SCHRODER CAPITAL FUNDS /DELAWARE/, 497, 1999-03-09

SCHRODER CAPITAL FUNDS /DELAWARE/
497, 1999-03-09

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[LOGO] SCHRODERS

PROSPECTUS

INVESTOR SHARES
March 1, 1999

[GRAPHIC OF THREE GLOBES, MAP AND COMPASS, FLAGS OVER CASH]

Schroder International Fund
Schroder Emerging Markets Fund
Schroder International Smaller Companies Fund
Schoder International Bond Fund
Schroder U.S. Diversified Growth Fund
Schroder U.S. Smaller Companies Fund
Schroder Micro Cap Fund

NEITHER THE U.S. SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<PAGE>

SCHRODERS' GLOBAL NETWORK
YOUR WINDOW ON THE WORLD

[World Map]

<PAGE>

[LOGO] SCHRODERS
- --------------------------------------------------------------------------------

PROSPECTUS

MARCH 1, 1999

SCHRODER CAPITAL FUNDS (DELAWARE)
INVESTOR SHARES

This Prospectus describes seven mutual funds offered by Schroder Capital Funds
(Delaware). The Trust offers Investor Shares of the Funds in this Prospectus.

SCHRODER INTERNATIONAL FUND seeks long-term capital appreciation through
investment in securities markets outside the United States.

SCHRODER EMERGING MARKETS FUND seeks long-term capital appreciation. The
Fund invests primarily in equity securities of issuers domiciled or
doing business in emerging market countries in regions such as Southeast
Asia, Latin America, and Eastern and Southern Europe.

SCHRODER INTERNATIONAL SMALLER COMPANIES FUND seeks long-term capital
appreciation through investment in securities markets outside the United
States. The Fund invests primarily in equity securities of companies
with market capitalizations of $1.5 billion or less.

SCHRODER INTERNATIONAL BOND FUND seeks a high rate of total return. The
Fund normally invests in debt securities and debt-related investments of
issuers domiciled outside the United States.

SCHRODER U.S. DIVERSIFIED GROWTH FUND seeks growth of capital by
investing in equity securities of companies in the United States.

SCHRODER U.S. SMALLER COMPANIES FUND seeks capital appreciation by
investing in equity securities of issuers domiciled in the United States
with market capitalizations of $1.5 billion or less.

SCHRODER MICRO CAP FUND seeks long-term capital appreciation by
investing in equity securities of issuers domiciled in the United States
with market capitalizations in the bottom third of companies in the
Russell 2000 Growth Index or of $300 million or less.

Shares of Schroder Micro Cap Fund are not currently being offered to the
public generally, and may be purchased only by existing shareholders and
by employees of Schroder Capital Management International Inc.
("Schroder"), the Fund's investment adviser, and its affiliates. The
determination to discontinue the general offering was made by Schroder
after consultation with the Board of Trustees of the Trust. Schroder
intends to review the discontinuation periodically, and may recommend at
any time that a more general offering of the Fund's shares be resumed.

Each of SCHRODER INTERNATIONAL FUND, SCHRODER EMERGING MARKETS FUND, SCHRODER
INTERNATIONAL SMALLER COMPANIES FUND, SCHRODER INTERNATIONAL BOND FUND, AND
SCHRODER U.S. SMALLER COMPANIES FUND seeks to achieve its investment objective
by investing substantially all of its investable assets in a separate Portfolio
(each a "Portfolio") of Schroder Capital Funds or Schroder Capital Funds II that
has the same investment objective as, and investment policies that are
substantially similar to those of, that Fund.

Schroder manages the Funds. You can call the Trust at (800) 730-2932 to find out
more about these Funds and other funds in the Schroder family.

This Prospectus explains what you should know about the Funds before you invest.
Please read it carefully.

<PAGE>

TABLE OF CONTENTS

Page
SUMMARY INFORMATION................................................. 3
Schroder International Fund......................................... 3
Schroder Emerging Markets Fund...................................... 5
Schroder International Smaller Companies Fund....................... 7
Schroder International Bond Fund.................................... 8
Schroder U.S. Diversified Growth Fund............................... 10
Schroder U.S. Smaller Companies Fund................................ 11
Schroder Micro Cap Fund............................................. 12
FEES AND EXPENSES................................................... 14
OTHER INVESTMENT STRATEGIES AND RISKS............................... 16
MANAGEMENT OF THE FUNDS............................................. 20
HOW THE FUNDS' SHARES ARE PRICED.................................... 23
HOW TO BUY SHARES................................................... 23
HOW TO SELL SHARES.................................................. 25
EXCHANGES........................................................... 26
DIVIDENDS AND DISTRIBUTIONS......................................... 26
TAXES............................................................... 26
YEAR 2000 DISCLOSURE................................................ 27
FINANCIAL HIGHLIGHTS................................................ 28

2
<PAGE>

SUMMARY INFORMATION

The Funds offered by Schroder Capital Funds (Delaware) provide a broad range of
investment choices. The Trust offers Advisor Shares, which have lower investment
minimums and higher fees and expenses, of all of the Funds (other than Schroder
Micro Cap Fund) in a separate prospectus. This summary identifies each Fund's
investment objective, principal investment strategies, and principal risks. 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 the Trust without a vote of the shareholders.

Each of SCHRODER INTERNATIONAL FUND, SCHRODER EMERGING MARKETS FUND, SCHRODER
INTERNATIONAL SMALLER COMPANIES FUND, SCHRODER INTERNATIONAL BOND FUND, and
SCHRODER U.S. SMALLER COMPANIES FUND seeks to achieve its investment objective
by investing substantially all of its investable assets in a separate Portfolio
of Schroder Capital Funds or Schroder Capital Funds II that has the same
investment objective as, and investment policies that are substantially similar
to those of, that Fund.

IN REVIEWING THE INVESTMENT OBJECTIVE AND POLICIES OF EACH OF THOSE FUNDS, YOU
SHOULD ASSUME THAT THE INVESTMENT OBJECTIVE AND POLICIES OF THE CORRESPONDING
PORTFOLIO ARE THE SAME IN ALL MATERIAL RESPECTS AS THOSE OF THE FUND. SCHRODER
IS THE INVESTMENT ADVISER TO EACH OF THESE FUNDS AND TO EACH PORTFOLIO.

After the narrative describing each Fund is a chart showing how the investment
returns of that Fund's Investor Shares have varied from year to year. The chart
shows returns for each full calendar year since the Fund commenced operations.
The table following the chart shows how the Fund's average annual returns for
the last year, for the last five years, and for the last ten years or the life
of the Fund (as applicable) compare to a broad-based securities market index.
The bar chart and table provide some indication of the risks of investing in the
Fund by showing the variability of its returns (where more than one calendar
year of performance is shown) and comparing the Fund's performance to a broad
measure of market performance. PAST PERFORMANCE IS NOT NECESSARILY AN INDICATION
OF FUTURE PERFORMANCE. It is possible to lose money on investments in the Funds.

For a discussion of recent market and portfolio developments affecting each
Fund's performance, see the Funds' most recent financial reports. You can call
the Trust at (800) 290-9826 to request a free copy of the financial reports.

SCHRODER INTERNATIONAL FUND

INVESTMENT OBJECTIVE. Long-term capital appreciation through investment in
securities markets outside the United States.

RELATED PORTFOLIO. Schroder International Fund invests substantially all of its
assets in International Equity Fund, a diversified portfolio of Schroder Capital
Funds.

PRINCIPAL INVESTMENTS. The Fund normally invests at least 65% of its total
assets in equity securities of companies domiciled outside of the United States,
and will invest in securities of companies domiciled in at least three countries
other than the United States. The Fund invests in a variety of equity
securities, including common and preferred stocks, securities convertible into
common and preferred stocks, and warrants to purchase common and preferred
stocks.

INVESTMENT STRATEGIES. The Fund normally invests a substantial portion of its
assets in countries included in the Morgan Stanley Capital International EAFE
Index, which is a market capitalization-weighted index of companies in developed
market countries in Europe, Australia and the Far East.

The Fund invests in issuers that Schroder believes offer the potential for
capital growth. In identifying candidates for investment, Schroder considers a
variety of factors, including the issuer's likelihood of above average earnings
growth, the securities' attractive relative valuation, and whether the issuer
has any proprietary advantages. Securities generally are sold when they reach
fair valuation or when significantly more attractive investment candidates
become available.

3
<PAGE>

The Fund also may do the following:

[ARROW Invest in securities of issuers domiciled or doing business in
"emerging market" countries.

[ARROW] Invest in securities of closed-end investment companies that invest
primarily in foreign securities.

PRINCIPAL RISKS.

[ARROW] FOREIGN SECURITIES. Investments in foreign securities entail risks not
present in domestic investments including, among others, risks related
to political or economic instability, currency exchange, and taxation.

[ARROW] EQUITY SECURITIES. Another risk of investing in the Fund is the risk
that the value of the equity securities in the portfolio will fall, or
will not appreciate as anticipated by Schroder, due to factors that
adversely affect markets generally or particular companies in the
portfolio.

[ARROW] GEOGRAPHIC CONCENTRATION. There is no limit on the amount of the Fund's
assets that may be invested in securities of issuers domiciled in any
one country. To the extent that the Fund invests a substantial amount
of its assets in one country, it will be more susceptible to the
political and economic developments and market fluctuations in that
country than if it invested in a more geographically diversified
portfolio.

[ARROW] EMERGING MARKETS. The Fund may invest in "emerging market" countries
whose securities markets may experience heightened levels of
volatility. The risks of investing in emerging markets include greater
political and economic uncertainties than in foreign developed markets,
currency transfer restrictions, a more limited number of potential
buyers, and an emerging market country's dependence on revenue from
particular commodities or international aid. Additionally, the
securities markets and legal systems in emerging market countries may
only be in a developmental stage and may provide few, or none, of the
advantages or protections of markets or legal systems available in more
developed countries. Emerging market countries may experience extremely
high levels of inflation, which may adversely affect those countries'
economies and securities markets.

[EDGAR REPRESENTATION OF GRAPH CHART]

Calendar Year Annual Return
- ------------- -------------
1989 22.13%
1990 -11.41%
1991 4.62%
1992 -4.01%
1993 45.72%
1994 -0.27%
1995 11.57%
1996 9.93%
1997 3.34%
1998 13.52%

During the periods shown above, the highest quarterly return was 18.20% for the
quarter ended September 30, 1989, and the lowest was -19.79% for the quarter
ended September 30, 1990.
<TABLE>
<S> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS PAST ONE YEAR PAST FIVE YEARS PAST TEN YEARS
(FOR PERIODS ENDING DECEMBER 31, 1998)

Schroder International Fund 13.52% 7.49% 8.55%

Morgan Stanley Capital International EAFE Index* 20.06% 9.33% 5.73%
</TABLE>

* The Morgan Stanley Capital International EAFE Index is a market
weighted index composed of companies representative of the market
structure of 20 developed market countries in Europe, Australia, Asia
and the Far East, and reflects dividends net of non-recoverable
withholding tax.

4
<PAGE>

SCHRODER EMERGING MARKETS FUND

INVESTMENT OBJECTIVE. To seek long-term capital appreciation.

RELATED PORTFOLIO. Schroder Emerging Markets Fund invests substantially all of
its assets in Schroder EM Core Portfolio, a non-diversified portfolio of
Schroder Capital Funds.

PRINCIPAL INVESTMENTS. The Fund normally invests at least 65% of its total
assets in equity securities of companies determined by Schroder to be "emerging
market" issuers. The Fund may invest the remaining 35% of its assets in
securities of issuers located anywhere in the world. The Fund invests in a
variety of equity securities, including common and preferred stocks, securities
convertible into common and preferred stocks, and warrants to purchase common
and preferred stocks.

INVESTMENT STRATEGIES. The Fund invests primarily in equity securities of
issuers domiciled or doing business in "emerging market" countries in regions
such as Southeast Asia, Latin America, and Eastern and Southern Europe.
"Emerging market" countries are countries not included at the time of investment
in the Morgan Stanley International World Index of major world economies.
Economies currently in the Index include: Australia, Austria, Belgium, Canada,
Denmark, Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, New
Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United
Kingdom, and the United States. Schroder may at times determine based on its own
analysis that an economy included in the Index should nonetheless be considered
an emerging market country, in which case that country would constitute an
emerging market country for purposes of the Fund's investments. The Fund
normally will invest in at least three countries other than the United States.

The Fund invests in issuers and countries that Schroder believes offer the
potential for capital growth. In identifying candidates for investment, Schroder
considers a variety of factors, including the issuer's likelihood of above
average earnings growth, the securities' attractive relative valuation, and
whether the issuer has any proprietary advantages. In addition, Schroder takes
into account the risk of local political and/or economic instability and the
liquidity of local markets. Securities generally are sold when they reach fair
valuation or when significantly more attractive investment candidates become
available.

The Fund also may do the following:

[ARROW] Invest in securities of closed-end investment companies that invest
primarily in foreign securities.

[ARROW] Invest up to 35% of its assets in debt securities, including junk
bonds, which entail certain risks.

[ARROW] Invest up to 5% of its assets in sovereign debt securities that are in
default.

PRINCIPAL RISKS.

5
<PAGE>

[ARROW] NON-DIVERSIFIED MUTUAL FUND. The Fund is a "non-diversified" mutual
fund, and will invest its assets in a more limited number of issuers
than may diversified investment companies. To the extent the Fund
focuses on fewer issuers, its risk of loss increases if the market
value of a security declines or if an issuer is not able to meet its
obligations.

[ARROW] JUNK BONDS. Securities rated below investment grade ("junk bonds") lack
outstanding investment characteristics and have speculative
characteristics and are subject to greater credit and market risks than
higher-rated securities. The ratings of junk bonds reflect a greater
possibility that adverse changes in the financial condition of the
issuer or in general economic conditions, or an unanticipated rise in
interest rates, may impair the ability of the issuer to make payments
of interest and principal. If this were to occur, the values of
securities held by the Fund may become more volatile.

[EDGAR REPRESENTATION OF GRAPH CHART]

Calendar Year Annual Return
- ------------- -------------
1998 -16.53%

During the periods shown above, the highest quarterly return was 24.47% for the
quarter ended December 31, 1998, and the lowest was -21.26% for the quarter
ended June 30, 1998. For the period January 1, 1998 through November 30, 1998,
the Fund's total return (unannualized) was -21.09%.
<TABLE>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS PAST ONE YEAR LIFE OF FUND
(FOR PERIODS ENDING DECEMBER 31, 1998) (SINCE 10/30/97)

Schroder Emerging Markets Fund -16.53% -13.94%

Morgan Stanley Capital International Emerging Markets Free Index* -24.29% -20.99%
</TABLE>

* The Morgan Stanley Capital International Emerging Markets Free Index is
an unmanaged market capitalization index of companies representative of
the market structure of 26 emerging countries in Europe, Latin America
and the Pacific Basin. The Index reflects actual buyable opportunities
for the non-domestic investor by taking into account local market
restrictions on share ownership by foreigners.

6
<PAGE>

SCHRODER INTERNATIONAL SMALLER COMPANIES FUND

INVESTMENT OBJECTIVE. Long-term capital appreciation through investment in
securities markets outside the United States.

RELATED PORTFOLIO. Schroder International Smaller Companies Fund invests
substantially all of its assets in Schroder International Smaller Companies
Portfolio, a diversified portfolio of Schroder Capital Funds.

PRINCIPAL INVESTMENTS. The Fund normally invests at least 65% of its total
assets in equity securities of smaller companies (with market capitalizations of
$1.5 billion or less at the time of investment) domiciled outside the United
States. The Fund invests in a variety of equity securities, including common and
preferred stocks, securities convertible into common and preferred stocks, and
warrants to purchase common and preferred stocks.

INVESTMENT STRATEGIES. In selecting investments for the Fund, Schroder considers
a number of factors, including the company's potential for long-term growth,
financial condition, sensitivity to cyclical factors, the relative value of the
company's securities (compared to that of other companies and to the market as a
whole), and the extent to which the company's management owns equity in the
company. The Fund will invest in securities of issuers domiciled in at least
three countries other than the United States, and may, although it does not
currently, invest in the securities of issuers domiciled or doing business in
emerging market countries. Securities generally are sold when they reach fair
valuation or when significantly more attractive investment candidates become
available.

The Fund invests in small capitalization companies that Schroder believes offer
the potential for capital growth. In doing so, Schroder considers, among other
things, an issuer's likelihood of above average earnings growth, the securities'
attractive relative valuation, and whether the issuer has any proprietary
advantages.

The Fund also may do the following:

[ARROW] Invest in closed-end funds that invest primarily in foreign securities.

[ARROW] Invest in securities of issuers domiciled or doing business in emerging
market countries.

PRINCIPAL RISKS.

[ARROW] SMALL COMPANIES. The Fund invests primarily in small companies, which
tend to be more vulnerable to adverse developments than larger
companies. Small companies may have limited product lines, markets, or
financial resources, or may depend on a limited management group. Their
securities may trade infrequently and in limited volumes. As a result,
the prices of these securities may fluctuate more than the prices of
securities of larger, more widely traded companies. Also, there may be
less publicly available information about small companies or less
market interest in their securities as compared to larger companies,
and it may take longer for the prices of the securities to reflect the
full value of their issuers' earnings potential or assets.

7
<PAGE>

[EDGAR REPRESENTATION OF GRAPH CHART]

Calendar Year End Annual Return
- ----------------- -------------
1997 -14.13%
1998 25.98%

During the periods shown above, the highest quarterly return was 20.25% for the
quarter ended March 31, 1998, and the lowest was -15.41% for the quarter ended
September 30, 1998.
<TABLE>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS PAST ONE YEAR LIFE OF FUND
(FOR PERIODS ENDING DECEMBER 31, 1998) (SINCE 11/4/96)

Schroder International Smaller Companies Fund 25.98% 3.31%

Salomon Smith Barney Extended Market Index (EPAC Region)* 14.14% 0.93%
</TABLE>

* The Salomon Smith Barney Extended Market Index (EPAC Region) (EMI EPAC)
is an unmanaged benchmark, representing the portion of the Salomon
Smith Barney Broad Market Index related to companies with small index
capitalization in approximately 22 European and Pacific Basin
countries. The Salomon Smith Barney EMI EPAC represents the smallest
companies in each country based on total market capital having in the
aggregate 20% of the cumulative available market capital in such
country.

SCHRODER INTERNATIONAL BOND FUND

INVESTMENT OBJECTIVE. To seek a high rate of total return.

RELATED PORTFOLIO. Schroder International Bond Fund invests substantially all of
its assets in Schroder International Bond Portfolio, a non-diversified portfolio
of Schroder Capital Funds II.

PRINCIPAL INVESTMENTS. The Fund normally invests substantially all of its assets
in debt securities and debt- related investments of companies domiciled outside
the United States. The Fund also may invest in debt securities of foreign
governments (including provinces and municipalities) and their agencies and
instrumentalities, debt securities of supranational organizations, and debt
securities of private issuers. The Fund normally invests in securities of
issuers in at least five countries other than the United States, although there
is no limit on the amount of the Fund's assets that may be invested in
securities of issuers domiciled in any one country.

INVESTMENT STRATEGIES. In seeking a high rate of total return, the Fund invests
in debt securities and debt-related investments. "Total return" consists of
current income, including interest payments and discount accruals, plus any
increases in the values of the Fund's investments, less any decreases in the
values of any of the Fund's investments. The bonds in which the Fund invests may
pay interest at fixed, variable, or floating rates. The rate of return on some
of the debt obligations in which the Fund invests may be linked to indices or
stock prices or indexed to the level of exchange rates between the U.S. dollar
and a foreign currency or currencies. The Fund currently has invested
approximately one-third of its assets in securities of issuers domiciled in
Germany. As a result, the Fund's investment performance will be affected by
economic, political, or other factors affecting issuers and investments in that
country more than if it had invested a
8
<PAGE>

smaller portion of its assets in issuers domiciled in Germany. The Fund may
borrow money to make investments. Additionally, Schroder may engage in active
currency management through the foreign currency exchange strategies described
later in this Prospectus to try to increase total return or to reduce risk.

The Fund also may do the following:

- -ARROW] Invest in securities of issuers domiciled or doing business in emerging
market countries.

[ARROW] Invest in securities convertible into common or preferred stock, or
traded together with warrants for the purchase of common stock.

[ARROW] Invest up to 10% of its assets in junk bonds, which entail certain
risks.

[ARROW] Sell securities short and then borrow those same securities from a
broker or other institution to complete the sale (a "short sale").

[ARROW] Enter into interest rate swaps for hedging purposes or to realize a
greater current return.

[ARROW] Engage in a variety of transactions involving the use of options and
futures contracts.

[ARROW] Invest in closed-end funds that invest primarily in emerging markets
securities.

[ARROW] Invest in derivative instruments, which are financial instruments whose
value depends upon, or is derived from, the value of an underlying
asset, such as a security, index or currency.

PRINCIPAL RISKS.

[ARROW] DEBT SECURITIES. The Fund invests in debt securities, which are subject
to market risk (the fluctuation of market value in response to changes
in interest rates) and to credit risks (the risk that the issuer may
become unable or unwilling to make timely payments of principal and
interest).

[ARROW] LEVERAGE. The Fund may borrow money by engaging in reverse repurchase
agreements to invest in additional securities. "Reverse" repurchase
agreements generally involve the sale by the Fund of securities held by
it and an agreement to repurchase the securities at an agreed-upon
price, date, and interest payment. The use of borrowed money, known as
leverage, increases the Fund's market exposure and risk and may result
in losses. The interest that the Fund must pay on borrowed money will
reduce its net investment income, and may also either offset any
potential capital gains or increase any losses. Leverage is a
speculative technique that makes the Fund's net asset value more
volatile than it normally would be.

9
<PAGE>

SCHRODER U.S. DIVERSIFIED GROWTH FUND
(FORMERLY, SCHRODER U.S. EQUITY FUND)

INVESTMENT OBJECTIVE. To seek growth of capital.

PRINCIPAL INVESTMENTS. The Fund normally invests substantially all of its assets
in equity securities of companies in the United States. The Fund invests in a
variety of equity securities including common and preferred stocks and warrants
to purchase common and preferred stocks. The Fund normally invests in securities
of companies with market capitalizations of more than $1.5 billion (at the time
of investment).

INVESTMENT STRATEGIES. The Fund may invest in companies, large or small, that
Schroder believes offer the potential for capital growth. For example, the Fund
may invest in companies whose earnings are believed to be in a relatively strong
growth trend, companies with a proprietary advantage, or companies that are in
industry segments that are experiencing rapid growth. The Fund also may invest
in companies in which significant further growth is not anticipated but whose
market value per share is thought to be undervalued. The Fund may invest in
relatively less well-known companies that meet any of these characteristics or
other characteristics identified by Schroder.

PRINCIPAL RISK.

[ARROW] EQUITY SECURITIES. The principal risks of investing in the Fund include
the risk that the value of the equity securities in the portfolio will
fall, or will not appreciate as anticipated by Schroder, due to factors
that adversely affect particular companies in the portfolio and/or the
U.S.
equities market in general.

[EDGAR REPRESENTATION OF GRAPHIC CHART]

Calendar Year End Annual Return
- ----------------- -------------
1989 24.42%
1990 -4.00%
1991 38.28%
1992 15.23%
1993 12.50%
1994 -5.21%
1995 28.03%
1996 21.48%
1997 23.33%
1998 21.94%

During the periods shown above, the highest quarterly return was 26.48% for the
quarter ended December 31, 1998, and the lowest was -15.40% for the quarter
ended September 30, 1998.
<TABLE>
<S> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS PAST ONE YEAR PAST FIVE YEARS PAST TEN YEARS
(FOR PERIODS ENDING DECEMBER 31, 1998)

Schroder U.S. Diversified Growth Fund 21.94% 17.25% 16.84%

Standard & Poor's 500 Index* 28.58% 21.37% 16.02%
</TABLE>

* The Standard & Poor's 500 Index is a market value weighted composite index
of 500 large capitalization U.S. companies and reflects the reinvestment of
dividends.

10
<PAGE>

SCHRODER U.S. SMALLER COMPANIES FUND

INVESTMENT OBJECTIVE. Capital appreciation.

RELATED PORTFOLIO. Schroder U.S. Smaller Companies Fund invests substantially
all of its assets in Schroder U.S. Smaller Companies Portfolio, a diversified
portfolio of Schroder Capital Funds.

PRINCIPAL INVESTMENTS. The Fund invests at least 65% of its total assets in
equity securities of companies in the United States that have (at the time of
investment) market capitalizations of $1.5 billion or less. The Fund also may
invest in equity securities of larger companies and in debt securities, if
Schroder believes such investments are consistent with the Fund's investment
objective. The Fund invests in a variety of equity securities including common
and preferred stocks, securities convertible into common and preferred stocks,
and warrants to purchase common and preferred stocks.

INVESTMENT STRATEGIES. In selecting investments for the Fund, Schroder seeks to
identify securities of companies with strong management that it believes can
generate above average earnings growth, and are selling at favorable prices in
relation to book values and earnings. The Fund intends to invest no more than
25% of its total assets in securities of small companies that, together with
their predecessors, have been in operation for less than three years.

PRINCIPAL RISKS.

[ARROW] SMALL COMPANIES. The Fund invests primarily in small companies, which
tend to be more vulnerable to adverse developments than larger
companies. Small companies may have limited product lines, markets, or
financial resources, or may depend on a limited management group. Their
securities may trade less frequently and in limited volumes. As a
result, the prices of these securities may fluctuate more than the
prices of securities of larger, more widely traded companies. Also,
there may be less publicly available information about small companies
or less market interest in their securities as compared to larger
companies, and it may take longer for the price of the securities to
reflect the full value of their issuers' earnings potential or assets.

[ARROW] EQUITY SECURITIES. Another risk of investing in the Fund is the risk
that the value of the equity securities in the portfolio will fall, or
will not appreciate as anticipated by Schroder, due to factors that
adversely affect particular companies in the portfolio and/or the U.S.
equities market in general.

[EDGAR REPRESENTATION OF GRAPH CHART]

Calendar Year End Annual Return
- ----------------- -------------
1994 4.45%
1995 49.08%
1996 22.29%
1997 26.86%
1998 -9.23%

11
<PAGE>

During the periods shown above, the highest quarterly return was 18.60% for the
quarter ended June 30, 1997, and the lowest was -23.27% for the quarter ended
September 30, 1998. For the period January 1, 1998 through November 30, 1998,
the Fund's total return (unannualized) was -10.79%.
<TABLE>
<S> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS PAST ONE YEAR PAST FIVE YEARS LIFE OF FUND
(FOR PERIODS ENDING DECEMBER 31, 1998) (SINCE 8/6/93)

Schroder U.S. Smaller Companies Fund -9.23% 17.00% 18.04%

Russell 2000 Index* -2.55% 10.28% 11.12%
</TABLE>

* The Russell 2000 Index is a market capitalization weighted broad based
index of 2000 small capitalization U.S. companies.

SCHRODER MICRO CAP FUND

SHARES OF SCHRODER MICRO CAP FUND ARE NOT CURRENTLY BEING OFFERED TO THE PUBLIC
GENERALLY, AND MAY BE PURCHASED ONLY BY EXISTING SHAREHOLDERS AND BY EMPLOYEES
OF SCHRODER AND ITS AFFILIATES. THE DETERMINATION TO DISCONTINUE THE GENERAL
OFFERING WAS MADE BY SCHRODER AFTER CONSULTATION WITH THE BOARD OF TRUSTEES OF
THE TRUST. SCHRODER INTENDS TO REVIEW THE DISCONTINUATION PERIODICALLY, AND MAY
RECOMMEND AT ANY TIME THAT A MORE GENERAL OFFERING OF THE FUND'S SHARES BE
RESUMED.

INVESTMENT OBJECTIVE. Long-term capital appreciation.

PRINCIPAL INVESTMENTS. The Fund normally invests at least 65% of its total
assets in equity securities of micro cap companies domiciled in the United
States. A micro cap company is a company with, at the time of initial
investment, a market capitalization in the bottom one-third of companies in the
Russell 2000 Growth Index (measured by capitalization), or with a market
capitalization of $300 million or less. The Fund invests in a variety of equity
securities including common and preferred stocks, securities convertible into
common and preferred stocks, and warrants to purchase common and preferred
stocks.

INVESTMENT STRATEGIES. Schroder seeks to identify securities of companies that
it believes offer the potential for long-term capital appreciation, based on
novel, superior or niche products or services, operating characteristics,
quality of management, an entrepreneurial management team, companies that have
gone public in recent years, opportunities provided by mergers, divestitures or
new management, or other factors. The Fund may invest in securities of small,
unseasoned companies, as well as securities of more established companies. Up to
35% of the Fund's assets may comprise other investments, including equity
securities of larger capitalization companies, if Schroder believes that such
investments are warranted to achieve the Fund's investment objective.

The Fund also may do the following:

[ARROW] Invest, to a limited degree, in non-convertible debt securities, when
Schroder believes that such investments are warranted to achieve the
Fund's investment objective.

[ARROW] Sell securities short and then borrow those same securities from a
broker or other institution to complete the sale (a "short sale").

[ARROW] Engage in a variety of transactions involving the use of options and
futures contracts, including index options and index futures contracts.

[ARROW] Invest in closed-end funds that invest primarily in micro cap
securities.

[ARROW] Invest in derivative instruments, which are financial instruments whose
value depends upon, or is derived from, the value of an underlying
asset, such as a security, index or currency. The Fund may engage in
derivatives transactions for hedging purposes.

