As filed with the Securities and Exchange Commission on September 30, 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. 68
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 48
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:
[X] immediately upon filing pursuant to Rule 485, paragraph (b)
[ ] on ________ pursuant to Rule 485, paragraph (b)
[ ] 60 days after filing pursuant to Rule 485, paragraph (a)(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: Investor and Advisor Shares of 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 Investor
Shares of Schroder Micro Cap Fund. Because Schroder International Fund,
Schroder Emerging Markets Fund, Schroder International. Smaller Companies
Fund, Schroder International Bond Fund, and Schroder U.S. Smaller Companies
Fund are structured as master-feeder funds, this amendment is also executed
by Schroder Capital Funds.
<PAGE>
CROSS REFERENCE SHEET
PART A
(Prospectuses offering Investor Shares and Advisor Shares of 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 Investor
Shares of Schroder Micro Cap Fund)
<TABLE>
<S> <C> <C>
FORM N-1A
ITEM NO. LOCATION IN PROSPECTUS
- ------- ----------------------
Item 1. Cover Page Cover Page
Item 2. Synopsis FUND STRUCTURE
Item 3. Condensed Financial Information FINANCIAL HIGHLIGHTS
Item 4. General Description of Registrant INVESTMENT OBJECTIVES AND POLICIES; MANAGEMENT OF
THE TRUST
Item 5. Management of the Fund MANAGEMENT OF THE TRUST
Item 5A. Management's Discussion of Fund Performance Not Applicable
Item 6. Capital Stock and Other Securities MANAGEMENT OF THE TRUST
Item 7. Purchase of Securities Being Offered HOW TO BUY SHARES
Item 8. Redemption or Repurchase HOW TO SELL SHARES
Item 9. Pending Legal Proceedings None
</TABLE>
<PAGE>
CROSS REFERENCE SHEET
PART B
(SAI offering Investor Shares and Advisor Shares of 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 Investor Shares of
Schroder Micro Cap Fund)
<TABLE>
<S> <C> <C>
FORM N-1A
ITEM NO. LOCATION IN SAI
- -------- ---------------
Item 10. Cover Page Cover Page
Item 11. Table of Contents TABLE OF CONTENTS
Item 12. General Information and History OTHER INFORMATION
Item 13. Investment Objectives and Other Policies INVESTMENT OBJECTIVES AND POLICIES OF THE TRUST
AND RISK CONSIDERATIONS; INVESTMENT RESTRICTIONS
Item 14. Management of the Fund MANAGEMENT
Item 15. Control Persons and Principal Holders of MANAGEMENT
Securities
Item 16. Investment Advisory and Other Services MANAGEMENT; PORTFOLIO TRANSACTIONS; OTHER
INFORMATION
Item 17. Brokerage Allocation and Other Practices PORTFOLIO TRANSACTIONS
Item 18. Capital Stock and Other Securities OTHER INFORMATION
Item 19. Purchase, Redemption and Pricing of ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Securities Being Offered
Item 20. Tax Status TAXATION
Item 21. Underwriters MANAGEMENT
Item 22. Calculation of Performance Data OTHER INFORMATION
Item 23. Financial Statements Not Applicable
</TABLE>
<PAGE>
PROSPECTUS
October 1, 1998
SCHRODER CAPITAL FUNDS (DELAWARE)
INVESTOR SHARES
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
The Schroder Capital Funds are mutual funds offering a wide range of investment
objectives: SCHRODER INTERNATIONAL FUND, SCHRODER INTERNATIONAL SMALLER
COMPANIES FUND, SCHRODER EMERGING MARKETS FUND, SCHRODER INTERNATIONAL BOND
FUND, SCHRODER U.S. DIVERSIFIED GROWTH FUND, SCHRODER U.S. SMALLER COMPANIES
FUND, AND SCHRODER MICRO CAP FUND. Each Fund is a series of shares of Schroder
Capital Funds (Delaware), and each Fund (other than Schroder U.S. Diversified
Growth Fund and Schroder Micro Cap Fund) currently invests substantially all of
its assets in a separately managed portfolio of Schroder Capital Funds or
Schroder Capital Funds II, each of which is a registered, open-end management
investment company. Schroder Capital Management International Inc. serves as
investment adviser to each of the Funds and to each portfolio. Each of the
Funds, except the Schroder Emerging Markets Fund and the Schroder International
Bond Fund, is a diversified mutual fund.
This Prospectus explains concisely the information that a prospective investor
should know before investing in Investor Shares of the Funds. Please read it
carefully and keep it for future reference. INVESTORS CAN FIND MORE DETAILED
INFORMATION ABOUT SCHRODER CAPITAL FUNDS (DELAWARE) IN THE OCTOBER 1, 1998
STATEMENT OF ADDITIONAL INFORMATION, AS AMENDED FROM TIME TO TIME. FOR A FREE
COPY OF THE STATEMENT OF ADDITIONAL INFORMATION, PLEASE CALL 1-800-290-9826. The
Statement of Additional Information has been filed with the Securities and
Exchange Commission and is incorporated into this Prospectus by reference. The
Securities and Exchange Commission maintains an Internet World Wide Web site (at
http://www.sec.gov) that contains the Statement of Additional Information,
materials that are incorporated by reference into this Prospectus and the
Statement of Additional Information, and other information about the Funds.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND
INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
FUND STRUCTURE............................................ 3
FINANCIAL HIGHLIGHTS...................................... 6
INVESTMENT OBJECTIVES AND POLICIES........................ 15
HOW TO BUY SHARES......................................... 26
HOW TO SELL SHARES........................................ 29
OTHER INFORMATION......................................... 31
MANAGEMENT OF THE TRUST................................... 32
APPENDIX A................................................ A-1
Description of Securities Ratings
2
<PAGE>
================================================================================
FUNDS AVAILABLE THROUGH SCHRODER FUND ADVISORS INC.
PLEASE CALL FOR COMPLETE INFORMATION AND TO OBTAIN A PROSPECTUS.
PLEASE READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST.
<TABLE>
<S> <C>
SCHRODER CAPITAL FUNDS (DELAWARE) 1-800-290-9826 SCHRODER SERIES TRUST 1-800-464-3108
SCHRODER INTERNATIONAL FUND SCHRODER LARGE CAPITALIZATION EQUITY FUND
SCHRODER EMERGING MARKETS FUND SCHRODER SMALL CAPITALIZATION VALUE FUND
SCHRODER SMALL CAPITALIZATION VALUE FUND SCHRODER MIDCAP VALUE FUND
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND SCHRODER INVESTMENT GRADE INCOME FUND
SCHRODER INTERNATIONAL BOND FUND SCHRODER SHORT-TERM INVESTMENT FUND
SCHRODER U.S. DIVERSIFIED GROWTH FUND
SCHRODER U.S. SMALLER COMPANIES FUND
SCHRODER MICRO CAP FUND
</TABLE>
=========================================================== ====================
FUND STRUCTURE
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 all of its investable assets in a separate portfolio (a
"Portfolio") of either 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. Accordingly, the investment
experience of each Fund will correspond directly with the investment experience
of its corresponding Portfolio. See "Management of the Trust - Information about
the Portfolios." The Funds and the Portfolios in which they invest are:
<TABLE>
<S> <C>
Funds Portfolios
SCHRODER INTERNATIONAL FUND INTERNATIONAL EQUITY FUND
(Schroder Capital Funds)
SCHRODER EMERGING MARKETS FUND SCHRODER EM CORE PORTFOLIO*
(Schroder Capital Funds)
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND SCHRODER INTERNATIONAL SMALLER COMPANIES PORTFOLIO
(Schroder Capital Funds)
SCHRODER INTERNATIONAL BOND FUND SCHRODER INTERNATIONAL BOND PORTFOLIO*
(Schroder Capital Funds II)
SCHRODER U.S. SMALLER COMPANIES FUND SCHRODER U.S. SMALLER COMPANIES PORTFOLIO
(Schroder Capital Funds)
</TABLE>
Each of SCHRODER U.S. DIVERSIFIED GROWTH FUND and SCHRODER MICRO CAP FUND seeks
to achieve its investment objective by investing directly in securities.
* Each of SCHRODER EM CORE PORTFOLIO and SCHRODER INTERNATIONAL BOND
PORTFOLIO is a non-diversified series of an open-end management investment
company. Each of the other Portfolios is a diversified series of an open-end
management investment company. See "Other Investment Practices and Risk
Considerations - Non-Diversification and Geographic Concentration."
3
<PAGE>
SUMMARY OF EXPENSES
Expenses are one of several factors to consider when investing in Investor
Shares of the Funds. There are no "Shareholder Transaction Expenses" associated
with a purchase or redemption of Investor Shares of the Funds. "Annual Operating
Expenses" for each Fund other than Schroder Emerging Markets Fund, Schroder
International Bond Fund and Schroder Micro Cap Fund show expenses incurred by
each Fund with respect to Investor Shares based on the Fund's expenses for the
most recently completed fiscal year. Annual Operating Expenses for Schroder
Emerging Markets Fund, Schroder International Bond Fund and Schroder Micro Cap
Fund are estimated based on anticipated expenses for the Funds' current fiscal
years. Annual Operating Expenses of each Fund (other than Schroder U.S.
Diversified Growth Fund and Schroder Micro Cap Fund) include the Fund's pro rata
portion of all operating expenses of the Portfolio of Schroder Capital Funds or
Schroder Capital Funds II in which the Fund invests. The Example shows the
cumulative expenses attributable to a hypothetical $1,000 investment in each
Fund over specified periods.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES NONE
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
<S> <C> <C> <C> <C> <C> <C> <C>
SCHRODER SCHRODER SCHRODER
SCHRODER INTERNATIONAL U.S. U.S.
SCHRODER EMERGING SMALLER SCHRODER DIVERSIFIED SMALLER SCHRODER
INTERNATIONAL MARKETS COMPANIES INTERNATIONAL GROWTH COMPANIES MICRO CAP
FUND FUND FUND BOND FUND FUND FUND FUND
Management Fees(1)
(after expense
limitation)(2) 0.61% 0.81% 0.00% 0.19% 0.57% 0.85% 0.61%
12b-1 Fees None None None None None None None
Other Expenses
(after expense
limitation)(2) 0.38% 0.89% 1.50% 0.76% 0.93% 0.52% 1.39%
----- ----- ----- ----- ----- ----- -----
Total Fund Operating
Expenses (after
expense
limitation)(2) 0.99% 1.70% 1.50% 0.95% 1.50% 1.37% 2.00%
</TABLE>
(1) Management Fees reflect the fees paid by the Portfolio and the Fund for
investment advisory and administrative services.
(2) The Management Fees, Other Expenses, and Total Fund Operating Expenses for
each of the Funds reflect expense limitations currently in effect. See
"Management of the Trust." Without the limitations, Management Fees, Other
Expenses, and Total Fund Operating Expenses for Investor Shares would be
0.68%, 0.38%, and 1.06%, respectively, in the case of Schroder
International Fund; 1.25%, 10.69%, and 11.94%, respectively, in the case of
Schroder Emerging Markets Fund; 1.10%, 2.83%, and 3.93%, respectively, in
the case of Schroder International Smaller Companies Fund; 0.70%, 9.55%,
and 10.25%, respectively, in the case of Schroder International Bond Fund;
0.75%, 0.93%, and 1.68%, respectively, in the case of Schroder U.S.
Diversified Growth Fund; and 1.50%, 1.42%, and 2.92%, respectively, in the
case of Schroder Micro Cap Fund. Other Expenses and Total Fund Operating
Expenses for each of Schroder Emerging Markets Fund, Schroder International
Bond Fund and Schroder Micro Cap Fund are estimated based on anticipated
expenses for the Fund current fiscal years.
EXAMPLE
Your investment of $1,000 would incur the following expenses, assuming 5% annual
return and redemption at the end of each period:
<TABLE>
<S> <C> <C> <C> <C>
1 year 3 years 5 years 10 years
------ ------- ------- --------
Schroder International Fund $10 $32 $55 $121
Schroder Emerging Markets Fund $17 $54 N/A N/A
Schroder International Smaller Companies Fund $15 $47 $82 $179
Schroder International Bond Fund $10 $30 N/A N/A
Schroder U.S. Diversified Growth Fund $15 $47 $82 $179
Schroder U.S. Smaller Companies Fund $14 $43 $75 $164
Schroder Micro Cap Fund $20 $63 N/A N/A
</TABLE>
The Annual Operating Expenses table and Example are provided to help you
understand your share of the operating expenses of a Fund attributable to
Investor Shares. THE TABLE AND EXAMPLE DO NOT REPRESENT PAST OR FUTURE EXPENSE
LEVELS. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. FEDERAL
REGULATIONS REQUIRE THE EXAMPLE TO ASSUME A 5% ANNUAL RETURN, BUT ACTUAL ANNUAL
RETURNS WILL VARY.
4
<PAGE>
[This page has been intentionally left blank.]
5
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights presented below for Schroder Micro Cap Fund, Schroder
U.S. Smaller Companies Fund and Schroder Emerging Markets Fund for the fiscal
year ended May 31, 1998 and for Schroder International Fund, Schroder
International Smaller Companies Fund and Schroder U.S. Diversified Growth Fund
for the fiscal year ended October 31, 1997 have been audited by
PricewaterhouseCoopers LLP, independent accountants to the Funds. The audited
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 April 30, 1998 for each of Schroder
International Fund, Schroder International Smaller Companies Fund and Schroder
U.S. Diversified Growth Fund, and for the period ended June 30, 1998 for
Schroder International Bond Fund are unaudited. The unaudited financial
statements for the period ended April 30, 1998 for each of Schroder
International Fund, Schroder International Smaller Companies Fund and Schroder
U.S. Diversified Growth Fund, and for the period ended June 30, 1998 for
Schroder International Bond Fund, 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.
SCHRODER INTERNATIONAL FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Six Months
Ended Year Ended Month Ended
April 30, October 31, October 31,
(unaudited) -----------------------------------------------------------------------------------
1998 1997 1996(a) 1995 1994 1993 1992 1991 1990 1989
---- ---- ------- ---- ---- ---- ---- ---- ---- ----
NET ASSET VALUE, BEGINNING OF PERIOD $18.37 $20.01 $20.91 $23.17 $20.38 $15.15 $16.22 $17.70 $18.20 $18.95
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
INVESTMENT OPERATIONS:
Net Investment Income (Loss)(b) 0.06 0.14 0.15 0.46 0.18 0.08 0.25 0.25 0.15 0.03
Net Realized and Unrealized Gain
(Loss) on Investments 2.43 1.31 1.74 (0.18) 2.69 5.27 (1.04) (0.25) (0.12) (0.78)
---- ---- ---- ------- ---- ---- ------ ------ ------ ------
Total from Investment Operations 2.49 1.45 1.89 0.28 2.87 5.35 (0.79) 0.00 0.03 (0.75)
---- ---- ---- ---- ---- ---- ------ ---- ---- ------
DISTRIBUTIONS FROM
Net Investment Income (0.29) (0.46) (0.47) -- (0.08) (0.12) (0.23) (0.25) (0.16) 0.00
------
Net Realized Gain on Investments (1.55) (2.63) (2.32) (2.54) -- -- (0.05) (1.23) (0.37) 0.00
------ ------ ------ ------ - - ------ ------ ------ ----
Total Distributions (1.84) (3.09) (2.79) (2.54) (0.08) (0.12) (0.28) (1.48) (0.53) 0.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ----
NET ASSET VALUE, END OF PERIOD $19.02 $18.37 $20.01 $20.91 $23.17 $20.38 $15.15 $16.22 $17.70 $18.20
====== ====== ====== ====== ====== ====== ====== ====== ====== =====
Total Return(c) 15.48% 8.33% 10.05% 2.08% 14.10% 35.54% (4.93%) 0.45% (0.07%) (4.01%)
Ratios/Supplementary Data
NET ASSETS, END OF PERIOD (IN $188,447 $191,219 $202,735 $212,330 $500,504 $320,550 $159,556 $108,398 $62,438 $49,740
THOUSANDS)
Ratios to Average Net Assets:
Expenses After Expense Limitation(b) 0.99% 0.99% 0.91% 0.90% 0.91% 0.93% 1.07% 1.12% 1.12%(e)
0.99%(d)
Expenses Before Expense Limitation 1.06% 1.04% N/A N/A N/A N/A N/A N/A N/A
(b) 1.05%(d)
Net Investment Income (Loss) After
Expense Limitation(b) 0.76%(d) 0.67% 0.86% 0.99% 0.94% 0.87% 1.62% 1.59% 0.83% 2.29%(e)
Average Commission Rate Per Share (e) $0.028 $0.0256 N/A N/A N/A N/A N/A N/A N/A
$0.0244
Portfolio Turnover Rate (f) 20.25% 36.22% 56.20% 61.26% 25.17% 56.05% 49.42% 50.58% 55.91% 21.98%(e)
</TABLE>
6
<PAGE>
Year Ended Year Ended
September 30, September 30,
- -------------------------------------------
1989 1988
---- ----
$14.40
------
$18.02
------
0.20 0.05
4.44 (2.34)
---- ------
4.64 (2.29)
---- ------
(0.04) 0.00
(0.05) (1.33)
------ ------
(0.09) (1.33)
------ -----
$18.95 $14.40
====== ======
32.2% (0.12%)
$48,655
$29,917
1.12%
1.30%
N/A
N/A
1.27% 0.38%
N/A
N/A
72.25% 86.19%
- ------------------------------------------------------
(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 ofSchroder International
Equity Fund.
(c) Total returns would have been lower had certain expenses not been reduced
during the periods shown.
(d) Annualized
(e) 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.
(f) 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.
7
<PAGE>
SCHRODER EMERGING MARKETS FUND
Period Ended
May 31,
1998(a)
---------------------
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INVESTMENT OPERATIONS:
Net Investment Income (Loss) 0.02
Net Realized and Unrealized Gain (Loss) on Investments (0.98)
Total from Investment Operations (0.96)
NET ASSET VALUE, END OF PERIOD $9.04
Total Return(a) (9.60)%
Ratios/Supplementary Data
NET ASSETS, END OF PERIOD (IN THOUSANDS) $18
Ratios to Average Net Assets:
Expenses After Expense Limitation (c)(d) 1.70%
Expenses Before Expense Limitation -- (e)
Net Investment Income (Loss) After Expense Limitation (c)(d) 1.72%
Average Commission Rate Per Share (f) 0.0039
Portfolio Turnover Rate(g) 22.97%
- ----------------------------------------------------------------------
(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.
8
<PAGE>
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND
<TABLE>
<S> <C> <C>
For the Period Period Ended
November 1, 1997 October 31,
to April 30, 1998 1997 (a)
(unaudited)
------------------- ---------------------
NET ASSET VALUE, BEGINNING OF PERIOD $9.22 $10.00
----- ------
INVESTMENT OPERATIONS:
Net Investment Income (Loss)(b) -- 0.02
Net Realized and Unrealized Gain (Loss) on Investments 1.41 (0.79)
---- ------
Total from Investment Operations 1.41 (0.77)
---- ------
DISTRIBUTIONS FROM
Net Investment Income (0.01) (0.01)
Net Realized Gain on Investments (0.51) --
Net Asset Value, End of period $10.11 $9.22
====== =====
Total Return(c) 16.64% (7.73)%
Ratios/Supplementary Data
NET ASSETS, END OF PERIOD (IN THOUSANDS) $6,413 $6,836
Ratios to Average Net Assets:
Expenses After Expense Limitation(b)(d) 1.50% 1.50%
Expenses Before Expense Limitation(b)(d) 4.79% 3.93%
Net Investment Income (Loss) After Expense Limitation (b)(d) (0.05)% 0.21%
Average Commission Rate Per Share(e) $0.0195 $0.0389
Portfolio Turnover Rate(f) 20.14% 32.30%
</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.
9
<PAGE>
SCHRODER U.S. DIVERSIFIED GROWTH FUND(a)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Six Months Ended
April 30, Year Ended October 31,
(unaudited) ------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
NET ASSET VALUE, BEGINNING OF YEAR $9.82 $9.76 $9.41 $8.52 $11.28 $10.51 $9.56
----- ----- ----- ----- ------ ------ -----
INVESTMENT OPERATIONS:
Net Investment Income (Loss) (0.02) (0.01) 0.04 0.07 0.04 0.05 0.02
Net Realized Income and Unrealized
Gain (Loss) on Investments 1.40 2.20 1.62 1.33 (0.27) 1.86 1.61
---- ---- ---- ---- ------ ---- ----
Total From Investment Operations 1.38 2.19 1.66 1.40 (0.23) 1.91 1.63
---- ---- ---- ---- ------ ---- ----
DISTRIBUTIONS FROM
Net Investment Income -- (0.02) (0.07) (0.05) (0.01) (0.04) (0.04)
Net Realized Gain on Investments (2.74) (2.11) (1.24) (0.46) (2.52) (1.10) (0.58)
Paid-In Capital -- -- -- -- -- -- (0.06)
- - - - - - ------
Total Distributions (2.74) (2.13) (1.31) (0.51) (2.53) (1.14) (0.68)
------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR $8.46 $9.82 $9.76 $9.41 $8.52 $11.28 $10.51
===== ===== ===== ===== ===== ====== ======
Total Return(b) 18.24% 26.49% 19.45% 17.68% (2.01%) 19.49% 17.74%
Ratios/Supplementary Data
NET ASSETS, END OF YEAR (IN THOUSANDS) $14,031 $13,861 $17,187 19,688 18,483 21,865 19,882
Ratios to Average Net Assets:
Expenses After Expense Limitations 1.50%(c) 1.50% 1.40% 1.40% 1.31% 1.18% 1.40%
Expenses Before Expense Limitations 1.74%(c) 1.68% 1.43% N/A N/A N/A N/A
Net Investment Income (Loss) After
Expense Limitation (0.44)%(c) (0.09)% 0.43% 0.78% 0.41% 0.51% 0.42%
Average Commission Rate Per Share(d) $0.0427 $0.0563 $0.0599 N/A N/A N/A N/A
Portfolio Turnover Rate 48.67% 44.28% 56.80% 57.21% 27.43% 57.78% 31.33%
</TABLE>
10
<PAGE>
Year Ended October 31,
- ------------------------------------------------
1991 1990 1989 1988
---- ---- ---- ----
$7.05 $8.35 $7.49 $10.15
- ----- ----- ----- ------
0.09 0.11 0.17 0.18
2.57 (0.77) 1.30 0.28
---- ------ ---- ----
2.66 (0.66) 1.47 0.46
---- ------ ---- ----
(0.11) (0.11) (0.15) (0.18)
-- (0.53) (0.46) (2.94)
(0.04) -- -- --
- ------ - - -
(0.15) (0.64) (0.61) (3.12)
- ------ ------ ------ ------
$9.56 $7.05 $8.35 $7.49
===== ===== ===== =====
38.16% (8.78%) 21.05% 7.74%
20,234 18,290 23,838 25,569
1.39% 1.34% 1.49% 1.60%
N/A N/A N/A N/A
1.30% 1.59% 1.99% 1.89%
N/A N/A N/A N/A
29.98% 28.31% 40.35% 18.42%
- ------------------------------------------------
- -----------------------------------------------
(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) Annualized.
(d) 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.
11
<PAGE>
SCHRODER U.S. SMALlER COMPANIES FUND
<TABLE>
<CAPTION>
Year Ended Period Ended
May 31, May 31, Year Ended October 31,
<S> <C> <C> <C> <C> <C> <C>
-------------- --------------------------------------------------------------------
1998 1997 1996(a)(b) 1995 1994 1993(b)
---- ---- ---------- ---- ---- -------
Net Asset Value, Beginning of $13.26 $17.23 $15.14 $11.81 $10.99 $10.00
------ ------ ------ ------ ------ ------
Period
Investment Operations
Net Investment Income (Loss) (0.06)(c) (0.02)(c) (0.06)(c) (0.04) (0.07) (0.02)
Net Realized and Unrealized Gain
(Loss) 2.82 1.88 4.10 3.78 0.97 1.01
---- ---- ---- ---- ---- ----
on Investments
Total from Investment Operations 2.76 1.86 4.04 3.74 0.90 0.99
---- ---- ---- ---- ---- ----
Distributions from Net Realized
Gain on Investments (1.26) (5.83) (1.95) (0.41) (0.08) --
------ ------ ------ ------ ------ -
Net Asset Value, End of Period $14.76 $13.26 $17.23 $15.14 $11.81 $10.99
====== ====== ====== ====== ====== ======
Total Return 21.63%(d) 14.73%(d) 29.35% 32.84% 8.26% 9.90%
Ratios/Supplementary Data
Net Assets, End of Period (in $51,679 $26,104 $13,743 $15,287 $13,324 $12,489
thousands)
Ratios to Average Net Assets:
Expenses After Expense 1.37%(c)(e) 1.49%(c)(e) 1.49%(c)(e) 1.49% 1.45% 2.03%(e)
Limitations
Expenses Before Limitations 1.37%((c)(e) 1.87%(c)(e) N/A N/A N/A N/A
Net Investment Income (Loss)
After (0.51%)(c)(e) (0.42%)(c)(e)(0.35%)(c)(e) (0.30%) (0.58%) (0.99%)(e)
Expense Limitation
Average Commission Rate Per $0.0582 $0.0584 $0.0583 N/A N/A N/A
Share(f)
Portfolio Turnover Rate(g) 54.98% 34.45% 58.50% 92.68% 70.82% 12.58%
</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) 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.
12
<PAGE>
SCHRODER MICRO CAP FUND
Year Ended
May 31,
1998 (a)
----------------------
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INVESTMENT OPERATIONS:
Net Investment Income (Loss) (0.04)
Net Realized and Unrealized Gain (Loss) on Investments 4.50
Total from Investment Operations 4.46
DISTRIBUTIONS FROM:
Net Realized Gain on Investments (0.20)
NET ASSET VALUE, END OF PERIOD $14.26
Total Return(b) 45.41%
Ratios/Supplementary Data
Net Assets, End of period (in thousands) $6,340
Ratios to Average Net Assets:
Expenses After Expense Limitation(c) 2.00%
Expenses Before Expense Limitation(c) 6.02%
Net Investment Income (Loss) After Expense Limitation(c) (0.77)%
Average Commission Rate Per Share(d) $0.0590
Portfolio Turnover Rate 165.71%
- ----------------------------------------------------------------------
(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.
13
<PAGE>
SCHRODER INTERNATIONAL BOND FUND
Period Ended
June 30,
1998
(unaudited)(a)
-----------------------
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INVESTMENT OPERATIONS:
Net Investment Income (Loss) 0.24
Net Realized and Unrealized Gain (Loss) on Investments (0.41)
Total from Investment Operations (0.17)
NET ASSET VALUE, END OF PERIOD $9.83
Total Return(b) (1.70)%
Ratios/Supplementary Data
NET ASSETS, END OF PERIOD (IN THOUSANDS) $58
Ratios to Average Net Assets:
Expenses After Expense Limitation(c)(d) 0.95%
Expenses Before Expense Limitation (c)(d) 150.09%
Net Investment Income (Loss) After Expense Limitation(c)(d) 5.35%
Portfolio Turnover Rate(e) 44.71%
- ----------------------------------------------------------------------
(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.
14
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Each Fund has a different investment objective that it pursues through the
investment policies described below.
Because of the differences in objectives and policies among the Funds, the Funds
will achieve different investment returns and will be subject to varying degrees
of market and financial risk. There is no assurance that any Fund will achieve
its objective. None of the Funds is intended to be a complete investment
program.
EACH FUND (OTHER THAN THE U.S. DIVERSIFIED GROWTH FUND AND THE MICRO CAP FUND)
CURRENTLY INVESTS SUBSTANTIALLY ALL OF ITS ASSETS IN A MANAGED PORTFOLIO OF
SCHRODER CAPITAL FUNDS OR SCHRODER CAPITAL FUNDS II. EACH SUCH PORTFOLIO IS
REFERRED TO IN THIS PROSPECTUS AS A "PORTFOLIO." IN REVIEWING THE DESCRIPTION OF
A FUND'S INVESTMENT OBJECTIVE AND POLICIES BELOW, INVESTORS 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 CAPITAL MANAGEMENT
INTERNATIONAL INC. ("SCMI") IS THE INVESTMENT ADVISER TO EACH FUND AND TO EACH
PORTFOLIO.
A Fund's investment objective may not be changed without shareholder approval.
The investment policies of each Fund may, unless otherwise specifically stated,
be changed by the Trustees of Schroder Capital Funds (Delaware) (the "Trust")
without a vote of the shareholders. All percentage limitations on investments
will apply at the time of investment and will not be considered violated unless
an excess or deficiency occurs or exists immediately after and as a result of
the investment except that the policies stated with regard to borrowing and
liquidity will be observed at all times.
SCHRODER INTERNATIONAL FUND
SCHRODER INTERNATIONAL FUND'S INVESTMENT OBJECTIVE IS LONG-TERM CAPITAL
APPRECIATION THROUGH INVESTMENT IN SECURITIES MARKETS OUTSIDE THE UNITED STATES.
Equity securities in which the Fund may invest include common stocks, preferred
stocks, securities convertible into common or preferred stocks, and rights or
warrants to purchase any of the foregoing. They may also include American
Depositary Receipts, European Depositary Receipts, and other similar instruments
providing for indirect investment in securities of foreign issuers. The Fund may
also invest in securities of closed-end investment companies that invest in turn
primarily in foreign securities.
The Fund normally will invest at least 65% of its assets in equity securities of
companies domiciled outside the United States and will invest in securities of
issuers domiciled in at least three countries other than the United States.
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. When the Fund has invested a
substantial portion of its assets in the securities of companies domiciled in a
single country, it will be more susceptible to the risks of investing in that
country than would a fund investing in a geographically more diversified
portfolio. 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. Other countries in which the
Fund may invest may be considered "emerging markets" and involve special risks.
See "Other Investment Practices and Risk Considerations - Foreign Securities."
The Fund may invest in debt securities, including, for example, securities of
foreign governments (including provinces and municipalities) or their agencies
or instrumentalities, securities issued or guaranteed by international
organizations designated or supported by multiple foreign governmental entities
to promote economic reconstruction or development, and debt securities of
foreign corporations or financial institutions. The Fund may invest up to 5% of
its net assets in lower-quality, high yielding debt securities, which entail
certain risks. See "Other Investment Practices and Risk Considerations - Debt
Securities."
15
<PAGE>
SCHRODER EMERGING MARKETS FUND
SCHRODER EMERGING MARKETS FUND'S INVESTMENT OBJECTIVE IS TO SEEK 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 will
normally invest in at least three countries other than the United States.
An "emerging market" country is any country not included at the time of
investment in the Morgan Stanley Capital International World Index of major
world economies. Those economies currently 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 of America. SCMI may at
times determine based on its own analysis that an economy included in the Index
should nonetheless be considered an emerging market country; any such country
would then constitute an emerging market country for purposes of investment by
the Fund.
The Fund normally invests at least 65% of its assets in equity securities of
issuers determined by SCMI to be emerging market issuers. Equity securities
include common stocks, preferred stocks, securities convertible into common or
preferred stocks, and rights or warrants to purchase any of the foregoing
(although such rights and warrants will not be taken into account in determining
compliance with the 65% requirement described in the preceding sentence.) They
may also include American Depositary Receipts, European Depositary Receipts, and
other similar instruments providing for indirect investment in securities of
foreign issuers. The Fund may also invest in securities of closed-end investment
companies that invest in turn primarily in foreign securities. The Fund is a
non-diversified mutual fund. See "Non-Diversification and Geographic
Concentration."
The remainder of the Fund's assets may be invested in securities of issuers
located anywhere in the world. The Fund may invest up to 35% of its assets in
debt securities, including lower-quality, high-yielding debt securities, which
entail certain risks. The Fund would invest in debt securities principally in an
effort to realize capital appreciation due, for example, to a favorable change
in currency exchange or control rates, or in the creditworthiness of their
issuers. The Fund may invest up to 5% of its assets in sovereign debt securities
that are in default. See "Other Investment Practices and Risk Considerations -
Debt Securities."
An issuer of a security will be considered to be an emerging market issuer if
SCMI 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 Fund may consider investment companies to be located in
the country or countries in which SCMI determines they focus their 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. When the Fund has invested a
substantial portion of its assets in the securities of companies domiciled in a
single country, it will be more susceptible to the risks of investing in that
country than would a Fund investing in a geographically more diversified
portfolio.
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND'S INVESTMENT OBJECTIVE IS
LONG-TERM CAPITAL APPRECIATION THROUGH INVESTMENT IN SECURITIES MARKETS OUTSIDE
THE UNITED STATES. The Fund normally invests at least 65% of its assets in
equity securities of companies domiciled outside the United States that have
market capitalizations of $1.5 billion or less at the time of investment. In
selecting investments for the Fund, SCMI considers a number of factors,
including, for example, the company's potential for long-term growth, the
company's financial condition, its sensitivity to cyclical factors, the relative
value of the company's securities (to those of other companies and to the market
as a whole), and the extent to which the company's management owns equity in the
company. Equity securities in which the Fund may invest include common stocks,
preferred stocks, securities convertible
16
<PAGE>
into common or preferred stocks, and rights or warrants to purchase any of the
foregoing. They may also include American Depositary Receipts, European
Depositary Receipts, and other similar instruments providing for indirect
investment in securities of foreign issuers. The Fund may also invest in
securities of closed-end investment companies that invest in turn primarily in
foreign securities.
The Fund will invest in securities of issuers domiciled in at least three
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. When the Fund has invested a substantial portion of its assets
in the securities of companies domiciled in a single country, it will be more
susceptible to the risks of investing in that country than would a fund
investing in a geographically more diversified portfolio. Certain countries in
which the Fund may invest may be considered "emerging markets" and involve
special risks. See "Other Investment Practices and Risk Considerations - Foreign
Securities."
Smaller companies may present greater opportunities for investment return than
do larger companies, but also involve greater risks. Smaller 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 volume. As a result, the prices of these securities may fluctuate more
than prices of securities of larger, more widely traded companies. See "Other
Investment Practices and Risk Considerations - Investments in Smaller
Companies."
The Fund may invest in debt securities, including, for example, securities of
foreign governments, international organizations, and foreign corporations and
U.S. government securities. The Fund may invest up to 5% of its total assets in
lower-quality, high yielding debt securities, which entail certain risks. See
"Other Investment Practices and Risk Considerations - Debt Securities."
SCHRODER INTERNATIONAL BOND FUND
SCHRODER INTERNATIONAL BOND FUND'S INVESTMENT OBJECTIVE IS TO SEEK A HIGH RATE
OF TOTAL RETURN. The Fund normally invests substantially all of its assets in
debt securities and debt-related investments of issuers domiciled outside the
United States.
"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 its investments and amortizations of
premiums). SCMI considers expected changes in foreign currency exchange rates in
determining the anticipated returns on securities denominated in foreign
currencies.
The Fund may invest in debt securities of foreign governments (including
provinces or municipalities) and their agencies and instrumentalities, debt
securities of supranational organizations, and debt securities of private
issuers. These bonds may pay interest at fixed, variable, or floating rates.
Certain securities in which the Fund invests may be convertible into common or
preferred stock, or they may be traded together with warrants for the purchase
of common stock. The rate of return on some debt obligations 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 may invest up to 10%
of its net assets in lower quality, high-yielding debt securities. See "Other
Investment Practices and Risk Considerations - Debt Securities." The Fund is a
non-diversified mutual fund. See "Non-Diversification and Geographic
Concentration."
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. When the Fund has invested a substantial portion of its assets in the
securities of companies domiciled in a single country, it will be more
susceptible to the risks of investing in that country than would a fund
investing in a geographically more diversified portfolio. The Fund has currently
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 portion of the Fund's assets
17
<PAGE>
invested in such issuers may change at any time. At times, the Fund may invest a
substantial portion of its assets in securities of issuers in emerging market
countries, which involves special risks. See "Other Investment Practices and
Risk Considerations - Foreign Securities."
Generally, the Fund's average maturity will be shorter when SCMI expects
interest rates in markets where the Fund has invested to rise, and longer when
SCMI expects interest rates in those markets to fall. SCMI may use various
techniques to increase the interest-rate sensitivity of the Fund's portfolio,
including transactions in futures and options on futures, interest-rate swaps,
caps, floors, and short sales of securities.
SCMI believes that active currency management, through the use of any of the
foreign currency exchange transactions described below, can enhance portfolio
returns through opportunities arising from, for example, interest-rate
differentials between securities denominated in different currencies or changes
in value between currencies. SCMI also believes that active currency management
can be employed as an overall portfolio risk management tool. Foreign currency
management can also provide increased overall portfolio risk diversification.
See "Other Investment Practices and Risk Considerations - Foreign Currency
Exchange Transactions." The Fund may also borrow money to invest in additional
securities. Use of leverage involves special risks. See "Other Investment
Practices and Risk Considerations - Leverage."
SCHRODER U.S. DIVERSIFIED GROWTH FUND
(FORMERLY, SCHRODER U.S. EQUITY FUND)
SCHRODER U.S. DIVERSIFIED GROWTH FUND'S INVESTMENT OBJECTIVE IS TO SEEK GROWTH
OF CAPITAL. The Fund normally invests substantially all of its assets in equity
securities of companies in the United States. Equity securities in which the
Fund may invest include common stocks, preferred stocks, securities convertible
into common or preferred stocks, and rights or warrants to purchase any of the
foregoing.
The Fund does not limit its investments to any particular type of company,
although the Fund will not normally invest in securities of small capitalization
companies (companies with market capitalizations of $1.5 billion or less). The
Fund may invest in companies, large or small, that SCMI believes offer the
potential for capital growth. They may, for example, include 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 may also 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 SCMI.
SCHRODER U.S. SMALLER COMPANIES FUND
SCHRODER U.S. SMALLER COMPANIES FUND'S INVESTMENT OBJECTIVE IS CAPITAL
APPRECIATION. The Fund invests at least 65% of its assets in equity securities
of U.S.-domiciled companies that have at the time of purchase market
capitalizations of $1.5 billion or less. In selecting investments for the Fund,
SCMI 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. Equity securities in
which the Fund may invest include common stocks, preferred stocks, securities
convertible into common or preferred stocks, and rights or warrants to purchase
any of the foregoing.
The Fund may also invest in equity securities of larger companies and in debt
securities, if SCMI believes such investments are consistent with the Fund's
investment objective. In addition, the Fund may invest up to 5% of its assets in
lower-quality, high yielding debt securities, which entail certain risks. See
"Other Investment Practices and Risk Considerations - Debt Securities."
Smaller companies may present greater opportunities for investment return than
do larger companies, but also involve greater risks. They may have limited
product lines, markets, or financial resources, or may depend on a limited
18
<PAGE>
management group. Their securities may trade less frequently and in limited
volume. As a result, the prices of these securities may fluctuate more than
prices of securities of larger, widely traded companies. See "Other Investment
Practices and Risk Considerations - Investments in Smaller Companies." 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.
SCHRODER MICRO CAP FUND
SCHRODER MICRO CAP FUND'S INVESTMENT OBJECTIVE IS LONG-TERM CAPITAL
APPRECIATION. It seeks to achieve its investment objective by investing at least
65% of its total assets in equity securities of U.S.-domiciled micro cap
companies. A micro cap company is a company with, at the time of initial
purchase, a market capitalization in the bottom one third of companies in the
Russell 2000 Growth Index (measured by capitalization); in addition, any company
with a market capitalization of $300 million or less will be considered a micro
cap company.
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 (in accordance with the provisions of the 1940
Act, as amended, (the "1940 Act") or any order, rule or regulation thereunder).
SCMI 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 SCMI believes that they could help the Fund attain
its objective.
Equity securities in which the Fund may invest include common stocks, preferred
stocks, securities convertible into common or preferred stocks, or rights or
warrants to purchase any of the foregoing. The Fund may also invest to a limited
degree in non-convertible debt securities when SCMI believes that such
investments are warranted to achieve the Fund's investment objective.
OTHER INVESTMENT PRACTICES AND RISK CONSIDERATIONS
The Funds may engage in the following investment practices, each of which
involves certain special risks. The SAI contains more detailed information about
these practices (some of which may be considered "derivative" investments).
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 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, 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.
19
<PAGE>
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, without limitation, 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, a Fund may have limited recourse
available to it in the event of default. The laws of some foreign countries may
limit a Fund's ability to invest in securities of certain issuers located in
those foreign countries. Special tax considerations apply to foreign securities.
Except as otherwise provided 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. Therefore, 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. 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, SCMI
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
net income available for distribution to shareholders. In certain circumstances,
a Fund may be able to pass through to shareholders credits for foreign taxes
paid. See "Other Information - Dividends, Distributions and Taxes."
Certain Funds may invest in securities of issuers in emerging market countries
with respect to some or all of their assets. The securities' prices and relative
currency values of emerging market investments are subject to greater volatility
than those of issuers in many 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 Funds 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 Funds may also invest a
substantial portion of their assets in securities traded in the over-the-counter
markets in such countries and not on any exchange, which may affect the
liquidity of the investment and expose the Funds to the credit risk of their
counterparties in trading those investments. Emerging market countries may
experience extremely high rates of inflation, which may adversely affect these
countries' economies and securities markets.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Changes in currency exchange rates will
affect the U.S. dollar values of 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 economic
and financial conditions,
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government intervention, speculation, and other factors, many of which may be
difficult (if not impossible) to predict. A Fund may engage in foreign currency
exchanges transactions to protect against uncertainty in the level of future
exchange rates. Although the strategy of engaging in foreign currency exchange
transactions could reduce the risk of loss due to a decline in the value of the
hedged currency, it could also limit the potential gain from an increase in the
value of the currency.
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
<PAGE>
various foreign currencies, either pending anticipated investments in securities
denominated in those currencies or as a hedge against anticipated market
changes.
SCMI may seek to enhance a Fund's investment return through active currency
management. SCMI may buy or sell foreign currencies for a Fund, on a spot or
forward basis, in an attempt to profit from inefficiencies in the pricing of
various currencies or of debt securities denominated in those currencies.
When investing in foreign securities, a Fund usually effects currency exchange
transactions on a "spot" (i.e., cash) basis at the spot rate prevailing in the
foreign exchange market. A Fund incurs foreign exchange expenses in converting
assets from one currency to another. In addition, 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.
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.
Forward contracts are not exchange traded, and there can be no assurance that a
liquid market will exist at a time when a Fund seeks to close out a forward
contract. Currently, only a limited market, if any, exists for exchange
transactions relating to currencies in certain emerging markets or to securities
of issuers domiciled or principally engaged in business in certain emerging
markets. This may limit a Fund's ability to hedge its investments in those
markets. These contracts involve a risk of loss if SCMI fails to predict
accurately changes in relative currency values, the direction of stock prices or
interest rates and other economic factors.
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"). From time to time, 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 SCMI believes correlates to the value of
the first currency. Cross hedging and proxy hedging transactions involve the
risk of imperfect correlation between changes in the values of the currencies to
which such transactions relate and changes in the value of the currency or other
asset or liability that is the subject of the hedge.
INVESTMENTS IN SMALLER COMPANIES. Certain Funds may invest all or a substantial
portion of their assets in securities issued by small companies. Such companies
may offer greater opportunities for capital appreciation than larger companies,
but investments in such companies may involve certain special risks. Such
companies may have limited product lines, markets, or financial resources and
may be dependent on a limited management group. While the markets in securities
of such companies have grown rapidly in recent years, such securities may trade
less frequently and in smaller volume than more widely held securities. The
values of these securities may fluctuate more sharply than those of other
securities, and a Fund may experience some difficulty in establishing or closing
out positions in these securities at prevailing market
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<PAGE>
prices. There may be less publicly available information about the issuers of
these securities or less market interest in such securities than in the case of
larger companies, and it may take a longer period of time for the prices of such
securities to reflect the full value of their issuers' underlying earnings
potential or assets.
Some securities of smaller issuers may be restricted as to resale or may
otherwise be highly illiquid. The ability of a Fund to dispose of such
securities may be greatly limited, and a Fund may have to continue to hold such
securities during periods when SCMI would otherwise have sold the securities. It
is possible that SCMI or its affiliates or clients may hold securities issued by
the same issuers, and may in some cases have acquired the securities at
different times, on more favorable terms, or at more favorable prices, than a
Fund.
LEVERAGE. Schroder International Bond 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. Certain other Funds may engage in forward
commitments, described below and in the SAI, which may have the same economic
effect as if the Funds had borrowed money.
The use of borrowed money, known as "leverage," increases Schroder International
Bond Fund's market exposure and risk and may result in losses. When the Fund has
borrowed money for leverage and its investments increase or decrease in value,
its net asset value will normally increase or decrease more than if it had not
borrowed money for this purpose. 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. The Fund will not always borrow
money for investment, and the extent to which the Fund will borrow money, and
the amount it may borrow, depend on market conditions and interest rates.
Successful use of leverage depends on SCMI's ability to predict market movements
correctly. The amount of leverage that can exist at any one time will not exceed
one-third of the value of the Fund's total assets (including the amount
borrowed). A Fund may be required to segregate certain assets against its
obligations under reverse repurchase agreements entered into by it.
DEBT SECURITIES. All of the Funds may invest in debt securities. A Fund may
invest in debt securities either to earn investment income or to benefit from
changes in the market values of such securities. Debt securities 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).
Each Fund also may invest in lower-quality, high-yielding debt securities rated
below investment grade and in unrated debt securities determined by SCMI to be
of comparable quality. Lower-rated debt securities (commonly called "junk
bonds") are considered to be of poor standing and predominantly speculative.
Securities in the lowest rating categories may have extremely poor prospects of
attaining any real investment standing, and some of those securities in which a
Fund may invest may be in default. The rating services' descriptions of
securities in the lower rating categories, including their speculative
characteristics, are set forth in Appendix A to this Prospectus.
In addition, lower-rated securities reflect a greater possibility that adverse
changes in the financial condition of the issuer, or in general economic
conditions, or both, or an unanticipated rise in interest rates, may impair the
ability of the issuer to make payments of interest and principal. 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
may also affect the value of these investments. The inability (or perceived
inability) of issuers to make timely payments of interest and principal would
likely make the values of securities held by a Fund more volatile and could
limit a Fund's ability to sell its securities at prices approximating the values
the Fund had placed on such securities. In the absence of a liquid trading
market for securities held by it, a Fund may be unable at times to establish the
fair value of such securities. The rating assigned to a security by a rating
agency does not reflect an assessment of the volatility of the security's market
value or of the liquidity of an investment in the security.
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Each Fund may at times invest in so-called "zero coupon" bonds and
"payment-in-kind" 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. Payment-in-kind bonds allow the issuer, at its
option, to make current interest payments on the bonds either in cash or in
additional bonds. The values of zero-coupon bonds and payment-in-kind bonds are
subject to greater fluctuation in response to changes in market interest rates
than bonds which pay interest currently, and may involve greater credit risk
than such bonds. From time to time, a Fund may invest a portion of its assets in
Brady Bonds, which are securities created through the exchange of existing
commercial bank loans to sovereign entities for new obligations in connection
with debt restructuring. Brady Bonds have been issued only recently and,
therefore, do not have a long payment history.
A Fund will not necessarily dispose of a security when its debt rating is
reduced below its rating at the time of purchase, although SCMI will monitor the
investment to determine whether continued investment in the security will assist
in meeting the Fund's investment objective.
OPTIONS AND FUTURES TRANSACTIONS. Each Fund may engage in a variety of
transactions involving the use of options and futures contracts. A Fund may
engage in such transactions for hedging purposes or, to the extent permitted by
applicable law, to increase its current return.
A Fund may seek to increase its current return by writing covered call options
and covered put options on its portfolio securities or other securities in which
it may invest. A Fund receives a premium from writing a call or put option,
which increases the Fund's return if the option expires unexercised or is closed
out at a net profit. A Fund may also buy and sell put and call options on such
securities for hedging purposes. When a Fund writes a call option on a portfolio
security, it gives up the opportunity to profit from any increase in the price
of the security above the exercise price of the option; when it writes a put
option, a Fund takes the risk that it will be required to purchase a security
from the option holder at a price above the current market price of the
security. A Fund may terminate an option that it has written prior to its
expiration by entering into a closing purchase transaction in which it purchases
an option having the same terms as the option written. A Fund may also from time
to time buy and sell combinations of put and call options on the same underlying
security to earn additional income.
A Fund may buy and sell index futures contracts. An "index future" is a contract
to buy or sell units of a particular index at an agreed price on a specified
future date. Depending on the change in value of the index between the time when
a Fund enters into and terminates an index future transaction, the Fund may
realize a gain or loss. A Fund may also purchase warrants, issued by banks or
other financial institutions, whose values are based on the values from time to
time of one or more securities indices.
A Fund may buy and sell futures contracts on U.S. Government securities or other
debt securities. A futures contract on a debt security is a contract to buy or
sell a certain amount of the debt security at an agreed price on a specified
future date. Depending on the change in the value of the security when the Fund
enters into and terminates a futures contract, the Fund realizes a gain or loss.
A Fund may purchase and sell options on futures contracts or on securities
indices in addition to or as an alternative to purchasing and selling futures
contracts.
A Fund may also purchase and sell put and call options on foreign currencies,
futures contracts on foreign currencies, and options on foreign currency futures
contracts as an alternative, or in addition to, the foreign currency exchange
transactions described above. Such transactions are similar to options and
futures contracts on securities, except that they typically contemplate that one
party to a transaction will deliver one foreign currency to the other in return
for another currency (which may or may not be the U.S.
dollar).
RISK FACTORS IN OPTIONS AND FUTURES TRANSACTIONS. Options and futures
transactions involve costs and may result in losses. The use of options and
futures involves certain special risks, including the risks that a Fund may be
unable at times to close out such positions, that hedging transactions may not
accomplish their purpose because of imperfect market correlations, or that SCMI
may not forecast market movements correctly.
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The effective use of options and futures strategies is dependent on, among other
things, a Fund's ability to terminate options and futures positions at times
when SCMI deems it desirable to do so. Although a Fund will enter into an option
or futures contract position only if SCMI believes that a liquid secondary
market exists for that option or futures contract, there is no assurance that a
Fund will be able to effect closing transactions at any particular time or at an
acceptable price.
Each Fund generally expects that its options and futures contract transactions
will be conducted on recognized exchanges. In certain instances, however, a Fund
may purchase and sell options in the over-the-counter markets. A Fund's ability
to terminate options in the over-the-counter markets may be more limited than
for exchange-traded options and may also involve the risk that securities
dealers participating in such transactions would be unable to meet their
obligations to a Fund. A Fund will, however, engage in over-the-counter
transactions only when appropriate exchange-traded transactions are unavailable
and when, in the opinion of SCMI, 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.
The use of options and futures strategies also involves the risk of imperfect
correlation between movements in the prices of options and futures contracts and
movements in the value of the underlying securities, index, or currency, or in
the prices of the securities or currencies that are the subject of a hedge. The
successful use of these strategies further depends on the ability of SCMI to
forecast market movements correctly.
Because the markets for certain options and futures contracts in which a Fund
will 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 investments may be limited. A
Fund's ability to engage in hedging transactions may be limited by certain
regulatory and tax considerations. A Fund's hedging transactions may affect the
character or amount of its distributions. The tax consequences of certain
hedging transactions have been modified by the Taxpayer Relief Act of 1997.
For more information about any of the options or futures portfolio transactions
described above, see the SAI.
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 that 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
typical "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" (i.e. the
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 a given minimum or maximum. The use of swap agreements is a highly
specialized activity that involves investment techniques and risks different
from those associated with ordinary portfolio securities transactions. If SCMI
is incorrect in its forecast of market values, interest rates, exchange rates,
or other factors, the Fund's investment performance would be less favorable than
if the Fund had not used such agreements.
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SHORT SALES. Schroder International Bond Fund and Schroder Micro Cap Fund may
engage in "short sales", which are transactions in which a Fund sells a security
that it does not own in anticipation of a decline in the market value of that
security. To complete the transaction, the Fund must borrow the security to make
delivery to the purchaser. The Fund is then obligated to replace the borrowed
security through a purchase of it at the market price at the time of
replacement. The price at that time may be more or less than the price at which
the security was sold by the Fund. The Fund incurs a loss as a result of the
short sale if the price of the security increases between the date of the short
sale and the date on which the Fund replaces the borrowed security. The Fund
realizes a gain if the security declines in price between those dates. The
result is the opposite of what one would expect from a cash purchase of a long
position in a security.
Until the security is replaced, the Fund is required to pay the lender amounts
equal to any dividend that accrues during the period of the loan. To borrow the
security, the Fund also may be required to pay a premium or specified amounts in
lieu of interest. The amount of any gain is decreased, and the amount of any
loss is increased, by any premium or amounts in lieu of interest the Fund is
required to pay. The proceeds of the short sale are retained by the broker, to
the extent necessary to meet margin requirements, until the short position is
closed out. No securities will be sold short, however, if thereafter the total
market value of all securities sold short would exceed 25% of the value of the
Fund's assets.
Any of the Funds may make short sales "against-the-box", are transactions in
which the Fund sells short a security that it owns in anticipation of a decline
in the market value of that security. The proceeds of the short sale are held by
a broker until the settlement date, at which time the Fund delivers the security
to close the short position. The Fund receives the net proceeds from the short
sale. It is anticipated that a Fund will make short sales against-the-box only
to protect the value of its net assets.
NON-DIVERSIFICATION AND GEOGRAPHIC CONCENTRATION. Schroder Emerging Markets Fund
and Schroder International Bond Fund are "non-diversified" mutual funds, and
each Fund may invest its assets in a more limited number of issuers than may
other investment companies. Under the Internal Revenue Code, an investment
company, including a non-diversified investment company, generally may not
invest more than 25% of its total assets in obligations of any one issuer other
than U.S. Government obligations and, with respect to 50% of its total assets, a
Fund may not invest more than 5% of its total assets in the securities of any
one issuer (except U.S. Government obligations). Thus, each Fund may invest up
to 25% of its total assets in the securities of each of any two issuers. This
practice involves an increased risk of loss to a Fund if the market value of a
security should decline or its issuer were otherwise not to meet its
obligations.
Any of the Funds may invest more than 25% of its total assets in issuers located
in any one country. To the extent that it does so, the Fund is susceptible to a
range of factors that could adversely affect that country, including political
and economic developments and foreign exchange-rate fluctuations as discussed
above. As a result of investing substantially in one country, the value of the
Fund's assets may fluctuate more widely than the value of shares of a comparable
fund with a lesser degree of geographic concentration.
SECURITIES LOANS, REPURCHASE AGREEMENTS AND FORWARD COMMITMENTS. Each Fund may
lend portfolio securities to brokers, dealers and financial institutions meeting
specified credit conditions, and may enter into repurchase agreements without
limit. Such activities may create taxable income in excess of the cash they
generate. The percentage limitation on the amount of a Fund's total assets that
may be loaned in accordance with the approved procedures is as follows: SCHRODER
INTERNATIONAL FUND - 10%; SCHRODER INTERNATIONAL SMALLER COMPANIES FUND,
SCHRODER INTERNATIONAL BOND FUND, SCHRODER U.S. DIVERSIFIED GROWTH FUND,
SCHRODER U.S. SMALLER COMPANIES AND SCHRODER MICRO CAP FUND - 25%; AND SCHRODER
EMERGING MARKETS FUND - 33 1/3%. 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 its
assets or realizing on the collateral. Each Fund may also purchase securities
for future delivery, 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.
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INVESTMENT IN OTHER INVESTMENT COMPANIES. Each Fund is permitted to invest in
other investment companies or pooled vehicles, including closed-end funds, that
are advised by SCMI or its affiliates or by unaffiliated parties. A Fund may
invest in the shares of other investment companies that invest in securities in
which the Fund is permitted to invest, subject to the limits and conditions
required under the 1940 Act or any orders, rules or regulations thereunder. When
investing through investment companies, a Fund may pay a premium above such
investment companies' 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 its advisory and administrative fees. At the same
time, the Fund would continue to pay its own fees and expenses.
LIQUIDITY. A Fund will not invest more than 15% (10%, in the case of Schroder
International Fund and Schroder U.S. Diversified Growth Fund) of its net assets
in securities determined by SCMI to be illiquid. Certain securities that are
restricted as to resale may nonetheless be resold by a Fund in accordance with
Rule 144A under the Securities Act of 1933, as amended. Such securities may be
determined by SCMI to be liquid for purposes of compliance with the limitation
on a Fund's investment in illiquid securities. There can, however, be no
assurance that a Fund will be able to sell such securities at any time when SCMI
deems it advisable to do so or at prices prevailing for comparable securities
that are more widely held.
