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Schroder U.S. Smaller Companies Fund
Two Portland Square, Portland, Maine 04101 Fund Literature:(800) 290-9826
Advisor Information:(800) 730-29328 Account Information:(800) 344-8332
General Information:(207) 879-8903 Fax:(207) 879-6206
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Schroder Capital Management International Inc. - Investment Adviser
Schroder Fund Advisors Inc. - Administrator and Distributor
This Prospectus offers Advisor Shares of Schroder U.S. Smaller Companies
Fund (the "Fund"), a separately managed, diversified portfolio of Schroder
Capital Funds (Delaware) (the "Trust"), an open-end management investment
company currently consisting of five separate portfolios, each of which
has different investment objectives and policies. The Fund's investment
objective is capital appreciation. Current income will be incidental to
the objective of capital appreciation.
THE FUND CURRENTLY SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY HOLDING,
AS ITS ONLY INVESTMENT SECURITIES, AN INTEREST IN SCHRODER U.S. SMALLER
COMPANIES PORTFOLIO (THE "PORTFOLIO"), A SEPARATE PORTFOLIO OF SCHRODER
CAPITAL FUNDS ("SCHRODER CORE"), A REGISTERED OPEN-END MANAGEMENT
INVESTMENT COMPANY HAVING SUBSTANTIALLY THE SAME INVESTMENT OBJECTIVE AND
POLICIES AS THE FUND. ACCORDINGLY, THE FUND'S INVESTMENT EXPERIENCE WILL
CORRESPOND DIRECTLY WITH THE PORTFOLIO'S INVESTMENT EXPERIENCE. SEE
"OTHER INFORMATION -- FUND STRUCTURE." THE PORTFOLIO WILL SEEK TO ACHIEVE
ITS INVESTMENT OBJECTIVE BY INVESTING, UNDER NORMAL MARKET CONDITIONS, AT
LEAST 65% OF ITS TOTAL ASSETS IN EQUITY SECURITIES OF COMPANIES DOMICILED
IN THE UNITED STATES THAT, AT THE TIME OF PURCHASE, HAVE MARKET
CAPITALIZATIONS OF $1.5 BILLION OR LESS. INVESTMENTS IN SMALLER
CAPITALIZATION COMPANIES INVOLVE GREATER RISKS THAN THOSE RISKS ASSOCIATED
WITH INVESTMENTS IN LARGER CAPITALIZATION COMPANIES.
This Prospectus sets forth concisely the information a prospective
investor should know before investing in the Fund. A Statement of
Additional Information (the "SAI") dated May 17, 1996, as revised August
15, 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, as revised August 15, 1996.
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PROSPECTUS SUMMARY
The Fund. The Fund is a separately managed, diversified portfolio of the
Trust, a Delaware business trust registered as an open-end management
investment company under the Investment Company Act of 1940 (the "Act").
The Fund s investment objective is capital appreciation. Current income
will be incidental to the objective of capital appreciation. Currently,
the Fund seeks its investment objective by investing all of its investable
assets in the Portfolio. The Portfolio will seek to achieve its
investment objective by investing, under normal market conditions, at
least 65% of its total assets in equity securities of companies domiciled
in the United States that, at the time of purchase, have market
capitalizations of $1.5 billion or less.
The Fund currently offers two separate classes of shares: Investor Shares
and Advisor Shares. Only Advisor Shares are offered through this
Prospectus and are sometimes referred to herein as the "Shares."
Investment Adviser. The Portfolio's investment adviser is Schroder
Capital Management International Inc. ("SCMI"), 787 Seventh Avenue, New
York, New York 10019. The investment management fee paid to SCMI by the
Portfolio is borne indirectly by the Fund and any other investors in the
Portfolio. See "Management -- Investment Adviser and Portfolio Manager."
Administrator and Distributor. Schroder Fund Advisors Inc. ("Schroder
Advisors"), formerly Schroder Capital Distributors, Inc., serves as
administrator and distributor of the Fund, and Forum Financial Services,
Inc. ("Forum") serves as the Fund s administrator.
Purchases and Redemptions of Shares. Shares may be purchased or redeemed
by mail, by bank-wire and through an investor s broker-dealer or other
financial institution. The minimum initial investment is $2,500, except
that the minimum initial investment for an individual retirement account
is $250. The minimum subsequent investment is $250. See "Investment in
the Fund -- Purchase of Shares" and -- "Redemption of Shares."
Dividends and Other Distributions. The Fund annually declares and pays as
a dividend substantially all of its net investment income and net realized
short-term capital gain and distributes any net realized long-term capital
gain. Dividends and capital gain distributions are reinvested
automatically in additional shares of the Fund at net asset value unless
the shareholder has notified the Fund in an Account Application or
otherwise in writing of the shareholder s election to receive dividends or
other distributions in cash. See "Dividends, Other Distributions and
Taxes."
Risk Considerations. There can be no assurance that the Portfolio will
achieve its investment objective. The Fund's net asset value and total
return will fluctuate based upon changes in the value of the securities in
which the Portfolio invests so that, upon redemption, an investment in the
Fund may be worth more or less than its original value. The Portfolio s
policy of investing in smaller companies entails certain risks in addition
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to those normally associated with investments in equity securities. See
"Additional Investment Policies and Risk Considerations."
Fee Table
The table below is intended to assist investors in understanding the
expenses that an investor in Advisor Shares would incur. There are no
transaction expenses associated with purchases or redemptions of Advisor
Shares.
Annual Fund Operating Expenses (as a percentage of average net assets)(1)
Management Fees (2) . . . . . . . . . . . . . . . . . . . 1.00%
12b-1 Fees (3) . . . . . . . . . . . . . . . . . . . . . . 0.25%
Other Expenses (after reimbursements) (4) . . . . . . . . 0.74%
Total Fund Operating Expenses (4) . . . . . . . . . . . . 1.99%
(1) Annual Fund Operating Expenses are based on the Fund s
fiscal year ended October 31, 1995, restated to reflect
current fees and expense reimbursements. The Fund's
expenses will include the Fund's pro rata portion of all
operating expenses of the Portfolio. The Trust's Board
of Trustees believes that the aggregate per share
expenses of the Fund and the Portfolio (after expense
waivers and reimbursements) will be approximately equal
to the expenses the Fund would incur if its assets were
invested directly in the type of securities held by the
Portfolio.
(2) Management Fees reflect the fees paid by the Portfolio
and the Fund for investment advisory and administrative
services.
(3) Long-term holders of Advisor Shares may pay aggregate
sales charges totaling more than the economic equivalent
of the maximum front end sales charge permitted by the
Rules of Fair Practice of the National Association of
Securities Dealers, Inc.
(4) Absent expense reimbursements, Other Expenses and Total
Fund Operating Expenses would be 1.37% and 2.62%,
respectively.
SCMI and Schroder Advisors have voluntarily undertaken to waive a portion
of their fees or assume certain expenses of the Fund during the current
fiscal year to the extent that the Fund's total expenses exceed 1.99% of
the Fund's average daily net assets. This undertaking cannot be withdrawn
except by a majority vote of the Trust's Board of Trustees.
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Example
Based on the expenses listed above, you would pay the following expenses
on a $1,000 investment, assuming (1) a 5% annual return, (2) redemption at
the end of each time period, and (3) reinvestment of all dividends and
other distributions:
1 year $ 20
3 years $ 62
5 years $107
10 years $232
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RETURNS, AND ACTUAL EXPENSES OR RETURNS MAY BE MORE OR LESS
THAN THOSE SHOWN. The 5% annual return is not a prediction of the Fund s
return, but is required by the SEC.