In the future, the Fund may seek to achieve its investment objective by
investing all or a portion of its assets in one or more registered investment
companies having substantially the same investment objective and similar
investment policies as the Fund.

12
<PAGE>

PRINCIPAL RISKS.

[ARROW] SMALL COMPANIES. The Fund invests primarily in small companies, which
tend to be more vulnerable to adverse developments than larger
companies. Small companies may have limited product lines, markets, or
financial resources, or may depend on a limited management group. Their
securities may trade less frequently and in limited volumes. As a
result, the prices of these securities may fluctuate more than the
prices of securities of larger, more widely traded companies. Also,
there may be less publicly available information about small companies
or less market interest in their securities as compared to larger
companies, and it may take longer for the prices of the securities to
reflect the full value of their issuers' earning potential or assets.

[ARROW] EQUITY SECURITIES. Another risk of investing in the Fund is the risk
that the value of the equity securities in the portfolio will fall, or
will not appreciate as anticipated by Schroder, due to factors that
adversely affect particular companies in the portfolio and/or the U.S.
equities market in general.

[EDGAR REPRESENTATION OF GRAPH CHART]

Calendar Year End Annual Return
- ----------------- -------------
1998 63.04%

During the periods shown above, the highest quarterly return was 26.11% for the
quarter ended March 31, 1998, and the lowest was -2.85% for the quarter ended
September 30, 1998. For the period January 1, 1998 through November 30, 1998,
the Fund's total return (unannualized) was 51.71%.
<TABLE>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS PAST ONE YEAR LIFE OF FUND
(FOR PERIODS ENDING DECEMBER 31, 1998) (SINCE 10/15/97)

Schroder Micro Cap Fund 63.04% 59.29%

Russell 2000 Index* -2.55% -7.34%
</TABLE>

* The Russell 2000 Index is a market capitalization weighted broad based
index of 2000 small capitalization U.S. companies.

13
<PAGE>

FEES AND EXPENSES

THESE TABLES DESCRIBE THE FEES AND EXPENSES THAT YOU WILL PAY IF YOU INVEST IN
INVESTOR SHARES OF THE FUNDS. CERTAIN FEES AND EXPENSES HAVE BEEN ESTIMATED FOR
SCHRODER INTERNATIONAL BOND FUND, WHICH HAD NOT COMPLETED A FULL FISCAL YEAR AS
OF DECEMBER 31, 1998. ANNUAL FUND 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 IN WHICH THE
FUND INVESTS.

SHAREHOLDER FEES (paid directly from your investment):

Maximum Sales Load Imposed on Purchases None
Maximum Deferred Sales Load None
Maximum Sales Load Imposed on Reinvested Dividends None
Redemption Fee None
Exchange Fee None

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund
assets):
<TABLE>
<S> <C> <C> <C> <C>
SCHRODER SCHRODER SCHRODER SCHRODER
INTERNATIONAL FUND EMERGING INTERNATIONAL INTERNATIONAL BOND
MARKETS FUND SMALLER COMPANIES FUND
FUND
Management Fees 0.675% 1.25% 1.10% 0.70%
Distribution (12b-1) Fees None None None None
Other Expenses 0.405% 1,976.64% 4.16% 92.17%

Total Annual Fund Operating Expenses 1.08% 1,977.89% 5.26% 92.87%
Fee Waiver and/or Expense 0.09% 1,976.19% 3.76% 91.92%
Limitations(1)

Net Expenses 0.99%(1) 1.70%(1) 1.50%(1) 0.95(%(1)

</TABLE>

SCHRODER U.S. SCHRODER U.S. SCHRODER MICRO
DIVERSIFIED SMALLER COMPANIES CAP FUND
GROWTH FUND FUND

0.75% 0.85% 1.50%
None None None
1.10% 0.52% 4.52%

1.85% 1.37% 6.02%
0.35% 0% 4.02%

1.50%(1) 1.37% 2.00%(1)

</TABLE>

(1) The Net Expenses shown above reflect the effect of contractually imposed
expense limitations and/or fee waivers in effect through December 31, 1999
on Total Annual Fund Operating Expenses of the Funds.

14
<PAGE>

EXAMPLE

This Example is intended to help you compare the cost of investing in a
Fund with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in Investor Shares of a
Fund for the time periods indicated and then redeem all of your shares at the
end of those periods. The Example also assumes that your investment earns a 5%
return each year and that the Fund's Total Annual Fund Operating Expenses remain
the same as those set forth above (absent the noted Fee Waiver and/or Expense
Limitation). Your actual costs may be higher or lower. Based on these
assumptions, your costs would be:
<TABLE>
<S> <C> <C> <C> <C>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Schroder International Fund* $110 $343 $595 $1,317
Schroder Emerging Markets Fund* $10,000 $10,000 $10,000 $10,000
Schroder International Smaller Companies Fund* $525 $1,572 $2,613 $5,192
Schroder International Bond Fund* $6,185 $9,816 $10,000 $10,000
Schroder U.S. Diversified Growth Fund* $188 $582 $1,001 $2,169
Schroder U.S. Smaller Companies Fund $139 $434 $750 $1,646
Schroder Micro Cap Fund* $599 $1,780 $2,936 $5,725
</TABLE>

* Assuming that each of these Fund's operating expenses remain the same as
Net Expenses set forth above, based on the other assumptions described
above, your costs would be as follows for 1 year, 3 years, 5 years, and 10
years, respectively:

Schroder International Fund - $101, $315, $547, and $1,213.
Schroder Emerging Markets Fund - $172, $535, $921, and $2,005.
Schroder International Smaller Companies Fund - $153, $474, $818, and $1,791.
Schroder International Bond Fund - $96, $301, $523, and $1,161.
Schroder U.S. Diversified Growth Fund - $153, $474, $818, and $1,791.
Schroder Micro Cap Fund - $203, $628, $1,079, and $2,330.

15
<PAGE>

OTHER INVESTMENT STRATEGIES AND RISKS

A Fund may not achieve its objective in all circumstances. The following
provides more detail about the Funds' principal risks and the circumstances
which could adversely affect the value of a Fund's shares or its total return or
yield. It is possible to lose money by investing in the Funds.

RISKS OF INVESTING IN THE FUNDS
FOREIGN SECURITIES. Except as otherwise noted in this Prospectus, there is no
limit on the amount of a Fund's assets that may be invested in foreign
securities. Investments in foreign securities entail certain risks. There may be
a possibility of nationalization or expropriation of assets, confiscatory
taxation, political or financial instability, and diplomatic developments that
could affect the value of a Fund's investments in certain foreign countries.
Since foreign securities normally are denominated and traded in foreign
currencies, the values of the Fund's assets may be affected favorably or
unfavorably by currency exchange rates, currency exchange control regulations,
foreign withholding taxes, and restrictions or prohibitions on the repatriation
of foreign currencies. There may be less information publicly available about a
foreign issuer than about a U.S. issuer, and foreign issuers are not generally
subject to accounting, auditing, and financial reporting standards and practices
comparable to those in the United States. The securities of some foreign issuers
are less liquid and at times more volatile than securities of comparable U.S.
issuers. Foreign brokerage commissions and other fees are also generally higher
than in the United States. Foreign settlement procedures and trade regulations
may involve certain risks (such as delay in payment or delivery of securities or
in the recovery of a Fund's assets held abroad) and expenses not present in the
settlement of domestic investments.

In addition, legal remedies available to investors in certain foreign countries
may be more limited than those available to investors in the United States or in
other foreign countries. The willingness and ability of foreign governmental
entities to pay principal and interest on government securities depends on
various economic factors, including the issuer's balance of payments, overall
debt level, and cash-flow considerations related to the availability of tax or
other revenues to satisfy the issuer's obligations. If a foreign governmental
entity defaults on its obligations on the securities, a Fund may have limited
recourse available to it. The laws of some foreign countries may limit a Fund's
ability to invest in securities of certain issuers located in those countries.

If a Fund purchases securities denominated in foreign currencies, a change in
the value of any such currency against the U.S. dollar will result in a change
in the U.S. dollar value of the Fund's assets and the Fund's income available
for distribution. In addition, although at times most of a Fund's income may be
received or realized in these currencies, the Fund will be required to compute
and distribute its income in U.S. dollars. As a result, if the exchange rate for
any such currency declines after the Fund's income has been earned and
translated into U.S. dollars but before payment to shareholders, the Fund could
be required to liquidate portfolio securities to make such distributions.
Similarly, if a Fund incurs an expense in U.S. dollars and the exchange rate
declines before the expense is paid, the Fund would have to convert a greater
amount of U.S. dollars to pay for the expense at that time than it would have
had to convert at the time the Fund incurred the expense. A Fund may buy or sell
foreign currencies and options and futures contracts on foreign currencies for
hedging purposes in connection with its foreign investments.

16
<PAGE>

United States may reduce or eliminate such taxes. Any such taxes paid by a Fund
will reduce its income available for distribution to shareholders. In certain
circumstances, a Fund may be able to pass through to shareholders credits for
foreign taxes paid.

DEBT SECURITIES. All of the Funds may invest in debt securities, which are
subject to the risk of fluctuation of market value in response to changes in
interest rates and the risk that the issuer may default on the timely payment of
principal and interest. Additionally, all of the Funds may invest in junk bonds,
which are lower-quality, high-yielding debt securities rated below Baa or BBB by
Moody's Investors Service Inc. or Standard & Poor's Rating Group (or, if they
are unrated, which Schroder believes to be of comparable quality). See the
Statement of Additional Information for further descriptions of securities
ratings assigned by Moody's and Standard & Poor's. Lower-rated debt securities
are predominantly speculative and tend to be more susceptible than other debt
securities to adverse changes in the financial condition of the issuer, general
economic conditions, or an unanticipated rise in interest rates, which may
affect an issuer's ability to pay interest and principal. This would likely make
the values of the securities held by a Fund more volatile and could limit the
Fund's ability to liquidate its securities. Changes by recognized rating
services in their ratings of any fixed-income security and in the perceived
ability of an issuer to make payments of interest and principal also may affect
the value of these investments.

U.S. GOVERNMENT SECURITIES. U.S. Government securities include a variety of
securities that differ in their interest rates, maturities, and dates of issue.
Securities issued or guaranteed by agencies or instrumentalities of the U.S.
Government may or may not be supported by the full faith and credit of the
United States or by the right of the issuer to borrow from the U.S. Treasury.

RISKS OF SMALLER CAPITALIZATION COMPANIES. Schroder International Smaller
Companies Fund, Schroder U.S. Smaller Companies Fund and Schroder Micro Cap Fund
invest in companies that are smaller and less well-known than larger, more
widely held companies. Small and mid-cap companies may offer greater
opportunities for capital appreciation than larger companies, but may also
involve certain special risks. They are more likely than larger companies to
have limited product lines, markets or financial resources, or to depend on a
small, inexperienced management group. Securities of smaller companies may trade
less frequently and in lesser volume than more widely held securities and their
values may fluctuate more sharply than other securities. They may also trade in
the over-the-counter market or on a regional exchange, or may otherwise have
limited liquidity. These securities may therefore be more vulnerable to adverse
developments than securities of larger companies and the Funds may have
difficulty establishing or closing out their securities positions in smaller
companies at prevailing market prices. Also, there may be less publicly
available information about smaller companies or less market interest in their
securities as compared to larger companies, and it may take longer for the
prices of the securities to reflect the full value of their issuers' earnings
potential or assets.

OTHER INVESTMENT STRATEGIES AND TECHNIQUES
In addition to the principal investment strategies described in the Summary
Information section above, the Funds may at times use the strategies and
techniques described below, which involve certain special risks. This Prospectus
does not attempt to disclose all of the various investment techniques and types
of securities that Schroder might use in managing the Funds. As in any mutual
fund, investors must rely on the professional investment judgment and skill of
the Fund's adviser.

FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Changes in currency exchange rates will
affect the U.S. dollar value of Fund assets, including securities denominated in
foreign currencies. Exchange rates between the U.S. dollar and other currencies
fluctuate in response to forces of supply and demand in the foreign exchange
markets. These forces are affected by the international balance of payments and
other political, economic and financial conditions, which may be difficult to
predict. A Fund may engage in currency exchange transactions to protect against
unfavorable fluctuations in exchange rates. Schroder International

17
<PAGE>

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.

In particular, a Fund may enter into foreign currency exchange transactions to
protect against a change in exchange rates 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").

From time to time, a Fund's currency hedging transactions may call for the
delivery of one foreign currency in exchange for another foreign currency and
may at times involve currencies in which its portfolio securities are not then
denominated ("cross hedging"). A Fund may also engage in "proxy" hedging,
whereby the Fund would seek to hedge the value of portfolio holdings denominated
in one currency by entering into an exchange contract on a second currency, the
valuation of which Schroder believes correlates to the value of the first
currency.

Schroder may buy or sell currencies in "spot" or forward transactions. "Spot"
transactions are executed contemporaneously on a cash basis at the
then-prevailing market rate. A forward currency contract is an obligation to
purchase or sell a specific currency at a future date (which may be any fixed
number of days from the date of the contract agreed upon by the parties) at a
price set at the time of the contract. Forward contracts do not eliminate
fluctuations in the underlying prices of securities and expose the Fund to the
risk that the counterparty is unable to perform.

A Fund incurs foreign exchange expenses in converting assets from one currency
to another. Schroder International Bond Fund may, to a limited extent, purchase
forward contracts to increase exposure in foreign currencies that are expected
to appreciate and thereby increase total return. All other Funds may engage in
foreign currency exchange transactions only for hedging purposes.

Although there is no limit on the amount of any Fund's assets that may be
invested in foreign currency exchange and foreign currency forward contracts,
each Fund may enter into such transactions only to the extent necessary to
effect the hedging transactions described above. In addition, Schroder
International Bond Fund may enter into foreign currency forward contracts for
non-hedging purposes. Suitable foreign currency hedging transactions may not be
available in all circumstances and there can be no assurance that a Fund will
utilize hedging transactions at any time.

SECURITIES LOANS, REPURCHASE AGREEMENTS, AND FORWARD COMMITMENTS. Each Fund
(other than Schroder International Fund and Schroder U.S. Diversified Growth
Fund) may lend portfolio securities to broker-dealers up to one-third of the
Fund's total assets. Each Fund (other than Schroder U.S. Diversified Growth
Fund) may also enter into repurchase agreements without limit. These
transactions must be fully collateralized at all times, but involve some risk to
a Fund if the other party should default on its obligation and the Fund is
delayed or prevented from recovering the collateral. Each Fund may also enter
into contracts to purchase securities for a fixed price at a future date beyond
customary settlement time, which may increase its overall investment exposure
and involves a risk of loss if the value of the securities declines prior to the
settlement date.

SHORT SALES (SCHRODER INTERNATIONAL BOND FUND AND SCHRODER MICRO CAP FUND). When
Schroder anticipates that the price of a security will decline, it may sell the
security short and borrow the same security from a broker or other institution
to complete the sale. The Fund may make a profit or incur a loss depending upon
whether the market price of the security decreases or increases between the date
of the short sale and the

18
<PAGE>

date on which the Fund must replace the borrowed security. An increase in the
value of a security sold short by the Fund over the price at which it was sold
short will result in a loss to the Fund, and there can be no assurance that the
Fund will be able to close out the position at any particular time or at an
acceptable price.

INVESTMENT IN OTHER INVESTMENT COMPANIES. Each Fund (other than Schroder U.S.
Diversified Growth Fund) may invest in other investment companies or pooled
vehicles, including closed-end funds, that are advised by Schroder or its
affiliates or by unaffiliated parties. When investing in another investment
company, a Fund may pay a premium above such investment company's net asset
value per share. As a shareholder in an investment company, a Fund would bear
its ratable share of the investment company's expenses, including advisory and
administrative fees, and would at the same time continue to pay its own fees and
expenses.

DERIVATIVE INVESTMENTS. Instead of investing directly in the types of portfolio
securities described in the Summary Information, each Fund may buy or sell a
variety of "derivative" investments to gain exposure to particular securities or
markets, in connection with hedging transactions, and to increase total return.
These may include options, futures, and indices, for example. Derivatives
involve the risk that they may not work as intended due to unanticipated
developments in market conditions or other causes. Also, derivatives often
involve the risk that the other party to the transaction will be unable to meet
its obligations or that the Fund will be unable to close out the position at any
particular time or at an acceptable price.

ZERO-COUPON BONDS. Each Fund which may invest in debt securities may invest in
zero-coupon bonds. Zero-coupon bonds are issued at a significant discount from
face value and pay interest only at maturity rather than at intervals during the
life of the security. Zero-coupon bonds allow an issuer to avoid the need to
generate cash to meet current interest payments and, as a result, may involve
greater credit risks than bonds that pay interest currently.

INTEREST RATE SWAPS. Schroder International Bond Fund may enter into interest
rate swaps for hedging purposes or to increase total return. Interest rate swaps
involve the exchange by the Fund with another party of different types of
interest-rate streams (for example, an exchange of floating rate payments for
fixed rate payments with respect to a notional amount of principal). The Fund's
ability to engage in certain interest rate transactions may be limited by tax
considerations. The use of interest rate swaps is a highly specialized activity
that involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions. If Schroder is incorrect in its
forecasts of market values, interest rates, or other relevant factors, the
investment performance of the Fund would be less favorable than it would have
been if this investment technique were not used.

PORTFOLIO TURNOVER. The length of time a Fund has held a particular security is
not generally a consideration in investment decisions. The investment policies
of a Fund may lead to frequent changes in the Fund's investments, particularly
in periods of volatile market movements. A change in the securities held by a
Fund is known as "portfolio turnover." Portfolio turnover generally involves
some expense to a Fund, including brokerage commissions or dealer mark-ups and
other transaction costs on the sale of securities and reinvestment in other
securities. Such sales may increase the amount of capital gains (and, in
particular, short-term gains) realized by the Funds, on which shareholders pay
tax.

TEMPORARY DEFENSIVE STRATEGIES. At times, Schroder may judge that conditions in
the securities markets make pursuing a Fund's basic investment strategy
inconsistent with the best interests of its shareholders. At such times,
Schroder may temporarily use alternate investment strategies primarily designed
to reduce fluctuations in the value of a Fund's assets. In implementing these
"defensive" strategies, the Fund would invest in high-quality debt securities,
cash, or money market instruments to any extent Schroder considers consistent
with such defensive strategies. It is impossible to predict when, or for how
long, a Fund will use these alternate strategies. One risk of taking such
temporary defensive positions is that the Fund may not achieve its investment
objective.

19
<PAGE>

OTHER INVESTMENTS. The Funds may also invest in other types of securities and
utilize a variety of investment techniques and strategies that are not described
in this Prospectus. These securities and techniques may subject the Funds to
additional risks. Please see the Statement of Additional Information for
additional information about the securities and investment techniques described
in this Prospectus and about additional techniques and strategies that may be
used by the Funds.

MANAGEMENT OF THE FUNDS

The Trust is governed by a Board of Trustees, which has retained Schroder to
manage the investments of each Fund. Subject to the control of the Trustees,
Schroder also manages the Funds' other affairs and business. Schroder has served
as investment adviser to each of the Funds since inception.

Each Portfolio in which the Schroder International Fund, Schroder Emerging
Markets Fund, Schroder International Smaller Companies Fund, Schroder
International Bond Fund and Schroder U.S. Smaller Companies Fund invests is
managed under the direction of a board of trustees of Schroder Capital Funds or
Schroder Capital Funds II. Schroder has served as investment adviser to each of
the Portfolios since inception. Subject to the direction and control of
Schroder, Schroder Investment Management International Limited (SIMIL), an
affiliate of Schroder, serves as subadviser to Schroder International Smaller
Companies Portfolio pursuant to an Investment Subadvisory Agreement among
Schroder, SIMIL and the Portfolio.

Schroder has been an investment manager since 1962, and currently serves as
investment adviser to the Funds, the Portfolios, and a broad range of
institutional investors. As of December 31, 1998, Schroder, together with its
United Kingdom affiliate, Schroder Capital Management International Limited, had
approximately $27.1 billion in assets under management. Schroder's address is
787 Seventh Avenue, 34th floor, New York, New York 10019, and its telephone
number is (212) 641-3900. SIMIL has been registered as a U.S. investment adviser
since 1998, and as of June 30, 1998 had under management assets of approximately
$42 billion. SIMIL's address is 31 Gresham Street, London, United Kingdom, EC2V
7QA.

INVESTMENT ADVISORY FEES PAID BY THE RELATED PORTFOLIOS. For the fiscal year
ended October 31, 1998 (May 31, 1998, in the case of Schroder U.S. Smaller
Companies Portfolio and Schroder EM Core Portfolio, and December 31, 1998 for
Schroder International Bond Portfolio), the Portfolios paid investment advisory
fees to Schroder at the following annual rates (based on the average net assets
of each Portfolio taken separately): International Equity Fund & 0.427%;
Schroder EM Core Portfolio & 0.086%; Schroder International Bond Portfolio &
0.00%; Schroder International Smaller Companies Portfolio & 0.00%; Schroder U.S.
Smaller Companies Portfolio & 0.60%. Schroder is contractually obligated through
December 31, 1999 to waive 0.10% of the investment advisory fees payable by
Schroder International Smaller Companies Portfolio. Each of the Funds that
invests in a related Portfolio bears a proportionate part of the investment
advisory fees (and other expenses) paid by the Portfolio (based on the
percentage of the Portfolio's assets attributable to the Fund).

Pursuant to the Investment Subadvisory Agreement, Schroder pays SIMIL a monthly
fee at the annual rate of 0.25% of the daily net assets of Schroder
International Smaller Companies Portfolio.

Each of the Funds that invests in a Portfolio has entered into an investment
advisory agreement with Schroder pursuant to which Schroder would manage the
Fund's assets directly in the event that the Fund were to cease investing
substantially all of its assets in a Portfolio. Schroder will not receive any
fees under that agreement so long as a Fund continues to invest substantially
all of its assets in a Portfolio or in another investment company.

INVESTMENT ADVISORY FEES PAID BY SCHRODER U.S. DIVERSIFIED GROWTH FUND AND
SCHRODER MICRO CAP FUND. For the fiscal year ended October 31, 1998, for
SCHRODER U.S. DIVERSIFIED GROWTH FUND and May 31, 1998, for SCHRODER MICRO CAP
FUND, those Funds paid investment advisory fees to Schroder at the following

20
<PAGE>

annual rates (based on the average net assets of each Fund taken separately):
SCHRODER U.S. DIVERSIFIED GROWTH FUND & 0.447% of the Fund's average net assets;
and SCHRODER MICRO CAP FUND & 0.00% of the Fund's average net assets.

EXPENSE LIMITATIONS AND WAIVERS. In order to limit the Funds' expenses, Schroder
is contractually obligated to reduce its compensation (and, if necessary, to pay
certain other Fund expenses) until December 31, 1999 to the extent that each
Fund's total operating expenses attributable to its Investor Shares exceed the
following annual rates (based on the average net assets of each Fund taken
separately): Schroder International Fund & 0.99%; Schroder Emerging Markets Fund
& 1.70%; Schroder International Smaller Companies Fund & 1.50%; Schroder
International Bond Fund & 0.95%; Schroder U.S. Diversified Growth Fund & 1.50%;
Schroder U.S. Smaller Companies Fund & 1.49%; and Schroder Micro Cap Fund &
2.00%. Schroder has agreed that, in any event, the advisory fees paid to it by
Schroder U.S. Diversified Growth Fund through December 31, 1999 will be limited
to 0.65% of the Fund's average daily net assets.

PORTFOLIO MANAGERS. Schroder's investment decisions for each of the Funds (or
for the related Portfolios in which certain of the Funds invest substantially
all of their assets) are generally made by an investment manager or an
investment team, with the assistance of an investment committee. The following
portfolio managers have had primary responsibility for making investment
decisions for the Portfolios or the Funds, as the case may be, since the years
shown below. Their recent professional experience is also shown.
<TABLE>
<S> <C> <C> <C>
FUND/PORTFOLIO PORTFOLIO MANAGER SINCE RECENT PROFESSIONAL EXPERIENCE
- -------------- ---------------------- ----------- --------------------------------------------------------
Schroder International Michael Perelstein 1997 Employed as an investment professional at Schroder since
Fund/International 1997. Mr. Perelstein is also Vice President of the Trust
Equity Fund and of Schroder Capital Funds and Schroder Capital Funds
II, and a Director and Senior Vice President of
Schroder. Prior to joining Schroder, Mr. Perelstein
was a Managing Director at MacKay - Shields Financial
Corp. from March 1993 to November 1996.

Schroder Emerging John Troiano Inception (1997) Employed as an investment professional at Schroder since
Markets Fund/Schroder 1986. Mr. Troiano is the Chief Executive and Director of
EM Core Portfolio Schroder, and a Vice President of the Trust and of
Schroder Capital Funds.

Heather Crighton Inception (1997) Employed as an investment professional at Schroder
since 1993. Ms. Crighton is a director and a First
Vice President of Schroder.

Mark Bridgeman Inception (1997) Employed as an investment professional at Schroder since
1990. Mr. Bridgeman is a First Vice President of
Schroder.

21
<PAGE>

Schroder International Jane P. Lucas 1998 Employed as an investment professional at Schroder since
Smaller Companies 1987. Ms. Lucas is a Vice President of the Trust and a
Fund/Schroder Senior Vice President of Schroder.
International Smaller
Companies Portfolio
Nicholas Melhuish 1998 Employed as an investment professional at Schroder since
1991. Mr. Melhuish is an investment manager of SIMIL and
of Schroder.

Schroder International Michael Perelstein Inception (1997) See above.
Bond
Fund/International
Bond Portfolio
Mark Astley Inception (1997) Employed as an investment professional at Schroder since
1986. Mr. Astley is a Vice President of the Trust and of
Schroder Capital Funds and Schroder Capital Funds II,
and is a First Vice President of Schroder.

Schroder U.S. Paul Morris 1997 Employed as an investment professional at Schroder since
Diversified Growth Fund 1997. Mr. Morris is Senior Vice President of Schroder.
Prior to joining Schroder, Mr. Morris was a Principal
and Senior Portfolio Manager at Weiss Peck Greer,
L.L.C., and a Managing Director, Equity Division, of
UBS Asset Management.

Schroder U.S. Smaller Ira L. Unschuld 1997 (sole manager Employed as an investment professional at Schroder since
Companies Fund/ since 1998) 1990. Mr. Unschuld is a Vice President of the Trust and
Schroder U.S. Smaller a Group Vice President of Schroder.
Companies Portfolio

Schroder Micro Cap Fund Ira L. Unschuld Inception (1997) See above.
</TABLE>

22
<PAGE>

HOW THE FUNDS' SHARES ARE PRICED

Each Fund calculates the net asset value of its Investor Shares by dividing the
total value of its assets attributable to its Investor Shares, less its
liabilities attributable to those shares, by the number of Investor Shares
outstanding. Shares are valued as of the close of trading on the New York Stock
Exchange (normally 4:00 p.m., Eastern time) each day the Exchange is open. The
Trust expects that days, other than weekend days, that the Exchange will not be
open are New Years Day, Martin Luther King, Jr. Day, Presidents Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. The Funds value their portfolio securities for which market
quotations are readily available at market value. Short-term investments that
will mature in 60 days or less are stated at amortized cost, which approximates
market value. The Funds value all other securities and assets at their fair
values as determined in accordance with procedures adopted by the Board of
Trustees. All assets and liabilities of a Fund denominated in foreign currencies
are valued in U.S. dollars based on the exchange rate last quoted by a major
bank prior to the time when the net asset value of the Fund's shares is
calculated. Because certain of the securities in which the Funds may invest may
trade on days when the Funds do not price their Investor Shares, the net asset
value of a Fund's Investor Shares may change on days when shareholders will not
be able to purchase or redeem their Investor Shares. The net asset value of a
Fund's Investor Shares will generally differ from that of its Advisor 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 Investor Shares and Advisor
Shares.

HOW TO BUY SHARES

You may purchase Investor Shares of each Fund directly from the Trust by
completing an Account Application and sending payment by check or wire as
described below. You may obtain an Account Application from the Trust or from
Forum Shareholder Services, LLC, the Trust's Transfer Agent, P.O. Box 446,
Portland, Maine 04112, or by calling (800) 344-8332.

Investor Shares of each of the Funds are sold at their net asset value next
determined after the Trust receives your order. In order for you to receive the
Fund's next determined net asset value, the Trust must receive your order before
the close of trading on the New York Stock Exchange.

INVESTMENT MINIMUMS
The minimum investment for initial and additional purchases for each Fund is as
follows:

INITIAL ADDITIONAL
INVESTMENT INVESTMENTS
------------- ------------------
Regular Accounts $10,000 $2,500
Traditional IRAs $2,000 $250

The Trust is authorized to reject any purchase order.

PURCHASES BY CHECK
You may purchase shares of a Fund by mailing a check (in U.S. dollars) payable
to (i) Schroder Capital Funds (Delaware), if you are purchasing shares of two or
more Funds, accompanied by written instructions as to how the check amount
should be allocated amongst the Funds whose shares you are purchasing or (ii)
the name of the Fund to be purchased (I.E., Schroder International Bond Fund) if
you are purchasing shares of a single Fund. Third-party checks will not be
accepted.

For initial purchases, your check must be accompanied by a completed Account
Application in proper form. The Trust may request additional documentation to
evidence the authority of the person or entity making the purchase request.

23
<PAGE>

You should mail your check and your completed Account Application to:

[Name of Fund] & Investor Shares
P.O. Box 446
Portland, Maine 04112

Your payments should clearly indicate the shareholder's name and account number,
if applicable.

