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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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Two Portland Square, Portland, Maine 04101
General Information: (207) 879-8903
Account Information: (800) 344-8332
Fund Literature: (800) 290-9826
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 Emerging Markets Fund
Institutional Portfolio (the "Fund"), a separately-managed, non-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 to achieve long-term capital appreciation through direct
or indirect investment in equity and debt securities of issuers domiciled or
doing business in emerging market countries in regions such as Southeast Asia,
Latin America, and Eastern and Southern Europe. Investing in securities of
emerging market issuers involves special risks in addition to those associated
with investments in securities of U.S. issuers.
THE FUND CURRENTLY SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY HOLDING, AS ITS
ONLY INVESTMENT SECURITIES, THE SECURITIES OF SCHRODER EMERGING MARKETS FUND
INSTITUTIONAL PORTFOLIO (THE "PORTFOLIO"), A SEPARATE PORTFOLIO OF 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."
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund. A Statement of Additional Information
(the "SAI") dated May 17, 1996 and as supplemented from time to time containing
additional information about the Fund has been filed with the Securities and
Exchange Commission ("SEC") and is hereby incorporated by reference into this
Prospectus. It is available without charge and may be obtained by writing or
calling the Fund at the address and telephone numbers printed above.
This Prospectus should be read and retained for information about the Fund.
THE SHARES OFFERED HEREBY ARE NOT OBLIGATIONS, DEPOSITS, OR ACCOUNTS OF, OR
ENDORSED OR GUARANTEED BY, ANY BANK OR ANY AFFILIATE OF A BANK AND ARE NOT
INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE SYSTEM, OR ANY FEDERAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This Prospectus is dated May 17, 1996
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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PROSPECTUS SUMMARY
THE FUND
The Fund is a separately managed, non-diversified portfolio of the Trust,
a Delaware business trust registered as an open-end management investment
company under the Investment Company Act of 1940 (the "Act"). The Fund's
investment objective is to achieve long-term capital appreciation through direct
or indirect investment in equity and debt securities of issuers domiciled or
doing business in emerging market countries in regions such as Southeast Asia,
Latin America, and Eastern and Southern Europe. Currently, the Fund seeks to
achieve its investment objective by investing exclusively in the Portfolio, a
series of Schroder Core, itself a registered open-end management investment
company. The Portfolio has substantially the same investment objective and
policies as the Fund. Accordingly, the investment experience of the Fund will
correspond directly with the investment experience of the Portfolio. The Fund
currently offers two separate classes of shares: Investor Shares ("Investor
Shares") and Advisor Shares ("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 advisory fee paid to SCMI by the Portfolio is borne indirectly by the
Fund. 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 Sub-
Administrator.
PURCHASES AND REDEMPTIONS OF SHARES
Shares may be purchased or redeemed by mail, by bank-wire and through an
investor's broker-dealer or other financial institution. The minimum initial
investment is $250,000. See "Investment in the Fund -- Purchase of Shares" and "
- -- Redemption of Shares." Purchases of Fund shares are subject to a purchase
charge of 0.50% of the amount invested. Redemptions of Fund shares are subject
to a redemption charge of 0.50% of the net asset value of the shares redeemed.
See "Investment In The Fund -- Purchase of Shares" and " -- Redemption of
Shares."
DIVIDENDS AND DISTRIBUTIONS
The Fund declares and pays as a dividend substantially all of its net
investment income annually and distributes any net realized long-term capital
gain at least annually. Dividend and capital gain distributions are reinvested
automatically in additional shares of the Fund at net asset value unless the
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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shareholder has notified the Fund in an Account Application or otherwise in
writing of the shareholder's election to receive dividends or distributions in
cash. See "Dividends, Distributions and Taxes."
RISK CONSIDERATIONS
Investments in securities of foreign issuers, particularly in countries
with smaller, emerging capital markets, involve certain risks not associated
with domestic investing, including fluctuations in foreign exchange rates,
uncertain political and economic developments, and the possible imposition of
exchange controls or other foreign governmental laws or restrictions. The Fund
is not intended for investors whose objective is assured income or preservation
of capital. The Fund should be considered a means of diversifying an investment
portfolio and not in itself a balanced investment program. See "Additional
Investment Policies and Risk Considerations."
FEE TABLE
The table below is intended to assist investors in understanding the
expenses that an investor in Investor Shares would incur.
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchase.............................. None
Maximum Sales Load Imposed on Reinvested Dividends.................. None
Deferred Sales Load................................................. None
Purchase Charge (based on amount invested)(1)....................... 0.50%
Redemption Charge (based on net asset value of shares redeemed)(1).. 0.50%
Annual Fund Operating Expenses (as a percentage of average net assets)(2)
Management Fees (after fee waivers)(3).............................. 0.36%
12b-1 Fees.......................................................... 0.00%
Other Expenses...................................................... 1.24%
Total Fund Operating Expenses(3).................................... 1.60%
(1) The Purchase Charge and the Redemption Charge are paid to the Fund and are
imposed on all purchases and redemptions of Shares, respectively, other
than with respect to Shares purchased through the reinvestment of dividends
or distributions. See "Investment in the Fund -- Purchase of Shares" and
"-- Redemption of Shares."
(2) The amounts of expenses reflect the operating expenses of the Fund prior to
its investment in the Portfolio and are based on annualized expenses
incurred for the Fund's most recent fiscal year ended October 31, 1995. The
Fund's expenses have, since November 1, 1995, and will continue to include
the Fund's pro rata portion of all operating expenses of the Portfolio,
which will be borne indirectly by Fund shareholders. The Trust's Board of
Trustees believes that the aggregate per share expenses of the Fund and the
Portfolio will be approximately equal to the expenses the Fund would incur
if its assets were invested directly in portfolio securities. Investment
advisory fees are
(FOOTNOTES CONTINUED ON NEXT PAGE)
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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(FOOTNOTES CONTINUED FROM PREVIOUS PAGE)
those incurred by the Portfolio; as long as the Fund's assets are invested
in the Portfolio, the Fund pays no investment advisory fees directly.
(3) Management Fees for the Fund reflect the annual fee rate that the Fund pays
for investment advisory (1.00%) and administrative (0.25%) services. Absent
fee waivers and expense reimbursements, Management Fees and Total Operating
Expenses would be 1.25% and 2.49%, respectively.
SCMI and Schroder Advisors have voluntarily undertaken to waive a portion
of their fees and assume certain expenses of the Fund during the current fiscal
year to the extent that total expenses exceed 1.60% of the Fund's average daily
net assets attributable to Investor Shares. This undertaking cannot be withdrawn
except by a majority vote of the Trust's Board of Trustees. See "Management --
Expenses."
EXAMPLE
Based on the expenses listed above, you would pay the following expenses on
a $1,000 investment, assuming (1) a 5% annual return, (2) no redemption and full
redemption at the end of each time period, and (3) reinvestment of all dividends
and other distributions:
No Redemption Full Redemption
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1 year........................ $ 21 1 year.................. $ 26
3 years....................... $ 55 3 years............... $ 60
5 years....................... $ 92 5 years................. $ 97
10 years...................... $195 10 years................ $200
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 Investor Shares of the
Fund for its first fiscal year. 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. The Fund's financial statements for the year ended
October 31, 1995 and independent accountants' report thereon are contained in
the Fund's Annual Report to Shareholders and are incorporated by reference into
the SAI. Further information about the performance of the Fund is contained in
the Annual Report, which may be obtained without charge by writing or calling
the Fund at the address or the telephone number for Fund Literature on the cover
of this Prospectus.
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March 31, 1995*
through
October 31, 1995
----------------
Net Asset Value, Beginning of Year.......................... $ 10.00
-------
Investment Operations
Net Investment Income.................................... 0.02
Net Realized and Unrealized Gain on Investments.......... 0.61
-------
Total from Investment Operations............................. 0.63
Net Asset Value, End of Period............................... $ 10.63
-------
-------
Total Return................................................. 6.30% (a)
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Ratio/Supplementary Data:
Net Assets, End of Year (Thousands)......................... 18,423
Ratio of Expenses to Average Net Assets..................... 1.58% (b)(c)
Ratio of Net Investment Income to Average Net Assets........ 0.46% (b)
Portfolio Turnover Rate..................................... 44.10%
* Commencement of operations
(a) Does not reflect purchase charge of 0.50%
(b) Annualized
(c) During the period, various fees and expenses were waived and reimbursed,
respectively. Had such waiver and reimbursement not occurred, the
annualized ratio of expenses to average net assets would have been 2.45%.
INVESTMENT OBJECTIVE AND POLICIES
The Fund is designed for investors who seek the aggressive growth
potential of emerging world markets and are willing to bear the special risks
of investing a portion of their assets in those markets. The Fund should be
considered a means of diversifying an investment portfolio and is not a
complete investment program. Investments in the securities of foreign issuers
generally involve risks in addition to risks associated with investments in
the securities of U.S. issuers. See "Additional Investment Policies and Risk
Considerations." The Fund is not intended for investors whose objective is
assured income and preservation of capital.
INVESTMENT OBJECTIVE AND THE PORTFOLIO
The Fund's investment objective is to achieve long-term capital
appreciation through direct or indirect investment in equity and debt
securities of issuers domiciled or doing business in emerging market countries
in regions such as Southeast Asia, Latin America, and Eastern and Southern
Europe. Current income will be incidental to the Fund's objective. There is no
assurance that the Fund will achieve its investment objective.
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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The Fund currently seeks to achieve its investment objective by investing
all of its investment assets in the Portfolio, which has substantially the
same investment objective and policies 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 Portfolio, including additional fundamental policies, is contained in
the SAI.
INVESTMENT POLICIES
Under normal conditions, the Portfolio invests at least 65% of its total
assets in emerging market equity and debt securities, including common stocks,
preferred stocks, convertible preferred stocks, stock rights and warrants,
convertible debt securities and non-convertible debt securities. Investments
in stock rights and warrants will not be considered for purposes of
determining compliance with this policy. The Portfolio may invest up to 35% of
its total assets in high risk debt securities that are unrated or rated below
investment grade. See "Additional Investment Policies and Risk
Considerations." Under certain circumstances, the Portfolio may invest
indirectly in emerging market securities by investing in other investment
companies or vehicles. See "Additional Investment Policies and Risk
Considerations -- Other Investment Vehicles" below.
In recent years, many emerging market countries have begun programs of
economic reform: removing import tariffs, dismantling trade barriers,
deregulating foreign investment, privatizing state owned industries,
permitting the value of their currencies to float against the dollar and other
major currencies, and generally reducing the level of state intervention in
industry and commerce. Important intra-regional economic integration also
holds the promise of greater trade and growth. At the same time, significant
progress has been made in restructuring the heavy external debt burden that
certain emerging market countries accumulated during the 1970s and 1980s.
While there is no assurance that these trends will continue, the Portfolio's
investment adviser will seek out attractive investment opportunities in these
countries.
"Emerging market" countries generally include all countries in the world
other than those included in the Morgan Stanley Capital International World
Index ("MSCI World") of major world economies. Where the investment adviser
determines that the economy of a particular country included in the MSCI World
more appropriately reflects an emerging market economy, however, the adviser
may include such country in the emerging market category. The following
countries currently are excluded from the Portfolio's emerging market
category: Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Ireland, Italy, Japan, Malaysia, Netherlands, New Zealand, Norway,
Singapore, Spain, Sweden, Switzerland, United Kingdom, and the United States
of America. The Portfolio will not necessarily seek to diversify investments
on a geographic basis within the emerging market category and, in this regard,
the Portfolio may invest more than 25% of its total assets in issuers located
in any one country. To the extent it invests in issuers located in one country
or area, the Portfolio is susceptible to factors adversely affecting that
country or area. See "Additional Investment Policies and Risk
Considerations -- Risk Considerations -- Geographic Concentration" below.
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An issuer of a security will be considered to be domiciled or doing
business in an emerging market when (1) the issuer is organized under the laws
of an emerging market country; (2) the issuer's primary securities trading
market is in an emerging market country; or (3) in the judgment of the
investment adviser, at least 50% of the issuer's revenues or profits are
derived from goods produced or sold, investments made, or services performed
in emerging market countries or which have at least 50% of their assets
situated in such countries. The Portfolio may acquire emerging market
securities that are denominated in currencies other than a currency of an
emerging market country. The Portfolio may consider investment companies to be
located in the country or countries in which they primarily invest.
In anticipation of the currency requirements of the Portfolio and to
attempt to protect against possible adverse movements in foreign exchange
rates, the Portfolio may enter into forward contracts to purchase or sell
foreign currencies. Although such contracts may reduce the risk of loss to the
Portfolio due to a decline in the value of the currency which is sold, they
also limit the gain that might result should the value of such currency rise.
ADDITIONAL INVESTMENT POLICIES AND RISK CONSIDERATIONS
INVESTMENT RESTRICTIONS
The investment objective and all investment policies of each of the Fund
and the Portfolio that are designated as fundamental may not be changed
without approval of the holders of a majority of the outstanding voting
securities of the Fund or the Portfolio, as applicable. A majority of
outstanding voting securities means the lesser of (i) 67% of the shares
present or represented at a shareholder meeting at which the holders of more
than 50% of the outstanding shares are present or represented, or (ii) more
than 50% of outstanding shares. Unless otherwise indicated, all investment
policies are not fundamental and may be changed by the Board without approval
by shareholders of the Fund. Likewise, nonfundamental investment policies of
the Portfolio may be changed by the Schroder Core Board without shareholder
approval. For more information concerning shareholder voting, see "Other
Information -- Capitalization and Voting" and "Other Information -- Fund
Structure."
Fundamental Policies
The following investment restrictions of the Portfolio are fundamental
policies:
(1) The Portfolio will not concentrate investments in any particular
industry; therefore, the Portfolio will not purchase the securities of
companies in any one industry if, thereafter, 25% or more of the
Portfolio's total assets would consist of securities of companies in that
industry. (This restriction does not apply to obligations issued or
guaranteed by the United States Government, its agencies or
instrumentalities.)
(2) The Portfolio will not issue senior securities, borrow money or
pledge its assets in excess of 10% of its total assets taken at market
value (including the amount borrowed) and then only from a bank as a
temporary measure for extraordinary or emergency purposes including to
meet redemptions or to settle securities transactions. Usually only
"leveraged" investment
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companies may borrow in excess of 5% of their assets; however, the
Portfolio will not borrow to increase income but only as a temporary
measure for extraordinary or emergency purposes, including to meet
redemptions or to settle securities transactions which may otherwise
require untimely dispositions of Portfolio securities. The Portfolio will
not purchase securities while borrowings exceed 5% of total assets. (For
the purpose of this restriction, collateral arrangements with respect to
the writing of options, futures contracts, options on futures contracts,
and collateral arrangements with respect to initial and variation margin
are not deemed to be a pledge of assets and neither such arrangements nor
the purchase or sale of futures or related options are deemed to be the
issuance of a senior security.)
(3) The Portfolio will not make investments for the purpose of
exercising control or management. Investments by the Portfolio in
wholly-owned investment entities created under the laws of certain
countries will not be deemed the making of investments for the purpose of
exercising control or management.
The percentage restrictions described above and in the SAI apply only at
the time of investment and require no action by the Portfolio as a result of
subsequent changes in value of the investments or the size of the Portfolio. A
supplementary list of investment restrictions is contained in the SAI.
