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As filed with the Securities and Exchange Commission on December 31, 1998
File Nos. 2-34215 and 811-1911
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
Post-Effective Amendment No.70
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 51
SCHRODER CAPITAL FUNDS (DELAWARE)
(formerly Schroder Capital Funds, Inc.)
Two Portland Square
Portland, Maine 04101
207-879-1900
Cheryl O. Tumlin, Esq.
Forum Administrative Services, LLC
Two Portland Square, Portland, Maine 04101
Copies to:
Timothy W. Diggins, Esq.
Ropes & Gray
One International Place, Boston, Massachusetts 02110
Carin Muhlbaum, 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:
[ ] immediately upon filing pursuant to Rule 485, paragraph (b)
[ ] on _________________ pursuant to Rule 485, paragraph (b)
[X] 60 days after filing pursuant to Rule 485, paragraph (a)(1)
[ ] on _________________ pursuant to Rule 485, paragraph (a)(1)
[ ] 75 days after filing pursuant to Rule 485, paragraph (a)(2)
[ ] on _________________ pursuant to Rule 485, paragraph (a)(2)
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Series Being Registered: Schroder International Fund, Schroder
Emerging Markets Fund, Schroder International Smaller Companies Fund,
Schroder International Bond Fund, Schroder U.S. Diversified Growth
Fund, Schroder U.S. Smaller Companies Fund and Schroder Micro Cap Fund.
Each series of the Registrant except Schroder U.S. Diversified Growth
Fund and Schroder Micro Cap Fund is structured as a master-feeder fund.
This registration statement is also executed by Schroder Capital Funds
and Schroder Capital Funds II.
<PAGE>
SCHRODER CAPITAL FUNDS (DELAWARE)
PROSPECTUS
INVESTOR SHARES
March 1, 1999
This Prospectus describes seven mutual funds offered by Schroder Capital Funds
(Delaware). The Trust offers Investor Shares of the Funds in this Prospectus.
SCHRODER INTERNATIONAL FUND seeks long-term capital appreciation
through investment in securities markets outside the United States.
SCHRODER EMERGING MARKETS FUND seeks long-term capital appreciation.
The Fund invests primarily in equity securities of issuers domiciled or
doing business in emerging market countries in regions such as
Southeast Asia, Latin America, and Eastern and Southern Europe. The
Fund is a non-diversified mutual fund.
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND seeks long-term capital
appreciation through investment in securities markets outside the
United States. The Fund invests primarily in equity securities of
companies with market capitalizations of $1.5 billion or less.
SCHRODER INTERNATIONAL BOND FUND seeks a high rate of total return. The
Fund normally invests in debt securities and debt-related investments
of issuers domiciled outside the United States. The Fund is a
non-diversified mutual fund.
SCHRODER U.S. DIVERSIFIED GROWTH FUND seeks growth of capital by
investing in equity securities of United States companies.
SCHRODER U.S. SMALLER COMPANIES FUND seeks capital appreciation by
investing in equity securities of issuers domiciled in the United
States with market capitalizations of $1.5 billion or less.
SCHRODER MICRO CAP FUND seeks long-term capital appreciation by
investing in equity securities of issuers domiciled in the United
States with market capitalizations in the bottom third of companies in
the Russell 2000 Growth Index or of $300 million or less. Shares of
Schroder Micro Cap Fund are not currently being offered to the public
generally, and may be purchased only by existing shareholders and by
employees of Schroder Capital Management International Inc.
("Schroder"), the Fund's investment adviser, and its affiliates. The
determination to discontinue the general offering was made by Schroder
after consultation with the Board of Trustees of the Trust. Schroder
intends to review the discontinuation periodically, and may recommend
at any time that a more general offering of the Fund's shares be
resumed.
Schroder manages the Funds. You can call the Trust at (800) 290-9826 to find out
more about these Funds and other funds in the Schroder family.
The Prospectus explains what you should know about the Funds before you invest.
Please read it carefully.
NEITHER THE U.S. SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
Page
----
SUMMARY INFORMATION.......................................................3
Schroder International Fund......................................3
Schroder Emerging Markets Fund...................................5
Schroder International Smaller Companies Fund....................8
Schroder International Bond Fund.................................9
Schroder U.S. Diversified Growth Fund...........................11
Schroder U.S. Smaller Companies Fund............................12
Schroder Micro Cap Fund.........................................14
FEES AND EXPENSES........................................................16
RISKS AND OTHER INVESTMENT STRATEGIES....................................18
MANAGEMENT OF THE FUNDS..................................................22
HOW THE FUNDS' SHARES ARE PRICED.........................................25
HOW TO BUY SHARES........................................................25
HOW TO SELL SHARES.......................................................27
EXCHANGES................................................................28
DIVIDENDS AND DISTRIBUTIONS..............................................28
TAXES....................................................................29
YEAR 2000 DISCLOSURE.....................................................29
FINANCIAL HIGHLIGHTS.....................................................30
<PAGE>
SUMMARY INFORMATION
The Funds offered by Schroder Capital Funds (Delaware) provide a broad range of
investment choices. This summary identifies each Fund's investment objective,
principal investment strategies, and principal risks. The investment objectives
and policies of each Fund may, unless otherwise specifically stated, be changed
by the Trustees of the Trust without a vote of the shareholders. As a matter of
policy, the Trustees would not materially change an investment objective of a
Fund without shareholder approval.
EACH OF SCHRODER INTERNATIONAL FUND, SCHRODER EMERGING MARKETS FUND, SCHRODER
INTERNATIONAL SMALLER COMPANIES FUND, SCHRODER INTERNATIONAL BOND FUND, AND
SCHRODER U.S. SMALLER COMPANIES FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE
BY INVESTING SUBSTANTIALLY ALL OF ITS INVESTABLE ASSETS IN A SEPARATE PORTFOLIO
OF SCHRODER CAPITAL FUNDS OR SCHRODER CAPITAL FUNDS II THAT HAS THE SAME
INVESTMENT OBJECTIVE AS, AND INVESTMENT POLICIES THAT ARE SUBSTANTIALLY SIMILAR
TO THOSE OF, THAT FUND. IN REVIEWING EACH OF THESE FUND'S INVESTMENT OBJECTIVE
AND POLICIES BELOW, YOU SHOULD ASSUME THAT THE INVESTMENT OBJECTIVE AND POLICIES
OF THE CORRESPONDING PORTFOLIO ARE THE SAME IN ALL MATERIAL RESPECTS AS THOSE OF
THE FUND. SCHRODER IS THE INVESTMENT ADVISER TO EACH OF THESE FUNDS AND TO EACH
PORTFOLIO.
After the narrative describing each Fund is a chart showing how the investment
returns of that Fund's Investor Shares have varied from year to year. The chart
shows returns for each full calendar year since the Fund commenced operations.
The table following the chart indicates some of the risks of investing in the
Fund by comparing that Fund's average annual returns for the last year, for the
last five years and for the last ten years or for the life of the Fund (as
applicable) to a broad-based securities market index. PAST PERFORMANCE IS NOT
NECESSARILY AN INDICATION OF FUTURE PERFORMANCE. It is possible to lose money on
investments in the Funds.
For a discussion of recent market and portfolio developments affecting each
Fund's performance, see the Funds' most recent financial reports. You can call
the Trust at (800) 290-9826 to request a free copy of the financial reports.
SCHRODER INTERNATIONAL FUND
o INVESTMENT OBJECTIVE. Long-term capital appreciation through
investment in securities markets outside the United States.
o RELATED PORTFOLIO. Schroder International Fund invests substantially
all of its assets in International Equity Fund, a diversified portfolio of
Schroder Capital Funds.
o PRINCIPAL INVESTMENTs. The Fund normally invests at least 65% of its
assets in equity securities of companies domiciled outside of the United
States, and will invest in securities of companies domiciled in at least
three countries other than the United States. The Fund invests in a variety
of equity securities, including common and preferred stocks, securities
convertible into common and preferred stocks, and warrants to purchase
common and preferred stocks.
o INVESTMENT STRATEGIEs. The Fund normally invests a substantial
portion of its assets in countries included in the Morgan Stanley Capital
International EAFE Index, which is a market capitalization-weighted index
of companies in developed market countries in Europe, Australia and the Far
East.
<PAGE>
The Fund also may do the following:
0 Invest in securities of issuers domiciled or doing business
in "emerging market" countries.
0 Invest in securities of closed-end investment companies that
invest primarily in foreign securities.
o PRINCIPAL RISKs.
0 FOREIGN SECURITIES. Investments in foreign securities entail
risks not present in domestic investments including, among
others, risks related to political or economic instability,
currency exchange and taxation.
0 EQUITY SECURITIES. Another risk of investing in the Fund is
the risk that the value of the equity securities in the
portfolio will fall, or will not appreciate as anticipated
by Schroder, due to factors that adversely affect markets
generally or particular companies in the portfolio.
0 GEOGRAPHIC CONCENTRATION. There is no limit on the amount of
the Fund's assets that may be invested in securities of
issuers domiciled in any one country. To the extent that the
Fund invests a substantial amount of its assets in one
country, it will be more susceptible to the political and
economic developments and market fluctuations in that
country than if it invested in a more geographically
diversified portfolio.
0 EMERGING MARKETS. The Fund may invest in "emerging market"
countries whose securities markets may experience heightened
levels of volatility. The risks of investing in emerging
markets include greater political and economic uncertainties
than in foreign developed markets, currency transfer
restrictions, a more limited number of potential buyers, and
an emerging market country's dependence on revenue from
particular commodities or international aid. Additionally,
the securities markets and legal systems in emerging market
countries may only be in a developmental stage and may
provide few, or none, of the advantages or protections of
markets or legal systems available in more developed
countries. Emerging market countries may experience
extremely high levels of inflation, which may adversely
affect those countries' economies and securities markets.
<PAGE>
[EDGAR REPRESENTATION OF A GRAPH CHART]
Calendar Year Annual Return
- ------------- -------------
1998 ___%
1997 3.34%
1996 9.93%
1995 11.57%
1994 -0.27%
1993 45.72%
1992 -4.01%
1991 4.62%
1990 -11.41%
1989 22.13%
1988 19.50%
During the periods shown above, the highest quarterly return was 18.20% for the
quarter ended September 30, 1989, and the lowest was -19.79% for the quarter
ended September 30, 1990. [NOTE: SUBJECT TO CHANGE BASED ON FOURTH QUARTER OF
1998.] For the period January 1, 1998 through October 31, 1998, the Fund's total
return (unannualized) was 5.04%.
<TABLE>
- ------------------------------------------------ -------------- ------------- -------------
<S> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS PAST ONE YEAR PAST FIVE PAST TEN
ENDING DECEMBER 31, 1998) YEARS YEARS
- ------------------------------------------------ -------------- ------------- -------------
- ------------------------------------------------ -------------- ------------- -------------
Schroder International Fund [___]% [___]% [___]%
- ------------------------------------------------ -------------- ------------- -------------
- ------------------------------------------------ -------------- ------------- -------------
Morgan Stanley Capital International EAFE [___]% [___]% [___]%
Index*
- ------------------------------------------------ -------------- ------------- -------------
</TABLE>
* The Morgan Stanley Capital International EAFE Index is a market weighted index
composed of companies representative of the market structure of 20 developed
market countries in Europe, Australia, Asia and the Far East, and reflects
dividends net of non-recoverable withholding tax.
SCHRODER EMERGING MARKETS FUND
o INVESTMENT OBJECTIVE. To seek long-term capital appreciation.
o RELATED PORTFOLIO. Schroder Emerging Markets Fund invests
substantially all of its assets in Schroder EM Core Portfolio, a non-diversified
portfolio of Schroder Capital Funds.
o PRINCIPAL INVESTMENTS. The Fund normally invests at least 65% of its
assets in equity securities of companies determined by Schroder to be "emerging
market" issuers. The Fund may invest the remaining 35% of its assets in
securities of issuers located anywhere in the world. The Fund invests in a
variety of equity securities, including common and preferred stocks, securities
convertible into common and preferred stocks, and warrants to purchase common
and preferred stocks.
o INVESTMENT STRATEGIES. The Fund invests primarily in equity
securities of issuers domiciled or doing business in"emerging market" countries
in regions such as Southeast Asia, Latin America, and Eastern and Southern
Europe. "Emerging market" countries are countries not included at the time of
investment in the Morgan Stanley International World Index of major world
economies. Economies currently in the Index include: Australia, Austria,
Belgium, Canada, Denmark, Finland, France,
<PAGE>
Germany, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal,
Singapore, Spain, Sweden, Switzerland, the United Kingdom, and the United
States. Schroder may at times determine based on its own analysis that an
economy included in the Index should nonetheless be considered an emerging
market country, in which case that country would constitute an emerging market
country for purposes of the Fund's investments. The Fund normally will invest in
at least three countries other than the United States.
The Fund also may do the following:
0 Invest in securities of closed-end investment companies
that invest primarily in foreign securities.
0 Invest up to 35% of its assets in debt securities,
including junk bonds, which entail certain risks.
0 Invest up to 5% of its assets in sovereign debt
securities that are in default.
o PRINCIPAL RISKs.
0 EMERGING MARKETS. The Fund may invest in "emerging
market" countries whose securities markets may
experience heightened levels of volatility. The risks
of investing in emerging markets include greater
political and economic uncertainties than in foreign
developed markets, currency transfer restrictions, a
more limited number of potential buyers, and an
emerging market country's dependence on revenue from
particular commodities or international aid.
Additionally, the securities markets and legal
systems in emerging market countries may only be in a
developmental stage and may provide few, or none, of
the advantages or protections of markets or legal
systems available in more developed countries.
Emerging market countries may experience extremely
high levels of inflation, which may adversely affect
those countries' economies and securities markets.
0 FOREIGN SECURITIES. Investments in foreign securities
entail risks not present in domestic investments
including, among others, risks related to political
or economic instability, currency exchange and
taxation.
0 GEOGRAPHIC CONCENTRATION. There is no limit on the
amount of the Fund's assets that may be invested in
securities of issuers domiciled in any one country.
To the extent that the Fund invests a substantial
amount of its assets in one country, it will be more
susceptible to the political and economic
developments and market fluctuations in that country
than if it invested in a more geographically
diversified portfolio.
0 NON-DIVERSIFIED FUND. The Fund is a "non-diversified"
mutual fund, and may invest its assets in a more
limited number of issuers than may diversified
investment companies. To the extent the Fund focuses
<PAGE>
on fewer issuers, its risk of loss increases if the
market value of a security declines or if an issuer
is not able to meet its obligations.
0 JUNK BONDS. Junk bonds reflect a greater possibility
that adverse changes in the financial condition of
the issuer or in general economic conditions, or an
unanticipated rise in interest rates, may impair the
ability of the issuer to make payments of interest
and principal. If this were to occur, the values of
securities held by the Fund may become more volatile.
0 EQUITY SECURITIES. Another risk of investing in the
Fund is the risk that the value of the equity
securities in the portfolio will fall, or will not
appreciate as anticipated by Schroder, due to factors
that adversely affect markets generally or particular
companies in the portfolio.
[EDGAR REPRESENTATION OF A GRAPH CHART]
Calendar Year Annual Return
- ------------- -------------
1998 ____%
During the periods shown above, the highest quarterly return was 16.90% for the
quarter ended March 31, 1998, and the lowest was -61.27% for the quarter ended
June 30, 1998. [NOTE: SUBJECT TO CHANGE BASED ON FOURTH QUARTER OF 1998.] For
the period January 1, 1998 through November 30, 1998, the Fund's total return
(unannualized) was [____]%.
- ------------------------------------------------ -----------------------
AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS LIFE OF FUND
ENDING DECEMBER 31, 1998) (SINCE 10/30/97)
- ------------------------------------------------ -----------------------
- ------------------------------------------------ -----------------------
Schroder Emerging Markets Fund [___]%
- ------------------------------------------------ -----------------------
- ------------------------------------------------ -----------------------
*Morgan Stanley Capital International Emerging [___]%
Markets Free Index
- ------------------------------------------------ -----------------------
* The Morgan Stanley Capital International Emerging Markets Free Index is an
unmanaged market capitalization index of companies representative of the market
structure of 26 emerging countries in Europe, Latin America and the Pacific
Basin. The Index reflects actual buyable opportunities for the non-domestic
investor by taking into account local market restrictions on share ownership by
foreigners.
<PAGE>
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND
o INVESTMENT OBJECTIVe. Long-term capital appreciation through
investment in securities markets outside the United States.
o RELATED PORTFOLIO. Schroder International Smaller Companies
Fund invests substantially all of its assets in Schroder International
Smaller Companies Portfolio, a diversified portfolio of Schroder
Capital Funds.
o PRINCIPAL INVESTMENTS. The Fund normally invests at least 65%
of its assets in equity securities of smaller companies (with market
capitalizations of $1.5 billion or less at the time of investment)
domiciled outside the United States. The Fund invests in a variety of
equity securities, including common and preferred stocks, securities
convertible into common and preferred stocks, and warrants to purchase
common and preferred stocks.
o INVESTMENT STRATEGIEs. In selecting investments for the Fund,
Schroder considers a number of factors, including the company's
potential for long-term growth, financial condition, sensitivity to
cyclical factors, the relative value of the company's securities
(compared to that of other companies and to the market as a whole),
and the extent to which the company's management owns equity in the
company. The Fund will invest in securities of issuers domiciled in at
least three countries other than the United States, and may, although
it does not currently, invest in the securities of issuers domiciled
or doing business in emerging market countries.
The Fund also may do the following:
0 Invest in closed-end funds that invest primarily in foreign
securities.
0 Invest in securities of issuers domiciled or doing business
in emerging market countries.
o PRINCIPAL RISKs.
0 FOREIGN SECURITIES. Investments in foreign securities entail
risks not present in domestic investments including, among
others, risks related to political or economic instability,
currency exchange and taxation.
0 SMALL COMPANIES. The Fund invests primarily in small
companies, which tend to be more vulnerable to adverse
developments than larger companies. Small companies may have
limited product lines, markets, or financial resources, or
may depend on a limited management group. Their securities
may trade infrequently and in limited volumes. As a result,
the prices of these securities may fluctuate more than the
prices of securities of larger, more widely traded
companies. Also, there may be less publicly available
information about small companies or less market interest in
their securities as compared to larger companies, and it may
take longer for the prices of the securities to reflect the
full value of their issuers' earnings potential or assets.
<PAGE>
0 EQUITY SECURITIES. Another risk of investing in the Fund is
the risk that the value of the equity securities in the
portfolio will fall, or will not appreciate as anticipated
by Schroder, due to factors that adversely affect markets
generally or particular companies in the portfolio.
0 GEOGRAPHIC CONCENTRATION. There is no limit on the amount of
the Fund's assets that may be invested in securities of
issuers domiciled in any one country. To the extent that the
Fund invests a substantial amount of its assets in one
country, it will be more susceptible to the political and
economic developments and market fluctuations in that
country than if it invested in a more geographically
diversified portfolio.
[EDGAR REPRESENTATION OF A GRAPH CHART]
Calendar Year Annual Return
- ------------- -------------
1998 ____%
1997 -14.13%
During the periods shown above, the highest quarterly return was 20.25% for the
quarter ended March 31, 1998, and the lowest was -15.41% for the quarter ended
September 30, 1998. [NOTE: SUBJECT TO CHANGE BASED ON FOURTH QUARTER OF 1998.]
For the period January 1, 1998 through October 31, 1998, the Fund's total return
(unannualized) was 16.88%.
<TABLE>
<S> <C> <C>
- ------------------------------------------------ ------------------- ------------------------
AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS PAST ONE YEAR LIFE OF FUND
ENDING DECEMBER 31, 1998) (SINCE 11/4/96)
- ------------------------------------------------ ------------------- ------------------------
- ------------------------------------------------ ------------------- ------------------------
Schroder International Smaller Companies Fund [___]% [___]%
- ------------------------------------------------ ------------------- ------------------------
- ------------------------------------------------ ------------------- ------------------------
Salomon Smith Barney Extended Market Index [___]% [___]%
(EPAC Region)*
- ------------------------------------------------ ------------------- ------------------------
</TABLE>
* The Salomon Smith Barney Extended Market Index (EPAC Region) (EMI EPAC) is an
unmanaged benchmark, representing the portion of the Salomon Smith Barney Broad
Market Index related to companies with small index capitalization in
approximately 22 European and Pacific Basin countries. The Salomon Smith Barney
EMI EPAC represents the smallest companies in each country based on total market
capital having in the aggregate 20% of the cumulative available market capital
in such country.
SCHRODER INTERNATIONAL BOND FUND
o INVESTMENT OBJECTIVe. To seek a high rate of total return.
<PAGE>
o RELATED PORTFOLIO. Schroder International Bond Fund invests substantially
all of its assets in Schroder International Bond Portfolio, a non-diversified
portfolio of Schroder Capital Funds II.
o PRINCIPAL INVESTMENTS. The Fund normally invests substantially all of its
assets in debt securities and debt-related investments of companies domiciled
outside the United States. The Fund also may invest in debt securities of
foreign governments (including provinces and municipalities) and their agencies
and instrumentalities, debt securities of supranational organizations, and debt
securities of private issuers. The Fund normally invests in securities of
issuers in at least five countries other than the United States, although there
is no limit on the amount of the Fund's assets that may be invested in
securities of issuers domiciled in any one country.
o INVESTMENT STRATEGIES. In seeking a high rate of total return, the Fund
invests in debt securities and debt-related investments. "Total return" consists
of current income, including interest payments and discount accruals, plus any
increases in the values of the Fund's investments, less any decreases in the
values of any of the Fund's investments. The bonds in which the Fund invests may
pay interest at fixed, variable, or floating rates. The rate of return on some
of the debt obligations in which the Fund invests may be linked to indices or
stock prices or indexed to the level of exchange rates between the U.S. dollar
and a foreign currency or currencies. The Fund currently has invested
approximately one-third of its assets in securities of issuers domiciled in
Germany. As a result, the Fund's investment performance will be affected by
economic, political, or other factors affecting issuers and investments in that
country more than if it had invested a smaller portion of its assets in issuers
domiciled in Germany. The Fund may borrow money to make investments.
Additionally, Schroder may engage in active currency management through the
foreign currency exchange strategies described later in this Prospectus to try
to increase total return or to reduce risk.
The Fund also may do the following:
0 Invest in securities of issuers domiciled or doing business
in emerging market countries.
0 Invest in securities convertible into common or preferred
stock, or traded together with warrants for the purchase of
common stock.
0 Invest up to 10% of its assets in junk bonds, which entail
certain risks.
0 Sell securities short and then borrow those same securities
from a broker or other institution to complete the sale (a
"short sale").
0 Enter into interest rate swaps for hedging purposes or to
realize a greater current return.
0 Engage in a variety of transactions involving the use of
options and futures contracts.
0 Invest in closed-end funds that invest primarily in emerging
markets securities.
<PAGE>
0 Invest in derivative instruments, which are financial
instruments whose value depends upon, or is derived from,
the value of an underlying asset, such as a security, index
or currency.
o PRINCIPAL RISKS.
0 DEBT SECURITIES. The Fund invests in debt securities, which
are subject to market risk (the fluctuation of market value
in response to changes in interest rates) and to credit
risks (the risk that the issuer may become unable or
unwilling to make timely payments of principal and
interest).
0 JUNK BONDS. Junk bonds reflect a greater possibility that
adverse changes in the financial condition of the issuer or
in general economic conditions, or an unanticipated rise in
interest rates, may impair the ability of the issuer to make
payments of interest and principal. If this were to occur,
the values of securities held by the Fund may become more
volatile.
0 LEVERAGE. The Fund may borrow money by engaging in reverse
repurchase agreements to invest in additional securities.
"Reverse" repurchase agreements generally involve the sale
by the Fund of securities held by it and an agreement to
repurchase the securities at an agreed-upon price, date, and
interest payment. The use of borrowed money increases the
Fund's market exposure and risk and may result in losses.
The interest that the Fund must pay on borrowed money will
reduce its net investment income, and may also either offset
any potential capital gains or increase any losses.
0 GEOGRAPHIC CONCENTRATION. There is no limit on the amount of
the Fund's assets that may be invested in securities of
issuers domiciled in any one country. To the extent that the
Fund invests a substantial amount of its assets in one
country, it will be more susceptible to the political and
economic developments and market fluctuations in that
country than if it invested in a more geographically
diversified portfolio.
0 NON-DIVERSIFIED FUND. The Fund is a "non-diversified" mutual
fund, and may invest its assets in a more limited number of
issuers than may diversified investment companies. To the
extent the Fund focuses on fewer issuers, its risk of loss
if the market value of a security declines or if an issuer
is not able to meet its obligations.
SCHRODER U.S. DIVERSIFIED GROWTH FUND (FORMERLY, SCHRODER U.S. EQUITY FUND)
o INVESTMENT OBJECTIVe. To seek growth of capital.
o PRINCIPAL INVESTMENTS. The Fund normally invests substantially all of
its assets in equity securities of companies in the United States. The Fund
invests in a variety of equity securities including common and preferred stocks
and warrants to purchase common and preferred stocks. The Fund normally invests
in securities of companies with market capitalizations of more than $1.5
billion.
<PAGE>
o INVESTMENT STRATEGIES. The Fund may invest in companies, large or
small, that Schroder believes offer the potential for capital growth. For
example, the Fund may invest in companies whose earnings are believed to be in a
relatively strong growth trend, companies with a proprietary advantage, or
companies that are in industry segments that are experiencing rapid growth. The
Fund also may invest in companies in which significant further growth is not
anticipated but whose market value per share is thought to be undervalued. The
Fund may invest in relatively less well-known companies that meet any of these
characteristics or other characteristics identified by Schroder.
o PRINCIPAL RISKs.
0 EQUITY SECURITIES. The principal risks of investing in the
Fund include the risk that the value of the equity
securities in the portfolio will fall, or will not
appreciate as anticipated by Schroder, due to factors that
adversely affect particular companies in the portfolio
and/or the U.S. equities market in general.
[EDGAR REPRESENTATION OF A GRAPH CHART]
Calendar Year Annual Return
- ------------- -------------
1998 ____%
1997 23.33%
1996 21.48%
1995 28.03%
1994 -5.21%
1993 12.50%
1992 15.23%
1991 38.28%
1990 -4.00%
1989 24.42%
1988 12.02%
During the periods shown above, the highest quarterly return was 20.14% for the
quarter ended March 31, 1987, and the lowest was -24.92% for the quarter ended
December 31, 1987. [NOTE: SUBJECT TO CHANGE BASED ON FOURTH QUARTER OF 1998.]
For the period January 1, 1998 through October 31, 1998, the Fund's total return
(unannualized) was 3.59%.
<PAGE>
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------ --------------- ------------- ------------
AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS PAST ONE YEAR PAST FIVE PAST TEN
ENDING DECEMBER 31, 1998) YEARS YEARS
- ------------------------------------------------ --------------- ------------- ------------
- ------------------------------------------------ --------------- ------------- ------------
Schroder U.S. Diversified Growth Fund [___]% [___]% [____]%
- ------------------------------------------------ --------------- ------------- ------------
- ------------------------------------------------ --------------- ------------- ------------
S&P 500 Index* [___]% [___]% [____]%
- ------------------------------------------------ --------------- ------------- ------------
</TABLE>
* The Standard & Poor's 500 Index is a market value weighted composite index of
500 large capitalization U.S. companies and reflects the reinvestment of
dividends.
SCHRODER U.S. SMALLER COMPANIES FUND
o INVESTMENT OBJECTIVe. Capital appreciation.
<PAGE>
o RELATED PORTFOLIO. Schroder U.S. Smaller Companies Fund invests
substantially all of its assets in Schroder U.S. Smaller Companies Portfolio, a
diversified portfolio of Schroder Capital Funds.
o PRINCIPAL INVESTMENTS. The Fund invests at least 65% of its assets in
equity securities of companies in the United States that have (at the time of
investment) market capitalizations of $1.5 billion or less. The Fund also may
invest in equity securities of larger companies and in debt securities, if
Schroder believes such investments are consistent with the Fund's investment
objective. The Fund invests in a variety of equity securities including common
and preferred stocks, securities convertible into common and preferred stocks,
and warrants to purchase common and preferred stocks.
o INVESTMENT STRATEGIES. In selecting investments for the Fund, Schroder
seeks to identify securities of companies with strong management that it
believes can generate above average earnings growth, and are selling at
favorable prices in relation to book values and earnings. The Fund intends to
invest no more than 25% of its total assets in securities of small companies
that, together with their predecessors, have been in operation for less than
three years.
o PRINCIPAL RISKS.
0 SMALL COMPANIES. The Fund invests primarily in small
companies, which tend to be more vulnerable to adverse
developments than larger companies. Small companies may have
limited product lines, markets, or financial resources, or
may depend on a limited management group. Their securities
may trade less frequently and in limited volumes. As a
result, the prices of these securities may fluctuate more
than the prices of securities of larger, more widely traded
companies. Also, there may be less publicly available
information about small companies or less market interest in
their securities as compared to larger companies, and it may
take longer for the price of the securities to reflect the
full value of their issuers' earnings potential or assets.
0 EQUITY SECURITIES. Another risk of investing in the Fund is
the risk that the value of the equity securities in the
portfolio will fall, or will not appreciate as anticipated
by Schroder, due to factors that adversely affect particular
companies in the portfolio and/or the U.S. equities market
in general.
<PAGE>
[EDGAR REPRESENTATION OF A GRAPH CHART]
Calendar Year Annual Return
- ------------- -------------
1998 ____%
1997 26.86%
1996 22.29%
1995 49.08%
1994 4.45%
During the periods shown above, the highest quarterly return was 18.60% for the
quarter ended June 30, 1997, and the lowest was -23.27% for the quarter ended
September 30, 1998. [NOTE: SUBJECT TO CHANGE BASED ON FOURTH QUARTER OF 1998.]
For the period January 1, 1998 through November 30, 1998, the Fund's total
return (unannualized) was [___]%.
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------ ------------------- -------------------- -----------------------
AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS PAST ONE YEAR PAST FIVE YEARS LIFE OF FUND
ENDING DECEMBER 31, 1998) (SINCE 8/16/93)
- ------------------------------------------------ ------------------- -------------------- -----------------------
- ------------------------------------------------ ------------------- -------------------- -----------------------
Schroder U.S. Smaller Companies Fund [___]% [___]% [___]%
- ------------------------------------------------ ------------------- -------------------- -----------------------
- ------------------------------------------------ ------------------- -------------------- -----------------------
Russell 2000 Index* [___]% [___]% [___]%
- ------------------------------------------------ ------------------- -------------------- -----------------------
</TABLE>
* The Russell 2000 Index is a market capitalization weighted broad based index
of 2000 small capitalization U.S. companies.
SCHRODER MICRO CAP FUND
SHARES OF SCHRODER MICRO CAP FUND ARE NOT CURRENTLY BEING OFFERED TO THE PUBLIC
GENERALLY, AND MAY BE PURCHASED ONLY BY EXISTING SHAREHOLDERS AND BY EMPLOYEES
OF SCHRODER AND ITS AFFILIATES. THE DETERMINATION TO DISCONTINUE THE GENERAL
OFFERING WAS MADE BY SCHRODER AFTER CONSULTATION WITH THE BOARD OF TRUSTEES OF
THE TRUST. SCHRODER INTENDS TO REVIEW THE DISCONTINUATION PERIODICALLY, AND MAY
RECOMMEND AT ANY TIME THAT A MORE GENERAL OFFERING OF THE FUND'S SHARES BE
RESUMED.
O INVESTMENT OBJECTIVE. Long-term capital appreciation.
o PRINCIPAL INVESTMENTS. The Fund normally invests at least 65% of its
assets in equity securities of micro cap companies domiciled in the United
States. A micro cap company is a company with, at the time of initial
investment, a market capitalization in the bottom one-third of companies in the
Russell 2000 Growth Index (measured by capitalization), or with a market
capitalization of $300 million or less. The Fund invests in a variety of equity
securities including common and preferred stocks, securities convertible into
common and preferred stocks, and warrants to purchase common and preferred
stocks.
<PAGE>
o INVESTMENT STRATEGIES. Schroder seeks to identify securities of
companies that it believes offer the potential for long-term capital
appreciation, based on novel, superior or niche products or services, operating
characteristics, quality of management, an entrepreneurial management team,
companies that have gone public in recent years, opportunities provided by
mergers, divestitures or new management, or other factors. The Fund may invest
in securities of small, unseasoned companies, as well as securities of more
established companies. Up to 35% of the Fund's assets may comprise other
investments, including equity securities of larger capitalization companies, if
Schroder believes that such investments are warranted to achieve the Fund's
investment objective.
The Fund also may do the following:
0 Invest, to a limited degree, in non-convertible debt
securities, when Schroder believes that such investments are
warranted to achieve the Fund's investment objective.
0 Sell securities short and then borrow those same securities
from a broker or other institution to complete the sale (a
"short sale").
0 Engage in a variety of transactions involving the use of
options and futures contracts, including index options and
index futures contracts.
0 Invest in closed-end funds that invest primarily in micro
cap securities.
0 Invest in derivative instruments, which are financial
instruments whose value depends upon, or is derived from,
the value of an underlying asset, such as a security, index
or currency. The Fund may engage in derivatives transactions
for hedging purposes.
In the future, the Fund may seek to achieve its investment objective by
investing all or a portion of its assets in one or more registered investment
companies having substantially the same investment objective and similar
investment policies as the Fund.
o PRINCIPAL RISKs.
0 SMALL COMPANIES. The Fund invests primarily in small
companies, which tend to be more vulnerable to adverse
developments than larger companies. Small companies may have
limited product lines, markets, or financial resources, or
may depend on a limited management group. Their securities
may trade less frequently and in limited volumes. As a
result, the prices of these securities may fluctuate more
than the prices of securities of larger, more widely traded
companies. Also, there may be less publicly available
information about small companies or less market interest in
their securities as compared to larger companies, and it may
take longer for the prices of the securities to reflect the
full value of their issuers' earning potential or assets.
<PAGE>
0 EQUITY SECURITIES. Another risk of investing in the Fund is
the risk that the value of the equity securities in the
portfolio will fall, or will not appreciate as anticipated
by Schroder, due to factors that adversely affect particular
companies in the portfolio and/or the U.S. equities market
in general.
<PAGE>
[EDGAR REPRESENTATION OF A GRAPH CHART]
Calendar Year Annual Return
- ------------- -------------
1998 ____%
During the periods shown above, the highest quarterly return was 26.61% for the
quarter ended March 31, 1998, and the lowest was 2.85% for the quarter ended
September 30, 1998. [NOTE: SUBJECT TO CHANGE BASED ON FOURTH QUARTER OF 1998.]
For the period January 1, 1998 through November 30, 1998, the Fund's total
return (unannualized) was [___]%.
<TABLE>
<S> <C> <C>
- ----------------------------------------- ----------------------- -----------------------
AVERAGE ANNUAL TOTAL RETURNS (FOR PAST ONE YEAR LIFE OF FUND
PERIODS ENDING DECEMBER 31, 1998) (SINCE 10/15/97)
- ----------------------------------------- ----------------------- -----------------------
- ----------------------------------------- ----------------------- -----------------------
Schroder Micro Cap Fund [___]% [___]%
- ----------------------------------------- ----------------------- -----------------------
- ----------------------------------------- ----------------------- -----------------------
Russell 2000 Index* [___]% [___]%
- ----------------------------------------- ----------------------- -----------------------
</TABLE>
<PAGE>
* The Russell 2000 Index is a market capitalization weighted broad based index
of 2000 small capitalization U.S. companies.
FEES AND EXPENSES
THESE TABLES DESCRIBE THE FEES AND EXPENSES THAT YOU WILL PAY IF YOU INVEST IN
INVESTOR SHARES OF THE FUNDS. CERTAIN FEES AND EXPENSES HAVE BEEN ESTIMATED FOR
THOSE FUNDS THAT HAVE BEEN IN EXISTENCE FOR LESS THAN ONE FISCAL YEAR.
SHAREHOLDER FEES (paid directly from your investment):
Maximum Sales Load Imposed on Purchases None
Maximum Deferred Sales Load None
Maximum Sales Load Imposed on Reinvested Dividends None
Redemption Fee None
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets):
<TABLE>
<S> <C> <C> <C> <C>
Schroder
Schroder Schroder International Schroder
International Emerging Smaller International
Fund Markets Fund2 Companies Fund Bond Fund
---- ------------- -------------- ---------
Management Fees 0.68% 1.25% 1.10% 0.70%
Distribution (12b-1) Fees None None None None
Other Expenses 0.40% 1,976.44% 4.16% 9.55%
Total Annual Fund 1.08% 1,977.68% 5.26% 10.25%
Operating Expenses
Fee Waiver and/or 0.09% 1,975.98% 3.76% 9.30%
Expense Limitation (1)
Net Expenses 0.99% 1.70% 1.50% 0.95%
</TABLE>
Schroder
U.S. Schroder U.S. Schroder
Diversified Smaller Companies Micro Cap
Growth Fund Fund Fund
----------- ---- ----
0.75% 0.85% 1.50%
None None None
1.10% 0.52% 4.52%
1.85% 1.37% 6.02%
0.35% --- 4.02%
1.50% --- 2.00%
- ---------------
1 The Net Expenses shown above reflect the effect of contractually imposed
expense limitations and/or fee waivers in effect through October 31, 1999 on
Total Annual Fund Operating Expenses of the Funds.
- ---------------
EXAMPLE
This Example is intended to help you compare the cost of investing in a
Fund with the cost of investing in other mutual funds.
<PAGE>
The Example assumes that you invest $10,000 in Investor Shares of a
Fund for the time periods indicated and then redeem all of your shares
at the end of those periods. The Example also assumes that your
investment earns a 5% return each year and that the Fund's total annual
operating expenses remain the same. Your actual costs may be higher or
lower. Based on these assumptions, your costs would be:
<TABLE>
<S> <C> <C> <C> <C>
---------------------------------------------------------- ---------- -------------- ------------- ------------
1 year 3 years 5 years 10 years
------ ------- ------- --------
---------------------------------------------------------- ---------- -------------- ------------- ------------
---------------------------------------------------------- ---------- -------------- ------------- ------------
Schroder International Fund* $ 110 $ 343 $ 595 $1,317
---------------------------------------------------------- ---------- -------------- ------------- ------------
---------------------------------------------------------- ---------- -------------- ------------- ------------
Schroder Emerging Markets Fund* $10,000 $10,000 $10,000 $10,000
---------------------------------------------------------- ---------- -------------- ------------- ------------
---------------------------------------------------------- ---------- -------------- ------------- ------------
Schroder International Smaller Companies* $ 525 $ 1,572 $ 2,613 $ 5,192
---------------------------------------------------------- ---------- -------------- ------------- ------------
---------------------------------------------------------- ---------- -------------- ------------- ------------
Schroder International Bond Fund* $10,000 $10,000 $10,000 $10,000
---------------------------------------------------------- ---------- -------------- ------------- ------------
---------------------------------------------------------- ---------- -------------- ------------- ------------
Schroder U.S. Diversified Growth Fund* $ 188 $ 852 $ 1,001 $ 2,169
---------------------------------------------------------- ---------- -------------- ------------- ------------
---------------------------------------------------------- ---------- -------------- ------------- ------------
Schroder U.S. Smaller Companies Fund $ 139 $ 434 $ 750 $ 1,646
---------------------------------------------------------- ---------- -------------- ------------- ------------
---------------------------------------------------------- ---------- -------------- ------------- ------------
Schroder Micro Cap Fund* $ 599 $ 1,718 $ 2,936 $ 5,725
---------------------------------------------------------- ---------- -------------- ------------- ------------
</TABLE>
- --------------
*Assuming that each of these Funds' operating expenses remain the same as Net
Expenses shown above, based on the other assumptions described above, your costs
would be:
<TABLE>
<S> <C> <C> <C> <C>
---------------------------------------------------------- ---------- -------------- ------------- ------------
1 year 3 years 5 years 10 years
------ ------- ------- --------
---------------------------------------------------------- ---------- -------------- ------------- ------------
---------------------------------------------------------- ---------- -------------- ------------- ------------
Schroder International Fund $ 101 $ 315 $ 547 $1213
---------------------------------------------------------- ---------- -------------- ------------- ------------
---------------------------------------------------------- ---------- -------------- ------------- ------------
Schroder Emerging Markets Fund $ 172 $ 535 $ 921 $2005
---------------------------------------------------------- ---------- -------------- ------------- ------------
---------------------------------------------------------- ---------- -------------- ------------- ------------
Schroder International Smaller Companies $ 153 $ 474 $ 818 $1791
---------------------------------------------------------- ---------- -------------- ------------- ------------
---------------------------------------------------------- ---------- -------------- ------------- ------------
Schroder International Bond Fund $ 97 $ 303 $ 525 $1166
---------------------------------------------------------- ---------- -------------- ------------- ------------
---------------------------------------------------------- ---------- -------------- ------------- ------------
Schroder U.S. Diversified Growth Fund $ 153 $ 474 $ 818 $1791
---------------------------------------------------------- ---------- -------------- ------------- ------------
---------------------------------------------------------- ---------- -------------- ------------- ------------
Schroder Micro Cap Fund $ 203 $ 628 $1079 $2330
---------------------------------------------------------- ---------- -------------- ------------- ------------
</TABLE>
<PAGE>
OTHER INVESTMENT STRATEGIES AND RISKS
A Fund may not achieve its objective in all circumstances and
you could lose money by investing. The following provides more detail
about the Funds' principal risks and the circumstances which could
adversely affect the value of a Fund's shares or its total return or
yield.
RISKS OF INVESTING IN THE FUNDS
o FOREIGN SECURITIES. Investments in foreign securities
entail certain risks. There may be a possibility of nationalization or
expropriation of assets, confiscatory taxation, political or financial
instability, and diplomatic developments that could affect the value of
a Fund's investments in certain foreign countries. Since foreign
securities normally are denominated and traded in foreign currencies,
the values of the Fund's assets may be affected favorably or
unfavorably by currency exchange rates, currency exchange control
regulations, foreign withholding taxes, and restrictions or
prohibitions on the repatriation of foreign currencies. There may be
less information publicly available about a foreign issuer than about a
U.S. issuer, and foreign issuers are not generally subject to
accounting, auditing, and financial reporting standards and practices
comparable to those in the United States. The securities of some
foreign issuers are less liquid and at times more volatile than
securities of comparable U.S. issuers. Foreign brokerage commissions
and other fees are also generally higher than in the United States.
Foreign settlement procedures and trade regulations may involve certain
<PAGE>
risks (such as delay in payment or delivery of securities or in the
recovery of a Fund's assets held abroad) and expenses not present in
the settlement of domestic investments.
In addition, legal remedies available to investors in certain
foreign countries may be more limited than those available to investors
in the United States or in other foreign countries. The willingness and
ability of foreign governmental entities to pay principal and interest
on government securities depends on various economic factors, including
the issuer's balance of payments, overall debt level, and cash-flow
considerations related to the availability of tax or other revenues to
satisfy the issuer's obligations. If a foreign governmental entity
defaults on its obligations on the securities, a Fund may have limited
recourse available to it. The laws of some foreign countries may limit
a Fund's ability to invest in securities of certain issuers located in
those countries. Special tax considerations apply to foreign
securities.
If a Fund purchases securities denominated in foreign currencies, a
change in the value of any such currency against the U.S. dollar will result in
a change in the U.S. dollar value of the Fund's assets and the Fund's income
available for distribution. In addition, although at times most of a Fund's
income may be received or realized in these currencies, the Fund will be
required to compute and distribute its income in U.S. dollars. As a result, if
the exchange rate for any such currency declines after the Fund's income has
been earned and translated into U.S. dollars but before payment to shareholders,
the Fund could be required to liquidate portfolio securities to make such
distributions. Similarly, if a Fund incurs an expense in U.S. dollars and the
exchange rate declines before the expense is paid, the Fund would have to
convert a greater amount of U.S. dollars to pay for the expense at that time
than it would have had to convert at the time the Fund incurred the expense. A
Fund may buy or sell foreign currencies and options and futures contracts on
foreign currencies for hedging purposes in connection with its foreign
investments.
In determining whether to invest in debt securities of foreign issuers,
Schroder considers the likely impact of foreign taxes on the net yield available
to the Fund and its shareholders. Income received by a Fund from sources within
foreign countries may be reduced by withholding and other taxes imposed by such
countries. Tax conventions between certain countries and the United States may
reduce or eliminate such taxes. Any such taxes paid by a Fund will reduce its
income available for distribution to shareholders. In certain circumstances, a
Fund may be able to pass through to shareholders credits for foreign taxes paid.
Except as otherwise noted in this Prospectus, there is no limit on the
amount of a Fund's assets that may be invested in foreign securities.
o DEBT SECURITIES. All of the Funds may invest in debt securities,
which are subject to the risk of fluctuation of market value in response to
changes in interest rates and the risk that the issuer may default on the timely
payment of principal and interest. Additionally, all of the Funds may invest in
lower-quality, high-yielding debt securities, commonly known as junk bonds.
Lower-rated debt securities are predominantly speculative and tend to be more
susceptible than other debt securities to adverse changes in the financial
condition of the issuer, general economic conditions, or an unanticipated rise
in interest rates, which may affect an issuer's ability to pay interest and
principal. This would likely make the values of the securities held by a Fund
more volatile and could limit the Fund's ability to liquidate its securities.
Changes by recognized rating services in their ratings of any fixed-income
security and in the perceived ability of an issuer to make payments of interest
and principal also may affect the value of these investments.
<PAGE>
o RISKS OF SMALLER CAPITALIZATION COMPANIES. Schroder International
Smaller Companies Fund, Schroder U.S. Smaller Companies Fund and Schroder Micro
Cap Fund invest in companies that are smaller and less well-known than larger,
more widely held companies. Small and mid-cap companies may offer greater
opportunities for capital appreciation than larger companies, but may also pose
certain special risks. They are more likely than larger companies to have
limited product lines, markets or financial resources, or to depend on a small,
inexperienced management group. Securities of smaller companies may trade less
frequently and in lesser volume than more widely held securities and their
values may fluctuate more sharply than other securities. They may also trade in
the over-the-counter market or on a regional exchange, or may otherwise have
limited liquidity. These securities may therefore be more vulnerable to adverse
developments than securities of larger companies and the Funds may have
difficulty establishing or closing out their securities positions in smaller
companies at prevailing market prices. Also, there may be less publicly
available information about smaller companies or less market interest in their
securities as compared to larger companies, and it may take longer for the
prices of the securities to reflect the full value of their issuers' earnings
potential or assets.
OTHER INVESTMENT STRATEGIES AND TECHNIQUES
In addition to the principal investment strategies described in the
Summary Information section above, the Funds may at times use the strategies and
techniques described below, which involve certain special risks. This Prospectus
does not attempt to disclose all of the various investment techniques and types
of securities that Schroder might use in managing the Funds. As in any mutual
fund, investors must rely on the professional investment judgment and skill of
the Fund's adviser.
o FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Changes in currency exchange
rates will affect the U.S. dollar value of Fund assets, including securities
denominated in foreign currencies. Exchange rates between the U.S. dollar and
other currencies fluctuate 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 political, economic and financial conditions, which may be
difficult to predict. A Fund may engage in currency exchange transactions to
protect against unfavorable fluctuations in exchange rates.
In particular, a Fund may enter into foreign currency exchange
transactions to protect against a change in exchange ratios that may occur
between the date on which the Fund contracts to trade a security and the
settlement date ("transaction hedging") or in anticipation of placing a trade
("anticipatory hedging"); to "lock in" the U.S. dollar value of interest and
dividends to be paid in a foreign currency; or to hedge against the possibility
that a foreign currency in which portfolio securities are denominated or quoted
may suffer a decline against the U.S. dollar ("position hedging"). Schroder
International Bond Fund may also enter into forward contracts to adjust the
Fund's exposure to various foreign currencies, either pending anticipated
investments in securities denominated in those currencies or as a hedge against
anticipated market changes.
From time to time, a Fund's currency hedging transactions may call for the
delivery of one foreign currency in exchange for another foreign currency and
may at times involve currencies in which its portfolio securities are not then
denominated ("cross hedging"). A Fund may also engage in "proxy" hedging,
whereby the Fund would seek to hedge the value of portfolio holdings denominated
in one currency by entering into an exchange contract on a second currency, the
valuation of which Schroder believes correlates to the value of the first
currency. Schroder may buy or sell currencies in "spot" or
<PAGE>
forward transactions. "Spot" transactions are executed contemporaneously on a
cash basis at the then-prevailing market rate.
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. Forward contracts do not eliminate fluctuations in the
underlying prices of securities and expose the Fund to the risk that the
counterparty is unable to perform.
A Fund incurs foreign exchange expenses in converting assets from one
currency to another. Schroder International Bond Fund may, to a limited extent,
purchase forward contracts to increase exposure in foreign currencies that are
expected to appreciate and thereby increase total return. All other Funds may
engage in foreign currency exchange transactions only for hedging purposes.
<PAGE>
Although there is no limit on the amount of any Fund's assets that may
be invested in foreign currency exchange and foreign currency forward contracts,
each Fund may enter into such transactions to the extent necessary to effect the
hedging transactions described above. In addition, Schroder International Bond
Fund may enter into foreign currency forward contracts for non-hedging purposes.
Suitable foreign currency hedging transactions may not be available in all
circumstances and there can be no assurance that a Fund will utilize hedging
transactions at any time.
O SECURITIES LOANS, REPURCHASE AGREEMENTS, AND FORWARD COMMITMENTS.
Each Fund may lend portfolio securities to broker-dealers up to one-third of the
Fund's total assets. Each Fund may also enter into repurchase agreements without
limit. These transactions must be fully collateralized at all times, but involve
some risk to a Fund if the other party should default on its obligation and the
Fund is delayed or prevented from recovering the collateral. Each Fund may also
enter into contracts to purchase securities for a fixed price at a future date
beyond customary settlement time, which may increase its overall investment
exposure and involves a risk of loss if the value of the securities declines
prior to the settlement date.
o SHORT SALES (SCHRODER INTERNATIONAL BOND FUND AND SCHRODER MICRO CAP
FUND). When Schroder anticipates that the price of a security will decline, it
may sell the security short and borrow the same security from a broker or other
institution to complete the sale. The Fund may make a profit or incur a loss
depending upon whether the market price of the security decreases or increases
between the date of the short sale and the date on which the Fund must replace
the borrowed security. An increase in the value of a security sold short by the
Fund over the price at which it was sold short will result in a loss to the
Fund, and there can be no assurance that the Fund will be able to close out the
position at any particular time or at an acceptable price.
o INVESTMENT IN OTHER INVESTMENT COMPANIES. Each Fund may invest in
other investment companies or pooled vehicles, including closed-end funds, that
are advised by Schroder or its affiliates or by unaffiliated parties. When
investing in another investment company, a Fund may pay a premium above such
investment company's net asset value per share. As a shareholder in an
investment company, a Fund would bear its ratable share of the investment
company's expenses, including advisory and administrative fees, and would at the
same time continue to pay its own fees and expenses.
o DERIVATIVE INVESTMENTS. Instead of investing directly in the types of
portfolio securities described in the Summary Information, each Fund may buy or
sell a variety of "derivative" investments to gain exposure to particular
securities or markets, in connection with hedging transactions, and to increase
total
<PAGE>
return. These may include options, futures, and indices, for example.
Derivatives involve the risk that they may not work as intended due to
unanticipated developments in market conditions or other causes. Also,
derivatives often involve the risk that the other party to the transaction will
be unable to meet its obligations or that the Fund will be unable to close out
the position at any particular time or at an acceptable price.
O ZERO-COUPON BONDS. Each Fund which may invest in debt securities may
invest in zero-coupon bonds. Zero-coupon bonds are issued at a significant
discount from face value and pay interest only at maturity rather than at
intervals during the life of the security. Zero-coupon bonds allow an issuer to
avoid the need to generate cash to meet current interest payments and, as a
result, may involve greater credit risks than bonds that pay interest currently.
<PAGE>
o INTEREST RATE SWAPs. Schroder International Bond Fund may enter into
interest rate swaps for hedging purposes or to increase total return. Interest
rate swaps involve the exchange by the Fund with another party of different
types of interest-rate streams (for example, an exchange of floating rate
payments for fixed rate payments with respect to a notional amount of
principal). The Fund's ability to engage in certain interest rate transactions
may be limited by tax considerations. The use of interest rate swaps is a highly
specialized activity that involves investment techniques and risks different
from those associated with ordinary portfolio securities transactions. If
Schroder is incorrect in its forecasts of market values, interest rates, or
other relevant factors, the investment performance of the Fund would be less
favorable than it would have been if this investment technique were not used.
O PORTFOLIO TURNOVER. The length of time a Fund has held a particular
security is not generally a consideration in investment decisions. The
investment policies of a Fund may lead to frequent changes in the Fund's
investments, particularly in periods of volatile market movements. A change in
the securities held by a Fund is known as "portfolio turnover." Portfolio
turnover generally involves some expense to a Fund, including brokerage
commissions or dealer mark-ups and other transaction costs on the sale of
securities and reinvestment in other securities. Such sales may increase the
amount of capital gains (and, in particular, short-term gains) realized by the
Funds, on which shareholders pay tax.
o TEMPORARY DEFENSIVE STRATEGIES. At times, Schroder may judge that
conditions in the securities markets make pursuing a Fund's basic investment
strategy inconsistent with the best interests of its shareholders. At such
times, Schroder may temporarily use alternate investment strategies primarily
designed to reduce fluctuations in the value of a Fund's assets. In implementing
these "defensive" strategies, the Fund would invest in high-quality debt
securities, cash, or money market instruments to any extent Schroder considers
consistent with such defensive strategies. It is impossible to predict when, or
for how long, a Fund will use these alternate strategies. One risk of taking
such temporary defensive positions is that the Fund may not achieve its
investment objectives.
MANAGEMENT OF THE FUNDS
The Trust is governed by a Board of Trustees, which has retained
Schroder to manage the investments of each Fund. Subject to the control of the
Trustees, Schroder also manages the Funds' other affairs and business. Schroder
has served as investment adviser to each of the Funds since inception.
<PAGE>
Each Portfolio in which the Schroder International Fund, Schroder
Emerging Markets Fund, Schroder International Smaller Companies Fund, Schroder
International Bond Fund and Schroder U.S. Smaller Companies Fund invests is
managed under the direction of a board of trustees of Schroder Capital Funds or
Schroder Capital Funds II. Schroder has served as investment adviser to each of
the Portfolios since inception. Subject to the direction and control of
Schroder, Schroder Investment Management International, Ltd. (SIMIL), an
affiliate of Schroder, serves as subadviser to Schroder International Smaller
Companies Portfolio pursuant to an Investment Subadvisory Agreement among
Schroder, SIMIL and the Portfolio.
Schroder has been an investment manager since 1962, and currently
serves as investment adviser to the Funds, the Portfolios, and a broad range of
institutional investors. As of June 30, 1998, Schroder had approximately $24
billion in assets under management. Schroder's address is 787 Seventh Avenue,
34th floor, New York, New York 10019, and its telephone number is (212)
641-3900. SIMIL has been registered as a U.S. investment adviser since 1998, and
as of June 30, 1998 had under management assets of approximately $42 billion.
SIMIL's address is 31 Gresham Street, London, United Kingdom, EC2V 7QA.
o MANAGEMENT FEES PAID BY THE RELATED PORTFOLIOS. For the fiscal year
ended October 31, 1998 (May 31, 1998, in the case of Schroder U.S. Smaller
Companies Portfolio and Schroder EM Core Portfolio, and December 31, 1998 for
Schroder International Bond Portfolio), the Portfolios paid management fees to
Schroder at the following annual rates (based on the average net assets of each
Portfolio taken separately): INTERNATIONAL EQUITY FUND -- 0.427%; SCHRODER EM
CORE PORTFOLIO -- 0.086%; SCHRODER INTERNATIONAL BOND PORTFOLIO -- 0.00%;
SCHRODER INTERNATIONAL SMALLER COMPANIES PORTFOLIO -- 0.00%; SCHRODER U.S.
SMALLER COMPANIES PORTFOLIO -- 0.60%. Schroder has agreed to waive 0.10% of the
advisory fees payable by Schroder International Smaller Companies Portfolio.
This waiver shall remain in effect until its elimination is approved by the
board of trustees of Schroder Capital Funds. Each of the Funds that invests in a
related Portfolio, because of its investment in the Portfolio, bears a
proportionate part of the management fees (and other expenses) paid by the
Portfolio (based on the percentage of the Portfolio's assets attributable to the
Fund).
Pursuant to the Investment Subadvisory Agreement, Schroder pays SIMIL a
monthly fee at the annual rate of 0.25% of the daily net assets of Schroder
International Smaller Companies Portfolio.
Each of the Funds that invests in a related Portfolio has entered into
an investment advisory agreement with Schroder pursuant to which Schroder would
manage the Fund's assets directly in the event that the Fund were to cease
investing substantially all of its assets in a Portfolio. Schroder will not
receive any fees under that agreement so long as a Fund continues to invest
substantially all of its assets in a Portfolio or in another investment company.
o MANAGEMENT FEES PAID BY SCHRODER U.S. DIVERSIFIED GROWTH FUND
AND SCHRODER MICRO CAP FUNd. For the fiscal year ended October 31, 1998, for
SCHRODEr U.S. DIVERSIFIED GROWTH FUND and May 31, 1998, for SCHRODER MICRO CAP
FUND, those Funds paid management fees to Schroder at the following annual rates
(based on the average net assets of each Fund taken separately): SCHRODER U.S.
DIVERSIFIED GROWTH FUND -- 0.447% of the Fund's average net assets; and SCHRODER
MICRO CAP FUND -- 0.00% of the Fund's average net assets.
<PAGE>
o EXPENSE LIMITATIONS AND WAIVERS. In order to limit the Funds'
expenses, Schroder has voluntarily agreed to reduce its compensation (and, if
necessary, to pay certain other Fund expenses) until October 31, 1999 to the
extent that each Fund's total operating expenses attributable to its Investor
Shares exceed the following annual rates (based on the average net assets of
each Fund taken separately): SCHRODER INTERNATIONAL FUND -- 0.99%; SCHRODER
EMERGING MARKETS FUND -- 1.70%; SCHRODER INTERNATIONAL SMALLER COMPANIES FUND --
1.50%; SCHRODER INTERNATIONAL BOND FUND -- 0.95%; SCHRODER U.S. DIVERSIFIED
GROWTH FUND -- 1.50%; SCHRODER U.S. SMALLER COMPANIES FUND -- 1.49%; and
SCHRODER MICRO CAP FUND -- 2.00%. Additionally, Schroder has agreed to limit the
advisory fees paid by SCHRODER U.S. DIVERSIFIED GROWTH FUND October 31, 1999 to
0.65% of the Fund's average daily net assets.
<PAGE>
o PORTFOLIO MANAGERs. Schroder's investment decisions for each of the
Funds (or for the related Portfolios in which certain of the Funds invest
substantially all of their assets) are generally made by an investment manager
or an investment team, with the assistance of an investment committee. The
following portfolio managers have had primary responsibility for making
investment decisions for the Portfolios or the Funds, as the case may be, since
the years shown below. Their recent professional experience is also shown.
<TABLE>
<S> <C> <C> <C>
--------------------------- ------------------------ ------------------- -------------------------------------------
Fund/Portfolio Portfolio Manager Since Recent Professional Experience
--------------------------- ------------------------ ------------------- -------------------------------------------
--------------------------- ------------------------ ------------------- -------------------------------------------
Schroder International Michael Perelstein 1997 Employed as an investment professional at
Fund/International Schroder since 1997. Mr. Perelstein is
Equity Fund also Vice President of the Trust and of
Schroder Capital Funds and Schroder
Capital Funds II, and a Director and
Senior Vice President of Schroder. Prior
to joining Schroder, Mr. Perelstein was a
Managing Director at MacKay-Shields
Financial Corp. from March 1993 to
November 1996.
--------------------------- ------------------------ ------------------- -------------------------------------------
--------------------------- ------------------------ ------------------- -------------------------------------------
Schroder Emerging Markets John Troiano Inception (1997) Employed as an investment professional at
Fund/Schroder EM Core Schroder since 1986. Mr. Troiano is the
Portfolio Chief Executive and director of Schroder,
and a Vice President of the Trust and of
Schroder Capital Funds.
--------------------------- ------------------------ ------------------- -------------------------------------------
--------------------------- ------------------------ ------------------- -------------------------------------------
Heather Crighton Inception (1997) Employed as an investment professional at
Schroder since 1993. Ms. Crighton is a
director and a First Vice President of
Schroder.
--------------------------- ------------------------ ------------------- -------------------------------------------
--------------------------- ------------------------ ------------------- -------------------------------------------
Mark Bridgeman Inception (1997) Employed as an investment professional at
Schroder since 1990. Mr. Bridgeman is a
First Vice President of Schroder.
--------------------------- ------------------------ ------------------- -------------------------------------------
--------------------------- ------------------------ ------------------- -------------------------------------------
Schroder International Jane P. Lucas 1998 Employed as an investment professional at
Smaller Companies Schroder since 1987. Ms. Lucas is a Vice
Fund/Schroder President of the Trust and a Senior Vice
International President of Schroder.
Smaller Companies
Portfolio
--------------------------- ------------------------ ------------------- -------------------------------------------
<PAGE>
--------------------------- ------------------------ ------------------- -------------------------------------------
Nicholas Melhuish 1998 Employed as an investment professional at
Schroder since 1991. Mr. Melhuish is an
investment manager of SIMIL and of
Schroder.
--------------------------- ------------------------ ------------------- -------------------------------------------
--------------------------- ------------------------ ------------------- -------------------------------------------
Schroder International Michael Perelstein Inception (1997) See above.
Bond Fund/
International Bond
Portfolio
--------------------------- ------------------------ ------------------- -------------------------------------------
--------------------------- ------------------------ ------------------- -------------------------------------------
Mark Astley Inception (1997) Employed as an investment professional at
Schroder since 1986. Mr. Astley is a
Vice President of the Trust and of
Schroder Capital Funds and Schroder
Capital Funds II, and is a First Vice
President of Schroder.
--------------------------- ------------------------ ------------------- -------------------------------------------
--------------------------- ------------------------ ------------------- -------------------------------------------
U.S. Diversified Paul Morris 1997 Employed as an investment professional at
Growth Fund Schroder since 1997. Mr. Morris is
Senior Vice President of Schroder. Prior
to joining Schroder, Mr. Morris was a
Principal and Senior Portfolio Manager
at Weiss Peck & Greer, L.L.C., and a
Managing Director, Equity Division, of
UBS Asset Management
--------------------------- ------------------------ ------------------- -------------------------------------------
--------------------------- ------------------------ ------------------- -------------------------------------------
Schroder U.S. Smaller Ira L. Unschuld 1997 (sole Employed as an investment professional at
Companies Portfolio manager since Schroder since 1990. Mr. Unschuld is a
1998) Vice President of the Trust and a Group
Vice President of Schroder.
--------------------------- ------------------------ ------------------- -------------------------------------------
--------------------------- ------------------------ ------------------- -------------------------------------------
Schroder Micro Cap Ira L. Unschuld Inception (1997) See above.
Fund
--------------------------- ------------------------ ------------------- -------------------------------------------
</TABLE>
HOW THE FUNDS' SHARES ARE PRICED
Each Fund calculates the net asset value of its Investor Shares by
dividing the total value of its assets attributable to its Investor Shares, less
its liabilities attributable to those shares, by the number of Investor Shares
outstanding. Shares are valued as of the close of trading on the New York Stock
Exchange (normally 4:00 p.m., Eastern time) each day the Exchange is open. The
Funds value their portfolio securities for which market quotations are readily
available at market value. Short-term investments that will mature in 60 days or
less are stated at amortized cost, which approximates market value. The Funds
value all other securities and assets at their fair values as determined by
Schroder. All assets and liabilities of a Fund 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's shares is
calculated. Because certain of the securities in which the Funds may invest may
trade on days when the Funds do not price their Investor Shares, the net asset
value of a Fund's Investor Shares may change on days when shareholders will not
be able to purchase or redeem their Investor Shares.
<PAGE>
HOW TO BUY SHARES
You may purchase Investor Shares of each Fund directly from the Trust
by completing an Account Application and sending payment by check or wire as
described below. You may obtain an Account Application from the Trust or from
Forum Shareholder Services, LLC, the Trust's Transfer Agent, P.O. Box 446,
Portland, Maine 04112, or by calling (800) 290-9826.
<PAGE>
Investor Shares of each of the Funds are sold at their net asset value
next determined after the Trust receives your order. In order for you to receive
the Fund's next determined net asset value, the Trust must receive your order
before the close of trading on the New York Stock Exchange.
INVESTMENT MINIMUMS
The minimum investment for initial and additional purchases for each
Fund is set forth in the following table:
<TABLE>
<S> <C> <C>
-------------------------------------- ----------------- --------------------
Initial Additional
Investment Investments
-------------------------------------- ----------------- --------------------
-------------------------------------- ----------------- --------------------
Regular Accounts $10,000 $2,500
-------------------------------------- ----------------- --------------------
-------------------------------------- ----------------- --------------------
Traditional IRAs $2,000 $250
-------------------------------------- ----------------- --------------------
</TABLE>
The Trust is authorized to reject any purchase order.
PURCHASES BY CHECK
You may purchase shares of a Fund by mailing a check (in U.S. dollars)
payable to (i) Schroder Capital Funds (Delaware), if you are purchasing shares
of two or more Funds, accompanied by written instructions as to how the check
amount should be allocated amongst the Funds whose shares you are purchasing or
(ii) the name of the Fund to be purchased (i.e., Schroder International Bond
Fund) if you are purchasing shares of a single Fund. Third-party checks will not
be accepted.
For initial purchases, your check must be accompanied by a completed
Account Application in proper form. The Trust may request additional
documentation to evidence the authority of the person or entity making the
purchase request.
<PAGE>
You should mail your check and your completed Account Application to:
[Name of Fund] -- Investor Shares
P.O. Box 446
Portland, Maine 04112
Your payments should clearly indicate the shareholder's name and account number,
if applicable.
PURCHASES BY BANK WIRE/TELEPHONE
If you make your initial investment by wire, your order must be
preceded by a completed Account Application. Upon receipt of the Application,
the Trust will assign you an account number and your account will become active.
Wire orders received prior to the close of trading on the New York Stock
Exchange (normally 4:00 p.m., Eastern Time) on each day the Exchange is open for
trading will be processed at the net asset value determined as of that day. Wire
orders received after that time will be processed at the net asset value
determined thereafter.
Once you have an account number, you may purchase Investor Shares by
telephoning the Transfer Agent at (800) 290-9826 to give notice that you will be
sending funds by wire, and then arranging with your bank to wire funds to the
Trust. Your purchase will not be processed until the Trust has received the
wired funds.
Federal Reserve Bank wire instructions are as follows:
The Chase Manhattan Bank
New York, NY
ABA No.: 021000021
For Credit To: Forum Shareholder Services, LLC
Account. No.: 910-2-718187
Ref.: [Name of Fund] - Investor Shares
Account of: (shareholder name)
Account No.: (shareholder account number)
The wire order must specify the name of the Fund, the shares' class (i.e.,
Investor Shares), the account name and number, address, confirmation number,
amount to be wired, name of the wiring bank, and name and telephone number of
the person to be contacted in connection with the order.
In an effort to prevent unauthorized or fraudulent purchase or
redemption requests by telephone, the Transfer Agent will follow reasonable
procedures 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 purchase or redemption requests, but either or both
may be liable if they do not follow these procedures.
<PAGE>
OTHER PURCHASE INFORMATION
Investor Shares of each Fund may be purchased for cash or in exchange
for securities held by the investor, subject to the determination by Schroder
that the securities are acceptable. (For purposes of determining whether
securities will be acceptable, Schroder will consider, among other things,
whether they are liquid securities of a type consistent with the investment
objectives and policies of the Fund in question and have a readily ascertainable
value.) If a Fund receives securities from an investor in exchange for shares of
the Fund, the Fund will under some circumstances have the same tax basis in the
securities as the investor had prior to the exchange (and the Fund's gain for
tax purposes would be calculated with regard to the investor's tax basis). Any
gain on the sale of those securities would be subject to distribution as capital
gain to all of the Fund's shareholders. Schroder reserves the right to reject
any particular investment. Securities accepted by Schroder will be valued in the
same manner as are the Trust's portfolio securities as of the time of the next
determination of the Funds' net asset value. All dividend, subscription, or
other rights which are reflected in the market price of accepted securities at
the time of valuation become the property of the relevant Fund and must be
delivered to the Fund upon receipt by the investor. A gain or loss for federal
income tax purposes may be realized by investors upon the exchange. Investors
interested in purchases through exchange should telephone Schroder at (800)
290-9826.
HOW TO SELL SHARES
You may sell your Investor Shares back to a Fund on any business day by
sending a letter of instruction or stock power form to the Trust, or by calling
the Transfer Agent at (800) 290-9826. The price you will receive is the net
asset value next determined after receipt of your redemption request in good
order. A redemption request is in good order if it includes the exact name in
which the shares are registered, the investor's account number, and the number
of shares or the dollar amount of shares to be redeemed, and, for written
requests, if it is signed exactly in accordance with the registration form. If
you hold your Investor Shares in certificate form, you must submit the
certificates and sign the assignment form on the back of the certificates.
Signatures must be guaranteed by a bank, broker/dealer, or certain other
financial institutions. You may redeem your Investor Shares by telephone only if
you elected the telephone redemption privilege option on your Account
Application or otherwise in writing. Shares for which certificates have been
issued may not be redeemed by telephone. The Trust may require additional
documentation from shareholders that are corporations, partnerships, agents,
fiduciaries, or surviving joint owners.
The Trust will pay you for your redemptions as promptly as possible and
in any event within seven days after the request for redemption is received in
writing in good order. (The Trust generally sends payment for shares the
business day after a request is received.) Under unusual circumstances, the
Trust may suspend redemptions or postpone payment for more than seven days, as
permitted by law. The Trust will only redeem shares for which it has received
payment.
If your account balance falls below a minimum amount set by the
Trustees (presently $2,000) of any Fund, the Trust may choose to redeem your
shares in that Fund and pay you for them. You will receive at least 30 days
written notice before the Trust redeems your shares, and you may purchase
additional shares at any time to avoid a redemption. The Trust may also redeem
shares if you own shares
<PAGE>
of any Fund above a maximum amount set by the Trustees. There is currently no
maximum, but the Trustees may establish one at any time, which could apply to
both present and future shareholders.
The Trust may suspend the right of redemption during any period when:
(1) trading on the New York Stock Exchange is restricted or the Exchange is
closed; (2) the Securities and Exchange Commission has by order permitted such
suspension; or (3) an emergency (as defined by rules of the SEC) exists making
disposal of portfolio investments or determination of the Fund's net asset value
not reasonably practicable.