FINANCIAL HIGHLIGHTS
The following financial highlights of the Fund are presented to assist
investors in evaluating the performance of a Share of the Fund for the
periods shown. The information presented relates to Investor Shares of
the Fund for a share outstanding for the periods shown. The holders of
Investor Shares bear expenses that are lower than those borne by the
holders of Advisor Shares. Prior to May 17, 1996, Advisor Shares had not
been offered by the Fund. Accordingly, information has not been presented
for Advisor Shares. Except for the period ended April 30, 1996, this
information is part of the Fund s financial statements and has been
audited by Coopers & Lybrand L.L.P., independent accountants to the Fund.
Information for the Fund's semi-annual period ended April 30, 1996, is
unaudited. The Fund's financial statements for the year ended October 31,
1995 and the independent accountants report thereon are contained in the
Fund's Annual Report to Shareholders and are incorporated by reference
into the SAI. Further information about the performance of the Fund is
contained in the Annual Report, which may be obtained without charge by
writing or calling the Fund at the address or the telephone number for
Fund Literature on the cover of this Prospectus.
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Six Months Ended Year Ended October 31,
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April 30, 1996(a) 1995 1994 1993(b)
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Net Asset Value, Beginning of Period $15.14 $11.81 $10.99 $10.00
Investment Operations
Net Investment Income (Loss) (0.01) (0.04) (0.07) (0.02)
Net Realized Income and Unrealized
Gain (Loss) on Investments 3.64 3.78 0.97 1.01
Total from Investment Operations 3.63 3.74 0.90 0.99
Distributions
from Net Investment Income - - - -
from Realized Capital Gain (1.95) (0.41) (0.08) -
from Capital Paid-In - - - -
Total Distributions (1.95) (0.41) (0.08) -
Net Asset Value, End of Period $16.82 $15.14 $11.81 $10.99
Total Return 22.28% 32.84% 8.26% 9.90%
Ratio/Supplementary Data:
Net Assets, End of Period (Thousands) $14,901 $15,287 $13,324 $12,489
Ratio of Expenses to Average Net Assets 1.36%(d) 1.49% 1.45% 2.03%(c)
Ratio of Net Investment
Income (Loss) to Average Net Assets (0.14)(c) (0.30%) (0.58%) (0.99%)(c)
Portfolio Turnover Rate 31.51% 92.68% 70.82% 12.58%
Average Brokerage Commission Rate $0.0180(e)
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(a) Unaudited.
(b) The Fund commenced operations on August 6, 1993.
(c) Annualized.
(d) For the fiscal year ending October 31, 1996, the ratio of
expenses to average net assets is estimated to be 1.49%.
(e) Amount represents the average commission per share paid to
brokers on the purchase and sale of portfolio securities.
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INVESTMENT OBJECTIVE AND POLICIES
The Fund is designed for the investment of that portion of an investor's
funds that can appropriately bear the special risks associated with
investment in smaller market capitalization companies with the aim of
capital appreciation. The Fund is not intended for investors whose
objective is assured income or preservation of capital.
Investment Objective and the Portfolio
The Fund's investment objective is capital appreciation. Current income
will be incidental to the objective of capital appreciation. There is no
assurance that the Fund will achieve its investment objective. The Fund's
investment objective is fundamental and cannot be changed without
shareholder approval.
The Fund currently seeks to achieve its investment objective by investing
all of its investable assets in the Portfolio, which has substantially the
same investment objective and policies as the Fund. Therefore, although
the following discusses the investment policies of the Portfolio and the
responsibilities of Schroder Core's Board of Trustees (the "Schroder Core
Board"), it applies equally to the Fund and the Trust's Board of Trustees
(the "Board"). Additional information concerning the investment policies
of the Fund and the Portfolio, including fundamental policies, is
contained in the SAI.
Investment Policies
The Portfolio will seek to achieve its investment objective by investing,
under normal market conditions, at least 65% of its total assets in equity
securities of companies domiciled in the United States that, at the time
of purchase, have market capitalizations of $1.5 billion or less. Market
capitalization means the market value of a company's outstanding stock.
In its investment approach, SCMI will attempt to identify securities of
companies that it believes can generate above average earnings growth,
selling at favorable prices in relation to book values and earnings. As
part of the investment decision, SCMI s assessment of the competency of an
issuer's management will be an important consideration. These criteria
are not rigid, and other investments may be included in the Portfolio if
they may help the Portfolio to attain its objective. These criteria can
be changed by the Schroder Core Board, without shareholder approval.
The Portfolio will invest principally in equity securities (common stocks,
securities convertible into common stocks or, subject to special
limitations, rights or warrants to subscribe for or purchase common
stocks). The Portfolio may also invest to a limited degree in non-
convertible debt securities and preferred stocks when, in the opinion of
SCMI, such investments are warranted to achieve the Portfolio's investment
objective. A convertible security is a bond, debenture, note, preferred
stock or other security that may be converted into or exchanged for a
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prescribed amount of common stock of the same or a different issuer within
a particular period of time at a specified price or formula.
The Portfolio may invest in securities of small, unseasoned companies
(which, together with any predecessors, have been in operation for less
than three years), as well as in securities of more established companies.
In view of the volatility of price movements of the former, as a non-
fundamental policy, the Portfolio currently intends to invest no more than
5% of its total assets in securities of small, unseasoned issuers.
Although there is no minimum rating for debt securities (convertible or
non-convertible) in which the Portfolio may invest, it is the present
intention of the Portfolio to invest no more than 5% of its net assets in
debt securities rated below Baa by Moody's Investors Service, Inc.
("Moody's") or BBB by Standard & Poor's Ratings Services ("S&P"), such
securities being commonly known as "high yield/high risk" securities or
"junk bonds," and it will not invest in debt securities that are in
default. High yield/high risk securities are predominantly speculative
with respect to the capacity to pay interest and repay principal and
generally involve a greater volatility of price than securities in higher
rated categories. In the event the Portfolio intends in the future to
invest more than 5% of its net assets in junk bonds, appropriate
disclosures will be made to existing and prospective shareholders. It
should be noted that even bonds rated Baa by Moody's or BBB by S&P are
described by those rating agencies as having speculative characteristics
and that changes in economic conditions or other circumstances are more
likely to lead to a weakened capacity of issuers of such bonds to make
principal and interest payments than is the case with higher grade bonds.
The Portfolio is not obligated to dispose of securities due to changes by
the rating agencies. See the SAI for information about the risks
associated with investing in junk bonds.
For temporary defensive purposes, the Portfolio may invest without
limitation in (or enter into repurchase agreements maturing in seven days
or less with U.S. banks and broker-dealers with respect to) short-term
debt securities, including commercial paper, U.S. Treasury bills, other
short-term U.S. Government securities, certificates of deposit and
bankers' acceptances of U.S. banks. The Portfolio also may hold cash and
time deposits in U.S. banks. See "Investment Policies" in the SAI for
further information about all these securities.
ADDITIONAL INVESTMENT POLICIES AND RISK CONSIDERATIONS
Investment Restrictions
The investment objective and all investment policies of the Fund and the
Portfolio that are designated as fundamental may not be changed without
approval of the holders of a majority of the outstanding voting securities
of the Fund or the Portfolio ("shares"), as applicable. A majority of
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
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(ii) more than 50% of outstanding shares. Unless otherwise indicated, all
investment policies of the Fund are not fundamental and may be changed by
the Board without approval by shareholders of the Fund. Likewise, non-
fundamental investment policies of the Portfolio may be changed by the
Schroder Core Board without approval of the Portfolio's interest holders.
For more information concerning shareholder voting, see "Other Information
-- Capitalization and Voting" and "Other Information -- Fund Structure."
