As filed with the Securities and Exchange Commission on February 28, 1997
File No. 2-34215
File No. 811-1911
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 60
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 41
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SCHRODER CAPITAL FUNDS (DELAWARE)
(formerly Schroder Capital Funds, Inc.)
(Exact Name of Registrant as Specified in Charter)
Two Portland Square, Portland, Maine 04101
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: 207-879-1900
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Catherine S. Wooledge, Esq.
Forum Financial Services, Inc.
Two Portland Square, Portland, Maine 04101
(Name and Address of Agent for Service)
Copies of Communications to:
Scott M. Shepard, Esq.
Jacobs Persinger & Parker
77 Water Street, New York, New York 10005
Alexandra Poe, Esq.
Schroder Capital Management International Inc.
787 seventh Avenue, 34th Floor
New York, New York 10019
It is proposed that this filing will become effective:
X immediately upon filing pursuant to Rule 485, paragraph (b)
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___ on [ ] pursuant to Rule 485, paragraph (b)
___ 60 days after filing pursuant to Rule 485, paragraph (a)(i)
___ on _________ pursuant to Rule 485, paragraph (a)(i)
___ 75 days after filing pursuant to Rule 485, paragraph (a)(ii)
___ on [ ] pursuant to Rule 485, paragraph (a)(ii)
___ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant has registered an indefinite number of shares of beneficial
interest under the Securities Act of 1933 pursuant to Rule 24f-2 under the
Investment Company Act of 1940. Accordingly, no fee is payable herewith.
Registrant filed a Rule 24f-2 Notice for its various portfolios with a October
31 fiscal year end on December 27, 1996. Schroder International Fund, Schroder
Emerging Markets Fund Institutional Portfolio, Schroder U.S. Smaller Companies
Fund and Schroder International Smaller Companies Fund of Registrant are
structured as master-feeder funds. This amendment includes a manually executed
signature page for the master funds.
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 404(c))
PART A
(Prospectuses offering Advisor Shares and Investor Shares of Schroder
International Fund, Schroder Emerging Markets Fund Institutional
Portfolio, Schroder U.S. Smaller Companies Fund and Schroder
U.S. Equity Fund)
Form N-1A Location in Prospectus
Item No. (Caption) (Caption)
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1. Cover Page Cover Page
2. Synopsis Prospectus Summary
3. Condensed Financial Information Not Applicable
4. General Description of Investment Objective and
Registrant Policies; Additional
Investment Policies and Risk
Considerations
5. Management of the Fund Management of the Fund -
Board of Trustees; Investment
Adviser and Portfolio
Manager; Administrative
Services; Distribution Plan &
Shareholder Services Plan;
Expenses; Portfolio
Transactions
5A. Management's Discussion of` Not Applicable
Fund Performance
6. Capital Stock and Other Securities Other Information -
Capitalization and Voting;
Shareholder Inquiries;
Dividends, Other
Distributions and Taxes
7. Purchase of Securities Investment in the Fund -
Purchase of Shares;
Retirement Plans; Individual
Retirement Accounts; Net
Asset Value
8. Redemption or Repurchase Investment in the Fund -
Redemption of Shares; Net
Asset Value
9. Pending Legal Proceedings Not Applicable
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 404(c))
PART A
(All other Prospectuses)
Not Applicable in this Filing
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 404(c))
PART B
(Statements of Additional Information offering Advisor Shares and Investor
Shares of Schroder International Fund, Schroder Emerging Markets Fund
Institutional Portfolio, Schroder U.S. Smaller Companies Fund and
Schroder U.S. Equity Fund)
Location in Statement of
Form N-1A Additional Information
Item No. (Caption) (Caption)
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10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Other Information -
Organization
13. Investment Objectives and Policies Investment Policies;
Investment Restrictions
14. Management of the Fund Management - Officers and
Directors
15. Control Persons and Principal Not Applicable
Holders of Securities
16. Investment Advisory and Management - Investment Other
Services Adviser; Officers
and Trustees; Administrative
Services; Distribution of
Fund Shares; Service
Organizations; Portfolio
Accounting; Fees and
Expenses; Portfolio
Transactions - Investment
Decisions; Brokerage and
Research Services; Other
Information Custodian;
Transfer Agent and Dividend
Disbursing Agent; Legal
Counsel; Independent
Accountants
17. Brokerage Allocation and Portfolio Transactions
Other Practices
18. Capital Stock and Other Securities Other Information -
Capitalization and Voting
19. Purchase, Redemption and Pricing of Determination of Net Asset
Securities Being Offered Value Per Share
20. Tax Status Taxation
21. Underwriters Management - Distribution of
Fund Shares; Fees and
Expenses
22. Calculation of Performance Data Other Information -
Performance Information
23. Financial Statements Not Applicable
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 404(c))
PART B
(All other SAIs)
Not Applicable in this Filing
<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.
Schroders
[GRAPHIC OMITTED]
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.
<PAGE>
MUTUAL FUND SHARES ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE
FDIC, THE FEDERAL RESERVE SYSTEM OR ANY OTHER GOVERNMENT AGENCY. THE SHARES 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.
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<PAGE>
PROSPECTUS
MARCH 1, 1997
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<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 Managers."
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<PAGE>
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.
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<PAGE>
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".
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<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
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<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 expenses reimbursements, Management Fees, Other Expenses
and Total 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
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<PAGE>
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
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<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights are presented below to assist you in evaluating per
share performance of the Fund's 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 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>
Year Year
Year Year Year Year Year Year Year Month Year ended ended
ended ended ended ended ended ended ended ended ended 9/30/88 9/30/87
10/31/96(a) 10/31/95 10/31/94 10/31/93 10/31/92 10/31/91 10/31/90 10/31/89 9/30/89 Unaudited Unaudited
<S> <C> <C> <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 18.02 14.07
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Investment Operations:
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Investment
Income 0.15(b) 0.46 0.18 0.08 0.25 0.25 0.15 0.03 0.20 0.05 (0.07)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Realized
Gain (Loss) 1.74 (0.18) 2.69 5.27 (1.04) (0.25) (0.12) (0.78) 4.44 (2.34) 4.71
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total From Investment
Operations 1.89 0.28 2.87 5.35 (0.79) 0.00 0.03 (0.75) 4.64 (2.29) 4.64
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Distributions
from Net
Investment Income (0.47) -- (0.08) (0.12) (0.23) (0.25) (0.16) 0.00 (0.04) 0.00 (0.02)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Distributions
from Realized
Capital Gain (2.32) (2.54) -- -- (0.05) (1.23) (0.37) 0.00 (0.05) (1.33) (0.67)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions (2.79) (2.54) (0.08) (0.12) (0.28) (1.48) (0.53) 0.00 (0.09) (1.33) (0.69)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value,
End of Period 20.01 20.91 23.17 20.38 15.15 16.22 17.70 18.20 18.95 14.40 18.02
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Return 10.05% 2.08% 14.10% 35.54% (4.93%) 0.45% (0.07%) (4.01%) 32.2% (0.12%) 34.8%
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Ratio/Supplementary Data:
Net Assets, End
of Period (Thousand) 202,735 212,330 500,504 320,550 159,556 108,398 62,438 49,740 48,655 29,917 32,553
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% 1.30% 1.64%
Ratio of Net Investment
Income to Average
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% 0.38% (0.42%)
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 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 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) 72.25% 86.19% 84.97%
Average Brokerage
Commissions (e) $0.0256 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
(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
the 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.
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<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 substantially similar 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 EAFE(R) Index, which is a market
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<PAGE>
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 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.
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<PAGE>
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
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<PAGE>
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."
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 economic instability, adverse movements in foreign exchange rates,
the imposition or tightening of exchange controls or other limitations on
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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
projectionist 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 have 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.
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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 such 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
X Schroder Group Assets Under Management Worldwide
As of December 31, 1996 -- Over $130 Billion
[GRAPHIC OMITTED]
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 MANAGE OVER $24 BILLION.
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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."
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
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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 0.10% of the Portfolio's
average daily net assets. Forum is compensated at the annual rate of 0.075% of
the Portfolio'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 0.10% of the
Fund's average daily net assets and pays Forum a monthly fee at the annual rate
of 0.075% of the Fund's average daily net assets.
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<PAGE>
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; SCMI will
reimburse the Fund for four-fifths of the amount required and Schroder Advisors
will reimburse the Fund for the remaining one-fifth. Forum may voluntarily waive
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 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 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
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<PAGE>
"Transfer Agent"). See "Other Information -- Shareholder Inquiries". Investments
may also be made through financial institutions and other 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 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" 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
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
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<PAGE>
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 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.
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.
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<PAGE>
(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 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),
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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
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<PAGE>
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 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.
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
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<PAGE>
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 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
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Capitalization and Voting
The Trust was organized as a Maryland corporation called Schroder Capital
Funds, Inc. on July 30, 1969, and was 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 preemptive rights.
Shareholders have non-cumulative voting rights, which means that the holders of
more than 50% of the shares voting for the election of Trustees can elect 100%
of the Trustees if they choose to do so. A shareholder is entitled to one vote
for each full share held (and a fractional vote for each fractional share held).
Each share of the Fund has equal voting rights, except that if a matter affects
only the shareholders of a particular class only shareholders of that class
shall have a right to vote. On Trust matters requiring shareholder approval,
shareholders of the Trust are entitled to vote only with respect to matters that
affect the interests of the Fund or the class of shares they hold, except as
otherwise required by applicable law.
There will normally be no meetings of shareholders to elect Trustees
unless and until such time as less than a majority of the Trustees holding
office have been elected by shareholders. However, the holders of not less than
a majority of the outstanding shares of the Trust may remove any person serving
as a Trustee and the Trust Board will call a special meeting of shareholders to
consider removal of one or more Trustees if requested in writing to do so by the
holders of not less than 10% of the outstanding shares of the Trust.
From time to time, certain shareholders may own a large percentage of the
shares of the Fund. Accordingly, those shareholders may be able to greatly
affect (if not determine) the outcome of a shareholder vote.
Reports
The Trust sends each Fund shareholder a semi-annual report and an audited
annual report containing the Fund's financial statements.
Performance
The Fund may include quotations of its average annual total return,
cumulative total return and other performance measures in advertisements or
reports to shareholders or prospective investors. Average annual total return of
a class of shares is based upon the overall dollar or percentage change in value
of a hypothetical investment each year over specified periods. Average annual
total returns reflect the deduction of a proportional share of a Fund's expenses
(on an annual basis) and assumes investment and reinvestment of all dividends
and 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
- 28 -
<PAGE>
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
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
- 29 -
<PAGE>
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
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
- 30 -
<PAGE>
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.
- 31 -
<PAGE>
Investment Adviser
Schroder Capital Management International Inc.
787 Seventh Avenue
New York, New York 10019
Administrator & Distributor
Schroder Fund Advisors Inc.
787 Seventh Avenue
New York, New York 10019
Sub-Administrator
Forum 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
- 32 -
<PAGE>
Table of Contents
PROSPECTUS SUMMARY..........................................................
EXPENSES OF INVESTING
IN THE FUND.............................................................
Fee Table...................................................................
Example.....................................................................
FINANCIAL HIGHLIGHTS........................................................
INVESTMENT OBJECTIVE........................................................
INVESTMENT POLICIES ........................................................
RISK CONSIDERATIONS.........................................................
MANAGEMENT OF THE FUND......................................................
Boards of Trustees..........................................................
Investment Adviser and Portfolio Managers...................................
Administrative Services.....................................................
Expenses....................................................................
Portfolio Transactions......................................................
Code of Ethics..............................................................
INVESTMENT IN THE FUND......................................................
Purchase of Shares..........................................................
Retirement Plans and Individual
Retirement Accounts.......................................................
Statement of Intention......................................................
Exchanges...................................................................
Redemption of Shares........................................................
Net Asset Value.............................................................
DIVIDENDS, DISTRIBUTIONS
AND TAXES.................................................................
The Fund....................................................................
The Portfolio...............................................................
OTHER INFORMATION...........................................................
Capitalization and Voting...................................................
Reports.....................................................................
Performance.................................................................
Custodian and Transfer Agent................................................
Shareholder Inquiries.......................................................
Service Organizations.......................................................
Fund Structure..............................................................
<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.
Schroders
[GRAPHIC OMITTED]
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. 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.
<PAGE>
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.
- 2 -
<PAGE>
PROSPECTUS
MARCH 1, 1997
- 3 -
<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 Managers."
- 4 -
<PAGE>
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.
- 5 -
<PAGE>
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 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".
- 6 -
<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
- 7 -
<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 waivers) (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 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 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 fee
waivers and expenses reimbursements, Management Fees, Other Expenses
and Total Operating Expenses would be 0.68%, 0.61%, and 1.29%,
respectively.
(3) 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%.
- 8 -
<PAGE>
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 assumes 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.
- 9 -
<PAGE>
1 YEAR .......................... $13
3 YEARS ......................... $39
5 YEARS ......................... $68
10 YEARS ......................... $150
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>
Year Year Year Year Year Year Year Month Year
ended ended ended ended ended ended ended ended ended ended ended
10/31/96(a) 10/31/95 10/31/94 10/31/93 10/31/92 10/31/91 10/31/90 10/31/89 9/30/89 9/30/88 9/30/87
-------------------- ----------------- -------- -------- -------- -------- ------- ------- -------
Unaudited Unaudited
<S> <C> <C> <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 18.02 14.07
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Investment
Operations:
Net Investment
Income 0.15(b) 0.46 0.18 0.08 0.25 0.25 0.15 0.03 0.20 0.05 (0.07)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Realized
Gain (Loss) 1.74 (0.18) 2.69 5.27 (1.04) (0.25) (0.12) (0.78) 4.44 (2.34) 4.71
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total From
Investment
Operations 1.89 0.28 2.87 5.35 (0.79) 0.00 0.03 (0.75) 4.64 (2.29) 4.64
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Distributions from
Net Investment
Income (0.47) -- (0.08) (0.12) (0.23) (0.25) (0.16) 0.00 (0.04) 0.00 (0.02)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Distributions from
Realized Capital
Gain (2.32) (2.54) -- -- (0.05) (1.23) (0.37) 0.00 (0.05) (1.33) (0.67)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions (2.79) (2.54) (0.08) (0.12) (0.28) (1.48) (0.53) 0.00 (0.09) (1.33) (0.69)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value,
End of Period 20.01 20.91 23.17 20.38 15.15 16.22 17.70 18.20 18.95 14.40 18.02
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Return 10.05% 2.08% 14.10% 35.54% (4.93%) 0.45% (0.07%) (4.01%) 32.2% (0.12%) 34.8%
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
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 29,917 32,553
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% 1.30% 1.64%
Ratio of Net
Investment Income to
</TABLE>
- 10 -
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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% 0.38% (0.42%)
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 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 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) 72.25% 86.19% 84.97%
Average Brokerage
Commissions (e) $0.0256 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
(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.
INVESTMENT OBJECTIVE
- 11 -
<PAGE>
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 substantially similar 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 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".
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Countries in which the Portfolio may invest include, but are not limited
to, countries listed in the Morgan Stanley Capital International EAFE(R)
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 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.
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<PAGE>
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.
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<PAGE>
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. 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.
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<PAGE>
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 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
projectionist measures imposed or negotiated by the countries with which they
trade.
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<PAGE>
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
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<PAGE>
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 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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<PAGE>
MANAGEMENT OF THE FUND
X Schroder Group Assets Under Management Worldwide
As of December 31, 1996 -- Over $130 Billion
[GRAPHIC OMITTED]
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 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.
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.
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<PAGE>
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 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 contract between SCMI and the
Trust with respect to the Fund is the same in all material respects as the
investment advisory agreement between SCMI and Schroder Core with respect to the
Portfolio (except as to the parties, the fees payable thereunder, 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.
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<PAGE>
Schroder Advisors is compensated at the annual rate of 0.20% of the Fund's
average daily net assets. Forum is compensated at the annual rate of 0.075% of
the Fund's average daily net assets.
Schroder Advisors and Forum provide similar services to the Portfolio, for
which the Portfolio pays Schroder Advisors at an annual rate of 0.15% 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 Services 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
Advisor Shares of the Fund. Schroder Advisors, in turn, may use these payments
to compensate others for services provided, or to reimburse othrs 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.
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 services
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
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<PAGE>
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 to Schroder
Advisors 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; SCMI will reimburse the Fund for
four-fifths of the amount required and Schroder Advisors will reimburse the Fund
for the remaining one-fifth. Forum voluntarily may waive 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
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<PAGE>
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 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:
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<PAGE>
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" 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
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.
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<PAGE>
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-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.
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<PAGE>
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 -- 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
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<PAGE>
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 have to pay federal income tax on that
part of its income that is distributed to shareholders. The Fund intends to
distribute substantially all of its income 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.
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<PAGE>
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 12b-1 fees and other
compensation payable to Service Organizations for distribution assistance and
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.
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.
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<PAGE>
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.
In an effort to adhere to certain tax requirements, the Fund may have to
limit its investment activity in some types of instruments.
If the Fund's dividends exceed its taxable income in any year, all or a
portion of the Fund's dividends may be treated as a return of capital to
shareholders for tax purposes. Any return of capital will reduce the cost basis
of your shares, which will result in a higher reported capital gain or a lower
reported capital loss when you sell your shares. Shareholders will be notified
by the Trust if a distribution included a return of capital.
Effect of Foreign Taxes. Foreign governments may impose taxes on the
Portfolio and its investments, which generally reduce the Fund's income.
However, an offsetting tax credit or deduction may be available to you. If so,
your tax statement will show more taxable income or capital gain than was
actually distributed by the Fund but will also show the amount of the available
offsetting credit or deduction.
If the Fund is eligible to do so, it intends to elect to permit its
shareholders to take a credit (or a deduction) for the Fund's share of foreign
income taxes paid by the Portfolio. If the Fund does make such an election, its
shareholders would include as gross income in their Federal income tax returns
both (i) distributions received from the Fund and (ii) the amount that the Fund
advises is their pro rata portion of foreign income taxes paid with respect to
or withheld from dividends and interest paid to the Portfolio from its foreign
investments. Shareholders then would be entitled, subject to certain
limitations, to take a foreign tax credit against their Federal income tax
liability for the amount of such foreign taxes or else to deduct such foreign
taxes as an itemized deduction from gross income.
The 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 called Schroder Capital
Funds, Inc. on July 30, 1969, and was reorganized as a Delaware business trust
on January 9, 1996. The Trust has
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<PAGE>
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 preemptive rights. Shareholders have non-cumulative voting rights, which
means that the holders of more than 50% of the shares voting for the election of
Trustees can elect 100% of the Trustees if they choose to do so. A shareholder
is entitled to one vote for each full share held (and a fractional vote for each
fractional share held). Each share of the Fund has equal voting rights, except
that if a matter affects only the shareholders of a particular class only
shareholders of that class shall have a right to vote. On Trust matters
requiring shareholder approval, shareholders of the Trust are entitled to vote
only with respect to matters that affect the interests of the Fund or the class
of shares they hold, except as otherwise required by applicable law.
There will normally be no meetings of shareholders to elect Trustees
unless and until such time as less than a majority of the Trustees holding
office have been elected by shareholders. However, the holders of not less than
a majority of the outstanding shares of the Trust may remove any person serving
as a Trustee and the Trust Board will call a special meeting of shareholders to
consider removal of one or more Trustees if requested in writing to do so by the
holders of not less than 10% of the outstanding shares of the Trust.
From time to time, certain shareholders may own a large percentage of the shares
of the Fund. Accordingly, those shareholders may be able to greatly affect (if
not determine) the outcome of a shareholder vote.
Reports
The Trust sends 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
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<PAGE>
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
consequences as a result of any of these occurrences.
- 31 -
<PAGE>
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 Forum Financial Corp. at (800) 730-2932.
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<PAGE>
Under federal securities law, any person or entity that signs a
registration statement may be liable for a misstatement or omission of a
material fact in the registration statement. Schroder Core, its Trustees and
certain of its officers are required to sign the registration statement of the
Trust and may be required to sign the registration statements of certain other
investors in the Portfolio. In addition, under federal securities law, Schroder
Core may be liable for misstatements or omissions of a material fact in any
proxy soliciting material of an investor in Schroder Core, including the Fund.
Each investor in the Portfolio, including the Trust, will indemnify Schroder
Core and its Trustees and officers ("Schroder Core Indemnitees") against certain
claims.
Indemnified claims are those brought against 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
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<PAGE>
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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<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
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<PAGE>
Table of Contents
PROSPECTUS SUMMARY........................................................
EXPENSES OF INVESTING
IN THE FUND...........................................................
Fee Table.................................................................
Example...................................................................
FINANCIAL HIGHLIGHTS......................................................
INVESTMENT OBJECTIVE......................................................
INVESTMENT POLICIES.......................................................
RISK CONSIDERATIONS.......................................................
MANAGEMENT OF THE FUND....................................................
Boards of Trustees........................................................
Investment Adviser and Portfolio Managers.................................
Administrative Services...................................................
Distribution Plan and Shareholder
Services Plan...........................................................
Expenses..................................................................
Portfolio Transactions....................................................
Code of Ethics............................................................
INVESTMENT IN THE FUND....................................................
Purchase of Shares........................................................
Retirement Plans and Individual
Retirement Accounts.....................................................
Exchanges.................................................................
Redemption of Shares......................................................
Net Asset Value...........................................................
DIVIDENDS, DISTRIBUTIONS
AND TAXES...............................................................
The Fund..................................................................
The Portfolio.............................................................
OTHER INFORMATION.........................................................
Capitalization and Voting.................................................
Reports...................................................................
Performance...............................................................
Custodian and Transfer Agent..............................................
Shareholder Inquiries.....................................................
Service Organizations.....................................................
Fund Structure............................................................
<PAGE>
SCHRODER EMERGING MARKETS FUND
INSTITUTIONAL PORTFOLIO
Investor Shares
This fund seeks to achieve long-term capital appreciation 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.
Schroders
[GRAPHIC OMITTED]
Your Window On The World
Schroder Emerging Markets 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 Emerging Markets Fund Institutional
Portfolio (the "Portfolio"), a separately managed series of Schroder Capital
Funds ("Schroder Core"), a non-diversified open-end management
<PAGE>
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.
- 2 -
<PAGE>
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
- 3 -
<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.
- 4 -
<PAGE>
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."
- 5 -
<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
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.
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%
(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) 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.
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<PAGE>
(3) Management Fees reflect the fees paid by the Portfolio and the Fund
for investment advisory and administrative services.
(4) Without fee waivers and expense reimbursements, Management Fees,
Other Expenses and Total Operating Expenses would be 1.25%, 0.45%,
and 1.70%, respectively.
(5) 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 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 Operating Expenses would be 1.10%
and 1.60%, respectively.
- 7 -
<PAGE>
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.
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<PAGE>
1 Year
Assuming redemptions ........................... $ 25
Assuming no redemptions ........................ $ 20
3 Years
Assuming redemptions ........................... $ 56
Assuming no redemptions ........................ $ 51
5 Years
Assuming redemptions ........................... $ 90
Assuming no redemptions ........................ $84
10 Years
Assuming redemptions .......................... $185
Assuming no redemptions ....................... $178
- 9 -
<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.
- 10 -
<PAGE>
<TABLE>
<CAPTION>
For the Year Ended March 31, 1995 (a)
October 31, Through
1996 (b) October 31, 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) --
------ ------
Distributions from Realized Capital Gain
Total Distributions
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 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.
- 11 -
<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 will be 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 substantially similar 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 Fund and the
Portfolio that are designated as fundamental, may not be changed without
approval of the holders of a majority of the outstanding voting securities of
the 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.
- 12 -
<PAGE>
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" below). 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" below.)
In recent years, many emerging market countries have begun programs of economic
reform: removing import tariffs, dismantling trade barriers, deregulating
foreign investment, privatizing state-owned industries, permitting the value of
their currencies to float against the dollar and other major currencies, and
generally reducing the level of state intervention in industry and commerce.
Important intra-regional economic integration also holds the promise of greater
trade and growth. At the same time, significant progress has been made in
restructuring the heavy external debt burden that certain emerging market
countries accumulated during the 1970s and 1980s. While there is no assurance
that these trends will continue, the Portfolio's investment adviser will seek
out attractive investment opportunities in these countries. The Portfolio may
acquire emerging market securities that are not denominated in emerging market
currency.
"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.
- 13 -
<PAGE>
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 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
- 14 -
<PAGE>
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).
- 15 -
<PAGE>
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 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
- 16 -
<PAGE>
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 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
- 17 -
<PAGE>
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
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
- 18 -
<PAGE>
securities are on loan, the borrower will pay the Portfolio any accrued income
on those securities, and the Portfolio may invest the cash collateral and earn
income or receive an agreed upon fee from a borrower that has delivered cash
equivalent collateral. Cash collateral received by the Portfolio will be
invested in U.S. Government securities and liquid high grade debt obligations.
The value of securities loaned will be marked to market daily. Portfolio
securities purchased with cash collateral are subject to possible depreciation.
Loans of securities by the Portfolio will be subject to termination at the
Portfolio's or the borrower's option. The Portfolio may pay reasonable
negotiated fees in connection with loaned securities, so long as such fees are
set forth in a written contract and approved by the Schroder Core Board. See
"Loans of Portfolio Securities" in the SAI for further information on securities
loans.
Options and Futures Transactions. Although the Portfolio does not
presently intend to do so, it may (a) write covered call options on portfolio
securities and the U.S. dollar and emerging market currencies, without limit;
(b) write covered put options on portfolio securities and the U.S. dollar and
emerging market currencies with the limitation that the aggregate value of the
obligations underlying the puts determined as of the date the options are sold
will not exceed 50% of the Portfolio's net assets; (c) purchase call and put
options in amounts 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 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
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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.
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.
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<PAGE>
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. 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
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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 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.
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<PAGE>
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.
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.
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<PAGE>
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.
MANAGEMENT OF THE FUND
X Schroder Group Assets Under Management Worldwide
As of December 31, 1996 -- Over $130 Billion
[GRAPHIC OMITTED]
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 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."
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<PAGE>
Investment Adviser and Portfolio Managers
As investment adviser to the Portfolio, SCMI manages the Portfolio and
continuously reviews, supervises and administers its investments. SCMI is
responsible for making decisions relating to the Portfolio's investments and
placing purchase and sale orders regarding such investments with brokers or
dealers it selects. For these services, the Investment Advisory Agreement
between SCMI and Schroder Core provides that SCMI will receive 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.
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
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<PAGE>
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 0.05% of the Portfolio's
average daily net assets. Forum is compensated at the annual rate of 0.05% of
the Portfolio'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 0.075% and pays
Forum a monthly fee at the annual rate of 0.075% of the Portfolio's average
daily net assets.
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<PAGE>
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 1.60% 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; SCMI will
reimburse the Fund for four-fifths of the amount required and Schroder Advisors
will reimburse the Fund for the remaining one-fifth. Forum may voluntarily waive
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
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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 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 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.
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<PAGE>
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.
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.
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<PAGE>
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 $2,500. 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 maintain the respective minimum account balance in each
fund in which they own shares. Exchanges between each Fund are at net asset
value.
Federal income tax purposes an exchange is considered to be a sale of
shares for 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 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.
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<PAGE>
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 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
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<PAGE>
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 companies. By
complying therewith, the Fund will not have to pay federal income tax on that
part of its income that is distributed to shareholders. The Fund intends to
distribute substantially all of its income and therefore, intends not to be
subject to
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<PAGE>
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 12b-1 fees and other
compensation payable to Service Organizations for distribution assistance and
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.
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.
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<PAGE>
In an effort to adhere to certain tax requirements, the Fund may have to
limit its investment activity in some types of instruments.
If the Fund's dividends exceed its taxable income in any year, all or a
portion of the Fund's dividends may be treated as a return of capital to
shareholders for tax purposes. Any return of capital will reduce the cost basis
of your shares, which will result in a higher reported capital gain or a lower
reported capital loss when you sell your shares. Shareholders will be notified
by the Trust if a distribution included a return of capital.
Effect of Foreign Taxes. Foreign governments may impose taxes on the
Portfolio and its investments, which generally reduce the Fund's income.
However, an offsetting tax credit or deduction may be available to you. If so,
your tax statement will show more taxable income or capital gain than was
actually distributed by the Fund but will also show the amount of the available
offsetting credit or deduction.
If the Fund is eligible to do so, it intends to elect to permit its
shareholders to take a credit (or a deduction) for the Fund's share of foreign
income taxes paid by the Portfolio. If the Fund does make such an election, its
shareholders would include as gross income in their Federal income tax returns
both (i) distributions received from the Fund and (ii) the amount that the Fund
advises is their pro rata portion of foreign income taxes paid with respect to
or withheld from, dividends and interest paid to the Portfolio from its foreign
investments. Shareholders then would be entitled, subject to certain
limitations, to take a foreign tax credit against their Federal income tax
liability for the amount of such foreign taxes or else to deduct such foreign
taxes as an itemized deduction from gross income.
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 called Schroder Capital
Funds, Inc. on July 30, 1969, and was 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
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<PAGE>
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 preemptive rights.
Shareholders have non-cumulative voting rights, which means that the holders of
more than 50% of the shares voting for the election of Trustees can elect 100%
of the Trustees if they choose to do so. A shareholder is entitled to one vote
for each full share held (and a fractional vote for each fractional share held).
Each share of the Fund has equal voting rights, except that if a matter affects
only the shareholders of a particular class only shareholders of that class
shall have a right to vote. On Trust matters requiring shareholder approval,
shareholders of the Trust are entitled to vote only with respect to matters that
affect the interests of the Fund or the class of shares they hold, except as
otherwise required by applicable law.
There will normally be no meetings of shareholders to elect Trustees
unless and until such time as less than a majority of the Trustees holding
office have been elected by shareholders. However, the holders of not less than
a majority of the outstanding shares of the Trust may remove any person serving
as a Trustee and the Trust Board will call a special meeting of shareholders to
consider removal of one or more Trustees if requested in writing to do so by the
holders of not less than 10% of the outstanding shares of the Trust.
As of February 15, 1997, the Robert Wood Johnson Foundation may be deemed
to control the Fund for purposes of the 1940 Act. 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.
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.
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<PAGE>
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 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.
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<PAGE>
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 Forum Financial Corp. 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 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
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<PAGE>
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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<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
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<PAGE>
Table of Contents
PROSPECTUS SUMMARY.......................................................
EXPENSES OF INVESTING
IN THE FUND..........................................................
Fee Table................................................................
Example..................................................................
FINANCIAL HIGHLIGHTS.....................................................
INVESTMENT OBJECTIVE.....................................................
INVESTMENT POLICIES......................................................
RISK CONSIDERATIONS......................................................
MANAGEMENT OF THE FUND...................................................
Boards of Trustees.......................................................
Investment Adviser and Portfolio Managers................................
Administrative Services..................................................
Expenses.................................................................
Portfolio Transactions...................................................
Code of Ethics...........................................................
INVESTMENT IN THE FUND...................................................
Purchase of Shares.......................................................
Retirement Plans and Individual
Retirement Accounts....................................................
Statement of Intention...................................................
Exchanges................................................................
Redemption of Shares.....................................................
Net Asset Value..........................................................
DIVIDENDS, DISTRIBUTIONS
AND TAXES..............................................................
The Fund.................................................................
The Portfolio............................................................
OTHER INFORMATION........................................................
Capitalization and Voting................................................
Reports..................................................................
Performance..............................................................
Custodian and Transfer Agent.............................................
Shareholder Inquiries....................................................
Service Organizations....................................................
Fund Structure...........................................................
<PAGE>
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.
Schroders
[GRAPHIC OMITTED]
Your Window On The World
Schroder Emerging Market 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 Emerging Markets Fund Institutional
Portfolio (the "Portfolio"), a separately managed series of Schroder Capital
Funds ("Schroder Core"), a non-diversified open-end management
<PAGE>
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 in 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 the SEC's Internet Web Site
(http://www.sec.gov) or may be obtained without charge from the Trust by writing
to Two Portland Square, Portland, Maine 04101 or by calling 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.
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<PAGE>
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
- 3 -
<PAGE>
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 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 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.
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<PAGE>
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 other 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."
- 5 -
<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
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 have been restated to reflect projected fees, expenses and
waivers for the current fiscal year.
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%
(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) 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.
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<PAGE>
(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 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 fee
waivers, Management Fees and Total Operating Expenses would be 1.10%
and 1.85%, respectively.
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<PAGE>
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.
1 Year
Assuming redemptions ........................... $ 27
Assuming no redemptions ........................ $ 22
3 Years
Assuming redemptions ........................... $ 64
Assuming no redemptions ........................ $ 59
5 Years
Assuming redemptions ........................... $102
Assuming no redemptions ........................ $ 97
10 Years
Assuming redemptions .......................... $211
Assuming no redemptions ....................... $206
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<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. 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>
For the Year Ended March 31, 1995 (a)
October 31, Through
1996 (b) October 31, 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) --
------ ------
Distributions from Realized Capital Gain
Total Distributions
Net Asset Value, End ofPperiod $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>
- 9 -
<PAGE>
- 10 -
<PAGE>
(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.
- 11 -
<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 will be 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 substantially similar 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 Fund and the
Portfolio that are designated as fundamental, may not be changed without
approval of the holders of a majority of the outstanding voting securities of
the 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.
- 12 -
<PAGE>
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" below). 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 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.
- 13 -
<PAGE>
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 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
- 14 -
<PAGE>
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).
- 15 -
<PAGE>
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 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
- 16 -
<PAGE>
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 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.
- 17 -
<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 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
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
- 18 -
<PAGE>
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 and the U.S. dollar and emerging market currencies, without limit;
(b) write covered put options on portfolio securities and the U.S. dollar and
emerging market currencies with the limitation that the aggregate value of the
obligations underlying the puts determined as of the date the options are sold
will not exceed 50% of the Portfolio's net assets; (c) purchase call and put
options in amounts 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 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
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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.
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
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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. 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
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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 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
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<PAGE>
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.
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
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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.
MANAGEMENT OF THE FUND
X Schroder Group Assets Under Management Worldwide
As of December 31, 1996 -- Over $130 Billion
[GRAPHIC OMITTED]
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 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."
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<PAGE>
Investment Adviser and Portfolio Managers
As investment adviser to the Portfolio, SCMI manages the Portfolio and
continuously reviews, supervises and administers its investments. SCMI is
responsible for making decisions relating to the Portfolio's investments and
placing purchase and sale orders regarding such investments with brokers or
dealers it selects. For these services, the Investment Advisory Agreement
between SCMI and Schroder Core provides that SCMI will receive 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.
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
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<PAGE>
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 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 0.075% 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 Services Plan
Schroder Advisors acts as distributor of the Fund's shares. 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, the Trust each month may compensate
Schroder Advisors or others for costs and reimburse expenses incurred in
connection with the distribution of Advisor Shares. This payment is subject to a
limit of an annual rate of 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.
Reimbursement 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 Service
Organizations under the Distribution Plan are calculated by reference to the
average daily net assets of Advisor Shares held by shareholders who have a
brokerage or other service relationship with the Service Organization. The Fund
will not be liable for distribution expenditures made by Schroder Advisors in
any given year in excess of the maximum amount payable under the Distribution
Plan in that year. Costs or expenses in excess of the 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)
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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 to Schroder Advisors is 0.25% of the
Fund's average daily net assets attributable to Advisor Shares.
Payments to Service Organizations under the Shareholder Service Plan are
calculated by reference to the average daily net assets of Advisor Shares held
by shareholders who have a brokerage or other service relationship with the
Service Organization. Some Service Organizations may impose additional or
different conditions on their clients, such as requiring them to invest more
than the minimum investments specified by the Fund or charging a direct fee for
servicing. If imposed, these fees would be in addition to any amounts 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
1.85% 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; SCMI will reimburse the Fund for four-fifths of the
amount required and Schroder Advisors will reimburse the Fund for the remaining
one-fifth. Forum may voluntarily waive 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.
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Although the Portfolio does not currently engage in directed brokerage
arrangements to pay expenses, it may do so in the future. These arrangements,
(whereby brokers executing the Portfolio's portfolio transactions 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 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 $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,
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<PAGE>
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.
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
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<PAGE>
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.
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 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
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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.
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
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<PAGE>
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 have to pay federal income tax on that
part of its income that is distributed to shareholders. The Fund intends to
distribute substantially all of its income 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 12b-1 fees and other
compensation payable to Service Organizations for distribution assistance and
shareholder servicing for the Advisor Shares.
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<PAGE>
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.
A redemption of Shares may result in taxable gain or loss to the redeeming
shareholder, depending on whether the redemption proceeds are more or less than
the shareholder's basis in the redeemed Shares. If Shares are redeemed at a loss
after being held for six months or less, the loss will be treated as a
long-term, rather than a short-term, capital loss to the extent of any capital
gain distributions received on those Shares.
The Fund must withhold 31% from dividends, capital gain distributions and
redemption proceeds payable to any individuals and certain other noncorporate
shareholders who do not furnish the Fund with a correct taxpayer identification
number. Withholding at that rate also is required from dividends and capital
gain distributions payable to such shareholders who otherwise are subject to
backup withholding. Depending on the residence of a shareholder for tax
purposes, distributions from the Fund may also be subject to state and local
taxes, including withholding taxes.
In an effort to adhere to certain tax requirements, the Fund may have to
limit its investment activity in some types of instruments.
If the Fund's dividends exceed its taxable income in any year, all or a
portion of the Fund's dividends may be treated as a return of capital to
shareholders for tax purposes. Any return of capital will reduce the cost basis
of your shares, which will result in a higher reported capital gain or a lower
reported capital loss when you sell your shares. Shareholders will be notified
by the Trust if a distribution included a return of capital.
Effect of Foreign Taxes. Foreign governments may impose taxes on the
Portfolio and its investments, which generally reduce the Fund's income.
However, an offsetting tax credit or deduction may be available to you. If so,
your tax statement will show more taxable income or capital gain than was
actually distributed by the Fund but will also show the amount of the available
offsetting credit or deduction.
If the Fund is eligible to do so, it intends to elect to permit its
shareholders to take a credit (or a deduction) for the Fund's share of foreign
income taxes paid by the Portfolio. If the Fund does make such an election, its
shareholders would include as gross income in their Federal income tax returns
both (i) distributions received from the Fund and (ii) the amount that the Fund
advises is their pro rata portion of foreign income taxes paid with respect to
or withheld from, dividends and interest paid to the Portfolio from its foreign
investments. Shareholders then would be entitled, subject to certain
limitations, to take a foreign tax credit against their Federal income tax
liability for the amount of such foreign taxes or else to deduct such foreign
taxes as an itemized deduction from gross income.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting the Fund and its shareholders; see the SAI
for further information. Shareholders should consult their own tax advisors as
to the tax consequences of their ownership of Shares.
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<PAGE>
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 called Schroder Capital
Funds, Inc. on July 30, 1969, and was 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 three 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 preemptive rights.
Shareholders have non-cumulative voting rights, which means that the holders of
more than 50% of the shares voting for the election of Trustees can elect 100%
of the Trustees if they choose to do so. A shareholder is entitled to one vote
for each full share held (and a fractional vote for each fractional share held).
Each share of the Fund has equal voting rights, except that if a matter affects
only the shareholders of a particular class only shareholders of that class
shall have a right to vote. On Trust matters requiring shareholder approval,
shareholders of the Trust are entitled to vote only with respect to matters that
affect the interests of the Fund or the class of shares they hold, except as
otherwise required by applicable law.
There will normally be no meetings of shareholders to elect Trustees
unless and until such time as less than a majority of the Trustees holding
office have been elected by shareholders. However, the holders of not less than
a majority of the outstanding shares of the Trust may remove any person serving
as a Trustee and the Trust Board will call a special meeting of shareholders to
consider removal of one or more Trustees if requested in writing to do so by the
holders of not less than 10% of the outstanding shares of the Trust.
As of February 15, 1997, the Robert Wood Johnson Foundation may be deemed
to
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<PAGE>
control the Fund for purposes of the 1940 Act. 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.
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.
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<PAGE>
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 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
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<PAGE>
Portfolio, such as an investment company, that might sell its shares to members
of the general public would not be required to sell its shares at the same
public offering price as the Fund and could have different advisory and other
fees and expenses than the Fund. Therefore, Fund shareholders may have different
returns than shareholders in another investment company that invests exclusively
in the Portfolio. There is currently no such other investment company that
offers its shares to members of the general public. Information regarding any
such funds in the future will be available from Schroder Core by calling Forum
Financial Corp. at (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. 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.
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<PAGE>
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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<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
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<PAGE>
Table of Contents
PROSPECTUS SUMMARY........................................................
EXPENSES OF INVESTING
IN THE FUND...........................................................
Fee Table.................................................................
Example...................................................................
FINANCIAL HIGHLIGHTS......................................................
INVESTMENT OBJECTIVE......................................................
INVESTMENT POLICIES.......................................................
RISK CONSIDERATIONS.......................................................
MANAGEMENT OF THE FUND....................................................
Boards of Trustees........................................................
Investment Adviser and Portfolio Managers.................................
Administrative Services...................................................
Distribution Plan and Shareholder
Service Plan............................................................
Expenses..................................................................
Portfolio Transactions....................................................
Code of Ethics............................................................
INVESTMENT IN THE FUND....................................................
Purchase of Shares........................................................
Retirement Plans and Individual
Retirement Accounts.....................................................
Exchanges.................................................................
Redemption of Shares......................................................
Net Asset Value...........................................................
DIVIDENDS, DISTRIBUTIONS
AND TAXES...............................................................
The Fund..................................................................
The Portfolio.............................................................
OTHER INFORMATION.........................................................
Capitalization and Voting.................................................
Reports...................................................................
Performance...............................................................
Custodian and Transfer Agent..............................................
Shareholder Inquiries.....................................................
Service Organizations.....................................................
Fund Structure............................................................
<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.
Schroders
[GRAPHIC OMITTED]
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. 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.
<PAGE>
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
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. 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.
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<PAGE>
("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.
- 3 -
<PAGE>
("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
willing to accept the risks associated with investments in smaller companies.
The Portfolio's policy of investing in smaller companies involves risks in
addition to those normally associated with investments in equity securities
- 4 -
<PAGE>
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."
- 5 -
<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
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 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 (after fee waivers) (2)(3)........................... 0.53%
12b-1 Fees........................................................... None
Other Expenses (3)................................................... 0.96%
Total Fund Operating Expenses (4).................................... 1.49%
(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) Without fee waivers and expense reimbursements, Management Fees and
Total Operating Expenses would be 0.85% and 1.81%, respectively.
(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 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."
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<PAGE>
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.
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<PAGE>
1 YEAR .......................... $15
3 YEARS ......................... $47
5 YEARS ......................... $82
10 YEARS ......................... $178
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<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights 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.
- 9 -
<PAGE>
<TABLE>
<CAPTION>
For the Years Ended For the Period
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
</TABLE>
- 10 -
<PAGE>
<TABLE>
<S> <C>
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.
- 11 -
<PAGE>
INVESTMENT OBJECTIVE
The investment objective of the Fund is capital appreciation. Current
income will be 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 substantially similar 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 5% of its total assets in unseasoned
companies.
- 12 -
<PAGE>
Although there is no minimum rating for debt securities (convertible or
non-convertible) in which the Portfolio may invest, the Portfolio intends to
invest no more than 5% of its net assets in debt securities rated below Baa by
Moody's Investors Service, 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.
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<PAGE>
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-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. The Portfolio
may not invest in warrants if, as a result, more than 5% of its net assets would
be so invested or if more than 2% of its net assets would be invested in
warrants not listed on a major U.S. stock exchange.
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
- 14 -
<PAGE>
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 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. Such short sales are subject to the limits described under
"Fundamental Restrictions" above. 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).
- 15 -
<PAGE>
Unseasoned Issuers. Investments in small, unseasoned issuers generally
carry greater risk than is customarily associated with larger, more seasoned
companies. Such issuers often have products and management personnel that have
not been tested by time or the marketplace and their financial resources may not
be as substantial as those of more established companies. Their securities
(which the Portfolio may purchase when they are offered to the public for the
first time) may have a limited trading market which can adversely affect their
sale by the Portfolio and can result in such securities being priced lower than
otherwise might be the case. If other institutional investors engage in trading
this type of security, the Portfolio may be forced to dispose of its holdings at
prices lower than might otherwise be obtained.
MANAGEMENT OF THE FUND
X Schroder Group Assets Under Management Worldwide
As of December 31, 1996 -- Over $130 Billion
[GRAPHIC OMITTED]
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 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
- 16 -
<PAGE>
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 will 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
of the Fund's average daily net assets; 0.40% up to $150 million of the Fund's
average daily net assets; 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 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 0.25% 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.
- 17 -
<PAGE>
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, interest, brokerage commissions and other
portfolio transaction expenses and extraordinary expenses) chargeable to
Investor Shares to 1.49% of the average daily net assets of the Fund
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
voluntarily waive 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.
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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 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
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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.
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 $2,500. 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.
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<PAGE>
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 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.
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<PAGE>
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.
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
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<PAGE>
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 do not have to pay federal income tax on that part
of its income that is distributed to shareholders. The Fund intends to
distribute substantially all of its income 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 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
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<PAGE>
redemption of Shares may result in taxable gain or loss to the redeeming
shareholder, depending on whether the redemption proceeds are more or less than
the shareholder's basis in the redeemed Shares. If Shares are redeemed at a loss
after being held for six months or less, the loss will be treated as a
long-term, rather than a short-term, capital loss to the extent of any capital
gain distributions received on those Shares.
The Fund must withhold 31% from dividends, capital gain distributions and
redemption proceeds payable to any individuals and certain other noncorporate
shareholders who do not furnish the Fund with a correct taxpayer identification
number. Withholding at that rate also is required from dividends and capital
gain distributions payable to such shareholders who otherwise are subject to
backup withholding. Depending on the residence of a shareholder for tax
purposes, distributions from the Fund may also be subject to state and local
taxes, including withholding taxes.
If the Fund's dividends exceed its taxable income in any year, all or a
portion of the Fund's dividends may be treated as a return of capital to
shareholders for tax purposes. Any return of capital will reduce the cost basis
of your shares, which will result in a higher reported capital gain or a lower
reported capital loss when you sell your shares. Shareholders will be notified
by the Trust if a distribution includes a return of capital.
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 not required to pay federal income tax because it is
classified as a partnership for federal income tax purposes. All interest,
dividends, gain and loss of the Portfolio will be deemed to have been "passed
through" to the Fund in proportion to the Fund's holdings in the Portfolio,
regardless of whether such interest, dividends or gains have been distributed by
the Portfolio.
The Portfolio intends to conduct its operations so as to enable the Fund
to qualify as a regulated investment company.
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<PAGE>
OTHER INFORMATION
Capitalization and Voting
The Trust was organized as a Maryland corporation called Schroder Capital
Funds, Inc. on July 30, 1969, and was 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
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, non-assessable and have no preemptive rights.
Shareholders have non-cumulative voting rights, which means that the holders of
more than 50% of the shares voting for the election of Trustees can elect 100%
of the Trustees if they choose to do so. A shareholder is entitled to one vote
for each full share held (and a fractional vote for each fractional share held).
Each share of the Fund has equal voting rights, except that if a matter affects
only the shareholders of a particular class only shareholders of that class
shall have a right to vote. On Trust matters requiring shareholder approval,
shareholders of the Trust are entitled to vote only with respect to matters that
affect the interests of the fund or the class of shares they hold, except as
otherwise required by applicable law.
There will normally be no meetings of shareholders to elect Trustees
unless and until such time as less than a majority of the Trustees holding
office have been elected by shareholders. However, the holders of not less than
a majority of the outstanding shares of the Trust may remove any person serving
as a Trustee and the Trust Board will call a special meeting of shareholders to
consider removal of one or more Trustees if requested in writing to do so by the
holders of not less than 10% of the outstanding shares of the Trust.
From time to time, certain shareholders may own a large percentage of the shares
of the Fund. Accordingly, those shareholders may be able to greatly affect (if
not determine) the outcome of a shareholder vote. 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.
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<PAGE>
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 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.
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<PAGE>
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 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
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.
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
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<PAGE>
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.
s
Indemnified claims are those brought against Schroder Core Indemnitees
based on a misstatement or omission of a material fact in the investor's
registration statement or proxy materials. No indemnification need be made,
however, if such alleged misstatement or omission relates to information about
Schroder Core and was supplied to the investor by Schroder Core. Similarly,
Schroder Core will indemnify each investor in the Portfolio, including the Fund,
for any claims brought against the investor with respect to the investor's
registration statement or proxy materials, to the extent the claim is based on a
misstatement or omission of a material fact relating to information about
Schroder Core that is supplied to the investor by Schroder Core. In addition,
each registered investment company investor in the Portfolio will indemnify each
Schroder Core Indemnitee against any claim based on a misstatement or omission
of a material fact relating to information about a series of the registered
investment company that did not invest in the Schroder Core. The purpose of
these cross-indemnity provisions is principally to limit the liability of
Schroder Core to information that it knows or should know and can control. With
respect to other prospectuses, other offering documents and proxy materials of
investors in Schroder Core, its liability is similarly limited to information
about and supplied by it.
