<PAGE>
(File Nos. 2-34215 and 811-1911)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
SCHRODER CAPITAL FUNDS (DELAWARE)
(Name of Registrant as Specified in its Charter)
BOARD OF TRUSTEES OF REGISTRANT
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2),
or Item 22(a)(2) of Schedule 14A
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11
1) Title of each class of securities to which transaction applies:
_________________________
2) Aggregate number of securities to which transaction applies:
_________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
_________________________
5) Total fee paid:
_________________________
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
_________________________
2) Form, Schedule or Registration Statement No.:
_________________________
3) Filing Party:
_________________________
4) Date Filed:
_________________________
<PAGE>
SCHRODER U.S. SMALLER COMPANIES FUND
TWO PORTLAND SQUARE
PORTLAND, MAINE 04101
July 16, 1996
Dear Shareholder:
We are pleased to forward to your attention the attached Notice and Proxy
Statement for the Special Meeting of Shareholders of Schroder U.S. Smaller
Companies Fund (the "Fund"), a series of Schroder Capital Funds (Delaware) (the
"Trust"), to be held on July 31, 1996. The Proxy Statement contains three
proposals. Please take the time to read these materials and cast your vote as
the proposals to be voted on are important to the Fund and to you as a
shareholder.
In Proposal 1, the Trust's Board of Trustees seeks shareholder approval
of a new fundamental investment policy that will enable the Fund to invest all
of its investment assets in another investment company (the "Core Portfolio")
having substantially the same investment objective, policies and restrictions
("Core and Gateway Fund Structure"). Under this structure, the only
investment securities that would be held by the Fund would be the Fund's
interest in the Core Portfolio. The Board believes that conversion to the
Core and Gateway Fund Structure may lead to certain cost savings by spreading
operational expenses over a larger asset base because multiple institutional
investors will be able to pool their assets for investment management purposes
rather than managing their assets separately, while simultaneously marketing
separate investment products with distinct, proprietary labels. Accordingly,
the Board believes that conversion to the Core and Gateway Fund Structure is
an appropriate step for the Fund. It is important to note that Schroder
Capital Management International Inc. will serve as the Core Portfolio's
investment adviser.
In addition to the proposed conversion to the Core and Gateway Fund
Structure, the Board also requests, in Proposal 2 that shareholders approve
the amendment of the Fund's investment objective and in Proposal 3 that
shareholders approve the amendment of certain of the Fund's fundamental
investment policies and restrictions. The amendments are proposed in order to
reflect changes in certain regulatory requirements and to provide the Fund
with greater flexibility to respond to future developments without the costs
and delays associated with a shareholder meeting. Management believes that
these proposed amendments will enhance management's ability to manage the
Fund's assets effectively and efficiently in changing regulatory and
investment environments. The proposed amendments will not, however, change the
Fund's emphasis of investing primarily in companies with smaller market
capitalizations.
THE BOARD RECOMMENDS APPROVAL OF EACH PROPOSAL AND URGES YOU TO COMPLETE
YOUR PROXY CARD AND RETURN IT AS SOON AS POSSIBLE.
We appreciate your participation and prompt response to this matter and
thank you for your continued support.
Yours sincerely,
Hermann C. Schwab Laura E. Luckyn-Malone
CHAIRMAN PRESIDENT
<PAGE>
SCHRODER U.S. SMALLER COMPANIES FUND
(A SERIES OF SCHRODER CAPITAL FUNDS (DELAWARE))
TWO PORTLAND SQUARE
PORTLAND, MAINE 04101
_________________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 31, 1996
_________________________
TO THE SHAREHOLDERS:
Notice is hereby given that a Special Meeting of Shareholders (the "Meeting") of
Schroder U.S. Smaller Companies Fund (the "Fund"), a series of Schroder Capital
Funds (Delaware) (the "Trust"), will be held at the offices of the Trust, Two
Portland Square, Portland, Maine, on July 31, 1996 at 10:00 a.m. Eastern time
for the following purposes:
(1) approval of a new investment policy that permits the Fund to invest all
of its investment assets in a portfolio of an open-end investment
company having substantially the same investment objective and policies
as the Fund;
(2) approval of the amendment of the Fund's investment objective;
(3) approval of the amendment of certain of the Fund's fundamental
investment policies and restrictions; and
(4) to transact any other business as may properly come before the Meeting
and any adjournment thereof.
The Board of Trustees of the Trust has fixed the close of business on June 28,
1996 as the record date for the determination of shareholders entitled to notice
of and to vote at the Meeting or any adjournment thereof.
By order of the Board of Trustees,
MARGARET H. DOUGLAS-HAMILTON
SECRETARY
New York, New York
July 16, 1996
YOUR VOTE IS IMPORTANT NO MATTER HOW LARGE OR SMALL YOUR HOLDINGS MAY BE. IN
ORDER TO AVOID THE UNNECESSARY EXPENSE OF FURTHER SOLICITATIONS, WE URGE YOU
TO INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY, DATE AND SIGN IT,
AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED.
<PAGE>
SCHRODER U.S. SMALLER COMPANIES FUND
(A SERIES OF SCHRODER CAPITAL FUNDS (DELAWARE))
TWO PORTLAND SQUARE
PORTLAND, MAINE 04101
_________________________
PROXY STATEMENT
_________________________
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 31, 1996
This Proxy Statement is furnished in connection with the solicitation of proxies
on behalf of the Board of Trustees (the "Board") of Schroder Capital Funds
(Delaware) (the "Trust"), a Delaware business trust, for use at a Special
Meeting of Shareholders, and any adjournment thereof (the "Meeting"), of
Schroder U.S. Smaller Companies Fund (the "Fund"), a series of the Trust. The
Meeting is to be held at the offices of the Trust, Two Portland Square,
Portland, Maine, on July 31, 1996 at 10:00 a.m. Eastern time, for the purposes
set forth in the accompanying Notice of Special Meeting of Shareholders. The
solicitation is made primarily by the mailing of this Proxy Statement and the
accompanying form of Proxy on or about July 16, 1996. The Fund will furnish,
without charge, a copy of its most recent annual report and semi-annual report
succeeding such annual report, if any, to shareholders upon request to the Fund
at the address above (or call 1-800-344-8332).
The solicitation of proxies will be primarily by mail but also may include
telephone or oral communications by officers of the Trust or by regular
employees of Schroder Capital Management International Inc. ("SCMI"), the Fund's
investment adviser, Forum Financial Services, Inc. ("Forum"), the Fund's sub-
administrator, Forum Financial Corp., the Fund's transfer agent, Schroder Fund
Advisors Inc. ("Schroder Advisors"), the Fund's distributor, or affiliates of
each of these entities. The costs of the Meeting and the preparation, printing
and mailing of proxies will be borne by the Fund. The address of SCMI and
Schroder Advisors is 787 Seventh Avenue, New York, New York 10019. The address
of Forum and Forum Financial Corp. is Two Portland Square, Portland, Maine
04101.
Shares may be voted in person or by proxy. Each whole share is entitled to one
vote and each fractional share is entitled to a proportionate fractional vote.
All properly executed proxies received prior to the Meeting will be voted at the
Meeting, and any adjournment thereof, in accordance with the instructions marked
thereon or otherwise provided thereon.