INVESTMENT TYPES
EQUITY SECURITIES. The Portfolio's emerging market investments will
comprise primarily equity securities. Such investments will consist
predominantly of common stock or preferred stock of established companies
listed on recognized securities exchanges or traded in other established
markets. However, the Portfolio may invest to a limited extent in convertible
preferred stock, warrants and stock rights. Due to the absence of established
securities markets in certain emerging market countries and restrictions in
certain countries on direct investment by foreign entities, the Portfolio may
invest in certain emerging market issuers exclusively or primarily through the
purchase of sponsored and unsponsored American Depository Receipts ("ADRs") or
other similar securities, such as American Depository Shares, Global
Depository Shares or International Depository Receipts; or through investment
in government approved investment companies or other vehicles. ADRs are
receipts typically issued by U.S. banks evidencing ownership of the underlying
securities, into which they are convertible. These securities may or may not
be denominated in the same currency as the underlying securities. Unsponsored
ADRs may be created without the participation of the foreign issuer. Holders
of these ADRs generally bear all the costs of the ADR facility, whereas
foreign issuers typically bear certain costs in a sponsored ADR. The bank or
trust company depository of an unsponsored ADR may be under no obligation to
distribute shareholder communications received from the foreign issuer or to
pass through voting rights.
DEBT SECURITIES. The Portfolio may also seek capital appreciation through
investment in emerging market convertible or non-convertible debt securities.
Capital appreciation in debt securities may arise as a result of a favorable
change in relative foreign exchange rates, in relative interest rate levels,
or in the creditworthiness of issuers. The receipt of income from such debt
securities is incidental to the Portfolio's objective of long-term capital
appreciation. Such income can be used, however, to offset the
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operating expenses of the Portfolio. In accordance with its investment
objective, the Portfolio will not seek to benefit from anticipated short-term
fluctuations in currency exchange rates. The Portfolio may, from time to time,
invest in debt securities with relatively high risk and high yields (as
compared to other debt securities meeting the Portfolio's investment
criteria), notwithstanding that the Portfolio may not anticipate that such
securities will experience substantial capital appreciation. The debt
securities in which the Portfolio invests may be unrated, but will not be in
default at the time of purchase. The Portfolio also may invest to a certain
extent in debt securities in order to participate in debt-to-equity conversion
programs sponsored by certain emerging market countries or corporate
reorganizations.
The Portfolio may invest in debt securities ("sovereign debt") issued or
guaranteed by emerging market governments (including countries, provinces and
municipalities) or their agencies and instrumentalities ("governmental
entities"), debt securities issued or guaranteed by international
organizations designated or supported by multiple foreign governmental
entities (which are not obligations of foreign governments) to promote
economic reconstruction or development, and debt securities issued by
corporations or financial institutions.
The Portfolio may invest a portion of its assets in certain debt
obligations known as "Brady Bonds." Brady Bonds are created through the
exchange of existing commercial bank loans to sovereign entities for new
obligations in connection with debt restructurings. To date, debt
restructurings utilizing Brady Bonds have been undertaken in Mexico,
Venezuela, Argentina, Albania, Ecuador, Jordan, Poland, Uraguay, Bulgaria, the
Dominican Republic, Costa Rica, Brazil, Nigeria, and the Philippines. Other
countries, including Panama, and Peru are expected to implement Brady Bond
debt restructurings in the future.
Brady Bonds are of recent origin, and accordingly do not have a long
payment history. Brady Bonds are actively traded in the over-the-counter
secondary market, and may be collateralized or uncollateralized. Although most
Brady Bonds are denominated in U.S. dollars, they are issued in various
currencies. U.S. dollar denominated Brady Bonds may be fixed rate par bonds or
floating rate discount bonds. They are generally collateralized in full as to
principal by U.S. Treasury zero coupon bonds having the same maturity as the
Brady Bonds. Interest payments on U.S. dollar denominated Brady Bonds
generally are collateralized on a one year or longer rolling forward basis by
cash or securities in an amount, in the case of fixed rate bonds, that is
equal to at least one year of interest payments or, in the case of floating
rate bonds, that is initially equal to at least one years interest payments
based on the current interest rate and is thereafter adjusted at regular
intervals. Certain Brady Bonds are entitled to "value recovery payments" in
certain circumstances, which in effect are supplemental interest payments but
are not generally collateralized. Brady Bonds are often viewed as having three
or four valuation components: (i) the collateralized repayment of principal at
final maturity; (ii) the collateralized interest payments; (iii) any
uncollateralized repayment of principal at maturity; and (iv) any
uncollateralized interest payments. The risks associated with these
uncollateralized amounts are referred to as "residual risk." Because of their
residual risk and, among other factors, the history of defaults in commercial
bank loans in countries issuing Brady Bonds, investments in Brady Bonds are
considered speculative.
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INVESTMENT IN OTHER INVESTMENT COMPANIES OR VEHICLES. The Portfolio may be
able to invest in certain emerging markets solely or primarily through
governmentally authorized investment vehicles or companies. Pursuant to the
Act, the Portfolio generally may invest up to 10% of its total assets in the
aggregate in the shares of other investment companies and up to 5% of its
total assets in any one investment company, as long as each investment does
not represent more than 3% of the outstanding voting stock of the investment
company in which the Portfolio invests at the time of such investment.
Investment in other investment companies may involve the payment of
substantial premiums above the value of such investment companies' portfolio
securities, and is subject to limitations under the Act and market
availability. The Portfolio does not intend to invest in such investment
companies unless, in the judgment of SCMI, the potential benefits of such
investment justify the payments of any applicable premiums or sale charges. As
a shareholder in an investment company, the Portfolio would bear its ratable
share of the investment company's expenses, including its advisory and
administrative fees. At the same time, the Portfolio would continue to pay its
own management fees and other expenses.
TEMPORARY DEFENSIVE INVESTMENTS. For temporary defensive purposes, the
Portfolio may invest without limitation in (or enter into repurchase
agreements maturing in seven days or less with U.S. banks and broker-dealers
with respect to) short-term debt securities, including U.S. Government
securities, certificates of deposit and bankers' acceptances of U.S. banks.
The Portfolio may also hold cash and time deposits in foreign banks
denominated in any major foreign currency. See "Investment Policies" in the
SAI for further information about all these securities.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. To hedge against adverse
price movements in the securities held in its portfolio and the currencies in
which they are denominated (as well as in the securities it might wish to
purchase and their denominated currencies), the Portfolio may engage in
transactions in forward foreign currency exchange contracts ("forward
contracts"). A forward contract involves an obligation to purchase or sell a
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. The Portfolio will generally not enter into a forward contract with
a term of greater than one year. Forward contracts are not exchange traded,
and there can be no assurance that a liquid market will exist at a time when
the Portfolio seeks to close out a forward contract. Nor is there any
assurance that a counterparty in an over-the-counter transaction will be able
to perform its obligations. Currently, only a limited market, if any, exists
for hedging transactions relating to currencies in certain emerging markets or
to securities of issuers domiciled or principally engaged in business in
certain emerging markets. This may limit the Portfolio's ability to
effectively hedge its investments in those markets. Hedging against a decline
in the value of a currency does not eliminate fluctuations in the prices of
portfolio securities or prevent losses if the prices of such securities
decline. Such transactions also limit the opportunity for gain if the value of
the hedged currencies should rise. In addition, it may not be possible for the
Portfolio to hedge against a devaluation that is so generally anticipated that
the Portfolio is not able to contract to sell the currency at a price above
the devaluation level it anticipates. See "Investment Policies -- Forward
Foreign Currency Exchange Contracts" in the SAI.
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ILLIQUID AND RESTRICTED SECURITIES. The Portfolio will not purchase or
otherwise acquire any security if, as a result, more than 15% of its net
assets (taken at current value) would be invested in securities that are
illiquid by virtue of the absence of a readily available market or because of
legal or contractual restrictions on resale ("restricted securities"). There
may be undesirable delays in selling illiquid securities at prices
representing their fair value. This policy includes over-the-counter options
held by the Portfolio and the "in the money" portion of the assets used to
cover such options. As stated above, this policy also includes assets which
are subject to material legal restrictions on repatriation. 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 would 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, and thus the Fund, could experience a loss.
The Portfolio may lend securities from its portfolio if liquid assets in
an amount at least equal to the current market value of the securities loaned
(including accrued interest thereon) plus the interest payable to the
Portfolio with respect to the loan is maintained by the Portfolio's custodian
bank in a segregated account. Any securities that the Portfolio may receive as
collateral will not become a part of its portfolio at the time of the loan,
and, in the event of a default by the borrower, the Portfolio will, if
permitted by law, dispose of such collateral except for such part thereof that
is a security in which the Portfolio is permitted to invest. During the time
that the securities are on loan, the borrower will pay the Portfolio any
accrued income on those securities, and the Portfolio may invest the cash
collateral and earn income or receive an agreed upon fee from a borrower that
has delivered cash equivalent collateral. Cash collateral received by the
Portfolio will be invested in U.S. Government securities and liquid high grade
debt obligations. The value of securities loaned will be marked to market
daily. Portfolio securities purchased with cash collateral are subject to
possible depreciation. Loans of securities by the Portfolio will be subject to
termination at the Portfolio's or the borrower's option. The Portfolio may pay
reasonable negotiated fees in connection with loaned securities, so long as
such fees are set forth in a written contract and approved by the Schroder
Core Board. See "Loans of Portfolio Securities" in the SAI for further
information on securities loans.
OPTIONS AND FUTURES TRANSACTIONS. While the Portfolio does not presently
intend to do so, it may (a) write covered call options on portfolio securities
and the U.S. dollar and emerging market
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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currencies, without limit; (b) write covered put options on portfolio
securities and the U.S. dollar and emerging market currencies with the
limitation that the aggregate value of the obligations underlying the puts
determined as of the date the options are sold will not exceed 50% of the
Portfolio's net assets; (c) purchase call and put options in amounts equaling
up to 5% of its total assets; and (d)(i) purchase and sell futures contracts
that are currently traded, or may in the future be traded, on U.S. and foreign
commodity exchanges on underlying portfolio securities, any emerging market
currency, U.S. and emerging market fixed-income securities and such indices of
U.S. or emerging market equity or fixed-income securities as may exist or come
into being and (ii) purchase and write call and put options on such futures
contracts, in all cases involving such futures contracts or options on futures
contracts for hedging purposes only, and without limit, except that the
Portfolio may not enter into futures contracts or purchase related options if,
immediately thereafter, the amount committed to margin plus the amount paid
for premiums for unexpired options on futures contracts generally exceeds 5%
of the value of the Portfolio's total assets. All of the foregoing are
referred to as "Hedging Instruments."
In general, the Portfolio may use Hedging Instruments: (1) to attempt to
protect against declines in the market value of the Portfolio's portfolio
securities or stock index futures, and the currencies in which they are
denominated and thus protect the Portfolio's net asset value per share against
downward market trends, or (2) to establish a position in securities markets
as a temporary substitute for purchasing particular equity securities. The
Portfolio will not use Hedging Instruments for speculation. The Hedging
Instruments which the Portfolio is authorized to use have certain risks
associated with them. Principal among such risks are: (a) the possible failure
of such instruments as hedging techniques in cases where the price movement of
the securities underlying the options or futures do not follow the price
movements of the portfolio securities subject to the hedge; (b) potentially
unlimited loss associated with futures transactions and the possible lack of a
liquid secondary market for closing out a futures position; and (c) possible
losses resulting from the inability of the Portfolio's investment adviser to
correctly predict the direction of stock prices, interest rates and other
economic factors. In addition, currently only a limited market, if any, exists
for hedging transactions relating to currencies in many emerging markets or to
securities of issuers domiciled or principally engaged in business in emerging
markets. This may limit the Portfolio's ability to effectively hedge its
investments in such emerging market countries. The Hedging Instruments the
Portfolio may use and the risks associated with them are described in greater
detail under "Options and Futures Transactions" in the SAI.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. The
Portfolio may purchase securities on a when-issued or delayed delivery basis
or may purchase or sell securities on a forward commitment basis. When such
transactions are negotiated, the price is fixed at the time of the commitment,
but delivery and payment can take place a month or more after the date of the
commitment. There is no overall limit on the percentage of the Portfolio's
assets which may be committed to the purchase of securities on a when-issued,
delayed delivery or forward commitment basis. An increase in the percentage of
the Portfolio's assets committed to the purchase of securities on a
when-issued, delayed delivery or forward commitment basis may increase the
volatility of the Portfolio's net asset value.
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WHEN, AS AND IF ISSUED SECURITIES. The Portfolio may purchase securities
on a "when, as and if issued" basis under which the issuance of the security
depends upon the occurrence of a subsequent event, such as approval of a
merger, corporate reorganization, leveraged buyout or debt restructuring. If
the anticipated event does not occur and the securities are not issued, the
Portfolio will have lost an investment opportunity. There is no overall limit
on the percentage of the Portfolio's assets which may be committed to the
purchase of securities on a "when, as and if issued" basis. An increase in the
percentage of the Portfolio's assets committed to the purchase of securities
on a "when, as and if issued" basis may increase the volatility of its net
asset value.
RISK CONSIDERATIONS
All investments, domestic and foreign, involve certain risks. Investments
in securities of foreign issuers, particularly in countries with smaller,
emerging capital markets, involve certain risks not associated with domestic
investing, including fluctuations in foreign exchange rates, uncertain
political and economic developments, and the possible imposition of exchange
controls or other foreign governmental laws or restrictions.
POLITICAL AND ECONOMIC RISKS. In any emerging market country, there is the
possibility of expropriation of assets, confiscatory taxation, political or
social instability or diplomatic developments which could affect investments
in those countries. Moreover, individual foreign economies may differ
favorably or unfavorably from the U.S. economy in such respects as economic
growth rate, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments positions. Certain foreign
investments may also be subject to foreign withholding or other governmental
taxes that could reduce the return on these investments.
Certain emerging market countries may restrict investment by foreign
entities. For example, some of these countries may limit the size of foreign
investment in certain issuers, require prior approval of foreign investment by
the government, impose additional tax on foreign investors or limit foreign
investors to specific classes of securities of an issuer that have less
advantageous rights (with regard to convertibility, for example) than classes
available to domiciliaries of the country.
Substantial limitations may also exist in certain countries with respect
to a foreign investor's ability to repatriate investment income, capital or
the proceeds of sales of securities. The Portfolio could be adversely affected
by delays in, or refusals to grant, any required governmental approvals for
repatriation of capital. No more than 15% of the Portfolio's net assets will
comprise, in the aggregate, assets which are (i) subject to material legal
restrictions on repatriation or (ii) illiquid securities.
FINANCIAL INFORMATION AND STANDARDS. Often the regulation of, and
available information about, issuers and their securities is less extensive in
emerging market countries than in the United States. Foreign companies may not
be subject to uniform accounting, auditing and financial reporting standards
or to requirements or practices comparable to those applicable to U.S.
companies.
REGULATION AND LIQUIDITY OF MARKETS. Government supervision and regulation
of exchanges and brokers in emerging market countries is frequently less
extensive than in the United States. These markets may have different
clearance and settlement procedures. In certain cases, settlements have not
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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kept pace with the volume of securities transactions, making it difficult to
conduct such transactions. Delays in settlement could adversely affect or
interrupt the Portfolio's intended investment program or result in investment
losses due to intervening declines in security values.
Securities markets in emerging market countries are substantially smaller
than U.S. securities markets and have substantially less trading volume,
resulting in diminished liquidity and greater price volatility. Reduced
secondary market liquidity may make it more difficult for the Portfolio to
determine the value of its portfolio securities or dispose of particular
instruments when necessary. Brokerage commissions and other transaction costs
on foreign securities exchanges are generally higher as well.
CURRENCY FLUCTUATIONS AND DEVALUATIONS. Because the Portfolio will invest
heavily in non-U.S. currency denominated securities, changes in foreign
currency exchange rates will affect the value of the Portfolio's investments.
A decline in the value of currencies in which the Portfolio's investments are
denominated against the dollar will result in a corresponding decline in the
dollar value of the Portfolio's assets. This risk tends to be heightened in
the case of investing in certain emerging market countries. For example, some
currencies of emerging market countries have experienced steady devaluations
relative to the U.S. dollar, and major adjustments have been made in certain
of such currencies periodically. Some emerging market countries may also have
managed currencies which do not freely float against the dollar.
INFLATION. Several emerging market countries have experienced substantial,
and in some periods extremely high, rates of inflation in recent years.