PURCHASES BY BANK WIRE/TELEPHONE

If you make your initial investment by wire, your order must be preceded by a
completed Account Application. Upon receipt of the Application, the Trust will
assign you an account number and your account will become active. Wire orders
received prior to the close of trading on the New York Stock Exchange (normally
4:00 p.m., Eastern Time) on each day the Exchange is open for trading will be
processed at the net asset value determined as of that day. Wire orders received
after that time will be processed at the net asset value next determined
thereafter.

Once you have an account number, you may purchase Investor Shares by telephoning
the Transfer Agent at (800) 344-8332 to give notice that you will be sending
funds by wire, and then arranging with your bank to wire funds to the Trust.
Your purchase will not be processed until the Trust has received the wired
funds.

Federal Reserve Bank wire instructions are as follows:

The Chase Manhattan Bank
New York, NY
ABA No.: 021000021
For Credit To: Forum Shareholder Services, LLC
Account. No.: 910-2-718187
Ref.: [Name of Fund] - Investor Shares
Account of: (shareholder name)
Account No.: (shareholder account number)

The wire order must specify the name of the Fund, the shares' class (I.E.,
Investor Shares), the account name and number, address, confirmation number,
amount to be wired, name of the wiring bank, and name and telephone number of
the person to be contacted in connection with the order.

In an effort to prevent unauthorized or fraudulent purchase or redemption
requests by telephone, the Transfer Agent will follow reasonable procedures to
confirm that telephone instructions are genuine. The Transfer Agent and the
Trust generally will not be liable for any losses due to unauthorized or
fraudulent purchase or redemption requests, but either or both may be liable if
they do not follow these procedures.

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 that have been returned to the
Transfer Agent are reinvested, and the checks are canceled.

OTHER PURCHASE INFORMATION

Investor Shares of each Fund may be purchased for cash or in exchange for
securities held by the investor, subject to the determination by Schroder that
the securities are acceptable. (For purposes of determining whether securities
will be acceptable, Schroder will consider, among other things, whether they are
liquid securities of a type consistent with the investment objectives and
policies of the Fund in question and have a readily ascertainable value.) If a
Fund receives securities from an investor in exchange for shares of the Fund,
the Fund will under some circumstances have the same tax basis in the securities
as the investor had prior to the exchange (and the Fund's gain for tax purposes
would be calculated with regard to the investor's

24
<PAGE>

tax basis). Any gain on the sale of those securities would be subject to
distribution as capital gain to all of the Fund's shareholders. Schroder
reserves the right to reject any particular investment. Securities accepted by
Schroder will be valued in the same manner as are the Trust's portfolio
securities as of the time of the next determination of the Funds' net asset
value. All dividend, subscription, or other rights which are reflected in the
market price of accepted securities at the time of valuation become the property
of the relevant Fund and must be delivered to the Fund upon receipt by the
investor. Investors may realize a gain or loss upon the exchange for federal
income tax purposes. Investors interested in purchases through exchange should
telephone the Trust at (800) 344-8332.

HOW TO SELL SHARES

You may sell your Investor Shares back to a Fund on any business day by sending
a letter of instruction or stock power form to the Trust, or by calling the
Transfer Agent at (800) 344-8332. The price you will receive is the net asset
value next determined after receipt of your redemption request in good order. A
redemption request is in good order if it includes the exact name in which the
shares are registered, the investor's account number, and the number of shares
or the dollar amount of shares to be redeemed, and, for written requests, if it
is signed exactly in accordance with the registration form. If you hold your
Investor Shares in certificate form, you must submit the certificates and sign
the assignment form on the back of the certificates. Signatures must be
guaranteed by a bank, broker-dealer, or certain other financial institutions.
You may redeem your Investor Shares by telephone only if you elected the
telephone redemption privilege option on your Account Application or otherwise
in writing. Shares for which certificates have been issued may not be redeemed
by telephone. The Trust may require additional documentation from shareholders
that are corporations, partnerships, agents, fiduciaries, or surviving joint
owners.

The Trust will pay you for your redemptions as promptly as possible and in any
event within seven days after the request for redemption is received in writing
in good order. (The Trust generally sends payment for shares the business day
after a request is received.) Under unusual circumstances, the Trust may suspend
redemptions or postpone payment for more than seven days, as permitted by law.
If you paid for your Investor Shares by check, you will not be sent redemption
proceeds until the check you used to pay for the Investor Shares has cleared,
which may take up to 15 calendar days from the purchase date.

If, because of your redemptions, your account balance falls below a minimum
amount set by the Trustees (presently $2,000) of any Fund, the Trust may choose
to redeem your shares in that Fund and pay you for them. You will receive at
least 30 days written notice before the Trust redeems your shares, and you may
purchase additional shares at any time to avoid a redemption. The Trust may also
redeem shares if you own shares of any Fund above a maximum amount set by the
Trustees. There is currently no maximum, but the Trustees may establish one at
any time, which could apply to both present and future shareholders.

The Trust may suspend the right of redemption during any period when: (1)
trading on the New York Stock Exchange is restricted or the Exchange is closed;
(2) the Securities and Exchange Commission has by order permitted such
suspension; or (3) an emergency (as defined by rules of the SEC) exists making
disposal of portfolio investments or determination of the Fund's net asset value
not reasonably practicable.

If you request that your redemption proceeds be sent to you at an address other
than your address of record, or to another party, you must include a signature
guarantee for each such signature by an eligible signature guarantor, such as a
member firm of a national securities exchange or a commercial bank or trust
company located in the United States. If you are a resident of a foreign
country, another type of certification may be required. Please contact the
Transfer Agent for more details at (800) 344-8332. Corporations, fiduciaries,
and other types of shareholders may be required to supply additional documents
which support their authority to effect a redemption.

25
<PAGE>

EXCHANGES

You can exchange your Investor Shares of any Fund for Investor Shares of any
other fund in the Schroder family of funds at any time at their respective net
asset values. To exchange shares, please call (800) 344-8332.

DIVIDENDS AND DISTRIBUTIONS

Each Fund distributes any net investment income and any net realized capital
gain at least annually. Distributions from net capital gain are made after
applying any available capital loss carryovers.

YOU CAN CHOOSE FROM FOUR DISTRIBUTION OPTIONS:

[ARROW] Reinvest all distributions in additional Investor Shares of your Fund;

[ARROW] Receive distributions from net investment income in cash while
reinvesting capital gains distributions in additional Investor Shares
of your Fund;

[ARROW] Receive distributions from net investment income in additional
Investor Shares of your Fund while receiving capital gain
distributions in cash; or

[ARROW] 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

TAXES ON DIVIDENDS AND DISTRIBUTIONS. For federal income tax purposes,
distributions of investment income are taxable as ordinary income. Taxes on
distributions of capital gains are determined by how long your Fund owned the
investments that generated the gains, rather than how long you have owned your
shares. Distributions are taxable to you even if they are paid from income or
gains earned by a Fund before you invested (and thus were included in the price
you paid for your shares). Distributions of gains from investments that a Fund
owned for more than 12 months will be taxable as capital gains. Distributions of
gains from investments that the Fund owned for 12 months or less will be taxable
as ordinary income. Distributions are taxable whether you received them in cash
or reinvested them in additional shares of the Funds.

TAXES WHEN YOU SELL OR EXCHANGE YOUR SHARES. Any gain resulting from the sale or
exchange of your shares in the Funds will also generally be subject to federal
income or capital gains tax, depending on your holding period.

TAX TREATMENT OF PORTFOLIOS. None of the Portfolios is required to pay federal
income tax because each is classified as a partnership for federal income tax
purposes. All interest, dividends, gains and losses of a Portfolio will be
deemed to have been "passed through" to a Fund in proportion to the Fund's
holdings in the Portfolio, regardless of whether such interest, dividends, gains
or losses have been distributed by the Portfolio. Each Portfolio intends to
conduct its operations so that a Fund, if it invests all of its assets in the
Portfolio, may qualify as a regulated investment company.

26
<PAGE>

CONSULT YOUR TAX ADVISOR ABOUT OTHER POSSIBLE TAX CONSEQUENCES. This is a
summary of certain federal tax consequences of investing in a Fund. You should
consult your tax advisor for more information on your own tax situation,
including possible state and local taxes.

YEAR 2000 DISCLOSURE

Each of the Funds receives services from its investment adviser, administrator,
subadministrator, distributor, transfer agent, custodian and other providers
which rely on the smooth functioning of their respective systems and the systems
of others to perform those services. It is generally recognized that certain
systems in use today may not perform their intended functions adequately after
the Year 1999 because of the inability of the software to distinguish the Year
2000 from the Year 1900. Schroder is taking steps that it believes are
reasonably designed to address this potential "Year 2000" problem and to obtain
satisfactory assurances that comparable steps are being taken by each of the
Funds' other major service providers. There can be no assurance, however, that
these steps will be sufficient to avoid any adverse impact on the Funds from
this problem. In addition, there can be no assurance that the Year 2000 problem
will not have an adverse impact on companies and other issuers in which the
Funds invest or on the securities markets generally, which may reduce the value
of the Funds' portfolio investments.

27
<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the financial
performance of each of the Funds for the past 5 years or since the Fund
commenced operations. The total returns represent the rate that an investor
would have earned or lost on an investment in Investor Shares of a Fund,
assuming reinvestment of all dividends and distributions.

The financial highlights presented below have been audited by
PricewaterhouseCoopers LLP, independent accountants to the Funds (other than
those for the semi-annual period ended November 30, 1998 for Schroder Emerging
Markets Fund, Schroder U.S. Smaller Companies Fund, and Schroder Micro Cap Fund,
which are unaudited). The financial statements for the 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. The
unaudited financial statements for Schroder Emerging Markets Fund, Schroder U.S.
Smaller Companies Fund, and Schroder Micro Cap Fund are contained in the
Semi-Annual Reports of those Funds and are incorporated by reference into the
Statement of Additional Information. Copies of the Funds' Annual and Semi-Annual
Reports may be obtained without charge by writing the Trust at Two Portland
Square, Portland, Maine 04101 or by calling (800) 290-9826.

SCHRODER INTERNATIONAL FUND

<TABLE>
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED OCTOBER 31,

1998 1997 1996(a) 1995 1994
---- ---- ------- ---- ----
Net Asset Value, Beginning of Period $18.37 $20.01 $20.91 $23.17 $20.38

Investment Operations:
Net Investment Income (Loss)(b) 0.23 0.14 0.15 0.46 0.18
Net Realized and Unrealized Gain (Loss) on 0.34 1.31 1.74 (0.18) 2.69
Investments

Total from Investment Operations 0.57 1.45 1.89 0.28 2.87

Distributions from:
Net Investment Income (0.29) (0.46) (0.47) - (0.08)
Net Realized Gain on Investments (1.55) (2.63) (2.32) (2.54) -

Total Distributions (1.84) (3.09) (2.79) (2.54) (0.08)

Net Asset Value, End of Period $17.10 $18.37 $20.01 $20.91 $23.17

3.82% 8.33% 10.05% 2.08% 14.10%
Total Return(c)
Ratios/Supplementary Data
Net Assets, End of Period (in thousands) $129,955 $191,219 $202,735 $212,330 $500,504
Ratios to Average Net Assets:
Expenses After Expense Limitations(b) 0.99% 0.99% 0.99% 0.91% 0.90%
Expenses Before Expense Limitations(b) 1.08% 1.06% 1.04% N/A N/A
Net Investment Income (Loss) After Expense 1.14% 0.67% 0.86% 0.99% 0.94%
Limitations(b)
Portfolio Turnover Rate(d) 53% 36% 56% 61% 25%
</TABLE>

(a) On November 1, 1995, the Fund converted to Core and Gateway(R) .
(b) For the years ending after October 31, 1995, includes the Fund's
proportionate share of income and expenses of Schroder International Equity
Fund.
(c) Total returns would have been lower had certain expenses not been reduced
during the periods shown.
(d) The rate after October 31, 1995 represents the turnover of the underlying
Portfolio.

28
<PAGE>

SCHRODER EMERGING MARKETS FUND

<TABLE>
<S> <C> <C>
FOR THE FOR THE
SIX MONTHS ENDED PERIOD ENDED
NOVEMBER 30, 1998 MAY 31, 1998(a)
(UNAUDITED)
Net Asset Value, Beginning of Period $9.04 $10.00

Investment Operations:
Net Investment Income (Loss) - 0.02(b)
Net Realized and Unrealized Gain (Loss) on Investments (1.11) (0.98)

Total from Investment Operations (1.11) (0.96)

Net Asset Value, End of Period $7.93 $9.04

(12.28)% (9.60)%
Total Return(c)
Ratios/Supplementary Data
Net Assets, End of Period (in thousands) $540 $18
Ratios to Average Net Assets:
Expenses After Expense Limitations(b)(d) 1.68% 1.70%
Expenses Before Expense Limitations(c)(d) 22.00%(b)(d) &(e)
Net Investment Income (Loss) After Expense Limitations(b)(d) 0.55% 1.72%
Portfolio Turnover Rate(f) 75.15% 22.97%
</TABLE>

(a) The Fund commenced operations on October 31, 1997.
(b) Includes the Fund's proportionate share of income and expenses of Schroder
EM Core Portfolio.
(c) Total returns would have been lower had certain expenses not been reduced
during the period shown. Total return calculations for a period of less
than one year are not annualized.
(d) Annualized.
(e) Amount is not meaningful due to short period of operations.
(f) Rate represents the turnover of Schroder EM Core Portfolio.

29
<PAGE>

SCHRODER INTERNATIONAL SMALLER COMPANIES FUND

FOR THE FOR THE
YEAR ENDED PERIOD ENDED
OCTOBER 31, 1998 OCTOBER 31, 1997(a)
Net Asset Value, Beginning of Period $9.22 $10.00

Investment Operations:
Net Investment Income (Loss)(b) 0.05 0.02
Net Realized and Unrealized Gain (Loss) on Investments 0.60 (0.79)

Total from Investment Operations 0.65 (0.77)

Distributions from:
Net Investment Income (0.01) (0.01)
Net Realized Gain on Investments (0.51) -

Total Distributions (0.52) (0.01)

Net Asset Value, End of Period $9.35 $9.22

7.88% (7.73)%
Total Return(c)
Ratios/Supplementary Data
Net Assets, End of Period (in thousands) $4,165 $6,836
Ratios to Average Net Assets:
Expenses After Expense Limitations(b) 1.50% 1.50%(d)
Expenses Before Expense Limitations(b) 5.26% 3.93(d)%
Net Investment Income (Loss) After Expense Limitations(b) 0.33% 0.21%(d)
Portfolio Turnover Rate(e) 82% 32%
</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 periods shown.
(d) Annualized.
(e) Rate represents the turnover of Schroder International Smaller Companies
Portfolio.

30
<PAGE>

SCHRODER INTERNATIONAL BOND FUND

FOR THE
PERIOD ENDED
DECEMBER 31, 1998(a)
Net Asset Value, Beginning of Period $10.00

Investment Operations:
Net Investment Income (Loss) 0.20
Net Realized and Unrealized Gain (Loss) on Investments 1.20

Total from Investment Operations 1.40
Distributions From:
Net Investment Income (0.13)
Net Realized Gain on Investment (0.02)

Total from Distributions (0.15)

Net Asset Value, End of Period $11.25

14.00%
Total Return(b)(c)
Ratios/Supplementary Data
Net Assets, End of Period (in thousands) $230
Ratios to Average Net Assets:
Expenses After Expense Limitation(d)(e) 0.95%
Expenses Before Expense Limitation(d)(e) 92.87%
Net Investment Income (Loss) After Expense Limitation(d)(e) 5.03%
Portfolio Turnover Rate(f) 140%
</TABLE>

(a) The Fund commenced operations on January 15, 1998.
(b) Total returns would have been lower had certain expenses not been reduced
during the period shown.
(c) Total return is calculated from the Fund's inception date.
(d) Includes the Fund's proportionate share of income and expenses of Schroder
International Bond Portfolio.
(e) Annualized.
(f) Rate represents the turnover of Schroder International Bond Portfolio.

31
<PAGE>

<TABLE>
<S> <C> <C> <C> <C> <C>
SCHRODER U.S. DIVERSIFIED GROWTH FUND(a)
FOR THE YEAR ENDED OCTOBER 31,
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Net Asset Value, Beginning of Year $9.82 $9.76 $9.41 $8.52 $11.28

Investment Operations:
Net Investment Income (Loss) (0.06) (0.01) 0.04 0.07 0.04
Net Realized Income and Unrealized Gain (Loss) on 0.78 2.20 1.62 1.33 (0.27)
Investments

Total From Investment Operations 0.72 2.19 1.66 1.40 (0.23)

Distributions from:
Net Investment Income - (0.02) (0.07) (0.05) (0.01)
Net Realized Gain on Investments (2.75) (2.11) (1.24) (0.46) (2.52)
Total Distributions (2.75) (2.13) (1.31) (0.51) (2.53)

Net Asset Value, End of Year $7.79 $9.82 $9.76 $9.41 $8.52

8.87% 26.49% 19.45% 17.68% (2.01)%
Total Return(b)
Ratios/Supplementary Data
Net Assets, End of Year (in thousands) $12,540 $13,861 $17,187 $19,688 $18,483
Ratios to Average Net Assets:
Expenses After Expense Limitations 1.50% 1.50% 1.40% 1.40% 1.31%
Expenses Before Expense Limitations 1.85% 1.68% 1.43% N/A N/A
Net Investment Income (Loss) After Expense Limitations (0.71)% (0.09)% 0.43% 0.78% 0.41%
Portfolio Turnover Rate 209% 44% 57% 57% 27%
</TABLE>

(a) Prior to September 14, 1998, the name of the Fund was Schroder U.S. Equity
Fund.
(b) Total returns would have been lower had certain expenses not been reduced
during the periods shown.

32
<PAGE>

SCHRODER U.S. SMALLER COMPANIES FUND
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED OCTOBER 31,
FOR THE FOR THE FOR THE 1996] 1995 1994
----- ---- ----
SIX MONTHS ENDED YEAR ENDED PERIOD ENDED
NOVEMBER 30, 1998 MAY 31, 1998 MAY 31, 1997(a)
(UNAUDITED)
Net Asset Value, Beginning $14.76 $13.26 $17.23 $15.14 $11.81 $10.99
of Period

Investment Operations:
Net Investment Income (0.03)(b) (0.06)(b) (0.02)(b) (0.06)(b) (0.04) (0.07)
(Loss)
Net Realized and (2.25) 2.82 1.88 4.10 3.78 0.97
Unrealized Gain (Loss) on
Investments
Total from Investment (2.28) 2.76 1.86 4.04 3.74 0.90
Operations
Distributions from Net - (1.26) (5.83) (1.95) (0.41) (0.08)
Realized Gain on
Investments

Net Asset Value, End of $12.48 $14.76 $13.26 $17.23 $15.14 $11.81
Period

(15.45)%(d) 21.63% 14.73%(d) 29.35% 32.84% 8.26%
Total Return(c)
Ratios/Supplementary Data
Net Assets, End of Period $53,037 $51,679 $26,104 $13,743 $15,287 $13,324
(in thousands)
Ratios to Average Net Assets:
Expenses After Expense 1.28%(b)(e) 1.37%(b) 1.49%(b)(e) 1.49%(b) 1.49% 1.45%
Limitations
Expenses Before Expense 1.32%(b)(e) 1.37%(b) 1.87%(b)(e) N/A N/A N/A
Limitations
Net Investment Income (0.45)%(b)(e) (0.51)%(b) (0.42)%(b)(e) (0.35)%(b) (0.30)% (0.58)%
(Loss) After Expense
Limitations
Portfolio Turnover Rate(f) 67.12% 54.98% 34.45% 58.50% 92.68% 70.82%
</TABLE>

(a) Effective May 31, 1997, the Fund changed its fiscal year end to May 31 from
October 31.
(b) Includes the Fund's proportionate share of income and expenses of Schroder
U.S. Smaller Companies Portfolio.
(c) Total return calculations for a period of less than one year are not
annualized.
(d) Total returns would have been lower had certain expenses not been limited
during the periods shown.
(e) Annualized.
(f) For periods ending after October 31, 1995, the rate represents the turnover
of Schroder U.S. Smaller Companies Portfolio.

33
<PAGE>

SCHRODER MICRO CAP FUND
<TABLE>
<S> <C> <C>
FOR THE FOR THE
SIX MONTHS ENDED PERIOD ENDED
NOVEMBER 30, 1998 MAY 31, 1998(a)
(UNAUDITED)
Net Asset Value, Beginning of Period $14.26 $10.00

Investment Operations:
Net Investment Income (Loss) (0.06) (0.04)
Net Realized and Unrealized Gain (Loss) on Investments 1.82 4.50

Total from Investment Operations 1.76 4.46

Distributions from:
Net Realized Gain on Investments (2.23) (0.20)

Net Asset Value, End of Period $13.79 $14.26

12.45% 45.41%
Total Return(b)
Ratios/Supplementary Data
Net Assets, End of Period (in thousands) $7,733 $6,340
Ratios to Average Net Assets:
Expenses After Expense Limitations(c) 2.00% 2.00%
Expenses Before Expense Limitations(c) 3.71% 6.02%
Net Investment Income (Loss) After Expense Limitations(c) (1.00)% (0.77)%
Portfolio Turnover Rate 169.80% 165.71%
</TABLE>

(a) The Fund commenced operations on October 15, 1997.
(b) Total returns would have been lower had certain expenses not been reduced
during the periods shown.
(c) Annualized.

34
<PAGE>

FUNDS AVAILABLE THROUGH SCHRODER FUND ADVISORS INC.
PLEASE CALL FOR COMPLETE INFORMATION AND TO OBTAIN THE RELEVANT PROSPECTUS.
PLEASE READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST.

SCHRODER CAPITAL FUNDS (DELAWARE) (800-730-2932)
SCHRODER INTERNATIONAL FUND
SCHRODER EMERGING MARKETS FUND
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND
SCHRODER INTERNATIONAL BOND FUND
SCHRODER U.S. DIVERSIFIED GROWTH FUND
SCHRODER U.S. SMALLER COMPANIES FUND
SCHRODER MICRO CAP FUND

SCHRODER SERIES TRUST (800-464-3108)
SCHRODER LARGE CAPITALIZATION EQUITY FUND
SCHRODER SMALL CAPITALIZATION VALUE FUND
SCHRODER MIDCAP VALUE FUND
SCHRODER SHORT-TERM INVESTMENT FUND
SCHRODER INVESTMENT GRADE INCOME FUND

SCHRODER SERIES TRUST II (800-464-3108)
SCHRODER ALL-ASIA FUND

35
<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
and
Norwest Bank
Sixth Street and Marquette
Minneapolis, Minnesota 55479

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>

Schroder Capital Funds (Delaware)'s statement of additional information
(SAI) and annual and semi-annual reports to shareholders include additional
information about the Funds. The SAI and the financial statements included in
The Trust's most recent annual report to shareholders are incorporated by
reference into this Prospectus, which means they are part of this Prospectus for
legal purposes. The Trust's annual report discusses the market conditions and
investment strategies that significantly affected each Fund's performance during
its last fiscal year. You may get free copies of these materials, request other
information about a Fund, or make shareholder inquiries by calling 800-290-9826.

You may review and copy information about the Trust, including its SAI,
at the Securities and Exchange Commission's public reference room in Washington,
D.C. You may also the Commission at 800-SEC-0330 for information about the
operation of the public reference room. You may also access reports and other
information about the Trust on the Commission's Internet site at WWW.SEC.GOV.
You may get copies of this information, with payment of a duplication fee, by
writing the Public Reference Section of the Commission, Washington, D.C.
20549-6009. You may need to refer to the Trust's file number under the
Investment Company Act, which is 811-1911.

Schroder Capital Funds (Delaware) [GRAPHIC OF
Two Portland Square MEETING,
Portland, ME 04101 NEWSPAPERS,
800-290-9826 CD AND KEYBOARD
OVER CASH]
File No. 811-1911

<PAGE>

[LOGO] SCHRODERS

PROSPECTUS

ADVISOR SHARES
March 1, 1999

[GRAPHIC OF THREE GLOBES, MAP AND COMPASS, FLAGS OVER CASH]

<PAGE>

SCHRODERS' GLOBAL NETWORK
YOUR WINDOW ON THE WORLD

[World Map]

<PAGE>

[LOGO] SCHRODERS

PROSPECTUS

March 1, 1999

Schroder Capital Funds (Delaware)
Advisor Shares

This Prospectus describes six mutual funds offered by Schroder Capital Funds
(Delaware). The Trust offers Advisor Shares of the Funds in this Prospectus.

SCHRODER INTERNATIONAL FUND seeks long-term capital appreciation
through investment in securities markets outside the United States.

SCHRODER EMERGING MARKETS FUND seeks long-term capital appreciation.
The Fund invests primarily in equity securities of issuers domiciled or
doing business in emerging market countries in regions such as
Southeast Asia, Latin America, and Eastern and Southern Europe.

SCHRODER INTERNATIONAL SMALLER COMPANIES FUNd seeks long-term capital
appreciation through investment in securities markets outside the
United States. The Fund invests primarily in equity securities of
companies with market capitalizations of $1.5 billion or less.

SCHRODER INTERNATIONAL BOND FUND seeks a high rate of total return. The
Fund normally invests in debt securities and debt-related investments
of issuers domiciled outside the United States.

SCHRODER U.S. DIVERSIFIED GROWTH FUND seeks growth of capital by
investing in equity securities of companies in the United States.

SCHRODER U.S. SMALLER COMPANIES FUND seeks capital appreciation by
investing in equity securities of issuers domiciled in the United
States with market capitalizations of $1.5 billion or less.

Schroder Capital Management International Inc. ("Schroder") manages the Funds.
You can call the Trust at (800) 730-2932 to find out more about these Funds and
other funds in the Schroder family.

This Prospectus explains what you should know about the Funds before you invest.
Please read it carefully.

<PAGE>

TABLE OF CONTENTS

PAGE
SUMMARY INFORMATION................................................... 3
Schroder International Fund......................................... 3
Schroder Emerging Markets Fund...................................... 5
Schroder International Smaller Companies Fund....................... 7
Schroder International Bond Fund.................................... 9
Schroder U.S. Diversified Growth Fund............................... 10
Schroder U.S. Smaller Companies Fund................................ 11
FEES AND EXPENSES..................................................... 13
OTHER INVESTMENT STRATEGIES AND RISKS................................. 15
MANAGEMENT OF THE FUNDS............................................... 18
HOW THE FUNDS' SHARES ARE PRICED...................................... 21
HOW TO BUY SHARES..................................................... 22
HOW TO SELL SHARES.................................................... 23
ADDITIONAL INFORMATION ABOUT ADVISOR SHARES........................... 25
EXCHANGES............................................................. 25
DIVIDENDS AND DISTRIBUTIONS........................................... 25
TAXES................................................................. 26
YEAR 2000 DISCLOSURE.................................................. 26
FINANCIAL HIGHLIGHTS.................................................. 27

2
<PAGE>

SUMMARY INFORMATION

The Funds offered by Schroder Capital Funds (Delaware) provide a broad range of
investment choices. The Trust offers Investor Shares, which have higher
investment minimums and lower fees and expenses, of all of the Funds in a
separate prospectus. This summary identifies each Fund's investment objective,
principal investment strategies, and principal risks. 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 the Trust without a vote of the shareholders.

Each of SCHRODER INTERNATIONAL FUND, SCHRODER EMERGING MARKETS FUND, SCHRODER
INTERNATIONAL SMALLER COMPANIES FUND, SCHRODER INTERNATIONAL BOND FUND, AND
SCHRODER U.S. SMALLER COMPANIES FUND seeks to achieve its investment objective
by investing substantially all of its investable assets in a separate Portfolio
of Schroder Capital Funds or Schroder Capital Funds II that has the same
investment objective as, and investment policies that are substantially similar
to those of, that Fund.

After the narrative describing each Fund is a bar chart showing how the
investment returns of that Fund's Advisor Shares have varied from year to year.
The chart shows returns for each full calendar year since the Fund commenced
operations. The table following the chart shows how the Fund's average annual
returns for the last year, for the last five years, and for the last ten years
or the life of the Fund (as applicable) compare to a broad-based securities
market index. The bar chart and table provide some indication of the risks of
investing in the Fund by showing the variability of its returns (where more than
one calendar year of performance is shown) and comparing the Fund's performance
to a broad measure of market performance. Schroder U.S. Smaller Companies Fund
is the only Fund that has had Advisor Shares outstanding for at least a full
calendar year. For that reason, the bar chart and the table for that Fund show
performance of its Advisor Shares, which have not been offered for the full life
of the Fund. Because the other Funds do not have a full calendar year of
performance to show for Advisor Shares, the bar chart and table for each of
these Funds show performance of its Investor Shares, which have been offered
since the inception of each Fund. PAST PERFORMANCE IS NOT NECESSARILY AN
INDICATION OF FUTURE PERFORMANCE. It is possible to lose money on investments in
the Funds.

SCHRODER INTERNATIONAL FUND

INVESTMENT OBJECTIVE. Long-term capital appreciation through investment in
securities markets outside the United States.

RELATED PORTFOLIO. Schroder International Fund invests substantially all of its
assets in International Equity Fund, a diversified portfolio of Schroder Capital
Funds.

3
<PAGE>

The Fund also may do the following:

[ARROW] Invest in securities of issuers domiciled or doing business in
"emerging market" countries.

[ARROW] Invest in securities of closed-end investment companies that invest
primarily in foreign securities.

PRINCIPAL RISKS.

