As filed with the Securities and Exchange Commission on September 23, 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. 64
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 45
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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
- --------------------------------------------------------------------------------
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 [ ] 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 May 31, 1998 will be filed on or about July 22, 1998. Schroder U.S.
Smaller Companies Fund of Registrant is structured as a master-feeder fund. This
amendment is executed for the master fund.
<PAGE>
PART A for Schroder U.S. Smaller Companies Fund - Advisor Shares, as filed in
Post-Effective Amendment No. 60 to this Registration Statement under the
Securities Act of 1933 is incorporated by reference herein in its entirety.
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(A))
PART A
(Prospectus offering Investor Shares
of Schroder U.S. Smaller Companies Fund.)
<TABLE>
<S> <C> <C> <C>
Form N-1A
Item No. (Caption) Location In Prospectus (Caption)
- --------- --------- ---------------------------------
1. Cover Page Cover Page
2. Synopsis Prospectus Summary
3. Condensed Financial Information Financial Highlights; 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 & Shareholder Services
Plan; Expenses; Portfolio Transactions
5A. Management's Discussion of` Not Applicable
Fund Performance
6. Capital Stock and Other Securities Other Information - Capitalization 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
</TABLE>
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(A))
PART B
<TABLE>
<S> <C> <C> <C>
(SAI offering Advisor and Investor Shares of Schroder U.S. Smaller Companies Fund)
Form N-1A Location in 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 Adviser;
Other Services 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 of Determination of Net Asset Value
Securities Being Offered 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
</TABLE>
<PAGE>
SCHRODER U.S. SMALLER COMPANIES FUND
Advisor Shares
Prospectus dated October 1, 1997
1. The Advisor Shares Prospectus dated March 1, 1997 is hereby redated October
1, 1997.
2. Replace page 4 with the following:
FINANCIAL HIGHLIGHTS
The financial highlights of the Fund are presented below to assist you in
evaluating per share performance of the Fund and its Advisor Shares for the
periods shown. Prior to December 23, 1996, the Fund offered one class of
shares-Investor Shares. Investor Shares' highlights are shown for the years
ended October 31, 1996, 1995, 1994 and 1993 (which have had a lower expense
ratio and higher performance than Advisor Shares). Advisor Shares are shown for
the period December 23, 1996 (commencement of operations) through May 31, 1997.
This information is part of the Fund's financial statements and has been audited
by Coopers & Lybrand L.L.P., independent accountants to the Fund. The Fund's
financial statements for the period ended May 31, 1997, and the related
independent accountants' report are contained in the Fund's Annual Report to
Shareholders and are incorporated by reference into the SAI. Further information
about the performance of the Fund is contained in the Annual Report, which may
be obtained without charge by writing the Fund at Two Portland Square, Portland,
Maine 04101 or by calling (800) 290-9826.
<TABLE>
<S> <C> <C> <C> <C> <C>
Advisor Shares Investor Shares
-------------- ---------------
Year Ended October 31,
Period Ended May 31, ---------------------------------------------------
1997(b) 1996(a) 1995 1994 1993(c)
------------------- ---------------------------------------------------
Net Asset Value, Beginning of Period $11.89 $15.14 $11.81 $10.99 $10.00
Investment Operations:
Net Investment Income (Loss) (0.03)(d) (0.06)(d) (0.04) (0.07) (0.02)
Net Realized and Unrealized Gain
(Loss) on Investments 1.38 4.10 3.78 0.97 1.01
---- ---- ---- ---- ----
Total from Investment Operations 1.35 4.04 3.74 0.90 0.99
---- ---- ---- ---- ----
Distributions from Net Realized
Gain on Investments 0.00 (1.95) (0.41) (0.08) ----
---- ------ ------ ------ ----
Net Asset Value, End of Period $13.24 $17.23 $15.14 $11.81 $10.99
====== ====== ====== ====== ======
Total Return 11.35% 29.35% 32.84% 8.26% 9.90%
Ratio/Supplementary Data:
Net Assets at the End of Period
(000's Omitted) $81 $13,743 $15,287 $13,324 $12,489
Ratios to Average Net Assets:
Expenses Including
Reimbursement/Waiver 1.74%(d)(e) 1.49%(d)(e) 1.49% 1.45% 2.03%(e)
Expenses Excluding
Reimbursement/Waiver 57.02%(d)(e) N/A N/A N/A N/A
Net Investment Income (loss) Including
Reimbursement/Waiver (0.67)%(d)(e) (0.35)%(d)(e) (0.30)% (0.58)% (0.99)%(e)
Average Commission Rate(f) $0.0584 $0.0583 N/A N/A N/A
Portfolio Turnover Rate(g) 34.45% 58.50% 92.68% 70.82% 12.58%
</TABLE>
(a) Effective May 1, 1997, the Fund changed its fical year end to May 31 from
October 31. The Fund converted to Core and Gateway(R) on August 15, 1996.
(b) On December 23, 1996, the Advisor Shares commenced operations.
(c) The Fund commenced operations on August 6, 1993.
(d) Includes the Fund's proportionate share of income and expenses of the
Portfolio.
(e) Annualized.
(f) For the fiscal year 1996 and thereafter, the Fund is required to disclose
average commission per share paid to brokers on the purchase and sale of
equity securities. The rate shown for the period ended May 31, 1997
represents the average commission per share paid by the Portfolio from
November 1, 1996 through May 31, 1997. For the years ended October 31,
1996, 1995, 1994 and 1993, the rate shown represents the average commission
per share paid by the Fund while it was making investments directly in
securities.
(g) Portfolio turnover rate represents the rate of portfolio activity. The rate
shown for the period ended May 31, 1997 represents portfolio activity of
the Portfolio from November 1, 1996 through May 31, 1997. The rate shown
for the year ended October 31, 1996 represents portfolio activity of the
Fund prior to the Core and Gateway conversion (namely, November 1, 1995
through August 15, 1996). The blended rate for both the Fund and Portfolio
for the full fiscal year ended October 31, 1996 is 105.13%.
3. The third paragraph in the section "Management of the Fund -- Investment
Adviser and Portfolio Managers" on Page 10 of the Prospectus is replaced in its
entirety by the following paragraph:
Fariba Talebi, a Vice President of the Trust, a Group Vice President of
SCMI and a Director of Schroder Capital Management Inc. with the assistance of
the special small cap investment team is primarily responsible for the
day-to-day management of the Portfolio's investments and has managed the
Portfolio since its inception. Prior to March 1, 1997, Ira Unschuld, a First
Vice President of SCMI and a member of the small cap investment team was a
co-manager of the Fund. Ms. Talebi has been employed by SCMI in the investment
research and portfolio management areas since 1987.
<PAGE>
SCHRODER U.S. SMALLER COMPANIES FUND
INVESTOR SHARES
The fund's investment objective is capital appreciation. It seeks to achieve its
objective by investing primarily in equity securities of companies domiciled in
the United States that have at the time of purchase market capitalizations of
$1.5 billion or less. It is intended for long-term investors seeking to
diversify their growth investments who are willing to accept the risks
associated with investments in smaller companies. Current income is incidental
to the objective of capital appreciation.
Schroder U.S. 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 U.S. Smaller Companies
Portfolio (the "Portfolio"), a series of Schroder Capital Funds ("Schroder
Core"). Accordingly, the Fund's investment experience corresponds directly with
the Portfolio's investment experience. The Portfolio has an identical investment
objective and substantially similar investment policies as the Fund. (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 October 1, 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 the SEC's 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
OCTOBER 1, 1997
<PAGE>
PROSPECTUS SUMMARY
This Prospectus offers Investor Class shares ("Investor Shares" or
"Shares") of the Fund which is 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 FOLLOWING SUMMARY IS
QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION CONTAINED IN THIS
PROSPECTUS.
OBJECTIVE. Capital appreciation.
STRATEGY. Invests at least 65% of its total assets in equity securities
of companies domiciled in 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. (See "Management of the
Fund - Investment Adviser and Portfolio Managers.")
ADMINISTRATIVE SERVICES. Schroder Fund Advisors Inc. ("Schroder Advisors")
serves as administrator and distributor of the Fund, and Forum Administrative
Services, LLC ("Forum") serves as the Fund's subadministrator.
PURCHASES AND REDEMPTIONS OF SHARES. Shares may be purchased or
redeemed by mail, by bank-wire and 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. (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 at least
annually distributes any net realized long-term capital gain and gain from
foreign currency transactions. Dividends and long-term 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 to diversify their growth
investments who are willing to accept the risks associated with investments in
smaller companies. Investment in smaller companies involves risks in addition to
those normally associated with investments in equity securities of large
capitalization companies. Of course, as with any mutual fund, there is no
assurance that the Fund or Portfolio will achieve its investment objective.
The Fund's net asset value ("NAV") varies because the market value of
the Fund's investment will change with changes in the value of the securities in
which the Portfolio invests due to changes in market conditions, interest rates,
currency rates, or political or economic situations. When you sell your Shares,
they may be worth more or less than what you paid for them. (See "Risk
Considerations.")
<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.
<TABLE>
<S> <C> <C>
SCHRODER CAPITAL FUNDS (DELAWARE) (800) 290-9826 SCHRODER SERIES TRUST (800) 464-3108
SCHRODER INTERNATIONAL BOND FUND SCHRODER LARGE CAPITALIZATION EQUITY FUND
SCHRODER EMERGING MARKETS FUND SCHRODER MIDCAP VALUE FUND
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL SCHRODER SMALL CAPITALIZATION VALUE FUND
PORTFOLIO SCHRODER INVESTMENT GRADE INCOME FUND
SCHRODER INTERNATIONAL FUND SCHRODER SHORT-TERM INVESTMENT FUND
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND
SCHRODER MICRO CAP FUND
SCHRODER U.S. EQUITY FUND
SCHRODER U.S. SMALLER COMPANIES FUND
SCHRODER CASH RESERVES FUND
</TABLE>
================================================================================
<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. The Annual Fund Operating Expenses are based on fees and expenses
incurred during the Fund's fiscal period ended May 31, 1997.
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)(a)
Management Fees (after fee waivers)(b)(c)............................ 0.50%
12b-1 Fees........................................................... None
Other Expenses (After Reimbursements)(c)............................. 0.99%
---------------------------------------
Total Fund Operating Expenses (c).................................... 1.49%
(a) The Fund's expenses include the Fund's pro rata portion of all
expenses of the Portfolio.
(b) Management Fees reflects the fees paid by the Portfolio and the Fund
to SCMI and Schroder Advisors for investment advisory and
administrative services.
(c) SCMI and Schroder Advisors voluntarily have undertaken to waive a
portion of their fees and assume certain expenses of the Fund in order
to limit Total Fund Operating Expenses to 1.49%. This undertaking
cannot be withdrawn except by a majority vote of the Trust's Board of
Trustees. (See "Management of the Fund--Expenses.") Without fee
waivers and reimbursements, Management Fees, Other Expenses and Total
Fund Operating Expenses would be 0.85%, 1.02% and 1.87%, respectively.
EXAMPLE
The table below indicates how much you would pay in total expenses on a
$1,000 investment in the Fund, assuming: (1) a 5% annual return; and (2)
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.................................................................$81
10 YEARS...............................................................$178
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights of the Fund are presented below to assist you
in evaluating per share performance of the Fund's Investor Shares for the
periods shown. This information is part of the Fund's financial statements and
has been audited by Coopers & Lybrand L.L.P., independent accountants to the
Fund. The Fund's financial statements for the period ended May 31, 1997, and the
related independent accountants' report are contained in the Fund's Annual
Report to Shareholders and are incorporated by reference into the SAI. Further
information about the performance of the Fund is contained in the Annual Report,
which may be obtained without charge by writing the Fund at Two Portland Square,
Portland, Maine 04101 or by calling (800) 290-9826.
<TABLE>
<S> <C> <C> <C> <C> <C>
Period Ended Year Ended
May 31 October 31,
1997(b) 1996(a) 1995 1994 1993(c)
------------ ---------------------------------------------------------
Net Asset Value, Beginning of Period $17.23 $15.14 $11.81 $10.99 $10.00
Investment Operations:
Net Investment Income (Loss) (0.02)(c) (0.06)(c) (0.04) (0.07) (0.02)
Net Realized and Unrealized Gain (Loss) on 1.88 4.10 3.78 0.97 1.01
---- ---- ---- ---- ----
Investments
Total from Investment Operations 1.86 4.04 3.74 0.90 0.99
---- ---- ---- ---- ----
Distributions from Net Realized Gain on Investments (5.83) (1.95) (0.41) (0.08) ----
------ ------ ------ ------ ----
Net Asset Value, End of Period $13.26 $17.23 $15.14 $11.81 $10.99
====== ====== ====== ====== ======
Total Return 14.73% 29.35% 32.84% 8.26% 9.90%
Ratio/Supplementary Data:
Net Assets at the End of Period (000's Omitted) $26,104 $13,743 $15,287 $13,324 $12,489
Ratios to Average Net Assets:
Expenses Including Reimbursement/Waiver 1.49%(c)(d) 1.49%(c)(d) 1.49% 1.45% 2.03%(d)
Expenses Excluding Reimbursement/Waiver 1.87%(c)(d) N/A N/A N/A N/A
Net Investment Income (loss) Including (0.42)%(c)(d) (0.35)%(c)(d) (0.30)% (0.58)% (0.99)%(d)
Reimbursement/Waiver
Average Commission Rate(e) $0.0584 $0.0583 N/A N/A N/A
Portfolio Turnover Rate(f) 34.45% 58.50% 92.68% 70.82% 12.58%
</TABLE>
(a) On December 23, 1996, the Fund began offering a second class of shares,
Advisor Shares, and all then outstanding shares of the Fund were
redesignated as Investor Shares.
(b) Effective May 1, 1997, the Fund changed its fiscal year end to May 31 from
October 31. The Fund converted to Core and Gateway(R) on August 15, 1996.
(c) The Fund commenced operations on August 6, 1993.
(d) Includes the Fund's proportionate share of income and expenses of the
Portfolio.
(e) Annualized.
(f) For the fiscal year 1996 and thereafter, the Fund is required to disclose
average commission per share paid to brokers on the purchase and sale of
equity securities. The rate shown for the period ended May 31, 1997
represents the average commission per share paid by the Portfolio from
November 1, 1996 through May 31, 1997. For the years ended October 31,
1996, 1995, 1994 and 1993, the rate shown represents the average commission
per share paid by the Fund while it was making investments directly in
securities.
(g) Portfolio turnover rate represents the rate of portfolio activity. The rate
shown for the period ended May 31, 1997 represents portfolio activity of
the Portfolio from November 1, 1996 through May 31, 1997. For the years
ended October 31, 1996, 1995, 1994 and 1993, the rate shown represents
portfolio activity while the Fund was making investments directly in
securities. The blended rate for both the Fund and the Portfolio for the
full fiscal year ended October 31, 1996 is 105.13%.
<PAGE>
INVESTMENT OBJECTIVE
The investment objective of the Fund is capital appreciation. Current
income is incidental to the objective of capital appreciation. The Fund is not
intended for investors whose objective is assured income or preservation of
capital. It is, rather, appropriate for investors who can bear the special risks
associated with investment in smaller capitalization companies.
The Fund currently seeks to achieve its investment objective by
investing all of its investable assets in the Portfolio, which has an identical
investment objective and substantially similar investment policies as the Fund.
There can be no assurance that the Fund or the 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 of the Fund and the Portfolio is contained in the SAI.
Under normal market conditions the Portfolio will seek to achieve its
investment objective by investing at least 65% of its total assets in equity
securities of companies domiciled in the United States that at the time of
purchase have market capitalizations of $1.5 billion or less. Market
capitalization means the market value of a company's outstanding stock.