Inflation and rapid fluctuations in inflation rates may have very negative
effects on the economies and securities markets of certain emerging market
countries. Further, inflation accounting rules in some emerging market
countries require, for companies that keep accounting records in the local
currency, that certain assets and liabilities be restated on the company's
balance sheet in order to express items in terms of currency of constant
purchasing power. Inflation accounting may indirectly generate losses or
profits for certain emerging market companies.
NON-DIVERSIFIED INVESTMENTS. Because suitable investments in emerging
market countries may be limited, the Portfolio, like the Fund, has classified
itself as a "non-diversified investment company" under the Act so that it may
invest more than 5% of its total assets in the securities of any one issuer.
This classification may not be changed without a shareholder vote. However, so
that the Portfolio may qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"),
the Portfolio will limit its investments so that at the close of each quarter
of the taxable year, (i) not more than 25% of the market value of the
Portfolio's total assets will be invested in the securities of a single
issuer, and (ii) with respect to 50% of the market value of its total assets
not more than 5% will be invested in the securities of a single issuer and the
Portfolio will not own more than 10% of the outstanding voting securities of a
single issuer. See "Dividends, Distributions and Taxes."
To the extent the Portfolio makes investments in excess of 5% of its
assets in a particular issuer, its exposure to credit and market risks
associated with that issuer is increased. Also, since a relatively high
percentage of the Portfolio's assets may be invested in the securities of a
limited number of
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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issuers, the Portfolio may be more susceptible to any single economic,
political or regulatory occurrence than a diversified investment company.
GEOGRAPHIC CONCENTRATION. The Portfolio may invest more than 25% of its
total assets in issuers located in any one country. To the extent it invests
in issuers located in one country, the Portfolio is susceptible to factors
adversely affecting that country. In particular, these factors may include the
political and economic developments and foreign exchange rate fluctuations
discussed above. As a result of investing substantially in one country, the
value of the Portfolio's assets may fluctuate more widely than the value of
shares of a comparable fund having a lesser degree of geographic
concentration.
CERTAIN RISKS OF DEBT SECURITIES. The Portfolio may invest without
limitation in emerging market debt securities rated investment grade. The
Portfolio may also invest up to 35% of its total assets in unrated debt
securities or in debt securities rated below investment grade. Debt securities
rated Baa by Moody's Investors Services, Inc. ("Moody's") are considered to
have speculative characteristics. Below investment grade securities, i.e.
those rated in the medium to lower rating categories of nationally recognized
statistical rating organizations such as Standard & Poor's Ratings Services
("S&P") and Moody's and unrated securities of comparable quality ("high
yield/high risk securities"), are predominantly speculative with respect to
the capacity to pay interest and repay principal, and generally involve a
greater volatility of price than securities in higher rating categories. These
securities are commonly referred to as "junk" bonds. The risks associated with
high yield/high risk securities are generally greater than those associated
with higher-rated securities. The Portfolio is not obligated to dispose of
securities due to changes by the rating agencies. A description of S&P's and
Moody's fixed-income securities ratings is contained in the Appendix to the
SAI.
In purchasing high yield/high risk securities, the Portfolio will rely on
the investment adviser's judgment, analysis and experience in evaluating the
creditworthiness of an issuer of such securities. Nonetheless, investors
should carefully review the investment objective and policies of the Portfolio
and consider their ability to assume the investment risks involved before
making an investment. The Portfolio is not authorized to purchase debt
securities that are in default, except for sovereign debt (discussed below) in
which the Portfolio may invest no more than 5% of its total assets while such
sovereign debt securities are in default.
The market values of high yield/high risk securities tend to reflect
individual issuer developments and to exhibit sensitivity to adverse economic
changes to a greater extent than do higher-rated securities, which react
primarily to fluctuations in the general level of interest rates. Issuers of
high yield/high risk securities may be highly leveraged and may not have
available to them more traditional methods of financing. During economic
downturns or substantial periods of rising interest rates, issuers of high
yield/high risk securities, especially those which are highly leveraged, may
be less able to service their principal and interest payment obligations, meet
their projected business goals or obtain additional financing. The risk of
loss due to default by the issuer is significantly greater for holders of high
yield/high risk securities because such securities may be unsecured and may be
subordinated to other creditors of the issuer. In addition, the Portfolio may
incur additional expenses to the extent it
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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is required to seek recovery upon a default by the issuer of such an
obligation or participate in the restructuring of such obligation.
Periods of economic uncertainty and change can be expected to result in
increased volatility of market prices of high yield/high risk securities and,
correspondingly, the Portfolio's net asset value to the extent it invests in
such securities. Further, market prices of such securities structured as zero
coupon or pay-in-kind securities are affected to a greater extent by interest
rate changes and thereby tend to be more volatile than any securities which
pay interest periodically and in cash.
High yield/high risk securities may have call or redemption features which
would permit an issuer to repurchase the securities from the Portfolio. If a
call were exercised by the issuer during a period of declining interest rates,
the Portfolio likely would have to replace such called securities with lower
yielding securities, thus decreasing the net investment income to the
Portfolio and dividends to shareholders.
While a secondary trading market for high yield/high risk securities does
exist, it is generally not as liquid as the secondary market for higher rated
securities. In periods of reduced secondary market liquidity, prices of high
yield/high risk securities may become volatile and experience sudden and
substantial price declines, and the Portfolio may have difficulty in disposing
of particular issues when necessary to meet the Portfolio's liquidity needs or
in response to a specific economic event such as a deterioration in the
creditworthiness of the issuer. Reduced secondary market liquidity for certain
high yield/high risk securities also may make it more difficult for the
Portfolio to obtain accurate market quotations for purposes of valuing the
Portfolio's investment portfolio. Market quotations are generally available on
many high yield/high risk securities only from a limited number of dealers and
may not necessarily represent firm bids of such dealers or prices for actual
sales. Under such conditions, the Portfolio may have to rely more heavily on
the judgment of the Board or SCMI under Board-approved guidelines to value
such securities accurately.
Adverse publicity and investor perceptions, which may not be based on
fundamental analysis, also may decrease the value and liquidity of high
yield/high risk securities, particularly in a thinly traded market. Factors
adversely affecting the market value of high yield/high risk securities are
likely to adversely affect the Portfolio's, and thus the Fund's, net asset
value.
Investment in sovereign debt involves a high degree of risk. Certain
emerging market countries such as Argentina, Brazil and Mexico are among the
largest debtors to commercial banks and foreign governments. At times, certain
emerging market countries have declared moratoria on the payment of principal
and/or interest on outstanding debt. The governmental entity that controls the
repayment of sovereign debt may not be able or willing to repay the principal
and/or interest when due in accordance with the terms of such debt. A
governmental entity's willingness or ability to repay principal and interest
when it is due may be affected by many factors such as its cash flow
situation, the extent of its foreign reserves, the availability of sufficient
foreign exchange, the relative size of the debt service burden to the economy
as a whole, and political restraints. The Portfolio, as a holder of sovereign
debt, may be requested to participate in the rescheduling of such debt and to
extend further loans to governmental entities. There is no bankruptcy
proceeding by which defaulted sovereign debt may be collected in whole or in
part.
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The sovereign debt instruments in which the Portfolio may invest involve
great risk and are deemed to be the equivalent in terms of quality to high
yield/high risk securities discussed above and are subject to many of the same
risks as such securities. Similarly, the Portfolio may have difficulty
disposing of certain sovereign debt obligations because there may be a thin
trading market for such securities. The Portfolio will not invest more than 5%
of its total assets in sovereign debt which is in default.
PORTFOLIO TURNOVER. The Portfolio may engage in short-term trading but its
portfolio turnover rate is not expected to exceed 100%. High portfolio
turnover and short-term trading involve correspondingly greater commission
expenses and transaction costs. Also, higher portfolio turnover rates can make
it more difficult for the Portfolio to qualify as a regulated investment
company for federal income tax purposes and may cause shareholders of the
Portfolio to recognize gains for federal income tax purposes. See "Taxation"
in the SAI.
MANAGEMENT
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, Ralph E. Hansmann (Honorary), 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 assets in the Portfolio. SCMI serves
as Investment Adviser to the Portfolio. SCMI manages the investment and
reinvestment of the assets in the Portfolio and continuously reviews,
supervises and administers the Portfolio's investments. In this regard, it is
the responsibility of SCMI to make decisions relating to the Portfolio's
investments and to place purchase and sale orders regarding investments with
brokers or dealers selected by it in its discretion. For its services with
respect to the Portfolio, SCMI receives a monthly advisory fee equal on an
annual basis to 1.00% of the Portfolio's average daily net assets, which the
Fund indirectly bears through investment in the Portfolio.
SCMI is a wholly-owned U.S. subsidiary of Schroders Incorporated, the
wholly-owned U.S. 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, as of December
31, 1995, assets under management in excess of $100 billion.
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The investment management team of John A. Troiano, a Vice President of the
Trust and Schroder Core, and Laura Luckyn-Malone, a Trustee and President of
the Trust and Schroder Core, with the assistance of an SCMI investment
committee, is primarily responsible for the day-to-day management of the
Portfolio's investment portfolio. Mr. Troiano and Ms. Malone managed the
Fund's investment portfolio from its inception until it invested its assets in
the Portfolio and have managed the Portfolio's assets since its inception. Mr.
Troiano has been a Managing Director of SCMI since October 1995 and has been
employed by various Schroder Group companies in the investment research and
portfolio management areas since 1988. Ms. Luckyn-Malone has been a Managing
Director of SCMI since October 1995 and has been employed by SCMI in the
portfolio management area since February 1990.
The Fund began pursuing its investment objective through investment in the
Portfolio on November 1, 1995. The Fund may withdraw its investment from the
Portfolio at any time if the Board determines that it is in the best interests
of the Fund and its shareholders to do so. See "Other Information -- Fund
Structure." Accordingly, the Fund has retained SCMI as its investment adviser
to manage the Fund's assets in the event the Fund withdraws its investment.
SCMI does not receive an investment advisory fee with respect to the Fund so
long as the Fund remains completely invested in the Portfolio or any other
investment company. If the Fund resumes directly investing in portfolio
securities, the Fund will pay SCMI a monthly advisory fee equal on an annual
basis to 1.00% of the Fund's average daily net assets. The investment advisory
contract between SCMI and the Trust with respect to the Fund is the same in
all material respects as the Portfolio's investment advisory contract except
as to the parties, the circumstances under which fees will be paid and the
jurisdiction whose laws govern the agreement. For the fiscal year ended
October 31, 1995, the Fund paid SCMI an advisory fee equal to 0.18% of its
average daily net assets.
On behalf of the Fund, the Trust has entered into an administrative
services contract with Schroder Advisors, 787 Seventh Avenue, New York, New
York 10019. Schroder Advisors is a wholly-owned subsidiary of SCMI. The Trust
and Schroder Advisors have entered into a sub-administration agreement with
Forum. Pursuant to these agreements, Schroder Advisors and Forum provide
certain management and administrative services necessary for the Fund's
operations, other than the investment management and administrative services
provided to the Fund by SCMI. For these services, the Fund pays Schroder
Advisors a monthly fee at the annual rate of 0.10% of the Fund's average daily
net assets. Payment for Forum's services is made by Schroder Advisors and is
not a separate expense of the Fund. Schroder Advisors and Forum provide
similar services to the Portfolio, for which the Portfolio pays Schroder
Advisors a monthly fee at the annual rate of 0.15% of the Portfolio's average
daily net assets, a portion of which Schroder Advisors pays Forum for its
services with respect to the Portfolio.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICE 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
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expenses incurred in connection with the distribution of Investor 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 Investor Shares. The Fund
will make no payment under the Distribution Plan with respect to Investor
Shares until the Board further so authorizes.
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 Investor Shares, (4) payments to broker-dealers who advise
shareholders regarding the purchase, sale, or retention of Investor 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 Investor 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 salesmen who are responsible for marketing various
mutual funds of the Trust may be allocated to those funds, including the
Investor 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.
The Trust will make no payments under the Shareholder Service Plan with
respect to Investor Shares until the Board further so authorizes.
Payments to Service Organizations under the Shareholder Service Plan are
calculated by reference to the average daily net assets of Investor 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
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schedule of any such fees. Shareholders using Service Organizations are urged
to consult them regarding any such fees or conditions.
EXPENSES
SCMI and Schroder Advisors have voluntarily undertaken to assume certain
expenses of the Fund and the Portfolio (or waive their respective fees). This
undertaking is designed to place a maximum limit on Fund expenses (excluding
taxes, interest, brokerage commissions and other portfolio transaction
expenses and extraordinary expenses) of 1.60% of the average daily net assets
of the Fund attributable to Investor Shares. This expense limitation cannot be
modified or withdrawn except by a majority vote of the Trustees of the Trust
who are not affiliated with SCMI or Schroder Advisors. If expense
reimbursements are required, they will be made on a monthly basis. SCMI will
reimburse the Fund or the Portfolio for four-fifths of the amount required and
Schroder Advisors will reimburse the Fund or the Portfolio for the remaining
one-fifth; provided, however, that neither SCMI nor Schroder Advisors will be
required to make any reimbursements or waive any fees in excess of the fees
payable to them by the Fund and the Portfolio 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. Commission rates
for brokerage transactions are fixed on many foreign securities exchanges, and
this may cause higher brokerage expenses to accrue to the Portfolio than would
be the case for comparable transactions effected on U.S. securities exchanges.
However, the Portfolio will seek to achieve the best net results in effecting
such transactions.
Subject to the Portfolio's policy of obtaining the best price consistent
with quality of execution on transactions, SCMI may employ Schroder Securities
Limited and its affiliates (collectively, "Schroder Securities"), affiliates
of SCMI, to effect transactions of the Portfolio on certain foreign securities
exchanges. Because of the affiliation between SCMI and Schroder Securities,
the Portfolio's payment of commissions to Schroder Securities is subject to
procedures adopted by 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
Securities and in no event will Schroder Securities receive any brokerage in
recognition of research services.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and subject to seeking the most favorable price and
execution available and such other policies as the Schroder Core Board may
determine, SCMI may 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.
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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Although the Portfolio does not currently engage in directed brokerage
arrangements to pay expenses, it may do so in the future. These arrangements,
whereby brokers executing the Portfolio's portfolio transactions would agree
to pay designated expenses of the Portfolio if brokerage commissions generated
by the Portfolio reached certain levels, might reduce 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 and accordingly are
not reflected in the Fund's expense table and financial highlights.
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 Inquires."
Investments may also be made through Service Organizations that assist their
customers in purchasing shares of the Fund. Such Service Organizations may
charge their customers a service fee for processing orders to purchase or sell
shares of the Fund. Investors wishing to purchase shares through their
accounts at a Service Organization should contact that organization directly
for appropriate instructions.
Shares of the Fund are offered at the net asset value next determined
after receipt of a Purchase Order (at the address set forth below). The
minimum initial investment is $250,000. All purchase payments are invested in
full and fractional shares. The Fund is authorized to reject any purchase
order.
Purchases of Fund shares are subject to a purchase charge of 0.50% of the
amount invested. This charge is designed to cover the transaction costs the
Fund incurs (either directly or indirectly as a result of its investment in
the Portfolio) as a result of investments in the Fund, including brokerage
commissions incurred by the Portfolio in acquiring portfolio securities,
currency transaction costs and transfer agent costs, and to protect the
interests of shareholders. This charge, which is not a sales charge, is paid
to the Fund, not to Schroder Advisors or any other entity. The purchase charge
is not assessed on the reinvestment of dividends or distributions or shares
purchased through a subscription in kind.
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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Initial and subsequent purchases may be made by mailing a check (in U.S.
dollars), payable to Schroder Emerging Markets Fund Institutional Portfolio,
to:
Schroder Emerging Markets Fund Institutional Portfolio
P.O. Box 446
Portland, Maine 04112
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:
Chase Manhattan Bank
New York, NY
ABA No.: 021000021
For Credit To: Forum Financial Corp.
