<PAGE>
As filed with the Securities and Exchange Commission on August 30, 1996
File No. 2-34215
File No. 811-1911
_______________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 53
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 34
_________________________________________________________________
SCHRODER CAPITAL FUNDS (DELAWARE)
(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
___________________________________________________________________
Thomas G. Sheehan, Esq.
Forum Financial Services, Inc.
Two Portland Square, Portland, Maine 04101
(Name and Address of Agent for Service)
Scott M. Shepard, Esq.
Jacobs Persinger & Parker
77 Water Street
New York, New York 10005
___________________________________________________________________
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to Rule 485, paragraph (b)
[ ] on [ ] pursuant to Rule 485, paragraph (b)
[X] 60 days after filing pursuant to Rule 485, paragraph (a)(1)
[ ] on ___________ pursuant to Rule 485, paragraph (a)(1)
[ ] 75 days after filing pursuant to Rule 485, paragraph (a)(2)
[ ] on [ ] pursuant to Rule 485, paragraph (a)(2)
[ ] this post-effective amendment designates a new effective date for
a previously filed post-effective 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 or about December 28, 1995.
Schroder U.S. Smaller Companies Fund is a master/feeder fund. This Post-
Effective Amendment No. 53 includes a manually executed signature page for
the master fund.
<PAGE>
SCHRODER CAPITAL FUNDS (DELAWARE)
Contents of Registration Statement
This registration statement consists of the following papers and
documents:
. Cover Sheet
. Contents of Registration Statement
. Cross Reference Sheets
. Schroder U.S. Smaller Companies Fund
------------------------------------
Part A - Prospectus - Investor Shares
Part A - Prospectus - Advisor Shares
Part B - Statement of Additional Information
. Part C - Other Information
. Signature Pages
. Exhibits
This filing is made to update the Investor Shares and Advisor
Shares Prospectuses and Statement of Additional Information of the
Schroder U.S. Smaller Companies Fund. No changes are hereby made to the
Prospectuses or Statements of Additional Information of Schroder U.S.
Equity Fund, Schroder International Fund (formerly International Equity
Fund) or Schroder Emerging Markets Fund Institutional Portfolio, the
other series of Schroder Capital Funds (Delaware).
<PAGE>
SCHRODER CAPITAL FUNDS (DELAWARE)
SCHRODER U.S. SMALLER COMPANIES FUND - INVESTOR SHARES
FORM N-1A
CROSS REFERENCE SHEET
PART A
<TABLE>
<CAPTION>
Form N-1A
Item No. Part A Item No. and Caption Location in Prospectus (Caption)
--------- --------------------------- --------------------------------
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Prospectus Summary
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Investment Objective and Policies; Additional
investment Policies and Risk Considerations
5. Management of the Fund Management - Board of Trustees; Investment Adviser
and Portfolio Manager; Administrative Services;
Expenses; Portfolio Transactions
5A. Management's Discussion of Fund Performance Not Applicable
6. Capital Stock and Other Securities Other Information - Capitalization and Voting;
Shareholder Inquiries; Dividends, Other
Distributions and Taxes
7. Purchase of Securities Being Offered Investment in the Fund - Purchase of Shares;
Retirement Plans; Individual Retirement Accounts;
Net Asset Value
8. Redemption or Repurchase Investment in the Fund - Redemption of Shares; Net
Asset Value
9. Pending Legal Proceedings Not Applicable
<PAGE>
SCHRODER U.S. SMALLER COMPANIES FUND - ADVISOR SHARES
FORM N-1A
CROSS REFERENCE SHEET
PART A
Form N-1A
Item No. Part A Item No. and Caption Location in Prospectus (Caption)
--------- --------------------------- --------------------------------
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Prospectus Summary
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Investment Objective and Policies; Additional
investment Policies and Risk Considerations
5. Management of the Fund Management - Board of Trustees; Investment Adviser
and Portfolio Manager; Administrative Services;
Expenses; Distribution Plan and Shareholder Services
Plan; Portfolio Transactions
5A. Management's Discussion of Fund Performance Not Applicable
6. Capital Stock and Other Securities Other Information - Capitalization and Voting;
Shareholder Inquiries; Dividends, Other
Distributions and Taxes
7. Purchase of Securities Being Offered Investment in the Fund - Purchase of Shares;
Retirement Plans; Individual Retirement Accounts;
Net Asset Value
8. Redemption or Repurchase Investment in the Fund - Redemption of Shares; Net
Asset Value
9. Pending Legal Proceedings Not Applicable
<PAGE>
PART B
Form N-1A
Item No. Part B Item No. and Caption Location in Prospectus (Caption)
--------- --------------------------- --------------------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Other Information - Organization
13. Investment Objectives and Policies Investment Policies; Investment Restrictions
14. Management of the Fund Management - Trustees and Officers
15. Control Persons and Principal Holders of Not Applicable
Securities
16. Investment Advisory and Other Services Management - Investment Adviser; Trustees and
Officers; Administrative Services; Distribution of
Fund Shares; Service Organizations; Portfolio
Accounting; Fees and Expenses; Portfolio
Transactions - Investment Decisions; Brokerage and
Research Services; Other Information - Custodian;
Transfer Agent and Dividend Disbursing Agent; Legal
Counsel; Independent Accountants
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities Other Information - Capitalization and Voting
19. Purchase, Redemption and Pricing of Determination of Net Asset Value Per Share
Securities Being Offered
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 Financial Statements
</TABLE>
<PAGE>
Schroder U.S. Smaller Companies Fund
Two Portland Square, Portland, Maine 04101
General Information: (207) 879-8903
Fund Literature: (800) 290-9826
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 Investor 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 five separate portfolios, each of which
has different investment objectives and policies. The Fund's investment
objective is capital appreciation. Current income will be incidental to
the objective of capital appreciation.
THE FUND CURRENTLY SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY HOLDING,
AS ITS ONLY INVESTMENT SECURITIES, AN INTEREST IN SCHRODER U.S. SMALLER
COMPANIES PORTFOLIO (THE "PORTFOLIO"), A SEPARATE PORTFOLIO OF SCHRODER
CAPITAL FUNDS ("SCHRODER CORE"), A REGISTERED OPEN-END MANAGEMENT
INVESTMENT COMPANY HAVING SUBSTANTIALLY THE SAME INVESTMENT OBJECTIVE AND
POLICIES AS THE FUND. ACCORDINGLY, THE FUND'S INVESTMENT EXPERIENCE WILL
CORRESPOND DIRECTLY WITH THE PORTFOLIO'S INVESTMENT EXPERIENCE. SEE
"OTHER INFORMATION -- FUND STRUCTURE." THE PORTFOLIO 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. 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 _______________________ 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
<PAGE>
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________________________.
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<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 capital appreciation. Current income
will be incidental to the objective of capital appreciation. Currently,
the Fund seeks its investment objective by investing all of its investable
assets in the Portfolio. The Portfolio 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 Fund currently offers two separate classes of shares: Investor Shares
and Advisor Shares. Only Investor 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 management fee paid to SCMI by the
Portfolio is borne indirectly by the Fund and any other investors in the
Portfolio. See "Management -- 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") serves as the Fund's 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 at net asset value, without the imposition of any
sales charge. The minimum initial investment is $10,000, except that the
minimum initial investment for an individual retirement account is $2,000.
The minimum subsequent investment is $2,500. See "Investment in the
Fund -- Purchase of Shares" and --"Redemption of Shares."
Dividends and Other Distributions. The Fund annually declares and pays as
a dividend substantially all of its net investment income and net realized
short-term capital gain and distributes any net realized long-term capital
gain. Dividends 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 an Account Application or
otherwise in writing of the shareholder's election to receive dividends or
other distributions in cash. See "Dividends, Other Distributions and
Taxes."
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<PAGE>
Risk Considerations. There can be no assurance that the Portfolio will
achieve its investment objective. The Fund's net asset value and total
return will fluctuate based upon changes in the value of the securities in
which the Portfolio invests so that, upon redemption, an investment in the
Fund may be worth more or less than its original value. The Portfolio'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 and Risk Considerations."
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<PAGE>
Fee Table
The table below is intended to assist investors in understanding the
expenses that an investor in Investor Shares would incur. There are no
transaction expenses associated with purchases or redemptions of Investor
Shares.
Annual Fund Operating Expenses (as a percentage of average net assets)(1)
Management Fees (2) . . . . . . . . . . . . . . . . 1.00%
12b-1 Fees . . . . . . . . . . . . . . . . . . . . . . . . 0.00%
Other Expenses (after reimbursements)(3) . . . . . . . . . 0.49%
Total Fund Operating Expenses (3) . . . . . . . . . . . . 1.49%
(1) Annual Fund Operating Expenses are based on the
Fund's fiscal year ended October 31, 1995,
restated to reflect current fees and expense
reimbursements. The Fund's expenses will include
the Fund's pro rata portion of all operating
expenses of the Portfolio. The Trust's Board of
Trustees believes that the aggregate per share
expenses of the Fund and the Portfolio (after
expense waivers and reimbursements) will be
approximately equal to the expenses the Fund
would incur if its assets were invested directly
in the type of securities held by the Portfolio.
(2) Management Fees reflect the fees paid by the
Portfolio and the Fund for investment advisory
and administrative services.
(3) Absent expense reimbursements, Other Expenses and Total
Fund Operating Expenses would be 1.12% and 2.12%,
respectively.
SCMI and Schroder Advisors have voluntarily undertaken to waive a portion
of their fees or assume certain expenses of the Fund during the current
fiscal year 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 Trust's Board of Trustees.
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:
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1 year $ 15
3 years $ 47
5 years $ 81
10 years $178
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RETURNS, AND ACTUAL EXPENSES OR RETURNS MAY 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 SEC.
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<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights of the Fund are presented to assist
investors in evaluating the performance of an Investor Share of the Fund
for the periods shown. Except for the period ended April 30, 1996, this
information is part of the Fund's financial statements and has been
audited by Coopers & Lybrand L.L.P., independent accountants to the Fund.
Information for the Fund's semi-annual period ended April 30, 1996, is
unaudited. The Fund's financial statements for the year ended October 31,
1995 and the 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 the telephone number for
Fund Literature on the cover of this Prospectus.
<TABLE>
<CAPTION>
Six Months Ended Year Ended October 31,
---------------- ----------------------
April 30, 1996(a) 1995 1994 1993(b)
-------------- ---- ---- ----
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $15.14 $11.81 $10.99 $10.00
Investment Operations
Net Investment Income (Loss) (0.01) (0.04) (0.07) (0.02)
Net Realized Income and Unrealized
Gain (Loss) on Investments 3.64 3.78 0.97 1.01
Total from Investment Operations 3.63 3.74 0.90 0.99
Distributions
from Net Investment Income - - - -
from Realized Capital Gain (1.95) (0.41) (0.08) -
from Capital Paid-In - - - -
Total Distributions (1.95) (0.41) (0.08) -
Net Asset Value, End of Period $16.82 $15.14 $11.81 $10.99
Total Return 22.28% 32.84% 8.26% 9.90%
Ratio/Supplementary Data:
Net Assets, End of Period (Thousands) $14,901 $15,287 $13,324 $12,489
Ratio of Expenses to Average Net Assets 1.36%(d) 1.49% 1.45% 2.03%(c)
Ratio of Net Investment
Income (Loss) to Average Net Assets (0.14)(c) (0.30%) (0.58%) (0.99%)(c)
Portfolio Turnover Rate 31.51% 92.68% 70.82% 12.58%
Average Brokerage Commission Rate $0.0180(e)
(a) Unaudited.
(b) The Fund commenced operations on August 6, 1993.
(c) Annualized.
(d) For the fiscal year ending October 31, 1996, the ratio of expenses to average net assets is estimated to be 1.49%.
(e) Amount represents the average commission per share paid to brokers on the purchase and sale of portfolio securities.
</TABLE>
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<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund is designed for the investment of that portion of an investor's
funds that can appropriately bear the special risks associated with
investment in smaller market capitalization companies with the aim of
capital appreciation. The Fund is not intended for investors whose
objective is assured income or preservation of capital.
Investment Objective and the Portfolio
The Fund's investment objective is capital appreciation. Current income
will be incidental to the objective of capital appreciation. There is no
assurance that the Fund will achieve its investment objective. The Fund's
investment objective is fundamental and cannot be changed without
shareholder approval.
The Fund currently 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. Therefore, although
the following discusses the investment policies of the Portfolio and the
responsibilities of Schroder Core's Board of Trustees (the "Schroder Core
Board"), it applies equally to the Fund and the Trust's Board of Trustees
(the "Board"). Additional information concerning the investment policies
of the Fund and the Portfolio, including fundamental policies, is
contained in the SAI.
Investment Policies
The Portfolio 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. Market
capitalization means the market value of a company's outstanding stock.
In its investment approach, SCMI will attempt to identify securities of
companies that 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, SCMI'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 Portfolio if
they may help the Portfolio to attain its objective. These criteria can
be changed by the Schroder Core Board, without shareholder approval.
The Portfolio 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). The Portfolio 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 Portfolio'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
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<PAGE>
prescribed amount of common stock of the same or a different issuer within
a particular period of time at a specified price or formula.
The Portfolio 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 Portfolio currently intends to invest no more than
5% of its total assets in securities of small, unseasoned issuers.
Although there is no minimum rating for debt securities (convertible or
non-convertible) in which the Portfolio may invest, it is the present
intention of the Portfolio 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 Ratings Services ("S&P"), such
securities being commonly known as "high yield/high risk" securities or
"junk bonds," and it will not invest in debt securities that 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 Portfolio 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 Portfolio 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 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 commercial paper, U.S. Treasury bills, other
short-term U.S. Government securities, certificates of deposit and
bankers' acceptances of U.S. banks. The Portfolio 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 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 ("shares"), as applicable. A majority of
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<PAGE>
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 of the Fund are not fundamental and may be changed by
the Board without approval by shareholders of the Fund. Likewise, non-
fundamental investment policies of the Portfolio may be changed by the
Schroder Core Board without approval of the Portfolio's interest holders.
For more information concerning shareholder voting, see "Other Information
-- Capitalization and Voting" and "Other Information -- Fund Structure."