The persons designated on the enclosed proxy cards will vote in accordance
with your direction as indicated thereon if your proxy card is received
properly executed. Unless instructions to the contrary are marked, proxies
will be voted FOR the approval of each of the Proposals described herein. Any
shareholder may revoke their proxy at any time prior to exercise thereof by
giving written notice to Forum Financial Corp., the Fund's transfer agent, at
P.O. Box 446, Portland, Maine 04112 or by signing and mailing another proxy at
a later date. To be effective, such revocation must be received by Forum
Financial Corp. prior to the Meeting. In addition, if you attend the Meeting
in person, you may, if you wish, vote by ballot at the Meeting, thereby
canceling any proxy previously given.
Abstentions and broker non-votes will be counted as shares present for purposes
of determining whether a quorum is present but will not be voted for or against
any adjournment. Accordingly, abstentions and broker non-votes effectively will
be votes against adjournment. In addition, abstentions and broker non-votes
will not be counted as
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<PAGE>
votes cast for purposes of determining whether sufficient votes have been
received to approve a Proposal. Broker non-votes are shares held in street name
for which the broker indicates that instructions have not been received from the
beneficial owners or other persons entitled to vote and the broker does not have
discretionary voting authority. In completing proxies, shareholders should be
aware that checking the box labeled ABSTAIN will result in the shares covered by
the proxy being treated as if they were voted AGAINST the Proposal.
One-third of the shares of the Fund outstanding on June 28, 1996 (the "Record
Date"), represented in person or by proxy, must be present to constitute a
quorum. A quorum is required for the transaction of business by the Fund at the
Meeting. If less than a quorum is present the Meeting may be adjourned.
As of the Record Date, there were 891,159.070 shares of the Fund outstanding.
Set forth below is certain information as to all persons known to the Trust who
owned of record or beneficially 5% or more of the Fund's outstanding shares as
of the Record Date.
Percentage of
Number of Outstanding
Shares Shares
----------- -------------
Schroder Nominees Limited, 120 Cheapside,
London EC2V 6DS England 714,979.862 80.23%
Grace Church Co., 75 Wall Street,
New York, New York 10265 145,548.345 16.33%
Coopers & Lybrand L.L.P. ("Coopers & Lybrand"), independent accountants of the
Trust for its current fiscal year ending October 31, 1996, has been given the
opportunity to make a statement if it so desires at the Meeting. Coopers &
Lybrand is not expected to be present at the Meeting but will be available
should any matter arise requiring its presence.
REQUIRED VOTES
Approval of each Proposal requires the affirmative vote of "a majority of the
outstanding voting securities" of the Fund as defined in the Investment
Company Act of 1940, as amended (the "1940 Act"). Under the 1940 Act, this
means the affirmative vote of the lesser of (1) 67% or more of the Fund's
shares present at the Meeting or represented by proxy if the holders of more
than 50% of the outstanding shares are present in person or by proxy at the
Meeting or (2) more than 50% of the Fund's outstanding shares. With respect
to Proposal 3, shareholders of the Fund may vote against the changes proposed
with respect to specific fundamental investment restrictions in the manner
indicated on the proxy card.
PROPOSAL 1
APPROVAL OF A NEW FUNDAMENTAL INVESTMENT POLICY PERMITTING INVESTMENT OF THE
FUND'S ASSETS IN ANOTHER INVESTMENT COMPANY
INTRODUCTION: CORE AND GATEWAY(REGISTERED TRADEMARK)
At a meeting held on May 16, 1996, the Board considered and approved, subject to
shareholder approval, the adoption of a new fundamental investment policy with
respect to the Fund which would allow the Fund to invest all of its investment
assets in another investment company (the "Core and Gateway Fund Structure").
The Core and Gateway Fund Structure, commonly known as the master-feeder fund
structure, is an arrangement that allows several investment companies with
different shareholder-related features or distribution channels, but having the
same investment objective, policies and restrictions, to combine their
investments by investing all of their assets in the same portfolio instead of
managing them separately, thereby achieving certain economies of scale. For
example, a fund offering its shares at net asset value (not subject to a sales
charge) might pool its investments with
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<PAGE>
another fund having the same investment objective and policies that offers its
shares subject to a front-end or contingent deferred sales charge.
Under the Core and Gateway Fund Structure, a fund ("Gateway Portfolio") invests
all its investment assets in another investment company (the "Core Portfolio")
having substantially the same investment objective and policies in exchange for
an interest in the Core Portfolio. The following illustration compares a
traditional mutual fund structure, whereby a fund invests directly in the
securities that comprise its investment portfolio, to the Core and Gateway Fund
Structure, whereby one or more Gateway Portfolios invest in a Core Portfolio,
which in turn invests in portfolio securities.
[Graphics illustrating Traditional Fund Structure and Core and Gateway Fund
Structure.]
Conversion to the Core and Gateway Fund Structure may serve to attract other
collective investment vehicles with different shareholder servicing or
distribution arrangements and with shareholders that would not have invested in
the Fund. In this event, additional assets may allow for operating expenses to
be spread over a larger asset base. No assurance can be given, however, that
the Core and Gateway Fund Structure will serve to increase overall assets under
management or result in the Fund achieving greater operational efficiencies.
NEW INVESTMENT POLICY
Certain fundamental investment restrictions of the Fund, such as those limiting
investment in a single issuer or concentration in an industry, may prevent it
from investing all of its assets in another investment company. The Board
proposes that these restrictions be modified by adding the following fundamental
investment policy:
Notwithstanding any other investment policy or restriction, the
Fund may seek to achieve its investment objective by holding, as
its only investment securities, the securities of another
investment company having substantially the same investment
objective and policies as the Fund.
If this policy is approved by shareholders, the Board currently expects that
on or about August 1, 1996, the Fund will invest all of its investment assets
in a newly created series (the "Portfolio") of Schroder Capital Funds (the
"Schroder Core"). The Portfolio would invest in securities of the same type,
and in accordance with the same investment objective (as proposed to be
amended in Proposal 2 below), as the Fund. Shareholders would continue to
hold shares of the Fund, and the Fund would hold an interest in the Portfolio.
The Core and Gateway Fund Structure will not alter the rights and privileges
of shareholders of the Fund. The value of a shareholder's investment in the
Fund will be the same immediately after the Fund's investment in the Portfolio
as immediately before that investment. In addition, the Fund's methods of
operation and shareholder services would not be materially affected by its
investment in the Portfolio, except that the assets of the Fund may be managed
as part of a larger pool.
Following the Fund's conversion to the Core and Gateway Fund Structure, the
Board would retain the right to withdraw the Fund's investments from the
Portfolio at any time. In the event of such withdrawal, the Fund would then
resume investing directly in individual securities of other issuers or invest in
another Core Portfolio.
-4-
<PAGE>
In approving the new fundamental policy with respect to the Fund, the Board
determined that (1) such investment is in the best interests of the Fund and its
shareholders; and (2) the interests of existing shareholders of the Fund will
not be diluted as a result of effecting the transaction. The Board considered,
among other things, the possible operational efficiencies offered by the
structure. The Board believes that, after applicable waivers or reimbursements,
investment in the Portfolio will not materially increase costs to the Fund's
shareholders. For more information about the Fund's expenses after conversion
to the Core and Gateway Fund Structure, see "Comparative Expense Information"
below.