In its investment approach, SCMI identifies securities of companies
that it believes can generate above average earnings growth, and are selling at
favorable prices in relation to book values and earnings. SCMI's assessment of
the competency of an issuer's management will be an important investment
consideration. These criteria are not rigid, and other investments may be
included in the Portfolio if they could help the Portfolio attain its objective.
These criteria can be changed by the Schroder Core Board, without shareholder
approval.
The Portfolio will invest principally in equity securities, namely,
common stocks, securities convertible into common stocks, or, subject to special
limitations, rights or warrants to subscribe for or purchase common stocks. The
Portfolio may also invest to a limited degree in non-convertible debt securities
and preferred stocks when SCMI believes that such investments are warranted to
achieve the Portfolio's investment objective.
The Portfolio may invest in securities of small, unseasoned companies
(which, together with any predecessors, have been in operation for less than
three years), as well as in securities of more established companies. The
Portfolio intends to invest no more than 25% of its total assets in unseasoned
companies.
Although there is no minimum rating for debt securities (convertible or
non-convertible) in which the Portfolio may invest, the Portfolio intends to
invest no more than 5% of its net assets in debt securities rated below "Baa" by
Moody's Investors Service ("Moody's") or "BBB" by Standard and Poor's ("S&P")
(such securities are commonly known as "high yield/high risk" securities or
"junk bonds"), and it will not invest in debt securities that are in default.
Prices of high yield/high risk securities are generally more volatile than
prices of higher rated securities, and are generally deemed more vulnerable to
default on interest and principal payments. It should be noted that even bonds
rated "Baa" by Moody's or "BBB" by S&P are described by them as having
speculative characteristics.Changes in economic conditions or other
circumstances are more likely to weaken the ability of issuers of these bonds to
make principal and interest payments than is the case with higher grade bonds.
The Portfolio is not obligated to dispose of securities due to rating changes by
Moody's, S&P or other agencies. Additional information about the risks
associated with investing in junk bonds is contained in the SAI.
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 U.S.
Government securities, certificates of deposit, and bankers' acceptances of U.S.
banks. The Portfolio also may hold cash and time deposits in U.S. banks.
Additional information about these securities is contained in the SAI.
<PAGE>
The following specific policies and limitations are considered at the
time of any purchase. SCMI may not buy these instruments or use these techniques
unless it believes that they are consistent with the Portfolio's objective.
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, they would be 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 also a shareholder and
not a creditor of the company. Dividends paid to common and preferred
stockholders are distributions of the earnings of the company and are 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 are not necessarily 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 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.
CONVERTIBLE SECURITIES. A convertible security is a bond, debenture,
note, preferred stock or other security that may be converted into or exchanged
for a prescribed amount of common stock of the same or a different issuer within
a particular period of time at a specified price or formula. Convertible
preferred stockentitles the holder to receive the dividend paid on the stock
until it is converted or exchanged. Before conversion, convertible debt
securities have characteristics similar to non-convertible debt securities in
that they ordinarily provide a stream of income with generally higher yields
than those of common stocks of the same or similar issuers. These securities are
usually senior to common stock in a company's capital structure, but are usually
subordinated to non-convertible debt securities. In general, the value of a
convertible security is the higher of its investment value (its value as a fixed
income security) and its conversion value (the value of the underlying shares of
common stock if the security is converted). As a fixed income security, the
value of a convertible security generally increases when interest rates decline
and generally decreases when interest rates rise. The value of a convertible
security is, however, also influenced by the value of the underlying common
stock.
REPURCHASE AGREEMENTS. The Portfolio may invest in repurchase
agreements, which are a means of investing monies for a short period whereby a
seller -- a U.S. bank or recognized broker-dealer -- sells securities to the
Portfolio and agrees to repurchase them (at the Portfolio's cost plus interest)
within a specified period (normally one day). 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. The Portfolio's custodian holds the securities until they
are repurchased. If a seller defaults under a repurchase agreement, the
Portfolio may have difficulty exercising its rights to the underlying securities
and may incur costs and experience time delays in disposing of them. To evaluate
potential risk, SCMI reviews the creditworthiness of banks and dealers with
which the Portfolio enters into repurchase agreements.
<PAGE>
ILLIQUID AND RESTRICTED SECURITIES. The Portfolio will not purchase or
otherwise acquire any security if, as a result, more than 15% of its net assets
(taken at current value) would be invested in securities that are illiquid: (1)
by virtue of the absence of a readily available market; or (2) 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. Illiquid Investments include over-the-counter options held by the
Portfolio and the 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 (pursuant to Rule
144A under the Securities Act of 1933, as amended) to qualified institutional
purchasers. If SCMI determines that a "Rule 144A security" is liquid pursuant to
guidelines adopted by the Schroder Core 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.
Additional information regarding these securities is contained in the SAI.
LOANS OF PORTFOLIO SECURITIES. The Portfolio may lend portfolio
securities (otherwise than in repurchase transactions) to brokers, dealers and
other financial institutions meeting specified credit conditions if the loan is
fully collateralized and if, after any loan, the value of the securities loaned
does not exceed 25% of the Portfolio's total asset value. By so doing, the
Portfolio attempts to earn interest income. In the event of the other party's
bankruptcy, the Portfolio could experience delays in recovering the securities
loaned and, potentially, a loss.
Securities loans are fully collateralized if the Portfolio maintains
liquid assets in a segregated account equal in amount to the current market
value of the securities loaned (including accrued interest thereon) plus the
loan interest payable to the Portfolio. Any securities that the Portfolio
receives as collateral will not become part of its portfolio at the time of the
loan. In the event of a default by the borrower, the Portfolio will (if
permitted by law) dispose of the collateral except for the part thereof that is
a security in which the Portfolio is permitted to invest. While the securities
are on loan, the borrower will pay the Portfolio any accrued income on those
securities, and the Portfolio may invest the cash collateral and earn income or
receive an agreed upon fee from a borrower that has delivered cash equivalent
collateral. Cash collateral received by the Portfolio will be invested in U.S.
Government securities and liquid high grade debt obligations. The value of
securities loaned will be marked to market daily. Portfolio securities purchased
with cash collateral are subject to possible depreciation. Loans of securities
by the Portfolio will be subject to termination at the Portfolio's or the
borrower's option. The Portfolio may pay reasonable negotiated fees in
connection with loaned securities, so long as such fees are set forth in a
written contract and approved by the Schroder Core Board.
OPTIONS AND FUTURES TRANSACTIONS. While the Portfolio does not
presently intend to do so, it may write covered call options and purchase
certain put and call options, stock index futures, and options on stock index
futures and broadly-based stock indices, all of which are referred to as
"Hedging Instruments. In general, the Portfolio may use Hedging Instruments: (1)
to protect against declines in the market value of the portfolio's securities;
or (2) 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 the Portfolio is authorized
to use have certain risks associated with them, including: (1) 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; (2)
potentially unlimited loss associated with futures transactions and the possible
lack of a liquid secondary market for closing out a futures position; and (3)
possible losses resulting from the inability of SCMI to predict the direction of
stock prices, interest rates and other economic factors. Additional information
regarding the Hedging Instruments the Portfolio may use and the risks associated
with them is contained 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." Noincome can result and no gain can be
realized from securities sold short against-the-box until the short position is
closed out. Additional information on "Short Sales Against-the-Box" is contained
in the SAI.
<PAGE>
INVESTMENT POLICY CHANGES. The investment objective, and the investment
policies of the Portfolio that are designated as fundamental, may not be changed
without approval of the holders of a majority of the outstanding voting
securities of the Portfolio. A majority of outstanding voting securities means
the lesser of: (1) 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 (2) more than 50% of outstanding shares.
Non-fundamental investment policies of the Portfolio may be changed by the
Schroder Core Board without approval of the investors in the Portfolio.
RISK CONSIDERATIONS
SMALLER COMPANIES. While all investments have risks, investments in
smaller capitalization companies carry greater risk than investments in larger
capitalization companies. Smaller capitalization companies generally experience
higher growth rates and higher failure rates than do larger capitalization
companies; and the trading volume of smaller capitalization companies'
securities is normally lower than that of larger capitalization companies and,
consequently, generally has a disproportionate effect on market price (tending
to make prices rise more in response to buying demand and fall more in response
to selling pressure).
UNSEASONED ISSUERS. Investments in small, unseasoned issuers generally
carry greater risk than is customarily associated with larger, more seasoned
companies. Such issuers often have products and management personnel that have
not been 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 can 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.
MANAGEMENT OF THE FUND
[check mark] SCHRODER GROUP ASSETS UNDER MANAGEMENT WORLDWIDE
AS OF JUNE 30, 1997 -- OVER $175 BILLION
[WORLD 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 PAULOAND AND BOGOTA .
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 is contained in the SAI.
<PAGE>
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 the Portfolio investments with
brokers or dealers it selects. For these services SCMI is entitled to receive a
monthly advisory fee at the annual rate of 0.60% of the Portfolio's average
daily net assets, which the Fund indirectly bears through its investment in the
Portfolio.
SCMI is a wholly owned U.S. subsidiary of Schroders Incorporated (doing
business in New York as Schroders Holdings) 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 in eighteen countries. The Schroder Group specializes in
providing investment management services.
Fariba Talebi, a Vice President of the Trust, a Group Vice President of
SCMI and a Director of Schroder Capital Management Inc. with the assistance of
the special small cap investment team is primarily responsible for the
day-to-day management of the Portfolio's investments and has managed the
Portfolio since its inception. Ms. Talebi has been employed by SCMI in the
investment research and portfolio management areas since 1987.
The Fund began pursuing its investment objective through investment in
the Portfolio on August 15, 1996. 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 Trust 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 from 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
0.50% of the Fund's average daily net assets for the first $100 million; 0.40%
on the next $150 million; and 0.35% of the Fund's average daily net assets in
excess of $250 million. 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 Agreement between SCMI and Schroder Core with respect to the
Portfolio (except as to the parties, the fees payable thereunder and the
circumstances under which fees will be paid).
ADMINISTRATIVE SERVICES
On behalf of the Fund, the Trust has entered into an administration
contract with Schroder Advisors, 787 Seventh Avenue, New York, New York 10019.
On behalf of the Fund, the Trust has also entered into a subadministration
agreement with Forum, Two Portland Square, Portland, Maine 04101. Under 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 entitled to receive compensation, at the annual rate
of 0.25% of the Fund's average daily net assets. Forum is entitled to receive
compensation at the annual rate of 0.10% of the Fund's average daily net assets.
Schroder Advisors and Forum provide similar services to the Portfolio.
Schroder Advisors provides such services without compensation. The Portfolio
pays Forum a monthly fee at the annual rate of 0.10% of the Portfolio's average
daily net assets for Forum's subadministration services.
EXPENSES
SCMI and Schroder Advisors voluntarily have undertaken 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 1.49% of the average daily net assets of the Fund
<PAGE>
attributable to the Shares. This expense limitation cannot be modified or
withdrawn except by a majority vote of the Trustees of the Trust who are not
interested persons (as defined in the 1940 Act) of the Trust. If expense
reimbursements are required, they will be made on a monthly basis. Forum may
waive voluntarily all or a portion of their fees, from time to time.
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.
Subject to the Portfolio's policy of obtaining the best price
consistent with quality of execution on transactions, SCMI may employ: (1)
Schroder & Co. Inc. and its affiliates ("Schroder & Co."), affiliates of SCMI,
to effect transactions of the Portfolio on the New York Stock Exchange and (2)
Schroder Securities Limited and its affiliates ("Schroder Securities"),
affiliates of SCMI, to effect transactions of the Portfolio, if any, on certain
foreign securities exchanges. Because of the affiliation between SCMI and both
Schroder & Co. and Schroder Securities, the Portfolio's payment of commissions
to them is subject to procedures adopted by the Schroder Core Board designed to
ensure that commissions will not exceed the usual and customary brokers'
commissions. No specific portion of the Portfolio's brokerage will be directed
to Schroder & Co. or Schroder Securities, and in no event will either receive
any brokerage in recognition of research services.
Although the Portfolio does not currently engage in directed brokerage
arrangements to pay expenses, it may do so in the future. These arrangements
(whereby brokers executing the Portfolio's portfolio transactions agree to pay
designated expenses of the Portfolio if brokerage commissions generated by the
Portfolio reached certain levels) might reduce the Portfolio's expenses (and,
indirectly, the Fund's expenses) and would not be expected to increase
materially the brokerage commissions paid by the Portfolio. Brokerage
commissions are not deemed to be Fund expenses.
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 (the "Transfer
Agent"). (See "Other Information -- Shareholder Inquiries.")
Investor Shares 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 $10,000. The minimum subsequent
investment is $2,500. All purchase payments are invested in full and fractional
Shares. The Fund is authorized to reject any purchase order.
Purchases may be made by mailing a check (in U.S. dollars), payable to
Schroder U.S. Smaller Companies Fund, to:
Schroder U.S. Smaller Companies Fund -- Investor Shares
P.O. Box 446
Portland, Maine 04112
<PAGE>
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 U.S. 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 will
become 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 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 written
request to the Transfer Agent. No certificates are issued for fractional shares.
Subsequent purchases may be made by check or by sending a wire as described
above. All payments should clearly indicate the shareholder's name and account
number.
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, capital gain
and other 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 are offered in connection with tax-deferred retirement plans.
Application forms and further information about these plans, including
applicable fees, are available upon request. Before investing in the Fund
through one of these plans, investors should consult their tax advisors.
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; the minimum subsequent investment is $2,000. 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.
<PAGE>
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 $10,000 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 to 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 series 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 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 shares' class (I.E.
Investor 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, Schroder
Advisors 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 change, 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 shares' class (I.E. Investor 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
<PAGE>
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 (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:
(1) trading on the New York Stock Exchange is restricted or that exchange is
closed; (2) the SEC has by order permitted such suspension; or (3) 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. Additional
information on purchases and redemptions is contained 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, Martin Luther King, Jr. 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 preceding 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.
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
THE FUND
The Fund intends to comply with the provisions of the 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 Investor Shares are
reinvested automatically in additional Investor Shares 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 compensation payable to
Service Organizations for shareholder servicing for the Advisor Shares.
Dividends from the Fund's income generally will be 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.
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 includes a return of capital.
<PAGE>
The foregoing is only a summary of some of the important federal tax
considerations generally affecting the Fund and its shareholders. Additional
information on the Fund is contained in the SAI. 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 gain and loss of the Portfolio will be deemed to have been
"passed through" to the Fund in proportion to the Fund's 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 Investor
Shares), and the costs of doing so will be borne by the Trust. The Trust
currently consists of eight separate Funds, each of which has a separate
investment objective and policies.
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 Fund 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 other distributions at NAV. Cumulative total returns are calculated
similarly except that the total return is aggregated over the relevant period
instead of annualized.
<PAGE>
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. Additional information and a description of
the methods used to determine total return and other performance measures for
the Fund is contained in the SAI.
CUSTODIAN AND TRANSFER AGENT
The Chase Manhattan Bank, N.A. is custodian of the Fund's and of the
Portfolio's assets. Forum Financial Corp. serves as the Fund's transfer and
dividend disbursing agent.
SHAREHOLDER INQUIRIES
Inquiries about the Fund, including its past performance, should be
directed to:
Schroder U.S. Smaller Companies Fund
P.O. Box 446
Portland, Maine 04112
Information about specific shareholder accounts may be obtained from
the Transfer Agent by calling (800) 344-8332.
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 an identical
investment objective and substantially similar investment policies as the Fund.