Certain Risks of Investing in the Portfolio. The Fund's investment in the
Portfolio may be affected by the actions of other large investors in the
Portfolio: for example, if the Portfolio had a large investor other than the
Fund that redeemed its interest in the Portfolio, the Portfolio's remaining
investors (including the Fund) might, as a result, experience higher pro rata
operating expenses, thereby producing lower returns.
The Fund may withdraw its entire investment from the Portfolio at any
time, if the Trust Board determines that it is in the best interests of the Fund
and its shareholders to do so. The Fund might withdraw, for example, if there
were other investors in the Portfolio 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 but not any other portfolio of Schroder Core. The
risk to an investor in the Portfolio of incurring financial loss on account of
such liability, however, 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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<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
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Table of Contents
PROSPECTUS SUMMARY........................................................
EXPENSES OF INVESTING
IN THE FUND...........................................................
Fee Table.................................................................
Example...................................................................
FINANCIAL HIGHLIGHTS......................................................
INVESTMENT OBJECTIVE......................................................
INVESTMENT POLICIES.......................................................
RISK CONSIDERATIONS.......................................................
MANAGEMENT OF THE FUND....................................................
Boards of Trustees........................................................
Investment Adviser and Portfolio Managers.................................
Administrative Services...................................................
Expenses..................................................................
Portfolio Transactions....................................................
Code of Ethics............................................................
INVESTMENT IN THE FUND....................................................
Purchase of Shares........................................................
Retirement Plans and
Individual Retirement Accounts........................................
Statement of Intention....................................................
Exchanges.................................................................
Redemption of Shares......................................................
Net Asset Value...........................................................
DIVIDENDS, DISTRIBUTIONS
AND TAXES.............................................................
The Fund..................................................................
The Portfolio.............................................................
OTHER INFORMATION.........................................................
Capitalization and Voting.................................................
Reports...................................................................
Performance...............................................................
Custodian and Transfer Agent..............................................
Shareholder Inquires......................................................
Service Organizations.....................................................
Fund Structure............................................................
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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 is incidental to the objective of capital
appreciation.
Schroders
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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. 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
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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 OFFERED 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
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MARCH 1, 1997
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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, diversified series of the Trust,
an open-end, management investment company registered under the Investment
Company Act of 1940 (the "1940 Act"). The following summary is qualified in its
entirety by the more detailed information contained in this Prospectus.
Objective. Capital appreciation.
Strategy. Invests at least 65% of its total assets in equity securities of
companies domiciled in the United States that have market capitalizations, 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 Managers."
Administrative Services. Schroder Fund Advisors Inc.
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("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 willing to accept the risks associated with investments in smaller
companies. The Portfolio's policy of investing in smaller companies involves
risks in addition to those normally associated with investments in equity
securities of
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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."
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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 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
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).................................................. 0.53%
12b-1 Fees (3)....................................................... None
Other Expenses....................................................... 1.21%
Total Fund Operating Expenses (4).................................... 1.74%
(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.
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(3) 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%.
(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 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 Operating Expenses would be 0.85%
and 2.06%, respectively.
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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.
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1 YEAR .......................... $18
3 YEARS ......................... $55
5 YEARS ......................... $94
10 YEARS ......................... $205
FINANCIAL HIGHLIGHTS
The financial highlights are presented below to assist you in evaluating
per share performance of the Fund's Advisor 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.
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<CAPTION>
For the Years Ended For the Period
October 31, August 6, 1993 (b) -
1996(a) 1995 1994 October 31, 1993
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<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 on
Investments 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 on
Investments (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:
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<S> <C> <C> <C> <C>
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
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(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.
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INVESTMENT OBJECTIVE
The investment objective of the Fund is capital appreciation. Current
income will be 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 substantially similar 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
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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 5% of its total assets in unseasoned
issuers.
Although there is no minimum rating for debt securities (convertible or
non-convertible) in which the Portfolio may invest, the Portfolio intends to
invest no more than 5% of its net assets in debt securities rated below Baa by
Moody's Investors Service, 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.
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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
holdersmay 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-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
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security at a specified price (usually representing a premium over the
applicable market value of the underlying equity security at the time of the
warrant's issuance) and usually during a specified period of time. The Portfolio
may not invest in warrants if, as a result, more than 5% of its net assets would
be so invested or if more than 2% of its net assets would be invested in
warrants not listed on a major U.S. stock exchange.
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 the m (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 assetvalue. 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 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
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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. S uch short sales are subject to the limits described under
"Fundamental Restrictions" above. See "Short Sales Against-the-Box" in the SAI
for further details.
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RISK CONSIDERATIONS
Smaller Companies. While all investments have risks, investments in
smaller capitalization companies carry greater risk than investments in larger
capitalization companies. Smaller capitalization companies generally experience
higher growth rates and higher failure rates than do larger capitalization
companies; and the trading volume of smaller capitalization companies'
securities is normally lower than that of larger capitalization companies and,
consequently, generally has a disproportionate effect on market price (tending
to make prices rise more in response to buying demand and fall more in response
to selling pressure).
Unseasoned Issuers. Investments in small, unseasoned issuers generally
carry greater risk than is customarily associated with larger, more seasoned
companies. Such issuers often have products and management personnel that have
not been tested by time or the marketplaceand 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
[MAP OF WORLD]
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.
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TOGETHER, SCHRODER CAPITAL MANAGEMENT INTERNATIONAL AND
SCHRODER CAPITAL MANAGEMENT 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."
Investment Adviser and Portfolio Managers
As investment adviser to the Portfolio, SCMI manages the Portfolio and
continuously reviews, supervises and administersits 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 will 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
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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
of the Fund's average daily net assets; 0.40% up to $150 million of the Fund's
average daily net assets; 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 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 0.25% 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 Services 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 of 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
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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.
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 to Schroder
Advisors 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
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<PAGE>
owned beneficially by investors who have a brokerage or other service
relationship with the Service Organization. Some Service Organizations may
impose additional or different conditions on their clients, such as requiring
their clients to invest more than the minimum or subsequent investments
specified by the Fund or charging a direct fee for servicing. If imposed, these
fees would be in addition to any amounts which might be paid to the Service
Organization by Schroder Advisors. Each Service Organization has agreed to
transmit to its clients a schedule of any such fees. Shareholders using Service
Organizations are urged to consult them regarding any such fees or conditions.
Expenses
SCMI and Schroder Advisors have voluntarily undertaken to 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 voluntarily waive 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
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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 , 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 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 minimumfor 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
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<PAGE>
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
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.
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.
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<PAGE>
The Fund may be used as an investment vehicle for an IRAincluding 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 $2,500. 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""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 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.
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<PAGE>
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 to15 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
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<PAGE>
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
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<PAGE>
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 that is distributed to shareholders. The Fund intends to
distribute substantially all of its income 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 additional Shares or
received in cash. Distributions by the Fund of any net capital gainwill 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
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<PAGE>
case of certain preferred stock); or are subject to certain forms of hedges or
short sales, then the portion of the dividends paid by the Fund attributable to
such securities will not be eligible for the dividends-received deduction.
A redemption of Shares may result in taxable gain or loss to the redeeming
shareholder, depending on whether the redemption proceeds are more or less than
the shareholder's basis in the redeemed Shares. If Shares are redeemed at a loss
after being held for six months or less, the loss will be treated as a
long-term, rather than a short-term, capital loss to the extent of any capital
gain distributions received on those Shares.
The Fund must withhold 31% from dividends, capital gain distributions and
redemption proceeds payable to any individuals and certain other noncorporate
shareholders who do not furnish the Fund with a correct taxpayer identification
number. Withholding at that rate also is required from dividends and capital
gain distributions payable to such shareholders who otherwise are subject to
backup withholding. Depending on the residence of a shareholder for tax
purposes, distributions from the Fund may also be subject to state and local
taxes, including withholding taxes.
If the Fund's dividends exceed its taxable income in any year, all or a
portion of the Fund's dividends may be treated as a return of capital to
shareholders for tax purposes. Any return of capital will reduce the cost basis
of your shares, which will result in a higher reported capital gain or a lower
reported capital loss when you sell your shares. Shareholders will be notified
by the Trust if a distribution includes a return of capital.
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<PAGE>
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 be required to pay federal income tax because it is
classified as a partnership for federal income tax purposes. All interest,
dividends, gain and loss of the Portfolio will be deemed to have been "passed
through" to the Fund in proportion to the Fund's holdings in the Portfolio,
regardless of whether such interest, dividends or gains have been distributed by
the Portfolio.
The Portfolio intends to conduct its operations so as to enable the Fund
to qualify as a regulated investment company.
OTHER INFORMATION
Capitalization and Voting
The Trust was organized as a Maryland corporation called Schroder Capital
Funds, Inc. on July 30, 1969, and was 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
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, non-assessable and have no preemptive rights.
Shareholders have non-cumulative voting rights, which means that the holders of
more than 50% of the shares voting for the election of Trustees can elect 100%
of the Trustees if they choose to do so. A shareholder is entitled to one vote
for each full share held (and a fractional vote for each fractional share held).
Each share of the Fund has equal voting rights, except that if a matter
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<PAGE>
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, Donaldson Lufkin & Jenrette and National Investors Service Corp. 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. TAverage 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 ofdividends
but do not reflect deductions for
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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. 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
- 32 -
<PAGE>
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, 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.
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
- 33 -
<PAGE>
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.
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
- 34 -
<PAGE>
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.
- 35 -
<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
<PAGE>
Table of Contents
PROSPECTUS SUMMARY.........................................
EXPENSES OF INVESTING
IN THE FUND............................................
Fee Table..................................................
Example....................................................
FINANCIAL HIGHLIGHTS.......................................
INVESTMENT OBJECTIVE.......................................
INVESTMENT POLICIES........................................
RISK CONSIDERATIONS........................................
MANAGEMENT OF THE FUND.....................................
Boards of Trustees.........................................
Investment Adviser and Portfolio Managers..................
Administrative Services....................................
Distribution Plan and
Shareholder Services Plan..............................
Expenses...................................................
Portfolio Transactions.....................................
Code of Ethics.............................................
INVESTMENT IN THE FUND.....................................
Purchase of Shares.........................................
Retirement Plans and
Individual Retirement Accounts.........................
Exchanges..................................................
Redemption of Shares.......................................
Net Asset Value............................................
DIVIDENDS, DISTRIBUTIONS
AND TAXES..............................................
The Fund...................................................
The Portfolio..............................................
OTHER INFORMATION..........................................
Capitalization and Voting..................................
Reports....................................................
Performance................................................
Custodian and Transfer Agent...............................
Shareholder Inquires.......................................
Service Organizations......................................
Fund Structure.............................................
<PAGE>
SCHRODER U.S. EQUITY FUND
Investor Shares
This fund seeks growth of capital by investing substantially all of its assets
in common stock and securities convertible into common stock. Income, while a
factor in portfolio selection, is secondary to the principal objective of
capital growth.
Schroders
Your Window On The World
This prospectus sets forth concisely the information you should know before
investing in Schroder U.S. Equity Fund (the "Fund") and should be retained for
future reference. To learn more about the Fund, a series of Schroder Capital
Funds (Delaware) (the "Trust"), you may obtain a copy of the Fund's current
Statement of Additional Information (the "SAI") which is incorporated by
<PAGE>
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 document or in
other documents to which the Fund 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. THE SHARES 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>
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. Growth of capital. Income, while a factor in portfolio
selection, is secondary to growth of capital.
Strategy. Invests substantially all of its assets in the common stock and
in securities convertible into the common stock of U.S. issuers.
Investment Adviser. The Fund's investment adviser is Schroder Capital
Management International Inc. ("SCMI"), 787 Seventh Avenue, New York, New York
10019. See "Management of the Fund -- Investment Adviser and Portfolio
Managers."
Administrative Services. SCMI is also the administrator and distributor of
the Fund. The Trust and SCMI have entered into a Sub-Administration Agreement
with Forum Financial Services, Inc. ("Forum"), through which Forum provides the
Fund with management and administrative services other than those provided by
SCMI. See "Management of the Fund -- Administrative Services."
Purchases and Redemptions of Shares. You may purchase or redeem shares 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. Dividends and capital gain
distributions are reinvested automatically in additional Investor Shares of the
Fund at net asset value unless you elect in your Account Application, or
otherwise in writing, to receive dividends or other distributions in cash. See
"Dividends, Distributions and Taxes."
Risk Considerations. There can be no assurance that the Fund will achieve
its investment objective. The Fund's net asset value and total return will
fluctuate with changes in the value of the securities in which the Fund invests.
When you sell your shares, they may be worth more or less than what you paid for
them. For further information see "Risk Considerations".
<PAGE>
FUNDS AVAILABLE THROUGH SCHRODER FUND ADVISORS INC.
Please call for complete information and to obtain a prospectus.
Please read the prospectus carefully before you invest.
[LOGO]
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
<PAGE>
EXPENSES OF INVESTING IN THE FUND
Fee Table
The table below is intended to help you understand 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)
Management Fees (after waivers) (1)(2).............................. 0.65%
12b-1 Fees.......................................................... None
Other Expenses...................................................... 0.83%
Total Fund Operating Expenses (after waivers)(2).................... 1.48%
(1) Management Fees reflect the fees paid by the Fund to SCMI and its
affiliate for investment advisory and administrative services.
(2) Without fee waivers, Management Fees and Total Operating Expenses would
be 0 75% and 1.58%, respectively.
SCMI and Schroder Advisors have voluntarily undertaken to waive a portion
of their fees and assume certain expenses of the Fund during the current
fiscal year in order to limit the Fund's total expenses to 1.48% 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."
<PAGE>
Example
The table below indicates how much you would pay in total expenses on a
$1,000 investment in the Fund, assuming (1) a 5% annual return and (2)
redemption at the end of each time period. The example is based on the expenses
listed above and assumes the reinvestment of all dividends and other
distributions. The example should not be considered a representation of past or
future expenses or returns; actual expenses or returns may vary from those
shown. The 5% annual return is not a prediction of the Fund's return, but is the
percentage required by the SEC for use in this example.
1 YEAR------------------------------$15
3 YEARS-----------------------------$47
5 YEARS-----------------------------$81
10 YEARS----------------------------$177
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights of the Fund are presented below to help you
evaluate per share performance of Investor Shares 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>
Year Ended October 31,
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, 9.41 8.52 11.28 10.51 9.56 7.05 8.35 7.49 10.15 12.55
---- ---- ----- ----- ---- ---- ---- ---- ----- -----
Beginning of year
Investment
Operations:
Net Investment 0.04 0.07 0.04 0.05 0.02 0.09 0.11 0.17 0.18 0.20
Income
Net Realized 1.62 1.33 (0.27) 1.86 1.61 2.57 (0.77) 1.30 0.28 0.18
Income and
Unrealized Gain
(Loss) on
Investments
Total From 1.66 1.40 (0.23) 1.91 1.63 2.66 (0.66) 1.47 0.46 0.38
Investment
Operations
Distributions
from Net (0.07) (0.05) (0.01) (0.04) (0.04) (0.11) (0.11) (0.15) (0.18) (0.25)
Investment Income
from net Realized (1.24) (0.46) (2.52) (1.10) (0.58) -- (0.53) (0.46) (2.94) (2.53)
Capital Gains
from Capital
Paid-In -- -- -- -- (0.06) (0.04) -- -- -- --
=======================================================================================
Total Distributions (1.31) (0.51) (2.53) (1.14) (0.68) (0.15) (0.64) (0.61) (3.12) (2.78)
Net Asset Value, $9.76 $9.41 $8.52 $11.28 $10.51 $9.56 $7.05 $8.35 $7.49 $10.15
End of Year
=======================================================================================
Total Return 19.45% 17.68% (2.01)% 19.49% 17.74% 38.16% (8.78)% 21.05% 7.74% 2.55%
=======================================================================================
Ratios/Supplementary Data:
Net Assets, End $17,187 19,688 18,483 21,865 19,882 20,234 18,290 23,838 25,569 29,749
of Year
(Thousands)
Ratio of Expenses 1.40%(a) 1.40% 1.31% 1.18% 1.40% 1.39% 1.34% 1.49% 1.60% 1.30%
to Average Net
Assets
Ratio of Net 0.43%(a) 0.78% 0.41% 0.51% 0.42% 1.30% 1.59% 1.99% 1.89% 1.60%
Investment
Income to
Average Net
Assets
Portfolio 56.8% 57.21% 27.43% 57.78% 31.33% 29.98% 28.31% 40.35% 18.42% 43.11%
Turnover Rate
Average brokerage
commission rate (b) $0.0599 N/A N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
(a) During the year ended October 31, 1996, the investment adviser waived a
portion of its fee. Had such waiver not occurred, the ratio of expenses to
average net assets would have been 1.43% and the ratio of net investment
income to average net assets would have been 0.40%.
(b) Amount represents the average commission per share paid to brokers on the
purchase and sale of portfolio securities.
<PAGE>
INVESTMENT OBJECTIVE
The primary investment objective of the Fund is to seek growth of capital.
Income, while a factor in portfolio selection, is secondary to the principal
objective. The Fund is not intended for investors whose objective is assured
income or preservation of capital. There can be no assurance that the Fund will
achieve its investment objective.
The Fund in the future may seek to achieve its investment objective by
holding, as its only investment securities, the securities of another investment
company having identical investment objectives and policies as the Fund (in
accordance with the provisions of the 1940 Act or any orders, rules or
regulations thereunder adopted by the Securities and Exchange Commission).
INVESTMENT POLICIES
The investment objective, and the investment policies of the Fund that are
designated as fundamental, may not be changed without approval of the holders of
a majority of the outstanding voting securities of the Fund. A majority of
outstanding voting securities means the lesser of (i) 67% of the shares present
or represented at a shareholder meeting at which the holders of more than 50% of
the outstanding shares are present or represented, or (ii) more than 50% of
outstanding shares. Unless otherwise indicated, all investment policies of the
Portfolio are not fundamental and may be changed by the Schroder Core Board
without shareholder approval.
The Fund will seek to achieve its investment objective by investing
substantially all of its assets in the common stock and securities convertible
into the common stock of U.S. issuers. As part of this policy, the Fund may also
invest in other securities with common stock purchase warrants attached, in such
warrants themselves, or in other rights to purchase common stock.
<PAGE>
The Fund may also invest up to 15% of its assets in investment grade
non-convertible preferred securities and non-convertible debt securities when
management believes that they will yield greater returns than U.S. Government
securities or bank certificates of deposit.
The Fund will generally purchase securities that SCMI believes have
potential for capital appreciation. Securities will generally be sold when the
Fund believes that such potential no longer exists or the risk of market-price
decline is too great.
For temporary defensive purposes, the Fund may invest all or any portion
of its assets in investment grade corporate bonds or debentures (meaning for
these purposes bonds or debentures rated "A" or better by Standard & Poor's or
the equivalent thereof); preferred stock; U.S. Government securities; or bank
certificates of deposit. Management may pursue a temporary defensive strategy
when it believes that the market appears relatively fully priced or when
uncertain economic conditions make assuming a temporary defensive position
advisable.
The Fund may also invest temporarily in certain short-term fixed income
securities. Such securities (which may include U.S. Government securities,
commercial paper, bank certificates of deposit and bankers' acceptances, and
repurchase agreements collateralized by these securities) may be used to invest
uncommitted cash balances or to maintain liquidity to meet shareholder
redemptions or other Fund obligations. The Fund will limit its total investment
at any time in these securities for this operating purpose to not more than 25%
of its total assets.
The Fund may from time to time acquire securities that are subject to
legal or contractual restrictions on resale. The risk involved is that a
considerable delay might occur between the time a decision is made to sell such
securities and the time the Fund is permitted to sell all or part of such
securities (publicly under a registration statement or an exemption from
registration, or privately to a suitable purchaser). That delay could lower the
price the Fund obtains for the securities and, in a registration, the Fund could
be required to pay registration expenses.
The Fund is authorized to borrow money from a bank on its promissory note
or other evidence of indebtedness. Monies borrowed would be invested and any
appreciation thereon (to the extent it exceeded interest paid on the loan) would
increase the net asset value of Fund shares.
<PAGE>
If, however, the investment performance of additional monies failed to cover the
Fund's interest charges, the net asset value would decrease faster than would
otherwise be the case. This is the speculative feature known as "leverage".
The Fund's authority to borrow is subject to limitations. Any borrowing
(i) cannot exceed one-third of the value of the Fund's total assets after the
borrowing, (ii) if at any time it exceeded the one-third limitation, the Fund
would within three days thereafter (not including Sundays or holidays) or such
longer period as the SEC may prescribe by rules and regulations, reduce its
borrowings to the limitation, and (iii) might or might not be secured and, if
secured, all or any part of the Fund's assets could be pledged. To comply with
these limitations, the Fund might be required to dispose of certain of its
assets when it might be disadvantageous to do so. The Fund has not borrowed for
investment or any other purpose during the last ten years and, as a
non-fundamental
<PAGE>
policy, has no current intention of borrowing for investment in the future.
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.
Current holdings and recent investment strategies are described in the Fund's
Annual and Semi-Annual Reports.
Common and Preferred Stock and Warrants. The Fund 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: 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 Fund 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 Fund of a security to meet
withdrawals by interest holders may require the Fund to sell these securities at
a discount from market prices
<PAGE>
; 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 Fund 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 Fund may invest in repurchase agreements, which
are a means of investing monies for a short period: a seller -- a U.S. bank or
recognized broker-dealer -- sells securities to the Fund and agrees to
repurchase them (at the Fund's cost plus interest) within a specified period
(normally one day). The values of the underlying securities purchased by the
Fund 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 Fund's
custodian bank holds the securities until they are repurchased. If the seller
defaults under a repurchase agreement, the Fund may have difficulty exercising
its rights to the underlying securities and may incur costs and experience time
delays in disposing of them. To evaluate potential risk, SCMI reviews the
creditworthiness of banks and dealers with which the Fund enters into repurchase
agreements.
Illiquid and Restricted Securities. As a non-fundamental policy, the
Fund will not purchase or otherwise acquire any security if, as a result, more
than 10% 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 Fund and the portion of its assets used to
cover such options. The limitation on investing in restricted securities does
not include securities that may not be resold to the general public but may be
resold to qualified institutional purchasers (pursuant to Rule 144A under the
Securities Act of 1933, as amended). If SCMI determines that a "Rule 144A
security" is liquid pursuant to guidelines adopted by the Trust Board, the
security will not be deemed illiquid. These guidelines take into account trading
activity for the securities and the availability of reliable pricing
information, among other factors. If there is a lack of trading interest in a
particular Rule 144A security, that security may become illiquid, which could
affect the Fund's liquidity. See "Investment Policies -- Illiquid and Restricted
Securities" in the SAI for further information.
<PAGE>
MANAGEMENT OF THE FUND
Schroder Group Assets Under Management Worldwide
As of December 31, 1996 -- Over $130 Billion
[LOGO]
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 MANAGE OVER $24 BILLION.
Board of Trustees
The business and affairs of the Fund are managed under the direction of
the Board of Trustees of the Trust (the "Trust Board"). The Trustees are Peter
E. Guernsey, John I. Howell, Clarence F. Michalis, Hermann C. Schwab and Mark J.
Smith. Additional information regarding the trustees and executive officers of
the Trust may be found in the SAI under the heading "Management, Trustees and
Officers."
Investment Adviser and Portfolio Managers
As investment adviser to the Fund, SCMI manages the Fund and continuously
reviews, supervises
<PAGE>
and administers its investments. SCMI is responsible for making decisions
relating to the Fund's investments and placing purchase and sale orders
regarding such investments with brokers or dealers it selects. For these
services, the Investment Advisory Agreement between SCMI and the Trust provides
that SCMI will receive a monthly fee at the annual rate of 0.75% of the Fund's
average daily net assets for the first $100 million and 0.50% of the Fund's
average daily net assets in excess of $100 million. For the fiscal year ended
October 31, 1996, the total advisory fees paid by the Fund to SCMI represented
an annual effective rate of 0.75% of the Fund's average daily net assets.
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.
Paul Morris, a Vice President of the Trust and a Senior Vice President of
SCMI, with the assistance of an investment committee, is primarily responsible
for the day-to-day management of the Fund's investments and has so managed the
Fund since February 1997. Mr. Morris has been employed by SCMI in the investment
research and portfolio management areas since ____.
<PAGE>
Administrative Services
Through its investment advisory contract with the Fund, SCMI provides
administrative services to the Fund. The Trust and SCMI have entered into a
sub-administration agreement with Forum. Pursuant to these agreements, Forum
provides certain additional management and administrative services necessary for
the Fund's operations. Payment for Forum's services is made by SCMI and is not a
separate expense of the Fund.
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 1.43% of the average daily net assets of the Fund
attributable to those shares. This expense limitation cannot be
<PAGE>
modified or withdrawn except by a majority vote of the Trustees of the Trust who
are not affiliated persons (as defined in the 1940 Act) of the Trust. If expense
reimbursements are required, they will be made on a monthly basis.
Portfolio Transactions
SCMI places orders for the purchase and sale of the Fund's investments
with brokers and dealers selected by SCMI and seeks "best execution" of such
portfolio transactions. The Fund 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 Fund's policy of obtaining the best price consistent with
quality of execution on transactions, SCMI may employ Schroder Wertheim &
Company, Incorporated and its affiliates ("Schroder Wertheim"), affiliates of
SCMI, to effect transactions of the Fund on the New York Stock Exchange. Because
of the affiliation between SCMI and Schroder Wertheim, the Fund's payment of
commissions to Schroder Wertheim is subject to procedures adopted by the Board
designed to ensure that such commissions will not exceed the usual and customary
brokers' commissions. No specific portion of the Fund's brokerage will be
directed to Schroder Wertheim and in no event will Schroder Wertheim 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 Trust Board may determine,
SCMI may consider sales of shares of the Fund as a factor in the selection of
broker-dealers to execute transactions for the Fund.
Although the Fund does not currently engage in directed brokerage
arrangements to pay expenses, it may do so in the future. These arrangements
(whereby brokers executing the Fund's portfolio transactions would agree to pay
designated expenses of the Fund if brokerage commissions generated by the Fund
reached certain levels) might reduce the Fund's expenses and would not be
expected to increase materially the brokerage commissions paid by the Fund.
Brokerage commissions are not deemed to be Fund expenses.
Code of Ethics
The Trust, SCMI 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
<PAGE>
Purchase of Shares
Investors may purchase Investor Shares directly from the Trust.
Prospectuses, sales material and Account Applications can be obtained from the
Trust or through Forum Financial Corp., the Fund's transfer agent (the "Transfer
Agent"). (See "Other Information -- Shareholder Inquires".) Investments may also
be made through Service Organizations that assist their customers in purchasing
shares of the Fund. Such Service Organizations may charge their customers a
service fee for processing orders to purchase or sell shares of the Fund.
Investors wishing to purchase shares through their accounts at a Service
Organization should contact that organization directly for appropriate
instructions.
Shares of the Fund are offered at the net asset value next determined
after receipt of a 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. Equity Fund, to:
Schroder U.S. Equity Fund
P.O. Box 446
Portland, Maine 04112
For initial purchases, the check must be accompanied by a completed
Account Application in proper form. Further documentation, such as corporate
resolutions and instruments of authority, may be requested from corporations,
administrators, executors, personal representatives, directors or custodians to
evidence the authority of the person or entity making the subscription request.
Investors and Service Organizations (on behalf of their customers) may
transmit purchase payments by Federal Reserve Bank wire directly to the Fund as
follows:
Chase Manhattan Bank
New York, NY
ABA No.: 021000021
For Credit To: Forum Financial Corp.
Acct. No.: 910-2-718187
Ref.: Schroder U.S. Equity 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) the account name and number, address, confirmation number, amount to
be wired, name of the wiring bank
<PAGE>
, 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 can 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, as the shareholder's agent, establishes for
each shareholder of record an open account to which all shares purchased and all
reinvested dividends and capital gain 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 capital gains will be reinvested. In addition, the
amount of any outstanding checks for dividends and capital gains that have been
returned to the Transfer Agent will be reinvested and such checks will be
canceled.
Retirement Plans and Individual Retirement Accounts
Shares of the Fund are offered in connection with tax-deferred retirement
plans. Applications forms and further information about these plans, including
applicable fees, are available upon request. Before investing in the Fund
through one of these plans, investors should consult their tax advisors.
The Fund may be used as an investment vehicle for an
<PAGE>
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 $2,500.
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.
Statements 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 Schroder Capital Funds (Delaware) 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 FFC at (800) 811-8258 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 Schroder Capital Funds (Delaware) may legally be sold, and may
be amended or terminated at any time upon sixty (60) days' notice.
Redemption of Shares
<PAGE>
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 such
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
<PAGE>
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 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, in conformity with applicable rules of the
SEC. The Fund will, however, redeem Shares solely in cash up to the lesser of
$250,000 or 1% of net assets during any 90-day period for any one shareholder.
In the event that payment for redeemed Shares is made wholly or partly in
portfolio securities, the shareholder may be subject to additional risks and
costs in converting the securities to cash. See "Additional Purchase and
Redemption Information -- Redemption in Kind" in the SAI. The proceeds of a
redemption may be more or less than the amount invested and, therefore, a
redemption may result in a gain or loss for Federal income tax purposes.
Due to the relatively high cost of maintaining smaller accounts, the Fund
reserves the right to redeem Shares in any account (other than an IRA) if at any
time the account does not have a value of at least $10,000, 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 $10,000
and be allowed at least 30 days to make an additional investment to increase the
account balance to at least $10,000.
<PAGE>
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 Board.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund intends to comply with the provisions of Subchapter M of the
Internal Revenue Code of 1986, as amended, applicable to regulated investment
companies. By so doing, the Fund will be relieved of Federal income tax on that
part of its investment company taxable income that is distributed to
shareholders (consisting generally of its share of the Portfolio's net
investment income, net short-term capital gain, and gain from certain foreign
currency transactions); and that part of its net long-term capital gain that is
distributed to shareholders. The Fund intends to distribute substantially all of
its investment company taxable income and its net realized long-term capital
gain at least annually and, therefore, intends not to be subject to Federal
income tax. The Fund
<PAGE>
also may make an additional dividend or other distribution if necessary to avoid
a 4% excise tax on certain undistributed income and gain. There are tax
requirements that all funds must follow in order to avoid federal taxation. 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 distributions in cash.
Dividends paid by the Fund out of its net investment income (including net
realized short-term capital gain) are taxable to shareholders of the Fund as
ordinary income even if the dividends are reinvested in additional shares of the
Fund. Distributions of net realized long-term capital gain, if any, are taxable
to shareholders of the Fund as long-term capital gain, regardless of the length
of time the shareholder may have held shares in the Fund at the time of
distribution. If a shareholder holds shares for six months or less and during
that period receives a distribution taxable to the shareholder as long-term
capital gain, any loss realized on the sale of the shares during that six-month
period would be a long-term capital loss to the extent of the distribution.
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.
<PAGE>
It is expected that a portion of the Fund's dividends from net investment
income will be eligible for the dividends received deduction for corporations.
The amount of such dividends eligible for the dividends received deduction is
limited to the amount of dividends from domestic corporations received during
the Fund's fiscal year. To the extent the Fund invests in the securities of
domestic issuers, the dividends to shareholders of the Fund may qualify for the
dividends received deduction for corporations.
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 12b-1 fees and other
compensation payable to Service Organizations for distribution assistance and
shareholder servicing for the Advisor Shares.
The Fund must withhold 31% from dividends, capital gain distributions and
redemption proceeds payable to any shareholder who does not furnish the Fund
with a correct taxpayer identification number; who fails to make required
certifications; or who is 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.
OTHER INFORMATION
<PAGE>
Capitalization and Voting
The Trust was organized as a Maryland corporation ("Schroder Capital
Funds, Inc.") on July 30, 1969 and on January 9, 1996 was reorganized as a
Delaware business trust. The Trust has authority to issue an unlimited number of
shares of beneficial interest. The Board may, without shareholder approval,
divide the authorized shares into an unlimited number of separate portfolios or
series (such as the Fund) and may divide 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 preemptive rights. Shareholders have non-cumulative voting rights, which
means that the holders of more than 50% of the shares voting for the election of
Trustees can elect 100% of the Trustees if they choose to do so. A shareholder
is entitled to one vote for each full share held (and a fractional vote for each
fractional share held). Each share of the Fund has equal voting rights, except
that if a matter affects only the shareholders of a particular class only
shareholders of that class shall have a right to vote. On matters requiring
shareholder approval, shareholders of the Trust are entitled to vote only with
respect to matters that affect the interests of the fund and class of shares
they hold, except as otherwise required by applicable law.
There will normally be no meetings of shareholders to elect Trustees
unless and until such time as less than a majority of the Trustees holding
office have been elected by shareholders. However, the holders of not less than
a majority of the outstanding shares of the Trust may remove any person serving
as a Trustee and the Board will call a special meeting of shareholders to
consider removal of one or more Trustees if requested in writing to do so by the
holders of not less than 10% of the outstanding shares of the Trust.
<PAGE>
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 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 non-standard 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 for the Fund represents only past performance:
performance should be considered in light of the Fund's investment objective and
policies and the market conditions during the measured time period and should
not be considered a representation of what may be achieved in the future. For a
description of the methods used to determine total return and other performance
measures for the Fund, please see the SAI.
Custodian and Transfer Agent
The Chase Manhattan Bank, N.A. is custodian of the Fund'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. Equity Fund
P.O. Box 446
Portland, Maine 04112
<PAGE>
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 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.
<PAGE>
Investment Adviser
Schroder Capital Management International Inc.
787 Seventh Avenue
New York, New York 10019
Administrator & Distributor
Schroder Capital Management International Inc.
787 Seventh Avenue
New York, New York 10019
Sub-Administrator
Forum Financial Services, Inc.
Two Portland Square
Portland, Maine 04101
Custodian
The Chase Manhattan Bank, N.A.
Chase MetroTech Center
Brooklyn, New York 11245
Transfer and Dividend Disbursing Agent
Forum Financial Corp.
P.O. Box 446
Portland, Maine 04112
Independent Accountants
Coopers & Lybrand, L.L.P.
One Post Office Square
Boston, Massachusetts 02109
<PAGE>
Table of Contents
PROSPECTUS SUMMARY.......................................
EXPENSES OF INVESTING
IN THE FUND..........................................
Fee Table................................................
Example..................................................
FINANCIAL HIGHLIGHTS.....................................
INVESTMENT OBJECTIVE.....................................
INVESTMENT POLICIES......................................
MANAGEMENT OF THE FUND...................................
Boards of Trustees.......................................
Investment Adviser and Portfolio Managers................
Administrative Services..................................
Expenses.................................................
Portfolio Transactions...................................
Code of Ethics...........................................
INVESTMENT IN THE FUND...................................
Purchase of Shares.......................................
Retirement Plans and Individual
Retirement Accounts....................................
Statements of Intention..................................
Exchanges................................................
Redemption of Shares.....................................
Net Asset Value..........................................
DIVIDENDS, DISTRIBUTIONS
AND TAXES..............................................
OTHER INFORMATION........................................
Capitalization and Voting................................
Reports..................................................
Performance..............................................
Custodian and Transfer Agent.............................
Shareholder Inquires.....................................
Service Organizations....................................
Fund Structure...........................................
<PAGE>
SCHRODER INTERNATIONAL FUND
Statement of Additional Information
March 1, 1997
[GRAPHIC OMITTED]
Investment Advisor
Schroder Capital Management International Inc. ("SCMI")
Administrator and Distributor
Schroder Fund Advisors, Inc. ("Schroder Advisors")
Sub-Administrator
Forum Administrative Services, Limited Liability Company ("Forum")
Transfer Agent and Dividend Disbursing Agent
Forum Financial Corp. ("FFC")
<PAGE>
General Information: (207) 879-8903
Account Information: (800) 344-8332
Fax: (207) 879-6206
Investor Shares of Schroder International Fund ("the Fund") are offered for sale
at net asset value with no sales charge as an investment vehicle for
individuals, institutions, corporations and fiduciaries. Advisor Shares of the
Fund are offered to individual investors, in most cases through Service
Organizations (as defined herein). Advisor Shares incur more expenses than
Investor Shares.
This Statement of Additional Information ("SAI") is not a prospectus and is only
authorized for distribution when preceded or accompanied by the current
Prospectus for the Fund dated March 1, 1997 (the "Prospectus"). This SAI
contains additional and more detailed information than that set forth in the
Prospectus and should be read in conjunction with the Prospectus and retained
for future reference. You may obtain an additional copy of the Prospectus
without charge by writing to the Fund at Two Portland Square, Portland, Maine
04101 or calling the numbers listed above.
- 2 -
<PAGE>
- 3 -
<PAGE>
<PAGE>
- 5 -
<PAGE>
TABLE OF CONTENTS PAGE
Introduction..........................................................
Investment Policies...................................................
Foreign Securities....................................................
Depository Receipts...................................................
Use of Forward Contracts in Foreign
Exchange Transactions...............................................
U.S. Government Securities............................................
Bank Obligations......................................................
Short-Term Debt Securities............................................
Repurchase Agreements.................................................
Investment Restrictions...............................................
Management
Officers and Trustees.................................................
Investment Adviser....................................................
Administrative Services...............................................
Distribution of Fund Shares...........................................
Service Organizations.................................................
Portfolio Accounting..................................................
Fees and Expenses.....................................................
Portfolio Transactions
Investment Decisions..................................................
Brokerage and Research Services.......................................
Additional Purchase and Redemption Information
Redemption in Kind....................................................
Taxation .............................................................
Other Information
Organization..........................................................
Capitalization and Voting.............................................
Principal Shareholders................................................
Custody of Fund Assets................................................
Transfer Agent and Dividend Disbursing Agent..........................
Performance Information...............................................
Independent Accountants...............................................
Counsel .............................................................
Registration Statement................................................
Financial Statements..................................................
Appendix..............................................................
- 6 -
<PAGE>
INTRODUCTION
Schroder International Fund (the "Fund") is a diversified, separately-managed
series of Schroder Capital Funds (Delaware) (the "Trust"), an open-end
management investment company consisting of eight separate portfolios, each of
which has different investment objectives and policies.
The Fund's investment objective is capital appreciation through investment in
securities markets outside the United States. Investments in foreign securities
involve certain risks not associated with domestic investing, and there can be
no assurance that the Fund's objective will be achieved. The Fund currently
seeks to achieve its investment objective by holding, as its only investment
securities, the securities of International Equity Fund (the "Portfolio"), a
separate series of Schroder Capital Funds ("Schroder Core").
The Fund was originally organized in 1985 as a separate portfolio of Fund Source
("Fund Source"), a Massachusetts business trust. Pursuant to a reorganization
(the "Reorganization") which became effective August 1, 1989, all assets and
liabilities of such series were transferred to the Trust in exchange for shares
of common stock of the Trust classified as the "Schroder International Equity
Fund." Such shares were distributed to the former shareholders of such series of
Fund Source and it thereby became a portfolio of the Trust. References in this
SAI to the Fund with respect to periods prior to the effective date of the
Reorganization mean as it was constituted as a portfolio of Fund Source.
INVESTMENT POLICIES
Introduction
The following information supplements the "Investment Objectives" and
"Investment Policies" sections of the Prospectus. The Fund currently seeks to
achieve its investment objective by investing all of its investable assets in
the Portfolio. Since the Fund has the same investment objective and policies as
the Portfolio and currently invests all of its assets in the Portfolio,
investment policies are discussed with respect to the Portfolio only.
The Portfolio will normally invest at least 65% of its total assets in equity
securities (including common and preferred stock, convertible securities,
depository receipts, and warrants or rights to purchase such equity securities)
of companies domiciled outside the United States. Investments also may be made
in debt obligations of foreign governments, corporations and international or
supranational organizations (and their agencies or instrumentalities).
For temporary defensive purposes, to accumulate cash for investments, or to meet
anticipated redemptions, the Portfolio may invest in (or enter into repurchase
agreements with banks and broker dealers with respect to) short-term debt
securities, including Treasury bills and other U.S. Government securities, and
certificates of deposit and bankers' acceptances of U.S. banks. The Portfolio
may also hold cash and time deposits in foreign banks, denominated in any major
foreign currency.
In anticipation of foreign exchange requirements and to avoid losses due to
adverse movements in foreign currency exchange rates, the Portfolio also may
enter into forward contracts to purchase and sell foreign currencies.
Foreign Securities
Investment in the securities of non-U.S. issuers may involve risks in addition
to those normally associated with investments in the securities of U.S. issuers.
There may be less publicly available information about foreign issuers than is
available for U.S. issuers, and foreign auditing, accounting and financial
reporting practices may differ from U.S. practices. Foreign securities markets
may be less active than U.S. markets and trading may be thin: as a result
foreign securities prices may be more volatile. The Portfolio's investment
adviser, Schroder Capital Management International Inc. ("SCMI" or "Adviser")
will, in general, invest only in securities of companies and governments of
countries which, in its judgment, are both politically and economically stable.
Nevertheless, all foreign investments are subject to risks of foreign political
and economic instability, adverse movements in foreign exchange rates, the
imposition or tightening of exchange controls or other limitations on the
repatriation of foreign capital and changes in foreign governmental attitudes
toward private investment, possibly leading to nationalization, increased
taxation, or confiscation of Portfolio assets.
<PAGE>
Depository Receipts
Investments in securities of foreign issuers may on occasion be in the form of
sponsored or unsponsored American Depository Receipts ("ADRs") or European
Depository Receipts ("EDRs"), or other similar securities convertible into
securities of foreign issuers. These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs are receipts typically issued in the United States by a bank or
trust company, evidencing ownership of the underlying securities. EDRs are
typically issued in Europe under a similar arrangement. Generally, ADRs, in
registered form, are designed for use in the U.S. securities markets and EDRs,
in bearer form, are designed for use in European securities markets. Unsponsored
ADRs may be created without the participation of the foreign issuer. Holders of
these ADRs generally bear all the costs of the ADR facility, whereas foreign
issuers typically bear certain costs in a sponsored ADR. The bank or trust
company depository of an unsponsored ADR may be under no obligation to
distribute shareholder communications received from the foreign issuer or to
pass through voting rights.
Use of Forward Contracts in Foreign Exchange Transactions
To protect or "hedge" against adverse movements in foreign currency exchange
rates, the Portfolio may invest in forward contracts to purchase or sell an
agreed-upon amount of a specified currency at a future date (which may be any
fixed number of days from the date of the contract agreed upon by the parties)
at a price set at the time of the contract. Such contracts are traded in the
interbank market directly between currency traders (usually large commercial
banks) and their customers. A forward contract generally has no deposit
requirement, and no commissions are charged at any stage for trades. Although
such contracts tend to minimize the risk of loss due to a decline in the value
of the currency sold, they expose the Portfolio to the risk that the
counterparty is unable to perform and they tend to limit gain that might result
from an increase in the value of the currency during the contract period.
U.S. Government Securities
The Portfolio may invest in obligations issued or guaranteed by the U.S.
Government (or its agencies or instrumentalities) that have remaining maturaties
not exceeding one year. Agencies and instrumentalities that issue or guarantee
debt securities have been established or sponsored by the U.S. Government and
include the Bank for Cooperatives, the Export-Import Bank, the Federal Farm
Credit System, the Federal Home Loan Banks, the Federal Home Loan Mortgage
Corporation, the Federal Intermediate Credit Banks, the Federal Land Banks, the
Federal National Mortgage Association, the Government National Mortgage
Association and the Student Loan Marketing Association. Except for obligations
issued by the U.S. Treasury and the Government National Mortgage Association,
none of the obligations of the other agencies or instrumentalities referred to
above are backed by the full faith and credit of the U.S. Government.
Bank Obligations
The Portfolio may invest in obligations of U.S. banks (including certificates of
deposit and bankers' acceptances) whose total assets at the time of purchase
exceed $1 billion. Such banks must be members of the Federal Deposit Insurance.
The Portfolio also may invest in certificates of deposit issued by foreign
banks, denominated in any major foreign currency. The Portfolio will invest in
instruments issued by foreign banks that, in the view of SCMI and Trustees of
Schroder Core, are of of comparable credit-worthiness and financial stature to
U.S. banks used by the Portfolio.
A certificate of deposit is an interest-bearing negotiable certificate issued by
a bank against funds deposited in the bank. A bankers' acceptance is a
short-term draft drawn on a commercial bank by a borrower, usually in connection
with an international commercial transaction. Although the borrower is liable
for payment of the draft, the bank unconditionally guarantees to pay the draft
at its face value on the maturity date.
Short-Term Debt Securities
- 2 -
<PAGE>
The Portfolio may invest in commercial paper -- short-term unsecured promissory
notes issued in bearer form by bank holding companies, corporations and finance
companies. The commercial paper purchased by the Portfolio for temporary
defensive purposes consists of direct obligations of domestic issuers that at
the time of investment are rated "P-1" by Moody's Investors Service, Inc.
("Moody's") or "A-1" by Standard & Poor's ("S&P"), or securities which, if not
rated, are issued by companies having an outstanding debt issue currently rated
Aa by Moody's or AAA or AA by S&P. The rating "P-1" is the highest commercial
paper rating assigned by Moody's and the rating "A-1" is the highest commercial
paper ratings assigned by S&P.
Repurchase Agreements
The Portfolio may invest in securities subject to repurchase agreements, with
U.S. banks or broker-dealers, that mature in seven days or less. In a typical
repurchase agreement the seller of a security commits itself at the time of the
sale to repurchase that security from the buyer at a mutually agreed-upon time
and price. The repurchase price exceeds the sale price, reflecting an
agreed-upon interest rate effective for the period the buyer owns the security
subject to repurchase. The agreed-upon rate is unrelated to the interest rate on
that security. SCMI will monitor the value of the underlying security at the
time the transaction is entered into and at all times during the term of the
repurchase agreement to insure that the value of the security always equals or
exceeds the repurchase price. If a seller defaults under a repurchase agreement,
the Portfolio may have difficulty exercising its rights to the underlying
securities and may incur costs and experience time delays in connection with the
disposition of such securities. To evaluate potential risks, SCMI reviews the
credit-worthiness of banks and dealers with which the Portfolio enters into
repurchase agreements.
INVESTMENT RESTRICTIONS
The following investment restrictions restate or are in addition to those
described under "Investment Restrictions" and "Investment Policies" in the
Prospectus. Under the following restrictions -- which unless otherwise indicated
may not be changed without the approval of the holders of a majority of the
Portfolio's outstanding shares -- the Portfolio will not:
(a) Invest more than 5% of its assets in the securities of any single
issuer. This restriction does not apply to securities issued by the
U.S. Government, its agencies or instrumentalities;
(b) Purchase more than 10% of the voting securities of any one issuer;
(c) Invest more than 10% of its assets in "illiquid securities" (Securities
that cannot be disposed of within seven days at their then current
value). For purposes of this limitation, "illiquid securities"
includes, except in those circumstances described below, (i)
"restricted securities", which are securities that cannot be resold to
the public without registration under Federal securities law, and (ii)
securities of issuers (together with all predecessors) having a record
of less than three years of continuous operation;
(d) Invest 25% or more of the value of its total assets in any one
industry;
(e) Borrow money, except from banks for temporary emergency purposes, and
then only in an amount not exceeding 5% of the value of the total
assets of the Portfolio;
(f) Pledge, mortgage or hypothecate its assets to an extent greater than
10% of the value of its total assets;
(g) Purchase securities on margin or sell short;
(h) Make investments for the purpose of exercising control or management;
(i) Purchase or sell real estate (provided that the Portfolio may invest in
securities issued by companies that invest in real estate or interests
therein);
- 3 -
<PAGE>
(j) Make loans to other persons (provided that for purposes of this
restriction, entering into repurchase agreements, acquiring corporate
debt securities and investing in U.S. Government obligations,
short-term commercial paper, certificates of deposit and bankers'
acceptances shall not be deemed to be the making of a loan);
(k) Invest in commodities; commodity contracts other than foreign currency
forward contracts; or oil, gas and other mineral resource, lease, or
arbitrage transactions.
(l) Write, purchase or sell options, puts, calls, straddles, spreads, or
combinations thereof.