Acct. No.: 910-2-718187
Ref.: Schroder Emerging Markets Fund Institutional
Portfolio -- Investor Shares
Account of: (shareholder name)
Account Number: (shareholder account number)
The wire order must specify the name of the Fund and class of shares, the
account name and number, address, confirmation number, amount to be wired,
name of the wiring bank and name and telephone number of the person to be
contacted in connection with the order. If the initial investment is by wire,
an account number will be assigned and an Account Application must be
completed and mailed to the Fund. Wire orders received prior to 4:00 p.m. (New
York City Time) on a Fund Business Day will be processed at the net asset
value determined as of that day. Wire orders received after 4:00 p.m. 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 Fund's Transfer Agent, as the
shareholder's agent, establishes an open account to which all shares purchased
are credited, together with any dividends and capital gain distributions that
are invested in additional shares. Although most shareholders elect not to
receive share certificates, certificates for full shares can be obtained by
specific written request to the Fund's Transfer Agent. No certificates are
issued for fractional shares. 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 gains will be
reinvested. In addition, the amount of any outstanding checks for dividends
and capital gains that have been returned to the Transfer Agent will be
reinvested and such checks will be canceled.
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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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.
REDEMPTION OF SHARES
Shares of the Fund are redeemed at their next determined net asset value
following receipt by the Fund (at the address set forth above under "Purchase
of Shares") of a redemption request in proper form. See "Net Asset Value."
Redemption requests may be made between 9:00 a.m. and 6:00 p.m. (New York City
Time) on each day that the New York Stock Exchange is open for trading.
Redemption requests that are received prior to 4:00 p.m. (New York City Time)
will be processed at the net asset value determined as of that day. Redemption
requests that are received after 4:00 p.m. will be processed at the net asset
value determined the next day that the New York Stock Exchange is open for
trading.
Redemptions of Fund shares are subject to a redemption charge of 0.50% of
the net asset value of the shares redeemed. This charge is designed to cover
the transaction costs the Fund incurs in redeeming Fund shares (either
directly or indirectly as a result of its investment in the Portfolio),
including brokerage commissions incurred by the Portfolio in selling portfolio
securities, currency transaction costs and transfer agent costs, and to
protect the interests of shareholders. This charge, which is not a sales
charge, is paid to the Fund, not to Schroder Advisors or any other entity. The
redemption charge is not assessed on shares acquired though the reinvestment
of dividends or distributions or on redemptions in kind. For purposes of
computing the redemption charge, redemptions by a shareholder are deemed to be
made on the following order: (i) from Shares purchased through the
reinvestment of dividends and distributions (with respect to which no
redemption charge is applied) and (ii) from Shares for which the redemption
charge is applicable, on a first purchased, first redeemed basis.
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's 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 those
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.
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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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 Fund's Transfer Agent. Such
institutions include certain banks, brokers, dealers (including municipal and
government securities brokers and dealers), credit unions and savings
associations. Notaries public are not acceptable. Further documentation 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 owner's 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 15 calendar days. Unless other instructions are
given in proper form, a check for the proceeds of a redemption will be sent to
the shareholder's address of record.
The Fund may suspend the right of redemption during any period when (i)
trading on the New York Stock Exchange is restricted or that exchange is
closed, (ii) the SEC has by order permitted such suspension, or (iii) an
emergency, as defined by rules of the SEC, exists making disposal of portfolio
investments or determination of the Fund's 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 Portfolio 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 if at any time the account
does not have a value of at least $100,000, unless the value of the account
fell below that amount solely as a result of market activity.
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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Shareholders will be notified that the value of the account is less than
$100,000 and be allowed at least 30 days to make an additional investment to
increase the account balance to at least $100,000.
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. (New York City Time), Monday
through Friday, each day that the New York Stock Exchange is open for trading,
(a "Fund Business Day"), which excludes the following holidays: New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Net asset value per share is calculated by
dividing the aggregate value of the Fund's assets (which is principally the
value of the Fund's investment in the Portfolio) less all Fund liabilities 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.
Trading by the Portfolio in securities on European and Far Eastern
exchanges and over-the-counter markets may not take place on every day that
the New York Stock Exchange is open for trading. Furthermore, trading takes
place in various foreign markets on days on which the Fund's net asset value
is not calculated. As a result, the Fund's net asset value may be
significantly affected by such trading on days when an investor has no access
to the Fund. If events materially affecting the value of foreign securities
occur between the time when their price is determined and the time when net
asset value is calculated, such securities will be valued at fair value as
determined in good faith by using methods approved by Schroder Core Board.
All assets and liabilities of the Portfolio denominated in foreign
currencies are valued in U.S. dollars based on the exchange rate last quoted
by a major bank prior to the time when the net asset value of the Fund is
calculated.
DIVIDENDS, DISTRIBUTIONS AND TAXES
THE FUND
The Fund intends to distribute substantially all of its net investment
income and its net realized capital gain at least annually and, therefore,
intends to continue not to be subject to Federal income tax.
The Fund intends to elect, pursuant to Section 853 of the Code if the Fund
is eligible to do so, to permit shareholders to take a credit (or a deduction)
for foreign income taxes paid by the Fund.
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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An investor should include as gross income in its Federal income tax returns
both cash dividends received from the Fund and also the amount that the Fund
advises is its pro rata portion of foreign income taxes paid with respect to,
or withheld from, dividends and interest paid to the Fund from the Fund's
foreign investments. An investor would then be entitled, subject to certain
limitations, to take a foreign tax credit against its Federal income tax
liability for the amount of such foreign taxes or else to deduct such foreign
taxes as an itemized deduction from gross income.
The Fund intends to declare and pay as a dividend substantially all of its
net investment income annually and to distribute any net realized capital gain
at least annually. Dividend and capital gain distributions will be reinvested
automatically in additional shares of the Fund at net asset value unless the
shareholder elects in writing to receive distributions in cash.
Dividend and capital gain distributions are made on a per share basis.
After every distribution, the value of a share declines by the amount of the
distribution. Purchases made shortly before a distribution include in the
purchase price the amount of the distribution which will be returned to the
investor in the form of a taxable dividend or capital gain distribution.
For Federal income tax purposes, distribution of the Fund's net taxable
income will be taxable to shareholders as ordinary income whether they are
invested in additional shares or received in cash. Distributions of any net
capital gains designated by the Fund as capital gain dividends will be taxable
as long-term capital gain, regardless of how long a shareholder has held the
shares and whether they are invested in additional shares or received in cash.
Each year the Trust will notify shareholders of the tax status of dividends
and distributions.
The Fund generally will be required to withhold at a rate of 31% ("backup
withholding") of all dividends, capital gain distributions and redemption
proceeds paid to shareholders if (i) the payee fails to furnish and to certify
the payee's correct taxpayer identification number or social security number,
(ii) the IRS notifies the Fund that the payee has failed to report properly
certain interest and dividend income to the IRS and to respond to notices to
that effect or (iii) when required to do so, the payee fails to certify that
he is not subject to backup withholding.
Depending on the residence of the shareholder for tax purposes,
distributions may also be subject to state and local taxes, including
withholding taxes. Shareholders should consult their own tax advisors as to
the tax consequences of ownership of shares of the Fund in their particular
circumstances.
THE PORTFOLIO
The Portfolio is not required to pay Federal income taxes on its net
investment income and capital gain, as it is treated as a partnership for
Federal income tax purposes. All interest, dividends and gains and losses of
the Portfolio are deemed to have been "passed through" to the Fund in
proportion to its holdings of the Portfolio, regardless of whether such
interest, dividends or gains have been distributed by the Portfolio or losses
have been realized by the Portfolio. Investment income received by the Fund
from sources within foreign countries may be subject to foreign income or
other taxes, with respect to which shareholders may be entitled to claim a
credit or deduction. See "The Fund" immediately above.
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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OTHER INFORMATION
CAPITALIZATION AND VOTING
The Trust was originally organized as a Maryland corporation on July 30,
1969 and on January 9, 1996 was reorganized as a Delaware business trust. The
Trust was formerly known as "Schroder Capital Funds, Inc." The Trust has
authority to issue an unlimited number of shares of beneficial interest. The
Board may, without shareholder approval, divide the authorized shares into an
unlimited number of separate portfolios or series (such as the Fund) and may
divide portfolios or series into classes of shares (such as the 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, and 9 classes of shares. The Fund
currently consists of two classes of shares.
Shares are fully paid and non-assessable, and have no pre-emptive rights.
They have non-cumulative voting rights, which means that the holders of more
than 50% of the shares voting for the election of Trustees can elect 100% of
the Trustees if they choose to do so. A shareholder is entitled to one vote
for each full share held (and a fractional vote for each fractional share
held) standing in his name on the books of the Trust. On matters requiring
shareholder approval, shareholders of the Trust are entitled to vote only with
respect to matters that affect the interest of the Fund or class of shares
they hold, except as otherwise required by applicable law.
There will normally be no meetings of shareholders to elect Trustees
unless and until such time as less than a majority of the Trustees holding
office have been elected by shareholders. However, the holders of not less
than a majority of the outstanding shares of the Trust may remove any person
serving as a Trustee and the Board will call a special meeting of shareholders
to consider removal of one or more Trustees if requested in writing to do so
by the holders of not less than 10% of the outstanding shares of the Trust.
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 April 30, 1996, the Robert Wood Johnson Foundation may be deemed to
control the Fund for purposes of the Act. From time to time, certain
shareholders may own a large percentage of the shares of a Fund. Accordingly,
those shareholders may be able to greatly affect (if not determine) the
outcome of a shareholder vote.
REPORTS
The Trust sends to each shareholder of the Fund a semi-annual report and
an audited annual report.
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
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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compounded rate of return of a hypothetical investment in a class of shares
over a period of 1, 5 and 10 years. Total return quotations assume that all
dividends and distributions are reinvested when paid, and do not reflect the
deduction of purchase charges or redemption charges.
Performance information for the Fund may be compared to various unmanaged
securities indices, groups of mutual funds tracked by mutual fund ratings
services, or other general economic indicators. Unmanaged indices may assume
the reinvestment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.
Performance information for the Fund represents only past performance and
does not necessarily indicate future results. Performance information should
be considered in light of the Fund's investment objective and policies,
characteristics and quality of the Fund's investments, and the market
conditions during the given time period, and should not be considered as a
representation of what may be achieved in the future. For a description of the
methods used to determine total return for the Fund, see the SAI.
CUSTODIAN AND TRANSFER AGENT
The Chase Manhattan Bank, N.A. is Custodian of the Fund's and of the
Portfolio's assets. Forum Financial Corp. serves as the Fund's Transfer and
Dividend Disbursing Agent.
SHAREHOLDER INQUIRIES
Inquiries about the Fund, including the Fund's past performance, should be
directed to:
Schroder Emerging Markets Fund Institutional Portfolio
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.
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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FUND STRUCTURE
OTHER 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. Except for certain
differences, each share of each class represents an undivided, proportionate
interest in the Fund. Each share of the Fund is entitled to participate
equally in dividends and other distributions and the proceeds of any
liquidation of the Fund except that, due to the differing expenses borne by
the two classes, the amount of dividends and other distribution will differ
between the classes. Information about Advisor Shares is available from the
Fund by calling Forum Financial Corp. at (207) 879-8903.
THE PORTFOLIO. The Fund seeks to achieve its investment objective by
investing all of its investable assets in the Portfolio, which has
substantially the same investment objective and policies as the Fund.
Accordingly, the Portfolio directly acquires its own securities and the Fund
acquires an indirect interest in those securities. The Portfolio is a separate
series of 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 four separate
portfolios. The assets of the Portfolio, a diversified portfolio, belong only
to, and the liabilities of the Portfolio are borne solely by, the Portfolio
and no other portfolio of Schroder Core.
The investment objective and fundamental investment policies of the Fund
and the Portfolio can be changed only with shareholder approval. 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 that has invested all of its assets in
the Portfolio. The Portfolio may permit other investment companies or
institutional investors to invest in it. All investors in the Portfolio will
invest on the same terms and conditions as the Fund and will pay a
proportionate share of the Portfolio's expenses.
The Portfolio normally will not hold meetings of investors except as
required by the Act. Each investor in the Portfolio will be entitled to vote
in proportion to its relative beneficial interest in the Portfolio. On most
issues subject to a vote of investors, as required by the Act and other
applicable law, the Fund will solicit proxies from shareholders of the Fund
and will vote its interest in the Portfolio in proportion to the votes cast by
its shareholders. If there are other investors in the Portfolio, there can be
no assurance that any issue that receives a majority of the votes cast by Fund
shareholders will receive a majority of votes cast by all investors in the
Portfolio; indeed, if other investors hold a majority interest in the
Portfolio, they could 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 fees and expenses than the Fund. Therefore, Fund shareholders
may have different returns than shareholders in another investment company
that invests exclusively in the Portfolio. There is currently no such other
investment company that offers its shares to members of the general
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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public. Information regarding any such funds in the future will be 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 the registration statements of any other 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, indemnifies 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 indemnifies 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 indemnifies 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, Schroder Core's liability is similarly limited to
information about and supplied by Schroder Core.
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
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30
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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investment adviser, 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. 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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31
<PAGE>
INVESTMENT ADVISER
Schroder Capital Management International Inc.
787 Seventh Avenue
New York, New York 10019
ADMINISTRATOR & DISTRIBUTOR
Schroder Fund Advisors Inc.
787 Seventh Avenue
New York, New York 10019
SUB-ADMINISTRATOR
Forum Financial Services, Inc.
Two Portland Square
Portland, Maine 04101
CUSTODIAN
The Chase Manhattan Bank, N.A.
Global Custody Division
Woolgate House, Coleman Street
London EC2P 2HD, United Kingdom
TRANSFER AND DIVIDEND DISBURSING AGENT
Forum Financial Corp.
P.O. Box 446
Portland, Maine 04112
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Table of Contents
PROSPECTUS SUMMARY........................................ 2
The Fund.................................................. 2
Investment Adviser........................................ 2
Administrator and Distributor............................. 2
Purchases and Redemptions of Shares....................... 2
Dividends and Distributions............................... 2
Risk Considerations....................................... 3
Fee Table................................................. 3
Example................................................... 4
FINANCIAL HIGHLIGHTS...................................... 4
INVESTMENT OBJECTIVE AND POLICIES......................... 5
Investment Objective and the Portfolio.................... 5
Investment Policies....................................... 6
ADDITIONAL INVESTMENT POLICIES AND RISK CONSIDERATIONS.... 7
Investment Restrictions................................... 7
Fundamental Policies...................................... 7
Investment Types.......................................... 8
Risk Considerations....................................... 13
MANAGEMENT................................................ 17
Investment Adviser and Portfolio Manager.................. 17
Distribution Plan and Shareholder Service Plan............ 18
Expenses.................................................. 20
Portfolio Transactions.................................... 20
Code of Ethics............................................ 21
INVESTMENT IN THE FUND.................................... 21
Purchase of Shares........................................ 21
Retirement Plans.......................................... 23
Redemption of Shares...................................... 23
Net Asset Value........................................... 25
DIVIDENDS, DISTRIBUTIONS AND TAXES........................ 25
The Fund.................................................. 25
The Portfolio............................................. 26
OTHER INFORMATION......................................... 27
Capitalization and Voting................................. 27
Reports................................................... 27
Performance Information................................... 27
Custodian and Transfer Agent.............................. 28
Shareholder Inquiries..................................... 28
Certain Servicing Organizations........................... 28
Fund Structure............................................ 29
[Logo]
- --------------------------------------------
[Logo]
Schroder
Emerging
Markets Fund
Institutional
Portfolio
PROSPECTUS
May 17, 1996
Schroder Capital Funds (Delaware)
<PAGE>
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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Two Portland Square Portland, Maine 04101
General Information: (207) 879-8903
Account Information: (800) 344-8332
Fund Literature: (800) 290-9826
Fax: (207) 879-6206
SCHRODER CAPITAL MANAGEMENT INTERNATIONAL INC. -- INVESTMENT ADVISER
SCHRODER FUND ADVISORS INC. -- ADMINISTRATOR AND DISTRIBUTOR
This Prospectus offers Advisor Shares of Schroder Emerging Markets Fund
Institutional Portfolio (the "Fund"), a separately-managed, non-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 to achieve long-term capital appreciation
through direct or indirect investment in equity and debt securities of issuers
domiciled or doing business in emerging market countries in regions such as
Southeast Asia, Latin America, and Eastern and Southern Europe. Investing in
securities of emerging market issuers involves special risks in addition to
those associated with investments in securities of U.S. issuers.