Investment Types
Common and Preferred Stock. The Portfolio may invest in common and
preferred stock. Common stockholders are the owners of the company
issuing the stock and, accordingly, vote on various corporate governance
matters such as mergers. They are not creditors of the company, but
rather, upon liquidation of the company, are entitled to their pro rata
share of the company s assets after creditors (including fixed income
security holders) and, if applicable, preferred stockholders are paid.
Preferred stock is a class of stock having a preference over common stock
as to dividends and, generally, as to the recovery of investment. A
preferred stockholder is a shareholder in a company and not a creditor of
the company, as is a holder of the company s fixed income securities.
Dividends paid to common and preferred stockholders are distributions of
the earnings of the company and not interest payments, which are expenses
of the company. Equity securities owned by the Portfolio may be traded in
the over-the counter market or on a securities exchange, but may not be
traded every day or in the volume typical of securities traded on a major
U.S. national securities exchange. As a result, disposition by the
Portfolio of a security to meet redemptions by interest holders or
otherwise may require the Portfolio to sell these securities at a discount
from market prices, to sell during periods when disposition is not
desirable, or to make many small sales over a lengthy period of time. The
market value of all securities, including equity securities, is based upon
the market s perception of value and not necessarily the book value of an
issuer or other objective measure of a company s worth.
Repurchase Agreements. The Portfolio may invest in repurchase
agreements. A repurchase agreement is a means of investing monies for a
short period. In a repurchase agreement, a seller - a U.S. bank or
recognized broker-dealer - sells securities to the Portfolio and agrees to
repurchase the securities at the Portfolio's cost plus interest within a
specified period (normally one day). In these transactions, the values of
the underlying securities purchased by the Portfolio are monitored at all
times by SCMI to insure that the total value of the securities equals or
exceeds the value of the repurchase agreement, and the Portfolio's
custodian bank holds the securities until they are repurchased. In the
event of default by the seller under the repurchase agreement, the
Portfolio may have difficulties in exercising its rights to the underlying
securities and may incur costs and experience time delays in disposing of
them. To evaluate potential risks, SCMI reviews the creditworthiness of
those banks and dealers with which the Portfolio enters into repurchase
agreements.
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Illiquid and Restricted Securities. As a non-fundamental policy, the
Portfolio will not purchase or otherwise acquire any security if, as a
result, more than 15% of its net assets (taken at current value) would be
invested in securities that are illiquid by virtue of the absence of a
readily available market or because of legal or contractual restrictions
on resale ("restricted securities"). There may be undesirable delays in
selling illiquid securities at prices representing their fair value. This
policy includes over-the-counter options held by the Portfolio and the "in
the money" portion of the assets used to cover such options. The
limitation on investing in restricted securities does not include
securities that may not be resold to the general public but may be resold
to qualified institutional purchasers pursuant to Rule 144A under the
Securities Act of 1933. If SCMI determines that a "Rule 144A security" is
liquid pursuant to guidelines adopted by the Schroder Core Board, it will
not be deemed illiquid. These guidelines take into account trading
activity for the securities and the availability of reliable pricing
information, among other factors. If there is a lack of trading interest
in a particular Rule 144A security, that security may become illiquid,
which could affect the Portfolio s liquidity. See "Investment Policies --
Illiquid and Restricted Securities" in the SAI for further details.
Loans of Portfolio Securities. The Portfolio may lend portfolio
securities (other than in repurchase transactions) to brokers, dealers and
other financial institutions meeting specified credit conditions, if the
loan is collateralized in accordance with applicable regulatory
requirements and if, after any loan, the value of the securities loaned
does not exceed 25% of the value of the Portfolio's total assets. By so
doing, the Portfolio attempts to earn income through the receipt of
interest on the loan. In the event of the bankruptcy of the other party
to a securities loan, the Portfolio could experience delays in recovering
the securities it lent. To the extent that, in the meantime, the value of
the securities the Portfolio lent has increased, the Portfolio could
experience a loss.
The Portfolio may lend securities from its portfolio if liquid assets in
an amount at least equal to the current market value of the securities
loaned (including accrued interest thereon) plus the interest payable to
the Portfolio with respect to the loan is maintained as collateral by the
Portfolio in a segregated account. Any securities that the Portfolio may
receive as collateral will not become a part of its portfolio at the time
of the loan, and, in the event of a default by the borrower, the Portfolio
will, if permitted by law, dispose of such collateral except for such part
thereof that is a security in which the Portfolio is permitted to invest.
During the time that the securities are on loan, the borrower will pay the
Portfolio any accrued income on those securities, and the Portfolio may
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
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Portfolio's or the borrower's option. The Portfolio may pay reasonable
negotiated fees in connection with loaned securities, so long as such fees
are set forth in a written contract and approved by the Schroder Core
Board.
Derivative Securities: Warrants, Options and Futures Transactions
Warrants. The Portfolio may invest in warrants, which are options to
purchase an equity security at a specified price (usually representing a
premium over the applicable market value of the underlying equity security
at the time of the warrant s issuance) and usually during a specified
period of time. The Portfolio may not invest in warrants if, as a result,
more than 5% of its net assets would be so invested or if, more than 2% of
its net assets would be invested in warrants that are not listed on the
New York or American Stock Exchanges.
Options and Futures Transactions. While the Portfolio does not presently
intend to do so, it may write covered call options and purchase certain
put and call options, stock index futures, and options on stock index
futures and broadly-based stock indices, all of which are referred to as
"Hedging Instruments". In general, the Portfolio may use Hedging
Instruments (1) to attempt to protect against declines in the market value
of the Portfolio's securities and thus protect the Fund's net asset value
per share against downward market trends or (2) to establish a position in
the equity markets as a temporary substitute for purchasing particular
equity securities. The Portfolio will not use Hedging Instruments for
speculation. The Hedging Instruments that the Portfolio is authorized to
use have certain risks associated with them. Principal among such risks
are (a) the possible failure of such instruments as hedging techniques in
cases where the price movements of the securities underlying the options
or futures do not follow the price movements of the portfolio securities
subject to the hedge; (b) potentially unlimited loss associated with
futures transactions and the possible lack of a liquid secondary market
for closing out a futures position; and (c) possible losses resulting from
the inability of SCMI to correctly predict the direction of stock prices,
interests rates and other economic factors. The Hedging Instruments the
Portfolio may use and the risks associated with them are described in
greater detail under "Options and Futures Transactions" in the SAI.
Short Sales Against-the-Box. The Portfolio may not sell securities short
except in "short sales against-the-box." For federal income tax purposes,
short sales against-the-box may be made to defer recognition of gain or
loss on the sale of securities until the short position is closed out.
See "Short Sales Against-the-Box" in the SAI for further details.
Risk Considerations
All investments involve certain risks. Investments in smaller
capitalization companies involve greater risks than those risks associated
with investments in larger capitalization companies. Smaller
capitalization companies generally experience higher growth rates and
higher failure rates than do larger capitalization companies. The trading
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volume of securities of smaller capitalization companies is normally less
than that of larger capitalization companies and, consequently, generally
has a disproportionate effect on their market price, tending to make them
rise more in response to buying demand and fall more in response to
selling pressure than is the case with larger capitalization companies.
Investments in small, unseasoned issuers generally involve greater risk
than is customarily associated with larger, more seasoned companies. Such
issuers often have products and management personnel that have not been
thoroughly tested by time or the marketplace, and their financial
resources may not be as substantial as those of more established
companies. Their securities, which the Portfolio may purchase when they
are offered to the public for the first time, may have a limited trading
market, which may adversely affect their sale by the Portfolio and may
result in such securities being priced lower than otherwise might be the
case. If other institutional investors engage in trading this type of
security, the Portfolio may be forced to dispose of its holdings at prices
lower than might otherwise be obtained.