ADDITIONAL INFORMATION REGARDING THE PORTFOLIO AND THE SCHRODER CORE
The Portfolio will be a series of the Schroder Core which, like the Trust, is an
open-end management investment company. The Schroder Core is organized as a
Delaware business trust and currently consists of two series. Interests in the
Portfolio will not be available for purchase by members of the general public.
Rather, the Portfolio will serve as an investment vehicle for different types of
collective investment entities such as mutual funds, commingled institutional
trust funds and offshore investment funds. In addition to the Fund, as of the
date of this Proxy Statement, a newly created mutual fund has stated its
intention of investing in the Portfolio. That fund is not part of the Schroder
fund family.
The investment objective and policies of the Portfolio will be substantially the
same as those of the Fund (as proposed to be amended in Proposals 2 and 3
below). In seeking to achieve the same objective as the Fund, the Portfolio
will invest in the same type of securities and engage in the same transactions
permitted by the investment policies and restrictions of the Fund (as proposed
to be amended in Proposal 3 below).
SCMI, currently the Fund's investment adviser, will be the investment adviser of
the Portfolio. See "Advisory Services" below. Forum, who currently performs
administrative services with respect to the Fund, will perform similar services
for the Portfolio. See "Administrative Services" below. Likewise, other
entities that currently perform services for the Fund, such as the Fund's
custodian, will perform substantially similar services for the Portfolio.
The Portfolio will value its assets at the same time, on the same days, and
pursuant to the same method as the Fund currently values its assets. Investors
in the Portfolio will have no preemptive or conversion rights. The Portfolio
normally will not hold meetings of investors except as required under the 1940
Act. As an investor in the Portfolio, the Fund will be entitled to vote in
proportion to its relative interest in the Portfolio. As to any issue on which
Fund shareholders vote, the Fund 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 the Fund's shareholders will receive a majority of
votes cast by all Portfolio shareholders. Investors holding at least a 10%
interest in the Portfolio will be able to call a meeting of shareholders for
certain purposes affecting only the Portfolio, and shareholders holding at least
a 10% interest in the Schroder Core will be able to call a meeting to remove any
Trustee. A Trustee may be removed upon the vote of the holders of interests
qualified to vote representing two-thirds of the value of the Schroder Core.
Generally, the Fund will hold a meeting of its shareholders to obtain
instructions on how to vote its interest in the Portfolio when the Portfolio is
conducting a meeting of its shareholders. However, subject to applicable
statutory and regulatory requirements, the Fund will not seek instructions from
its shareholders with respect to (1) any proposal relating to the Portfolio
which, if made with respect to the Fund, would not require the vote of Fund
shareholders, or (2) any proposal relating to the Portfolio that is identical to
a proposal previously approved by the Fund's shareholders.
Investments in the Portfolio may not be transferred to another investor, but an
investor may withdraw all or any portion of its investment at any time. Upon
liquidation of the Portfolio, investors in the Portfolio would be entitled to
share pro rata in the net assets of the Portfolio available for distribution to
investors.
Under Delaware law, investors in the Schroder Core 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
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<PAGE>
indicated that they and the courts in their state may decline to apply Delaware
law on this point. To guard against this risk, the Schroder Core's Trust
Instrument contains an express disclaimer of investor liability for the debts,
liabilities, obligations and expenses of the Schroder Core. The Trust
Instrument provides for indemnification out of each series' property of any
investor or former investor 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 an investor for any act or
obligation of the series and satisfy any judgment thereon. Thus, the risk of an
investor incurring financial loss on account of investor liability is limited to
circumstances in which Delaware law does not apply (or no contractual limitation
of liability was in effect) and the series is unable to meet its obligations.
TRUSTEES AND OFFICERS OF THE SCHRODER CORE
Subject to the provisions of its Trust Instrument, the business of the Schroder
Core is supervised by its Trustees, who serve indefinite terms and who have all
powers necessary or convenient to carry out their responsibilities. The same
individuals currently serve as Trustees of the Schroder Core and the Trust. A
majority of Trustees then in office generally would be able to appoint successor
Trustees and fill vacancies, provided that at least a majority of the Trustees
has been elected by shareholders. Trustees of the Schroder Core who are not
interested persons of the Schroder Core receive an annual fee of $2,000 and a
fee of $500 for each meeting of the Board attended by them and may receive other
amounts with respect to the performance of additional duties.
Officers of the Schroder Core are elected by the Schroder Core's Trustees and
serve at the pleasure of the Board. The same individuals currently serve as
officers of the Schroder Core and the Trust. None of the interested Trustees
and officers of the Trust and the Schroder Core receive compensation from the
Schroder Core or the Trust. These individuals may be employed by SCMI, Forum
or their affiliates.
ADVISORY SERVICES
SCMI, which currently serves as investment adviser to the Fund, will act as
investment adviser to the Portfolio pursuant to an investment advisory contract
with the Schroder Core (the "Core Contract"). Subject to the general control of
the Schroder Core's Board of Trustees, SCMI will make investment decisions for
the Portfolio and will continuously review, supervise and administer the
Portfolio's investment program.
The Core Contract will be substantially similar in all material respects to the
current investment advisory contract with respect to the Fund (the "Current Fund
Contract") except with respect to its fee rate. Under the Core Contract with
respect to the Portfolio, SCMI will receive a monthly advisory fee at the annual
rate of 0.60% of the Portfolio's average daily net assets. Under the Current
Fund Contract, SCMI currently receives a monthly advisory fee at an annual rate
equal to 0.50% of the first $100 million of the Fund's average daily net assets;
0.40% of the next $150 million of 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 Fund paid SCMI an advisory fee of 0.50%
of the Fund's average daily net assets.
Like the Current Fund Contract, the Core Contract will continue in effect with
respect to the Portfolio provided such continuance is approved annually (1) by
the holders of a majority of the outstanding voting interests of the Portfolio
or by the Board of Trustees of the Schroder Core and (2) by a majority of the
Trustees of the Schroder Core who are not parties to such contract or
"interested persons" (as defined in the 1940 Act) of any such party. Like the
Current Fund Contract, the Core Contract could be terminated without penalty by
a vote of the Trustees of the Schroder Core or the interestholders of the
Portfolio on 60 days' written notice to SCMI, or by SCMI on 60 days' written
notice to the Schroder Core and would terminate automatically if assigned.
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, will be
primarily responsible for the day-to-day management of the investment portfolio
of the Portfolio, a function they currently perform for the Fund. Ms. Talebi
and Mr. Unschuld have been employed by SCMI in the investment research and
management areas since 1987 and 1990, respectively.
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<PAGE>
ADMINISTRATIVE SERVICES
Pursuant to an administrative services contract with the Trust, Schroder
Advisors currently provides management and administrative services necessary for
the Fund's operations other than any management services provided to the Fund by
SCMI pursuant to the Fund Contract, including among other things, (1)
preparation of shareholder reports and communications, (2) regulatory
compliance, such as reports to and filings with the Securities and Exchange
Commission and state securities commissions, and (3) general supervision of the
operation of the Fund, including coordination of the services performed by the
Fund's investment adviser, transfer agent, custodian, independent accountants,
legal counsel and others. For administrative services with respect to the Fund,
Schroder Advisors receives a monthly fee equal to 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 the Fund's average daily
net assets in excess of $250 million. Schroder Advisors is a wholly-owned
subsidiary of SCMI, and is a registered broker-dealer organized to act as an
administrator and distributor of mutual funds.