If you request that your redemption proceeds be sent to you at an
address other than your address of record, or to another party, you must include
a signature guarantee for each such signature by an eligible signature
guarantor, such as a member firm of a national securities exchange or a
commercial bank or trust company located in the United States. If you are a
resident of a foreign country, another type of certification may be required.
Please contact the Transfer Agent for more details at (800) 290-9826.
Corporations, fiduciaries, and other types of shareholders may be required to
supply additional documents which support their authority to effect a
redemption.
EXCHANGES
You can exchange your Investor Shares of any Fund for Investor Shares
of any other fund in the Schroder family of funds at any time at their
respective net asset values. To exchange shares, please call (800) 290-9826.
DIVIDENDS AND DISTRIBUTIONS
Each Fund distributes any net investment income and any net realized
capital gain at least annually. Distributions from net capital gain are made
after applying any available capital loss carryovers.
YOU CAN CHOOSE FROM FOUR DISTRIBUTION OPTIONS:
-- Reinvest all distributions in additional Investor Shares of your
Fund;
-- Receive distributions from net investment income in cash while
reinvesting capital gains distributions in additional Investor
Shares of your Fund;
-- Receive distributions from net investment income in additional
Investor Shares of your Fund while receiving capital gain
distributions in cash; or
-- Receive all distributions in cash.
You can change your distribution option by notifying the Transfer Agent
in writing. If you do not select an option when you open your account, all
distributions by a Fund will be reinvested in Investor Shares of that Fund. You
will receive a statement confirming reinvestment of distributions in additional
Fund shares promptly following the period in which the reinvestment occurs.
<PAGE>
TAXES
o TAXES ON DIVIDENDS AND DISTRIBUTIONS. For federal income tax purposes,
distributions of investment income are taxable as ordinary income. Taxes on
distributions of capital gains are determined by how long your Fund owned the
investments that generated the gains, rather than how long you have owned your
shares. Distributions are taxable to you even if they are paid from income or
gains earned by a Fund before you invested (and thus were included in the price
you paid for your shares). Distributions of gains from investments that a Fund
owned for more than 12 months will be taxable as capital gains. Distributions of
gains from investments that the Fund owned for 12 months or less will be taxable
as ordinary income. Distributions are taxable whether you received them in cash
or reinvested them in additional shares of the Funds.
o TAXES WHEN YOU SELL OR EXCHANGE YOUR SHARES. Any gain resulting from the
sale or exchange of your shares in the Funds will also generally be subject to
federal income or capital gains tax, depending on your holding period.
o TAX TREATMENT OF PORTFOLIOS. None of the Portfolios is required to pay
federal income tax because each is classified as a partnership for federal
income tax purposes. All interest, dividends, gains and losses of a Portfolio
will be deemed to have been "passed through" to a Fund in proportion to the
Fund's holdings in the Portfolio, regardless of whether such interest,
dividends, gains or losses have been distributed by the Portfolio. Each
portfolio intends to conduct its operations so that a Fund, if it invests all of
its assets in the Portfolio, may qualify as a regulated investment company.
o CONSULT YOUR TAX ADVISOR ABOUT OTHER POSSIBLE TAX CONSEQUENCES. This is a
summary of certain federal tax consequences of investing in a Fund. You should
consult your tax advisor for more information on your own tax situation,
including possible state and local taxes.
YEAR 2000 DISCLOSURE
Each of the Funds receives services from its investment adviser,
administrator, subadministrator, distributor, transfer agent, custodian and
other providers which rely on the smooth functioning of their respective systems
and the systems of others to perform those services. It is generally recognized
that certain systems in use today may not perform their intended functions
adequately after the Year 1999 because of the inability of the software to
distinguish the Year 2000 from the Year 1900. Schroder is taking steps that it
believes are reasonably designed to address this potential "Year 2000" problem
and to obtain satisfactory assurances that comparable steps are being taken by
each of the Funds' other major service providers. There can be no assurance,
however, that these steps will be sufficient to avoid any adverse impact on the
Funds from this problem.
FINANCIAL HIGHLIGHTS
The financial highlights presented below for Schroder International Fund,
Schroder International Smaller Companies Fund and Schroder U.S. Diversified
Growth Fund for the fiscal year ended October 31, 1998 and for International
Bond Fund for the fiscal year ended December 31, 1998 have been audited by
PricewaterhouseCoopers LLP, independent accountants to the Funds. The financial
statements for those Funds and the related independent accountants' reports are
contained in each Fund's Annual Report and are incorporated by reference into
the Statement of Additional Information ("SAI"). The financial highlights for
the period ended November 30, 1998 for each of Schroder Micro Cap Fund, Schroder
U.S. Smaller Companies Fund and Schroder Emerging Markets Fund are unaudited.
The financial statements for those Funds are contained in each of those Fund's
Semi-Annual Reports and are incorporated by reference into the SAI. Copies of
the Funds' Annual and Semi-Annual Reports may be obtained without charge by
writing the Funds at Two Portland Square, Portland, Maine 04101 or by calling
1-800-290-9826.
<PAGE>
<TABLE>
SCHRODER INTERNATIONAL FUND
<S> <C> <C> <C> <C> <C>
Year Ended
October 31,
----------------------------------------------------------------------
1998 1997 1996(a) 1995 1994
---- ---- ------- ---- ----
NET ASSET VALUE, BEGINNING OF PERIOD $xx.xx $xx.xx $xx.xx $xx.xx $xx.xx
INVESTMENT OPERATIONS:
Net Investment Income (Loss)(b) x.xx x.xx x.xx x.xx x.xx
Net Realized and Unrealized Gain
(Loss) on Investments x.xx x.xx x.xx x.xx x.xx
Total from Investment Operations x.xx x.xx x.xx x.xx x.xx
DISTRIBUTIONS FROM
Net Investment Income (x.xx) (x.xx) (x.xx) (x.xx) (x.xx)
------ ------ ------ ------ ------
Net Realized Gain on Investments (x.xx) (x.xx) (x.xx) (x.xx) (x.xx)
------ ------ ------ ------ ------
Total Distributions (x.xx) (x.xx) (x.xx) (x.xx) (x.xx)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $xx.xx $xx.xx $xx.xx $xx.xx $xx.xx
Total Return(c) x.xx% x.xx% x.xx% x.xx% x.xx%
Ratios/Supplementary Data
NET ASSETS, END OF PERIOD (IN $xxx,xxx $xxx,xxx $xxx,xxx $xxx,xxx $xxx,xxx
THOUSANDS)
Ratios to Average Net Assets:
Expenses After Expense Limitation(b)
x.xx% x.xx% x.xx% x.xx% x.xx%
Expenses Before Expense Limitation
(b) x.xx% x.xx% x.xx% x.xx% x.xx%
Net Investment Income (Loss) After
Expense Limitation(b) x.xx% x.xx% x.xx% x.xx% x.xx%
AAverage Commission Rate Per Share (d) $x.xxxx $x.xxxx $x.xxxx $x.xxxx $x.xxxx
Portfolio Turnover Rate (e) xx.xx% xx.xx% xx.xx% xx.xx% xx.xx%
</TABLE>
- ----------------------------------------
(a) On November 1, 1995, the Fund converted to Core and Gateway(R). 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 designated
as Investor Shares.
(b) For the years ending after October 31, 1995, includes the Fund's
proportionate share of income and expenses of Schroder International Equity
Fund.
(c) Total returns would have been lower had certain expenses not been reduced
during the periods shown.
(d) For the fiscal years beginning on or after September 1, 1995, the Fund is
required to disclose average commission per share paid to brokers on the
purchase and sale of equity securities on which commissions are charged.
For periods ending after October 31, 1995, the rate represents the average
commission per share paid by Schroder International Equity Fund.
(e) Portfolio turnover represents the rate of portfolio activity. For periods
ending after October 31, 1995, the rate represents the portfolio turnover
rate of Schroder International Equity Fund.
<PAGE>
<TABLE>
<S> <C> <C>
SCHRODER EMERGING MARKETS FUND
Period Ended Period Ended
November 30, May 31,
1998 1998(a)
(unaudited)
-------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $xx.xx $xx.xx
INVESTMENT OPERATIONS:
Net Investment Income (Loss) x.xx x.xx
Net Realized and Unrealized Gain (Loss) on Investments (x.xx) (x.xx)
Total from Investment Operations (x.xx) (x.xx)
NET ASSET VALUE, END OF PERIOD $x.xx $x.xx
Total Return(a) (x.xx)% (x.xx)%
Ratios/Supplementary Data
NET ASSETS, END OF PERIOD (IN THOUSANDS) $xx.xx $xx.xx
Ratios to Average Net Assets:
Expenses After Expense Limitation(c)(d) x.xx% x.xx%
Expenses Before Expense Limitation(c)(d) -- --
Net Investment Income (Loss) After Expense Limitation(c)(d) x.xx% x.xx%
Average Commission Rate Per Share (f) x.xxxx x.xxxx
Portfolio Turnover Rate(g) xx.xx% xx.xx%
</TABLE>
- ------------------------------------------------------------------------
(a) The Fund commenced operations on October 31, 1997.
(b) Total returns would have been lower had certain expenses not been reduced
during the period shown.
(c) Includes the Fund's proportionate share of income and expenses of Schroder
EM Core Portfolio.
(d) Annualized.
(e) Amount is not meaningful due to short period of operations.
(f) Amount represents the average commission per share paid by Schroder EM Core
Portfolio to brokers on th purchase and sale of equity securities on which
commissions are charged.
(g) Portfolio turnover represents the rate of portfolio activity of Schroder EM
Core Portfolio.
<PAGE>
<TABLE>
<S> <C> <C>
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND
Year Ended Period Ended
October 31, October 31,
1998 1997 (a)
-------------------- --------------------
NET ASSET VALUE, BEGINNING OF PERIOD $x.xx $x.xx
INVESTMENT OPERATIONS:
Net Investment Income (Loss)(b) -- --
Net Realized and Unrealized Gain (Loss) on Investments x.xx x.xx
Total from Investment Operations x.xx x.xx
DISTRIBUTIONS FROM
Net Investment Income (x.xx) (x.xx)
Net Realized Gain on Investments (x.xx) (x.xx)
NET ASSET VALUE, END OF PERIOD $xx.xx $xx.xx
Total Return(c) xx.xx% xx.xx%
Ratios/Supplementary Data
NET ASSETS, END OF PERIOD (IN THOUSANDS) $x,xxx $x,xxx Ratios to Average Net
Assets:
Expenses After Expense Limitation(b) x.xx% x.xx%
Expenses Before Expense Limitation(b) x.xx% x.xx%
Net Investment Income (Loss) After Expense Limitation (b) (x.xx)% (x.xx)%
Average Commission Rate Per Share(e) $x.xxxx $x.xxxx
Portfolio Turnover Rate(f) xx.xx% xx.xx%
</TABLE>
- ------------------------------------------------------------------------
(a) The Fund commenced operations on November 4, 1996.
(b) Includes the Fund's proportionate share of income and expenses of Schroder
International Smaller Companies Portfolio.
(c) Total returns would have been lower had certain expenses not been reduced
during the period shown.
(d) Annualized.
(e) Amount represents the average commission per share paid to brokers on the
purchase and sale of the equity securities of Schroder International
Smaller Companies Portfolio on which commissions are charged.
(f) Portfolio turnover represents the rate of portfolio activity of Schroder
International Smaller Companies Portfolio.
<PAGE>
<TABLE>
SCHRODER U.S. DIVERSIFIED GROWTH FUND (A)
<S> <C> <C> <C> <C> <C>
Year Ended October 31,
1998 1997 1996 1995 1994
-----------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR $x.xx $x.xx $x.xx $x.xx $x.xx
----- ----- ----- ----- -----
INVESTMENT OPERATIONS:
Net Investment Income (Loss) (x.xx) (x.xx) (x.xx) (x.xx) (x.xx)
Net Realized Income and Unrealized
Gain (Loss) on Investments x.xx x.xx x.xx x.xx x.xx
---- ---- ---- ---- ----
Total From Investment Operations x.xx x.xx x.xx x.xx x.xx
DISTRIBUTIONS FROM
Net Investment Income -- -- -- -- --
Net Realized Gain on Investments (x.xx) (x.xx) (x.xx) (x.xx) (x.xx)
Paid-In Capital -- -- -- -- --
Total Distributions (x.xx) (x.xx) (x.xx) (x.xx) (x.xx)
NET ASSET VALUE, END OF YEAR $x.xx $x.xx $x.xx $x.xx $x.xx
Total Return(b) xx.xx% xx.xx% xx.xx% xx.xx% xx.xx%
Ratios/Supplementary Data
NET ASSETS, END OF YEAR (IN THOUSANDS) $xx,xxx $xx,xxx $xx,xxx $xx,xxx $xx,xxx
Ratios to Average Net Assets:
Expenses After Expense Limitations x.xx% x.xx% x.xx% x.xx% x.xx%
Expenses Before Expense Limitations x.xx% x.xx% x.xx% x.xx% x.xx%
Net Investment Income (Loss) After
Expense Limitation (x.xx)% (x.xx)% (x.xx)% (x.xx)% (x.xx)%
Average Commission Rate Per Share(c) $x.xxxx $x.xxxx $x.xxxx $x.xxxx $x.xxxx
Portfolio Turnover Rate xx.xx% xx.xx% xx.xx% xx.xx% xx.xx%
</TABLE>
- --------------------------------------------------------------------------------
(a) Prior to September 14, 1998, the name of the Fund was Schroder U.S. Equity
Fund.
(b) Total return would have been lower had certain expenses not been reduced
during the periods shown.
(c) For the fiscal years beginning on or after September 1, 1995, the Fund is
required to disclose the average commission per share paid to brokers on
the purchase and sale of portfolio securities.
SCHRODER U.S. SMALLER COMPANIES FUND
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Period Ended Year Ended Period Ended
November 30, May 31, May 31, Year Ended October 31,
1998 1998 1997 1996(a)(b) 1995 1994
----------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $xx.xx $xx.xx $xx.xx $xx.xx $xx.xx $xx.xx
Investment Operations
Net Investment Income (Loss) (x.xx) (x.xx) (x.xx) (x.xx) (x.xx) (x.xx)
Net Realized and Unrealized Gain
(Loss) x.xx x.xx x.xx x.xx x.xx x.xx
---- ---- ---- ---- ---- ----
on Investments
Total from Investment Operations x.xx x.xx x.xx x.xx x.xx x.xx
---- ---- ---- ---- ---- ----
Distributions from Net Realized
Gain on Investments (x.xx) (x.xx) (x.xx) (x.xx) (x.xx) (x.xx)
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period $xx.xx $xx.xx $xx.xx $xx.xx $xx.xx $xx.xx
====== ====== ====== ====== ====== ======
Total Return xx.xx% xx.xx% xx.xx% xx.xx% xx.xx% xx.xx%
Ratios/Supplementary Data
Net Assets, End of Period (in $xx,xxx $xx,xxx $xx,xxx $xx,xxx $xx,xxx $xx,xxx
thousands)
Ratios to Average Net Assets:
Expenses After Expense Limitations x.xx% x.xx% x.xx% x.xx% x.xx% x.xx%
Expenses Before Limitations x.xx% x.xx% x.xx% x.xx% x.xx% x.xx%
Net Investment Income (Loss) After
Expense Limitation (x.xx%) (x.xx%) (x.xx%) (x.xx%) (x.xx%) (x.xx%)
Average Commission Rate Per Share(f) $x.xxxx $x.xxxx $x.xxxx $x.xxxx $x.xxxx $x.xxxx
Portfolio Turnover Rate(g) xx.xx% xx.xx% xx.xx% xx.xx% xx.xx% xx.xx%
</TABLE>
---------------------------------------
<PAGE>
(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
designated as Investor Shares.
(b) The Fund commenced operations on August 6, 1993 and converted to Core and
Gateway on August 15, 1996.
(c) Includes the Fund's proportionate share of income and expenses of Schroder
U.S. Smaller Companies Portfolio.
(d) For the periods ended November 30, 1997 and May 31, 1997 the total returns
would have been lower had certain expenses not been reduced.
(e) Annualized.
(f) For the fiscal year beginning on or after September 1, 1995, the Fund is
required to disclose average commission per share paid by the Portfolio to
brokers on the purchase and sale of equity securities on which commissions
are charged. For the periods after October 31, 1996, the rate represents
the average commission per share paid by Schroder U.S. Smaller Companies
Portfolio.
(g) Portfolio turnover represents the rate of portfolio activity. For the
periods ending after October 31, 1996, the rate represents the portfolio
turnover rate of Schroder U.S. Smaller Companies Portfolio.
<PAGE>
<TABLE>
<S> <C> <C>
SCHRODER MICRO CAP FUND
Period Ended Year Ended
November 30, May 31,
1998 1998 (a)
(unaudited)
------------------------- -------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $xx.xx $xx.xx
INVESTMENT OPERATIONS:
Net Investment Income (Loss) (x.xx) (x.xx)
Net Realized and Unrealized Gain (Loss) on Investments x.xx x.xx
Total from Investment Operations x.xx x.xx
DISTRIBUTIONS FROM:
Net Realized Gain on Investments (x.xx) (x.xx)
NET ASSET VALUE, END OF PERIOD $xx.xx $xx.xx
Total Return(b) xx.xx% xx.xx%
Ratios/Supplementary Data
NET ASSETS, END OF PERIOD (IN THOUSANDS) $x,xxx $x,xxx
Ratios to Average Net Assets:
Expenses After Expense Limitation(c) x.xx% x.xx%
Expenses Before Expense Limitation(c) x.xx% x.xx%
Net Investment Income (Loss) After Expense Limitation(c) (x.xx)% (x.xx)%
Average Commission Rate Per Share(d) $x.xxxx $x.xxxx
Portfolio Turnover Rate xx.xx% xx.xx%
</TABLE>
- ------------------------------------------------------------------------
(a) The Fund commenced operations on October 15, 1997.
(b) Total returns would have been lower had certain expenses not been reduced
during the period shown.
(c) Annualized.
(d) Amount represents the average commission per share paid to brokers on the
purchase and sale of equity securities on which commissions are charged.
<PAGE>
<TABLE>
<S> <C>
SCHRODER INTERNATIONAL BOND FUND
Period Ended
June 30,
1998
(unaudited)(a)
-------------------------
NET ASSET VALUE, BEGINNING OF PERIOD
$xx.xx
INVESTMENT OPERATIONS:
Net Investment Income (Loss) (x.xx)
Net Realized and Unrealized Gain (Loss) on Investments x.xx
Total from Investment Operations x.xx
NET ASSET VALUE, END OF PERIOD $x.xx
Total Return(b) xx.xx%
Ratios/Supplementary Data
NET ASSETS, END OF PERIOD (IN THOUSANDS) $x,xxx
Ratios to Average Net Assets:
Expenses After Expense Limitation(c)(d) x.xx%
Expenses Before Expense Limitation(c)(d) x.xx%
Net Investment Income (Loss) After Expense Limitation(c)(d) (x.xx)%
Portfolio Turnover Rate(e) xx.xx%
</TABLE>
- ------------------------------------------------------------------------
(a) The Fund commenced operations on January 15, 1998.
(b) Total returns would have been lower had certain expenses not been reduced
during the period shown.
(c) Includes the Fund's proportionate share of income and expenses of Schroder
International Bond Portfolio.
(d) Annualized.
(e) Portfolio turnover represents the rate of portfolio activity of Schroder
International Bond Portfolio.
<PAGE>
================================================================================
FUNDS AVAILABLE THROUGH SCHRODER FUND ADVISORS INC.
PLEASE CALL FOR COMPLETE INFORMATION AND TO OBTAIN THE RELEVANT PROSPECTUS.
PLEASE READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST.
<TABLE>
<S><C> <C>
SCHRODER CAPITAL FUNDS (DELAWARE) (800-290-9826) SCHRODER SERIES TRUST (800-464-3108)
SCHRODER INTERNATIONAL FUND SCHRODER LARGE CAPITALIZATION EQUITY FUND
SCHRODER EMERGING MARKETS FUND SCHRODER SMALL CAPITALIZATION VALUE FUND
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND SCHRODER MIDCAP VALUE FUND
SCHRODER INTERNATIONAL BOND FUND SCHRODER SHORT-TERM INVESTMENT FUND
SCHRODER U.S. DIVERSIFIED GROWTH FUND SCHRODER INVESTMENT GRADE INCOME FUND
SCHRODER U.S. SMALLER COMPANIES FUND
SCHRODER MICRO CAP FUND
</TABLE>
SCHRODER SERIES TRUST II (800-464-3108)
SCHRODER ALL-ASIA FUND
================================================================================
<PAGE>
[Back Cover] [Logo]
SCHRODER CAPITAL FUNDS (DELAWARE)
SCHRODER INTERNATIONAL FUND
SCHRODER EMERGING MARKETS FUND
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND
SCHRODER INTERNATIONAL BOND FUND
SCHRODER U.S. DIVERSIFIED GROWTH FUND
SCHRODER U.S. SMALLER COMPANIES FUND
SCHRODER MICRO CAP FUND
Schroder Capital Funds (Delaware)'s statement of additional information (SAI)
and annual and semi-annual reports to shareholders include additional
information about the Funds. The SAI and the financial statements included in
the Trust's most recent annual report to shareholders are incorporated by
reference into this Prospectus, which means they are part of this Prospectus for
legal purposes. The Trust's annual report discusses the market conditions and
investment strategies that significantly affected each Fund's performance during
its last fiscal year. You may get free copies of these materials, request other
information about a Fund, or make shareholder inquiries by calling
1-800-290-9826.
You may review and copy information about the Trust, including its SAI, at the
Securities and Exchange Commission's public reference room in Washington, D.C.
You may call the Commission at 1-800-SEC-0330 for information about the
operation of the public reference room. You may also access reports and other
information about the Trust on the Commission's Internet site at WWW.SEC.GOV.
You may get copies of this information, with payment of a duplication fee, by
writing the Public Reference Section of the Commission, Washington, D.C.
20549-6009. You may need to refer to the Trust's file number under the
Investment Company Act, which is 811-1911.
Schroder Capital Funds (Delaware) INVESTOR SHARES
Two Portland Square
Portland, ME 04101 PROSPECTUS
800-290-9826
March 1, 1999
File No. 811-1911
<PAGE>
SCHRODER CAPITAL FUNDS (DELAWARE)
PROSPECTUS
ADVISOR SHARES
March 1, 1999
This Prospectus describes six mutual funds offered by Schroder Capital Funds
(Delaware). The Trust offers Advisor Shares of the Funds in this Prospectus.
SCHRODER INTERNATIONAL FUND seeks long-term capital appreciation
through investment in securities markets outside the United States.
SCHRODER EMERGING MARKETS FUND seeks long-term capital appreciation.
The Fund invests primarily in equity securities of issuers domiciled or
doing business in emerging market countries in regions such as
Southeast Asia, Latin America, and Eastern and Southern Europe. The
Fund is a non-diversified mutual fund.
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND seeks long-term capital
appreciation through investment in securities markets outside the
United States. The Fund invests primarily in equity securities of
companies with market capitalizations of $1.5 billion or less.
SCHRODER INTERNATIONAL BOND FUND seeks a high rate of total return. The
Fund normally invests in debt securities and debt-related investments
of issuers domiciled outside the United States. The Fund is a
non-diversified mutual fund.
SCHRODER U.S. DIVERSIFIED GROWTH FUND seeks growth of capital by
investing in equity securities of United States companies.
SCHRODER U.S. SMALLER COMPANIES FUND seeks capital appreciation by
investing in equity securities of issuers domiciled in the United
States with market capitalizations of $1.5 billion or less.
Schroder Capital Management International Inc. ("Schroder") manages the Funds.
You can call the Trust at (800) 290-9826 to find out more about these Funds and
other funds in the Schroder family.
The Prospectus explains what you should know about the Funds before you invest.
Please read it carefully.
NEITHER THE U.S. SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
Page
----
SUMMARY INFORMATION........................................................3
Schroder International Fund.......................................3
Schroder Emerging Markets Fund....................................5
Schroder International Smaller Companies Fund.....................8
Schroder International Bond Fund.................................10
Schroder U.S. Diversified Growth Fund............................12
Schroder U.S. Smaller Companies Fund.............................13
FEES AND EXPENSES.........................................................14
RISKS AND OTHER INVESTMENT STRATEGIES.....................................16
MANAGEMENT OF THE FUNDS...................................................20
HOW THE FUNDS' SHARES ARE PRICED..........................................23
HOW TO BUY SHARES.........................................................23
HOW TO SELL SHARES........................................................26
ADDITIONAL INFORMATION ABOUT ADVISOR SHARES...............................27
EXCHANGES.................................................................28
DIVIDENDS AND DISTRIBUTIONS...............................................28
TAXES.....................................................................29
YEAR 2000 DISCLOSURE......................................................29
FINANCIAL HIGHLIGHTS......................................................29
<PAGE>
SUMMARY INFORMATION
The Funds offered by Schroder Capital Funds (Delaware) provide a broad range of
investment choices. This summary identifies each Fund's investment objective,
principal investment strategies, and principal risks. The investment objectives
and policies of each Fund may, unless otherwise specifically stated, be changed
by the Trustees of the Trust without a vote of the shareholders. As a matter of
policy, the Trustees would not materially change an investment objective of a
Fund without shareholder approval.
EACH OF SCHRODER INTERNATIONAL FUND, SCHRODER EMERGING MARKETS FUND, SCHRODER
INTERNATIONAL SMALLER COMPANIES FUND, SCHRODER INTERNATIONAL BOND FUND, AND
SCHRODER U.S. SMALLER COMPANIES FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE
BY INVESTING SUBSTANTIALLY ALL OF ITS INVESTABLE ASSETS IN A SEPARATE PORTFOLIO
OF SCHRODER CAPITAL FUNDS OR SCHRODER CAPITAL FUNDS II THAT HAS THE SAME
INVESTMENT OBJECTIVE AS, AND INVESTMENT POLICIES THAT ARE SUBSTANTIALLY SIMILAR
TO THOSE OF, THAT FUND. IN REVIEWING EACH OF THESE FUND'S INVESTMENT OBJECTIVE
AND POLICIES BELOW, YOU SHOULD ASSUME THAT THE INVESTMENT OBJECTIVE AND POLICIES
OF THE CORRESPONDING PORTFOLIO ARE THE SAME IN ALL MATERIAL RESPECTS AS THOSE OF
THE FUND. SCHRODER IS THE INVESTMENT ADVISER TO EACH OF THESE FUNDS AND TO EACH
PORTFOLIO.
After the narrative describing each Fund is a bar chart showing how the
investment returns of that Fund's Advisor Shares have varied from year to year
and a table showing how the Fund's average annual returns compared to a
broad-based securities market index. Schroder U.S. Smaller Companies Fund is the
only Fund that has had Advisor Shares outstanding for a full calendar year. For
that reason, the bar chart and table for that Fund show performance of its
Advisor Shares, which have not been offered for the full life of the Fund.
Because the other Funds do not have a full calendar year of performance to show
for Advisor Shares, the bar chart and table for each of these Funds show
performance of its Investor Shares, which have been offered since the inception
of each Fund. PAST PERFORMANCE IS NOT NECESSARILY AN INDICATION OF FUTURE
PERFORMANCE. It is possible to lose money on investments in the Funds.
For a discussion of recent market and portfolio developments affecting each
Fund's performance, see the Funds' most recent financial reports. You can call
the Trust at (800) 290-9826 to request a free copy of the financial reports.
SCHRODER INTERNATIONAL FUND
o INVESTMENT OBJECTIVE. Long-term capital appreciation through investment
in securities markets outside the United States.
o RELATED PORTFOLIO. Schroder International Fund invests substantially all
of its assets in International Equity Fund, a diversified portfolio of Schroder
Capital Funds.
o PRINCIPAL INVESTMENTs. The Fund normally invests at least 65% of its
assets in equity securities of companies domiciled outside of the United States,
and will invest in securities of companies domiciled in at least three countries
other than the United States. The Fund invests in a variety of equity
securities, including common and preferred stocks, securities convertible into
common and preferred stocks, and warrants to purchase common and preferred
stocks.
<PAGE>
o INVESTMENT STRATEGIES. The Fund normally invests a substantial portion of
its assets in countries included in the Morgan Stanley Capital International
EAFE Index, which is a market capitalization-weighted index of companies in
developed market countries in Europe, Australia and the Far East.
The Fund also may do the following:
0 Invest in securities of issuers domiciled or doing business
in "emerging market" countries.
0 Invest in securities of closed-end investment companies that
invest primarily in foreign securities.
o PRINCIPAL RISKS.
0 FOREIGN SECURITIES. Investments in foreign securities entail
risks not present in domestic investments including, among
others, risks related to political or economic instability,
currency exchange and taxation.
0 EQUITY SECURITIES. Another risk of investing in the Fund is
the risk that the value of the equity securities in the
portfolio will fall, or will not appreciate as anticipated
by Schroder, due to factors that adversely affect markets
generally or particular companies in the portfolio.
0 GEOGRAPHIC CONCENTRATION. There is no limit on the amount of
the Fund's assets that may be invested in securities of
issuers domiciled in any one country. To the extent that the
Fund invests a substantial amount of its assets in one
country, it will be more susceptible to the political and
economic developments and market fluctuations in that
country than if it invested in a more geographically
diversified portfolio.
0 EMERGING MARKETS. The Fund may invest in "emerging market"
countries whose securities markets may experience heightened
levels of volatility. The risks of investing in emerging
markets include greater political and economic uncertainties
than in foreign developed markets, currency transfer
restrictions, a more limited number of potential buyers, and
an emerging market country's dependence on revenue from
particular commodities or international aid. Additionally,
the securities markets and legal systems in emerging market
countries may only be in a developmental stage and may
provide few, or none, of the advantages or protections of
markets or legal systems available in more developed
countries. Emerging market countries may experience
extremely high levels of inflation, which may adversely
affect those countries' economies and securities markets.
SCHRODER INTERNATIONAL FUND - INVESTOR SHARES*
<PAGE>
[EDGAR REPRESENTATION OF GRAPH CHART]
Calendar Year Annual Return
- ------------- -------------
1998 ___%
1997 33.40%
1996 9.93%
1995 11.57%
1994 -0.27%
1993 45.72%
1992 -4.01%
1991 4.62%
1990 -11.41%
1989 22.13%
1988 19.50%
During the periods shown above, the highest quarterly return was 18.20% for the
quarter ended September 30, 1989, and the lowest was -19.79% for the quarter
ended September 30, 1990. [NOTE: SUBJECT TO CHANGE BASED ON FOURTH QUARTER OF
1998.] For the period January 1, 1998 through October 31, 1998, the Fund's total
return (unannualized) was 5.04%.
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------ -------------- ------------- -------------
AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS PAST ONE YEAR PAST FIVE PAST TEN
ENDING DECEMBER 31, 1998) YEARS YEARS
- ------------------------------------------------ -------------- ------------- -------------
- ------------------------------------------------ -------------- ------------- -------------
Schroder International Fund [___]% [___]% [___]%
- ------------------------------------------------ -------------- ------------- -------------
- ------------------------------------------------ -------------- ------------- -------------
Morgan Stanley Capital International EAFE [___]% [___]% [___]%
Index**
- ------------------------------------------------ -------------- ------------- -------------
</TABLE>
* The bar chart and table show performance of the Fund's Investor Shares, which
are offered in a different prospectus. Although Advisor Shares and Investor
Shares would have similar annual returns (because all the Fund's shares
represent interests in the same portfolio of securities), Advisor Share
performance would be lower than Investor Share performance because of the higher
expenses paid by Advisor Shares.
** The Morgan Stanley Capital International EAFE Index is a market weighted
index composed of companies representative of the market structure of 20
developed market countries in Europe, Australia, Asia and the Far East, and
reflects dividends net of non-recoverable withholding tax.
SCHRODER EMERGING MARKETS FUND
o INVESTMENT OBJECTIVe. To seek long-term capital appreciation.
o RELATED PORTFOLIO. Schroder Emerging Markets Fund invests substantially
all of its assets in Schroder EM Core Portfolio, a non-diversified portfolio of
Schroder Capital Funds.
o PRINCIPAL INVESTMENTS. The Fund normally invests at least 65% of its
assets in equity securities of companies determined by Schroder to be "emerging
market" issuers. The Fund may invest the remaining 35% of its assets in
securities of issuers located anywhere in the world. The Fund invests in a
variety of equity securities, including common and preferred stocks, securities
convertible into common and preferred stocks, and warrants to purchase common
and preferred stocks.
<PAGE>
o INVESTMENT STRATEGIES. The Fund invests primarily in equity securities of
issuers domiciled or doing business in"emerging market" countries in regions
such as Southeast Asia, Latin America, and Eastern and Southern Europe.
"Emerging market" countries are countries not included at the time of investment
in the Morgan Stanley International World Index of major world economies.
Economies currently in the Index include: Australia, Austria, Belgium, Canada,
Denmark, Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, New
Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United
Kingdom, and the United States. Schroder may at times determine based on its own
analysis that an economy included in the Index should nonetheless be considered
an emerging market country, in which case that country would constitute an
emerging market country for purposes of the Fund's investments. The Fund
normally will invest in at least three countries other than the United States.
The Fund also may do the following:
0 Invest in securities of closed-end investment companies
that invest primarily in foreign securities.
0 Invest up to 35% of its assets in debt securities,
including junk bonds, which entail certain risks.
0 Invest up to 5% of its assets in sovereign debt
securities that are in default.
o PRINCIPAL RISKs.
0 EMERGING MARKETS. The Fund may invest in "emerging market"
countries whose securities markets may experience heightened
levels of volatility. The risks of investing in emerging
markets include greater political and economic uncertainties
than in foreign developed markets, currency transfer
restrictions, a more limited number of potential buyers, and
an emerging market country's dependence on revenue from
particular commodities or international aid. Additionally,
the securities markets and legal systems in emerging market
countries may only be in a developmental stage and may
provide few, or none, of the advantages or protections of
markets or legal systems available in more developed
countries. Emerging market countries may experience
extremely high levels of inflation which may adversely
affect those countries' economies and securities markets.
0 FOREIGN SECURITIES. Investments in foreign securities entail
risks not present in domestic investments including, among
others, risks related to political or economic instability,
currency exchange and taxation.
0 GEOGRAPHIC CONCENTRATION. There is no limit on the amount of
the Fund's assets that may be invested in securities of
issuers domiciled in any one country. To the extent that the
Fund invests a substantial amount of its assets in one
country, it will be more susceptible to the political and
economic developments and market fluctuations in that
country than if it invested in a more geographically
diversified portfolio.
0 NON-DIVERSIFIED FUND. The Fund is a "non-diversified" mutual
fund, and may invest its assets in a more limited number of
issuers than may diversified investment companies. To the
extent the Fund focuses on fewer issuers, its risk of loss
increases if the market value of a security declines or if
an issuer is not able to meet its obligations.
<PAGE>
0 JUNK BONDS. Junk bonds reflect a greater possibility
that adverse changes in the financial condition of the
issuer or in general economic conditions, or an
unanticipated rise in interest rates, may impair the
ability of the issuer to make payments of interest and
principal. If this were to occur, the values of
securities held by the Fund may become more volatile.
0 EQUITY SECURITIES. Another risk of investing in the
Fund is the risk that the value of the equity
securities in the portfolio will fall, or will not
appreciate as anticipated by Schroder, due to factors
that adversely affect markets generally or particular
companies in the portfolio.
SCHRODER EMERGING MARKETS FUND - INVESTOR SHARES*
[EDGAR REPRESENTATION OF GRAPH CHART]
Calendar Year Annual Return
- ------------- -------------
1998 ____%
During the periods shown above, the highest quarterly return was 16.90% for the
quarter ended March 31, 1998, and the lowest was -61.27% for the quarter ended
June 30, 1998. [NOTE: SUBJECT TO CHANGE BASED ON FOURTH QUARTER OF 1998.] For
the period January 1, 1998 through November 30, 1998, the Fund's total return
(unannualized) was [___]%.
- ------------------------------------------------ -----------------------
AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS LIFE OF FUND
ENDING DECEMBER 31, 1998) (SINCE 10/30/97)
- ------------------------------------------------ -----------------------
- ------------------------------------------------ -----------------------
Schroder Emerging Markets Fund - Investor [___]%
Shares*
- ------------------------------------------------ -----------------------
- ------------------------------------------------ -----------------------
**Morgan Stanley Capital International [___]%
Emerging Markets Free Index
- ------------------------------------------------ -----------------------
* The bar chart and table show performance of the Fund's Investor Shares, which
are offered in a different prospectus. Although Advisor Shares and Investor
Shares would have similar annual returns (because all the Fund's shares
represent interests in the same portfolio of securities), Advisor Share
performance would be lower than Investor Share performance because of the higher
expenses paid by Advisor Shares.
** The Morgan Stanley Capital International Emerging Markets Free Index is an
unmanaged market capitalization index of companies representative of the market
structure of 26 emerging countries in Europe, Latin
<PAGE>
America and the Pacific Basin. The Index reflects actual buyable opportunities
for the non-domestic investor by taking into account local market restrictions
on share ownership by foreigners.
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND
o INVESTMENT OBJECTIVe. Long-term capital appreciation through investment
in securities markets outside the United States.
o RELATED PORTFOLIO. Schroder International Smaller Companies Fund invests
substantially all of its assets in Schroder International Smaller Companies
Portfolio, a diversified portfolio of Schroder Capital Funds.
o PRINCIPAL INVESTMENTS. The Fund normally invests at least 65% of its
assets in equity securities of smaller companies (with market capitalizations of
$1.5 billion or less at the time of investment) domiciled outside the United
States. The Fund invests in a variety of equity securities, including common and
preferred stocks, securities convertible into common and preferred stocks, and
warrants to purchase common and preferred stocks.
o INVESTMENT STRATEGIEs. In selecting investments for the Fund, Schroder
considers a number of factors, including the company's potential for long-term
growth, financial condition, sensitivity to cyclical factors, the relative value
of the company's securities (compared to that of other companies and to the
market as a whole), and the extent to which the company's management owns equity
in the company. The Fund will invest in securities of issuers domiciled in at
least three countries other than the United States, and may, although it does
not currently, invest in the securities of issuers domiciled or doing business
in emerging market countries.
The Fund also may do the following:
0 Invest in closed-end funds that invest primarily in
foreign securities.
0 Invest in securities of issuers domiciled or doing
business in emerging market countries.
o PRINCIPAL RISKs.
0 FOREIGN SECURITIES. Investments in foreign securities
entail risks not present in domestic investments
including, among others, risks related to political or
economic instability, currency exchange and taxation.
0 SMALL COMPANIES. The Fund invests primarily in small
companies, which tend to be more vulnerable to adverse
developments than larger companies. Small companies may
have limited product lines, markets, or financial
resources, or may depend on a limited management group.
Their securities may trade infrequently and in limited
volumes. As a result, the prices of these securities
may fluctuate more than the prices of securities of
larger, more widely traded companies. Also, there may
be less publicly available information about small
<PAGE>
companies or less market interest in their securities
as compared to larger companies, and it may take longer
for the prices of the securities to reflect the full
value of their issuers' earnings potential or assets.
0 EQUITY SECURITIES. Another risk of investing in the
Fund is the risk that the value of the equity
securities in the portfolio will fall, or will not
appreciate as anticipated by Schroder, due to factors
that adversely affect markets generally or particular
companies in the portfolio.
0 GEOGRAPHIC CONCENTRATION. There is no limit on the
amount of the Fund's assets that may be invested in
securities of issuers domiciled in any one country. To
the extent that the Fund invests a substantial amount
of its assets in one country, it will be more
susceptible to the political and economic developments
and market fluctuations in that country than if it
invested in a more geographically diversified
portfolio.
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND - INVESTOR SHARES*
[EDGAR REPRESENTATION OF GRAPH CHART]
Calendar Year Annual Return
- ------------- -------------
1998 ____%
1997 -14.13%
During the periods shown above, the highest quarterly return was 20.25% for the
quarter ended March 31, 1998, and the lowest was -15.41% for the quarter ended
September 30, 1998. [NOTE: SUBJECT TO CHANGE BASED ON FOURTH QUARTER OF 1998.]
For the period January 1, 1998 through October 31, 1998, the Fund's total return
(unannualized) was [__]%.
<TABLE>
<S> <C> <C>
- ------------------------------------------------ ------------------- ------------------------
AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS PAST ONE YEAR LIFE OF FUND
ENDING DECEMBER 31, 1998) (SINCE 11/4/96)
- ------------------------------------------------ ------------------- ------------------------
- ------------------------------------------------ ------------------- ------------------------
Schroder International Smaller Companies Fund* [___]% [___]%
- ------------------------------------------------ ------------------- ------------------------
- ------------------------------------------------ ------------------- ------------------------
Salomon Smith Barney Extended Market Index [___]% [___]%
(EPAC Region)**
- ------------------------------------------------ ------------------- ------------------------
</TABLE>
* The bar chart and table show performance of the Fund's Investor Shares, which
are offered in a different prospectus. Although Advisor Shares and Investor
Shares would have similar annual returns (because all the
<PAGE>
Fund's shares represent interests in the same portfolio of securities), Advisor
Share performance would be lower than Investor Share performance because of the
higher expenses paid by Advisor Shares.
** The Salomon Smith Barney Extended Market Index (EPAC Region) (EMI EPAC) is an
unmanaged benchmark, representing the portion of the Salomon Smith Barney Broad
Market Index related to companies with small index capitalization in
approximately 22 European and Pacific Basin countries. The Salomon Smith Barney
Extended Market Index (EPAC Region) represents the smallest companies in each
country based on total market capital having in the aggregate 20% of the
cumulative available market capital in such country.
SCHRODER INTERNATIONAL BOND FUND
o INVESTMENT OBJECTIVE. To seek a high rate of total return.
o RELATED PORTFOLIO. Schroder International Bond Fund invests substantially
all of its assets in Schroder International Bond Portfolio, a non-diversified
portfolio of Schroder Capital Funds II.
o PRINCIPAL INVESTMENTS. The Fund normally invests substantially all of its
assets in debt securities and debt-related investments of companies domiciled
outside the United States. The Fund also may invest in debt securities of
foreign governments (including provinces and municipalities) and their agencies
and instrumentalities, debt securities of supranational organizations, and debt
securities of private issuers. The Fund normally invests in securities of
issuers in at least five countries other than the United States, although there
is no limit on the amount of the Fund's assets that may be invested in
securities of issuers domiciled in any one country.
o INVESTMENT STRATEGIES. In seeking a high rate of total return, the Fund
invests in debt securities and debt-related investments. "Total return" consists
of current income, including interest payments and discount accruals, plus any
increases in the values of the Fund's investments, less any decreases in the
values of any of the Fund's investments. The bonds in which the Fund invests may
pay interest at fixed, variable, or floating rates. The rate of return on some
of the debt obligations in which the Fund invests may be linked to indices or
stock prices or indexed to the level of exchange rates between the U.S. dollar
and a foreign currency or currencies. The Fund currently has invested
approximately one-third of its assets in securities of issuers domiciled in
Germany. As a result, the Fund's investment performance will be affected by
economic, political, or other factors affecting issuers and investments in that
country more than if it had invested a smaller portion of its assets in issuers
domiciled in Germany. The Fund may borrow money to make investments.
Additionally, Schroder may engage in active currency management through the
foreign currency exchange strategies described later in this Prospectus to try
to increase total return or to reduce risk.
The Fund also may do the following:
0 Invest in securities of issuers domiciled or doing
business in emerging market countries.
0 Invest in securities convertible into common or
preferred stock, or traded together with warrants for
the purchase of common stock.
0 Invest up to 10% of its assets in junk bonds, which
entail certain risks.
<PAGE>
0 Sell securities short and then borrow those same
securities from a broker or other institution to
complete the sale (a "short sale").
0 Enter into interest rate swaps for hedging purposes or
to realize a greater current return.
0 Engage in a variety of transactions involving the use
of options and futures contracts.
0 Invest in closed-end funds that invest primarily in
emerging markets securities.
0 Invest in derivative instruments, which are financial
instruments whose value depends upon, or is derived
from, the value of an underlying asset, such as a
security, index or currency.
o PRINCIPAL RISKs.
0 DEBT SECURITIES. The Fund invests in debt securities,
which are subject to market risk (the fluctuation of
market value in response to changes in interest rates)
and to credit risks (the risk that the issuer may
become unable or unwilling to make timely payments of
principal and interest).
0 JUNK BONDS. Junk bonds reflect a greater possibility
that adverse changes in the financial condition of the
issuer or in general economic conditions, or an
unanticipated rise in interest rates, may impair the
ability of the issuer to make payments of interest and
principal. If this were to occur, the values of
securities held by the Fund may become more volatile.
0 LEVERAGE. The Fund may borrow money by engaging in
reverse repurchase agreements to invest in additional
securities. "Reverse" repurchase agreements generally
involve the sale by the Fund of securities held by it
and an agreement to repurchase the securities at an
agreed-upon price, date, and interest payment. The use
of borrowed money increases the Fund's market exposure
and risk and may result in losses. The interest that
the Fund must pay on borrowed money will reduce its net
investment income, and may also either offset any
potential capital gains or increase any losses.
0 GEOGRAPHIC CONCENTRATION. There is no limit on the
amount of the Fund's assets that may be invested in
securities of issuers domiciled in any one country. To
the extent that the Fund invests a substantial amount
of its assets in one country, it will be more
susceptible to the political and economic developments
and market fluctuations in that country than if it
invested in a more geographically diversified
portfolio.
0 NON-DIVERSIFIED FUND. The Fund is a "non-diversified"
mutual fund, and may invest its assets in a more
limited number of issuers than may diversified
<PAGE>
investment companies. To the extent the Fund focuses on
fewer issuers, its risk of loss increases if the market
value of a security declines or if an issuer is not
able to meet its obligations.
SCHRODER U.S. DIVERSIFIED GROWTH FUND (FORMERLY, SCHRODER U.S. EQUITY FUND)
o INVESTMENT OBJECTIVE. To seek growth of capital.
o PRINCIPAL INVESTMENTS. The Fund normally invests substantially all of
its assets in equity securities of companies in the United States. The Fund
invests in a variety of equity securities including common and preferred stocks
and warrants to purchase common and preferred stocks. The Fund normally invests
in securities of companies with market capitalizations of more than $1.5
billion.
o INVESTMENT STRATEGIES. The Fund may invest in companies, large or
small, that Schroder believes offer the potential for capital growth. For
example, the Fund may invest in companies whose earnings are believed to be in a
relatively strong growth trend, companies with a proprietary advantage, or
companies that are in industry segments that are experiencing rapid growth. The
Fund also may invest in companies in which significant further growth is not
anticipated but whose market value per share is thought to be undervalued. The
Fund may invest in relatively less well-known companies that meet any of these
characteristics or other characteristics identified by Schroder.
o PRINCIPAL RISKS.
0 EQUITY SECURITIES. The principal risks of investing
in the Fund include the risk that the value of the
equity securities in the portfolio will fall, or will
not appreciate as anticipated by Schroder, due to
factors that adversely markets generally or
particular companies in the portfolio.
SCHRODER U.S. DIVERSIFIED GROWTH FUND - INVESTOR SHARES*
[EDGAR REPRESENTATION OF GRAPH CHART]
Calendar Year Annual Return
- ------------- -------------
1998 ___%
1997 23.33%
1996 21.48%
1995 28.03%
1994 -5.21%
1993 12.50%
1992 15.23%
1991 38.28%
1990 -4.00%
1989 24.42%
1988 12.02%
<PAGE>
During the periods shown above, the highest quarterly return was 20.14% for the
quarter ended March 31, 1987, and the lowest was -24.92% for the quarter ended
December 31, 1987. [NOTE: SUBJECT TO CHANGE BASED ON FOURTH QUARTER OF 1998.]
For the period January 1, 1998 through October 31, 1998, the Fund's total return
(unannualized) was 3.59%.
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------ --------------- ------------- ------------
AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS PAST ONE YEAR PAST FIVE PAST TEN
ENDING DECEMBER 31, 1998) YEARS YEARS
- ------------------------------------------------ --------------- ------------- ------------
- ------------------------------------------------ --------------- ------------- ------------
Schroder U.S. Diversified Growth Fund* [___]% [___]% [____]%
- ------------------------------------------------ --------------- ------------- ------------
- ------------------------------------------------ --------------- ------------- ------------
S&P 500 Index** [___]% [___]% [____]%
- ------------------------------------------------ --------------- ------------- ------------
</TABLE>
* The bar chart and table show performance of the Fund's Investor Shares, which
are offered in a different prospectus. Although Advisor Shares and Investor
Shares would have similar annual returns (because all the Fund's shares
represent interests in the same portfolio of securities), Advisor Share
performance would be lower than Investor Share performance because of the higher
expenses paid by Advisor Shares.
** The Standard & Poor's 500 Index is a market value weighted composite index of
500 large capitalization U.S. companies and reflects the reinvestment of
dividends.
SCHRODER U.S. SMALLER COMPANIES FUND
o INVESTMENT OBJECTIVe. Capital appreciation.
o RELATED PORTFOLIO. Schroder U.S. Smaller Companies Fund invests
substantially all of its assets in Schroder U.S. Smaller Companies Portfolio, a
diversified portfolio of Schroder Capital Funds.
o PRINCIPAL INVESTMENTS. The Fund invests at least 65% of its assets in
equity securities of companies in the United States that have (at the time of
investment) market capitalizations of $1.5 billion or less. The Fund also may
invest in equity securities of larger companies and in debt securities, if
Schroder believes such investments are consistent with the Fund's investment
objective. The Fund invests in a variety of equity securities including common
and preferred stocks, securities convertible into common and preferred stocks,
and warrants to purchase common and preferred stocks.
o INVESTMENT STRATEGIES. In selecting investments for the Fund, Schroder
seeks to identify securities of companies with strong management that it
believes can generate above average earnings growth, and are selling at
favorable prices in relation to book values and earnings. The Fund intends to
invest no more than 25% of its total assets in securities of small companies
that, together with their predecessors, have been in operation for less than
three years.
o PRINCIPAL RISKs.
<PAGE>
0 SMALL COMPANIES. The Fund invests primarily in small
companies, which tend to be more vulnerable to adverse
developments than larger companies. Small companies may
have limited product lines, markets, or financial
resources, or may depend on a limited management group.
Their securities may trade less frequently and in
limited volumes. As a result, the prices of these
securities may fluctuate more than the prices of
securities of larger, more widely traded companies.
Also, there may be less publicly available information
about small companies or less market interest in their
securities as compared to larger companies, and it may
take longer for the prices of the securities to reflect
the full value of their issuers' earnings potential or
assets.
0 EQUITY SECURITIES. Another risk of investing in the
Fund is the risk that the value of the equity
securities in the portfolio will fall, or will not
appreciate as anticipated by Schroder, due to factors
that adversely affect particular companies in the
portfolio and/or the U.S. equities market in general.
[EDGAR REPRESENTATION OF GRAPH CHART]
Calendar Year Annual Return
- ------------- -------------
1998 ____%
1997 26.60%
During the periods shown above, the highest quarterly return was 18.53% for the
quarter ended June 30, 1997, and the lowest was -23.22% for the quarter ended
September 30, 1998. [NOTE: SUBJECT TO CHANGE BASED ON FOURTH QUARTER OF 1998.]
For the period January 1, 1998 through November 30, 1998, the Fund's total
return (unannualized) was -10.89%.
<PAGE>
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------ ------------------- -------------------- -----------------------
AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS PAST ONE YEAR PAST FIVE YEARS LIFE OF FUND
ENDING DECEMBER 31, 1998) (SINCE 8/16/93)
- ------------------------------------------------ ------------------- -------------------- -----------------------
- ------------------------------------------------ ------------------- -------------------- -----------------------
Schroder U.S. Smaller Companies Fund [___]% [___]% [___]%
- ------------------------------------------------ ------------------- -------------------- -----------------------
- ------------------------------------------------ ------------------- -------------------- -----------------------
Russell 2000 Index* [___]% [___]% [___]%
- ------------------------------------------------ ------------------- -------------------- -----------------------
</TABLE>
* The Russell 2000 Index is a market capitalization weighted broad based index
of 2000 small capitalization U.S. companies.
FEES AND EXPENSES
THESE TABLES DESCRIBE THE FEES AND EXPENSES THAT YOU WILL PAY IF YOU INVEST IN
ADVISOR SHARES OF THE FUNDS. CERTAIN FEES AND EXPENSES HAVE BEEN ESTIMATED FOR
THOSE FUNDS THAT HAVE BEEN IN EXISTENCE FOR LESS THAN ONE FISCAL YEAR.
SHAREHOLDER FEES (paid directly from your investment):
Maximum Sales Load Imposed on Purchases None
Maximum Deferred Sales Load None
Maximum Sales Load Imposed on Reinvested Dividends None
Redemption Fee None
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets):
<TABLE>
<S> <C> <C> <C> <C>
Schroder
Schroder Schroder International Schroder
International Emerging Smaller International
Fund Markets Fund Companies Fund Bond Fund
---- ------------- -------------- ---------
Management Fees 0.67% 1.25% 1.10% 0.70%
Distribution (12b-1) Fees(1) 0% 0% 0% 0%
Other Expenses (2) 1224.20% 10.69% 4.41% 9.55%
Total Annual Fund 1224.87% 11.94% 5.51% 10.25%
Operating Expenses
Fee Waiver and/or 1223.63% 10.24% 3.76% 9.30
Expense Limitation (3)
Net Expenses (3) 1.24% 1.70% 1.75% 0.95
</TABLE>
Schroder
U.S. Schroder U.S.
Diversified Smaller Companies
Growth Fund Fund
----------- ----
0.75% 0.85%
0% 0%
1.35% 3.05%
2.10% 3.90%
0.35% 2.31
1.75% 1.59
- ---------------
1 Each Fund has adopted a Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended, with respect to its Advisor Shares.
Although the Trustees have not currently authorized payments under the
Distribution Plan, payments by a Fund under its Shareholder Service Plan, which
will not exceed the annual rate of 0.25% of a Fund's average daily net assets,
will be deemed to have been made pursuant to the Distribution Plan to the extent
such payments may be considered to be primarily intended to result in the sale
of the Fund's Advisor Shares.
2 Other Expenses and Total Fund Operating Expenses for each Fund other than
Schroder U.S. Smaller Companies Fund and Schroder International Fund are
estimated based on anticipated expenses for that Fund's current fiscal year.
3 The Net Expenses shown above reflect the effect of contractually imposed
expense limitations and/or fee waivers in effect through October 31, 1999 on
Total Annual Fund Operating Expensees of the Fund
<PAGE>
EXAMPLE
This Example is intended to help you compare the cost of investing in a Fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in Advisor Shares of a Fund for the
time periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment earns a 5% return each
year and that the Fund's total annual operating expenses remain the same. Your
actual costs may be higher or lower. Based on these assumptions, your costs
would be:
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------- --------- -------------- ------------- ------------
1 year 3 years 5 years 10 years
------ ------- ------- --------
- ----------------------------------------------------------- --------- -------------- ------------- ------------
- ----------------------------------------------------------- --------- -------------- ------------- ------------
Schroder International Fund* $10,000 $10,000 $10,000 $10,000
- ----------------------------------------------------------- --------- -------------- ------------- ------------
- ----------------------------------------------------------- --------- -------------- ------------- ------------
Schroder Emerging Markets Fund* $ 1,153 $3,223 $5,017 $8,518
- ----------------------------------------------------------- --------- -------------- ------------- ------------
- ----------------------------------------------------------- --------- -------------- ------------- ------------
Schroder International Smaller Companies* $ 550 $ 1,640 $2,720 $5,372
- ----------------------------------------------------------- --------- -------------- ------------- ------------
- ----------------------------------------------------------- --------- -------------- ------------- ------------
Schroder International Bond Fund* $ 998 $ 2,840 $4,493 $7,925
- ----------------------------------------------------------- --------- -------------- ------------- ------------
- ----------------------------------------------------------- --------- -------------- ------------- ------------
Schroder U.S. Diversified Growth Fund* $ 213 $ 658 $1,129 $2,431
- ----------------------------------------------------------- --------- -------------- ------------- ------------
- ----------------------------------------------------------- --------- -------------- ------------- ------------
Schroder U.S. Smaller Companies Fund* $ 392 $ 1,189 $2,004 $4,121
- ----------------------------------------------------------- --------- -------------- ------------- ------------
</TABLE>
- --------------
*Assuming that each of these Funds' operating expenses remain the same as Net
Expenses shown above, based on the other assumptions described above, your costs
would be:
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------- --------- -------------- ------------- ------------
1 year 3 years 5 years 10 years
------ ------- ------- --------
- ----------------------------------------------------------- --------- -------------- ------------- ------------
- ----------------------------------------------------------- --------- -------------- ------------- ------------
Schroder International Fund $ 126 $ 393 $ 681 $ 1,500
- ----------------------------------------------------------- --------- -------------- ------------- ------------
- ----------------------------------------------------------- --------- -------------- ------------- ------------
Schroder Emerging Markets Fund $ 173 $ 536 $ 923 $2,009
- ----------------------------------------------------------- --------- -------------- ------------- ------------
- ----------------------------------------------------------- --------- -------------- ------------- ------------
Schroder International Smaller Companies $ 178 $ 551 $ 949 $2,062
- ----------------------------------------------------------- --------- -------------- ------------- ------------
- ----------------------------------------------------------- --------- -------------- ------------- ------------
Schroder International Bond Fund $ 97 $ 303 $ 525 $1,166
- ----------------------------------------------------------- --------- -------------- ------------- ------------
- ----------------------------------------------------------- --------- -------------- ------------- ------------
Schroder U.S. Diversified Growth Fund $ 178 $ 551 $ 949 $2,062
- ----------------------------------------------------------- --------- -------------- ------------- ------------
- ----------------------------------------------------------- --------- -------------- ------------- ------------
Schroder U.S. Smaller Companies Fund $ 162 $ 502 $ 866 $1,889
- ----------------------------------------------------------- --------- -------------- ------------- ------------
</TABLE>
<PAGE>
OTHER INVESTMENT STRATEGIES AND RISKS
A Fund may not achieve its objective in all circumstances and you could
lose money by investing. The following provides more detail about the Funds'
principal risks and the circumstances which could adversely affect the value of
a Fund's shares or its total return or yield.
<PAGE>
RISKS OF INVESTING IN THE FUNDS
<PAGE>
o FOREIGN SECURITIES. Investments in foreign securities entail certain
risks. There may be a possibility of nationalization or expropriation of assets,
confiscatory taxation, political or financial instability, and diplomatic
developments that could affect the value of a Fund's investments in certain
foreign countries. Since foreign securities normally are denominated and traded
in foreign currencies, the values of the Fund's assets may be affected favorably
or unfavorably by currency exchange rates, currency exchange control
regulations, foreign withholding taxes, and restrictions or prohibitions on the
repatriation of foreign currencies. There may be less information publicly
available about a foreign issuer than about a U.S. issuer, and foreign issuers
are not generally subject to accounting, auditing, and financial reporting
standards and practices comparable to those in the United States. The securities
of some foreign issuers are less liquid and at times more volatile than
securities of comparable U.S. issuers. Foreign brokerage commissions and other
fees are also generally higher than in the United States. Foreign settlement
procedures and trade regulations may involve certain risks (such as delay in
payment or delivery of securities or in the recovery of a Fund's assets held
abroad) and expenses not present in the settlement of domestic investments.
In addition, legal remedies available to investors in certain foreign
countries may be more limited than those available to investors in the United
States or in other foreign countries. The willingness and ability of foreign
governmental entities to pay principal and interest on government securities
depends on various economic factors, including the issuer's balance of payments,
overall debt level, and cash-flow considerations related to the availability of
tax or other revenues to satisfy the issuer's obligations. If a foreign
governmental entity defaults on its obligations on the securities, a Fund may
have limited recourse available to it. The laws of some foreign countries may
limit a Fund's ability to invest in securities of certain issuers located in
those countries. Special tax considerations apply to foreign securities. Except
as otherwise noted in this Prospectus, there is no limit on the amount of a
Fund's assets that may be invested in foreign securities.
If a Fund purchases securities denominated in foreign currencies, a
change in the value of any such currency against the U.S. dollar will result in
a change in the U.S. dollar value of the Fund's assets and the Fund's income
available for distribution. In addition, although at times most of a Fund's
income may be received or realized in these currencies, the Fund will be
required to compute and distribute its income in U.S. dollars. As a result, if
the exchange rate for any such currency declines after the Fund's income has
been earned and translated into U.S. dollars but before payment to shareholders,
the Fund could be required to liquidate portfolio securities to make such
distributions. Similarly, if a Fund incurs an expense in U.S. dollars and the
exchange rate declines before the expense is paid, the Fund would have to
convert a greater amount of U.S. dollars to pay for the expense at that time
than it would have had to convert at the time the Fund incurred the expense. A
Fund may buy or sell foreign currencies and options and futures contracts on
foreign currencies for hedging purposes in connection with its foreign
investments.
In determining whether to invest in debt securities of foreign issuers,
Schroder considers the likely impact of foreign taxes on the net yield available
to the Fund and its shareholders. Income received by a Fund from sources within
foreign countries may be reduced by withholding and other taxes imposed by such
countries. Tax conventions between certain countries and the United States may
reduce or eliminate such taxes. Any such taxes paid by a Fund will reduce its
income available for distribution to shareholders. In certain circumstances, a
Fund may be able to pass through to shareholders credits for foreign taxes paid.
<PAGE>
o DEBT SECURITIES. All of the Funds may invest in debt securities, which
are subject to the risk of fluctuation of market value in response to changes in
interest rates and the risk that the issuer may default on the timely payment of
principal and interest. Additionally, all of the Funds may invest in
lower-quality, high-yielding debt securities, commonly known as junk bonds.
Lower-rated debt securities are predominantly speculative and tend to be more
susceptible than other debt securities to adverse changes in the financial
condition of the issuer, general economic conditions, or an unanticipated rise
in interest rates, which may affect an issuer's ability to pay interest and
principal. This would likely make the values of the securities held by a Fund
more volatile and could limit the Fund's ability to liquidate its securities.
Changes by recognized rating services in their ratings of any fixed-income
security and in the perceived ability of an issuer to make payments of interest
and principal also may affect the value of these investments.
<PAGE>
o RISKS OF SMALLER CAPITALIZATION COMPANIES. Schroder International
Smaller Companies Fund and Schroder U.S. Smaller Companies Fund invest in
companies that are smaller and less well-known than larger, more widely held
companies. Small and mid-cap companies may offer greater opportunities for
capital appreciation than larger companies, but may also pose certain special
risks. They are more likely than larger companies to have limited product lines,
markets or financial resources, or to depend on a small, inexperienced
management group. Securities of smaller companies may trade less frequently and
in lesser volume than more widely held securities and their values may fluctuate
more sharply than other securities. They may also trade in the over-the-counter
market or on a regional exchange, or may otherwise have limited liquidity. These
securities may therefore be more vulnerable to adverse developments than
securities of larger companies and the Funds may have difficulty establishing or
closing out their securities positions in smaller companies at prevailing market
prices. Also, there may be less publicly available information about smaller
companies or less market interest in their securities as compared to larger
companies, and it may take longer for the prices of the securities to reflect
the full value of their issuers' earnings potential or assets.
OTHER INVESTMENT STRATEGIES AND TECHNIQUES
In addition to the principal investment strategies described in the
Summary Information section above, the Funds may at times use the strategies and
techniques described below, which involve certain special risks. This Prospectus
does not attempt to disclose all of the various investment techniques and types
of securities that Schroder might use in managing the Funds. As in any mutual
fund, investors must rely on the professional investment judgment and skill of
the Fund's adviser.
o FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Changes in currency exchange
rates will affect the U.S. dollar value of Fund assets, including securities
denominated in foreign currencies. Exchange rates between the U.S. dollar and
other currencies fluctuate 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 political, economic and financial conditions, which may be
difficult to predict. A Fund may engage in currency exchange transactions to
protect against unfavorable fluctuations in exchange rates.
In particular, a Fund may enter into foreign currency exchange
transactions to protect against a change in exchange ratios that may occur
between the date on which the Fund contracts to trade a security and the
settlement date ("transaction hedging") or in anticipation of placing a trade
("anticipatory hedging"); to "lock in" the U.S. dollar value of interest and
dividends to be paid in a foreign currency; or to hedge against the possibility
that a foreign currency in which portfolio securities are denominated or quoted
may suffer a decline against the U.S. dollar ("position hedging"). Schroder
International Bond Fund may also
<PAGE>
enter into forward contracts to adjust the Fund's exposure to various foreign
currencies, either pending anticipated investments in securities denominated in
those currencies or as a hedge against anticipated market changes.
From time to time, a Fund's currency hedging transactions may call for the
delivery of one foreign currency in exchange for another foreign currency and
may at times involve currencies in which its portfolio securities are not then
denominated ("cross hedging"). A Fund may also engage in "proxy" hedging,
whereby the Fund would seek to hedge the value of portfolio holdings denominated
in one currency by entering into an exchange contract on a second currency, the
valuation of which Schroder believes correlates to the value of the first
currency. Schroder may buy or sell currencies in "spot" or forward transactions.
"Spot" transactions are executed contemporaneously on a cash basis at the
then-prevailing market rate.
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. Forward contracts do not eliminate fluctuations in the
underlying prices of securities and expose the Fund to the risk that the
counterparty is unable to perform.
A Fund incurs foreign exchange expenses in converting assets from one
currency to another. Schroder International Bond Fund may, to a limited extent,
purchase forward contracts to increase exposure in foreign currencies that are
expected to appreciate and thereby increase total return. All other Funds may
engage in foreign currency exchange transactions only for hedging purposes.
Although there is no limit on the amount of any Fund's assets that may
be invested in foreign currency exchange and foreign currency forward contracts,
each Fund may enter into such transactions to the extent necessary to effect the
hedging transactions described above. In addition, Schroder International Bond
Fund may enter into foreign currency forward contracts for non-hedging purposes.
Suitable foreign currency hedging transactions may not be available in all
circumstances and there can be no assurance that a Fund will utilize hedging
transactions at any time.
O SECURITIES LOANS, REPURCHASE AGREEMENTS, AND FORWARD COMMITMENTS.
Each Fund may lend portfolio securities to broker-dealers up to one-third of the
Fund's total assets. Each Fund may also enter into repurchase agreements without
limit. These transactions must be fully collateralized at all times, but involve
some risk to a Fund if the other party should default on its obligation and the
Fund is delayed or prevented from recovering the collateral. Each Fund may also
enter into contracts to purchase securities for a fixed price at a future date
beyond customary settlement time, which may increase its overall investment
exposure and involves a risk of loss if the value of the securities declines
prior to the settlement date.
o SHORT SALES (SCHRODER INTERNATIONAL BOND FUND). When Schroder
anticipates that the price of a security will decline, it may sell the security
short and borrow the same security from a broker or other institution to
complete the sale. The Fund may make a profit or incur a loss depending upon
whether the market price of the security decreases or increases between the date
of the short sale and the date on which the Fund must replace the borrowed
security. An increase in the value of a security sold short by the Fund over the
price at which it was sold short will result in a loss to the Fund, and there
can be no assurance that the Fund will be able to close out the position at any
particular time or at an acceptable price.
o INVESTMENT IN OTHER INVESTMENT COMPANIES. Each Fund may invest in
other investment companies or pooled vehicles, including closed-end funds, that
are advised by Schroder or its affiliates or by
<PAGE>
unaffiliated parties. When investing in another investment company, a Fund may
pay a premium above such investment company's net asset value per share. As a
shareholder in an investment company, a Fund would bear its ratable share of the
investment company's expenses, including advisory and administrative fees, and
would at the same time continue to pay its own fees and expenses.
o DERIVATIVE INVESTMENTS. Instead of investing directly in the types of
portfolio securities described in the Summary Information, each Fund may buy or
sell a variety of "derivative" investments to gain exposure to particular
securities or markets, in connection with hedging transactions, and to increase
total return. These may include options, futures, and indices, for example.
Derivatives involve the risk that they may not work as intended under all market
conditions. Also, derivatives often involve the risk that the other party to the
transaction will be unable to meet its obligations or that the Fund will be
unable to close out the position at any particular time or at an acceptable
price.
O ZERO-COUPON BONDS. Each Fund which may invest in debt securities may
invest in zero-coupon bonds. Zero-coupon bonds are issued at a significant
discount from face value and pay interest only at maturity rather than at
intervals during the life of the security. Zero-coupon bonds allow an issuer to
avoid the need to generate cash to meet current interest payments and, as a
result, may involve greater credit risks than bonds that pay interest currently.
o INTEREST RATE SWAPs. Schroder International Bond Fund may enter into
interest rate swaps for hedging purposes or to increase total return. Interest
rate swaps involve the exchange by the Fund with another party of different
types of interest-rate streams (for example, an exchange of floating rate
payments for fixed rate payments with respect to a notional amount of
principal). The Fund's ability to engage in certain interest rate transactions
may be limited by tax considerations. The use of interest rate swaps is a highly
specialized activity that involves investment techniques and risks different
from those associated with ordinary portfolio securities transactions. If
Schroder is incorrect in its forecasts of market values, interest rates, or
other relevant factors, the investment performance of the Fund would be less
favorable than it would have been if this investment technique were not used.
O PORTFOLIO TURNOVER. The length of time a Fund has held a particular
security is not generally a consideration in investment decisions. The
investment policies of a Fund may lead to frequent changes in the Fund's
investments, particularly in periods of volatile market movements. A change in
the securities held by a Fund is known as "portfolio turnover." Portfolio
turnover generally involves some expense to a Fund, including brokerage
commissions or dealer mark-ups and other transaction costs on the sale of
securities and reinvestment in other securities. Such sales may increase the
amount of capital gains (and, in particular, short-term gains) realized by the
Funds, on which shareholders pay tax.
o TEMPORARY DEFENSIVE STRATEGIES. At times, Schroder may judge that
conditions in the securities markets make pursuing a Fund's basic investment
strategy inconsistent with the best interests of its shareholders. At such
times, Schroder may temporarily use alternate investment strategies primarily
designed to reduce fluctuations in the value of a Fund's assets. In implementing
these "defensive" strategies, the Fund would invest in high-quality debt
securities, cash, or money market instruments to any extent Schroder considers
consistent with such defensive strategies. It is impossible to predict when, or
for how long, a Fund will use these alternate strategies. One risk of taking
such temporary defensive positions is that the Fund may not achieve its
investment objectives.
<PAGE>
MANAGEMENT OF THE FUNDS
The Trust is governed by a Board of Trustees, which has retained
Schroder to manage the investments of each Fund. Subject to the control of the
Trustees, Schroder also manages the Funds' other affairs and business. Schroder
has served as investment adviser to each of the Funds since inception.