MANAGEMENT
Board of Trustees
The business and affairs of the Fund are managed under the direction of
the Board. The business and affairs of the Portfolio are managed under
the direction of the Schroder Core Board. The Trustees of both the Trust
and Schroder Core are Peter E. Guernsey, John I. Howell, Laura E. Luckyn-
Malone, Clarence F. Michalis, Hermann C. Schwab and Mark J. Smith.
Additional information regarding the Trustees and the respective executive
officers of the Trust and Schroder Core may be found in the SAI under the
heading "Management -- Trustees and Officers." The Board and the Schroder
Core Board have separately adopted written procedures reasonably
appropriate to deal with potential conflicts of interest.
Investment Adviser and Portfolio Manager
The Fund currently invests all of its investable assets in the Portfolio.
SCMI serves as investment adviser to the Portfolio. As such, SCMI manages
the investment and reinvestment of the Portfolio's assets and continuously
reviews, supervises and administers the Portfolio's investments. In this
regard, it is the responsibility of SCMI to make decisions relating to the
Portfolio s investments and to place purchase and sale orders regarding
investments with brokers or dealers selected by it in its discretion. For
its services with respect to the Portfolio, SCMI receives a monthly
advisory fee at the annual rate of 0.60% of the Portfolio's average daily
net assets. The Fund indirectly bears SCMI's advisory fees through its
investment in the Portfolio.
SCMI is a wholly-owned U.S. subsidiary of Schroders Incorporated, the
wholly-owned U.S. subsidiary of Schroders plc, a publicly owned company
organized under the laws of England. Schroders plc is the holding company
parent of a large world-wide group of banks and financial services
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companies (referred to as the "Schroder Group"), with associated companies
and branch and representative offices located in eighteen countries world-
wide. The investment management subsidiaries of the Schroder Group had
assets under management of over $100 billion as of December 31, 1995.
The investment management team of Fariba Talebi, a Vice President of the
Trust and a Group Vice President of SCMI, and Ira Unschuld, a Vice
President of the Trust and of SCMI, with the assistance of an investment
committee, is primarily responsible for the day-to-day management of the
Portfolio's investments and has so managed the Portfolio since its
inception. Ms. Talebi and Mr. Unschuld have been employed by SCMI in the
investment research and portfolio management areas since 1987 and 1990,
respectively.
Administrative Services
On behalf of the Fund, the Trust has entered into an administrative
services agreement with Schroder Advisors, 787 Seventh Avenue, New York,
New York 10019. Schroder Advisors is a wholly-owned subsidiary of SCMI.
On behalf of the Fund, the Trust has also entered into an administrative
services agreement with Forum, Two Portland Square, Portland, Maine 04101.
Pursuant to these agreements, Schroder Advisors and Forum provide certain
management and administrative services necessary for the Fund's
operations, other than the administrative services provided to the Fund by
SCMI. For these services, the Fund pays Schroder Advisors a monthly fee
of 0.25% of the Fund's average daily net assets and pays Forum a monthly
fee of 0.075% of the Fund's average daily net assets. Schroder Advisors
and Forum provide similar services to the Portfolio, for which the
Portfolio pays Forum a monthly fee at the annual rate of 0.075% of the
Portfolio's average daily net assets. Schroder Advisors receives no fee
for the administrative services it provides the Portfolio.
Expenses
SCMI and Schroder Advisors have voluntarily undertaken to assume certain
expenses of the Fund and the Portfolio (or to waive a portion of their
respective fees). This undertaking is designed to place a maximum limit
on the total Fund expenses (excluding taxes, interest, brokerage
commissions and other portfolio transaction expenses and extraordinary
expenses) chargeable to Advisor Shares of 1.99% of the average daily net
assets of the Fund attributable to those shares. This expense limitation
cannot be withdrawn except by a majority vote of the Trustees of the Trust
who are not interested persons (as defined in the Act) of the Trust. If
expense reimbursements are required, they will be made on a monthly basis.
Neither SCMI nor Schroder Advisors will be required to make any
reimbursements or waive any fees in excess of the fees payable to them by
the Fund on a monthly basis for their respective advisory and
administrative services.
Distribution Plan and Shareholder Services Plan
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<PAGE>
Schroder Advisors acts as distributor of the Fund s shares. Under a
distribution plan pursuant to Rule 12b-1 under the 1940 Act (the
"Distribution Plan") adopted by the Trust on behalf of the Fund, each
month the Trust pays directly or reimburses Schroder Advisors, as
distributor, for costs and expenses incurred in connection with the
distribution of Advisor Shares. Such payment or reimbursement is subject
to a limit on an annual basis to 0.50% of the Fund's average daily net
assets attributable to Advisor Shares. The maximum annual amount payable
under the Distribution Plan is currently 0.25%, which amount may only be
increased by action of the Board.
Payment or reimbursement under the Distribution Plan may be for various
types of costs, including: (1) advertising expenses, (2) costs of printing
prospectuses and other materials to be given or sent to prospective
investors, (3) expenses of sales employees or agents of Schroder Advisors,
including salary, commissions, travel and related expenses in connection
with the distribution of Advisor Shares, (4) payments to broker-dealers
who advise shareholders regarding the purchase, sale, or retention of
Advisor Shares, and (5) payments to banks, trust companies, broker-dealers
(other than Schroder Advisors) or other financial organizations
(collectively, "Service Organizations"). Payments to Service Organizations
under the Distribution Plan are calculated by reference to the average
daily net assets of Advisor Shares held by shareholders who have a
brokerage or other service relationship with the Service Organization.
The Fund will not be liable for distribution expenditures made by Schroder
Advisors in any given year in excess of the maximum amount payable under
the Distribution Plan in that year. Costs or expenses in excess of the per
annum limit may not be carried forward to future years. Salary expenses of
salesmen who are responsible for marketing various mutual funds of the
Trust may be allocated to those funds, including the Advisor Shares class
of the Fund, that have adopted a distribution plan similar to that of the
Fund on the basis of average daily net assets. Travel expenses may be
allocated to, or divided among, the particular funds of the Trust for
which they are incurred.
The Trust, on behalf of the Fund, has also adopted a shareholder service
plan (the "Shareholder Service Plan"), pursuant to which Schroder
Advisors, as administrator of the Fund, is authorized to pay Service
Organizations a servicing fee. Payments under the Shareholder Service
Plan may be for various types of services, including (1) answering
customer inquiries regarding the manner in which purchases, exchanges and
redemptions of shares of the Fund may be effected and other matters
pertaining to the Fund s services, (2) providing necessary personnel and
facilities to establish and maintain shareholder accounts and records, (3)
assisting shareholders in arranging for processing purchase, exchange and
redemption transactions, (4) arranging for the wiring of funds, (5)
guaranteeing shareholder signatures in connection with redemption orders
and transfers and changes in shareholder-designated accounts, (6)
integrating periodic statements with other customer transactions and (7)
providing such other related services as the shareholder may request.
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<PAGE>
Payments to Service Organizations under the Shareholder Service Plan are
calculated by reference to the average daily net assets of Advisor Shares
held by shareholders who have a brokerage or other service relationship
with the Service Organization. Some Service Organizations may impose
additional or different conditions on their clients, such as requiring
their clients to invest more than the minimum or subsequent investments
specified by the Fund or charging a direct fee for servicing. If imposed,
these fees would be in addition to any amounts which might be paid to the
Service Organization by Schroder Advisors. Each Service Organization has
agreed to transmit to its clients a schedule of any such fees.
Shareholders using Service Organizations are urged to consult them
regarding any such fees or conditions.