The Trust and Schroder Advisors have entered into a sub-administration agreement
with Forum with respect to the Fund. 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 administrative services contract and the 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
Rule 12b-1 plan or in the administrative services agreement 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 agreement will terminate automatically in the event
of its assignment.
If the Fund were invested in the Portfolio, the administrative fees that
Schroder Advisors and Forum would receive with respect to the Fund would be
calculated on a different basis. Schroder Advisors and Forum would receive
administrative services fees with respect to the Fund of 0.25% and 0.075%,
respectively, of the Fund's average daily net assets. The fees paid to Forum
would be paid by the Fund and not by Schroder, as is currently the case. In
addition, the Fund would be responsible for its pro rata portion of the
administrative services fees paid by the Portfolio relating to administrative
services performed on behalf of Portfolio by Forum. For these services, Forum
would receive administrative services fees paid by the Portfolio of 0.075% of
the Portfolio's average daily net assets.
Although the proposed administrative services fees paid directly or indirectly
by the Fund would exceed the current fee paid by the Fund for administrative
services, the Board believes that this change is justified in light of the
complexity of the Core and Gateway Fund Structure and the overall benefits to
shareholders.
EXPENSE LIMITATIONS
SCMI and Schroder Advisors have voluntarily undertaken to assume certain
expenses of the Fund (or waive their respective fees) upon conversion to the
Core and Gateway Fund Structure, which applies to fees and expenses paid by the
Fund as well as fees and expenses paid by the Core Portfolio, of which the Fund
bears its pro rata portion. 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 1.49% and 1.99% of
the average daily net assets of the Fund attributable to Investor Shares and
Advisor Shares, respectively. These expense limitations cannot be withdrawn
except by a majority vote of the Trustees of the Trust who are not interested
persons of the Trust (the "Independent Trustees"). If expense reimbursements
are required, they will be made on a monthly basis. Neither SCMI nor Schroder
Advisors, however, 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. This undertaking to reimburse
or waive expenses supplements any applicable state expense limitation. Without
applicable expense
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<PAGE>
reimbursements and fee waivers, expenses for each Fund would be higher under the
Core and Gateway Fund Structure than under the Fund's current operating
structure.
COMPARATIVE EXPENSE INFORMATION
The following information is intended to show the various expenses that an
investor in the Fund would bear directly or indirectly after conversion of the
Fund to the Core and Gateway Fund Structure in comparison to those borne under
the existing structure.
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES
(as a percentage of average daily net assets)
Actual Pro Forma Pro Forma Pro Forma
Fund (1) Fund Portfolio Combined
---------- --------- --------- ---------
Investor Advisor Investor Advisor Investor Advisor Investor Advisor
Shares Shares Shares Shares Shares Shares Shares Shares
-------- ------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees(2) 0.75% 0.75% 0.325% 0.325% 0.675% 0.675% 1.00% 1.00%
Rule 12b-1 Fees 0.00% 0.25% 0.00% 0.25% 0.00% 0.00% 0.00% 0.25%
Other Expenses
(after estimated waivers
and reimbursements)(3) 0.74% 0.99% 0.18% 0.43% 0.31% 0.31% 0.49% 0.74%
----- ----- ----- ----- ----- ----- ----- -----
Total Operating Expenses 1.49% 1.99% 0.505% 1.005% 0.985% 0.985% 1.49% 1.99%
----- ----- ------ ------ ------ ------ ----- -----
----- ----- ------ ------ ------ ------ ----- -----
</TABLE>
(1) Expenses for the fiscal year ended October 31, 1995. Advisor Shares
expenses have been restated to reflect current fees borne by holders of Advisor
Shares.
(2) Management Fees reflect the fees paid for investment advisory and
administrative services.
(3) Following conversion to the Core and Gateway Fund Structure, SCMI and
Schroder Advisors have voluntarily undertaken to assume certain expenses of
the Fund to the extent the Total Operating Expenses of Investor Shares and
Advisor Shares exceed 1.49% and 1.99%, respectively. This undertaking cannot
be withdrawn except by a majority vote of the Trust's Board. Absent estimated
expense reimbursements and fee waivers, Other Expenses and Total Operating
Expenses after conversion would be: Investor Shares, 1.12% and 2.12%,
respectively; Advisor Shares, 1.37% and 2.62%, respectively.
The table below compares actual fees paid to SCMI under the Current Fund
Contract for the fiscal year ended October 31, 1995 with the fees that would
have been payable had the Fund invested all of its investment assets in the
Portfolio for the same period, before applicable fee waivers and expense
reimbursements:
Actual Fees Payable under Core and
Fees Paid Gateway Fund Structure % Change
--------- ---------------------- --------
$71,188 $85,426 20%
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EXAMPLE. The following illustrates the expenses on a $1,000 investment in the
Fund under the existing and proposed fund structures assuming (1) a 5% annual
return, (2) reinvestment of all dividends and distributions, and (3) full
redemption at the end of each period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Existing Structure-Investor Shares $15 $47 $81 $178
Existing Structure-Advisor Shares $20 $62 $107 $232
Proposed Structure-Investor Shares $15 $47 $81 $178
Proposed Structure-Advisor Shares $20 $62 $107 $232
The purpose of the table and example is to assist investors in understanding the
various costs and expenses an investor in shares of the Fund would bear directly
or indirectly after conversion of the Fund to the Core and Gateway Fund
Structure in comparison to those borne under the existing fund structure. THE
EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR
RETURN. ACTUAL EXPENSES AND RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN.
TAX CONSEQUENCES OF INVESTMENT IN THE PORTFOLIO
The Trust will receive an opinion from its tax counsel, Kirkpatrick & Lockhart
LLP, on or prior to the date of the Fund's conversion to the Core and Gateway
Fund Structure, that the Fund's contribution of all of its assets to the
Portfolio in exchange for a beneficial interest therein is not expected to
result in the recognition of gain or loss for federal income tax purposes by
the Fund or its shareholders. While no ruling has been requested from the
Internal Revenue Service ("IRS") concerning the foregoing, and the IRS is not
bound by an opinion of counsel, the Board believes that the opinion of counsel
provides sufficient authority regarding the tax effects of the Fund's
investment in the Portfolio, in view of the nature and complexity of such
investment.
It is intended that the Fund will continue to qualify for treatment as a
regulated investment company under Subchapter M of the Internal Revenue Code
of 1986, as amended. In each taxable year that the Fund so qualifies, the
Fund (but not its shareholders) will be relieved of federal income tax on that
part of its investment company taxable income (consisting of its share of the
Portfolio's net investment income and net short-term capital gain) and its
share of the Portfolio's net capital gain (the excess of net long-term capital
gain over net short-term capital loss) that is distributed to its
shareholders. Neither the Fund nor the Portfolio is expected to be required
to pay any federal income or excise taxes. Distributions from the Fund,
except for distributions designated as net capital gain distributions, will
continue to be taxable to its shareholders as ordinary income, whether
received in cash or reinvested in Fund shares.