Each Portfolio in which the Schroder International Fund, Schroder
Emerging Markets Fund, Schroder International Smaller Companies Fund, Schroder
International Bond Fund and Schroder U.S. Smaller Companies Fund invests is
managed under the direction of a board of trustees of Schroder Capital Funds or
Schroder Capital Funds II. Schroder has served as investment adviser to each of
the Portfolios since inception. Subject to the direction and control of
Schroder, Schroder Investment Management International, Ltd. (SIMIL), an
affiliate of Schroder, serves as subadviser to Schroder International Smaller
Companies Portfolio pursuant to an Investment Subadvisory Agreement among
Schroder, SIMIL and the Portfolio.
Schroder has been an investment manager since 1962, and currently
serves as investment adviser to the Funds, the Portfolios, and a broad range of
institutional investors. As of June 30, 1998, Schroder had approximately $24
billion in assets under management. Schroder's address is 787 Seventh Avenue,
New York, New York 10019, and its telephone number is (212) 641-3900. SIMIL has
been registered as a U.S. investment adviser since 1998, and as of June 30, 1998
had under management assets of approximately $42 billion. SIMIL's address is 31
Gresham Street, London, United Kingdom, EC2V 7QA.
o MANAGEMENT FEES PAID BY THE RELATED PORTFOLIOS. For the fiscal year ended
October 31, 1998 (May 31, 1998, in the case of Schroder U.S. Smaller Companies
Portfolio and Schroder EM Core Portfolio, and December 31, 1998 for Schroder
International Bond Portfolio), the Portfolios paid management fees to Schroder
at the following annual rates (based on the average net assets of each Portfolio
taken separately): INTERNATIONAL EQUITY FUND -- 0.427%; SCHRODER EM CORE
PORTFOLIO -- 0.086%; SCHRODER INTERNATIONAL BOND PORTFOLIO -- 0.00%; SCHRODER
INTERNATIONAL SMALLER COMPANIES PORTFOLIO -- 0.00%; SCHRODER U.S. SMALLER
COMPANIES PORTFOLIO -- 0.60%. Schroder has agreed to waive 0.10% of the advisory
fees payable by Schroder International Smaller Companies Portfolio. This waiver
shall remain in effect until its elimination is approved by the board of
trustees of Schroder Capital Funds. Each of the Funds that invests in a related
Portfolio, because of its investment in the Portfolio, bears a proportionate
part of the management fees (and other expenses) paid by the Portfolio (based on
the percentage of the Portfolio's assets attributable to the Fund).
Pursuant to the Investment Subadvisory Agreement, Schroder pays SIMIL a
monthly fee at the annual rate of 0.25% of the daily net assets of Schroder
International Smaller Companies Portfolio.
Each of the Funds that invests in a related Portfolio has entered into
an investment advisory agreement with Schroder pursuant to which Schroder would
manage the Fund's assets directly in the event that the Fund were to cease
investing substantially all of its assets in a Portfolio. Schroder will not
receive any fees under that agreement so long as a Fund continues to invest
substantially all of its assets in a Portfolio or in another investment company.
o MANAGEMENT FEES PAID BY SCHRODER U.S. DIVERSIFIED GROWTH FUNd. For the
fiscal year ended October 31, 1998, SCHRODER U.S. DIVERSIFIED GROWTH FUNd paid
management fees to Schroder at the annual rate of 0.447% of the Fund's average
net assets.
<PAGE>
o EXPENSE LIMITATIONS AND WAIVERS. In order to limit the Funds' expenses,
Schroder has voluntarily agreed to reduce its compensation (and, if necessary,
to pay certain other Fund expenses) until October 31, 1999 to the extent that
each Fund's total operating expenses attributable to its Advisor Shares exceed
the following annual rates (based on the average net assets of each Fund taken
separately): SCHRODER INTERNATIONAL FUND -- 1.24%; SCHRODER EMERGING MARKETS
FUND -- 1.95%; SCHRODER INTERNATIONAL SMALLER COMPANIES FUND -- 1.75%; SCHRODER
INTERNATIONAL BOND FUND -- 1.20%; SCHRODER U.S. DIVERSIFIED GROWTH FUND --
1.75%; and SCHRODER U.S. SMALLER COMPANIES FUND -- 1.75%. Additionally, Schroder
has agreed to limit the advisory fees paid by SCHRODER U.S. DIVERSIFIED GROWTH
FUND through October 31, 1999 to 0.65% of the Fund's average daily net assets.
o PORTFOLIO MANAGERs. Schroder's investment decisions for each of the
Funds (or for the related Portfolios in which certain of the Funds invest
substantially all of their assets) are generally made by an investment manager
or an investment team, with the assistance of an investment committee. The
following portfolio managers have had primary responsibility for making
investment decisions for the Portfolios or the Funds, as the case may be, since
the years shown below. Their recent professional experience is also shown.
<TABLE>
<S> <C> <C> <C>
- --------------------------- ------------------------ ------------------- --------------------------------------------------- ---
Fund/Portfolio Portfolio Manager Since Recent Professional Experience
- --------------------------- ------------------------ ------------------- --------------------------------------------------- ---
- --------------------------- ------------------------ ------------------- --------------------------------------------------- ---
Schroder International Michael Perelstein 1997 Employed as an investment professional at
Fund/International Schroder since 1997. Mr. Perelstein is also Vice
Equity Fund President of the Trust and of Schroder Capital
Funds and Schroder Capital Funds II, and a
Director and Senior Vice President of Schroder.
Prior to joining Schroder, Mr. Perelstein was a
Managing Director at MacKay-Shields Financial
Corp. from March 1993 to November 1996.
- --------------------------- ------------------------ ------------------- --------------------------------------------------- ---
- --------------------------- ------------------------ ------------------- --------------------------------------------------- ---
Schroder Emerging Markets John Troiano Inception (1997) Employed as an investment professional at
Fund/Schroder EM Core Schroder since 1986. Mr. Troiano is the Chief
Portfolio Executive and director of Schroder, and a Vice
President of the Trust and of Schroder Capital
Funds.
- --------------------------- ------------------------ ------------------- --------------------------------------------------- ---
- --------------------------- ------------------------ ------------------- --------------------------------------------------- ---
Heather Crighton Inception (1997) Employed as an investment professional at
Schroder since 1993. Ms. Crighton is a director
and a First Vice President of Schroder.
- --------------------------- ------------------------ ------------------- --------------------------------------------------- ---
- --------------------------- ------------------------ ------------------- --------------------------------------------------- ---
Mark Bridgeman Inception (1997) Employed as an investment professional at
Schroder since 1990. Mr. Bridgeman is a First
Vice President of Schroder.
- --------------------------- ------------------------ ------------------- --------------------------------------------------- ---
- --------------------------- ------------------------ ------------------- --------------------------------------------------- ---
Schroder International Jane P. Lucas 1998 Employed as an investment professional at
Smaller Companies Schroder since 1987. Ms. Lucas is a Vice
Fund/Schroder President of the Trust and a Senior Vice
International President of Schroder.
Smaller Companies
Portfolio
- --------------------------- ------------------------ ------------------- --------------------------------------------------- ---
<PAGE>
- --------------------------- ------------------------ ------------------- --------------------------------------------------- ---
Nicholas Melhuish 1998 Employed as an investment professional at
Schroder since 1991. Mr. Melhuish is an
investment manager of SIMIL and of Schroder.
- --------------------------- ------------------------ ------------------- --------------------------------------------------- ---
- --------------------------- ------------------------ ------------------- --------------------------------------------------- ---
Schroder International Michael Perelstein Inception (1997) See above.
Bond Fund/
International Bond
Portfolio
- --------------------------- ------------------------ ------------------- --------------------------------------------------- ---
- --------------------------- ------------------------ ------------------- --------------------------------------------------- ---
Mark Astley Inception (1997) Employed as an investment professional at
Schroder since 1986. Mr. Astley is a Vice
President of the Trust and of Schroder Capital
Funds and Schroder Capital Funds II, and is a
First Vice President of Schroder.
- --------------------------- ------------------------ ------------------- --------------------------------------------------- ---
- --------------------------- ------------------------ ------------------- --------------------------------------------------- ---
U.S. Diversified Paul Morris 1997 Employed as an investment professional at
Growth Fund Schroder since 1997. Mr. Morris is Senior Vice
President of Schroder. Prior to joining
Schroder, Mr. Morris was a Principal and Senior
Portfolio Manager at Weiss Peck & Greer, L.L.C.,
and a Managing Director, Equity Division, of UBS
Asset Management
- --------------------------- ------------------------ ------------------- --------------------------------------------------- ---
- --------------------------- ------------------------ ------------------- --------------------------------------------------- ---
Schroder U.S. Smaller Ira L. Unschuld 1997 (sole Employed as an investment professional at
Companies Portfolio manager since Schroder since 1990. Mr. Unschuld is a Vice
1998) President of the Trust and a Group Vice President
of Schroder.
- --------------------------- ------------------------ ------------------- --------------------------------------------------- ---
</TABLE>
HOW THE FUNDS' SHARES ARE PRICED
Each Fund calculates the net asset value of its Advisor Shares by
dividing the total value of its assets attributable to its Advisor Shares, less
its liabilities attributable to those shares, by the number of Advisor Shares
outstanding. Shares are valued as of the close of trading on the New York Stock
Exchange (normally 4:00 p.m.) each day the Exchange is open. The Funds value
their portfolio securities for which market quotations are readily available at
market value. Short-term investments that will mature in 60 days or less are
stated at amortized cost, which approximates market value. The Funds value all
other securities and assets at their fair values as determined by Schroder. All
assets and liabilities of a Fund 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's shares is calculated. Because
certain of the securities in which the Funds may invest may trade on days when
the Funds do not price their Advisor Shares, the net asset value of a Fund's
Advisor Shares may change on days when shareholders will not be able to purchase
or redeem their Advisor Shares.
<PAGE>
HOW TO BUY SHARES
You may purchase Advisor Shares of each Fund directly from the Trust or
through a service organization such as a bank, trust company, broker-dealer, or
other financial organization (a Service Organization) having an arrangement with
Schroder Fund Advisors Inc., the distributor of the Trust's shares. If you do
not have a Service Organization, Schroder Fund Advisors Inc. can provide you
with a list of available firms. Your Service Organization is responsible for
forwarding all of the necessary documentation to the Trust, and may charge for
its services.
Advisor Shares of each of the Funds are sold at their net asset value
next determined after the Trust receives your order. In order for you to receive
the Fund's next determined net asset value, the Trust must receive your order
before the close of regular trading on the New York Stock Exchange.
If the Advisor Shares you purchase will be held in your own name (rather
than in the name of your Service Organization), your payment for the shares must
be accompanied by a completed Account Application in proper form. The Trust or
Forum Shareholder Services, LLC, the Trust's Transfer Agent, may request
additional documentation, such as copies of corporate resolutions and
instruments of authority, from corporations, administrators, executors, personal
representatives, directors, or custodians. You may obtain an Account Application
from the Transfer Agent, P.O. Box 446, Portland, Maine 04112, or by calling
(800)290-9826. You also may obtain an Account Application from your Service
Organization.
INVESTMENT MINIMUMS
The minimum investment for initial and additional purchases for each
Fund is set forth in the following table:
-------------------------------------- ----------------- -------------------
Initial Additional
Investment Investments
-------------------------------------- ----------------- -------------------
-------------------------------------- ----------------- -------------------
Regular Accounts $2,500 $2,500
-------------------------------------- ----------------- -------------------
-------------------------------------- ----------------- -------------------
Traditional IRAs $250 $250
-------------------------------------- ----------------- -------------------
The Trust is authorized to reject any purchase order.
PURCHASES BY CHECK
You may purchase shares of a Fund by mailing a check (in U.S. dollars)
payable to (i) Schroder Capital Funds (Delaware), if you are purchasing shares
of two or more Funds, accompanied by written instructions as to how the check
amount should be allocated amongst the Funds whose shares you are purchasing or
(ii) the name of the Fund to be purchased (i.e., Schroder International Bond
Fund) if you are purchasing shares of a single Fund. Third-party checks will not
be accepted.
For initial purchases, your check must be accompanied by a completed
Account Application in proper form. The Trust may request additional
documentation to evidence the authority of the person or entity making the
purchase request.
<PAGE>
You should mail your check and your completed Account Application to:
[Name of Fund] -- Advisor Shares
P.O. Box 446
Portland, Maine 04112
Your payments should clearly indicate the shareholder's name and account number,
if applicable.
PURCHASES BY BANK WIRE/TELEPHONE
If you make your initial investment by wire, your order must be
preceded by a completed Account Application. Upon receipt of the Application,
the Trust will assign you an account number and your account will become active.
Wire orders received prior to the close of trading on the New York Stock
Exchange (normally 4:00 p.m., Eastern Time) on each day the Exchange is open for
trading will be processed at the net asset value determined as of that day. Wire
orders received after that time will be processed at the net asset value
determined thereafter.
Once you have an account number, you may purchase Advisor Shares
through your Service Organization or by telephoning the Transfer Agent at (800)
290-9826 to give notice that you will be sending funds by wire, and then
arranging with your bank to wire funds to the Trust. Your purchase will not be
processed until the Trust has received the wired funds.
Federal Reserve Bank wire instructions are as follows:
The Chase Manhattan Bank
New York, NY
ABA No.: 021000021
For Credit To: Forum Shareholder Services, LLC
Account. No.: 910-2-718187
Ref.: [Name of Fund] - Advisor Shares
Account of: (shareholder name)
Account No.: (shareholder account number)
The wire order must specify the name of the Fund, the shares' class (i.e.,
Advisor Shares), the account name and number, address, confirmation number,
amount to be wired, name of the wiring bank, and name and telephone number of
the person to be contacted in connection with the order.
In an effort to prevent unauthorized or fraudulent purchase or
redemption requests by telephone, the Transfer Agent will follow reasonable
procedures 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 purchase or redemption requests, but either or both
may be liable if they do not follow these procedures.
<PAGE>
OTHER PURCHASE INFORMATION
Advisor Shares of each Fund may be purchased for cash or in exchange
for securities held by the investor, subject to the determination by Schroder
that the securities are acceptable. (For purposes of determining whether
securities will be acceptable, Schroder will consider, among other things,
whether they are liquid securities of a type consistent with the investment
objectives and policies of the Fund in question and have a readily ascertainable
value.) If a Fund receives securities from an investor in exchange for shares of
the Fund, the Fund will under some circumstances have the same tax basis in the
securities as the investor had prior to the exchange (and the Fund's gain for
tax purposes would be calculated with regard to the investor's tax basis). Any
gain on the sale of those securities would be subject to distribution as capital
gain to all of the Fund's shareholders. Schroder reserves the right to reject
any particular investment. Securities accepted by Schroder will be valued in the
same manner as are the Trust's portfolio securities as of the time of the next
determination of the Funds' net asset value. All dividend, subscription, or
other rights which are reflected in the market price of accepted securities at
the time of valuation become the property of the relevant Fund and must be
delivered to the Fund upon receipt by the investor. A gain or loss for federal
income tax purposes may be realized by investors upon the exchange. Investors
interested in purchases through exchange should telephone Schroder at (800)
290-9826.
Schroder Fund Advisors Inc., Schroder, or their affiliates may, at
their own expense and out of their own assets, provide compensation to dealers
or other financial intermediaries in connection with sales of Trust shares or
shareholder servicing. In some instances, this compensation may be made
available only to certain dealers or other financial intermediaries who have
sold or are expected to sell significant amounts of shares of the Trust.
HOW TO SELL SHARES
You may sell your Advisor Shares back to a Fund on any day the New York
Stock Exchange is open, either through your Service Organization or directly to
the Fund. If your shares are held in the name of a Service Organization, you may
only sell the shares through that Service Organization. The Service Organization
may charge you for its services. If you choose to sell your shares directly to
the Fund, you may do so by sending a letter of instruction or stock power form
to the Trust, or by calling the Transfer Agent at (800) 290-9826.
The price you will receive is the net asset value next determined after receipt
of your redemption request in good order. A redemption request is in good order
if it includes the exact name in which the shares are registered, the investor's
account number, and the number of shares or the dollar amount of shares to be
redeemed, and, for written requests, if it is signed exactly in accordance with
the registration form. If you hold your Advisor Shares in certificate form, you
must submit the certificates and sign the assignment form on the back of the
certificates. Signatures must be guaranteed by a bank, broker/dealer, or certain
other financial institutions. You may redeem your Advisor Shares by telephone
only if you elected the telephone redemption privilege option on your Account
Application or otherwise in writing. Shares for which certificates have been
issued may not be redeemed by telephone. The Trust may require additional
documentation from shareholders that are corporations, partnerships, agents,
fiduciaries, or surviving joint owners.
If you redeem shares through your Service Organization, your Service
Organization is responsible for ensuring that the Transfer Agent receives your
redemption request in proper form and at the appropriate time.
<PAGE>
The Trust will pay you for your redemptions as promptly as possible and
in any event within seven days after the request for redemption is received in
writing in good order. (The Trust generally sends payment for shares the
business day after a request is received.) Under unusual circumstances, the
Trust may suspend redemptions or postpone payment for more than seven days, as
permitted by law. The Trust will only redeem shares for which it has received
payment.
<PAGE>
If your account balance falls below a minimum amount set by the
Trustees (presently $2,000) of any Fund, the Trust may choose to redeem your
shares in that Fund and pay you for them. You will receive at least 30 days
written notice before the Trust redeems your shares, and you may purchase
additional shares at any time to avoid a redemption. The Trust may also redeem
shares if you own shares of any Fund above a maximum amount set by the Trustees.
There is currently no maximum, but the Trustees may establish one at any time,
which could apply to both present and future shareholders.
The Trust may suspend the right of redemption during any period when:
(1) trading on the New York Stock Exchange is restricted or the Exchange is
closed; (2) the Securities and Exchange Commission has by order permitted such
suspension; or (3) an emergency (as defined by rules of the SEC) exists making
disposal of portfolio investments or determination of the Fund's net asset value
not reasonably practicable.
If you request that your redemption proceeds be sent to you at an
address other than your address of record, or to another party, you must include
a signature guarantee for each such signature by an eligible signature
guarantor, such as a member firm of a national securities exchange or a
commercial bank or trust company located in the United States. If you are a
resident of a foreign country, another type of certification may be required.
Please contact the Transfer Agent for more details at (800) 290-9826.
Corporations, fiduciaries, and other types of shareholders may be required to
supply additional documents which support their authority to effect a
redemption.
WIRE TRANSFERS
If your Service Organization receives Federal Reserve wires, you may
instruct that your redemption proceeds be forwarded by wire to your account with
your Service Organization; you may also instruct that your redemption proceeds
be forwarded to you by a wire transfer. Please indicate your Service
Organization's or your own complete wiring instructions.
ADDITIONAL INFORMATION ABOUT ADVISOR SHARES
The Trust sells Advisor Shares of the Funds at their net asset value
without any sales charges or loads, so that the full amount of your purchase
payment is invested in the Fund you select. You also receive the full value of
your Advisor Shares when you sell them back to a Fund, without any deferred
sales charge.
SHAREHOLDER SERVICING PLAN. The Trust has adopted a Shareholder
Servicing Plan (the "Service Plan") for the Advisor Shares of each Fund. Under
the Service Plan, each Fund pays fees to Schroder Fund Advisors Inc. at an
annual rate of up to 0.25% of the average daily net assets of the Fund
represented by Advisor Shares. Schroder Fund Advisors Inc. may enter into
shareholder service agreements with Service Organizations pursuant to which the
Service Organizations provide administrative support services to their customers
who are Fund shareholders. In return for providing these support services, a
Service Organization may receive payments from Schroder Fund Advisors Inc. at a
rate not exceeding 0.25% of the average daily
<PAGE>
net assets of the Advisor Shares of each Fund for which the Service Organization
is the Service Organization of record. Some Service Organizations may impose
additional conditions or fees. For instance a Service Organization may require
its clients to invest more than the minimum amounts required by the Trust for
initial or subsequent investments or may charge a direct fee for its services.
These fees would be in addition to any amounts which you pay as a shareholder of
a Fund or amounts which might be paid to the Service Organization by Schroder
Fund Advisors Inc. Please contact your Service Organization for details.
<PAGE>
DISTRIBUTION PLANS. Each Fund has adopted a Distribution Plan which
allows the Fund to pay distribution fees for the sale and distribution of its
Advisor Shares. Under the Plans, each Fund may pay Schroder Fund Advisors Inc.
compensation in an amount limited in any fiscal year to the annual rate of 0.50%
of the Fund's average daily net assets attributable to its Advisor Shares. THE
TRUSTEES HAVE NOT CURRENTLY AUTHORIZED PAYMENTS UNDER THE DISTRIBUTION PLAN,
although payments by a Fund under the Shareholder Service Plan, which will not
exceed the annual rate of 0.25% of a Fund's average daily net assets, will be
deemed to have been made pursuant to the Distribution Plan to the extent such
payments may be considered to be primarily intended to result in the sale of the
Fund's Advisor Shares. To the extent that payments are made in the future under
the Plans, they would be paid out of a Fund's assets attributable to its Advisor
Shares on an ongoing basis, would increase the cost of your investment, and may
cost you more than paying other types of sales charges imposed by other funds.
Payments under a Fund's Shareholder Servicing Plan for Advisor Shares
will be considered to have been made pursuant to the Fund's Distribution Plan,
to the extent such payments may be deemed to be primarily intended to result in
the sale of the Fund's Advisor Shares.
EXCHANGES
You can exchange your Advisor Shares of any Fund for Advisor Shares of
any other fund in the Schroder family of funds at any time at their respective
net asset values. Contact your Service Organization or the Transfer Agent for
details. The Trust reserves the right to change or suspend the exchange
privilege at any time. Shareholders would be notified of any such change or
suspension.
DIVIDENDS AND DISTRIBUTIONS
Each Fund distributes any net investment income and any net realized
capital gain at least annually. Distributions from net capital gain are made
after applying any available capital loss carryovers.
YOU CAN CHOOSE FROM FOUR DISTRIBUTION OPTIONS:
-- Reinvest all distributions in additional Advisor Shares of your
Fund;
-- Receive distributions from net investment income in cash while
reinvesting capital gains distributions in additional Advisor
Shares of your Fund;
-- Receive distributions from net investment income in additional
Advisor Shares of your Fund while receiving capital gain
distributions in cash; or
-- Receive all distributions in cash.
<PAGE>
You can change your distribution option by notifying the Transfer Agent
in writing. If you do not select an option when you open your account, all
distributions by a Fund will be reinvested in Advisor Shares of that Fund. You
will receive a statement confirming reinvestment of distributions in additional
Fund shares promptly following the period in which the reinvestment occurs.
TAXES
o TAXES ON DIVIDENDS AND DISTRIBUTIONs. For federal income tax purposes,
distributions of investment income are taxable as ordinary income. Taxes on
distributions of capital gains are determined by how long your Fund owned the
investments that generated the gains, rather than how long you have owned your
shares. Distributions are taxable to you even if they are paid from income or
gains earned by a Fund before you invested (and thus were included in the price
you paid for your shares). Distributions of gains from investments that a Fund
owned for more than 12 months will be taxable as capital gains. Distributions of
gains from investments that the Fund owned for 12 months or less will be taxable
as ordinary income. Distributions are taxable whether you received them in cash
or reinvested them in additional shares of the Funds.
o TAXES WHEN YOU SELL OR EXCHANGE YOUR SHAREs. Any gain resulting from the
sale or exchange of your shares in the Funds will also generally be subject to
federal income or capital gains tax, depending on your holding period.
o TAX TREATMENT OF THE PORTFOLIOS. None of the Portfolios is required to
pay federal income tax because each is classified as a partnership for federal
income tax purposes. All interest, dividends, gains and losses of a Portfolio
will be deemed to have been "passed through" to a Fund in proportion to the
Fund's holdings in the Portfolio, regardless of whether such interest,
dividends, gains or losses have been distributed by the Portfolio. Each
Portfolio intends to conduct its operations so that a Fund, if it invests all of
its assets in the Portfolio, may qualify as a regulated investment company.
o CONSULT YOUR TAX ADVISOR ABOUT OTHER POSSIBLE TAX CONSEQUENCES. This is a
summary of certain federal tax consequences of investing in a Fund. You should
consult your tax advisor for more information on your own tax situation,
including possible state and local taxes.
YEAR 2000 DISCLOSURE
Each of the Funds receives services from its investment adviser,
administrator, subadministrator, distributor, transfer agent, custodian and
other providers which rely on the smooth functioning of their respective systems
and the systems of others to perform those services. It is generally recognized
that certain systems in use today may not perform their intended functions
adequately after the Year 1999 because of the inability of the software to
distinguish the Year 2000 from the Year 1900. Schroder is taking steps that it
believes are reasonably designed to address this potential "Year 2000" problem
and to obtain satisfactory assurances that comparable steps are being taken by
each of the Funds' other major service providers. There can be no assurance,
however, that these steps will be sufficient to avoid any adverse impact on the
Funds from this problem.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
financial performance of each of the Funds for the past 5 years or since the
Fund commenced operations. Certain information reflects financial results for a
single Fund share. The total returns represent the rate that an investor would
have earned or lost on an investment in Advisor Shares of a Fund, assuming
reinvestment of all dividends and distributions. This information has been
audited by PricewaterhouseCoopers LLP, whose report, along with each Fund's
<PAGE>
financial statements, are included in the Funds' annual report to shareholders.
The annual report is available upon request.
<TABLE>
<S> <C> <C> <C>
SCHRODER U.S. SMALLER COMPANIES FUND
Period Ended Year Ended Period Ended
November 30, May 31, May 31,
1998 1998 1997
-------------------------------------------
Net Asset Value, Beginning of Period $xx.xx $xx.xx $xx.xx
Investment Operations
Net Investment Income (Loss) (x.xx) (x.xx) (x.xx)
Net Realized and Unrealized Gain
(Loss) x.xx x.xx x.xx
on Investments
Total from Investment Operations x.xx x.xx x.xx
Distributions from Net Realized
Gain on Investments (x.xx) (x.xx) (x.xx)
------ ------ ------
Net Asset Value, End of Period $xx.xx $xx.xx $xx.xx
====== ====== ======
Total Return xx.xx% xx.xx% xx.xx%
Ratios/Supplementary Data
Net Assets, End of Period (in $xx,xxx $xx,xxx $xx,xxx
thousands)
Ratios to Average Net Assets:
Expenses After Expense Limitations x.xx% x.xx% x.xx%
Expenses Before Limitations x.xx% x.xx% x.xx%
Net Investment Income (Loss) After
Expense Limitation (x.xx%) (x.xx%) (x.xx%)
Average Commission Rate Per Share $x.xxxx $x.xxxx $x.xxxx
Portfolio Turnover Rate(e) xx.xx% xx.xx% xx.xx%
</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
designated as Investor Shares.
(b) Includes the Fund's proportionate share of income and expenses of Schroder
U.S. Smaller Companies Portfolio.
(c) For the period ended May 31, 1997 the total returns would have been lower
had certain expenses not been reduced.
(d) Annualized.
(e) Portfolio turnover represents the rate of portfolio activity. For the
periods ending after October 31, 1996, the rate represents the portfolio
turnover rate of Schroder U.S. Smaller Companies Portfolio.
<PAGE>
SCHRODER INTERNATIONAL FUND
Period Ended
October 31,
----------------
1998
NET ASSET VALUE, BEGINNING OF PERIOD $xx.xx
INVESTMENT OPERATIONS:
Net Investment Income (Loss)(b) x.xx
Net Realized and Unrealized Gain
(Loss) on Investments x.xx
Total from Investment Operations x.xx
DISTRIBUTIONS FROM
Net Investment Income (x.xx)
Net Realized Gain on Investments (x.xx)
Total Distributions (x.xx)
NET ASSET VALUE, END OF PERIOD $xx.xx
Total Return(c) x.xx%
Ratios/Supplementary Data
NET ASSETS, END OF PERIOD (IN $xxx,xxx
THOUSANDS)
Ratios to Average Net Assets:
Expenses After Expense Limitation(b)
x.xx%
Expenses Before Expense Limitation
(b) x.xx%
Net Investment Income (Loss) After
Expense Limitation(b) x.xx%
AAverage Commission Rate Per Share (d) $x.xxxx
Portfolio Turnover Rate (e) xx.xx%
- ----------------------------------------
<PAGE>
================================================================================
FUNDS AVAILABLE THROUGH SCHRODER FUND ADVISORS INC.
PLEASE CALL FOR COMPLETE INFORMATION AND TO OBTAIN THE RELEVANT PROSPECTUS.
PLEASE READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST.
<TABLE>
<S><C> <C>
SCHRODER CAPITAL FUNDS (DELAWARE) (800) 290-9826 SCHRODER SERIES TRUST (800) 464-3108
SCHRODER INTERNATIONAL FUND SCHRODER LARGE CAPITALIZATION EQUITY FUND
SCHRODER EMERGING MARKETS FUND SCHRODER SMALL CAPITALIZATION VALUE FUND
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND SCHRODER MIDCAP VALUE FUND
SCHRODER INTERNATIONAL BOND FUND SCHRODER SHORT-TERM INVESTMENT FUND
SCHRODER U.S. DIVERSIFIED GROWTH FUND SCHRODER INVESTMENT GRADE INCOME FUND
SCHRODER U.S. SMALLER COMPANIES FUND
</TABLE>
SCHRODER SERIES TRUST II (800) 464-3108
SCHRODER ALL-ASIA FUND
================================================================================
<PAGE>
[Back Cover] [Logo]
SCHRODER CAPITAL FUNDS (DELAWARE)
SCHRODER INTERNATIONAL FUND
SCHRODER EMERGING MARKETS FUND
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND
SCHRODER INTERNATIONAL BOND FUND
SCHRODER U.S. DIVERSIFIED GROWTH FUND
SCHRODER U.S. SMALLER COMPANIES FUND
Schroder Capital Funds (Delaware)'s statement of additional information (SAI)
and annual and semi-annual reports to shareholders include additional
information about the Funds. The SAI and the financial statements included in
the Trust's most recent annual report to shareholders are incorporated by
reference into this Prospectus, which means they are part of this Prospectus for
legal purposes. The Trust's annual report discusses the market conditions and
investment strategies that significantly affected each Fund's performance during
its last fiscal year. You may get free copies of these materials, request other
information about a Fund, or make shareholder inquiries by calling
1-800-290-9826.
You may review and copy information about the Trust, including its SAI, at the
Securities and Exchange Commission's public reference room in Washington, D.C.
You may call the Commission at 1-800-SEC-0330 for information about the
operation of the public reference room. You may also access reports and other
information about the Trust on the Commission's Internet site at WWW.SEC.GOV.
You may get copies of this information, with payment of a duplication fee, by
writing the Public Reference Section of the Commission, Washington, D.C.
20549-6009. You may need to refer to the Trust's file number under the
Investment Company Act, which is 811-1911.
Schroder Capital Funds (Delaware) ADVISOR SHARES
Two Portland Square
Portland, ME 04101 PROSPECTUS
800-290-9826
March 1, 1999
File No. 811-1911
<PAGE>
INSERT EMU-INV
<PAGE>
SCHRODER CAPITAL FUNDS (DELAWARE)
PROSPECTUS
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
ADVISOR SHARES
March 1, 1999
This prospectus describes Schroder Emerging Markets Fund Institutional
Portfolio, a non-diversified series of shares of Schroder Capital Funds
(Delaware). The Fund seeks 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, Eastern and Southern Europe, and Africa. The Trust offers Advisor
Shares of the Fund in this prospectus.
Schroder Capital Management International Inc. ("Schroder") manages the Fund.
You can call (800) 290-9826 to find out more about the Fund and other funds in
the Schroder family.
The prospectus explains what you should know about the Fund before you invest.
Please read it carefully.
NEITHER THE U.S. SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
Page
----
SUMMARY INFORMATION.......................................................3
FEES AND EXPENSES.........................................................6
OTHER INVESTMENT STRATEGIES...............................................7
MANAGEMENT OF THE FUND...................................................11
HOW THE FUND'S SHARES ARE PRICED.........................................12
HOW TO BUY SHARES........................................................13
HOW TO SELL SHARES.......................................................15
ADDITIONAL INFORMATION ABOUT ADVISOR SHARES..............................17
EXCHANGES................................................................17
DIVIDENDS AND DISTRIBUTIONS..............................................17
TAXES....................................................................18
YEAR 2000 DISCLOSURE.....................................................18
FINANCIAL HIGHLIGHTS.....................................................19
<PAGE>
SUMMARY INFORMATION
This summary identifies the investment objective, principal investment
strategies, and principal risks of Schroder Emerging Markets Fund Institutional
Portfolio. The investment objective and policies of the Fund may, unless
otherwise specifically stated, be changed by the Board of Trustees of Schroder
Capital Funds (Delaware) without a vote of the shareholders. As a matter of
policy, the Board of Trustees of the Trust would not materially change the
Fund's investment objective without shareholder approval.
THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING SUBSTANTIALLY
ALL OF ITS INVESTABLE ASSETS IN SCHRODER EMERGING MARKETS FUND INSTITUTIONAL
PORTFOLIO, A SEPARATELY MANAGED, NON-DIVERSIFIED PORTFOLIO OF SCHRODER CAPITAL
FUNDS THAT HAS THE SAME INVESTMENT OBJECTIVE AS, AND INVESTMENT POLICIES THAT
ARE SUBSTANTIALLY SIMILAR TO THOSE OF, THE FUND. IN REVIEWING THE FUND'S
INVESTMENT OBJECTIVE AND POLICIES BELOW, YOU SHOULD ASSUME THAT THE INVESTMENT
OBJECTIVE AND POLICIES OF THE PORTFOLIO ARE THE SAME IN ALL MATERIAL RESPECTS AS
THOSE OF THE FUND. SCHRODER IS THE INVESTMENT ADVISER TO THE FUND AND TO THE
PORTFOLIO.
After the narrative describing the Fund is a chart showing how the investment
returns of the Fund's Advisor Shares have varied from year to year. The chart
shows returns for each full calendar year since the Fund commenced operations.
The table following the chart provides some indication of the risks of investing
in the Fund by showing how the Fund's average annual returns for the last year
and for the life of the Fund compare to a broad-based securities market index.
PAST PERFORMANCE IS NOT NECESSARILY AN INDICATION OF FUTURE PERFORMANCE. It is
possible to lose money on an investment in the Fund.
For a discussion of recent market and portfolio developments affecting the
Fund's performance, see the Fund's most recent financial reports. You can call
the Trust at (800) 290-9826 to request a free copy of the financial reports.
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
o INVESTMENT OBJECTIVe. To seek 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.
o PRINCIPAL INVESTMENTS. The Fund normally invests at least 65% of its
assets in securities of companies determined by Schroder to be "emerging market"
issuers. The Fund may invest the remaining 35% of its assets in securities of
issuers located anywhere in the world. The Fund may invest in equity or debt
securities of any kind. The Fund is non-diversified.
o INVESTMENT STRATEGIEs. The Fund invests primarily in equity
securities of issuers domiciled or doing business in"emerging market" countries
in regions such as Southeast Asia, Latin America, Eastern and Southern Europe,
and Africa. "Emerging market" countries are countries not included at the time
of investment in the Morgan Stanley International World Index of major world
economies. Economies currently in the Index include: Australia, Austria,
Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, the
Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,
Switzerland, the United Kingdom, and the United States. Schroder may at times
determine based on its own analysis that an economy included in the Index should
nonetheless be considered an emerging market country, in which case that country
would constitute an emerging market country for purposes of
<PAGE>
the Fund's investments. There is no limit on the amount of the Fund's assets
that may be invested in securities of issuers domiciled in any one country.
The Fund also may do the following:
0 Invest in securities of closed-end investment
companies that invest primarily in foreign
securities, including securities of emerging market
issuers.
0 Invest up to 35% of its assets in debt securities,
including lower-quality, high-yielding debt
securities (commonly known as "junk bonds"), which
entail certain risks.
o PRINCIPAL RISKs.
0 EMERGING MARKETS. The Fund may invest in "emerging
market" countries whose securities markets may
experience heightened levels of volatility. The risks
of investing in emerging markets include greater
political and economic uncertainties than in foreign
developed markets, currency transfer restrictions, a
more limited number of potential buyers, and a
developing country's dependence on revenue from
particular commodities or international aid.
Additionally, the securities markets and legal
systems in emerging market countries may only be in a
developmental stage and may provide few, or none, of
the advantages or protections of markets or legal
systems available in more developed countries.
Emerging market countries may experience extremely
high levels of inflation, which may adversely affect
those countries' economies and securities markets.
0 FOREIGN SECURITIES. Investments in foreign securities
entail risks not present in domestic investments
including, among other things, risks related to
political or economic instability, currency exchange
and taxation.
0 SMALL COMPANIES. The Fund invests primarily in small
companies, which tend to be more vulnerable to
adverse developments than larger companies. Small
companies may have limited product lines, markets, or
financial resources, or may depend on a limited
management group. Their securities may trade
infrequently and in limited volumes. As a result, the
prices of these securities may fluctuate more than
the prices of securities of larger, more widely
traded companies. Also, there may be less publicly
available information about small companies or less
market interest in their securities as compared to
larger companies, and it may take longer for the
prices of the securities to reflect the full value of
their issuers' earnings potential or assets.
0 GEOGRAPHIC CONCENTRATION. There is no limit on the
amount of the Fund's assets that may be invested in
securities of issuers domiciled in any one country.
To the extent that the Fund invests a substantial
amount of its assets in one country, it will be more
susceptible to the political and economic
developments and market fluctuations in that country
than if it invested in a geographically more
diversified portfolio.
0 NON-DIVERSIFIED FUND. The Fund is a "non-diversified"
mutual fund, and may invest its assets in a more
limited number of issuers than may other diversified
investment companies. To the extent the Fund focuses
on fewer issuers, its risk
<PAGE>
of loss increases if the market value of a security
declines or if an issuer is not able to meet its
obligations.
0 EQUITY SECURITIES. Another risk of investing in the
Fund is the risk that the value of the equity
securities in the portfolio will fall, or will not
appreciate as anticipated by Schroder, due to factors
that adversely affect markets in general or
particular companies in the portfolio.
0 DEBT SECURITIES. The Fund invests in debt securities,
which are subject to market risk (the fluctuation of
market value in response to changes in interest
rates) and to credit risks (the risk that the issuer
may become unable or unwilling to make timely
payments of principal and interest).
0 JUNK BONDS. Junk bonds reflect a greater possibility
that adverse changes in the financial condition of
the issuer or in general economic conditions, or an
unanticipated rise in interest rates, may impair the
ability of the issuer to make payments of interest
and principal. If this were to occur, the values of
securities held by the Fund may become more volatile.
[EDGAR REPRESENTATION OF GRAPH CHART]
Calendar Year Annual Return
- ------------- -------------
1998 ___%
1997 -5.21%
1996 7.93%
[NOTE: NUMBERS IN BAR CHART ABOVE REFLECT INVESTOR SHARE INFORMATION. FORUM TO
REVISE TO SHOW ADVISOR SHARE INFORMATION.]
During the periods shown above, the highest quarterly return was [____]% for the
quarter ended [_____], and the lowest was [_____]% for the quarter ended
[________]. [NOTE: SUBJECT TO CHANGE BASED ON FOURTH QUARTER OF 1998.] For the
period January 1, 1998 through October 31, 1998, the Fund's total return
(unannualized) was [_____]%.
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------ ----------------- -------------------- ----------------
AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS SINCE INCEPTION OF LIFE OF FUND
ENDING DECEMBER 31, 1998) LAST ONE YEAR ADVISOR SHARES (SINCE 3/31/95)
(-------)
- ------------------------------------------------ ----------------- -------------------- ----------------
- ------------------------------------------------ ----------------- -------------------- ----------------
Schroder Emerging Markets Fund Institutional [___]% [___]% [___]%
Portfolio
- ------------------------------------------------ ----------------- -------------------- ----------------
- ------------------------------------------------ ----------------- -------------------- ----------------
*Morgan Stanley Capital International Emerging [___]% [___]% [___]%
Markets Free Index
- ------------------------------------------------ ----------------- -------------------- ----------------
</TABLE>
<PAGE>
* The Morgan Stanley Capital International Emerging Markets Free Index is an
unmanaged market capitalization index of companies representative of the market
structure of 26 emerging countries in Europe, Latin America, and the Pacific
Basin. The Index reflects actual buyable opportunities for the non-domestic
investor by taking into account local market restrictions on share ownership by
foreigners.
FEES AND EXPENSES
THESE TABLES DESCRIBE THE FEES AND EXPENSES THAT YOU WILL PAY IF YOU INVEST IN
ADVISOR SHARES OF THE FUND.
SHAREHOLDER FEES (paid directly from your investment):
Maximum Sales Load Imposed on Purchases None
Maximum Deferred Sales Load None
Maximum Sales Load Imposed on Reinvested Dividends None
Purchase Charge (based on amount invested)(1) 0.50%
Redemption Charge (as a percentage of the net asset value
of shares redeemed)(1) 0.50%
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets):
Management Fees 1.10%
Distribution (12b-1) Fees (2) 0%
Other Expenses 0.86%
Total Annual Fund Operating Expenses 1.97%
Fee Waiver and/or Expense Limitation (3) 0.36%
Net Expenses (3) 1.61%
- --------------------------
1 The Purchase and Redemption Charges are collected by the Fund and paid to the
Portfolio to compensate the other investors in the Portfolio for expenses
incurred in connection with purchases and sales of portfolio securities.
2 The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended, with respect to its Advisor Shares.
Although the Trustees have not currently authorized payments under the
Distribution Plan, payments by the Fund under its Shareholder Service Plan,
which will not exceed the annual rate of 0.25% of the Fund's average daily net
assets, will be deemed to have been made pursuant to the Distribution Plan to
the extent such payments may be considered to be primarily intended to result in
the sale of the Fund's Advisor Shares.
3 The Net Expenses shown above reflect the effect of contractually imposed
expense limitations and/or fee waivers in effect through October 31, 1999 on
Total Annual Fund Operating Expenses of the Funds.
<PAGE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in Advisor Shares of the Fund for
the time periods indicated and either retain all of your shares or redeem all of
your shares at the end of those periods. The Example also assumes that your
investment earns a 5% return each year and that the Fund's total annual
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:*
<TABLE>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Assuming no redemption $250 $667 $1110 $2341
Assuming full redemption $301 $722 $1168 $2408
at end of period
</TABLE>
- --------------------
*Assuming that the Fund's operating expenses remain the same as the Net Expenses
shown above, based on the other assumptions described above, your costs would
be:
<TABLE>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Assuming no redemption $ 214 $ 559 $ 928 $1,966
Assuming full redemption $ 266 $ 615 $ 987 $2,035
at end of period
</TABLE>
<PAGE>
OTHER INVESTMENT STRATEGIES AND RISKS
The Fund may not achieve its objective in all circumstances and you
could lose money by investing. The following provides more detail about the
Fund's principal risks and the circumstances which could adversely affect the
value of the Fund's shares or its total return.
RISKS OF INVESTING IN THE FUND
o EMERGING MARKETs. The Fund intends to invest a substantial portion of
its assets in securities of issuers in emerging market countries. An issuer will
be considered to be an emerging market issuer if Schroder determines that: (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) 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) at
least 50% of its assets are situated in emerging market countries.
The prices of securities of issuers in emerging market countries are
subject to greater volatility than those of issuers in more developed countries.
Investments in emerging market countries are subject to the same risks
applicable to foreign investments generally, although those risks may be
increased due to conditions in such countries. For example, the securities
markets and legal systems in emerging market countries may only be in a
developmental stage and may provide few, or none, of the advantages or
<PAGE>
protections of markets or legal systems available in more developed countries.
Although many of the securities in which the Fund may invest are traded on
securities exchanges, they may trade in limited volume, and the exchanges may
not provide all of the conveniences or protections provided by securities
exchanges in more developed markets. The Fund may also invest a substantial
portion of its assets in securities traded in the over-the-counter markets in
emerging market countries and not on any exchange, which may affect the
liquidity of the investment and expose the Fund to the credit risk of its
counterparties in trading those investments. Emerging market countries may
experience extremely high rates of inflation, which may adversely affect those
countries' economies and securities markets.
o INVESTMENT IN ASIa. Certain Asian markets have experienced
devaluation and/or significant volatility during the past several years.
Schroder cannot predict whether, when and to what extent the Asian markets will
recover. To the extent that the Fund focuses its investments in any Asian
countries, the Fund will be susceptible to adverse political, economic and
market developments in those countries.
o FOREIGN SECURITIES. Investments in foreign securities entail certain
risks. There may be a possibility of nationalization or expropriation of assets,
confiscatory taxation, political or financial instability, and diplomatic
developments that could affect the value of the Fund's investments in certain
foreign countries. Since foreign securities normally are denominated and traded
in foreign currencies, the values of the Fund's assets may be affected favorably
or unfavorably by currency exchange rates, currency exchange control
regulations, foreign withholding taxes, and restrictions or prohibitions on the
repatriation of foreign currencies. There may be less information publicly
available about a foreign issuer than about a U.S. issuer, and foreign issuers
are not generally subject to accounting, auditing, and financial reporting
standards and practices comparable to those in the United States. The securities
of some foreign issuers are less liquid and at times more volatile than
securities of comparable U.S. issuers. Foreign brokerage commissions and other
fees are also generally higher than in the United States. Foreign settlement
procedures and trade regulations may involve certain risks (such as delay in
payment or delivery of securities or in the recovery of the Fund's assets held
abroad) and expenses not present in the settlement of domestic investments.
In addition, legal remedies available to investors in certain foreign
countries may be more limited than those available with respect to investments
in the United States or in other foreign countries. The willingness and ability
of sovereign issuers to pay principal and interest on government securities
depends on various economic factors, including the issuer's balance of payments,
overall debt level, and cash-flow considerations related to the availability of
tax or other revenues to satisfy the issuer's obligations. If a foreign
governmental entity is unable or unwilling to meet its obligations on the
securities in accordance with their terms, the Fund may have limited recourse
available to it in the event of default. The laws of some foreign countries may
limit the Fund's ability to invest in securities of certain issuers located in
those countries. Special tax considerations apply to foreign securities. Except
as otherwise noted in this Prospectus, there is no limit on the amount of the
Fund's assets that may be invested in foreign securities.
If the Fund purchases securities denominated in foreign currencies, a
change in the value of any such currency against the U.S. dollar will result in
a change in the U.S. dollar value of the Fund's assets and the Fund's income
available for distribution. In addition, although at times most of the Fund's
income may be received or realized in these currencies, the Fund will be
required
<PAGE>
to compute and distribute its income in U.S. dollars. As a result, if the
exchange rate for any such currency declines after the Fund's income has been
earned and translated into U.S. dollars but before payment, the Fund could be
required to liquidate portfolio securities to make such distributions.
Similarly, if an exchange rate declines between the time the Fund incurs
expenses in U.S. dollars and the time such expenses are paid, the amount of such
currency required to be converted into U.S. dollars in order to pay such
expenses in U.S. dollars will be greater than the equivalent amount in any such
currency of such expenses at the time they were incurred. The Fund may buy or
sell foreign currencies and options and futures contracts on foreign currencies
for hedging purposes in connection with its foreign investments.
In determining whether to invest in debt securities of foreign issuers,
Schroder considers the likely impact of foreign taxes on the net yield available
to the Fund and its shareholders. Income received by the Fund from sources
within foreign countries may be reduced by withholding and other taxes imposed
by such countries. Tax conventions between certain countries and the United
States may reduce or eliminate such taxes. Any such taxes paid by the Fund will
reduce its income available for distribution to shareholders. In certain
circumstances, the Fund may be able to pass through to shareholders credits for
foreign taxes paid.
o DEBT SECURITIEs. The Fund may invest in debt securities, which are
subject to the risk of fluctuation of market value in response to changes in
interest rates and the risk that the issuer may become unable or unwilling to
make timely payments of principal and interest. Additionally, the Fund may
invest in lower-quality, high-yielding debt securities, commonly known as junk
bonds. Lower-rated securities are predominantly speculative and tend to be more
susceptible than other debt securities to adverse changes in the financial
condition of the issuer, general economic conditions, or an unanticipated rise
in interest rates, which may affect an issuer's ability to pay interest and
principal. This would likely make the values of the securities held by the Fund
more volatile and could limit the Fund's ability to liquidate its securities.
Changes by recognized rating services in their ratings of any fixed-income
security and in the perceived ability of an issuer to make payments of interest
and principal also may affect the value of these investments.
INVESTMENT STRATEGIES AND TECHNIQUES
The Summary Information at the beginning of the prospectus summarizes
the investment objectives and principal investment strategies of the Fund. This
prospectus does not attempt to disclose all of the various investment techniques
and types of securities that Schroder might use in managing the Fund. As in any
mutual fund, investors must rely on the professional investment judgment and
skill of the Fund's adviser. In addition to those described in the Summary
Information, the Fund may at times use the following strategies and techniques,
which involve certain special risks:
o FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Changes in currency exchange
rates will affect the U.S. dollar value of Fund assets, including securities
denominated in foreign currencies. Exchange rates between the U.S. dollar and
other currencies fluctuate 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 political, economic and financial conditions, which may be
difficult to predict. The Fund may engage in currency exchange transactions to
protect against unfavorable fluctuations in exchange rates.
In particular, the Fund may enter into foreign currency exchange
transactions to protect against a change in exchange ratios that may occur
between the date on which the Fund contracts to trade a security and the
settlement date ("transaction hedging") or in anticipation of placing a trade
("anticipatory hedging"); to "lock in" the U.S. dollar value of interest and
dividends to be paid in a
<PAGE>
foreign currency; or to hedge against the possibility that a foreign currency in
which portfolio securities are denominated or quoted may suffer a decline
against the U.S. dollar ("position hedging").
From time to time, the Fund's currency hedging transactions may call
for the delivery of one foreign currency in exchange for another foreign
currency and may at times involve currencies in which its portfolio securities
are not then denominated ("cross hedging"). The Fund may also engage in "proxy"
hedging, whereby the Fund would seek to hedge the value of portfolio holdings
denominated in one currency by entering into an exchange contract on a second
currency, the valuation of which Schroder believes correlates to the value of
the first currency. Schroder may buy or sell currencies in "spot" or forward
transactions. "Spot" transactions are executed contemporaneously on a cash basis
at the then-prevailing market rate.
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. Forward contracts do not eliminate fluctuations in the
underlying prices of securities and expose the Fund to the risk that the
counterparty is unable to perform.
The Fund incurs foreign exchange expenses in converting assets from one
currency to another. Although there is no limit on the amount of the Fund's
assets that may be invested in foreign currency exchange and foreign currency
forward contracts, the Fund may engage in foreign currency exchange transactions
only for hedging purposes. Suitable foreign currency hedging transactions may
not be available in all circumstances and there can be no assurance that the
Fund will utilize hedging transactions at any time.
O SECURITIES LOANS, REPURCHASE AGREEMENTS, AND FORWARD COMMITMENTS. The
Fund may lend portfolio securities to broker-dealers up to one-quarter of the
Fund's total assets. The Fund may also enter into repurchase agreements without
limit. These transactions must be fully collateralized at all times, but involve
some risk to the Fund if the other party should default on its obligation and
the Fund is delayed or prevented from recovering the collateral. The Fund may
also enter into contracts to purchase securities for a fixed price at a future
date beyond customary settlement time, which may increase its overall investment
exposure and involves a risk of loss if the value of the securities declines
prior to the settlement date.
o INVESTMENT IN OTHER INVESTMENT COMPANIES. The Fund may invest in
other investment companies or pooled vehicles, including closed-end funds, that
are advised by Schroder or its affiliates or by unaffiliated parties. When
investing in another investment company, the Fund may pay a premium above such
investment company's net asset value per share. As a shareholder in an
investment company, the Fund would bear its ratable share of the investment
company's expenses, including advisory and administrative fees, and would at the
same time continue to pay its own fees and expenses.
o DERIVATIVE INVESTMENTS. Instead of investing directly in the types of
portfolio securities described in the Summary Information, the Fund may buy or
sell a variety of "derivative" investments to gain exposure to particular
securities or markets, in connection with hedging transactions, and, to the
extent permitted by applicable law, to increase total return. These may include
options, futures, and indices, for example. Derivatives involve the risk that
they may not work as intended under all market conditions. Also, derivatives
often involve the risk that the other party to the transaction will be unable to
<PAGE>
meet its obligations or that the Fund will be unable to close out the position
at any particular time or at an acceptable price.
O ZERO-COUPON BONDS. The Fund may invest in zero-coupon bonds.
Zero-coupon bonds are issued at a significant discount from face value and pay
interest only at maturity rather than at intervals during the life of the
security. Zero-coupon bonds allow an issuer to avoid the need to generate cash
to meet current interest payments and, as a result, may involve greater credit
risks than bonds that pay interest currently.
o PORTFOLIO TURNOVEr. The length of time the Fund has held a particular
security is not generally a consideration in investment decisions. The
investment policies of the Fund may lead to frequent changes in the Fund's
investments, particularly in periods of volatile market movements. A change in
the securities held by the Fund is known as "portfolio turnover." Portfolio
turnover generally involves some expense to the Fund, including brokerage
commissions or dealer mark-ups and other transaction costs on the sale of
securities and reinvestment in other securities. Such sales may increase the
amount of capital gains (and, in particular, short-term gains) realized by the
Fund, on which shareholders pay tax.
o TEMPORARY DEFENSIVE STRATEGIES. At times, Schroder may judge that
conditions in the securities markets make pursuing the Fund's basic investment
strategy inconsistent with the best interests of its shareholders. At such
times, Schroder may temporarily use alternate investment strategies primarily
designed to reduce fluctuations in the value of the Fund's assets. In
implementing these "defensive" strategies, the Fund would invest in high-quality
debt securities, cash, or money market instruments to any extent Schroder
considers consistent with such defensive strategies. It is impossible to predict
when, or for how long, the Fund will use these alternate strategies. One risk of
taking such temporary defensive positions is that the Fund may not achieve its
investment objective.
MANAGEMENT OF THE FUND
The Trust is governed by a Board of Trustees which has retained
Schroder to manage the investments of the Fund. Subject to the control of the
Trustees, Schroder also manages the Fund's other affairs and business. Schroder
has served as investment adviser to the Fund since inception.
Schroder Emerging Markets Fund Institutional Portfolio, the Portfolio
in which the Fund invests, is managed under the direction of a board of trustees
of Schroder Capital Funds. Schroder has served as investment adviser to the
Portfolio since inception.
Schroder has been an investment manager since 1962, and currently
serves as investment adviser to the Fund, the Portfolio, and a broad range of
institutional investors. Schroder's address is 787 Seventh Avenue, New York, New
York 10019, and its telephone number is (212) 641-3900.
o MANAGEMENT FEES PAID BY THE PORTFOLIO. For the fiscal year ended
October 31, 1998 the Portfolio paid management fees to Schroder at the annual
rate of 0.718%. Schroder has agreed to waive [ ] of the advisory fees payable by
the Portfolio. This waiver shall remain in effect until its elimination is
approved by the board of trustees of Schroder Capital Funds. The Fund, because
of its investment in the Portfolio, bears a proportionate part of the management
fees (and other expenses) paid by the Portfolio (based on the percentage of the
Portfolio's assets attributable to the Fund).
<PAGE>
The Fund has entered into an investment advisory agreement with
Schroder pursuant to which Schroder would manage the Fund's assets directly in
the event that the Fund were to cease investing substantially all of its assets
in the Portfolio. Schroder will not receive any fees under that agreement so
long as the Fund continues to invest substantially all of its assets in the
Portfolio or in another investment company.
o EXPENSE LIMITATIONS AND WAIVERs. In order to limit the Fund's
expenses, Schroder has voluntarily agreed to reduce its compensation (and, if
necessary, to pay certain other Fund expenses) until October 31, 1999 to the
extent that the Fund's total operating expenses attributable to its Advisor
Shares exceed the annual rate of 1.45%.
o PORTFOLIO MANAGERs. Schroder's investment decisions for the Fund and
the Portfolio are generally made by an investment manager or an investment team,
with the assistance of an investment committee. The following portfolio managers
have had primary responsibility for making investment decisions for the
Portfolio or the Fund, as the case may be, since the years shown below. Their
recent professional experience is also shown.
<TABLE>
<S> <C> <C> <C>
- --------------------------- ------------------------ ------------------- -------------------------------------------- ----------
Fund/Portfolio Portfolio Manager Since Recent Professional Experience
- --------------------------- ------------------------ ------------------- -------------------------------------------- ----------
- --------------------------- ------------------------ ------------------- -------------------------------------------- ----------
Both the Fund and the John Troiano Inception (1995) Employed as an investment professional at
Portfolio Schroder since 1986. Mr. Troiano is the
Chief Executive and director
of Schroder, and a Vice President
of the Trust and of Schroder
Capital Funds.
- --------------------------- ------------------------ ------------------- -------------------------------------------- ----------
- --------------------------- ------------------------ ------------------- -------------------------------------------- ----------
Heather Crighton Inception (1995) Employed as an investment professional at
Schroder since 1993. Ms. Crighton is a
director and a First Vice President of
Schroder.
- --------------------------- ------------------------ ------------------- -------------------------------------------- ----------
- --------------------------- ------------------------ ------------------- -------------------------------------------- ----------
Mark Bridgeman Inception (1995) Employed as an investment professional at
Schroder since 1990. Mr. Bridgeman is a
First Vice President of Schroder.
- --------------------------- ------------------------ ------------------- -------------------------------------------- ----------
- --------------------------- ------------------------ ------------------- -------------------------------------------- ----------
</TABLE>
HOW THE FUND'S SHARES ARE PRICED
<PAGE>
The Fund calculates the net asset value of its Advisor Shares by
dividing the total value of its assets attributable to its Advisor Shares, less
its liabilities attributable to those shares, by the number of Advisor Shares
outstanding. Shares are valued as of the close of trading on the New York Stock
Exchange (normally 4:00 p.m.) each day the Exchange is open. The Fund values its
portfolio securities for which market quotations are readily available at market
value. Short-term investments that will mature in 60 days or less are stated at
amortized cost, which approximates market value. The Fund values all other
securities and assets at their fair values as determined by Schroder. All assets
and liabilities of the Fund denominated in foreign currencies are valued in U.S.
dollars based on the exchange
<PAGE>
rate last quoted by a major bank prior to the time when the net asset value of
the Fund's shares is calculated. Because certain of the securities in which the
Fund may invest may trade on days when the Fund does not price its Advisor
Shares, the net asset value of the Fund's Advisor Shares may change on days when
shareholders will not be able to purchase or redeem their Advisor Shares.
HOW TO BUY SHARES
You may purchase Advisor Shares of the Fund directly from the Trust or
through a service organization such as a bank, trust company, broker-dealer, or
other financial organization (a Service Organization) having an arrangement with
Schroder Fund Advisors Inc., the distributor of the Trust's shares. If you do
not have a Service Organization, Schroder Fund Advisors Inc. can provide you
with a list of available firms. Your Service Organization is responsible for
forwarding all of the necessary documentation to the Trust, and may charge for
its services.
Advisor Shares of the Fund are sold at their net asset value next
determined after the Trust receives your order, plus a purchase charge of 0.50%
of the amount invested. The purchase charge, which is not a sales charge, is
assessed by the Fund and paid to the Portfolio to compensate other investors in
the Portfolio for expenses incurred in purchasing securities due to an
investment in the Fund. The purchase charge is not assessed on the reinvestment
of dividends or distributions or on purchases through an in-kind subscription.
In order for you to receive the Fund's next determined net asset value, the
Trust must receive your order before the close of regular trading on the New
York Stock Exchange.
If the shares you purchase will be held in your own name (rather than
in the name of your Service Organization), your payment for the shares must be
accompanied by a completed Account Application in proper form. The Trust or
Forum Shareholder Services, LLC, the Trust's Transfer Agent, may request
additional documentation, such as copies of corporate resolutions and
instruments of authority, from corporations, administrators, executors, personal
representatives, directors, or custodians. You may obtain an Account Application
from the Transfer Agent, P.O. Box 446, Portland, Maine 04112, or by calling
(800) 290-9826. You also may obtain an Account Application from your Service
Organization.
INVESTMENT MINIMUMS
The minimum investment for initial and additional purchases for the
Fund is set forth in the following table:
-------------------------------------- ----------------- -------------------
Initial Additional
Investment Investments
-------------------------------------- ----------------- -------------------
-------------------------------------- ----------------- -------------------
Regular Accounts $250,000 No minimum
-------------------------------------- ----------------- -------------------
-------------------------------------- ----------------- -------------------
Traditional IRAs $2,000 $250
-------------------------------------- ----------------- -------------------
The Trust is authorized to reject any purchase order.
<PAGE>
PURCHASES BY CHECK
You may purchase shares of the Fund by mailing a check (in U.S. dollars)
payable to the Fund. Third-party checks will not be accepted.
For initial purchases, your check must be accompanied by a completed
Account Application in proper form. The Trust may request additional
documentation to evidence the authority of the person or entity making the
purchase request.
You should mail your check and your completed Account Application to:
Schroder Emerging Markets Fund Institutional Portfolio -- Advisor Shares
P.O. Box 446
Portland, Maine 04112
Your payments should clearly indicate the shareholder's name and account number,
if applicable.
PURCHASES BY BANK WIRE/TELEPHONE
If you make your initial investment by wire, your order must be
preceded by a completed Account Application. Upon receipt of the Application,
the Trust will assign you an account number and your account will become active.
Wire orders received prior to the close of trading on the New York Stock
Exchange (normally 4:00 p.m., Eastern Time) on each day the Exchange is open for
trading will be processed at the net asset value determined as of that day.
Wire orders received after that time will be processed at the net asset value
determined thereafter.
Once you have an account number, you may purchase Advisor Shares
through your Service Organization or by telephoning the Transfer Agent at (800)
290-9826 to give notice that you will be sending funds by wire, and then
arranging with your bank to wire funds to the Trust. Your purchase will not be
processed until the Trust has received the wired funds.
Federal Reserve Bank wire instructions are as follows:
The Chase Manhattan Bank
New York, NY
ABA No.: 021000021
For Credit To: Forum Shareholder Services, LLC
Account. No.: 910-2-718187
Ref.: Schroder Emerging Markets Fund Institutional
Portfolio -- Advisor Shares
Account of: (shareholder name)
Account No.: (shareholder account number)
The wire order must specify the name of the Fund, the shares' class (i.e.,
Advisor Shares), the account name and number, address, confirmation number,
amount to be wired, name of the wiring bank, and name and telephone number of
the person to be contacted in connection with the order.
In an effort to prevent unauthorized or fraudulent purchase or
redemption requests by telephone, the Transfer Agent will follow reasonable
procedures to confirm that telephone instructions are genuine. The Transfer
Agent and the Trust generally will not be liable for any losses due to
<PAGE>
unauthorized or fraudulent purchase or redemption requests, but either or both
may be liable if they do not follow these procedures.
OTHER PURCHASE INFORMATION
Advisor Shares of the Fund may be purchased for cash or in exchange for
securities held by the investor, subject to the determination by Schroder that
the securities are acceptable. (For purposes of determining whether securities
will be acceptable, Schroder will consider, among other things, whether they are
liquid securities of a type consistent with the investment objectives and
policies of the Fund and have a readily ascertainable value.) If the Fund
receives securities from an investor in exchange for shares of the Fund, the
Fund will under some circumstances have the same tax basis in the securities as
the investor had prior to the exchange (and the Fund's gain for tax purposes
would be calculated with regard to the investor's tax basis). Any gain on the
sale of those securities would be subject to distribution as capital gain to all
of the Fund's shareholders. Schroder reserves the right to reject any particular
investment. Securities accepted by Schroder will be valued in the same manner as
are the Trust's portfolio securities as of the time of the next determination of
the Fund's net asset value. All dividend, subscription, or other rights which
are reflected in the market price of accepted securities at the time of
valuation become the property of the Fund and must be delivered to the Fund upon
receipt by the investor. A gain or loss for federal income tax purposes may be
realized by investors upon the exchange. Investors interested in purchases
through exchange should telephone Schroder at (800) 290-9826.
HOW TO SELL SHARES
You may sell your Advisor Shares back to the Fund on any day the New
York Stock Exchange is open, either through your Service Organization or
directly to the Fund. If your shares are held in the name of a Service
Organization, you may only sell the shares through that Service Organization.
The Service Organization may charge you for its services. If you choose to sell
your shares directly to the Fund, you may do so by sending a letter of
instruction or stock power form to the Trust, or by calling the Transfer Agent
at (800) 290-9826.
The price you will receive is the net asset value next
determined after receipt of your redemption request in good order, plus a
redemption charge of 0.50% of the amount redeemed. The redemption charge, which
is not a sales charge, is assessed by the Fund and paid to the Portfolio to
compensate the other investors in the Portfolio for expenses incurred in
connection with sales of portfolio securities. 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 Advisor Shares purchased through the reinvestment of
dividends and distributions (with respect to which no redemption charge is
applied) and (ii) from Advisor Shares for which the redemption charge is
applicable, on a first purchased, first redeemed basis.
A redemption request is in good order if it includes the exact name in
which the shares are registered, the investor's account number, and the number
of shares or the dollar amount of shares to be redeemed, and, for written
requests, if it is signed exactly in accordance with the registration form. If
you hold your Advisor Shares in certificate form, you must submit the
certificates and sign the assignment form on the back of the certificates.
Signatures must be guaranteed by a bank, broker/dealer, or certain other
<PAGE>
financial institutions. You may redeem your Advisor Shares by telephone only if
you elected the telephone redemption privilege option on your Account
Application or otherwise in writing. Shares for which certificates have been
issued may not be redeemed by telephone. The Trust may require additional
documentation from shareholders that are corporations, partnerships, agents,
fiduciaries, or surviving joint owners.
If you redeem shares through your Service Organization, your Service
Organization is responsible for ensuring that the Transfer Agent receives your
redemption request in proper form and at the appropriate time.
The Trust will pay you for your redemptions as promptly as possible and
normally within seven days after the request for redemption is received in
writing in good order. (The Trust generally sends payment for shares the
business day after a request is received.) Under unusual circumstances, the
Trust may suspend redemptions or postpone payment for more than seven days, as
permitted by law. The Trust will only redeem shares for which it has received
payment.
If your account balance falls below a minimum amount set by the
Trustees (presently $100,000) of the Fund, the Trust may choose to redeem your
shares in the Fund and pay you for them. You will receive at least 30 days
written notice before the Trust redeems your shares, and you may purchase
additional shares at any time to avoid a redemption. The Trust may also redeem
shares if you own shares of the Fund above a maximum amount set by the Trustees.
There is currently no maximum, but the Trustees may establish one at any time,
which could apply to both present and future shareholders.
The Trust may suspend the right of redemption during any period when:
(1) trading on the New York Stock Exchange is restricted or the Exchange is
closed; (2) the Securities and Exchange Commission has by order permitted such
suspension; or (3) an emergency (as defined by rules of the SEC) exists making
disposal of portfolio investments or determination of the Fund's net asset value
not reasonably practicable.
If you request that your redemption proceeds be sent to you at an
address other than your address of record, or to another party, you must include
a signature guarantee for each such signature by an eligible signature
guarantor, such as a member firm of a national securities exchange or a
commercial bank or trust company located in the United States. If you are a
resident of a foreign country, another type of certification may be required.
Please contact the Transfer Agent for more details at (800) 290-9826.
Corporations, fiduciaries, and other types of shareholders may be required to
supply additional documents which support their authority to effect a
redemption.
WIRE TRANSFERS
If your Service Organization receives Federal Reserve wires, you may
instruct that your redemption proceeds be forwarded by wire to your account with
your Service Organization; you may also instruct that your redemption proceeds
be forwarded to you by a wire transfer. Please indicate your Service
Organization's or your own complete wiring instructions.
ADDITIONAL INFORMATION ABOUT ADVISOR SHARES
SHAREHOLDER SERVICING PLAN. The Trust has adopted a Shareholder
Servicing Plan (the "Service Plan") for the Advisor Shares of the Fund. Under
the Service Plan, the Fund pays fees to Schroder Fund
<PAGE>
Advisors Inc. at an annual rate of up to 0.25% of the average daily net assets
of the Fund represented by Advisor Shares. Schroder Fund Advisors Inc. may enter
into shareholder service agreements with Service Organizations pursuant to which
the Service Organizations provide administrative support services to their
customers who are Fund shareholders. In return for providing these support
services, a Service Organization may receive payments from Schroder Fund
Advisors Inc. at a rate not exceeding 0.25% of the average daily net assets of
the Advisor Shares of each Fund for which the Service Organization is the
Service Organization of record. Some Service Organizations may impose additional
conditions or fees. For instance a Service Organization may require its clients
to invest more than the minimum amounts required by the Trust for initial or
subsequent investments or may charge a direct fee for its services. These fees
would be in addition to any amounts which you pay as a shareholder of the Fund
or amounts which might be paid to the Service Organization by Schroder Fund
Advisors Inc. Please contact your Service Organization for details.
DISTRIBUTION PLANS. The Fund has adopted a Distribution Plan which
allows the Fund to pay distribution fees for the sale and distribution of its
Advisor Shares. Under the Plan, the Fund may pay Schroder Fund Advisors Inc.
compensation in an amount limited in any fiscal year to the annual rate of 0.50%
of the Fund's average daily net assets attributable to its Advisor Shares. THE
TRUSTEES HAVE NOT CURRENTLY AUTHORIZED PAYMENTS UNDER THE DISTRIBUTION PLAN,
although payments by the Fund under the Shareholder Service Plan, which will not
exceed the annual rate of 0.25% of the Fund's average daily net assets, will be
deemed to have been made pursuant to the Distribution Plan to the extent such
payments may be considered to be primarily intended to result in the sale of the
Fund's Advisor Shares. To the extent that payments are made in the future under
the Plan, they would be paid out of the Fund's assets attributable to its
Advisor Shares on an ongoing basis, would increase the cost of your investment,
and may cost you more than paying other types of sales charges imposed by other
funds.
Payments under the Fund's Shareholder Servicing Plan for Advisor Shares
will be considered to have been made pursuant to the Fund's Distribution Plan,
to the extent such payments may be deemed to be primarily intended to result in
the sale of the Fund's Advisor Shares.
EXCHANGES
You can exchange your Advisor Shares of the Fund for Advisor Shares of
any other fund in the Schroder family of funds at any time at their respective
net asset values. To exchange shares, please call (800) 290-9826.
DIVIDENDS AND DISTRIBUTIONS
The Fund distributes any net investment income and any net realized
capital gain at least annually. Distributions from net capital gain are made
after applying any available capital loss carryovers.
