As filed with the Securities and Exchange Commission on June 30, 1997
File No. 2-34215
File No. 811-1911
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 62
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 43
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SCHRODER CAPITAL FUNDS (DELAWARE)
(FORMERLY SCHRODER CAPITAL FUNDS, INC.)
(Exact Name of Registrant as Specified in Charter)
Two Portland Square, Portland, Maine 04101
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: 207-879-1900
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Catherine S. Wooledge, Esq.
Forum Financial Services, Inc.
Two Portland Square, Portland, Maine 04101
(Name and Address of Agent for Service)
Copies of Communications to:
Timothy W. Diggins, Esq.
Ropes & Gray
One International Place
Boston, Massachusetts 10005
Alexandra Poe, Esq.
Schroder Capital Management International Inc.
787 Seventh Avenue, 34th Floor
New York, New York 10019
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It is proposed that this filing will become effective:
[X] immediately upon filing pursuant to Rule 485, paragraph (b)
[ ] on [ ] pursuant to Rule 485, paragraph (b)
[ ] 60 days after filing pursuant to Rule 485, paragraph (a)(i)
[ ] on _________ pursuant to Rule 485, paragraph (a)(i)
[ ] 75 days after filing pursuant to Rule 485, paragraph (a)(ii) on
[ ] on [ ] pursuant to Rule 485, paragraph (a)(ii)
[ ] this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
The Registrant has registered an indefinite number of shares of beneficial
interest under the Securities Act of 1933 (the "1933 Act") pursuant to Rule
24f-2 under the Investment Company Act of 1940 (the "1940 Act"). Accordingly, no
fee is payable herewith. A Rule 24f-2 Notice for the Registrant's fiscal year
ending October 31, 1997 will be filed with the Commission on or about December
27, 1997. Schroder International Smaller Companies Fund of Registrant is
structured as a master-feeder fund. This amendment is executed for the master
fund.
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(a))
PART A
(Prospectuses offering Advisor Shares and Investor Shares
of Schroder International Smaller Companies Fund.)
Form N-1A
ITEM NO. (CAPTION) LOCATION IN PROSPECTUS (CAPTION)
- ----------- --------- ---------------------------------
1. Cover Page Cover Page
2. Synopsis Prospectus Summary
3. Condensed Financial Financial Highlights;
Information Other Information -
Performance Information
4. General Description of Investment Objective and Policies;
Registrant Additional Investment Policies and
Risk Considerations
5. Management of the Fund Management of the Fund - Board of
Trustees; Investment Adviser and
Portfolio Manager; Administrative
Services;Distribution Plan & Share-
holder Services Plan; Expenses;
Portfolio Transactions
5A. Management's Discussion Not Applicable
of Fund Performance
6. Capital Stock and Other Other Information - Capitlaization
Securities and Voting; Shareholder Inquiries;
Dividends, Other Distributions and
Taxes
7. Purchase of Securities Investment in the Fund - Purchase of
Shares; Retirement Plans; Individual
Retirement Accounts; Net Asset Value
8. Redemption or Repurchase Investment in the Fund - Redemption
of Shares; Net Asset Value
9. Pending Legal Proceedings Not Applicable
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(A))
PART A
(All other Prospectuses)
Not Applicable in this Filing
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(A))
PART B
(SAI offering shares of Schroder International Smaller Companies Fund)
Location in
Form N-1A Statement of Additional
ITEM NO. (CAPTION) Information (Caption)
- --------- -------- --------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Other Information
- Organization
13. Investment Objectives and Policies Investment Policies;
Investment Restrictions
14. Management of the Fund Management - Officers and
Directors
15. Control Persons and Principal Not Applicable
Holders of Securities
16. Investment Advisory and Management - Investment
Other Services Adviser; Officers and
Trustees; Administrative
Services; Distribution
of Fund Shares; Service
Organizations;Portfolio
Accounting;Fees and
Expenses; Portfolio
Transactions-Investment
Decisions; Brokerage
and Research Services;
Other Information-
Custodian; Transfer
Agent and Dividend
Disbursing Agent;
Legal Counsel;
Independent Accountants
17. Brokerage Allocation and Portfolio Transactions
Other Practices
18. Capital Stock and Other Securities Other Information -
Capitalization and
Voting
19. Purchase, Redemption and Pricing Determination of Net Asset
of Securities Being Offered Value Per Share
20. Tax Status Taxation
21. Underwriters Management - Distribution
of Fund Shares; Fees and
Expenses
22. Calculation of Performance Data Other Information -
Performance Information
23. Financial Statements Not Applicable
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(A))
PART B
(All other SAIs)
Not Applicable in this Filing
<PAGE>
2
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND
INVESTOR SHARES
This fund's investment objective is long-term capital appreciation through
investment in markets outside the United States. It seeks to achieve its
investment objective by investing primarily in equity securities, which may be
denominated in foreign or U.S. currency, of companies domiciled outside of the
United States that have market capitalizations of $1.5 billion or less at the
time of investment. It is intended for long-term investors seeking international
diversification and willing to accept the risks associated with investment in
smaller companies of foreign markets.
Schroder International Smaller Companies Fund (the "Fund"), a series of Schroder
Capital Funds (Delaware) (the "Trust"), seeks to achieve its investment
objective by investing substantially all of its assets in Schroder International
Smaller Companies Portfolio (the "Portfolio"), which has an identical investment
objective and substantially similar investment policies and strategies as the
Fund. Accordingly, the Fund's investment experience corresponds directly with
the Portfolio's investment experience. The Portfolio is a series of Schroder
Capital Funds ("Schroder Core"). (See "Other Information -- Fund Structure".)
This Prospectus sets forth concisely the information you should know before
investing and should be retained for future reference. To learn more about the
Fund, you may obtain a copy of the Fund's current Statement of Additional
Information (the "SAI"), which is incorporated by reference into this
Prospectus. The SAI dated June 27, 1997, as amended from time to time, has been
filed with the Securities and Exchange Commission ("SEC") and is available along
with other related materials for reference on their Internet Web Site
(http://www.sec.gov) or may be obtained without charge from the Trust by writing
to Two Portland Square, Portland, Maine 04101 or by calling (800) 290-9826. The
Fund has not authorized anyone to provide you with information that is different
from what is contained in this Prospectus or in other documents to which this
Prospectus refers you.
MUTUAL FUND SHARES ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE
FDIC, THE FEDERAL RESERVE SYSTEM OR ANY OTHER GOVERNMENT AGENCY AND ALSO ARE NOT
OBLIGATIONS, DEPOSITS OR ACCOUNTS OF, OR ENDORSED OR GUARANTEED BY, ANY BANK OR
ITS AFFILIATES. MUTUAL FUND INVESTMENTS ARE SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
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.
PROSPECTUS
JUNE 27, 1997
<PAGE>
================================================================================
FUNDS AVAILABLE THROUGH SCHRODER FUND ADVISORS INC.
PLEASE CALL FOR COMPLETE INFORMATION AND TO OBTAIN A PROSPECTUS.
PLEASE READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST.
SCHRODER CAPITAL FUNDS (DELAWARE) SCHRODER SERIES TRUST
(800) 290-9826 (800) 464-3108
SCHRODER EMERGING MARKETS FUND-- SCHRODER EQUITY VALUE FUND
INSTITUTIONAL PORTFOLIO SCHRODER INVESTMENT GRADE INCOME FUND
SCHRODER INTERNATIONAL BOND FUND SCHRODER SHORT-TERM INVESTMENT FUND
SCHRODER INTERNATIONAL FUND SCHRODER SMALL CAPITALIZATION VALUE FUND
SCHRODER INTERNATIONAL SMALLER
COMPANIES FUND
SCHRODER U.S. EQUITY FUND
SCHRODER U.S. SMALLER COMPANIES FUND
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2
<PAGE>
PROSPECTUS SUMMARY
This Prospectus offers Investor Class shares ("Investor Shares" or, at
times, "Shares") of the Fund, which is a separately managed, diversified series
of the Trust, an open-end, management investment company registered under the
Investment Company Act of 1940 (the "1940 Act"). The Fund invests substantially
all of its assets in the Portfolio, a separately managed, diversified series of
Schroder Core, an open-end, management investment company registered under the
1940 Act. THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE
DETAILED INFORMATION CONTAINED IN THIS PROSPECTUS.
OBJECTIVE. Seeks long-term capital appreciation through investment
in securities markets outside the United States.
STRATEGY. Invests at least 65%, and normally intends to invest
substantially all, of its total assets in by investing primarily in equity
securities, which may be denominated in foreign or U.S. currency, of companies
domiciled outside of the United States that have market capitalizations of $1.5
billion or less at the time of investment.
INVESTMENT ADVISER. The Portfolio's investment adviser is Schroder
Capital Management International Inc. ("SCMI"), 787 Seventh Avenue, New York,
New York 10019. The Fund (and indirectly its shareholders) bears a pro rata
portion of the investment advisory fee the Portfolio pays to SCMI. Prior to
November 1, 1997, the Fund had no operating history. The historical performance
of the Adviser's commingled investment fund for tax-exempt pension and profit
sharing trusts which has substantially similar policies, strategies and risks,
managed by Schroder Capital, the portfolio manager of the Portfolio, is
presented in Appendix A.
ADMINISTRATIVE SERVICES. Schroder Fund Advisors Inc.("Schroder
Advisors") serves as administrator and distributor of the Fund, and Forum
Administrative Services, Limited Liability Company ("Forum") serves as the
Fund's subadministrator.
PURCHASES AND REDEMPTIONS OF SHARES. Shares may be purchased or
redeemed by mail, by bank-wire or through your broker-dealer or other financial
institution. The minimum initial investment is $10,000, except that the minimum
for an Individual Retirement Account ("IRA") is $2,000. The minimum subsequent
investment is $2,500 except that for IRAs the minimum 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 any net
realized short-term capital gain and at least annually distributes any net
realized long-term capital gain and gains from foreign currency transactions.
Dividends and capital-gain distributions are reinvested automatically in
additional Investor Shares of the Fund at net asset value unless you elect in
your account application, or otherwise in writing, to receive dividends and
other distributions in cash. (See "Dividends, Distributions and Taxes".)
RISK CONSIDERATIONS. Alone, the Fund is not a balanced investment plan.
It is intended for long-term investors seeking international diversification who
are willing to accept the risks of foreign investing and the risks of investing
in smaller capitalization companies, Investments in smaller capitalization
companies involves risks in addition to those normally associated with investing
in equity securities of large capitalization companies. In addition, investments
in securities of non-U.S. issuers involve certain risks not associated with
domestic investing, such as uncertain political and economic developments, and
the possible imposition of exchange controls or other foreign governmental, laws
or restrictions. Of course, as with any mutual fund, there is no assurance that
the Fund or Portfolio will achieve its investment objective. (See "Investment
Policies" and "Risk Considerations".)
The Fund's net asset value ("NAV") varies because the market value of
the Portfolio's investments will change with changes in market conditions,
interest rates, currency rates, or political or economic events. When you sell
your shares, they may be worth more or less than what you paid for them. (For
further information, see "Risk Considerations".)
3
<PAGE>
EXPENSES OF INVESTING IN THE FUND
FEE TABLE
The table below is intended to assist you in understanding the expenses
that an investor in Investor Shares of the Fund would incur. There are no
transaction expenses associated with purchases or redemptions of Investor
Shares.
Annual Fund Operating Expenses (as a percentage of average net assets)(1)
Management Fees (after waivers)(2)(3).................................0.00%
12b-1 Fees ............................................................None
OTHER EXPENSES (AFTER WAIVERS AND REIMBURSEMENTS)(2)(3)................1.50
Total Fund Operating Expenses (after waivers and
reimbursements)(2)(3)..............................................1.50%
(1) The Fund's expenses include its pro rata portion of all operating
expenses of the Portfolio.
(2) Management Fees reflect the fees paid by the Portfolio and the
Fund for investment advisory and administrative services.
(3) SCMI and Schroder Advisors have undertaken voluntarily to waive all or
a portion of their fees and assume certain expenses of the Fund during
the current fiscal year in order to limit the Fund's investment
advisory fee to 0.75% and Total Fund Operating Expenses to 1.50% 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. (See
"Management of the Fund --Expenses".) Without waivers and
reimbursements, Management Fees, Other Expenses and Total Fund
Operating Expenses would be 1.00%, 3.04%, and 4.04%, respectively.
EXAMPLE
The table below indicates how much you would pay in total expenses on a
$1,000 investment in the Fund, assuming: (i) a 5% annual return; and (ii)
redemption at the end of each time period. The example is based on the expenses
listed above and assumes the reinvestment of all dividends and other
distributions. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR RETURNS; ACTUAL EXPENSES OR RETURNS MAY VARY FROM THOSE
SHOWN. The 5% annual return is not a prediction of the Fund's return but is the
percentage required by the SEC for use in this example.
1 YEAR..............................................................$15
3 YEARS.............................................................$47
5 YEARS.............................................................$82
10 YEARS...........................................................$179
4
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights of the Fund are presented below to assist you
in evaluating per share performance of Investor Shares of the Fund for the
period shown. The Fund's unaudited financial statements for the six-month period
ended April 30, 1997 are contained in the Fund's Semi-Annual Report to
Shareholders and are incorporated by reference into the SAI. The Semi-Annual
Report to Shareholders may be obtained without charge by writing the Fund at Two
Portland Square, Portland, Maine 04101 or by calling (800) 290-9826.
Period Ended
April 30,
1997 (a)
-------------------
Net Asset Value, Beginning of period $10.00
Investment Operations:
Net investment Income (Loss) -- (c)
Net realized and Unrealized Gain (Loss) on
Investments (0.64)
------
Total from Investment Operations (0.64)
------
Distributions from
Net Investment Income (0.01)
Net Asset Value, End of period $9.35
=======
Total Return (6.43%)
Ratios/Supplementary Data:
Net Assets at End of period (000s omitted) $6,990
Ratios to Average Net Assets:
Expenses including reimbursement/waiver 1.47%(b)(c)
Expenses excluding reimbursement/waiver 1.90%(b)(c)
Net investment income (loss) including
reimbursement/waiver (0.05)%(b)(c)
Portfolio Turnover Rate 8.64%(d)
Average Brokerage Commissions $0.0366(e)
(a) The Fund commenced operations on November 4, 1996.
(b) Annualized.
(c) Includes the Fund's proportionate share of income and expenses of the
Portfolio.
(d) Portfolio turnover rate represents the rate of portfolio activity for the
period ended April 30, 1997 of the Portfolio.
(e) Amount represents the average commission per share paid to brokers on the
purchase and sale of the portfolio securities of the Portfolio.
5
<PAGE>
INVESTMENT OBJECTIVE
This Fund's investment objective is long-term capital appreciation
through investment in markets outside the United States. It seeks to achieve its
investment objective by investing at least 65%, and normally intends to invest
substantially all, of its total assets in equity securities, which may be
denominated in foreign or U.S. currency, of companies domiciled outside of the
United States that have market capitalizations of $1.5 billion or less at the
time of investment.
The Fund currently seeks to achieve its investment objective by
investing substantially all of its assets in the Portfolio, which has an
identical investment objective and substantially similar policies and strategies
as the Fund. There can be no assurance that the Fund or Portfolio will achieve
its investment objective.
INVESTMENT POLICIES
Although the following information describes 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 "Trust Board"). Additional information concerning the investment
policies and restrictions of the Fund and the Portfolio is contained in the SAI.
The investment objective and fundamental investment policies may not be
changed without approval of the holders of a majority of the outstanding voting
securities of the Portfolio. A majority of outstanding voting securities means
the lesser of: (i) 67% of the shares present or represented at a shareholder
meeting at which the holders of more than 50% of the outstanding shares are
present or represented; or (ii) more than 50% of outstanding shares. Unless
otherwise indicated, all investment policies of the Portfolio are not
fundamental. Non-fundamental investment policies may be changed by the Schroder
Core Board without approval of the investors in the Portfolio.
The Portfolio normally invests in equity securities of issuers that
have market capitalizations under $1.5 billion or less at the time of
investment. Investments by the Portfolio are selected by Schroder Capital on the
basis of their potential for capital appreciation without regard for current
income. Schroder Capital generally considers the following factors in
determining the potential for capital appreciation: (i) issuers' potential for
long-term growth; (ii) issuers' financial conditions; (iii) valuation; (iv)
issuers' sensitivity to cyclical factors; and (v) whether issuers' management
holds a significant equity position in the issuer.
The Portfolio may purchase preferred stock and convertible securities,
including warrants and convertible preferred stock, and may purchase American
Depositary Receipts, European Depositary Receipts, Global Depositary Receipts or
other similar securities (collectively, "Depositary Receipts") of foreign
issuers. Depositary receipts typically are receipts issued by a financial
institution or trust company evidencing ownership of underlying securities. 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 and certificates of deposit and bankers' acceptances of
U.S. banks. The Portfolio may also hold cash and time deposits in foreign banks
denominated in any major foreign currency. (See "Additional Investment Policies
and Risk Considerations" in the Prospectus and "Investment Policies" in the SAI
for further information about all these types of investments.)
Countries in which the Portfolio may invest include, but are not
limited to, Japan, Germany, the United Kingdom, France, Italy, Belgium, Austria,
Finland, Ireland, New Zealand, Switzerland, the Netherlands, Hong Kong,
Singapore, Malaysia, Australia, Sweden, Norway, Denmark and Spain. The Portfolio
has a non-fundamental policy to invest in the securities of foreign issuers
domiciled in at least three foreign countries. In general, the Portfolio invests
only in securities of companies and governments in countries that Schroder
Capital, in its judgment, considers both politically and economically stable.
The Portfolio may invest more than 25% of its total assets in issuers located in
any one country. To the extent it invests in issuers located in one country, the
Portfolio may be susceptible to factors adversely affecting that country. (See
"Additional Investment Policies and Risk Considerations".)
6
<PAGE>
In selecting securities denominated in foreign currencies, Schroder
Capital considers, among other factors, the effect of movement in currency
exchange rates on the U.S.-dollar value of such securities. An increase in the
value of a currency will increase the total return to the Portfolio of
securities denominated in such currency. Conversely, a decline in the value of
the currency will reduce the total return. The Portfolio may also enter into
foreign exchange contracts, including forward contracts to purchase or sell
foreign currencies, in anticipation of its currency requirements and to protect
against possible adverse movements in foreign exchange rates. Although such
contracts may reduce the risk of loss to the Portfolio from adverse movements in
currency values, the contracts also limit possible gains from favorable
movements. (See "Additional Investment Policies and Risk Considerations".)
ADDITIONAL INVESTMENT POLICIES AND RISK CONSIDERATIONS
COMMON AND PREFERRED STOCK AND WARRANTS. The Portfolio may invest in
common and preferred stock. Common stockholders are the owners of the company
issuing the stock and, accordingly, vote on various corporate governance matters
such as mergers. They are not creditors of the company, but rather, upon
liquidation of the company, are entitled to their pro rata share of the
company's assets after creditors (including fixed income security holders) and
preferred stockholders, if any, 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 withdrawals by interest holders or otherwise may require the
Portfolio to sell these securities at a discount from market prices, to sell
during periods when disposition is not desirable, or to make many small sales
over a lengthy period of time. The market value of all securities, including
equity securities, is based upon the market's perception of value and not
necessarily the book value of an issuer or other objective measure of a
company's worth.
The Portfolio may also invest in warrants, which are options to
purchase an equity security at a specified price (usually representing a premium
over the applicable market value of the underlying equity security at the time
of the warrant's issuance) and usually during a specified period of time.
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:
(i) 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 (ii) to establish a position in the equities
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: (i) 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; (ii) potentially
unlimited loss associated with futures transactions and the possible lack of a
liquid secondary market for closing out a futures position; and (iii) possible
losses resulting from the inability of the investment adviser to correctly
predict the direction of stock prices, interests rates and other economic
factors. The Hedging Instruments that 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 "in the box", and no income can result and no gain can be
realized from securities sold short against-the-box until the short position is
closed out. Such short sales are subject to the limits described under
"Fundamental Restrictions". (See "Short Sales Against-the-Box" in the SAI for
further details.)
7
<PAGE>
DEPOSITARY RECEIPTS. The Portfolio may invest in certain issuers
exclusively or primarily through the purchase of sponsored and unsponsored
Depositary Receipts, including American Depositary Receipts ("ADRs")and other
similar securities, such as European Depositary Receipts ("EDRs"), Global
Depositary Receipts ("GDRs") or International Depositary Receipts ("IDRs"), 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 depositary of an unsponsored ADR may be under no obligation to
distribute shareholder communications received from the foreign issuer or to
pass through voting rights. EDRs, GDRs and IDRs are similar to ADRs and are
designed for use in foreign markets.
FOREIGN EXCHANGE CONTRACTS. Changes in foreign currency exchange rates
affect the U.S.-dollar values of securities denominated in currencies other than
the U.S. dollar. The rate of exchange between the U.S. dollar and other
currencies fluctuates in response to forces of supply and demand in the foreign
exchange markets. These forces are affected by the international balance of
payments and other economic and financial conditions, government intervention,
speculation and other factors, many of which may be difficult if not impossible
to predict. When investing in foreign securities, the Portfolio usually effects
currency exchange transactions on a spot (I.E., cash) basis at the spot rate
prevailing in the foreign exchange market. The Portfolio incurs foreign exchange
expenses in converting assets from one currency to another.
The Portfolio may enter into foreign currency forward contracts or
currency futures or options contracts for the purchase or sale of foreign
currency to "lock in" the U.S. dollar price of the securities denominated in a
foreign currency or the U.S. dollar value of interest and dividends to be paid
on such securities, or to hedge against the possibility that the currency of a
foreign country in which the Portfolio has investments may suffer a decline
against the U.S. dollar. A forward currency contract is an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. This method of attempting to hedge the
value of portfolio securities against a decline in the value of a currency does
not eliminate fluctuations in the underlying prices of the securities and may
expose the Portfolio to the risk that the counterparty is unable to perform.
Although the strategy of engaging in foreign currency transactions could reduce
the risk of loss due to a decline in the value of the hedged currency, it could
also limit the potential gain from an increase in the value of the currency. The
Portfolio does not intend to maintain a net exposure to such contracts where the
fulfillment of obligations under such contracts would obligate it to deliver an
amount of foreign currency in excess of the value of its portfolio securities or
other assets denominated in the currency. The Portfolio will not enter into
these contracts for speculative purposes and will not enter into non-hedging
currency contracts. These contracts involve a risk of loss if Schroder Capital
fails to predict currency values correctly.
The Portfolio is required to distribute substantially all of its
investment income in U.S. dollars. Because most of the Portfolio's income is
received and realized in foreign currencies; a decline in the value of a
particular foreign currency against the U.S. dollar occurring after the
Portfolio's income has been earned may require the Portfolio to liquidate some
portfolio securities to acquire sufficient U.S. dollars to make such
distributions. Similarly, if the exchange rate declines between the time the
Portfolio incurs expenses in U.S. dollars and the time such expenses are paid,
the Portfolio may be required to liquidate additional foreign securities to
purchase the U.S. dollars required to meet such expenses.
FIRM- AND STANDBY-COMMITMENT AGREEMENTS AND WHEN-ISSUED SECURITIES. New
issues of certain debt securities are often offered on a when-issued basis. That
is, the payment obligation and the interest rate are fixed at the time the buyer
enters into the commitment, but delivery and payment for the securities normally
take place after the date of the commitment to purchase. Firm- and
standby-commitment agreements call for the purchase of securities at an
agreed-upon price on a specified future date. The transactions are entered into
in order to secure what is considered to be an advantageous price and yield to
the Portfolio and not for purposes of leveraging the
8
<PAGE>
Portfolio's assets. However, the Portfolio will not accrue any income on these
securities prior to delivery. The value of when-issued securities and firm- and
standby-commitment agreements may vary prior to and after delivery depending on
market conditions and changes in interest-rate levels. There is a risk that a
party with whom the Portfolio has entered into such transactions will not
perform its commitment, which could result in a gain or loss to the Portfolio.
DEBT SECURITIES. The Portfolio may also invest in debt obligations of
the United States and its subdivisions, foreign governments, international
organizations and foreign corporations. The Portfolio may from time to time
invest up to 5% of its total assets in debt securities with high risk and high
yields (as compared to other debt securities meeting the Portfolio's investment
criteria). The debt securities in which the Portfolio invests may be unrated but
will not be in default at the time of purchase. The value of debt securities
generally varies inversely with interest rate changes. (See "Additional
Investment Policies and Risk Considerations".)
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS. The Portfolio may
invest in certificates of deposit, time deposits, bankers' acceptances, and
other short-term debt obligations issued by commercial banks and in certificates
of deposit, time deposits, and other short-term obligations issued by savings
and loan associations ("S&Ls"). Certificates of deposit are receipts from a bank
or S&L for funds deposited for a specified period of time at a specified rate of
return. Time deposits in banks or S&Ls are generally similar to certificates of
deposit, but are uncertificated. Bankers' acceptances are time drafts drawn on
commercial banks by borrowers, usually in connection with international
commercial transactions. The Portfolio will limit its investment in time
deposits for which there is a penalty for early withdrawal to 15% of its net
assets.
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, as amended. If SCMI determines that a "Rule 144A
security" is liquid pursuant to guidelines adopted by the Trust Board, the
security 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 information.)
LENDING OF PORTFOLIO SECURITIES. The Portfolio may lend its investment
securities to brokers, dealers and financial institutions for the purpose of
realizing additional income. The total market value of securities loaned will
not at any time exceed 25% of the value of the total assets of the Portfolio.
The risk in lending portfolio securities, as with other extensions of credit, is
the possible loss of rights in the collateral should the borrower fail
financially. In determining whether to lend securities, the Portfolio's
investment adviser will consider all relevant facts and circumstances, including
the creditworthiness of the borrower.
COMMERCIAL PAPER. The Portfolio may invest in commercial paper, which
represents short-term unsecured promissory notes issued by banks or bank holding
companies, corporations and finance companies. The Portfolio may invest in
commercial paper primarily rated at the time of investment "P-1" by Moody's
Investor Service ("Moody's") or "A-1" by Standard and Poor's ("S&P"), or, if
unrated by Moody's or S&P, deemed comparable in quality by the Portfolio's
investment adviser. The Portfolio may also invest in commercial paper rated
below "A-1"/ "P-1"; however, such investments are subject to the Portfolio's 10%
limit on high-yield, high-risk securities. (See "Appendix A -- Description of
Securities Ratings" to the SAI.)
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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
ensure 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.
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 commercial paper, U.S. Treasury bills,
other short-term U.S. Government securities, certificates of deposit and
bankers' acceptances of U.S. banks. U.S. Government securities are obligations
of, or guaranteed by, the U.S. Government or its agencies, instrumentalities or
government-sponsored enterprises. The Portfolio also may hold cash and time
deposits in U.S. banks. In transactions involving "repurchase agreements," the
Portfolio purchases securities from a bank or broker-dealer who agrees to
repurchase the security at the Portfolio's cost plus interest within a specified
time. The securities purchased by the Portfolio have a total value in excess of
the value of the repurchase agreement and are held by the Portfolio's custodian
bank until repurchased. (See "Investment Policies" in Part B for further
information about all these securities.)
RISK CONSIDERATIONS
FOREIGN INVESTMENTS. Investments in foreign securities involve certain
risks not associated with domestic investments, 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.
Foreign economies may differ favorably or unfavorably from the U.S.
economy in such respects as economic growth rates, rates of inflation, capital
reinvestment, resources, self-sufficiency and balance of payments positions.
Certain foreign investments may also be subject to foreign withholding taxes,
thereby reducing the income available for distribution to the Portfolio's
interestholders. Additionally, commission rates payable on foreign portfolio
transactions may often be higher than in the U.S. Because international
investments generally involve risks in addition to those risks associated with
investments in the U.S., the Fund should be considered only as a vehicle for
international diversification and not as a complete investment program.
Issuers of securities in foreign jurisdictions are generally not
subject to the same degree of regulation as are U.S. issuers with respect to
such matters as insider trading rules, restrictions on market manipulation,
shareholder proxy requirements and timely disclosure of information. Often,
available information about issuers and their securities is less extensive in
foreign markets, particularly emerging market countries, than in the United
States. In addition, laws in foreign countries governing business organizations,
bankruptcy and insolvency may provide less protection to security holders such
as the Portfolio than that provided by U.S.
laws.
Moreover: (i) interest payable on foreign securities may be subject to
foreign withholding taxes, thereby reducing the income earned by the Portfolio;
(ii) accounting, auditing and financial reporting standards differ from those in
the U.S., which means that less information about foreign companies may be
available than is generally available about issuers of comparable securities in
the U.S.; (iii) foreign securities may trade less frequently and/or with less
volume than U.S. securities and consequently may exhibit greater price
volatility; and (iv) foreign securities trading practices, including those
involving securities settlement, may expose the Portfolio to increased risk in
the event of a failed trade or the insolvency of a foreign broker-dealer or
registrar.
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GEOGRAPHIC CONCENTRATION. The Portfolio may invest more than 25% of its
total assets in issuers located in any one country. To the extent that it
invests in issuers located in one country, the Portfolio is susceptible to
factors adversely affecting that country, including 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 with a
lesser degree of geographic concentration.
CURRENCY FLUCTUATIONS AND DEVALUATIONS. Because the Portfolio will
invest in non-U.S. dollar denominated securities, changes in foreign currency
exchange rates will affect the value of the Portfolio's investments. A decline
against the dollar in the value of currencies in which the Portfolio's
investments are denominated will result in a corresponding decline in the dollar
value of its assets. Exchange rates are influenced generally by the forces of
supply and demand in the foreign currency markets and by numerous other
political and economic events occurring outside the United States, many of which
may be difficult, if not impossible, to predict.
The Portfolio may enter into foreign currency forward contracts to
purchase or sell foreign currencies in anticipation of its currency requirements
and to protect against possible adverse movements in foreign exchange rates.
Although such contracts may reduce the risk of loss to the Portfolio due to a
decline in the value of the currency sold, they also limit any possible gain
that might result should the value of such currency rise. (See "Options and
Futures Transactions".)
SMALLER COMPANIES. Investments in smaller capitalization companies
involve greater risks than those associated with investments in larger
capitalization companies. Smaller capitalization companies generally experience
higher growth rates and higher failure rates than do larger capitalization
companies. The trading volume of securities of smaller capitalization companies
is normally less than that of larger capitalization companies and, consequently,
generally has a disproportionate effect on their market price, tending to make
them rise more in response to buying demand and fall more in response to selling
pressure than is the case with larger capitalization companies.
Investments in small, unseasoned issuers generally involve greater risk
than is customarily associated with larger, more seasoned companies. Such
issuers often have products and management personnel which have not been
thoroughly tested by time or the marketplace and their financial resources may
not be as substantial as those of more established companies. Their securities,
which the 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 can result in such securities being priced lower than
otherwise might be the case. If other institutional investors engage in trading
this type of security, the Portfolio may be forced to dispose of its holdings at
prices lower than might otherwise be obtained.
FIXED-INCOME SECURITIES AND THEIR CHARACTERISTICS. Fixed-income
securities generally are subject to market risk and credit risk. Market risk
refers to the change in the market value of investments by the Portfolio in
fixed income securities, including money market instruments, when there is a
change in interest rates or the issuer's actual or perceived creditworthiness or
ability to meet its obligations. There is normally an inverse relationship
between the market value of fixed-rate debt securities and changes in interest
rates. In other words, an increase in interest rates produces a decrease in
market value. Moreover, the longer the remaining maturity of a security, the
greater will be the effect of interest rate changes on the market value of that
security. The Portfolio's investments are subject to "credit risk" relating to
the financial condition of the issuers of the securities that the Portfolio
holds. Credit risk refers to changes in the ability of an issuer to make
payments of interest and principal when due and changes in the market's
perception of an issuer's creditworthiness that affect the value of the debt
securities of that issuer.