EVALUATION BY THE BOARD
At a meeting held on May 16, 1996, the Board considered and determined to seek
shareholder approval of a new fundamental investment policy that would allow the
Fund to convert to the Core and Gateway Fund Structure. Management of the Trust
presented to the Board the potential benefits, along with the costs and
potential risks, of the Fund converting to this structure. In this regard the
Board considered the following.
Management of the Trust presented information concerning steps which some mutual
funds have taken to avoid the erosion of assets under management while
developing a competitive advantage in the mutual funds marketplace. The Core
and Gateway Fund Structure, as approved by the Board, is designed to retain
current assets and to attract new assets to the structure. Management believes
that the retention of assets would assist the Fund in its efforts to keep
operational costs from rising significantly. In addition, in the view of
management, a larger asset base may allow the purchase of individual investment
securities in larger amounts, which may reduce certain transactional and
custodial expenses.
The Board recognized that (1) certain of the benefits of the Core and Gateway
Fund Structure would likely arise only if the Portfolio was to grow through
investments in the Portfolio by investors other than the Fund; and (2) there is
no assurance that, even if other investors invest in the Portfolio, expense
savings or other benefits will be realized.
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In addition, the Board recognized that SCMI, Schroder Advisors, Forum and other
service providers to the Fund may benefit through increased economies of scale
in the event that assets rise, without a corresponding benefit to Fund
shareholders. In particular, conversion to the Core and Gateway Fund Structure
may enable SCMI and Schroder Advisors to increase assets under management
through attraction and development of new investment vehicles with less risk
than would be possible without this structure. As a result, SCMI and Schroder
Advisors could earn fees with less risk of limited success than is typical in
the early, developmental years of an investment vehicle, since new investors in
the Portfolio will be presented with the ability to pool their assets in an
established vehicle.
The Board considered that the Portfolio will pay a higher advisory fee than is
currently paid by the Fund under the Current Fund Contract. In addition, the
Board considered the fact that the Fund will pay more for administrative
services under the Core and Gateway Fund Structure than it does currently. The
Board also considered the fact that the proposed advisory and administration
fees, unlike the Fund's current advisory and administration fees, are not
structured to decline as the Portfolio reaches certain asset levels. In
determining that the proposed fee restructurings and fee increases are fair and
reasonable, the Board considered, among other things, the size and nature of the
Fund, the value of the benefit that the Fund will realize through investment
advisory services and administrative services, comparative data as to investment
advisory fees and expense ratios of comparable funds, and the nature and
complexity of the Core and Gateway Fund Structure.
Management informed the Board that, depending upon the size of the Fund at the
time of conversion, and after applicable waivers and reimbursements, the
combined expense ratio of the Fund and the Portfolio will be approximately equal
to the expense ratio of the Fund if it continued to invest directly in
investment securities. The Board considered that, without applicable expense
reimbursements and fee waivers, expenses for each Fund initially would be higher
under the Core and Gateway Fund Structure than under each Fund's current
operating structure.
The Board also considered, among other things, (1) the costs of the proposed
change in fund structure, (2) other options to the proposed change, and (3) the
tax-free nature of the proposed change.
After consideration of the foregoing and all other relevant factors, the Board,
including a majority of the Independent Trustees, determined that (1) the
conversion of the Fund to the Core and Gateway Fund Structure is in the best
interests of the Fund and (2) the interests of the Fund's shareholders will not
be diluted as a result of the conversion. Even if this proposal is approved by
the Fund's shareholders, the Board will retain the right to delay or not to
proceed with the conversion if it determines that it would not be in the best
interests of the Fund and its shareholders to do so.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" PROPOSAL 1
PROPOSAL 2
APPROVAL OF THE AMENDMENT OF THE FUND'S INVESTMENT OBJECTIVE
At a meeting held on May 16, 1996, the Board considered and determined to seek
shareholder approval of the amendment of the Fund's investment objective. The
Fund's current 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. The Board proposes that the investment
objective be amended to provide that the Fund's investment objective is capital
appreciation.
In connection with the proposed amendment of the Fund's investment objective,
the Board has also adopted a new non-fundamental policy (the "New Policy") for
the Fund that can be changed by the Board without shareholder
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approval. Under the New Policy, the Fund will seek to achieve its investment
objective by investing, under normal market conditions, at least 65% of its
total assets in equity securities of companies domiciled in the United States
that, at the time of purchase, have market capitalizations of $1.5 billion or
less. The New Policy, by increasing the maximum market capitalization from $1
billion to $1.5 billion, increases the universe of companies that may be
considered for purposes of the 65% requirement. SCMI believes that such an
increase in maximum market capitalization is appropriate due to the ever
increasing market capitalizations of companies in general. The New Policy will
only become effective if shareholders approve this proposal.
The Board believes the proposed amendment of the Fund's investment objective is
in the best interest of the Fund and its shareholders. As a result of the
amendment, the Board will be able to amend the New Policy in response to
economic or other developments without the costs and delay associated with a
shareholder meeting.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" PROPOSAL 2
PROPOSAL 3
APPROVAL OF THE AMENDMENT OF CERTAIN OF THE FUND'S FUNDAMENTAL
INVESTMENT POLICIES AND RESTRICTIONS
The Fund has adopted certain fundamental investment policies and restrictions,
which are set forth in the Fund's prospectus and statement of additional
information, and which may only be changed with shareholder approval.
Investment policies and restrictions that the Fund has not designated as being
fundamental are considered to be "non-fundamental" and may be changed by the
Fund's Board without shareholder approval.
Certain of the fundamental restrictions that the Fund has adopted in the past
reflect regulatory, business or industry conditions, practices or requirements
that are no longer in effect. Other fundamental restrictions reflect regulatory
requirements which remain in effect, but which are not required to be stated as
fundamental, or in some cases even as non-fundamental, restrictions.
Accordingly, the Board has approved revisions to the Fund's fundamental
restrictions to simplify, modernize and make more uniform those investment
restrictions that are required to be fundamental, and to eliminate those
fundamental restrictions that are not legally required. In some instances,
existing fundamental restrictions that are proposed to be eliminated because
they are not required to be fundamental would be reclassified as
non-fundamental restrictions.
The Board believes that the proposed changes to the Fund's fundamental
restrictions will enhance management's ability to manage efficiently and
effectively the Fund's assets in changing regulatory and investment
environments. Additionally, by reducing to a minimum those policies that can be
changed only by shareholder vote, the Fund will be able to avoid the costs and
delays associated with a shareholder meeting when making changes to its
investment policies that, at a future date, the Board considers desirable.
Although the proposed amendments to the fundamental restrictions will allow the
Fund greater flexibility to respond to future investment opportunities, it is
not anticipated that any proposed amendment will result in a change to the
Fund's current operations.
A description of each proposed change to the Fund's fundamental investment
restrictions is set forth below. A complete list of the Fund's proposed
fundamental investment restrictions is set forth in Appendix A. In addition, a
description of those non-fundamental investment restrictions that would be
adopted in conjunction with the elimination of certain fundamental restrictions
are also set forth below. Any non-fundamental investment restriction may be
modified or eliminated by the Board at any future date without any further
approval of shareholders. A complete list of the Fund's proposed non-
fundamental investment restrictions is set forth in Appendix B.
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If the proposed changes are approved by shareholders at the Meeting, the Fund's
prospectus and statement of additional information will be revised to reflect
those changes. This will occur as soon as practicable following the Meeting.