YOU CAN CHOOSE FROM FOUR DISTRIBUTION OPTIONS:
-- Reinvest all distributions in additional Advisor Shares of the
Fund;
<PAGE>
-- Receive distributions from net investment income in cash while
reinvesting capital gains distributions in additional Advisor
Shares of the Fund;
-- Receive distributions from net investment income in additional
Advisor Shares of the Fund while receiving capital gain
distributions in cash; or
-- Receive all distributions in cash.
You can change your distribution option by notifying the Transfer Agent
in writing. If you do not select an option when you open your account, all
distributions by the Fund will be reinvested in Advisor Shares of the Fund. You
will receive a statement confirming reinvestment of distributions in additional
Fund shares promptly following the period in which the reinvestment occurs.
TAXES
o TAXES ON DIVIDENDS AND DISTRIBUTIONs. For federal income tax
purposes, distributions of investment income are taxable as ordinary income.
Taxes on distributions of capital gains are determined by how long the Fund
owned the investments that generated the gains, rather than how long you have
owned your shares. Distributions are taxable to you even if they are paid from
income or gains earned by the Fund before you invested (and thus were included
in the price you paid for your shares). Distributions of gains from investments
that the Fund owned for more than 12 months will be taxable as capital gains.
Distributions of gains from investments that the Fund owned for 12 months or
less will be taxable as ordinary income. Distributions are taxable whether you
received them in cash or reinvested them in additional shares of the Fund.
o TAXES WHEN YOU SELL OR EXCHANGE YOUR SHAREs. Any gain resulting from
the sale or exchange of your shares in the Fund will also generally be subject
to federal income or capital gains tax, depending on your holding period.
o TAX TREATMENT OF 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, gains
or losses have been distributed by the Portfolio. The Portfolio intends to
conduct its operations so that the Fund, if it invests all of its assets in the
Portfolio, may qualify as a regulated investment company.
o CONSULT YOUR TAX ADVISOR ABOUT OTHER POSSIBLE TAX CONSEQUENCES. This
is a summary of certain federal tax consequences of investing in the Fund. You
should consult your tax advisor for more information on your own tax situation,
including possible state and local taxes.
YEAR 2000 DISCLOSURE
The Fund receives services from its investment adviser, administrator,
subadministrator, distributor, transfer agent, custodian and other providers
which rely on the smooth functioning of their respective systems and the systems
of others to perform those services. It is generally recognized that certain
systems in use today may not perform their intended functions adequately after
the Year 1999 because of the inability of the software to distinguish the Year
2000 from the Year 1900. Schroder is taking steps that it believes are
reasonably designed to address this potential "Year 2000" problem and to obtain
satisfactory assurances that comparable steps are being taken by each of the
Fund's other major service providers. There can be no assurance, however, that
these steps will be sufficient to avoid any adverse impact on the Fund from this
problem.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
financial performance of the Fund for the past 5 years or since the Fund
commenced operations. Certain information reflects financial results for a
single Fund share. The total returns represent the rate that an investor would
have earned or lost on an investment in Advisor Shares of the Fund, assuming
reinvestment of all dividends and distributions. This information has been
audited by Pricewaterhouse Coopers LLP, whose report, along with the Fund's
financial statements, are included in the Fund's annual report to shareholders.
The annual report is available upon request.
<TABLE>
<S> <C> <C>
Schroder Emerging Markets Fund Institutional Portfolio Fund - Advisor Shares
Period Ended Period Ended
-------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $xx.xx $xx.xx
INVESTMENT OPERATIONS:
Net Investment Income (Loss) x.xx x.xx
Net Realized and Unrealized Gain (Loss) on Investments (x.xx) (x.xx)
Total from Investment Operations (x.xx) (x.xx)
NET ASSET VALUE, END OF PERIOD $x.xx $x.xx
Total Return(a) (x.xx)% (x.xx)%
Ratios/Supplementary Data
NET ASSETS, END OF PERIOD (IN THOUSANDS) $xx.xx $xx.xx
Ratios to Average Net Assets:
Expenses After Expense Limitation x.xx% x.xx%
Expenses Before Expense Limitation -- --
Net Investment Income (Loss) After Expense Limitation x.xx% x.xx%
Average Commission Rate Per Share x.xxxx x.xxxx
Portfolio Turnover Rate xx.xx% xx.xx%
</TABLE>
- ------------------------------------------------------------------------
<PAGE>
================================================================================
FUNDS AVAILABLE THROUGH SCHRODER FUND ADVISORS INC.
PLEASE CALL (800) 730-2932 FOR COMPLETE INFORMATION AND TO OBTAIN THE
RELEVANT PROSPECTUS.
PLEASE READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST.
<TABLE>
<S><C> <C>
SCHRODER CAPITAL FUNDS (DELAWARE) SCHRODER SERIES TRUST
SCHRODER INTERNATIONAL FUND SCHRODER LARGE CAPITALIZATION EQUITY FUND
SCHRODER EMERGING MARKETS FUND SCHRODER SMALL CAPITALIZATION VALUE FUND
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND SCHRODER SHORT-TERM INVESTMENT FUND
SCHRODER INTERNATIONAL BOND FUND SCHRODER MIDCAP VALUE FUND
SCHRODER U.S. DIVERSIFIED GROWTH FUND SCHRODER INVESTMENT GRADE INCOME FUND
SCHRODER U.S. SMALLER COMPANIES FUND
SCHRODER MICRO CAP FUND
</TABLE>
SCHRODER SERIES TRUST II
SCHRODER ALL-ASIA FUND
================================================================================
<PAGE>
[Back Cover] [Logo]
SCHRODER CAPITAL FUNDS (DELAWARE)
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
The Fund's statement of additional information (SAI) and annual and semi-annual
reports to shareholders include additional information about the Fund. The SAI
and the financial statements included in the Fund's most recent annual report to
shareholders are incorporated by reference into this prospectus, which means
they are part of this prospectus for legal purposes. The Fund's annual report
discusses the market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. You may get free
copies of these materials, request other information about the Trust and the
Fund, or make shareholder inquiries by calling (800) 290-9826.
You may review and copy information about the Fund, including its SAI, at the
Securities and Exchange Commission's public reference room in Washington, D.C.
You may call the Commission at (800) SEC-0330 for information about the
operation of the public reference room. You may also access reports and other
information about the Trust and the Fund on the Commission's Internet site at
WWW.SEC.GOV. You may get copies of this information, with payment of a
duplication fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009. You may need to refer to the Trust's file number
under the Investment Company Act, which is 811-1911.
Schroder Capital Funds (Delaware) ADVISOR SHARES
Two Portland Square
Portland, ME 04101 PROSPECTUS
800-290-9826
March 1, 1999
File No. 811-1911
<PAGE>
SCHRODER CAPITAL FUNDS (DELAWARE)
PROSPECTUS
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
INVESTOR SHARES
March 1, 1999
This prospectus describes Schroder Emerging Markets Fund Institutional
Portfolio, a non-diversified series of shares of Schroder Capital Funds
(Delaware). The Fund seeks 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, Eastern and Southern Europe, and Africa. The Trust offers Investor
Shares of the Fund in this prospectus.
Schroder Capital Management International Inc. ("Schroder") manages the Fund.
You can call (800) 290-9826 to find out more about the Fund and other funds in
the Schroder family.
The prospectus explains what you should know about the Fund before you invest.
Please read it carefully.
NEITHER THE U.S. SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
Page
SUMMARY INFORMATION............................................................3
FEES AND EXPENSES..............................................................6
OTHER INVESTMENT STRATEGIES....................................................7
MANAGEMENT OF THE FUND........................................................11
HOW THE FUND'S SHARES ARE PRICED..............................................12
HOW TO BUY SHARES.............................................................13
HOW TO SELL SHARES............................................................15
EXCHANGES.....................................................................17
DIVIDENDS AND DISTRIBUTIONS...................................................17
TAXES.........................................................................17
YEAR 2000 DISCLOSURE..........................................................18
FINANCIAL HIGHLIGHTS..........................................................18
<PAGE>
SUMMARY INFORMATION
This summary identifies the investment objective, principal investment
strategies, and principal risks of Schroder Emerging Markets Fund Institutional
Portfolio. The investment objective and policies of the Fund may, unless
otherwise specifically stated, be changed by the Board of Trustees of Schroder
Capital Funds (Delaware) without a vote of the shareholders. As a matter of
policy, the Board of Trustees of the Trust would not materially change the
Fund's investment objective without shareholder approval.
THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING SUBSTANTIALLY
ALL OF ITS INVESTABLE ASSETS IN SCHRODER EMERGING MARKETS FUND INSTITUTIONAL
PORTFOLIO, A SEPARATELY MANAGED, NON-DIVERSIFIED PORTFOLIO OF SCHRODER CAPITAL
FUNDS THAT HAS THE SAME INVESTMENT OBJECTIVE AS, AND INVESTMENT POLICIES THAT
ARE SUBSTANTIALLY SIMILAR TO THOSE OF, THE FUND. IN REVIEWING THE FUND'S
INVESTMENT OBJECTIVE AND POLICIES BELOW, YOU SHOULD ASSUME THAT THE INVESTMENT
OBJECTIVE AND POLICIES OF THE PORTFOLIO ARE THE SAME IN ALL MATERIAL RESPECTS AS
THOSE OF THE FUND. SCHRODER IS THE INVESTMENT ADVISER TO THE FUND AND TO THE
PORTFOLIO.
After the narrative describing the Fund is a chart showing how the investment
returns of the Fund's Investor Shares have varied from year to year. The chart
shows returns for each full calendar year since the Fund commenced operations.
The table following the chart provides some indication of the risks of investing
in the Fund by showing how the Fund's average annual returns for the last year
and for the life of the Fund compare to a broad-based securities market index.
PAST PERFORMANCE IS NOT NECESSARILY AN INDICATION OF FUTURE PERFORMANCE. It is
possible to lose money on an investment in the Fund.
For a discussion of recent market and portfolio developments affecting the
Fund's performance, see the Fund's most recent financial reports. You can call
the Trust at (800) 290-9826 to request a free copy of the financial reports.
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
o INVESTMENT OBJECTIVe. To seek 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.
o PRINCIPAL INVESTMENTS. The Fund normally invests at least 65% of its
assets in securities of companies determined by Schroder to be "emerging market"
issuers. The Fund may invest the remaining 35% of its assets in securities of
issuers located anywhere in the world. The Fund may invest in equity or debt
securities of any kind. The Fund is non-diversified.
o INVESTMENT STRATEGIEs. The Fund invests primarily in equity
securities of issuers domiciled or doing business in"emerging market" countries
in regions such as Southeast Asia, Latin America, Eastern and Southern Europe,
and Africa. "Emerging market" countries are countries not included at the time
of investment in the Morgan Stanley International World Index of major world
economies. Economies currently in the Index include: Australia, Austria,
Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, the
Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,
Switzerland, the United Kingdom, and the United States. Schroder may at times
determine based on its own analysis that an economy included in the Index should
nonetheless be considered an emerging market country, in which case that country
would constitute an emerging market country for purposes of the Fund's
<PAGE>
investments. There is no limit on the amount of the Fund's assets that may be
invested in securities of issuers domiciled in any one country.
The Fund also may do the following:
0 Invest in securities of closed-end investment
companies that invest primarily in foreign
securities, including securities of emerging market
issuers.
0 Invest up to 35% of its assets in debt securities,
including lower-quality, high-yielding debt
securities (commonly known as "junk bonds"), which
entail certain risks.
o PRINCIPAL RISKS.
0 EMERGING MARKETS. The Fund may invest in "emerging
market" countries whose securities markets may
experience heightened levels of volatility. The risks
of investing in emerging markets include greater
political and economic uncertainties than in foreign
developed markets, currency transfer restrictions, a
more limited number of potential buyers, and a
developing country's dependence on revenue from
particular commodities or international aid.
Additionally, the securities markets and legal
systems in emerging market countries may only be in a
developmental stage and may provide few, or none, of
the advantages or protections of markets or legal
systems available in more developed countries.
Emerging market countries may experience extremely
high levels of inflation, which may adversely affect
those countries' economies and securities markets.
0 FOREIGN SECURITIES. Investments in foreign securities
entail risks not present in domestic investments
including, among other things, risks related to
political or economic instability, currency exchange
and taxation.
0 SMALL COMPANIES. The Fund invests primarily in small
companies, which tend to be more vulnerable to
adverse developments than larger companies. Small
companies may have limited product lines, markets, or
financial resources, or may depend on a limited
management group. Their securities may trade
infrequently and in limited volumes. As a result, the
prices of these securities may fluctuate more than
the prices of securities of larger, more widely
traded companies. Also, there may be less publicly
available information about small companies or less
market interest in their securities as compared to
larger companies, and it may take longer for the
prices of the securities to reflect the full value of
their issuers' earnings potential or assets.
0 GEOGRAPHIC CONCENTRATION. There is no limit on the
amount of the Fund's assets that may be invested in
securities of issuers domiciled in any one country.
To the extent that the Fund invests a substantial
amount of its assets in one country, it will be more
susceptible to the political and economic
developments and market fluctuations in that country
than if it invested in a geographically more
diversified portfolio.
0 NON-DIVERSIFIED FUND. The Fund is a "non-diversified"
mutual fund, and may invest its assets in a more
limited number of issuers than may other diversified
investment companies. To the extent the Fund focuses
on fewer issuers, its risk of loss increases if the
market value of a security declines or if an issuer
is not able to meet its obligations.
<PAGE>
0 EQUITY SECURITIES. Another risk of investing in the
Fund is the risk that the value of the equity
securities in the portfolio will fall, or will not
appreciate as anticipated by Schroder, due to factors
that adversely affect markets in general or
particular companies in the portfolio.
0 DEBT SECURITIES. The Fund invests in debt securities,
which are subject to market risk (the fluctuation of
market value in response to changes in interest
rates) and to credit risks (the risk that the issuer
may become unable or unwilling to make timely
payments of principal and interest).
0 JUNK BONDS. Junk bonds reflect a greater possibility
that adverse changes in the financial condition of
the issuer or in general economic conditions, or an
unanticipated rise in interest rates, may impair the
ability of the issuer to make payments of interest
and principal. If this were to occur, the values of
securities held by the Fund may become more volatile.
[EDGAR REPRESENTATION OF GRAPH CHART]
Calendar Year Annual Return
- ------------- -------------
1998 ___%
1997 -5.21%
1996 7.93%
During the periods shown above, the highest quarterly return was 12.13% for the
quarter ended June 30, 1997, and the lowest was -21.96% for the quarter ended
September 30, 1998. [NOTE: SUBJECT TO CHANGE BASED ON FOURTH QUARTER OF 1998.]
For the period January 1, 1998 through October 31, 1998, the Fund's total return
(unannualized) was -28.91%.
<TABLE>
<S> <C> <C>
- ------------------------------------------------ ----------------------- -----------------------
AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS LIFE OF FUND
ENDING DECEMBER 31, 1998) LAST ONE YEAR (SINCE 3/31/95)
- ------------------------------------------------ ----------------------- -----------------------
- ------------------------------------------------ ----------------------- -----------------------
Schroder Emerging Markets Fund Institutional [___]% [___]%
Portfolio
- ------------------------------------------------ ----------------------- -----------------------
- ------------------------------------------------ ----------------------- -----------------------
*Morgan Stanley Capital International Emerging [___]% [___]%
Markets Free Index
- ------------------------------------------------ ----------------------- -----------------------
</TABLE>
<PAGE>
* The Morgan Stanley Capital International Emerging Markets Free Index is an
unmanaged market capitalization index of companies representative of the market
structure of 26 emerging countries in Europe, Latin America, and the Pacific
Basin. The Index reflects actual buyable opportunities for the non-domestic
investor by taking into account local market restrictions on share ownership by
foreigners.
FEES AND EXPENSES
THESE TABLES DESCRIBE THE FEES AND EXPENSES THAT YOU WILL PAY IF YOU INVEST IN
INVESTOR SHARES OF THE FUND.
SHAREHOLDER FEES (paid directly from your investment):
Maximum Sales Load Imposed on Purchases None
Maximum Deferred Sales Load None
Maximum Sales Load Imposed on Reinvested Dividends None
Purchase Charge (based on amount invested)(1) 0.50%
Redemption Charge (as a percentage of the net asset value
of shares redeemed)(1) 0.50%
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets):
Management Fees 1.10%
Distribution (12b-1) Fees None
Other Expenses 0.54%
Total Annual Fund Operating Expenses 1.64%
Fee Waiver and/or Expense Limitation (2) 0.28%
Net Expenses (2) 1.36%
- --------------------------
1 The Purchase and Redemption Charges are collected by the Fund and paid to the
Portfolio to compensate the other investors in the Portfolio for expenses
incurred in connection with purchases and sales of portfolio securities.
2 The Net Expenses shown above reflect the effect of contractually imposed
expense limitations and/or fee waivers in effect through October 31, 1999 on
Total Annual Fund Operating Expenses.
<PAGE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in Investor Shares of the Fund for
the time periods indicated and either retain all of your shares or redeem all of
your shares at the end of those periods. The Example also assumes that your
investment earns a 5% return each year and that the Fund's total annual
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:*
<TABLE>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Assuming no redemption $217 $567 $942 $1994
Assuming full redemption
at end of period $268 $622 $1001 $2063
</TABLE>
- --------------
*Assuming that the Fund's operating expenses remain the same as the Net Expenses
shown above, based on the other assumptions described above, your costs would
be:
<TABLE>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Assuming no redemption $188 $480 $794 $1683
Assuming full redemption
at end of period $240 $535 $853 $1753
</TABLE>
<PAGE>
OTHER INVESTMENT STRATEGIES AND RISKS
The Fund may not achieve its objective in all circumstances and you
could lose money by investing. The following provides more detail about the
Fund's principal risks and the circumstances which could adversely affect the
value of the Fund's shares or its total return.
RISKS OF INVESTING IN THE FUND
o EMERGING MARKETs. The Fund intends to invest a substantial portion of
its assets in securities of issuers in emerging market countries. An issuer will
be considered to be an emerging market issuer if Schroder determines that: (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) 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) at
least 50% of its assets are situated in emerging market countries.
The prices of securities of issuers in emerging market countries are
subject to greater volatility than those of issuers in more developed countries.
Investments in emerging market countries are subject to the same risks
applicable to foreign investments generally, although those risks may be
increased due to conditions in such countries. For example, the securities
markets and legal systems in emerging market countries may only be in a
developmental stage and may provide few, or none, of the advantages or
protections of markets or legal systems available in more developed countries.
Although many of the securities in which the Fund may invest are traded on
<PAGE>
securities exchanges, they may trade in limited volume, and the exchanges may
not provide all of the conveniences or protections provided by securities
exchanges in more developed markets. The Fund may also invest a substantial
portion of its assets in securities traded in the over-the-counter markets in
emerging market countries and not on any exchange, which may affect the
liquidity of the investment and expose the Fund to the credit risk of its
counterparties in trading those investments. Emerging market countries may
experience extremely high rates of inflation, which may adversely affect those
countries' economies and securities markets.
o INVESTMENT IN ASIA. Certain Asian markets have experienced
devaluation and/or significant volatility during the past several years.
Schroder cannot predict whether, when and to what extent the Asian markets will
recover. To the extent that the Fund focuses its investments in any Asian
countries, the Fund will be susceptible to adverse political, economic and
market developments in those countries.
o FOREIGN SECURITIES. Investments in foreign securities entail certain
risks. There may be a possibility of nationalization or expropriation of assets,
confiscatory taxation, political or financial instability, and diplomatic
developments that could affect the value of the Fund's investments in certain
foreign countries. Since foreign securities normally are denominated and traded
in foreign currencies, the values of the Fund's assets may be affected favorably
or unfavorably by currency exchange rates, currency exchange control
regulations, foreign withholding taxes, and restrictions or prohibitions on the
repatriation of foreign currencies. There may be less information publicly
available about a foreign issuer than about a U.S. issuer, and foreign issuers
are not generally subject to accounting, auditing, and financial reporting
standards and practices comparable to those in the United States. The securities
of some foreign issuers are less liquid and at times more volatile than
securities of comparable U.S. issuers. Foreign brokerage commissions and other
fees are also generally higher than in the United States. Foreign settlement
procedures and trade regulations may involve certain risks (such as delay in
payment or delivery of securities or in the recovery of the Fund's assets held
abroad) and expenses not present in the settlement of domestic investments.
In addition, legal remedies available to investors in certain foreign
countries may be more limited than those available with respect to investments
in the United States or in other foreign countries. The willingness and ability
of sovereign issuers to pay principal and interest on government securities
depends on various economic factors, including the issuer's balance of payments,
overall debt level, and cash-flow considerations related to the availability of
tax or other revenues to satisfy the issuer's obligations. If a foreign
governmental entity is unable or unwilling to meet its obligations on the
securities in accordance with their terms, the Fund may have limited recourse
available to it in the event of default. The laws of some foreign countries may
limit the Fund's ability to invest in securities of certain issuers located in
those countries. Special tax considerations apply to foreign securities. Except
as otherwise noted in this Prospectus, there is no limit on the amount of the
Fund's assets that may be invested in foreign securities.
If the Fund purchases securities denominated in foreign currencies, a
change in the value of any such currency against the U.S. dollar will result in
a change in the U.S. dollar value of the Fund's assets and the Fund's income
available for distribution. In addition, although at times most of the Fund's
income may be received or realized in these currencies, the Fund will be
required to compute and distribute its income in U.S. dollars. As a result, if
the exchange rate for any such currency declines after the Fund's income has
been earned and translated into U.S. dollars but before payment, the Fund could
be required to liquidate portfolio securities to make such distributions.
Similarly, if an exchange rate declines between the time the Fund incurs
<PAGE>
expenses in U.S. dollars and the time such expenses are paid, the amount of such
currency required to be converted into U.S. dollars in order to pay such
expenses in U.S. dollars will be greater than the equivalent amount in any such
currency of such expenses at the time they were incurred. The Fund may buy or
sell foreign currencies and options and futures contracts on foreign currencies
for hedging purposes in connection with its foreign investments.
In determining whether to invest in debt securities of foreign issuers,
Schroder considers the likely impact of foreign taxes on the net yield available
to the Fund and its shareholders. Income received by the Fund from sources
within foreign countries may be reduced by withholding and other taxes imposed
by such countries. Tax conventions between certain countries and the United
States may reduce or eliminate such taxes. Any such taxes paid by the Fund will
reduce its income available for distribution to shareholders. In certain
circumstances, the Fund may be able to pass through to shareholders credits for
foreign taxes paid.
o DEBT SECURITIES. The Fund may invest in debt securities, which are
subject to the risk of fluctuation of market value in response to changes in
interest rates and the risk that the issuer may become unable or unwilling to
make timely payments of principal and interest. Additionally, the Fund may
invest in lower-quality, high-yielding debt securities, commonly known as junk
bonds. Lower-rated securities are predominantly speculative and tend to be more
susceptible than other debt securities to adverse changes in the financial
condition of the issuer, general economic conditions, or an unanticipated rise
in interest rates, which may affect an issuer's ability to pay interest and
principal. This would likely make the values of the securities held by the Fund
more volatile and could limit the Fund's ability to liquidate its securities.
Changes by recognized rating services in their ratings of any fixed-income
security and in the perceived ability of an issuer to make payments of interest
and principal also may affect the value of these investments.
INVESTMENT STRATEGIES AND TECHNIQUES
The Summary Information at the beginning of the prospectus summarizes
the investment objectives and principal investment strategies of the Fund. This
prospectus does not attempt to disclose all of the various investment techniques
and types of securities that Schroder might use in managing the Fund. As in any
mutual fund, investors must rely on the professional investment judgment and
skill of the Fund's adviser. In addition to those described in the Summary
Information, the Fund may at times use the following strategies and techniques,
which involve certain special risks:
o FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Changes in currency exchange
rates will affect the U.S. dollar value of Fund assets, including securities
denominated in foreign currencies. Exchange rates between the U.S. dollar and
other currencies fluctuate 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 political, economic and financial conditions, which may be
difficult to predict. The Fund may engage in currency exchange transactions to
protect against unfavorable fluctuations in exchange rates.
In particular, the Fund may enter into foreign currency exchange
transactions to protect against a change in exchange ratios that may occur
between the date on which the Fund contracts to trade a security and the
settlement date ("transaction hedging") or in anticipation of placing a trade
("anticipatory hedging"); to "lock in" the U.S. dollar value of interest and
<PAGE>
dividends to be paid in a foreign currency; or to hedge against the possibility
that a foreign currency in which portfolio securities are denominated or quoted
may suffer a decline against the U.S. dollar ("position hedging").
From time to time, the Fund's currency hedging transactions may call
for the delivery of one foreign currency in exchange for another foreign
currency and may at times involve currencies in which its portfolio securities
are not then denominated ("cross hedging"). The Fund may also engage in "proxy"
hedging, whereby the Fund would seek to hedge the value of portfolio holdings
denominated in one currency by entering into an exchange contract on a second
currency, the valuation of which Schroder believes correlates to the value of
the first currency. Schroder may buy or sell currencies in "spot" or forward
transactions. "Spot" transactions are executed contemporaneously on a cash basis
at the then-prevailing market rate.
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. Forward contracts do not eliminate fluctuations in the
underlying prices of securities and expose the Fund to the risk that the
counterparty is unable to perform.
The Fund incurs foreign exchange expenses in converting assets from one
currency to another. Although there is no limit on the amount of the Fund's
assets that may be invested in foreign currency exchange and foreign currency
forward contracts, the Fund may engage in foreign currency exchange transactions
only for hedging purposes. Suitable foreign currency hedging transactions may
not be available in all circumstances and there can be no assurance that the
Fund will utilize hedging transactions at any time.
O SECURITIES LOANS, REPURCHASE AGREEMENTS, AND FORWARD COMMITMENTS. The
Fund may lend portfolio securities to broker-dealers up to one-quarter of the
Fund's total assets. The Fund may also enter into repurchase agreements without
limit. These transactions must be fully collateralized at all times, but involve
some risk to the Fund if the other party should default on its obligation and
the Fund is delayed or prevented from recovering the collateral. The Fund may
also enter into contracts to purchase securities for a fixed price at a future
date beyond customary settlement time, which may increase its overall investment
exposure and involves a risk of loss if the value of the securities declines
prior to the settlement date.
o INVESTMENT IN OTHER INVESTMENT COMPANIES. The Fund may invest in
other investment companies or pooled vehicles, including closed-end funds, that
are advised by Schroder or its affiliates or by unaffiliated parties. When
investing in another investment company, the Fund may pay a premium above such
investment company's net asset value per share. As a shareholder in an
investment company, the Fund would bear its ratable share of the investment
company's expenses, including advisory and administrative fees, and would at the
same time continue to pay its own fees and expenses.
o DERIVATIVE INVESTMENTS. Instead of investing directly in the types of
portfolio securities described in the Summary Information, the Fund may buy or
sell a variety of "derivative" investments to gain exposure to particular
securities or markets, in connection with hedging transactions, and, to the
extent permitted by applicable law, to increase total return. These may include
options, futures, and indices, for example. Derivatives involve the risk that
they may not work as intended under all market conditions. Also, derivatives
often involve the risk that the other party to the transaction will be unable to
meet its obligations or that the Fund will be unable to close out the position
at any particular time or at an acceptable price.
<PAGE>
O ZERO-COUPON BONDS. The Fund may invest in zero-coupon bonds.
Zero-coupon bonds are issued at a significant discount from face value and pay
interest only at maturity rather than at intervals during the life of the
security. Zero-coupon bonds allow an issuer to avoid the need to generate cash
to meet current interest payments and, as a result, may involve greater credit
risks than bonds that pay interest currently.
o PORTFOLIO TURNOVER. The length of time the Fund has held a particular
security is not generally a consideration in investment decisions. The
investment policies of the Fund may lead to frequent changes in the Fund's
investments, particularly in periods of volatile market movements. A change in
the securities held by the Fund is known as "portfolio turnover." Portfolio
turnover generally involves some expense to the Fund, including brokerage
commissions or dealer mark-ups and other transaction costs on the sale of
securities and reinvestment in other securities. Such sales may increase the
amount of capital gains (and, in particular, short-term gains) realized by the
Fund, on which shareholders pay tax.
o TEMPORARY DEFENSIVE STRATEGIES. At times, Schroder may judge that
conditions in the securities markets make pursuing the Fund's basic investment
strategy inconsistent with the best interests of its shareholders. At such
times, Schroder may temporarily use alternate investment strategies primarily
designed to reduce fluctuations in the value of the Fund's assets. In
implementing these "defensive" strategies, the Fund would invest in high-quality
debt securities, cash, or money market instruments to any extent Schroder
considers consistent with such defensive strategies. It is impossible to predict
when, or for how long, the Fund will use these alternate strategies. One risk of
taking such temporary defensive positions is that the Fund may not achieve its
investment objective.
MANAGEMENT OF THE FUND
The Trust is governed by a Board of Trustees which has retained
Schroder to manage the investments of the Fund. Subject to the control of the
Trustees, Schroder also manages the Fund's other affairs and business. Schroder
has served as investment adviser to the Fund since inception.
Schroder Emerging Markets Fund Institutional Portfolio, the Portfolio
in which the Fund invests, is managed under the direction of a board of trustees
of Schroder Capital Funds. Schroder has served as investment adviser to the
Portfolio since inception.
Schroder has been an investment manager since 1962, and currently
serves as investment adviser to the Fund, the Portfolio, and a broad range of
institutional investors. Schroder's address is 787 Seventh Avenue, New York, New
York 10019, and its telephone number is (212) 641-3900.
o MANAGEMENT FEES PAID BY THE PORTFOLIO. For the fiscal year ended
October 31, 1998 the Portfolio paid management fees to Schroder at the annual
rate of 1.00%. Schroder has agreed to waive 0.15% of the advisory fees payable
by the Portfolio. This waiver shall remain in effect until its elimination is
approved by the board of trustees of Schroder Capital Funds. The Fund, because
of its investment in the Portfolio, bears a proportionate part of the management
fees (and other expenses) paid by the Portfolio (based on the percentage of the
Portfolio's assets attributable to the Fund).
<PAGE>
The Fund has entered into an investment advisory agreement with
Schroder pursuant to which Schroder would manage the Fund's assets directly in
the event that the Fund were to cease investing substantially all of its assets
in the Portfolio. Schroder will not receive any fees under that agreement so
long as the Fund continues to invest substantially all of its assets in the
Portfolio or in another investment company.
o EXPENSE LIMITATIONS AND WAIVERS. In order to limit the Fund's
expenses, Schroder has voluntarily agreed to reduce its compensation (and, if
necessary, to pay certain other Fund expenses) until October 31, 1999 to the
extent that the Fund's total operating expenses attributable to its Investor
Shares exceed the annual rate of 1.45%.
o PORTFOLIO MANAGERS. Schroder's investment decisions for the Fund and
the Portfolio are generally made by an investment manager or an investment team,
with the assistance of an investment committee. The following portfolio managers
have had primary responsibility for making investment decisions for the
Portfolio or the Fund, as the case may be, since the years shown below. Their
recent professional experience is also shown.
<TABLE>
<S> <C> <C> <C>
- --------------------------- ------------------------ ------------------- --------------------------------------------
Fund/Portfolio Portfolio Manager Since Recent Professional Experience
- --------------------------- ------------------------ ------------------- --------------------------------------------
Both the Fund and the John Troiano Inception (1995) Employed as an investment professional at
Portfolio Schroder since 1986. Mr. Troiano is the
Chief Executive and director of
Schroder, and a Vice President
of the Trust and of Schroder
Capital Funds.
- --------------------------- ------------------------ ------------------- -------------------------------------------- ----------
- --------------------------- ------------------------ ------------------- -------------------------------------------- ----------
Heather Crighton Inception (1995) Employed as an investment professional at
Schroder since 1993. Ms. Crighton is a
director and a First Vice President of
Schroder.
- --------------------------- ------------------------ ------------------- -------------------------------------------- ----------
- --------------------------- ------------------------ ------------------- -------------------------------------------- ----------
Mark Bridgeman Inception (1995) Employed as an investment professional at
Schroder since 1990. Mr. Bridgeman is a
First Vice President of Schroder.
- --------------------------- ------------------------ ------------------- -------------------------------------------- ----------
- --------------------------- ------------------------ ------------------- -------------------------------------------- ----------
</TABLE>
HOW THE FUND'S SHARES ARE PRICED
The Fund calculates the net asset value of its Investor Shares by
dividing the total value of its assets attributable to its Investor Shares, less
its liabilities attributable to those shares, by the number of Investor Shares
outstanding. Shares are valued as of the close of trading on the New York Stock
Exchange (normally 4:00 p.m.) each day the Exchange is open. The Fund values its
portfolio securities for which market quotations are readily available at market
value. Short-term investments that will mature in 60 days or less are stated at
amortized cost, which approximates market value. The Fund values all other
securities and assets at their fair values as determined by Schroder. All assets
and liabilities of the Fund 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
<PAGE>
when the net asset value of the Fund's shares is calculated. Because certain of
the securities in which the Fund may invest may trade on days when the Fund does
not price its Investor Shares, the net asset value of the Fund's Investor Shares
may change on days when shareholders will not be able to purchase or redeem
their Investor Shares.
HOW TO BUY SHARES
You may purchase Investor Shares of the Fund directly from the Trust or
through a service organization such as a bank, trust company, broker-dealer, or
other financial organization (a Service Organization) having an arrangement with
Schroder Fund Advisors Inc., the distributor of the Trust's shares. If you do
not have a Service Organization, Schroder Fund Advisors Inc. can provide you
with a list of available firms. Your Service Organization is responsible for
forwarding all of the necessary documentation to the Trust, and may charge for
its services.
Investor Shares of the Fund are sold at their net asset value next
determined after the Trust receives your order, plus a purchase charge of 0.50%
of the amount invested. The purchase charge, which is not a sales charge, is
assessed by the Fund and paid to the Portfolio to compensate other investors in
the Portfolio for expenses incurred in purchasing securities due to an
investment in the Fund. The purchase charge is not assessed on the reinvestment
of dividends or distributions or on purchases through an in-kind subscription.
In order for you to receive the Fund's next determined net asset value, the
Trust must receive your order before the close of regular trading on the New
York Stock Exchange.
If the shares you purchase will be held in your own name (rather than
in the name of your Service Organization), your payment for the shares must be
accompanied by a completed Account Application in proper form. The Trust or
Forum Shareholder Services, LLC, the Trust's Transfer Agent, may request
additional documentation, such as copies of corporate resolutions and
instruments of authority, from corporations, administrators, executors, personal
representatives, directors, or custodians. You may obtain an Account Application
from the Transfer Agent, P.O. Box 446, Portland, Maine 04112, or by calling
(800) 290-9826. You also may obtain an Account Application from your Service
Organization.
INVESTMENT MINIMUMS
The minimum investment for initial and additional purchases for the
Fund is set forth in the following table:
-------------------------------------- ----------------- -------------------
Initial Additional
Investment Investments
-------------------------------------- ----------------- -------------------
-------------------------------------- ----------------- -------------------
Regular Accounts $250,000 No minimum
-------------------------------------- ----------------- -------------------
-------------------------------------- ----------------- -------------------
Traditional IRAs $2,000 $250
-------------------------------------- ----------------- -------------------
The Trust is authorized to reject any purchase order.
<PAGE>
PURCHASES BY CHECK
You may purchase shares of the Fund by mailing a check (in U.S. dollars)
payable to the Fund. Third-party checks will not be accepted.
For initial purchases, your check must be accompanied by a completed
Account Application in proper form. The Trust may request additional
documentation to evidence the authority of the person or entity making the
purchase request.
You should mail your check and your completed Account Application to:
Schroder Emerging Markets Fund Institutional Portfolio -- Investor Shares
P.O. Box 446
Portland, Maine 04112
Your payments should clearly indicate the shareholder's name and account number,
if applicable.
PURCHASES BY BANK WIRE/TELEPHONE
If you make your initial investment by wire, your order must be
preceded by a completed Account Application. Upon receipt of the Application,
the Trust will assign you an account number and your account will become active.
Wire orders received prior to the close of trading on the New York Stock
Exchange (normally 4:00 p.m., Eastern Time) on each day the Exchange is open for
trading will be processed at the net asset value determined as of that day.
Wire orders received after that time will be processed at the net asset value
determined thereafter.
Once you have an account number, you may purchase Investor Shares
through your Service Organization or by telephoning the Transfer Agent at (800)
290-9826 to give notice that you will be sending funds by wire, and then
arranging with your bank to wire funds to the Trust. Your purchase will not be
processed until the Trust has received the wired funds.
Federal Reserve Bank wire instructions are as follows:
The Chase Manhattan Bank
New York, NY
ABA No.: 021000021
For Credit To: Forum Shareholder Services, LLC
Account. No.: 910-2-718187
Ref.: Schroder Emerging Markets Fund Institutional Portfolio -- Investor Shares
Account of: (shareholder name)
Account No.: (shareholder account number)
The wire order must specify the name of the Fund, the shares' class (i.e.,
Investor Shares), the account name and number, address, confirmation number,
amount to be wired, name of the wiring bank, and name and telephone number of
the person to be contacted in connection with the order.
In an effort to prevent unauthorized or fraudulent purchase or
redemption requests by telephone, the Transfer Agent will follow reasonable
procedures to confirm that telephone instructions are genuine. The Transfer
Agent and the Trust generally will not be liable for any losses due to
<PAGE>
unauthorized or fraudulent purchase or redemption requests, but either or both
may be liable if they do not follow these procedures.
OTHER PURCHASE INFORMATION
Investor Shares of the Fund may be purchased for cash or in exchange
for securities held by the investor, subject to the determination by Schroder
that the securities are acceptable. (For purposes of determining whether
securities will be acceptable, Schroder will consider, among other things,
whether they are liquid securities of a type consistent with the investment
objectives and policies of the Fund and have a readily ascertainable value.) If
the Fund receives securities from an investor in exchange for shares of the
Fund, the Fund will under some circumstances have the same tax basis in the
securities as the investor had prior to the exchange (and the Fund's gain for
tax purposes would be calculated with regard to the investor's tax basis). Any
gain on the sale of those securities would be subject to distribution as capital
gain to all of the Fund's shareholders. Schroder reserves the right to reject
any particular investment. Securities accepted by Schroder will be valued in the
same manner as are the Trust's portfolio securities as of the time of the next
determination of the Fund's net asset value. All dividend, subscription, or
other rights which are reflected in the market price of accepted securities at
the time of valuation become the property of the Fund and must be delivered to
the Fund upon receipt by the investor. A gain or loss for federal income tax
purposes may be realized by investors upon the exchange. Investors interested in
purchases through exchange should telephone Schroder at (800) 290-9826.
HOW TO SELL SHARES
You may sell your Investor Shares back to the Fund on any day the New
York Stock Exchange is open, either through your Service Organization or
directly to the Fund. If your shares are held in the name of a Service
Organization, you may only sell the shares through that Service Organization.
The Service Organization may charge you for its services. If you choose to sell
your shares directly to the Fund, you may do so by sending a letter of
instruction or stock power form to the Trust, or by calling the Transfer Agent
at (800) 290-9826.
The price you will receive is the net asset value next determined after
receipt of your redemption request in good order, plus a redemption charge of
0.50% of the amount redeemed. The redemption charge, which is not a sales
charge, is assessed by the Fund and paid to the Portfolio to compensate the
other investors in the Portfolio for expenses incurred in connection with sales
of portfolio securities. 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 Investor Shares purchased through the reinvestment of dividends and
distributions (with respect to which no redemption charge is applied) and (ii)
from Investor Shares for which the redemption charge is applicable, on a first
purchased, first redeemed basis.
A redemption request is in good order if it includes the exact name in
which the shares are registered, the investor's account number, and the number
of shares or the dollar amount of shares to be redeemed, and, for written
requests, if it is signed exactly in accordance with the registration form. If
you hold your Investor Shares in certificate form, you must submit the
certificates and sign the assignment form on the back of the certificates.
Signatures must be guaranteed by a bank, broker/dealer, or certain other
<PAGE>
financial institutions. You may redeem your Investor Shares by telephone only if
you elected the telephone redemption privilege option on your Account
Application or otherwise in writing. Shares for which certificates have been
issued may not be redeemed by telephone. The Trust may require additional
documentation from shareholders that are corporations, partnerships, agents,
fiduciaries, or surviving joint owners.
If you redeem shares through your Service Organization, your Service
Organization is responsible for ensuring that the Transfer Agent receives your
redemption request in proper form and at the appropriate time.
The Trust will pay you for your redemptions as promptly as possible and
normally within seven days after the request for redemption is received in
writing in good order. (The Trust generally sends payment for shares the
business day after a request is received.) Under unusual circumstances, the
Trust may suspend redemptions or postpone payment for more than seven days, as
permitted by law. The Trust will only redeem shares for which it has received
payment.
If your account balance falls below a minimum amount set by the
Trustees (presently $100,000) of the Fund, the Trust may choose to redeem your
shares in the Fund and pay you for them. You will receive at least 30 days
written notice before the Trust redeems your shares, and you may purchase
additional shares at any time to avoid a redemption. The Trust may also redeem
shares if you own shares of the Fund above a maximum amount set by the Trustees.
There is currently no maximum, but the Trustees may establish one at any time,
which could apply to both present and future shareholders.
The Trust may suspend the right of redemption during any period when:
(1) trading on the New York Stock Exchange is restricted or the Exchange is
closed; (2) the Securities and Exchange Commission has by order permitted such
suspension; or (3) an emergency (as defined by rules of the SEC) exists making
disposal of portfolio investments or determination of the Fund's net asset value
not reasonably practicable.
If you request that your redemption proceeds be sent to you at an
address other than your address of record, or to another party, you must include
a signature guarantee for each such signature by an eligible signature
guarantor, such as a member firm of a national securities exchange or a
commercial bank or trust company located in the United States. If you are a
resident of a foreign country, another type of certification may be required.
Please contact the Transfer Agent for more details at (800) 290-9826.
Corporations, fiduciaries, and other types of shareholders may be required to
supply additional documents which support their authority to effect a
redemption.
WIRE TRANSFERS
If your Service Organization receives Federal Reserve wires, you may
instruct that your redemption proceeds be forwarded by wire to your account with
your Service Organization; you may also instruct that your redemption proceeds
be forwarded to you by a wire transfer. Please indicate your Service
Organization's or your own complete wiring instructions.
EXCHANGES
You can exchange your Investor Shares of the Fund for Investor Shares
of any other fund in the Schroder family of funds at any time at their
respective net asset values. To exchange shares, please call (800) 290-9826.
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
The Fund distributes any net investment income and any net realized
capital gain at least annually. Distributions from net capital gain are made
after applying any available capital loss carryovers.
YOU CAN CHOOSE FROM FOUR DISTRIBUTION OPTIONS:
-- Reinvest all distributions in additional Investor Shares of the
Fund;
-- Receive distributions from net investment income in cash while
reinvesting capital gains distributions in additional Investor
Shares of the Fund;
-- Receive distributions from net investment income in additional
Investor Shares of the Fund while receiving capital gain
distributions in cash; or
-- Receive all distributions in cash.
You can change your distribution option by notifying the Transfer Agent
in writing. If you do not select an option when you open your account, all
distributions by the Fund will be reinvested in Investor Shares of the Fund. You
will receive a statement confirming reinvestment of distributions in additional
Fund shares promptly following the period in which the reinvestment occurs.
TAXES
o TAXES ON DIVIDENDS AND DISTRIBUTIONS. For federal income tax
purposes, distributions of investment income are taxable as ordinary income.
Taxes on distributions of capital gains are determined by how long the Fund
owned the investments that generated the gains, rather than how long you have
owned your shares. Distributions are taxable to you even if they are paid from
income or gains earned by the Fund before you invested (and thus were included
in the price you paid for your shares). Distributions of gains from investments
that the Fund owned for more than 12 months will be taxable as capital gains.
Distributions of gains from investments that the Fund owned for 12 months or
less will be taxable as ordinary income. Distributions are taxable whether you
received them in cash or reinvested them in additional shares of the Fund.
o TAXES WHEN YOU SELL OR EXCHANGE YOUR SHARES. Any gain resulting from
the sale or exchange of your shares in the Fund will also generally be subject
to federal income or capital gains tax, depending on your holding period.
o TAX TREATMENT OF 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, gains
or losses have been distributed by the Portfolio. The Portfolio intends to
conduct its operations so that the Fund, if it invests all of its assets in the
Portfolio, may qualify as a regulated investment company.
o CONSULT YOUR TAX ADVISOR ABOUT OTHER POSSIBLE TAX CONSEQUENCES. This
is a summary of certain federal tax consequences of investing in the Fund. You
should consult your tax advisor for more information on your own tax situation,
including possible state and local taxes.
<PAGE>
YEAR 2000 DISCLOSURE
The Fund receives services from its investment adviser, administrator,
subadministrator, distributor, transfer agent, custodian and other providers
which rely on the smooth functioning of their respective systems and the systems
of others to perform those services. It is generally recognized that certain
systems in use today may not perform their intended functions adequately after
the Year 1999 because of the inability of the software to distinguish the Year
2000 from the Year 1900. Schroder is taking steps that it believes are
reasonably designed to address this potential "Year 2000" problem and to obtain
satisfactory assurances that comparable steps are being taken by each of the
Fund's other major service providers. There can be no assurance, however, that
these steps will be sufficient to avoid any adverse impact on the Fund from this
problem.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
financial performance of the Fund for the past 5 years or since the Fund
commenced operations. Certain information reflects financial results for a
single Fund share. The total returns represent the rate that an investor would
have earned or lost on an investment in Investor Shares of the Fund, assuming
reinvestment of all dividends and distributions. This information has been
audited by Pricewaterhouse Coopers LLP, whose report, along with the Fund's
financial statements, are included in the Fund's annual report to shareholders.
The annual report is available upon request.
Schroder Emerging Markets Fund Institutional Portfolio Fund - Investor Shares
<TABLE>
<S> <C> <C>
Period Ended Period Ended
-------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $xx.xx $xx.xx
INVESTMENT OPERATIONS:
Net Investment Income (Loss) x.xx x.xx
Net Realized and Unrealized Gain (Loss) on Investments (x.xx) (x.xx)
Total from Investment Operations (x.xx) (x.xx)
NET ASSET VALUE, END OF PERIOD $x.xx $x.xx
Total Return(a) (x.xx)% (x.xx)%
Ratios/Supplementary Data
NET ASSETS, END OF PERIOD (IN THOUSANDS) $xx.xx $xx.xx
Ratios to Average Net Assets:
Expenses After Expense Limitation x.xx% x.xx%
Expenses Before Expense Limitation -- --
Net Investment Income (Loss) After Expense Limitation x.xx% x.xx%
Average Commission Rate Per Share x.xxxx x.xxxx
Portfolio Turnover Rate xx.xx% xx.xx%
- ------------------------------------------------------------------------
</TABLE>
<PAGE>
================================================================================
FUNDS AVAILABLE THROUGH SCHRODER FUND ADVISORS INC.
PLEASE CALL (800) 730-2932 FOR COMPLETE INFORMATION AND TO OBTAIN THE RELEVANT
PROSPECTUS.
PLEASE READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST.
<TABLE>
<S> <C> <C>
SCHRODER CAPITAL FUNDS (DELAWARE) SCHRODER SERIES TRUST
SCHRODER INTERNATIONAL FUND SCHRODER LARGE CAPITALIZATION EQUITY FUND
SCHRODER EMERGING MARKETS FUND SCHRODER SMALL CAPITALIZATION VALUE FUND
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND SCHRODER SHORT-TERM INVESTMENT FUND
SCHRODER INTERNATIONAL BOND FUND SCHRODER MIDCAP VALUE FUND
SCHRODER U.S. DIVERSIFIED GROWTH FUND SCHRODER INVESTMENT GRADE INCOME FUND
SCHRODER U.S. SMALLER COMPANIES FUND
SCHRODER MICRO CAP FUND
</TABLE>
SCHRODER SERIES TRUST II
SCHRODER ALL-ASIA FUND
================================================================================
<PAGE>
[Back Cover] [Logo]
SCHRODER CAPITAL FUNDS (DELAWARE)
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
Schroder Emerging Markets Fund Institutional Portfolio's statement of additional
information (SAI) and annual and semi-annual reports to shareholders include
additional information about the Fund. The SAI and the financial statements
included in the Fund's most recent annual report to shareholders are
incorporated by reference into this prospectus, which means they are part of
this prospectus for legal purposes. The Fund's annual report discusses the
market conditions and investment strategies that significantly affected the
Fund's performance during its last fiscal year. You may get free copies of these
materials, request other information about the Trust and the Fund, or make
shareholder inquiries by calling (800) 290-9826.
You may review and copy information about the Fund, including its SAI, at the
Securities and Exchange Commission's public reference room in Washington, D.C.
You may call the Commission at (800) SEC-0330 for information about the
operation of the public reference room. You may also access reports and other
information about the Trust and the Fund on the Commission's Internet site at
WWW.SEC.GOV. You may get copies of this information, with payment of a
duplication fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009. You may need to refer to the Trust's file number
under the Investment Company Act, which is 811-1911.
Schroder Capital Funds (Delaware) INVESTOR SHARES
Two Portland Square
Portland, ME 04101 PROSPECTUS
800-290-9826
March 1, 1999
File No. 811-1911
<PAGE>
SCHRODER CAPITAL FUNDS (DELAWARE)
SCHRODER INTERNATIONAL FUND
SCHRODER EMERGING MARKETS FUND
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND
SCHRODER INTERNATIONAL BOND FUND
SCHRODER U.S. DIVERSIFIED GROWTH FUND
SCHRODER U.S. SMALLER COMPANIES FUND
SCHRODER MICRO CAP FUND
FORM N-1A
PART B
STATEMENT OF ADDITIONAL INFORMATION
MARCH 1, 1999
This Statement of Additional Information (SAI) is not a prospectus and is only
authorized for distribution when accompanied or preceded by a Prospectus for the
Funds, as amended or supplemented from time to time. This SAI relates to the
Funds' Investor Shares and Advisor Shares. Investor Shares and Advisor Shares
are offered through separate Prospectuses, each dated March 1, 1999. This SAI
contains information which may be useful to investors but which is not included
in the Prospectuses. Investors may obtain free copies of the Prospectuses by
calling the Trust at 1-800-290-9826.
Certain disclosure has been incorporated by reference into this SAI from the
Funds' annual reports. For a free copy of the annual reports, please call
1-800-290-9826.
TABLE OF CONTENTS
TRUST HISTORY..................................................................1
CAPITALIZATION AND SHARE CLASSES...............................................1
MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS......................2
INVESTMENT RESTRICTIONS.......................................................18
TRUSTEES AND OFFICERS.........................................................28
SCHRODER AND ITS AFFILIATES...................................................32
INVESTMENT ADVISORY AGREEMENTS................................................33
ADMINISTRATIVE SERVICES.......................................................36
DISTRIBUTOR...................................................................37
FUND ACCOUNTING...............................................................39
BROKERAGE ALLOCATION AND OTHER PRACTICES......................................40
DETERMINATION OF NET ASSET VALUE..............................................44
REDEMPTIONS IN KIND...........................................................46
TAXES.........................................................................46
PRINCIPAL HOLDERS OF SECURITIES...............................................47
PERFORMANCE INFORMATION.......................................................48
CUSTODIAN.....................................................................52
INDEPENDENT AUDITORS..........................................................52
SHAREHOLDER LIABILITY.........................................................52
FINANCIAL STATEMENTS..........................................................52
<PAGE>
SCHRODER CAPITAL FUNDS (DELAWARE)
STATEMENT OF ADDITIONAL INFORMATION
TRUST HISTORY
Schroder Capital Funds (Delaware) was organized as a Maryland
corporation on July 30, 1969; reorganized on February 29, 1988 as Schroder
Capital Funds, Inc.; and reorganized as a Delaware business trust organized
under the laws of the State of Delaware on January 9, 1996. The Trust's Trust
Instrument, which is governed by Delaware law, is on file with the Secretary of
State of the State of Delaware.
FUND CLASSIFICATION
The Trust currently offers shares of beneficial interest of nine series
with separate investment objectives and policies. Seven funds (the "Funds") are
offered pursuant to the Prospectuses and this SAI. Each Fund other than Schroder
Emerging Markets Fund and Schroder International Bond Fund is a "diversified"
investment company under the 1940 Act. This means that with respect to 75% of a
Fund's total assets, the Fund may not invest in securities of any issuer if,
immediately after such investment, more than 5% of the total assets of the Fund
(taken at current value) would be invested in the securities of that issuer
(this limitation does not apply to investments in U.S. Government securities).
None of the diversified Funds is subject to this limitation with respect to the
remaining 25% of its total assets. Each of Schroder Emerging Markets Fund and
Schroder International Bond Fund is a "non-diversified" investment company under
the 1940 Act, and therefore may invest its assets in a more limited number of
issuers than may diversified investment companies. To the extent a Fund invests
a significant portion of its assets in the securities of a particular issuer, it
will be subject to an increased risk of loss if the market value of the issuer's
securities declines.
CAPITALIZATION AND SHARE CLASSES
The Trust has an unlimited number of shares of beneficial interest that
may, without shareholder approval, be divided into an unlimited number of series
of such shares, which, in turn, may be divided into an unlimited number of
classes of such shares. Each Fund's shares (except Schroder Micro Cap Fund) are
presently divided into two classes, Investor Shares and Advisor Shares. Each
class is offered through a separate Prospectus. Unlike Investor Shares, Advisor
Shares are currently subject to shareholder service fees, so that the
performance of a Fund's Investor Shares should be more favorable than that of
the Fund's Advisor Shares over the same time period.
A Fund may suspend the sale of shares at any time and may refuse any
order to purchase shares. Under unusual circumstances, the Trust may suspend
redemption of Fund shares or postpone redemption payments for more than seven
days, as permitted by law. If your account balance falls below a minimum amount
set by the Trustees (presently $2,000), the Trust may choose to redeem your
shares in that Fund and pay you for them. You will receive at least 30 days'
written notice before the Trust redeems your shares, and you may purchase
additional shares at any time to avoid a redemption. The Trust may also redeem
shares if you own shares of any Fund above a maximum amount set by the Trustees.
<PAGE>
There is currently no maximum, but the Trustees may establish one at any time,
which could apply to both present and future shareholders.
Shares entitle their holders to one vote per share, with fractional
shares voting proportionally; however, a separate vote will be taken by each
Fund or class of shares on matters affecting the particular Fund or class, as
determined by the Trustees. For example, a change in a fundamental investment
policy for a Fund would be voted upon only by shareholders of that Fund and a
change to a distribution plan relating to a particular class and requiring
shareholder approval would be voted upon only by shareholders of that class.
Shares have noncumulative voting rights. Although the Trust is not required to
hold annual meetings of its shareholders, shareholders have the right to call a
meeting to elect or remove Trustees or to take other actions as provided in the
Trust Instrument. Shares have no preemptive or subscription rights, and are
transferable. Shares are entitled to dividends as declared by the Trustees, and
if a Fund were liquidated, each class of shares of the Fund would receive the
net assets of the Fund attributable to the class. Because Investor and Advisor
Shares are subject to different expenses, a Fund's dividends and other
distributions will normally differ between the two classes. The Trust may
suspend the sale of shares at any time and may refuse any order to purchase
shares.
MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS
In addition to the principal investment strategies and the principal
risks of the Funds described in the Prospectuses, each Fund may employ other
investment practices and may be subject to additional risks which are described
below. Because the following is a combined description of investment strategies
and risks for all the Funds, certain strategies or risks described below may not
apply to your Fund. Unless a strategy or policy described below is specifically
prohibited by the investment restrictions listed in the Prospectuses, under
"Investment Restrictions" in this SAI, or by applicable law, a Fund may engage
in each of the practices described below.
CERTAIN DERIVATIVE INSTRUMENTS
Derivative instruments are financial instruments whose value depends
upon, or is derived from, the value of an underlying asset, such as a security,
index or currency. As described below, each Fund may engage in a variety of
transactions involving the use of derivative instruments, including options and
futures contracts on securities and securities indices and options on futures
contracts. These transactions may be used by a Fund for hedging purposes or, to
the extent permitted by applicable law, to increase its current return. The
Funds may also engage in derivative transactions involving foreign currencies.
See "Foreign Currency Transactions." OPTIONS
Each Fund may purchase and sell covered put and call options on its
portfolio securities to enhance investment performance and to protect against
changes in market prices.
COVERED CALL OPTIONS. A Fund may write covered call options on its
securities to realize a greater current return through the receipt of premiums
than it would realize on its securities alone. Such option transactions may also
be used as a limited form of hedging against a decline in the price of
securities owned by the Fund.
<PAGE>
A call option gives the holder the right to purchase, and obligates the
writer to sell, a security at the exercise price at any time before the
expiration date. A call option is "covered" if the writer, at all times while
obligated as a writer, either owns the underlying securities (or comparable
securities satisfying the cover requirements of the securities exchanges), or
has the right to acquire such securities through immediate conversion of
securities.
In return for the premium received when it writes a covered call
option, the Fund gives up some or all of the opportunity to profit from an
increase in the market price of the securities covering the call option during
the life of the option. The Fund retains the risk of loss should the price of
such securities decline. If the option expires unexercised, the Fund realizes a
gain equal to the premium, which may be offset by a decline in price of the
underlying security. If the option is exercised, the Fund realizes a gain or
loss equal to the difference between the Fund's cost for the underlying security
and the proceeds of the sale (exercise price minus commissions) plus the amount
of the premium.
A Fund may terminate a call option that it has written before it
expires by entering into a closing purchase transaction. A Fund may enter into
closing purchase transactions in order to free itself to sell the underlying
security or to write another call on the security, realize a profit on a
previously written call option, or protect a security from being called in an
unexpected market rise. Any profits from a closing purchase transaction may be
offset by a decline in the value of the underlying security. Conversely, because
increases in the market price of a call option will generally reflect increases
in the market price of the underlying security, any loss resulting from a
closing purchase transaction is likely to be offset in whole or in part by
unrealized appreciation of the underlying security owned by the Fund.
COVERED PUT OPTIONS. A Fund may write covered put options in order to
enhance its current return. Such options transactions may also be used as a
limited form of hedging against an increase in the price of securities that the
Fund plans to purchase. A put option gives the holder the right to sell, and
obligates the writer to buy, a security at the exercise price at any time before
the expiration date. A put option is "covered" if the writer segregates cash and
high-grade short-term debt obligations or other permissible collateral equal to
the price to be paid if the option is exercised.
In addition to the receipt of premiums and the potential gains from
terminating such options in closing purchase transactions, the Fund also
receives interest on the cash and debt securities maintained to cover the
exercise price of the option. By writing a put option, the Fund assumes the risk
that it may be required to purchase the underlying security for an exercise
price higher than its then current market value, resulting in a potential
capital loss unless the security later appreciates in value.
A Fund may terminate a put option that it has written before it expires
by a closing purchase transaction. Any loss from this transaction may be
partially or entirely offset by the premium received on the terminated option.
PURCHASING PUT AND CALL OPTIONS. A Fund may also purchase put options
to protect portfolio holdings against a decline in market value. This protection
lasts for the life of the put option because the Fund, as a holder of the
option, may sell the underlying security at the exercise price regardless of any
decline in its market price. In order for a put option to be profitable, the
market price of the underlying security must decline sufficiently below the
exercise price to cover the premium and transaction costs that the Fund must
<PAGE>
pay. These costs will reduce any profit the Fund might have realized had it sold
the underlying security instead of buying the put option.
A Fund may purchase call options to hedge against an increase in the
price of securities that the Fund wants ultimately to buy. Such hedge protection
is provided during the life of the call option since the Fund, as holder of the
call option, is able to buy the underlying security at the exercise price
regardless of any increase in the underlying security's market price. In order
for a call option to be profitable, the market price of the underlying security
must rise sufficiently above the exercise price to cover the premium and
transaction costs. These costs will reduce any profit the Fund might have
realized had it bought the underlying security at the time it purchased the call
option.
A Fund may also purchase put and call options to enhance its current
return. A Fund may also buy and sell combinations of put and call options on the
same underlying security to earn additional income.
OPTIONS ON FOREIGN SECURITIES. A Fund may purchase and sell options on
foreign securities if in Schroder's opinion the investment characteristics of
such options, including the risks of investing in such options, are consistent
with the Fund's investment objectives. It is expected that risks related to such
options will not differ materially from risks related to options on U.S.
securities. However, position limits and other rules of foreign exchanges may
differ from those in the U.S. In addition, options markets in some countries,
many of which are relatively new, may be less liquid than comparable markets in
the U.S.
RISKS INVOLVED IN THE SALE OF OPTIONS. Options transactions involve
certain risks, including the risks that Schroder will not forecast interest rate
or market movements correctly, that a Fund may be unable at times to close out
such positions, or that hedging transactions may not accomplish their purpose
because of imperfect market correlations. The successful use of these strategies
depends on the ability of Schroder to forecast market and interest rate
movements correctly.
An exchange-listed option may be closed out only on an exchange which
provides a secondary market for an option of the same series. Although a Fund
will enter into an option position only if Schroder believes that a liquid
secondary market exists, there is no assurance that a liquid secondary market on
an exchange will exist for any particular option or at any particular time. If
no secondary market were to exist, it would be impossible to enter into a
closing transaction to close out an option position. As a result, a Fund may be
forced to continue to hold, or to purchase at a fixed price, a security on which
it has sold an option at a time when Schroder believes it is inadvisable to do
so.
Higher than anticipated trading activity or order flow or other
unforeseen events might cause The Options Clearing Corporation or an exchange to
institute special trading procedures or restrictions that might restrict the
Funds' use of options. The exchanges have established limitations on the maximum
number of calls and puts of each class that may be held or written by an
investor or group of investors acting in concert. It is possible that the Funds
and other clients of Schroder may be considered such a group. These position
limits may restrict the Funds' ability to purchase or sell options on particular
securities.
<PAGE>
As described below, each Fund generally expects that its options
transactions will be conducted on recognized exchanges. In certain instances,
however, a Fund may purchase and sell options in the over-the-counter markets.
Options which are not traded on national securities exchanges may be closed out
only with the other party to the option transaction. For that reason, it may be
more difficult to close out over-the-counter options than exchange-traded
options. Options in the over-the-counter market may also involve the risk that
securities dealers participating in such transactions would be unable to meet
their obligations to a Fund. Furthermore, over-the-counter options are not
subject to the protection afforded purchasers of exchange-traded options by The
Options Clearing Corporation. A Fund will, however, engage in over-the-counter
options transactions only when appropriate exchange-traded options transactions
are unavailable and when, in the opinion of Schroder, the pricing mechanism and
liquidity of the over-the-counter markets are satisfactory and the participants
are responsible parties likely to meet their contractual obligations. A Fund
will treat over-the-counter options (and, in the case of options sold by the
Fund, the underlying securities held by the Fund) as illiquid investments as
required by applicable law.
Government regulations, particularly the requirements for qualification
as a "regulated investment company" under the Internal Revenue Code, may also
restrict the Trust's use of options.
FUTURES CONTRACTS
In order to hedge against the effects of adverse market changes, each
Fund that may invest in debt securities may buy and sell futures contracts on
U.S. Government securities and other debt securities in which the Fund may
invest, and on indices of debt securities. In addition, each Fund that may
invest in equity securities may purchase and sell stock index futures to hedge
against changes in stock market prices. Each Fund may also, to the extent
permitted by applicable law, buy and sell futures contracts and options on
futures contracts to increase the Fund's current return. All such futures and
related options will, as may be required by applicable law, be traded on
exchanges that are licensed and regulated by the Commodity Futures Trading
Commission (the "CFTC"). Depending upon the change in the value of the
underlying security or index when a Fund enters into or terminates a futures
contract, the Fund may realize a gain or loss.
FUTURES ON DEBT SECURITIES AND RELATED OPTIONS. A futures contract on a
debt security is a binding contractual commitment which, if held to maturity,
will result in an obligation to make or accept delivery, during a particular
month, of securities having a standardized face value and rate of return. By
purchasing futures on debt securities -- assuming a "long" position -- a Fund
will legally obligate itself to accept the future delivery of the underlying
security and pay the agreed price. By selling futures on debt securities --
assuming a "short" position -- it will legally obligate itself to make the
future delivery of the security against payment of the agreed price. Open
futures positions on debt securities will be valued at the most recent
settlement price, unless that price does not, in the judgment of persons acting
at the direction of the Trustees as to the valuation of the Fund's assets,
reflect the fair value of the contract, in which case the positions will be
valued by the Trustees or such persons.
Positions taken in the futures markets are not normally held to
maturity, but are instead liquidated through offsetting transactions that may
result in a profit or a loss. While futures positions taken by a Fund will
usually be liquidated in this manner, a Fund may instead make or take delivery
of the underlying securities whenever it appears economically advantageous to
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the Fund to do so. A clearing corporation associated with the exchange on which
futures are traded assumes responsibility for such closing transactions and
guarantees that a Fund's sale and purchase obligations under closed-out
positions will be performed at the termination of the contract.
Hedging by use of futures on debt securities seeks to establish more
certainly than would otherwise be possible the effective rate of return on
portfolio securities. A Fund may, for example, take a "short" position in the
futures market by selling contracts for the future delivery of debt securities
held by the Fund (or securities having characteristics similar to those held by
the Fund) in order to hedge against an anticipated rise in interest rates that
would adversely affect the value of the Fund's portfolio securities. When
hedging of this character is successful, any depreciation in the value of
portfolio securities may substantially be offset by appreciation in the value of
the futures position.
On other occasions, a Fund may take a "long" position by purchasing
futures on debt securities. This would be done, for example, when the Fund
expects to purchase particular securities when it has the necessary cash, but
expects the rate of return available in the securities markets at that time to
be less favorable than rates currently available in the futures markets. If the
anticipated rise in the price of the securities should occur (with its
concomitant reduction in yield), the increased cost to the Fund of purchasing
the securities may be offset, at least to some extent, by the rise in the value
of the futures position taken in anticipation of the subsequent securities
purchase.
Successful use by a Fund of futures contracts on debt securities is
subject to Schroder's ability to predict correctly movements in the direction of
interest rates and other factors affecting markets for debt securities. For
example, if a Fund has hedged against the possibility of an increase in interest
rates which would adversely affect the market prices of debt securities held by
it and the prices of such securities increase instead, the Fund will lose part
or all of the benefit of the increased value of its securities which it has
hedged because it will have offsetting losses in its futures positions. In
addition, in such situations, if the Fund has insufficient cash, it may have to
sell securities to meet daily maintenance margin requirements. The Fund may have
to sell securities at a time when it may be disadvantageous to do so.
A Fund may purchase and write put and call options on certain debt
futures contracts, as they become available. Such options are similar to options
on securities except that options on futures contracts give 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 period of
the option. As with options on securities, the holder or writer of an option may
terminate his position by selling or purchasing an option of the same series.
There is no guarantee that such closing transactions can be effected. A Fund
will be required to deposit initial margin and maintenance margin with respect
to put and call options on futures contracts written by it pursuant to brokers'
requirements, and, in addition, net option premiums received will be included as
initial margin deposits. See "Margin Payments" below. Compared to the purchase
or sale of futures contracts, the purchase of call or put options on futures
contracts involves less potential risk to a Fund because the maximum amount at
risk is the premium paid for the options plus transactions costs. However, there
may be circumstances when the purchase of call or put options on a futures
contract would result in a loss to a Fund when the purchase or sale of the
futures contracts would not, such as when there is no movement in the prices of
debt securities. The writing of a put or call option on a futures contract
involves risks similar to those risks relating to the purchase or sale of
futures contracts.
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INDEX FUTURES CONTRACTS AND OPTIONS. A Fund may invest in debt index
futures contracts and stock index futures contracts, and in related options. A
debt index futures contract is a contract to buy or sell units of a specified
debt index at a specified future date at a price agreed upon when the contract
is made. A unit is the current value of the index. A stock index futures
contract is a contract to buy or sell units of a stock index at a specified
future date at a price agreed upon when the contract is made. A unit is the
current value of the stock index.
Depending on the change in the value of the index between the time when
a Fund enters into and terminates an index futures transaction, the Fund may
realize a gain or loss. The following example illustrates generally the manner
in which index futures contracts operate. The Standard & Poor's 100 Stock Index
is composed of 100 selected common stocks, most of which are listed on the New
York Stock Exchange. The S&P 100 Index assigns relative weightings to the common
stocks included in the Index, and the Index fluctuates with changes in the
market values of those common stocks. In the case of the S&P 100 Index,
contracts are to buy or sell 100 units. Thus, if the value of the S&P 100 Index
were $180, one contract would be worth $18,000 (100 units x $180). The stock
index futures contract specifies that no delivery of the actual stocks making up
the index will take place. Instead, settlement in cash must occur upon the
termination of the contract, with the settlement being the difference between
the contract price and the actual level of the stock index at the expiration of
the contract. For example, if a Fund enters into a futures contract to buy 100
units of the S&P 100 Index at a specified future date at a contract price of
$180 and the S&P 100 Index is at $184 on that future date, the Fund will gain
$400 (100 units x gain of $4). If the Fund enters into a futures contract to
sell 100 units of the stock index at a specified future date at a contract price
of $180 and the S&P 100 Index is at $182 on that future date, the Fund will lose
$200 (100 units x loss of $2).
A Fund may purchase or sell futures contracts with respect to any
securities indices. Positions in index futures may be closed out only on an
exchange or board of trade which provides a secondary market for such futures.
In order to hedge a Fund's investments successfully using futures
contracts and related options, a Fund must invest in futures contracts with
respect to indices or sub-indices the movements of which will, in Schroder's
judgment, have a significant correlation with movements in the prices of the
Fund's securities.
Options on index futures contracts are similar to options on securities
except that options on index futures contracts give the purchaser the right, in
return for the premium paid, to assume a position in an index 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 period of the option.
Upon exercise of the option, the holder would assume the underlying futures
position and would receive a variation margin payment of cash or securities
approximating the increase in the value of the holder's option position. If an
option is exercised on the last trading day prior to the expiration date of the
option, the settlement will be made entirely in cash based on the difference
between the exercise price of the option and the closing level of the index on
which the futures contract is based on the expiration date. Purchasers of
options who fail to exercise their options prior to the exercise date suffer a
loss of the premium paid.
As an alternative to purchasing and selling call and put options on
index futures contracts, each of the Funds that may purchase and sell index
futures contracts may purchase and sell call and put options on the underlying
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indices themselves to the extent that such options are traded on national
securities exchanges. Index options are similar to options on individual
securities in that the purchaser of an index option acquires the right to buy
(in the case of a call) or sell (in the case of a put), and the writer
undertakes the obligation to sell or buy (as the case may be), units of an index
at a stated exercise price during the term of the option. Instead of giving the
right to take or make actual delivery of securities, the holder of an index
option has the right to receive a cash "exercise settlement amount". This amount
is equal to the amount by which the fixed exercise price of the option exceeds
(in the case of a put) or is less than (in the case of a call) the closing value
of the underlying index on the date of the exercise, multiplied by a fixed
"index multiplier".