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MANAGEMENT OF THE FUND
SCHRODER GROUP ASSETS UNDER MANAGEMENT WORLDWIDE AS OF DECEMBER 31,1996-
OVER $150 BILLION
[WOLD MAP GRAPHIC]
THE SCHRODER INVESTMENT MANAGEMENT GROUP INVESTMENT AND REPRESENTATIVE OFFICES
WORLDWIDE INCLUDE NEW YORK, LONDON, BOSTON, ZURICH, WARSAW, TOKYO, HONG KONG,
BEIJING, SHANGHAI, TAIPEI, SEOUL, BANGKOK, KUALA LUMPUR, SINGAPORE, JAKARTA,
SYDNEY, BUENOS AIRES, SAO PAULO, AND BOGOTA.
TOGETHER, SCHRODER CAPITAL MANAGEMENT INTERNATIONAL AND SCHRODER CAPITAL
MANAGEMENT INC. MANAGE OVER $24 BILLION
BOARDS OF TRUSTEES
The business and affairs of the Fund are managed under the direction of
the Trust Board. The business and affairs of the Portfolio are managed under the
direction of the Schroder Core Board. Additional information regarding the
Trustees and executive officers of the Trust, as well as Schroder Core's
trustees and executive officers, may be found in the SAI under the heading
"Management, Trustees and Officers".
INVESTMENT ADVISER AND PORTFOLIO MANAGERS
As investment adviser to the Portfolio, SCMI manages the Portfolio and
continuously reviews, supervises and administers its investments. SCMI is
responsible for making decisions relating to the Portfolio's investments and
placing purchase and sale orders regarding such investments with brokers or
dealers it selects. For these services, the Investment Advisory Agreement
between SCMI and the Trust provides that SCMI is entitled to receive a monthly
advisory fee at the annual rate of 0.85% of the Portfolio's average daily net
assets, which the Fund indirectly bears through investment in the Portfolio.
SCMI has agreed, however, to waive 0.10% of the advisory fees payable under the
Investment Advisory Agreement by the Portfolio. Such fee limitation arrangement
shall remain in effect until its elimination is approved by the Schroder Core
Board. The Fund bears no separate investment advisory fee directly. Prior to
November 1, 1996, the Fund had no operating history. The historical performance
of the Adviser's commingled investment fund for tax-exempt pension and profit
sharing trusts which has substantially similar policies, strategies and risks,
managed by Schroder Capital, the portfolio manager of the Portfolio, is
presented in Appendix A.
SCMI is a wholly owned U.S. subsidiary of Schroders Incorporated, the
wholly owned U.S. holding company subsidiary of Schroders plc. Schroders plc is
the holding company parent of a large world-wide group of banks and financial
services companies (referred to as the "Schroder Group"), with associated
companies and branch and representative offices located in eighteen countries
world-wide. The Schroder Group specializes in providing investment management
services.
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As of the date of this Prospectus, Schroder Capital has been investing
in international small companies as a specialist area for over 20 years and has
14 analysts dedicated to following small company stock. Schroders' analysts
maintain contact with over 1,500 small companies in a typical year and conduct
over 900 exclusive on-site company visits.
Richard R. Foulkes, a Vice President of the Trust and Deputy Chairman of
SCMI, with the assistance of an SCMI investment committee, is primarily
responsible for the day-to-day management of the Portfolio's investments. Mr.
Foulkes has managed the Portfolio's investment portfolio since January 1997. Mr.
Foulkes has been a Director and Executive Vice President of Schroder Capital
Management International Ltd. since 1989 and a Deputy Chairman/Executive Vice
President of Schroder Capital Management Inc. since October 1995.
The Fund pursues its investment objective through investment in the
Portfolio. The Fund may withdraw its investment from the Portfolio at any time
if the Trust 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 at the annual rate of 0.75% of the Fund's
average daily net assets. The investment advisory agreement between SCMI and the
Trust with respect to the Fund is the same in all material respects as the
investment advisory contract between SCMI and Schroder Core with respect to the
Portfolio (except as to the parties, the fees payable thereunder, the
circumstances under which fees will be paid and the jurisdiction whose laws
govern the agreement).
ADMINISTRATIVE SERVICES
On behalf of the Fund, the Trust has entered into an administration
agreement with Schroder Advisors, 787 Seventh Avenue, 34th Floor, New York, New
York 10019. On behalf of the Portfolio, the Trust has also entered into a
subadministration 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 investment management and administrative services provided to the
Portfolio by SCMI. Schroder Advisors is compensated at the annual rate of 0.10%
of the Fund's average daily net assets. Forum is compensated at the annual rate
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 Schroder Advisors at the annual rate of 0.15% of
the Portfolio's average daily net assets and pays Forum at the annual rate of
0.075% of the Portfolio's average daily net assets.
EXPENSES
SCMI and Schroder Advisors have undertaken voluntarily to waive a
portion of their fees or assume certain expenses of the Fund in order to limit
total Fund expenses excluding taxes, interest, brokerage commissions and other
portfolio transaction expenses and extraordinary expenses chargeable to Investor
Shares to 1.50% of the average daily net assets of the Fund attributable to
those shares. This expense limitation cannot be modified or withdrawn except by
a majority vote of the Trustees of the Trust who are not affiliated persons (as
defined in the 1940 Act) of the Trust. If expense reimbursements are required,
they will be made on a monthly basis. Forum has agreed to waive, up to 0.025%, a
pro rata portion of its fees at the Fund level as necessary to keep the total
expense ratio for the Fund, including indirect expenses borne by the Fund as a
result of investing in the Portfolio, at 1.50% of the average daily net assets
of the Fund.
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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.
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 such 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 are 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. These arrangements 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.
CODE OF ETHICS
The Trust, Schroder Core, SCMI, Schroder Advisors, and Schroders
Incorporated have each adopted a code of ethics that contains 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 ("Transfer
Agent"). (See "Other Information -- Shareholder Inquiries".)
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 $100,000. There is no minimum
subsequent investment. SCMI reserves the right to waive the minimum initial
investment at its discretion. All purchase payments are invested in full and
fractional shares. The Fund is authorized to reject any purchase order.
Purchases may be made by mailing a check(in U.S. dollars), payable to
"Schroder International Smaller Companies Fund" to:
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Schroder International Smaller Companies Fund - Investor Shares
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, may be requested from
corporations, administrators, executors, personal representatives, directors or
custodians to evidence the authority of the person or entity making the
investment.
Investors 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.
Account No.: 910-2-718187
Ref.: Schroder International Smaller Companies Fund -
Investor Shares
Account of: (shareholder name)
Account No.: (shareholder account number)
The wire order must specify the name of the Fund, the shares' class
(I.E., Investor 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 before any account becomes
active. Wire orders received prior to 4:00 p.m. (Eastern time) on each day that
the New York Stock Exchange is open for trading (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. (Eastern time) will be processed at the net asset value
determined as of the next Fund Business Day. (See "Net Asset Value".)
The Fund's Transfer Agent establishes for each shareholder of record an
open account to which all shares purchased and all reinvested dividends and
other distributions are credited. 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 other distributions will automatically 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 the checks will be canceled.
RETIREMENT PLANS AND INDIVIDUAL RETIREMENT ACCOUNTS
Shares of the Fund are offered in connection with tax-deferred
retirement plans. Applications forms and further information about these plans,
including applicable fees, are available upon request. Before investing in the
Fund through one of these plans, investors should consult their tax advisors.
The Fund may be used as an investment vehicle for an IRA including
SEP-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 $25,000. There is no minimum subsequent investment amount. Under
certain circumstances contributions to an IRA may be tax deductible. IRAs are
available to individuals (and their spouses) who receive compensation or earned
income whether or not they are active participants in a tax-qualified or
government-approved retirement plan. An IRA contribution by an individual or
spouse who participates in a tax-qualified or government-approved retirement
plan may not be deductible, depending upon the individual's income.
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<PAGE>
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.
STATEMENT OF INTENTION
Investor Share investors also may meet the minimum initial investment
requirement based on cumulative purchases by means of a written Statement of
Intention, expressing the investor's intention to invest $100,000 or more in
Investor Shares of the Fund within a period of 13 months.
Investors wishing to enter into a Statement of Intention in conjunction
with their initial investment in shares of the Fund should complete the
appropriate portion of the account application form. Current Fund shareholders
can obtain a Statement of Intention form by contacting the Transfer Agent.
The Fund reserves the right to redeem shares in any account if, at the
end of the Statement of Intention period, the account does not have a value of
at least the minimum investment amount.
EXCHANGES
Shareholders may exchange Investor Shares of the Fund for Investor
Shares of any other fund of the Trust so long as they meet the initial
investment minimum of the fund being purchased and maintain the respective
minimum account balance in each fund in which they own shares. Exchanges between
each fund are at net asset value.
For federal income tax purposes an exchange is considered to be a sale
of shares on which a shareholder may realize a capital gain or loss. An exchange
may be made by calling the Transfer Agent at (800) 344-8332 or by mailing
written instructions to Schroder Capital Funds (Delaware), P.O. Box 446,
Portland, Maine 04112. Exchange privileges may be exercised only in those states
where shares of the other series of the Trust may legally be sold. Exchange
privileges may be amended or terminated at any time upon sixty (60) days'
notice.
REDEMPTION OF SHARES
Shares of the Fund are redeemed at their next determined net asset
value after receipt by the Fund (at the address set forth above under "Purchase
of Shares") of a redemption request in proper form. Redemption requests may be
made between 9:00 a.m. and 6:00 p.m. (Eastern time) on each Fund Business Day.
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. (Eastern time) will be processed at the net
asset value determined the next Fund Business Day. (See "Net Asset Value".)
BY TELEPHONE. Redemption requests may be made by telephoning the
Transfer Agent at the 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, 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 telephone
instructions are genuine. The Transfer Agent and the Trust generally 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
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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 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 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 proceeds will be mailed
until checks in payment for the purchase of the shares to be redeemed have been
cleared, which may take up to 15 calendar days from the purchase date. 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 Trust 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 investment portfolio of the Portfolio
or of the Fund), in lieu of cash. 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 falls below that amount solely as a result of market
activity. Shareholders will be notified that the value of the account is less
than $2,000 and be allowed at least 30 days to make an additional investment to
increase the account balance to at least $2,000.
NET ASSET VALUE
The net asset value per share of the Fund is calculated separately for
each class of shares of the Fund at 4:00 p.m. (Eastern time), Monday through
Friday, each Fund Business Day, which excludes the following U.S. holidays: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. Net asset value per share is calculated
by dividing the aggregate value of the Fund's assets less all Fund liabilities,
if any, by the number of shares of the Fund outstanding.
The net asset value per share of the Fund is calculated separately for
each class of Shares of the Fund at 4:00 p.m. (Eastern time), Monday through
Friday, each Fund Business Day, which excludes the following U.S. holidays: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day,
17
<PAGE>
Thanksgiving Day and Christmas Day. Net asset value per Share is calculated by
dividing the aggregate value of the Fund's assets less all Fund liabilities, if
any, by the number of Shares of the Fund outstanding.
Generally, securities held by the Portfolio that are listed on
recognized stock exchanges are valued at the last reported sale price, on the
day when the securities are valued (the "Valuation Day"), on the primary
exchange on which the securities are principally traded. Listed securities
traded on recognized stock exchanges for which there were no sales on the
Valuation Day are valued at the last sale price on the proceeding trading day or
at closing mid-market prices. Securities traded in over-the-counter markets 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 in securities on non-U.S. exchanges and over-the-counter
markets may not take place on every day that the New York Stock Exchange is open
for trading. Furthermore, trading takes place in various foreign markets on days
on which the Fund's net asset value is not calculated. If events materially
affecting the value of foreign securities occur between the time when their
price is determined and the time when net asset value is calculated, such
securities will be valued at fair value as determined in good faith by using
methods approved by 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 comply with the provisions of Internal Revenue Code
of 1986, as amended, applicable to regulated investment companies. By complying
therewith, the Fund will not have to pay federal income tax on that part of its
investment income or net realized capital gain that is distributed to
shareholders. The Fund intends to distribute substantially all of its income and
net realized capital gain and, therefore, intends not to be subject to federal
income tax.
Dividends and capital-gain distributions on a class of shares are
reinvested automatically in additional shares of the same class at net asset
value unless the shareholder has elected in the account application, or
otherwise in writing, to receive dividends and other distributions in cash.
After every dividend and other distribution, the value of a share
declines by the amount of the distribution. Purchases made shortly before a
dividend or other distribution include in the purchase price the amount of the
distribution, which will be returned to the investor in the form of a taxable
distribution.
Dividends and other distributions paid by the Fund with respect to both
classes of its shares are calculated in the same manner and at the same time.
The per share dividends on Advisor Shares are expected to be lower than the per
share dividends on Investor Shares as a result of any compensation payable to
Service Organizations for shareholder servicing for the Advisor Shares.
Dividends from the Fund's income generally are taxable to shareholders
as ordinary income whether dividends are invested in additional shares or
received in cash. Distributions by the Fund of any net capital gain is taxable
to a shareholder as long-term capital gain, regardless of how long the
shareholder has held the shares. 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 dividends do not exceed the
aggregate amount of dividends received by the Fund from domestic corporations,
provided the Fund shares are held 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 fewer than 46 days (91 days
18
<PAGE>
in the case of certain preferred stock); or are subject to certain forms of
hedges or short sales, then the portion of the dividends paid by the Fund
attributable to such securities will not be eligible for the dividends-received
deduction.
A redemption of shares may result in taxable gain or loss to the
redeeming shareholder, depending on whether the redemption proceeds are more or
less than the shareholder's basis in the redeemed shares. If shares are redeemed
at a loss after being held for six months or less, the loss will be treated as a
long-term, rather than a short-term, capital loss to the extent of any
capital-gain distributions received on those shares.
The Fund must withhold 31% from dividends, capital-gain distributions
and redemption proceeds payable to any individuals and certain other
noncorporate shareholders who do not furnish the Fund with a correct taxpayer
identification number. Withholding at that rate also is required from dividends
and capital-gain distributions payable to such shareholders who otherwise are
subject to backup withholding. Depending on the residence of a shareholder for
tax purposes, distributions from the Fund may also be subject to state and local
taxes, including withholding taxes.
In an effort to adhere to certain tax requirements, the Fund may have
to limit its investment activity in some types of instruments.
If the Fund's dividends exceed its taxable income in any year, all or a
portion of the Fund's dividends may be treated as a return of capital to
shareholders for tax purposes. Any return of capital will reduce the cost basis
of your shares, which will result in a higher reported capital gain or a lower
reported capital loss when you sell your shares. Shareholders will be notified
by the Trust if a distribution included a return of capital.
EFFECT OF FOREIGN TAXES. Foreign governments may impose taxes on the
Portfolio and its investments, which generally reduce the Fund's income.
However, an offsetting tax credit or deduction may be available to you. If so,
your tax statement will show more taxable income or capital gain than was
actually distributed by the Fund but will also show the amount of the available
offsetting credit or deduction.
If the Fund is eligible to do so, it intends to elect to permit its
shareholders to take a credit (or a deduction) for the Fund's share of foreign
income taxes paid by the Portfolio. If the Fund does make such an election, its
shareholders would include as gross income in their federal income tax returns
both: (i) distributions received from the Fund; and (ii) the amount that the
Fund advises is their pro rata portion of foreign income taxes paid with respect
to or withheld from dividends and interest paid to the Portfolio from its
foreign investments. Shareholders then would be entitled, subject to certain
limitations, to take a foreign tax credit against their 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 foregoing is only a summary of some of the important federal tax
considerations generally affecting the Fund and its shareholders; see the SAI
for further information. Shareholders should consult their own tax advisors as
to the tax consequences of their ownership of shares.
THE PORTFOLIO
The Portfolio is not required to pay federal income tax because it is
classified as a partnership for federal income tax purposes. All interest,
dividends and gains and losses of the Portfolio will be deemed to have been
"passed through" to the Fund in proportion to its holdings in the Portfolio,
regardless of whether such interest, dividends or gains have been distributed by
the Portfolio. The Portfolio intends to conduct its operations so as to enable
the Fund to qualify as a regulated investment company.
19
<PAGE>
OTHER INFORMATION
CAPITALIZATION AND VOTING
The Trust was organized as a Maryland corporation on July 30, 1969;
reorganized on February 29, 1988, as Schroder Capital Funds, Inc.; and
reorganized on January 9, 1996, as a Delaware business trust. 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 the Investor
Shares), and the costs of doing so will be borne by the Trust. The Trust
currently consists of seven separate portfolios, each of which has separate
investment objectives and policies.
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, non-assessable, and have no preemptive 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).
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. On Trust matters requiring shareholder approval,
shareholders of the Trust are entitled to vote only with respect to matters that
affect the interests of the Fund or the class of shares they hold, except as
otherwise required by applicable law.
There will normally be no meetings of shareholders to elect Trustees
unless and until such time as less than a majority of the Trustees holding
office have been elected by shareholders. However, the holders of not less than
a majority of the outstanding shares of the Trust may remove any person serving
as a Trustee and the Trust Board will call a special meeting of shareholders to
consider removal of one or more Trustees if requested in writing to do so by the
holders of not less than 10% of the outstanding shares of the Trust. From time
to time, certain shareholders may own a large percentage of the shares of the
Fund. Accordingly, those shareholders may be able to greatly affect (if not
determine) the outcome of a shareholder vote.
REPORTS
The Trust sends each shareholder a semi-annual report and an audited
annual report containing the Fund's financial statements.
PERFORMANCE
The Fund may include quotations of its average annual total return,
cumulative total return and other performance measures in advertisements or
reports to shareholders or prospective investors. Average annual total return of
a class of shares is based upon the overall dollar or percentage change in value
of a hypothetical investment each year over specified periods. Average annual
total returns reflect the deduction of a proportional share of a Fund's expenses
(on an annual basis) and assumes investment and reinvestment of all dividends
and distributions at NAV. Cumulative total returns are calculated similarly
except that the total return is aggregated over the relevant period instead of
annualized.
Performance quotations are calculated separately for each class of
shares of the Fund. The Fund may also 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 do not reflect deductions for administrative and
management costs and expenses.
20
<PAGE>
Performance information represents only past performance and does not
necessarily indicate future results. For a description of the methods used to
determine total return and other performance measures for the Fund, see the SAI.
CUSTODIAN AND TRANSFER AGENT
The Chase Manhattan Bank is custodian of the Fund's and the Portfolio's
assets. Forum Financial Corp.serves as the Fund's transfer and dividend
disbursing agent.
SHAREHOLDER INQUIRIES
Inquiries about the Fund, including its past performance, should be
directed to:
Schroder International 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.
FUND STRUCTURE
CLASSES OF SHARES. The Fund has two classes of shares, Investor Shares
and Advisor Shares. Advisor Shares are offered by a separate prospectus to
individual investors, in most cases through Service Organizations. Advisor
Shares have lower investment minimums and 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
distributions will differ between the classes. Information about Advisor Shares
is available from the Fund by calling Schroder Advisors at (800) 730-2932.
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 substantially similar 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 December 1996. Schroder Core is registered under the 1940 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 Fund's investment in the Portfolio is in the form of a
non-transferable beneficial interest. As of November 4, 1996, there were two
institutional investors in the Portfolio. The Portfolio may permit other
investment companies or qualified investors to invest in it. All other investors
in the Portfolio will invest on the same terms and conditions as the Fund. All
investors in the Portfolio bear a proportionate share of the Portfolio's
expenses.
The Portfolio normally will not hold meetings of investors except as
required by the 1940 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 1940 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.
21
<PAGE>
The Portfolio will not sell its shares directly to members of the
general public. Another investor in the Portfolio, such as an investment
company, that might sell its shares to members of the general public would not
be required to sell its shares at the same public offering price as the Fund and
could have different advisory and other fees and expenses than the Fund.
Therefore, Fund shareholders may have different returns than shareholders in
another investment company that invests exclusively in the Portfolio. There is
currently no such other investment company that offers its shares to members of
the general public. Information regarding any such funds in the future will be
available from Schroder Core by calling Forum Financial Corp. at (207) 879-8903.
Under federal securities law, 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
investors in the Portfolio. In addition, under federal securities law, Schroder
Core may be liable for misstatements or omissions of a material fact in any
proxy soliciting material of an investor in Schroder Core, including the Fund.
Each investor in the Portfolio, including the Trust, will indemnify Schroder
Core and its Trustees and officers ("Schroder Core Indemnitees") against certain
claims.
Indemnified claims are those brought against the Schroder Core
Indemnitees based on a misstatement or omission of a material fact in the
investor's registration statement or proxy materials. No indemnification need be
made, however, if such alleged misstatement or omission relates to information
about Schroder Core and 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 Schroder
Core. The purpose of these cross-indemnity provisions is 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 Trust 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 Trust
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 likely incur
brokerage fees or other transaction costs. If the Fund withdrew its investment
from the Portfolio, the Trust Board would consider appropriate alternatives,
including the management of the Fund's assets in accordance with its investment
objective and policies by SCMI, 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 Trust 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, may be liable for
all obligations of the Portfolio. The risk to an investor in the Portfolio of
incurring financial loss on account of such liability, however, is limited to
circumstances in which the Portfolio is 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.
22
<PAGE>
APPENDIX A
PRIOR PERFORMANCE OF SCMI
The following table sets forth SCMI's composite performance data
relating to the historical performance of a commingled investment fund for
tax-exempt pension and profit sharing trusts that is managed by the investment
adviser and is the only account managed by the investment adviser with an
investment objective, policies, strategies and risks substantially similar to
those of the Portfolio. The commingled fund commenced operations in May, 1989,
and as of September 30, 1996, had total net assets of approximately $980
million. THE DATA ARE PROVIDED TO ILLUSTRATE THE PAST PERFORMANCE OF SCMI IN
MANAGING SUBSTANTIALLY SIMILAR ACCOUNTS AS MEASURED AGAINST SPECIFIED MARKET
INDICES AND DO NOT REPRESENT THE PERFORMANCE OF THE PORTFOLIO. INVESTORS SHOULD
NOT CONSIDER THIS PERFORMANCE DATA AS AN INDICATION OF FUTURE PERFORMANCE OF THE
PORTFOLIO, OF THE FUND OR OF THE INVESTMENT ADVISER.
SCMI's composite performance data shown below were calculated in
accordance with recommended standards of the Association for Investment
Management and Research ("AIMR"), respectively applied to all time periods. AIMR
is a non-profit membership and education organization with more than 60,000
members worldwide that, among other things, has formulated a set of performance
presentation standards for investment advisers. These AIMR performance
presentation standards are intended to: (i) promote full and fair presentations
by investment advisers of their performance results; and (ii) ensure uniformity
in reporting so that performance results of investment advisers are directly
comparable. All returns presented were calculated on a total return basis and
include all dividends and interest, accrued income and realized and unrealized
gains and losses. Returns do not reflect the deduction of investment advisory
fees, custody fees, brokerage commissions and execution costs paid by the
account, without provision for federal or state taxes. Securities transactions
are accounted for on the trade date and accrual accounting is utilized. Cash and
equivalents are included in performance returns. The monthly returns combine the
accounts' returns (calculated on a time-weighted rate of return that is revalued
whenever cash flows exceed $500) by asset-weighting each account's asset value
as of the beginning of the month. Quarterly and yearly returns are calculated by
linking the monthly and quarterly returns, respectively, in accordance with AIMR
standards.
The commingled investment fund that is included in the investment
adviser's composite is not subject to the same types of expenses to which the
Portfolio is subject nor to the diversification requirements, specific tax
restrictions and investment limitations imposed on the Portfolio by the
Investment Company Act of 1940 or the Internal Revenue Code. The performance
results for SCMI's composite could have been adversely affected if the
commingled investment fund had been subject to such regulation.
The investment results of the commingled investment fund are audited annually.
Presenting the performance of such fund here is not intended to predict or
suggest the returns that might be experienced by the Portfolio, the Fund or an
individual investor investing in the Fund. Investors should also be aware that
the use of a methodology different from that used below to calculate performance
could result in different performance data.
Annual Rates of Return
<TABLE>
<CAPTION>
1/1/96 - 5/31/89 -
9/30/96 1995 1994 1993 1992 1991 1990 12/31/89
--------- ---- ---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Adviser's Composite 13.6% 6.2% 4.4% 30.0% -9.3% 8.4% -2.3% 36.8%
Salomon Brothers
Extended Market Index (1) 7.7% 4.8% 9.4% 30.7% -15.3% 6.5% -22.6% 24.9%
- ---------------------------------
</TABLE>
(1) The Salomon Brothers Extended Market Index ("EMI") is the portion of the
Salomon Brothers Broad Market Index ("BMI") related to companies with small
market capitalization in approximately 22 countries. Only issues that non-local
investors may purchase are included. In establishing the EMI, Salomon Brothers
ranks all companies in the BMI (I.E., companies with available market capital
greater than U.S. $100 million) within each country by their total (unadjusted)
market capital. The EMI represents the smallest companies in each country based
on total market capital having in the aggregate 20% of the cumulative available
market capital in such country.
A-1
<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
SUBADMINISTRATOR
Forum Administrative Services, Limited Liability Company
Two Portland Square
Portland, Maine 04101
CUSTODIAN
The Chase Manhattan Bank
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 AUDITORS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Table of Contents
PROSPECTUS SUMMARY.............................3
EXPENSES OF INVESTING
IN THE FUND................................4
Fee Table......................................4
Example........................................4
FINANCIAL HIGHLIGHTS...........................5
INVESTMENT OBJECTIVE...........................6
INVESTMENT POLICIES............................6
ADDITIONAL INVESTMENT POLICIES
AND RISK CONSIDERATIONS....................7
RISK CONSIDERATIONS...........................10
MANAGEMENT OF THE FUND........................12
Boards of Trustees............................12
Investment Adviser and
Portfolio Managers........................12
Administrative Services.......................13
Expenses......................................13
Portfolio Transactions........................14
Code of Ethics................................14
INVESTMENT IN THE FUND........................14
Purchase of Shares............................14
Retirement Plans and Individual
Retirement Accounts.........................15
Statement of Intention........................16
Exchanges.....................................16
Redemption of Shares..........................16
Net Asset Value...............................17
DIVIDENDS, DISTRIBUTIONS
AND TAXES...................................18
The Fund......................................18
The Portfolio.................................19
OTHER INFORMATION.............................20
Capitalization and Voting.....................20
Reports.......................................20
Performance...................................20
Custodian and Transfer Agent..................21
Shareholder Inquiries.........................21
Fund Structure................................21
Appendix A...................................A-1
<PAGE>
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND
ADVISOR SHARES
This fund's investment objective is long-term capital appreciation through
investment in markets outside the United States. It seeks to achieve its
investment objective by investing primarily in equity securities, which may be
denominated in foreign or U.S. currency, of companies domiciled outside of the
United States that have market capitalizations of $1.5 billion or less at the
time of investment. It is intended for long-term investors seeking international
diversification and willing to accept the risks associated with investment in
smaller companies of foreign markets.
YOUR WINDOW ON THE WORLD
Schroder International Smaller Companies Fund (the "Fund"), a series of Schroder
Capital Funds (Delaware) (the "Trust"), seeks to achieve its investment
objective by investing substantially all of its assets in Schroder International
Smaller Companies Portfolio (the "Portfolio"), which has an identical investment
objective and substantially similar investment policies and strategies as the
Fund. Accordingly, the Fund's investment experience corresponds directly with
the Portfolio's investment experience. The Portfolio is a series of Schroder
Capital Funds ("Schroder Core"). (See "Other Information -- Fund Structure".)
This Prospectus sets forth concisely the information you should know before
investing and should be retained for future reference. To learn more about the
Fund, you may obtain a copy of the Fund's current Statement of Additional
Information (the "SAI"), which is incorporated by reference into this
Prospectus. The SAI dated June 27, 1997, as amended from time to time, has been
filed with the Securities and Exchange Commission ("SEC") and is available along
with other related materials for reference on their Internet Web Site
(http://www.sec.gov) or may be obtained without charge from the Trust by writing
to Two Portland Square, Portland, Maine 04101 or by calling (800) 290-9826. The
Fund has not authorized anyone to provide you with information that is different
from what is contained in this Prospectus or in other documents to which this
Prospectus refers you.
MUTUAL FUND SHARES ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE
FDIC, THE FEDERAL RESERVE SYSTEM OR ANY OTHER GOVERNMENT AGENCY AND ALSO ARE NOT
OBLIGATIONS, DEPOSITS OR ACCOUNTS OF, OR ENDORSED OR GUARANTEED BY, ANY BANK OR
ITS AFFILIATES. MUTUAL FUND INVESTMENTS ARE SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
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.
PROSPECTUS
JUNE 27, 1997
<PAGE>
================================================================================
FUNDS AVAILABLE THROUGH SCHRODER FUND ADVISORS INC.
PLEASE CALL FOR COMPLETE INFORMATION AND TO OBTAIN A PROSPECTUS.
PLEASE READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST.
SCHRODER CAPITAL FUNDS (DELAWARE) SCHRODER SERIES TRUST
(800) 290-9826 (800) 464-3108
SCHRODER EMERGING MARKETS FUND-- SCHRODER EQUITY VALUE FUND
INSTITUTIONAL PORTFOLIO SCHRODER INVESTMENT GRADE INCOME FUND
SCHRODER INTERNATIONAL BOND FUND SCHRODER SHORT-TERM INVESTMENT FUND
SCHRODER INTERNATIONAL FUND SCHRODER SMALL CAPITALIZATION VALUE FUND
SCHRODER INTERNATIONAL SMALLER
COMPANIES FUND
SCHRODER U.S. EQUITY FUND
SCHRODER U.S. SMALLER COMPANIES FUND
================================================================================
2
<PAGE>
PROSPECTUS SUMMARY
This Prospectus offers Advisor Class shares ("Advisor Shares" or, at
times, "Shares") of the Fund, which is a separately managed, diversified series
of the Trust, an open-end, management investment company registered under the
Investment Company Act of 1940 (the "1940 Act"). The Fund invests substantially
all of its assets in the Portfolio, a separately managed, diversified series of
Schroder Core, an open-end, management investment company registered under the
1940 Act. THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE
DETAILED INFORMATION CONTAINED IN THIS PROSPECTUS.
OBJECTIVE. Seeks long-term capital appreciation through investment
in securities markets outside the United States.
STRATEGY. Invests at least 65%, and normally intends to invest
substantially all, of its total assets in by investing primarily in equity
securities, which may be denominated in foreign or U.S. currency, of companies
domiciled outside of the United States that have market capitalizations of $1.5
billion or less at the time of investment.
INVESTMENT ADVISER. The Portfolio's investment adviser is Schroder
Capital Management International Inc. ("SCMI"), 787 Seventh Avenue, New York,
New York 10019. The Fund (and indirectly its shareholders) bears a pro rata
portion of the investment advisory fee the Portfolio pays to SCMI. Prior to
November 1, 1997, the Fund had no operating history. The historical performance
of the Adviser's commingled investment fund for tax-exempt pension and profit
sharing trusts which has substantially similar policies, strategies and risks,
managed by Schroder Capital, the portfolio manager of the Portfolio, is
presented in Appendix A.
ADMINISTRATIVE SERVICES. Schroder Fund Advisors Inc. ("Schroder
Advisors") serves as administrator and distributor of the Fund, and Forum
Administrative Services, Limited Liability Company ("Forum") serves as the
Fund's subadministrator.