THE FUND CURRENTLY SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY HOLDING, AS
ITS ONLY INVESTMENT SECURITIES, THE SECURITIES OF SCHRODER EMERGING MARKETS
FUND INSTITUTIONAL PORTFOLIO (THE "PORTFOLIO"), A SEPARATE PORTFOLIO OF
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."
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund. A Statement of Additional
Information (the "SAI") dated May 17, 1996 and as supplemented from time to
time containing additional information about the Fund has been filed with the
Securities and Exchange Commission ("SEC") and is hereby incorporated by
reference into this Prospectus. It is available without charge and may be
obtained by writing or calling the Fund at the address and telephone numbers
printed above.
This prospectus should be read and retained for information about the Fund.
THE SHARES OFFERED HEREBY ARE NOT OBLIGATIONS, DEPOSITS, OR ACCOUNTS OF, OR
ENDORSED OR GUARANTEED BY, ANY BANK OR ANY AFFILIATE OF A BANK AND ARE NOT
INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE SYSTEM, OR ANY FEDERAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
This Prospectus is dated May 17, 1996
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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PROSPECTUS SUMMARY
THE FUND
The Fund is a separately managed, non-diversified portfolio of the Trust,
a Delaware business trust registered as an open-end management investment
company under the Investment Company Act of 1940 (the "Act"). The Fund's
investment objective is to achieve long-term capital appreciation through
direct or indirect investment in equity and debt securities of issuers
domiciled or doing business in emerging market countries in regions such as
Southeast Asia, Latin America, and Eastern and Southern Europe. Currently, the
Fund seeks to achieve its investment objective by investing exclusively in the
Portfolio, a series of Schroder Core, itself a registered open-end management
investment company. The Portfolio has substantially the same investment
objective and policies as the Fund. Accordingly, the investment experience of
the Fund will correspond directly with the investment experience of the
Portfolio. The Fund currently offers two separate classes of shares: Advisor
Shares ("Advisor Shares") and Investor Shares ("Investor Shares"). Only
Advisor Shares are offered through this Prospectus and are sometimes referred
to herein as the "Shares."
INVESTMENT ADVISER
The Portfolio's Investment Adviser is Schroder Capital Management
International Inc. ("SCMI"), 787 Seventh Avenue, New York, New York 10019. The
investment advisory fee paid to SCMI by the Portfolio is borne indirectly by
the Fund. See "Management -- 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
Sub-Administrator.
PURCHASES AND REDEMPTIONS OF SHARES
Shares may be purchased or redeemed by mail, by bank-wire and through an
investor's broker-dealer or other financial institution. The minimum initial
investment is $250,000. See "Investment in the Fund -- Purchase of Shares" and
" -- Redemption of Shares." Purchases of Fund shares are subject to a purchase
charge of 0.50% of the amount invested. Redemptions of Fund shares are subject
to a redemption charge of 0.50% of the net asset value of the shares redeemed.
See "Investment In The Fund -- Purchase of Shares" and " -- Redemption of
Shares."
DIVIDENDS AND DISTRIBUTIONS
The Fund declares and pays as a dividend substantially all of its net
investment income annually and distributes any net realized long-term capital
gain at least annually. Dividend and capital gain distributions are reinvested
automatically in additional shares of the Fund at net asset value unless the
shareholder has notified the Fund in an Account Application or otherwise in
writing of the shareholder's election to receive dividends or distributions in
cash. See "Dividends, Distributions and Taxes."
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2
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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RISK CONSIDERATIONS
Investments in securities of foreign issuers, particularly in countries
with smaller, emerging capital markets, involve certain risks not associated
with domestic investing, including fluctuations in foreign exchange rates,
uncertain political and economic developments, and the possible imposition of
exchange controls or other foreign governmental laws or restrictions. The Fund
is not intended for investors whose objective is assured income or
preservation of capital. The Fund should be considered a means of diversifying
an investment portfolio and not in itself a balanced investment program. See
"Additional Investment Policies and Risk Considerations."
FEE TABLE
The table below is intended to assist investors in understanding the
expenses that an investor in Advisor Shares would incur.
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchase................................ None
Maximum Sales Load Imposed on Reinvested Dividends................... None
Deferred Sales Load.................................................. None
Purchase Charge (based on amount invested)(1)........................ 0.50%
Redemption Charge (based on net asset value of shares redeemed)(1)... 0.50%
Annual Fund Operating Expenses (as a percentage of average net assets)(2)
Management Fees (after fee waivers)(3)............................... 0.36%
12b-1 Fees........................................................... 0.25%
Other Expenses....................................................... 1.49%
Total Fund Operating Expenses(3)(4).................................. 2.10%
(1) The Purchase Charge and the Redemption Charge are paid to the Fund and are
imposed on all purchases and redemptions of Shares, respectively, other
than with respect to Shares purchased through the reinvestment of
dividends or distributions. See "Investment in the Fund -- Purchase of
Shares" and " -- Redemption of Shares."
(2) The amounts of expenses reflect the operating expenses of the Fund prior
to its investment in the Portfolio and are based on annualized expenses
incurred for the Fund's most recent fiscal year ended October 31, 1995,
after restatement to reflect current fees borne by holders of Advisor
Shares. The Fund's expenses have, since November 1, 1995, and will
continue to include the Fund's pro rata portion of all operating expenses
of the Portfolio, which will be borne indirectly by Fund shareholders. The
Trust's Board of Trustees believes that the aggregate per share expenses
of the Fund and the Portfolio will be approximately equal to the expenses
the Fund would incur if its assets were invested directly in portfolio
securities. Investment advisory fees are those incurred by the Portfolio;
as long as the Fund's assets are invested in the Portfolio, the Fund pays
no investment advisory fees directly.
(FOOTNOTES CONTINUED ON NEXT PAGE)
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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(FOOTNOTES CONTINUED FROM PREVIOUS PAGE)
(3) Management Fees for the Fund reflect the annual fee rate that the Fund
pays for investment advisory (1.00%) and administrative (0.25%) services.
Absent fee waivers and expense reimbursements, Management Fees and Total
Operating Expenses would be 1.25% and 2.99%, respectively.
(4) 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.
SCMI and Schroder Advisors have voluntarily undertaken to waive a portion
of their fees and assume certain expenses of the Fund during the current
fiscal year to the extent that total expenses exceed 2.10% of the Fund's
average daily net assets attributable to Advisor Shares. This undertaking
cannot be withdrawn except by a majority vote of the Trust's Board of
Trustees. See "Management -- Expenses."
EXAMPLE
Based on the expenses listed above, you would pay the following expenses
on a $1,000 investment, assuming (1) a 5% annual return, (2) no redemption and
full redemption at the end of each time period, and (3) reinvestment of all
dividends and other distributions:
No Redemption Full Redemption
------------- ----------------
1 year............... $ 26 1 year............... $ 31
3 years.............. $ 71 3 years.............. $ 76
5 years.............. $ 118 5 years.............. $ 123
10 years............. $ 248 10 years............. $ 253
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 its first
fiscal year. Information presented relates to Investor Shares of the Fund for
a share outstanding for its first fiscal year. The holders of Investor Shares
bear expenses that are lower than those borne by the holders of Advisor
Shares. Prior to the date of this Prospectus, Advisor Shares had not been
offered by the Fund. Accordingly, information has not been presented for
Advisor Shares. 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. The Fund's financial statements for the year ended October 31, 1995
and independent accountants' report thereon are contained in the Fund's Annual
Report to Shareholders and are incorporated by reference into the SAI. Further
information about the performance of the Fund is contained in the Annual
Report, which may be obtained without charge by writing or calling the Fund at
the address or the telephone number for Fund Literature on the cover of this
Prospectus.
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4
<PAGE>
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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March 31, 1995*
through
October 31, 1995
----------------
Net Asset Value, Beginning of Year........................... $10.00
------
Investment Operations
Net Investment Income.................................... 0.02
Net Realized and Unrealized
Gain on Investments.................................... 0.61
----
Total from Investment Operations............................. 0.63
Net Asset Value, End of Period............................... $10.63
------
------
Total Return................................................. 6.30%(a)
-------
-------
Ratio/Supplementary Data:
Net Assets, End of Year (Thousands)...................... 18,423
Ratio of Expenses to Average Net Assets.................. 1.58%(b)(c)
Ratio of Net Investment
Income to Average Net Assets........................... 0.46%(b)
Portfolio Turnover Rate.................................. 44.10%
* Commencement of operations
(a) Does not reflect purchase charge of 0.50%
(b) Annualized
(c) During the period, various fees and expenses were waived and reimbursed,
respectively. Had such waiver and reimbursement not occurred, the
annualized ratio of expenses to average net assets would have been 2.45%
INVESTMENT OBJECTIVE AND POLICIES
The Fund is designed for investors who seek the aggressive growth
potential of emerging world markets and are willing to bear the special risks
of investing a portion of their assets in those markets. The Fund should be
considered a means of diversifying an investment portfolio and is not a
complete investment program. Investments in the securities of foreign issuers
generally involve risks in addition to risks associated with investments in
the securities of U.S. issuers. See "Additional Investment Policies and Risk
Considerations." 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 to achieve long-term capital
appreciation through direct or indirect investment in equity and debt
securities of issuers domiciled or doing business in emerging market countries
in regions such as Southeast Asia, Latin America, and Eastern and Southern
Europe. Current income will be incidental to the Fund's objective. There is no
assurance that the Fund will achieve its investment objective.
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5
<PAGE>
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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The Fund currently seeks to achieve its investment objective by investing
all of its investment assets in the Portfolio, which has substantially the
same investment objective and policies 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 additional fundamental policies, is
contained in the SAI.
INVESTMENT POLICIES
Under normal conditions, the Portfolio invests at least 65% of its total
assets in emerging market equity and debt securities, including common stocks,
preferred stocks, convertible preferred stocks, stock rights and warrants,
convertible debt securities and non-convertible debt securities. Investments
in stock rights and warrants will not be considered for purposes of
determining compliance with this policy. The Portfolio may invest up to 35% of
its total assets in high risk debt securities that are unrated or rated below
investment grade. See "Additional Investment Policies and Risk
Considerations." Under certain circumstances, the Portfolio may invest
indirectly in emerging market securities by investing in other investment
companies or vehicles. See "Additional Investment Policies and Risk
Considerations -- Other Investment Vehicles" below.
In recent years, many emerging market countries have begun programs of
economic reform: removing import tariffs, dismantling trade barriers,
deregulating foreign investment, privatizing state owned industries,
permitting the value of their currencies to float against the dollar and other
major currencies, and generally reducing the level of state intervention in
industry and commerce. Important intra-regional economic integration also
holds the promise of greater trade and growth. At the same time, significant
progress has been made in restructuring the heavy external debt burden that
certain emerging market countries accumulated during the 1970s and 1980s.
While there is no assurance that these trends will continue, the Portfolio's
investment adviser will seek out attractive investment opportunities in these
countries.
"Emerging market" countries generally include all countries in the world
other than those included in the Morgan Stanley Capital International World
Index ("MSCI World") of major world economies. Where the investment adviser
determines that the economy of a particular country included in the MSCI World
more appropriately reflects an emerging market economy, however, the adviser
may include such country in the emerging market category. The following
countries currently are excluded from the Portfolio's emerging market
category: Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Ireland, Italy, Japan, Malaysia, Netherlands, New Zealand, Norway,
Singapore, Spain, Sweden, Switzerland, United Kingdom, and the United States
of America. The Portfolio will not necessarily seek to diversify investments
on a geographic basis within the emerging market category and, in this regard,
the Portfolio may invest more than 25% of its total assets in issuers located
in any one country. To the extent it invests in issuers located in one country
or area, the Portfolio is susceptible to factors adversely affecting that
country or area. See "Additional Investment Policies and Risk
Considerations -- Risk Considerations -- Geographic Concentration" below.
An issuer of a security will be considered to be domiciled or doing
business in an emerging market when (1) the issuer is organized under the laws
of an emerging market country; (2) the issuer's primary securities trading
market is in an emerging market country; or (3) in the judgment of the
investment adviser,
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6
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
- ------------------------------------------------------------------------------
at least 50% of the issuer's revenues or profits are derived from goods
produced or sold, investments made, or services performed in emerging market
countries or which have at least 50% of their assets situated in such
countries. The Portfolio may acquire emerging market securities that are
denominated in currencies other than a currency of an emerging market country.
The Portfolio may consider investment companies to be located in the country
or countries in which they primarily invest.
In anticipation of the currency requirements of the Portfolio and to
attempt to protect against possible adverse movements in foreign exchange
rates, the Portfolio may enter into forward contracts to purchase or sell
foreign currencies. Although such contracts may reduce the risk of loss to the
Portfolio due to a decline in the value of the currency which is sold, they
also limit the gain that might result should the value of such currency rise.
ADDITIONAL INVESTMENT POLICIES AND RISK CONSIDERATIONS
INVESTMENT RESTRICTIONS
The investment objective and all investment policies of each of the Fund
and the Portfolio that are designated as fundamental may not be changed
without approval of the holders of a majority of the outstanding voting
securities of the Fund or the Portfolio, as applicable. A majority of
outstanding voting securities means the lesser of (i) 67% of the shares
present or represented at a shareholder meeting at which the holders of more
than 50% of the outstanding shares are present or represented, or (ii) more
than 50% of outstanding shares. Unless otherwise indicated, all investment
policies are not fundamental and may be changed by the Board without approval
by shareholders of the Fund. Likewise, nonfundamental investment policies of
the Portfolio may be changed by the Schroder Core Board without shareholder
approval. For more information concerning shareholder voting, see "Other
Information -- Capitalization and Voting" and "Other Information -- Fund
Structure."
FUNDAMENTAL POLICIES
The following investment restrictions of the Portfolio are fundamental
policies:
(1) The Portfolio will not concentrate investments in any particular
industry; therefore, the Portfolio will not purchase the securities of
companies in any one industry if, thereafter, 25% or more of the
Portfolio's total assets would consist of securities of companies in that
industry. (This restriction does not apply to obligations issued or
guaranteed by the United States Government, its agencies or
instrumentalities.)
(2) The Portfolio will not issue senior securities, borrow money or
pledge its assets in excess of 10% of its total assets taken at market
value (including the amount borrowed) and then only from a bank as a
temporary measure for extraordinary or emergency purposes including to
meet redemptions or to settle securities transactions. Usually only
"leveraged" investment companies may borrow in excess of 5% of their
assets; however, the Portfolio will not borrow to increase income but only
as a temporary measure for extraordinary or emergency purposes, including
to meet redemptions or to settle securities transactions which may
otherwise require untimely dispositions of Portfolio securities. The
Portfolio will not purchase securities while borrowings exceed 5% of total
assets. (For the purpose
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7
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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of this restriction, collateral arrangements with respect to the writing
of options, futures contracts, options on futures contracts, and
collateral arrangements with respect to initial and variation margin are
not deemed to be a pledge of assets and neither such arrangements nor the
purchase or sale of futures or related options are deemed to be the
issuance of a senior security.)
(3) The Portfolio will not make investments for the purpose of
exercising control or management. Investments by the Portfolio in
wholly-owned investment entities created under the laws of certain
countries will not be deemed the making of investments for the purpose of
exercising control or management.