(m) Underwrite securities issued by other persons (except to the extent
that, in connection with the disposition of its portfolio investments,
it may be deemed to be an underwriter under U.S. securities laws);
(n) Invest in warrants, valued at the lower of cost or market, to more than
5% of the value of the Portfolio's net assets. Included within that
amount, but not to exceed 2% of the value of the Portfolio's net
assets, may be warrants that are not listed on the New York or American
Stock Exchange. Warrants acquired by the Portfolio in units or attached
to securities may be deemed to be without value;
(o) As a non-fundamental policy, invest in or hold securities of any issuer
if officers or Trustees of the Company or SCMI individually owning more
than 0.5% of the securities of such issuer together own more than 5% of
the securities of such issuer; and
(p) Purchase more than 3% of the outstanding securities of any closed-end
investment company. (Any such purchase of securities issued by a
closed-end investment company will otherwise be made in full compliance
with Sections 12(d)(1)(a)(i), (ii) and (iii) of the Investment Company
Act of the 1940 Act.)
<PAGE>
As a non-fundamental policy, the Portfolio will not invest in restricted
securities. This policy does not include restricted securities eligible for
resale to qualified institutional purchasers pursuant to Rule 144A under the
Securities Act of 1933 that are determined to be liquid by SCMI pursuant to
guidelines adopted by the Schroder Core Board. Such guidelines take into account
trading activity for such securities and the availability of reliable pricing
information, among other factors. If there is a lack of trading interest in
particular Rule 144A securities, these securities may be illiquid.
MANAGEMENT
Officers and Trustees
The following information relates to the principal occupations during the past
five years of each Trustee and executive officer of the Trust and shows the
nature of any affiliation with SCMI. Each of these individuals currently serves
in the same capacity for Schroder Core.
Peter E. Guernsey, Oyster Bay, New York - Trustee of the Trust - Insurance
Consultant since August 1986; prior thereto Senior Vice President, Marsh &
McLennan, Inc., insurance brokers.
Ralph E. Hansmann (Honorary), 40 Wall Street, New York, New York - Honorary
Trustee of the Trust - Private investor; Director, First Eagle Fund of America,
Inc.; Director, Verde Exploration, Ltd.; Trustee Emeritus, Institute for
Advanced Study; Trustee and Treasurer, New York Public Library; Life Trustee,
Hamilton College.
John I. Howell, 7 Riverside Road, Greenwich, Connecticut - Trustee of the Trust
- - Private Consultant since February 1987; Director, American International
Group, Inc.; Director, American International Life Assurance Company of New
York.
Clarence F. Michalis, 44 East 64th Street, New York, New York - Trustee of the
Trust - Chairman of the Board of Directors, Josiah Macy, Jr. Foundation
(charitable foundation).
Hermann C. Schwab, 787 Seventh Avenue, New York, New York - Chairman (Honorary)
and Trustee of the Trust - retired since March, 1988; prior thereto, consultant
to SCMI since February 1, 1984.
Mark J. Smith(a) (b), 33 Gutter Lane, London, England - a Vice President and
Trustee of the Trust - First Vice President of SCMI since April 1990; Director
and Vice President, Schroder Advisors since 1989.
Robert G. Davy, 787 Seventh Avenue, New York, New York - a Vice-President of the
Trust - Director of SCMI and Schroder Capital Management International Ltd.
since 1994; First Vice President of SCMI since July, 1992; prior thereto,
employed by various affiliates of Schroders plc in various positions in the
investment research and portfolio management areas since 1986.
Margaret H. Douglas-Hamilton(b) (c), 787 Seventh Avenue, New York, New York -
Secretary of the Trust - Secretary of SCM since July 1995; Secretary of Schroder
Advisers since April 1990; First Vice President and General Counsel of Schroders
Incorporated(b) since May 1987; prior thereto, partner of Sullivan & Worcester,
a law firm.
- 5 -
<PAGE>
Richard R. Foulkes, 787 Seventh Avenue, New York, New York - a Vice President of
the Trust; Deputy Chairman of SCMI since October 1995; Director and Executive
Vice President of Schroder Capital Management International Ltd. since 1989.
David I. Goldstein, 2 Portland Square, Portland, Maine - Assistant Treasurer and
Assistant Secretary of the Trust Counsel, Forum Financial Services, Inc. Since
1991; prior thereto, associate at Kirkpatrick & Lockhart, Washington, D.C.
Barbara Gottlieb(c), 787 Seventh Avenue, New York, New York - Assistant
Secretary of the Trust - Assistant Vice President of SWIS since July 1995 prior
thereto held various positions with SWIS affiliates.
Robert Jackowitz(b) (c), 787 Seventh Avenue, New York, New York - Treasurer of
the Trust - Vice President of SCM since September 1995; Treasurer of SCM and
Schroder Advisers since July 1995; Vice President of SCMI since June 1995; and
Assistant Treasurer of Schroders Incorporated since January 1993.
John Y. Keffer, 2 Portland Square, Portland, Maine - Vice President of the
Trust. President of Forum Financial Services, Inc., the Fund's
sub-administrator, and Forum Financial Corp., the Fund's transfer and dividend
disbursing agent and fund accountant.
Jane P. Lucas, (c) 787 Seventh Avenue, New York, New York - Vice President of
the Trust - Director and Senior Vice President SCMI; Director of SCM since
September 1995; Assistant Director Schroder Investment Management Ltd. since
June 1991.
Gerardo Machado, 787 Seventh Avenue, New York, New York - Assistant Secretary of
the Trust - Associate, SCMI.
Catherine A. Mazza, 787 Seventh Avenue, New York, New York - Vice President of
the Trust - President of Schroder Advisors since 1997; First Vice President of
SCMI and SCM since 1996; prior thereto, held various marketing positions at
Alliance Capital, an investment adviser, since July 1985.
Thomas G. Sheehan, 2 Portland Square, Portland, Maine - Assistant Treasurer and
Assistant Secretary of the Trust - Counsel, Forum Financial Services, Inc. since
1993; prior thereto, Special Counsel, U.S. Securities and Exchange Commission,
Division of Investment Management, Washington, D.C.
Fariba Talebi, 787 Seventh Avenue, New York, New York - Vice President of the
Trust - First Vice President of SCMI since April 1993, employed in various
positions in the investment research and portfolio management areas since 1987.
John A. Troiano(b), 787 Seventh Avenue, New York, New York - Vice President of
the Trust - Managing Director and Senior Vice President of SCMI since October
1995; Director of Schroder Advisors since October 1992; Director of SCMI since
1991; prior thereto, employed by various affiliates of SCMI in various positions
in the investment research and portfolio management areas since 1981.
Ira L. Unschuld, 787 Seventh Avenue, New York, New York - Vice President of the
Trust - Vice President of SCMI since April, 1993 and an Associate from July,
1990 to April, 1993; prior to July, 1990, employed by various financial
institutions as a securities or financial analyst.
(a) Interested Trustee of the Trust within the meaning of the 1940 Act.
- 6 -
<PAGE>
(b) Schroder Fund Advisors, Inc. ("Schroder Advisors") is a wholly-
owned subsidiary of SCMI, which is a wholly-owned subsidiary of
Schroders Incorporated, which in turn is an indirect, wholly-owned U.S.
subsidiary of Schroders plc.
(c) Schroder Capital Management Inc. ("SCM") is a wholly-owned subsidiary
of Schroder Wertheim Holdings Incorporated which is a wholly-owned
subsidiary of Schroders, Incorporated, which in turn is an indirect
wholly-owned U.S. subsidiary of Schroders plc.
Officers and Trustees who are interested persons of the Trust receive no salary,
fees or compensation from the Fund. Independent Trustees of the Trust receive an
annual fee of $1,000 and a fee of $250 for each meeting of the Board attended by
them except in the case of Mr. Schwab, who receives an annual fee of $1,500 and
a fee of $500 for each meeting attended. The Fund has no bonus, profit sharing,
pension or retirement plans.
The following table provides the fees paid to each Trustee of the Trust for the
fiscal year ended October 31, 1996.
<TABLE>
<CAPTION>
Name of Trustee Aggregate Pension or Estimated Annual Total Compensation
Compensation From Retirement Benefits Benefits Upon From Trust And Fund
Trust Accrued As Part of Retirement Complex Paid To
Trust Expenses Trustees
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mr. Guernsey $1,750 $0 $0 $1,750
Mr. Hansmann 1,375 0 0 1,375
Mr. Howell 1,750 0 0 1,750
Mr. Michalis 1,750 0 0 1,750
Mr. Schwab 3,000 0 0 3,000
Mr. Smith 0 0 0 0
</TABLE>
As of February 15, 1997 the officers and Trustees of the Trust owned, in the
aggregate, less than 1% of the Fund's outstanding shares.
Although the Trust is a Delaware business trust, certain of its Trustees or
officers are residents of the United Kingdom and substantially all of their
assets may be located outside of the U.S. As a result it may be difficult for
U.S. investors to effect service upon such persons within the U.S., or to
realize U.S. civil judgment against them. Civil remedies and criminal penalties
under U.S. Federal securities laws may be unenforceable in the U.K Extradition
treaties now in effect between the U.S. and the United Kingdom might not subject
such persons to effective enforcement of the criminal penalties of such acts.
- 7 -
<PAGE>
Investment Adviser
SCMI, 787 Seventh Avenue, New York, New York, 10019, serves as Adviser to the
Portfolio pursuant to an Investment Advisory Contract between the Trust and
SCMI. SCMI is a wholly-owned U.S. subsidiary of Schroders Incorporated, the
wholly-owned U.S. holding company subsidiary of Schroders plc. Schroders plc is
the holding company parent of a large worldwide group of banks and financial
service companies (referred to as the "Schroder Group"), with associated
companies and branch and representative offices in eighteen countries. The
Schroder Group specializes in providing investment management services.
Pursuant to the Investment Advisory Contract, SCMI is responsible for managing
the investment and reinvestment of the Fund's assets included and for
continuously reviewing, supervising and administering its investments. In this
regard, it is the responsibility of SCMI to make decisions relating to the
Fund's investments and to place purchase and sale orders regarding such
investments with brokers or dealers it selects . SCMI also furnishes to the
Board which has overall responsibility for the business and affairs of the
Trust, periodic reports on the investment performance of the Fund.
Under the terms of the Investment Advisory Contract, SCMI is required to manage
the Fund's investment portfolio in accordance with applicable laws and
regulations. In making its investment decisions, SCMI does not use material
information that may be in its possession or in the possession of its
affiliates.
The Investment Advisory Contract will continue in effect provided such
continuance is approved annually (i) by the holders of a majority of the
outstanding voting securities of the Fund or by the Trust Board and (ii) by a
majority of the Trustees who are not parties to such Contract or "interested
persons" (as defined in the 1940 Act) of any such party. The Investment Advisory
Contract may be terminated without penalty by vote of the Trustees or the
shareholders of the Fund on 60 days' written notice to the Adviser, or by the
Adviser on 60 days' written notice to the Trusts and it will terminate
automatically if assigned. The Investment Advisory Contract also provides that,
with respect to the Fund, neither SCMI nor its personnel shall be liable for any
error of judgment or mistake of law or for any act or omission in the
performance of its or their duties to the Fund, except for willful misfeasance,
bad faith or gross negligence in the performance of its or their duties or by
reason of reckless disregard of its or their obligations and duties under the
Investment Advisory Contract.
The Fund pays SCMI for its services a fee of 0.45% of its average daily net
assets for the first $100 million of The Fund's net such assets, 0.40% of the
next $150 million of average daily assets, and 0.35% of the Fund's average daily
net assets in excess of $250 million. For the fiscal years ended October 31,
1994, 1995 and 1996, SCMI received advisory fees of $1,665,176, $893,082 and
$_______________, respectively.
The Fund currently invests all of its assets in the Portfolio. SCMI will 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.
The Fund may withdraw its investment from the Portfolio at any time if the Board
determines that it is in the best interests of the Fund and its shareholders to
do so. Accordingly, the Fund retains SCMI as its investment adviser to manage
the Fund's assets in the event the Fund so withdraws its investment.
The investment advisory contract between Schroder Core and SCMI with respect to
the Portfolio is the same in all material respects as the Fund's Investment
Advisory Contract (except as to the parties, the circumstances under which fees
will be paid, the jurisdiction whose laws govern the agreement and fees payable
thereunder). For its investment advisory services under the Investment Advisory
Contract with respect to the Portfolio, SCMI receives an advisory fee of 0.45%
of the Portfolio's average daily net assets.
Administrative Services
On behalf of the Fund, the Trust has entered into an Administrative Services
Contract with Schroder Fund Advisors Inc. ("Schroder Advisors"), 787 Seventh
Avenue, New York, New York 10019. The Trust and Schroder Advisors have entered
into a Sub-Administration Agreement with Forum Financial Services, Inc.
("Forum"). Pursuant to their agreements,
- 8 -
<PAGE>
Schroder Advisors and Forum provide management and administrative services other
than those provided by SCMI including: (i) preparation of shareholder reports
and communications, (ii) regulatory compliance, such as reports to and filings
with the Securities and Exchange Commission [and state securities commissions]
and (iii) general supervision of the operation of the Fund, including
coordination of the services performed by the Fund's investment adviser,
transfer agent, custodian, independent accountants, legal counsel and others.
Schroder Advisors is a wholly-owned subsidiary of SCMI, and is a registered
broker-dealer organized to act as administrator and distributor of mutual funds.
Effective July 5, 1995, Schroder Advisors changed its name from Schroder Capital
Distributors Inc.
For these services, Schroder Advisors receives from the Fund a fee, payable
monthly, at the annual rate of 0.20% of the Fund's average daily net assets. For
the fiscal years ended October 31, 1994, 1995 and 1996, Schroder Advisors
received administrative fees of $832,588; $446,541; and $434,804 respectively.
Payment for Forum's services is made by Schroder Advisors and is not a separate
expense of the Fund.
The Administrative Services Contract and Sub-Administration Agreement are
terminable with respect to the Fund without penalty, at any time, by vote of a
majority of the Trustees who are not "interested persons" of the Trust (As
defined in the 1940 Act) and who have no direct or indirect financial interest
in the operation of the Fund's Distribution Plan or in the Administrative
Services Contract or Sub-Administration Agreement, upon not more than 60 days'
written notice to Schroder Advisors or Forum, as appropriate, or by vote of the
holders of a majority of the shares of the Fund, or upon 60 days' notice by
Schroder Advisors or Forum. The Administrative Services Contract will terminate
automatically in the event of its assignment.
The Sub-Administration Agreement is terminable with respect to the Fund without
penalty, at any time, by the Board, Schroder Advisors and the Adviser upon 60
days' written notice to Forum or by Forum upon 60 days' written notice to the
Fund and Schroder Advisors, and the Adviser, as appropriate.
Schroder Advisors and Forum provide similar services to the Portfolio pursuant
to administrative services agreements between Schroder Core and each of these
entities, for which Schroder Advisors and Forum are separately compensated at an
annual rate of 0.075% of the average daily net assets of the Portfolio. The fees
paid by the Fund to SCMI and Schroder Advisors therefore may equal up to 0.80%
of the Fund's average daily net assets. The administrative services agreements
are the same in all material respects as the Fund's respective agreements
(except as to the parties, the circumstances under which fees will be paid, the
fees payable thereunder and the jurisdiction whose laws govern the agreement).
Distribution of Fund Shares
Under a Distribution Plan (the "Plan") adopted by the Fund, the Trust will pay
directly or will reimburse the Adviser or a broker-dealer registered under the
Securities Exchange Act of 1934 (the Adviser or such registered broker-dealer,
if so designated, being a "Distributor" of the Fund shares) monthly (subject to
a limit of 0.50% per annum of the Fund's average daily net assets) for the sum
of (a) advertising expenses including advertising by radio, television,
newspapers, magazines, brochures, sales literature or direct mail, (b) costs of
printing prospectuses and other materials to be given or sent to prospective
investors, (c) expenses of sales employees or agents of the Distributor,
including salary, commissions, travel and related expenses in connection with
the distribution of Fund shares, and (d) payments to broker-dealers (other than
the Distributor) or other organizations (other than banks) for services rendered
in the distribution of the Fund's shares, including payments in amounts based on
the average daily value of Fund shares owned by shareholders in respect of which
the broker-dealer or organization has a distributing relationship. The Fund will
make no payments or reimbursements under the Distribution Plan until the Board
specifically further so authorizes. The Fund will not be liable for distribution
expenditures made by the Distributor in any given year in excess of the maximum
amount (0.50% per annum of the Fund's average daily net assets) payable under
the Plan in that year. Salary expense of sales staff responsible for marketing
shares of the Fund may be allocated among various portfolios of the Trust that
have adopted a Plan similar to that of the Fund on the basis of average net
assets; travel expenses are allocated among the portfolios of the Trust. The
Board of Trustees has concluded that there is a reasonable likelihood that the
Plan will benefit the Fund and its shareholders.
- 9 -
<PAGE>
Without shareholder approval, the Plan may not be amended to increase materially
the costs that the Fund may bear. Other material amendments to the Plan must be
approved by the Board and by the Trustees who are not "interested persons" of
the Trust and who have direct or indirect financial interest in the operation of
the Plan or in any related agreement (by vote cast in person at a meeting called
for the purpose of considering such amendments). The selection and nomination of
the Trustees of the Trust has been committed to the discretion of the Trustees
who are not "interested persons" of the Trust. The Plan has been approved, and
is subject to annual approval, by the Board and by the Trustees who are not
"interested persons" and have no direct or indirect financial interest in the
operation of the Plan (by vote cast in person at a meeting called for the
purpose of voting on the Plan). The Fund Investor Shares will make no payments
under the Distribution Plan until the Board specifically so authorizes. The Plan
is terminable with respect to the Fund at any time by a vote of a majority of
the Trustees who are not "interested persons" of the Trust and who have no
direct or indirect financial interest in the operation of the Plan or by vote of
the holders of a majority of the shares of the Fund.
Schroder Advisors acts as Distributor of the Fund's shares.
During the fiscal year ended October 31, 1996, the Fund spent, pursuant to the
Plan the following amounts on:
<TABLE>
<CAPTION>
Period Ended
October 31
1996 1995
----- ----
<S> <C> <C>
advertising $ -0- $ -0-
printing and mailing of prospectuses to other than $ -0- $ -0-
current shareholders
compensation to underwriters $ -0- $ -0-
compensation to dealers $ -0- $ -0-
compensation to sales personnel $ -0- $ -0-
interest, carrying, or other financing charges $ -0- $ -0-
</TABLE>
- 10 -
<PAGE>
Service Organizations
The Fund may also contract with banks, trust companies, broker-dealers or other
financial organizations ("Service Organizations") to provide certain
administrative services for the Fund. The Fund may pay fees (which will vary
depending upon the services provided) to Service Organizations in amounts up to
an annual rate of 0.25% of the daily net asset value of the Fund's shares owned
by shareholders with whom the Service Organization has a servicing relationship.
Services provided by Service Organization may include: providing personnel and
facilities necessary to establish and maintain certain shareholder accounts and
records; assisting in processing purchase and redemption transactions; arranging
for the wiring of funds; transmitting and receiving funds in connection with
client orders to purchase or redeem shares; verifying and guaranteeing client
signatures in connection with redemption orders, transfers among and changes in
client-designated accounts; providing periodic statements of client's account
balances and, to the extent practicable, integrating such information with other
client transactions; furnishing periodic and annual statements and confirmations
of all purchases and redemption of shares in a client's account; transmitting
proxy statements, annual reports, and updating prospectuses and other
communications from the Fund to clients; and such other services as the Fund or
a client reasonably may request, to the extent permitted by applicable statute,
rule or regulation. Neither SCMI nor Schroder Advisors will be a Service
Organization or receive fees for servicing. The Fund will make no such payments
to service organizations until the Board specifically so authorizes.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring to invest more than the minimum investments
specified by the Fund or charging a direct fee for servicing. If imposed, these
fees would be in addition to any amounts that might be paid to the Service
Organization by the Fund. Each Service Organization 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.
The Glass-Steagall Act and other applicable laws provide that banks may not
engage in the business of underwriting, selling or distributing securities.
There currently is no precedent prohibiting banks from performing administrative
and shareholder servicing functions as Service Organizations. However, judicial
or administrative decisions or interpretations of such laws, as well as changes
in either federal or state statutes or regulations relating to the permissible
activities of banks and their subsidiaries or affiliates, could prevent a bank
service organization from continuing to perform all or a part of its servicing
activities. If a bank were prohibited from so acting, its shareholder clients
would be permitted to remain shareholders of the Fund and alternative means for
continuing the servicing of such shareholders would be sought. In that event,
changes in the operation of the Fund might occur and a shareholder serviced by
such a bank might no longer be able to avail itself of any services then being
provided by the bank. It is not expected that shareholders would suffer any
adverse financial consequences as a result of any of these occurrences.
Portfolio Accounting
Forum Financial Corp. ("FFC"), an affiliate of Forum, performs portfolio
accounting services for the Fund pursuant to a Fund Accounting Agreement with
the Trust. The Fund Accounting Agreement will continue in effect only if such
continuance is specifically approved at least annually by the Board of Trustees
or by a vote of the shareholders of the Trust and in either case by a majority
of the Trustees who are not parties to the Fund Accounting Agreement (or
interested persons of any such party) at a meeting called for the purpose of
voting on the Fund Accounting Agreement.
Under its agreement, FFC prepares and maintains the books and records of the
Fund, on behalf of the Trust, that are required to be maintained under the 1940
Act; calculates the net asset value per share of the Fund, calculates dividends
and capital gain distributions; and prepares periodic reports to shareholders
and the Securities and Exchange Commission. For its services to the fund, FFC
receives from the Trust a fee of $36,000 per year plus, $12,000 per year for
each class of the Fund above one,. FFC is paid an additional $24,000 per year
with respect to global and international funds. FFC is also paid an additional
$12,000 per year with respect to tax-free money market funds, funds with more
than 25% of their total assets invested in asset backed securities funds, that
have more than 100 security positions or funds that have a monthly portfolio
turnover rate of 10% or greater.
FFC is required to use its best judgment and efforts in rendering fund
accounting services and is not be liable to the Trust for any action or inaction
in the absence of bad faith, willful misconduct or gross negligence. FFC is not
responsible or liable for any failure or delay in performance of its fund
accounting obligations arising out of or caused, directly or
- 11 -
<PAGE>
indirectly, by circumstances beyond its reasonable control. The Trust has agreed
to indemnify and hold harmless FFC and its employees, agents, officers and
directors against and from any and all claims, demands, actions, suits,
judgments, liabilities, losses, damages, costs, charges, counsel fees and all
other expenses arising out of or in any way related to FFC's actions taken or
failures to act with respect to a Fund or based, if applicable, upon
information, instructions or requests with respect to a Fund given or made to
FFC by an officer of the Trust duly authorized. This indemnification does not
apply to FFC's actions taken or failures to act in cases of FFC's own bad faith,
willful misconduct or gross negligence.
FFC assumed responsibility for fund accounting on August 15, 1994. Previously,
these services were performed by SCMI. For the fiscal years ended October 31,
1994 ; October 31, 1995; and October 31, 1996 1996, the Fund paid fund
accounting fees of $114,325; $72,000; and $12,000 respectively.
Fees and Expenses
As compensation for the advisory, administrative and management services
rendered to the Fund, SCMI and Schroder Advisors each earn (before waivers)
monthly fees at the following annual rates:
Fee Rate
Portion of average daily value Advisory Administrative
of the Fund's net assets Fee Fee
------------------------------ -------- ---
100% 0.45% 0.35%
SCMI and Schroder Advisors have voluntarily undertaken to assume certain
expenses of the Fund. This undertaking is designed to limit Fund expenses
(including all fees to be paid to SCMI and Schroder Advisors but excluding
taxes, interest, brokerage commissions and other portfolio transaction expenses
and extraordinary expenses) to 0.99 of the Fund's daily net assets. [This
expense limitation may only be withdrawn by a majority vote of the Trustees of
the Trust who are not "interested persons" of the trust.] If expense
reimbursements are required, they will be made on a monthly basis: SCMI will
reimburse the Fund for four-fifths of the amount required and Schroder Advisors
will reimburse the Fund for the remaining one-fifth. This undertaking to
reimburse expenses supplements any applicable state expense limitation. For the
fiscal year ended October 31, 1996, the Fund's expenses were [0.99]% of its
average net assets. Without expenses, reimbursements and fee waivers, Management
Fees, Other Expenses and Total Operating Expenses for the fiscal year ended
October 31, 1996 would be [0.75]%, [0.29]%, and [1.04]%, respectively, except
for the expenses paid by SCMI or Schroder Advisors, the Fund bears all costs of
its operations.
PORTFOLIO TRANSACTIONS
Investment Decisions
Investment decisions for the Fund and for the other investment advisory clients
of SCMI are made to achieve their respective investment objectives. Investment
decisions are the product of many factors in
- 12 -
<PAGE>
addition to basic suitability for the particular client involved and a
particular security may be bought or sold for certain clients and not bought or
sold for other clients. Likewise, a particular security may be bought for one or
more clients when one or more clients are selling the security. In some
instances, one client may sell a particular security to another client. It also
sometimes happens that two or more clients simultaneously purchase or sell the
same security, in which event each day's transactions in such security are,
insofar as is possible, averaged as to price and allocated between such clients
in a manner which in SCMI's opinion is equitable to each and in accordance with
the amount being purchased or sold by each. There may be circumstances when
purchases or sales of portfolio securities for one or more clients will have an
adverse effect on other clients.
Brokerage and Research Services
Transactions on U.S. stock exchanges and other agency transactions involve the
payment by the Fund of negotiated brokerage commissions. Such commissions vary
among brokers. Also, a particular broker may charge different commissions
according to the difficulty and size of transactions. Transactions in foreign
securities generally involve the payment of fixed brokerage commissions, which
are generally higher than those in the United States. Since most brokerage
transactions for the Fund will be placed with foreign broker-dealers, certain
portfolio transaction costs for the Fund may be higher than fees for similar
transactions executed on U.S. securities exchanges. There is generally no stated
commission in the case of securities traded in the over-the-counter markets, but
the price paid by the Fund usually includes an undisclosed dealer commission or
mark-up. In underwritten offerings, the price paid by the Fund includes a
disclosed, fixed commission or discount retained by the underwriter or dealer.
For the years ended October 31, 1994, 1995, and 1996, the Fund paid a total of
$653,234; $584,429; and $756,181 respectively, in brokerage commissions.
The Investment Advisory Contract authorizes and directs SCMI to place orders for
the purchase and sale of the Fund's investments with brokers or dealers it
selects and to seek "best execution" of such portfolio transactions. SCMI places
all such orders for the purchase and sale of portfolio securities and buys and
sells securities for the Fund through a substantial number of brokers and
dealers. In so doing, SCMI uses its best efforts to obtain for the Fund the most
favorable price and execution available. The Fund may, however, pay higher than
the lowest available commission rates when SCM believes it is reasonable to do
so in light of the value of the brokerage and research services provided by the
broker effecting the transaction. In seeking the most favorable price and
execution, SCMI, considers all factors it deems relevant (including price, size
of transaction, the nature of the market for the security, amount of commission,
the timing of the transaction taking into account market prices and trends, the
reputation, experience and financial stability of the broker-dealers involved
and the quality of service rendered by the broker-dealers in other
transactions).
It has for many years been a common practice in the investment advisory business
as conducted in certain countries, including the United States, for advisers of
investment companies and other institutional investors to receive research
services from broker-dealers that execute portfolio transactions for the clients
of such advisers. Consistent with this practice, SCMI may receive research
services from broker-dealers with which SCMI places the Fund's portfolio
transactions. These services, which in some cases may also be purchased for
cash, include such items as general economic and security market reviews,
industry and company reviews, evaluations of securities and recommendations as
to the purchase and sale of securities. Some of these services are of value to
SCMI in advising various of its clients (including the Fund), although not all
of these services are necessarily useful and of value in managing the Fund. The
management fee paid by the Fund is not reduced because SCMI and its affiliates
receive such services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934 (the
"Act"), SCMI may cause the Fund to pay a broker-dealer which provides with
"brokerage and research services" (as defined in the Act) to SCMI an amount of
disclosed commission for effecting a securities transaction for the Fund in
excess of the commission which another broker-dealer would have charged for
effecting that transaction.
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 Trustees may determine, SCMI may
consider sales of shares of the Fund as a factor in the selection of
broker-dealers to execute portfolio transactions for the Fund.
- 13 -
<PAGE>
Subject to the general policies regarding allocation of portfolio brokerage as
set forth above, the Trust Board has authorized SCMI to employ Schroder
Securities Limited and its affiliates (collectively, "Schroder Securities"),
affiliates of SCMI, to effect securities transactions of the Fund on various
foreign securities exchanges on which Schroder Securities has trading
privileges, provided certain other conditions are satisfied as described below.
Payment of brokerage commissions to Schroder Securities for effecting such
transactions is subject to Section 17(e) of the 1940 Act, which requires, among
other things, that commissions for transactions on securities exchanges paid by
a registered investment company to a broker which is an affiliated person of
such investment company (or an affiliated person of another person so
affiliated) not exceed the usual and customary broker's commissions for such
transactions. It is the Fund's policy that commissions paid to Schroder
Securities will in SCMI's judgment be (i) at least as favorable as commissions
contemporaneously charged by Schroder Securities on comparable transactions for
its most favored unaffiliated customers and (ii) at least as favorable as those
that would be charged on comparable transactions by other qualified brokers
having comparable execution capability. The Trust Board, including a majority of
the Trustees who are not interested persons, has adopted procedures pursuant to
Rule 17e-1 promulgated by the Securities and Exchange Commission under Section
17(e) to ensure that commissions paid to Schroder Securities by the Fund satisfy
the foregoing standards. The Board will review all transactions at least
quarterly for compliance with these procedures.
The Fund has no understanding or arrangement to direct any specific portion of
its brokerage to Schroder Securities and will not direct brokerage to Schroder
Securities in recognition of research services. The Fund paid no commissions to
Schroder Securities in the Fund's fiscal years ended October 31, 1994, 1995 or
1996. For the fiscal year ended October 31, 1995 and 1996, the Fund paid $1,829
and $________, respectively in brokerage commissions to Schroder, Munchmeyer,
Hengst & Co., an affiliate of Schroder Securities Limited, representing [0.003]%
of the Fund's aggregate brokerage commissions and [0.005]% of the Fund's
aggregate dollar amount of transactions involving the payment of commissions.
[For the fiscal year ended October 31, 1996, the Fund paid $[1,829] in brokerage
commissions to Schroder, Munchmeyer, Hengst & Co., an affiliate of Schroder
Securities Limited, these commissions represent [0.003]% of the Fund's aggregate
brokerage commissions and [0.005]% and _____% of the Fund's aggregate dollar
amount of transactions involving the payment of commissions.
The annual portfolio turnover rate of the Fund may exceed 50% but will not
ordinarily exceed 100%.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Determination of Net Asset Value Per Share
The net asset value per share of the Fund is determined each day the New York
Stock Exchange (the "Exchange") is open as of 4:00 P.M. New York time that day,
by dividing the value of the Fund's net assets by the total number of Fund
shares outstanding. The Exchange's most recent holiday schedule (which is
subject to change) states that it will close on New Year's Day, President's Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. It may also close on other days.
The Trust's Board of Trustees has established procedures for the valuation of
the Fund's securities: (i) equity securities traded on a securities exchange or
on the NASDAQ National Market System for which last sale information is
regularly reported are valued at the last reported sales prices on their primary
exchange or the NASDAQ National Market System that day (or, in the absence of
sales that day, at values based on the last sale prices on the preceding trading
day or closing mid-market prices); (ii) NASDAQ and other unlisted equity
securities for which last sale prices are not regularly reported but for which
over-the-counter market quotations are readily available are valued at the most
recently reported mid-market prices; (iii) securities (including restricted
securities) not having readily-available market quotations are valued at fair
value under the Board's procedures; (iv) debt securities having a maturity in
excess of 60 days are valued at the mid-market prices determined by a portfolio
pricing service or obtained from active market makers on the basis of reasonable
inquiry; and (v) short-term debt securities (having a remaining maturity of 60
days or less) are valued at cost, adjusted for amortization of premiums and
accretion of discount.
- 14 -
<PAGE>
Puts, calls and Stock Index Futures are valued at the last sales price on the
principal exchange on which they are traded, or, if there are no transactions,
in accordance with (i) above. When the Fund writes an option, an amount equal to
the premium received by the Fund is recorded in the Fund's books as an asset,
and an equivalent deferred credit is recorded as a liability. The deferred
credit is adjusted ("marked-to-market") to reflect the current market value of
the option.
Detailed information pertaining to the purchase of shares of the Fund,
redemption of shares and the determination of the net asset value of Fund shares
is set forth in the Prospectus under "Investment in the Fund".
Redemption in Kind
In the event that payment for redeemed shares is made wholly or partly in
portfolio securities, the shareholder may incur brokerage costs in converting
the securities to cash. An in kind distribution of portfolio securities will be
less liquid than cash. The shareholder may have difficulty in finding a buyer
for portfolio securities received in payment for redeemed shares. Portfolio
securities may decline in value between the time of receipt by the shareholder
and conversion to cash. A redemption in kind of the Fund's portfolio securities
could result in a less diversified portfolio of investments for the Fund and
could affect adversely the liquidity of the Fund's portfolio.
TAXATION
The Fund intends to continue to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). To
do so the Fund intends to distribute to shareholders at least 90% of its net
investment income (which includes dividends, interest and the excess of any net
short-term capital gains over net long-term capital losses), and to meet certain
diversification of assets, source of income, and other requirements of the
Code.The Fund will therefore not be subject to Federal income tax on its net
investment income and net realized capital gains (the excess of net long-term
capital gains over net short-term capital losses) distributed to shareholders.
If the Fund does not meet all of these Code requirements, it will be taxed as an
ordinary corporation, and its distributions will be taxable to shareholders as
ordinary income.
Amounts not distributed on a timely basis (in accordance with a calendar year
distribution requirement) are subject to a 4% nondeductible excise tax. To
prevent this, the Fund must distribute for each calendar year an amount equal to
the sum of (1) at least 98% of its ordinary income (excluding any capital gains
or losses) for the calendar year, (2) at least 98% of the excess of its capital
gains over capital losses realized during the one-year period ending October 31
of such year, and (3) all such ordinary income and capital gains for previous
years that were not distributed during such years. A distribution will be
treated as paid during the calendar year if it is declared by the Fund in
October, November or December of the year with a record date in such month and
paid by the Fund during January of the following year. Such distributions will
be taxable to shareholders in the calendar year in which the distributions are
declared, rather than the calendar year in which the distributions are received.
Under the Code, gains or losses attributable to fluctuations in foreign exchange
rates occur between the time the Fund accrues interest (or other receivable) or
accrues expenses (or other liabilities) and the time the Fund actually collects
such receivable or pays such liabilities are generally treated as ordinary
income or ordinary loss. Similarly, gains or losses on disposition of debt
securities denominated in a foreign currency attributable to fluctuations in the
value of the foreign currency between the date of acquisition of the security
and the date of disposition as well as gains or losses from certain foreign
currency transactions and options on certain foreign currency transactions, are
generally treated as ordinary gain or loss. These gains or losses, referred to
under the Code as "Section 988" gains or losses, may increase or decrease the
amount of the Fund's net investment income to be distributed to its shareholders
as ordinary income.
Generally, the hedging transactions undertaken by the Fund may be deemed to be
"straddles" for Federal income tax purposes. The straddle rules may affect the
character of gains (or losses) realized by the Fund. In addition, losses
realized by the Fund on positions that are part of a straddle may be deferred
under the straddle rules (rather than being taken into account in calculating
the taxable income for the taxable year in which the losses are realized).
Because only a few regulations implementing the straddle rules have been
promulgated, the tax consequences to the Fund of hedging transactions are not
entirely clear. Hedging transactions may increase the amount of short-term
capital gain realized by the Fund that is taxed as ordinary income when
distributed to shareholders.
- 15 -
<PAGE>
The Fund may make one or more of the elections available under the Code which
are applicable to straddles. If the Fund makes any of the elections, the amount,
character and timing of the recognition of gains or losses from the affected
straddle positions will be determined under rules that vary according to the
election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because application of the straddle rules may affect the character of gains or
losses, defer losses and/or accelerate the recognition of gains or losses from
the affected straddle positions, the amount that must be distributed to
shareholders (and which will be taxed to shareholders as ordinary income or
long-term capital gain) may be differenet from fund that did not engage in such
hedging transactions.
The requirements applicable to regulated investment companies such as the Fund
may limit the extent to which the Fund will be able to engage in transactions in
options and forward contracts.
Distributions of net investment income (including realized net short-term
capital gain) are taxable to shareholders as ordinary income. It is not expected
that such distributions will be eligible for the dividends received deduction
available to corporations.
Distributions of net long-term capital gain are taxable to shareholders as
long-term capital gain, regardless of the length of time the Fund shares have
been held by a shareholder, and are not eligible for the dividends received
deduction. A loss realized by a shareholder on the sale of shares of the Fund
with respect to which capital gain dividends have been paid will, to the extent
of such capital gain dividends, be treated as long-term capital loss (even
though such shares may have been held by the shareholder for one year or less).
Further, a loss realized on a disposition will be disallowed to the extent the
shares disposed of are replaced (whether by reinvestment or distributions or
otherwise) within a period of 61 days beginning 30 days before and ending 30
days after the shares are disposed of. In such a case, the basis of the shares
acquired will be adjusted to reflect the disallowed loss.
All distributions to shareholders are taxable whether reinvested in additional
shares or received in cash. Shareholders that reinvest distributions will have
for federal income tax purposes a cost basis in each share received equal to the
net asset value of a share of the Fund on the reinvestment date. Shareholders
will be notified annually as to the Federal tax status of distributions.
Distributions by the Fund reduce the net asset value of the Fund's shares. If a
distribution reduces the net asset value below a shareholder's cost basis, such
distribution nevertheless is taxable to the shareholder as ordinary income or
capital gain as described above, even though, from an investment standpoint, it
may constitute a partial return of capital. In particular, investors should be
careful to consider the tax implications of buying shares just prior to a
distribution. The price of shares purchased at that time includes the amount of
the forthcoming distribution which will be returned to the investor in the form
of a taxable distibution.
Upon redemption or sale of shares, a shareholder will realize a taxable gain or
which will be treated as capital gain or loss if the shares are capital assets
in the shareholder's hands. Such gain or loss generally will be long-term or
short-term depending upon the shareholder's holding period for the shares.
The Fund intends to minimize foreign income and withholding taxes by investing
in obligations whose payments will be subject to minimal or no such taxes
(insofar as this objective is consistent with the Fund's income objective).
However, since the Fund may incur foreign taxes, it intends, (if it is eligible
to do so) under Section 853 of the Code to treat each shareholder as having
received an additional distribution from the Fund (in the amount indicated in a
notice furnished to the shareholder, as the shareholder's pro rata portion of
income taxes paid to or withheld by foreign governments with respect to
interest, dividends and gain on the Fund's foreign portfolio investments.
Shareholders then may take the amount of such foreign taxes paid or withheld as
a credit against their Federal income tax, subject to certain limitations.
Shareholders find it more to their advantage to do so, they may, in the
alternative, deduct the foreign tax withheld as an itemized deduction in
computing taxable income. Shareholders are referred to their tax advisers
regarding to the availability of the foreign tax credit.
- 16 -
<PAGE>
The Fund will be required to report to the Internal Revenue Service (the "IRS")
all distributions and gross proceeds from the redemption of Fund shares (except
in the case of certain exempt shareholder). All such distributions and proceeds
generally will be subject to withholding of Federal income tax at a rate of 31%
("backup withholding") in the case of nonexempt shareholders if (1) the
shareholder fails to furnish the Fund with and to certify the shareholder's
correct taxpayer identification number or social security number, (2) the IRS
notifies the Fund that the shareholder has failed to report properly certain
interest and dividend income to the IRS and to respond to notices to that
effect, or (3) when required to do so, the shareholder fails to certify that
they are not subject to backup withholding. If the withholding provisions are
applicable, any such distributions or proceeds, whether reinvested in additional
shares or taken in cash, will be reduced by the amount required to be withheld.
Any amounts withheld may be credited against the shareholder's Federal income
tax liability. Investors may wish to consult their tax advisers about the
applicability of the backup withholding provisions.
The foregoing discussion relates only to Federal income tax law as applicable to
U.S. persons (i.e., U.S. citizens and residents and U.S. domestic corporations,
partnerships, trusts and estates). Distributions by the Fund also may be subject
to state and local taxes, and their treatment under state and local income tax
laws may differ from the Federal income tax treatment. Shareholders should
consult their tax advisors with respect to particular questions of Federal,
state and local taxation. Shareholders who are not U.S. persons should consult
their tax advisors regarding U.S. and foreign tax consequences of ownership of
shares of the Fund including the likelihood that distributions to them would be
subject to withholding of U.S. tax at a rate of 30% (or a lower rate under a tax
treaty).
OTHER INFORMATION
Organization
The Trust was originally organized as a Maryland corporation on July 30, 1969.
On February 29, 1988, the Trust was recapitalized to enable the Board to
establish a series of separately managed investment portfolios, each having
different investment objectives and policies. At the time of the
recapitalization, the Trust's name was changed from "The Cheapside Dollar Fund
Limited" to "Schroder Capital Funds, Inc." On January 9, 1996, the Trust was
reorganized as a Delaware business trust. At that time, the Trust's name was
changed from "Schroder Capital Funds, Inc." to its present name. The Trust is
registered as an open-end management investment company under the Act.
Delaware law provides that shareholders shall be entitled to the same
limitations of personal liability extended to stockholders of private
corporations for profit. The securities regulators of some states, however, have
indicated that they and the courts in their state may decline to apply Delaware
law on this point. To guard against this risk, the Trust Instrument contains an
express disclaimer of shareholder liability for the debts, liabilities,
obligations, and expenses of the Trust. The Trust Instrument provides for
indemnification out of each series' property of any shareholder or former
shareholder held personally liable for the obligations of the series. The Trust
Instrument also provides that each series shall, upon request, assume the
defense of any claim made against any shareholder for any act or obligation of
the series and satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which Delaware law does not apply (or no contractual limitation
of liability was in effect) and the portfolio is unable to meet its obligations.
Forum believes that, in view of the above, there is no risk of personal
liability to shareholders.
Capitalization and Voting
The Trust has an unlimited number of authorized shares of beneficial interest.
The Board may, without shareholder approval, divide the authorized shares into
an unlimited number of separate portfolios or series (such as the Fund) and may
divide such portfolios or series into classes of shares, and the costs of doing
so will be borne by the Trust. The Trust currently consists of five separate
portfolios, each of which has separate investment objectives and policies, and
five classes, two of which pertain to the Schroder International Fund.
Shares of the Fund are fully paid and nonassessable, and have no preferences as
to conversion, exchange, dividends, retirement or other features. Shares have no
preemptive rights and have non-cumulative voting rights, which means that the
holders of more than 50% of the shares voting for the election of Trustees can
elect
- 17 -
<PAGE>
100% of the Trustees if they choose to do so. A shareholder is entitled to one
vote for each full share held (and a fractional vote for each fractional share
held. Shares of each class vote separately to approve investment advisory
agreements or changes in investment objectives and other fundamental policies
affecting the portfolio to which they pertain, but all classes vote together in
the election of Trustees and ratification of the selection of independent
accountants. Shareholders of any particular class are not be entitled to vote on
any matters as to which such class are not directly affected.
The Trust will not hold annual meetings of shareholders. The matters considered
at an annual meeting typically include the reelection of Trustees, approval of
an investment advisory agreement, and the ratification of the selection of
independent accountants. These matters will not be submitted to shareholders
unless a meeting of shareholders is held for some other reason, such as those
indicated below. Each of the Trustees will serve until death, resignation or
removal. Vacancies will be filled by the remaining Trustees, subject to the
provisions of the 1940 Act requiring a meeting of shareholders for election of
Trustees to fill vacancies when less than a majority of Trustees then in office
have been elected by shareholders. Similarly, the selection of accountants and
renewal of investment advisory agreements for future years will be performed
annually by the Board. Future shareholder meetings will be held to elect
Trustees if required by the 1940 Act, to obtain shareholder approval of changes
in fundamental investment policies, to obtain shareholder approval of material
changes in investment advisory agreements, to select new accountants if the
employment of the Trust's accountants has been terminated, and to seek any other
shareholder approval required under the 1940 Act. The Trust Board has the power
to call a meeting of shareholders at any time when it believes it is necessary
or appropriate. In addition, the Trust Instrument provides that a special
meeting of shareholders may be called at any time for any purpose by the holders
of at least 10% of the outstanding shares entitled to be voted at such meeting.
In addition to the foregoing rights, the Trust Instrument provides that holders
of at least two-thirds of the outstanding shares of the Trust may remove any
person serving as a Trustee either by declaration in writing or at a meeting
called for such purpose. Further, the Board is required to call a shareholders
meeting for the purpose of considering the removal of one or more Trustees if
requested in writing to do so by the holders of not less than 10% of the
outstanding shares of the Trust. In addition, the Board is required, if
requested in writing to do so by ten or more shareholders of record (who have
been such for at least six months), holding in the aggregate the lesser of
(i)shares of the Trust having a total net asset value of at least $25,000 or
(ii) 1% of the outstanding shares of the Trust, to help such holders communicate
with other shareholders of the Trust with a view to obtaining the requisite
signatures to request a special meeting to consider Trustee removal.
Principal Shareholders
As of February 24 1997, the following persons owned (of record or beneficially)
5% or more of the Fund's shares:
Shareholder Share Balance Percent of Fund
- ----------- ------------- ---------------
Boat & Co 1,117,877.976 10.78%
PO Box 14737
St Louis, MO 63718
Union College Pooled Endowment Funds 756,135.770 7.29%
P.O. Box 3199, Church Street Station
New York, NY 10008
MAC & CO 962,339.663 9.28%
Mellon Bank, N.A.
MPNF 5044422
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<PAGE>
P.O. Box 320
Pittsburgh, PA 15230-3198
MAC & CO 796,894.162 7.68%
Mellon Bank, N.A.
IWHF5042882
P.O. Box 320
Pittsburgh, PA 15230-3198
Custody of Fund Assets
The Chase Manhattan Bank, N.A., through its Global Custody Division located in
London, England, acts as custodian of the Fund's assets, but plays no role in
making decisions as to the purchase or sale of portfolio securities for the
Fund. Pursuant to rules adopted under the 1940 Act, the Fund may maintain its
foreign securities and cash in the custody of certain eligible foreign banks and
securities depositories. Selection of these foreign custodial institutions is
made by the Trust Board following a consideration of a number of factors,
including (but not limited to) the reliability and financial stability of the
institution; the ability of the institution to perform capably custodial
services for the Fund; the reputation of the institution in its national market;
the political and economic stability of the country in which the institution is
located; and further risks of potential nationalization or expropriation of Fund
assets.
Transfer Agent and Dividend Disbursing Agent
Forum Financial Corp., Portland, Maine, serves as the Fund's Transfer and
Dividend Disbursing Agent.
Performance Information
The Fund may, from time to time, include quotations of its average annual total
return in advertisement or reports to shareholders or prospective investors.
Quotations of average annual total return will be expressed in terms of the
average annual compounded rate of return of a hypothetical investment in the
Fund over periods of 1, 5 and 10 years, calculated pursuant to the following
formula:
P(1+T)n=ERV
(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n= the number of years, and ERV = the ending redeemable value of a
hypothetical $1,000 payment made at the beginning of the period). All total
return figures will reflect the deduction of Fund expenses (net of certain
reimbursed expenses) on an annual basis, and will assume that all dividends and
distributions are reinvested when paid.
For the one year, five year and ten year periods ended October 31, 1996, the
average annual total return of the Fund was 2.08%, 8.56% and 12.51%,
respectively.
Quotations of total return will reflect only the performance of a hypothetical
investment in the Fund during the particular time period shown. Total return for
the Fund will vary based on changes in market conditions and the level of the
Fund's expenses, and no reported performance which may be expected in the
future.
In connection with communicating total return to current or prospective
investors, the Fund also may compare these figures to the performance of other
mutual funds tracked by mutual fund rating services or to other unmanaged
indexes which may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs.
Investors who purchase and redeem shares of the Fund through a customer account
maintained at a Service Organization may be charged one or more of the following
types of fees as agreed upon by the Services Organization and the investor, with
respect to the customer services provided by the Service Organization: account
fees (a fixed amount per month or per year); transaction fees (a fixed amount
per transaction processed); compensating balance requirements (a minimum dollar
amount a customer must maintain in order to obtain the services offered); or
account maintenance fees (a periodic charge
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<PAGE>
based upon a percentage of the assets in the account or of the dividends paid on
these assets). Such fees will have the effect of reducing the average annual
total return of the Fund for those investors.