PURCHASES AND REDEMPTIONS OF SHARES. Shares may be purchased or
redeemed by mail, by bank-wire or through your broker-dealer or other financial
institution. The minimum initial investment is $10,000, except that the minimum
for an Individual Retirement Account ("IRA") is $2,000. The minimum subsequent
investment is $2,500 except that for IRAs the minimum 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 any net
realized short-term capital gain and at least annually distributes any net
realized long-term capital gain and gains from foreign currency transactions.
Dividends and capital-gain distributions are reinvested automatically in
additional Advisor Shares of the Fund at net asset value unless you elect in
your account application, or otherwise in writing, to receive dividends and
other distributions in cash. (See "Dividends, Distributions and Taxes".)
RISK CONSIDERATIONS. Alone, the Fund is not a balanced investment plan.
It is intended for long-term investors seeking international diversification who
are willing to accept the risks of foreign investing and the risks of investing
in smaller capitalization companies, Investments in smaller capitalization
companies involves risks in addition to those normally associated with investing
in equity securities of large capitalization companies. In addition, investments
in securities of non-U.S. issuers involve certain risks not associated with
domestic investing, such as uncertain political and economic developments, and
the possible imposition of exchange controls or other foreign governmental, laws
or restrictions. Of course, as with any mutual fund, there is no assurance that
the Fund or Portfolio will achieve its investment objective. (See "Investment
Policies" and "Risk Considerations".)
The Fund's net asset value ("NAV") varies because the market value of
the Portfolio's investments will change with changes in market conditions,
interest rates, currency rates, or political or economic events. When you sell
your shares, they may be worth more or less than what you paid for them. (For
further information, see "Risk Considerations".)
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EXPENSES OF INVESTING IN THE FUND
FEE TABLE
The table below is intended to assist you in understanding the expenses
that an investor in Advisor Shares of the Fund 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 (after waivers)(2)(3).................................0.75%
12b-1 Fees ............................................................None
OTHER EXPENSES (AFTER WAIVERS AND REIMBURSEMENTS)(2)(3)...............1.00%
Total Fund Operating Expenses (after waivers
and reimbursements)(2)(3).......................................1.75%
(1) The Fund's expenses include its pro rata portion of all operating
expenses of the Portfolio.
(2) Management Fees reflect the fees paid by the Portfolio and the
Fund for investment advisory and administrative services.
(3) SCMI and Schroder Advisors have undertaken voluntarily to waive all or
a portion of their fees and assume certain expenses of the Fund during
the current fiscal year in order to limit the Fund's investment
advisory fee to 0.75% and Total Fund Operating Expenses to 1.75% 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. (See
"Management of the Fund --Expenses".) Without waivers and
reimbursements, Management Fees, Other Expenses and Total Fund
Operating Expenses would be 1.00%, 3.29%, and 4.29%, respectively.
EXAMPLE
The table below indicates how much you would pay in total expenses on a
$1,000 investment in the Fund, assuming: (i) a 5% annual return; and (ii)
redemption at the end of each time period. The example is based on the expenses
listed above and assumes the reinvestment of all dividends and other
distributions. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR RETURNS; ACTUAL EXPENSES OR RETURNS MAY VARY FROM THOSE
SHOWN. The 5% annual return is not a prediction of the Fund's return but is the
percentage required by the SEC for use in this example.
1 YEAR............................................................$18
3 YEARS...........................................................$55
5 YEARS...........................................................$95
10 YEARS..........................................................$206
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FINANCIAL HIGHLIGHTS
The financial highlights of the Fund are presented below to assist you
in evaluating per share performance of the Fund. Information is presented for
Investor shares (which have had a lower expense ratio than Advisor Shares) as
Advisor Shares were not issued for the period shown. The Fund's unaudited
financial statements for the six-month period ended April 30, 1997 are contained
in the Fund's Semi-Annual Report to Shareholders and are incorporated by
reference into the SAI. The Semi-Annual Report to Shareholders may be obtained
without charge by writing the Fund at Two Portland Square, Portland, Maine 04101
or by calling 1-800-290-9826.
Period Ended
April 30,
1997 (a)
--------------------
Net Asset Value, Beginning of period $10.00
Investment Operations:
Net Investment Income (Loss) -- (c)
Net Realized and Unrealized Gain (Loss) on
Investments (0.64)
------
Total from Investment Operations (0.64)
------
Distributions from
Net Investment Income (0.01)
Net Asset Value, End of period $9.35
=====
Total Return (6.43%)
Ratios/Supplementary Data:
Net Assets at End of period (000s omitted) $6,990
Ratios to Average Net Assets:
Expenses including reimbursement/waiver 1.47%(b)(c)
Expenses excluding reimbursement/waiver 1.90%(b)(c)
Net investment income (loss) including
reimbursement/waiver (0.05)%(b)(c)
Portfolio Turnover Rate 8.64%(d)
Average Brokerage Commissions $0.0366(e)
(a) The Fund commenced operations on November 4, 1996, issuing only Investor
shares.
(b) Annualized.
(c) Includes the Fund's proportionate share of income and expenses of the
Portfolio.
(d) Portfolio turnover rate represents the rate of portfolio activity of the
Portfolio for the period ended April 30, 1997.
(e) Amount represents the average commission per share paid to brokers on the
purchase and sale of the portfolio securities of the Portfolio.
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INVESTMENT OBJECTIVE
This Fund's investment objective is long-term capital appreciation
through investment in markets outside the United States. It seeks to achieve its
investment objective by investing at least 65%, and normally intends to invest
substantially all, of its total assets in equity securities, which may be
denominated in foreign or U.S. currency, of companies domiciled outside of the
United States that have market capitalizations of $1.5 billion or less at the
time of investment.
The Fund currently seeks to achieve its investment objective by
investing substantially all of its assets in the Portfolio, which has an
identical investment objective and substantially similar policies and strategies
as the Fund. There can be no assurance that the Fund or Portfolio will achieve
its investment objective.
INVESTMENT POLICIES
Although the following information describes 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 "Trust Board"). Additional information concerning the investment
policies and restrictions of the Fund and the Portfolio is contained in the SAI.
The investment objective and fundamental investment policies may not be
changed without approval of the holders of a majority of the outstanding voting
securities of the Portfolio. A majority of outstanding voting securities means
the lesser of: (i) 67% of the shares present or represented at a shareholder
meeting at which the holders of more than 50% of the outstanding shares are
present or represented; or (ii) more than 50% of outstanding shares. Unless
otherwise indicated, all investment policies of the Portfolio are not
fundamental. Non-fundamental investment policies may be changed by the Schroder
Core Board without approval of the investors in the Portfolio.
The Portfolio normally invests in equity securities of issuers that
have market capitalizations under $1.5 billion or less at the time of
investment. Investments by the Portfolio are selected by Schroder Capital on the
basis of their potential for capital appreciation without regard for current
income. Schroder Capital generally considers the following factors in
determining the potential for capital appreciation: (i) issuers' potential for
long-term growth; (ii) issuers' financial conditions; (iii) valuation; (iv)
issuers' sensitivity to cyclical factors; and (v) whether issuers' management
holds a significant equity position in the issuer.
The Portfolio may purchase preferred stock and convertible securities,
including warrants and convertible preferred stock, and may purchase American
Depositary Receipts, European Depositary Receipts, Global Depositary Receipts or
other similar securities (collectively, "Depositary Receipts") of foreign
issuers. Depositary receipts typically are receipts issued by a financial
institution or trust company evidencing ownership of underlying securities. 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 and certificates of deposit and bankers' acceptances of
U.S. banks. The Portfolio may also hold cash and time deposits in foreign banks
denominated in any major foreign currency. (See "Additional Investment Policies
and Risk Considerations" in the Prospectus and "Investment Policies" in the SAI
for further information about all these types of investments.)
Countries in which the Portfolio may invest include, but are not
limited to, Japan, Germany, the United Kingdom, France, Italy, Belgium, Austria,
Finland, Ireland, New Zealand, Switzerland, the Netherlands, Hong Kong,
Singapore, Malaysia, Australia, Sweden, Norway, Denmark and Spain. The Portfolio
has a non-fundamental policy to invest in the securities of foreign issuers
domiciled in at least three foreign countries. In general, the Portfolio invests
only in securities of companies and governments in countries that Schroder
Capital, in its judgment, considers both politically and economically stable.
The Portfolio may invest more than 25% of its total assets in issuers located in
any one country. To the extent it invests in issuers located in one country, the
Portfolio may be susceptible to factors adversely affecting that country. (See
"Additional Investment Policies and Risk Considerations".)
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In selecting securities denominated in foreign currencies, Schroder
Capital considers, among other factors, the effect of movement in currency
exchange rates on the U.S.-dollar value of such securities. An increase in the
value of a currency will increase the total return to the Portfolio of
securities denominated in such currency. Conversely, a decline in the value of
the currency will reduce the total return. The Portfolio may also enter into
foreign exchange contracts, including forward contracts to purchase or sell
foreign currencies, in anticipation of its currency requirements and to protect
against possible adverse movements in foreign exchange rates. Although such
contracts may reduce the risk of loss to the Portfolio from adverse movements in
currency values, the contracts also limit possible gains from favorable
movements. (See "Additional Investment Policies and Risk Considerations".)
ADDITIONAL INVESTMENT POLICIES AND RISK CONSIDERATIONS
COMMON AND PREFERRED STOCK AND WARRANTS. The Portfolio may invest in
common and preferred stock. Common stockholders are the owners of the company
issuing the stock and, accordingly, vote on various corporate governance matters
such as mergers. They are not creditors of the company, but rather, upon
liquidation of the company, are entitled to their pro rata share of the
company's assets after creditors (including fixed income security holders) and
preferred stockholders, if any, 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 withdrawals by interest holders or otherwise may require the
Portfolio to sell these securities at a discount from market prices, to sell
during periods when disposition is not desirable, or to make many small sales
over a lengthy period of time. The market value of all securities, including
equity securities, is based upon the market's perception of value and not
necessarily the book value of an issuer or other objective measure of a
company's worth.
The Portfolio may also invest in warrants, which are options to
purchase an equity security at a specified price (usually representing a premium
over the applicable market value of the underlying equity security at the time
of the warrant's issuance) and usually during a specified period of time.
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:
(i) 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 (ii) to establish a position in the equities
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: (i) 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; (ii) potentially
unlimited loss associated with futures transactions and the possible lack of a
liquid secondary market for closing out a futures position; and (iii) possible
losses resulting from the inability of the investment adviser to correctly
predict the direction of stock prices, interests rates and other economic
factors. The Hedging Instruments that 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 "in the box", and no income can result and no gain can be
realized from securities sold short against-the-box until the short position is
closed out. Such short sales are subject to the limits described under
"Fundamental Restrictions". (See "Short Sales Against-the-Box" in the SAI for
further details.)
7
<PAGE>
DEPOSITARY RECEIPTS. The Portfolio may invest in certain issuers
exclusively or primarily through the purchase of sponsored and unsponsored
Depositary Receipts, including American Depositary Receipts ("ADRs")and other
similar securities, such as European Depositary Receipts ("EDRs"), Global
Depositary Receipts ("GDRs") or International Depositary Receipts ("IDRs"), 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 depositary of an unsponsored ADR may be under no obligation to
distribute shareholder communications received from the foreign issuer or to
pass through voting rights. EDRs, GDRs and IDRs are similar to ADRs and are
designed for use in foreign markets.
FOREIGN EXCHANGE CONTRACTS. Changes in foreign currency exchange rates
affect the U.S.-dollar values of securities denominated in currencies other than
the U.S. dollar. The rate of exchange between the U.S. dollar and other
currencies fluctuates in response to forces of supply and demand in the foreign
exchange markets. These forces are affected by the international balance of
payments and other economic and financial conditions, government intervention,
speculation and other factors, many of which may be difficult if not impossible
to predict. When investing in foreign securities, the Portfolio usually effects
currency exchange transactions on a spot (I.E., cash) basis at the spot rate
prevailing in the foreign exchange market. The Portfolio incurs foreign exchange
expenses in converting assets from one currency to another.
The Portfolio may enter into foreign currency forward contracts or
currency futures or options contracts for the purchase or sale of foreign
currency to "lock in" the U.S. dollar price of the securities denominated in a
foreign currency or the U.S. dollar value of interest and dividends to be paid
on such securities, or to hedge against the possibility that the currency of a
foreign country in which the Portfolio has investments may suffer a decline
against the U.S. dollar. A forward currency contract is an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. This method of attempting to hedge the
value of portfolio securities against a decline in the value of a currency does
not eliminate fluctuations in the underlying prices of the securities and may
expose the Portfolio to the risk that the counterparty is unable to perform.
Although the strategy of engaging in foreign currency transactions could reduce
the risk of loss due to a decline in the value of the hedged currency, it could
also limit the potential gain from an increase in the value of the currency. The
Portfolio does not intend to maintain a net exposure to such contracts where the
fulfillment of obligations under such contracts would obligate it to deliver an
amount of foreign currency in excess of the value of its portfolio securities or
other assets denominated in the currency. The Portfolio will not enter into
these contracts for speculative purposes and will not enter into non-hedging
currency contracts. These contracts involve a risk of loss if Schroder Capital
fails to predict currency values correctly.
The Portfolio is required to distribute substantially all of its
investment income in U.S. dollars. Because most of the Portfolio's income is
received and realized in foreign currencies; a decline in the value of a
particular foreign currency against the U.S. dollar occurring after the
Portfolio's income has been earned may require the Portfolio to liquidate some
portfolio securities to acquire sufficient U.S. dollars to make such
distributions. Similarly, if the exchange rate declines between the time the
Portfolio incurs expenses in U.S. dollars and the time such expenses are paid,
the Portfolio may be required to liquidate additional foreign securities to
purchase the U.S. dollars required to meet such expenses.
FIRM- AND STANDBY-COMMITMENT AGREEMENTS AND WHEN-ISSUED SECURITIES. New
issues of certain debt securities are often offered on a when-issued basis. That
is, the payment obligation and the interest rate are fixed at the time the buyer
enters into the commitment, but delivery and payment for the securities normally
take place after the date of the commitment to purchase. Firm- and
standby-commitment agreements call for the purchase of securities at an
agreed-upon price on a specified future date. The transactions are entered into
in order to secure what is considered to be an advantageous price and yield to
the Portfolio and not for purposes of leveraging the
8
<PAGE>
Portfolio's assets. However, the Portfolio will not accrue any income on these
securities prior to delivery. The value of when-issued securities and firm- and
standby-commitment agreements may vary prior to and after delivery depending on
market conditions and changes in interest-rate levels. There is a risk that a
party with whom the Portfolio has entered into such transactions will not
perform its commitment, which could result in a gain or loss to the Portfolio.
DEBT SECURITIES. The Portfolio may also invest in debt obligations of
the United States and its subdivisions, foreign governments, international
organizations and foreign corporations. The Portfolio may from time to time
invest up to 5% of its total assets in debt securities with high risk and high
yields (as compared to other debt securities meeting the Portfolio's investment
criteria). The debt securities in which the Portfolio invests may be unrated but
will not be in default at the time of purchase. The value of debt securities
generally varies inversely with interest rate changes. (See "Additional
Investment Policies and Risk Considerations".)
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS. The Portfolio may
invest in certificates of deposit, time deposits, bankers' acceptances, and
other short-term debt obligations issued by commercial banks and in certificates
of deposit, time deposits, and other short-term obligations issued by savings
and loan associations ("S&Ls"). Certificates of deposit are receipts from a bank
or S&L for funds deposited for a specified period of time at a specified rate of
return. Time deposits in banks or S&Ls are generally similar to certificates of
deposit, but are uncertificated. Bankers' acceptances are time drafts drawn on
commercial banks by borrowers, usually in connection with international
commercial transactions. The Portfolio will limit its investment in time
deposits for which there is a penalty for early withdrawal to 15% of its net
assets.
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, as amended. If SCMI determines that a "Rule 144A
security" is liquid pursuant to guidelines adopted by the Trust Board, the
security 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 information.)
LENDING OF PORTFOLIO SECURITIES. The Portfolio may lend its investment
securities to brokers, dealers and financial institutions for the purpose of
realizing additional income. The total market value of securities loaned will
not at any time exceed 25% of the value of the total assets of the Portfolio.
The risk in lending portfolio securities, as with other extensions of credit, is
the possible loss of rights in the collateral should the borrower fail
financially. In determining whether to lend securities, the Portfolio's
investment adviser will consider all relevant facts and circumstances, including
the creditworthiness of the borrower.
COMMERCIAL PAPER. The Portfolio may invest in commercial paper, which
represents short-term unsecured promissory notes issued by banks or bank holding
companies, corporations and finance companies. The Portfolio may invest in
commercial paper primarily rated at the time of investment "P-1" by Moody's
Investor Service ("Moody's") or "A-1" by Standard and Poor's ("S&P"), or, if
unrated by Moody's or S&P, deemed comparable in quality by the Portfolio's
investment adviser. The Portfolio may also invest in commercial paper rated
below "A-1"/ "P-1"; however, such investments are subject to the Portfolio's 10%
limit on high-yield, high-risk securities. (See "Appendix A -- Description of
Securities Ratings" to the SAI.)
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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
ensure 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.
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 commercial paper, U.S. Treasury bills,
other short-term U.S. Government securities, certificates of deposit and
bankers' acceptances of U.S. banks. U.S. Government securities are obligations
of, or guaranteed by, the U.S. Government or its agencies, instrumentalities or
government-sponsored enterprises. The Portfolio also may hold cash and time
deposits in U.S. banks. In transactions involving "repurchase agreements," the
Portfolio purchases securities from a bank or broker-dealer who agrees to
repurchase the security at the Portfolio's cost plus interest within a specified
time. The securities purchased by the Portfolio have a total value in excess of
the value of the repurchase agreement and are held by the Portfolio's custodian
bank until repurchased. (See "Investment Policies" in Part B for further
information about all these securities.)
RISK CONSIDERATIONS
FOREIGN INVESTMENTS. Investments in foreign securities involve certain
risks not associated with domestic investments, 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.
Foreign economies may differ favorably or unfavorably from the U.S.
economy in such respects as economic growth rates, rates of inflation, capital
reinvestment, resources, self-sufficiency and balance of payments positions.
Certain foreign investments may also be subject to foreign withholding taxes,
thereby reducing the income available for distribution to the Portfolio's
interestholders. Additionally, commission rates payable on foreign portfolio
transactions may often be higher than in the U.S. Because international
investments generally involve risks in addition to those risks associated with
investments in the U.S., the Fund should be considered only as a vehicle for
international diversification and not as a complete investment program.
Issuers of securities in foreign jurisdictions are generally not
subject to the same degree of regulation as are U.S. issuers with respect to
such matters as insider trading rules, restrictions on market manipulation,
shareholder proxy requirements and timely disclosure of information. Often,
available information about issuers and their securities is less extensive in
foreign markets, particularly emerging market countries, than in the United
States. In addition, laws in foreign countries governing business organizations,
bankruptcy and insolvency may provide less protection to security holders such
as the Portfolio than that provided by U.S.
laws.
Moreover: (i) interest payable on foreign securities may be subject to
foreign withholding taxes, thereby reducing the income earned by the Portfolio;
(ii) accounting, auditing and financial reporting standards differ from those in
the U.S., which means that less information about foreign companies may be
available than is generally available about issuers of comparable securities in
the U.S.; (iii) foreign securities may trade less frequently and/or with less
volume than U.S. securities and consequently may exhibit greater price
volatility; and (iv) foreign securities trading practices, including those
involving securities settlement, may expose the Portfolio to increased risk in
the event of a failed trade or the insolvency of a foreign broker-dealer or
registrar.
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GEOGRAPHIC CONCENTRATION. The Portfolio may invest more than 25% of its
total assets in issuers located in any one country. To the extent that it
invests in issuers located in one country, the Portfolio is susceptible to
factors adversely affecting that country, including 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 with a
lesser degree of geographic concentration.
CURRENCY FLUCTUATIONS AND DEVALUATIONS. Because the Portfolio will
invest in non-U.S. dollar denominated securities, changes in foreign currency
exchange rates will affect the value of the Portfolio's investments. A decline
against the dollar in the value of currencies in which the Portfolio's
investments are denominated will result in a corresponding decline in the dollar
value of its assets. Exchange rates are influenced generally by the forces of
supply and demand in the foreign currency markets and by numerous other
political and economic events occurring outside the United States, many of which
may be difficult, if not impossible, to predict.
The Portfolio may enter into foreign currency forward contracts to
purchase or sell foreign currencies in anticipation of its currency requirements
and to protect against possible adverse movements in foreign exchange rates.
Although such contracts may reduce the risk of loss to the Portfolio due to a
decline in the value of the currency sold, they also limit any possible gain
that might result should the value of such currency rise. (See "Options and
Futures Transactions".)
SMALLER COMPANIES. Investments in smaller capitalization companies
involve greater risks than those associated with investments in larger
capitalization companies. Smaller capitalization companies generally experience
higher growth rates and higher failure rates than do larger capitalization
companies. The trading volume of securities of smaller capitalization companies
is normally less than that of larger capitalization companies and, consequently,
generally has a disproportionate effect on their market price, tending to make
them rise more in response to buying demand and fall more in response to selling
pressure than is the case with larger capitalization companies.
Investments in small, unseasoned issuers generally involve greater risk
than is customarily associated with larger, more seasoned companies. Such
issuers often have products and management personnel which have not been
thoroughly tested by time or the marketplace and their financial resources may
not be as substantial as those of more established companies. Their securities,
which the 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 can result in such securities being priced lower than
otherwise might be the case. If other institutional investors engage in trading
this type of security, the Portfolio may be forced to dispose of its holdings at
prices lower than might otherwise be obtained.
FIXED-INCOME SECURITIES AND THEIR CHARACTERISTICS. Fixed-income
securities generally are subject to market risk and credit risk. Market risk
refers to the change in the market value of investments by the Portfolio in
fixed income securities, including money market instruments, when there is a
change in interest rates or the issuer's actual or perceived creditworthiness or
ability to meet its obligations. There is normally an inverse relationship
between the market value of fixed-rate debt securities and changes in interest
rates. In other words, an increase in interest rates produces a decrease in
market value. Moreover, the longer the remaining maturity of a security, the
greater will be the effect of interest rate changes on the market value of that
security. The Portfolio's investments are subject to "credit risk" relating to
the financial condition of the issuers of the securities that the Portfolio
holds. Credit risk refers to changes in the ability of an issuer to make
payments of interest and principal when due and changes in the market's
perception of an issuer's creditworthiness that affect the value of the debt
securities of that issuer.
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MANAGEMENT OF THE FUND
SCHRODER GROUP ASSETS UNDER MANAGEMENT WORLDWIDE AS OF DECEMBER 31,1996-
OVER $150 BILLION
[WORLD MAP GRAPHIC]
THE SCHRODER INVESTMENT MANAGEMENT GROUP INVESTMENT AND REPRESENTATIVE OFFICES
WORLDWIDE INCLUDE NEW YORK,LONDON, BOSTON, ZURICH, WARSAW, TOKYO, HONG KONG,
BEIJING, SHANGHAI, TAIPEI, SEOUL, BANGKOK, KUALA LUMPUR, SINGAPORE, JAKARTA,
SYDNEY, BUENOS AIRES, SAO PAULO, AND BOGOTA.
TOGETHER, SCHRODER CAPITAL MANAGEMENT INTERNATIONAL AND SCHRODER
CAPITAL MANAGEMENT INC. MANAGE OVER $24 BILLION
BOARDS OF TRUSTEES
The business and affairs of the Fund are managed under the direction of
the Trust Board. The business and affairs of the Portfolio are managed under the
direction of the Schroder Core Board. Additional information regarding the
Trustees and executive officers of the Trust, as well as Schroder Core's
trustees and executive officers, may be found in the SAI under the heading
"Management, Trustees and Officers".
INVESTMENT ADVISER AND PORTFOLIO MANAGERS
As investment adviser to the Portfolio, SCMI manages the Portfolio and
continuously reviews, supervises and administers its investments. SCMI is
responsible for making decisions relating to the Portfolio's investments and
placing purchase and sale orders regarding such investments with brokers or
dealers it selects. For these services, the Investment Advisory Agreement
between SCMI and the Trust provides that SCMI is entitled to receive a monthly
advisory fee at the annual rate of 0.85% of the Portfolio's average daily net
assets, which the Fund indirectly bears through investment in the Portfolio.
SCMI has agreed, however, to waive 0.10% of the advisory fees payable under the
Investment Advisory Agreement by the Portfolio. Such fee limitation arrangement
shall remain in effect until its elimination is approved by the Schroder Core
Board. The Fund bears no separate investment advisory fee directly. Prior to
November 1, 1996, the Fund had no operating history. The historical performance
of the Adviser's commingled investment fund for tax-exempt pension and profit
sharing trusts which has substantially similar policies, strategies and risks,
managed by Schroder Capital, the portfolio manager of the Portfolio, is
presented in Appendix A.
SCMI is a wholly owned U.S. subsidiary of Schroders Incorporated, the
wholly owned U.S. holding company subsidiary of Schroders plc. Schroders plc is
the holding company parent of a large world-wide group of banks and financial
services companies (referred to as the "Schroder Group"), with associated
companies and branch and representative offices located in eighteen countries
world-wide. The Schroder Group specializes in providing investment management
services.
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As of the date of this Prospectus, Schroder Capital has been investing
in international small companies as a specialist area for over 20 years and has
14 analysts dedicated to following small company stock. Schroders' analysts
maintain contact with over 1,500 small companies in a typical year and conduct
over 900 exclusive on-site company visits.
Richard R. Foulkes, a Vice President of the Trust and Deputy Chairman of
SCMI, with the assistance of an SCMI investment committee, is primarily
responsible for the day-to-day management of the Portfolio's investments. Mr.
Foulkes has managed the Portfolio's investment portfolio since January 1997. Mr.
Foulkes has been a Director and Executive Vice President of Schroder Capital
Management International Ltd. since 1989 and a Deputy Chairman/Executive Vice
President of Schroder Capital Management Inc. since October 1995.
The Fund pursues its investment objective through investment in the
Portfolio. The Fund may withdraw its investment from the Portfolio at any time
if the Trust 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 at the annual rate of 0.75% of the Fund's
average daily net assets. The investment advisory agreement between SCMI and the
Trust with respect to the Fund is the same in all material respects as the
investment advisory contract between SCMI and Schroder Core with respect to the
Portfolio (except as to the parties, the fees payable thereunder, the
circumstances under which fees will be paid and the jurisdiction whose laws
govern the agreement).
ADMINISTRATIVE SERVICES
On behalf of the Fund, the Trust has entered into an administration
agreement with Schroder Advisors, 787 Seventh Avenue, 34th Floor, New York, New
York 10019. On behalf of the Portfolio, the Trust has also entered into a
subadministration 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 investment management and administrative services provided to the
Portfolio by SCMI. Schroder Advisors is compensated at the annual rate of 0.10%
of the Fund's average daily net assets. Forum is compensated at the annual rate
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 Schroder Advisors at the annual rate of 0.15% of
the Portfolio's average daily net assets and pays Forum at the annual rate of
0.075% of the Portfolio's average daily net assets.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICE PLAN
Schroder Advisors acts as distributor of the Fund's shares. Schroder
Advisors was organized in 1989 and registered as a broker-dealer to serve as an
administrator and distributor for mutual funds. The Trust may compensate
Schroder Advisors under a distribution plan, adopted pursuant to Rule 12b-1
under the 1940 Act (the "Distribution Plan") by the Trust on behalf of the
Fund's Advisor Shares. Schroder Advisors, in turn, may use these payments to
compensate others for services provided, or to reimburse others for expenses
incurred, in connection with the distribution of Advisor Shares. The
Distribution Plan authorizes monthly payments at an annual rate of up to 0.50%
of the Fund's average daily net assets attributable to Advisor Shares. No
payments will be made under the Distribution Plan until the Board so authorizes.
Payments under the Distribution Plan may be for various types of costs,
including: (i) advertising expenses; (ii) costs of printing prospectuses and
other materials to be given or sent to prospective investors; (iii) expenses of
sales employees or agents of Schroder Advisors, including salary, commissions,
travel and related expenses in connection with the distribution of Advisor
Shares; (iv) payments to broker-dealers who advise
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<PAGE>
shareholders regarding the purchase, sale, or retention of Advisor Shares; and
(v) payments to banks, trust companies, broker-dealers (other than Schroder
Advisors) or other financial organizations (collectively, "Service
Organizations"). Payments to a particular Service Organization under the
Distribution Plan will be calculated by reference to the average daily net
assets of Advisor Shares owned beneficially by investors 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 annual limit may not be carried forward
to future years. Salary expenses of sales personnel who are responsible for
marketing various shares of portfolios of the Trust may be allocated to those
portfolios, including the Advisor Shares of the Fund, that have adopted a plan
similar to that of the Fund on the basis of average daily net assets. Travel
expenses may be allocated to, or divided among, the particular portfolios 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 is authorized to pay Service Organizations a servicing fee. Payments
under the Shareholder Service Plan may be for various types of services,
including: (i) 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; (ii) providing necessary
personnel and facilities to establish and maintain shareholder accounts and
records; (iii) assisting shareholders in arranging for processing purchase,
exchange and redemption transactions; (iv) arranging for the wiring of funds;
(v) guaranteeing shareholder signatures in connection with redemption orders and
transfers and changes in shareholder-designated accounts; (vi) integrating
periodic statements with other customer transactions; and (vii) providing such
other related services as the shareholder may request. The maximum amount
payable under the Shareholder Service Plan is 0.25% of the Fund's average daily
net assets attributable to Advisor Shares.
Payments to a particular Service Organization under the Shareholder
Service Plan are calculated by reference to the average daily net assets of
Advisor Shares owned beneficially by investors who have a 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 undertaken voluntarily to waive a
portion of their fees or assume certain expenses of the Fund in order to limit
total Fund expenses excluding taxes, interest, brokerage commissions and other
portfolio transaction expenses and extraordinary expenses chargeable to Advisor
Shares to 1.75% of the average daily net assets of the Fund attributable to
those shares. This expense limitation cannot be modified or withdrawn except by
a majority vote of the Trustees of the Trust who are not affiliated persons (as
defined in the 1940 Act) of the Trust. If expense reimbursements are required,
they will be made on a monthly basis. Forum has agreed to waive, up to 0.025%, a
pro rata portion of its fees at the Fund level as necessary to keep the total
expense ratio for the Fund, including indirect expenses borne by the Fund as a
result of investing in the Portfolio, at 1.50% of the average daily net assets
of the Fund.
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
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expenses to accrue to the Portfolio than would be the case for comparable
transactions effected on U.S. securities exchanges.
Subject to the Portfolio's policy of obtaining the best price
consistent with quality of execution on transactions, SCMI may employ Schroder
Securities Limited and its affiliates (collectively, "Schroder Securities")
affiliates of SCMI to effect transactions of the Portfolio on certain foreign
securities exchanges. Because of the affiliation between SCMI and Schroder
Securities, the Portfolio's payment of commissions to Schroder Securities is
subject to procedures adopted by 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 such 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 are 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. These arrangements 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.
CODE OF ETHICS
The Trust, Schroder Core, SCMI, Schroder Advisors, and Schroders
Incorporated have each adopted a code of ethics that contains 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 ("Transfer
Agent"). (See "Other Information -- Shareholder Inquiries".)
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 $25,000, and the minimum subsequent
investment is $2000. SCMI reserves the right to waive the minimum initial
investment at its discretion. All purchase payments are invested in full and
fractional shares. The Fund is authorized to reject any purchase order.
