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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
ADVISOR SHARES
This fund seeks to achieve long-term capital appreciation through direct or
indirect investment in equity and debt securities of issuers domiciled or
doing business in emerging market countries in regions such as Southeast Asia,
Latin America, and Eastern and Southern Europe. It is designed for investors
who seek the aggressive growth potential of emerging world markets and are
willing to bear the special risks of investing in those markets.
[Logo]
YOUR WINDOW ON THE WORLD
Schroder Emerging Markets Fund Institutional Portfolio (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
Emerging Markets Fund Institutional Portfolio (the "Portfolio"), a separately
managed non-diversified series of Schroder Capital Funds ("Schroder Core"), an
open-end management investment company. The Portfolio has an identical
investment objective and substantially similar investment policies as the
Fund. Accordingly, the Fund's investment experience will correspond directly
with the Portfolio's investment experience. (See "Other Information -- Fund
Structure").
This prospectus sets forth concisely the information 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 March 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 their Internet Web Site
(http://www.sec.gov) or may be obtained without charge from the Trust by
writing to Two Portland Square, Portland, Maine 04101 or by calling
1-800-290-9826. 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 the 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
March 1, 1997
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FUNDS AVAILABLE THROUGH SCHRODER FUND ADVISORS INC.
Please call for complete information and to obtain a prospectus.
Please read the prospectus carefully before you invest.
Schroder Capital Funds (Delaware) (1-800-290-9826) Schroder Series Trust
(1-800-464-3108)
SCHRODER INTERNATIONAL FUND SCHRODER EQUITY VALUE FUND
SCHRODER EMERGING MARKETS FUND -- SCHRODER SMALL CAPITALIZATION VALUE FUND
INSTITUTIONAL PORTFOLIO SCHRODER HIGH YIELD INCOME FUND
SCHRODER INTERNATIONAL SMALLER
COMPANIES FUND SCHRODER INVESTMENT GRADE INCOME FUND
SCHRODER U.S. SMALLER COMPANIES FUND SCHRODER SHORT-TERM INVESTMENT FUND
SCHRODER U.S. EQUITY FUND
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PROSPECTUS SUMMARY
This Prospectus offers Advisor Class shares ("Advisor Shares" or "Shares")
of the Fund. The Fund is a separately managed, non-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. Long-term capital appreciation through direct or indirect
investment in equity and debt securities of issuers domiciled or doing
business in emerging market countries in regions such as Southeast Asia, Latin
America, and Eastern and Southern Europe. Current income will be incidental to
the Fund's objective.
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 Manager."
ADMINISTRATIVE SERVICES. Schroder Fund Advisors Inc. ("Schroder Advisors")
serves as administrator and distributor of the Fund, and Forum Administrative
Services, Limited Liability Company ("Forum") serves as the Fund's sub-
administrator.
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 $250,000. There is no minimum
for subsequent investments. See "Investment in the Fund -- Purchase of Shares"
and " -- Redemption of Shares." Purchases of Fund shares are subject to a
purchase charge of 0.50% of the amount invested. Redemptions of Fund shares
are subject to a redemption charge of 0.50% of the amount invested. 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. Dividends and
long-term capital gain distributions are reinvested automatically in
additional Advisor Shares of the Fund at net asset value unless you elect in
your Account Application, or otherwise in writing, to receive dividends and
other distributions in cash. See "Dividends, Distributions and Taxes."
RISK CONSIDERATIONS. Alone, the Fund is not a balanced investment plan. It
is intended for investors who seek the aggressive growth potential of emerging
world markets and are willing to bear their special investment risks,
including but not limited to tightening of exchange controls and
expropriation, nationalization or confiscation of assets by local governments.
The Fund is not intended for investors whose objective is assured income or
preservation of capital: investments in the securities of foreign issuers,
particularly in countries with smaller, emerging capital markets, involve
risks in addition to risks associated with investments in the securities of
U.S. issuers. 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") will vary because the market value of the Portfolio's
investments will change with changes in the value of the securities in which
the Portfolio invests and with 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. For
further information, see "Risk Considerations".
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EXPENSES OF INVESTING IN THE FUND
FEE TABLE
The table below is intended to assist you in understanding the expenses
that an investor in Advisor Shares of the Fund would incur. The Annual Fund
Operating Expenses reflect projected fees, expenses and waivers for the
current fiscal year.
<TABLE>
<CAPTION>
<S> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchase.................................. None
Maximum Sales Load Imposed on Reinvested Dividends...................... None
Deferred Sales Load..................................................... None
Purchase Charge (based on amount invested)(1)........................... 0.50%
Redemption Charge (based on net asset value of shares redeemed)(1)...... 0.50%
Annual Fund Operating Expenses (as a percentage of average net assets)(2)
Management Fees (after waivers)(3)(4)................................... 0.95%
12b-1 Fees.............................................................. None
Other Expenses.......................................................... 0.75%
Total Fund Operating Expenses(4)........................................ 1.70%
</TABLE>
(1) The Purchase Charge and the Redemption Charge are paid to the Fund and are
imposed on all purchases and redemptions of Shares except for Shares
purchased through the reinvestment of dividends or distributions. See
"Investment in the Fund -- Purchase of Shares" and " -- Redemption of
Shares."
(2) The Fund's expenses include the Fund's pro rata portion of all operating
expenses of the Portfolio.
(3) Management Fees reflect the fees paid by the Portfolio and the Fund for
investment advisory and administrative services.
(4) SCMI and Schroder Advisors have voluntarily undertaken to waive a portion
of their fees and assume certain expenses of the Fund during the current
fiscal year in order to limit the Total Fund Operating Expenses to 1.70%
of the Fund's average daily net assets. This undertaking cannot be
withdrawn except by a majority vote of the Trust's Board of Trustees. See
"Management of the Fund -- Expenses." Without waivers, Management Fees and
Total Fund Operating Expenses would have been 1.10% and 1.85%,
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; (2) reinvestment
of all dividends and other distributions; and (3) imposition of the purchase and
redemption charge. The example is based on the expenses listed above. 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.
<TABLE>
<CAPTION>
Years
------------------------------------------
<S> <C> <C> <C> <C>
1 3 5 10
--------- --------- --------- ---------
Assuming no redemption....................... $ 22 $ 59 $ 97 $ 206
Assuming full redemption at the end of the
period..................................... $ 27 $ 64 $ 102 $ 211
</TABLE>
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FINANCIAL HIGHLIGHTS
The financial highlights are presented below to assist you in evaluating
per share performance of the Fund. Information presented is for Investor
shares as Advisor Shares were not issued for the periods shown. This
information has been audited by Coopers & Lybrand L.L.P., independent
accountants to the Fund. The Fund's financial statements for the year ended
October 31, 1996, 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 1-800-290-9826.
<TABLE>
<CAPTION>
March 31,
For the Year 1995(a)
Ended Through
October 31, October 31,
1996(b) 1995
----------------- ---------------
<S> <C> <C>
Net Asset Value, beginning of period $10.63 $10.00
------- -------
Investment Operations:
Net Investment Income 0.02(c) 0.02
Net Realized Gain 0.43(d) 0.61
------- -------
Total From Investment Operations 0.45 0.63
------- -------
Distributions from Net Investment Income (0.02) --
------- -------
Net Asset Value, End of Period $11.06 $10.63
------- -------
------- -------
Total Return(e) 4.22% 6.30%
Ratios/Supplementary Data:
Net Assets, End of Period (Thousands) $167,570 $18,423
Ratio of Expenses to Average Net Assets after waivers 1.60%(c) 1.58%(f)
Ratio of Net Investment Income to Average Net Assets
after waivers 0.36%(c) 0.46%(f)
Ratio of Expenses to Average Net Assets before waivers 1.71%(c) 2.45%(f)
Ratio of Net Investment Income (Loss) to Average Net
Assets before waivers 0.25%(c) (0.41)%(f)
Portfolio Turnover Rate(g) 102.70% 44.10%
Average Brokerage Commissions(h) $0.0008 N.A.
</TABLE>
- ---------
(a) Commencement of operations.
(b) On May 17, 1996, the Fund began offering two classes of shares, Investor
Shares and Advisor Shares, and all then outstanding shares of the Fund
were converted to Investor Shares.
(c) Includes the Fund's proportionate share of income and expenses of the
Portfolio.
(d) The amount shown for a share outstanding does not correspond with the
aggregate net gain (loss) on investments for the period ended due to the
timing of sales and repurchases of Fund shares in relation to fluctuating
market values of the investments of the Fund.
(e) Total return calculation does not include the purchase or redemption fee
of 0.50%, respectively.
(f) Annualized.
(g) Portfolio turnover rate represents the rate of portfolio activity. The
rate for year ended October 31, 1996, represents the portfolio turnover
rate of the Portfolio.
(h) Amount represents the average commission per share paid to brokers on the
purchase and sale of the Portfolio's investment portfolio securities.
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INVESTMENT OBJECTIVE
The investment objective of the Fund is to seek to achieve long-term
capital appreciation through direct or indirect investment in equity and debt
securities of issuers domiciled or doing business in emerging market countries
in regions such as Southeast Asia, Latin America, and Eastern and Southern
Europe. Current income is incidental to the Fund's objective.
The Fund is designed for investors who seek the aggressive growth
potential of emerging markets and are willing to bear the special risks of
investing a portion of their assets in those markets. The Fund is not a
complete investment program and investments in the securities of foreign
issuers generally involve risks in addition to the risks associated with
investments in the securities of U.S. issuers. The Fund is not intended for
investors whose objective is assured income or preservation of capital. See
"Risk Considerations."
The Fund currently seeks to achieve its investment objective by investing
all of its investable assets in the Portfolio, which has substantially the
same investment objective and policies as the Fund. There can be no assurance
that the Fund or Portfolio will achieve its investment objective.
INVESTMENT POLICIES
Although the following information describes the investment policies of
the Portfolio and the responsibilities of Schroder Core's Board of Trustees
(the "Schroder Core Board"), it applies equally to the Fund and the Trust's
Board of Trustees (the "Trust Board"). Additional information concerning the
investment policies of the Fund and the Portfolio is contained in the SAI.
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 (i) 67% of the
shares present or represented at a shareholder meeting at which the holders of
more than 50% of the outstanding shares are present or represented, or (ii) more
than 50% of outstanding shares. Non fundamental investment policies may be
changed by the Schroder Core Board without approval of the investors in the
Portfolio.
Under normal market conditions the Portfolio will invest at least 65% of
its total assets in emerging market equity and debt securities, including
common stocks; preferred stocks; convertible preferred stocks; stock rights
and warrants; convertible debt securities; and non-convertible debt
securities. (Investments in stock rights and warrants will not be considered
for purposes of determining compliance with this policy.) The Portfolio may
invest up to 35% of its total assets in high-risk debt securities that are
unrated or rated below investment grade. (See "Risk Considerations"). Under
certain circumstances, the Portfolio may invest indirectly in emerging market
securities by investing in other investment companies or vehicles. (See "Risk
Considerations -- Investment in Other Investment Companies or Vehicles".) The
Portfolio may acquire emerging market securities that are not denominated in
emerging market currency.
In recent years, many emerging market countries have begun programs of
economic reform: removing import tariffs, dismantling trade barriers,
deregulating foreign investment, privatizing state-owned industries,
permitting the value of their currencies to float against the dollar and other
major currencies, and generally reducing the level of state intervention in
industry and commerce. Important intra-regional economic integration also
holds the promise of greater trade and growth. At the same time, significant
progress has been made in restructuring the heavy external debt burden that
certain emerging market countries accumulated during the 1970s and 1980s. While
there is no assurance that these trends will continue, the Portfolio's
investment adviser will
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seek out attractive investment opportunities in these countries.
"Emerging market" countries are all those not included in the Morgan
Stanley Capital International World Index ("MSCI World") of major world
economies. If, however, the investment adviser determines that the economy of
a MSCI World-listed country is an emerging market economy, the adviser may
include such country in the emerging market category. The following countries
are currently excluded from the Portfolio's emerging market category:
Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany,
Ireland, Italy, Japan, Malaysia, Netherlands, New Zealand, Norway, Singapore,
Spain, Sweden, Switzerland, United Kingdom, and the United States of America.
The Portfolio will not necessarily seek to diversify investments on a
geographic basis and may invest more than 25% of its total assets in issuers
located in any one country. (See "Risk Considerations -- Geographic
Concentration".)
An issuer of a security will be considered to be domiciled or doing
business in an emerging market when (i) it is organized under the laws of an
emerging market country; (ii) its primary securities trading market is in an
emerging market country; (iii) in the judgment of the investment adviser, at
least 50% of the issuer's revenues or profits are derived from goods produced
or sold, investments made, or services performed in emerging market countries;
or (iv) it has at least 50% of its assets situated in emerging market
countries. The Portfolio may consider investment companies to be located in
the country or countries in which they primarily invest.
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's investments will
consist primarily of the common or preferred stock of established emerging
market companies that are listed on recognized securities exchanges or traded
in other established markets. However, the Portfolio may make limited
investment in convertible preferred stock, warrants and stock rights.
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. 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.
Convertible preferred stock generally may be converted at a stated price
within a specific amount of time into a specified number of shares of common
stock. A convertible security entitles the holder to receive the dividend paid
on preferred stock until the convertible security is converted or exchanged.
Before conversion, convertible securities have characteristics similar to
non-convertible debt securities in that they ordinarily
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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 usually are 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.
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.
AMERICAN DEPOSITORY RECEIPTS ("ADRs"). Due to the absence of established
securities markets in certain emerging market countries and restrictions in
certain countries on direct investment by foreign entities, the Portfolio may
invest in certain emerging market issuers through the purchase of sponsored
and unsponsored American Depository Receipts ("ADRs") or other similar
securities, such as American Depository Shares, Global Depository Shares or
International Depository Receipts. ADRs are receipts typically issued by U.S.
banks evidencing ownership of the underlying securities into which they are
convertible. These securities may or may not be denominated in the same
currency as the underlying securities. Unsponsored ADRs may be created without
the participation of the foreign issuer. Holders of unsponsored ADRs generally
bear all the costs of the ADR facility, whereas foreign issuers typically bear
certain costs in a sponsored ADR. The bank or trust company depository of an
unsponsored ADR may be under no obligation to distribute shareholder
communications received from the foreign issuer or to pass through voting
rights.
DEBT SECURITIES. The Portfolio may seek capital appreciation through
investment in emerging market convertible or non-convertible debt securities.
Capital appreciation in debt securities may arise as a result of a favorable
change in relative foreign exchange rates, in relative interest rate levels,
or in the creditworthiness of issuers. The receipt of income from such debt
securities is incidental to the Portfolio's objective of long-term capital
appreciation. Such income can be used, however, to offset the operating
expenses of the Portfolio. In accordance with its investment objective, the
Portfolio will not seek to benefit from anticipated short-term fluctuations in
currency exchange rates. The Portfolio also may invest to a certain extent in
debt securities in order to participate in debt-to-equity conversion programs
incident to corporate reorganizations.
Debt securities are generally subject to two kinds of risk -- Credit risk
and market risk. Credit risk refers to the ability of the debtor, and any
other obligor, to pay principal and interest on the debt as it becomes due.
The Portfolio may, from time to time, invest in debt securities with high risk
and high yields (as compared to other debt securities meeting the Portfolio's
investment criteria). The debt securities in which the Portfolio invests may
be unrated, but will not be in default at the time of purchase. Market risk
refers to the tendency of the value of debt securities to vary inversely with
interest rate changes. Certain debt instruments may also be subject to
extension risk, which refers to change in total return on a debt instrument
resulting from extension or abbreviation of the instrument's maturity.
The Portfolio may invest in debt securities issued or guaranteed by
emerging market governments (including countries, provinces and municipalities)
or their agencies and instrumentalities ("governmental entities"); debt
securities issued
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or guaranteed by international organizations designated or supported by multiple
foreign governmental entities (which are not obligations of foreign governments)
to promote economic reconstruction or development; and debt securities issued by
corporations or financial institutions.
BRADY BONDS. The Portfolio may invest a portion of its assets in Brady
Bonds, which are securities created through the exchange of existing
commercial bank loans to sovereign entities for new obligations in connection
with debt restructuring (under a debt restructuring plan introduced by former
U.S. Secretary of the Treasury, Nicholas F. Brady). Brady Bonds have been
issued only recently, and therefore do not have a long payment history. Brady
Bonds may have collateralized and uncollateralized components, are issued in
various currencies and are actively traded in the over-the-counter secondary
market. Brady Bonds are not considered U.S. Government securities. In light of
the residual risk associated with the uncollateralized portions of Brady Bonds
and, among other factors, the history of defaults with respect to commercial
bank loans by public and private entities of countries issuing Brady Bonds,
investments in Brady Bonds are considered speculative. Brady Bonds acquired by
the Portfolio could be subject to restructuring arrangements or to requests
for new credit, which could cause the Portfolio to suffer a loss of interest
or principal on its holdings. (For further information see "Brady Bonds," in
the Statement of Additional Information.)
INVESTMENT IN OTHER INVESTMENT COMPANIES OR VEHICLES. The Portfolio may be
able to invest in certain emerging markets solely or primarily through
governmentally authorized investment vehicles or companies. Pursuant to the
1940 Act, the Portfolio may invest up to 10% of its total assets in the shares
of other investment companies and up to 5% of its total assets in any one
investment company, as long as each investment does not represent more than 3%
of the outstanding voting stock of the investment company at the time of such
investment.
When investing through investment companies the Fund may pay substantial
premiums above such investment companies' net asset value per share. Such
investments are subject to limitations under the 1940 Act and market
availability. The Portfolio does not intend to invest in other investment
companies unless, in the judgment of SCMI, the potential benefits of such
investment justify the payments of any applicable premiums or sales charges.
As a shareholder in an investment company, the Portfolio would bear its
ratable share of the investment company's expenses, including its advisory and
administrative fees. At the same time, the Portfolio would continue to pay its
own fees and expenses.
TEMPORARY DEFENSIVE INVESTMENTS. For temporary defensive purposes, the
Portfolio may invest without limitation in (or enter into repurchase
agreements maturing in seven days or less with U.S. banks and broker-dealers
with respect to) short-term debt securities, including commercial paper, U.S.
Treasury bills, other short-term U.S. Government securities, certificates of
deposit, and bankers' acceptances of U.S. banks. The Portfolio also may hold
cash and time deposits denominated in any major foreign currency in foreign
banks. See the SAI for further information about these securities.
REPURCHASE AGREEMENTS. The Portfolio may invest in repurchase agreements,
which are a means of investing monies for a short period, whereby 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 value of the underlying securities
purchased by the Portfolio is 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 bank holds the securities until
they are repurchased. If the seller defaults under a repurchase
9
<PAGE>
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.
FOREIGN EXCHANGE CONTRACTS. Changes in currency exchange rates will affect
the U.S. dollar values of securities denominated in foreign currencies. The
rate of exchange between the U.S. dollar and other currencies fluctuates in
response to forces of supply and demand in the foreign exchange markets. These
forces are affected by the international balance of payments and other
economic and financial conditions, government intervention, speculation, and
other factors, many of which may be difficult (if not impossible) to predict.
When investing in foreign securities, the Portfolio usually effects currency
exchange transactions on a spot (i.e., cash) basis at the spot rate prevailing
in the foreign exchange market. The Portfolio incurs foreign exchange expenses
in converting assets from one currency to another.
The Portfolio may enter into forward contracts for the purchase or sale of
foreign currency (i) to "lock in" the U.S. dollar price of the securities
denominated in a foreign currency or the U.S. dollar value of interest and
dividends to be paid on such securities or (ii) to hedge against the
possibility that a foreign currency may suffer a decline against the U.S.
dollar. A forward currency contract is an obligation to purchase or sell a
specific currency at a future date (which may be any fixed number of days from
the date of the contract agreed upon by the parties) at a price set at the
time of the contract. This method of attempting to hedge against a decline in
the value of a currency does not eliminate fluctuations in the underlying
prices of securities and exposes the Portfolio to the risk that the
counterparty is unable to perform. Although the strategy of engaging in
foreign currency transactions could reduce the risk of loss due to a decline
in the value of the hedged currency, it could also limit the potential gain
from an increase in the value of the currency. The Portfolio does not intend
to maintain a net exposure to such contracts if the fulfillment of obligations
under such contracts would obligate it to deliver an amount of foreign
currency in excess of the value of its portfolio securities or other assets
denominated in the currency. The Portfolio will not enter into these contracts
for speculative purposes and will not enter into non-hedging currency
contracts. The Portfolio will generally not enter into a forward contract with
a term of greater than one year. Forward contracts are not exchange traded,
and there can be no assurance that a liquid market will exist at a time when
the Portfolio seeks to close out a forward contract. Currently, only a limited
market, if any, exists for hedging transactions relating to currencies in
certain emerging markets or to securities of issuers domiciled or principally
engaged in business in certain emerging markets. This may limit the
Portfolio's ability to effectively hedge its investments in those markets.
These contracts involve a risk of loss if SCMI fails to predict currency
values. The Portfolio has no plan to enter into currency futures or options
contracts, but may do so in the future. See "Risk Considerations -- Currency
Fluctuations and Devaluations."
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 (i) by virtue of the absence of a readily available market or (ii)
because of legal or contractual restrictions on resale ("restricted
securities"). There may be undesirable delays in selling illiquid securities
at prices representing their fair value. This policy includes over-the-counter
options held by the Portfolio and the 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 (pursuant to Rule 144A
under the Securities Act of
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1933, as amended) but may be resold 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. See "Investment
Policies -- Illiquid and Restricted Securities" in the SAI for further
information.
LOANS OF PORTFOLIO SECURITIES. The Portfolio may lend portfolio securities
(otherwise than as occurs in repurchase transactions) to brokers, dealers and
other financial institutions meeting specified credit conditions if the loan
is collateralized in accordance with applicable regulatory requirements and
if, after any loan, the value of the securities loaned does not exceed 25% of
the value of the Portfolio's total assets. By so doing, the Portfolio attempts
to earn interest income. In the event of the other party's bankruptcy, the
Portfolio could experience delays in recovering the securities it lent; if, in
the meantime, the value of the securities the Portfolio lent has increased,
the Portfolio, and thus the Fund, could experience a loss.
The Portfolio may lend its securities if it maintains in a segregated
account liquid assets equal 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; and, in the event of
a default by the borrower, the Portfolio will (if permitted by law) dispose of
such collateral except for such part thereof that is a security in which the
Portfolio is permitted to invest. 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. See "Loans of
Portfolio Securities" in the SAI for further information on securities loans.
OPTIONS AND FUTURES TRANSACTIONS. Although the Portfolio does not
presently intend to do so, it may (a) write covered call options on portfolio
securities, the U.S. dollar and emerging market currencies without limit;
(b) write covered put options on portfolio securities and the U.S. dollar and
emerging market currencies with the limitation that the aggregate value of the
obligations underlying the puts determined as of the date the options are sold
will not exceed 50% of the Portfolio's net assets; (c) purchase call and put
options in amounts up to 5% of its total assets; and (d)(i) purchase and sell
futures contracts that are traded on U.S. and foreign commodity exchanges on
underlying portfolio securities, any emerging market currency, U.S. and
emerging market fixed-income securities and such indices of U.S. or emerging
market equity or fixed-income securities as may exist or come into being and
(ii) purchase and write call and put options on such futures contracts, in all
cases involving such futures contracts or options on futures contracts for
hedging purposes only, and without limit, except that the Portfolio may not
enter into futures contracts or purchase related options if, immediately
thereafter, the amount committed to margin plus the amount paid for premiums for
unexpired options on futures contracts generally exceeds 5% of the
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value of the Portfolio's total assets. All of the foregoing are referred to as
"Hedging Instruments."
In general, the Portfolio may use Hedging Instruments: (1) to protect
against declines in the market value of the Portfolio's portfolio securities
or stock index futures, and the currencies in which they are denominated, or
(2) to establish a position in securities markets as a temporary substitute
for purchasing particular equity securities. The Portfolio will not use
Hedging Instruments for speculation. Hedging Instruments have certain risks
associated with them including: (a) the possible failure of such instruments
as hedging techniques in cases where the price movement of the securities
underlying the options or futures does not follow the price movements of the
portfolio securities subject to the hedge; (b) potentially unlimited loss
associated with futures transactions and the possible lack of a liquid
secondary market for closing out a futures position; and (c) possible losses
resulting from the inability of the Portfolio's investment adviser to predict
the direction of stock prices, interest rates and other economic factors. In
addition, only a limited market, if any, currently exists for hedging
transactions relating to currencies in many emerging markets or to securities
of issuers domiciled or principally engaged in business in emerging markets.
This may limit the Portfolio's ability to effectively hedge its investments in
such emerging market countries. The Hedging Instruments the Portfolio may use
and the risks associated with them are described in greater detail under
"Options and Futures Transactions" in the SAI.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. The
Portfolio may purchase securities on a when-issued or delayed delivery basis
or may purchase or sell securities on a forward commitment basis. When such
transactions are negotiated, the price is fixed at the time of the commitment,
but delivery and payment may take place a month or more after the date of the
commitment. There is no overall limit on the percentage of the Portfolio's
assets that may be committed to the purchase of securities on a when-issued,
delayed delivery or forward commitment basis. An increase in the percentage of
the Portfolio's assets committed to the purchase of securities on a
when-issued, delayed delivery or forward commitment basis may increase the
volatility of the Portfolio's net asset value.
WHEN, AS AND IF ISSUED SECURITIES. The Portfolio may purchase securities
on a "when, as and if issued" basis under which the issuance of the security
depends upon the occurrence of a subsequent event, such as approval of a
merger, corporate reorganization, leveraged buyout or debt restructuring. If
the anticipated event does not occur and the securities are not issued, the
Portfolio will have lost an investment opportunity. There is no overall limit
to the percentage of the Portfolio's assets that may be committed to the
purchase of securities on a "when, as and if issued" basis. An increase in the
percentage of the Portfolio's assets committed to the purchase of securities
on a "when, as and if issued" basis may increase the volatility of its net
asset value.
RISK CONSIDERATIONS
FOREIGN INVESTMENTS. All investments, domestic and foreign, involve risk.
Investment in the securities of foreign issuers may involve risks in addition
to those normally associated with investments in the securities of U.S.
issuers. While the Portfolio will generally invest only in securities of
companies and governments in countries that SCMI considers both politically
and economically stable, all foreign investments are subject to risks of
foreign political and economic instability, adverse movements in foreign
exchange rates, the imposition or tightening of exchange controls, or other
limitations on repatriation of foreign capital. Foreign investments are
subject to the risk of changes in foreign governmental attitudes towards
private investment that could lead to nationalization, increased taxation or
confiscation of Portfolio assets.
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Moreover, (i) dividends payable on foreign securities may be subject to
foreign withholding taxes, thereby reducing the income earned by the
Portfolio; (ii) commission rates payable on foreign portfolio transactions are
generally higher than in the United States; (iii) accounting, auditing and
financial reporting standards differ from those in the United States, which
means that less information about foreign companies may be available than is
generally available about issuers of comparable securities in the U.S.; (iv)
foreign securities often trade less frequently and with lower volume than U.S.
securities and consequently may exhibit greater price volatility; and (v)
foreign securities trading practices, including those involving securities
settlement, may expose the Portfolio to increased risk in the event of a
failed trade or the insolvency of a foreign broker-dealer or registrar.
REGULATION AND LIQUIDITY OF MARKETS. Government supervision and regulation
of exchanges and brokers in emerging market countries is typically less
extensive than in the United States. These markets may have different
clearance and settlement procedures, and in certain cases, settlements have
not kept pace with the volume of securities transactions, making them
difficult to conduct. Delays in settlement could adversely affect or interrupt
the Portfolio's intended investment program or result in investment losses due
to intervening declines in security values.
Securities markets in emerging market countries are substantially smaller
than U.S. securities markets and have substantially lower trading volume,
resulting in diminished liquidity and greater price volatility. Reduced
secondary market liquidity may make it more difficult for the Portfolio to
determine the value of its portfolio securities or dispose of particular
instruments when necessary. Brokerage commissions and other transaction costs
on foreign securities exchanges are also generally higher.
EMERGING MARKETS. In any emerging market country, there is the possibility
of expropriation of assets, confiscatory taxation, nationalization of
companies or industries, foreign exchange controls, foreign investment
controls on daily stock market movements, default in foreign government
securities, political or social instability, or diplomatic developments that
could affect investments in those countries. In the event of expropriation,
nationalization or other confiscation, the Portfolio could lose its entire
investment in a country. The economies of developing countries generally are
heavily dependent upon international trade and, accordingly, have been and may
continue to be adversely affected by trade barriers, exchange controls,
managed adjustments in relative currency values and other protectionist
measures imposed or negotiated by the countries with which they trade. There
may also be less monitoring and regulation of emerging markets and the
activities of brokers there. Investing may require that the Portfolio adopt
special procedures, seek local government approvals or take other actions that
may incur costs for the Portfolio.
Certain emerging market countries may restrict investment by foreign
entities by limiting the size of foreign investment in certain issuers;
requiring prior approval of foreign investment by the government; imposing
additional tax on foreign investors; or limiting foreign investors to specific
classes of securities of an issuer that have less advantageous rights (with
regard to price or convertibility, for example) than classes available to
domiciliaries of the country. These restrictions or controls may at times
limit or preclude investment in certain securities and may increase the costs
and expenses of the Portfolio.
CURRENCY FLUCTUATIONS AND DEVALUATIONS. Because the Portfolio will invest
heavily in non-U.S. currency-denominated securities, changes in foreign
currency exchange rates will affect the value of the Portfolio's investments.
A decline against the dollar in the value of currencies in which the
Portfolio's investments are denominated will result in a corresponding decline
in the dollar value of the Portfolio's assets. This risk is heightened in some
emerging market countries.
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Some emerging market countries may also have managed currencies that do not
freely float against the dollar.
The Portfolio is required to distribute substantially all of its
investment income in U.S. dollars. Because most of the Portfolio's income will
be received and realized in foreign currencies, a decline in the value of a
particular foreign currency against the U.S. dollar that occurs after the
Portfolio's income has been earned may require the Portfolio to liquidate some
portfolio securities to acquire sufficient U.S. dollars to make such
distributions. Similarly, if the exchange rate declines between the time the
Portfolio incurs expenses in U.S. dollars and the time such expenses are paid,
the Portfolio may be required to liquidate additional foreign securities to
purchase the U.S. dollars required to meet such expenses.
INFLATION. Several emerging market countries have experienced high, and in
some periods extremely high, rates of inflation in recent years. Inflation and
rapid fluctuations in inflation rates may adversely affect these countries'
economies and securities markets. Further, inflation accounting rules in some
emerging market countries require, for companies that keep accounting records
in the local currency, that certain assets and liabilities be restated on the
company's balance sheet in order to express items in terms of currency of
constant purchasing power. Inflation accounting may indirectly generate losses
or profits for certain emerging market companies.
NON-DIVERSIFIED INVESTMENTS. Because suitable investments in emerging
market countries may be limited, the Portfolio, like the Fund, has classified
itself as a 'non-diversified investment company' under the 1940 Act so that it
may invest more than 5% of its total assets in the securities of a single
issuer. This classification may not be changed without a shareholder vote.
However, so that the Portfolio may continue to qualify as a 'regulated
investment company' under Subchapter M of the Internal Revenue Code of 1986,
as amended at the close of each quarter of the taxable year, (i) not more than
25% of the market value of the Portfolio's total assets will be invested in
the securities of a single issuer, and (ii) with respect to 50% of the market
value of its total assets, not more than 5% will be invested in the securities
of a single issuer; and the Portfolio will not own more than 10% of the
outstanding voting securities of a single issuer. See "Dividends,
Distributions and Taxes."
To the extent the Portfolio makes investments in excess of 5% of its
assets in a particular issuer, its exposure to credit and market risks
associated with that issuer is increased. Also, since a relatively high
percentage of the Portfolio's assets may be invested in the securities of a
limited number of issuers, the Portfolio may be more susceptible to any single
economic, political or regulatory occurrence than a diversified investment
company.
GEOGRAPHIC CONCENTRATION. The Portfolio may invest more than 25% of its
total assets in issuers located in any one country. To the extent it invests
in issuers of one country, the Portfolio is susceptible to factors adversely
affecting that country, including political and economic developments and
foreign exchange rate fluctuations as discussed above. The value of the
Portfolio's assets may fluctuate more widely than the value of shares of a
comparable fund with less geographic concentration.
CERTAIN RISKS OF DEBT SECURITIES. The Portfolio may invest without
limitation in investment grade emerging market debt securities; it may invest
up to 35% of its total assets in debt securities that are unrated or are rated
below investment grade (below Baa by Moody's or BBB by S&P; for a further
description of S&P's and Moody's securities ratings please see the Appendix to
the SAI). Note that even debt securities rated Baa by Moody's are considered
to have speculative characteristics. Below investment grade securities (and
unrated securities of comparable quality) ("high yield/high risk securities")
are predominantly speculative with respect to the
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capacity to pay interest and repay principal, and generally involve a greater
volatility of price than securities in higher rating categories. These
securities are commonly referred to as "junk" bonds. The risks associated with
junk bonds are generally greater than those associated with higher-rated
securities. The Portfolio is not obligated to dispose of securities due to
rating changes by Moody's, S&P or other rating agencies. The Portfolio is not
authorized to purchase debt securities that are in default, except for
sovereign debt (discussed below) in which the Portfolio may invest no more
than 5% of its total assets while such sovereign debt securities are in
default.
In purchasing high yield/high risk securities, the Portfolio will rely on
the investment adviser's judgment, analysis and experience in evaluating the
creditworthiness of an issuer of such securities. Nonetheless, investors
should review the investment objective and policies of the Fund and consider
their willingness to assume risk before making an investment.
High yield/high risk securities' market values are affected more by
individual issuer developments and are more sensitive to adverse economic
changes than are higher-rated securities. Issuers of high yield/high risk
securities may be highly leveraged and may not have more traditional methods
of financing available to them. During economic downturns or substantial
periods of rising interest rates, issuers of high yield/high risk securities,
especially highly leveraged ones, may be less able to service their principal
and interest payment obligations, meet their projected business goals, or
obtain additional financing. The risk of loss due to default by the issuer is
significantly greater for holders of high yield/high risk securities because
such securities may be unsecured and may be subordinated to other creditors of
the issuer. In addition, the Portfolio may incur additional expenses if it is
required to seek recovery upon a default by the issuer of such an obligation
or participate in the restructuring of such obligation.
Periods of economic uncertainty and change will likely cause increased
volatility in the market prices of high yield/high risk securities and,
correspondingly, the Portfolio's net asset value if it invests in such
securities; market prices of such securities structured as zero coupon or
pay-in-kind securities are more affected by interest rate changes and thus
tend to be more volatile than securities that pay interest periodically and in
cash.
High yield/high risk securities may have call or redemption features which
would permit an issuer to repurchase the securities from the Portfolio. If a
call were exercised by the issuer during a period of declining interest rates,
the Portfolio would likely have to replace called securities with lower
yielding securities, thus decreasing the Portfolio's net investment income and
dividends to shareholders.
While a secondary trading market for high yield/high risk securities does
exist, it is generally not as liquid as the secondary market for higher rated
securities. In periods of reduced secondary market liquidity, prices of high
yield/high risk securities may become volatile and experience sudden and
substantial price declines. The Portfolio may therefore have difficulty
disposing of particular issues to meet its liquidity needs or in response to a
specific economic event (such as a deterioration in the creditworthiness of
the issuer). Reduced secondary market liquidity for certain high yield/high
risk securities also may make it more difficult for the Portfolio to obtain
accurate market quotations (for purposes of valuing the Portfolio's investment
portfolio): market quotations are generally available on many high yield/high
risk securities only from a limited number of dealers and may not necessarily
represent firm bids of such dealers or prices for actual sales. Under such
conditions, high yield/high risk securities may have to be valued at fair
value as determined by the Schroder Core Board or SCMI under Board-approved
guidelines.
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Adverse publicity and investor perceptions (which may not be based on
fundamental analysis) may decrease the value and liquidity of high yield/high
risk securities, particularly in a thinly traded market. Factors adversely
affecting the market value of high yield/high risk securities are likely to
adversely affect the Portfolio's, and thus the Fund's, net asset value.
SOVEREIGN DEBT. Investment in sovereign debt carries high risk. Certain
emerging market countries such as Argentina, Brazil and Mexico are among the
largest debtors to commercial banks and foreign governments. At times, certain
emerging market countries have declared moratoria on the payment of principal
and/or interest on outstanding debt. The governmental entity that controls the
repayment of sovereign debt may not be able or willing to repay the principal
and/or interest when due in accordance with the terms of such debt. A
governmental entity's willingness or ability to repay principal and interest
when it is due may be affected by many factors, such as its cash flow
situation, the extent of its foreign reserves, the availability of sufficient
foreign exchange, the relative size of the debt service burden to the economy
as a whole, and political restraints. The Portfolio, as a holder of sovereign
debt, may be asked to participate in the rescheduling of such debt and to
extend further loans to governmental entities. There is no bankruptcy
proceeding by which defaulted sovereign debt may be collected.
The sovereign debt instruments in which the Portfolio may invest involve
great risk and are deemed to be the equivalent in terms of quality to high
yield/high risk securities discussed above and are subject to many of the same
risks as such securities. Similarly, the Portfolio may have difficulty
disposing of certain sovereign debt obligations because there may be a thin
trading market for such securities. The Portfolio will not invest more than 5%
of its total assets in sovereign debt in default.