[ARROW] GEOGRAPHIC CONCENTRATION. There is no limit on the amount of the
Fund's assets that may be invested in securities of issuers domiciled
in any one country. To the extent that the Fund invests a substantial
amount of its assets in one country, it will be more susceptible to
the political and economic developments and market fluctuations in
that country than if it invested in a more geographically diversified
portfolio.

[ARROW] EMERGING MARKETS. The Fund may invest in "emerging market" countries
whose securities markets may experience heightened levels of
volatility. The risks of investing in emerging markets include greater
political and economic uncertainties than in foreign developed
markets, currency transfer restrictions, a more limited number of
potential buyers, and an emerging market country's dependence on
revenue from particular commodities or international aid.
Additionally, the securities markets and legal systems in emerging
market countries may only be in a developmental stage and may provide
few, or none, of the advantages or protections of markets or legal
systems available in more developed countries. Emerging market
countries may experience extremely high levels of inflation, which may
adversely affect those countries' economies and securities markets.

The bar chart and table below provide some indication of the risks of investing
in the Fund by showing the variability of its returns and comparing the Fund's
performance to a broad measure of market performance. Because the Fund does not
have a full calendar year of performance to show for its Advisor Shares, the bar
chart and table show performance of the Fund's Investor Shares, which have been
offered since the inception of the Fund.

SCHRODER INTERNATIONAL FUND & INVESTOR SHARES*

[The following table was depicted as a bar chart in the printed material.]

1989..................22.13%
1990.................-11.41%
1991...................4.62%
1992..................-4.01%
1993..................45.72%
1994..................-0.27%
1995..................11.57%
1996...................9.93%
1997...................3.34%
1998..................13.52%

4
<PAGE>

During the periods shown above, the highest quarterly return was 18.20% for the
quarter ended September 30, 1989, and the lowest was -19.79% for the quarter
ended September 30, 1990.

Average Annual Total Returns .......................... Past Past Past
(for periods ending December 31, 1998) One Year Five Years Ten Years

Schroder International Fund ........................... 13.52% 7.49% 8.55%

Morgan Stanley Capital International EAFE Index** ..... 20.06% 9.33% 5.73%

</TABLE>

* The bar chart and table show performance of the Fund's Investor Shares,
which are offered in a different prospectus. Although Advisor Shares
and Investor Shares would have similar annual returns (because all the
Fund's shares represent interests in the same portfolio of securities),
Advisor Share performance would be lower than Investor Share
performance because of the higher expenses paid by Advisor Shares.

** The Morgan Stanley Capital International EAFE Index is a market
weighted index composed of companies representative of the market
structure of 20 developed market countries in Europe, Australia, Asia
and the Far East, and reflects dividends net of non-recoverable
withholding tax.

SCHRODER EMERGING MARKETS FUND

INVESTMENT OBJECTIVE. To seek long-term capital appreciation.

RELATED PORTFOLIO. Schroder Emerging Markets Fund invests substantially all of
its assets in Schroder EM Core Portfolio, a non-diversified portfolio of
Schroder Capital Funds.

The Fund also may do the following:

[ARROW] Invest in securities of closed-end investment companies that invest
primarily in foreign securities.

[ARROW] Invest up to 35% of its assets in debt securities, including junk
bonds, which entail certain risks.

[ARROW] Invest up to 5% of its assets in sovereign debt securities that are in
default.

5
<PAGE>

PRINCIPAL RISKS.

[ARROW] NON-DIVERSIFIED MUTUAL FUND. The Fund is a "non-diversified" mutual
fund, and will invest its assets in a more limited number of issuers
than may diversified investment companies. To the extent the Fund
focuses on fewer issues, its risk of loss increases if the market value
of a security declines or if an issuer is not able to meet its
obligations.

SCHRODER EMERGING MARKETS FUND & INVESTOR SHARES*

[The following table was depicted as a bar chart in the printed material.]

1998..................-16.53%

6
<PAGE>

Average Annual Total Returns Past Life of Fund
(for periods ending December 31, 1998) One Year (since 10/30/97)

Schroder Emerging Markets Fund & Investor Shares* -16.53% -13.94%

Morgan Stanley Capital International Emerging Markets Free Index** -24.29% -20.99%

</TABLE>

** The Morgan Stanley Capital International Emerging Markets Free Index is
an unmanaged market capitalization index of companies representative of
the market structure of 26 emerging countries in Europe, Latin America
and the Pacific Basin. The Index reflects actual buyable opportunities
for the non-domestic investor by taking into account local market
restrictions on share ownership by foreigners.

SCHRODER INTERNATIONAL SMALLER COMPANIES FUND

INVESTMENT OBJECTIVE. Long-term capital appreciation through investment in
securities markets outside the United States.

INVESTMENT STRATEGIES. In selecting investments for the Fund, Schroder considers
a number of factors, including the company's potential for long-term growth, the
securities' financial condition, sensitivity to cyclical factors, the relative
value of the company's securities (compared to that of other companies and to
the market as a whole), and the extent to which the company's management owns
equity in the company. The Fund will invest in securities of issuers domiciled
in at least three countries other than the United States, and may, although it
does not currently, invest in the securities of issuers domiciled or doing
business in emerging market countries. Securities generally are sold when they
reach fair valuation or when significantly more attractive investment candidates
become available.

The Fund invests in small capitalization companies that Schroder believes offer
the potential for capital growth. In doing so, Schroder considers, among other
things, the issuer's likelihood of above average earnings growth, the
securities' attractive relative valuation, and whether the issuer has any
proprietary advantages.

The Fund also may do the following:

[ARROW] Invest in closed-end funds that invest primarily in foreign
securities.

[ARROW] Invest in securities of issuers domiciled or doing business in
emerging market countries.

PRINCIPAL RISKS.

[ARROW] SMALL COMPANIES. The Fund invests primarily in small companies, which
tend to be more vulnerable to adverse developments than larger
companies. Small companies may have limited product

7
<PAGE>

lines, markets, or financial resources, or may depend on a limited
management group. Their securities may trade infrequently and in
limited volumes. As a result, the prices of these securities may
fluctuate more than the prices of securities of larger, more widely
traded companies. Also, there may be less publicly available
information about small companies or less market interest in their
securities as compared to larger companies, and it may take longer for
the prices of the securities to reflect the full value of their
issuers' earnings potential or assets.

[ARROW] Geographic Concentration. There is no limit on the amount of the
Fund's assets that may be invested in securities of issuers domiciled
in any one country. To the extent that the Fund invests a substantial
amount of its assets in one country, it will be more susceptible to
the political and economic developments and market fluctuations in
that country than if it invested in a more geographically diversified
portfolio.

SCHRODER INTERNATIONAL SMALLER COMPANIES FUND & INVESTOR SHARES*

[The following table was depicted as a bar chart in the printed material.]

1997...................-14.13%
1998....................25.98%

During the periods shown above, the highest quarterly return was 20.25% for the
quarter ended March 31, 1998, and the lowest was -15.41% for the quarter ended
September 30, 1998.

Average Annual Total Returns Past Life of Fund
(for periods ending December 31, 1998) One Year (since 11/4/96)

Schroder International Smaller Companies Fund* 25.98% 3.31%

Salomon Smith Barney Extended Market Index (EPAC Region)** 14.14% 0.93%

</TABLE>

** The Salomon Smith Barney Extended Market Index (EPAC Region) (EMI EPAC)
is an unmanaged benchmark, representing the portion of the Salomon
Smith Barney Broad Market Index related to companies with small index
capitalization in approximately 22 European and Pacific Basin
countries. The Salomon Smith Barney EMI EPAC represents the smallest
companies in each country based on total market capital having in the
aggregate 20% of the cumulative available market capital in such
country.

8
<PAGE>

SCHRODER INTERNATIONAL BOND FUND

INVESTMENT OBJECTIVE. To seek a high rate of total return.

RELATED PORTFOLIO. Schroder International Bond Fund invests substantially all of
its assets in Schroder International Bond Portfolio, a non-diversified portfolio
of Schroder Capital Funds II.

PRINCIPAL INVESTMENTS. The Fund normally invests substantially all of its assets
in debt securities and debt-related investments of companies domiciled outside
the United States. The Fund also may invest in debt securities of foreign
governments (including provinces and municipalities) and their agencies and
instrumentalities, debt securities of supranational organizations, and debt
securities of private issuers. The Fund normally invests in securities of
issuers in at least five countries other than the United States, although there
is no limit on the amount of the Fund's assets that may be invested in
securities of issuers domiciled in any one country.

The Fund also may do the following:

[ARROW] Invest in securities of issuers domiciled or doing business in
emerging market countries.

[ARROW] Invest in securities convertible into common or preferred stock, or
traded together with warrants for the purchase of common stock.

[ARROW] Invest up to 10% of its assets in junk bonds, which entail certain
risks.

[ARROW] Sell securities short and then borrow those same securities from a
broker or other institution to complete the sale (a "short sale").

[ARROW] Enter into interest rate swaps for hedging purposes or to realize a
greater current return.

[ARROW] Engage in a variety of transactions involving the use of options and
futures contracts.

[ARROW] Invest in closed-end funds that invest primarily in emerging markets
securities.

[ARROW] Invest in derivative instruments, which are financial instruments
whose value depends upon, or is derived from, the value of an
underlying asset, such as a security, index or currency.

PRINCIPAL RISKS.

[ARROW] DEBT SECURITIES. The Fund invests in debt securities, which are
subject to market risk (the fluctuation of market value in response to
changes in interest rates) and to credit risks (the risk that the
issuer may become unable or unwilling to make timely payments of
principal and interest).

9
<PAGE>

unanticipated rise in interest rates, may impair the ability of the
issuer to make payments of interest and principal. If this were to
occur, the values of securities held by the Fund may become more
volatile.

[ARROW] LEVERAGE. The Fund may borrow money by engaging in reverse repurchase
agreements to invest in additional securities. "Reverse" repurchase
agreements generally involve the sale by the Fund of securities held
by it and an agreement to repurchase the securities at an agreed-upon
price, date, and interest payment. The use of borrowed money, known as
leverage, increases the Fund's market exposure and risk and may result
in losses. The interest that the Fund must pay on borrowed money will
reduce its net investment income, and may also either offset any
potential capital gains or increase any losses. Leverage is a
speculative technique that makes the Fund's net asset value more
volatile than it normally would be.

[ARROW] GEOGRAPHIC CONCENTRATION. There is no limit on the amount of the
Fund's assets that may be invested in securities of issuers domiciled
in any one country. To the extent that the Fund invests a substantial
amount of its assets in one country, it will be more susceptible to
the political and economic developments and market fluctuations in
that country than if it invested in a more geographically diversified
portfolio.

SCHRODER U.S. DIVERSIFIED GROWTH FUND
(FORMERLY, SCHRODER U.S. EQUITY FUND)

INVESTMENT OBJECTIVE. To seek growth of capital.

PRINCIPAL INVESTMENTS. The Fund normally invests substantially all of its
assets in equity securities of companies in the United States. The Fund invests
in a variety of equity securities including common and preferred stocks and
warrants to purchase common and preferred stocks. The Fund normally invests in
securities of companies with market capitalizations of more than $1.5 billion
(at the time of investment).

PRINCIPAL RISK.

[ARROW] EQUITY SECURITIES.The principal risks of investing in the Fund include
the risk that the value of the equity securities in the portfolio will
fall, or will not appreciate as anticipated by Schroder, due to
factors that adversely affect particular companies in the portfolio
and/or the U.S. equities market in general.

10
<PAGE>

SCHRODER U.S. DIVERSIFIED GROWTH FUND - INVESTOR SHARES*

[The following table was depicted as a bar chart in the printed material.]

1989..................24.42%
1990..................-4.00%
1991..................38.28%
1992..................15.23%
1993..................12.50%
1994..................-5.21%
1995..................28.03%
1996..................21.48%
1997..................23.33%
1998..................21.94%

During the periods shown above, the highest quarterly return was 26.48% for the
quarter ended December 31, 1998, and the lowest was-15.40% for the quarter
ended September 30, 1998.

Average Annual Total Returns Past Past Past
(for periods ending December 31, 1998) One Year Five Years Ten Years

Schroder U.S. Diversified Growth Fund* 21.94% 17.25% 16.84%

Standard & Poor's 500 Index** 28.58% 21.37% 16.02%

</TABLE>

* The bar chart and table show performance of the Fund's Investor
Shares, which are offered in a different prospectus. Although Advisor
Shares and Investor Shares would have similar annual returns (because
all the Fund's shares represent interests in the same portfolio of
securities), Advisor Share performance would be lower than Investor
Share performance because of the higher expenses paid by Advisor
Shares.

** The Standard & Poor's 500 Index is a market value weighted composite
index of 500 large capitalization U.S. companies and reflects the
reinvestment of dividends.

SCHRODER U.S. SMALLER COMPANIES FUND

INVESTMENT OBJECTIVE. Capital appreciation.

RELATED PORTFOLIO. Schroder U.S. Smaller Companies Fund invests substantially
all of its assets in Schroder U.S. Smaller Companies Portfolio, a diversified
portfolio of Schroder Capital Funds.

11
<PAGE>

PRINCIPAL RISKS.

[ARROW] SMALL COMPANIES.The Fund invests primarily in small companies, which
tend to be more vulnerable to adverse developments than larger
companies. Small companies may have limited product lines, markets, or
financial resources, or may depend on a limited management group.
Their securities may trade less frequently and in limited volumes. As
a result, the prices of these securities may fluctuate more than the
prices of securities of larger, more widely traded companies. Also,
there may be less publicly available information about small companies
or less market interest in their securities as compared to larger
companies, and it may take longer for the prices of the securities to
reflect the full value of their issuers' earnings potential or assets.

[ARROW] Equity Securities.Another risk of investing in the Fund is the risk
that the value of the equity securities in the portfolio will fall, or
will not appreciate as anticipated by Schroder, due to factors that
adversely affect particular companies in the portfolio and/or the U.S.
equities market in general.

SCHRODER U.S. SMALLER COMPANIES FUND

[The following table was depicted as a bar chart in the printed material.]

1997..................26.60%
1998..................-9.39%

During the periods shown above, the highest quarterly return was 18.53% for the
quarter ended June 30, 1997, and the lowest was -23.22% for the quarter ended
September 30, 1998. For the period January 1, 1998 through November 30, 1998,
the Fund's total return (unannualized) was -10.89%.

Average Annual Total Returns Past Since Inception
(for periods ending December 31, 1998) One Year Of Advisor Shares
(12/23/96)

Schroder U.S. Smaller Companies Fund -9.39% 7.72%

Russell 2000 Index* -2.55% 9.31%

</TABLE>

* The Russell 2000 Index is a market capitalization weighted broad based index
of 2000 small capitalization U.S. companies.

12
<PAGE>

FEES AND EXPENSES

THESE TABLES DESCRIBE THE FEES AND EXPENSES THAT YOU WILL PAY IF YOU INVEST IN
ADVISOR SHARES OF THE FUNDS. CERTAIN FEES AND EXPENSES HAVE BEEN ESTIMATED FOR
SCHRODER INTERNATIONAL BOND FUND, WHICH HAD NOT COMPLETED A FULL FISCAL YEAR AS
OF DECEMBER 31, 1998. ANNUAL FUND 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 IN WHICH THE FUND INVESTS.

SHAREHOLDER FEES
(paid directly from your investment):

Maximum Sales Load Imposed on Purchases None
Maximum Deferred Sales Load None
Maximum Sales Load Imposed on Reinvested Dividends None
Redemption Fee None
Exchange Fee None

ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets):

Schroder
Schroder International Schroder
Schroder Emerging Smaller Schroder Schroder U.S. U.S.Smaller
International Markets Companies International Diversified Companies
Fund Fund Fund Bond Fund Growth Fund Fund

Management Fees 0.675% 1.25% 1.10% 0.70% 0.75% 0.85%
Distribution (12b-1) Fees(1) 0% 0% 0% 0% 0% 0%
Other Expenses (includes a 0.25% 1224.195% 10.94% 4.41% 92.43% 1.35% 3.03%
shareholder servicing fee)(2)

Total Annual Fund Operating 1224.87% 12.19% 5.51% 93.13% 2.10% 3.88%
Expenses(2)
Fee Waiver(s) and/or Expense 1223.63% 10.24% 3.76% 91.93% 0.35% 2.30%
Limitation(3)

Net Expenses(3) 1.24% 1.95% 1.75% 1.20% 1.75% 1.62%

</TABLE>

(1) Each Fund has adopted a Distribution Plan pursuant to Rule 12b-1 under
the Investment Company Act of 1940, as amended, with respect to its
Advisor Shares. Although the Trustees have not currently authorized
payments under the Distribution Plan, payments by a Fund under its
Shareholder Service Plan, which will not exceed the annual rate of
0.25% of a Fund's average daily net assets, will be deemed to have been
made pursuant to the Distribution Plan to the extent such payments may
be considered to be primarily intended to result in the sale of the
Fund's Advisor Shares.

(2) Other Expenses and Total Fund Operating Expenses for each Fund other
than Schroder U.S. Smaller Companies Fund and Schroder International
Fund are estimated based on anticipated expenses for that Fund's
current fiscal year.

(3) The Net Expenses shown above reflect the effect of contractually
imposed expense limitations and/or fee waivers in effect through
December 31, 1999 on Total Annual Fund operating Expenses of the Funds.

13
<PAGE>

EXAMPLE

This Example is intended to help you compare the cost of investing in a Fund
with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in Advisor Shares of a Fund for the
time periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment earns a 5% return each
year and that the Fund's Total Annual Fund Operating Expenses remain the same as
those set forth above (absent the noted Fee Waiver and/or Expense Limitation).
Your actual costs may be higher or lower. Based on these assumptions, your costs
would be:
<TABLE>
<S> <C> <C> <C> <C>

1 year 3 years 5 years 10 years
------ ------- ------- --------
Schroder International Fund* $10,000 $10,000 $10,000 $10,000
Schroder Emerging Markets Fund* $10,000 $10,000 $10,000 $10,000
Schroder International Smaller Companies Fund* $ 550 $ 1,640 $ 2,720 $ 5,372
Schroder International Bond Fund* $10,000 $10,000 $10,000 $10,000
Schroder U.S. Diversified Growth Fund* $ 213 $ 658 $ 1,129 $ 2,431
Schroder U.S. Smaller Companies Fund* $ 391 $ 1,185 $ 1,997 $ 4,108
</TABLE>

* Assuming that each of the Fund's operating expenses remain the same as Net
Expenses set forth above, based on the other assumptions described above, your
costs would be as follows for 1 year, 3 years, 5 years, and 10 years,
respectively:

Schroder International Fund - $126, $393, $681, and $1,500.
Schroder Emerging Markets Fund - $198, $613, $1,054, and $2,278.
Schroder International Smaller Companies Fund - $178, $551, $949, and $2,062.
Schroder International Bond Fund - $122, $380, $657, and $1,450.
Schroder U.S. Diversified Growth Fund - $178, $551, $949, and $2,062.
Schroder U.S. Smaller Companies Fund - $161, $499, $860, and $1,878.

14
<PAGE>

OTHER INVESTMENT STRATEGIES AND RISKS

RISKS OF INVESTING IN THE FUNDS

Foreign Securities. Except as otherwise noted in this Prospectus, there is no
limit on the amount of a Fund's assets that may be invested in foreign
securities. Investments in foreign securities entail certain risks. There may be
a possibility of nationalization or expropriation of assets, confiscatory
taxation, political or financial instability, and diplomatic developments that
could affect the value of a Fund's investments in certain foreign countries.
Since foreign securities normally are denominated and traded in foreign
currencies, the values of the Fund's assets may be affected favorably or
unfavorably by currency exchange rates, currency exchange control regulations,
foreign withholding taxes, and restrictions or prohibitions on the repatriation
of foreign currencies. There may be less information publicly available about a
foreign issuer than about a U.S. issuer, and foreign issuers are not generally
subject to accounting, auditing, and financial reporting standards and practices
comparable to those in the United States. The securities of some foreign issuers
are less liquid and at times more volatile than securities of comparable U.S.
issuers. Foreign brokerage commissions and other fees are also generally higher
than in the United States. Foreign settlement procedures and trade regulations
may involve certain risks (such as delay in payment or delivery of securities or
in the recovery of a Fund's assets held abroad) and expenses not present in the
settlement of domestic investments.

In addition, legal remedies available to investors in certain foreign
countries may be more limited than those available to investors in the United
States or in other foreign countries. The willingness and ability of foreign
governmental entities to pay principal and interest on government securities
depends on various economic factors, including the issuer's balance of payments,
overall debt level, and cash-flow considerations related to the availability of
tax or other revenues to satisfy the issuer's obligations. If a foreign
governmental entity defaults on its obligations on the securities, a Fund may
have limited recourse available to it. The laws of some foreign countries may
limit a Fund's ability to invest in securities of certain issuers located in
those countries.

If a Fund purchases securities denominated in foreign currencies, a
change in the value of any such currency against the U.S. dollar will result in
a change in the U.S. dollar value of the Fund's assets and the Fund's income
available for distribution. In addition, although at times most of a Fund's
income may be received or realized in these currencies, the Fund will be
required to compute and distribute its income in U.S. dollars. As a result, if
the exchange rate for any such currency declines after the Fund's income has
been earned and translated into U.S. dollars but before payment to shareholders,
the Fund could be required to liquidate portfolio securities to make such
distributions. Similarly, if a Fund incurs an expense in U.S. dollars and the
exchange rate declines before the expense is paid, the Fund would have to
convert a greater amount of U.S. dollars to pay for the expense at that time
than it would have had to convert at the time the Fund incurred the expense. A
Fund may buy or sell foreign currencies and options and futures contracts on
foreign currencies for hedging purposes in connection with its foreign
investments.

Special tax considerations apply to foreign securities. In determining whether
to invest in debt securities of foreign issuers, Schroder considers the likely
impact of foreign taxes on the net yield available to the Fund and its
shareholders. Income received by a Fund from sources within foreign countries
may be reduced by withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. Any such taxes paid by a Fund will reduce its income
available for distribution to shareholders. In certain circumstances, a Fund may
be able to pass through to shareholders credits for foreign taxes paid.

15
<PAGE>

DEBT SECURITIES. All of the Funds may invest in debt securities, which are
subject to the risk of fluctuation of market value in response to changes in
interest rates and the risk that the issuer may default on the timely payment of
principal and interest. Additionally, all of the Funds may invest in junk bonds,
which are lower- quality, high-yielding debt securities rated below Baa or BBB
by Moody's Investors Service Inc. or Standard & Poor's Rating Group (or, if they
are unrated, which Schroder believes to be of comparable quality). See the
Statement of Additional Information for further descriptions of securities
ratings assigned by Moody's and Standard & Poor's. Lower-rated debt securities
are predominantly speculative and tend to be more susceptible than other debt
securities to adverse changes in the financial condition of the issuer, general
economic conditions, or an unanticipated rise in interest rates, which may
affect an issuer's ability to pay interest and principal. This would likely make
the values of the securities held by a Fund more volatile and could limit the
Fund's ability to liquidate its securities. Changes by recognized rating
services in their ratings of any fixed-income security and in the perceived
ability of an issuer to make payments of interest and principal also may affect
the value of these investments.

RISKS OF SMALLER CAPITALIZATION COMPANIES. Schroder International Smaller
Companies Fund and Schroder U.S. Smaller Companies Fund invest in companies that
are smaller and less well- known than larger, more widely held companies. Small
and mid-cap companies may offer greater opportunities for capital appreciation
than larger companies, but may also involve certain special risks. They are more
likely than larger companies to have limited product lines, markets or financial
resources, or to depend on a small, inexperienced management group. Securities
of smaller companies may trade less frequently and in lesser volume than more
widely held securities and their values may fluctuate more sharply than other
securities. They may also trade in the over-the- counter market or on a regional
exchange, or may otherwise have limited liquidity. These securities may
therefore be more vulnerable to adverse developments than securities of larger
companies and the Funds may have difficulty establishing or closing out their
securities positions in smaller companies at prevailing market prices. Also,
there may be less publicly available information about smaller companies or less
market interest in their securities as compared to larger companies, and it may
take longer for the prices of the securities to reflect the full value of their
issuers' earnings potential or assets.

OTHER INVESTMENT STRATEGIES AND TECHNIQUES

In addition to the principal investment strategies described in the Summary
Information section above, the Funds may at times use the strategies and
techniques described below, which involve certain special risks. This Prospectus
does not attempt to disclose all of the various investment techniques and types
of securities that Schroder might use in managing the Funds. As in any mutual
fund, investors must rely on the professional investment judgment and skill of
the Fund's adviser.

16
<PAGE>

"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").

Although there is no limit on the amount of any Fund's assets that may be
invested in foreign currency exchange and foreign currency forward contracts,
each Fund may enter into such transactions only to the extent necessary to
effect the hedging transaction described above. In addition, Schroder
International Bond Fund may enter into foreign currency forward contracts for
non-hedging purposes. Suitable foreign currency hedging transactions may not be
available in all circumstances and there can be no assurance that a Fund will
utilize hedging transactions at any time.

SHORT SALES (SCHRODER INTERNATIONAL BOND FUND). When Schroder anticipates that
the price of a security will decline, it may sell the security short and borrow
the same security from a broker or other institution to complete the sale. The
Fund may make a profit or incur a loss depending upon whether the market price
of the security decreases or increases between the date of the short sale and
the date on which the Fund must replace the borrowed security. An increase in
the value of a security sold short by the Fund over the price at which it was
sold short will result in a loss to the Fund, and there can be no assurance that
the Fund will be able to close out the position at any particular time or at an
acceptable price.

17
<PAGE>

MANAGEMENT OF THE FUNDS

Each Portfolio in which the Schroder International Fund, Schroder Emerging
Markets Fund, Schroder International Smaller Companies Fund, Schroder
International Bond Fund and Schroder U.S. Smaller

18
<PAGE>

Companies Fund invests is managed under the direction of a board of trustees of
Schroder Capital Funds or Schroder Capital Funds II. Schroder has served as
investment adviser to each of the Portfolios since inception. Subject to the
direction and control of Schroder, Schroder Investment Management International
Limited (SIMIL), an affiliate of Schroder, serves as subadviser to Schroder
International Smaller Companies Portfolio pursuant to an Investment Subadvisory
Agreement among Schroder, SIMIL and the Portfolio.

Schroder has been an investment manager since 1962, and currently serves as
investment adviser to the Funds, the Portfolios, and a broad range of
institutional investors. As of December 31, 1998, Schroder, together with its
United Kingdom affiliate, Schroder Capital Management International Limited, had
approximately $27.1 billion in assets under management. Schroder's address is
787 Seventh Avenue, New York, New York 10019, and its telephone number is (212)
641-3900. SIMIL has been registered as a U.S. investment adviser since 1998, and
as of June 30, 1998 had under management assets of approximately $42 billion.
SIMIL's address is 31 Gresham Street, London, United Kingdom, EC2V 7QA.

INVESTMENT ADVISORY FEES PAID BY THE RELATED PORTFOLIOS. For the fiscal year
ended October 31, 1998 (May 31, 1998, in the case of Schroder U.S. Smaller
Companies Portfolio and Schroder EM Core Portfolio, and December 31, 1998 for
Schroder International Bond Portfolio), the Portfolios paid investment advisory
fees to Schroder at the following annual rates (based on the average net assets
of each Portfolio taken separately): INTERNATIONAL EQUITY FUND - 0.427%;
SCHRODER EM CORE PORTFOLIO - 0.086%; SCHRODER INTERNATIONAL BOND PORTFOLIO -
0.00%; SCHRODER INTERNATIONAL SMALLER COMPANIES PORTFOLIO - 0.00%; SCHRODER U.S.
SMALLER COMPANIES PORTFOLIO - 0.60%. Schroder is contractually obligated through
December 31, 1999 to waive 0.10% of the advisory fees payable by Schroder
International Smaller Companies Portfolio. Each of the Funds that invests in a
Portfolio bears a proportionate part of the investment advisory fees (and other
expenses) paid by the Portfolio (based on the percentage of the Portfolio's
assets attributable to the Fund).

Pursuant to the Investment Subadvisory Agreement, Schroder pays SIMIL a monthly
fee at the annual rate of 0.25% of the daily net assets of Schroder
International Smaller Companies Portfolio.

INVESTMENT ADVISORY FEES PAID BY SCHRODER U.S. DIVERSIFIED GROWTH FUND. For the
fiscal year ended October 31, 1998, SCHRODER U.S. DIVERSIFIED GROWTH FUND paid
investment advisory fees to Schroder at the annual rate of 0.447% of the Fund's
average net assets.

EXPENSE LIMITATIONS AND WAIVERS. In order to limit the Funds' expenses, Schroder
is contractually obligated to reduce its compensation (and, if necessary, to pay
certain other Fund expenses) until December 31, 1999 to the extent that each
Fund's total operating expenses attributable to its Advisor Shares exceed the
following annual rates (based on the average net assets of each Fund taken
separately): SCHRODER INTERNATIONAL FUND - 1.24%; SCHRODER EMERGING MARKETS FUND
- - 1.95%; SCHRODER INTERNATIONAL SMALLER COMPANIES FUND - 1.75%; SCHRODER
INTERNATIONAL BOND FUND - 1.20%; SCHRODER U.S. DIVERSIFIED GROWTH FUND - 1.75%;
AND SCHRODER U.S. SMALLER COMPANIES FUND - 1.74%, but in no event will the Net
Expenses of Schroder U.S. Smaller Companies Fund Advisor Shares be more than
0.25% higher than the Net Expenses of the Fund's Investor Shares. Schroder has
agreed that, in any event, the advisory fees paid to it by Schroder U.S.
Diversified Growth Fund through December 31, 1999 will be limited to 0.65% of
the Fund's average daily net assets.