Purchases may be made by mailing a check (in U.S. dollars), payable to
"Schroder International Smaller Companies Fund" to:
Schroder International Smaller Companies Fund - Advisor Shares
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, may be requested from
corporations, administrators, executors, personal representatives, directors or
custodians to evidence the authority of the person or entity making the
investment.
Investors may transmit purchase payments by Federal Reserve Bank wire
directly to the Fund as follows:
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Chase Manhattan Bank
New York, NY
ABA No.: 021000021
For Credit To: Forum Financial Corp.
Account No.: 910-2-718187
Ref.: Schroder International Smaller Companies Fund -
Advisor Shares
Account of: (shareholder name)
Account No.: (shareholder account number)
The wire order must specify the name of the Fund, the shares' class
(I.E., Advisor 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 before any account becomes
active. Wire orders received prior to 4:00 p.m. (Eastern time) on each day that
the New York Stock Exchange is open for trading (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. (Eastern time) will be processed at the net asset value
determined as of the next Fund Business Day. (See "Net Asset Value".)
The Fund's Transfer Agent establishes for each shareholder of record an
open account to which all shares purchased and all reinvested dividends and
other distributions are credited. 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 other distributions will automatically 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 the checks will be canceled.
RETIREMENT PLANS AND INDIVIDUAL RETIREMENT ACCOUNTS
Shares of the Fund are offered in connection with tax-deferred
retirement plans. Applications forms and further information about these plans,
including applicable fees, are available upon request. Before investing in the
Fund through one of these plans, investors should consult their tax advisors.
The Fund may be used as an investment vehicle for an IRA including
SEP-IRA. An IRA naming The First National Bank of Boston as custodian is
available from the Trust or the Transfer Agent. The minimum initial investment
for an IRA is $2,000. There is no minimum subsequent investment amount. Under
certain circumstances contributions to an IRA may be tax deductible. IRAs are
available to individuals (and their spouses) who receive compensation or earned
income whether or not they are active participants in a tax-qualified or
government-approved retirement plan. An IRA contribution by an individual or
spouse who 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.
EXCHANGES
Shareholders may exchange Advisor Shares of the Fund for Advisor Shares
of any other fund of the Trust so long as they meet the initial investment
minimum of the fund being purchased and maintain the respective minimum account
balance in each fund in which they own shares. Exchanges between each fund are
at net asset value.
For federal income tax purposes an exchange is considered to be a sale
of shares on which a shareholder
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<PAGE>
may realize a capital gain or loss. An exchange may be made by calling the
Transfer Agent at (800) 344-8332 or by mailing written instructions to Schroder
Capital Funds (Delaware), P.O. Box 446, Portland, Maine 04112. Exchange
privileges may be exercised only in those states where shares of the other
series of the Trust may legally be sold. Exchange privileges may be amended or
terminated at any time upon sixty (60) days' notice.
REDEMPTION OF SHARES
Shares of the Fund are redeemed at their next determined net asset
value after receipt by the Fund (at the address set forth above under "Purchase
of Shares") of a redemption request in proper form. Redemption requests may be
made between 9:00 a.m. and 6:00 p.m. (Eastern time) on each Fund Business Day.
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. (Eastern time) will be processed at the net
asset value determined the next Fund Business Day. (See "Net Asset Value".)
BY TELEPHONE. Redemption requests may be made by telephoning the
Transfer Agent at the 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, 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 telephone
instructions are genuine. The Transfer Agent and the Trust generally 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 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 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 proceeds will be mailed
until checks in payment for the purchase of the shares to be redeemed have been
cleared, which may take up to 15 calendar days from the purchase date. 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.
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If the Trust 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 investment portfolio of the Portfolio
or of the Fund), in lieu of cash. 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 falls below that amount solely as a result of market
activity. Shareholders will be notified that the value of the account is less
than $2,000 and be allowed at least 30 days to make an additional investment to
increase the account balance to at least $2,000.
NET ASSET VALUE
The net asset value per share of the Fund is calculated separately for
each class of shares of the Fund at 4:00 p.m. (Eastern time), Monday through
Friday, each Fund Business Day, which excludes the following U.S. holidays: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. Net asset value per share is calculated
by dividing the aggregate value of the Fund's assets less all Fund liabilities,
if any, by the number of shares of the Fund outstanding.
The net asset value per share of the Fund is calculated separately for
each class of Shares of the Fund at 4:00 p.m. (Eastern time), Monday through
Friday, each Fund Business Day, which excludes the following U.S. holidays: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. Net asset value per Share is calculated
by dividing the aggregate value of the Fund's assets less all Fund liabilities,
if any, by the number of Shares of the Fund outstanding.
Generally, securities held by the Portfolio that are listed on
recognized stock exchanges are valued at the last reported sale price, on the
day when the securities are valued (the "Valuation Day"), on the primary
exchange on which the securities are principally traded. Listed securities
traded on recognized stock exchanges for which there were no sales on the
Valuation Day are valued at the last sale price on the proceeding trading day or
at closing mid-market prices. Securities traded in over-the-counter markets 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 in securities on non-U.S. exchanges and over-the-counter
markets may not take place on every day that the New York Stock Exchange is open
for trading. Furthermore, trading takes place in various foreign markets on days
on which the Fund's net asset value is not calculated. If events materially
affecting the value of foreign securities occur between the time when their
price is determined and the time when net asset value is calculated, such
securities will be valued at fair value as determined in good faith by using
methods approved by 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.
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DIVIDENDS, DISTRIBUTIONS AND TAXES
THE FUND
The Fund intends to comply with the provisions of Internal Revenue Code
of 1986, as amended, applicable to regulated investment companies. By complying
therewith, the Fund will not have to pay federal income tax on that part of its
investment income or net realized capital gain that is distributed to
shareholders. The Fund intends to distribute substantially all of its income and
net realized capital gain and, therefore, intends not to be subject to federal
income tax.
Dividends and capital-gain distributions on a class of shares are
reinvested automatically in additional shares of the same class at net asset
value unless the shareholder has elected in the account application, or
otherwise in writing, to receive dividends and other distributions in cash.
After every dividend and other distribution, the value of a share
declines by the amount of the distribution. Purchases made shortly before a
dividend or other distribution include in the purchase price the amount of the
distribution, which will be returned to the investor in the form of a taxable
distribution.
Dividends and other distributions paid by the Fund with respect to both
classes of its shares are calculated in the same manner and at the same time.
The per share dividends on Advisor Shares are expected to be lower than the per
share dividends on Advisor Shares as a result of any compensation payable to
Service Organizations for shareholder servicing for the Advisor Shares.
Dividends from the Fund's income generally are taxable to shareholders
as ordinary income whether dividends are invested in additional shares or
received in cash. Distributions by the Fund of any net capital gain is taxable
to a shareholder as long-term capital gain, regardless of how long the
shareholder has held the shares. 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 dividends do not exceed the
aggregate amount of dividends received by the Fund from domestic corporations,
provided the Fund shares are held 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 fewer than 46 days (91 days in the case of
certain preferred stock); or are subject to certain forms of hedges or short
sales, then the portion of the dividends paid by the Fund attributable to such
securities will not be eligible for the dividends-received deduction.
A redemption of shares may result in taxable gain or loss to the
redeeming shareholder, depending on whether the redemption proceeds are more or
less than the shareholder's basis in the redeemed shares. If shares are redeemed
at a loss after being held for six months or less, the loss will be treated as a
long-term, rather than a short-term, capital loss to the extent of any
capital-gain distributions received on those shares.
The Fund must withhold 31% from dividends, capital-gain distributions
and redemption proceeds payable to any individuals and certain other
noncorporate shareholders who do not furnish the Fund with a correct taxpayer
identification number. Withholding at that rate also is required from dividends
and capital-gain distributions payable to such shareholders who otherwise are
subject to backup withholding. Depending on the residence of a shareholder for
tax purposes, distributions from the Fund may also be subject to state and local
taxes, including withholding taxes.
In an effort to adhere to certain tax requirements, the Fund may have
to limit its investment activity in some types of instruments.
If the Fund's dividends exceed its taxable income in any year, all or a
portion of the Fund's dividends may be treated as a return of capital to
shareholders for tax purposes. Any return of capital will reduce the cost basis
of your shares, which will result in a higher reported capital gain or a lower
reported capital loss when you sell your
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<PAGE>
shares. Shareholders will be notified by the Trust if a distribution included a
return of capital.
EFFECT OF FOREIGN TAXES. Foreign governments may impose taxes on the
Portfolio and its investments, which generally reduce the Fund's income.
However, an offsetting tax credit or deduction may be available to you. If so,
your tax statement will show more taxable income or capital gain than was
actually distributed by the Fund but will also show the amount of the available
offsetting credit or deduction.
If the Fund is eligible to do so, it intends to elect to permit its
shareholders to take a credit (or a deduction) for the Fund's share of foreign
income taxes paid by the Portfolio. If the Fund does make such an election, its
shareholders would include as gross income in their federal income tax returns
both: (i) distributions received from the Fund; and (ii) the amount that the
Fund advises is their pro rata portion of foreign income taxes paid with respect
to or withheld from dividends and interest paid to the Portfolio from its
foreign investments. Shareholders then would be entitled, subject to certain
limitations, to take a foreign tax credit against their 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 foregoing is only a summary of some of the important federal tax
considerations generally affecting the Fund and its shareholders; see the SAI
for further information. Shareholders should consult their own tax advisors as
to the tax consequences of their ownership of shares.
THE PORTFOLIO
The Portfolio is not required to pay federal income tax because it is
classified as a partnership for federal income tax purposes. All interest,
dividends and gains and losses of the Portfolio will be deemed to have been
"passed through" to the Fund in proportion to its holdings in the Portfolio,
regardless of whether such interest, dividends or gains have been distributed by
the Portfolio. The Portfolio intends to conduct its operations so as to enable
the Fund to qualify as a regulated investment company.
OTHER INFORMATION
CAPITALIZATION AND VOTING
The Trust was organized as a Maryland corporation on July 30, 1969;
reorganized on February 29, 1988, as Schroder Capital Funds, Inc.; and
reorganized on January 9, 1996, as a Delaware business trust. 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 the Advisor Shares),
and the costs of doing so will be borne by the Trust. The Trust currently
consists of seven separate portfolios, each of which has separate investment
objectives and policies.
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, non-assessable, and have no preemptive 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).
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. On Trust matters requiring shareholder approval,
shareholders of the Trust are entitled to vote only with respect to matters that
affect the interests of the Fund or the class of shares they hold, except as
otherwise required by applicable law.
20
<PAGE>
There will normally be no meetings of shareholders to elect Trustees
unless and until such time as less than a majority of the Trustees holding
office have been elected by shareholders. However, the holders of not less than
a majority of the outstanding shares of the Trust may remove any person serving
as a Trustee and the Trust Board will call a special meeting of shareholders to
consider removal of one or more Trustees if requested in writing to do so by the
holders of not less than 10% of the outstanding shares of the Trust. From time
to time, certain shareholders may own a large percentage of the shares of the
Fund. Accordingly, those shareholders may be able to greatly affect (if not
determine) the outcome of a shareholder vote.
REPORTS
The Trust sends each shareholder a semi-annual report and an audited
annual report containing the Fund's financial statements.
PERFORMANCE
The Fund may include quotations of its average annual total return,
cumulative total return and other performance measures in advertisements or
reports to shareholders or prospective investors. Average annual total return of
a class of shares is based upon the overall dollar or percentage change in value
of a hypothetical investment each year over specified periods. Average annual
total returns reflect the deduction of a proportional share of a Fund's expenses
(on an annual basis) and assumes investment and reinvestment of all dividends
and distributions at NAV. Cumulative total returns are calculated similarly
except that the total return is aggregated over the relevant period instead of
annualized.
Performance quotations are calculated separately for each class of
shares of the Fund. The Fund may also 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 do not reflect deductions for administrative and
management costs and expenses.
Performance information represents only past performance and does not
necessarily indicate future results. For a description of the methods used to
determine total return and other performance measures for the Fund, see the SAI.
CUSTODIAN AND TRANSFER AGENT
The Chase Manhattan Bank is custodian of the Fund's and the Portfolio's
assets. Forum Financial Corp. serves as the Fund's transfer and dividend
disbursing agent.
SHAREHOLDER INQUIRIES
Inquiries about the Fund, including its past performance, should be
directed to:
Schroder International 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.
FUND STRUCTURE
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. 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
21
<PAGE>
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 Schroder Advisors at (800)
730-2932.
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 substantially similar 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 December 1996. Schroder Core is registered under the 1940 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 Fund's investment in the Portfolio is in the form of a
non-transferable beneficial interest. As of November 4, 1996, there were two
institutional investors in the Portfolio. The Portfolio may permit other
investment companies or qualified investors to invest in it. All other investors
in the Portfolio will invest on the same terms and conditions as the Fund. All
investors in the Portfolio bear a proportionate share of the Portfolio's
expenses.
The Portfolio normally will not hold meetings of investors except as
required by the 1940 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 1940 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. 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 federal securities law, 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
investors in the Portfolio. In addition, under federal securities law, Schroder
Core may be liable for misstatements or omissions of a material fact in any
proxy soliciting material of an investor in Schroder Core, including the Fund.
Each investor in the Portfolio, including the Trust, will indemnify Schroder
Core and its Trustees and officers ("Schroder Core Indemnitees") against certain
claims.
Indemnified claims are those brought against the Schroder Core
Indemnitees based on a misstatement or omission of a material fact in the
investor's registration statement or proxy materials. No indemnification need be
made, however, if such alleged misstatement or omission relates to information
about Schroder Core and 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 Schroder
Core. The purpose of these cross-indemnity provisions is to
22
<PAGE>
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 Trust 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 Trust
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 likely incur
brokerage fees or other transaction costs. If the Fund withdrew its investment
from the Portfolio, the Trust Board would consider appropriate alternatives,
including the management of the Fund's assets in accordance with its investment
objective and policies by SCMI, 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 Trust 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, may be liable for
all obligations of the Portfolio. The risk to an investor in the Portfolio of
incurring financial loss on account of such liability, however, is limited to
circumstances in which the Portfolio is 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.
23
<PAGE>
APPENDIX A
PRIOR PERFORMANCE OF SCMI
The following table sets forth SCMI's composite performance data
relating to the historical performance of a commingled investment fund for
tax-exempt pension and profit sharing trusts that is managed by the investment
adviser and is the only account managed by the investment adviser with an
investment objective, policies, strategies and risks substantially similar to
those of the Portfolio. The commingled fund commenced operations in May, 1989,
and as of September 30, 1996, had total net assets of approximately $980
million. THE DATA ARE PROVIDED TO ILLUSTRATE THE PAST PERFORMANCE OF SCMI IN
MANAGING SUBSTANTIALLY SIMILAR ACCOUNTS AS MEASURED AGAINST SPECIFIED MARKET
INDICES AND DO NOT REPRESENT THE PERFORMANCE OF THE PORTFOLIO. INVESTORS SHOULD
NOT CONSIDER THIS PERFORMANCE DATA AS AN INDICATION OF FUTURE PERFORMANCE OF THE
PORTFOLIO, OF THE FUND OR OF THE INVESTMENT ADVISER.
SCMI's composite performance data shown below were calculated in
accordance with recommended standards of the Association for Investment
Management and Research ("AIMR"), respectively applied to all time periods. AIMR
is a non-profit membership and education organization with more than 60,000
members worldwide that, among other things, has formulated a set of performance
presentation standards for investment advisers. These AIMR performance
presentation standards are intended to: (i) promote full and fair presentations
by investment advisers of their performance results; and (ii) ensure uniformity
in reporting so that performance results of investment advisers are directly
comparable. All returns presented were calculated on a total return basis and
include all dividends and interest, accrued income and realized and unrealized
gains and losses. Returns do not reflect the deduction of investment advisory
fees, custody fees, brokerage commissions and execution costs paid by the
account, without provision for federal or state taxes. Securities transactions
are accounted for on the trade date and accrual accounting is utilized. Cash and
equivalents are included in performance returns. The monthly returns combine the
accounts' returns (calculated on a time-weighted rate of return that is revalued
whenever cash flows exceed $500) by asset-weighting each account's asset value
as of the beginning of the month. Quarterly and yearly returns are calculated by
linking the monthly and quarterly returns, respectively, in accordance with AIMR
standards.
The commingled investment fund that is included in the investment
adviser's composite is not subject to the same types of expenses to which the
Portfolio is subject nor to the diversification requirements, specific tax
restrictions and investment limitations imposed on the Portfolio by the
Investment Company Act of 1940 or the Internal Revenue Code. The performance
results for SCMI's composite could have been adversely affected if the
commingled investment fund had been subject to such regulation.
The investment results of the commingled investment fund are audited annually.
Presenting the performance of such fund here is not intended to predict or
suggest the returns that might be experienced by the Portfolio, the Fund or an
individual investor investing in the Fund. Investors should also be aware that
the use of a methodology different from that used below to calculate performance
could result in different performance data.
<TABLE>
<CAPTION>
Annual Rates of Return
1/1/96 - 5/31/89 -
9/30/96 1995 1994 1993 1992 1991 1990 12/31/89
-------- ---- ---- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Adviser's Composite 13.6% 6.2% 4.4% 30.0% -9.3% 8.4% -2.3% 36.8%
Salomon Brothers
Extended Market Index (1) 7.7% 4.8% 9.4% 30.7% -15.3% 6.5% -22.6% 24.9%
</TABLE>
(1) The Salomon Brothers Extended Market Index ("EMI") is the portion of the
Salomon Brothers Broad Market Index ("BMI") related to companies with small
market capitalization in approximately 22 countries. Only issues that non-local
investors may purchase are included. In establishing the EMI, Salomon Brothers
ranks all companies in the BMI (I.E., companies with available market capital
greater than U.S. $100 million) within each country by their total (unadjusted)
market capital. The EMI represents the smallest companies in each country based
on total market capital having in the aggregate 20% of the cumulative available
market capital in such country.
<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
SUBADMINISTRATOR
Forum Administrative Services, Limited Liability Company
Two Portland Square
Portland, Maine 04101
CUSTODIAN
The Chase Manhattan Bank
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 AUDITORS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Table of Contents
PROSPECTUS SUMMARY.............................3
EXPENSES OF INVESTING
IN THE FUND................................4
Fee Table......................................4
Example........................................4
FINANCIAL HIGHLIGHTS...........................5
INVESTMENT OBJECTIVE...........................6
INVESTMENT POLICIES............................6
ADDITIONAL INVESTMENT POLICIES
AND RISK CONSIDERATIONS....................7
RISK CONSIDERATIONS...........................10
MANAGEMENT OF THE FUND........................12
Boards of Trustees............................12
Investment Adviser and
Portfolio Managers........................12
Administrative Services.......................13
Distribution Plan and
Shareholder Service Plan..................13
Expenses......................................14
Portfolio Transactions........................14
Code of Ethics................................15
INVESTMENT IN THE FUND........................15
Purchase of Shares............................15
Retirement Plans and Individual
Retirement Accounts.......................16
Exchanges.....................................16
Redemption of Shares..........................17
Net Asset Value...............................18
DIVIDENDS, DISTRIBUTIONS
AND TAXES...................................19
The Fund......................................19
The Portfolio.................................20
OTHER INFORMATION.............................20
Capitalization and Voting.....................20
Reports.......................................21
Performance...................................21
Custodian and Transfer Agent..................21
Shareholder Inquiries.........................21
Fund Structure................................21
Appendix A...................................A-1
<PAGE>
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND
STATEMENT OF ADDITIONAL INFORMATION
JUNE 27, 1997
[WORLD MAP GRAPHIC]
INVESTMENT ADVISER
Schroder Capital Management International Inc. ("SCMI")
ADMINISTRATOR AND DISTRIBUTOR
Schroder Fund Advisors, Inc. ("Schroder Advisors")
SUBADMINISTRATOR
Forum Administrative Services, Limited Liability Company ("Forum")
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Forum Financial Corp. ("FFC")
GENERAL INFORMATION: (207) 879-8903
ACCOUNT INFORMATION: (800) 344-8332
FAX: (207) 879-6206
Investor Shares of Schroder International Smaller Companies Fund ("the Fund")
are offered for sale at net asset value with no sales charge as an investment
vehicle for individuals, institutions, corporations and fiduciaries. Advisor
Shares of the Fund also are offered for sale at net asset value to individual
investors, in most cases through Service Organizations (as defined herein).
Advisor Shares are offered at lower investment minimums but incur more expenses
than Investor Shares.
This Statement of Additional Information ("SAI") is not a prospectus and is
authorized for distribution only when preceded or accompanied by the Fund's
current prospectuses dated June 27, 1997, as amended from time to time (the
"Prospectus"). This SAI contains additional and more detailed information than
that set forth in the Prospectus and should be read in conjunction with the
Prospectus and retained for future reference. All terms used in this SAI that
are defined in the Prospectus have the meaning assigned in the Prospectus. You
may obtain an additional copy of the Prospectus without charge by writing to the
Fund at Two Portland Square, Portland, Maine 04101 or calling the numbers listed
above.
<PAGE>
2
TABLE OF CONTENTS
INTRODUCTION..................................................3
INVESTMENT POLICIES...........................................3
Foreign Securities............................................3
Emerging Markets..............................................4
Depository Receipts...........................................4
Use of Forward Contracts in
Foreign Exchange Transactions.............................4
U.S. Government Securities....................................5
Bank Obligations..............................................5
Short-Term Debt Securities....................................5
Repurchase Agreements.........................................5
Warrants......................................................6
Illiquid and Restricted Securities............................6
Loans of Portfolio Securities.................................6
Covered Calls and Hedging.....................................6
Short Sales Against-the-Box...................................10
INVESTMENT RESTRICTIONS.......................................10
MANAGEMENT....................................................11
Officers and Trustees.........................................11
Investment Adviser............................................13
Administrative Services.......................................14
Distribution of Fund Shares...................................15
Service Organizations.........................................16
Portfolio Accounting..........................................16
Fees and Expenses.............................................17
PORTFOLIO TRANSACTIONS........................................17
Investment Decisions..........................................17
Brokerage and Research Services...............................18
ADDITIONAL PURCHASE AND
REDEMPTION INFORMATION....................................19
Determination of Net Asset Value Per Share....................19
Redemption In-Kind............................................20
TAXATION......................................................20
OTHER INFORMATION.............................................22
Organization..................................................22
Capitalization and Voting.....................................23
Performance Information.......................................23
Custodian.....................................................24
Transfer Agent and Dividend Disbursing Agent..................24
Legal Counsel.................................................24
Independent Accountant........................................25
Registration Statement........................................25
FINANCIAL STATEMENTS..........................................25
APPENDIX......................................................A-1
2
<PAGE>
8
INTRODUCTION
Schroder International Smaller Companies Fund (the "Fund") is a
separately-managed, diversified series of Schroder Capital Funds (Delaware) (the
"Trust"), an open-end management investment company registered under the
Investment Company Act of 1940 (the "1940 Act"). The Trust currently consists of
six separate series, each of which has different investment objectives and
policies.
The Fund's investment objective is long-term capital appreciation through
investment in securities markets outside the United States. The Fund currently
seeks to achieve its investment objective by holding, as its only investment
securities, the securities of Schroder International Smaller Companies Portfolio
(the "Portfolio"), a separate diversified series of Schroder Capital Funds
("Schroder Core"), an open-end management investment company registered under
the 1940 Act. . Investments in foreign securities involve certain risks not
associated with domestic investing, and there can be no assurance that the
Fund's or Portfolio's investment objective will be achieved. Since the Fund has
the same investment objective and substantially similar investment policies as
the Portfolio and currently invests substantially all of its assets in the
Portfolio, investment policies and restrictions are discussed with respect to
the Portfolio only.
The Portfolio seeks to achieve its investment objective by investing, under
normal market conditions, at least 65% of its total assets in equity securities,
which may be denominated in foreign or U.S. currency, of companies domiciled
outside of the United States that have market capitalizations of $1.5 billion or
less at the time of investment. Investments in foreign securities involve
special risks in addition to those associated with investments in general, and
investments in smaller capitalization companies involve greater risks than those
risks associated with investments in larger capitalization companies. There can
be no assurance that the Fund or Portfolio will achieve its investment
objective. (See "The Fund -- Special Risk Considerations.")
INVESTMENT POLICIES
The Fund's investment objective and policies authorize it to invest in certain
types of securities and to engage in certain investment techniques identified in
"Investment Policies" and Risk Considerations" in the Prospectus.
The following information supplements these sections of the Prospectus.
As described in the Prospectus, the Portfolio invests at least 65%, and normally
intends to invest substantially all of its assets in equity securities, which
may be denominated in foreign or U.S. currency, of companies domiciled outside
of the United States that have market capitalizations of $1.5 billion or less at
the time of investment.
FOREIGN SECURITIES
The Portfolio may invest, without limit (subject to the other investment
policies applicable to the Portfolio), in U.S. dollar-denominated and
foreign-currency denominated foreign debt securities and in certificates of
deposit issued by foreign banks and foreign branches of U.S. banks to any extent
deemed appropriate by SCMI.
Investment in the securities of non-U.S. issuers may involve risks in addition
to those normally associated with investments in the securities of U.S. issuers.
There may be less publicly available information about foreign issuers than is
available for U.S. issuers, and foreign auditing, accounting and financial
reporting practices may differ from U.S. practices. Foreign securities markets
may have lower volume or activity than U.S. markets, resulting in thin trading
and lower liquidity than for U.S. issues. Consequently, securities prices may be
more volatile. In general, SCMI invests only in securities of companies and
governments of countries that, in its judgment, are both politically and
economically stable. Nevertheless, all foreign investments are subject to risks
of foreign political and economic instability, adverse movements in foreign
exchange rates, the imposition or tightening of exchange controls or other
limitations on the repatriation of foreign capital, and changes in foreign
governmental attitudes toward private investment, possibly leading to adoption
of foreign governmental restrictions affecting the payment of principal and
interest, nationalization, increased withholding, taxation, or confiscation of
portfolio assets, and other possible adverse political or economic developments
that would affect portfolio assets. In addition, it may be more difficult to
obtain and enforce a judgment against a foreign issuer or a foreign branch of a
domestic bank.
3
<PAGE>
EMERGING MARKETS
The Portfolio may invest in securities of issuers located in countries
considered by some to be emerging market countries. The risks of investing in
foreign securities may be greater with respect to securities of issuers in, or
denominated in the currencies of, emerging market countries. The economies of
emerging market countries generally are heavily dependent upon international
trade and, accordingly, have been and may continue to be adversely affected by
trade barriers, exchange controls, managed adjustments in relative currency
values and other protectionist measures imposed or negotiated by the countries
with which they trade. These economies also have been and may continue to be
adversely affected by economic conditions in the countries with which they
trade. The securities markets of emerging market countries are substantially
smaller, less developed, less liquid and more volatile than the securities
markets of the United States and other developed countries. Disclosure and
regulatory standards in many respects are less stringent in emerging market
countries than in the United States and other major markets. There also may be a
lower level of monitoring and regulation of emerging market countries than in
the United States and other major markets. There also may be a lower level of
monitoring and regulation of emerging markets and the activities of investors in
such markets, and enforcement of existing regulations may be extremely limited.
Investing in local markets, particularly in emerging market countries, may
require the Portfolio to adopt special procedures, seek local government
approvals or take other actions, each of which may involve additional costs to
the Portfolio. Certain emerging market countries may also restrict investment
opportunities in issuers in industries deemed important to national interests or
in all issuers with respect to foreign investors. Currency risk tends to be
heightened in the case of investing in certain emerging market countries.
DEPOSITORY RECEIPTS
Investments in securities of foreign issuers may on occasion be in the form of
sponsored or unsponsored American Depository Receipts ("ADRs") or European
Depository Receipts ("EDRs"), or other similar securities convertible into
securities of foreign issuers. These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs are receipts typically issued in the United States by a bank or
trust company, evidencing ownership of the underlying securities. EDRs are
typically issued in Europe under a similar arrangement. Generally, ADRs, in
registered form, are designed for use in the U.S. securities markets and EDRs,
in bearer form, are designed for use in European securities markets. Unsponsored
ADRs may be created without the participation of the foreign issuer. Holders of
these ADRs generally bear all the costs of the ADR facility, whereas foreign
issuers typically bear certain costs in a sponsored ADR. The bank or trust
company depository of an unsponsored ADR may be under no obligation to
distribute shareholder communications received from the foreign issuer or to
pass through voting rights.
USE OF FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
In anticipation of foreign exchange requirements and to protect or "hedge"
against adverse movements in foreign currency exchange rates, the Portfolio may
invest in forward foreign currency exchange contracts ("forward contracts") to
purchase or sell an agreed-upon amount of a specified currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. Such forward
contracts are traded in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for trades. Although such contracts tend to minimize the risk of loss due
to a decline in the value of the currency that is sold, they expose the
Portfolio to the risk that the counterparty is unable to perform and tend to
limit commensurately any potential gain which might result should the value of
such currency increase during the contract period.
4
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U.S. GOVERNMENT SECURITIES
The Portfolio may invest in obligations issued or guaranteed by the U.S.
Government or its agencies or instrumentalities which have remaining maturates
not exceeding one year. Agencies and instrumentalities which issue or guarantee
debt securities and that have been established or sponsored by the U.S.
Government include the Bank for Cooperatives, the Export-Import Bank, the
Federal Farm Credit System, the Federal Home Loan Banks, the Federal Home Loan
Mortgage Corporation, the Federal Intermediate Credit Banks, the Federal Land
Banks, the Federal National Mortgage Association, the Government National
Mortgage Association and the Student Loan Marketing Association. Except for
obligations issued by the U.S. Treasury and the Government National Mortgage
Association, none of the obligations of the other agencies or instrumentalities
referred to above are backed by the full faith and credit of the U.S.
Government. There can be no assurance that the U.S. Government will provide
financial support to these obligations where it is not obligated to do so.
BANK OBLIGATIONS
The Portfolio will not invest in any obligation of a domestic or foreign bank
unless: (i) the bank has capital, surplus, and individual profits (as of the
date of the most recently published financial statements) in excess of $100
million (or the equivalent in other currencies); and (ii) in the case of a U.S.
bank, its deposits are insured by the Federal Deposit Insurance Corporation.
These limitations do not prohibit investments in the securities issued by
foreign branches of U.S. banks, provided such U.S. banks meet the foregoing
requirements. The Portfolio may also invest in certificates of deposit issued by
foreign banks, denominated in any major foreign currency. The Portfolio may
invest in instruments issued by foreign banks which, in the view of Schroder
Capital and the Trustees of Schroder Core, are of credit-worthiness and
financial stature in their respective countries comparable to U.S. banks used by
the Portfolio. A certificate of deposit is an interest-bearing negotiable
certificate issued by a bank against funds deposited in the bank. A bankers'
acceptance is a short-term draft drawn on a commercial bank by a borrower,
usually in connection with an international commercial transaction. Although the
borrower is liable for payment of the draft, the bank unconditionally guarantees
to pay the draft at its face value on the maturity date.
SHORT-TERM DEBT SECURITIES
The Portfolio may invest in commercial paper, that is short-term unsecured
promissory notes issued in bearer form by bank holding companies, corporations
and finance companies. The commercial paper purchased by the Portfolio for
temporary defensive purposes consists of direct obligations of domestic issuers
which, at the time of investment, are rated "P-1" by Moody's Investors Service
("Moody's") or "A-1" by Standard & Poor's ("S&P"), or securities that, if not
rated, are issued by companies having an outstanding debt issue currently rated
"Aaa" or "Aa" by Moody's or "AAA" or "AA" by S&P. The rating "P-1" is the
highest commercial paper rating assigned by Moody's and the rating "A-1" is the
highest commercial paper ratings assigned by S&P.