PORTFOLIO TURNOVER. The Portfolio may engage in short-term trading but its
portfolio turnover rate is not expected to exceed 100%. High portfolio
turnover and short-term trading involve correspondingly greater commission
expenses and transaction costs. Also, higher portfolio turnover rates may
cause shareholders of the Portfolio to recognize gains for federal income tax
purposes. See "Taxation" in the SAI.
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MANAGEMENT OF THE FUND
SCHRODER GROUP ASSETS UNDER MANAGEMENT WORLDWIDE AS OF DECEMBER 31, 1996 --
OVER $130 BILLION
[GRAPHIC]
THE SCHRODER INVESTMENT MANAGEMENT GROUP INVESTMENT AND REPRESENTATIVE OFFICES
WORLDWIDE INCLUDE NEW YORK, LONDON, BOSTON, ZURICH, WARSAW, TOKYO, HONG KONG,
BEIJING, SHANGHAI, TAIPEI, SEOUL, BANGKOK, KUALA LUMPUR, SINGAPORE, JAKARTA,
SYDNEY, BUENOS AIRES, SAO PAULO, BOGOTA AND CARACAS.
TOGETHER, SCHRODER CAPITAL MANAGEMENT INTERNATIONAL AND
SCHRODER CAPITAL MANAGEMENT INC. MANAGE OVER $24 BILLION
BOARDS OF TRUSTEES
The business and affairs of the Fund are managed under the direction of
the Trust Board. The business and affairs of the Portfolio are managed under
the direction of the Schroder Core Board. Additional information regarding the
trustees and executive officers of the Trust, as well as Schroder Core's
trustees and executive officers, may be found in the SAI under the heading
"Management, Trustees and Officers."
INVESTMENT ADVISER AND PORTFOLIO MANAGER
As investment adviser to the Portfolio, SCMI manages the Portfolio and
continuously reviews, supervises and administers its investments. SCMI is
responsible for making decisions relating to the Portfolio's investments and
placing purchase and sale orders regarding such investments with brokers or
dealers it selects. For these services, the Investment Advisory Agreement
between SCMI and Schroder Core provides that SCMI is entitled to receive a
monthly advisory fee at the annual rate of 1.00% 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, 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.
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The Schroder Group specializes in providing investment management services.
John A. Troiano, a Vice President of the Trust and Schroder Core, with the
assistance of an SCMI investment committee, is primarily responsible for the
day-to-day management of the Portfolio's investment portfolio. Mr. Troiano
managed the Fund's investment portfolio from its inception until it invested
its assets in the Portfolio and has managed the Portfolio's assets since its
inception. Mr. Troiano has been a Managing Director of SCMI since October 1995
and has been employed by various Schroder Group companies in the investment
research and portfolio management areas since 1988.
The Fund began pursuing its investment objective through investment in the
Portfolio on November 1, 1995. The Fund may withdraw its investment from the
Portfolio at any time if the Board determines that it is in the best interests
of the Fund and its shareholders to do so. (See "Other Information -- Fund
Structure.") Accordingly, the Fund has retained SCMI as its investment adviser
to manage the Fund's assets in the event the Fund withdraws its investment.
SCMI does not receive an investment advisory fee with respect to the Fund so
long as the Fund remains completely invested in the Portfolio (or any other
investment company). If the Fund resumes directly investing in portfolio
securities, the Fund will pay SCMI a monthly advisory fee equal at the annual
rate of 1.00% of the Fund's average daily net assets. The investment advisory
agreement between SCMI and the Trust with respect to the Fund is the same in
all material respects as the investment advisory contract between SCMI and
Schroder Core with respect to the Portfolio (except as to the parties, the
fees payable thereunder, the circumstances under which fees will be paid and
the jurisdiction whose laws govern the agreement). For the fiscal year ended
October 31, 1996, the Fund paid SCMI an advisory fee of 0.10% of its average
daily net assets.
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 sub-administration
agreement with Forum, Two Portland Square, Portland, Maine 04101. Pursuant to
these agreements, Schroder Advisors and Forum provide certain management and
administrative services necessary for the Fund's operations. Schroder Advisors
is compensated at the annual rate of 0.05% of the Fund's average daily net
assets. Forum is compensated at the annual rate of 0.05% of the Fund's average
daily net assets.
Schroder Advisors and Forum provide similar services to the Portfolio, for
which the Portfolio pays Schroder Advisors an annual rate of 0.05% and pays
Forum a monthly fee at the annual rate of 0.10% of the Portfolio's average
daily net assets.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICE PLAN
Schroder Advisors acts as distributor of the Fund's shares. Schroder
Advisors was organized in 1989 as a registered broker-dealer to serve as an
administrator and distributor for the Fund and other mutual funds. The Trust
may compensate Schroder Advisors under a distribution plan, adopted pursuant
to Rule 12b-1 under the 1940 Act (the "Distribution Plan") by the Trust on
behalf of the Fund's Advisor Shares. Payments under the Distribution Plan
would be made monthly at an annual rate of up to 0.50% of the Fund's average
daily net assets attributable to Advisor Shares. Schroder Advisors, in turn,
may use these payments to compensate others for services provided, or to
reimburse others for expenses incurred, in connection with the distribution of
Advisor Shares. The maximum annual amount payable under the Distribution Plan
is currently 0.25%, but no payments will be made
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under the Distribution Plan until the Board so authorizes.
Payments under the Distribution Plan may be for various types of costs,
including: (i) advertising expenses, (ii) costs of printing prospectuses and
other materials to be given or sent to prospective investors, (iii) expenses
of sales employees or agents of Schroder Advisors, including salary,
commissions, travel and related expenses in connection with the distribution
of Advisor Shares, (iv) payments to broker-dealers who advise shareholders
regarding the purchase, sale, or retention of Advisor Shares, and (v) payments
to banks, trust companies, broker-dealers (other than Schroder Advisors) or
other financial organizations (collectively, "Service Organizations").
Payments to a particular Service Organization under the Distribution Plan are
calculated by reference to the average daily net assets of Advisor Shares
owned beneficially by investors who have a brokerage or other service
relationship with the Service Organization. The Fund will not be liable for
distribution expenditures made by Schroder Advisors in any given year in
excess of the maximum amount payable under the Distribution Plan in that year.
Costs or expenses in excess of the annual limit may not be carried forward to
future years. Salary expenses of sales personnel who are responsible for
marketing various shares of portfolios of the Trust may be allocated to those
portfolios, including the Advisor Shares of the Fund, that have adopted a plan
similar to that of the Fund on the basis of average daily net assets. Travel
expenses may be allocated to, or divided among, the particular portfolios of
the Trust for which they are incurred.
The Trust, on behalf of the Fund, has also adopted a shareholder service
plan (the "Shareholder Service Plan") pursuant to which Schroder Advisors is
authorized to pay Service Organizations a servicing fee. Payments under the
Shareholder Service Plan may be for various types of services, including:
(i) answering customer inquiries regarding the manner in which purchases,
exchanges and redemptions of shares of the Fund may be effected and other
matters pertaining to the Fund's services, (ii) providing necessary personnel
and facilities to establish and maintain shareholder accounts and records,
(iii) assisting shareholders in arranging for processing purchase, exchange
and redemption transactions, (iv) arranging for the wiring of funds,
(v) guaranteeing shareholder signatures in connection with redemption orders and
transfers and changes in shareholder-designated accounts, (vi) integrating
periodic statements with other customer transactions and (vii) providing such
other related services as the shareholder may request. The maximum amount
payable under the Shareholder Services Plan is 0.25% of the Fund's average
daily net assets attributable to Advisor Shares.
Payments to a particular Service Organization under the Shareholder
Service Plan are calculated by reference to the average daily net assets of
Advisor Shares owned beneficially by investors who have a service relationship
with the Service Organization. Some Service Organizations may impose
additional or different conditions on their clients, such as requiring them to
invest more than the minimum or subsequent investments specified by the Fund
or charging a direct fee for servicing. If imposed, these fees would be in
addition to any amounts be paid to the Service Organization by Schroder
Advisors. Each Service Organization has agreed to transmit to its clients a
schedule of any such fees. Shareholders using Service Organizations are urged
to consult them regarding any such fees or conditions.
EXPENSES
SCMI and Schroder Advisors have voluntarily undertaken to waive a portion
of their fees or assume certain expenses of the Fund in order to limit total
Fund expenses (excluding taxes, interest, brokerage commissions and other
portfolio transaction expenses and extraordinary expenses) chargeable to
Advisor Shares to 1.70% of the
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average daily net assets of the Fund attributable to those shares. In
addition, effective March 1, 1997, SCMI voluntarily has agreed to waive
advisory fees paid the Portfolio to 0.85% of the average daliy net assets.
Neither expense limitation can 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 and seeks "best
execution" of such portfolio transactions. The Portfolio may pay brokers
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. Commission rates for brokerage transactions are fixed on
many foreign securities exchanges, which may cause higher brokerage expenses
to accrue to the Portfolio than would be the case for comparable transactions
effected on U.S. securities exchanges.
Subject to the Portfolio's policy of obtaining the best price consistent
with quality of execution on transactions, SCMI may employ Schroder Securities
Limited and its affiliates (collectively, "Schroder Securities"), affiliates
of SCMI, to effect transactions of the Portfolio on certain foreign securities
exchanges. Because of the affiliation between SCMI and Schroder Securities,
the Portfolio's payment of commissions to Schroder Securities is subject to
procedures adopted by the Schroder Core Board designed to ensure that the
commissions will not exceed the usual and customary brokers' commissions. No
specific portion of the Portfolio's brokerage will be directed to Schroder
Securities and in no event will Schroder Securities receive any brokerage in
recognition of research services.
Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc., and subject to seeking the most favorable price and
execution available and such other policies as the Schroder Core Board may
determine, SCMI may consider sales of shares of the Fund or any other entity
that invests in the Portfolio as a factor in the selection of broker-dealers
to execute portfolio transactions for the Portfolio.
Although the Portfolio does not currently engage in directed brokerage
arrangements to pay expenses, it may do so in the future. These arrangements,
(whereby brokers executing the Portfolio's portfolio transactions 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 materially
increase the brokerage commissions paid by the Portfolio.
CODE OF ETHICS
The Trust, Schroder Core, SCMI, Schroder Advisors, and Schroders
Incorporated have each adopted a code of ethics that contains a policy on
personal securities transactions by "access persons," including portfolio
managers and investment analysts. That policy complies in all material
respects with the recommendations set forth in the Report of the Advisory
Group on Personal Investing of the Investment Company Institute, of which the
Trust is a member.
INVESTMENT IN THE FUND
PURCHASE OF SHARES
Investors may purchase Advisor Shares directly from the Trust.
Prospectuses, sales material and Account Applications can be obtained from the
Trust or through Forum Financial Corp., the Fund's transfer agent (the
"Transfer Agent"). (See "Other Information -- Shareholder Inquiries.")
Investments may also be made through Ser-
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vice Organizations that assist their customers in purchasing shares of the
Fund. Service Organizations may charge their customers a service fee for
processing orders to purchase or sell shares of the Fund. Investors wishing to
purchase shares through their accounts at a Service Organization should
contact that organization directly for appropriate instructions.
Shares of the Fund are offered at the net asset value next determined
after receipt of a completed Account Application (at the address set forth
below). The minimum initial investment is $250,000. There is no minimum for
subsequent investments. All purchase payments are invested in full and
fractional shares. The Fund is authorized to reject any purchase order.
Purchases of Fund shares are subject to a purchase charge of 0.50% of the
amount invested. This charge is designed to cover the transaction costs the
Fund incurs (either directly or indirectly) as a result of investments in the
Fund, including brokerage commissions in acquiring portfolio securities;
currency transaction costs and transfer agent costs; and to protect the
interests of shareholders. This charge, which is not a sales charge, is paid
to the Fund, not to Schroder Advisors or any other entity. The purchase charge
is not assessed on the reinvestment of dividends or distributions or shares
purchased through a subscription in kind.
Purchases may be made by mailing a check (in U.S. dollars), payable to
Schroder Emerging Markets Fund Institutional Portfolio, to:
Schroder Emerging Markets Fund
Institutional Portfolio --
Advisor Shares
P.O. Box 446
Portland, Maine 04112
For initial purchases, the check must be accompanied by a completed
Account Application in proper form. Further documentation may be requested
from corporations, administrators, executors, personal representatives,
directors or custodians to evidence the authority of the person or entity
making the subscription request.
Investors and Service Organizations (on behalf of their customers) may
transmit purchase payments by Federal Reserve Bank wire directly to the Fund
as follows:
Chase Manhattan Bank
New York, NY
ABA No.: 021000021
For Credit To: Forum Financial Corp.
Account. No.: 910-2-718187
Ref.: Schroder Emerging Markets Fund Institutional Portfolio -- Advisor
Shares
Account of: (shareholder name)
Account Number: (shareholder account number)
The wire order must specify the name of the Fund, the shares' class (I.E.,
Advisor Shares), the account name and number, address, confirmation number,
amount to be wired, name of the wiring bank, and name and telephone number of
the person to be contacted in connection with the order. If the initial
investment is by wire, an account number will be assigned and an Account
Application must be completed and mailed to the Fund before any account 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"
below.
The Fund's Transfer Agent establishes for each shareholder of record an
open account to which all shares purchased and all reinvested dividends and
other distributions are credited. Although most shareholders elect not to
receive share certificates, certificates for full shares can be obtained by
written request to the Transfer Agent. No certificates are issued for
fractional shares.
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The Transfer Agent will deem an account lost if six months have passed
since correspondence to the shareholder's address of record is returned,
unless the Transfer Agent determines the shareholder's new address. When an
account is deemed lost, dividends and other distributions will automatically
be reinvested. In addition, the amount of any outstanding checks for dividends
and 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 of the Fund are offered in connection with tax-deferred retirement
plans. Application forms and further information about these plans, including
applicable fees, are available upon request. Before investing in the Fund
through one of these plans, investors should consult their tax advisors.
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 $250; the minimum subsequent investment is $250. Under certain
circumstances contributions to an IRA may be tax deductible. IRAs are
available to individuals (and their spouse) 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 qualified plan. Tax advice should be
obtained before effecting a rollover.
EXCHANGES
Shareholders may exchange Shares of the Fund for shares of any other
series of the Trust so long as they meet the initial investment minimum of the
fund being purchased and they 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 for Federal income tax purposes on which a shareholder may realize a
capital gain or loss. An exchange may be made by calling the Transfer Agent at
(800) 344-8332 or by mailing written instructions to Schroder Capital Funds
(Delaware), P.O. Box 446, Portland, Maine 04112. Exchange privileges may be
exercised only in those states where shares of the other series of the Trust
may legally be sold. Exchange privileges may be amended or terminated at any
time upon sixty (60) days' notice.
REDEMPTION OF SHARES
Shares of the Fund are redeemed at their next determined net asset value
after receipt by the Fund (at the address set forth above under "Purchase of
Shares") of a redemption request in proper form. Redemption requests may be
made between 9:00 a.m. and 6:00 p.m. (Eastern Time) on each Fund Business Day.
Redemption requests that are received prior to 4:00 p.m. (Eastern Time) will
be processed at the net asset value determined as of that day. Redemption
requests that are received after 4:00 p.m. (Eastern Time) will be processed at
the net asset value determined the next Fund Business Day. See "Net Asset
Value" below.
Redemptions of Fund shares are subject to a redemption charge of 0.50% of
the net asset value of the shares redeemed. This charge is designed to cover
the transaction costs the Fund incurs in redeeming Fund shares (either
directly or indirectly as a result of its investment in the Portfolio),
including brokerage commissions in selling port-
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folio securities, currency transaction costs, transfer agent costs, and to
protect the interests of shareholders. This charge, which is not a sales
charge, is paid to the Fund, not to Schroder Advisors or any other entity. The
redemption charge is not assessed on shares acquired through the reinvestment
of dividends or distributions or on redemptions in kind. For purposes of
computing the redemption charge, redemptions by a shareholder are deemed to be
made in the following order: (i) from Shares purchased through the
reinvestment of dividends and distributions (with respect to which no
redemption charge is applied) and (ii) from Shares for which the redemption
charge is applicable, on a first purchased, first redeemed basis.
BY TELEPHONE. Redemption requests may be made by telephoning the Transfer
Agent at the telephone number on the cover page of this Prospectus. A
shareholder must provide the Transfer Agent with the class of shares, the
dollar amount or number of shares to be redeemed, shareholder account number,
and some additional form of identification such as a password. A redemption by
telephone may be made only if the telephone redemption privilege option has
been elected on the Account Application or otherwise in writing. In an effort
to prevent unauthorized or fraudulent redemption requests by telephone,
reasonable procedures will be, followed by the Transfer Agent to confirm that
telephone instructions are genuine. The Transfer Agent and the Trust generally
will not be liable for any losses due to unauthorized or fraudulent redemption
requests, but may be liable if they do not follow these procedures. Shares for
which certificates have been issued may not be redeemed by telephone. In times
of drastic economic or market 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 class of shares, the dollar amount or number of Shares to be redeemed, and
the shareholder account number. The letter must also be signed in exactly the
same way the account is registered (if there is more than one owner of the
Shares, all must sign) and, in certain cases, signatures must be guaranteed by
an institution that is acceptable to the Transfer Agent. Such institutions
include certain banks, brokers, dealers (including municipal and government
securities brokers and dealers), credit unions and savings associations.
Notaries public are not acceptable. Further documentation may be requested to
evidence the authority of the person or entity making the redemption request.
Questions concerning the need for signature guarantees or documentation of
authority should be directed to the Fund at the above address or by calling
the telephone number appearing on the cover of this Prospectus.
If Shares to be redeemed are held in certificate form, the certificates
must be enclosed with the redemption request and the assignment form on the
back of the certificates (or an assignment separate from the certificates but
accompanied by the certificates) must be signed by all owners in exactly the
same way the owners' names are written on the face of the certificates.
Requirements for signature guarantees and/or documentation of authority as
described above could also apply. For your protection, the Fund suggests that
certificates be sent by registered mail.
ADDITIONAL REDEMPTION INFORMATION. CHECKS FOR REDEMPTION PROCEEDS WILL
normally be mailed within seven days. No redemption proceeds will be mailed
until checks in payment for the purchase of the Shares to be redeemed have
been cleared, which may take up to 15 calendar days from the purchase date.
Unless other instructions are given in proper form, a check for the proceeds
of a redemption will be sent to the shareholder's address of record.
The Fund may suspend the right of redemption during any period when
(i) trading on the New York Stock Exchange is restricted or that
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exchange is closed, (ii) the SEC has by order permitted such suspension, or
(iii) an emergency (as defined by rules of the SEC) exists making disposal of
portfolio investments or determination of the Fund's net asset value not
reasonably practicable.
If the Trust Board determines that it would be detrimental to the best
interest of the remaining shareholders of the Fund to make payment wholly or
partly in cash, the Fund may redeem Shares in whole or in part by a
distribution in kind of portfolio securities (from the investment portfolio of
the Portfolio or of the Fund), in lieu of cash. The Fund will, however, redeem
Shares solely in cash up to the lesser of $250,000 or 1% of net assets during
any 90-day period for any one shareholder. In the event that payment for
redeemed Shares is made wholly or partly in portfolio securities, the
shareholder may be subject to additional risks and costs in converting the
securities to cash. See "Additional Purchase and Redemption Information 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 $100,000, 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 $100,000 and be allowed at least 30 days to make an additional investment
to increase the account balance to at least $100,000.
NET ASSET VALUE
The net asset value per share of the Fund is calculated separately for
each class of shares of the Fund at 4:00 p.m. (Eastern Time), Monday through
Friday, each Fund Business Day, which excludes the following U.S. holidays:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. Net asset value per Share is
calculated by dividing the aggregate value of the Fund's assets less all Fund
liabilities, if any, by the number of Shares of the Fund outstanding.
Generally, securities 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.
Trading in securities on non-U.S. exchanges and over-the-counter markets
may not take place on every day that the New York Stock Exchange is open for
trading. Furthermore, trading takes place in various foreign markets on days
on which the Fund's net asset value is not calculated. If events materially
affecting the value of foreign securities occur between the time when their
price is determined and the time when net asset value is calculated, such
securities will be valued at fair value as determined in good faith by using
methods approved by the Schroder Core Board. All assets and liabilities of the
Portfolio denominated in foreign currencies are valued in U.S. dollars based
on the exchange rate last quoted by a major bank prior to the time when the
net asset value of the Fund is calculated.
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DIVIDENDS, DISTRIBUTIONS AND TAXES
THE FUND
The Fund intends to comply with the provisions of 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 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 gains and therefore, intends not to be subject to
federal income tax.
Dividends and capital gain distributions on Advisor Shares are reinvested
automatically in additional Advisor 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 will be 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 the dividends are invested in additional Shares or
received in cash. Distributions by the Fund of any net capital gain will be
taxable to a shareholder as long-term capital gain regardless of how long the
shareholder has held the Shares. Each year the Trust will notify shareholders
of the tax status of dividends and other distributions.
Dividends from the Fund will qualify for the dividends-received deduction
for corporate shareholders to the extent dividends do not exceed the aggregate
amount of dividends received by the Fund from domestic corporations, provided
the Fund shares are held for more than 45 days. If securities held by the Fund
are considered to be debt-financed (generally, acquired with borrowed funds);
are held by the Fund for fewer than 46 days (91 days in the case of certain
preferred stock); or are subject to certain forms of hedges or short sales,
then the portion of the dividends paid by the Fund attributable to such
securities will not be eligible for the dividends-received deduction.
A redemption of Shares may result in taxable gain or loss to the redeeming
shareholder, depending on whether the redemption proceeds are more or less
than the shareholder's basis in the redeemed Shares. If Shares are redeemed at
a loss after being held for six months or less, the loss will be treated as a
long-term, rather than a short-term, capital loss to the extent of any capital
gain distributions received on those Shares.
The Fund must withhold 31% from dividends, capital gain distributions and
redemption proceeds payable to any individuals and certain other noncorporate
shareholders who do not furnish the Fund with a correct taxpayer identification
number. Withholding at that rate also is required from dividends and capital
gain distributions payable to such shareholders who otherwise are subject to
backup withholding. Depending on the residence of a shareholder for tax
purposes, distributions from the Fund may also be subject to state and local
taxes, including withholding taxes.
In an effort to adhere to certain tax requirements, the Fund may have to
limit its investment activity in some types of instruments.
If the Fund's dividends exceed its taxable income in any year, all or a
portion of the Fund's dividends may be treated as a return of capital to
shareholders for tax purposes. Any return of capital will reduce the cost
basis of your shares, which will result in a higher reported capital gain or a
lower reported capital loss when you sell your
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<PAGE>
shares. Shareholders will be notified by the Trust if a distribution included
a return of capital.
EFFECT OF FOREIGN TAXES. Foreign governments may impose taxes on the
Portfolio and its investments, which generally reduce the Fund's income.
However, an offsetting tax credit or deduction may be available to you. If so,
your tax statement will show more taxable income or capital gain than was
actually distributed by the Fund but will also show the amount of the
available offsetting credit or deduction.
If the Fund is eligible to do so, it intends to elect to permit its
shareholders to take a credit (or a deduction) for the Fund's share of foreign
income taxes paid by the Portfolio. If the Fund does make such an election,
its shareholders would include as gross income in their federal income tax
returns both (i) distributions received from the Fund and (ii) the amount that
the Fund advises is their pro rata portion of foreign income taxes paid with
respect to or withheld from, dividends and interest paid to the Portfolio from
its foreign investments. Shareholders then would be entitled, subject to
certain limitations, to take a foreign tax credit against their federal income
tax liability for the amount of such foreign taxes or else to deduct such
foreign taxes as an itemized deduction from gross income.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting the Fund and its shareholders; see the SAI
for further information. Shareholders should consult their own tax advisors as
to the tax consequences of their ownership of Shares.
THE PORTFOLIO
The Portfolio is not required to pay federal income tax because it is
classified as a partnership for federal income tax purposes. All interest,
dividends, gains and losses 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 as a Delaware business trust on January 9, 1996. 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 such portfolios or series into classes of shares (such as the
Advisor Shares), and the costs of doing so will be borne by the Trust. The
Trust currently consists of eight separate portfolios, each of which has
separate investment objectives and policies.
The Fund currently consists of two classes of Shares. Each share of the
Fund is entitled to participate equally in dividends and other distributions
and the proceeds of any liquidation except that, due to the differing expenses
borne by the classes, dividends and liquidation proceeds for each class will
likely differ.
Shares are fully paid and non-assessable, and have no pre-emptive rights.
Shareholders have non-cumulative voting rights, which means that the holders
of more than 50% of the shares voting for the election of Trustees can elect
100% of the Trustees if they choose to do so. A shareholder is entitled to one
vote for each full share held (and a fractional vote for each fractional share
held). 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.
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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, and those shareholders may be able to greatly affect (if
not determine) the outcome of a shareholder vote. As of February 15, 1997, the
Robert Wood Johnson Foundation may be deemed to control the Fund for purposes
of the 1940 Act.
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 distributions at NAV. Cumulative total returns are calculated
similarly except that the total return is aggregated over the relevant period
instead of annualized.
Performance quotations are calculated separately for each class of shares
of the Fund. The Fund may also be compared to various unmanaged securities
indices, groups of mutual funds tracked by mutual fund ratings services, or
other general economic indicators. Unmanaged indices may assume the
reinvestment of dividends but do not reflect deductions for administrative and
management costs and expenses.
Performance information represents only past performance and does not
necessarily indicate future results. For a description of the methods used to
determine total return and other performance measures for the Fund, see the
SAI.
CUSTODIAN AND TRANSFER AGENT
The Chase Manhattan Bank, 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 Emerging Markets Fund
Institutional Portfolio
P.O. Box 446
Portland, Maine 04112
Information about specific shareholder accounts may be obtained from the
Transfer Agent by calling (800) 344-8332.
SERVICE ORGANIZATIONS
The Glass-Steagall Act and other applicable laws and regulations provide
that banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks
from performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or
interpretations of such laws, as well as changes in either Federal or state
regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, could prevent a bank Service Organization from
continuing to perform all or part of its servicing activities. If a bank were
prohibited from so acting, its shareholder clients would be permitted to
remain shareholders of the Fund and alternative means for continuing the
servicing of such shareholders would be sought. It is not expected that share-
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holders would suffer any adverse financial consequences as a result of any of
these occurrences.
FUND STRUCTURE
Classes of Shares. The Fund has two classes of shares, Investor Shares and
Advisor Shares. Investor Shares are offered by a separate prospectus to
corporations, institutions, and fiduciaries, including fiduciary, agency, and
custodial clients of bank trust departments, trust companies, and their
affiliates. Advisor Shares incur more expenses than Investor Shares. Except
for certain differences, each share of each class represents an undivided,
proportionate interest in the Fund. Each share of the Fund is entitled to
participate equally in dividends and other distributions and the proceeds of
any liquidation of the Fund except that, due to the differing expenses borne
by the two classes, the amount of dividends and other distributions will
differ between the classes. Information about Investor Shares is available
from the Fund by calling Schroder Advisors at (800) 730-2932.
THE PORTFOLIO. The Fund seeks to achieve its investment objective by
investing all of its investable assets in the Portfolio, which has the same
investment objective and substantially similar policies as the Fund.
Accordingly, the Portfolio directly acquires its own securities and the Fund
acquires an indirect interest in those securities. The Portfolio is a separate
series of Schroder Core, a business trust organized under the laws of the
State of Delaware in 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, the Fund is the
only institutional investor in the Portfolio. The Portfolio may permit other
investment companies or institutional investors to invest in it. All other
investors in the Portfolio will invest on the same terms and conditions as the
Fund and will pay a proportionate share of the Portfolio's expenses.
The Portfolio normally will not hold meetings of investors except as
required by the 1940 Act. Each investor in the Portfolio will be entitled to
vote in proportion to its relative beneficial interest in the Portfolio. On
most issues subject to a vote of investors, as required by the 1940 Act and
other applicable law, the Fund will solicit proxies from its shareholders and
will vote its interest in the Portfolio in proportion to the votes cast by its
shareholders. If there are other investors in the Portfolio, there can be no
assurance that any issue that receives a majority of the votes cast by Fund
shareholders will receive a majority of votes cast by all investors in the
Portfolio; indeed, if other investors hold a majority interest in the
Portfolio, they could have voting control of the Portfolio.
The Portfolio will not sell its shares directly to members of the general
public. Another investor in the Portfolio, such as an investment company, that
might sell its shares to members of the general public would not be required
to sell its shares at the same public offering price as the Fund and could
have different advisory and other fees and expenses than the Fund. Therefore,
Fund shareholders may have different returns than shareholders in another
investment company that invests exclusively in the Portfolio. There is
currently no such other investment company that offers its shares to members
of the general public. Information regarding any such funds in the future will
be available from Schroder Core by calling at (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.
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In addition, under federal securities law, Schroder Core may be liable for
misstatements or omissions of a material fact in any proxy soliciting material
of a publicly offered 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 and other offering
documents and proxy materials of investors in Schroder Core, its liability is
similarly limited to information about and supplied by it.
CERTAIN RISKS OF INVESTING IN THE PORTFOLIO. The Fund's investment in the
Portfolio may be affected by the actions of other large investors in the
Portfolio, if any. For example, if the Portfolio had a large investor other
than the Fund that redeemed its interest in the Portfolio, the Portfolio's
remaining investors (including the Fund) might, as a result, experience higher
pro rata operating expenses, thereby producing lower returns.
The Fund may withdraw its entire investment from the Portfolio at any
time, if the Trust Board determines that it is in the best interests of the
Fund and its shareholders to do so. The Fund might withdraw, for example, if
there were other investors in the Portfolio with power to, and who did by a
vote of the shareholders of all investors (including the Fund), change the
investment objective or policies of the Portfolio in a manner not acceptable
to the Trust Board. A withdrawal could result in a distribution in kind of
portfolio securities (as opposed to a cash distribution) by the Portfolio.
That distribution could result in a less diversified portfolio of investments
for the Fund and could affect adversely the liquidity of the Fund's portfolio.
If the Fund decided to convert those securities to cash, it 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, if the Board decided not to
permit SCMI to manage the Fund's assets, could have a significant impact on
shareholders of the Fund.
Each investor in the Portfolio, including the Fund, may be liable for all
obligations of the Portfolio. The risk to an investor in the Portfolio of
incurring financial loss on account of such liability, however, is limited to
circumstances in which the Portfolio is unable to meet its obligations, the
occurrence of which SCMI considers to be quite remote. Upon liquidation of the
Portfolio, investors would be entitled to share pro rata in the net assets of
the Portfolio available for distribution to investors.
29
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
INVESTMENT ADVISER
Schroder Capital Management International Inc.
787 Seventh Avenue
New York, New York 10019
ADMINISTRATOR & DISTRIBUTOR
Schroder Fund Advisors Inc.
787 Seventh Avenue
New York, New York 10019
SUB-ADMINISTRATOR
Forum Administrative Services, Limited Liability Company
Two Portland Square
Portland, Maine 04101
CUSTODIAN
The Chase Manhattan Bank, N.A.
Global Custody Division
Woolgate House, Coleman Street
London EC2P 2HD, United Kingdom
TRANSFER AND DIVIDEND DISBURSING AGENT
Forum Financial Corp.
P.O. Box 446
Portland, Maine 04112
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand, L.L.P.
One Post Office Square
Boston, Massachusetts 02109
TABLE OF CONTENTS
PROSPECTUS SUMMARY.................... 3
EXPENSES OF INVESTING IN THE FUND..... 4
Fee Table............................. 4
Example............................... 4
FINANCIAL HIGHLIGHTS.................. 5
INVESTMENT OBJECTIVE.................. 6
INVESTMENT POLICIES................... 6
RISK CONSIDERATIONS................... 12
MANAGEMENT OF THE FUND................ 17
Boards of Trustees.................... 17
Investment Adviser and Portfolio
Manager.............................. 17
Administrative Services............... 18
Distribution Plan and Shareholder
Service Plan......................... 18
Expenses.............................. 19
Portfolio Transactions................ 20
Code of Ethics........................ 20
INVESTMENT IN THE FUND................ 20
Purchase of Shares.................... 20
Retirement Plans and Individual
Retirement
Accounts............................. 22
Exchanges............................. 22
Redemption of Shares.................. 22
Net Asset Value....................... 24
DIVIDENDS, DISTRIBUTIONS AND TAXES.... 25
The Fund.............................. 25
The Portfolio......................... 26
OTHER INFORMATION..................... 26
Capitalization and Voting............. 26
Reports............................... 27
Performance........................... 27
Custodian and Transfer Agent.......... 27
Shareholder Inquiries................. 27
Service Organizations................. 27
Fund Structure........................ 28
[LOGO]
- --------------------------------------------
SCHRODER
EMERGING
MARKETS FUND
INSTITUTIONAL
PORTFOLIO
ADVISOR SHARES
PROSPECTUS
MARCH 1, 1997
SCHRODER CAPITAL FUNDS (DELAWARE)
<PAGE>
SCHRODER INTERNATIONAL FUND
ADVISOR SHARES
This fund seeks long-term capital appreciation by investing in securities
markets outside the United States. It is intended for long-term investors
seeking international diversification and willing to accept the risks of
foreign investing.
[LOGO]
YOUR WINDOW ON THE WORLD
Schroder International Fund (the "Fund"), a series of Schroder Capital Funds
(Delaware) (the "Trust"), seeks to achieve its investment objective by
investing substantially all of its assets in Schroder International Equity
Fund (the "Portfolio"), which invests primarily in equity securities of
non-U.S. Companies. The Portfolio is a separately managed, diversified series
of Schroder Capital Funds ("Schroder Core"), an open-end, management
investment company. The Portfolio has an identical investment objective and
substantially similar investment policies as the Fund (see "Other Information
- -Fund Structure"). Accordingly, the Fund's investment experience will
correspond directly with the Portfolio's investment experience.
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 March 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 their Internet
Web Site (http://www.sec.gov) or may be obtained without charge from the Trust
by writing to Two Portland Square, Portland, Maine 04101 or by calling
1-800-290-9826. 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
March 1, 1997
1
<PAGE>
FUNDS AVAILABLE THROUGH SCHRODER FUND ADVISORS INC.
PLEASE CALL FOR COMPLETE INFORMATION AND TO OBTAIN A PROSPECTUS.
PLEASE READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST.
SCHRODER CAPITAL FUNDS (DELAWARE) (1-800-290-9826)
SCHRODER INTERNATIONAL FUND
SCHRODER EMERGING MARKETS FUND --
INSTITUTIONAL PORTFOLIO
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND
SCHRODER U.S. SMALLER COMPANIES FUND
SCHRODER U.S. EQUITY FUND
SCHRODER SERIES TRUST (1-800-464-3108)
SCHRODER EQUITY VALUE FUND
SCHRODER SMALL CAPITALIZATION VALUE FUND
SCHRODER HIGH YIELD INCOME FUND
SCHRODER INVESTMENT GRADE INCOME FUND
SCHRODER SHORT-TERM INVESTMENT FUND
2
<PAGE>
PROSPECTUS SUMMARY
This prospectus offers Advisor Class shares ("Advisor Shares" or "Shares")
of the Fund. The Fund is a separately managed, diversified series of the
Trust, an open-end, management investment company registered under the
Investment Company Act of 1940 (the "1940 Act"). THE FOLLOWING SUMMARY IS
QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION CONTAINED IN THIS
PROSPECTUS.
OBJECTIVE. Long-term capital appreciation through investment in securities
markets outside the United States.
STRATEGY. Invests primarily in equity securities of companies domiciled
outside the United States.
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 Manager."
ADMINISTRATIVE SERVICES. Schroder Fund Advisors Inc. ("Schroder Advisors")
serves as administrator and distributor of the Fund, and Forum Administrative
Services, Limited Liability Company ("Forum") serves as the Fund's sub-
administrator.
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 $2,500, except that the minimum
for an Individual Retirement Account ("IRA") is $250. The minimum subsequent
investment is $250. See "Investment in the Fund -- Purchase of Shares" and
" -- Redemption of Shares."
DIVIDENDS AND OTHER DISTRIBUTIONS. The Fund annually declares and pays as
a dividend substantially all of its net investment income and at least
annually distributes any net realized long-term capital gain and gains from
foreign currency transactions. Dividends and long-term capital gain
distributions are reinvested automatically in additional Advisor Shares of the
Fund at net asset value unless you elect in your Account Application, or
otherwise in writing, to receive dividends and other distributions in cash.
See "Dividends, Distributions and Taxes."
RISK CONSIDERATIONS. Alone, the Fund is not a balanced investment plan. It
is intended for long-term investors seeking international diversification who
are willing to accept the risks of foreign investing. Investments in foreign
securities involve certain risks not associated with domestic investing,
including uncertain political and economic developments, the possible
imposition of exchange controls or other changes in foreign governmental laws
or restrictions. Of course, as with any mutual fund, there is no assurance
that the Fund or Portfolio will achieve its investment objective.
The Fund's net asset value ("NAV") varies because the market value of the
Portfolio's investments will change with changes in the value of the
securities in which the Portfolio invests and with changes in market
conditions, interest rates, currency notes, or political or economic
situations. When you sell your shares, they may be worth more or less than
what you paid for them. For further information, see "Risk Considerations".
3
<PAGE>
EXPENSES OF INVESTING IN THE FUND
FEE TABLE
The table below is intended to assist you in understanding the expenses
that an investor in Advisor Shares of the Fund would incur. There are no
transaction expenses associated with purchases or redemptions of Advisor
Shares.
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)(1)
Management Fees (after fee waiver)(2)(3)........................... 0.65%
12b-1 Fees(4)...................................................... None
Other Expenses (after expense reimbursement)(3).................... 0.59%
Total Fund Operating Expenses(3)................................... 1.24%
(1) Based on the Fund's expenses for the fiscal year ended October 31, 1996.