19
<PAGE>

manager or an investment team, with the assistance of an investment committee.
The following portfolio managers have had primary responsibility for making
investment decisions for the Portfolios or the Funds, as the case may be, since
the years shown below. Their recent professional experience is also shown.

Fund/Portfolio Portfolio Manager Since Recent Professional Experience

Schroder International Michael Perelstein 1997 Employed as an investment professional at Schroder since
Fund/International 1997. Mr. Perelstein is also Vice President of the Trust
Equity Fund and of Schroder Capital Funds and Schroder Capital Funds
II, and a Director and Senior Vice President of Schroder.
Prior to joining Schroder, Mr.Perelstein was a Managing
Director at MacKay-Shields Financial Corp.from March 1993
to November 1996.

Heather Crighton Inception (1997) Employed as an investment professional at Schroder since
1993. Ms. Crighton is a director and a First Vice President
of Schroder.

Mark Bridgeman Inception (1997) Employed as an investment professional at Schroder since
1990. Mr. Bridgeman is a First Vice President of
Schroder.

Nicholas Melhuish 1998 Employed as an investment professional at Schroder since
1991. Mr. Melhuish is an investment manager of SIMIL and
of Schroder.
20
<PAGE>

Schroder International Michael Perelstein Inception (1997) See above.
Bond Fund/
International Bond
Portfolio
Mark Astley Inception (1997) Employed as an investment professional at Schroder since
1986. Mr. Astley is a Vice President of the Trust and of
Schroder Capital Funds and Schroder Capital Funds II,
and is a First Vice President of Schroder.

Schroder U.S. Paul Morris 1997 Employed as an investment professional at Schroder since
Diversified Growth Fund 1997. Mr. Morris is Senior Vice President of Schroder.
Prior to joining Schroder, Mr. Morris was a Principal and
Senior Portfolio Manager at Weiss Peck & Greer, L.L.C., and
a Managing Director, Equity Division, of UBS Asset
Management.

Schroder U.S. Smaller Ira L. Unschuld 1997 (sole Employed as an investment professional at Schroder since
Companies manager 1990. Mr. Unschuld is a Vice President of the Trust and
Fund/Schroder U.S since 1998) a Group Vice President of Schroder.
Smaller Companies
Portfolio

</TABLE>

HOW THE FUNDS' SHARES ARE PRICED

Each Fund calculates the net asset value of its Advisor Shares by dividing the
total value of its assets attributable to its Advisor Shares, less its
liabilities attributable to those shares, by the number of Advisor Shares
outstanding. Shares are valued as of the close of trading on the New York Stock
Exchange (normally 4:00 p.m.) each day the Exchange is open. The Trust expects
that days, other than weekend days, that the Exchange will not be open are New
Years Day, Martin Luther King, Jr. Day, Presidents Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The Funds
value their portfolio securities for which market quotations are readily
available at market value. Short-term investments that will mature in 60 days or
less are stated at amortized cost, which approximates market value. The Funds
value all other securities and assets at their fair values as determined in
accordance with procedures adopted by the Board of Trustees. All assets and
liabilities of a Fund denominated in foreign currencies are valued in U.S.
dollars based on the exchange rate last quoted by a major bank prior to the time
when the net asset value of the Fund's shares is calculated. Because certain of
the securities in which the Funds may invest may trade on days when the Funds do
not price their Advisor Shares, the net asset value of a Fund's Advisor Shares
may change on days when shareholders will not be able to purchase or redeem
their Advisor Shares. The net asset value of a Fund's Advisor Shares will
generally differ from that of its Investor 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 Advisor Shares and Investor Shares.

21
<PAGE>

HOW TO BUY SHARES

You may purchase Advisor Shares of each Fund directly from the Trust or through
a service organization such as a bank, trust company, broker-dealer, or other
financial organization (a Service Organization) having an arrangement with
Schroder Fund Advisors Inc., the distributor of the Trust's shares. If you do
not have a Service Organization, Schroder Fund Advisors Inc. can provide you
with a list of available firms. Your Service Organization is responsible for
forwarding all of the necessary documentation to the Trust, and may charge for
its services.

Advisor Shares of each of the Funds are sold at their net asset value next
determined after the Trust receives your order. In order for you to receive the
Fund's next determined net asset value, the Trust must receive your order before
the close of regular trading on the New York Stock Exchange.

If the Advisor Shares you purchase will be held in your own name (rather than in
the name of your Service Organization), your payment for the shares must be
accompanied by a completed Account Application in proper form. The Trust or
Forum Shareholder Services, LLC, the Trust's Transfer Agent, may request
additional documentation, such as copies of corporate resolutions and
instruments of authority, from corporations, administrators, executors, personal
representatives, directors, or custodians. You may obtain an Account Application
from the Transfer Agent, P.O. Box 446, Portland, Maine 04112, or by calling
(800) 344-8332. You also may obtain an Account Application from your Service
Organization.

INVESTMENT MINIMUMS
The minimum investment for initial and additional purchases for each Fund is as
follows:

Initial Additional
Investment Investments
Regular Accounts $2,500 $2,500
Traditional IRAs $ 250 $ 250

The Trust is authorized to reject any purchase order.

PURCHASES BY CHECK
You may purchase shares of a Fund by mailing a check (in U.S. dollars) payable
to (i) Schroder Capital Funds (Delaware), if you are purchasing shares of two or
more Funds, accompanied by written instructions as to how the check amount
should be allocated amongst the Funds whose shares you are purchasing or (ii)
the name of the Fund to be purchased (i.e., Schroder International Bond Fund) if
you are purchasing shares of a single Fund. Third-party checks will not be
accepted.

You should mail your check and your completed Account Application to:

[Name of Fund] - Advisor Shares
P.O. Box 446
Portland, Maine 04112

Your payments should clearly indicate the shareholder's name and account number,
if applicable.

PURCHASES BY BANK WIRE/TELEPHONE
If you make your initial investment by wire, your order must be preceded by a
completed Account Application. Upon receipt of the Application, the Trust will
assign you an account number and your account will become active. Wire orders
received prior to the close of trading on the New York Stock Exchange (normally
4:00 p.m., Eastern Time) on each day the Exchange is open for trading will be
processed at the net asset value determined as of that day. Wire orders received
after that time will be processed at the net asset value next determined
thereafter.

22
<PAGE>

Once you have an account number, you may purchase Advisor Shares through your
Service Organization or by telephoning the Transfer Agent at (800) 344-8332 to
give notice that you will be sending funds by wire, and then arranging with your
bank to wire funds to the Trust. Your purchase will not be processed until the
Trust has received the wired funds.

Federal Reserve Bank wire instructions are as follows:

The Chase Manhattan Bank
New York, NY
ABA No.: 021000021
For Credit To: Forum Shareholder Services, LLC
Account. No.: 910-2-718187
Ref.: [Name of Fund] - Advisor Shares
Account of: (shareholder name)
Account No.: (shareholder account number)

The wire order must specify the name of the Fund, the shares' class (i.e.,
Advisor Shares), the account name and number, address, confirmation number,
amount to be wired, name of the wiring bank, and name and telephone number of
the person to be contacted in connection with the order.

OTHER PURCHASE INFORMATION

Advisor Shares of each Fund may be purchased for cash or in exchange for
securities held by the investor, subject to the determination by Schroder that
the securities are acceptable. (For purposes of determining whether securities
will be acceptable, Schroder will consider, among other things, whether they are
liquid securities of a type consistent with the investment objectives and
policies of the Fund in question and have a readily ascertainable value.) If a
Fund receives securities from an investor in exchange for shares of the Fund,
the Fund will under some circumstances have the same tax basis in the securities
as the investor had prior to the exchange (and the Fund's gain for tax purposes
would be calculated with regard to the investor's tax basis). Any gain on the
sale of those securities would be subject to distribution as capital gain to all
of the Fund's shareholders. Schroder reserves the right to reject any particular
investment. Securities accepted by Schroder will be valued in the same manner as
are the Trust's portfolio securities as of the time of the next determination of
the Funds' net asset value. All dividend, subscription, or other rights which
are reflected in the market price of accepted securities at the time of
valuation become the property of the relevant Fund and must be delivered to the
Fund upon receipt by the investor. Investors may realize a gain or loss upon the
exchange for federal income tax purposes. Investors interested in purchases
through exchange should telephone Schroder at (800) 344-8332.

Schroder Fund Advisors Inc., Schroder, or their affiliates may, at their own
expense and out of their own assets, provide compensation to dealers or other
financial intermediaries in connection with sales of Trust shares or shareholder
servicing. In some instances, this compensation may be made available only to
certain dealers or other financial intermediaries who have sold or are expected
to sell significant amounts of shares of the Trust.

HOW TO SELL SHARES

You may sell your Advisor Shares back to a Fund on any day the New York Stock
Exchange is open, either through your Service Organization or directly to the
Fund. If your shares are held in the name of a Service Organization, you may
only sell the shares through that Service Organization. The Service Organization

23
<PAGE>

may charge you for its services. If you choose to sell your shares directly to
the Fund, you may do so by sending a letter of instruction or stock power form
to the Trust, or by calling the Transfer Agent at (800) 344-8332.

The price you will receive is the net asset value next determined after receipt
of your redemption request in good order. A redemption request is in good order
if it includes the exact name in which the shares are registered, the investor's
account number, and the number of shares or the dollar amount of shares to be
redeemed, and, for written requests, if it is signed exactly in accordance with
the registration form. If you hold your Advisor Shares in certificate form, you
must submit the certificates and sign the assignment form on the back of the
certificates. Signatures must be guaranteed by a bank, broker-dealer, or certain
other financial institutions. You may redeem your Advisor Shares by telephone
only if you elected the telephone redemption privilege option on your Account
Application or otherwise in writing. Shares for which certificates have been
issued may not be redeemed by telephone. The Trust may require additional
documentation from shareholders that are corporations, partnerships, agents,
fiduciaries, or surviving joint owners.

If you redeem shares through your Service Organization, your Service
Organization is responsible for ensuring that the Transfer Agent receives your
redemption request in proper form and at the appropriate time.

The Trust will pay you for your redemptions as promptly as possible and in any
event within seven days after the request for redemption is received in writing
in good order. (The Trust generally sends payment for shares the business day
after a request is received.) Under unusual circumstances, the Trust may suspend
redemptions or postpone payment for more than seven days, as permitted by law.
If you paid for your Advisor Shares by check, you will not be sent redemption
proceeds until the check you used to pay for the Advisor Shares has cleared,
which may take up to 15 calendar days from the purchase date.

WIRE TRANSFERS

If your Service Organization receives Federal Reserve wires, you may instruct
that your redemption proceeds be forwarded by wire to your account with your
Service Organization; you may also instruct that your redemption proceeds be
forwarded to you by a wire transfer. Please indicate your Service Organization's
or your own complete wiring instructions.

24
<PAGE>

ADDITIONAL INFORMATION ABOUT ADVISOR SHARES

The Trust sells Advisor Shares of the Funds at their net asset value without any
sales charges or loads, so that the full amount of your purchase payment is
invested in the Fund you select. You also receive the full value of your Advisor
Shares when you sell them back to a Fund, without any deferred sales charge.

SHAREHOLDER SERVICING PLAN. The Trust has adopted a Shareholder Servicing Plan
(the "Service Plan") for the Advisor Shares of each Fund. Under the Service
Plan, each Fund pays fees to Schroder Fund Advisors Inc. at an annual rate of up
to 0.25% of the average daily net assets of the Fund represented by Advisor
Shares. Schroder Fund Advisors Inc. may enter into shareholder service
agreements with Service Organizations pursuant to which the Service
Organizations provide administrative support services to their customers who are
Fund shareholders. In return for providing these support services, a Service
Organization may receive payments from Schroder Fund Advisors Inc. at a rate not
exceeding 0.25% of the average daily net assets of the Advisor Shares of each
Fund for which the Service Organization is the Service Organization of record.
Some Service Organizations may impose additional conditions or fees. For
instance a Service Organization may require its clients to invest more than the
minimum amounts required by the Trust for initial or subsequent investments or
may charge a direct fee for its services. These fees would be in addition to any
amounts which you pay as a shareholder of a Fund or amounts which might be paid
to the Service Organization by Schroder Fund Advisors Inc. Please contact your
Service Organization for details.

DISTRIBUTION PLANS. Each Fund has adopted a Distribution Plan which allows the
Fund to pay distribution fees for the sale and distribution of its Advisor
Shares. Under the Plans, each Fund may pay Schroder Fund Advisors Inc.
compensation in an amount limited in any fiscal year to the annual rate of 0.50%
of the Fund's average daily net assets attributable to its Advisor Shares. The
Trustees have not currently authorized payments under the Distribution Plan,
although payments by a Fund under the Shareholder Service Plan, which will not
exceed the annual rate of 0.25% of a Fund's average daily net assets, will be
deemed to have been made pursuant to the Distribution Plan to the extent such
payments may be considered to be primarily intended to result in the sale of the
Fund's Advisor Shares. To the extent that payments are made in the future under
the Plans, they would be paid out of a Fund's assets attributable to its Advisor
Shares on an ongoing basis, would increase the cost of your investment, and may
cost you more than paying other types of sales charges imposed by other funds.

Payments under a Fund's Shareholder Servicing Plan for Advisor Shares
will be considered to have been made pursuant to the Fund's Distribution Plan,
to the extent such payments may be deemed to be primarily intended to result in
the sale of the Fund's Advisor Shares.

EXCHANGES

You can exchange your Advisor Shares of any Fund for Advisor Shares of any other
fund in the Schroder family of funds at any time at their respective net asset
values. Contact your Service Organization or the Transfer Agent for details. The
Trust reserves the right to change or suspend the exchange privilege at any
time. Shareholders would be notified of any such change or suspension.

DIVIDENDS AND DISTRIBUTIONS

Each Fund distributes any net investment income and any net realized capital
gain at least annually. Distributions from net capital gain are made after
applying any available capital loss carryovers.

YOU CAN CHOOSE FROM FOUR DISTRIBUTION OPTIONS:

[ARROW] Reinvest all distributions in additional Advisor Shares of your Fund;

25
<PAGE>

[ARROW] Receive distributions from net investment income in cash while
reinvesting capital gains distributions in additional Advisor Shares of
your Fund;

[ARROW] Receive distributions from net investment income in additional Advisor
Shares of your Fund while receiving capital gain distributions in cash;
or

[ARROW] 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 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

TAX TREATMENT OF THE PORTFOLIOS. None of the Portfolios is required to pay
federal income tax because each is classified as a partnership for federal
income tax purposes. All interest, dividends, gains and losses of a Portfolio
will be deemed to have been "passed through" to a Fund in proportion to the
Fund's holdings in the Portfolio, regardless of whether such interest,
dividends, gains or losses have been distributed by the Portfolio. Each
Portfolio intends to conduct its operations so that a Fund, if it invests all of
its assets in the Portfolio, may qualify as a regulated investment company.

YEAR 2000 DISCLOSURE

26
<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the financial
performance of each of the Funds for the past 5 years or since the Fund
commenced operations. The total returns represent the rate that an investor
would have earned or lost on an investment in Advisor Shares of a Fund, assuming
reinvestment of all dividends and distributions.

The financial highlights presented below for Schroder International Fund for the
fiscal year ended October 31, 1998 have been audited by PricewaterhouseCoopers
LLP, independent accountants to the Funds. The financial statements for that
Fund and the related independent accountants' reports are contained in the
Fund's Annual Report and are incorporated by reference into the Statement of
Additional Information. The financial highlights for the semi-annual period
ended November 30, 1998 for Schroder U.S. Smaller Companies Fund are unaudited.
The unaudited financial statements for that Fund are contained in the Fund's
Semi-Annual Reports and are incorporated by reference into the Statement of
Additional Information. 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 (800) 290-9826.

SCHRODER INTERNATIONAL FUND

For the
Period Ended
October 31, 1998(a)

Net Asset Value, Beginning of Period $16.35
_______

Investment Operations:
Net Investment Income (Loss)(b) 0.21(e)
Net Realized and Unrealized Gain (Loss) on Investments 0.45
_______

Total from Investment Operations 0.66
_______

Net Asset Value, End of Period $17.01
=======

4.04%
Total Return(c)
Ratios/Supplementary Data
Net Assets, End of Period (in thousands) $-(f)
Ratios to Average Net Assets:
Expenses After Expense Limitation(b) 1.24%
Expenses Before Expense Limitation(b) -(g)%
Net Investment Income (Loss) After Expense Limitation(b) 1.38%
Portfolio Turnover Rate(d) 53%

(a) Advisor Class shares were first issued on January 21, 1998.
(b) Includes the Fund's proportionate share of income and expenses of the
Schroder International Equity Fund.
(c) Total return, which is not annualized, would have been lower had certain
expenses not been reduced during the period shown.
(d) Rate represents the turnover of the Schroder International Equity Fund.
(e) Based on average share method.
(f) Net assets at end of period were less than one thousand dollars.
(g) Amount is not meaningful due to short period of operations and small asset
level.

27
<PAGE>

SCHRODER U.S. SMALLER COMPANIES FUND
<TABLE>
<S> <C> <C> <C>
For the For the For the
Six Months Ended Year Ended Period Ended
November 30, May 31, May 31,
1998 1998 1997(a)
(Unaudited) ---- -------

Net Asset Value, Beginning of Period $14.72 $13.24 $11.89

Investment Operations:
Net Investment Income (Loss)(b) (0.03) (0.05) (0.03)
Net Realized and Unrealized Gain (Loss) on Investments (2.25) 2.79 1.38

Total from Investment Operations (2.28) 2.74 1.35

Distributions from Net Realized Gain on Investments - (1.26) -

Net Asset Value, End of Period $12.44 $14.72 $13.24

(15.49)% 21.50% 11.35%
Total Return(c)(d)
Ratios/Supplementary Data
Net Assets, End of Period (in thousands) $6,055 $4,544 $81
Ratios to Average Net Assets:
Expenses After Expense Limitations 1.54%(e) 1.58% 1.74%(e)
Expenses Before Limitations 2.08%(e) 3.88% 57.02%(e)
Net Investment Income (Loss) After Expense Limitation (0.74)%(e) (0.78)% (0.67)%(e)
Portfolio Turnover Rate(f) 67.12% 54.98% 34.45%

(a) Since commencement of operations on December 23, 1996.
(b) Includes the Fund's proportionate share of income and expenses of the
Schroder U.S. Smaller Companies Portfolio.
(c) Total return calculations for a period of less than one year are not
annualized.
(d) Total returns would have been lower had certain expenses not been limited
during the period shown.
(e) Annualized.
(f) For periods ending after October 31, 1996, the rate represents the turnover
of Schroder U.S. Smaller Companies Portfolio.
</TABLE>

28
<PAGE>

FUNDS AVAILABLE THROUGH SCHRODER FUND ADVISORS INC.
Please call for complete information and to obtain the relevant prospectus.
Please read the prospectus carefullybefore you invest.
<TABLE>
<S> <C> <C>

Schroder Capital Funds (Delaware) (800) 730-2932 Schroder Series Trust (800) 464-3108
Schroder International Fund Schroder Large Capitalization Equity Fund
Schroder Emerging Markets Fund Schroder Small Capitalization Value Fund
Schroder International Smaller Companies Fund Schroder MidCap Value Fund
Schroder International Bond Fund Schroder Short-Term Investment Fund
Schroder U.S. Diversified Growth Fund Schroder Investment Grade Income Fund
Schroder U.S. Smaller Companies Fund
Schroder Series Trust II (800) 464-3108
Schroder All-Asia Fund

</TABLE>

29
<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

SUBADMINISTRTATOR
Forum Administrative Services, LLC
Two Portland Square
Portland, Maine 04101

CUSTODIAN
The Chase Manhattan Bank
Chase Metro Tech Center
Brooklyn, New York 11245
and
The Chase Manhattan Bank
Global Custody Division
125 London Wall
London EC2Y 5AJ, United Kingdom
and
Norwest Bank
Sixth Street and Marquette
Minneapolis, Minnesota 55479

TRANSFER AND DIVIDEND DISBURSING AGENT
Forum Shareholder Services, LLC
P.O. Box 446
Portland, Maine 04112

COUNSEL
Ropes & Gray
One International Place
Boston, Massachusetts 02109

INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109

<PAGE>

(This page has been left blank intentionally)

<PAGE>

Schroder Capital Funds (Delaware)'s statement of additional [GRAPHIC OF
information (SAI) and annual and semi-annual reports to MEETING,
shareholders include additional information about the Funds. NEWSPAPERS,
The SAI and the financial statements included in the Trust's CD AND KEYBOARD
most recent annual report to shareholders are incorporated OVER CASH]
by reference into this Prospectus, which means they are part
of this Prospectus for legal purposes. The Trust's annual
report discusses the market conditions and investment
strategies that significantly affected each Fund's
performance during its last fiscal year. You may get free
copies of these materials, request other information about a
Fund, or make shareholder inquiries by calling 800-290-9826.

You may review and copy information about the Trust,
including its SAI, at the Securities and Exchange
Commission's public reference room in Washington, D.C. You
may also call the Commission at 800-SEC-0330 for information
about the operation of the public reference room. You may
also access reports and other information about the Trust on
the Commission's Internet site at www.sec.gov. You may get
copies of this information, with payment of a duplication
fee, by writing the Public Reference Section of the
Commission, Washington, D.C. 20549-6009. You may need to
refer to the Trust's file number under the Investment
Company Act, which is 811-1911.

Schroder Capital Funds (Delaware)
Two Portland Square
Portland, ME 04101
800-290-9826

File No. 811-1911

<PAGE>

SCHRODER CAPITAL FUNDS (DELAWARE)

SCHRODER INTERNATIONAL FUND
SCHRODER EMERGING MARKETS FUND
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND
SCHRODER INTERNATIONAL BOND FUND
SCHRODER U.S. DIVERSIFIED GROWTH FUND
SCHRODER U.S. SMALLER COMPANIES FUND
SCHRODER MICRO CAP FUND

FORM N-1A
PART B

STATEMENT OF ADDITIONAL INFORMATION

MARCH 1, 1999

This Statement of Additional Information (SAI) is not a prospectus and is only
authorized for distribution when accompanied or preceded by a Prospectus for the
Funds, as amended or supplemented from time to time. This SAI relates to the
Funds' Investor Shares and Advisor Shares. Investor Shares and Advisor Shares
are offered through separate Prospectuses, each dated March 1, 1999. This SAI
contains information which may be useful to investors but which is not included
in the Prospectuses. Investors may obtain free copies of the Prospectuses by
calling the Trust at 800-290-9826.

Certain disclosure has been incorporated by reference into this SAI from the
Funds' annual reports. For a free copy of the annual reports, please call
800-290-9826.

<PAGE>

TABLE OF CONTENTS

TRUST HISTORY..........................................................2

CAPITALIZATION AND SHARE CLASSES.......................................2

MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS..............3

INVESTMENT RESTRICTIONS...............................................19

TRUSTEES AND OFFICERS.................................................29

SCHRODER AND ITS AFFILIATES...........................................34

INVESTMENT ADVISORY AGREEMENTS........................................34

ADMINISTRATIVE SERVICES...............................................38

DISTRIBUTOR...........................................................41

FUND ACCOUNTING.......................................................42

BROKERAGE ALLOCATION AND OTHER PRACTICES..............................44

DETERMINATION OF NET ASSET VALUE......................................48

REDEMPTIONS IN KIND...................................................50

TAXES.................................................................50

PRINCIPAL HOLDERS OF SECURITIES.......................................52

PERFORMANCE INFORMATION...............................................52

CUSTODIAN.............................................................55

INDEPENDENT ACCOUNTANTS...............................................60

SHAREHOLDER LIABILITY.................................................60

FINANCIAL STATEMENTS..................................................60

APPENDIX A..........................................................A-1

APPENDIX B...........................................................B-1

<PAGE>

SCHRODER CAPITAL FUNDS (DELAWARE)

STATEMENT OF ADDITIONAL INFORMATION

TRUST HISTORY

Schroder Capital Funds (Delaware) was organized as a Maryland
corporation on July 30, 1969; reorganized on February 29, 1988 as Schroder
Capital Funds, Inc.; and reorganized as a Delaware business trust organized
under the laws of the State of Delaware on January 9, 1996. The Trust's Trust
Instrument, which is governed by Delaware law, is on file with the Secretary of
State of the State of Delaware.

FUND CLASSIFICATION

The Trust currently offers shares of beneficial interest of nine series
with separate investment objectives and policies. Seven funds (the "Funds") are
offered pursuant to the Prospectuses and this SAI. Each Fund other than Schroder
Emerging Markets Fund and Schroder International Bond Fund is a "diversified"
investment company under the 1940 Act. This means that with respect to 75% of a
Fund's total assets, the Fund may not invest in securities of any issuer if,
immediately after such investment, more than 5% of the total assets of the Fund
(taken at current value) would be invested in the securities of that issuer
(this limitation does not apply to investments in U.S. Government securities).
None of the diversified Funds is subject to this limitation with respect to the
remaining 25% of its total assets. Each of Schroder Emerging Markets Fund and
Schroder International Bond Fund is a "non-diversified" investment company under
the 1940 Act, and therefore may invest its assets in a more limited number of
issuers than may diversified investment companies. To the extent a Fund invests
a significant portion of its assets in the securities of a particular issuer, it
will be subject to an increased risk of loss if the market value of the issuer's
securities declines.

CAPITALIZATION AND SHARE CLASSES

The Trust has an unlimited number of shares of beneficial interest that
may, without shareholder approval, be divided into an unlimited number of series
of such shares, which, in turn, may be divided into an unlimited number of
classes of such shares. Each Fund's shares (except Schroder Micro Cap Fund) are
presently divided into two classes, Investor Shares and Advisor Shares. Each
class is offered through a separate Prospectus. Unlike Investor Shares, Advisor
Shares are currently subject to shareholder service fees, so that the
performance of a Fund's Investor Shares should be more favorable than that of
the Fund's Advisor Shares over the same time period.

A Fund may suspend the sale of shares at any time and may refuse any
order to purchase shares. Under unusual circumstances, the Trust may suspend
redemption of Fund shares or postpone redemption payments for more than seven
days, as permitted by law. If, because of your redemptions, your account balance
falls below a minimum amount set by the Trustees (presently $2,000), the Trust
may choose to redeem your shares in that Fund and pay you for them. You will
receive at least 30 days' written notice before the Trust redeems your shares,
and you may purchase additional shares at any time to avoid a redemption. The
Trust may also redeem shares if you own shares of any Fund

2
<PAGE>

above a maximum amount set by the Trustees. There is currently no maximum, but
the Trustees may establish one at any time, which could apply to both present
and future shareholders.

Shares entitle their holders to one vote per share, with fractional
shares voting proportionally; however, a separate vote will be taken by each
Fund or class of shares on matters affecting the particular Fund or class, as
determined by the Trustees. For example, a change in a fundamental investment
policy for a Fund would be voted upon only by shareholders of that Fund and a
change to a distribution plan relating to a particular class and requiring
shareholder approval would be voted upon only by shareholders of that class.
Shares have noncumulative voting rights. Although the Trust is not required to
hold annual meetings of its shareholders, shareholders have the right to call a
meeting to elect or remove Trustees or to take other actions as provided in the
Trust Instrument. Shares have no preemptive or subscription rights, and are
transferable. Shares are entitled to dividends as declared by the Trustees, and
if a Fund were liquidated, each class of shares of the Fund would receive the
net assets of the Fund attributable to the class. Because Investor and Advisor
Shares are subject to different expenses, a Fund's dividends and other
distributions will normally differ between the two classes. The Trust may
suspend the sale of shares at any time and may refuse any order to purchase
shares.

MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS

In addition to the principal investment strategies and the principal
risks of the Funds described in the Prospectuses, each Fund may employ other
investment practices and may be subject to additional risks which are described
below. Because the following is a combined description of investment strategies
and risks for all the Funds, certain strategies or risks described below may not
apply to your Fund. Unless a strategy or policy described below is specifically
prohibited by the investment restrictions listed in the Prospectuses, under
"Investment Restrictions" in this SAI, or by applicable law, a Fund may engage
in each of the practices described below.

CERTAIN DERIVATIVE INSTRUMENTS

Derivative instruments are financial instruments whose value depends
upon, or is derived from, the value of an underlying asset, such as a security,
index or currency. As described below, each Fund may engage in a variety of
transactions involving the use of derivative instruments, including options and
futures contracts on securities and securities indices and options on futures
contracts. These transactions may be used by a Fund for hedging purposes or, to
the extent permitted by applicable law, to increase its current return. The
Funds may also engage in derivative transactions involving foreign currencies.
See "Foreign Currency Transactions."

OPTIONS

Each Fund may purchase and sell covered put and call options on its
portfolio securities to enhance investment performance and to protect against
changes in market prices.

3
<PAGE>

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 the sale (exercise price minus commissions) plus the amount
of the premium.

A Fund may terminate a call option that it has written before it
expires by entering into a closing purchase transaction. A Fund may enter into
closing purchase transactions in order to free itself to sell the underlying
security or to write another call on the security, realize a profit on a
previously written call option, or protect a security from being called in an
unexpected market rise. Any profits from a closing purchase transaction may be
offset by a decline in the value of the underlying security. Conversely, because
increases in the market price of a call option will generally reflect increases
in the market price of the underlying security, any loss resulting from a
closing purchase transaction is likely to be offset in whole or in part by
unrealized appreciation of the underlying security owned by the Fund.