A Fund may purchase or sell options on stock indices in order to close
out its outstanding positions in options on stock indices which it has
purchased. A Fund may also allow such options to expire unexercised.
Compared to the purchase or sale of futures contracts, the purchase of
call or put options on an index involves less potential risk to a Fund because
the maximum amount at risk is the premium paid for the options plus transactions
costs. The writing of a put or call option on an index involves risks similar to
those risks relating to the purchase or sale of index futures contracts.
A Fund may also purchase warrants, issued by banks and other financial
institutions, whose values are based on the values from time to time of one or
more securities indices.
MARGIN PAYMENTS. When a Fund purchases or sells a futures contract, it
is required to deposit with its custodian an amount of cash, U.S. Treasury
bills, or other permissible collateral equal to a small percentage of the amount
of the futures contract. This amount is known as "initial margin". The nature of
initial margin is different from that of margin in security transactions in that
it does not involve borrowing money to finance transactions. Rather, initial
margin is similar to a performance bond or good faith deposit that is returned
to a Fund upon termination of the contract, assuming a Fund satisfies its
contractual obligations.
Subsequent payments to and from the broker occur on a daily basis in a
process known as "marking to market". These payments are called "variation
margin" and are made as the value of the underlying futures contract fluctuates.
For example, when a Fund sells a futures contract and the price of the
underlying debt security rises above the delivery price, the Fund's position
declines in value. The Fund then pays the broker a variation margin payment
equal to the difference between the delivery price of the futures contract and
the market price of the securities underlying the futures contract. Conversely,
if the price of the underlying security falls below the delivery price of the
contract, the Fund's futures position increases in value. The broker then must
make a variation margin payment equal to the difference between the delivery
price of the futures contract and the market price of the securities underlying
the futures contract.
When a Fund terminates a position in a futures contract, a final
determination of variation margin is made, additional cash is paid by or to the
Fund, and the Fund realizes a loss or a gain. Such closing transactions involve
additional commission costs.
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SPECIAL RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS
LIQUIDITY RISKS. Positions in futures contracts may be closed out only
on an exchange or board of trade which provides a secondary market for such
futures. Although each Fund intends to purchase or sell futures only on
exchanges or boards of trade where there appears to be an active secondary
market, there is no assurance that a liquid secondary market on an exchange or
board of trade will exist for any particular contract or at any particular time.
If there is not a liquid secondary market at a particular time, it may not be
possible to close a futures position at such time and, in the event of adverse
price movements, a Fund would continue to be required to make daily cash
payments of variation margin. However, in the event financial futures are used
to hedge portfolio securities, such securities will not generally be sold until
the financial futures can be terminated. In such circumstances, an increase in
the price of the portfolio securities, if any, may partially or completely
offset losses on the financial futures.
In addition to the risks that apply to all options transactions, there
are several special risks relating to options on futures contracts. The ability
to establish and close out positions in such options will be subject to the
development and maintenance of a liquid secondary market. It is not certain that
such a market will develop. Although a Fund generally will purchase only those
options for which there appears to be an active secondary market, there is no
assurance that a liquid secondary market on an exchange will exist for any
particular option or at any particular time. In the event no such market exists
for particular options, it might not be possible to effect closing transactions
in such options with the result that a Fund would have to exercise the options
in order to realize any profit.
HEDGING RISKS. There are several risks in connection with the use by a
Fund of futures contracts and related options as a hedging device. One risk
arises because of the imperfect correlation between movements in the prices of
the futures contracts and options and movements in the underlying securities or
index or in the prices of a Fund's securities which are the subject of a hedge.
Schroder will, however, attempt to reduce this risk by purchasing and selling,
to the extent possible, futures contracts and related options on securities and
indices the movements of which will, in its judgment, correlate closely with
movements in the prices of the underlying securities or index and a Fund's
portfolio securities sought to be hedged.
Successful use of futures contracts and options by a Fund for hedging
purposes is also subject to Schroder's ability to predict correctly movements in
the direction of the market. It is possible that, where a Fund has purchased
puts on futures contracts to hedge its portfolio against a decline in the
market, the securities or index on which the puts are purchased may increase in
value and the value of securities held in the portfolio may decline. If this
occurred, the Fund would lose money on the puts and also experience a decline in
value in its portfolio securities. In addition, the prices of futures, for a
number of reasons, may not correlate perfectly with movements in the underlying
securities or index due to certain market distortions. First, all participants
in the futures market are subject to margin deposit requirements. Such
requirements may cause investors to close futures contracts through offsetting
transactions which could distort the normal relationship between the underlying
security or index and futures markets. Second, the margin requirements in the
futures markets are less onerous than margin requirements in the securities
markets in general, and as a result the futures markets may attract more
speculators than the securities markets do. Increased participation by
speculators in the futures markets may also cause temporary price distortions.
Due to the possibility of price distortion, even a correct forecast of general
market trends by Schroder may still not result in a successful hedging
transaction over a very short time period.
<PAGE>
LACK OF AVAILABILITY. Because the markets for certain options and
futures contracts and other derivative instruments in which a Fund may invest
(including markets located in foreign countries) are relatively new and still
developing and may be subject to regulatory restraints, a Fund's ability to
engage in transactions using such instruments may be limited. Suitable
derivative transactions may not be available in all circumstances and there is
no assurance that a Fund will engage in such transactions at any time or from
time to time. A Fund's ability to engage in hedging transactions may also be
limited by certain regulatory and tax considerations.
OTHER RISKS. Each Fund will incur brokerage fees in connection with its
futures and options transactions. In addition, while futures contracts and
options on futures will be purchased and sold to reduce certain risks, those
transactions themselves entail certain other risks. Thus, while a Fund may
benefit from the use of futures and related options, unanticipated changes in
interest rates or stock price movements may result in a poorer overall
performance for the Fund than if it had not entered into any futures contracts
or options transactions. Moreover, in the event of an imperfect correlation
between the futures position and the portfolio position which is intended to be
protected, the desired protection may not be obtained and the Fund may be
exposed to risk of loss.
FORWARD COMMITMENTS
Each Fund may enter into contracts to purchase securities for a fixed
price at a future date beyond customary settlement time ("forward commitments")
if the Fund holds, and maintains until the settlement date in a segregated
account, cash or liquid securities in an amount sufficient to meet the purchase
price, or if the Fund enters into offsetting contracts for the forward sale of
other securities it owns. Forward commitments may be considered securities in
themselves, and involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in addition to
the risk of decline in the value of the Fund's other assets. Where such
purchases are made through dealers, the Fund relies on the dealer to consummate
the sale. The dealer's failure to do so may result in the loss to the Fund of an
advantageous yield or price.
Although a Fund will generally enter into forward commitments with the
intention of acquiring securities for its portfolio or for delivery pursuant to
options contracts it has entered into, a Fund may dispose of a commitment prior
to settlement if Schroder deems it appropriate to do so. A Fund may realize
short-term profits or losses upon the sale of forward commitments.
<PAGE>
REPURCHASE AGREEMENTS
Each Fund may enter into repurchase agreements. A repurchase agreement
is a contract under which the Fund acquires a security for a relatively short
period (usually not more than one week) subject to the obligation of the seller
to repurchase and the Fund to resell such security at a fixed time and price
(representing the Fund's cost plus interest). It is the Trust's present
intention to enter into repurchase agreements only with member banks of the
Federal Reserve System and securities dealers meeting certain criteria as to
creditworthiness and financial condition established by the Trustees of the
Trust, and only with respect to obligations of the U.S. government or its
agencies or instrumentalities or other high quality short-term debt obligations.
Repurchase agreements may also be viewed as loans made by a Fund which are
collateralized by the securities subject to repurchase. Schroder will monitor
such transactions to ensure that the value of the underlying securities will be
at least equal at all times to the total amount of the repurchase obligation,
including the interest factor. If the seller defaults, a Fund could realize a
loss on the sale of the underlying security to the extent that the proceeds of
sale including accrued interest are less than the resale price provided in the
agreement including interest. In addition, if the seller should be involved in
bankruptcy or insolvency proceedings, a Fund may incur delay and costs in
selling the underlying security or may suffer a loss of principal and interest
if a Fund is treated as an unsecured creditor and required to return the
underlying collateral to the seller's estate.
WHEN-ISSUED SECURITIES
Each Fund may from time to time purchase securities on a "when-issued"
basis. Debt securities are often issued on this basis. The price of such
securities, which may be expressed in yield terms, is fixed at the time a
commitment to purchase is made, but delivery and payment for the when-issued
securities take place at a later date. Normally, the settlement date occurs
within one month of the purchase. During the period between purchase and
settlement, no payment is made by a Fund and no interest accrues to the Fund. To
the extent that assets of a Fund are held in cash pending the settlement of a
purchase of securities, that Fund would earn no income. While a Fund may sell
its right to acquire when-issued securities prior to the settlement date, a Fund
intends actually to acquire such securities unless a sale prior to settlement
appears desirable for investment reasons. At the time a Fund makes the
commitment to purchase a security on a when-issued basis, it will record the
transaction and reflect the amount due and the value of the security in
determining the Fund's net asset value. The market value of the when-issued
securities may be more or less than the purchase price payable at the settlement
date. Each Fund will establish a segregated account in which it will maintain
cash and U.S. government securities or other liquid securities at least equal in
value to commitments for when-issued securities. Such segregated securities
either will mature or, if necessary, be sold on or before the settlement date.
<PAGE>
LOANS OF FUND PORTFOLIO SECURITIES
A Fund may lend its portfolio securities, provided: (1) the loan is
secured continuously by collateral consisting of U.S. government securities,
cash, or cash equivalents adjusted daily to have market value at least equal to
the current market value of the securities loaned; (2) the Fund may at any time
call the loan and regain the securities loaned; (3) the Fund will receive any
interest or dividends paid on the loaned securities; and (4) the aggregate
market value of the Fund's portfolio securities loaned will not at any time
exceed one-third of the total assets of the Fund. In addition, it is anticipated
that the Fund may share with the borrower some of the income received on the
collateral for the loan or that it will be paid a premium for the loan. Before a
Fund enters into a loan, Schroder considers all relevant facts and
circumstances, including the creditworthiness of the borrower. The risks in
lending portfolio securities, as with other extensions of credit, consist of
possible delay in recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially. Although voting rights or
rights to consent with respect to the loaned securities pass to the borrower, a
Fund retains the right to call the loans at any time on reasonable notice, and
it will do so in order that the securities may be voted by the Fund if the
holders of such securities are asked to vote upon or consent to matters
materially affecting the investment. A Fund will not lend portfolio securities
to borrowers affiliated with that Fund.
FOREIGN SECURITIES
Each Fund may invest without limit in securities principally traded in
foreign markets. Each Fund may also invest without limit in Eurodollar
certificates of deposit and other certificates of deposit issued by United
States branches of foreign banks and foreign branches of United States banks.
Investments in foreign securities may involve risks and considerations
different from or in addition to investments in domestic securities. There may
be less information publicly available about a foreign company than about a U.S.
company, and foreign companies are not generally subject to accounting,
auditing, and financial reporting standards and practices comparable to those in
the United States. The securities of some foreign companies are less liquid and
at times more volatile than securities of comparable U.S. companies. Foreign
brokerage commissions and other fees are also generally higher than in the
United States. Foreign settlement procedures and trade regulations may involve
certain risks (such as delay in payment or delivery of securities or in the
recovery of a Fund's assets held abroad) and expenses not present in the
settlement of domestic investments. Also, because foreign securities are
normally denominated and traded in foreign currencies, the values of a Fund's
assets may be affected favorably or unfavorably by currency exchange rates and
exchange control regulations, and a Fund may incur costs in connection with
conversion between currencies.
In addition, with respect to certain foreign countries, there is a
possibility of nationalization or expropriation of assets, imposition of
currency exchange controls, adoption of foreign governmental restrictions
affecting the payment of principal and interest, imposition of withholding or
confiscatory taxes, political or financial instability, and adverse political,
diplomatic or economic developments which could affect the values of investments
in those countries. In certain countries, legal remedies available to investors
may be more limited than those available with respect to investments in the
United States or other countries and it may be more difficult to obtain and
enforce a judgment against a foreign issuer. Also, the laws of some foreign
countries may limit a Fund's ability to invest in securities of certain issuers
located in those countries.
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Special tax considerations apply to foreign securities. In determining
whether to invest in securities of foreign issuers, Schroder will consider the
likely impact of foreign taxes on the net yield available to the Fund and its
shareholders. Income received by a Fund from sources within foreign countries
may be reduced by withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. It is impossible to determine the effective rate of
foreign tax in advance since the amount of a Fund's assets to be invested in
various countries is not known, and tax laws and their interpretations may
change from time to time and may change without advance notice. Any such taxes
paid by a Fund will reduce its net income available for distribution to
shareholders.
FOREIGN CURRENCY TRANSACTIONS
Each Fund may engage in currency exchange transactions to protect
against uncertainty in the level of future foreign currency exchange rates and
to increase current return. A Fund may engage in both "transaction hedging" and
"position hedging".
When it engages in transaction hedging, a Fund enters into foreign
currency transactions with respect to specific receivables or payables of that
Fund generally arising in connection with the purchase or sale of its portfolio
securities. A Fund will engage in transaction hedging when it desires to "lock
in" the U.S. dollar price of a security it has agreed to purchase or sell, or
the U.S. dollar equivalent of a dividend or interest payment in a foreign
currency. By transaction hedging, a Fund will attempt to protect against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the applicable foreign currency during the period between the
date on which the security is purchased or sold or on which the dividend or
interest payment is declared, and the date on which such payments are made or
received.
A Fund may purchase or sell a foreign currency on a spot (or cash)
basis at the prevailing spot rate in connection with transaction hedging. A Fund
may also enter into contracts to purchase or sell foreign currencies at a future
date ("forward contracts") and purchase and sell foreign currency futures
contracts.
For transaction hedging purposes, a Fund may also purchase
exchange-listed and over-the-counter call and put options on foreign currency
futures contracts and on foreign currencies. A put option on a futures contract
gives a Fund the right to assume a short position in the futures contract until
expiration of the option. A put option on currency gives a Fund the right to
sell a currency at an exercise price until the expiration of the option. A call
option on a futures contract gives a Fund the right to assume a long position in
the futures contract until the expiration of the option. A call option on
currency gives a Fund the right to purchase a currency at the exercise price
until the expiration of the option. A Fund will engage in over-the-counter
transactions only when appropriate exchange-traded transactions are unavailable
and when, in Schroder's opinion, the pricing mechanism and liquidity are
satisfactory and the participants are responsible parties likely to meet their
contractual obligations.
When it engages in position hedging, a Fund enters into foreign
currency exchange transactions to protect against a decline in the values of the
foreign currencies in which securities held by a Fund are denominated or are
quoted in their principal trading markets or an increase in the value of
currency for securities which a Fund expects to purchase. In connection with
position hedging, a Fund may purchase put or call options on foreign currency
<PAGE>
and foreign currency futures contracts and buy or sell forward contracts and
foreign currency futures contracts. A Fund may also purchase or sell foreign
currency on a spot basis.
The precise matching of the amounts of foreign currency exchange
transactions and the value of the portfolio 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 values of
those securities between the dates the currency exchange transactions are
entered into and the dates they mature.
It is impossible to forecast with precision the market value of a
Fund's portfolio securities at the expiration or maturity of a forward or
futures contract. Accordingly, it may be necessary for a Fund to purchase
additional foreign currency on the spot market (and bear the expense of such
purchase) if the market value of the security or securities being hedged is less
than the amount of foreign currency a Fund is obligated to deliver and if a
decision is made to sell the security or securities and make delivery of the
foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio security or
securities of a Fund if the market value of such security or securities exceeds
the amount of foreign currency a Fund is obligated to deliver.
To offset some of the costs to a Fund of hedging against fluctuations
in currency exchange rates, a Fund may write covered call options on those
currencies.
Transaction and position hedging do not eliminate fluctuations in the
underlying prices of the securities which a Fund owns or intends to purchase or
sell. They simply establish a rate of exchange which one can achieve at some
future point in time. Additionally, although these techniques tend to minimize
the risk of loss due to a decline in the value of the hedged currency, they tend
to limit any potential gain which might result from the increase in the value of
such currency. Also, suitable foreign currency hedging transactions may not be
available in all circumstances and there can be no assurance that a Fund will
utilize hedging transactions at any time or from time to time.
A Fund may also seek to increase its current return by purchasing and
selling foreign currency on a spot basis, and by purchasing and selling options
on foreign currencies and on foreign currency futures contracts, and by
purchasing and selling foreign currency forward contracts.
CURRENCY FORWARD AND FUTURES CONTRACTS. A forward foreign currency
exchange contract involves 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 as agreed by the parties, at a price set at the time of the contract.
In the case of a cancelable forward contract, the holder has the unilateral
right to cancel the contract at maturity by paying a specified fee. The
contracts are traded in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for trades. A foreign currency futures contract is a standardized contract
for the future delivery of a specified amount of a foreign currency at a future
date at a price set at the time of the contract. Foreign currency futures
contracts traded in the United States are designed by and traded on exchanges
regulated by the CFTC, such as the New York Mercantile Exchange.
<PAGE>
Forward foreign currency exchange contracts differ from foreign
currency futures contracts in certain respects. For example, the maturity date
of a forward contract may be any fixed number of days from the date of the
contract agreed upon by the parties, rather than a predetermined date in a given
month. Forward contracts may be in any amounts agreed upon by the parties rather
than predetermined amounts. Also, forward foreign exchange contracts are traded
directly between currency traders so that no intermediary is required. A forward
contract generally requires no margin or other deposit.
At the maturity of a forward or futures contract, a Fund may either
accept or make delivery of the currency specified in the contract, or at or
prior to maturity enter into a closing transaction involving the purchase or
sale of an offsetting contract. Closing transactions with respect to forward
contracts are usually effected with the currency trader who is a party to the
original forward contract. Closing transactions with respect to futures
contracts are effected on a commodities exchange; a clearing corporation
associated with the exchange assumes responsibility for closing out such
contracts.
Positions in foreign currency futures contracts and related options may
be closed out only on an exchange or board of trade which provides a secondary
market in such contracts or options. Although a Fund will normally purchase or
sell foreign currency futures contracts and related options only on exchanges or
boards of trade where there appears to be an active secondary market, there is
no assurance that a secondary market on an exchange or board of trade will exist
for any particular contract or option or at any particular time. In such event,
it may not be possible to close a futures or related option position and, in the
event of adverse price movements, a Fund would continue to be required to make
daily cash payments of variation margin on its futures positions.
FOREIGN CURRENCY OPTIONS. Options on foreign currencies operate
similarly to options on securities, and are traded primarily in the
over-the-counter market, although options on foreign currencies have recently
been listed on several exchanges. Such options will be purchased or written only
when Schroder believes that a liquid secondary market exists for such options.
There can be no assurance that a liquid secondary market will exist for a
particular option at any specific time. Options on foreign currencies are
affected by all of those factors which influence exchange rates and investments
generally.
The value of a foreign currency option is dependent upon the value of
the foreign currency and the U.S. dollar, and may have no relationship to the
investment merits of a foreign security. 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 and there is no regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely basis.
Available quotation information is generally representative of very large
transactions in the interbank market and thus may not reflect relatively smaller
transactions (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 cannot be reflected in the U.S. options
markets.
<PAGE>
FOREIGN CURRENCY CONVERSION. Although foreign exchange dealers do not
charge a fee for currency conversion, they do realize a profit based on the
difference (the "spread") between prices at which they buy and sell various
currencies. Thus, a dealer may offer to sell a foreign currency to a Fund at one
rate, while offering a lesser rate of exchange should a Fund desire to resell
that currency to the dealer.
ZERO-COUPON SECURITIES
Zero-coupon securities in which a Fund may invest are debt obligations
which are generally issued at a discount and payable in full at maturity, and
which do not provide for current payments of interest prior to maturity.
Zero-coupon securities usually trade at a deep discount from their face or par
value and are subject to greater market value fluctuations from changing
interest rates than debt obligations of comparable maturities which make current
distributions of interest. As a result, the net asset value of shares of a Fund
investing in zero-coupon securities may fluctuate over a greater range than
shares of other Funds of the Trust and other mutual funds investing in
securities making current distributions of interest and having similar
maturities.
Zero-coupon securities may include U.S. Treasury bills issued directly
by the U.S. Treasury or other short-term debt obligations, and longer-term bonds
or notes and their unmatured interest coupons which have been separated by their
holder, typically a custodian bank or investment brokerage firm. A number of
securities firms and banks have stripped the interest coupons from the
underlying principal (the "corpus") of U.S. Treasury securities and resold them
in custodial receipt programs with a number of different names, including
Treasury Income Growth Receipts ("TIGRS") and Certificates of Accrual on
Treasuries ("CATS"). CATS and TIGRS are not considered U.S. government
securities. The underlying U.S. Treasury bonds and notes themselves are held in
book-entry form at the Federal Reserve Bank or, in the case of bearer securities
(i.e., unregistered securities which are owned ostensibly by the bearer or
holder thereof), in trust on behalf of the owners thereof.
In addition, the Treasury has facilitated transfers of ownership of
zero-coupon securities by accounting separately for the beneficial ownership of
particular interest coupons and corpus payments on Treasury securities through
the Federal Reserve book-entry record-keeping system. The Federal Reserve
program as established by the Treasury Department is known as "STRIPS" or
"Separate Trading of Registered Interest and Principal of Securities." Under the
STRIPS program, a Fund will be able to have its beneficial ownership of U.S.
Treasury zero-coupon securities recorded directly in the book-entry
record-keeping system in lieu of having to hold certificates or other evidences
of ownership of the underlying U.S. Treasury securities.
When debt obligations have been stripped of their unmatured interest
coupons by the holder, the stripped coupons are sold separately. The principal
or corpus is sold at a deep discount because the buyer receives only the right
to receive a future fixed payment on the security and does not receive any
rights to periodic cash interest payments. Once stripped or separated, the
corpus and coupons may be sold separately. Typically, the coupons are sold
separately or grouped with other coupons with like maturity dates and sold in
such bundled form. Purchasers of stripped obligations acquire, in effect,
discount obligations that are economically identical to the zero-coupon
securities issued directly by the obligor.
<PAGE>
SHORT SALES
In a short sale, a Fund sells a borrowed security and has a
corresponding obligation to the lender to return the identical security. A Fund
also may engage in short sales if, at the time of the short sale, it owns or has
the right to obtain, at no additional cost, an equal amount of the security
being sold short. This investment technique is known as a short sale
"against-the-box." In such a short sale, a seller does not immediately deliver
the securities sold and is said to have a short position in those securities
until delivery occurs. If a Fund engages in a short sale, the collateral for the
short position is maintained by the Fund's custodian or a qualified
sub-custodian. While the short sale is open, the Fund maintains in a segregated
account an amount of securities equal in kind and amount to the securities sold
short or securities convertible into or exchangeable for such equivalent
securities. These securities constitute the Fund's long position. The Fund does
not engage in short sales against-the-box for speculative purposes but may,
however, make a short sale as a hedge, when Schroder believes that the price of
a security may decline, causing a decline in the value of a security owned by
the Fund (or a security convertible or exchangeable for such security). There
are certain additional transaction costs associated with short sales
against-the-box, but Schroder endeavors to offset these costs with the income
from the investment of the cash proceeds of short sales. Under the Taxpayer
Relief Act of 1997, activities by the Fund which lock-in gain on an appreciated
financial instrument generally will be treated as a "constructive sale" of such
instrument which will trigger gain (but not loss) for federal income tax
purposes. Such activities may create taxable income in excess of the cash they
generate.
ARBITRAGE
Schroder International Bond Fund may sell a security in one market and
simultaneously purchase the same security in another market in order to take
advantage of differences in the price of the security in the different markets.
The Fund does not actively engage in arbitrage. Such transactions may be entered
into only with respect to debt securities and will occur only in a dealer's
market where the buying and selling dealers involved confirm their prices to the
Fund at the time of the transaction, thus eliminating any risk to the assets of
the Fund.
SWAP AGREEMENTS
Schroder International Bond Fund may enter into interest-rate, index
and currency-exchange rate swap agreements for purposes of attempting to obtain
a particular desired return at a lower cost to the Fund than if the Fund had
invested directly in an instrument that yielded such desired return. Swap
agreements are two-party contracts entered into primarily by institutional
investors for periods ranging from a few weeks to more than one year. In a
standard "swap" transaction, two parties agree to exchange the returns (or
differentials in rates of return) earned or realized on particular predetermined
investments or instruments. The gross returns to be exchanged or "swapped"
between the parties are calculated with respect to a "notional amount" (for
example, the return on or increase in value of a particular dollar amount
invested at a particular interest rate, in a particular foreign currency or in a
"basket" of securities representing a particular index). Commonly used swap
agreements include interest-rate caps, under which, in return for a premium, one
party agrees to make payments to the other to the extent that interest rates
exceed a specified rate, or "cap"; interest-rate floors, under which, in return
for a premium, one party agrees to make payments to the other to the extent that
interest rates fall below a specified level, or "floor"; and interest-rate
collars, under which a party sells a cap and purchases a floor or vice versa in
an attempt to protect itself against interest rate movements exceeding given
minimum or maximum levels.
<PAGE>
The "notional amount" of the swap agreement is only a fictive basis on
which to calculate the obligations that the parties to a swap agreement have
agreed to exchange. Most swap agreements entered into by the Fund would
calculate the obligations of the parties to an agreement on a "net" basis.
Consequently, the Fund's obligations (or rights) under a swap agreement are
generally equal only to the net amount to be paid or received under the
agreement based on the relative values of the positions held by each party to
the agreement (the "net amount"). The Fund's obligations under a swap agreement
will be accrued daily (offset against any amounts owing to the Fund) and any
accrued but unpaid net amounts owed to a swap counterparty will be covered by
maintaining a segregated account comprised of segregable assets to avoid any
potential leveraging of the Fund's investment portfolio. The Fund will not enter
into a swap agreement with any single party if the net amount owed or to be
received under existing contracts with that party would exceed 5% of the Fund's
assets.
Certain swap agreements are exempt from most provisions of the
Commodity Exchange Act and, therefore, are not regulated as futures or commodity
option transactions under that Act. To qualify for this exemption, a swap
agreement must be entered into by "eligible participants," which includes the
following, provided the participants' total assets exceed established levels: a
bank or trust company, savings association or credit union, insurance company,
investment company subject to regulation under the 1940 Act, commodity pool,
corporation, partnership, proprietorship, organization, trust or other entity,
employee benefit plan, governmental entity, broker-dealer, futures commission
merchant, natural person, or regulated foreign person. To be eligible, natural
persons and most other entities must have total assets exceeding $10 million;
commodity pools and employee benefit plans must have assets exceeding $5
million. In addition, an eligible swap transaction must meet three conditions.
First, the swap agreement may not be part of a fungible class of agreements that
are standardized as to their material economic terms. Second, the
creditworthiness of parties with actual or potential obligations under the swap
agreement must be a material consideration in entering into or determining the
terms of the swap agreement, including pricing, cost, or credit enhancement
terms. Third, swap agreements may not be entered into and traded on or through a
multilateral transaction execution facility.
This exemption is not exclusive, and participants may continue to rely
on existing exclusions for swaps, such as the Policy Statement issued in July
1989 which recognized a safe harbor for swap transactions from regulation as
futures or commodity option transactions under the Commodity Exchange Act or its
regulations. The Policy Statement applies to swap transactions settled in cash
that: (1) have individually tailored terms; (2) lack exchange style offset and
the use of a clearing organization or margin system; (3) are undertaken in
connection with a line of business; and (4) are not marketed to the public.
TEMPORARY DEFENSIVE STRATEGIES
As described in the Prospectuses, Schroder may at times judge that
conditions in the securities markets make pursuing a Fund's basic investment
strategies inconsistent with the best interests of its shareholders and may
temporarily use alternate investment strategies primarily designed to reduce
fluctuations in the value of a Fund's assets. In implementing these "defensive"
strategies, the Fund would invest in high-quality debt securities, cash, or
money market instruments to any extent Schroder considers consistent with such
defensive strategies. It is impossible to predict when, or for how long, a Fund
will use these alternate strategies.
<PAGE>
INVESTMENT RESTRICTIONS
The Trust has adopted the following fundamental and non-fundamental
investment restrictions for each Fund. Each Fund's fundamental investment
restrictions may not be changed without the affirmative vote of a "majority of
the outstanding voting securities" of the affected Fund, which is defined in the
1940 Act to mean the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares and (2) 67% or more of the shares present at a meeting if
more than 50% of the outstanding shares are represented at the meeting in person
or by proxy. The non-fundamental investment policies described in the
Prospectuses and this SAI are not fundamental and may be changed by the
Trustees, without shareholder approval. As a matter of policy, the Trustees
would not materially change a Fund's investment objective without shareholder
approval.
THE PORTFOLIOS IN WHICH SCHRODER INTERNATIONAL FUND, SCHRODER EMERGING
MARKETS FUND, SCHRODER INTERNATIONAL SMALLER COMPANIES FUND, SCHRODER
INTERNATIONAL BOND FUND, AND SCHRODER U.S. SMALLER COMPANIES FUND INVEST HAVE
SUBSTANTIALLY THE SAME INVESTMENT RESTRICTIONS AS THEIR CORRESPONDING FUND. IN
REVIEWING THE DESCRIPTION OF A FUND'S INVESTMENT RESTRICTIONS BELOW, YOU SHOULD
ASSUME THAT THE INVESTMENT RESTRICTIONS OF THE CORRESPONDING PORTFOLIO ARE THE
SAME IN ALL MATERIAL RESPECTS AS THOSE OF THE FUND.
SCHRODER INTERNATIONAL FUND
Schroder International Fund will not:
FUNDAMENTAL POLICIES:
1. 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.
2. Purchase more than 10% of the voting securities of any one issuer.
3. 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: (1)
"restricted securities", which are securities than cannot be resold to
the public without registration under federal securities law; and (2)
securities of issuers (together with all predecessors) having a record
of less than three years of continuous operation.
<PAGE>
4. Invest 25% or more of the value of its total assets in any one
industry.
5. 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 Fund.
6. Pledge, mortgage or hypothecate its assets to an extent greater than
10% of the value of its total assets.
7. Purchase securities on margin or sell short.
8. Make investments for the purpose of exercising control or management.
9. Purchase or sell real estate (provided that the Fund may invest in
securities issued by companies that invest in real estate or interests
therein).
10. 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).
11. Invest in commodities, commodity contracts other than foreign currency
forward contracts, or oil, gas and other mineral resource, lease, or
arbitrage transactions.
12. Write, purchase or sell options, puts, calls, straddles, spreads,
or combinations thereof.
13. 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).
14. Invest in warrants, valued at the lower of cost or market, to more than
5% of the value of the Fund's net assets. Included within that amount,
but not to exceed 2% of the value of the Fund's net assets, may be
warrants that are not listed on the New York or American Stock
Exchange. Warrants acquired by the Fund in units or attached to
securities may be deemed to be without value.
15. 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 1940 Act.
<PAGE>
NON-FUNDAMENTAL POLICY:
Schroder International Fund 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,
as amended, that are determined to be liquid by Schroder pursuant to guidelines
adopted by the Board of Trustees of Schroder Capital Funds. 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.
SCHRODER EMERGING MARKETS FUND
Schroder Emerging Markets Fund will not:
FUNDAMENTAL POLICIES:
1. Purchase a security if, as a result, more than 25% of the Fund's total
assets would be invested in securities of issuers conducting their
principal business activities in the same industry. For purposes of
this limitation, there is no limit on: (1) investments in U.S.
Government securities, in repurchase agreements covering U.S.
Government securities, in securities issued by the states, territories
or possessions of the United States or in foreign government
securities; or (2) investment in issuers domiciled in a single
jurisdiction. Notwithstanding anything to the contrary, to the extent
permitted by the 1940 Act, the Fund may invest in one or more
investment companies; provided that, except to the extent that it
invests in other investment companies pursuant to Section 12(d)(1)(A)
of the 1940 Act, the Fund treats the assets of the investment companies
in which it invests as its own for purposes of this policy.
2. Borrow money if, as a result, outstanding borrowings would exceed an
amount equal to one- third of the Fund's total assets.
<PAGE>
3. Purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the Fund
from investing in securities or other instruments backed by real estate
or securities of companies engaged in the real estate business).
4. Make loans to other parties. For purposes of this limitation, entering
into repurchase agreements, lending securities and acquiring any debt
security are not deemed to be the making of loans.
<PAGE>
5. Purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not
prevent the Fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed
by physical commodities).
6. Underwrite (as that term is defined in the Securities Act of 1933, as
amended) securities issued by other persons except, to the extent that
in connection with the disposition of its assets, the Fund may be
deemed to be an underwriter.
7. Issue any class of senior securities except to the extent consistent
with the 1940 Act.
NONFUNDAMENTAL POLICIES:
1. The Fund is "non-diversified" as that term is defined in the 1940 Act.
To the extent required to qualify as a regulated investment company
under the Internal Revenue Code of 1986, as amended, the Fund may not
purchase a security (other than a U.S. Government security or a
security of an investment company) if, as a result: (1) with respect to
50% of its assets, more than 5% of the Fund's total assets would be
invested in the securities of any single issuer; (2) with respect to
50% of its assets, the Fund would own more than 10% of the outstanding
securities of any single issuer; or (3) more than 25% of the Fund's
total assets would be invested in the securities of any single issuer.
2. For purposes of the limitation on borrowing, the following are not
treated as borrowings to the extent they are fully collateralized: (1)
the delayed delivery of purchase securities (such as the purchase of
when-issued securities); (2) reverse repurchase agreements; (3)
dollar-roll transactions; and (4) the lending of securities.
3. Invest more than 15% of its net assets in "illiquid securities", which
include: (1) securities that cannot be disposed of within seven days
at their then-current value; (2) repurchase agreements not entitling
the holder to payment of principal within seven days; and (3)
securities subject to restrictions on the sale of the securities to
the public without registration under the Securities Act of 1933, as
amended, ("restricted securities") that are not readily marketable.
The Fund may treat certain restricted securities as liquid pursuant to
guidelines adopted by the Board of Trustees of the Trust or the Board
of Schroder Capital Funds, as the case may be.
4. Make investments for the purpose of exercising control of an issuer.
Investments by the Fund in entities created under the laws of foreign
countries solely to facilitate investment in securities in that country
will not be deemed the making of investments for the purpose of
exercising control.
5. Invest in securities of another investment company, except to the
extent permitted by the 1940 Act.
<PAGE>
6. Sell securities short, unless it owns or has the right to obtain
securities equivalent in kind and amount to the securities sold short
(short sales "against-the-box"), and provided that transactions in
futures contracts and options are not deemed to constitute selling
securities short.
7. Purchase securities on margin, except that the Fund may use short-term
credit for the clearance of its portfolio's transactions, and provided
that initial and variation margin payments in connection with futures
contracts and options on futures contracts shall not constitute
purchasing securities on margin.
8. Lend a security if, as a result, the amount of loaned securities would
exceed an amount equal to one-third of the Fund's total assets.
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND
Schroder International Smaller Companies Fund will not:
FUNDAMENTAL POLICIES:
1. With respect to 75% of it assets, purchase a security other than a
security issued or guaranteed by the U.S. Government, its agencies or
instrumentalities or a security of an investment company if, as a
result, more than 5% of the Fund's total assets would be invested in
the securities of a single issuer or the Fund would own more than 10%
of the outstanding voting securities of any single issuer.
2. Concentrate investments in any particular industry; therefore, the Fund
will not purchase the securities of companies in any one industry if,
thereafter, 25% or more of the Fund's total assets would consist of
securities of companies in that industry. This restriction does not
apply to obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities. An investment of more than 25% of the
Fund's assets in the securities of issuers located in one country does
not contravene this policy.
3. Borrow money in excess of 33 1/3% of its total assets taken at market
value (including the amount borrowed) and then only from a bank as a
temporary measure for extraordinary or emergency purposes, including
to meet redemptions or to settle securities transactions that may
otherwise require untimely dispositions of portfolio securities.
4. Purchase or sell real estate, provided that the Fund may invest in
securities issued by companies which invest in real estate or interests
therein.
5. Make loans to other persons, provided that for purposes of this
restriction, entering into repurchase agreements or acquiring any
otherwise permissible debt securities or engaging in securities loans
shall not be deemed to be the making of a loan.
<PAGE>
6. Invest in commodities or commodity contracts other than forward
foreign currency exchange contracts.
7. Underwrite securities issued by other persons except to the extent
that, in connection with the disposition of its portfolio investments,
it may be deemed to be an underwriter under U.S. securities laws.
8. Issue senior securities except to the extent permitted by the 1940 Act.
NON-FUNDAMENTAL POLICY:
1. As a non-fundamental policy, the Fund will not invest more than 15% of
its assets in securities determined by Schroder to be illiquid. Certain
securities that are restricted as to resale may nonetheless be resold
by the Fund in accordance with Rule 144A under the Securities Act of
1933, as amended. Such securities may be determined by Schroder to be
liquid for purposes of compliance with the limitation on the Fund's
investment in illiquid securities.
SCHRODER INTERNATIONAL BOND FUND
Schroder International Bond Fund will not:
FUNDAMENTAL POLICIES:
1. Concentrate investments in any particular industry; therefore, the Fund
will not purchase the securities of companies in any one industry if,
thereafter, 25% or more of the Fund's total assets would consist of
securities of companies in that industry. This restriction does not
apply to obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities (or repurchase agreements with respect
thereto). An investment of more than 25% of the Fund's assets in the
securities of issuers located in one country does not contravene this
policy.
2. Borrow money in excess of 33 1/3% of its total assets taken at market
value (including the amount borrowed) and then only from a bank as a
temporary measure for extraordinary or emergency purposes, including
to meet redemptions or to settle securities transactions that may
otherwise require untimely dispositions of portfolio securities.
3. Purchase or sell real estate, provided that the Fund may invest in
securities issued by companies that invest in real estate or interests
therein.
<PAGE>
4. Make loans to other persons, provided that for purposes of this
restriction, entering into repurchase agreements or acquiring any
otherwise permissible debt securities including engaging in securities
lending shall not be deemed to be the making of a loan.
5. Invest in commodities or commodity contracts, except that, subject to
the restrictions described in the Prospectus and elsewhere in this SAI,
the Fund may: (1) enter into futures contracts and options on futures
contracts; (2) enter into forward foreign currency exchange contracts
and foreign currency options; (3) purchase or sell currencies on a spot
or forward basis; and (4) enter into futures contracts on securities,
currencies or on indices of such securities or currencies, or any other
financial instruments, and purchase and sell options on such futures
contracts.
6. 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.
7. Issue senior securities except to the extent permitted by the 1940 Act.
NON-FUNDAMENTAL POLICIES:
1. Acquire securities or invest in repurchase agreements with respect to
any securities if, as a result, more than 15% of its net assets (taken
at current value) would be invested in illiquid securities (securities
that cannot be disposed of within seven days at their then-current
value), including repurchase agreements not entitling the holder to
payment of principal within seven days and securities that are not
readily marketable by virtue of restrictions on the sale of such
securities to the public without registration under the Securities Act
of 1933, as amended. Illiquid securities do not include securities
that can be sold to the public in foreign markets or that may be
eligible for resale to qualified institutional purchasers pursuant to
Rule 144A under the Securities Act of 1933 that are determined to be
liquid by the investment adviser pursuant to guidelines adopted by the
Trust's Board of Trustees.
2. Make investments for the purpose of exercising control or management,
except in connection with a merger, consolidation, acquisition, or
reorganization with another investment company or series thereof.
(Investments by the Fund in wholly-owned investment entities created
under the laws of certain foreign countries will not be deemed the
making of investments for the purpose of exercising control or
management.)
3. Invest in interests in oil, gas or other mineral exploration, resource,
or lease transactions or development programs but may purchase readily
marketable securities of companies that operate, invest in, or sponsor
such programs.
<PAGE>
4. The Fund may acquire or retain the securities of any other investment
company except to the extent permitted by the 1940 Act, including in
connection with a merger, consolidation, acquisition, or
reorganization.
SCHRODER U.S. DIVERSIFIED GROWTH FUND
Schroder U.S. Diversified Growth Fund will not:
FUNDAMENTAL POLICIES:
<PAGE>
1. Issue senior securities except that: (1) it may borrow money from a
bank on its promissory note or other evidence of indebtedness (any such
borrowing may not exceed one-third of the Fund's total assets after the
borrowing); (2) if at any time such borrowing exceeds 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 (3) 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 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 does not borrow for investment
purposes.)
2. Effect short sales, purchase any security on margin or write or
purchase put and call options.
3. Acquire more than 10% of the voting securities of any one issuer.
4. Invest 25% or more of the value of its total assets in any one
industry.
5. Engage in the purchase and sale of illiquid interests in real estate,
including illiquid interests in real estate investment trusts.
6. Engage in the purchase and sale of commodities or commodity contracts.
7. Invest in companies for the purpose of exercising control or
management.
8. 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, as.
amended.
<PAGE>
9. 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. Acquire securities described in the two immediately preceding
fundamental policies which in the aggregate exceed 10% of the value of
the Fund's total assets.
11. Invest in other investment companies.
NON-FUNDAMENTAL POLICIES:
1. 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.
2. Engage in writing, buying or selling of stock index futures, options
on stock index futures, financial futures contracts or options
thereon.
SCHRODER U.S. SMALLER COMPANIES FUND
Schroder U.S. Smaller Companies Fund will not:
FUNDAMENTAL POLICIES:
1. Borrow money, except that the Fund may borrow from banks or by
entering into reverse repurchase agreements, provided that such
borrowings do not exceed 33 1/3% of the value of the Portfolio's
total assets (computed immediately after the borrowing).
2. 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).
3. Invest in commodities or commodity contracts (other than covered call
options, 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, 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).
4. 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.
<PAGE>
5. Purchase or write puts or calls except as permitted by any of its
other fundamental policies.
6. 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; the Fund may also
make loans of portfolio securities and enter into repurchase
agreements.
7. 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.
8. Invest in companies for the purpose of acquiring control or
management thereof.
9. 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).
10. Invest in real estate or in interests in real estate, but may purchase
readily marketable securities of companies holding real estate or
interests therein.
NON-FUNDAMENTAL POLICY:
1. As a non-fundamental policy, the Fund will not invest more than 15% of
its assets in securities determined by Schroder to be illiquid. Certain
securities that are restricted as to resale may nonetheless be resold
by the Fund in accordance with Rule 144A under the Securities Act of
1933, as amended. Such securities may be determined by Schroder to be
liquid for purposes of compliance with the limitation on the Fund's
investment in illiquid securities.
<PAGE>
SCHRODER MICRO CAP FUND
Schroder Micro Cap Fund will not:
FUNDAMENTAL POLICIES:
1. Underwrite securities of other companies (except insofar as the Fund
might be deemed to be an underwriter in the resale of any securities
held in its portfolio).
2. Invest in commodities or commodity contracts (other than Hedging
Instruments, which it may use as permitted by any of its other
fundamental policies, whether or not any such Hedging Instrument is
considered to be a commodity or a commodity contract).
<PAGE>
3. Purchase securities on margin; however, the Fund may make margin
deposits in connection with any Hedging Instruments, which it may use
as permitted by any of its other fundamental policies.
4. Purchase or write puts or calls except as permitted by any of its
other fundamental policies.
5. Lend money except in connection with the acquisition of that portion of
publicly-distributed debt securities that the Fund's investment
policies and restrictions permit it to purchase; the Fund may also make
loans of portfolio securities and enter into repurchase agreements.
6. Pledge, mortgage or hypothecate its assets to an extent greater than
10% of the value of the total assets of the Fund; however, this does
not prohibit the escrow arrangements contemplated by the put and call
activities of the Fund or other collateral or margin arrangements in
connection with any of the Hedging Instruments, which it may use as
permitted by any of its other fundamental policies.
7. Invest in companies for the purpose of acquiring control or management
thereof, except that the Fund may invest in other investment companies
to the extent permitted under the 1940 Act or by rule or exemption
thereunder.
8. Invest in interests in oil, gas or other mineral exploration or
development programs (but may purchase readily marketable securities of
companies that operate, invest in, or sponsor such programs).
9. Invest in real estate or in interests in real estate, but may purchase
readily marketable securities of companies holding real estate or
interests therein.
NON-FUNDAMENTAL POLICY:
1. As a non-fundamental policy, the Fund will not invest more than 15% of
its assets in securities determined by Schroder to be illiquid. Certain
securities that are restricted as to resale may nonetheless be resold
by the Fund in accordance with Rule 144A under the Securities Act of
1933, as amended. Such securities may be determined by Schroder to be
liquid for purposes of compliance with the limitation on the Fund's
investment in illiquid securities.
-------------------
All percentage limitations on investments (other than limitations on
borrowing and illiquid securities) will apply at the time of investment and
shall not be considered violated unless an excess or deficiency occurs or exists
immediately after and as a result of such investment.
TRUSTEES AND OFFICERS
The Trustees of the Trust are responsible for the general oversight of
the Trust's business. Subject to such policies as the Trustees may determine,
Schroder furnishes a continuing investment program for each Fund and makes
investment decisions on its behalf. Subject to the control of the Trustees,
Schroder also manages the Funds' other affairs and business.
The Trustees and executive officers of the Trust and their principal
occupations during the last five years are set forth below.
David N. Dinkins, Trustee. 71. 787 Seventh Avenue, New York, New York.
Trustee, Schroder Capital Funds, Schroder Capital Funds II, and Schroder Series
Trust. Professor, Columbia University School of International and Public
Affairs. Director, American Stock Exchange, Carver Federal Savings Bank,
Transderm Laboratory Corporation, and The Cosmetics Center, Inc. Formerly,
Mayor, City of New York.
John I. Howell, Trustee. 82. 787 Seventh Avenue, New York, New York.
Trustee, Schroder Capital Funds, Schroder Capital Funds II, Schroder Series
Trust, and Schroder Series Trust II. Director, American International Life
Assurance Company of New York. Private consultant since 1987.
Peter S. Knight, Trustee. 48. 787 Seventh Avenue, New York, New York.
Trustee, Schroder Capital Funds, Schroder Capital Funds II, and Schroder Series
Trust. Partner, Wunder, Knight, Levine, Thelen & Forscey. Director, Comsat
Corp., Medicis Pharmaceutical Corp., and Whitman Education Group, Inc. Formerly,
Campaign Manager, Clinton/Gore '96.
Peter E. Guernsey, Trustee. 77. 787 Seventh Avenue, New York, New York.
Trustee, Schroder Capital Funds, Schroder Capital Funds II, Schroder Series
Trust, and Schroder Series Trust II. Formerly, Senior Vice President, Marsh &
McLennan, Inc.
(*) Sharon L. Haugh, Trustee. 53. 787 Seventh Avenue, New York, New York.
Chairman, Schroder Capital Management Inc. Executive Vice President and
Executive Director, Schroder Capital Management International Inc. Chairman and
Director, Schroder Fund Advisors Inc. Trustee, Schroder Capital Funds, Schroder
Capital Funds II, and Schroder Series Trust.
William L. Means, Trustee. 59. 787 Seventh Avenue, New York, New York.
Trustee, Schroder Series Trust II. Formerly, Chief Investment Officer, Alaska
Permanent Fund Corporation.
Clarence F. Michalis, Trustee. 77. 787 Seventh Avenue, New York, New York.
Trustee, Schroder Capital Funds, Schroder Capital Funds II, and Schroder Series
Trust. Chairman of the Board of Directors, Josiah Macy, Jr. Foundation.
<PAGE>
Hermann C. Schwab, Trustee. 79. 787 Seventh Avenue, New York, New York.
Trustee, Schroder Capital Funds, Schroder Capital Funds II, and Schroder Series
Trust. Trustee, St. Luke's/Roosevelt Hospital Center. Formerly, consultant to
Schroder Capital Management International Inc.
(*) Mark J. Smith, President and Trustee of the Trust. 36. 787 Seventh
Avenue, New York, New York. Director and Senior Vice President, Schroder Capital
Management International Limited and Schroder Capital Management International
Inc. Director, Schroder Investment Management Ltd., Schroder Fund Advisors Inc.,
and Schroder Japanese Warrant Fund Ltd. Trustee, Schroder Capital Funds,
Schroder Capital Funds II, and Schroder Series Trust. Vice President, Schroder
Series Trust II.
Mark Astley, Vice President of the Trust. 34. 787 Seventh Avenue, New York,
New York. First Vice President of Schroder Capital Management International Inc.
Formerly, employed by various affiliates of Schroder Capital Management
International Inc. in various positions in the investment research and portfolio
management areas since 1987.
Robert G. Davy, Vice President of the Trust. 37. 787 Seventh Avenue, New
York, New York. Director of Schroder Capital Management International Inc. and
Schroder Capital Management International Ltd. since 1994; First Vice President
of Schroder Capital Management International Inc. since July 1992. Formerly,
employed by various affiliates of Schroder Capital Management International Inc.
in various positions in the investment research and portfolio management areas
since 1986.
Margaret H. Douglas-Hamilton, Vice President of the Trust. 57. 787 Seventh
Avenue, New York, New York. Director and Secretary of Schroder Capital
Management Inc.
Richard R. Foulkes, Vice President of the Trust. 53. 787 Seventh Avenue,
New York, New York. Deputy Chairman of Schroder Capital Management International
Inc. since October 1995; Director and Executive Vice President of Schroder
Capital Management International Ltd. since 1989.
John Y. Keffer, Vice President of the Trust. 56. Two Portland Square,
Portland, Maine. President of Forum Financial Corp., the Fund's transfer and
dividend disbursing agent and other affiliated entities including Forum
Financial Services, Inc., Forum Administrative Services, LLC, and Forum
Advisors, Inc.
_____________________
(*)Trustee who is an "interested person" (as defined in the 1940 Act) of the
Trust, Schroder, or Schroder Fund Advisors Inc.
<PAGE>
Michael Perelstein, Vice President of the Trust. 43. 787 Seventh Avenue,
New York, New York. Director since May 1997 and Senior Vice President of
Schroder Capital Management International Inc. since January 1997. Formerly,
Managing Director of MacKay - Shields Financial Corp.
Catherine A. Mazza, Vice President of the Trust. 39. 787 Seventh Avenue,
New York, New York. First Vice President, Schroder Capital Management
International Inc. and Schroder Capital Management Inc. President, Schroder Fund
Advisors Inc. Vice President, Schroder Capital Funds, Schroder Capital Funds II,
and Schroder Series Trust. Formerly, Vice President, Alliance Capital Management
L.P.
Alexandra Poe, Secretary and Vice President of the Trust. 38. 787 Seventh
Avenue, New York, New York. Vice President, Schroder Capital Management
International Inc. Senior Vice President, Secretary, and General Counsel,
Schroder Fund Advisors Inc. Vice President and Secretary, Schroder Capital
Funds, Schroder Capital Funds II, and Schroder Series Trust. Assistant
Secretary, Schroder Series Trust II. Formerly, Attorney, Gordon, Altman,
Butowsky, Weitzen, Shalov & Wein; Vice President and Counsel, Citibank, N.A.
Jane E. Lucas, Vice President of the Trust. 38. 787 Seventh Avenue, New
York, New York. Director, Schroder Capital Management Inc. Director and Senior
Vice President, Schroder Capital Management International Inc. Assistant
Director, Schroder Investment Management Ltd.
Fergal Cassidy, Treasurer and Principal Financial and Accounting Officer of
the Trust. 29. 787 Seventh Avenue, New York, New York. Vice President and
Treasurer, Schroder Capital Management Inc. Vice President and Comptroller,
Schroder Capital Management International Inc. Treasurer and Chief Financial
Officer, Schroder Fund Advisors Inc. Assistant Treasurer, Schroder Series Trust.
Formerly, Senior Accountant, Concurrency Management Corp.
Alan Mandel, Assistant Treasurer of the Trust. 41. 787 Seventh Avenue, New
York, New York. First Vice President of Schroder Capital Management
International Inc. since September 1998. Formerly, Director of Mutual Fund
Administration for Salomon Brothers Asset Management; Chief Financial Officer
and Vice President of Mutual Capital Management.
Carin Muhlbaum, Assistant Secretary of the Trust. 36. Vice President of
Schroder Capital Management International Inc. since 1998. Formerly, an
investment management attorney with Seward & Kissel and prior thereto, with
Gordon Altman Butowsky Weitzen Shalov & Wein.
Nicholas Rossi, Assistant Secretary of the Trust. 35. 787 Seventh Avenue,
New York, New York. Associate of Schroder Capital Management International Inc.
since October 1997 and Assistant Vice President of Schroder Fund Advisors Inc.
since March 1998. Formerly, Mutual Fund Specialist, Willkie Farr & Gallagher;
Fund Administrator, Furman Selz LLC since 1992.
Thomas G. Sheehan, Assistant Treasurer and Assistant Secretary of the
Trust. 44. Two Portland Square, Portland, Maine. Relationship Manager and
Counsel, Forum Financial Services, Inc. since 1993. Formerly, Special Counsel,
U.S. Securities and Exchange Commission, Division of Investment Management,
Washington, D.C.
<PAGE>
John A. Troiano, Vice President of the Trust. 38. 787 Seventh Avenue, New
York, New York. Director of Schroder Capital Management Inc. since April 1997;
Chief Executive Officer, since July 1, 1997, of Schroder Capital Management
International Inc. and Managing Director and Senior Vice President of Schroder
Capital Management International Inc. since October 1995. Formerly, employed by
various affiliates of Schroder Capital Management International Inc. in various
positions in the investment research and portfolio management areas since 1981.
Cheryl O. Tumlin, Assistant Treasurer and Assistant Secretary of the Trust.
32. Two Portland Square, Portland, Maine. Assistant Counsel, Forum
Administrative Services, LLC since July 1996. Formerly, attorney with the U.S.
Securities and Exchange Commission, Division of Market Regulation since 1995 and
prior thereto, attorney with Robinson Silverman Pearce Aronsohn & Berman since
1991.
Ira L. Unschuld, Vice President of the Trust. 33. 787 Seventh Avenue, New
York, New York. Group Vice President of Schroder Capital Management
International Inc. since April 1998 and an Associate from July 1990 to April
1993.
Except as otherwise noted, the principal occupations of the Trustees and
officers for the last five years have been with the employers shown above,
although in some cases they have held different positions with such employers or
their affiliates.
TRUSTEE COMPENSATION
Trustees who are not "interested persons" (as defined in the 1940 Act) of
the Trust, Schroder, or Schroder Fund Advisors Inc. receive an annual retainer
of $11,000 for their services as Trustees of all open-end investment companies
distributed by Schroder Fund Advisors Inc., and $1,250 per meeting attended in
person or $500 per meeting attended by telephone. Members of an Audit Committee
for one or more of such investment companies receive an additional $1,000 per
year. Payment of the annual retainer is allocated among the various investment
companies based on their relative net assets. Payment of meeting fees is
allocated only among those investment companies to which the meeting relates.
The following table sets forth information regarding compensation paid for
the fiscal year ended October 31, 1998 to the disinterested Trustees.
<PAGE>
COMPENSATION TABLE
- -------------------------------------------------------------------------
(2) (3)
(1) AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM TRUST AND
NAME OF FROM TRUST FUND COMPLEX PAID
TRUSTEE TO TRUSTEES*
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
David N. Dinkins**
$3,565 $13,000
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Peter E. Guernsey $3,907 $14,250
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
John I. Howell $3,907 $14,250
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Peter S. Knight** $3,907 $14,250
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
William L. Means*** $0 $0
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Clarence F. Michalis $3,907 $14,250
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Hermann C. Schwab $3,907 $14,250
- -------------------------------------------------------------------------
* The Total Compensation listed in column (3) for each
Trustee includes compensation for services as a Trustee of
Schroder Capital Funds ("SCF"), Schroder Capital Funds II
("SCF II"), Schroder Series Trust ("SST"), and Schroder
Series Trust II (formerly Schroder Asian Growth Fund, Inc.,
"SST II"). The Trust, SCF, SCF II, SST, and SST II are
considered part of the same "Fund Complex" for these
purposes. ** Messrs. Dinkins and Knight were elected
Trustees of the Trust on December 8, 1997. *** Mr. Means
was elected Trustee of the Trust on December 15, 1998.
As of October 31, 1998, the Trustees of the Trust as a group owned less
than 1% of the outstanding shares of each Fund. Mr. Ira Unschuld, principal
advisor to and vice president of Schroder Micro Cap Fund, held 7.55% of the
Investor Shares of that Fund.
The Trust's Trust Instrument provides that the Trust will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with litigation in which they may be involved because of their offices with the
Trust, except if it is determined in the manner specified in the Trust
Instrument that they have not acted in good faith in the reasonable belief that
their actions were in the best interests of the Trust or that such
indemnification would relieve any officer or Trustee of any liability to the
Trust or its Shareholders by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of his or her duties. The Trust, at its
expense, provides liability insurance for the benefit of its Trustees and
officers.
<PAGE>
SCHRODER AND ITS AFFILIATES
Schroder has served as the investment adviser for each of the Funds and
each of the related Portfolios since their inception. Schroder is a wholly-owned
subsidiary of Schroder U.S. Holdings Inc., which engages through its subsidiary
firms in the investment banking, asset management, and securities businesses.
Affiliates of Schroder U.S. Holdings Inc. (or their predecessors) have been
investment managers since 1927. Schroder itself has been an investment manager
since 1962, and served as investment manager for approximately $___ billion as
of December 31, 1998. Schroder U.S. Holdings Inc. is an indirect, wholly-owned
U.S. subsidiary of Schroders plc, a publicly owned holding company organized
under the laws of England. Schroders plc and its affiliates engage in
international merchant banking and investment management businesses, and as of
December 31, 1998, had under management assets of approximately $____ billion.
Schroder Fund Advisors Inc., an affiliate of Schroder that serves as the
Trust's principal underwriter, is a wholly-owned subsidiary of Schroder Capital
Management International Inc. Schroder Capital Management International Inc. is
also a wholly-owned subsidiary of Schroder U.S. Holdings Inc.
INVESTMENT ADVISORY AGREEMENTS
Under Investment Advisory Agreements between the Trust and Schroder
(the "Advisory Agreements"), Schroder, at its expense, provides the Funds with
investment advisory services and advises and assists the officers of the Trust
in taking such steps as are necessary or appropriate to carry out the decisions
of its Trustees regarding the conduct of business of the Trust and each Fund.
The fees to be paid under the Advisory Agreements are set forth in the
Prospectuses.
Under the Advisory Agreements, Schroder is required to regularly
provide the Funds with investment research, advice, and supervision and
furnishes continuously investment programs consistent with the investment
objectives and policies of the various Funds, and determines, for the various
Funds, what securities shall be purchased, what securities shall be held or
sold, and what portion of a Fund's assets shall be held uninvested, subject
always to the provisions of the Trust's Trust Instrument and By-laws, and of the
1940 Act, and to a Fund's investment objectives, policies, and restrictions, and
subject further to such policies and instructions as the Trustees may from time
to time establish.
Schroder makes available to the Trust, without additional expense to
the Trust, the services of such of its directors, officers, and employees as may
duly be elected Trustees or officers of the Trust, subject to their individual
consent to serve and to any limitations imposed by law. Schroder pays the
compensation and expenses of officers and executive employees of the Trust.
Schroder also provides investment advisory research and statistical facilities
and all clerical services relating to such research, statistical, and investment
work. Schroder pays the Trust's office rent.
Under the Advisory Agreements, the Trust is responsible for all its
other expenses, including clerical salaries not related to investment
activities; fees and expenses incurred in connection with membership in
investment company organizations; brokers' commissions; payment for portfolio
pricing services to a pricing agent, if any; legal expenses; auditing expenses;
accounting expenses; taxes and governmental fees; fees and expenses of the
transfer agent and investor servicing agent of the Trust; the cost of preparing
share certificates or any other expenses, including clerical expenses, incurred
in connection with the issue, sale, underwriting, redemption, or repurchase of
<PAGE>
shares; the expenses of and fees for registering or qualifying securities for
sale; the fees and expenses of the Trustees of the Trust who are not affiliated
with Schroder; the cost of preparing and distributing reports and notices to
shareholders; public and investor relations expenses; and fees and disbursements
of custodians of the Funds' assets. The Trust is also responsible for its
expenses incurred in connection with litigation, proceedings, and claims and the
legal obligation it may have to indemnify its officers and Trustees with respect
thereto.
Schroder's compensation under the Advisory Agreements may be reduced in
any year if a Fund's expenses exceed the limits on investment company expenses
imposed by any statute or regulatory authority of any jurisdiction in which
shares of the Fund are qualified for offer or sale.
The Advisory Agreements may be terminated without penalty by vote of
the Trustees as to any Fund, by the shareholders of that Fund, or by Schroder on
60 days' written notice. Each Advisory Agreement also terminates without payment
of any penalty in the event of its assignment. In addition, each Advisory
Agreement may be amended only by a vote of the shareholders of the affected
Fund(s), and each Advisory Agreement provides that it will continue in effect
from year to year only so long as such continuance is approved at least annually
with respect to a Fund by vote of either the Trustees or the shareholders of the
Fund, and, in either case, by a majority of the Trustees who are not "interested
persons" of Schroder. In each of the foregoing cases, the vote of the
shareholders is the affirmative vote of a "majority of the outstanding voting
securities" as defined in the Investment Company Act of 1940.
Subject to the direction and control of Schroder, Schroder Investment
Management International, Ltd. (SIMIL), an affiliate of Schroder, serves as
subadviser to Schroder International Smaller Companies Portfolio pursuant to an
Investment Subadvisory Agreement among Schroder, SIMIL and the Portfolio.
Forum Administrative Services, LLC ("FAdS") and Forum Shareholder
Services, LLC ("Forum") provide certain accounting, transfer agency, and other
services to the Trust. The Trust compensates FAdS and Forum on a basis approved
by the Trustees.
THE PORTFOLIOS
Each Fund (other than Schroder U.S. Diversified Growth Fund and
Schroder Micro Cap Fund) currently invests all of its assets in a related
Portfolio that has the same investment objectives and substantially the same
investment policies as the relevant Fund. As long as a Fund remains completely
invested in a Portfolio (or any other investment company), Schroder is not
entitled to receive any investment advisory fee with respect to the Fund. A Fund
may withdraw its investment from the related Portfolio at any time if the
Trust's Board of Trustees determines that it is in the best interests of the
Fund and its shareholders to do so. The Trust has retained Schroder as
investment adviser to manage a Fund's assets in the event that the Fund
withdraws its investment from its related Portfolio.
Schroder is the investment advisor to each of the related Portfolios
pursuant to an investment advisory agreement (the "Portfolio Advisory
Agreement") between Schroder and Schroder Capital Funds, on behalf of the
Portfolios. Schroder receives an investment advisory fee with respect to each
related Portfolio. The Portfolio Advisory Agreement is the same in all material
respects as the Investment Advisory Agreement between the Trust on behalf of the
Funds and Schroder. Each of the Funds that invests in a related Portfolio bears
a proportionate part of the management fees paid by the Portfolio (based on the
percentage of the Portfolio's assets attributable to the Fund).
<PAGE>
RECENT MANAGEMENT FEES. Of the total management fees paid by the Portfolios
to Schroders, the portion borne indirectly by each Fund that invests in a
related Portfolio during the three most recent fiscal years is set forth in the
following tables. For Schroder U.S. Diversified Growth Fund and Schroder Micro
Cap Fund (which do not invest in a Portfolio), the tables reflect management
fees paid by such Fund to Schroders. The fees listed in the following tables
reflect reductions pursuant to expense limitations in effect during such
periods.
Funds with May 31 fiscal year end:
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Fund Management Fees Paid for Management Fees Paid for Management Fees Paid for
Fiscal Year Ended 5/31/98 Fiscal Year Ended 5/31/97 Fiscal Year Ended 5/31/96
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
N/A N/A
Schroder Emerging Markets $22
Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder U.S. Smaller $254,758 $59,916(a) $76,373(b)
Companies Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
N/A
Schroder Micro Cap Fund $26,896 $3,733(c)
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>
(a) Period Ended May 31, 1997
(b) Year Ended October 31, 1996
(c) Period Ended November 30, 1997
Funds with October 31 fiscal year end:
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Fund Management Fees Paid for Management Fees Paid for Management Fees Paid for
Fiscal Year Ended 10/31/98 Fiscal Year Ended 10/31/97 Fiscal Year Ended 10/31/96
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder International Fund $868,163 $891,659 $978,697
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
N/A
Schroder International Paid to Schroder $51,559 Paid to Schroder $60,033
Smaller Companies Fund
Paid to SIMIL $ Paid to SIMIL $
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder U.S. Diversified $101,134 $118,887 $139,483
Growth Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>
Fund with December 31 fiscal year end:
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Fund Management Fees Paid for Management Fees Paid for Management Fees Paid for
Fiscal Year Ended 12/31/98 Fiscal Year Ended 12/31/97 Fiscal Year Ended 12/31/96
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder International Bond $53,529(a) N/A
Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
(a) Period Ended December 31, 1997
</TABLE>
<PAGE>
FEE WAIVERS
Schroder voluntarily waived its fees during the three most recent fiscal
years pursuant to voluntary expense limitations and/or waivers in effect during
such periods. The portion of the amounts waived with respect to the management
fees indirectly borne by each Fund that invests in a related Portfolio is set
forth in the following tables. For Schroder U.S. Diversified Growth Fund and
Schroder Micro Cap Fund (which do not invest in a Portfolio), the tables reflect
the amount of management fees paid by such Fund that was waived by Schroder.
Funds with May 31 fiscal year end:
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Fund Fees Waived During Fiscal Fees Waived During Fiscal Fees Waived During Fiscal
Year Ended 5/31/98 Year Ended 5/31/97 Year Ended 5/31/96
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder Emerging Markets $673,304 N/A N/A
Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder U.S. Smaller $0 $10,038(a) $16,090(b)
Companies Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder Micro Cap Fund $26,896 $3,733(c) N/A
- ------------------------------ ---------------------------- --------------------------- ----------------------------
(a) Period Ended May 31, 1997
(b) Year Ended October 31, 1996
(c) Period Ended November 30, 1997
</TABLE>
Funds with October 31 fiscal year end:
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Fund Fees Waived During Fiscal Fees Waived During Fiscal Fees Waived During Fiscal
Year Ended 10/31/98 Year Ended 10/31/97 Year Ended 10/31/96
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder International Fund $43,861 $47,444 $51,971
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder International $51,559 $60,033 N/A
Smaller Companies Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder U.S. Diversified $40,931 $28,422 $4,355
Growth Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>
<PAGE>
Fund with December 31 fiscal year end:
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Fund Fees Waived During Fiscal Fees Waived During Fiscal Fees Waived During Fiscal
Year Ended 12/31/98 Year Ended 12/31/97 Year Ended 12/31/96
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder International Bond $ $53,529(a) N/A
Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>
(a) Period Ended December 31, 1997
(b)
ADMINISTRATIVE SERVICES
On behalf of each Fund, except Schroder U.S. Diversified Growth Fund, the
Trust has entered into an administration agreement with Schroder Fund Advisors
Inc., under which Schroder Fund Advisors Inc. provides management and
administrative services necessary for the operation of the Funds, including: (1)
preparation of shareholder reports and communications; (2) regulatory
compliance, such as reports to and filings with the SEC and state securities
commissions; and (3) general supervision of the operation of the Funds,
including coordination of the services performed by its investment adviser,
transfer agent, custodian, independent accountants, legal counsel and others.
Schroder Fund Advisors Inc. is a wholly owned subsidiary of Schroder and is a
registered broker-dealer organized to act as administrator and distributor of
mutual funds.
For providing administrative services Schroder Fund Advisors Inc. is
entitled to receive a monthly fee at the following annual rates (based upon each
Fund's average daily net assets): 0.15% with respect to Schroder International
Fund and Schroder Emerging Markets Fund; 0.10% with respect to Schroder
International Smaller Companies Fund and Schroder International Bond Fund; and
0.25% with respect to Schroder U.S. Smaller Companies Fund and Schroder Micro
Cap Fund. The administration agreement is terminable with respect to the Fund
without penalty, at any time, by the Trustees upon 60 days' written notice to
Schroder Fund Advisors Inc. or by Schroder Fund Advisors Inc. upon 60 days'
written notice to the Trust.
The Trust has entered into a subadministration agreement with FAdS. Under
its agreement, FAdS assists Schroder Fund Advisors Inc. with certain of its
responsibilities under the administration agreement, including shareholder
reporting and regulatory compliance. For providing its services, FAdS is
entitled to receive a monthly fee from the Funds at the following annual rates
(based upon each Fund's average daily net assets): 0.05% with respect to
Schroder International Fund; 0.10% with respect to Schroder U.S. Diversified
Growth Fund, Schroder U.S. Smaller Companies Fund and Schroder Micro Cap Fund;
and 0.075% with respect to Schroder International Smaller Companies Fund,
Schroder International Bond Fund and Schroder Emerging Markets Fund. The
subadministration agreement is terminable with respect to the Fund without
penalty, at any time, by the Trust upon 60 days' written notice to FAdS or by
FAdS upon 60 days' written notice to the Trust.
Schroder Fund Advisors Inc. has voluntarily waived a portion of its
advisory fee and has assumed certain expenses of the Fund so that the Fund's
total expenses, including indirect expenses borne by the Fund as a result of
investing in the Portfolio, would not exceed 1.45% (of the respective share's
average daily net assets) on Investor Shares and 1.70% (of the respective
share's average daily net assets) on Advisor Shares. The expense limitations
cannot be modified or withdrawn except by a majority vote of the Trustees of the
Trust who are not affiliated persons ( as defined in the Act ) of the Trust.
<PAGE>
During the three most recent fiscal years, the Fund paid the following
fees to Schroder Fund Advisors Inc. and FAdS pursuant to the administration
agreement and the subadministration agreement. The fees listed in the following
table reflect reductions pursuant to fee waivers and expense limitations in
effect during such periods.