Accordingly, the Portfolio directly acquires its own securities and the Fund
acquires an indirect interest in those securities. The Portfolio is a separate
series of Schroder Core, a business trust organized under the laws of the State
of Delaware in September 1995. Schroder Core is registered under the 1940 Act as
an open-end, management investment company and currently has four separate
series. 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 March 1, 1997, there are two
institutional investors in the Portfolio, the Fund and Small Cap Opportunities
Fund, a series of Norwest Advantage Funds. The Portfolio may permit other
investment companies or institutional investors to invest in it. All other
investors in the Portfolio will invest on the same terms and conditions as the
Fund and will pay a proportionate share of the Portfolio's expenses.
<PAGE>
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 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 (800) 730-2932.
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, 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 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 the Schroder Core. The purpose of
these cross-indemnity provisions is principally to limit the liability of
Schroder Core to information that it knows or should know and can control. With
respect to other prospectuses, 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. 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 the 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 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 the Fund.
<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, LLC
Two Portland Square
Portland, Maine 04101
CUSTODIAN
The Chase Manhattan Bank, N.A.
Chase MetroTech Center
Brooklyn, New York 11245
TRANSFER AND DIVIDEND DISBURSING AGENT
Forum Financial Corp.
P.O. Box 446
Portland, Maine 04112
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand, L.L.P.
One Post Office Square
Boston, Massachusetts 02109
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUMMARY............................3
EXPENSES OF INVESTING
IN THE FUND...............................4
Fee Table.....................................4
Example.......................................4
FINANCIAL HIGHLIGHTS..........................5
INVESTMENT OBJECTIVE..........................6
INVESTMENT POLICIES...........................6
RISK CONSIDERATIONS...........................9
MANAGEMENT OF THE FUND........................9
Boards of Trustees............................9
Investment Adviser and Portfolio Managers.....9
Administrative Services......................10
Expenses.....................................11
Portfolio Transactions.......................11
Code of Ethics...............................12
INVESTMENT IN THE FUND.......................12
Purchase of Shares...........................12
Retirement Plans and
Individual Retirement Accounts...........13
Statement of Intention.........................
Exchanges....................................13
Redemption of Shares.........................13
Net Asset Value..............................14
DIVIDENDS, DISTRIBUTIONS
AND TAXES................................14
The Fund.....................................14
The Portfolio................................16
OTHER INFORMATION............................16
Capitalization and Voting....................16
Reports......................................17
Performance..................................17
Custodian and Transfer Agent.................17
Shareholder Inquires.........................17
Fund Structure...............................18
<PAGE>
SCHRODER U.S. SMALLER COMPANIES FUND
STATEMENT OF ADDITIONAL INFORMATION
OCTOBER 1, 1997
-----------------------------------------------------------------------
[World Graphic]
INVESTMENT ADVISER
- ------------------
Schroder Capital Management International Inc. ("SCMI")
ADMINISTRATOR AND DISTRIBUTOR
- -----------------------------
Schroder Fund Advisors, Inc. ("Schroder Advisors")
SUBADMINISTRATOR
- ----------------
Forum Administrative Services, LLC ("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 U.S. 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 with no sales charge to
individual investors, in most cases through Service Organizations (as defined in
the prospectus) at lower investment minimums but higher 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 October 1, 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
printed above.
<PAGE>
TABLE OF CONTENTS
INTRODUCTION..................................................3
INVESTMENT POLICIES...........................................3
U.S. Government Securities....................................3
Bank Obligations..............................................3
Short-Term Debt Securities....................................3
Repurchase Agreements.........................................4
High Yield/Junk Bonds ........................................4
Illiquid and Restricted Securities............................5
Loans of Portfolio Securities.................................5
Covered Calls and Hedging.....................................5
Short Sales Against-the-Box...................................9
INVESTMENT RESTRICTIONS.......................................9
MANAGEMENT....................................................10
Officers and Trustees.........................................10
Investment Adviser............................................12
Administrative Services.......................................13
Distribution of Fund Shares...................................14
Service Organizations.........................................15
Portfolio Accounting..........................................16
Fees and Expenses.............................................16
PORTFOLIO TRANSACTIONS........................................17
Investment Decisions..........................................17
Brokerage and Research Services...............................17
ADDITIONAL PURCHASE AND
REDEMPTION INFORMATION...................................18
Determination of Net Asset Value Per Share....................18
Redemption In-Kind............................................19
TAXATION......................................................19
OTHER INFORMATION.............................................20
Organization..................................................20
Capitalization and Voting.....................................21
Principal Shareholders........................................22
Performance Information.......................................22
Custodian.....................................................23
Transfer Agent and Dividend Disbursing Agent..................23
Legal Counsel.................................................23
Independent Accountants.......................................23
Registration Statement........................................23
Financial Statements..........................................23
APPENDIX......................................................A-1
<PAGE>
INTRODUCTION
Schroder U.S. Smaller Companies Fund is a diversified, separately managed series
of Schroder Capital Funds (Delaware) (the "Trust"), an open-end management
investment company currently consisting of eight separate series, each of which
has a different investment objective and policies.
The Fund's investment objective is to seek capital appreciations by investing
primarily in equity securities of companies domiciled in the U.S. that have
market capitalizations, at the time of purchase of $1.5 billion or less. There
can be no assurance that the Fund's investment objective will be achieved.
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 as identified
in "Investment Objective" and "Investment Policies" in the Prospectus. The
following information supplements the discussion found in those sections by
providing additional information or elaborating upon the discussion with respect
to certain of those securities and techniques.
U.S. GOVERNMENT SECURITIES
The Fund may invest in obligations issued or guaranteed by the U.S. Government
(or its agencies, instrumentalities or government-sponsored enterprises) that
have remaining maturities not exceeding one year. Agencies, instrumentalities
and government-sponsored enterprises that issue or guarantee debt securities
have been established or sponsored by the U.S. Government and 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 United States
Treasury, the Government National Mortgage Association and other securities
guaranteed by the United States Treasury, 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 Fund may invest in obligations of U.S. banks (including certificates of
deposit and bankers' acceptances) whose total assets at the time of purchase in
exceed $1 billion. Such banks must be members of the Federal Deposit Insurance
Corporation.
A certificate of deposit is an interest-bearing negotiable certificate issued by
a bank against funds deposited in the bank. A bankers' acceptance is a
short-term draft drawn on a commercial bank by a borrower, usually in connection
with an international commercial transaction. Although the borrower is liable
for payment of the draft, the bank unconditionally guarantees to pay the draft
at its face value on the maturity date.
SHORT-TERM DEBT SECURITIES
The Fund may invest in commercial paper -- short-term unsecured promissory notes
issued in bearer form by bank holding companies, corporations and finance
companies. The commercial paper purchased by the Fund for temporary defensive
purposes consists of direct obligations of domestic issuers that at the time of
investment are rated "P-1" by Moody's Investors Service ("Moody's") or "A-1" by
Standard and Poor's ("S&P"), or securities which, 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 rating assigned by S&P.
<PAGE>
REPURCHASE AGREEMENTS
The Fund may invest in securities subject to repurchase agreements that mature
in seven days or less with U.S. banks or broker- dealers. In a typical
repurchase agreement the seller of a security commits itself at the time of the
sale to repurchase that security from the buyer at a mutually agreed-upon time
and price. The repurchase price exceeds the sale price, reflecting an
agreed-upon interest rate effective for the period the buyer owns the security
subject to repurchase. The agreed-upon rate is unrelated to the interest rate on
that security. SCMI will monitor the value of the underlying security at the
time the transaction is entered into and at all times during the term of the
repurchase agreement to insure that the value of the security always equals or
exceeds the repurchase price. If a seller defaults under a repurchase agreement,
the Fund may have difficulty exercising its rights to the underlying securities
and may incur costs and experience time delays in connection with the
disposition of such securities. To evaluate potential risks, SCMI reviews the
credit-worthiness of banks and dealers with which the Fund enters into
repurchase agreements.
HIGH YIELD/JUNK BONDS
The Fund may invest up to 5% of its assets in bonds rated below "Baa" by Moody's
or "BBB" by S&P (commonly known as "high yield/high risk securities" or "junk
bonds"). Securities rated lower than "Baa" by Moody's or "BBB" by S&P are
classified as non-investment grade securities and are considered speculative.
Junk bonds may be issued as a consequence of corporate restructurings (such as
leveraged buyouts, mergers, acquisitions, debt recapitalizations, or similar
events) or by smaller or highly leveraged companies. Although the growth of the
high yield securities market in the 1980's paralleled a long economic expansion,
recently many issuers have been affected by adverse economic and market
conditions. It should be recognized that an economic downturn or increase in
interest rates is likely to have a negative effect on: (1) the high yield bond
market; (2) the value of high yield securities; and (3) the ability of the
securities' issuers to service their principal and interest payment obligations,
to meet their projected business goal, or to obtain additional financing. In
addition, the market for high yield securities, which is concentrated in
relatively few market makers, may not be as liquid as the market for investment
grade securities. Under adverse market or economic conditions, the market for
high yield securities could contract further, independent of any specific
adverse changes in the condition of a particular issuer. As a result, the Fund
could find it more difficult to sell these securities or may be able to sell the
securities only at prices lower than if such securities were widely traded.
Prices realized upon the sale of such lower rated or unrated securities, under
these circumstances, may be less than the prices used in calculating the Fund's
net asset value.
In periods of reduced market liquidity, junk bond prices may become more
volatile and may experience sudden and substantial price declines. Also, there
may be significant disparities in the prices quoted for junk bonds by various
dealers. Under such conditions, a Fund may have to use subjective rather than
objective criteria to value its junk bond investments accurately and rely more
heavily on the judgment of the Fund's investment adviser.
Prices for junk bonds also may be affected by legislative and regulatory
developments. For example, new federal laws require the divestiture by federally
insured savings and loans associations of their investments in high yield bonds.
Also, from time to time, Congress has considered legislation to restrict or
eliminate the corporate tax deduction for interest payments or to regulate
corporate restructurings such as takeovers, mergers or leveraged buyouts. These
laws could adversely affect the Fund's net asset value and investment practices,
the market for high yield securities, the financial condition of issuers of
these securities, and the value of outstanding high yield securities.
Lower rated or unrated debt obligations also present risks based on payment
expectations. If an issuer calls the obligation for redemption, the Fund may
have to replace the security with a lower yielding security, resulting in a
decreased return for investors. If the Fund experiences unexpected net
redemptions, it may be forced to sell its higher rated securities, resulting in
a decline in the overall credit quality of the Fund's portfolio and increasing
the exposure of the Fund to the risks of high yield securities.
<PAGE>
ILLIQUID AND RESTRICTED SECURITIES
"Illiquid and Restricted Securities" under "Investment Policies" in the
Prospectus sets forth the circumstances in which the Fund may invest in
"restricted securities". In connection with the Fund's original purchase of
restricted securities it may negotiate rights with the issuer to have such
securities registered for sale at a later time. Further, the registration
expenses of illiquid restricted securities may also be negotiated by the Fund
with the issuer at the time such securities are purchased by the Fund. When
registration is required, however, a considerable period may elapse between the
decision to sell the securities and the time the Fund would be permitted to sell
such securities. A similar delay might be experienced in attempting to sell such
securities pursuant to an exemption from registration. Thus, the Fund may not be
able to obtain as favorable a price as that prevailing at the time of the
decision to sell.
LOANS OF PORTFOLIO SECURITIES
The Fund 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: (1) on each business day, at least equal the
market value of the loaned securities; and (2) must consist of cash, bank
letters of credit, U.S. Government securities, or other cash equivalents in
which the Fund is permitted to invest. To be acceptable as collateral, letters
of credit must obligate a bank to pay amounts demanded by the Fund if the demand
meets the terms of the letter. Such terms and the issuing bank must be
satisfactory to the Fund. When lending portfolio securities, the Fund 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 plus the interest on the
collateral securities.(less any finders' or administrative fees the Fund pays in
arranging the loan). The Fund 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
Trust's Board of Trustees (the "Trust Board"). The Fund will not lend its
portfolio securities to any officer, director, employee or affiliate of the Fund
or SCMI. The terms of the Fund's loans must meet certain tests under the
Internal Revenue Code and permit the Fund to reacquire loaned securities on five
business days' notice or in time to vote on any important matter.
COVERED CALLS AND HEDGING
As described in the Prospectus, the Fund may write covered calls on up to 100%
of its total assets or employ one or more types of Hedging Instruments. When
hedging to attempt to protect against declines in the market value of the Fund's
portfolio, to permit the Fund to retain unrealized gain in the value of
portfolio securities which have appreciated, or to facilitate selling securities
for investment reasons, the Fund may: (1) sell Stock Index Futures; (2) purchase
puts on such Futures or securities; or (3) write covered calls on securities or
on Stock Index Futures. When hedging to establish a position in the equities
markets as a temporary substitute for purchasing particular equity securities
(which the Fund will normally purchase and then terminate the hedging position),
the Fund may: (1) purchase Stock Index Futures; or (2) purchase calls on such
Futures or on securities. The Fund's strategy of hedging with Stock Index
Futures and options on such Futures will be incidental to the Fund's activities
in the underlying cash market.
WRITING COVERED CALL OPTIONS. The Fund may write (I.E., sell) call options
("calls") if: (1) the calls are listed on a domestic securities or commodities
exchange; and (2) the calls are "covered" (I.E., the Fund 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 Fund is exercised, the Fund 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 Fund 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 Fund if the price of the underlying
security should decline during the call period, which may be offset to some
extent by the premium.
<PAGE>
To terminate its obligation on a call it has written, the Fund may 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 Fund retains the underlying security
and the premium received. Any such profits are considered short-term capital
gain for federal income tax purposes, and when distributed by the Fund are
taxable as ordinary income. If the Fund 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 Fund 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 Fund 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 Fund to deliver
a futures contract; it would simply put the Fund in a short futures position,
which is permitted by the Fund's hedging policies.
PURCHASING CALLS AND PUTS. The Fund may purchase put options ("puts") that
relate to: (1) securities it holds; (2) Stock Index Futures (whether or not it
holds such Stock Index Futures in its portfolio); or (3) broadly-based stock
indices. The Fund may not sell puts other than those it previously purchased,
nor purchase puts on securities it does not hold. The fund may purchase calls:
(1) as to securities, broadly-based stock indices or Stock Index Futures; or (2)
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 Fund would not
exceed 5% of the Fund's total assets.
When the Fund 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 Fund 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 Fund will lose its premium
payments and the right to purchase the underlying investment. When the Fund
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 Fund 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 Fund owns
enables the Fund to attempt to protect itself during the put period against a
decline below the exercise price in the value of the underlying investment 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 exceeds 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 Fund will
lose its premium payment and the right to sell the underlying investment; the
put may, however, be sold prior to expiration (whether or not at a profit).
Purchasing a put on either a stock index or on a Stock Index Future not held by
the Fund permits the Fund 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 Fund 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 Fund purchases a put on a stock
index, or on a Stock Index Future not held by it, the put protects the Fund 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 Fund's delivery of the underlying investment.
<PAGE>
STOCK INDEX FUTURES. The Fund 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 Fund 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 Fund's Custodian in an account registered in the futures broker's name;
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 Fund 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 Fund, 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 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 Fund 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 Fund, a seller of a corresponding call on
the same index will pay the Fund 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") which determines the
total dollar value for each point of difference. When the Fund 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 Fund's
exercise of its put, to deliver to the Fund 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 Fund's
Custodian, or a securities depository acting for the Custodian, will act as the
Fund's escrow agent, through the facilities of the Options Clearing Corporation
("OCC"), as to the securities on which the Fund 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 Fund's entering into a closing transaction. An option position may be
closed out only on a market that provides secondary trading for options of the
same series, and there is no assurance that a liquid secondary market will exist
for any particular option.