The Fund's expenses include the Fund's pro rata portion of all operating
expenses of the Portfolio.
(2) Management Fees reflect the fees paid by the Portfolio and the Fund for
investment advisory and administrative services.
(3) SCMI and Schroder Advisors have voluntarily undertaken to waive a portion
of their fees and assume certain expenses of the Fund during the current
fiscal year in order to limit the Fund's Total Fund Operating Expenses to
1.24% of the Fund's average daily net assets. This undertaking cannot be
withdrawn except by a majority vote of the Trust's Board of Trustees. See
"Management of the Fund -- Expenses." Without waivers and reimbursements,
Management Fees, Other Expenses and Total Fund Operating Expenses would be
0.68%, 0.61% and 1.29%, respectively.
(4) Subject to the approval of the Trust's Board of Trustees 12b-1 fees may be
imposed at an annual rate of up to 0.50%.
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 period. The example is based on the expenses
listed above and 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....................................................... $ 13
3 years...................................................... $ 39
5 years...................................................... $ 68
10 years..................................................... $150
4
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights are presented below to assist you in evaluating
per share performance of the Fund. Information presented is for Investor
Shares as Advisor Shares were not issued for the periods shown. Information
for periods prior to August 1, 1989 pertains to the Fund's predecessor-
in-interest. Information for all periods after the year ended September 30,
1988 has been audited by Coopers & Lybrand L.L.P., independent accountants to
the Fund. The Fund's financial statements for the year ended October 31, 1996,
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 also 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 1-800-290-9826.
<TABLE>
<CAPTION>
Month
Ended
Year ended October 31, October 31,
--------------------------------------------------------------------------- -------------
1996(a)(b) 1995 1994 1993 1992 1991 1990 1989
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $20.91 $23.17 $20.38 $15.15 $16.22 $17.70 $18.20 $18.95
------ ------ ------ ------ ------ ------ ------ ------
Investment Operations:
Net Investment Income 0.15(b) 0.46 0.18 0.08 0.25 0.25 0.15 0.03
------ ------ ------ ------ ------ ------ ------ ------
Net Realized Gain
(Loss) 1.74 (0.18) 2.69 5.27 (1.04) (0.25) (0.12) (0.78)
------ ------ ------ ------ ------ ------ ------ ------
Total From Investment
Operations 1.89 0.28 2.87 5.35 (0.79) 0.00 0.03 (0.75)
------ ------ ------ ------ ------ ------ ------ ------
Distributions from Net
Investment Income (0.47) -- (0.08) (0.12) (0.23) (0.25) (0.16) 0.00
------ ------ ------ ------ ------ ------ ------ ------
Distributions from
Realized Capital Gain (2.32) (2.54) -- -- (0.05) (1.23) (0.37) 0.00
------ ------ ------ ------ ------ ------ ------ ------
Total Distributions (2.79) (2.54) (0.08) (0.12) (0.28) (1.48) (0.53) 0.00
------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of
Period $20.01 $20.91 $23.17 $20.38 $15.15 $16.22 $17.70 $18.20
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------
Total Return 10.05% 2.08% 14.10% 35.54% (4.93%) 0.45% (0.07%) (4.01%)
Ratio/Supplementary Data:
Net Assets, End of
Period (Thousands) $202,735 $212,330 $500,504 $320,550 $159,556 $108,398 $62,348 $49,740
Ratio of Expenses to
Average Net Assets
after waivers 0.99%(b) 0.91% 0.90% 0.91% 0.93% 1.07% 1.12% 1.12%(d)
Ratio of Net
Investment Income
to Average Net
Assets after
waivers 0.86%(b) 0.99% 0.94% 0.87% 1.62% 1.59% 0.83% 2.29%(d)
Ratio of Expenses to
Average Net Assets
before waivers 1.04%(b) N/A N/A N/A N/A N/A N/A N/A
Ratio of Net
Investment Income
to Average Net
Assets before
waivers 0.81%(b) N/A N/A N/A N/A N/A N/A N/A
Portfolio Turnover
Rate(c) 56.20% 61.26% 25.17% 56.05% 49.42% 50.58% 55.91% 21.98%(d)
Average Brokerage
Commission Rate(e) $0.0256 N/A N/A N/A N/A N/A N/A N/A
</TABLE>
Year Ended
September 30,
-----------------------------
1989 1988 1987
Unaudited
-----------------------------
Net Asset Value,
Beginning of Period $14.40 $18.02 $14.07
------ ------ ------
Investment Operations:
Net Investment Income 0.20 0.05 (0.07)
---- ------ ------
Net Realized Gain
(Loss) 4.44 2.34) 4.71
---- ------ ------
Total From Investment
Operations 4.64 (2.29) 4.64
---- ------ ------
Distributions from Net
Investment Income (0.04) 0.00 (0.02)
----- ------ -------
Distributions from
Realized Capital Gain (0.05) (1.33) (0.67)
----- ------- --------
Total Distributions (0.09) (1.33) (0.69)
----- ------- --------
Net Asset Value, End of
Period $18.95 $14.40 $18.02
------ ------ ------
------ ------ ------
Total Return 32.2% (0.12%) 34.8%
Ratio/Supplementary Data:
Net Assets, End of
Period (Thousands) $48,655 $29,917 $32,553
Ratio of Expenses to
Average Net Assets
after waivers 1.12% 1.30% 1.64%
Ratio of Net
Investment Income
to Average Net
Assets after
waivers 1.27% 0.38% (0.42%)
Ratio of Expenses to
Average Net Assets
before waivers N/A N/A N/A
Ratio of Net
Investment Income
to Average Net
Assets before
waivers N/A N/A N/A
Portfolio Turnover
Rate(c) 72.25 86.19% 84.97%
Average Brokerage
Commission Rate(e) N/A N/A N/A
- ---------
(a) On May 16, 1996, the Fund began offering two classes of shares, Investor
Shares and Advisor Shares, and all then outstanding shares of the Fund
were converted to Investor Shares.
(b) Includes the Fund's proportionate share of income and expenses of the
Portfolio.
(c) Portfolio turnover rate represents the rate of portfolio activity. The
rate for year ended October 31, 1996, represents the portfolio turnover
rate of the Portfolio.
(d) Annualized.
(e) Amount represents the average commission per share paid to brokers on the
purchase and sale of the Portfolio's investment portfolio securities.
5
<PAGE>
INVESTMENT OBJECTIVE
The investment objective of the Fund is long-term capital appreciation
through investment in securities markets outside the United States.
The Fund is designed for U.S. investors who seek international
diversification of their investments by participating in foreign securities
markets. The Fund is not a complete investment program and investments in the
securities of foreign issuers generally involve risks in addition to the risks
associated with investments in the securities of U.S. issuers. (See "Risk
Considerations.") The Fund currently seeks to achieve its investment objective
by investing all of its investable assets in the Portfolio, which has
substantially the same investment objective and policies as the Fund. There
can be no assurance that the Fund or Portfolio will achieve its investment
objective.
INVESTMENT POLICIES
Although the following information describes the investment policies of
the Portfolio and the responsibilities of Schroder Core's Board of Trustees
(the "Schroder Core Board"), it applies equally to the Fund and the Trust's
Board of Trustees (the "Trust Board"). Additional information concerning the
investment policies of the Fund and the Portfolio is contained in the SAI.
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 (i) 67% of the
shares present or represented at a shareholder meeting at which the holders of
more than 50% of the outstanding shares are present or represented, or (ii)
more than 50% of outstanding shares. Non-fundamental investment policies of
the Portfolio may be changed by the Schroder Core Board without approval of
the investors in the Portfolio.
Under normal market conditions, the Portfolio will invest at least 65% of
its total assets in equity securities of companies domiciled outside the U.S.
Investments by the Portfolio are selected on the basis of their potential for
capital appreciation without regard for current income. The Portfolio may also
invest in debt securities of foreign governments, international organizations
and foreign corporations and in the securities of closed-end investment
companies investing primarily in foreign securities. The Portfolio may invest
up to 5% of its net assets in debt securities with relatively high risk and
high yields (as compared to other debt securities meeting the Portfolio's
investment criteria). The debt securities in which the Portfolio invests may
be unrated, but will not be in default at the time of purchase. See "Risk
Considerations" and "Debt Securities". Countries in which the Portfolio may
invest include, but are not limited to, countries listed in the Morgan Stanley
Capital International EAFE Index, which is a market capitalization index of
companies in developed market countries in Europe, Australia and the Far East.
The Portfolio invests in the securities of foreign issuers domiciled in at
least three foreign countries. The Portfolio may invest more than 25% of its
total assets in issuers located in any one country. See "Risk
Considerations -- Geographic Concentration." The Portfolio also may invest in
securities of issuers located in countries considered by some to be emerging
market countries. See "Risk Considerations -- Emerging Markets."
The Portfolio may purchase preferred stock and convertible debt
securities, including warrants and convertible preferred stock, and may
purchase American Depository Receipts, European Depository Receipts or other
similar securities of foreign issuers. The Portfolio also may enter into
foreign exchange contracts, including forward contracts to purchase or sell
foreign currencies, in anticipation of its currency requirements and to
protect against possible adverse movements in foreign exchange rates. Although
these contracts may reduce the risk of loss to the Portfolio from adverse
movements in currency values, the contracts also limit possible gains from
favorable movements. For temporary defensive purposes, the
6
<PAGE>
Portfolio may invest without limitation in (or enter into repurchase
agreements maturing in seven days or less with U.S. banks and broker-dealers
with respect to) short-term debt securities, including U.S. Government
securities, certificates of deposit and bankers' acceptances of U.S. banks.
The Portfolio may also hold cash (U.S. dollars, foreign currencies or
multinational currency units) and time deposits in U.S. and foreign banks. See
"Risk Considerations" below and "Investment Policies" in the SAI.
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, are entitled to their pro rata share of the
company's assets after creditors (including fixed income security holders) and
preferred stockholders, if any, are paid. Preferred stock is a class of stock
having a preference over common stock as to dividends and, generally, as to
the recovery of investment. A preferred stockholder is also a shareholder and
not a creditor of the company. Equity securities owned by the Portfolio may be
traded in the over-the-counter market or on a securities exchange, but may not
be traded every day or in the volume typical of securities traded on a major
U.S. national securities exchange. As a result, disposition by the Portfolio
of a security to meet withdrawals by interest holders or otherwise may require
the Portfolio to sell these securities at a discount from market prices, to
sell during periods when disposition is not desirable, or to make many small
sales over a lengthy period of time. The market value of all securities,
including equity securities, is based upon the market's perception of value
and not necessarily the "book value" of an issuer or other objective measure
of a company's worth.
The Portfolio may also invest in warrants, which are options to purchase
an equity security at a specified price (usually representing a premium over
the applicable market value of the underlying equity security at the time of
the warrant's issuance) and usually during a specified period of time.
FOREIGN EXCHANGE CONTRACTS. Changes in foreign currency exchange rates
will affect the U.S. dollar values of securities denominated in currencies
other than the U.S. dollar. The rate of exchange between the U.S. dollar and
other currencies fluctuates in response to forces of supply and demand in the
foreign exchange markets. These forces are affected by the international
balance of payments, other economic and financial conditions, government
intervention, speculation, and other factors, many of which may be difficult
if not impossible to predict. When investing in foreign securities, the
Portfolio usually effects currency exchange transactions on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign exchange market. The
Portfolio incurs foreign exchange expenses in converting assets from one
currency to another.
The Portfolio may enter into foreign currency forward contracts for the
purchase or sale of foreign currency to "lock in" the U.S. dollar price of the
securities denominated in a foreign currency or the U.S. dollar value of
interest and dividends to be paid on such securities; or to hedge against the
possibility that the currency of a foreign country in which the Portfolio has
investments may suffer a decline against the U.S. dollar. A forward currency
contract is an obligation to purchase or sell a specific currency at a future
date, which may be any fixed number of days from the date of the contract
agreed upon by the parties, at a price set at the time of the contract. This
method of attempting to hedge the value of portfolio securities against a
decline in the value of a currency does not eliminate fluctuations in the
underlying prices of the securities and may expose the Portfolio to the risk
that the counterparty is unable to perform.
7
<PAGE>
Although the strategy of engaging in foreign currency transactions
could reduce the risk of loss due to a decline in the value of the hedged
currency, it could also limit the potential gain from an increase in the value
of the currency. The Portfolio does not intend to maintain a net exposure to
such contracts where the fulfillment of obligations under such contracts would
obligate it to deliver an amount of foreign currency in excess of the value of
its portfolio securities or other assets denominated in the currency. The
Portfolio will not enter into these contracts for speculative purposes and
will not enter into non-hedging currency contracts. These contracts involve a
risk of loss if SCMI fails to predict currency values correctly. The Portfolio
has no present intention to enter into currency futures or options contracts,
but may do so in the future. See "Risk Considerations -- Currency Fluctuations
and Devaluations."
DEBT SECURITIES. The Portfolio may seek capital appreciation through
investment in convertible or non-convertible debt securities. Capital
appreciation in debt securities may arise as a result of a favorable change in
relative foreign exchange rates, in relative interest rate levels, or in the
creditworthiness of issuers. The receipt of income from such debt securities
is incidental to the Portfolio's objective of long-term capital appreciation.
Such income can be used, however, to offset the operating expenses of the
Portfolio. In accordance with its investment objective, the Portfolio will not
seek to benefit from anticipated short-term fluctuations in currency exchange
rates. The Portfolio also may invest to a certain extent in debt securities in
order to participate in debt-to-equity conversion programs incident to
corporate reorganizations.
Debt securities are generally subject to two kinds of risk -- credit risk
and market risk. Credit risk refers to the ability of the debtor, and any
other obligor, to pay principal and interest on the debt as it becomes due.
The Portfolio may, from time to time, invest in debt securities with high risk
and high yields (as compared to other debt securities meeting the Portfolio's
investment criteria). The debt securities in which the Portfolio invests may
be unrated, but will not be in default at the time of purchase. Market risk
refers to the tendency of the value of debt securities to vary inversely with
interest rate changes. Certain debt instruments may also be subject to
extension risk, which refers to change in total return on a debt instrument
resulting from extension or abbreviation of the instrument's maturity.
The Portfolio may invest in debt securities issued or guaranteed by
foreign governments (including countries, provinces and municipalities) or
their agencies and instrumentalities; debt securities issued or guaranteed by
international organizations designated or supported by multiple foreign
governmental entities (which are not obligations of foreign governments) to
promote economic reconstruction or development; and debt securities issued by
corporations or financial institutions.
RISK CONSIDERATIONS
FOREIGN INVESTMENTS. All investments, domestic and foreign, involve risks.
Investment in the securities of foreign issuers may involve risks in addition
to those normally associated with investments in the securities of U.S.
issuers. While the Portfolio will generally invest only in securities of
companies and governments in countries that SCMI, in its judgment, considers
both politically and economically stable, all foreign investments are subject
to risks of foreign political and economic instability, adverse movements in
foreign exchange rates, the imposition or tightening of exchange controls or
other limitations on repatriation of foreign capital. Foreign investments are
subject to the risk of changes in foreign governmental attitudes towards
private investment that could lead to nationalization, increased taxation or
confiscation of Portfolio assets.
Moreover, (i) dividends payable on foreign securities may be subject to
foreign withholding taxes, thereby reducing the income earned by the
Portfolio; (ii) commission rates payable on foreign portfolio transactions are
generally higher than in the United States; (iii) accounting, auditing and
financial reporting standards
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differ from those in the United States, which means that less information
about foreign companies may be available than is generally available about
issuers of comparable securities in the United States; (iv) foreign securities
often trade less frequently and with lower volume than United States securities
and consequently may exhibit greater price volatility; and (v) foreign
securities trading practices, including those involving securities settlement,
may expose the Portfolio to increased risk in the event of a failed trade or the
insolvency of a foreign broker-dealer or registrar.
EMERGING MARKETS. Investing in emerging market countries generally
presents greater risk than does other foreign investing. In any emerging
market country, there is the increased possibility of expropriation of assets,
confiscatory taxation, nationalization of companies or industries, foreign
exchange controls, foreign investment controls on daily stock market
movements, default in foreign government securities, political or social
instability, or diplomatic developments that could affect investments in those
countries. In the event of expropriation, nationalization or other
confiscation, the Portfolio could lose its entire investment in the country
involved. The economies of developing countries are more likely to be
adversely affected by trade barriers, exchange controls, managed adjustments
in relative currency values and other protectionist measures imposed or
negotiated by the countries with which they trade. There may also be less
monitoring and regulation of emerging markets and the activities of brokers
there. Investing may require that the Portfolio adopt special procedures, seek
local government approvals or take other actions that may incur costs for the
Portfolio.
Certain emerging market countries may restrict investment by foreign
investors. These restrictions or controls may at times limit or preclude
investment in certain securities and may increase the costs and expenses of
the Portfolio.
Several emerging market countries have experienced high, and in some
periods extremely high, rates of inflation in recent years. Inflation and
rapid fluctuations in inflation rates may adversely affect these countries'
economies and securities markets. Further, inflation accounting rules in some
emerging market countries may indirectly generate losses or profits for
certain emerging market companies.
CURRENCY FLUCTUATIONS AND DEVALUATIONS. Because the Portfolio will invest
heavily in non-U.S. currency-denominated securities, changes in foreign
currency exchange rates will affect the value of the Portfolio's investments.
A decline against the dollar in the value of currencies in which the
Portfolio's investments are denominated will result in a corresponding decline
in the dollar value of the Portfolio's assets. This risk is heightened in some
emerging market countries.
The Fund is required to distribute substantially all of its investment
income in U.S. dollars. Because most of the Portfolio's income is received and
realized in foreign currencies, a decline in the value of a particular foreign
currency against the U.S. dollar that occurs after the Portfolio's income has
been earned may require the Portfolio to liquidate some portfolio securities
to acquire sufficient U.S. dollars to make such distributions. Similarly, if
the exchange rate declines between the time the Portfolio incurs expenses in
U.S. dollars and the time expenses are paid, the Portfolio may be required to
liquidate additional foreign securities to purchase the U.S. dollars required
to meet its expenses.
GEOGRAPHIC CONCENTRATION. The Portfolio may invest more than 25% of its
total assets in issuers located in any one country and to the extent that it
does so, is susceptible to a range of factors that could adversely affect that
country, including the political and economic developments and foreign
exchange rate fluctuations discussed above. As a result of investing
substantially in one country, the value of the Portfolio's assets may
fluctuate more widely than the value of shares of a comparable fund
with a lesser degree of geographic concentration.
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MANAGEMENT OF THE FUND
SCHRODER GROUP ASSETS UNDER MANAGEMENT WORLDWIDE AS OF DECEMBER 31, 1996--
OVER $130 BILLION
THE SCHRODER INVESTMENT MANAGEMENT GROUP INVESTMENT AND REPRESENTATIVE OFFICES
WORLDWIDE INCLUDE NEW YORK, LONDON, BOSTON, ZURICH, WARSAW, TOKYO, HONG KONG,
BEIJING, SHANGHAI, TAIPEI, SEOUL, BANGKOK, KUALA LUMPUR, SINGAPORE, JAKARTA,
SYDNEY, BUENOS AIRES, SAO PAULO, BOGOTA AND CARACAS.
TOGETHER, SCHRODER CAPITAL MANAGEMENT INTERNATIONAL AND
SCHRODER CAPITAL MANAGEMENT INC. MANAGE OVER $24 BILLION
BOARDS OF TRUSTEES
The business and affairs of the Fund are managed under the direction of
the Trust Board. The business and affairs of the Portfolio are managed under
the direction of the Schroder Core Board. Additional information regarding the
trustees and executive officers of the Trust, as well as Schroder Core's
trustees and executive officers, may be found in the SAI.
INVESTMENT ADVISER AND PORTFOLIO MANAGERS
As investment adviser to the Portfolio, SCMI manages the Portfolio and
continuously reviews, supervises and administers its investments. In this
regard, SCMI is responsible for making decisions relating to the Portfolio's
investments and placing purchase and sale orders regarding investments with
brokers or dealers selected by it in its discretion. For its services with
respect to the Portfolio, the Investment Advisory Agreement between SCMI and
Schroder Core provides that SCMI receives a monthly advisory fee at the annual
rate of 0.45% 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, 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. The investment management team of Mark J. Smith, a Trustee
and President of the Trust and of Schroder Core, and Michael Perelstein, Vice
President of the Trust and of Schroder
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Core (with the assistance of an SCMI investment committee), is primarily
responsible for the day-to-day management of the Portfolio's investment
portfolio. Mr. Smith, who has managed the Fund's portfolio since October 1989
and the Portfolio's investments since its inception, has been a First Vice
President of SCMI since April 1990 and a Director thereof since April 1993. He
has been employed by various Schroder Group companies in the investment
research and portfolio management areas since 1983. Mr. Perelstein has been a
Senior Vice President of SCMI since January 2, 1997. Prior thereto, Mr.
Perelstein was a Managing Director at MacKay Shields. Mr. Perelstein has more
than twelve years of international and global investment experience.
The Fund began pursuing its investment objective through investment in the
Portfolio on November 1, 1995. The Fund may withdraw its investment from the
Portfolio at any time if the Board determines that it is in the best interests
of the Fund and its shareholders to do so. (See "Other Information -- Fund
Structure.") Accordingly, the Fund has retained SCMI as its investment adviser
to manage the Fund's assets in the event the Fund withdraws its investment.
SCMI does not receive an investment advisory fee with respect to the Fund so
long as the Fund remains completely invested in the Portfolio (or any other
investment company). If the Fund resumes directly investing in portfolio
securities, the Fund will pay SCMI a monthly advisory fee at the annual rate
of 0.50% of the first $100 million of the Fund's average daily net assets;
0.40% of the next $150 million of average daily net assets; and 0.35% of
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 contract between SCMI and
Schroder Core with respect to the Portfolio (except as to the parties, the
fees payable thereunder, the circumstances under which fees will be paid and
the jurisdiction whose laws govern the agreement).
ADMINISTRATIVE SERVICES
On behalf of the Fund, the Trust has entered into an administrative
services contract with Schroder Advisors, 787 Seventh Avenue, New York, New
York 10019. On behalf of the Portfolio, the Trust has also entered into a
sub-administration agreement with Forum, Two Portland Square, Portland, Maine
04101. Pursuant to these agreements, Schroder Advisors and Forum provide
certain management and administrative services necessary for the Fund's
operations. Schroder Advisors is compensated at the annual rate of 0.15% of
the Fund's average daily net assets. Forum is compensated at the annual rate
of 0.05% of the Fund's average daily net assets.
Schroder Advisors and Forum provide similar services to the Portfolio, for
which the Portfolio pays Schroder Advisors at an annual rate of 0.075% of the
Portfolio's average daily net assets and pays Forum a monthly fee at the
annual rate of 0.075% of the Portfolio's average daily net assets.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICE PLAN
Schroder Advisors acts as distributor of the Fund's shares. Schroder
Advisors was organized in 1989 and registered as a broker-dealer to serve as
an administrator and distributor for the Fund and other mutual funds. The
Trust may compensate Schroder Advisors under a distribution plan, adopted
pursuant to Rule 12b-1 under the 1940 Act (the "Distribution Plan") by the
Trust on behalf of the Fund's Advisor Shares. Schroder Advisors, in turn, may
use these payments to compensate others for services provided, or to reimburse
others for expenses incurred, in connection with the distribution of Advisor
Shares. Payments under the Distribution Plan would be made monthly at an
annual rate of up to 0.50% of the Fund's average daily net assets attributable
to Advisor Shares. The maximum annual amount payable under the Distribution Plan
is currently 0.25%, but no payments will be made under the Distribution Plan
until the Board so authorizes.
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Payments under the Distribution Plan may be for various types of costs,
including: (i) advertising expenses, (ii) costs of printing prospectuses and
other materials to be given or sent to prospective investors, (iii) expenses
of sales employees or agents of Schroder Advisors, including salary,
commissions, travel and related expenses in connection with the distribution
of Advisor Shares, (iv) payments to broker-dealers who advise shareholders
regarding the purchase, sale, or retention of Advisor Shares, and (v) payments
to banks, trust companies, broker-dealers (other than Schroder Advisors) or
other financial organizations (collectively, "Service Organizations").
Payments to a particular Service Organization under the Distribution Plan will
be calculated by reference to the average daily net assets of Advisor Shares
owned beneficially by investors who have a brokerage or other service
relationship with the Service Organization. The Fund will not be liable for
distribution expenditures made by Schroder Advisors in any given year in
excess of the maximum amount payable under the Distribution Plan in that year.
Costs or expenses in excess of the annual limit may not be carried forward to
future years. Salary expenses of sales personnel who are responsible for
marketing various shares of portfolios of the Trust may be allocated to those
portfolios, including the Advisor Shares of the Fund, that have adopted a plan
similar to that of the Fund on the basis of average daily net assets. Travel
expenses may be allocated to, or divided among, the particular portfolios of
the Trust for which they are incurred.
The Trust, on behalf of the Fund, has also adopted a shareholder service
plan (the "Shareholder Service Plan"), pursuant to which Schroder Advisors is
authorized to pay Service Organizations a servicing fee. Payments under the
Shareholder Service Plan may be for various types of services, including: (i)
answering customer inquiries regarding the manner in which purchases,
exchanges and redemptions of shares of the Fund may be effected and other
matters pertaining to the Fund's services, (ii) providing necessary personnel
and facilities to establish and maintain shareholder accounts and records,
(iii) assisting shareholders in arranging for processing purchase, exchange
and redemption transactions, (iv) arranging for the wiring of funds, (v)
guaranteeing shareholder signatures in connection with redemption orders and
transfers and changes in shareholder-designated accounts, (vi) integrating
periodic statements with other customer transactions and (vii) providing such
other related services as the shareholder may request. The maximum amount
payable under the Shareholder Service Plan is 0.25% of the Fund's average
daily net assets attributable to Advisor Shares.
Payments to a particular Service Organization under the Shareholder
Service Plan are calculated by reference to the average daily net assets of
Advisor Shares owned beneficially by investors who have a service relationship
with the Service Organization. Some Service Organizations may impose
additional or different conditions on their clients, such as requiring their
clients to invest more than the minimum or subsequent investments specified by
the Fund or charging a direct fee for servicing. If imposed, these fees would
be in addition to any amounts which might be paid to the Service Organization
by Schroder Advisors. Each Service Organization has agreed to transmit to its
clients a schedule of any such fees. Shareholders using Service Organizations
are urged to consult them regarding any such fees or conditions.
EXPENSES
SCMI and Schroder Advisors have voluntarily 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
Advisor Shares to 1.24% of the average daily net assets of the Fund
attributable to those shares. This expense limitation cannot be modified or
withdrawn except by a majority vote of the Trustees of the Trust who are not
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
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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 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.
Commission rates for brokerage transactions are fixed on many foreign
securities exchanges, and in many cases are higher than commission rates for
comparable transactions effected on U.S. securities exchanges.
Subject to the Portfolio's policy of obtaining the best price consistent
with quality of execution on transactions, SCMI may employ Schroder Securities
Limited and its affiliates (collectively, "Schroder Securities"), affiliates
of SCMI, to effect transactions of the Portfolio on certain foreign securities
exchanges. Because of the affiliation between SCMI and Schroder Securities,
the Portfolio's payment of commissions to Schroder Securities is subject to
procedures adopted by the Schroder Core Board designed to ensure that the
commissions will not exceed the usual and customary brokers' commissions. No
specific portion of the Portfolio's brokerage will be directed to Schroder
Securities and in no event will Schroder Securities receive any brokerage in
recognition of research services.
Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc., and subject to seeking the most favorable price and
execution available and such other policies as the Schroder Core Board may
determine, SCMI may consider sales of shares of the Fund or any other entity
that invests in the Portfolio as a factor in the selection of broker-dealers
to execute portfolio transactions for the Portfolio.
Although the Portfolio does not currently engage in directed brokerage
arrangements to pay expenses, it may do so in the future. These arrangements
(whereby brokers executing the Portfolio's portfolio transactions would agree
to pay designated expenses of the Portfolio if brokerage commissions generated
by the Portfolio reached certain levels) might reduce the Portfolio's expenses
(and, indirectly, the Fund's expenses). These arrangements would not be
expected to increase materially the brokerage commissions paid by the
Portfolio.
CODE OF ETHICS
The Trust, Schroder Core, SCMI, Schroder Advisors, and Schroders
Incorporated have each adopted a code of ethics that contains a policy on
personal securities transactions by "access persons," including portfolio
managers and investment analysts. That policy complies in all material
respects with the recommendations set forth in the Report of the Advisory
Group on Personal Investing of the Investment Company Institute, of which the
Trust is a member.
INVESTMENT IN THE FUND
PURCHASE OF SHARES
Investors may purchase Advisor Shares directly from the Trust.
Prospectuses, sales material and Account Applications can be obtained from the
Trust or through Forum Financial Corp., the Fund's transfer agent (the
"Transfer Agent"). See "Other Information -- Shareholder Inquiries".
Investments may also be made through Service Organizations that assist their
customers in purchasing shares of the Fund. Service Organizations may charge
their customers a service fee for processing orders to purchase or sell shares
of the Fund. Investors wishing to purchase shares through their accounts at a
Service Organization should contact that organization directly for appropriate
instructions.
Shares of the Fund are offered at the net asset value next determined
after receipt of a completed Account Application (at the address set forth
below). The minimum initial investment is $2,500, except that the minimum for
an IRA is $250. The minimum subsequent investment is $250. All purchase payments
are
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invested in full and fractional shares. The Fund is authorized to reject any
purchase order.
Purchases may be made by mailing a check (in U.S. dollars), payable to
Schroder International Fund, to:
Schroder International Fund-Advisor Shares
P.O. Box 446
Portland, Maine 04112
For initial purchases, the check must be accompanied by a completed
Account Application in proper form. Further documentation may be requested
from corporations, administrators, executors, personal representatives,
directors or custodians to evidence the authority of the person or entity
making the subscription request.
Investors and Service Organizations (on behalf of their customers) may
transmit purchase payments by Federal Reserve Bank wire directly to the Fund
as follows:
Chase Manhattan Bank
New York, NY
ABA No.: 021000021
For Credit To: Forum Financial Corp.
Account No.: 910-2-718187
Ref.: Schroder International Fund -- Advisor Shares
Account of: (shareholder name)
Account Number: (shareholder account number)
The wire order must specify the name of the Fund, the shares' class (i.e.,
Advisor Shares), the account name and number, address, confirmation number,
amount to be wired, name of the wiring bank, and name and telephone number of
the person to be contacted in connection with the order. If the initial
investment is by wire, an account number will be assigned and an Account
Application must be completed and mailed to the Fund before any account
becomes active. Wire orders received prior to 4:00 p.m. (Eastern Time) on each
day that the New York Stock Exchange is open for trading (a "Fund Business
Day") will be processed at the net asset value determined as of that day. Wire
orders received after 4:00 p.m. (Eastern Time) will be processed at the net
asset value determined as of the next Fund Business Day. See "Net Asset
Value."
The Fund's Transfer Agent establishes for each shareholder of record an
open account to which all shares purchased and all reinvested dividends and
other distributions are credited. Although most shareholders elect not to
receive share certificates, certificates for full shares can be obtained by
specific written request to the Fund's Transfer Agent. No certificates are
issued for fractional shares.
The Transfer Agent will deem an account lost if six months have passed
since correspondence to the shareholder's address of record is returned,
unless the Transfer Agent determines the shareholder's new address. When an
account is deemed lost, dividends and other distributions will automatically
be reinvested. In addition, the amount of any outstanding checks for dividends
and 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 of the Fund are offered in connection with tax-deferred retirement
plans. Application forms and further information about these plans, including
applicable fees, are available upon request. Before investing in the Fund
through one of these plans, investors should consult their tax advisors.
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 $250; the minimum subsequent investment is $250. 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-
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approved retirement plan may not be deductible, depending upon the
individual's income. Individuals also may establish an IRA to receive
a "rollover" contribution of distributions from another IRA or a qualified
plan. Tax advice should be obtained before effecting a rollover.
EXCHANGES
Shareholders may exchange Shares of the Fund for shares of any other
series of the Trust so long as they maintain the respective minimum account
balance in each Fund in which they own shares. Exchanges between each Fund are
at net asset value.
For federal income tax purposes an exchange is considered to be a sale of
shares on which a shareholder may realize a capital gain or loss. An exchange
may be made by calling the Transfer Agent at (800) 344-8332 or by mailing
written instructions to Schroder Capital Funds (Delaware), P.O. Box 446,
Portland, Maine 04112. Exchange privileges may be exercised only in those
states where shares of the other series of the Trust may legally be sold.
Exchange privileges may be amended or terminated at any time upon sixty (60)
days' notice.
REDEMPTION OF SHARES
Shares of the Fund are redeemed at their next determined net asset value
after receipt by the Fund (at the address set forth above under "Purchase of
Shares") of a redemption request in proper form. Redemption requests may be
made between 9:00 a.m. and 6:00 p.m. (Eastern Time) on each Fund Business Day.
Redemption requests that are received prior to 4:00 p.m. (Eastern Time) will
be processed at the net asset value determined as of that day. Redemption
requests that are received after 4:00 p.m. (Eastern Time) will be processed at
the net asset value determined the next Fund Business Day. See "Net Asset
Value" below.
By Telephone. Redemption requests may be made by telephoning the Transfer
Agent at the telephone number on the cover page of this Prospectus. A
shareholder must provide the Transfer Agent with the class of Shares, the
dollar amount or number of shares to be redeemed, shareholder account number,
and some additional form of identification such as a password. A redemption by
telephone may be made only if the telephone redemption privilege option has
been elected on the Account Application or otherwise in writing. In an effort
to prevent unauthorized or fraudulent redemption requests by telephone,
reasonable procedures will be followed by the Transfer Agent to confirm that
telephone instructions are genuine. The Transfer Agent and the Trust generally
will not be liable for any losses due to unauthorized or fraudulent redemption
requests, but may be liable if they do not follow these procedures. Shares for
which certificates have been issued may not be redeemed by telephone. In times
of drastic economic or market changes, it may be difficult to make redemptions
by telephone. If a shareholder cannot reach the Transfer Agent by telephone,
redemption requests may be mailed or hand-delivered to the Transfer Agent.
Written Requests. Redemptions may be made by letter to the Fund specifying
the class of shares, the dollar amount or number of Shares to be redeemed, and
the shareholder account number. The letter must also be signed in exactly the
same way the account is registered (if there is more than one owner of the
Shares, all must sign) and, in certain cases, signatures must be guaranteed by
an institution that is acceptable to the Transfer Agent. Such institutions
include certain banks, brokers, dealers (including municipal and government
securities brokers and dealers), credit unions and savings associations.
Notaries public are not acceptable. Further documentation may be requested to
evidence the authority of the person or entity making the redemption request.
Questions concerning the need for signature guarantees or documentation of
authority should be directed to the Fund at the above address or by calling the
telephone number appearing on the cover of this Prospectus.
If Shares to be redeemed are held in certificate form, the certificates
must be enclosed with the redemption request and the assignment form on the
back of the certificates, (or
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an assignment separate from the certificates but accompanied by the
certificates), must be signed by all owners in exactly the same way the
owners' names are written on the face of the certificates. Requirements for
signature guarantees and/or documentation of authority as described above could
also apply. For your protection, the Fund suggests that certificates be sent by
registered mail.
ADDITIONAL REDEMPTION INFORMATION. Checks for redemption proceeds will
normally be mailed within seven days. No redemption proceeds will be mailed
until checks in payment for the purchase of the Shares to be redeemed have
been cleared, which may take up to 15 calendar days from the purchase date.
Unless other instructions are given in proper form, a check for the proceeds
of a redemption will be sent to the shareholder's address of record.
The Fund may suspend the right of redemption during any period when (i)
trading on the New York Stock Exchange is restricted or that exchange is
closed, (ii) the SEC has by order permitted such suspension, or (iii) an
emergency (as defined by rules of the SEC) exists making disposal of portfolio
investments or determination of the Fund's net asset value not reasonably
practicable.
If the Trust Board determines that it would be detrimental to the best
interest of the remaining shareholders of the Fund to make payment wholly or
partly in cash, the Fund may redeem Shares in whole or in part by a
distribution in kind of portfolio securities (from the investment portfolio of
the Portfolio or of the Fund), in lieu of cash. The Fund will, however, redeem
Shares solely in cash up to the lesser of $250,000 or 1% of net assets during
any 90-day period for any one shareholder. In the event that payment for
redeemed Shares is made wholly or partly in portfolio securities, the
shareholder may be subject to additional risks and costs in converting the
securities to cash. See "Additional Purchase and Redemption Information
Redemption in Kind" in the SAI.
The proceeds of a redemption may be more or less than the amount invested
and, therefore, a redemption may result in a gain or loss for Federal income
tax purposes.
Due to the relatively high cost of maintaining smaller accounts, the Fund
reserves the right to redeem Shares in any account (other than an IRA) if at
any time the account does not have a value of at least $2,000, unless the
value of the account falls below that amount solely as a result of market
activity. Shareholders will be notified that the value of the account is less
than $2,000 and be allowed at least 30 days to make an additional investment
to increase the account balance to at least $2,000.
NET ASSET VALUE
The net asset value per share of the Fund is calculated separately for
each class of Shares of the Fund at 4:00 p.m. (Eastern Time), Monday through
Friday, each Fund Business Day, which excludes the following U.S. holidays:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. Net asset value per Share is
calculated by dividing the aggregate value of the Fund's assets less all Fund
liabilities, if any, by the number of Shares of the Fund outstanding.
Generally, securities 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.