ALTERNATIVE INVESTMENTS. At times, SCMI may judge that market conditions make
pursuing a Fund's basic investment strategy inconsistent with the best interests
of its shareholders. At such times, SCMI may temporarily use alternative
strategies, primarily designed to reduce fluctuations in the values of the
Fund's assets. In implementing these "defensive" strategies, a Fund may invest
without limit in U.S. government obligations and other high-quality debt
instruments and any other investment SCMI considers to be consistent with such
defensive strategies, and may hold any portion of its assets in cash.
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
securities sales may result in realization of taxable capital gain. The
portfolio turnover rate for each Fund is reported under "Financial Highlights."
HOW TO BUY SHARES
Investors may purchase Investor Shares of each Fund directly from the Trust.
Prospectuses, sales material and account applications can be obtained from the
Trust or through Forum Shareholder Services, LLC, the Trust's transfer agent
(the "Transfer Agent"). Investments also may be made through broker-dealers and
other financial institutions ("Service Organizations"). Service Organizations
may charge their customers a service fee for processing orders to purchase or
sell shares. Investors wishing to purchase Shares through their accounts at a
Service Organization should contact that organization directly for appropriate
instructions. A Service Organization is responsible for forwarding all necessary
documentation to the Trust, and may charge for its services.
Each Fund's Investor Shares are offered at the net asset value next-determined
after receipt of your completed account application (at the address set forth
below) and your purchase request in good order. The minimum initial investment
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and the minimum subsequent investment for each Fund is set forth in the table
below. A Service Organization may impose higher minimums on your initial or
subsequent investment. The Trust is authorized to reject any purchase order.
INITIAL SUBSEQUENT
FUND INVESTMENT INVESTMENt
- ---- ---------- ----------
Schroder International Fund $10,000 $2,500
Schroder Emerging Markets Fund $10,000 $2,500
Schroder International Smaller Companies Fund $10,000 $2,500
Schroder International Bond Fund $10,000 $2,500
Schroder U.S. Diversified Growth Fund $10,000 $2,500
Schroder U.S. Smaller Companies Fund $10,000 $2,500
Schroder Micro Cap Fund $10,000 $2,500
Purchases may be made by mailing a check (in U.S. dollars), payable to the Fund
to:
[Name of Fund] - Investor Shares
P.O. Box 446
Portland, Maine 04112
For initial purchases, the check must be accompanied by a completed account
application in proper form. Further documentation, such as corporate resolutions
and instruments of authority, may be requested from corporations,
administrators, executors, personal representatives, directors or custodians to
evidence the authority of the person or entity making the subscription request.
You may make subsequent purchases by mailing a check, by sending a bank wire, or
through your Service Organization, as indicated. All payments should clearly
indicate the shareholder's name and account number.
Investors and Service Organizations (on behalf of their customers) may transmit
purchase payments by Federal Reserve Bank wire directly to the Fund 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 the Fund] - Investor Shares
Account of: (shareholder name)
Account No.: (shareholder account number)
The wire order must specify the name of the Fund, the shares' class (i.e..,
Investor Shares), the account name and number, address, confirmation number,
amount to be wired, name of the wiring bank, and name and telephone number of
the person to be contacted in connection with the order. If the initial
investment is by wire, an account number will be assigned and a completed
account application must be mailed to the Fund before any transaction will be
effected. Wire orders received prior to the close of the New York Stock Exchange
on a day when the Exchange is open for trading are processed at the net asset
value determined as of that day. Wire orders received after the close of the New
York Stock Exchange are processed at the net asset value next determined.
The Fund's Transfer Agent establishes for each shareholder of record an open
account to which all shares purchased and all reinvested dividends and other
distributions are credited. Although most shareholders elect not to receive
share certificates, certificates for full shares can be obtained by written
request to the Fund's Transfer Agent. No certificates are issued for fractional
shares.
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The Transfer Agent will deem an account lost if six months have passed since
correspondence to the shareholder's address of record is returned, unless the
Transfer Agent determines the shareholder's new address. When an account is
deemed lost, dividends and other distributions are automatically reinvested. In
addition, the amount of any outstanding checks for dividends and other
distributions that have been returned to the Transfer Agent are reinvested, and
the checks are canceled.
DISTRIBUTOR
Schroder Fund Advisors Inc. ("Schroder Advisors"), 787 Seventh Avenue, New York,
New York 10019, serves as Distributor of the Funds' shares. Schroder Advisors
was organized in 1989 as a registered broker-dealer to serve as an administrator
and distributor of each Fund and other mutual funds.
Schroder Advisors and its affiliates, at their own expense and out of their own
assets, may provide compensation to financial institutions in connection with
sales of the Funds' shares or the servicing of shareholder accounts.
RETIREMENT PLANS AND INDIVIDUAL RETIREMENT ACCOUNTS
Investor Shares are offered in connection with tax-deferred retirement plans,
including traditional and Roth IRAs. Application forms and further information
about these plans, including applicable fees, are available upon request. Before
investing in a Fund through one of these plans, investors should consult their
tax advisors.
The Funds may be used as an investment vehicle for an IRA including a SEP-IRA.
An IRA naming Bank-Boston as custodian is available from the Trust or the
Transfer Agent. The minimum initial investment for an IRA and the minimum
subsequent investment for each Fund is set forth in the table below. Generally,
contributions and investment earnings in a traditional IRA grow tax-deferred
until withdrawn. In contrast, contributions to a Roth IRA are not
tax-deductible, but investment earnings generally grow tax-free. IRAs are
available to individuals (and their spouses) who receive compensation or earned
income whether or not they are active participants in a tax-qualified or
government-approved retirement plan. An IRA contribution by an individual or
spouse who participates in a tax-qualified or government-approved retirement
plan may not be deductible, depending upon the individual's income. Individuals
also may establish an IRA to receive a "rollover" contribution of distributions
from another IRA or qualified plan. Consult your tax advisor.
Initial Subsequent
Fund Investment Investment
Schroder International Fund $2,000 $250
Schroder Emerging Markets Fund $2,000 $250
Schroder International Smaller Companies Fund $2,000 $250
Schroder International Bond Fund $2,000 $250
Schroder U.S. Diversified Growth Fund $2,000 $250
Schroder U.S. Smaller Companies Fund $2,000 $250
Schroder Micro Cap Fund $2,000 $250
EXCHANGES
You may exchange a Fund's Investor Shares for Investor Shares of any fund
offered by the Schroder family of funds so long as your investment meets the
initial investment minimum of the fund being purchased, and you maintain the
respective minimum account balance in each fund in which you own shares.
Exchanges between funds are made at net asset value.
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For federal income tax purposes, an exchange is considered to be a sale of
shares on which you may realize a capital gain or loss. If you hold Investor
Shares directly, you may make an exchange by calling the Transfer Agent at
1-800-344-8332 (see "How to Sell Shares - Telephone Requests") or by mailing
written instructions to Schroder Capital Funds (Delaware), P.O. Box 446,
Portland, Maine 04112. If you hold Investor Shares through a Service
Organization, you must make an exchange through the Service Organization.
Exchange privileges may be exercised only in those states where shares of the
other funds of the Schroder family of funds may legally be sold. Exchange
privileges may be amended or terminated at any time upon sixty (60) days'
notice.
STATEMENT OF INTENTION
Investor Share investors also may meet the minimum initial investment
requirement based on cumulative purchases by means of a written Statement of
Intention, expressing the investor's intention to invest the minimum initial
investment or more in Investor Shares of a Fund within a period of 13 months.
Investors wishing to enter into a Statement of Intention in conjunction with
their initial investment in shares of a Fund should complete the appropriate
portion of the account application form. Current Fund shareholders can obtain a
Statement of Intention form by contacting the Transfer Agent.
The Trust reserves the right to redeem Shares in any account if, at the end of
the Statement of Intention period, the account does not have a value of at least
the minimum initial investment amount.
HOW TO SELL SHARES
You can sell your Investor Shares in a Fund to that Fund 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 Trust will only
redeem shares for which it has received payment.
Investor Shares are redeemed at their net asset value next determined after
receipt by the Fund (see the address set forth under "How to Buy Shares") of a
redemption request in proper form. Redemption requests that are received in good
order prior to the close of the Exchange on a day on which the Exchange is open
are processed at the net asset value determined as of that day. Redemption
requests that are received after the close of the Exchange are processed at the
net asset value next determined.
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TELEPHONE REQUESTS
Redemption requests may be made by a shareholder of record by telephoning the
Transfer Agent at the telephone number on the cover page of this Prospectus. A
shareholder must provide the Transfer Agent with the class of shares, the dollar
amount or number of shares to be redeemed, shareholder account number, and some
additional form of identification such as a password. A redemption by telephone
may be made only if the telephone redemption privilege option has been elected
on the account application or otherwise in writing. In an effort to prevent
unauthorized or fraudulent redemption requests by telephone, reasonable
procedures will be followed by the Transfer Agent to confirm that telephone
instructions are genuine. The Transfer Agent and the Trust generally will not be
liable for any losses due to unauthorized or fraudulent redemption requests, but
either or both may be liable if they do not follow these procedures. Shares for
which certificates have been issued may not be redeemed by telephone. In times
of drastic economic or market change, it may be difficult to make redemptions by
telephone. If a shareholder cannot reach the Transfer Agent by telephone,
redemption requests may be mailed or hand-delivered to the Transfer Agent.
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WRITTEN REQUESTS
Redemptions may be made by a shareholder of record by letter to a Fund
specifying the class of shares, the dollar amount or number of Shares to be
redeemed, and the shareholder account number. The letter must also be signed in
exactly the same way the account is registered (if there is more than one owner
of the shares, all must sign) and, in certain cases, signatures must be
guaranteed by an institution that is acceptable to the Transfer Agent. Such
institutions include certain banks, brokers, dealers (including municipal and
government securities brokers and dealers), credit unions and savings
associations. Notaries public are not acceptable. Further documentation may be
requested to evidence the authority of the person or entity making the
redemption request. Questions concerning the need for signature guarantees or
documentation of authority should be directed to the Fund at the above address
or by calling 1-800-290-9826.
If Investor Shares to be redeemed are held in certificate form, the certificates
must be enclosed with the redemption request, and the assignment form on the
back of the certificates (or an assignment separate from the certificates but
accompanied by the certificates) must be signed by all owners in exactly the
same way the owners' names are written on the face of the certificates.
Requirements for signature guarantees and/or documentation of authority as
described above could also apply. For your protection, the Trust suggests that
certificates be sent by registered mail.
Additional Redemption Information. Checks for redemption proceeds normally are
mailed within seven days. No redemption proceeds are mailed until checks in
payment for the purchase of Investor Shares to be redeemed have been cleared,
which may take up to 15 calendar days from the purchase date. Unless other
instructions are given in proper form, a check for the proceeds of a redemption
is sent to the shareholder's address of record.
A Fund may suspend the right of redemption during any period when: (1) trading
on the New York Stock Exchange is restricted or the New York Stock Exchange is
closed; (2) the SEC has by order permitted such suspension; or (3) an emergency
(as defined by rules of the SEC) exists making disposal of portfolio investments
or determination of the Fund's net asset value not reasonably practicable.
If the Board of Trustees determines that it would be detrimental to the best
interest of the remaining shareholders of a Fund to make payment wholly or
partly in cash, a Fund may redeem Investor Shares in whole or in part by a
distribution in kind of portfolio securities in lieu of cash. The Fund will,
however, redeem Investor Shares solely in cash up to the lesser of $250,000 or
1% of net assets during any 90-day period for any one shareholder. In the event
that payment for redeemed Investor Shares is made wholly or partly in portfolio
securities, the shareholder may be subject to additional risks and costs in
converting the securities to cash.
See "Additional Purchase and Redemption Information" in the SAI.
The proceeds of a redemption may be more or less than the amount invested and,
therefore, a redemption may result in a gain or loss for federal income tax
purposes.
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Due to the relatively high cost of maintaining smaller accounts, the Fund
reserves the right to redeem shares in any account (other than an IRA) if at any
time the account does not have a value of at least $2,000, unless the value of
the account falls below that amount solely as a result of market activity.
Shareholders will be notified that the value of the account is less than the
required minimum and will be allowed at least 30 days to make an additional
investment to increase the account balance to at least the required minimum
amount.
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.
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OTHER INFORMATION
DETERMINATION OF NET ASSET VALUE
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 its Investor Shares
outstanding. Shares are valued as of the close of the New York Stock Exchange
(normally, 4:00 p.m. Eastern time) each day the Exchange is open. Portfolio
securities for which market quotations are readily available are stated at
market value. Short-term investments that will mature in 60 days or less are
stated at amortized cost, which approximates market value. All other securities
and assets are valued at their fair values determined in accordance with
procedures approved by the Board of Trustees. The net asset value of a Fund's
Investor Shares will generally differ from that of its other class of shares due
to the variance in daily net income realized by and dividends paid on each class
of shares, and differences in the expenses of the different classes. 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 is calculated.
DIVIDENDS, DISTRIBUTIONS AND TAXES
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: (1) reinvest all distributions in
additional Investor Shares of your Fund; (2) receive distributions from net
investment income in cash while reinvesting capital-gain distributions in
additional Investor Shares of your Fund; (3) receive distributions from net
investment income in additional Investor Shares of your Fund while receiving
capital-gain distributions in cash; or (4) 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.
TAXES
Each Fund intends to qualify as a "regulated investment company" for federal
income tax purposes and to meet all other requirements that are necessary for it
to be relieved of federal taxes on income and gain it distributes to
shareholders. A Fund will distribute substantially all of its net investment
income and net capital gain income on a current basis.
All Fund distributions will be taxable to you as ordinary income, except that
any distributions of net long-term capital gain will be taxed as such,
regardless of how long you have held the shares. Long-term capital gains will be
subject to a maximum rate of 28% or 20%, depending upon the holding period of
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the portfolio investment generating the gains. Distributions will be taxable as
described above whether received in cash or in shares through the reinvestment
of distributions.
Early in each year the Trust will notify you of the amount and tax status of
distributions paid to you by each Fund for the preceding year.
The foregoing is a summary of certain federal income tax consequences of
investing in a Fund. You should consult your tax advisor to determine the
precise effect of an investment in a Fund on your particular tax situation.
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CERTAIN INFORMATION REGARDING FOREIGN TAXES. Foreign governments may impose
taxes on the Funds and the Portfolios and their investments, which generally
would reduce the income of the Fund or Portfolio. However, an offsetting tax
credit or deduction may be available to you.
Each Fund that is eligible to do so intends to elect to permit its shareholders
to take a credit (or a deduction) for the Fund's share of qualified foreign
income taxes paid by the Portfolio in which that Fund invests its assets. If the
Fund does make such an election, its shareholders would include as gross income
in their federal income tax returns both: (1) distributions received from the
Fund; and (2) the amount that the Fund advises is their pro rata portion of
foreign income taxes paid with respect to or withheld from dividends and
interest paid to the Fund from its foreign investments. Shareholders then would
be entitled, subject to certain limitations, (including, with respect to a
foreign tax credit, a holding period requirement) to take a foreign tax credit
against their federal income tax liability for the amount of such foreign taxes
or else to deduct such foreign taxes as an itemized deduction from gross income.
THE PORTFOLIOS
The Portfolios are not required to pay federal income tax because they are
classified as partnerships for federal income tax purposes. All interest,
dividends, gain and losses of the Portfolios will be deemed to have been "passed
through" to the Funds in proportion to the Funds' holdings in the Portfolios
regardless of whether such interest, dividends or gain have been distributed by
the Portfolios.
Each Portfolio intends to conduct its operations so as to enable each Fund, if
each invests all of its assets in a Portfolio, to qualify as a regulated
investment company.
MANAGEMENT OF THE TRUST
The Board of Trustees of the Trust is responsible for generally overseeing the
conduct of the Trust's business. The business and affairs of each Portfolio are
managed under the direction of the Board of Trustees of Schroder Capital Funds
or of Schroder Capital Funds II. Information regarding the trustees and
executive officers of the Trust, as well as the Trustees and executive officers
of Schroder Capital Funds and Schroder Capital Funds II, may be found in the
SAI.
Schroder Capital Management International Inc. ("SCMI") is the investment
adviser to each of the Funds. SCMI is a wholly owned U.S. subsidiary of
Schroders U.S. Holdings Inc., which engages through its subsidiary firms in the
investment banking, asset management and securities businesses. Affiliates of
Schroders U.S. Holdings Inc. (or their predecessors) have been investment
managers since 1927. SCMI and its United Kingdom affiliate, Schroder Capital
Management International, Ltd., served as investment managers for over $27
billion in the aggregate as of June 30, 1998. Schroders 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 June 30, 1998, had under management assets of
approximately $175 billion. Schroder Fund Advisors Inc. ("Schroder Advisors") is
a wholly owned subsidiary of SCMI.
SCMI also serves as investment adviser to each of the Portfolios of Schroder
Capital Funds and Schroder Capital Funds II. Each of those Portfolios pays
advisory fees to SCMI monthly at the following annual rates (based on the assets
of each Portfolio taken separately): INTERNATIONAL EQUITY FUND - 0.45% of the
Portfolio's average daily net assets; SCHRODER INTERNATIONAL BOND PORTFOLIO -
0.50% of the Portfolio's average daily net assets; SCHRODER INTERNATIONAL
SMALLER COMPANIES PORTFOLIO - 0.85% of the Portfolio's average daily net assets;
SCHRODER EM CORE PORTFOLIO - 1.00% of the Portfolio's average daily net assets;
and SCHRODER U.S. SMALLER COMPANIES PORTFOLIO - 0.60% of the Portfolio's average
daily net assets. SCMI has agreed to waive 0.10% of the advisory fees payable by
SCHRODER INTERNATIONAL SMALLER COMPANIES PORTFOLIO. This fee limitation
arrangement shall remain in effect until its elimination is approved by the
Board of Trustees of Schroder Capital Funds. Each Fund, due to its investment in
a 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).
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Subject to the direction and control of SCMI, Schroder Investment Management
International, Ltd. ("SIMIL"), 31 Gresham Street, London, U.K. EC2V 7QA, an
affiliate of SCMI, serves as subadviser to Schroder International Smaller
Companies Portfolio pursuant to an Investment Subadvisory Agreement among SCMI,
SIMIL, and the Portfolio. SIMIL, a newly organized investment advisory firm, is
a wholly owned subsidiary of Schroders plc, and as of June 30, 1998 had under
management assets of approximately $42 billion. Under the Subadvisory Agreement,
SCMI pays SIMIL a monthly fee at the annual rate of 0.25% of the Portfolio's
average daily net assets.
Each Fund (except Schroder U.S. Diversified Growth Fund and Schroder Micro Cap
Fund) has entered into an investment advisory agreement with SCMI pursuant to
which SCMI 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. SCMI
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 another investment
company). For further information on these investment advisory agreements, see
the SAI.
SCHRODER U.S. DIVERSIFIED GROWTH FUND pays advisory fees to SCMI monthly at the
annual rates of 0.75% of the first $100 million of the Fund's average daily net
assets and 0.50% of the Fund's average daily net assets in excess of $100
million. Schroder Micro Cap Fund pays advisory fees monthly to SCMI at the
annual rate of 1.25% of the Fund's average daily net assets.
ADMINISTRATIVE SERVICES. The Trust, on behalf of each Fund (other than the
Schroder U.S. Diversified Growth Fund), has entered into an administration
agreement with Schroder Advisors, pursuant to which Schroder Advisors provides
certain management and administrative services to those Funds. The Trust, on
behalf of each Fund, has entered into subadministration agreements with Forum
Administrative Services, LLC, Two Portland Square, Portland, Maine 04101
("FAdS"), pursuant to which FAdS provides certain management and administrative
services necessary for the Funds' operations. The Trust pays fees to Schroder
Advisors and to FAdS monthly at the following annual rates: SCHRODER
INTERNATIONAL FUND - 0.15% and 0.05%, respectively, of the Fund's average daily
net assets; SCHRODER EMERGING MARKETS FUND - 0.15% and 0.075%, respectively, of
the Fund's average daily net assets; SCHRODER INTERNATIONAL SMALLER COMPANIES
FUND - 0.10% and 0.075%, respectively, of the Fund's average daily net assets;
SCHRODER INTERNATIONAL BOND FUND - 0.10% and 0.075%, respectively, of the Fund's
average daily net assets; SCHRODER U.S. SMALLER COMPANIES FUNd - 0.25% and
0.075%, respectively, of the Fund's average daily net assets; and SCHRODER MICRO
CAP FUND - 0.25% and 0.10%, respectively, of the Fund's average daily net
assets. Each of the Emerging Markets Fund, the International Smaller Companies
Fund and Micro Cap Fund also is subject to a $25,000 minimum annual fee plus a
$12,000 charge per class under the subadministration agreement.
Schroder Advisors and FAdS also serve as administrator and subadministrator,
respectively, to each of the Portfolios of Schroder Capital Funds and Schroder
Capital Funds II. Each of those Portfolios pays administration fees to Schroder
Advisors and subadministration fees to FAdS monthly at the following annual
rates (based on the assets of each Portfolio taken separately): INTERNATIONAL
EQUITY FUND - 0.075% and 0.075%, respectively, of the Portfolio's average daily
net assets; SCHRODER INTERNATIONAL BOND PORTFOLIO - 0.10% and 0.75%,
respectively, of the Portfolio's average daily net assets; SCHRODER
INTERNATIONAL SMALLER COMPANIES PORTFOLIO - 0.15% and 0.075%, respectively, of
the Portfolio's average daily net assets; SCHRODER EM CORE PORTFOLIO - 0.10% and
0.075%, respectively, of the Portfolio's daily net assets; and SCHRODER U.S.
SMALLER COMPANIES PORTFOLIO - 0.00% and 0.075%, respectively, of the Portfolio's
average daily net assets. Each Portfolio is subject to a $25,000 minimum
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annual fee under the subadministration agreement. Each Fund, due to its
investment in a Portfolio, bears a proportionate part of the administration and
subadministration fees paid by the Portfolio (based on the percentage of the
Portfolio's assets attributable to the Fund).
In order to limit the Funds' expenses, SCMI and Schroder Advisors have
voluntarily agreed to reduce their compensation (and, if necessary, to pay
certain expenses of each of the Funds) with respect to each of the Funds to the
extent that a Fund's expenses chargeable to Investor Shares exceed the following
annual rates: SCHRODER INTERNATIONAL FUND - 0.99% of the Fund's average daily
net assets attributable to Investor Shares; SCHRODER EMERGING MARKETS FUND -
1.70% of the Fund's average daily net assets attributable to Investor Shares;
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND - 1.50% of the Fund's average
daily net assets attributable to Investor Shares; SCHRODER INTERNATIONAL BOND
FUND - 0.95% of the Fund's average daily net assets attributable to Investor
Shares; SCHRODER U.S. DIVERSIFIED GROWTH FUND - 1.50% of the Fund's average
daily net assets attributable to Investor Shares; SCHRODER U.S. SMALLER
COMPANIES FUND - 1.49% of the Fund's average daily net assets attributable to
Investor Shares; and SCHRODER MICRO CAP FUND - 2.00% of the Fund's average daily
net assets attributable to Investor Shares. In addition, SCMI has agreed to
limit the advisory fees paid by the U.S. DIVERSIFIED GROWTH FUND to 0.65% of the
Fund's average daily net assets. FAdS may waive voluntarily all or a portion of
its subadvisory fees, from time to time. The Trust pays all expenses not assumed
by SCMI and Schroder Advisors, including Trustees' fees, auditing, legal,
custodial, and investor servicing, and shareholder reporting expenses.
SCMI's investment decisions for each Portfolio in which a Fund invests (or, for
Schroder U.S. Diversified Growth Fund, for the Fund) are made by an investment
manager or an investment team, with the assistance of an investment committee at
SCMI. The Portfolio Managers for each Fund are as follows:
SCHRODER INTERNATIONAL FUND:
MICHAEL PERELSTEIN - Portfolio Manager since January 1997 of Schroder
International Equity Portfolio, in which Schroder International Fund
invests, and Portfolio Manager since 1997 of Schroder International Bond
Portfolio, in which Schroder International Bond Fund invests. Mr. Perelstein
is a Vice President of the Trust and of Schroder Capital Funds and is a
Director and Senior Vice President of SCMI. He was previously a Managing
Director, MacKay-Shields Financial Corp.
SCHRODER EMERGING MARKETS FUND:
JOHN A. TROIANO - Portfolio Manager since inception of Schroder EM Core
Portfolio, in which Schroder Emerging Markets Fund invests. Mr. Troiano is
a Vice President of the Trust and of Schroder Capital Funds. He is also the
Chief Executive of SCMI.
HEATHER CRIGHTON - Portfolio Manager since inception of Schroder EM Core
Portfolio, in which Schroder Emerging Markets Fund invests. Ms. Crighton is
a First Vice President of SCMI.
MARK BRIDGEMAN - Portfolio Manager since inception of Schroder EM Core
Portfolio, in which Schroder Emerging Markets Fund invests. Mr. Bridgeman
is a Vice President of SCMI.
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND:
JANE P. LUCAS - Portfolio Manager since September 1998 of Schroder
International Smaller Companies Portfolio, in which Schroder International
Smaller Companies Fund invests. Ms. Lucas is a Vice President of the Trust
and a Senior Vice President of SCMI.
NICHOLAS MELHUISH - Portfolio Manager since September 1998 of Schroder
International Smaller Companies Portfolio, in which Schroder International
Smaller Companies Fund invests. Mr. Melhuish is an investment manager of
SIMIL and of SCMI.
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SCHRODER INTERNATIONAL BOND FUND:
MICHAEL PERELSTEIN - Portfolio Manager since January 1997 of Schroder
International Equity Portfolio, in which Schroder International Fund
invests, and Portfolio Manager since inception of Schroder International
Bond Portfolio, in which Schroder International Bond Fund invests. Mr.
Perelstein is a Vice President of the Trust and of Schroder Capital Funds
and is a Director and Senior Vice President of SCMI. He was previously a
Managing Director, MacKay-Shields Financial Corp.
MARK ASTLEY - Portfolio Manager since inception of Schroder International
Bond Portfolio, in which Schroder International Bond Fund invests. Mr.
Astley is a Vice President of the Trust and of Schroder Capital Funds II.
He is also a First Vice President of SCMI.
SCHRODER U.S. DIVERSIFIED GROWTH FUND:
PAUL MORRIS - Portfolio Manager since January 1997 of Schroder U.S.
Diversified Growth Fund. Mr. Morris is Senior Vice President of SCMI. He
was previously Principal and Senior Portfolio Manager, Weiss Peck & Greer,
L.L.C., and Managing Director, Equity Division, UBS Asset Management.
SCHRODER U.S. SMALLER COMPANIES FUND:
IRA L. UNSCHULD - Resumed portfolio management in September 1998 of
Schroder U.S. Smaller Companies Portfolio, in which Schroder U.S. Smaller
Companies Fund invests. Mr. Unschuld was co-manager with Fariba Talebi
since inception through March 1997. Mr. Unschuld is a Vice President of the
Trust and Group Vice President of SCMI.
SCHRODER MICRO CAP FUND:
IRA UNSCHULD - Portfolio Manager since inception of Schroder Micro Cap
Fund. Mr. Unschuld is Vice President of the Trust and Group Vice President
of SCMI.
SCMI places all orders for purchases and sales of the Funds' securities. In
selecting broker-dealers, SCMI may consider research and brokerage services
furnished to it and its affiliates. Schroder & Co. Inc. and Schroder Securities
Limited, affiliates of SCMI, may receive brokerage commissions from the Funds in
accordance with procedures adopted by the Trustees under the 1940 Act which
require periodic review of these transactions. Subject to seeking the most
favorable price and execution available, SCMI may consider sales of shares of
the Funds as a factor in the selection of broker-dealers.
YEAR 2000
The Funds receive services from their investment adviser, administrators,
distributor, transfer agent and custodian 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 form the year 1900. SCMI 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.
PERFORMANCE INFORMATION
Yield (for Investor Shares of the International Bond Fund) and total return data
relating to Investor Shares of the Funds may from time to time be included in
advertisement about the Funds. The "yield" of a Fund's Investor Shares is
calculated by dividing the Fund's annualized net investment income per Investor
Shares during a recent 30-day period by the net asset value per Investor Shares
on the last day of that period. When a Fund's total return is advertised with
respect to Investor Shares, it will be calculated for the past year, the past
five years, and the past ten years (or if a Fund's Investor Shares have been
offered for a period shorter than one, five, or ten years, that period will be
substituted) since the establishment of the Fund, as more fully described in the
SAI. Total return quotations assume that all dividends and distributions are
reinvested when paid.
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ALL DATA ARE BASED ON PAST INVESTMENT RESULTS AND DO NOT PREDICT FUTURE
PERFORMANCE. Investment performance of a Fund's Investor 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 its
Investor Shares. Investment performance also often reflects the risks associated
with each 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 Investor Shares to
those of various classes of other mutual funds and other investment vehicles.
Performance of each Fund's Investor Shares may be compared to various indices.
See the SAI for a fuller discussion of performance information.
ADDITIONAL INFORMATION ABOUT THE TRUST
The Trust was organized as a Maryland corporation on July 30, 1969, reorganized
on February 29, 1988 as Schroder Capital Funds, Inc. and reorganized as a
Delaware business trust on January 9, 1996. The Trust has 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 Trust's shares
of beneficial interest are presently divided into nine different series. Each
Fund's shares are presently divided into two classes, Investor Shares, which are
offered through this Prospectus, and Advisor Shares, which are offered through a
separate prospectus. Unlike Investor Shares, Advisor Shares are subject to
shareholder service and distribution fees, which will affect their performance
relative to Investor Shares. To obtain more information about Advisor Shares,
contact Schroder Capital Funds (Delaware) at 1-800-290-9826. The Trust's
principal office is located at Two Portland Square, Portland, Maine 04101, and
its telephone number is 1-207-879-8903.
Each share has one vote, with fractional shares voting proportionally.
Shareholders of a class of shares or series generally have separate voting
rights with respect to matters that affect only that class or series. See
"Organization and Capitalization" in the SAI. Shares are freely transferable and
are entitled to dividends and other distributions as declared by the Trustees.
Dividends paid by the Funds on their two classes of shares will normally differ
in amount due to the differing expenses borne by the two classes. If a Fund were
liquidated, each class of shares would receive the net assets of the Fund
attributable to that class. The Trust may suspend the sale of a Fund's shares at
any time and may refuse any order to purchase shares. 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 Declaration of Trust.
INFORMATION ABOUT THE PORTFOLIOS
Each of the Funds (other than Schroder U.S. Diversified Growth Fund and Schroder
Micro Cap Fund) seeks to achieve its investment objective by investing all of
its investable assets in a Portfolio of Schroder Capital Funds or Schroder
Capital Funds II that has the same investment objective and similar policies. In
that way, a Portfolio acquires investment securities directly, and a Fund
acquires an indirect interest in those securities. Schroder Capital Funds is a
business trust organized under the laws of the State of Delaware in September
1995. Schroder Capital Funds II is a
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business trust organized under the laws of the State of Delaware in December
1996. Each of Schroder Capital Funds and Schroder Capital Funds II is registered
under the 1940 Act as an open-end management investment company. The assets of a
Portfolio belong only to, and the liabilities of a Portfolio are borne solely
by, that Portfolio and no other Portfolio of Schroder Capital Funds or Schroder
Capital Funds II.
A Fund's investment in a Portfolio is in the form of a non-transferable
beneficial interest. All other investors in a Portfolio invest on the same terms
and conditions as the Fund and pay a proportionate share of the Portfolio's
expenses.
The Portfolios normally will not hold meetings of investors except as required
by the 1940 Act. Each investor in a Portfolio will be entitled to vote in
proportion to its relative beneficial interest in the Portfolio. On most issues
subject to a vote of investors, in accordance with applicable law the Board of
Trustees will either: (1) solicit voting instructions from Fund shareholders
with regard to the voting of all proxies with respect to a Fund's shares and
vote such proxies in accordance with such instructions, or (2) vote the
interests held by a Fund in the same proportion as the vote of all other holders
of the Portfolio's interests. If there are other investors in the Portfolio,
there can be no assurance that any issue that receives a majority of the votes
cast by Fund shareholders will receive a majority of votes cast by all investors
in the Portfolio; indeed, if other investors hold a majority interest in the
Portfolio, they could have voting control of the Portfolio.
The Portfolios do not sell their shares directly to members of the general
public. Another investor in a Portfolio, such as an investment company, that
might sell its shares to members of the general public would not be required to
sell its shares at the same public offering price as the Fund investing in that
Portfolio and could have different fees and expenses than the Fund. Therefore,
Fund shareholders may have different returns than shareholders in another
investment company that invests exclusively in the same Portfolio. Information
regarding any such funds in the future will be available by calling
1-800-730-2932.
Under federal securities law, any person or entity that signs a registration
statement may be liable for a misstatement of a material fact in, or omission of
a material fact from, the registration statement. Each of Schroder Capital Funds
and Schroder Capital Funds II, their Trustees, and certain of their officers are
required to sign the registration statement of the Trust and may be required to
sign the registration statements of certain other investors in the Portfolio. In
addition, Schroder Capital Funds or Schroder Capital Funds II may be liable for
misstatements or omissions of a material fact in any proxy soliciting material
of an investor in a Portfolio, including a Fund. Each investor in a Portfolio,
including the Trust, is required to indemnify Schroder Capital Funds or Schroder
Capital Funds II, as the case may be, and their Trustees and officers ("SCF
Indemnitees") against certain claims.
Indemnified claims are those brought against SCF Indemnitees based on a
misstatement of a material fact in, or omission of a material fact from, a
registration statement or proxy materials. No indemnification need be made,
however, if such alleged misstatement or omission relates to information about
Schroder Capital Funds or Schroder Capital Funds II, as the case may be, and was
supplied to the investor by Schroder Capital Funds or Schroder Capital Funds II,
as the case may be. Similarly, Schroder Capital Funds or Schroder Capital Funds
II, as the case may be, is required to indemnify each investor in a Portfolio,
including a Fund, for any claims brought against the investor with respect to
the investor's registration statement or proxy materials, to the extent the
claim is based on a misstatement or omission of a material fact relating to
information about Schroder Capital Funds or Schroder Capital Funds II, as the
case may be, that is supplied to the investor by Schroder Capital Funds or
Schroder Capital Funds II, as the case may be.
A Fund's investment in a Portfolio may be affected by the actions of other large
investors in the Portfolio; for example, if the Portfolio had a large investor
other than the Fund that redeemed its interest in the Portfolio, the Portfolio's
remaining investors (including the Fund) might, as a result, experience higher
pro rata operating expenses, thereby producing lower returns.
37
<PAGE>
A Fund may withdraw its entire investment from a Portfolio at any time, if the
Trust Board determines that it is in the best interests of the Fund and its
shareholders to do so. A Fund might withdraw, for example, if there were other
investors in the Portfolio who, by a vote of the shareholders of all investors
(including the Fund), changed the investment objective or policies of the
Portfolio in a manner not acceptable to the Trust Board. A withdrawal could
result in a distribution in kind of portfolio securities (as opposed to a cash
distribution) by the Portfolio. That distribution could result in a less
diversified portfolio of investments for the Fund and could affect adversely the
liquidity of the Fund's portfolio. If the Fund decided to convert those
securities to cash, it would likely incur brokerage fees or other transaction
costs. If a Fund should withdraw its investment from a Portfolio, the Trust
Board would consider appropriate alternatives, including the management of the
Fund's assets in accordance with its investment objective and policies by SCMI,
or the investment of all of the Fund's investable assets in another pooled
investment entity having substantially the same investment objective as the
Fund. The inability of a Fund to find a suitable replacement investment, if the
Board decided not to permit SCMI to manage the Fund's assets, could have a
significant adverse impact on shareholders of the Fund.
Each investor in a Portfolio, including a Fund, may be liable for all
obligations of the Portfolio. The risk to an investor in a Portfolio of
incurring financial loss on account of such liability, however, is limited to
circumstances in which the Portfolio is unable to meet its obligations, the
occurrence of which SCMI considers to be remote. Upon liquidation of a
Portfolio, investors would be entitled to share pro rata in the net assets of
the Portfolio available for distribution to investors.
38
<PAGE>
APPENDIX A
DESCRIPTION OF SECURITIES RATINGS
Moody's Investors Service Inc. ("Moody's")
Fixed-Income Security Ratings
"Aaa" Fixed-income securities which are rated "Aaa" are judged to be
of the best quality. They carry the smallest degree of
investment risk and are generally referred to as "gilt edge".
Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
"Aa" Fixed-income securities which are rated "Aa" are judged to be
of high quality by all standards. Together with the "Aaa" group
they comprise what are generally known as high grade fixed-
income securities. T hey are rated lower than the best fixed-
income securities because margins of protection may not be as
large as in "Aaa" securities or fluctuation of protective
elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat
larger than in "Aaa" securities.
"A" Fixed-income securities which are rated "A" possess many
favorable investment attributes and are to be considered as
upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment
sometime in the future.
"Baa" Fixed-income securities which are rated "Baa" are considered as
medium grade obligations; i.e., they are neither highly
protected nor poorly secured. Interest payments and principal
security appear adequate for the present be certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time. Such fixed-income
securities lack outstanding investment characteristics and in
fact have speculative characteristics as well. Fixed-income
securities rated "Aaa", "Aa", "A" and "Baa" are considered
investment grade.
"Ba" Fixed-income securities which are rated "Ba" are judged to have
speculative elements; their future cannot be considered as well
assured. Often the protection of interest and principal
payments may be very moderate, and therefore not well
safeguarded during both good and bad times in the future.
Uncertainty of position characterizes bonds in this class.
"B" Fixed-income securities which are rated "B" generally lack
characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other
terms of the contract over any long period of time may be
small.
"Caa" Fixed-income securities which are rated "Caa" are of poor
standing. Such issues may be in default or there may be present
elements of danger with respect to principal or interest.
"Ca" Fixed-income securities which are rated "Ca" present
obligations which are speculative in a high degree. Such issues
are often in default or have other marked shortcomings.
"C" Fixed-income securities which are rated "C" are the lowest
rated class of fixed-income securities, and issues so rated can
be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Rating Refinements: Moody's may apply numerical modifiers, "1", "2", and "3" in
each generic rating classification from "Aa" through "B" in its municipal
fixed-income security rating system. The modifier "1" indicates that the
security ranks in the higher end of its generic rating category; the modifier
"2" indicates a mid-range ranking; and a modifier "3" indicates that the issue
ranks in the lower end of its generic rating category.
A-1
<PAGE>
COMMERCIAL PAPER RATINGS
Moody's Commercial Paper ratings are opinions of the ability to repay punctually
promissory obligations not having an original maturity in excess of nine months.
The ratings apply to Municipal Commercial Paper as well as taxable Commercial
Paper. Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment capacity of rated issuers:
"Prime-1", "Prime-2", "Prime-3".
Issuers rated "Prime-1" have a superior capacity for repayment of short-term
promissory obligations. Issuers rated "Prime-2" have a strong capacity for
repayment of short-term promissory obligations; and Issuers rated "Prime-3" have
an acceptable capacity for repayment of short-term promissory obligations.
Issuers rated "Not Prime" do not fall within any of the Prime rating categories.
STANDARD & POOR'S RATING GROUP ("STANDARD & POOR'S")
FIXED-INCOME SECURITY RATINGS
A Standard & Poor's fixed-income security rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers, or
lessees.
The ratings are based on current information furnished by the issuer or obtained
by Standard & Poor's from other sources it considers reliable. The ratings are
based, in varying degrees, on the following considerations: (1) likelihood of
default-capacity and willingness of the obligor as to the timely payment of
interest and repayment of principal in accordance with the terms of the
obligation; (2) nature of and provisions of the obligation; and (3) protection
afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.
Standard & Poor's does not perform an audit in connection with any rating and
may, on occasion, rely on unaudited financial information. The ratings may be
changed, suspended or withdrawn as a result of changes in, or unavailability of,
such information, or for other reasons.
"AAA" Fixed-income securities rated "AAA" have the highest rating
assigned by Standard & Poor's. Capacity to pay interest and
repay principal is extremely strong.
"AA" Fixed-income securities rated "AA" have a very strong capacity
to pay interest and repay principal and differs from the
highest-rated issues only in small degree.
"A" Fixed-income securities rated "A" have a strong capacity to pay
interest and repay principal although they are somewhat more
susceptible to the adverse effects of changes in circumstances
and economic conditions than fixed-income securities in
higher-rated categories.
"BBB" Fixed-income securities rated "BBB" are regarded as having an
adequate capacity to pay interest and repay principal. Whereas
it normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely
to lead to a weakened capacity to pay interest and repay
principal for fixed-income securities in this category than for
fixed-income securities in higher-rated categories.Fixed-income
securities rated "AAA", "AA", "A" and "BBB" are considered
investment grade.
"BB" Fixed-income securities rated "BB" have less near-term
vulnerability to default than other speculative grade
fixed-income securities. However, it faces major ongoing
uncertainties or exposure to adverse business, financial or
economic conditions which could lead to inadequate capacity or
willingness to pay interest and repay principal.
"B" Fixed-income securities rated "B" have a greater vulnerability
to default but presently have the capacity to meet interest
payments and principal repayments. Adverse business, financial
or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
A-2
<PAGE>
"CCC" Fixed-income securities rated "CCC" have a current identifiable
vulnerability to default, and the obligor is dependent upon
favorable business, financial and economic conditions to meet
timely payments of interest and repayments of principal. In the
event of adverse business, financial or economic conditions, it
is not likely to have the capacity to pay interest and repay
principal.
"CC" The rating "CC" is typically applied to fixed-income securities
subordinated to senior debt which is assigned an actual or
implied "CCC" rating.
"C" The rating "C" is typically applied to fixed-income securities
subordinated to senior debt which is assigned an actual or
implied "CCC-" rating.
"CI" The rating "CI" is reserved for fixed-income securities on
which no interest is being paid.
"D" The rating "D" is reserved for fixed-income securities when the
issue is in payment default, or the obligor has filed for
bankruptcy. The D rating category is used when interest
payments or principal payments are not made on the date due,
even if the applicable grace period has not expired, unless S&P
believes that such payments will made during such grace period.
"NR" Indicates that no rating has been requested, that there is
insufficient information on which to base a rating or that
Standard & Poor's does not rate a particular type of obligation
as a matter of policy.
Fixed-income securities rated "BB", "B", "CCC", "CC" and "C" are regarded as
having predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. "BB" indicates the least degree of speculation and
"C" the highest degree of speculation. While such fixed-income securities will
likely have some quality and protective characteristics, these are out-weighed
by large uncertainties or major risk exposures to adverse conditions.
Plus (+) or minus (-): The rating from "AA" TO "CCC" may be modified by the
addition of a plus or minus sign to show relative standing with the major
ratings categories.
COMMERCIAL PAPER RATINGS
Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. The commercial paper rating is not a recommendation to purchase or
sell a security. The ratings are based upon current information furnished by the
issuer or obtained by Standard & Poor's from other sources it considers
reliable. The ratings may be changed, suspended, or withdrawn as a result of
changes in or unavailability of such information. Ratings are graded into group
categories, ranging from "A" for the highest quality obligations to "D" for the
lowest. Ratings are applicable to both taxable and tax-exempt commercial paper.
Issues assigned "A" ratings are regarded as having the greatest capacity for
timely payment. Issues in this category are further refined with the designation
"1", "2", and "3" to indicate the relative degree of safety.
"A-1" Indicates that the degree of safety regarding timely payment is
very strong.
"A-2" Indicates capacity for timely payment on issues with this
designation is strong. However, the relative degree of
safety is not as overwhelming as for issues designated "A-1".
"A-3" Indicates a satisfactory capacity for timely payment.
Obligations carrying this designation are, however, somewhat
more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher
designations.
A-3
<PAGE>
INVESTMENT ADVISER
Schroder Capital Management International Inc.
787 Seventh Avenue, 34th Floor
New York, New York 10019
ADMINISTRATOR & DISTRIBUTOR
Schroder Fund Advisors Inc.
787 Seventh Avenue, 34th Floor
New York, New York 10019
SUBADMINISTRATOR
Forum Administrative Services, LLC
Two Portland Square
Portland, Maine 04101
CUSTODIAN
The Chase Manhattan Bank
Chase MetroTech Center
Brooklyn, New York 11245
and
Global Custody Division
125 London Wall
London EC2Y 5AJ United Kingdom
TRANSFER AND DIVIDEND DISBURSING AGENT
Forum Shareholder Services, LLC
P.O. Box 446
Portland, Maine 04112
COUNSEL
Ropes & Gray
One International Place
Boston, Massachusetts 02110
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109
<PAGE>
[This page has been intentionally left blank.]
<PAGE>
[LOGO]
PROSPECTUS
OCTOBER 1, 1998
SCHRODER CAPITAL FUNDS (DELAWARE)
ADVISOR SHARES
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
The Schroder Capital Funds are mutual funds offering a wide range of investment
objectives: SCHRODER INTERNATIONAL FUND, SCHRODER EMERGING MARKETS FUND,
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND, SCHRODER INTERNATIONAL BOND FUND,
SCHRODER U.S. DIVERSIFIED GROWTH FUND, AND SCHRODER U.S. SMALLER COMPANIES FUND.
Each of the Funds is a series of shares of Schroder Capital Funds (Delaware),
and each Fund (other than Schroder U.S. Diversified Growth Fund) invests
substantially all of its assets in a separately managed portfolio of Schroder
Capital Funds or Schroder Capital Funds II, each of which is a registered,
open-end management investment company. Schroder Capital Management
International Inc. serves as investment adviser to each of the Funds and to each
portfolio. Each of the Funds, except Schroder Emerging Markets Fund and Schroder
International Bond Fund, is a diversified mutual fund.
This Prospectus explains concisely the information that a prospective investor
should know before investing in Advisor Shares of the Funds. Please read it
carefully and keep it for future reference. INVESTORS CAN FIND MORE DETAILED
INFORMATION ABOUT SCHRODER CAPITAL FUNDS (DELAWARE) IN THE OCTOBER 1, 1998
STATEMENT OF ADDITIONAL INFORMATION, AS AMENDED FROM TIME TO TIME. FOR A FREE
COPY OF THE STATEMENT OF ADDITIONAL INFORMATION, PLEASE CALL 1-800-290-9826. The
Statement of Additional Information has been filed with the Securities and
Exchange Commission and is incorporated into this Prospectus by reference. The
Securities and Exchange Commission maintains an Internet World Wide Web site (at
http://www.sec.gov) that contains the Statement of Additional Information,
materials that are incorporated by reference into this Prospectus and the
Statement of Additional Information, and other information about the Funds.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND
INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
FUND STRUCTURE....................................................... 3
FINANCIAL HIGHLIGHTS................................................. 5
INVESTMENT OBJECTIVES AND POLICIES................................... 7
HOW TO BUY SHARES.................................................... 18
HOW TO SELL SHARES................................................... 21
OTHER INFORMATION.................................................... 22
MANAGEMENT OF THE TRUST.............................................. 23
APPENDIX A........................................................... A-1
Description of Securities Ratings
2
<PAGE>
================================================================================
FUNDS AVAILABLE THROUGH SCHRODER FUND ADVISORS INC.
PLEASE CALL FOR COMPLETE INFORMATION AND TO OBTAIN A PROSPECTUS.
PLEASE READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST.
<TABLE>
<S> <C>
SCHRODER CAPITAL FUNDS (DELAWARE) 1-800-290-9826 SCHRODER SERIES TRUST 1-800-464-3108
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 INVESTMENT GRADE INCOME FUND
SCHRODER U.S. DIVERSIFIED GROWTH FUND SCHRODER SHORT-TERM INVESTMENT FUND
SCHRODER U.S. SMALLER COMPANIES FUND
</TABLE>
=========================================================== ====================
FUND STRUCTURE
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 all of its investable assets in a
separate portfolio ( a "Portfolio") of either 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.
Accordingly, the investment experience of each Fund will correspond
directly with the investment experience of its corresponding Portfolio. See
"Management of the Trust - Information about the Portfolios." The Funds and
the Portfolios in which they invest are:
<TABLE>
<S> <C>
FUNDS PORTFOLIOS
- ----- ----------
Schroder International Fund International Equity Fund
(Schroder Capital Funds)
Schroder Emerging Markets Fund Schroder EM Core Portfolio*
(Schroder Capital Funds)
Schroder International Smaller Companies Fund Schroder International Smaller Companies Portfolio
(Schroder Capital Funds)
Schroder International Bond Fund Schroder International Bond Portfolio*
(Schroder Capital Funds II)
Schroder U.S. Smaller Companies Fund Schroder U.S. Smaller Companies Portfolio
(Schroder Capital Funds)
</TABLE>
SCHRODER U.S. DIVERSIFIED GROWTH FUND seeks to achieve its investment objective
by investing directly in securities.
* Each of SCHRODER EM CORE PORTFOLIO and SCHRODER INTERNATIONAL BOND
PORTFOLIO is a non-diversified series of an open-end management
investment company. Each of the other Portfolios is a diversified
series of an open-end management investment company. See "Other
Investment Practices and Risk Considerations - Non-Diversification and
Geographic Concentration."
3
<PAGE>
SUMMARY OF EXPENSES
Expenses are one of several factors to consider when investing in Advisor Shares
of the Funds. There are no "Shareholder Transaction Expenses" associated with a
purchase or redemption of Advisor Shares of the Funds. "Annual Operating
Expenses" for each Fund show the estimated expenses of the Fund with respect to
its Advisor Shares for the Fund's current fiscal year (except in the case of
Schroder U.S. Smaller Companies Fund, where Annual Operating Expenses are shown
with respect to its Advisor Shares based on the Fund's expenses for its most
recently completed fiscal year). Annual Operating Expenses of each Fund (other
than Schroder U.S. Diversified Growth Fund) include the Fund's pro rata portion
of all operating expenses of the Portfolio of Schroder Capital Funds or Schroder
Capital Funds II in which the Fund invests. The Example shows the cumulative
expenses attributable to a hypothetical $1,000 investment in each Fund over
specified periods.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES NONE
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<S> <C> <C> <C> <C> <C> <C>
SCHRODER SCHRODER
SCHRODER INTERNATIONAL SCHRODER U.S. SCHRODER
SCHRODER EMERGING SMALLER INTERNATIONAL DIVERSIFIED U.S. SMALLER
INTERNATIONAL MARKETS COMPANIES BOND GROWTH COMPANIES
FUND FUND FUND FUND FUND FUND
=========================== =============== =============== =============== =============== ================= =================
Management Fees(1)
(after expense
limitation)(2) 0.61% 0.81% 0.00% 0.19% 0.57% 0.85%
12b-1 Fees(3) 0% 0% 0% 0% 0% 0%
Other Expenses (after
expense limitation)(2) 0.63% 1.14% 1.75% 1.01% 1.18% 0.74%
----- ----- ----- ----- ----- -----
Total Fund Operating
Expenses (after expense
limitation)(2) 1.24% 1.95% 1.75% 1.20% 1.75% 1.58%
</TABLE>
(1) Management Fees reflect the fees paid by the Portfolio and the Fund for
investment advisory and administrative services.
(2) The Management Fees, Other Expenses, and Total Fund Operating Expenses for
each of the Funds reflect expense limitations currently in effect. See
"Management of the Trust." Without the limitations, Management Fees, Other
Expenses, and Total Fund Operating Expenses for Advisor Shares would be
0.68%, 4.22%, and 4.90%, respectively, in the case of International Fund;
1.25%, 1.16%, and 2.41%, respectively, in the case of Emerging Markets
Fund; 1.10%, 3.08%, and 4.18%, respectively, in the case of International
Smaller Companies Fund; 0.70%, 2.43%, and 3.13%, respectively, in the case
of International Bond Fund; 0.75%, 1.18%, and 1.93%, respectively, in the
case of U.S. Diversified Growth Fund; and 0.85%, 3.03%, and 3.88%,
respectively, in the case of U.S. Smaller Companies Fund. Other Expenses
and Total Fund Operating Expenses for each Fund other than Schroder U.S.
Smaller Companies Fund are estimated based on anticipated expenses for that
Fund's current fiscal year.
(3) 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 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. See
"How to Buy Shares -- Distributor and Distribution Plan."
<PAGE>
EXAMPLE
Your investment of $1,000 would incur the following expenses, assuming 5% annual
return and redemption at the end of each period:
1 year 3 years 5 years 10 years
------ ------- ------- --------
Schroder International Fund $13 $39 $68 $150
Schroder Emerging Markets Fund $20 $61 N/A N/A
Schroder International Smaller Companies Fund $18 $55 $95 $207
Schroder International Bond Fund $12 $38 N/A N/A
Schroder U.S. Diversified Growth Fund $18 $55 $95 $206
Schroder U.S. Smaller Companies Fund $16 $50 $87 $189
The Annual Operating Expenses table and Example are provided to help you
understand your share of the operating expenses of a Fund attributable to
Advisor Shares. THE TABLE AND EXAMPLE DO NOT REPRESENT PAST OR FUTURE
EXPENSE LEVELS. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FEDERAL REGULATIONS REQUIRE THE EXAMPLE TO ASSUME A 5% ANNUAL RETURN, BUT
ACTUAL ANNUAL RETURNS WILL VARY.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights for Schroder U.S. Smaller Companies Fund presented
below for the fiscal year ended May 31, 1998 and for the period ended May 31,
1997 have been audited by PricewaterhouseCoopers LLP, independent accountants to
the Funds. The audited financial statements for Schroder U.S. Smaller Companies
Fund and the related independent accountants' report are contained in the Fund's
Annual Report to Shareholders and are incorporated by reference into the
Statement of Additional Information (the "SAI"). The financial highlights for
Schroder International Fund for the period ended April 30, 1998 are unaudited.
The unaudited financial statements of Schroder International Fund for the period
ended April 30, 1998 similarly are incorporated by reference into the SAI. None
of the other Funds had any Advisor Shares outstanding during those periods.
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.
SCHRODER U.S. SMALLER COMPANIES FUND
<TABLE>
<S> <C> <C>
For the For the
Year Ended Period Ended
May 31, May 31,
-------------------- --------------------
1998 1997 (a)
-------------------- --------------------
NET ASSET VALUE, BEGINNING OF PERIOD $13.24 $11.89
INVESTMENT OPERATIONS:
Net Investment Income (Loss)(b) (0.05) (0.03)
Net Realized and Unrealized Gain (Loss) on Investments 2.79 1.38
-------------------- --------------------
Total from Investment Operations 2.74 1.35
-------------------- --------------------
DISTRIBUTIONS FROM
Net Realized Gain on Investments (1.26) --
NET ASSET VALUE, END OF PERIOD $14.72 $13.24
==================== ====================
Total Return(c) 21.50% 11.35%
Ratios/Supplementary Data
NET ASSETS, END OF PERIOD (IN THOUSANDS) $4,544 $81
Ratios to Average Net Assets:
Expenses After Expense Limitation(b) 1.58% 1.74%(d)
Expenses Before Expense Limitation(b) 3.88% 57.02%(d)
Net investment income (loss) including waiver of fees(b) (0.78%) (0.67%(d)
Average Commission Rate Per Share(e) $0.0582 $0.0584
Portfolio Turnover Rate (f) 54.98% 34.45%
</TABLE>
(a) Advisor Class shares were first issued on December 23, 1996.
(b) Includes the Fund's proportionate share of income and expenses of U.S.
Smaller Companies Portfolio.
(c) Total returns would have been lower had certain expenses not been reduced
during the period shown.
(d) Annualized.
(e) The rate represents the average commission per share paid by U.S. Smaller
Companies Portfolio to brokers on the purchase and sale of equity
securities on which commissions were charged.
(f) Portfolio turnover represents the rate of portfolio activity of U.S.
Smaller Companies Portfolio.
5
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SCHRODER INTERNATIONAL FUND
For the
Period Ended
April 30,
1998
(Unaudited)(a)
--------------------
NET ASSET VALUE, BEGINNING OF PERIOD $16.35
INVESTMENT OPERATIONS:
Net Investment Income (Loss)(b) 0.04
Net Realized and Unrealized Gain (Loss) on Investments 2.63
--------------------
Total from Investment Operations 2.67
--------------------
DISTRIBUTION FROM:
Net Investment Income --
Net Realized Gain on Investments --
--------------------
Total Distributions --
====================
NET ASSET VALUE, END OF PERIOD $19.02
====================
Total Return(c) 16.33%
Ratios/Supplementary Data
NET ASSETS, END OF PERIOD (IN THOUSANDS) $ 4
Ratios to Average Net Assets:
Expenses After Expense Limitation(b)(d) 1.24%
Expenses Before Expense Limitation(b)(d) 673.02%
Net investment income (loss) including waiver of fees(b)(d) 1.74%
Average Commission Rate Per Share(e) $0.0244
Portfolio Turnover Rate(f) 20.25%
(a) Advisor Class shares were first issued on January 21, 1998.