The Fund's option activities may affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Fund may cause the
Fund to sell related portfolio securities, thus increasing its turnover rate in
a manner beyond the Fund's control. The exercise by the Fund 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 Fund's
control, holding a put might cause the Fund to sell the underlying investment
for reasons that would not exist in the absence of the put. The Fund 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 which 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 Fund's net asset value being more sensitive to changes in the
value of the underlying investment.
<PAGE>
REGULATORY ASPECTS OF HEDGING INSTRUMENTS AND COVERED CALLS. The Fund 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 Fund 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 Fund 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 Fund 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 Fund 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 which the Fund 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 (the "1940 Act"), when the Fund purchases a Stock Index Future, the Fund
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.
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 Fund'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 which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures markets depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures markets could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit requirements in the futures
markets are less onerous than margin requirements in the securities markets.
Therefore, increased participation by speculators in the futures markets may
cause temporary price distortions.
The risk of imperfect correlation increases as the composition of the Fund's
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 Fund 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 Fund has
used Hedging Instruments in a short hedge, the market may advance and the value
of equity securities held in the Fund's portfolio may decline. If this occurred,
the Fund 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.
<PAGE>
If the Fund 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 Fund then concludes not to invest in equity securities at that
time because of concerns as to possible further market decline or for other
reasons, the Fund will realize a loss on the Hedging Instruments that is not
offset by a reduction in the price of the equity securities purchased.
INVESTMENT RESTRICTIONS
The Fund's significant investment restrictions are described in the Prospectus.
The following investment restrictions, except where stated to be non-fundamental
policies, are also fundamental policies of the Fund and, 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
shares. Under the 1940 Act, such a "majority" vote is defined as the vote of the
holders of the lesser of: (1) 67% or more of the shares present or represented
by proxy at a meeting of shareholders, if the holders of more than 50% of the
outstanding shares are present; or (2) more than 50% of the outstanding shares.
Under these additional restrictions, the Fund cannot:
1. Underwrite securities of other companies (except insofar as the Fund
might be deemed to be an underwriter in the resale of any securities
held in its portfolio);
2. Invest in commodities or commodity contracts (other than Hedging
Instruments, which it may use as permitted by any of its other
fundamental policies, whether or not any such Hedging Instrument is
considered to be a commodity or a commodity contract);
3. Purchase securities on margin; however, the Fund may make margin
deposits in connection with any Hedging Instruments, which it may use
as permitted by any of its other fundamental policies;
4. Purchase or write puts or calls except as permitted by any of its other
fundamental policies;
5. Lend money except in connection with the acquisition of that portion of
publicly-distributed debt securities which the Fund's investment
policies and restrictions permit it to purchase (see "Investment
Objective" and "Investment Policies" in the Prospectus); the Portfolio
may also make loans of portfolio securities (see "Loans of Portfolio
Securities") and enter into repurchase agreements (see "Repurchase
Agreements");
6. Pledge, mortgage or hypothecate its assets to an extent greater than
10% of the value of the total assets of the Fund; however, this does
not prohibit the escrow arrangements contemplated by the put and call
activities of the Fund or other collateral or margin arrangements in
connection with any of the Hedging Instruments, which it may use as
permitted by any of its other fundamental policies;
7. Invest in companies for the purpose of acquiring control or management
thereof;
8. Invest in interests in oil, gas or other mineral exploration or
development programs (but may purchase readily marketable securities of
companies which operate, invest in, or sponsor such programs); or
9. Invest in real estate or in interests in real estate, but may purchase
readily marketable securities of companies holding real estate or
interests therein.
<PAGE>
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. Each of these individuals currently serves
in the same capacity for Schroder Core.
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.
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.
<PAGE>
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; Managing Director, 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; Chief Executive Officer, since
April 1, 1997, of SCMI and 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.
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 receive no salary,
fees or compensation from the Fund. Independent Trustees of the Trust receive an
annual fee of $1,000 and a fee of $250 for each meeting of the Trust Board
attended by them except in the case of Mr. Schwab, who receives an annual fee of
$1,500 and a fee of $500 for each meeting attended. The Fund has no bonus,
profit sharing, pension or retirement plans.
<PAGE>
The following table provides the fees paid to each Trustee of the Trust for the
twelve months ended May 31, 1997.
<TABLE>
<S> <C> <C> <C> <C>
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
- ------------------------------- -------------------- --------------------- -------------------- ---------------------
Mr. Guernsey $2,250 $0 $0 $2,250
Mr. Hansmann 750 0 0 750
Mr. Howell 2,250 0 0 2,250
Mr. Michalis 2,000 0 0 2,000
Mr. Schwab 4,000 0 0 4,000
Mr. Smith 0 0 0 0
</TABLE>
As of August 31, 1997, the officers and Trustees of the Trust owned, in the
aggregate, less than 1% of the Fund's outstanding shares.
While 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
U.S. civil judgments against them. Civil remedies and criminal penalties under
U.S. federal securities law may be unenforceable in the United Kingdom.
Extradition treaties now in effect between the U.S. and the United Kingdom might
not subject such persons to effective enforcement of the criminal penalties of
such acts.
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 company subsidiary of Schroders plc. Schroders plc is
the holding company parent of a large worldwide group of banks and financial
service companies (referred to as the "Schroder Group"), with associated
companies and branch and representative offices in eighteen countries. The
Schroder Group specializes in providing investment management services, with
funds under management currently in excess of $175 billion as of June 30, 1997.
Under the Investment Advisory Agreement, SCMI is responsible for managing the
investment and reinvestment of the Portfolio's assets and continuously reviews,
supervises and administers its investments. In this regard, it is the
responsibility of SCMI to make decisions relating to the Portfolio's investments
and to place purchase and sale orders regarding such investments with brokers or
dealers selected . SCMI also furnishes to Schroder Core 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 the 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
inside 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: (1) by the holders of a majority of the outstanding voting
securities of the Portfolio or by Schroder Core Board; and (2) 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 Schroder Core Board or the
interstholders of the Portfolio shareholders of the Fund 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.
<PAGE>
For providing advisory services to the Portfolio, SCMI is entitled to a fee of
0.50% of its average daily net assets for the first $100 million of the
Portfolio's net assets, 0.40% of the next $150 million of average daily assets,
and 0.35% of the Portfolio's average daily net assets in excess of $250 million.
The following table shows the dollar amount of fees payable under the Investment
Advisory Agreement, the amount of fee that was waived by SCMI, if any, and the
actual fee received by SCMI. Prior to the Fund's restructuring on August 15,
1996, SCMI collected its advisory fees directly from the Fund.
Advisory Fee Advisory Fee Advisory Fee
Payable Waived Retained
------------- ------------ -------------
Period Ended May 31, 1997 $211,277 $35,396 $175,881
Year Ended October 31, 1996 $76,373 $16,090 $60,283
Year Ended October 31, 1995 $71,188 $0 $71,188
Year Ended October 31, 1994 $63,210 $0 $63,210
The Fund currently invests all of its assets 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. Accordingly, the Trust retains SCMI as investment adviser to manage the
Fund's assets in the event the Fund so withdraws its investment. As long as the
Fund remains completely invested in the Portfolio (or any other investment
company), SCMI is not entitled to receive an investment advisory fee with
respect to the Fund. The investment advisory agreement between the Trust and
SCMI with respect to the Fund is the same in all material respects as the
Portfolio's Investment Advisory Agreement (except as to the parties, the fee and
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, for
providing investment advisory services under the investment advisory agreement
for the Fund, SCMI would be entitled to receive an advisory fee of 0.60% of the
Fund's average daily net assets.
ADMINISTRATIVE SERVICES
On behalf of the Fund, the Trust has entered into an Administration Agreement
with Schroder Advisors, under which Schroder Advisors provides management and
administrative services necessary for the operation of the Fund, including: (1)
preparation of shareholder reports and communications; (2) regulatory
compliance, such as reports to and filings with the Securities and Exchange
Commission and state securities commissions; and (3) general supervision of the
operation of the Fund, including coordination of the services performed by the
Fund's investment adviser, 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.
During any period in which the Fund invests substantially all of its assets in
the Portfolio, for providing administrative services Schroder Advisors is
entitled to receive from the Fund a fee, payable monthly, at the annual rate of
0.25% of the Fund's average daily net assets. During any period in which the
Fund invests substantially all of its assets directly in securities, for
providing administrative services SCMI would be entitled to receive a monthly
fee from the Fund at the annual rate of 0.15% 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.
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. During any period in which the Fund invests
substantially all of its assets in the Portfolio, for providing
subadministrative services Forum is entitled to a fee at the annual rate of
0.05% of the Fund's average daily net assets. During any period in which the
Fund invests substantially all of its assets directly in securities, for
providing administrative services Forum would be entitled to receive a monthly
fee from the Fund at the annual rate of 0.10% of the Fund's 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.
<PAGE>
Under administration and subadministration agreements with Schroder Core,
Schroder Advisors and Forum provide similar services to the Portfolio for which
Forum is entitled to separate compensation at the annual rates of 0.10% of the
Portfolio's average daily net assets. Schroder Advisors is not entitled to
separate compensation for providing such services to the Portfolio. Accordingly,
the fees paid by the Fund and/or Portfolio to SCMI and Schroder Advisors may
equal up to 0.85% 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 and the fees payable thereunder.
The following table shows the dollar amount of fees payable under the
Administration Agreement between the Fund and Schroder Advisors, the amount of
fee waived by the Adviser, if any, and the actual fee received by Schroder
Advisors. This data reflects fees payable under prior agreements as discussed
below.
<TABLE>
<S> <C> <C> <C>
Administration Fee Administration Fee Administration Fee
Payable Waived Retained
-------------------- ------------------ -------------------
Period Ended May 31, 1997 $26,410 $0 $26,410
Year Ended October 31, 1996 $41,063 $26,850 $14,213
Year Ended October 31, 1995 $35,594 $0 $35,594
Year Ended October 31, 1994 $31,690 $0 $31,690
</TABLE>
The Trust formerly had entered into an Administrative Services Contract with
Schroder Advisors that had substantially similar terms and provisions in all
material respects as those of the Administration Agreement except as to the fees
payable and the circumstances under which the fees were paid. Under this
contract Schroder Advisors was entitled to a fee, payable monthly, at the annual
rate of 0.25% of the first $100 million of Fund's average daily net assets,
0.20% of the next $150 million, and 0.175% on assets in excess of $250 million
to the extent the Fund invested directly in securities. During the periods the
contract was in effect, the Fund had invested substantially all of its assets in
the Portfolio, and, accordingly, Schroder Advisors was entitled to a fee of
0.325% and was obligated to pay a fee to Forum Financial Services, Inc. ("FFSI")
at the rate of 0.075% for services provided under a former Sub-Administration
Agreement.
Under the former Sub-Administration Agreement among the Trust, SCMI, Schroder
Advisors, and FFSI, which had substantially similar terms and provisions in all
material respects to the current Subadministration Agreement for the Fund except
as to the circumstances under which the fees were paid, payment for FFSI's
services was made by Schroder Advisors and was not a separate expense of the
Fund.
Under former administration and subadministration agreements with Schroder Core,
Schroder Advisors and FFSI provided similar services to the Portfolio for which
Schroder Advisors was entitled to compensation at the annual rate of 0.00% of
the average daily net assets of the Portfolio and obligated to pay a fee to FFSI
of 0.075% for sub-administration services. The Portfolio's administration and
subadministration agreements were the same in all material respects as the
Fund's respective agreements (except as to the parties, the circumstances under
which fees were paid, the fees payable thereunder, and the jurisdiction whose
laws govern the agreement).
DISTRIBUTION OF FUND SHARES
Schroder Advisors serves as Distributor of the Fund shares under 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.
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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 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: (1)
advertising expenses including advertising by radio, television, newspapers,
magazines, brochures, sales literature or direct mail; (2) costs of printing
prospectuses and other materials to be given or sent to prospective investors;
(3) 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 (4) 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. The maximum annual amount
currently payable under the Plan is 0.25%, but 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 , 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 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. During the periods ended
October 31, 1994, 1995, 1996, and the period ended May 31, 1997, the Fund
neither accrued nor paid any dollars under the Plan.
SERVICE ORGANIZATIONS
The Fund may also contract with banks, trust companies, broker-dealers or other
financial organizations ("Service Organizations") to provide certain
administrative services for Advisor Shares of the Fund. The Fund may pay fees
(which may 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 shares owned by shareholders with whom the Service Organization had a
servicing relationship. Services provided by Service Organizations may include:
(1) providing personnel and facilities necessary to establish and maintain
certain shareholder accounts and records; (2) assisting in processing purchase
and redemption transactions; (3) arranging for the wiring of funds; transmitting
and receiving funds in connection with client orders to purchase or redeem
shares; (4) verifying and guaranteeing client signatures in connection with
redemption orders, transfers among and changes in client-designated accounts;
(5) providing periodic statements of a client's account balances and, to the
<PAGE>
extent practicable, integrating such information with other client transactions;
(6) furnishing periodic and annual statements and confirmations of all purchases
and redemptions of shares in a client's account; (7) transmitting proxy
statements, annual reports, and updating prospectuses and other communications
from the Fund to clients; and (8) such other services as the Fund or a client
reasonably may request, to the extent permitted by applicable statute, rule or
regulation. Neither SCMI nor Schroder Advisors will be a Service Organization or
receive fees for servicing. The Fund has no intention of making any such
payments to Service Organizations with respect to accounts of institutional
investors and, in any event, will make no such payments until the Trust Board
specifically so authorizes.
Some Service Organizations could impose additional or different conditions on
their clients, such as requiring them clients 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 agrees 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
FFC, 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 FFC or by FFC upon 60 days' written notice
to the Trust.
Under its agreement, FFC prepares and maintains the books and records of the
Fund 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 Securities
and Exchange Commission. For its services to the Fund, FFC 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. FFC is entitled to an additional $24,000 per year
with respect to global and international funds. In addition, FFC is also is
entitled to 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.
FFC is required to use its best judgment and efforts in rendering fund
accounting services and is not be liable to the Trust for any action or inaction
in the absence of bad faith, willful misconduct or gross negligence. FFC is not
responsible or liable for any failure or delay in performance of its fund
accounting obligations arising out of or caused, directly or indirectly, by
circumstances beyond its reasonable control. The Trust has agreed to indemnify
and hold harmless FFC 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 FFC's actions taken or failures to act with respect
to a Fund or based, if applicable, upon information, instructions or requests
with respect to a Fund given or made to FFC by an officer of the Trust duly
authorized. This indemnification does not apply to FFC's actions taken or
failures to act in cases of FFC's own bad faith, willful misconduct or gross
negligence.
<PAGE>
FFC assumed responsibility for fund accounting on August 15, 1994. Previously,
these services were performed by Schroders Incorporated, the parent company of
SCMI. For the fiscal years ended October 31, 1994, 1995, 1996, and the period
ended May 31, 1997, the Fund and the Portfolio paid fund accounting fees of
$28,797, $36,000, $37,972 and $21,000, respectively.
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 a pro rata portion of 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. Advisor Shares or Investor Shares also
bear any class-specific expenses, such as fees payable to service organizations.
Trust expenses directly attributed to the Fund are charged to the Fund; other
expenses are allocated proportionately among all the series of the Trust in
relation to the net assets of each series.
PORTFOLIO TRANSACTIONS
INVESTMENT DECISIONS
Investment decisions for the Portfolio and for the other investment advisory
clients of SCMI are made with a view to achieving their respective investment
objectives. Investment decisions are the product of many factors in addition to
basic suitability for the particular client involved, and a particular security
may be bought or sold for other clients at the same time. Likewise, a particular
security may be bought for one or more clients when one or more other 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. The
Portfolio's portfolio transaction costs are borne pro rata by its investors,
including the Fund.