Investment Types
Common and Preferred Stock. 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, generally, as to the recovery of investment. A
preferred stockholder is a shareholder in a 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.
Repurchase Agreements. The Portfolio 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 Portfolio and agrees to
repurchase the securities at the Portfolio's cost plus interest within a
specified period (normally one day). In these transactions, the values of
the underlying securities purchased by the Portfolio 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 Portfolio's
custodian bank holds the securities until they are repurchased. 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 disposing of
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<PAGE>
them. To evaluate potential risks, SCMI reviews the creditworthiness of
those banks and dealers with which the Portfolio enters into repurchase
agreements.
Illiquid and Restricted Securities. As a non-fundamental policy, 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. The
limitation on investing in restricted securities does not include
securities that may not be resold to the general public but may be resold
to qualified institutional purchasers pursuant to Rule 144A under the
Securities Act of 1933. If SCMI determines that a "Rule 144A security" is
liquid pursuant to guidelines adopted by the Schroder Core Board, it will
not be deemed illiquid. These guidelines take into account trading
activity for the securities and the availability of reliable pricing
information, among other factors. If there is a lack of trading interest
in a particular Rule 144A security, that security may become illiquid,
which could affect the Portfolio's liquidity. 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 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 as collateral by the
Portfolio 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
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<PAGE>
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 Schroder Core
Board.
Derivative Securities: Warrants, Options and Futures Transactions
Warrants. 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) and usually during a specified
period of time. The Portfolio may not invest in warrants if, as a result,
more than 5% of its net assets would be so invested or if, more than 2% of
its net assets would be invested in warrants that are not listed on the
New York or American Stock Exchanges.
Options and Futures Transactions. While the Portfolio 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 Portfolio may use Hedging
Instruments (1) to attempt to protect against declines in the market value
of the Portfolio's securities and thus protect the Fund's net asset value
per share against downward market trends or (2) to establish a position in
the equity markets as a temporary substitute for purchasing particular
equity securities. The Portfolio will not use Hedging Instruments for
speculation. The Hedging Instruments that 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 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 SCMI to correctly predict the direction of stock prices,
interests rates and other economic factors. The Hedging Instruments the
Portfolio may use and the risks associated with them are described in
greater detail under "Options and Futures Transactions" in the SAI.
Short Sales Against-the-Box. The Portfolio 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
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loss on the sale of securities until the short position is closed out.
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
has 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 that 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 Portfolio 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 Portfolio and may
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 Portfolio may be forced to dispose of its holdings at prices
lower than might otherwise be obtained.
MANAGEMENT
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 Schroder Core Board. The Trustees of both the Trust
and Schroder Core are Peter E. Guernsey, 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 Schroder Core may be found in the SAI under the
heading "Management -- Trustees and Officers." The Board and the Schroder
Core 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 investable assets in the Portfolio.
SCMI serves as investment adviser to the Portfolio. As such, SCMI manages
the investment and reinvestment of the Portfolio's assets 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
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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 at the annual rate of 0.60% of the Portfolio's average daily
net assets. The Fund indirectly bears SCMI's advisory fees through its
investment in the Portfolio.
SCMI is a wholly-owned U.S. subsidiary of Schroders Incorporated, the
wholly-owned U.S. subsidiary of Schroders plc, a publicly owned company
organized under the laws of England. 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 eighteen countries world-
wide. The investment management subsidiaries of the Schroder Group had
assets under management of over $100 billion as of December 31, 1995.
The investment management team of Fariba Talebi, a Vice President of the
Trust and a Group 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
Portfolio's investments and has so managed the Portfolio 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 the Fund, the Trust has entered into an administrative
services agreement Schroder Advisors, 787 Seventh Avenue, New York, New
York 10019. Schroder Advisors is a wholly-owned subsidiary of SCMI. On
behalf of the Fund, the Trust has also entered into an administrative
services agreement with Forum, Two Portland Square, Portland, Maine 04101.
Pursuant to these agreements, Schroder Advisors and Forum provide certain
management and administrative services necessary for the Fund's
operations, other than the administrative services provided to the Fund by
SCMI. For these services, the Fund pays Schroder Advisors a monthly fee
of 0.25% of the Fund's average daily net assets and pays Forum a monthly
fee of 0.075% of the Fund's average daily net assets. Schroder Advisors
and Forum provide similar services to the Portfolio, for which the
Portfolio pays Forum a monthly fee at the annual rate of 0.075% of the
Portfolio's average daily net assets. Schroder Advisors receives no fee
for the administrative services it provides the Portfolio.
Expenses
SCMI and Schroder Advisors have voluntarily undertaken to assume certain
expenses of the Fund and the Portfolio (or to waive a portion of their
respective fees). This undertaking is designed to place a maximum limit
on the total Fund expenses (excluding taxes, interest, brokerage
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commissions and other portfolio transaction expenses and extraordinary
expenses) chargeable to Investor Shares of 1.49% of the average daily net
assets of the Fund attributable to those shares. This expense limitation
cannot be withdrawn except by a majority vote of the Trustees of the Trust
who are not interested persons (as defined in the Act) of the Trust. If
expense reimbursements are required, they will be made on a monthly basis.
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
SCMI places orders for the purchase and sale of the Portfolio's
investments with brokers and dealers selected by SCMI in its discretion
and seeks "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.
SCMI may also consider sales of shares of the Fund or any other entity
that invests in the Portfolio as a factor in the selection of broker-
dealers to execute portfolio transactions for the Portfolio.
Subject to the Portfolio's policy of obtaining the best price consistent
with quality of execution on transactions, SCMI may employ (a) Schroder
Wertheim & Company, Incorporated and its affiliates ("Schroder Wertheim"),
affiliates of SCMI, to effect transactions of the Portfolio on the New
York Stock Exchange and (b) Schroder Securities Limited and its affiliates
("Schroder Securities"), affiliates of SCMI, to effect transactions of the
Portfolio, if any, on certain foreign securities exchanges. Because of the
affiliation between SCMI and Schroder Wertheim and Schroder Securities,
the Portfolio's payment of commissions to them is subject to procedures
adopted by the Schroder Core Board designed to ensure 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 Wertheim or Schroder Securities, and in no event will either
receive any brokerage in recognition of research services.
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 transactions would
agree to pay designated expenses of the Portfolio if brokerage commissions
generated by the Portfolio reached certain levels, might reduce the
Portfolio's expenses (and, indirectly, the Fund's expenses). As
anticipated, these arrangements would not materially increase the
brokerage commissions paid by the Portfolio. Brokerage commissions are
not deemed to be Fund expenses. In the Fund's fee table, per share table,
and financial highlights, however, directed brokerage arrangements might
cause Fund expenses to appear lower than actual expenses incurred.
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Code of Ethics
The Trust, Schroder Core, 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 Investor 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
(the "Transfer Agent"). See "Other Information Shareholder Inquiries."
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 completed Account Application (at the address set forth
below) without the imposition of a sales charge. The minimum initial
investment is $10,000, except that the minimum initial investment for an
individual retirement account ("IRA") is $2,000. The minimum subsequent
investment is $2,500. All purchase payments are invested in full and
fractional shares. The Fund is authorized to reject any purchase order.
Initial and subsequent purchases may be made by mailing a check (in U.S.
dollars), payable to Schroder U.S. Smaller Companies 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. 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 subscription request.
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 U.S. Smaller Companies Fund - Investor
Shares
Account of: (shareholder name)
Account Number: (shareholder account number)
The wire order must specify the name of the Fund, the Investor Shares
class, 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. (eastern time) on a Fund Business Day (as defined under
"Net Asset Value" below) will be processed at the net asset value
determined as of that day. Wire orders received after 4:00 p.m. will be
processed at the net asset value determined as of the next Fund Business
Day. See "Net Asset Value" below.
For each shareholder of record, the 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 reinvested 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 Transfer Agent. No
certificates are issued for fractional Shares. The Transfer Agent will
deem an account lost if six months have passed since correspondence to the
shareholder's address of record is returned, unless the Transfer Agent
determines the shareholder's new address. When an account is deemed lost,
dividends and capital gain distributions will be reinvested. In addition,
the amount of any outstanding checks for dividends and capital gain
distributions that have been returned to the Transfer Agent will be
reinvested and such checks will be canceled.
Retirement Plans
Shares of the Fund are offered in connection with tax-deferred retirement
plans. Application forms and further information about these plans,
including applicable fees, are available upon request. Before investing
in the Fund through one of these plans, investors should consult their tax
advisors.
Individual Retirement Accounts
The Fund may be used as an investment vehicle for an IRA. An IRA naming
The First National Bank of Boston as custodian is available from the Trust
or the Transfer Agent. The minimum initial investment for an IRA is
$2,000; the minimum subsequent investment is $2,500. IRAs are available to
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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. (eastern 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.
(eastern time) will be processed at the net asset value determined as of
that day. Redemption requests that are received after 4:00 p.m. will be
processed at the net asset value determined the next Fund Business Day.
See "Net Asset Value" below.
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
class of Shares, the dollar amount or number of Shares to be redeemed, the
shareholder account number and some additional form of identification such
as a password. A redemption by telephone may be made only if the telephone
redemption privilege option has been elected on the Account Application or
otherwise in writing. In an effort to prevent unauthorized or fraudulent
redemption requests by telephone, reasonable procedures will be followed
by the Transfer Agent to confirm that such instructions are genuine. The
Transfer Agent and the Trust will not be liable for any losses due to
unauthorized or fraudulent redemption requests but may be liable if they
do not follow these procedures. Shares for which certificates have been
issued may not be redeemed by telephone. In times of drastic economic or
market 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 class of Shares, the dollar amount or number of Shares to be redeemed
and the shareholder account number. The letter must also be signed in
exactly the same way the account is registered (if there is more than one
owner of the Shares, all must sign) and, in certain cases, signatures must
be guaranteed by an institution that is acceptable to the Transfer Agent.
Such institutions include certain banks, brokers, dealers (including
municipal and government securities brokers and dealers), credit unions
and savings associations. Notaries public are not acceptable. Further
documentation may be requested to evidence the authority of the person or
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<PAGE>
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. No redemption will be effected
until all checks in payment for the purchase of the Shares to be redeemed
have been cleared, which may take up to fifteen 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 net asset value 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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<PAGE>
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 separately for
each class of Shares of the Fund at 4:00 p.m. (eastern 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
(which is principally the value of the Fund's interest in the Portfolio)
less all Fund liabilities, if any, by the number of Shares of the Fund
outstanding.
Securities held by the Portfolio that are 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
Schroder Core Board.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The Fund
Dividends and other distributions. At least annually the Fund declares
and pays as a dividend substantially all of its net investment income and
net short-term capital gain and distributes any net capital gain (the
excess of net long-term capital gain over net short-term capital loss).
The Fund also may make an additional dividend or other distribution if
necessary to avoid a 4% excise tax on certain undistributed income and
gain.
Dividends and capital gain distributions on Investor Shares will be
reinvested automatically in additional Investor Shares at net asset value
unless the shareholder elects in writing to receive distributions in cash.
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<PAGE>
Dividends and other distributions paid by the Fund with respect to both
classes of its shares will be calculated in the same manner and at the
same time. The per share dividends on Investor Shares will be higher than
the per share dividends on Advisor Shares as a result of the higher
expenses allocable to Advisor Shares.
Taxes. The Fund intends to continue to qualify for treatment as a regu-
lated investment company ("RIC") under the Internal Revenue Code of 1986,
as amended, so that it will be relieved of federal income tax on that part
of its investment company taxable income (consisting generally of net
investment income and net short-term capital gain) and net capital gain
that is distributed to its shareholders.
Dividends from the Fund's investment company taxable income generally will
be taxable to shareholders as ordinary income whether they are invested in
additional Shares or received in cash. Distributions by the Fund of any
net capital gain, when designated as such, will be taxable to a
shareholder as long-term capital gain, regardless of how long the
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 other distributions.
Dividends from the Fund will qualify for the dividends-received deduction
for corporate shareholders to the extent they do not exceed the aggregate
amount of dividends received by the Fund from domestic corporations,
provided the Fund shares are held by such a shareholder 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 attributable to such securities will not be
eligible for the dividends-received deduction.
A loss realized by a shareholder on the sale of Shares held for six months
or less with respect to which capital gain distributions have been paid
will, to the extent of such distributions, be treated as long-term capital
loss. Furthermore, a loss realized on a disposition of Shares will be
disallowed to the extent those Shares 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 disposition. In
such a case, the basis of the Shares acquired will be adjusted to reflect
the disallowed loss.
Dividends and other distributions by the Fund reduce the net asset value
of the Shares. If a distribution reduces the net asset value below a
shareholder's cost basis, the distribution nevertheless will be taxable to
the shareholder as ordinary income or capital gain as described above,
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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, with the result that those purchasing just prior
to a dividend or other distribution will receive a distribution that
nevertheless will be taxable to them.
On redemption or sale of his Shares, a shareholder will realize a taxable
gain or loss depending upon his basis in the Shares. The gain or loss
generally will be treated as capital gain or loss if the Shares are
capital assets in the shareholders' hands and will be long-term or short-
term depending upon the shareholder's holding period for the Shares.
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 in their particular
circumstances.
The Fund must withhold 31% from dividends, capital gain distributions and
redemption proceeds payable to any individuals and certain other
noncorporate shareholders who do not furnish the Fund with a correct
taxpayer identification number. Withholding at that rate also is required
from dividends and capital gain distributions payable to such shareholders
who otherwise are subject to backup withholding.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting the Fund and its shareholders; see the
SAI for a further discussion.
The Portfolio
The Portfolio will be classified for federal income tax purposes as a
partnership and thus will not be required to pay federal income tax on its
net investment income and capital gains. All net investment income and
gain and losses of the Portfolio will be deemed to have been "passed
through" to the Fund in proportion to its holdings of the Portfolio,
regardless of whether such income or gain has been distributed by the
Portfolio. The Portfolio intends to conduct its operations so as to
enable the Fund to continue to qualify for treatment as a RIC.
OTHER INFORMATION
Capitalization and Voting
The Trust was 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 has
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authority to issue an unlimited number of shares of beneficial interest.