Portfolio Transactions
SCMI places orders for the purchase and sale of the Portfolio's
investments with brokers and dealers selected by SCMI in its discretion
and seeks "best execution" of such portfolio transactions. The Portfolio
may pay higher than the lowest available commission rates when SCMI
believes it is reasonable to do so in light of the value of the brokerage
and research services provided by the broker effecting the transaction.
SCMI may also consider sales of shares of the Fund or any other entity
that invests in the Portfolio as a factor in the selection of broker-
dealers to execute portfolio transactions for the Portfolio.
Subject to the Portfolio's policy of obtaining the best price consistent
with quality of execution on transactions, SCMI may employ (a) Schroder
Wertheim & Company, Incorporated and its affiliates ("Schroder Wertheim"),
affiliates of SCMI, to effect transactions of the Portfolio on the New
York Stock Exchange and (b) Schroder Securities Limited and its affiliates
("Schroder Securities"), affiliates of SCMI, to effect transactions of the
Portfolio, if any, on certain foreign securities exchanges. Because of the
affiliation between SCMI and Schroder Wertheim and Schroder Securities,
the Portfolio's payment of commissions to them is subject to procedures
adopted by the Schroder Core Board designed to ensure that such
commissions will not exceed the usual and customary brokers' commissions.
No specific portion of the Portfolio's brokerage will be directed to
Schroder Wertheim or Schroder Securities, and in no event will either
receive any brokerage in recognition of research services.
Although the Portfolio does not currently engage in directed brokerage
arrangements to pay expenses, it may do so in the future. These
arrangements, whereby brokers executing the Portfolio s transactions would
agree to pay designated expenses of the Portfolio if brokerage commissions
generated by the Portfolio reached certain levels, might reduce the
Portfolio s expenses (and, indirectly, the Fund s expenses). As
anticipated, these arrangements would not materially increase the
brokerage commissions paid by the Portfolio. Brokerage commissions are
not deemed to be Fund expenses. In the Fund s fee table, per share table,
and financial highlights, however, directed brokerage arrangements might
cause Fund expenses to appear lower than actual expenses incurred.
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<PAGE>
Code of Ethics
The Trust, Schroder Core, SCMI, Schroder Advisors, and Schroders
Incorporated have adopted codes of ethics that contain a policy on
personal securities transactions by "access persons," including portfolio
managers and investment analysts. That policy complies in all material
respects with the recommendations set forth in the Report of the Advisory
Group on Personal Investing of the Investment Company Institute, of which
the Trust is a member.
INVESTMENT IN THE FUND
Purchase of Shares
Investors may purchase Advisor Shares directly from the Trust.
Prospectuses, sales material and Account Applications can be obtained from
the Trust or through Forum Financial Corp., the Fund's transfer agent
(the "Transfer Agent"). See "Other Information - Shareholder Inquiries."
Investments may also be made through Service Organizations that assist
their customers in purchasing shares of the Fund. Such Service
Organizations may charge their customers a service fee for processing
orders to purchase or sell shares of the Fund. Investors wishing to
purchase shares through their accounts at a Service Organization should
contact that organization directly for appropriate instructions.
Shares of the Fund are offered at the net asset value next determined
after receipt of a completed Account Application (at the address set forth
below). The minimum initial investment is $2,500, except that the minimum
initial investment for an individual retirement account is $250. The
minimum subsequent investment is $250. All purchase payments are invested
in full and fractional shares. The Fund is authorized to reject any
purchase order.
Initial and subsequent purchases may be made by mailing a check (in U.S.
dollars), payable to Schroder U.S. Smaller Companies Fund, to:
Schroder U.S. Smaller Companies Fund
P.O. Box 446
Portland, Maine 04112
For initial purchases, the check must be accompanied by a completed
Account Application in proper form. Further documentation, such as copies
of corporate resolutions and instruments of authority, may be requested
from corporations, administrators, executors, personal representatives,
directors or custodians to evidence the authority of the person of entity
making the subscription request.
Investors and Service Organizations (on behalf of their customers) may
transmit purchase payments by Federal Reserve Bank wire directly to the
Fund as follows:
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<PAGE>
Chase Manhattan Bank
New York, NY
ABA No.: 021000021
For Credit To: Forum Financial Corp.
Acct. No.: 910-2-718187
Ref.: Schroder U.S. Smaller Companies Fund - Advisor Shares
Account of: (shareholder name)
Account Number: (shareholder account number)
The wire order must specify the name of the Fund, the Advisor Shares
class, the account name and number, address, confirmation number, amount
to be wired, name of the wiring bank and name and telephone number of the
person to be contacted in connection with the order. If the initial
investment is by wire, an account number will be assigned and an Account
Application must be completed and mailed to the Fund. Wire orders received
prior to 4:00 p.m. (eastern time) on a Fund Business Day (as defined under
"Net Asset Value" below) will be processed at the net asset value
determined as of that day. Wire orders received after 4:00 p.m. will be
processed at the net asset value determined as of the next Fund Business
Day. See "Net Asset Value" below.
For each shareholder of record, the Transfer Agent, as the shareholder's
agent, establishes an open account to which all Shares purchased are
credited, together with any dividends and capital gain distributions that
are reinvested in additional Shares. Although most shareholders elect not
to receive Share certificates, certificates for full Shares can be
obtained by specific written request to the Transfer Agent. No
certificates are issued for fractional Shares. The Transfer Agent will
deem an account lost if six months have passed since correspondence to the
shareholder s address of record is returned, unless the Transfer Agent
determines the shareholder s new address. When an account is deemed lost,
dividends and capital gain distributions will be reinvested. In addition,
the amount of any outstanding checks for dividends and capital gain
distributions that have been returned to the Transfer Agent will be
reinvested and such checks will be canceled.
Retirement Plans
Shares of the Fund are offered in connection with tax-deferred retirement
plans. Application forms and further information about these plans,
including applicable fees, are available upon request. Before investing
in the Fund through one of these plans, investors should consult their tax
advisors.
Individual Retirement Accounts
The Fund may be used as an investment vehicle for an IRA. An IRA naming
The First National Bank of Boston as custodian is available from the Trust
or the Transfer Agent. The minimum initial investment for an IRA is $250;
the minimum subsequent investment is $250. IRAs are available to
individuals who receive compensation or earned income, and their spouses,
whether or not they are active participants in a tax-qualified or
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<PAGE>
government-approved retirement plan. An IRA contribution by an individual
who participates, or whose spouse participates, in a tax-qualified or
government-approved retirement plan may not be deductible, depending upon
the individual's income. Individuals also may establish an IRA to receive
a "rollover" contribution of distributions from another IRA or a qualified
plan. Tax advice should be obtained before effecting a rollover.
Redemption of Shares
Shares of the Fund are redeemed at their next determined net asset value
following receipt by the Fund (at the address set forth above under
"Purchase of Shares") of a redemption request in proper form. See "Net
Asset Value." Redemption requests may be made between 9:00 a.m. and 6:00
p.m. (eastern time) on each day that the New York Stock Exchange is open
for trading. Redemption requests that are received prior to 4:00 p.m.
(eastern time) will be processed at the net asset value determined as of
that day. Redemption requests that are received after 4:00 p.m. will be
processed at the net asset value determined the next Fund Business Day.
See "Net Asset Value" below.