For temporary defensive purposes, to accumulate cash for investments, or to meet
anticipated redemptions, the Portfolio may invest in (or enter into repurchase
agreements with banks and broker dealers with respect to) short-term debt
securities, including Treasury bills and other U.S. Government securities, and
certificates of deposit and bankers' acceptances of U.S. banks. The Portfolio
may also hold cash and time deposits in foreign banks, denominated in any major
foreign currency.
REPURCHASE AGREEMENTS
The Portfolio may enter into repurchase agreements with U.S. banks or
broker-dealers maturing in seven days or less. In a typical repurchase agreement
the seller of a security commits itself at the time of the sale to repurchase
that security from the buyer at a mutually agreed-upon time and price. The
repurchase price exceeds the sale price, reflecting an agreed-upon interest rate
effective for the period the buyer owns the security subject to repurchase. The
agreed-upon rate is unrelated to the interest rate on that security. SCMI
monitors the value of the underlying security at the time the transaction is
entered into and at all times during the term of the repurchase agreement to
insure that the value of the security always equals or exceeds the repurchase
price. In the event of default by the seller under the repurchase agreement, the
Portfolio may have difficulties in exercising its rights to the underlying
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securities and may incur costs and experience time delays in connection with the
disposition of such securities. To evaluate potential risks, SCMI reviews the
creditworthiness of those banks and dealers with which the Portfolio enters into
repurchase agreements.
WARRANTS
The Portfolio may invest in warrants. Warrants are options to purchase equity
securities at specific prices valid for a specific period of time. Their prices
do not necessarily move parallel to the prices of the underlying securities.
Warrants have no voting rights, receive no dividends and have no rights with
respect to the assets of the issuer.
ILLIQUID AND RESTRICTED SECURITIES
"Illiquid and Restricted Securities" in the Prospectus sets forth the
circumstances in which the Portfolio may invest in illiquid and restricted
securities. In connection with the Portfolios original purchase of restricted
securities, SCMI may negotiate rights with the issuer to have such securities
registered for sale at a later time. Further, the expenses of registration of
restricted securities that are illiquid may also be negotiated by the Portfolio
with the issuer at the time such securities are purchased by the Portfolio. When
registration is required, however, a considerable period may elapse between a
decision to sell the securities and the time to sell such securities. A similar
delay might be experienced in attempting to sell such securities pursuant to an
exemption from registration. Thus, the Portfolio may not be able to obtain as
favorable a price as that prevailing at the time of the decision
LOANS OF PORTFOLIO SECURITIES
The Portfolio may lend its portfolio securities subject to the restrictions
stated in the Prospectus. Under applicable regulatory requirements (which are
subject to change), the loan collateral must, on each business day, at least
equal the market value of the loaned securities and must consist of cash, bank
letters of credit, U.S. Government securities, or other cash equivalents in
which the Portfolio is permitted to invest. To be acceptable as collateral,
letters of credit must obligate a bank to pay amounts demanded by the Portfolio
if the demand meets the terms of the letter. Such terms and the issuing bank
must be satisfactory to the Portfolio. In a portfolio securities lending
transaction, the Portfolio receives from the borrower an amount equal to the
interest paid or the dividends declared on the loaned securities during the term
of the loan as well as the interest on the collateral securities, less any
finders or administrative fees the Portfolio pays in arranging the loan. The
Portfolio may share the interest it receives on the collateral securities with
the borrower as long as it realizes at least a minimum amount of interest
required by the lending guidelines established by the Schroder Core Board. The
Portfolio will not lend its portfolio securities to any officer, director,
employee or affiliate of the Portfolio, the Fund or Schroder Capital. The terms
of the Portfolio s loans must meet certain tests under the Internal Revenue Code
and permit the Portfolio to reacquire loaned securities on five business days
notice or in time to vote on any important matter.
COVERED CALLS AND HEDGING
As described in the Prospectus, while the Portfolio does not presently intend to
do so, it may write covered calls on up to 100% of its total assets or employ
one or more types of Hedging Instruments (as defined in the Prospectus). When
hedging to attempt to protect against declines in the market value of the
Portfolio s securities, to permit the Portfolio to retain unrealized gains in
the value of portfolio securities that have appreciated, or to facilitate
selling securities for investment reasons, the Portfolio would: (i) sell Stock
Index Futures (as defined below); (ii) purchase puts on such futures or on
securities; or (iii) write covered calls on securities or such futures. When
hedging to establish a position in the equities markets as a temporary
substitute for purchasing particular equity securities (which the Portfolio will
normally purchase and then terminate the hedging position), the Portfolio would:
(i) purchase Stock Index Futures; or (ii) purchase calls on such futures or on
securities. The Portfolio s strategy of hedging with Stock Index Futures and
options on such futures will be incidental to the Portfolio s activities in the
underlying cash market.
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WRITING COVERED CALL OPTIONS. The Portfolio may write (I.E., sell) call options
("calls") if: (i) the calls are listed on a domestic securities or commodities
exchange; and (ii) the calls are "covered" (I.E., the Portfolio owns the
securities subject to the call or other securities acceptable for applicable
escrow arrangements) while the call is outstanding. A call written on a Stock
Index Future must be covered by deliverable securities or segregated liquid
assets. If a call written by the Portfolio is exercised, the Portfolio forgoes
any profit from any increase in the market price above the call price of the
underlying investment on which the call was written.
When the Portfolio writes a call on a security, it receives a premium and agrees
to sell the underlying securities to a purchaser of a corresponding call on the
same security during the call period (usually not more than nine months) at a
fixed exercise price (which may differ from the market price of the underlying
security), regardless of market price changes during the call period. The risk
of loss will have been retained by the Portfolio if the price of the underlying
security should decline during the call period, which may be offset to some
extent by the premium.
To terminate its obligation on a call it has written, the Portfolio may be
purchase a corresponding call in a "closing purchase transaction". A profit or
loss will be realized, depending upon whether the net of the amount of option
transaction costs and the premium previously received on the call written was
more or less than the price of the call subsequently purchased. A profit may
also be realized if the call lapses unexercised, because the Portfolio retains
the underlying security and the premium received. If the Portfolio could not
effect a closing purchase transaction due to the lack of a market, it would have
to hold the callable securities until the call lapsed or was exercised.
The Portfolio may also write calls on Stock Index Futures without owning a
futures contract or a deliverable bond, provided that at the time the call is
written, the Portfolio covers the call by segregating in escrow an equivalent
dollar amount of liquid assets. The fund will segregate additional liquid assets
if the value of the escrowed assets drops below 100% of the current value of the
Stock Index Future. In no circumstances would an exercise notice require the
Portfolio to deliver a futures contract; it would simply put the Portfolio in a
short futures position, which is permitted by the Portfolio s hedging policies.
PURCHASING CALLS AND PUTS. The Portfolio may purchase put options ("puts") that
relate to: (i) securities held by it; (ii) Stock Index Futures (whether or not
it holds such futures in its portfolio); or (iii) broadly based stock indices.
The Portfolio may not sell puts other than those it previously purchased nor
purchase puts on securities it does not hold. The Portfolio may purchase calls:
(i) as to securities, broadly based stock indices or Stock Index Futures; or
(ii) to effect a "closing purchase transaction" to terminate its obligation on a
call it has previously written. A call or put may be purchased only if, after
such purchase, the value of all put and call options held by the Portfolio would
not exceed 5% of its total assets.
When the Portfolio purchases a call (other than in a closing purchase
transaction), it pays a premium and, except as to calls on stock indices, has
the right to buy the underlying investment from a seller of a corresponding call
on the same investment during the call period at a fixed exercise price. The
Portfolio benefits only if the call is sold at a profit or if, during the call
period, the market price of the underlying investment is above the sum of the
call price plus the transaction costs and the premium paid for the call and the
call is exercised. If the call is not exercised or sold (whether or not at a
profit), it will become worthless at its expiration date and the Portfolio will
lose its premium payments and the right to purchase the underlying investment.
When the Portfolio purchases a call on a stock index, it pays a premium, but
settlement is in cash rather than by delivery of an underlying investment.
When the Portfolio purchases a put, it pays a premium and, except as to puts on
stock indices, has the right to sell the underlying investment to a seller of a
corresponding put on the same investment during the put period at a fixed
exercise price. Buying a put on a security or Stock Index Future the Portfolio
owns enables it to attempt to protect itself during the put period against a
decline in the value of the underlying investment below the exercise price by
selling the underlying investment at the exercise price to a seller of a
corresponding put. If the market price of the underlying investment is equal to
or above the exercise price and, as a result, the put is not exercised or
resold, the put will become worthless at its expiration date and the Portfolio
will lose its premium payment and the right to sell the underlying investment;
the put may, however, be sold prior to expiration (whether or not at a profit).
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Purchasing a put on either a stock index or on a Stock Index Future not held by
the Portfolio permits it either to resell the put or to buy the underlying
investment and sell it at the exercise price. The resale price of the put will
vary inversely with the price of the underlying investment. If the market price
of the underlying investment is above the exercise price and, as a result, the
put is not exercised, the put will become worthless on its expiration date. In
the event of a decline in price of the underlying investment, the Portfolio
could exercise or sell the put at a profit to attempt to offset some or all of
its loss on its portfolio securities. When the Portfolio purchases a put on a
stock index, or on a Stock Index Future not held by it, the put protects the
Portfolio to the extent that the index moves in a similar pattern to the
securities held. In the case of a put on a stock index or Stock Index Future,
settlement is in cash rather than by the Portfolio s delivery of the underlying
investment.
STOCK INDEX FUTURES. The Portfolio may buy and sell futures contracts only if
they relate to broadly based stock indices ("Stock Index Futures"). A stock
index is "broadly based" if it includes stocks that are not limited to issuers
in any particular industry or group of industries. Stock Index Futures obligate
the seller to deliver (and the purchaser to take) cash to settle the futures
transaction or to enter into an offsetting contract. No physical delivery of the
underlying stocks in the index is made.
No price is paid or received upon the purchase or sale of a Stock Index Future
Upon entering into a futures transaction, the Portfolio will be required to
deposit an initial margin payment in cash or U.S. Treasury bills with a futures
commission merchant (the "futures broker"). The initial margin will be deposited
with the Portfolio s custodian in an account registered in the futures broker s
name; however the futures broker can gain access to that account only under
specified conditions. As the future is marked to market to reflect changes in
its market value, subsequent margin payments, called variation margin, will be
paid to or by the futures broker on a daily basis. Prior to expiration of the
future, if the Portfolio elects to close out its position by taking an opposite
position, a final determination of variation margin is made, additional cash is
required to be paid by or released to the Portfolio, and any loss or gain is
realized for tax purposes. Although Stock Index Futures by their terms call for
settlement by the delivery of cash, in most cases the obligation is fulfilled
without such delivery, by entering into an offsetting transaction. All futures
transactions are effected through a clearinghouse associated with the exchange
on which the contracts are traded.
Puts and calls on broadly based stock indices or Stock Index Futures are similar
to puts and calls on securities or other futures contracts except that all
settlements are in cash and gain or loss depends on changes in the index in
question (and thus on price movements in the stock market generally) rather than
on price movements in individual securities or futures contracts. When the
Portfolio buys a call on a stock index or Stock Index Future, it pays a premium.
During the call period, upon exercise of a call by the Portfolio, a seller of a
corresponding call on the same index will pay the Portfolio an amount of cash to
settle the call if the closing level of the stock index or Stock Index Future
upon which the call is based is greater than the exercise price of the call;
that cash payment is equal to the difference between the closing price of the
index and the exercise price of the call times a specified multiple (the
"multiplier") that determines the total dollar value for each point of
difference. When the Portfolio buys a put on a stock index or Stock Index
Future, it pays a premium and has the right during the put period to require a
seller of a corresponding put, upon the Portfolio s exercise of its put, to
deliver to the Portfolio an amount of cash to settle the put if the closing
level of the stock index or Stock Index Future upon which the put is based is
less than the exercise price of the put; that cash payment is determined by the
multiplier, in the same manner as described above as to calls.
ADDITIONAL INFORMATION ABOUT HEDGING INSTRUMENTS AND THEIR USE. The Portfolio s
custodian, or a securities depository acting for the custodian, will act as the
Portfolio s escrow agent, through the facilities of the Options Clearing
Corporation ("OCC"), as to the securities on which the Portfolio has written
options, or as to other acceptable escrow securities, so that no margin will be
required for such transactions. OCC will release the securities on the
expiration of the option or upon the Portfolio s entering into a closing
transaction. An option position may be closed out only on a market that provides
secondary trading for options of the same series, and there is no assurance that
a liquid secondary market will exist for any particular option.
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The Portfolios option activities may affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Portfolio may cause
it to sell related portfolio securities, thus increasing its turnover rate in a
manner beyond its control. The exercise by the Portfolio of puts on securities
or Stock Index Futures may cause the sale of related investments, also
increasing portfolio turnover. Although such exercise is within the Portfolio s
control, holding a put might cause the Portfolio to sell the underlying
investment for reasons that would not exist in the absence of the put. The
Portfolio will pay a brokerage commission each time it buys or sells a call, a
put or an underlying investment in connection with the exercise of a put or
call. Such commissions may be higher than those that would apply to direct
purchases or sales of the underlying investments. Premiums paid for options are
small in relation to the market value of such investments, and, consequently,
put and call options offer large amounts of leverage. The leverage offered by
trading in options could result in the Portfolio s net asset value being more
sensitive to changes in the value of the underlying investments.
REGULATORY ASPECTS OF HEDGING INSTRUMENTS AND COVERED CALLS. The Portfolio must
operate within certain restrictions as to its long and short positions in Stock
Index Futures and options thereon under a rule (the "CFTC Rule") adopted by the
Commodity Futures Trading Commission (the "CFTC") under the Commodity Exchange
Act (the "CEA"), which excludes the Portfolio from registration with the CFTC as
a "commodity pool operator" (as defined in the CEA) if it complies with the CFTC
Rule. Under these restrictions the Portfolio will not, as to any positions,
whether short, long or a combination thereof, enter into Stock Index Futures and
options thereon for which the aggregate initial margins and premiums exceed 5%
of the fair market value of its total assets, with certain exclusions as defined
in the CFTC Rule. Under the restrictions, the Portfolio also must, as to its
short positions, use Stock Index Futures and options thereon solely for
bona-fide hedging purposes within the meaning and intent of the applicable
provisions under the CEA.
Transactions in options by the Portfolio are subject to limitations established
by each of the exchanges governing the maximum number of options that may be
written or held by a single investor or group of investors acting in concert,
regardless of whether the options were written or purchased on the same or
different exchanges or are held in one or more accounts or through one or more
exchanges or brokers. Thus, the number of options that the Portfolio may write
or hold may be affected by options written or held by other entities, including
other investment companies having the same or an affiliated investment adviser.
Position limits also apply to Stock Index Futures. An exchange may order the
liquidation of positions found to be in violation of those limits and may impose
certain other sanctions. Due to requirements under the Investment Company Act of
1940, as amended ("1940 Act"), when the Portfolio purchases a Stock Index
Future, the Portfolio will maintain, in a segregated account or accounts with
its custodian bank, cash or readily marketable, short- term (maturing in one
year or less) debt instruments in an amount equal to the market value of the
securities underlying such Stock Index Future, less the margin deposit
applicable to it.
LIMITS ON USE OF HEDGING INSTRUMENTS. Due to the Short-Short Limitation
described under "Taxation," the Portfolio will limit the extent to which it
engages in the following activities but will not be precluded from them: (i)
selling investments, including Stock Index Futures, held for less than three
months, whether or not they were purchased on the exercise of a call held by the
Portfolio; (ii) purchasing calls or puts that expire in less than three months;
(iii) effecting closing transactions with respect to calls or puts purchased
less than three months previously; (iv) exercising puts held for less than three
months; and (v) writing calls on investments held for less than three months.
POSSIBLE RISK FACTORS IN HEDGING. In addition to the risks discussed above,
there is a risk in using short hedging by selling Stock Index Futures or
purchasing puts on stock indices that the prices of the applicable index (thus
the prices of the Hedging Instruments) will correlate imperfectly with the
behavior of the cash (i.e., market value) prices of the Portfolio s equity
securities. The ordinary spreads between prices in the cash and futures markets
are subject to distortions due to differences in the natures of those markets.
First, all participants in the futures markets are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions that could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures markets depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures markets could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit requirements in the futures
markets are less onerous than margin
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requirements in the securities markets. Therefore, increased participation by
speculators in the futures markets may cause temporary price distortions.
The risk of imperfect correlation increases as the composition of the Portfolio
diverges from the securities included in the applicable index. To compensate for
the imperfect correlation of movements in the price of the equity securities
being hedged and movements in the price of the Hedging Instruments, the
Portfolio may use Hedging Instruments in a greater dollar amount than the dollar
amount of equity securities being hedged if the historical volatility of the
prices of such equity securities being hedged is more than the historical
volatility of the applicable index. It is also possible that where the Portfolio
has used Hedging Instruments in a short hedge, the market may advance and the
value of equity securities held in the Portfolio may decline. If this occurred,
the Portfolio would lose money on the Hedging Instruments and also experience a
decline in value in its equity securities. However, while this could occur for a
very brief period or to a very small degree, the value of a diversified
portfolio of equity securities will tend to move over time in the same direction
as the indices upon which the Hedging Instruments are based.
If the Portfolio uses Hedging Instruments to establish a position in the
equities markets as a temporary substitute for the purchase of individual equity
securities (long hedging) by buying Stock Index Futures and/or calls on such
futures, on securities or on stock indices, it is possible that the market may
decline. If the Portfolio then concluded not to invest in equity securities at
that time because of concerns as to possible further market decline or for other
reasons, it would realize a loss on the Hedging Instruments that is not offset
by a reduction in the price of the equity securities purchased.
SHORT SALES AGAINST-THE-BOX
After the Portfolio makes a short sale against-the-box, while the short position
is open, it must own an equal amount of the securities sold short or by virtue
of ownership of securities have the right, without payment of further
consideration, to obtain an equal amount of the securities sold short. Short
sales against-the-box may be made to defer recognition of gain or loss for
federal income tax purposes on the sale of securities "in the box" until the
short position is closed out.
INVESTMENT RESTRICTIONS
The following investment restrictions, except where stated to be non-fundamental
policies, are also-fundamental policies of the Fund. Except as noted, the Fund's
policies are the same as those of the Portfolio. The policies defined as
fundamental, together with the fundamental policies and investment objective
described in the Prospectus, cannot be changed without the vote of a "majority"
of the Fund's outstanding voting interests. Under the 1940 Act, such a
"majority" vote is defined as the vote of the holders of the lesser of: (i) 67%
or more of the interests present or represented by proxy at a meeting of
interestholders, if the holders of more than 50% of the outstanding interests
are present; or (ii) more than 50% of the outstanding interests.
The following investment restrictions of the Portfolio are fundamental policies:
1. The Fund may not, with respect to 75% of its assets, purchase a
security other than a security issued or guaranteed by the U.S.
Government, its agencies or instrumentalities or a security of an
investment company if, as a result, more than 5% of the Fund's
total assets would be invested in the securities of a single
issuer or the Fund would own more than 10% of the outstanding
voting securities of any single issuer.
2. The Fund may not concentrate investments in any particular
industry; therefore, the Fund will not purchase the securities of
companies in any one industry if, thereafter, 25% or more of the
Fund's total assets would consist of securities of companies in
that industry. This restriction does not apply to obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. An investment of more than 25% of the Fund's
assets in the securities of issuers located in one country does
not contravene this policy.
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3. The Fund may not borrow money in excess of 33 1/3% 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 that may otherwise require untimely
dispositions of portfolio securities.
4. The Fund may not purchase or sell real estate, provided that the
Fund may invest in securities issued by companies which invest in
real estate or interests therein.
5. The Fund may not make loans to other persons, provided that for
purposes of this restriction, entering into repurchase agreements
or acquiring any otherwise permissible debt securities or engaging
in securities loans shall not be deemed to be the making of a
loan.
6. The Fund may not invest in commodities or commodity contracts
other than forward foreign currency exchange contracts.
7. The Fund may not underwrite securities issued by other persons
except to the extent that, in connection with the disposition
of its portfolio investments, it may be deemed to be an
underwriter under U.S. securities laws.
8. The Fund may not issue senior securities except to the extent
permitted by the 1940 Act.
Except for the policies on borrowing and illiquid securities, the percentage
restrictions described above apply only at the time of investment and require no
action by the Fund as a result of subsequent changes in value of the investments
or the size of the Fund.
MANAGEMENT
OFFICERS AND TRUSTEES
The following information relates to the principal occupations during the past
five years of each Trustee and executive officer of the Trust and shows the
nature of any affiliation with SCMI. PETER E. GUERNSEY, 75, c/o the Trust, Two
Portland Square, Portland, Maine - Trustee of the Trust; Insurance Consultant
since August 1986; prior thereto Senior Vice President, Marsh & McLennan, Inc.,
insurance brokers.
JOHN I. HOWELL, 80, c/o the Trust, Two Portland Square, Portland, Maine -
Trustee of the Trust; Private Consultant since February 1987; Honorary Director,
American International Group, Inc.; Director, American International Life
Assurance Company of New York.
CLARENCE F. MICHALIS, 75, c/o the Trust, Two Portland Square, Portland, Maine -
Trustee of the Trust; Chairman of the Board of Directors, Josiah Macy, Jr.
Foundation (charitable foundation).
HERMANN C. SCHWAB, 77, c/o the Trust, Two Portland Square, Portland, Maine -
Chairman and Trustee of the Trust; retired since March, 1988; prior thereto,
consultant to SCMI since February 1, 1984.
MARK J. SMITH*, 35, 33 Gutter Lane, London, England - President and Trustee of
the Trust; Senior Vice President and Director of SCMI since April 1990; Director
and Senior Vice President, Schroder Advisors.
MARK ASTLEY, 33, 787 Seventh Avenue, New York, New York - Vice President of the
Trust; First Vice President of SCMI, prior thereto, employed by various
affiliates of SCMI in various positions in the investment research and portfolio
management areas since 1987.
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ROBERT G. DAVY, 36, 787 Seventh Avenue, New York, New York - Vice President of
the Trust; Director of SCMI and Schroder Capital Management International Ltd.
since 1994; First Vice President of SCMI since July, 1992; prior thereto,
employed by various affiliates of SCMI in various positions in the investment
research and portfolio management areas since 1986.
MARGARET H. DOUGLAS-HAMILTON, 55, 787 Seventh Avenue, New York, New York - Vice
President of the Trust; Secretary of SCM since July 1995; Senior Vice President
(since April 1997) and General Counsel of Schroders Incorporated since May 1987;
prior thereto, partner of Sullivan & Worcester, a law firm.
RICHARD R. FOULKES, 51, 787 Seventh Avenue, New York, New York - Vice President
of the Trust; Deputy Chairman of SCMI since October 1995; Director and Executive
Vice President of Schroder Capital Management International Ltd.
since 1989.
ROBERT JACKOWITZ, 30, 787 Seventh Avenue, New York, New York - Treasurer of the
First Trust; Vice President of SCM since September 1995; Treasurer of SCM and
Schroder Advisors since July 1995; Vice President of SCMI and SCM since April
1997; and Assistant Treasurer of Schroders Incorporated since January 1990.
JOHN Y. KEFFER, 54, Two Portland Square, Portland, Maine - Vice President of the
Trust; President of FFC, the Fund's transfer and dividend disbursing agent and
other affiliated entities including Forum Financial Services, Inc. and Forum
Advisors, Inc.
JANE P. LUCAS, 35, 787 Seventh Avenue, New York, New York - Vice President of
the Trust; Director and Senior Vice President SCMI; Director of SCM since
September 1995; Director of Schroder Advisors since September 1996; Assistant
Director Schroder Investment Management Ltd. since June 1991.
CATHERINE A. MAZZA, 37, 787 Seventh Avenue, New York, New York - Vice President
of the Trust; President of Schroder Advisors since 1997; First Vice President of
SCMI and SCM since 1996; prior thereto, held various marketing positions at
Alliance Capital, an investment adviser, since July 1985.
MICHAEL PERELSTEIN, 41, 787 Seventh Avenue, New York, New York - Vice President
of the Trust; Director since May 1997 and Senior Vice President of SCMI since
January 1997; prior thereto, Managing Director of MacKay - Shields Financial
Corp.
ALEXANDRA POE, 36, 787 Seventh Avenue, New York, New York - Secretary and Vice
President of the Trust; Vice President of SCMI since August 1996; Fund Counsel
and Senior Vice President of Schroder Advisors since August 1996; Secretary of
Schroder Advisors; prior thereto, an investment management attorney with Gordon
Altman Butowsky Weitzen Shalov & Wein since July 1994; prior thereto counsel and
Vice President of Citibank, N.A. since 1989.
THOMAS G. SHEEHAN, 42, Two Portland Square, Portland, Maine - Assistant
Treasurer and Assistant Secretary of the Trust; Counsel, Forum Financial
Services, Inc. since 1993; prior thereto, Special Counsel, U.S. Securities and
Exchange Commission, Division of Investment Management, Washington, D.C.
FARIBA TALEBI, 36, 787 Seventh Avenue, New York, New York - Vice President of
the Trust; Group Vice President of SCMI since April 1993, employed in various
positions in the investment research and portfolio management areas since 1987;
Director of SCM since April 1997.
JOHN A. TROIANO, 38, 787 Seventh Avenue, New York, New York - Vice President of
the Trust; Director of SCM since April 1997; Managing Director and Senior Vice
President of SCMI since October 1995; prior thereto, employed by various
affiliates of SCMI in various positions in the investment research and portfolio
management areas since 1981.
IRA L. UNSCHULD, 31, 787 Seventh Avenue, New York, New York - Vice President of
the Trust; Vice President of SCMI since April, 1993 and an Associate from July,
1990 to April, 1993.
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<PAGE>
CATHERINE S. WOOLEDGE, 55, Two Portland Square, Portland, Maine - Assistant
Treasurer and Assistant Secretary of the Trust - Counsel, Forum Financial
Services, Inc. since November 1996. Prior thereto, associate at Morrison &
Foerster, Washington, D.C. from October 1994 to November 1996, associate
corporate counsel at Franklin Resources, Inc. from September 1993 to September
1994, and prior thereto associate at Drinker Biddle & Reath, Philadelphia, PA.
* Interested Trustee of the Trust within the meaning of the 1940 Act.
Schroder Advisors is a wholly owned subsidiary of SCMI, which is a wholly owned
subsidiary of Schroders Incorporated, which in turn is an indirect, wholly owned
U.S. subsidiary of Schroders plc. Schroder Capital Management Inc. ("SCM") is
also a wholly owned subsidiary of Schroders Incorporated.
Officers and Trustees who are interested persons of the Trust and Schroder Core
receive no salary, fees or compensation from the Fund or the Portfolio.
Independent Trustees of the Trust and Schroder Core receive an annual fee of
$1,000 and a fee of $250 for each meeting of the Board attended by them except
in the case of Mr. Schwab, who receives an annual fee of $1,500 and a fee of
$500 for each meeting attended. The Trust has no bonus, profit sharing, pension
or retirement plans.
The following table provides the fees paid to each Trustee of the Trust for the
fiscal year ended October 31, 1996.
<TABLE>
<CAPTION>
Name of Trustee Aggregate Pension or Estimated Annual Total Compensation
Compensation From Retirement Benefits Benefits Upon From Trust And Fund
Trust Accrued As Part of Retirement Complex Paid To
Trust Expenses Trustees
- ------------------------------- -------------------- --------------------- -------------------- ---------------------
<S> <C> <C> <C> <C>
Mr. Guernsey $1,750 $0 $0 $1,750
Mr. Howell 1,750 0 0 1,750
Mr. Michalis 1,750 0 0 1,750
Mr. Schwab 3,000 0 0 3,000
Mr. Smith 0 0 0 0
</TABLE>
As of June 1, 1997, the officers and Trustees of the Trust owned, in the
aggregate, less than 1% of the Fund's outstanding shares.
Although the Trust is a Delaware business trust, certain of its Trustees or
officers are residents of the United Kingdom and substantially all of their
assets may be located outside of the U.S. As a result, it may be difficult for
U.S. investors to effect service upon such persons within the U.S. or to realize
judgments of courts of the U.S. predicated upon civil liabilities of such
persons under the federal securities laws. The Trust has been advised that there
is substantial doubt as to the enforceability in the United Kingdom of such
civil remedies and criminal penalties as are afforded by the federal securities
laws. Also it is unclear if extradition treaties now in effect between the U.S.
and the United Kingdom would subject such persons to effective enforcement of
criminal penalties.
INVESTMENT ADVISER
SCMI, 787 Seventh Avenue, New York, New York 10019, serves as investment adviser
to the Portfolio under an Investment Advisory Agreement between Schroder Core
and SCMI. SCMI is a wholly owned U.S. subsidiary of Schroders Incorporated, the
wholly owned U.S. holding subsidiary of Schroders plc. Schroders plc is the
holding company parent of a large worldwide group of banks and financial service
companies (referred to as the "Schroder Group"), with associated companies and
branch and representative offices located in eighteen countries. The Schroder
Group specializes in providing investment management services, with funds under
management currently in excess of $150 billion as of March 31, 1997.
13
<PAGE>
Under the Investment Advisory Agreement, SCMI is responsible for managing the
investment and reinvestment of the Portfolio's assets and for continuously
reviewing, supervising and administering the Portfolio's investments. In this
regard, it is the responsibility of SCMI to make decisions relating to the
Portfolio's investments and to place purchase and sale orders regarding such
investments with brokers or dealers it selects. SCMI also furnishes to the
Schroder Core Board and the Trust Board, which has overall responsibility for
the business and affairs of the Trust, periodic reports on the investment
performance of the Portfolio and Fund.
Under the terms of the Investment Advisory Agreement, SCMI is required to manage
the Portfolio's investment portfolio in accordance with applicable laws and
regulations. In making its investment decisions, SCMI does not use material
information that may be in its possession or in the possession of its
affiliates.
The Investment Advisory Agreement continues in effect provided such continuance
is approved annually: (i) by the holders of a majority of the outstanding voting
securities of the Portfolio or by the Schroder Core Board; and (ii) by a
majority of the Trustees who are not parties to the Agreement or "interested
persons" (as defined in the 1940 Act) of any such party. The Investment Advisory
Agreement may be terminated without penalty by vote of the Trustees or the
shareholders of the Portfolio on 60 days' written notice to the investment
adviser, or by the investment adviser on 60 days' written notice to Schroder
Core, and it terminates automatically if assigned. The Investment Advisory
Agreement also provides that, with respect to the Portfolio, neither SCMI nor
its personnel shall be liable for any error of judgment or mistake of law or for
any act or omission in the performance of its or their duties to the Portfolio,
except for willful misfeasance, bad faith or gross negligence in the performance
of its or their duties or by reason of reckless disregard of its or their
obligations and duties under the Agreement.
For providing investment advisory services to the Portfolio, SCMI is entitled to
a fee of 0.85% of the Portfolio's average daily net assets. SCMI has agreed ,
however, to waive a portion of the advisory fees payable by the Portfolio. This
waiver cannot be reduced or eliminated except by a majority vote of the Trust's
Board of Trustees.