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 the transaction, for example. 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. For fiscal years ended October 31, 1994, 1995, 1996
and the period ended May 31, 1997, the Fund paid total brokerage commissions of
$29,224, $34,391, $37,589 and $145,748, respectively.
The Investment Advisory Agreement authorizes and directs SCMI to place orders
for the purchase and sale of the Fund's 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 through a substantial number of brokers and dealers. In so
doing, SCMI uses its best efforts to obtain for the Portfolio the most favorable
price and execution available. The Portfolio may, however, pay higher than the
lowest available commission rates when SCMI believes it is reasonable to do so
in light of the value of the brokerage and research services provided by the
broker effecting the transaction. In seeking the most favorable price and
execution, SCMI
<PAGE>
considers all factors it may deem relevant (including price, transaction size,
the nature of the market for the security, the commission amount, the timing of
the transaction (taking into account market prices and trends), the reputation,
experience and financial stability of the broker-dealers involved, and the
quality of service rendered by the broker-dealers in other transactions).
It has for many years been a common practice in the investment advisory business
for advisers of investment companies and other institutional investors to
receive research services from broker-dealers 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
Portfolio), although not all of these services are necessarily useful and of
value in managing the Portfolio. The investment advisory fee paid by the
Portfolio is not reduced because SCMI and its affiliates receive such services.
As permitted by Section 28(e) of the 1934 Act, SCMI may cause the Portfolio to
pay a broker-dealer that provides SCMI with "brokerage and research services"
(as defined in the 1934 Act) an amount of disclosed commission for effecting a
securities transaction for the Portfolio in excess of the commission which
another broker-dealer would have charged for effecting that transaction. In
addition, SCMI may allocate brokerage transactions to broker-dealers who have
entered into arrangements under which the broker-dealer allocates a portion of
the commissions paid by the Portfolio toward payment of Portfolio expenses, such
as custodian fees.
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: (1) Schroder & Co. Inc. ("Schroder & Co.") an affiliate of SCMI,
to effect securities transactions of the Portfolio on the New York Stock
Exchange only; and (2) 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 & Co. 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 a securities
exchange paid by a registered investment company to a broker that is an
affiliated person of such investment company (or an affiliated person of another
person so affiliated) not exceed the usual and customary broker's commissions
for such transactions. It is the Portfolio's policy that commissions paid to
Schroder & Co. or Schroder Securities will in SCMI's opinion be: (1) at least as
favorable as commissions contemporaneously charged by Schroder & Co. or Schroder
Securities, as the case may be, on comparable transactions for their most
favored unaffiliated customers; and (2) at least as favorable as those which
would be charged on comparable transactions by other qualified brokers having
comparable execution capability. The Schroder Core Board, including a majority
of the non-interested Trustees, has adopted procedures pursuant to Rule 17e-1
promulgated by the Securities and Exchange Commission under Section 17(e) to
ensure that commissions paid to Schroder & Co. or Schroder Securities by the
Portfolio satisfy the foregoing standards. Such procedures will be reviewed at
least annually by the Schroder Core Board, including a majority of the
non-interested Trustees. The Schroder Core Board will also review all
transactions at least quarterly for compliance with such procedures.
It is further a policy of the Portfolio that all such transactions effected for
the Portfolio by Schroder & Co. on the New York Stock Exchange be in accordance
with Rule 11a2-2(T) promulgated under the 1934 Act, which requires in substance
that a member of such exchange not associated with Schroder & Co. actually
execute the transaction on the exchange floor or through the exchange
facilities. Thus, while Schroder & Co. will bear responsibility for determining
important elements of execution such as timing and order size, another firm will
actually execute the transaction.
Schroder & Co. 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 11a2-2(T), Schroder Core has entered
into an agreement with Schroder & Co. 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.
<PAGE>
The Fund has no understanding or arrangement to direct any specific portion of
its brokerage to Schroder & Co. and will not direct brokerage to Schroder & Co.
in recognition of research services. The Fund paid no commissions to Schroder &
Co. during the fiscal years ended October 31, 1994, 1995, 1996 and the period
ended May 31, 1997.
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. 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, Martin Luther King, Jr.'s Birthday, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The Trust Board and Schroder Core Board have established procedures for the
valuation of securities: (1) equity securities traded on a securities exchange
or on the NASDAQ National Market System for which last sale information is
regularly reported are valued at the last reported sales prices on their primary
exchange or the NASDAQ National Market System that day (or, in the absence of
sales that day, at values based on the last sale prices on the preceding trading
day or closing mid-market prices); (2) NASDAQ and other unlisted equity
securities for which last sale prices are not regularly reported but for which
over-the-counter market quotations are readily available are valued at the most
recently reported mid-market prices; (3) securities (including restricted
securities) not having readily-available market quotations are valued at fair
value under the respective Board's procedures; (4) 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 (5) 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 (1) 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.
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 will be
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 Fund's portfolio securities
could result in a less diversified portfolio of investments for the Fund and
could affect adversely the liquidity of the Fund's portfolio.
TAXATION
Under the Code, the Fund and each other series established from time to time by
the Trust Board is treated as a separate taxpayer for federal income tax
purposes with the result that: (1) each such series must meet separately the
income and distribution requirements for qualification as a regulated investment
company; and (2) the amounts of investment income and capital gain earned are
determined on a series-by-series (rather than on Trust-wide) basis.
<PAGE>
The Fund qualified for its last fiscal year as a regulated investment company
under Subchapter M of the Code and intends to so qualify each year so long as
such qualification is in the best interests of its shareholders. To do so, the
Fund intends to distribute to shareholders at least 90% of its "investment
company taxable income" as defined in the Code (which includes, dividends,
interest and the excess of any net short-term capital gain over net long-term
capital loss), and to meet certain diversification of assets, source of income,
and other requirements of the Code. The Fund will therefore not be subject to
federal income tax on its investment company taxable income and "net capital
gain" (the excess of net long-term capital gain over net short-term capital
loss) 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 this, the Fund must distribute for each calendar year an amount equal to
the sum of: (1) at least 98% of its ordinary income (excluding any capital gain
or loss) for the calendar year; (2) at least 98% of the excess of its capital
gain over capital loss realized during the one-year period ending October 31 of
such year; and (3) all such ordinary income and capital gain 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 the calendar year in which the distributions are received.
Distributions of investment company taxable income (including realized net
short-term capital gain) are taxable to shareholders as ordinary income.
Generally, dividends of investment income (but not capital gain) from the Fund
will qualify for the federal dividends-received deduction for corporate
shareholders to the extent such dividends do not exceed the aggregate amount of
dividends received by the Fund from domestic corporations, provided the Fund
shares are held by said shareholders for more than 45 days. If securities held
by the Fund are considered to be "debt-financed" (generally, acquired with
borrowed funds), are held by the Fund for less than 46 days (91 days in the case
of certain preferred stock), or are subject to certain forms of hedges or short
sales, the portion of the dividends paid by the Fund that corresponds to the
dividends paid with respect to such securities will not be eligible for the
corporate dividends-received deduction.
Distributions of net long-term capital gain are taxable to shareholders as
long-term capital gain, regardless of the length of time 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 distributions have been paid will, to the extent of such
capital-gain distributions, 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 distribution 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 to shareholders are taxable whether reinvested in additional
shares or received in cash. Shareholders that reinvest distributions will have
for federal income tax purposes a cost basis 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. If a
distribution reduces 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
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, which will be returned to the investor in the form of a taxable
distribution.
Upon redemption or sale of shares, a shareholder will realize a taxable gain or
loss, which 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.
<PAGE>
The Fund may write, purchase or sell options or futures contracts. Unless the
Fund is eligible to, and does, make a special election, such options and futures
contracts that are "Section 1256 contracts" will be "marked to market" for
federal income tax purposes at the end of each taxable year (I.E., each option
or futures contract will be treated as sold for its fair market value on the
last day of the taxable year). In general, unless such special election is made,
gain or loss from transactions in options and futures contracts will be 60%
long-term and 40% short-term capital gain or loss.
Code Section 1092, which applies to certain "straddles," may affect the taxation
of the Fund's transactions in options and futures contracts. Under Section 1092,
the Fund may be required to postpone recognition for tax purposes of losses
incurred in certain closing transactions in options and futures.
The Trust is required to report to the Internal Revenue Service ("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 the withholding of federal income tax at a rate of
31% ("backup withholding") in the case of non-exempt shareholders if: (1) the
shareholder fails to furnish the Trust with and to certify the shareholder's
correct taxpayer identification number or social security number; (2) the IRS
notifies the Trust that the shareholder has failed to report properly certain
interest and dividend income to the IRS and to respond to notices to that
effect; or (3) when required to do so, the shareholder fails to certify that it
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 advisors 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 its board of
directors to establish a series of separately managed investment portfolios,
each having different investment objectives and policies. At the time of the
recapitalization, the Trust's name was changed from "The Cheapside Dollar Fund
Limited" to "Schroder Capital Funds, Inc." On January 9, 1996, the Trust was
reorganized as a Delaware business trust. At that time, the Trust's name was
changed to its present name. The Trust is registered as an open-end management
investment company under the 1940 Act.
Delaware law provides that shareholders shall be entitled to the same
limitations of personal liability extended to stockholders of private
corporations for profit. The securities regulators of some states, however, have
indicated that they and the courts in their state may decline to apply Delaware
law on this point. To guard against this risk, the Trust Instrument contains an
express disclaimer of shareholder liability for the debts, liabilities,
obligations, and expenses of the Trust. The Trust Instrument provides for
indemnification out of each series' property of any shareholder or former
shareholder held personally liable for the obligations of the series. The Trust
Instrument also
<PAGE>
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.
CAPITALIZATION AND VOTING
The Trust has authorized 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 may be borne by the
fund or Trust in accordance with the Trust Instrument. The Trust currently
consists of eight separate series, each of which has a separate investment
objective and policies. Some of the series offer two classes of shares, Investor
Shares and Advisor Shares.
When issued for the consideration described in the prospectuses or under the
applicable dividend reinvestment plan, 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.
Each shareholder of record 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 portfolio 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 affected.
The Trust does 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 are not submitted to shareholders unless
a meeting of shareholders is held for some other reason, such as those indicated
below. Each of the Trustees serves until death, resignation or removal.
Vacancies are 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. Similarly, the selection of independent accountants and renewal of
investment advisory agreements for future years is 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 independent accountants
if the employment of the Trust's independent 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: (1)
shares of the Trust having a total net asset value of at least $25,000; or (2)
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
Performance quotations of the average annual total return and cumulative total
return of each class of shares is provided in advertisements or reports to
shareholders or prospective investors.
<PAGE>
Quotations of average annual total return are expressed in terms of the average
annual compounded rate of return of a hypothetical investment in a class of the
Fund over periods of 1, 5 and 10 years (since commencement of operations),
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 = the ending redeemable value of
a hypothetical $1,000 payment made at the beginning of the period). All total
return figures reflect the deduction of Fund and any class expenses (net of
certain reimbursed expenses) on an annual basis and will assume that all
dividends and distributions are reinvested in shares of the same class when
paid.
As of May 31, 1997, the Fund's performance was as follows:
INVESTOR SHARES ADVISOR SHARES
--------------- --------------
Month Ended 0.25% 0.34%
Year to Date (1.49%) 1.66%
12 Months Ended 4-30-97 5.20% N/A
1 Year Total Return 10.93% N/A
3 Year Total Return 27.40% N/A
5 Year Total Return N/A N/A
Since Inception 24.91% 27.23%
Quotations of cumulative total return will reflect only the performance of a
hypothetical investment in a class of the Fund during the particular time period
shown. Cumulative total returns vary based on changes in market conditions and
the level of the Fund's and any applicable class expenses, and no reported
performance figure should be considered an indication of performance which may
be expected in the future.
In connection with communicating cumulative total return to current or
prospective investors, these figures may also be compared with the performance
of other mutual funds tracked by mutual fund rating services or to 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 a class of the Fund through a
customer account maintained at a Service Organization may be charged one or more
of the following types of fees as agreed upon by the Service Organization and
the investor, with respect to the customer services provided by the Service
Organization: (1) account fees (a fixed amount per month or per year); (2)
transaction fees (a fixed amount per transaction processed); (3) compensating
balance requirements (a minimum dollar amount a customer must maintain in order
to obtain the services offered); or (4) 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 have the effect of reducing the average annual
or cumulative total returns for those investors.
<PAGE>
PRINCIPAL SHAREHOLDERS
As of August 31, 1997, the following persons owned of record or beneficially 5%
or more of the Fund's shares:
<TABLE>
<S> <C> <C>
Percent Of Class
Investor Sharesshareholder Share Balance OF Fund
- -------------------------- ------------- -----------------
Schroder Nominees Limited 530,191 24.61%
120 Cheapside
London EC2V 6DS England
GOOSS & CO 215,072 11.65%
c/o Chase Manhattan Bank
1211-6th Ave 35th Floor
New York, NY 10036
FTC & CO 212,477 9.86%
Attn: DATALYNC #022
PO Box 173736
Denver, CO 80217-3736
Fleet National Bank TTEE 145,885 6.77%
FBO Durotest for Higgens Assoc
PO Box 92800
Rochester, NY 14692
Grace Church Co 145,548 6.76%
75 Wall Street 17th Floor
New York, NY 10265
Advisor Sharesshareholder
- -------------------------
Donaldson Lufkin & Jenrette 20,121 68.68%
Securities Corporation
PO Box 2052
Jersey City, NY 10265
National Investor Services Corp 9175 31.32%
For Exclusive Benefit of Our Customers
55 Water Street
New York, NY 10041
</TABLE>
<PAGE>
CUSTODIAN
The Chase Manhattan Bank, through its Global Custody Division located in London,
England, acts as custodian of the Portfolio's assets but plays no role in making
decisions as to the purchase or sale of portfolio securities for the Portfolio.
Pursuant to rules adopted under the 1940 Act, the 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 Core Trust 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 perform capably custodial
services for the Fund; 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 assets.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
FFC, Portland, Maine, 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.
INDEPENDENT ACCOUNTANTS
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. Securities and Exchange Commission filings. Their 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 Securities and Exchange Commission
under the Securities Act of 1933 with respect to the securities offered hereby,
certain portions of which have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. The registration
statement, including the exhibits filed therewith, may be examined at the office
of the Securities and Exchange Commission in Washington, D.C.
Statements contained herein and in the Prospectus as to the contents of any
contract or other documents referred to are not necessarily complete, and, in
each instance, reference is made to the copy of such contract or other documents
filed as an exhibit to the registration statement, each such statement being
qualified in all respects by such reference.
FINANCIAL STATEMENTS
The audited Statement of Assets and Liabilities, Statement of Operations,
Statements of Changes in Net Assets, Statement of Investments, Notes to
Financial Statements and Financial Highlights of the Fund for the fiscal year
ended May 31, 1997 and the Report of Independent Accountants thereon (included
in the Annual Report to shareholders), which are delivered along with this SAI,
are incorporated herein by reference.
<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's 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's from other sources it considers reliable. The ratings are based, in
varying degrees, on the following considerations: (1) 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; (2) nature of and provisions of the obligation; and (3) 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.
"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.
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS
Included in the Prospectus:
Financial Highlights for Schroder U.S. Smaller Companies Fund
Included in the Statement of Additional Information:
Audited financial statements for the fiscal year ended May 31, 1997
including Statement of Assets and Liabilities, Statement of Operations,
Statement of Changes in Net Assets, Notes to Financial Statements,
Financial Highlights, Portfolio of Investments and Report of
Independent Accountants for Schroder U.S. Smaller Companies Fund, filed
with the Securities and Exchange Commission on August 6, 1997 for such
Fund, accession number 0000889812-97-001630, pursuant to Rule 30b2-1
under the Investment Company Act of 1940, as amended, and incorporated
herein by reference.