By Telephone. Redemption requests may be made by telephoning the Transfer
Agent at the Account Information telephone number on the cover page of
this Prospectus. A shareholder must provide the Transfer Agent with the
class of Shares, the dollar amount or number of Shares to be redeemed, the
shareholder account number and some additional form of identification such
as a password. A redemption by telephone may be made only if the telephone
redemption privilege option has been elected on the Account Application or
otherwise in writing. In an effort to prevent unauthorized or fraudulent
redemption requests by telephone, reasonable procedures will be followed
by the Transfer Agent to confirm that such instructions are genuine. The
Transfer Agent and the Trust will not be liable for any losses due to
unauthorized or fraudulent redemption requests but may be liable if they
do not follow these procedures. Shares for which certificates have been
issued may not be redeemed by telephone. In times of drastic economic or
market changes, it may be difficult to make redemptions by telephone. If a
shareholder cannot reach the Transfer Agent by telephone, redemption
requests may be mailed or hand-delivered to the Transfer Agent.
Written Requests. Redemptions may be made by letter to the Fund specifying
the class of Shares, the dollar amount or number of Shares to be redeemed
and the shareholder account number. The letter must also be signed in
exactly the same way the account is registered (if there is more than one
owner of the Shares, all must sign) and, in certain cases, signatures must
be guaranteed by an institution that is acceptable to the Transfer Agent.
Such institutions include certain banks, brokers, dealers (including
municipal and government securities brokers and dealers), credit unions
and savings associations. Notaries public are not acceptable. Further
documentation may be requested to evidence the authority of the person or
entity making the redemption request. Questions concerning the need for
signature guarantees or documentation of authority should be directed to
the Fund at the above address or by calling the Account Information
telephone number appearing on the cover of this Prospectus.
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<PAGE>
If Shares to be redeemed are held in certificate form, the certificates
must be enclosed with the redemption request and the assignment form on
the back of the certificates, or an assignment separate from the
certificates (but accompanied by the certificates), must be signed by all
owners in exactly the same way the owners names are written on the face
of the certificates. Requirements for signature guarantees and/or
documentation of authority as described above could also apply. For your
protection, the Fund suggests that certificates be sent by registered
mail.
Additional Redemption Information. Checks for redemption proceeds will
normally be mailed within seven days. No redemption will be effected
until all checks in payment for the purchase of the Shares to be redeemed
have been cleared, which may take up to fifteen calendar days. Unless
other instructions are given in proper form, a check for the proceeds of a
redemption will be sent to the shareholder's address of record.
The Fund may suspend the right of redemption during any period when (i)
trading on the New York Stock Exchange is restricted or that exchange is
closed, (ii) the SEC has by order permitted such suspension, or (iii) an
emergency, as defined by rules of the SEC, exists making disposal of
portfolio investments or determination of the Fund s net asset value not
reasonably practicable.
If the Board determines that it would be detrimental to the best interest
of the remaining shareholders of the Fund to make payment wholly or partly
in cash, the Fund may redeem Shares in whole or in part by a distribution
in kind of securities from the portfolio of the Fund, in lieu of cash, in
conformity with applicable rules of the SEC. The Fund will, however,
redeem Shares solely in cash up to the lesser of $250,000 or 1% of net
assets during any 90-day period for any one shareholder. In the event that
payment for redeemed Shares is made wholly or partly in portfolio
securities, the shareholder may be subject to additional risks and costs
in converting the securities to cash. See "Additional Purchase and
Redemption Information -- Redemption in Kind" in the SAI.
The proceeds of a redemption may be more or less than the amount invested
and, therefore, a redemption may result in a gain or loss for federal
income tax purposes.
Due to the relatively high cost of maintaining smaller accounts, the Fund
reserves the right to redeem Shares in any account (other than an IRA) if
at any time the account does not have a value of at least $2,000, unless
the value of the account fell below that amount solely as a result of
market activity. Shareholders will be notified that the value of the
account is less than $2,000 and be allowed at least 30 days to make an
additional investment to increase the account balance to at least $2,000.
Net Asset Value
The net asset value per Share of the Fund is calculated separately for
each class of Shares of the Fund at 4:00 p.m. (eastern time), Monday
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<PAGE>
through Friday, each day that the New York Stock Exchange is open for
trading (a "Fund Business Day"), which excludes the following holidays:
New Year's Day, Presidents Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. Net asset value per
Share is calculated by dividing the aggregate value of the Fund's assets
(which is principally the value of the Fund's interest in the Portfolio)
less all Fund liabilities, if any, by the number of Shares of the Fund
outstanding.
Securities held by the Portfolio that are listed on recognized stock
exchanges are valued at the last reported sale price, prior to the time
when the securities are valued, on the exchange on which the securities
are principally traded. Listed securities traded on recognized stock
exchanges where last sale prices are not available are valued at mid-
market prices. Securities traded in over-the-counter markets, or listed
securities for which no trade is reported on the valuation date, are
valued at the most recent reported mid-market price. Other securities and
assets for which market quotations are not readily available are valued at
fair value as determined in good faith using methods approved by the
Schroder Core Board.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The Fund
Dividends and other distributions. At least annually the Fund declares
and pays as a dividend substantially all of its net investment income and
net short-term capital gain and distributes any net capital gain (the
excess of net long-term capital gain over net short-term capital loss).
The Fund also may make an additional dividend or other distribution if
necessary to avoid a 4% excise tax on certain undistributed income and
gain.
Dividends and capital gain distributions on Advisor Shares will be
reinvested automatically in additional Advisor Shares at net asset value
unless the shareholder elects in writing to receive distributions in cash.
Dividends and other distributions paid by the Fund with respect to both
classes of its shares will be calculated in the same manner and at the
same time. The per share dividends on Advisor Shares will be lower than
the per share dividends on Investor Shares as a result of the higher
expenses allocable to Advisor Shares.
Taxes. The Fund intends to continue to qualify for treatment as a
regulated investment company ("RIC") under the Internal Revenue Code of
1986, as amended, so that it will be relieved of federal income tax on
that part of its investment company taxable income (consisting generally
of net investment income and net short-term capital gain) and net capital
gain that is distributed to its shareholders.
Dividends from the Fund's investment company taxable income generally will
be taxable to shareholders as ordinary income whether they are invested in
additional Shares or received in cash. Distributions by the Fund of any
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<PAGE>
net capital gain, when designated as such, will be taxable to a
shareholder as long-term capital gain, regardless of how long the
shareholder has held the Shares and whether they are invested in
additional Shares or received in cash. Each year the Trust will notify
shareholders of the tax status of dividends and other distributions.
Dividends from the Fund will qualify for the dividends-received deduction
for corporate shareholders to the extent they do not exceed the aggregate
amount of dividends received by the Fund from domestic corporations,
provided the Fund shares are held by such a shareholder for more than 45
days. If securities held by the Fund are considered to be debt-financed
(generally, acquired with borrowed funds), are held by the Fund for less
than 46 days (91 days in the case of certain preferred stock), or are
subject to certain forms of hedges or short sales, the portion of the
dividends paid by the Fund attributable to such securities will not be
eligible for the dividends-received deduction.
A loss realized by a shareholder on the sale of Shares held for six months
or less with respect to which capital gain distributions have been paid
will, to the extent of such distributions, be treated as long-term capital
loss. Furthermore, a loss realized on a disposition of Shares will be
disallowed to the extent those Shares are replaced (whether by
reinvestment of distributions or otherwise) within a period of 61 days
beginning 30 days before and ending 30 days after the disposition. In
such a case, the basis of the Shares acquired will be adjusted to reflect
the disallowed loss.
Dividends and other distributions by the Fund reduce the net asset value
of the Shares. If a distribution reduces the net asset value below a
shareholder's cost basis, the distribution nevertheless will be taxable to
the shareholder as ordinary income or capital gain as described above,
even though, from an investment standpoint, it may constitute a partial
return of capital. In particular, investors should be careful to consider
the tax implications of buying Shares just prior to a distribution. The
price of Shares purchased at that time includes the amount of the
forthcoming distribution, with the result that those purchasing just prior
to a dividend or other distribution will receive a distribution that
nevertheless will be taxable to them.
