaction in order to
terminate its obligation under the option and must deliver or receive the
underlying securities at the exercise price.
Prior to exercise or expiration, an option position can only be terminated by
entering into a closing purchase or sale transaction. If a covered call option
writer is unable to effect a closing purchase transaction or to purchase an
offsetting OTC option, it cannot sell the underlying security until the option
expires or the option is exercised. Accordingly, a covered call option writer
may not be able to sell an underlying security at a time when it might otherwise
be advantageous to do so. A covered put option writer who is unable to effect a
closing purchase transaction or to purchase an offsetting OTC option would
continue to bear the risk of decline in the market price of the underlying
security until the option expires or is exercised. In addition, a covered put
writer would be unable to utilize the amount held in cash or U.S. Government or
other high grade short-term obligations as security for the put option for other
investment purposes until the exercise or expiration of the option.
The Portfolio's ability to close out its position as a writer of an option is
dependent upon the existence of a liquid secondary market on option exchanges.
There is no assurance that such a market will exist, particularly in the case of
OTC options, as such options will generally only be closed out by entering into
a closing purchase transaction with the purchasing dealer. However, the
Portfolio may be able to purchase an offsetting option which does not close out
its position as a writer but constitutes an asset of equal value to the
obligation under the option written. If the Portfolio is not able to either
enter into a closing purchase transaction or purchase an offsetting position, it
will be required to maintain the securities subject to the call, or the
collateral underlying the put, even though it might not be advantageous to do
so, until a closing transaction can be entered into (or the option is exercised
or expires).
Among the possible reasons for the absence of a liquid secondary market on an
exchange are: (i) insufficient trading interest in certain options;
(ii) restrictions on transactions imposed by an exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes or
series of options or underlying securities; (iv) interruption of the normal
operations on an exchange; (v) inadequacy of the facilities of an exchange or
the OCC to handle current trading volume; or (vi) a decision by one or more
exchanges to discontinue the trading of options (or a particular class or series
of options), in which event the secondary market on that exchange (or in that
class or series of options) would cease to exist.
In the event of the bankruptcy of a broker through which the Portfolio engages
in transactions in options, the Portfolio could experience delays and/or losses
in liquidating open positions purchased or sold through the broker and/or incur
a loss of all or part of its margin deposits with the broker. Similarly, in the
event of the bankruptcy of the writer of an OTC option purchased by the
Portfolio, the Portfolio could experience a loss of all or part of the value of
the option. Transactions will be entered into by the Portfolio only with
brokers or financial institutions deemed creditworthy by the Adviser.
Exchanges have established limitations governing the maximum number of options
on the same underlying security or futures contract (whether or not covered)
which may be written by a single investor, whether acting alone or in concert
with others (regardless of whether such options are written on the same or
different exchanges or are held or written on one or more accounts or through
one or more brokers). An exchange may order the liquidation of positions found
to be in violation of these limits and it may impose other sanctions or
restrictions. These position limits may restrict the number of listed options
which the Portfolio may write.
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The hours of trading for options may not conform to the hours during which the
underlying securities are traded. To the extent that the option markets close
before the markets for the underlying securities, significant price and rate
movements can take place in the underlying markets that cannot be reflected in
the option markets.
The extent to which the Portfolio may enter into transactions involving options
may be limited by the Internal Revenue Code's requirements for qualification as
a regulated investment company and the Portfolio's intention to qualify as such
(see "Taxation").
FUTURES CONTRACTS. The Portfolio may purchase and sell interest rate, currency,
and index futures contracts ("futures contracts") that are traded on U.S. and
foreign commodity exchanges, on such underlying securities as U.S. Treasury
bonds, notes and bills, and/or any foreign government fixed-income security
("interest rate" futures), on various currencies ("currency futures") and on
such indices of U.S. and foreign securities as may exist or come into being
("index futures").
The Portfolio will purchase or sell interest rate futures contracts for the
purpose of hedging some or all of the value of its portfolio securities (or
anticipated portfolio securities) against changes in prevailing interest rates.
If the Adviser anticipates that interest rates may rise and, concomitantly, the
price of certain of its portfolio securities fall, the Portfolio may sell an
interest rate futures contract. If declining interest rates are anticipated,
the Portfolio may purchase an interest rate futures contract to protect against
a potential increase in the price of securities the Portfolio intends to
purchase. Subsequently, appropriate securities may be purchased by the
Portfolio in an orderly fashion; as securities are purchased, corresponding
futures positions would be terminated by offsetting sales of contracts.
The Portfolio will purchase or sell index futures contracts for the purpose of
hedging some or all of its portfolio (or anticipated portfolio) securities
against changes in their prices. If the Adviser anticipates that the prices of
securities held by the Portfolio may fall, the Portfolio may sell an index
futures contract. Conversely, if the Portfolio wishes to hedge against
anticipated price rises in those securities which the Portfolio intends to
purchase, the Portfolio may purchase an index futures contract.
The Portfolio will purchase or sell currency futures on currencies in which its
portfolio securities (or anticipated portfolio securities) are denominated for
the purposes of hedging against anticipated changes in currency exchange rates.
The Portfolio will enter into currency futures contracts for the same reasons as
set forth above for entering into forward foreign currency exchange contracts;
namely, to secure the value of a security purchased or sold in a given currency
vis-a-vis a different currency or to hedge against an adverse currency exchange
rate movement of a portfolio security's (or anticipated portfolio security's)
denominated currency vis-a-vis a different currency.
In addition to the above, interest rate, index and currency futures will be
bought or sold in order to close out short or long positions maintained by the
Portfolio in corresponding futures contracts.
Although most interest rate futures contracts call for actual delivery or
acceptance of securities, the contracts usually are closed out before the
settlement date without making or taking delivery. A futures contract sale is
closed out by effecting a futures contract purchase for the same aggregate
amount of the specific type of security (currency) and the same delivery date.
If the sale price exceeds the offsetting purchase price, the seller would be
paid the difference and would realize a gain. If the offsetting purchase price
exceeds the sale price, the seller would pay the difference and would realize a
loss. Similarly, a futures contract purchase is closed out by effecting a
futures contract sale for the same aggregate amount of the specific type of
security (currency) and the same delivery date. If the offsetting
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sale price exceeds the purchase price, the purchaser would realize a gain,
whereas if the purchase price exceeds the offsetting sale price, the purchaser
would realize a loss. There is no assurance that the Portfolio will be able to
enter into a closing transaction.
INTEREST RATE FUTURES CONTRACTS. When the Portfolio enters into an interest
rate futures contract, it is initially required to deposit with the Portfolio's
custodian, in a segregated account in the name of the broker performing the
transaction, an "initial margin" of cash or U.S. Government securities or other
high grade short-term obligations equal to approximately 2% of the contract
amount. Initial margin requirements are established by the exchanges on which
futures contracts trade and may, from time to time, change. In addition,
brokers may establish margin deposit requirements in excess of those required by
the exchanges.
Initial margin in futures transactions is different from margin in securities
transactions in that initial margin does not involve the borrowing of Portfolios
by a brokers' client but is, rather, a good faith deposit on the futures
contract which will be returned to the Portfolio upon the proper termination of
the futures contract. The margin deposits made are marked to market daily and
the Portfolio may be required to make subsequent deposits of cash or U.S.
Government securities called "variation margin," with the Portfolio's futures
contract clearing broker, which are reflective of price fluctuations in the
futures contract.
CURRENCY FUTURES. Generally, foreign currency futures provide for the delivery
of a specified amount of a given currency, on the exercise date, for a set
exercise price denominated in U.S. dollars or other currency. Foreign currency
futures contracts would be entered into for the same reason and under the same
circumstances as forward foreign currency exchange contracts. The Adviser will
assess such factors as cost spreads, liquidity and transaction costs in
determining whether to utilize futures contracts or forward contracts in its
foreign currency transactions and hedging strategy.
Purchasers and sellers of foreign currency futures contracts are subject to the
same risks that apply to the buying and selling of futures generally. In
addition, there are risks associated with foreign currency futures contracts and
their use as a hedging device similar to those associated with options on
foreign currencies described above. Further, settlement of a foreign currency
futures contract must occur within the country issuing the underlying currency.
Thus, the Portfolio must accept or make delivery of the underlying foreign
currency in accordance with any U.S. or foreign restrictions or regulations
regarding the maintenance of foreign banking arrangements by U.S. residents and
may be required to pay any fees, taxes or charges associated with such delivery
which are assessed in the issuing country.
INDEX FUTURES CONTRACTS. The Portfolio may invest in index futures contracts.
An index futures contract sale creates an obligation by the Portfolio, as
seller, to deliver cash at a specified future time. An index futures contract
purchase would create an obligation by the Portfolio, as purchaser, to take
delivery of cash at a specified future time. Futures contracts on indices do
not require the physical delivery of securities, but provide for a final cash
settlement on the expiration date which reflects accumulated profits and losses
credited or debited to each party's account.
The Portfolio is required to maintain margin deposits with brokerage firms
through which it effects index futures contracts in a manner similar to that
described above for interest rate futures contracts. In addition, due to
current industry practice, daily variations in gains and losses on open
contracts are required to be reflected in cash in the form of variation margin
payments. The Portfolio may be required to make additional margin payments
during the term of the contract.
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At any time prior to expiration of the futures contract, the Portfolio may elect
to close the position by taking an opposite position which will operate to
terminate the Portfolio's position in the futures contract. A final
determination of variation margin is then made, additional cash is required to
be paid by or released to the Portfolio and the Portfolio realizes a loss or
gain.
OPTIONS ON FUTURES CONTRACTS. The Portfolio may purchase and write call and put
options on futures contracts which are traded on an exchange and enter into
closing transactions with respect to such options to terminate an existing
position. An option on a futures contract gives the purchaser the right (in
return for the premium paid) to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the term of the option. Upon
exercise of the option, the delivery of the futures position by the writer of
the option to the holder of the option is accompanied by delivery of the
accumulated balance in the writer's futures margin account, which represents the
amount by which the market price of the futures contract at the time of exercise
exceeds, in case of a call, or is less than, in the case of a put, the exercise
price of the option on the futures contract.
The Portfolio will purchase and write options on futures contracts for identical
purposes to those set forth above for the purchase of a futures contract
(purchase of a call option or sale of a put option) and the sale of a futures
contract (purchase of a put option or sale of a call option), or to close out a
long or short position in futures contracts. If, for example, the Adviser
wished to protect against an increase in interest rates and the resulting
negative impact on the value of a portion of its fixed-income portfolio, it
might write a call option on an interest rate futures contract, the underlying
security of which correlates with the portion of the portfolio the Adviser seeks
to hedge. Any premiums received in the writing of options on futures contracts
may provide a further hedge against losses resulting from price declines in
portions of the Portfolio's investment portfolio.
Options on foreign currency futures contracts may involve certain additional
risks. Trading options on foreign currency futures contracts is relatively new.
The ability to establish and close out positions on such options is subject to
the maintenance of a liquid secondary market. To reduce this risk, the
Portfolio will not purchase or write options on foreign currency futures
contracts unless and until, in the Adviser's option, the market for such option
has developed sufficiently that the risks in connection with such options are
not greater than the risks in connection with transactions in the underlying
foreign currency futures contracts.
LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS ON FUTURES. The Portfolio may not
enter into futures contracts or purchase related options thereon if, immediately
thereafter, the amount committed to margin plus the amount paid for premiums for
unexpired options on futures contracts exceeds 5% of the value of the
Portfolio's total assets, after taking into account unrealized gains and
unrealized losses on such contracts it has entered into, provided, however, that
in the case of an option that is in-the-money (the exercise price of the call
(put) option is less (more) than the market price of the underlying security) at
the time of purchase, the in-the-money amount may be excluded in calculating the
5%. However, there is no overall limitation on the percentage of the
Portfolio's assets which may be subject to a hedge position. In addition, in
accordance with the regulations of the Commodity Futures Trading Commission
("CFTC") under which the Portfolio is exempted from registration as a commodity
pool operator, the Portfolio may only enter into futures contracts and options
on futures contracts transactions for purposes of hedging a part or all of its
portfolio. Except as described above, there are no other limitations on the use
of futures and options thereon by the Portfolio.