(b) 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 period shown.
(d) Annualized.
(e) Amount represents the average commissions per share paid by Schroder
International Equity Fund to brokers on the purchase and sale of
equity securities on which commissions are charged.
(f) Portfolio turnover represents the rate of portfolio activity of
Schroder International Equity Fund.
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<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Each Fund has a different investment objective that it pursues through the
investment policies described below.
Because of the differences in objectives and policies among the Funds, the Funds
will achieve different investment returns and will be subject to varying degrees
of market and financial risk. There is no assurance that any Fund will achieve
its objective. None of the Funds is intended to be a complete investment
program.
EACH FUND (OTHER THAN SCHRODER U.S. DIVERSIFIED GROWTH FUND) CURRENTLY INVESTS
SUBSTANTIALLY ALL OF ITS ASSETS IN A MANAGED PORTFOLIO OF SCHRODER CAPITAL FUNDS
OR SCHRODER CAPITAL FUNDS II. EACH SUCH PORTFOLIO IS REFERRED TO IN THIS
PROSPECTUS AS A "PORTFOLIO." IN REVIEWING THE DESCRIPTION OF A FUND'S INVESTMENT
OBJECTIVE AND POLICIES BELOW, INVESTORS 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 CAPITAL MANAGEMENT
INTERNATIONAL INC. ("SCMI") IS THE INVESTMENT ADVISER TO EACH FUND AND TO EACH
PORTFOLIO.
A Fund's investment objective may not be changed without shareholder approval.
The investment policies of each Fund may, unless otherwise specifically stated,
be changed by the Trustees of Schroder Capital Funds (Delaware) (the "Trust")
without a vote of the shareholders. All percentage limitations on investments
will apply at the time of investment and will not be considered violated unless
an excess or deficiency occurs or exists immediately after and as a result of
the investment.
SCHRODER INTERNATIONAL FUND
SCHRODER INTERNATIONAL FUND'S INVESTMENT OBJECTIVE IS LONG-TERM CAPITAL
APPRECIATION THROUGH INVESTMENT IN SECURITIES MARKETS OUTSIDE THE UNITED STATES.
Equity securities in which the Fund may invest include common stocks, preferred
stocks, securities convertible into common or preferred stocks, and rights or
warrants to purchase any of the foregoing. They may also include American
Depositary Receipts, European Depositary Receipts, and other similar instruments
providing for indirect investment in securities of foreign issuers. The Fund may
also invest in securities of closed-end investment companies that invest in turn
primarily in foreign securities.
The Fund normally invests at least 65% of its assets in equity securities of
companies domiciled outside the United States and will invest in securities of
issuers domiciled in at least three countries other than the United States.
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. When the Fund has invested a
substantial portion of its assets in the securities of companies domiciled in a
single country, it will be more susceptible to the risks of investing in that
country than would a fund investing in a geographically more diversified
portfolio. 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. Other countries in which the
Fund may invest may be considered "emerging markets" and involve special risks.
See "Other Investment Practices and Risk Considerations - Foreign Securities."
The Fund may invest in debt securities, including, for example, securities of
foreign governments (including provinces and municipalities) or their agencies
or instrumentalities, securities issued or guaranteed by international
organizations designated or supported by multiple foreign governmental entities
to promote economic reconstruction or development, and debt securities of
foreign corporations or financial institutions. The Fund may invest up to 5% of
its net assets in lower-quality, high yielding debt securities, which entail
certain risks. See "Other Investment Practices and Risk Considerations - Debt
Securities."
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<PAGE>
SCHRODER EMERGING MARKETS FUND
SCHRODER EMERGING MARKETS FUND'S INVESTMENT OBJECTIVE IS TO SEEK 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 will
normally invest in at least three countries other than the United States.
An "emerging market" country is any country not included at the time of
investment in the Morgan Stanley Capital International World Index of major
world economies. Those economies currently 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 of America. SCMI may at
times determine based on its own analysis that an economy included in the Index
should nonetheless be considered an emerging market country; any such country
would then constitute an emerging market country for purposes of investment by
the Fund.
The Fund normally invests at least 65% of its assets in equity securities of
issuers determined by SCMI to be emerging market issuers. Equity securities
include common stocks, preferred stocks, securities convertible into common or
preferred stocks, and rights or warrants to purchase any of the foregoing
(although such rights and warrants will not be taken into account in determining
compliance with the 65% requirement described in the preceding sentence). They
may also include American Depositary Receipts, European Depositary Receipts, and
other similar instruments providing for indirect investment in securities of
foreign issuers. The Fund may also invest in securities of closed-end investment
companies that invest in turn primarily in foreign securities. The Fund is a
non-diversified mutual fund. See "Non-Diversification and Geographic
Concentration."
The remainder of the Fund's assets may be invested in securities of issuers
located anywhere in the world. The Fund may invest up to 35% of its assets in
debt securities, including lower-quality, high yielding debt securities, which
entail certain risks. The Fund would invest in debt securities principally in an
effort to realize capital appreciation due, for example, to a favorable change
in currency exchange or control rates, or in the creditworthiness of their
issuers. The Fund may invest up to 5% of its assets in sovereign debt securities
that are in default. See "Other Investment Practices and Risk Considerations -
Debt Securities."
An issuer of a security will be considered to be an emerging market issuer if
SCMI 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 Fund may consider investment companies to be located in
the country or countries in which SCMI determines they focus their 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. When the Fund has invested a
substantial portion of its assets in the securities of companies domiciled in a
single country, it will be more susceptible to the risks of investing in that
country than would a fund investing in a geographically more diversified
portfolio.
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND'S INVESTMENT OBJECTIVE IS
LONG-TERM CAPITAL APPRECIATION THROUGH INVESTMENT IN SECURITIES MARKETS OUTSIDE
THE UNITED STATES. The Fund normally invests at least 65% of its assets in
equity securities of companies domiciled outside the United States that have
market capitalizations of $1.5 billion or less at the time of investment. In
selecting investments for the Fund, SCMI considers a number of factors,
including, for example, the company's potential for long-term growth, the
company's financial condition, its sensitivity to cyclical factors, the relative
value of the company's securities (to those of other companies and to the market
as a whole), and the extent to which the company's management owns equity in the
company.
8
<PAGE>
Equity securities in which the Fund may invest include common stocks, preferred
stocks, securities convertible into common or preferred stocks, and rights or
warrants to purchase any of the foregoing. They may also include American
Depositary Receipts, European Depositary Receipts, and other similar instruments
providing for indirect investment in securities of foreign issuers. The Fund may
also invest in securities of closed-end investment companies that invest in turn
primarily in foreign securities.
The Fund will invest in securities of issuers domiciled in at least three
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. When the Fund has invested a substantial portion of its assets
in the securities of companies domiciled in a single country, it will be more
susceptible to the risks of investing in that country than would a Fund
investing in a geographically more diversified portfolio. Certain countries in
which the Fund may invest may be considered "emerging markets" and involve
special risks. See "Other Investment Practices and Risk Considerations - Foreign
Securities."
Smaller companies may present greater opportunities for investment return than
do larger companies, but also involve greater risks. Smaller 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 volume. As a result, the prices of these securities may fluctuate more
than prices of securities of larger, more widely traded companies. See "Other
Investment Practices and Risk Considerations - Investments in Smaller
Companies."
The Fund may invest in debt securities, including, for example, securities of
foreign governments, international organizations, and foreign corporations and
U.S. government securities. The Fund may invest up to 5% of its total assets in
lower-quality, high yielding debt securities, which entail certain risks. See
"Other Investment Practices and Risk Considerations - Debt Securities."
SCHRODER INTERNATIONAL BOND FUND
SCHRODER INTERNATIONAL BOND FUND'S INVESTMENT OBJECTIVE IS TO SEEK A HIGH RATE
OF TOTAL RETURN. The Fund normally invests substantially all of its assets in
debt securities and debt-related investments of issuers domiciled outside the
United States.
"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 its investments and amortizations of
premiums). SCMI considers expected changes in foreign currency exchange rates in
determining the anticipated returns on securities denominated in foreign
currencies.
The Fund 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. These bonds may pay interest at fixed, variable, or floating rates.
Certain securities in which the Fund invests may be convertible into common or
preferred stock, or they may be traded together with warrants for the purchase
of common stock. The rate of return on some debt obligations 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 may invest up to 10%
of its net assets in lower-quality, high-yielding debt securities. See "Other
Investment Practices and Risk Considerations - Debt Securities." The Fund is a
non-diversified mutual fund. See "Non-Diversification and Geographic
Concentration."
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. When the Fund has invested a substantial portion of its assets in the
securities of companies domiciled in a single country, it will be more
susceptible to the risks of investing in that country than would a fund
investing in a geographically more diversified portfolio. The Fund has currently
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
9
<PAGE>
smaller portion of its assets in issuers domiciled in Germany. The portion of
the Fund's assets invested in such issuers may change at any time. At times, the
Fund may invest a substantial portion of its assets in securities of issuers in
emerging market countries, which involves special risks. See "Other Investment
Practices and Risk Considerations - Foreign Securities."
Generally, the Fund's average maturity will be shorter when SCMI expects
interest rates in markets where the Fund has invested to rise, and longer when
SCMI expects interest rates in those markets to fall. SCMI may use various
techniques to increase the interest-rate sensitivity of the Fund's portfolio,
including transactions in futures and options on futures, interest-rate swaps,
caps, floors, and short sales of securities.
SCMI believes that active currency management, through the use of any of the
foreign currency exchange transactions described below, can enhance portfolio
returns through opportunities arising from, for example, interest-rate
differentials between securities denominated in different currencies or changes
in value between currencies. SCMI also believes that active currency management
can be employed as an overall portfolio risk management tool. Foreign currency
management can also provide increased overall portfolio risk diversification.
See "Other Investment Practices and Risk Considerations - Foreign Currency
Exchange Transactions." The Fund may also borrow money to invest in additional
securities. Use of leverage involves special risks. See "Other Investment
Practices and Risk Considerations - Leverage."
SCHRODER U.S. DIVERSIFIED GROWTH FUND
(FORMERLY, SCHRODER U.S. EQUITY FUND)
SCHRODER U.S. DIVERSIFIED GROWTH FUND'S INVESTMENT OBJECTIVE IS GROWTH OF
CAPITAL. The Fund normally invests substantially all of its assets in equity
securities of companies in the United States. Equity securities in which the
Fund may invest include common stocks, preferred stocks, securities convertible
into common or preferred stocks, and rights or warrants to purchase any of the
foregoing.
The Fund does not limit its investments to any particular type of company
although the Fund will not normally invest in securities of small capitalization
companies (companies with market capitalizations of $1.5 billion or less). The
Fund may invest in companies, large or small, that SCMI believes offer the
potential for capital growth. They may, for example, include 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 may also 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 SCMI.
SCHRODER U.S. SMALLER COMPANIES FUND
SCHRODER U.S. SMALLER COMPANIES FUND'S INVESTMENT OBJECTIVE IS TO SEEK CAPITAL
APPRECIATION. The Fund invests at least 65% of its assets in equity securities
of U.S.-domiciled companies that have at the time of purchase market
capitalizations of $1.5 billion or less. In selecting investments for the Fund,
SCMI 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. Equity securities in
which the Fund may invest include common stocks, preferred stocks, securities
convertible into common or preferred stocks, and rights or warrants to purchase
any of the foregoing.
The Fund may also invest in equity securities of larger companies and in debt
securities, if SCMI believes such investments are consistent with the Fund's
investment objective. In addition, the Fund may invest up to 5% of its assets in
lower-quality, high yielding debt securities, which entail certain risks. See
"Other Investment Practices and Risk Considerations - Debt Securities."
Smaller companies may present greater opportunities for investment return than
do larger companies, but also involve greater risks. They 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
volume. As a result, the prices
10
<PAGE>
of these securities may fluctuate more than prices of securities of larger,
widely traded companies. See "Other Investment Practices and Risk Considerations
- - Investments in Smaller Companies." 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.
OTHER INVESTMENT PRACTICES AND RISK CONSIDERATIONS
The Funds may engage in the following investment practices, each of which
involves certain special risks. The SAI contains more detailed information about
these practices (some of which may be considered "derivative" investments).
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 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, 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 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, without limitation, 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, a Fund may have limited recourse
available to it in the event of default. The laws of some foreign countries may
limit a Fund's ability to invest in securities of certain issuers located in
those foreign countries. Special tax considerations apply to foreign securities.
Except as otherwise provided 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. Therefore, 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. 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, SCMI
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
net income available for distribution to shareholders. In certain circumstances,
a Fund may be able to pass through to
11
<PAGE>
shareholders credits for foreign taxes paid. See "Other Information - Dividends,
Distributions and Taxes."
Certain Funds may invest in securities of issuers in emerging market countries
with respect to some or all of their assets. The securities' prices and relative
currency values of emerging market investments are subject to greater volatility
than those of issuers in many 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 Funds 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 Funds may also invest a
substantial portion of their assets in securities traded in the over-the-counter
markets in such countries and not on any exchange, which may affect the
liquidity of the investment and expose the Funds to the credit risk of their
counterparties in trading those investments. Emerging market countries may
experience extremely high rates of inflation, which may adversely affect these
countries' economies and securities markets.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Changes in currency exchange rates will
affect the U.S. dollar values of 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 economic
and financial conditions, government intervention, speculation, and other
factors, many of which may be difficult (if not impossible) to predict. A Fund
may engage in foreign currency exchanges transactions to protect against
uncertainty in the level of future exchange rates. Although the strategy of
engaging in foreign currency exchange transactions could reduce the risk of loss
due to a decline in the value of the hedged currency, it could also limit the
potential gain from an increase in the value of the currency.
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.
SCMI may seek to enhance a Fund's investment return through active currency
management. SCMI may buy or sell foreign currencies for a Fund, on a spot or
forward basis, in an attempt to profit from inefficiencies in the pricing of
various currencies or of debt securities denominated in those currencies.
When investing in foreign securities, a Fund usually effects currency exchange
transactions on a "spot" (i.e., cash) basis at the spot rate prevailing in the
foreign exchange market. A Fund incurs foreign exchange expenses in converting
assets from one currency to another. In addition, 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.
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.
Forward contracts are not exchange traded, and there can be no assurance that a
liquid market will exist at a time when a Fund seeks to close out a forward
contract. Currently, only a limited market, if any, exists for exchange
transactions relating to currencies in certain emerging markets or to securities
of issuers domiciled or principally
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<PAGE>
engaged in business in certain emerging markets. This may limit a Fund's ability
to hedge its investments in those markets. These contracts involve a risk of
loss if SCMI fails to predict accurately changes in relative currency values,
the direction of stock prices or interest rates and other economic factors.
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"). From time to time, 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 SCMI believes correlates to the value of
the first currency. Cross hedging and proxy hedging transactions involve the
risk of imperfect correlation between changes in the values of the currencies to
which such transactions relate and changes in the value of the currency or other
asset or liability that is the subject of the hedge.
INVESTMENTS IN SMALLER COMPANIES. Certain Funds may invest all or a substantial
portion of their assets in securities issued by small companies. Such companies
may offer greater opportunities for capital appreciation than larger companies,
but investments in such companies may involve certain special risks. Such
companies may have limited product lines, markets, or financial resources and
may be dependent on a limited management group. While the markets in securities
of such companies have grown rapidly in recent years, such securities may trade
less frequently and in smaller volume than more widely held securities. The
values of these securities may fluctuate more sharply than those of other
securities, and a Fund may experience some difficulty in establishing or closing
out positions in these securities at prevailing market prices. There may be less
publicly available information about the issuers of these securities or less
market interest in such securities than in the case of larger companies, and it
may take a longer period of time for the prices of such securities to reflect
the full value of their issuers' underlying earnings potential or assets.
Some securities of smaller issuers may be restricted as to resale or may
otherwise be highly illiquid. The ability of a Fund to dispose of such
securities may be greatly limited, and a Fund may have to continue to hold such
securities during periods when SCMI would otherwise have sold the securities. It
is possible that SCMI or its affiliates or clients may hold securities issued by
the same issuers, and may in some cases have acquired the securities at
different times, on more favorable terms, or at more favorable prices, than a
Fund.
LEVERAGE.Schroder International Bond 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. Certain other Funds may engage in forward
commitments, described below and in the SAI, which may have the same economic
effect as if the Funds had borrowed money.
The use of borrowed money, known as "leverage," increases Schroder International
Bond Fund's market exposure and risk and may result in losses. When the Fund has
borrowed money for leverage and its investments increase or decrease in value,
its net asset value will normally increase or decrease more than if it had not
borrowed money for this purpose. 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. The Fund will not always borrow
money for investments, and the extent to which the Fund will borrow money, and
the amount it may borrow, depend on market conditions and interest rates.
Successful use of leverage depends on SCMI's ability to predict market movements
correctly. The amount of leverage that can exist at any one time will not exceed
one-third of the value of the Fund's total assets (including the amount
borrowed). A Fund may be required to segregate certain assets against its
obligations under reverse repurchase agreements entered into by it.
DEBT SECURITIES. Each Fund may invest in debt securities. A Fund may invest in
debt securities either to earn investment income or to benefit from changes in
the market values of such securities. Debt securities are subject to market risk
(the fluctuation of market value in response to changes in interest rates) and
to credit risk (the risk that the issuer may become unable or unwilling to make
timely payments of principal and interest).
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Each Fund also may invest in lower-quality, high-yielding debt securities rated
below investment grade and in unrated debt securities determined by SCMI to be
of comparable quality. Lower-rated debt securities (commonly called "junk
bonds") are considered to be of poor standing and predominantly speculative.
Securities in the lowest rating categories may have extremely poor prospects of
attaining any real investment standing, and some of those securities in which a
Fund may invest may be in default. The rating services' descriptions of
securities in the lower rating categories, including their speculative
characteristics, are set forth in Appendix A to this Prospectus.
In addition, lower-rated securities reflect a greater possibility that adverse
changes in the financial condition of the issuer, or in general economic
conditions, or both, or an unanticipated rise in interest rates, may impair the
ability of the issuer to make payments of interest and principal. 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
may also affect the value of these investments. The inability (or perceived
inability) of issuers to make timely payments of interest and principal would
likely make the values of securities held by a Fund more volatile and could
limit a Fund's ability to sell its securities at prices approximating the values
the Fund had placed on such securities. In the absence of a liquid trading
market for securities held by it, a Fund may be unable at times to establish the
fair value of such securities. The rating assigned to a security by a rating
agency does not reflect an assessment of the volatility of the security's market
value or of the liquidity of an investment in the security.
Each Fund may at times invest in so-called "zero coupon" bonds and
"payment-in-kind" 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. Payment-in-kind bonds allow the issuer, at its
option, to make current interest payments on the bonds either in cash or in
additional bonds. The values of zero-coupon bonds and payment-in-kind bonds are
subject to greater fluctuation in response to changes in market interest rates
than bonds which pay interest currently, and may involve greater credit risk
than such bonds. From time to time, a Fund may invest a portion of its assets in
Brady Bonds, which are securities created through the exchange of existing
commercial bank loans to sovereign entities for new obligations in connection
with debt restructuring. Brady Bonds have been issued only recently and,
therefore, do not have a long payment history.
A Fund will not necessarily dispose of a security when its debt rating is
reduced below its rating at the time of purchase, although SCMI will monitor the
investment to determine whether continued investment in the security will assist
in meeting the Fund's investment objective.
OPTIONS AND FUTURES TRANSACTIONS. Each Fund may engage in a variety of
transactions involving the use of options and futures contracts. A Fund may
engage in such transactions for hedging purposes or, to the extent permitted by
applicable law, to increase its current return.
A Fund may seek to increase its current return by writing covered call options
and covered put options on its portfolio securities or other securities in which
it may invest. A Fund receives a premium from writing a call or put option,
which increases the Fund's return if the option expires unexercised or is closed
out at a net profit. A Fund may also buy and sell put and call options on such
securities for hedging purposes. When a Fund writes a call option on a portfolio
security, it gives up the opportunity to profit from any increase in the price
of the security above the exercise price of the option; when it writes a put
option, a Fund takes the risk that it will be required to purchase a security
from the option holder at a price above the current market price of the
security. A Fund may terminate an option that it has written prior to its
expiration by entering into a closing purchase transaction in which it purchases
an option having the same terms as the option written. A Fund may also from time
to time buy and sell combinations of put and call options on the same underlying
security to earn additional income.
A Fund may buy and sell index futures contracts. An "index future" is a contract
to buy or sell units of a particular index at an agreed price on a specified
future date. Depending on the change in value of the index between the time when
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a Fund enters into and terminates an index future transaction, the Fund may
realize a gain or loss. A Fund may also purchase warrants, issued by banks or
other financial institutions, whose values are based on the values from time to
time of one or more securities indices.
A Fund may buy and sell futures contracts on U.S. Government securities or other
debt securities. A futures contract on a debt security is a contract to buy or
sell a certain amount of the debt security at an agreed price on a specified
future date. Depending on the change in the value of the security when the Fund
enters into and terminates a futures contract, the Fund realizes a gain or loss.
A Fund may purchase and sell options on futures contracts or on securities
indices in addition to or as an alternative to purchasing and selling futures
contracts.
A Fund may also purchase and sell put and call options on foreign currencies,
futures contracts on foreign currencies, and options on foreign currency futures
contracts as an alternative, or in addition to, the foreign currency exchange
transactions described above. Such transactions are similar to options and
futures contracts on securities, except that they typically contemplate that one
party to a transaction will deliver one foreign currency to the other in return
for another currency (which may or may not be the U.S.
dollar).
RISK FACTORS IN OPTIONS AND FUTURES TRANSACTIONS. Options and futures
transactions involve costs and may result in losses. The use of options and
futures involves certain special risks, including the risks that a Fund may be
unable at times to close out such positions, that hedging transactions may not
accomplish their purpose because of imperfect market correlations, or that SCMI
may not forecast market movements correctly.
The effective use of options and futures strategies is dependent on, among other
things, a Fund's ability to terminate options and futures positions at times
when SCMI deems it desirable to do so. Although a Fund will enter into an option
or futures contract position only if SCMI believes that a liquid secondary
market exists for that option or futures contract, there is no assurance that a
Fund will be able to effect closing transactions at any particular time or at an
acceptable price.
Each Fund generally expects that its options and futures contract transactions
will be conducted on recognized exchanges. In certain instances, however, a Fund
may purchase and sell options in the over-the-counter markets. A Fund's ability
to terminate options in the over-the-counter markets may be more limited than
for exchange-traded options and may also involve the risk that securities
dealers participating in such transactions would be unable to meet their
obligations to a Fund. A Fund will, however, engage in over-the-counter
transactions only when appropriate exchange-traded transactions are unavailable
and when, in the opinion of SCMI, 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.
The use of options and futures strategies also involves the risk of imperfect
correlation between movements in the prices of options and futures contracts and
movements in the value of the underlying securities, index, or currency, or in
the prices of the securities or currency that are the subject of a hedge. The
successful use of these strategies further depends on the ability of SCMI to
forecast market movements correctly.
Because the markets for certain options and futures contracts in which a Fund
will 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 investments may be limited. A
Fund's ability to engage in hedging transactions may be limited by certain
regulatory and tax considerations. A Fund's hedging transactions may affect the
character or amount of its distributions. The tax consequences of certain
hedging transactions have been modified by the Taxpayer Relief Act of 1997.
For more information about any of the options or futures portfolio transactions
described above, see the SAI.
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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 that 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 typical "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"
(i.e., the 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 a given minimum or maximum. The use of swap agreements
is a highly specialized activity that involves investment techniques and risks
different from those associated with ordinary portfolio securities transactions.
If SCMI is incorrect in its forecast of market values, interest rates, exchange
rates, or other factors, the Fund's investment performance would be less
favorable than if the Fund had not used such agreements.
SHORT SALES. Schroder International Bond Fund may engage in "short sales," which
are transactions in which the Fund sells a security that it does not own in
anticipation of a decline in the market value of that security. To complete the
transaction, the Fund must borrow the security to make delivery to the
purchaser. The Fund is then obligated to replace the borrowed security through a
purchase of it at the market price at the time of replacement. The price at that
time may be more or less than the price at which the security was sold by the
Fund. The Fund incurs a loss as a result of the short sale if the price of the
security increases between the date of the short sale and the date on which the
Fund replaces the borrowed security. The Fund realizes a gain if the security
declines in price between those dates. The result is the opposite of what one
would expect from a cash purchase of a long position in a security.
Until the security is replaced, the Fund is required to pay the lender amounts
equal to any dividend that accrues during the period of the loan. To borrow the
security, the Fund also may be required to pay a premium or specified amounts in
lieu of interest. The amount of any gain is decreased, and the amount of any
loss is increased, by any premium or amounts in lieu of interest the Fund is
required to pay. The proceeds of the short sale are retained by the broker, to
the extent necessary to meet margin requirements, until the short position is
closed out. No securities will be sold short, however, if thereafter the total
market value of all securities sold short would exceed 25% of the value of the
Fund's assets.
Any of the Funds may make short sales "against-the-box", which are transactions
in which the Fund sells short a security that it owns in anticipation of a
decline in the market value of that security. The proceeds of the short sale are
held by a broker until the settlement date, at which time the Fund delivers the
security to close the short position. The Fund receives the net proceeds from
the short sale. It is anticipated that a Fund will make short sales
against-the-box only to protect the value of its net assets.
NON-DIVERSIFICATION AND GEOGRAPHIC CONCENTRATION. Schroder Emerging Markets Fund
and Schroder International Bond Fund are "non-diversified" mutual funds, and
each Fund may invest its assets in a more limited number of issuers than may
other investment companies. Under the Internal Revenue Code, an investment
company, including a non-diversified investment company, generally may not
invest more than 25% of its total assets in obligations of any one issuer other
than U.S. Government obligations and, with respect to 50% of its total assets, a
fund may not invest more than 5% of its total assets in the securities of any
one issuer (except U.S. Government obligations). Thus, each Fund may invest up
to 25% of its total assets in the securities of each of any two issuers. This
practice involves an increased risk of loss to a Fund if the market value of a
security should decline or its issuer were otherwise not to meet its
obligations.
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Any of the Funds may invest more than 25% of its total assets in issuers located
in any one country. To the extent that it does so, a Fund is susceptible to a
range of factors that could adversely affect that country, including political
and economic developments and foreign exchange rate fluctuations as discussed
above. As a result of investing substantially in one country, the value of a
Fund's assets may fluctuate more widely than the value of shares of a comparable
fund with a lesser degree of geographic concentration.
SECURITIES LOANS, REPURCHASE AGREEMENTS AND FORWARD COMMITMENTS. Each Fund may
lend portfolio securities to brokers, dealers and financial institutions meeting
specified credit conditions, and may enter into repurchase agreements without
limit. Such activities may create taxable income in excess of the cash they
generate. The percentage limitation on the amount of a Fund's total assets that
may be loaned in accordance with the approved procedures is as follows: SCHRODER
INTERNATIONAL FUND - 10%; SCHRODER INTERNATIONAL SMALLER COMPANIES FUND,
SCHRODER INTERNATIONAL BOND FUND, SCHRODER U.S. DIVERSIFIED GROWTH FUND AND
SCHRODER U.S. SMALLER COMPANIES FUND - 25%; AND SCHRODER EMERGING MARKETS FUND -
33 1/3%. 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 its assets or realizing on
the collateral. Each Fund may also purchase securities for future delivery,
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.
INVESTMENT IN OTHER INVESTMENT COMPANIES. Each Fund is permitted to invest in
other investment companies or pooled vehicles, including closed-end funds, that
are advised by SCMI or its affiliates or by unaffiliated parties. A Fund may
invest in the shares of other investment companies that invest in securities in
which the Fund is permitted to invest, subject to the limits and conditions
required under the Investment Company Act of 1940, as amended (the "1940 Act"),
or any orders, rules or regulations thereunder. When investing through
investment companies, a Fund may pay a premium above such investment companies'
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 its
advisory and administrative fees. At the same time, the Fund would continue to
pay its own fees and expenses.
LIQUIDITY. A Fund will not invest more than 15% (10%, in the case of Schroder
International Fund and U.S. Diversified Growth Fund) of its net assets in
securities determined by SCMI to be illiquid. Certain securities that are
restricted as to resale may nonetheless be resold by a Fund in accordance with
Rule 144A under the Securities Act of 1933, as amended. Such securities may be
determined by SCMI to be liquid for purposes of compliance with the limitation
on a Fund's investment in illiquid securities. There can, however, be no
assurance that a Fund will be able to sell such securities at any time when SCMI
deems it advisable to do so or at prices prevailing for comparable securities
that are more widely held.
ALTERNATIVE INVESTMENTS. At times, SCMI may judge that market conditions make
pursuing a Fund's basic investment strategy inconsistent with the best interests
of its shareholders. At such times, SCMI may temporarily use alternative
strategies, primarily designed to reduce fluctuations in the values of the
Fund's assets. In implementing these "defensive" strategies, a Fund may invest
without limit in U.S. government obligations and other high-quality debt
instruments and any other investment SCMI considers to be consistent with such
defensive strategies, and may hold any portion of its assets in cash.
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
securities sales may result in realization of taxable capital gain. The
portfolio turnover rates for each Fund for its most recently completed fiscal
year are as follows: Schroder International Fund, 36.22%, Schroder Emerging
Markets Fund, 22.97%; Schroder International Smaller Companies Fund, 32.30%;
Schroder U.S. Diversified Growth Fund 44.28%; and Schroder U.S. Smaller
Companies Fund 54.98%.
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HOW TO BUY SHARES
Investors may purchase Advisor Shares of each Fund directly from the Trust.
Prospectuses, sales material and account applications can be obtained from the
Trust or through Forum Shareholder Services, LLC, the Trust's transfer agent
(the "Transfer Agent"). Investments also may be made through broker-dealers and
other financial institutions ("Service Organizations"). Service Organizations
may charge their customers a service fee for processing orders to purchase or
sell shares. Investors wishing to purchase Shares through their accounts at a
Service Organization should contact that organization directly for appropriate
instructions. A Service Organization is responsible for forwarding all necessary
documentation to the Trust, and may charge for its services.
Each Fund's Advisor Shares are offered at the net asset value next-determined
after receipt of your completed account application (at the address set forth
below) and your purchase request in good order. The minimum initial investment
and the minimum subsequent investment for each Fund is set forth in the table
below. A Service Organization may impose higher minimums on your initial or
subsequent investment. The Trust is authorized to reject any purchase order.
Initial Subsequent
Fund Investment Investment
Schroder International Fund $2,500 $250
Schroder Emerging Markets Fund $2,500 $250
Schroder International Smaller Companies Fund $2,500 $250
Schroder International Bond Fund $2,500 $250
Schroder U.S. Diversified Growth Fund $2,500 $250
Schroder U.S. Smaller Companies Fund $2,500 $250
Purchases may be made by mailing your check (in U.S. dollars), payable to the
Fund to:
[Name of Fund] - Advisor Shares
P.O. Box 446
Portland, Maine 04112
For initial purchases, your check must be accompanied by a completed account
application in proper form. Further documentation, such as corporate resolutions
and instruments of authority, may be requested from corporations,
administrators, executors, personal representatives, directors or custodians to
evidence the authority of the person or entity making the purchase request.
You may make subsequent purchases by mailing a check, by sending a bank wire, or
through your Service Organization, as indicated. All payments should clearly
indicate the shareholder's name and account number.
Investors and Service Organizations (on behalf of their customers) may transmit
purchase payments by Federal Reserve Bank wire directly to the Fund 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. If the initial
investment is by wire, an account number will be assigned, and a completed
account application must be mailed to the Fund before any transaction will be
effected. Wire orders received prior to the close of the New York Stock Exchange
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on a day when the Exchange is open for trading are processed at the net asset
value next determined as of that day. Wire orders received after the close of
the New York Stock Exchange are processed at the net asset value next
determined.
The Fund's Transfer Agent establishes for each shareholder of record an open
account to which all shares purchased and all reinvested dividends and other
distributions are credited. Although most shareholders elect not to receive
share certificates, certificates for full shares can be obtained by written
request to the Fund's Transfer Agent. No certificates are issued for fractional
shares.
The Transfer Agent will deem an account lost if six months have passed since
correspondence to the shareholder's address of record is returned, unless the
Transfer Agent determines the shareholder's new address. When an account is
deemed lost, dividends and other distributions are automatically reinvested. In
addition, the amount of any outstanding checks for dividends and other
distributions that have been returned to the Transfer Agent are reinvested, and
the checks are canceled.
DISTRIBUTOR AND DISTRIBUTION PLAN
Schroder Fund Advisors Inc. ("Schroder Advisors"), 787 Seventh Avenue, New York,
New York 10019, serves as Distributor of the Funds' shares. Schroder Advisors
was organized in 1989 as a registered broker-dealer to serve as an administrator
and distributor of each Fund and other mutual funds.
Each Fund has adopted a Distribution Plan pursuant to which the Fund may pay
Schroder Advisors or others 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.
SHAREHOLDER SERVICE PLAN
The Trust has adopted a shareholder service plan (the "Service Plan") for the
Advisor Shares of each Fund. Under the Service Plan, each Fund pays fees to
Schroder Advisors or others at an annual rate of up to 0.25% of the average
daily net assets of the Fund represented by Advisor Shares. Schroder Advisors
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 Advisors 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. Payments to a particular Service Organization under the
Service Plan are calculated by reference to the average daily net assets of
Advisor Shares owned beneficially by investors who have a service relationship
with the Service Organization. Some Service Organizations may impose additional
conditions or fees, such as requiring clients to invest more than the minimum
amounts required by the Trust for initial or subsequent investments or
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charging a direct fee for services. Such fees would be in addition to any
amounts which might be paid to the Service Organization by Schroder Advisors.
Please contact your Service Organization for details.
Schroder Advisors and its affiliates, at their own expense and out of their own
assets, may provide other compensation to financial institutions in connection
with sales of the Funds' shares or the servicing of shareholder accounts.
RETIREMENT PLANS AND INDIVIDUAL RETIREMENT ACCOUNTS
Advisor Shares are offered in connection with tax-deferred retirement plans,
including traditional and Roth IRAs. Application forms and further information
about these plans, including applicable fees, are available upon request. Before
investing in a Fund through one of these plans, investors should consult their
tax advisors.
The Funds may be used as an investment vehicle for an IRA including a SEP-IRA.
An IRA naming Bank-Boston as custodian is available from the Trust or the
Transfer Agent. The minimum initial investment for an IRA and the minimum
subsequent investment for each Fund is set forth in the table below. Generally,
contributions and investment earnings in a traditional IRA grow tax-deferred
until withdrawn. In contrast, contributions to a Roth IRA are not
tax-deductible, but investment earnings generally grow tax-free. IRAs are
available to individuals (and their spouses) who receive compensation or earned
income whether or not they are active participants in a tax-qualified or
government-approved retirement plan. An IRA contribution by an individual or
spouse who participates in a tax-qualified or government-approved retirement
plan may not be deductible, depending upon the individual's income. Individuals
also may establish an IRA to receive a "rollover" contribution of distributions
from another IRA or qualified plan. Consult your tax advisor.
Initial Subsequent
Fund Investment Investment
Schroder International Fund $250 $250
Schroder Emerging Markets Fund $250 $250
Schroder International Smaller Companies Fund $250 $250
Schroder International Bond Fund $250 $250
Schroder U.S. Diversified Growth Fund $250 $250
Schroder U.S. Smaller Companies Fund $250 $250
EXCHANGES
You may exchange a Fund's Advisor Shares for Advisor Shares of any fund offered
by the Schroder family of funds so long as your investment meets the initial
investment minimum of the fund being purchased, and you maintain the respective
minimum account balance in each fund in which you own shares. Exchanges between
Funds are made at net asset value.
For federal income tax purposes, an exchange is considered to be a sale of
shares on which you may realize a capital gain or loss. If you hold Advisor
Shares directly, you may make an exchange by calling the Transfer Agent at
1-800-344-8332 (see "How to Sell Shares - Telephone Requests") or by mailing
written instructions to Schroder Capital Funds (Delaware), P.O. Box 446,
Portland, Maine 04112. If you hold Advisor Shares through a Service
Organization, you must make an exchange through the Service Organization.
Exchange privileges may be exercised
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only in those states where shares of the other funds of the Schroder family of
funds may legally be sold. Exchange privileges may be amended or terminated at
any time upon sixty (60) days' notice.
HOW TO SELL SHARES
You can sell your Advisor Shares in a Fund to that Fund 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 shares through that Service Organization. The Trust will only redeem
shares for which it has received payment.
Advisor Shares are redeemed at their net asset value next determined after
receipt by the Fund (see the address set forth under "How to Buy Shares") of a
redemption request in proper form. Redemption requests that are received in good
order prior to the close of the Exchange on a day on which the Exchange is open
are processed at the net asset value determined as of that day. Redemption
requests that are received after the close of the Exchange are processed at the
net asset value next determined.
TELEPHONE REQUESTS
Redemption requests may be made by a shareholder of record by telephoning the
Transfer Agent at the telephone number on the cover page of this Prospectus. A
shareholder must provide the Transfer Agent with the class of shares, the dollar
amount or number of shares to be redeemed, shareholder account number, and some
additional form of identification such as a password. A redemption by telephone
may be made only if the telephone redemption privilege option has been elected
on the account application or otherwise in writing. In an effort to prevent
unauthorized or fraudulent redemption requests by telephone, reasonable
procedures will be followed by the Transfer Agent to confirm that telephone
instructions are genuine. The Transfer Agent and the Trust generally will not be
liable for any losses due to unauthorized or fraudulent redemption requests, but
either or both may be liable if they do not follow these procedures. Shares for
which certificates have been issued may not be redeemed by telephone. In times
of drastic economic or market change, it may be difficult to make redemptions by
telephone. If a shareholder cannot reach the Transfer Agent by telephone,
redemption requests may be mailed or hand-delivered to the Transfer Agent.
WRITTEN REQUESTS
Redemptions may be made by a shareholder of record by letter to a Fund
specifying the class of shares, the dollar amount or number of shares to be
redeemed, and the shareholder account number. The letter must also be signed in
exactly the same way the account is registered (if there is more than one owner
of the shares, all must sign) and, in certain cases, signatures must be
guaranteed by an institution that is acceptable to the Transfer Agent. Such
institutions include certain banks, brokers, dealers (including municipal and
government securities brokers and dealers), credit unions and savings
associations. Notaries public are not acceptable. Further documentation may be
requested to evidence the authority of the person or entity making the
redemption request. Questions concerning the need for signature guarantees or
documentation of authority should be directed to the Fund at the above address
or by calling 1-800-290-9826.
If Advisor Shares to be redeemed are held in certificate form, the certificates
must be enclosed with the redemption request, and the assignment form on the
back of the certificates (or an assignment separate from the certificates but
accompanied by the certificates) must be signed by all owners in exactly the
same way the owners' names are written on the face of the certificates.
Requirements for signature guarantees and/or documentation of authority as
described above could also apply. For your protection, the Trust suggests that
certificates be sent by registered mail.
ADDITIONAL REDEMPTION INFORMATION. Checks for redemption proceeds normally are
mailed within seven days. No redemption proceeds are mailed until checks in
payment for the purchase of the Advisor Shares to be redeemed have been cleared,
which may take up to 15 calendar days from the purchase date. Unless other
instructions are given in proper form, a check for the proceeds of a redemption
is sent to the shareholder's address of record.
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A Fund may suspend the right of redemption during any period when: (1) trading
on the New York Stock Exchange is restricted or the New York Stock 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 the Board of Trustees determines that it would be detrimental to the best
interest of the remaining shareholders of a Fund to make payment wholly or
partly in cash, the Fund may redeem Advisor Shares in whole or in part by a
distribution in kind of portfolio securities in lieu of cash. The Fund will,
however, redeem Advisor Shares solely in cash up to the lesser of $250,000 or 1%
of net assets during any 90-day period for any one shareholder. In the event
that payment for redeemed Advisor Shares is made wholly or partly in portfolio
securities, the shareholder may be subject to additional risks and costs in
converting the securities to cash. See "Additional Purchase and Redemption
Information" in the SAI.
The proceeds of a redemption may be more or less than the amount invested and,
therefore, a redemption may result in a gain or loss for federal income tax
purposes.
Due to the relatively high cost of maintaining smaller accounts, the Fund
reserves the right to redeem shares in any account (other than an IRA) if at any
time the account does not have a value of at least $2,000, unless the value of
the account falls below that amount solely as a result of market activity.
Shareholders will be notified that the value of the account is less than the
required minimum and will be allowed at least 30 days to make an additional
investment to increase the account balance to at least the required minimum
amount.
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.
OTHER INFORMATION
DETERMINATION OF NET ASSET VALUE
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 ITS ADVISOR SHARES
OUTSTANDING. Shares are valued as of the close of the New York Stock Exchange
(normally, 4:00 p.m. Eastern time) each day the New York Stock Exchange is open.
Portfolio securities for which market quotations are readily available are
stated at market value. Short-term investments that will mature in 60 days or
less are stated at amortized cost, which approximates market value. All other
securities and assets are valued at their fair values as determined in
accordance with procedures approved by the Board of Trustees. The net asset
value of a Fund's Advisor Shares will generally differ from that of its other
class of shares due to the variance in daily net income realized by and
dividends paid on each class of shares, and differences in the expenses of the
different classes. 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 is
calculated.
DIVIDENDS, DISTRIBUTIONS AND TAXES
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: (1) reinvest all distributions in
additional Advisor Shares of your Fund; (2) receive distributions from net
investment income in cash while reinvesting capital-gain distributions in
additional Advisor Shares of your Fund; (3) receive distributions from net
investment income in additional Advisor Shares of your Fund while receiving
capital-gain distributions in cash; or (4) receive all distributions in cash.
You can change your distribution option by notifying the Transfer Agent in
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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
Each Fund intends to qualify as a "regulated investment company" for federal
income tax purposes and to meet all other requirements that are necessary for it
to be relieved of federal taxes on income and gain it distributes to
shareholders. A Fund will distribute substantially all of its net investment
income and net capital-gain income on a current basis.
All Fund distributions will be taxable to you as ordinary income, except that
any distributions of net long-term capital gain will be taxed as such,
regardless of how long you have held the shares. Long-term capital gain will be
subject to a maximum rate of 28% or 20% depending upon the holding period of the
portfolio investment generating the gain. Distributions will be taxable as
described above whether received in cash or in shares through the reinvestment
of distributions.
Early in each year the Trust will notify you of the amount and tax status of
distributions paid to you by each Fund for the preceding year.
The foregoing is a summary of certain federal income tax consequences of
investing in a Fund. You should consult your tax advisor to determine the
precise effect of an investment in a Fund on your particular tax situation.
CERTAIN INFORMATION REGARDING FOREIGN TAXES. Foreign governments may impose
taxes on the Funds and the Portfolios and their investments, which generally
would reduce the income of the Fund or Portfolio. However, an offsetting tax
credit or deduction may be available to you.
Each Fund that is eligible to do so intends to elect to permit its shareholders
to take a credit (or a deduction) for the Fund's share of qualified foreign
income taxes paid by the Portfolio in which that Fund invests its assets. If the
Fund does make such an election, its shareholders would include as gross income
in their federal income tax returns both: (1) distributions received from the
Fund and (2) the amount that the Fund advises is their pro rata portion of
foreign income taxes paid with respect to or withheld from dividends and
interest paid to the Fund from its foreign investments. Shareholders then would
be entitled, subject to certain limitations (including, with respect to a
foreign tax credit, a holding period requirement), to take a foreign tax credit
against their federal income tax liability for the amount of such foreign taxes
or else to deduct such foreign taxes as an itemized deduction from gross income.
THE PORTFOLIOS
The Portfolios are not required to pay federal income tax because they are
classified as partnerships for federal income tax purposes. All interest,
dividends, gain and losses of the Portfolios will be deemed to have been "passed
through" to the Funds in proportion to the Funds' holdings in the Portfolios
regardless of whether such interest, dividends or gain have been distributed by
the Portfolios.
Each Portfolio intends to conduct its operations so as to enable each fund, if
each invests all of its assets in a Portfolio, to qualify as a regulated
investment company.
MANAGEMENT OF THE TRUST
The Board of Trustees of the Trust is responsible for generally overseeing the
conduct of the Trust's business. The business and affairs of each Portfolio are
managed under the direction of the Board of Trustees of Schroder Capital Funds
or of Schroder Capital Funds II. Information regarding the Trustees and
executive officers of the Trust, as well as the Trustees and executive officers
of Schroder Capital Funds and Schroder Capital Funds II, may be found in the
SAI.
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Schroder Capital Management International Inc. ("SCMI") is the investment
adviser to each of the Funds. SCMI is a wholly owned U.S. subsidiary of
Schroders U.S. Holdings Inc., which engages through its subsidiary firms in the
investment banking, asset management and securities businesses. Affiliates of
Schroders U.S. Holdings Inc. (or their predecessors) have been investment
managers since 1927. SCMI and its United Kingdom affiliate, Schroder Capital
Management International, Ltd., served as investment managers for over $27
billion in the aggregate as of June 30, 1998. Schroders 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 June 30, 1998, had under management assets of
approximately $175 billion. Schroder Fund Advisors Inc. ("Schroder Advisors") is
a wholly owned subsidiary of SCMI.
SCMI also serves as investment adviser to each of the Portfolios of Schroder
Capital Funds and Schroder Capital Funds II. Each of those Portfolios pays
advisory fees to SCMI monthly at the following annual rates (based on the assets
of each Portfolio taken separately): SCHRODER INTERNATIONAL EQUITY FUND - 0.45%
of the Portfolio's average daily net assets; SCHRODER INTERNATIONAL BOND
PORTFOLIO - 0.50% of the Portfolio's average daily net assets; SCHRODER
INTERNATIONAL SMALLER COMPANIES PORTFOLIO - 0.85% of the Portfolio's average
daily net assets; SCHRODER EM CORE PORTFOLIo - 1.00% of the Portfolio's average
daily net assets; and SCHRODER U.S. SMALLER COMPANIES PORTFOLIo - 0.60% of the
Portfolio's average daily net assets. SCMI has agreed to waiver 0.10% of the
advisory fees payable by Schroder International Smaller Companies Portfolio.
This fee limitation arrangement shall remain in effect until its elimination is
approved by the Board of Trustees of Schroder Capital Funds. Each Fund, due to
its investment in a 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).
Subject to the direction and control of SCMI Schroder Investment Management
International, Ltd. ("SIMIL"), 31 Gresham Street, London, U.K. EC2V 7QA, an
affiliate of SCMI, serves as subadviser to Schroder International Smaller
Companies Portfolio pusuant to an Investment Subadvisory Agreement among SCMI,
SIMIL, and the Portfolio. SIMIL, a newly organized investment advisory firm, is
a wholly owned subsidiary of Schroders plc, and as of June 30, 1998 had under
management assets of approximately $42 billion. Under the Subadvisory Agreement,
SCMI pays SIMIL a monthly fee at the annual rate of 0.25% of the Portfolio's
average daily net assets.
Each Fund (except Schroder U.S. Diversified Growth Fund) has entered into an
investment advisory agreement with SCMI pursuant to which SCMI 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. SCMI 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 another investment company). For further
information on these investment advisory agreements, see the SAI.
SCHRODER U.S. DIVERSIFIED GROWTH FUND pays advisory fees to SCMI monthly at the
annual rates of 0.75% of the first $100 million of the Fund's average daily net
assets and 0.50% of the Fund's average daily net assets in excess of $100
million.
ADMINISTRATIVE SERVICES. The Trust, on behalf of each Fund (other than Schroder
U.S. Diversified Growth Fund), has entered into an administration agreement with
Schroder Advisors pursuant to which Schroder Advisors provides certain
management and administrative services to these Funds. The Trust, on behalf of
each Fund, has entered into subadministration agreements with Forum
Administrative Services, LLC, Two Portland Square, Portland, Maine 04101
("FAdS"), pursuant to which FAdS provides certain management and administrative
services necessary for the Funds' operations. The Trust pays fees to Schroder
Advisors and to FAdS monthly at the following annual rates: SCHRODER
INTERNATIONAL FUND - 0.15% and 0.05%, respectively, of the Fund's average daily
net assets; SCHRODER EMERGING MARKETS FUND - 0.15% and 0.075%, respectively, of
the Fund's average daily net assets; SCHRODER INTERNATIONAL SMALLER COMPANIES
FUND - 0.10% and 0.075%, respectively, of the Fund's average daily net assets;
SCHRODER INTERNATIONAL BOND FUND - 0.10% and 0.075%, respectively, of the Fund's
average daily net assets; and SCHRODER U.S. SMALLER COMPANIES FUND - 0.25% and
0.075%, respectively, of the Fund's average daily net
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assets. Each of Emerging Markets Fund and International Smaller Companies Fund
also is subject to a $25,000 minimum annual fee plus a $12,000 charge per class
under the subadministration agreement.
Schroder Advisors and FAdS also serve as administrator and subadministrator,
respectively, to each of the Portfolios of Schroder Capital Funds and Schroder
Capital Funds II. Each of those Portfolios pays administration fees to Schroder
Advisors and subadministration fees to FAdS monthly at the following annual
rates (based on the assets of each Portfolio taken separately): INTERNATIONAL
EQUITY FUND - 0.075% and 0.075%, respectively, of the Portfolio's average daily
net assets; SCHRODER INTERNATIONAL BOND PORTFOLIO - 0.10% and 0.075%,
respectively, of the Portfolio's average daily net assets; SCHRODER
INTERNATIONAL SMALLER COMPANIES PORTFOLIO - 0.15% and 0.075%, respectively, of
the Portfolio's average daily net assets; SCHRODER EM CORE PORTFOLIO - 0.10% and
0.075%, respectively, of the Portfolio's daily net assets; and SCHRODER U.S.
SMALLER COMPANIES PORTFOLIO - 0.00% and 0.075%, respectively, of the Portfolio's
average daily net assets. Each Portfolio is subject to a $25,000 minimum annual
fee under the subadministration agreement. Each Fund, due to its investment in a
Portfolio, bears a proportionate part of the administration and
subadministration fees paid by the Portfolio (based on the percentage of the
Portfolio's assets attributable to the Fund).
In order to limit the Funds' expenses, SCMI and Schroder Advisors have
voluntarily agreed to reduce their compensation (and, if necessary, to pay
certain expenses of each of the Funds) with respect to each of the Funds to the
extent that a Fund's expenses chargeable to Advisor Shares exceed the following
annual rates: SCHRODER INTERNATIONAL FUND - 1.24% of the Fund's average daily
net assets attributable to Advisor Shares; SCHRODER EMERGING MARKETS FUNd -
1.95% of the Fund's average daily net assets attributable to Advisor Shares;
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND - 1.75% of the Fund's average
daily net assets attributable to Advisor Shares; SCHRODER INTERNATIONAL BOND
FUND - 1.20% of the Fund's average daily net assets attributable to Advisor
Shares; SCHRODER U.S. DIVERSIFIED GROWTH FUND - 1.75% of the Fund's average
daily net assets attributable to Advisor Shares; and SCHRODER U.S. SMALLER
COMPANIES FUND - 1.74% of the Fund's average daily net assets attributable to
Advisor Shares. In addition, SCMI has agreed to limit the advisory fees paid by
SCHRODER U.S. DIVERSIFIED GROWTH FUND to 0.65% of the Fund's average daily net
assets. FAdS may waive voluntarily all or a portion of its subadvisory fees,
from time to time. The Trust pays all expenses not assumed by SCMI and Schroder
Advisors, including Trustees' fees, auditing, legal, custodial, and investor
servicing, and shareholder reporting expenses.
SCMI's investment decisions for each Portfolio in which a Fund invests (or, in
the case of Schroder U.S. Diversified Growth Fund, for the Fund) are made by an
investment manager or an investment team, with the assistance of an investment
committee at SCMI. The Portfolio Managers for each Fund are as follows:
SCHRODER INTERNATIONAL FUND:
MICHAEL PERELSTEIN --Portfolio Manager since January 1997 of Schroder
International Equity Portfolio, in which Schroder International Fund
invests, and Portfolio Manager since inception of Schroder International
Bond Portfolio, in which Schroder International Bond Fund invests. Mr.
Perelstein is a Vice President of the Trust and of Schroder Capital Funds
and is a Director and Senior Vice President of SCMI. He was previously a
Managing Director, MacKay-Shields Financial Corp.
SCHRODER EMERGING MARKETS FUND:
JOHN A. TROIANO --Portfolio Manager since inception of Schroder EM Core
Portfolio, in which Schroder Emerging Markets Fund invests. Mr. Troiano is
a Vice President of the Trust and of Schroder Capital Funds. He is also the
Chief Executive of SCMI.
HEATHER CRIGHTON --Portfolio Manager since inception of Schroder EM Core
Portfolio, in which Schroder Emerging Markets Fund invests. Ms. Crighton is
a First Vice President of SCMI.
MARK BRIDGEMAN --Portfolio Manager since inception of Schroder EM Core
Portfolio, in which Schroder Emerging Markets Fund invests. Mr. Bridgeman
is a Vice President of SCMI.
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SCHRODER INTERNATIONAL SMALLER COMPANIES FUND:
JANE P. LUCAS - Portfolio Manager since September 1998 of Schroder
International Smaller Companies Portfolio, in which Schroder International
Smaller Companies Fund invests. Ms. Lucas is a Vice President of the Trust
and a Senior Vice President of SCMI.
NICHOLAS MELHUISH --Portfolio Manager since September 1998 of Schroder
International Smaller Companies Portfolio, in which Schroder International
Smaller Companies Fund invests. Mr. Melhuish is an investment manager of
SIMIL and of SCMI.
SCHRODER INTERNATIONAL BOND FUND:
MICHAEL PERELSTEIN --Portfolio Manager since January 1997 of Schroder
International Equity Portfolio, in which Schroder International Fund
invests, and Portfolio Manager since inception of Schroder International
Bond Portfolio, in which Schroder International Bond Fund invests. Mr.
Perelstein is a Vice President of the Trust and of Schroder Capital Funds
and is a Director and Senior Vice President of SCMI. He was previously a
Managing Director, MacKay-Shields Financial Corp.
MARK ASTLEY --Portfolio Manager since inception of Schroder International
Bond Portfolio, in which Schroder International Bond Fund invests. Mr.
Astley is a Vice President of the Trust and of Schroder Capital Funds II.
He is also a First Vice President of SCMI.
SCHRODER U.S. DIVERSIFIED GROWTH FUND:
PAUL MORRIS --Portfolio Manager since January 1997 of Schroder U.S.
Diversified Growth Fund. Mr. Morris is Senior Vice President of SCMI. He
was previously Principal and Senior Portfolio Manager, Weiss Peck & Greer,
L.L.C., and Managing Director, Equity Division, UBS Asset Management.
SCHRODER U.S. SMALLER COMPANIES FUND:
IRA L. UNSCHULD --Resumed portfolio management in September 1998 of
Schroder U.S. Smaller Companies Portfolio, in which Schroder U.S. Smaller
Companies Fund invests. Mr. Unschuld was co-manager with Fariba Talebi
since inception through March 1997. Mr. Unschuld is a Vice President of the
Trust and Group Vice President of SCMI.
SCMI places all orders for purchases and sales of the Funds' securities. In
selecting broker-dealers, SCMI may consider research and brokerage services
furnished to it and its affiliates. Schroder & Co. Inc. and Schroder Securities
Limited, affiliates of SCMI, may receive brokerage commissions from the Funds in
accordance with procedures adopted by the Trustees under the 1940 Act which
require periodic review of these transactions. Subject to seeking the most
favorable price and execution available, SCMI may consider sales of shares of
the Funds as a factor in the selection of broker-dealers.
YEAR 2000
The Funds receive services from their investment adviser, administrators,
distributor, transfer agent and custodian, which rely on the smooth functioning
of their respective systems and the systems of others to perform these 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. SCMI is taking
steps that it believes are reasonably designed to address this potential year
2000 problem and
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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.