The percentage restrictions described above and in the SAI apply only at
the time of investment and require no action by the Portfolio as a result of
subsequent changes in value of the investments or the size of the Portfolio. A
supplementary list of investment restrictions is contained in the SAI.
INVESTMENT TYPES
EQUITY SECURITIES. The Portfolio's emerging market investments will
comprise primarily equity securities. Such investments will consist
predominantly of common stock or preferred stock of established companies
listed on recognized securities exchanges or traded in other established
markets. However, the Portfolio may invest to a limited extent in convertible
preferred stock, warrants and stock rights. Due to the absence of established
securities markets in certain emerging market countries and restrictions in
certain countries on direct investment by foreign entities, the Portfolio may
invest in certain emerging market issuers exclusively or primarily through the
purchase of sponsored and unsponsored American Depository Receipts ("ADRs") or
other similar securities, such as American Depository Shares, Global
Depository Shares or International Depository Receipts; or through investment
in government approved investment companies or other vehicles. ADRs are
receipts typically issued by U.S. banks evidencing ownership of the underlying
securities, into which they are convertible. These securities may or may not
be denominated in the same currency as the underlying securities. Unsponsored
ADRs may be created without the participation of the foreign issuer. Holders
of these ADRs generally bear all the costs of the ADR facility, whereas
foreign issuers typically bear certain costs in a sponsored ADR. The bank or
trust company depository of an unsponsored ADR may be under no obligation to
distribute shareholder communications received from the foreign issuer or to
pass through voting rights.
DEBT SECURITIES. The Portfolio may also seek capital appreciation through
investment in emerging market convertible or non-convertible debt securities.
Capital appreciation in debt securities may arise as a result of a favorable
change in relative foreign exchange rates, in relative interest rate levels,
or in the creditworthiness of issuers. The receipt of income from such debt
securities is incidental to the Portfolio's objective of long-term capital
appreciation. Such income can be used, however, to offset the operating
expenses of the Portfolio. In accordance with its investment objective, the
Portfolio will not seek to benefit from anticipated short-term fluctuations in
currency exchange rates. The Portfolio may, from time to time, invest in debt
securities with relatively high risk and high yields (as compared to other
debt securities meeting the Portfolio's investment criteria), notwithstanding
that the Portfolio may not anticipate that such securities will experience
substantial capital appreciation. The debt securities in which the Portfolio
invests may be unrated, but will not be in default at the time of purchase.
The Portfolio also may invest to a certain extent in
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8
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
- ------------------------------------------------------------------------------
debt securities in order to participate in debt-to-equity conversion programs
sponsored by certain emerging market countries or corporate reorganizations.
The Portfolio may invest in debt securities ("sovereign debt") issued or
guaranteed by emerging market governments (including countries, provinces and
municipalities) or their agencies and instrumentalities ("governmental
entities"), debt securities issued or guaranteed by international
organizations designated or supported by multiple foreign governmental
entities (which are not obligations of foreign governments) to promote
economic reconstruction or development, and debt securities issued by
corporations or financial institutions.
The Portfolio may invest a portion of its assets in certain debt
obligations known as "Brady Bonds." Brady Bonds are created through the
exchange of existing commercial bank loans to sovereign entities for new
obligations in connection with debt restructurings implemented pursuant to a
plan introduced by Nicholas F. Brady, former U.S. Secretary of the Treasury.
To date, debt restructurings utilizing Brady Bonds have been undertaken in
Mexico, Venezuela, Argentina, Albania, Ecuador, Jordan, Poland, Uraguay,
Bulgaria, the Dominican Republic, Costa Rica, Brazil, Nigeria, and the
Philippines. Other countries, including Panama and Peru, are expected to
implement Brady Bond debt restructurings in the future.
Brady Bonds are of recent origin, and accordingly do not have a long
payment history. Brady Bonds are actively traded in the over-the-counter
secondary market, and may be collateralized or uncollateralized. Although most
Brady Bonds are denominated in U.S. dollars, they are issued in various
currencies. U.S. dollar denominated Brady Bonds may be fixed rate par bonds or
floating rate discount bonds. They are generally collateralized in full as to
principal by U.S. Treasury zero coupon bonds having the same maturity as the
Brady Bonds. Interest payments on U.S. dollar denominated Brady Bonds
generally are collateralized on a one year or longer rolling forward basis by
cash or securities in an amount, in the case of fixed rate bonds, that is
equal to at least one year of interest payments or, in the case of floating
rate bonds, that is initially equal to at least one years interest payments
based on the current interest rate and is thereafter adjusted at regular
intervals. Certain Brady Bonds are entitled to "value recovery payments" in
certain circumstances, which in effect are supplemental interest payments but
are not generally collateralized. Brady Bonds are often viewed as having three
or four valuation components: (i) the collateralized repayment of principal at
final maturity; (ii) the collateralized interest payments; (iii) any
uncollateralized repayment of principal at maturity; and (iv) any
uncollateralized interest payments. The risks associated with these
uncollateralized amounts are referred to as "residual risk." Because of their
residual risk and, among other factors, the history of defaults in commercial
bank loans in countries issuing Brady Bonds, investments in Brady Bonds are
considered speculative.
INVESTMENT IN OTHER INVESTMENT COMPANIES OR VEHICLES. The Portfolio may be
able to invest in certain emerging markets solely or primarily through
governmentally authorized investment vehicles or companies. Pursuant to the
Act, the Portfolio generally may invest up to 10% of its total assets in the
aggregate in the shares of other investment companies and up to 5% of its
total assets in any one investment company, as long as each investment does
not represent more than 3% of the outstanding voting stock of the investment
company in which the Portfolio invests at the time of such investment.
Investment in other investment companies may involve the payment of
substantial premiums above the value of such investment companies' portfolio
securities, and is subject to limitations under the Act and
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market availability. The Portfolio does not intend to invest in such
investment companies unless, in the judgment of SCMI, the potential benefits
of such investment justify the payments of any applicable premiums or sale
charges. As a shareholder in an investment company, the Portfolio would bear
its ratable share of the investment company's expenses, including its advisory
and administrative fees. At the same time, the Portfolio would continue to pay
its own management fees and other expenses.
TEMPORARY DEFENSIVE INVESTMENTS. For temporary defensive purposes, the
Portfolio may invest without limitation in (or enter into repurchase
agreements maturing in seven days or less with U.S. banks and broker-dealers
with respect to) short-term debt securities, including U.S. Government
securities, certificates of deposit and bankers' acceptances of U.S. banks.
The Portfolio may also hold cash and time deposits in foreign banks
denominated in any major foreign currency. See "Investment Policies" in the
SAI for further information about all these securities.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. To hedge against adverse
price movements in the securities held in its portfolio and the currencies in
which they are denominated (as well as in the securities it might wish to
purchase and their denominated currencies), the Portfolio may engage in
transactions in forward foreign currency exchange contracts ("forward
contracts"). A forward contract involves an obligation to purchase or sell a
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. The Portfolio will generally not enter into a forward contract with
a term of greater than one year. Forward contracts are not exchange traded,
and there can be no assurance that a liquid market will exist at a time when
the Portfolio seeks to close out a forward contract. Nor is there any
assurance that a counterparty in an over-the-counter transaction will be able
to perform its obligations. Currently, only a limited market, if any, exists
for hedging transactions relating to currencies in certain emerging markets or
to securities of issuers domiciled or principally engaged in business in
certain emerging markets. This may limit the Portfolio's ability to
effectively hedge its investments in those markets. Hedging against a decline
in the value of a currency does not eliminate fluctuations in the prices of
portfolio securities or prevent losses if the prices of such securities
decline. Such transactions also limit the opportunity for gain if the value of
the hedged currencies should rise. In addition, it may not be possible for the
Portfolio to hedge against a devaluation that is so generally anticipated that
the Portfolio is not able to contract to sell the currency at a price above
the devaluation level it anticipates. See "Investment Policies -- Forward
Foreign Currency Exchange Contracts" in the SAI.
ILLIQUID AND RESTRICTED SECURITIES. The Portfolio will not purchase or
otherwise acquire any security if, as a result, more than 15% of its net
assets (taken at current value) would be invested in securities that are
illiquid by virtue of the absence of a readily available market or because of
legal or contractual restrictions on resale ("restricted securities"). There
may be undesirable delays in selling illiquid securities at prices
representing their fair value. This policy includes over-the-counter options
held by the Portfolio and the "in the money" portion of the assets used to
cover such options. As stated above, this policy also includes assets which
are subject to material legal restrictions on repatriation. 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
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particular Rule 144A security, that security may be 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, and thus the Fund, could experience a loss.
The Portfolio may lend securities from its portfolio if liquid assets in
an amount at least equal to the current market value of the securities loaned
(including accrued interest thereon) plus the interest payable to the
Portfolio with respect to the loan is maintained by the Portfolio's custodian
bank in a segregated account. Any securities that the Portfolio may receive as
collateral will not become a part of its portfolio at the time of the loan,
and, in the event of a default by the borrower, the Portfolio will, if
permitted by law, dispose of such collateral except for such part thereof that
is a security in which the Portfolio is permitted to invest. During the time
that the securities are on loan, the borrower will pay the Portfolio any
accrued income on those securities, and the Portfolio may invest the cash
collateral and earn income or receive an agreed upon fee from a borrower that
has delivered cash equivalent collateral. Cash collateral received by the
Portfolio will be invested in U.S. Government securities and liquid high grade
debt obligations. The value of securities loaned will be marked to market
daily. Portfolio securities purchased with cash collateral are subject to
possible depreciation. Loans of securities by the Portfolio will be subject to
termination at the Portfolio's or the borrower's option. The Portfolio may pay
reasonable negotiated fees in connection with loaned securities, so long as
such fees are set forth in a written contract and approved by the Schroder
Core Board. See "Loans of Portfolio Securities" in the SAI for further
information on securities loans.
OPTIONS AND FUTURES TRANSACTIONS. Although the Portfolio does not
presently intend to do so, it may (a) write covered call options on portfolio
securities and the U.S. dollar and emerging market currencies, without limit;
(b) write covered put options on portfolio securities and the U.S. dollar and
emerging market currencies with the limitation that the aggregate value of the
obligations underlying the puts determined as of the date the options are sold
will not exceed 50% of the Portfolio's net assets; (c) purchase call and put
options in amounts equaling up to 5% of its total assets; and (d)(i) purchase
and sell futures contracts that are currently traded, or may in the future be
traded, on U.S. and foreign commodity exchanges on underlying portfolio
securities, any emerging market currency, U.S. and emerging market
fixed-income securities and such indices of U.S. or emerging market equity or
fixed-income securities as may exist or come into being and (ii) purchase and
write call and put options on such futures contracts, in all cases involving
such futures contracts or options on futures contracts for hedging purposes
only, and without limit, except that the Portfolio may not enter into futures
contracts or purchase related options if, immediately thereafter, the amount
committed to margin plus the amount paid for premiums for unexpired options on
futures contracts generally exceeds 5% of the value of the Portfolio's total
assets. All of the foregoing are referred to as "Hedging Instruments."
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In general, the Portfolio may use Hedging Instruments: (1) to attempt to
protect against declines in the market value of the Portfolio's portfolio
securities or stock index futures, and the currencies in which they are
denominated and thus protect the Portfolio's net asset value per share against
downward market trends, or (2) to establish a position in securities markets
as a temporary substitute for purchasing particular equity securities. The
Portfolio will not use Hedging Instruments for speculation. The Hedging
Instruments which the Portfolio is authorized to use have certain risks
associated with them. Principal among such risks are: (a) the possible failure
of such instruments as hedging techniques in cases where the price movement of
the securities underlying the options or futures do not follow the price
movements of the portfolio securities subject to the hedge; (b) potentially
unlimited loss associated with futures transactions and the possible lack of a
liquid secondary market for closing out a futures position; and (c) possible
losses resulting from the inability of the Portfolio's investment adviser to
correctly predict the direction of stock prices, interest rates and other
economic factors. In addition, currently only a limited market, if any, exists
for hedging transactions relating to currencies in many emerging markets or to
securities of issuers domiciled or principally engaged in business in emerging
markets. This may limit the Portfolio's ability to effectively hedge its
investments in such emerging market countries. The Hedging Instruments the
Portfolio may use and the risks associated with them are described in greater
detail under "Options and Futures Transactions" in the SAI.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. The
Portfolio may purchase securities on a when-issued or delayed delivery basis
or may purchase or sell securities on a forward commitment basis. When such
transactions are negotiated, the price is fixed at the time of the commitment,
but delivery and payment can take place a month or more after the date of the
commitment. There is no overall limit on the percentage of the Portfolio's
assets which may be committed to the purchase of securities on a when-issued,
delayed delivery or forward commitment basis. An increase in the percentage of
the Portfolio's assets committed to the purchase of securities on a
when-issued, delayed delivery or forward commitment basis may increase the
volatility of the Portfolio's net asset value.
WHEN, AS AND IF ISSUED SECURITIES. The Portfolio may purchase securities
on a "when, as and if issued" basis under which the issuance of the security
depends upon the occurrence of a subsequent event, such as approval of a
merger, corporate reorganization, leveraged buyout or debt restructuring. If
the anticipated event does not occur and the securities are not issued, the
Portfolio will have lost an investment opportunity. There is no overall limit
on the percentage of the Portfolio's assets which may be committed to the
purchase of securities on a "when, as and if issued" basis. An increase in the
percentage of the Portfolio's assets committed to the purchase of securities
on a "when, as and if issued" basis may increase the volatility of its net
asset value.
RISK CONSIDERATIONS
All investments, domestic and foreign, involve certain risks. Investments
in securities of foreign issuers, particularly in countries with smaller,
emerging capital markets, involve certain risks not associated with domestic
investing, including fluctuations in foreign exchange rates, uncertain
political and economic developments, and the possible imposition of exchange
controls or other foreign governmental laws or restrictions.
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POLITICAL AND ECONOMIC RISKS. In any emerging market country, there is the
possibility of expropriation of assets, confiscatory taxation, political or
social instability or diplomatic developments which could affect investments
in those countries. Moreover, individual foreign economies may differ
favorably or unfavorably from the U.S. economy in such respects as economic
growth rate, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments positions. Certain foreign
investments may also be subject to foreign withholding or other governmental
taxes that could reduce the return on these investments.
Certain emerging market countries may restrict investment by foreign
entities. For example, some of these countries may limit the size of foreign
investment in certain issuers, require prior approval of foreign investment by
the government, impose additional tax on foreign investors or limit foreign
investors to specific classes of securities of an issuer that have less
advantageous rights (with regard to convertibility, for example) than classes
available to domiciliaries of the country.
Substantial limitations may also exist in certain countries with respect
to a foreign investor's ability to repatriate investment income, capital or
the proceeds of sales of securities. The Portfolio could be adversely affected
by delays in, or refusals to grant, any required governmental approvals for
repatriation of capital. No more than 15% of the Portfolio's net assets will
comprise, in the aggregate, assets which are (i) subject to material legal
restrictions on repatriation or (ii) illiquid securities.
FINANCIAL INFORMATION AND STANDARDS. Often the regulation of, and
available information about, issuers and their securities is less extensive in
emerging market countries than in the United States. Foreign companies may not
be subject to uniform accounting, auditing and financial reporting standards
or to requirements or practices comparable to those applicable to U.S.
companies.
REGULATION AND LIQUIDITY OF MARKETS. Government supervision and regulation
of exchanges and brokers in emerging market countries is frequently less
extensive than in the United States. These markets may have different
clearance and settlement procedures. In certain cases, settlements have not
kept pace with the volume of securities transactions, making it difficult to
conduct such transactions. Delays in settlement could adversely affect or
interrupt the Portfolio's intended investment program or result in investment
losses due to intervening declines in security values.