The Trust Board may, without shareholder approval, divide the authorized
shares into an unlimited number of separate portfolios or series (such as
the Fund) and may divide portfolios or series into classes of shares (such
as Investor 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. The Fund currently
consists of two classes of shares.
Each share of the Fund is entitled to participate equally in dividends and
other distributions and the proceeds of any liquidation except that, due
to the differing expenses borne by the classes, dividends and liquidation
proceeds for each class will likely differ. Shares are fully paid and
non-assessable, and shareholders have no pre-emptive rights. Shareholders
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 Trust 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. Each share of the Fund has equal voting
rights, except that if a matter affects only the shareholders of a
particular class only shareholders of that class shall have a right to
vote.
As of August 1, 1996, Schroder Nominees Limited 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.
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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. Total
return is calculated separately for each class of the Fund. Quotations of
average annual total return will be expressed in terms of the average
annual compounded rate of return of a hypothetical investment in a class
of shares over a period of one, five and ten years. Total return
quotations assume that all dividends and other 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 distributions 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 its 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 Organizations
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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
Classes of Shares. The Fund has two classes of shares, Investor 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 Investor Shares. Accordingly, the
performance of the two classes will differ. 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 distributions
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 Schroder Core, a business trust organized under the
laws of the State of Delaware in September 1995. Schroder Core is
registered under the Act as an open-end management investment company and
currently has three 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
Schroder Core.
The investment objective and fundamental investment policies of the Fund
and the Portfolio can be changed only with shareholder or interestholder
approval, respectively. See "Investment Objective and Policies" and
- 25 -
<PAGE>
"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 in the Portfolio. The
Portfolio may permit other investment companies or institutional investors
to invest in it. All other 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 its shareholders
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 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. Information regarding any such funds is available from
Schroder Core by calling Forum Financial Corp. at (207) 879-8903.
Under the federal securities laws, any person or entity that signs a
registration statement may be liable for a misstatement or omission of a
material fact in the registration statement. Schroder Core, its Trustees
and certain of its officers are required to sign the registration
statement of the Trust and may be required to sign the registration
statements of certain other future publicly offered investors in the
Portfolio. In addition, under the federal securities laws, Schroder Core
could be liable for misstatements or omissions of a material fact in any
proxy soliciting material of a publicly offered investor in Schroder Core,
including the Fund. Under the Trust Instrument for Schroder Core, each
investor in the Portfolio, including the Trust, will indemnify Schroder
Core and its Trustees and officers ("Schroder Core Indemnities") against
certain claims. Indemnified claims are those brought against Schroder
Core Indemnities but based on a misstatement or omission of a material
- 26 -
<PAGE>
fact in the investor's registration statement or proxy materials, except
to the extent such claim is based on a misstatement or omission of a
material fact relating to information about Schroder Core in the
investor's registration statement or proxy materials that was supplied to
the investor by Schroder Core. Similarly, Schroder Core will indemnify
each investor in the Portfolio, including the Fund, for any claims brought
against the investor with respect to the investor's registration statement
or proxy materials, to the extent the claim is based on a misstatement or
omission of a material fact relating to information about Schroder Core
that is supplied to the investor by Schroder Core. In addition, each
registered investment company investor in the Portfolio will indemnify
each Schroder Core Indemnitee against any claim based on a misstatement or
omission of a material fact relating to information about a series of the
registered investment company that did not invest in the Core. The
purpose of these cross-indemnity provisions is principally to limit the
liability of Schroder Core to information that it knows or should know and
can control. With respect to other prospectuses and other offering
documents and proxy materials of investors in Schroder Core, its liability
is similarly limited to information about and supplied by it.
Certain Risks of Investing in 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
SCMI, 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 SCMI to manage
the Fund's assets, could have a significant impact on shareholders of the
Fund.
- 27 -
<PAGE>
Each investor in the Portfolio, including the Fund, will be liable for all
obligations of the Portfolio but not any other portfolio of Schroder Core.
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 the occurrence of
which SCMI considers to be quite remote. 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.
- 28 -
<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
Administrator
Forum Financial Services, Inc.
Two Portland Square
Portland, Maine 04101
Custodian
The Chase Manhattan Bank, N.A.
Chase MetroTech Center
Brooklyn, New York 11245
Transfer and Dividend Disbursing Agent
Forum Financial Corp.
P.O. Box 446
Portland, Maine 04112
Independent Accountants
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
<PAGE>
Table of Contents
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . 2
The Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Investment Adviser . . . . . . . . . . . . . . . . . . . . . . 2
Administrator and Distributor . . . . . . . . . . . . . . . . 2
Purchases and Redemptions of Shares . . . . . . . . . . . . . 2
Dividends and Other Distributions . . . . . . . . . . . . . . 2
Risk Considerations . . . . . . . . . . . . . . . . . . . . . 2
Fee Table . . . . . . . . . . . . . . . . . . . . . . . . . . 3
FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . 4
INVESTMENT OBJECTIVE
AND POLICIES . . . . . . . . . . . . . . . . . . . . . . . . 5
Investment Objective and the Portfolio . . . . . . . . . . . . 5
Investment Policies . . . . . . . . . . . . . . . . . . . . . 5
ADDITIONAL INVESTMENT POLICIES AND
RISK CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . 6
Investment Restrictions . . . . . . . . . . . . . . . . . . . 6
Investment Types . . . . . . . . . . . . . . . . . . . . . . . 7
Risk Considerations . . . . . . . . . . . . . . . . . . . . . 9
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Board of Trustees . . . . . . . . . . . . . . . . . . . . . . 9
Investment Adviser and Portfolio Manager . . . . . . . . . . 10
Administrative Services . . . . . . . . . . . . . . . . . . 10
Expenses . . . . . . . . . . . . . . . . . . . . . . 10
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . 11
Code of Ethics . . . . . . . . . . . . . . . . . . . . . . . . 11
INVESTMENT IN THE FUND . . . . . . . . . . . . . . . . . . . . 12
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . 12
Retirement Plans . . . . . . . . . . . . . . . . . . . . . . . 13
Individual Retirement Accounts . . . . . . . . . . . . . . . . 13
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . 13
Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . 15
DIVIDENDS, OTHER DISTRIBUTIONS
AND TAXES . . . . . . . . . . . . . . . . . . . . . . . . . 15
The Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
The Portfolio . . . . . . . . . . . . . . . . . . . . . . . . 17
OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . 17
Capitalization and Voting . . . . . . . . . . . . . . . . . . 17
Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Performance Information . . . . . . . . . . . . . . . . . . . 18
Custodian and Transfer Agent . . . . . . . . . . . . . . . . . 18
Shareholder Inquires . . . . . . . . . . . . . . . . . . . . . 19
Certain Service Organizations . . . . . . . . . . . . . . . . 19
Fund Structure . . . . . . . . . . . . . . . . . . . . . . . 19
<PAGE>
<TABLE>
<CAPTION>
<C> <S>
Schroder U.S. Smaller Companies Fund
Two Portland Square, Portland, Maine 04101 Fund Literature:(800) 290-9826
Advisor Information:(800) 730-29328 Account Information:(800) 344-8332
General Information:(207) 879-8903 Fax:(207) 879-6206
</TABLE>
Schroder Capital Management International Inc. - Investment Adviser
Schroder Fund Advisors Inc. - Administrator and Distributor
This Prospectus offers 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 five separate portfolios, each of which
has different investment objectives and policies. The Fund's investment
objective is capital appreciation. Current income will be incidental to
the objective of capital appreciation.
THE FUND CURRENTLY SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY HOLDING,
AS ITS ONLY INVESTMENT SECURITIES, AN INTEREST IN SCHRODER U.S. SMALLER
COMPANIES PORTFOLIO (THE "PORTFOLIO"), A SEPARATE PORTFOLIO OF SCHRODER
CAPITAL FUNDS ("SCHRODER CORE"), A REGISTERED OPEN-END MANAGEMENT
INVESTMENT COMPANY HAVING SUBSTANTIALLY THE SAME INVESTMENT OBJECTIVE AND
POLICIES AS THE FUND. ACCORDINGLY, THE FUND'S INVESTMENT EXPERIENCE WILL
CORRESPOND DIRECTLY WITH THE PORTFOLIO'S INVESTMENT EXPERIENCE. SEE
"OTHER INFORMATION -- FUND STRUCTURE." THE PORTFOLIO 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. 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 _____________________ 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.
<PAGE>
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 ____________________________.
- 2 -
<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 capital appreciation. Current income
will be incidental to the objective of capital appreciation. Currently,
the Fund seeks its investment objective by investing all of its investable
assets in the Portfolio. The Portfolio 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 Fund currently offers two separate classes of shares: Investor Shares
and Advisor 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 management fee paid to SCMI by the
Portfolio is borne indirectly by the Fund and any other investors in the
Portfolio. See "Management -- 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") serves as the Fund s 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 $2,500, except
that the minimum initial investment for an individual retirement account
is $250. The minimum subsequent investment is $250. See "Investment in
the Fund -- Purchase of Shares" and -- "Redemption of Shares."
Dividends and Other Distributions. The Fund annually declares and pays as
a dividend substantially all of its net investment income and net realized
short-term capital gain and distributes any net realized long-term capital
gain. Dividends 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 an Account Application or
otherwise in writing of the shareholder s election to receive dividends or
other distributions in cash. See "Dividends, Other Distributions and
Taxes."
- 3 -
<PAGE>
Risk Considerations. There can be no assurance that the Portfolio will
achieve its investment objective. The Fund's net asset value and total
return will fluctuate based upon changes in the value of the securities in
which the Portfolio invests so that, upon redemption, an investment in the
Fund may be worth more or less than its original value. The Portfolio 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 and Risk Considerations."
Fee Table
The table below is intended to assist investors in understanding the
expenses that an investor in Advisor Shares would incur. 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)
Management Fees (2) . . . . . . . . . . . . . . . . . . . 1.00%
12b-1 Fees (3) . . . . . . . . . . . . . . . . . . . . . . 0.25%
Other Expenses (after reimbursements) (4) . . . . . . . . 0.74%
Total Fund Operating Expenses (4) . . . . . . . . . . . . 1.99%
(1) Annual Fund Operating Expenses are based on the Fund s
fiscal year ended October 31, 1995, restated to reflect
current fees and expense reimbursements. The Fund's
expenses will include the Fund's pro rata portion of all
operating expenses of the Portfolio. The Trust's Board
of Trustees believes that the aggregate per share
expenses of the Fund and the Portfolio (after expense
waivers and reimbursements) will be approximately equal
to the expenses the Fund would incur if its assets were
invested directly in the type of securities held by the
Portfolio.
(2) Management Fees reflect the fees paid by the Portfolio
and the Fund for investment advisory and administrative
services.
(3) Long-term holders of Advisor Shares may pay aggregate
sales charges totaling more than the economic equivalent
of the maximum front end sales charge permitted by the
Rules of Fair Practice of the National Association of
Securities Dealers, Inc.
(4) Absent expense reimbursements, Other Expenses and Total
Fund Operating Expenses would be 1.37% and 2.62%,
respectively.
- 4 -
<PAGE>
SCMI and Schroder Advisors have voluntarily undertaken to waive a portion
of their fees or assume certain expenses of the Fund during the current
fiscal year to the extent that the Fund's total expenses exceed 1.99% of
the Fund's average daily net assets. This undertaking cannot be withdrawn
except by a majority vote of the Trust's Board of Trustees.
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 $ 20
3 years $ 62
5 years $107
10 years $232
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RETURNS, AND ACTUAL EXPENSES OR RETURNS MAY 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 SEC.
FINANCIAL HIGHLIGHTS
The following financial highlights of the Fund are presented to assist
investors in evaluating the performance of a Share of the Fund for the
periods shown. The information presented relates to Investor Shares of
the Fund for a share outstanding for the periods shown. The holders of
Investor Shares bear expenses that are lower than those borne by the
holders of Advisor Shares. Prior to May 17, 1996, Advisor Shares had not
been offered by the Fund. Accordingly, information has not been presented
for Advisor Shares. Except for the period ended April 30, 1996, this
information is part of the Fund s financial statements and has been
audited by Coopers & Lybrand L.L.P., independent accountants to the Fund.
Information for the Fund's semi-annual period ended April 30, 1996, is
unaudited. The Fund's financial statements for the year ended October 31,
1995 and the 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 the telephone number for
Fund Literature on the cover of this Prospectus.
- 5 -
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended October 31,
---------------- ----------------------
April 30, 1996(a) 1995 1994 1993(b)
----------------- ---- ---- -------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $15.14 $11.81 $10.99 $10.00
Investment Operations
Net Investment Income (Loss) (0.01) (0.04) (0.07) (0.02)
Net Realized Income and Unrealized
Gain (Loss) on Investments 3.64 3.78 0.97 1.01
Total from Investment Operations 3.63 3.74 0.90 0.99
Distributions
from Net Investment Income - - - -
from Realized Capital Gain (1.95) (0.41) (0.08) -
from Capital Paid-In - - - -
Total Distributions (1.95) (0.41) (0.08) -
Net Asset Value, End of Period $16.82 $15.14 $11.81 $10.99
Total Return 22.28% 32.84% 8.26% 9.90%
Ratio/Supplementary Data:
Net Assets, End of Period (Thousands) $14,901 $15,287 $13,324 $12,489
Ratio of Expenses to Average Net Assets 1.36%(d) 1.49% 1.45% 2.03%(c)
Ratio of Net Investment
Income (Loss) to Average Net Assets (0.14)(c) (0.30%) (0.58%) (0.99%)(c)
Portfolio Turnover Rate 31.51% 92.68% 70.82% 12.58%
Average Brokerage Commission Rate $0.0180(e)
</TABLE>
(a) Unaudited.
(b) The Fund commenced operations on August 6, 1993.
(c) Annualized.
(d) For the fiscal year ending October 31, 1996, the ratio of
expenses to average net assets is estimated to be 1.49%.
(e) Amount represents the average commission per share paid to
brokers on the purchase and sale of portfolio securities.
- 6 -
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund is designed for the investment of that portion of an investor's
funds that can appropriately bear the special risks associated with
investment in smaller market capitalization companies with the aim of
capital appreciation. The Fund is not intended for investors whose
objective is assured income or preservation of capital.