Trading in securities on non-U.S. exchanges and over-the-counter markets
may
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not take place on every day that the New York Stock Exchange is open for
trading. Furthermore, trading takes place in various foreign markets on days
on which the Fund's net asset value is not calculated. If events materially
affecting the value of foreign securities occur between the time when their
price is determined and the time when net asset value is calculated, such
securities will be valued at fair value as determined in good faith by using
methods approved by the Schroder Core Board.
All assets and liabilities of the Portfolio denominated in foreign
currencies are valued in U.S. dollars based on the exchange rate last quoted
by a major bank prior to the time when the net asset value of the Fund is
calculated.
DIVIDENDS, DISTRIBUTIONS AND TAXES
THE FUND
The Fund intends to comply with the provisions of 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 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 Advisor Shares
are reinvested automatically in additional Advisor 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 will be 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 will be
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. Share-
17
<PAGE>
holders should consult their own tax advisors as to the tax consequences of
their ownership of Shares.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting the Fund and its shareholders; see the SAI
for further information.
EFFECT OF FOREIGN TAXES. Foreign governments may impose taxes on the
Portfolio and its investments, which generally reduce the Fund's income.
However, an offsetting tax credit or deduction may be available to you. If so,
your tax statement will show more taxable income or capital gain than was
actually distributed by the Fund but will also show the amount of the
available offsetting credit or deduction.
If the Fund is eligible to do so, it intends to elect to permit its
shareholders to take a credit (or a deduction) for the Fund's share of foreign
income taxes paid by the Portfolio. If the Fund does make such an election,
its shareholders would include as gross income in their Federal income tax
returns both (i) distributions received from the Fund and (ii) the amount that
the Fund advises is their pro rata portion of foreign income taxes paid with
respect to or withheld from dividends and interest paid to the Portfolio from
its foreign investments. Shareholders then would be entitled, subject to
certain limitations, to take a foreign tax credit against their Federal income
tax liability for the amount of such foreign taxes or else to deduct such
foreign taxes as an itemized deduction from gross income.
In an effort to adhere to certain tax requirements, the Fund may have to
limit its investment activity in some types of instruments.
If the Fund's dividends exceed its taxable income in any year all or a
portion of the Fund's dividends may be treated as a return of capital to
shareholders for tax purposes. Any return of capital will reduce the cost
basis of your shares, which will result in a higher reported capital gain or a
lower reported capital loss when you sell your shares. Shareholders will be
notified by the Trust if a distribution included a return of capital.
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, gains and losses 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, 1998 as Schroder Capital Funds, Inc. and
reorganized as a Delaware business trust on January 9, 1996. 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 such portfolios or series into classes of shares (such as the
Advisor Shares), and the costs of doing so will be borne by the Trust. The
Trust currently consists of eight separate portfolios, each of which has
separate investment objectives and policies. The Fund currently consists of
two classes of shares.
Each share of the Fund is entitled to participate equally in dividends and
other distributions and the proceeds of any liquidation except that, due to
the differing expenses borne by the classes, dividends and liquidation
proceeds for each class will likely differ. Shares are fully paid and
non-assessable, and have no pre-emptive rights. Shareholders have non-
cumulative voting rights, which means that the holders of more than 50% of the
shares voting for the election of Trustees can elect 100% of the Trustees if
they choose to do so. A shareholder is entitled to one vote for each full
share held (and a fractional vote for each fractional share held). 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
18
<PAGE>
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 to 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 distributions at NAV. Cumulative total returns are calculated
similarly except that the total return is aggregated over the relevant period
instead of annualized.
Performance quotations are calculated separately for each class of shares
of the Fund. The Fund may also be compared to various unmanaged securities
indices, groups of mutual funds tracked by mutual fund ratings services, or
other general economic indicators. Unmanaged indices may assume the
reinvestment of dividends but do not reflect deductions for administrative and
management costs and expenses.
Performance information represents only past performance and does not
necessarily indicate future results. For a description of the methods used to
determine total return and other performance measures for the Fund, see the
SAI.
CUSTODIAN AND TRANSFER AGENT
The Chase Manhattan Bank, 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 International 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.
SERVICE ORGANIZATIONS
The Glass-Steagall Act and other applicable laws and regulations provide
that banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks
from performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or
interpretations of such laws, as well as changes in either Federal or state
regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, could prevent a bank Service Organization from
continuing to perform all or part of its servicing activities. If a bank were
prohibited from so acting, its shareholder clients would be permitted to
remain shareholders of the Fund and alternative means for continuing the
servicing of such shareholders would be sought. It is not expected that
shareholders would suffer any adverse financial
19
<PAGE>
consequences as a result of any of these occurrences.
FUND STRUCTURE
CLASSES OF SHARES. The Fund has two classes of shares, Advisor Shares and
Investor Shares. Investor Shares are offered by a separate prospectus to
corporations, institutions, and fiduciaries, including fiduciary, agency, and
custodial clients of bank trust departments, trust companies, and their
affiliates. Advisor Shares incur more expenses than Investor Shares. Except
for certain differences, each share of each class represents an undivided,
proportionate interest in the Fund. Each share of the Fund is entitled to
participate equally in dividends and other distributions and the proceeds of
any liquidation of the Fund except that, due to the differing expenses borne
by the two classes, the amount of dividends and other distributions will
differ between the classes. Information about Investor Shares is available
from the Fund by calling Schroder Advisors at (800) 730-2932.
THE PORTFOLIO. The Fund seeks to achieve its investment objective by
investing all of its investable assets in the Portfolio, which has the same
investment objective and substantially similar policies as the Fund.
Accordingly, the Portfolio directly acquires its own securities and the Fund
acquires an indirect interest in those securities. The Portfolio is a separate
series of Schroder Core, a business trust organized under the laws of the
State of Delaware in 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, the Fund is the
only institutional investor in the Portfolio. The Portfolio may permit other
investment companies or institutional investors to invest in it. All other
investors in the Portfolio will invest on the same terms and conditions as the
Fund and will pay a proportionate share of the Portfolio's expenses.
The Portfolio normally will not hold meetings of investors except as
required by the 1940 Act. Each investor in the Portfolio will be entitled to
vote in proportion to its relative beneficial interest in the Portfolio. On
most issues subject to a vote of investors, as required by the 1940 Act and
other applicable law, the Fund will solicit proxies from its shareholders and
will vote its interest in the Portfolio in proportion to the votes cast by its
shareholders. If there are other investors in the Portfolio, there can be no
assurance that any issue that receives a majority of the votes cast by Fund
shareholders will receive a majority of votes cast by all investors in the
Portfolio; indeed, if other investors hold a majority interest in the
Portfolio, they could have voting control of the Portfolio.
The Portfolio will not sell its shares directly to members of the general
public. Another investor in the Portfolio, such as an investment company, that
might sell its shares to members of the general public would not be required
to sell its shares at the same public offering price as the Fund and could
have different advisory and other fees and expenses than the Fund. Therefore,
Fund shareholders may have different returns than shareholders in another
investment company that invests exclusively in the Portfolio. There is
currently no such other investment company that offers its shares to members
of the general public. Information regarding any such funds in the future will
be available from Schroder Core by calling at (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, under federal securities law,
Schroder Core may be liable for misstatements or omissions of a material fact
in any proxy soliciting material of an investor in Schroder Core, including
the Fund. Each investor in the Portfolio, including
20
<PAGE>
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 principal purpose of these cross-indemnity provisions is to
limit the liability of Schroder Core to information that it knows or should
know and can control. With respect to other prospectuses and other offering
documents and proxy materials of investors in Schroder Core, its liability is
similarly limited to information about and supplied by it.
CERTAIN RISKS OF INVESTING IN THE PORTFOLIO. The Fund's investment in the
Portfolio may be affected by the actions of other large investors in the
Portfolio, if any. For example, if the Portfolio had a large investor other
than the Fund that redeemed its interest in the Portfolio, the Portfolio's
remaining investors (including the Fund) might, as a result, experience higher
pro rata operating expenses, thereby producing lower returns.
The Fund may withdraw its entire investment from the Portfolio at any
time, if the Trust Board determines that it is in the best interests of the
Fund and its shareholders to do so. The Fund might withdraw, for example, if
there were other investors in the Portfolio with power to, and who did by a
vote of the shareholders of all investors (including the Fund), change the
investment objective or policies of the Portfolio in a manner not acceptable
to the Trust Board. A withdrawal could result in a distribution in kind of
portfolio securities (as opposed to a cash distribution) by the Portfolio.
That distribution could result in a less diversified portfolio of investments
for the Fund and could affect adversely the liquidity of the Fund's portfolio.
If the Fund decided to convert those securities to cash, it 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, if the Board decided not to
permit SCMI to manage the Fund's assets, could have a significant impact on
shareholders of the Fund.
Each investor in the Portfolio, including the Fund, may be liable for all
obligations of the Portfolio. The risk to an investor in the Portfolio of
incurring financial loss on account of such liability, however, is limited to
circumstances in which the Portfolio is unable to meet its obligations, the
occurrence of which SCMI considers to be quite remote. Upon liquidation of the
Portfolio, investors would be entitled to share pro rata in the net assets of
the Portfolio available for distribution to investors.
21
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
1
<PAGE>
INVESTMENT ADVISER
Schroder Capital Management International Inc.
787 Seventh Avenue
New York, New York 10019
ADMINISTRATOR & DISTRIBUTOR
Schroder Fund Advisors Inc.
787 Seventh Avenue
New York, New York 10019
SUB-ADMINISTRATOR
Forum Administrative Services, Limited Liability Company
Two Portland Square
Portland, Maine 04101
CUSTODIAN
The Chase Manhattan Bank, N.A.
Global Custody Division
Woolgate House, Coleman Street
London EC2P 2HD, United Kingdom
TRANSFER AND DIVIDEND DISBURSING AGENT
Forum Financial Corp.
P.O. Box 446
Portland, Maine 04112
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand, L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Table of Contents
PROSPECTUS SUMMARY.................... 3
EXPENSES OF INVESTING IN THE FUND..... 4
Fee Table............................. 4
Example............................... 4
FINANCIAL HIGHLIGHTS.................. 5
INVESTMENT OBJECTIVE.................. 6
INVESTMENT POLICIES................... 6
RISK CONSIDERATIONS................... 8
MANAGEMENT OF THE FUND................ 10
Boards of Trustees.................... 10
Investment Adviser and Portfolio
Managers............................. 10
Administrative Services............... 11
Distribution Plan and Shareholder
Service Plan......................... 11
Expenses.............................. 12
Portfolio Transactions................ 13
Code of Ethics........................ 13
INVESTMENT IN THE FUND................ 13
Purchase of Shares.................... 13
Retirement Plans and Individual
Retirement
Accounts............................. 14
Exchanges............................. 15
Redemption of Shares.................. 15
Net Asset Value....................... 16
DIVIDENDS, DISTRIBUTIONS AND TAXES.... 17
The Fund.............................. 17
The Portfolio......................... 18
OTHER INFORMATION..................... 18
Capitalization and Voting............. 18
Reports............................... 19
Performance........................... 19
Custodian and Transfer Agent.......... 19
Shareholder Inquiries................. 19
Service Organizations................. 19
Fund Structure........................ 20
[LOGO]
- --------------------------------------------
SCHRODER
INTERNATIONAL
FUND
ADVISOR SHARES
PROSPECTUS
MARCH 1, 1997
SCHRODER CAPITAL FUNDS (DELAWARE)
1
<PAGE>
SCHRODER U.S. SMALLER COMPANIES FUND
ADVISOR SHARES
This 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 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 will be incidental to the
objective of capital appreciation.
[LOGO]
Proof of February 27, 1997
YOUR WINDOW ON THE WORLD
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"), which invests, under normal
market conditions, at least 65% of its total assets in equity securities of
companies domiciled in the United States that, at the time of purchase, have
market capitalizations of $1.5 billion or less. The Portfolio is a separately
managed, diversified series of Schroder Capital Funds ("Schroder Core"), an
open-end management investment company under the Investment Company Act of
1940 (the "1940 Act"). The Portfolio has an identical investment objective and
substantially similar investment policies as the Fund. Accordingly, the Fund's
investment experience will correspond directly with the Portfolio's investment
experience. See "Other Information -- Fund Structure."
This prospectus sets forth concisely the information you should know before
investing and should be retained for further 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 March 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 their
Internet Web Site (http://www.sec.gov) or may be obtained without charge from
the Trust by writing to Two Portland Square, Portland, Maine 04101 or by
calling 1-800-290-9826. 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
MARCH 1, 1997
1
<PAGE>
PROSPECTUS SUMMARY
This prospectus offers Advisor Class shares ("Advisor Shares" or "Shares")
of the Fund. The Fund is a separately managed, diversified series of the
Trust, an open-end, management investment company registered under the 1940
Act. THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION CONTAINED IN THIS PROSPECTUS.
OBJECTIVE. 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, at
the time of purchase, of $1.5 billion or less.
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 Manager."
ADMINISTRATIVE SERVICES. Schroder Fund Advisors Inc. ("Schroder Advisors")
serves as administrator and distributor of the Fund, and Forum Administrative
Services, Limited Liability Company ("Forum") serves as the Fund's sub-
administrator.
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 gains from
foreign currency transactions. Dividends and long-term capital gain
distributions are reinvested automatically in additional Advisor Shares of the
Fund at net asset value unless you elect in your Account Application, or
otherwise in writing, to receive dividends and other distributions in cash.
See "Dividends, Distributions and Taxes."
RISK CONSIDERATIONS. Alone, the fund is not a balanced investment plan. It
is intended for long-term investors seeking 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
Portfolio's investments will change with changes in the value of the
securities in which the Portfolio invests and with 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. For further information, see "Risk Considerations."
2
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FUNDS AVAILABLE THROUGH SCHRODER FUND ADVISORS INC.
PLEASE CALL FOR COMPLETE INFORMATION AND TO OBTAIN A PROSPECTUS.
PLEASE READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST.
SCHRODER CAPITAL FUNDS (DELAWARE) SCHRODER SERIES TRUST (1-800-464-3108)
(1-800-290-9826) SCHRODER EQUITY VALUE FUND
SCHRODER INTERNATIONAL FUND SCHRODER SMALL CAPITALIZATION VALUE FUND
SCHRODER EMERGING MARKETS FUND -- SCHRODER HIGH YIELD INCOME FUND
INSTITUTIONAL PORTFOLIO SCHRODER INVESTMENT GRADE INCOME FUND
SCHRODER INTERNATIONAL SMALLER SCHRODER SHORT-TERM INVESTMENT FUND
COMPANIES FUND
SCHRODER U.S. SMALLER COMPANIES FUND
SCHRODER U.S. EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXPENSES OF INVESTING IN THE FUND
FEE TABLE
The table below is intended to assist you in understanding the expenses
that an investor in Advisor Shares of the Fund would incur. There are no
transaction expenses associated with purchases or redemptions of Advisor
Shares. The Annual Fund Operating Expenses reflect projected fees, expenses
and waivers for the current fiscal year.
Annual Fund Operating Expenses (as a percentage of average net assets)(1)
Management Fees(2)(3) . . . . . . . . . . . . . . . . . . . 0.53%
12b-1 Fees(4) . . . . . . . . . . . . . . . . . . . . . . . None
Other Expenses. . . . . . . . . . . . . . . . . . . . . . . 1.21%
Total Fund Operating Expenses(3). . . . . . . . . . . . . . 1.74%
(1) The Fund's expenses include the Fund's pro rata portion of all operating
expenses of the Portfolio.
(2) Management Fees reflect the fees paid by the Portfolio and the Fund for
investment advisory and administrative services.
(3) SCMI and Schroder Advisors have voluntarily undertaken to waive a portion
of their fees and assume certain expenses of the Fund during the current
fiscal year in order to limit the Fund's Total Fund Operating Expenses to
1.74% of the Fund's average daily net assets. This undertaking cannot be
withdrawn except by a majority vote of the Trust's Board of Trustees. See
"Management of the Fund -- Expenses." Without fee waivers, Management Fees
and Total Fund Operating Expenses would be 0.85% and 2.06%, respectively.
(4) In the future, subject to the approval of the Trust's Board of Trustees,
12b-1 fees may be charged at an annual rate of up to 0.50%.
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 . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18
3 years. . . . . . . . . . . . . . . . . . . . . . . . . . $ 55
5 years. . . . . . . . . . . . . . . . . . . . . . . . . . $ 94
10 years. . . . . . . . . . . . . . . . . . . . . . . . . . $205
3
<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. Information
presented is for Investor Shares as Advisor Shares were not issued 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 year ended October 31,
1996, 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 also
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
1-800-290-9826.
<TABLE>
<CAPTION>
Year Ended October 31, August 6,
---------------------------------------- 1993(b) -
1996(a) 1995 1994 October 31, 1993
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $15.14 $11.81 $10.99 $10.00
--------- --------- --------- --------
Investment Operations:
Net Investment Loss (0.06)(c) (0.04) (0.07) (0.02)
Net Realized and Unrealized Gain
(Loss) 4.10 3.78 0.97 1.01
--------- --------- --------- --------
Total from Investment Operations 4.04 3.74 0.90 0.99
--------- --------- --------- --------
Distributions from Net Realized Gain (1.95) (0.41) (0.08) --
--------- --------- --------- --------
Net Asset Value, End of Period $17.23 $15.14 $11.81 $10.99
--------- --------- --------- --------
--------- --------- --------- --------
Total Return 29.35% 32.84% 8.26% 9.90%
Ratios/Supplementary Data:
Net Assets, End of Period (Thousands) $13,743 $15,287 $13,324 $12,489
Ratio of Expenses to Average Net
Assets 1.49(c)(d) 1.49% 1.45% 2.03%(e)
Ratio of Net Investment Loss to
Average Net Assets (0.35)(c)(d) (0.30%) (0.58%) (0.99%)(e)
Portfolio Turnover Rate(f) 58.50% 92.68% 70.82% 12.58%
Average Brokerage Commission Rate(g) $0.0583 N/A N/A N/A
</TABLE>
- ---------
(a) On May 17, 1996, the Fund began offering two classes of shares, Investor
Shares and Advisor Shares, and all then outstanding shares of the Fund
were converted to Investor Shares.
(b) Commencement of operations.
(c) Includes the Fund's proportionate share of income and expenses of the
Portfolio.
(d) During the year ended October 31, 1996, various fees were waived. Had such
waivers not occurred, the ratio of expenses to average net assets would
have been 1.80% and the ratio of net investment loss to average net assets
would have been (0.66)%, both of which include the Fund's proportionate
share of income and expenses of the Portfolio.
(e) Annualized.
(f) Portfolio turnover rate represents the rate of portfolio activity. The
rate for year ended October 31, 1996, represents the portfolio turnover
rate of the Portfolio.
(g) The average commission per share represents the amount paid to brokers on
the purchase and sale of portfolio securities while the Fund was making
investments directly in securities.
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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 substantially the
same investment objective and policies as the Fund. There can be no assurance
that the Fund or Portfolio will achieve its investment objective.
INVESTMENT POLICIES
Although the following information describes the investment policies of
the Portfolio and the responsibilities of Schroder Core's Board of Trustees
(the "Schroder Core Board"), it applies equally to the Fund and the Trust's
Board of Trustees (the "Trust Board"). Additional information concerning the
investment policies of the Fund and the Portfolio is contained in the SAI.
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 (i) 67% of the
shares present or represented at a shareholder meeting at which the holders of
more than 50% of the outstanding shares are present or represented, or (ii)
more than 50% of outstanding shares. Non-fundamental investment policies of
the Portfolio may be changed by the Schroder Core Board without approval of
the investors in the Portfolio.
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 United States-domiciled companies that at the time of purchase
have market capitalizations of $1.5 billion or less. (Market capitalization
means the market value of a company's outstanding stock.)
In its investment approach, SCMI will identify 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. A
convertible security is a bond, debenture, note, preferred stock or other
security that may be converted into or exchanged for a prescribed amount of
common stock of the same or a different issuer within a particular period of
time at a specified price or formula. The Portfolio may 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
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in debt securities rated below Baa by Moody's Investors Service, Inc.
("Moody's") or BBB by Standard & Poor's Ratings Services ("S&P") (such
securities 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 junk bonds 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 such bonds to make principal and
interest payments than is the case with higher grade bonds. The Portfolio is not
obligated to dispose of securities due to rating changes by Moody's, S&P or
other agencies. See the SAI for information about the risks associated with
investing in junk bonds.
For temporary defensive purposes, the Portfolio may invest without
limitation in (or enter into repurchase agreements maturing in seven days or
less with U.S. banks and broker-dealers with respect to) short-term debt
securities, including commercial paper, U.S. Treasury bills, other short-term
U.S. Government securities, certificates of deposit, and bankers' acceptances
of U.S. banks. The Portfolio also may hold cash and time deposits in U.S.
banks. See "Investment Policies" in the SAI for further information about
these securities.
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.
Convertible preferred stock generally may be converted at a stated price
within a specific amount of time into a specified number of shares of common
stock. A convertible security entitles the holder to receive the dividend paid
on preferred stock until the convertible security is converted or exchanged.
Before conversion, convertible 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
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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.
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.
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 bank 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.
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 (i) by virtue of the absence of a readily available market or (ii)
because of legal or contractual restrictions on resale ("restricted
securities"). There may be undesirable delays in selling illiquid securities
at prices representing their fair value. This policy includes over-the-counter
options held by the Portfolio and the 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. See "Investment Policies -- Illiquid and
Restricted Securities" in the SAI for further information.
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
collateralized in accordance with applicable regulatory requirements 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 it lent; if in the
meantime, the value of the securities the Portfolio lent has increased, the
Portfolio could experience a loss.
The Portfolio may lend its securities if it maintains collateral in a
segregated account, and its liquid assets are equal to the current market
value of the securities loaned (including accrued interest thereon) plus the
loan interest payable to
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<PAGE>
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 such
collateral except for such 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 (a) the
possible failure of such instruments as hedging techniques in cases where the
price movements of the securities underlying the options or futures do not
follow the price movements of the portfolio securities subject to the hedge;
(b) potentially unlimited loss associated with futures transactions and the
possible lack of a liquid secondary market for closing out a futures position;
and (c) possible losses resulting from the inability of SCMI to predict the
direction of stock prices, interest rates and other economic factors. The
Hedging Instruments the Portfolio may use and the risks associated with them
are described in greater detail under "Options and Futures Transactions" in
the SAI.
SHORT SALES AGAINST-THE-BOX. The Portfolio may not sell securities short
except in "short sales against-the-box." For federal income tax purposes,
short sales against-the-box may be made to defer recognition of gain or loss
on the sale of securities "in the box;" and no income can result and no gain
can be realized from securities sold short against-the-box until the short
position is closed out. See "Short Sales Against-the-Box" in the SAI for
further details.
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
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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
SCHRODER GROUP ASSETS UNDER MANAGEMENT WORLDWIDE AS OF DECEMBER 31, 1996 --
OVER $130 BILLION
[GRAPHIC]
THE SCHRODER INVESTMENT MANAGEMENT GROUP INVESTMENT AND REPRESENTATIVE OFFICES
WORLDWIDE INCLUDE
NEW YORK, LONDON, BOSTON, ZURICH, WARSAW, TOKYO, HONG KONG, BEIJING, SHANGHAI,
TAIPEI, SEOUL, BANGKOK, KUALA LUMPUR, SINGAPORE, JAKARTA, SYDNEY, BUENOS
AIRES, SAO PAULO, BOGOTA AND CARACAS.
TOGETHER, SCHRODER CAPITAL MANAGEMENT INTERNATIONAL AND
SCHRODER CAPITAL MANAGEMENT INC. MANAGE OVER $24 BILLION
Boards of Trustees
The business and affairs of the Fund are managed under the direction of
the Trust Board. The business and affairs of the Portfolio are managed under
the direction of the Schroder Core Board. Additional information regarding the
trustees and executive officers of the Trust, as well as Schroder Core's
trustees and executive officers, may be found in the SAI under the heading
"Management, Trustees and Officers."
INVESTMENT ADVISER AND PORTFOLIO MANAGERS
As investment adviser to the Portfolio, SCMI manages the Portfolio and
continuously reviews,
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supervises and administers its investments. SCMI is
responsible for making decisions relating to the Portfolio's investments and
placing purchase and sale orders regarding such investments with brokers or
dealers it selects. For these services, the Investment Advisory Agreement
between SCMI and Schroder Core provides that 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, 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.
The investment management team of Fariba Talebi (a Vice President of the
Trust and a Group Vice President of SCMI) and Ira Unschuld (a Vice President
of the Trust and of SCMI) with the assistance of an investment committee, is
primarily responsible for the day-to-day management of the Portfolio's
investments and has so managed the Portfolio since its inception. Ms. Talebi
and Mr. Unschuld have been employed by SCMI in the investment research and
portfolio management areas since 1987 and 1990, respectively.
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, it will pay SCMI an advisory fee, payable monthly, 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 greater than $250 million. The investment advisory agreement
between SCMI and the Trust with respect to the Fund is the same in all
material respects as Schroder Core's Investment Advisory Contract with respect
to the Portfolio (except as to the parties, the fees payable thereunder, the
circumstances under which fees will be paid and the jurisdiction whose laws
govern the contract).
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 Portfolio, the Trust has also entered into a
sub-administration agreement with Forum, Two Portland Square, Portland, Maine
04101. Pursuant to these agreements, Schroder Advisors and Forum provide
certain management and administrative services necessary for the Fund's
operations. Schroder Advisors is compensated at the annual rate of 0.25% of
the Fund's average daily net assets. Forum is compensated at the annual rate
of 0.075% of the Fund's average daily net assets.
Schroder Advisors and Forum provide similar services to the Portfolio.
Schroder Advisors provides such services without compensation. The Portfolio
pays Forum a monthly fee at the annual rate of 0.075% of the Portfolio's
average daily net assets for its sub-administration services.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICE PLAN
Schroder Advisors acts as distributor of the Fund's shares. Schroder
Advisors was organized in 1989 as a registered broker-dealer to serve as an
administrator and distributor of the Fund and
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other mutual funds. The Trust may compensate Schroder Advisors under a
distribution plan, adopted pursuant to Rule 12b-1 under the 1940 Act (the
"Distribution Plan") by the Trust on behalf of the Fund's Advisor Shares.
Schroder Advisors, in turn, may use these payments to compensate others for
services provided, or to reimburse others for expenses incurred, in connection
with the distribution of Advisor Shares. Payments under the Distribution Plan
would be made monthly at an annual rate of up to 0.50% of the Fund's average
daily net assets attributable to Advisor Shares. The maximum annual amount
payable under the Distribution Plan is currently 0.25%, but no payments will be
made under the Distribution Plan with respect to Advisor Shares until the Board
so authorizes.
Payments under the Distribution Plan may be for various types of costs,
including: (i) advertising expenses, (ii) costs of printing prospectuses and
other materials to be given or sent to prospective investors, (iii) expenses
of sales employees or agents of Schroder Advisors, including salary,
commissions, travel and related expenses in connection with the distribution
of Advisor Shares, (iv) payments to broker-dealers who advise shareholders
regarding the purchase, sale, or retention of Advisor Shares, and (v) payments
to banks, trust companies, broker-dealers (other than Schroder Advisors) or
other financial organizations (collectively, "Service Organizations").
Payments to a particular Service Organization under the Distribution Plan will
be calculated by reference to the average daily net assets of Advisor Shares
owned beneficially by investors who have a brokerage or other service
relationship with the Service Organization. The Fund will not be liable for
distribution expenditures made by Schroder Advisors in any given year in
excess of the maximum amount payable under the Distribution Plan in that year.
Costs or expenses in excess of the annual limit may not be carried forward to
future years. Salary expenses of sales personnel who are responsible for
marketing various shares of portfolios of the Trust may be allocated to those
portfolios, including the Advisor Shares of the Fund, that have adopted a plan
similar to that of the Fund on the basis of average daily net assets. Travel
expenses may be allocated to, or divided among, the particular portfolios of
the Trust for which they are incurred.
The Trust, on behalf of the Fund, has also adopted a shareholder service
plan (the "Shareholder Service Plan"), pursuant to which Schroder Advisors is
authorized to pay Service Organizations a servicing fee. Payments under the
Shareholder Service Plan may be for various types of services, including: (i)
answering customer inquiries regarding the manner in which purchases,
exchanges and redemptions of shares of the Fund may be effected and other
matters pertaining to the Fund's services, (ii) providing necessary personnel
and facilities to establish and maintain shareholder accounts and records,
(iii) assisting shareholders in arranging for processing purchase, exchange
and redemption transactions, (iv) arranging for the wiring of funds, (v)
guaranteeing shareholder signatures in connection with redemption orders and
transfers and changes in shareholder-designated accounts, (vi) integrating
periodic statements with other customer transactions and (vii) providing such
other related services as the shareholder may request. The maximum amount
payable under the Shareholder Service Plan is 0.25% of the Fund's average
daily net assets attributable to Advisor Shares.
Payments to a particular Service Organization under the Shareholder
Service Plan are calculated by reference to the average daily net assets of
Advisor Shares owned beneficially by investors who have a service relationship
with the Service Organization. Some Service Organizations may impose additional
or different conditions on their clients, such as requiring their clients to
invest more than the minimum or subsequent investments specified by the Fund or
charging a direct fee for servicing. If imposed,these fees would be
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in addition to any amounts which might be paid to the Service Organization by
Schroder Advisors. Each Service Organization has agreed to transmit to its
clients a schedule of any such fees. Shareholders using Service Organizations
are urged to consult them regarding any such fees or conditions.
EXPENSES
SCMI and Schroder Advisors have voluntarily undertaken to waive a portion
of their fees or assume certain expenses of the Fund in order to limit total
Fund expenses (excluding taxes, interest, brokerage commissions and other
portfolio transaction expenses and extraordinary expenses) chargeable to
Advisor Shares to 1.74% of the average daily net assets of the Fund
attributable to those shares. This expense limitation cannot be modified or
withdrawn except by a majority vote of the Trustees of the Trust who are not
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 (a) Schroder
Wertheim & Company, Incorporated and its affiliates ("Schroder Wertheim"),
affiliates of SCMI, to effect transactions of the Portfolio on the New York
Stock Exchange and (b) Schroder Securities Limited and its affiliates
("Schroder Securities"), affiliates of SCMI, to effect transactions of the
Portfolio, if any, on certain foreign securities exchanges. Because of the
affiliation between SCMI and both Schroder Wertheim and Schroder Securities,
the Portfolio's payment of commissions to them is subject to procedures
adopted by the Schroder Core Board designed to ensure that the commissions
will not exceed the usual and customary brokers' commissions. No specific
portion of the Portfolio's brokerage will be directed to Schroder Wertheim or
Schroder Securities, and in no event will either receive any brokerage in
recognition of research services.
Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc., and subject to seeking the most favorable price and
execution available and such other policies as the Schroder Core Board may
determine, SCMI may consider sales of shares of the Fund or any other entity
that invests in the Portfolio as a factor in the selection of broker-dealers
to execute portfolio transactions for the Portfolio.
Although the Portfolio does not currently engage in directed brokerage
arrangements to pay expenses, it may do so in the future. These arrangements
(whereby brokers executing the Portfolio's portfolio transactions 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 invest-
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ment analysts. That policy complies in all material respects with the
recommendations set forth in the Report of the Advisory Group on Personal
Investing of the Investment Company Institute, of which the Trust is a member.
INVESTMENT IN THE FUND
PURCHASE OF SHARES
Investors may purchase Advisor Shares directly from the Trust.
Prospectuses, sales material and Account Applications can be obtained from the
Trust or through Forum Financial Corp., the Fund's transfer agent (the
"Transfer Agent"). See "Other Information -- Shareholder Inquiries".
Investments may also be made through Service Organizations that assist their
customers in purchasing shares of the Fund. Service Organizations may charge
their customers a service fee for processing orders to purchase or sell shares
of the Fund. Investors wishing to purchase shares through their accounts at a
Service Organization should contact that organization directly for appropriate
instructions.
Shares of the Fund are offered at the net asset value next determined
after receipt of a completed Account Application (at the address set forth
below). The minimum initial investment is $10,000, except that the minimum for
an IRA is $2,000. The minimum subsequent investment is $2,500. All purchase
payments are invested in full and fractional shares. The Fund is authorized to
reject any purchase order.
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 --
Advisor Shares
P.O. Box 446
Portland, Maine 04112
For initial purchases, the check must be accompanied by a completed
Account Application in proper form. Further documentation may be requested
from corporations, administrators, executors, personal representatives,
directors or custodians to evidence the authority of the person or entity
making the subscription request.
Investors and Service Organizations (on behalf of their customers) may
transmit purchase payments by Federal Reserve Bank wire directly to the Fund
as follows:
Chase Manhattan Bank
New York, NY
ABA No.: 021000021
For Credit To: Forum Financial Corp.
Account. No.: 910-2-718187
Ref.: Schroder U.S. Smaller Companies Fund -- Advisor Shares
Account of: (shareholder name)
Account Number: (shareholder account number)
The wire order must specify the name of the Fund, the shares' class (i.e.,
Advisor Shares), the account name and number, address, confirmation number,
amount to be wired, name of the wiring bank, and name and telephone number of
the person to be contacted in connection with the order. If the initial
investment is by wire, an account number will be assigned and an Account
Application must be completed and mailed to the Fund before any account 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"
below.
The Fund's Transfer Agent establishes for each shareholder of record, an
open account to which all shares purchased and all reinvested dividends and
distributions are credited. Although most shareholders elect not to receive
share certificates, certificates for full shares can be obtained
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by written request to the Fund's Transfer Agent. No certificates are issued for
fractional shares.
The Transfer Agent will deem an account lost if six months have passed
since correspondence to the shareholder's address of record is returned,
unless the Transfer Agent determines the shareholder's new address. When an
account is deemed lost, dividends and other distributions will automatically
be reinvested. In addition, the amount of any outstanding checks for dividends
and 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 of the Fund are offered in connection with tax-deferred retirement
plans. Application forms and further information about these plans, including
applicable fees, are available upon request. Before investing in the Fund
through one of these plans, investors should consult their tax advisors.
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.
EXCHANGES
Shareholders may exchange Shares of the Fund for 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.
An exchange is considered to be a sale of shares for Federal income tax
purposes on which a shareholder may realize a capital gain or loss. An
exchange may be made by calling the Transfer Agent at (800) 344-8332 or by
mailing written instructions to Schroder Capital Funds (Delaware), P.O. Box
446, Portland, Maine 04112. Exchange privileges may be exercised only in those
states where shares of the other series of the Trust may legally be sold.
Exchange privileges may be amended or terminated at any time upon sixty (60)
days' notice.
REDEMPTION OF SHARES
Shares of the Fund are redeemed at their next determined net asset value
after receipt by the Fund (at the address set forth above under "Purchase of
Shares") of a redemption request in proper form. Redemption requests may be
made between 9:00 a.m. and 6:00 p.m. (Eastern Time) on each Fund Business Day.
Redemption requests that are received prior to 4:00 p.m. (Eastern Time) will
be processed at the net asset value determined as of that day. Redemption
requests that are received after 4:00 p.m. (Eastern Time) will be processed at
the net asset value determined the next Fund Business Day. See "Net Asset
Value" below.
BY TELEPHONE. Redemption requests may be made by telephoning the Transfer
Agent at the telephone number on the cover page of this Prospectus. A
shareholder must provide the Transfer Agent with the class of Shares, the
dollar amount or number of shares to be redeemed, shareholder account number,
and some additional form of
14
<PAGE>
identification such as a password. A redemption by telephone may be made only if
the telephone redemption privilege option has been elected on the Account
Application or otherwise in writing. In an effort to prevent unauthorized or
fraudulent redemption requests by telephone, reasonable procedures will be
followed by the Transfer Agent to confirm that telephone instructions are
genuine. The Transfer Agent and the Trust generally will not be liable for any
losses due to unauthorized or fraudulent redemption requests, but may be liable
if they do not follow these procedures. Shares for which certificates have been
issued may not be redeemed by telephone. In times of drastic economic or market
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 class of shares, the dollar amount or number of Shares to be redeemed, and
the shareholder account number. The letter must also be signed in exactly the
same way the account is registered (if there is more than one owner of the
Shares, all must sign) and, in certain cases, signatures must be guaranteed by
an institution that is acceptable to the Transfer Agent. Such institutions
include certain banks, brokers, dealers (including municipal and government
securities brokers and dealers), credit unions and savings associations.
Notaries public are not acceptable. Further documentation may be requested to
evidence the authority of the person or entity making the redemption request.
Questions concerning the need for signature guarantees or documentation of
authority should be directed to the Fund at the above address or by calling
the telephone number appearing on the cover of this Prospectus.
If Shares to be redeemed are held in certificate form, the certificates
must be enclosed with the redemption request and the assignment form on the
back of the certificates (or an assignment separate from the certificates but
accompanied by the certificates) must be signed by all owners in exactly the
same way the owners' names are written on the face of the certificates.
Requirements for signature guarantees and/or documentation of authority as
described above could also apply. For your protection, the Fund suggests that
certificates be sent by registered mail.
ADDITIONAL REDEMPTION INFORMATION. Checks for redemption proceeds will
normally be mailed within seven days. No redemption proceeds will be mailed
until checks in payment for the purchase of the Shares to be redeemed have
been cleared, which may take up to 15 calendar days from the purchase date.
Unless other instructions are given in proper form, a check for the proceeds
of a redemption will be sent to the shareholder's address of record.
The Fund may suspend the right of redemption during any period when (i)
trading on the New York Stock Exchange is restricted or that exchange is
closed, (ii) the SEC has by order permitted such suspension, or (iii) an
emergency (as defined by rules of the SEC) exists making disposal of portfolio
investments or determination of the Fund's net asset value not reasonably
practicable.