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The writer of an option on a futures contract is required to deposit initial and
variation margin pursuant to requirements similar to those applicable to futures
contracts. Premiums received from the writing of an option on a futures
contract are included in initial margin deposits.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS. The Portfolio
may sell a futures contract to protect against the decline in the value of
securities (or the currency in which they are denominated) held by the
Portfolio. However, it is possible that the futures market may advance and the
value of securities (or the currency in which they are denominated) held in the
portfolio of the Portfolio may decline. If this occurred, the Portfolio would
lose money on the futures contract and also experience a decline in value of its
portfolio securities. While this might occur for only a very brief period or to
a very small degree, over time the value of a diversified portfolio will tend to
move in the same direction as the futures contracts.
If the Portfolio purchases a futures contract to hedge against the increase in
value of securities it intends to buy (or the currency in which they are
denominated), and the value of such securities (currencies) decreases, then the
Portfolio may determine not to invest in the securities as planned and will
realize a loss on the futures contract that is not offset by a reduction in the
price of the securities.
If the Portfolio has sold a call option on a futures contract, it will cover
this position by holding in a segregated account maintained at its Custodian,
cash, U.S. Government Securities or other high grade debt obligations equal in
value (when added to any initial or variation margin on deposit) to the market
value of the securities (currencies) underlying the futures contract or the
exercise price of the option. Such a position may also be covered by owning the
securities (currencies) underlying the futures contract, or by holding a call
option permitting the Portfolio to purchase the same contract at a price no
higher than the price at which the short position was established.
In addition, if the Portfolio holds a long position in a futures contract it
will hold cash, U.S. Government Securities or other high grade debt obligations
equal to the purchase price of the contract (less the amount of initial or
variation margin on deposit) in a segregated account maintained for the
Portfolio by its Custodian. Alternatively, the Portfolio could cover its long
position by purchasing a put option on the same futures contract with an
exercise price as high or higher than the price of the contract held by the
Portfolio.
Exchanges limit the amount by which the price of a futures contract may move on
any day. If the price moves equal the daily limit on successive days, then it
may prove impossible to liquidate a futures position until the daily limit moves
have creased. In the event of adverse price movements, the Portfolio would
continue to be required to make daily cash payments of variation margin on open
futures positions. In such situations, if the Portfolio has insufficient cash,
it may have to sell portfolio securities to meet daily variation margin
requirements at a time when it may be disadvantageous to do so. In addition,
the Portfolio may be required to take or make delivery of the instruments
underlying interest rate futures contracts it holds at a time when it is
disadvantageous to do so. The inability to close out options and futures
positions could also have an adverse impact on the Portfolio's ability to
effectively hedge its portfolio.
Futures contracts and options thereon which are purchased or sold on foreign
commodities exchanges may have greater price volatility than their U.S.
counterparts. Furthermore, foreign commodities exchanges may be less regulated
and under less governmental scrutiny than U.S. exchanges. Brokerage
commissions, clearing costs and other transaction costs may be higher on foreign
exchanges. Greater margin requirements may limit the Portfolio's ability to
enter into certain commodity transactions on
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foreign exchanges. Moreover, differences in clearance and delivery requirements
on foreign exchanges may occasion delays in the settlement of the Portfolio's
transactions effected on foreign exchanges.
In the event of the bankruptcy of a broker through which the Portfolio engages
in transactions in futures or options thereon, the Portfolio could experience
delays and/or losses in liquidating open positions purchased or sold through the
broker and/or incur a loss of all or part of its margin deposits with the
broker. Similarly in the event of the bankruptcy of the writer of an OTC option
purchased by the Portfolio, the Portfolio could experience a loss of all or part
of the value of the option. Transactions are entered into by the Portfolio only
with brokers or financial institutions deemed creditworthy by the Adviser.
While the futures contracts and options transactions to be engaged in by the
Portfolio for the purpose of hedging the Portfolio's portfolio securities are
not speculative in nature, there are risks inherent in the use of such
instruments. One such risk which may arise in employing futures contracts to
protect against the price volatility of portfolio securities (and the currencies
in which they are denominated) is that the prices of securities and indices
subject to futures contracts (and thereby the futures contract prices) may
correlate imperfectly with the behavior of the cash prices of the Portfolio's
portfolio securities (and the currencies in which they are denominated).
Another such risk is that prices of interest rate futures contracts may not move
in tandem with the changes in prevailing interest rates against which the
Portfolio seeks a hedge. A correlation may also be distorted by the fact that
the futures market is dominated by short-term traders seeking to profit from the
difference between a contract or security price objective and their cost of
borrowed funds. Such distortions are generally minor and would diminish as the
contract approached maturity.
There may exist an imperfect correlation between the price movements of futures
contracts purchased by the Portfolio and the movements in the prices of the
securities (currencies) which are the subject of the hedge. If participants in
the futures market elect to close out their contracts through offsetting
transactions rather than meet margin deposit requirements, distortions in the
normal relationship between the debt securities or currency markets and futures
markets could result. Price distortions could also result if investors in
futures contracts choose to make or take delivery of underlying securities
rather than engage in closing transactions due to the resultant reduction in the
liquidity of the futures market. In addition, because the deposit requirements
in the futures markets are less onerous than margin requirements in the cash
market, increased participation by speculators in the futures market can be
anticipated with the resulting speculation causing temporary price distortions.
Due to the possibility of price distortions in the futures market and because of
the imperfect correlation between movements in the prices of securities and
movements in the prices of futures contracts, a correct forecast of interest
rate trends may still not result in a successful hedging transaction.
There is no assurance that a liquid secondary market will exist for futures
contracts and related options in which the Portfolio may invest. In the event a
liquid market does not exist, it may not be possible to close out a futures
position, and in the event of adverse price movements, the Portfolio would
continue to be required to make daily cash payments of variation margin. In
addition, limitations imposed by an exchange or board of trade on which futures
contracts are traded may compel or prevent the Portfolio from closing out a
contract which may result in reduced gain or increased loss to the Portfolio.
The absence of a liquid market in futures contracts might cause the Portfolio to
make or take delivery of the underlying securities (currencies) at a time when
it may be disadvantageous to do so.
The extent to which the Portfolio may enter into transactions involving futures
contracts and options thereon may be limited by the Internal Revenue Code's
requirements for qualification as a regulated investment company and the
Portfolio's intention to qualify as such (see "Taxation").
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WARRANTS AND STOCK RIGHTS. The Portfolio may invest in warrants, which are
options to purchase an equity security at a specified price (usually
representing a premium over the applicable market value of the underlying equity
security at the time of the warrant's issuance). The Portfolio may not invest
more than 5% of its net assets (at the time of investment) in warrants (other
than those that have been acquired in units or attached to other securities).
No more than 2% of the Portfolio's net assets (at the time of investment) may be
invested in warrants that are not listed on the New York or American Stock
Exchanges. Investments in warrants involve certain risks, including the possible
lack of a liquid market for the resale of the warrants, potential price
fluctuations as a result of speculation or other factors and failure of the
price of the underlying security to reach a level at which the warrant can be
prudently exercised (in which case the warrant may expire without being
exercised, resulting in the loss of the Portfolio's entire investment therein).
The prices of warrants do not necessarily move parallel to the prices of the
underlying securities. Warrants have no voting rights, receive no dividends and
have no rights with respect to the assets of the issuer.
In addition, the Portfolio may invest up to 5% of its assets (at the time of
investment) in stock rights. A stock right is an option given to a shareholder
to buy additional shares at a predetermined price during a specified time
period.
INVESTMENT RESTRICTIONS
The Portfolio's significant investment restrictions are described in the
Prospectus. The following investment restrictions, except where stated to be
non-fundamental policies, are also fundamental policies of the Portfolio and,
together with the fundamental policies and investment objective described in the
Prospectus, cannot be changed without the vote of a "majority" of the
Portfolio's outstanding shares. Under the Investment Company Act of 1940 (the
"1940 Act"), such a "majority" vote is defined as the vote of the holders of the
lesser of : (i) 67% of more of the shares present or represented by proxy at a
meeting of shareholders, if the holders of more than 50% of the outstanding
shares are present, or (ii) more than 50% of the outstanding shares. Under
these additional restrictions, the Portfolio cannot:
(a) Underwrite securities of other companies except insofar as the
Portfolio might be deemed to be an underwriter in the resale of any securities
held in its portfolio.
(b) Invest in commodities or commodity contracts other than Hedging
Instruments which it may use as permitted by any of its other fundamental
policies, whether or not any such Hedging Instrument is considered to be a
commodity or a commodity contract.
(c) Purchase securities on margin; however, the Portfolio may make margin
deposits in connection with any Hedging Instruments which it may use as
permitted by any of its other fundamental policies.
(d) Purchase or write puts or calls except as permitted by any of its
other fundamental policies.
(e) Lend money except in connection with the acquisition of debt
securities which the Portfolio's investment policies and restrictions permit it
to purchase (see "Investment Objective and Policies" in the Prospectus); the
Portfolio may also make loans of portfolio securities (see "Loans of Portfolio
Securities") and enter into repurchase agreements (see "Repurchase Agreements").
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(f) As a non-fundamental policy, invest in or hold securities of any
issuer if officers or Trustees of the Trust or SCMI individually owning more
than 0.5% of the securities of such issuer together own more than 5% of the
securities of such issuer.
(g) As a non-fundamental policy, invest more than 5% of the value of its
total assets in securities of issuers having a record, together with
predecessors, of less than three years of continuous operation.
(h) Make short sales of securities.
(i) Invest in interests in oil, gas or other mineral exploration or
development programs but may purchase readily marketable securities of companies
which operate, invest in, or sponsor such programs.
(j) Invest in real estate or in interests in real estate, but may purchase
readily marketable securities of companies holding real estate or interests
therein.
MANAGEMENT
OFFICERS AND TRUSTEES
The following information relates to the principal occupations of each Trustee
and executive officer of the Trust during the past five years and shows the
nature of any affiliation with SCMI. Each of these individuals currently serves
in the same capacity for Core Trust.
PETER E. GUERNSEY, Oyster Bay, New York - a Trustee of the Trust - Insurance
Consultant since August 1986; prior thereto Senior Vice President, Marsh &
McLennan, Inc., insurance brokers.
RALPH E. HANSMANN, 40 Wall Street, New York, New York - a Trustee of the Trust -
Private investor; Director, First Eagle Fund of America, Inc.; Director, Verde
Exploration, Ltd.; Trustee Emeritus, Institute for Advanced Study; Trustee and
Treasurer, New York Public Library; Life Trustee, Hamilton College.
JOHN I. HOWELL, 7 Riverside Road, Greenwich, Connecticut - a Trustee of the
Trust - Private Consultant since February 1987; Director, American International
Group, Inc.; Director, American International Life Assurance Company of New
York.
LAURA E. LUCKYN-MALONE(a) (b) (c), 787 Seventh Avenue, New York, New York -
President and a Trustee of the Trust - Managing Director of SCMI since October
1995; Director of SWIS since July 1995; prior thereto, Director and Senior Vice
President of SCMI since February 1990; Director and President, Schroder
Advisors.
CLARENCE F. MICHALIS, 44 East 64th Street, New York, New York - a Trustee of the
Trust - Chairman of the Board of Directors, Josiah Macy, Jr. Foundation
(charitable foundation).
HERMANN C. SCHWAB, 787 Seventh Avenue, New York, New York - Chairman (Honorary)
and a Trustee of the Trust - retired since March, 1988; prior thereto,
consultant to SCMI since February 1, 1984.
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MARK J. SMITH(a) (b), 33 Gutter Lane, London, England - a Vice President and a
Trustee of the Trust - First Vice President of SCMI since April 1990; Director
and Vice President, Schroder Advisors.