Securities markets in emerging market countries are substantially smaller
than U.S. securities markets and have substantially less trading volume,
resulting in diminished liquidity and greater price volatility. Reduced
secondary market liquidity may make it more difficult for the Portfolio to
determine the value of its portfolio securities or dispose of particular
instruments when necessary. Brokerage commissions and other transaction costs
on foreign securities exchanges are generally higher as well.
CURRENCY FLUCTUATIONS AND DEVALUATIONS. Because the Portfolio will invest
heavily in non-U.S. currency denominated securities, changes in foreign
currency exchange rates will affect the value of the Portfolio's investments.
A decline in the value of currencies in which the Portfolio's investments are
denominated against the dollar will result in a corresponding decline in the
dollar value of the Portfolio's assets. This risk tends to be heightened in
the case of investing in certain emerging market countries. For example, some
currencies of emerging market countries have experienced steady devaluations
relative to the U.S. dollar, and major adjustments have been made in certain
of such currencies periodically. Some emerging market countries may also have
managed currencies which do not freely float against the dollar.
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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INFLATION. Several emerging market countries have experienced substantial,
and in some periods extremely high, rates of inflation in recent years.
Inflation and rapid fluctuations in inflation rates may have very negative
effects on the economies and securities markets of certain emerging market
countries. Further, inflation accounting rules in some emerging market
countries require, for companies that keep accounting records in the local
currency, that certain assets and liabilities be restated on the company's
balance sheet in order to express items in terms of currency of constant
purchasing power. Inflation accounting may indirectly generate losses or
profits for certain emerging market companies.
NON-DIVERSIFIED INVESTMENTS. Because suitable investments in emerging
market countries may be limited, the Portfolio, like the Fund, has classified
itself as a "non-diversified investment company" under the Act so that it may
invest more than 5% of its total assets in the securities of any one issuer.
This classification may not be changed without a shareholder vote. However, so
that the Portfolio may qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"),
the Portfolio will limit its investments so that at the close of each quarter
of the taxable year, (i) not more than 25% of the market value of the
Portfolio's total assets will be invested in the securities of a single
issuer, and (ii) with respect to 50% of the market value of its total assets
not more than 5% will be invested in the securities of a single issuer and the
Portfolio will not own more than 10% of the outstanding voting securities of a
single issuer. See "Dividends, Distributions and Taxes."
To the extent the Portfolio makes investments in excess of 5% of its
assets in a particular issuer, its exposure to credit and market risks
associated with that issuer is increased. Also, since a relatively high
percentage of the Portfolio's assets may be invested in the securities of a
limited number of issuers, the Portfolio may be more susceptible to any single
economic, political or regulatory occurrence than a diversified investment
company.
GEOGRAPHIC CONCENTRATION. The Portfolio may invest more than 25% of its
total assets in issuers located in any one country. To the extent it invests
in issuers located in one country, the Portfolio is susceptible to factors
adversely affecting that country. In particular, these factors may include the
political and economic developments and foreign exchange rate fluctuations
discussed above. As a result of investing substantially in one country, the
value of the Portfolio's assets may fluctuate more widely than the value of
shares of a comparable fund having a lesser degree of geographic
concentration.
CERTAIN RISKS OF DEBT SECURITIES. The Portfolio may invest without
limitation in emerging market debt securities rated investment grade. The
Portfolio may also invest up to 35% of its total assets in unrated debt
securities or in debt securities rated below investment grade. Debt securities
rated Baa by Moody's Investors Service, Inc. ("Moody's") are considered to
have speculative characteristics. Below investment grade securities, i.e.
those rated in the medium to lower rating categories of nationally recognized
statistical rating organizations such as Standard & Poor's Ratings Services
("S&P") and Moody's and unrated securities of comparable quality ("high
yield/high risk securities"), are predominantly speculative with respect to
the capacity to pay interest and repay principal, and generally involve a
greater volatility of price than securities in higher rating categories. These
securities are commonly referred to as "junk" bonds. The risks associated with
high yield/high risk securities are generally greater than those associated
with higher-rated securities. The Portfolio is not obligated to dispose of
securities due to changes by the rating agencies. A description of S&P's and
Moody's fixed-income securities ratings is contained in the Appendix to the
SAI.
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In purchasing high yield/high risk securities, the Portfolio will rely on
the investment adviser's judgment, analysis and experience in evaluating the
creditworthiness of an issuer of such securities. Nonetheless, investors
should carefully review the investment objective and policies of the Portfolio
and consider their ability to assume the investment risks involved before
making an investment. The Portfolio is not authorized to purchase debt
securities that are in default, except for sovereign debt (discussed below) in
which the Portfolio may invest no more than 5% of its total assets while such
sovereign debt securities are in default.
The market values of high yield/high risk securities tend to reflect
individual issuer developments and to exhibit sensitivity to adverse economic
changes to a greater extent than do higher-rated securities, which react
primarily to fluctuations in the general level of interest rates. Issuers of
high yield/high risk securities may be highly leveraged and may not have
available to them more traditional methods of financing. During economic
downturns or substantial periods of rising interest rates, issuers of high
yield/high risk securities, especially those which are highly leveraged, may
be less able to service their principal and interest payment obligations, meet
their projected business goals or obtain additional financing. The risk of
loss due to default by the issuer is significantly greater for holders of high
yield/high risk securities because such securities may be unsecured and may be
subordinated to other creditors of the issuer. In addition, the Portfolio may
incur additional expenses to the extent it is required to seek recovery upon a
default by the issuer of such an obligation or participate in the
restructuring of such obligation.
Periods of economic uncertainty and change can be expected to result in
increased volatility of market prices of high yield/high risk securities and,
correspondingly, the Portfolio's net asset value to the extent it invests in
such securities. Further, market prices of such securities structured as zero
coupon or pay-in-kind securities are affected to a greater extent by interest
rate changes and thereby tend to be more volatile than any securities which
pay interest periodically and in cash.
High yield/high risk securities may have call or redemption features which
would permit an issuer to repurchase the securities from the Portfolio. If a
call were exercised by the issuer during a period of declining interest rates,
the Portfolio likely would have to replace such called securities with lower
yielding securities, thus decreasing the net investment income to the
Portfolio and dividends to shareholders.
While a secondary trading market for high yield/high risk securities does
exist, it is generally not as liquid as the secondary market for higher rated
securities. In periods of reduced secondary market liquidity, prices of high
yield/high risk securities may become volatile and experience sudden and
substantial price declines, and the Portfolio may have difficulty in disposing
of particular issues when necessary to meet the Portfolio's liquidity needs or
in response to a specific economic event such as a deterioration in the
creditworthiness of the issuer. Reduced secondary market liquidity for certain
high yield/high risk securities also may make it more difficult for the
Portfolio to obtain accurate market quotations for purposes of valuing the
Portfolio's investment portfolio. Market quotations are generally available on
many high yield/high risk securities only from a limited number of dealers and
may not necessarily represent firm bids of such dealers or prices for actual
sales. Under such conditions, the Portfolio may have to rely more heavily on
the judgment of the Board or SCMI under Board-approved guidelines to value
such securities accurately.
Adverse publicity and investor perceptions, which may not be based on
fundamental analysis, also may decrease the value and liquidity of high
yield/high risk securities, particularly in a thinly traded market.
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Factors adversely affecting the market value of high yield/high risk
securities are likely to adversely affect the Portfolio's, and thus the
Fund's, net asset value.
Investment in sovereign debt involves a high degree of risk. Certain
emerging market countries such as Argentina, Brazil and Mexico are among the
largest debtors to commercial banks and foreign governments. At times, certain
emerging market countries have declared moratoria on the payment of principal
and/or interest on outstanding debt. The governmental entity that controls the
repayment of sovereign debt may not be able or willing to repay the principal
and/or interest when due in accordance with the terms of such debt. A
governmental entity's willingness or ability to repay principal and interest
when it is due may be affected by many factors such as its cash flow
situation, the extent of its foreign reserves, the availability of sufficient
foreign exchange, the relative size of the debt service burden to the economy
as a whole, and political restraints. The Portfolio, as a holder of sovereign
debt, may be requested to participate in the rescheduling of such debt and to
extend further loans to governmental entities. There is no bankruptcy
proceeding by which defaulted sovereign debt may be collected in whole or in
part.
The sovereign debt instruments in which the Portfolio may invest involve
great risk and are deemed to be the equivalent in terms of quality to high
yield/high risk securities discussed above and are subject to many of the same
risks as such securities. Similarly, the Portfolio may have difficulty
disposing of certain sovereign debt obligations because there may be a thin
trading market for such securities. The Portfolio will not invest more than 5%
of its total assets in sovereign debt which is in default.
PORTFOLIO TURNOVER. The Portfolio may engage in short-term trading but its
portfolio turnover rate is not expected to exceed 100%. High portfolio
turnover and short-term trading involve correspondingly greater commission
expenses and transaction costs. Also, higher portfolio turnover rates can make
it more difficult for the Portfolio to qualify as a regulated investment
company for federal income tax purposes and may cause shareholders of the
Portfolio to recognize gains for federal income tax purposes. See "Taxation"
in the SAI.
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, Ralph E. Hansmann (Honorary), 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 assets in the Portfolio. SCMI serves
as Investment Adviser to the Portfolio. SCMI manages the investment and
reinvestment of the assets in the Portfolio and continuously
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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reviews, supervises and administers the Portfolio's investments. In this
regard, it is the responsibility of SCMI to make decisions relating to the
Portfolio's investments and to place purchase and sale orders regarding
investments with brokers or dealers selected by it in its discretion. For its
services with respect to the Portfolio, SCMI receives a monthly advisory fee
equal on an annual basis to 1.00% of the Portfolio's average daily net assets,
which the Fund indirectly bears through investment in the Portfolio.
SCMI is a wholly-owned U.S. subsidiary of Schroders Incorporated, the
wholly-owned U.S. 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, as of December
31, 1995, assets under management in excess of $100 billion.
The investment management team of John A. Troiano, a Vice President of the
Trust and Schroder Core, and Laura Luckyn-Malone, a Trustee and President of
the Trust and Schroder Core, with the assistance of an SCMI investment
committee, is primarily responsible for the day-to-day management of the
Portfolio's investment portfolio. Mr. Troiano and Ms. Luckyn-Malone managed
the Fund's investment portfolio from its inception until it invested its
assets in the Portfolio and have managed the Portfolio's investments since its
inception. Mr. Troiano has been a Managing Director of SCMI since October 1995
and has been employed by various Schroder Group companies in the investment
research and portfolio management areas since 1988. Ms. Luckyn-Malone has been
a Managing Director of SCMI since October 1995 and has been employed by SCMI
in the portfolio management area since 1990.
The Fund began pursuing its investment objective through investment in the
Portfolio on November 1, 1995. The Fund may withdraw its investment from the
Portfolio at any time if the Board determines that it is in the best interests
of the Fund and its shareholders to do so. See "Other Information -- Fund
Structure." Accordingly, the Fund has retained SCMI as its investment adviser
to manage the Fund's assets in the event the Fund withdraws its investment.
SCMI does not receive an investment advisory fee with respect to the Fund so
long as the Fund remains completely invested in the Portfolio or any other
investment company. If the Fund resumes directly investing in portfolio
securities, the Fund will pay SCMI a monthly advisory fee equal on an annual
basis to 1.00% of the Fund's average daily net assets. The investment advisory
contract between SCMI and the Trust with respect to the Fund is the same in
all material respects as the Portfolio's investment advisory contract except
as to the parties, the circumstances under which fees will be paid and the
jurisdiction whose laws govern the agreement. For the fiscal year ended
October 31, 1995, the Fund paid SCMI an advisory fee equal to 0.18% of its
average daily net assets.
On behalf of the Fund, the Trust has entered into an administrative
services contract with Schroder Advisors, 787 Seventh Avenue, New York, New
York 10019. Schroder Advisors is a wholly-owned subsidiary of SCMI. The Trust
and Schroder Advisors have entered into a sub-administration agreement with
Forum. Pursuant to these agreements, Schroder Advisors and Forum provide
certain management and administrative services necessary for the Fund's
operations, other than the investment management and administrative services
provided to the Fund by SCMI. For these services, the Fund pays Schroder
Advisors a monthly fee at the annual rate of 0.10% of the Fund's average daily
net assets. Payment for Forum's services is made by Schroder Advisors and is
not a separate expense of the Fund. Schroder Advisors and Forum
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provide similar services to the Portfolio, for which the Portfolio pays
Schroder Advisors a monthly fee at the annual rate of 0.15% of the Portfolio's
average daily net assets, a portion of which Schroder Advisors pays Forum for
its services with respect to the Portfolio.
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 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 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 mutual 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.
The maximum amount payable under the Shareholder Services Plan is 0.25% of the
Fund's average daily net assets attributable to Advisor Shares.
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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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.
EXPENSES
SCMI and Schroder Advisors have voluntarily undertaken to assume certain
expenses of the Fund and the Portfolio (or waive their respective fees). This
undertaking is designed to place a maximum limit on Fund expenses (excluding
taxes, interest, brokerage commissions and other portfolio transaction
expenses and extraordinary expenses) of 2.10% of the average daily net assets
of the Fund attributable to Advisor Shares. This expense limitation cannot be
modified or withdrawn except by a majority vote of the Trustees of the Trust
who are not affiliated with SCMI or Schroder Advisors. If expense
reimbursements are required, they will be made on a monthly basis. SCMI will
reimburse the Fund or Portfolio for four-fifths of the amount required and
Schroder Advisors will reimburse the Fund or Portfolio for the remaining
one-fifth; provided, however, that neither SCMI nor Schroder Advisors will be
required to make any reimbursements or waive any fees in excess of the fees
payable to them by the Fund and the Portfolio 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. Commission rates
for brokerage transactions are fixed on many foreign security exchanges, and
this may cause higher brokerage expenses to accrue to the Portfolio than would
be the case for comparable transactions effected on U.S. securities exchanges.
However, the Portfolio will seek to achieve the best net results in effecting
such transactions.
Subject to the Portfolio's policy of obtaining the best price consistent
with quality of execution on transactions, SCMI may employ Schroder Securities
Limited and its affiliates (collectively, "Schroder Securities"), affiliates
of SCMI, to effect transactions of the Portfolio on certain foreign securities
exchanges. Because of the affiliation between SCMI and Schroder Securities,
the Portfolio's payment of commissions to Schroder Securities is subject to
procedures adopted by 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
Securities and in no event will Schroder Securities receive any brokerage in
recognition of research services.
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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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 Schroder Core Board may
determine, SCMI may 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.
Although the Portfolio does not currently engage in directed brokerage
arrangements to pay expenses, it may do so in the future. These arrangements,
whereby brokers executing the Portfolio's portfolio transactions would agree
to pay designated expenses of the Portfolio if brokerage commissions generated
by the Portfolio reached certain levels, might reduce 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 and accordingly are
not reflected in the Fund's expense table and financial highlights.
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 Inquires."
Investments may also be made through Service Organizations that assist their
customers in purchasing shares of the Fund. Such Service Organizations may
charge their customers a service fee for processing orders to purchase or sell
shares of the Fund. Investors wishing to purchase shares through their
accounts at a Service Organization should contact that organization directly
for appropriate instructions.
Shares of the Fund are offered at the net asset value next determined
after receipt of a Purchase Order (at the address set forth below). The
minimum initial investment is $250,000. All purchase payments are invested in
full and fractional shares. The Fund is authorized to reject any purchase
order.
Purchases of Fund shares are subject to a purchase charge of 0.50% of the
amount invested. This charge is designed to cover the transaction costs the
fund incurs (either directly or indirectly as a result of its investment in
the Portfolio) as a result of investments in the Fund, including brokerage
commissions incurred by the Portfolio in acquiring portfolio securities,
currency transaction costs and transfer agent costs, and to protect the
interests of shareholders. This charge, which is not a sales charge, is paid
to the Fund, not to Schroder Advisors or any other entity. The purchase charge
is not assessed on the reinvestment of dividends or distributions or shares
purchased through a subscription in kind.