The Fund currently invests all of its investable assets in the Portfolio. The
Fund may withdraw its investment from the Portfolio at any time if the Board
determines that it is in the best interests of the Fund and its shareholders to
do so. Accordingly, the Fund retains SCMI as its investment adviser to manage
the Fund's assets in the event the Fund so withdraws its investment. The
investment advisory agreement between Trust and SCMI with respect to the Fund is
the same in all material respects as the Portfolio's Investment Advisory
Agreement including the fee payable (except as to the parties, the circumstances
under which fees will be paid, and the jurisdiction whose laws govern the
agreement). During a time that the Fund did not have substantially all of its
assets invested in the Portfolio or another investment company, SCMI would be
entitled to receive an advisory fee of 0.85% of the average daily net assets of
the Fund managed directly by SCMI.
ADMINISTRATIVE SERVICES
On behalf of the Fund, the Trust has entered into an Administration Agreement
with Schroder Advisors, 787 Seventh Avenue, New York, New York 10019. Under the
Administration Agreement, Schroder Advisors provides management and
administrative services necessary for the operation of the Fund, including: (i)
preparation of shareholder reports and communications; (ii) regulatory
compliance, such as reports to and filings with the SEC (and state securities
commissions); and (iii) general supervision of the operation of the Fund,
including coordination of the services performed by the Fund's investment
adviser, if any, transfer agent, custodian, independent accountants, legal
counsel and others. Schroder Advisors is a wholly owned subsidiary of SCMI and
is a registered broker-dealer organized to act as administrator and distributor
of mutual funds.
For providing administrative services to the Fund, Schroder Advisors is entitled
to receive a fee, payable monthly, at the annual rate of 0.10% of the Fund's
average daily net assets. The Administration Agreement is terminable with
respect to the Fund without penalty, at any time, by the Trust Board, upon 60
days' written notice to Schroder Advisors or by Schroder Advisors upon 60 days'
written notice to the Trust.
14
<PAGE>
The Trust has entered into a Subadministration Agreement with Forum. Under the
Subadministration Agreement, Forum assists Schroder Advisors with certain of its
responsibilities under the Administration Agreement, including shareholder
reporting and regulatory compliance. Under the Subadministration Agreement,
Forum is entitled to a fee at the annual rate of 0.075% of the average daily net
assets. The Subadministration Agreement is terminable with respect to the Fund
without penalty, at any time, by the Trust Board, upon 60 days' written notice
to Forum or by Forum upon 60 days' written notice to the Trust.
Under administration and subadministration agreements with Schroder Core,
Schroder Advisors and Forum provide similar services to the Portfolio for which
each is separately entitled to compensation at the annual rates of 0.10% and
0.075%, respectively, of the average daily net assets of the Portfolio.
Accordingly, the fees paid by the Fund and Portfolio to SCMI and Schroder
Advisors may equal up to 0.1.05% of the Fund's average daily net assets. The
Portfolio's administration and subadministration agreements are the same in all
material respects as the Fund's respective agreements (except as to the parties,
the circumstances under which fees will be paid, the fees payable thereunder,
and the jurisdiction whose laws govern the agreement).
DISTRIBUTION OF FUND SHARES
Schroder Advisors, 787 Seventh Avenue, New York, New York 10019, serves as
Distributor of the Fund shares pursuant to a Distribution Agreement. Schroder
Advisors is a wholly owned subsidiary of Schroders Incorporated, the parent
company of SCMI, and is a registered broker-dealer organized to act as
administrator and/or distributor of mutual funds.
Under the Distribution Agreement, Schroder Advisors has agreed to use its best
efforts to secure purchases of Fund shares in jurisdictions in which such shares
may be legally offered for sale. Schroder Advisors is not obligated to sell any
specific amount of Fund shares. Further, Schroder Advisors has agreed in the
Distribution Agreement to serve without compensation and, except as provided
under a Distribution Plan approved with respect to Advisor shares, to pay from
its own resources all costs and expenses incident to the sale and distribution
of Fund shares including expenses for printing and distributing prospectuses and
other sales materials to prospective investors, advertising expenses, and the
salaries and expenses of its employees or agents in connection with the
distribution of Fund shares.
Under a Distribution Plan (the "Plan") adopted by the Fund with respect to
Advisor Shares only, the Trust may pay directly or may reimburse the investment
adviser or a broker-dealer registered under the Securities Exchange Act of 1934
(the "1934 Act") (the investment adviser or such registered broker-dealer, if so
designated, being a "Distributor" of the Fund's shares) monthly (subject to a
limit of 0.50% per annum of the Fund's average daily net assets) for: (i)
advertising expenses including advertising by radio, television, newspapers,
magazines, brochures, sales literature or direct mail; (ii) costs of printing
prospectuses and other materials to be given or sent to prospective investors;
(iii) expenses of sales employees or agents of the Distributor, including
salary, commissions, travel, and related expenses in connection with the
distribution of Fund shares; and (iv) payments to broker-dealers (other than the
Distributor) or other organizations for services rendered in the distribution of
the Fund's shares, including payments in amounts based on the average daily
value of Fund shares owned by shareholders in respect of which the broker-dealer
or organization has a distributing relationship. No payments may be made under
the Plan until the Trust Board so authorizes. Any payment made pursuant to the
Plan is contingent upon the Trust Board's approval. The Fund is not liable for
distribution expenditures of the Distributor in any given year in excess of the
maximum amount (0.50% per annum of the Fund's average daily net assets) payable
under the Plan in that year. Salary expenses of sales staff responsible for
marketing shares of the Fund may be allocated among various series of the Trust
that have adopted a Plan similar to that of the Fund on the basis of average net
assets; travel expenses are allocated among the series of the Trust. The Trust
Board has concluded that there is a reasonable likelihood that the Plan will
benefit the Fund and its shareholders.
Without shareholder approval, the Plan may not be amended to increase materially
the costs that the Fund may bear. Other material amendments to the Plan must be
approved by the Trust Board, and by the Trustees who are not "interested
persons" (as defined in the 1940 Act) of the Trust and who have no direct or
indirect financial interest in the operation of the Plan or in any related
agreement, by vote cast in person at a meeting called for the purpose of
15
<PAGE>
considering such amendments. The selection and nomination of the Trustees of the
Trust has been committed to the discretion of the Trustees who are not
"interested persons" of the Trust. The Plan has been approved, and is subject to
annual approval, by the Trust Board and by the Trustees who are not "interested
persons" and have no direct or indirect financial interest in the operation of
the Plan, by vote cast in person at a meeting called for the purpose of voting
on the Plan. The Plan is terminable with respect to the Fund at any time by a
vote of a majority of the Trustees who are not "interested persons" of the Trust
and who have no direct or indirect financial interest in the operation of the
Plan or by vote of the holders of a majority of the shares of the Fund
SERVICE ORGANIZATIONS
The Trust may also contract with banks, trust companies, broker-dealers or other
financial organizations ("Service Organizations") to provide certain
administrative services with respect to Advisor Shares of the Fund. The Fund may
pay fees (which vary depending upon the services provided) to Service
Organizations in amounts up to an annual rate of 0.25% of the daily net asset
value of the Fund's Advisor Shares owned by shareholders with whom the Service
Organization had a servicing relationship. Services provided by Service
Organizations may include: (i) providing personnel and facilities necessary to
establish and maintain certain shareholder accounts and records; (ii) assisting
in processing purchase and redemption transactions; (iii) arranging for the
wiring of funds; transmitting and receiving funds in connection with client
orders to purchase or redeem shares; (iv) verifying and guaranteeing client
signatures in connection with redemption orders, transfers among and changes in
client-designated accounts; (v) providing periodic statements of a client's
account balances and, to the extent practicable, integrating such information
with other client transactions; (vi) furnishing periodic and annual statements
and confirmations of all purchases and redemptions of shares in a client's
account; (vii) transmitting proxy statements, annual reports, and updating
prospectuses and other communications from the Fund to clients; and (viii) such
other services as the Fund or a client reasonably may request, to the extent
permitted by applicable statute, rule or regulation. Neither SCMI nor Schroder
Advisors is a Service Organization nor receives fees for servicing. The Fund has
no intention of making any such payments to Service Organizations with respect
to accounts of Investor Shares.
Some Service Organizations could impose additional or different conditions on
their clients, such as requiring them to invest more than the minimum
investments specified by the Fund or charging a direct fee for servicing. If
imposed, these fees would be in addition to any amounts that might be paid to
the Service Organization by the Fund. Each Service Organization would agree to
transmit to its clients a schedule of any such fees. Shareholders using Service
Organizations would be urged to consult them regarding any such fees or
conditions.
The Glass-Steagall Act and other applicable laws provide that banks may not
engage in the business of underwriting, selling or distributing securities.
There currently is no precedent prohibiting banks from performing administrative
and shareholder servicing functions as Service Organizations. However, judicial
or administrative decisions or interpretations of such laws, as well as changes
in either federal or state statutes or regulations relating to the permissible
activities of banks and their subsidiaries or affiliates, could prevent a bank
service organization from continuing to perform all or a part of its servicing
activities. If a bank were prohibited from so acting, its shareholder clients
would be permitted to remain shareholders of the Fund and alternative means for
continuing the servicing of such shareholders would be sought. In that event,
changes in the operation of the Fund might occur and a shareholder serviced by
such a bank might no longer be able to avail itself of any services then being
provided by the bank. It is not expected that shareholders would suffer any
adverse financial consequences as a result of any of these occurrences.
PORTFOLIO ACCOUNTING
Forum Accounting Services, Limited Liability Company ("FAS, LLC"), an affiliate
of Forum, performs portfolio accounting services for the Fund pursuant to a Fund
Accounting Agreement with the Trust. The Accounting Agreement is terminable with
respect to the Fund without penalty, at any time, by the Trust Board, upon 60
days' written notice to FAS, LLC or by FAS, LLC upon 60 days' written notice to
the Trust.
16
<PAGE>
Under the Accounting Agreement, FAS, LLC prepares and maintains the books and
records of the Fund, on behalf of the Trust, that are required to be maintained
under the 1940 Act; calculates the net asset value per share of the Fund,
calculates dividends and capital gain distributions; and prepares periodic
reports to shareholders and the SEC. For its services to the Fund, FAS, LLC is
entitled to receive from the Trust a fee of $36,000 per year plus $12,000 per
year for each class of the Fund above one. FAS, LLC is entitled to be paid an
additional $24,000 per year with respect to global and international funds. FAS,
LLC also is entitled to be paid an additional $12,000 per year with respect to
tax-free money market funds, funds with more than 25% of their total assets
invested in asset backed securities, funds that have more than 100 security
positions, or funds that have a monthly portfolio turnover rate of 10% or
greater.
FAS, LLC is required to use its best judgment and efforts in rendering fund
accounting services and is not liable to the Trust for any action or inaction in
the absence of bad faith, willful misconduct or gross negligence. FAS, LLC is
not responsible or liable for any failure or delay in performance of its fund
accounting obligations arising out of or caused, directly or indirectly, by
circumstances beyond its reasonable control. The Trust has agreed to indemnify
and hold harmless FAS, LLC and its employees, agents, officers and directors
against and from any and all claims, demands, actions, suits, judgments,
liabilities, losses, damages, costs, charges, counsel fees and all other
expenses arising out of or in any way related to FAS, LLC's actions taken or
failures to act with respect to a Fund or based, if applicable, upon
information, instructions or requests with respect to a Fund given or made to
FAS, LLC by an officer of the Trust duly authorized. This indemnification does
not apply to FAS, LLC's actions taken or failures to act in cases of FAS, LLC's
own bad faith, willful misconduct or gross negligence.
FEES AND EXPENSES
The Fund bears all costs of its operations other than expenses specifically
assumed by Schroder Advisors or SCMI, including those expenses it indirectly
bears through its investment in the Portfolio. The costs borne by the Fund
include its pro rata share of Portfolio expenses including advisory fees; legal
and accounting expenses; Trustees' fees and expenses; insurance premiums,
custodian and transfer agent fees and expenses; brokerage fees and expenses;
expenses of registering and qualifying the Fund's shares for sale with the SEC
and with various state securities commissions; expenses of obtaining quotations
on portfolio securities, if any, and pricing of the Fund's shares; a portion of
the expenses of maintaining the Fund's legal existence and of shareholders'
meetings; expenses of preparation and distribution to existing shareholders of
reports, proxies and prospectuses; and a proportionate amount of the total
operating expenses of the Portfolio, including advisory fees paid to SCMI. Trust
expenses directly attributed to the Fund or a class thereof are charged to the
Fund or class; other expenses are allocated proportionately among all the series
of the Trust in relation to the net assets of each series. From time to time,
SCMI, Schroder Advisors, Forum, or FAS, LLC voluntarily may waive all or a
portion of its respective fees.
PORTFOLIO TRANSACTIONS
The following discussion with respect to the Fund is applicable to the Portfolio
in connection with any portfolio holdings. References to the Fund are to the
Fund or Portfolio as the context requires.
INVESTMENT DECISIONS
Investment decisions for the Fund and for the other investment advisory clients
of SCMI are made to achieve their respective investment objectives. Investment
decisions are the product of many factors in addition to basic suitability for
the particular client involved and a particular security may be bought or sold
for certain clients and not bought or sold for other clients. Likewise, a
particular security may be bought for one or more clients when one or more
clients are selling the security. In some instances, one client may sell a
particular security to another client. It also sometimes happens that two or
more clients simultaneously purchase or sell the same security, in which event
each day's transactions in such security are, insofar as is possible, averaged
as to price and allocated between such clients in a manner which in SCMI's
opinion is equitable to each and in accordance with the amount being purchased
or sold by each. There may be circumstances when purchases or sales of portfolio
securities for one or more clients will have an adverse effect on other clients.
17
<PAGE>
BROKERAGE AND RESEARCH SERVICES
Transactions on U.S. stock exchanges and other agency transactions involve the
payment by the Fund of negotiated brokerage commissions. Such commissions vary
among brokers. Also, a particular broker may charge different commissions
according to the difficulty and size of transactions. Transactions in foreign
securities generally involve the payment of fixed brokerage commissions, which
are generally higher than those in the U.S. Since most brokerage transactions
for the Fund will be placed with foreign broker-dealers, certain portfolio
transaction costs for the Fund may be higher than fees for similar transactions
executed on U.S. securities exchanges. There is generally no stated commission
in the case of securities traded in the over-the-counter markets, but the price
paid by the Fund usually includes an undisclosed dealer commission or mark-up.
In underwritten offerings, the price paid by the Fund includes a disclosed,
fixed commission or discount retained by the underwriter or dealer.
The Investment Advisory Agreement authorizes and directs SCMI to place orders
for the purchase and sale of the portfolio investments with brokers or dealers
it selects and to seek "best execution" of such portfolio transactions. SCMI
places all such orders for the purchase and sale of portfolio securities and
buys and sells securities for the Fund through a substantial number of brokers
and dealers. In so doing, SCMI uses its best efforts to obtain for the Fund the
most favorable price and execution available. The Fund may, however, pay higher
than the lowest available commission rates when SCMI believes it is reasonable
to do so in light of the value of the brokerage and research services provided
by the broker effecting the transaction. In seeking the most favorable price and
execution, SCMI considers all factors it deems relevant (including price, size
of transaction, the nature of the market for the security, amount of the
commission, the timing of the transaction taking into account market prices and
trends, reputation, experience and financial stability of the broker-dealers
involved and the quality of service rendered by the broker-dealers in other
transactions).
It has for many years been a common practice in the investment advisory business
as conducted in certain countries, including the U.S., for advisers of
investment companies and other institutional investors to receive research
services from broker-dealers that execute portfolio transactions for the clients
of such advisers. Consistent with this practice, SCMI may receive research
services from broker-dealers with which SCMI places the Fund's portfolio
transactions. These services, which in some cases may also be purchased for
cash, include such items as general economic and security market reviews,
industry and company reviews, evaluations of securities and recommendations as
to the purchase and sale of securities. Some of these services are of value to
SCMI in advising various of its clients (including the Fund), although not all
of these services are necessarily useful and of value in managing the Fund. The
management fee paid by the Fund is not reduced because SCMI and its affiliates
receive such services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934, SCMI may
cause the Fund to pay a broker-dealer that provides "brokerage and research
services" (as defined in the 1934 Act) to SCMI an amount of disclosed commission
for effecting a securities transaction for the Fund in excess of the commission
which another broker-dealer would have charged for effecting that transaction.
Subject to the general policies of the Portfolio regarding allocation of
portfolio brokerage as set forth above, the Schroder Core Board has authorized
SCMI to employ: (i) Schroder Wertheim & Company, Incorporated ("Schroder
Wertheim") an affiliate of SCMI, to effect securities transactions of the
Portfolio on the New York Stock Exchange only; and (ii) Schroder Securities
Limited and its affiliates (collectively, {"Schroder Securities"), affiliates of
SCMI, to effect securities transactions of the Portfolio on various foreign
securities exchanges on which Schroder Securities has trading privileges,
provided certain other conditions are satisfied as described below.
Payment of brokerage commissions to Schroder Wertheim or Schroder Securities for
effecting such transactions is subject to Section 17(e) of the 1940 Act, which
requires, among other things, that commissions for transactions on securities
exchanges paid by a registered investment company to a broker which is an
affiliated person of such investment company (or an affiliated person of another
person so affiliated) not exceed the usual and customary broker's commissions
for such transactions. It is the Fund's policy that commissions paid to Schroder
Wertheim or Schroder Securities will in SCMI's judgment be: (i) at least as
favorable as commissions contemporaneously charged by Schroder Wertheim Schroder
Securities on comparable transactions for its most favored unaffiliated
18
<PAGE>
customers; and (ii) at least as favorable as those that would be charged on
comparable transactions by other qualified brokers having comparable execution
capability. The Trust Board, including a majority of the Trustees who are not
interested persons, has adopted procedures pursuant to Rule 17e-l under Section
17(e) to ensure that commissions paid to Schroder Securities by the Fund satisfy
the foregoing standards. The Trust Board will review all transactions at least
quarterly for compliance with these procedures.
It is further a policy of the Portfolio that all such transactions effected for
the Portfolio by Schroder Wertheim on the New York Stock Exchange be in
accordance with Rule 11a 2-2(T) under the 1934 Act, which requires in substance
that a member of such exchange not associated with Schroder Wertheim actually
execute the transaction on the exchange floor or through the exchange
facilities. Thus, while Schroder Wertheim will bear responsibility for
determining important elements of execution such as timing and order size,
another firm will actually execute the transaction.
Schroder Wertheim pays a portion of the brokerage commissions it receives from
the Portfolio to the brokers executing the Portfolio's transactions on the New
York Stock Exchange. In accordance with Rule 11a 22-2(T), Schroder Core has
entered into an agreement with Schroder Wertheim permitting it to retain a
portion of the brokerage commissions paid to it by the Portfolio. This agreement
has been approved by the Schroder Core Board, including a majority of the
non-interested Trustees.
The Portfolio has no understanding or arrangement to direct any specific portion
of its brokerage to Schroder Wertheim and will not direct brokerage to Schroder
Wertheim in recognition of research services.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
DETERMINATION OF NET ASSET VALUE PER SHARE
The net asset value per share of the Fund is determined as of 4:00 p.m. (Eastern
time) each day the New York Stock Exchange (the "Exchange") is open by dividing
the value of the net assets allocated to a class of the Fund by the total number
of outstanding shares of that class. Any assets or liabilities initially
expressed in terms of non-U.S. dollar currencies are translated into U.S.
dollars at the prevailing market rates as quoted by one or more banks or dealers
on the afternoon of valuation. The Exchange's most recent holiday schedule
(which is subject to change) states that it will close on New Year's Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
The Schroder Core Board has established procedures for the valuation of the
Portfolio's securities: (i) equity securities listed or traded on the New York
or American Stock Exchange or other domestic or foreign stock exchange are
valued at their latest sale prices on such exchange that day prior to the time
when assets are valued; in the absence of sales that day, such securities are
valued at the mid-market prices (in cases where securities are traded on more
than one exchange, the securities are valued on the exchange designated as the
primary market by the Fund's investment adviser); (ii) unlisted equity
securities for which over-the-counter market quotations are readily available
are valued at the latest available mid-market prices prior to the time of
valuation; (iii) securities (including restricted securities) not having
readily-available market quotations are valued at fair value under the Schroder
Core Board's procedures; (iv) debt securities having a maturity in excess of 60
days are valued at the mid-market prices determined by a portfolio pricing
service or obtained from active market makers on the basis of reasonable
inquiry; and (v) short-term debt securities (having a remaining maturity of 60
days or less) are valued at cost, adjusted for amortization of premiums and
accretion of discount.
Puts, calls and Stock Index Futures are valued at the last sales price on the
principal exchange on which they are traded, or, if there are no transactions,
in accordance with (i) above. When the Fund writes an option, an amount equal to
the premium received by the Fund is recorded in the Fund's books as an asset,
and an equivalent deferred credit is recorded as a liability. The deferred
credit is adjusted ("marked-to-market") to reflect the current market value of
the option.
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<PAGE>
Detailed information pertaining to the purchase of shares of the Fund,
redemption of shares and the determination of the net asset value of Fund shares
is set forth in the Prospectus under "Investment in the Fund".
REDEMPTION IN-KIND
In the event that payment for redeemed shares is made wholly or partly in
portfolio securities, the shareholder may incur brokerage costs in converting
the securities to cash. An in-kind distribution of portfolio securities is
generally less liquid than cash. The shareholder may have difficulty finding a
buyer for portfolio securities received in payment for redeemed shares.
Portfolio securities may decline in value between the time of receipt by the
shareholder and conversion to cash. A redemption in-kind of the portfolio
securities could result in a less diversified portfolio of investments for the
Portfolio and could affect adversely the liquidity of the investment portfolio
of the Portfolio.
TAXATION
The Fund intends to qualify as a regulated investment company under Subchapter M
of the Internal Revenue Code of 1986, as amended (the "Code"). To qualify as a
regulated investment company the Fund intends to distribute to shareholders at
least 90% of its net investment income (which includes, among other items,
dividends, interest and the excess of any net short-term capital gains over net
long-term capital losses), and to meet certain diversification of asset, source
of income, and other requirements of the Code. By so doing, the Fund will not be
subject to federal income tax on its net investment income and net realized
capital gains (the excess of net long-term capital gains over net short-term
capital losses) distributed to shareholders. If the Fund does not meet all of
these Code requirements, it will be taxed as an ordinary corporation, and its
distributions will be taxable to shareholders as ordinary income.
Amounts not distributed on a timely basis in accordance with a calendar year
distribution requirement are subject to a 4% nondeductible excise tax. To
prevent imposition of the excise tax, the Fund must distribute for each calendar
year an amount equal to the sum of: (i) at least 98% of its ordinary income
(excluding any capital gains or losses) for the calendar year; (ii) at least 98%
of the excess of its capital gains over capital losses realized during the
one-year period ending April 30, of such year; and (iii) all such ordinary
income and capital gains for previous years that were not distributed during
such years. A distribution will be treated as paid during the calendar year if
it is declared by the Fund in October, November or December of the year with a
record date in such month and paid by the Fund during January of the following
year. Such distributions will be taxable to shareholders in the calendar year in
which the distributions are declared, rather than in the calendar year in which
the distributions are received.
Under the Code, gains or losses attributable to exchange rate fluctuations that
occur between the time the Fund accrues interest (or other receivable) or
expenses (or other liabilities) denominated in a foreign currency and the time
the Fund actually collects such receivable or pays such liabilities generally
are treated as ordinary income or ordinary loss. Similarly, gains or losses on
disposition, of debt securities denominated in a foreign currency attributable
to fluctuations in the value of the foreign currency between the date of
acquisition of the security and the date of disposition as well as gains or
losses from certain foreign currency transactions and options on certain foreign
currency transactions, generally are treated as ordinary gain or loss. These
gains or losses, referred to under the Code as "Section 988" gains or losses,
may increase or decrease the amount of the Fund's net investment income to be
distributed to its shareholders as ordinary income.
Generally, the hedging transactions undertaken by the Fund may be deemed
"straddles" for federal income tax purposes. The straddle rules may affect the
character of gains or losses realized by the Fund. In addition, losses realized
by the Fund on positions that are part of a straddle may be deferred under the
straddle rules rather than being taken into account in calculating the taxable
income for the taxable year in which the losses are realized. Because only a few
regulations implementing the straddle rules have been promulgated, the tax
consequences to the Fund of hedging transactions are not entirely clear. The
hedging transactions may increase the amount of short-term capital gain realized
by the Fund that is taxed as ordinary income when distributed to shareholders.
20
<PAGE>
The Fund may make one or more of the elections available under the Code that are
applicable to straddles. If the Fund makes any of the elections, the amount,
character and timing of the recognition of gains or losses from the affected
straddle positions will be determined under rules that vary according to the
election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because application of the straddle rules may affect the character of gains or
losses, defer losses and/or accelerate the recognition of gains or losses from
the affected straddle positions, the amount that must be distributed to
shareholders and that will be taxed to shareholders as ordinary income or
long-term capital gain may be increased or decreased as compared to a fund that
did not engage in such hedging transactions.
The requirements applicable to regulated investment companies such as the Fund
may limit the extent to which the Fund will be able to engage in transactions in
options and forward contracts.
Distributions of net investment income (including realized net short-term
capital gain) are taxable to shareholders as ordinary income. It is not expected
that such distributions will be eligible for the dividends-received deduction
available to corporations.
Distributions of net long-term capital gain are taxable to shareholders as
long-term capital gain, regardless of the length of time the Fund shares have
been held by a shareholder, and are not eligible for the dividends received
deduction. A loss realized by a shareholder on the sale of shares of the Fund
with respect to which capital gain dividends have been paid will, to the extent
of such capital gain dividends, be treated as long-term capital loss (even
though such shares may have been held by the shareholder for one year or less).
Further, a loss realized on a disposition will be disallowed to the extent the
shares disposed of are replaced (whether by reinvestment or distributions or
otherwise) within a period of 61 days beginning 30 days before and ending 30
days after the shares are disposed of. In such a case, the basis of the shares
acquired will be adjusted to reflect the disallowed loss.
All distributions are taxable to the shareholder whether reinvested in
additional shares or received in cash. Shareholders receiving distributions in
the form of additional shares will have a cost basis for federal income tax
purposes in each share received equal to the net asset value of a share of the
Fund on the reinvestment date. Shareholders will be notified annually as to the
federal tax status of distributions.
Distributions by the Fund reduce the net asset value of the Fund's shares.
Should a distribution reduce the net asset value below a shareholder's cost
basis, such distribution nevertheless would be taxable to the shareholder as
ordinary income or capital gain as described above, even though, from an
investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implications of
buying shares just prior to a distribution. The price of shares purchased at
that time includes the amount of the forthcoming distribution. Those purchasing
just prior to a distribution will receive a distribution which will nevertheless
be taxable to them.
Upon redemption or sale of his shares, a shareholder will realize a taxable gain
or loss depending upon his basis in his shares. Such gain or loss generally will
be treated as capital gain or loss if the shares are capital assets in the
shareholder's hands. Such gain or loss generally will be long-term or short-term
depending upon the shareholder's holding period for the shares.
The Fund intends to minimize foreign income and withholding taxes by investing
in obligations the payments with respect to which will be subject to minimal or
no such taxes (insofar as this objective is consistent with the Fund's income
objective). However, since the Fund may incur foreign taxes, it intends, if it
is eligible to do so, to elect under Section 853 of the Code to treat each
shareholder as having received an additional distribution from the Fund, in the
amount indicated in a notice furnished to him, as his pro rata portion of income
taxes paid to or withheld by foreign governments with respect to interest,
dividends and gains on the Fund's foreign portfolio investments. The shareholder
then may take the amount of such foreign taxes paid or withheld as a credit
against his federal income tax, subject to certain limitations. If the
shareholder finds it more to his advantage to do so, he may, in the
21
<PAGE>
alternative, deduct the foreign tax withheld as an itemized deduction in
computing his taxable income. Each shareholder is referred to his tax adviser
with respect to the availability of the foreign tax credit.
The Fund will be required to report to the Internal Revenue Service (the "IRS")
all distributions and gross proceeds from the redemption of Fund shares, except
in the case of certain exempt shareholders. All such distributions and proceeds
generally will be subject to withholding of federal income tax at a rate of 31%
("backup withholding") in the case of nonexempt shareholders if: (i) the
shareholder fails to furnish the Fund with and to certify the shareholder's
correct taxpayer identification number or social security number; (ii) the IRS
notifies the Fund that the shareholder has failed to report certain interest and
dividend income to the IRS and to respond to notices to that effect; or (iii)
when required to do so, the shareholder fails to certify that he is not subject
to backup withholding. If the withholding provisions are applicable, any such
distributions or proceeds, whether reinvested in additional shares or taken in
cash, will be reduced by the amount required to be withheld. Any amounts
withheld may be credited against the shareholder's federal income tax liability.
Investors may wish to consult their tax advisers about the applicability of the
backup withholding provisions.
The foregoing discussion relates only to federal income tax law as applicable to
U.S. persons (I.E., U.S. citizens and residents and U.S. domestic corporations,
partnerships, trusts and estates). Distributions by the Fund also may be subject
to state and local taxes, and their treatment under state and local income tax
laws may differ from the federal income tax treatment. Shareholders should
consult their tax advisors with respect to particular questions of federal,
state and local taxation. Shareholders who are not U.S. persons should consult
their tax advisors regarding U.S. and foreign tax consequences of ownership of
shares of the Fund including the likelihood that distributions to them would be
subject to withholding of U.S. tax at a rate of 30% (or a lower rate under a tax
treaty).
OTHER INFORMATION
ORGANIZATION
The Trust was originally organized as a Maryland corporation on July 30, 1969.
On February 29, 1988, the Trust was recapitalized to enable the Trust Board to
establish a series of separately managed investment portfolios, each having a
different investment objective and policies. At the time of the
recapitalization, the Trust's name was changed from "The Cheapside Dollar Fund
Limited" to "Schroder Capital Funds, Inc." On January 9, 1996, the Trust was
reorganized as a Delaware business trust. At that time, the Trust's name was
changed from "Schroder Capital Funds, Inc." to its present name. The Trust is
registered as an open-end management investment company under the Act.
Delaware law provides that shareholders shall be entitled to the same
limitations of personal liability extended to stockholders of private,
for-profit corporations. The securities regulators of some states, however, have
indicated that they and the courts in their state may decline to apply Delaware
law on this point. To guard against this risk, the Trust Instrument contains an
express disclaimer of shareholder liability for the debts, liabilities,
obligations, and expenses of the Trust. The Trust Instrument provides for
indemnification out of each series' property of any shareholder or former
shareholder held personally liable for the obligations of the series. The Trust
Instrument also provides that each series shall, upon request, assume the
defense of any claim made against any shareholder for any act or obligation of
the series and satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which Delaware law does not apply (or no contractual limitation
of liability was in effect) and the series is unable to meet its obligations.
Forum believes that, in view of the above, there is no risk of personal
liability to shareholders.
22
<PAGE>
CAPITALIZATION AND VOTING
The Trust has 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 series (such as the Fund) and may divide series
into classes of shares, and the costs of doing so will be borne by the Trust.
The Trust currently consists of five separate series, each of which has a
separate investment objective and policies, and two classes, Investor Shares and
Advisor Shares, in each series.
When issued for the consideration or in accordance with the dividend
reinvestment plan described in the Prospectus, Fund shares are fully paid,
nonassessable, and have no preferences as to conversion, exchange, dividends,
retirement or other features. Shares have no preemptive rights and 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. Shares of each class
vote separately to approve investment advisory agreements or changes in
investment objectives and other fundamental policies affecting the series to
which they pertain, but all classes vote together in the election of Trustees
and ratification of the selection of independent accountants. Shareholders of
any particular class are not be entitled to vote on any matters as to which such
class are not directly affected.