ROBERT G. DAVY, 787 Seventh Avenue, New York, New York - a Vice-President of the
Trust - Director of SCMI and Schroder Capital Management International Ltd.
since 1994; First Vice President of SCMI since July, 1992; prior thereto,
employed by various affiliates of Schroders plc in various positions in the
investment research and portfolio management areas since 1986.
RICHARD R. FOULKES, 787 Seventh Avenue, New York, New York - a Vice President of
the Trust; Deputy Chairman of SCMI since October 1995; Director of SCMI since
1979, Director of Schroder Capital Management International Ltd. since 1989, and
Executive Vice President of both of these entities.
JOHN Y. KEFFER, 2 Portland Square, Portland, Maine - a Vice President of the
Trust. President of Forum Financial Services, Inc., the Fund's sub-
administrator, and Forum Financial Corp., the Fund's transfer and dividend
disbursing agent and fund accountant.
JANE P. LUCAS, (c) 787 Seventh Avenue, New York, New York - Vice President of
the Trust - Director and Senior Vice President SCMI; Director of SWIS since
September 1995; Assistant Director Schroder Investment Management Ltd. since
June 1991.
CATHERINE A. MAZZA, 787 Seventh Avenue, New York, New York - a Vice President of
the Trust - Senior Vice President Schroder Advisors since December 1995; Vice
President of SCMI since October 1994; prior thereto, held various marketing
positions at Alliance Capital, an investment adviser, since July 1985.
FARIBA TALEBI, 787 Seventh Avenue, New York, New York - a Vice President of the
Trust - First Vice President of SCMI since April 1993, employed in various
positions in the investment research and portfolio management areas since 1987.
JOHN A. TROIANO(b), 787 Seventh Avenue, New York, New York - a Vice President of
the Trust - Managing Director of SCMI since October 1995; Director of Schroder
Advisors since October 1992, Director and Senior Vice President of SCMI since
1991; prior thereto, employed by various affiliates of SCMI in various positions
in the investment research and portfolio management areas since 1981.
IRA L. UNSCHULD, 787 Seventh Avenue, New York, New York - a Vice President of
the Trust - a Vice President of SCMI since April, 1993 and an Associate from
July, 1990 to April, 1993; prior to July, 1990, employed by various financial
institutions as a securities or financial analyst.
ROBERT JACKOWITZ(b) (c), 787 Seventh Avenue, New York, New York - Treasurer of
the Trust - Vice President of SWIS since September 1995; Treasurer of SWIS and
Schroder Advisers since July 1995; Vice President of SCMI since June 1995; and
Assistant Treasurer of Schroders Incorporated since January 1993.
MARGARET H. DOUGLAS-HAMILTON(b) (c), 787 Seventh Avenue, New York, New York -
Secretary of the Trust - Secretary of SWIS since July 1995; Secretary of
Schroder Advisers since April 1990; First Vice President and General Counsel of
Schroders Incorporated(b) since May 1987; prior thereto, partner of Sullivan &
Worcester, a law firm.
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DAVID I. GOLDSTEIN, 2 Portland Square, Portland, Maine - Assistant Treasurer and
Assistant Secretary of the Trust - Counsel, Forum Financial Services, Inc. Since
1991; prior thereto, associate at Kirkpatrick & Lockhart, Washington, D.C.
THOMAS G. SHEEHAN, 2 Portland Square, Portland, Maine - Assistant Treasurer and
Assistant Secretary of the Trust - Counsel, Forum Financial Services, Inc. since
1993; prior thereto, Special Counsel, U.S. Securities and Exchange Commission,
Division of Investment Management, Washington, D.C.
BARBARA GOTTLIEB(c), 787 Seventh Avenue, New York, New York - Assistant
Secretary of the Trust - Assistant Vice President of SWIS since July 1995 prior
thereto held various positions with SWIS affiliates.
GERARDO MACHADO, 787 Seventh Avenue, New York, New York - Assistant Secretary of
the Trust - Associate, SCMI.
(a) Interested Trustee of the Trust within the meaning of the 1940 Act.
(b) Schroder Fund Advisors, Inc. ("Schroder Advisors") is a wholly-owned
subsidiary of SCMI, which is a wholly-owned subsidiary of Schroders
Incorporated, which in turn is an indirect, wholly-owned U.S. subsidiary of
Schroders plc.
(c) Schroder Wertheim Investment Services, Inc. ("SWIS") is a wholly-owned
subsidiary of Schroder Wertheim Holdings Incorporated which is a wholly-owned
subsidiary of Schroders, Incorporated, which in turn is an indirect wholly-owned
U.S. subsidiary of Schroders plc.
Officers and Trustees who are interested persons of the Trust receive no salary,
fees or compensation from the Fund. Independent Trustees of the Trust receive
an annual fee of $1,000 and a fee of $250 for each meeting of the Board attended
by them except in the case of Mr. Schwab, who receives an annual fee of $1,500
and a fee of $500 for each meeting attended. The Fund has no bonus, profit
sharing, pension or retirement plans.
The following table provides the fees paid to each Trustee of the Trust for the
fiscal year ended October 31, 1995.
<TABLE>
<CAPTION>
Name of Trustee Aggregate Pension or Estimated Total
Compensation Retirement Annual Benefits Compensation
From Trust Benefits Accrued Upon Retirement From Trust And
As Part of Trust Fund Complex
Expenses Paid to Trustees
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mr. Guernsey $4,000 $0 $0 $4000
Mr. Hansmann 3,500 0 0 3,500
Mr. Howell 4,000 0 0 4,000
Ms. Luckyn-Malone 0 0 0 0
Mr. Michalis 3,000 0 0 3,000
Mr. Schwab 7,000 0 0 7,000
Mr. Smith 0 0 0 0
</TABLE>
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As of April ___, 1996, the officers and Trustees of the Trust owned, in the
aggregate, less than 1% of the Fund's outstanding shares.
Although the Trust is a Delaware business trust, certain of its Trustees or
officers are residents of the United Kingdom and substantially all of their
assets may be located outside of the U.S. As a result it may be difficult for
U.S. investors to effect service upon such persons within the U.S., or to
realize judgments of courts of the U.S. predicated upon civil liabilities of
such persons under the Federal securities laws of the U.S. The Trust has been
advised that there is substantial doubt as to the enforceability in the United
Kingdom of such civil remedies and criminal penalties as are afforded by the
Federal securities laws of the U.S. Also it is unclear if extradition treaties
now in effect between the U.S. and the United Kingdom would subject such persons
to effective enforcement of the criminal penalties of such acts.
INVESTMENT ADVISER
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 between the Trust and SCMI. SCMI is a wholly-owned
U.S. subsidiary of Schroders Incorporated, the wholly-owned U.S. holding company
subsidiary of Schroders plc. Schroders plc is the holding company parent of a
large worldwide group of banks and financial service companies (referred to as
the "Schroder Group"), with associated companies and branch and representative
offices located in seventeen countries worldwide. The Schroder Group
specializes in providing investment management services, with Group funds under
management currently in excess of $100 billion.
Pursuant to the Investment Advisory Contract, SCMI is responsible for managing
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 also
furnishes to the Board of Trustees periodic reports on the investment
performance of the Fund. Under the terms of the Investment Advisory Contract,
SCMI is required to manage the Portfolio's investment portfolio in accordance
with applicable laws and regulations. In making its investment decisions, SCMI
does not use material inside information that may be in its possession or in the
possession of its affiliates.
The Investment Advisory Contract will continue in effect provided such
continuance is approved annually (i) by the holders of a majority of the
outstanding voting securities of the Fund or by the Board and (ii) by a majority
of the Trustees who are not parties to such Contract or "interested persons" (as
defined in the 1940 Act) of any such party. The Investment Advisory Contract
may be terminated without penalty by vote of the Trustees or the shareholders of
the Fund on 60 days' written notice to the Adviser, or by the Adviser on 60
days' written notice to the Trust and it will terminate automatically if
assigned. The Investment Advisory Contract also provides that, with respect to
the Fund, neither SCMI nor its personnel shall be liable for any error of
judgment or mistake of law or for any act or omission in the performance of its
or their duties to the Fund, except for willful misfeasance, bad faith or gross
negligence in the performance of the SCMI's or their duties or by reason of
reckless disregard of its or their obligations and duties under the Investment
Advisory Contract.
Under the terms of the Investment Advisory Contract, SCMI receives a monthly fee
equal on an annual basis to 1.00% of its average daily net assets. From
commencement of operations through October 31, 1995, SCMI received an advisory
fee of $19,326.
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The Fund currently invests all of its assets in the Portfolio. SCMI will not
receive an investment advisory fee with respect to the Fund so long as the Fund
remains completely invested in the Portfolio or any other investment company.
The Fund may withdraw its 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. Accordingly, the Fund retains SCMI as its investment adviser to manage
the Fund's assets in the event the Fund so withdraws its investment.
The investment advisory contract between Core Trust and SCMI with respect to the
Portfolio is the same in all material respects as the Fund's Investment Advisory
Contract except as to the parties, the circumstances under which fees will be
paid and the jurisdiction whose laws govern the agreement.
ADMINISTRATIVE SERVICES
The Trust has entered into an Administrative Services Contract with Schroder
Fund Advisors Inc. ("Schroder Advisors"), 787 Seventh Avenue, New York, New York
10019, pursuant to which Schroder Advisors provides management and
administrative services necessary for the operation of the Fund, other than any
management services provided to the Fund by SCMI pursuant to the Investment
Advisory Contract, including among other things, (i) preparation of shareholder
reports and communications, (ii) regulatory compliance, such as reports to and
filings with the Securities and Exchange Commission and state securities
commissions, and (iii) general supervision of the operation of the Fund,
including coordination of the services performed by the Fund's investment
adviser, transfer agent, custodian, independent accountants, legal counsel and
others. Schroder Advisors is a wholly-owned subsidiary of SCMI, and is a
registered broker-dealer organized to act as administrator and distributor of
mutual funds. Effective July 5, 1995, Schroder Advisors changed its name from
Schroder Capital Distributors Inc.
For these services, Schroder Advisors will receive from the Fund a fee, payable
monthly, at the annual rate of 0.10% of the Fund's average daily net assets.
From commencement of operations through October 31, 1995, Schroder Advisors
received an administrative fee of $19,591.
The Administrative Services Contract is terminable with respect to the Fund
without penalty, at any time, by vote of a majority of the Trustees who are not
"interested persons" of the Trust and who have no direct or indirect financial
interest in the operation of the Fund's Distribution Plan or in the
Administrative Services Contract, upon not more than 60 days' written notice to
Schroder Advisors or by vote of the holders of a majority of the shares of the
Fund, or, upon 60 days' notice, by Schroder Advisors. The Administrative
Services Contract will terminate automatically in the event of its assignment.
The Trust and Schroder Advisors have entered into a Sub-Administration Agreement
with Forum Financial Services, Inc. ("Forum"). Pursuant to the Sub-
Administration Agreement, Forum assists Schroder Advisors with certain of its
responsibilities under the Administrative Services Agreement, including
shareholder reporting and regulatory compliance. Payment for Forum's services
is made by Schroder Advisors and is not a separate expense of the Fund.
The Sub-Administration Agreement is terminable with respect to the Fund without
penalty, at any time, by the Board, Schroder Advisors and the Adviser upon 60
days' written notice to Forum or by Forum upon 60 days' written notice to the
Fund and Schroder Advisors, and the Adviser, as appropriate.
Schroder Advisors and Forum provide similar services to the Portfolio pursuant
to administrative services agreements between Core Trust and each of these
entities, for which Schroder Advisors is separately compensated at an annual
rate of 0.15% of the average daily net assets of the Portfolio, a
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portion of which Forum receives for its services with respect to the Portfolio.
The administrative services agreements are the same in all material respects as
the Fund's respective agreements except as to the parties, the circumstances
under which fees will be paid, the fees payable thereunder and the jurisdiction
whose laws govern the agreements.