On redemption or sale of his Shares, a shareholder will realize a taxable
gain or loss depending upon his basis of the Shares. The gain or loss
generally will be treated as capital gain or loss if the Shares are
capital assets in the shareholders' hands and will be long-term or short-
term depending upon the shareholder's holding period for the Shares.
Depending on the residence of the shareholder for tax purposes,
distributions may also be subject to state and local taxes, including
withholding taxes. Shareholders should consult their own tax advisors as
to the tax consequences of ownership of Shares in their particular
circumstances.
The Fund must withhold 31% from dividends, capital gain distributions and
redemption proceeds payable to any individuals and certain other
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<PAGE>
noncorporate shareholders who do not furnish the Fund with a correct
taxpayer identification number. Withholding at that rate also is required
from dividends and capital gain distributions payable to such shareholders
who otherwise are subject to backup withholding.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting the Fund and its shareholders; see the
SAI for a further discussion.
The Portfolio
The Portfolio will be classified for federal income tax purposes as a
partnership and thus will not be required to pay federal income tax on its
net investment income and capital gains. All net investment income and
gain and losses of the Portfolio will be deemed to have been "passed
through" to the Fund in proportion to its holdings of the Portfolio,
regardless of whether such income or gain has been distributed by the
Portfolio. The Portfolio intends to conduct its operations so as to
enable the Fund to continue to qualify for treatment as a RIC.
OTHER INFORMATION
Capitalization and Voting
The Trust was organized as a Maryland corporation on July 30, 1969 and on
January 9, 1996 was reorganized as a Delaware business trust. The Trust
was formerly known as "Schroder Capital Funds, Inc." The Trust has
authority to issue an unlimited number of shares of beneficial interest.
The Trust Board may, without shareholder approval, divide the authorized
shares into an unlimited number of separate portfolios or series (such as
the Fund) and may divide portfolios or series into classes of shares (such
as Advisor Shares), and the costs of doing so will be borne by the Trust.
The Trust currently consists of five separate portfolios, each of which
has separate investment objectives and policies. The Fund currently
consists of two classes of shares.
Each share of the Fund is entitled to participate equally in dividends and
other distributions and the proceeds of any liquidation except that, due
to the differing expenses borne by the classes, dividends and liquidation
proceeds for each class will likely differ. Shares are fully paid and
non-assessable, and shareholders have no pre-emptive rights. Shareholders
have non-cumulative voting rights, which means that the holders of more
than 50% of the shares voting for the election of Trustees can elect 100%
of the Trustees if they choose to do so. A shareholder is entitled to one
vote for each full share held (and a fractional vote for each fractional
share held) standing in his name on the books of the Trust. On matters
requiring shareholder approval, shareholders of the Trust are entitled to
vote only with respect to matters that affect the interest of the Fund or
class of shares they hold, except as otherwise required by applicable law.
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
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<PAGE>
office have been elected by shareholders. However, the holders of not less
than a majority of the outstanding shares of the Trust may remove any
person serving as a Trustee, and the Trust Board will call a special
meeting of shareholders to consider removal of one or more Trustees if
requested in writing to do so by the holders of not less than 10% of the
outstanding shares of the Trust. Each share of the Fund has equal voting
rights, except that if a matter affects only the shareholders of a
particular class only shareholders of that class shall have a right to
vote.
As of August 1, 1996, Schroder Nominees Limited may be deemed to control
the Fund for purposes of the Act. From time to time, certain shareholders
may own a large percentage of the shares of a Fund. Accordingly, those
shareholders may be able to greatly affect (if not determine) the outcome
of a shareholder vote.
Reports
The Trust sends to each shareholder of the Fund a semi-annual report and
an audited annual report.
Performance Information
The Fund may, from time to time include quotations of its total return in
advertisements or reports to shareholders or prospective investors. Total
return is calculated separately for each class of the Fund. Quotations of
average annual total return will be expressed in terms of the average
annual compounded rate of return of a hypothetical investment in a class
of shares over a period of one, five and ten years. Total return
quotations assume that all dividends and other distributions are
reinvested when paid.
Performance information for the Fund may be compared to various unmanaged
securities indices, groups of mutual funds tracked by mutual fund ratings
services, or other general economic indicators. Unmanaged indices may
assume the reinvestment of distributions but generally do not reflect
deductions for administrative and management costs and expenses.
Performance information for the Fund represents only past performance and
does not necessarily indicate future results. Performance information
should be considered in light of the Fund's investment objective and
policies, characteristics and quality of the Fund's investments, and the
market conditions during the given time period and should not be
considered as a representation of what may be achieved in the future. For
a description of the methods used to determine total return for the Fund,
see the SAI.
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.
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<PAGE>
Shareholder Inquiries
Inquiries about the Fund, including its past performance, should be
directed to:
Schroder U.S. Smaller Companies Fund
P.O. Box 446
Portland, Maine 04112
Information about specific shareholder accounts may be obtained from the
Transfer Agent by calling (800) 344-8332.
Certain Service Organizations
The Glass-Steagall Act and other applicable laws and regulations provide
that banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks
from performing administrative and shareholder servicing functions as
Service Organizations. However, judicial or administrative decisions or
interpretations of such laws, as well as changes in either federal or
state regulations relating to the permissible activities of banks and
their subsidiaries or affiliates, could prevent a bank Service
Organization from continuing to perform all or part of its servicing
activities. If a bank were prohibited from so acting, its shareholder
clients would be permitted to remain shareholders of the Fund and
alternative means for continuing the servicing of such shareholders would
be sought. It is not expected that shareholders would suffer any adverse
financial consequences as a result of any of these occurrences.
Fund Structure
Classes of Shares. The Fund has two classes of shares, Advisor Shares and
Investor Shares. Investor Shares are offered by a separate prospectus to
corporations, institutions, and fiduciaries, including fiduciary, agency,
and custodial clients of bank trust departments, trust companies, and
their affiliates. Investor Shares incur less expenses than Advisor
Shares. Accordingly, the performance of the two classes will differ.
Except for certain differences, each share of each class represents an
undivided proportionate interest in the Fund. Each share of the Fund is
entitled to participate equally in dividends and other distributions and
the proceeds of any liquidation of the Fund except that, due to the
differing expenses borne by the two classes, the amount of dividends and
other distributions will differ between the classes. Information about
Investor Shares is available from the Fund by calling Forum Financial
Corp. at (207) 879-8903.
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
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<PAGE>
laws of the State of Delaware in September 1995. Schroder Core is
registered under the Act as an open-end management investment company and
currently has three separate portfolios. The assets of the Portfolio, a
diversified portfolio, belong only to, and the liabilities of the
Portfolio are borne solely by, the Portfolio and no other portfolio of
Schroder Core.
The investment objective and fundamental investment policies of the Fund
and the Portfolio can be changed only with shareholder or interestholder
approval, respectively. See "Investment Objective and Policies" and
"Management of the Fund" for a complete description of the Portfolio's
investment objective, policies, restrictions, management, and expenses.
The Fund's investment in the Portfolio is in the form of a
non-transferable beneficial interest. As of the date of this Prospectus,
the Fund is the only institutional investor in the Portfolio. The
Portfolio may permit other investment companies or institutional investors
to invest in it. All other investors in the Portfolio will invest on the
same terms and conditions as the Fund and will pay a proportionate share
of the Portfolio's expenses.
The Portfolio normally will not hold meetings of investors except as
required by the Act. Each investor in the Portfolio will be entitled to
vote in proportion to its relative beneficial interest in the Portfolio.