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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Initial and subsequent purchases may be made by mailing a check (in U.S.
dollars), payable to Schroder Emerging Markets Fund Institutional Portfolio,
to:
Schroder Emerging Markets Fund Institutional Portfolio
P.O. Box 446
Portland, Maine 04112
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:
Chase Manhattan Bank
New York, NY
ABA No.: 021000021
For Credit To: Forum Financial Corp.
Acct. No.: 910-2-718187
Ref.: Schroder Emerging Markets Fund Institutional
Portfolio -- Advisor Shares
Account of: (shareholder name)
Account Number: (shareholder account number)
The wire order must specify the name of the Fund and class of shares, the
account name and number, address, confirmation number, amount to be wired,
name of the wiring bank and name and telephone number of the person to be
contacted in connection with the order. If the initial investment is by wire,
an account number will be assigned and an Account Application must be
completed and mailed to the Fund. Wire orders received prior to 4:00 p.m. (New
York City Time) on a Fund Business Day will be processed at the net asset
value determined as of that day. Wire orders received after 4:00 p.m. 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 Fund's Transfer Agent, as the
shareholder's agent, establishes an open account to which all shares purchased
are credited, together with any dividends and capital gain distributions that
are invested in additional shares. Although most shareholders elect not to
receive share certificates, certificates for full shares can be obtained by
specific written request to the Fund's Transfer Agent. No certificates are
issued for fractional shares. 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 gains will be
reinvested. In addition, the amount of any outstanding checks for dividends
and capital gains that have been returned to the Transfer Agent will be
reinvested and such checks will be canceled.
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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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.
REDEMPTION OF SHARES
Shares of the Fund are redeemed at their next determined net asset value
following receipt by the Fund (at the address set forth above under "Purchase
of Shares") of a redemption request in proper form. See "Net Asset Value."
Redemption requests may be made between 9:00 a.m. and 6:00 p.m. (New York City
Time) on each day that the New York Stock Exchange is open for trading.
Redemption requests that are received prior to 4:00 p.m. (New York City Time)
will be processed at the net asset value determined as of that day. Redemption
requests that are received after 4:00 p.m. will be processed at the net asset
value determined the next Fund Business Day. See "Net Asset Value" below.
Redemptions of Fund shares are subject to a redemption charge of 0.50% of
the net asset value of the shares redeemed. This charge is designed to cover
the transaction costs the Fund incurs in redeeming Fund shares (either
directly or indirectly as a result of its investment in the Portfolio),
including brokerage commissions incurred by the Portfolio in selling portfolio
securities, currency transaction costs and transfer agent costs, and to
protect the interests of shareholders. This charge, which is not a sales
charge, is paid to the Fund, not to Schroder Advisors or any other entity. The
redemption charge is not assessed on shares acquired through the reinvestment
of dividends or distributions or on redemptions in kind. For purposes of
computing the redemption charge, redemptions by a shareholder are deemed to be
made in the following order: (i) from Shares purchased through the
reinvestment of dividends and distributions (with respect to which no
redemption charge is applied) and (ii) from Shares for which the redemption
charge is applicable, on a first purchased, first redeemed basis.
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's 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 those
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
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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Fund's Transfer Agent. Such institutions include certain banks, brokers,
dealers (including municipal and government securities brokers and dealers),
credit unions and savings associations. Notaries public are not acceptable.
Further documentation 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 15 calendar days. Unless other instructions are
given in proper form, a check for the proceeds of a redemption will be sent to
the shareholder's address of record.
The Fund may suspend the right of redemption during any period when (i)
trading on the New York Stock Exchange is restricted or that exchange is
closed, (ii) the SEC has by order permitted such suspension, or (iii) an
emergency, as defined by rules of the SEC, exists making disposal of portfolio
investments or determination of the Fund's 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 portfolio securities, 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 if at any time the account
does not have a value of at least $100,000, 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 $100,000 and be
allowed at least 30 days to make an additional investment to increase the
account balance to at least $100,000.
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. (New York City Time), Monday
through Friday, each day that the New York Stock Exchange is open for trading,
(a "Fund Business Day"), which excludes the following holidays: New Year's
Day,
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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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 investment in the Portfolio) less all Fund liabilities 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.
Trading by the Portfolio in securities on European and Far Eastern
exchanges and over-the-counter markets may not take place on every day that
the New York Stock Exchange is open for trading. Furthermore, trading takes
place in various foreign markets on days on which the Fund's net asset value
is not calculated. As a result, the Fund's net asset value may be
significantly affected by such trading on days when an investor has no access
to the Fund. If events materially affecting the value of foreign securities
occur between the time when their price is determined and the time when net
asset value is calculated, such securities will be valued at fair value as
determined in good faith by using methods approved by the Schroder Core Board.
All assets and liabilities of the Portfolio denominated in foreign
currencies are valued in U.S. dollars based on the exchange rate last quoted
by a major bank prior to the time when the net asset value of the Fund is
calculated.
DIVIDENDS, DISTRIBUTIONS AND TAXES
THE FUND
The Fund intends to distribute substantially all of its net investment
income and its net realized long term capital gain at least annually and,
therefore, intends to continue not to be subject to Federal income tax.
The Fund intends to elect, pursuant to Section 853 of the Code if the Fund
is eligible to do so, to permit shareholders to take a credit (or a deduction)
for foreign income taxes paid by the Fund. An investor should include as gross
income in its Federal income tax returns both cash dividends received from the
Fund and also the amount that the Fund advises is its pro rata portion of
foreign income taxes paid with respect to, or withheld from, dividends and
interest paid to the Fund from the Fund's foreign investments. An investor
would then be entitled, subject to certain limitations, to take a foreign tax
credit against its Federal income tax liability for the amount of such foreign
taxes or else to deduct such foreign taxes as an itemized deduction from gross
income.
The Fund intends to declare and pay as a dividend substantially all of its
net investment income annually and to distribute any net realized capital gain
at least annually. Dividend and capital gain distributions will be reinvested
automatically in additional shares of the Fund at net asset value unless the
shareholder elects in writing to receive distributions in cash.
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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Dividend and capital gain distributions are made on a per share basis.
After every distribution the value of a share declines by the amount of the
distribution. Purchases made shortly before a distribution include in the
purchase price the amount of the distribution which will be returned to the
investor in the form of a taxable dividend or capital gain distribution.
For Federal income tax purposes, distribution of the Fund's net taxable
income will be taxable to shareholders as ordinary income whether they are
invested in additional shares or received in cash. Distributions of any net
capital gain designated by the Fund as capital gain dividends will be taxable
as long-term capital gain, regardless of how long a shareholder has held the
shares and whether they are invested in additional shares or received in cash.
Each year the Trust will notify shareholders of the tax status of dividends
and distributions.
The Fund generally will be required to withhold at a rate of 31% ("backup
withholding") of all dividends, capital gains distributions and redemption
proceeds paid to shareholders if (i) the payee fails to furnish and to certify
the payee's correct taxpayer identification number or social security number,
(ii) the IRS notifies the Fund that the payee has failed to report properly
certain interest and dividend income to the IRS and to respond to notices to
that effect or (iii) when required to do so, the payee fails to certify that
he is not subject to backup withholding.
Depending on the residence of the shareholder for tax purposes,
distributions may also be subject to state and local taxes, including
withholding taxes. Shareholders should consult their own tax advisors as to
the tax consequences of ownership of shares of the Fund in their particular
circumstances.
THE PORTFOLIO
The Portfolio is not required to pay Federal income taxes on its net
investment income and capital gain, as it is treated as a partnership for
Federal income tax purposes. All interest, dividends and gains and losses of
the Portfolio are deemed to have been "passed through" to the Fund in
proportion to its holdings of the Portfolio, regardless of whether such
interest, dividends or gains have been distributed by the Portfolio or losses
have been realized by the Portfolio. Investment income received by the Fund
from sources within foreign countries may be subject to foreign income or
other taxes, with respect to which shareholders may be entitled to claim a
credit or deduction. See "The Fund" immediately above.
OTHER INFORMATION
CAPITALIZATION AND VOTING
The Trust was originally organized as a Maryland corporation on July 30,
1969 and on January 9, 1996 was reorganized as a Delaware business trust. The
Trust was formerly known as "Schroder Capital Funds, Inc." The Trust has
authority to issue an unlimited number of shares of beneficial interest. The
Board may, without shareholder approval, divide the authorized shares into an
unlimited number of separate portfolios or series (such as the Fund) and may
divide portfolios or series into classes of shares (such as the Advisor
Shares), and the costs of doing so will be borne by the Trust. The Trust
currently consists of five separate portfolios, each of which has separate
investment objectives and policies, and 9 classes of shares. The Fund
currently consists of two classes of shares.
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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Shares are fully paid and non-assessable, and have no pre-emptive rights.
They have non-cumulative voting rights, which means that the holders of more
than 50% of the shares voting for the election of Trustees can elect 100% of
the Trustees if they choose to do so. A shareholder is entitled to one vote
for each full share held (and a fractional vote for each fractional share
held) standing in his name on the books of the Trust. On matters requiring
shareholder approval, shareholders of the Trust are entitled to vote only with
respect to matters that affect the interest of the Fund or class of shares
they hold, except as otherwise required by applicable law.
There will normally be no meetings of shareholders to elect Trustees
unless and until such time as less than a majority of the Trustees holding
office have been elected by shareholders. However, the holders of not less
than a majority of the outstanding shares of the Trust may remove any person
serving as a Trustee and the Board will call a special meeting of shareholders
to consider removal of one or more Trustees if requested in writing to do so
by the holders of not less than 10% of the outstanding shares of the Trust.
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 April 30, 1996, the Robert Wood Johnson Foundation may be deemed to
control the Fund for purposes of the Act. From time to time, certain
shareholders may own a large percentage of the shares of a Fund. Accordingly,
those shareholders may be able to greatly affect (if not determine) the
outcome of a shareholder vote.
REPORTS
The Trust sends to each shareholder of the Fund a semi-annual report and
an audited annual report.
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 1, 5 and 10 years. Total return quotations assume that all
dividends and distributions are reinvested when paid, and do not reflect the
deduction of purchase charges or redemption charges.
Performance information for the Fund may be compared to various unmanaged
securities indices, groups of mutual funds tracked by mutual fund ratings
services, or other general economic indicators. Unmanaged indices may assume
the reinvestment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.
Performance information for the Fund represents only past performance and
does not necessarily indicate future results. Performance information should
be considered in light of the Fund's investment objective and policies,
characteristics and quality of the Fund's investments, and the market
conditions during the given time period, and should not be considered as a
representation of what may be achieved in the future. For a description of the
methods used to determine total return for the Fund, see the SAI.
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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CUSTODIAN AND TRANSFER AGENT
The Chase Manhattan Bank, N.A. is Custodian of the Fund's and of the
Portfolio's assets. Forum Financial Corp. serves as the Fund's Transfer and
Dividend Disbursing Agent.
SHAREHOLDER INQUIRIES
Inquiries about the Fund, including the Fund's past performance, should be
directed to:
Schroder Emerging Markets Fund Institutional Portfolio
P.O. Box 446
Portland, Maine 04112
Information about specific 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
OTHER CLASSES OF SHARES. The Fund has two classes of shares, Investor
Shares and Advisor 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
distribution will differ between the classes. Information about Investor
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
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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Delaware in September 1995. Schroder Core is registered under the Act as an
open-end management investment company and currently has four separate
portfolios. The assets of the Portfolio, a diversified portfolio, belong only
to, and the liabilities of the Portfolio are borne solely by, the Portfolio
and no other portfolio of Schroder Core.
The investment objective and fundamental investment policies of the Fund
and the Portfolio can be changed only with shareholder approval. See
"Investment Objective" 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 investors in the Portfolio will invest on the same terms and conditions as
the Fund and will pay a proportionate share of the Portfolio's expenses.
The Portfolio normally will not hold meetings of investors except as
required by the Act. Each investor in the Portfolio will be entitled to vote
in proportion to its relative beneficial interest in the Portfolio. On most
issues subject to a vote of investors, as required by the Act and other
applicable law, the Fund will solicit proxies from shareholders of the Fund
and will vote its interest in the Portfolio in proportion to the votes cast by
its shareholders. If there are other investors in the Portfolio, there can be
no assurance that any issue that receives a majority of the votes cast by Fund
shareholders will receive a majority of votes cast by all investors in the
Portfolio; indeed, if other investors hold a majority interest in the
Portfolio, they could 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 fees and expenses than the Fund. Therefore, Fund shareholders
may have different returns than shareholders in another investment company
that invests exclusively in the Portfolio. There is currently no such other
investment company that offers its shares to members of the general public.
Information regarding any such funds in the future will be available from
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 the registration statements of any other publicly-offered investors
in the Portfolio. In addition, under the Federal securities laws, Schroder
Core could be liable for a 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, indemnifies Schroder Core and
its Trustees and officers ("Schroder Core Indemnitees") against certain
claims. Indemnified claims are those brought against Schroder Core Indemnitees
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,
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28
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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Schroder Core indemnifies 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 indemnifies 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, Schroder Core's liability is similarly limited to
information about and supplied by Schroder Core.
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, or
the investment of all of the Fund's investable assets in another pooled
investment entity having substantially the same investment objective as the
Fund. The inability of the Fund to find a suitable replacement investment, in
the event the Board decided not to permit the 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. 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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29
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INVESTMENT ADVISER
Schroder Capital Management International Inc.
787 Seventh Avenue
New York, New York 10019
ADMINISTRATOR & DISTRIBUTOR
Schroder Fund Advisors Inc.
787 Seventh Avenue
New York, New York 10019
SUB-ADMINISTRATOR
Forum Financial Services, Inc.
Two Portland Square
Portland, Maine 04101
CUSTODIAN
The Chase Manhattan Bank, N.A.
Global Custody Division
Woolgate House, Coleman Street
London EC2P 2HD, United Kingdom
TRANSFER AND DIVIDEND DISBURSING AGENT
Forum Financial Corp.
P.O. Box 446
Portland, Maine 04112
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand, L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Table of Contents
PROSPECTUS SUMMARY................................. 2
The Fund........................................... 2
Investment Adviser................................. 2
Administrator and Distributor...................... 2
Purchases and Redemptions of Shares................ 2
Dividends and Distributions........................ 2
Risk Considerations................................ 3
Fee Table.......................................... 3
FINANCIAL HIGHLIGHTS............................... 4
INVESTMENT OBJECTIVE AND POLICIES.................. 5
Investment Objective and the Portfolio............. 5
Investment Policies................................ 6
ADDITIONAL INVESTMENT POLICIES
AND RISK CONSIDERATIONS........................... 7
Investment Restrictions............................ 7
Fundamental Policies............................... 7
Investment Types................................... 8
Risk Considerations................................ 12
MANAGEMENT......................................... 16
Board of Trustees.................................. 16
Investment Adviser and Portfolio Manager........... 16
Distribution Plan and Shareholder Service Plan..... 18
Expenses........................................... 19
Portfolio Transactions............................. 19
Code of Ethics..................................... 20
INVESTMENT IN THE FUND............................. 20
Purchase of Shares................................. 20
Retirement Plans................................... 22
Redemption of Shares............................... 22
Net Asset Value.................................... 23
DIVIDENDS, DISTRIBUTIONS AND TAXES................. 24
The Fund........................................... 24
The Portfolio...................................... 25
OTHER INFORMATION.................................. 25
Capitalization and Voting.......................... 25
Reports............................................ 26
Performance Information............................ 26
Custodian and Transfer Agent....................... 27
Shareholder Inquiries.............................. 27
Certain Service Organizations...................... 27
Fund Structure..................................... 27
[Logo] SCHRODERS
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Schroder
Emerging Markets
Fund Institutional
Portfolio
Advisor Shares
PROSPECTUS
May 17, 1996
Schroder Capital Funds (Delaware)