Investment Objective and the Portfolio
The Fund's investment objective is capital appreciation. Current income
will be incidental to the objective of capital appreciation. There is no
assurance that the Fund will achieve its investment objective. The Fund's
investment objective is fundamental and cannot be changed without
shareholder approval.
The Fund currently 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. Therefore, although
the following discusses the investment policies of the Portfolio and the
responsibilities of Schroder Core's Board of Trustees (the "Schroder Core
Board"), it applies equally to the Fund and the Trust's Board of Trustees
(the "Board"). Additional information concerning the investment policies
of the Fund and the Portfolio, including fundamental policies, is
contained in the SAI.
Investment Policies
The Portfolio 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. Market
capitalization means the market value of a company's outstanding stock.
In its investment approach, SCMI will attempt to identify securities of
companies that 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, SCMI 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 Portfolio if
they may help the Portfolio to attain its objective. These criteria can
be changed by the Schroder Core Board, without shareholder approval.
The Portfolio 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). The Portfolio may also invest to a limited degree in non-
- 7 -
<PAGE>
convertible debt securities and preferred stocks when, in the opinion of
SCMI, such investments are warranted to achieve the Portfolio'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.
The Portfolio 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 Portfolio currently intends to invest no more than
5% of its total assets in securities of small, unseasoned issuers.
Although there is no minimum rating for debt securities (convertible or
non-convertible) in which the Portfolio may invest, it is the present
intention of the Portfolio 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 Ratings Services ("S&P"), such
securities being commonly known as "high yield/high risk" securities or
"junk bonds," and it will not invest in debt securities that 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 Portfolio 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 Portfolio 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 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 commercial paper, U.S. Treasury bills, other
short-term U.S. Government securities, certificates of deposit and
bankers' acceptances of U.S. banks. The Portfolio also may hold cash and
time deposits in U.S. banks. See "Investment Policies" in the SAI for
further information about all these securities.
- 8 -
<PAGE>
ADDITIONAL INVESTMENT POLICIES AND RISK CONSIDERATIONS
Investment Restrictions
The investment objective and all investment policies 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 ("shares"), 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 of the Fund are not fundamental and may be changed by
the Board without approval by shareholders of the Fund. Likewise, non-
fundamental investment policies of the Portfolio may be changed by the
Schroder Core Board without approval of the Portfolio's interest holders.
For more information concerning shareholder voting, see "Other Information
-- Capitalization and Voting" and "Other Information -- Fund Structure."
Investment Types
Common and Preferred Stock. 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, generally, as to the recovery of investment. A
preferred stockholder is a shareholder in a 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.
Repurchase Agreements. The Portfolio 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 Portfolio and agrees to
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repurchase the securities at the Portfolio's cost plus interest within a
specified period (normally one day). In these transactions, the values of
the underlying securities purchased by the Portfolio 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 Portfolio's
custodian bank holds the securities until they are repurchased. 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 disposing of
them. To evaluate potential risks, SCMI reviews the creditworthiness of
those banks and dealers with which the Portfolio enters into repurchase
agreements.
Illiquid and Restricted Securities. As a non-fundamental policy, 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. The
limitation on investing in restricted securities does not include
securities that may not be resold to the general public but may be resold
to qualified institutional purchasers pursuant to Rule 144A under the
Securities Act of 1933. If SCMI determines that a "Rule 144A security" is
liquid pursuant to guidelines adopted by the Schroder Core Board, it will
not be deemed illiquid. These guidelines take into account trading
activity for the securities and the availability of reliable pricing
information, among other factors. If there is a lack of trading interest
in a particular Rule 144A security, that security may become illiquid,
which could affect the Portfolio s liquidity. 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 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
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loaned (including accrued interest thereon) plus the interest payable to
the Portfolio with respect to the loan is maintained as collateral by the
Portfolio 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 Schroder Core
Board.
Derivative Securities: Warrants, Options and Futures Transactions
Warrants. 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) and usually during a specified
period of time. The Portfolio may not invest in warrants if, as a result,
more than 5% of its net assets would be so invested or if, more than 2% of
its net assets would be invested in warrants that are not listed on the
New York or American Stock Exchanges.
Options and Futures Transactions. While the Portfolio 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 Portfolio may use Hedging
Instruments (1) to attempt to protect against declines in the market value
of the Portfolio's securities and thus protect the Fund's net asset value
per share against downward market trends or (2) to establish a position in
the equity markets as a temporary substitute for purchasing particular
equity securities. The Portfolio will not use Hedging Instruments for
speculation. The Hedging Instruments that 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 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
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the inability of SCMI to correctly predict the direction of stock prices,
interests rates and other economic factors. The Hedging Instruments the
Portfolio may use and the risks associated with them are described in
greater detail under "Options and Futures Transactions" in the SAI.
Short Sales Against-the-Box. The Portfolio 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 until the short position is closed out.
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
has 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 that 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 Portfolio 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 Portfolio and may
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 Portfolio may be forced to dispose of its holdings at prices
lower than might otherwise be obtained.
MANAGEMENT
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 Schroder Core Board. The Trustees of both the Trust
and Schroder Core are Peter E. Guernsey, 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 Schroder Core may be found in the SAI under the
heading "Management -- Trustees and Officers." The Board and the Schroder
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Core 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 investable assets in the Portfolio.
SCMI serves as investment adviser to the Portfolio. As such, SCMI manages
the investment and reinvestment of the Portfolio's assets 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 at the annual rate of 0.60% of the Portfolio's average daily
net assets. The Fund indirectly bears SCMI's advisory fees through its
investment in the Portfolio.
SCMI is a wholly-owned U.S. subsidiary of Schroders Incorporated, the
wholly-owned U.S. subsidiary of Schroders plc, a publicly owned company
organized under the laws of England. 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 eighteen countries world-
wide. The investment management subsidiaries of the Schroder Group had
assets under management of over $100 billion as of December 31, 1995.
The investment management team of Fariba Talebi, a Vice President of the
Trust and a Group 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
Portfolio's investments and has so managed the Portfolio 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 the Fund, the Trust has entered into an administrative
services agreement with Schroder Advisors, 787 Seventh Avenue, New York,
New York 10019. Schroder Advisors is a wholly-owned subsidiary of SCMI.
On behalf of the Fund, the Trust has also entered into an administrative
services agreement with Forum, Two Portland Square, Portland, Maine 04101.
Pursuant to these agreements, Schroder Advisors and Forum provide certain
management and administrative services necessary for the Fund's
operations, other than the administrative services provided to the Fund by
SCMI. For these services, the Fund pays Schroder Advisors a monthly fee
of 0.25% of the Fund's average daily net assets and pays Forum a monthly
fee of 0.075% of the Fund's average daily net assets. Schroder Advisors
and Forum provide similar services to the Portfolio, for which the
Portfolio pays Forum a monthly fee at the annual rate of 0.075% of the
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Portfolio's average daily net assets. Schroder Advisors receives no fee
for the administrative services it provides the Portfolio.
Expenses
SCMI and Schroder Advisors have voluntarily undertaken to assume certain
expenses of the Fund and the Portfolio (or to waive a portion of their
respective fees). This undertaking is designed to place a maximum limit
on the total Fund expenses (excluding taxes, interest, brokerage
commissions and other portfolio transaction expenses and extraordinary
expenses) chargeable to Advisor Shares of 1.99% of the average daily net
assets of the Fund attributable to those shares. This expense limitation
cannot be withdrawn except by a majority vote of the Trustees of the Trust
who are not interested persons (as defined in the Act) of the Trust. If
expense reimbursements are required, they will be made on a monthly basis.
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.
Distribution Plan and Shareholder Services Plan
Schroder Advisors acts as distributor of the Fund s shares. Under a
distribution plan pursuant to Rule 12b-1 under the 1940 Act (the
"Distribution Plan") adopted by the Trust on behalf of the Fund, 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% of the Fund's average daily net
assets attributable to Advisor Shares. The maximum annual amount payable
under the Distribution Plan is currently 0.25%, which amount may only be
increased by action of the Board.
Payment or reimbursement under the Distribution Plan 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 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
under the Distribution Plan 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.
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 Distribution 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
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salesmen who are responsible for marketing various mutual funds of the
Trust may be allocated to those funds, including the Advisor Shares class
of the Fund, that have adopted a distribution 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 funds of the Trust for
which they are incurred.
The Trust, on behalf of the Fund, has also adopted a shareholder service
plan (the "Shareholder Service Plan"), pursuant to which Schroder
Advisors, as administrator of the Fund, is authorized to pay Service
Organizations a servicing fee. Payments under the Shareholder Service
Plan may be for various types of services, including (1) answering
customer inquiries regarding the manner in which purchases, exchanges and
redemptions of shares of the Fund may be effected and other matters
pertaining to the Fund s services, (2) providing necessary personnel and
facilities to establish and maintain shareholder accounts and records, (3)
assisting shareholders in arranging for processing purchase, exchange and
redemption transactions, (4) arranging for the wiring of funds, (5)
guaranteeing shareholder signatures in connection with redemption orders
and transfers and changes in shareholder-designated accounts, (6)
integrating periodic statements with other customer transactions and (7)
providing such other related services as the shareholder may request.
Payments to Service Organizations under the Shareholder Service Plan 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. Some Service Organizations may impose
additional or different conditions on their clients, such as requiring
their clients to invest more than the minimum or subsequent investments
specified by the Fund or charging a direct fee for servicing. If imposed,
these fees would be in addition to any amounts which might be paid to the
Service Organization by Schroder Advisors. 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.
Portfolio Transactions
SCMI places orders for the purchase and sale of the Portfolio's
investments with brokers and dealers selected by SCMI in its discretion
and seeks "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.
SCMI may also consider sales of shares of the Fund or any other entity
that invests in the Portfolio as a factor in the selection of broker-
dealers to execute portfolio transactions for the Portfolio.
Subject to the Portfolio's policy of obtaining the best price consistent
with quality of execution on transactions, SCMI may employ (a) Schroder
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Wertheim & Company, Incorporated and its affiliates ("Schroder Wertheim"),
affiliates of SCMI, to effect transactions of the Portfolio on the New
York Stock Exchange and (b) Schroder Securities Limited and its affiliates
("Schroder Securities"), affiliates of SCMI, to effect transactions of the
Portfolio, if any, on certain foreign securities exchanges. Because of the
affiliation between SCMI and Schroder Wertheim and Schroder Securities,
the Portfolio's payment of commissions to them is subject to procedures
adopted by the Schroder Core Board designed to ensure 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 Wertheim or Schroder Securities, and in no event will either
receive any brokerage in recognition of research services.
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 transactions would
agree to pay designated expenses of the Portfolio if brokerage commissions
generated by the Portfolio reached certain levels, might reduce the
Portfolio s expenses (and, indirectly, the Fund s expenses). As
anticipated, these arrangements would not materially increase the
brokerage commissions paid by the Portfolio. Brokerage commissions are
not deemed to be Fund expenses. In the Fund s fee table, per share table,
and financial highlights, however, directed brokerage arrangements might
cause Fund expenses to appear lower than actual expenses incurred.
Code of Ethics
The Trust, Schroder Core, 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
(the "Transfer Agent"). See "Other Information - Shareholder Inquiries."
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.
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<PAGE>
Shares of the Fund are offered at the net asset value next determined
after receipt of a completed Account Application (at the address set forth
below). The minimum initial investment is $2,500, except that the minimum
initial investment for an individual retirement account is $250. The
minimum subsequent investment is $250. All purchase payments are invested
in full and fractional shares. The Fund is authorized to reject any
purchase order.
Initial and subsequent purchases may be made by mailing a check (in U.S.
dollars), payable to Schroder U.S. Smaller Companies 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. 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 of entity
making the subscription request.
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 - Advisor Shares
Account of: (shareholder name)
Account Number: (shareholder account number)
The wire order must specify the name of the Fund, the Advisor Shares
class, 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. (eastern time) on a Fund Business Day (as defined under
"Net Asset Value" below) will be processed at the net asset value
determined as of that day. Wire orders received after 4:00 p.m. will be
processed at the net asset value determined as of the next Fund Business
Day. See "Net Asset Value" below.
For each shareholder of record, the 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
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are reinvested 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 Transfer Agent. No
certificates are issued for fractional Shares. The Transfer Agent will
deem an account lost if six months have passed since correspondence to the
shareholder s address of record is returned, unless the Transfer Agent
determines the shareholder s new address. When an account is deemed lost,
dividends and capital gain distributions will be reinvested. In addition,
the amount of any outstanding checks for dividends and capital gain
distributions that have been returned to the Transfer Agent will be
reinvested and such checks will be canceled.
Retirement Plans
Shares of the Fund are offered in connection with tax-deferred retirement
plans. Application forms and further information about these plans,
including applicable fees, are available upon request. Before investing
in the Fund through one of these plans, investors should consult their tax
advisors.
Individual Retirement Accounts
The Fund may be used as an investment vehicle for an IRA. An IRA naming
The First National Bank of Boston as custodian is available from the Trust
or the Transfer Agent. The minimum initial investment for an IRA is $250;
the minimum subsequent investment is $250. 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. (eastern 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.
(eastern time) will be processed at the net asset value determined as of
that day. Redemption requests that are received after 4:00 p.m. will be
processed at the net asset value determined the next Fund Business Day.
See "Net Asset Value" below.
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
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class of Shares, the dollar amount or number of Shares to be redeemed, the
shareholder account number and some additional form of identification such
as a password. A redemption by telephone may be made only if the telephone
redemption privilege option has been elected on the Account Application or
otherwise in writing. In an effort to prevent unauthorized or fraudulent
redemption requests by telephone, reasonable procedures will be followed
by the Transfer Agent to confirm that such instructions are genuine. The
Transfer Agent and the Trust will not be liable for any losses due to
unauthorized or fraudulent redemption requests but may be liable if they
do not follow these procedures. Shares for which certificates have been
issued may not be redeemed by telephone. In times of drastic economic or
market 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 class of Shares, the dollar amount or number of Shares to be redeemed
and the shareholder account number. The letter must also be signed in
exactly the same way the account is registered (if there is more than one
owner of the Shares, all must sign) and, in certain cases, signatures must
be guaranteed by an institution that is acceptable to the Transfer Agent.