COVERED PUT OPTIONS. A Fund may write covered put options in order to
enhance its current return. Such options transactions may also be used as a
limited form of hedging against an increase in the price of securities that the
Fund plans to purchase. A put option gives the holder the right to sell, and
obligates the writer to buy, a security at the exercise price at any time before
the expiration date. A put option is "covered" if the writer segregates cash and
high-grade short-term debt obligations or other permissible collateral equal to
the price to be paid if the option is exercised.

In addition to the receipt of premiums and the potential gains from
terminating such options in closing purchase transactions, the Fund also
receives interest on the cash and debt securities maintained to cover the
exercise price of the option. By writing a put option, the Fund assumes the risk
that it may be required to purchase the underlying security for an exercise
price higher than its then current market value, resulting in a potential
capital loss unless the security later appreciates in value.

A Fund may terminate a put option that it has written before it expires
by a closing purchase transaction. Any loss from this transaction may be
partially or entirely offset by the premium received on the terminated option.

4
<PAGE>

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 at the time it purchased the call
option.

A Fund may also purchase put and call options to enhance its current
return. A Fund may also buy and sell combinations of put and call options on the
same underlying security to earn additional income.

OPTIONS ON FOREIGN SECURITIES. A Fund may purchase and sell options on
foreign securities if in Schroder's opinion the investment characteristics of
such options, including the risks of investing in such options, are consistent
with the Fund's investment objectives. It is expected that risks related to such
options will not differ materially from risks related to options on U.S.
securities. However, position limits and other rules of foreign exchanges may
differ from those in the U.S. In addition, options markets in some countries,
many of which are relatively new, may be less liquid than comparable markets in
the U.S.

RISKS INVOLVED IN THE SALE OF OPTIONS. Options transactions involve
certain risks, including the risks that Schroder will not forecast interest rate
or market movements correctly, that a Fund may be unable at times to close out
such positions, or that hedging transactions may not accomplish their purpose
because of imperfect market correlations. The successful use of these strategies
depends on the ability of Schroder to forecast market and interest rate
movements correctly.

An exchange-listed option may be closed out only on an exchange which
provides a secondary market for an option of the same series. Although a Fund
will enter into an option position only if Schroder believes that a liquid
secondary market exists, there is no assurance that a liquid secondary market on
an exchange will exist for any particular option or at any particular time. If
no secondary market were to exist, it would be impossible to enter into a
closing transaction to close out an option position. As a result, a Fund may be
forced to continue to hold, or to purchase at a fixed price, a security on which
it has sold an option at a time when Schroder believes it is inadvisable to do
so.

Higher than anticipated trading activity or order flow or other
unforeseen events might cause The Options Clearing Corporation or an exchange to
institute special trading procedures or restrictions that might restrict the
Funds' use of options. The exchanges have established limitations on the maximum
number of calls and puts of each class that may be held or written by an
investor or group of investors

5
<PAGE>

acting in concert. It is possible that the Funds and other clients of Schroder
may be considered such a group. These position limits may restrict the Funds'
ability to purchase or sell options on particular securities.

As described below, each Fund generally expects that its options
transactions will be conducted on recognized exchanges. In certain instances,
however, a Fund may purchase and sell options in the over-the-counter markets.
Options which are not traded on national securities exchanges may be closed out
only with the other party to the option transaction. For that reason, it may be
more difficult to close out over-the-counter options than exchange-traded
options. Options in the over-the-counter market may also involve the risk that
securities dealers participating in such transactions would be unable to meet
their obligations to a Fund. Furthermore, over-the-counter options are not
subject to the protection afforded purchasers of exchange-traded options by The
Options Clearing Corporation. A Fund will, however, engage in over-the-counter
options transactions only when appropriate exchange-traded options transactions
are unavailable and when, in the opinion of Schroder, the pricing mechanism and
liquidity of the over-the-counter markets are satisfactory and the participants
are responsible parties likely to meet their contractual obligations. A Fund
will treat over-the-counter options (and, in the case of options sold by the
Fund, the underlying securities held by the Fund) as illiquid investments as
required by applicable law.

Government regulations, particularly the requirements for qualification
as a "regulated investment company" under the Internal Revenue Code, may also
restrict the Trust's use of options.

FUTURES CONTRACTS

In order to hedge against the effects of adverse market changes, each
Fund that may invest in debt securities may buy and sell futures contracts on
U.S. Government securities and other debt securities in which the Fund may
invest, and on indices of debt securities. In addition, each Fund that may
invest in equity securities may purchase and sell stock index futures to hedge
against changes in stock market prices. Each Fund may also, to the extent
permitted by applicable law, buy and sell futures contracts and options on
futures contracts to increase the Fund's current return. All such futures and
related options will, as may be required by applicable law, be traded on
exchanges that are licensed and regulated by the Commodity Futures Trading
Commission (the "CFTC"). Depending upon the change in the value of the
underlying security or index when a Fund enters into or terminates a futures
contract, the Fund may realize a gain or loss.

FUTURES ON DEBT SECURITIES AND RELATED OPTIONS. A futures contract on a
debt security is a binding contractual commitment which, if held to maturity,
will result in an obligation to make or accept delivery, during a particular
month, of securities having a standardized face value and rate of return. By
purchasing futures on debt securities -- assuming a "long" position -- a Fund
will legally obligate itself to accept the future delivery of the underlying
security and pay the agreed price. By selling futures on debt securities --
assuming a "short" position -- it will legally obligate itself to make the
future delivery of the security against payment of the agreed price. Open
futures positions on debt securities will be valued at the most recent
settlement price, unless that price does not, in the judgment of persons acting
at the direction of the Trustees as to the valuation of the Fund's assets,
reflect the fair value of the contract, in which case the positions will be
valued by the Trustees or such persons.

6
<PAGE>

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.

Hedging by use of futures on debt securities seeks to establish more
certainly than would otherwise be possible the effective rate of return on
portfolio securities. A Fund may, for example, take a "short" position in the
futures market by selling contracts for the future delivery of debt securities
held by the Fund (or securities having characteristics similar to those held by
the Fund) in order to hedge against an anticipated rise in interest rates that
would adversely affect the value of the Fund's portfolio securities. When
hedging of this character is successful, any depreciation in the value of
portfolio securities may substantially be offset by appreciation in the value of
the futures position.

On other occasions, a Fund may take a "long" position by purchasing
futures on debt securities. This would be done, for example, when the Fund
expects to purchase particular securities when it has the necessary cash, but
expects the rate of return available in the securities markets at that time to
be less favorable than rates currently available in the futures markets. If the
anticipated rise in the price of the securities should occur (with its
concomitant reduction in yield), the increased cost to the Fund of purchasing
the securities may be offset, at least to some extent, by the rise in the value
of the futures position taken in anticipation of the subsequent securities
purchase.

Successful use by a Fund of futures contracts on debt securities is
subject to Schroder's ability to predict correctly movements in the direction of
interest rates and other factors affecting markets for debt securities. For
example, if a Fund has hedged against the possibility of an increase in interest
rates which would adversely affect the market prices of debt securities held by
it and the prices of such securities increase instead, the Fund will lose part
or all of the benefit of the increased value of its securities which it has
hedged because it will have offsetting losses in its futures positions. In
addition, in such situations, if the Fund has insufficient cash, it may have to
sell securities to meet daily maintenance margin requirements. The Fund may have
to sell securities at a time when it may be disadvantageous to do so.

A Fund may purchase and write put and call options on certain debt
futures contracts, as they become available. Such options are similar to options
on securities except that options on futures contracts give the purchaser the
right, in return for the premium paid, to assume a position in a futures
contract (a long position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during the period of
the option. As with options on securities, the holder or writer of an option may
terminate his position by selling or purchasing an option of the same series.
There is no guarantee that such closing transactions can be effected. A Fund
will be required to deposit initial margin and maintenance margin with respect
to put and call options on futures contracts written by it pursuant to brokers'
requirements, and, in addition, net option premiums received will be included as
initial margin deposits. See "Margin Payments" below. Compared to the purchase
or sale of futures contracts, the purchase of call or put options on futures
contracts involves less potential risk to a Fund because the maximum amount at
risk is the premium paid for the options plus transactions costs. However, there
may be circumstances when the purchase of call or put options on a futures
contract

7
<PAGE>

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. A Fund may invest in debt index
futures contracts and stock index futures contracts, and in related options. A
debt index futures contract is a contract to buy or sell units of a specified
debt index at a specified future date at a price agreed upon when the contract
is made. A unit is the current value of the index. A stock index futures
contract is a contract to buy or sell units of a stock index at a specified
future date at a price agreed upon when the contract is made. A unit is the
current value of the stock index.

Depending on the change in the value of the index between the time when
a Fund enters into and terminates an index futures transaction, the Fund may
realize a gain or loss. The following example illustrates generally the manner
in which index futures contracts operate. The Standard & Poor's 100 Stock Index
is composed of 100 selected common stocks, most of which are listed on the New
York Stock Exchange. The S&P 100 Index assigns relative weightings to the common
stocks included in the Index, and the Index fluctuates with changes in the
market values of those common stocks. In the case of the S&P 100 Index,
contracts are to buy or sell 100 units. Thus, if the value of the S&P 100 Index
were $180, one contract would be worth $18,000 (100 units x $180). The stock
index futures contract specifies that no delivery of the actual stocks making up
the index will take place. Instead, settlement in cash must occur upon the
termination of the contract, with the settlement being the difference between
the contract price and the actual level of the stock index at the expiration of
the contract. For example, if a Fund enters into a futures contract to buy 100
units of the S&P 100 Index at a specified future date at a contract price of
$180 and the S&P 100 Index is at $184 on that future date, the Fund will gain
$400 (100 units x gain of $4). If the Fund enters into a futures contract to
sell 100 units of the stock index at a specified future date at a contract price
of $180 and the S&P 100 Index is at $182 on that future date, the Fund will lose
$200 (100 units x loss of $2).

A Fund may purchase or sell futures contracts with respect to any
securities indices. Positions in index futures may be closed out only on an
exchange or board of trade which provides a secondary market for such futures.

In order to hedge a Fund's investments successfully using futures
contracts and related options, a Fund must invest in futures contracts with
respect to indices or sub-indices the movements of which will, in Schroder's
judgment, have a significant correlation with movements in the prices of the
Fund's securities.

Options on index futures contracts are similar to options on securities
except that options on index futures contracts give the purchaser the right, in
return for the premium paid, to assume a position in an index futures contract
(a long position if the option is a call and a short position if the option is a
put) at a specified exercise price at any time during the period of the option.
Upon exercise of the option, the holder would assume the underlying futures
position and would receive a variation margin payment of cash or securities
approximating the increase in the value of the holder's option position. If an
option is exercised on the last trading day prior to the expiration date of the
option, the settlement will be made entirely in cash based on the difference
between the exercise price of the option and the closing level of

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<PAGE>

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
indices themselves to the extent that such options are traded on national
securities exchanges. Index options are similar to options on individual
securities in that the purchaser of an index option acquires the right to buy
(in the case of a call) or sell (in the case of a put), and the writer
undertakes the obligation to sell or buy (as the case may be), units of an index
at a stated exercise price during the term of the option. Instead of giving the
right to take or make actual delivery of securities, the holder of an index
option has the right to receive a cash "exercise settlement amount". This amount
is equal to the amount by which the fixed exercise price of the option exceeds
(in the case of a put) or is less than (in the case of a call) the closing value
of the underlying index on the date of the exercise, multiplied by a fixed
"index multiplier".

A Fund may purchase or sell options on stock indices in order to close
out its outstanding positions in options on stock indices which it has
purchased. A Fund may also allow such options to expire unexercised.

Compared to the purchase or sale of futures contracts, the purchase of
call or put options on an index involves less potential risk to a Fund because
the maximum amount at risk is the premium paid for the options plus transactions
costs. The writing of a put or call option on an index involves risks similar to
those risks relating to the purchase or sale of index futures contracts.

A Fund may also purchase warrants, issued by banks and other financial
institutions, whose values are based on the values from time to time of one or
more securities indices.

MARGIN PAYMENTS. When a Fund purchases or sells a futures contract, it
is required to deposit with its custodian an amount of cash, U.S. Treasury
bills, or other permissible collateral equal to a small percentage of the amount
of the futures contract. This amount is known as "initial margin". The nature of
initial margin is different from that of margin in security transactions in that
it does not involve borrowing money to finance transactions. Rather, initial
margin is similar to a performance bond or good faith deposit that is returned
to a Fund upon termination of the contract, assuming a Fund satisfies its
contractual obligations.

Subsequent payments to and from the broker occur on a daily basis in a
process known as "marking to market". These payments are called "variation
margin" and are made as the value of the underlying futures contract fluctuates.
For example, when a Fund sells a futures contract and the price of the
underlying debt security rises above the delivery price, the Fund's position
declines in value. The Fund then pays the broker a variation margin payment
equal to the difference between the delivery price of the futures contract and
the market price of the securities underlying the futures contract. Conversely,
if the price of the underlying security falls below the delivery price of the
contract, the Fund's futures position increases in value. The broker then must
make a variation margin payment equal to the difference between the delivery
price of the futures contract and the market price of the securities underlying
the futures contract.

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<PAGE>

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 in the prices of a Fund's securities which are the subject of a hedge.
Schroder will, however, attempt to reduce this risk by purchasing and selling,
to the extent possible, futures contracts and related options on securities and
indices the movements of which will, in its judgment, correlate closely with
movements in the prices of the underlying securities or index and a Fund's
portfolio securities sought to be hedged.

Successful use of futures contracts and options by a Fund for hedging
purposes is also subject to Schroder's ability to predict correctly movements in
the direction of the market. It is possible that, where a Fund has purchased
puts on futures contracts to hedge its portfolio against a decline in the
market, the securities or index on which the puts are purchased may increase in
value and the value of securities held in the portfolio may decline. If this
occurred, the Fund would lose money on the puts and also experience a decline in
value in its portfolio securities. In addition, the prices of futures, for a
number of reasons, may not correlate perfectly with movements in the underlying
securities or index due to certain market distortions. First, all participants
in the futures market are subject to margin deposit requirements. Such
requirements may cause investors to close futures contracts through offsetting
transactions which could distort the normal relationship between the underlying
security or index and futures markets. Second, the margin requirements in the
futures markets are less onerous than margin requirements in the securities

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<PAGE>

markets in general, and as a result the futures markets may attract more
speculators than the securities markets do. Increased participation by
speculators in the futures markets may also cause temporary price distortions.
Due to the possibility of price distortion, even a correct forecast of general
market trends by Schroder may still not result in a successful hedging
transaction over a very short time period.

LACK OF AVAILABILITY. Because the markets for certain options and
futures contracts and other derivative instruments in which a Fund may invest
(including markets located in foreign countries) are relatively new and still
developing and may be subject to regulatory restraints, a Fund's ability to
engage in transactions using such instruments may be limited. Suitable
derivative transactions may not be available in all circumstances and there is
no assurance that a Fund will engage in such transactions at any time or from
time to time. A Fund's ability to engage in hedging transactions may also be
limited by certain regulatory and tax considerations.

OTHER RISKS. Each Fund will incur brokerage fees in connection with its
futures and options transactions. In addition, while futures contracts and
options on futures will be purchased and sold to reduce certain risks, those
transactions themselves entail certain other risks. Thus, while a Fund may
benefit from the use of futures and related options, unanticipated changes in
interest rates or stock price movements may result in a poorer overall
performance for the Fund than if it had not entered into any futures contracts
or options transactions. Moreover, in the event of an imperfect correlation
between the futures position and the portfolio position which is intended to be
protected, the desired protection may not be obtained and the Fund may be
exposed to risk of loss.

FORWARD COMMITMENTS

Each Fund may enter into contracts to purchase securities for a fixed
price at a future date beyond customary settlement time ("forward commitments")
if the Fund holds, and maintains until the settlement date in a segregated
account, cash or liquid securities in an amount sufficient to meet the purchase
price, or if the Fund enters into offsetting contracts for the forward sale of
other securities it owns. Forward commitments may be considered securities in
themselves, and involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in addition to
the risk of decline in the value of the Fund's other assets. Where such
purchases are made through dealers, the Fund relies on the dealer to consummate
the sale. The dealer's failure to do so may result in the loss to the Fund of an
advantageous yield or price.

Although a Fund will generally enter into forward commitments with the
intention of acquiring securities for its portfolio or for delivery pursuant to
options contracts it has entered into, a Fund may dispose of a commitment prior
to settlement if Schroder deems it appropriate to do so. A Fund may realize
short-term profits or losses upon the sale of forward commitments.

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<PAGE>

REPURCHASE AGREEMENTS

Each Fund may enter into repurchase agreements. A repurchase agreement
is a contract under which the Fund acquires a security for a relatively short
period (usually not more than one week) subject to the obligation of the seller
to repurchase and the Fund to resell such security at a fixed time and price
(representing the Fund's cost plus interest). It is the Trust's present
intention to enter into repurchase agreements only with member banks of the
Federal Reserve System and securities dealers meeting certain criteria as to
creditworthiness and financial condition established by the Trustees of the
Trust, and only with respect to obligations of the U.S. government or its
agencies or instrumentalities or other high quality short-term debt obligations.
Repurchase agreements may also be viewed as loans made by a Fund which are
collateralized by the securities subject to repurchase. Schroder will monitor
such transactions to ensure that the value of the underlying securities will be
at least equal at all times to the total amount of the repurchase obligation,
including the interest factor. If the seller defaults, a Fund could realize a
loss on the sale of the underlying security to the extent that the proceeds of
sale including accrued interest are less than the resale price provided in the
agreement including interest. In addition, if the seller should be involved in
bankruptcy or insolvency proceedings, a Fund may incur delay and costs in
selling the underlying security or may suffer a loss of principal and interest
if a Fund is treated as an unsecured creditor and required to return the
underlying collateral to the seller's estate.

WHEN-ISSUED SECURITIES

Each Fund may from time to time purchase securities on a "when-issued"
basis. Debt securities are often issued on this basis. The price of such
securities, which may be expressed in yield terms, is fixed at the time a
commitment to purchase is made, but delivery and payment for the when-issued
securities take place at a later date. Normally, the settlement date occurs
within one month of the purchase. During the period between purchase and
settlement, no payment is made by a Fund and no interest accrues to the Fund. To
the extent that assets of a Fund are held in cash pending the settlement of a
purchase of securities, that Fund would earn no income. While a Fund may sell
its right to acquire when-issued securities prior to the settlement date, a Fund
intends actually to acquire such securities unless a sale prior to settlement
appears desirable for investment reasons. At the time a Fund makes the
commitment to purchase a security on a when-issued basis, it will record the
transaction and reflect the amount due and the value of the security in
determining the Fund's net asset value. The market value of the when-issued
securities may be more or less than the purchase price payable at the settlement
date. Each Fund will establish a segregated account in which it will maintain
cash and U.S. government securities or other liquid securities at least equal in
value to commitments for when-issued securities. Such segregated securities
either will mature or, if necessary, be sold on or before the settlement date.

LOANS OF FUND PORTFOLIO SECURITIES

A Fund may lend its portfolio securities, provided: (1) the loan is
secured continuously by collateral consisting of U.S. government securities,
cash, or cash equivalents adjusted daily to have market value at least equal to
the current market value of the securities loaned; (2) the Fund may at any time
call the loan and regain the securities loaned; (3) the Fund will receive any
interest or dividends paid on the loaned securities; and (4) the aggregate
market value of the Fund's portfolio securities loaned will not at any time
exceed one-third of the total assets of the Fund. In addition, it is anticipated
that the Fund may share with the borrower some of the income received on the
collateral for the loan or that it will be paid a premium for the loan. Before a
Fund enters into a loan, Schroder considers all relevant facts and
circumstances, including the creditworthiness of the borrower. The risks in
lending portfolio securities,

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<PAGE>

as with other extensions of credit, consist of possible delay in recovery of the
securities or possible loss of rights in the collateral should the borrower fail
financially. Although voting rights or rights to consent with respect to the
loaned securities pass to the borrower, a Fund retains the right to call the
loans at any time on reasonable notice, and it will do so in order that the
securities may be voted by the Fund if the holders of such securities are asked
to vote upon or consent to matters materially affecting the investment. A Fund
will not lend portfolio securities to borrowers affiliated with that Fund.

FOREIGN SECURITIES

Each Fund may invest without limit in securities principally traded in
foreign markets. Each Fund may also invest without limit in Eurodollar
certificates of deposit and other certificates of deposit issued by United
States branches of foreign banks and foreign branches of United States banks.

Investments in foreign securities may involve risks and considerations
different from or in addition to investments in domestic securities. There may
be less information publicly available about a foreign company than about a U.S.
company, and foreign companies are not generally subject to accounting,
auditing, and financial reporting standards and practices comparable to those in
the United States. The securities of some foreign companies are less liquid and
at times more volatile than securities of comparable U.S. companies. Foreign
brokerage commissions and other fees are also generally higher than in the
United States. Foreign settlement procedures and trade regulations may involve
certain risks (such as delay in payment or delivery of securities or in the
recovery of a Fund's assets held abroad) and expenses not present in the
settlement of domestic investments. Also, because foreign securities are
normally denominated and traded in foreign currencies, the values of a Fund's
assets may be affected favorably or unfavorably by currency exchange rates and
exchange control regulations, and a Fund may incur costs in connection with
conversion between currencies.

In addition, with respect to certain foreign countries, there is a
possibility of nationalization or expropriation of assets, imposition of
currency exchange controls, adoption of foreign governmental restrictions
affecting the payment of principal and interest, imposition of withholding or
confiscatory taxes, political or financial instability, and adverse political,
diplomatic or economic developments which could affect the values of investments
in those countries. In certain countries, legal remedies available to investors
may be more limited than those available with respect to investments in the
United States or other countries and it may be more difficult to obtain and
enforce a judgment against a foreign issuer. Also, the laws of some foreign
countries may limit a Fund's ability to invest in securities of certain issuers
located in those countries.

Special tax considerations apply to foreign securities. In determining
whether to invest in securities of foreign issuers, Schroder will consider the
likely impact of foreign taxes on the net yield available to the Fund and its
shareholders. Income received by a Fund from sources within foreign countries
may be reduced by withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. It is impossible to determine the effective rate of
foreign tax in advance since the amount of a Fund's assets to be invested in
various countries is not known, and tax laws and their interpretations may
change from time to time and may change without advance notice. Any such taxes
paid by a Fund will reduce its net income available for distribution to
shareholders.

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<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 that
Fund generally arising in connection with the purchase or sale of its portfolio
securities. A Fund will engage in transaction hedging when it desires to "lock
in" the U.S. dollar price of a security it has agreed to purchase or sell, or
the U.S. dollar equivalent of a dividend or interest payment in a foreign
currency. By transaction hedging, a Fund will attempt to protect against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the applicable foreign currency during the period between the
date on which the security is purchased or sold or on which the dividend or
interest payment is declared, and the date on which such payments are made or
received.

A Fund may purchase or sell a foreign currency on a spot (or cash)
basis at the prevailing spot rate in connection with transaction hedging. A Fund
may also enter into contracts to purchase or sell foreign currencies at a future
date ("forward contracts") and purchase and sell foreign currency futures
contracts.

For transaction hedging purposes, a Fund may also purchase
exchange-listed and over-the-counter call and put options on foreign currency
futures contracts and on foreign currencies. A put option on a futures contract
gives a Fund the right to assume a short position in the futures contract until
expiration of the option. A put option on currency gives a Fund the right to
sell a currency at an exercise price until the expiration of the option. A call
option on a futures contract gives a Fund the right to assume a long position in
the futures contract until the expiration of the option. A call option on
currency gives a Fund the right to purchase a currency at the exercise price
until the expiration of the option. A Fund will engage in over-the-counter
transactions only when appropriate exchange-traded transactions are unavailable
and when, in Schroder's opinion, the pricing mechanism and liquidity are
satisfactory and the participants are responsible parties likely to meet their
contractual obligations.

When it engages in position hedging, a Fund enters into foreign
currency exchange transactions to protect against a decline in the values of the
foreign currencies in which securities held by a Fund are denominated or are
quoted in their principal trading markets or an increase in the value of
currency for securities which a Fund expects to purchase. In connection with
position hedging, a Fund may purchase put or call options on foreign currency
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.

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<PAGE>

It is impossible to forecast with precision the market value of a
Fund's portfolio securities at the expiration or maturity of a forward or
futures contract. Accordingly, it may be necessary for a Fund to purchase
additional foreign currency on the spot market (and bear the expense of such
purchase) if the market value of the security or securities being hedged is less
than the amount of foreign currency a Fund is obligated to deliver and if a
decision is made to sell the security or securities and make delivery of the
foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio security or
securities of a Fund if the market value of such security or securities exceeds
the amount of foreign currency a Fund is obligated to deliver.

To offset some of the costs to a Fund of hedging against fluctuations
in currency exchange rates, a Fund may write covered call options on those
currencies.

Transaction and position hedging do not eliminate fluctuations in the
underlying prices of the securities which a Fund owns or intends to purchase or
sell. They simply establish a rate of exchange which one can achieve at some
future point in time. Additionally, although these techniques tend to minimize
the risk of loss due to a decline in the value of the hedged currency, they tend
to limit any potential gain which might result from the increase in the value of
such currency. Also, suitable foreign currency hedging transactions may not be
available in all circumstances and there can be no assurance that a Fund will
utilize hedging transactions at any time or from time to time.

A Fund may also seek to increase its current return by purchasing and
selling foreign currency on a spot basis, and by purchasing and selling options
on foreign currencies and on foreign currency futures contracts, and by
purchasing and selling foreign currency forward contracts.

CURRENCY FORWARD AND FUTURES CONTRACTS. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract as agreed by the parties, at a price set at the time of the contract.
In the case of a cancelable forward contract, the holder has the unilateral
right to cancel the contract at maturity by paying a specified fee. The
contracts are traded in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for trades. A foreign currency futures contract is a standardized contract
for the future delivery of a specified amount of a foreign currency at a future
date at a price set at the time of the contract. Foreign currency futures
contracts traded in the United States are designed by and traded on exchanges
regulated by the CFTC, such as the New York Mercantile Exchange.

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

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<PAGE>

usually effected with the currency trader who is a party to the original forward
contract. Closing transactions with respect to futures contracts are effected on
a commodities exchange; a clearing corporation associated with the exchange
assumes responsibility for closing out such contracts.

Positions in foreign currency futures contracts and related options may
be closed out only on an exchange or board of trade which provides a secondary
market in such contracts or options. Although a Fund will normally purchase or
sell foreign currency futures contracts and related options only on exchanges or
boards of trade where there appears to be an active secondary market, there is
no assurance that a secondary market on an exchange or board of trade will exist
for any particular contract or option or at any particular time. In such event,
it may not be possible to close a futures or related option position and, in the
event of adverse price movements, a Fund would continue to be required to make
daily cash payments of variation margin on its futures positions.

FOREIGN CURRENCY OPTIONS. Options on foreign currencies operate
similarly to options on securities, and are traded primarily in the
over-the-counter market, although options on foreign currencies have recently
been listed on several exchanges. Such options will be purchased or written only
when Schroder believes that a liquid secondary market exists for such options.
There can be no assurance that a liquid secondary market will exist for a
particular option at any specific time. Options on foreign currencies are
affected by all of those factors which influence exchange rates and investments
generally.

The value of a foreign currency option is dependent upon the value of
the foreign currency and the U.S. dollar, and may have no relationship to the
investment merits of a foreign security. Because foreign currency transactions
occurring in the interbank market involve substantially larger amounts than
those that may be involved in the use of foreign currency options, investors may
be disadvantaged by having to deal in an odd lot market (generally consisting of
transactions of less than $1 million) for the underlying foreign currencies at
prices that are less favorable than for round lots.

There is no systematic reporting of last sale information for foreign
currencies and there is no regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely basis.
Available quotation information is generally representative of very large
transactions in the interbank market and thus may not reflect relatively smaller
transactions (less than $1 million) where rates may be less favorable. The
interbank market in foreign currencies is a global, around-the-clock market. To
the extent that the U.S. options markets are closed while the markets for the
underlying currencies remain open, significant price and rate movements may take
place in the underlying markets that cannot be reflected in the U.S.
options markets.

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

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<PAGE>

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.

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

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<PAGE>

Fund's long position. The Fund does not engage in short sales against-the-box
for speculative purposes but may, however, make a short sale as a hedge, when
Schroder believes that the price of a security may decline, causing a decline in
the value of a security owned by the Fund (or a security convertible or
exchangeable for such security). There are certain additional transaction costs
associated with short sales against-the-box, but Schroder endeavors to offset
these costs with the income from the investment of the cash proceeds of short
sales. Under the Taxpayer Relief Act of 1997, activities by the Fund which
lock-in gain on an appreciated financial instrument generally will be treated as
a "constructive sale" of such instrument which will trigger gain (but not loss)
for federal income tax purposes. Such activities may create taxable income in
excess of the cash they generate.

ARBITRAGE

Schroder International Bond Fund may sell a security in one market and
simultaneously purchase the same security in another market in order to take
advantage of differences in the price of the security in the different markets.
The Fund does not actively engage in arbitrage. Such transactions may be entered
into only with respect to debt securities and will occur only in a dealer's
market where the buying and selling dealers involved confirm their prices to the
Fund at the time of the transaction, thus eliminating any risk to the assets of
the Fund.