Funds with May 31 fiscal year end:
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Fund
Management Fees Paid for Management Fees Paid for Management Fees Paid for
Fiscal Year Ended 5/31/98 Fiscal Year Ended 5/31/97 Fiscal Year Ended 5/31/96
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder Emerging Markets Schroder Fund Advisors N/A N/A
Fund Inc. $5
FAdS $4
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder U.S. Smaller Schroder Fund Advisors Schroder Fund Advisors Schroder Fund Advisors
Companies Fund Inc. $106,075 Inc. $0(a) Inc. $14,213(b)
FAdS $63,663 FAdS $15,007(a) FAdS N/A
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder Micro Cap Fund Schroder Fund Advisors Schroder Fund Advisors N/A
Inc. $0 Inc. $0(c)
FAdS $2,152 FAdS $299(c)
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>
(a) Period Ended May 31, 1997
(b) Year Ended October 31, 1996
(c) Period Ended November 30, 1997
Funds with October 31 fiscal year end:
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Fund
Management Fees Paid for Management Fees Paid for Management Fees Paid for
Fiscal Year Ended 10/31/98 Fiscal Year Ended 10/31/97 Fiscal Year Ended 10/31/96
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder International Fund Schroder Fund Advisors Schroder Fund Advisors Schroder Fund Advisors
Inc. $299,039 Inc. $366,100 Inc. $699,777
FAdS $228,761 FAdS $229,792 FAdS N/A
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder International Schroder Fund Advisors Schroder Fund Advisors N/A
Smaller Companies Fund Inc. $0 Inc. $577
FAdS $9,085 FAdS $10,018
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder U.S. Diversified Schroder Fund Advisors Schroder Fund Advisors Schroder Fund Advisors
Growth Fund Inc. $0 Inc. $0 Inc. $0
FAdS $13,485 FAdS $15,853 FAdS N/A
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>
Fund with December 31 fiscal year end:
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Fund Management Fees Paid for Management Fees Paid for Management Fees Paid for
Fiscal Year Ended 12/31/98 Fiscal Year Ended 12/31/97 Fiscal Year Ended 12/31/96
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder International Bond Schroder Fund Advisors Schroder Fund Advisors N/A
Fund Inc. $ Inc. $0(a)
FAdS $ FAdS $0(a)
- ------------------------------ ---------------------------- --------------------------- ----------------------------
(a) Period Ended December 31, 1997
</TABLE>
DISTRIBUTOR
Pursuant to a Distribution Agreement with the Trust, Schroder Fund
Advisors Inc. (the "Distributor"), 787 Seventh Avenue, New York, New York 10019,
serves as the distributor for the Trust's continually offered shares. The
Distributor pays all of its own expenses in performing its obligations under the
Distribution Agreement. The Distributor is not obligated to sell any specific
amount of shares of any Fund. Please see "Schroder and its Affiliates" for
ownership information regarding the Distributor.
DISTRIBUTION PLAN FOR ADVISOR SHARES. Each Fund has adopted a Distribution Plan
under Rule 12b-1 of the Investment Company Act of 1940 pursuant to which the
Fund may pay the Distributor compensation in an amount limited in any fiscal
year to the annual rate of 0.50% of the Fund's average daily net assets
attributable to Advisor Shares. The Trustees have not authorized any payments
under the Distribution Plans, although they may at any time authorize payments
at an annual rate of up to 0.50% of a Fund's average daily net assets
attributable to Advisor Shares. The Distribution Plans also relate to payments
made pursuant to the Trust's Shareholder Servicing Plan for Advisor Shares, to
the extent such payments may be deemed to be primarily intended to result in the
sale of a Fund's Advisor Shares. See "Shareholder Servicing Plan for Advisor
Shares" below.
The various costs and expenses that may be paid or reimbursed under the
Distribution Plans include advertising expenses, costs of printing prospectuses
and other materials to be given or sent to prospective investors, expenses of
sales employees or agents of the Distributor, including salary, commissions,
travel and related expenses in connection with the distribution of Advisor
Shares, payments to broker-dealers who advise shareholders regarding the
purchase, sale, or retention of Advisor Shares, and payments to banks, trust
companies, broker-dealers (other than the Distributor) or other financial
organizations.
A Distribution Plan may not be amended to increase materially the amount
of distribution expenses permitted thereunder without the approval of a majority
of the outstanding Advisor Shares of the relevant Fund. Any other material
amendment to a Distribution Plan must be approved both by a majority of the
Trustees and a majority of those Trustees ("Qualified 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 Distribution Plan
or in any related agreement, by vote cast in person at a meeting called for the
purpose. Each Distribution Plan will continue in effect for successive one-year
periods provided each such continuance is approved by a majority of the Trustees
<PAGE>
and the Qualified Trustees by vote cast in person at a meeting called for the
purpose. Each Distribution Plan may be terminated at any time by vote of a
majority of the Qualified Trustees or by vote of a majority of the Fund's
outstanding Advisor Shares.
SHAREHOLDER SERVICING PLAN FOR ADVISOR SHARES. Each Fund (except
Schroder Micro Cap Fund) has also adopted a Shareholder Servicing Plan (the
"Service Plan") for the Advisor Shares of each Fund. Under the Service Plan,
each Fund pays fees to the Distributor at an annual rate of up to 0.25% of the
average daily net assets of the Fund attributable to its Advisor Shares. The
Distributor may enter into shareholder service agreements with Service
Organizations pursuant to which the Service Organizations provide administrative
support services to their customers who are Fund shareholders.
In return for providing these support services, a Service Organization
may receive payments from the Distributor at a rate not exceeding 0.25% of the
average daily net assets of the Advisor Shares of each Fund for which the
Service Organization is the Service Organization of record. These administrative
services may include, but are not limited to, the following functions:
establishing and maintaining accounts and records relating to clients of the
Service Organization; answering shareholder inquiries regarding the manner in
which purchases, exchanges, and redemptions of Advisor Shares of the Trust may
be effected and other matters pertaining to the Trust's services; providing
necessary personnel and facilities to establish and maintain shareholder
accounts and records; assisting shareholders in arranging for processing
purchase, exchange, and redemption transactions; arranging for the wiring of
funds; guaranteeing shareholder signatures in connection with redemption orders
and transfers and changes in shareholder-designated accounts; integrating
periodic statements with other customer transactions; and providing such other
related services as the shareholder may request. Some Service Organizations may
impose additional conditions or fees, such as requiring clients to invest more
than the minimum amounts required by the Trust for initial or subsequent
investments or charging a direct fee for services. Such fees would be in
addition to any amounts which might be paid to the Service Organization by the
Distributor.
Please contact your Service Organization for details.
The Service Plan was initially adopted for each Fund in [_________]. In
the fiscal years ended October 31, 1998, 1997, and 1996, respectively, the Trust
paid an aggregate of $________, $________, and $________ to the Distributor
under the Service Plan[, all of which was, in turn, repaid by the Distributor to
Service Organizations.] [NOTE: PLEASE CONFIRM THE BRACKETED TEXT] [All such
payments were made by Schroder International Fund and Schroder U.S. Smaller
Companies Fund, the only Funds with Advisor Shares outstanding during these
periods.] [NOTE: PLEASE CONFIRM]
FUND ACCOUNTING
Forum Accounting Services, LLC ("Forum Accounting"), an affiliate of
Forum, performs fund accounting services for each Fund pursuant to an agreement
with the Trust. Under the Accounting Agreement, Forum Accounting prepares and
maintains the books and records of each Fund that are required to be maintained
under the 1940 Act, calculates the net asset value per share of each Fund,
calculates dividends and capital gain distributions, and prepares periodic
reports to shareholders and the SEC.
<PAGE>
For its services to each Fund, Forum Accounting is entitled to receive
from the Trust a fee of $36,000 per year plus $12,000 per year for each class of
each Fund above one. Forum Accounting is entitled to an additional $24,000 per
year for global and international funds, and 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, and funds that have a monthly turnover rate of 10% or more.
The tables below show the amount of fees paid by the Funds to Forum
Accounting during the three most recent fiscal years (or such shorter time a
Fund has been operational).
Funds with May 31 fiscal year end:
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Fund Accounting Fees Paid Accounting Fees Paid Accounting Fees Paid
During Fiscal Year Ended During Fiscal Year Ended During Fiscal Year Ended
5/31/98 5/31/97 5/31/96
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder Emerging Markets $1,306 N/A N/A
Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder U.S. Smaller $19,179 $12,955(a) $37,972(b)
Companies Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder Micro Cap Fund $27,645 $4,645(c) N/A
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>
(a) Period Ended May 31, 1997
(b) Year Ended October 31, 1996
(c) Period Ended November 30, 1997
Funds with October 31 fiscal year end:
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Fund Accounting Fees Paid Accounting Fees Paid Accounting Fees Paid
During Fiscal Year Ended During Fiscal Year Ended During Fiscal Year Ended
10/31/98 10/31/97 10/31/96
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder International Fund $84,000 $83,959 $86,000
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder International $79,000 $71,200 N/A
Smaller Companies Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder U.S. Diversified $36,000 $36,000 $36,000
Growth Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>
<PAGE>
Fund with December 31 fiscal year end:
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Fund Accounting Fees Paid Accounting Fees Paid Accounting Fees Paid
During Fiscal Year Ended During Fiscal Year Ended During Fiscal Year Ended
12/31/98 12/31/97 12/31/96
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder International Bond $ $62,000(a) N/A
Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>
(a) Period Ended December 31, 1997
BROKERAGE ALLOCATION AND OTHER PRACTICES
Schroder may place portfolio transactions with broker-dealers which
furnish, without cost, certain research, statistical, and quotation services of
value to Schroder and its affiliates in advising the Trust and other clients,
provided that it shall always seek best price and execution with respect to
transactions. Certain investments may be appropriate for the Trust and for other
clients advised by Schroder. Investment decisions for the Trust and other
clients are made with a view to achieving their respective investment objectives
and after consideration of such factors as their current holdings, availability
of cash for investment, and the size of their investments generally. Frequently,
a particular security may be bought or sold for only one client or in different
amounts and at different times for more than one but less than all clients.
Likewise, a particular security may be bought for one or more clients when one
or more other clients are selling the security. In addition, purchases or sales
of the same security may be made for two or more clients of Schroder on the same
day. In such event, such transactions will be allocated among the clients in a
manner believed by Schroder to be equitable to each. In some cases, this
procedure could have an adverse effect on the price or amount of the securities
purchased or sold by the Trust. Purchase and sale orders for the Trust may be
combined with those of other clients of Schroder in the interest of achieving
the most favorable net results for the Trust.
BROKERAGE AND RESEARCH SERVICES. Transactions on U.S. stock exchanges
and other agency transactions involve the payment by the Trust of negotiated
brokerage commissions. Such commissions vary among different brokers. Also, a
particular broker may charge different commissions according to such factors as
the difficulty and size of the transaction. Transactions in foreign securities
often involve the payment of fixed brokerage commissions, which are generally
higher than those in the United States, and therefore certain portfolio
transaction costs may be higher than the costs 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 Trust usually includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid by the Trust includes a disclosed, fixed
commission or discount retained by the underwriter or dealer.
Schroder places all orders for the purchase and sale of portfolio
securities and buys and sells securities through a substantial number of brokers
and dealers. In so doing, it uses its best efforts to obtain the best price and
execution available. In seeking the best price and execution, Schroder considers
all factors it deems relevant, including price, the size of the transaction, the
nature of the market for the security, the amount of the commission, the timing
of the transaction (taking into account market prices and trends), the
reputation, experience, and financial stability of the broker-dealer involved,
and the quality of service rendered by the broker-dealer in other transactions.
<PAGE>
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, statistical, and quotation services from broker-dealers
that execute portfolio transactions for the clients of such advisers. Consistent
with this practice, Schroder receives research, statistical, and quotation
services from many broker-dealers with which it places the Trust's portfolio
transactions. These services, which in some cases may also be purchased for
cash, include such matters 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
Schroder and its affiliates in advising various of their clients (including the
Trust or a Portfolio), although not all of these services are necessarily useful
and of value in managing a Fund or a Portfolio. The investment advisory fee paid
by a Fund or a Portfolio is not reduced because Schroder and its affiliates
receive such services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934, as
amended, and by the Advisory Agreements and the Portfolio Advisory Agreement,
Schroder may cause a Fund or a Portfolio to pay a broker that provides brokerage
and research services to Schroder an amount of disclosed commission for
effecting a securities transaction for a Fund or a Portfolio in excess of the
commission which another broker would have charged for effecting that
transaction. Schroder's authority to cause a Fund or a Portfolio to pay any such
greater commissions is also subject to such policies as the Trustees (or the
Trustees of Schroder Capital Funds, in the case of a Portfolio) may adopt from
time to time.
To the extent permitted by law, the Funds or the Portfolios may engage
in brokerage transactions with Schroder & Co. Inc. ("Schroder & Co."), an
affiliate of Schroder, to effect securities transactions on the New York Stock
Exchange only or Schroder Securities Limited and its affiliates (collectively,
"Schroder Securities"), affiliates of Schroder, to effect securities
transactions on various foreign securities exchanges on which Schroder
Securities has trading privileges. Consistent with regulations under the 1940
Act, the Funds and the Portfolios have adopted procedures which are reasonably
designed to provide that any commissions or other remuneration the Funds or the
Portfolios pay to Schroder & Co. and Schroder Securities do not exceed the usual
and customary broker's commission. In addition, the Funds and the Portfolios
will adhere to the rule, under the Securities Exchange Act of 1934, governing
floor trading. This rule permits the Funds and the Portfolios to effect, but not
execute, exchange listed securities transactions with Schroder & Co. Schroder &
Co. pays a portion of the brokerage commissions it receives from a Fund or a
Portfolio to the brokers executing the transactions. Also, due to securities law
limitations, the Funds or the Portfolios may be required to limit purchases of
securities in a public offering if Schroder & Co. or Schroder Securities or one
of their affiliates is a member of the syndicate for that offering.
None of the Funds or the Portfolios has any understanding or arrangement
to direct any specific portion of its brokerage to Schroder & Co. or Schroder
Securities, and none will direct brokerage to Schroder & Co. or Schroder
Securities in recognition of research services.
The following tables show the aggregate brokerage commissions paid for
the three most recent fiscal years with respect to each Fund that incurred
brokerage costs. For each Fund that invests in a related Portfolio, the amounts
listed represent aggregate brokerage commissions paid by the Portfolio.
<PAGE>
Funds with May 31 fiscal year end:
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Fund Brokerage Commissions Paid Brokerage Commissions Brokerage Commissions Paid
During Fiscal Year Ended Paid During Fiscal Year During Fiscal Year Ended
5/31/98 Ended 5/31/97 5/31/96
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder Emerging Markets $92,368 N/A N/A
Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder U.S. Smaller $491,278 $167,043(a) $137,589(b)
Companies Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder Micro Cap Fund $11,185 $2,966(c) N/A
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>
(a) Period Ended May 31, 1997
(b) Year Ended October 31, 1996
(c) Period Ended November 30, 1997
Funds with October 31 fiscal year end:
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Fund Brokerage Commissions Paid Brokerage Commissions Brokerage Commissions Paid
During Fiscal Year Ended Paid During Fiscal Year During Fiscal Year Ended
10/31/98 Ended 10/31/97 10/31/96
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
$421,129 $756,181
Schroder International Fund $
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder International $ $37,223 N/A
Smaller Companies Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder U.S. Diversified $ $20,510 N/A
Growth Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>
Fund with December 31 fiscal year end:
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Fund Brokerage Commissions Paid Brokerage Commissions Brokerage Commissions Paid
During Fiscal Year Ended Paid During Fiscal Year During Fiscal Year Ended
12/31/98 Ended 12/31/97 12/31/96
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder International Bond $ $297(a) N/A
Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>
(a) Period Ended December 31, 1997
In the fiscal year ended October 31, 1998, Schroder, on behalf of the
Trust, placed agency and underwritten transactions having an approximate
aggregate dollar value of $________, (___% of the Trust's aggregate agency and
underwritten transactions, on which approximately $_______ of commissions were
paid) with brokers and dealers (other than Schroder & Co. and Schroder
Securities) whose research, statistical, and quotation services Schroder
considered to be particularly useful to it and its affiliates. However, many of
<PAGE>
such transactions were placed with such brokers and dealers without regard to
the furnishing of such services.
The following tables show the aggregate brokerage commissions paid to
Schroder & Co. and Schroder Securities for the three most recent fiscal years,
as well as the percentage such commissions represented of all transactions on
which the Fund paid brokerage commissions during such fiscal year. For each Fund
that invests in a related Portfolio, the amounts listed represent aggregate
brokerage commissions paid by the Portfolio.
Funds with May 31 fiscal year end:
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Fund Brokerage Commissions Paid Brokerage Commissions Brokerage Commissions Paid
During Fiscal Year Ended Paid During Fiscal Year During Fiscal Year Ended
5/31/98 Ended 5/31/97 5/31/96
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder Emerging Markets Schroder & Co. $0 0% N/A N/A
Fund
Schroder Securities $ %
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder U.S. Smaller Schroder & Co. $0 0% Schroder & Co. $0 0%(a) Schroder & Co. $0 0%(b)
Companies Fund
Schroder Securities $ % Schroder Securities $ % Schroder Securities $ %
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder Micro Cap Fund Schroder & Co. $0 0% Schroder & Co. $0 0%(c) N/A
Schroder Securities $ % Schroder Securities $ %
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>
(a) Period Ended May 31, 1997
(b) Year Ended October 31, 1996
(c) Period Ended November 30, 1997
Funds with October 31 fiscal year end:
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Fund Brokerage Commissions Paid Brokerage Commissions Brokerage Commissions Paid
During Fiscal Year Ended Paid During Fiscal Year During Fiscal Year Ended
10/31/98 Ended 10/31/97 10/31/96
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder International Fund Schroder & Co. $ % Schroder & Co. $4,716 Schroder & Co. $0 0%
0.99%
Schroder Securities $ % Schroder Securities $ %
Schroder Securities $ %
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder International Schroder & Co. $ % Schroder & Co. $0 0% N/A
Smaller Companies Fund
Schroder Securities $ % Schroder Securities $ %
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder U.S. Diversified Schroder & Co. $ % Schroder & Co. $0 0% N/A
Growth Fund
Schroder Securities $ % Schroder Securities $ %
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>
<PAGE>
Fund with December 31 fiscal year end:
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Fund Brokerage Commissions Paid Brokerage Commissions Brokerage Commissions Paid
During Fiscal Year Ended Paid During Fiscal Year During Fiscal Year Ended
12/31/98 Ended 12/31/97 12/31/96
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder International Bond Schroder & Co. $ % Schroder & Co. $0 0%(a) N/A
Fund
Schroder Securities $ % Schroder Securities $ %
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>
(a) Period Ended December 31, 1997
DETERMINATION OF NET ASSET VALUE
The net asset value per share of each class of shares of each Fund is
determined daily as of the close of trading on the New York Stock Exchange
(normally 4:00 p.m., Eastern Time) on each day the Exchange is open for trading.
Any assets or liabilities initially expressed in terms of foreign 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 New York Stock Exchange
is normally closed on the following national holidays: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving, and Christmas.
The Trustees have established procedures for the valuation of a Fund's
securities, as follows:
Equities listed or traded on a domestic or foreign stock exchange are
valued at their latest sale prices on such exchange on that day prior to the
time when the assets are valued. In the absence of sales that day, such
securities are valued at the mid-market prices. (Where the securities are traded
on more than one exchange, they are valued on the exchange that Schroder
designates as the primary market.) Unlisted 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. Securities
that do not have readily available market quotations are valued at fair value
pursuant to procedures established by the Trustees. Debt securities having a
maturity of more than 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. 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 discounts.
If any securities held by a Fund are restricted as to resale, their fair
value is generally determined as the amount which the Trust could reasonably
expect to realize from an orderly disposition of such securities over a
reasonable period of time. The valuation procedures applied in any specific
instance are likely to vary from case to case. However, consideration is
generally given to the financial position of the issuer and other fundamental
analytical data relating to the investment and to the nature of the restrictions
on disposition of the securities (including any registration expenses that might
be borne by the Trust in connection with such disposition). In addition,
specific factors are also generally considered, such as the cost of the
<PAGE>
investment, the market value of any unrestricted securities of the same class
(both at the time of purchase and at the time of valuation), the size of the
holding, the prices of any recent transactions or offers with respect to such
securities, and any available analysts' reports regarding the issuer.
Generally, trading in certain securities (such as foreign securities) is
substantially completed each day at various times prior to the close of the New
York Stock Exchange. The values of these securities used in determining the net
asset value of the Trust's shares are computed as of such times. Also, because
of the amount of time required to collect and process trading information as to
large numbers of securities issues, the values of certain securities (such as
convertible bonds and U.S. Government Securities) are determined based on market
quotations collected earlier in the day at the latest practicable time prior to
the close of the Exchange. Occasionally, events affecting the value of such
securities may occur between such times and the close of the Exchange which will
not be reflected in the computation of the Trust's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value, in the manner described
above.
The proceeds received by each Fund for each issue or sale of its shares,
and all income, earnings, profits, and proceeds thereof, subject only to the
rights of creditors, will be specifically allocated to such Fund, and constitute
the underlying assets of that Fund. The underlying assets of each Fund will be
segregated on the Trust's books of account, and will be charged with the
liabilities in respect of such Fund and with a share of the general liabilities
of the Trust. Each Fund's assets will be further allocated among its constituent
classes of shares on the Trust's books of account. Expenses with respect to any
two or more Funds or classes may be allocated in proportion to the net asset
values of the respective Funds or classes except where allocations of direct
expenses can otherwise be fairly made to a specific Fund or class.
REDEMPTIONS IN KIND
In consideration of the best interests of the remaining shareholders,
the Trust may pay certain redemption proceeds in whole or in part by a
distribution in kind of securities held by a Fund in lieu of cash. The Trust
does not expect to redeem shares in kind under normal circumstances. If your
shares are redeemed in kind, you should expect to incur transaction costs upon
the disposition of the securities received in the distribution.
TAXES
Each Fund intends to qualify each year and elect to be taxed as a
regulated investment company under Subchapter M of the United States Internal
Revenue Code of 1986, as amended (the "Code").
As a regulated investment company qualifying to have its tax liability
determined under Subchapter M, a Fund will not be subject to federal income tax
on any of its net investment income or net realized capital gains that are
distributed to shareholders.
In order to qualify as a "regulated investment company," a Fund must,
among other things, (a) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, gains from the sale or
<PAGE>
other dispositions of stock, securities, or foreign currencies, and other income
(including gains from options, futures, or forward contracts) derived with
respect to its business of investing in such stock, securities, or currencies,
and (b) diversify its holdings so that, at the close of each quarter of its
taxable year, (i) at least 50% of the value of its total assets consists of
cash, cash items, U.S. Government Securities, and other securities limited
generally with respect to any one issuer to not more than 5% of the total assets
of the Fund and not more than 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its assets is invested in the
securities of any issuer (other than U.S. Government Securities).
If a Fund fails to distribute in a calendar year substantially all of
its ordinary income for such year and substantially all of its capital gain net
income for the one-year period ending October 31 (or later if a Fund is
permitted so to elect and so elects), plus any retained amount from the prior
year, that Fund will be subject to a 4% excise tax on the undistributed amounts.
A dividend paid to shareholders by a Fund in January of a year generally is
deemed to have been paid by that Fund on December 31 of the preceding year, if
the dividend was declared and payable to shareholders of record on a date in
October, November, or December of that preceding year. Each Fund intends
generally to make distributions sufficient to avoid imposition of the 4% excise
tax. In order to receive the favorable tax treatment accorded regulated
investment companies and their shareholders, moreover, a Fund must in general
distribute with respect to each taxable year at least 90% of the sum of its
taxable net investment income, its net tax-exempt income, and, the excess, if
any, of net short-term capital gains over net long-term capital losses for such
year.
A Fund's distributions will be taxable to you as ordinary income to the
extent derived from the Fund's investment income and net short-term gains (that
is, net gains from capital assets held for no more than one year). Distributions
designated by a Fund as deriving from net gains on capital assets held for more
than one year will be taxable to you as long-term capital gains (generally
subject to a 20% tax rate), regardless of how long you have held the shares.
Distributions will be taxable to you as described above whether received in cash
or in shares through the reinvestment of distributions. Early in each year the
Trust will notify each shareholder of the amount and tax status of distributions
paid to the shareholder by each of the Funds for the preceding year.
Upon the disposition of shares of a Fund (whether by sale, exchange, or
redemption), a shareholder will realize a gain or loss. Such gain or loss will
be capital gain or loss if the shares are capital assets in the shareholder's
hands, and will be long-term or short-term generally depending upon the
shareholder's holding period for the shares. Long-term capital gains will
generally be taxed at a federal income tax rate of 20%. Any loss realized by a
shareholder on a disposition of shares held by the shareholder for six months or
less will be treated as a long-term capital loss to the extent of any
distributions of capital gain dividends received by the shareholder with respect
to such shares. In general, any loss realized upon a taxable disposition of
shares will be treated as long-term capital loss if the shares have been held
for more than one year, and otherwise as short-term capital loss. With respect
to investment income and gains received by a Fund from sources outside the
United States, such income and gains may be subject to foreign taxes which are
withheld at the source. The effective rate of foreign taxes in which a Fund will
be subject depends on the specific countries in which its assets will be
invested and the extent of the assets invested in each such country and,
therefore, cannot be determined in advance.
<PAGE>
A Fund's ability to use options, futures, and forward contracts and
other hedging techniques, and to engage in certain other transactions, may be
limited by tax considerations. A Fund's transactions in
foreign-currency-denominated debt instruments and its hedging activities will
likely produce a difference between its book income and its taxable income. This
difference may cause a portion of the Fund's distributions of book income to
constitute returns of capital for tax purposes or require the Fund to make
distributions exceeding book income in order to permit the Trust to continue to
qualify, and be taxed under Subchapter M of the Code, as a regulated investment
company. The tax consequences of certain hedging transactions have been modified
by the Taxpayer Relief Act of 1997.
Under federal income tax law, a portion of the difference between the
purchase price of zero-coupon securities in which a Fund has invested and their
face value ("original issue discount") is considered to be income to the Fund
each year, even though the Fund will not receive cash interest payments from
these securities. This original issue discount (imputed income) will comprise a
part of the net investment income of the Fund which must be distributed to
shareholders in order to maintain the qualification of the Fund as a regulated
investment company and to avoid federal income tax at the level of the Fund.
This discussion of the federal income tax and state tax treatment of the
Trust and its shareholders is based on the law as of the date of this SAI.
PRINCIPAL HOLDERS OF SECURITIES
As of December December 1, 1998, the Trustees of the Trust and, except a
noted below, the officers of the Trust, as a group owned less than 1% of the
outstanding shares of either class of each Fund.
The table attached as Appendix A lists those shareholders that owned 5% or
more of the shares of each Fund as of October 31, 1998, and therefore are
controlling persons of such Fund. Because these shareholders hold a substantial
number of shares, they may be able to require that the Trust hold special
shareholder meetings and may be able to determine the outcome of any shareholder
vote.
PERFORMANCE INFORMATION
Average annual total return of a class of shares of a Fund for one-,
five-, and ten-year periods (or for such shorter periods as shares of that class
of shares of the Fund have been offered) is determined by calculating the actual
dollar amount of investment return on a $1,000 investment in that class of
shares at the beginning of the period, and then calculating the annual
compounded rate of return which would produce that amount. Total return for a
period of one year or less is equal to the actual return during that period.
Total return calculations assume reinvestment of all Fund distributions at net
asset value on their respective reinvestment dates. Total return may be
presented for other periods.
ALL PERFORMANCE DATA IS BASED ON PAST INVESTMENT RESULTS AND DOES NOT
PREDICT FUTURE PERFORMANCE. Investment performance of a particular class of a
Fund's shares, which will vary, is based on many factors, including market
<PAGE>
conditions, the composition of the Fund's portfolio, and the Fund's operating
expenses attributable to that class of shares. Investment performance also often
reflects the risks associated with a Fund's investment objectives and policies.
Quotations of yield or total return for any period when an expense limitation is
in effect will be greater than if the limitation had not been in effect. These
factors should be considered when comparing the investment results of a Fund's
shares to those of various classes of other mutual funds and other investment
vehicles. Performance for each Fund's shares may be compared to various indices.
The tables below set forth the total return of Investor Shares of the
Funds for the one-year period ended October 31, 1998 (November 30, 1998 for
those Funds with a May 31 fiscal year end) and for the period from the
commencement of each Fund's operations until October 31, 1998 (November 30, 1998
for those Funds with a May 31 fiscal year end). The table also sets forth total
return information for a Fund's Advisor Shares for any periods (or partial
periods) when they were outstanding, and pro forma total return information for
periods (or partial periods) when there were no Advisor Shares outstanding. Pro
forma total return information for Advisor Shares is estimated by restating the
total return of Investor Shares for the same period to reflect the actual fees
and expenses applicable to Advisor Shares, which are higher than the fees and
expenses applicable to Investor Shares (for instance, Advisor shares are subject
to shareholder servicing fees paid at a rate of up to 0.25% of the average daily
net asset value of a Fund attributable to its Advisor Shares). PLEASE NOTE THAT
THE HIGHER EXPENSES APPLICABLE TO A FUND'S ADVISOR SHARES SHOULD HAVE THE EFFECT
OF REDUCING THE TOTAL RETURN OF THE ADVISOR SHARES BELOW THAT OF THE INVESTOR
SHARES BY THE AMOUNT OF SUCH HIGHER EXPENSES, COMPOUNDED OVER THE RELEVANT
PERIOD.
TOTAL RETURN FOR PERIODS ENDED NOVEMBER 30, 1998
(FOR FUNDS WITH MAY 30 FISCAL YEAR END)
<TABLE>
<S> <C> <C> <C>
- ------------------- ----------- ----------- ----------- ---------------- ------------ ------------
SINCE
INCEPTION INCEPTION INCEPTION
FUND CLASS 1 YEAR 5 YEAR OF FUND DATE OF DATE OF
(ANNUALIZED) FUND CLASS
- ------------------- ----------- ----------- ----------- ---------------- ------------ ------------
- ------------------- ----------- ----------- ----------- ---------------- ------------ ------------
Schroder Emerging Investor -17.99 N/A -19.20% 10/30/97 10/30/97
Markets Fund Shares
Advisor N/A N/A N/A N/A
Shares*
- ------------------- ----------- ----------- ----------- ---------------- ------------ ------------
- ------------------- ----------- ----------- ----------- ---------------- ------------ ------------
Schroder U.S. Investor -10.17% 13.09% N/A 8/16/93 8/16/93
Smaller Companies Shares
Fund
Advisor -10.21% N/A N/A 12/23/96
Shares**
- ------------------- ----------- ----------- ----------- ---------------- ------------ ------------
- ------------------- ----------- ----------- ----------- ---------------- ------------ ------------
Schroder Micro Investor 57.69% N/A 54.76% 10/15/97 10/15/97
Cap Fund Shares
- ------------------- ----------- ----------- ----------- ---------------- ------------ ------------
</TABLE>
<PAGE>
TOTAL RETURN FOR PERIODS ENDED OCTOBER 31, 1998
(FOR FUNDS WITH OCTOBER 31 FISCAL YEAR END)
<TABLE>
<S> <C> <C> <C>
- ------------------ -------------- ------------ ------------- ----------- --------------- ------------ --------------
SINCE
INCEPTION INCEPTION INCEPTION
FUND CLASS 1 YEAR 5 YEAR 10 YEAR OF FUND DATE OF DATE OF CLASS
(ANNUALIZED) FUND
- ------------------ -------------- ------------ ------------- ----------- --------------- ------------ --------------
- ------------------ -------------- ------------ ------------- ----------- --------------- ------------ --------------
Schroder Investor 3.82% 7.48% 8.41% 11.24% 12/19/85 12/19/85
International Shares
Fund
Advisor 3.53% 7.45% 8.40% 11.14% 1/21/98
Shares***
- ------------------ -------------- ------------ ------------- ----------- --------------- ------------ --------------
- ------------------ -------------- ------------ ------------- ----------- --------------- ------------ --------------
Schroder Investor 7.88% N/A N/A -0.23% 11/4/96 11/4/96
International Shares
Smaller
Companies Fund Advisor N/A N/A N/A N/A N/A
Shares****
- ------------------ -------------- ------------ ------------- ----------- --------------- ------------ --------------
- ------------------ -------------- ------------ ------------- ----------- --------------- ------------ --------------
Schroder U.S. Investor 8.87% 13.66% 15.08% 11.20% 10/31/70 10/31/70
Diversified Shares
Growth Fund
Advisor N/A N/A N/A N/A N/A
Shares*
- ------------------ -------------- ------------ ------------- ----------- --------------- ------------ --------------
</TABLE>
TOTAL RETURN FOR PERIODS ENDED DECEMBER 31, 1998
(FOR FUND WITH DECEMBER 31 FISCAL YEAR END)
<TABLE>
<S> <C> <C> <C>
- -------------------- ----------- ------------ ---------------- ------------ -------------
SINCE
INCEPTION INCEPTION INCEPTION
FUND CLASS 1 YEAR OF FUND DATE OF DATE OF
(ANNUALIZED) FUND CLASS
- -------------------- ----------- ------------ ---------------- ------------ -------------
- -------------------- ----------- ------------ ---------------- ------------ -------------
Schroder Investor _____% _____% 1/15/98 1/15/98
International Bond Shares
Fund*
Advisor N/A N/A N/A
Shares*
- -------------------- ----------- ------------ ---------------- ------------ -------------
</TABLE>
<PAGE>
* Pro forma.
** Total return for Advisor Shares of Schroder U.S. Smaller Companies Fund
reflects pro forma information (based on Investor Share performance)
through December 22, 1996, and actual total return from December 23,
1996 (the inception date of Advisor Shares of the Fund) through November
30, 1998. The actual total return of Advisor Shares of the Fund from
December 23, 1996 through November 30, 1998 (not annualized) was _____%.
*** Total return for Advisor Shares of Schroder International Fund reflects
pro forma information (based on Investor Share performance) through
January 20, 1998, and actual total return from January 21, 1998 (the
inception date of Advisor Shares of the Fund) through October 31, 1998.
The actual total return of Advisor Shares of the Fund from January 21,
1998 through October 31, 1998 (not annualized) was ____%.
**** Total return for Advisor Shares of Schroder International Smaller
Companies Fund reflects pro forma information (based on Investor Share
performance) through _________, 1998, and actual total return from
________, 1998 (the inception date of Advisor Shares of the Fund)
through October 31, 1998. The actual total return of Advisor Shares of
the Fund from ________, 1998 through October 31, 1998 (not annualized)
was ___%.
From time to time, Schroder or Forum may reduce its compensation or
assume expenses of a Fund in order to reduce the Fund's expenses, as described
in the Trust's current Prospectuses. Any such waiver or assumption would
increase a Fund's yield or total return for each class of shares during the
period of the waiver or assumption.
THE PORTFOLIOS
Each of the related Portfolios (other than Schroder International Bond
Portfolio) is a separate series of Schroder Capital Funds, an open-end
management investment company. Schroder International Bond Portfolio is a series
of Schroder Capital Funds II. Schroder Capital Funds and Schroder Capital Funds
II both are business trusts organized under the laws of the State of Delaware.
A Fund's investment in a Portfolio is in the form of a non-transferable
beneficial interest. A Portfolio may have other investors, each of whom will
invest on the same conditions as the related Fund and will pay a proportionate
share of the Portfolio's expenses.
A Portfolio normally will not hold meetings of investors except as
required by the 1940 Act. Each investor in a Portfolio is entitled to vote in
proportion to its relative beneficial interest in the Portfolio. If a Portfolio
has investors other than the related Fund, there can be no assurance that any
issue that receives a majority of the votes cast by Fund shareholders will
receive of majority of votes cast by all Portfolio shareholders. If other
investors hold a majority interest of any Portfolio, they could have voting
control of that Portfolio.
The Portfolios do not sell their shares directly to the public. Another
investor (such as an investment company) in a Portfolio that might sell its
shares to the public would not be required to sell its shares at the same
offering price as the related Fund, and could have different fees and expenses
than that Fund. Therefore, the Fund's shareholders may have different returns
than shareholders of another investment company that invests in the Portfolio.
<PAGE>
The investors in each Portfolio, including each related Fund, have
agreed to indemnify Schroder Capital Funds or Schroder Capital Funds II, as
applicable, and such trust's trustees and officers, against certain claims.
CERTAIN RISKS OF INVESTING IN THE PORTFOLIOS. A Fund's investment in a
Portfolio may be affected by the actions of other large investors in the
Portfolio, if any. For example, if a Portfolio has a large investor other than
the Fund and that investor redeems its interests in the Portfolio, the
Portfolio's remaining investors (including the Fund) might bear a larger portion
of the Portfolio's operating expenses. This would result in lower returns for
the Fund.
A Fund may withdraw its entire investment from a Portfolio at any time,
if the Trustees determine that it is in the best interests of the Fund and its
shareholders to do so. Such a withdrawal may result in a distribution in kind of
portfolio securities by the Portfolio, which could adversely affect the
liquidity of the Fund's assets. If the Fund converted those securities to cash,
it would likely incur brokerage fees or other transaction costs. In the event
that a Fund withdraws its entire investment from its related Portfolio, the
Fund's inability to find a suitable replacement investment could have a
significant negative impact on the Fund's shareholders.
Each investor in a Portfolio, including the related Fund, may be liable
for all obligations of the Portfolio. The risk that this would cause an investor
financial loss, however, is limited to circumstances in which the Portfolio
would be unable to meet its obligations. Schroder considers this risk to be
remote. Upon liquidation of a Portfolio, investors in that Portfolio (including
the related Fund) would be entitled to share pro rata in the Portfolio's net
assets available for distribution to investors.
CUSTODIAN
The Chase Manhattan Bank, through its Global Custody Division located at
125 London Wall, London EC2Y 5AJ, United Kingdom, acts as custodian of the
assets of the Funds and the Portfolios (other than Schroder U.S. Smaller
Companies Fund, Schroder U.S. Smaller Companies Portfolio, Schroder U.S.
Diversified Growth Fund and Schroder Micro Cap Fund). Norwest Bank, Sixth Street
and Marquette, Minneapolis, Minnesota 55479, acts as custodian of the assets of
each of Schroder U.S. Smaller Companies Fund, Schroder U.S. Smaller Companies
Portfolio, Schroder U.S. Diversified Growth Fund and Schroder Micro Cap Fund.
The custodians' responsibilities include safeguarding and controlling the Funds'
cash and securities, handling the receipt and delivery of securities, and
collecting interest and dividends on the Funds' investments. Neither custodian
determines the investment policies of the Funds or decides which securities a
Fund will buy or sell.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Forum Shareholder Services, LLC, Two Portland Square, Portland, Maine
04101, is the Funds' transfer agent and dividend disbursing agent.
<PAGE>
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP, the Trust's independent accountants, provide
audit services, tax return preparation services, and assistance and consultation
in connection with the Trust's various Securities and Exchange Commission
filings. Their address is One Post Office Square, Boston, Massachusetts 02109.
LEGAL COUNSEL
Ropes & Gray, One International Place, Boston, Massachusetts 02110-2624,
serves as counsel to the Trust.
SHAREHOLDER LIABILITY
Under Delaware law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Trust. However, the Trust's
Trust Instrument disclaims shareholder liability for acts or obligations of the
Trust and requires that notice of such disclaimer be given in each agreement,
obligation, or instrument entered into or executed by the Trust or the Trustees.
The Trust's Trust Instrument provides for indemnification out of a Fund's
property for all loss and expense of any shareholder held personally liable for
the obligations of a Fund. Thus the risk of a shareholder's incurring financial
loss on account of shareholder liability is limited to circumstances in which
the Fund would be unable to meet its obligations.
FINANCIAL STATEMENTS
The fiscal year end of Schroder International Fund, Schroder International
Smaller Companies Fund and Schroder U.S. Diversified Growth Fund is October 31.
The fiscal year end of Schroder International Bond Fund is December 31. The
fiscal year end of Schroder Emerging Markets Fund, Schroder U.S. Smaller
Companies Fund and Schroder Micro Cap Fund is May 31.
The following Financial Statements required by Part B and the related
Report of Independent Public Accountants are incorporated herein by reference to
the Trust's Annual Report, dated October 31, 1998, which was filed
electronically with the Securities and Exchange Commission on [date] (Accession
Number:
- --------------).
<PAGE>
APPENDIX A - HOLDERS OF 5% OR MORE OF OUTSTANDING SHARES
As of December 1, 1998, the shareholders listed below owned more than 5% of a
Fund as noted. Shareholders owning 25% or more of the shares of a Fund or of the
Trust as a whole may be deemed to be controlling persons. By reason of their
substantial holdings of shares, these persons may be able to require the Trust
to hold a shareholder meeting to vote on certain issues and may be able to
determine the outcome of any shareholder vote. As noted, certain of these
shareholders are known to the Trust to hold their shares of record only and have
no beneficial interest, including the right to vote, in the shares.
<TABLE>
<S> <C> <C> <C>
NUMBER OF NUMBER % OF SHARES
INVESTOR OF OF FUND
SCHRODER INTERNATIONAL FUND SHARES ADVISOR CLASS OWNED
SHARES
- ----------------------------------------------------------------- ------------------- -------------- ------------------
Mac & Co.
Mellon Bank NA
PO Box 3198
Pittsburgh PA 15230-3198 928,314.855 12.70
Union College Pooled Endowment Funds
PO Box 3199 Church Street Station
New York NY 10008 828,387.036 11.33
Mac & Co.
Mellon Bank NA
PO Box 3198
Pittsburgh PA 15230-3198 745,728.570 10.20
Lutheran Church
Missouri Synod Foundation
1333 5 Kirkwood Road
St. Louis MO 63122 661,134.137 9.05
Norwest Bank Minnesota NA, Trustee
PO Box 1450 NW 8477
Minneapolis MN 55480-8477 548,281.576 7.50
Miter & Co
c/o Marshall & Ilsley Trust Company
PO Box 2977
Milwaukee WI 53202-2977 474,033.767 6.49
Northern Trust Company TEE for
Norwest Foundation
c/o Mutual Fund Processing
P.O. Box 92956
Chicago IL 60675-2956 468,840.772 6.41
Forum Administrative Services, LLC
ATTN Corporate Accounting
Two Portland Square
Portland ME 04101 5.429 100.00
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
NUMBER OF NUMBER OF % OF
INVESTOR ADVISOR SHARES
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND SHARES SHARES OF FUND
CLASS
OWNED
- ---------------------------------------------------------- ----------------- ---------------- -----------------
Schroder Investment Management
Client Account
33 Gutter Lane
London EC2V 8AS
United Kingdom 300,000.00 67.35
Hudson-Webber Foundation
333 West Fort Street, Suite 1310
Detroit, MI 48226 23.72
105,675.441
Charles Schwab & Co. Inc.
Special Customer Account
Attn: Mutual Funds
101 Montgomery Street
San Francisco CA 94104 39,498.669 8.70
NUMBER OF NUMBER OF % OF
INVESTOR ADVISOR SHARES
SCHRODER U.S. DIVERSIFIED GROWTH FUND SHARES SHARES OF FUND
CLASS
OWNED
- ----------------------------------------------------------- ----------------- ---------------- -----------------
Wendel & Co.
c/o The Bank of New York
Mutual Fund Reorg. Dept.
PO Box 1066
Wall Street Station
New York NY 10268 9.45
151,693.424
Fox & Co.
PO Box 976
New York NY 10268 8.39
134,710.352
Security Nominees Incorporated
1 State Street
New York NY 10017 7.06
113,383.988
Citibank F.S.B. as Trustee
for Natwest Crawley
1410 N. Westshore Blvd.
Tampa FL 33607 91,615.031 5.71
Wendel & Co.
c/o The Bank of New York
EBT Mutual Fund Section
PO Box 1066
Wall Street Station
New York NY 10268 80,776.999 5.03
<PAGE>
NUMBER OF NUMBER OF % OF
INVESTOR ADVISOR SHARES
SCHRODER INTERNATIONAL BOND FUND SHARES SHARES OF FUND
CLASS
OWNED
- ---------------------------------------------------------- ----------------- ---------------- -----------------
Charles Schwab & Co. Inc.
101 Montgomery Street
San Francisco CA 94104 19,842.627 100.00
NUMBER OF NUMBER OF % OF
INVESTOR ADVISOR SHARES
SCHRODER EMERGING MARKETS FUND SHARES SHARES OF FUND
CLASS
OWNED
- ---------------------------------------------------------- ----------------- ---------------- -----------------
Charles Schwab & Co. Inc.
Special Cust Account FBO
101 Montgomery Street
San Francisco CA 94104 64,500.095 94.70
NUMBER NUMBER OF % OF
OF ADVISOR SHARES
SCHRODER U.S. SMALLER COMPANIES FUND INVESTOR SHARES OF FUND
SHARES CLASS
OWNED
- ---------------------------------------------------------- ---------------- ----------------- ----------------
First American Trust Co TTEE
FBO Managed Omnibus Reinvestment
421 North Main Street 25.99
1,073,354.023
BALSA & Co.
c/o Chase Manhattan Bank
PO Box 1768
Grand Central Station
New York NY 10163-1768 15.53
641,387.856
Charles Schwab & Co Inc.
101 Montgomery Street
San Francisco CA 94104 12.18
502,972.182
American Express Trust Co.
FBO American Express Trust Retirement Service
P.O. Box 534
Minneapolis MN 55440 81.70
396,502.408
National Investor Services Corp.
55 Water Street
New York NY 10041 31,971.971 6.59
<PAGE>
NUMBER NUMBER OF % OF
OF ADVISOR SHARES
SCHRODER MICRO CAP FUND INVESTOR SHARES OF FUND
SHARES CLASS
OWNED
- ---------------------------------------------------------- ---------------- ----------------- ----------------
Schroders Incorporated
787 Seventh Avenue
New York NY 10019 25.76
144,036.581
Charles Schwab & Co. Inc.
101 Montgomery Street
San Francisco CA 94104 16.12
90,121.862
Schroder Capital Management International Inc.
ATTN: Fergal Cassidy
787 7th Avenue, 34th Floor
New York NY 10019 12.49
69,824.291
Ira Unschuld
150 East 56th Street
New York NY 10022 7.55
42,233.565
</TABLE>
<PAGE>
SCHRODER CAPITAL FUNDS (DELAWARE)
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
FORM N-1A
PART B
STATEMENT OF ADDITIONAL INFORMATION
MARCH 1, 1999
This Statement of Additional Information (SAI) is not a prospectus and is only
authorized for distribution when accompanied or preceded by a Prospectus for
Schroder Emerging Markets Fund Institutional Portfolio, as amended or
supplemented from time to time. This SAI relates to the Fund's Investor Shares
and Advisor Shares. Investor Shares and Advisor Shares are offered through
separate Prospectuses, each dated March 1, 1999. This SAI contains information
which may be useful to investors but which is not included in the Prospectuses.
Investors may obtain free copies of the Prospectuses by calling the Trust at
1-800-290-9826.
Certain disclosure has been incorporated by reference into this SAI from the
Fund's annual report. For a free copy of the annual report, please call
1-800-290-9826.
<PAGE>
TABLE OF CONTENTS
TRUST HISTORY..................................................................1
CAPITALIZATION AND SHARE CLASSES...............................................1
MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS......................2
INVESTMENT RESTRICTIONS.......................................................16
TRUSTEES AND OFFICERS.........................................................17
SCHRODER AND ITS AFFILIATES...................................................22
INVESTMENT ADVISORY AGREEMENT.................................................23
ADMINISTRATIVE SERVICES.......................................................25
DISTRIBUTOR...................................................................26
FUND ACCOUNTING...............................................................28
BROKERAGE ALLOCATION AND OTHER PRACTICES......................................28
DETERMINATION OF NET ASSET VALUE..............................................31
REDEMPTIONS IN KIND...........................................................32
TAXES.........................................................................32
PRINCIPAL HOLDERS OF SECURITIES...............................................34
PERFORMANCE INFORMATION.......................................................34
CUSTODIAN.....................................................................36
INDEPENDENT AUDITORS..........................................................37
SHAREHOLDER LIABILITY.........................................................37
FINANCIAL STATEMENTS..........................................................37
<PAGE>
SCHRODER CAPITAL FUNDS (DELAWARE)
STATEMENT OF ADDITIONAL INFORMATION
TRUST HISTORY
Schroder Capital Funds (Delaware) was organized as a Maryland
corporation on July 30, 1969; reorganized on February 29, 1988 as Schroder
Capital Funds, Inc.; and reorganized as a Delaware business trust organized
under the laws of the State of Delaware on January 9, 1996. The Trust's Trust
Instrument, which is governed by Delaware law, is on file with the Secretary of
State of the State of Delaware.
FUND CLASSIFICATION
The Trust currently offers shares of beneficial interest of nine series
with separate investment objectives and policies. Shares of Schroder Emerging
Markets Fund Institutional Portfolio are offered pursuant to the Prospectuses
and this SAI. The Fund is a "non-diversified" investment company under the 1940
Act, and therefore may invest its assets in a more limited number of issuers
than may diversified investment companies. To the extent the Fund invests a
significant portion of its assets in the securities of a particular issuer, it
will be subject to an increased risk of loss if the market value of the issuer's
securities declines.
CAPITALIZATION AND SHARE CLASSES
The Trust has an unlimited number of shares of beneficial interest that
may, without shareholder approval, be divided into an unlimited number of series
of such shares, which, in turn, may be divided into an unlimited number of
classes of such shares. The Fund's shares are presently divided into two
classes, Investor Shares and Advisor Shares. Each class is offered through a
separate Prospectus. Unlike Investor Shares, Advisor Shares are currently
subject to shareholder service fees, so that the performance of the Fund's
Investor Shares should be more favorable than that of the Fund's Advisor Shares
over the same time period.
The Fund may suspend the sale of shares at any time and may refuse any
order to purchase shares. Under unusual circumstances, the Trust may suspend
redemption of Fund shares, or postpone redemption payments for more than seven
days, as permitted by law. If your account balance falls below a minimum amount
set by the Trustees (presently $100,000), the Trust may choose to redeem your
shares in the Fund and pay you for them. You will receive at least 30 days'
written notice before the Trust redeems your shares, and you may purchase
additional shares at any time to avoid a redemption. The Trust may also redeem
shares if you own Fund shares above a maximum amount set by the Trustees. There
is currently no maximum, but the Trustees may establish one at any time, which
could apply to both present and future shareholders.
Shares entitle their holders to one vote per share, with fractional
shares voting proportionally; however, a separate vote will be taken by each
Fund or class of shares on matters affecting the particular Fund or class, as
determined by the Trustees. For example, a change in a fundamental investment
policy for a Fund would be voted upon only by shareholders of that Fund and a
change to a distribution plan relating to a particular class and requiring
<PAGE>
shareholder approval would be voted upon only by shareholders of that class.
Shares have noncumulative voting rights. Although the Trust is not required to
hold annual meetings of its shareholders, shareholders have the right to call a
meeting to elect or remove Trustees or to take other actions as provided in the
Trust Instrument. Shares have no preemptive or subscription rights, and are
transferable. Shares are entitled to dividends as declared by the Trustees, and
if the Fund were liquidated, each class of shares of the Fund would receive the
net assets of the Fund attributable to the class. Because Investor and Advisor
Shares are subject to different expenses, the Fund's dividends and other
distributions will normally differ between the two classes. The Trust may
suspend the sale of shares at any time and may refuse any order to purchase
shares.
MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS
In addition to the principal investment strategies and the principal
risks of the Fund described in the Prospectuses, the Fund may employ other
investment practices and may be subject to additional risks which are described
below.
CERTAIN DERIVATIVE INSTRUMENTS
Derivative instruments are financial instruments whose value depends
upon, or is derived from, the value of an underlying asset, such as a security,
index or currency. As described below, the Fund may engage in a variety of
transactions involving the use of derivative instruments, including options and
futures contracts on securities and securities indices and options on futures
contracts. These transactions may be used by the Fund for hedging purposes or,
to the extent permitted by applicable law, to increase its current return. The
Fund may also engage in derivative transactions involving foreign currencies.
See "Foreign Currency Transactions."
OPTIONS
The Fund may purchase and sell covered put and call options on its
portfolio securities to enhance investment performance and to protect against
changes in market prices.
COVERED CALL OPTIONS. The Fund may write covered call options on its
securities to realize a greater current return through the receipt of premiums
than it would realize on its securities alone. Such option transactions may also
be used as a limited form of hedging against a decline in the price of
securities owned by the Fund.
A call option gives the holder the right to purchase, and obligates the
writer to sell, a security at the exercise price at any time before the
expiration date. A call option is "covered" if the writer, at all times while
obligated as a writer, either owns the underlying securities (or comparable
securities satisfying the cover requirements of the securities exchanges), or
has the right to acquire such securities through immediate conversion of
securities.
In return for the premium received when it writes a covered call
option, the Fund gives up some or all of the opportunity to profit from an
increase in the market price of the securities covering the call option during
the life of the option. The Fund retains the risk of loss should the price of
such securities decline. If the option expires unexercised, the Fund realizes a
gain equal to the premium, which may be offset by a decline in price of the
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underlying security. If the option is exercised, the Fund realizes a gain or
loss equal to the difference between the Fund's cost for the underlying security
and the proceeds of the sale (exercise price minus commissions) plus the amount
of the premium.
The Fund may terminate a call option that it has written before it
expires by entering into a closing purchase transaction. The Fund may enter into
closing purchase transactions in order to free itself to sell the underlying
security or to write another call on the security, realize a profit on a
previously written call option, or protect a security from being called in an
unexpected market rise. Any profits from a closing purchase transaction may be
offset by a decline in the value of the underlying security. Conversely, because
increases in the market price of a call option will generally reflect increases
in the market price of the underlying security, any loss resulting from a
closing purchase transaction is likely to be offset in whole or in part by
unrealized appreciation of the underlying security owned by the Fund.
COVERED PUT OPTIONS. The Fund may write covered put options in order to
enhance its current return. Such options transactions may also be used as a
limited form of hedging against an increase in the price of securities that the
Fund plans to purchase. A put option gives the holder the right to sell, and
obligates the writer to buy, a security at the exercise price at any time before
the expiration date. A put option is "covered" if the writer segregates cash and
high-grade short-term debt obligations or other permissible collateral equal to
the price to be paid if the option is exercised.
In addition to the receipt of premiums and the potential gains from
terminating such options in closing purchase transactions, the Fund also
receives interest on the cash and debt securities maintained to cover the
exercise price of the option. By writing a put option, the Fund assumes the risk
that it may be required to purchase the underlying security for an exercise
price higher than its then current market value, resulting in a potential
capital loss unless the security later appreciates in value.
The Fund may terminate a put option that it has written before it
expires by a closing purchase transaction. Any loss from this transaction may be
partially or entirely offset by the premium received on the terminated option.
PURCHASING PUT AND CALL OPTIONS. The Fund may also purchase put options
to protect portfolio holdings against a decline in market value. This protection
lasts for the life of the put option because the Fund, as a holder of the
option, may sell the underlying security at the exercise price regardless of any
decline in its market price. In order for a put option to be profitable, the
market price of the underlying security must decline sufficiently below the
exercise price to cover the premium and transaction costs that the Fund must
pay. These costs will reduce any profit the Fund might have realized had it sold
the underlying security instead of buying the put option.
The Fund may purchase call options to hedge against an increase in the
price of securities that the Fund wants ultimately to buy. Such hedge protection
is provided during the life of the call option since the Fund, as holder of the
call option, is able to buy the underlying security at the exercise price
regardless of any increase in the underlying security's market price. In order
for a call option to be profitable, the market price of the underlying security
must rise sufficiently above the exercise price to cover the premium and
transaction costs. These costs will reduce any profit the Fund might have
realized had it bought the underlying security at the time it purchased the call
option.
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The Fund may also purchase put and call options to enhance its current
return. The Fund may also buy and sell combinations of put and call options on
the same underlying security to earn additional income.
OPTIONS ON FOREIGN SECURITIES. The Fund may purchase and sell options
on foreign securities if in Schroder's opinion the investment characteristics of
such options, including the risks of investing in such options, are consistent
with the Fund's investment objectives. It is expected that risks related to such
options will not differ materially from risks related to options on U.S.
securities. However, position limits and other rules of foreign exchanges may
differ from those in the U.S. In addition, options markets in some countries,
many of which are relatively new, may be less liquid than comparable markets in
the U.S.
RISKS INVOLVED IN THE SALE OF OPTIONS. Options transactions involve
certain risks, including the risks that Schroder will not forecast interest rate
or market movements correctly, that the Fund may be unable at times to close out
such positions, or that hedging transactions may not accomplish their purpose
because of imperfect market correlations. The successful use of these strategies
depends on the ability of Schroder to forecast market and interest rate
movements correctly.
An exchange-listed option may be closed out only on an exchange which
provides a secondary market for an option of the same series. Although the Fund
will enter into an option position only if Schroder believes that a liquid
secondary market exists, there is no assurance that a liquid secondary market on
an exchange will exist for any particular option or at any particular time. If
no secondary market were to exist, it would be impossible to enter into a
closing transaction to close out an option position. As a result, the Fund may
be forced to continue to hold, or to purchase at a fixed price, a security on
which it has sold an option at a time when Schroder believes it is inadvisable
to do so.
Higher than anticipated trading activity or order flow or other
unforeseen events might cause The Options Clearing Corporation or an exchange to
institute special trading procedures or restrictions that might restrict the
Fund's use of options. The exchanges have established limitations on the maximum
number of calls and puts of each class that may be held or written by an
investor or group of investors acting in concert. It is possible that the Fund
and other clients of Schroder may be considered such a group. These position
limits may restrict the Fund's ability to purchase or sell options on particular
securities.
As described below, the Fund generally expects that its options
transactions will be conducted on recognized exchanges. In certain instances,
however, the Fund may purchase and sell options in the over-the-counter markets.
Options which are not traded on national securities exchanges may be closed out
only with the other party to the option transaction. For that reason, it may be
more difficult to close out over-the-counter options than exchange-traded
options. Options in the over-the-counter market may also involve the risk that
securities dealers participating in such transactions would be unable to meet
their obligations to the Fund. Furthermore, over-the-counter options are not
subject to the protection afforded purchasers of exchange-traded options by The
Options Clearing Corporation. The Fund will, however, engage in over-the-counter
options transactions only when appropriate exchange-traded options transactions
are unavailable and when, in the opinion of Schroder, the pricing mechanism and
liquidity of the over-the-counter markets are satisfactory and the participants
are responsible parties likely to meet their contractual obligations. The Fund
will treat over-the-counter options (and, in the case of options sold by the
Fund, the underlying securities held by the Fund) as illiquid investments as
required by applicable law.
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Government regulations, particularly the requirements for qualification
as a "regulated investment company" under the Internal Revenue Code, may also
restrict the Trust's use of options.
FUTURES CONTRACTS
In order to hedge against the effects of adverse market changes, the
Fund may buy and sell futures contracts on U.S. Government securities and other
debt securities in which the Fund may invest, and on indices of debt securities.
In addition, the Fund may purchase and sell stock index futures to hedge against
changes in stock market prices. The Fund may also, to the extent permitted by
applicable law, buy and sell futures contracts and options on futures contracts
to increase the Fund's current return. All such futures and related options
will, as may be required by applicable law, be traded on exchanges that are
licensed and regulated by the Commodity Futures Trading Commission (the "CFTC").
Depending upon the change in the value of the underlying security or index when
the Fund enters into or terminates a futures contract, the Fund may realize a
gain or loss.
FUTURES ON DEBT SECURITIES AND RELATED OPTIONS. A futures contract on a
debt security is a binding contractual commitment which, if held to maturity,
will result in an obligation to make or accept delivery, during a particular
month, of securities having a standardized face value and rate of return. By
purchasing futures on debt securities -- assuming a "long" position -- the Fund
will legally obligate itself to accept the future delivery of the underlying
security and pay the agreed price. By selling futures on debt securities --
assuming a "short" position -- it will legally obligate itself to make the
future delivery of the security against payment of the agreed price. Open
futures positions on debt securities will be valued at the most recent
settlement price, unless that price does not, in the judgment of persons acting
at the direction of the Trustees as to the valuation of the Fund's assets,
reflect the fair value of the contract, in which case the positions will be
valued by the Trustees or such persons.
Positions taken in the futures markets are not normally held to
maturity, but are instead liquidated through offsetting transactions that may
result in a profit or a loss. While futures positions taken by the Fund will
usually be liquidated in this manner, the Fund may instead make or take delivery
of the underlying securities whenever it appears economically advantageous to
the Fund to do so. A clearing corporation associated with the exchange on which
futures are traded assumes responsibility for such closing transactions and
guarantees that the Fund's sale and purchase obligations under closed-out
positions will be performed at the termination of the contract.
Hedging by use of futures on debt securities seeks to establish more
certainly than would otherwise be possible the effective rate of return on
portfolio securities. The Fund may, for example, take a "short" position in the
futures market by selling contracts for the future delivery of debt securities
held by the Fund (or securities having characteristics similar to those held by
the Fund) in order to hedge against an anticipated rise in interest rates that
would adversely affect the value of the Fund's portfolio securities. When
hedging of this character is successful, any depreciation in the value of
portfolio securities may substantially be offset by appreciation in the value of
the futures position.
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On other occasions, the Fund may take a "long" position by purchasing
futures on debt securities. This would be done, for example, when the Fund
expects to purchase particular securities when it has the necessary cash, but
expects the rate of return available in the securities markets at that time to
be less favorable than rates currently available in the futures markets. If the
anticipated rise in the price of the securities should occur (with its
concomitant reduction in yield), the increased cost to the Fund of purchasing
the securities may be offset, at least to some extent, by the rise in the value
of the futures position taken in anticipation of the subsequent securities
purchase.
Successful use by the Fund of futures contracts on debt securities is
subject to Schroder's ability to predict correctly movements in the direction of
interest rates and other factors affecting markets for debt securities. For
example, if the Fund has hedged against the possibility of an increase in
interest rates which would adversely affect the market prices of debt securities
held by it and the prices of such securities increase instead, the Fund will
lose part or all of the benefit of the increased value of its securities which
it has hedged because it will have offsetting losses in its futures positions.
In addition, in such situations, if the Fund has insufficient cash, it may have
to sell securities to meet daily maintenance margin requirements. The Fund may
have to sell securities at a time when it may be disadvantageous to do so.
The Fund may purchase and write put and call options on certain debt
futures contracts, as they become available. Such options are similar to options
on securities except that options on futures contracts give 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 period of
the option. As with options on securities, the holder or writer of an option may
terminate his position by selling or purchasing an option of the same series.
There is no guarantee that such closing transactions can be effected. The Fund
will be required to deposit initial margin and maintenance margin with respect
to put and call options on futures contracts written by it pursuant to brokers'
requirements, and, in addition, net option premiums received will be included as
initial margin deposits. See "Margin Payments" below. Compared to the purchase
or sale of futures contracts, the purchase of call or put options on futures
contracts involves less potential risk to the Fund because the maximum amount at
risk is the premium paid for the options plus transactions costs. However, there
may be circumstances when the purchase of call or put options on a futures
contract would result in a loss to the Fund when the purchase or sale of the
futures contracts would not, such as when there is no movement in the prices of
debt securities. The writing of a put or call option on a futures contract
involves risks similar to those risks relating to the purchase or sale of
futures contracts.
INDEX FUTURES CONTRACTS AND OPTIONS. The Fund may invest in debt index
futures contracts and stock index futures contracts, and in related options. A
debt index futures contract is a contract to buy or sell units of a specified
debt index at a specified future date at a price agreed upon when the contract
is made. A unit is the current value of the index. A stock index futures
contract is a contract to buy or sell units of a stock index at a specified
future date at a price agreed upon when the contract is made. A unit is the
current value of the stock index.
Depending on the change in the value of the index between the time when
the Fund enters into and terminates an index futures transaction, the Fund may
realize a gain or loss. The following example illustrates generally the manner
in which index futures contracts operate. The Standard & Poor's 100 Stock Index
is composed of 100 selected common stocks, most of which are listed on the New
<PAGE>
York Stock Exchange. The S&P 100 Index assigns relative weightings to the common
stocks included in the Index, and the Index fluctuates with changes in the
market values of those common stocks. In the case of the S&P 100 Index,
contracts are to buy or sell 100 units. Thus, if the value of the S&P 100 Index
were $180, one contract would be worth $18,000 (100 units x $180). The stock
index futures contract specifies that no delivery of the actual stocks making up
the index will take place. Instead, settlement in cash must occur upon the
termination of the contract, with the settlement being the difference between
the contract price and the actual level of the stock index at the expiration of
the contract. For example, if the Fund enters into a futures contract to buy 100
units of the S&P 100 Index at a specified future date at a contract price of
$180 and the S&P 100 Index is at $184 on that future date, the Fund will gain
$400 (100 units x gain of $4). If the Fund enters into a futures contract to
sell 100 units of the stock index at a specified future date at a contract price
of $180 and the S&P 100 Index is at $182 on that future date, the Fund will lose
$200 (100 units x loss of $2).
The Fund may purchase or sell futures contracts with respect to any
securities indices. Positions in index futures may be closed out only on an
exchange or board of trade which provides a secondary market for such futures.
In order to hedge the Fund's investments successfully using futures
contracts and related options, the Fund must invest in futures contracts with
respect to indices or sub-indices the movements of which will, in Schroder's
judgment, have a significant correlation with movements in the prices of the
Fund's securities.
Options on index futures contracts are similar to options on securities
except that options on index futures contracts give the purchaser the right, in
return for the premium paid, to assume a position in an index 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 period of the option.
Upon exercise of the option, the holder would assume the underlying futures
position and would receive a variation margin payment of cash or securities
approximating the increase in the value of the holder's option position. If an
option is exercised on the last trading day prior to the expiration date of the
option, the settlement will be made entirely in cash based on the difference
between the exercise price of the option and the closing level of the index on
which the futures contract is based on the expiration date. Purchasers of
options who fail to exercise their options prior to the exercise date suffer a
loss of the premium paid.
As an alternative to purchasing and selling call and put options on
index futures contracts, the Fund that may purchase and sell index futures
contracts may purchase and sell call and put options on the underlying indices
themselves to the extent that such options are traded on national securities
exchanges. Index options are similar to options on individual securities in that
the purchaser of an index option acquires the right to buy (in the case of a
call) or sell (in the case of a put), and the writer undertakes the obligation
to sell or buy (as the case may be), units of an index at a stated exercise
price during the term of the option. Instead of giving the right to take or make
actual delivery of securities, the holder of an index option has the right to
receive a cash "exercise settlement amount". This amount is equal to the amount
by which the fixed exercise price of the option exceeds (in the case of a put)
or is less than (in the case of a call) the closing value of the underlying
index on the date of the exercise, multiplied by a fixed "index multiplier".
<PAGE>
The Fund may purchase or sell options on stock indices in order to
close out its outstanding positions in options on stock indices which it has
purchased. The Fund may also allow such options to expire unexercised.
Compared to the purchase or sale of futures contracts, the purchase of
call or put options on an index involves less potential risk to the Fund because
the maximum amount at risk is the premium paid for the options plus transactions
costs. The writing of a put or call option on an index involves risks similar to
those risks relating to the purchase or sale of index futures contracts.
The Fund may also purchase warrants, issued by banks and other
financial institutions, whose values are based on the values from time to time
of one or more securities indices.
MARGIN PAYMENTS. When the Fund purchases or sells a futures contract,
it is required to deposit with its custodian an amount of cash, U.S. Treasury
bills, or other permissible collateral equal to a small percentage of the amount
of the futures contract. This amount is known as "initial margin". The nature of
initial margin is different from that of margin in security transactions in that
it does not involve borrowing money to finance transactions. Rather, initial
margin is similar to a performance bond or good faith deposit that is returned
to the Fund upon termination of the contract, assuming the Fund satisfies its
contractual obligations.
Subsequent payments to and from the broker occur on a daily basis in a
process known as "marking to market". These payments are called "variation
margin" and are made as the value of the underlying futures contract fluctuates.
For example, when the Fund sells a futures contract and the price of the
underlying debt security rises above the delivery price, the Fund's position
declines in value. The Fund then pays the broker a variation margin payment
equal to the difference between the delivery price of the futures contract and
the market price of the securities underlying the futures contract. Conversely,
if the price of the underlying security falls below the delivery price of the
contract, the Fund's futures position increases in value. The broker then must
make a variation margin payment equal to the difference between the delivery
price of the futures contract and the market price of the securities underlying
the futures contract.
When the Fund terminates a position in a futures contract, a final
determination of variation margin is made, additional cash is paid by or to the
Fund, and the Fund realizes a loss or a gain. Such closing transactions involve
additional commission costs.
SPECIAL RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS
LIQUIDITY RISKS. Positions in futures contracts may be closed out only
on an exchange or board of trade which provides a secondary market for such
futures. Although the Fund intends to purchase or sell futures only on exchanges
or boards of trade where there appears to be an active secondary market, there
is no assurance that a liquid secondary market on an exchange or board of trade
will exist for any particular contract or at any particular time. If there is
not a liquid secondary market at a particular time, it may not be possible to
close a futures position at such time and, in the event of adverse price
movements, the Fund would continue to be required to make daily cash payments of
variation margin. However, in the event financial futures are used to hedge
portfolio securities, such securities will not generally be sold until the
financial futures can be terminated. In such circumstances, an increase in the
price of the portfolio securities, if any, may partially or completely offset
losses on the financial futures.
<PAGE>
In addition to the risks that apply to all options transactions, there
are several special risks relating to options on futures contracts. The ability
to establish and close out positions in such options will be subject to the
development and maintenance of a liquid secondary market. It is not certain that
such a market will develop. Although the Fund generally will purchase only those
options for which there appears to be an active secondary market, there is no
assurance that a liquid secondary market on an exchange will exist for any
particular option or at any particular time. In the event no such market exists
for particular options, it might not be possible to effect closing transactions
in such options with the result that the Fund would have to exercise the options
in order to realize any profit.
HEDGING RISKS. There are several risks in connection with the use by
the Fund of futures contracts and related options as a hedging device. One risk
arises because of the imperfect correlation between movements in the prices of
the futures contracts and options and movements in the underlying securities or
index or in the prices of the Fund's securities which are the subject of a
hedge. Schroder will, however, attempt to reduce this risk by purchasing and
selling, to the extent possible, futures contracts and related options on
securities and indices the movements of which will, in its judgment, correlate
closely with movements in the prices of the underlying securities or index and
the Fund's portfolio securities sought to be hedged.
Successful use of futures contracts and options by the Fund for hedging
purposes is also subject to Schroder's ability to predict correctly movements in
the direction of the market. It is possible that, where the Fund has purchased
puts on futures contracts to hedge its portfolio against a decline in the
market, the securities or index on which the puts are purchased may increase in
value and the value of securities held in the portfolio may decline. If this
occurred, the Fund would lose money on the puts and also experience a decline in
value in its portfolio securities. In addition, the prices of futures, for a
number of reasons, may not correlate perfectly with movements in the underlying
securities or index due to certain market distortions. First, all participants
in the futures market are subject to margin deposit requirements. Such
requirements may cause investors to close futures contracts through offsetting
transactions which could distort the normal relationship between the underlying
security or index and futures markets. Second, the margin requirements in the
futures markets are less onerous than margin requirements in the securities
markets in general, and as a result the futures markets may attract more
speculators than the securities markets do. Increased participation by
speculators in the futures markets may also cause temporary price distortions.
Due to the possibility of price distortion, even a correct forecast of general
market trends by Schroder may still not result in a successful hedging
transaction over a very short time period.