Such institutions include certain banks, brokers, dealers (including
municipal and government securities brokers and dealers), credit unions
and savings associations. Notaries public are not acceptable. Further
documentation may be requested to evidence the authority of the person or
entity making the redemption request. Questions concerning the need for
signature guarantees or documentation of authority should be directed to
the Fund at the above address or by calling the 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. No redemption will be effected
until all checks in payment for the purchase of the Shares to be redeemed
have been cleared, which may take up to fifteen 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.
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<PAGE>
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 net asset value 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 separately for
each class of Shares of the Fund at 4:00 p.m. (eastern 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
(which is principally the value of the Fund's interest in the Portfolio)
less all Fund liabilities, if any, by the number of Shares of the Fund
outstanding.
Securities held by the Portfolio that are 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
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<PAGE>
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
Schroder Core Board.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
/R>
The Fund
Dividends and other distributions. At least annually the Fund declares
and pays as a dividend substantially all of its net investment income and
net short-term capital gain and distributes any net capital gain (the
excess of net long-term capital gain over net short-term capital loss).
The Fund also may make an additional dividend or other distribution if
necessary to avoid a 4% excise tax on certain undistributed income and
gain.
Dividends and capital gain distributions on Advisor Shares will be
reinvested automatically in additional Advisor Shares at net asset value
unless the shareholder elects in writing to receive distributions in cash.
Dividends and other distributions paid by the Fund with respect to both
classes of its shares will be calculated in the same manner and at the
same time. The per share dividends on Advisor Shares will be lower than
the per share dividends on Investor Shares as a result of the higher
expenses allocable to Advisor Shares.
Taxes. The Fund intends to continue to qualify for treatment as a
regulated investment company ("RIC") under the Internal Revenue Code of
1986, as amended, so that it will be relieved of federal income tax on
that part of its investment company taxable income (consisting generally
of net investment income and net short-term capital gain) and net capital
gain that is distributed to its shareholders.
Dividends from the Fund's investment company taxable income generally will
be taxable to shareholders as ordinary income whether they are invested in
additional Shares or received in cash. Distributions by the Fund of any
net capital gain, when designated as such, will be taxable to a
shareholder as long-term capital gain, regardless of how long the
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 other distributions.
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<PAGE>
Dividends from the Fund will qualify for the dividends-received deduction
for corporate shareholders to the extent they do not exceed the aggregate
amount of dividends received by the Fund from domestic corporations,
provided the Fund shares are held by such a shareholder 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 attributable to such securities will not be
eligible for the dividends-received deduction.
A loss realized by a shareholder on the sale of Shares held for six months
or less with respect to which capital gain distributions have been paid
will, to the extent of such distributions, be treated as long-term capital
loss. Furthermore, a loss realized on a disposition of Shares will be
disallowed to the extent those Shares 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 disposition. In
such a case, the basis of the Shares acquired will be adjusted to reflect
the disallowed loss.
Dividends and other distributions by the Fund reduce the net asset value
of the Shares. If a distribution reduces the net asset value below a
shareholder's cost basis, the distribution nevertheless will 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, with the result that those purchasing just prior
to a dividend or other distribution will receive a distribution that
nevertheless will be taxable to them.
On redemption or sale of his Shares, a shareholder will realize a taxable
gain or loss depending upon his basis of the Shares. The gain or loss
generally will be treated as capital gain or loss if the Shares are
capital assets in the shareholders' hands and will be long-term or short-
term depending upon the shareholder's holding period for the Shares.
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 in their particular
circumstances.
The Fund must withhold 31% from dividends, capital gain distributions and
redemption proceeds payable to any individuals and certain other
noncorporate shareholders who do not furnish the Fund with a correct
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<PAGE>
taxpayer identification number. Withholding at that rate also is required
from dividends and capital gain distributions payable to such shareholders
who otherwise are subject to backup withholding.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting the Fund and its shareholders; see the
SAI for a further discussion.
The Portfolio
The Portfolio will be classified for federal income tax purposes as a
partnership and thus will not be required to pay federal income tax on its
net investment income and capital gains. All net investment income and
gain and losses of the Portfolio will be deemed to have been "passed
through" to the Fund in proportion to its holdings of the Portfolio,
regardless of whether such income or gain has been distributed by the
Portfolio. The Portfolio intends to conduct its operations so as to
enable the Fund to continue to qualify for treatment as a RIC.
OTHER INFORMATION
Capitalization and Voting
The Trust was 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 has
authority to issue an unlimited number of shares of beneficial interest.
The Trust Board may, without shareholder approval, divide the authorized
shares into an unlimited number of separate portfolios or series (such as
the Fund) and may divide portfolios or series into classes of shares (such
as Advisor 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. The Fund currently
consists of two classes of shares.
Each share of the Fund is entitled to participate equally in dividends and
other distributions and the proceeds of any liquidation except that, due
to the differing expenses borne by the classes, dividends and liquidation
proceeds for each class will likely differ. Shares are fully paid and
non-assessable, and shareholders have no pre-emptive rights. Shareholders
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.
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<PAGE>
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 Trust 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. Each share of the Fund has equal voting
rights, except that if a matter affects only the shareholders of a
particular class only shareholders of that class shall have a right to
vote.
As of August 1, 1996, Schroder Nominees Limited 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.
Performance Information
The Fund may, from time to time include quotations of its total return in
advertisements or reports to shareholders or prospective investors. Total
return is calculated separately for each class of the Fund. Quotations of
average annual total return will be expressed in terms of the average
annual compounded rate of return of a hypothetical investment in a class
of shares over a period of one, five and ten years. Total return
quotations assume that all dividends and other 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 distributions 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.
- 24 -
<PAGE>
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 its 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 Organizations
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
Classes of Shares. The Fund has two classes of shares, Advisor Shares and
Investor Shares. Investor 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. Investor Shares incur less expenses than Advisor
Shares. Accordingly, the performance of the two classes will differ.
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 distributions will differ between the classes. Information about
Investor Shares is available from the Fund by calling Forum Financial
Corp. at (207) 879-8903.
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<PAGE>
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 Schroder Core, a business trust organized under the
laws of the State of Delaware in September 1995. Schroder Core is
registered under the Act as an open-end management investment company and
currently has three 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
Schroder Core.
The investment objective and fundamental investment policies of the Fund
and the Portfolio can be changed only with shareholder or interestholder
approval, respectively. See "Investment Objective and 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 in the Portfolio. The
Portfolio may permit other investment companies or institutional investors
to invest in it. All other 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 its shareholders
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 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
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<PAGE>
shareholders in another investment company that invests exclusively in the
Portfolio. Information regarding any such funds is available from
Schroder Core by calling Forum Financial Corp. at (207) 879-8903.
Under the federal securities laws, any person or entity that signs a
registration statement may be liable for a misstatement or omission of a
material fact in the registration statement. Schroder Core, its Trustees
and certain of its officers are required to sign the registration
statement of the Trust and may be required to sign the registration
statements of certain other future publicly offered investors in the
Portfolio. In addition, under the federal securities laws, Schroder Core
could be liable for misstatements or omissions of a material fact in any
proxy soliciting material of a publicly offered investor in Schroder Core,
including the Fund. Under the Trust Instrument for Schroder Core, each
investor in the Portfolio, including the Trust, will indemnify Schroder
Core and its Trustees and officers ("Schroder Core Indemnities") against
certain claims. Indemnified claims are those brought against Schroder
Core Indemnities but based on a misstatement or omission of a material
fact in the investor's registration statement or proxy materials, except
to the extent such claim is based on a misstatement or omission of a
material fact relating to information about Schroder Core in the
investor's registration statement or proxy materials that was supplied to
the investor by Schroder Core. Similarly, Schroder Core will indemnify
each investor in the Portfolio, including the Fund, for any claims brought
against the investor with respect to the investor's registration statement
or proxy materials, to the extent the claim is based on a misstatement or
omission of a material fact relating to information about Schroder Core
that is supplied to the investor by Schroder Core. In addition, each
registered investment company investor in the Portfolio will indemnify
each Schroder Core Indemnitee against any claim based on a misstatement or
omission of a material fact relating to information about a series of the
registered investment company that did not invest in the Core. The
purpose of these cross-indemnity provisions is principally to limit the
liability of Schroder Core to information that it knows or should know and
can control. With respect to other prospectuses and other offering
documents and proxy materials of investors in Schroder Core, its liability
is similarly limited to information about and supplied by it.
Certain Risks of Investing in 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
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<PAGE>
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
SCMI, 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 SCMI 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 Schroder Core.
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 the occurrence of
which SCMI considers to be quite remote. 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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<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
Administrator
Forum Financial Services, Inc.
Two Portland Square
Portland, Maine 04101
Custodian
The Chase Manhattan Bank, N.A.
Chase MetroTech Center
Brooklyn, New York 11245
Transfer and Dividend Disbursing Agent
Forum Financial Corp.
P.O. Box 446
Portland, Maine 04112
Independent Accountants
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
- 29 -
<PAGE>
Table of Contents
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . 1
The Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Investment Adviser . . . . . . . . . . . . . . . . . . . . . . 1
Administrator and Distributor . . . . . . . . . . . . . . . . 1
Purchases and Redemptions of Shares . . . . . . . . . . . . . 1
Dividends and Other Distributions . . . . . . . . . . . . . . 1
Risk Considerations . . . . . . . . . . . . . . . . . . . . . 1
Fee Table . . . . . . . . . . . . . . . . . . . . . . . . . . 2
FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . 4
INVESTMENT OBJECTIVE
AND POLICIES . . . . . . . . . . . . . . . . . . . . . . . . 5
Investment Objective and the Portfolio . . . . . . . . . . . . 5
Investment Policies . . . . . . . . . . . . . . . . . . . . . 5
ADDITIONAL INVESTMENT POLICIES AND
RISK CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . 6
Investment Restrictions . . . . . . . . . . . . . . . . . . . 6
Investment Types . . . . . . . . . . . . . . . . . . . . . . . 6
Risk Considerations . . . . . . . . . . . . . . . . . . . . . 8
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Board of Trustees . . . . . . . . . . . . . . . . . . . . . . 9
Investment Adviser and Portfolio Manager . . . . . . . . . . . 9
Administrative Services . . . . . . . . . . . . . . . . . . . 9
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Distribution Plan and Shareholder Services Plan . . . . . . . 10
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . 11
Code of Ethics . . . . . . . . . . . . . . . . . . . . . . . . 11
INVESTMENT IN THE FUND . . . . . . . . . . . . . . . . . . . . 11
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . 11
Retirement Plans . . . . . . . . . . . . . . . . . . . . . . . 13
Individual Retirement Accounts . . . . . . . . . . . . . . . . 13
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . 13
Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . 14
DIVIDENDS, OTHER DISTRIBUTIONS
AND TAXES . . . . . . . . . . . . . . . . . . . . . . . . . 15
The Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
The Portfolio . . . . . . . . . . . . . . . . . . . . . . . . 16
OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . 16
Capitalization and Voting . . . . . . . . . . . . . . . . . . 16
Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Performance Information . . . . . . . . . . . . . . . . . . . 17
Custodian and Transfer Agent . . . . . . . . . . . . . . . . . 17
Shareholder Inquires . . . . . . . . . . . . . . . . . . . . . 17
Certain Service Organizations . . . . . . . . . . . . . . . . 17
Fund Structure . . . . . . . . . . . . . . . . . . . . . . . 18
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<PAGE>
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 five 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").
The Fund's investment objective is capital appreciation. The Fund
currently seeks to achieve its investment objective by holding, as its
only investment securities, an interest in Schroder U.S. Smaller Companies
Portfolio (the "Portfolio"), a separate portfolio of Schroder Capital
Funds ("Schroder Core"), a registered open-end management investment
company having substantially the same investment objective and policies as
the Fund. The Portfolio 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.
Investor 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 Investor Shares.
This SAI is not a prospectus and is only authorized for distribution when
preceded or accompanied by the Prospectus for the Fund dated
_______________ (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 for the Fund may
be obtained without charge by writing or calling the Fund at the address
and information numbers printed above.
This SAI is dated ________________.
<PAGE>
TABLE OF CONTENTS
INVESTMENT POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
U.S. Government Securities . . . . . . . . . . . . . . . . . . . . . . 3
Bank Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Short-Term Debt Securities . . . . . . . . . . . . . . . . . . . . . . 3
Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 3
Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
High Yield/Junk Bonds . . . . . . . . . . . . . . . . . . . . . . . . 4
Illiquid and Restricted Securities . . . . . . . . . . . . . . . . . . 5
Loans of Portfolio Securities . . . . . . . . . . . . . . . . . . . . . 5
Covered Calls and Hedging . . . . . . . . . . . . . . . . . . . . . . . 5
Short Sales Against-the-Box . . . . . . . . . . . . . . . . . . . . . . 9
INVESTMENT RESTRICTIONS 9
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Trustees and Officers . . . . . . . . . . . . . . . . . . . . . . . . . 11
Investment Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Administrative Services . . . . . . . . . . . . . . . . . . . . . . . . 14
Distribution of Fund Shares . . . . . . . . . . . . . . . . . . . . . . 15
Service Organizations . . . . . . . . . . . . . . . . . . . . . . . . . 16
Portfolio Accounting . . . . . . . . . . . . . . . . . . . . . . . . . 16
Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . 17
Investment Decisions . . . . . . . . . . . . . . . . . . . . . . . . . 17
Brokerage and Research Services . . . . . . . . . . . . . . . . . . . . 18
ADDITIONAL PURCHASE AND
REDEMPTION INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 19
Determination of Net Asset Value Per Share . . . . . . . . . . . . . . 19
Redemption in Kind . . . . . . . . . . . . . . . . . . . . . . . . . . 19
TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Taxation of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . 20
Taxation of the Portfolio . . . . . . . . . . . . . . . . . . . . . . . 20
OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Capitalization and Voting . . . . . . . . . . . . . . . . . . . . . . . 21
Principal Shareholders . . . . . . . . . . . . . . . . . . . . . . . . 22
Performance Information . . . . . . . . . . . . . . . . . . . . . . . . 23
Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Transfer Agent and Dividend Disbursing Agent . . . . . . . . . . . . . 24
Legal Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . 24
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . 24
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 24
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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 and Policies" and "Additional
Investment Policies and Risk Considerations" in the Prospectus. The Fund
currently seeks to achieve its investment objective by investing all of
its investable assets in the Portfolio, which has the same investment
objective and policies as the Fund. 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 herein with respect to the
Portfolio only. Therefore, although the following discusses the
investment policies of the Portfolio and the responsibilities of the
Schroder Core Board of Trustees ("Schroder Core Board"), it applies
equally to the Fund and the Trust's Board of Trustees (the "Board"). 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 Portfolio may invest in obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities that have remaining
maturities not exceeding one year. Agencies and instrumentalities that
issue or guarantee debt securities and that 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 is 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 insured
by 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 Portfolio may invest in commercial paper, that is short-term unsecured
promissory notes issued in bearer form by bank holding companies,
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corporations and finance companies. The commercial paper purchased by the
Portfolio for temporary defensive purposes consists of direct obligations
of domestic issuers that, at the time of investment, are rated "P-1" by
Moody s Investors Service, Inc. ("Moody s") or "A-1" by Standard & Poor s
Ratings Services ("S&P"), or securities that, 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 Portfolio may enter into 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 creditworthiness of those banks and dealers with which
the Portfolio enters into repurchase agreements.