SWAP AGREEMENTS

Schroder International Bond Fund may enter into interest-rate, index
and currency-exchange rate swap agreements for purposes of attempting to obtain
a particular desired return at a lower cost to the Fund than if the Fund had
invested directly in an instrument that yielded such desired return. Swap
agreements are two-party contracts entered into primarily by institutional
investors for periods ranging from a few weeks to more than one year. In a
standard "swap" transaction, two parties agree to exchange the returns (or
differentials in rates of return) earned or realized on particular predetermined
investments or instruments. The gross returns to be exchanged or "swapped"
between the parties are calculated with respect to a "notional amount" (for
example, the return on or increase in value of a particular dollar amount
invested at a particular interest rate, in a particular foreign currency or in a
"basket" of securities representing a particular index). Commonly used swap
agreements include interest-rate caps, under which, in return for a premium, one
party agrees to make payments to the other to the extent that interest rates
exceed a specified rate, or "cap"; interest-rate floors, under which, in return
for a premium, one party agrees to make payments to the other to the extent that
interest rates fall below a specified level, or "floor"; and interest-rate
collars, under which a party sells a cap and purchases a floor or vice versa in
an attempt to protect itself against interest rate movements exceeding given
minimum or maximum levels.

The "notional amount" of the swap agreement is only a fictive basis on
which to calculate the obligations that the parties to a swap agreement have
agreed to exchange. Most swap agreements entered into by the Fund would
calculate the obligations of the parties to an agreement on a "net" basis.
Consequently, the Fund's obligations (or rights) under a swap agreement are
generally equal only to the net amount to be paid or received under the
agreement based on the relative values of the positions held by each party to
the agreement (the "net amount"). The Fund's obligations under a swap agreement
will be accrued daily (offset against any amounts owing to the Fund) and any
accrued but unpaid net amounts owed to a swap counterparty will be covered by
maintaining a segregated account comprised of segregable assets to avoid any
potential leveraging of the Fund's investment portfolio. The Fund will not

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<PAGE>

enter into a swap agreement with any single party if the net amount owed or to
be received under existing contracts with that party would exceed 5% of the
Fund's assets.

Certain swap agreements are exempt from most provisions of the
Commodity Exchange Act and, therefore, are not regulated as futures or commodity
option transactions under that Act. To qualify for this exemption, a swap
agreement must be entered into by "eligible participants," which includes the
following, provided the participants' total assets exceed established levels: a
bank or trust company, savings association or credit union, insurance company,
investment company subject to regulation under the 1940 Act, commodity pool,
corporation, partnership, proprietorship, organization, trust or other entity,
employee benefit plan, governmental entity, broker-dealer, futures commission
merchant, natural person, or regulated foreign person. To be eligible, natural
persons and most other entities must have total assets exceeding $10 million;
commodity pools and employee benefit plans must have assets exceeding $5
million. In addition, an eligible swap transaction must meet three conditions.
First, the swap agreement may not be part of a fungible class of agreements that
are standardized as to their material economic terms. Second, the
creditworthiness of parties with actual or potential obligations under the swap
agreement must be a material consideration in entering into or determining the
terms of the swap agreement, including pricing, cost, or credit enhancement
terms. Third, swap agreements may not be entered into and traded on or through a
multilateral transaction execution facility.

This exemption is not exclusive, and participants may continue to rely
on existing exclusions for swaps, such as the Policy Statement issued in July
1989 which recognized a safe harbor for swap transactions from regulation as
futures or commodity option transactions under the Commodity Exchange Act or its
regulations. The Policy Statement applies to swap transactions settled in cash
that: (1) have individually tailored terms; (2) lack exchange style offset and
the use of a clearing organization or margin system; (3) are undertaken in
connection with a line of business; and (4) are not marketed to the public.

TEMPORARY DEFENSIVE STRATEGIES

As described in the Prospectuses, Schroder may at times judge that
conditions in the securities markets make pursuing a Fund's basic investment
strategies inconsistent with the best interests of its shareholders and may
temporarily use alternate investment strategies primarily designed to reduce
fluctuations in the value of a Fund's assets. In implementing these "defensive"
strategies, the Fund would invest in high-quality debt securities, cash, or
money market instruments to any extent Schroder considers consistent with such
defensive strategies. It is impossible to predict when, or for how long, a Fund
will use these alternate strategies.

INVESTMENT RESTRICTIONS

The Trust has adopted the following fundamental and non-fundamental
investment restrictions for each Fund. Each Fund's fundamental investment
restrictions may not be changed without the affirmative vote of a "majority of
the outstanding voting securities" of the affected Fund, which is defined in the
1940 Act to mean the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares and (2) 67% or more of the shares present at a meeting if
more than 50% of the outstanding shares are represented at the meeting in person
or by proxy. The non-fundamental investment policies described in the
Prospectuses and this SAI are not fundamental and may be changed by the
Trustees, without

19
<PAGE>

shareholder approval.

THE PORTFOLIOS IN WHICH SCHRODER INTERNATIONAL FUND, SCHRODER EMERGING
MARKETS FUND, SCHRODER INTERNATIONAL SMALLER COMPANIES FUND, SCHRODER
INTERNATIONAL BOND FUND, AND SCHRODER U.S. SMALLER COMPANIES FUND INVEST HAVE
SUBSTANTIALLY THE SAME INVESTMENT RESTRICTIONS AS THEIR CORRESPONDING FUND. IN
REVIEWING THE DESCRIPTION OF A FUND'S INVESTMENT RESTRICTIONS BELOW, YOU SHOULD
ASSUME THAT THE INVESTMENT RESTRICTIONS OF THE CORRESPONDING PORTFOLIO ARE THE
SAME IN ALL MATERIAL RESPECTS AS THOSE OF THE FUND.

SCHRODER INTERNATIONAL FUND

Schroder International Fund will not:

FUNDAMENTAL POLICIES:

1. Invest more than 5% of its assets in the securities of any single
issuer. This restriction does not apply to securities issued by the
U.S. Government, its agencies or instrumentalities.

2. Purchase more than 10% of the voting securities of any one issuer.

3. Invest more than 10% of its assets in "illiquid securities" (securities
that cannot be disposed of within seven days at their then-current
value). For purposes of this limitation, "illiquid securities"
includes, except in those circumstances described below: (1)
"restricted securities", which are securities than cannot be resold to
the public without registration under federal securities law; and (2)
securities of issuers (together with all predecessors) having a record
of less than three years of continuous operation.

4. Invest 25% or more of the value of its total assets in any one
industry.

5. Borrow money, except from banks for temporary emergency purposes, and
then only in an amount not exceeding 5% of the value of the total
assets of the Fund.

6. Pledge, mortgage or hypothecate its assets to an extent greater than
10% of the value of its total assets.

7. Purchase securities on margin or sell short.

8. Make investments for the purpose of exercising control or management.

9. Purchase or sell real estate (provided that the Fund may invest in
securities issued by companies that invest in real estate or interests
therein).

10. Make loans to other persons (provided that for purposes of this
restriction, entering into repurchase agreements, acquiring corporate
debt securities and investing in U.S. Government obligations,

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<PAGE>

short-term commercial paper, certificates of deposit and bankers'
acceptances shall not be deemed to be the making of a loan).

11. Invest in commodities, commodity contracts other than foreign currency
forward contracts, or oil, gas and other mineral resource, lease, or
arbitrage transactions.

12. Write, purchase or sell options, puts, calls, straddles, spreads,
or combinations thereof.

13. Underwrite securities issued by other persons (except to the extent
that, in connection with the disposition of its portfolio investments,
it may be deemed to be an underwriter under U.S. securities laws).

14. Invest in warrants, valued at the lower of cost or market, to more than
5% of the value of the Fund's net assets. Included within that amount,
but not to exceed 2% of the value of the Fund's net assets, may be
warrants that are not listed on the New York or American Stock
Exchange. Warrants acquired by the Fund in units or attached to
securities may be deemed to be without value.

15. Purchase more than 3% of the outstanding securities of any closed-end
investment company. Any such purchase of securities issued by a
closed-end investment company will otherwise be made in full compliance
with Sections 12(d)(1)(a)(i), (ii) and (iii) of the 1940 Act.

NON-FUNDAMENTAL POLICY:

Schroder International Fund will not invest in restricted securities. This
policy does not include restricted securities eligible for resale to qualified
institutional purchasers pursuant to Rule 144A under the Securities Act of 1933,
as amended, that are determined to be liquid by Schroder pursuant to guidelines
adopted by the Board of Trustees of Schroder Capital Funds. Such guidelines take
into account trading activity for such securities and the availability of
reliable pricing information, among other factors. If there is a lack of trading
interest in particular Rule 144A securities, these securities may be illiquid.

SCHRODER EMERGING MARKETS FUND

Schroder Emerging Markets Fund will not:

FUNDAMENTAL POLICIES:

1. Purchase a security if, as a result, more than 25% of the Fund's total
assets would be invested in securities of issuers conducting their
principal business activities in the same industry. For purposes of
this limitation, there is no limit on: (1) investments in U.S.
Government securities, in repurchase agreements covering U.S.
Government securities, in securities issued by the states, territories
or possessions of the United States or in foreign government
securities; or (2) investment in issuers domiciled in a single
jurisdiction. Notwithstanding anything to the contrary, to the extent
permitted by the 1940 Act, the Fund may invest in one or more
investment companies; provided that, except to the extent that it
invests in other investment companies pursuant to Section 12(d)(1)(A)
of the 1940 Act, the Fund treats the assets of the investment companies

21
<PAGE>

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.

NONFUNDAMENTAL POLICIES:

1. The Fund is "non-diversified" as that term is defined in the 1940 Act.
To the extent required to qualify as a regulated investment company
under the Internal Revenue Code of 1986, as amended, the Fund may not
purchase a security (other than a U.S. Government security or a
security of an investment company) if, as a result: (1) with respect to
50% of its assets, more than 5% of the Fund's total assets would be
invested in the securities of any single issuer; (2) with respect to
50% of its assets, the Fund would own more than 10% of the outstanding
securities of any single issuer; or (3) more than 25% of the Fund's
total assets would be invested in the securities of any single issuer.

2. For purposes of the limitation on borrowing, the following are not
treated as borrowings to the extent they are fully collateralized: (1)
the delayed delivery of purchase securities (such as the purchase of
when-issued securities); (2) reverse repurchase agreements; (3)
dollar-roll transactions; and (4) the lending of securities.

3. Invest more than 15% of its net assets in "illiquid securities", which
include: (1) securities that cannot be disposed of within seven days at
their then-current value; (2) repurchase agreements not entitling the
holder to payment of principal within seven days; and (3) securities
subject to restrictions on the sale of the securities to the public
without registration under the Securities Act of 1933, as amended,
("restricted securities") that are not readily marketable. The Fund may
treat certain restricted securities as liquid pursuant to guidelines
adopted by the Board of Trustees of the Trust or the Board of Schroder
Capital Funds, as the case may be.

22
<PAGE>

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.

7. Purchase securities on margin, except that the Fund may use short-term
credit for the clearance of its portfolio's transactions, and provided
that initial and variation margin payments in connection with futures
contracts and options on futures contracts shall not constitute
purchasing securities on margin.

8. Lend a security if, as a result, the amount of loaned securities would
exceed an amount equal to one-third of the Fund's total assets.

SCHRODER INTERNATIONAL SMALLER COMPANIES FUND

Schroder International Smaller Companies Fund will not:

FUNDAMENTAL POLICIES:

1. With respect to 75% of it assets, purchase a security other than a
security issued or guaranteed by the U.S. Government, its agencies or
instrumentalities or a security of an investment company if, as a
result, more than 5% of the Fund's total assets would be invested in
the securities of a single issuer or the Fund would own more than 10%
of the outstanding voting securities of any single issuer.

2. Concentrate investments in any particular industry; therefore, the Fund
will not purchase the securities of companies in any one industry if,
thereafter, 25% or more of the Fund's total assets would consist of
securities of companies in that industry. This restriction does not
apply to obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities. An investment of more than 25% of the
Fund's assets in the securities of issuers located in one country does
not contravene this policy.

3. Borrow money in excess of 33 1/3% of its total assets taken at market
value (including the amount borrowed) and then only from a bank as a
temporary measure for extraordinary or emergency purposes, including to
meet redemptions or to settle securities transactions that may
otherwise require untimely dispositions of portfolio securities.

4. Purchase or sell real estate, provided that the Fund may invest in
securities issued by companies which invest in real estate or interests
therein.

23
<PAGE>

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.

NON-FUNDAMENTAL POLICY:

1. As a non-fundamental policy, the Fund will not invest more than 15% of
its assets in securities determined by Schroder to be illiquid. Certain
securities that are restricted as to resale may nonetheless be resold
by the Fund in accordance with Rule 144A under the Securities Act of
1933, as amended. Such securities may be determined by Schroder to be
liquid for purposes of compliance with the limitation on the Fund's
investment in illiquid securities.

SCHRODER INTERNATIONAL BOND FUND

Schroder International Bond Fund will not:

FUNDAMENTAL POLICIES:

1. Concentrate investments in any particular industry; therefore, the Fund
will not purchase the securities of companies in any one industry if,
thereafter, 25% or more of the Fund's total assets would consist of
securities of companies in that industry. This restriction does not
apply to obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities (or repurchase agreements with respect
thereto). An investment of more than 25% of the Fund's assets in the
securities of issuers located in one country does not contravene this
policy.

2. Borrow money in excess of 33 1/3% of its total assets taken at market
value (including the amount borrowed) and then only from a bank as a
temporary measure for extraordinary or emergency purposes, including to
meet redemptions or to settle securities transactions that may
otherwise require untimely dispositions of portfolio securities.

3. Purchase or sell real estate, provided that the Fund may invest in
securities issued by companies that invest in real estate or interests
therein.

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.

24
<PAGE>

5. Invest in commodities or commodity contracts, except that, subject to
the restrictions described in the Prospectus and elsewhere in this SAI,
the Fund may: (1) enter into futures contracts and options on futures
contracts; (2) enter into forward foreign currency exchange contracts
and foreign currency options; (3) purchase or sell currencies on a spot
or forward basis; and (4) enter into futures contracts on securities,
currencies or on indices of such securities or currencies, or any other
financial instruments, and purchase and sell options on such futures
contracts.

6. Underwrite securities issued by other persons except to the extent
that, in connection with the disposition of its portfolio investments,
it may be deemed to be an underwriter under U.S. securities laws.

7. Issue senior securities except to the extent permitted by the 1940 Act.

NON-FUNDAMENTAL POLICIES:

1. Acquire securities or invest in repurchase agreements with respect to
any securities if, as a result, more than 15% of its net assets (taken
at current value) would be invested in illiquid securities (securities
that cannot be disposed of within seven days at their then-current
value), including repurchase agreements not entitling the holder to
payment of principal within seven days and securities that are not
readily marketable by virtue of restrictions on the sale of such
securities to the public without registration under the Securities Act
of 1933, as amended. Illiquid securities do not include securities that
can be sold to the public in foreign markets or that may be eligible
for resale to qualified institutional purchasers pursuant to Rule 144A
under the Securities Act of 1933 that are determined to be liquid by
the investment adviser pursuant to guidelines adopted by the Trust's
Board of Trustees.

2. Make investments for the purpose of exercising control or management,
except in connection with a merger, consolidation, acquisition, or
reorganization with another investment company or series thereof.
(Investments by the Fund in wholly-owned investment entities created
under the laws of certain foreign countries will not be deemed the
making of investments for the purpose of exercising control or
management.)

3. Invest in interests in oil, gas or other mineral exploration, resource,
or lease transactions or development programs but may purchase readily
marketable securities of companies that operate, invest in, or sponsor
such programs.

4. The Fund may acquire or retain the securities of any other investment
company except to the extent prohibited by the 1940 Act, including in
connection with a merger, consolidation, acquisition, or
reorganization.

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<PAGE>

SCHRODER U.S. DIVERSIFIED GROWTH FUND

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 note or other evidence of indebtedness (any such
borrowing may not exceed one-third of the Fund's total assets after the
borrowing); (2) if at any time such borrowing exceeds such one-third
limitation, the Fund would within three days thereafter (not including
Sundays or holidays) or such longer period as the Securities and
Exchange Commission may prescribe by rules and regulations, reduce its
borrowings to the limitation; and (3) might or might not be secured
and, if secured, all or any part of the Fund's assets could be pledged.
To comply with such limitations, the Fund might be required to dispose
of certain assets when it might be disadvantageous to do so. Any such
borrowings would be subject to Federal Reserve Board regulations. (As a
non-fundamental policy, the Fund does not borrow for investment
purposes.)

2. Effect short sales, purchase any security on margin or write or
purchase put and call options.

3. Acquire more than 10% of the voting securities of any one issuer.

4. Invest 25% or more of the value of its total assets in any one
industry.

5. Engage in the purchase and sale of illiquid interests in real
estate, including illiquid interests in real estate investment trusts.

6. Engage in the purchase and sale of commodities or commodity contracts.

7. Invest in companies for the purpose of exercising control or
management.

8. Underwrite securities of other issuers, except that the Fund may
acquire portfolio securities, not in excess of 10% of the value of its
total assets, under circumstances where if sold it might be deemed to
be an underwriter for the purposes of the Securities Act of 1933, as
amended.

9. Make loans to other persons except that it may purchase evidences of
indebtedness of a type distributed privately to financial institutions
but not in excess of 10% of the value of its total assets.

10. Acquire securities described in the two immediately preceding
fundamental policies which in the aggregate exceed 10% of the value of
the Fund's total assets.

11. Invest in other investment companies.

26
<PAGE>

NON-FUNDAMENTAL POLICIES:

1. Invest more than 10% of its total assets in illiquid securities,
including securities described in items 8 and 9 above and repurchase
agreements maturing more than seven days after they are entered into.

2. Engage in writing, buying or selling of stock index futures, options on
stock index futures, financial futures contracts or options thereon.

SCHRODER U.S. SMALLER COMPANIES FUND

Schroder U.S. Smaller Companies Fund will not:

FUNDAMENTAL POLICIES:

1. Borrow money, except that the Fund may borrow from banks or by entering
into reverse repurchase agreements, provided that such borrowings do
not exceed 33 1/3% of the value of the Portfolio's total assets
(computed immediately after the borrowing).

2. Underwrite securities of other companies (except insofar as the Fund
might be deemed to be an underwriter in the resale of any securities
held in its portfolio).

3. Invest in commodities or commodity contracts (other than covered call
options, put and call options, stock index futures, and options on
stock index futures and broadly-based stock indices, all of which are
referred to as Hedging Instruments, which it may use as permitted by
any of its other fundamental policies, whether or not any such Hedging
Instrument is considered to be a commodity or a commodity contract).

4. Purchase securities on margin; however, the Fund may make margin
deposits in connection with any Hedging Instruments, which it may use
as permitted by any of its other fundamental policies.

5. Purchase or write puts or calls except as permitted by any of its
other fundamental policies.

6. Lend money except in connection with the acquisition of that portion of
publicly-distributed debt securities which the Fund's investment
policies and restrictions permit it to purchase; the Fund may also make
loans of portfolio securities and enter into repurchase agreements.

7. Pledge, mortgage or hypothecate its assets to an extent greater than
10% of the value of the total assets of the Fund; however, this does
not prohibit the escrow arrangements contemplated by the put and call
activities of the Fund or other collateral or margin arrangements in
connection with any of the Hedging Instruments, which it may use as
permitted by any of its other fundamental policies.

8. Invest in companies for the purpose of acquiring control or
management thereof.

27
<PAGE>

9. Invest in interests in oil, gas or other mineral exploration or
development programs (but may purchase readily marketable securities of
companies which operate, invest in, or sponsor such programs).

10. Invest in real estate or in interests in real estate, but may purchase
readily marketable securities of companies holding real estate or
interests therein.

NON-FUNDAMENTAL POLICY:

SCHRODER MICRO CAP FUND

Schroder Micro Cap Fund will not:

FUNDAMENTAL POLICIES:

1. Underwrite securities of other companies (except insofar as the Fund
might be deemed to be an underwriter in the resale of any securities
held in its portfolio).

2. Invest in commodities or commodity contracts (other than Hedging
Instruments, which it may use as permitted by any of its other
fundamental policies, whether or not any such Hedging Instrument is
considered to be a commodity or a commodity contract).

3. Purchase securities on margin; however, the Fund may make margin
deposits in connection with any Hedging Instruments, which it may use
as permitted by any of its other fundamental policies.

4. Purchase or write puts or calls except as permitted by any of its
other fundamental policies.

5. Lend money except in connection with the acquisition of that portion of
publicly-distributed debt securities that the Fund's investment
policies and restrictions permit it to purchase; the Fund may also make
loans of portfolio securities and enter into repurchase agreements.

6. Pledge, mortgage or hypothecate its assets to an extent greater than
10% of the value of the total assets of the Fund; however, this does
not prohibit the escrow arrangements contemplated by the put and call
activities of the Fund or other collateral or margin arrangements in
connection with any of the Hedging Instruments, which it may use as
permitted by any of its other fundamental policies.

7. Invest in companies for the purpose of acquiring control or management
thereof, except that the Fund may invest in other investment companies
to the extent permitted under the 1940 Act or by rule or exemption
thereunder.

28
<PAGE>

8. Invest in interests in oil, gas or other mineral exploration or
development programs (but may purchase readily marketable securities of
companies that operate, invest in, or sponsor such programs).

9. Invest in real estate or in interests in real estate, but may purchase
readily marketable securities of companies holding real estate or
interests therein.

NON-FUNDAMENTAL POLICY:

All percentage limitations on investments (other than limitations on
borrowing and illiquid securities) will apply at the time of investment and
shall not be considered violated unless an excess or deficiency occurs or exists
immediately after and as a result of such investment.

-------------------

TRUSTEES AND OFFICERS

The Trustees of the Trust are responsible for the general oversight of
the Trust's business. Subject to such policies as the Trustees may determine,
Schroder furnishes a continuing investment program for each Fund and makes
investment decisions on its behalf. Subject to the control of the Trustees,
Schroder also manages the Funds' other affairs and business.

The Trustees and executive officers of the Trust and their principal
occupations during the last five years are set forth below.

David N. Dinkins, Trustee. 71. 787 Seventh Avenue, New York, New York.
Trustee, Schroder Capital Funds, Schroder Capital Funds II, and Schroder Series
Trust. Professor, Columbia University School of International and Public
Affairs. Director, American Stock Exchange, Carver Federal Savings Bank,
Transderm Laboratory Corporation, and The Cosmetics Center, Inc. Formerly,
Mayor, City of New York.

John I. Howell, Trustee. 82. 787 Seventh Avenue, New York, New York.
Trustee, Schroder Capital Funds, Schroder Capital Funds II, Schroder Series
Trust, and Schroder Series Trust II. Director, American International Life
Assurance Company of New York. Private consultant since 1987.

Peter S. Knight, Trustee. 48. 787 Seventh Avenue, New York, New York.
Trustee, Schroder Capital Funds, Schroder Capital Funds II, and Schroder Series
Trust. Partner, Wunder, Knight, Levine, Thelen & Forscey. Director, Comsat
Corp., Medicis Pharmaceutical Corp., and Whitman Education Group, Inc. Formerly,
Campaign Manager, Clinton/Gore '96.

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<PAGE>

Peter E. Guernsey, Trustee. 77. 787 Seventh Avenue, New York, New York.
Trustee, Schroder Capital Funds, Schroder Capital Funds II, Schroder Series
Trust, and Schroder Series Trust II. Formerly, Senior Vice President, Marsh &
McLennan, Inc.

(*) Sharon L. Haugh, Trustee. 53. 787 Seventh Avenue, New York, New York.
Chairman, Schroder Capital Management Inc. Executive Vice President and
Executive Director, Schroder Capital Management International Inc. Chairman and
Director, Schroder Fund Advisors Inc. Trustee, Schroder Capital Funds, Schroder
Capital Funds II, and Schroder Series Trust.

William L. Means, Trustee. 59. 787 Seventh Avenue, New York, New York.
Trustee, Schroder Series Trust II. Formerly, Chief Investment Officer, Alaska
Permanent Fund Corporation.

Clarence F. Michalis, Trustee. 77. 787 Seventh Avenue, New York, New York.
Trustee, Schroder Capital Funds, Schroder Capital Funds II, and Schroder Series
Trust. Chairman of the Board of Directors, Josiah Macy, Jr. Foundation.

Hermann C. Schwab, Trustee. 79. 787 Seventh Avenue, New York, New York.
Trustee, Schroder Capital Funds, Schroder Capital Funds II, and Schroder Series
Trust. Trustee, St. Luke's/Roosevelt Hospital Center. Formerly, consultant to
Schroder Capital Management International Inc.

(*) Mark J. Smith, President and Trustee of the Trust. 36. 787 Seventh
Avenue, New York, New York. Director and Senior Vice President, Schroder Capital
Management International Limited and Schroder Capital Management International
Inc. Director, Schroder Investment Management Ltd., Schroder Fund Advisors Inc.,
and Schroder Japanese Warrant Fund Ltd. Trustee, Schroder Capital Funds,
Schroder Capital Funds II, and Schroder Series Trust. Vice President, Schroder
Series Trust II.

Mark Astley, Vice President of the Trust. 34. 787 Seventh Avenue, New York,
New York. First Vice President of Schroder Capital Management International Inc.
Formerly, employed by various affiliates of Schroder Capital Management
International Inc. in various positions in the investment research and portfolio
management areas since 1987.

Robert G. Davy, Vice President of the Trust. 37. 787 Seventh Avenue, New
York, New York. Director of Schroder Capital Management International Inc. and
Schroder Capital Management International Ltd. since 1994; First Vice President
of Schroder Capital Management International Inc. since July 1992. Formerly,
employed by various affiliates of Schroder Capital Management International Inc.
in various positions in the investment research and portfolio management areas
since 1986.

Margaret H. Douglas-Hamilton, Vice President of the Trust. 57. 787 Seventh
Avenue, New York, New York. Director and Secretary of Schroder Capital
Management Inc.

______________
(*) Trustee who is an "interested person" (as defined in the 1940 Act) of the
Trust, Schroder, or Schroder Fund Advisors Inc.

30
<PAGE>

Richard R. Foulkes, Vice President of the Trust. 53. 787 Seventh Avenue,
New York, New York. Deputy Chairman of Schroder Capital Management International
Inc. since October 1995; Director and Executive Vice President of Schroder
Capital Management International Ltd. since 1989.

John Y. Keffer, Vice President of the Trust. 56. Two Portland Square,
Portland, Maine. President of Forum Financial Corp., the Fund's transfer and
dividend disbursing agent and other affiliated entities including Forum
Financial Services, Inc., Forum Administrative Services, LLC, and Forum
Advisors, Inc.

Michael Perelstein, Vice President of the Trust. 43. 787 Seventh Avenue,
New York, New York. Director since May 1997 and Senior Vice President of
Schroder Capital Management International Inc. since January 1997. Formerly,
Managing Director of MacKay - Shields Financial Corp.

Catherine A. Mazza, Vice President of the Trust. 39. 787 Seventh Avenue,
New York, New York. First Vice President, Schroder Capital Management
International Inc. and Schroder Capital Management Inc. President, Schroder Fund
Advisors Inc. Vice President, Schroder Capital Funds, Schroder Capital Funds II,
and Schroder Series Trust. Formerly, Vice President, Alliance Capital Management
L.P.

Alexandra Poe, Secretary and Vice President of the Trust. 38. 787 Seventh
Avenue, New York, New York. Vice President, Schroder Capital Management
International Inc. Senior Vice President, Secretary, and General Counsel,
Schroder Fund Advisors Inc. Vice President and Secretary, Schroder Capital
Funds, Schroder Capital Funds II, and Schroder Series Trust. Assistant
Secretary, Schroder Series Trust II. Formerly, Attorney, Gordon, Altman,
Butowsky, Weitzen, Shalov & Wein; Vice President and Counsel, Citibank, N.A.

Jane E. Lucas, Vice President of the Trust. 38. 787 Seventh Avenue, New
York, New York. Senior Vice President, Schroder Capital Management International
Inc.

Fergal Cassidy, Treasurer and Principal Financial and Accounting Officer of
the Trust. 29. 787 Seventh Avenue, New York, New York. Vice President and
Treasurer, Schroder Capital Management Inc. Vice President and Comptroller,
Schroder Capital Management International Inc. Treasurer and Chief Financial
Officer, Schroder Fund Advisors Inc. Assistant Treasurer, Schroder Series Trust.
Formerly, Senior Accountant, Concurrency Management Corp.

Alan Mandel, Assistant Treasurer of the Trust. 41. 787 Seventh Avenue, New
York, New York. First Vice President of Schroder Capital Management
International Inc. since September 1998. Formerly, Director of Mutual Fund
Administration for Salomon Brothers Asset Management; Chief Financial Officer
and Vice President of Mutual Capital Management.

Carin Muhlbaum, Assistant Secretary of the Trust. 36. Vice President of
Schroder Capital Management International Inc. since 1998. Formerly, an
investment management attorney with Seward & Kissel and prior thereto, with
Gordon Altman Butowsky Weitzen Shalov & Wein.

31
<PAGE>

Nicholas Rossi, Assistant Secretary of the Trust. 35. 787 Seventh Avenue,
New York, New York. Associate of Schroder Capital Management International Inc.
since October 1997 and Assistant Vice President of Schroder Fund Advisors Inc.
since March 1998. Formerly, Mutual Fund Specialist, Willkie Farr & Gallagher;
Fund Administrator, Furman Selz LLC since 1992.

Thomas G. Sheehan, Assistant Treasurer and Assistant Secretary of the
Trust. 44. Two Portland Square, Portland, Maine. Relationship Manager and
Counsel, Forum Financial Services, Inc. since 1993. Formerly, Special Counsel,
U.S. Securities and Exchange Commission, Division of Investment Management,
Washington, D.C.