LACK OF AVAILABILITY. Because the markets for certain options and
futures contracts and other derivative instruments in which the Fund may invest
(including markets located in foreign countries) are relatively new and still
developing and may be subject to regulatory restraints, the Fund's ability to
engage in transactions using such instruments may be limited. Suitable
derivative transactions may not be available in all circumstances and there is
no assurance that the Fund will engage in such transactions at any time or from
time to time. The Fund's ability to engage in hedging transactions may also be
limited by certain regulatory and tax considerations.
<PAGE>
OTHER RISKS. The Fund will incur brokerage fees in connection with its
futures and options transactions. In addition, while futures contracts and
options on futures will be purchased and sold to reduce certain risks, those
transactions themselves entail certain other risks. Thus, while the Fund may
benefit from the use of futures and related options, unanticipated changes in
interest rates or stock price movements may result in a poorer overall
performance for the Fund than if it had not entered into any futures contracts
or options transactions. Moreover, in the event of an imperfect correlation
between the futures position and the portfolio position which is intended to be
protected, the desired protection may not be obtained and the Fund may be
exposed to risk of loss.
FORWARD COMMITMENTS
The Fund may enter into contracts to purchase securities for a fixed
price at a future date beyond customary settlement time ("forward commitments")
if the Fund holds, and maintains until the settlement date in a segregated
account, cash or liquid securities in an amount sufficient to meet the purchase
price, or if the Fund enters into offsetting contracts for the forward sale of
other securities it owns. Forward commitments may be considered securities in
themselves, and involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in addition to
the risk of decline in the value of the Fund's other assets. Where such
purchases are made through dealers, the Fund relies on the dealer to consummate
the sale. The dealer's failure to do so may result in the loss to the Fund of an
advantageous yield or price.
Although the Fund will generally enter into forward commitments with
the intention of acquiring securities for its portfolio or for delivery pursuant
to options contracts it has entered into, the Fund may dispose of a commitment
prior to settlement if Schroder deems it appropriate to do so. The Fund may
realize short-term profits or losses upon the sale of forward commitments.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements. A repurchase agreement
is a contract under which the Fund acquires a security for a relatively short
period (usually not more than one week) subject to the obligation of the seller
to repurchase and the Fund to resell such security at a fixed time and price
(representing the Fund's cost plus interest). It is the Trust's present
intention to enter into repurchase agreements only with member banks of the
Federal Reserve System and securities dealers meeting certain criteria as to
creditworthiness and financial condition established by the Trustees of the
Trust, and only with respect to obligations of the U.S. government or its
agencies or instrumentalities or other high quality short-term debt obligations.
Repurchase agreements may also be viewed as loans made by the Fund which are
collateralized by the securities subject to repurchase. Schroder will monitor
such transactions to ensure that the value of the underlying securities will be
at least equal at all times to the total amount of the repurchase obligation,
including the interest factor. If the seller defaults, the Fund could realize a
loss on the sale of the underlying security to the extent that the proceeds of
sale including accrued interest are less than the resale price provided in the
agreement including interest. In addition, if the seller should be involved in
bankruptcy or insolvency proceedings, the Fund may incur delay and costs in
selling the underlying security or may suffer a loss of principal and interest
if the Fund is treated as an unsecured creditor and required to return the
underlying collateral to the seller's estate.
<PAGE>
WHEN-ISSUED SECURITIES
The Fund may from time to time purchase securities on a "when-issued"
basis. Debt securities are often issued on this basis. The price of such
securities, which may be expressed in yield terms, is fixed at the time a
commitment to purchase is made, but delivery and payment for the when-issued
securities take place at a later date. Normally, the settlement date occurs
within one month of the purchase. During the period between purchase and
settlement, no payment is made by the Fund and no interest accrues to the Fund.
To the extent that assets of the Fund are held in cash pending the settlement of
a purchase of securities, the Fund would earn no income. While the Fund may sell
its right to acquire when-issued securities prior to the settlement date, the
Fund intends actually to acquire such securities unless a sale prior to
settlement appears desirable for investment reasons. At the time the Fund makes
the commitment to purchase a security on a when-issued basis, it will record the
transaction and reflect the amount due and the value of the security in
determining the Fund's net asset value. The market value of the when-issued
securities may be more or less than the purchase price payable at the settlement
date. The Fund will establish a segregated account in which it will maintain
cash and U.S. government securities or other liquid securities at least equal in
value to commitments for when-issued securities. Such segregated securities
either will mature or, if necessary, be sold on or before the settlement date.
LOANS OF FUND PORTFOLIO SECURITIES
The Fund may lend its portfolio securities, provided: (1) the loan is
secured continuously by collateral consisting of U.S. government securities,
cash, or cash equivalents adjusted daily to have market value at least equal to
the current market value of the securities loaned; (2) the Fund may at any time
call the loan and regain the securities loaned; (3) the Fund will receive any
interest or dividends paid on the loaned securities; and (4) the aggregate
market value of the Fund's portfolio securities loaned will not at any time
exceed one-third of the total assets of the Fund. In addition, it is anticipated
that the Fund may share with the borrower some of the income received on the
collateral for the loan or that it will be paid a premium for the loan. Before
the Fund enters into a loan, Schroder considers all relevant facts and
circumstances, including the creditworthiness of the borrower. The risks in
lending portfolio securities, as with other extensions of credit, consist of
possible delay in recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially. Although voting rights or
rights to consent with respect to the loaned securities pass to the borrower,
the Fund retains the right to call the loans at any time on reasonable notice,
and it will do so in order that the securities may be voted by the Fund if the
holders of such securities are asked to vote upon or consent to matters
materially affecting the investment. The Fund will not lend portfolio securities
to borrowers affiliated with the Fund.
FOREIGN SECURITIES
The Fund may invest without limit in securities principally traded in
foreign markets. The Fund may also invest without limit in Eurodollar
certificates of deposit and other certificates of deposit issued by United
States branches of foreign banks and foreign branches of United States banks.
Investments in foreign securities may involve risks and considerations
different from or in addition to investments in domestic securities. There may
be less information publicly available about a foreign company than about a U.S.
company, and foreign companies are not generally subject to accounting,
auditing, and financial reporting standards and practices comparable to those in
the United States. The securities of some foreign companies are less liquid and
at times more volatile than securities of comparable U.S. companies. Foreign
brokerage commissions and other fees are also generally higher than in the
<PAGE>
United States. Foreign settlement procedures and trade regulations may involve
certain risks (such as delay in payment or delivery of securities or in the
recovery of the Fund's assets held abroad) and expenses not present in the
settlement of domestic investments. Also, because foreign securities are
normally denominated and traded in foreign currencies, the values of the Fund's
assets may be affected favorably or unfavorably by currency exchange rates and
exchange control regulations, and the Fund may incur costs in connection with
conversion between currencies.
In addition, with respect to certain foreign countries, there is a
possibility of nationalization or expropriation of assets, imposition of
currency exchange controls, adoption of foreign governmental restrictions
affecting the payment of principal and interest, imposition of withholding or
confiscatory taxes, political or financial instability, and adverse political,
diplomatic or economic developments which could affect the values of investments
in those countries. In certain countries, legal remedies available to investors
may be more limited than those available with respect to investments in the
United States or other countries and it may be more difficult to obtain and
enforce a judgment against a foreign issuer. Also, the laws of some foreign
countries may limit the Fund's ability to invest in securities of certain
issuers located in those countries.
Special tax considerations apply to foreign securities. In determining
whether to invest in securities of foreign issuers, Schroder will consider the
likely impact of foreign taxes on the net yield available to the Fund and its
shareholders. Income received by the Fund from sources within foreign countries
may be reduced by withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. It is impossible to determine the effective rate of
foreign tax in advance since the amount of the Fund's assets to be invested in
various countries is not known, and tax laws and their interpretations may
change from time to time and may change without advance notice. Any such taxes
paid by the Fund will reduce its net income available for distribution to
shareholders.
FOREIGN CURRENCY TRANSACTIONS
The Fund may engage in currency exchange transactions to protect
against uncertainty in the level of future foreign currency exchange rates and
to increase current return. The Fund may engage in both "transaction hedging"
and "position hedging".
When it engages in transaction hedging, the Fund enters into foreign
currency transactions with respect to specific receivables or payables of the
Fund generally arising in connection with the purchase or sale of its portfolio
securities. The Fund will engage in transaction hedging when it desires to "lock
in" the U.S. dollar price of a security it has agreed to purchase or sell, or
the U.S. dollar equivalent of a dividend or interest payment in a foreign
currency. By transaction hedging, the Fund will attempt to protect against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the applicable foreign currency during the period between the
date on which the security is purchased or sold or on which the dividend or
interest payment is declared, and the date on which such payments are made or
received.
The Fund may purchase or sell a foreign currency on a spot (or cash)
basis at the prevailing spot rate in connection with transaction hedging. The
Fund may also enter into contracts to purchase or sell foreign currencies at a
<PAGE>
future date ("forward contracts") and purchase and sell foreign currency futures
contracts.
For transaction hedging purposes, the Fund may also purchase
exchange-listed and over-the-counter call and put options on foreign currency
futures contracts and on foreign currencies. A put option on a futures contract
gives the Fund the right to assume a short position in the futures contract
until expiration of the option. A put option on currency gives the Fund the
right to sell a currency at an exercise price until the expiration of the
option. A call option on a futures contract gives the Fund the right to assume a
long position in the futures contract until the expiration of the option. A call
option on currency gives the Fund the right to purchase a currency at the
exercise price until the expiration of the option. The Fund will engage in
over-the-counter transactions only when appropriate exchange-traded transactions
are unavailable and when, in Schroder's opinion, the pricing mechanism and
liquidity are satisfactory and the participants are responsible parties likely
to meet their contractual obligations.
When it engages in position hedging, the Fund enters into foreign
currency exchange transactions to protect against a decline in the values of the
foreign currencies in which securities held by the Fund are denominated or are
quoted in their principal trading markets or an increase in the value of
currency for securities which the Fund expects to purchase. In connection with
position hedging, the Fund may purchase put or call options on foreign currency
and foreign currency futures contracts and buy or sell forward contracts and
foreign currency futures contracts. The Fund may also purchase or sell foreign
currency on a spot basis.
The precise matching of the amounts of foreign currency exchange
transactions and the value of the portfolio 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 values of
those securities between the dates the currency exchange transactions are
entered into and the dates they mature.
It is impossible to forecast with precision the market value of the
Fund's portfolio securities at the expiration or maturity of a forward or
futures contract. Accordingly, it may be necessary for the Fund to purchase
additional foreign currency on the spot market (and bear the expense of such
purchase) if the market value of the security or securities being hedged is less
than the amount of foreign currency the Fund is obligated to deliver and if a
decision is made to sell the security or securities and make delivery of the
foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio security or
securities of the Fund if the market value of such security or securities
exceeds the amount of foreign currency the Fund is obligated to deliver.
To offset some of the costs to the Fund of hedging against fluctuations
in currency exchange rates, the Fund may write covered call options on those
currencies.
Transaction and position hedging do not eliminate fluctuations in the
underlying prices of the securities which the Fund owns or intends to purchase
or sell. They simply establish a rate of exchange which one can achieve at some
future point in time. Additionally, although these techniques tend to minimize
the risk of loss due to a decline in the value of the hedged currency, they tend
to limit any potential gain which might result from the increase in the value of
such currency. Also, suitable foreign currency hedging transactions may not be
available in all circumstances and there can be no assurance that the Fund will
utilize hedging transactions at any time or from time to time.
<PAGE>
The Fund may also seek to increase its current return by purchasing and
selling foreign currency on a spot basis, and by purchasing and selling options
on foreign currencies and on foreign currency futures contracts, and by
purchasing and selling foreign currency forward contracts.
CURRENCY FORWARD AND FUTURES CONTRACTS. A forward foreign currency
exchange contract involves 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 as agreed by the parties, at a price set at the time of the contract.
In the case of a cancelable forward contract, the holder has the unilateral
right to cancel the contract at maturity by paying a specified fee. The
contracts are traded in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for trades. A foreign currency futures contract is a standardized contract
for the future delivery of a specified amount of a foreign currency at a future
date at a price set at the time of the contract. Foreign currency futures
contracts traded in the United States are designed by and traded on exchanges
regulated by the CFTC, such as the New York Mercantile Exchange.
Forward foreign currency exchange contracts differ from foreign
currency futures contracts in certain respects. For example, the maturity date
of a forward contract may be any fixed number of days from the date of the
contract agreed upon by the parties, rather than a predetermined date in a given
month. Forward contracts may be in any amounts agreed upon by the parties rather
than predetermined amounts. Also, forward foreign exchange contracts are traded
directly between currency traders so that no intermediary is required. A forward
contract generally requires no margin or other deposit.
At the maturity of a forward or futures contract, the Fund may either
accept or make delivery of the currency specified in the contract, or at or
prior to maturity enter into a closing transaction involving the purchase or
sale of an offsetting contract. Closing transactions with respect to forward
contracts are usually effected with the currency trader who is a party to the
original forward contract. Closing transactions with respect to futures
contracts are effected on a commodities exchange; a clearing corporation
associated with the exchange assumes responsibility for closing out such
contracts.
Positions in foreign currency futures contracts and related options may
be closed out only on an exchange or board of trade which provides a secondary
market in such contracts or options. Although the Fund will normally purchase or
sell foreign currency futures contracts and related options only on exchanges or
boards of trade where there appears to be an active secondary market, there is
no assurance that a secondary market on an exchange or board of trade will exist
for any particular contract or option or at any particular time. In such event,
it may not be possible to close a futures or related option position and, in the
event of adverse price movements, the Fund would continue to be required to make
daily cash payments of variation margin on its futures positions.
FOREIGN CURRENCY OPTIONS. Options on foreign currencies operate
similarly to options on securities, and are traded primarily in the
over-the-counter market, although options on foreign currencies have recently
been listed on several exchanges. Such options will be purchased or written only
when Schroder believes that a liquid secondary market exists for such options.
There can be no assurance that a liquid secondary market will exist for a
particular option at any specific time. Options on foreign currencies are
affected by all of those factors which influence exchange rates and investments
generally.
<PAGE>
The value of a foreign currency option is dependent upon the value of
the foreign currency and the U.S. dollar, and may have no relationship to the
investment merits of a foreign security. 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 and there is no regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely basis.
Available quotation information is generally representative of very large
transactions in the interbank market and thus may not reflect relatively smaller
transactions (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 cannot be reflected in the U.S.
options markets.
FOREIGN CURRENCY CONVERSION. Although foreign exchange dealers do not
charge a fee for currency conversion, they do realize a profit based on the
difference (the "spread") between prices at which they buy and sell various
currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer.
ZERO-COUPON SECURITIES
Zero-coupon securities in which the Fund may invest are debt
obligations which are generally issued at a discount and payable in full at
maturity, and which do not provide for current payments of interest prior to
maturity. Zero-coupon securities usually trade at a deep discount from their
face or par value and are subject to greater market value fluctuations from
changing interest rates than debt obligations of comparable maturities which
make current distributions of interest. As a result, the net asset value of
shares of the Fund investing in zero-coupon securities may fluctuate over a
greater range than shares of other Funds of the Trust and other mutual funds
investing in securities making current distributions of interest and having
similar maturities.
Zero-coupon securities may include U.S. Treasury bills issued directly
by the U.S. Treasury or other short-term debt obligations, and longer-term bonds
or notes and their unmatured interest coupons which have been separated by their
holder, typically a custodian bank or investment brokerage firm. A number of
securities firms and banks have stripped the interest coupons from the
underlying principal (the "corpus") of U.S. Treasury securities and resold them
in custodial receipt programs with a number of different names, including
Treasury Income Growth Receipts ("TIGRS") and Certificates of Accrual on
Treasuries ("CATS"). CATS and TIGRS are not considered U.S. government
securities. The underlying U.S. Treasury bonds and notes themselves are held in
book-entry form at the Federal Reserve Bank or, in the case of bearer securities
(i.e., unregistered securities which are owned ostensibly by the bearer or
holder thereof), in trust on behalf of the owners thereof.
In addition, the Treasury has facilitated transfers of ownership of
zero-coupon securities by accounting separately for the beneficial ownership of
particular interest coupons and corpus payments on Treasury securities through
<PAGE>
the Federal Reserve book-entry record-keeping system. The Federal Reserve
program as established by the Treasury Department is known as "STRIPS" or
"Separate Trading of Registered Interest and Principal of Securities." Under the
STRIPS program, the Fund will be able to have its beneficial ownership of U.S.
Treasury zero-coupon securities recorded directly in the book-entry
record-keeping system in lieu of having to hold certificates or other evidences
of ownership of the underlying U.S. Treasury securities.
When debt obligations have been stripped of their unmatured interest
coupons by the holder, the stripped coupons are sold separately. The principal
or corpus is sold at a deep discount because the buyer receives only the right
to receive a future fixed payment on the security and does not receive any
rights to periodic cash interest payments. Once stripped or separated, the
corpus and coupons may be sold separately. Typically, the coupons are sold
separately or grouped with other coupons with like maturity dates and sold in
such bundled form. Purchasers of stripped obligations acquire, in effect,
discount obligations that are economically identical to the zero-coupon
securities issued directly by the obligor.
TEMPORARY DEFENSIVE STRATEGIES
As described in the Prospectuses, Schroder may at times judge that
conditions in the securities markets make pursuing the Fund's basic investment
strategies inconsistent with the best interests of its shareholders and may
temporarily use alternate investment strategies primarily designed to reduce
fluctuations in the value of the Fund's assets. In implementing these
"defensive" strategies, the Fund would invest in high-quality debt securities,
cash, or money market instruments to any extent Schroder considers consistent
with such defensive strategies. It is impossible to predict when, or for how
long, the Fund will use these alternate strategies.
[SIGNIFICANT PORTFOLIO TURNOVER VARIATIONS
Note: In accordance with Form N-1A, explain any significant variation
in the Fund's portfolio turnover rates over the two most recently completed
fiscal years, or any anticipated variation in the portfolio turnover rate from
that reported in the last fiscal year. If there is nothing to report, eliminate
this sub-section.] [FORUM TO CONFIRM]
INVESTMENT RESTRICTIONS
The Trust has adopted the following fundamental and non-fundamental
investment restrictions for each Fund. The Fund's fundamental investment
restrictions may not be changed without the affirmative vote of a "majority of
the outstanding voting securities" of the Fund, which is defined in the 1940 Act
to mean the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares and (2) 67% or more of the shares present at a meeting if
more than 50% of the outstanding shares are represented at the meeting in person
or by proxy. The non-fundamental investment policies described in the
Prospectuses and this SAI are not fundamental and may be changed by the
Trustees, without shareholder approval. As a matter of policy, the Trustees
would not materially change the Fund's investment objective without shareholder
approval.
<PAGE>
THE PORTFOLIO IN WHICH SCHRODER EMERGING MARKETS FUND INSTITUTIONAL
PORTFOLIO INVESTS HAS SUBSTANTIALLY THE SAME INVESTMENT RESTRICTIONS AS THE
FUND. IN REVIEWING THE DESCRIPTION OF THE FUND'S INVESTMENT RESTRICTIONS BELOW,
YOU SHOULD ASSUME THAT THE INVESTMENT RESTRICTIONS OF THE PORTFOLIO ARE THE SAME
IN ALL MATERIAL RESPECTS AS THOSE OF THE FUND.
The Fund will not:
1. Underwrite securities of other companies (except insofar as the Fund
might be deemed to be an underwriter in the resale of any securities
held in its portfolio);
2. Invest in commodities or commodity contracts (other than hedging
instruments, which it may use as permitted by any of its other
fundamental policies, whether or not any such hedging instrument is
considered to be a commodity or a commodity contract);
3. Purchase securities on margin; however, the Fund may make margin
deposits in connection with any hedging instruments which it may use as
permitted by any of its other fundamental policies;
4. Purchase or write puts or calls except as permitted by any of its
other fundamental policies;
5. Lend money except in connection with the acquisition of debt securities
that the Fund's investment policies and restrictions permit it to
purchase. The Fund may make loans of portfolio securities and enter
into repurchase agreements;
6. As a non-fundamental policy, invest in or hold securities of any issuer
if officers or Trustees of the Trust or Schroder individually owning
more than 0.5% of the securities of such issuer together own more than
5% of the securities of such issuer;
7. 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;
8. Make short sales of securities;
9. 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);
10. Invest in real estate or in interests in real estate (but may purchase
readily marketable securities of companies holding real estate or
interests therein);
11. As a non-fundamental policy, the Fund will not invest more than 15% of
its assets in securities determined by Schroder to be illiquid. Certain
securities that are restricted as to resale may nonetheless be resold
by the Fund in accordance with Rule 144A under the Securities Act of
1933, as amended. Such securities may be determined by Schroder to be
liquid for purposes of compliance with the limitation on the Fund's
investment in illiquid securities.
<PAGE>
-------------------
All percentage limitations on investments (other than limitations on
borrowing and illiquid securities) will apply at the time of investment and
shall not be considered violated unless an excess or deficiency occurs or exists
immediately after and as a result of such investment.
TRUSTEES AND OFFICERS
The Trustees of the Trust are responsible for the general oversight of
the Trust's business. Subject to such policies as the Trustees may determine,
Schroder furnishes a continuing investment program for each Fund and makes
investment decisions on its behalf. Subject to the control of the Trustees,
Schroder also manages the Fund's other affairs and business.
The Trustees and executive officers of the Trust and their principal
occupations during the last five years are set forth below.
David N. Dinkins, Trustee. 71. 787 Seventh Avenue, New York, New York.
Trustee, Schroder Capital Funds, Schroder Capital Funds II, and Schroder Series
Trust. Professor, Columbia University School of International and Public
Affairs. Director, American Stock Exchange, Carver Federal Savings Bank,
Transderm Laboratory Corporation, and The Cosmetics Center, Inc. Formerly,
Mayor, City of New York.
John I. Howell, Trustee. 82. 787 Seventh Avenue, New York, New York.
Trustee, Schroder Capital Funds, Schroder Capital Funds II, Schroder Series
Trust, and Schroder Series Trust II. Director, American International Life
Assurance Company of New York. Private consultant since 1987.
Peter S. Knight, Trustee. 48. 787 Seventh Avenue, New York, New York.
Trustee, Schroder Capital Funds, Schroder Capital Funds II, and Schroder Series
Trust. Partner, Wunder, Knight, Levine, Thelen & Forscey. Director, Comsat
Corp., Medicis Pharmaceutical Corp., and Whitman Education Group, Inc. Formerly,
Campaign Manager, Clinton/Gore '96.
Peter E. Guernsey, Trustee. 77. 787 Seventh Avenue, New York, New York.
Trustee, Schroder Capital Funds, Schroder Capital Funds II, Schroder Series
Trust, and Schroder Series Trust II. Formerly, Senior Vice President, Marsh &
McLennan, Inc.
(*) Sharon L. Haugh, Trustee. 53. 787 Seventh Avenue, New York, New York.
Chairman, Schroder Capital Management Inc. Executive Vice President and
Executive Director, Schroder Capital Management International Inc. Chairman and
Director, Schroder Fund Advisors Inc. Trustee, Schroder Capital Funds, Schroder
Capital Funds II, and Schroder Series Trust.
William L. Means, Trustee. 59. 787 Seventh Avenue, New York, New York.
Trustee, Schroder Series Trust II. Formerly, Chief Investment Officer, Alaska
Permanent Fund Corporation.
<PAGE>
Clarence F. Michalis, Trustee. 77. 787 Seventh Avenue, New York, New York.
Trustee, Schroder Capital Funds, Schroder Capital Funds II, and Schroder Series
Trust. Chairman of the Board of Directors, Josiah Macy, Jr. Foundation.
Hermann C. Schwab, Trustee. 79. 787 Seventh Avenue, New York, New York.
Trustee, Schroder Capital Funds, Schroder Capital Funds II, and Schroder Series
Trust. Trustee, St. Luke's/Roosevelt Hospital Center. Formerly, consultant to
Schroder Capital Management International Inc.
(*) Mark J. Smith, President and Trustee of the Trust. 36. 787 Seventh
Avenue, New York, New York. Director and Senior Vice President, Schroder Capital
Management International Limited and Schroder Capital Management International
Inc. Director, Schroder Investment Management Ltd., Schroder Fund Advisors Inc.,
and Schroder Japanese Warrant Fund Ltd. Trustee, Schroder Capital Funds,
Schroder Capital Funds II, and Schroder Series Trust. Vice President, Schroder
Series Trust II.
Mark Astley, Vice President of the Trust. 34. 787 Seventh Avenue, New York,
New York. First Vice President of Schroder Capital Management International Inc.
Formerly, employed by various affiliates of Schroder Capital Management
International Inc. in various positions in the investment research and portfolio
management areas since 1987.
Robert G. Davy, Vice President of the Trust. 37. 787 Seventh Avenue, New
York, New York. Director of Schroder Capital Management International Inc. and
Schroder Capital Management International Ltd. since 1994; First Vice President
of Schroder Capital Management International Inc. since July 1992. Formerly,
employed by various affiliates of Schroder Capital Management International Inc.
in various positions in the investment research and portfolio management areas
since 1986.
Margaret H. Douglas-Hamilton, Vice President of the Trust. 57. 787 Seventh
Avenue, New York, New York. Director and Secretary of Schroder Capital
Management Inc.
Richard R. Foulkes, Vice President of the Trust. 53. 787 Seventh Avenue,
New York, New York. Deputy Chairman of Schroder Capital Management International
Inc. since October 1995; Director and Executive Vice President of Schroder
Capital Management International Ltd. since 1989.
John Y. Keffer, Vice President of the Trust. 56. Two Portland Square,
Portland, Maine. President of Forum Financial Corp., the Fund's transfer and
dividend disbursing agent and other affiliated entities including Forum
Financial Services, Inc., Forum Administrative Services, LLC, and Forum
Advisors, Inc.
______________________
(*) Trustee who is an "interested person" (as defined in the 1940 Act) of the
Trust, Schroder, or Schroder Fund Advisors Inc.
<PAGE>
Michael Perelstein, Vice President of the Trust. 43. 787 Seventh Avenue,
New York, New York. Director since May 1997 and Senior Vice President of
Schroder Capital Management International Inc. since January 1997. Formerly,
Managing Director of MacKay - Shields Financial Corp.
Catherine A. Mazza, Vice President of the Trust. 39. 787 Seventh Avenue,
New York, New York. First Vice President, Schroder Capital Management
International Inc. and Schroder Capital Management Inc. President, Schroder Fund
Advisors Inc. Vice President, Schroder Capital Funds, Schroder Capital Funds II,
and Schroder Series Trust. Formerly, Vice President, Alliance Capital Management
L.P.
Alexandra Poe, Secretary and Vice President of the Trust. 38. 787 Seventh
Avenue, New York, New York. Vice President, Schroder Capital Management
International Inc. Senior Vice President, Secretary, and General Counsel,
Schroder Fund Advisors Inc. Vice President and Secretary, Schroder Capital
Funds, Schroder Capital Funds II, and Schroder Series Trust. Assistant
Secretary, Schroder Series Trust II. Formerly, Attorney, Gordon, Altman,
Butowsky, Weitzen, Shalov & Wein; Vice President and Counsel, Citibank, N.A.
Jane E. Lucas, Vice President of the Trust. 38. 787 Seventh Avenue, New
York, New York. Director, Schroder Capital Management Inc. Director and Senior
Vice President, Schroder Capital Management International Inc. Assistant
Director, Schroder Investment Management Ltd.
Fergal Cassidy, Treasurer and Principal Financial and Accounting Officer of
the Trust. 29. 787 Seventh Avenue, New York, New York. Vice President and
Treasurer, Schroder Capital Management Inc. Vice President and Comptroller,
Schroder Capital Management International Inc. Treasurer and Chief Financial
Officer, Schroder Fund Advisors Inc. Assistant Treasurer, Schroder Series Trust.
Formerly, Senior Accountant, Concurrency Management Corp.
Alan Mandel, Assistant Treasurer of the Trust. 41. 787 Seventh Avenue, New
York, New York. First Vice President of Schroder Capital Management
International Inc. since September 1998. Formerly, Director of Mutual Fund
Administration for Salomon Brothers Asset Management; Chief Financial Officer
and Vice President of Mutual Capital Management.
Carin Muhlbaum, Assistant Secretary of the Trust. 36. Vice President of
Schroder Capital Management International Inc. since 1998. Formerly, an
investment management attorney with Seward & Kissel and prior thereto, with
Gordon Altman Butowsky Weitzen Shalov & Wein.
Nicholas Rossi, Assistant Secretary of the Trust. 35. 787 Seventh Avenue,
New York, New York. Associate of Schroder Capital Management International Inc.
since October 1997 and Assistant Vice President of Schroder Fund Advisors Inc.
since March 1998. Formerly, Mutual Fund Specialist, Wilkie Farr & Gallagher;
Fund Administrator, Furman Selz LLC since 1992.
Thomas G. Sheehan, Assistant Treasurer and Assistant Secretary of the
Trust. 44. Two Portland Square, Portland, Maine. Relationship Manager and
Counsel, Forum Financial Services, Inc. since 1993. Formerly, Special Counsel,
U.S. Securities and Exchange Commission, Division of Investment Management,
Washington, D.C.
<PAGE>
John A. Troiano, Vice President of the Trust. 38. 787 Seventh Avenue, New
York, New York. Director of Schroder Capital Management Inc. since April 1997;
Chief Executive Officer, since July 1, 1997, of Schroder Capital Management
International Inc. and Managing Director and Senior Vice President of Schroder
Capital Management International Inc. since October 1995. Formerly, employed by
various affiliates of Schroder Capital Management International Inc. in various
positions in the investment research and portfolio management areas since 1981.
Cheryl O. Tumlin, Assistant Treasurer and Assistant Secretary of the Trust.
32. Two Portland Square, Portland, Maine. Assistant Counsel, Forum
Administrative Services, LLC since July 1996. Formerly, attorney with the U.S.
Securities and Exchange Commission, Division of Market Regulation since 1995 and
prior thereto, attorney with Robinson Silverman Pearce Aronsohn & Berman since
1991.
Ira L. Unschuld, Vice President of the Trust. 33. 787 Seventh Avenue, New
York, New York. Group Vice President of Schroder Capital Management
International Inc. since April 1998 and an Associate from July 1990 to April
1993.
Except as otherwise noted, the principal occupations of the Trustees and
officers for the last five years have been with the employers shown above,
although in some cases they have held different positions with such employers or
their affiliates.
TRUSTEE COMPENSATION
Trustees who are not "interested persons" (as defined in the 1940 Act)
of the Trust, Schroder, or Schroder Fund Advisors Inc. receive an annual
retainer of $11,000 for their services as Trustees of all open-end investment
companies distributed by Schroder Fund Advisors Inc., and $1,250 per meeting
attended in person or $500 per meeting attended by telephone. Members of an
Audit Committee for one or more of such investment companies receive an
additional $1,000 per year. Payment of the annual retainer is allocated among
the various investment companies based on their relative net assets. Payment of
meeting fees is allocated only among those investment companies to which the
meeting relates.
The following table sets forth information regarding compensation paid
for the fiscal year ended October 31, 1998 to the disinterested Trustees.
<PAGE>
COMPENSATION TABLE
- --------------------------------------------------------------------------------
(2) (3)
AGGREGATE TOTAL COMPENSATION
(1) COMPENSATION FROM TRUST AND
FROM TRUST FUND COMPLEX PAID TO
NAME OF TRUSTEES*
TRUSTEE
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
David N. Dinkins** $3,565 $13,000
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Peter E. Guernsey $3,907 $14,250
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
John I. Howell $3,907 $14,250
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Peter S. Knight** $3,907 $14,250
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
William L. Means*** $0 $0
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Clarence F. Michalis $3,907 $14,250
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Hermann C. Schwab $3,907 $14,250
- -------------------------------------------------------------------------
* The Total Compensation listed in column (3) for each
Trustee includes compensation for services as a Trustee of
Schroder Capital Funds ("SCF"), Schroder Capital Funds II
("SCF II"), Schroder Series Trust ("SST"), and Schroder
Series Trust II (formerly Schroder Asian Growth Fund, Inc.,
"SST II"). The Trust, SCF, SCF II, SST, and SST II are
considered part of the same "Fund Complex" for these
purposes. ** Messrs. Dinkins and Knight were elected
Trustees of the Trust on December 8, 1997. *** Mr. Means
was elected Trustee of the Trust on December 15, 1998.
As of October 31, 1998, the Trustees of the Trust as a group owned less
than 1% of the outstanding shares of each Fund. Mr. Ira Unschuld, principal
advisor to and vice president of Schroder Micro Cap Fund, held 7.55% of the
Investor Shares of that Fund.
The Trust's Trust Instrument provides that the Trust will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with litigation in which they may be involved because of their offices with the
Trust, except if it is determined in the manner specified in the Trust
Instrument that they have not acted in good faith in the reasonable belief that
their actions were in the best interests of the Trust or that such
indemnification would relieve any officer or Trustee of any liability to the
Trust or its Shareholders by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of his or her duties. The Trust, at its
expense, provides liability insurance for the benefit of its Trustees and
officers.
SCHRODER AND ITS AFFILIATES
Schroder has served as the investment adviser for the Fund and the
Portfolio since their inception. Schroder is a wholly-owned subsidiary of
Schroder U.S. Holdings Inc., which engages through its subsidiary firms in the
investment banking, asset management, and securities businesses. Affiliates of
Schroder U.S. Holdings Inc. (or their predecessors) have been investment
managers since 1927. Schroder itself has been an investment manager since 1962,
and served as investment manager for approximately $___ billion as of December
31, 1998. Schroder U.S. Holdings Inc. is an indirect, wholly-owned U.S.
subsidiary of Schroders plc, a publicly owned holding company organized under
the laws of England. Schroders plc and its affiliates engage in international
<PAGE>
merchant banking and investment management businesses, and as of December 31,
1998, had under management assets of approximately $____ billion.
Schroder Fund Advisors Inc., an affiliate of Schroder that serves as the
Trust's distributor, is a wholly-owned subsidiary of Schroder Capital Management
International Inc. Schroder Capital Management International Inc. is also a
wholly-owned subsidiary of Schroder U.S. Holdings Inc.
INVESTMENT ADVISORY AGREEMENT
Under an Investment Advisory Agreement between the Trust and Schroder
(the "Advisory Agreement"), Schroder, at its expense, provides the Fund with
investment advisory services and advises and assists the officers of the Trust
in taking such steps as are necessary or appropriate to carry out the decisions
of its Trustees regarding the conduct of business of the Trust and each Fund.
The fees to be paid under the Advisory Agreement are set forth in the
Prospectuses. As long as the Fund invests all of its assets in the Portfolio (or
another investment company), Schroder is not entitled to receive any advisory
fees pursuant to the Advisory Agreement. In the event that the Fund did not
invest all of its assets in the Portfolio or another investment company,
Schroder would be entitled to receive advisory fees monthly at the annual rate
of 1.00% of the Fund's average daily net assets.
Under the Advisory Agreement, Schroder is required to regularly provide
the Fund with investment research, advice, and supervision and furnishes
continuously investment programs consistent with the investment objectives and
policies of the various Funds, and determines, for the various Funds, what
securities shall be purchased, what securities shall be held or sold, and what
portion of the Fund's assets shall be held uninvested, subject always to the
provisions of the Trust's Trust Instrument and By-laws, and of the 1940 Act, and
to the Fund's investment objectives, policies, and restrictions, and subject
further to such policies and instructions as the Trustees may from time to time
establish.
Schroder makes available to the Trust, without expense to the Trust,
the services of such of its directors, officers, and employees as may duly be
elected Trustees or officers of the Trust, subject to their individual consent
to serve and to any limitations imposed by law. Schroder pays the compensation
and expenses of officers and executive employees of the Trust. Schroder also
provides investment advisory research and statistical facilities and all
clerical services relating to such research, statistical, and investment work.
Schroder pays the Trust's office rent.
Under the Advisory Agreement, the Trust is responsible for all its
other expenses, including clerical salaries not related to investment
activities; fees and expenses incurred in connection with membership in
investment company organizations; brokers' commissions; payment for portfolio
pricing services to a pricing agent, if any; legal expenses; auditing expenses;
accounting expenses; taxes and governmental fees; fees and expenses of the
transfer agent and investor servicing agent of the Trust; the cost of preparing
share certificates or any other expenses, including clerical expenses, incurred
in connection with the issue, sale, underwriting, redemption, or repurchase of
shares; the expenses of and fees for registering or qualifying securities for
sale; the fees and expenses of the Trustees of the Trust who are not affiliated
with Schroder; the cost of preparing and distributing reports and notices to
shareholders; public and investor relations expenses; and fees and disbursements
of custodians of the Fund's assets. The Trust is also responsible for its
<PAGE>
expenses incurred in connection with litigation, proceedings, and claims and the
legal obligation it may have to indemnify its officers and Trustees with respect
thereto.
Schroder's compensation under the Advisory Agreement may be reduced in
any year if the Fund's expenses exceed the limits on investment company expenses
imposed by any statute or regulatory authority of any jurisdiction in which
shares of the Fund are qualified for offer or sale.
The Advisory Agreement may be terminated without penalty by vote of the
Trustees, by the shareholders of the Fund, or by Schroder on 60 days' written
notice. The Advisory Agreement also terminates without payment of any penalty in
the event of its assignment. In addition, the Advisory Agreement may be amended
only by a vote of the shareholders of the Fund, and the Advisory Agreement
provides that it will continue in effect from year to year only so long as such
continuance is approved at least annually with respect to the Fund by vote of
either the Trustees or the shareholders of the Fund, and, in either case, by a
majority of the Trustees who are not "interested persons" of Schroder. In each
of the foregoing cases, the vote of the shareholders is the affirmative vote of
a "majority of the outstanding voting securities" as defined in the Investment
Company Act of 1940.
Forum Administrative Services, LLC ("FAdS") and Forum Shareholder
Services, LLC ("Forum") provide certain accounting, transfer agency, and other
services to the Trust. The Trust compensates FAdS and Forum on a basis approved
by the Trustees.
THE PORTFOLIO
The Fund currently invests all of its assets in the Portfolio, which
has the same investment objective and substantially the same investment policies
as the Fund. As long as the Fund remains completely invested in the Portfolio
(or any other investment company), Schroder is not entitled to receive any
investment advisory fee with respect to the Fund. The Fund may withdraw its
investment from the Portfolio at any time if the Trust's Board of Trustees
determines that it is in the best interests of the Fund and its shareholders to
do so. The Trust has retained Schroder as investment adviser to manage the
Fund's assets in the event that the Fund withdraws its investment from its
related Portfolio.
Schroder is the investment advisor to the related Portfolio pursuant to
an investment advisory agreement (the "Portfolio Advisory Agreement") between
Schroder and Schroder Capital Funds, on behalf of the Portfolio. Schroder
receives an investment advisory fee with respect to the related Portfolio. The
Portfolio Advisory Agreement is the same in all material respects as the
Investment Advisory Agreement between the Trust on behalf of the Fund and
Schroder. As investment adviser to the Portfolio, Schroder is entitled to
monthly advisory fees at the annual rate of 1.00% of the Portfolio's daily net
assets. The Fund bears a proportionate part of the management fees paid by the
Portfolio (based on the percentage of the Portfolio's assets attributable to the
Fund).
RECENT MANAGEMENT FEES. Of the total management fees paid by the
Portfolio to Schroders, the portion borne indirectly by the Fund during the
three most recent fiscal years is set forth in the following table. The fees
listed in the table reflect reductions pursuant to expense limitations in effect
during such periods.
<PAGE>
<TABLE>
<S> <C> <C> <C>
- ----------------------- ---------------------------- --------------------------- --------
Management Fees Paid for Management Fees Paid for Management Fees Paid for
Fiscal Year Ended 10/31/98 Fiscal Year Ended 10/31/97 Fiscal Year Ended 10/31/96
- ------------------------------ ---------------------------- ---------------------------
- ------------------------------ ---------------------------- ---------------------------
$2,389,875 $1,778,646 $1,115,324
- ------------------------------ ---------------------------- ---------------------------
</TABLE>
FEE WAIVERS
Schroder voluntarily waived its fees in the following amounts during
the three most recent fiscal years pursuant to voluntary expense limitations
and/or waivers in effect during such periods. The portion of the amounts waived
with respect to the management fees indirectly borne by the Fund are as follows:
- ------------------------------
Fees Waived During Fiscal
Year Ended 5/31/98
- ------------------------------
- ------------------------------
$673,304
- ------------------------------
ADMINISTRATIVE SERVICES
On behalf of the Fund, the Trust has entered into an administration
agreement with Schroder Fund Advisors Inc., under which Schroder Fund Advisors
Inc. provides management and administrative services necessary for the operation
of the Fund, including: (1) preparation of shareholder reports and
communications; (2) regulatory compliance, such as reports to and filings with
the SEC and state securities commissions; and (3) general supervision of the
operation of the Fund, including coordination of the services performed by its
investment adviser, transfer agent, custodian, independent accountants, legal
counsel and others. Schroder Fund Advisors Inc. is a wholly owned subsidiary of
Schroder and is a registered broker-dealer organized to act as administrator and
distributor of mutual funds.
For providing administrative services Schroder Fund Advisors Inc. is
entitled to receive a monthly fee at the annual rate of [___]% of the Fund's
average daily net assets. The administration agreement is terminable with
respect to the Fund without penalty, at any time, by the Trustees upon 60 days'
written notice to Schroder Fund Advisors Inc. or by Schroder Fund Advisors Inc.
upon 60 days' written notice to the Trust.
The Trust has entered into a subadministration agreement with FAdS.
Under its agreement, FAdS assists Schroder Fund Advisors Inc. with certain of
its responsibilities under the administration agreement, including shareholder
reporting and regulatory compliance. For providing its services, FAdS is
entitled to receive a monthly fee from the Fund at the annual rate of [___]% of
the Fund's average daily net assets. The subadministration agreement is
terminable with respect to the Fund without penalty, at any time, by the Trust
upon 60 days' written notice to FAdS or by FAdS upon 60 days' written notice to
the Trust.
Schroder Fund Advisors Inc. has voluntarily waived a portion of its
advisory fee and has assumed certain expenses of the Fund so that the Fund's
total expenses, including indirect expenses borne by the Fund as a result of
investing in the Portfolio, would not exceed 1.45% (of the respective share's
average daily net assets) on Investor Shares and 1.70% (of the respective
share's average daily net assets) on Advisor Shares. The expense limitations
cannot be modified or withdrawn except by a majority vote of the Trustees of the
Trust who are not affiliated persons ( as defined in the Act ) of the Trust.
During the three most recent fiscal years, the Fund paid the following
fees to Schroder Fund Advisors Inc. and FAdS pursuant to the administration
agreement and the subadministration agreement. The fees listed in the following
table reflect reductions pursuant to fee waivers and expense limitations in
effect during such periods.
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- ---------------------------
Management Fees Paid for Management Fees Paid for Management Fees Paid for
Fiscal Year Ended 10/31/98 Fiscal Year Ended 10/31/97 Fiscal Year Ended 10/31/96
- ------------------------------ ---------------------------- ---------------------------
- ------------------------------ ---------------------------- ---------------------------
Schroder Fund Advisors Inc. Schroder Fund Advisors Schroder Fund Advisors
$202,061 Inc. $203,062 Inc. $50,434
FAdS $327,069 FAdS $320,055 FAdS $175,124
- ------------------------------ ---------------------------- ---------------------------
</TABLE>
DISTRIBUTOR
Pursuant to a Distribution Agreement with the Trust, Schroder Fund
Advisors Inc. (the "Distributor"), 787 Seventh Avenue, New York, New York 10019,
serves as the distributor for the Trust's continually offered shares. The
Distributor pays all of its own expenses in performing its obligations under the
Distribution Agreement. The Distributor is not obligated to sell any specific
amount of shares of the Fund. Please see "Administrative Services" for ownership
information regarding the Distributor.
DISTRIBUTION PLAN FOR ADVISOR SHARES. The Fund has adopted a
Distribution Plan under Rule 12b-1 of the Investment Company Act of 1940
pursuant to which the Fund may pay the Distributor compensation in an amount
limited in any fiscal year to the annual rate of 0.25% of the Fund's average
daily net assets attributable to Advisor Shares. The Trustees have not
authorized any payments under the Distribution Plan, although they may at any
time authorize payments at an annual rate of up to 0.50% of the Fund's average
daily net assets attributable to Advisor Shares. The Distribution Plan also
relates to payments made pursuant to the Trust's Shareholder Servicing Plan for
Advisor Shares, to the extent such payments may be deemed to be primarily
intended to result in the sale of the Fund's Advisor Shares. See "Shareholder
Servicing Plan for Advisor Shares" below.
The various costs and expenses that may be paid or reimbursed under the
Distribution Plan include advertising expenses, costs of printing prospectuses
and other materials to be given or sent to prospective investors, expenses of
sales employees or agents of the Distributor, including salary, commissions,
travel and related expenses in connection with the distribution of Advisor
Shares, payments to broker-dealers who advise shareholders regarding the
purchase, sale, or retention of Advisor Shares, and payments to banks, trust
companies, broker-dealers (other than the Distributor) or other financial
organizations.
<PAGE>
The Distribution Plan may not be amended to increase materially the
amount of distribution expenses permitted thereunder without the approval of a
majority of the outstanding Advisor Shares of the Fund. Any other material
amendment to a Distribution Plan must be approved both by a majority of the
Trustees and a majority of those Trustees ("Qualified 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 Distribution Plan
or in any related agreement, by vote cast in person at a meeting called for the
purpose. The Distribution Plan will continue in effect for successive one-year
periods provided each such continuance is approved by a majority of the Trustees
and the Qualified Trustees by vote cast in person at a meeting called for the
purpose. The Distribution Plan may be terminated at any time by vote of a
majority of the Qualified Trustees or by vote of a majority of the Fund's
outstanding Advisor Shares.
SHAREHOLDER SERVICING PLAN FOR ADVISOR SHARES. The Fund has also adopted
a Shareholder Servicing Plan (the "Service Plan") for its Advisor Shares. Under
the Service Plan, the Fund pays fees to the Distributor at an annual rate of up
to 0.25% of the average daily net assets of the Fund attributable to its Advisor
Shares. The Distributor may enter into shareholder service agreements with
Service Organizations pursuant to which the Service Organizations provide
administrative support services to their customers who are Fund shareholders.
In return for providing these support services, a Service Organization
may receive payments from the Distributor at a rate not exceeding 0.25% of the
average daily net assets of the Advisor Shares of the Fund for which the Service
Organization is the Service Organization of record. These administrative
services may include, but are not limited to, the following functions:
establishing and maintaining accounts and records relating to clients of the
Service Organization; answering shareholder inquiries regarding the manner in
which purchases, exchanges, and redemptions of Advisor Shares of the Trust may
be effected and other matters pertaining to the Trust's services; providing
necessary personnel and facilities to establish and maintain shareholder
accounts and records; assisting shareholders in arranging for processing
purchase, exchange, and redemption transactions; arranging for the wiring of
funds; guaranteeing shareholder signatures in connection with redemption orders
and transfers and changes in shareholder-designated accounts; integrating
periodic statements with other customer transactions; and providing such other
related services as the shareholder may request. Some Service Organizations may
impose additional conditions or fees, such as requiring clients to invest more
than the minimum amounts required by the Trust for initial or subsequent
investments or charging a direct fee for services. Such fees would be in
addition to any amounts which might be paid to the Service Organization by the
Distributor.
Please contact your Service Organization for details.
The following table shows the aggregate amounts paid by the Trust to the
Distributor under the Service Plan during the three most recent fiscal years.
All of such amounts were, in turn, repaid by the Distributor to Service
Organizations. [PLEASE CONFIRM]
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- ---------------------------
Fees Paid Pursuant to Fees Paid Pursuant to Fees Paid Pursuant to
Service Plan During Fiscal Service Plan During Fiscal Service Plan During
Year Ended 10/31/98 Year Ended 10/31/97 Fiscal Year Ended 10/31/96
- ------------------------------ ---------------------------- ---------------------------
- ------------------------------ ---------------------------- ---------------------------
$ $ $
- ------------------------------ ---------------------------- ---------------------------
</TABLE>
<PAGE>
FUND ACCOUNTING
Forum Accounting Services, LLC ("Forum Accounting"), an affiliate of
Forum, performs fund accounting services for the Fund pursuant to an agreement
with the Trust. Under the Accounting Agreement, Forum Accounting prepares and
maintains the books and records of the Fund that are required to be maintained
under the 1940 Act, calculates the net asset value per share of the Fund,
calculates dividends and capital gain distributions, and prepares periodic
reports to shareholders and the SEC.
For its services to the Fund, Forum Accounting is entitled to receive
from the Trust a fee of $36,000 per year plus $12,000 per year for each class of
each Fund above one. Forum Accounting is entitled to an additional $24,000 per
year for global and international funds, and 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, and funds that have a monthly turnover rate of 10% or more.
The tables below show the amount of fees paid by the Fund to Forum
Accounting during the three most recent fiscal years (or such shorter time the
Fund has been operational).
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- ---------------------------
Accounting Fees Paid During Accounting Fees Paid Accounting Fees Paid
Fiscal Year Ended 10/31/98 During Fiscal Year Ended During Fiscal Year Ended
10/31/97 10/31/96
- ------------------------------ ---------------------------- ---------------------------
- ------------------------------ ---------------------------- ---------------------------
$84,000 $73,000 $76,488
- ------------------------------ ---------------------------- ---------------------------
</TABLE>
BROKERAGE ALLOCATION AND OTHER PRACTICES
Schroder may place portfolio transactions with broker-dealers which
furnish, without cost, certain research, statistical, and quotation services of
value to Schroder and its affiliates in advising the Trust and other clients,
provided that it shall always seek best price and execution with respect to
transactions. Certain investments may be appropriate for the Trust and for other
clients advised by Schroder. Investment decisions for the Trust and other
clients are made with a view to achieving their respective investment objectives
and after consideration of such factors as their current holdings, availability
of cash for investment, and the size of their investments generally. Frequently,
a particular security may be bought or sold for only one client or in different
amounts and at different times for more than one but less than all clients.
Likewise, a particular security may be bought for one or more clients when one
or more other clients are selling the security. In addition, purchases or sales
of the same security may be made for two or more clients of Schroder on the same
day. In such event, such transactions will be allocated among the clients in a
manner believed by Schroder to be equitable to each. In some cases, this
procedure could have an adverse effect on the price or amount of the securities
purchased or sold by the Trust. Purchase and sale orders for the Trust may be
combined with those of other clients of Schroder in the interest of achieving
the most favorable net results for the Trust.
<PAGE>
BROKERAGE AND RESEARCH SERVICES. Transactions on U.S. stock exchanges
and other agency transactions involve the payment by the Trust of negotiated
brokerage commissions. Such commissions vary among different brokers. Also, a
particular broker may charge different commissions according to such factors as
the difficulty and size of the transaction. Transactions in foreign securities
often involve the payment of fixed brokerage commissions, which are generally
higher than those in the United States, and therefore certain portfolio
transaction costs may be higher than the costs 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 Trust usually includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid by the Trust includes a disclosed, fixed
commission or discount retained by the underwriter or dealer.
Schroder places all orders for the purchase and sale of portfolio
securities and buys and sells securities through a substantial number of brokers
and dealers. In so doing, it uses its best efforts to obtain the best price and
execution available. In seeking the best price and execution, Schroder considers
all factors it deems relevant, including price, the size of the transaction, the
nature of the market for the security, the amount of the commission, the timing
of the transaction (taking into account market prices and trends), the
reputation, experience, and financial stability of the broker-dealer involved,
and the quality of service rendered by the broker-dealer 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, statistical, and quotation services from broker-dealers
that execute portfolio transactions for the clients of such advisers. Consistent
with this practice, Schroder receives research, statistical, and quotation
services from many broker-dealers with which it places the Trust's portfolio
transactions. These services, which in some cases may also be purchased for
cash, include such matters 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
Schroder and its affiliates in advising various of their clients (including the
Trust or the Portfolio), although not all of these services are necessarily
useful and of value in managing the Fund or the Portfolio. The investment
advisory fee paid by the Fund or the Portfolio is not reduced because Schroder
and its affiliates receive such services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934, as
amended, and by the Advisory Agreements and the Portfolio Advisory Agreement,
Schroder may cause the Fund or the Portfolio to pay a broker that provides
brokerage and research services to Schroder an amount of disclosed commission
for effecting a securities transaction for the Fund or the Portfolio in excess
of the commission which another broker would have charged for effecting that
transaction. Schroder's authority to cause the Fund or the Portfolio to pay any
such greater commissions is also subject to such policies as the Trustees (or
the Trustees of Schroder Capital Funds, in the case of the Portfolio) may adopt
from time to time.
To the extent permitted by law, the Fund or the Portfolio may engage in
brokerage transactions with Schroder & Co. Inc. ("Schroder & Co."), an affiliate
of Schroder, to effect securities transactions on the New York Stock Exchange
only or Schroder Securities Limited and its affiliates (collectively, "Schroder
Securities"), affiliates of Schroder, to effect securities transactions on
various foreign securities exchanges on which Schroder Securities has trading
privileges. Consistent with regulations under the 1940 Act, the Fund and the
Portfolio have adopted procedures which are reasonably designed to provide that
any commissions or other remuneration the Fund or the Portfolio pay to Schroder
<PAGE>
& Co. and Schroder Securities do not exceed the usual and customary broker's
commission. In addition, the Fund and the Portfolio will adhere to the rule,
under the Securities Exchange Act of 1934, governing floor trading. This rule
permits the Fund and the Portfolio to effect, but not execute, exchange listed
securities transactions with Schroder & Co. Schroder & Co. pays a portion of the
brokerage commissions it receives from the Fund or a Portfolio to the brokers
executing the transactions. Also, due to securities law limitations, the Fund or
the Portfolio may be required to limit purchases of securities in a public
offering if Schroder & Co. or Schroder Securities or one of their affiliates is
a member of the syndicate for that offering.
Neither the Fund nor the Portfolio has any understanding or arrangement
to direct any specific portion of its brokerage to Schroder & Co. or Schroder
Securities, and neither will direct brokerage to Schroder & Co. or Schroder
Securities in recognition of research services.
The following table shows the aggregate brokerage commissions paid for
the three most recent fiscal years with respect to the Fund that incurred
brokerage costs. The amounts listed represent aggregate brokerage commissions
paid by the Portfolio.
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- ---------------------------
Brokerage Commissions Paid Brokerage Commissions Paid Brokerage Commissions
During Fiscal Year Ended During Fiscal Year Ended Paid During Fiscal Year
10/31/98 10/31/97 Ended 10/31/96
- ------------------------------ ---------------------------- ---------------------------
- ------------------------------ ---------------------------- ---------------------------
$ $1,413,998 $101,087
- ------------------------------ ---------------------------- ---------------------------
</TABLE>
In the fiscal year ended October 31, 1998, Schroder, on behalf of the
Trust, placed agency and underwritten transactions having an approximate
aggregate dollar value of $________, (___% of the Trust's aggregate agency and
underwritten transactions, on which approximately $_______ of commissions were
paid) with brokers and dealers (other than Schroder & Co. and Schroder
Securities) whose research, statistical, and quotation services Schroder
considered to be particularly useful to it and its affiliates. However, many of
such transactions were placed with such brokers and dealers without regard to
the furnishing of such services.
The following table shows the aggregate brokerage commissions paid to
Schroder & Co. and Schroder Securities for the three most recent fiscal years,
as well as the percentage such commissions represented of all transactions on
which the Fund paid brokerage commissions during such fiscal year. The amounts
listed represent aggregate brokerage commissions paid by the Portfolio.
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- ---------------------------
Brokerage Commissions Paid Brokerage Commissions Paid Brokerage Commissions
During Fiscal Year Ended During Fiscal Year Ended Paid During Fiscal Year
10/31/98 10/31/97 Ended 10/31/96
- ------------------------------ ---------------------------- ---------------------------
- ------------------------------ ---------------------------- ---------------------------
Schroder & Co. $0 0% Schroder & Co. $0 0% Schroder & Co. $0 0%
Schroder Securities $ (%) Schroder Securities $ (%) Schroder Securities $ (%)
- ------------------------------ ---------------------------- ---------------------------
</TABLE>
<PAGE>
DETERMINATION OF NET ASSET VALUE
The net asset value per share of each class of shares of each Fund is
determined daily as of the close of trading on the New York Stock Exchange
(normally 4:00 p.m., Eastern Time) on each day the Exchange is open for trading.
Any assets or liabilities initially expressed in terms of foreign 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 New York Stock Exchange
is normally closed on the following national holidays: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving, and Christmas.
The Trustees have established procedures for the valuation of the Fund's
securities, as follows: Equity securities listed or traded on a domestic or
foreign stock exchange are valued at their latest sale prices on such exchange
on that day prior to the time when the assets are valued. In the absence of
sales that day, such securities are valued at the mid-market prices. (Where the
securities are traded on more than one exchange, they are valued on the exchange
that Schroder designates as the primary market.) Unlisted 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. Securities
that do not have readily available market quotations are valued at fair value
pursuant to procedures established by the Trustees. Debt securities having a
maturity of more than 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. 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 discounts.
If any securities held by the Fund are restricted as to resale, their
fair value is generally determined as the amount which the Trust could
reasonably expect to realize from an orderly disposition of such securities over
a reasonable period of time. The valuation procedures applied in any specific
instance are likely to vary from case to case. However, consideration is
generally given to the financial position of the issuer and other fundamental
analytical data relating to the investment and to the nature of the restrictions
on disposition of the securities (including any registration expenses that might
be borne by the Trust in connection with such disposition). In addition,
specific factors are also generally considered, such as the cost of the
investment, the market value of any unrestricted securities of the same class
(both at the time of purchase and at the time of valuation), the size of the
holding, the prices of any recent transactions or offers with respect to such
securities, and any available analysts' reports regarding the issuer.
Generally, trading in certain securities (such as foreign securities) is
substantially completed each day at various times prior to the close of the New
York Stock Exchange. The values of these securities used in determining the net
asset value of the Trust's shares are computed as of such times. Also, because
of the amount of time required to collect and process trading information as to
large numbers of securities issues, the values of certain securities (such as
convertible bonds and U.S. Government Securities) are determined based on market
quotations collected earlier in the day at the latest practicable time prior to
the close of the Exchange. Occasionally, events affecting the value of such
securities may occur between such times and the close of the Exchange which will
not be reflected in the computation of the Trust's net asset value. If events
<PAGE>
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value, in the manner described
above.
The proceeds received by the Fund for each issue or sale of its shares,
and all income, earnings, profits, and proceeds thereof, subject only to the
rights of creditors, will be specifically allocated to the Fund, and constitute
the underlying assets of the Fund. The underlying assets of the Fund will be
segregated on the Trust's books of account, and will be charged with the
liabilities in respect of the Fund and with a share of the general liabilities
of the Trust. The Fund's assets will be further allocated among its constituent
classes of shares on the Trust's books of account. Expenses with respect to any
two or more Funds or classes may be allocated in proportion to the net asset
values of the respective Funds or classes except where allocations of direct
expenses can otherwise be fairly made to a specific Fund or class.
REDEMPTIONS IN KIND
The Trust has agreed to redeem shares of the Fund solely in cash up to
the lesser of $250,000 or 1% of the Fund's net assets during any 90-day period
for any one shareholder. In consideration of the best interests of the remaining
shareholders, the Trust may pay certain redemption proceeds exceeding this
amount in whole or in part by a distribution in kind of securities held by the
Fund in lieu of cash. The Trust does not expect to redeem shares in kind under
normal circumstances. If your shares are redeemed in kind, you should expect to
incur transaction costs upon the disposition of the securities received in the
distribution.
TAXES
The Fund intends to qualify each year and elect to be taxed as a regulated
investment company under Subchapter M of the United States Internal Revenue Code
of 1986, as amended (the "Code").
As a regulated investment company qualifying to have its tax liability
determined under Subchapter M, the Fund will not be subject to federal income
tax on any of its net investment income or net realized capital gains that are
distributed to shareholders.
In order to qualify as a "regulated investment company," the Fund must,
among other things, (a) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, gains from the sale or
other dispositions of stock, securities, or foreign currencies, and other income
(including gains from options, futures, or forward contracts) derived with
respect to its business of investing in such stock, securities, or currencies,
and (b) diversify its holdings so that, at the close of each quarter of its
taxable year, (i) at least 50% of the value of its total assets consists of
cash, cash items, U.S. Government Securities, and other securities limited
generally with respect to any one issuer to not more than 5% of the total assets
of the Fund and not more than 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its assets is invested in the
securities of any issuer (other than U.S. Government Securities).
If the Fund fails to distribute in a calendar year substantially all of
its ordinary income for such year and substantially all of its capital gain net
income for the one-year period ending October 31 (or later if the Fund is
permitted so to elect and so elects), plus any retained amount from the prior
year, that Fund will be subject to a 4% excise tax on the undistributed amounts.
A dividend paid to shareholders by the Fund in January of a year generally is
deemed to have been paid by the Fund on December 31 of the preceding year, if
the dividend was declared and payable to shareholders of record on a date in
October, November, or December of that preceding year. The Fund intends
generally to make distributions sufficient to avoid imposition of the 4% excise
tax. In order to receive the favorable tax treatment accorded regulated
investment companies and their shareholders, moreover, the Fund must in general
distribute with respect to each taxable year at least 90% of the sum of its
taxable net investment income, its net tax-exempt income, and, the excess, if
any, of net short-term capital gains over net long-term capital losses for such
year.
The Fund's distributions will be taxable to you as ordinary income to
the extent derived from the Fund's investment income and net short-term gains
(that is, net gains from capital assets held for no more than one year).
Distributions designated by the Fund as deriving from net gains on capital
assets held for more than one year will be taxable to you as long-term capital
gains (generally subject to a 20% tax rate), regardless of how long you have
held the shares. Distributions will be taxable to you as described above whether
received in cash or in shares through the reinvestment of distributions. Early
in each year the Trust will notify each shareholder of the amount and tax status
of distributions paid to the shareholder by the Fund for the preceding year.
Upon the disposition of shares of the Fund (whether by sale, exchange,
or redemption), a shareholder will realize a gain or loss. Such gain or loss
will be capital gain or loss if the shares are capital assets in the
shareholder's hands, and will be long-term or short-term generally depending
upon the shareholder's holding period for the shares. Long-term capital gains
will generally be taxed at a federal income tax rate of 20%. Any loss realized
by a shareholder on a disposition of shares held by the shareholder for six
months or less will be treated as a long-term capital loss to the extent of any
distributions of capital gain dividends received by the shareholder with respect
to such shares. In general, any loss realized upon a taxable disposition of
shares will be treated as long-term capital loss if the shares have been held
for more than one year, and otherwise as short-term capital loss. With respect
to investment income and gains received by the Fund from sources outside the
United States, such income and gains may be subject to foreign taxes which are
withheld at the source. The effective rate of foreign taxes in which the Fund
will be subject depends on the specific countries in which its assets will be
invested and the extent of the assets invested in each such country and,
therefore, cannot be determined in advance.
The Fund's ability to use options, futures, and forward contracts and
other hedging techniques, and to engage in certain other transactions, may be
limited by tax considerations. The Fund's transactions in
foreign-currency-denominated debt instruments and its hedging activities will
likely produce a difference between its book income and its taxable income. This
difference may cause a portion of the Fund's distributions of book income to
constitute returns of capital for tax purposes or require the Fund to make
distributions exceeding book income in order to permit the Trust to continue to
qualify, and be taxed under Subchapter M of the Code, as a regulated investment
company. The tax consequences of certain hedging transactions have been modified
by the Taxpayer Relief Act of 1997.
Under federal income tax law, a portion of the difference between the
purchase price of zero-coupon securities in which the Fund has invested and
their face value ("original issue discount") is considered to be income to the
Fund each year, even though the Fund will not receive cash interest payments
<PAGE>
from these securities. This original issue discount (imputed income) will
comprise a part of the net investment income of the Fund which must be
distributed to shareholders in order to maintain the qualification of the Fund
as a regulated investment company and to avoid federal income tax at the level
of the Fund.
This discussion of the federal income tax and state tax treatment of the
Trust and its shareholders is based on the law as of the date of this SAI.
PRINCIPAL HOLDERS OF SECURITIES
As of December 1, 1998, the Trustees of the Trust and, except a noted
below, the officers of the Trust, as a group owned less than 1% of the
outstanding shares of either class of each Fund.
The following table lists those shareholders that owned 5% or more of
the shares of each Fund as of October 31, 1998, and therefore are controlling
persons of such Fund. Because these shareholders hold a substantial number of
shares, they may be able to require that the Trust hold special shareholder
meetings and may be able to determine the outcome of any shareholder vote.
HOLDERS OF 5% OR MORE OF OUTSTANDING SHARES
As of December 1, 1998, the shareholders listed below owned more than 5% of a
Fund as noted. Shareholders owning 25% or more of the shares of a Fund or of the
Trust as a whole may be deemed to be controlling persons. By reason of their
substantial holdings of shares, these persons may be able to require the Trust
to hold a shareholder meeting to vote on certain issues and may be able to
determine the outcome of any shareholder vote. As noted, certain of these
shareholders are known to the Trust to hold their shares of record only and have
no beneficial interest, including the right to vote, in the shares.
<TABLE>
<S> <C> <C> <C>
NUMBER NUMBER OF % OF
OF ADVISOR SHARES
INVESTOR SHARES OF FUND
SHARES CLASS
OWNED
- ---------------------------------------------------------- ---------------- ----------------- ----------------
The Robert Wood Johnson Foundation
P.O. Box 2316
College Road at Route One
Princeton, NJ 08543 34.80
4,917,050.5
University of Chicago
450 North Cityfront Plaza Drive
Chicago, IL 60611 27.22
3,845,643.1
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Baptist Foundation of Texas
1601 Elm Street, Suite 1700
Dallas, Texas 75201-7241 11.81
1,668,533.6
Northwest Area Foundation
US Bank Trust NA
332 minnesota Street
St Paul, Minnesota 55101 825,132.8 5.84
NationsBank Montgomery
600 Montgomery St., 4th Floor
San Francisco, CA 94111 99.98
2,729,270.3
</TABLE>
PERFORMANCE INFORMATION
Average annual total return of a class of shares of the Fund for one-,
five-, and ten-year periods (or for such shorter periods as shares of that class
of shares of the Fund have been offered) is determined by calculating the actual
dollar amount of investment return on a $1,000 investment in that class of
shares at the beginning of the period, and then calculating the annual
compounded rate of return which would produce that amount. Total return for a
period of one year or less is equal to the actual return during that period.
Total return calculations assume reinvestment of all Fund distributions at net
asset value on their respective reinvestment dates. Total return may be
presented for other periods.
ALL PERFORMANCE DATA IS BASED ON PAST INVESTMENT RESULTS AND DOES NOT
PREDICT FUTURE PERFORMANCE. Investment performance of a particular class of the
Fund's shares, which will vary, is based on many factors, including market
conditions, the composition of the Fund's portfolio, and the Fund's operating
expenses attributable to that class of shares. Investment performance also often
reflects the risks associated with the Fund's investment objectives and
policies. Quotations of yield or total return for any period when an expense
limitation is in effect will be greater than if the limitation had not been in
effect. These factors should be considered when comparing the investment results
of the Fund's shares to those of various classes of other mutual funds and other
investment vehicles. Performance for each Fund's shares may be compared to
various indices.
The table below sets forth the total return of Investor Shares of the
Fund for most recent fiscal year and for the period from the commencement of the
Fund's operations until October 31, 1998. The table also sets forth total return
information for the Fund's Advisor Shares for any periods (or partial periods)
when they were outstanding, and pro forma total return information for periods
(or partial periods) when there were no Advisor Shares outstanding. Pro forma
total return information for Advisor Shares is estimated by restating the total
return of Investor Shares for the same period to reflect the actual fees and
expenses applicable to Advisor Shares, which are higher than the fees and
expenses applicable to Investor Shares (for instance, Advisor Shares are subject
to shareholder servicing fees paid at a rate of up to 0.25% of the average daily
net asset value of the Fund attributable to its Advisor Shares). PLEASE NOTE
THAT THE HIGHER EXPENSES APPLICABLE TO THE FUND'S ADVISOR SHARES SHOULD HAVE THE
EFFECT OF REDUCING THE TOTAL RETURN OF THE ADVISOR SHARES BELOW THAT OF THE
INVESTOR SHARES BY THE AMOUNT OF SUCH HIGHER EXPENSES, COMPOUNDED OVER THE
RELEVANT PERIOD.
<PAGE>
TOTAL RETURN FOR PERIODS ENDED OCTOBER 31, 1998
<TABLE>
<S> <C> <C> <C> <C>
- ---------------------- ---------- -------------------------- ----------------- -----------------
SINCE INCEPTION
OF FUND INCEPTION DATE INCEPTION DATE
CLASS 1 YEAR (ANNUALIZED) OF FUND OF CLASS
- ---------------------- ---------- -------------------------- ----------------- -----------------
- ---------------------- ---------- -------------------------- ----------------- -----------------
Investor Shares _____% _____% 3/31/95 3/31/95
Advisor Shares* _____% _____% 11/21/96
- ---------------------- ---------- -------------------------- ----------------- -----------------
</TABLE>
* Total return for Advisor Shares of the Fund reflects pro forma information
(based on Investor Share performance) through November 20, 1996, and actual
total return from November 21, 1996 (the inception date of Advisor Shares of
the Fund) through October 31, 1998. The actual total return of Advisor
Shares of the Fund from November 21, 1996 through October 31, 1998 (not
annualized) was _______%.
From time to time, Schroder, Forum or any of their affiliates that
provide services to the Fund may reduce their compensation or assume
expenses of the Fund in order to reduce the Fund's expenses, as described in
the Trust's current Prospectuses. Any such waiver or assumption would
increase the Fund's total return for each class of shares during the period
of the waiver or assumption.
THE PORTFOLIO
The Portfolio is a separate series of Schroder Capital Funds, an
open-end management investment company. Schroder Capital Funds is a business
trust organized under the laws of the State of Delaware.
The Fund's investment in the Portfolio is in the form of a
non-transferable beneficial interest. The Portfolio may have other
investors, each of whom will invest on the same conditions as the related
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 is entitled to vote in
proportion to its relative beneficial interest in the Portfolio. If the
Portfolio has investors other than the Fund, 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 Portfolio shareholders. If other
investors hold a majority interest of the Portfolio, they could have voting
control of the Portfolio.
The Portfolio does not sell its shares directly to the public. Another
investor (such as an investment company) in the Portfolio that might sell its
shares to the public would not be required to sell its shares at the same
offering price as the Fund, and could have different fees and expenses than the
Fund. Therefore, the Fund's shareholders may have different returns than
shareholders of another investment company that invests in the Portfolio.