(B) EXHIBITS:
Exhibit
- -------
NOTE: * INDICATES THAT THE EXHIBIT IS INCORPORATED HEREIN BY REFERENCE. ALL
REFERENCES TO A POST-EFFECTIVE AMENDMENT ("PEA") OR PRE-EFFECTIVE AMENDMENT
("PREEA") ARE TO PEAS AND PREEAS TO REGISTRANT'S REGISTRATION STATEMENT ON FORM
N-1A, FILE NO. 2-34215.
(1)* Trust Instrument of Registrant (filed as Exhibit (1) to PEA No.
46 via EDGAR on January 10, 1996, accession number
0000912057-96-000285).
(2)* BYLAWS dated September 8, 1995 (filed as Exhibit (2) to
Registrant's PEA No. 61 via EDGAR on April 18, 1997, accession
number 0000912057-97-013527).
(3) Not Applicable
(4)* 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
<PAGE>
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) (a)* Investment Advisory Agreement between the Trust and
Schroder Capital Management International Inc. dated January
9, 1996, with respect to Schroder U.S. Equity Fund (filed as
Exhibit (5) to Registrant's PEA No. 61 via EDGAR on April
18, 1997, accession number 0000912057-97-013527).
(b)* Investment Advisory Agreement between the Trust and Schroder
Capital Management International Inc. dated January 9, 1996,
with respect to Schroder Emerging Markets Fund Institutional
Portfolio, (filed as Exhibit 5(a) to Registrant's PEA No. 46
via EDGAR on January 10, 1996, accession number
0000912057-96-000285).
(c)* Investment Advisory Agreement between the Trust and Schroder
Capital Management International, Inc. dated January 9,
1996, with respect to Schroder U.S. Smaller Companies Fund,
Schroder Latin America Fund and International Equity Fund
(filed as Exhibit 5(c) to Registrant's PEA No. 63 via EDGAR
on July 18, 1997, accession number 0001004402-97-000035).
(d)* Investment Advisory Agreement between the Trust and Schroder
Capital Management International Inc. dated March 15, 1996,
with respect to Schroder International Smaller Companies
Fund and Schroder Global Asset Allocation Fund (filed as
Exhibit 5(d) to Registrant's PEA No. 63 via EDGAR on July
18, 1997, accession number 0001004402-97-000035).
(6) (a)* Distribution Agreement between the Trust and Schroder
Fund Advisors Inc. dated January 9, 1996, with respect to
Schroder U.S. Equity Fund (filed as Exhibit (6) to
Registrant's PEA No. 61 via EDGAR on April 18, 1997,
accession number 0000912057-97-013527).
(b)* Distribution Agreement between the Trust and Schroder Fund
Advisors Inc. dated January 9, 1996, as amended, with
respect to Schroder Emerging Markets Fund
<PAGE>
Institutional Portfolio, Schroder U.S. Smaller Companies
Fund, Schroder Latin American Fund, Schroder International
Fund, Schroder International Smaller Companies Fund and
Schroder Global Asset Allocation Fund (filed as Exhibit (6)
to Registrant's Post Effective Amendment No. 46 via EDGAR on
January 10, 1996, accession number 0000912057-96-000285).
(7) Not Applicable
(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 PEA No. 61 via EDGAR on April 18, 1997,
accession number 0000912057-97-013527).
(9) (a) Administration Agreement between the Trust and Schroder Fund
Advisors Inc. dated November 26, 1996, with respect to Schroder
International Fund, Schroder U.S. Smaller Companies Fund,
Schroder Latin American Fund, Schroder Emerging Markets Fund
Institutional Portfolio, Schroder International Smaller Companies
Fund and Schroder Global Asset Allocation Fund (filed herewith).
(b)* Subadministration Agreement between the Trust and Forum
Administrative Services, LLC dated February 1, 1997, with respect
to Schroder International Fund, Schroder U.S. Equity Fund,
Schroder U.S. Smaller Companies Fund, Schroder Latin American
Fund, Schroder Emerging Markets Fund Institutional Portfolio,
Schroder International Smaller Companies Fund and Schroder Global
Asset Allocation Fund (filed as Exhibit 9(b) to Registrant's
Post-Effective Amendment No. 61 via EDGAR on April 18, 1997,
accession number 0000912057-97-013527).
(c)* Transfer Agency Agreement between the Trust and Forum Financial
Corp. dated January 9, 1996, as amended, with respect to Schroder
International Fund, Schroder U.S. Equity Fund, Schroder U.S.
Smaller Companies Fund, Schroder Latin American Fund, Schroder
Emerging Markets Fund Institutional Portfolio, Schroder
International Smaller Companies Fund and Schroder Global Asset
Allocation Fund (filed as Exhibit 9(c) to Registrant's PEA No. 46
and via EDGAR on January 10, 1996, accession number
0000912057-96-000285).
(d)* Fund Accounting Agreement between the Trust and Forum Financial
Corp. dated January 9, 1996, as amended, with respect to Schroder
International Fund, Schroder U.S. Equity Fund, Schroder U.S.
Smaller Companies Fund, Schroder Latin American Fund, Schroder
Emerging Markets Fund - Institutional Portfolio, Schroder
International Smaller Companies Fund and Schroder Global Asset
Allocation Fund (filed as Exhibit 9(d) to Registrant's PEA No. 61
via EDGAR on April 18, 1997, accession number
0000912057-97-013527).
(10) Not Applicable.
(11) Consent of Independent Auditors (filed herewith).
(12) Not Applicable.
(13) Not Applicable.
<PAGE>
(14) Not Applicable.
(15) (a)* Form of Master Distribution Plan adopted by Registrant (filed as
Exhibit 15(a) to Registrant's PEA No. 46 via EDGAR on January
10, 1996, accession number 0000912057-96-000285).
(b)* Form of Distribution Plan Supplement with respect to each Fund
(filed as Exhibit 15(b) to Registrant's PEA No. 46 via EDGAR on
January 10, 1996, accession number 0000912057-96-000285).
(16) (a)* Schedule of Sample Performance Calculations -- Schroder U.S.
Equity Fund (filed as Exhibit 16 to Registrant's PEA No. 61 via
EDGAR on April 18, 1997, accession number 0000912057-97-013527).
(b) Schedule of Sample Performance Calculations -- Schroder U.S.
Smaller Companies Fund (filed herewith).
(17) Financial Data Schedule (filed herewith).
(18) Not Applicable.
Other Exhibits
(A)* Copies of Powers of Attorney pursuant to which Trustees have
signed this Post-Effective Amendment (filed as an Other
Exhibits to Registrant's PEA No. 45).
(B)* Copy of Power of Attorney pursuant to which Mr. Jackowitz has
signed this Post-Effective Amendment (filed as an Other
Exhibit to PEA No. 45).
(C)* Copy of Power of Attorney pursuant to which the Trustees and
President have signed this Post-Effective Amendment (filed as
an Other Exhibit to PEA No. 62 via EDGAR on June 30, 1997,
accession number 0001004402-97-000030).
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
<TABLE>
<S> <C>
Number of Record Holders
------------------------
Title of Class as of August 31, 1997
-------------- ---------------------
Schroder U.S. Equity Fund - Investor Shares 586
Schroder U.S. Equity Fund - Advisor Shares 0
Schroder International Fund - Investor Shares 729
Schroder International Fund - Advisor Shares 0
Schroder U.S. Smaller Companies Fund - Investor Shares 335
Schroder U.S. Smaller Companies Fund - Advisor Shares 2
Schroder Emerging Markets Fund Institutional Portfolio - Investor Shares 26
Schroder Emerging Markets Fund Institutional Portfolio - Advisor Shares 1
Schroder International Smaller Companies Fund - Investor Shares 3
Schroder International Smaller Companies Fund - Advisor Shares 0
Schroder International Bond Fund 0
Schroder Latin America Fund 0
Schroder Global Asset Allocation Fund 0
</TABLE>
<PAGE>
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
<PAGE>
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 Schroder, 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 Schroder which provides investment management
services to 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.
Mr. Foulkes is also a Director of Schroder Ltd.
John A. Troiano. Chief Executive and Director 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 and Senior Vice President of Schroder Ltd.
John S. Ager. Senior Vice President and Director of SCMI. Mr. Ager is
also a Director of Schroder Ltd.
Sharon L. Haugh. Executive Vice President and Director of SCMI,
Director and Chairman of Schroder Advisors Inc., and Director of
Schroder Ltd.
Gavin D.L. Ralston. Senior Vice President and Managing Director of
SCMI; Director of Schroder Ltd.
Mark J. Smith. Senior Vice President and Director of SCMI. Mr. Smith
is also Director of Schroder Ltd.
<PAGE>
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, also First
Vice President of Schroder Ltd.
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).
<PAGE>
(b) Forum Administrative Services, LLC, Two Portland Square, Portland, Maine
04101 (corporate minutes and all other records required under the
Subadministration Agreement).
ITEM 31. MANAGEMENT SERVICES.
None.
ITEM 32. UNDERTAKINGS.
(a) 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, with respect to rule 485(b) under the Securities Act of
1933, the Registrant has duly caused this amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of New York, and State of New York on the 30th day
of September, 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 30th
day of September, 1997.
Signatures Title
---------- -----
(a) Principal Executive Officer
Mark J. Smith President
By:/s/ Thomas G. Sheehan
----------------------
Thomas G. Sheehan, Attorney-in-Fact
(b) Principal Financial and
Accounting Officer
Thomas G. Sheehan Acting Treasurer
/s/ Thomas G. Sheehan
------------------------
Thomas G. Sheehan, Attorney-in-Fact
(c) Majority of the Trustees
Peter E. Guernsey* Trustee
John I. Howell* Trustee
Hermann C. Schwab* Trustee
Clarence F. Michalis* Trustee
*By: /s/ Thomas G. Sheeehan
----------------------------
Thomas G. Sheehan, Attorney-in-Fact
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, the Schroder
Capital Funds has duly caused this Registration Statement for Schroder Capital
Funds (Delaware) 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 30th day of
September, 1997.
SCHRODER CAPITAL FUNDS
By: /s/ Catherine A. Mazza
----------------------
Catherine A. Mazza
Vice President
<PAGE>
INDEX TO EXHIBITS
Sequential
Exhibit Page Number
- ------- -----------
(9)(a) Administration Agreement between the Trust and Schroder Fund Advisors
Inc. dated November 26, 1996.
(11) Consent of Independent Auditors.
(16)(b) Schedule of Sample Performance Calculations -- Schroder U.S. Smaller
Companies Fund.
(17) Financial Data Schedule - Schroder U.S. Smaller Companies.
<PAGE>
EXHIBIT (9)(A)
<PAGE>
SCHRODER CAPITAL FUNDS (DELAWARE)
ADMINISTRATION AGREEMENT
AGREEMENT made this 26th day of November, 1996, between Schroder Capital
Funds (Delaware) (the "Trust"), a business trust organized under the laws of the
State of Delaware with its principal place of business at Two Portland Square,
Portland, Maine 04101, and Schroder Fund Advisors Inc. ("Schroder"), a
corporation organized under the laws of the State of Maryland.
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended, (the "1940 Act") as an open-end management investment company and is
authorized to issue shares of beneficial interest in separate series and
classes;
WHEREAS, the Trust has entered into various Investment Advisory Agreements
with Schroder Capital Management International Inc. (the "Adviser"), pursuant to
which the Adviser provides investment advisory services for the Trust;
WHEREAS, the Trust desires that Schroder perform certain administrative
services for each series of the Trust as listed in Appendix A hereto (each a
"Series") and each class of shares of each Series (each a "Class") and Schroder
is willing to provide those services on the terms and conditions set forth in
this Agreement;
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the Trust and Schroder agree as follows:
SECTION 1. APPOINTMENT. The Trust hereby appoints Schroder as
administrator of the Trust and of each Series and any class of Shares thereof
and Schroder hereby accepts such appointment, all in accordance with the terms
and conditions of this Agreement. In connection therewith, the Trust has
delivered to Schroder copies of its Trust Instrument and Bylaws, the Trust's
Registration Statement and all amendments thereto filed pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), or the 1940 Act (the
"Registration Statement"), and the current prospectus and statement of
additional information of each Class of each Series (collectively, as currently
in effect and as amended or supplemented, the "Prospectus"), all in such manner
and to such extent as may from time to time be authorized by the Trust's Board
of Trustees (the "Board"), and shall promptly furnish Schroder with all
amendments of or supplements to the foregoing.
SECTION 2. FURNISHING OF EXISTING ACCOUNTS AND RECORDS. The Trust shall
promptly turn over to Schroder such of the accounts and records previously
maintained by or for it as are necessary for Schroder to perform its functions
under this Agreement. The Trust authorizes Schroder to rely on such accounts and
records turned over to it and hereby indemnifies and will hold Schroder, its
successors and assigns, harmless of and from any and all expenses, damages,
claims, suits, liabilities, actions, demands and losses whatsoever arising out
of or in connection with any error, omission, inaccuracy or other deficiency of
such accounts and records or in the failure of the Trust to provide any portion
of such or to provide any information needed by Schroder to knowledgeably
perform its functions.
SECTION 3. ADMINISTRATIVE DUTIES
(a) Subject to the direction and control of the Board and in cooperation
with the Adviser, Schroder shall provide, or oversee, as applicable,
administrative services necessary for the Trust's operations with respect to
each Series except those services that are the responsibility of the Adviser or
the Series' custodian or transfer agent, all in such manner and to such extent
as may be authorized by the Board.
(b) With respect to the Trust, each Series and each Class thereof, as
applicable, Schroder shall:
<PAGE>
(i) oversee (A) the preparation and maintenance by the Adviser and
the Trust's sub-administrator, custodian, transfer agent,
dividend disbursing agent and fund accountant in such form, for
such periods and in such locations as may be required by
applicable law, of all documents and records relating to the
operation of the Trust required to be prepared or maintained by
the Trust or its agents pursuant to applicable law; (B) the
reconciliation of account information and balances among the
Adviser and the Trust's custodian, transfer agent, dividend
disbursing agent and fund accountant; (C) the transmission of
purchase and redemption orders for Shares; (D) the notification
to the Adviser of available funds for investment; and (E) the
performance of fund accounting, including the calculation of the
net asset value of the Shares;
(ii) oversee the performance of administrative and professional
services rendered to the Trust by others, including its
sub-administrator, custodian, transfer agent and dividend
disbursing agent as well as legal, auditing and shareholder
servicing and other services performed for each Series or class
thereof;
(iii)oversee the preparation and the printing of the periodic
updating of the Registration Statement and Prospectus, tax
returns, and reports to shareholders, the Securities and Exchange
Commission and state securities commissions;
(iv) oversee the preparation of proxy and information statements and
any other communications to shareholders;
(v) at the request of the Board, provide the Trust with adequate
general office space and facilities and provide persons suitable
to the Board to serve as officers of the Trust;
(vi) provide the Trust, at the Trust's request, with the services of
persons who are competent to perform such supervisory or
administrative functions as are necessary for effective operation
of the Trust;
(vii)oversee the preparation, filing and maintenance of the Trust's
governing documents, including the Trust Instrument and minutes
of meetings of Trustees and shareholders;
(viii) oversee with the cooperation of the Trust's counsel, the
Adviser, and other relevant parties, preparation and
dissemination of materials for meetings of the Board;
(ix) monitor sales of Shares and ensure that such Shares are properly
and duly registered with the Securities and Exchange Commission
and applicable state securities commissions;
(x) oversee the calculation of performance data for dissemination to
information services covering the investment company industry,
for sales literature of the Trust and other appropriate purposes;
(xi) oversee the determination of the amount of, and supervise the
declaration of, dividends and other distributions to shareholders
as necessary to, among other things, maintain the qualification
of each Series as a regulated investment company under the
Internal Revenue Code of 1986, as amended, and prepare and
distribute to appropriate parties notices announcing the
declaration of dividends and other distributions to shareholders;
and
(xii)advise the Trust and its Board on matters concerning the Trust
and its affairs.