If the Trust Board determines that it would be detrimental to the best
interest of the remaining shareholders of the Fund to make payment wholly or
partly in cash, the Fund may redeem Shares in whole or in part by a distribution
in kind of portfolio securities (from the investment portfolio of the Portfolio
or of the Fund), in lieu of cash. The Fund will, however, redeem Shares solely
in cash up to the lesser of $250,000 or 1% of net assets during any 90-day
period for any one shareholder. In the event that payment for redeemed Shares is
made wholly or partly in portfolio securities, the shareholder may be subject to
additional risks and costs in converting the securities to cash. See "Additional
Purchase and Redemption Information" in the SAI.
15
<PAGE>
The proceeds of a redemption may be more or less than the amount invested
and, therefore, a redemption may result in a gain or loss for Federal income
tax purposes.
Due to the relatively high cost of maintaining smaller accounts, the Fund
reserves the right to redeem Shares in any account (other than an IRA) if at
any time the account does not have a value of at least $2,000, unless the
value of the account falls below that amount solely as a result of market
activity. Shareholders will be notified that the value of the account is less
than $2,000 and be allowed at least 30 days to make an additional investment
to increase the account balance to at least $2,000.
NET ASSET VALUE
The net asset value per share of the Fund is calculated separately for
each class of shares of the Fund at 4:00 p.m. (Eastern Time), Monday through
Friday, each Fund Business Day, which excludes the following U.S. holidays:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. Net asset value per Share is
calculated by dividing the aggregate value of the Fund's assets less all Fund
liabilities, if any, by the number of Shares of the Fund outstanding.
Generally, securities 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.
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 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. In its effort to adhere to these requirements, the Fund
may have to limit its investment activity in some types of instruments.
Dividends and capital gain distributions on Advisor Shares are reinvested
automatically in additional Advisor 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 will be 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 addi-
16
<PAGE>
tional Shares or received in cash. Distributions by the Fund of any net capital
gain will be 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. Shareholders should
consult their own tax advisors as to the tax consequences of their ownership
of Shares.
If the Fund's dividends exceed its taxable income in any year all or a
portion of the Fund's dividends may be treated as a return of capital to
shareholders for tax purposes. Any return of capital will reduce the cost
basis of your shares, which will result in a higher reported capital gain or a
lower reported capital loss when you sell your shares. Shareholders will be
notified by the Trust if a distribution included a return of capital.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting the Fund and its shareholders; see the SAI
for further information. Shareholders should consult their own tax advisors as
to the tax consequences of their ownership of shares.
THE PORTFOLIO
The Portfolio is not required to pay federal income tax because it is
classified as a partnership for federal income tax purposes. All interest,
dividends, gains and losses 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 28, 1988 as Schroder Capital Funds, Inc. and
reorganized as a Delaware business trust on January 9, 1996. 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 such portfolios
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or series into classes of shares (such as the Advisor Shares), and the costs of
doing so will be borne by the Trust. The Trust currently consists of eight
separate series, each of which has separate investment objectives and policies.
The Fund currently consists of two classes of shares. Each share of the
Fund is entitled to participate equally in dividends and other distributions
and the proceeds of any liquidation except that, due to the differing expenses
borne by the classes, dividends and liquidation proceeds for each class will
likely differ.
Shares are fully paid and non-assessable, and have no pre-emptive rights.
Shareholders have non-cumulative voting rights, which means that the holders
of more than 50% of the shares voting for the election of Trustees can elect
100% of the Trustees if they choose to do so. A shareholder is entitled to one
vote for each full share held (and a fractional vote for each fractional share
held). 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. As of February
15, 1997, Schroder Nominees Limited may be deemed to have controlled the Fund
for purposes of the 1940 Act.
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 distributions at NAV. Cumulative total returns are calculated
similarly except that the total return is aggregated over the relevant period
instead of annualized.
Performance quotations are calculated separately for each class of shares
of the Fund. The Fund may also be compared to various unmanaged securities
indices, groups of mutual funds tracked by mutual fund ratings services, or
other general economic indicators. Unmanaged indices may assume the
reinvestment of dividends but do not reflect deductions for administrative and
management costs and expenses.
Performance information represents only past performance and does not
necessarily indicate future results. For a description of the methods used to
determine total return and other performance measures for the Fund, see the SAI.
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<PAGE>
CUSTODIAN AND TRANSFER AGENT
The Chase Manhattan Bank, N.A. is custodian of the Fund's and of the
Portfolio's assets. Forum Financial Corp. serves as the Fund's transfer and
dividend disbursing agent.
SHAREHOLDER INQUIRIES
Inquiries about the Fund, including its past performance, should be
directed to:
Schroder U.S. Smaller Companies Fund
P.O. Box 446
Portland, Maine 04112
Information about specific shareholder accounts may be obtained from the
Transfer Agent by calling (800) 344-8332.
SERVICE ORGANIZATIONS
The Glass-Steagall Act and other applicable laws and regulations provide
that banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks
from performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or
interpretations of such laws, as well as changes in either Federal or state
regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, could prevent a bank Service Organization from
continuing to perform all or part of its servicing activities. If a bank were
prohibited from so acting, its shareholder clients would be permitted to
remain shareholders of the Fund and alternative means for continuing the
servicing of such shareholders would be sought. It is not expected that
shareholders would suffer any adverse financial consequences as a result of
any of these occurrences.
FUND STRUCTURE
CLASSES OF SHARES. The Fund has two classes of shares, Investor Shares and
Advisor Shares. Investor Shares are offered by a separate prospectus to
corporations, institutions, and fiduciaries, including fiduciary, agency, and
custodial clients of bank trust departments, trust companies, and their
affiliates. Advisor Shares incur more expenses than Investor Shares. Except
for certain differences, each share of each class represents an undivided,
proportionate interest in the Fund. Each share of the Fund is entitled to
participate equally in dividends and other distributions and the proceeds of
any liquidation of the Fund except that, due to the differing expenses borne
by the two classes, the amount of dividends and other distributions will
differ between the classes. Information about Investor Shares is available
from the Fund by calling Schroder Advisors at (800) 730-2932.
THE PORTFOLIO. The Fund seeks to achieve its investment objective by
investing all of its investable assets in the Portfolio, which has similar the
same investment objective and policies as the Fund. Accordingly, the Portfolio
directly acquires its own securities and the Fund acquires an indirect
interest in those securities. The Portfolio is a separate series of ("Schroder
Core"), a business trust organized under the laws of the State of Delaware in
September 1995. Schroder Core is registered under the 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 Norwest Advantage
Funds' SmallCap Opportunities Fund. 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.
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<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 it. 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.
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<PAGE>
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 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, if the Board decided not to
permit SCMI to manage the Fund's assets, could have a significant impact on
shareholders the Fund.
Each investor in the Portfolio, including the Fund, may be liable for all
obligations of the Portfolio. The risk to an investor in the Portfolio of
incurring financial loss on account of such liability, however, is limited to
circumstances in which the Portfolio is unable to meet its obligations, the
occurrence of which SCMI considers to be quite remote. Upon liquidation of the
Portfolio, investors would be entitled to share pro rata in the net assets of
the Portfolio available for distribution to investors.
21
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<PAGE>
INVESTMENT ADVISER
Schroder Capital Management International Inc.
787 Seventh Avenue
New York, New York 10019
ADMINISTRATOR & DISTRIBUTOR
Schroder Fund Advisors Inc.
787 Seventh Avenue
New York, New York 10019
SUB-ADMINISTRATOR
Forum Administrative Services, Limited Liability Company
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
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
Distribution Plan and Shareholder
Service Plan......................... 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
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
Service Organizations................. 17
Fund Structure........................ 18
[Logo]
- --------------------------------------------
SCHRODER
U.S. SMALLER
COMPANIES
FUND
ADVISOR SHARES
PROSPECTUS
MARCH 1, 1997
SCHRODER CAPITAL FUNDS (DELAWARE)
<PAGE>
SCHRODER U.S. SMALLER COMPANIES FUND
INVESTOR SHARES
This 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 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"), which invests, under normal
market conditions, at least 65% of its total assets in equity securities of
companies domiciled in the United States that, at the time of purchase, have
market capitalizations of $1.5 billion or less. The Portfolio is a separately
managed, diversified series of Schroder Capital Funds ("Schroder Core"), an
open-end management investment company registered under the Investment
Company Act of 1940 (the "1940 Act"). The Portfolio has an identical
investment objective and substantially similar investment policies as the
Fund. Accordingly, the Fund's investment experience will correspond directly
with the Portfolio's investment experience. See "Other Information -- Fund
Structure."
This prospectus sets forth concisely the information you should know before
investing and should be retained for further 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 March 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 their Internet
Web Site (http://www.sec.gov) or may be obtained without charge from the
Trust by writing to Two Portland Square, Portland, Maine 04101 or by calling
1-800-290-9826. 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
MARCH 1, 1997
<PAGE>
FUNDS AVAILABLE THROUGH SCHRODER FUND ADVISORS INC.
Please call for complete information and to obtain a prospectus.
Please read the prospectus carefully before you invest.
<TABLE>
<S> <C>
Schroder Capital Funds (Delaware) (1-800-290-9826) Schroder Series Trust (1-800-464-3108)
SCHRODER INTERNATIONAL FUND SCHRODER EQUITY VALUE FUND
SCHRODER EMERGING MARKETS FUND -- SCHRODER SMALL CAPITALIZATION VALUE FUND
INSTITUTIONAL PORTFOLIO SCHRODER HIGH YIELD INCOME FUND
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND SCHRODER INVESTMENT GRADE INCOME FUND
SCHRODER U.S. SMALLER COMPANIES FUND SCHRODER SHORT-TERM INVESTMENT FUND
SCHRODER U.S. EQUITY FUND
</TABLE>
2
<PAGE>
PROSPECTUS SUMMARY
This prospectus offers Investor Class shares ("Investor Shares" or
"Shares") of the Fund. The Fund is a separately managed, diversified series
of the Trust, an open-end, management investment company registered under the
1940 Act. THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE
DETAILED INFORMATION CONTAINED IN THIS PROSPECTUS.
OBJECTIVE. 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,
at the time of purchase, of $1.5 billion or less.
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 Manager."
ADMINISTRATIVE SERVICES. Schroder Fund Advisors Inc. ("Schroder
Advisors") serves as administrator and distributor of the Fund, and Forum
Administrative Services, Limited Liability Company ("Forum") serves as the
Fund's sub-administrator.
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 gains 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 and 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
Portfolio's investments will change with changes in the value of the
securities in which the Portfolio invests and with 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. For further information, see "Risk Considerations."
3
<PAGE>
EXPENSES OF INVESTING IN THE FUND
FEE TABLE
The table below is intended to assist you in understanding the expenses
that an investor in Investor Shares of the Fund would incur. There are no
transaction expenses associated with purchases or redemptions of Investor
Shares. The Annual Fund Operating Expenses have been restated to reflect
projected fees, expenses and waivers for the current fiscal year.
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)(1)
<TABLE>
<S> <C>
Management Fees (after fee waivers)(2)(3)........................................... 0.53%
12b-1 Fees.......................................................................... None
Other Expenses(3)................................................................... 0.96%
Total Fund Operating Expenses(3).................................................... 1.49%
</TABLE>
(1) The Fund's expenses include the Fund's pro rata portion of all operating
expenses of the Portfolio.
(2) Management Fees reflect the fees paid by the Portfolio and the Fund for
investment advisory and administrative services.
(3) SCMI and Schroder Advisors have voluntarily undertaken to waive a portion
of their fees and assume certain expenses of the Fund during the current
fiscal year in order to limit the Fund's Total Fund Operating Expenses to
1.49% of the Fund's average daily net assets. This undertaking cannot be
withdrawn except by a majority vote of the Trust's Board of Trustees. See
"Management of the Fund -- Expenses." Without fee waivers, Management Fees
and Total Operating Expenses would be 0.85% and 1.81%, 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.
<TABLE>
<S> <C>
1 year................................................................................ $ 15
3 years............................................................................... $ 47
5 years............................................................................... $ 82
10 years............................................................................... $178
</TABLE>
4
<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 year ended October 31,
1996, 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
1-800-290-9826.
<TABLE>
<CAPTION>
August 6,
Year Ended October 31, 1993(b) -
--------------------------------- October 31,
1996(a) 1995 1994 1993
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 15.14 $ 11.81 $ 10.99 $ 10.00
--------- --------- --------- ---------
Investment Operations:
Net Investment Loss (0.06)(c) (0.04) (0.07) (0.02)
Net Realized and Unrealized Gain (loss) 4.10 3.78 0.97 1.01
--------- --------- --------- ---------
Total from Investment Operations 4.04 3.74 0.90 0.99
--------- --------- --------- ---------
Distributions from Net Realized Gain (1.95) (0.41) (0.08) --
--------- --------- --------- ---------
Net Asset Value, End of period $ 17.23 $ 15.14 $ 11.81 $ 10.99
--------- --------- --------- ---------
--------- --------- --------- ---------
Total Return 29.35% 32.84% 8.26% 9.90%
Ratios/Supplementary Data:
Net Assets, End of Period (thousands) $13,743 $15,287 $13,324 $12,489
Ratio of Expenses to Average Net Assets 1.49(c)(d) 1.49% 1.45% 2.03%(e)
Ratio of Net Investment Loss to Average
Net Assets (0.35)(c)(d) (0.30%) (0.58%) (0.99%)(e)
Portfolio Turnover Rate(f) 58.50% 92.68% 70.82% 12.58%
Average Brokerage Commission Rate(g) $0.0583 N/A N/A N/A
</TABLE>
- ---------
(a) On May 17, 1996, the Fund began offering two classes of shares, Investor
Shares and Advisor Shares, and all then outstanding shares of the Fund
were converted to Investor Shares.
(b) Commencement of operations.
(c) Includes the Fund's proportionate share of income and expenses of the
Portfolio.
(d) During the year ended October 31, 1996, various fees were waived. Had such
waivers not occurred, the ratio of expenses to average net assets would
have been 1.80% and the ratio of net investment loss to average net assets
would have been (0.66)%, both of which include the Fund's proportionate
share of income and expenses of the Portfolio.
(e) Annualized.
(f) Portfolio turnover rate represents the rate of portfolio activity. The
rate for year ended October 31, 1996, represents the portfolio turnover
rate of the Portfolio.
(g) The average commission per share paid to brokers represents the amount
paid to brokers on the purchase and sale of portfolio securities while the
Fund was making investments directly in securities.
5
<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 substantially the
same investment objective and policies as the Fund. There can be no assurance
that the Fund or Portfolio will achieve its investment objective.
INVESTMENT POLICIES
Although the following information describes the investment policies of
the Portfolio and the responsibilities of Schroder Core's Board of Trustees
(the "Schroder Core Board"), it applies equally to the Fund and the Trust's
Board of Trustees (the "Trust Board"). Additional information concerning the
investment policies of the Fund and the Portfolio is contained in the SAI.
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
(i) 67% of the shares present or represented at a shareholder meeting at
which the holders of more than 50% of the outstanding shares are present or
represented, or (ii) more than 50% of outstanding shares. Non-fundamental
investment policies of the Portfolio may be changed by the Schroder Core
Board without approval of the investors in the Portfolio.
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 United States-domiciled companies that at the time of purchase
have market capitalizations of $1.5 billion or less. (Market capitalization
means the market value of a company's outstanding stock.)
In its investment approach, SCMI will identify 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. A convertible security is a bond, debenture, note, preferred stock or
other security that may be converted into or exchanged for a prescribed
amount of common stock of the same or a different issuer within a particular
period of time at a specified price or formula. The Portfolio may 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
6
<PAGE>
in debt securities rated below Baa by Moody's Investors Service, Inc.
("Moody's") or BBB by Standard & Poor's Ratings Services ("S&P") (such
securities 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 junk bonds 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 such bonds
to make principal and interest payments than is the case with higher grade
bonds. The Portfolio is not obligated to dispose of securities due to rating
changes by Moody's, S&P or other agencies. See the SAI for information about
the risks associated with investing in junk bonds.
For temporary defensive purposes, the Portfolio may invest without
limitation in (or enter into repurchase agreements maturing in seven days or
less with U.S. banks and broker-dealers with respect to) short-term debt
securities, including commercial paper, U.S. Treasury bills, other short-term
U.S. Government securities, certificates of deposit, and bankers' acceptances
of U.S. banks. The Portfolio also may hold cash and time deposits in U.S.
banks. See "Investment Policies" in the SAI for further information about
these securities.
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.
Convertible preferred stock generally may be converted at a stated price
within a specific amount of time into a specified number of shares of common
stock. A convertible security entitles the holder to receive the dividend
paid on preferred stock until the convertible security is converted or
exchanged. Before conversion, convertible 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-convert-
7
<PAGE>
ible 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.
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.
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 bank 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.
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 (i) by virtue of the absence of a readily available market or (ii)
because of legal or contractual restrictions on resale ("restricted
securities"). There may be undesirable delays in selling illiquid securities
at prices representing their fair value. This policy includes
over-the-counter options held by the Portfolio and the 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.
See "Investment Policies -- Illiquid and Restricted Securities" in the SAI
for further information.
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 collateralized in accordance with applicable regulatory requirements
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 it lent; if in
the meantime, the value of the securities the Portfolio lent has increased,
the Portfolio could experience a loss.
The Portfolio may lend its securities if it maintains collateral in a
segregated account, and its liquid assets are equal to the current market
value of the securities loaned (including accrued interest thereon) plus the
loan interest payable to
8
<PAGE>
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
such collateral except for such 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 (a) the
possible failure of such instruments as hedging techniques in cases where the
price movements of the securities underlying the options or futures do not
follow the price movements of the portfolio securities subject to the hedge;
(b) potentially unlimited loss associated with futures transactions and the
possible lack of a liquid secondary market for closing out a futures
position; and (c) possible losses resulting from the inability of SCMI to
predict the direction of stock prices, interest rates and other economic
factors. The Hedging Instruments the Portfolio may use and the risks
associated with them are described in greater detail under "Options and
Futures Transactions" in the SAI.
SHORT SALES AGAINST-THE-BOX. The Portfolio may not sell securities short
except in "short sales against-the-box." For federal income tax purposes,
short sales against-the-box may be made to defer recognition of gain or loss
on the sale of securities "in the box;" and no income can result and no gain
can be realized from securities sold short against-the-box until the short
position is closed out. See "Short Sales Against-the-Box" in the SAI for
further details.
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
9
<PAGE>
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
SCHRODER GROUP ASSETS UNDER MANAGEMENT WORLDWIDE AS OF DECEMBER 31, 1996 --
OVER $130 BILLION
[GRAPHIC]
THE SCHRODER INVESTMENT MANAGEMENT GROUP INVESTMENT AND REPRESENTATIVE
OFFICES WORLDWIDE INCLUDE NEW YORK, LONDON, BOSTON, ZURICH, WARSAW, TOKYO,
HONG KONG, BEIJING, SHANGHAI, TAIPEI, SEOUL, BANGKOK, KUALA LUMPUR,
SINGAPORE, JAKARTA, SYDNEY, BUENOS AIRES, SAO PAULO, BOGOTA AND CARACAS.
TOGETHER, SCHRODER CAPITAL MANAGEMENT INTERNATIONAL AND
SCHRODER CAPITAL MANAGEMENT INC. MANAGE OVER $24 BILLION
BOARDS OF TRUSTEES
The business and affairs of the Fund are managed under the direction of
the Trust Board. The business and affairs of the Portfolio are managed under
the direction of the Schroder Core Board.
Additional information regarding the trustees and executive officers of the
Trust, as well as Schroder Core's trustees and executive officers, may be
found in the SAI under the heading "Management, Trustees and Officers."
INVESTMENT ADVISER AND PORTFOLIO MANAGERS
As investment adviser to the Portfolio, SCMI manages the Portfolio and
continuously reviews, supervises and administers its investments. SCMI
10
<PAGE>
is responsible for making decisions relating to the Portfolio's investments
and placing purchase and sale orders regarding such investments with brokers
or dealers it selects. For these services, the Investment Advisory Agreement
between SCMI and Schroder Core provides that 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, 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.
The investment management team of Fariba Talebi (a Vice President of the
Trust and a Group Vice President of SCMI) and Ira Unschuld (a Vice President
of the Trust and of SCMI) with the assistance of an investment committee, is
primarily responsible for the day-to-day management of the Portfolio's
investments and has so managed the Portfolio since its inception. Ms. Talebi
and Mr. Unschuld have been employed by SCMI in the investment research and
portfolio management areas since 1987 and 1990, respectively.
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, it will pay SCMI an advisory fee, payable
monthly, 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 greater than $250 million. The investment
advisory agreement between SCMI and the Trust with respect to the Fund is the
same in all material respects as Schroder Core's Investment Advisory Contract
with respect to the Portfolio (except as to the parties, the fees payable
thereunder, the circumstances under which fees will be paid and the
jurisdiction whose laws govern the contract).
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 Portfolio, the Trust has also entered into a
sub-administration agreement with Forum, Two Portland Square, Portland, Maine
04101. Pursuant to these agreements, Schroder Advisors and Forum provide
certain management and administrative services necessary for the Fund's
operations. Schroder Advisors is compensated at the annual rate of 0.25% of
the Fund's average daily net assets. Forum is compensated at the annual rate
of 0.075% of the Fund's average daily net assets.
Schroder Advisors and Forum provide similar services to the Portfolio.
Schroder Advisors provides such services without compensation. The Portfolio
pays Forum a monthly fee at the annual rate of 0.075% of the Portfolio's
average daily net assets for its sub-administration services.
EXPENSES
SCMI and Schroder Advisors have voluntarily undertaken to waive a portion
of their fees or assume certain expenses of the Fund in order to limit total
Fund expenses (excluding taxes, inter-
11
<PAGE>
est, 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 attributable to those shares. This expense
limitation cannot be modified or withdrawn except by a majority vote of the
Trustees of the Trust who are not 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 (a) Schroder
Wertheim & Company, Incorporated and its affiliates ("Schroder Wertheim"),
affiliates of SCMI, to effect transactions of the Portfolio on the New York
Stock Exchange and (b) Schroder Securities Limited and its affiliates
("Schroder Securities"), affiliates of SCMI, to effect transactions of the
Portfolio, if any, on certain foreign securities exchanges. Because of the
affiliation between SCMI and both Schroder Wertheim and Schroder Securities,
the Portfolio's payment of commissions to them is subject to procedures
adopted by the Schroder Core Board designed to ensure that the commissions
will not exceed the usual and customary brokers' commissions. No specific
portion of the Portfolio's brokerage will be directed to Schroder Wertheim or
Schroder Securities, and in no event will either receive any brokerage in
recognition of research services.
Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc., and subject to seeking the most favorable price and
execution available and such other policies as the Schroder Core Board may
determine, SCMI may consider sales of shares of the Fund or any other entity
that invests in the Portfolio as a factor in the selection of broker-dealers
to execute portfolio transactions for the Portfolio.
Although the Portfolio does not currently engage in directed brokerage
arrangements to pay expenses, it may do so in the future. These arrangements
(whereby brokers executing the Portfolio's portfolio transactions 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."
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Investments may also be made through service organizations that assist their
customers in purchasing shares of the Fund ("Service Organizations"). Service
Organizations may charge their customers a service fee for processing orders
to purchase or sell shares of the Fund. Investors wishing to purchase shares
through their accounts at a Service Organization should contact that
organization directly for appropriate instructions.
Shares of the Fund are offered at the net asset value next determined
after receipt of a completed Account Application (at the address set forth
below). The minimum initial investment is $10,000, except that the minimum
for an IRA is $2,000. The minimum subsequent investment is $2,500. All
purchase payments are invested in full and fractional shares. The Fund is
authorized to reject any purchase order.
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
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 subscription request.
Investors and Service Organizations (on behalf of their customers) may
transmit purchase payments by Federal Reserve Bank wire directly to the Fund
as follows:
Chase Manhattan Bank
New York, NY
ABA No.: 021000021
For Credit To: Forum Financial Corp.
Account No.: 910-2-718187
Ref.: Schroder U.S. Smaller Companies Fund -- Investor Shares
Account of: (shareholder name)
Account Number: (shareholder account number)
The wire order must specify the name of the Fund, the 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" below.
The Fund's Transfer Agent, establishes for each shareholder of record, an
open account to which all shares purchased and all reinvested dividends and
other distributions are credited. Although most shareholders elect not to
receive share certificates, certificates for full shares can be obtained by
written request to the Fund's Transfer Agent. No certificates are issued for
fractional shares.
The Transfer Agent will deem an account lost if six months have passed
since correspondence to the shareholder's address of record is returned,
unless the Transfer Agent determines the shareholder's new address. When an
account is deemed lost, dividends and other distributions will automatically
be reinvested. In addition, the amount of any outstanding checks for
dividends and other distributions that have been returned to the Transfer
Agent will be reinvested and such checks will be canceled.
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RETIREMENT PLANS AND INDIVIDUAL RETIREMENT
ACCOUNTS
Shares of the Fund are offered in connection with tax-deferred retirement
plans. Application forms and further information about these plans, including
applicable fees, are available upon request. Before investing in the Fund
through one of these plans, investors should consult their tax advisors.
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.
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. Each purchase of
shares under a Statement of Intention will be made at net asset value plus
the sales charge applicable at the time of the purchase to a single
transaction of the dollar amount indicated in the Statement.
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 Shares of the Fund for 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.
An exchange is considered to be a sale of shares for Federal income tax
purposes on which a shareholder may realize a capital gain or loss. An
exchange may be made by calling the Transfer Agent at (800) 344-8332 or by
mailing written instructions to Schroder Capital Funds (Delaware), P.O. Box
446, Portland, Maine 04112. Exchange privileges may be exercised only in
those states where shares of the other series of the Trust may legally be
sold. Exchange privileges may be amended or terminated at any time upon sixty
(60) days' notice.
REDEMPTION OF SHARES
Shares of the Fund are redeemed at their next determined net asset value
after receipt by the Fund (at the address set forth above under "Purchase of
Shares") of a redemption request in proper form. Redemption requests may be
made between 9:00 a.m. and 6:00 p.m. (Eastern Time) on each Fund Business
Day. Redemption requests that are received prior to 4:00 p.m. (Eastern Time)
will be processed at the net asset value determined
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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" below.
BY TELEPHONE. Redemption requests may be made by telephoning the Transfer
Agent at the telephone number on the cover page of this Prospectus. A
shareholder must provide the Transfer Agent with the class of Shares, the
dollar amount or number of shares to be redeemed, shareholder account number,
and some additional form of identification such as a password. A redemption
by telephone may be made only if the telephone redemption privilege option
has been elected on the Account Application or otherwise in writing. In an
effort to prevent unauthorized or fraudulent redemption requests by
telephone, reasonable procedures will be followed by the Transfer Agent to
confirm that telephone instructions are genuine. The Transfer Agent and the
Trust generally will not be liable for any losses due to unauthorized or
fraudulent redemption requests, but may be liable if they do not follow these
procedures. Shares for which certificates have been issued may not be
redeemed by telephone. In times of drastic economic or market 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 class of shares, the dollar amount or number of Shares to be
redeemed, and the shareholder account number. The letter must also be signed
in exactly the same way the account is registered (if there is more than one
owner of the Shares, all must sign) and, in certain cases, signatures must be
guaranteed by an institution that is acceptable to the Transfer Agent. Such
institutions include certain banks, brokers, dealers (including municipal and
government securities brokers and dealers), credit unions and savings
associations. Notaries public are not acceptable. Further documentation may
be requested to evidence the authority of the person or entity making the
redemption request. Questions concerning the need for signature guarantees or
documentation of authority should be directed to the Fund at the above
address or by calling the telephone number appearing on the cover of this
Prospectus.
If Shares to be redeemed are held in certificate form, the certificates
must be enclosed with the redemption request and the assignment form on the
back of the certificates (or an assignment separate from the certificates but
accompanied by the certificates) must be signed by all owners in exactly the
same way the owners' names are written on the face of the certificates.
Requirements for signature guarantees and/or documentation of authority as
described above could also apply. For your protection, the Fund suggests that
certificates be sent by registered mail.
ADDITIONAL REDEMPTION INFORMATION. Checks for redemption proceeds will
normally be mailed within seven days. No redemption proceeds will be mailed
until checks in payment for the purchase of the Shares to be redeemed have
been cleared, which may take up to 15 calendar days from the purchase date.
Unless other instructions are given in proper form, a check for the proceeds
of a redemption will be sent to the shareholder's address of record.
The Fund may suspend the right of redemption during any period when (i)
trading on the New York Stock Exchange is restricted or that exchange is
closed, (ii) the SEC has by order permitted such suspension, or (iii) an
emergency (as defined by rules of the SEC) exists making disposal of
portfolio investments or determination of the Fund's net asset value not
reasonably practicable.
If the Trust Board determines that it would be detrimental to the best
interest of the remaining shareholders of the Fund to make payment wholly or
partly in cash, the Fund may redeem Shares in
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whole or in part by a distribution in kind of portfolio securities (from the
investment portfolio of the Portfolio or of the Fund), in lieu of cash. The
Fund will, however, redeem Shares solely in cash up to the lesser of $250,000
or 1% of net assets during any 90-day period for any one shareholder. In the
event that payment for redeemed Shares is made wholly or partly in portfolio
securities, the shareholder may be subject to additional risks and costs in
converting the securities to cash. See "Additional Purchase and Redemption
Information" in the SAI.
The proceeds of a redemption may be more or less than the amount invested
and, therefore, a redemption may result in a gain or loss for Federal income
tax purposes.
Due to the relatively high cost of maintaining smaller accounts, the Fund
reserves the right to redeem Shares in any account (other than an IRA) if at
any time the account does not have a value of at least $2,000, unless the
value of the account falls below that amount solely as a result of market
activity. Shareholders will be notified that the value of the account is less
than $2,000 and be allowed at least 30 days to make an additional investment
to increase the account balance to at least $2,000.
NET ASSET VALUE
The net asset value per share of the Fund is calculated separately for
each class of shares of the Fund at 4:00 p.m. (Eastern Time), Monday through
Friday, each Fund Business Day, which excludes the following U.S. holidays:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. Net asset value per Share is
calculated by dividing the aggregate value of the Fund's assets less all Fund
liabilities, if any, by the number of Shares of the Fund outstanding.
Generally, securities 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.
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 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. In its effort to adhere to these requirements, the Fund
may have to limit its investment activity in some types of instruments.
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
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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 will be 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
will be 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. Shareholders should
consult their own tax advisors as to the tax consequences of their ownership
of Shares.
If the Fund's dividends exceed its taxable income in any year all or a
portion of the Fund's dividends may be treated as a return of capital to
shareholders for tax purposes. Any return of capital will reduce the cost
basis of your shares, which will result in a higher reported capital gain or
a lower reported capital loss when you sell your shares. Shareholders will be
notified by the Trust if a distribution included a return of capital.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting the Fund and its shareholders; see the SAI
for further information. Shareholders should consult their own tax advisors
as to the tax consequences of their ownership of shares.
THE PORTFOLIO
The Portfolio is not required to pay federal income tax because it is
classified as a partnership for federal income tax purposes. All interest,
dividends, gains and losses 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.
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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 28, 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 such 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 series, each of which has separate
investment objectives and policies.
The Fund currently consists of two classes of shares. Each share of the
Fund is entitled to participate equally in dividends and other distributions
and the proceeds of any liquidation except that, due to the differing
expenses borne by the classes, dividends and liquidation proceeds for each
class will likely differ.
Shares are fully paid and non-assessable, and have no pre-emptive rights.
Shareholders have non-cumulative voting rights, which means that the holders
of more than 50% of the shares voting for the election of Trustees can elect
100% of the Trustees if they choose to do so. A shareholder is entitled to
one vote for each full share held (and a fractional vote for each fractional
share held). 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. As of February
15, 1997, Schroder Nominees Limited may be deemed to have controlled the Fund
for purposes of the 1940 Act.
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 distributions at NAV. Cumulative total returns are
calculated similarly except that the total return is aggregated over the
relevant period instead of annualized.
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Performance quotations are calculated separately for each class of shares
of the Fund. The Fund may also be compared to various unmanaged securities
indices, groups of mutual funds tracked by mutual fund ratings services, or
other general economic indicators. Unmanaged indices may assume the
reinvestment of dividends but do not reflect deductions for administrative
and management costs and expenses.
Performance information represents only past performance and does not
necessarily indicate future results. For a description of the methods used to
determine total return and other performance measures for the Fund, see the
SAI.
CUSTODIAN AND TRANSFER AGENT
The Chase Manhattan Bank, 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.
SERVICE ORGANIZATIONS
The Glass-Steagall Act and other applicable laws and regulations provide
that banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks
from performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or
interpretations of such laws, as well as changes in either Federal or state
regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, could prevent a bank Service Organization from
continuing to perform all or part of its servicing activities. If a bank were
prohibited from so acting, its shareholder clients would be permitted to
remain shareholders of the Fund and alternative means for continuing the
servicing of such shareholders would be sought. It is not expected that
shareholders would suffer any adverse financial consequences as a result of
any of these occurrences.
FUND STRUCTURE
CLASSES OF SHARES. The Fund has two classes of shares, Investor Shares
and Advisor Shares. Advisor Shares are offered by a separate prospectus to
individual investors, in most cases through Service Organizations. Advisor
Shares incur more expenses than Investor Shares. Except for certain
differences, each share of each class represents an undivided, proportionate
interest in the Fund. Each share of the Fund is entitled to participate
equally in dividends and other distributions and the proceeds of any
liquidation of the Fund except that, due to the differing expenses borne by
the two classes, the amount of dividends and other 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 the same
investment objective and substantially similar policies as the Fund.
Accordingly, the Portfolio directly acquires its own securities and the Fund
acquires an indirect interest in those securities. The Portfolio is a
separate series of Schroder Core, a business trust organized under the laws
of the State of Delaware in 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
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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 Norwest Advantage
Funds' Small Cap Opportunities Fund. The Portfolio may permit other
investment companies or institutional investors to invest in it. All other
investors in the Portfolio will invest on the same terms and conditions as
the Fund and will pay a proportionate share of the Portfolio's expenses.
The Portfolio normally will not hold meetings of investors except as
required by the 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 it. 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 pro-
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spectuses, 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 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, if the Board decided not to
permit SCMI to manage the Fund's assets, could have a significant impact on
shareholders the Fund.
Each investor in the Portfolio, including the Fund, may be liable for all
obligations of the Portfolio. The risk to an investor in the Portfolio of
incurring financial loss on account of such liability, however, is limited to
circumstances in which the Portfolio is unable to meet its obligations, the
occurrence of which SCMI considers to be quite remote. Upon liquidation of
the Portfolio, investors would be entitled to share pro rata in the net
assets of the Portfolio available for distribution to investors.
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INVESTMENT ADVISER
Schroder Capital Management International Inc.
787 Seventh Avenue
New York, New York 10019
ADMINISTRATOR & DISTRIBUTOR
Schroder Fund Advisors Inc.
787 Seventh Avenue
New York, New York 10019
SUB-ADMINISTRATOR
Forum Administrative Services, Limited Liability Company
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
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................ 10
Boards of Trustees.................... 10
Investment Adviser and Portfolio
Managers............................. 10
Administrative Services............... 11
Expenses.............................. 11
Portfolio Transactions................ 12
Code of Ethics........................ 12
INVESTMENT IN THE FUND................ 12
Purchase of Shares.................... 12
Retirement Plans and Individual
Retirement
Accounts............................. 14
Statement of Intention................ 14
Exchanges............................. 14
Redemption of Shares.................. 14
Net Asset Value....................... 16
DIVIDENDS, DISTRIBUTIONS AND TAXES.... 16
The Fund.............................. 16
The Portfolio......................... 17
OTHER INFORMATION..................... 18
Capitalization and Voting............. 18
Reports............................... 18
Performance........................... 18
Custodian and Transfer Agent.......... 19
Shareholder Inquiries................. 19
Service Organizations................. 19
Fund Structure........................ 19
[LOGO]
- --------------------------------------------
SCHRODER
U.S. SMALLER
COMPANIES
FUND
INVESTOR SHARES
PROSPECTUS
MARCH 1, 1997
SCHRODER CAPITAL FUNDS (DELAWARE)
<PAGE>
SCHRODER INTERNATIONAL FUND
INVESTOR SHARES
This fund seeks long-term capital appreciation by investing primarily in
securities markets outside the United States. It is intended for long-term
investors seeking international diversification and willing to accept the
risks of foreign investing.
Schroder International Fund (the "Fund"), a series of Schroder Capital Funds
(Delaware) (the "Trust"), seeks to achieve its investment objective by
investing substantially all of its assets in Schroder International Equity
Fund (the "Portfolio"), which invests primarily in equity securities of
non-U.S. companies. The Portfolio is a separately managed, diversified series
of Schroder Capital Funds ("Schroder Core"), an open-end, management
investment company. The Portfolio has an identical investment objective and
substantially similar investment policies as the Fund (see "Other
Information -- Fund Structure"). Accordingly, the Fund's investment experience
will correspond directly with the Portfolio's investment experience.
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 March 1, 1997, as amended from time, has been filed
with the Securities and Exchange Commission ("SEC") and is available along
with other related materials for reference on their Internet Web Site
(http://www.sec.gov) or may be obtained without charge from the Trust by
writing to Two Portland Square, Portland, Maine 04101 or by calling
1-800-290-9826. 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
MARCH 1, 1997
<PAGE>
FUNDS AVAILABLE THROUGH SCHRODER FUND ADVISORS INC.
PLEASE CALL FOR COMPLETE INFORMATION AND TO OBTAIN A PROSPECTUS.