Independent Accountants
Coopers & Lybrand L.L.P. serves as independent accountants for the Fund. Coopers
& Lybrand L.L.P. provides audit services and consultation in connection with
review of U.S. Securities and Exchange Commission filings. Their address is One
Post Office Square, Boston, Massachusetts 02109.
Counsel
Jacobs Persinger & Parker, 77 Water Street, New York, New York 10005, counsel to
the Fund, passes upon certain legal matters in connection with the shares
offered by the Fund.
Registration Statement
This SAI and the Prospectus do not contain all the information included in the
Fund's registration statement filed with the Securities and Exchange Commission
under the Securities Act of 1933 with respect to the securities offered hereby,
certain portions of which have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. The registration
statement, including the exhibits filed therewith, may be examined at the office
of the Securities and Exchange Commission in Washington, D.C.
Statements contained herein and in the Prospectus as to the contents of any
contract or other documents referred to are not necessarily complete, and, in
each instance, reference is made to the copy of such contract or other documents
filed as an exhibit to the registration statement, each such statement being
qualified in all respects by such reference.
FINANCIAL STATEMENTS
The audited Statement of Assets and Liabilities, Statement of Operations,
Statements of Changes in Net Assets, Statement of Investments, notes thereto,
and Financial Highlights of the Fund for the fiscal year ended October 31, 1996
and the Report of Independent Accountants thereon (included in the Annual Report
to shareholders), which are delivered along with this SAI, are incorporated
herein by reference.
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<PAGE>
SCHRODER EMERGING MARKETS FUND
INSTITUTIONAL PORTFOLIO
================================================================================
Statement of Additional Information
March 1, 1997
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Investment Advisor
================================================================================
Schroder Capital Management International Inc. ("SCMI")
Administrator and Distributor
Schroder Fund Advisors, Inc. ("Schroder Advisors")
Sub-Administrator
Forum Administrative Services, Limited Liability Company ("Forum")
Transfer Agent and Dividend Disbursing Agent
Forum Financial Corp. ("FFC")
<PAGE>
General Information: (207) 879-8903
Account Information: (800) 344-8332
Fax: (207) 879-6206
Investor Shares of Schroder Emerging Market Fund Institutional Portfolio (the
"Fund") are offered for sale at net asset value with no sales charge as an
investment vehicle for individuals, institutions, corporations and fiduciaries.
Advisor Shares of the Fund are offered to individual investors, in most cases
through Service Organizations (as defined herein). Advisor Shares incur more
expenses than Investor Shares.
This Statement of Additional Information ("SAI") is not a prospectus and is only
authorized for distribution when preceded or accompanied by the current
Prospectus for the Fund dated March 1, 1997 (the "Prospectus"). This SAI
contains additional and more detailed information than that set forth in the
Prospectus and should be read in conjunction with the Prospectus and retained
for future reference. You may obtain an additional copy of the Prospectus
without charge by writing to the Fund at Two Portland Square, Portland, Maine
04101 or calling the numbers printed above.
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<PAGE>
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<PAGE>
TABLE OF CONTENTS PAGE
INTRODUCTION........................................................
INVESTMENT POLICIES.................................................
Convertible Securities..............................................
Debt-to-Equity Conversions..........................................
U.S. Government Securities..........................................
Bank Obligations....................................................
Short-Term Debt Securities..........................................
Repurchase Agreements...............................................
Illiquid and Restricted Securities..................................
Loans of Portfolio Securities.......................................
Forward Foreign Currency
Exchange Contracts................................................
Options and Hedging.................................................
Warrants and Stock Rights...........................................
INVESTMENT RESTRICTIONS.............................................
MANAGEMENT..........................................................
Officers and Trustees...............................................
Investment Adviser..................................................
Administrative Services.............................................
Distribution of Fund Shares.........................................
Service Organizations...............................................
Portfolio Accounting................................................
Fees and Expenses...................................................
PORTFOLIO TRANSACTIONS..............................................
Investment Decisions................................................
Brokerage and Research Services.....................................
<PAGE>
ADDITIONAL PURCHASE AND
REDEMPTION INFORMATION............................................
Determination of Net Asset Value
Per Share.........................................................
Redemption in Kind..................................................
TAXATION............................................................
OTHER INFORMATION...................................................
Organization........................................................
Capitalization and Voting...........................................
Principal Shareholders..............................................
Custodian...........................................................
Transfer Agent and Dividend Disbursing Agent........................
Performance Information.............................................
Legal Counsel.......................................................
Independent Accountant..............................................
Registration Statements.............................................
Financial Statements................................................
APPENDIX - Ratings of
Corporate Debt Instruments
and Countries Excluded from
Emerging Markets Category...........................................
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<PAGE>
INTRODUCTION
Schroder Emerging Markets Fund Institutional Portfolio (the "Fund") is a
non-diversified, separately-managed portfolio of Schroder Capital Funds
(Delaware) (the "Trust"), an open-end management investment company currently
consisting of eight separate series, each of which has different investment
objectives and policies.
The Fund's investment objective is to achieve long-term capital appreciation
through direct or indirect investment in equity and debt securities of issuers
domiciled or doing business in emerging market countries in regions such as
Southeast Asia, Latin America, and Eastern and Southern Europe. There is no
assurance that the Fund will achieve this objective. Furthermore, investing in
securities of emerging market issuers involves special risks in addition to
those associated with investments in securities of U.S. issuers. The Fund
currently seeks to achieve its investment objective by holding, as its only
investment securities, the securities of Schroder Emerging Markets Fund
Institutional Portfolio (the "Portfolio"), a separate series of Schroder Capital
Funds ("Schroder Core").
INVESTMENT POLICIES
The Fund's investment objective and policies authorize it to invest in certain
types of securities and to engage in certain investment techniques as identified
in "Investment Objective" and "Investment Policies" in the Prospectus. The
following supplements the discussion found in those sections by providing
additional information or elaborating upon the discussion there. The Fund
currently seeks to achieve its investment objective by investing all of its
investable assets in the Portfolio. Since the Fund has the same investment
objective and policies as the Portfolio and currently invests all of its assets
in the Portfolio, investment policies are discussed with respect to the
Portfolio only.
Convertible Securities
The Portfolio may invest in convertible preferred stocks and convertible debt
securities. A convertible security is a bond, debenture, note, preferred stock
or other security that may be converted into or exchanged for a prescribed
amount of common stock of the same or a different issuer within a particular
period of time at a specified price or formula. Convertible securities rank
senior to common stocks in a corporation's capital structure and, therefore,
carry less risk than the corporation's common stock. The value of a convertible
security is a function of its "investment value" (its value as if it did not
have a conversion privilege), and its "conversion value" (the security's worth
if it were to be exchanged for the underlying security, at market value,
pursuant to its conversion privilege).
Debt-to-Equity Conversions
The Portfolio may invest up to 5% of its net assets in debt-to-equity
conversions. Debt-to-equity conversion programs are sponsored in varying degrees
by certain emerging market countries,
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<PAGE>
particularly in Latin America, and permit investors to use external debt of a
country to make equity investments in local companies. Many conversion programs
relate primarily to investments in transportation, communication, utilities and
similar infrastructure-related areas. The terms of the programs vary from
country to country, but include significant restrictions on the application of
proceeds received in the conversion and on the repatriation of investment
profits and capital. When inviting conversion applications by holders of
eligible debt, a government usually specifies the minimum discount from par
value that it will accept for conversion. SCMI Adviser believes that
debt-to-equity conversion programs may offer investors opportunities to invest
in otherwise restricted equity securities that have a potential for significant
capital appreciation and intends to invest assets of the Portfolio to a limited
extent in such programs under appropriate circumstances. There can be no
assurance that debt-to-equity conversion programs will continue or be successful
or that the Portfolio will be able to convert all or any of its emerging market
debt portfolio into equity investments.
U.S. Government Securities
The Portfolio may invest in obligations issued or guaranteed by the U.S.
government (or its agencies or instrumentalities) which have remaining
maturities not exceeding one year. Agencies and instrumentalities that have been
established or sponsored by the U.S. Government and issue or guarantee debt
securities include the Bank for Cooperatives, the Export-Import Bank, the
Federal Farm Credit System, the Federal Home Loan Banks, the Federal Home Loan
Mortgage Corporation, the Federal Intermediate Credit Banks, the Federal Land
Banks, the Federal National Mortgage Association, the Government National
Mortgage Association and the Student Loan Marketing Association. Except for
obligations issued by the U.S. Treasury and the Government National Mortgage
Association, none of the obligations of the other agencies or instrumentalities
referred to above are backed by the full faith and credit of the U.S.
Government.
Bank Obligations
The Portfolio may invest in obligations of U.S. banks (including certificates of
deposit and bankers' acceptances) whose total assets at the time of purchase
exceed $1 billion. Such banks must be members of the Federal Deposit Insurance
Corporation.
A certificate of deposit is an interest-bearing negotiable certificate issued by
a bank against funds deposited in the bank. A bankers' acceptance is a
short-term draft drawn on a commercial bank by a borrower, usually in connection
with an international commercial transaction. Although the borrower is liable
for payment of the draft, the bank unconditionally guarantees to pay the draft
at its face value on the maturity date.
Short-Term Debt Securities
The Portfolio may invest in commercial paper -- short-term unsecured promissory
notes issued in bearer form by bank holding companies, corporations and finance
companies. The commercial paper purchased by the Portfolio for temporary
defensive purposes consists of direct obligations of domestic issuers that at
the time of investment are rated "P-1" by Moody's Investors Service, Inc.
("Moody's") or "A-1" by Standard & Poor's ("S&P"), or securities which, if not
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<PAGE>
rated, are issued by companies having an outstanding debt issue currently rated
Aaa or Aa by Moody's or AAA or AA by S&P. The rating "P-1" is the highest
commercial paper rating assigned by Moody's and the rating "A-1" is the highest
commercial paper rating assigned by S&P.
Repurchase Agreements
The Portfolio may invest in securities subject to repurchase agreements that
mature in seven days or less with U.S. banks or broker-dealers. In a typical
repurchase agreement the seller of a security commits itself at the time of the
sale to repurchase that security from the buyer at a mutually agreed-upon time
and price. The repurchase price exceeds the sale price, reflecting an
agreed-upon interest rate effective for the period the buyer owns the security
subject to repurchase. The agreed-upon rate is unrelated to the interest rate on
that security. SCMI will monitor the value of the underlying security at the
time the transaction is entered into and at all times during the term of the
repurchase agreement to insure that the value of the security always equals or
exceeds the repurchase price. If a seller defaults under a repurchase agreement,
the Portfolio may have difficulty exercising its rights to the underlying
securities and may incur costs and experience time delays in connection with the
disposition of such securities. To evaluate potential risks, SCMI reviews the
credit-worthiness of banks and dealers with which the Portfolio enters into
repurchase agreements.
Illiquid and Restricted Securities
"Illiquid and Restricted Securities" under "Investment Policies" in the
Prospectus sets forth the circumstances in which the Portfolio may invest in
"restricted securities." In connection with the Portfolio's original purchase of
restricted securities, it may negotiate rights with the issuer to have such
securities registered for sale at a later time. Further, the registration
expenses of illiquid restricted securities may also be negotiated by the
Portfolio with the issuer at the time such securities are purchased by the
Portfolio. When registration is required, however, a considerable period may
elapse between the decision to sell the securities and the time the Portfolio
would be permitted to sell such securities. A similar delay might be experienced
in attempting to sell such securities pursuant to an exemption from
registration. Thus, the Portfolio may not be able to obtain as favorable a price
as that prevailing at the time of the decision to sell.
Loans of Portfolio Securities
The Portfolio may lend its portfolio securities subject to the restrictions
stated in the Prospectus. Under applicable regulatory requirements (which are
subject to change), the loan collateral must (a) on each business day, at least
equal the market value of the loaned securities and (b) consist of cash, bank
letters of credit, U.S. Government securities, or other cash equivalents in
which the Portfolio is permitted to invest. To be acceptable as collateral,
letters of credit must obligate a bank to pay amounts demanded by the Portfolio
if the demand meets the terms of the letter. Such terms and the issuing bank
must be satisfactory to the Portfolio. When lending portfolio securities, the
Portfolio receives from the borrower an amount equal to the interest paid or the
dividends declared on the loaned securities during the term of the loan plus the
interest on the collateral securities (less any finders' or administrative fees
the Portfolio pays in arranging the loan). The Portfolio may share the interest
it receives on the collateral securities with the borrower if it realizes at
least a minimum amount of interest required by the lending
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<PAGE>
guidelines established by the Trust's Board of Trustees (the "Trust Board"). The
Portfolio will not lend its portfolio securities to any officer, director,
employee or affiliate of the Portfolio or SCMI. The terms of the Portfolio's
loans must meet certain tests under the Internal Revenue Code and permit the
Portfolio to reacquire loaned securities on five business days' notice or in
time to vote on any important matter.
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 Schroder Core's Board
of Trustees.
Forward Foreign Currency Exchange Contracts
To hedge against adverse price movements in the securities held in its portfolio
and the currencies in which they are denominated (as well as in the securities
it might wish to purchase and their denominated currencies) the Portfolio may
engage in transactions in forward foreign currency contracts.
A forward foreign currency exchange contract ("forward contract") is an
obligation to purchase or sell a currency at a future date (which may be any
fixed number of days from the date of the contract agreed upon by the parties)
at a price set at the time of the contract. The Portfolio may enter into forward
contracts as a hedge against fluctuations in future foreign exchange rates.
Currently, only a limited market, if any, exists for hedging transactions
relating to currencies in many emerging market countries or to securities of
issuers domiciled or principally engaged in business in emerging market
countries. This may limit the Portfolio's ability to effectively hedge its
investments in those emerging markets. Hedging against a decline in the value of
a currency does not eliminate fluctuations in the prices of portfolio securities
or prevent losses if the prices of such securities decline. Such transactions
also limit the opportunity for gain if the value of the hedged currencies should
rise. In addition, it may not be possible for the Portfolio to hedge against a
devaluation that is so generally anticipated that the Portfolio is not able to
contract to sell the currency at a price above the devaluation level it
anticipates.
The Portfolio will enter into forward contracts under certain instances. When
the Portfolio enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may, for example, wish to secure the price
of the security in U.S. dollars or some other foreign currency which the
Portfolio is temporarily holding in its portfolio. By entering into a forward
contract for the purchase or sale (for a fixed amount of dollars or other
currency) of the amount of foreign currency involved in the underlying security
transactions, the Portfolio will be able to protect itself against possible loss
(resulting from adverse changes in the relationship between the U.S. dollar or
other currency being used for the security purchase and the foreign currency in
which the security is denominated) during the period between the date on which
the security is purchased or sold and the date on which payment is made or
received.
In addition, when the Portfolio anticipates purchasing securities at some future
date, and wishes to secure the current exchange rate of the currency in which
those securities are denominated against the U.S. dollar or some other foreign
currency, it may enter into a forward contract to purchase an amount
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<PAGE>
of currency equal to part or all of the value of the anticipated purchase, for a
fixed amount of U.S. dollars or other currency.
In all of the above instances, if the currency in which the Portfolio's
portfolio securities (or anticipated portfolio securities) are denominated rises
in value with respect to the currency which is being purchased, then the
Portfolio will have realized fewer gains than if the Portfolio had not entered
into the forward contracts. Furthermore, the precise matching of the forward
contract amounts and the value of the securities involved will not generally be
possible, since the future value of such securities in foreign currencies will
change as a consequence of market movements in the value of those securities
between the date the forward contract is entered into and the date it matures.
To the extent that the Portfolio enters into forward foreign currency contracts
to hedge against a decline in the value of portfolio holdings denominated in a
particular foreign currency resulting from currency fluctuations, there is a
risk that the Portfolio may nevertheless realize a gain or loss as a result of
currency fluctuations after such portfolio holdings are sold should the
Portfolio be unable to enter into an "offsetting" forward foreign currency
contract with the same party or another party. The Portfolio may be limited in
its ability to enter into hedging transactions involving forward contracts by
the Internal Revenue Code requirements relating to qualifications as a regulated
investment company (see "Taxation").
The Portfolio is not required to enter into such transactions with regard to its
foreign currency-denominated securities and will not do so unless deemed
appropriate by the Adviser. Generally, the Portfolio will not enter into a
forward contract with a term of greater than one year.
Options and Hedging
As discussed in the Prospectus, the Portfolio may write covered call options
against securities held in its portfolio and covered put options on eligible
portfolio securities and may purchase options of the same series to effect
closing transactions; and may hedge against potential changes in the market
value of its investments (or anticipated investments) by purchasing put and call
options on portfolio (or eligible portfolio) securities (and the currencies in
which they are denominated) and engaging in transactions involving futures
contracts and options on such contracts.
Call and put options on U.S. Treasury notes, bonds and bills and on various
foreign currencies are listed on several U.S. and foreign securities exchanges
and are written in over-the-counter transactions ("OTC Options"). Listed options
are issued or guaranteed by the exchange on which they trade or by a clearing
corporation such as the Options Clearing Corporation ("OCC"). Ownership of a
listed call option gives the Portfolio the right to buy from the OCC (in the
U.S.) or other clearing corporation or exchange, the underlying security or
currency covered by the option at the stated exercise price (the price per unit
of the underlying security or currency) by filing an exercise notice prior to
the expiration date of the option. The writer (seller) of the option would then
have the obligation to sell, to the OCC (in the U.S.) or other clearing
corporation or exchange, the underlying security or currency at that exercise
price prior to the expiration date of the option, regardless of its then current
market price. Ownership of a listed put option would give the Portfolio the
right to sell the underlying security or currency to the OCC (in the U.S.) or
other clearing corporation or exchange at the stated exercise price. Upon notice
of exercise of the put option, the writer of the option would have the
obligation to
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<PAGE>
purchase the underlying security or currency from the OCC (in the
U.S.) or other clearing corporation or exchange at the exercise price.
The OCC or other clearing corporation or exchange that issues listed options
ensures that all transactions in such options are properly executed. OTC options
are purchased from or sold (written) to dealers or financial institutions which
have entered into direct agreements with the Portfolio. With OTC options,
variables such as expiration date, exercise price and premium will be agreed
between the Portfolio and the transacting dealer. If the transacting dealer
fails to make or take delivery of the securities or amount of foreign currency
underlying an option it has written, the Portfolio would lose the premium paid
for the option as well as any anticipated benefit of the transaction. The
Portfolio will engage in OTC option transactions only with member banks of the
Federal Reserve System or primary dealers in U.S. Government securities or with
affiliates of such banks or dealers which have capital of at least $50 million
or whose obligations are guaranteed by an entity having capital of at least $50
million.
Options on Foreign Currencies. The Portfolio may purchase and write options on
foreign currencies for purposes similar to those involved with investing in
forward foreign currency exchange contracts. For example, in order to protect
against declines in the dollar value of portfolio securities which are
denominated in a foreign currency, the Portfolio may purchase put options on an
amount of such foreign currency equivalent to the current value of the portfolio
securities involved. As a result, the Portfolio would be able to sell the
foreign currency for a fixed amount of U.S. dollars, thereby securing the dollar
value of the portfolio securities (less the amount of the premiums paid for the
options). Conversely, the Portfolio may purchase call options on foreign
currencies in which securities it anticipates purchasing are denominated to
secure a set U.S. dollar price for such securities and protect against a decline
in the value of the U.S. dollar against such foreign currency. The Portfolio may
also purchase call and put options to close out written option positions.
The Portfolio may also write covered call options on foreign currency to protect
against potential declines in its portfolio securities which are denominated in
foreign currencies. If the U.S. dollar value of the portfolio securities falls
as a result of a decline in the exchange rate between the foreign currency in
which it is denominated and the U.S. dollar, then a loss to the Portfolio
occasioned by such value decline would be ameliorated by receipt of the premium
on the option sold. At the same time, however, the Portfolio gives up the
benefit of any rise in value of the relevant portfolio securities above the
exercise price of the option and, in fact, only receives a benefit from the
writing of the option to the extent that the value of the portfolio securities
falls below the price of the premium received. The Portfolio may also write
options to close out long call option positions. A covered put option on a
foreign currency would be written by the Portfolio for the same reason it would
purchase a call option, namely, to hedge against an increase in the U.S. dollar
value of a foreign security which the Portfolio anticipates purchasing. Here,
the receipt of the premium would offset, to the extent of the size of the
premium, any increased cost to the Portfolio resulting from an increase in the
U.S. dollar value of the foreign security. However, the Portfolio could not
benefit from any decline in the cost of the foreign security which is greater
than the price of the premium received. The Portfolio may also write options to
close out long put option positions.
Markets in foreign currency options are relatively new and the Portfolio's
ability to establish and close out positions on such options is subject to the
maintenance of a liquid secondary market. Although the Portfolio will not
purchase or write such options unless and until, in the opinion of the
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<PAGE>
SCMI, the market for them has developed sufficiently to ensure that their risks
are not greater than the risks in connection with the underlying currency, there
can be no assurance that a liquid secondary market will exist for a particular
option at any specific time. In addition, options on foreign currencies are
affected by all of those factors that influence foreign exchange rates and
investments generally.
The value of a foreign currency option depends upon the value of the underlying
currency relative to the U.S. dollar: as a result, the price of the option
position may vary with changes in the value of either or both currencies and may
have no relationship to the investment merits of a foreign security, including
foreign securities held in a "hedged" investment portfolio. Because foreign
currency transactions occurring in the interbank market involve substantially
larger amounts than those that may be involved in the use of foreign currency
options, investors may be disadvantaged by having to deal in an odd lot market
(generally consisting of transactions of less than $1 million) for the
underlying foreign currencies at prices that are less favorable than for round
lots.
There is no systematic reporting of last sale information for foreign currencies
or any regulatory requirement that quotations available through dealers or other
market sources be firm or revised on a timely basis. Quotation information
available is generally representative of very large transactions in the
interbank market and thus may not reflect relatively smaller transactions (i.e.,
less than $1 million) where rates may be less favorable. The interbank market in
foreign currencies is a global, around-the-clock market. To the extent that the
U.S. options markets are closed while the markets for the underlying currencies
remain open, significant price and rate movements may take place in the
underlying markets that are not reflected in the options market.
Covered Call Writing. The Portfolio is permitted to write covered call options
on portfolio securities and on the U.S. dollar and foreign currencies in which
they are denominated, without limit. Generally, a call option is "covered" if
the Portfolio owns (or has the right to acquire without additional cash
consideration (or for additional cash consideration held for the Portfolio by
its Custodian in a segregated account) the underlying security (currency)
subject to the option. In the case of call options on U.S. Treasury Bills,
however, the Portfolio might own U.S. Treasury Bills of a different series from
those underlying the call option, but with a principal amount and value
corresponding to the exercise price and a maturity date no later than that of
the security (currency) deliverable under the call option. A call option is also
covered if the Portfolio holds a call on the same security as the underlying
security (currency) of the written option, where the exercise price of the call
used for coverage is equal to or less than the exercise price of the call or
greater than the exercise price of the call written if the mark to market
difference is maintained by the Portfolio in cash, U.S. Government securities or
other high grade debt obligations which the Portfolio holds in a segregated
account maintained with its custodian.
The Portfolio will receive a premium from the purchaser in return for a call it
has written. Receipt of such premiums may enable the Portfolio to earn a higher
level of current income than it would earn from holding the underlying
securities (currencies) alone. Moreover, the premium received will offset a
portion of the potential loss incurred by the Portfolio if the securities
(currencies) underlying the option are ultimately sold (exchanged) by the
Portfolio at a loss. Furthermore, a premium received on a call written on a
foreign currency will ameliorate any potential loss of value on the portfolio
security due to a decline in the value of the currency. However, during the
option period, the covered call writer has, in return for the premium, given up
the
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opportunity for capital appreciation above the exercise price should the market
price of the underlying security (or the exchange rate of the currency in which
it is denominated) increase, but has retained the risk of loss should the price
of the underlying security (or the exchange rate of the currency in which it is
denominated) decline. The premium received will fluctuate with varying economic
market conditions. If the market value of the portfolio securities (or the
currencies in which they are denominated) upon which call options have been
written increases, the Portfolio may receive a lower total return from the
portion of its portfolio upon which calls have been written than it would have
had such calls not been written.
With respect to listed options and certain OTC options, during the option period
the Portfolio may be required, at any time, to deliver the underlying security
(currency) against payment of the exercise price on any calls it has written
(exercise of certain listed and OTC options may be limited to specific
expiration dates). This obligation is terminated upon the expiration of the
option period or at such earlier time when the writer effects a closing purchase
transaction. A closing purchase transaction is accomplished by purchasing an
option of the same series as the option previously written. However, once the
Portfolio has been assigned an exercise notice, the Portfolio will be unable to
effect a closing purchase transaction.
Closing purchase transactions are ordinarily effected to realize a profit on an
outstanding call option, to prevent an underlying security (currency) from being
called, to permit the sale of an underlying security (or the exchange of the
underlying currency) or to enable the Portfolio to write another call option on
the underlying security (currency) with either a different exercise price or
expiration date or both. The Portfolio may realize a net gain or loss from a
closing purchase transaction depending upon whether the amount of the premium
received on the call option is more or less than the cost of effecting the
closing purchase transaction. Any loss incurred in a closing purchase
transaction may be wholly or partially offset by unrealized appreciation in the
market value of the underlying security (currency). Conversely, a gain resulting
from a closing purchase transaction could be offset in whole or in part or
exceeded by a decline in the market value of the underlying security (currency).
If a call option expires unexercised, the Portfolio realizes a gain in the
amount of the premium on the option less the commission paid. Such a gain,
however, may be offset by depreciation in the market value of the underlying
security (currency) during the option period. If a call option is exercised, the
Portfolio realizes a gain or loss from the sale of the underlying security
(currency) equal to the difference between the purchase price of the underlying
security (currency) and the proceeds of the sale of the security (currency) plus
the premium received on the option less the commission paid.
Options written by the Portfolio will normally have expiration dates of up to
eighteen months from the date written. The exercised price of a call option may
be below, equal to or above the current market value of the underlying security
at the time the option is written.
Covered Put Writing. As a writer of a covered put option, the Portfolio would
incur an obligation to buy the security underlying the option from the purchaser
of the put, at the option's exercise price at any time during the option period,
at the purchaser's election (certain listed and OTC put options written by the
Portfolio will be exercisable by the purchaser only on a specific date). A put
is "covered" if at all times the Portfolio maintains with its custodian (in a
segregated account) cash, U.S. Government securities or other high grade
obligations in an amount equal to at least the exercise price of the option.
Similarly, a short put
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position could be covered by the Portfolio by its purchase of a put option on
the same security (currency) as the underlying security of the written option,
where the exercise price of the purchased option is equal to or more than the
exercise price of the put written or less than the exercise price of the put
written if the marked to market difference is maintained by the Portfolio in
cash, U.S. Government securities or other high grade debt obligations which the
Portfolio holds in a segregated account maintained at its custodian. In writing
puts, the Portfolio assumes the risk of loss should the market value of the
underlying security (currency) decline below the exercise price of the option
(any loss being decreased by the receipt of the premium on the option written).
In the case of listed options, during the option period the Portfolio may be
required, at any time, to make payment of the exercise price against delivery of
the underlying security (currency). The operation of and limitations on covered
put options in other respects are substantially identical to those of call
options.
The Portfolio will write put options for three purposes: (1) to receive the
income derived from the premiums paid by purchasers; (2) when the investment
adviser wishes to purchase the security (or a security denominated in the
currency underlying the option) underlying the option at a price lower than its
current market price (in which case it will write the covered put at an exercise
price reflecting the lower purchase price sought); and (3) to close out a long
put option position. The potential gain on a covered put option is limited to
the premium received on the option (less the commissions paid on the
transaction) while the potential loss equals the differences between the
exercise price of the option and the current market price of the underlying
securities (currencies) when the put is exercised, offset by the premium
received (less the commissions paid on the transaction).
Purchasing Call and Put Options. The Portfolio may purchase listed and OTC call
and put options in amounts equaling up to 5% of its total assets. The Portfolio
may purchase a call option in order to close out a covered call position (see
"Covered Call Writing" above), to protect against an increase in price of a
security it anticipates purchasing or, in the case of a call option on foreign
currency, to hedge against an adverse exchange rate move of the currency in
which the security it anticipates purchasing is denominated vis-++-vis the
currency in which the exercise price is denominated. The purchase of the call
option to effect a closing transaction on a call written over-the-counter may be
a listed or an OTC option. In either case, the call purchased is likely to be on
the same securities (currencies) and have the same terms as the written option.
If purchased over-the-counter, the option would generally be acquired from the
dealer or financial institution which purchased the call written by the
Portfolio.
The Portfolio may purchase put options on securities (currencies) which it holds
in its portfolio to protect itself against a decline in the value of the
security and to close out written put option positions. If the value of the
underlying security (currency) were to fall below the exercise price of the put
purchased in an amount greater then the premium paid for the option, the
Portfolio would incur no additional loss. In addition, the Portfolio may sell a
put option it has previously purchased prior to the sale of the securities
(currencies) underlying such option. Such a sale would result in a net gain or
loss depending upon whether the amount received on the sale is more or less than
the premium and other transaction costs paid on the put option that is sold. Any
such gain or loss could be offset in whole or in part by a change in the market
value of the underlying security (currency). If a put option purchased by the
Portfolio expired without being sold or exercised, the premium would be lost.
Risks of Options Transactions. During the option period, the covered call writer
has, in return for the premium on the option, given up the opportunity for
capital appreciation above the exercise price if the market price of the
underlying security (or the value of its denominated currency)
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increases, but has retained the risk of loss if the price of the underlying
security (or the value of its denominated currency) declines. The writer has no
control over the time when it may be required to fulfill its obligation as a
writer of the option. Once an option writer has received an exercise notice, it
cannot effect a closing purchase transaction in order to terminate its
obligation under the option and must deliver or receive the underlying
securities at the exercise price.
Prior to exercise or expiration, an option position can only be terminated by
entering into a closing purchase or sale transaction. If a covered call option
writer is unable to effect a closing purchase transaction or to purchase an
offsetting OTC option, it cannot sell the underlying security until the option
expires or the option is exercised. Accordingly, a covered call option writer
may not be able to sell an underlying security at a time when it might otherwise
be advantageous to do so. A covered put option writer who is unable to effect a
closing purchase transaction or to purchase an offsetting OTC option would
continue to bear the risk of decline in the market price of the underlying
security until the option expires or is exercised. In addition, a covered put
writer would be unable to utilize the amount held in cash or U.S. Government or
other high grade short-term obligations as security for the put option for other
investment purposes until the exercise or expiration of the option.
The Portfolio's ability to close out its position as a writer of an option is
dependent upon the existence of a liquid secondary market on option exchanges.
There is no assurance that such a market will exist, particularly in the case of
OTC options, since such options will generally only be closed out by entering
into a closing purchase transaction with the purchasing dealer. However, the
Portfolio may be able to purchase an offsetting option that does not close out
its position as a writer but constitutes an asset of equal value to the
obligation under the option written. If the Portfolio is not able to either
enter into a closing purchase transaction or purchase an offsetting position, it
will be required to maintain the securities subject to the call, or the
collateral underlying the put, even though it might not be advantageous to do
so, until a closing transaction can be entered into (or the option is exercised
or expires).
Among the possible reasons for the absence of a liquid secondary market on an
exchange are: (i) insufficient trading interest in certain options; (ii)
restrictions on transactions imposed by an exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes or
series of options or underlying securities; (iv) interruption of the normal
operations on an exchange; (v) inadequacy of the facilities of an exchange or
the OCC to handle current trading volume; or (vi) a decision by one or more
exchanges to discontinue the trading of options (or a particular class or series
of options), in which event the secondary market on that exchange (or in that
class or series of options) would cease to exist.
In the event of the bankruptcy of a broker through which the Portfolio engages
in transactions in options, the Portfolio could experience delays and/or losses
in liquidating open positions purchased or sold through the broker and/or incur
a loss of all or part of its margin deposits with the broker. Similarly, in the
event of the bankruptcy of the writer of an OTC option purchased by the
Portfolio, the Portfolio could experience a loss of all or part of the value of
the option. Transactions will be entered into by the Portfolio only with brokers
or financial institutions deemed creditworthy by SCMI.
Exchanges have established limitations governing the maximum number of options
on the same underlying security or futures contract (whether or not covered)
that may be written by a single
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investor, whether acting alone or in concert with others (regardless of whether
such options are written on the same or different exchanges or are held or
written on one or more accounts or through one or more brokers). An exchange may
order the liquidation of positions found to be in violation of these limits and
it may impose other sanctions or restrictions. These position limits may
restrict the number of listed options which the Portfolio may write.
The hours of trading for options may not conform to the hours during which the
underlying securities are traded. If the option markets close before the markets
for the underlying securities, significant price and rate movements can take
place in the underlying markets that cannot be reflected in the option markets.
The extent to which the Portfolio may enter into transactions involving options
may be limited by the Internal Revenue Code's requirements for qualification as
a regulated investment company and the Portfolio's intention to qualify as such
(see "Taxation").
Futures Contracts. The Portfolio may purchase and sell interest rate, currency,
and index futures contracts ("futures contracts") that are traded on U.S. and
foreign commodity exchanges, on such underlying securities as U.S. Treasury
bonds, notes and bills, and/or any foreign government fixed-income security
("interest rate" futures), on various currencies ("currency futures") and on
such indices of U.S. and foreign securities as may exist or come into being
("index futures").
The Portfolio will purchase or sell interest rate futures contracts for the
purpose of hedging some or all of the value of its portfolio securities (or
anticipated portfolio securities) against changes in prevailing interest rates.
If the investment adviser anticipates that interest rates may rise and,
concomitantly, the price of certain of its portfolio securities fall, the
Portfolio may sell an interest rate futures contract. If declining interest
rates are anticipated, the Portfolio may purchase an interest rate futures
contract to protect against a potential increase in the price of securities the
Portfolio intends to purchase. Subsequently, appropriate securities may be
purchased by the Portfolio in an orderly fashion; as securities are purchased,
corresponding futures positions would be terminated by offsetting sales of
contracts.
The Portfolio will purchase or sell index futures contracts for the purpose of
hedging some or all of its portfolio (or anticipated portfolio) securities
against changes in their prices. If it anticipates that the prices of securities
it holds may fall, the Portfolio may sell an index futures contract. Conversely,
if the Portfolio wishes to hedge against anticipated price rises in those
securities which it intends to purchase, the Portfolio may purchase an index
futures contract.
The Portfolio will purchase or sell currency futures on currencies in which its
portfolio securities (or anticipated portfolio securities) are denominated for
the purposes of hedging against anticipated changes in currency exchange rates.
The Portfolio will enter into currency futures contracts for the same reasons as
set forth above for entering into forward foreign currency exchange contracts;
namely, to secure the value of a security purchased or sold in a given currency
vis-a-vis a different currency or to hedge against an adverse currency exchange
rate movement of a portfolio security's (or anticipated portfolio security's)
denominated currency vis-++-vis a different currency.
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In addition to the above, interest rate, index and currency futures will be
bought or sold in order to close out short or long positions maintained by the
Portfolio in corresponding futures contracts.
Although most interest rate futures contracts call for actual delivery or
acceptance of securities, the contracts usually are closed out before the
settlement date without making or taking delivery. A futures contract sale is
closed out by effecting a futures contract purchase for the same aggregate
amount of the specific type of security (currency) and the same delivery date.
If the sale price exceeds the offsetting purchase price, the seller would be
paid the difference and would realize a gain. If the offsetting purchase price
exceeds the sale price, the seller would pay the difference and would realize a
loss. Similarly, a futures contract purchase is closed out by effecting a
futures contract sale for the same aggregate amount of the specific type of
security (currency) and the same delivery date. If the offsetting sale price
exceeds the purchase price, the purchaser would realize a gain, whereas if the
purchase price exceeds the offsetting sale price, the purchaser would realize a
loss. There is no assurance that the Portfolio will be able to enter into a
closing transaction.
Interest Rate Futures Contracts. When the Portfolio enters into an interest rate
futures contract, it is initially required to deposit with the Portfolio's
custodian (in a segregated account in the name of the broker performing the
transaction) an "initial margin" of cash or U.S. Government securities or other
high grade short-term obligations equal to approximately 2% of the contract
amount. Initial margin requirements are established by the exchanges on which
futures contracts trade and may change. In addition, brokers may establish
margin deposit requirements in excess of those required by the exchanges.
Initial margin in futures transactions is different from margin in securities
transactions in that initial margin does not involve the borrowing of money by a
brokers' client but is, rather, a good faith deposit on the futures contract
that will be returned to the Portfolio upon the proper termination of the
futures contract. The margin deposits made are marked to market daily and the
Portfolio may be required to make subsequent deposits of cash or U.S. Government
securities (called "variation margin") with the Portfolio's futures contract
clearing broker, which are reflective of price fluctuations in the futures
contract.
Currency Futures. Generally, foreign currency futures provide for the delivery
of a specified amount of a given currency, on the exercise date, for a set
exercise price denominated in U.S. dollars or other currency. Foreign currency
futures contracts would be entered into for the same reason and under the same
circumstances as forward foreign currency exchange contracts. SCMI will assess
such factors as cost spreads, liquidity and transaction costs in determining
whether to use futures contracts or forward contracts in its foreign currency
transactions and hedging strategy.
Purchasers and sellers of foreign currency futures contracts are subject to the
same risks that apply generally to the buying and selling of futures. In
addition, there are risks associated with foreign currency futures contracts and
their use as a hedging device similar to those associated with options on
foreign currencies described above. Further, settlement of a foreign currency
futures contract must occur within the country issuing the underlying currency.
Thus, the Portfolio must accept or make delivery of the underlying foreign
currency in accordance with any U.S. or foreign restrictions or regulations
regarding the maintenance of foreign banking arrangements by U.S. residents and
may be required to pay any fees, taxes or charges associated with such delivery
which are assessed in the issuing country.
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Index Futures Contracts. The Portfolio may invest in index futures contracts. An
index futures contract sale creates an obligation by the Portfolio, as seller,
to deliver cash at a specified future time. An index futures contract purchase
would create an obligation by the Portfolio, as purchaser, to take delivery of
cash at a specified future time. Futures contracts on indices do not require the
physical delivery of securities, but provide for a final cash settlement on the
expiration date that reflects accumulated profits and losses credited or debited
to each party's account.
The Portfolio is required to maintain margin deposits with brokerage firms
through which it effects index futures contracts in a manner similar to that
described above for interest rate futures contracts. In addition, due to current
industry practice, daily variations in gains and losses on open contracts are
required to be reflected in cash in the form of variation margin payments. The
Portfolio may be required to make additional margin payments during the term of
the contract.
At any time prior to expiration of the futures contract, the Portfolio may elect
to close the position by taking an opposite position, which will operate to
terminate the Portfolio's position in the futures contract. A final
determination of variation margin is then made, additional cash is required to
be paid by or released to the Portfolio and the Portfolio realizes a loss or
gain.
Options on Futures Contracts. The Portfolio may purchase and write call and put
options on futures contracts traded on an exchange and may enter into closing
transactions with respect to such options to terminate an existing position. An
option on a futures contract gives the purchaser the right (in return for the
premium paid) to assume a position in a futures contract (a long position if the
option is a call and a short position if the option is a put) at a specified
exercise price at any time during the term of the option. Upon exercise of the
option, the delivery of the futures position by the writer of the option to the
holder of the option is accompanied by delivery of the accumulated balance in
the writer's futures margin account, which represents the amount by which the
market price of the futures contract at the time of exercise exceeds, in case of
a call, or is less than, in the case of a put, the exercise price of the option
on the futures contract.
The Portfolio will purchase and write options on futures contracts for purposes
identical to those set forth above for the purchase of a futures contract
(purchase of a call option or sale of a put option) and the sale of a futures
contract (purchase of a put option or sale of a call option), or to close out a
long or short position in futures contracts. If, for example, the investment
adviser wished to protect against an increase in interest rates and the
resulting negative impact on the value of a portion of its fixed-income
portfolio, it might write a call option on an interest rate futures contract,
the underlying security of which correlates with the portion of the portfolio
the Adviser seeks to hedge. Any premiums received in the writing of options on
futures contracts may provide a further hedge against losses resulting from
price declines in portions of the Portfolio's investment portfolio.
Options on foreign currency futures contracts may involve certain additional
risks. Trading options on foreign currency futures contracts is relatively new.
The ability to establish and close out positions on such options is subject to
the maintenance of a liquid secondary market. To reduce this risk, the Portfolio
will not purchase or write options on foreign currency futures contracts unless
and until, in SCMI's opinion, the market for such options has developed
sufficiently that the risks in connection with them are not greater than the
risks in connection with transactions in the underlying foreign currency futures
contracts.
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Limitations on Futures Contracts and Options on Futures. The Portfolio may not
enter into futures contracts or purchase related options thereon if, immediately
thereafter, the amount committed to margin plus the amount paid for premiums for
unexpired options on futures contracts exceeds 5% of the value of the
Portfolio's total assets, after taking into account unrealized gains and
unrealized losses on such contracts it has entered into, provided, however, that
in the case of an option that is in-the-money (the exercise price of the call
(put) option is less (more) than the market price of the underlying security) at
the time of purchase, the in-the-money amount may be excluded in calculating the
5%. However, there is no overall limitation on the percentage of the Portfolio's
assets which may be subject to a hedge position. In addition, in accordance with
the regulations of the Commodity Futures Trading Commission ("CFTC") under which
the Portfolio is exempted from registration as a commodity pool operator, the
Portfolio may only enter into futures contracts and options on futures contracts
transactions for purposes of hedging a part or all of its portfolio. Except as
described above, there are no other limitations on the use of futures and
options thereon by the Portfolio.
The writer of an option on a futures contract is required to deposit initial and
variation margin pursuant to requirements similar to those applicable to futures
contracts. Premiums received from the writing of an option on a futures contract
are included in initial margin deposits.
Risks of Transactions in Futures Contracts and Related Options. The Portfolio
may sell a futures contract to protect against the decline in the value of
securities (or the currency in which they are denominated) held by the
Portfolio. However, it is possible that the futures market may advance and the
value of the Portfolio's securities (or the currency in which they are
denominated) may decline. If this occurs, the Portfolio will lose money on the
futures contract and also experience a decline in value of its portfolio
securities. While this might occur for only a very brief period or to a very
small degree, over time the value of a diversified portfolio will tend to move
in the same direction as the futures contracts.
If the Portfolio purchases a futures contract to hedge against the increase in
value of securities it intends to buy (or the currency in which they are
denominated), and the value of such securities (currencies) decreases, then the
Portfolio may determine not to invest in the securities as planned and will
realize a loss on the futures contract that is not offset by a reduction in the
price of the securities.
If the Portfolio has sold a call option on a futures contract, it will cover
this position by holding (in a segregated account maintained at its Custodian)
cash, U.S. Government Securities or other high grade debt obligations equal in
value (when added to any initial or variation margin on deposit) to the market
value of the securities (currencies) underlying the futures contract or the
exercise price of the option. Such a position may also be covered by owning the
securities (currencies) underlying the futures contract, or by holding a call
option permitting the Portfolio to purchase the same contract at a price no
higher than the price at which the short position was established.
In addition, if the Portfolio holds a long position in a futures contract it
will hold cash, U.S. Government Securities or other high grade debt obligations
equal to the purchase price of the contract (less the amount of initial or
variation margin on deposit) in a segregated account maintained for the
Portfolio by its Custodian. Alternatively, the Portfolio could cover its long
position by purchasing a put option on the same futures contract with an
exercise price as high or higher than the price of the contract held by the
Portfolio.
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Exchanges limit the amount by which the price of a futures contract may move on
any day. If the price moves equal the daily limit on successive days, then it
may prove impossible to liquidate a futures position until the daily limit moves
have ceased. In the event of adverse price movements, the Portfolio would
continue to be required to make daily cash payments of variation margin on open
futures positions. In such situations, if the Portfolio has insufficient cash,
it may have to sell portfolio securities to meet daily variation margin
requirements at a time when it may be disadvantageous to do so. In addition, the
Portfolio may be required to take or make delivery of the instruments underlying
interest rate futures contracts it holds at a time when it is disadvantageous to
do so. The inability to close out options and futures positions could also have
an adverse impact on the Portfolio's ability to effectively hedge its portfolio.
Futures contracts and options thereon that are purchased or sold on foreign
commodities exchanges may have greater price volatility than their U.S.
counterparts. Furthermore, foreign commodities exchanges may be less regulated
and under less governmental scrutiny than U.S. exchanges and brokerage
commissions, clearing costs and other transaction costs may be higher. Greater
margin requirements may limit the Portfolio's ability to enter into certain
commodity transactions on foreign exchanges. Moreover, differences in clearance
and delivery requirements on foreign exchanges may cause delays in the
settlement of the Portfolio's foreign exchange transactions.
In the event of the bankruptcy of a broker through which the Portfolio engages
in transactions in futures or options thereon, the Portfolio could experience
delays and/or losses in liquidating open positions purchased or sold through the
broker and/or incur a loss of all or part of its margin deposits with the
broker. Similarly, in the event of the bankruptcy of the writer of an OTC option
purchased by the Portfolio, the Portfolio could experience a loss of all or part
of the value of the option. Transactions are entered into by the Portfolio only
with brokers or financial institutions deemed creditworthy by SCMI.
While the futures contracts and options transactions to be engaged in by the
Portfolio for the purpose of hedging its portfolio securities are not
speculative in nature, there are risks inherent in the use of such instruments.
One such risk which may arise in employing futures contracts to protect against
the price volatility of portfolio securities (and the currencies in which they
are denominated) is that the prices of securities and indices subject to futures
contracts (and thereby the futures contract prices) may correlate imperfectly
with the behavior of the cash prices of the Portfolio's portfolio securities
(and the currencies in which they are denominated). Another such risk is that
prices of interest rate futures contracts may not move in tandem with the
changes in prevailing interest rates against which the Portfolio seeks a hedge.
A correlation may also be distorted by the fact that the futures market is
dominated by short-term traders seeking to profit from the difference between a
contract or security price objective and their cost of borrowed funds. Such
distortions are generally minor and would diminish as the contract approached
maturity.
There may exist an imperfect correlation between the price movements of futures
contracts purchased by the Portfolio and the movements in the prices of the
securities (currencies) which are the subject of the hedge. If participants in
the futures market elect to close out their contracts through offsetting
transactions rather than meet margin deposit requirements, distortions in the
normal relationship between the debt securities or currency markets and futures
markets could result. Price distortions
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<PAGE>
could also result if investors in futures contracts choose to make or take
delivery of underlying securities rather than engage in closing transactions due
to the resultant reduction in the liquidity of the futures market. In addition,
because the deposit requirements in the futures markets are less onerous than
margin requirements in the cash market, increased participation by speculators
in the futures market can be anticipated with the resulting speculation causing
temporary price distortions. Due to the possibility of price distortions in the
futures market and because of the imperfect correlation between movements in the
prices of securities and movements in the prices of futures contracts, a correct
forecast of interest rate trends may still not result in a successful hedging
transaction.
There is no assurance that a liquid secondary market will exist for futures
contracts and related options in which the Portfolio may invest. In the event a
liquid market does not exist, it may not be possible to close out a futures
position, and in the event of adverse price movements, the Portfolio would
continue to be required to make daily cash payments of variation margin. In
addition, limitations imposed by an exchange or board of trade on which futures
contracts are traded may compel or prevent the Portfolio from closing out a
contract, which may result in reduced gain or increased loss to the Portfolio.
The absence of a liquid market in futures contracts might cause the Portfolio to
make or take delivery of the underlying securities (currencies) at a time when
it may be disadvantageous to do so.
The extent to which the Portfolio may enter into transactions involving futures
contracts and options thereon may be limited by the Internal Revenue Code's
requirements for qualification as a regulated investment company and the
Portfolio's intention to qualify as such (see "Taxation").
Warrants and Stock Rights. The Portfolio may invest in warrants, which are
options to purchase an equity security at a specified price (usually
representing a premium over the applicable market value of the underlying equity
security at the time of the warrant's issuance). The Portfolio may not invest
more than 5% of its net assets (at the time of investment) in warrants (other
than those that have been acquired in units or attached to other securities). No
more than 2% of the Portfolio's net assets (at the time of investment) may be
invested in warrants that are not listed on the New York or American Stock
Exchanges. Investments in warrants involve certain risks, including the possible
lack of a liquid market for the resale of the warrants, potential price
fluctuations as a result of speculation or other factors and failure of the
price of the underlying security to reach a level at which the warrant can be
prudently exercised (in which case the warrant may expire without being
exercised, resulting in the loss of the Portfolio's entire investment therein).