Warrants. The Portfolio may invest in warrants. 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.
The Portfolio may not invest in warrants if, as a result, more than 5% of
its net assets would be so invested or if, more than 2% of its net assets
would be so invested in warrants that are not listed on the New York or
American Stock Exchanges.
High Yield/Junk Bonds
The Portfolio 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"). Ratings of bonds represents the rating
agencies' opinion regarding their quality, are not a guarantee of quality
and may be reduced after the Portfolio has acquired the security. Credit
ratings attempt to evaluate the safety of principal and interest payments
and do not reflect an assessment of the volatility of the security's
market value or the liquidity of an investment in the security. In
addition, a rating agency may fail to make timely changes in credit
ratings in response to subsequent events, so that an issuer's financial
condition may be better or worse than the rating indicates.
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Securities rated less than Baa by Moody s or BBB by S&P are classified as
non-investment grade securities and securities rated are Baa and BB
respectively, are considered speculative by those rating agencies.
Changes in economic condition or other circumstances are more likely to
lead to a weakened capacity for such securities to make principal and
interest payments than is the case for higher grade debt securities. Debt
securities rated below investment grade are deemed by these agencies to be
predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal and may involve substantial risk exposure to
adverse conditions. Junk bonds includes securities that are in default or
face the risk of default with respect to the payment of principal or
interest. Such securities are generally unsecured and are often
subordinated to other creditors of the issuer. To the extent a Fund is
required to seek recovery upon a default in the payment of principal or
interest on its portfolio holdings, the Portfolio may incur additional
expenses and have limited legal recourse in the event of a default.
Lower rated debt securities generally offer a higher current yield than
that available from higher grade issuers, but they involve higher risks,
in that they are especially subject to adverse changes in general economic
conditions and in the industries in which the issuers are engaged, to
changes in the financial condition of the issuers and to price
fluctuations in response to changes in interest rates. During periods of
economic downturn or rising interest rates, highly leveraged issuers may
experience financial stress, which could adversely effect their ability to
make payments of principal and interest and increase the possibility of
default. In addition, such issuers may not have more traditional methods
of financing available to them, and may be unable to repay debt at
maturity by refinancing. The risk of loss due to default by such issuers
is significantly greater because such securities frequently are unsecured
and subordinated to the prior payment of senior indebtedness.
The market for lower rated securities has expanded rapidly in recent
years, and its growth paralleled a long economic expansion. In the past,
the prices of many lower rated debt securities declined substantially,
reflecting an expectation that many issuers of such securities might
experience financial difficulties. As a result, the yields on lower rated
debt securities rose dramatically. However, such higher yields did not
reflect the value of the income stream that holders of such securities
could lose a substantial portion of their value as a result of the
issuers' financial restructuring or default. There can be no assurance
that such declines will not recur. The market for lower rated debt
securities generally is thinner and less active than that for higher
quality securities, which may limit the Portfolio's ability to sell such
securities at fair value in response to changes in the economy or the
financial markets. Adverse publicity and investor perceptions, whether or
not based on fundamental analysis, may also decrease the values and
liquidity of lower rated securities, especially in a thinly traded market.
Illiquid and Restricted Securities
"Illiquid and Restricted Securities" under "Additional Investment Policies
and Risk Considerations" in the Prospectus sets forth the circumstances in
which the Portfolio may invest in illiquid and restricted securities. In
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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 elapse 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 Schroder Core Board. The Portfolio will not lend its
portfolio securities to any officer, director, employee or affiliate of
the Portfolio, the Fund 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.
Covered Calls and Hedging
As described in the Prospectus, the Portfolio may write covered calls on
up to 100% of its total assets or employ one or more types of Hedging
Instruments (as defined in the Prospectus). When hedging to attempt to
protect against declines in the market value of the Portfolio s
securities, to permit the Portfolio to retain unrealized gains in the
value of portfolio securities that have appreciated, or to facilitate
selling securities for investment reasons, the Portfolio would (i) sell
Stock Index Futures (as defined below), (ii) purchase puts on such futures
or on securities, or (iii) write covered calls on securities or such
futures. When hedging to establish a position in the equities markets as
a temporary substitute for purchasing particular equity securities (which
the Portfolio will normally purchase and then terminate the hedging
position), the Portfolio would (i) purchase Stock Index Futures or
(ii) purchase calls on such futures or on securities. The Portfolio s
strategy of hedging with Stock Index Futures and options on such futures
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will be incidental to the Portfolio s activities in the underlying cash
market.
Writing Covered Call Options. The Portfolio 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 Portfolio
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 Portfolio is
exercised, the Portfolio 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 Portfolio 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
nine 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
Portfolio 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 Portfolio 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 Portfolio retains the underlying security and the premium
received. If the Portfolio 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 Portfolio 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 Portfolio 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 Portfolio to deliver a futures
contract; it would simply put the Portfolio in a short futures position,
which is permitted by the Portfolio s hedging policies.
Purchasing Calls and Puts. The Portfolio may purchase put options
("puts") that relate to (i) securities held by it, (ii) Stock Index
Futures (whether or not it holds such futures in its portfolio), or
(iii) broadly based stock indices. The Portfolio may not sell puts other
than those it previously purchased nor purchase puts on securities it does
not hold. The Portfolio may purchase calls (i) as to securities, broadly
based stock indices or Stock Index Futures or (ii) to effect a "closing
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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 Portfolio
would not exceed 5% of its total assets.
When the Portfolio 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 Portfolio benefits only if the call is sold at
a profit or if, during the call period, the market price of the underlying
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 Portfolio will lose its premium
payments and the right to purchase the underlying investment. When the
Portfolio 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 Portfolio 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 Portfolio owns enables it 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 Portfolio 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 Portfolio permits it 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 Portfolio 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 Portfolio purchases a put on a stock
index, or on a Stock Index Future not held by it, the put protects the
Portfolio 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 Portfolio s delivery of
the underlying investment.
Stock Index Futures. The Portfolio 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
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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 Portfolio 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 Portfolio 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 Portfolio 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 Portfolio, 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 other futures contracts except
that all settlements are in cash and gain or loss depends on changes 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 Portfolio 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 Portfolio, a seller of a corresponding call on
the same index will pay the Portfolio 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") that determines the total dollar value for each point of
difference. When the Portfolio 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 Portfolio s exercise of
its put, to deliver to the Portfolio 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
Portfolio s custodian, or a securities depository acting for the
custodian, will act as the Portfolio s escrow agent, through the
facilities of the Options Clearing Corporation ("OCC"), as to the
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securities on which the Portfolio 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 Portfolio s entering into a closing transaction. An
option position may be closed out only on a market that 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 Portfolio s option activities may affect its portfolio turnover rate
and brokerage commissions. The exercise of calls written by the Portfolio
may cause it to sell related portfolio securities, thus increasing its
turnover rate in a manner beyond its control. The exercise by the
Portfolio 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 Portfolio s control, holding a put might cause the
Portfolio to sell the underlying investment for reasons that would not
exist in the absence of the put. The Portfolio 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 that 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 Portfolio s net
asset value being more sensitive to changes in the value of the underlying
investments.
Regulatory Aspects of Hedging Instruments and Covered Calls. The
Portfolio 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
Portfolio 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 Portfolio 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 Portfolio 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.
Transactions in options by the Portfolio are subject to limitations
established by each of the exchanges governing the maximum number of
options that 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 that the Portfolio 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
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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 of 1940, as amended ("1940 Act"), when the Portfolio purchases
a Stock Index Future, the Portfolio 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.
Limits on Use of Hedging Instruments. Due to the Short-Short Limitation
described under "Taxation," the Portfolio 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 Portfolio; (ii) purchasing calls or puts that 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 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 Portfolio 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 that
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
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 Portfolio 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 Portfolio has used
Hedging Instruments in a short hedge, the market may advance and the value
of equity securities held in the Portfolio may decline. If this occurred,
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the Portfolio 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 securities will tend to move
over time in the same direction as the indices upon which the Hedging
Instruments are based.
If the Portfolio 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 Portfolio then concluded not to
invest in equity securities at that time because of concerns as to
possible further market decline or for other reasons, it would 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 Portfolio makes a short sale against-the-box, while the short
position is open, it 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 recognition of
gain or loss for federal income tax purposes on the sale of securities "in
the box" until the short position is closed out.
INVESTMENT RESTRICTIONS
The Portfolio s significant investment restrictions are described in the
Prospectus. The following investment restrictions, except where stated to
be fundamental policies, are non-fundamental policies of the Portfolio.
The policies defined as fundamental, 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
voting interests. Under 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
interests present or represented by proxy at a meeting of interestholders,
if the holders of more than 50% of the outstanding interests are present,
or (ii) more than 50% of the outstanding interests.
The following investment restrictions of the Portfolio are fundamental
policies:
(a) With respect to 75% of its assets, the Portfolio may not
purchase a security other than a U.S. government security
if, as a result, more than 5% of its total assets would
be invested in the securities of a single issuer or it
would own more than 10% of the outstanding voting
securities of any single issuer.
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<PAGE>
(b) The Portfolio may not purchase securities if, immediately
after the purchase, 25% or more of the value of its 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.
(c) The Portfolio 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
Portfolio's total assets (computed immediately after the
borrowing).
(d) The Portfolio may not issue senior securities except to
the extent permitted by the 1940 Act.
(e) The Portfolio may not underwrite securities of other
issuers, except to the extent that it may be considered
to be acting as an underwriter in connection with the
disposition of portfolio securities.
(f) The Portfolio may not make loans, except it may enter
into repurchase agreements, purchase debt securities that
are otherwise permitted investments and lend portfolio
securities.
(g) The Portfolio may not purchase or sell real estate or any
interest therein, except that it 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.
(h) The Portfolio may not purchase or sell physical
commodities unless acquired as a result of owning
securities or other instruments, but it may purchase,
sell or enter into financial options and futures and
forward currency contracts and other financial contracts
or derivative instruments.
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.
The following investment restrictions of the Portfolio are non-
fundamental policies:
(a) The Portfolio's borrowings for other than temporary or
emergency purposes or meeting redemption requests may not
exceed an amount equal to 5% of the value its net assets.
- 13 -
<PAGE>
(b) The Portfolio may not acquire securities or invest in
repurchase agreements with respect to any securities if,
as result, more than 15% of its 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 that are not readily
marketable by virtue of restrictions on the sale of such
securities to the public without registration under the
Securities Act of 1933, as amended ("Restricted
Securities").
(c) The Portfolio may not invest in securities of another
investment company, except to the extent permitted by the
1940 Act.
(d) The Portfolio 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 Portfolio may make margin
deposits in connection with permitted transactions in
options, futures contracts and options on futures
contracts.
(e) The Portfolio 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 Portfolio
could invest, if, as a result, more than 5% of the value
of the Portfolio's total assets would be so invested.
(f) The Portfolio may not pledge, mortgage, hypothecate or
encumber any of its assets except to secure permitted
borrowings.
(g) The Portfolio 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 SCMI,
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 Portfolio may not invest in interest in oil and gas
or interests in other mineral exploration or development
programs.
(i) The Portfolio may not lend portfolio securities if the
total value of all loaned securities would exceed 25% of
its total assets.
(j) The Portfolio may not purchase real estate limited
partnership interests.
- 14 -
<PAGE>
(k) The Portfolio may not invest in warrants if, as a result,
more than 5% of its net assets would be so invested or
if, more than 2% of its net assets would be invested in
warrants that are not listed on the New York or American
Stock Exchanges.
MANAGEMENT
Trustees and Officers
The following information relates to the principal occupations of each
Trustee and executive officer of the Trust and the Schroder Core during
the past five years.
Peter E. Guernsey, age 75, Oyster Bay, New York - a Trustee of the Trust
and the Schroder Core - Insurance Consultant since August 1986; prior
thereto Senior Vice President, Marsh & McLennan, Inc., insurance brokers.
John I. Howell, age 79, 7 Riverside Road, Greenwich, Connecticut - a
Trustee of the Trust and the Schroder Core - 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), age 43, 787 Seventh Avenue, New York,
New York - President and a Trustee of the Trust and the Schroder Core -
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, age 74, 44 East 64th Street, New York, New York - a
Trustee of the Trust and the Schroder Core - Chairman of the Board of
Directors, Josiah Macy, Jr. Foundation (charitable foundation).
Hermann C. Schwab, age 76, 787 Seventh Avenue, New York, New York -
Chairman (Honorary) and a Trustee of the Trust and the Schroder Core -
retired since March, 1988; prior thereto, consultant to SCMI since
February 1, 1984.
Mark J. Smith (a) (b), age 34, 33 Gutter Lane, London, England - a Vice
President and a Trustee of the Trust and the Schroder Core - First Vice
President of SCMI since April 1990; Director and Vice President, Schroder
Advisors.
Robert G. Davy, age 35, 787 Seventh Avenue, New York, New York - a Vice-
President of the Trust and the Schroder Core - Director of SCMI and
Schroder Capital Management International Ltd. since 1994; First Vice
President of SCMI since July, 1992; prior thereto, employed by various
- 15 -
<PAGE>
affiliates of Schroders plc in various positions in the investment
research and portfolio management areas since 1986.