The Trust will not hold annual meetings of shareholders. The matters considered
at an annual meeting typically include the reelection of Trustees, approval of
an investment advisory agreement, and the ratification of the selection of
independent accountants. These matters will not be submitted to shareholders
unless a meeting of shareholders is held for some other reason, such as those
indicated below. Each of the Trustees will serve until death, resignation or
removal. Vacancies will be filled by the remaining Trustees, subject to the
provisions of the 1940 Act requiring a meeting of shareholders for election of
Trustees to fill vacancies when less than a majority of Trustees then in office
have been elected by shareholders. Similarly, the selection of accountants and
renewal of investment advisory agreements for future years will be performed
annually by the Trust Board. Future shareholder meetings will be held to elect
Trustees if required by the 1940 Act, to obtain shareholder approval of changes
in fundamental investment policies, to obtain shareholder approval of material
changes in investment advisory agreements, to select new accountants if the
employment of the Trust's accountants has been terminated, and to seek any other
shareholder approval required under the 1940 Act. The Trust Board has the power
to call a meeting of shareholders at any time when it believes it is necessary
or appropriate. In addition, the Trust Instrument provides that a special
meeting of shareholders may be called at any time for any purpose by the holders
of at least 10% of the outstanding shares entitled to be voted at such meeting.
In addition to the foregoing rights, the Trust Instrument provides that holders
of at least two-thirds of the outstanding shares of the Trust may remove any
person serving as a Trustee either by declaration in writing or at a meeting
called for such purpose. Further, the Trust Board is required to call a
shareholders meeting for the purpose of considering the removal of one or more
Trustees if requested in writing to do so by the holders of not less than 10% of
the outstanding shares of the Trust. In addition, the Trust Board is required,
if requested in writing to do so by ten or more shareholders of record (who have
been such for at least six months), holding in the aggregate the lesser of: (i)
shares of the Trust having a total net asset value of at least $25,000; or (ii)
1% of the outstanding shares of the Trust, to help such holders communicate with
other shareholders of the Trust with a view to obtaining the requisite
signatures to request a special meeting to consider Trustee removal.
PERFORMANCE INFORMATION
The Fund may, from time to time, include quotations of its average annual total
return in advertisements or reports to shareholders or prospective investors.
23
<PAGE>
Quotations of average annual total return will be expressed in terms of the
average annual compounded rate of return of a hypothetical investment in the
Fund over periods of 1, 5 and 10 years, calculated pursuant to the following
formula:
P(1+T)n=ERV
(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n= the number of years, and ERV is the ending redeemable value of
a hypothetical $1,000 payment made at the beginning of the period). All total
return figures will reflect the deduction of Fund expenses (net of certain
reimbursed expenses) on an annual basis, and will assume that all dividends and
distributions are reinvested when paid.
Quotations of total return will reflect only the performance of a hypothetical
investment in the Fund during the particular time period shown. Total return for
the Fund will vary based on changes in market conditions and the level of the
Fund's expenses, and no reported performance figure should be considered an
indication of future performance. Total return will be calculated separately for
each class of the Fund.
In connection with communicating total return to current or prospective
investors, the Fund also may compare these figures to the performance of other
mutual funds tracked by mutual fund rating services or to other unmanaged
indexes that may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs.
Investors who purchase and redeem shares of the Fund through a customer account
maintained at a Service Organization may be charged one or more of the following
types of fees as agreed upon by the Services Organization and the investor, with
respect to the customer services provided by the Service Organization: account
fees (a fixed amount per month or per year); transaction fees (a fixed amount
per transaction processed); compensating balance requirements (a minimum dollar
amount a customer must maintain in order to obtain the services offered); or
account maintenance fees (a periodic charge based upon a percentage of the
assets in the account or of the dividends paid on these assets). Such fees will
have the effect of reducing the average annual total return of the Fund for
those investors.
CUSTODIAN
The Chase Manhattan Bank, through its Global Custody Division located in London,
England, acts as custodian of the Fund's assets but plays no role in making
decisions as to the purchase or sale of portfolio securities for the Fund or
Portfolio. Pursuant to rules adopted under the 1940 Act, the Fund or Portfolio
may maintain its foreign securities and cash in the custody of certain eligible
foreign banks and securities depositories. Selection of these foreign custodial
institutions is made by the Trust Board and Schroder Core Board following a
consideration of a number of factors, including (but not limited to) the
reliability and financial stability of the institution; the ability of the
institution to capably perform custodial services, the reputation of the
institution in its national market; the political and economic stability of the
country in which the institution is located; and further risks of potential
nationalization or expropriation of portfolio securities and other assets held
in that country.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Forum Financial Corp., P.O. Box 446, Portland, Maine 04112, acts as the Fund's
transfer agent and dividend disbursing agent.
LEGAL COUNSEL
ROPES & GRAY, One International Place, Boston, Massachusetts 02110-2624, counsel
to the Fund, passes upon certain legal matters in connection with the shares
offered by the Funds.
24
<PAGE>
INDEPENDENT AUDITORS
COOPERS & LYBRAND, L.L.P. serves as independent accountants for the Fund.
Coopers & Lybrand, L.L.P. provides audit services and consultation in connection
with review of U.S. SEC filings. Coopers & Lybrand, L.L.P.'s address is One Post
Office Square, Boston, Massachusetts 02109.
REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information included in the
Trust's registration statement filed with the SEC under the 1933 Act with
respect to the securities offered hereby, certain portions of which have been
omitted pursuant to the rules and regulations of the SEC. The registration
statement, including the exhibits filed therewith, may be examined at the office
of the SEC in Washington, D.C. or on their web site at www.sec.gov.
Statements contained herein and in the prospectuses as to the contents of any
contract or other documents referred to are not necessarily complete, and, in
each instance, reference is made to the copy of such contract or other documents
filed as an exhibit to the registration statement, each such statement being
qualified in all respects by such reference.
FINANCIAL STATEMENTS
The fiscal year end of the Fund is April 30. Financial statements for the Fund's
semi-annual period and fiscal year (audited) are distributed to shareholders of
record. The unaudited Statement of Assets and Liabilities, Statement of
Operations, Statement of Changes in Net Assets, Statement of Investments,
related notes, and Financial Highlights of Investor Shares of the Fund for the
period from November 4, 1996 (commencement of operations) through April 30,
1997, which are delivered along with this SAI, are incorporated herein by
reference. The Board in the future may change the fiscal year end of the Fund.
25
<PAGE>
APPENDIX
RATINGS OF CORPORATE DEBT INSTRUMENTS
MOODY'S INVESTORS SERVICE
FIXED-INCOME SECURITY RATINGS
"Aaa" Fixed-income securities which are rated "Aaa" are judged to be
of the best quality. They carry the smallest degree of
investment risk and are generally referred to as "gilt edge".
Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
"Aa" Fixed-income securities which are rated "Aa" are judged to be of
high quality by all standards. Together with the "Aaa" group
they comprise what are generally known as high grade
fixed-income securities. They are rated lower than the best
fixed-income securities because margins of protection may not be
as large as in "Aaa" securities or fluctuation of protective
elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat
larger than in "Aaa" securities.
COMMERCIAL PAPER RATINGS
Moody's commercial paper ratings are opinions of the ability to repay punctually
promissory obligations not having an original maturity in excess of nine months.
The ratings apply to municipal commercial paper as well as taxable commercial
paper. Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment capacity of rated issuers:
"Prime-1", "Prime-2", "Prime-3".
Issuers rated "Prime-1" have a superior capacity for repayment of short-term
promissory obligations. Issuers rated "Prime-2" have a strong capacity for
repayment of short-term promissory obligations; and Issuers rated "Prime-3" have
an acceptable capacity for repayment of short-term promissory obligations.
Issuers rated "Not Prime" do not fall within any of the Prime rating categories.
STANDARD & POOR'S
FIXED-INCOME SECURITY RATINGS
An S&P fixed-income security rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers, or
lessees.
The ratings are based on current information furnished by the issuer or obtained
by S&P from other sources it considers reliable. The ratings are based, in
varying degrees, on the following considerations: (i) likelihood of
default-capacity and willingness of the obligor as to the timely payment of
interest and repayment of principal in accordance with the terms of the
obligation; (ii) nature of and provisions of the obligation; and (iii)
protection afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.
S&P does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended or withdrawn as a result of changes in, or unavailability of, such
information, or for other reasons.
A-1
<PAGE>
"AAA" Fixed-income securities rated "AAA" have the highest rating
assigned by S&P. Capacity to pay interest and repay principal
is extremely strong.
"AA" Fixed-income securities rated "AA" have a very strong capacity
to pay interest and repay principal and differs from the
highest-rated issues only in small degree.
COMMERCIAL PAPER RATINGS
S&P commercial paper rating is a current assessment of the likelihood of timely
payment of debt having an original maturity of no more than 365 days. The
commercial paper rating is not a recommendation to purchase or sell a security.
The ratings are based upon current information furnished by the issuer or
obtained by S&P from other sources it considers reliable. The ratings may be
changed, suspended, or withdrawn as a result of changes in or unavailability of
such information. Ratings are graded into group categories, ranging from "A" for
the highest quality obligations to "D" for the lowest. Ratings are applicable to
both taxable and tax-exempt commercial paper.
Issues assigned "A" ratings are regarded as having the greatest capacity for
timely payment. Issues in this category are further refined with the designation
"1", "2", and "3" to indicate the relative degree of safety.
"A-1" Indicates that the degree of safety regarding timely payment is
very strong.
"A-2" Indicates capacity for timely payment on issues with this
designation is strong. However, the relative degree of safety is
not as overwhelming as for issues designated "A-1".
"A-3" Indicates a satisfactory capacity for timely payment.
Obligations carrying this designation are, however, somewhat
more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
A-2
<PAGE>
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997 (UNAUDITED)
ASSETS:
Investments (Notes 1 and 2):
Investments in Schroder International
Smaller Companies Portfolio
(cost $7,545,638) $ 6,987,844
Organization costs, net of amortization (Note 2) 13,599
--------------
Total assets 7,001,443
--------------
LIABILITIES:
Other payables and accrued expenses 11,286
--------------
Total liabilities 11,286
--------------
NET ASSETS $ 6,990,157
==============
COMPONENTS OF NET ASSETS:
Paid-in capital $ 7,454,784
Undistributed net investment income (loss) (7,149)
Accumulated net realized gain (loss) 100,316
Net unrealized appreciation (depreciation) on investments (557,794)
--------------
NET ASSETS $ 6,990,157
==============
SHARES OF BENEFICIAL INTEREST 747,540
NET ASSET VALUE OFFERING AND
REDEMPTION PRICE PER SHARE
(NET ASSETS / SHARES OF BENEFICIAL INTEREST) $ 9.35
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
<PAGE>
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD NOVEMBER 4, 1996 THROUGH APRIL 30, 1997 (UNAUDITED)
NET INVESTMENT INCOME ALLOCATED FROM THE PORTFOLIO:
Dividend income (net of foreign withholding
taxes of $5,659) $ 34,670
Interest income 14,069
Net expenses (40,368)
--------------
NET INVESTMENT INCOME ALLOCATED FROM THE PORTFOLIO 8,371
--------------
EXPENSES:
Administration (Note 3) 5,883
Transfer agency (Note 3) 6,364
Accounting (Note 3) 5,867
Audit 4,500
Amortization of organization costs (Note 2) 1,511
Trustees 118
Miscellaneous 560
--------------
TOTAL EXPENSES 24,803
Fees waived and expenses reimbursed (Note 4) (14,710)
--------------
NET EXPENSES 10,093
--------------
NET INVESTMENT INCOME (LOSS) (1,722)
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS ALLOCATED
FROM THE PORTFOLIO:
Net realized gain (loss) on investments sold 100,617
Net realized gain (loss) on foreign currency transactions (301)
--------------
NET REALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS 100,316
--------------
Net change in unrealized appreciation (depreciation)
on investments (557,427)
Net change in unrealized appreciation (depreciation)
on foreign currency transactions (367)
-------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION)ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS (557,794)
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS ALLOCATED
FROM THE PORTFOLIO (457,478)
-------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ (459,200)
=============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
<PAGE>
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD NOVEMBER 4, 1996 THROUGH APRIL 30, 1997 (UNAUDITED)
NET ASSETS, BEGINNING OF PERIOD $ -
- -------------------------------
------------
OPERATIONS:
Net investment income (loss) (1,722)
Net realized gain (loss) on investments 100,316
Net change in unrealized appreciation (depreciation)
on investments (557,794)
------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS (459,200)
------------
DISTRIBUTION TO SHAREHOLDERS FROM:
Net investment income (5,427)
------------
CAPITAL SHARE TRANSACTIONS:
Sale of shares 7,454,784
------------
NET INCREASE (DECREASE) IN NET ASSETS 6,990,157
------------
NET ASSETS, END OF PERIOD (INCLUDING LINE A) $ 6,990,157
- --------------------------------------------
============
(A) Accumulated undistributed net investment income (loss) $ (7,149)
============
SHARE TRANSACTIONS
Sale of shares 747,540
============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
<PAGE>
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS
FOR A SHARE OUTSTANDING ---------------------
THROUGHOUT THE PERIOD For the Period
November 4,
1996
through
April 30, 1997 (a)
(Unaudited)
---------------------
1997(a)
--------------
Net Asset Value, Beginning of Period $10.00
--------------
Investment Operations
Net Realized and Unrealized Gain (Loss) on Investments (0.64)
--------------
Distributions From
Net Investment Income (0.01)
--------------
Net Asset Value, End of Period $9.35
==============
Total Return (6.43)%(b)
Ratio/Supplementary Data
Net Assets at End of Period (in thousands) $6,990
Ratios to Average Net Assets:
Expenses including reimbursement/waiver 1.47%(c)(d)
Expenses excluding reimbursement/waiver 1.90%(c)(d)
Net investment income (loss) including reimbursement/waiver (0.05)%(c)(d)
Average Commision Rate (e) $0.0366
Portfolio turnover rate (f) 8.64%
- -------------------------------------------------------
(a) The Fund commenced operations on November 4, 1996.
(b) Not annualized.
(c) Includes the Fund's proportionate share of income and expenses of the
Portfolio.
(d) Annualized.
(e) Amount represents the average commission per share paid to brokers on the
purchase and sale of the Portfolio's investment portfolio securities.
(f) Portfolio turnover rate represents the rate of portfolio activity
of the Portfolio.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
<PAGE>
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. ORGANIZATION
Schroder Capital Funds (Delaware) (the "Trust") was organized as a Maryland
corporation on July 30, 1969; reorganized as a series company on February 29,
1988, as Schroder Capital Funds, Inc.; and reorganized on January 9, 1996, as a
Delaware business trust. The Trust, which is registered as an open-end,
management investment company under the Investment Company Act of 1940 (the
"Act"), currently has six investment portfolios. Included in this report is the
Schroder International Smaller Companies Fund (the "Fund"), a diversified
portfolio that commenced operations on November 4, 1996. Under its Trust
Instrument, the Trust is authorized to issue an unlimited number of the Fund's
Investor Shares and Advisor Shares of beneficial interest without par value. As
of April 30, 1997, only Investor Shares had been issued.
MASTER FEEDER ARRANGEMENT - The Fund currently seeks to achieve its investment
objective by investing all of its investable assets in a separate diversified
portfolio, Schroder International Smaller Companies Portfolio (the "Portfolio")
of Schroder Capital Funds ("Schroder Core") that has the same investment
objective and substantially similar investment policies as the Fund. This is
commonly referred to as a master-feeder arrangement. Schroder Core also is
registered as an open-end, management investment company. The Fund may withdraw
its investment from the Portfolio at any time if the Trust's Board of Trustees
determines that it is in the best interest of the Fund and its shareholders to
do so. The Fund accounts for its investment in the Portfolio as a partnership
investment and records its share of the Portfolio income, expense and realized
and unrealized gain and loss daily. The financial statements of the Portfolio
are included on pages 11 to 20 in this report, and should be read in conjunction
with the Fund's financial statements. The Fund owns substantially all of the
interests in the Portfolio.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with generally accepted
accounting principles, which require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of increase and decrease in net assets from
operations during the fiscal period. Actual results could differ from those
estimates.
The following represent significant accounting policies of the Fund:
SECURITY VALUATION - The Trust determines the net asset value per share of the
Fund as of 4:00 p.m., Eastern time, on each Fund business day. Valuation of
securities held in the Portfolio are discussed in the Notes to the Financial
Statements of the Portfolio.
INVESTMENT INCOME AND EXPENSES - The Trust records daily its pro rata share of
the Portfolio's income, expenses and realized and unrealized gain and loss. In
addition, the Fund accrues its own expenses.
DISTRIBUTIONS TO SHAREHOLDERS - Dividends and net capital gain, if any, are
distributed to shareholders at least annually. Distributions are based on
amounts calculated in accordance with applicable federal income tax regulations.
FEDERAL TAXES - The Fund intends to qualify and continue to qualify each year as
a regulated investment company and distribute all of its taxable income. In
addition, by distributing in each calendar year substantially all of its net
investment income, capital gain and certain other amounts, if any, the Fund will
not be subject to a federal excise tax. Therefore, no federal income or excise
tax provision is required.
<PAGE>
EXPENSE ALLOCATION - The Trust accounts separately for the assets and
liabilities and operation of each Fund. Expenses that are directly attributable
to more than one Fund are allocated among the respective Funds. Expenses that
are directly attributable to a class are allocated to that class.
ORGANIZATIONAL COSTS - Costs incurred by the Fund in connection with its
organization and initial registration are being amortized on a straight line
basis over a five year period.
NOTE 3. INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER - The Fund currently invests all of its assets in the
Portfolio, which retains Schroder Capital Management International Inc. (the
"Adviser") to act as investment adviser pursuant to an Investment Advisory
Agreement. See Notes to the Financial Statements of the Portfolio.
ADMINISTRATOR AND SUBADMINISTRATOR - Effective November 26, 1996 and February 1,
1997, the Fund has entered into Administration and Subadministration Agreements
with Schroder Fund Advisors Inc. ("Schroder Advisors") and Forum Administrative
Services, Limited Liability Company ("Forum"). From November 26, 1996 through
January 31, 1997 the Fund had a Subadministration Agreement with Forum Financial
Services, Inc. ("FFSI") that was identical in all material terms to the February
1, 1997 Agreement with Forum. For these services, Schroder Advisors is entitled
to receive compensation at annual fees payable monthly of 0.10% of the average
daily net assets of the Fund. For its services, Forum is entitled to receive
compensation at annual fees payable monthly of 0.075% of the average daily net
assets of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT - The transfer agent and dividend
disbursing agent for the Fund is Forum Financial Corp.(R) ("FFC"). The Transfer
Agent is paid a transfer agent fee in the amount of $12,000 per year, plus
certain other fees and expenses.
OTHER SERVICE PROVIDERS - The fund accountant of the Fund is FFC. For its
services to the Fund, FFC is entitled to receive from the Trust a fee of $12,000
per year.
NOTE 4. WAIVER OF FEES AND REIMBURSEMENT OF EXPENSES
Schroder Advisors voluntarily has waived a portion of its fee and has assumed
certain expenses of the Fund so that the Fund's total expenses would not exceed
1.50% of the Fund's average daily net assets on an annual basis. The expense
limitation cannot be modified or withdrawn except by a majority vote of the
Trustees of the Trust. Forum and FFC may waive voluntarily all or a portion of
their fees, from time to time. For the period ended April 30, 1997, fees waived
and expenses reimbursed by Schroder Advisors were $3,362 and $11,348,
respectively.
<PAGE>
/fundSCHRODER INTERNATIONAL SMALLER COMPANIES PORTFOLIO (PORTFOLIO)
/soiSCHEDULE OF INVESTMENTS
/periodAPRIL 30, 1997 (Unaudited)
/h1Stocks (95.3%)
/h2Denmark (4.7%)
/h3Common Stock
/port1,900
Bang & Olufsen Holding AS - B
CAPITAL EQUIPMENT
109,540
2,000
Carli Gry International AS
CoNSUMER DURABLES
100,437
2,700
InWear Group AS(a)
CoNSUMER DURABLES
117,156
/totalTotal Denmark
/total327,133
/h2Finland (2.1%)
/h3Common Stock
3,800
KCI Konecranes International
MACHINERY
146,053
/h2France (9.3%)
/h3Common Stock
300
Altran Technologies SA
SERVICES
104,345
250
Galeries Lafayette(a)
RETAIL
100,233
900
GasCogne SA
MATERIALS
76,640
1,500
Genset SA(a)
CONSUMER DURABLES
74,018
2,200
Lapeyre SA
MATERIALS
132,685
3,000
Servant Soft SA
CAPITAL EQUIPMENT
80,700
2,200
Sommer Allibert
CAPITAL EQUIPMENT
79,158
/totalTotal France
/total647,779
/h2Germany (10.0%)
/h3Common Stock
70
Hugo Boss AG
CoNSUMER DURABLES
89,334
600
Jungheinrich AG
MACHINERY
83,502
500
KSB AG
MACHINERY
98,170
600
Marschollek Lautenschlaeger und Partner AG
FINANCE
121,268
1,900
Moebel Walther AG
CONSUMER DURABLES
87,775
700
Rhoen-Klinikum AG
CoNSUMER DURABLES
90,143
200
Sto Ag-Vorzug
MATERIALS
71,606
3,000
Tarkett AG
MATERIALS
53,704
/totalTotal Germany
/total695,502
/h2Hong Kong (3.7%)
/h3Common Stock
110,000
Chen Hsong Holdings
MATERIALS
59,285
52,000
HKR International Ltd.
FINANCE
64,106
35,000
Varitronix International Ltd.
CAPITAL EQUIPMENT
48,796
83,000
YGM Trading Ltd.
RETAIL
85,716
/totalTotal Hong Kong
/total257,903
/h2Italy (5.1%)
/h3Common Stock
5,520
Brembo SpA
CAPITAL EQUIPMENT
59,654
70,000
Finanziaria Autogrill SpA(a)
RETAIL
98,138
9,500
Gewiss SpA
MACHINERY
127,638
5,000
SAES Getters SpA
CAPITAL EQUIPMENT
70,975
/totalTotal Italy
/total356,405
/h2Japan (29.7%)
/h3Common Stock
5,000
Aichi Toyota Motor Co. Ltd.
CAPITAL EQUIPMENT
59,097
13,000
Airport Facilities Co. Ltd.
SERVICES
69,143
8,000
Amada Metrecs Co. Ltd.
MACHINERY
72,493
5,000
Arcland Sakamoto
RETAIL
48,065
11,000
Canon Copyer Sales Co.
CAPITAL EQUIPMENT
106,612
6,000
Charle Co.
RETAIL
63,824
200
Chubu-Nippon Broadcast Co. Ltd.
SERVICES
3,876
14,000
Daidoh Ltd.
MATERIALS
77,220
8,000
Diamond City Co.
FINANCE
44,126
6,000
Eiden Sakakiya Co. Ltd.
RETAIL
48,223
3,000
Glory Ltd.
MACHINERY
54,369
11,000
Hitachi Transport System
SERVICES
83,815
12,000
Idec Izumi
MACHINERY
87,936
4,000
Inaba Denkisangyo Co.
CAPITAL EQUIPMENT
62,092
9,000
Inabata & Co.
CONSUMER DURABLES
54,465
5,000
Kansai Kosaido Co. Ltd.
CAPITAL EQUIPMENT
57,915
5,500
Mandom Corp.
CoNSUMER NON-DURABLES
54,606
6,000
Maruzen Co. Ltd.
CAPITAL EQUIPMENT
34,796
3,450
Mirai Industry Co. Ltd.
MATERIALS
68,505
1,000
Nagaileben Co. Ltd.
CONSUMER DURABLES
33,410
9,000
Nippon Cable System
CAPITAL EQUIPMENT
78,010
6,000
Nishio Rent All Co.
CAPITAL EQUIPMENT
68,080
16,800
Nissan Fire & Marine Insurance
FINANCE
57,584
8,000
Sanki Engineering
CAPITAL EQUIPMENT
64,297
5,500
Santen Pharmaceutical
CONSUMER DURABLES
98,810
12,000
Tachibana Shokai
SERVICES
85,099
14,000
Tokyo Soir
RETAIL
42,471
13,000
Toyo Shutter
CAPITAL EQUIPMENT
55,622
3,500
TrusCo Nakayama Corp.
SERVICES
54,881
7,000
Tsubaki Nakashima Co. Ltd.
CAPITAL EQUIPMENT
55,158
3,000
Tsutsumi Jewelry Co. Ltd.
SERVICES
61,224
11,000
Yodogawa Steel Works
MATERIALS
62,233
6
Yoshinoya D&C Co. Ltd.
RETAIL
58,152
7,000
Yushiro Chemical Industry
MATERIALS
47,711
/totalTotal Japan
/total2,073,920
/h2Malaysia (1.5%)
/h3Common Stock
28,000
Nylex (Malaysia) Berhad
MACHINERY
55,331
26,000
Sime UEP Properties Berhad
FINANCE
51,793
/totalTotal Malaysia
/total107,124
/h2Netherlands (1.1%)
/h3Common Stock
4,550
Beter Bed Holding NV
RETAIL
79,644
/h2Singapore (1.0%)
/h3Common Stock
19,000
Clipsal Industries Ltd.
CAPITAL EQUIPMENT
74,480
/h2Spain (1.6%)
/h3Common Stock
1,700
Cortefiel SA
RETAIL
54,698
2,500
Vallehermoso SA
FINANCE
61,612
/totalTotal Spain
/total116,310
/h2Sweden (1.5%)
/h3Common Stock
3,500
Cardo AB
CAPITAL EQUIPMENT
104,837
/h2Switzerland (3.5%)
/h3Common Stock
35
Bobst SA
MACHINERY
50,977
5
Lindt & Spruengli AG
CoNSUMER NON-DURABLES
91,964
500
Safra Republic Holdings SA
FINANCE
99,000
/totalTotal Switzerland
/total241,941
/h2United Kingdom (20.5%)
/h3Common Stock
14,100
AEA Technology plc
SERVICES
111,990
9,900
Bespak plc
SERVICES
99,996
22,800
Blagden Inds. plc
SERVICES
62,892
5,250
Bodycote International plc
CAPITAL EQUIPMENT
61,760
8,000
Candover Investments plc
FINANCE
88,593
17,500
W. Canning plc
MATERIALS
86,605
17,600
Devro plc
CoNSUMER NON-DURABLES
88,956
170,000
Gardiner Group plc
SERVICES
78,614
7,700
IONA Technologies plc - ADR(a)
SERVICES
111,650
1,667
Lanica Trust (b)
FINANCE
5,410
5,700
Logica plc
SERVICES
80,233
14,300
London Clubs International plc
SERVICES
89,796
8,450
Oriflame International SA
SERVICES
65,058
86,000
Rutland Trust plc
FINANCE
81,284
10,500
Servisair plc
SERVICES
79,734
85,500
Taylor Nelson AGB plc
SERVICES
74,568
16,000
Ultra Electronics Holdings plc(a)
CAPITAL EQUIPMENT
72,562
9,100
Whatman plc
CAPITAL EQUIPMENT
93,023
/totalTotal United Kingdom
/total1,432,724
/totalTotal Investments (Cost $7,219,179) - 95.3%
/total6,661,755
/Other Assets Less Liabilities - 4.7%
/total326,089
/totalTotal Net Assets - 100.0%
/total6,987,844
- -------------------------
(a) Non-income producing security.
(b) Valued pursuant to methodology approved by the Board of
Trustees.
ADR - American Depositary Receipts
The accompanying notes are an integral part of the financial statements.
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS
Included in the Prospectus:
Financial Highlights.
Included in the Statement of Additional Information:
Unaudited financial statements for the period November 4, 1996
(commencement of operations) through April 30, 1997 including Statement
of Assets and Liabilities dated April 30, 1997; Statement of Operations
for the Period November 4, 1996 (commencement of operations) through
April 30, 1997 (Unaudited); Statement of Changes in Net Assets for the
Period November 4, 1996 (commencement of operations) through April 30,
1997 (Unaudited); Financial Highlights (for Investor Shares); and Notes
to Financial Statements (Unaudited) for Schroder International Smaller
Companies Fund are incorporated in the SAI by reference and are
included in the Post-Effective Amendment.
(B) EXHIBITS:
EXHIBIT PAGE NUMBER
- ------- -----------
(1) Trust Instrument of Schroder Capital Funds (Delaware) (filed as Exhibit 1
to Registrant's Post Effective Amendment No. 46 via EDGAR on January 10,
1996, accession number 0000912057-96-000285 and incorporated herein by
reference).
(2) BYLAWS dated September 8, 1995, (filed as Exhibit 2 to Registrant's
Post-Effective Amendment No. 61 via EDGAR on April 18, 1997, accession
number 0000912057-97-013527, and incorporated herein by reference).
(4)(a) Sections 2.04 and 2.06 of Registrant's Trust Instrument provide as
follows:
SECTION 2.04 TRANSFER OF SHARES. Except as otherwise provided by
the Trustees, Shares shall be transferable on the records of the
Trust only by the record holder thereof or by such record holders
agent thereunto duly authorized in writing, upon delivery to the
Trustees or the Trust's transfer agent of a duly executed
instrument of transfer and such evidence of the genuineness of such
execution and authorization and of such other matters as may be
required by the Trustees. Upon such delivery the transfer shall be
recorded on the register of the Trust. Until such record is made,
the Shareholder of record shall be deemed to be the holder of such
Shares for all purposes hereunder and neither the Trustees nor the
Trust, nor any transfer agent or registrar nor any officer,
employee or agent of the Trust shall be affected by any notice of
the proposed transfer.
SECTION 2.06 ESTABLISHMENT OF SERIES. The Trust created hereby
shall consist of one or more Series and separate and distinct
records shall be maintained by the Trust for each Series and the
assets associated with any such Series shall be held and accounted
for separately from the assets of the Trust or any other Series.
The Trustees shall have full power and authority, in their sole
discretion, and without obtaining any prior authorization or vote
of the Shareholders of any Series of the Trust, to: establish and
designate and to change in any manner any such Series of Shares or
any classes of initial or additional Series; to fix such
preferences, voting powers, rights and privileges of such Series or
classes thereof as the Trustees may from time to time determine; to
divide or combine the Shares or any Series or classes thereof into
a greater or lesser number; to classify or reclassify any issued
Shares or any Series or classes thereof into one or more Series or
classes of Shares; and to take such other action with respect to
the Shares as the Trustees may deem desirable. The establishment
and designation of any Series shall be effective upon the adoption
of a resolution by a majority of the Trustees setting forth such
establishment and designation and the relative rights and
preferences of the Shares of such Series. A Series may issue any
number of Shares, and need not issue any shares. At any time that
there are no Shares outstanding of any particular Series previously
established and designated, the Trustees may by a majority vote
abolish that Series and the establishment and designation thereof.
All references to Shares in this Trust Instrument shall be deemed
to be Shares of any or all Series, or classes thereof, as the
context may require. All provisions herein relating to the Trust
shall apply equally to each Series of the Trust, and each class
thereof, except as the context otherwise requires.
Each Share of a Series of the Trust shall represent an equal
beneficial interest in the net assets of such Series. Each holder
of Shares of a Series shall be entitled to receive his pro rata
share of all distributions made with respect to such Series. Upon
redemption of his Shares, such Shareholder shall be paid solely out
of the funds and property of such Series of the Trust.
(5) Investment Advisory Contract between the Trust and Schroder Capital
Management International Inc. dated January 9, 1996 (filed as Exhibit 5 to
Registrant's Post-Effective Amendment No. 61 via EDGAR on April 18, 1997,
accession number 0000912057-97-013527, and incorporated herein by
reference).