PERFORMANCE INFORMATION
Yield (for Advisor Shares of Schroder International Bond Fund) and total return
data relating to Advisor Shares of the Funds may from time to time be included
in advertisements about the Funds. The "yield" of a Fund's Advisor Shares is
calculated by dividing the Fund's annualized net investment income per Advisor
Shares during a recent 30-day period by the net asset value per Advisor Shares
on the last day of that period. When a Fund's "total return" is advertised with
respect to Advisor Shares, it will be calculated for the past year, the past
five years, and the past ten years (or if a Fund's Advisor Shares have been
offered for a period shorter than one, five, or ten years, that period will be
substituted) through the most recent calendar quarter, as more fully described
in the SAI. Advertisements about a Fund may include total return information for
the Fund's Investor Shares for periods prior to the initial offering date of the
Fund's Advisor Shares; that information may be adjusted to reflect the actual
fees and expenses attributable to the Advisor Shares that were not applicable to
the Fund's Advisor Shares during the periods presented. Total return for any
period of one year or less represents the actual rate of return on such an
investment earned during the period, although annualized figures may also be
shown in advertisements. Total return quotations assume that all dividends and
distributions are reinvested when paid.
ALL DATA ARE BASED ON PAST INVESTMENT RESULTS AND DO NOT PREDICT FUTURE
PERFORMANCE. Investment performance of a Fund's Advisor 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 its Advisor
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 Advisor Shares to those of various
classes of other mutual funds and other investment vehicles. Performance for
each Fund's Advisor Shares may be compared to various indices. See the SAI for
more information.
ADDITIONAL INFORMATION ABOUT THE TRUST
The Trust was organized as a Maryland corporation on July 30, 1969, reorganized
on February 29, 1988 as Schroder Capital Funds, Inc. and reorganized as a
Delaware business trust on January 9, 1996. The Trust has 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 Trust's shares
of beneficial interest are presently divided into eight different series. Each
Fund's shares are presently divided into two classes, Advisor Shares, which are
offered through this Prospectus, and Investor Shares, which are offered through
a separate prospectus. Unlike Advisor Shares, Investor Shares are not subject to
shareholder service and distribution fees, which will affect their performance
relative to Advisor Shares. To obtain more information about Investor Shares,
contact Schroder Capital Funds (Delaware) at 1-800-290-9826. The Trust's
principal office is located at Two Portland Square, Portland, Maine 04101, and
its telephone number is 1-207-879-8903.
Each share has one vote, with fractional shares voting proportionally.
Shareholders of a class of shares or series generally have separate voting
rights with respect to matters that affect only that class or series. See "Other
Information - Capitalization and Voting" in the SAI. Shares are freely
transferable and are entitled to dividends and other distributions as declared
by the Trustees. Dividends paid by the Funds on their two classes of shares will
normally differ in amount due to the differing expenses borne by the two
classes. If a Fund were liquidated, each class of shares would receive the net
assets of the Fund attributable to that class. The Trust may suspend the sale of
a Fund's shares at any time and may refuse any order to purchase shares.
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.
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INFORMATION ABOUT THE PORTFOLIOS
Each of the Funds (other than Schroder U.S. Diversified Growth Fund) seeks to
achieve its investment objective by investing all of its investable assets in a
Portfolio of Schroder Capital Funds or Schroder Capital Funds II, that has the
same investment objective and similar policies. In that way, a Portfolio
acquires investment securities directly, and a Fund acquires an indirect
interest in those securities. Schroder Capital Funds is a business trust
organized under the laws of the State of Delaware in September 1995. Schroder
Capital Funds II is a business trust organized under the laws of the State of
Delaware in December 1996. Each of Schroder Capital Funds and Schroder Capital
Funds II is registered under the 1940 Act as an open-end management investment
company. The assets of a Portfolio belong only to, and the liabilities of a
Portfolio are borne solely by, that Portfolio and no other Portfolio of Schroder
Capital Funds or Schroder Capital Funds II.
A Fund's investment in a Portfolio is in the form of a non-transferable
beneficial interest. All other investors in a Portfolio invest on the same terms
and conditions as the Fund and pay a proportionate share of the Portfolio's
expenses.
The Portfolios normally will not hold meetings of investors except as required
by the 1940 Act. Each investor in a Portfolio will be entitled to vote in
proportion to its relative beneficial interest in the Portfolio. On most issues
subject to a vote of investors, in accordance with applicable law the Board of
Trustees will either: (1) solicit voting instructions from Fund shareholders
with regard to the voting of all proxies with respect to a Fund's shares and
vote such proxies in accordance with such instructions, or (2) vote the
interests held by a Fund in the same proportion as the vote of all other holders
of the Portfolio's interests. If there are other investors in the Portfolio,
there can be no assurance that any issue that receives a majority of the votes
cast by Fund shareholders will receive a majority of votes cast by all investors
in the Portfolio; indeed, if other investors hold a majority interest in the
Portfolio, they could have voting control of the Portfolio.
The Portfolios do not sell their shares directly to members of the general
public. Another investor in a Portfolio, such as an investment company, that
might sell its shares to members of the general public would not be required to
sell its shares at the same public offering price as the Fund investing in that
Portfolio and could have different fees and expenses than the Fund. Therefore,
Fund shareholders may have different returns than shareholders in another
investment company that invests exclusively in the same Portfolio. Information
regarding any such funds in the future will be available by calling
1-800-730-2932.
Under federal securities law, any person or entity that signs a registration
statement may be liable for a misstatement of a material fact in, or omission of
a material fact from, the registration statement. Each of Schroder Capital Funds
and Schroder Capital Funds II, their Trustees, and certain of their officers are
required to sign the registration statement of the Trust and may be required to
sign the registration statements of certain other investors in the Portfolio. In
addition, Schroder Capital Funds or Schroder Capital Funds II may be liable for
misstatements or omissions of a material fact in any proxy soliciting material
of an investor in a Portfolio, including a Fund. Each investor in a Portfolio,
including the Trust, is required to indemnify Schroder Capital Funds or Schroder
Capital Funds II, as the case may be, and their Trustees and officers ("SCF
Indemnitees") against certain claims.
Indemnified claims are those brought against SCF Indemnitees based on a
misstatement of a material fact in, or omission of a material fact from, a
registration statement or proxy materials. No indemnification need be made,
however, if such alleged misstatement or omission relates to information about
Schroder Capital Funds or Schroder Capital Funds II, as the case may be, and was
supplied to the investor by Schroder Capital Funds or Schroder Capital Funds II,
as the case may be. Similarly, Schroder Capital Funds or Schroder Capital Funds
II, as the case may be, is required to indemnify each investor in a Portfolio,
including a Fund, for any claims brought against the investor with respect to
the investor's registration statement or proxy materials, to the extent the
claim is based on a misstatement or omission of a material fact relating to
information about Schroder Capital Funds or Schroder Capital Funds II, as the
case may be, that is supplied to the investor by Schroder Capital Funds or
Schroder Capital Funds II, as the case may be.
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A Fund's investment in a Portfolio may be affected by the actions of other large
investors in the Portfolio; for example, if the Portfolio had a large investor
other than the Fund that redeemed its interest in the Portfolio, the Portfolio's
remaining investors (including the Fund) might, as a result, experience higher
pro rata operating expenses, thereby producing lower returns.
A Fund may withdraw its entire investment from a Portfolio at any time, if the
Trust Board determines that it is in the best interests of the Fund and its
shareholders to do so. A Fund might withdraw, for example, if there were other
investors in the Portfolio who, by a vote of the shareholders of all investors
(including the Fund), changed the investment objective or policies of the
Portfolio in a manner not acceptable to the Trust Board. A withdrawal could
result in a distribution in kind of portfolio securities (as opposed to a cash
distribution) by the Portfolio. That distribution could result in a less
diversified portfolio of investments for the Fund and could affect adversely the
liquidity of the Fund's portfolio. If the Fund decided to convert those
securities to cash, it would likely incur brokerage fees or other transaction
costs. If a Fund should withdraw its investment from a Portfolio, the Trust
Board would consider appropriate alternatives, including the management of the
Fund's assets in accordance with its investment objective and policies by SCMI,
or the investment of all of the Fund's investable assets in another pooled
investment entity having substantially the same investment objective as the
Fund. The inability of a Fund to find a suitable replacement investment, if the
Board decided not to permit SCMI to manage the Fund's assets, could have a
significant adverse impact on shareholders of the Fund.
Each investor in a Portfolio, including a Fund, may be liable for all
obligations of the Portfolio. The risk to an investor in a Portfolio of
incurring financial loss on account of such liability, however, is limited to
circumstances in which the Portfolio is unable to meet its obligations, the
occurrence of which SCMI considers to be remote. Upon liquidation of a
Portfolio, investors would be entitled to share pro rata in the net assets of
the Portfolio available for distribution to investors.
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APPENDIX A
DESCRIPTION OF SECURITIES RATINGS
MOODY'S INVESTORS SERVICE INC. ("MOODY'S")
Fixed-Income Security Ratings
"Aaa" Fixed-income securities which are rated "Aaa" are judged to be
of the best quality. They carry the smallest degree of
investment risk and are generally referred to as "gilt edge".
Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
"Aa" Fixed-income securities which are rated "Aa" are judged to be
of high quality by all standards. Together with the "Aaa" group
they comprise what are generally known as high grade
fixed-income securities. They are rated lower than the best
fixed-income securities because margins of protection may not
be as large as in "Aaa" securities or fluctuation of protective
elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat
larger than in "Aaa" securities.
"A" Fixed-income securities which are rated "A" possess many
favorable investment attributes and are to be considered as
upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment
sometime in the future.
"Baa" Fixed-income securities which are rated "Baa" are considered as
medium grade obligations; i.e., they are neither highly
protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable
over any great length of time. Such fixed-income securities
lack outstanding investment characteristics and in fact have
speculative characteristics as well. Fixed-income securities
rated "Aaa", "Aa", "A" and "Baa" are considered investment
grade.
"Ba" Fixed-income securities which are rated "Ba" are judged to have
speculative elements; their future cannot be considered as well
assured. Often the protection of interest and principal
payments may be very moderate, and therefore not well
safeguarded during both good and bad times in the future.
Uncertainty of position characterizes bonds in this class.
"B" Fixed-income securities which are rated "B" generally lack
characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other
terms of the contract over any long period of time may be
small.
"Caa" Fixed-income securities which are rated "Caa" are of poor
standing. Such issues may be in default or there may be
present elements of danger with respect to principal or
interest.
"Ca" Fixed-income securities which are rated "Ca" present
obligations which are speculative in a high degree. Such issues
are often in default or have other marked shortcomings.
"C" Fixed-income securities which are rated "C" are the lowest
rated class of fixed-income securities, and issues so rated can
be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Rating Refinements: Moody's may apply numerical modifiers, "1", "2", and "3" in
each generic rating classification from "Aa" through "B" in its municipal
fixed-income security rating system. The modifier "1" indicates that the
security ranks in the higher end of its generic rating category; the modifier
"2" indicates a mid-range ranking; and a modifier "3" indicates that the issue
ranks in the lower end of its generic rating category.
A-1
<PAGE>
COMMERCIAL PAPER RATINGS
Moody's Commercial Paper ratings are opinions of the ability to repay punctually
promissory obligations not having an original maturity in excess of nine months.
The ratings apply to Municipal Commercial Paper as well as taxable Commercial
Paper. Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment capacity of rated issuers:
"Prime-1", "Prime-2", "Prime-3".
Issuers rated "Prime-1" have a superior capacity for repayment of short-term
promissory obligations. Issuers rated "Prime-2" have a strong capacity for
repayment of short-term promissory obligations; and Issuers rated "Prime-3" have
an acceptable capacity for repayment of short-term promissory obligations.
Issuers rated "Not Prime" do not fall within any of the Prime rating categories.
STANDARD & POOR'S RATING GROUP ("STANDARD & POOR'S")
Fixed-Income Security Ratings
A Standard & Poor's fixed-income security rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers, or
lessees.
The ratings are based on current information furnished by the issuer or obtained
by Standard & Poor's from other sources it considers reliable. The ratings are
based, in varying degrees, on the following considerations: (1) likelihood of
default-capacity and willingness of the obligor as to the timely payment of
interest and repayment of principal in accordance with the terms of the
obligation; (2) nature of and provisions of the obligation; and (3) protection
afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.
Standard & Poor's does not perform an audit in connection with any rating and
may, on occasion, rely on unaudited financial information. The ratings may be
changed, suspended or withdrawn as a result of changes in, or unavailability of,
such information, or for other reasons.
"AAA" Fixed-income securities rated "AAA" have the highest rating
assigned by Standard & Poor's. Capacity to pay interest and repay
principal is extremely strong.
"AA" Fixed-income securities rated "AA" have a very strong
capacity to pay interest and repay principal and differs from the
highest-rated issues only in small degree.
"A" Fixed-income securities rated "A" have a strong capacity to pay
interest and repay principal although they are somewhat more
susceptible to the adverse effects of changes in circumstances
and economic conditions than fixed-income securities in
higher-rated categories.
"BBB" Fixed-income securities rated "BBB" are regarded as having an
adequate capacity to pay interest and repay principal. Whereas
it normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely
to lead to a weakened capacity to pay interest and repay
principal for fixed-income securities in this category than for
fixed-income securities in higher-rated categories.
Fixed-income securities rated "AAA", "AA", "A" and "BBB" are
considered investment grade.
"BB" Fixed-income securities rated "BB" have less near-term
vulnerability to default than other speculative grade
fixed-income securities. However, it faces major ongoing
uncertainties or exposure to adverse business, financial or
economic conditions which could lead to inadequate capacity or
willingness to pay interest and repay principal.
"B" Fixed-income securities rated "B" have a greater vulnerability
to default but presently have the capacity to meet interest
payments and principal repayments. Adverse business, financial
or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
A-2
<PAGE>
"CCC" Fixed-income securities rated "CCC" have a current identifiable
vulnerability to default, and the obligor is dependent upon
favorable business, financial and economic conditions to meet
timely payments of interest and repayments of principal. In the
event of adverse business, financial or economic conditions, it
is not likely to have the capacity to pay interest and repay
principal.
"CC" The rating "CC" is typically applied to fixed-income securities
subordinated to senior debt which is assigned an actual or
implied "CCC" rating.
"C" The rating "C" is typically applied to fixed-income
securities subordinated to senior debt which is assigned
an actual or implied "CCC-" rating.
"CI" The rating "CI" is reserved for fixed-income securities on
which no interest is being paid.
"D" The rating "D" is reserved for fixed-income securities when
the issue is in payment default, or the obligor has filed for
bankruptcy. The D rating category is used when interest
payments or principal payments are not made on the date due,
even if the applicable grace period has not expired, unless
S&P believes that such payments will made during such grace
period.
"NR" Indicates that no rating has been requested, that there is
insufficient information on which to base a rating or that
Standard & Poor's does not rate a particular type of obligation
as a matter of policy.
Fixed-income securities rated "BB", "B", "CCC", "CC" and "C" are regarded as
having predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. "BB" indicates the least degree of speculation and
"C" the highest degree of speculation. While such fixed-income securities will
likely have some quality and protective characteristics, these are out-weighed
by large uncertainties or major risk exposures to adverse conditions.
Plus (+) or minus (-): The rating from "AA" TO "CCC" may be modified by the
addition of a plus or minus sign to show relative standing with the major
ratings categories.
COMMERCIAL PAPER RATINGS
Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. The commercial paper rating is not a recommendation to purchase or
sell a security. The ratings are based upon current information furnished by the
issuer or obtained by Standard & Poor's from other sources it considers
reliable. The ratings may be changed, suspended, or withdrawn as a result of
changes in or unavailability of such information. Ratings are graded into group
categories, ranging from "A" for the highest quality obligations to "D" for the
lowest. Ratings are applicable to both taxable and tax-exempt commercial paper.
Issues assigned "A" ratings are regarded as having the greatest capacity for
timely payment. Issues in this category are further refined with the designation
"1", "2", and "3" to indicate the relative degree of safety.
"A-1" Indicates that the degree of safety regarding timely payment is
very strong.
"A-2" Indicates capacity for timely payment on issues with this
designation is strong. However, the relative degree of safety
is not as overwhelming as for issues designated "A-1".
"A-3" Indicates a satisfactory capacity for timely payment.
Obligations carrying this designation are, however, somewhat
more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher
designations.
A-3
<PAGE>
INVESTMENT ADVISER
Schroder Capital Management International Inc.
787 Seventh Avenue, 34th Floor
New York, New York 10019
ADMINISTRATOR and DISTRIBUTOR
Schroder Fund Advisors Inc.
787 Seventh Avenue, 34th Floor
New York, New York 10019
SUBADMINISTRATOR
Forum Administrative Services, LLC
Two Portland Square
Portland, Maine 04101
CUSTODIAN
The Chase Manhattan Bank
Chase MetroTech Center
Brooklyn, New York 11245
and
The Chase Manhattan Bank
Global Custody Division
125 London Wall
London EC2Y 5AJ, United Kingdom
TRANSFER AND DIVIDEND DISBURSING AGENT
Forum Shareholder Services, LLC
P.O. Box 446
Portland, Maine 04112
COUNSEL
Ropes & Gray
One International Place
Boston, Massachusetts 02110
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109
SCHRODER CAPITAL FUNDS (DELAWARE)
PO Box 446
Portland, Maine 04112
1-800-290-9826
<PAGE>
[This page has been intentionally left blank.]
<PAGE>
4
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
COMBINED STATEMENT OF ADDITIONAL INFORMATION
OCTOBER 1, 1998
INVESTMENT ADVISER
Schroder Capital Management International Inc. ("SCMI")
ADMINISTRATOR AND DISTRIBUTOR
Schroder Fund Advisors Inc. ("Schroder Advisors")
SUBADMINISTRATOR
Forum Administrative Services, LLC ("FAdS")
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Forum Shareholder Services, LLC ("Forum")
GENERAL INFORMATION: 1-207-879-8903
ACCOUNT INFORMATION: 1-800-344-8332
FAX: 1-207-879-6206
Investor Shares of 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, a "Fund" and collectively, the "Funds") are
offered for sale at net asset value with no sales charge as an investment
vehicle for individuals, institutions, corporations and fiduciaries. The Funds'
Advisor Shares also are offered for sale at net asset value to individual
investors, in most cases through Service Organizations (as defined in the
prospectuses) at lower investment minimums but higher expenses than Investor
Shares.
This Combined Statement of Additional Information ("SAI") is not a
prospectus and is authorized for distribution only when preceded or accompanied
by the Funds' current combined prospectus dated October 1, 1998, as may be
amended from time to time for each of the Investor Shares and the Advisor Shares
(each, a "Prospectus" and, together, the "Prospectuses"). This SAI contains
additional and more detailed information than that set forth in each Prospectus
and should be read in conjunction with the applicable Prospectus and retained
for future reference. The Prospectuses and this SAI are available along with
other related materials for reference on the SEC's Internet Web Site
(http://www.sec.gov). All terms used in this SAI that are defined in the
Prospectuses have the meaning assigned in the Prospectuses. You may obtain an
additional copy of the applicable Prospectus(es) without charge by writing to
the Trust at Two Portland Square, Portland, Maine 04101 or calling the numbers
listed above.
<PAGE>
TABLE OF CONTENTS
INVESTMENT OBJECTIVES AND POLICIES
OF THE TRUST AND RISK
CONSIDERATIONS....................................3
Options.............................................3
Futures Contracts...................................5
Special Risks of Transactions in Futures
Contracts and Related Options.....................8
Forward Commitments.................................9
Repurchase Agreements...............................9
When-Issued Securities..............................9
Loans of Fund Securities...........................10
Foreign Securities.................................10
Foreign Currency Transactions......................11
Zero-Coupon Securities.............................13
Short Sales........................................14
INVESTMENT RESTRICTIONS............................15
MANAGEMENT.........................................23
Officers and Trustees..............................23
Control Persons and Principal Holders
of Securities....................................26
Administrative Services............................27
Distribution of Fund Shares........................27
Shareholder Service Plan and
Service Organization.............................28
Fund Accounting....................................29
PORTFOLIO TRANSACTIONS.............................30
Investment Decisions...............................30
Brokerage and Research Services....................30
ADDITIONAL PURCHASE AND
REDEMPTION INFORMATION...........................32
Determination of Net Asset Value Per Share.........32
Redemption In-Kind.................................32
TAXATION...........................................32
OTHER INFORMATION..................................35
Fund Structure.....................................35
Organization of the Trust..........................37
Capitalization and Voting..........................38
Performance Information............................38
Principal Shareholders.............................39
Custodian..........................................39
Transfer Agent and Dividend
Disbursing Agent.................................39
Legal Counsel......................................39
Independent Accountant.............................39
Year 2000 Disclosure...............................40
Registration Statement.............................40
Financial Statements...............................40
Appendix A - Performance Information .............A-1
Appendix B - Miscellaneous Tables.................B-1
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES OF THE TRUST
AND RISK CONSIDERATIONS
The Trust offers shares of beneficial interest of seven series (the
"Funds") with separate investment objectives and policies. The investment
objectives and policies of the Funds are described in the Prospectuses. This
Statement contains additional information concerning certain investment
practices and investment restrictions of the Trust and the Funds.
Except as described below under "Investment Restrictions", the
investment objectives and policies described in the Prospectus and in this
Statement are not fundamental, and the Board of Trustees may change the
non-fundamental policies of a Fund without an affirmative vote of shareholders
of a Fund.
Except as otherwise noted below, the following descriptions of certain
investment policies and techniques are applicable to all of the Funds.
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.
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 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
<PAGE>
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
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.
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.
OPTIONS ON FOREIGN SECURITIES. A Fund may purchase and sell options on
foreign securities if in SCMI'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 SCMI 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 SCMI to forecast market and interest rate movements correctly.
<PAGE>
An exchange-listed option may be closed out only on an exchange which
provides a secondary market for an option of the same series. 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 SCMI 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 SCMI may be considered such a group. These position limits
may restrict the Fund's ability to purchase or sell options on particular
securities.
Options that 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 unlisted options than listed options.
Furthermore, unlisted options are not subject to the protection afforded
purchasers of listed options by The Options Clearing Corporation.
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
debt securities of the type in which the Fund may invest and on indexes 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").
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
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.
<PAGE>
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 SCMI'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.
INDEX FUTURES CONTRACTS AND OPTIONS. Certain Funds 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. Debt index futures
in which the Funds are presently expected to invest are not now available,
although such futures contracts are expected to become available in the future.
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.
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
<PAGE>
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 indexes. 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 indexes or sub-indexes the movements of which will, in its 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
indexes 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.
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.
<PAGE>
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.
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 movements in the prices of a Fund's securities which are the subject of
a hedge. SCMI will, however, attempt to reduce this risk by purchasing and
selling, to the extent possible, futures contracts and related options on
securities and indexes 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 SCMI'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
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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 SCMI may
still not result in a successful hedging transaction over a very short time
period.
OTHER RISKS. The Funds will incur brokerage fees in connection with
their 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 high-grade debt obligations 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, a 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 SCMI deems it appropriate to do so. A Fund may realize
short-term profits or losses upon the sale of forward commitments.
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 7 days) 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. SCMI 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
<PAGE>
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 high-grade debt obligations 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 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) a Fund will receive any
interest or dividends paid on the loaned securities; and (4) the aggregate
market value of securities of any Fund 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, SCMI 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 a 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 a Fund.
FOREIGN SECURITIES
Each Fund may invest in foreign securities and in certificates of
deposit issued by United States branches of foreign banks and foreign branches
of United States banks.
Investments in foreign securities may involve considerations different
from investments in domestic securities due to limited publicly available
information, non-uniform accounting standards, lower trading volume and possible
consequent illiquidity, greater volatility in price, the possible imposition of
withholding or confiscatory taxes, the possible adoption of foreign governmental
restrictions affecting the payment of principal and interest, expropriation of
assets, nationalization, or other adverse political or economic developments.
Foreign companies may not be subject to auditing and financial reporting
standards and requirements comparable to those which apply to U.S. companies.
Foreign brokerage commissions and other fees are generally higher than in the
United States. It may be more difficult to obtain and enforce a judgment against
a foreign issuer.
In addition, to the extent that any Fund's foreign investments are not
United States dollar-denominated, the Fund may be affected favorably or
unfavorably by changes in currency exchange rates or exchange control
regulations and may incur costs in connection with conversion between
currencies.
In determining whether to invest in securities of foreign issuers, the
investment adviser of a Fund seeking current income 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.
<PAGE>
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 a 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 SCMI'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
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.
<PAGE>
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.
A Fund may also seek to increase its current return by purchasing and
selling foreign currencies 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, 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 SCMI 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
<PAGE>
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 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 SCMI 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 SCMI 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. For more information regarding the taxation of such activities, see
"Taxation."
ARBITRAGE. 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. 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 that 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" (i.e.,
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.
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 the 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 ("CEA") and, therefore, are not regulated as futures or commodity
option transactions under the CEA. To qualify for this
<PAGE>
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 CEA 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 conjunction with a
line of business; and (4) are not marketed to the public.
INVESTMENT RESTRICTIONS
These restrictions, unless otherwise indicated, are all fundamental
policies of each Fund and cannot be changed without the affirmative vote of a
majority of the outstanding shares of each Fund, which is defined in the 1940
Act as the affirmative vote of the holders of the lesser of: (1) 67% or more of
the shares present at a meeting of shareholders, if the holders of more than 50%
of the outstanding shares are represented at the meeting in person or by proxy;
or (2) more than 50% of the outstanding shares. The fundamental restrictions are
set forth below for each of the Funds.
SCHRODER INTERNATIONAL FUND
Under the additional restrictions set forth below, 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;
<PAGE>
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 that 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;
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 Portfolio;
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 Portfolio 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 Portfolio's net assets. Included within that
amount, but not to exceed 2% of the value of the Portfolio's net
assets, may be warrants that are not listed on the New York or American
Stock Exchange. Warrants acquired by the Portfolio in units or attached
to securities may be deemed to be without value;
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 Investment Company
Act of 1940 (the "1940 Act").
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
that are determined to be liquid by SCMI 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.
<PAGE>
SCHRODER EMERGING MARKETS FUND
Under the additional restrictions set forth below, 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 ("municipal securities") 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 the 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.
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.
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.
<PAGE>
NONFUNDAMENTAL POLICIES
Schroder Emerging Markets Fund has adopted the following nonfundamental
investment limitations. A nonfundamental policy does not override a fundamental
limitation. The policies of the Portfolio may be changed by the Board of
Trustees of Schroder Capital Funds without approval of its interestholders or
Fund shareholders.
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 Code, 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 purchased securities (such as the purchase of
when-issued securities); (2) reverse repurchase agreements; (3)
dollar-roll transactions; and (5) the lending of securities ("leverage
transactions"). (See Fundamental Limitation No. 2 "Borrowing.")
In addition, the Emerging Markets Fund will not:
3. Invest more than 15% of its net assets in: (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
1933 Act ("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.
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; and may not
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.
<PAGE>
7. 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
Under the additional restrictions set forth below, Schroder
International Smaller Companies Fund will not:
FUNDAMENTAL POLICIES:
1. With respect to 75% of its assets, purchase a security
other than a security issued or guaranteed by the U.S. Government, its
agencies or instrumentalities or a security of an investment company
if, as a result, more than 5% of the Fund's total assets would be
invested in the securities of a single issuer or the Fund would own
more than 10% of the outstanding voting securities of any single
issuer.
2. 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 331/3% 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.
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.
Except for the policies on borrowing and illiquid securities, the percentage
restrictions described above apply only at the time of investment and require no
action by the Fund as a result of subsequent changes in value of the investments
or the size of the Fund.
SCHRODER INTERNATIONAL BOND FUND
Under the additional restrictions set forth below, Schroder
International Bond Fund will not:
<PAGE>
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.
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 foreign forward
currency exchange contracts and foreign currency options; (3) purchase
or sell currencies on a spot or forward basis; and (4) may enter into
futures contracts on securities, currencies or on indices of such
securities or currencies, or any other financial instruments, and may
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:
International Bond Fund has adopted the following nonfundamental
investment limitations. A nonfundamental policy does not override a fundamental
limitation. The policies of the Portfolio may be changed by the Board of
Trustees of Schroder Capital Funds without approval of its interestholders or
Fund shareholders. The Fund will not:
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 ("Restricted Securities").
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
<PAGE>
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.
4. The Fund may acquire or retain the securities of any other investment
company to the extent permitted by the 1940 Act, including in
connection with a merger, consolidation, acquisition, or
reorganization.
Except for the policies on borrowing and illiquid securities, the percentage
restrictions described above apply only at the time of investment and require no
action by the Fund as a result of subsequent changes in value of the investments
or the size of the Fund.
SCHRODER U.S. DIVERSIFIED GROWTH FUND
Under the additional restrictions set forth below, Schroder U.S.
Diversified Growth Fund will not:
FUNDAMENTAL POLICIES:
1. Issue senior securities except that: (1) it may borrow money
from a bank on its promissory Fund's total assets after the borrowing;
(2) if at any time it exceeded such one-third limitation, the Fund
would within three days thereafter (not including Sundays or holidays)
or such longer period as the Securities and Exchange Commission may
prescribe by rules and regulations, reduce its borrowings to the
limitation; and (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.
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. Will not aAcquire securities described in 8 and 9 above which in the
aggregate exceed 10% of the value of the Fund's total assets.
11. Invest in other investment companies.
<PAGE>
NON-FUNDAMENTAL POLICIES:
Schroder U.S. Diversified Growth Fund: (1) will not invest more than
10% of its total assets in illiquid securities, including securities described
in items 8 and 9 above and repurchase agreements maturing more than seven days;
and (2) will not 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
Under the additional restrictions set forth below, 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 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;
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 (see "Investment
Objective" and "Investment Policies" in the Prospectus); the Fund may
also make loans of portfolio securities (see "Loans of Portfolio
Securities") and enter into repurchase agreements (see "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); or
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.
SCHRODER MICRO CAP FUND
Under the additional restrictions set forth below, Schroder Micro Cap
Fund will not:
<PAGE>
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);
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 (see "Investment
Objective" and "Investment Policies" in the Prospectus); the Fund may
also make loans of portfolio securities (see "Loans of Portfolio
Securities") and enter into repurchase agreements (see "Repurchase
Agreements");
6. Pledge, mortgage or hypothecate its assets to an extent greater than
10% of the value of the total assets of the Fund; however, this does
not prohibit the escrow arrangements contemplated by the put and call
activities of the Fund or other collateral or margin arrangements in
connection with any of the Hedging Instruments, which it may use as
permitted by any of its other fundamental policies;
7. Invest in companies for the purpose of acquiring control or management
thereof, 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 which operate, invest in, or sponsor such programs); or
9. Invest in real estate or in interests in real estate, but may purchase
readily marketable securities of companies holding real estate or
interests therein.
MANAGEMENT
OFFICERS AND TRUSTEES. The following information relates to the
principal occupations during the past five years of each Trustee and executive
officer of the Trust and shows the nature of any affiliation with SCMI. Except
as noted, each of these individuals currently serves in the same capacity for
Schroder Capital Funds, Schroder Capital Funds II and Schroder Series Trust,
other registered investment companies in the Schroder family of funds.
PETER E. GUERNSEY, 75, c/o the Trust, Two Portland Square, Portland, Maine -
Trustee of the Trust; Insurance Consultant since August 1986; prior thereto
Senior Vice President, Marsh & McLennan, Inc., insurance brokers.
JOHN I. HOWELL, 80, c/o the Trust, Two Portland Square, Portland, Maine -
Trustee of the Trust; Private Consultant since February 1987; Honorary Director,
American International Group, Inc.; Director, American International Life
Assurance Company of New York.
<PAGE>
CLARENCE F. MICHALIS, 75, c/o the Trust, Two Portland Square, Portland, Maine -
Trustee of the Trust; Chairman of the Board of Directors, Josiah Macy, Jr.
Foundation (charitable foundation).
HERMANN C. SCHWAB, 77, c/o the Trust, Two Portland Square, Portland, Maine -
Chairman and Trustee of the Trust; retired since March, 1988; prior thereto,
consultant to SCMI since February 1, 1984.
HON. DAVID N. DINKINS, 69, c/o the Trust, Two Portland Square, Portland, Maine,
Trustee of the Trust; Professor, Columbia University School of International and
Public Affairs; Director, American Stock Exchange, Carver Federal Savings Bank,
Transderm Laboratory Corporation, and The Cosmetic Center, Inc.; formerly,
Mayor, The City of New York.
PETER S. KNIGHT, 46, c/o the Trust, Two Portland Square, Portland, Maine,
Trustee of the Trust; Partner, Wunder, Knight, Levine, Thelen & Forcey;
Director, Comsat Corp., Medicis Pharmaceutical Corp., and Whitman Education
Group Inc., Formerly, Campaign Manager, Clinton/Gore `96.
SHARON L. HAUGH*, 51, 787 Seventh Avenue, New York, New York, Trustee of the
Trust; Chairman, Schroder Capital Management Inc. ("SCM"), Executive Vice
President and Director, SCMI; Chairman and Director, Schroder Advisors.
MARK J. SMITH*, 35, 33 Gutter Lane, London, England - President and Trustee of
the Trust; Senior Vice President and Director of SCMI since April 1990; Director
and Senior Vice President, Schroder Advisors.
MARK ASTLEY, 33, 787 Seventh Avenue, New York, New York - Vice President of the
Trust; First Vice President of SCMI, prior thereto, employed by various
affiliates of SCMI in various positions in the investment research and portfolio
management areas since 1987.
FERGAL CASSIDY, 29, 787 Seventh Avenue, New York, New York - Treasurer of the
Trust; Acting Controller and Assistant Vice President of SCM and SCMI since
September 1997; Assistant Vice President of SCM and SCMI from April 1997 to
September 1997; Associate, SCMI, from August 1995 to March 1997; and prior
thereto Senior Accountant of Concurrency Mgt., Greenwich, Connecticut from
November 1994 to August 1995, and Senior Accountant, Schroder Properties,
London, September 1990 to November 1993.
ROBERT G. DAVY, 36, 787 Seventh Avenue, New York, New York - Vice President of
the Trust; Director of SCMI and Schroder Capital Management International Ltd.
since 1994; First Vice President of SCMI since July, 1992; prior thereto,
employed by various affiliates of SCMI in various positions in the investment
research and portfolio management areas since 1986.
MARGARET H. DOUGLAS-HAMILTON, 55, 787 Seventh Avenue, New York, New York - Vice
President of the Trust; Secretary of SCM since July 1995; Senior Vice President
(since April 1997) and General Counsel of Schroders U.S. Holdings Inc. since May
1987; prior thereto, partner of Sullivan & Worcester, a law firm.
RICHARD R. FOULKES, 51, 787 Seventh Avenue, New York, New York - Vice President
of the Trust; Deputy Chairman of SCMI since October 1995; Director and Executive
Vice President of Schroder Capital Management International Ltd. since 1989.
JOHN Y. KEFFER, 54, Two Portland Square, Portland, Maine - Vice President of the
Trust; President of FFC, the Fund's transfer and dividend disbursing agent and
other affiliated entities including Forum Financial Services, Inc., Forum
Administrative Services, LLC, and Forum Advisors, Inc.
JANE P. LUCAS, 35, 787 Seventh Avenue, New York, New York - Vice President of
the Trust; Director and Senior Vice President SCMI; Director of SCM since
September 1995; Director of Schroder Advisors since September 1996; Assistant
Director Schroder Investment Management Ltd. since June 1991.
ALAN MANDEL, 41, 787 Seventh Avenue, New York, New York - Assistant Treasurer of
the Trust; Vice President of SCMI since September 1998; prior thereto Director
of Mutual Fund Administration for Salomon Brothers Asset
<PAGE>
Management since 1995; prior thereto Chief Financial Officer and Vice President
of Mutual Capital Management since 1991.
CATHERINE A. MAZZA, 37, 787 Seventh Avenue, New York, New York - Vice President
of the Trust; President of Schroder Advisors since 1997; First Vice President of
SCMI and SCM since 1996; prior thereto, held various marketing positions at
Alliance Capital, an investment adviser, since July 1985.
CARIN MUHLBAUM, 36, 787 Seventh Avenue, New York, New York - Assistant Secretary
of the Trust; Vice President of SCMI since 1998; prior thereto an investment
management attorney with Seward & Kissel since 1998; prior thereto an investment
management attorney with Gordon Altman Butowsky Weitzen Shalov & Wein since
1989.
MICHAEL PERELSTEIN, 41, 787 Seventh Avenue, New York, New York - Vice President
of the Trust; Director since May 1997 and Senior Vice President of SCMI since
January 1997; prior thereto, Managing Director of MacKay - Shields Financial
Corp.
ALEXANDRA POE, 37, 787 Seventh Avenue, New York, New York - Secretary and Vice
President of the Trust; Vice President of SCMI since August 1996; Fund Counsel
and Senior Vice President of Schroder Advisors since August 1996; Secretary of
Schroder Advisors; prior thereto, an investment management attorney with Gordon
Altman Butowsky Weitzen Shalov & Wein since July 1994; prior thereto counsel and
Vice President of Citibank, N.A. since 1989.
NICHOLAS ROSSI, 35, 787 Seventh Avenue, New York, New York - Assistant Secretary
of the Trust, Associate of SCMI since October 1997 and Assistant Vice President
Schroder Advisors since March 1998; prior thereto Mutual Fund Specialist,
Willkie Farr & Gallagher since May 1996; prior thereto, Fund Administrator with
Furman Selz LLC since 1992.
THOMAS G. SHEEHAN, 44, Two Portland Square, Portland, Maine - Assistant
Treasurer and Assistant Secretary of the Trust; Relationship Manager and
Counsel, Forum Financial Services, Inc. since 1993; prior thereto, Special
Counsel, U.S. Securities and Exchange Commission, Division of Investment
Management, Washington, D.C.
FARIBA TALEBI, 36, 787 Seventh Avenue, New York, New York - Vice President of
the Trust; Group Vice President of SCMI since April 1993, employed in various
positions in the investment research and portfolio management areas since 1987;
Director of SCM since April 1997.
JOHN A. TROIANO, 38, 787 Seventh Avenue, New York, New York - Vice President of
the Trust; Director of SCM since April 1997; Chief Executive Officer, since July
1, 1997, of SCMI and Managing Director and Senior Vice President of SCMI since
October 1995; prior thereto, employed by various affiliates of SCMI in various
positions in the investment research and portfolio management areas since 1981.
CHERYL O. TUMLIN, 32, Two Portland Square, Portland, Maine - Assistant Treasurer
and Assistant Secretary of the Trust; Assistant Counsel, Forum Administrative
Services, LLC since July 1996, prior thereto, attorney with the U.S. Securities
and Exchange Commission, Division of Market Regulation since 1995; prior
thereto, attorney with Robinson Silverman Pearce Aronsohn & Berman since 1991.
IRA L. UNSCHULD, 31, 787 Seventh Avenue, New York, New York - Vice President of
the Trust; Vice President of SCMI since April, 1993 and an Associate from July,
1990 to April, 1993.
<PAGE>
* Interested Trustee of the Trust within the meaning of the 1940 Act.
Schroder Advisors is a wholly owned subsidiary of SCMI, which is a wholly
owned subsidiary of Schroders U.S. Holdings Inc., which in turn is an indirect,
wholly owned U.S. subsidiary of Schroders plc. SCM is also a wholly owned
subsidiary of Schroders U.S. Holdings Inc..
Officers and Trustees who are interested persons of the Trust receive
no salary, fees or compensation from the Fund. Independent Trustees of the Trust
receive an annual retainer of $11,000 and additional fees of $1,250 per meeting
attended in person or $500 per meeting attended by telephone. Members of an
Audit Committee for one or more of the 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. None of the registered investment companies in the Fund Complex
has any bonus, profit sharing, pension or retirement plans.
The following table provides the total fees paid by the Trust to each
independent Trustee of the Trust for the fiscal year ended May 31, 1998
<TABLE>
<S> <C> <C> <C> <C>
Pension or Total
Retirement Compensation From
Aggregate Benefits Accrued Estimated Annual Trust And Fund
Compensation From As Part of Trust Benefits Upon Complex Paid To
Name of Trustee Trust Expenses Retirement Trustees
- ----------------- -------------------- -------------------- --------------------- -------------------
Mr. Guernsey $2,289 $0 $0 $7,000
Mr. Howell $1,680 $0 $0 $7,000
Mr. Michalis $2,289 $0 $0 $7,000
Mr. Schwab $2,539 $0 $0 $7,750
Mr. Dinkins $1,430 $0 $0 $5,000
Mr. Knight $1,430 $0 $0 $6,250
</TABLE>
* In addition to the Trust, the "Fund Complex" includes three other registered
investment companies (Schroder Capital Funds II, an open-end company; Schroder
Capital Funds, an open-end company; and Schroder Series Trust, an open-end
company) for which SCMI serves as investment adviser for each series.
As of August 31, 1998, the officers and Trustees of the Trust owned, in the
aggregate, less than 1% of the Trust's outstanding shares. Mr. Ira Unschuld,
principal advisor with regard to Micro Cap Fund, held 8.01% of the Investor
Shares of that Fund, as set forth in Table 4 of APPENDIX B. ----------
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Table 5 in APPENDIX B to this SAI sets forth certain information with
regard to the holders of more than 5% of the beneficial interests in each Fund,
together with information regarding the holders of more than 25% of the
beneficial interests in each Fund.
INVESTMENT ADVISER
SCMI, 787 Seventh Avenue, New York, New York 10019, serves as
investment adviser to each Portfolio under an investment advisory agreement
between Schroder Core and SCMI. SCMI is a wholly owned U.S. subsidiary of
Schroders U.S. Holdings Inc., the wholly owned U.S. holding company subsidiary
of Schroders plc. Schroders plc is the holding company parent of a large
worldwide group of banks and financial service companies (referred to as the
"Schroder Group"), with associated companies and branch and representative
offices in eighteen countries. The Schroder Group specializes in providing
investment management services, with funds under management currently in excess
of $175 billion as of September 30, 1997.
<PAGE>
Under the advisory agreements, SCMI is responsible for managing the
investment program for each Fund or Portfolio. In this regard, it is SCMI's
responsibility to make decisions relating to the portfolio investments and to
place purchase and sale orders regarding such investments with brokers or
dealers it selects. SCMI also furnishes Schroder Core Board and the Trust Board
with periodic reports on the investment performance of the Portfolios and the
Funds.
Under the terms of the advisory agreements, SCMI is required to manage
the investment portfolios in accordance with applicable laws and regulations. In
making its investment decisions, SCMI does not use material inside information
that may be in its possession or in the possession of its affiliates.
Each Fund (other than U.S. Diversified Growth Fund and Micro Cap Fund)
currently invests all of its assets in a Portfolio. As long as a Fund remains
completely invested in a Portfolio (or any other investment company), SCMI is
not entitled to receive an investment advisory fee with respect to the Fund. A
Fund may withdraw its investment from a Portfolio at any time if the Trust Board
determines that it is in the best interests of the Fund and its shareholders to
do so. Accordingly, the Trust has retained SCMI as investment adviser to manage
a Fund's assets in the event a Fund so withdraws its investment. The investment
advisory agreement between the Trust and SCMI with respect to the Funds is the
same in all material respects as the Investment Advisory Agreement with respect
to the Portfolios (except as to the parties, the fees and the circumstances
under which fees will be paid, and the jurisdiction whose laws govern the
agreement). During a time that a Fund did not have substantially all of its
assets invested in a Portfolio or another investment company, for providing
investment advisory services under the investment advisory agreement for the
Fund, SCMI would be entitled to receive advisory fees monthly at the following
annual rates (based on the assets of each Fund taken separately): SCHRODER
INTERNATIONAL FUND -- 0.50% of the first $100 million of the Fund's average
daily net assets, 0.40% of the next $150 million of average daily net assets and
0.35% of average daily net assets in excess of $250 million; SCHRODER EMERGING
MARKETS FUND -- 1.00% of the Fund's average daily net assets; SCHRODER
INTERNATIONAL SMALLER COMPANIES FUND -- 0.75% of the Fund's average daily net
assets; SCHRODER INTERNATIONAL BOND PORTFOLIO -- 0.50% of the Fund's average
daily net assets; and SCHRODER U.S. SMALLER COMPANIES FUND -- 0.50% of the first
$100 million of the Fund's average daily net assets, 0.40% of the next $150
million of average net assets and 0.35% of average daily net assets in excess of
$250 million.
Table 1 in APPENDIX B shows the dollar amount of the advisory fees
payable had certain waivers not been in place, together with the dollar amount
of investment advisory fees waived, and the dollar amount of net fees paid. The
percentage amounts of the advisory fees are set forth in the Prospectus. This
information is provided for the past three years (or such shorter terms as a
Fund has been operational).
Each Fund Advisory Agreement continues in effect provided such
continuance is approved annually: (1) by the holders of a majority of the
outstanding voting securities of the Funds or by the Board; and, in either case,
(2) by a majority of the Trustees who are not parties to the Agreement or
"interested persons" (as defined in the 1940 Act) of any such party. Each Fund
Advisory Agreement may be terminated without penalty by vote of the Trustees or
the Fund's shareholders on 60 days' written notice to the investment adviser, or
by the investment adviser on 60 days' written notice to the Trust, and it
terminates automatically if assigned. Each Fund's Advisory Agreement also
provides that, with respect to the Funds, neither SCMI nor its personnel shall
be liable for any error of judgment or mistake of law or for any act or omission
in the performance of duties to either Fund, except for willful misfeasance, bad
faith or gross negligence in the performance of duties or by reason of reckless
disregard of any obligations and duties under the Agreement.
Subject to the direction and control of SCMI, Schroder Investment Management
International, Ltd. ("SIMIL"), 31 Gresham Street, London, U.K. EC2V 7QA, an
affiliate of SCMI, serves as subadviser to Schroder International Smaller
Companies Portfolio pursuant to an Investment Subadvisory Agreement among SCMI,
SIMIL, and the Portfolio. SIMIL, a newly organized investment advisory firm, is
a wholly-owned subsidiary of Schroders plc, and as of June 30, 1998 had under
management assets of approximately $42 billion. Under the Subadvisory Agreement,
SCMI pays SIMIL a monthly fee at the annual rate of 0.25% of the portfolio's
average daily net assets.
Under the terms of the Investment Subadvisory agreement, SIMIL provides
investment subadvisory services to Schroder International Smaller Companies
Portfolio in accordance with applicable laws and regulations. In making its
investment decisions, SIMIL does not use material inside information that may be
in its possession or in the possession of its affiliates.
The Investment Subadvisory agreement continues in effect provided such
continuance is approved annually: (1) by the vote of a majority of the
outstanding voting securities of the Portfolio (as defined in the 1940 Act) or
by the Board and (2) by a majority of the Trustees who are not parties to the
agreement or "interested persons" (as defined in the 1940 Act)of any party of
the agreement. The investment sub-advisory agreement may be terminated without
penalty (i) by a vote of the Board or by a vote of a majority of the outstanding
voting interests of the Portfolio on 60 days' written notice to SIMIL; (ii) by
the SCMI on 60 days' written notice to the SIMIL; or (iii) by SIMIL on 60 days'
written notice to the Trust. The agreement shall terminate automatically if
assigned. The agreement also provides that, with respect to the Portfolio,
neither SIMIL nor its personnel shall be liable for any error of judgement or
mistake of law or for any act or omission in the performance of its or their
duties to the Portfolio, except for willful misfeasance, bad faith or gross
negligence in the performance of SIMIL's or their duties or by reason of
reckless disregard of its or their obligationns and duties under the agreement.
ADMINISTRATIVE SERVICES
On behalf of each Fund, the Trust has entered into an Administration
Agreement with Schroder Advisors, under which Schroder Advisors provides
management and administrative services necessary for the operation of each 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 each
Fund, including coordination of the services performed by each Fund's investment
adviser, transfer agent,
<PAGE>
custodian, independent accountants, legal counsel and others. Schroder Advisors
is a wholly owned subsidiary of SCMI and is a registered broker-dealer organized
to act as administrator and distributor of mutual funds.
For providing administrative services Schroder Advisors is entitled to
receive from the Funds a fee, payable monthly, at the annual rate set out in the
Prospectus as to each Fund's average daily net assets. The Administration
Agreement is terminable with respect to each Fund without penalty, at any time,
by the Trust Board, upon 60 days' written notice to Schroder Advisors or by
Schroder Advisors upon 60 days' written notice to the Trust.
The Trust has entered into a Subadministration Agreement with FAdS.
Under its Agreement, FAdS assists Schroder Advisors 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 each Fund at the annual rate set out in
the Prospectus as to the Fund's average daily net assets. The Subadministration
Agreement is terminable with respect to each Fund without penalty, at any time,
by the Trust Board, upon 60 days' written notice to FAdS or by FAdS upon 60
days' written notice to the Fund.
Schroder Advisors and FAdS provide similar services to the Portfolios
pursuant to administration and subadministration agreements between Schroder
Core and each of these entities, for which Schroder Advisors and FAdS are each
compensated at the annual rate set out in the Prospectus as to each Portfolio's
average daily net assets. The administration and subadministration agreements
with regard to the Portfolios are the same in all material respects as the
Funds' respective agreements (except as to the parties, the circumstances under
which the fees will be paid, and the fees payable thereunder).
The fees paid by the Funds and Portfolios to SCMI and Schroder Advisors
may equal up the totals set forth in the Prospectus as to each Fund's average
daily net assets. Such fees as a whole are higher than advisory and management
fees charged to mutual funds which invest primarily in U.S. securities but not
necessarily higher than those charged to funds with investment objectives
similar to that of the Funds.
Table 2 in APPENDIX B shows the Administration Fees and
Subadministration Fees payable by each Fund had certain waivers not been in
place, together with the dollar amount of such fees waived and the dollar amount
of net fees paid by each Fund. This information is provided for the past three
years (or such shorter time as a Fund has been operational).
DISTRIBUTION OF FUND SHARES
Schroder Advisors, 787 Seventh Avenue, New York, New York 10019, serves
as Distributor of Fund shares under a Distribution Agreement. Schroder Advisors
is a wholly owned subsidiary of Schroders U.S. Holdings Inc., the parent company
of SCMI, and is a registered broker-dealer organized to act as administrator
and/or distributor of mutual funds.
Under the Distribution Agreement, Schroder Advisors has agreed to use
its best efforts to secure purchases of Fund shares in jurisdictions in which
such shares may be legally offered for sale. Schroder Advisors is not obligated
to sell any specific amount of Fund shares. Further, Schroder Advisors has
agreed in the Distribution Agreement to serve without compensation and to pay
from its own resources all costs and expenses incident to the sale and
distribution of Fund shares including expenses for printing and distributing
prospectuses and other sales materials to prospective investors, advertising
expenses, and the salaries and expenses of its employees or agents in connection
with the distribution of Fund shares.
Under a Distribution Plan (the "Plan," which is of the type known as a
reimbursement plan) adopted by the Trust with respect to Advisor Shares only,
the Trust may pay directly or may reimburse the investment adviser or a
broker-dealer registered under the Securities Exchange Act of 1934 (the "1934
Act") (the investment adviser or such registered broker-dealer, if so
designated, being a "Distributor" of the Fund's shares) monthly (subject to a
limit of 0.50% per annum of that Fund's average daily net assets) for: (1)
advertising expenses including advertising by radio, television, newspapers,
magazines, brochures, sales literature or direct mail; (2) costs of printing
prospectuses and other materials to be given or sent to
<PAGE>
prospective investors; (3) expenses of sales employees or agents of the
Distributor, including salary, commissions, travel, and related expenses in
connection with the distribution of Fund shares; and (4) payments to
broker-dealers (other than the Distributor) or other organizations for services
rendered in the distribution of the Fund's shares, including payments in amounts
based on the average daily value of Fund shares owned by shareholders in respect
of which the broker-dealer or organization has a distributing relationship. The
Trustees have not currently authorized payments under the 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. Under the Plan, the Funds are not liable for distribution
expenditures of the Distributor in any given year in excess of the maximum
amount (0.50% per annum of the Fund's average daily net assets) payable under
the Plan in that year. Salary expenses of sales staff responsible for marketing
shares of the Fund may be allocated among various series of the Trust that have
adopted a Plan similar to that of the Fund on the basis of average net assets;
travel expenses are allocated among the series of the Trust. The Trust Board has
concluded that there is a reasonable likelihood that the Plan will benefit the
Fund and its shareholders.
Without shareholder approval, the Plan may not be amended to increase
materially the costs that any Fund may bear. Other material amendments to the
Plan must be approved by the Trust , and by the Trustees who are not "interested
persons" (as defined in the 1940 Act) of the Trust and who have no direct or
indirect financial interest in the operation of the Plan or in any related
agreement (the "disinterested Trustees"), by vote cast in person at a meeting
called for the purpose of considering such amendments. The selection and
nomination of the Trustees of the Trust has been committed to the discretion of
the disinterested Trustees. The Plan has been approved, and is subject to annual
approval, by the Trust Board and by the disinterested Trustees, by vote cast in
person at a meeting called for the purpose of voting on the Plan. The Plan is
terminable with respect to a Fund at any time by a vote of a majority of the
disinterested Trustees or by vote of the holders of a majority of the shares of
the Fund. During the periods ended October 31, 1997, neither Fund had any shares
outstanding and, therefore, neither accrued nor paid any dollars under the Plan.
SHAREHOLDER SERVICE PLAN AND SERVICE ORGANIZATIONS
Under the Shareholder Service Plan approved by the Trust for the Funds'
Advisor Shares, the Trust may also contract with banks, trust companies,
broker-dealers or other financial organizations ("Service Organizations") to
provide certain administrative services for shareholders of the Funds' Advisor
Shares. The Funds may pay fees (which may vary depending upon the services
provided) to Service Organizations in amounts up to an annual rate of 0.25% of
the daily net asset value of the Funds' Advisor Shares owned by shareholders
with whom the Service Organization has a servicing relationship. Services
provided by Service Organizations may include: (1) providing personnel and
facilities necessary to establish and maintain certain shareholder accounts and
records; (2) assisting in processing purchase, exchange and redemption
transactions; (3) arranging for the wiring of funds or transmitting and
receiving funds in connection with client orders to purchase or redeem shares;
(4) verifying and guaranteeing client signatures in connection with redemption
orders, transfers among, and changes in client-designated accounts; (5)
providing periodic statements of a client's account balances and, to the extent
practicable, integrating such information with other client transactions; (6)
furnishing periodic and annual statements and confirmations of all purchases and
redemptions of shares in a client's account; (7) transmitting proxy statements,
annual reports, and updating prospectuses and other communications from the Fund
to clients; and (8) such other services as the Fund or a client reasonably may
request, to the extent permitted by applicable statute, rule or regulation.
Neither SCMI nor Schroder Advisors will be a Service Organization or receive
fees for servicing. The Funds have no intention of making any such payments to
Service Organizations with respect to accounts of institutional investors and,
in any event, would make no such payments until the Trust Board specifically so
authorizes.
Some Service Organizations may impose additional or different conditions
on their clients, such as requiring them to invest more than the minimum
investments specified by the Funds or charging a direct fee for servicing. If
<PAGE>
imposed, these fees would be in addition to any amounts that might be paid to
the Service Organization by the Funds. Each Service Organization agrees to
transmit to its clients a schedule of any such fees. Shareholders using Service
Organizations are urged to consult them regarding any such fees or conditions.
The Glass-Steagall Act and other applicable laws provide that banks may
not engage in the business of underwriting, selling or distributing securities.
There currently is no precedent prohibiting banks from performing administrative
and shareholder servicing functions as Service Organizations. However, judicial
or administrative decisions or interpretations of such laws, as well as changes
in either federal or state statutes or regulations relating to the permissible
activities of banks and their subsidiaries or affiliates, could prevent a bank
service organization from continuing to perform all or a part of its servicing
activities. If a bank were prohibited from so acting, its shareholder clients
would be permitted to remain Fund shareholders, and alternative means for
continuing the servicing of such shareholders would be sought. In that event,
changes in the operation of a Fund might occur, and a shareholder serviced by
such a bank might no longer be able to avail itself of any services then being
provided by the bank. It is not expected that shareholders would suffer any
adverse financial consequences as a result of any of these occurrences.
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. The Accounting Agreement is terminable with respect to each Fund
without penalty, at any time, by the Trust Board upon 60 days' written notice to
Forum Accounting or by Forum Accounting upon 60 days' written notice to the
Trust.
Under its 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. 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 with respect to global and international funds. In addition, Forum
Accounting also is entitled to an additional $12,000 per year with respect to
tax-free money market funds, funds with more than 25% of their total assets
invested in asset-backed securities, funds that have more than 100 security
positions, or funds that have a monthly portfolio turnover rate of 10% or
greater.