The prices of warrants do not necessarily move parallel to the prices of the
underlying securities. Warrants have no voting rights, receive no dividends and
have no rights with respect to the assets of the issuer.
In addition, the Portfolio may invest up to 5% of its assets (at the time of
investment) in stock rights. A stock right is an option given to a shareholder
to buy additional shares at a predetermined price during a specified time
period.
INVESTMENT RESTRICTIONS
The Portfolio's significant investment restrictions are described in the
Prospectus. The following investment restrictions, except where stated to be
non-fundamental policies, are also fundamental policies of the Portfolio and,
together with the fundamental policies and investment objective described in the
Prospectus, cannot be changed without the vote of a "majority" of the
Portfolio's outstanding
- 18 -
<PAGE>
shares. Under the Investment Company Act of 1940, such a "majority" vote is
defined as the vote of the holders of the lesser of : (i) 67% of more of the
shares present or represented by proxy at a meeting of shareholders, if the
holders of more than 50% of the outstanding shares are present, or (ii) more
than 50% of the outstanding shares. Under these additional restrictions, the
Portfolio cannot:
(a) Underwrite securities of other companies (except insofar as the
Portfolio might be deemed to be an underwriter in the resale of any securities
held in its portfolio);
(b) Invest in commodities or commodity contracts (other than Hedging
Instruments, which it may use as permitted by any of its other fundamental
policies, whether or not any such Hedging Instrument is considered to be a
commodity or a commodity contract);
(c) Purchase securities on margin; however, the Portfolio may make margin
deposits in connection with any Hedging Instruments which it may use as
permitted by any of its other fundamental policies;
(d) Purchase or write puts or calls except as permitted by any of its
other fundamental policies;
(e) Lend money except in connection with the acquisition of debt
securities that the Portfolio's investment policies and restrictions permit it
to purchase (see "Investment Objective" and "Investment Policies" in the
Prospectus). The Portfolio may make loans of portfolio securities (see "Loans of
Portfolio Securities") and enter into repurchase agreements (see "Repurchase
Agreements");
(f) As a non-fundamental policy, invest in or hold securities of any
issuer if officers or Trustees of the Trust or SCMI individually owning more
than 0.5% of the securities of such issuer together own more than 5% of the
securities of such issuer;
(g) As a non-fundamental policy, invest more than 5% of the value of its
total assets in securities of issuers having a record, together with
predecessors, of less than three years of continuous operation;
(h) Make short sales of securities;
(i) Invest in interests in oil, gas or other mineral exploration or
development programs (but may purchase readily marketable securities of
companies which operate, invest in, or sponsor such programs);
(j) Invest in real estate or in interests in real estate (but may purchase
readily marketable securities of companies holding real estate or interests
therein).
MANAGEMENT
Officers and Trustees
- 19 -
<PAGE>
The following information relates to the principal occupations during the past
five years of each Trustee and executive officer of the Trust and shows the
nature of any affiliation with SCMI. Each of these individuals currently serves
in the same capacity for Schroder Core.
Peter E. Guernsey, Oyster Bay, New York - Trustee of the Trust - Insurance
Consultant since August 1986; prior thereto Senior Vice President, Marsh &
McLennan, Inc., insurance brokers.
Ralph E. Hansmann (Honorary), 40 Wall Street, New York, New York - Honorary
Trustee of the Trust - Private investor; Director, First Eagle Fund of America,
Inc.; Director, Verde Exploration, Ltd.; Trustee Emeritus, Institute for
Advanced Study; Trustee and Treasurer, New York Public Library; Life Trustee,
Hamilton College.
John I. Howell, 7 Riverside Road, Greenwich, Connecticut - Trustee of the Trust
- - Private Consultant since February 1987; Director, American International
Group, Inc.; Director, American International Life Assurance Company of New
York.
Clarence F. Michalis, 44 East 64th Street, New York, New York - Trustee of the
Trust - Chairman of the Board of Directors, Josiah Macy, Jr. Foundation
(charitable foundation).
Hermann C. Schwab, 787 Seventh Avenue, New York, New York - Chairman (Honorary)
and Trustee of the Trust - retired since March, 1988; prior thereto, consultant
to SCMI since February 1, 1984.
Mark J. Smith(a) (b), 33 Gutter Lane, London, England - a Vice President and
Trustee of the Trust - First Vice President of SCMI since April 1990; Director
and Vice President, Schroder Advisors since 1989.
Robert G. Davy, 787 Seventh Avenue, New York, New York - a Vice-President of the
Trust - Director of SCMI and Schroder Capital Management International Ltd.
since 1994; First Vice President of SCMI since July, 1992; prior thereto,
employed by various affiliates of Schroders plc in various positions in the
investment research and portfolio management areas since 1986.
Margaret H. Douglas-Hamilton(b) (c), 787 Seventh Avenue, New York, New York -
Secretary of the Trust - Secretary of SCM since July 1995; Secretary of Schroder
Advisers since April 1990; First Vice President and General Counsel of Schroders
Incorporated(b) since May 1987; prior thereto, partner of Sullivan & Worcester,
a law firm.
Richard R. Foulkes, 787 Seventh Avenue, New York, New York - a Vice President of
the Trust; Deputy Chairman of SCMI since October 1995; Director and Executive
- 20 -
<PAGE>
Vice President of Schroder Capital Management International Ltd. since 1989.
David I. Goldstein, 2 Portland Square, Portland, Maine - Assistant Treasurer and
Assistant Secretary of the Trust Counsel, Forum Financial Services, Inc. Since
1991; prior thereto, associate at Kirkpatrick & Lockhart, Washington, D.C.
Barbara Gottlieb(c), 787 Seventh Avenue, New York, New York - Assistant
Secretary of the Trust - Assistant Vice President of SWIS since July 1995 prior
thereto held various positions with SWIS affiliates.
Robert Jackowitz(b) (c), 787 Seventh Avenue, New York, New York - Treasurer of
the Trust - Vice President of SCM since September 1995; Treasurer of SCM and
Schroder Advisers since July 1995; Vice President of SCMI since June 1995; and
Assistant Treasurer of Schroders Incorporated since January 1993.
John Y. Keffer, 2 Portland Square, Portland, Maine - Vice President of the
Trust. President of Forum Financial Services, Inc., the Fund's
sub-administrator, and Forum Financial Corp., the Fund's transfer and dividend
disbursing agent and fund accountant.
Jane P. Lucas, (c) 787 Seventh Avenue, New York, New York - Vice President of
the Trust - Director and Senior Vice President SCMI; Director of SCM since
September 1995; Assistant Director Schroder Investment Management Ltd. since
June 1991.
Gerardo Machado, 787 Seventh Avenue, New York, New York - Assistant Secretary of
the Trust - Associate, SCMI.
Catherine A. Mazza, 787 Seventh Avenue, New York, New York - Vice President of
the Trust - President of Schroder Advisors since 1997; First Vice President of
SCMI and SCM since 1996; prior thereto, held various marketing positions at
Alliance Capital, an investment adviser, since July 1985.
Thomas G. Sheehan, 2 Portland Square, Portland, Maine - Assistant Treasurer and
Assistant Secretary of the Trust - Counsel, Forum Financial Services, Inc. since
1993; prior thereto, Special Counsel, U.S. Securities and Exchange Commission,
Division of Investment Management, Washington, D.C.
Fariba Talebi, 787 Seventh Avenue, New York, New York - Vice President of the
Trust - First Vice President of SCMI since April 1993, employed in various
positions in the investment research and portfolio management areas since 1987.
John A. Troiano(b), 787 Seventh Avenue, New York, New York - Vice President of
the Trust - Managing Director and Senior Vice President of SCMI since October
1995; Director of Schroder Advisors since October 1992; Director of SCMI since
1991; prior thereto, employed by various affiliates of SCMI in various positions
in the investment research and portfolio management areas since 1981.
- 21 -
<PAGE>
Ira L. Unschuld, 787 Seventh Avenue, New York, New York - Vice President of the
Trust - Vice President of SCMI since April, 1993 and an Associate from July,
1990 to April, 1993; prior to July, 1990, employed by various financial
institutions as a securities or financial analyst.
(a) Interested Trustee of the Trust within the meaning of the 1940 Act.
(b) Schroder Fund Advisors, Inc. ("Schroder Advisors") is a wholly-owned
subsidiary of SCMI, which is a wholly-owned subsidiary of Schroders
Incorporated, which in turn is an indirect, wholly-owned U.S. subsidiary of
Schroders plc.
(c) Schroder Capital Management, Inc. ("SCM") is a wholly-owned subsidiary of
Schroder Wertheim Holdings Incorporated which is a wholly-owned subsidiary
of Schroders, Incorporated, which in turn is an indirect wholly-owned U.S.
subsidiary of Schroders plc.
Officers and Trustees who are interested persons of the Trust receive no salary,
fees or compensation from the Fund. Independent Trustees of the Trust receive an
annual fee of $1,000 and a fee of $250 for each meeting of the Board attended by
them except in the case of Mr. Schwab, who receives an annual fee of $1,500 and
a fee of $500 for each meeting attended. The Fund has no bonus, profit sharing,
pension or retirement plans.
The following table provides the fees paid to each Trustee of the Trust for the
fiscal year ended October 31, 1996.
<TABLE>
<CAPTION>
Name of Trustee Aggregate Pension or Estimated Annual Total
Compensation From Retirement Benefits Upon Compensation From
Trust Benefits Accrued Retirement Trust And Fund
As Part of Trust Complex Paid To
Expenses Trustees
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mr. Guernsey $1,750 $0 $0 $1,750
Mr. Hansmann 1,375 0 0 1,375
Mr. Howell 1,750 0 0 1,750
Mr. Michalis 1,750 0 0 1,750
Mr. Schwab 3,000 0 0 3,000
Mr. Smith 0 0 0 0
</TABLE>
- 22 -
<PAGE>
As of February 15, 1997, the officers and Trustees of the Trust owned, in the
aggregate, less than 1% of the Fund's outstanding shares.
Although the Trust is a Delaware business trust, certain of its Trustees or
officers are residents of the United Kingdom and substantially all of their
assets may be located outside of the U.S. As a result it may be difficult for
U.S. investors to effect service upon such persons within the U.S., or to
realize U.S. civil judgments against them. Civil remedies and criminal penalties
under U.S. federal securities law may be unenforceable in the U.K. Extradition
treaties now in effect between the U.S. and the United Kingdom might not subject
such persons to effective enforcement of the criminal penalties of such acts.
Investment Adviser
Schroder Capital Management International Inc. ("SCMI"), 787 Seventh Avenue, New
York, New York 10019, serves as Investment Adviser to the Portfolio pursuant to
an Investment Advisory Contract between the Trust and SCMI dated. SCMI is a
wholly-owned U.S. subsidiary of Schroders Incorporated, the wholly-owned U.S.
holding company subsidiary of Schroders plc. Schroders plc is the holding
company parent of a large worldwide group of banks and financial service
companies (referred to as the "Schroder Group"), with associated companies and
branch and representative offices in eighteen countries. The Schroder Group
specializes in providing investment management services.
Pursuant to the Investment Advisory Contract, SCMI is responsible for managing
the investment and reinvestment of the Fund's assets and continuously reviews,
supervises and administers its investments. In this regard, it is the
responsibility of SCMI to make decisions relating to the Fund's investments and
to place purchase and sale orders regarding such investments with brokers or
dealers it selected. SCMI also furnishes to the Trust Board periodic reports on
the investment performance of the Fund. Under the terms of the Investment
Advisory Contract, SCMI is required to manage the Portfolio's investment
portfolio in accordance with applicable laws and regulations. In making its
investment decisions, SCMI does not use material inside information that may be
in its possession or in the possession of its affiliates.
The Investment Advisory Contract will continue in effect provided such
continuance is approved annually (i) by the holders of a majority of the
outstanding voting securities of the Fund or by the Trust Board and (ii) by a
majority of the Trustees who are not parties to such Contract or "interested
persons" (as defined in the 1940 Act) of any such party. The Investment Advisory
Contract may be terminated without penalty by vote of the Trustees or the
shareholders of the Fund on 60 days' written notice to the Adviser, or by the
Adviser on 60 days' written notice to the Trust, and it will terminate
automatically if assigned. The Investment Advisory Contract also provides that,
with respect to the Fund, neither SCMI nor its personnel shall be liable for any
error of judgment or mistake of law or for any act or omission in the
performance of its or their duties to the Fund, except for willful misfeasance,
- 23 -
<PAGE>
bad faith or gross negligence in the performance of the its or their duties or
by reason of reckless disregard of its or their obligations and duties under the
Investment Advisory Contract.
Under the terms of the Investment Advisory Contract, SCMI receives a monthly fee
equal on an annual basis to 1.00% of its average daily net assets. For the
period from commencement of operations through October 31, 1995 and for the
fiscal year ended October 31, 1996, SCMI received an advisory fee of $19,326 and
$___________, respectively.
The Fund currently invests all of its assets in the Portfolio. SCMI will 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).
The Fund may withdraw its investment from the Portfolio at any time if the Board
determines that it is in the best interests of the Fund and its shareholders to
do so. Accordingly, the Fund retains SCMI as its investment adviser to manage
the Fund's assets in the event the Fund so withdraws its investment.
The investment advisory contract between Schroder Core and SCMI with respect to
the Portfolio is the same in all material respects as the Fund's Investment
Advisory Contract (except as to the parties, the circumstances under which fees
will be paid and the jurisdiction whose laws govern the agreement).
Administrative Services
The Trust has entered into an Administrative Services Contract with Schroder
Fund Advisors Inc. ("Schroder Advisors"), 787 Seventh Avenue, New York, New York
10019, pursuant to which Schroder Advisors provides management and
administrative services necessary for the operation of the Fund, other than
those provided by SCMI, including, (i) preparation of shareholder reports and
communications, (ii) regulatory compliance, such as reports to and filings with
the Securities and Exchange Commission and state securities commissions, and
(iii) general supervision of the operation of the Fund, including coordination
of the services performed by the Fund's investment adviser, transfer agent,
custodian, independent accountants, legal counsel and others. Schroder Advisors
is a wholly-owned subsidiary of SCMI, and is a registered broker-dealer
organized to act as administrator and distributor of mutual funds. Effective
July 5, 1995, Schroder Advisors changed its name from Schroder Capital
Distributors Inc.
For these services, Schroder Advisors will receive from the Fund a fee, payable
monthly, at the annual rate of 0.10% of the Fund's average daily net assets.
From commencement of operations through October 31, 1995, Schroder Advisors
received an administrative fee of $19,591.
The Administrative Services Contract is terminable with respect to the Fund
without penalty, at any time, by vote of a majority of the Trustees who are not
"interested persons" of the Trust and who have no direct or indirect financial
interest in the operation of the Fund's Distribution Plan or in the
Administrative Services Contract, upon not more than 60 days' written notice to
Schroder Advisors or by vote of the holders of a majority of the shares of the
Fund, or upon 60 days' notice by Schroder Advisors. The Administrative Services
Contract will terminate automatically in the event of its assignment.
- 24 -
<PAGE>
The Trust and Schroder Advisors have entered into a Sub-Administration Agreement
with Forum Financial Services, Inc. ("Forum"). Pursuant to the
Sub-Administration Agreement, Forum assists Schroder Advisors with certain of
its responsibilities under the Administrative Services Agreement, including
shareholder reporting and regulatory compliance. Payment for Forum's services is
made by Schroder Advisors and is not a separate expense of the Fund.
The Sub-Administration Agreement is terminable with respect to the Fund without
penalty, at any time, by the Board, Schroder Advisors and the Adviser upon 60
days' written notice to Forum or by Forum upon 60 days' written notice to the
Fund and Schroder Advisors, and the Adviser, as appropriate.
Schroder Advisors and Forum provide similar services to the Portfolio pursuant
to administrative services agreements between Schroder Core and each of these
entities, for which Schroder Advisors and Forum are separately compensated at an
annual rate of 0.075% of the average daily net assets of the Portfolio. The
administrative services agreements are the same in all material respects as the
Fund's respective agreements except as to the parties, the circumstances under
which fees will be paid, the fees payable thereunder and the jurisdiction whose
laws govern the agreements.
The fees paid by the Fund to SCMI and Schroder Advisors may equal up to 1.25% of
the Fund's average daily net assets. Such fees as a whole are higher than
advisory and management fees charged to mutual funds which invest primarily in
U.S. securities but not necessarily higher than those charged to funds with
investment objectives similar to that of the Fund.
Distribution of Fund Shares
Under a Distribution Plan (the "Plan") adopted by the Fund, with respect to
Adviser Shares only, the Trust may pay directly or may reimburse the Investment
Adviser or a broker-dealer registered under the Securities Exchange Act of 1934
(the Investment Adviser or such registered broker-dealer, if so designated,
being a "Distributor" of the Fund's shares) monthly (subject to a limit of 0.50%
per annum of the Fund's average daily net assets) for the sum of (a) advertising
expenses including advertising by radio, television, newspapers, magazines,
brochures, sales literature or direct mail, (b) costs of printing prospectuses
and other materials to be given or sent to prospective investors, (c) expenses
of sales employees or agents of the Distributor, including salary, commissions,
travel, and related expenses in connection with the distribution of Fund shares,
and (d) payments to broker-dealers (other than the Distributor) or other
organizations (other than banks) for services rendered in the distribution of
the Fund's shares, including payments in amounts based on the average daily
value of Fund shares owned by shareholders in respect of which the broker-dealer
or organization has a distributing relationship. Any payment or reimbursement
made pursuant to the Plan is contingent upon the Board's approval. The Fund will
not be liable for distribution expenditures made by the Distributor in any given
year in excess of the maximum amount (0.50% per annum of the Fund's average
daily net assets) payable under the Plan in that year. Salary expenses of sales
staff responsible for marketing shares of the Fund may be allocated among
various portfolios of the Trust that have adopted a Plan similar to that of the
Fund on the basis of average net assets; travel expenses are allocated among the
portfolios of the Trust. The Board has concluded that there is a reasonable
likelihood that the Plan will benefit the Fund and its shareholders.
- 25 -
<PAGE>
Without shareholder approval, the Plan may not be amended to increase materially
the costs that the Fund may bear. Other material amendments to the Plan must be
approved by the Board, and by the Trustees who are not "interested persons" (as
defined in the 1940 Act) of the Trust and who have no direct or indirect
financial interest in the operation of the Plan or in any related agreement, by
vote cast in person at a meeting called for the purpose of considering such
amendments. The selection and nomination of the Trustees of the Trust has been
committed to the discretion of the Trustees who are not "interested persons" of
the Trust. The Plan has been approved, and is subject to annual approval, by the
Trust Board and by the Trustees who are not "interested persons" and have no
direct or indirect financial interest in the operation of the Plan, by vote cast
in person at a meeting called for the purpose of voting on the Plan. The Fund
will make no payments under the Distribution Plan until the Board specifically
so authorizes. The Plan is terminable with respect to the Fund at any time by a
vote of a majority of the Trustees who are not "interested persons" of the Trust
and who have no direct or indirect financial interest in the operation of the
Plan or by vote of the holders of a majority of the shares of the Fund.
Schroder Advisors acts as Distributor of the Fund's shares.
During the periods indicated below the Fund spent pursuant to the Plan the
following amounts on:
Period Ended
October 31,
1996 1995
---- ----
advertising $ -0- $ -0-
printing and mailing of prospectuses to other than $ -0- $ -0-
current shareholders
compensation to underwriters $ -0- $ -0-
compensation to dealers $ -0- $ -0-
compensation to sales personnel $ -0- $ -0-
interest, carrying, or other financing charges $ -0- $ -0-
Service Organizations
The Fund may also contract with banks, trust companies, broker-dealers or other
financial organizations ("Service Organizations") to provide certain
administrative services for the Fund. The Fund may pay fees (which vary
depending upon the services provided) to Service Organizations in amounts up to
an annual rate of 0.25% of the daily net asset value of the Fund's shares owned
by shareholders with whom the Service Organization had a servicing relationship.
Services provided by Service Organizations may include
- 26 -
<PAGE>
: providing personnel and facilities necessary to establish and maintain certain
shareholder accounts and records; assisting in processing purchase and
redemption transactions; arranging for the wiring of funds; transmitting and
receiving funds in connection with client orders to purchase or redeem shares;
verifying and guaranteeing client signatures in connection with redemption
orders, transfers among and changes in client-designated accounts; providing
periodic statements of a client's account balances and, to the extent
practicable, integrating such information with other client transactions;
furnishing periodic and annual statements and confirmations of all purchases and
redemptions of shares in a client's account; transmitting proxy statements,
annual reports, and updating prospectuses and other communications from the Fund
to clients; and such other services as the Fund or a client reasonably may
request, to the extent permitted by applicable statute, rule or regulation.
Neither SCMI nor Schroder Advisors will be a Service Organization or receive
fees for servicing. The Fund has no intention of making any such payments to
Service Organizations with respect to accounts of institutional investors, and
in any event will make no such payments until the Board specifically so
authorizes.
Some Service Organizations could impose additional or different conditions on
their clients, such as requiring them to invest more than the minimum
investments specified by the Fund or charging a direct fee for servicing. If
imposed, these fees would be in addition to any amounts that might be paid to
the Service Organization by the Fund. Each Service Organization would agree to
transmit to its clients a schedule of any such fees. Shareholders using Service
Organizations would be urged to consult them regarding any such fees or
conditions.
The Glass-Steagall Act and other applicable laws provide that banks may not
engage in the business of underwriting, selling or distributing securities.
There currently is no precedent prohibiting banks from performing administrative
and shareholder servicing functions as Service Organizations. However, judicial
or administrative decisions or interpretations of such laws, as well as changes
in either federal or state statutes or regulations relating to the permissible
activities of banks and their subsidiaries or affiliates, could prevent a bank
service organization from continuing to perform all or a part of its servicing
activities. If a bank were prohibited from so acting, its shareholder clients
would be permitted to remain shareholders of the Fund and alternative means for
continuing the servicing of such shareholders would be sought. In that event,
changes in the operation of the Fund might occur and a shareholder serviced by
such a bank might no longer be able to avail itself of any services then being
provided by the bank. It is not expected that shareholders would suffer any
adverse financial consequences as a result of any of these occurrences.
Portfolio Accounting
Forum Financial Corp. ("FFC"), an affiliate of Forum, performs portfolio
accounting services for the Fund pursuant to a Fund Accounting Agreement with
the Trust. The Fund Accounting Agreement will continue in effect only if such
continuance is specifically approved at least annually by the Board of Trustees
or by a vote of the shareholders of the Trust and in either case by a majority
of the Trustees who are not parties to the Fund Accounting Agreement (or
interested persons of any such party), at a meeting called for the purpose of
voting on the Fund Accounting Agreement.
Under its agreement, FFC prepares and maintains the books and records of the
Fund, on behalf of the Trust, that are required to be maintained under the 1940
Act; calculates the net asset value per share of the Fund; calculates dividends
and capital gain distributions; and prepares periodic reports to
- 27 -
<PAGE>
shareholders and the Securities and Exchange Commission. For its services to the
Fund, FFC receives from the Trust a fee of $36,000 per year plus $12,000 per
year for each class of the Fund above one. FFC is paid an additional $24,000 per
year with respect to global and international funds. In addition, FFC is also
paid an additional $12,000 per year with respect to tax-free money market funds,
funds with more than 25% of their total assets invested in asset backed
securities, funds that have more than 100 security positions or funds that have
a monthly portfolio turnover rate of 10% or greater.
FFC is required to use its best judgment and efforts in rendering fund
accounting services and is not be liable to the Trust for any action or inaction
in the absence of bad faith, willful misconduct or gross negligence. FFC is not
responsible or liable for any failure or delay in performance of its fund
accounting obligations arising out of or caused, directly or indirectly, by
circumstances beyond its reasonable control. The Trust has agreed to indemnify
and hold harmless FFC and its employees, agents, officers and directors against
and from any and all claims, demands, actions, suits, judgments, liabilities,
losses, damages, costs, charges, counsel fees and all other expenses arising out
of or in any way related to FFC's actions taken or failures to act with respect
to a Fund or based, if applicable, upon information, instructions or requests
with respect to a Fund given or made to FFC by an officer of the Trust duly
authorized. This indemnification does not apply to FFC's actions taken or
failures to act in cases of FFC's own bad faith, willful misconduct or gross
negligence.
For the fiscal years ended October 31, 1995 and 1996, the Fund paid fund
accounting fees of $35,667 and $12,000 respectively.
Fees and Expenses
As compensation for the advisory, administrative and management services
rendered to the Fund, SCMI and Schroder Advisors will each earn monthly fees at
the following annual rates:
Fee Rate
Portion of average daily value Advisory Administrative
of the Fund's net assets Fee Fee
------------------------ --- ---
100% 1.00% 0.25%
SCMI and Schroder Advisors have voluntarily undertaken to assume certain
expenses of the Fund. This undertaking is designed limit Fund expenses
(including all fees to be paid to SCMI and Schroder Advisors but excluding
taxes, interest, brokerage commissions and other portfolio transaction expenses
and extraordinary expenses) to 1.45% and 1.60% with respect to Investor Shares
and Advisor Shares, respectively, of the Fund's daily net assets. This expense
limitation may be withdrawn by a majority vote of the Trustees of the Trust who
are not "interested persons". If expense reimbursements are required, they will
be made on a monthly basis. SCMI will reimburse the Fund for four-fifths of the
amount required and Schroder Advisors, the remaining one-fifth. This undertaking
to reimburse expenses supplements any applicable state expense limitation.
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<PAGE>
The Fund bears all costs of its operations other than expenses specifically
assumed by Schroder Advisors or SCMI, including those expenses it indirectly
bears through its investment in the Portfolio. The costs borne by the Fund
include legal and accounting expenses; Trustees' fees and expenses; insurance
premiums, custodian and transfer agent fees and expenses; brokerage fees and
expenses; expenses of registering and qualifying the Fund's shares for sale with
the SEC and with various state securities commissions; expenses of obtaining
quotations on portfolio securities and pricing of the Fund's shares; a portion
of the expenses of maintaining the Fund's legal existence and of shareholders'
meetings; and expenses of preparation and distribution to existing shareholders
of reports, proxies and prospectuses. Trust expenses directly attributed to the
Fund are charged to the Fund; other expenses are allocated proportionately among
all the portfolios of the Trust in relation to the net assets of each portfolio.
PORTFOLIO TRANSACTIONS
Investment Decisions
Investment decisions for the Fund and for the other investment advisory clients
of SCMI are made to achieve their respective investment objectives. Investment
decisions are the product of many factors in addition to basic suitability for
the particular client involved and, a particular security may be bought or sold
for certain clients and not bought or sold for other clients. Likewise, a
particular security may be bought for one or more clients when one or more
clients are selling the security. In some instances, one client may sell a
particular security to another client. It also sometimes happens that two or
more clients simultaneously purchase or sell the same security, in which event
each day's transactions in such security are, insofar as is possible, averaged
as to price and allocated between such clients in a manner which in SCMI's
opinion is equitable to each and in accordance with the amount being purchased
or sold by each. There may be circumstances when purchases or sales of portfolio
securities for one or more clients will have an adverse effect on other clients.
- 29 -
<PAGE>
Brokerage and Research Services
Transactions on U.S. stock exchanges and other agency transactions involve the
payment by the Fund of negotiated brokerage commissions. Such commissions vary
among brokers. Also, a particular broker may charge different commissions
according to the difficulty and size of the transaction; for example,
transactions in foreign securities generally involve the payment of fixed
brokerage commissions, which are generally higher than those in the U.S. Since
most brokerage transactions for the fund will be placed with foreign
broker-dealers, certain portfolio transaction costs for the Fund may be higher
than fees for similar transactions executed on U.S. securities exchanges.
However, the Fund will seek to achieve the best net results in effecting its
portfolio transactions. There is generally less governmental supervision and
regulation of foreign stock exchanges and brokers than in the United States.
There is generally no stated commission in the case of securities traded in the
over-the-counter markets, but the price paid by the Fund usually includes an
undisclosed dealer commission or mark-up. In underwritten offerings, the price
paid by the Fund includes a disclosed, fixed commission or discount retained by
the underwriter or dealer.
The Investment Advisory Contract authorizes and directs SCMI to place orders for
the purchase and sale of the Fund's investments with brokers or dealers it
selects and to seek "best execution" of such portfolio transactions. SCMI places
all such orders for the purchase and sale of portfolio securities and buys and
sells securities for the Fund through a substantial number of brokers and
dealers. In so doing, SCMI uses its best efforts to obtain for the Fund the most
favorable price and execution available. The Fund may, however, pay higher than
the lowest available commission rates when SCMI believes it is reasonable to do
so in light of the value of the brokerage and research services provided by the
broker effecting the transaction. In seeking the most favorable price and
execution, SCMI considers all factors it may deem relevant (including price,
transaction size, the nature of the market for the security, the commission
amount, the timing of the transaction (taking into account market prices and
trends), the reputation, experience and financial stability of the
broker-dealers involved, and the quality of service rendered by the
broker-dealers in other transactions). For the period from commencement of
operations through October 31, 1996, the Fund paid a total of $101,087 in
brokerage commissions.
It has for many years been a common practice in the investment advisory business
for advisers of investment companies and other institutional investors to
receive research services from broker-dealers that execute portfolio
transactions for the clients of such advisers. Consistent with this practice,
SCMI may receive research services from broker-dealers with which SCMI places
the Fund's portfolio transactions. These services, which in some cases may also
be purchased for cash, include such items as general economic and security
market reviews, industry and company reviews, evaluations of securities and
recommendations as to the purchase and sale of securities. Some of these
services are of value to SCMI in advising various of its clients (including the
Fund), although not all of these services are necessarily useful and of value in
managing the Fund. The investment advisory fee paid by the Fund is not reduced
because SCMI and its affiliates receive such services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934, SCMI may
cause the Fund to pay a broker-dealer that provides SCMI with "brokerage and
research services" (as
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defined in the Act) an amount of disclosed commission for effecting a securities
transaction for the Fund in excess of the commission which another broker-dealer
would have charged for effecting that transaction. In addition, SCMI may
allocate brokerage transactions to broker-dealers who have entered into
arrangements under which the broker-dealer allocates a portion of the
commissions paid by the Fund toward payment of Fund expenses, such as custodian
fees.
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 Trustees may determine, SCMI may
consider sales of shares of the Fund as a factor in the selection of
broker-dealers to execute portfolio transactions for the Fund.
Subject to the general policies of the Fund regarding allocation of portfolio
brokerage as set forth above, the Trust Board has authorized SCMI to employ (a)
Schroder Wertheim & Company, Incorporated ("Schroder Wertheim") an affiliate of
SCMI, to effect securities transactions of the Fund on the New York Stock
Exchange only, and (b) Schroder Securities Limited and its affiliates
(collectively, "Schroder Securities"), affiliates of SCMI, to effect securities
transactions of the Fund on various foreign securities exchanges on which
Schroder Securities has trading privileges, provided certain other conditions
are satisfied as described below.
Payment of brokerage commissions to Schroder Wertheim or Schroder Securities for
effecting such transactions is subject to Section 17(e) of the 1940 Act, which
requires, among other things, that commissions for transactions on a securities
exchange paid by a registered investment company to a broker which is an
affiliated person of such investment company (or an affiliated person of another
person so affiliated) not exceed the usual and customary broker's commissions
for such transactions. It is the Fund's policy that commissions paid to Schroder
Wertheim or Schroder Securities will in SCMI's be (i) at least as favorable as
commissions contemporaneously charged by Schroder Wertheim or Schroder
Securities, as the case may be, on comparable transactions for their most
favored unaffiliated customers and (ii) at least as favorable as those which
would be charged on comparable transactions by other qualified brokers having
comparable execution capability. The Trust Board, including a majority of the
non-interested Trustees, has adopted procedures pursuant to Rule 17e-1
promulgated by the Securities and Exchange Commission under Section 17(e) to
ensure that commissions paid to Schroder Wertheim or Schroder Securities by the
Fund satisfy the foregoing standards. Such procedures will be reviewed at least
annually by the Board, including a majority of the non-interested Trustees. The
Board will also review all transactions at least quarterly for compliance with
such procedures.
It is further a policy of the Fund that all such transactions effected for the
Fund by Schroder Wertheim on the New York Stock Exchange be in accordance with
Rule 11a2-2(T) promulgated under the 1934 Act, which requires in substance that
a member of such exchange not associated with Schroder Wertheim actually execute
the transaction on the exchange floor or through the exchange facilities. Thus,
while Schroder Wertheim will bear responsibility for determining important
elements of execution such as timing and order size, another firm will actually
execute the transaction.
Schroder Wertheim will pay a portion of the brokerage commissions it receives
from the Fund to the brokers executing the Fund's transactions on the New York
Stock Exchange. In accordance with Rule 11a2-2(T), the Trust has entered into an
agreement with Schroder Wertheim permitting it to retain a
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portion of the brokerage commissions paid to it by the Fund. This agreement has
been approved by the Board, including a majority of the non-interested Trustees.
The Fund has no understanding or arrangement to direct any specific portion of
its brokerage to Schroder Wertheim or Schroder Securities and will not direct
brokerage to Schroder Wertheim or Schroder Securities in recognition of research
services.
From time to time, the Fund may purchase securities of a broker or dealer
through which its regularly engages in securities transactions. During the
fiscal year ended October 31, 1996, the Fund purchased securities of Global
Securities, one of its regular broker-dealers. Such securities had a value of
$110,979 as of the end of the Fund's fiscal year.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Determination of Net Asset Value Per Share
The net asset value per share of the Fund is determined each day the New York
Stock Exchange (the "Exchange") is opens as of 4:00 p.m. (Eastern Time), by
dividing the value of the Fund's net assets by the total number of Fund shares
outstanding. Any assets or liabilities initially expressed in terms of non-U.S.
dollar currencies are translated into U.S. dollars at the prevailing market
rates as quoted by one or more banks or dealers on the afternoon of valuation.
The Exchange's most recent holiday schedule (which is subject to change) states
that it will close on New Year's Day, President's Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The Trust Board has established procedures for the valuation of the Fund's
securities: (i) equity securities listed or traded on the New York or American
Stock Exchange or other domestic or foreign stock exchange are valued at their
latest sale prices on such exchange that day prior to the time when assets are
valued; in the absence of sales that day, such securities are valued at the
mid-market prices (in cases where securities are traded on more than one
exchange, the securities are valued on the exchange designated as the primary
market by the Fund's investment adviser); (ii) unlisted equity securities for
which over-the-counter market quotations are readily available are valued at the
latest available mid-market prices prior to the time of valuation; (iii)
securities (including restricted securities) not having readily-available market
quotations are valued at fair value under the Board's procedures; (iv) debt
securities having a maturity in excess of 60 days are valued at the mid-market
prices determined by a portfolio pricing service or obtained from active market
makers on the basis of reasonable inquiry; and (v) short-term debt securities
(having a remaining maturity of 60 days or less) are valued at cost, adjusted
for amortization of premiums and accretion of discount.
When the Fund writes an option, an amount equal to the premium received by the
Fund is recorded in the Fund's books as an asset, and an equivalent deferred
credit is recorded as a liability. The deferred credit is adjusted
("marked-to-market") to reflect the current market value of the option. Options
purchased by the Fund are valued at their mid-market prices in the case of
exchange-traded options or, in the case of options traded in the
over-the-counter market, the average of the last bid price as obtained from two
or more dealers unless there is only one dealer, in which case that dealer's
price is used. Futures contracts and related options are stated at market value.
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Redemption In Kind
In the event that payment for redeemed shares is made wholly or partly in
portfolio securities, shareholders may incur brokerage costs in converting the
securities to cash. An in kind distribution of portfolio securities will be less
liquid than cash. The shareholder may have difficulty finding a buyer for
portfolio securities received in payment for redeemed shares. Portfolio
securities may decline in value between the time of receipt by the shareholder
and conversion to cash. A redemption in kind of the Fund's portfolio securities
could result in a less diversified portfolio of investments for the Fund and
could affect adversely the liquidity of the Fund's portfolio.
TAXATION
Under the Internal Revenue Code of 1986, as amended (the "Code"), the Fund and
each other portfolio established from time to time by the Board will be treated
as a separate taxpayer for Federal income tax purposes with the result that: (a)
each such portfolio must meet separately the income and distribution
requirements for qualification as a regulated investment company, and (b) the
amounts of investment income and capital gains earned will be determined on a
portfolio-by-portfolio (rather than on a Trust-wide) basis.
The Fund intends to qualify as a regulated investment company under Subchapter M
of the Code. To do so, the Fund intends to distribute to shareholders at least
90% of its "investment company taxable income" as defined in the Code (which
includes dividends, interest and the excess of any net short-term capital gains
over net long-term capital losses), and to meet certain diversification of
assets, source of income, and other requirements of the Code. The Fund will
therefore not be subject to Federal income tax on its investment company taxable
income and "net capital gains" (the excess of net long-term capital gains over
net short-term capital losses) distributed to shareholders. If the Fund does not
meet all of these Code requirements, it will be taxed as an ordinary
corporation, and its distributions will be taxable to shareholders as ordinary
income.
Amounts not distributed on a timely basis (in accordance with a calendar year
distribution requirement) are subject to a 4% nondeductible excise tax. To
prevent this, the Fund must distribute for each calendar year an amount equal to
the sum of (1) at least 98% of its ordinary income (excluding any capital gains
or losses) for the calendar year, (2) at least 98% of the excess of its capital
gains over capital losses realized during the one-year period ending October 31
of such year, and (3) all such ordinary income and capital gains for previous
years that were not distributed during such years. A distribution will be
treated as paid during the calendar year if it is declared by the Fund in
October, November or December of the year with a record date in such month and
paid by the Fund during January of the following year. Such distributions will
be taxable to shareholders in the calendar year in which the distributions are
declared, rather than the calendar year in which the distributions are received.
Distributions of investment company taxable income (including realized net
short-term capital gain) are taxable to shareholders as ordinary income.
Generally, it is not expected that such distributions
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will be eligible for the dividends received deduction available to corporations.
However, if the Fund acquires at least 10% of the stock of a foreign corporation
that has U.S. source income, a portion of the Fund's ordinary income dividends
attributable to such income may be eligible for such deduction, if certain
requirements are met.
Distributions of net long-term capital gain are taxable to shareholders as
long-term capital gain, regardless of the length of time the Fund shares have
been held by a shareholder, and are not eligible for the dividends received
deduction. A loss realized by a shareholder on the sale of shares of the Fund
with respect to which capital gain dividends have been paid will, to the extent
of such capital gain dividends, be treated as long-term capital loss (even
though such shares may have been held by the shareholder for one year or less).
Further, a loss realized on a disposition will be disallowed to the extent the
shares disposed of are replaced (whether by reinvestment or distributions or
otherwise) within a period of 61 days beginning 30 days before and ending 30
days after the shares are disposed of. In such a case, the basis of the shares
acquired will be adjusted to reflect the disallowed loss.
All distributions to shareholders are taxable whether reinvested in additional
shares or received in cash. Shareholders that reinvest distributions will have
for federal income tax purposes a cost basis in each share received equal to the
net asset value of a share of the Fund on the reinvestment date. Shareholders
will be notified annually as to the Federal tax status of distributions.
Distributions by the Fund reduce the net asset value of the Fund's shares. If a
distribution reduces the net asset value below a shareholder's cost basis, such
distribution nevertheless would be taxable to the shareholder as ordinary income
or capital gain as described above, even though, from an investment standpoint,
it may constitute a partial return of capital. In particular, investors should
be careful to consider the tax implications of buying shares just prior to a
distribution. The price of shares purchased at that time includes the amount of
the forthcoming distribution which will be returned to the investor in the form
of a taxable distribution.
Upon redemption or sale of shares, a shareholder will realize a taxable gain or
loss, which will be treated as capital gain or loss if the shares are capital
assets in the shareholder's hands. Such gain or loss generally will be long-term
or short-term depending upon the shareholder's holding period for the shares.
Ordinary income dividends paid by the Fund to shareholders who are nonresident
aliens will be subject to a 30% U.S. withholding tax under existing provisions
of the Code applicable to foreign individuals and entities unless a reduced rate
of withholding or a withholding exemption is provided under applicable treaty
law. Nonresident shareholders are urged to consult their own tax advisers
concerning the applicability of the U.S. withholding tax.
Dividends and interest received (and, in certain circumstances, capital gains
realized) by the Fund may give rise to withholding and other taxes imposed by
foreign countries. Tax conventions between certain countries and the U.S. may
reduce or eliminate such taxes. If more than 50% in value of the Fund's total
assets at the close of its taxable year consists of securities of foreign
corporations, the Fund will be eligible and intends to file an election with the
Internal Revenue Service ("IRS") pursuant to which shareholders of the Fund will
be required to include their proportionate
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share of such withholding taxes in their U.S. income tax returns as gross
income; treat such proportionate share as taxes paid by them; and, subject to
certain limitations, deduct such proportionate share in computing their taxable
incomes or, alternatively, use them as foreign tax credits against their U.S.
income taxes. No deductions for foreign taxes, however, may be claimed by
noncorporate shareholders who do not itemize deductions. A shareholder that is a
nonresident alien individual or a foreign corporation may be subject to U.S.
withholding tax on the income resulting from the Fund's election described in
this paragraph but may not be able to claim a credit or deduction against such
U.S. tax for the foreign taxes treated as having been paid by such shareholder.
The Fund will report annually to its shareholders the amount per share of such
withholding taxes.
Due to investment laws in certain emerging market countries, it is anticipated
that the Fund's investments in equity securities in such countries will consist
primarily of shares of investment companies (or similar investment entities)
organized under foreign law or of ownership interests in special accounts,
trusts or partnerships. If the Fund purchases shares of an investment company
(or similar investment entity) organized under foreign law, the Fund will be
treated as owning shares in a passive foreign investment company ("PFIC") for
U.S. Federal income tax purposes. The Fund may be subject to U.S. Federal income
tax, and an additional tax in the nature of interest, on a portion of
distributions from such company and on gain from the disposition of such shares
(collectively referred to as "excess distributions"), even if such excess
distributions are paid by the Fund as a dividend to its shareholders. The Fund
may be eligible to make an election with respect to certain PFICs in which it
owns shares that will allow it to avoid the taxes on excess distributions.
However, such election may cause the Fund to recognize income in a particular
year in excess of the distributions received from such PFICs.
The Fund may write, purchase or sell options or futures contracts. Unless the
Fund is eligible to make and does make a special election, such options and
futures contracts that are "Section 1256 contracts" will be "marked to market"
for Federal income tax purposes at the end of each taxable year (i.e., each
option or futures contract will be treated as sold for its fair market value on
the last day of the taxable year). In general, unless such special election is
made, gain or loss from transactions in options and futures contracts will be
60% long-term and 40% short-term capital gain or loss.
Code Section 1092, which applies to certain "straddles," may affect the taxation
of the Fund's transactions in options and futures contracts. Under Section 1092,
the Fund may be required to postpone recognition for tax purposes of losses
incurred in certain closing transactions in options and futures.
One of the requirements for qualification as a regulated investment company is
that less than 30% of the Fund's gross income may be derived from gains from the
sale or other disposition of securities held for less than three months.
Accordingly, the Fund may be restricted in effecting closing transactions within
three months after entering into an option or futures contract.
In general, gains from "foreign currencies" and from foreign currency options,
foreign currency futures and forward foreign exchange contracts relating to
investments in stock, securities or foreign currencies will be qualifying income
for purposes of determining whether the Fund qualifies as a regulated investment
company. It is currently unclear, however, who will be treated as the issuer of
a foreign currency instrument or how foreign currency options, futures or
forward foreign currency contracts will
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be valued for purposes of the regulated investment company diversification
requirements applicable to the Fund.
Under Code Section 988 special rules are provided for certain transactions in a
foreign currency other than the taxpayer's functional currency (i.e., unless
certain special rules apply, currencies other than the U.S. dollar). In general,
foreign currency gains or losses from certain forward contracts not traded in
the interbank market, from futures contracts that are not "regulated futures
contracts," and from unlisted options will be treated as ordinary income or loss
under Code Section 988. In certain circumstances, the Fund may elect capital
gain or loss treatment for such transactions. In general, however, Code Section
988 gains or losses will increase or decrease the amount of the Fund's
investment company taxable income available to be distributed to shareholders as
ordinary income. Additionally, if Code Section 988 losses exceed other
investment company taxable income during a taxable year, the Fund would not be
able to make any ordinary dividend distributions, and any distributions made
before the losses were realized but in the same taxable year would be
recharacterized as a return of capital to shareholders, thereby reducing each
shareholder's basis in his Fund shares.
The Trust will be required to report to the IRS all distributions and gross
proceeds from the redemption of Fund shares (except in the case of certain
exempt shareholders). All such distributions and proceeds generally will be
subject to the withholding of Federal income tax at a rate of 31% ("backup
withholding") in the case of non-exempt shareholders if (1) the shareholder
fails to furnish the Trust with and to certify the shareholder's correct
taxpayer identification number or social security number, (2) the IRS notifies
the Trust that the shareholder has failed to report properly certain interest
and dividend income to the IRS and to respond to notices to that effect, or (3)
when required to do so, the shareholder fails to certify that they are not
subject to backup withholding. If the withholding provisions are applicable, any
such distributions or proceeds, whether reinvested in additional shares or taken
in cash, will be reduced by the amount required to be withheld. Any amounts
withheld may be credited against the shareholder's Federal income tax liability.
Investors may wish to consult their tax advisers about the applicability of the
backup withholding provisions.
Distributions by the Fund also may be subject to state and local taxes, and
their treatment under state and local income tax laws may differ from the
Federal income tax treatment. Shareholders should consult their tax advisers
with respect to particular questions of Federal, foreign, state and local
taxation.
OTHER INFORMATION
Organization
The Trust was originally organized as a Maryland corporation on July 30, 1969.
On February 29, 1988, the Trust was recapitalized to enable its Board to
establish a series of separately managed investment portfolios, each having
different investment objectives and policies. At the time of the
recapitalization, the Trust's name was changed from "The Cheapside Dollar Fund
Limited" to "Schroder Capital Funds, Inc." On January 9, 1996, the Trust was
reorganized as a Delaware business trust. At that time, the Trust's name was
changed from "Schroder Capital Funds, Inc." to its present name. The Trust is
registered as an open-end management investment company under the Act.
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Delaware law provides that shareholders shall be entitled to the same
limitations of personal liability extended to stockholders of private
corporations for profit. The securities regulators of some states, however, have
indicated that they and the courts in their state may decline to apply Delaware
law on this point. To guard against this risk, the Trust Instrument contains an
express disclaimer of shareholder liability for the debts, liabilities,
obligations, and expenses of the Trust. The Trust Instrument provides for
indemnification out of each series' property of any shareholder or former
shareholder held personally liable for the obligations of the series. The Trust
Instrument also provides that each series shall, upon request, assume the
defense of any claim made against any shareholder for any act or obligation of
the series and satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which Delaware law does not apply (or no contractual limitation
of liability was in effect) and the portfolio is unable to meet its obligations.
Forum believes that, in view of the above, there is no risk of personal
liability to shareholders.
Capitalization and Voting
The Trust has an unlimited number of authorized shares of beneficial interest.
The Board may, without shareholder approval, divide the authorized shares into
an unlimited number of separate portfolios or series (such as the Fund) and may
divide such portfolios or series into classes of shares, and the costs of doing
so will be borne by the Trust. The Trust currently consists of five separate
portfolios, each of which has separate investment objectives and policies, and
five classes, two of which pertains to Schroder International Fund.
Shares of the Fund are fully paid and nonassessable, and have no preferences as
to conversion, exchange, dividends, retirement or other features. Shares have no
preemptive rights and have non-cumulative voting rights, which means that the
holders of more than 50% of the shares voting for the election of Trustees can
elect 100% of the Trustees if they choose to do so. Each shareholder of record
is entitled to one vote for each full share held (and a fractional vote for each
fractional share held). Shares of each class vote separately to approve
investment advisory agreements or changes in investment objectives and other
fundamental policies affecting the portfolio to which they pertain, but all
classes vote together in the election of Trustees and ratification of the
selection of independent accountants. Shareholders of any particular class are
not entitled to vote on any matters as to which such class are not affected.