Richard R. Foulkes, age 50, 787 Seventh Avenue, New York, New York - a
Vice President of the Trust and the Schroder Core ; 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, age 53, 2 Portland Square, Portland, Maine - a Vice
President of the Trust and the Schroder Core . 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), age 34, 787 Seventh Avenue, New York, New York - Vice
President of the Trust and the Schroder Core - Director and Senior Vice
President SCMI; Director of SWIS since September 1995; Assistant Director
Schroder Investment Management Ltd. since June 1991.
Catherine A. Mazza, age 36, 787 Seventh Avenue, New York, New York - a
Vice President of the Trust and the Schroder Core - 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, age 35, 787 Seventh Avenue, New York, New York - a Vice
President of the Trust and the Schroder Core - Group 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), age 37, 787 Seventh Avenue, New York, New York - a
Vice President of the Trust and the Schroder Core - 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, age 31, 787 Seventh Avenue, New York, New York - a Vice
President of the Trust and the Schroder Core - 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), age 29, 787 Seventh Avenue, New York, New York -
Treasurer of the Trust and the Schroder Core - Vice President of SWIS
since September 1995; Treasurer of SWIS and Schroder Advisers since July
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<PAGE>
1995; Vice President of SCMI since June 1995; and Assistant Treasurer of
Schroders Incorporated since January 1993.
Margaret H. Douglas-Hamilton (b) (c), age 55, 787 Seventh Avenue, New
York, New York - Secretary of the Trust and the Schroder Core - Secretary
of SWIS since July 1995; Secretary of Schroder Advisers since April 1990;
First Vice President and General Counsel of Schroders Incorporated since
May 1987; prior thereto, partner of Sullivan & Worcester, a law firm.
David I. Goldstein, age 34, 2 Portland Square, Portland, Maine - Assistant
Treasurer and Assistant Secretary of the Trust and the Schroder Core -
Counsel, Forum Financial Services, Inc. Since 1991; prior thereto,
associate at Kirkpatrick & Lockhart LLP, Washington, D.C.
Thomas G. Sheehan, age 42, 2 Portland Square, Portland, Maine - Assistant
Treasurer and Assistant Secretary of the Trust and the Schroder Core -
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), age 42, 787 Seventh Avenue, New York, New York -
Assistant Secretary of the Trust and the Schroder Core - Assistant Vice
President of SWIS since July 1995 prior thereto held various positions
with SWIS affiliates.
Gerardo Machado, age 58, 787 Seventh Avenue, New York, New York -
Assistant Secretary of the Trust and the Schroder Core - Associate, SCMI.
(a) Interested Trustee of the Trust within the meaning of the 1940
Act by virtue of positions with SCMI and its affiliates.
(b) 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 and the
Schroder Core receive no salary, fees or compensation from the Fund or the
Portfolio. Independent Trustees of the Trust and the Schroder Core
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.
- 17 -
<PAGE>
The following table provides the fees paid to each Trustee of the Trust
for the fiscal year ended October 31, 1995.
<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Aggregate Benefits Accrued Estimated Annual From Trust And
Compensation As Part of Trust Benefits Upon Fund Complex
Name of Trustee From Trust Expenses Retirement Paid To Trustees
--------------- ------------ ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Mr. Guernsey $4,000 $0 $0 $4,000
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 August 1, 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 United States As a result, it
may be difficult for U.S. investors to effect service upon such persons
within the United States or to realize judgments of courts of the United
States predicated upon civil liabilities of such persons under the federal
securities laws. 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. Also it is unclear if extradition treaties now in effect between
the United States and the United Kingdom would subject such persons to
effective enforcement of criminal penalties.
Investment Adviser
Schroder Capital Management International Inc. ("SCMI"), 787 Seventh
Avenue, New York, New York 10019, serves as investment adviser to the
Portfolio pursuant to an Investment Advisory Contract dated March 15,
1996. 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 eighteen countries worldwide. The investment management
subsidiaries of the Schroder Group had assets under management of over
$100 billion as of December 31, 1995.
- 18 -
<PAGE>
Pursuant to the Investment Advisory Contract, SCMI is responsible for
managing the investment and reinvestment of the Portfolio's assets and for
continuously reviewing, supervising and administering 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 such investments with brokers or dealers
selected by it in its discretion. SCMI also furnishes to the Schroder
Core Board, which has overall responsibility for the business and affairs
of the Schroder Core, periodic reports on the investment performance of
the Portfolio.
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 Portfolio or by the Schroder Core
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 Portfolio on 60 days
written notice to SCMI, or by SCMI on 60 days written notice to the
Schroder Core, and it will terminate automatically if assigned. The
Investment Advisory Contract also provides that, with respect to the
Portfolio, 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 Portfolio, 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 investment advisory services under the Investment Advisory
Contract with respect to the Portfolio, SCMI receives an advisory fee of
0.60% of the Portfolio's average daily net assets. Prior to March 15,
1996 SCMI served as the investment adviser to the Fund pursuant to an
investment advisory contract with the Trust. For the period from
commencement of operations on August 6, 1993 through October 31, 1993,
SCMI received investment advisory fees of $11,958 from the Fund. For the
fiscal years ended October 31, 1994 and 1995, SCMI received investment
advisory fees of $63,210 and $71,188, respectively, from the Fund.
Administrative Services
On behalf of the Fund, the Trust has entered into an administrative
services agreement with Schroder Advisors, 787 Seventh Avenue, New York,
New York 10019. Schroder Advisors is a wholly-owned subsidiary of SCMI.
On behalf of the Fund, the Trust has also entered into an administrative
services agreement with Forum Financial Services, Inc. ("Forum"), Two
- 19 -
<PAGE>
Portland Square, Portland, Maine 04101. Pursuant to their agreements,
Schroder Advisors and Forum provide certain management and administrative
services necessary for the Fund s operations, other than the
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.
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
these entities, for which Schroder Advisors is separately compensated
0.25% of the Fund's average daily net assets and Forum is separately
compensated 0.075% of the Fund's average daily net assets. In addition,
the Fund would be responsible for its pro rata portion of the
administrative services performed on behalf of the Portfolio by Forum.
For these services, Forum will receive administrative services fees paid
by the Portfolio of 0.075% of the Portfolio'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.
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 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 anytime, 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.
- 20 -
<PAGE>
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. During the fiscal year ended October 31, 1995, no payments were
made pursuant to the Plan.
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
- 21 -
<PAGE>
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. In
approving the continuance of the Plan, the Board of Trustees concluded
that there is a reasonable likelihood that the Plan will benefit the Fund
and its shareholders. 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.
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
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
- 22 -
<PAGE>
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
- 23 -
<PAGE>
October 31, 1995, the Fund paid fund accounting fees of $28,797 and
$36,000, respectively.
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 as set forth above. SCMI and Schroder Advisors have voluntarily
undertaken to assume certain expenses of the Fund (or waive their
respective fees). This undertaking is designed to place a limit on the
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 Adviser 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. 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
reimbursement 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 expenses
supplements any applicable state expense limitations.
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 Portfolio 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
- 24 -
<PAGE>
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 Portfolio 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. There is generally no stated commission in
the case of securities traded in the over-the-counter markets, but the
price paid by the Portfolio usually includes an undisclosed dealer
commission or mark-up. In underwritten offerings, the price paid by the
Portfolio 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 Portfolio 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 Portfolio through a substantial number of brokers and
dealers. In so doing, SCMI uses its best efforts to obtain for the
Portfolio the most favorable price and execution available. The Portfolio
may, however, pay higher than the lowest available commission rates when
SCMI believes it is reasonable to do so in light of the value of the
brokerage and research services provided by the broker effecting the
transaction. In seeking the most favorable price and execution, SCMI,
having in mind the Portfolio 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 Portfolio s portfolio transactions. These services,
which in some cases may also be purchased for cash, include such items as
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<PAGE>
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 Portfolio), although not
all of these services are necessarily useful and of value in managing the
Portfolio. The management fee paid by the Portfolio 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 Portfolio 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 Portfolio 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
Portfolio.
Subject to the general policies of the Fund regarding allocation of
portfolio brokerage as set forth above, the Schroder Core Board has
authorized the Portfolio to employ Schroder Wertheim & Company,
Incorporated ("Schroder Wertheim") an affiliate of SCMI, to effect
securities transactions of the Portfolio, 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 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 Portfolio s policy
that commissions paid to Schroder Wertheim will in the judgment of the
officers of the Schroder Core 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 Schroder
Core 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 by the Portfolio satisfy the foregoing
standards. The Schroder Core Board will review all transactions at least
quarterly for compliance with such procedures.
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<PAGE>
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. The portfolio turnover rate for
the Fund for the fiscal years ended October 31, 1994 and 1995 were 70.82%
and 92.68%, respectively.
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, 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,
Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. It may also close on other days.
The Schroder Core Board has established procedures for the valuation of
the Portfolio s securities: (i) equity securities traded on a securities
exchange or on the Nasdaq Stock Market ("Nasdaq") for which last sale
information is regularly reported are valued at the last reported sales
prices on their primary exchange or the Nasdaq 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 Schroder
Core 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 Portfolio writes an
option, an amount equal to the premium received by it is recorded on its
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.
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 distributee [or
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<PAGE>
"shareholder receiving the distribution"] 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 portfolio
securities could result in a less diversified portfolio of investments and
could affect adversely the liquidity of the portfolio.
TAXATION
Taxation of the Fund
In order to continue to qualify for treatment as a regulated investment
company ("RIC") under the Internal Revenue Code of 1986, as amended
("Code"), the Fund (which is treated separately from each other portfolio
of the trust for these purposes) must distribute to its shareholders for
each taxable year at least 90% of its investment company taxable income
(consisting generally of net investment income and net short-term capital
gain) and must meet several additional requirements. Among these
requirements are the following: (1) the Fund must derive at least 90% of
its gross income each taxable year from dividends, interest, payments with
respect to securities loans, and gains from the sale or other disposition
of securities, or other income (including gains from Hedging Instruments)
derived with respect to its business of investing in securities ("Income
Requirement"); (2) the Fund must derive less than 30% of its gross income
each taxable year from the sale or other disposition of securities or
Hedging Instruments that were held for less than three months ("Short-
Short Limitation"); and (3) at the close of each quarter of the Fund's
taxable year, (i) at least 50% of the value of its total assets must be
represented by cash and cash items, U.S. government securities, and other
securities limited, in respect of any one issuer, to an amount that does
not exceed 5% of the value of the Fund's total assets and that does not
represent more than 10% of the issuer's voting securities, and (ii) not
more than 25% of the value of its total assets may be invested in
securities (other than U.S. government securities) of any one issuer. The
Fund, as an investor in the Portfolio, will be deemed to own a
proportionate share of the Portfolio's assets, and to earn a proportionate
share of the Portfolio's income, for purposes of determining whether the
Fund satisfies all the requirements described above to qualify as a RIC.
The Fund will be subject to a nondeductible 4% excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of
its ordinary income for that year and capital gain net income for the one-
year period ending on October 31 of that year, plus certain other amounts.
See the next section for a discussion of the tax consequences to the Fund
of hedging transactions engaged in by the Portfolio.
Taxation of the Portfolio
The Portfolio will be treated as a separate partnership for federal income
tax purposes and will not be a "publicly traded partnership." As a
result, the Portfolio will not be subject to federal income tax; instead,
the Fund, as an investor in the Portfolio, will be required to take into
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<PAGE>
account in determining its federal income tax liability its share of the
Portfolio's income, gains, losses, deductions, and credits, without regard
to whether it has received any cash distributions from the Portfolio. The
Portfolio also will not be subject to state income or franchise tax.
Because, as noted above, the Fund will be deemed to own a proportionate
share of the Portfolio's assets, and to earn a proportionate share of the
Portfolio's income, for purposes of determining whether the Fund satisfies
the requirements to qualify as a RIC, the Portfolio intends to conduct its
operations so that the Fund will be able to satisfy all those
requirements.
Distributions to the Fund from the Portfolio (whether pursuant to a
partial or complete withdrawal or otherwise) will not result in the Fund's
recognition of any gain or loss for federal income tax purposes, except
that (1) gain will be recognized to the extent any cash that is
distributed exceeds the Fund's basis for its interest in the Portfolio
before the distribution, (2) income or gain will be recognized if the
distribution is in liquidation of the Fund's entire interest in the
Portfolio and includes a disproportionate share of any unrealized
receivables held by the Portfolio, and (3) loss will be recognized if a
liquidation distribution consists solely of cash and/or unrealized
receivables. The Fund's basis for its interest in the Portfolio generally
will equal the amount of cash and the basis of any property the Fund
invests in the Portfolio, increased by the Fund's share of the Portfolio's
net income and gains and decreased by (a) the amount of cash and the basis
of any property the Portfolio distributes to the Fund and (b) the Fund's
share of the Portfolio's losses.
The Portfolio's use of hedging strategies, such as writing (selling) and
purchasing Hedging Instruments, involves complex rules that will determine
for income tax purposes the character and timing of recognition of the
gains and losses it realizes in connection therewith. Gains from Hedging
Instruments derived by the Portfolio with respect to its business of
investing in securities will qualify as permissible income for the Fund
under the Income Requirement. However, income from the disposition of
Hedging Instruments will be subject to the Short-Short Limitation for the
Fund if they are held for less than three months.
If the Portfolio satisfies certain requirements, any increase in value of
a position that is part of a "designated hedge" will be offset by any
decrease in value (whether realized or not) of the offsetting hedging
position during the period of the hedge for purposes of determining
whether the Fund satisfies the Short-Short Limitation. Thus, only the net
gain (if any) from the designated hedge will be included in gross income
for purposes of that limitation. The Portfolio will consider whether it
should seek to qualify for this treatment for its hedging transactions.
To the extent it does not so qualify, it may be forced to defer the clos-
ing out of certain Hedging Instruments beyond the time when it otherwise
would be advantageous to do so, in order for the Fund to continue to
qualify as a RIC.