Forum Accounting is required to use its best judgment and efforts in
rendering fund accounting services and is not liable to the Trust for any action
or inaction in the absence of bad faith, willful misconduct or gross negligence.
Forum Accounting is not responsible or liable for any failure or delay in
performance of its fund accounting obligations arising out of or caused,
directly or indirectly, by circumstances beyond its reasonable control. The
Trust has agreed to indemnify and hold harmless Forum Accounting and its
employees, agents, officers and directors against and from any and all claims,
demands, actions, suits, judgments, liabilities, losses, damages, costs,
charges, counsel fees and all other expenses arising out of or in any way
related to Forum Accounting's actions taken or failures to act with respect to a
Fund or based, if applicable, upon information, instructions or requests with
respect to a Fund given or made to Forum Accounting by an officer of the Trust
duly authorized. This indemnification does not apply to Forum Accounting's
actions taken or failures to act in cases of Forum Accounting's own bad faith,
willful misconduct or gross negligence.
Table 3 in APPENDIX B shows the dollar amount of fees paid for accounting
services by the Funds and the Portfolios. This information is provided for the
past three years (or such shorter time a Fund has been operational).
<PAGE>
PORTFOLIO TRANSACTIONS
INVESTMENT DECISIONS
Investment decisions for the Funds or the Portfolios and for SCMI's
other investment advisory clients are made with a view to achieving their
respective investment objectives. Investment decisions are the product of many
factors in addition to basic suitability for the particular client involved, and
a particular security may be bought or sold for other clients at the same time.
Likewise, a particular security may be bought for one or more clients when one
or more other clients are selling the security. In some instances, one client
may sell a particular security to another client. It also sometimes happens that
two or more clients simultaneously purchase or sell the same security, in which
event each day's transactions in such security are, insofar as is possible,
averaged as to price and allocated between such clients in a manner that, in
SCMI's opinion, is equitable to each and in accordance with the amount being
purchased or sold by each. There may be circumstances when purchases or sales of
portfolio securities for one or more clients will have an adverse effect on
other clients. Each Portfolio's portfolio transaction costs are borne pro rata
by its investors, including the Fund that invests in it.
BROKERAGE AND RESEARCH SERVICES
Transactions on U.S. stock exchanges and other agency transactions
involve the payment of negotiated brokerage commissions. Such commissions vary
among brokers. Also, a particular broker may charge different commissions
according to the difficulty and size of the transaction; for example,
transactions in foreign securities generally involve the payment of fixed
brokerage commissions, which are generally higher than those in the U.S. Since
most brokerage transactions for a Fund are placed with foreign broker-dealers,
certain portfolio transaction costs for a Fund may be higher than fees for
similar transactions executed on U.S. securities exchanges. However, SCMI seeks
to achieve the best net results in effecting its portfolio transactions. There
is generally less governmental supervision and regulation of foreign stock
exchanges and brokers than in the U.S. There is generally no stated commission
in the case of securities traded in the over-the-counter markets, but the price
paid usually includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid includes a disclosed, fixed commission or
discount retained by the underwriter or dealer.
Each Fund's Advisory Agreement and the Core Advisory Agreements
authorize and direct SCMI to place orders for the purchase and sale of a Fund's
or a Portfolio's investments with brokers or dealers it selects and to seek
"best execution" of such portfolio transactions. SCMI places all such orders for
the purchase and sale of portfolio securities and buys and sells securities
through a substantial number of brokers and dealers. In so doing, SCMI uses its
best efforts to obtain the most favorable price and execution available. A Fund
or a Portfolio may, however, pay higher than the lowest available commission
rates when SCMI believes it is reasonable to do so in light of the value of the
brokerage and research services provided by the broker effecting the
transaction. In seeking the most favorable price and execution, SCMI considers
all factors it deems relevant (including price, transaction size, the nature of
the market for the security, the commission amount, the timing of the
transaction (taking into account market prices and trends), the reputation,
experience and financial stability of the broker-dealers involved, and the
quality of service rendered by the broker-dealers in other transactions).
Historically, investment advisers, including advisers of investment
companies and other institutional investors, have received research services
from broker-dealers that execute portfolio transactions for the advisers'
clients. Consistent with this practice, SCMI may receive research services from
broker-dealers with which it places portfolio transactions. These services,
which in some cases may also be purchased for cash, include such items as
general economic and security market reviews, industry and company reviews,
evaluations of securities and recommendations as to the purchase and sale of
securities. Some of these services are of value to SCMI in advising various of
its clients (including a Fund 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
SCMI and its affiliates receive such services.
<PAGE>
As permitted by Section 28(e) of the 1934 Act, SCMI may cause a Fund or
a Portfolio to pay a broker-dealer that provides SCMI with "brokerage and
research services" (as defined in the 1934 Act) an amount of disclosed
commission for effecting a securities transaction in excess of the commission
which another broker-dealer would have charged for effecting that transaction.
In addition, although it does not do so currently SCMI may allocate brokerage
transactions to broker-dealers who have entered into arrangements under which
the broker-dealer allocates a portion of the commissions paid by a Fund or a
Portfolio toward payment of Fund or Portfolio expenses, such as custodian fees.
Subject to the general policies of a Fund or a Portfolio regarding
allocation of portfolio brokerage as set forth above, the Core Board has
authorized SCMI to employ: (1) Schroder & Co. Inc., an affiliate of SCMI, to
effect securities transactions of a Fund or a Portfolio on the New York Stock
Exchange only; and (2) Schroder Securities Limited and its affiliates
(collectively, "Schroder Securities"), affiliates of SCMI, to effect securities
transactions of a Fund or a Portfolio on various foreign securities exchanges on
which Schroder Securities has trading privileges, provided certain other
conditions are satisfied as described below.
Payment of brokerage commissions to Schroder & Co. Inc. or Schroder
Securities for effecting such transactions is subject to Section 17(e) of the
1940 Act, which requires, among other things, that commissions for transactions
on a securities exchange paid by a registered investment company to a broker
that is an affiliated person of such investment company (or an affiliated person
of another person so affiliated) not exceed the usual and customary broker's
commissions for such transactions. It is the policy of each Fund and of each
Portfolio that commissions paid to Schroder & Co. Inc. or Schroder Securities
will, in SCMI's opinion, be: (1) at least as favorable as commissions
contemporaneously charged by Schroder & Co. Inc. or Schroder Securities, as the
case may be, on comparable transactions for their most favored unaffiliated
customers; and (2) at least as favorable as those which would be charged on
comparable transactions by other qualified brokers having comparable execution
capability. The Trust Board and Core Board, including a majority of the
respective non-interested Trustees, have each adopted procedures pursuant to
Rule 17e-1 under the 1940 Act to ensure that commissions paid to Schroder & Co.
Inc. or Schroder Securities by a Fund or a Portfolio satisfy the foregoing
standards. Such procedures are reviewed periodically by the applicable Board,
including a majority of the non-interested Trustees.
Each Board also reviews all transactions at least quarterly for compliance with
such procedures.
It is further a policy of the Funds and the Portfolios that all such
transactions effected by Schroder & Co. Inc. on the New York Stock Exchange be
in accordance with Rule 11a2-2(T) promulgated under the 1934 Act, which requires
in substance that a member of such exchange not associated with Schroder & Co.
Inc. actually execute the transaction on the exchange floor or through the
exchange facilities. Thus, while Schroder & Co. Inc. will bear responsibility
for determining important elements of execution such as timing and order size,
another firm will actually execute the transaction.
Schroder & Co. Inc. pays a portion of the brokerage commissions it receives
from a Fund or a Portfolio to the brokers executing the transactions on the New
York Stock Exchange. In accordance with Rule 11a2-2(T), Schroder Core has
entered into an agreement with Schroder & Co. Inc. permitting it to retain a
portion of the brokerage commissions paid to it by a Fund or a Portfolio. Each
Board, including a majority of the non-interested Trustees, has approved this
agreement.
None of the Funds or the Portfolios has any understanding or arrangement to
direct any specific portion of its brokerage to Schroder & Co. Inc. or Schroder
Securities, and none will direct brokerage to Schroder & Co. Inc. or Schroder
Securities in recognition of research services.
From time to time, a Fund or a Portfolio may purchase securities of a
broker or dealer through which it regularly engages in securities transactions.
See Table 5 in APPENDIX B to this SAI for information regarding the payment
of brokerage commissions.
<PAGE>
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
DETERMINATION OF NET ASSET VALUE PER SHARE
The net asset value per share of each class of a Fund is determined as
of the close of trading on the New York Stock Exchange each day that the
Exchange is open. Any assets or liabilities initially expressed in terms of
non-U.S. dollar currencies are translated into U.S. dollars at the prevailing
market rates as quoted by one or more banks or dealers on the afternoon of
valuation. The Exchange's most recent holiday schedule (which is subject to
change) states that it will close on New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
The Board has established procedures for the valuation of a Fund's
securities: (1) equity securities listed or traded on the New York or American
Stock Exchange or other domestic or foreign stock exchange are valued at their
latest sale prices on such exchange that day prior to the time when assets are
valued; in the absence of sales that day, such securities are valued at the
mid-market prices (in cases where securities are traded on more than one
exchange, the securities are valued on the exchange designated as the primary
market by the Portfolio's investment adviser); (2) unlisted equity securities
for which over-the-counter market quotations are readily available are valued at
the latest available mid-market prices prior to the time of valuation; (3)
securities (including restricted securities) not having readily-available market
quotations are valued at fair value under the Board's procedures; (4) debt
securities having a maturity in excess of 60 days are valued at the mid-market
prices determined by a portfolio pricing service or obtained from active market
makers on the basis of reasonable inquiry; and (5) short-term debt securities
(having a remaining maturity of 60 days or less) are valued at cost, adjusted
for amortization of premiums and accretion of discount.
When an option is written, an amount equal to the premium received is
recorded in the books as an asset, and an equivalent deferred credit is recorded
as a liability. The deferred credit is adjusted ("marked-to-market") to reflect
the current market value of the option. Options are valued at their mid-market
prices in the case of exchange-traded options or, in the case of options traded
in the over-the-counter market, the average of the last bid price as obtained
from two or more dealers unless there is only one dealer, in which case that
dealer's price is used. Futures contracts and related options are stated at
market value.
REDEMPTIONS IN-KIND
In the event that payment for redeemed shares is made wholly or partly
in portfolio securities, shareholders may incur brokerage costs in converting
the securities to cash. An in-kind distribution of portfolio securities is
generally less liquid than cash. The shareholder may have difficulty finding a
buyer for portfolio securities received in payment for redeemed shares.
Portfolio securities may decline in value between the time of receipt by the
shareholder and conversion to cash. A redemption in-kind of portfolio securities
could result in a less diversified portfolio of investments for a Fund and could
affect adversely the liquidity of its investment portfolio.
TAXATION
Under the Internal Revenue Code of 1986, as amended (the "Code"), each
Fund and each other series established from time to time by the Trust Board is
treated as a separate taxpayer for federal income tax purposes with the result
that: (1) each such series must meet separately the income and distribution
requirements for qualification as a regulated investment company; and (2) the
amounts of investment income and capital gain earned are determined on a
series-by-series (rather than on a Trust-wide) basis.
Each Fund intends to qualify as a regulated investment company under
Subchapter M of the Code each year so long as such qualification is in the best
interests of its shareholders. To do so, each Fund intends to distribute to
shareholders at least 90% of its "investment company taxable income" as defined
in the Code (which includes, among other items, dividends, interest and the
excess of any net short-term capital gain over net long-term capital loss), and
to meet certain diversification of assets, source of income, and other
requirements of the Code. By so doing, each Fund will not be subject to federal
income tax on its investment company taxable income and "net
<PAGE>
capital gain" (the excess of net long-term capital gain over net short-term
capital loss) distributed to shareholders. If a Fund does not meet all of these
Code requirements, it will be taxed as an ordinary corporation, and its
distributions will be taxable to shareholders as ordinary income.
Amounts not distributed on a timely basis (in accordance with a
calendar year distribution requirement) are subject to a 4% nondeductible excise
tax. To prevent this, each Fund must distribute for each calendar year an amount
equal to the sum of: (1) at least 98% of its ordinary income (excluding any
capital gain or loss) for the calendar year; (2) at least 98% of the excess of
its capital gain over capital loss realized during the one-year period ending
October 31 of such year; and (3) all such ordinary income and capital gain for
previous years that were not distributed during such years. A distribution will
be treated as paid during the calendar year if it is declared by a Fund in
October, November or December of the year with a record date in such month and
paid by the Fund during January of the following year. Such distributions will
be taxable to shareholders in the calendar year in which the distributions are
declared, rather than the calendar year in which the distributions are received.
Distributions of investment company taxable income (including net
realized short-term capital gain) are taxable to shareholders as ordinary
income. Generally, it is not expected that such distributions will be eligible
for the dividends received deduction available to corporations.
Distributions of net long-term capital gain are taxable to shareholders
as long-term capital gain, regardless of the length of time Fund shares have
been held by a shareholder and are not eligible for the dividends received
deduction. Such distributions will qualify for the new reduced rates for capital
gains on assets held for more than 18 months to the extent they represent gains
on the sale of such assets. A loss realized by a shareholder on the sale of Fund
shares held for six months or less with respect to which capital-gain
distributions have been paid will, to the extent of such capital-gain
distributions, be treated as long-term capital loss. Further, a loss realized on
a disposition will be disallowed to the extent the shares disposed of are
replaced (whether by reinvestment or distribution or otherwise) within a period
of 61 days beginning 30 days before and ending 30 days after the shares are
disposed of. In such a case, the basis of the shares acquired will be adjusted
to reflect the disallowed loss.
All distributions to shareholders are taxable whether reinvested in
additional shares or received in cash. Shareholders that reinvest distributions
will have for federal income tax purposes a cost basis in each share received
equal to the net asset value of a share of a Fund on the reinvestment date.
Shareholders will be notified annually as to the federal tax status of
distributions.
Distributions by a Fund reduce the net asset value of that Fund's
shares. If a distribution reduces the net asset value below a shareholder's cost
basis, such distribution nevertheless would be taxable to the shareholder as
ordinary income or capital gain as described above, even though, from an
investment standpoint, it may constitute a partial return of capital. In
particular, investors should consider the tax implications of buying shares just
prior to a distribution. The price of shares purchased at that time includes the
amount of the forthcoming distribution, which will be returned to the investor
in the form of a taxable distribution.
Upon redemption or sale of shares, a shareholder will realize a taxable
gain or loss, which will be treated as capital gain or loss if the shares are
capital assets in the shareholder's hands. Such gain or loss generally will be
long-term or short-term depending upon the shareholder's holding period for the
shares, and generally will qualify for the new reduced rates for capital gains
if the shares have been held for more than 18 months.
Ordinary income dividends paid to Fund shareholders who are nonresident
aliens are subject to a 30% U.S. withholding tax under existing provisions of
the Code applicable to foreign individuals and entities unless a reduced rate of
withholding or a withholding exemption is provided under applicable treaty law.
Nonresident shareholders are urged to consult their own tax advisors concerning
the applicability of the U.S. withholding tax.
Dividends and interest received (and, in certain circumstances,
realized capital gain) by a Fund may give rise to withholding and other taxes
imposed by foreign countries. Tax conventions between certain countries and the
U.S. may reduce or eliminate such taxes. If more than 50% in value of a Fund's
total assets at the close of its taxable year consists of stock or securities of
foreign corporations, that Fund will be eligible, and ordinarily expects,
<PAGE>
to file an election with the Internal Revenue Service ("IRS") pursuant to which
shareholders of the Fund will be required to include their proportionate share
of such withholding taxes in their U.S. income tax returns as gross income;
treat such proportionate share as taxes paid by them; and, subject to certain
limitations, deduct such proportionate share in computing their taxable incomes
or, alternatively use them as foreign tax credits against their U.S. income
taxes. No deductions for foreign taxes, however, may be claimed by noncorporate
shareholders who do not itemize deductions. Each Fund will report annually to
its shareholders the amount per share of such withholding taxes.
Due to investment laws in certain emerging market countries, it is
anticipated that a Fund's investments in equity securities in such countries
will consist primarily of shares of investment companies (or similar investment
entities) organized under foreign law or of ownership interests in special
accounts, trusts or partnerships. If a Fund purchases shares of an investment
company (or similar investment entity) organized under foreign law, that Fund
will be treated as owning shares in a passive foreign investment company
("PFIC") for U.S. federal income tax purposes. A Fund may be subject to U.S.
federal income tax, and an additional tax in the nature of interest, on a
portion of distributions from such company and on gain from the disposition of
such shares (collectively referred to as "excess distributions"), even if such
excess distributions are paid by that Fund as a dividend to its shareholders.
Each Fund may make an election with respect to a PFIC in which it owns
shares to mark such shares to the market annually or to treat the PFIC as a
"qualified electing fund" that will allow it to avoid the taxes on excess
distributions. However, such election may cause a Fund to recognize income in a
particular year in excess of the distributions received from such PFICs.
If a Fund engages in hedging transactions, including hedging
transactions in options, futures contracts, and straddles, or other similar
transactions, it will be subject to special tax rules (including constructive
sale, mark-to-market, straddle, wash sale, and short sale rules), the effect of
which may be to accelerate income to the Fund, defer losses to the Fund, cause
adjustments in the holding periods of the Fund's securities, or convert
short-term capital losses into long-term capital losses. These rules could
therefore affect the amount, timing and character of distributions to
shareholders. Each Fund will endeavor to make any available elections pertaining
to such transactions in a manner believed to be in the best interests of the
Fund.
Certain of a Fund's hedging activities (including its transactions, if
any, in foreign currencies or foreign currency-denominated instruments) are
likely to produce a difference between its book income and its taxable income.
If a Fund's book income exceeds its taxable income, the distribution (if any) of
such excess will be treated as: (1) a dividend to the extent of the Fund's
remaining earnings and profits (including earnings and profits arising from
tax-exempt income); (2) thereafter as a return of capital to the extent of the
recipient's basis in the shares; and (3) thereafter as gain from the sale or
exchange of a capital asset. If a Fund's book income is less than its taxable
income, the Fund could be required to make distributions exceeding book income
to qualify as a regulated investment company that is accorded special tax
treatment.
In general, gain from "foreign currencies" and from foreign currency
options, foreign currency futures contracts and forward foreign exchange
contracts relating to investments in stock, securities or foreign currencies
will be qualifying income for purposes of determining whether a Fund qualifies
as a regulated investment company. It is currently unclear, however, who will be
treated as the issuer of a foreign currency instrument or how foreign currency
options, futures contracts or forward foreign currency contracts will be valued
for purposes of the regulated investment company diversification requirements
applicable to each Fund.
A Fund's transactions in foreign currencies, foreign
currency-denominated debt securities and certain foreign currency options,
futures contracts and forward contracts (and similar instruments) may give rise
to ordinary income or loss to the extent such income or loss results from
fluctuations in the value of the foreign currency concerned.
Certain a Fund's investments, including assets "marked to the market"
for federal income tax purposes and debt obligations issued or purchased at a
discount, will create taxable income in excess of the cash they generate. In
such cases, a Fund may be required to sell assets (including when it is not
advantageous to do so) to generate the
<PAGE>
cash necessary to distribute as dividends to its shareholders all of its income
and gains and therefore to eliminate any tax liability at the Fund level.
Pursuant to the 1997 Act, new "constructive sale" provisions apply to
activities by a Fund which lock-in gain on an "appreciated financial position."
Generally, a "position" is defined to include stock, a debt instrument, or
partnership interest, or an interest in any of the foregoing, including through
a short sale, a swap contract, or a future or forward contract. Under the 1997
Act, the entry into a short sale, a swap contract or a future or forward
contract relating to an appreciated direct position in any stock or debt
instrument, or the acquisition of stock or debt instrument at a time when a Fund
occupies an offsetting (short) appreciated position in the stock or debt
instrument, is treated as a "constructive sale" that gives rise to the immediate
recognition of gain (but not loss). The application of these new provisions may
cause a Fund to recognize taxable income from these offsetting transactions in
excess of the cash generated by such activities.
The Trust is required to report to the IRS all distributions and gross
proceeds from the redemption of Fund shares (except in the case of certain
exempt shareholders). All such distributions and proceeds generally will be
subject to the withholding of federal income tax at a rate of 31% ("backup
withholding") in the case of non-exempt shareholders if: (1) the shareholder
fails to furnish the Trust with and to certify the shareholder's correct
taxpayer identification number or social security number; (2) the IRS notifies
the Trust that the shareholder has failed to report properly certain interest
and dividend income to the IRS and to respond to notices to that effect; or (3)
when required to do so, the shareholder fails to certify that it is not subject
to backup withholding. If the withholding provisions are applicable, any such
distributions or proceeds, whether reinvested in additional shares or taken in
cash, will be reduced by the amount required to be withheld. Any amounts
withheld may be credited against the shareholder's federal income tax liability.
Investors may wish to consult their tax advisors about the applicability of the
"backup withholding" provisions.
The IRS recently revised its regulations affecting the application to
foreign investors of the "back-up withholding" and withholding tax rules
described above. The new regulations will generally be effective for payments
made on or after January 1, 1999 (although transition rules will apply). In some
circumstances, the new rules will increase the certification and filing
requirements imposed on foreign investors in order to qualify for exemption from
the 31% back-up withholding tax and for reduced withholding tax rates under
income tax treaties. Foreign investors in each Fund should consult their tax
advisors with respect to the potential application of these new regulations.
The income tax and estate tax consequences to a non-U.S. shareholder
entitled to claim the benefits of an applicable tax treaty may be different from
those described herein. Non-U.S. shareholders may be required to provide
appropriate documentation to establish their entitlement to the benefits of such
a treaty.
Non-U.S. shareholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in shares of
a Fund.
The foregoing discussion relates only to federal income tax law as
applicable to U.S. persons (I.E., U.S. citizens and residents and U.S. domestic
corporations, partnerships, trusts and estates). Distributions by a Fund also
may be subject to foreign, state and local taxes, and their treatment under
foreign, state and local income tax laws may differ from the federal income tax
treatment. Shareholders should consult their tax advisors with respect to
particular questions of federal, foreign, state and local taxation.
OTHER INFORMATION
FUND STRUCTURE
CLASSES OF SHARES. Each Fund except Micro Cap Fund has two classes of
shares, Investor Shares and Advisor Shares. Advisor Shares are offered by a
separate prospectus to individual investors, in most cases through service
organizations. Advisor Shares incur more expenses but have lower investment
minimums than Investor Shares. Except for certain class differences, each share
of each class represents an undivided, proportionate interest
<PAGE>
in the Fund. Each share of the Fund is entitled to participate equally in
dividends and other distributions and the proceeds of any liquidation of the
Fund except that, due to the differing expenses borne by the two classes, the
amount of dividends and other distributions differs between the classes.
Information about the other class of shares is available from the Trust by
calling Schroder Advisors at 1-800-730-2932.
THE PORTFOLIOS. Each of the Funds (except U.S. Diversified Growth Fund
and Micro Cap Fund) seeks to achieve its investment objective by investing all
of its investable assets in a Portfolio that has the same investment objective
and substantially similar policies as those of the Fund. Accordingly, the
Portfolio directly acquires its own securities, and the Fund acquires an
indirect interest in those securities. Schroder International Bond Portfolio is
a separate series of Schroder Capital Funds II, a business trust organized under
the laws of the state of Delaware in December, 1996 ("Schroder Core II"). Each
other Portfolio in which a Fund invests is a separate series of Schroder Core, a
business trust organized under the laws of the State of Delaware in September
1995. Schroder Core is registered under the 1940 Act as an open-end, management
investment company and currently has eleven separate series. Schroder Core II is
similarly registered and currently has one series. The assets of each Portfolio
belong only to, and the liabilities of each Portfolio are borne solely by, that
Portfolio and no other portfolio of Schroder Core or Schroder Core II.
Each Fund's investment in a Portfolio is in the form of a
non-transferable beneficial interest. The Portfolio may permit other investment
companies or other qualified investors to invest in it. All other investors in
the Portfolio will invest on the same terms and conditions as the Fund and will
pay a proportionate share of the Portfolio's expenses.
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. On most issues
subject to a vote of investors, as permitted under the 1940 Act and other
applicable law, the Board may solicit proxies from the Fund's shareholders and
vote the Fund's interest in a Portfolio based upon the vote of its shareholders
or the Board may determine to vote the Fund's interests in a Portfolio in the
same proportion as the vote of all other interestholders in the Portfolio. If
there are other investors in the Portfolio, there can be no assurance that any
issue that receives a majority of the votes cast by Fund shareholders would
receive a majority of votes cast by all investors in the Portfolio; indeed, if
other investors hold a majority interest in the Portfolio, they could have
voting control of the Portfolio.
The Portfolios do not sell their shares directly to members of the
general public. Another investor in a Portfolio, such as an investment company,
that might sell its shares to members of the general public would not be
required to sell its shares at the same offering price as a Fund and could have
different fees and expenses than the Fund. Therefore, Fund shareholders may have
different returns than shareholders in another investment company that invests
exclusively in a Portfolio. There is currently no such other investment company
that offers its shares to members of the general public. Information regarding
any such funds in the future is available from Schroder Capital Funds (the
"Core") or Schroder Core II by calling Forum Shareholder Services, LLC at
1-800-730-2932.
Under federal securities law, any person or entity that signs a
registration statement may be liable for a misstatement or omission of a
material fact in the registration statement. Schroder Core, Schroder Core II,
their trustees and certain of their officers are required to sign the
registration statement and amendments thereto of the Trust and may be required
to sign the registration statements of certain other investors in a Portfolio.
In addition, under federal securities law, Schroder Core or Schroder Core II may
be liable for misstatements or omissions of a material fact in any proxy
soliciting material of a publicly offered investor in Schroder Core or Schroder
Core II, including a Fund. Each investor in a Portfolio, including the Trust,
has agreed to indemnify Schroder Core or Schroder Core II and its Trustees and
officers ("Schroder Core Indemnitees") against certain claims.
Indemnified claims are those brought against Schroder Core Indemnitees
based on a misstatement or omission of a material fact in the investor's
registration statement or proxy materials. No indemnification need be made,
however, if such alleged misstatement or omission relates to information about
Schroder Core and was supplied to the investor by Schroder Core or Schroder Core
II. Similarly, Schroder Core or Schroder Core II will indemnify each investor in
a Portfolio, including the Fund, for any claims brought against the investor
with respect
<PAGE>
to the investor's registration statement or proxy materials, to the extent the
claim is based on a misstatement or omission of a material fact relating to
information about Schroder Core or Schroder Core II that is supplied to the
investor by Schroder Core or Schroder Core II. In addition, each registered
investment company investor in the Portfolio will indemnify each Schroder Core
Indemnitee against any claim based on a misstatement or omission of a material
fact relating to information about a series of the registered investment company
that did not invest in the Schroder Core or Schroder Core II. The purpose of
these cross-indemnity provisions is principally to limit the liability of
Schroder Core or Schroder Core II to information that it knows or should know
and can control. With respect to other prospectuses and other offering documents
and proxy materials of investors in Schroder Core or Schroder Core II, its
liability is similarly limited to information about and supplied by it.
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 had a large investor other than
the Fund that redeemed its interest in the Portfolio, the Portfolio's remaining
investors (including the Fund) might, as a result, experience higher pro rata
operating expenses, thereby producing lower returns.
A Fund may withdraw its entire investment from a Portfolio at any time,
if the Trust Board determines that it is in the best interests of the Fund and
its shareholders to do so. A Fund might withdraw, for example, if there were
other investors in the Portfolio with power to, and who did by a vote of the
shareholders of all investors (including the Fund), change the investment
objective or policies of the Portfolio in a manner not acceptable to the Trust
Board. A withdrawal could result in a distribution in kind of portfolio
securities (as opposed to a cash distribution) by the Portfolio. That
distribution could result in a less diversified portfolio of investments for the
Fund and could affect adversely the liquidity of the Fund's portfolio. If the
Fund decided to convert those securities to cash, it would likely incur
brokerage fees or other transaction costs. If the Fund withdrew its investment
from the Portfolio, the Trust Board would consider appropriate alternatives,
including the management of the Fund's assets in accordance with its investment
objective and policies by SCMI or the investment of all of the Fund's investable
assets in another pooled investment entity having substantially the same
investment objective as the Fund. The inability of the Fund to find a suitable
replacement investment, if the Board decided not to permit SCMI to manage the
Fund's assets, could have a significant impact on shareholders of the Fund.
Each investor in the Portfolio, including the Fund, may be liable for
all obligations of the Portfolio. The risk to an investor in the Portfolio of
incurring financial loss on account of such liability, however, is limited to
circumstances in which the Portfolio is unable to meet its obligations, the
occurrence of which SCMI considers to be quite remote. Upon liquidation of the
Portfolio, investors would be entitled to share pro rata in the net assets of
the Portfolio available for distribution to investors.
ORGANIZATION OF THE TRUST
The Trust was organized as a Maryland corporation on July 30, 1969;
reorganized on February 29, 1988 as Schroder Capital Funds, Inc.; and
reorganized on January 9, 1996, as a Delaware business trust. The Trust is
registered as an open-end management investment company under the 1940 Act.
Delaware law provides that shareholders shall be entitled to the same
limitations of personal liability extended to stockholders of private
corporations for profit. Securities regulators of some states, however, have
indicated that they and the courts in their state may decline to apply Delaware
law on this point. To guard against this risk, the Trust Instrument contains an
express disclaimer of shareholder liability for the debts, liabilities,
obligations, and expenses of the Trust. The Trust Instrument provides for
indemnification out of each series' property of any shareholder or former
shareholder held personally liable for the obligations of the series. The Trust
Instrument also provides that each series shall, upon request, assume the
defense of any claim made against any shareholder for any act or obligation of
the series and satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which Delaware law does not apply (or no contractual limitation
of liability was in effect) and the series is unable to meet its obligations.
Schroder believes that, in view of the above, there is no risk of personal
liability to shareholders.
<PAGE>
CAPITALIZATION AND VOTING
The Trust has authorized an unlimited number of shares of beneficial
interest. The Trust Board may, without shareholder approval, divide the
authorized shares into an unlimited number of separate series (such as the
Funds) and may divide series into classes of shares, and the costs of doing so
may be borne by a series or a class or the Trust in accordance with the Trust
Instrument. The Trust currently consists of nine series. Each series offers two
classes of shares, Investor Shares and Advisor Shares except for Schroder Micro
Cap Fund, which has authorized only Investor Shares..
When issued for the consideration described in the relevant Prospectus
or under the dividend reinvestment plan, shares are fully paid, nonassessable,
and have no preferences as to conversion, exchange, dividends, retirement or
other features. Shares have no preemptive rights and have non-cumulative voting
rights, which means that the holders of more than 50% of the shares voting for
the election of Trustees can elect 100% of the Trustees if they choose to do so.
Each shareholder of record is entitled to one vote for each full share held (and
a fractional vote for each fractional share held).
The Trust does not hold annual meetings of shareholders. The matters
considered at an annual meeting typically include the reelection of Trustees,
approval of an investment advisory agreement, and the ratification of the
selection of independent accountants. These matters are not submitted to
shareholders unless a meeting of shareholders is held for some other reason,
such as those indicated below. Each Trustee serves until death, resignation or
removal. Vacancies are filled by the remaining Trustees, subject to the
provisions of the 1940 Act requiring a meeting of shareholders for election of
Trustees to fill vacancies. Similarly, the selection of independent accountants
and renewal of investment advisory agreements for future years is performed
annually by the Trust Board. Future shareholder meetings will be held to elect
Trustees if required by the 1940 Act, to obtain shareholder approval of changes
in fundamental investment policies, to obtain shareholder approval of material
changes in investment advisory agreements, to select new independent accountants
if the employment of the Trust's independent accountants has been terminated,
and to seek any other shareholder approval required under the 1940 Act.
The Trust Board has the power to call a meeting of shareholders at any time when
it believes it is necessary or appropriate.
In addition to the foregoing rights, the Trust Instrument provides that
holders of at least two-thirds of the outstanding shares of the Trust may remove
any person serving as a Trustee at any meeting
of the shareholders.
PERFORMANCE INFORMATION
Performance quotations of the average annual total return and
cumulative total return of a Fund is provided in advertisements or reports to
shareholders or prospective investors.
Quotations of average annual total return are expressed in terms of the
average annual compounded rate of return of a hypothetical investment in a fund
or class over periods of 1, 5 and 10 years (or since commencement of operations
if any of these periods are not available), calculated pursuant to the following
formula:
P (1+T)n = ERV
(where P = a hypothetical initial payment of $1,000, T = the average
annual total return, n = the number of years, and ERV = the ending redeemable
value of a hypothetical $1,000 payment made at the beginning of the period). All
total return figures reflect the deduction of fund and any class expenses (net
of any reimbursed expenses) on an annual basis and generally assume that all
dividends and distributions, when paid, are reinvested in shares of the same
class.
<PAGE>
Quotations of cumulative total return reflect only the performance of a
hypothetical investment in a fund or a class during the particular time period
shown. Cumulative total returns vary based on changes in market conditions and
the level of a fund's and any applicable class's expenses, and no reported
performance figure should be considered an indication of performance which may
be expected in the future.
In communications to current or prospective shareholders, performance
figures such as cumulative total return, also may be compared with the
performance of other mutual funds tracked by mutual fund rating services or to
unmanaged indexes that may assume reinvestment of dividends but generally do not
reflect deductions for administrative and management costs.
Investors who purchase and redeem shares through a customer account
maintained at a financial institution or a Service Organization may be charged
one or more of the following types of fees as agreed upon by the financial
institution or Service Organization and the investor, with respect to the
customer services provided: (1) account fees (a fixed amount per month or per
year); (2) transaction fees (a fixed amount per transaction processed); (3)
compensating balance requirements (a minimum dollar amount a customer must
maintain in order to obtain the services offered); or (4) account maintenance
fees (a periodic charge based upon a percentage of the assets in the account or
of the dividends paid on these assets). Such fees have the effect of reducing
the average annual or cumulative total returns for those investors.
For information regarding performance data as for the relevant period
for each of the Funds, see APPENDIX A.
PRINCIPAL SHAREHOLDERS
For information regarding Principal Shareholders of each Fund, see
Table 4 in APPENDIX B.
CUSTODIAN
The Chase Manhattan Bank, through its Global Custody Division located
in London, England, acts as custodian of the Funds' and the Portfolios' assets
but plays no role in making decisions as to the purchase or sale of portfolio
securities for the Funds or the Portfolios. Pursuant to rules adopted under the
1940 Act, a Portfolio may maintain its foreign securities and cash in the
custody of certain eligible foreign banks and securities depositories. Selection
of these foreign custodial institutions is made currently by the Core Trust
Board following a consideration of a number of factors, including (but not
limited to) the reliability and financial stability of the institution; the
ability of the institution to perform capably custodial services for the
Portfolio; the reputation of the institution in its national market; the
political and economic stability of the country in which the institution is
located; and further risks of potential nationalization or expropriation of
Portfolio assets.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Forum Shareholder Services, LLC, Two Portland Square, Portland, Maine
04101, acts as the Funds' transfer agent and dividend disbursing agent.
LEGAL COUNSEL
Ropes & Gray, One International Place, Boston, Massachusetts 02110-2624,
serves as counsel to the Trust.
INDEPENDENT ACCOUNTANT
PricewaterhouseCoopers LLP serves as independent accountants for the
Trust. PricewaterhouseCoopers LLP provides audit services and consultation in
connection with review of U.S. SEC filings. Their address is One Post Office
Square, Boston, Massachusetts 02109.
<PAGE>
YEAR 2000 DISCLOSURE
The Funds receive services from the investment advisor, administrators,
distributor, transfer agent and custodian 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
Advisors 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.
REGISTRATION STATEMENT
This SAI and each Prospectus do not contain all the information
included in the Trust's registration statement filed with the SEC under the
Securities Act of 1933 with respect to the securities offered hereby, certain
portions of which have been omitted pursuant to the rules and regulations of the
SEC. The registration statement, including the exhibits filed therewith, may be
examined at the office of the SEC in Washington, D.C.
Statements contained herein and in each Prospectus as to the contents
of any contract or other documents referred to are not necessarily complete,
and, in each instance, reference is made to the copy of such contract or other
documents filed as an exhibit to the registration statement, each such statement
being qualified in all respects by such reference.
FINANCIAL STATEMENTS
The 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.
Financial statements for each Fund's semi-annual period and fiscal year
will be distributed to shareholders of record. The Board in the future may
change the fiscal year end of a Fund.
The following financial statements are incorporated by reference into this
SAI:
Audited financial statements for the fiscal year ended May 31, 1998
including Schedule of Investments, Statement of Assets and Liabilities,
Statement of Operations, Statement of Changes in Net Assets, Financial
Highlights, Notes to Financial Statements and Report of Independent
Accountants for Schroder Emerging Markets Fund, Schroder U.S. Smaller
Companies Fund, and Schroder Micro Cap Fund (and including the audited
financial statements of the Portfolio in which each Fund invests, where
applicable) (Annual Reports filed via EDGAR on August 7, 1998, August
11, 1998 and August 7, 1998, accession numbers 0001004402-98-000434,
0000889812-98-001913, and 0001004402-98-00435, respectively).
Unaudited financial statements for the period ended April 30, 1998
including Schedule of Investments, Statement of Assets and Liabilities,
Statement of Operations, Statement of Changes in Net Assets, Financial
Highlights, Notes to Financial Statements for Schroder International
Smaller Companies Fund, Schroder International Fund and Schroder U.S.
Diversified Growth Fund (and including the unaudited financial
statements of the Portfolio in which each Fund invests, where
applicable) (Semi-Annual Reports filed via EDGAR on June 30, 1998,
accession numbers 0000889812-98-001656, 0000889812-98-001655, and
0000889812-98-001654, respectively).
Unaudited financial statements for the period ended June 30, 1998
including Schedule of Investments, Statement of Assets and Liabilities,
Statement of Operations, Statement of Changes in Net Assets, Financial
Highlights, Notes to Financial Statements for Schroder International
Bond Fund (and for Schroder International Bond Portfolio) (Semi-Annual
Report filed via EDGAR on September 8, 1998,
<PAGE>
accession number 0001004402-98-000484).
Audited financial statements for the fiscal year ended October 31, 1997
including Schedule of Investments, Statement of Assets and Liabilities,
Statement of Operations, Statement of Changes in Net Assets, Financial
Highlights, Notes to Financial Statements and Report of Independent
Accountants for Schroder International Fund, Schroder International
Smaller Companies Fund Schroder U.S. Diversified Growth Fund and
Schroder Emerging Markets Fund Institutional Portfolio (and including
the audited financial statements of the Portfolio in which each Fund
invests, where applicable) (Annual Reports filed via EDGAR on January
6, 1998 and January 9, 1998, accession numbers 0000889812-98-000006,
000889812-98-000005, 000889812-98-000004 and 0001004402-98-000018,
respectively).
<PAGE>
APPENDIX A
PERFORMANCE INFORMATION
The average annual return of each of International Fund, International
Smaller Companies Fund, and U.S. Diversified Growth Fund for the semi-annual
period ended April 30, 1998 is shown below. The average annual return for
International Bond Fund for the semi-annual period ended June 30, 1998, is shown
below. The average annual return for Schroder Emerging Markets Fund, Schroder
U.S. Smaller Companies Fund and Schroder Micro Cap Fund for the fiscal year
ended May 31, 1998 is shown below.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CALENDAR SINCE
ONE THREE YEAR ONE THREE FIVE TEN INCEPTION
MONTHS MONTHS TO DATE YEAR YEARS YEARS YEARS ANNUALIZED
SCHRODER INTERNATIONAL
FUND
Investor Shares 1.98% 12.41% 16.83% 17.59% 13.23% 13.35% 9.50% 12.69%
Advisor Shares 1.98% 12.34% 16.33% N/A N/A N/A N/A 13.69%
SCHRODER EMERGING MARKETS
FUND
Investor Shares (13/66)% (10.85)% (10.55)% N/A N/A N/A N/A
SCHRODER INTERNATIONAL
SMALLER COMPANIES FUND
Investor Shares 5.09% 17.29% 26.37% 15.02% N/A N/A N/A N/A
SCHRODER INTERNATIONAL
BOND FUND
Investor Shares (1.60)% (1.40)% (1.70)% N/A N/A N/A N/A N/A
SCHRODER U.S. DIVERSIFIED
GROWTH FUND
Investor Shares 0.48% 14.79% 12.50% 34.09% 25.59% 17.99% 16.36% 11.75%
SCHRODER U.S. SMALLER
COMPANIES FUND
Investor Shares (5.14)% 0.89% 5.50% 21.63% 28.70% N/A N/A 24.23%
Advisor Shares (5.15)% 0.82% 5.44% 21.50% N/A N/A N/A 23.24%
SCHRODER MICRO CAP FUND
Investor Shares (0.63)% 19.93% 34.91% N/A N/A N/A N/A N/A
- --------------------------- - ----------- ----------- ---------- ----------- ----------- ---------- ----------- -------------
</TABLE>
As of May 31, 1998, there were no outstanding Advisor Shares of any Fund other
than Schroder International Fund and Schroder U.S. Smaller Companies Fund.
<PAGE>
APPENDIX B
MISCELLANEOUS TABLES
TABLE 1 - INVESTMENT ADVISORY FEES
Fees are paid at the Portfolio level where the Fund invests in a Portfolio. If
the Fund invests in other than in a Portfolio, the expense is paid by the Fund.
<TABLE>
<S> <C> <C> <C>
GROSS FEE FEE WAIVED NET FEE PAID
SCHRODER INTERNATIONAL FUND
Year Ended October 31, 1997 $891,659 $47,444 $844,215
Year Ended October 31, 1996 $978,697 $51,971 $926,726
Year Ended October 31, 1995 $893,082 $ 0 $893,082
SCHRODER INTERNATIONAL SMALLER
COMPANIES FUND
Year Ended October 31, 1997 $60,033 $60,033 $ 0
SCHRODER U.S. DIVERSIFIED GROWTH FUND
Year Ended October 31, 1997 $118,887 $28,422 $ 90,465
Year Ended October 31, 1996 $139,483 $ 4,355 $135,128
Year Ended October 31, 1995 $140,988 $ 0 $140,988
SCHRODER INTERNATIONAL BOND FUND(1)
Period Ended December 31, 1997 $53,529 $53,529 $ 0
SCHRODER EMERGING MARKETS FUND
Year Ended May 31, 1998 $ 22 $ 15 $ 7
SCHRODER U.S. SMALLER COMPANIES FUND
Year Ended May 31, 1998
Investor Shares $243,031 $ 0 $243,031
Advisor Shares $ 11,697 $ 0 $ 11,697
Period Ended May 31, 1997 $ 59,916 $10,038 $ 49,878
Year Ended October 31, 1996 $ 76,373 $16,090 $ 60,283
SCHRODER MICRO CAP FUND
Year Ended May 31, 1998 $26,896 $26,896 $ 0
Period Ended November 30, 1997 $ 3,733 $ 3,733 $ 0
</TABLE>
- ----------------------------------------- - ----------------- -- ---------------
(1) For the first full year International Bond Portfolio has been in
operation.
<PAGE>
TABLE 2 - ADMINISTRATION FEES
(Includes the Fund's Proportion of the Portfolio's Expenses where Applicable)
A. ADMINISTRATION FEES PAID TO SCHRODER FUND ADVISORS, INC.
<TABLE>
<S> <C> <C> <C>
NET FEE
GROSS FEE FEE WAIVED PAID
SCHRODER INTERNATIONAL FUND
Year Ended October 31, 1997 $463,353 $ 97,253 $366,100
Year Ended October 31, 1996 $761,036 $61,259 $699,777
Year Ended October 31, 1995 $446,541 $ $446,541
0
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND
Year Ended October 31, 1997 $ 18,234 $ 17,657 $ 577
SCHRODER U.S. DIVERSIFIED GROWTH FUND
Year Ended October 31, 1997 $ 0 $ $
Year Ended October 31, 1996 $ 0 0 0
Year Ended October 31, 1995 $ 0 $ $
0 0
$ $
0 0
SCHRODER INTERNATIONAL BOND FUND
Period Ended December 31, 1997 $ 10,706 $ 10,706 $ 0
SCHRODER EMERGING MARKETS FUND
Year Ended May 31, 1998 $ $ 0 $ 5
5
SCHRODER U.S. SMALLER COMPANIES FUND
Year Ended May 31, 1998
Investor Shares $101,204 $ $101,204
Advisor Shares $ 4,871 0 $ 4,871
Period Ended May 31, 1997 $ 25,060 $ $
Year Ended October 31, 1996 $ 41,063 0 0
$ 25,060 $ 14,213
$ 26,850
SCHRODER MICRO CAP FUND
Year Ended May 31, 1998 $5,379 $5,379 $
Period Ended November 30, 1997 $ 747 $ 747 0
$
0
</TABLE>
<PAGE>
B. SUBADMINSTRATION FEES PAID TO FORUM ADMINISTRATIVE SERVICES, LLC
<TABLE>
<S> <C> <C> <C>
NET FEE
GROSS FEE FEE WAIVED PAID
SCHRODER INTERNATIONAL FUND
Year Ended October 31, 1997 $229,792 $ 0 $229,792
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND
Year Ended October 31, 1997 $ 10,018 $ 0 $ 10,018
SCHRODER U.S. DIVERSIFIED GROWTH FUND
Year Ended October 31, 1997 $ 15,853 $ 0 $ 15,853
SCHRODER INTERNATIONAL BOND FUND
Period Ended December 31, 1997 $ 25,000 $ 25,000 $ 0
SCHRODER EMERGING MARKETS FUND $ 2,742 $ 2,742 $ 4
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
NET FEE
GROSS FEE FEE WAIVED PAID
SCHRODER U.S. SMALLER COMPANIES FUND
Year Ended May 31, 1998
Investor Shares $ 60,740 $ 0 $ 60,740
Advisor Shares $ 2,923 $ 0 $ 2,923
Period Ended May 31, 1997 $ 15,007 $ 0 $ 15,007
SCHRODER MICRO CAP FUND
Year Ended May 31, 1998 $15,685 $13,533 $ 2,152
Period Ended November 30, 1997 $ 299 $ 0 $ 299
</TABLE>
<PAGE>
TABLE 3 - FUND ACCOUNTING FEES
(Includes the Fund's Share of the Portfolio's Expense, where applicable)
<TABLE>
<S> <C> <C> <C>
GROSS FEE FEE WAIVED NET FEE PAID
SCHRODER INTERNATIONAL FUND
Year Ended October 31, 1997 $83,959 $ 0 $83,959
Year Ended October 31, 1996 $86,000 $ 0 $86,000
Year Ended October 31, 1995 $72,000 $ 0 $72,000
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND
Year Ended October 31, 1997 $71,200 $ 0 $71,200
SCHRODER U.S. DIVERSIFIED GROWTH FUND
Year Ended October 31, 1997 $36,000 $ 0 $36,000
Year Ended October 31, 1996 $36,000 $ 0 $36,000
Year Ended October 31, 1995 $38,000 $ 0 $38,000
SCHRODER INTERNATIONAL BOND FUND(1)
Period Ended December 31, 1997 $62,000 $24,000 $38,000
SCHRODER EMERGING MARKETS FUND
Year Ended May 31, 1998 $ 1,306 $ 0 $ 1,306
SCHRODER U.S. SMALLER COMPANIES FUND
Year Ended May 31, 1998
Investor Shares $18,378 $ 0 $18,378
Advisor Shares $ 801 $ 0 $18,378
Period Ended May 31, 1997 $12,955 $ 0 $12,955
Year Ended October 31, 1996 $37,972 $ 0 $37,972
SCHRODER MICRO CAP FUND
Year Ended May 31, 1998 $27,645 $ 0 $27,645
Period Ended November 30, 1997 $ 4,645 $ 0 $ 4,645
</TABLE>
- -----------------------------------------------------
(1) For the first full year International Bond Portfolio has been in
operation.
<PAGE>
TABLE 4 - HOLDERS OF 5% OR MORE OF OUTSTANDING SHARES
As of August 31, 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.
NUMBER OF NUMBER OF % OF SHARES
INVESTOR ADVISOR OF FUND
SHARES SHARES CLASS OWNED
SCHRODER INTERNATIONAL FUND
Mac & Co.
Mellon Bank NA
PO Box 3198
Pittsburgh PA 15230-3198 928,314.855 11.51
Mac & Co.
Mellon Bank NA
PO Box 3198
Pittsburgh PA 15230-3198 916,961.447 11.37
Union College Pooled Endowment Funds 8.20
PO Box 3199 Church Street Station
New York NY 10008 828,387.036
Lutheran Church
Missouri Synod Foundation
1333 5 Kirkwood Road 661,134.137 8.20
St. Louis MO 63122
Norwest Bank Minnesota NA, Trustee
PO Box 1450 NW 8477
Minneapolis MN 55480-8477 548,281.576 6.80
<PAGE>
<TABLE>
<S> <C> <C> <C>
NUMBER OF NUMBER OF % OF SHARES
INVESTOR ADVISOR OF FUND
SHARES SHARES CLASS OWNED
SCHRODER INTERNATIONAL FUND (CONTINUED)
Northern Trust Company TEE for
Norwest Foundation
c/o Mutual Fund Processing
P.O. Box 92956
Chicago, IL 60675-2956 526,318.089 6.52
Miter & Co
c/o Marshall & Ilsley Trust Company
PO Box 2977
Milwaukee WI 53202-2977 492,436.243 6.10
Forum Administrative Services, LLC
ATTN Corporate Accounting
Two Portland Square
Portland, ME 04101 5.429 100
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND
Schroder Investment Management
Client Account
33 Gutter Lane
London EC2V 8AS
United Kingdom 300,000.00 67.47
Hudson-Webber Foundation
333 West Fort Street, Suite 1310
Detroit, MI 48226 105,675.441 23.77
Charles Schwab & Co. Inc.
Special Customer Account
Attn: Mutual Funds
101 Montgomery Street
San Francisco CA 94104 38,667.365 8.70
SCHRODER U.S. DIVERSIFIED GROWTH FUND
Wendel & Co.
c/o The Bank of New York
Mutual Fund Reorg. Dept.
PO Box 1066
Wall Street Station 151,693.424 9.27
New York NY 10268
Security Nominees Incorporated
1 State Street
New York NY 10017 113,383.988 6.93
Citibank F.S.B. as Trustee
for Natwest Crawley
1410 N. Westshore Blvd.
Tampa FL 33607 102,810.356 6.29
Fox & Co.
PO Box 976
New York NY 10268 95,661.743 5.85
Wendel & Co.
c/o The Bank of New York
EBT Mutual Fund Section
PO Box 1066
Wall Street Station
New York NY 10268 85,776.999 5.24
SCHRODER INTERNATIONAL BOND FUND
Charles Schwab & Co. Inc.
101 Montgomery Street
San Francisco CA 94104 6,001.655 100.00
SCHRODER EMERGING MARKETS FUND
Charles Schwab & Co. Inc.
Special Cust Account FBO
101 Montgomery Street
San Francisco CA 94104 57,726.027 96.30
<PAGE>
NUMBER OF NUMBER OF % OF SHARES
INVESTOR ADVISOR OF FUND
SHARES SHARES CLASS OWNED
SCHRODER U.S. SMALLER COMPANIES FUND
First American Trust Co TTEE
FBO Managed Omnibus Reinvestment
421 North main Street ,018,447.865 21.98
BALSA & Co.
c/o Chase Manhattan Bank
PO Box 1768
Grand Central Station
New York, NY 10163-1768 641,387.856 13.85
FTC & Co.
PO Box 173736
Denver CO 80217-3736 489,639.244 10.57
Charles Schwab & Co Inc.
101 Montgomery Street
San Francisco CA 94104 397,465.194 8.58
Schroder Nominees Limited
120 Cheapside
London EC2V 6DS
United Kingdom 286,178.869 6.18
Donaldson Lufkin & Jenrette
Securities Corporation
Jersey City NJ 07303 257,155.682 85.89
National Investor Services Corp.
55 Water Street
New York NY 10041 32,010.861 10.69
SCHRODER MICRO CAP FUND
Schroders Incorporated
787 Seventh Avenue
New York NY 10019 144,036.581 32.00
Boston Financial Data Services
FBO Schroder International Omnibus A/C
116,942.359 25.98
Schroder Capital Management International Inc.
ATTN: Fergal Cassidy
787 7th Avenue, 34th Floor
New York, NY 10019 60.044.763 13.34
Charles Schwab & Co. Inc.
101 Montgomery Street
San Francisco CA 94104 38,431.528 8.54
IRA Unschuld
150 East 56th Street
New York NY 10022 36318.370 8.07
</TABLE>
<PAGE>
TABLE 5- BROKERAGE COMMISSIONS
The following table shows the aggregate brokerage commissions with respect to
each Fund that incurred brokerage costs. The data is for the past three fiscal
years or shorter period if the Fund has been in operation for a shorter period.
With respect to each Fund that invests in a Portfolio, the amounts represent
aggregate brokerage commissions paid by the Portfolio.
<TABLE>
<CAPTION>
PERCENTAGE
OF COMMISSION
TRANSACTIONS
<S> <C> <C> <C> <C>
PERCENTAGE OF EXECUTED
COMMISSIONS COMMISSIONS THROUGH
AGGREGATE PAID TO PAID TO SCHRODER &
COMMISSIONS SCHRODER & SCHRODER & CO. INC.
PAID CO. INC. CO. INC.
SCHRODER INTERNATIONAL FUND
Year Ended October 31, 1997 $421,129 $4,716 0.99% 1.11%
Year Ended October 31, 1996 $756,181 0 0 0
Year Ended October 31, 1995 $584,429 0 0 0
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND
Year Ended October 31, 1997 $ 37,223 0 0 0
SCHRODER U.S. DIVERSIFIED GROWTH FUND
Year Ended October 31, 1997 $ 20,510 0 0 0
Year Ended October 31, 1996
Year Ended October 31, 1995
SCHRODER INTERNATIONAL BOND FUND(1)
Period Ended December 31, 1997 $ 297 0 0 0
SCHRODER EMERGING MARKETS FUND
Year Ended May 31, 1998 $ 92,368 0 0 0
SCHRODER U.S. SMALLER COMPANIES FUND
Year Ended May 31, 1998 $491,278 0 0 0
Period Ended May 31, 1997 $167,043 0 0 0
Year Ended October 31, 1996 $137,589
SCHRODER MICRO CAP FUND
Year Ended May 31, 1998 $ 11,185 0 0 0
Period Ended November 30, 1997 $ 2,966 0 0 0
</TABLE>
During the last three fiscal years certain Funds paid brokerage commissions to
Schroder & Co. Inc., an affiliate of SCMI. The tables above indicate the Funds
that paid commissions to Schroder & Co. Inc., the aggregate amounts of
commissions paid, the percentage of aggregate brokerage commissions paid to
Schroder & Co. Inc. and the percentage of the aggregate dollar amount of
transactions involving payment of commissions that were effected through
Schroder & Co. Inc. ----------------------------------------------------
(1) Based solely on the first full year of the Portfolio.
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements
Prospectus:
Financial Highlights.
Statement of Additional Information:
Audited financial statements for the fiscal year
ended May 31, 1998 including Schedule of Investments,
Statement of Assets and Liabilities, Statement of
Operations, Statement of Changes in Net Assets,
Financial Highlights, Notes to Financial Statements
and Report of Independent Accountants for Schroder
Emerging Markets Fund, Schroder U.S. Smaller
Companies Fund, and Schroder Micro Cap Fund (Annual
Reports filed via EDGAR on August 7, 1998, August 11,
1998 and August 7, 1998, accession numbers
0001004402-98-000434, 0000889812-98-001913, and
0001004402-98-00435, respectively).
Unaudited financial statements for the period ended
April 30, 1998 including Schedule of Investments,
Statement of Assets and Liabilities, Statement of
Operations, Statement of Changes in Net Assets,
Financial Highlights, Notes to Financial Statements
for Schroder International Smaller Companies Fund,
Schroder International Fund and Schroder U.S.
Diversified Growth Fund (Semi-Annual Reports filed
via EDGAR on June 30, 1998, accession numbers
0000889812-98-001656, 0000889812-98-001655, and
0000889812-98-001654, respectively).
Unaudited financial statements for the period ended
June 30, 1998 including Schedule of Investments,
Statement of Assets and Liabilities, Statement of
Operations, Statement of Changes in Net Assets,
Financial Highlights, Notes to Financial Statements
for Schroder International Bond Fund (Semi-Annual
Report filed via EDGAR on September 8, 1998,
accession number 0001004402-98-000484).