On most issues subject to a vote of investors, as required by the Act and
other applicable law, the Fund will solicit proxies from its shareholders
and will vote its interest in the Portfolio in proportion to the votes
cast by its shareholders. If there are other investors in the Portfolio,
there can be no assurance that any issue that receives a majority of the
votes cast by Fund shareholders will receive a majority of votes cast by
all investors in the Portfolio; indeed, if other investors hold a majority
interest in the Portfolio, they could have voting control of the
Portfolio.
The Portfolio will not sell its shares directly to members of the general
public. Another investor in the Portfolio, such as an investment company,
that might sell its shares to members of the general public would not be
required to sell its shares at the same public offering price as the Fund
and could have different advisory and other fees and expenses than the
Fund. Therefore, Fund shareholders may have different returns than
shareholders in another investment company that invests exclusively in the
Portfolio. Information regarding any such funds is available from
Schroder Core by calling Forum Financial Corp. at (207) 879-8903.
Under the federal securities laws, any person or entity that signs a
registration statement may be liable for a misstatement or omission of a
material fact in the registration statement. Schroder Core, its Trustees
and certain of its officers are required to sign the registration
statement of the Trust and may be required to sign the registration
statements of certain other future publicly offered investors in the
Portfolio. In addition, under the federal securities laws, Schroder Core
could be liable for misstatements or omissions of a material fact in any
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proxy soliciting material of a publicly offered investor in Schroder Core,
including the Fund. Under the Trust Instrument for Schroder Core, each
investor in the Portfolio, including the Trust, will indemnify Schroder
Core and its Trustees and officers ("Schroder Core Indemnities") against
certain claims. Indemnified claims are those brought against Schroder
Core Indemnities but based on a misstatement or omission of a material
fact in the investor's registration statement or proxy materials, except
to the extent such claim is based on a misstatement or omission of a
material fact relating to information about Schroder Core in the
investor's registration statement or proxy materials that was supplied to
the investor by Schroder Core. Similarly, Schroder Core will indemnify
each investor in the Portfolio, including the Fund, for any claims brought
against the investor with respect to the investor's registration statement
or proxy materials, to the extent the claim is based on a misstatement or
omission of a material fact relating to information about Schroder Core
that is supplied to the investor by Schroder Core. In addition, each
registered investment company investor in the Portfolio will indemnify
each Schroder Core Indemnitee against any claim based on a misstatement or
omission of a material fact relating to information about a series of the
registered investment company that did not invest in the Core. The
purpose of these cross-indemnity provisions is principally to limit the
liability of Schroder Core to information that it knows or should know and
can control. With respect to other prospectuses and other offering
documents and proxy materials of investors in Schroder Core, its liability
is similarly limited to information about and supplied by it.
Certain Risks of Investing in the Portfolio. The Fund's investment in the
Portfolio may be affected by the actions of other large investors in the
Portfolio, if any. For example, if the Portfolio had a large investor
other than the Fund that redeemed its interest in the Portfolio, the
Portfolio's remaining investors (including the Fund) might, as a result,
experience higher pro rata operating expenses, thereby producing lower
returns.
The Fund may withdraw its entire investment from the Portfolio at any
time, if the Board determines that it is in the best interests of the Fund
and its shareholders to do so. The Fund might withdraw, for example, if
there were other investors in the Portfolio with power to, and who did by
a vote of the shareholders of all investors (including the Fund), change
the investment objective or policies of the Portfolio in a manner not
acceptable to the Board. A withdrawal could result in a distribution in
kind of portfolio securities (as opposed to a cash distribution) by the
Portfolio. That distribution could result in a less diversified portfolio
of investments for the Fund and could affect adversely the liquidity of
the Fund's portfolio. If the Fund decided to convert those securities to
cash, it usually would incur brokerage fees or other transaction costs.
If the Fund withdrew its investment from the Portfolio, the Board would
consider what action might be taken, including the management of the
Fund's assets in accordance with its investment objective and policies by
SCMI, the Fund's investment adviser and subadviser, respectively, or the
investment of all of the Fund's investable assets in another pooled
investment entity having substantially the same investment objective as
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the Fund. The inability of the Fund to find a suitable replacement
investment, in the event the Board decided not to permit SCMI to manage
the Fund's assets, could have a significant impact on shareholders of the
Fund.
Each investor in the Portfolio, including the Fund, will be liable for all
obligations of the Portfolio but not any other portfolio of Schroder Core.
The risk to an investor in the Portfolio of incurring financial loss on
account of such liability, however, would be limited to circumstances in
which the Portfolio was unable to meet its obligations the occurrence of
which SCMI considers to be quite remote. Upon liquidation of the
Portfolio, investors would be entitled to share pro rata in the net assets
of the Portfolio available for distribution to investors.
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Investment Adviser
Schroder Capital Management International Inc.
787 Seventh Avenue
New York, New York 10019
Administrator & Distributor
Schroder Fund Advisors Inc.
787 Seventh Avenue
New York, New York 10019
Administrator
Forum Financial Services, Inc.
Two Portland Square
Portland, Maine 04101
Custodian
The Chase Manhattan Bank, N.A.
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
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Table of Contents
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . 1
The Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Investment Adviser . . . . . . . . . . . . . . . . . . . . . . 1
Administrator and Distributor . . . . . . . . . . . . . . . . 1
Purchases and Redemptions of Shares . . . . . . . . . . . . . 1
Dividends and Other Distributions . . . . . . . . . . . . . . 1
Risk Considerations . . . . . . . . . . . . . . . . . . . . . 1
Fee Table . . . . . . . . . . . . . . . . . . . . . . . . . . 2
FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . 4
INVESTMENT OBJECTIVE
AND POLICIES . . . . . . . . . . . . . . . . . . . . . . . . 5
Investment Objective and the Portfolio . . . . . . . . . . . . 5
Investment Policies . . . . . . . . . . . . . . . . . . . . . 5
ADDITIONAL INVESTMENT POLICIES AND
RISK CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . 6
Investment Restrictions . . . . . . . . . . . . . . . . . . . 6
Investment Types . . . . . . . . . . . . . . . . . . . . . . . 6
Risk Considerations . . . . . . . . . . . . . . . . . . . . . 8
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Board of Trustees . . . . . . . . . . . . . . . . . . . . . . 9
Investment Adviser and Portfolio Manager . . . . . . . . . . . 9
Administrative Services . . . . . . . . . . . . . . . . . . . 9
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Distribution Plan and Shareholder Services Plan . . . . . . . 10
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . 11
Code of Ethics . . . . . . . . . . . . . . . . . . . . . . . . 11
INVESTMENT IN THE FUND . . . . . . . . . . . . . . . . . . . . 11
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . 11
Retirement Plans . . . . . . . . . . . . . . . . . . . . . . . 13
Individual Retirement Accounts . . . . . . . . . . . . . . . . 13
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . 13
Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . 14
DIVIDENDS, OTHER DISTRIBUTIONS
AND TAXES . . . . . . . . . . . . . . . . . . . . . . . . . 15
The Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
The Portfolio . . . . . . . . . . . . . . . . . . . . . . . . 16
OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . 16
Capitalization and Voting . . . . . . . . . . . . . . . . . . 16
Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Performance Information . . . . . . . . . . . . . . . . . . . 17
Custodian and Transfer Agent . . . . . . . . . . . . . . . . . 17
Shareholder Inquires . . . . . . . . . . . . . . . . . . . . . 17
Certain Service Organizations . . . . . . . . . . . . . . . . 17
Fund Structure . . . . . . . . . . . . . . . . . . . . . . . 18
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