PROPOSED CHANGES. The following is the text and a summary description of the
proposed changes to the Fund's fundamental restrictions, together with the text
of those non-fundamental restrictions that would be adopted in connection with
the elimination of certain of the Fund's current fundamental restrictions. With
respect to each restriction (except the restriction on borrowing), if a
percentage restriction is adhered to at the time of any investment or
transaction, a later increase or decrease in percentage resulting in a change in
the values of the Fund's portfolio securities or the amount of its total assets
will not be considered a violation of the fundamental restriction.
1. AMENDMENT OF FUNDAMENTAL RESTRICTION ON PORTFOLIO DIVERSIFICATION.
CURRENT FUNDAMENTAL RESTRICTION:
"The Fund cannot invest in securities (except those of the U.S.
Government or its agencies or instrumentalities) of 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."
PROPOSED FUNDAMENTAL RESTRICTION:
"With respect to 75% of its assets, the Fund may not purchase a security
other than a U.S. Government Security if, as a result, more than 5% of
the Fund's total assets would be invested in the securities of a single
issuer or the Fund would own more than 10% of the outstanding voting
securities of any single issuer."
DISCUSSION:
The Fund is classified as a "diversified" investment company under the
1940 Act and must have a fundamental restriction establishing the
percentage limitations with respect to investments in individual issuers.
The Fund's current restriction is more limiting than required by the 1940
Act. Accordingly, the Board is proposing that the restriction be amended
to conform to the requirements imposed by the 1940 Act on a diversified
investment company. The restriction as amended would enable the Fund to
invest up to 25% of its assets without regard to any percentage
limitation with respect to investment in a single issuer.
2. AMENDMENT OF FUNDAMENTAL RESTRICTION ON INDUSTRY CONCENTRATION.
CURRENT FUNDAMENTAL RESTRICTION:
"The Fund cannot 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."
PROPOSED FUNDAMENTAL RESTRICTION:
"The Fund may not purchase securities if, immediately after the purchase,
25% or more of the value of the Fund's total assets would be invested in
the securities of issuers conducting their principal business activities
in the same industry; provided, however, that there is no limit on
investments in U.S. Government Securities."
DISCUSSION:
The proposed change to the Fund's fundamental concentration policy would
clarify that the restriction does not apply to investments in U.S.
Government Securities.
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<PAGE>
3. AMENDMENT OF FUNDAMENTAL RESTRICTION ON BORROWING.
CURRENT FUNDAMENTAL RESTRICTION:
"The Fund cannot 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."
PROPOSED FUNDAMENTAL RESTRICTION:
"The Fund may borrow money from banks or by entering into reverse
repurchase agreements, provided that such borrowings do not exceed 33
1/3% of the value of the Fund's total assets (computed immediately after
the borrowing)."
DISCUSSION:
The Fund's current fundamental restriction on borrowing is more
restrictive than required by the 1940 Act. The Board believes that
changing the Fund's fundamental restriction in the manner proposed will
provide flexibility for future contingencies. Although the proposed
fundamental restriction would permit the Fund to use borrowing for
leveraging or investment purposes, the Fund has no current intention of
doing so. Accordingly, in addition to the modification of the existing
fundamental restriction, if shareholders approve this Proposal, the Fund
would become subject to the following non-fundamental restriction that
may be changed at any time without a shareholder vote: "The Fund's
borrowings for other than temporary or emergency purposes or meeting
redemption requests may not exceed an amount equal to 5% of the value of
the Fund's net assets."
4. AMENDMENT OF FUNDAMENTAL RESTRICTION ON MAKING LOANS.
CURRENT FUNDAMENTAL RESTRICTIONS:
"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."
"The Fund cannot 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; the Fund may
also make loans of portfolio securities and enter into repurchase
agreements."
PROPOSED FUNDAMENTAL RESTRICTION:
"The Fund may not make loans, except the Fund may enter into repurchase
agreements, purchase debt securities that are otherwise permitted
investments and lend portfolio securities."
DISCUSSION:
The proposed fundamental restriction clarifies that loans of portfolio
securities will be excluded from the general fundamental restriction on
making loans and eliminates the percentage restriction on loans. The
Board believes that changing the Fund's fundamental restriction in the
manner proposed will provide flexibility in the event of future
developments. The amendment of this restriction will not result in a
change to the Fund's current operations. Rather, the current percentage
limitation will continue as a non-fundamental restriction. Accordingly,
in addition to the modification of the existing fundamental restriction,
if shareholders approve this Proposal, the Fund would become subject to
the following non-fundamental restriction: "The Fund may not lend
portfolio securities if the total value of all loaned securities would
exceed 25% of the Fund's total assets."
5. AMENDMENT OF FUNDAMENTAL RESTRICTION ON REAL ESTATE INVESTMENTS.
CURRENT FUNDAMENTAL RESTRICTION:
"The Fund cannot invest in real estate or in interests in real estate,
but may purchase readily marketable securities of companies holding real
estate or interests therein."
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PROPOSED FUNDAMENTAL RESTRICTION:
"The Fund may not purchase or sell real estate or any interest therein,
except that the Fund may invest in debt obligations secured by real
estate or interests therein or securities issued by companies that invest
in real estate or interests therein."
DISCUSSION:
The proposed change clarifies the exceptions to the prohibition on
investing in real estate.
6. AMENDMENT OF FUNDAMENTAL RESTRICTION ON INVESTING IN COMMODITIES.
CURRENT FUNDAMENTAL RESTRICTION:
"The Fund cannot 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 commodity contract."
PROPOSED FUNDAMENTAL RESTRICTION:
"The Fund may not purchase or sell physical commodities unless acquired
as a result of owning securities or other instruments, but the Fund may
purchase, sell or enter into financial options and futures and forward
currency contracts and other financial contracts or derivative
instruments."
DISCUSSION:
The proposed changes to this restriction are intended to ensure that the
Fund will have the maximum flexibility to enter into hedging or other
transactions utilizing financial contracts and derivative products when
doing so is permitted by operating policies established for the Fund by
its Board.
7. ADDITION OF FUNDAMENTAL RESTRICTION ON ISSUING SENIOR SECURITIES.
PROPOSED FUNDAMENTAL RESTRICTION:
"The Fund may not issue senior securities except to the extent permitted
by the 1940 Act."
DISCUSSION:
The 1940 Act establishes limits on the ability of a Fund to issue senior
securities. The addition of this fundamental restriction clarifies the
extent to which the Fund may issue senior securities. The addition of
this provision will not result in a change to the Fund's current
operations.
8. AMENDMENT AND RECLASSIFICATION OF FUNDAMENTAL RESTRICTION ON SHORT SALES.
CURRENT FUNDAMENTAL RESTRICTION:
"The Fund cannot 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 asset will be held as
collateral for such short sales at any one time."
DISCUSSION:
The Fund is not required to establish a fundamental restriction on short
sales. Consistent with the Board's determination to promote flexibility
and efficiency in the event of future changes in the law, the Board
believes that the Fund's fundamental restriction on this subject should
be eliminated and replaced by a non-fundamental restriction. If
shareholders approve this Proposal, the Fund would become subject to the
following non-fundamental restriction: "The Fund may not purchase
securities on margin, or make short sales of securities (except short
sales against the box), except for the use of short-term credit necessary
for the clearance of purchases and sales of portfolio securities. The
Fund may make margin deposits in connection with permitted transactions
in options, futures contracts and options on futures contracts."