Audited financial statements for the fiscal year
ended October 31, 1997 including Schedule of
Investments, Statement of Assets and Liabilities,
Statement of Operations, Statement of Changes in Net
Assets, Financial Highlights, Notes to Financial
Statements and Report of Independent Accountants for
Schroder International Fund, Schroder International
Smaller Companies Fund Schroder U.S. Diversified
Growth Fund and Schroder Emerging Markets Fund
Institutional Portfolio (Annual Reports filed via
EDGAR on January 6, 1998 and January 9, 1998,
accession numbers 0000889812-98-000006,
000889812-98-000005, 000889812-98-000004 and
0001004402-98-000018, respectively).
(b) Exhibits
(1) Trust Instrument of Registrant Amended and Restated
as of March 13, 1998 (filed herewith).
(2) Bylaws of Registrant dated September 8, 1995 (see
Note 1).
(3) Not Applicable.
(4) See the following Articles and Sections in the Trust
Instrument filed as Exhibit (1): 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.
<PAGE>
(5)(a) 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
(filed herewith).
(b) 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 1).
(c) 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
3).
(d) 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 3).
(e) 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 4).
(f) Investment Advisory Agreement between the Trust and
SCMI dated as of March 5, 1997, with respect to
Schroder International Bond Fund and Schroder Cash
Reserves Fund (see Note 4).
(g) Investment Advisory Agreement between the Trust and
SCMI dated as of March 5, 1997, with respect to
Schroder Micro Cap Fund (see Note 4).
(h) Investment Advisory Agreement between the Trust and
SCMI dated as of November 26, 1996, with respect to
Schroder Emerging Markets Fund (see Note 4).
(6)(a) Distribution Agreement between the Trust and Schroder
Fund Advisors Inc. dated as of January 9, 1996, with
respect to Schroder U.S. Diversified Growth Fund (see
Note 1).
(b) Distribution Agreement between the Trust and Schroder
Fund Advisors Inc. dated as of January 9, 1996, as
amended, with respect to Schroder Emerging Markets Fund
Institutional Portfolio, Schroder International Fund,
Schroder Latin American Fund, Schroder Global Asset
Allocation Fund, Schroder U.S. Smaller Companies Fund,
Schroder International Smaller Companies Fund, Schroder
Emerging Markets Fund, Schroder European Growth Fund,
Schroder Asia Fund, Schroder Japan Fund, Schroder
United Kingdom Fund, Schroder Cash Reserves Fund,
Schroder International Bond Fund, Schroder Greater
China Fund and Schroder Micro Cap Fund (see Note 4).
(7) Not Applicable.
(8)(a) Form of Global Custody Agreement Between the Trust and
The Chase Manhattan Bank, N.A. with respect to Schroder
Greater China Fund (see Note 2).
<PAGE>
(b) 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 Latin American Fund,
Schroder Global Asset Allocation Fund, Schroder U.S.
Smaller Companies Fund, Schroder International Smaller
Companies Fund, Schroder U.S. Diversified Growth Fund,
Schroder Emerging Markets Fund, Schroder European
Growth Fund, Schroder Asia Fund, Schroder Japan Fund,
Schroder United Kingdom Fund, Schroder Cash Reserves
Fund, Schroder International Bond Fund, Schroder
Greater China Fund and Schroder Micro Cap Fund (see
Note 4).
(9)(a) 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 Latin American Fund,
Schroder Emerging Markets Fund Institutional Portfolio,
Schroder International Smaller Companies Fund, Schroder
Micro Cap Fund, Schroder Emerging Markets Fund,
Schroder Global Asset Allocation Fund, Schroder Cash
Reserves Fund, Schroder International Bond Fund and
Schroder Greater China Fund (filed herewith).
(b) 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 Latin American 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 (filed
herewith).
(c) 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 Latin American Fund, Schroder Global
Asset Allocation Fund, Schroder U.S. Smaller Companies
Fund, Schroder International Smaller Companies Fund,
Schroder U.S. Diversified Growth Fund, Schroder
Emerging Markets Fund, Schroder European Growth Fund,
Schroder Asia Fund, Schroder Japan Fund, Schroder
United Kingdom Fund, Schroder Cash Reserves Fund,
Schroder Greater China Fund, Schroder International
Bond Fund and Schroder Micro Cap Fund (see Note 4).
(d) 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 Latin American Fund, Schroder
Emerging Markets Fund Institutional Portfolio, Schroder
International Smaller Companies Fund, Schroder Global
Asset Allocation Fund, Schroder European Growth Fund,
Schroder Asia Fund, Schroder Japan Fund, Schroder
United Kingdom Fund, Schroder Cash Reserves Fund,
Schroder Micro Cap Fund, Schroder Greater China Fund
and Schroder Emerging Markets Fund (see Note 4).
(e) Shareholder Service Plan adopted by the Trust with
respect to Schroder Greater China Fund (see Note 2).
<PAGE>
(10) Opinion and consent of Smith Katzenstein Furlow LLP
as to the legality of the securities being registered
(see Note 4).
(11) Consent of Indpendent Auditors (filed herewith).
(12) No financial statements were omitted from Item 23.
(13) Not Applicable.
(14) Not Applicable.
(15) 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 3).
16)(a) Schedule of Sample Performance Calculations -- Schroder
Greater China Fund (to be filed).
(b) Schedule of Sample Performance Calculations -- Schroder
Cash Reserves Fund (to be filed ).
(c) Schedule of Sample Performance Calculations -- Schroder
U.S. Diversified Growth Fund (see Note 1).
(d) Schedule of Sample Performance Calculations -- Schroder
U.S. Smaller Companies Fund (see Note 5).
(e) Schedule of Sample Performance Calculations -- Schroder
International Fund, Schroder International Smaller
Companies Fund, Schroder Emerging Markets Fund,
Schroder International Bond Fund, Schroder Micro Cap
Fund and Schroder Emerging Markets Fund Institutional
Portfolio (see note 4).
(17) Financial Data Schedules (filed herewith).
(18)(a) Multiclass (Rule 18f-3) Plan adopted by Trust with
respect to Schroder Greater China Fund (see Note 2).
(b) Multiclass (Rule 18f-3) Plan adopted by Trust (see Note
6).
<PAGE>
Other Exhibits:
Power of Attorney forms pursuant to which this Post-Effective
Amendment is signed (see Note 7).
Power of Attorney from Fergal Cassidy (filed herewith).
Power of Attorney from Sharon L. Haugh (filed herewith).
Power of Attorney from David N. Dinkins (filed herewith).
Power of Attorney from Peter S. Knight (filed herewith).
Power of Attorney from Hermann C. Schwab (filed herewith).
Power of Attorney from Mark J. Smith (filed herewith).
Power of Attorney from John I. Howell (filed herewith).
Power of Attorney from Peter E. Guernsey (filed herewith).
Power of Attorney from Clarence F. Michalis (filed herewith).
----------
Notes:
1 Exhibit incorporated by reference as filed on PEA No. 61 via EDGAR on
April 18, 1997, accession number 0000912057-97-013527.
2 Exhibit incorporated by reference as filed on PEA No. 67 via EDGAR on
July 17, 1998, accession number 001004402-98-000399.
3 Exhibit incorporated by reference as filed on PEA No. 63 via EDGAR on
July 18, 1997, accession number 0001004402-97-000035.
4 Exhibit incorporated by reference as filed on PEA No. 66 via EDGAR on
February 27, 1998, accession number 0001004402-98-000149.
5 Exhibit incorporated by reference as filed on PEA No. 64 via EDGAR on
September 30, 1997, accession number 0001004402-97-000103.
6 Exhibit incorporated by reference as filed on PEA No. 65 via EDGAR on
June 30, 1997, accession number 0001004402-97-000053
7 Exhibit incorporated herein by reference as filed on PEA No. 62 via
EDGAR on June 30, 1997, accession number 0001004402-97-000030.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
<PAGE>
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<S> <C> <C>
-------------------------------------------------------------------------- -------------------------------
Number of Recordholders
Title of Class (Fund) as of 9/1/98
-------------------------------------------------------------------------- -------------------------------
-------------------------------------------------------------------------- --------------- ---------------
Advisor Investor
-------------------------------------------------------------------------- --------------- ---------------
Schroder U.S. Diversified Growth Fund 0 565
-------------------------------------------------------------------------- --------------- ---------------
Schroder International Fund 1 434
-------------------------------------------------------------------------- --------------- ---------------
Schroder U.S. Smaller Companies Fund 5 591
-------------------------------------------------------------------------- --------------- ---------------
Schroder Emerging Markets Fund Institutional Portfolio 4 22
-------------------------------------------------------------------------- --------------- ---------------
Schroder International Smaller Companies Fund 0 4
-------------------------------------------------------------------------- --------------- ---------------
Schroder Emerging Markets Fund 0 4
-------------------------------------------------------------------------- --------------- ---------------
Schroder Micro Cap Fund N/A 29
-------------------------------------------------------------------------- --------------- ---------------
Schroder International Bond Fund 0 1
-------------------------------------------------------------------------- --------------- ---------------
</TABLE>
ITEM 27. 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);
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
<PAGE>
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 28. 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
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
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
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
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
---------------------------------- ------------------------------------ ----------------------------------
<PAGE>
---------------------------------- ------------------------------------ ----------------------------------
Name Title Business Connections
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
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.*
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Mark J. Smith Senior Vice President, Director SCMI
------------------------------------ ----------------------------------
Senior Vice President, Director Schroder Ltd.*
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Fund Advisors Inc.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Trustee and Officer Certain open end management
investment companies for which
SCMI and/or its affiliates
provide investment services
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
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
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
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
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Michael M. Perelstein Senior Vice President, Director SCMI
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Senior Vice President, Director Schroders Ltd.*
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Managing Director MacKay Shields Financial
Corporation
resigned 11/96
---------------------------------- ------------------------------------ ----------------------------------
<PAGE>
---------------------------------- ------------------------------------ ----------------------------------
Name Title Business Connections
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
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, Director SCMI
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Capital Management Inc.
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
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.
<PAGE>
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.
<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.
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Denis H. Clough Director SIMIL
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Capital Management
International Limited
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
Director Schroder Investment Management
(UK) Limited
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
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
---------------------------------- ------------------------------------ ----------------------------------
<PAGE>
---------------------------------- ------------------------------------ ----------------------------------
Name Title Business Connections
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
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
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
Phillipa J. Gould Director SIMIL
------------------------------------
----------------------------------
Director, Senior Vice President SCMI
------------------------------------ ----------------------------------
----------------------------------
Director Schroder Capital Management
International Limited
------------------------------------ ----------------------------------
----------------------------------
Director Schroder Investment Management
International Inc.
------------------------------------ ----------------------------------
----------------------------------
Director Schroder Investment Management
International (Europe) Limited
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
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
---------------------------------- ------------------------------------ ----------------------------------
<PAGE>
---------------------------------- ------------------------------------ ----------------------------------
Name Title Business Connections
---------------------------------- ------------------------------------ ----------------------------------
--------------------------------- ------------------------------------- ----------------------------------
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
--------------------------------- ------------------------------------- ----------------------------------
--------------------------------- ------------------------------------- ----------------------------------
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
---------------------------------- ------------------------------------ ----------------------------------
<PAGE>
---------------------------------- ------------------------------------ ----------------------------------
Name Title Business Connections
---------------------------------- ------------------------------------ ----------------------------------
---------------------------------- ------------------------------------ ----------------------------------
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.
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.
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Schroder Fund Advisors Inc., the Registrant's principal
underwriter, also serves as principal underwriter for Schroder
Series Trust.
(b) Following is information with respect to each officer and
director of Schroder Fund Advisors, Inc. the Distributor of
the shares of Schroder Emerging Markets Fund Institutional
Portfolio, Schroder International Fund, Schroder Latin
American Fund, Schroder Global Asset Allocation Fund, Schroder
U.S. Smaller Companies Fund, Schroder International Smaller
Companies Fund, Schroder U.S. Diversified Growth Fund,
Schroder Emerging Markets Fund, Schroder European Growth Fund,
<PAGE>
Schroder Asia Fund, Schroder Japan Fund, Schroder United
Kingdom Fund, Schroder Cash Reserves Fund, Schroder
International Bond Fund and Schroder Micro Cap Fund (each, a
series of the Registrant):
Catherine A. Mazza. President, Director.
Mark J. Smith. Director.
Sharon L. Haugh. Chairman and Director.
Fergal Cassidy. Treasurer and Chief Financial Officer.
Alexandra Poe. General Counsel and Senior Vice President.
Jane P. Lucas. Director.
Alan Mandel. Senior Vice President.
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.
<PAGE>
ITEM 30. 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,
Maine 04101 (shareholder records).
ITEM 31. MANAGEMENT SERVICES
None.
ITEM 32. 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 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Amendment to
the Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of New York, and State of New York on the
30th day of September, 1998.
SCHRODER CAPITAL FUNDS (DELAWARE)
By: /s/ Catherine A. Mazza
----------------------------
Catherine A. Mazza
Vice President
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below by the following persons on the
30th day of September, 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 and
Accounting 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/ Thomas G. Sheehan
----------------------------
Thomas G. Sheehan
Attorney-in-Fact
<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 30th day of September, 1998.
SCHRODER CAPITAL FUNDS
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
September, 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 and
Accounting 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
<PAGE>
INDEX TO EXHIBITS
Exhibit
(1) Trust Instrument of Registrant Amended and Restated as of March 13,
1998.
(5)(a) 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.
(5)(i) Investment Subadvisory Agreement between Schroder Capital Funds, SCMI
and Schroder Investment Management International, Ltd. dated as of
September 22, 1998 with respect to Schroder International Smaller
Companies Portfolio
(9)(a) 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
Latin American Fund, Schroder Emerging Markets Fund Institutional
Portfolio, Schroder International Smaller Companies Fund, Schroder
Micro Cap Fund, Schroder Emerging Markets Fund, Schroder Cash Reserves
Fund and Schroder International Bond Fund.
(9)(b) 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 Latin American Fund, Schroder
Emerging Markets Fund Institutional Portfolio, Schroder International
Smaller Companies Fund, Schroder Micro Cap Fund, Schroder Emerging
Markets Fund, Schroder Cash Reserves Fund and Schroder International
Bond Fund.
(11) Consent of Independent Accountants - PricewaterhouseCoopers LLP
(17) Financial Data Schedules.
Other Exhibits
Power of Attorney from Fergal Cassidy.
Power of Attorney from Sharon L. Haugh.
Power of Attorney from David N. Dinkins.
Power of Attorney from Peter S. Knight.
Power of Attorney from Hermann C. Schwab.
Power of Attorney from Mark J. Smith.
Power of Attorney from John I. Howell.
Power of Attorney from Peter E. Guernsey.
Power of Attorney from Clarence F. Michalis.
Exhibit (1)
SCHRODER CAPITAL FUNDS (DELAWARE)
TRUST INSTRUMENT
DATED SEPTEMBER 6, 1995
AS AMENDED SEPTEMBER 17, 1996
AND RESTATED AS OF MARCH 13, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
PAGE
ARTICLE I NAME AND DEFINITIONS
Section 1.01 Name........................................................................1
Section 1.02 Definitions.................................................................1
ARTICLE II BENEFICIAL INTEREST
Section 2.01 Shares of Beneficial Interest...............................................2
Section 2.02 Issuance of Shares..........................................................2
Section 2.03 Register of Shares and Share Certificates...................................2
Section 2.04 Transfer of Shares..........................................................3
Section 2.05 Treasury Shares.............................................................3
Section 2.06 Establishment of Series.....................................................3
Section 2.07 Investment in the Trust.....................................................4
Section 2.08 Assets and Liabilities of Series............................................4
Section 2.09 No Preemptive Rights........................................................5
Section 2.10 No Personal Liability of Shareholders.......................................5
Section 2.11 Assent to Trust Instrument..................................................5
ARTICLE III THE TRUSTEES
Section 3.01 Management of the Trust.....................................................5
Section 3.02 Initial Trustees............................................................6
Section 3.03 Term of Office..............................................................6
Section 3.04 Vacancies and Appointments..................................................6
Section 3.05 Temporary Absence...........................................................6
Section 3.06 Number of Trustees..........................................................6
Section 3.07 Effect of Ending of a Trustee's Service.....................................6
Section 3.08 Ownership of Assets of the Trust............................................7
ARTICLE IV POWERS OF THE TRUSTEES
Section 4.01 Powers......................................................................7
Section 4.02 Issuance and Repurchase of Shares...........................................9
Section 4.03 Trustees and Officers as Shareholders.......................................9
Section 4.04 Action by the Trustees.....................................................10
Section 4.05 Chairman of the Trustees...................................................10
Section 4.06 Principal Transactions.....................................................10
ARTICLE V EXPENSES OF THE TRUST...............................................................................10
<PAGE>
ARTICLE VI INVESTMENT ADVISER, PRINCIPAL UNDERWRITER,
ADMINISTRATOR AND TRANSFER AGENT
Section 6.01 Investment Adviser.........................................................11
Section 6.02 Principal Underwriter......................................................11
Section 6.03 Administrator..............................................................12
Section 6.04 Transfer Agent.............................................................12
Section 6.05 Parties to Contract........................................................12
Section 6.06 Provisions and Amendments..................................................12
ARTICLE VII SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 7.01 Voting Powers..............................................................12
Section 7.02 Meetings...................................................................13
Section 7.03 Quorum and Required Vote...................................................13
ARTICLE VIII CUSTODIAN
Section 8.01 Appointment and Duties.....................................................14
Section 8.02 Central Certificate System.................................................14
ARTICLE IX DISTRIBUTIONS AND REDEMPTIONS
Section 9.01 Distributions..............................................................14
Section 9.02 Redemptions................................................................15
Section 9.03 Determination of Net Asset Value
and Valuation of Portfolio Assets..........................................15
Section 9.04 Suspension of the Right of Redemption......................................16
Section 9.05 Redemption of Shares in Order to
Qualify as Regulated Investment Company....................................16
ARTICLE X LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 10.01 Limitation of Liability....................................................16
Section 10.02 Indemnification............................................................16
Section 10.03 Shareholders...............................................................17
ARTICLE XI MISCELLANEOUS
Section 11.01 Trust Not a Partnership....................................................18
Section 11.02 Trustee's Good Faith Action, Expert Advice, No Bond or Surety..............18
Section 11.03 Establishment of Record Dates..............................................18
Section 11.04 Termination of Trust.......................................................19
Section 11.05 Reorganization.............................................................19
Section 11.06 Filing of Copies, References, Headings.....................................20
Section 11.07 Applicable Law.............................................................20
Section 11.08 Amendments.................................................................20
Section 11.09 Fiscal Year................................................................21
Section 11.10 Provisions in Conflict With Law............................................21
APPENDIX A Established Series........................................................A-1
</TABLE>
<PAGE>
SCHRODER CAPITAL FUNDS (DELAWARE)
This TRUST INSTRUMENT of SCHRODER CAPITAL FUNDS (DELAWARE) is restated
and executed as of the 13th day of March 1998 by the parties signatory hereto,
as Trustees.
WHEREAS, the Trustees desire to establish a business trust for the
investment and reinvestment of funds contributed thereto;
NOW THEREFORE, the Trustees declare that all money and property
contributed to the trust hereunder shall be held and managed in trust under this
Trust Instrument as herein set forth below.
ARTICLE I
NAME AND DEFINITIONS
SECTION 1.01 NAME. The name of the trust created hereby is "Schroder
Capital Funds (Delaware)."
SECTION 1.02 DEFINITIONS. Wherever used herein, unless otherwise required
by the context or specifically provided:
(a) The "1940 Act" means the Investment Company Act of 1940, as amended
from time to time.
(b) "Bylaws" means the Bylaws of the trust as adopted by the Trustees,
as amended from time to time;
(c) "Commission" has the meaning given it in the 1940 Act. "Affiliated
Person", "Assignment," "Interested Person" and "Principal Underwriter" shall
have the respective meanings given them in the 1940 Act, as modified by or
interpreted by any applicable order or orders of the Commission or any rules or
regulations adopted by or interpretive releases of the Commission thereunder.
"Majority Shareholder Vote" shall have the same meaning as the term "vote of a
majority of the outstanding voting securities" is given in the 1940 Act, as
modified by or interpreted by any applicable order or orders of the Commission
or any rules or regulations adopted by or interpretive releases of the
Commission thereunder.
(d) "Delaware Act" refers to Chapter 38 of Title 12 of the Delaware Code
entitled "Treatment of Delaware Business Trusts," as amended from time to time.
(e) "Net Asset Value" means the net asset value of each Series of the Trust
determined in the manner provided in Article IX, Section 9.03 hereof;
(f) "Outstanding Shares" means those Shares shown from time to time in
the books of the Trust or its transfer agent as then issued and outstanding, but
shall not include Shares which have been redeemed or repurchased by the Trust
and which are at the time held in the treasury of the Trust;
(g) "Series" means a series of Shares of the Trust established in
accordance with the provisions of Article II, Section 2.06 hereof.
<PAGE>
(h) "Shareholder" means a record owner of Outstanding Shares of the Trust;
(i) "Shares" means the equal proportionate transferable units of beneficial
interest into which the beneficial interest of each Series of the Trust or class
thereof shall be divided and may include fractions of Shares as well as whole
Shares;
(j) The "Trust" means Learning AssetsTM and reference to the Trust, when
applicable to one or more Series of the Trust, shall refer to any such Series;
(k) The "Trustees" means the person or persons who has or have signed
this Trust Instrument, so long as he or they shall continue in office in
accordance with the terms hereof, and all other persons who may from time to
time be duly qualified and serving as Trustees in accordance with the provisions
of Article III hereof and reference herein to a Trustee or to the Trustees shall
refer to the individual Trustees in their capacity as Trustees hereunder;
(l) "Trust Property" means any and all property, real or personal, tangible
or intangible, which is owned or held by or for the account of one or more of
the Trust or any Series, or the Trustees on behalf of the Trust or any Series.
ARTICLE II
BENEFICIAL INTEREST
SECTION 2.01 SHARES OF BENEFICIAL INTEREST. The beneficial interest in
the Trust shall be divided into such transferable Shares of one or more separate
and distinct Series or classes of a Series as the Trustees shall from time to
time create and establish. The number of Shares of each Series, and class
thereof, authorized hereunder is unlimited. Each Share shall have no par value.
All Shares issued hereunder, including without limitation, Shares issued in
connection with a dividend in Shares or a split or reverse split of Shares,
shall be fully paid and nonassessable.
SECTION 2.02 ISSUANCE OF SHARES. The Trustees in their discretion may,
from time to time, without vote of the Shareholders, issue Shares, in addition
to the then issued and outstanding Shares and Shares held in the treasury, to
such party or parties and for such amount and type of consideration, subject to
applicable law, including cash or securities, at such time or times and on such
terms as the Trustees may deem appropriate, and may in such manner acquire other
assets (including the acquisition of assets subject to, and in connection with,
the assumption of liabilities) and businesses. In connection with any issuance
of Shares, the Trustees may issue fractional Shares and Shares held in the
treasury. The Trustees may from time to time divide or combine the Shares into a
greater or lesser number without thereby changing the proportionate beneficial
interests in the Trust. Contributions to the Trust may be accepted for, and
Shares shall be redeemed as, whole Shares and/or 1/1,000th of a Share or
integral multiples thereof.
SECTION 2.03 REGISTER OF SHARES AND SHARE CERTIFICATES. A register
shall be kept at the principal office of the Trust or an office of the Trust's
transfer agent which shall contain the names and addresses of the Shareholders
of each Series, the number of Shares of that Series (or any class or classes
thereof) held by them respectively and a record of all transfers thereof. As to
Shares for which no certificate has been issued, such register shall be entitled
to receive dividends or other distributions or otherwise to exercise or enjoy
the rights of Shareholders. No Shareholder shall be entitled to receive payment
of any dividend or other distribution, nor to have notice given to him as herein
or in the Bylaws
<PAGE>
provided, until he has given his address to the transfer agent or such officer
or other agent of the Trustees as shall keep the said register for entry
thereon. No share certificates shall be issued by the Trust except to the extent
authorized by the Board of Trustees.
SECTION 2.04 TRANSFER OF SHARES. Except as otherwise provided by the
Trustees, Shares shall be transferable on the records of the Trust only by the
record holder thereof or by his agent thereunto duly authorized in writing, upon
delivery to the Trustees or the Trust's transfer agent of a duly executed
instrument of transfer and such evidence of the genuineness of such execution
and authorization and of such other matters as may be required by the Trustees.
Upon such delivery the transfer shall be recorded on the register of the Trust.
Until such record is made, the Shareholder of record shall be deemed to be the
holder of such Shares for all purposes hereunder and neither the Trustees nor
the Trust, nor any transfer agent or registrar nor any officer, employee or
agent of the Trust shall be affected by any notice of the proposed transfer.
SECTION 2.05 TREASURY SHARES. Shares held in the treasury shall, until
reissued pursuant to Section 2.02 hereof, not confer any voting rights on the
Trustees, nor shall such Shares be entitled to any dividends or other
distributions declared with respect to the Shares.
SECTION 2.06 ESTABLISHMENT OF SERIES. The Trust created hereby shall
consist of one or more Series and separate and distinct records shall be
maintained by the Trust for each Series and the assets associated with any such
Series shall be held and accounted for separately from the assets of the Trust
or any other Series. The Trustees shall have full power and authority, in their
sole discretion, and without obtaining any prior authorization or vote of the
Shareholders of any Series of the Trust, to establish and designate and to
change in any manner any such Series of Shares or any classes of initial or
additional Series and to fix such preferences, voting powers, rights and
privileges of such Series or classes thereof as the Trustees may from time to
time determine, to divide or combine the Shares or any Series or classes thereof
into a greater or lesser number, to classify or reclassify any issued Shares or
any Series or classes thereof into one or more Series or classes of Shares, and
to take such other action with respect to the Shares as the Trustees may deem
desirable. The establishment and designation of any Series shall be effective
upon the adoption of a resolution by a majority of the Trustees setting forth
such establishment and designation and the relative rights and preferences of
the Shares of such Series. A Series may issue any number of Shares and need not
issue shares. At any time that there are no Shares outstanding of any particular
Series previously established and designated, the Trustees may by a majority
vote abolish that Series and the establishment and designation thereof.
All references to Shares in this Trust Instrument shall be deemed to be
Shares of any or all Series, or classes thereof, as the context may require. All
provisions herein relating to the Trust shall apply equally to each Series of
the Trust, and each class thereof, except as the context otherwise requires.
Each Share of a Series of the Trust shall represent an equal beneficial
interest in the net assets of such Series. Each holder of Shares of a Series
shall be entitled to receive his pro rata share of all distributions made with
respect to such Series. Upon redemption of his Shares, such Shareholder shall be
paid solely out of the funds and property of such Series of the Trust.
<PAGE>
SECTION 2.07 INVESTMENT IN THE TRUST. The Trustees shall accept
investments in any Series of the Trust from such persons and on such terms as
they may from time to time authorize. At the Trustees' discretion, such
investments, subject to applicable law, may be in the form of cash or securities
in which the affected Series is authorized to invest, valued as provided in
Article IX, Section 9.03 hereof. Investments in a Series shall be credited to
each Shareholder's account in the form of full Shares at the Net Asset Value per
Share next determined after the investment is received or accepted as may be
determined by the Trustees; provided, however, that the Trustees may, in their
sole discretion, (a) fix the Net Asset Value per Share of the initial capital
contribution, (b) impose a sales charge upon investments in the Trust in such
manner and at such time determined by the Trustees or (c) issue fractional
Shares.
SECTION 2.08 ASSETS AND LIABILITIES OF SERIES. All consideration
received by the Trust for the issue or sale of Shares of a particular Series,
together with all assets in which such consideration is invested or reinvested,
all income, earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds in whatever form the
same may be, shall be held and accounted for separately from the other assets of
the Trust and of every other Series and may be referred to herein as "assets
belonging to" that Series. The assets belonging to a particular Series shall
belong to that Series for all purposes, and to no other Series, subject only to
the rights of creditors of that Series. In addition, any assets, income,
earnings, profits or funds, or payments and proceeds with respect thereto, which
are not readily identifiable as belonging to any particular Series shall be
allocated by the Trustees between and among one or more of the Series in such
manner as the Trustees, in their sole discretion, deem fair and equitable. Each
such allocation shall be conclusive and binding upon the Shareholders of all
Series for all purposes, and such assets, income, earnings, profits or funds, or
payments and proceeds with respect thereto shall be assets belonging to that
Series. The assets belonging to a particular Series shall be so recorded upon
the books of the Trust, and shall be held by the Trustees in trust for the
benefit of the holders of Shares of that Series. The assets belonging to each
particular Series shall be charged with the liabilities of that Series and all
expenses, costs, charges and reserves attributable to that Series. Any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular Series shall be allocated
and charged by the Trustees between or among any one or more of the Series in
such manner as the Trustees in their sole discretion deem fair and equitable.
Each such allocation shall be conclusive and binding upon the Shareholders of
all Series for all purposes. Without limitation of the foregoing provisions of
this Section 2.08, but subject to the right of the Trustees in their discretion
to allocate general liabilities, expenses, costs, changes or reserves as herein
provided, the debts, liabilities, obligations and expenses incurred, contracted
for or otherwise existing with respect to a particular Series shall be
enforceable against the assets of such Series only, and not against the assets
of the Trust generally. Notice of this contractual limitation on inter-Series
liabilities may, in the Trustee's sole discretion, be set forth in the
certificate of trust of the Trust (whether originally or by amendment) as filed
or to be filed in the Office of the Secretary of State of the State of Delaware
pursuant to the Delaware Act, and upon the giving of such notice in the
certificate of trust, the statutory provisions of Section 3804 of the Delaware
Act relating to limitations on inter-Series liabilities (and the statutory
effect under Section 3804 of setting forth such notice in the certificate of
trust) shall become applicable to the Trust and each Series. Any person
extending credit to, contracting with or having any claim against any Series may
look only to the assets of that Series to satisfy or enforce any debt, with
respect to that Series. No Shareholder or former Shareholder of any Series shall
have a claim on or any right to any assets allocated or belonging to any other
Series.
SECTION 2.09 NO PREEMPTIVE RIGHTS. Shareholders shall have no preemptive or
other right to subscribe to any additional Shares or other securities issued by
the Trust or the Trustees, whether of the same or other Series.
<PAGE>
SECTION 2.10 NO PERSONAL LIABILITY OF SHAREHOLDERS. Each Shareholder of
the Trust and of each Series shall not be personally liable for the debts,
liabilities, obligation and expenses incurred by, contracted for, or otherwise
existing with respect to, the Trust or by or on behalf of any Series. The
Trustees shall have no power to bind any Shareholder personally or to call upon
any Shareholder for the payment of any sum of money or assessment whatsoever
other than such as the Shareholder may at any time personally agree to pay by
way of subscription for any Shares or otherwise. Every note, bond, contract or
other undertaking issued by or on behalf of the Trust or the Trustees relating
to the Trust or to a Series shall include a recitation limiting the obligation
represented thereby to the Trust or to one or more Series and its or their
assets (but the omission of such a recitation shall not operate to bind any
Shareholder or Trustee of the Trust).
SECTION 2.11 ASSENT TO TRUST INSTRUMENT. Every Shareholder, by virtue of
having purchased a Share shall become a Shareholder and shall be held to have
expressly assented and agreed to be bound by the terms hereof.
ARTICLE III
THE TRUSTEES
SECTION 3.01 MANAGEMENT OF THE TRUST. The Trustees shall have exclusive
and absolute control over the Trust Property and over the business of the Trust
to the same extent as if the Trustees were the sole owners of the Trust Property
and business in their own right, but with such powers of delegation as may be
permitted by this Trust Instrument. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without the State of Delaware, in any and
all states of the United States of America, in the District of Columbia, in any
and all commonwealths, territories, dependencies, colonies, or possessions of
the United States of America, and in any foreign jurisdiction and to do all such
other things and execute all such instruments as they deem necessary, proper or
desirable in order to promote the interests of the Trust although such things
are not herein specifically mentioned. Any determination as to what is in the
interests of the Trust made by the Trustees in good faith shall be conclusive.
In construing the provisions of this Trust Instrument, the presumption shall be
in favor of a grant of power to the Trustees.
The enumeration of any specific power in this Trust Instrument shall not be
construed as limiting the aforesaid power. The powers of the Trustees may be
exercised without order of or resort to any court.
Except for the Trustees named herein or appointed to fill vacancies
pursuant to Section 3.04 of this Article III, the Trustees shall be elected by
the Shareholders owning of record a plurality of the Shares voting at a meeting
of Shareholders. Such a meeting shall be held on a date fixed by the Trustees.
In the event that less than a majority of the Trustees holding office have been
elected by Shareholders, the Trustees then in office will call a Shareholders'
meeting for the election of Trustees.
SECTION 3.02 INITIAL TRUSTEES. The initial Trustees shall be the persons
named herein. On a date fixed by the Trustees, the Shareholders shall elect at
least three (3) but not more than twelve (12) Trustees, as specified by the
Trustees pursuant to Section 3.06 of this Article III.
SECTION 3.03 TERM OF OFFICE. The Trustees shall hold office during the
lifetime of this Trust, and until its termination as herein provided; except (a)
that any Trustee may resign his trust by written
<PAGE>
instrument signed by him and delivered to the other Trustees, which shall take
effect upon such delivery or upon such later date as is specified therein; (b)
that any Trustee may be removed at any time by written instrument, signed by at
least two-thirds of the number of Trustees prior to such removal, specifying the
date when such removal shall become effective; (c) that any Trustee who requests
in writing to be retired or who has died, become physically or mentally
incapacitated by reason of disease or otherwise, or is otherwise unable to
serve, may be retired by written instrument signed by a majority of the other
Trustees, specifying the date of his retirement; and (d) that a Trustee may be
removed at any meeting of the Shareholders of the Trust by a vote of
Shareholders owning at least two-thirds of the Outstanding Shares.
SECTION 3.04 VACANCIES AND APPOINTMENTS. In case of the declination to
serve, death, resignation, retirement, removal, physical or mental incapacity by
reason of disease or otherwise, or a Trustee is otherwise unable to serve, or an
increase in the number of Trustees, a vacancy shall occur. Whenever a vacancy in
the Board of Trustees shall occur, until such vacancy is filled, the other
Trustees shall have all the powers hereunder and the certificate of the other
Trustees of such vacancy shall be conclusive. In the case of an existing
vacancy, the remaining Trustees shall fill such vacancy by appointing such other
person as they in their discretion shall see fit consistent with the limitations
under the 1940 Act. Such appointment shall be evidenced by a written instrument
signed by a majority of the Trustees in office or by resolution of the Trustees,
duly adopted, which shall be recorded in the minutes of a meeting of the
Trustees, whereupon the appointment shall take effect.
An appointment of a Trustee may be made by the Trustees then in office
in anticipation of a vacancy to occur by reason of retirement, resignation or
increase in number of Trustees effective at a later date, provided that said
appointment shall become effective only at or after the effective date of said
retirement, resignation or increase in number of Trustees. As soon as any
Trustee appointed pursuant to this Section 3.04 shall have accepted this trust,
the trust estate shall vest in the new Trustee or Trustees, together with the
continuing Trustees, without any further act or conveyance, and he shall be
deemed a Trustee hereunder.
SECTION 3.05 TEMPORARY ABSENCE. Any Trustee may, by power of attorney,
delegate his power for a period not exceeding six months at any time to any
other Trustee or Trustees, provided that in no case shall less than two Trustees
personally exercise the other powers hereunder except as herein otherwise
expressly provided.
SECTION 3.06 NUMBER OF TRUSTEES. The number of Trustees shall be at least
three (3), and thereafter shall be such number as shall be fixed from time to
time by a majority of the Trustees, provided, however, that the number of
Trustees shall in no event be more than twelve (12).
SECTION 3.07 EFFECT OF ENDING OF A TRUSTEE'S SERVICE. The declination
to serve, death, resignation, retirement, removal, incapacity, or inability of
the Trustees, or any one of them, shall not operate to terminate the trust or to
revoke any existing agency created pursuant to the terms of this Trust
Instrument.
SECTION 3.08 OWNERSHIP OF ASSETS OF THE TRUST. The assets of the Trust
and of each Series shall be held separate and apart from any assets now or
hereafter held in any capacity other than as Trustee hereunder by the Trustees
or any successor Trustees. Legal title in all of the assets of the Trust and the
right to conduct any business shall at all times be considered as vested in the
Trustees on behalf of the Trust, except that the Trustees may cause legal title
to any Trust Property to be held by, or in the name of the Trust, or in the name
of any person as nominee. No Shareholder shall be deemed to have a
<PAGE>
severable ownership in any individual asset of the Trust or of any Series or any
right of partition or possession thereof, but each Shareholder shall have,
except as otherwise provided for herein, a proportionate undivided beneficial
interest in the Trust or Series. The Shares shall be personal property giving
only the rights specifically set forth in this Trust Instrument.
ARTICLE IV
POWERS OF THE TRUSTEES
SECTION 4.01 POWERS. The Trustees in all instances shall act as
principals, and are and shall be free from the control of the Shareholders. The
Trustees shall have full power and authority to do any and all acts and to make
and execute any and all contracts and instruments that they may consider
necessary or appropriate in connection with the management of the Trust. The
Trustees shall not in any way be bound or limited by present or future laws or
customs in regard to trust investments, but shall have full authority and power
to make any and all investments which they, in their sole discretion, shall deem
proper to accomplish the purpose of this Trust without recourse to any court or
other authority. Subject to any applicable limitation in this Trust Instrument
or the Bylaws of the Trust, the Trustees shall have the power and authority:
(a) To invest and reinvest cash and other property, and to hold cash or
other property uninvested, without in any event being bound or limited by any
present or future law or custom in regard to investments by trustees, and to
sell, exchange, lend, pledge, mortgage, hypothecate, write options on and lease
any or all of the assets of the Trust:
(b) To operate as and carry on the business of an investment company, and
exercise all the powers necessary and appropriate to the conduct of such
operations;
(c) To borrow money and in this connection issue notes or other
evidence of indebtedness; to secure borrowings by mortgaging, pledging or
otherwise subjecting as security the Trust Property; to endorse, guarantee, or
undertake the performance of an obligation or engagement of any other Person and
to lend Trust Property;
(d) To provide for the distribution of interests of the Trust either
through a principal underwriter in the manner hereinafter provided for or by the
Trust itself, or both, or otherwise pursuant to a plan of distribution of any
kind;
(e) To adopt Bylaws not inconsistent with this Trust Instrument
providing for the conduct of the business of the Trust and to amend and repeal
them to the extent that they do not reserve that right to the Shareholders; such
Bylaws shall be deemed incorporated and included in this Trust Instrument;
(f) To elect and remove such officers and appoint and terminate such agents
as they consider appropriate;
(g) To employ one or more banks, trust companies or companies that are
members of a national securities exchange or such other entities as the
Commission may permit as custodians of any assets of the Trust subject to any
conditions set forth in this Trust Instrument or in the Bylaws;
(h) To retain one or more transfer agents and shareholder servicing agents,
or both;
(i) To set record dates in the manner provided herein or in the Bylaws;
<PAGE>
(j) To delegate such authority as they consider desirable to any officers
of the Trust and to any investment adviser, manager, custodian, underwriter or
other agent or independent contractor;
(k) To sell or exchange any or all of the assets of the Trust, subject to
the provisions of Article XI, subsection 11.04(b) hereof;
(l) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
powers of attorney to such person or persons as the Trustees shall deem proper,
granting to such person or persons such power and discretion with relation to
securities or property as the Trustees shall deem proper;
(m) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities;
(n) To hold any security or property in a form not indicating any
trust, whether in bearer, book entry, unregistered or other negotiable form; or
either in the name of the Trust or in the name of a custodian or a nominee or
nominees, subject in either case to proper safeguards according to the usual
practice of Delaware business trusts or investment companies;
(o) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes in
accordance with the provisions of Article II hereof and to establish classes of
such Series having relative rights, powers and duties as they may provide
consistent with applicable law;
(p) Subject to the provisions of Section 3804 of the Delaware Act, to
allocate assets, liabilities and expenses of the Trust to a particular Series or
to apportion the same between or among two or more Series, provided that any
liabilities or expenses incurred by a particular Series shall be payable solely
out of the assets belonging to that Series as provided for in Article II hereof;
(q) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of which is
held in the Trust; to consent to any contract, lease, mortgage, purchase, or
sale of property by such corporation or concern, and to pay calls or
subscriptions with respect to any security held in the Trust;
(r) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust or any matter in controversy including, but not limited to,
claims for taxes;
(s) To make distributions of income and of capital gains to
Shareholders in the manner provided herein;
(t) To establish, from time to time, a minimum investment for Shareholders
in the Trust or in one or more Series or class, and to require the redemption of
the Shares of any Shareholders whose investment is less than such minimum upon
giving notice to such Shareholder;
(u) To establish one or more committees, to delegate any of the powers
of the Trustees to said committees and to adopt a committee charter providing
for such responsibilities, membership (including Trustees, officers or other
agents of the Trust therein) and any other characteristics of said committees as
the Trustees may deem proper. Notwithstanding the provisions of this Article IV,
<PAGE>
and in addition to such provisions or any other provision of this Trust
Instrument or of the Bylaws, the Trustees may by resolution appoint a committee
consisting of less than the whole number of Trustees then in office, which
committee may be empowered to act for and bind the Trustees and the Trust, as if
the acts of such committee were the acts of all the Trustees then in office,
with respect to the institution, prosecution, dismissal, settlement, review or
investigation of any action, suit or proceeding which shall be pending or
threatened to be brought before any court, administrative agency or other
adjudicatory body;
(v) To interpret the investment policies, practices or limitations of any
Series;
(w) To establish a registered office and have a registered agent in the
state of Delaware; and
(x) In general to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary, suitable
or proper for the accomplishment of any purpose or the attainment of any object
or the furtherance of any power hereinbefore set forth, either alone or in
association with others, and to do every other act or thing incidental or
appurtenant to or growing out of or connected with the aforesaid business or
purposes, objects or powers.
The foregoing clauses shall be construed as objects and powers, and the
foregoing enumeration of specific powers shall not be held to limit or restrict
in any manner the general powers of the Trustees. Any action by one or more of
the Trustees in their capacity as such hereunder shall be deemed an action on
behalf of the Trust or the applicable Series, and not an action in an individual
capacity.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust.
No one dealing with the Trustees shall be under any obligation to make any
inquiry concerning the authority of the Trustees, or to see the application of
any payments made or property transferred to the Trustees or upon their order.
SECTION 4.02 ISSUANCE AND REPURCHASE OF SHARES. The Trustees shall have
the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, and otherwise deal in Shares and, subject to the
provisions set forth in Article II and Article IX, to apply to any such
repurchase, redemption, retirement, cancellation or acquisition of Shares any
funds or property of the Trust, or the particular Series of the Trust, with
respect to which such Shares are issued.
SECTION 4.03 TRUSTEES AND OFFICERS AS SHAREHOLDERS. Any Trustee,
officer or other agent of the Trust may acquire, own and dispose of Shares to
the same extent as if he were not a Trustee, officer or agent; and the Trustees
may issue and sell or cause to be issued and sold Shares to and buy such Shares
from any such person or any firm or company in which he is interested, subject
only to the general limitations herein contained as to the sale and purchase of
such Shares; and all subject to any restrictions which may be contained in the
Bylaws.
SECTION 4.04 ACTION BY THE TRUSTEES. The Trustees shall act by majority
vote at a meeting duly called or by unanimous written consent without a meeting
or by telephone meeting provided a quorum of Trustees participate in any such
telephone meeting, unless the 1940 Act requires that a particular action be
taken only at a meeting at which the Trustees are present in person. At any
meeting of the Trustees, a majority of the Trustees shall constitute a quorum.
Meetings of the Trustees may be called orally or in writing by the Chairman of
the Board of Trustees or by any two other Trustees. Notice of the time, date and
<PAGE>
place of all meetings of the Trustees shall be given by the party calling the
meeting to each Trustee by telephone, facsimile or other electronic mechanism
sent to his home or business address at least twenty-four hours in advance of
the meeting or by written notice mailed to his home or business address at least
seventy-two hours in advance of the meeting. Notice need not be given to any
Trustee who attends the meeting without objecting to the lack of notice or who
executes a written waiver of notice with respect to the meeting. Any meeting
conducted by telephone shall be deemed to take place at the principal office of
the Trust, as determined by the Bylaws or by the Trustees. Subject to the
requirements of the 1940 Act, the Trustees by majority vote may delegate to any
one or more of their number their authority to approve particular matters or
take particular actions on behalf of the Trust. Written consents or waivers of
the Trustees may be executed in one or more counterparts. Execution of a written
consent or waiver and delivery thereof to the Trust may be accomplished by
facsimile or other similar electronic mechanism.
SECTION 4.05 CHAIRMAN OF THE TRUSTEES. The Trustees shall appoint one
of their number to be Chairman of the Board of Trustees. The Chairman shall
preside at all meetings of the Trustees, shall be responsible for the execution
of policies established by the Trustees and the administration of the Trust, and
may be (but is not required to be) the chief executive, financial and/or
accounting officer of the Trust.
SECTION 4.06 PRINCIPAL TRANSACTIONS. Except to the extent prohibited by
applicable law, the Trustees may, on behalf of the Trust, buy any securities
from or sell any securities to, or lend any assets of the Trust to, any Trustee
or officer of the Trust or any firm of which any such Trustee or officer is a
member acting as principal, or have any such dealings with any investment
adviser, administrator, distributor or transfer agent for the Trust or with any
Interested Person of such person; and the Trust may employ any such person, or
firm or company in which such person is an Interested Person, as broker, legal
counsel, registrar, investment adviser, administrator, distributor, transfer
agent, dividend disbursing agent, custodian or in any other capacity upon
customary terms.
ARTICLE V
EXPENSES OF THE TRUST
Subject to the provisions of Article II, Section 2.08 hereof, the
Trustees shall be reimbursed from the Trust estate or the assets belonging to
the appropriate Series for their expenses and disbursements, including, without
limitation, interest charges, taxes, brokerage fees and commissions; expenses of
issue, repurchase and redemption of shares; certain insurance premiums;
applicable fees, interest charges and expenses of third parties, including the
Trust's investment advisers, managers, administrators, distributors, custodian,
transfer agent and fund accountant; fees of pricing, interest, dividend, credit
and other reporting services; costs of membership in trade associations;
telecommunications expenses; funds transmission expenses; auditing, legal and
compliance expenses; costs of forming the Trust and maintaining corporate
existence; costs of preparing and printing the Trust's prospectuses, statements
of additional information and shareholder reports and delivering them to
existing shareholders; expenses of meetings of shareholders and proxy
solicitations therefore; costs of maintaining books and accounts; costs of
reproduction, stationery and supplies; fees and expenses of the Trust's
trustees; compensation of the Trust's officers and employees and costs of other
personnel performing services for the Trust; costs of Trustee meetings;
Securities and Exchange Commission registration fees and related expenses; state
or foreign securities laws registration fees and related expenses and for such
non-recurring items as may arise, including litigation to which the Trust (or a
Trustee acting as such) is a party, and for all losses and liabilities by them
incurred in administering the Trust, and for the payment of such expenses,
disbursements, losses and liabilities the Trustees shall have a lien on the
assets belonging to the
<PAGE>
appropriate Series, or in the case of an expense allocable to more than one
Series, on the assets of each such Series, prior to any rights or interests of
the Shareholders thereto. This section shall not preclude the Trust from
directly paying any of the aforementioned fees and expenses.
ARTICLE VI
INVESTMENT ADVISER, PRINCIPAL UNDERWRITER,
ADMINISTRATOR AND TRANSFER AGENT
SECTION 6.01 INVESTMENT ADVISER. The Trustees may in their discretion,
from time to time, enter into an investment advisory contract or contracts with
respect to the Trust or any Series whereby the other party or parties to such
contract or contracts shall undertake to furnish the Trustees with such
investment advisory, statistical and research facilities and services and such
other facilities and services, if any, all upon such terms and conditions as may
be prescribed in the Bylaws or as the Trustees may in their discretion determine
(such terms and conditions not to be inconsistent with the provisions of this
Trust Instrument or of the Bylaws). Notwithstanding any other provision of this
Trust Instrument, the Trustees may authorize any investment adviser (subject to
such general or specific instructions as the Trustees may from time to time
adopt) to effect purchases, sales or exchanges of portfolio securities, other
investment instruments of the Trust, or other Trust Property on behalf of the
Trustees, or may authorize any officer, agent, or Trustee to effect such
purchases, sales or exchanges pursuant to recommendations of the investment
adviser (and all without further action by the Trustees).
Any such purchases, sales and exchanges shall be deemed to have been authorized
by all of the Trustees.
The Trustees may authorize the investment adviser to employ, from time
to time, one or more sub-advisers to perform such of the acts and services of
the investment adviser, and upon such terms and conditions, as may be agreed
upon between the investment adviser and sub-adviser (such terms and conditions
not to be inconsistent with the provisions of this Trust Instrument or of the
Bylaws). Any reference in this Trust Instrument to the investment adviser shall
be deemed to include such sub-advisers, unless the context otherwise requires.
SECTION 6.02 PRINCIPAL UNDERWRITER. The Trustees may in their
discretion from time to time enter into an exclusive or non-exclusive
underwriting contract or contracts providing for the sale of Shares, whereby the
Trust may either agree to sell Shares to the other party to the contract or
appoint such other party its sales agent for such Shares. In either case, the
contract shall be on such terms and conditions as may be prescribed in the
Bylaws and as the Trustees may in their discretion determine (such terms and
conditions not to be inconsistent with the provisions of this Trust Instrument
or of the Bylaws); and such contract may also provide for the repurchase or sale
of Shares by such other party as principal or as agent of the Trust.
SECTION 6.03 ADMINISTRATOR. The Trustees may in their discretion from
time to time enter into one or more management or administrative contracts
whereby the other party or parties shall undertake to furnish the Trustees with
management or administrative services. The contract or contracts shall be on
such terms and conditions as may be prescribed in the Bylaws and as the Trustees
may in their discretion determine (such terms and conditions not to be
inconsistent with the provisions of this Trust Instrument or of the Bylaws).
SECTION 6.04 TRANSFER AGENT. The Trustees may in their discretion from
time to time enter into one or more transfer agency and Shareholder service
contracts whereby the other party or parties shall undertake to furnish the
Trustees with transfer agency and Shareholder services. The contract or
contracts shall be on such terms and conditions as may be prescribed in the
Bylaws and as the Trustees
<PAGE>
may in their discretion determine (such terms and conditions not to be
inconsistent with the provisions of this Trust Instrument or of the Bylaws).
SECTION 6.05 PARTIES TO CONTRACT. Any contract of the character
described in Sections 6.01, 6.02, 6.03 and 6.04 of this Article VI or any
contract of the character described in Article VIII hereof may be entered into
with any corporation, firm, partnership, trust or association, although one or
more of the Trustees or officers of the Trust may be an officer, director,
trustee, shareholder, or member of such other party to the contract, and no such
contract shall be invalidated or rendered void or voidable by reason of the
existence of any relationship, nor shall any person holding such relationship be
disqualified from voting on or executing the same in his capacity as Shareholder
and/or Trustee, nor shall any person holding such relationship be liable merely
by reason of such relationship for any loss or expense to the Trust under or by
reason of said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was not
inconsistent with the provisions of this Article VI or Article VIII hereof or of
the Bylaws. The same person (including a firm, corporation, partnership, trust,
or association) may be the other party to contracts entered into pursuant to
Sections 6.01, 6.02, 6.03 and 6.04 of this Article VI or pursuant to Article
VIII hereof, and any individual may be financially interested or otherwise
affiliated with persons who are parties to any or all of the contracts mentioned
in this Section 6.05.
SECTION 6.06 PROVISIONS AND AMENDMENTS. Any contract entered into
pursuant to Sections 6.01 or 6.02 of this Article VI shall be consistent with
and subject to the requirements of Section 15 of the 1940 Act, if applicable, or
other applicable Act of Congress hereafter enacted with respect to its
continuance in effect, its termination, and the method of authorization and
approval of such contract or renewal thereof, and no amendment to any contract
entered into pursuant to Section 6.01 of this Article VI shall be effective
unless assented to in a manner consistent with the requirements of said Section
15, as modified by any applicable rule, regulation or order of the Commission.
ARTICLE VII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
SECTION 7.01 VOTING POWERS. The Shareholders shall have power to vote
only (a) for the election of Trustees as provided in Article III, Sections 3.01
and 3.02 hereof, (b) for the removal of Trustees as provided in Article III,
Section 3.03(d) hereof, (c) with respect to any investment advisory contract as
provided in Article VI, Sections 6.01 and 6.06 hereof, and (d) with respect to
such additional matters relating to the Trust as may be required by law, by this
Trust Instrument, or the Bylaws or any registration of the Trust with the
Commission or any State, or as the Trustees may consider desirable.
On any matter submitted to a vote of the Shareholders, all Shares shall
be voted separately by individual Series, except (i) when required by the 1940
Act, Shares shall be voted in the aggregate and not by individual Series; and
(ii) when the Trustees have determined that the matter affects the interests of
more than one Series, then the Shareholders of all such Series shall be entitled
to vote thereon. The Trustees may also determine that a matter affects only the
interests of one or more classes of a Series, in which case any such matter
shall be voted on by such class or classes. Each whole Share shall be entitled
to one vote as to any matter on which it is entitled to vote, and each
fractional Share shall be entitled to a proportionate fractional vote. There
shall be no cumulative voting in the election of Trustees. Shares may be voted
in person or by proxy or in any manner provided for in the Bylaws. A proxy may
be given in writing. The Bylaws may provide that proxies may also, or may
instead, be given by any electronic or telecommunications device or in any other
manner. Notwithstanding anything else herein or in the Bylaws, in the event a
proposal by anyone other than the officers or Trustees of the Trust is submitted
<PAGE>
to a vote of the Shareholders of one or more Series or of the Trust, or in the
event of any proxy contest or proxy solicitation or proposal in opposition to
any proposal by the officers or Trustees of the Trust, Shares may be voted only
in person or by written proxy. Until Shares are issued, the Trustees may
exercise all rights of Shareholders and may take any action required or
permitted by law, this Trust Instrument or any of the Bylaws of the Trust to be
taken by Shareholders.
SECTION 7.02 MEETINGS. The first Shareholders' meeting shall be held in
order to elect Trustees as specified in Section 3.02 of Article III hereof at
the principal office of the Trust or such other place as the Trustees may
designate. Meetings may be held within or without the State of Delaware. Special
meetings of the Shareholders of any Series may be called by the Trustees and
shall be called by the Trustees upon the written request of Shareholders owning
at least one-tenth of the Outstanding Shares entitled to vote. Whenever ten or
more Shareholders meeting the qualifications set forth in Section 16(c) of the
1940 Act, as the same may be amended from time to time, seek the opportunity of
furnishing materials to the other Shareholders with a view to obtaining
signatures on such a request for a meeting, the Trustees shall comply with the
provisions of said Section 16(c) with respect to providing such Shareholders
access to the list of the Shareholders of record of the Trust or the mailing of
such materials to such Shareholders of record, subject to any rights provided to
the Trust or any Trustees provided by said Section 16(c). Notice shall be sent,
by First Class Mail or such other means determined by the Trustees, at least 15
days prior to any such meeting.
SECTION 7.03 QUORUM AND REQUIRED VOTE. One-third of Shares entitled to
vote in person or by proxy shall be a quorum for the transaction of business at
a Shareholders' meeting, except that where any provision of law or of this Trust
Instrument permits or requires that holders of any Series shall vote as a Series
(or that holders of a class shall vote as a class), then one-third of the
aggregate number of Shares of that Series (or that class) entitled to vote shall
be necessary to constitute a quorum for the transaction of business by that
Series (or that class). Any lesser number shall be sufficient for adjournments.
Any adjourned session or sessions may be held, within a reasonable time after
the date set for the original meeting, without the necessity of further notice.
Except when a larger vote is required by law or by any provision of this Trust
Instrument or the Bylaws, a majority of the Shares voted in person or by proxy
shall decide any questions and a plurality shall elect a Trustee, provided that
where any provision of law or of this Trust Instrument permits or requires that
the holders of any Series shall vote as a Series (or that the holders of any
class shall vote as a class), then a majority of the Shares present in person or
by proxy of that Series (or class), voted on the matter in person or by proxy
shall decide that matter insofar as that Series (or class) is concerned.
Shareholders may act by unanimous written consent. Actions taken by Series (or
class) may be consented to unanimously in writing by Shareholders of that Series
(or class).