The fees paid by the Fund to SCMI and Schroder Advisors may equal up to 1.25% of
the Fund's average daily net assets. Such fees as a whole are higher than
advisory and management fees charged to mutual funds which invest primarily in
U.S. securities but not necessarily higher than those charged to funds with
investment objectives similar to that of the Fund.
DISTRIBUTION OF FUND SHARES
Under a Distribution Plan (the "Plan") adopted by the Fund, the Trust may pay
directly or may reimburse the Investment Adviser or a broker-dealer registered
under the Securities Exchange Act of 1934 (the "1934 Act") (the Investment
Adviser or such registered broker-dealer, if so designated, to be a
"Distributor" of the Fund's shares) monthly (subject to a limit of 0.50% per
annum of the Fund's average daily net assets) for the sum of (a) advertising
expenses including advertising by radio, television, newspapers, magazines,
brochures, sales literature or direct mail, (b) costs of printing prospectuses
and other materials to be given or sent to prospective investors, (c) 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 (d) payments to broker-dealers (other than the Distributor) or other
organizations (other than banks) for services rendered in the distribution of
the Fund's shares, including payments in amounts based on the average daily
value of Fund shares owned by shareholders in respect of which the broker-dealer
or organization has a distributing relationship. Any payment or reimbursement
made pursuant to the Plan is contingent upon the Board's approval. 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. Salary expense
of salesmen who are responsible for marketing shares of the Fund may be
allocated to various portfolios of the Trust that have adopted a Plan similar to
that of the Fund on the basis of average net assets; travel expense is allocated
to, or divided among, the particular portfolios of the Trust for which it is
incurred. The Board has concluded that there is a reasonable likelihood that
the Plan will benefit the Fund and its shareholders.
The Plan provides that it may not be amended to increase materially the costs
which the Fund may bear pursuant to the Plan without shareholder approval and
that other material amendments of the Plan must be approved by the Board, and by
the Trustees who are neither "interested persons" (as defined in the 1940 Act)
of the Trust nor have any direct or indirect financial interest in the operation
of the Plan or in any related agreement, by vote cast in person at a meeting
called for the purpose of considering such amendments. The selection and
nomination of the Trustees of the Trust has been committed to the discretion of
the Trustees who are not "interested persons" of the Trust. The Plan has been
approved, and is subject to annual approval, by the Board and by the Trustees
who are neither "interested persons" nor have any direct or indirect financial
interest in the operation of the Plan, by vote cast in person at a meeting
called for the purpose of voting on the Plan. 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. The Plan is terminable with respect to the
Fund at any time by a vote of a majority of the Trustees who are not "interested
persons" of the Trust and who have no direct or indirect financial interest in
the operation of the Plan or by vote of the holders of a majority of the shares
of the Fund.
Schroder Advisors acts as Distributor of the Fund's shares.
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SERVICE ORGANIZATIONS
The Fund may also contract with banks, trust companies, broker-dealers or other
financial organizations ("Service Organizations") to provide certain
administrative services for the Fund. The Fund could pay fees to Service
Organizations (which 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 had a servicing relationship.
Services provided by Service Organizations may include, among other things:
providing necessary personnel and facilities to establish and maintain certain
shareholder accounts and records; assisting in processing purchase and
redemption transactions; arranging for the wiring of funds; transmitting and
receiving funds in connection with client orders to purchase or redeem shares;
verifying and guaranteeing client signatures in connection with redemption
orders, transfers among and changes in client-designated accounts; providing
periodic statements showing a client's account balances and, to the extent
practicable, integrating such information with other client transactions;
furnishing periodic and annual statements and confirmations of all purchases and
redemptions of shares in a client's account; transmitting proxy statements,
annual reports, and updating prospectuses and other communications from the Fund
to clients; and such other services as the Fund or a client reasonably may
request, to the extent permitted by applicable statute, rule or regulation.
Neither SCMI nor Schroder Advisors will be a Service Organization or receive
fees for servicing. The Fund has no intention of making any such payments to
Service Organizations with respect to accounts of institutional investors, and
in any event will make no such payments until the Board specifically further so
authorizes.
Some Service Organizations could 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 would agree to transmit to its clients a schedule of any such fees.
Shareholders using Service Organizations would be urged to consult them
regarding any such fees or conditions.
The Glass-Steagall Act and other applicable laws provide that banks may not
engage in the business of underwriting, selling or distributing securities.
There currently is no precedent prohibiting banks from performing administrative
and shareholder servicing functions as Service Organizations. However, judicial
or administrative decisions or interpretations of such laws, as well as changes
in either federal or state statutes or regulations relating to the permissible
activities of banks and their subsidiaries or affiliates, could prevent a bank
service organization from continuing to perform all or a part of its servicing
activities. If a bank were prohibited from so acting, its shareholder clients
would be permitted to remain shareholders of the Fund and alternative means for
continuing the servicing of such shareholders would be sought. In that event,
changes in the operation of the Fund might occur and a shareholder serviced by
such a bank might no longer be able to avail itself of any services then being
provided by the bank. It is not expected that shareholders would suffer any
adverse financial consequences as a result of any of these occurrences.
PORTFOLIO ACCOUNTING
Forum Financial Corp. ("FFC"), an affiliate of Forum, performs portfolio
accounting services for the Fund pursuant to a Fund Accounting Agreement with
the Trust. The Fund Accounting Agreement will continue in effect only if such
continuance is specifically approved at least annually by the Board of Trustees
or by a vote of the shareholders of the Trust and in either case by a majority
of the Trustees who
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are not parties to the Fund Accounting Agreement or interested persons of any
such party, at a meeting called for the purpose of voting on the Fund Accounting
Agreement.
Under its agreement, FFC prepares and maintains books and records of the Fund on
behalf of the Trust that are required to be maintained under the 1940 Act,
calculates the net asset value per share of the Fund and dividends and capital
gain distributions and prepares periodic reports to shareholders and the
Securities and Exchange Commission. For its services, FFC receives from the
Trust with respect to the Fund a fee of $36,000 per year plus, for each class of
the Fund above one, $12,000 per year. FFC is paid an additional $24,000 per
year with respect to global and international funds. In addition, FFC is paid
an additional $12,000 per year with respect to tax-free money market funds and
funds with more than 25% of their total assets invested in asset backed
securities, that have more than 100 security positions or that have a monthly
portfolio turnover rate of 10% or greater.
FFC is required to use its best judgment and efforts in rendering fund
accounting services and is not be liable to the Trust for any action or inaction
in the absence of bad faith, willful misconduct or gross negligence. FFC is not
responsible or liable for any failure or delay in performance of its fund
accounting obligations arising out of or caused, directly or indirectly, by
circumstances beyond its reasonable control and the Trust has agreed to
indemnify and hold harmless FFC, its employees, agents, officers and directors
against and from any and all claims, demands, actions, suits, judgments,
liabilities, losses, damages, costs, charges, counsel fees and other expenses of
every nature and character arising out of or in any way related to FFC's
actions taken or failures to act with respect to a Fund or based, if applicable,
upon information, instructions or requests with respect to a Fund given or made
to FFC by an officer of the Trust duly authorized. This indemnification does
not apply to FFC's actions taken or failures to act in cases of FFC's own bad
faith, willful misconduct or gross negligence.
For the fiscal year ended October 31, 1995, the Fund paid fund accounting fees
of $35,667.
FEES AND EXPENSES
As compensation for the advisory, administrative and management services
rendered to the Fund, SCMI and Schroder Advisors will each earn monthly fees at
the following annual rates:
Fee Rate
Portion of average daily value Advisory Administrative
of the Fund's net assets Fee Fee
------------------------ --- ---
100% 1.00% 0.25%
SCMI and Schroder Advisors 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 Advisors 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 will apply for the Fund's first year of operations, and
may be withdrawn by a majority vote of the disinterested Trustees. 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 Advisors,
the remaining one-fifth; provided, however, that neither SCMI nor Schroder
Advisors 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.
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Certain of the states in which the shares of the Fund may be qualified for sale
impose limitations on the expenses of the Fund. If, in any fiscal year, the
total expenses of the Fund (excluding taxes, interest, expenses under the Plan,
brokerage commissions and other portfolio transaction expenses, other
expenditures which are capitalized in accordance with generally accepted
accounting principles and extraordinary expenses, but including the advisory and
administrative fees) exceed the expense limitations applicable to the Fund
imposed by the securities regulations of any such state, SCMI will reimburse the
Fund for four-fifths of the excess, and Schroder Advisors, the remaining one-
fifth of the excess. As of the date of this SAI, the Fund believes that the
most restrictive state expense limitation which might be applicable to the Fund
requires reimbursement of expenses in any year that applicable Fund expenses
exceed 2 1/2% of the first $30 million of the average daily value of Fund net
assets, 2% of the next $70 million of the average daily value of Fund net assets
and 1 1/2% of the remaining average daily value of Fund net assets.
Except for the expenses paid by SCMI or Schroder Advisors, the Fund bears all
costs of its operations.
PORTFOLIO TRANSACTIONS
INVESTMENT DECISIONS
Investment decisions for the Fund and for the other investment advisory clients
of SCMI are made with a view to achieving their respective investment
objectives. Investment decisions are the product of many factors in addition to
basic suitability for the particular client involved. Thus, a particular
security may be bought or sold for certain clients even though it could have
been bought or sold for other clients at the same time. Likewise, a particular
security may be bought for one or more clients when one or more clients are
selling the security. In some instances, one client may sell a particular
security to another client. It also sometimes happens that two or more clients
simultaneously purchase or sell the same security, in which event each day's
transactions in such security are, insofar as is possible, averaged as to price
and allocated between such clients in a manner which in SCMI's opinion is
equitable to each and in accordance with the amount being purchased or sold by
each. There may be circumstances when purchases or sales of portfolio
securities for one or more clients will have an adverse effect on other clients.
BROKERAGE AND RESEARCH SERVICES
Transactions on U.S. stock exchanges and other agency transactions involve the
payment by the Fund of negotiated brokerage commissions. Such commissions vary
among different brokers. Also, a particular broker may charge different
commissions according to such factors as the difficulty and size of the
transaction. Transactions in foreign securities generally involve the payment
of fixed brokerage commissions, which are generally higher than those in the
U.S. Since most brokerage transactions for the fund will be placed with foreign
broker-dealers, certain portfolio transaction costs for the Fund may be higher
than fees for similar transactions executed on U.S. securities exchanges.
However, the Fund will seek to achieve the best net results in effecting its
portfolio transactions. There is generally less governmental supervision and
regulation of foreign stock exchanges and brokers than in the United States.
There is generally no stated commission in the case of securities traded in the
over-the-counter markets, but the price paid by the Fund usually includes an
undisclosed dealer commission or mark-up. In underwritten offerings, the price
paid by the Fund includes a disclosed, fixed commission or discount retained by
the underwriter or dealer.
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The Investment Advisory Contract authorizes and directs SCMI to place orders for
the purchase and sale of the Fund's investments with brokers or dealers selected
by SCMI in its discretion and to seek "best execution" of such portfolio
transactions. SCMI places all such orders for the purchase and sale of
portfolio securities and buys and sells securities for the Fund through a
substantial number of brokers and dealers. In so doing, SCMI uses its best
efforts to obtain for the Fund the most favorable price and execution available.
The Fund may, however, pay higher than the lowest available commission rates
when SCMI believes it is reasonable to do so in light of the value of the
brokerage and research services provided by the broker effecting the
transaction. In seeking the most favorable price and execution, SCMI, having in
mind the Fund's best interests, considers all factors it may deem relevant,
including, by way of illustration, price, the size of the transaction, the
nature of the market for the security, the amount of the commission, the timing
of the transaction taking into account market prices and trends, the reputation,
experience and financial stability of the broker-dealers involved and the
quality of service rendered by the broker-dealers in other transactions. For
period from commencement of operations through October 31, 1995, the Fund paid a
total of $101,087 in brokerage commissions.