PLEASE READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST.
SCHRODER CAPITAL FUNDS (DELAWARE) SCHRODER SERIES TRUST
(1-800-290-9826) (1-800-464-3108)
SCHRODER INTERNATIONAL FUND SCHRODER EQUITY VALUE FUND
SCHRODER EMERGING MARKETS FUND -- SCHRODER SMALL CAPITALIZATION
INSTITUTIONAL PORTFOLIO VALUE FUND
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND SCHRODER HIGH YIELD INCOME FUND
SCHRODER U.S. SMALLER COMPANIES FUND SCHRODER INVESTMENT GRADE INCOME
SCHRODER U.S. EQUITY FUND FUND
SCHRODER SHORT-TERM INVESTMENT
FUND
2
<PAGE>
PROSPECTUS SUMMARY
This prospectus offers Investor Class shares ("Investor Shares" or
"Shares") of the Fund. The Fund is a separately managed, diversified series of
the Trust, an open-end, management investment company registered under the
Investment Company Act of 1940 (the "1940 Act"). THE FOLLOWING SUMMARY IS
QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION CONTAINED IN THIS
PROSPECTUS.
OBJECTIVE. Long-term capital appreciation through investment in securities
markets outside the United States.
STRATEGY. Invests primarily in equity securities of companies domiciled
outside the United States.
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 Manager."
ADMINISTRATIVE SERVICES. Schroder Fund Advisors Inc. ("Schroder Advisors")
serves as administrator and distributor of the Fund, and Forum Administrative
Services, Limited Liability Company ("Forum") serves as the Fund's sub-
administrator.
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 gains 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 international diversification who
are willing to accept the risks of foreign investing. Investments in foreign
securities involve certain risks not associated with domestic investing,
including uncertain political and economic developments, the possible
imposition of exchange controls or other changes in foreign governmental laws
or restrictions. Of course, as with any mutual fund, there is no assurance
that the Fund or portfolio will achieve its investment objective.
The Fund's net asset value ("NAV") varies because the market value of the
Portfolio's investments will change with changes in the value of the
securities in which the Portfolio invests and with 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. For further information, see "Risk Considerations."
3
<PAGE>
EXPENSES OF INVESTING IN THE FUND
FEE TABLE
The table below is intended to assist you in understanding the expenses
that an investor in Investor Shares of the Fund would incur. There are no
transaction expenses associated with purchases or redemptions of Investor
Shares.
Annual Fund Operating Expenses (as a percentage of average net assets)(1)
Management Fees (after fee waivers)(2)(3).................... 0.65%
12b-1 Fees................................................... None
Other Expenses (after expense reimbursements)(3)............. 0.34%
Total Fund Operating Expenses(3)............................. 0.99%
(1) Based on the Fund's expenses for the fiscal year ended October 31, 1996.
The Fund's expenses include the Fund's pro rata portion of all operating
expenses of the Portfolio.
(2) Management Fees reflect the fees paid by the Portfolio and the Fund for
investment advisory and administrative services.
(3) SCMI and Schroder Advisors have voluntarily undertaken to waive a portion
of their fees and assume certain expenses of the Fund during the current
fiscal year in order to limit the Fund's total expenses to 0.99% of the
Fund's average daily net assets. This undertaking cannot be withdrawn
except by a majority vote of the Trust's Board of Trustees. See "Management
of the Fund -- Expenses." Without fee waivers and expense reimbursements,
Management Fees, Other Expenses and Total Fund Operating Expenses would be
0.68%, 0.36%, and 1.04%, 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................................................... $ 10
3 years.................................................. $ 32
5 years.................................................. $ 55
10 years................................................. $122
4
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FINANCIAL HIGHLIGHTS
The financial highlights are presented below to assist you in evaluating
per share performance of the Funds' Investor Shares for the periods shown.
Information for periods prior to August 1, 1989 pertains to the Fund's
predecessor-in-interest. Information for all periods after the year ended
September 30, 1988 has been audited by Coopers & Lybrand L.L.P., independent
accountants to the Fund. The Funds' financial statements for the year ended
October 31, 1996, 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
1-800-290-9826.
<TABLE>
<CAPTION>
Year
Month ended
ended September
Year ended October 31, October 31, 30,
--------------------------------------------------------------------------- ----------- ---------
1996(a) 1995 1994 1993 1992 1991 1990 1989 1989
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
beginning of period $20.91 $23.17 $20.38 $15.15 $16.22 $17.70 $18.20 $18.95 $14.40
--------- --------- --------- --------- --------- --------- --------- ----------- ---------
Investment Operations:
Net Investment Income 0.15(b) 0.46 0.18 0.08 0.25 0.25 0.15 0.03 0.20
Net Realized Gain
(Loss) 1.74 (0.18) 2.69 5.27 (1.04) (0.25) (0.12) (0.78) 4.44
--------- --------- --------- --------- --------- --------- --------- ----------- ---------
Total From Investment
Operations 1.89 0.28 2.87 5.35 (0.79) 0.00 0.03 (0.75) 4.64
--------- --------- --------- --------- --------- --------- --------- ----------- ---------
Distributions from Net
Investment Income (0.47) -- (0.08) (0.12) (0.23) (0.25) (0.16) 0.00 (0.04)
Distributions from
Realized Capital
Gain (2.32) (2.54) -- -- (0.05) (1.23) (0.37) 0.00 (0.05)
--------- --------- --------- --------- --------- --------- --------- ----------- ---------
Total Distributions (2.79) (2.54) (0.08) (0.12) (0.28) (1.48) (0.53) 0.00 (0.09)
--------- --------- --------- --------- --------- --------- --------- ----------- ---------
Net Asset Value, End of
Period $ 20.01 $ 20.91 $ 23.17 $ 20.38 $ 15.15 $ 16.22 $ 17.70 $ 18.20 $ 18.95
--------- --------- --------- --------- --------- --------- --------- ----------- ---------
--------- --------- --------- --------- --------- --------- --------- ----------- ---------
Total Return 10.05% 2.08% 14.10% 35.54% (4.93%) 0.45% (0.07%) (4.01%) 32.2%
Ratio/Supplementary Data:
Net Assets, End of
Period (Thousands) $202,735 $212,330 $500,504 $320,550 $159,556 $108,398 $62,438 $49,740 $48,655
Ratio of Expenses to
Average Net Assets
after waivers 0.99%(b) 0.91% 0.90% 0.91% 0.93% 1.07% 1.12% 1.12% (d) 1.12%
Ratio of Net
Investment Income
to Average Net
Assets after
waivers 0.86%(b) 0.99% 0.94% 0.87% 1.62% 1.59% 0.83% 2.29% (d) 1.27%
Ratio of Expenses to
Average Net Assets
before waivers 1.04%(b) N/A N/A N/A N/A N/A N/A N/A N/A
Ratio of Net
Investment Income
to Average Net
Assets before
waivers 0.81%(b) N/A N/A N/A N/A N/A N/A N/A N/A
Portfolio Turnover
Rate(c) 56.20% 61.26% 25.17% 56.95% 49.42% 50.58% 55.91% 21.98% (d) 72.25%
Average Brokerage
Commissions(e) $0.0256 N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
Year ended
September 30,
-------------------------
1988 1987
Unaudited
- --------------------------------------------------
Net Asset Value,
beginning of period $18.02 $14.07
--------- ---------
Investment Operations:
Net Investment Income 0.05 (0.07)
Net Realized Gain
(Loss) (2.34) 4.71
--------- ---------
Total From Investment
Operations (2.29) 4.64
--------- ---------
Distributions from Net
Investment Income 0.00 (0.02)
Distributions from
Realized Capital
Gain (1.33) (0.67)
--------- ---------
Total Distributions (1.33) (0.69)
--------- ---------
Net Asset Value, End of
Period $ 14.40 $ 18.02
--------- ---------
--------- ---------
Total Return (0.12%) 34.8%
Ratio/Supplementary Data:
Net Assets, End of
Period (Thousands) $29,917 $32,553
Ratio of Expenses to
Average Net Assets
after waivers 1.30% 1.64%
Ratio of Net
Investment Income
to Average Net
Assets after
waivers 0.38% (0.42%)
Ratio of Expenses to
Average Net Assets
before waivers N/A N/A
Ratio of Net
Investment Income
to Average Net
Assets before
waivers N/A N/A
Portfolio Turnover
Rate(c) 86.19% 84.97%
Average Brokerage
Commissions(e) N/A N/A
- ---------
(a) On May 16, 1996, the Fund began offering two classes of shares, Investor
Shares and Advisor Shares, and all then outstanding shares of the Fund
were converted to Investor Shares.
(b) Includes the Fund's proportionate share of income and expenses of the
Portfolio.
(c) Portfolio turnover represents the rate of portfolio activity. The rate for
year ended October 31, 1996 represents the portfolio turnover rate of the
Portfolio.
(d) Annualized.
(e) Amount represents the average commission per share paid to brokers on the
purchase and sale of the Portfolio's investment portfolio securities.
5
<PAGE>
INVESTMENT OBJECTIVE
The investment objective of the Fund is long-term capital appreciation
through investment in securities markets outside the United States.
The Fund is designed for U.S. investors who seek international
diversification of their investments by participating in foreign securities
markets. The Fund is not a complete investment program and investments in the
securities of foreign issuers generally involve risks in addition to the risks
associated with investments in the securities of U.S. issuers. (See "Risk
Considerations.") The Fund currently seeks to achieve its investment objective
by investing all of its investable assets in the Portfolio, which has
substantially the same investment objective and policies as the Fund. There
can be no assurance that the Fund or Portfolio will achieve its investment
objective.
INVESTMENT POLICIES
Although the following information describes the investment policies of
the Portfolio and the responsibilities of Schroder Core's Board of Trustees
(the "Schroder Core Board"), it applies equally to the Fund and the Trust's
Board of Trustees (the "Trust Board"). Additional information concerning the
investment policies of the Fund and the Portfolio is contained in the SAI.
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 (i) 67% of the
shares present or represented at a shareholder meeting at which the holders of
more than 50% of the outstanding shares are present or represented, or (ii)
more than 50% of outstanding shares. Non-fundamental investment policies of
the Portfolio may be changed by the Schroder Core Board without approval of
the investors in the Portfolio.
Under normal market conditions, the Portfolio will invest at least 65% of
its total assets in equity securities of companies domiciled outside the U.S.
Investments by the Portfolio are selected on the basis of their potential for
capital appreciation without regard for current income. The Portfolio may also
invest in debt securities of foreign governments, international organizations
and foreign corporations and in the securities of closed-end investment
companies investing primarily in foreign securities. The Portfolio may invest
up to 5% of its net assets in debt securities with relatively high risk and
high yields (as compared to other debt securities meeting the Portfolio's
investment criteria). The debt securities in which the Portfolio invests may
be unrated, but will not be in default at the time of purchase. See "Debt
Securities" and "Risk Considerations".
Countries in which the Portfolio may invest include, but are not limited
to, countries listed in the Morgan Stanley Capital International EAFE
- -Registered Trademark- Index, which is a market capitalization index of
companies in developed market countries in Europe, Australia and the Far
East. The Portfolio invests in the securities of foreign issuers domiciled in
at least three foreign countries. The Portfolio may invest more than 25% of
its total assets in issuers located in any one country. See "Risk
Considerations -- Geographic Concentration". The Portfolio also may invest in
securities of issuers located in countries considered by some to be emerging
market countries. See "Risk Considerations -- Emerging Markets".
The Portfolio may purchase preferred stock and convertible debt
securities, including warrants and convertible preferred stock, and may
purchase American Depository Receipts, European Depository Receipts or other
similar securities of foreign issuers. The Portfolio also may enter into
foreign exchange contracts, including forward contracts to purchase or sell
foreign currencies, in anticipation of its currency requirements and to
protect against possible adverse movements in foreign exchange rates. Although
6
<PAGE>
such contracts may reduce the risk of loss to the Portfolio from adverse
movements in currency values, the contracts also limit possible gains from
favorable movements. For temporary defensive purposes, the Portfolio may
invest without limitation in (or enter into repurchase agreements maturing in
seven days or less with U.S. banks and broker-dealers with respect to)
short-term debt securities, including U.S. Government securities,
certificates of deposit and bankers' acceptances of U.S. banks. The Portfolio
may also hold cash (U.S. dollars, foreign currencies or multinational
currency units) and time deposits in U.S. and foreign banks. See "Risk
Considerations" below and "Investment Policies" in the SAI for further
information about these types of investments.
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, are entitled to their pro rata share of the
company's assets after creditors (including fixed income security holders) and
preferred stockholders, if any, are paid. Preferred stock is a class of stock
having a preference over common stock as to dividends and, generally, as to
the recovery of investment. A preferred stockholder is also a shareholder and
not a creditor of the company. Equity securities owned by the Portfolio may be
traded in the over-the-counter market or on a securities exchange, but may not
be traded every day or in the volume typical of securities traded on a major
U.S. national securities exchange. As a result, disposition by the Portfolio
of a security to meet withdrawals by interest holders or otherwise may require
the Portfolio to sell these securities at a discount from market prices, to
sell during periods when disposition is not desirable, or to make many small
sales over a lengthy period of time. The market value of all securities,
including equity securities, is based upon the market's perception of value
and not necessarily the "book value" of an issuer or other objective measure
of a company's worth. The Portfolio may also invest in warrants, which are
options to purchase an equity security at a specified price (usually
representing a premium over the applicable market value of the underlying
equity security at the time of the warrant's issuance) and usually during a
specified period of time.
FOREIGN EXCHANGE CONTRACTS. Changes in foreign currency exchange rates
will affect the U.S. dollar values of securities denominated in currencies
other than the U.S. dollar. The rate of exchange between the U.S. dollar and
other currencies fluctuates in response to forces of supply and demand in the
foreign exchange markets. These forces are affected by the international
balance of payments, other economic and financial conditions, government
intervention, speculation, and other factors, many of which may be difficult
if not impossible to predict. When investing in foreign securities, the
Portfolio usually effects currency exchange transactions on a spot (I.E.,
cash) basis at the spot rate prevailing in the foreign exchange market. The
Portfolio incurs foreign exchange expenses in converting assets from one
currency to another.
The Portfolio may enter into foreign currency forward contracts for the
purchase or sale of foreign currency to "lock in" the U.S. dollar price of the
securities denominated in a foreign currency or the U.S. dollar value of
interest and dividends to be paid on such securities; or to hedge against the
possibility that the currency of a foreign country in which the Portfolio has
investments may suffer a decline against the U.S. dollar. A forward currency
contract is an obligation to purchase or
7
<PAGE>
sell a specific currency at a future date, which may be any fixed number of
days from the date of the contract agreed upon by the parties, at a price set
at the time of the contract. This method of attempting to hedge the value of
portfolio securities against a decline in the value of a currency does not
eliminate fluctuations in the underlying prices of the securities and may
expose the Portfolio to the risk that the counterparty is unable to perform.
Although the strategy of engaging in foreign currency transactions could
reduce the risk of loss due to a decline in the value of the hedged currency,
it could also limit the potential gain from an increase in the value of the
currency. The Portfolio does not intend to maintain a net exposure to such
contracts where the fulfillment of obligations under such contracts would
obligate it to deliver an amount of foreign currency in excess of the value
of its portfolio securities or other assets denominated in the currency. The
Portfolio will not enter into these contracts for speculative purposes and
will not enter into non-hedging currency contracts. These contracts involve a
risk of loss if SCMI fails to predict currency values correctly. The
Portfolio has no present intention to enter into currency futures or options
contracts, but may do so in the future. See "Risk Considerations -- Currency
Fluctuations and Devaluations".
DEBT SECURITIES. The Portfolio may seek capital appreciation through
investment in convertible or non-convertible debt securities. Capital
appreciation in debt securities may arise as a result of a favorable change in
relative foreign exchange rates, in relative interest rate levels, or in the
creditworthiness of issuers. The receipt of income from such debt securities
is incidental to the Portfolio's objective of long-term capital appreciation.
Such income can be used, however, to offset the operating expenses of the
Portfolio. In accordance with its investment objective, the Portfolio will not
seek to benefit from anticipated short-term fluctuations in currency exchange
rates. The Portfolio also may invest to a certain extent in debt securities in
order to participate in debt-to-equity conversion programs incident to
corporate reorganizations.
Debt securities are generally subject to two kinds of risk -- credit risk
and market risk. Credit risk refers to the ability of the debtor, and any
other obligor, to pay principal and interest on the debt as it becomes due.
The Portfolio may, from time to time, invest in debt securities with high risk
and high yields (as compared to other debt securities meeting the Portfolio's
investment criteria). The debt securities in which the Portfolio invests may
be unrated, but will not be in default at the time of purchase. Market risk
refers to the tendency of the value of debt securities to vary inversely with
interest rate changes. Certain debt instruments may also be subject to
extension risk, which refers to change in total return on a debt instrument
resulting from extension or abbreviation of the instrument's maturity.
The Portfolio may invest in debt securities issued or guaranteed by
foreign governments (including countries, provinces and municipalities) or
their agencies and instrumentalities; debt securities issued or guaranteed by
international organizations designated or supported by multiple foreign
governmental entities (which are not obligations of foreign governments) to
promote economic reconstruction or development; and debt securities issued by
corporations or financial institutions.
RISK CONSIDERATIONS
FOREIGN INVESTMENTS. All investments, domestic and foreign, involve
risks. Investment in the securities of foreign issuers may involve risks in
addition to those normally associated with investments in securities of U.S.
issuers. While the Portfolio will generally invest only in securities of
companies and governments in countries that SCMI, in its judgment, considers
both politically and economically stable, all foreign investments are subject
to risks of foreign political and eco-
8
<PAGE>
nomic instability, adverse movements in foreign exchange rates, the
imposition or tightening of exchange controls or other limitations on
repatriation of foreign capital. Foreign investments are subject to the risk
of changes in foreign governmental attitudes towards private investment that
could lead to nationalization, increased taxation or confiscation of
Portfolio assets.
Moreover, (i) dividends payable on foreign securities may be subject to
foreign withholding taxes, thereby reducing the income earned by the
Portfolio; (ii) commission rates payable on foreign portfolio transactions are
generally higher than in the United States; (iii) accounting, auditing and
financial reporting standards differ from those in the United States, which
means that less information about foreign companies may be available than is
generally available about issuers of comparable securities in the United
States; (iv) foreign securities often trade less frequently and with lower
volume than United States securities and consequently may exhibit greater
price volatility; and (v) foreign securities trading practices, including
those involving securities settlement, may expose the Portfolio to increased
risk in the event of a failed trade or the insolvency of a foreign
broker-dealer or registrar.
EMERGING MARKETS. Investing in emerging market countries generally
presents greater risk than does other foreign investing. In any emerging
market country, there is the increased possibility of expropriation of assets,
confiscatory taxation, nationalization of companies or industries, foreign
exchange controls, foreign investment controls on daily stock market
movements, default in foreign government securities, political or social
instability, or diplomatic developments that could affect investments in those
countries. In the event of expropriation, nationalization or other
confiscation, the Portfolio could lose its entire investment in the country
involved. The economies of developing countries are more likely to be
adversely affected by trade barriers, exchange controls, managed adjustments
in relative currency values and other protectionist measures imposed or
negotiated by the countries with which they trade. There may also be less
monitoring and regulation of emerging markets and the activities of brokers
there. Investing may require that the Portfolio adopt special procedures, seek
local government approvals or take other actions that may incur costs for the
Portfolio.
Certain emerging market countries may restrict investment by foreign
investors. These restrictions or controls may at times limit or preclude
investment in certain securities and may increase the costs and expenses of
the Portfolio.
Several emerging market countries have experienced high, and in some
periods extremely high, rates of inflation in recent years. Inflation and
rapid fluctuations in inflation rates may adversely affect these countries'
economies and securities markets. Further, inflation accounting rules in some
emerging market countries may indirectly generate losses or profits for
certain emerging market companies.
CURRENCY FLUCTUATIONS AND DEVALUATIONS. Because the Portfolio will invest
heavily in non-U.S. currency-denominated securities, changes in foreign
currency exchange rates will affect the value of the Portfolio's investments.
A decline against the dollar in the value of currencies in which the
Portfolio's investments are denominated will result in a corresponding decline
in the dollar value of the Portfolio's assets. This risk is heightened in some
emerging market countries.
The Fund is required to distribute substantially all of its investment
income in U.S. dollars. Because most of the Portfolio's income is received
and realized in foreign currencies, a decline in the value of a particular
foreign currency against the U.S. dollar that occurs after the Portfolio's
income has been earned may require the Portfolio to liquidate some portfolio
securities to acquire sufficient U.S. dollars to make such distributions.
Similarly, if the exchange rate declines between the time the Portfolio
incurs expenses in U.S. dollars and the
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time the expenses are paid, the Portfolio may be required to liquidate
additional foreign securities to purchase the U.S. dollars required to meet
its expenses.
GEOGRAPHIC CONCENTRATION. The Portfolio may invest more than 25% of its
total assets in issuers located in any one country and to the extent that it
does so, is susceptible to a range of factors that could adversely affect that
country, including the political and economic developments and foreign
exchange rate fluctuations discussed above. As a result of investing
substantially in one country, the value of the Portfolio's assets may
fluctuate more widely than the value of shares of a comparable fund with a
lesser degree of geographic concentration.
MANAGEMENT OF THE FUND
SCHRODER GROUP ASSETS UNDER MANAGEMENT WORLDWIDE AS OF DECEMBER 31, 1996 --
OVER $130 BILLION
[GRAPHIC]
THE SCHRODER INVESTMENT MANAGEMENT GROUP INVESTMENT AND REPRESENTATIVE OFFICES
WORLDWIDE INCLUDE NEW YORK, LONDON, BOSTON, ZURICH, WARSAW, TOKYO, HONG KONG,
BEIJING, SHANGHAI, TAIPEI, SEOUL, BANGKOK, KUALA LUMPUR, SINGAPORE, JAKARTA,
SYDNEY, BUENOS AIRES, SAO PAULO, BOGOTA AND CARACAS.
TOGETHER, SCHRODER CAPITAL MANAGEMENT INTERNATIONAL AND
SCHRODER CAPITAL MANAGEMENT INC. MANAGE OVER $24 BILLION
BOARDS OF TRUSTEES
The business and affairs of the Fund are managed under the direction of
the Trust Board. The business and affairs of the Portfolio are managed under
the direction of the Schroder Core Board. Information regarding the trustees
and executive officers of the Trust, as well as Schroder Core's trustees and
executive officers, may be found in the SAI under the heading "Management,
Trustees and Officers."
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INVESTMENT ADVISER AND PORTFOLIO MANAGERS
As investment adviser to the Portfolio, SCMI manages the Portfolio and
continuously reviews, supervises and administers its investments. In this
regard, SCMI is responsible for making decisions relating to the Portfolio's
investments and placing purchase and sale orders regarding investments with
brokers or dealers selected by it in its discretion. For its services with
respect to the Portfolio, the Investment Advisory Agreement between SCMI and
Schroder Core provides that SCMI receives a monthly advisory fee at the annual
rate of 0.45% 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, 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.
The investment management team of Mark J. Smith, a Trustee and President
of the Trust and of Schroder Core, and Michael Perelstein, Vice President of
the Trust and of Schroder Core (with the assistance of an SCMI investment
committee), is primarily responsible for the day-to-day management of the
Portfolio's investment portfolio. Mr. Smith, who has managed the Fund's
portfolio since October 1989 and the Portfolio's investments since its
inception, has been a First Vice President of SCMI since April 1990 and a
Director thereof since April 1993. He has been employed by various Schroder
Group companies in the investment research and portfolio management areas
since 1983. Mr. Perelstein has been a Senior Vice President of SCMI since
January 2, 1997. Prior thereto, Mr. Perelstein was a Managing Director at
MacKay Shields. Mr. Perelstein has more than twelve years of international and
global investment experience.
The Fund began pursuing its investment objective through investment in the
Portfolio on November 1, 1995. The Fund may withdraw its investment from the
Portfolio at any time if the Board determines that it is in the best interests
of the Fund and its shareholders to do so. (See "Other Information -- Fund
Structure.") Accordingly, the Fund has retained SCMI as its investment adviser
to manage the Fund's assets in the event the Fund withdraws its investment.
SCMI does not receive an investment advisory fee with respect to the Fund so
long as the Fund remains completely invested in the Portfolio (or any other
investment company). If the Fund resumes directly investing in portfolio
securities, the Fund will pay SCMI a monthly advisory at the annual rate of
0.50% of the first $100 million of the Fund's average daily net assets; 0.40%
of the next $150 million of average daily net assets; and 0.35% of 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 contract between SCMI and
Schroder Core with respect to the Portfolio (except as to the parties, the
fees payable thereunder, the circumstances under which fees will be paid and
the jurisdiction whose laws govern the agreement).
ADMINISTRATIVE SERVICES
On behalf of the Fund, the Trust has entered into an administrative
services contract with Schroder Advisors, 787 Seventh Avenue, New York, New
York 10019. On behalf of the Portfolio, the Trust has also entered into a
sub-administration agreement with Forum, Two Portland Square, Portland, Maine
04101. Pursuant to these agreements, Schroder Advisors and Forum provide
certain management and administrative services necessary for the Fund's
operations. Schroder Advisors is compensated at the annual rate of 0.15% of
the Fund's average daily net assets.
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Forum is compensated at the annual rate of 0.05% of the Fund's average daily
net assets.
Schroder Advisors and Forum provide similar services to the Portfolio, for
which the Portfolio pays Schroder Advisors at an annual rate of 0.075% of the
Portfolio's average daily net assets and pays Forum a monthly fee at the
annual rate of 0.075% of the Portfolio's average daily net assets.
EXPENSES
SCMI and Schroder Advisors have voluntarily 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 0.99% of the average daily net assets of the Fund
attributable to those shares. This expense limitation cannot be modified or
withdrawn except by a majority vote of the Trustees of the Trust who are not
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 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.
Commission rates for brokerage transactions are fixed on many foreign
securities exchanges, and in many cases are higher than commission rates for
comparable transactions effected on U.S. securities exchanges.
Subject to the Portfolio's policy of obtaining the best price consistent
with quality of execution on transactions, SCMI may employ Schroder Securities
Limited and its affiliates (collectively, "Schroder Securities"), affiliates
of SCMI, to effect transactions of the Portfolio on certain foreign securities
exchanges. Because of the affiliation between SCMI and Schroder Securities,
the Portfolio's payment of commissions to Schroder Securities is subject to
procedures adopted by the Schroder Core Board designed to ensure that the
commissions will not exceed the usual and customary brokers' commissions. No
specific portion of the Portfolio's brokerage will be directed to Schroder
Securities and in no event will Schroder Securities receive any brokerage in
recognition of research services.
Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc., and subject to seeking the most favorable price and
execution available and such other policies as the Schroder Core Board may
determine, SCMI may consider sales of shares of the Fund or any other entity
that invests in the Portfolio as a factor in the selection of broker-dealers
to execute portfolio transactions for the Portfolio.
Although the Portfolio does not currently engage in directed brokerage
arrangements to pay expenses, it may do so in the future. These arrangements
(whereby brokers executing the Portfolio's portfolio transactions would agree
to pay designated expenses of the Portfolio if brokerage commissions generated
by the Portfolio reached certain levels) might reduce the Portfolio's expenses
(and, indirectly, the Fund's expenses). These arrangements would not be
expected to increase materially the brokerage commissions paid by the
Portfolio.
CODE OF ETHICS
The Trust, Schroder Core, SCMI, Schroder Advisors, and Schroders
Incorporated have each adopted a code of ethics that contains a policy on
personal securities transactions by "access persons," including portfolio
managers and investment analysts. That policy complies in all material
respects with the recommendations set forth in the
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Report of the Advisory Group on Personal Investing of the Investment Company
Institute, of which the Trust is a member.
INVESTMENT IN THE FUND
PURCHASE OF SHARES
Investors may purchase Investor Shares directly from the Trust.
Prospectuses, sales material and Account Applications can be obtained from the
Trust or through Forum Financial Corp., the Fund's transfer agent (the
"Transfer Agent"). See "Other Information -- Shareholder Inquiries".
Investments may also be made through Financial Institutions and other
organizations that assist their customers in purchasing shares of the Fund
("Service Organizations"). Service Organizations may charge their customers a
service fee for processing orders to purchase or sell shares of the Fund.
Investors wishing to purchase shares through their accounts at a Service
Organization should contact that organization directly for appropriate
instructions.
Shares of the Fund are offered at the net asset value next determined
after receipt of a completed Account Application (at the address set forth
below). The minimum initial investment is $10,000, except that the minimum for
an IRA is $2,000. The minimum subsequent investment is $2,500. All purchase
payments are invested in full and fractional shares. The Fund is authorized to
reject any purchase order.
Purchases may be made by mailing a check (in U.S. dollars), payable to
Schroder International Fund, to:
Schroder International Fund -- Investor Shares
P.O. Box 446
Portland, Maine 04112
For initial purchases, the check must be accompanied by a completed
Account Application in proper form. Further documentation may be requested
from corporations, administrators, executors, personal representatives,
directors or custodians to evidence the authority of the person or entity
making the subscription request.
Investors and Service Organizations (on behalf of their customers) may
transmit purchase payments by Federal Reserve Bank wire directly to the Fund
as follows:
Chase Manhattan Bank
New York, NY
ABA No.: 021000021
For Credit To: Forum Financial Corp.
Account No.: 910-2-718187
Ref.: Schroder International Fund -- Investor Shares
Account of: (shareholder name)
Account Number: (shareholder account number)
The wire order must specify the name of the Fund, the shares' class (I.E.,
Investor Shares), the account name and number, address, confirmation number,
amount to be wired, name of the wiring bank, and name and telephone number of
the person to be contacted in connection with the order. If the initial
investment is by wire, an account number will be assigned and an Account
Application must be completed and mailed to the Fund before any account
becomes active. Wire orders received prior to 4:00 p.m. (Eastern Time) on each
day that the New York Stock Exchange is open for trading (a "Fund Business
Day") will be processed at the net asset value determined as of that day. Wire
orders received after 4:00 p.m. (Eastern Time) will be processed at the net
asset value determined as of the next Fund Business Day. See "Net Asset
Value".
The Fund's Transfer Agent establishes for each shareholder of record an
open account to which all shares purchased and all reinvested dividends and
other distributions are credited. Although most shareholders elect not to
receive share certificates, certificates for full shares can be obtained by
specific written request to the Fund's Transfer Agent. No certificates are
issued for fractional shares.
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The Transfer Agent will deem an account lost if six months have passed
since correspondence to the shareholder's address of record is returned,
unless the Transfer Agent determines the shareholder's new address. When an
account is deemed lost, dividends and other distributions will automatically
be reinvested. In addition, the amount of any outstanding checks for dividends
and capital gains that have been returned to the Transfer Agent will be
reinvested and the checks will be canceled.
RETIREMENT PLANS AND INDIVIDUAL RETIREMENT ACCOUNTS
Shares of the Fund are offered in connection with tax-deferred retirement
plans. 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 $250. 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.
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 of the account application form. Current Fund shareholders
can obtain a Statement of Intention form by contacting the Transfer Agent.
The Fund reserves the right to redeem Shares in any account if, at the end
of the Statement of Intention period, the account does not have a value of at
least the minimum investment amount.
EXCHANGES
Shareholders may exchange Shares of the Fund for shares of any other
series of the Trust so long as they meet the initial investment minimum of the
fund being purchased and they maintain the respective minimum account balance
in each fund in which they own shares. Exchanges between each Fund are at net
asset value.
For federal income tax purposes an exchange is considered to be a sale of
shares on which a shareholder may realize a capital gain or loss. An exchange
may be made by calling the Transfer Agent at (800) 344-8332 or by mailing
written instructions to Schroder Capital Funds (Delaware), P.O. Box 446,
Portland, Maine 04112. Exchange privileges may be exercised only in those
states where shares of the other series of the Trust may legally be sold.
Exchange privileges may be amended or terminated at any time upon sixty (60)
days' notice.
REDEMPTION OF SHARES
Shares of the Fund are redeemed at their next determined net asset value
after receipt by the
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Fund (at the address set forth above under "Purchase of Shares") of a
redemption request in proper form. Redemption requests may be made between
9:00 a.m. and 6:00 p.m. (Eastern Time) on each Fund Business Day. Redemption
requests that are received prior to 4:00 p.m. (Eastern Time) will be processed
at the net asset value determined as of that day. Redemption requests that are
received after 4:00 p.m. (Eastern Time) will be processed at the net asset
value determined the next Fund Business Day. See "Net Asset Value".
BY TELEPHONE. Redemption requests may be made by telephoning the Transfer
Agent at the telephone number on the cover page of this Prospectus. A
shareholder must provide the Transfer Agent with the class of Shares, the
dollar amount or number of shares to be redeemed, shareholder account number,
and some additional form of identification such as a password. A redemption by
telephone may be made only if the telephone redemption privilege option has
been elected on the Account Application or otherwise in writing. In an effort
to prevent unauthorized or fraudulent redemption requests by telephone,
reasonable procedures will be followed by the Transfer Agent to confirm that
telephone instructions are genuine. The Transfer Agent and the Trust generally
will not be liable for any losses due to unauthorized or fraudulent redemption
requests, but may be liable if they do not follow these procedures. Shares for
which certificates have been issued may not be redeemed by telephone. In times
of drastic economic or market changes, it may be difficult to make redemptions
by telephone. If a shareholder cannot reach the Transfer Agent by telephone,
redemption requests may be mailed or hand-delivered to the Transfer Agent.
WRITTEN REQUESTS. Redemptions may be made by letter to the Fund specifying
the class of shares, the dollar amount or number of Shares to be redeemed, and
the shareholder account number. The letter must also be signed in exactly the
same way the account is registered (if there is more than one owner of the
Shares, all must sign) and, in certain cases, signatures must be guaranteed by
an institution that is acceptable to the Transfer Agent. Such institutions
include certain banks, brokers, dealers (including municipal and government
securities brokers and dealers), credit unions and savings associations.
Notaries public are not acceptable. Further documentation may be requested to
evidence the authority of the person or entity making the redemption request.
Questions concerning the need for signature guarantees or documentation of
authority should be directed to the Fund at the above address or by calling
the telephone number appearing on the cover of this Prospectus.
If Shares to be redeemed are held in certificate form, the certificates
must be enclosed with the redemption request and the assignment form on the
back of the certificates (or an assignment separate from the certificates but
accompanied by the certificates), must be signed by all owners in exactly the
same way the owners' names are written on the face of the certificates.
Requirements for signature guarantees and/or documentation of authority as
described above could also apply. For your protection, the Fund suggests that
certificates be sent by registered mail.
ADDITIONAL REDEMPTION INFORMATION. Checks for redemption proceeds will
normally be mailed within seven days. No redemption proceeds will be mailed
until checks in payment for the purchase of the Shares to be redeemed have
been cleared, which may take up to 15 calendar days from the purchase date.
Unless other instructions are given in proper form, a check for the proceeds
of a redemption will be sent to the shareholder's address of record.
The Fund may suspend the right of redemption during any period when (i)
trading on the New York Stock Exchange is restricted or that exchange is
closed, (ii) the SEC has by order permitted such suspension, or (iii) an
emergency (as defined by rules of the SEC) exists making disposal of portfolio
investments or determination
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of the Fund's net asset value not reasonably practicable.
If the Trust Board determines that it would be detrimental to the best
interest of the remaining shareholders of the Fund to make payment wholly or
partly in cash, the Fund may redeem Shares in whole or in part by a
distribution in kind of portfolio securities (from the investment portfolio of
the Portfolio or of the Fund), in lieu of cash. The Fund will, however, redeem
Shares solely in cash up to the lesser of $250,000 or 1% of net assets during
any 90-day period for any one shareholder. In the event that payment for
redeemed Shares is made wholly or partly in portfolio securities, the
shareholder may be subject to additional risks and costs in converting the
securities to cash. See "Additional Purchase and Redemption Information" in
the SAI.
The proceeds of a redemption may be more or less than the amount invested
and, therefore, a redemption may result in a gain or loss for Federal income
tax purposes.
Due to the relatively high cost of maintaining smaller accounts, the Fund
reserves the right to redeem Shares in any account (other than an IRA) if at
any time the account does not have a value of at least $2,000, unless the
value of the account falls below that amount solely as a result of market
activity. Shareholders will be notified that the value of the account is less
than $2,000 and be allowed at least 30 days to make an additional investment
to increase the account balance to at least $2,000.
NET ASSET VALUE
The net asset value per share of the Fund is calculated separately for
each class of shares of the Fund at 4:00 p.m. (Eastern Time), Monday through
Friday, each Fund Business Day, which excludes the following U.S. holidays:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. Net asset value per Share is
calculated by dividing the aggregate value of the Fund's assets less all Fund
liabilities, if any, by the number of Shares of the Fund outstanding.
Generally, securities 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.
Trading in securities on non-U.S. exchanges and over-the-counter markets
may not take place on every day that the New York Stock Exchange is open for
trading. Furthermore, trading takes place in various foreign markets on days
on which the Fund's net asset value is not calculated. If events materially
affecting the value of foreign securities occur between the time when their
price is determined and the time when net asset value is calculated, such
securities will be valued at fair value as determined in good faith by using
methods approved by the Schroder Core Board.
All assets and liabilities of the Portfolio denominated in foreign
currencies are valued in U.S. dollars based on the exchange rate last quoted
by a major bank prior to the time when the net asset value of the Fund is
calculated.