ARTICLE VIII
CUSTODIAN
SECTION 8.01 APPOINTMENT AND DUTIES. The Trustees shall at all times
employ a bank, a company that is a member of a national securities exchange, or
a trust company, each having capital, surplus and undivided profits of at least
twenty million dollars ($20,000,000) and is a member of the Depository Trust
Company as custodian with authority as its agent, but subject to such
restrictions, limitations and other requirements, if any, as may be contained in
the Bylaws of the Trust: (a) to hold the securities owned by the Trust and
deliver the same upon written order or oral order confirmed in writing; (b) to
receive and receipt for any moneys due to the Trust and deposit the same in its
own banking department or elsewhere as the Trustees may direct; and (c) to
disburse such funds upon orders or vouchers.
<PAGE>
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian, and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees, provided that in
every case such sub-custodian shall be a bank, a company that is a member of a
national securities exchange, or a trust company organized under the laws of the
United States or one of the states thereof and having capital, surplus and
undivided profits of at least twenty million dollars ($20,000,000) and is a
member of the Depository Trust Company or such other person as may be permitted
by the Commission or otherwise in accordance with the 1940 Act.
SECTION 8.02 CENTRAL CERTIFICATE SYSTEM. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct the
custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, as amended, or such other
person as may be permitted by the Commission, or otherwise in accordance with
the 1940 Act, pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as fungible and may
be transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust or its custodians, sub-custodians or other agents.
ARTICLE IX
DISTRIBUTIONS AND REDEMPTIONS
SECTION 9.01 DISTRIBUTIONS.
(a) The Trustees may from time to time declare and pay dividends or other
distributions with respect to any Series. The amount of such dividends or
distributions and the payment of them and whether they are in cash or any other
Trust Property shall be wholly in the discretion of the Trustees.
(b) Dividends and other distributions may be paid or made to the
Shareholders of record at the time of declaring a dividend or other distribution
or among the Shareholders of record at such other date or time or dates or times
as the Trustees shall determine, which dividends or distributions, at the
election of the Trustees, may be paid pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees may
determine. The Trustees may adopt and offer to Shareholders such dividend
reinvestment plans, cash dividend payout plans or related plans as the Trustees
shall deem appropriate.
(c) Anything in this Trust Instrument to the contrary notwithstanding,
the Trustees may at any time declare and distribute a stock dividend pro rata
among the Shareholders of a particular Series, or class thereof, as of the
record date of that Series fixed as provided in Subsection 9.01(b) hereof.
SECTION 9.02 REDEMPTIONS. In case any holder of record of Shares of a
particular Series desires to dispose of his Shares or any portion thereof, he
may deposit at the office of the transfer agent or other authorized agent of
that Series a written request or such other form of request as the Trustees may
from time to time authorize, requesting that the Series purchase the Shares in
accordance with this Section 9.02; and the Shareholder so requesting shall be
entitled to require the Series to purchase, and the Series or the principal
underwriter of the Series shall purchase his said Shares, but only at the Net
Asset Value thereof (as described in Section 9.03 of this Article IX). The
Series shall make payment for any such Shares to be redeemed, as aforesaid, in
cash or property from the assets of that Series and payment for such Shares
<PAGE>
shall be made by the Series or the principal underwriter of the Series to the
Shareholder of record within seven (7) days after the date upon which the
request is effective. Upon redemption, shares shall become Treasury shares and
may be re-issued from time to time.
SECTION 9.03 DETERMINATION OF NET ASSET VALUE AND VALUATION OF
PORTFOLIO ASSETS. The term "Net Asset Value" of any Series shall mean that
amount by which the assets of that Series exceed its liabilities, all as
determined by or under the direction of the Trustees. Such value shall be
determined separately for each Series and shall be determined on such days and
at such times as the Trustees may determine. Such determination shall be made
with respect to securities for which market quotations are readily available, at
the market value of such securities; and with respect to other securities and
assets, at the fair value as determined in good faith by the Trustees; provided,
however, that the Trustees, without Shareholder approval, may alter the method
of valuing portfolio securities insofar as permitted under the 1940 Act and the
rules, regulations and interpretations thereof promulgated or issued by the
Commission or insofar as permitted by any Order of the Commission applicable to
the Series. The Trustees may delegate any of their powers and duties under this
Section 9.03 with respect to valuation of assets and liabilities. The resulting
amount, which shall represent the total Net Asset Value of the particular
Series, shall be divided by the total number of shares of that Series
outstanding at the time and the quotient so obtained shall be the Net Asset
Value per Share of that Series. At any time the Trustees may cause the Net Asset
Value per Share last determined to be determined again in similar manner and may
fix the time when such redetermined value shall become effective. If, for any
reason, the net income of any Series, determined at any time, is a negative
amount, the Trustees shall have the power with respect to that Series (a) to
offset each Shareholder's pro rata share of such negative amount from the
accrued dividend account of such Shareholder, (b) to reduce the number of
Outstanding Shares of such Series by reducing the number of Shares in the
account of each Shareholder by a pro rata portion of that number of full and
fractional Shares which represents the amount of such excess negative net
income, (c) to cause to be recorded on the books of such Series an asset account
in the amount of such negative net income (provided that the same shall
thereupon become the property of such Series with respect to such Series and
shall not be paid to any Shareholder), which account may be reduced by the
amount, of dividends declared thereafter upon the Outstanding Shares of such
Series on the day such negative net income is experienced, until such asset
account is reduced to zero; (d) to combine the methods described in clauses (a)
and (b) and (c) of this sentence; or (e) to take any other action they deem
appropriate, in order to cause (or in order to assist in causing) the Net Asset
Value per Share of such Series to remain at a constant amount per Outstanding
Share immediately after each such determination and declaration. The Trustees
shall also have the power not to declare a dividend out of net income for the
purpose of causing the Net Asset Value per Share to be increased. The Trustees
shall not be required to adopt, but may at any time adopt, discontinue or amend
the practice of maintaining the Net Asset Value per Share of the Series at a
constant Amount.
SECTION 9.04 SUSPENSION OF THE RIGHT OF REDEMPTION. The Trustees may
declare a suspension of the right of redemption or postpone the date of payment
as permitted under the 1940 Act. Such suspension shall take effect at such time
as the Trustees shall specify but not later than the close of business on the
business day next following the declaration of suspension, and thereafter there
shall be no right of redemption or payment until the Trustees shall declare the
suspension at an end. In the case of a suspension of the right of redemption, a
Shareholder may either withdraw his request for redemption or receive payment
based on the Net Asset Value per Share next determined after the termination of
the suspension. In the event that any Series is divided into classes, the
provisions of this Section 9.03, to the extent applicable as determined in the
discretion of the Trustees and consistent with applicable law, may be equally
applied to each such class.
<PAGE>
SECTION 9.05 REDEMPTION OF SHARES IN ORDER TO QUALIFY AS REGULATED
INVESTMENT COMPANY. If the Trustees shall, at any time and in good faith, be of
the opinion that direct or indirect ownership of Shares of any Series has or may
become concentrated in any Person to an extent which would disqualify any Series
as a regulated investment company under the Internal Revenue Code, then the
Trustees shall have the power (but not the obligation) by lot or other means
deemed equitable by them (a) to call for redemption by any such person of a
number, or principal amount, of Shares sufficient to maintain or bring the
direct or indirect ownership of Shares into conformity with the requirements for
such qualification and (b) to refuse to transfer or issue Shares to any person
whose acquisition of Shares in question would result in such disqualification.
The redemption shall be effected at the redemption price and in the manner
provided in this Article IX.
The holders of Shares shall upon demand disclose to the Trustees in writing
such information with respect to direct and indirect ownership of Shares as the
Trustees deem necessary to comply with the requirements of any taxing authority.
ARTICLE X
LIMITATION OF LIABILITY AND INDEMNIFICATION
SECTION 10.01 LIMITATION OF LIABILITY. A Trustee, when acting in such
capacity, shall not be personally liable to any person other than the Trust or
beneficial owner for any act, omission or obligation of the Trust or any
Trustee. A Trustee shall not be liable for any act or omission or any conduct
whatsoever in his capacity as Trustee, provided that nothing contained herein or
in the Delaware Act shall protect any Trustee against any liability to the Trust
or to Shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee hereunder.
SECTION 10.02 INDEMNIFICATION.
(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
Shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office or (B)
not to have acted in good faith in the reasonable belief that his action was in
the best interest of the Trust; or
<PAGE>
(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 his office, (A) by the court or other body approving
the settlement; (B) by at least a majority of those Trustees who are neither
Interested Persons of the Trust nor are parties to the matter based upon a
review of readily available facts (as opposed to a full trial-type inquiry); or
(C) by written opinion of independent legal counsel based upon a review of
readily available facts (as opposed to a full trial-type inquiry);
provided, however, that any Shareholder 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 Section 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 Section 10.02.
SECTION 10.03 SHAREHOLDERS. In case any Shareholder of any Series shall
be held to be personally liable solely by reason of his being or having been a
Shareholder of such Series and not because of his acts or omissions or for some
other reason, the Shareholder or former Shareholder (or his heirs, executors,
administrators or other legal representatives, or, in the case of a corporation
or other entity, its corporate or other general successor) shall be entitled out
of the assets belonging to the applicable Series to be held harmless from and
indemnified against all loss and expense arising from such liability. The Trust,
on behalf of the affected Series, shall, upon request by the Shareholder, assume
the defense of any claim made against the Shareholder for any act or obligation
of the Series and satisfy any judgment thereon from the assets of the Series.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01 TRUST NOT A PARTNERSHIP. It is hereby expressly declared
that a trust and not a partnership is created hereby. No Trustee hereunder shall
have any power to bind personally either the Trust officers or any Shareholder.
All persons extending credit to, contracting with or having any claim against
the Trust or the Trustees shall look only to the assets of the appropriate
Series or (if the Trustees shall have yet to have established Series) of the
Trust for payment under such credit, contract or claim; and neither the
Shareholders nor the Trustees, nor any of their agents, whether past, present or
<PAGE>
future, shall be personally liable therefor. Nothing in this Trust Instrument
shall protect a Trustee against any liability to which the Trustee would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee hereunder.
SECTION 11.02 TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR
SURETY. The exercise by the Trustees of their powers and discretions hereunder
in good faith and with reasonable care under the circumstances then prevailing
shall be binding upon everyone interested. Subject to the provisions of Article
X hereof and to Section 11.01 of this Article XI, the Trustees shall not be
liable for errors of judgment or mistakes of fact or law. The Trustees may take
advice of counsel or other experts with respect to the meaning and operation of
this Trust Instrument, and subject to the provisions of Article X hereof and
Section 11.01 of this Article XI, shall be under no liability for any act or
omission in accordance with such advice or for failing to follow such advice.
The Trustees shall not be required to give any bond as such, nor any surety if a
bond is obtained.
SECTION 11.03 ESTABLISHMENT OF RECORD DATES. The Trustees may close the
Share transfer books of the Trust for a period not exceeding sixty (60) days
preceding the date of any meeting of Shareholders, or the date for the payment
of any dividends or other distributions, or the date for the allotment of
rights, or the date when any change or conversion or exchange of Shares shall go
into effect; or in lieu of closing the stock transfer books as aforesaid, the
Trustees may fix in advance a date, not exceeding sixty (60) days preceding the
date of any meeting of Shareholders, or the date for payment of any dividend or
other distribution, or the date for the allotment of rights, or the date when
any change or conversion or exchange of Shares shall go into effect, as a record
date for the determination of the Shareholders entitled to notice of, and to
vote at, any such meeting, or entitled to receive payment of any such dividend
or other distribution, or to any such allotment of rights, or to exercise the
rights in respect of any such change, conversion or exchange of Shares, and in
such case such Shareholders and only such Shareholders as shall be Shareholders
of record on the date so fixed shall be entitled to such notice of, and to vote
at, such meeting, or to receive payment of such dividend or other distribution,
or to receive such allotment or rights, or to exercise such rights, as the case
may be, notwithstanding any transfer of any Shares on the books of the Trust
after any such record date fixed as aforesaid.
SECTION 11.04 TERMINATION OF TRUST.
(a) This Trust shall continue without limitation of time but subject to the
provisions of Subsection 11.04(b).
(b) The Trustees may, subject to a Majority Shareholder Vote of each Series
affected by the matter or, if applicable, to a Majority Shareholder Vote of the
Trust, and subject to a vote of a majority of the Trustees,
(i) sell and convey all or substantially all of the assets of
the Trust or any affected Series to another trust, partnership, association or
corporation, or to a separate series of shares thereof, organized under the laws
of any state which trust, partnership, association or corporation is an open-end
management investment company as defined in the 1940 Act, or is a series
thereof, for adequate consideration which may include the assumption of all
outstanding obligations, taxes and other liabilities, accrued or contingent, of
the Trust or any affected Series, and which may include shares of beneficial
interest, stock or other ownership interests of such trust, partnership,
association or corporation or of a series thereof; or
<PAGE>
(ii) at any time sell and convert into money all of the assets
of the Trust or any affected Series.
Upon making reasonable provision, in the determination of the Trustees, for the
payment of all such liabilities in either (i) or (ii), by such assumption or
otherwise, the Trustees shall distribute the remaining proceeds or assets (as
the case may be) of each Series (or class) ratably among the holders of Shares
of that Series then outstanding.
(c) Upon completion of the distribution of the remaining proceeds or
the remaining assets as provided in Subsection 11.05(b), the Trust or any
affected Series shall terminate and the Trustees and the Trust shall be
discharged of any and all further liabilities and duties hereunder and the
right, title and interest of all parties with respect to the Trust or Series
shall be canceled and discharged.
Upon termination of the Trust, following completion of winding up of its
business, the Trustees shall cause a certificate of cancellation of the Trust's
certificate of trust to be filed in accordance with the Delaware Act, which
certificate of cancellation may be signed by any one Trustee.
SECTION 11.05 REORGANIZATION. Notwithstanding anything else herein, the
Trustees, in order to change the form of organization of the Trust, may, without
prior Shareholder approval, (a) cause the Trust to merge or consolidate with or
into one or more trusts, partnerships, associations or corporations so long as
the surviving or resulting entity is an open-end management investment company
under the 1940 Act, or is a series thereof, that will succeed to or assume the
Trust's registration under that Act and which is formed, organized or existing
under the laws of a state, commonwealth, possession or colony of the United
States or (b) cause the Trust to incorporate under the laws of Delaware. Any
agreement of merger or consolidation or certificate of merger may be signed by a
majority of Trustees and facsimile signatures conveyed by electronic or
telecommunication means shall be valid.
Pursuant to and in accordance with the provisions of Section 3815(f) of
the Delaware Act, and notwithstanding anything to the contrary contained in this
Trust Instrument, an agreement of merger or consolidation approved by the
Trustees in accordance with this Section 11.05 may effect any amendment to the
Trust Instrument or effect the adoption of a new trust instrument of the Trust
if it is the surviving or resulting trust in the merger or consolidation.
SECTION 11.06 FILING OF COPIES, REFERENCES, HEADINGS. The original or a
copy of this Trust Instrument and of each amendment hereof or Trust Instrument
supplemental hereto shall be kept at the office of the Trust where it may be
inspected by any Shareholder. Anyone dealing with the Trust may rely on a
certificate by an officer or Trustee of the Trust as to whether or not any such
amendments or supplements have been make and as to any matters in connection
with the Trust hereunder, and with the same effect as if it were the original,
may rely on a copy certified by an officer or Trustee of the Trust to be a copy
of this Trust Instrument or of any such amendment or supplemental Trust
Instrument. In this Trust Instrument or in any such amendment or supplemental
Trust Instrument, references to this Trust Instrument, and all expressions like
"herein," "hereof" and "hereunder," shall be deemed to refer to this Trust
Instrument as amended or affected by any such supplemental Trust Instrument. All
expressions like "his", "he" and "him", shall be deemed to include the feminine
and neuter, as well as masculine, genders. Headings are placed herein for
convenience of reference only and in case of any conflict, the text of this
Trust Instrument, rather than the headings, shall control. This Trust Instrument
may be executed in any number of counterparts each of which shall be deemed an
original.
SECTION 11.07 APPLICABLE LAW. The trust set forth in this instrument is
made in the State of Delaware, and the Trust and this Trust Instrument, and the
rights and obligations of the Trustees and
<PAGE>
Shareholders hereunder, are to be governed by and construed and administered
according to the Delaware Act and the laws of said State; provided, however,
that there shall not be applicable to the Trust, the Trustees or this Trust
Instrument (a) the provisions of Section 3540 of Title 12 of the Delaware Code
or (b) any provisions of the laws (statutory or common) of the State of Delaware
(other than the Delaware Act) pertaining to trusts which relate to or regulate
(i) the filing with any court or governmental body or agency of trustee accounts
or schedules of trustee fees and charges, (ii) affirmative requirements to post
bonds for trustees, officers, agents or employees of a trust, (iii) the
necessity for obtaining court or other governmental approval concerning the
acquisition, holding or disposition of real or personal property, (iv) fees or
other sums payable to trustees, officers, agents or employees of a trust, (v)
the allocation of receipts and expenditures to income or principal, (vi)
restrictions or limitations on the permissible nature, amount or concentration
of trust investments or requirements relating to the titling, storage or other
manner of holding of trust assets, or (vii) the establishment of fiduciary or
other standards of responsibilities or limitations on the acts or powers of
trustees, which are inconsistent with the limitations or liabilities or
authorities and powers of the Trustees set forth or referenced in this Trust
Instrument. The Trust shall be of the type commonly called a "business trust",
and without limiting the provisions hereof, the Trust may exercise all powers
which are ordinarily exercised by such a trust under Delaware law. The Trust
specifically reserves the right to exercise any of the powers or privileges
afforded to trusts or actions that may be engaged in by trusts under the
Delaware Act, and the absence of a specific reference herein to any such power,
privilege or action shall not imply that the Trust may not exercise such power
or privilege or take such actions.
SECTION 11.08 AMENDMENTS. Except as specifically provided herein, the
Trustees may, without shareholder vote, amend or otherwise supplement this Trust
Instrument by making an amendment, a Trust Instrument supplemental hereto or an
amended and restated trust instrument. Shareholders shall have the right to vote
(a) on any amendment which would affect their right to vote granted in Section
7.01 of Article VII hereof, (b) on any amendment to this Section 11.08, (c) on
any amendment as may be required by law or by the Trust's registration statement
filed with the Commission and (d) on any amendment submitted to them by the
Trustees. Any amendment required or permitted to be submitted to Shareholders
which, as the Trustees determine, shall affect the Shareholders of one or more
Series shall be authorized by vote of the Shareholders of each Series affected
and no vote of shareholders of a Series not affected shall be required.
Notwithstanding anything else herein, any amendment to Article X hereof shall
not limit the rights to indemnification or insurance provided therein with
respect to action or omission of Covered Persons prior to such amendment.
SECTION 11.09 FISCAL YEAR. The fiscal year of the Trust shall end on a
specified date as set forth in the Bylaws, provided, however, that the Trustees
may, without Shareholder approval, change the fiscal year of the Trust.
SECTION 11.10 PROVISIONS IN CONFLICT WITH LAW. The provisions of this
Trust Instrument are severable, and if the Trustees shall determine, with the
advice of counsel, that any of such provisions is in conflict with the 1940 Act,
the regulated investment company provisions of the Internal Revenue Code or with
other applicable laws and regulations, the conflicting provision shall be deemed
never to have constituted a part of this Trust Instrument; provided, however,
that such determination shall not affect any of the remaining provisions of this
Trust Instrument or render invalid or improper any action taken or omitted prior
to such determination. If any provision of this Trust Instrument shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction and
shall not in any matter affect such provisions in any other jurisdiction or any
other provision of this Trust Instrument in any jurisdiction.
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this amended and
restated Trust Instrument to be executed as of the day and year first written
above.
<TABLE>
<S><C> <C>
/s/ Hermann C. Schwab /s/ Peter S. Knight
- -------------------------------- --------------------------------
Herman C. Schwabb Peter S. Knight
as Trustee and not individually as Trustee and not individually
/s/ Peter E. Guernsey /s/ Sharon L. Haugh
- -------------------------------- --------------------------------
Peter E. Guernsey Sharon L. Haugh
as Trustee and not individually as Trustee and not individually
/s/ John I. Howell /s/ Mark J. Smith
- -------------------------------- --------------------------------
John I. Howell Mark J. Smith
as Trustee and not individually as Trustee and not individually
/s/ Clarence F. Michalis /s/ David N. Dinkins
- ------------------------------- --------------------------------
Clarence F. Michalis Hon. David I. Dinkins
as Trustee and not individually as Trustee and not individually
</TABLE>
APPENDIX A
ESTABLISHED SERIES
The following Series have been created by the Trustees in accordance
with section 2.06 of the Trust Instrument:
<TABLE>
<S> <C> <C>
Series Date Established
------ ----------------
1. Schroder International Fund 9/6/95
2. Schroder Emerging Markets Fund Institutional Portfolio 9/6/95
3. Schroder U.S. Diversified Growth Fund 9/6/95
4. Schroder U.S. Smaller Companies Fund 9/6/95
5. Schroder Latin American Fund 9/6/95
6. Schroder International Smaller Companies Fund 3/15/96
7. Schroder Global Asset Allocation Fund 3/15/96
8. Schroder Emerging Markets Fund 11/26/96
9. Schroder European Growth Fund 11/26/96
10. Schroder Japan Fund 11/26/96
11. Schroder Asia Fund 11/26/96
12. Schroder United Kingdom Fund 11/26/96
13. Schroder International Bond Fund 3/5/97
14. Schroder Cash Reserves Fund 3/5/97
15. Schroder Micro Cap Fund 9/18/97
</TABLE>
Exhibit (5)(a)
SCHRODER CAPITAL FUNDS (DELAWARE)
FORM OF INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 14th day of September, 1998, between Schroder
Capital Funds (Delaware) (the "Trust"), a business trust organized under the
laws of the State of Delaware with its principal place of business at Two
Portland Square, Portland, Maine 04101, and Schroder Capital Management
International Inc. (the "Adviser"), a corporation organized under the laws of
the State of New York with its principal place of business at One State Street,
New York, New York.
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended, (the "Act") as an open-end management investment company and
is authorized to issue interests (as defined in the Trust's Trust Instrument) in
separate series;
WHEREAS, the Adviser provides investment advice and is registered with
the Securities and Exchange Commission (the "SEC") as an investment adviser
under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and
is registered with the United Kingdom Investment Management Regulatory
Organization ("IMRO");
WHEREAS, the Trust desires that the Adviser perform investment advisory
services for each series listed in Appendix A (each a "Fund," and collectively
the "Funds"), and the Adviser is willing to provide those services on the terms
and conditions set forth in this Agreement; and
WHEREAS, the Adviser is willing to render such investment advisory services
to the Portfolios;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
SECTION 1. THE TRUST; DELIVERY OF DOCUMENTS
The Trust is engaged in the business of investing and reinvesting its
assets in securities of the type and in accordance with the limitations
specified in its Trust Instrument and Registration Statement filed with the
Securities and Exchange Commission (the "Commission") under the Act, as may be
supplemented from time to time, all in such manner and to such extent as may
from time to time be authorized by the Trust's Board of Trustees (the "Board").
The Trust is currently authorized to issue seven series of interests and the
Board is authorized to issue interests in any number of additional series. The
Trust has delivered to the Adviser copies of the Trust's Trust Instrument and
Registration Statement and will from time to time furnish Adviser with any
amendments thereof.
<PAGE>
SECTION 2. INVESTMENT ADVISER; APPOINTMENT
The Trust hereby employs Adviser, subject to the direction and control
of the Board, to manage the investment and reinvestment of the assets in each
Fund and, without limiting the generality of the foregoing, to provide other
services specified in Section 3 hereof.
SECTION 3. DUTIES OF THE ADVISER
(a) The Adviser shall make decisions with respect to all purchases and
sales of securities and other investment assets in the Funds. To carry out such
decisions, the Adviser is hereby authorized, as agent and attorney-in-fact for
the Trust, for the account of, at the risk of and in the name of the Trust, to
place orders and issue instructions with respect to those transactions of the
Funds. In all purchases, sales and other transactions in securities for the
Funds, the Adviser is authorized to exercise full discretion and act for the
Trust in the same manner and with the same force and effect as the Trust might
or could do with respect to such purchases, sales or other transactions, as well
as with respect to all other things necessary or incidental to the furtherance
or conduct of such purchases, sales or other transactions.
(b) The Adviser will report to the Board at each meeting thereof all
changes in the Funds since the prior report, and will also keep the Board
informed of important developments affecting the Trust, the Funds and the
Adviser, and on its own initiative, will furnish the Board from time to time
with such information as the Adviser may believe appropriate for this purpose,
whether concerning the individual companies whose securities are included in a
Fund's holdings, the industries in which they engage, or the economic, social or
political conditions prevailing in each country in which the Fund maintains
investments. The Adviser will also furnish the Board with such statistical and
analytical information with respect to securities in the Funds as the Adviser
may believe appropriate or as the Board reasonably may request. In making
purchases and sales of securities for a Fund, the Adviser will bear in mind the
policies set from time to time by the Board as well as the limitations imposed
by the Trust's Trust Instrument and Registration Statement under the Act, the
limitations in the Act and in the Internal Revenue Code of 1986, as amended, in
respect of regulated investment companies and the investment objectives,
policies and restrictions of the Funds.
(c) The Adviser will from time to time employ or associate with such
persons as the Adviser believes to be particularly fitted to assist in the
execution of the Adviser's duties hereunder, the cost of performance of such
duties to be borne and paid by the Adviser. No obligation may be incurred on the
Trust's behalf in any such respect.
(d) The Adviser shall maintain records for each Fund relating to
portfolio transactions and the placing and allocation of brokerage orders as are
required to be maintained by the Trust under the Act. The Adviser shall prepare
and maintain, or cause to be prepared and maintained, in such form, for such
periods and in such locations as may be required by applicable law, all
documents and records relating to the services provided by the Adviser pursuant
to this Agreement required to be prepared and maintained by the Trust pursuant
to the rules and regulations of any national, state, or local government entity
with jurisdiction over the Trust,
<PAGE>
including the Commission and the Internal Revenue Service. The books and records
pertaining to the Trust which are in possession of the Adviser shall be the
property of the Trust. The Trust, or the Trust's authorized representatives,
shall have access to such books and records at all times during the Adviser's
normal business hours. Upon the reasonable request of the Trust, copies of any
such books and records shall be provided promptly by the Adviser to the Trust or
the Trust's authorized representatives.
SECTION 4. EXPENSES
The Trust hereby confirms that the Trust shall be responsible and shall
assume the obligation for payment of all the Trust's expenses, including:
interest charges, taxes, brokerage fees and commissions; certain insurance
premiums; fees, interest charges and expenses of the Trust's custodian and
transfer agent; telecommunications expenses; auditing, legal and compliance
expenses; costs of the Trust's formation and maintaining its existence; costs of
preparing the Trust's registration statement, account application forms and
interestholder reports and delivering them to existing and prospective
interestholders; costs of maintaining books of original entry for portfolio and
fund accounting and other required books and accounts and of calculating the net
asset value of interests in the Trust; costs of reproduction, stationery and
supplies; compensation of the Trust's trustees, officers and employees and costs
of other personnel performing services for the Trust who are not officers of the
Adviser or of Forum Financial Services, Inc. or affiliated persons of either;
costs of Trust meetings; registration fees and related expenses for registration
with the Commission and the securities regulatory authorities of other countries
in which the Trust's interests are sold; state securities law registration fees
and related expenses; and fees and out-of-pocket expenses payable to Forum
Financial Services, Inc. under any placement agent, management or similar
agreement.
SECTION 5. STANDARD OF CARE
(a) The Trust shall expect of the Adviser, and the Adviser will give
the Trust the benefit of, the Adviser's best judgment and efforts in rendering
its services to the Trust, and as an inducement to the Adviser's undertaking
these services the Adviser shall not be liable hereunder for any mistake of
judgment or in any event whatsoever, except for lack of good faith, provided
that nothing herein shall be deemed to protect, or purport to protect, the
Adviser against any liability to the Trust or to the Trust's interestholders to
which the Adviser would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of the Adviser's duties
hereunder, or by reason of the Adviser's reckless disregard of its obligations
and duties hereunder. As used in this Section 5, the term "Adviser" shall
include any affiliates of the Adviser performing services for the Funds
contemplated hereby and directors, officers and employees of the Adviser as well
as the Adviser itself.
(b) The Adviser shall not be liable for any losses caused by
disturbances of its operations by virtue of force majeure, war, riot, or damage
caused by nature or due to other events for which the Adviser is not responsible
(e.g., strike, lock-out or losses caused by the imposition of foreign exchange
controls, expropriation of assets or other acts of domestic or foreign
authorities) except under the circumstances provided for in Section 5(a).
<PAGE>
The presence of exculpatory language in this Agreement shall not in any
way limit or be deemed by anyone to limit the Trust, the Trustees of the Trust,
the Funds, the Adviser, or any other party appointed pursuant to this Agreement,
including without limitation any custodian, as in any way limiting causes of
action and remedies which may, notwithstanding such language, be available to
the Trust, the Trustees of the Trust, Funds or any other party appointed
pursuant to this Agreement, either under common law or statutory law principles
applicable to fiduciary relationships or under the Federal securities laws.
SECTION 6. COMPENSATION
In consideration of the foregoing, the Trust shall pay the Adviser,
with respect to each of the Funds, a fee at an annual rate as listed in Appendix
A hereto. Such fees shall be accrued by the Trust based on average daily net
assets and shall be payable monthly in arrears on the first day of each calendar
month for services performed hereunder during the prior calendar month. No fee
shall be payable hereunder with respect to a Fund during any period in which the
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.
SECTION 7. EFFECTIVENESS, DURATION, AND TERMINATION
(a) This Agreement shall become effective with respect to a Fund
immediately upon approval by a majority of the outstanding voting interests of
that Fund.
(b) This Agreement shall remain in effect with respect to a Fund for a
period of two years from the date of its effectiveness and shall continue in
effect for successive twelve-month periods (computed from each anniversary date
of the approval) with respect to the Fund; provided that such continuance is
specifically approved at least annually (i) by the Board or by the vote of a
majority of the outstanding voting interests of the Fund, and, in either case,
(ii) by a majority of the Trust's trustees who are not parties to this Agreement
or interested persons of any such party (other than as trustees of the Trust);
provided further, however, that if this Agreement or the continuation of this
Agreement is not approved as to a Fund, the Adviser may continue to render to
that Fund the services described herein in the manner and to the extent
permitted by the Act and the rules and regulations thereunder.
(c) This Agreement may be terminated with respect to a Fund at any
time, without the payment of any penalty, (i) by the Board or by a vote of a
majority of the outstanding voting interests of a Fund on 60 days' written
notice to the Adviser or (ii) by the Adviser on 60 days' written notice to the
Trust. This agreement shall terminate upon assignment.
SECTION 8. ACTIVITIES OF THE ADVISER
Except to the extent necessary to perform its obligations hereunder,
nothing herein shall be deemed to limit or restrict the Adviser's right, or the
right of any of the Adviser's officers,
<PAGE>
directors or employees who may also be a trustee, officer or employee of the
Trust, or persons otherwise affiliated persons of the Trust to engage in any
other business or to devote time and attention to the management or other
aspects of any other business, whether of a similar or dissimilar nature, or to
render services of any kind to any other corporation, trust, firm, individual or
association. It is specifically understood that officers, directors and
employees of the Adviser and its affiliates may continue to engage in providing
portfolio management services and advice to other investment companies, whether
or not registered, and to other investment advisory clients. When other clients
of the Adviser desire to purchase or sell a security at the same time such
security is purchased or sold for the Funds, such purchases and sales will, to
the extent feasible, be allocated among the Funds and such clients in a manner
believed by the Adviser to be equitable to the Funds and such clients.
SECTION 9. LIMITATION OF INTERESTHOLDER AND TRUSTEE LIABILITY
The Trustees of the Trust and the interestholders of the Funds shall
not be liable for any obligations of the Trust or of the Funds under this
Agreement, and the Adviser agrees that, in asserting any rights or claims under
this Agreement, it shall look only to the assets and property of the Trust or
the Funds to which the Adviser's rights or claims relate in settlement of such
rights or claims, and not to the Trustees of the Trust or the interestholders of
the Funds.
SECTION 10. NOTICE
Any notice or other communication required to be given pursuant to this
Agreement shall be in writing or by telex and shall be effective upon receipt.
Notices and communications shall be given, if to the Trust, at:
Schroder Capital Funds (Delaware)
Two Portland Square
Portland, Maine 04101
Attention: Thomas G. Sheehan
and if to the Adviser, at:
Schroder Capital Management International Inc.
787 Seventh Avenue, 29th Floor
New York, New York 10019
Attention: Catherine A. Mazza
SECTION 11. MISCELLANEOUS
(a) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties hereto and, if required by the Act, by a vote of a majority of the
outstanding voting interests of the Funds
<PAGE>
thereby affected. No amendment to this Agreement or the termination of this
Agreement with respect to a Fund shall effect this Agreement as it pertains to
any other Fund.
(b) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.
(c) This Agreement may be executed by the parties hereto on any number of
counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
(d) Section headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
(e) This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the State of Delaware.
(f) The Adviser confirms that each Fund is a "Non-private Customer" as
defined in the rules of IMRO.
(g) The terms "vote of a majority of the outstanding voting interests,"
"interested person," "affiliated person" and "assignment" shall have the
meanings ascribed thereto in the Act to the terms "vote of a majority of the
outstanding voting securities," "interested person," "affiliated person" and
"assignment," respectively.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
SCHRODER CAPITAL FUNDS (DELAWARE)
/S/ __________________________
SCHRODER CAPITAL MANAGEMENT
INTERNATIONAL INC.
/S/________________________
<PAGE>
SCHRODER CAPITAL FUNDS (DELAWARE)
INVESTMENT ADVISORY AGREEMENT
Appendix A
Annual Fee as a % of
the Average Daily
Funds of the Trust Net Assets of the Fund
- ------------------ ----------------------
Schroder Greater China Fund 1.00%
Schroder Cash Reserves Fund 0.20% of the first $300
million of assets; 0.16%
for next $400 million, and
0.12% of remaining net
assets
Exhibit (5)(i)
SCHRODER CAPITAL FUNDS
INVESTMENT SUBADVISORY AGREEMENT
June 15, 1998
AGREEMENT made this 15th day of June, 1998, among Schroder Capital
Funds (the "Trust"), a business trust organized under the laws of the State of
Delaware with its principal place of business at Two Portland Square, Portland,
Maine 04101, Schroder Capital Management International Inc. (the "Adviser"), a
corporation organized under the laws of the State of New York with its principal
place of business at One State Street, New York, New York and Schroder
Investment Management, Ltd. with its principal office and place of business at
31 Gresham Street, London, U.K. EC2V 7QA (the "Subadviser").
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company and
is authorized to issue its shares of beneficial interest, no par value, in
separate series and classes;
WHEREAS, the Subadviser provides investment advice and is registered
with the Securities and Exchange Commission (the "SEC") as an investment adviser
under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and
is registered with the United Kingdom Investment Management Regulatory
Organization ("IMRO");
WHEREAS, the Trust and the Adviser desire that the Subadviser perform
investment advisory services for Schroder International Smaller Companies
Portfolio (the "Portfolio") and the Subadviser is willing to provide those
services on the terms and conditions set forth in this Agreement; and
WHEREAS, the Subadviser is willing to render such investment advisory
services to the Portfolio; and
NOW THEREFORE, in consideration for the promises and covenants
contained herein, the Trust, the Adviser and the Subadviser hereby agree as
follows:
SECTION 1. THE TRUST; DELIVERY OF DOCUMENTS
The Trust is engaged in the business of investing and reinvesting its
assets in securities of the type and in accordance with the limitations
specified in its Trust Instrument, By-Laws and Registration Statement filed with
the Securities and Exchange Commission (the "Commission") under the Act and the
Securities Act of 1933 (the "Securities Act"), including any representations
made in the prospectus and statement of additional information relating to the
Portfolio contained therein and as may be supplemented from time to time, all in
such manner and to such extent as may from time to time be authorized by the
Trust's Board of Trustees (the "Board"). The Trust is currently authorized to
issue thirty-one series of shares and the Board is authorized to issue any
unissued shares in any number of additional classes or series. The Trust has
delivered to the
<PAGE>
Adviser copies of the documents listed in this Section 1 and will from time to
time furnish Subadviser with any amendments thereof.
SECTION 2. INVESTMENT SUBADVISER; APPOINTMENT
Subject to the direction and control of the Board, the Adviser manages
the investment and reinvestment of the assets of the Portfolio and provides for
certain management and services as specified in the Investment Advisory
Agreements between the Trust and the Adviser with respect to the Portfolio.
The Adviser hereby employs Subadviser, subject to the direction and
control of the Adviser and the Board, to manage the investment and reinvestment
of the assets in each Portfolio and, without limiting the generality of the
foregoing, to provide other services as specified herein, all in such manner and
to such extent as may be directed from time to time by the Adviser. The
Subadviser accepts this employment and agrees to render its services for the
compensation set forth herein.
SECTION 3. DUTIES OF THE SUBADVISER
(a) The Subadviser is authorized to make decisions with respect to
purchases and sales of securities and other investment assets in the Portfolio.
To carry out such decisions, the Subadviser is hereby authorized, as agent and
attorney-in-fact for the Trust, for the account of, at the risk of and in the
name of the Trust, to place orders and issue instructions with respect to those
transactions of the Portfolio. In all purchases, sales and other transactions in
securities for the Portfolio, the Subadviser is authorized to exercise full
discretion and act for the Trust in the same manner and with the same force and
effect as the Trust might or could do with respect to such purchases, sales or
other transactions, as well as with respect to all other things necessary or
incidental to the furtherance or conduct of such purchases, sales or other
transactions.
(b) The Subadviser will report to the Board at each meeting thereof all
changes in the Portfolio since the prior report, and will also keep the Board
informed of important developments affecting the Trust, the Portfolio and the
Subadviser, and on its own initiative, will furnish the Board from time to time
with such information as the Subadviser may believe appropriate for this
purpose, whether concerning the individual companies whose securities are
included in a Portfolio's holdings, the industries in which they engage, or the
economic, social or political conditions prevailing in each country in which the
Portfolio maintains investments. The Subadviser will also furnish the Board with
such statistical and analytical information with respect to securities in the
Portfolio as the Subadviser may believe appropriate or as the Board reasonably
may request. In making purchases and sales of securities for a Portfolio, the
Subadviser will bear in mind the policies set from time to time by the Board as
well as the limitations imposed by the Trust's Trust Instrument, By-Laws and
Registration Statement under the Act and the Securities Act, the limitations in
the Act and in the Internal Revenue Code of 1986, as amended in respect of
regulated investment companies and the investment objectives, policies and
restrictions of the Portfolio.
<PAGE>
(c) The Subadviser will from time to time employ or associate with such
persons as the Subadviser believes to be particularly fitted to assist in the
execution of the Subadviser's duties hereunder, the cost of performance of such
duties to be borne and paid by the Subadviser. No obligation may be incurred on
the Trust's behalf in any such respect.
(d) The Subadviser shall maintain records for each Portfolio relating
to portfolio transactions and the placing and allocation of brokerage orders as
are required to be maintained by the Trust under the Act. The Subadviser shall
prepare and maintain, or cause to be prepared and maintained, in such form, for
such periods and in such locations as may be required by applicable law, all
documents and records relating to the services provided by the Subadviser
pursuant to this Agreement required to be prepared and maintained by the Trust
pursuant to the rules and regulations of any national, state, or local
government entity with jurisdiction over the Trust, including the Securities and
Exchange Commission and the Internal Revenue Service. The books and records
pertaining to the Trust which are in possession of the Subadviser shall be the
property of the Trust. The Trust, or the Trust's authorized representatives,
shall have access to such books and records at all times during the Subadviser's
normal business hours. Upon the reasonable request of the Trust, copies of any
such books and records shall be provided promptly by the Subadviser to the Trust
or the Trust's authorized representatives.
SECTION 4. EXPENSES
Subject to any expense reimbursement arrangements between the Adviser
or others and the Trust, the Trust shall be responsible and shall assume the
obligation for payment of all of the Trust's expenses. The Subadviser shall pay
for maintaining its staff and personnel necessary to perform its obligations
under this Agreement and shall, at its own expense maintain the office space,
facilities, equipment and personnel that are reasonably necessary to carry out
its obligations hereunder.
SECTION 5. STANDARD OF CARE
The Trust shall expect of the Subadviser, and the Subadviser will give
the Trust the benefit of, the Subadviser's best judgment and efforts in
rendering its services to the Trust, and as an inducement to the Subadviser's
undertaking these services the Subadviser shall not be liable hereunder for any
mistake of judgment or in any event whatsoever, except for lack of good faith,
provided that nothing herein shall be deemed to protect, or purport to protect,
the Subadviser against any liability to the Trust or to the Trust's interest
holders to which the Subadviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of the
Subadviser's duties hereunder, or by reason of the Subadviser's reckless
disregard of its obligations and duties hereunder. As used in this Section 5,
the term "Subadviser" shall include any affiliates of the Subadviser performing
services for the Portfolio contemplated hereby and directors, officers and
employees of the Subadviser as well as the Subadviser itself.
The Subadviser shall not be liable for any losses caused by
disturbances of its operations by virtue of force majeure, war, riot, or damage
caused by nature or due to other events for which
<PAGE>
the Subadviser is not responsible (e.g., strike, lock-out or losses caused by
the imposition of foreign exchange controls, expropriation of assets or other
acts of domestic or foreign authorities).
The presence of exculpatory language in this Agreement shall not be
deemed by the Trust, the Portfolio, the Adviser, the Subadviser, or any other
party appointed pursuant to this Agreement, including without limitation any
custodian, as in any way limiting causes of action and remedies which may,
notwithstanding such language, be available to the Portfolio either under common
law or statutory law principles applicable to fiduciary relationships or under
the Federal securities laws.
SECTION 6. COMPENSATION
In consideration of the foregoing, the Adviser shall pay the
Subadviser, with respect to the Portfolio, a fee at an annual rate as listed in
Appendix A hereto. Such fees shall be accrued by the Adviser daily and shall be
payable monthly in arrears on the first day of each calendar month for services
performed hereunder during the prior calendar month.
SECTION 7. EFFECTIVENESS, DURATION, AND TERMINATION
(a) This Agreement shall become effective with respect to the Portfolio
immediately upon the later of approval by a majority of the Trust's trustees who
are not parties to this Agreement or interested persons of any such party (other
than as trustees of the Trust) and, if required by applicable law, by a vote of
a majority of the outstanding voting securities of the Portfolio.
(b) This Agreement shall remain in effect with respect to the Portfolio
for a period of one year from the date of its effectiveness and shall continue
in effect for successive twelve-month periods (computed from each anniversary
date of the approval) with respect to the Portfolio; provided that such
continuance is specifically approved at least annually (i) by the Board or by
the vote of a majority of the outstanding voting securities of the Portfolio,
and, in either case, (ii) by a majority of the Trust's trustees who are not
parties to this Agreement or interested persons of any such party (other than as
trustees of the Trust); provided further, however, that if this Agreement or the
continuation of this Agreement is not approved as to a Portfolio, the Subadviser
may continue to render to that Portfolio the services described herein in the
manner and to the extent permitted by the Act and the rules and regulations
thereunder.
(c) This Agreement may be terminated at any time, without the payment
of any penalty, (i) by the Board or by a vote of a majority of the outstanding
voting interests of a Portfolio on 60 days' written notice to the Subadviser;
(ii) by the Adviser on 60 days' written notice to the Subadvisor; or (iii) by
the Subadviser on 60 days' written notice to the Trust. This Agreement shall
terminate upon assignment.
<PAGE>
SECTION 8. ACTIVITIES OF THE SUBADVISER
Except to the extent necessary to perform its obligations hereunder,
nothing herein shall be deemed to limit or restrict the Subadviser's right, or
the right of any of the Subadviser's officers, directors or employees who may
also be a trustee, officer or employee of the Trust, or persons otherwise
affiliated persons of the Trust to engage in any other business or to devote
time and attention to the management or other aspects of any other business,
whether of a similar or dissimilar nature, or to render services of any kind to
any other corporation, trust, firm, individual or association. It is
specifically understood that officers, directors and employees of the Subadviser
and its affiliates may continue to engage in providing portfolio management
services and advice to other investment companies, whether or not registered,
and to other investment advisory clients. When other clients of the Subadviser
desire to purchase or sell a security at the same time such security is
purchased or sold for the Portfolio, such purchases and sales will, to the
extent feasible, be allocated among the Portfolio and such clients in a manner
believed by the Subadviser to be equitable to the Portfolio and such clients.
SECTION 9. LIMITATION OF INTERESTHOLDER AND TRUSTEE LIABILITY
The Trustees of the Trust and the interestholders of the Portfolio
shall not be liable for any obligations of the Trust or of the Portfolio under
this Agreement, and the Subadviser agrees that, in asserting any rights or
claims under this Agreement, it shall look only to the assets and property of
the Trust or the Portfolio to which the Subadviser's rights or claims relate in
settlement of such rights or claims, and not to the Trustees of the Trust or the
interestholders of the Portfolio.
SECTION 10. NOTICE
Any notice or other communication required to be given pursuant to this
Agreement shall be in writing or by telex and shall be effective upon receipt.
Notices and communications shall be given, if to the Trust, at:
Schroder Capital Funds (Delaware)
Two Portland Square
Portland, ME 04101
if to the Adviser, at:
Schroder Capital Management International Inc.,
787 Seventh Avenue, 29th Floor
New York, New York 10019
<PAGE>
and if to the Subadviser, at:
Schroder Investment Management International, Ltd.
31 Gresham Street
London, U.K. EC2V 7QA
SECTION 11. MISCELLANEOUS
(a) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by all
parties hereto and, if required by applicable law, by a vote of a majority of
the outstanding voting securities of the Portfolio.
(b) This Agreement shall be governed by and shall be construed in
accordance with the laws of the State of Delaware.
(c) This Agreement may be executed by the parties hereto on any number
of counterparts, and all of the counterparts taken together shall be deemed to
constitute one and the same instrument.
(d) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.
(e) Section headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
(f) The terms "vote of a majority of the outstanding voting
securities," "interested person," "affiliated person" and "assignment" shall
have the meanings ascribed thereto in the Act.
(g) The Subadviser confirms that the Portfolio is a "Non-private
customer" as defined in the rules of the IMRO.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
SCHRODER CAPITAL FUNDS
__________________________
SCHRODER CAPITAL MANAGEMENT
INTERNATIONAL, INC.
__________________________
SCHRODER INVESTMENT MANAGEMENT
INTERNATIONAL, LTD
__________________________
Exhibit (9)(a)
SCHRODER CAPITAL FUNDS (DELAWARE)
ADMINISTRATION AGREEMENT
AGREEMENT made this 26th day of November, 1996, between Schroder
Capital Funds (Delaware) (the "Trust"), a business trust organized under the
laws of the State of Delaware with its principal place of business at Two
Portland Square, Portland, Maine 04101, and Schroder Fund Advisors Inc.
("Schroder"), a corporation organized under the laws of the State of Maryland.
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended, (the "1940 Act") as an open-end management investment company and is
authorized to issue shares of beneficial interest in separate series and
classes;
WHEREAS, the Trust has entered into various Investment Advisory
Agreements with Schroder Capital Management International Inc. (the "Adviser"),
pursuant to which the Adviser provides investment advisory services for the
Trust;
WHEREAS, the Trust desires that Schroder perform certain administrative
services for each series of the Trust as listed in Appendix A hereto (each a
"Series") and each class of shares of each Series (each a "Class") and Schroder
is willing to provide those services on the terms and conditions set forth in
this Agreement;
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the Trust and Schroder agree as follows:
SECTION 1. APPOINTMENT. The Trust hereby appoints Schroder as
administrator of the Trust and of each Series and any class of Shares thereof
and Schroder hereby accepts such appointment, all in accordance with the terms
and conditions of this Agreement. In connection therewith, the Trust has
delivered to Schroder copies of its Trust Instrument and Bylaws, the Trust's
Registration Statement and all amendments thereto filed pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), or the 1940 Act (the
"Registration Statement"), and the current prospectus and statement of
additional information of each Class of each Series (collectively, as currently
in effect and as amended or supplemented, the "Prospectus"), all in such manner
and to such extent as may from time to time be authorized by the Trust's Board
of Trustees (the "Board"), and shall promptly furnish Schroder with all
amendments of or supplements to the foregoing.
SECTION 2. FURNISHING OF EXISTING ACCOUNTS AND RECORDS. The Trust shall
promptly turn over to Schroder such of the accounts and records previously
maintained by or for it as are necessary for Schroder to perform its functions
under this Agreement. The Trust authorizes Schroder to rely on such accounts and
records turned over to it and hereby indemnifies and will hold Schroder, its
successors and assigns, harmless of and from any and all expenses, damages,
claims, suits, liabilities, actions, demands and losses whatsoever arising out
<PAGE>
of or in connection with any error, omission, inaccuracy or other deficiency of
such accounts and records or in the failure of the Trust to provide any portion
of such or to provide any information needed by Schroder to knowledgeably
perform its functions.
SECTION 3. ADMINISTRATIVE DUTIES
(a) Subject to the direction and control of the Board and in
cooperation with the Adviser, Schroder shall provide, or oversee, as applicable,
administrative services necessary for the Trust's operations with respect to
each Series except those services that are the responsibility of the Adviser or
the Series' custodian or transfer agent, all in such manner and to such extent
as may be authorized by the Board.
(b) With respect to the Trust, each Series and each Class thereof, as
applicable, Schroder shall:
(i) oversee (A) the preparation and maintenance by the Adviser and
the Trust's sub-administrator, custodian, transfer agent,
dividend disbursing agent and fund accountant in such form,
for such periods and in such locations as may be required by
applicable law, of all documents and records relating to the
operation of the Trust required to be prepared or maintained
by the Trust or its agents pursuant to applicable law; (B) the
reconciliation of account information and balances among the
Adviser and the Trust's custodian, transfer agent, dividend
disbursing agent and fund accountant; (C) the transmission of
purchase and redemption orders for Shares; (D) the
notification to the Adviser of available funds for investment;
and (E) the performance of fund accounting, including the
calculation of the net asset value of the Shares;
(ii) oversee the performance of administrative and professional
services rendered to the Trust by others, including its
sub-administrator, custodian, transfer agent and dividend
disbursing agent as well as legal, auditing and shareholder
servicing and other services performed for each Series or
class thereof;
(iii) oversee the preparation and the printing of the periodic
updating of the Registration Statement and Prospectus, tax
returns, and reports to shareholders, the Securities and
Exchange Commission and state securities commissions;
(iv) oversee the preparation of proxy and information statements
and any other communications to shareholders;
(v) at the request of the Board, provide the Trust with adequate
general office space and facilities and provide persons
suitable to the Board to serve as officers of the Trust;
<PAGE>
(vi) provide the Trust, at the Trust's request, with the services
of persons who are competent to perform such supervisory or
administrative functions as are necessary for effective
operation of the Trust;
(vii) oversee the preparation, filing and maintenance of the
Trust's governing documents, including the Trust Instrument
and minutes of meetings of Trustees and shareholders;
(viii) oversee with the cooperation of the Trust's counsel, the
Adviser, and other relevant parties, preparation and
dissemination of materials for meetings of the Board;
(ix) monitor sales of Shares and ensure that such Shares are
properly and duly registered with the Securities and Exchange
Commission and applicable state securities commissions;
(x) oversee the calculation of performance data for dissemination
to information services covering the investment company
industry, for sales literature of the Trust and other
appropriate purposes;
(xi) oversee the determination of the amount of, and supervise the
declaration of, dividends and other distributions to
shareholders as necessary to, among other things, maintain the
qualification of each Series as a regulated investment company
under the Internal Revenue Code of 1986, as amended, and
prepare and distribute to appropriate parties notices
announcing the declaration of dividends and other
distributions to shareholders; and
(xii) advise the Trust and its Board on matters concerning the Trust
and its affairs.
(c) Schroder shall oversee the preparation and maintenance, or cause to
be prepared and maintained, records in such form for such periods and in such
locations as may be required by applicable regulations, all documents and
records relating to the services provided to the Trust pursuant to this
Agreement required to be maintained pursuant to the 1940 Act, rules and
regulations of the Securities and Exchange Commission, the Internal Revenue
Service and any other national, state or local government entity with
jurisdiction over the Trust. The accounts and records pertaining to the Trust
which are in possession of Schroder, or an entity subcontracted by Schroder,
shall be the property of the Trust. The Trust, or the Trust's authorized
representatives, shall have access to such accounts and records at all times
during Schroder's, or its subcontractor's, normal business hours. Upon the
reasonable request of the Trust, copies of any such accounts and records shall
be provided promptly by Schroder to the Trust or the Trust's authorized
representatives. In the event the Trust designates a successor to any of
Schroder's obligations under this agreement, Schroder shall, at the expense and
direction of the Trust, transfer to such successor all relevant books, records
and other data established or maintained by Schroder, or its subcontractor,
under this Agreement.
<PAGE>
SECTION 4. STANDARD OF CARE
(a) Schroder, in performing under the terms and conditions of this
Agreement, shall use its best judgment and efforts in rendering the services
described herein, and shall incur no liability for its status under this
agreement or for any reasonable actions taken or omitted in good faith. As an
inducement to Schroder's undertaking to render these services, the Trust hereby
agrees to indemnify and hold harmless Schroder, its employees, agents, officers
and directors, from any and all loss, liability and expense, including any legal
expenses, arising out of Schroder's performance under this Agreement, or status,
or any act or omission of Schroder, its employees, agents, officers and
directors; provided that this indemnification shall not apply to Schroder's
actions taken or failures to act in cases of Schroder's own bad faith, willful
misconduct or gross negligence in the performance of its duties under this
Agreement; and further provided, that Schroder shall give the Trust notice and
reasonable opportunity to defend against any such loss, claim, damage, liability
or expense in the name of the Trust or Schroder, or both. The Trust will be
entitled to assume the defense of any suit brought to enforce any such claim or
demand, and to retain counsel of good standing chosen by the Trust and approved
by Schroder,such approval not to which approval shall be unreasonably
withheldnot be withheld unreasonably. In the event the Trust does elect to
assume the defense of any such suit and retain counsel of good standing approved
by Schroder, the defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by any of them; but in case the
Trust does not elect to assume the defense of any such suit, or in case Schroder
does not approve of counsel chosen by the Trust or Schroder has been advised
that it may have available defenses or claims which are not available or
conflict with those available to the Trust, the Trust will reimburse Schroder,
its employees, agents, officers and directors for the fees and expenses of any
one counsellaw firm retained as counsel by Schroder or them. Schroder may, at
any time, waive its right to indemnification under this agreement and assume its
own defense. The provisions of paragraphs (b) through (d) of this Section 4
should not in any way limit the foregoing:
(b) Schroder may rely upon the advice of the Trust or of counsel, who
may be counsel for the Trust or counsel for Schroder, and upon statements of
accountants, brokers and other persons believed by it in good faith to be expert
in the matters upon which they are consulted, and Schroder shall not be liable
to anyone for any actions taken in good faith upon such statements.
(c) Schroder may act upon any oral instruction which it receives and
which it believes in good faith was transmitted by the person or persons
authorized by the Board of the Trust to give such oral instruction. Schroder
shall have no duty or obligation to make any inquiry or effort of certification
of such oral instruction.
(d) Schroder shall not be liable for any action taken in good faith
reliance upon any written instruction or certified copy of any resolution of the
Board of the Trust, and Schroder may rely upon the genuineness of any such
document or copy thereof reasonably believed in good faith by Schroder to have
been validly executed.
(e) Schroder may rely and shall be protected in acting upon any
signature, instruction, request, letter of transmittal, certificate, opinion of
counsel, statement, instrument, report, notice,
<PAGE>
consent, order, or other paper document believed by it to be genuine and to have
been signed or presented by the purchaser, Trust or other proper party or
parties.