The Trust will not hold annual meetings of shareholders. The matters considered
at an annual meeting typically include the reelection of Trustees, approval of
an investment advisory agreement, and the ratification of the selection of
independent accountants. These matters will not be submitted to shareholders
unless a meeting of shareholders is held for some other reason, such as those
indicated below. Each of the Trustees will serve until death, resignation or
removal. Vacancies will be filled by the remaining Trustees, subject to the
provisions of the 1940 Act requiring a meeting of shareholders for election of
Trustees to fill vacancies when less than a majority of Trustees then in office
have been elected by shareholders. Similarly, the selection of accountants and
renewal of investment advisory agreements for future years will be performed
annually by the Board. Future shareholder meetings will be held to elect
Trustees if required by the 1940 Act, to obtain shareholder approval of changes
in fundamental investment policies, to obtain shareholder approval of material
changes in investment advisory agreements, to select new accountants if the
employment of the Trust's accountants has been
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terminated, and to seek any other shareholder approval required under the 1940
Act. The Trust Board has the power to call a meeting of shareholders at any time
when it believes it is necessary or appropriate. In addition, the Trust
Instrument provides that a special meeting of shareholders may be called at any
time for any purpose by the holders of at least 10% of the outstanding shares
entitled to be voted at such meeting.
In addition to the foregoing rights, the Trust Instrument provides that holders
of at least two-thirds of the outstanding shares of the Trust may remove any
person serving as a Trustee either by declaration in writing or at a meeting
called for such purpose. Further, the Trust Board is required to call a
shareholders meeting for the purpose of considering the removal of one or more
Trustees if requested in writing to do so by the holders of not less than 10% of
the outstanding shares of the Trust. In addition, the Trust Board is required,
if requested in writing to do so by ten or more shareholders of record (who have
been such for at least six months), holding in the aggregate the lesser of (i)
shares of the Trust having a total net asset value of at least $25,000 or (ii)
1% of the outstanding shares of the Trust, to help such holders communicate with
other shareholders of the Trust with a view to obtaining the requisite
signatures to request a special meeting to consider Trustee removal.
Principal Shareholders
As of February 24, 1997, the following persons owned of record or beneficially
5% or more of the Fund's shares:
Shareholder Share Balance Percent of Fund
- ----------- ------------- ---------------
Investor Shares
The Robert Wood Johnson Foundation 4,917,050.504 30.17%
P.O. Box 2316
College Road at Route One
Princeton, NJ 08543
University of Chicago 3,388,253.056 20.79%
450 North Cityfront Plaza Drive
Chicago, IL 60611
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GOOSS & CO 1,116,866.431 6.85%
c/o Chase Manhattan Bank
1211 6th Ave, 35th Floor
New York, NY 10036
Saxon & Co 1,604,506.853 6.53%
PO Box 7780-1888
Philadelphia, PA 19182
Northwest Area Foundation 822,372.923 5.05%
E-12-01 First National Bank Building
332 Minnesota Street
St Paul, MN 55101-1373
Advisor Shares
Montgomery Securities 1,116,871.724 100.00%
600 Montgomery St., 4th Floor
San Francisco, CA 94111
Custodian
The Chase Manhattan Bank, N.A., through its Global Custody Division located in
London, England, acts as custodian of the Fund's assets, but plays no role in
making decisions as to the purchase or sale of portfolio securities for the
Fund. Pursuant to rules adopted under the 1940 Act, the Fund may maintain its
foreign securities and cash in the custody of certain eligible foreign banks and
securities depositories. Selection of these foreign custodial institutions is
made by the Trust Board following a consideration of a number of factors,
including (but not limited to) the reliability and financial stability of the
institution; the ability of the institution to perform capably custodial
services for the Fund; the reputation of the institution in its national market;
the political and economic stability of the country in which the institution is
located; and further risks of potential nationalization or expropriation of Fund
assets.
Transfer Agent and Dividend Disbursing Agent
Forum Financial Corp., Portland, Maine, acts as the Fund's transfer agent and
dividend disbursing agent.
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Performance Information
The Fund may, from time to time, include quotations of its average annual total
return in advertisements or reports to shareholders or prospective investors.
Quotations of average annual total return will be expressed in terms of the
average annual compounded rate of return of a hypothetical investment in the
Fund over periods of 1, 5 and 10 years (up to the life of the Fund), calculated
pursuant to the following formula:
P (1+T)n = ERV
(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n = the number of years, and ERV = the ending redeemable value of
a hypothetical $1,000 payment made at the beginning of the period). All total
return figures will reflect the deduction of Fund expenses (net of certain
reimbursed expenses) on an annual basis, and will assume that all dividends and
distributions are reinvested when paid.
For the one year, and since inception periods ended October 31, 1996, the
average annual total return of the Fund with respect to Investor Shares was
4.22% and 6.66%, respectively.
Quotations of total return will reflect only the performance of a hypothetical
investment in the Fund during the particular time period shown. Total return for
the Fund will vary based on changes in market conditions and the level of the
Fund's expenses, and no reported performance figure should be considered an
indication of performance which may be expected in the future.
In connection with communicating total return to current or prospective
investors, the Fund also may compare these figures to the performance of other
mutual funds tracked by mutual fund rating services or to other unmanaged
indexes which may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs.
Investors who purchase and redeem shares of the Fund through a customer account
maintained at a Service Organization may be charged one or more of the following
types of fees as agreed upon by the Service Organization and the investor, with
respect to the customer services provided by the Service Organization: account
fees (a fixed amount per month or per year); transaction fees (a fixed amount
per transaction processed); compensating balance requirements (a minimum dollar
amount a customer must maintain in order to obtain the services offered); or
account maintenance fees (a periodic charge based upon a percentage of the
assets in the account or of the dividends paid on these assets). Such fees will
have the effect of reducing the average annual total return of the Fund for
those investors.
Legal Counsel
Jacobs Persinger & Parker, 77 Water Street, New York, New York 10005, counsel to
the Fund, passes upon certain legal matters in connection with the shares
offered by the Fund.
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Independent Accountants
Coopers & Lybrand L.L.P. serves as independent accountants for the Fund. Coopers
& Lybrand L.L.P. provides audit services and consultation in connection with
review of U.S. Securities and Exchange Commission filings. Their address is One
Post Office Square, Boston, Massachusetts 02109.
Registration Statement
This SAI and the Prospectus do not contain all the information included in the
Fund's registration statement filed with the Securities and Exchange Commission
under the Securities Act of 1933 with respect to the securities offered hereby,
certain portions of which have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. The registration
statement, including the exhibits filed therewith, may be examined at the office
of the Securities and Exchange Commission in Washington, D.C.
Statements contained herein and in the Prospectus as to the contents of any
contract or other documents referred to are not necessarily complete, and, in
each instance, reference is made to the copy of such contract or other documents
filed as an exhibit to the registration statement, each such statement being
qualified in all respects by such reference.
FINANCIAL STATEMENTS
The audited Statement of Assets and Liabilities, Statement of Operations,
Statements of Changes in Net Assets, Statement of Investments, notes thereto,
and Financial Highlights of the Fund for the period from commencement of
operations through October 31, 1996 and the Report of Independent Accountants
thereon (included in the Annual Report to shareholders), which are delivered
along with this SAI, are incorporated herein by reference.
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SCHRODER U.S. SMALLER COMPANIES FUND
Statement of Additional Information
March 1, 1997
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Investment Advisor
Schroder Capital Management International Inc. ("SCMI")
Administrator and Distributor
Schroder Fund Advisors, Inc. ("Schroder Advisors")
Sub-Administrator
Forum Administrative Services, Limited Liability Company ("Forum")
Transfer Agent and Dividend Disbursing Agent
Forum Financial Corp. ("FFC")
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General Information: (207) 879-8903
Account Information: (800) 344-8332
Fax: (207) 879-6206
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Investor Shares of Schroder U.S. Smaller Companies Fund (the "Fund") are offered
for sale at net asset value with no sales charge as an investment vehicle for
individuals, institutions, corporations and fiduciaries. Advisor Shares of the
Fund are offered to individual investors, in most cases through Service
Organizations (as defined herein). Advisor Shares incur more expenses than
vestor Shares.
This Statement of Additional Information ("SAI") is not a prospectus and is only
authorized for distribution when preceded or accompanied by the current
Prospectus for the Fund dated March 1, 1997 (the "Prospectus"). This SAI
contains additional and more detailed information than that set forth in the
Prospectus and should be read in conjunction with the Prospectusand retained for
future reference. You may obtain an additional copy of the Prospectus without
charge by writing to the Fund at Two Portland Square, Portland, Maine 04101 or
calling the numbers printed above.
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TABLE OF CONTENTS PAGE
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INVESTMENT POLICIES
Introduction.................................................
U.S. Government Securities...................................
Bank Obligations.............................................
Short-Term Debt Securities...................................
Repurchase Agreements........................................
High Yield/Junk Bonds .......................................
Illiquid and Restricted Securities...........................
Loans of Portfolio Securities................................
Covered Calls and Hedging....................................
Short Sales Against-the-Box..................................
INVESTMENT RESTRICTIONS......................................
MANAGEMENT...................................................
Trustees and Officers........................................
Investment Adviser...........................................
Administrative Services......................................
Distribution of Fund Shares..................................
Service Organizations........................................
Portfolio Accounting.........................................
Fees and Expenses............................................
PORTFOLIO TRANSACTIONS.......................................
Investment Decisions.........................................
Brokerage and Research Services..............................
ADDITIONAL PURCHASE AND
REDEMPTION INFORMATION.......................................
Determination of Net Asset Value Per Share...................
Redemption in Kind...........................................
TAXATION.....................................................
OTHER INFORMATION............................................
Organization.................................................
Capitalization and Voting....................................
Principal Shareholders.......................................
Performance Information......................................
Custodian....................................................
Transfer Agent and Dividend Disbursing Agent.................
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Legal Counsel................................................
Independent Accountants......................................
FINANCIAL STATEMENTS.........................................
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INTRODUCTION
Schroder U.S. Smaller Companies Fund (the "Fund") is a diversified,
separately-managed series of Schroder Capital Funds (Delaware) (the "Trust"), an
open-end management investment company currently consisting of eight separate
series, each of which has different investment objectives and policies.
The Fund's investment objective is to seek capital appreciations by
investing primarily in equity securities of companies domiciled in the U.S. that
have market capitalizations, at the time of purchase of $1.5 billion or less.
There can be no assurance that the Fund's investment objective will be achieved.
INVESTMENT POLICIES
The Fund's investment objective and policies authorize it to invest in certain
types of securities and to engage in certain investment techniques as identified
in " MethodInvestment Objective" and "Investment Policies" in the Prospectus.
The following supplements the discussion found in those sections by providing
additional information or elaborating upon the discussion with respect to
certain of those securities and techniques.
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U.S. Government Securities
The Fund may invest in obligations issued or guaranteed by the United States
government (or its agencies or instrumentalities) that have remaining maturities
not exceeding one year. Agencies and instrumentalities that have been
established or sponsored by the United States government and issue or guarantee
debt securities include the Bank for Cooperatives, the Export-Import Bank, the
Federal Farm Credit System, the Federal Home Loan Banks, the Federal Home Loan
Mortgage Corporation, the Federal Intermediate Credit Banks, the Federal Land
Banks, the Federal National Mortgage Association, the Government National
Mortgage Association and the Student Loan Marketing Association. Except for
obligations issued by the United States Treasury and the Government National
Mortgage Association, none of the obligations of the other agencies or
instrumentalities referred to above are backed by the full faith and credit of
the United States government.
Bank Obligations
The Fund may invest in obligations of U.S. banks (including certificates of
deposit and bankers' acceptances) havingwhose total assets at the time of
purchase in exceed $1 billion. Such banks must be members of the Federal Deposit
Insurance Corporation.
A certificate of deposit is an interest-bearing negotiable certificate issued by
a bank against funds deposited in the bank. A bankers' acceptance is a
short-term draft drawn on a commercial bank by a borrower, usually in connection
with an international commercial transaction. Although the borrower is liable
for payment of the draft, the bank unconditionally guarantees to pay the draft
at its face value on the maturity date.
Short-Term Debt Securities
The Fund may invest in commercial paper -- short-term unsecured promissory notes
issued in bearer form by bank holding companies, corporations and finance
companies. The commercial paper purchased by the Fund for temporary defensive
purposes consists of direct obligations of domestic issuers that at the time of
investment are rated "P-1" by Moody's Investors Service, Inc. ("Moody's") or
"A-1" by Standard & Poor's ("S&P"), or securities which, if not rated, are
issued by companies having an outstanding debt issue currently rated Aa by
Moody's or AAA or AA by S&P. The rating "P-1" is the highest commercial paper
rating assigned by Moody's and the rating "A-1" is the highest commercial paper
rating assigned by S&P.
Repurchase Agreements
The Fund may invest in securities subject to repurchase agreements that mature
in seven days or less with U.S. banks or broker- dealers. In a typical
repurchase agreement the seller of a security commits itself at the time of the
sale to repurchase that security from the buyer at a mutually agreed-upon time
and price. The repurchase price exceeds the sale price, reflecting an
agreed-upon interest rate effective for the period the buyer owns the security
subject to repurchase. The agreed-upon rate is unrelated to the interest rate on
that security. SCMI will monitor the value of the underlying security at the
time the transaction is entered into and at
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all times during the term of the repurchase agreement to insure that the value
of the security always equals or exceeds the repurchase price. If a seller
defaults under a repurchase agreement, the Fund may have difficulty exercising
its rights to the underlying securities and may incur costs and experience time
delays in connection with the disposition of such securities. To evaluate
potential risks, SCMI reviews the credit-worthiness of banks and dealers with
which the Fund enters into repurchase agreements.
High Yield/Junk Bonds
The Fund may invest up to 5% of its assets in bonds rated below Baa by Moody's
or BBB by S&P (commonly known as "high yield/high risk securities" or "junk
bonds"). Securities rated lower than Baa by Moody's or BBB by S&P are classified
as non-investment grade securities and are considered speculative. Junk bonds
may be issued as a consequence of corporate restructurings (such as leveraged
buyouts, mergers, acquisitions, debt recapitalizations, or similar events) or by
smaller or highly leveraged companies. Although the growth of the high yield
securities market in the 1980's paralleled a long economic expansion, recently
many issuers have been affected by adverse economic and market conditions. It
should be recognized that an economic downturn or increase in interest rates is
likely to have a negative effect on (i) the high yield bond market, (ii) the
value of high yield securities and (iii) the ability of the securities' issuers
to service their principal and interest payment obligations, to meet their
projected business goal, or to obtain additional financing. In addition, the
market for high yield securities, which is concentrated in relatively few market
makers, may not be as liquid as the market for investment grade securities.
Under adverse market or economic conditions, the market for high yield
securities could contract further, independent of any specific adverse changes
in the condition of a particular issuer. As a result, the Fund could find it
more difficult to sell these securities or may be able to sell the securities
only at prices lower than if such securities were widely traded. Prices realized
upon the sale of such lower rated or unrated securities, under these
circumstances, may be less than the prices used in calculating the Fund's net
asset value.
In periods of reduced market liquidity, junk bond prices may become more
volatile and may experience sudden and substantial price declines. Also, there
may be significant disparities in the prices quoted for junk bonds by various
dealers. Under such conditions, a Fund may have to use subjective rather than
objective criteria to value its junk bond investments accurately and rely more
heavily on the judgment of the Fund's investment adviser.
Prices for junk bonds also may be affected by legislative and regulatory
developments. For example, new federal laws require the divestiture by federally
insured savings and loans associations of their investments in high yield bonds.
Also, from time to time, Congress has considered legislation to restrict or
eliminate the corporate tax deduction for interest payments or to regulate
corporate restructurings such as takeovers, mergers or leveraged buyouts. These
laws could adversely affect the
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Fund's net asset value and investment practices, the market for high yield
securities, the financial condition of issuers of these securities, and the
value of outstanding high yield securities.
Lower rated or unrated debt obligations also present risks based on payment
expectations. If an issuer calls the obligation for redemption, the Fund may
have to replace the security with a lower yielding security, resulting in a
decreased return for investors. If the Fund experiences unexpected net
redemptions, it may be forced to sell its higher rated securities, resulting in
a decline in the overall credit quality of the Fund's portfolio and increasing
the exposure of the Fund to the risks of high yield securities.
Illiquid and Restricted Securities
"Illiquid and Restricted Securities" under "Investment Policies" in the
Prospectus sets forth the circumstances in which the Fund may invest in
"restricted securities". In connection with the Fund's original purchase of
restricted securities it may negotiate rights with the issuer to have such
securities registered for sale at a later time. Further, the registration
expenses of illiquid restricted securities may also be negotiated by the Fund
with the issuer at the time such securities are purchased by the Fund. When
registration is required, however, a considerable period may elapse between the
decision to sell the securities and the time the Fund would be permitted to sell
such securities. A similar delay might be experienced in attempting to sell such
securities pursuant to an exemption from registration. Thus, the Fund may not be
able to obtain as favorable a price as that prevailing at the time of the
decision to sell.
Loans of Portfolio Securities
The Fund may lend its portfolio securities subject to the restrictions stated in
the Prospectus. Under applicable regulatory requirements (which are subject to
change), the loan collateral must (a) on each business day, at least equal the
market value of the loaned securities and (b) must consist of cash, bank letters
of credit, U.S. Government securities, or other cash equivalents in which the
Fund is permitted to invest. To be acceptable as collateral, letters of credit
must obligate a bank to pay amounts demanded by the Fund if the demand meets the
terms of the letter. Such terms and the issuing bank must be satisfactory to the
Fund. When lending portfolio securities, the Fund receives from the borrower an
amount equal to the interest paid or the dividends declared on the loaned
securities during the term of the loan plus the interest on the collateral
securities.(less any finders' or administrative fees the Fund pays in arranging
the loan). The Fund may share the interest it receives on the collateral
securities with the borrower as long as it realizes at least a minimum amount of
interest required by the lending guidelines established by the Trust's Board of
Trustees (the "Trust Board"). The Fund will not lend its portfolio securities to
any officer, director, employee or affiliate of the Fund or SCMI. The terms of
the Fund's loans must meet certain tests under the Internal Revenue Code and
permit the Fund to reacquire loaned securities on five business days' notice or
in time to vote on any important matter.
Covered Calls and Hedging
As described in the Prospectus, the Fund may write covered calls on up to 100%
of its total assets or employ one or more types of Hedging Instruments. When
hedging to attempt to protect against declines in the market value of the Fund's
portfolio, to permit the Fund to retain unrealized gains in the
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value of portfolio securities which have appreciated, or to facilitate selling
securities for investment reasons, the Fund may: (i) sell Stock Index Futures;
(ii) purchase puts on such Futures or securities; or (iii) write covered calls
on securities or on Stock Index Futures. When hedging to establish a position in
the equities markets as a temporary substitute for purchasing particular equity
securities (which the Fund will normally purchase and then terminate the hedging
position), the Fund may: (i) purchase Stock Index Futures, or (ii) purchase
calls on such Futures or on securities. The Fund's strategy of hedging with
Stock Index Futures and options on such Futures will be incidental to the Fund's
activities in the underlying cash market.
Writing Covered Call Options. The Fund may write (i.e., sell) call options
("calls") if: (i) the calls are listed on a domestic securities or commodities
exchange, and (ii) the calls are "covered" (i.e., the Fund owns the securities
subject to the call or other securities acceptable for applicable escrow
arrangements) while the call is outstanding. A call written on a Stock Index
Future must be covered by deliverable securities or segregated liquid assets. If
a call written by the Fund is exercised, the Fund forgoes any profit from any
increase in the market price above the call price of the underlying investment
on which the call was written.
When the Fund writes a call on a security, it receives a premium and agrees to
sell the underlying securities to a purchaser of a corresponding call on the
same security during the call period (usually not more than nine months) at a
fixed exercise price (which may differ from the market price of the underlying
security), regardless of market price changes during the call period. The risk
of loss will have been retained by the Fund if the price of the underlying
security should decline during the call period, which may be offset to some
extent by the premium.
To terminate its obligation on a call it has written, the Fund may purchase a
corresponding call in a "closing purchase transaction". A profit or loss will be
realized, depending upon whether the net of the amount of option transaction
costs and the premium previously received on the call written was more or less
than the price of the call subsequently purchased. A profit may also be realized
if the call lapses unexercised, because the Fund retains the underlying security
and the premium received. Any such profits are considered short-term capital
gains for Federal income tax purposes, and when distributed by the Fund are
taxable as ordinary income. If the Fund could not effect a closing purchase
transaction due to the lack of a market, it would have to hold the callable
securities until the call lapsed or was exercised.
The Fund may also write calls on Stock Index Futures without owning a futures
contract or a deliverable bond, provided that at the time the call is written,
the Fund covers the call by segregating in escrow an equivalent dollar amount of
liquid assets. The fund will segregate additional liquid assets if the value of
the escrowed assets drops below 100% of the current value of the Stock Index
Future. In no circumstances would an exercise notice require the Fund to deliver
a futures contract; it would simply put the Fund in a short futures position,
which is permitted by the Fund's hedging policies.
Purchasing Calls and Puts. The Fund may purchase put options ("puts") that
relate to: (i) securities it holds, (ii) Stock Index Futures (whether or not it
holds such Stock Index Futures in its portfolio), or (iii) broadly-based stock
indices. The Fund may not sell puts other than those it previously purchased,
nor purchase puts on securities it does not hold. The fund may purchase calls:
(a) as to securities, broadly-based stock indices or Stock Index Futures, or (b)
to effect a "closing purchase transaction" to terminate its obligation on a call
it has previously written. A call or put may
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be purchased only if, after such purchase, the value of all put and call options
held by the Fund would not exceed 5% of the Fund's total assets.
When the Fund purchases a call (other than in a closing purchase transaction),
it pays a premium and, except as to calls on stock indices, has the right to buy
the underlying investment from a seller of a corresponding call on the same
investment during the call period at a fixed exercise price. The Fund benefits
only if the call is sold at a profit or if, during the call period, the market
price of the underlying investment is above the sum of the call price plus the
transaction costs and the premium paid for the call and the call is exercised.
If the call is not exercised or sold (whether or not at a profit), it will
become worthless at its expiration date and the Fund will lose its premium
payments and the right to purchase the underlying investment. When the Fund
purchases a call on a stock index, it pays a premium, but settlement is in cash
rather than by delivery of an underlying investment.
When the Fund purchases a put, it pays a premium and, except as to puts on stock
indices, has the right to sell the underlying investment to a seller of a
corresponding put on the same investment during the put period at a fixed
exercise price. Buying a put on a security or Stock Index Future the Fund owns
enables the Fund to attempt to protect itself during the put period against a
decline below he excercise price in the value of the underlying investment by
selling the underlying investment at the exercise price to a seller of a
corresponding put. If the market price of the underlying investment is equal to
or exceeds the exercise price and, as a result, the put is not exercised or
resold, the put will become worthless at its expiration date and the Fund will
lose its premium payment and the right to sell the underlying investment; the
put may, however, be sold prior to expiration (whether or not at a profit).
Purchasing a put on either a stock index or on a Stock Index Future not held by
the Fund permits the Fund either to resell the put or to buy the underlying
investment and sell it at the exercise price. The resale price of the put will
vary inversely with the price of the underlying investment. If the market price
of the underlying investment is above the exercise price and, as a result, the
put is not exercised, the put will become worthless on its expiration date. In
the event of a decline in price of the underlying investment, the Fund could
exercise or sell the put at a profit to attempt to offset some or all of its
loss on its portfolio securities. When the Fund purchases a put on a stock
index, or on a Stock Index Future not held by it, the put protects the Fund to
the extent that the index moves in a similar pattern to the securities held. In
the case of a put on a stock index or Stock Index Future, settlement is in cash
rather than by the Fund's delivery of the underlying investment.
Stock Index Futures. The Fund may buy and sell futures contracts only if they
relate to broadly-based stock indices ("Stock Index Futures"). A stock index is
"broadly-based" if it includes stocks that are not limited to issuers in any
particular industry or group of industries. Stock Index Futures obligate the
seller to deliver (and the purchaser to take) cash to settle the futures
transaction, or to enter into an offsetting contract. No physical delivery of
the underlying stocks in the index is made.
No price is paid or received upon the purchase or sale of a Stock Index Future.
Upon entering into a Futures transaction, the Fund will be required to deposit
an initial margin payment in cash or U.S. Treasury bills with a futures
commission merchant (the "futures broker"). The initial margin will be deposited
with the Fund's Custodian in an account registered in the futures broker's name;
the futures broker can gain access to that account only under specified
conditions. As the Future is marked-to-market to reflect changes in its market
value, subsequent margin payments
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(called variation margin) will be paid to or by the futures broker on a daily
basis. Prior to expiration of the Future, if the Fund elects to close out its
position by taking an opposite position, a final determination of variation
margin is made, additional cash is required to be paid by or released to the
Fund, and any loss or gain is realized for tax purposes. Although Stock Index
Futures by their terms call for settlement by the delivery of cash, in most
cases the obligation is fulfilled without such delivery, by entering into an
offsetting transaction. All futures transactions are effected through a
clearinghouse associated with the exchange on which the contracts are traded.
Puts and calls on broadly-based stock indices or Stock Index Futures are similar
to puts and calls on securities or futures contracts except that all settlements
are in cash and gain or loss depends on changes in the index in question (and
thus on price movements in the stock market generally) rather than on price
movements in individual securities or futures contracts. When the Fund buys a
call on a stock index or Stock Index Future, it pays a premium. During the call
period, upon exercise of a call by the Fund, a seller of a corresponding call on
the same index will pay the Fund an amount of cash to settle the call if the
closing level of the stock index or Stock Index Future upon which the call is
based is greater than the exercise price of the call; that cash payment is equal
to the difference between the closing price of the index and the exercise price
of the call times a specified multiple (the "multiplier") which determines the
total dollar value for each point of difference. When the Fund buys a put on a
stock index or Stock Index Future, it pays a premium and has the right during
the put period to require a seller of a corresponding put, upon the Fund's
exercise of its put, to deliver to the Fund an amount of cash to settle the put
if the closing level of the stock index or Stock Index Future upon which the put
is based is less than the exercise price of the put; that cash payment is
determined by the multiplier, in the same manner as described above as to calls.
Additional Information About Hedging Instruments and their Use. The Fund's
Custodian, or a securities depository acting for the Custodian, will act as the
Fund's escrow agent, through the facilities of the Options Clearing Corporation
("OCC"), as to the securities on which the Fund has written options(or as to
other acceptable escrow securities) so that no margin will be required for such
transactions. OCC will release the securities on the expiration of the option or
upon the Fund's entering into a closing transaction. An option position may be
closed out only on a market that provides secondary trading for options of the
same series, and there is no assurance that a liquid secondary market will exist
for any particular option.
The Fund's option activities may affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Fund may cause the
Fund to sell related portfolio securities, thus increasing its turnover rate in
a manner beyond the Fund's control. The exercise by the Fund of puts on
securities or Stock Index Futures may cause the sale of related investments,
also increasing portfolio turnover. Although such exercise is within the Fund's
control, holding a put might cause the Fund to sell the underlying investment
for reasons that would not exist in the absence of the put. The Fund will pay a
brokerage commission each time it buys or sells a call, a put or an underlying
investment in connection with the exercise of a put or call. Such commissions
may be higher than those which would apply to direct purchases or sales of the
underlying investments. Premiums paid for options are small in relation to the
market value of such investments and consequently, put and call options offer
large amounts of leverage. The leverage offered by trading in options could
result in the Fund's net asset value being more sensitive to changes in the
value of the underlying investment.
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Regulatory Aspects of Hedging Instruments and Covered Calls. The Fund must
operate within certain restrictions as to its long and short positions in Stock
Index Futures and options thereon under a rule (the "CFTC Rule") adopted by the
Commodity Futures Trading Commission (the "CFTC") under the Commodity Exchange
Act (the "CEA"), which excludes the Fund from registration with the CFTC as a
"commodity pool operator" (as defined in the CEA) if it complies with the CFTC
Rule. Under these restrictions the Fund will not, as to any positions, whether
short, long or a combination thereof, enter into Stock Index Futures and options
thereon for which the aggregate initial margins and premiums exceed 5% of the
fair market value of its total assets, with certain exclusions as defined in the
CFTC Rule. Under the restrictions, the Fund also must, as to its short
positions, use Stock Index Futures and options thereon solely for bona-fide
hedging purposes within the meaning and intent of the applicable provisions
under the CEA.
Transactions in options by the Fund are subject to limitations established by
each of the exchanges governing the maximum number of options that may be
written or held by a single investor or group of investors acting in concert,
regardless of whether the options were written or purchased on the same or
different exchanges or are held in one or more accounts or through one or more
exchanges or brokers. Thus, the number of options which the Fund may write or
hold may be affected by options written or held by other entities(including
other investment companies having the same or an affiliated investment adviser).
Position limits also apply to Stock Index Futures. An exchange may order the
liquidation of positions found to be in violation of those limits and may impose
certain other sanctions. Due to requirements under the 1940 Act, when the Fund
purchases a Stock Index Future, the Fund will maintain, in a segregated account
or accounts with its custodian bank, cash or readily-marketable, short-term
(maturing in one year or less) debt instruments in an amount equal to the market
value of the securities underlying such Stock Index Future, less the margin
deposit applicable to it.
Tax Aspects of Hedging Instruments. The Fund intends to qualify as a "regulated
investment company" under the Internal Revenue Code of 1986 (the "Code"). One of
the tests for such qualification is that less than 30% of its gross income must
be derived from gains realized on the sale of securities held for less than
three months. Due to this limitation, the Fund will limit the extent to which it
engages in the following activities, but will not be precluded from them: (i)
selling investments, including Stock Index Futures, held for less than three
months, whether or not they were purchased on the exercise of a call held by the
Fund; (ii) purchasing calls or puts that expire in less than three months; (iii)
effecting closing transactions with respect to calls or puts purchased less than
three months previously; (iv) exercising puts held by the Fund for less than
three months; and (v) writing calls on investments held for less than three
months.
Possible Risk Factors in Hedging. In addition to the risks discussed above,
there is a risk in using short hedging by selling Stock Index Futures or
purchasing puts on stock indices that the prices of the applicable index (thus
the prices of the Hedging Instruments) will correlate imperfectly with the
behavior of the cash (i.e., market value) prices of the Fund's equity
securities. The ordinary spreads between prices in the cash and futures markets
are subject to distortions due to differences in the natures of those markets.
First, all participants in the futures markets are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures markets depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent
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participants decide to make or take delivery, liquidity in the futures markets
could be reduced, thus producing distortion. Third, from the point of view of
speculators, the deposit requirements in the futures markets are less onerous
than margin requirements in the securities markets. Therefore, increased
participation by speculators in the futures markets may cause temporary price
distortions.
The risk of imperfect correlation increases as the composition of the Fund's
portfolio diverges from the securities included in the applicable index. To
compensate for the imperfect correlation of movements in the price of the equity
securities being hedged and movements in the price of the Hedging Instruments,
the Fund may use Hedging Instruments in a greater dollar amount than the dollar
amount of equity securities being hedged if the historical volatility of the
prices of such equity securities being hedged is more than the historical
volatility of the applicable index. It is also possible that where the Fund has
used Hedging Instruments in a short hedge, the market may advance and the value
of equity securities held in the Fund's portfolio may decline. If this occurred,
the Fund would lose money on the Hedging Instruments and also experience a
decline in value in its equity securities. However, while this could occur for a
very brief period or to a very small degree, the value of a diversified
portfolio of equity securities will tend to move over time in the same direction
as the indices upon which the Hedging Instruments are based.
If the Fund uses Hedging Instruments to establish a position in the equities
markets as a temporary substitute for the purchase of individual equity
securities (long hedging) by buying Stock Index Futures and/or calls on such
Futures, on securities or on stock indices, it is possible that the market may
decline; if the Fund then concludes not to invest in equity securities at that
time because of concerns as to possible further market decline or for other
reasons, the Fund will realize a loss on the Hedging Instruments that is not
offset by a reduction in the price of the equity securities purchased.
Short Sales Against-the-Box
After the Fund makes a short sale against-the-box, while the short position is
open, the Fund must own an equal amount of the securities sold short; or by
virtue of ownership of securities have the right, without payment of further
consideration, to obtain an equal amount of the securities sold short. Short
sales against-the-box may be made to defer, for Federal income tax purposes,
recognition of gain or loss on the sale of securities "in the box" until the
short position is closed out.
INVESTMENT RESTRICTIONS
The Fund's significant investment restrictions are described in the Prospectus.
The following investment restrictions, except where stated to be non-fundamental
policies, are also fundamental policies of the Fund and, together with the
fundamental policies and investment objective described in the Prospectus,
cannot be changed without the vote of a "majority" of the Fund's outstanding
shares. Under the Investment Company Act of 1940, such a "majority" vote is
defined as the vote of the holders of the lesser of: (i) 67% or more of the
shares present or represented by proxy at a meeting of shareholders, if the
holders of more than 50% of the outstanding shares are present, or (ii) more
than 50% of the outstanding shares. Under these additional restrictions, the
Fund cannot:
(a) Underwrite securities of other companies (except insofar as the Fund
might be deemed to be an underwriter in the resale of any securities
held in its portfolio);
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(b) Invest in commodities or commodity contracts (other than Hedging
Instruments which it may use as permitted by any of its other
fundamental policies, whether or not any such Hedging Instrument is
considered to be a commodity or a commodity contract);
(c) Purchase securities on margin; however, the Fund may make margin
deposits in connection with any Hedging Instruments which it may use
as permitted by any of its other fundamental policies;
(d) Purchase or write puts or calls except as permitted by any of its
other fundamental policies;
(e) Lend money except in connection with the acquisition of that portion
of publicly-distributed debt securities which the Fund's investment
policies and restrictions permit it to purchase (see "Investment
Objective" and "Investment Policies" in the Prospectus); the
Portfolio may also make loans of portfolio securities (see "Loans of
Portfolio Securities") and enter into repurchase agreements (see
"Repurchase Agreements");
(f) Pledge, mortgage or hypothecate its assets to an extent greater than
10% of the value of the total assets of the Fund; however, this does
not prohibit the escrow arrangements contemplated by the put and
call activities of the Fund or other collateral or margin
arrangements in connection with any of the Hedging Instruments which
it may use as permitted by any of its other fundamental policies;
(g) As a non-fundamental policy, invest in or hold securities of any
issuer if officers or Trustees of the Company or SCMI individually
owning more than 0.5% of the securities of such issuer together own
more than 5% of the securities of such issuer;
(h) Invest in companies for the purpose of acquiring control or
management thereof;
(i) Invest in interests in oil, gas or other mineral exploration or
development programs (but may purchase readily marketable securities
of companies which operate, invest in, or sponsor such programs); or
(j) Invest in real estate or in interests in real estate, but may
purchase readily marketable securities of companies holding real
estate or interests therein.
MANAGEMENT
Trustees and Officers
The following information relates to the principal occupations during the past
five years of each Trustee and executive officer of the Trust and shows the
nature of
- 10 -
<PAGE>
any affiliation with SCMI. Each of these individuals currently serves in the
same capacity for Schroder Core.
Peter E. Guernsey, Oyster Bay, New York - Trustee of the Trust - Insurance
Consultant since August 1986; prior thereto Senior Vice President, Marsh &
McLennan, Inc., insurance brokers.
Ralph E. Hansmann (Honorary), 40 Wall Street, New York, New York - Honorary
Trustee of the Trust - Private investor; Director, First Eagle Fund of America,
Inc.; Director, Verde Exploration, Ltd.; Trustee Emeritus, Institute for
Advanced Study; Trustee and Treasurer, New York Public Library; Life Trustee,
Hamilton College.
John I. Howell, 7 Riverside Road, Greenwich, Connecticut - Trustee of the Trust
- - Private Consultant since February 1987; Director, American International
Group, Inc.; Director, American International Life Assurance Company of New
York.
Clarence F. Michalis, 44 East 64th Street, New York, New York - Trustee of the
Trust - Chairman of the Board of Directors, Josiah Macy, Jr. Foundation
(charitable foundation).
Hermann C. Schwab, 787 Seventh Avenue, New York, New York - Chairman (Honorary)
and Trustee of the Trust - retired since March, 1988; prior thereto, consultant
to SCMI since February 1, 1984.
Mark J. Smith(a) (b), 33 Gutter Lane, London, England - a Vice President and
Trustee of the Trust - First Vice President of SCMI since April 1990; Director
and Vice President, Schroder Advisors since 1989.
Robert G. Davy, 787 Seventh Avenue, New York, New York - a Vice-President of the
Trust - Director of SCMI and Schroder Capital Management International Ltd.
since 1994; First Vice President of SCMI since July, 1992; prior thereto,
employed by various affiliates of Schroders plc in various positions in the
investment research and portfolio management areas since 1986.
Margaret H. Douglas-Hamilton(b) (c), 787 Seventh Avenue, New York, New York -
Secretary of the Trust - Secretary of SCM since July 1995; Secretary of Schroder
Advisers since April 1990; First Vice President and General Counsel of Schroders
Incorporated(b) since May 1987; prior thereto, partner of Sullivan & Worcester,
a law firm.
Richard R. Foulkes, 787 Seventh Avenue, New York, New York - a Vice President of
the Trust; Deputy Chairman of SCMI since October 1995; Director and Executive
Vice President of Schroder Capital Management International Ltd. since 1989.
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<PAGE>
David I. Goldstein, 2 Portland Square, Portland, Maine - Assistant Treasurer and
Assistant Secretary of the Trust Counsel, Forum Financial Services, Inc. Since
1991; prior thereto, associate at Kirkpatrick & Lockhart, Washington, D.C.
Barbara Gottlieb(c), 787 Seventh Avenue, New York, New York - Assistant
Secretary of the Trust - Assistant Vice President of SWIS since July 1995 prior
thereto held various positions with SWIS affiliates.
Robert Jackowitz(b) (c), 787 Seventh Avenue, New York, New York - Treasurer of
the Trust - Vice President of SCM since September 1995; Treasurer of SCM and
Schroder Advisers since July 1995; Vice President of SCMI since June 1995; and
Assistant Treasurer of Schroders Incorporated since January 1993.
John Y. Keffer, 2 Portland Square, Portland, Maine - Vice President of the
Trust. President of Forum Financial Services, Inc., the Fund's
sub-administrator, and Forum Financial Corp., the Fund's transfer and dividend
disbursing agent and fund accountant.
Jane P. Lucas, (c) 787 Seventh Avenue, New York, New York - Vice President of
the Trust - Director and Senior Vice President SCMI; Director of SCM since
September 1995; Assistant Director Schroder Investment Management Ltd. since
June 1991.
Gerardo Machado, 787 Seventh Avenue, New York, New York - Assistant Secretary of
the Trust - Associate, SCMI.
Catherine A. Mazza, 787 Seventh Avenue, New York, New York - Vice President of
the Trust - President of Schroder Advisors since 1997; First Vice President of
SCMI and SCM since 1996; prior thereto, held various marketing positions at
Alliance Capital, an investment adviser, since July 1985.
Thomas G. Sheehan, 2 Portland Square, Portland, Maine - Assistant Treasurer and
Assistant Secretary of the Trust - Counsel, Forum Financial Services, Inc. since
1993; prior thereto, Special Counsel, U.S. Securities and Exchange Commission,
Division of Investment Management, Washington, D.C.
Fariba Talebi, 787 Seventh Avenue, New York, New York - Vice President of the
Trust - First Vice President of SCMI since April 1993, employed in various
positions in the investment research and portfolio management areas since 1987.
John A. Troiano(b), 787 Seventh Avenue, New York, New York - Vice President of
the Trust - Managing Director and Senior Vice President of SCMI since October
1995; Director of Schroder Advisors since October 1992; Director of SCMI since
1991; prior thereto, employed by various affiliates of SCMI in various positions
in the investment research and portfolio management areas since 1981.
<PAGE>
Ira L. Unschuld, 787 Seventh Avenue, New York, New York - Vice President of the
Trust - Vice President of SCMI since April, 1993 and an Associate from July,
1990 to April, 1993; prior to July, 1990, employed by various financial
institutions as a securities or financial analyst.
(a) Interested Trustee of the Trust within the meaning of the 1940 Act.
(b) Schroder Advisors is a wholly-owned subsidiary of SCMI, which is a
wholly-owned subsidiary of Schroders Incorporated, which in turn is an
indirect, wholly-owned
subsidiary of Schroders plc.
Officers and Trustees who are interested persons of the Trust receive no salary,
fees or compensation from the Fund. Independent Trustees of the Trust receive an
annual fee of $1,000 and a fee of $250 for each meeting of the Board attended by
them except in the case of Mr. Schwab, who receives an annual fee of $1,500 and
a fee of $500 for each meeting attended. The Fund has no bonus, profit sharing,
pension or retirement plans.
The following table provides the fees paid to each Trustee of the Trust for the
fiscal year ended October 31, 1996.
<TABLE>
<CAPTION>
Name of Trustee Aggregate Pension or Estimated Annual Total Compensation
Compensation From Retirement Benefits Benefits Upon From Trust And Fund
Trust Accrued As Part of Retirement Complex Paid To
Trust Expenses Trustees
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mr. Guernsey $1,750 $0 $0 $1,750
Mr. Hansmann 1,375 0 0 1,375
Mr. Howell 1,750 0 0 1,750
Ms. Luckyn-Malone 0 0 0 0
Mr. Michalis 1,750 0 0 1,750
Mr. Schwab 3,000 0 0 3,000
Mr. Smith 0 0 0 0
</TABLE>
As of February 15, 1997, the officers and Trustees of the Trust owned, in the
aggregate, less than 1% of the Fund's outstanding shares.
- 13 -
<PAGE>
Although the Trust is a Delaware business trust, certain of its Trustees or
officers are residents of the United Kingdom and substantially all of their
assets may be located outside of the U.S. As a result it may be difficult for
U.S. investors to effect service upon such persons within the U.S., or to
realize U.S. civil judgments against them. Civil remedies and criminal penalties
under U.S. federal securities law may be unenforceable in the U.K. Extradition
treaties now in effect between the U.S. and the United Kingdom might not subject
such persons to effective enforcement of the criminal penalties of such acts.
Investment Adviser
Schroder Capital Management International Inc. ("SCMI"), 787 Seventh Avenue, New
York, New York 10019, serves as Investment Adviser to the Fund pursuant to an
Investment Advisory Contract between the Trust and SCMI dated. SCMI is a
wholly-owned United States subsidiary of Schroders Incorporated, the
wholly-owned United States holding company subsidiary of Schroders plc.
Schroders plc is the holding company parent of a large worldwide group of banks
and financial service companies (referred to as the "Schroder Group"), with
associated companies and branch and representative offices in eighteen
countries. The Schroder Group specializes in providing investment management
services.
Pursuant to the Investment Advisory Contracts, SCMI manages the investment and
reinvestment of the Fund's assets and continuously reviews, supervises and
administers its investments. In this regard, it is the responsibility of SCMI to
make decisions relating to the Fund's investments and to place purchase and sale
orders regarding such investments with brokers or dealers selected by it in its
discretion. SCMI also furnishes to the Trust Board, which has overall
responsibility for the business and affairs of the Trust, periodic reports on
the investment performance of the Fund.
Under the terms of the Investment Advisory Contract, SCMI is required to manage
the Fund's portfolio in accordance with applicable laws and regulations. In
making its investment decisions, SCMI does not use material inside information
that may be in its possession or in the possession of its affiliates.
The Investment Advisory Contract will continue in effect provided such
continuance is approved annually (i) by the holders of a majority of the
outstanding voting securities of the Fund or by the Trust Board and (ii) by a
majority of the Trustees who are not parties to such Contract or "interested
persons" (as defined in the 1940 Act) of any such party. The Investment Advisory
Contract may be terminated without penalty by vote of the Trustees or the
shareholders of the Fund on 60 days' written notice to the Adviser, or by the
Adviser on 60 days' written notice to the Trust and it will terminate
automatically if assigned. The Investment Advisory Contract also provides that,
with respect to the Fund, neither SCMI nor its personnel shall be liable for any
error of judgment or mistake of law or for any act or omission in the
performance of its or their duties to the Fund, except for willful misfeasance,
bad faith or gross negligence in the performance of its or their duties or by
reason of reckless disregard of its or their obligations and duties under the
Investment Advisory Contract.
- 14 -
<PAGE>
For its services, the Fund pays SCMI a monthly fee equal on an annual basis to
0.50% of its average daily net assets for the first $100 million of the Fund's
net assets; 0.40% of the next $150 million of average daily assets; and 0.35% of
the Fund's average daily net assets in excess of $250 million. For the fiscal
years ended October 31, 1994, 1995 and 1996, SCMI received fees of $63,210,
$71,188 and $58,914 respectively.
Administrative Services
On behalf of the Fund, the Trust has entered into an Administrative Services
Contract with Schroder Fund Advisors Inc. ("Schroder Advisors"), 787 Seventh
Avenue, New York, New York 10019. The Trust and Schroder Advisors have entered
into a Sub-Administration Agreement with Forum Financial Services, Inc.
("Forum"). Pursuant to their agreements, Schroder Advisors and Forum provide
management and administrative services other than those provided to the Fund by
SCMI pursuant to the Investment Advisory Contract, including, (i) preparation of
shareholder reports and communications, (ii) regulatory compliance, such as
reports to and filings with the Securities and Exchange Commission and state
securities commissions, and (iii) general supervision of the operation of the
Fund, including coordination of the services performed by the Fund's investment
adviser, transfer agent, custodian, independent accountants, legal counsel and
others. Schroder Advisors is a wholly-owned subsidiary of SCMI, and is a
registered broker-dealer organized to act as administrator and distributor of
mutual funds. Effective July 5, 1995, Schroder Advisors changed its name from
Schroder Capital Distributors Inc.
For these services, Schroder Advisors will receive from the Fund a fee, payable
monthly, at the annual rate of 0.25% of the Fund's average daily net assets for
the first $100 million of the Fund's average daily net assets; 0.20% of the next
$150 million of average daily net assets; and 0.175% of the Fund's average daily
net assets in excess of $250 million. The fees paid by the Fund to SCMI and
Schroder Advisors may equal up to 0.75% of the Fund's average daily net assets.
For the fiscal years ended October 31, 1994, 1995 and 1996, Schroder Advisors
received fees of $31,690, $35,594 and $24,923 respectively. Payment for Forum's
services is made by Schroder Advisors and is not a separate expense of the Fund.
The Administrative Services Contract and Sub-Administration Agreement are
terminable with respect to the Fund without penalty, at any time, by vote of a
majority of the Trustees who are not "interested persons" of the Trust and who
have no direct or indirect financial interest in the operation of the Fund's
Distribution Plan or in the Administrative Services Contract or
Sub-Administration Agreement, upon not more than 60 days' written notice to
Schroder Advisors or Forum, as appropriate, or by vote of the holders of a
majority of the shares of the Fund; or upon 60 days' notice by Schroder Advisors
or Forum. The Administrative Services Contract will terminate automatically in
the event of its assignment.
Schroder Advisors and Forum provide similar services to the Portfolio pursuant
to administrative services agreements between Schroder Core and each of these
entities, for which Schroder Advisors and Forum are separately compensated at an
annual rate of 0.075% of the average daily net assets of the Portfolio. The fees
paid by the Fund to SCMI and Schroder Advisors may equal up to [0.80]% of
- 15 -
<PAGE>
the Fund's average daily net assets. The administrative services agreements are
the same in all material respects as the Fund's respective agreements except as
to the parties, the circumstances under which fees will be paid, the fees
payable thereunder and the jurisdiction whose laws govern the agreement.
Distribution of Fund Shares
Under a Distribution Plan (the "Plan") adopted by the Fund, with respect to
Adviser Shares only, the Trust may pay directly or may reimburse the Investment
Adviser or a broker-dealer registered under the Securities Exchange Act of 1934
(the Investment Adviser or such registered broker-dealer, if so designated,
being a "Distributor" of the Fund's shares) monthly (subject to a limit of 0.50%
per annum of the Fund's average daily net assets) for the sum of (a) advertising
expenses including advertising by radio, television, newspapers, magazines,
brochures, sales literature or direct mail, (b) costs of printing prospectuses
and other materials to be given or sent to prospective investors, (c) expenses
of sales employees or agents of the Distributor, including salary, commissions,
travel, and related expenses in connection with the distribution of Fund shares,
and (d) payments to broker-dealers (other than the Distributor) or other
organizations (other than banks) for services rendered in the distribution of
the Fund's shares, including payments in amounts based on the average daily
value of Fund shares owned by shareholders in respect of which the broker-dealer
or organization has a distributing relationship. Any payment or reimbursement
made pursuant to the Plan is contingent upon the Board of Trustees' approval.
The Fund will not be liable for distribution expenditures made by the
Distributor in any given year in excess of the maximum amount (0.50% per annum
of the Fund's average daily net assets) payable under the Plan in that year.