DIVIDENDS, DISTRIBUTIONS AND TAXES
THE FUND
The Fund intends to comply with the provisions of the Internal Revenue
Code of 1986, as amended, applicable to regulated investment companies. By
complying therewith, the Fund will not
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have to pay federal income tax on that part of its 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 will be 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 will be
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
securitries 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.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting the Fund and its shareholders; see the SAI
for further information. Shareholders should consult their own tax advisors as
to the tax consequences of their ownership of Shares.
In an effort to adhere to certain tax requirements, the Fund may have to
limit its investment activity in some types of instruments.
If the Fund's dividends exceed its taxable income in any year all or a
portion of the Fund's dividends may be treated as a return of capital to
shareholders for tax purposes. Any return of capital will reduce the cost
basis of your shares, which
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<PAGE>
will result in a higher reported capital gain or a lower reported capital loss
when you sell your shares. Shareholders will be notified by the Trust if a
distribution included a return of capital.
EFFECT OF FOREIGN TAXES. Foreign governments may impose taxes on the
Portfolio and its investments, which generally reduce the Fund's income.
However, an offsetting tax credit or deduction may be available to you. If so,
your tax statement will show more taxable income or capital gain than was
actually distributed by the Fund but will also show the amount of the
available offsetting credit or deduction.
If the Fund is eligible to do so, it intends to elect to permit its
shareholders to take a credit (or a deduction) for the Fund's share of foreign
income taxes paid by the Portfolio. If the Fund does make such an election,
its shareholders would include as gross income in their Federal income tax
returns both (i) distributions received from the Fund and (ii) the amount that
the Fund advises is their pro rata portion of foreign income taxes paid with
respect to or withheld from dividends and interest paid to the Portfolio from
its foreign investments. Shareholders then would be entitled, subject to
certain limitations, to take a foreign tax credit against their Federal income
tax liability for the amount of such foreign taxes or else to deduct such
foreign taxes as an itemized deduction from gross income.
THE 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, gains and losses 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 as a Delaware business trust on January 9, 1996. 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 such 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 portfolios, each of which has
separate investment objectives and policies.
The Fund currently consists of two classes of shares. Each share of the
Fund is entitled to participate equally in dividends and other distributions
and the proceeds of any liquidation except that, due to the differing expenses
borne by the classes, dividends and liquidation proceeds for each class will
likely differ.
Shares are fully paid and non-assessable, and have no pre-emptive rights.
Shareholders have non-cumulative voting rights, which means that the holders
of more than 50% of the shares voting for the election of Trustees can elect
100% of the Trustees if they choose to do so. A shareholder is entitled to one
vote for each full share held (and a fractional vote for each fractional share
held). 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
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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 distributions at NAV. Cumulative total returns are calculated
similarly except that the total return is aggregated over the relevant period
instead of annualized.
Performance quotations are calculated separately for each class of shares
of the Fund. The Fund may also be compared to various unmanaged securities
indices, groups of mutual funds tracked by mutual fund ratings services, or
other general economic indicators. Unmanaged indices may assume the
reinvestment of dividends but do not reflect deductions for administrative and
management costs and expenses.
Performance information represents only past performance and does not
necessarily indicate future results. For a description of the methods used to
determine total return and other performance measures for the Fund, see the
SAI.
CUSTODIAN AND TRANSFER AGENT
The Chase Manhattan Bank, 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 International 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.
SERVICE ORGANIZATIONS
The Glass-Steagall Act and other applicable laws and regulations provide
that banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks
from performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or
interpretations of such laws, as well as changes in either Federal or state
regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, could prevent a bank Service Organization from
continuing to perform all or part of its servicing activities. If a bank were
prohibited from so acting, its shareholder clients would be permitted to
remain shareholders of the Fund and alternative means for continuing the
servicing of such shareholders would be sought. It is not expected that share-
19
<PAGE>
holders would suffer any adverse financial consequences as a result of any of
these occurrences.
FUND STRUCTURE
CLASSES OF SHARES. The Fund has two classes of shares, Investor Shares and
Advisor Shares. Advisor Shares are offered by a separate prospectus to
individual investors, in most cases through Service Organizations. Advisor
Shares incur more expenses than Investor Shares. 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 the same
investment objective and substantially similar policies as the Fund.
Accordingly, the Portfolio directly acquires its own securities and the Fund
acquires an indirect interest in those securities. The Portfolio is a separate
series of Schroder Capital Funds ("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, the Fund is the
only institutional investor in the Portfolio. The Portfolio may permit other
investment companies or institutional investors to invest in it. All other
investors in the Portfolio will invest on the same terms and conditions as the
Fund and will pay a proportionate share of the Portfolio's expenses.
The Portfolio normally will not hold meetings of investors except as
required by the 1940 Act. Each investor in the Portfolio will be entitled to
vote in proportion to its relative beneficial interest in the Portfolio. On
most issues subject to a vote of investors, as required by the 1940 Act and
other applicable law, the Fund will solicit proxies from its shareholders and
will vote its interest in the Portfolio in proportion to the votes cast by its
shareholders. If there are other investors in the Portfolio, there can be no
assurance that any issue that receives a majority of the votes cast by Fund
shareholders will receive a majority of votes cast by all investors in the
Portfolio; indeed, if other investors hold a majority interest in the
Portfolio, they could have voting control of the Portfolio.
The Portfolio will not sell its shares directly to members of the general
public. Another investor in the Portfolio, such as an investment company, that
might sell its shares to members of the general public would not be required
to sell its shares at the same public offering price as the Fund and could
have different advisory and other fees and expenses than the Fund. Therefore,
Fund shareholders may have different returns than shareholders in another
investment company that invests exclusively in the Portfolio. There is
currently no such other investment company that offers its shares to members
of the general public. Information regarding any such funds in the future will
be available from Schroder Core by calling (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, under federal securities law,
Schroder
20
<PAGE>
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 principal purpose of these cross-indemnity provisions is to
limit the liability of Schroder Core to information that it knows or should
know and can control. With respect to other prospectuses and other offering
documents and proxy materials of investors in Schroder Core, its liability is
similarly limited to information about and supplied by it.
CERTAIN RISKS OF INVESTING IN THE PORTFOLIO. The Fund's investment in the
Portfolio may be affected by the actions of other large investors in the
Portfolio, if any. For example, if the Portfolio had a large investor other
than the Fund that redeemed its interest in the Portfolio, the Portfolio's
remaining investors (including the Fund) might, as a result, experience higher
pro rata operating expenses, thereby producing lower returns.
The Fund may withdraw its entire investment from the Portfolio at any
time, if the Trust Board determines that it is in the best interests of the
Fund and its shareholders to do so. The Fund might withdraw, for example, if
there were other investors in the Portfolio with power to, and who did by a
vote of the shareholders of all investors (including the Fund), change the
investment objective or policies of the Portfolio in a manner not acceptable
to the Trust Board. A withdrawal could result in a distribution in kind of
portfolio securities (as opposed to a cash distribution) by the Portfolio.
That distribution could result in a less diversified portfolio of investments
for the Fund and could affect adversely the liquidity of the Fund's portfolio.
If the Fund decided to convert those securities to cash, it 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, if the Board decided not to
permit SCMI to manage the Fund's assets, could have a significant impact on
shareholders of the Fund.
Each investor in the Portfolio, including the Fund, may be liable for all
obligations of the Portfolio. The risk to an investor in the Portfolio of
incurring financial loss on account of such liability, however, is limited to
circumstances in which the Portfolio is unable to meet its obligations, the
occurrence of which SCMI considers to be quite remote. Upon liquidation of the
Portfolio, investors would be entitled to share pro rata in the net assets of
the Portfolio available for distribution to investors.
21
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
INVESTMENT ADVISER
Schroder Capital Management International Inc.
787 Seventh Avenue
New York, New York 10019
ADMINISTRATOR & DISTRIBUTOR
Schroder Fund Advisors Inc.
787 Seventh Avenue
New York, New York 10019
SUB-ADMINISTRATOR
Forum Administrative Services, Limited Liability Company
Two Portland Square
Portland, Maine 04101
CUSTODIAN
The Chase Manhattan Bank, N.A.
Global Custody Division
Woolgate House, Coleman Street
London EC2P 2HD, United Kingdom
TRANSFER AND DIVIDEND DISBURSING AGENT
Forum Financial Corp.
P.O. Box 446
Portland, Maine 04112
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand, L.L.P.
One Post Office Square
Boston, Massachusetts 02109
TABLE OF CONTENTS
PROSPECTUS SUMMARY.................... 2
EXPENSES OF INVESTING IN THE FUND..... 3
Fee Table............................. 3
Example............................... 5
FINANCIAL HIGHLIGHTS.................. 4
INVESTMENT OBJECTIVE.................. 6
INVESTMENT POLICIES................... 6
RISK CONSIDERATIONS................... 8
MANAGEMENT OF THE FUND................ 9
Boards of Trustees.................... 9
Investment Adviser and Portfolio
Managers............................. 9
Administrative Services............... 10
Expenses.............................. 10
Portfolio Transactions................ 10
Code of Ethics........................ 11
INVESTMENT IN THE FUND................ 11
Purchase of Shares.................... 11
Retirement Plans and Individual
Retirement Accounts.................. 12
Statement of Intention................ 12
Exchanges............................. 13
Redemption of Shares.................. 13
Net Asset Value....................... 14
DIVIDENDS, DISTRIBUTIONS AND TAXES.... 15
The Fund.............................. 15
The Portfolio......................... 16
OTHER INFORMATION..................... 16
Capitalization and Voting............. 16
Reports............................... 17
Performance........................... 17
Custodian and Transfer Agent.......... 17
Shareholder Inquiries................. 17
Service Organizations................. 17
Fund Structure........................ 17
[LOGO]
- --------------------------------------------
SCHRODER
INTERNATIONAL
FUND
INVESTOR SHARES
PROSPECTUS
MARCH 1, 1997
SCHRODER CAPITAL FUNDS (DELAWARE)
<PAGE>
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
INVESTOR SHARES
This fund seeks to achieve long-term capital appreciation through direct or
indirect investment in equity and debt securities of issuers domiciled or
doing business in emerging market countries in regions such as Southeast
Asia, Latin America, and Eastern and Southern Europe. It is designed for
investors who seek the aggressive growth potential of emerging world markets
and are willing to bear the special risks of investing in those markets.
Schroder Emerging Markets Fund Institutional Portfolio (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
Emerging Markets Fund Institutional Portfolio (the "Portfolio"), a separately
managed, non-diversified series of Schroder Capital Funds ("Schroder Core"),
an open-end management investment company. The Portfolio has an identical
investment objective and substantially similar investment policies as the
Fund. Accordingly, the Fund's investment experience correspond directly with
the Portfolio's investment experience. (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 March 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 their Internet
Web Site (http://www.sec.gov) or may be obtained without charge from the
Trust by writing to Two Portland Square, Portland, Maine 04101 or by calling
1-800-290-9826. 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
MARCH 1, 1997
<PAGE>
FUNDS AVAILABLE THROUGH SCHRODER FUND ADVISORS INC.
Please call for complete information and to obtain a prospectus.
Please read the prospectus carefully before you invest.
<TABLE>
<S> <C>
SCHRODER CAPITAL FUNDS (DELAWARE) (1-800-290-9826) SCHRODER SERIES TRUST (1-800-464-3108)
SCHRODER INTERNATIONAL FUND SCHRODER EQUITY VALUE FUND
SCHRODER EMERGING MARKETS FUND -- SCHRODER SMALL CAPITALIZATION VALUE FUND
INSTITUTIONAL PORTFOLIO SCHRODER HIGH YIELD INCOME FUND
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND SCHRODER INVESTMENT GRADE INCOME FUND
SCHRODER U.S. SMALLER COMPANIES FUND SCHRODER SHORT-TERM INVESTMENT FUND
SCHRODER U.S. EQUITY FUND
</TABLE>
2
<PAGE>
PROSPECTUS SUMMARY
This Prospectus offers Investor Class shares ("Investor Shares" or
"Shares") of the Fund. The Fund is a separately managed, non-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. Long-term capital appreciation through direct or indirect
investment in equity and debt securities of issuers domiciled or doing
business in emerging market countries in regions such as Southeast Asia,
Latin America, and Eastern and Southern Europe. Current income will be
incidental to the Fund's objective.
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, Limited Liability Company ("Forum") serves as the
Fund's sub-administrator.
PURCHASES AND REDEMPTIONS OF SHARES. Shares may be purchased or redeemed
by mail, by bank-wire and through your broker-dealer or other financial
institution. The minimum initial investment is $250,000. There is no minimum
for subsequent investments. See "Investment in the Fund -- Purchase of
Shares" and " -- Redemption of Shares." Purchases of Fund shares are subject
to a purchase charge of 0.50% of the amount invested. Redemptions of Fund
shares are subject to a redemption charge of 0.50% of the amount invested.
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. 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 investors who seek the aggressive growth potential of
emerging world markets and are willing to bear their special investment
risks, including but not limited to tightening of exchange controls and
expropriation, nationalization or confiscation of assets by local
governments. The Fund is not intended for investors whose objective is
assured income or preservation of capital: investments in the securities of
foreign issuers, particularly in countries with smaller, emerging capital
markets, involve risks in addition to risks associated with investments in
the securities of U.S. issuers. 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") will vary because the market
value of the Portfolio's investments will change with changes in the value of
the securities in which the Portfolio invests and with 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. For further information, see "Risk Considerations."
3
<PAGE>
EXPENSES OF INVESTING IN THE FUND
FEE TABLE
The table below is intended to assist you in understanding the expenses
that an investor in Investor Shares of the Fund would incur. The Annual Fund
Operating Expenses have been restated to reflect projected fees, expenses and
waivers for the current fiscal year.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchase.......................................... None
Maximum Sales Load Imposed on Reinvested Dividends.............................. None
Deferred Sales Load............................................................. None
Purchase Charge (based on amount invested)(1)................................... 0.50%
Redemption Charge (based on net asset value of shares redeemed)(1).............. 0.50%
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)(2)
Management Fees (after fee waivers)(3)(4)....................................... 0.95%
12b-1 Fees...................................................................... None
Other Expenses.................................................................. 0.50%
Total Fund Operating Expenses(4)................................................ 1.45%
</TABLE>
(1) The Purchase Charge and the Redemption Charge are paid to the Fund and
are imposed on all purchases and redemptions of Shares except for Shares
purchased through the reinvestment of dividends or distributions. See
"Investment in the Fund -- Purchase of Shares" and " -- Redemption of
Shares."
(2) The Fund's expenses include the Fund's pro rata portion of all
operating expenses of the Portfolio.
(3) Management Fees reflect the fees paid by the Portfolio and the Fund for
investment advisory and administrative services.
(4) SCMI and Schroder Advisors have voluntarily undertaken to waive a portion
of their fees and assume certain expenses of the Fund during the current
fiscal year in order to limit the Fund's Total Fund Operating Expenses to
1.45% of the Fund's average daily net assets. This undertaking cannot be
withdrawn except by a majority vote of the Trust's Board of Trustees.
See "Management of the Fund -- Expenses." Without fee waivers, Management
Fees and Total Fund Operating Expenses would be 1.10% and 1.60%,
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;
2() reinvestment of all dividends and other distributions; and (3) imposition
of the purchase and redemption charge. The example is based on the expenses
listed above. 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.
<TABLE>
Years
------------------------------------------
1 3 5 10
------------------------------------------
<S> <C> <C> <C> <C>
Assuming no redemption.................... $20 $49 $79 $152
Assuming full redemption at end of
period.................................. $25 $54 $84 $157
</TABLE>
4
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights of the Fund are presented below to assist you in
evaluating per share performance of Investor Shares of the Fund for the
periods shown. This information has been audited by Coopers & Lybrand L.L.P.,
independent accountants to the Fund. The Fund's financial statements for the
year ended October 31, 1996, 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 1-800-290-9826.
<TABLE>
March 31,
For the Year 1995(a)
Ended Through
October 31, October 31,
1996(b) 1995
--------------- ---------------
<S> <C> <C>
Net Asset Value, beginning of period $10.63 $10.00
--------------- ---------------
Investment Operations:
Net investment Income 0.02(c) 0.02
Net realized Gain (Loss) 0.43(d) 0.61
--------------- ---------------
Total From Investment Operations 0.45 0.63
--------------- ---------------
Distributions from Net Investment Income (0.02) --
--------------- ---------------
Net Asset Value, End of period $11.06 $10.63
--------------- ---------------
--------------- ---------------
Total Return(e) 4.22% 6.30%
Ratios/Supplementary Data:
Net Assets, End of period (Thousands) $167,570 $18,423
Ratio of Expenses to Average Net Assets after waivers 1.60%(c) 1.58%(f)
Ratio of Net Investment Income to Average Net Assets
after waivers 0.36%(c) 0.46%(f)
Ratio of Expenses to Average Net Assets before waivers 1.71%(c) 2.45%(f)
Ratio of Net Investment Income to Average Net Assets
before waivers 0.25%(c) (0.41)%(f)
Portfolio Turnover Rate(g) 102.70% 44.10%
Average Brokerage Commissions(h) $0.0008 N.A.
</TABLE>
- ---------
(a) Commencement of operations.
(b) On May 17, 1996, the Fund began offering two classes of shares, Investor
Shares and Advisor Shares, and all then outstanding shares of the Fund
were converted to Investor Shares.
(c) Includes the Fund's proportionate share of income and expenses of the
Portfolio.
(d) The amount shown for a share outstanding does not correspond with the
aggregate net gain (loss) on investments for the period ended due to the
timing of sales and repurchases of Fund shares in relation to fluctuating
market values of the investments of the Fund.
(e) Total return calculation does not include the purchase or redemption fee
of 0.50%, respectively.
(f) Annualized.
(g) Portfolio turnover rate represents the rate of portfolio activity. The
rate for the year October 31, 1996, represents the portfolio turnover rate
of the Portfolio.
(h) Amount represents the average commission per share paid to brokers on the
purchase and sale of the Portfolio's investment portfolio securities.
5
<PAGE>
INVESTMENT OBJECTIVE
The investment objective of the Fund is to seek to achieve long-term
capital appreciation through direct or indirect investment in equity and debt
securities of issuers domiciled or doing business in emerging market
countries in regions such as Southeast Asia, Latin America, and Eastern and
Southern Europe. Current income is incidental to the Fund's objective.
The Fund is designed for investors who seek the aggressive growth
potential of emerging markets and are willing to bear the special risks of
investing a portion of their assets in those markets. The Fund is not a
complete investment program and investments in the securities of foreign
issuers generally involve risks in addition to the risks associated with
investments in the securities of U.S. issuers. The Fund is not intended for
investors whose objective is assured income or preservation of capital. See
"Risk Considerations."
The Fund currently seeks to achieve its investment objective by investing
all of its investable assets in the Portfolio, which has substantially the
same investment objective and policies as the Fund. There can be no assurance
that the Fund or Portfolio will achieve its investment objective.
INVESTMENT POLICIES
Although the following information describes the investment policies of
the Portfolio and the responsibilities of Schroder Core's Board of Trustees
(the "Schroder Core Board"), it applies equally to the Fund and the Trust's
Board of Trustees (the "Trust Board"). Additional information concerning the
investment policies of the Fund and the Portfolio is contained in the SAI.
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
(i) 67% of the shares present or represented at a shareholder meeting at
which the holders of more than 50% of the outstanding shares are present or
represented, or (ii) more than 50% of outstanding shares. Non-fundamental
investment policies may be changed by the Schroder Core Board without
approval of the investors in the Portfolio.
Under normal market conditions, the Portfolio will, invest at least 65%
of its total assets in emerging market equity and debt securities, including
common stocks; preferred stocks; convertible preferred stocks; stock rights
and warrants; convertible debt securities; and non-convertible debt
securities. (Investments in stock rights and warrants will not be considered
for purposes of determining compliance with this policy.) The Portfolio may
invest up to 35% of its total assets in high-risk debt securities that are
unrated or rated below investment grade. (See "Risk Considerations"). Under
certain circumstances, the Portfolio may invest indirectly in emerging market
securities by investing in other investment companies or vehicles. (See "Risk
Considerations -- Investment in Other Investment Companies or Vehicles".) The
Portfolio may acquire emerging market securities that are not denominated in
emerging market currency.
In recent years, many emerging market countries have begun programs of
economic reform: removing import tariffs, dismantling trade barriers,
deregulating foreign investment, privatizing state-owned industries,
permitting the value of their currencies to float against the dollar and
other major currencies, and generally reducing the level of state
intervention in industry and commerce. Important intra-regional economic
integration also holds the promise of greater trade and growth. At the same
time, significant progress has been made in restructuring the heavy external
debt burden that certain emerging market countries accumulated during the
1970s and 1980s. While there is no assurance that these trends will continue,
the Portfolio's investment adviser will
6
<PAGE>
seek out attractive investment opportunities in these countries.
"Emerging market" countries are all those not included in the Morgan
Stanley Capital International World Index ("MSCI World") of major world
economies. If, however, the investment adviser determines that the economy of
a MSCI World-listed country is an emerging market economy, the adviser may
include such country in the emerging market category. The following countries
are currently excluded from the Portfolio's emerging market category:
Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany,
Ireland, Italy, Japan, Malaysia, Netherlands, New Zealand, Norway, Singapore,
Spain, Sweden, Switzerland, United Kingdom, and the United States of America.
The Portfolio will not necessarily seek to diversify investments on a
geographic basis and may invest more than 25% of its total assets in issuers
located in any one country. (See "Risk Considerations -- Geographic
Concentration".)
An issuer of a security will be considered to be domiciled or doing
business in an emerging market when (1) it is organized under the laws of an
emerging market country; (2) its primary securities trading market is in an
emerging market country; (3) in the judgment of the investment adviser, at
least 50% of the issuer's revenues or profits are derived from goods produced
or sold, investments made, or services performed in emerging market
countries; or (4) it has at least 50% of its assets situated in emerging
market countries. The Portfolio may consider investment companies to be
located in the country or countries in which they primarily invest.
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's investments will
consist primarily of the common or preferred stock of established emerging
market companies that are listed on recognized securities exchanges or traded
in other established markets. However, the Portfolio may make limited
investment in convertible preferred stock, warrants and stock rights.
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. Equity securities owned by the Portfolio may
be traded in the over-the counter market or on a securities exchange, but are
not 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.
Convertible preferred stock generally may be converted at a stated price
within a specific amount of time into a specified number of shares of common
stock. A convertible security entitles the holder to receive the dividend
paid on preferred stock until the convertible security is converted or
exchanged. Before conversion, convertible securities have characteristics
similar to non-convertible debt securities in that they ordinarily
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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 usually are 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.
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.
AMERICAN DEPOSITORY RECEIPTS ("ADRs"). Due to the absence of established
securities markets in certain emerging market countries and restrictions in
certain countries on direct investment by foreign entities, the Portfolio may
invest in certain emerging market issuers through the purchase of sponsored
and unsponsored American Depository Receipts ("ADRs") or other similar
securities, such as American Depository Shares, Global Depository Shares or
International Depository Receipts. ADRs are receipts typically issued by U.S.
banks evidencing ownership of the underlying securities into which they are
convertible. These securities may or may not be denominated in the same
currency as the underlying securities. Unsponsored ADRs may be created
without the participation of the foreign issuer. Holders of unsponsored ADRs
generally bear all the costs of the ADR facility, whereas foreign issuers
typically bear certain costs in a sponsored ADR. The bank or trust company
depository of an unsponsored ADR may be under no obligation to distribute
shareholder communications received from the foreign issuer or to pass
through voting rights.
DEBT SECURITIES. The Portfolio may seek capital appreciation through
investment in emerging market convertible or non-convertible debt securities.
Capital appreciation in debt securities may arise as a result of a favorable
change in relative foreign exchange rates, in relative interest rate levels,
or in the creditworthiness of issuers. The receipt of income from such debt
securities is incidental to the Portfolio's objective of long-term capital
appreciation. Such income can be used, however, to offset the operating
expenses of the Portfolio. In accordance with its investment objective, the
Portfolio will not seek to benefit from anticipated short-term fluctuations
in currency exchange rates. The Portfolio also may invest to a certain extent
in debt securities in order to participate in debt-to-equity conversion
programs incident to corporate reorganizations.
Debt securities are generally subject to two kinds of risk -- Credit
risk and market risk. Credit risk refers to the ability of the debtor, and
any other obligor, to pay principal and interest on the debt as it becomes
due. The Portfolio may, from time to time, invest in debt securities with
high risk and high yields (as compared to other debt securities meeting the
Portfolio's investment criteria). The debt securities in which the Portfolio
invests may be unrated, but will not be in default at the time of purchase.
Market risk refers to the tendency of the value of debt securities to vary
inversely with interest rate changes. Certain debt instruments may also be
subject to extension risk, which refers to change in total return on a debt
instrument resulting from extension or abbreviation of the instrument's
maturity.
The Portfolio may invest in debt securities issued or guaranteed by
emerging market governments (including countries, provinces and
municipalities) or their agencies and instrumentalities ("governmental
entities"); debt securities issued
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or guaranteed by international organizations designated or supported by
multiple foreign governmental entities (which are not obligations of foreign
governments) to promote economic reconstruction or development; and debt
securities issued by corporations or financial institutions.
BRADY BONDS. The Portfolio may invest a portion of its assets in Brady
Bonds, which are securities created through the exchange of existing
commercial bank loans to sovereign entities for new obligations in connection
with debt restructuring (under a debt restructuring plan introduced by former
U.S. Secretary of the Treasury, Nicholas F. Brady). Brady Bonds have been
issued only recently, and therefore do not have a long payment history. Brady
Bonds may have collateralized and uncollateralized components, are issued in
various currencies and are actively traded in the over-the-counter secondary
market. Brady Bonds are not considered U.S. Government securities. In light
of the residual risk associated with the uncollateralized portions of Brady
Bonds and, among other factors, the history of defaults with respect to
commercial bank loans by public and private entities of countries issuing
Brady Bonds, investments in Brady Bonds are considered speculative. Brady
Bonds acquired by the Portfolio could be subject to restructuring
arrangements or to requests for new credit, which could cause the Portfolio
to suffer a loss of interest or principal on its holdings. (For further
information see "Brady Bonds," in the Statement of Additional Information.)
INVESTMENT IN OTHER INVESTMENT COMPANIES OR VEHICLES. The Portfolio may
be able to invest in certain emerging markets solely or primarily through
governmentally authorized investment vehicles or companies. Pursuant to the
1940 Act, the Portfolio may invest up to 10% of its total assets in the
shares of other investment companies and up to 5% of its total assets in any
one investment company, as long as each investment does not represent more
than 3% of the outstanding voting stock of the investment company at the time
of such investment.
When investing through investment companies the Fund may pay substantial
premiums above such investment companies' net asset value per share. Such
investments are subject to limitations under the 1940 Act and market
availability. The Portfolio does not intend to invest in other investment
companies unless, in the judgment of SCMI, the potential benefits of such
investment justify the payments of any applicable premiums or sales charges.
As a shareholder in an investment company, the Portfolio would bear its
ratable share of the investment company's expenses, including its advisory
and administrative fees. At the same time, the Portfolio would continue to
pay its own fees and expenses.
TEMPORARY DEFENSIVE INVESTMENTS. For temporary defensive purposes, the
Portfolio may invest without limitation in (or enter into repurchase
agreements maturing in seven days or less with U.S. banks and broker-dealers
with respect to) short-term debt securities, including commercial paper, U.S.
Treasury bills, other short-term U.S. Government securities, certificates of
deposit, and bankers' acceptances of U.S. banks. The Portfolio also may hold
cash and time deposits denominated in any major foreign currency in foreign
banks. See the SAI for further information about these securities.
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 value of the underlying securities
purchased by the Portfolio is 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 bank holds the securities
until they are repurchased. If the seller defaults under a repurchase
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<PAGE>
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.
FOREIGN EXCHANGE CONTRACTS. Changes in currency exchange rates will
affect the U.S. dollar values of securities denominated in foreign
currencies. The rate of exchange between the U.S. dollar and other currencies
fluctuates in response to forces of supply and demand in the foreign exchange
markets. These forces are affected by the international balance of payments
and other economic and financial conditions, government intervention,
speculation, and other factors, many of which may be difficult (if not
impossible) to predict. When investing in foreign securities, the Portfolio
usually effects currency exchange transactions on a spot (i.e., cash) basis
at the spot rate prevailing in the foreign exchange market. The Portfolio
incurs foreign exchange expenses in converting assets from one currency to
another.
The Portfolio may enter into forward contracts for the purchase or sale
of foreign currency (i) to "lock in" the U.S. dollar price of the securities
denominated in a foreign currency or the U.S. dollar value of interest and
dividends to be paid on such securities or (ii) to hedge against the
possibility that a foreign currency may suffer a decline against the U.S.
dollar. A forward currency contract is an obligation to purchase or sell a
specific currency at a future date (which may be any fixed number of days
from the date of the contract agreed upon by the parties), at a price set at
the time of the contract. This method of attempting to hedge against a
decline in the value of a currency does not eliminate fluctuations in the
underlying prices of securities and exposes the Portfolio to the risk that
the counterparty is unable to perform. Although the strategy of engaging in
foreign currency transactions could reduce the risk of loss due to a decline
in the value of the hedged currency, it could also limit the potential gain
from an increase in the value of the currency. The Portfolio does not intend
to maintain a net exposure to such contracts if the fulfillment of
obligations under such contracts would obligate it to deliver an amount of
foreign currency in excess of the value of its portfolio securities or other
assets denominated in the currency. The Portfolio will not enter into these
contracts for speculative purposes and will not enter into non-hedging
currency contracts. The Portfolio will generally not enter into a forward
contract with a term of greater than one year. Forward contracts are not
exchange traded, and there can be no assurance that a liquid market will
exist at a time when the Portfolio seeks to close out a forward contract.
Currently, only a limited market, if any, exists for hedging transactions
relating to currencies in certain emerging markets or to securities of
issuers domiciled or principally engaged in business in certain emerging
markets. This may limit the Portfolio's ability to effectively hedge its
investments in those markets. These contracts involve a risk of loss if SCMI
fails to predict currency values. The Portfolio has no plan to enter into
currency futures or options contracts, but may do so in the future. See "Risk
Considerations -- Currency Fluctuations and Devaluations."
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 (i) by virtue of the absence of a readily available market or (ii)
because of legal or contractual restrictions on resale ("restricted
securities"). There may be undesirable delays in selling illiquid securities
at prices representing their fair value. This policy includes
over-the-counter options held by the Portfolio and the 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 (pursuant to Rule 144A under the Securities Act of
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1933, as amended) but may be resold 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.
See "Investment Policies -- Illiquid and Restricted Securities" in the SAI
for further information.
LOANS OF PORTFOLIO SECURITIES. The Portfolio may lend portfolio
securities (otherwise than as occurs in repurchase transactions) to brokers,
dealers and other financial institutions meeting specified credit conditions
if the loan is collateralized in accordance with applicable regulatory
requirements and if, after any loan, the value of the securities loaned does
not exceed 25% of the value of the Portfolio's total assets. By so doing, the
Portfolio attempts to earn interest income. In the event of the other party's
bankruptcy, the Portfolio could experience delays in recovering the
securities it lent; if, in the meantime, the value of the securities the
Portfolio lent has increased, the Portfolio, and thus the Fund, could
experience a loss.
The Portfolio may lend its securities if it maintains in a segregated
account liquid assets equal 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; and, in the event
of a default by the borrower, the Portfolio will (if permitted by law)
dispose of such collateral except for such part thereof that is a security in
which the Portfolio is permitted to invest. 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. See "Loans of
Portfolio Securities" in the SAI for further information on securities loans.
OPTIONS AND FUTURES TRANSACTIONS. Although the Portfolio does not
presently intend to do so, it may (a) write covered call options on portfolio
securities, the U.S. dollar and emerging market currencies without limit; (b)
write covered put options on portfolio securities and the U.S. dollar and
emerging market currencies with the limitation that the aggregate value of
the obligations underlying the puts determined as of the date the options are
sold will not exceed 50% of the Portfolio's net assets; (c) purchase call and
put options in amounts up to 5% of its total assets; and (d)(i) purchase and
sell futures contracts that are traded on U.S. and foreign commodity
exchanges on underlying portfolio securities, any emerging market currency,
U.S. and emerging market fixed-income securities and such indices of U.S. or
emerging market equity or fixed-income securities as may exist or come into
being and (ii) purchase and write call and put options on such futures
contracts, in all cases involving such futures contracts or options on
futures contracts for hedging purposes only, and without limit, except that
the Portfolio may not enter into futures contracts or purchase related
options if, immediately thereafter, the amount committed to margin plus the
amount paid for premiums for unexpired options on futures contracts generally
exceeds 5% of the
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value of the Portfolio's total assets. All of the foregoing are referred to
as "Hedging Instruments."
In general, the Portfolio may use Hedging Instruments: (1) to protect
against declines in the market value of the Portfolio's portfolio securities
or stock index futures, and the currencies in which they are denominated, or
(2) to establish a position in securities markets as a temporary substitute
for purchasing particular equity securities. The Portfolio will not use
Hedging Instruments for speculation. Hedging Instruments have certain risks
associated with them including: (a) the possible failure of such instruments
as hedging techniques in cases where the price movement of the securities
underlying the options or futures does not follow the price movements of the
portfolio securities subject to the hedge; (b) potentially unlimited loss
associated with futures transactions and the possible lack of a liquid
secondary market for closing out a futures position; and (c) possible losses
resulting from the inability of the Portfolio's investment adviser to predict
the direction of stock prices, interest rates and other economic factors. In
addition, only a limited market, if any, currently exists for hedging
transactions relating to currencies in many emerging markets or to securities
of issuers domiciled or principally engaged in business in emerging markets.
This may limit the Portfolio's ability to effectively hedge its investments
in such emerging market countries. The Hedging Instruments the Portfolio may
use and the risks associated with them are described in greater detail under
"Options and Futures Transactions" in the SAI.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. The
Portfolio may purchase securities on a when-issued or delayed delivery basis
or may purchase or sell securities on a forward commitment basis. When such
transactions are negotiated, the price is fixed at the time of the
commitment, but delivery and payment may take place a month or more after the
date of the commitment. There is no overall limit on the percentage of the
Portfolio's assets that may be committed to the purchase of securities on a
when-issued, delayed delivery or forward commitment basis. An increase in the
percentage of the Portfolio's assets committed to the purchase of securities
on a when-issued, delayed delivery or forward commitment basis may increase
the volatility of the Portfolio's net asset value.
WHEN, AS AND IF ISSUED SECURITIES. The Portfolio may purchase securities
on a "when, as and if issued" basis under which the issuance of the security
depends upon the occurrence of a subsequent event, such as approval of a
merger, corporate reorganization, leveraged buyout or debt restructuring. If
the anticipated event does not occur and the securities are not issued, the
Portfolio will have lost an investment opportunity. There is no overall limit
to the percentage of the Portfolio's assets that may be committed to the
purchase of securities on a "when, as and if issued" basis. An increase in
the percentage of the Portfolio's assets committed to the purchase of
securities on a "when, as and if issued" basis may increase the volatility of
its net asset value.
RISK CONSIDERATIONS
FOREIGN INVESTMENTS. All investments, domestic and foreign, involve risk.
Investment in the securities of foreign issuers may involve risks in addition
to those normally associated with investments in the securities of U.S.
issuers. While the Portfolio will generally invest only in securities of
companies and governments in countries that SCMI considers both politically
and economically stable, all foreign investments are subject to risks of
foreign political and economic instability, adverse movements in foreign
exchange rates, the imposition or tightening of exchange controls, or other
limitations on repatriation of foreign capital. Foreign investments are
subject to the risk of changes in foreign governmental attitudes towards
private investment that could lead to nationalization, increased taxation or
confiscation of Portfolio assets.
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Moreover, (i) dividends payable on foreign securities may be subject to
foreign withholding taxes, thereby reducing the income earned by the
Portfolio; (ii) commission rates payable on foreign portfolio transactions
are generally higher than in the United States; (iii) accounting, auditing
and financial reporting standards differ from those in the United States,
which means that less information about foreign companies may be available
than is generally available about issuers of comparable securities in the
U.S.; (iv) foreign securities often trade less frequently and with lower
volume than U.S. securities and consequently may exhibit greater price
volatility; and (v) foreign securities trading practices, including those
involving securities settlement, may expose the Portfolio to increased risk
in the event of a failed trade or the insolvency of a foreign broker-dealer
or registrar.
REGULATION AND LIQUIDITY OF MARKETS. Government supervision and
regulation of exchanges and brokers in emerging market countries is typically
less extensive than in the United States. These markets may have different
clearance and settlement procedures, and in certain cases, settlements have
not kept pace with the volume of securities transactions, making them
difficult to conduct. Delays in settlement could adversely affect or
interrupt the Portfolio's intended investment program or result in investment
losses due to intervening declines in security values.
Securities markets in emerging market countries are substantially smaller
than U.S. securities markets and have substantially lower trading volume,
resulting in diminished liquidity and greater price volatility. Reduced
secondary market liquidity may make it more difficult for the Portfolio to
determine the value of its portfolio securities or dispose of particular
instruments when necessary. Brokerage commissions and other transaction costs
on foreign securities exchanges are also generally higher.
EMERGING MARKETS. In any emerging market country, there is the
possibility of expropriation of assets, confiscatory taxation,
nationalization of companies or industries, foreign exchange controls,
foreign investment controls on daily stock market movements, default in
foreign government securities, political or social instability, or diplomatic
developments that could affect investments in those countries. In the event
of expropriation, nationalization or other confiscation, the Portfolio could
lose its entire investment in a country. The economies of developing
countries generally are heavily dependent upon international trade and,
accordingly, have been and may continue to be adversely affected by trade
barriers, exchange controls, managed adjustments in relative currency values
and other protectionist measures imposed or negotiated by the countries with
which they trade. There may also be less monitoring and regulation of
emerging markets and the activities of brokers there. Investing may require
that the Portfolio adopt special procedures, seek local government approvals
or take other actions that may incur costs for the Portfolio.