SECTION 5. EXPENSES
(a) Subject to any agreement by Schroder or other person to reimburse
any expenses of the Trust that relate to any Series, the Trust shall be
responsible for and assume the obligation for payment of all of its expenses,
including: (a) the fee payable under Section 6 hereof; (b) any fees payable to
the Adviser; (c) any fees payable to Schroder; (d) expenses of issue, repurchase
and redemption of Shares; (e) interest charges, taxes and brokerage fees and
commissions; (f) the cost (or appropriate share thereof) of reasonable premiums
for errors and omissions and other liability insurance policy of FFSI; (g)
premiums of insurance for the Trust, its Trustees and officers and fidelity bond
premiums; (hg) fees, interest charges and expenses of third parties, including
the Trust's custodian, transfer agent, dividend disbursing agent and fund
accountant; (ih) fees of pricing, interest, dividend, credit and other reporting
services; (ij) costs of membership in trade associations; (kj)
telecommunications expenses; (l) funds transmission expenses; (m) auditing,
legal and compliance expenses; (n) costs of forming the Trust and maintaining
its existence; (o) to the extent permitted by the 1940 Act, costs of preparing
and printing the Series' Prospectuses, subscription application forms and
shareholder reports and delivering them to existing shareholders; (p) expenses
of meetings of shareholders and proxy solicitations therefore; (q) costs of
maintaining books of original entry for portfolio and fund accounting and other
required books and accounts, of calculating the net asset value of shares of the
Trust and of preparing tax returns; (r) costs of reproduction, stationery and
supplies; (s) fees and expenses of the Trust's Trustees; (t) compensation of the
Trust's officers and employees who are not employees of the Adviser or Sub-
Schroder or their respective affiliated persons and costs of other personnel
(who may be employees of the Adviser, Schroder or their respective affiliated
persons) performing services for the Trust; (u) costs of Trustee meetings; (v)
Securities and Exchange Commission registration fees and related expenses; (w)
state or foreign securities laws registration fees and related expenses; and (x)
all fees and expenses paid by the Trust in accordance with any distribution plan
adopted pursuant to Rule 12b-1 under the 1940 Act or under any shareholder
service plan or agreement.
(b) If the aggregate expenses of every character incurred by, or
allocated to, a Series in any fiscal year, other than interest, taxes, brokerage
commissions and other portfolio transaction expenses, other expenditures which
are capitalized in accordance with generally accepted accounting principles and
any extraordinary expense (including, without limitation, litigation and
indemnification expense), but including the fees provided for in Section 6 and
under an Advisory Agreement with respect to a Series ("includable expenses"),
shall exceed the expense limitations applicable to that Series imposed by state
securities law or regulations thereunder, as these limitations may be raised or
lowered from time to time, Schroder shall pay that Series an amount equal to a
percentage of that excess ("Schroder's reimbursement"), such Schroder's
reimbursement to be in an amount set forth with respect to the Series in
Appendix A to this Agreement. With respect to portions of a fiscal year in which
this Agreement shall be in effect, the foregoing limitations shall be prorated
according to the proportion which that portion of the fiscal year bear to the
full fiscal year. At the end of each month of the Trust's fiscal year, Schroder
<PAGE>
will review the includable expenses accrued during that fiscal year to the end
of the period and shall estimate the contemplated includable expenses for the
balance of that fiscal year. If, as a result of that review and estimation, it
appears likely that the includable expenses will exceed the limitations referred
to in this Section 5(b) for a fiscal year, the monthly fees payable to Schroder
under this contract for such month shall be reduced, subject to a later
reimbursement to reflect actual expenses, by an amount equal to a percentage
(which shall be equal to Schroder's reimbursement) of a pro rata portion
(prorated on the basis of the remaining months of the fiscal year, including the
month just ended) of the amount by which the includable expenses for the fiscal
year (less an amount equal to the aggregate of actual reductions made pursuant
to this provision with respect to prior months of the fiscal year) are expected
to exceed the limitations provided in this Section 5(b). For purposes of the
foregoing, the value of the net assets of each Series shall be computed in the
manner specified in Section 6, and any payments required to be made by Schroder
shall be made once a year promptly after the end of the Trust's fiscal year.
SECTION 6. COMPENSATION
(a) In consideration of the services performed by Schroder under this
Agreement, the Trust will pay Schroder, with respect to each Series, a fee at
the annual rate, as listed in Appendix B hereto. Such fee shall be accrued by
the Trust daily and shall be payable monthly in arrears on the first day of each
calendar month for services performed under this agreement during the prior
calendar month. (a) For the administrative services provided by the
Sub-Administrator pursuant to this AgreementIf the fees payable pursuant to this
provision begin to accrue before the end of any month or if this Agreement
terminates before the end of any month, the fees for the period from that date
to the end of that month or from the beginning of that month to the date of
termination, as the case may be, shall be prorated according to the proportion
that the period bears to the full month in which the effectiveness or
termination occurs. Upon the termination of this Agreement, the Trust shall pay
to Sub-SchroderAdministrat such compensation as shall be payable prior to the
effective date of such termination.
(b) In the event that this agreement is terminated, Schroder shall be
reimbursed for reasonable charges and disbursements associated with promptly
transferring to its successor as designated by the Trust the original or copies
of all accounts and records maintained by Schroder under this agreement, and
cooperating with, and providing reasonable assistance to its successor in the
establishment of the accounts and records necessary to carry out the successor's
or other person's responsibilities.
(c) Notwithstanding anything in this Agreement to the contrary,
Schroder and its affiliated persons may receive compensation or reimbursement
from the Trust with respect to (i) the provision of services on behalf of the
Series in accordance with any distribution plan adopted by the Trust pursuant to
Rule 12b-1 under the 1940 Act or (ii) the provision of shareholder support or
other services, including fund accounting services or (iii) service as a
Director or officer of the Fund.
<PAGE>
SECTION 7. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Agreement shall become effective on the date first above
written with respect to each Series of the Trust then existing and shall relate
to every other Series as of the later of the date on which the Trust's
Registration Statement relating to the shares of such Series becomes effective
or the Series commences operations.
(b) This Agreement shall continue in effect for twelve months and,
thereafter, shall be automatically renewed each year for an additional term of
one year.
(c) This Agreement may be terminated with respect to a Series at any
time, without the payment of any penalty, (i) by the Board on 60 days' written
notice to Schroder or (ii) by Schroder on 60 days' written notice to the Trust.
Upon receiving notice of termination by Schroder, the Trust shall use its best
efforts to obtain a successor administrator. Upon receipt of written notice from
the Trust of the appointment of a successor, and upon payment to Schroder of all
fees owed through the effective termination date, and reimbursement for
reasonable charges and disbursements, Schroder shall promptly transfer to the
successor administrator the original or copies of all accounts and records
maintained by Schroder under this agreement including, in the case of records
maintained on computer systems, copies of such records in machine-readable form,
and shall cooperate with, and provide reasonable assistance to, the successor
administrator in the establishment of the accounts and records necessary to
carry out the successor administrator's responsibilities. For so long as
Schroder continues to perform any of the services contemplated by this Agreement
after termination of this Agreement as agreed to by the Trust and Schroder, the
provisions of Sections 4 and 6 hereof shall continue in full force and effect.
SECTION 8. ACTIVITIES OF SCHRODER
(a) Except to the extent necessary to perform Schroder's obligations
under this Agreement, nothing herein shall be deemed to limit or restrict the
right of Schroder, or any affiliate of Schroder, or any employee of the
Schroder, to engage in any other business or to devote time and attention to the
management or other aspects of any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any other corporation,
firm, individual or association.
(b) Schroder may subcontract any or all of its functions or
responsibilities pursuant to this Agreement to one or more corporations, trusts,
firms, individuals or associations, which may be affiliates of Schroder, who
agree to comply with the terms of this Agreement. Schroder may pay those persons
for their services, but no such payment will increase Schroder's compensation
from the Trust.
SECTION 9. COOPERATION WITH INDEPENDENT ACCOUNTANTS.
Schroder shall cooperate, if applicable, with the Trust's independent public
accountants and shall take reasonable action to make all necessary information
available to such accountants for the performance of their duties.
<PAGE>
SECTION 10. SERVICE DAYS. Nothing contained in this Agreement is
intended to or shall require Schroder, in any capacity under this agreement, to
perform any functions or duties on any day other than a business day of the
Trust or of a Series. Functions or duties normally scheduled to be performed on
any day which is not a business day of the Trust or of a Series shall be
performed on, and as of, the next business day, unless otherwise required by
law.
SECTION 11. NOTICES. Any notice or other communication required by or
permitted to be given in connection with this Agreement shall be in writing and
shall be delivered in person, or by first-class mail, postage prepaid, or by
overnight or two-day private mail service to the respective party. Notice to the
Trust shall be given as follows or at such other address as the Trust may
designate in writing:
Schroder Capital Funds (Delaware)
787 Seventh Avenue
New York, New York 10019
Notice to Schroder shall be given as follows or at such other address
as Schroder may designate in writing:
Schroder Fund Advisors Inc.
787 Seventh Avenue
New York, New York 10019
Notices and other communications received by the parties at the
addresses listed above shall be deemed to have been properly given.
SECTION 12. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY
The Trustees of the Trust and the shareholders of each Series shall not
be liable for any obligations of the Trust or of the Series under this
Agreement, and Schroder agrees that, in asserting any rights or claims under
this Agreement, it shall look only to the assets and property of the Trust or
the Series to which Schroder's rights or claims relate in settlement of such
rights or claims, and not to the Trustees of the Trust or the shareholders of
the Series.
SECTION 13. MISCELLANEOUS
(a) No provisions of this Agreement may be amended or modified in
any manner except by a written agreement properly authorized and executed by
both parties hereto.
(b) This Agreement may be executed in two or more counterparts,
each of which, when so executed shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
<PAGE>
(c) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.
(d) Section and Paragraph headings in this Agreement are included
for convenience only and are not to be used to construe or interpret this
Agreement.
(e) This Agreement shall extend to and shall be binding upon the
parties hereto and their respective successors and assigns; provided, however,
that this Agreement shall not be assignable by the Trust without the written
consent of Schroder, or by Schroder, without the written consent of the Trust
authorized or approved by a resolution of the Board.
(f) This Agreement shall be governed by the laws of the State of New
York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
SCHRODER CAPITAL FUNDS (DELAWARE)
/s/ Catherine A Mazza
------------------------------------
Catherine A. Mazza
SCHRODER FUND ADVISORS INC.
/s/ Jane P. Lucas
------------------------------------
Jane P. Lucas
<PAGE>
SCHRODER CAPITAL FUNDS (DELAWARE)
ADMINISTRATION AGREEMENT
APPENDIX A
FUNDS OF THE TRUST
Schroder International Fund
Schroder U.S. Smaller Companies Fund
Schroder Latin American Fund
Schroder Emerging Markets Fund Institutional Portfolio
Schroder International Smaller Companies Fund
Schroder Micro Cap Fund
Schroder Emerging Markets Fund
Schroder International Bond Fund
<PAGE>
SCHRODER CAPITAL FUNDS (DELAWARE)
ADMINISTRATION AGREEMENT
APPENDIX B
ADMINISTRATION FEES
<TABLE>
<S><C> <C>
Fee As % Of The Average Annual
Series of the Trust Daily Net Assets of the Series
------------------- ------------------------------
Schroder International Fund
0.20% for the
first $100
million; 0.15% of
the next $150
million; and
0.125% of assets
in excess of $250
million
</TABLE>
Schroder U.S. Smaller Companies Fund,
Schroder Latin American Fund,
Schroder Emerging Markets Fund
Institutional Portfolio,
Schroder Emerging Markets Fund 0.15%
Schroder International Smaller
Companies Fund,
Schroder International Bond Fund 0.10%
Schroder Global Asset Allocation Fund 0.125%
Schroder Micro Cap Fund 0.25%
During any period in which Schroder International Fund invests all (or
substantially all) of its investment assets in a registered, open-end management
investment company, or separate series thereof, in accordance with Section
12(d)(1)(E) of the Investment Company Act of 1940, the Trust shall pay Schroder
a monthly fee on the first business day of each month based upon the average
daily value of the net assets of the Fund during the preceding month at an
annual rate of 0.15% of the average daily value of net assets of the Fund.
During any period in which Schroder Emerging Markets Fund Institutional
Portfolio invests all (or substantially all) of its investment assets in a
registered, open-end management investment company, or separate series thereof,
in accordance with Section 12(d)(1)(E) of the Investment Company Act of 1940,
the Trust shall pay Schroder a monthly fee on the first business day of each
month based upon the average daily value of the net assets of the Fund during
the preceding month at an annual rate of 0.05% of the average daily value of net
assets of the Fund.
During any period in which Schroder U.S. Smaller Companies Fund invests
all (or substantially all) of its investment assets in a registered, open-end
management investment company, or separate series thereof, in accordance with
Section 12(d)(1)(E) of the Investment Company Act of 1940, the Trust shall pay
Schroder a monthly fee on the first business day of each month based upon the
average daily value of the net assets of the Fund during the preceding month at
an annual rate of 0.25% of the average daily value of net assets of the Fund.
Exhibit (9)(b)
SCHRODER CAPITAL FUNDS (DELAWARE)
SUBADMINISTRATION AGREEMENT
THIS AGREEMENT dated as of the AGREEMENT made this 1st day of February,
1997, between Schroder Capital Funds (Delaware) (the "Fund"), a business trust
organized under the laws of the State of Delaware with its principal place of
business at Two Portland Square, Portland, Maine 04101, and Forum Administrative
Services, Limited Liability Company ("Subadministrator"), a limited liability
company organized under the laws of the State of Delaware.
WHEREAS, the Fund is registered under the Investment Company Act of
1940 as amended ("1940 Act") as an open-end management investment company and is
authorized to issue shares of beneficial interest ("Shares") in separate series
and classes;
WHEREAS, the Fund has entered into various Investment Advisory
Agreements with Schroder Capital Management International Inc. (the "Adviser")
and Administrative Services Agreement with Schroder Fund Advisers Inc. (the
"Administrator"), pursuant to which the Adviser and Administrator provide
certain management and administrative services for the Fund.
WHEREAS, the Fund desires that the Subadministrator perform certain
administrative services for each of the series of the Fund as listed in Appendix
A hereto (each a "Series") and each class of shares of each Series (each a
"Class") other than any administrative services required to be performed by the
Adviser or the Administrator, and the Subadministrator is willing to provide
those services on the terms and conditions set forth in this Agreement;
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the Fund and the Subadministrator agree as follows:
SECTION 1. APPOINTMENT. The Fund hereby appoints the Subadministrator
as subadministrator of the Fund and of each Series and any class of Shares
thereof and the Subadministrator hereby accepts such appointment, all in
accordance with the terms and conditions of this Agreement. In connection
therewith, the Fund has delivered to the Subadministrator copies of its Trust
Instrument and Bylaws, the Fund's Registration Statement and all amendments
thereto filed pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), or the 1940 Act (the "Registration Statement"), and the
current prospectus and statement of additional information of each Class of each
Series (collectively, as currently in effect and as amended or supplemented, the
"Prospectus"), all in such manner and to such extent as may from time to time be
authorized by the Fund's Board of Trustees (the "Board"), and shall promptly
furnish the Subadministrator with all amendments of or supplements to the
foregoing.
SECTION 2. FURNISHING OF EXISTING ACCOUNTS AND RECORDS. The Fund shall
promptly turn over to the Subadministrator such of the accounts and records
previously maintained by or for it as are necessary for the Subadministrator to
perform its functions under this Agreement. The Fund authorizes the
Subadministrator to rely on such
<PAGE>
accounts and records turned over to it and hereby indemnifies and will hold the
Subadministrator, its successors and assigns, harmless of and from any and all
expenses, damages, claims, suits, liabilities, actions, demands and losses
whatsoever arising out of or in connection with any error, omission, inaccuracy
or other deficiency of such accounts and records or in the failure of the Fund
to provide any portion of such or to provide any information needed by the
Subadministrator to knowledgeably perform its functions.
SECTION 3. ADMINISTRATIVE DUTIES
(a) Subject to the direction and control of the Board and in
cooperation with the Adviser and the Administrator, the Subadministrator shall
provide administrative services necessary for the Fund's operations with respect
to each Series except those services that are the responsibility of the Adviser,
the Administrator or the Series' custodian or transfer agent, all in such manner
and to such extent as may be authorized by the Board and requested by the
Administrator.
(b) With respect to the Fund, each Series and each Class thereof, as
applicable, the Subadministrator shall:
(i) oversee (A) the preparation and maintenance by the Adviser and
the Fund's custodian, transfer agent, dividend disbursing
agent and fund accountant (or if appropriate, prepare and
maintain) in such form, for such periods and in such locations
as may be required by applicable law, of all documents and
records relating to the operation of the Fund required to be
prepared or maintained by the Fund or its agents pursuant to
applicable law; (B) the reconciliation of account information
and balances among the Adviser and the Fund's custodian,
transfer agent, dividend disbursing agent and fund accountant;
(C) the transmission of purchase and redemption orders for
Shares; (D) the notification to the Adviser of available funds
for investment; and (E) the performance of fund accounting,
including the calculation of the net asset value of the
Shares;
(ii) oversee the performance of administrative and professional
services rendered to the Fund by others, including its
custodian, transfer agent and dividend disbursing agent as
well as legal, auditing and shareholder servicing and other
services performed for each Series or class thereof;
(iii) be responsible for the preparation and the printing of the
periodic updating of the Registration Statement and
Prospectus, tax returns, and reports to shareholders, the
Securities and Exchange Commission and state securities
commissions;
(iv) be responsible for the preparation of proxy and information
statements and any other communications to shareholders;
<PAGE>
(v) at the request of the Board, provide the Fund with adequate
general office space and facilities and provide persons
suitable to the Board to serve as officers of the Fund;
(vi) provide the Fund,, at the Fund's expense's request, with the
services of persons who may bare competent to perform such
supervisory, or administrative and clerical functions as are
necessary to provide effective operationsfor effective
operation of the Fund;
(vii) prepare, file and maintain the Fund's governing documents,
including the Trust Instrument and minutes of meetings
of Trustees and shareholders;
(viii) with the cooperation of the Fund's counsel, the Administrator,
the Adviser, and other relevant parties, prepare and
disseminate materials for meetings of the Board;
(ix) monitor sales of Shares and ensure that such Shares are
properly and duly registered with the Securities and Exchange
Commission and applicable state securities commissions;
(x) oversee the calculation of performance data for dissemination
to information services covering the investment company
industry, for sales literature of the Fund and other
appropriate purposes;
(xi) oversee the determination of the amount of, and supervise the
declaration of, dividends and other distributions to
shareholders as necessary to, among other things, maintain the
qualification of each Series as a regulated investment company
under the Internal Revenue Code of 1986, as amended, and
prepare and distribute to appropriate parties notices
announcing the declaration of dividends and other
distributions to shareholders; and
(xii) advise the Fund and its Board on matters concerning the Fund
and its affairs.
(c) The Subadministrator shall prepare and maintain or cause to be
prepared and maintained records in such form for such periods and in such
locations as may be required by applicable regulations, all documents and
records relating to the services provided to the Fund pursuant to this Agreement
required to be maintained pursuant to the 1940 Act, rules and regulations of the
Securities and Exchange Commission, the Internal Revenue Service and any other
national, state or local government entity with jurisdiction over the Fund. The
accounts and records pertaining to the Fund which are in possession of the
Subadministrator shall be the property of the Fund. The Fund, or the Fund's
authorized representatives, shall have access to such accounts and records at
all times during the Subadministrator's normal business hours. Upon the
reasonable request of the Fund, copies of any such accounts and records shall be
provided promptly by the Subadministrator to the Fund or the Fund's authorized
representatives. In the event the Fund designates a successor to any of the
Subadministrator's obligations under
<PAGE>
this agreement, the Subadministrator shall, at the expense and direction of the
Fund, transfer to such successor all relevant books, records and other data
established or maintained by the Subadministrator under this Agreement.
SECTION 4. STANDARD OF CARE.
(a) The Subadministrator, in performing under the terms and conditions
of this Agreement, shall use its best judgment and efforts in rendering the
services described herein, and shall incur no liability for its status under
this agreement or for any reasonable actions taken or omitted in good faith. As
an inducement to the Subadministrator's undertaking to render these services,
the Fund hereby agrees to indemnify and hold harmless the Subadministrator, its
employees, agents, officers and directors, from any and all loss, liability and
expense, including any legal expenses, arising out of the Subadministrator's
performance under this Agreement, or status, or any act or omission of the
Subadministrator, its employees, agents, officers and directors; provided that
this indemnification shall not apply to the Subadministrator's actions taken or
failures to act in cases of the Subadministrator's own bad faith, willful
misconduct or gross negligence in the performance of its duties under this
Agreement; and further provided, that the Subadministrator shall give the Fund
notice and reasonable opportunity to defend against any such loss, claim,
damage, liability or expense in the name of the Fund or the Subadministrator, or
both. The Fund will be entitled to assume the defense of any suit brought to
enforce any such claim or demand, and to retain counsel of good standing chosen
by the Fund and approved by the Subadministrator,such approval not to which
approval shall be unreasonably withheldnot be withheld unreasonably. In the
event the Fund does elect to assume the defense of any such suit and retain
counsel of good standing approved by the Subadministrator, the defendant or
defendants in such suit shall bear the fees and expenses of any additional
counsel retained by any of them; but in case the Fund does not elect to assume
the defense of any such suit, or in case the Subadministrator does not approve
of counsel chosen by the Fund or the Subadministrator has been advised that it
may have available defenses or claims which are not available or conflict with
those available to the Fund, the Fund will reimburse the Subadministrator, its
employees, agents, officers and directors for the fees and expenses of any one
counsellaw firm retained as counsel by the Subadministrator or them. The
Subadministrator may, at any time, waive its right to indemnification under this
agreement and assume its own defense. The provisions of paragraphs (b) through
(d) of this Section 4 should not in any way limit the foregoing:
(b) The Subadministrator may rely upon the advice of the Fund or of
counsel, who may be counsel for the Fund or counsel for the Subadministrator,
and upon statements of accountants, brokers and other persons believed by it in
good faith to be expert in the matters upon which they are consulted, and the
Subadministrator shall not be liable to anyone for any actions taken in good
faith upon such statements.
(c) The Subadministrator may act upon any oral instruction which it
receives and which it believes in good faith was transmitted by the person or
persons authorized by the Board of the Fund to give such oral instruction. The
Subadministrator shall have no duty or obligation to make any inquiry or effort
of certification of such oral instruction.
<PAGE>
(c) The Subadministrator shall not be liable for any action taken in
good faith reliance upon any written instruction or certified copy of any
resolution of the Board of the Fund, and the Subadministrator may rely upon the
genuineness of any such document or copy thereof reasonably believed in good
faith by the Subadministrator to have been validly executed.
(d) The Subadministrator may rely and shall be protected in acting upon
any signature, instruction, request, letter of transmittal, certificate, opinion
of counsel, statement, instrument, report, notice, consent, order, or other
paper document believed by it to be genuine and to have been signed or presented
by the purchaser, Fund or other proper party or parties.
SECTION 5. EXPENSES. Subject to any agreement by the Subadministrator
or other person to reimburse any expenses of the Fund that relate to any Series,
the Fund shall be responsible for and assume the obligation for payment of all
of its expenses, including: (a) the fee payable under Section 6 hereof; (b) any
fees payable to the Adviser; (c) any fees payable to the Administrator; (d)
expenses of issue, repurchase and redemption of Shares; (e) interest charges,
taxes and brokerage fees and commissions; (f) the cost (or appropriate share
thereof) of reasonable premiums for errors and omissions and other liability
insurance policy of FFSI; (g) premiums of insurance for the Fund, its Trustees
and officers and fidelity bond premiums; (hg) fees, interest charges and
expenses of third parties, including the Fund's custodian, transfer agent,
dividend disbursing agent and fund accountant; (ih) fees of pricing, interest,
dividend, credit and other reporting services; (ij) costs of membership in trade
associations; (kj) telecommunications expenses; (l) funds transmission expenses;
(m) auditing, legal and compliance expenses; (n) costs of forming the Fund and
maintaining its existence; (o) to the extent permitted by the 1940 Act, costs of
preparing and printing the Series' Prospectuses, subscription application forms
and shareholder reports and delivering them to existing shareholders; (p)
expenses of meetings of shareholders and proxy solicitations therefore; (q)
costs of maintaining books of original entry for portfolio and fund accounting
and other required books and accounts, of calculating the net asset value of
shares of the Fund and of preparing tax returns; (r) costs of reproduction,
stationery and supplies; (s) fees and expenses of the Fund's Trustees; (t)
compensation of the Fund's officers and employees who are not employees of the
Adviser or Sub- Subadministrator or their respective affiliated persons and
costs of other personnel (who may be employees of the Adviser, the
Administrator, the Subadministrator or their respective affiliated persons)
performing services for the Fund; (u) costs of Trustee meetings; (v) Securities
and Exchange Commission registration fees and related expenses; (w) state or
foreign securities laws registration fees and related expenses; and (x) all fees
and expenses paid by the Fund in accordance with any distribution plan adopted
pursuant to Rule 12b-1 under the 1940 Act or under any shareholder service plan
or agreement.
SECTION 6. COMPENSATION.
(a) In consideration of the services performed by the Subadministrator
under this Agreement, the Fund will pay the Subadministrator, with respect to
each Fund, a fee at the annual rate, as listed in Appendix B hereto. Such fee
shall be accrued by the Fund daily and shall be payable monthly in arrears on
the first day of each calendar month for services
<PAGE>
performed under this agreement during the prior calendar month. (a) For the
administrative services provided by the Sub-Administrator pursuant to this
AgreementIf the fees payable pursuant to this provision begin to accrue before
the end of any month or if this Agreement terminates before the end of any
month, the fees for the period from that date to the end of that month or from
the beginning of that month to the date of termination, as the case may be,
shall be prorated according to the proportion that the period bears to the full
month in which the effectiveness or termination occurs. Upon the termination of
this Agreement, the Fund shall pay to the Sub-Administrator Subadministrator
such compensation as shall be payable prior to the effective date of such
termination.
(b) In the event that this agreement is terminated, the
Subadministrator shall be reimbursed for reasonable charges and disbursements
associated with promptly transferring to its successor as designated by the Fund
or the Administrator the original or copies of all accounts and records
maintained by the Subadministrator under this agreement, and cooperating with,
and providing reasonable assistance to its successor in the establishment of the
accounts and records necessary to carry out the successor's or other person's
responsibilities.
(c) Notwithstanding anything in this Agreement to the contrary, the
Subadministrator and its affiliated persons may receive compensation or
reimbursement from the Fund with respect to (i) the provision of services on
behalf of the Series in accordance with any distribution plan adopted by the
Fund pursuant to Rule 12b-1 under the 1940 Act or (ii) the provision of
shareholder support or other services, including fund accounting services or
(iii) service as a Director or officer of the Fund.
SECTION 7. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Agreement shall become effective on the date first above
written with respect to each Series of the Fund then existing and shall relate
to every other Series as of the later of the date on which the Fund's
Registration Statement relating to the shares of such Series becomes effective
and the Series commences operations.
(b) This Agreement shall continue in effect for twelve months and,
thereafter, shall be automatically renewed each year for an additional term of
one year.
(c) This Agreement may be terminated with respect to a Series at any
time, without the payment of any penalty, (i) by the Board on 60 days' written
notice to the Subadministrator or (ii) by the Subadministrator on 60 days'
written notice to the Fund. Upon receiving notice of termination by the
Subadministrator, the Fund shall use its best efforts to obtain a successor
subadministrator. Upon receipt of written notice from the Fund of the
appointment of a successor, and upon payment to the Subadministrator of all fees
owed through the effective termination date, and reimbursement for reasonable
charges and disbursements, the Subadministrator shall promptly transfer to the
successor subadministrator the original or copies of all accounts and records
maintained by the Subadministrator under this agreement including, in the case
of records maintained on computer systems, copies of such records in
machine-readable form, and shall cooperate with, and provide reasonable
assistance to, the successor sub-
<PAGE>
administrator in the establishment of the accounts and records necessary to
carry out the successor sub-administrator's responsibilities. For so long as the
Subadministrator continues to perform any of the services contemplated by this
Agreement after termination of this Agreement as agreed to by the Fund and the
Subadministrator, the provisions of Sections 4 and 6 hereof shall continue in
full force and effect. SECTION 8. ACTIVITIES OF SUB-ADMINISTRATOR. Except to the
extent necessary to perform its obligations under this Agreement, nothing herein
shall be deemed to limit or restrict the Subadministrator's right, or the right
of any of its officers, directors or employees (whether or not they are a
Trustee, officer, employee or other affiliated person of the Fund) to engage in
any other business or to devote time and attention to the management or other
aspects of any other business, whether of a similar or dissimilar nature, or to
render services of any kind to any other corporation, trust, fund, firm,
individual or association.
SECTION 9. COOPERATION WITH INDEPENDENT ACCOUNTANTS. The
Subadministrator shall cooperate with the Fund's independent public accountants
and shall take reasonable action to make all necessary information available to
such accountants for the performance of their duties.
SECTION 10. SERVICE DAYS. Nothing contained in this Agreement is
intended to or shall require the Subadministrator, in any capacity under this
agreement, to perform any functions or duties on any day other than a business
day of the Fund or of a Series. Functions or duties normally scheduled to be
performed on any day which is not a business day of the Fund or of a Series
shall be performed on, and as of, the next business day, unless otherwise
required by law.
SECTION 11. NOTICES. Any notice or other communication required by or
permitted to be given in connection with this Agreement shall be in writing and
shall be delivered in person, or by first-class mail, postage prepaid, or by
overnight or two-day private mail service to the respective party. Notice to the
Fund shall be given as follows or at such other address as a party may have
designated in writing, shall be deemed to have been properly given:
Schroder Capital Funds (Delaware)
787 Seventh Avenue
New York, New York 10019
Notice to the Subadministrator shall be given as follows or at such
other address as a party may have designated in writing, shall be deemed to have
been properly given:
Forum Administrative Services, Limited Liability Company
Two Portland Square
Portland, Maine 04101
Notices and other communications received by the parties at the
addresses listed above.
<PAGE>
SECTION 12. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY.
The Trustees of the Fund and the shareholders of each Series shall not
be liable for any obligations of the Fund or of the Series under this Agreement,
and the Subadministrator agrees that, in asserting any rights or claims under
this Agreement, it shall look only to the assets and property of the Fund or the
Series to which the Subadminstrator's rights or claims relate in settlement of
such rights or claims, and not to the Trustees of the Fund or the shareholder of
the Series.
SECTION 13. MISCELLANEOUS
(a) No provisions of this Agreement may be amended or modified in
any manner except by a written agreement properly authorized and executed by
both parties hereto.
(b) This Agreement may be executed in two or more counterparts,
each of which, when so executed shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
(c) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.
(d) Section and Paragraph headings in this Agreement are included
for convenience only and are not to be used to construe or interpret this
Agreement.
(e) This Agreement shall extend to and shall be binding upon the
parties hereto and their respective successors and assigns; provided, however,
that this Agreement shall not be assignable by the fund without the written
consent of the Subadministrator, or by the Subadministrator, without the written
consent of the Fund authorized or approved by a resolution of the Board.
(f) This Agreement shall be governed by the laws of the State of New
York.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
SCHRODER CAPITAL FUNDS (DELAWARE)
____/s/Alexandra Poe_______
Alexandra Poe
FORUM ADMINISTRATIVE SERVICES,
LIMITED LIABILITY COMPANY
______/s/ John Y. Keffer___________
John Y. Keffer
<PAGE>
settlement of such rights or claims, and not to the Trustees of the Fund or the
shareholder of the Series.
SECTION 13. MISCELLANEOUS
(a) No provisions of this Agreement may be amended or modified in
any manner except by a written agreement properly authorized and executed by
both parties hereto.
(b) This Agreement may be executed in two or more counterparts,
each of which, when so executed shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
(c) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.
(d) Section and Paragraph headings in this Agreement are included
for convenience only and are not to be used to construe or interpret this
Agreement.
(e) This Agreement shall extend to and shall be binding upon the
parties hereto and their respective successors and assigns; provided, however,
that this Agreement shall not be assignable by the fund without the written
consent of the Subadministrator, or by the Subadministrator, without the written
consent of the Fund authorized or approved by a resolution of the Board.
(f) This Agreement shall be governed by the laws of the State of New
York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
SCHRODER CAPITAL FUNDS (DELAWARE)
By: ALEXANDRA POE, SECRETARY AND VICE
PRESIDENT___
FORUM ADMINISTRATIVE SERVICES,
LIMITED LIABILITY COMPANY
By: Forum Advisors, Inc. as Manager
By: JOHN Y. KEFFER, PRESIDENT___
<PAGE>
SCHRODER CAPITAL FUNDS (DELAWARE)
SUBADMINISTRATION AGREEMENT
APPENDIX A
SERIES OF THE FUND
Schroder International Fund
Schroder U.S. Diversified Growth Fund
Schroder U.S. Smaller Companies Fund
Schroder Latin American Fund
Schroder Emerging Markets Fund Institutional Portfolio
Schroder International Smaller Companies Fund
Schroder Micro Cap Fund
Schroder Emerging Markets Fund
Schroder International Bond Fund
<PAGE>
SCHRODER CAPITAL FUNDS (DELAWARE)
SUBADMINISTRATION AGREEMENT
APPENDIX B
SERIES OF THE FUND
International Equity Fund
Schroder U.S. Diversified Growth Fund
Schroder U.S. Smaller Companies Fund
SCHEDULE B
SUBADMINISTRATION FEES
<TABLE>
<S> <C>
Fee As % of the Average Annual
Series of the Fund Daily Net Assets of the Series
------------------ ------------------------------
Schroder International Fund 0.05%
Schroder U.S. Diversified Growth Fund,
Schroder U.S. Smaller Companies Fund,
Schroder Latin American Fund,
Schroder Emerging Markets Fund
Institutional Portfolio and
Schroder Micro Cap Fund 0.10%
Schroder International Smaller Companies Fund,
Schroder International Bond Fund, and
Schroder Emerging Markets Fund 0.075%
</TABLE>
(a) The minimum subadministration fee per Series, except Schroder
International Fund, Schroder U.S. Diversified Growth Fund, Schroder U.S. Smaller
Companies Fund, Schroder Latin American Fund and Schroder Emerging Markets Fund
Institutional Portfolio, is $25,000 plus $12,000 per Class for each Class of the
Series above one.
(b) During any period in which Schroder Emerging Markets Fund
Institutional Portfolio invests all (or substantially all) of its investable
assets in a registered, open-end management investment company, or separate
Series thereof ("Core Portfolio"), the above listed fee for this Series shall be
0.05%. The Subadministrator agrees to waive this fee only after the full waiver
<PAGE>
of fees payable by the Series or the Core Portfolio to the Adviser and the
Administrator, and then only to the extent necessary to keep the total expense
ratio for this Series (including its pro rata share of the expenses of the Core
Portfolio) at or below 1.60% of average annual daily net assets in the Series.
(c) During any period in which Schroder U.S. Smaller Companies Fund invests
all (or substantially all) of its investable assets in a Core Portfolio, the
above listed fee for this Series shall be 0.075%.
Exhibit (11)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the following with respect to Post-Effective Amendment No.
68 to the Registration Statement on Form N-1A (File No. 2-34215) of Schroder
Capital Funds (Delaware) (consisting of Investor Shares of Schroder Emerging
Markets Fund, Schroder U.S. Diversified Growth Fund, Schroder International
Fund, Schroder International Smaller Companies Fund, Schroder U.S. Smaller
Companies Fund, and Schroder Micro Cap Fund and Advisor Shares of Schroder U.S.
Smaller Companies Fund, Schroder Emerging Markets Fund (collectively the
"Funds"):
1. The reference to our firm under the heading "Financial Highlights" in
the Prospectus.
2. The incorporation by reference of our reports dated December 19, 1997
and July 21, 1998, on our audits of the financial statements and
financial highlights of the Funds, which reports are included in the
Fund's Annual Reports for the years ended October 31, 1997 and May 31,
1998, which are incorporated by reference in the Statement of
Additional Information.
3. The reference to our firm under the heading "Independent Accountants"
in the Prospectus and Statement of Additional Information.
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 28, 1998
Other Exhibit
SCHRODER CAPITAL FUNDS (DELAWARE)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that FERGAL CASSIDY constitutes and
appoints THOMAS G. SHEEHAN, CHERYL O. TUMLIN, MARK J. SMITH, and CATHERINE A.
MAZZA and each of them, as true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities to sign the Registration Statement on Form
N-1A and any or all amendments thereto of SCHRODER CAPITAL FUNDS (DELAWARE), and
to file the same, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
/s/ Fergal Cassidy
------------------------
FERGAL CASSIDY
Dated: June 26, 1998
SCHRODER CAPITAL FUNDS (DELAWARE)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that SHARON L. HAUGH constitutes and
appoints THOMAS G. SHEEHAN, CHERYL O. TUMLIN, MARK J. SMITH, and CATHERINE A.
MAZZA and each of them, as true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, for her and in her name, place
and stead, in any and all capacities to sign the Registration Statement on Form
N-1A and any or all amendments thereto of SCHRODER CAPITAL FUNDS (DELAWARE), and
to file the same, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as she might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or their or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
/s/ Sharon L Haugh
--------------------------------
SHARON L. HAUGH
Dated: July ___, 1998
SCHRODER CAPITAL FUNDS (DELAWARE)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the HON. DAVID N. DINKINS
constitutes and appoints THOMAS G. SHEEHAN, CHERYL O. TUMLIN, MARK J. SMITH, and
CATHERINE A. MAZZA and each of them, as true and lawful attorneys-in-fact and
agents with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities to sign the Registration
Statement on Form N-1A and any or all amendments thereto of SCHRODER CAPITAL
FUNDS (DELAWARE), and to file the same, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
/s/ David N. Dinkins
---------------------------------
HON. DAVID N. DINKINS
Dated: July 30, 1998
SCHRODER CAPITAL FUNDS (DELAWARE)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that PETER S. KNIGHT constitutes and
appoints THOMAS G. SHEEHAN, CHERYL O. TUMLIN, MARK J. SMITH, and CATHERINE A.
MAZZA and each of them, as true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities to sign the Registration Statement on Form
N-1A and any or all amendments thereto of SCHRODER CAPITAL FUNDS (DELAWARE), and
to file the same, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
/s/ Peter S. Knight
----------------------------
PETER S. KNIGHT
Dated: July __, 1998
SCHRODER CAPITAL FUNDS (DELAWARE)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that HERMANN C. SCHWAB constitutes and
appoints THOMAS G. SHEEHAN, CHERYL O. TUMLIN, MARK J. SMITH, and CATHERINE A.
MAZZA and each of them, as true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities to sign the Registration Statement on Form
N-1A and any or all amendments thereto of SCHRODER CAPITAL FUNDS (DELAWARE), and
to file the same, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
/s/ Hermann C. Schwab
-----------------------------
HERMANN C. SCHWAB
Dated: July 29th, 1998
SCHRODER CAPITAL FUNDS (DELAWARE)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that MARK J. SMITH constitutes and
appoints THOMAS G. SHEEHAN, CHERYL O. TUMLIN, and CATHERINE A. MAZZA and each of
them, as true and lawful attorneys-in-fact and agents with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities to sign the Registration Statement on Form N-1A and any
or all amendments thereto of SCHRODER CAPITAL FUNDS (DELAWARE), and to file the
same, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
/s/ Mark J. Smith
-----------------------------
MARK J. SMITH
Dated: July 30th, 1998
SCHRODER CAPITAL FUNDS (DELAWARE)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that JOHN I. HOWELL constitutes and
appoints THOMAS G. SHEEHAN, CHERYL O. TUMLIN, MARK J. SMITH, and CATHERINE A.
MAZZA and each of them, as true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities to sign the Registration Statement on Form
N-1A and any or all amendments thereto of SCHRODER CAPITAL FUNDS (DELAWARE), and
to file the same, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
/s/ John I. Howell
-----------------------
JOHN I. HOWELL
Dated: August 4, 1998
SCHRODER CAPITAL FUNDS (DELAWARE)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that PETER E. GUERNSEY constitutes and
appoints THOMAS G. SHEEHAN, CHERYL O. TUMLIN, MARK J. SMITH, and CATHERINE A.
MAZZA and each of them, as true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities to sign the Registration Statement on Form
N-1A and any or all amendments thereto of SCHRODER CAPITAL FUNDS (DELAWARE), and
to file the same, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
/s/ Peter E. Guernsey
-------------------------------
PETER E. GUERNSEY
Dated: July ___, 1998
SCHRODER CAPITAL FUNDS (DELAWARE)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that CLARENCE F. MICHALIS constitutes
and appoints THOMAS G. SHEEHAN, CHERYL O. TUMLIN, MARK J. SMITH, and CATHERINE
A. MAZZA and each of them, as true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities to sign the Registration Statement on Form
N-1A and any or all amendments thereto of SCHRODER CAPITAL FUNDS (DELAWARE), and
to file the same, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
/s/ Clarence F. Michalis
-------------------------------------
CLARENCE F. MICHALIS
Dated: August 10, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE NORWEST
ADVANTAGE ANNUAL REPORT DATED MAY 31, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000019532
<NAME> SCHRODER CAPITAL FUNDS (DELAWARE)
<SERIES>
<NUMBER>08
<NAME>EMERGING MARKETS FUND-INVESTOR
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> OCT-31-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 17,832
<INVESTMENTS-AT-VALUE> 17,832
<RECEIVABLES> 17,876
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 35,708
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5
<TOTAL-LIABILITIES> 5
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20,895
<SHARES-COMMON-STOCK> 1,971
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 39
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (917)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (2,190)
<NET-ASSETS> 17,827
<DIVIDEND-INCOME> 63
<INTEREST-INCOME> 10
<OTHER-INCOME> (31)
<EXPENSES-NET> 5
<NET-INVESTMENT-INCOME> 37
<REALIZED-GAINS-CURRENT> (915)
<APPREC-INCREASE-CURRENT> (2,190)
<NET-CHANGE-FROM-OPS> (3,068)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 20,895
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 17,827
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 42,551
<AVERAGE-NET-ASSETS> 3,691
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> (.98)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.04
<EXPENSE-RATIO> .85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SCHRODER
EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO SEMI-ANNUAL REPORT DATED 4/30/98
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 042
<NAME> SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 207,402,636
<INVESTMENTS-AT-VALUE> 207,402,636
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 11,533
<TOTAL-ASSETS> 207,414,169
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 57,030
<TOTAL-LIABILITIES> 57,030
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 209,925,845
<SHARES-COMMON-STOCK> 2,347,273
<SHARES-COMMON-PRIOR> 2,276,150
<ACCUMULATED-NII-CURRENT> 861,883
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (23,535,678)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 20,105,089
<NET-ASSETS> 207,357,139
<DIVIDEND-INCOME> 1,969,579
<INTEREST-INCOME> 434,073
<OTHER-INCOME> (1,152,796)
<EXPENSES-NET> 197,542
<NET-INVESTMENT-INCOME> 1,053,314
<REALIZED-GAINS-CURRENT> (12,770,742)
<APPREC-INCREASE-CURRENT> 18,187,887
<NET-CHANGE-FROM-OPS> 6,470,459
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 26,384
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,056,417
<NUMBER-OF-SHARES-REDEEMED> 296,767
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,641,377
<ACCUMULATED-NII-PRIOR> 431,813
<ACCUMULATED-GAINS-PRIOR> (10,764,936)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 201,542
<AVERAGE-NET-ASSETS> 25,444,335
<PER-SHARE-NAV-BEGIN> 11.11
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> .35
<PER-SHARE-DIVIDEND> .01
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.50
<EXPENSE-RATIO> 1.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SCHRODER
EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO SEMI-ANNUAL REPORT DATED 4/30/98
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 041
<NAME> SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 207,402,636
<INVESTMENTS-AT-VALUE> 207,402,636
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 11,533
<TOTAL-ASSETS> 207,414,169
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 57,030
<TOTAL-LIABILITIES> 57,030
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 209,925,845
<SHARES-COMMON-STOCK> 15,755,974
<SHARES-COMMON-PRIOR> 16,199,944
<ACCUMULATED-NII-CURRENT> 861,883
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (23,535,678)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 20,105,089
<NET-ASSETS> 207,357,139
<DIVIDEND-INCOME> 1,969,579
<INTEREST-INCOME> 434,073
<OTHER-INCOME> (1,152,796)
<EXPENSES-NET> 197,542
<NET-INVESTMENT-INCOME> 1,053,314
<REALIZED-GAINS-CURRENT> (12,770,742)
<APPREC-INCREASE-CURRENT> 18,187,887
<NET-CHANGE-FROM-OPS> 6,470,459
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 596,860
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 28,954,939
<NUMBER-OF-SHARES-REDEEMED> 33,275,850
<SHARES-REINVESTED> 355,423
<NET-CHANGE-IN-ASSETS> 2,641,377
<ACCUMULATED-NII-PRIOR> 431,813
<ACCUMULATED-GAINS-PRIOR> (10,764,936)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 201,542
<AVERAGE-NET-ASSETS> 171,693,368
<PER-SHARE-NAV-BEGIN> 11.08
<PER-SHARE-NII> .06
<PER-SHARE-GAIN-APPREC> .35
<PER-SHARE-DIVIDEND> .04
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.45
<EXPENSE-RATIO> 1.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SCHRODER
INTERNATIONAL FUND SEMI-ANNUAL REPORT DATED 4/30/98 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 022
<NAME> SCHRODER INTERNATIONAL FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 185,824,077
<INVESTMENTS-AT-VALUE> 185,824,077
<RECEIVABLES> 2,801,226
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 188,625,303
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 174,743
<TOTAL-LIABILITIES> 174,743
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 135,746,519
<SHARES-COMMON-STOCK> 205
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 453,266
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 6,597,967
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 45,652,808
<NET-ASSETS> 188,450,560
<DIVIDEND-INCOME> 1,038,431
<INTEREST-INCOME> 527,118
<OTHER-INCOME> (672,149)
<EXPENSES-NET> 262,909
<NET-INVESTMENT-INCOME> 678,179
<REALIZED-GAINS-CURRENT> 6,686,245
<APPREC-INCREASE-CURRENT> 18,243,629
<NET-CHANGE-FROM-OPS> 25,608,053
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,140,556
<DISTRIBUTIONS-OF-GAINS> 15,603,343
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,500
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 188,450,560
<ACCUMULATED-NII-PRIOR> 2,915,643
<ACCUMULATED-GAINS-PRIOR> 15,515,065
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 262,909
<AVERAGE-NET-ASSETS> 1,623
<PER-SHARE-NAV-BEGIN> 16.35
<PER-SHARE-NII> .04
<PER-SHARE-GAIN-APPREC> 2.63
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.02
<EXPENSE-RATIO> 1.24
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SCHRODER
INTERNATIONAL FUND SEMI-ANNUAL REPORT DATED 4/30/98 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 021
<NAME> SCHRODER INTERNATIONAL FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 185,824,077
<INVESTMENTS-AT-VALUE> 185,824,077
<RECEIVABLES> 2,801,226
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 188,625,303
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 174,743
<TOTAL-LIABILITIES> 174,743
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 135,746,519
<SHARES-COMMON-STOCK> 9,907,267
<SHARES-COMMON-PRIOR> 10,410,792
<ACCUMULATED-NII-CURRENT> 453,266
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 6,597,967
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 45,652,808
<NET-ASSETS> 188,450,560
<DIVIDEND-INCOME> 1,038,431
<INTEREST-INCOME> 527,118
<OTHER-INCOME> (672,149)
<EXPENSES-NET> 262,909
<NET-INVESTMENT-INCOME> 678,179
<REALIZED-GAINS-CURRENT> 6,686,245
<APPREC-INCREASE-CURRENT> 18,243,629
<NET-CHANGE-FROM-OPS> 25,608,053
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,140,556
<DISTRIBUTIONS-OF-GAINS> 15,603,343
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 37,535,652
<NUMBER-OF-SHARES-REDEEMED> (59,966,674)
<SHARES-REINVESTED> 12,794,795
<NET-CHANGE-IN-ASSETS> 188,450,560
<ACCUMULATED-NII-PRIOR> 2,915,643
<ACCUMULATED-GAINS-PRIOR> 15,515,065
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 262,909
<AVERAGE-NET-ASSETS> 180,834,977
<PER-SHARE-NAV-BEGIN> 18.37
<PER-SHARE-NII> .06
<PER-SHARE-GAIN-APPREC> 2.43
<PER-SHARE-DIVIDEND> .29
<PER-SHARE-DISTRIBUTIONS> 1.55
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.02
<EXPENSE-RATIO> .99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SCHRODER
INTERNATIONAL SMALLER COMPANIES FUND SEMI-ANNUAL REPORT DATED 4/30/98 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 002
<NAME> SCHRODER INTERNATIONAL SMALLER COMPANIES FUND-INVESTOR
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 6,403,344
<INVESTMENTS-AT-VALUE> 6,403,344
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 10,577
<TOTAL-ASSETS> 6,413,921
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,404
<TOTAL-LIABILITIES> 1,404
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,379,300
<SHARES-COMMON-STOCK> 634,039
<SHARES-COMMON-PRIOR> 741,676
<ACCUMULATED-NII-CURRENT> (1,528)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 130,600
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (95,855)
<NET-ASSETS> 6,412,517
<DIVIDEND-INCOME> 43,437
<INTEREST-INCOME> 2,670
<OTHER-INCOME> (38,104)
<EXPENSES-NET> 9,529
<NET-INVESTMENT-INCOME> (1,526)
<REALIZED-GAINS-CURRENT> 130,603
<APPREC-INCREASE-CURRENT> 857,380
<NET-CHANGE-FROM-OPS> 986,457
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 9,569
<DISTRIBUTIONS-OF-GAINS> 377,722
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 145,822
<NUMBER-OF-SHARES-REDEEMED> 1,244,451
<SHARES-REINVESTED> 75,896
<NET-CHANGE-IN-ASSETS> (423,567)
<ACCUMULATED-NII-PRIOR> 9,567
<ACCUMULATED-GAINS-PRIOR> 377,721
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 43,986
<AVERAGE-NET-ASSETS> 6,408,210
<PER-SHARE-NAV-BEGIN> 9.22
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 1.41
<PER-SHARE-DIVIDEND> .01
<PER-SHARE-DISTRIBUTIONS> 0.51
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.11
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE NORWEST
ADVANTAGE ANNUAL REPORT DATED MAY 31, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000019532
<NAME> SCHRODER CAPITAL FUNDS (DELAWARE)
<SERIES>
<NUMBER>06
<NAME>MICRO CAP FUND
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> OCT-15-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 5,891,543
<INVESTMENTS-AT-VALUE> 6,482,616
<RECEIVABLES> 26,517
<ASSETS-OTHER> 830
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,509,963
<PAYABLE-FOR-SECURITIES> 139,085
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 31,279
<TOTAL-LIABILITIES> 170,364
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,158,961
<SHARES-COMMON-STOCK> 444,612
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 589,565
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 591,073
<NET-ASSETS> 6,333,599
<DIVIDEND-INCOME> 6,833
<INTEREST-INCOME> 19,542
<OTHER-INCOME> 0
<EXPENSES-NET> 42,924
<NET-INVESTMENT-INCOME> (16,549)
<REALIZED-GAINS-CURRENT> 651,514
<APPREC-INCREASE-CURRENT> 591,073
<NET-CHANGE-FROM-OPS> 1,226,038
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 45,400
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,068,331
<NUMBER-OF-SHARES-REDEEMED> 954,770
<SHARES-REINVESTED> 45,400
<NET-CHANGE-IN-ASSETS> 6,339,599
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 26,896
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 129,568
<AVERAGE-NET-ASSETS> 3,429,583
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (.04)
<PER-SHARE-GAIN-APPREC> 4.50
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .20
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.26
<EXPENSE-RATIO> 2.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
SCHRODER U.S. DIVERSIFIED GROWTH FUND SEMI-ANNUAL REPORT DATED 4/30/98 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 001
<NAME> SCHRODER U.S. DIVERSIFIED GROWTH FUND-INVESTOR
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 9,110,087
<INVESTMENTS-AT-VALUE> 14,014,488
<RECEIVABLES> 789,177
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 14,803,665
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 773,004
<TOTAL-LIABILITIES> 773,004
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,520,938
<SHARES-COMMON-STOCK> 1,657,775
<SHARES-COMMON-PRIOR> 1,412,181
<ACCUMULATED-NII-CURRENT> (30,521)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,635,843
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,904,401
<NET-ASSETS> 14,030,661
<DIVIDEND-INCOME> 71,548
<INTEREST-INCOME> 2,556
<OTHER-INCOME> 0
<EXPENSES-NET> 104,625
<NET-INVESTMENT-INCOME> (30,521)
<REALIZED-GAINS-CURRENT> 1,636,421
<APPREC-INCREASE-CURRENT> 748,893
<NET-CHANGE-FROM-OPS> 2,354,793
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 3,866,690
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 259,214
<NUMBER-OF-SHARES-REDEEMED> 1,438,833
<SHARES-REINVESTED> 2,861,027
<NET-CHANGE-IN-ASSETS> 169,511
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 3,866,112
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 52,137
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 120,651
<AVERAGE-NET-ASSETS> 14,018,458
<PER-SHARE-NAV-BEGIN> 9.82
<PER-SHARE-NII> (.02)
<PER-SHARE-GAIN-APPREC> 1.40
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 2.74
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.46
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE NORWEST
ADVANTAGE ANNUAL REPORT DATED MAY 31, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000019532
<NAME> SCHRODER CAPITAL FUNDS (DELAWARE)
<SERIES>
<NUMBER>032
<NAME>U.S. SMALLER COMPANIES FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 56,224,866
<INVESTMENTS-AT-VALUE> 56,224,866
<RECEIVABLES> 203,989
<ASSETS-OTHER> 816
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 56,429,671
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 206,137
<TOTAL-LIABILITIES> 206,137
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 47,523,710
<SHARES-COMMON-STOCK> 308,725
<SHARES-COMMON-PRIOR> 6,098
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 127,185
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8,572,639
<NET-ASSETS> 56,223,534
<DIVIDEND-INCOME> 235,045
<INTEREST-INCOME> 128,809
<OTHER-INCOME> (320,187)
<EXPENSES-NET> 264,142
<NET-INVESTMENT-INCOME> (220,475)
<REALIZED-GAINS-CURRENT> 2,230,689
<APPREC-INCREASE-CURRENT> 4,722,131
<NET-CHANGE-FROM-OPS> 6,732,345
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 3,389,867
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,400,648
<NUMBER-OF-SHARES-REDEEMED> 1,088,176
<SHARES-REINVESTED> 27,828
<NET-CHANGE-IN-ASSETS> 30,038,457
<ACCUMULATED-NII-PRIOR> 887
<ACCUMULATED-GAINS-PRIOR> 1,508,223
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 309,061
<AVERAGE-NET-ASSETS> 40,481,651
<PER-SHARE-NAV-BEGIN> 13.26
<PER-SHARE-NII> (.06)
<PER-SHARE-GAIN-APPREC> 2.82
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 1.26
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.72
<EXPENSE-RATIO> .84
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE NORWEST
ADVANTAGE ANNUAL REPORT DATED MAY 31, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000019532
<NAME> SCHRODER CAPITAL FUNDS (DELAWARE)
<SERIES>
<NUMBER>031
<NAME>U.S. SMALLER COMPANIES FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 56,224,866
<INVESTMENTS-AT-VALUE> 56,224,866
<RECEIVABLES> 203,989
<ASSETS-OTHER> 816
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 56,429,671
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 206,137
<TOTAL-LIABILITIES> 206,137
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 47,523,710
<SHARES-COMMON-STOCK> 3,501,037
<SHARES-COMMON-PRIOR> 1,969,016
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 127,185
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8,572,639
<NET-ASSETS> 56,223,534
<DIVIDEND-INCOME> 235,045
<INTEREST-INCOME> 128,809
<OTHER-INCOME> (320,187)
<EXPENSES-NET> 264,142
<NET-INVESTMENT-INCOME> (220,475)
<REALIZED-GAINS-CURRENT> 2,230,689
<APPREC-INCREASE-CURRENT> 4,722,131
<NET-CHANGE-FROM-OPS> 6,732,345
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 3,389,867
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 30,815,123
<NUMBER-OF-SHARES-REDEEMED> 11,273,810
<SHARES-REINVESTED> 2,814,366
<NET-CHANGE-IN-ASSETS> 30,038,457
<ACCUMULATED-NII-PRIOR> 887
<ACCUMULATED-GAINS-PRIOR> 1,508,223
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 309,061
<AVERAGE-NET-ASSETS> 40,481,651
<PER-SHARE-NAV-BEGIN> 13.24
<PER-SHARE-NII> (.05)
<PER-SHARE-GAIN-APPREC> 2.79
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 1.26
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.76
<EXPENSE-RATIO> .61
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