Salary expenses of sales staff responsible for marketing shares of the Fund may
be allocated among various portfolios of the Trust that have adopted a Plan
similar to that of the Fund on the basis of average net assets; travel expense s
are allocated among the portfolios of the Trust. The Board of Trustees has
concluded that there is a reasonable likelihood that the Plan will benefit the
Fund and its shareholders.
Schroder Advisors was appointed Distributor of the Fund's shares under the Plan
pursuant to an agreement approved by the Board of Trustees of the Trust at a
meeting held on November 2, 1992. Under such agreement, Schroder Advisors is not
obligated to sell any specific amount of Fund shares.
Without shareholder approval the Plan provides may not be amended to increase
materially the costs that the Fund may bear. Other material amendments to the
Plan must be approved by the Trust Board, and by the Trustees who are neither
"interested persons" (as defined in the 1940 Act) of the Trust nor have any
direct or indirect financial interest in the operation of the Plan or in any
related agreement, by vote cast in person at a meeting called for the purpose of
considering such amendments. The selection and nomination of the Trustees of the
Trust has been committed to the discretion of the Trustees who are not
"interested persons" of the Trust. The Plan has been approved, and is subject to
annual approval, by the Trust and by the Trustees who are neither "interested
persons" nor have any direct or indirect financial interest in the operation of
the Plan, by vote cast in person at a meeting called for the purpose of voting
on the Plan. The Trust Board and the Trustees who are not "interested persons"
and who have no direct or indirect financial interest in the operation of the
Plan voted to approve the Plan at a meeting held on November 2, 1992. The Plan
was approved by the
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<PAGE>
initial shareholders of the Fund at a meeting held on July 27, 1993. At a
meeting held on November 21, 1994, the Trust Board and the Trustees who are not
"interested persons" and who have no direct or indirect financial interest in
the operation of the Plan voted to continue the Plan for the one-year period
ending February 1, 1996. The Plan is terminable with respect to the Fund at any
time by a vote of a majority of the Trustees who are not "interested persons" of
the Trust and who have no direct or indirect financial interest in the operation
of the Plan or by vote of the holders of a majority of the shares of the Fund.
During the period from commencement of operations through October 31, 1996, the
Fund spent, respectively, pursuant to the Plan, the following amounts on:
Period Ended
October 31,
1996 1995
---- ----
advertising $ -0- $ -0-
printing and mailing of prospectuses to other than $ -0- $ -0-
current shareholders
compensation to underwriters $ -0- $ -0-
compensation to dealers $ -0- $ -0-
compensation to sales personnel $ -0- $ -0-
interest, carrying, or other financing charges $ -0- $ -0-
Service Organizations
The Fund may also contract with banks, trust companies, broker-dealers or other
financial organizations ("Service Organizations") to provide certain
administrative services for the Fund. The Fund could pay fees (which will vary
depending upon the service provided) to Service Organizations in amounts up to
an annual rate of 0.25% of the daily net asset value of the Fund's shares owned
by shareholders with whom the Service Organization had a servicing relationship.
Services provided by Service Organizations may include providing personnel and
facilities necessary to establish and maintain certain shareholder accounts and
records; assisting in processing purchase and redemption transactions; arranging
for the wiring of funds; transmitting and receiving funds in connection with
client orders to purchase or redeem shares; verifying and guaranteeing client
signatures in connection with redemption orders, transfers among and changes in
client-designated accounts; providing periodic statements of a client's account
balances and, to the extent practicable, integrating such information with other
client transactions; furnishing periodic and annual statements and confirmations
of all purchases
- 17 -
<PAGE>
and redemptions of shares in a client's account; transmitting proxy statements,
annual reports, and updating prospectuses and other communications from the Fund
to clients; and such other services as the Fund or a client reasonably may
request, to the extent permitted by applicable statute, rule or regulation.
Neither SCMI nor Schroder Advisors will be a Service Organization or receive
fees for servicing.
Some Service Organizations could impose additional or different conditions on
their clients, such as requiring them clients to invest more than the minimum
investments specified by the Fund or charging a direct fee for servicing. If
imposed, these fees would be in addition to any amounts that might be paid to
the Service Organization by the Fund. Each Service Organization would agree to
transmit to its clients a schedule of any such fees. Shareholders using Service
Organizations would be urged to consult them regarding any such fees or
conditions.
The Glass-Steagall Act and other applicable laws provide that banks may not
engage in the business of underwriting, selling or distributing securities.
There currently is no precedent prohibiting banks from performing administrative
and shareholder servicing functions as Service Organizations. However, judicial
or administrative decisions or interpretations of such laws, as well as changes
in either federal or state statutes or regulations relating to the permissible
activities of banks and their subsidiaries or affiliates, could prevent a bank
service organization from continuing to perform all or a part of its servicing
activities. If a bank were prohibited from so acting, its shareholder clients
would be permitted to remain shareholders of the Fund and alternative means for
continuing the servicing of such shareholders would be sought. In that event,
changes in the operation of the Fund might occur and a shareholder serviced by
such a bank might no longer be able to avail itself of any services then being
provided by the bank. It is not expected that shareholders would suffer any
adverse financial consequences as a result of any of these occurrences.
Portfolio Accounting
Forum Financial Corp. ("FFC"), an affiliate of Forum, performs portfolio
accounting services for the Fund pursuant to a Fund Accounting Agreement with
the Trust. The Fund Accounting Agreement will continue in effect only if such
continuance is specifically approved at least annually by the Board of Trustees
or by a vote of the shareholders of the Trust and in either case by a majority
of the Trustees who are not parties to the Fund Accounting Agreement (or
interested persons of any such party), at a meeting called for the purpose of
voting on the Fund Accounting Agreement.
Under its agreement, FFC prepares and maintains the books and records of the
Fund, on behalf of the Trust, that are required to be maintained under the 1940
Act; calculates the net asset value per share of the Fund;calculates dividends
and capital gain distributions; and prepares periodic reports to shareholders
and the Securities and Exchange Commission. For its services to the Fund, FFC
receives from the Trust a fee of $36,000 per year plus $12,000 per year also for
each class of the Fund above one. FFC is paid an additional $24,000 per year
with respect to global and international funds. In addition, FFC is paid an
additional $12,000 per year with respect to tax-free money market funds, funds
with more than 25% of their total assets invested in asset backed securities,
funds that have more than 100 security positions, or that have a monthly
portfolio turnover rate of 10% or greater.
- 18 -
<PAGE>
FFC is required to use its best judgment and efforts in rendering fund
accounting services and is not be liable to the Trust for any action or inaction
in the absence of bad faith, willful misconduct or gross negligence. FFC is not
responsible or liable for any failure or delay in performance of its fund
accounting obligations arising out of or caused, directly or indirectly, by
circumstances beyond its reasonable control. The Trust has agreed to indemnify
and hold harmless FFC and its employees, agents, officers and directors against
and from any and all claims, demands, actions, suits, judgments, liabilities,
losses, damages, costs, charges, counsel fees and all other expenses arising out
of or in any way related to FFC's actions taken or failures to act with respect
to a Fund or based, if applicable, upon information, instructions or requests
with respect to a Fund given or made to FFC by an officer of the Trust duly
authorized. This indemnification does not apply to FFC's actions taken or
failures to act in cases of FFC's own bad faith, willful misconduct or gross
negligence.
FFC assumed responsibility for fund accounting on August 15, 1994. Previously,
these services were performed by Schroders Incorporated, the parent company of
SCMI. For the fiscal years ended October 31, 1994 and October 31, 1995, the Fund
paid fund accounting fees of $28,797 and $36,000, respectively.
Fees and Expenses
As compensation for the advisory, administrative and management services
rendered to the Fund, SCMI and Schroder Advisors will each earn monthly fees at
the following annual rates:
Portion of average daily value Fee Rate
of the Fund's net assets SCMI Schroder Advisors
- ------------------------------ -------- -----------------
up to $100 million 0.50% 0.25%
$100 million to $250 million 0.40% 0.20%
over $250 million 0.35% 0.175%
The Fund bears all costs of its operations other than expenses specifically
assumed by Schroder Advisors or SCMI, including those expenses it indirectly
bears through its investment in the
- 19 -
<PAGE>
Portfolio. The costs borne by the Fund include legal and accounting expenses;
Trustees' fees and expenses; insurance premiums, custodian and transfer agent
fees and expenses; brokerage fees and expenses; expenses of registering and
qualifying the Fund's shares for sale with the SEC and with various state
securities commissions; expenses of obtaining quotations on portfolio securities
and pricing of the Fund's shares; a portion of the expenses of maintaining the
Fund's legal existence and of shareholders' meetings; and expenses of
preparation and distribution to existing shareholders of reports, proxies and
prospectuses. Trust expenses directly attributed to the Fund are charged to the
Fund; other expenses are allocated proportionately among all the portfolios of
the Trust in relation to the net assets of each portfolio.
PORTFOLIO TRANSACTIONS
Investment Decisions
Investment decisions for the Fund and for the other investment advisory clients
of SCMI are made to achieve their respective investment objectives. Investment
decisions are the product of many factors in addition to basic suitability for
the particular client involved and a particular security may be bought or sold
for certain clients and not bought or sold for other clients. Likewise, a
particular security may be bought for one or more clients when one or more
clients are selling the security. In some instances, one client may sell a
particular security to another client. It also sometimes happens that two or
more clients simultaneously purchase or sell the same security, in which event
each day's transactions in such security are, insofar as is possible, averaged
as to price and allocated between such clients in a manner which in SCMI's
opinion is equitable to each and in accordance with the amount being purchased
or sold by each. There may be circumstances when purchases or sales of portfolio
securities for one or more clients will have an adverse effect on other clients.
Brokerage and Research Services
Transactions on U.S. stock exchanges and other agency transactions involve the
payment by the Fund of negotiated brokerage commissions. Such commissions vary
among brokers. Also, a particular broker may charge different commissions
according to the difficulty and size of the transaction, for example. There is
generally no stated commission in the case of securities traded in the
over-the-counter markets, but the price paid by the Fund usually includes an
undisclosed dealer commission or mark-up. In underwritten offerings, the price
paid by the Fund includes a disclosed, fixed commission or discount retained by
the underwriter or dealer. For fiscal years ended October 31, 1993, 1994 and
1995, the Fund paid total brokerage commissions of $13,174, $29,224 and $34,391,
respectively.
The Investment Advisory Contract authorizes and directs SCMI to place orders for
the purchase and sale of the Fund's investments with brokers or dealers it
selects and to seek "best execution" of such portfolio transactions. SCMI places
all such orders for the purchase and sale of portfolio securities and buys and
sells securities for the Fund through a substantial number of brokers and
dealers. In so doing, SCMI uses its best efforts to obtain for the Fund the most
favorable price and execution available. The Fund may, however, pay higher than
the lowest available commission rates when SCMI believes it is reasonable to do
so in light of the value of the brokerage and research services provided by the
broker effecting the transaction. In seeking the most favorable
- 20 -
<PAGE>
price and execution, SCMI, considers all factors it deems relevant (including,
by way of illustration, price, transaction size, the nature of the market for
the security, commission amount, the timing of the transaction (taking into
account market prices and trends), the reputation, experience and financial
stability of the broker-dealers involved, and the quality of service rendered by
the broker-dealers in other transactions).
It has for many years been a common practice in the investment advisory business
for advisers of investment companies and other institutional investors to
receive research services from broker-dealers that execute portfolio
transactions for the clients of such advisers. Consistent with this practice,
SCMI may receive research services from broker-dealers with which SCMI places
the Fund's portfolio transactions. These services, which in some cases may also
be purchased for cash, include such items as general economic and security
market reviews, industry and company reviews, evaluations of securities and
recommendations as to the purchase and sale of securities. Some of these
services are of value to SCMI in advising various of its clients (including the
Fund), although not all of these services are necessarily useful and of value in
managing the Fund. The management fee paid by the Fund is not reduced because
SCMI and its affiliates receive such services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934 , SCMI may
cause the Fund to pay a broker-dealer that provides "brokerage and research
services" (as defined in the Act) to SCMI with an amount of disclosed commission
for effecting a securities transaction for the Fund in excess of the commission
which another broker-dealer would have charged for effecting that transaction.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and subject to seeking the most favorable price and
execution available and such other policies as the Trustees may determine, SCMI
may consider sales of shares of the Fund as a factor in the selection of
broker-dealers to execute portfolio transactions for the Fund.
Subject to the general policies of the Fund regarding allocation of portfolio
brokerage as set forth above, the Trust Board has authorized the Fund to employ
Schroder Wertheim & Company, Incorporated ("Schroder Wertheim") an affiliate of
SCMI, to effect securities transactions of the Fund on the New York Stock
Exchange only, provided certain other conditions are satisfied as described
below.
Payment of brokerage commissions to Schroder Wertheim for effecting such
transactions is subject to Section 17(e) of the 1940 Act, which requires, among
other things, that commissions for transactions on a national securities
exchange paid by a registered investment company to a broker which is an
affiliated person of such investment company (or an affiliated person of another
person so affiliated) not exceed the usual and customary broker's commissions
for such transactions. It is the Fund's policy that commissions paid to Schroder
Wertheim will in SCMI's judgment be (i) at least as favorable as commissions
contemporaneously charged by Schroder Wertheim on comparable transactions for
its most favored unaffiliated customers and (ii) at least as favorable as those
which would be charged on comparable transactions by other qualified brokers
having comparable execution capability. The Trust Board , including a majority
of the non-interested Trustees, has adopted procedures pursuant to Rule 17e-1
promulgated by the Securities and Exchange Commission under
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Section 17(e) to ensure that commissions paid to Schroder Wertheim by the Fund
satisfy the foregoing standards. The Trust Board will review all transactions at
least quarterly for compliance with such procedures.
The Fund has no understanding or arrangement to direct any specific portion of
its brokerage to Schroder Wertheim and will not direct brokerage to Schroder
Wertheim in recognition of research services. The Fund paid no commissions to
Schroder Wertheim during the fiscal yeras ended October 31, 1993, 1994 and 1995.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Determination of Net Asset Value Per Share
The net asset value per share of the Fund is determined each day the New York
Stock Exchange (the "Exchange") is open, as of 4:00 P.M.(Eastern Time), by
dividing the value of the Fund's net assets by the total number of Fund shares
outstanding. The Exchange's most recent holiday schedule (which is subject to
change) states that it will close on New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
The Trust Board has established procedures for the valuation of the Fund's
securities: (i) equity securities traded on a securities exchange or on the
NASDAQ National Market System for which last sale information is regularly
reported are valued at the last reported sales prices on their primary exchange
or the NASDAQ National Market System that day (or, in the absence of sales that
day, at values based on the last sale prices on the preceding trading day or
closing mid-market prices); (ii) NASDAQ and other unlisted equity securities for
which last sale prices are not regularly reported but for which over-the-counter
market quotations are readily available are valued at the most recently reported
mid-market prices; (iii) securities (including restricted securities) not having
readily-available market quotations are valued at fair value under the Board's
procedures; (iv) debt securities having a maturity in excess of 60 days are
valued at the mid-market prices determined by a portfolio pricing service or
obtained from active market makers on the basis of reasonable inquiry; and (v)
short-term debt securities (having a remaining maturity of 60 days or less) are
valued at cost, adjusted for amortization of premiums and accretion of discount.
Puts, calls and Stock Index Futures are valued at the last sales price on the
principal exchange on which they are traded, or, if there are no transactions,
in accordance with (i) above. When the Fund writes an option, an amount equal to
the premium received by the Fund is recorded in the Fund's books as an asset,
and an equivalent deferred credit is recorded as a liability. The deferred
credit is adjusted ("marked-to-market") to reflect the current market value of
the option.
Redemption in Kind
In the event that payment for redeemed shares is made wholly or partly in
portfolio securities, the shareholder may incur brokerage costs in converting
the securities to cash. An in kind distribution of portfolio securities will be
less liquid than cash. The shareholder may have difficulty finding a buyer for
portfolio securities received in payment for redeemed shares. Portfolio
securities may decline in value between the time of receipt by
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the shareholder and conversion to cash. A redemption in kind of the Fund's
portfolio securities could result in a less diversified portfolio of investments
for the Fund and could affect adversely the liquidity of the Fund's portfolio.
TAXATION
Under the Internal Revenue Code of 1986, as amended (the "Code"), the Fund and
each other portfolio established from time to time by the Board of Trustees of
the Trust will be treated as a separate taxpayer for Federal income tax purposes
with the result that: (a) each such portfolio must meet separately the income
and distribution requirements for qualification as a regulated investment
company, and (b) the amounts of investment income and capital gains earned will
be determined on a portfolio-by-portfolio (rather than on Trust-wide) basis.
The Fund intends to qualify as a regulated investment company under Subchapter M
of the Code. To do so, the Fund intends to distribute to shareholders at least
90% of its "investment company taxable income" as defined in the Code (which
includes, dividends, interest and the excess of any net short-term capital gains
over net long-term capital losses), and to meet certain diversification of
assets, source of income, and other requirements of the Code. The Fund will
therefore not be subject to Federal income tax on its investment company taxable
income and "net capital gains" (the excess of net long-term capital gains over
net short-term capital losses) distributed to shareholders. If the Fund does not
meet all of these Code requirements, it will be taxed as an ordinary
corporation, and its distributions will be taxable to shareholders as ordinary
income.
Amounts not distributed on a timely basis (in accordance with a calendar year
distribution requirement) are subject to a 4% nondeductible excise tax. To
prevent this, the Fund must distribute for each calendar year an amount equal to
the sum of (1) at least 98% of its ordinary income (excluding any capital gains
or losses) for the calendar year, (2) at least 98% of the excess of its capital
gains over capital losses realized during the one-year period ending October 31
of such year, and (3) all such ordinary income and capital gains for previous
years that were not distributed during such years. A distribution will be
treated as paid during the calendar year if it is declared by the Fund in
October, November or December of the year with a record date in such month and
paid by the Fund during January of the following year. Such distributions will
be taxable to shareholders in the calendar year in which the distributions are
declared, rather than the calendar year in which the distributions are received.
Distributions of investment company taxable income (including realized net
short-term capital gain) are taxable to shareholders as ordinary income.
Generally, dividends of investment income (but not capital gain) from the Fund
will qualify for the Federal dividends-received deduction for corporate
shareholders to the extent such dividends do not exceed the aggregate amount of
dividends received by the Fund from domestic corporations, provided the Fund
shares are held by said shareholders for more than 45 days. If securities held
by the Fund are considered to be "debt-financed" (generally, acquired with
borrowed funds), are held by the Fund for less than 46 days (91 days in the case
of certain preferred stock), or are subject to certain forms of hedges or short
sales, the portion of the dividends paid by the Fund that corresponds to the
dividends paid with respect to such securities will not be eligible for the
corporate dividends-received deduction.
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Distributions of net long-term capital gain are taxable to shareholders as
long-term capital gain, regardless of the length of time the Fund shares have
been held by a shareholder, and are not eligible for the dividends received
deduction. A loss realized by a shareholder on the sale of shares of the Fund
with respect to which capital gain dividends have been paid will, to the extent
of such capital gain dividends, be treated as long-term capital loss (even
though such shares may have been held by the shareholder for one year or less).
Further, a loss realized on a disposition will be disallowed to the extent the
shares disposed of are replaced (whether by reinvestment of distributions or
otherwise) within a period of 61 days beginning 30 days before and ending 30
days after the shares are disposed of. In such a case, the basis of the shares
acquired will be adjusted to reflect the disallowed loss.
All distributions to shareholders are taxable whether reinvested in additional
shares or received in cash. Shareholders that reinvest distributions in
additional shares will have a cost basis for federal income tax purposes in each
share received equal to the net asset value of a share of the Fund on the
reinvestment date. Shareholders will be notified annually as to the Federal tax
status of distributions.
Distributions by the Fund reduce the net asset value of the Fund's shares. If a
distribution reduces the net asset value below a shareholder's cost basis, such
distribution nevertheless would be taxable to the shareholder as ordinary income
or capital gain as described above, even though, from an investment standpoint,
it may constitute a partial return of capital. In particular, investors should
be careful to consider the tax implications of buying shares just prior to a
distribution. The price of shares purchased at that time includes the amount of
the forthcoming distribution which will be returned to the investor in the form
of a taxable distribution.
Upon redemption or sale of shares, a shareholder will realize a taxable gain or
loss which generally will be treated as capital gain or loss if the shares are
capital assets in the shareholder's hands. Such gain or loss generally will be
long-term or short-term depending upon the shareholder's holding period for the
shares.
The Trust will be required to report to the IRS all distributions and gross
proceeds from the redemption of Fund shares (except in the case of certain
exempt shareholders). All such distributions and proceeds generally will be
subject to the withholding of Federal income tax at a rate of 31% ("backup
withholding") in the case of non-exempt shareholders if (1) the shareholder
fails to furnish the Trust with and to certify the shareholder's correct
taxpayer identification number or social security number, (2) the IRS notifies
the Trust that the shareholder has failed to report properly certain interest
and dividend income to the IRS and to respond to notices to that effect, or (3)
when required to do so, the shareholder fails to certify that they are not
subject to backup withholding. If the withholding provisions are applicable, any
such distributions or proceeds, whether reinvested in additional shares or taken
in cash, will be reduced by the amount required to be withheld. Any amounts
withheld may be credited against the shareholder's Federal income tax liability.
Investors may wish to consult their tax advisers about the applicability of the
backup withholding provisions.
The foregoing discussion relates only to Federal income tax law as applicable to
U.S. persons (i.e., U.S. citizens and residents and U.S. domestic corporations,
partnerships, trusts and estates). Distributions by the Fund also may be subject
to state and local taxes, and their treatment under state
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and local income tax laws may differ from the Federal income tax treatment.
Shareholders should consult their tax advisers with respect to particular
questions of Federal, state and local taxation. Shareholders who are not U.S.
persons should consult their tax advisers regarding U.S. and foreign tax
consequences of ownership of shares of the Fund including the likelihood that
distributions to them would be subject to withholding of U.S. tax at a rate of
30% (or a lower rate under a tax treaty).
OTHER INFORMATION
Organization
The Trust was originally organized as a Maryland corporation on July 30, 1969.
On February 29, 1988, the Trust was recapitalized to enable its Board to
establish a series of separately managed investment portfolios, each having
different investment objectives and policies. At the time of the
recapitalization, the Trust's name was changed from "The Cheapside Dollar Fund
Limited" to "Schroder Capital Funds, Inc." On January 9, 1996, the Trust was
reorganized as a Delaware business trust. At that time, the Trust's name was
changed from "Schroder Capital Funds, Inc." to its present name. The Trust is
registered as an open-end management investment company under the Act.
Delaware law provides that shareholders shall be entitled to the same
limitations of personal liability extended to stockholders of private
corporations for profit. The securities regulators of some states, however, have
indicated that they and the courts in their state may decline to apply Delaware
law on this point. To guard against this risk, the Trust Instrument contains an
express disclaimer of shareholder liability for the debts, liabilities,
obligations, and expenses of the Trust. The Trust Instrument provides for
indemnification out of each series' property of any shareholder or former
shareholder held personally liable for the obligations of the series. The Trust
Instrument also provides that each series shall, upon request, assume the
defense of any claim made against any shareholder for any act or obligation of
the series and satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which Delaware law does not apply (or no contractual limitation
of liability was in effect) and the portfolio is unable to meet its obligations.
Forum believes that, in view of the above, there is no risk of personal
liability to shareholders.
Capitalization and Voting
The Trust has an unlimited number of authorized shares of beneficial interest.
The Board may, without shareholder approval, divide the authorized shares into
an unlimited number of separate portfolios or series (such as the Fund) and may
divide such portfolios or series into classes of shares, and the costs of doing
so will be borne by the Trust. The Trust currently consists of five separate
portfolios, each of which has separate investment objectives and policies, and
five classes, two of which pertains to the Schroder Fund.
The Shares of the Fund are fully paid and nonassessable, and have no preferences
as to conversion, exchange, dividends, retirement or other features. The Shares
have no preemptive rights and have non-cumulative voting rights, which means
that the holders of more than 50% of the shares voting for the election of
Trustees can elect 100% of the Trustees if they choose to do so. Each
shareholder of record is entitled to one vote for each full share held (and a
fractional vote for each fractional share held). Shares of each class vote
separately to approve investment advisory agreements or changes in investment
objectives and other fundamental policies affecting the portfolio to which they
pertain, but all classes
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vote together in the election of Trustees and ratification of the selection of
independent accountants. Shareholders of any particular class are not be
entitled to vote on any matters as to which such class are not affected.
The Trust will not hold annual meetings of shareholders. The matters considered
at an annual meeting typically include the reelection of Trustees, approval of
an investment advisory agreement, and the ratification of the selection of
independent accountants. These matters will not be submitted to shareholders
unless a meeting of shareholders is held for some other reason, such as those
indicated below. Each of the Trustees will serve until death, resignation or
removal. Vacancies will be filled by the remaining Trustees, subject to the
provisions of the 1940 Act requiring a meeting of shareholders for election of
Trustees to fill vacancies when less than a majority of Trustees then in office
have been elected by shareholders. Similarly, the selection of accountants and
renewal of investment advisory agreements for future years will be performed
annually by the Board. Future shareholder meetings will be held to elect
Trustees if required by the 1940 Act, to obtain shareholder approval of changes
in fundamental investment policies, to obtain shareholder approval of material
changes in investment advisory agreements, to select new accountants if the
employment of the Trust's accountants has been terminated, and to seek any other
shareholder approval required under the 1940 Act. The Trust Board has the power
to call a meeting of shareholders at any time when it believes it is necessary
or appropriate. In addition, Trust Instrument provides that a special meeting of
shareholders may be called at any time for any purpose by the holders of at
least 10% of the outstanding shares entitled to be voted at such meeting.
In addition to the foregoing rights, the Trust Instrument provides that holders
of at least two-thirds of the outstanding shares of the Trust may remove any
person serving as a Trustee either by declaration in writing or at a meeting
called for such purpose. Further, the Board is required to call a shareholders
meeting for the purpose of considering the removal of one or more Trustees if
requested in writing to do so by the holders of not less than 10% of the
outstanding shares of the Trust. In addition, the Trust Board is required:, if
requested in writing to do so by ten or more shareholders of record (who have
been such for at least six months), holding in the aggregate the lesser of (i)
shares of the Trust having a total net asset value of at least $25,000 or (ii)
1% of the outstanding shares of the Trust, to help such holders communicate with
other shareholders of the Trust with a view to obtaining the requisite
signatures to request a special meeting to consider Trustee removal.
Principal Shareholders
As of February 24, 1997, the following persons owned of record or beneficially
5% or more of the Fund's shares:
Shareholder Share Balance Percent of Fund
- ----------- ------------- ---------------
Donaldson Lufkin & Jenrette 3,240.042 62.02%
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P O Box 2052
Jersey City, NJ 07303
National Investors Services Corp. 1,983.927 37.98%
75 Wall Street
New York, NY 10265
Performance Information
The Fund may, from time to time, include quotations of its average annual total
return in advertisements or reports to shareholders or prospective investors.
Quotations of average annual total return will be expressed in terms of the
average annual compounded rate of return of a hypothetical investment in the
Fund over periods of 1, 5 and 10 years (up to the life of the Fund), calculated
pursuant to the following formula:
P(1+T)^n = ERV
(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n = the number of years, and ERV = the ending redeemable value of
a hypothetical $1,000 payment made at the beginning of the period). All total
return figures will reflect the deduction of Fund expenses (net of certain
reimbursed expenses) on an annual basis, and will assume that all dividends and
distributions are reinvested when paid.
For the one year, and since inception periods ended October 31, 1996, the
average annual total return of the Fund with respect to Investor Shares was
29.35% and 24.60%, respectively.
Quotations of total return will reflect only the performance of a hypothetical
investment in the Fund during the particular time period shown. Total return for
the Fund will vary based on changes in market conditions and the level of the
Fund's expenses, and no reported performance figure should be considered an
indication of performance which may be expected in the future.
In connection with communicating total return to current or prospective
investors, the Fund also may compare these figures to the performance of other
mutual funds tracked by mutual fund rating services or to other unmanaged
indexes which may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs.
Investors who purchase and redeem shares of the Fund through a customer account
maintained at a Service Organization may be charged one or more of the following
types of fees as agreed upon by the Service Organization and the investor, with
respect to the customer services provided by the Service Organization: account
fees (a fixed amount per month or per year); transaction fees (a fixed amount
per transaction processed); compensating balance requirements (a minimum dollar
amount a customer must maintain in order to obtain the services offered); or
account maintenance fees (a periodic charge
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based upon a percentage of the assets in the account or of the dividends paid on
these assets). Such fees will have the effect of reducing the average annual
total return of the Fund for those investors.
Custodian
All securities and cash of the Fund are held by The Chase Manhattan Bank, N.A.,
Chase MetroTech Center, Brooklyn, New York 11245.
Transfer Agent and Dividend Disbursing Agent
Forum Financial Corp., Portland, Maine, acts as the Fund's transfer agent and
dividend disbursing agent.
Legal Counsel
Jacobs Persinger & Parker, 77 Water Street, New York, New York 10005, counsel to
the Fund, passes upon certain legal matters in connection with the shares
offered by the Fund.
Independent Accountant
Coopers & Lybrand L.L.P. ("Coopers & Lybrand") serves as independent accountants
for the Fund. Coopers & Lybrand provides audit services and consultation in
connection with review of U.S. Securities and Exchange Commission filings. Their
address is One Post Office Square, Boston, Massachusetts 02109.
FINANCIAL STATEMENTS
The audited Statement of Assets and Liabilities, Statement of Operations,
Statements of Changes in Net Assets, Statement of Investments, notes thereto,
and Financial Highlights of the Fund for the fiscal year ended October 31, 1996
and the Report of Independent Accountants thereon (included in the Annual Report
to shareholders), which are delivered along with this SAI, are incorporated
herein by reference.
<PAGE>
SCHRODER U.S. EQUITY FUND
Statement of Additional Information
March 1, 1997
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[GRAPHIC OMITTED]
Investment Advisor
Schroder Capital Management International Inc. ("SCMI")
Administrator and Distributor
Schroder Fund Advisors, Inc. ("Schroder Advisors")
Sub-Administrator
Forum Administrative Services, Limited Liability Company ("Forum")
Transfer Agent and Dividend Disbursing Agent
Forum Financial Corp. ("FFC")
General Information: (207) 879-8903
Account Information: (800) 344-8332
Fax: (207) 879-6206
<PAGE>
Investor Shares of the Fund are offered for sale at net asset value with no
sales charge as an investment vehicle for individuals, institutions,
corporations and fiduciaries. Advisor Shares of the Fund are offered to
individual investors, in most cases through Service Organizations (as defined
herein). Advisor Shares incur more expenses than Investor Shares.
This Statement of Additional Information ("SAI") is not a prospectus and is only
authorized for distribution when preceded or accompanied by the current
Prospectus for the Fund dated March 1, 1997 (the "Prospectus"). This SAI
contains additional and more detailed information than that set forth in the
Prospectus and should be read in conjunction with the Prospectus and retained
for future reference. You may obtain an additional copy of the Prospectus
without charge by writing to the Fund at Two Portland Square, Portland, Maine
04101 or calling the numbers listed above.
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TABLE OF CONTENTS PAGE
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INVESTMENT POLICIES
Introduction
Primary Investments
Temporary Defensive and Operating Investments
Restricted Securities
Leverage
INVESTMENT RESTRICTIONS
MANAGEMENT
Trustees and Officers
Investment Adviser
Sub-Administrator
Distribution of Fund Shares
Portfolio Accounting
PORTFOLIO TRANSACTIONS
Investment Decisions
Portfolio Brokerage
SHARE OWNERSHIP
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ADDITIONAL PURCHASE AND
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REDEMPTION INFORMATION
Determination of Net Asset Value
Redemption in Kind
TAXATION
OTHER INFORMATION
Organization
Capitalization and Voting
Performance Information
Custodian
Transfer Agent and Dividend Disbursing Agent
Legal Counsel
Independent Accountants
FINANCIAL STATEMENTS
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INTRODUCTION
Schroder U.S. Equity Fund (the "Fund") is a separately-managed, diversified,
no-load portfolio of Schroder Capital Funds (Delaware) (the "Trust"), an
open-end management investment company currently consisting of seven separate
portfolios, each of which has different investment objectives and policies.
Schroder U.S. Equity Fund is described herein.
The Fund's primary investment objective is to seek growth of capital. Income,
while a factor in portfolio selection, is secondary to the principal objective.
There is no assurance that these objectives will be achieved. The Fund invests
substantially all its assets in common stocks and securities convertible into
common stock and may also invest in warrants or other rights to purchase common
stock, and to a lesser extent in non-convertible preferred and debt securities.
INVESTMENT POLICIES
Introduction
The following information supplements the discussion found under "The Fund -
Investment Objectives and Investment Policies" in the Prospectus.
<PAGE>
The Fund is a "diversified" portfolio and, as such, at least 75% of the Fund's
total assets must be represented by cash and cash items, Government securities
and securities limited in respect of any one issuer to not more than 5% of the
Fund's total assets and to not more than 10% of the voting securities of such
issuer. The classification of the Fund as diversified under the Investment
Company Act of 1940 (the "1940 Act") cannot be changed without the majority
approval of the Fund's shareholders. As used in this SAI, "majority approval of
the Fund's shareholders" means approval of the lesser of (i) 67% or more of the
Fund's shares present at a meeting if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy, and (ii)
more than 50% of the outstanding shares of the Fund.
The investment objectives of the Fund set forth in the Prospectus are
fundamental policies of the Fund, meaning that they cannot be changed without
majority approval of the Fund's shareholders. A non-fundamental policy could be
changed by the Trust's Board of Trustees without such prior shareholder
approval. Unless otherwise indicated, all of the investment policies of the Fund
described below are also fundamental policies.
Primary Investments
The Fund will generally purchase securities which are believed to have potential
for capital appreciation. Securities, however, will be disposed of in situations
where the Fund believes that such potential is no longer feasible or the risk of
decline in market price is too great. Pursuant to this policy, the Fund has
invested and normally will invest substantially all its assets in common stock
and securities convertible into common stock. The Fund may also invest in other
securities with common stock purchase warrants attached, or in such warrants or
other rights to purchase common stock. The Fund may also invest to a limited
degree in non-convertible preferred and debt securities. Such investments might
be made at such times as in the opinion of management substantially greater
yields could be earned on such securities of investment grade than on U.S.
Government securities and bank certificates of deposit. As a non-fundamental
policy, the Fund will not invest more than 15% of its total assets in such
non-convertible preferred and debt securities.
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Temporary Defensive and Operating Investments
For temporary defensive purposes, the Fund may invest all or any portion of its
assets in investment grade corporate bonds or debentures (meaning for these
purposes bonds or debentures rated "A" or better by Standard & Poor's ("S&P") or
the equivalent thereof), preferred stock, U.S. Government securities or bank
certificates of deposit. (According to S&P, bonds rated "A" have a strong
capacity to pay principal and interest although they are somewhat more
susceptible to the adverse effect of changes in circumstances and economic
conditions.) The conditions under which the Fund may so invest all or any
portion of its assets for temporary defensive purposes will be at such times as
in the opinion of management the market appears relatively fully priced or at
such times as in the opinion of management uncertain economic conditions
indicate the advisability of assuming such a temporary defensive position.
As an operating, non-fundamental policy, the Fund may also invest temporarily in
certain short-term fixed income securities. Such securities may be used to
invest uncommitted cash balances, or to maintain liquidity to meet shareholder
redemptions or other Fund obligations. Such securities might include U.S.
Government securities, commercial paper, bank certificates of deposit and
bankers acceptances, and repurchase agreements collateralized by such
securities. The Fund will limit its total investment at any time in these
securities for this operating purpose to not more than 25% of its total assets.
Certain of the securities in which the Fund may invest for either of the
foregoing temporary purposes are more fully described as follows:
1. U.S. Government Securities - These securities consist of obligations
issued or guaranteed by the United States Government or its agencies or
instrumentalities. Agencies and instrumentalities which issue or guarantee debt
securities and which have been established or sponsored by the United States
Government include the Bank for Cooperatives, the Export-Import Bank, the
Federal Farm Credit System, the Federal Home Loan Banks, the Federal Home Loan
Mortgage Corporation, the Federal Intermediate Credit Banks, the Federal Land
Banks, the Federal National Mortgage Association, the Government National
Mortgage Association, and the Student Loan Marketing Association.
2. Bank Obligations - These securities consist of certificates of deposit
and bankers' acceptances issued by U.S. banks having total assets at the time of
purchase in excess of $1 billion. Such banks must be members of the Federal
Deposit Insurance Corporation. A certificate of deposit is an interest-bearing
negotiable certificate issued by a bank against funds deposited in the bank. A
bankers' acceptance is a short-term draft drawn on a commercial bank by a
borrower, usually in connection with an international commercial transaction.
Although the borrower is liable for payment of the draft, the bank
unconditionally guarantees to pay the draft at its face value on the maturity
date.
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The foregoing limitation as to banks in whose obligations the Fund may invest is
a non-fundamental policy of the Fund.
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3. Commercial Paper - These securities are short-term unsecured promissory
notes issued in bearer form by bank holding companies, corporations and finance
companies. The commercial
- 7 -
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paper which may be purchased by the Fund for temporary purposes would consist of
direct obligations of domestic issuers which, at the time of investment, are
rated "P-1" by Moody's Investors Services, Inc. ("Moody's") or "A-1" by S&P, or
securities which, if not rated, are issued by companies having an outstanding
debt issue currently rated Aa by Moody's or AAA or AA by S&P. The rating "P-1"
is the highest commercial paper rating assigned by Moody's and the rating "A-1"
is the highest commercial paper ratings assigned by S&P. Such limitations with
respect to commercial paper constitute a non-fundamental policy of the Fund.
4. Repurchase Agreements - The Fund may invest in securities subject to
repurchase agreements maturing in seven days or less (normally one day) with
member banks of the Federal Reserve System or certain dealers listed on the
Federal Reserve Bank of New York's list of reporting dealers. In a typical
repurchase agreement the seller of a security commits itself at the time of the
sale to repurchase such security from the buyer at a mutually agreed-upon time
and price. The repurchase price exceeds the sale price, reflecting an
agreed-upon interest rate effective for the period the buyer owns the security
subject to repurchase. The agreed-upon rate is unrelated to the interest rate on
the underlying security. The value of the underlying security is monitored by
the Fund's investment adviser at the time the transaction is entered into and at
all times during the term of the repurchase agreement to insure that the value
of the security always equals or exceeds the repurchase price. In the event of
default by the seller under the repurchase agreement, the Fund may have
difficulties in exercising its rights to the underlying securities and may incur
costs and experience time delays in connection with the disposition of such
securities. To evaluate potential risks, the investment adviser reviews the
creditworthiness of those banks and dealers with which the Fund enters into
repurchase agreements. The foregoing policy with respect to repurchase
agreements is a non-fundamental policy of the Fund.
Restricted Securities
The Fund may from time to time acquire securities which are subject to legal or
contractual restrictions on resale. The Fund may invest up to 10% of the value
of its total assets in such restricted securities and should changes in market
values result in more than 10% being so invested, management will take such
action as it deems appropriate to reduce such assets to the 10% limit. A
considerable period might elapse between the time a decision is made to sell
such securities and the time the Fund might be permitted to sell all or part of
such securities publicly under an effective registration statement or an
exemption from registration, or the time the Fund might find a suitable
purchaser willing to accept such securities subject to restrictions. Such delay
might adversely affect the price obtainable by the Fund for such securities. The
Fund may be required to pay the registration expenses of restricted securities
held by it.
Leverage
The Fund is authorized to borrow money from a bank on its promissory note or
other evidence of indebtedness. Monies borrowed would be invested and any
appreciation thereon, to the extent it exceeded interest paid on the loan, would
cause the net assets value of Fund shares to rise faster than it would
otherwise. If, however, the investment performance of additional monies failed
to cover the Fund's interest charges, the net asset value would decrease faster
than would otherwise be the case. This is the speculative feature known as
"leverage". Any such borrowing (i) would not exceed one-third of the value of
the Fund's total assets after borrowing, (ii) if at any time it exceeded such
one-
- 8 -
<PAGE>
third limitation, the Fund would within three days thereafter (not including
Sundays or holidays) or such longer period as the Securities and Exchange
Commission may prescribe by rules and regulations, reduce its borrowings to the
limitation and (iii) might or might not be secured and, if secured, all or any
part of the Fund's assets could be pledged. To comply with such limitations, the
Fund might be required to dispose of certain of its assets when it might be
disadvantageous to do so. Any such borrowings would be subject to Federal
Reserve Board regulations. The Fund has not borrowed money for investment or any
other purpose during the last ten years and, as a non-fundamental policy, will
not borrow for investment in the future.
INVESTMENT RESTRICTIONS
The following investment restrictions restate or are in addition to those
described under "The Fund - Investment Restrictions" in the Prospectus. These
restrictions, which are fundamental policies (except as set forth), provide that
the Fund:
1. Will not issue senior securities except that it may borrow money from a
bank on its promissory note or other evidence of indebtedness. Any such
borrowing (i) would not exceed one-third of the value of the Fund's total assets
after the borrowing, (ii) if at any time it exceeded such one-third limitation,
the Fund would within three days thereafter (not including Sundays or holidays)
or such longer period as the Securities and Exchange Commission may prescribe by
rules and regulations, reduce its borrowings to the limitation and (iii) might
or might not be secured and, if secured, all or any part of the Fund's assets
could be pledged. To comply with such limitations, the Fund might be required to
dispose of certain of its assets when it might be disadvantageous to do so. Any
such borrowings would be subject to Federal Reserve Board regulations. (As a
non-fundamental policy, the Fund will not borrow for investment purposes).
2. Will not effect short sales, purchase any security on margin or write
or purchase put and call options.
3. Will not acquire more than 10% of the voting securities of any one
issuer.
4. Will not invest 25% or more of the value of its total assets in any one
industry.
5. Will not engage in the purchase and sale of illiquid interests in real
estate, including illiquid interests in real estate investment trusts.
6. Will not engage in the purchase and sale of commodities or commodity
contracts.
7. Will not invest in companies for the purpose of exercising control or
management.
8. Will not underwrite securities of other issuers, except that the Fund
may acquire portfolio securities, not in excess of 10% of the value of its total
assets, under circumstances where if sold it might be deemed to be an
underwriter for the purposes of the Securities Act of 1933.
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<PAGE>
9. Will not make loans to other persons except that it may purchase
evidences of indebtedness of a type distributed privately to financial
institutions but not in excess of 10% of the value of its total assets.
10. Will not acquire securities described in 8 and 9 above which in the
aggregate exceed 10% of the value of the Fund's total assets.
11. Will not invest in other investment companies.
As non-fundamental policies, the Fund (a) will not invest more than 10% of its
total assets in illiquid securities, including securities described in items 8
and 9 above and repurchase agreements maturing more than seven days after they
are entered into and (b) will not engage in writing, buying or selling of stock
index futures, options on stock index futures, financial futures contracts or
options thereon.
MANAGEMENT
Trustees and Officers
The following information relates to the principal occupations of each Trustee
and executive officer of the Trust during the past five years and shows the
nature of any affiliation with SCMI.
Robert G. Davy, 787 Seventh Avenue, New York, New York - a Vice-President of the
Trust - Director of SCMI and Schroder Capital Management International Ltd.
since 1994; First Vice President of SCMI since July, 1992; prior thereto,
employed by various affiliates of Schroders plc in various positions in the
investment research and portfolio management areas since 1986.
Margaret H. Douglas-Hamilton(b) (c), 787 Seventh Avenue, New York, New York -
Secretary of the Trust - Secretary of SCMI since July 1995; Secretary of
Schroder Advisers since April 1990; First Vice President and General Counsel of
Schroders Incorporated(b) since May 1987; prior thereto, partner of Sullivan &
Worcester, a law firm.
Richard R. Foulkes, 787 Seventh Avenue, New York, New York - a Vice President of
the Trust; Deputy Chairman of SCMI since October 1995; Director and Executive
Vice President of Schroder Capital Management International Ltd. since 1989.
David I. Goldstein, 2 Portland Square, Portland, Maine - Assistant Treasurer and
Assistant Secretary of the Trust Counsel, Forum Financial Services, Inc. Since
1991; prior thereto, associate at Kirkpatrick & Lockhart, Washington, D.C.
Barbara Gottlieb(c), 787 Seventh Avenue, New York, New York - Assistant
Secretary of the Trust - Assistant Vice President of SWIS since July 1995 prior
thereto held various positions with SWIS affiliates.
Peter E. Guernsey, Oyster Bay, New York - Trustee of the Trust - Insurance
Consultant since August 1986; prior thereto Senior Vice President, Marsh &
McLennan, Inc., insurance brokers.
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<PAGE>
Ralph E. Hansmann (Honorary), 40 Wall Street, New York, New York - Honorary
Trustee of the Trust - Private investor; Director, First Eagle Fund of America,
Inc.; Director, Verde Exploration, Ltd.; Trustee Emeritus, Institute for
Advanced Study; Trustee and Treasurer, New York Public Library; Life Trustee,
Hamilton College.
John I. Howell, 7 Riverside Road, Greenwich, Connecticut - Trustee of the Trust
- - Private Consultant since February 1987; Director, American International
Group, Inc.; Director, American International Life Assurance Company of New
York.
Robert Jackowitz(b) (c), 787 Seventh Avenue, New York, New York - Treasurer of
the Trust - Vice President of SCMI since September 1995; Treasurer of SCMI and
Schroder Advisers since July 1995; Vice President of SCMI since June 1995; and
Assistant Treasurer of Schroders Incorporated since January 1993.
John Y. Keffer, 2 Portland Square, Portland, Maine - Vice President of the
Trust. President of Forum Financial Services, Inc., the Fund's
sub-administrator, and Forum Financial Corp., the Fund's transfer and dividend
disbursing agent and fund accountant.
Jane P. Lucas, (c) 787 Seventh Avenue, New York, New York - Vice President of
the Trust - Director and Senior Vice President SCMI; Director of SCMI since
September 1995; Assistant Director Schroder Investment Management Ltd. since
June 1991.
Gerardo Machado, 787 Seventh Avenue, New York, New York - Assistant Secretary of
the Trust - Associate, SCMI.
Catherine A. Mazza, 787 Seventh Avenue, New York, New York - Vice President of
the Trust - President of Schroder Advisors since 1997; First Vice President of
SCMI and SCMI since1996; Vice President of SCMI since 1994; prior thereto, held
various marketing positions at Alliance Capital, an investment adviser, since
July 1985.
Clarence F. Michalis, 44 East 64th Street, New York, New York - Trustee of the
Trust - Chairman of the Board of Directors, Josiah Macy, Jr. Foundation
(charitable foundation).
Hermann C. Schwab, 787 Seventh Avenue, New York, New York - Chairman (Honorary)
and Trustee of the Trust - retired since March, 1988; prior thereto, consultant
to SCMI since February 1, 1984.
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<PAGE>
Thomas G. Sheehan, 2 Portland Square, Portland, Maine - Assistant Treasurer and
Assistant Secretary of the Trust - Counsel, Forum Financial Services, Inc. since
1993; prior thereto, Special Counsel, U.S. Securities and Exchange Commission,
Division of Investment Management, Washington, D.C.
Mark J. Smith(a) (b), 33 Gutter Lane, London, England - a Vice President and
Trustee of the Trust - First Vice President of SCMI since April 1990; Director
and Vice President, Schroder Advisors since 1989.
Fariba Talebi, 787 Seventh Avenue, New York, New York - Vice President of the
Trust - First Vice President of SCMI since April 1993, employed in various
positions in the investment research and portfolio management areas since 1987.
John A. Troiano(b), 787 Seventh Avenue, New York, New York - Vice President of
the Trust - Managing Director and Senior Vice President of SCMI since October
1995; Director of Schroder Advisors since October 1992; Director of SCMI since
1991; prior thereto, employed by various affiliates of SCMI in various positions
in the investment research and portfolio management areas since 1981.
Ira L. Unschuld, 787 Seventh Avenue, New York, New York - Vice President of the
Trust - Vice President of SCMI since April, 1993 and an Associate from July,
1990 to April, 1993; prior to July, 1990, employed by various financial
institutions as a securities or financial analyst.
(a) Interested Trustee of the Trust within the meaning of the 1940 Act.
(b) Schroder Fund Advisors, Inc. ("Schroder Advisors") is a wholly-owned
subsidiary of SCMI, which is a wholly-owned subsidiary of Schroders
Incorporated, which in turn is an indirect, wholly-owned U.S. subsidiary
of Schroders plc.