Certain emerging market countries may restrict investment by foreign
entities by limiting the size of foreign investment in certain issuers;
requiring prior approval of foreign investment by the government; imposing
additional tax on foreign investors; or limiting foreign investors to
specific classes of securities of an issuer that have less advantageous
rights (with regard to price or convertibility, for example) than classes
available to domiciliaries of the country. These restrictions or controls may
at times limit or preclude investment in certain securities and may increase
the costs and expenses of the Portfolio.
CURRENCY FLUCTUATIONS AND DEVALUATIONS. Because the Portfolio will invest
heavily in non-U.S. currency-denominated securities, changes in foreign
currency exchange rates will affect the value of the Portfolio's investments.
A decline against the dollar in the value of currencies in which the
Portfolio's investments are denominated will result in a corresponding
decline in the dollar value of the Portfolio's assets. This risk is
heightened in some emerging market countries.
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Some emerging market countries may also have managed currencies that do not
freely float against the dollar.
The Portfolio is required to distribute substantially all of its
investment income in U.S. dollars. Because most of the Portfolio's income
will be received and realized in foreign currencies, a decline in the value
of a particular foreign currency against the U.S. dollar that occurs after
the Portfolio's income has been earned may require the Portfolio to liquidate
some portfolio securities to acquire sufficient U.S. dollars to make such
distributions. Similarly, if the exchange rate declines between the time the
Portfolio incurs expenses in U.S. dollars and the time such expenses are
paid, the Portfolio may be required to liquidate additional foreign
securities to purchase the U.S. dollars required to meet such expenses.
INFLATION. Several emerging market countries have experienced high, and
in some periods extremely high, rates of inflation in recent years. Inflation
and rapid fluctuations in inflation rates may adversely affect these
countries' economies and securities markets. Further, inflation accounting
rules in some emerging market countries require, for companies that keep
accounting records in the local currency, that certain assets and liabilities
be restated on the company's balance sheet in order to express items in terms
of currency of constant purchasing power. Inflation accounting may indirectly
generate losses or profits for certain emerging market companies.
NON-DIVERSIFIED INVESTMENTS. Because suitable investments in emerging
market countries may be limited, the Portfolio, like the Fund, has classified
itself as a "non-diversified investment company" under the 1940 Act so that
it may invest more than 5% of its total assets in the securities of a single
issuer. This classification may not be changed without a shareholder vote.
However, so that the Portfolio may continue to qualify as a "regulated
investment company" under Subchapter M of the Internal Revenue Code of 1986,
as amended at the close of each quarter of the taxable year, (i) not more
than 25% of the market value of the Portfolio's total assets will be invested
in the securities of a single issuer, and (ii) with respect to 50% of the
market value of its total assets, not more than 5% will be invested in the
securities of a single issuer; and the Portfolio will not own more than 10%
of the outstanding voting securities of a single issuer. See "Dividends,
Distributions and Taxes."
To the extent the Portfolio makes investments in excess of 5% of its
assets in a particular issuer, its exposure to credit and market risks
associated with that issuer is increased. Also, since a relatively high
percentage of the Portfolio's assets may be invested in the securities of a
limited number of issuers, the Portfolio may be more susceptible to any
single economic, political or regulatory occurrence than a diversified
investment company.
GEOGRAPHIC CONCENTRATION. The Portfolio may invest more than 25% of its
total assets in issuers located in any one country. To the extent it invests
in issuers of one country, the Portfolio is susceptible to factors adversely
affecting that country, including political and economic developments and
foreign exchange rate fluctuations as discussed above. The value of the
Portfolio's assets may fluctuate more widely than the value of shares of a
comparable fund with less geographic concentration.
CERTAIN RISKS OF DEBT SECURITIES. The Portfolio may invest without
limitation in investment grade emerging market debt securities; it may invest
up to 35% of its total assets in debt securities that are unrated or are
rated below investment grade (below Baa by Moody's or BBB by S&P; for a
further description of S&P's and Moody's securities ratings please see the
Appendix to the SAI). Note that even debt securities rated Baa by Moody's are
considered to have speculative characteristics. Below investment grade
securities (and unrated securities of comparable quality) ("high yield/high
risk securities") are predominantly speculative with respect to the
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capacity to pay interest and repay principal, and generally involve a greater
volatility of price than securities in higher rating categories. These
securities are commonly referred to as "junk" bonds. The risks associated
with junk bonds are generally greater than those associated with higher-rated
securities. The Portfolio is not obligated to dispose of securities due to
rating changes by Moody's, S&P or other rating agencies. The Portfolio is not
authorized to purchase debt securities that are in default, except for
sovereign debt (discussed below) in which the Portfolio may invest no more
than 5% of its total assets while such sovereign debt securities are in
default.
In purchasing high yield/high risk securities, the Portfolio will rely on
the investment adviser's judgment, analysis and experience in evaluating the
creditworthiness of an issuer of such securities. Nonetheless, investors
should review the investment objective and policies of the Fund and consider
their willingness to assume risk before making an investment.
High yield/high risk securities' market values are affected more by
individual issuer developments and are more sensitive to adverse economic
changes than are higher-rated securities. Issuers of high yield/high risk
securities may be highly leveraged and may not have more traditional methods
of financing available to them. During economic downturns or substantial
periods of rising interest rates, issuers of high yield/high risk securities,
especially highly leveraged ones, may be less able to service their principal
and interest payment obligations, meet their projected business goals, or
obtain additional financing. The risk of loss due to default by the issuer is
significantly greater for holders of high yield/high risk securities because
such securities may be unsecured and may be subordinated to other creditors
of the issuer. In addition, the Portfolio may incur additional expenses if it
is required to seek recovery upon a default by the issuer of such an
obligation or participate in the restructuring of such obligation.
Periods of economic uncertainty and change will likely cause increased
volatility in the market prices of high yield/high risk securities and,
correspondingly, the Portfolio's net asset value if it invests in such
securities; market prices of such securities structured as zero coupon or
pay-in-kind securities are more affected by interest rate changes and thus
tend to be more volatile than securities that pay interest periodically and
in cash.
High yield/high risk securities may have call or redemption features
which would permit an issuer to repurchase the securities from the Portfolio.
If a call were exercised by the issuer during a period of declining interest
rates, the Portfolio would likely have to replace called securities with
lower yielding securities, thus decreasing the Portfolio's net investment
income and dividends to shareholders.
While a secondary trading market for high yield/high risk securities does
exist, it is generally not as liquid as the secondary market for higher rated
securities. In periods of reduced secondary market liquidity, prices of high
yield/high risk securities may become volatile and experience sudden and
substantial price declines. The Portfolio may, therefore, have difficulty
disposing of particular issues to meet its liquidity needs or in response to
a specific economic event (such as a deterioration in the creditworthiness of
the issuer). Reduced secondary market liquidity for certain high yield/high
risk securities also may make it more difficult for the Portfolio to obtain
accurate market quotations (for purposes of valuing the Portfolio's
investment portfolio): market quotations are generally available on many high
yield/high risk securities only from a limited number of dealers and may not
necessarily represent firm bids of such dealers or prices for actual sales.
Under such conditions, high yield/high risk securities may have to be valued
at fair value as determined by the Schroder Core Board or SCMI under
Board-approved guidelines.
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Adverse publicity and investor perceptions (which may not be based on
fundamental analysis) may decrease the value and liquidity of high yield/high
risk securities, particularly in a thinly traded market. Factors adversely
affecting the market value of high yield/high risk securities are likely to
adversely affect the Portfolio's, and thus the Fund's, net asset value.
SOVEREIGN DEBT. Investment in sovereign debt carries high risk. Certain
emerging market countries such as Argentina, Brazil and Mexico are among the
largest debtors to commercial banks and foreign governments. At times,
certain emerging market countries have declared moratoria on the payment of
principal and/or interest on outstanding debt. The governmental entity that
controls the repayment of sovereign debt may not be able or willing to repay
the principal and/or interest when due in accordance with the terms of such
debt. A governmental entity's willingness or ability to repay principal and
interest when it is due may be affected by many factors, such as its cash
flow situation, the extent of its foreign reserves, the availability of
sufficient foreign exchange, the relative size of the debt service burden to
the economy as a whole, and political restraints. The Portfolio, as a holder
of sovereign debt, may be asked to participate in the rescheduling of such
debt and to extend further loans to governmental entities. There is no
bankruptcy proceeding by which defaulted sovereign debt may be collected.
The sovereign debt instruments in which the Portfolio may invest involve
great risk and are deemed to be the equivalent in terms of quality to high
yield/high risk securities discussed above and are subject to many of the
same risks as such securities. Similarly, the Portfolio may have difficulty
disposing of certain sovereign debt obligations because there may be a thin
trading market for such securities. The Portfolio will not invest more than
5% of its total assets in sovereign debt in default.
PORTFOLIO TURNOVER. The Portfolio may engage in short-term trading but
its portfolio turnover rate is not expected to exceed 100%. High portfolio
turnover and short-term trading involve correspondingly greater commission
expenses and transaction costs. Also, higher portfolio turnover rates may
cause shareholders of the Portfolio to recognize gains for federal income tax
purposes. See "Taxation" in the SAI.
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MANAGEMENT OF THE FUND
SCHRODER GROUP ASSETS UNDER MANAGEMENT WORLDWIDE AS OF DECEMBER 31, 1996 --
OVER $130 BILLION
[GRAPHIC]
THE SCHRODER INVESTMENT MANAGEMENT GROUP INVESTMENT AND REPRESENTATIVE OFFICES
WORLDWIDE INCLUDE NEW YORK, LONDON, BOSTON, ZURICH, WARSAW, TOKYO, HONG KONG,
BEIJING, SHANGHAI, TAIPEI, SEOUL, BANGKOK, KUALA LUMPUR, SINGAPORE, JAKARTA,
SYDNEY, BUENOS AIRES, SAO PAULO, BOGOTA AND CARACAS.
TOGETHER, SCHRODER CAPITAL MANAGEMENT INTERNATIONAL AND
SCHRODER CAPITAL MANAGEMENT INC. MANAGE OVER $24 BILLION
BOARDS OF TRUSTEES
The business and affairs of the Fund are managed under the direction of
the Trust Board. The business and affairs of the Portfolio are managed under
the direction of the Schroder Core Board. Additional information regarding
the trustees and executive officers of the Trust, as well as Schroder Core's
trustees and executive officers, may be found in the SAI under the heading
"Management, Trustees and Officers."
INVESTMENT ADVISER AND PORTFOLIO MANAGER
As investment adviser to the Portfolio, SCMI manages the Portfolio and
continuously reviews, supervises and administers its investments. SCMI is
responsible for making decisions relating to the Portfolio's investments and
placing purchase and sale orders regarding such investments with brokers or
dealers it selects. For these services, the Investment Advisory Agreement
between SCMI and Schroder Core provides that SCMI is entitled to receive a
monthly advisory fee at the annual rate of 1.00% 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, 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.
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John A. Troiano, a Vice President of the Trust and Schroder Core, with
the assistance of an SCMI investment committee, is primarily responsible for
the day-to-day management of the Portfolio's investment portfolio. Mr.
Troiano managed the Fund's investment portfolio from its inception until it
invested its assets in the Portfolio and has managed the Portfolio's assets
since its inception. Mr. Troiano has been a Managing Director of SCMI since
October 1995 and has been employed by various Schroder Group companies in the
investment research and portfolio management areas since 1988.
The Fund began pursuing its investment objective through investment in
the Portfolio on November 1, 1995. The Fund may withdraw its investment from
the Portfolio at any time if the Board determines that it is in the best
interests of the Fund and its shareholders to do so. (See "Other Information
- -- Fund Structure.") Accordingly, the Fund has retained SCMI as its
investment adviser to manage the Fund's assets in the event the Fund
withdraws its investment. SCMI does not receive an investment advisory fee
with respect to the Fund so long as the Fund remains completely invested in
the Portfolio (or any other investment company). If the Fund resumes directly
investing in portfolio securities, the Fund will pay SCMI a monthly advisory
fee at the annual rate of 1.00% of the Fund's average daily net assets. The
investment advisory agreement between SCMI and the Trust with respect to the
Fund is the same in all material respects as the investment advisory contract
between SCMI and Schroder Core with respect to the Portfolio (except as to
the parties, the fees payable thereunder, the circumstances under which fees
will be paid and the jurisdiction whose laws govern the agreement). For the
fiscal year ended October 31, 1996, the Fund paid SCMI an advisory fee of
0.10% of its average daily net assets.
ADMINISTRATIVE SERVICES
On behalf of the Fund, the Trust has entered into an administration
services contract with Schroder Advisors, 787 Seventh Avenue, New York, New
York 10019. On behalf of the Portfolio, the Trust has also entered into a
sub-administration agreement with Forum, Two Portland Square, Portland, Maine
04101. Pursuant to these agreements, Schroder Advisors and Forum provide
certain management and administrative services necessary for the Fund's
operations. Schroder Advisors is compensated at the annual rate of 0.05% of
the Fund's average daily net assets. Forum is compensated at the annual rate
of 0.05% of the Fund's average daily net assets.
Schroder Advisors and Forum provide similar services to the Portfolio,
for which the Portfolio pays Schroder Advisors an annual rate of 0.05% and
pays Forum a monthly fee at the annual rate of 0.10% of the Portfolio's
average daily net assets.
EXPENSES
SCMI and Schroder Advisors have voluntarily 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 1.45% of the average daily net assets of the Fund
attributable to those shares. In addition, effective March 1, 1997, SCMI
voluntarily has agreed to waive advisory fees paid by the Portfolio to 0.85%
of the average daily net assets. Neither this expense limitation can 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.
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PORTFOLIO TRANSACTIONS
SCMI places orders for the purchase and sale of the Portfolio's
investments with brokers and dealers selected by SCMI and seeks "best
execution" of such portfolio transactions. The Portfolio may pay brokers
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. Commission rates for brokerage transactions are fixed on
many foreign securities exchanges, which may cause higher brokerage expenses
to accrue to the Portfolio than would be the case for comparable transactions
effected on U.S. securities exchanges.
Subject to the Portfolio's policy of obtaining the best price consistent
with quality of execution on transactions, SCMI may employ Schroder
Securities Limited and its affiliates (collectively, "Schroder Securities"),
affiliates of SCMI, to effect transactions of the Portfolio on certain
foreign securities exchanges. Because of the affiliation between SCMI and
Schroder Securities, the Portfolio's payment of commissions to Schroder
Securities is subject to procedures adopted by the Schroder Core Board
designed to ensure that the commissions will not exceed the usual and
customary brokers' commissions. No specific portion of the Portfolio's
brokerage will be directed to Schroder Securities and in no event will
Schroder Securities receive any brokerage in recognition of research services.
Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc., and subject to seeking the most favorable price and
execution available and such other policies as the Schroder Core Board may
determine, SCMI may consider sales of shares of the Fund or any other entity
that invests in the Portfolio as a factor in the selection of broker-dealers
to execute portfolio transactions for the Portfolio.
Although the Portfolio does not currently engage in directed brokerage
arrangements to pay expenses, it may do so in the future. These arrangements,
(whereby brokers executing the Portfolio's portfolio transactions 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
materially increase the brokerage commissions paid by the Portfolio.
CODE OF ETHICS
The Trust, Schroder Core, SCMI, Schroder Advisors, and Schroders
Incorporated have each adopted a code of ethics that contains a policy on
personal securities transactions by "access persons," including portfolio
managers and investment analysts. That policy complies in all material
respects with the recommendations set forth in the Report of the Advisory
Group on Personal Investing of the Investment Company Institute, of which the
Trust is a member.
INVESTMENT IN THE FUND
PURCHASE OF SHARES
Investors may purchase Investor Shares directly from the Trust.
Prospectuses, sales material and Account Applications can be obtained from
the Trust or through Forum Financial Corp., the Fund's transfer agent (the
"Transfer Agent"). See "Other Information -- Shareholder Inquiries."
Investments may also be made through Financial Institutions and other
organizations that assist their customers in purchasing shares of the Fund
("Service Organizations"). Service Organizations may charge their customers a
service fee for processing orders to purchase or sell shares of the Fund.
Investors wishing to purchase shares through their accounts at a Service
Organization should contact that organization directly for appropriate
instructions.
Shares of the Fund are offered at the net asset value next determined
after receipt of a completed Account Application (at the address set forth
below). The minimum initial investment is $250,000. There is no minimum for
subsequent investments. All purchase payments are invested
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<PAGE>
in full and fractional shares. The Fund is authorized to reject any purchase
order.
Purchases of Fund shares are subject to a purchase charge of 0.50% of the
amount invested. This charge is designed to cover the transaction costs the
Fund incurs (either directly or indirectly) as a result of investments in the
Fund, including brokerage commissions in acquiring portfolio securities;
currency transaction costs and transfer agent costs; and to protect the
interests of shareholders. This charge, which is not a sales charge, is paid
to the Fund, not to Schroder Advisors or any other entity. The purchase
charge is not assessed on the reinvestment of dividends or distributions or
shares purchased through a subscription in kind.
Purchases may be made by mailing a check (in U.S. dollars), payable to
Schroder Emerging Markets Fund Institutional Portfolio, to:
Schroder Emerging Markets Fund
Institutional Portfolio -- Investor Shares
P.O. Box 446
Portland, Maine 04112
For initial purchases, the check must be accompanied by a completed
Account Application in proper form. Further documentation, such as corporate
resolutions and instruments of authority, may be requested from corporations,
administrators, executors, personal representatives, directors or custodians
to evidence the authority of the person or entity making the subscription
request.
Investors and Service Organizations (on behalf of their customers) may
transmit purchase payments by Federal Reserve Bank wire directly to the Fund
as follows:
Chase Manhattan Bank
New York, NY
ABA No.: 021000021
For Credit To: Forum Financial Corp.
Account No.: 910-2-718187
Ref.: Schroder Emerging Markets Fund Institutional Portfolio -- Investor
Shares
Account of: (shareholder name)
Account Number: (shareholder account number)
The wire order must specify the name of the Fund, 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" below.
The Fund's Transfer Agent establishes for each shareholder of record an
open account to which all shares purchased and all reinvested dividends and
other distributions are credited. Although most shareholders elect not to
receive share certificates, certificates for full shares can be obtained by
written request to the Fund's Transfer Agent. No certificates are issued for
fractional shares.
The Transfer Agent will deem an account lost if six months have passed
since correspondence to the shareholder's address of record is returned,
unless the Transfer Agent determines the shareholder's new address. When an
account is deemed lost, dividends and other distributions will automatically
be reinvested. In addition, the amount of any outstanding checks for
dividends and other distributions that have been returned to the Transfer
Agent will be reinvested and the checks will be canceled.
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<PAGE>
RETIREMENT PLANS AND INDIVIDUAL RETIREMENT ACCOUNTS
Shares of the Fund are offered in connection with tax-deferred retirement
plans. Application forms and further information about these plans, including
applicable fees, are available upon request. Before investing in the Fund
through one of these plans, investors should consult their tax advisors.
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 spouse) 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 qualified plan.
Tax advice should be obtained before effecting a rollover.
STATEMENT OF INTENTION
Investor Share investors also may meet the minimum initial investment
requirement based on cumulative purchases by means of a written Statement of
Intention, expressing the investor's intention to invest $250,000 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 Shares of the Fund for shares of any other
series of the Trust so long as they meet the initial investment minimum of
the fund being purchased and they maintain the respective minimum account
balance in each fund in which they own shares. Exchanges between each Fund
are at net asset value.
For federal income tax purposes an exchange is considered to be a sale of
shares on which a shareholder may realize a capital gain or loss. An exchange
may be made by calling the Transfer Agent at (800) 344-8332 or by mailing
written instructions to Schroder Capital Funds (Delaware), P.O. Box 446,
Portland, Maine 04112. Exchange privileges may be exercised only in those
states where shares of the other series of the Trust may legally be sold.
Exchange privileges may be amended or terminated at any time upon sixty (60)
days' notice.
REDEMPTION OF SHARES
Shares of the Fund are redeemed at their next determined net asset value
after receipt by the Fund (at the address set forth above under "Purchase of
Shares") of a redemption request in proper form. Redemption requests may be
made between 9:00 a.m. and 6:00 p.m. (Eastern Time) on each Fund Business
Day. Redemption requests that are received prior to 4:00 p.m. (Eastern Time)
will be processed at the net asset value determined as of that day.
Redemption requests that are received after 4:00 p.m. (Eastern Time) will be
processed at the net asset value determined the next Fund Business Day. See
"Net Asset Value" below.
Redemptions of Fund shares are subject to a redemption charge of 0.50% of
the net asset value of the shares redeemed. This charge is designed to cover
the transaction costs the Fund incurs in
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<PAGE>
redeeming Fund shares (either directly or indirectly as a result of its
investment in the Portfolio), including brokerage commissions in selling
portfolio securities, currency transaction costs, transfer agent costs, and
to protect the interests of shareholders. This charge, which is not a sales
charge, is paid to the Fund, not to Schroder Advisors or any other entity.
The redemption charge is not assessed on shares acquired through the
reinvestment of dividends or distributions or on redemptions in kind. For
purposes of computing the redemption charge, redemptions by a shareholder are
deemed to be made in the following order: (i) from Shares purchased through
the reinvestment of dividends and distributions (with respect to which no
redemption charge is applied) and (ii) from Shares for which the redemption
charge is applicable, on a first purchased, first redeemed basis.
BY TELEPHONE. Redemption requests may be made by telephoning the Transfer
Agent at the telephone number on the cover page of this Prospectus. A
shareholder must provide the Transfer Agent with the class of shares, the
dollar amount or number of shares to be redeemed, shareholder account number,
and some additional form of identification such as a password. A redemption
by telephone may be made only if the telephone redemption privilege option
has been elected on the Account Application or otherwise in writing. In an
effort to prevent unauthorized or fraudulent redemption requests by
telephone, reasonable procedures will be followed by the Transfer Agent to
confirm that telephone instructions are genuine. The Transfer Agent and the
Trust generally will not be liable for any losses due to unauthorized or
fraudulent redemption requests, but may be liable if they do not follow these
procedures. Shares for which certificates have been issued may not be
redeemed by telephone. In times of drastic economic or market 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 class of shares, the dollar amount or number of Shares to be
redeemed, and the shareholder account number. The letter must also be signed
in exactly the same way the account is registered (if there is more than one
owner of the Shares, all must sign) and, in certain cases, signatures must be
guaranteed by an institution that is acceptable to the Transfer Agent. Such
institutions include certain banks, brokers, dealers (including municipal and
government securities brokers and dealers), credit unions and savings
associations. Notaries public are not acceptable. Further documentation may
be requested to evidence the authority of the person or entity making the
redemption request. Questions concerning the need for signature guarantees or
documentation of authority should be directed to the Fund at the above
address or by calling the telephone number appearing on the cover of this
Prospectus.
If Shares to be redeemed are held in certificate form, the certificates
must be enclosed with the redemption request and the assignment form on the
back of the certificates (or an assignment separate from the certificates but
accompanied by the certificates) must be signed by all owners in exactly the
same way the owners' names are written on the face of the certificates.
Requirements for signature guarantees and/or documentation of authority as
described above could also apply. For your protection, the Fund suggests that
certificates be sent by registered mail.
ADDITIONAL REDEMPTION INFORMATION. Checks for redemption proceeds will
normally be mailed within seven days. No redemption proceeds will be mailed
until checks in payment for the purchase of the Shares to be redeemed have
been cleared, which may take up to 15 calendar days from the purchase date.
Unless other instructions are given in proper form, a check for the proceeds
of a redemption will be sent to the shareholder's address of record.
The Fund may suspend the right of redemption during any period when (i)
trading on the
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<PAGE>
New York Stock Exchange is restricted or that exchange is closed, (ii) the
SEC has by order permitted such suspension, or (iii) an emergency (as defined
by rules of the SEC) exists making disposal of portfolio investments or
determination of the Fund's net asset value not reasonably practicable.
If the Trust Board determines that it would be detrimental to the best
interest of the remaining shareholders of the Fund to make payment wholly or
partly in cash, the Fund may redeem Shares in whole or in part by a
distribution in kind of portfolio securities (from the investment portfolio
of the Portfolio or of the Fund), in lieu of cash. The Fund will, however,
redeem Shares solely in cash up to the lesser of $250,000 or 1% of net assets
during any 90-day period for any one shareholder. In the event that payment
for redeemed Shares is made wholly or partly in portfolio securities, the
shareholder may be subject to additional risks and costs in converting the
securities to cash. See "Additional Purchase and Redemption Information 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 $100,000, 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 $100,000 and be allowed at least 30 days to make an additional
investment to increase the account balance to at least $100,000.
NET ASSET VALUE
The net asset value per share of the Fund is calculated separately for
each class of shares of the Fund at 4:00 p.m. (Eastern Time), Monday through
Friday, each Fund Business Day, which excludes the following U.S. holidays:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. Net asset value per Share is
calculated by dividing the aggregate value of the Fund's assets less all Fund
liabilities, if any, by the number of Shares of the Fund outstanding.
Generally, securities 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.
Trading in securities on non-U.S. exchanges and over-the-counter markets
may not take place on every day that the New York Stock Exchange is open for
trading. Furthermore, trading takes place in various foreign markets on days
on which the Fund's net asset value is not calculated. If events materially
affecting the value of foreign securities occur between the time when their
price is determined and the time when net asset value is calculated, such
securities will be valued at fair value as determined in good faith by using
methods approved by the Schroder Core Board.
All assets and liabilities of the Portfolio denominated in foreign
currencies are valued in U.S. dollars based on the exchange rate last quoted
by a major bank prior to the time when the net asset value of the Fund is
calculated.
DIVIDENDS, DISTRIBUTIONS AND TAXES
THE FUND
The Fund intends to comply with the provisions of the Internal Revenue
Code of 1986, as amended, applicable to regulated investment com-
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<PAGE>
panies. By complying therewith, the Fund will not have to pay federal income
tax on that part of its 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 will be 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 the dividends are invested in
additional Shares or received in cash. Distributions by the Fund of any net
capital gain will be taxable to a shareholder as long-term capital gain
regardless of how long the shareholder has held the Shares. Each year the
Trust will notify shareholders of the tax status of dividends and other
distributions.
Dividends from the Fund will qualify for the dividends-received deduction
for corporate shareholders to the extent dividends do not exceed the
aggregate amount of dividends received by the Fund from domestic
corporations, provided the Fund shares are held for more than 45 days. If
securities held by the Fund are considered to be debt-financed (generally,
acquired with borrowed funds); are held by the Fund for fewer than 46 days
(91 days in the case of certain preferred stock); or are subject to certain
forms of hedges or short sales, then the portion of the dividends paid by the
Fund attributable to such securities will not be eligible for the
dividends-received deduction.
A redemption of Shares may result in taxable gain or loss to the
redeeming shareholder, depending on whether the redemption proceeds are more
or less than the shareholder's basis in the redeemed Shares. If Shares are
redeemed at a loss after being held for six months or less, the loss will be
treated as a long-term, rather than a short-term, capital loss to the extent
of any capital gain distributions received on those Shares.
The Fund must withhold 31% from dividends, capital gain distributions and
redemption proceeds payable to any individuals and certain other noncorporate
shareholders who do not furnish the Fund with a correct taxpayer
identification number. Withholding at that rate also is required from
dividends and capital gain distributions payable to such shareholders who
otherwise are subject to backup withholding. Depending on the residence of a
shareholder for tax purposes, distributions from the Fund may also be subject
to state and local taxes, including withholding taxes.
In an effort to adhere to certain tax requirements, the Fund may have to
limit its investment activity in some types of instruments.
If the Fund's dividends exceed its taxable income in any year, all or a
portion of the Fund's dividends may be treated as a return of capital to
shareholders for tax purposes. Any return of capital will reduce the cost
basis of your shares, which will result in a higher reported capital gain or
a lower reported capital loss when you sell your shares. Shareholders will be
notified by the Trust if a distribution included a return of capital.
EFFECT OF FOREIGN TAXES. Foreign governments may impose taxes on the
Portfolio and its investments, which generally reduce the Fund's income.
However, an offsetting tax credit or deduction may be available to you. If
so, your tax statement
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<PAGE>
will show more taxable income or capital gain than was actually distributed
by the Fund but will also show the amount of the available offsetting credit
or deduction.
If the Fund is eligible to do so, it intends to elect to permit its
shareholders to take a credit (or a deduction) for the Fund's share of
foreign income taxes paid by the Portfolio. If the Fund does make such an
election, its shareholders would include as gross income in their Federal
income tax returns both (i) distributions received from the Fund and (ii) the
amount that the Fund advises is their pro rata portion of foreign income
taxes paid with respect to or withheld from, dividends and interest paid to
the Portfolio from its foreign investments. Shareholders then would be
entitled, subject to certain limitations, to take a foreign tax credit
against their federal income tax liability for the amount of such foreign
taxes or else to deduct such foreign taxes as an itemized deduction from
gross income.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting the Fund and its shareholders; see the SAI
for further information. Shareholders should consult their own tax advisors
as to the tax consequences of their ownership of Shares.
THE PORTFOLIO
The Portfolio is not required to pay federal income tax because it is
classified as a partnership for federal income tax purposes. All interest,
dividends, gains and losses 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 as a Delaware business trust on January 9, 1996. 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 such 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 portfolios, each of which has
separate investment objectives and policies.
The Fund currently consists of two classes of Shares. Each share of the
Fund is entitled to participate equally in dividends and other distributions
and the proceeds of any liquidation except that, due to the differing
expenses borne by the classes, dividends and liquidation proceeds for each
class will likely differ.
Shares are fully paid and non-assessable, and have no pre-emptive rights.
Shareholders have non-cumulative voting rights, which means that the holders
of more than 50% of the shares voting for the election of Trustees can elect
100% of the Trustees if they choose to do so. A shareholder is entitled to
one vote for each full share held (and a fractional vote for each fractional
share held). 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 con-
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sider 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, and those shareholders may be able to greatly affect (if
not determine) the outcome of a shareholder vote. As of February 15, 1997,
the Robert Wood Johnson Foundation may be deemed to control the Fund for
purposes of the 1940 Act.
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 distributions at NAV. Cumulative total returns are
calculated similarly except that the total return is aggregated over the
relevant period instead of annualized.
Performance quotations are calculated separately for each class of shares
of the Fund. The Fund may also be compared to various unmanaged securities
indices, groups of mutual funds tracked by mutual fund ratings services, or
other general economic indicators. Unmanaged indices may assume the
reinvestment of dividends but do not reflect deductions for administrative
and management costs and expenses.
Performance information represents only past performance and does not
necessarily indicate future results. For a description of the methods used to
determine total return and other performance measures for the Fund, see the
SAI.
CUSTODIAN AND TRANSFER AGENT
The Chase Manhattan Bank, 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 Emerging Markets Fund
Institutional Portfolio
P.O. Box 446
Portland, Maine 04112
Information about specific shareholder accounts may be obtained from the
Transfer Agent by calling (800) 344-8332.
SERVICE ORGANIZATIONS
The Glass-Steagall Act and other applicable laws and regulations provide
that banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks
from performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or
interpretations of such laws, as well as changes in either Federal or state
regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, could prevent a bank Service Organization from
continuing to perform all or part of its servicing activities. If a bank were
prohibited from so acting, its shareholder clients would be permitted to
remain shareholders of the Fund and alternative means for continuing the
servicing of such shareholders would be sought. It is not expected that
shareholders would suffer any adverse financial consequences as a result of
any of these occurrences.
FUND STRUCTURE
CLASSES OF SHARES. The Fund has two classes of shares, Investor Shares
and Advisor Shares. Advisor Shares are offered by a separate prospectus to
individual investors, in most cases through Service Organizations. Advisor
Shares incur more expenses than Investor Shares. Except for certain
26
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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 the same
investment objective and substantially similar policies as the Fund.
Accordingly, the Portfolio directly acquires its own securities and the Fund
acquires an indirect interest in those securities. The Portfolio is a
separate series of Schroder Core, a business trust organized under the laws
of the State of Delaware in 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, the Fund is the
only institutional investor in the Portfolio. The Portfolio may permit other
investment companies or institutional investors to invest in it. All other
investors in the Portfolio will invest on the same terms and conditions as
the Fund and will pay a proportionate share of the Portfolio's expenses.
The Portfolio normally will not hold meetings of investors except as
required by the 1940 Act. Each investor in the Portfolio will be entitled to
vote in proportion to its relative beneficial interest in the Portfolio. On
most issues subject to a vote of investors, as required by the 1940 Act and
other applicable law, the Fund will solicit proxies from its shareholders and
will vote its interest in the Portfolio in proportion to the votes cast by
its shareholders. If there are other investors in the Portfolio, there can be
no assurance that any issue that receives a majority of the votes cast by
Fund shareholders will receive a majority of votes cast by all investors in
the Portfolio; indeed, if other investors hold a majority interest in the
Portfolio, they could have voting control of the Portfolio.
The Portfolio will not sell its shares directly to members of the general
public. Another investor in the Portfolio, such as an investment company,
that might sell its shares to members of the general public would not be
required to sell its shares at the same public offering price as the Fund and
could have different advisory and other fees and expenses than the Fund.
Therefore, Fund shareholders may have different returns than shareholders in
another investment company that invests exclusively in the Portfolio. There
is currently no such other investment company that offers its shares to
members of the general public. Information regarding any such funds in the
future will be available from Schroder Core by calling (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, under federal securities law,
Schroder Core may be liable for misstatements or omissions of a material fact
in any proxy soliciting material of a publicly offered investor in Schroder
Core, including the Fund. 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.
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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 and other offering documents and proxy
materials of investors in Schroder Core, its liability is similarly limited
to information about and supplied by it.
CERTAIN RISKS OF INVESTING IN THE PORTFOLIO. The Fund's investment in the
Portfolio may be affected by the actions of other large investors in the
Portfolio, if any. For example, if the Portfolio had a large investor other
than the Fund that redeemed its interest in the Portfolio, the Portfolio's
remaining investors (including the Fund) might, as a result, experience
higher pro rata operating expenses, thereby producing lower returns.
The Fund may withdraw its entire investment from the Portfolio at any
time, if the Trust Board determines that it is in the best interests of the
Fund and its shareholders to do so. The Fund might withdraw, for example, if
there were other investors in the Portfolio with power to, and who did by a
vote of the shareholders of all investors (including the Fund), change the
investment objective or policies of the Portfolio in a manner not acceptable
to the Trust Board. A withdrawal could result in a distribution in kind of
portfolio securities (as opposed to a cash distribution) by the Portfolio.
That distribution could result in a less diversified portfolio of investments
for the Fund and could affect adversely the liquidity of the Fund's
portfolio. If the Fund decided to convert those securities to cash, it 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, if the Board decided not to
permit SCMI to manage the Fund's assets, could have a significant impact on
shareholders of the Fund.
Each investor in the Portfolio, including the Fund, may be liable for all
obligations of the Portfolio. The risk to an investor in the Portfolio of
incurring financial loss on account of such liability, however, is limited to
circumstances in which the Portfolio is unable to meet its obligations, the
occurrence of which SCMI considers to be quite remote. Upon liquidation of
the Portfolio, investors would be entitled to share pro rata in the net
assets of the Portfolio available for distribution to investors.
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INVESTMENT ADVISER
Schroder Capital Management International Inc.
787 Seventh Avenue
New York, New York 10019
ADMINISTRATOR & DISTRIBUTOR
Schroder Fund Advisors Inc.
787 Seventh Avenue
New York, New York 10019
SUB-ADMINISTRATOR
Forum Administrative Services, Limited Liability Company
Two Portland Square
Portland, Maine 04101
CUSTODIAN
The Chase Manhattan Bank, N.A.
Global Custody Division
Woolgate House, Coleman Street
London EC2P 2HD, United Kingdom
TRANSFER AND DIVIDEND DISBURSING AGENT
Forum Financial Corp.
P.O. Box 446
Portland, Maine 04112
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand, L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Table of Contents
PROSPECTUS SUMMARY.................... 3
EXPENSES OF INVESTING IN THE FUND..... 4
Fee Table............................. 4
Example............................... 4
FINANCIAL HIGHLIGHTS.................. 5
INVESTMENT OBJECTIVE.................. 6
INVESTMENT POLICIES................... 6
RISK CONSIDERATIONS................... 12
MANAGEMENT OF THE FUND................ 17
Boards of Trustees.................... 17
Investment Adviser and Portfolio
Manager.............................. 17
Administrative Services............... 18
Expenses.............................. 18
Portfolio Transactions................ 19
Code of Ethics........................ 19
INVESTMENT IN THE FUND................ 19
Purchase of Shares.................... 19
Retirement Plans and Individual
Retirement
Accounts............................. 21
Statement of Intention................ 21
Exchanges............................. 21
Redemption of Shares.................. 21
Net Asset Value....................... 23
DIVIDENDS, DISTRIBUTIONS AND TAXES.... 23
The Fund.............................. 23
The Portfolio......................... 25
OTHER INFORMATION..................... 25
Capitalization and Voting............. 25
Reports............................... 26
Performance........................... 26
Custodian and Transfer Agent.......... 26
Shareholder Inquiries................. 26
Service Organizations................. 26
Fund Structure........................ 26
[LOGO]
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SCHRODER
EMERGING
MARKETS FUND
INSTITUTIONAL
PORTFOLIO
INVESTOR SHARES
PROSPECTUS
MARCH 1, 1997
SCHRODER CAPITAL FUNDS (DELAWARE)