(c) Schroder shall oversee the preparation and maintenance, or cause to be
prepared and maintained, records in such form for such periods and in such
locations as may be required by applicable regulations, all documents and
records relating to the services provided to the Trust pursuant to this
Agreement required to be maintained pursuant to the 1940 Act, rules and
regulations of the Securities and Exchange Commission, the Internal Revenue
Service and any other national, state or local government entity with
jurisdiction over the Trust. The accounts and records pertaining to the Trust
which are in possession of Schroder, or an entity subcontracted by Schroder,
<PAGE>
shall be the property of the Trust. The Trust, or the Trust's authorized
representatives, shall have access to such accounts and records at all times
during Schroder's, or its subcontractor's, normal business hours. Upon the
reasonable request of the Trust, copies of any such accounts and records shall
be provided promptly by Schroder to the Trust or the Trust's authorized
representatives. In the event the Trust designates a successor to any of
Schroder's obligations under this agreement, Schroder shall, at the expense and
direction of the Trust, transfer to such successor all relevant books, records
and other data established or maintained by Schroder, or its subcontractor,
under this Agreement.
SECTION 4. STANDARD OF CARE
(a) Schroder, in performing under the terms and conditions of this
Agreement, shall use its best judgment and efforts in rendering the services
described herein, and shall incur no liability for its status under this
agreement or for any reasonable actions taken or omitted in good faith. As an
inducement to Schroder's undertaking to render these services, the Trust hereby
agrees to indemnify and hold harmless Schroder, its employees, agents, officers
and directors, from any and all loss, liability and expense, including any legal
expenses, arising out of Schroder's performance under this Agreement, or status,
or any act or omission of Schroder, its employees, agents, officers and
directors; provided that this indemnification shall not apply to Schroder's
actions taken or failures to act in cases of Schroder's own bad faith, willful
misconduct or gross negligence in the performance of its duties under this
Agreement; and further provided, that Schroder shall give the Trust notice and
reasonable opportunity to defend against any such loss, claim, damage, liability
or expense in the name of the Trust or Schroder, or both. The Trust will be
entitled to assume the defense of any suit brought to enforce any such claim or
demand, and to retain counsel of good standing chosen by the Trust and approved
by Schroder,such approval not to which approval shall be unreasonably
withheldnot be withheld unreasonably. In the event the Trust does elect to
assume the defense of any such suit and retain counsel of good standing approved
by Schroder, the defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by any of them; but in case the
Trust does not elect to assume the defense of any such suit, or in case Schroder
does not approve of counsel chosen by the Trust or Schroder has been advised
that it may have available defenses or claims which are not available or
conflict with those available to the Trust, the Trust will reimburse Schroder,
its employees, agents, officers and directors for the fees and expenses of any
one counsellaw firm retained as counsel by Schroder or them. Schroder may, at
any time, waive its right to indemnification under this agreement and assume its
own defense. The provisions of paragraphs (b) through (d) of this Section 4
should not in any way limit the foregoing:
(b) Schroder may rely upon the advice of the Trust or of counsel, who may
be counsel for the Trust or counsel for Schroder, and upon statements of
accountants, brokers and other persons believed by it in good faith to be expert
in the matters upon which they are consulted, and Schroder shall not be liable
to anyone for any actions taken in good faith upon such statements.
(c) Schroder may act upon any oral instruction which it receives and which
it believes in good faith was transmitted by the person or persons authorized by
the Board of the Trust to give such oral instruction. Schroder shall have no
duty or obligation to make any inquiry or effort of certification of such oral
instruction.
(d) Schroder shall not be liable for any action taken in good faith
reliance upon any written instruction or certified copy of any resolution of the
Board of the Trust, and Schroder may rely upon the genuineness of any such
document or copy thereof reasonably believed in good faith by Schroder to have
been validly executed.
(e) Schroder may rely and shall be protected in acting upon any signature,
instruction, request, letter of transmittal, certificate, opinion of counsel,
statement, instrument, report, notice, consent, order, or other paper document
believed by it to be genuine and to have been signed or presented by the
purchaser, Trust or other proper party or parties.
SECTION 5. EXPENSES
(a) Subject to any agreement by Schroder or other person to reimburse any
expenses of the Trust that relate to any Series, the Trust shall be responsible
for and assume the obligation for payment of all of its expenses, including: (a)
the fee payable under Section 6 hereof; (b) any fees payable to the Adviser; (c)
<PAGE>
any fees payable to Schroder; (d) expenses of issue, repurchase and redemption
of Shares; (e) interest charges, taxes and brokerage fees and commissions; (f)
the cost (or appropriate share thereof) of reasonable premiums for errors and
omissions and other liability insurance policy of FFSI; (g) premiums of
insurance for the Trust, its Trustees and officers and fidelity bond premiums;
(hg) fees, interest charges and expenses of third parties, including the Trust's
custodian, transfer agent, dividend disbursing agent and fund accountant; (ih)
fees of pricing, interest, dividend, credit and other reporting services; (ij)
costs of membership in trade associations; (kj) telecommunications expenses; (l)
funds transmission expenses; (m) auditing, legal and compliance expenses; (n)
costs of forming the Trust and maintaining its existence; (o) to the extent
permitted by the 1940 Act, costs of preparing and printing the Series'
Prospectuses, subscription application forms and shareholder reports and
delivering them to existing shareholders; (p) expenses of meetings of
shareholders and proxy solicitations therefore; (q) costs of maintaining books
of original entry for portfolio and fund accounting and other required books and
accounts, of calculating the net asset value of shares of the Trust and of
preparing tax returns; (r) costs of reproduction, stationery and supplies; (s)
fees and expenses of the Trust's Trustees; (t) compensation of the Trust's
officers and employees who are not employees of the Adviser or Sub- Schroder or
their respective affiliated persons and costs of other personnel (who may be
employees of the Adviser, Schroder or their respective affiliated persons)
performing services for the Trust; (u) costs of Trustee meetings; (v) Securities
and Exchange Commission registration fees and related expenses; (w) state or
foreign securities laws registration fees and related expenses; and (x) all fees
and expenses paid by the Trust in accordance with any distribution plan adopted
pursuant to Rule 12b-1 under the 1940 Act or under any shareholder service plan
or agreement.
(b) If the aggregate expenses of every character incurred by, or allocated
to, a Series in any fiscal year, other than interest, taxes, brokerage
commissions and other portfolio transaction expenses, other expenditures which
are capitalized in accordance with generally accepted accounting principles and
any extraordinary expense (including, without limitation, litigation and
indemnification expense), but including the fees provided for in Section 6 and
under an Advisory Agreement with respect to a Series ("includable expenses"),
shall exceed the expense limitations applicable to that Series imposed by state
securities law or regulations thereunder, as these limitations may be raised or
lowered from time to time, Schroder shall pay that Series an amount equal to a
percentage of that excess ("Schroder's reimbursement"), such Schroder's
reimbursement to be in an amount set forth with respect to the Series in
Appendix A to this Agreement. With respect to portions of a fiscal year in which
this Agreement shall be in effect, the foregoing limitations shall be prorated
according to the proportion which that portion of the fiscal year bear to the
full fiscal year. At the end of each month of the Trust's fiscal year, Schroder
will review the includable expenses accrued during that fiscal year to the end
of the period and shall estimate the contemplated includable expenses for the
balance of that fiscal year. If, as a result of that review and estimation, it
appears likely that the includable expenses will exceed the limitations referred
to in this Section 5(b) for a fiscal year, the monthly fees payable to Schroder
under this contract for such month shall be reduced, subject to a later
reimbursement to reflect actual expenses, by an amount equal to a percentage
(which shall be equal to Schroder's reimbursement) of a pro rata portion
(prorated on the basis of the remaining months of the fiscal year, including the
month just ended) of the amount by which the includable expenses for the fiscal
year (less an amount equal to the aggregate of actual reductions made pursuant
to this provision with respect to prior months of the fiscal year) are expected
to exceed the limitations provided in this Section 5(b). For purposes of the
foregoing, the value of the net assets of each Series shall be computed in the
manner specified in Section 6, and any payments required to be made by Schroder
shall be made once a year promptly after the end of the Trust's fiscal year.
SECTION 6. COMPENSATION
(a) In consideration of the services performed by Schroder under this
Agreement, the Trust will pay Schroder, with respect to each Series, a fee at
the annual rate, as listed in Appendix B hereto. Such fee shall be accrued by
the Trust daily and shall be payable monthly in arrears on the first day of each
calendar month for services performed under this agreement during the prior
calendar month. (a) For the administrative services provided by the
Sub-Administrator pursuant to this AgreementIf the fees payable pursuant to this
provision begin to accrue before the end of any month or if this Agreement
terminates before the end of any month, the fees for the period from that date
to the end of that month or from the beginning of that month to the date of
termination, as the case may be, shall be prorated according to the proportion
<PAGE>
that the period bears to the full month in which the effectiveness or
termination occurs. Upon the termination of this Agreement, the Trust shall pay
to Sub- SchroderAdministrat such compensation as shall be payable prior to the
effective date of such termination.
(b) In the event that this agreement is terminated, Schroder shall be
reimbursed for reasonable charges and disbursements associated with promptly
transferring to its successor as designated by the Trust the original or copies
of all accounts and records maintained by Schroder under this agreement, and
cooperating with, and providing reasonable assistance to its successor in the
establishment of the accounts and records necessary to carry out the successor's
or other person's responsibilities.
(c) Notwithstanding anything in this Agreement to the contrary, Schroder
and its affiliated persons may receive compensation or reimbursement from the
Trust with respect to (i) the provision of services on behalf of the Series in
accordance with any distribution plan adopted by the Trust pursuant to Rule
12b-1 under the 1940 Act or (ii) the provision of shareholder support or other
services, including fund accounting services or (iii) service as a Director or
officer of the Fund.
SECTION 7. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Agreement shall become effective on the date first above written
with respect to each Series of the Trust then existing and shall relate to every
other Series as of the later of the date on which the Trust's Registration
Statement relating to the shares of such Series becomes effective or the Series
commences operations.
(b) This Agreement shall continue in effect for twelve months and,
thereafter, shall be automatically renewed each year for an additional term of
one year.
(c) This Agreement may be terminated with respect to a Series at any time,
without the payment of any penalty, (i) by the Board on 60 days' written notice
to Schroder or (ii) by Schroder on 60 days' written notice to the Trust. Upon
receiving notice of termination by Schroder, the Trust shall use its best
efforts to obtain a successor administrator. Upon receipt of written notice from
the Trust of the appointment of a successor, and upon payment to Schroder of all
fees owed through the effective termination date, and reimbursement for
reasonable charges and disbursements, Schroder shall promptly transfer to the
successor administrator the original or copies of all accounts and records
maintained by Schroder under this agreement including, in the case of records
maintained on computer systems, copies of such records in machine-readable form,
and shall cooperate with, and provide reasonable assistance to, the successor
administrator in the establishment of the accounts and records necessary to
carry out the successor administrator's responsibilities. For so long as
Schroder continues to perform any of the services contemplated by this Agreement
after termination of this Agreement as agreed to by the Trust and Schroder, the
provisions of Sections 4 and 6 hereof shall continue in full force and effect.
SECTION 8. ACTIVITIES OF SCHRODER
(a) Except to the extent necessary to perform Schroder's obligations under
this Agreement, nothing herein shall be deemed to limit or restrict the right of
Schroder, or any affiliate of Schroder, or any employee of the Schroder, to
engage in any other business or to devote time and attention to the management
or other aspects of any other business, whether of a similar or dissimilar
nature, or to render services of any kind to any other corporation, firm,
individual or association.
(b) Schroder may subcontract any or all of its functions or
responsibilities pursuant to this Agreement to one or more corporations, trusts,
firms, individuals or associations, which may be affiliates of Schroder, who
agree to comply with the terms of this Agreement. Schroder may pay those persons
for their services, but no such payment will increase Schroder's compensation
from the Trust.
SECTION 9. COOPERATION WITH INDEPENDENT ACCOUNTANTS.
Schroder shall cooperate, if applicable, with the Trust's independent public
accountants and shall take reasonable action to make all necessary information
available to such accountants for the performance of their duties.
<PAGE>
SECTION 10. SERVICE DAYS. Nothing contained in this Agreement is intended
to or shall require Schroder, in any capacity under this agreement, to perform
any functions or duties on any day other than a business day of the Trust or of
a Series. Functions or duties normally scheduled to be performed on any day
which is not a business day of the Trust or of a Series shall be performed on,
and as of, the next business day, unless otherwise required by law.
SECTION 11. NOTICES. Any notice or other communication required by or
permitted to be given in connection with this Agreement shall be in writing and
shall be delivered in person, or by first-class mail, postage prepaid, or by
overnight or two-day private mail service to the respective party. Notice to the
Trust shall be given as follows or at such other address as the Trust may
designate in writing:
Schroder Capital Funds (Delaware)
787 Seventh Avenue
New York, New York 10019
Notice to Schroder shall be given as follows or at such other address as
Schroder may designate in writing:
Schroder Fund Advisors Inc.
787 Seventh Avenue
New York, New York 10019
Notices and other communications received by the parties at the addresses
listed above shall be deemed to have been properly given.
SECTION 12. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY
The Trustees of the Trust and the shareholders of each Series shall not be
liable for any obligations of the Trust or of the Series under this Agreement,
and Schroder agrees that, in asserting any rights or claims under this
Agreement, it shall look only to the assets and property of the Trust or the
Series to which Schroder's rights or claims relate in settlement of such rights
or claims, and not to the Trustees of the Trust or the shareholders of the
Series.
SECTION 13. MISCELLANEOUS
(a) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties hereto.
(b) This Agreement may be executed in two or more counterparts, each of
which, when so executed shall be deemed to be an original, but such counterparts
shall together constitute but one and the same instrument.
(c) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.
(d) Section and Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this Agreement.
(e) This Agreement shall extend to and shall be binding upon the parties
hereto and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable by the Trust without the written consent of
Schroder, or by Schroder, without the written consent of the Trust authorized or
approved by a resolution of the Board.
<PAGE>
(f) This Agreement shall be governed by the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
SCHRODER CAPITAL FUNDS (DELAWARE)
--------------------------------
Laura E. Luckyn-Malone
President
SCHRODER FUND ADVISORS INC.
------------------------
<PAGE>
SCHRODER CAPITAL FUNDS (DELAWARE)
ADMINISTRATION AGREEMENT
APPENDIX A
SERIES OF THE TRUST
Schroder International Fund
Schroder U.S. Smaller Companies Fund
Schroder Latin American Fund
Schroder Emerging Markets Fund Institutional Portfolio
Schroder International Smaller Companies Fund
Schroder Global Asset Allocation Fund
<PAGE>
SCHRODER CAPITAL FUNDS (DELAWARE)
ADMINISTRATION AGREEMENT
APPENDIX B
ADMINISTRATION FEES
Series Of The Trust Fee As % Of The Average Annual
-------------------
Daily Net Assets Of The Series
------------------------------
Schroder International Fund 0.20% for the first $100 million;
0.15% of the next $150 million; and
0.125% of assets in excess of $250 million
Schroder U.S. Smaller Companies Fund,
Schroder Latin American Fund,
Schroder Emerging Markets Fund
Institutional Portfolio 0.15%
Schroder International Smaller
Companies Fund 0.10%
Schroder Global Asset Allocation Fund 0.125%
During any period in which Schroder International Fund invests all (or
substantially all) of its investment assets in a registered, open-end management
investment company, or separate series thereof, in accordance with Section
12(d)(1)(E) of the Investment Company Act of 1940, the Trust shall pay Schroder
a monthly fee on the first business day of each month based upon the average
daily value of the net assets of the Fund during the preceding month at an
annual rate of 0.15% of the average daily value of net assets of the Fund.