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9. AMENDMENT AND RECLASSIFICATION OF FUNDAMENTAL RESTRICTION ON PLEDGING
ASSETS.
CURRENT FUNDAMENTAL RESTRICTION:
"The Fund cannot pledge, mortgage or hypothecate its assets to any extent
greater than 10% of the value of the total assets of the Fund."
DISCUSSION:
The Fund is not required to have a fundamental restriction on its ability
to pledge securities. However, certain state securities laws or
regulations require the Fund to establish at least a non-fundamental
restriction on this subject. In order to maximize the Fund's flexibility
in the event of future changes in state securities laws or regulations,
the Board believes that the Fund's restriction on pledging securities
should be eliminated and replaced with a non-fundamental restriction that
does not have a 10% limitation. If shareholders approve this Proposal,
the Fund would become subject to the following non-fundamental
restriction: "The Fund may not pledge, mortgage, hypothecate or encumber
any of its assets except to secure permitted borrowings."
10. AMENDMENT AND RECLASSIFICATION OF FUNDAMENTAL RESTRICTION ON INVESTMENTS
IN OTHER INVESTMENT COMPANIES.
CURRENT FUNDAMENTAL RESTRICTION:
"The Fund cannot 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."
DISCUSSION:
The Fund's current fundamental restriction conforms to the limits under
the 1940 Act. However, the Fund is not required to have a fundamental
restriction on this subject. In order to maximize the Fund's flexibility
in the event of future changes in federal and state securities laws or
regulations, the Board believes that the Fund's restriction on
investments in other investment companies should be amended and
reclassified as a non-fundamental restriction. If shareholders approve
this Proposal, the Fund would become subject to the following non-
fundamental restriction: "The Fund may not invest in securities of
another investment company, except to the extent permitted by the 1940
Act."
11. AMENDMENT AND RECLASSIFICATION OF FUNDAMENTAL RESTRICTION ON INVESTMENTS
IN OIL, GAS OR OTHER MINERAL EXPLORATION OR DEVELOPMENT PROGRAMS.
CURRENT FUNDAMENTAL RESTRICTION:
"The Fund cannot 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."
DISCUSSION:
The Fund is not required to have a fundamental restriction with respect
to oil, gas or mineral investments, but certain state securities laws or
regulations require the Fund to establish at least a non-fundamental
restriction on this subject. In order to maximize the Fund's flexibility
in the event of future changes in state securities laws or policies, the
Board believes that the Fund's restriction on oil, gas and mineral
investments should be amended and reclassified as a non-fundamental
restriction. If shareholders approve this Proposal, the Fund would
become subject to the following non-fundamental restriction: "The Fund
may not invest in interests in oil and gas or interests in other mineral
exploration or development programs."
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<PAGE>
12. AMENDMENT AND RECLASSIFICATION OF FUNDAMENTAL RESTRICTION ON MARGIN
TRANSACTIONS.
CURRENT FUNDAMENTAL RESTRICTION:
"The Fund cannot 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."
DISCUSSION:
The Fund is not required to have a fundamental restriction on its ability
to engage in margin transactions. However, certain state securities laws
or regulations require the Fund to establish at least a non-fundamental
restriction on this subject. In order to maximize the Fund's flexibility
in the event of future changes in state securities laws or regulations,
the Board believes that the Fund's restriction on margin transactions
should be amended and reclassified as non-fundamental. If shareholders
approve this Proposal, the Fund would become subject to the following
non-fundamental restriction: "The Fund may not purchase securities on
margin, or make short sales of securities (except short sales against the
box), except for the use of short-term credit necessary for the clearance
of purchases and sales of portfolio securities. The Fund may make margin
deposits in connection with permitted transactions in options, futures
contracts and options on futures contracts."
13. ELIMINATION OF FUNDAMENTAL RESTRICTION REGARDING PERCENTAGE REQUIREMENTS.
CURRENT FUNDAMENTAL RESTRICTION:
"The Fund cannot deviate from the percentage requirements listed under
`Investment Objective and Policies' and `Additional Investment Policies
and Risk Considerations' [in the Prospectus]."
DISCUSSION:
The Fund is not required to set forth all of its percentage limitations
as fundamental policies. Accordingly, in order to maximize the Fund's
flexibility, the Board believes that the Fund's percentage limitations
should be made non-fundamental except with respect to the percentage
limitations set forth in Appendix A. For more information on the current
limitations covered by this restriction, please see the Fund's
prospectus.
14. ELIMINATION OF FUNDAMENTAL RESTRICTION ON INVESTING FOR THE PURPOSE OF
CONTROL.
CURRENT FUNDAMENTAL RESTRICTION:
"The Fund cannot invest in companies for the purpose of acquiring control
or management thereof."
DISCUSSION:
There is no legal requirement that the Fund have a fundamental
restriction on this subject, and the Fund's Board believes that it is in
the best interest of the Fund to remove such a restriction. The
elimination of this restriction would clarify that the Fund may exercise
freely its rights as a shareholder of the companies in which the Fund
invests. The Fund does not intend to become involved in directing or
administering the day-to-day operations of any company. However, SCMI
believes that it should be able to communicate freely the Fund's views as
a shareholder on important matters of policy to a company's management,
its board of Trustees, and its shareholders, when it believes that such
action or policy may affect significantly the value of its investment.
The activities that the Fund might engage in, either individually or with
others, include seeking changes in a company's direction, seeking the
sale of a company or a portion of its assets, or participating in a
takeover effort or in opposition to a takeover effort. SCMI believes
that the Fund currently may engage in such activities without necessarily
violating this provision. Nevertheless, the existence of the provision
might give rise to a claim that such activities did in fact constitute
investing for control or management. Although the Fund could be drawn
into lawsuits whether or not this provision is eliminated, SCMI believes
that, on balance, elimination of this provision would be beneficial to
the Fund. Any activities conducted by the Fund will continue to be
limited to those instances where SCMI believes
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that potential litigation risk and expense is offset by the potential for
substantial enhancement or preservation of the value of the Fund's
investments.
15. ELIMINATION OF FUNDAMENTAL RESTRICTION ON PUTS AND CALLS.
CURRENT FUNDAMENTAL RESTRICTION:
"The Fund cannot purchase or write puts or calls except as permitted by
any of its other investment policies."
DISCUSSION:
There is no legal requirement that a Fund have a fundamental restriction
on this subject, and the Fund's Board believes that it is in the best
interest of the Fund to eliminate such a restriction.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" PROPOSAL 3
OTHER BUSINESS
Management knows of no other business to be presented at the Meeting. If any
additional matters should be properly presented, it is intended that the
enclosed proxy will be voted on such matters in accordance with the judgment of
the persons designated in the proxy.
ADDITIONAL INFORMATION
SUBMISSION OF SHAREHOLDER PROPOSALS
It is anticipated that, following the Meeting, neither the Trust nor the Fund
will hold any shareholder meetings except as required by Federal law or Delaware
state law. Shareholders wishing to submit proposals, including proposals to
nominate persons for election as Trustees, for inclusion in a proxy statement
for a subsequent shareholder meeting should send proposals to the Assistant
Secretary of Schroder Capital Funds (Delaware), David I. Goldstein, in care of
Forum Financial Group, Two Portland Square, Portland, Maine 04101.