The investors in the Portfolio, including the related Fund, have agreed
to indemnify Schroder Capital Funds, and such trust's trustees and officers,
against certain claims.
<PAGE>
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 has a large investor other than
the Fund and that investor redeems its interests in the Portfolio, the
Portfolio's remaining investors (including the Fund) might bear a larger portion
of the Portfolio's operating expenses. This would result in lower returns for
the Fund.
The Fund may withdraw its entire investment from the Portfolio at any
time, if the Trustees determine that it is in the best interests of the Fund and
its shareholders to do so. Such a withdrawal may result in a distribution in
kind of portfolio securities by the Portfolio, which could adversely affect the
liquidity of the Fund's assets. If the Fund converted those securities to cash,
it would likely incur brokerage fees or other transaction costs. In the event
that the Fund withdraws its entire investment from the Portfolio, the Fund's
inability to find a suitable replacement investment could have a significant
negative impact on the Fund's shareholders.
Each investor in the Portfolio, including the Fund, may be liable for
all obligations of the Portfolio. The risk that this would cause an investor
financial loss, however, is limited to circumstances in which the Portfolio
would be unable to meet its obligations. Schroder considers this risk to be
remote. Upon liquidation of the Portfolio, investors in the Portfolio (including
the related Fund) would be entitled to share pro rata in the Portfolio's net
assets available for distribution to investors.
CUSTODIAN
The Chase Manhattan Bank, through its Global Custody Division located at
125 London Wall, London EC2Y 5AJ, United Kingdom, acts as custodian of the
assets of the Fund and the Portfolio. The custodian's responsibilities include
safeguarding and controlling the Fund's cash and securities, handling the
receipt and delivery of securities, and collecting interest and dividends on the
Fund's investments. The custodian does not determine the investment policies of
the Fund or decide which securities the Fund will buy or sell.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Forum Shareholder Services, LLC, Two Portland Square, Portland, Maine
04101, is the Fund's transfer agent and dividend disbursing agent.
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP, the Trust's independent accountants, provide
audit services, tax return preparation services, and assistance and consultation
in connection with the Trust's various Securities and Exchange Commission
filings. Their address is One Post Office Square, Boston, Massachusetts 02109.
LEGAL COUNSEL
Ropes & Gray, One International Place, Boston, Massachusetts 02110-2624,
serves as counsel to the Trust.
<PAGE>
SHAREHOLDER LIABILITY
Under Delaware law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Trust. However, the Trust's
Trust Instrument disclaims shareholder liability for acts or obligations of the
Trust and requires that notice of such disclaimer be given in each agreement,
obligation, or instrument entered into or executed by the Trust or the Trustees.
The Trust's Trust Instrument provides for indemnification out of the Fund's
property for all loss and expense of any shareholder held personally liable for
the obligations of the Fund. Thus the risk of a shareholder's incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Fund would be unable to meet its obligations.
FINANCIAL STATEMENTS
The fiscal year end of the Fund is October 31.
The following Financial Statements required by Part B and the related
Report of Independent Public Accountants are incorporated herein by reference to
the Trust's Annual Report, dated October 31, 1998, which was filed
electronically with the Securities and Exchange Commission on [date] (Accession
Number:
- --------------).
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
(a) Trust Instrument of Registrant Amended and Restated as of March 13, 1998
(see Note 1).
(b) Bylaws of Registrant dated September 8, 1995 (see Note 2).
(c) See the following Articles and Sections in the Trust Instrument filed as
Exhibit (a): Article II, Sections 2.03, 2.04, 2.06, 2.08, 2.09, 2.10, 2.11;
Article III, Section 3.08; Article VII; Article IX; and Article X, Section
10.03.
(d) (1) Investment Advisory Agreement between the Trust and Schroder Capital
Management International Inc. ("SCMI") dated as of September 14, 1998
with respect to Schroder Greater China Fund and Schroder Cash Reserves
Fund (see Note 1).
(2) Investment Advisory Agreement between the Trust and SCMI dated as of
January 9, 1996, with respect to Schroder U.S. Diversified Growth Fund
(see Note 2).
(3) Investment Advisory Agreement between the Trust and SCMI dated as of
January 9, 1996, with respect to Schroder U.S. Smaller Companies Fund,
Schroder Latin America Fund and International Equity Fund (see Note
4).
(4) Investment Advisory Agreement between the Trust and SCMI dated as of
March 15, 1996, with respect to Schroder International Smaller
Companies Fund and Schroder Global Asset Allocation Fund (see Note 4).
(5) Investment Advisory Agreement between the Trust and SCMI dated as of
January 9, 1996, with respect to Schroder Emerging Markets Fund
Institutional Portfolio (see Note 5).
(6) Investment Advisory Agreement between the Trust and SCMI dated as of
March 5, 1997, with respect to Schroder International Bond Fund (see
Note 5).
(7) Investment Advisory Agreement between the Trust and SCMI dated as of
March 5, 1997, with respect to Schroder Micro Cap Fund (see Note 5).
(8) Investment Advisory Agreement between the Trust and SCMI dated as of
November 26, 1996, with respect to Schroder Emerging Markets Fund (see
Note 5).
(e) Distribution Agreement between the Trust and Schroder Fund Advisors Inc.
dated as of December 15, 1998, with respect to Schroder U.S. Diversified
Growth Fund, Schroder Emerging Markets Fund Institutional Portfolio,
Schroder International Fund, Schroder U.S. Smaller Companies Fund, Schroder
International Smaller Companies Fund, Schroder Emerging Markets Fund,
Schroder Cash Reserves Fund, Schroder International Bond Fund, Schroder
Greater China Fund and Schroder Micro Cap Fund (filed herewith).
(f) Not Applicable.
(g) (1) Global Custody Agreement between the Trust and The Chase Manhattan
Bank, N.A. dated as of January 9, 1996, as amended May 3, 1996, with
respect to Schroder Emerging Markets Fund Institutional Portfolio,
Schroder International Fund, Schroder U.S. Smaller Companies Fund,
Schroder International Smaller Companies Fund, Schroder U.S.
Diversified Growth Fund, Schroder Emerging Markets Fund, Schroder Cash
Reserves Fund, Schroder International Bond Fund, Schroder Greater
China Fund and Schroder Micro Cap Fund (see Note 5).
(2) Custody Agreement between the Trust and Norwest Bank N.A. dated as
of________with respect to Schroder U.S. Diversified Growth Fund,
Schroder micro Cap Fund and Schroder U.S. Smaller Companies Fund
(filed herewith).
(h) (1) Administration Agreement between the Trust and Schroder Fund Advisors
Inc. dated as of November 26, 1996, with respect to Schroder
International Fund, Schroder U.S. Smaller Companies Fund, Schroder
Emerging Markets Fund Institutional Portfolio, Schroder International
Smaller Companies Fund, Schroder Micro Cap Fund, Schroder Emerging
Markets Fund, Schroder Cash Reserves Fund, Schroder International Bond
Fund and Schroder Greater China Fund (see Note 1).
<PAGE>
(2) Subadministration Agreement between the Trust and Forum Administrative
Services, LLC dated as of February 1, 1997, with respect to Schroder
International Fund, Schroder U.S. Diversified Growth Fund, Schroder
U.S. Smaller Companies Fund, Schroder Emerging Markets Fund
Institutional Portfolio, Schroder International Smaller Companies
Fund, Schroder Micro Cap Fund, Schroder Emerging Markets Fund,
Schroder Cash Reserves Fund, Schroder Greater China Fund and Schroder
International Bond Fund (see Note 1).
(3) Transfer Agency Agreement between the Trust and Forum Shareholder
Services, LLC dated as of January 9, 1996, as amended, with respect to
Schroder Emerging Markets Fund Institutional Portfolio, Schroder
International Fund, Schroder U.S. Smaller Companies Fund, Schroder
International Smaller Companies Fund, Schroder U.S. Diversified Growth
Fund, Schroder Emerging Markets Fund, Schroder Cash Reserves Fund,
Schroder Greater China Fund, Schroder International Bond Fund and
Schroder Micro Cap Fund (see Note 5).
(4) Fund Accounting Agreement between the Trust and Forum Accounting
Services, LLC dated as of March 5, 1997 with respect to Schroder
International Fund, Schroder U.S. Diversified Growth Fund, Schroder
U.S. Smaller Companies Fund, Schroder Emerging Markets Fund
Institutional Portfolio, Schroder International Smaller Companies
Fund, Schroder Cash Reserves Fund, Schroder Micro Cap Fund, Schroder
Greater China Fund and Schroder Emerging Markets Fund (see Note 5).
(5) Shareholder Service Plan adopted by the Trust with respect to Schroder
Greater China Fund (see Note 3).
(i) (1) Opinion and consent of Smith Katzenstein Furlow LLP as to the legality
of the securities previously registered (see Note 5).
(2) Opinion and consent of Jacobs Persinger & Parker with respect to
Schroder International Fund, Schroder U.S. Equity Fund and Schroder
U.S. Smaller Companies Fund (see Note 6).
(3) Opinion and consent of David I. Goldstein, Esq. as to the legality of
the securities being registered (see Note 7).
(j) Not Applicable.
(k) No financial statements were omitted from Item 22.
(l) Not Applicable.
(m) Distribution Plan adopted by Registrant dated as of January 9, 1996 with
respect to Advisor Shares of Schroder U.S. Smaller Companies Fund, Schroder
Latin American Fund, Schroder International Fund, Schroder Emerging Markets
Fund Institutional Portfolio, Schroder International Smaller Companies
Fund, Schroder Micro Cap Fund, Schroder Emerging Markets Fund, Schroder
Cash Reserves Fund, Schroder Greater China Fund, Schroder International
Bond Fund and Schroder U.S. Diversified Growth Fund (see Note 4).
(n) Financial Data Schedules (see Note 1).
(o) Multiclass (Rule 18f-3) Plan adopted by Trust (see Note 8).
Other Exhibits:
Power of Attorney forms pursuant to which this Post-Effective Amendment
is signed (see Note 9).
Power of Attorney from Fergal Cassidy (see Note 1).
Power of Attorney from Sharon L. Haugh (see Note 1).
Power of Attorney from David N. Dinkins (see Note 1).
Power of Attorney from Peter S. Knight (see Note 1).
Power of Attorney from Hermann C. Schwab (see Note 1).
Power of Attorney from Mark J. Smith (see Note 1).
Power of Attorney from John I. Howell (see Note 1).
Power of Attorney from Peter E. Guernsey (see Note 1).
Power of Attorney from Clarence F. Michalis (see Note 1).
<PAGE>
- ---------------
Notes:
1 Exhibit incorporated by reference as filed on Post-Effective Amendment No.
68 via EDGAR on September 30, 1998, accession number 0001004402-98-000531.
2 Exhibit incorporated by reference as filed on Post-Effective Amendment No.
61 via EDGAR on April 18, 1997, accession number 0000912057-97-013527.
3 Exhibit incorporated by reference as filed on Post-Effective Amendment No.
67 via EDGAR on July 17, 1998, accession number 001004402-98-000399.
4 Exhibit incorporated by reference as filed on Post-Effective Amendment No.
63 via EDGAR on July 18, 1997, accession number 0001004402-97-000035.
5 Exhibit incorporated by reference as filed on Post-Effective Amendment No.
66 via EDGAR on February 27, 1998, accession number 0001004402-98-000149.
6 Exhibit incorporated by reference as filed on Post-Effective Amendment No.
54 via EDGAR on October 24, 1996, accession number 0000912057-96-023645.
7 Exhibit incorporated by reference as filed on Post-Effective Amendment No.
69 via EDGAR on November 30, 1998, accession number 0001004402-98-000621.
8 Exhibit incorporated by reference as filed on Post-Effective Amendment No.
65 via EDGAR on January 27, 1998, accession number 0001004402-98-000053
9 Exhibit incorporated herein by reference as filed on Post-Effective
Amendment No. 62 via EDGAR on June 30, 1997, accession number
0001004402-97-000030.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
ITEM 25. INDEMNIFICATION
Section 10.02 of the Registrant's Trust Instrument reads as follows:
"(a) Subject to the exceptions and limitations contained in subsection
10.02(b):
"(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 his 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);
<PAGE>
provided, however, that any Holder may, by appropriate legal
proceedings, challenge any such determination by the Trustees or by
independent counsel.
"(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall
not be exclusive of or affect any other rights to which any Covered
Person may now or hereafter be entitled, shall continue as to a person
who has ceased to be a Covered Person and shall inure to the benefit of
the heirs, executors and administrators of such a person. Nothing
contained herein shall affect any rights to indemnification to which
Trust personnel, other than Covered Persons, and other persons may be
entitled by contract or otherwise under law.
"(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character
described in Subsection 10.02(a) of this Section 10.02 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 Subsection 10.02; provided, however, that
either (i) such Covered Person shall have provided appropriate security
for such undertaking, (ii) the Trust is insured against losses arising
out of any such advance payments or (iii) 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 10.02."
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The following is a description of any business, profession, vocation or
employment of a substantial nature in which the investment adviser of
the registrant, Schroder Capital Management International Inc.
("SCMI"), and each trustee or officer of the investment adviser is or
has been, at any time during the past two years, engaged for his or her
own account or in the capacity of trustee, officer or employee. The
address of each company listed, unless otherwise noted, is 787 Seventh
Avenue, 34th Floor, New York, NY 10019. Schroder Capital Management
International Limited ("Schroder Ltd."), a United Kingdom affiliate of
SCMI, provides investment management services to international clients
located principally in the United Kingdom.
<TABLE>
<S> <C> <C>
------------------------------------ ------------------------------------ ----------------------------------
Name Title Business Connections
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
David M. Salisbury Chairman, Director SCMI
------------------------------------ ----------------------------------
Chief Executive, Director Schroder Ltd.*
------------------------------------ ----------------------------------
Director Schroders plc.*
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee and Officer Schroder Series Trust II
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
John A. Troiano Chief Executive, Director SCMI
------------------------------------
----------------------------------
Chief Executive, Director Schroder Ltd.*
------------------------------------ ----------------------------------
----------------------------------
Officer Certain open end management
investment companies for which
SCMI and/or its affiliates
provide investment services
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Richard R. Foulkes Deputy Chairman, Director SCMI
------------------------------------ ----------------------------------
Deputy Chairman Schroder Ltd.*
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Officer Certain open end management
investment companies for which
SCMI and/or its affiliates
provide investment services
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Michael M. Perelstein Senior Vice President, Director SCMI
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Senior Vice President, Director Schroders Ltd.*
------------------------------------ ------------------------------------ ----------------------------------
<PAGE>
------------------------------------ ------------------------------------ ----------------------------------
Sharon L. Haugh Executive Vice President, Director SCMI
----------------------------------
------------------------------------ ----------------------------------
Director, Chairman Schroder Fund Advisors Inc.
------------------------------------ ----------------------------------
Director Schroder Ltd.*
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Chairman, Director Schroder Capital Management Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee Certain open end management
investment companies for which
SCMI and/or its affiliates
provide investment services
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Gavin D. L. Ralston Senior Vice President, Managing SCMI
Director
------------------------------------ ----------------------------------
Director Schroder Ltd.*
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Robert G. Davy Senior Vice President, Director SCMI
------------------------------------ ----------------------------------
Director Schroder Ltd.*
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Officer Certain open end management
investment companies for which
SCMI and/or its affiliates
provide investment services
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Mark J. Smith Senior Vice President, Director SCMI
------------------------------------ ----------------------------------
Senior Vice President, Director Schroder Ltd.*
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director, Senior Vice President Schroder Fund Advisors Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee and Officer Certain open end management
investment companies for which
SCMI and/or its affiliates
provide investment services
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Jane P. Lucas Senior Vice President, Director SCMI
------------------------------------ ----------------------------------
Director Schroder Fund Advisors Inc.
------------------------------------ ----------------------------------
Director Schroder Capital Management Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Officer Certain open end management
investment companies for which
SCMI and/or its affiliates
provide investment services
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
David R. Robertson Group Vice President SCMI
------------------------------------ ----------------------------------
Senior Vice President Schroder Fund Advisors Inc.
----------------------------------
------------------------------------
Director of Institutional Business Oppenheimer Funds, Inc.
resigned 2/98
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Louise Croset First Vice President, Director SCMI
------------------------------------ ----------------------------------
First Vice President Schroder Ltd.*
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee and Officer Schroder Series Trust II
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Ellen B. Sullivan Group Vice President SCMI
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Capital Management Inc.
------------------------------------ ------------------------------------ ----------------------------------
<PAGE>
------------------------------------ ------------------------------------ ----------------------------------
Catherine A. Mazza Group Vice President SCMI
------------------------------------ ----------------------------------
President, Director Schroder Fund Advisors Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Capital Management Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee and Officer Certain open end management
investment companies for which
SCMI and/or its affiliates
provide investment services
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Heather F. Crighton First Vice President, Director SCMI
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
First Vice President, Director Schroder Ltd.*
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Ira Unschuld Group Vice President SCMI
------------------------------------ ----------------------------------
Officer Certain open end management
investment companies for which
SCMI and/or its affiliates
provide investment services
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Paul M. Morris Senior Vice President SCMI
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Capital Management Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Principal, Senior Portfolio Manager Weiss, Peck & Greer LLC
resigned 12/96
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Susan B. Kenneally First Vice President, Director SCMI
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
First Vice President, Director Schroder Ltd.*
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Jennifer A. Bonathan First Vice President, Director SCMI
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
First Vice President, Director Schroder Ltd.*
------------------------------------ ------------------------------------ ----------------------------------
</TABLE>
*Schroder Ltd. and Schroders plc. are located at 31 Gresham St., London
EC2V 7QA, United Kingdom.
The following is a description of any business, profession, vocation or
employment of a substantial nature in which the investment subadviser
of Schroder International Smaller Companies Portfolio, Schroder
Investment Management International Ltd. ("SIMIL"), and each trustee or
officer of the investment subadviser is or has been, at any time during
the past two years, engaged for his or her own account or in the
capacity of trustee, officer or employee. The address of each company
listed below is set forth in the note following the table. Schroder
Capital Management International Limited ("Schroder Ltd."), a United
Kingdom affiliate of SCMI, provides investment management services to
international clients located principally in the United Kingdom.
<PAGE>
<TABLE>
<S> <C> <C>
------------------------------------ ------------------------------------ ----------------------------------
Name Title Business Connections*
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Hugh Westrope Bolland Director SIMIL
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroders (C.I.) Limited
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Investment Management
(Hong Kong)
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Properties Limited
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Personal Investment
Management
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director, Chief Executive Officer Schroder Investment Management
Limited
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Chairman Schroder Investment Management
(Australasia) Limited
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Chairman Schroder Investment Management
(UK) Limited
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Jennifer A. Bonathan Director SIMIL
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
First Vice President, Director Schroder Capital Management
International Limited
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
First Vice President, Director SCMI
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
First Vice President, Director Schroder Ltd.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Nigel J. Burnham Director SIMIL
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Finance Officer, First Vice SCMI
President
------------------------------------ ----------------------------------
Finance Officer, First Vice Schroder Capital Management
President International Limited
------------------------------------ ----------------------------------
Assistant Vice President Schroder Fund Advisors, Inc.
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Robert G. Davy Director SIMIL
------------------------------------ ----------------------------------
Senior Vice President, Director SCMI
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Ltd.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Officer Certain open end management
investment companies for which
SCMI and/or its affiliates
provide investment services
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Denis H. Clough Director SIMIL
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Capital Management
International Limited
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Investment Management
(UK) Limited
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Richard R. Foulkes Deputy Chairman, Director SIMIL
------------------------------------ ----------------------------------
Deputy Chairman, Director SCMI
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Deputy Chairman Schroder Ltd.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Officer Certain open end management
investment companies for which
SCMI and/or its affiliates
provide investment services
------------------------------------ ------------------------------------ ----------------------------------
<PAGE>
------------------------------------ ------------------------------------ ----------------------------------
Madeleine S. Hall Director SIMIL
----------------------------------
------------------------------------ ----------------------------------
Director Schroder Investment Management
(UK) Limited
------------------------------------ ----------------------------------
Assistant Director Schroder Investment Management
Limited
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Jeremy A. Hill Chairman, Director SIMIL
------------------------------------ ----------------------------------
Commissioner PT Schroder Investment
Management Indonesia
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Chairman Schroder Investment Management
(Hong Kong) Limited
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Chairman Schroder Investment Management
(Japan) Limited
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Chairman Korea Schroder Fund Management
Limited
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Investment Management
Limited
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director/Chairman Certain open end management
investment companies for which
SCMI and/or its affiliates
provide investment services
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Ian Johnson Secretary SIMIL
------------------------------------ ----------------------------------
Secretary Schroder Capital Management
International Limited
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Assistant Secretary J. Henry Schroder & Co., Limited
------------------------------------ ------------------------------------ ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Jan Anthony Kingzett Director SIMIL
------------------------------------- ----------------------------------
Deputy Chairman Schroder Investment Management
(Japan) Limited
------------------------------------- ----------------------------------
Chairman Schroder Investment Trust
Management Limited
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Schroder Investment Management
(Singapore) Limited
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Schroder Investment Management
Limited
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Certain open end management
investment companies for which
SCMI and/or its affiliates
provide investment services
----------------------------------- ------------------------------------- ----------------------------------
----------------------------------- ------------------------------------- ----------------------------------
Maggie Lay Wah Lee Director SIMIL
------------------------------------- ----------------------------------
Director Schroder Investment Management
(Singapore) Limited
----------------------------------
-------------------------------------
Director Schroder Investment Management
Limited
----------------------------------- ------------------------------------- ----------------------------------
<PAGE>
----------------------------------- ------------------------------------- ----------------------------------
Richard A. Mountford Chief Executive Officer, Chief SIMIL
Operating Officer, Director
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director, Deputy Chairman Schroder Investment Management
(Singapore) Limited
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Schroder Investment Management
(UK) Limited
------------------------------------- ----------------------------------
------------------------------------- ----------------------------------
Director Schroder Investment Management
Limited
----------------------------------- ------------------------------------- ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Nicola Ralston Deputy Chairman, Director SIMIL
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Nicola Jane Richards Director SIMIL
------------------------------------ ----------------------------------
Division Director Schroder Investment Management
Limited
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Christopher N. Rodgers Director SIMIL
------------------------------------ ----------------------------------
Director Schroder Investment Management
Limited
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Investment Management
(UK) Limited
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
David M. Salisbury Director SIMIL
------------------------------------ ----------------------------------
Chairman, Director SCMI
------------------------------------ ----------------------------------
Chief Executive, Director Schroder Ltd.
------------------------------------ ----------------------------------
Director Schroders plc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee and Officer Schroder Series Trust II
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Daniele Serruya Director SIMIL
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Assistant Director, Investment Schroder Investment Management
Manager Limited
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Olaf N. Siedler Director SIMIL
------------------------------------ ----------------------------------
Director Schroder Investment Management
(UK) Limited
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Investment Manager Schroder Investment Management
Limited
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Hugh M. Stewart Director SIMIL
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Investment Management
(UK) Limited
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Investment Manager Schroder Investment Management
Limited
------------------------------------ ------------------------------------ ----------------------------------
------------------------------------ ------------------------------------ ----------------------------------
Thomas J. Willoughby Chief Compliance Officer SIMIL
------------------------------------ ----------------------------------
Schroder Unit Trust Limited Director
------------------------------------ ------------------------------------ ----------------------------------
</TABLE>
Each of SCMI, Schroder Capital Management International Limited,
Schroder Investment Management Limited, Schroder Investment Management
(UK) Limited, Schroder Investment Management (Europe), Korea Schroder
Fund Management Limited and Schroder Personal Investment Management,
are located at 33 Gutter Lane, London EC2V 8AS United Kingdom.
<PAGE>
Schroder Investment Management (Singapore) Limited is located at #47-01
OCBC Centre, Singapore.
Schroder Investment Management (Hong Kong) Limited is located at 8
Connaight Place, Hong Kong.
Schroder Investment Management (Australasia) Limited is located at 225
George Place, Sydney Australia.
PT Schroder Investment Management Indonesia is located at Lippo Plaza
Bldg., 25 Jakarta, 12820.
Schroders (C.I.) Limited is located at St. Peter Port, Guernsey,
Channel Islands, GY1 3UF.
Schroder Properties Limited is located at Senator House, 85 Queen
Victoria Street, London EC4V 4EJ, United Kingdom.
Schroder Fund Advisors Inc. is located at 787 Seventh Avenue, 34th
Floor, New York, NY 10019.
Schroder Ltd. and Schroders plc. are located at 31 Gresham St., London
EC2V 7QA, United Kingdom.
ITEM 27. PRINCIPAL UNDERWRITERS
(a) Schroder Fund Advisors Inc., the Registrant's principal underwriter, also
serves as principal underwriter for:
Schroder Series Trust
Schroder Series Trust II
(b) Following is information with respect to each officer and director of
Schroder Fund Advisors, Inc. the Distributor of the shares of Schroder
Emerging Markets Fund Institutional Portfolio, Schroder International
Fund, Schroder U.S. Smaller Companies Fund, Schroder International
Smaller Companies Fund, Schroder U.S. Diversified Growth Fund, Schroder
Emerging Markets Fund, Schroder International Bond Fund, Schroder Micro
Cap Fund and Schroder Greater China Fund (each, a series of the
Registrant):
<TABLE>
<S> <C> <C>
Name Position with Underwriter Position with Registrant
---- ------------------------- ------------------------
Catherine A. Mazza President, Director Vice President
Mark J. Smith Director. Trustee, President
Sharon L. Haugh Chairman and Director Trustee
Fergal Cassidy Treasurer and Chief Financial Officer Treasurer
Alexandra Poe General Counsel and Senior Vice President Vice President and Secretary
Jane P. Lucas Director. Vice president
Alan Mandel Senior Vice President Assistant Treasurer
</TABLE>
Business address for each is 787 Seventh Avenue, New York, New York
10019 except for Mark J. Smith, whose business address is 31 Gresham
St., London EC2V 7QA, United Kingdom.
(c) Not Applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules
thereunder are maintained at the offices of SCMI (investment management
records) and Schroder Fund Advisors Inc. (administrator and distributor
records), 787 Seventh Avenue, New York, New York 10019, except that
certain items are maintained at the following locations:
(a) Forum Accounting Services, LLC, Two Portland Square, Portland, Maine
04101 (fund accounting records).
(b) Forum Administrative Services, LLC, Two Portland Square, Portland,
Maine 04101 (corporate minutes and all other records required under the
Subadministration Agreement).
(c) Forum Shareholder Services, LLC, Two Portland Square, Portland, Main
04101 (shareholder records).
<PAGE>
ITEM 29. MANAGEMENT SERVICES
None.
ITEM 30. UNDERTAKINGS
Registrant undertakes to furnish upon request and without charge to
each person to whom a prospectus is delivered a copy of Registrant's
latest annual report to shareholders relating to the fund to which the
prospectus relates.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the has duly caused this
post-effective amendment number 70 to the Registrant's registration statement to
be signed on its behalf by the undersigned, duly authorized, in the City of New
York, and State of New York on the 31st day of December 1998.
SCHRODER CAPITAL FUNDS (DELAWARE)
By: /s/ Alexandra Poe
-----------------------------
Alexandra Poe
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment to the Registration Statement has been signed below by the following
persons on the 31st day of December 1998.
Signatures Title
(a) Principal Executive Officer
Mark J. Smith President
By: /s/ Cheryl O. Tumlin
--------------------------------
Cheryl O. Tumlin
Attorney-in-Fact*
(b) Principal Financial Officer
/s/ Fergal Cassidy
-----------------------------------
Fergal Cassidy Treasurer
(c) The Trustees
Peter E. Guernsey Trustee
John I. Howell Trustee
Hermann C. Schwab Trustee
Clarence F. Michalis Trustee
Mark J. Smith Trustee
David N. Dinkins Trustee
Peter S. Knight Trustee
Sharon L. Haugh Trustee
By: /s/ Cheryl O. Tumlin
--------------------------------
Cheryl O. Tumlin
Attorney-in-Fact*
* Pursuant to powers of attorney filed as Other Exhibits to this
registration statement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, Schroder
Capital Funds has duly caused this amendment to the Registration Statement for
Schroder Capital Funds (Delaware) to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of New York and the State of New York on
the 31st day of December 1998.
SCHRODER CAPITAL FUNDS
By: /s/ Alexandra Poe
------------------------------
Alexandra Poe
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1940, this Registration
Statement amendment of Schroder Capital Funds (Delaware) has been signed below
by the following persons on the 31st day of December 1998.
Signatures Title
(a) Principal Executive Officer
Mark J. Smith President
By: /s/ Cheryl O. Tumlin
-----------------------------
Cheryl O. Tumlin
Attorney-in-Fact*
(b) Principal Financial Officer
/s/ Fergal Cassidy
--------------------------------
Fergal Cassidy Treasurer
(c) The Trustees
Peter E. Guernsey Trustee
John I. Howell Trustee
Hermann C. Schwab Trustee
Clarence F. Michalis Trustee
Mark J. Smith Trustee
Hon. David N. Dinkins Trustee
Peter S. Knight Trustee
Sharon L. Haugh Trustee
By: /s/ Cheryl O. Tumlin
----------------------------
Cheryl O. Tumlin
Attorney-in-Fact*
* Pursuant to powers of attorney filed as Other Exhibits to this
registration statement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, Schroder
Capital Funds II has duly caused this amendment to the Registration Statement
for Schroder Capital Funds (Delaware) to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of New York and the State of
New York on the 30th day of December 1998.
SCHRODER CAPITAL FUNDS II
By: /s/ Catherine A. Mazza
----------------------------
Catherine A. Mazza
Vice President
Pursuant to the requirements of the Securities Act of 1940, this Registration
Statement amendment of Schroder Capital Funds (Delaware) has been signed below
by the following persons on the 30th day of December 1998.
Signatures Title
(a) Principal Executive Officer
Mark J. Smith President
By: /s/ Thomas G. Sheehan
----------------------------
Thomas G. Sheehan
Attorney-in-Fact*
(b) Principal Financial Officer
/s/ Fergal Cassidy
-------------------------------
Fergal Cassidy Treasurer
(c) The Trustees
Peter E. Guernsey Trustee
John I. Howell Trustee
Hermann C. Schwab Trustee
Clarence F. Michalis Trustee
Mark J. Smith Trustee
Hon. David N. Dinkins Trustee
Peter S. Knight Trustee
Sharon L. Haugh Trustee
By: /s/ Thomas G. Sheehan
---------------------------
Thomas G. Sheehan
Attorney-in-Fact*
* Pursuant to powers of attorney filed as Other Exhibits to this
registration statement.
<PAGE>
INDEX TO EXHIBITS
Exhibit
(e) Distribution Agreement between the Trust and Schroder Fund Advisors
Inc. dated as of December 15, 1998, with respect to Schroder U.S.
Diversified Growth Fund, Schroder Emerging Markets Fund Institutional
Portfolio, Schroder International Fund, Schroder U.S. Smaller Companies
Fund, Schroder International Smaller Companies Fund, Schroder Emerging
Markets Fund, Schroder Cash Reserves Fund, Schroder International Bond
Fund, Schroder Greater China Fund and Schroder Micro Cap Fund.
(g)(2) Custody Agreement between the Trust and Norwest Bank N.A. dated as of
with respect to Schroder U.S. Diversified Growth Fund, Schroder Micro
Cap Fund and Schroder U.S. Smaller Companies Fund.
Other
Exhibit (e)
SCHRODER CAPITAL FUNDS (DELAWARE)
DISTRIBUTION AGREEMENT
This Agreement is made as of the 15th day of December 1998 by and
between Schroder Capital Funds (Delaware), a Delaware business trust (the
"Trust"), and Schroder Fund Advisors, Inc. (the "Distributor").
1. The Trust hereby appoints the Distributor as a distributor of shares
of each of the series of shares of beneficial interest of the Trust (each, a
"Fund"), and the Distributor hereby accepts such appointment.
2. The Distributor will have the right, as principal, to sell shares of
each Fund to investment dealers against orders therefor at the public offering
price less a discount determined by the Distributor, which discount will not
exceed the amount of the sales charge referred to below. The Distributor will
have the right, as principal, to purchase shares from the Trust at their net
asset value and to sell such shares to the public against orders therefor at the
public offering price. Upon receipt of an order to purchase share of a Fund from
a bank or dealer with whom the Distributor has a sales contract, the Distributor
will promptly purchase shares of such Fund from the Trust to fill such order.
Upon receipt of registration instructions in proper form and payment for such
shares, the Distributor will transmit such instructions to the Trust or its
agent for registration of the shares purchased. The Distributor will also have
the right, as agent for the Trust, to sell shares at the public offering price
to such persons and upon such conditions as the Trustees of the Trust may from
time to time determine.
The public offering price shall be the net asset value of the shares in
question then in effect, plus the applicable sales charge, if any, determined in
the manner set forth in the then current prospectus and statement of additional
information of the Trust or as permitted by the Investment Company Act of 1940,
as amended, and the rules and regulations promulgated thereunder. The net asset
value of shares shall be determined in the manner provided in the then current
prospectus and statement of additional information of the Trust and when
determined shall be applicable to transactions as provided for in such
prospectus and statement of additional information.
On every sale the Trust, on behalf of the Fund in question, shall
receive the applicable net asset value of the shares.
3. The Trust reserves the right to issue shares at any time directly to
its shareholders as a stock dividend or stock split and to sell shares to its
shareholders or to other persons approved by the Distributor at not less than
net asset value.
4. The Distributor will use its best efforts to place shares sold by it
on an investment basis. The Distributor does not agree to sell any specific
number of shares. Shares will be sold by the Distributor only against orders
therefor. The Distributor will not purchase shares from anyone other than the
Trust and will not take "long" or "short" positions in shares contrary to the
instructions of the Trust or any applicable law, rule, or regulation.
5. The Distributor will be an independent contractor and neither the
Distributor nor any of its officers or employees, as such, is or shall be an
employee of the Trust. The Distributor is responsible for its own conduct and
the employment, control, and conduct of its agents and employees and for injury
to such agents or employees or to others through its agents or employees. The
Distributor assumes full responsibility for its agents and employees under
applicable statutes and agrees to pay all employer taxes thereunder. The
Distributor will maintain at its own expense insurance against public liability
in such an amount as the Trustees of the Trust may from time to time reasonably
request.
6. The Trust reserves the right to reject any order for the purchase of
shares, provided, however, that the Trust agrees that it will not arbitrarily or
without reasonable cause refuse acceptance or confirmation of such orders.
7. The Trust covenants and agrees that it will, at its own expense:
(a) use its best efforts to keep authorized, but unissued, sufficien
shares to meet the reasonable requirements of the Distributor;
<PAGE>
(b) supply the Distributor with the net asset value per share of each
Fund computed as at the times prescribed by and in compliance with all
pertinent requirements of the Trust Instrument of the Trust and
applicable law;
(c) prepare, file, and keep effective registration statements,
prospectuses and licenses covering as many shares as may be necessary
for distribution and sale of shares in such jurisdictions where shares
may lawfully be sold and as reasonably requested by the Distributor;
and
(d) maintain qualified personnel and adequate facilities for the
acceptance and confirmation of orders for the sale of Shares.
8. The Distributor will pay all expenses incident to the sale and
distribution of the shares issued or sold hereunder, including (i) expenses of
printing and distributing or disseminating any sales literature (including
prospectuses and annual reports), advertising, and selling aids in connection
with such offering of the shares for sale (except that such expenses shall not
include expenses incurred by the Trust in connection with the preparation,
printing, and distribution of any report or other communication to holders of
shares in their capacity as such) and (ii) expenses of advertising in connection
with such offering. The Trust authorizes the Distributor in connection with the
sale or arranging for the sale of shares to give only such information and to
make only such statements or representations as are contained in the prospectus
or in sales literature or advertisements approved by the Trust.
9. The Distributor covenants and agrees that it will comply, at its own
expense, with the applicable Federal and state laws and regulations regulating
the affairs of broker-dealers, and will conduct its affairs with the Trust and
with dealers, brokers, and investors in accordance with the Conduct Rules of The
National Association of Securities Dealers, Inc. The Distributor agrees that all
sales literature and advertisements used by the Distributor shall be subject to
the approval of the Trust.
10. (a) Except as provided in subsection (b) below, in the absence of
(i) any breach of its obligations under this Agreement (ii) willful misfeasance,
bad faith, or gross negligence on the part of the Distributor, or (iii) reckless
disregard by the Distributor of its obligations and duties hereunder, the
Distributor shall not be subject to any liability whatsoever to the Trust, or to
any shareholder of the Trust, for any error of judgment, mistake of law, or any
other act or omission in the course of, or connected with, rendering services
hereunder. The Trust agrees to indemnify and hold harmless the Distributor and
each person who controls the Distributor within the meaning of the Securities
Act of 1933, as amended (the "1933 Act"), against any and all losses, claims,
damages, or liabilities, joint or several, to which they or any of them may
become subject under the 1933 and 1940 Acts, the Securities Exchange Act of
1934, as amended, or other Federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Trust's registration statement for the registration of the shares as originally
filed or in any amendment thereof, or in the Trust's current prospectus filed as
a part thereof, or in any amendment thereof or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and agrees to reimburse each such indemnified party for
any legal loss, claim, damage, liability, or action; provided, however, that the
Trust will not be liable in any such case to the extent that any such loss,
claim, damage, or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon information furnished to the Trust in writing by or on
behalf of the Distributor specifically for use in connection with the
preparation thereof.
(b) The Distributor agrees to indemnify and hold harmless the Trust and
each person who has been, is, or may hereafter be a Trustee of the Trust against
expenses incurred by any of them in connection with any claim or in connection
with any action, suit, or proceeding to which any of them may be a party, which
arises out of or is alleged to arise out of any alleged misrepresentation or
omission to state a material fact, or out of any alleged misrepresentation or
omission to state a material fact, on the part of the Distributor or any agent
<PAGE>
or employee of the Distributor or any other person for whose acts the
Distributor is responsible or is alleged to be responsible unless such
misrepresentation or omissions was made in reliance upon written information
furnished by the Trust. The term "expenses" includes amounts paid in
satisfaction of judgments or in settlements which are mad with the Distributor's
consent.
In addition, the Distributor agrees to indemnify and hold harmless the
Trust and each person who has been, is, or may hereafter be a Trustee of the
Trust and each person who controls the Trust or any Trust within the meaning of
the 1933 Act, against any and all losses, claims, damages, or liabilities, joint
or several, to which they or any of them may become subject under the 1933 and
1940 Acts, the Securities Exchange Act of 1934, as amended, or other Federal or
state statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Trust's registration statement for the
registration of the shares as originally filed or in any amendment thereof, or
in the Trust's current prospectus filed as a part thereof, or in any amendment
thereof or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and agrees to
reimburse each such indemnified party for any legal loss, claim, damage,
liability, or action, BUT ONLY to the extent that any such loss, claim, damage,
or liability arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
information furnished to the Trust in writing by or on behalf of the Distributor
specifically for use in connection with the preparation thereof.
(c) The foregoing rights or indemnification shall be in addition to any
other rights to which a person or entity may otherwise be entitled.
11. This Agreement shall terminate automatically in the event of its
assignment. This Agreement may be terminated at any time (i) by the Board of
Trustees of the Trust or by vote of a majority of the outstanding voting
securities of the Trust by thirty days' written notice addressed to the
Distributor at its principal place of business; and (ii) by the Distributor by
thirty days' written notice addressed to the Trust at its principal place of
business.
12. This Agreement shall continue in effect for one year, and
thereafter only so long as its continuance is specifically approved at least
annually by a majority of the Board of Trustees of the Trust who are not parties
to the Agreement or interested persons of any such party cast in person at a
meeting called for the purpose of voting on such approval, or by vote of a
majority of the outstanding voting securities of the Trust.
13. A copy of the Trust Instrument of the Trust is on file with the
Secretary of State of the State of Delaware, and notice is hereby given that
this instrument is executed on behalf of the Trustees of the Trust as Trustees
and not individually, and that the obligations of or arising out of this
instrument are not binding upon any of the Trustees, officers, or shareholders
individually but are binding only upon the assets and property of the Trust.
<PAGE>
It is intended that this Agreement shall constitute a separate and
discrete contractual arrangement between the Distributor and the Trust on behalf
of each Fund separately and shall be construed in all respect so as to give
effect to this intention to the same extent as if the agreement between the
Distributor and the Trust on behalf of each such Fund were set out in a separate
writing. Without limiting the generality of the foregoing, no Fund shall be
liable or responsible for the acts, omissions, or liabilities of any other Fund,
or of the Trust on behalf or in respect of any other Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the 15th day of December 1998.
SCHRODER CAPITAL FUNDS (DELAWARE)
By:_______________________________
Title:
SCHRODER FUND ADVISORS INC.
By:_______________________________
Title:
Exhibit (g)(2)
CUSTODIAN CONTRACT
between
SCHRODER CAPITAL FUNDS (DELAWARE)
and
NORWEST BANK MINNESOTA, N.A.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Page
1. Employment of Custodian and Property to be Held by It..................................................1
2. Duties of the Custodian with Respect to Property of the Fund Held by
the Custodian in the United States.....................................................................1
2.1 Holding Securities.............................................................................1
2.2 Delivery of Securities.........................................................................1
2.3 Registration of Securities.....................................................................3
2.4 Bank Accounts..................................................................................3
2.5 Payments for Shares............................................................................3
2.6 Availability of Federal Funds..................................................................3
2.7 Collection of Income...........................................................................3
2.8 Payment of Company Monies......................................................................3
2.9 Liability for Payment in Advance of Receipt of Securities Purchased............................4
2.10 Payments for Repurchases or Redemptions of Shares of a Fund....................................4
2.11 Appointment of Agents..........................................................................4
2.12 Deposit of Fund Assets in Securities System....................................................4
2.13 Segregated Account.............................................................................5
2.14 Ownership Certificates for Tax Purposes........................................................6
3. Proxies ...............................................................................................9
4. Communications Relating to Fund Portfolio Securities...................................................9
5. Proper Instructions....................................................................................9
6. Actions Permitted Without Express Authority............................................................9
7. Evidence of Authority..................................................................................9
8. Class Actions..........................................................................................10
9. Records 10
10. Opinion of Company's Independent Accountant............................................................10
11. Reports to Company by Independent Public Accountant....................................................10
12. Compensation of Custodian..............................................................................11
13. Responsibility of Custodian............................................................................11
14. Effective Period, Termination and Amendment............................................................11
15. Successor Custodian....................................................................................12
16. Interpretive and Additional Provisions.................................................................12
17. New York Law to Apply..................................................................................12
<PAGE>
18. Prior Contracts........................................................................................12
19. General 13
</TABLE>
<PAGE>
CUSTODIAN CONTRACT
------------------
This AGREEMENT made as of ___________________________by and between
Schroder Capital Funds (Delaware), a Delaware Business Trust having its
principal office and place of business at Two Portland Square, Portland, Maine
04101 (the "Company"), and Norwest Bank Minnesota, N.A., a national banking
association having its principal office and place of business at Sixth and
Marquette, Minneapolis, MN 55479 (the "Custodian").
WHEREAS, the Company is a mutual fund whose shares are currently
offered in seven series.
WHEREAS, the Company desires to appoint the Custodian as the custodian
for each Fund (which, together with each future series of the Company that
adopts this contract are hereafter referred to individually as a "Fund" and
collectively as the "Funds") set forth on Exhibit A and the Custodian desires to
accept such appointment;
WITNESSETH, that in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It.
The Company hereby employs the Custodian as the custodian of the assets
of each Fund. The Company agrees to deliver to the Custodian all securities and
cash owned by each Fund, and all payments of income, payments of principal or
capital distributions received by the Fund with respect to all securities owned
by the Fund from time to time, and the cash consideration received by the Fund
for such new or treasury shares of capital stock ("Shares") of the Fund as may
be issued or sold from time to time. The Custodian shall not be responsible for
any property of a Fund held or received by the Fund and not delivered to the
Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article
5), the Custodian shall from time to time employ one or more sub-custodians, but
only in accordance with any necessary approvals by the Board of Trustees of the
Company, and provided that the appointment by the Custodian of any
sub-custodians shall not relieve the Custodian of any of its responsibilities or
liabilities hereunder.
2. Duties of the Custodian with Respect to Fund Property held by the Custodian
in the United States.
2.1 Holding Securities.
The Custodian shall hold and physically segregate for the account of
each of the Funds all non-cash property, including all securities owned by the
Funds, other than securities which are maintained pursuant to Section 2.12 in a
clearing agency which acts as a securities depository or in a Federal Reserve
Bank, as Custodian may select, and to permit such deposited assets, subject to
Section 2.3, to be registered in the name of Custodian or Custodian's agent or
nominee on the records of such Federal Reserve Bank or such registered clearing
agency or the nominee of either, and to employ and use securities depositories,
clearing agencies, clearance systems, sub-custodians or agents located outside
the United States in connection with transactions involving foreign securities,
collectively referred to herein as a "Securities System".
The ownership of assets of each Fund, whether securities or otherwise,
and whether any such assets are held directly by the Custodian or through a
sub-custodian or a Securities System, shall be clearly recorded on the
Custodian's books as belonging to such Fund. Beneficial ownership of the assets
shall be freely transferable without the payment of money or value other than
for safe custody or administration.
No assets are, nor shall any assets be, subject to any right, charge,
security interest, lien, or claim of any kind in favor of the Custodian, any
sub-custodian, any Securities System, or any creditor of any of them.
Nothwithstanding any other provision of this Agreement, including
without limitation any provision of Section 2.2 or Section 2.8, all payments and
deliveries of assets of any kind shall be made only on a delivery-versus-payment
basis, except in accordance with specific Proper Instructions to do otherwise.
<PAGE>
2.2 Delivery of Securities.
The Custodian shall release and deliver securities owned by the Company
for the account of a Fund held by the Custodian or in a Securities System
account of the Custodian only upon receipt of Proper Instructions, which may be
continuing instructions when deemed appropriate by the parties, and only in the
following cases:
1) Upon sale of such securities for the account of a Fund and receipt
of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Company
on behalf of a Fund;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.12 hereof; 4) To the
depository agent in connection with tender or other similar offers
for portfolio securities of a Fund; 5) To the issuer thereof or
its agent when such securities are called, redeemed, retired or
otherwise become payable; provided that, in any such case, the
cash or other consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the name of
the Company for the account of a Fund or into the name of any
nominee or nominees of the Custodian in accordance with Section
2.3, or for exchange for a different number of bonds, certificates
or other evidence representing the same aggregate face amount or
number of units; provided that, in any such case, the new
securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of a Fund, to the
broker or its clearing agent, against a receipt, for examination
in accordance with "street delivery" custom; provided that in any
such case, the Custodian shall have no responsibility or liability
for any loss arising from the delivery of such securities prior to
receiving payment for such securities except as may arise from the
Custodian's own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of
the securities of the issuer of such securities, or pursuant to
provisions for conversion contained in such securities, or
pursuant to any deposit agreement; provided that, in any such
case, the new securities and cash, if any, are to be delivered to
the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts of
temporary securities for definitive securities; provided that, in
any such case, the new securities and cash, if any, are to be
delivered to the Custodian;
10) For delivery in connection with any loans of securities made by
the Company on behalf of a Fund, but only against receipt of
adequate collateral as agreed upon from time to time by the
Custodian and the Company, which may be in the form of cash or
obligations issued by the United States government, its agencies
or instrumentalities, except that in connection with any loans for
which collateral is to be credited to the Custodian's account in
the book-entry system authorized by the U.S. Department of the
Treasury, the Custodian will not be held liable or responsible for
the delivery of securities owned by a Fund prior to the receipt of
such collateral in accordance with those procedures implemented by
such system providing the greatest protection to the assets of the
Company under the circumstances.
11) For delivery as security in connection with any borrowings by the
Company on behalf of a Fund requiring a pledge of assets by the
Company on behalf of such Fund, but only against receipt of
amounts borrowed;
12) For delivery in accordance with the provisions of any agreement
among the Company on behalf of a Fund, the Custodian and a
broker-dealer registered under the Securities Exchange Act of 1934
(the "Exchange Act") and a member of the National Association of
Securities Dealers, Inc. ("NASD"), relating to the compliance with
the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Company;
<PAGE>
13) For delivery in accordance with the provisions of any agreement
among the Company on behalf of a Fund, the Custodian, and a
Futures Commission Merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract Market,
or any similar organization or organizations, regarding account
deposits in connection with transactions by the Company on behalf
of a Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the applicable Fund, for delivery to such Transfer
Agent or to the holders of shares in connection with distributions
in kind, as may be described from time to time in the Fund's
currently effective prospectus and statement of additional
information ("prospectus"), in satisfaction of requests by holders
of Shares for repurchase or redemptions; and
15) For any other proper corporate purpose, but only upon receipt of,
in addition to Proper Instructions, a certificate signed by an
officer of the Company, specifying the securities to be delivered,
setting forth the purpose for which such delivery is to be made,
declaring such purpose to be a proper corporate purpose, and
naming the person or persons to whom delivery of such securities
shall be made.
2.3 Registration of Securities.
Domestic securities held by the Custodian (other than bearer
securities) shall be registered in the name of the Company for the account of
the applicable Fund(s) or in the name of any nominee of the Company or of any
nominee of the Custodian which nominee shall be assigned exclusively to the
Company, unless the Company has authorized in writing the appointment of a
nominee to be used in common with other registered investment companies having
the same investment adviser as the applicable Fund(s). All securities accepted
by the Custodian on behalf of the Company under the terms of this Contract shall
be in "street name" or other good delivery form.
2.4 Bank Accounts.
Cash held by the Custodian for each Fund and otherwise uninvested may
be deposited in the Banking Department of the Custodian or in such other banks
or trust companies as the Custodian may in its discretion deem necessary or
desirable, in each case in an account which does not contain any assets of the
Custodian other than assets held by it as a fiduciary, custodian, or otherwise
for customers and in which it has no beneficial interest; provided, however,
that every such bank or trust company shall be qualified to act as a custodian
under the Investment Company Act of 1940 and that each such bank or trust
company and the cash to be deposited with each such bank or trust company shall
be approved by vote of a majority of the Board of Directors of the Company. Such
cash shall be deposited by the Custodian in its capacity as Custodian and shall
be withdrawable by the Custodian only in that capacity.
2.5 Payments for Shares.
The Custodian shall receive from the Transfer Agent of each Fund and
deposit into the Fund account such payments as are received for Shares of the
Fund issued or sold from time to time by the Fund. The Custodian will provide
timely notification to the Fund and the Transfer Agent of any receipt by it of
payments for Shares of the Funds.
2.6 Availability of Federal Funds.
Upon mutual agreement between the Company and the Custodian, the
Custodian shall, upon the receipt of Proper Instructions, make federal funds
available to the Funds as of specified times agreed upon from time to time by
the Company and the Custodian in the amount of checks received in payment for
Shares of the Funds which are deposited into the Funds' accounts.
2.7 Collection of Income.
The Custodian shall, or shall cause its agent or sub-custodian to,
collect on a timely basis all income and other payments with respect to
registered securities held hereunder to which each Fund shall be entitled either
by law or pursuant to custom in the securities business, and shall collect on a
timely basis all income and other payments with respect to bearer securities if,
on the date of payment by the issuer, such securities are held by the Custodian
or its agent or sub-custodian and shall credit such income, as collected, to the
<PAGE>
applicable Fund's custodian account. Without limiting the generality of the
foregoing, the Custodian shall detach and present for payment all coupons and
other income items requiring presentation as and when they become due and shall
collect interest when due on securities held hereunder. Unless the Custodian is
the lending agent in connection with securities loaned by the Fund, arrangements
for the collection of income due each Fund on securities loaned pursuant to the
provisions of Section 2.2 (10) shall be the responsibility of the Company. The
Custodian will have no duty or responsibility in connection therewith, other
than to provide the Company with such information or data as may be necessary to
assist the Company in arranging for the timely delivery to the Custodian of the
income to which each Fund is properly entitled.
2.8 Payment of Company Monies.
Upon receipt of Proper Instructions, which may be continuing
instructions when deemed appropriate by the parties, the Custodian shall pay out
monies of each Fund in the following cases only
1) Upon the purchase of domestic securities, options, or options on
futures contracts for the account of each Fund but only (a)
against the delivery of such securities or evidence of title to
such options or options on futures contracts, to the Custodian
registered in the name of the Company for the account of a Fund
or in the name of a nominee of the Custodian referred to in
Section 2.3 hereof or in proper form for transfer; (b) in the
case of a purchase effected through a Securities System, in
accordance with the conditions set forth in Section 2.12 hereof
or (c) in the case of the repurchase agreements entered into
between the Company and the Custodian, or another bank, or a
broker-dealer which is a member of NASD against delivery of the
securities either in certificate form or through an entry
crediting the Custodian's account at the Federal Reserve Bank
with such securities.
2) In connection with conversion, exchange or surrender of
securities owned by a Fund as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by a Fund as
set forth in Section 2.10 hereof;
4) For the payment of any expense or liability incurred by a Fund,
including but not limited to the following payments for the
account of such Fund: interest, taxes, management, accounting,
transfer agent and legal fees, and operating expenses of the Fund
whether or not such expenses are to be in whole or part
capitalized or treated as deferred expenses;
5) For the payment of any dividends declared pursuant to the
governing documents of the Company and the applicable Fund;
6) For payment of the amount of dividends received in respect of
securities sold short; or
7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a certificate signed by an
officer of the Company, specifying the amount of such payment,
setting forth the purpose for which such payment is to be made,
declaring such purpose to be a proper purpose, and naming the
person or persons to whom such payment is to be made.
2.9 Liability for Payment in Advance of Receipt of Securities Purchased.
The Custodian shall not make payment for the purchase of domestic
securities for the account of a Fund in advance of receipt of the securities
purchased in the absence of specific written instructions from the Company to so
pay in advance. In any and every case where payment for purchase of domestic
securities for the account of a Fund is made by the Custodian in advance of
receipt of the securities purchased in the absence of specific written
instructions from the Company to so pay in advance, the Custodian shall be
absolutely liable to the Company (for the account of the Fund) for such
securities to the same extent as if the securities had been received by the
Custodian.
2.10 Payments for Repurchases or Redemptions of Shares of a Fund.
From such funds as may be available for the purpose but subject to the
limitations of the Trust Instrument or Bylaws and any applicable votes of the
Board of Trustees of the Company, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the redemption or
repurchase of Shares of a Fund, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders.
<PAGE>
2.11 Appointment of Agents.
The Custodian may, with the consent of the Company, at any time or
times in its discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified under the Investment Company Act of 1940
to act as a custodian, as its agent to carry out such of the provisions of this
Article 2 as the Custodian may from time to time direct; provided, however, that
the appointment of any agent shall not relieve the Custodian of any of its
responsibilities or liabilities hereunder.
2.12 Deposit of Fund Assets in Securities Systems.
The Custodian may deposit and/or maintain domestic securities owned by
any Fund in a clearing agency registered with the Securities and Exchange
commission under Section 17A of the Exchange Act, which acts as a securities
depository, or in a Federal Reserve Bank, as Custodian may select, and permit
such deposited assets to be registered in the name of Custodian or Custodian's
agent or nominee on the records of such Federal Reserve Bank or such registered
clearing agency or the nominee of either (collectively referred to herein as
"Securities System") in accordance with applicable Federal Reserve Board and
Securities and Exchange Commission rules and regulations, if any, and subject to
the following provisions:
1) The Custodian may keep domestic securities of a Fund in a
Securities System provided that such securities are represented in
an account ("Account") of the Custodian in the Securities System
which shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for customers;
2) The records of the Custodian with respect to domestic securities
of a Fund which are maintained in a Securities System shall
identify by book-entry those securities belonging to such Fund;
3) The Custodian shall pay for domestic securities purchased for the
account of a Fund upon (i) the simultaneous receipt of advice from
the Securities System that such securities have been transferred
to the Account, and (ii) the making of an entry on the records of
the Custodian to reflect such payment and transfer for the account
of the Fund. The Custodian shall transfer domestic securities sold
for the account of a Fund upon (i) the simultaneous receipt of
advice from the Securities System that payment for such securities
has been transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such transfer and
payment for the account of the Fund. Copies of all advises from
the Securities System of transfers of securities for the account
of a Fund shall identify the Fund, be maintained for the Fund by
the Custodian and be provided to the Company at its request. Upon
request, the Custodian shall furnish the Company confirmation of
each transfer to or from the account of a Fund in the form of a
written advice or notice and shall furnish to the Company copies
of daily transaction sheets reflecting each day's transactions in
the Securities System for the account of each Fund.
4) The Custodian shall provide the Company with any report obtained
by the Custodian on the Securities System's accounting system,
internal accounting control and procedures for safeguarding
securities deposited in the Securities System;
5) The Custodian shall have received the initial certificate required
by Article 15 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Company (for the account of each
Fund) for any loss or damage to the applicable Fund(s) resulting
from use of the Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its agents or
of any of its or their employees or from failure of the Custodian
or any such agent or employee to enforce effectively such rights
as it may have against the Securities System; at the election of
the Company, it shall be entitled to be subrogated to the rights
of the Custodian with respect to any claim against the Securities
System or any other person which the Custodian may have as a
consequence of any such loss or damage if and to the extent that
the applicable Funds have not been made whole for any such loss or
damage.
<PAGE>
2.13 Segregated Account.
The Custodian shall upon receipt of Proper Instructions establish and
maintain a segregated account or accounts for and on behalf of each Fund, into
which account or accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to Section 2.12
hereof, (i) in accordance with the provisions of any agreement among the
Company, the Custodian and a broker-dealer registered under the Exchange Act and
a member of NASD (or any futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with the rules of The Options
Clearing Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract market), or of
any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Company for the account of
any Fund, (ii) for the purpose of segregating cash or government securities in
connection with options purchased, sold or written by the Company for the
account of any Fund or commodity futures contracts or options thereon purchased
or sold by the Company for the account of any Fund, (iii) for the purpose of
compliance by the Company with the procedures required by Investment Company Act
Release No. 10666, or any subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper corporate purposes,
but only, in the case of the clause (iv), upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of the Board of Trustees of the
Company signed by an officer of the Company and certified by the Secretary or an
Assistant Secretary, setting forth the purpose or purposes of such segregated
account and declaring such purposes to be proper corporate purposes.
2.14 Ownership Certificates for Tax Purposes.
The Custodian shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in connection with receipt of
income or other payments with respect to domestic securities of each Fund held
by it and in connection with transfers of securities.
3. Proxies.
The Custodian shall, with respect to the securities held hereunder,
cause to be promptly executed by the registered holder of such securities, if
the securities are registered otherwise than in the name of the Company or a
nominee of the Company, all proxies, without indication of the manner in which
such proxies are to be voted, and shall promptly deliver to the Company such
proxies, all proxy soliciting materials and all notices relating to such
securities.
4. Communications Relating to Fund Portfolio Securities.
The Custodian shall transmit promptly to the Company all written
information (including, without limitation, pendency of calls and maturities of
securities and expirations of rights in connection therewith and notices of
exercise of call and put options written by the Fund and the maturity of futures
contracts purchased or sold by the Company) received by the Custodian from
issuers of the securities being held for each Fund. With respect to tender or
exchange offers, the Custodian shall transmit promptly to the Company all
written information received by the Custodian from issuers of the securities
whose tender or exchange is sought and from the party (or his agents) making the
tender or exchange offer. If the Company desires to take action with respect to
any tender offer, exchange offer or any other similar transaction, the Company
shall notify the Custodian at least one business day prior to the date on which
the Custodian is to take such action.
5. Proper Instructions.
Proper Instructions as used in this Contract means a writing signed or
initialed by one or more person or persons as the Board of Trustees of the
Company shall have from time to time authorized. Each such writing shall set
forth the specific transaction or type of transaction involved, including a
specific statement of the purpose for which such action is requested. Oral
instructions will be considered Proper Instructions if the Custodian reasonably
believes them to have been given by a person authorized to give such
instructions with respect to the transaction involved. The Company shall cause
all oral instructions to be confirmed in writing, provided that any failure to
provide such confirmation will not in any way limit the effectiveness of such
oral instructions. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of Trustees of the
Company accompanied by a detailed description of procedures approved by the
<PAGE>
Board of Trustees, Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices provided that the
Board of Trustees and the Custodian are satisfied that such procedures afford
adequate safeguards for each Fund's assets.
6. Actions Permitted Without Express Authority.
The Custodian may in its discretion, without express authority from the
Company:
1) Make payments to itself or others for minor expenses of handling
securities provided that the Company shall be notified of all
such payments in advance;
2) Surrender securities in temporary form for securities in
definitive form;
3) Endorse for collection, in the names of the applicable Fund,
checks, drafts and other negotiable instruments; and
4) In general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and
other dealings with the securities and property of the Company
except as otherwise directed by the Board of Trustees of the
Company.
7. Evidence of Authority.
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the
Company. The Custodian may receive and accept a certified copy of a vote of the
Board of Directors of the Company as conclusive evidence (a) of the authority of
any person to act in accordance with such vote or (b) of any determination or of
any action duly made or taken by the Board of Directors as described in such
vote, and such vote may be considered as in full force and effect until receipt
by the Custodian of written notice to the contrary.
8. Class Actions. The Custodian shall transmit promptly to the Company all
notices or other communications received by it in connection with any class
action lawsuit relating to securities currently or previously held for one or
more of the Funds. Upon being directed by the Company to do so, the Custodian
shall furnish to the Company any and all written materials which establish the
holding/ownership, amount held/owned, and period of holding/ownership of the
securities in question.
9. Records.
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Company and each Fund under the Investment Company Act of
1940, with particular attention to Section 31 thereof and Rule 31a-1 and 31a-2
thereunder. The Custodian shall also maintain records as directed by the Company
in connection with applicable federal and state tax laws and any other law or
administrative rules or procedures which may be applicable to the Company and
the Funds. With respect to securities and cash deposited with a Securities
System, a sub-custodian or an agent of the Custodian, the Custodian shall
identify on its books all such securities and cash as belonging to the Company
for the account of the applicable Fund(s). All such records shall be the
property of the Company and shall at all times during the regular business hours
of the Custodian be open for inspection by duly authorized officers, employees
or agents of the Company. Such records shall be made available to the Company
for review by employees and agents of the Securities and Exchange Commission.
The Custodian shall furnish to the Company, and its agents as directed by the
Company, as of the close of business on the last day of each month a statement
showing all transactions and entries for the account of the Company during that
month, and all holdings as of month-end.
All records so maintained in connection with the performance of its
duties under this Agreement shall remain the property of the Company and, in the
event of termination of this Agreement, shall be delivered to the Company.
Subsequent to such delivery, and surviving the termination of this Agreement,
the Company shall provide the Custodian access to examine and photocopy such
records as the Custodian, in its discretion, deems necessary, for so long as
such records are retained by the Company.
<PAGE>
10. Opinion of Company's Independent Accountant.
The Custodian shall take all reasonable action, as the Company may from
time to time request, to obtain from year to year favorable opinions from the
Company's independent accountants with respect to the Custodian's activities
hereunder and in connection with the preparation of the Company's Form N-1A and
Form N-SAR or other reports to the Securities and Exchange Commission and with
respect to any other requirements of such Commission.
11. Reports to Company by Independent Public Accountants.
The Custodian shall provide the Company, at such times as the Company
may reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts, including
securities deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian under this Contract; such reports shall be of
sufficient scope, and in sufficient detail, as may reasonably be required by the
Company to provide reasonable assurance that any material inadequacies would be
disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
12. Compensation of Custodian.
For performance by the Custodian pursuant to this Agreement, the
Company, agrees to pay the Custodian annual asset fees as set out in Exhibit B
as billed by the Custodian on a monthly basis. Fees may be changed from time to
time subject to mutual written agreement between the Company and the Custodian.
No fee shall be payable hereunder with respect to any Fund during any period in
which such Fund invests all (or substantially all) of its investment assets in a
registered, open-end management investment company, or separate series thereof,
in accordance with Section 12(d)(1)(E) under the Investment Company Act of 1940,
as amended.
13. Responsibility of Custodian.
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties.
The Custodian shall be held to the exercise of reasonable care in carrying out
the provisions of this Contract, but shall be kept indemnified by and shall be
without liability to the Company or any Fund for any action taken or omitted by
it in good faith and without negligence. It shall be entitled to rely on and may
act upon advice of counsel of, or reasonably acceptable to, the Company on all
matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice.
If the Company requires the Custodian to take any action with respect
to securities, which action involves the payment of money or which action may,
in the reasonable opinion of the Custodian, result in the Custodian or its
nominee assigned to the Company being liable for the payment of money or
incurring liability of some other form, the Company, as a prerequisite to
requiring the Custodian to take such action, shall provide indemnity to the
Custodian in an amount and form reasonably satisfactory to it.
If the Company requires the Custodian to advance cash or securities for
any purpose or in the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of a Fund shall be
security therefor and should the Company fail to repay the Custodian promptly
with respect to any Fund, the Custodian shall be entitled to utilize available
cash and to dispose of assets to the extent necessary to obtain reimbursement.
The Custodian shall not be liable for any loss or damage to the Company
or any Fund resulting from participation in a securities depository unless such
loss or damage arises by reason of any negligence, misfeasance, or willful
misconduct of officers or employees as agents of the Custodian, or from its
failure to enforce effectively such rights as it may have against any securities
depository or from use of a sub-custodian or agent. Anything in this Contract to
the contrary notwithstanding, the Custodian shall exercise, in the performance
of its obligations undertaken or reasonably assumed with respect to this
Agreement, reasonable care, for which the Custodian shall be responsible to the
same extent as if it were performing such duties directly. The Custodian shall
be responsible for the securities and cash held by or deposited with any
sub-custodian or agent to the same extent as if such securities and cash were
directly held by or deposited with the Custodian. The Custodian hereby agrees
<PAGE>
that it shall indemnify and hold the Company and each applicable Fund harmless
from and against any loss which shall occur as a result of the failure of a
foreign sub-custodian holding the securities and cash to provide a level of
safeguards for maintaining any Fund's securities and cash not materially
different from that provided by a United States custodian holding such
securities and cash in the United States.
The Custodian agrees to indemnify and hold the Company and each of the
Funds harmless for any and all loss, liability and expense, including reasonable
legal fees and expenses, arising out of the Custodian's own negligence or
willful misconduct or that of its officers, agents, sub-custodians or employees
in the performance of the Custodian's duties and obligations under this
Contract.
14. Effective Period, Termination and Amendment.
The Contract shall become effective as of its execution, shall continue
in full force and effect until terminated as hereinafter provided, may be
amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than sixty (60) days after the date of such delivery or mailing; provided,
however, that the Custodian shall not act under Section 2.12 hereof in the
absence of receipt of an initial certificate of the Secretary or an Assistant
Secretary that the Board of Trustees of the Company has approved the initial use
of a particular Securities System, as required by Rule 17f-4 under the
Investment Company Act of 1940, provided further, however, that the Company
shall not amend or terminate this Contract in contravention of any applicable
federal or state regulations, or any provision of its Trust Instrument, and
further provided, that the Company may at any time by action of its Board of
Trustees, with respect to any Fund (i) substitute another bank or trust company
for the Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency or
upon the happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
Upon termination of the Contract, the Company on behalf of each Fund
shall pay to the Custodian such compensation as may be due as elsewhere provided
in this Agreement of the date of such termination and shall likewise reimburse
the Custodian for its reasonable costs, expenses and disbursements as elsewhere
provided in this Agreement.
15. Successor Custodian.
If a successor custodian shall be appointed by the Board of Trustees of
the Company, the Custodian shall, upon termination, deliver to such successor
custodian all securities, funds and other properties held by the Custodian and
all instruments held by the Custodian relative thereto and all property held by
it under this Contract and to transfer to an account of such successor custodian
all of each Fund's securities held in any Securities System.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board of
Trustees of the Company, deliver at the office of the Custodian and transfer
such securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940, of
its own selection, having an aggregate capital, surplus, and undivided profits,
as shown by its last published report, of not less than $100,000,000, all
securities, funds and other properties held by the Custodian and all instruments
held by the Custodian relative thereto and all other property held by it under
this Contract and to transfer to an account of such successor custodian all of
each Fund's securities held in any Securities System. Thereafter, such bank or
trust company shall be the successor of the Custodian under and pursuant to this
Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Company to procure the certified copy of the vote referred to or
of the Board of Trustees to appoint a successor custodian, the Custodian shall
be entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
<PAGE>
16. Interpretive and Additional Provisions.
In connection with the operation of this Contract, the Custodian and
the Company may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Company. No interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this Contract.
17. New York Law to Apply.
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of the State of New York.
18. Prior Contracts.
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Company and the Custodian relating to the custody of
each Fund's assets. This Contract shall not be assignable by any party hereto;
provided however, that any entity into which the Company or the Custodian, as
the case may be, may be merged or converted or with which it may be
consolidated, or any entity succeeding to all or substantially all of the
business of the Company or the custody business of the Custodian, shall succeed
to the respective rights and shall assume the respective duties of the Company
or the Custodian, as the case may be, hereunder.
19. General.
Nothing expressed or mentioned in or to be implied from any provision
of this Contract is intended to, or shall be construed to give any person or
corporation other than the parties hereto, any legal or equitable right, remedy
or claim under or in respect to this Contract, or any covenant, condition and
provision herein contained, this Contract and all of the covenants, conditions
and provisions hereof being intended to be and being the sole and exclusive
benefit of the parties hereto and their respective successors and assigns.
A copy of the Trust Instrument of the Company is on file with the
Secretary of State of the State of Delaware and notice is hereby given that this
instrument is executed on behalf of the Trustees of the Company as Trustees and
not individually, and that the obligations of or arising out of this instrument
are not binding upon any of the Trustees, officers, or shareholders individually
but are binding only upon the assets and property of the Trust.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized officers as of the day
and year first above written.
SCHRODER CAPITAL FUNDS (DELAWARE) NORWEST BANK MINNESOTA, N.A.
By /s/ Catherine Mazza By /s/ Denise Zapzalka
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ATTEST ATTEST
By /s/ Carin Muhlbaum By /s/ Susan J. Skonnard
------------------ ---------------------
<PAGE>
EXHIBIT A
SCHRODER CAPITAL FUNDS (DELAWARE)
Schroder U.S. Diversified Growth Fund
Schroder U.S. Smaller Companies Fund
Schroder MicroCap Fund
<PAGE>
EXHIBIT B
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FEE STRUCTURE FOR SCHRODER CAPITAL MANAGEMENT INTERNATIONAL
- --------------------------------------------------------------------------------
1. ANNUAL ASSET-BASED FEE (WITH NO TRANSACTION FEE):
1.5 BASIS POINTS
THE ABOVE FEE STRUCTURE WILL BE GUARANTEED BY NORWEST BANK FOR A THREE YEAR
PERIOD.