During any period in which Schroder Emerging Markets Fund Institutional
Portfolio invests all (or substantially all) of its investment assets in a
registered, open-end management investment company, or separate series thereof,
in accordance with Section 12(d)(1)(E) of the Investment Company Act of 1940,
the Trust shall pay Schroder a monthly fee on the first business day of each
month based upon the average daily value of the net assets of the Fund during
the preceding month at an annual rate of 0.05% of the average daily value of net
assets of the Fund.
During any period in which Schroder U.S. Smaller Companies Fund invests all
(or substantially all) of its investment assets in a registered, open-end
management investment company, or separate series thereof, in accordance with
Section 12(d)(1)(E) of the Investment Company Act of 1940, the Trust shall pay
Schroder a monthly fee on the first business day of each month based upon the
average daily value of the net assets of the Fund during the preceding month at
an annual rate of 0.25% of the average daily value of net assets of the Fund.
<PAGE>
EXHIBIT 11
CONSENT OF INDEPENDENT AUDITORS
To the Trustees of Schroder Capital Funds (Delaware):
We hereby consent to the following with respect to Post-Effective Amendment No.
64 to the Registration Statement on Form N-1A (File No. 2-34215) of Schroder
Capital Funds (Delaware) (consisting of Schroder U.S. smaller Companies Fund
(the "Fund"):
1. The reference to our firm under the heading "Financial Highlights" in
the Prospectus.
2. The incorporation by reference of our report dated July 14, 1997 on
our audit of the financial statements and financial highlights of the
Fund, which report is included in the Fund's Annual Report for the
period ended May 31, 1997, which are incorporated by reference in the
Statement of Additional Information.
3. The reference to our firm under the heading "Independent Accountants"
in the Statement of Additional Information.
4. The reference naming our firm as "Independent Accountants" on the back
of the Investor Shares Prospectus.
/s/ Coopers & Lybrand L. L. P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
September 24, 1997
<PAGE>
EXHIBIT 16(b)
SCHEDULE OF SAMPLE PERFORMANCE QUOTATION CALCULATIONS
SCHRODER U.S. SMALLER COMPANIES FUND - INVESTOR SHARES
Note: All performance is for the period ended: _______05/31/97_______
1. AVERAGE ANNUAL TOTAL RETURN (PURSUANT TO SEC STANDARDIZED FORMULA)
SEC Formula: T = ({{[((ERV/P) - 1)(1 - S) - S](1 - R) - R} + 1}1 / n )-1
where: T = average annual total return
P = initial payment of $1,000
n = number of years
ERV = ending redeemable value of the initial
payment at the end of the period
S = Maximum initial sales charge
R = Maximum redemption charge (calculated based
on _______)(I.E., lower of purchase amount or redemption
amount)
a. Average Annual Total Return (assuming deduction of the maximum sales/
--------------------------- purchase/redemption charges)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
CAL YR 1 MTH 3 MTH 6 MTH 1 YR 3 YR 5 YR 10 YR INCEPT
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
P($) 1000 1000 1000 1000 1000 1000 1000 1000 1000
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
N(YR) 1/12 1/4 1/2 1 3 5 10
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
ERV
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
S
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
R
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
T(%)
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
</TABLE>
<TABLE>
b. Average Annual Total Return (assuming no deduction of sales/purchase/
--------------------------- redemption charges)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
CAL YR 1 MTH 3 MTH 6 MTH 1 YR 3 YR 5 YR 10 YR INCEPT
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
P($) 1000 1000 1000 1000 1000 1000 1000 1000 1000
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
N(YR) 5/12 1/12 1/4 1/2 1 3 5 10 3.83
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
ERV 1100.40 1117.10 1080.70 1111.20 1109.30 2069.30 - - 2347.30
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
T(%) 26.02 284.71 36.51 23.68 10.93 27.40 - - 24.91
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
</TABLE>
<PAGE>
2. CUMULATIVE TOTAL RETURN (PURSUANT TO NON-STANDARDIZED FORMULA)
Formula: C = {{[(T + 1)n - 1 - R]/(1 - R)} + S}/(1 - S)
where: C = cumulative total return of the investment over the
specified period
T = average annual total return (see above)
P = initial payment of $1,000
n = number of years
ERV = ending redeemable value of the initial payment at the
end of the period
a. Cumulative Total Return (assuming deduction of the maximum sales/purchase/
----------------------- redemption charges)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
CAL YR 1 MTH 3 MTH 6 MTH 1 YR 3 YR 5 YR 10 YR INCEPT
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
P($) 1000 1000 1000 1000 1000 1000 1000 1000 1000
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
N(YR) 1/12 1/4 1/2 1 3 5 10
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
ERV
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
S
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
R
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
C(%)
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
</TABLE>
b. Cumulative or Aggregate Total Return (assuming no deduction of sales/purchase
------------------------------------ /redemption charges)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
CAL YR 1 MTH 3 MTH 6 MTH 1 YR 3 YR 5 YR 10 YR INCEPT
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
P($) 1000 1000 1000 1000 1000 1000 1000 1000 1000
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
N(YR) 5/12 1/12 1/4 1/2 1 3 5 10 3.83
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
ERV 1100.40 1117.10 1080.70 1111.20 1109.30 2069.30 - - 2347.30
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
C(%) 10.04 11.71 8.07 11.12 10.93 106.93 - - 134.73
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
</TABLE>
<PAGE>
3. 30 DAY YIELD (PURSUANT TO SEC STANDARDIZED FORMULA)
SEC Formula: Y = 2{[(a - b)/(cd) + 1]6 - 1]}
where: Y = 30 day yield
a = dividends and interest earned during the period
b = expenses accrued for the period (net of
reimbursements)
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends
d = the maximum offering price per share on the last
day of the period
<TABLE>
<S> <C> <C> <C> <C> <C>
- ------------------------ ---------------------- ---------------------- ----------------------- ----------------------
A($) B($) C D($) Y(%)
- ------------------------ ---------------------- ---------------------- ----------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ----------------------- ----------------------
N/A N/A N/A N/A N/A
- ------------------------ ---------------------- ---------------------- ----------------------- ----------------------
</TABLE>
4. 30 DAY TAX-EQUIVALENT YIELD (PURSUANT TO SEC STANDARDIZED FORMULA)
SEC Formula: TEY = Y/(1 - TR)
where: TEY = 30 day tax-equivalent yield
Y = 30 day yield (see above)
TR = assumed applicable tax rate
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------- ---------------------------------------------------------
TR(%) TEY(%)
- ----------------------------------------------------------- ---------------------------------------------------------
- ----------------------------------------------------------- ---------------------------------------------------------
N/A N/A
- ----------------------------------------------------------- ---------------------------------------------------------
</TABLE>
5. 30-DAY DISTRIBUTION RATE (PURSUANT TO NON-STANDARDIZED FORMULA)
Formula: 30 Day Distribution Rate ("Rate")= (ab)/c
where: Rate = 30 day distribution rate
a = distributions in last 30 days
b = number of 30 day periods in year
c = maximum offering price per share on last
day of period
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
A B C RATE(%)
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
N/A N/A N/A N/A
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
</TABLE>
<PAGE>
SCHEDULE OF SAMPLE PERFORMANCE QUOTATION CALCULATIONS
SCHRODER U.S. SMALLER COMPANIES FUND - ADVISOR SHARES
Note: All performance is for the period ended:_______05/31/97________
1. AVERAGE ANNUAL TOTAL RETURN (PURSUANT TO SEC STANDARDIZED FORMULA)
SEC Formula: T = ({{[((ERV/P)-1)(1-S)-S](1-R)-R}+1}1/n)-1
where: T = average annual total return
P = initial payment of $1,000
n = number of years
ERV = ending redeemable value of the initial
payment at the end of the period
S = Maximum initial sales charge
R = Maximum redemption charge (calculated based on
_______)(I.E., lower of purchase amount or redemption
amount)
a. Average Annual Total Return (assuming deduction of the maximum sales/purchase
--------------------------- /redemption charges)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
CAL YR 1 MTH 3 MTH 6 MTH 1 YR 3 YR 5 YR 10 YR INCEPT
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
P($) 1000 1000 1000 1000 1000 1000 1000 1000 1000
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
N(YR) 1/12 1/4 1/2 1 3 5 10
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
ERV
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
S
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
R
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
T(%)
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
</TABLE>
b. Average Annual Total Return (assuming no deduction of sales/purchase/
--------------------------- redemption charges)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
CAL YR 1 MTH 3 MTH 6 MTH 1 YR 3 YR 5 YR 10 YR INCEPT
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
P($) 1000 1000 1000 1000 1000 1000 1000 1000 1000
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
N(YR) 5/12 1/12 1/4 1/2 1 3 5 10 .44
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
ERV 1098.80 1117.30 1079.90 - - - - - 1113.50
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
T(%) 25.56 269.11 35.68 - - - - - 27.23
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
</TABLE>
<PAGE>
2. CUMULATIVE TOTAL RETURN (PURSUANT TO NON-STANDARDIZED FORMULA)
Formula: C = {{[(T + 1)n - 1 - R]/(1 - R)} + S}/(1 - S)
where: C = cumulative total return of the investment over the
specified period
T = average annual total return (see above)
P = initial payment of $1,000
n = number of years
ERV = ending redeemable value of the initial payment at the
end of the period
a. Cumulative Total Return (assuming deduction of the maximum sales/purchase/
----------------------- redemption charges)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
CAL YR 1 MTH 3 MTH 6 MTH 1 YR 3 YR 5 YR 10 YR INCEPT
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
P($) 1000 1000 1000 1000 1000 1000 1000 1000 1000
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
N(YR) 1/12 1/4 1/2 1 3 5 10
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
ERV
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
S
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
R
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
C(%)
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
</TABLE>
b. Cumulative Or Aggregate Total Return (assuming no deduction of sales/purchase
------------------------------------ /redemption charges)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
CAL YR 1 MTH 3 MTH 6 MTH 1 YR 3 YR 5 YR 10 YR INCEPT
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
P($) 1000 1000 1000 1000 1000 1000 1000 1000 1000
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
N(YR) 5/12 1/12 1/4 1/2 1 3 5 10 .44
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
ERV 1098.80 1117.30 1079.90 - - - - - 1113.50
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
C(%) 9.88 11.73 7.99 - - - - - 11.35
- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
</TABLE>
<PAGE>
3. 30 DAY YIELD (PURSUANT TO SEC STANDARDIZED FORMULA)
SEC Formula: Y = 2{[(a - b)/(cd) + 1]6 - 1]}
where: Y = 30 day yield
a = dividends and interest earned during the period
b = expenses accrued for the period (net of
reimbursements)
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends
d = the maximum offering price per share on the last
day of the period
<TABLE>
<S> <C> <C> <C> <C> <C>
- ------------------------ ---------------------- ---------------------- ----------------------- ----------------------
A($) B($) C D($) Y(%)
- ------------------------ ---------------------- ---------------------- ----------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ----------------------- ----------------------
N/A N/A N/A N/A N/A
- ------------------------ ---------------------- ---------------------- ----------------------- ----------------------
</TABLE>
4. 30 DAY TAX-EQUIVALENT YIELD (PURSUANT TO SEC STANDARDIZED FORMULA)
SEC Formula: TEY = Y/(1 - TR)
where: TEY = 30 day tax-equivalent yield
Y = 30 day yield (see above)
TR = assumed applicable tax rate
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------- ---------------------------------------------------------
TR(%) TEY(%)
- ----------------------------------------------------------- ---------------------------------------------------------
- ----------------------------------------------------------- ---------------------------------------------------------
N/A N/A
- ----------------------------------------------------------- ---------------------------------------------------------
</TABLE>
5. 30-DAY DISTRIBUTION RATE (PURSUANT TO NON-STANDARDIZED FORMULA)
Formula: 30 Day Distribution Rate ("Rate")= (ab)/c
where: Rate = 30 day distribution rate
a = distributions in last 30 days
b = number of 30 day periods in year
c = maximum offering price per share on last day
of period
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
A B C RATE(%)
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
N/A N/A N/A N/A
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 17
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
SCHRODER U.S. SMALLER COMPANIES ANNUAL REPORT DATED 5/31/97 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 031
<NAME> U.S. SMALLER COMPANIES
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 22,250,270
<INVESTMENTS-AT-VALUE> 26,100,778
<RECEIVABLES> 120,095
<ASSETS-OTHER> 6,634
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 26,227,507
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 42,430
<TOTAL-LIABILITIES> 42,430
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20,825,459
<SHARES-COMMON-STOCK> 6,098
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 887
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,508,223
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,850,508
<NET-ASSETS> 26,185,077
<DIVIDEND-INCOME> 73,393
<INTEREST-INCOME> 33,234
<OTHER-INCOME> (84,771)
<EXPENSES-NET> 64,383
<NET-INVESTMENT-INCOME> (42,527)
<REALIZED-GAINS-CURRENT> 1,749,974
<APPREC-INCREASE-CURRENT> 1,017,015
<NET-CHANGE-FROM-OPS> 2,724,462
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 4,517,569
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 129,171
<NUMBER-OF-SHARES-REDEEMED> 56,464
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 12,442,522
<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> 107,963
<AVERAGE-NET-ASSETS> 63,715
<PER-SHARE-NAV-BEGIN> 11.89
<PER-SHARE-NII> (.03)
<PER-SHARE-GAIN-APPREC> 1.38
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.24
<EXPENSE-RATIO> 1.74
<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 U.S. SMALLER COMPANIES ANNUAL REPORT DATED 5/31/97 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 030
<NAME> U.S. SMALLER COMPANIES
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 22,250,270
<INVESTMENTS-AT-VALUE> 26,100,778
<RECEIVABLES> 120,095
<ASSETS-OTHER> 6,634
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 26,227,507
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 42,430
<TOTAL-LIABILITIES> 42,430
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20,825,459
<SHARES-COMMON-STOCK> 1,969,016
<SHARES-COMMON-PRIOR> 797,795
<ACCUMULATED-NII-CURRENT> 887
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,508,223
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,850,508
<NET-ASSETS> 26,185,077
<DIVIDEND-INCOME> 73,393
<INTEREST-INCOME> 33,234
<OTHER-INCOME> (84,771)
<EXPENSES-NET> 64,383
<NET-INVESTMENT-INCOME> (42,527)
<REALIZED-GAINS-CURRENT> 1,749,974
<APPREC-INCREASE-CURRENT> 1,017,015
<NET-CHANGE-FROM-OPS> 2,724,462
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 4,517,569
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 14,779,822
<NUMBER-OF-SHARES-REDEEMED> 4,133,899
<SHARES-REINVESTED> 3,516,999
<NET-CHANGE-IN-ASSETS> 12,442,522
<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> 107,963
<AVERAGE-NET-ASSETS> 17,210,029
<PER-SHARE-NAV-BEGIN> 17.23
<PER-SHARE-NII> (.02)
<PER-SHARE-GAIN-APPREC> 1.88
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (5.83)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.26
<EXPENSE-RATIO> 1.49
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