NOTICE TO BANKS, BROKER-DEALERS AND VOTING TRUSTEES AND THEIR NOMINEES
Banks, broker-dealers and voting trustees and their nominees should advise the
Assistant Treasurer of Schroder Capital Funds (Delaware), Thomas G. Sheehan, in
care of Forum Financial Group, Two Portland Square, Portland, Maine 04101,
whether, with respect to shares of record held by them, other persons are
beneficial owners of shares for which proxies are being solicited and, if so,
the number of copies of the Proxy Statement needed in order to supply copies to
the beneficial owners of the shares.
YOU ARE URGED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY
By order of the Board of Trustees,
MARGARET H. DOUGLAS-HAMILTON
SECRETARY
New York, New York
July 16, 1996
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APPENDIX A
PROPOSED FUNDAMENTAL INVESTMENT RESTRICTIONS
(1) With respect to 75% of its assets, the Fund may not purchase a security
other than a U.S. Government Security if, as a result, more than 5% of
the Fund's total assets would be invested in the securities of a single
issuer or the Fund would own more than 10% of the outstanding voting
securities of any single issuer.
(2) The Fund may not purchase securities if, immediately after the purchase,
25% or more of the value of the Fund's total assets would be invested in
the securities of issuers conducting their principal business activities
in the same industry; provided, however, that there is no limit on
investments in U.S. Government Securities.
(3) The Fund may borrow money from banks or by entering into reverse
repurchase agreements, provided that such borrowings do not exceed 33
1/3% of the value of the Fund's total assets (computed immediately after
the borrowing).
(4) The Fund may not issue senior securities except to the extent permitted
by the 1940 Act.
(5) The Fund may not underwrite securities of other issuers, except to the
extent that the Fund may be considered to be acting as an underwriter in
connection with the disposition of portfolio securities.
(6) The Fund may not make loans, except the Fund may enter into repurchase
agreements, purchase debt securities that are otherwise permitted
investments and lend portfolio securities.
(7) The Fund may not purchase or sell real estate or any interest therein,
except that the Fund may invest in debt obligations secured by real
estate or interests therein or securities issued by companies that invest
in real estate or interests therein.
(8) The Fund may not purchase or sell physical commodities unless acquired as
a result of owning securities or other instruments, but the Fund may
purchase, sell or enter into financial options and futures and forward
currency contracts and other financial contracts or derivative
instruments.
<PAGE>
APPENDIX B
PROPOSED NON-FUNDAMENTAL INVESTMENT RESTRICTIONS
(a) The Fund's borrowings for other than temporary or emergency purposes or
meeting redemption requests may not exceed an amount equal to 5% of the
value of the Fund's net assets.
(b) The Fund may not acquire securities or invest in repurchase agreements
with respect to any securities if, as result, more than 15% of the Fund's
net assets (taken at current value) would be invested in repurchase
agreements not entitling the holder to payment of principal within seven
days and in securities which are not readily marketable, including
securities that are not readily marketable by virtue of restrictions on
the sale of such securities to the public without registration under the
1933 Act ("Restricted Securities").
(c) The Fund may not invest in securities of another investment company,
except to the extent permitted by the 1940 Act.
(d) The Fund may not purchase securities on margin, or make short sales of
securities (except short sales against the box), except for the use of
short-term credit necessary for the clearance of purchases and sales of
portfolio securities. The Fund may make margin deposits in connection
with permitted transactions in options, futures contracts and options on
futures contracts.
(e) The Fund may not invest in securities (other than fully-collateralized
debt obligations) issued by companies that have conducted continuous
operations for less than three years, including the operations of
predecessors unless guaranteed as to principal and interest by an issuer
in whose securities the Fund could invest, if, as a result, more than 5%
of the value of the Fund's total assets would be so invested.
(f) The Fund may not pledge, mortgage, hypothecate or encumber any of its
assets except to secure permitted borrowings.
(g) The Fund may not invest in or hold securities of any issuer if, to the
Trust's knowledge, officers and Trustees of the Trust or officers and
directors of the Fund's investment adviser, individually owning
beneficially more than 1/2 of 1% of the securities of the issuer, in the
aggregate own more than 5% of the issuer's securities.
(h) The Fund may not invest in interests in oil and gas or interests in other
mineral exploration or development programs.
(i) The Fund may not lend portfolio securities if the total value of all
loaned securities would exceed 25% of the Fund's total assets.
(j) The Fund may not purchase real estate limited partnership interests.
(k) The Fund may not invest in warrants if, as a result, more than 5% of the
Fund's net assets would be so invested or if, more than 2% of the Fund's
net assets would be invested in warrants that are not listed on the New
York or American Stock Exchanges.
<PAGE>
SCHRODER U.S. SMALLER COMPANIES FUND
(A SERIES OF SCHRODER CAPITAL FUNDS (DELAWARE))
TWO PORTLAND SQUARE
PORTLAND, MAINE 04101
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
Revoking any such prior appointments, the undersigned appoints Thomas G. Sheehan
and David I. Goldstein (or, if only one shall act, that one) proxies with the
power of substitution to vote all of the shares of Schroder U.S. Smaller
Companies Fund (the "Fund"), a series of Schroder Capital Funds (Delaware) (the
"Trust"), registered in the name of the undersigned at the Special Meeting of
Shareholders of the Trust (the "Meeting") to be held at the offices of the
Trust, Two Portland Square, Portland, Maine, on July 31, 1996 at 10:00 a.m.
Eastern time, and at any adjournment or adjournments thereof.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE PROPOSALS LISTED BELOW.
PROPOSAL 1
To approve a new investment policy that permits the Fund to invest all
of its investment assets in a portfolio of an open-end investment
company having substantially the same investment objective and
policies as the Fund.
FOR ____ AGAINST ____ ABSTAIN ____
PROPOSAL 2
To approve the amendment of the Fund's investment objective.
FOR ____ AGAINST ____ ABSTAIN ____
PLEASE SIGN AND DATE THIS PROXY ON THE REVERSE SIDE AND RETURN IT IN THE
ENCLOSED ENVELOPE.
<PAGE>
PROPOSAL 3
To approve the amendment of certain of the Fund's fundamental
investment policies and restrictions.
FOR ____ AGAINST ____ ABSTAIN ____
____ To vote against the proposed changes to one or more specific
fundamental investment restrictions, but to approve the others, place
an "X" in the space at left AND indicate the number(s) (as set forth
in the proxy statement) of the investment restriction(s) you do not
want to change on this line:
------------------------------------
In their discretion the proxies are authorized to vote upon such other business
as may properly come before the Meeting. Receipt is acknowledged of the Proxy
Statement for the Special Meeting of Shareholders to be held on July 31, 1996.
(NOTE: Checking the space labeled ABSTAIN will result in the shares covered by
the Proxy being treated as if they were voted AGAINST the proposal.)
-------------------------------------- ---------------
Authorized Signature Date
--------------------------------------
Printed Name (and Title if Applicable)
-------------------------------------- --------------
Authorized Signature (Joint Investor) Date
--------------------------------------
Printed Name (and Title if Applicable)
PLEASE SIGN AND DATE THIS PROXY ON THE REVERSE SIDE AND RETURN IT IN THE
ENCLOSED ENVELOPE.