It has for many years been a common practice in the investment advisory business
for advisers of investment companies and other institutional investors to
receive research services from broker-dealers which execute portfolio
transactions for the clients of such advisers. Consistent with this practice,
SCMI may receive research services from broker-dealers with which SCMI places
the Fund's portfolio transactions. These services, which in some cases may also
be purchased for cash, include such items as general economic and security
market reviews, industry and company reviews, evaluations of securities and
recommendations as to the purchase and sale of securities. Some of these
services are of value to SCMI in advising various of its clients (including the
Fund), although not all of these services are necessarily useful and of value in
managing the Fund. The investment advisory fee paid by the Fund is not reduced
because SCMI and its affiliates receive such services.
As permitted by Section 28(e) of the 1934 Act, SCMI may cause the Fund to pay a
broker-dealer which provides "brokerage and research services" (as defined in
the Act) to SCMI an amount of disclosed commission for effecting a securities
transaction for the Fund in excess of the commission which another broker-dealer
would have charged for effecting that transaction. In addition, SCMI may
allocate brokerage transactions to broker/dealers who have entered into
arrangements under which the broker/dealer allocates a portion of the
commissions paid by the Fund toward payment of Fund expenses, such as custodian
fees.
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 Trustees 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.
Subject to the general policies of the Fund regarding allocation of portfolio
brokerage as set forth above, the Board has authorized the Fund to employ (a)
Schroder Wertheim & Company, Incorporated ("Schroder Wertheim") an affiliate of
SCMI, to effect securities transactions of the Fund, on the New York Stock
Exchange only, and (b) Schroder Securities Limited and its affiliates
(collectively, "Schroder Securities"), which are affiliated with SCMI, to effect
securities transactions of the Fund on various foreign securities exchanges on
which Schroder Securities has trading privileges, provided certain other
conditions are satisfied as described below.
Payment of brokerage commissions to Schroder Wertheim or Schroder Securities for
effecting such transactions is subject to Section 17(e) of the 1940 Act, which
requires, among other things, that commissions for transactions on a securities
exchange paid by a registered investment company to a
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broker which is an affiliated person of such investment company or an affiliated
person of another person so affiliated not exceed the usual and customary
broker's commissions for such transactions. It is the Fund's policy that
commissions paid to Schroder Wertheim or Schroder Securities will in the
judgment of the officers of SCMI responsible for making portfolio decisions and
selecting brokers, be (i) at least as favorable as commissions contemporaneously
charged by Schroder Wertheim or Schroder Securities, as the case may be, on
comparable transactions for their most favored unaffiliated customers and (ii)
at least as favorable as those which would be charged on comparable transactions
by other qualified brokers having comparable execution capability. The Board,
including a majority of the non-interested Trustees, has adopted procedures
pursuant to Rule 17e-1 promulgated by the Securities and Exchange Commission
under Section 17(e) to ensure that commissions paid to Schroder Wertheim or
Schroder Securities by the Fund satisfy the foregoing standards. Such
procedures will be reviewed at least annually by the Board, including a majority
of the non-interested Trustees. The Board will also review all transactions at
least quarterly for compliance with such procedures.
It is further a policy of the Fund that all such transactions effected for the
Fund by Schroder Wertheim on the New York Stock Exchange be in accordance with
Rule 11a2-2(T) promulgated under the 1934 Act, which requires in substance that
a member of such exchange not associated with Schroder Wertheim actually execute
the transaction on the exchange floor or through the exchange facilities. Thus,
while Schroder Wertheim will bear responsibility for determining important
elements of execution such as timing and order size, another firm will actually
execute the transaction.
Schroder Wertheim will pay a portion of the brokerage commissions it receives
from the Fund to the brokers executing the Fund's transactions on the Exchange.
In accordance with Rule 11a2-2(T), the Trust has entered into an agreement with
Schroder Wertheim permitting it to retain a portion of the brokerage commissions
paid to it by the Fund. This agreement has been approved by the Board,
including a majority of the non-interested Trustees.
The Fund has no understanding or arrangement to direct any specific portion of
its brokerage to Schroder Wertheim or Schroder Securities and will not direct
brokerage to Schroder Wertheim or Schroder Securities in recognition of research
services.
From time to time, the Fund may purchase securities of a broker or dealer
through which its regularly engages in securities transactions. During the
fiscal year ended October 31, 1995, the Fund purchased securities of Global
Securities, one of its regular broker-dealers. Such securities had a value of
$110,979 as of the end of the Fund's fiscal year.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
DETERMINATION OF NET ASSET VALUE PER SHARE
The net asset value per share of the Fund is determined each day the New York
Stock Exchange (the "Exchange") is open as of 4:00 p.m. Eastern Time that day,
by dividing the value of the Fund's net assets by the total number of Fund
shares outstanding. Any assets or liabilities initially expressed in terms of
non-U.S. dollar currencies are translated into U.S. dollars at the prevailing
market rates as quoted by one or more banks or dealers on the afternoon of
valuation. The Exchange's most recent holiday schedule (which is subject to
change) states that it will close on New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. It may also close on other days.
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The Board has established procedures for the valuation of the Fund's securities:
(i) equity securities listed or traded on the New York or American Stock
Exchange or other domestic or foreign stock exchange are valued at their latest
sale prices on such exchange that day prior to the time when assets are valued;
in the absence of sales that day, such securities are valued at the mid-market
prices (in cases where securities are traded on more than one exchange, the
securities are valued on the exchange designated as the primary market by the
Fund's investment adviser); (ii) unlisted equity securities for which over-the-
counter market quotations are readily available are valued at the latest
available mid-market prices prior to the time of valuation; (iii) securities
(including restricted securities) not having readily-available market quotations
are valued at fair value under the Board's procedures; (iv) debt securities
having a maturity in excess of 60 days are valued at the mid-market prices
determined by a portfolio pricing service or obtained from active market makers
on the basis of reasonable inquiry; and (v) short-term debt securities (having a
remaining maturity of 60 days or less) are valued at cost, adjusted for
amortization of premiums and accretion of discount.
When the Fund writes an option, an amount equal to the premium received by the
Fund is recorded in the Fund's books as an asset, and an equivalent deferred
credit is recorded as a liability. The deferred credit is adjusted ("marked-to-
market") to reflect the current market value of the option. Options purchased
by the Fund are valued at their mid-market prices in the case of exchange-traded
options or, in the case of options traded in the over-the-counter market, the
average of the last bid price as obtained from two or more dealers unless there
is only one dealer, in which case that dealer's price is used. Futures
contracts and related options are stated at market value.
REDEMPTION IN KIND
In the event that payment for redeemed shares is made wholly or partly in
portfolio securities, brokerage costs may be incurred by the shareholder in
converting the securities to cash. An in kind distribution of portfolio
securities will be less liquid than cash. The shareholder may have difficulty
in finding a buyer for portfolio securities received in payment for redeemed
shares. Portfolio securities may decline in value between the time of receipt
by the shareholder and conversion to cash. A redemption in kind of the Fund's
portfolio securities could result in a less diversified portfolio of investments
for the Fund and could affect adversely the liquidity of the Fund's portfolio.
TAXATION
Under the Internal Revenue Code of 1986, as amended (the "Code"), the Fund and
each other portfolio established from time to time by the Board will be treated
as a separate taxpayer for Federal income tax purposes with the result that: (a)
each such portfolio must meet separately the income and distribution
requirements for qualification as a regulated investment company, and (b) the
amounts of investment income and capital gains earned will be determined on a
portfolio-by-portfolio (rather than on a Trust-wide) basis.
The Fund intends to qualify as a regulated investment company under Subchapter M
of the Code. To qualify as a regulated investment company the Fund intends to
distribute to shareholders at least 90% of its "investment company taxable
income" as defined in the Code (which includes, among other items, dividends,
interest and the excess of any net short-term capital gains over net long-term
capital losses), and to meet certain diversification of assets, source of
income, and other requirements of the Code. By so doing, the Fund will not be
subject to Federal income tax on its investment company taxable income and "net
capital gains" (the excess of net long-term capital gains over net short-term
capital losses) distributed to shareholders. If the Fund does not meet all of
these Code requirements, it will be taxed as an ordinary corporation, and its
distributions will be taxable to shareholders as ordinary income.
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Amounts not distributed on a timely basis in accordance with a calendar year
distribution requirement are subject to a 4% nondeductible excise tax. To
prevent imposition of the excise tax, the Fund must distribute for each calendar
year an amount equal to the sum of (1) at least 98% of its ordinary income
(excluding any capital gains or losses) for the calendar year, (2) at least 98%
of the excess of its capital gains over capital losses realized during the one-
year period ending October 31 of such year, and (3) all such ordinary income and
capital gains for previous years that were not distributed during such years. A
distribution will be treated as paid during the calendar year if it is declared
by the Fund in October, November or December of the year with a record date in
such month and paid by the Fund during January of the following year. Such
distributions will be taxable to shareholders in the calendar year in which the
distributions are declared, rather than the calendar year in which the
distributions are received.
Distributions of investment company taxable income (including realized net
short-term capital gain) are taxable to shareholders as ordinary income.
Generally, it is not expected that such distributions will be eligible for the
dividends received deduction available to corporations. However, if the Fund
acquires at least 10% of the stock of a foreign corporation which has U.S.
source income, a portion of the Fund's ordinary income dividends attributable to
such income may be eligible for such deduction, if certain requirements are met.
Distributions of net long-term capital gain are taxable to shareholders as long-
term capital gain, regardless of the length of time the Fund shares have been
held by a shareholder, and are not eligible for the dividends received
deduction. A loss realized by a shareholder on the sale of shares of the Fund
with respect to which capital gain dividends have been paid will, to the extent
of such capital gain dividends, be treated as long-term capital loss although
such shares may have been held by the shareholder for one year or less.
Further, a loss realized on a disposition will be disallowed to the extent the
shares disposed of are replaced (whether by reinvestment or distributions or
otherwise) within a period of 61 days beginning 30 days before and ending 30
days after the shares are disposed of. In such a case, the basis of the shares
acquired will be adjusted to reflect the disallowed loss.
All distributions are taxable to the shareholder whether reinvested in
additional shares or received in cash. Shareholders receiving distributions in
the form of additional shares will have a cost basis for Federal income tax
purposes in each share received equal to the net asset value of a share of the
Fund on the reinvestment date. Shareholders will be notified annually as to the
Federal tax status of distributions.
Distributions by the Fund reduce the net asset value of the Fund's shares.
Should a distribution reduce the net asset value below a shareholder's cost
basis, such distribution nevertheless would be taxable to the shareholder as
ordinary income or capital gain as described above, even though, from an
investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implications of
buying shares just prior to a distribution. The price of shares purchased at
that time includes the amount of the forthcoming distribution. Those purchasing
just prior to a distribution will receive a distribution which will nevertheless
be taxable to them.
Upon redemption or sale of his shares, a shareholder will realize a taxable gain
or loss depending upon his basis in his shares. Such gain or loss generally
will be treated as capital gain or loss if the shares are capital assets in the
shareholder's hands. Such gain or loss generally will be long-term or short-
term depending upon the shareholder's holding period for the shares.
Ordinary income dividends paid by the Fund to shareholders who are nonresident
aliens will be subject to a 30% U.S. withholding tax under existing provisions
of the Code applicable to foreign individuals and entities unless a reduced rate
of withholding or a withholding exemption is provided under
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applicable treaty law. Nonresident shareholders are urged to consult their own
tax advisers concerning the applicability of the U.S. 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 U.S. may
reduce or eliminate such taxes. If more than 50% in value of the Fund's total
assets at the close of its taxable year consists of securities of foreign
corporations, the Fund will be eligible, and 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 U.S. income tax returns as gross income, treat such proportionate share
as taxes paid by them, and, subject to certain limitations, deduct such
proportionate share in computing their taxable incomes or, alternatively, use
them as foreign tax credits against their U.S. income taxes. No deductions for
foreign taxes, however, may be claimed by noncorporate shareholders who do not
itemize deductions. A shareholder that is a nonresident alien individual or a
foreign corporation may be subject to U.S. withholding tax on the income
resulting from the Fund's election described in this paragraph but may not be
able to claim a credit or deduction against such U.S. tax for the foreign taxes
treated as having been paid by such shareholder. The Fund will report annually
to its shareholders the amount per share of such withholding taxes.