(c) Schroder Capital Management, Inc. ("SCMI") is a wholly-owned subsidiary of
Schroder Wertheim Holdings Incorporated which is a wholly-owned subsidiary
of Schroders, Incorporated, which in turn is an indirect wholly-owned U.S.
subsidiary of Schroders plc.
Officers and Trustees who are interested persons of the Trust receive no salary,
fees or compensation from the Fund. Independent Trustees of the Trust receive an
annual fee of $1,000 and a fee of $250 for
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each meeting of the Board attended by them except in the case of Mr. Schwab, who
receives an annual fee of $1,500 and a fee of $500 for each meeting attended.
The Fund has no bonus, profit sharing, pension or retirement plans.
The following table provides the fees paid to each Trustee of the Trust for the
fiscal year ended October 31, 1996.
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<PAGE>
<TABLE>
<CAPTION>
Name of Trustee Aggregate Pension or Estimated Annual Total Compensation
Compensation From Retirement Benefits Benefits Upon From Trust And Fund
Trust Accrued As Part of Retirement Complex Paid To
Trust Expenses Trustees
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mr. Guernsey $1,750 $0 $0 $1,750
Mr. Hansmann 1,375 0 0 1,375
Mr. Howell 1,750 0 0 1,750
Ms. Luckyn-Malone 0 0 0 0
Mr. Michalis 1,750 0 0 1,750
Mr. Schwab 3,000 0 0 3,000
Mr. Smith 0 0 0 0
</TABLE>
As of February 15, 1997, the officers and Trustees of the Trust owned, in the
aggregate, less than 1% of the Fund's outstanding shares.
While the Trust is a Delaware business trust, certain of its Trustees or
officers are residents of the United Kingdom and substantially all of their
assets may be located outside of the U.S. As a result it may be difficult for
U.S. investors to effect service upon such persons within the U.S., or to
realize judgments of courts of the U.S. predicated upon civil liabilities of
such persons under the Federal securities laws of the U.S. The Trust has been
advised that there is substantial doubt as to the enforceability in the United
Kingdom of such civil remedies and criminal penalties as are afforded by the
Federal securities laws of the U.S. Also it is unclear if extradition treaties
now in effect between the U.S. and the United Kingdom would subject such persons
to effective enforcement of the criminal penalties of such acts.
Investment Adviser
Schroder Capital Management International Inc. ("SCMI"), 787 Seventh Avenue, New
York, New York 10019, serves as Investment Adviser to the Fund pursuant to an
Investment Advisory Contract between the Trust and SCMI. SCMI is a wholly-owned
United States subsidiary of Schroders Incorporated, the wholly-owned United
States holding company subsidiary of Schroders plc. Schroders plc is the holding
company parent of a large world-wide group of banks and financial service
companies (referred to as the "Schroder Group"), with associated companies and
branch and representative offices located in eighteen countries. The Schroder
Group specializes in providing investment management services, with Group funds
under management currently in excess of $130 billion.
Under the Investment Advisory Contract, SCMI regularly provides the Fund with
investment research, advice and supervision and furnishes continuously an
investment program for the Fund's investments consistent with the Fund's
investment objectives. SCMI recommends what securities shall be bought or sold
by the Fund, and what portion of the Fund's assets shall be held uninvested.
SCMI advises and assists the officers of the Trust in taking such steps as are
necessary or appropriate to carry out the decisions of its Board of Trustees
regarding the foregoing matters and general conduct of the
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<PAGE>
investment business of the Fund. SCMI pays directly any office rent of the Fund
and furnishes or causes to be furnished without expense to the Fund, the
services of such of its officers and employees and employees of its corporate
affiliates as may be duly elected officers or Trustees of the Trust. In
addition, SCMI provides investment advisory, research and statistical facilities
and all clerical services relating to research, statistical and investment work.
The Fund pays all of its other costs and expenses, including without limitation:
brokers' commissions; legal, auditing or accounting expenses, taxes or
governmental fees; cost of preparing share certificates or any other expenses
(including clerical expenses) of issue (not including sales or promotion
expenses unless the Fund shall in the future duly adopt a plan pursuant to Rule
12b-1 under the 1940 Act), distribution, redemption or repurchase of shares of
the Fund; registration expenses; the cost of preparing and distributing reports
and notices to shareholders; fees or disbursements of the custodian of the
Fund's assets, of the Fund's dividend disbursing agent and of the Fund's
transfer agent. To the extent employees of SCMI or its affiliates devote their
time to the affairs of the Fund, other than as officers or Trustees, the Fund
will reimburse SCMI or such affiliates the pro rate share of such individuals'
salaries or wages and expenses.
Under the Investment Advisory Contract, SCMI receives a fee for its services,
computed daily and payable monthly, at the annual rate of 0.75% of the Fund's
average daily net assets of the first $100 million and 0.50% of the Fund's
average daily net assets in excess of $100 million.. It is the Trust's
understanding that although other mutual funds pay investment advisory fees at
annual rates of 0.75% or more of their average net assets (or a portion
thereof), the majority of other mutual funds, regardless of size, pay advisory
fees at rates lower than 0.75% of any portion of their average net assets. For
the fiscal years ended October 31, 1994, 1995 and 1996, SCMI earned an aggregate
of $144,539, $140,988 and $139,483, respectively, in advisory fees from the
Fund.
The Investment Advisory Contract will continue in effect provided such
continuance is approved annually (i) by the holders of a majority of the
outstanding voting securities of the Fund or by the Board and (ii) by a majority
of the Trustees who are not parties to such Contract or "interested persons" (as
defined in the 1940 Act) of any such party. The Investment Advisory Contract may
be terminated without penalty by vote of the Trustees or the shareholders of the
Fund on 60 days' written notice to the Adviser, or by the Adviser on 60 days'
written notice to the Trust and it will terminate automatically if assigned. The
Investment Advisory Contract also provides that, with respect to the Fund,
neither SCMI nor its personnel shall be liable for any error of judgment or
mistake of law or for any act or omission in the performance of its or their
duties to the Fund, except for willful misfeasance, bad faith or gross
negligence in the performance of the SCMI's or their duties or by reason of
reckless disregard of its or their obligations and duties under the Investment
Advisory Contract.
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<PAGE>
Sub-Administrator
On behalf of the Fund, the Trust and SCMI have entered into a Sub-Administration
Agreement with Forum Financial Services, Inc. ("Forum"). Pursuant to its
agreement, Forum provides certain management and administrative services
necessary for the Fund's operations, other than the investment management and
administrative services provided to the Fund by SCMI pursuant to the
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<PAGE>
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<PAGE>
Investment Advisory Contract, including among other things, (i) preparation of
shareholder reports and communications, (ii) regulatory compliance, such as
reports to and filings with the Securities and Exchange Commission and state
securities commissions, and (iii) general supervision of the operation of the
Fund, including coordination of the services performed by the Fund's investment
adviser, transfer agent, custodian, independent accountants, legal counsel and
others.
The Sub-Administration Agreement is terminable with respect to the Fund without
penalty, at any time, by the Board of Trustees and SCMI upon 60 days' written
notice to Forum or by Forum upon 60 days' written notice to the Fund and the
Adviser.
Distribution of Fund Shares
Schroder Fund Advisors Inc. ("Schroder Advisors"), 787 Seventh Avenue, New York,
New York 10019, was appointed Distributor of the Fund shares pursuant to an
agreement approved by the Board of Trustees of the Trust at a meeting held on
November 2, 1992. The renewal of the distribution agreement for the one year
period ending February 1, 1996 was approved by the Board of Trustees at a
meeting held on November 21, 1994 (which approval included the approval of a
majority of the Trustees who are not interested persons). Schroder Advisors is a
wholly-owned subsidiary of Schroders Incorporated, the parent company of SCMI,
and is a registered broker-dealer organized to act as administrator and/or
distributor of mutual funds. Effective July 5, 1995, Schroder Advisors changed
its name from Schroder Capital Distributors Inc.
Under the distribution agreement, Schroder Advisors has agreed to use its best
efforts to secure purchases of Fund shares in jurisdictions in which such shares
may be legally offered for sale. Schroder Advisors is not obligated to sell any
specific amount of Fund shares. Further, Schroder Advisors has agreed in the
distribution agreement to serve without compensation and to pay from its own
resources all costs and expenses incident to the sale and distribution of Fund
shares including expenses of printing and distribution to prospective investors
of prospectuses and other sales materials and advertising expenses, and the
salaries and expenses of its employees or agents in connection with the
distribution of Fund shares.
Portfolio Accounting
Forum Financial Corp. ("FFC"), an affiliate of Forum, performs portfolio
accounting services for the Fund pursuant to a Fund Accounting Agreement with
the Trust. The Fund Accounting Agreement will continue in effect only if such
continuance is specifically approved at least annually by the Board of Trustees
or by a vote of the shareholders of the Trust and in either case by a majority
of the Trustees who are not parties to the Fund Accounting Agreement or
interested persons of any such party, at a meeting called for the purpose of
voting on the Fund Accounting Agreement.
Under its agreement, FFC prepares and maintains books and records of the Fund on
behalf of the Trust that are required to be maintained under the 1940 Act,
calculates the net asset value per share of the Fund and dividends and capital
gain distributions and prepares periodic reports to shareholders and the
Securities and Exchange Commission. For its services, FFC receives from the
Trust with respect to the Fund a fee of $36,000 per year plus, for each class of
the Fund above one, $12,000 per year. FFC is
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<PAGE>
paid an additional $24,000 per year with respect to global and international
funds. In addition, FFC is paid an additional $12,000 per year with respect to
tax-free money market funds and funds with more than 25% of their total assets
invested in asset backed securities, that have more than 100 security positions
or that have a monthly portfolio turnover rate of 10% or greater.
FFC is required to use its best judgment and efforts in rendering fund
accounting services and is not be liable to the Trust for any action or inaction
in the absence of bad faith, willful misconduct or gross negligence. FFC is not
responsible or liable for any failure or delay in performance of its fund
accounting obligations arising out of or caused, directly or indirectly, by
circumstances beyond its reasonable control and the Trust has agreed to
indemnify and hold harmless FFC, its employees, agents, officers and directors
against and from any and all claims, demands, actions, suits, judgments,
liabilities, losses, damages, costs, charges, counsel fees and other expenses of
every nature and character arising out of or in any way related to FFC's actions
taken or failures to act with respect to a Fund or based, if applicable, upon
information, instructions or requests with respect to a Fund given or made to
FFC by an officer of the Trust duly authorized. This indemnification does not
apply to FFC's actions taken or failures to act in cases of FFC's own bad faith,
willful misconduct or gross negligence.
FFC assumed responsibility for fund accounting on August 15, 1994. Previously,
these services were performed by Schroders Incorporated, the parent company of
SCMI. For the fiscal years ended October 31, 1994, 1995 and 1996, the Fund paid
fund accounting fees of $31,596, $38,000 and $36,000, respectively.
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<PAGE>
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<PAGE>
PORTFOLIO TRANSACTIONS
Investment Decisions
Investment decisions for the Fund and for the other investment advisory clients
of SCMI are made with a view to achieving their respective investment
objectives. Investment decisions are the product of many factors in addition to
basic suitability for the particular client involved. Thus, a particular
security may be bought or sold for other clients at the same time. Likewise, a
particular security may be bought for one or more clients when one or more
clients are selling the security. In some instances, one client may sell a
particular security to another client. It also sometimes happens that two or
more clients simultaneously purchase or sell the same security, in which event
each day's transactions in such security are, insofar as is possible, averaged
as to price and allocated between such clients in a manner which in SCMI's
opinion is equitable to each and in accordance with the amount being purchased
or sold by each. There may be circumstances when purchases or sales of portfolio
securities for one or more clients will have an adverse effect on other clients.
Portfolio Brokerage
Decisions with respect to allocation of portfolio brokerage are made by the
Trust's President, a Vice President or Treasurer.
It is the Fund's policy, consistent with the best execution, to secure the
highest possible price on sales and the lowest possible price on purchases of
securities. Over- the-counter purchases and sales are transacted directly with
principal market makers except in those circumstances where in the opinion of
the Trust's officers better prices and executions are available elsewhere.
Portfolio transactions are frequently placed with broker-dealers who provide
SCMI with research and statistical assistance. The assistance may include advice
as to the advisability of investing in securities, security analysis and
reports, economic studies, industry studies, receipt of quotations for portfolio
valuations and similar services.
Give equal price and comparable execution of the transaction, it is the policy
of the Fund to select a broker or dealer primarily on the basis of the
furnishing of such services to SCMI by the broker or dealer. Although no fixed
formula is used in placing such transactions, an attempt is made to allocate
such brokerage in proportion to the services rendered to SCMI. SCMI may thus be
able to supplement its own information, and to consider the views and
information of other research organizations in arriving at its investment
recommendations. If such information is received, and if it is in fact useful to
SCMI, it may tend to reduce SCMI's cost; however, the dollar value of any
information received is indeterminable and may in fact be negligible and does
not tend to reduce SCMI's normal and customary research activities. The research
services furnished by brokers or dealers through whom the Fund effects
securities transactions may be used by SCMI in servicing all of its accounts,
and not all such services may be used by SCMI in connection with the Fund.
Portfolio transactions are also frequently placed with broker-dealers acting as
principals in the "third market".
Subject to the general policies of the Fund regarding allocation of portfolio
brokerage as set forth above, the Board of Trustees has authorized the Fund to
employ Schroder Wertheim & Company, Incorporated ("Schroder Wertheim"), an
affiliate of SCMI, to effect securities transactions of the Fund,
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<PAGE>
on the New York Stock Exchange only, provided certain other conditions are
satisfied as described below.
Payment of brokerage commissions to Schroder Wertheim for effecting such
transactions is subject to Section 17(e) of the 1940 Act, which requires, among
other things, that commissions for transactions on a national securities
exchange paid by a registered investment company to a broker which is an
affiliated person of such investment company or an affiliated person of another
person so affiliated not exceed the usual and customary broker's commissions for
such transactions. It is the Fund's policy that commissions paid to Schroder
Wertheim will in the judgment of the officers of the Trust responsible for
making portfolio decisions and selecting brokers, be (i) at least as favorable
as commissions contemporaneously charged by Schroder Wertheim on comparable
transactions for its most favored unaffiliated customers and (ii) at least as
favorable as those which would be charged on comparable transactions by other
qualified brokers having comparable execution capability. The Board of Trustees
of the Trust, including a majority of the non-interested Trustees, has adopted
procedures pursuant to Rule 17e-1 promulgated by the Securities and Exchange
Commission under Section 17(e) to ensure that commissions paid to Schroder
Wertheim by the Fund satisfy the foregoing standards. The Board will review all
transactions at least quarterly for compliance with these procedures.
The Fund has no understanding or arrangement to direct any specific portion of
its brokerage to Schroder Wertheim and will not direct brokerage to Schroder
Wertheim in recognition of research services.
During the fiscal years ended October 31, 1994, 1995 and 1996 the total
brokerage commissions paid by the Fund on portfolio transactions were $23,579,
$31,381and $31,868 respectively. These amounts do not include any spreads or
concessions on principal transactions on a net trade basis. Substantially all of
such commissions were paid to firms which provided SCMI with research and
statistical assistance. No commissions were paid to Schroder Wertheim during any
of the fiscal years ended October 31, 1994, 1995 and 1996.
SHARE OWNERSHIP
As of February 24, 1997, the following persons owned of record or beneficially
5% or more of the Fund's shares:w
Shareholder Share Balance Percent of Fund
- --------------------------------------------------------------------------------
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<PAGE>
Gracechurch Co. 191,211.439 11.22%
75 Wall Street
New York, NY 10265
Schroder Nominees Limited 152,044.768 8.93%
120 Cheapside
London EC2V 6DS England
Wendel & Co. 110,983.024 6.52%
c/o The Bank of New York
Wall Street Station
New York, NY 10268
Fox & Co. 101,539.373 5.96%
P.O. Box 976
New York, NY 10268
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Determination of Net Asset Value
The net asset value per share of the Fund is calculated at 4:00 p.m. (New York
City time), Monday through Friday, on each day that the New York Stock Exchange
is open for trading (which excludes the following national business 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
liabilities by the number of shares of the Fund outstanding.
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<PAGE>
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<PAGE>
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<PAGE>
Portfolio securities listed on the New York Stock Exchange are valued on the
basis of the last sale on that date on the basis of information obtained from
authoritative sources at the end of the business day. Lacking any sales, they
are valued at the average of the closing bid and asked prices. Securities not
listed on such exchange are valued by the use of quotations on any other
national stock exchange on which the securities are listed, or if unlisted,
published quotations in common use and/or quotations from a market maker or
makers in the security, in each case on the basis of information obtained from
authoritative sources, or if securities for which no quotations are available,
including restricted securities, by such other method as the Board of Trustees,
in good faith, shall deem to reflect their fair value. If securities are listed
on more than one national stock exchange (other than the New York Stock
Exchange), they are valued on the basis of quotations on the national stock
exchange in which the primary market for the securities exists.
Redemption in Kind
In the event that payment for redeemed shares is made wholly or partly in
portfolio securities, brokerage costs may be incurred by the shareholder in
converting the securities to cash. An in kind distribution of portfolio
securities will be less liquid than cash. The shareholder may have difficulty in
finding a buyer for portfolio securities received in payment for redeemed
shares. Portfolio securities may decline in value between the time of receipt by
the shareholder and conversion to cash. A redemption in kind of the Fund's
portfolio securities could result in a less diversified portfolio of investments
for the Fund and could affect adversely the liquidity of the Fund's portfolio.
TAXATION
Under the Internal Revenue Code of 1986, as amended (the "Code"), the Fund and
each other portfolio established from time to time by the Board of Trustees of
the Trust will be treated as a separate taxpayer for Federal income tax purposes
with the result that: (a) each such portfolio must meet separately the income
and distribution requirements for qualification as a regulated investment
company, and (b) the amounts of investment income and capital gains earned will
be determined on a portfolio-by-portfolio (rather than on a Trust-wide) basis.
The Fund intends to continue to qualify as a regulated investment company under
Subchapter M of the Code. To qualify as a regulated investment company the Fund
intends to distribute to shareholders at least 90% of its "investment company
taxable income" as defined in the Code (which includes, among other items,
dividends, interest and the excess of any net short-term capital gains over net
long-term capital losses), and to meet certain diversification of assets, source
of income, and other requirements of the Code. By so doing, the Fund will not be
subject to Federal income tax on its investment company taxable income and "net
capital gains" (the excess of net long-term capital gains over net short-term
capital losses) distributed to shareholders. If the Fund does not meet all of
these Code requirements, it will be taxed as an ordinary corporation, and its
distributions will be taxable to shareholders as ordinary income.
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<PAGE>
Amounts not distributed on a timely basis in accordance with a calendar year
distribution requirement are subject to a 4% nondeductible excise tax. To
prevent imposition of the excise tax, the Fund must distribute for each calendar
year an amount equal to the sum of (1) at least 98% of its ordinary income
(excluding any capital gains or losses) for the calendar year, (2) at least 98%
of the excess of its capital gains over capital losses realized during the
one-year period ending October 31 of such year, and (3) all such ordinary income
and capital gains for previous years that were not distributed during such
years. A distribution will be treated as paid during the calendar year if it is
declared by the Fund in October, November or December of the year with a record
date in such month and paid by the Fund during January of the following year.
Such distributions will be taxable to shareholders in the calendar year in which
the distributions are declared, rather than the calendar year in which the
distributions are received.
Distributions of investment company taxable income (including realized net
short-term capital gain) are taxable to shareholders as ordinary income.
Generally, dividends of investment income (but not capital gain) from the Fund
will qualify for the Federal 70% dividends-received deduction for corporate
shareholders to the extent such dividends do not exceed the aggregate amount of
dividends received by the Fund from domestic corporations, provided the Fund
shares are held by said shareholders for more than 45 days. If securities held
by the Fund are considered to be "debt-financed" (generally, acquired with
borrowed funds), are held by the Fund for less than 46 days (91 days in the case
of certain preferred stock), or are subject to certain forms of hedges or short
sales, the portion of the dividends paid by the Fund which corresponds to the
dividends paid with respect to such securities will not be eligible for the
corporate dividends-received deduction.
Distributions of net long-term capital gain are taxable to shareholders as
long-term capital gain, regardless of the length of time the Fund shares have
been held by a shareholder, and are not eligible for the dividends received
deduction. A loss realized by a shareholder on the sale of shares of the Fund
with respect to which capital gain dividends have been paid will, to the extent
of such capital gain dividends, be treated as long-term capital loss although
such shares may have been held by the shareholder for one year or less. Further,
a loss realized on a disposition will be disallowed to the extent the shares
disposed of are replaced (whether by reinvestment of distributions or otherwise)
within a period of 61 days beginning 30 days before and ending 30 days after the
shares are disposed of. In such a case, the basis of the shares acquired will be
adjusted to reflect the disallowed loss.
All distributions are taxable to the shareholder whether reinvested in
additional shares or received in cash. Shareholders receiving distributions in
the form of additional shares will have a cost basis for Federal income tax
purposes in each share received equal to the net asset value of a share of the
Fund on the reinvestment date. Shareholders will be notified annually as to the
Federal tax status of distributions.
Distributions by the Fund reduce the net asset value of the Fund's shares.
Should a distribution reduce the net asset value below a shareholder's cost
basis, such distribution nevertheless would be taxable to the shareholder as
ordinary income or capital gain as described above, even though, from an
investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implications of
buying shares just prior to a distribution. The price of shares purchased at
that time includes the amount of the forthcoming distribution. Those purchasing
just prior to a distribution will receive a distribution which will nevertheless
be taxable to them.
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<PAGE>
Upon redemption or sale of his shares, a shareholder will realize a taxable gain
or loss depending upon his basis in his shares. Such gain or loss generally will
be treated as capital gain or loss if the shares are capital assets in the
shareholder's hands. Such gain or loss generally will be long-term or short-term
depending upon the shareholder's holding period for the shares.
The Trust will be required to report to the Internal Revenue Service (the "IRS")
all distributions as well as gross proceeds from the redemption of the Fund
shares, except in the case of certain exempt shareholders. All such
distributions and proceeds generally will be subject to withholding of Federal
income tax at a rate of 31% ("backup withholding") in the case of non-exempt
shareholders if (1) the shareholder fails to furnish the Trust with and to
certify the shareholder's correct taxpayer identification number or social
security number, (2) the IRS notifies the Trust that the shareholder has failed
to report properly certain interest and dividend income to the IRS and to
respond to notices to that effect, or (3) when required to do so, the
shareholder fails to certify that he is not subject to backup withholding. If
the withholding provisions are applicable, any such distributions or proceeds,
whether reinvested in additional shares or taken in cash, will be reduced by the
amount required to be withheld. Any amounts withheld may be credited against the
shareholder's Federal income tax liability. Investors may wish to consult their
tax advisers about the applicability of the backup withholding provisions.
The foregoing discussion relates only to Federal income tax law as applicable to
U.S. persons (i.e., U.S. citizens and residents and U.S. domestic corporations,
partnerships, trusts and estates). Distributions by the Fund also may be subject
to state and local taxes, and their treatment under state and local income tax
laws may differ from the Federal income tax treatment. Shareholders should
consult their tax advisers with respect to particular questions of Federal,
state and local taxation. Shareholders who are not U.S. persons should consult
their tax advisers regarding U.S. and foreign tax consequences of ownership of
shares of the Fund including the likelihood that distributions to them would be
subject to withholding of U.S. tax at a rate of 30% (or a lower rate under a tax
treaty).
OTHER INFORMATION
Organization
The Trust was originally organized as a Maryland corporation on July 30, 1969.
On February 29, 1988, the Trust was recapitalized to enable the Board to
establish a series of separately managed investment portfolios, each having
different investment objectives and policies. At the time of the
recapitalization, the Trust's name was changed from "The Cheapside Dollar Fund
Limited" to
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"Schroder Capital Funds, Inc." On January 9, 1996, the Trust was reorganized as
a Delaware business trust. At that time, the Trust's name was changed from
"Schroder Capital Funds, Inc." to its present name. The Trust is registered as
an open-end management investment company under the Act.
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<PAGE>
Delaware law provides that shareholders shall be entitled to the same
limitations of personal liability extended to stockholders of private
corporations for profit. The securities regulators of some states, however, have
indicated that they and the courts in their state may decline to apply Delaware
law on this point. To guard against this risk, the Trust Instrument contains an
express disclaimer of shareholder liability for the debts, liabilities,
obligations, and expenses of the Trust. The Trust Instrument provides for
indemnification out of each series' property of any shareholder or former
shareholder held personally liable for the obligations of the series. The Trust
Instrument also provides that each series shall, upon request, assume the
defense of any claim made against any shareholder for any act or obligation of
the series and satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which Delaware law does not apply (or no contractual limitation
of liability was in effect) and the portfolio is unable to meet its obligations.
Forum believes that, in view of the above, there is no risk of personal
liability to shareholders.
Capitalization and Voting
The Trust has an unlimited number of authorized shares of beneficial interest.
The Board may, without shareholder approval, divide the authorized shares into
an unlimited number of separate portfolios or series (such as the Fund) and may
divide portfolios or series into classes of shares, and the costs of doing so
will be borne by the Trust. The Trust currently consists of five separate
portfolios, each of which has separate investment objectives and policies, and
five classes, one of which pertains to the Fund.
The shares of the Trust are fully paid and nonassessable, and have no
preferences as to conversion, exchange, dividends, retirement or other features.
The shares have no preemptive rights. They have non-cumulative voting rights,
which means that the holders of more than 50% of the shares voting for the
election of Trustees can elect 100% of the Trustees if they choose to do so. A
shareholder is entitled to one vote for each full share held (and a fractional
vote for each fractional share held), then standing in his name on the books of
the Trust. Shares of each class would vote separately to approve investment
advisory agreements or changes in investment objectives and other fundamental
policies affecting the portfolio to which they pertain, but all classes would
vote together in the election of Trustees and ratification of the selection of
independent accountants. Shareholders of any particular class would not be
entitled to vote on any matters as to which such class were not affected.
The Trust will not hold annual meetings of shareholders. The matters considered
at an annual meeting typically include the reelection of Trustees, approval of
an investment advisory agreement, and the ratification of the selection of
independent accountants. These matters will not be submitted to shareholders
unless a meeting of shareholders is held for some other reason, such as those
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<PAGE>
- 32 -
<PAGE>
indicated below. Each of the Trustees will serve until death, resignation or
removal. Vacancies will be filled by the remaining Trustees, subject to the
provisions of the 1940 Act requiring a meeting of shareholders for election of
Trustees to fill vacancies when less than a majority of Trustees then in office
have been elected by shareholders. Similarly, the selection of accountants and
renewal of investment advisory agreements for future years will be performed
annually by the Board. Future shareholder meetings will be held to elect
Trustees if required by the 1940 Act, to obtain shareholder approval of changes
in fundamental investment policies, to obtain shareholder approval of material
changes in investment advisory agreements, to select new accountants if the
employment of the Trust's accountants has been terminated, and to seek any other
shareholder approval required under the 1940 Act. The Board has the power to
call a meeting of shareholders at any time when it believes it is necessary or
appropriate. In addition, Trust Instrument provides that a special meeting of
shareholders may be called at any time for any purpose by the holders of at
least 10% of the outstanding shares entitled to be voted at such meeting.
In addition to the foregoing rights, the Trust Instrument provides that holders
of at least two-thirds of the outstanding shares of the Trust may remove any
person serving as a Trustee either by declaration in writing or at a meeting
called for such purpose. Further, the Board is required to call a shareholders
meeting for the purpose of considering the removal of one or more Trustees if
requested in writing to do so by the holders of not less than 10% of the
outstanding shares of the Trust. In addition, the Board is required to provide
certain assistance if requested in writing to do so by ten or more shareholders
of record (who have been such for at least six months), holding in the aggregate
the lesser of shares of the Trust having a total net asset value of at least
$25,000 or 1% of the outstanding shares of the Trust, for
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<PAGE>
the purpose of enabling such holders to communicate with other shareholders of
the Trust with a view to obtaining the requisite signatures to request a special
meeting to consider such removal.
Performance Information
The Fund may, from time to time, include quotations of total return data in
advertisements, sales literature or reports to shareholders or prospective
investors.
Quotations of average annual total return will be expressed in terms of the
average annual compounded rate of return of a hypothetical investment in the
Fund over periods of 1, 5 and 10 years, calculated pursuant to the following
formula:
P(1+T)^n = ERV
(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n = the number of years, and ERV = the ending redeemable value of
a hypothetical $1,000 payment made at the beginning of the period). All total
return figures will reflect the deduction of Fund expenses on an annual basis,
and will assume that all dividends and distributions are reinvested when paid.
For the one year, five year and ten year periods ended October 31, 1995, the
average annual total returns of the Fund were 17.68%, 17.50% and 13.09%,
respectively.
Quotations of total return will reflect only the performance of a hypothetical
investment in the Fund during the particular time period shown. Total return for
the Fund will vary based on changes in market conditions and the level of the
Fund's expenses, and no reported performance figure should be considered an
indication of performance which may be expected in the future.
In connection with communicating total return to current or prospective
investors, the Fund also may compare these figures to the performance of other
mutual funds tracked by mutual fund rating services or to other unmanaged
indexes which may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs.
Custodian
All securities and cash of the Fund are held by The Chase Manhattan Bank, N.A.,
Chase MetroTech Center, Brooklyn, New York 11245.
Transfer Agent and Dividend Disbursing Agent
Forum Financial Corp., Portland, Maine, acts as the Fund's transfer agent and
dividend disbursing agent.
Legal Counsel
Jacobs Persinger & Parker, 77 Water Street, New York, New York 10005, counsel to
the Fund, passes upon certain legal matters in connection with the shares
offered by the Fund.
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<PAGE>
Independent Accountants
Coopers & Lybrand L.L.P. ("Coopers & Lybrand") serves as independent accountants
for the Fund. Coopers & Lybrand provides audit services and consultation in
connection with review of U.S. Securities and Exchange Commission filings.
Coopers & Lybrand's address is One Post Office Square, Boston, Massachusetts
02109.
FINANCIAL STATEMENTS
The audited Statement of Assets and Liabilities, Statement of Operations,
Statements of Changes in Net Assets, Statement of Investments, notes thereto,
and Financial Highlights of the Fund for the fiscal year ended October 31, 1995
and the Report of Independent Accountants thereon (included in the Annual Report
to shareholders), which are delivered along with this SAI, are incorporated
herein by reference.
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<PAGE>
PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits.
(a) Financial Statements
Included in the Prospectus:
Financial Highlights.
Incorporated by reference in the Statement of Additional Information for each
Fund:
For the fiscal year ended October 31, 1996 - Statement of Assets and
Liabilities, Statement of Operations, Statements of Changes in Net
Assets; Statement of Investments, Notes to Financial Statements, Report
of Independent Accountants (for each Fund, filed with the Securities
and Exchange Commission on January 6, 1997 as part of Registrant's
Annual Report for such Fund pursuant to Rule 30b-1 under the Investment
Company Act of 1940, as amended, and incorporated herein by reference)
(b) Exhibits:
(1) Trust Instrument of Schroder Capital Funds (Delaware) (the "Trust") (filed
as Exhibit 1 to Registrant's Post-Effective Amendment No. 46 and incorporated
herein by reference).
(2) None.
(3) None.
(4) (a) Sections 2.04 and 2.06 of Registrant's Trust Instrument provide as
follows:
Section 2.04 Transfer of Shares. Except as otherwise provided by the Trustees,
Shares shall be transferable on the records of the Trust only by the record
holder thereof or by his agent thereunto duly authorized in writing, upon
delivery to the Trustees or the Trust's transfer agent of a duly executed
instrument of transfer and such evidence of the genuineness of such execution
and authorization and of such other matters as may be required by the Trustees.
Upon such delivery the transfer shall be recorded on the register of the Trust.
Until such record is made, the Shareholder of record shall be deemed to be the
holder of such Shares for all purposes hereunder and neither the Trustees nor
the Trust, nor any transfer agent or registrar nor any officer, employee or
agent of the Trust shall be affected by any notice of the proposed transfer.
Section 2.06 Establishment of Series. The Trust created hereby shall consist of
one or more Series and separate and distinct records shall be maintained by the
Trust for each Series and the assets associated with any such Series shall be
held and accounted for separately from the assets of the Trust or any
<PAGE>
other Series. The Trustees shall have full power and authority, in their sole
discretion, and without obtaining any prior authorization or vote of the
Shareholders of any Series of the Trust, to establish and designate and to
change in any manner any such Series of Shares or any classes of initial or
additional Series and to fix such preferences, voting powers, rights and
privileges of such Series or classes thereof as the Trustees may from time to
time determine, to divide or combine the Shares or any Series or classes thereof
into a greater or lesser number, to classify or reclassify any issued Shares or
any Series or classes thereof into one or more Series or classes of Shares, and
to take such other action with respect to the Shares as the Trustees may deem
desirable. The establishment and designation of any Series shall be effective
upon the adoption of a resolution by a majority of the Trustees setting forth
such establishment and designation and the relative rights and preferences of
the Shares of such Series. A Series may issue any number of Shares and need not
issue shares. At any time that there are no Shares outstanding of any particular
Series previously established and designated, the Trustees may by a majority
vote abolish that Series and the establishment and designation thereof.
All references to Shares in this Trust Instrument shall be deemed to be Shares
of any or all Series, or classes thereof, as the context may require. All
provisions herein relating to the Trust shall apply equally to each Series of
the Trust, and each class thereof, except as the context otherwise requires.
Each Share of a Series of the Trust shall represent an equal beneficial interest
in the net assets of such Series. Each holder of Shares of a Series shall be
entitled to receive his pro rata share of all distributions made with respect to
such Series. Upon redemption of his Shares, such Shareholder shall be paid
solely out of the funds and property of such Series of the Trust."
(5) (a) Form of Investment Advisory Contract between the Trust and Schroder
Capital Management International Inc. (filed as Exhibit 5 to Registrant's
Post-Effective Amendment No. 46 and incorporated herein by reference).
(6) Form of Master Distribution Contract and Supplement to be between the Trust
and Schroder Fund Advisors Inc. (filed as Exhibit 6 to Registrant's
Post-Effective Amendment No. 46 and incorporated herein by reference).
(8) Form of Global Custody Agreement to be between the Trust and The Chase
Manhattan Bank, N.A. (filed as Exhibit 8 to Registrant's Post-Effective
Amendment No. 46 and incorporated herein by reference).
(9) (a) Form of Administration Agreement with Schroder Fund Advisors Inc. (filed
as Exhibit to Registrant's Post-Effective Amendment No. 46 and incorporated
herein by reference).
(9) (b) Form of Sub-Administration Agreement with Forum Financial Services, Inc.
(filed as Exhibit 9(b) to Registrant's Post - Effective Amendment No. 46 and
incorporated herein by reference).
(9) (c) Form of Transfer Agency Agreement with Forum Financial Corp. (filed as
Exhibit 9(c) to Registrant's Post-Effective Amendment No. 46 and incorporated
herein by reference).
(9) (d) Form of Fund Accounting Agreement with Forum Financial Corp. (filed as
Exhibit 9(d) to Registrant's Post-Effective Amendment No. 46 and incorporated
herein by reference).
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<PAGE>
(10) Opinion of Jacobs Persinger & Parker as to legality of shares to be issued
by the Trust (filed as Exhibit 10(d) to Registrant's Post - Effective Amendment
No. 46 and incorporated herein by reference).
(11) Consent of Coopers & Lybrand L.L.P. (filed herewith).
(15) (a) Form of Master Distribution Plan adopted by Registrant (filed as
Exhibit 15(a) to Registrant's Post-Effective Amendment No. 46 and
incorporated herein by reference).
(b) Form of Distribution Plan Supplement (filed as Exhibit 15(b) to
Registrant's Post- Effective Amendment No. 46 and incorporated
herein by reference).
Other Exhibits:
Copies of Powers of Attorney pursuant to which Trustees have signed this
Post-Effective Amendment (filed as Other Exhibits to Post-Effective Amendment
No. 45 and incorporated herein by reference).
Copy of Power of Attorney pursuant to which Mr. Jackowitz has signed this
Post-Effective Amendment (filed as an Other Exhibit to Post-Effective Amendment
No. 45 and incorporated herein by reference).
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
Number of Record
Holders as of
Title of Class January 31, 1997
-------------- ----------------
Schroder U.S. Equity Fund 610
Schroder International Fund 1,099
Schroder U.S. Smaller Companies Fund 90
Schroder Emerging Markets Fund Institutional Portfolio 2
Schroder International Smaller Companies Fund 3
Schroder Latin America Fund 2
Schroder Global Asset Allocation Fund N/A
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<PAGE>
ITEM 27. INDEMNIFICATION.
In accordance with Section 3803 of the Delaware Business Trust Act, SECTION 5.2
of the Registrant's Trust Instrument provides as follows:
"5.2. Indemnification.
"(a) Subject to the exceptions and limitations contained in Section (b) below:
"(i) Every Person who is, or has been, a Trustee or officer of the Trust
(hereinafter referred to as a "Covered Person") shall be indemnified by the
Trust to the fullest extent permitted by law against liability and against all
expenses reasonably incurred or paid by him in connection with any claim,
action, suit or proceeding in which he becomes involved as a party or otherwise
by virtue of being or having been a Trustee or officer and against amounts paid
or incurred by him in the settlement thereof;
"(ii) The words "claim," "action," "suit," or "proceeding" shall apply to all
claims, actions, suits or proceedings (civil, criminal or other, including
appeals), actual or threatened while in office or thereafter, and the words
"liability" and "expenses" shall include, without limitation, attorneys' fees,
costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
"(b) No indemnification shall be provided hereunder to a Covered Person:
"(i) Who shall have been adjudicated by a court or body before which the
proceeding was brought (A) to be liable to the Trust or its Holders by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the Covered Person's office or (B) not to have
acted in good faith in the reasonable belief that Covered Person's action was in
the best interest of the Trust; or
"(ii) In the event of a settlement, unless there has been a determination that
such Trustee or officer did not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
Trustee's or officer's office,
"(A) By the court or other body approving the settlement;
"(B) By at least a majority of those Trustees who are neither Interested Persons
of the Trust nor are parties to the matter based upon a review of readily
available facts (as opposed to a full trial-type inquiry); or
"(C) By written opinion of independent legal counsel based upon a review of
readily available facts (as opposed to a full trial-type inquiry); provided,
however, that any Holder may, by appropriate legal proceedings, challenge any
such determination by the Trustees or by independent counsel.
"(c) The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not be exclusive of
or affect any other rights to which any Covered Person may now or hereafter be
entitled, shall continue as to a person who has ceased to be a Covered Person
and shall inure to the benefit of the heirs, executors and administrators of
such a person.
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<PAGE>
Nothing contained herein shall affect any rights to indemnification to which
Trust personnel, other than Covered Persons, and other persons may be entitled
by contract or otherwise under law.
"(d) Expenses in connection with the preparation and presentation of a defense
to any claim, action, suit or proceeding of the character described in paragraph
(a) of this Section 5.2 may be paid by the Trust or Series from time to time
prior to final disposition thereof upon receipt of an undertaking by or on
behalf of such Covered Person that such amount will be paid over by him to the
Trust or Series if it is ultimately determined that he is not entitled to
indemnification under this Section 5.2; provided, however, that either (a) such
Covered Person shall have provided appropriate security for such undertaking,
(b) the Trust is insured against losses arising out of any such advance payments
or (c) either a majority of the Trustees who are neither Interested Persons of
the Trust nor parties to the matter, or independent legal counsel in a written
opinion, shall have determined, based upon a review of readily available facts
(as opposed to a trial-type inquiry or full investigation), that there is reason
to believe that such Covered Person will be found entitled to indemnification
under this Section 5.2.
"(e) Conditional advancing of indemnification monies under this Section 5.2 for
actions based upon the 1940 Act may be made only on the following conditions:
(i) the advances must be limited to amounts used, or to be used, for the
preparation or presentation of a defense to the action, including costs
connected with the preparation of a settlement; (ii) advances may be made only
upon receipt of a written promise by, or on behalf of, the recipient to repay
that amount of the advance which exceeds that amount which it is ultimately
determined that he is entitled to receive from the Trust by reason of
indemnification; and (iii) (a) such promise must be secured by a surety bond,
other suitable insurance or an equivalent form of security which assures that
any repayments may be obtained by the Trust without delay or litigation, which
bond, insurance or other form of security must be provided by the recipient of
the advance, or (b) a majority of a quorum of the Trust's disinterested,
non-party Trustees, or an independent legal counsel in a written opinion, shall
determine, based upon a review of readily available facts, that the recipient of
the advance ultimately will be found entitled to indemnification.
"(f) In case any Holder or former Holder of any Series shall be held to be
personally liable solely by reason of the Holder or former Holder being or
having been a Holder of that Series and not because of the Holder or former
Holder acts or omissions or for some other reason, the Holder or former Holder
(or the Holder or former Holder's heirs, executors, administrators or other
legal representatives, or, in the case of a corporation or other entity, its
corporate or other general successor) shall be entitled out of the assets
belonging to the applicable Series to be held harmless from and indemnified
against all loss and expense arising from such liability. The Trust, on behalf
of the affected Series, shall, upon request by the Holder, assume the defense of
any claim made against the Holder for any act or obligation of the Series and
satisfy any judgment thereon from the assets of the Series."
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
The following are the directors and principal officers of SCMI, including their
business connections of a substantial nature. The address of each company
listed, unless otherwise noted, is 33 Gutter Lane, London EC2V 8AS, United
Kingdom. Schroder Capital Management International Limited ("Schroder Ltd.") is
a United Kingdom affiliate of SCMI which provides investment management services
international clients located principally in the United States.
- 5 -
<PAGE>
David M. Salisbury. Chief Executive Officer, Director and Chairman of
Schroder Capital; Joint Chief Executive and Director of Schroder.
Richard R. Foulkes. Senior Vice President and Managing Director of
Schroder Capital.
John A. Troiano. Managing Director and Senior Vice President. Mr. Troiano
is also a Director of Schroder Ltd.
David Gibson. Senior Vice President and Director of Schroder Capital.
Director of Schroder Wertheim Investment Services Inc.
John S. Ager. Senior Vice President and Director of Schroder Capital.
Sharon L. Haugh. Senior Vice President and Director of Schroder Capital,
Director and Chairman of Schroder Advisors Inc.
Gavin D.L. Ralston. Senior Vice President and Director of Schroder
Capital.
Mark J. Smith. Senior Vice President and Director of Schroder Capital.
Robert G. Davy. Senior Vice President. Mr. Davy is also a Director of
Schroder Ltd. and an officer of open end investment companies for which
SCMI and/or its affiliates provide investment services.
Jane P. Lucas. Senior Vice President and Director of Schroder Capital;
Director of Schroder Advisors Inc.; Director of Schroder Wertheim
Investment Services, Inc.
C. John Govett. Director of Schroder Capital; Group Managing Director of
Schroder Investment Management Ltd. And Director of Schroders plc.
Phillipa J. Gould. Senior Vice President and Director of Schroder Capital.
Louise Croset. First Vice President and Director of Schroder Capital.
Abdallah Nauphal, Group Vice President and Director.
ITEM 29. PRINCIPAL UNDERWRITERS.
(A) Schroder Fund Advisors Inc., the Registrant's principal underwriter, also
serves as principal underwriter for WSIS Series Trust.
(B) Following is information with respect to each officer and director of
Schroder Fund Advisors Inc., the Distributor of the shares of Schroder
International Fund, Schroder U.S. Equity Fund, Schroder U.S. Smaller Companies
Fund, Schroder Emerging Markets Fund Institutional Portfolio, Schroder
International Smaller Companies Fund, Schroder International Bond Fund and
Schroder Latin America Fund (each a series of the Registrant):
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<PAGE>
Catherine A. Mazza, President
Mark J. Smith, Director and Vice President.
John A. Troiano, Director and Vice President
Sharon L. Haugh, Director
Robert Jackowitz, Treasurer
Margaret H. Douglas-Hamilton, Secretary
* Address for each is 787 Seventh Avenue, New York, New York 10019 except for
John A. Troiano and Mark J. Smith each of whose address is 33 Gutter Lane,
London, England.
(C) Inapplicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
The accounts, books and other documents required to be maintained by Registrant
with respect to Schroder Cash Reserves Fund pursuant to Section 31(a) of the
Investment Company Act of 1940 and the Rules thereunder will be maintained at
the offices of Schroder Capital Management International Inc. and Schroder Fund
Advisors Inc., 787 Seventh Avenue, New York, New York 10019, except that certain
items will be maintained at the following locations:
(a) Forum Financial Corp., Two Portland Square, Portland, Maine 04101
(shareholder records).
(B) Forum Financial Services, Inc., Two Portland Square, Portland, Maine 04101
(corporate minute book).
ITEM 31. MANAGEMENT SERVICES.
Inapplicable.
ITEM 32. UNDERTAKINGS.
(i) Registrant undertakes to file a post-effective amendment, using financial
statements which need not be certified, within four to six months from the
latter of the effective date of Registrant's Securities Act of 1933
Registration Statement relating to the prospectuses offering those shares
or the commencement of public shares of the respective shares; and,
(ii) Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest annual report to shareholders
relating to the portfolio or class thereof to which the prospectus relates
upon request and without charge.
- 7 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of New York, and State of New York on the
17th day of January, 1997.
SCHRODER CAPITAL FUNDS (DELAWARE)
By: /s/ Mark J. Smith
-------------------------------
Mark J. Smith
President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement amendment has been signed below by the following persons on the 17th
day of January, 1997.
Signatures Title
---------- -----
(a) Principal Executive Officer
/s/ Mark J. Smith President
--------------------------------------------
Mark J. Smith
(b) Principal Financial and
Accounting Officer
ROBERT JACKOWITZ* Treasurer
*By: /s/ Thomas G. Sheehan
----------------------------------------
Thomas G. Sheehan, Attorney-in-Fact
(c) Majority of the Trustees
PETER E. GUERNSEY* Trustee
JOHN I. HOWELL* Trustee
HERMANN C. SCHWAB* Trustee
CLARENCE F. MICHALIS* Trustee
*By: /s/ Thomas G. Sheehan
----------------------------------------
Thomas G. Sheehan, Attorney-in-Fact
<PAGE>
SIGNATURES
On behalf of Schroder Capital Funds, being duly authorized, I have duly caused
this amendment to the Registration Statement of Schroder Capital Funds
(Delaware) to be signed in the City of New York, State of New York on the 17th
day of January, 1997.
SCHRODER CAPITAL FUNDS
By: /s/ Mark J. Smith
---------------------------
Mark J. Smith
President
This amendment to the Registration Statement of Schroder Capital Funds
(Delaware) has been signed below by the following persons in the capacities
indicated on the 17th day of January, 1997.
Signatures Title
---------- -----
(a) Principal Executive Officer
/s/ Mark J. Smith President
--------------------------------------------
Mark J. Smith
(b) Principal Financial and
Accounting Officer
ROBERT JACKOWITZ* Treasurer
*By: /s/ Thomas G. Sheehan
----------------------------------------
Thomas G. Sheehan, Attorney-in-Fact
(c) Majority of the Trustees
PETER E. GUERNSEY* Trustee
JOHN I. HOWELL* Trustee
HERMANN C. SCHWAB* Trustee
CLARENCE F. MICHALIS* Trustee
*By: /s/ Thomas G. Sheehan
----------------------------------------
Thomas G. Sheehan, Attorney-in-Fact
<PAGE>
Index to Exhibits
Sequential
Exhibit Page Number
- ------- -----------
(11) Consent of Coopers & Lybrand L.L.P.
EXHIBIT 11
<PAGE>
Coopers Coopers & Lybrand L.L.P.
& Lybrand a professional services firm
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Schroder Capital Funds (Delaware):
We hereby consent to the following with respect to Post-Effective
Amendment No. 60 to the Registration Statement of Form N-1A (File No. 2-34215)
of Schroder Capital Funds (Delaware) (consisting of Schroder International Fund,
Schroder U.S. Smaller Companies Fund, Schroder U.S. Equity Fund, and Schroder
Emerging Markets Fund-Institutional Portfolio) (collectively, the "Funds"):
1. The reference to our firm under the heading "Financial Highlights" in
the Prospectuses.
2. The incorporation by reference of our reports dated December 23, 1996
on our audits of the financial statements and financial hightlights of the
Funds, which reports are included in the Funds' Annual Reports for the year
ended October 31, 1996, which are incorporated by reference in the Statements of
Additional Information.
3. The reference to our firm under the heading "Independent Accountant" in
the Statements of Additional Information.
/s/ Coopers & Lybrand L.L.P.
-------------------------------
COOPERS & LYBRAND L.L.P
Boston, Massachusetts
February 26, 1997