- 29 -
<PAGE>
Exchange-traded futures contracts and listed options thereon constitute
"Section 1256 contracts." Section 1256 contracts are required to be
"marked-to-market" (that is, treated as having been sold at market value)
at the end of the Portfolio's taxable year. Sixty percent of any gain or
loss recognized as a result of these "deemed sales," and 60% of any net
realized gain or loss from any actual sales, of Section 1256 contracts are
treated as long-term capital gain or loss, and the remainder is treated as
short-term capital gain or loss.
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, one of which pertains to the
Fund.
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<PAGE>
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.
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<PAGE>
Principal Shareholders
As of July 31, 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 609,641,834 71.50%
120 Cheapside
London EC2V 6DS England
Gracechurch Co. 145,548,345 17.07%
75 Wall Street
New York, NY 10265
Shareholder Share Balance Percent of Fund
----------- ------------- ---------------
Schroder Nominees Limited BOJ 56,338,028 6.61%
120 Cheapside
London, EC2V 6DS England
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:
n
P (1+T) = 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 other 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
- 32 -
<PAGE>
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. Total return will be calculated separately
for each class of the Fund.
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 and the Portfolio 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., P.O. Box 446, Portland, Maine 04112, acts as the
Fund s transfer agent and dividend disbursing agent.
Legal Counsel
Jacobs Persinger & Parker, 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
Coopers & Lybrand L.L.P. serves as independent accountants for the Fund
and the Portfolio. Coopers & Lybrand L.L.P. provides audit services and
consultation in connection with review of Securities and Exchange
Commission filings. Coopers & Lybrand L.L.P. 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
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<PAGE>
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 with
this SAI, are incorporated herein by reference. The unaudited Statement
of Assets and Liabilities, Statement of Operations, Statement of Changes
in Net Assets, Statement of Investments, notes thereto, and Financial
Highlights of the Fund for the six month period ended April 30, 1996
(included in the Semi-Annual Report to shareholders) which are also
delivered with this SAI, are also incorporated herein by reference.
- 34 -
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits.
(a) Financial Statements
Included in the Prospectuses for Schroder U.S. Smaller Companies
Fund ("Fund"):
Financial Highlights.
Incorporated by reference in the Statement of Additional Information
for each Fund:
For the period ended April 30, 1996 - Statement of Assets and
Liabilities, Statement of Operations, Statement of Changes in Net
Assets, Statement of Investments and Notes to Financial Statements;
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 the Fund, filed with the Securities and Exchange
Commission on January 9, 1995 as part of the 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).
(2) None.
(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.
<PAGE>
"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 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. (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).
C-2
<PAGE>
(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. (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 Administrative Services Agreement with Schroder Fund
Advisors Inc. with respect to Schroder U.S. Smaller Companies
Fund (to be filed).
(d) Form of Administrative Services Agreement with Forum
Financial Services, Inc. with respect to Schroder U.S.
Smaller Companies Fund (to be filed).
(e) 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).
(f) 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 (filed as Exhibit 10(d) to Registrant's Post-
Effective Amendment No. 46 and incorporated herein by reference).
(11) Consent of Coopers & Lybrand L.L.P., independent accountants
(filed herewith).
(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 (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).
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<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
(1) (2)
Title of Class Number of Record
Holders as of
July 31, 1996
-------------
Schroder U.S. Equity Fund 619
Schroder International Fund 919
Schroder U.S. Smaller Companies Fund 13
Schroder Emerging Markets Fund 19
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:
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<PAGE>
"(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;
"(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
C-5
<PAGE>
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 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
eighteen 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.
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<PAGE>
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.
David M. Salisbury, Chairman & Chief Executive. 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, Senior Vice President. Mr. Ager is also a Director of
Schroder Ltd.
Richard R. Foulkes, Deputy Chairman. Mr. Foulkes is also an
Executive Vice President of Schroder Ltd.
David Gibson, Director. Mr. Gibson is also a Director of Schroder
Ltd., a Director of Schroder Investment Management Limited, and a
Director of Schroder Wertheim Investment Services, an SCMI
affiliate.
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., a Director of Schroder Advisors and Deputy Chairman of
Schroder Wertheim Investment Services, an SCMI affiliate.
Laura E. Luckyn-Malone, Managing Director. Ms. Luckyn-Malone is
also a Managing Director of Schroder Ltd., President and Director of
a closed-end investment company for which SCMI and/or its affiliates
provide investment services, President and Trustee of an open-end
investment company for which SCMI and/or its affiliates provide
investment services and Chairman, President & Director of Schroder
Advisors. Ms. Luckyn-Malone is also a Director of Schroder Wertheim
Investment Services, an affiliate of SCMI.
Gavin D.L. Ralston, Director. Mr. Ralston is also a Director of
Schroder Ltd.
C-7
<PAGE>
Mark J. Smith, Director. Mr. Smith is also a Director, Schroder
Ltd. and Schroder Investment Management (Guernsey) Limited, an
investment management company, and Director and a 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.
John A. Troiano, Managing Director. Mr. Troiano is also a Managing
Director of Schroder Ltd., Director of Schroder Advisors and Vice
President 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 and an officer of
various open-end investment companies for which SCMI and/or its
affiliates provide investment services.
Andrew R. Barker, First Vice President. Mr. Barker is also a First
Vice President of Schroder Ltd.
J. Ann Bonathan, First Vice President. Ms. Bonathan is also a First
Vice President of Schroder Ltd. Until December 1994, Ms. Bonathan
was Deputy Head of Custody Operations of SG Warburg, 1 Finsbury
Avenue, London, merchant bankers.
John D. Burns, First Vice President. Mr. Burns is also a First Vice
President of Schroder Ltd.
Heather F. Crighton, First Vice President. Ms. Crighton is also a
Vice President of Schroder Ltd.
Louise Crouset, Director. Mr. Crouset is also a Director of
Schroder Ltd.
Robert C. Davy, Director. 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 a 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 and Schroder Wertheim Investment
Services.
Abdallah Nauphal, Director.
Joshua Shapiro, First Vice President.
John Stainsby, First Vice President. Mr. Stainsby is also First
Vice President of Schroder Ltd.
Fariba Talebi, Group Vice President. Ms. Talebi is also an officer
of various open end investment companies for which SCMI and/or its
affiliates provide investment services.
C-8
<PAGE>
Jan Kees van Heusde, First Vice President. Mr. van Heusde is also
First Vice President of Schroder Ltd.
Patrick Vermeulen, First Vice President. Mr. Vermeulen is also
First Vice President of Schroder Ltd.
Mark J. Astley, First Vice President, Assistant Director.
William H. Barnes, Vice President.
Susan M. Belson, Vice President.
Mark Bridgeman, Analyst/Fund Manager. Mr. Bridgeman is also a Fund
Manager of Schroder Ltd.
Alan Gilston, Vice President.
Donald Farquharson, First Vice President, Assistant Director.
James Gray, Vice President. Mr. Gray is also a Senior Vice
President of Schroder Advisors and a Vice President of Schroder
Wertheim Investment Services, an SCMI affiliate. During the last
two years, Mr. Gray has been a Mutual Fund Administrator at Furman
Selz, 230 Park Avenue, New York City, NY, a broker dealer and prior
to that, a Mutual Fund Administrator with Concord Holdings Corp.,
125 West 55th Street, New York City, a Mutual Fund Administration
business.
David Harris, Assistant Vice President.
Robert A. Jackowitz, Vice President. Mr. Jackowitz is also
Treasurer of Schroder Wertheim Investment Services, an SCMI
affiliate and various open- and closed-end investment companies for
which SCMI and/or its affiliates provide investment services.
Clare L. Latham, Vice President. Ms. Latham is also an Investment
Manager of Schroder Ltd.
Catherine A. Mazza, First Vice President. Ms. Mazza is also a
Senior Vice President of Schroder Advisors and a Vice President of
various open-end and closed-end investment companies for which SCMI
and/or its affiliates provide investment services. Until September
1994, Ms. Mazza was 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. Until October 1994, Mr. Melendez
was a Vice President of NatWest Securities, 175 Water Street, New
York, NY, an investment adviser.
Connie Moak-Mazur, Marketing, Client Services. Ms. Moak-Mazur is
also a Group Vice President of Schroder Wertheim Investment
Services, an affiliate of SCMI. Until June 1995, Ms. Moak-Mazur was
in Marketing and Client Services at Wasser Stein Perells, 31 West
52nd Street, New York, NY, an investment bank.
C-9
<PAGE>
Erick Richter, Assistant Vice President.
Ellen B. Sullivan, First Vice President.
Ira L. Unschuld, First Vice President. Mr. Unschuld is also an
officer of various open end investment companies for which SCMI
and/or its affiliates provide investment services.
Herve van Caloen, First Vice President. During the last two years,
Mr. Van Caloen was a Portfolio Manager at Provident Capital
Management, Philadelphia, PA, an Investment Adviser.
Dawn M. Vroegop, Vice President.
ITEM 29. PRINCIPAL UNDERWRITERS.
(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):
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Distributor with Registrant
------------------ -------------------- --------------------
<S> <C> <C>
Laura E. Luckyn-Malone Chairman, President and Director and President
Director
Sharon L. Haugh Director None
Mark J. Smith Director and Vice President Director and Vice President
John A. Troiano Director Vice President
Margaret H. Douglas-Hamilton Secretary Secretary
Catherine A. Mazza Senior Vice President Vice President
Robert Jackowitz Treasurer Treasurer
</TABLE>
* 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.
C-10
<PAGE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
The accounts, books and other documents required to be maintained by
Registrant with respect to Schroder U.S. Smaller Companies 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, except that certain items will be
maintained at the following locations:
(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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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant 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 9th day of August, 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 capabilities indicated on the 9th day of August,
1996.
Signatures Title
---------- -----
(a) Principal Executive Officer
/s/ Laura E. Luckyn-Malone
---------------------------
Laura E. Luckyn-Malone President and Trustee
(b) Principal Financial and Accounting
ROBERT JACKOWITZ* Treasurer
(c) Majority of the Trustees
/s/ Laura E. Luckyn-Malone
---------------------------
Laura E. Luckyn-Malone Trustee
PETER E. GUERNSEY* Trustee
JOHN I. HOWELL* Trustee
HERMANN C. SCHWAB* Trustee
MARK J. SMITH* Trustee
*By: /s/ Thomas G. Sheehan
----------------------
Thomas G. Sheehan, Attorney-in-Fact
<PAGE>
SIGNATURES
On behalf of Schroder Capital Funds, being duly authorized, I have duly
caused this amendment to the Registration Statement of Schroder Capital
Funds (Delaware) to be signed in the City of New York and State of New
York on the 9th day of August, 1996.
SCHRODER CAPITAL FUNDS
By: /s/ Laura E. Luckyn-Malone
---------------------------
Laura E. Luckyn-Malone
President
This amendment to the Registration Statement of Schroder Capital Funds
(Delaware) has been signed below by the following persons in the
capacities indicated on the 9th day of August, 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
*By: /s/ Thomas G. Sheehan
----------------------
Thomas G. Sheehan, Attorney-in-Fact
(c) Majority of the Trustees
/s/ Laura E. Luckyn-Malone Trustee
Laura E. Luckyn-Malone
PETER E. GUERNSEY* Trustee
JOHN I. HOWELL* Trustee
HERMANN C. SCHWAB* Trustee
MARK J. SMITH* Trustee
*By: /s/ Thomas G. Sheehan
----------------------
Thomas G. Sheehan, Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
No. Description of Exhibit
--- ----------------------
1. Trust Instrument*
2. None
3. None
4. Instrument defining the rights of holders of the
Registrant's shares of beneficial interest*
5. Investment Advisory Contract*
6. Master Distribution Contract and Supplement*
7. Inapplicable
8. Form of Global Custody Contract with Chase Manhattan
Bank*
9. (a) Form of Administration Agreement with Schroder
Fund Advisors Inc.*
(b) Form of Sub-Administration Agreement with Forum
Financial Services, Inc.*
(c) Form of Administrative Services Agreement with
Schroder Fund Advisors Inc. with respect to
Schroder U.S. Smaller Companies Fund (to be
filed).
(d) Form of Administrative Services Agreement with
Forum Financial Services, Inc. with respect to
Schroder U.S. Smaller Companies Fund (to be
filed).
(e) Form of Transfer Agency Agreement with Forum
Financial Corp.*
(f) Form of Fund Accounting Agreement with Forum
Financial Corp.*
* Incorporated by reference from Post-Effective Amendment No. 46 to
the registration statement, SEC File No. 2-34215, filed on January 9,
1996.
<PAGE>
No. Description of Exhibit
--- ----------------------
10. Opinion of Jacobs Persinger & Parker*
11. Consent of Coopers & Lybrand L.L.P. (filed herewith)
15. (a) Form of Master Distribution Plan*
(b) Form of Distribution Plan Supplement*
19. Powers of Attorney**
* Incorporated by reference from Post-Effective Amendment No. 46 to
the registration statement, SEC File No. 2-34215, filed on January 9,
1996.
** Incorporated by reference from Post-Effective Amendment No. 44 to
the registration statement, SEC File No. 2-34215, filed on October 11,
1995.
<PAGE>
<PAGE>
EX. 99.B11
COOPERS COOPERS & LYBRAND L.L.P.
& LYBRAND a professional services firm
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Schroder Capital Funds (Delaware):
We hereby consent to the following with respect to Post-Effective
Amendment No. 53 to the Registration Statement on Form N-1A (File No. 2-
34215) of Schroder Capital Funds (Delaware) (consisting of Schroder
International Fund (formerly International Equity Fund), Schroder U.S.
Smaller Companies Fund, Schroder U.S. Equity Fund, and Schroder Emerging
Markets Fund Institutional Portfolio) (collectively, the "Funds"):
1. The reference to our firm under the heading "Financial
Highlights" in the Prospectuses.
2. The incorporation by reference of our reports dated
December 27, 1995 on our audits of the financial
statements and financial highlights of the Funds, which
reports are included in the Funds' Annual Reports for the
year ended October 31, 1995, which are incorporated by
reference in the Statements of Additional Information.
3. The reference to our firm under the heading "Independent
Accountants" in the Statements of Additional Information.
/s/ COOPERS & LYBRAND L.L.P.
----------------------------
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
August 29, 1996
<PAGE>