Due to investment laws in certain emerging market countries, it is anticipated
that the Fund's investments in equity securities in such countries will consist
primarily of shares of investment companies (or similar investment entities)
organized under foreign law or of ownership interests in special accounts,
trusts or partnerships. If the Fund purchases shares of an investment company
(or similar investment entity) organized under foreign law, the Fund will be
treated as owning shares in a passive foreign investment company ("PFIC") for
U.S. Federal income tax purposes. The Fund may be subject to U.S. Federal
income tax, and an additional tax in the nature of interest, on a portion of
distributions from such company and on gain from the disposition of such shares
(collectively referred to as "excess distributions"), even if such excess
distributions are paid by the Fund as a dividend to its shareholders. The Fund
may 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 distributions received from such PFICs.
The Fund may write, purchase or sell options or futures contracts. Unless the
Fund is eligible to make and makes a special election, such options and futures
contracts that are "Section 1256 contracts" will be "marked to market" for
Federal income tax purposes at the end of each taxable year, i.e., each option
or futures contract will be treated as sold for its fair market value on the
last day of the taxable year. In general, unless the special election referred
to in the previous sentence is made, gain or loss from transactions in options
and futures contracts will be 60% long-term and 40% short-term capital gain or
loss.
Code Section 1092, which applies to certain "straddles," may affect the taxation
of the Fund's transactions in options and futures contracts. Under Section
1092, the Fund may be required to postpone recognition for tax purposes of
losses incurred in certain closing transactions in options and futures.
One of the requirements for qualification as a regulated investment company is
that less than 30% of the Fund's gross income may be derived from gains from the
sale or other disposition of securities held for less than three months.
Accordingly, the Fund may be restricted in effecting closing transactions within
three months after entering into an option or futures contract.
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In general, gains from "foreign currencies" and from foreign currency options,
foreign currency futures and forward foreign exchange contracts relating to
investments in stock, securities or foreign currencies will be qualifying income
for purposes of determining whether the Fund qualifies as a regulated investment
company. It is currently unclear, however, who will be treated as the issuer of
a foreign currency instrument or how foreign currency options, futures or
forward foreign currency contracts will be valued for purposes of the regulated
investment company diversification requirements applicable to the Fund.
Under Code Section 988 special rules are provided for certain transactions in a
foreign currency other than the taxpayer's functional currency (i.e., unless
certain special rules apply, currencies other than the U.S. dollar). In
general, foreign currency gains or losses from certain forward contracts not
traded in the interbank market, from futures contracts that are not "regulated
futures contracts," and from unlisted options will be treated as ordinary income
or loss under Code Section 988. In certain circumstances, the Fund may elect
capital gain or loss treatment for such transactions. In general, however, Code
Section 988 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 capital to shareholders, thereby reducing each
shareholder's basis in his Fund shares.
The Trust will be required to report to the Internal Revenue Service (the "IRS")
all distributions as well as gross proceeds from the redemption of the Fund
shares, except in the case of certain exempt shareholders. All such
distributions and proceeds generally will be subject to the withholding of
Federal income tax at a rate of 31% ("backup withholding") in the case of non-
exempt shareholders if (1) the shareholder fails to furnish the Trust with and
to certify the shareholder's correct taxpayer identification number or social
security number, (2) the IRS notifies the Trust that the shareholder has failed
to report properly certain interest and dividend income to the IRS and to
respond to notices to that effect, or (3) when required to do so, the
shareholder fails to certify that he is not subject to backup withholding. If
the withholding provisions are applicable, any such distributions or proceeds,
whether reinvested in additional shares or taken in cash, will be reduced by the
amount required to be withheld. Any amounts withheld may be credited against
the shareholder's Federal income tax liability. Investors may wish to consult
their tax advisers about the applicability of the backup withholding provisions.
Distributions by the Fund also may be subject to state and local taxes, and
their treatment under state and local income tax laws may differ from the
Federal income tax treatment. Shareholders should consult their tax advisers
with respect to particular questions of Federal, foreign, state and local
taxation.
OTHER INFORMATION
ORGANIZATION
The Trust was originally organized as a Maryland corporation on July 30,
1969. On February 29, 1988, the Trust was recapitalized to enable the Board to
establish a series of separately managed investment portfolios, each having
different investment objectives and policies. At the time of the
recapitalization, the Trust's name was changed from "The Cheapside Dollar Fund
Limited" to "Schroder Capital Funds, Inc." On January 9, 1996, the Trust was
reorganized as a Delaware business trust. At that time, the Trust's name was
changed from "Schroder Capital Funds, Inc." to its present name. The Trust is
registered as an open-end management investment company under the Act.
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Delaware law provides that shareholders shall be entitled to the same
limitations of personal liability extended to stockholders of private
corporations for profit. The securities regulators of some states, however,
have indicated that they and the courts in their state may decline to apply
Delaware law on this point. To guard against this risk, the Trust Instrument
contains an express disclaimer of shareholder liability for the debts,
liabilities, obligations, and expenses of the Trust. The Trust Instrument
provides for indemnification out of each series' property of any shareholder or
former shareholder held personally liable for the obligations of the series.
The Trust Instrument also provides that each series shall, upon request, assume
the defense of any claim made against any shareholder for any act or obligation
of the series and satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which Delaware law does not apply (or no contractual limitation
of liability was in effect) and the portfolio is unable to meet its obligations.
Forum believes that, in view of the above, there is no risk of personal
liability to shareholders.
CAPITALIZATION AND VOTING
The Trust has an unlimited number of authorized shares of beneficial interest.
The Board may, without shareholder approval, divide the authorized shares into
an unlimited number of separate portfolios or series (such as the Fund) and may
divide portfolios or series into classes of shares, and the costs of doing so
will be borne by the Trust. The Trust currently consists of five separate
portfolios, each of which has separate investment objectives and policies, and
five classes, one of which pertains to the Fund.
The shares of the Trust 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 Trustees can elect 100% of the Trustees if they choose to do so. A
shareholder is entitled to one vote for each full share held (and a fractional
vote for each fractional share held), then standing in his name on the books of
the Trust. Shares of each class would vote separately to approve investment
advisory agreements or changes in investment objectives and other fundamental
policies affecting the portfolio to which they pertain, but all classes would
vote together in the election of Trustees and ratification of the selection of
independent accountants. Shareholders of any particular class would not be
entitled to vote on any matters as to which such class were not affected.
The Trust will not hold annual meetings of shareholders. The matters considered
at an annual meeting typically include the reelection of Trustees, approval of
an investment advisory agreement, and the ratification of the selection of
independent accountants. These matters will not be submitted to shareholders
unless a meeting of shareholders is held for some other reason, such as those
indicated below. Each of the Trustees will serve until death, resignation or
removal. Vacancies will be filled by the remaining Trustees, subject to the
provisions of the 1940 Act requiring a meeting of shareholders for election of
Trustees to fill vacancies when less than a majority of Trustees then in office
have been elected by shareholders. Similarly, the selection of accountants and
renewal of investment advisory agreements for future years will be performed
annually by the Board. Future shareholder meetings will be held to elect
Trustees if required by the 1940 Act, to obtain shareholder approval of changes
in fundamental investment policies, to obtain shareholder approval of material
changes in investment advisory agreements, to select new accountants if the
employment of the Trust's accountants has been terminated, and to seek any other
shareholder approval required under the 1940 Act. The Board has the power to
call a meeting of shareholders at any time when it believes it is necessary or
appropriate. In addition, Trust Instrument provides that a special meeting of
shareholders may be called at any time for any purpose by the holders of at
least 10% of the outstanding shares entitled to be voted at such meeting.
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In addition to the foregoing rights, the Trust Instrument provides that holders
of at least two-thirds of the outstanding shares of the Trust may remove any
person serving as a Trustee either by declaration in writing or at a meeting
called for such purpose. Further, the Board is required to call a shareholders
meeting for the purpose of considering the removal of one or more Trustees if
requested in writing to do so by the holders of not less than 10% of the
outstanding shares of the Trust. In addition, the Board is required to provide
certain assistance if requested in writing to do so by ten or more shareholders
of record (who have been such for at least six months), holding in the aggregate
the lesser of shares of the Trust having a total net asset value of at least
$25,000 or 1% of the outstanding shares of the Trust, for the purpose of
enabling such holders to communicate with other shareholders of the Trust with a
view to obtaining the requisite signatures to request a special meeting to
consider such removal.
PRINCIPAL SHAREHOLDERS
As of April ___, 1996, the following persons owned of record or beneficially 5%
or more of the Fund's shares:
SHAREHOLDER SHARE BALANCE PERCENT OF FUND
- ----------- ------------- ---------------
The Robert Wood Johnson Foundation 2,835,538.752 51.26%
P.O. Box 2316
College Road at Route One
Princeton, NJ 08543
University of Chicago 869,956.899 15.73%
450 North Cityfront Plaza Drive
Chicago, IL 60611
Schroder Nominees Limited 642,064.664 11.61%
JHSW Retirement Benefits Scheme
120 Cheapside
London EC2V 6DS England
The Board of Trustees of the Leland 593,376.420 10.73%
Stanford Junior University
c/o Stanford Management Co.
2770 Sand Bill Road
Menlo Park, CA 94025
General Reinsurance Corp. 421,803.152 7.62%
695 E Main Street
Financial Center
Stamford, CT 06904-2350
CUSTODIAN
The Chase Manhattan Bank, N.A., through its Global Custody Division located in
London, England, acts as custodian of the Fund's assets, but plays no role in
making decisions as to the purchase or sale of portfolio securities for the
Fund. Pursuant to rules adopted under the 1940 Act, the Fund may maintain its
foreign securities and cash in the custody of certain eligible foreign banks and
securities depositories. Selection of these foreign custodial institutions is
made by the Board following a consideration of a
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number of factors, including (but not limited to) the reliability and financial
stability of the institution; the ability of the institution to perform capably
custodial services for the Fund; the reputation of the institution in its
national market; the political and economic stability of the country in which
the institution is located; and further risks of potential nationalization or
expropriation of Fund assets.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Forum Financial Corp., Portland, Maine, acts as the Fund's transfer agent and
dividend disbursing agent.
PERFORMANCE INFORMATION
The 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 will be expressed in terms of the
average annual compounded rate of return of a hypothetical investment in the
Fund over periods of 1, 5 and 10 years (up to the life of the Fund), calculated
pursuant to the following formula:
P (1+T)TO THE POWER OF n = ERV
(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n = the number of years, and ERV = the ending redeemable value of
a hypothetical $1,000 payment made at the beginning of the period). All total
return figures will reflect the deduction of Fund expenses (net of certain
reimbursed expenses) on an annual basis, and will assume that all dividends and
distributions are reinvested when paid.
For the period from commencement of operations on March 31, 1995 through October
31, 1995, the average annual total return of the Fund was 10.98%.
Quotations of total return will reflect only the performance of a hypothetical
investment in the Fund during the particular time period shown. Total return
for the Fund will vary based on changes in market conditions and the level of
the Fund's expenses, and no reported performance figure should be considered an
indication of performance which may be expected in the future.
In connection with communicating total return to current or prospective
investors, the Fund also may compare these figures to the performance of other
mutual funds tracked by mutual fund rating services or to other unmanaged
indexes which may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs.
Investors who purchase and redeem shares of the Fund through a customer account
maintained at a Service Organization may be charged one or more of the following
types of fees as agreed upon by the Service Organization and the investor, with
respect to the customer services provided by the Service Organization: account
fees (a fixed amount per month or per year); transaction fees (a fixed amount
per transaction processed); compensating balance requirements (a minimum dollar
amount a customer must maintain in order to obtain the services offered); or
account maintenance fees (a periodic charge based upon a percentage of the
assets in the account or of the dividends paid on these assets). Such fees will
have the effect of reducing the average annual total return of the Fund for
those investors.