(5)(a) Investment Advisory Agreement between the Trust and Schroder Capital
Management International Inc. with respect to Schroder Emerging Markets
Fund - Institutional Portfolio, Schroder U.S. Smaller Companies Fund,
Schroder Latin American Fund and International Equity Fund dated January 9,
1996 ( filed as Exhibit 5(a) to Registrant's Post Effective Amendment No.
46 via EDGAR on January 10, 1996, accession number 0000912057-96-000285 and
incorporated herein by reference).
(6) Distribution Agreement between the Trust and Schroder Fund Advisors Inc.
dated January 9, 1996 (filed as Exhibit 6 to Registrant's Post-Effective
Amendment No. 61 via EDGAR on April 18, 1997, accession number
0000912057-97-013527, and incorporated herein by reference).
(6)(a) Distribution Agreement between the Trust and Schroder Fund Advisors Inc.
with respect to Schroder Emerging Markets Fund - Institutional Portfolio,
Schroder U.S. Smaller Companies Fund, Schroder Latin American Fund and
International Equity Fund (filed as Exhibit 7(a). to Registrant's Post
Effective Amendment No. 46 via EDGAR on January 10, 1996, accession number
0000912057-96-000285 and incorporated herein by reference).
(6)(b) Distribution Agreement between the Trust and Schroder Capital Management
International Inc. with respect to Schroder U.S. Equity Fund (filed as
Exhibit 7(b) to Registrant's Post Effective Amendment No. 46 via EDGAR on
January 10, 1996, accession number 0000912057-96-000285 and incorporated
herein by reference).
(8) Global Custody Agreement between the Trust and The Chase Manhattan Bank,
N.A. dated January 9, 1996, as amended May 3, 1996 (filed as Exhibit 8 to
Registrant's Post-Effective Amendment No. 61 via EDGAR on April 18, 1997,
accession number 0000912057-97-013527, and incorporated herein by
reference).
(9)(a) Administration Agreement with Schroder Fund Advisors Inc. (filed as
Exhibit 9(a) to Registrant's Post-Effective Amendment No. 46 via EDGAR on
January 10, 1996, accession number 0000912057-96-000285 and incorporated
herein by reference).
(9)(b) Subadministration Agreement between the Trust and Forum Administrative
Services, Limited Liability Company dated February 1, 1997 (filed as
Exhibit 9(b) to Registrant's Post-Effective Amendment No. 61 via EDGAR on
April 18, 1997, accession number 0000912057-97-013527, and incorporated
herein by reference).
(9)(c) Transfer Agency Agreement between the Trust and Forum Financial Corp.
dated January 9, 1996 (filed as Exhibit 9(c) to Registrant's Post-Effective
Amendment No. 46 and via EDGAR on January 10, 1996, accession number
0000912057-96-000285 incorporated herein by reference).
(9)(d) Fund Accounting Agreement between the Trust and Forum Financial Corp.
dated January 9, 1996 (filed as Exhibit 9(d) to Registrant's Post-Effective
Amendment No. 61 via EDGAR on April 18, 1997, accession number
0000912057-97-013527, and incorporated herein by reference).
(9)(e) Transfer Agency Agreement with Forum Financial Corp. (filed as Exhibit
9(c) to Registrant's Post-Effective Amendment No. 46 via EDGAR on January
10, 1996, accession number 0000912057-96-000285 and incorporated herein by
reference).
(9)(f) Fund Accounting Agreement with Forum Financial Corp. (filed as Exhibit
9(d) to Registrant's Post-Effective Amendment No. 46 via EDGAR on January
10, 1996, accession number 0000912057-96-000285 and incorporated herein by
reference).
(10) Consent of Ropes & Gray pursuant to the Registrants 24f-2 notice will be
filed with Registrant's annual update. (11) Consent of Coopers & Lybrand
L.L.P. (filed herewith).
(15)(a) Form of Master Distribution Plan adopted by Registrant (filed as Exhibit
15(a) to Registrant's Post Effective Amendment No. 46 via EDGAR on January
10, 1996, accession number 0000912057-96-000285 and incorporated herein by
reference).
(15)(b) Form of Distribution Plan Supplement with respect to each Fund (filed as
Exhibit 15(b) to Registrant's Post Effective Amendment No. 46 via EDGAR on
January 10, 1996, accession number 0000912057-96-000285 and incorporated
herein by reference).
(16) Schedule of Sample Performance Calculations -- Schroder U.S. Equity Fund
(filed as Exhibit 16 to Registrant's Post-Effective Amendment No. 61 via
EDGAR on April 18, 1997, accession number 0000912057-97-013527, and
incorporated herein by reference).
Other Exhibits
Copies of Powers of Attorney pursuant to which Trustees have signed this
Post-Effective Amendment (filed as Other Exhibits to Post-Effective
Amendment No. 45 and incorporated herein by reference).
Copy of Power of Attorney pursuant to which Mr. Jackowitz has signed this
Post-Effective Amendment (filed as an Other Exhibit to Post-Effective
Amendment No. 45 and incorporated herein by reference).
Copy of Power of Attorney pursuant to which the Trustees and President have
signed this Post-Effective Amendment filed herewith.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
<TABLE>
<CAPTION>
NUMBER OF RECORD HOLDERS
TITLE OF CLASS AS OF JUNE 2, 1997
-------------- - ------------------
<S> <C>
Schroder U.S. Equity Fund 598
Schroder International Fund 822
Schroder U.S. Smaller Companies Fund 242
Schroder Emerging Markets Fund Institutional Portfolio 28
Schroder International Smaller Companies Fund 3
Schroder Latin America Fund 1
Schroder Global Asset Allocation Fund N/A
</TABLE>
ITEM 27. INDEMNIFICATION.
In accordance with Section 3803 of the Delaware Business Trust Act, SECTION 5.2
of the Registrant's Trust Instrument provides as follows:
"5.2. Indemnification.
"(a) Subject to the exceptions and limitations contained in Section (b) below:
"(i) Every person who is, or has been, a Trustee or officer of the Trust
(hereinafter referred to as a "Covered Person") shall be indemnified by the
Trust to the fullest extent permitted by law against liability and against all
expenses reasonably incurred or paid by them in connection with any claim,
action, suit or proceeding in which they become involved as a party or otherwise
by virtue of being or having been a Trustee or officer and against amounts paid
or incurred by them in the settlement thereof;
"(ii) The words "claim," "action," "suit," or "proceeding" shall apply to all
claims, actions, suits or proceedings (civil, criminal or other, including
appeals), actual or threatened while in office or thereafter, and the words
"liability" and "expenses" shall include, without limitation, attorneys' fees,
costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
"(b) No indemnification shall be provided hereunder to a Covered Person:
"(i) Who shall have been adjudicated by a court or body before which the
proceeding was brought (A) to be liable to the Trust or its Holders by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the Covered Person's office or (B) not to have
acted in good faith in the reasonable belief that Covered Person's action was in
the best interest of the Trust; or
"(ii) In the event of a settlement, unless there has been a determination that
such Trustee or officer did not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
Trustee's or officer's office,
"(A) By the court or other body approving the settlement;
"(B) By at least a majority of those Trustees who are neither Interested Persons
of the Trust nor are parties to the matter based upon a review of readily
available facts (as opposed to a full trial-type inquiry); or
"(C) By written opinion of independent legal counsel based upon a review of
readily available facts (as opposed to a full trial-type inquiry); provided,
however, that any Holder may, by appropriate legal proceedings, challenge any
such determination by the Trustees or by independent counsel.
"(c) The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not be exclusive of
or affect any other rights to which any Covered Person may now or hereafter be
entitled, shall continue as to a person who has ceased to be a Covered Person
and shall inure to the benefit of the heirs, executors and administrators of
such a person. Nothing contained herein shall affect any rights to
indemnification to which Trust personnel, other than Covered Persons, and other
persons may be entitled by contract or otherwise under law.
"(d) Expenses in connection with the preparation and presentation of a defense
to any claim, action, suit or proceeding of the character described in paragraph
(a) of this Section 5.2 may be paid by the Trust or Series prior to final
disposition thereof upon receipt of an undertaking by or on behalf of such
Covered Person that such amount will be paid over by Covered Person to the Trust
or Series if it is ultimately determined that the Covered Person is not entitled
to indemnification under this Section 5.2; provided, however, that either (a)
such Covered Person shall have provided appropriate security for such
undertaking, (b) the Trust is insured against losses arising out of any such
advance payments or (c) either a majority of the Trustees who are neither
Interested Persons of the Trust nor parties to the matter, or independent legal
counsel in a written opinion, shall have determined, based upon a review of
readily available facts (as opposed to a trial-type inquiry or full
investigation), that there is reason to believe that such Covered Person will be
found entitled to indemnification under this Section 5.2.
"(e) Conditional advancing of indemnification monies under this Section 5.2 for
actions based upon the 1940 Act may be made only on the following conditions:
(i) the advances must be limited to amounts used, or to be used, for the
preparation or presentation of a defense to the action, including costs
connected with the preparation of a settlement; (ii) advances may be made only
upon receipt of a written promise by, or on behalf of, the recipient to repay
that amount of the advance which exceeds that amount which it is ultimately
determined that he is entitled to receive from the Trust by reason of
indemnification; and (iii) (a) such promise must be secured by a surety bond,
other suitable insurance or an equivalent form of security which assures that
any repayments may be obtained by the Trust without delay or litigation, which
bond, insurance or other form of security must be provided by the recipient of
the advance, or (b) a majority of a quorum of the Trust's disinterested,
non-party Trustees, or an independent legal counsel in a written opinion, shall
determine, based upon a review of readily available facts, that the recipient of
the advance ultimately will be found entitled to indemnification.
"(f) In case any Holder or former Holder of any Series shall be held to be
personally liable solely by reason of the Holder or former Holder being or
having been a Holder of that Series and not because of the Holder or former
Holder acts or omissions or for some other reason, the Holder or former Holder
(or the Holder or former Holder's heirs, executors, administrators or other
legal representatives, or, in the case of a corporation or other entity, its
corporate or other general successor) shall be entitled out of the assets
belonging to the applicable Series to be held harmless from and indemnified
against all loss and expense arising from such liability. The Trust, on behalf
of the affected Series, shall, upon request by the Holder, assume the defense of
any claim made against the Holder for any act or obligation of the Series and
satisfy any judgment thereon from the assets of the Series."
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
The following are the directors and principal officers of SCMI, including their
business connections of a substantial nature. The address of each company
listed, unless otherwise noted, is 33 Gutter Lane, London EC2V 8AS, United
Kingdom. Schroder Capital Management International Limited ("Schroder Ltd.") is
a United Kingdom affiliate of SCMI which provides investment management services
international clients located principally in the United States.
David M. Salisbury. Chief Executive Officer, Director and Chairman of
SCMI; Joint Chief Executive and Director of Schroder Ltd.
Richard R. Foulkes. Deputy Chairman/Executive Vice President of SCMI.
John A. Troiano. Managing Director and Senior Vice President of SCMI.
Mr. Troiano is also a Director of Schroder Ltd.
David Gibson. Senior Vice President and Director of SCMI. Director of
Schroder Capital Management.
John S. Ager. Senior Vice President and Director of SCMI.
Sharon L. Haugh. Senior Vice President and Director of SCMI, Director
and Chairman of Schroder Advisors Inc.
Gavin D.L. Ralston. Senior Vice President and Managing Director of
SCMI.
Mark J. Smith. Senior Vice President and Director of SCMI.
Robert G. Davy. Senior Vice President. Mr. Davy is also a Director of
Schroder Ltd. and an officer of open end investment companies for
which SCMI and/or its affiliates provide investment services.
Jane P. Lucas. Senior Vice President and Director of SCMI; Director of
Schroder Advisors Inc.; Director of Schroder Capital Management.
C. John Govett. Director of SCMI; Group Managing Director of Schroder
Ltd. And Director of Schroders plc.
Phillipa J. Gould. Senior Vice President and Director of SCMI.
Louise Croset. First Vice President and Director of SCMI.
Abdallah Nauphal, Group Vice President and Director of SCMI.
ITEM 29. PRINCIPAL UNDERWRITERS.
(A) Schroder Fund Advisors Inc., the Registrant's principal underwriter, also
serves as principal underwriter for WSIS Series Trust.
(B) Following is information with respect to each officer and director of
Schroder Fund Advisors Inc., the Distributor of the shares of Schroder
International Fund, Schroder U.S. Equity Fund, Schroder U.S. Smaller Companies
Fund, Schroder Emerging Markets Fund Institutional Portfolio, Schroder
International Smaller Companies Fund, Schroder International Bond Fund and
Schroder Latin American Fund (each a series of the Registrant):
Catherine A. Mazza, President.
Mark J. Smith, Director and Senior Vice President.
Sharon L. Haugh, Chairman and Director.
Robert Jackowitz, Treasurer and CFO.
Alexandra Poe, Secretary and Senior Vice President.
Jane E. Lucas, Director.
* Address for each is 787 Seventh Avenue, New York, New York 10019 except for
Mark J. Smith, whose address is 33 Gutter Lane, London, England, EC2V 8AS.
(C) Inapplicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
The accounts, books and other documents required to be maintained by Registrant
with respect to Registrant's series pursuant to Section 31(a) of the Investment
Company Act of 1940 and the Rules thereunder are maintained at the offices of
Schroder Capital Management International Inc. (investment management records)
and Schroder Fund Advisors Inc. (administrator and distributor records), 787
Seventh Avenue, New York, New York 10019, except that certain items will be
maintained at the following locations:
(a) Forum Financial Corp., Two Portland Square, Portland, Maine 04101
(shareholder and fund accounting records).
(b) Forum Administrative Services, Limited Liability Company, Two Portland
Square, Portland, Maine 04101 (corporate minutes all other records required
under the Subadministration Agreement).
ITEM 31. MANAGEMENT SERVICES.
None.
ITEM 32. UNDERTAKINGS.
(a) Registrant undertakes to file a post-effective amendment, using
financial statements which need not be certified, within four to six
months from the latter of the effective date of Registrant's Securities
Act of 1933 Registration Statement relating to the prospectuses
offering those shares or the commencement of public shares of the
respective shares; and,
(b) Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest annual report to
shareholders relating to the portfolio or class thereof to which the
prospectus relates upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that this post-effective amendment
to the Registration Statement meets all of the requirements for effectiveness
under paragraph (b) of Rule 485 under the Securities Act of 1933 and has duly
caused this amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereto duly authorized, in the City of New York, and State
of New York on the 26th day of June, 1997.
SCHRODER CAPITAL FUNDS (DELAWARE)
By:/S/ CATHERINE A. MAZZA
Catherine A. Mazza
Vice President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement amendment has been signed below by the following persons on the 26th
day of June, 1997.
SIGNATURES TITLE
(a) Principal Executive Officer and Trustee
Mark J. Smith President and Trustee
By: /S/ CATHERINE S. WOOLEDGE
Catherine S. Wooledge, Attorney-in-Fact
(b) Principal Financial and
Accounting Officer
Robert Jackowitz* Treasurer
*By: /S/ CATHERINE S. WOOLEDGE
Catherine S. Wooledge, Attorney-in-Fact
(c) Remaining Trustees
Peter E. Guernsey* Trustee
John I. Howell* Trustee
Hermann C. Schwab* Trustee
Clarence F. Michalis* Trustee
*By: /S/ CATHERINE S. WOOLEDGE
Catherine S. Wooledge, Attorney-in-Fact
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of New York and
the State of New York on the 27th day of June, 1997.
SCHRODER CAPITAL FUNDS
By: /S/ CATHERINE A. MAZZA
Catherine A. Mazza
Vice President
<PAGE>
INDEX TO EXHIBITS
Sequential
EXHIBIT Page Number
(11) Consent of Coopers & Lybrand L.L.P.
Other
Exhibits: Copy of Power of Attorney pursuant to which the Trustees and
President have signed this Post-Effective Amendment filed herewith.
<PAGE>
[LOGO] COOPERS & LYBRAND L.L.P.
[vertical line]
a professional services firm
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Schroder Capital Funds (Delaware):
We hereby consent to the following with respect to Post-Effective Amendment
No. 62 to the Registration Statement on Form N-1A (File No. 2-34215) of Schroder
Capital Funds (Delaware) (consisting of Schroder International Smaller Companies
Fund, the "Fund"):
1. The reference to our firm under the heading "Independent Accountant" in
the Statement of Additional Information.
2. The reference naming our firm as "Independent Auditors" on the back of
both the Investor Shares and Advisor Shares Prospectuses.
/s/Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
June 30, 1997
<PAGE>
SCHRODER CAPITAL FUNDS
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Peter E. Guernsey constitutes and
appoints Thomas G. Sheehan, Catherine S. Wooledge, Mark J. Smith, and Catherine
Mazza and each of them, as true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities to sign the Registration Statement on Form
N-1A and any or all amendments thereto of Schroder Capital Funds, and, to the
extent that another registered investment company is or seeks to become an
investor in one or more series of Schroder Capital Funds, to sign the
Registration Statement of the registered investment company on Form N-1A and any
or all amendments thereto, and to file the same, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Peter E. Guernsey
Peter E. Guernsey
Dated: June 4, 1997
<PAGE>
SCHRODER CAPITAL FUNDS
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that John I. Howell constitutes and
appoints Thomas G. Sheehan, Catherine S. Wooledge, Mark J. Smith, and Catherine
Mazza and each of them, as true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities to sign the Registration Statement on Form
N-1A and any or all amendments thereto of Schroder Capital Funds, and, to the
extent that another registered investment company is or seeks to become an
investor in one or more series of Schroder Capital Funds, to sign the
Registration Statement of the registered investment company on Form N-1A and any
or all amendments thereto, and to file the same, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ John I. Howell
John I. Howell
Dated: June 4, 1997
<PAGE>
SCHRODER CAPITAL FUNDS
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Hermann C. Schwab constitutes and
appoints Thomas G. Sheehan, Catherine S. Wooledge, Mark J. Smith, and Catherine
Mazza and each of them, as true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities to sign the Registration Statement on Form
N-1A and any or all amendments thereto of Schroder Capital Funds, and, to the
extent that another registered investment company is or seeks to become an
investor in one or more series of Schroder Capital Funds, to sign the
Registration Statement of the registered investment company on Form N-1A and any
or all amendments thereto, and to file the same, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Hermann C. Schwab
Hermann C. Schwab
Dated: June 4, 1997
<PAGE>
SCHRODER CAPITAL FUNDS
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Clarence F. Michalis constitutes
and appoints Thomas G. Sheehan, Catherine S. Wooledge, Mark J. Smith, and
Catherine Mazza and each of them, as true and lawful attorneys-in-fact and
agents with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities to sign the Registration
Statement on Form N-1A and any or all amendments thereto of Schroder Capital
Funds, and, to the extent that another registered investment company is or seeks
to become an investor in one or more series of Schroder Capital Funds, to sign
the Registration Statement of the registered investment company on Form N-1A and
any or all amendments thereto, and to file the same, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Clarence F. Michalis
Clarence F. Michalis
Dated: June 4, 1997
<PAGE>
SCHRODER CAPITAL FUNDS
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Mark J. Smith constitutes and
appoints Thomas G. Sheehan, Catherine S. Wooledge, and Catherine Mazza and each
of them, as true and lawful attorneys-in-fact and agents with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities to sign the Registration Statement on Form N-1A and any
or all amendments thereto of Schroder Capital Funds, and, to the extent that
another registered investment company is or seeks to become an investor in one
or more series of Schroder Capital Funds, to sign the Registration Statement of
the registered investment company on Form N-1A and any or all amendments
thereto, and to file the same, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
/s/ Mark J. Smith
Mark J. Smith
Dated: June 4, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SCHRODER
CAPITAL FUNDS (DELAWARE) SEMI-ANNUAL REPORT DATED APRIL 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT
</LEGEND>
<CIK> 0000019532
<NAME> SCHRODER CAPITAL FUNDS, INC.
<SERIES>
<NUMBER> 040
<NAME> SCHRODER EMERGING MARKETS INSTITUTIONAL PORTFOLIO (FUND)
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 197,956,640
<INVESTMENTS-AT-VALUE> 232,619,185
<RECEIVABLES> 39,939
<ASSETS-OTHER> 17,533
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 232,676,657
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 39,685
<TOTAL-LIABILITIES> 39,685
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 208,965,571
<SHARES-COMMON-STOCK> 16,839,211
<SHARES-COMMON-PRIOR> 15,153,374
<ACCUMULATED-NII-CURRENT> 2,972
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (10,192,363)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 33,860,792
<NET-ASSETS> 232,636,972
<DIVIDEND-INCOME> 1,839,773
<INTEREST-INCOME> 217,336
<OTHER-INCOME> (1,875,839)
<EXPENSES-NET> 169,726
<NET-INVESTMENT-INCOME> 11,544
<REALIZED-GAINS-CURRENT> (3,490,410)
<APPREC-INCREASE-CURRENT> 32,186,438
<NET-CHANGE-FROM-OPS> 28,707,572
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 150,511
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 25,532,978
<NUMBER-OF-SHARES-REDEEMED> 5,048,000
<SHARES-REINVESTED> 87,690
<NET-CHANGE-IN-ASSETS> 65,066,922
<ACCUMULATED-NII-PRIOR> 152,823
<ACCUMULATED-GAINS-PRIOR> (6,701,953)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 195,987
<AVERAGE-NET-ASSETS> 194,250,498
<PER-SHARE-NAV-BEGIN> 11.06
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 1.72
<PER-SHARE-DIVIDEND> .01
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.77
<EXPENSE-RATIO> 1.54
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SCHRODER
CAPITAL FUNDS (DELAWARE) SEMI-ANNUAL REPORT DATED APRIL 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT
</LEGEND>
<CIK> 0000019532
<NAME> SCHRODER CAPITAL FUNDS, INC.
<SERIES>
<NUMBER> 041
<NAME> SCHRODER EMERGING MARKETS INSTITUTIONAL PORTFOLIO (FUND)
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 197,956,640
<INVESTMENTS-AT-VALUE> 232,619,185
<RECEIVABLES> 39,939
<ASSETS-OTHER> 17,533
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 232,676,657
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 39,685
<TOTAL-LIABILITIES> 39,685
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 208,965,571
<SHARES-COMMON-STOCK> 1,368,268
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 2,972
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (10,192,363)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 33,860,792
<NET-ASSETS> 232,636,972
<DIVIDEND-INCOME> 1,839,773
<INTEREST-INCOME> 217,336
<OTHER-INCOME> (1,875,839)
<EXPENSES-NET> 169,726
<NET-INVESTMENT-INCOME> 11,544
<REALIZED-GAINS-CURRENT> (3,490,410)
<APPREC-INCREASE-CURRENT> 32,186,438
<NET-CHANGE-FROM-OPS> 28,707,572
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 10,884
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 15,937,193
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 10,884
<NET-CHANGE-IN-ASSETS> 65,066,922
<ACCUMULATED-NII-PRIOR> 152,823
<ACCUMULATED-GAINS-PRIOR> (6,701,953)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 195,987
<AVERAGE-NET-ASSETS> 14,689,083
<PER-SHARE-NAV-BEGIN> 11.28
<PER-SHARE-NII> (.01)
<PER-SHARE-GAIN-APPREC> 1.56
<PER-SHARE-DIVIDEND> .01
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.82
<EXPENSE-RATIO> 1.79
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SCHRODER
CAPITAL FUNDS (DELAWARE) SEMI-ANNUAL REPORT DATED APRIL 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000019532
<NAME> SCHRODER CAPITAL FUNDS, INC.
<SERIES>
<NUMBER> 020
<NAME> SCHRODER INTERNATIONAL FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 155,902,047
<INVESTMENTS-AT-VALUE> 189,128,725
<RECEIVABLES> 1,200,090
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 190,328,815
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 208,823
<TOTAL-LIABILITIES> 208,823
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 147,501,033
<SHARES-COMMON-STOCK> 10,541,225
<SHARES-COMMON-PRIOR> 10,134,012
<ACCUMULATED-NII-CURRENT> 239,541
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 9,152,740
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 33,226,678
<NET-ASSETS> 190,119,992
<DIVIDEND-INCOME> 1,235,169
<INTEREST-INCOME> 123,752
<OTHER-INCOME> (718,244)
<EXPENSES-NET> 228,936
<NET-INVESTMENT-INCOME> 411,741
<REALIZED-GAINS-CURRENT> 9,180,573
<APPREC-INCREASE-CURRENT> 2,236,420
<NET-CHANGE-FROM-OPS> 11,828,734
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,570,768
<DISTRIBUTIONS-OF-GAINS> 26,130,027
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 31,417,639
<NUMBER-OF-SHARES-REDEEMED> 42,892,722
<SHARES-REINVESTED> 17,731,934
<NET-CHANGE-IN-ASSETS> (12,615,210)
<ACCUMULATED-NII-PRIOR> 4,398,568
<ACCUMULATED-GAINS-PRIOR> 26,102,194
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 274,760
<AVERAGE-NET-ASSETS> 192,508,016
<PER-SHARE-NAV-BEGIN> 20.01
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 1.07
<PER-SHARE-DIVIDEND> .46
<PER-SHARE-DISTRIBUTIONS> 2.63
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.04
<EXPENSE-RATIO> .99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SCHRODER
CAPITAL FUNDS (DELAWARE) SEMI-ANNUAL REPORT DATED APRIL 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT
</LEGEND>
<CIK> 0000019532
<NAME> SCHRODER CAPITAL FUNDS, INC.
<SERIES>
<NUMBER> 050
<NAME> SCHRODER INTERNATIONAL SMALLER COMPANIES
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 7,545,638
<INVESTMENTS-AT-VALUE> 6,987,844
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 13,599
<TOTAL-ASSETS> 7,001,443
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 11,286
<TOTAL-LIABILITIES> 11,286
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,454,784
<SHARES-COMMON-STOCK> 747,540
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (7,149)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 100,316
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (557,794)
<NET-ASSETS> 6,990,157
<DIVIDEND-INCOME> 34,670
<INTEREST-INCOME> 14,069
<OTHER-INCOME> (40,368)
<EXPENSES-NET> 10,093
<NET-INVESTMENT-INCOME> (1,722)
<REALIZED-GAINS-CURRENT> 100,316
<APPREC-INCREASE-CURRENT> (557,794)
<NET-CHANGE-FROM-OPS> (459,200)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,427
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,454,784
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 6,990,157
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 24,803
<AVERAGE-NET-ASSETS> 6,932,895
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> (.64)
<PER-SHARE-DIVIDEND> .01
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.35
<EXPENSE-RATIO> 1.47
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SCHRODER
CAPITAL FUNDS (DELAWARE) SEMI-ANNUAL REPORT DATED APRIL 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT
</LEGEND>
<CIK> 0000019532
<NAME> SCHRODER CAPITAL FUNDS, INC.
<SERIES>
<NUMBER> 010
<NAME> SCHRODER U.S. EQUITY FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 10,613,810
<INVESTMENTS-AT-VALUE> 13,853,141
<RECEIVABLES> 558,327
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 14,411,468
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 22,906
<TOTAL-LIABILITIES> 22,906
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,323,704
<SHARES-COMMON-STOCK> 1,664,106
<SHARES-COMMON-PRIOR> 1,761,071
<ACCUMULATED-NII-CURRENT> 7,153
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,818,374
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,239,331
<NET-ASSETS> 14,338,562
<DIVIDEND-INCOME> 113,506
<INTEREST-INCOME> 8,208
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 7,152
<REALIZED-GAINS-CURRENT> 2,818,374
<APPREC-INCREASE-CURRENT> (751,728)
<NET-CHANGE-FROM-OPS> 2,073,798
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 41,185
<DISTRIBUTIONS-OF-GAINS> 3,648,560
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 106,592
<NUMBER-OF-SHARES-REDEEMED> 3,973,098
<SHARES-REINVESTED> 2,684,379
<NET-CHANGE-IN-ASSETS> (2,798,074)
<ACCUMULATED-NII-PRIOR> 41,186
<ACCUMULATED-GAINS-PRIOR> 3,648,560
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 61,190
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 122,721
<AVERAGE-NET-ASSETS> 16,452,561
<PER-SHARE-NAV-BEGIN> 9.76
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 1.02
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 2.13
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.65
<EXPENSE-RATIO> 1.40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SCHRODER
CAPITAL FUNDS (DELAWARE) SEMI-ANNUAL REPORT DATED APRIL 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT
</LEGEND>
<CIK> 0000019532
<NAME> SCHRODER CAPITAL FUNDS, INC.
<SERIES>
<NUMBER> 030
<NAME> SCHRODER U.S. SMALLER COMPANIES FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 18,172,166
<INVESTMENTS-AT-VALUE> 19,738,693
<RECEIVABLES> 12,000
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 7,119
<TOTAL-ASSETS> 19,757,812
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 31,398
<TOTAL-LIABILITIES> 31,398
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 16,839,816
<SHARES-COMMON-STOCK> 1,654,123
<SHARES-COMMON-PRIOR> 797,795
<ACCUMULATED-NII-CURRENT> (29,905)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,349,976
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,566,527
<NET-ASSETS> 19,726,414
<DIVIDEND-INCOME> 63,483
<INTEREST-INCOME> 26,571
<OTHER-INCOME> (68,138)
<EXPENSES-NET> 51,821
<NET-INVESTMENT-INCOME> (29,905)
<REALIZED-GAINS-CURRENT> 1,537,280
<APPREC-INCREASE-CURRENT> (1,266,966)
<NET-CHANGE-FROM-OPS> 240,409
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 4,517,569
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,667,572
<NUMBER-OF-SHARES-REDEEMED> 4,023,839
<SHARES-REINVESTED> 3,516,999
<NET-CHANGE-IN-ASSETS> 5,983,859
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 4,330,265
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 78,256
<AVERAGE-NET-ASSETS> 16,199,185
<PER-SHARE-NAV-BEGIN> 17.23
<PER-SHARE-NII> (.02)
<PER-SHARE-GAIN-APPREC> .49
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 5.83
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.87
<EXPENSE-RATIO> 1.49
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SCHRODER
CAPITAL FUNDS (DELAWARE) SEMI-ANNUAL REPORT DATED APRIL 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT
</LEGEND>
<CIK> 0000019532
<NAME> SCHRODER CAPITAL FUNDS, INC.
<SERIES>
<NUMBER> 031
<NAME> SCHRODER U.S. SMALLER COMPANIES FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 18,172,166
<INVESTMENTS-AT-VALUE> 19,738,693
<RECEIVABLES> 12,000
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 7,119
<TOTAL-ASSETS> 19,757,812
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 31,398
<TOTAL-LIABILITIES> 31,398
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 16,839,816
<SHARES-COMMON-STOCK> 8,179
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (29,905)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,349,976
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,566,527
<NET-ASSETS> 19,726,414
<DIVIDEND-INCOME> 63,483
<INTEREST-INCOME> 26,571
<OTHER-INCOME> (68,138)
<EXPENSES-NET> 51,821
<NET-INVESTMENT-INCOME> (29,905)
<REALIZED-GAINS-CURRENT> 1,537,280
<APPREC-INCREASE-CURRENT> (1,266,966)
<NET-CHANGE-FROM-OPS> 240,409
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 123,171
<NUMBER-OF-SHARES-REDEEMED> 22,884
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 5,983,859
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 4,330,265
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 78,256
<AVERAGE-NET-ASSETS> 53,910
<PER-SHARE-NAV-BEGIN> 11.89
<PER-SHARE-NII> (.01)
<PER-SHARE-GAIN-APPREC> (.03)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.85
<EXPENSE-RATIO> 1.74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>