LEGAL COUNSEL
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[LAW FIRM], 77 Water Street, New York, New York 10005, counsel to the Fund,
passes upon certain legal matters in connection with the shares offered by the
Fund.
INDEPENDENT ACCOUNTANTS
[ACCOUNTANT] L.L.P. ("ACCOUNTANT") serves as independent accountants for the
Fund. [ACCOUNTANT] provides audit services and consultation in connection with
review of U.S. Securities and Exchange Commission filings. ACCOUNTANT'S address
is One Post Office Square, Boston, Massachusetts 02109.
REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information included in the
Fund's registration statement filed with the Securities and Exchange Commission
under the Securities Act of 1933 with respect to the securities offered hereby,
certain portions of which have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. The registration
statement, including the exhibits filed therewith, may be examined at the office
of the Securities and Exchange Commission in Washington, D.C.
Statements contained herein and in the Prospectus as to the contents of any
contract or other documents referred to are not necessarily complete, and, in
each instance, reference is made to the copy of such contract or other documents
filed as an exhibit to the registration statement, each such statement being
qualified in all respects by such reference.
FINANCIAL STATEMENTS
The audited Statement of Assets and Liabilities, Statement of Operations,
Statements of Changes in Net Assets, Statement of Investments, notes thereto,
and Financial Highlights of the Fund for the period from commencement of
operations through October 31, 1995 and the Report of Independent Accountants
thereon (included in the Annual Report to shareholders), which are delivered
along with this SAI, are incorporated herein by reference.
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PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
Included in the Prospectus:
Financial Highlights.
Incorporated by reference in the Statement of Additional Information for each
Fund:
For the fiscal year ended October 31, 1995 - Statement of Assets and
Liabilities, Statement of Operations, Statements of Changes in Net Assets;
for fiscal years ended 1993 and 1994, Statement of Investments, Notes to
Financial Statements, Report of Independent Accountants (for each Fund,
filed with the Securities and Exchange Commission on January 9, 1995 as
part of Registrant's Annual Report for such Fund pursuant to Rule 30b-1
under the Investment Company Act of 1940, as amended, and incorporated
herein by reference)
(b) Exhibits:
(1) Trust Instrument of Schroder Capital Funds (Delaware) (the "Trust") (filed
as Exhibit 1 to Registrant's Post-Effective Amendment No. 46 and
incorporated herein by reference).
(3) None.
(4) (a) Sections 2.04 and 2.06 of Registrant's Trust Instrument provide as
follows:
"SECTION 2.04 TRANSFER OF SHARES. Except as otherwise
provided by the Trustees, Shares shall be transferable on the
records of the Trust only by the record holder thereof or by his
agent thereunto duly authorized in writing, upon delivery to the
Trustees or the Trust's transfer agent of a duly executed
instrument of transfer and such evidence of the genuineness of
such execution and authorization and of such other matters as may
be required by the Trustees. Upon such delivery the transfer
shall be recorded on the register of the Trust. Until such
record is made, the Shareholder of record shall be deemed to be
the holder of such Shares for all purposes hereunder and neither
the Trustees nor the Trust, nor any transfer agent or registrar
nor any officer, employee or agent of the Trust shall be affected
by any notice of the proposed transfer.
"SECTION 2.06 ESTABLISHMENT OF SERIES. The Trust
created hereby shall consist of one or more Series and separate
and distinct records shall be maintained by the Trust for each
Series and the assets associated with any such Series shall be
held and accounted for separately from the assets of the Trust or
any other Series. The Trustees shall have full power and
authority, in their sole discretion, and without obtaining any
prior authorization or vote of the Shareholders of any Series of
the Trust, to establish and designate and to change in any manner
any such Series of Shares or any classes of initial or additional
Series and to fix such preferences, voting powers, rights and
privileges of such Series or classes thereof as the Trustees may
from time to time determine, to divide or combine the Shares or
any Series or classes thereof into a greater or lesser number,
to classify or reclassify any issued Shares or any Series or
classes thereof into one or more Series or classes of Shares, and
to take such other action with respect to the Shares as the
Trustees may deem desirable. The establishment and designation
of any Series shall be effective upon the adoption of a
resolution by a majority of the Trustees setting forth such
establishment and designation and the relative rights and
preferences of
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the Shares of such Series. A Series may issue any number of
Shares and need not issue shares. At any time that there are no
Shares outstanding of any particular Series previously
established and designated, the Trustees may by a majority vote
abolish that Series and the establishment and designation
thereof.
"All references to Shares in this Trust Instrument
shall be deemed to be Shares of any or all Series, or classes
thereof, as the context may require. All provisions herein
relating to the Trust shall apply equally to each Series of the
Trust, and each class thereof, except as the context otherwise
requires.
"Each Share of a Series of the Trust shall represent an
equal beneficial interest in the net assets of such Series. Each
holder of Shares of a Series shall be entitled to receive his pro
rata share of all distributions made with respect to such Series.
Upon redemption of his Shares, such Shareholder shall be paid
solely out of the funds and property of such Series of the
Trust."
(5) Form of Investment Advisory Contract between the Trust and Schroder Capital
Management International Inc. with respect to each Fund (filed as Exhibit 5
to Registrant's Post-Effective Amendment No. 46 and incorporated herein by
reference).
(6) Form of Master Distribution Contract and Supplement to be between the Trust
and Schroder Fund Advisors Inc. (filed as Exhibit 6 to Registrant's Post-
Effective Amendment No. 46 and incorporated herein by reference).
(8) Form of Global Custody Agreement to be between the Trust and The Chase
Manhattan Bank, N.A. (filed as Exhibit 8 to Registrant's Post-Effective
Amendment No. 46 and incorporated herein by reference).
(9) (a) Form of Administration Agreement with Schroder Fund Advisors Inc. with
respect to each Fund except Schroder U.S. Equity Fund (filed as
Exhibit 9(a) to Registrant's Post-Effective Amendment No. 46 and
incorporated herein by reference).
(b) Form of Sub-Administration Agreement with Forum Financial Services,
Inc. (filed as Exhibit 9(b) to Registrant's Post-Effective Amendment
No. 46 and incorporated herein by reference).
(c) Form of Transfer Agency Agreement with Forum Financial Corp. (filed as
Exhibit 9(c) to Registrant's Post-Effective Amendment No. 46 and
incorporated herein by reference).
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(d) Form of Fund Accounting Agreement with Forum Financial Corp. (filed as
Exhibit 9(d) to Registrant's Post-Effective Amendment No. 46 and
incorporated herein by reference).
(10) Opinion of Jacobs Persinger & Parker as to legality of shares to be issued
by the Trust (to be filed by subsequent post-effective amendment prior to
the effective date of this Post-Effective Amendment No. 47).
(11) Consent of Coopers & Lybrand L.L.P. (to be filed by subsequent post-
effective amendment prior to the effective date of this Post-Effective
Amendment No. 47).
(15) (a) Form of Master Distribution Plan adopted by Registrant (filed as
Exhibit 15(a) to Registrant's Post-Effective Amendment No. 46 and
incorporated herein by reference).
(b) Form of Distribution Plan Supplement with respect to each Fund (filed
as Exhibit 15(b) to Registrant's Post-Effective Amendment No. 46 and
incorporated herein by reference).
Other Exhibits:
Copies of Powers of Attorney pursuant to which Trustees have signed this
Post-Effective Amendment (filed as Other Exhibits to Post-Effective
Amendment No. 45 and incorporated herein by reference).
Copy of Power of Attorney pursuant to which Mr. Jackowitz has signed this
Post-Effective Amendment (filed as an Other Exhibit to Post-Effective
Amendment No. 45 and incorporated herein by reference).
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
(1) (2)
Number of Record
Holders as of
Title of Class April __, 1996
-------------- --------------
Schroder U.S. Equity Fund
International Equity Fund
Schroder U.S. Smaller
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Companies Fund
Schroder Emerging Markets Fund
Institutional Portfolio
Schroder Latin American Fund N/A
ITEM 27. INDEMNIFICATION.
In accordance with Section 3803 of the Delaware Business Trust Act,
SECTION 5.2 of the Registrant's Trust Instrument provides as follows:
"5.2. INDEMNIFICATION.
"(a) Subject to the exceptions and limitations contained in
Section (b) below:
"(i) Every Person who is, or has been, a Trustee or
officer of the Trust (hereinafter referred to as a "Covered
Person") shall be indemnified by the Trust to the fullest extent
permitted by law against liability and against all expenses
reasonably incurred or paid by him in connection with any claim,
action, suit or proceeding in which he becomes involved as a
party or otherwise by virtue of being or having been a Trustee or
officer and against amounts paid or incurred by him in the
settlement thereof;
"(ii) The words "claim," "action," "suit," or
"proceeding" shall apply to all claims, actions, suits or
proceedings (civil, criminal or other, including appeals), actual
or threatened while in office or thereafter, and the words
"liability" and "expenses" shall include, without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement,
fines, penalties and other liabilities.
"(b) No indemnification shall be provided hereunder to a Covered
Person:
"(i) Who shall have been adjudicated by a court or body
before which the proceeding was brought (A) to be liable to the
Trust or its Holders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in
the conduct of the Covered Person's office or (B) not to have
acted in good faith in the reasonable belief that Covered
Person's action was in the best interest of the Trust; or
"(ii) In the event of a settlement, unless there has
been a determination that such Trustee or officer did not engage
in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the Trustee's
or officer's office,
"(A) By the court or other body approving the
settlement;
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"(B) By at least a majority of those Trustees who are
neither Interested Persons of the Trust nor are parties to
the matter based upon a review of readily available facts
(as opposed to a full trial-type inquiry); or
"(C) By written opinion of independent legal counsel
based upon a review of readily available facts (as opposed
to a full trial-type inquiry);
provided, however, that any Holder may, by appropriate legal
proceedings, challenge any such determination by the Trustees or
by independent counsel.
"(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not
be exclusive of or affect any other rights to which any Covered Person may
now or hereafter be entitled, shall continue as to a person who has ceased
to be a Covered Person and shall inure to the benefit of the heirs,
executors and administrators of such a person. Nothing contained herein
shall affect any rights to indemnification to which Trust personnel, other
than Covered Persons, and other persons may be entitled by contract or
otherwise under law.
"(d) Expenses in connection with the preparation and presentation
of a defense to any claim, action, suit or proceeding of the character
described in paragraph (a) of this Section 5.2 may be paid by the Trust or
Series from time to time prior to final disposition thereof upon receipt of
an undertaking by or on behalf of such Covered Person that such amount will
be paid over by him to the Trust or Series if it is ultimately determined
that he is not entitled to indemnification under this Section 5.2;
provided, however, that either (a) such Covered Person shall have provided
appropriate security for such undertaking, (b) the Trust is insured
against losses arising out of any such advance payments or (c) either a
majority of the Trustees who are neither Interested Persons of the Trust
nor parties to the matter, or independent legal counsel in a written
opinion, shall have determined, based upon a review of readily available
facts (as opposed to a trial-type inquiry or full investigation), that
there is reason to believe that such Covered Person will be found entitled
to indemnification under this Section 5.2.
"(e) Conditional advancing of indemnification monies under this
Section 5.2 for actions based upon the 1940 Act may be made only on the
following conditions: (i) the advances must be limited to amounts used, or
to be used, for the preparation or presentation of a defense to the action,
including costs connected with the preparation of a settlement; (ii)
advances may be made only upon receipt of a written promise by, or on
behalf of, the recipient to repay that amount of the advance which exceeds
that amount which it is ultimately determined that he is entitled to
receive from the Trust by reason of indemnification; and (iii) (a) such
promise must be secured by a surety bond, other suitable insurance or an
equivalent form of security which assures that any repayments may be
obtained by the Trust without delay or litigation, which bond, insurance or
other form of security must be provided by the recipient of the advance, or
(b) a majority of a quorum of the Trust's disinterested, non-party
Trustees, or an independent legal counsel
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in a written opinion, shall determine, based upon a review of readily
available facts, that the recipient of the advance ultimately will be found
entitled to indemnification.
"(f) In case any Holder or former Holder of any Series shall be held
to be personally liable solely by reason of the Holder or former Holder
being or having been a Holder of that Series and not because of the Holder
or former Holder acts or omissions or for some other reason, the Holder or
former Holder (or the Holder or former Holder's heirs, executors,
administrators or other legal representatives, or, in the case of a
corporation or other entity, its corporate or other general successor)
shall be entitled out of the assets belonging to the applicable Series to
be held harmless from and indemnified against all loss and expense arising
from such liability. The Trust, on behalf of the affected Series, shall,
upon request by the Holder, assume the defense of any claim made against
the Holder for any act or obligation of the Series and satisfy any judgment
thereon from the assets of the Series."
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
(a) Schroder Capital Management International Inc. ("SCMI") provides
advisory services to individuals, businesses and other entities (including
registered investment companies). SCMI is a wholly-owned United States
subsidiary of Schroders Incorporated, the wholly-owned United States holding
company subsidiary of Schroders plc. Schroders plc is the holding company
parent of a large worldwide group of banks and financial service companies
(referred to as the "Schroder Group"), with associated companies and branch and
representative offices located in seventeen countries worldwide.
(b) Several of SCMI's officers and/or directors also serve as officers
and/or directors of, or are employed by, various other entities within the
Schroder Group.
The following are the directors and principal officers of SCMI, including
their business connections which are of a substantial nature. The address of
each company listed, unless otherwise noted, is 33 Gutter Lane, London EC2V 8AS,
United Kingdom. Schroder Capital Management International Limited ("Schroder
Ltd.") is a United Kingdom affiliate of SCMI which provides investment
management services to international clients located principally in the United
States.
I. Peter Sedgwick, Chairman. Mr. Sedgwick is also Vice Chairman of
Schroders PLC, 120 Cheapside, London EC2V 6DS, United Kingdom, the holding
company of the various Schroder companies, Chairman and Director of
Schroder Ltd., Director and Chief Executive Officer of Schroder Investment
Management Limited, an investment management company, Director of Schroder
Investment Management (UK) Limited, Schroder Personal Financial Management
Limited, Schroder Investment Management (Europe) Limited, Schroder
Investment Trust Management Limited and Church, Charity & Local Authorities
Fund Managers Limited, 2 Fore Street, London EC2Y 5AQ, United Kingdom, each
an investment management company, and Director, The Equitable Life
Assurance Company, Walton Street, Aylesbury, Bucks, United Kingdom, a life
assurance
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company. Mr. Sedgwick is also a director of various nominee companies and
of various unit trust companies, investment trusts and closed end
investment companies for which SCMI and/or its affiliates provide
investment services.
David M. Salisbury, Chief Executive Officer. Mr. Salisbury is also the
Joint Chief Executive Officer and Director of Schroder Ltd. and Director of
Dimensional Fund Advisors Inc., 1299 Ocean Avenue, Santa Monica,
California, an investment advisory company and DFA Securities Inc., a
broker dealer subsidiary of Dimensional Fund Advisors Inc. located at the
same address. Until October 1992 Mr. Salisbury was Chairman of Schroder
Fund Advisors Inc. ("Schroder Advisors"), 787 Seventh Avenue, New York, New
York, a broker dealer. Mr. Salisbury is a director or former director of
various investment trust companies and closed end investment companies for
which SCMI and/or its affiliates provide investment services.
John S. Ager, Director. Mr. Ager is also a Director of Schroder Ltd.
Richard R. Foulkes, Director. Mr. Foulkes is also a Director of Schroder
Ltd.
David Gibson, Director. Mr. Gibson is also a Director of Schroder Ltd. and
Director of Schroder Investment Management Limited.
C. John Govett, Director. Mr. Govett is also a Director of Schroder Ltd.,
Schroder Investment Management Limited, Schroder Personal Investment
Management (investment adviser), Schroder Ventures Limited (investment
adviser) and Schroder Venture International Holdings Limited (investment
adviser). He is Chairman and Director of Schroder Properties Limited. He
is also Director of several investment companies for which SCMI and/or its
affiliates provide investment services.
Sharon L. Haugh, Director. Ms. Haugh is also a Director of Schroder Ltd.
and Director of Schroder Advisors.
Laura E. Luckyn-Malone, Director. Ms. Luckyn-Malone is also a Director of
Schroder Ltd. and President and Director of a closed-end investment company
for which SCMI and/or its affiliates provide investment services.
Gavin D.L. Ralston, Director. Mr. Ralston is also a Director of Schroder
Ltd.
Mark J. Smith, Director. Mr. Smith is also Director, Schroder Ltd. and
Schroder Investment Management (Guernsey) Limited, an investment management
company, and Director and Vice President of Schroder Advisors. Mr. Smith is
also a director of various investment trusts and open end investment
companies for which SCMI and/or its affiliates provide investment services.
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John A. Troiano, Director. Mr. Troiano is also a Director of Schroder
Ltd., Director of Schroder Advisors and President and Director of open end
investment companies for which Schroder and/or its affiliates provide
investment services.
Jane Lucas, Director. Ms. Lucas is also a director Schroder Wertheim
Investment Services, an affiliate of SCMI.
Andrew R. Barker, First Vice President. Mr. Barker is also First Vice
President of Schroder Ltd.
J. Ann Bonathan, First Vice President. Ms. Bonathan is also First Vice
President of Schroder Ltd. During the last two years, Ms. Bonathan has
been Deputy Head of Custody Operations of SG Warburg, 1 Finsbury Avenue,
London, merchant bankers.
John D. Burns, First Vice President. During the last two years, Mr. Burns
has been First Vice President of Schroder Ltd. and Assistant Director of
Morgan Grenfell Asset Management Ltd., 20 Finsbury Circus, London EC2M 1NB,
an investment adviser.
Heather F. Crighton, Vice President. Ms. Crighton is also Vice President of
Schroder Ltd.
Louise Crouset, First Vice President. Mr. Crouset is also First Vice
President of Schroder Ltd. and, until October 1993, was Vice President of
Wellington Management, an investment adviser.
Robert C. Davy, First Vice President. Mr. Davy is also a Director of
Schroder Ltd. and an officer of open end investment companies for which
SCMI and/or its affiliates provide investment services.
Margaret H. Douglas-Hamilton, Secretary. Ms. Douglas-Hamilton is also
First Vice President and General Counsel of Schroders Incorporated, 787
Seventh Avenue, New York, New York, the holding company for various United
States based SCMI affiliates. Ms. Douglas-Hamilton is also Secretary to
various SCMI affiliates, including Schroder Advisors.
Abdallah Nauphal, First Vice President.
Joshua Shapiro, First Vice President.
John Stainsby, First Vice President. Mr. Stainsby is also First Vice
President of Schroder Ltd.
Ellen B. Sullivan, First Vice President.
Fariba Talebi, First Vice President. Ms. Talebi is also an officer of
various open end investment companies for which SCMI and/or its affiliates
provide investment services.
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Jan Kees van Heusde, First Vice President. Mr. van Heusde is also First
Vice President of Schroder Ltd.
Patrick Vermeulen, Vice First President. Mr. Vermeulen is also Vice First
President of Schroder Ltd.
Kathleen Adams, Vice President. Ms. Adams is also Vice President of
Schroder Advisors.
Mark J. Astley, Vice President.
William H. Barnes, Vice President. During the last two years, Mr. Barnes
has been a marketer at Nomura Capital Management Ltd., 180 Maiden Lane New
York, NY 10038, and investment adviser.
Susan M. Belson, Vice President.
Alan Gilston, Vice President.
Robert A. Jackowitz, Vice President.
Clare L. Latham, Vice President. During the last two years, Ms. Latham has
been First Vice President of Schroder Ltd. and Analyst at the Bank of
England, Threadneedle Street, London EC2R 8AH.
Catherine A. Mazza, Vice President. During the last two years, Ms. Mazza
has been a Vice President of Alliance Capital, 1345 Sixth Avenue, New York,
NY 10105, an investment adviser.
Robert J. Martorana, Vice President.
Thomas Melendez, Vice President. During the last two years, Mr. Melendez
has been a Vice President of Natwest Securities, 175 Water Street, New
York, NY, an investment adviser.
Ira L. Unschuld, Vice President. Mr. Unschuld is also an officer of
various open end investment companies for which SCMI and/or its affiliates
provide investment services.
Dawn M. Vroegop, Vice President. During the last two years, Ms. Vroegop
has been an Associate of A.T. Keaney, Inc., 153 East 53rd Street, New York,
NY, management consultants.
ITEM 29. PRINCIPAL UNDERWRITERS.
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(a) Schroder Fund Advisors, Inc., the Registrant's principal underwriter,
also serves as principal underwriter for WSIS Series Trust.
(b) Following is information with respect to each officer and director of
Schroder Fund Advisors Inc., the Distributor of the shares of International
Equity Fund, Schroder U.S. Equity Fund, Schroder U.S. Smaller Companies Fund,
Schroder Emerging Markets Fund and Schroder Latin American Fund (each a series
of the Registrant):
Position and
Name and Principal Position and Offices Offices with
Business Address* with Distributor Registrant
------------------ -------------------- ------------
Laura E. Luckyn-Malone Chairman and Director and
President President
Sharon L. Haugh Director None
Mark J. Smith Director and Vice Director and Vice
President President
John A. Troiano Director Vice President
Margaret H. Douglas-Hamilton Secretary Secretary
Kathleen Adams Vice President None
Catherine A. Mazza Vice President Vice President
Robert Jackowitz Treasurer Treasurer
* Address for each is 787 Seventh Avenue, New York, New York 10019 except
for John A. Troiano and Mark J. Smith each of whose address is 33 Gutter Lane,
London, England.
(c) Inapplicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
The accounts, books and other documents required to be maintained by
Registrant with respect to Schroder Emerging Markets Fund pursuant to Section
31(a) of the Investment Company Act of 1940 and the Rules thereunder will be
maintained at the offices of Schroder Capital Management International Inc. and
Schroder Fund Advisors Inc., 787 Seventh Avenue, New York, New York 10019 and/or
33 Gutter Lane, London EC2V 8AS, England, except that certain items will be
maintained at the following locations:
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(a) Forum Financial Corp., Two Portland Square, Portland, Maine 04101
(shareholder records).
(b) Forum Financial Services, Inc., Two Portland Square, Portland, Maine
04101 (corporate minute book).
ITEM 31. MANAGEMENT SERVICES.
Inapplicable.
ITEM 32. UNDERTAKINGS.
Inapplicable.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of New York and the State of New York on
the 1st day of March, 1996.
SCHRODER CAPITAL FUNDS (DELAWARE)
By: /s/ Laura E. Luckyn-Malone
------------------------------
Laura E. Luckyn-Malone
President
Pursuant to the requirements of the Securities Act of 1933, this amendment to
the Registrant's Registration Statement has been signed below by the following
persons in the capacities indicated on the 1st day of March, 1996.
Signatures Title
---------- -----
(a) Principal Executive Officer
/s/ Laura E. Luckyn-Malone President
---------------------------- and Trustee
Laura E. Luckyn-Malone
(b) Principal Financial and
Accounting Officer
ROBERT JACKOWITZ* Treasurer
(c) Majority of the Trustees
/s/ Laura E. Luckyn-Malone Trustee
----------------------------
Laura E. Luckyn-Malone
PETER E. GUERNSEY* Trustee
RALPH E. HANSMANN* Trustee
JOHN I. HOWELL* Trustee
HERMANN C. SCHWAB* Trustee
MARK J. SMITH* Trustee
*By: /s/ Thomas G. Sheehan
-----------------------------
Thomas G. Sheehan, Attorney-in-Fact
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