John A. Troiano, Vice President of the Trust. 38. 787 Seventh Avenue, New
York, New York. Director of Schroder Capital Management Inc. since April 1997;
Chief Executive Officer, since July 1, 1997, of Schroder Capital Management
International Inc. and Managing Director and Senior Vice President of Schroder
Capital Management International Inc. since October 1995. Formerly, employed by
various affiliates of Schroder Capital Management International Inc. in various
positions in the investment research and portfolio management areas since 1981.

Ira L. Unschuld, Vice President of the Trust. 33. 787 Seventh Avenue, New
York, New York. Group Vice President of Schroder Capital Management
International Inc. since April 1998 and an Associate from July 1990 to April
1993.

Except as otherwise noted, the principal occupations of the Trustees and
officers for the last five years have been with the employers shown above,
although in some cases they have held different positions with such employers or
their affiliates.

TRUSTEE COMPENSATION

Trustees who are not "interested persons" (as defined in the 1940 Act) of
the Trust, Schroder, or Schroder Fund Advisors Inc. received the following
compensation for the fiscal year ended October 31, 1998:

32
<PAGE>

<TABLE>
<S> <C> <C>
COMPENSATION TABLE

- -----------------------------------------------------------------------------------------------------------
(2) (3)

(1) AGGREGATE TOTAL COMPENSATION FROM TRUST
COMPENSATION AND
NAME OF FROM TRUST FUND COMPLEX PAID TO TRUSTEES*
TRUSTEE
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
David N. Dinkins
$3,546 $14,250
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------

Peter E. Guernsey $3,911 $23,750
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------

John I. Howell $3,911 $25,000
- -----------------------------------------------------------------------------------------------------------
Peter S. Knight $3,911 $15,500
- -----------------------------------------------------------------------------------------------------------
William L. Means** $0 $9,500
- -----------------------------------------------------------------------------------------------------------
Clarence F. Michalis $3,911 $14,250
- -----------------------------------------------------------------------------------------------------------
Hermann C. Schwab $3,911 $14,250
- -----------------------------------------------------------------------------------------------------------
</TABLE>

* The Total Compensation listed in column (3) for each Trustee includes
compensation for services as Trustee of the Trust, Schroder Capital
Funds ("SCF"), Schroder Capital Funds II ("SCF II"), Schroder Series
Trust ("SST"), and Schroder Series Trust II (formerly Schroder Asian
Growth Fund, Inc., "SST II"). The Trust, SCF, SCF II, SST, and SST II
are considered part of the same "Fund Complex" for these purposes.

** Mr. Means was elected Trustee of the Trust on December 15, 1998.

As of February 1, 1999, the Trustees of the Trust as a group owned less
than 1% of the outstanding shares of each Fund. Mr. Ira Unschuld, principal
advisor to and vice president of Schroder Micro Cap Fund, held 12.38% of the
Investor Shares of that Fund.

The Trust's Trust Instrument provides that the Trust will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with litigation in which they may be involved because of their offices with the
Trust, except if it is determined in the manner specified in the Trust
Instrument that they have not acted in good faith in the reasonable belief that
their actions were in the best interests of the Trust or that such
indemnification would relieve any officer or Trustee of any liability to the
Trust or its Shareholders by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of his or her duties. The Trust, at its
expense, provides liability insurance for the benefit of its Trustees and
officers.

33
<PAGE>

SCHRODER AND ITS AFFILIATES

Schroder has served as the investment adviser for each of the Funds and
each of the related Portfolios since their inception. Schroder is a wholly-owned
subsidiary of Schroder U.S. Holdings Inc., which engages through its subsidiary
firms in the investment banking, asset management, and securities businesses.
Affiliates of Schroder U.S. Holdings Inc. (or their predecessors) have been
investment managers since 1927. Schroder itself has been an investment manager
since 1962, and, together with its United Kingdom affiliate, Schroder Capital
Management International Limited, served as investment manager for approximately
$27.1 billion as of December 31, 1998. Schroder U.S. Holdings Inc. is an
indirect, wholly-owned U.S. subsidiary of Schroders plc, a publicly owned
holding company organized under the laws of England. Schroders plc and its
affiliates engage in international merchant banking and investment management
businesses and as of December 31, 1998, had under management assets of
approximately $195 billion.

Schroder Fund Advisors Inc., an affiliate of Schroder that serves as the
Trust's principal underwriter, is a wholly-owned subsidiary of Schroder Capital
Management International Inc. Schroder Capital Management International Inc. is
also a wholly-owned subsidiary of Schroder U.S. Holdings Inc.

INVESTMENT ADVISORY AGREEMENTS

Under Investment Advisory Agreements between the Trust and Schroder
(the "Advisory Agreements"), Schroder, at its expense, provides the Funds with
investment advisory services and advises and assists the officers of the Trust
in taking such steps as are necessary or appropriate to carry out the decisions
of its Trustees regarding the conduct of business of the Trust and each Fund.
The fees to be paid under the Advisory Agreements are set forth in the
Prospectuses.

Under the Advisory Agreements, Schroder is required to regularly
provide the Funds with investment research, advice, and supervision and
furnishes continuously investment programs consistent with the investment
objectives and policies of the various Funds, and determines, for the various
Funds, what securities shall be purchased, what securities shall be held or
sold, and what portion of a Fund's assets shall be held uninvested, subject
always to the provisions of the Trust's Trust Instrument and By-laws, and of the
1940 Act, and to a Fund's investment objectives, policies, and restrictions, and
subject further to such policies and instructions as the Trustees may from time
to time establish.

Schroder makes available to the Trust, without additional expense to
the Trust, the services of such of its directors, officers, and employees as may
duly be elected Trustees or officers of the Trust, subject to their individual
consent to serve and to any limitations imposed by law. Schroder pays the
compensation and expenses of officers and executive employees of the Trust.
Schroder also provides investment advisory research and statistical facilities
and all clerical services relating to such research, statistical, and investment
work. Schroder pays the Trust's office rent.

Under the Advisory Agreements, the Trust is responsible for all its
other expenses, including clerical salaries not related to investment
activities; fees and expenses incurred in connection with membership in
investment company organizations; brokers' commissions; payment for portfolio
pricing services to a pricing agent, if any; legal expenses; auditing expenses;
accounting expenses; taxes and governmental fees; fees and expenses of the
transfer agent and investor servicing agent of the Trust; the cost of preparing
share certificates or any other expenses, including clerical expenses, incurred
in connection with the issue, sale, underwriting, redemption, or repurchase of
shares; the expenses of and fees for registering or qualifying securities for
sale; the fees and expenses of the Trustees of the Trust

34
<PAGE>

who are not affiliated with Schroder; the cost of preparing and distributing
reports and notices to shareholders; public and investor relations expenses; and
fees and disbursements of custodians of the Funds' assets. The Trust is also
responsible for its expenses incurred in connection with litigation,
proceedings, and claims and the legal obligation it may have to indemnify its
officers and Trustees with respect thereto.

Schroder's compensation under the Advisory Agreements may be reduced in
any year if a Fund's expenses exceed the limits on investment company expenses
imposed by any statute or regulatory authority of any jurisdiction in which
shares of the Fund are qualified for offer or sale.

The Advisory Agreements may be terminated without penalty by vote of
the Trustees as to any Fund, by the shareholders of that Fund, or by Schroder on
60 days' written notice. Each Advisory Agreement also terminates without payment
of any penalty in the event of its assignment. In addition, each Advisory
Agreement may be amended only by a vote of the shareholders of the affected
Fund(s), and each Advisory Agreement provides that it will continue in effect
from year to year only so long as such continuance is approved at least annually
with respect to a Fund by vote of either the Trustees or the shareholders of the
Fund, and, in either case, by a majority of the Trustees who are not "interested
persons" of Schroder. In each of the foregoing cases, the vote of the
shareholders is the affirmative vote of a "majority of the outstanding voting
securities" as defined in the Investment Company Act of 1940.

Subject to the direction and control of Schroder, Schroder Investment
Management International Limited (SIMIL), an affiliate of Schroder, serves as
subadviser to Schroder International Smaller Companies Portfolio pursuant to an
Investment Subadvisory Agreement among Schroder, SIMIL and the Portfolio.

Forum Administrative Services, LLC ("FAdS") and Forum Shareholder
Services, LLC ("Forum") provide certain accounting, transfer agency, and other
services to the Trust. The Trust compensates FAdS and Forum on a basis approved
by the Trustees.

THE PORTFOLIOS

Each Fund (other than Schroder U.S. Diversified Growth Fund and
Schroder Micro Cap Fund) currently invests all of its assets in a related
Portfolio that has the same investment objectives and substantially the same
investment policies as the relevant Fund. As long as a Fund remains completely
invested in a Portfolio (or any other investment company), Schroder is not
entitled to receive any investment advisory fee with respect to the Fund. A Fund
may withdraw its investment from the related Portfolio at any time if the
Trust's Board of Trustees determines that it is in the best interests of the
Fund and its shareholders to do so. The Trust has retained Schroder as
investment adviser to manage a Fund's assets in the event that the Fund
withdraws its investment from its related Portfolio.

Schroder is the investment advisor to each of the related Portfolios
pursuant to an investment advisory agreement (the "Portfolio Advisory
Agreement") between Schroder and Schroder Capital Funds, on behalf of the
Portfolios. Schroder receives an investment advisory fee with respect to each
related Portfolio. The Portfolio Advisory Agreement is the same in all material
respects as the Investment Advisory Agreement between the Trust on behalf of the
Funds and Schroder. Each of the Funds that

35
<PAGE>

invests in a related Portfolio bears a proportionate part of the investment
advisory fees paid by the Portfolio (based on the percentage of the Portfolio's
assets attributable to the Fund).

RECENT INVESTMENT ADVISORY FEES. Of the total investment advisory fees
paid by the Portfolios to Schroders, the portion borne indirectly by each Fund
that invests in a related Portfolio during the three most recent fiscal years is
set forth in the following tables. For Schroder U.S. Diversified Growth Fund and
Schroder Micro Cap Fund (which do not invest in a Portfolio), the tables reflect
investment advisory fees paid by such Fund to Schroders. The fees listed in the
following tables reflect reductions pursuant to expense limitations in effect
during such periods.

Funds with May 31 fiscal year end:
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Fund Investment Advisory Fees Investment Advisory Fees Investment Advisory Fees
Paid for Fiscal Year Ended Paid for Fiscal Year Paid for Fiscal Year Ended
5/31/98 Ended 5/31/97 5/31/96
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
N/A N/A
Schroder Emerging Markets $2
Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Schroder U.S. Smaller $254,728 $49,878 $60,283(a)
Companies Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Schroder Micro Cap Fund $0 N/A N/A
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>

(a) Year Ended October 31, 1996

Funds with October 31 fiscal year end:
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Fund Investment Advisory Fees Investment Advisory Fees Investment Advisory Fees
Paid for Fiscal Year Ended Paid for Fiscal Year Paid for Fiscal Year Ended
10/31/98 Ended 10/31/97 10/31/96
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Schroder International Fund $718,360 $844,215 $978,697
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
N/A
Schroder International $0 $0
Smaller Companies Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Schroder U.S. Diversified $60,203 $90,466 $116,530
Growth Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>

36
<PAGE>

Fund with December 31 fiscal year end:
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Fund Investment Advisory Fees Investment Advisory Fees Investment Advisory Fees
Paid for Fiscal Year Ended Paid for Fiscal Year Paid for Fiscal Year Ended
12/31/98 Ended 12/31/97 12/31/96
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Schroder International Bond $0 N/A N/A
Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>

FEE WAIVERS

Schroder voluntarily waived its fees during the three most recent
fiscal years pursuant to voluntary expense limitations and/or waivers in effect
during such periods. The portion of the amounts waived with respect to the
investment advisory fees indirectly borne by each Fund that invests in a related
Portfolio is set forth in the following tables. For Schroder U.S. Diversified
Growth Fund and Schroder Micro Cap Fund (which do not invest in a Portfolio),
the tables reflect the amount of the investment advisory fees paid by such Fund
that was waived by Schroder.

Funds with May 31 fiscal year end:
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Fund Fees Waived During Fiscal Fees Waived During Fiscal Fees Waived During Fiscal
Year Ended 5/31/98 Year Ended 5/31/97 Year Ended 5/31/96
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Schroder Emerging Markets $20 N/A N/A
Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Schroder U.S. Smaller $0 $10,038 $16,090(a)
Companies Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Schroder Micro Cap Fund $26,896 N/A N/A
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>

(a) Year Ended October 31, 1996

37
<PAGE>

Funds with October 31 fiscal year end:
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Fund Fees Waived During Fiscal Fees Waived During Fiscal Fees Waived During Fiscal
Year Ended 10/31/98 Year Ended 10/31/97 Year Ended 10/31/96
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Schroder International Fund $38,224 $47,444 $0
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Schroder International $51,558 $60,033 N/A
Smaller Companies Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Schroder U.S. Diversified $40,931 $28,422 $4,355
Growth Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Fund with December 31 fiscal year end:

- ------------------------------ ---------------------------- --------------------------- ----------------------------

Fund Fees Waived During Fiscal Fees Waived During Fiscal Fees Waived During Fiscal
Year Ended 12/31/98 Year Ended 12/31/97 Year Ended 12/31/96
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Schroder International Bond $403 N/A N/A
Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>

ADMINISTRATIVE SERVICES

On behalf of each Fund (except Schroder U.S. Diversified Growth Fund),
the Trust has entered into an administration agreement with Schroder Fund
Advisors Inc., under which Schroder Fund Advisors Inc. provides management and
administrative services necessary for the operation of the Funds, including: (1)
preparation of shareholder reports and communications; (2) regulatory
compliance, such as reports to and filings with the SEC and state securities
commissions; and (3) general supervision of the operation of the Funds,
including coordination of the services performed by its investment adviser,
transfer agent, custodian, independent accountants, legal counsel and others.
Schroder Fund Advisors Inc. is a wholly owned subsidiary of Schroder and is a
registered broker-dealer organized to act as administrator and distributor of
mutual funds.

For providing administrative services, Schroder Fund Advisors Inc. is
entitled to receive a monthly fee at the following annual rates (based upon each
Fund's average daily net assets): 0.15% with respect to Schroder International
Fund and Schroder Emerging Markets Fund; 0.10% with respect to Schroder
International Smaller Companies Fund and Schroder International Bond Fund; and
0.25% with respect to Schroder U.S. Smaller Companies Fund and Schroder Micro
Cap Fund. The administration agreement is terminable with respect to the Funds
without penalty, at any time, by the Trustees upon 60 days' written notice to
Schroder Fund Advisors Inc. or by Schroder Fund Advisors Inc. upon 60 days'
written notice to the Trust.

38
<PAGE>

The Trust has entered into a subadministration agreement with FAdS. Under
its agreement, FAdS assists Schroder Fund Advisors Inc. with certain of its
responsibilities under the administration agreement, including shareholder
reporting and regulatory compliance. For providing its services, FAdS is
entitled to receive a monthly fee from the Funds at the following annual rates:
(based upon each Fund's average daily net assets): 0.05% with respect to
Schroder International Fund; 0.10% with respect to Schroder U.S. Diversified
Growth Fund and Schroder Micro Cap Fund; and 0.075%; with respect to Schroder
International Smaller Companies Fund, Schroder International Bond Fund, Schroder
U.S. Smaller Companies Fund and Schroder Emerging Markets Fund. The
subadministration agreement is terminable with respect to the Fund without
penalty, at any time, by the Trust upon 60 days' written notice to FAdS or by
FAdS upon 60 days' written notice to the Trust. Each of the Emerging Markets
Fund, the International Smaller Companies Fund, International Bond 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.

During the three most recent fiscal years, the Fund paid the following
fees to Schroder Fund Advisors Inc. and FAdS pursuant to the administration
agreement and the subadministration agreement. The fees listed in the following
table reflect reductions pursuant to fee waivers and expense limitations in
effect during such periods.

39
<PAGE>

Funds with May 31 fiscal year end:
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Administration Fees Paid Administration Fees Paid Administration Fees Paid
Fund for Fiscal Year Ended for Fiscal Year Ended for Fiscal Year Ended
5/31/98 5/31/97 5/31/96
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Schroder Emerging Markets Schroder Fund Advisors N/A N/A
Fund Inc. $2

FAdS $4
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Schroder U.S. Smaller Schroder Fund Advisors Schroder Fund Advisors Schroder Fund Advisors
Companies Fund Inc. $106,075 Inc. $25,060 Inc. $0(a)

FAdS $63,663 FAdS $15,007 FAdS $16,140
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Schroder Micro Cap Fund Schroder Fund Advisors Schroder Fund Advisors N/A
Inc. $0 Inc. N/A

FAdS $2,152 FAdS N/A
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>

(a) Year Ended October 31, 1996

Funds with October 31 fiscal year end:
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- --------------------------- ----------------------------
Fund
Administration Fees Paid Aministration Fees Paid Administration Fees Paid
for Fiscal Year Ended for Fiscal Year Ended for Fiscal Year Ended
10/31/98 10/31/97 10/31/96
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Schroder International Fund Schroder Fund Advisors Schroder Fund Advisors Schroder Fund Advisors
Inc. $280,443 Inc. $348,301 Inc. $430,361

FAdS $210,164 FAdS $247,591 FAdS $217,445
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Schroder International Schroder Fund Advisors Schroder Fund Advisors N/A
Smaller Companies Fund Inc. $0 Inc. $0

FAdS $9,085 FAdS $10,595
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Schroder U.S. Diversified Schroder Fund Advisors Schroder Fund Advisors Schroder Fund Advisors
Growth Fund Inc. $0 Inc. $0 Inc. $0

FAdS $13,485 FAdS $15,853 FAdS $18,598
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>

Fund with December 31 fiscal year end:
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Fund Administration Fees Paid Administration Fees Paid Administration Fees Paid
for Fiscal Year Ended for Fiscal Year Ended for Fiscal Year Ended
12/31/98 12/31/97 12/31/96
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Schroder International Bond Schroder Fund Advisors Schroder Fund Advisors N/A
Fund Inc. $0 Inc. N/A

FAdS $90 FAdS N/A
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>

40
<PAGE>

DISTRIBUTOR

Pursuant to a Distribution Agreement with the Trust, Schroder Fund
Advisors Inc. (the "Distributor"), 787 Seventh Avenue, New York, New York 10019,
serves as the distributor for the Trust's continually offered shares. The
Distributor pays all of its own expenses in performing its obligations under the
Distribution Agreement. The Distributor is not obligated to sell any specific
amount of shares of any Fund. Please see "Schroder and its Affiliates" for
ownership information regarding the Distributor.

DISTRIBUTION PLAN FOR ADVISOR SHARES. Each Fund has adopted a
Distribution Plan under Rule 12b-1 of the Investment Company Act of 1940
pursuant to which the Fund may pay the Distributor compensation in an amount
limited in any fiscal year to the annual rate of 0.50% of the Fund's average
daily net assets attributable to Advisor Shares. The Trustees have not
authorized any payments under the Distribution Plans, although they may at any
time authorize payments at an annual rate of up to 0.50% of a Fund's average
daily net assets attributable to Advisor Shares. The Distribution Plans also
relate to payments made pursuant to the Trust's Shareholder Servicing Plan for
Advisor Shares, to the extent such payments may be deemed to be primarily
intended to result in the sale of a Fund's Advisor Shares. See "Shareholder
Servicing Plan for Advisor Shares" below.

The various costs and expenses that may be paid or reimbursed under the
Distribution Plans include advertising expenses, costs of printing prospectuses
and other materials to be given or sent to prospective investors, expenses of
sales employees or agents of the Distributor, including salary, commissions,
travel and related expenses in connection with the distribution of Advisor
Shares, payments to broker-dealers who advise shareholders regarding the
purchase, sale, or retention of Advisor Shares, and payments to banks, trust
companies, broker-dealers (other than the Distributor) or other financial
organizations.

A Distribution Plan may not be amended to increase materially the amount
of distribution expenses permitted thereunder without the approval of a majority
of the outstanding Advisor Shares of the relevant Fund. Any other material
amendment to a Distribution Plan must be approved both by a majority of the
Trustees and a majority of those Trustees ("Qualified Trustees") who are not
"interested persons" (as defined in the 1940 Act) of the Trust, and who have no
direct or indirect financial interest in the operation of the Distribution Plan
or in any related agreement, by vote cast in person at a meeting called for the
purpose. Each Distribution Plan will continue in effect for successive one-year
periods provided each such continuance is approved by a majority of the Trustees
and the Qualified Trustees by vote cast in person at a meeting called for the
purpose. Each Distribution Plan may be terminated at any time by vote of a
majority of the Qualified Trustees or by vote of a majority of the Fund's
outstanding Advisor Shares.

SHAREHOLDER SERVICING PLAN FOR ADVISOR SHARES. Each Fund (except
Schroder Micro Cap Fund) has also adopted a Shareholder Servicing Plan (the
"Service Plan") for the Advisor Shares of each Fund. Under the Service Plan,
each Fund pays fees to the Distributor at an annual rate of up to 0.25% of the
average daily net assets of the Fund attributable to its Advisor Shares. The
Distributor may enter into shareholder service agreements with Service
Organizations pursuant to which the Service Organizations provide administrative
support services to their customers who are Fund shareholders.

41
<PAGE>

In return for providing these support services, a Service Organization
may receive payments from the Distributor at a rate not exceeding 0.25% of the
average daily net assets of the Advisor Shares of each Fund for which the
Service Organization is the Service Organization of record. These administrative
services may include, but are not limited to, the following functions:
establishing and maintaining accounts and records relating to clients of the
Service Organization; answering shareholder inquiries regarding the manner in
which purchases, exchanges, and redemptions of Advisor Shares of the Trust may
be effected and other matters pertaining to the Trust's services; providing
necessary personnel and facilities to establish and maintain shareholder
accounts and records; assisting shareholders in arranging for processing
purchase, exchange, and redemption transactions; arranging for the wiring of
funds; guaranteeing shareholder signatures in connection with redemption orders
and transfers and changes in shareholder-designated accounts; integrating
periodic statements with other customer transactions; and providing such other
related services as the shareholder may request. Some Service Organizations may
impose additional conditions or fees, such as requiring clients to invest more
than the minimum amounts required by the Trust for initial or subsequent
investments or charging a direct fee for services. Such fees would be in
addition to any amounts which might be paid to the Service Organization by the
Distributor.
Please contact your Service Organization for details.

The Service Plan was initially adopted for each Fund (except Schroder Micro
Cap Fund) on March 15, 1996. In the fiscal years ended May 31, 1998 and 1997
respectively, the Trust paid an aggregate of $4,871 and $70 to the Distributor
under the Service Plan, all of which was, in turn, repaid by the Distributor to
Service Organizations. All such payments were made by Schroder U.S. Smaller
Companies Fund, the only Fund with Advisor Shares outstanding during these
periods.

FUND ACCOUNTING

Forum Accounting Services, LLC ("Forum Accounting"), an affiliate of
Forum, performs fund accounting services for each Fund pursuant to an agreement
with the Trust. Under the Accounting Agreement, Forum Accounting prepares and
maintains the books and records of each Fund that are required to be maintained
under the 1940 Act, calculates the net asset value per share of each Fund,
calculates dividends and capital gain distributions, and prepares periodic
reports to shareholders and the SEC.

For its services to each Fund, Forum Accounting is entitled to receive
from the Trust a fee of $36,000 per year plus $12,000 per year for each class of
each Fund above one. Forum Accounting is entitled to an additional $24,000 per
year for global and international funds, and an additional $12,000 per year with
respect to tax-free money market funds, funds with more than 25% of their total
assets invested in asset-backed securities, funds that have more than 100
security positions, and funds that have a monthly turnover rate of 10% or more.

The tables below show the amount of fees paid by after waivers and/or
expense limitations the Funds to Forum Accounting during the three most recent
fiscal years (or such shorter time a Fund has been operational).

42
<PAGE>

Funds with May 31 fiscal year end:
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Fund Accounting Fees Paid Accounting Fees Paid Accounting Fees Paid
During Fiscal Year Ended During Fiscal Year Ended During Fiscal Year Ended
5/31/98 5/31/97 5/31/96
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Schroder Emerging Markets $1,306 N/A N/A
Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Schroder U.S. Smaller $19,179 $12,955 $37,972(a)
Companies Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Schroder Micro Cap Fund $27,645 $N/A N/A
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>

(a) Year Ended October 31, 1996

Funds with October 31 fiscal year end:
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Fund Accounting Fees Paid Accounting Fees Paid Accounting Fees Paid
During Fiscal Year Ended During Fiscal Year Ended During Fiscal Year Ended
10/31/98 10/31/97 10/31/96
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Schroder International Fund $74,747 $83,959 $86,000
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Schroder International $79,000 $71,200 N/A
Smaller Companies Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Schroder U.S. Diversified $36,000 $36,000 $36,000
Growth Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>

Fund with December 31 fiscal year end:
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Fund Accounting Fees Paid Accounting Fees Paid Accounting Fees Paid
During Fiscal Year Ended During Fiscal Year Ended During Fiscal Year Ended
12/31/98 12/31/97 12/31/96
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Schroder International Bond $11,809 N/A N/A
Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>

43
<PAGE>

BROKERAGE ALLOCATION AND OTHER PRACTICES

Schroder may place portfolio transactions with broker-dealers which
furnish, without cost, certain research, statistical, and quotation services of
value to Schroder and its affiliates in advising the Trust and other clients,
provided that it shall always seek best price and execution with respect to
transactions. Certain investments may be appropriate for the Trust and for other
clients advised by Schroder. Investment decisions for the Trust and other
clients are made with a view to achieving their respective investment objectives
and after consideration of such factors as their current holdings, availability
of cash for investment, and the size of their investments generally. Frequently,
a particular security may be bought or sold for only one client or in different
amounts and at different times for more than one but less than all clients.
Likewise, a particular security may be bought for one or more clients when one
or more other clients are selling the security. In addition, purchases or sales
of the same security may be made for two or more clients of Schroder on the same
day. In such event, such transactions will be allocated among the clients in a
manner believed by Schroder to be equitable to each. In some cases, this
procedure could have an adverse effect on the price or amount of the securities
purchased or sold by the Trust. Purchase and sale orders for the Trust may be
combined with those of other clients of Schroder in the interest of achieving
the most favorable net results for the Trust.

BROKERAGE AND RESEARCH SERVICES. Transactions on U.S. stock exchanges
and other agency transactions involve the payment by the Trust of negotiated
brokerage commissions. Such commissions vary among different brokers. Also, a
particular broker may charge different commissions according to such factors as
the difficulty and size of the transaction. Transactions in foreign securities
often involve the payment of fixed brokerage commissions, which are generally
higher than those in the United States, and therefore certain portfolio
transaction costs may be higher than the costs for similar transactions executed
on U.S. securities exchanges. There is generally no stated commission in the
case of securities traded in the over-the-counter markets, but the price paid by
the Trust usually includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid by the Trust includes a disclosed, fixed
commission or discount retained by the underwriter or dealer.

Schroder places all orders for the purchase and sale of portfolio
securities and buys and sells securities through a substantial number of brokers
and dealers. In so doing, it uses its best efforts to obtain the best price and
execution available. In seeking the best price and execution, Schroder considers
all factors it deems relevant, including price, the size of the transaction, the
nature of the market for the security, the amount of the commission, the timing
of the transaction (taking into account market prices and trends), the
reputation, experience, and financial stability of the broker-dealer involved,
and the quality of service rendered by the broker-dealer in other transactions.

It has for many years been a common practice in the investment advisory
business for advisers of investment companies and other institutional investors
to receive research, statistical, and quotation services from broker-dealers
that execute portfolio transactions for the clients of such advisers. Consistent
with this practice, Schroder receives research, statistical, and quotation
services from many broker-dealers with which it places the Trust's portfolio
transactions. These services, which in some cases may also be purchased for
cash, include such matters as general economic and security market reviews,
industry and company reviews, evaluations of securities, and recommendations as
to the purchase and sale of securities. Some of these services are of value to
Schroder and its affiliates in

44
<PAGE>

advising various of their clients (including the Trust or a Portfolio), although
not all of these services are necessarily useful and of value in managing a Fund
or a Portfolio. The investment advisory fee paid by a Fund or a Portfolio is not
reduced because Schroder and its affiliates receive such services.

As permitted by Section 28(e) of the Securities Exchange Act of 1934, as
amended, and by the Advisory Agreements and the Portfolio Advisory Agreement,
Schroder may cause a Fund or a Portfolio to pay a broker that provides brokerage
and research services to Schroder an amount of disclosed commission for
effecting a securities transaction for a Fund or a Portfolio in excess of the
commission which another broker would have charged for effecting that
transaction. Schroder's authority to cause a Fund or a Portfolio to pay any such
greater commissions is also subject to such policies as the Trustees (or the
Trustees of Schroder Capital Funds, in the case of a Portfolio) may adopt from
time to time.

To the extent permitted by law, the Funds or the Portfolios may engage
in brokerage transactions with Schroder & Co. Inc. ("Schroder & Co."), an
affiliate of Schroder, to effect securities transactions on the New York Stock
Exchange only or Schroder Securities Limited and its affiliates (collectively,
"Schroder Securities"), affiliates of Schroder, to effect securities
transactions on various foreign securities exchanges on which Schroder
Securities has trading privileges. Consistent with regulations under the 1940
Act, the Funds and the Portfolios have adopted procedures which are reasonably
designed to provide that any commissions or other remuneration the Funds or the
Portfolios pay to Schroder & Co. and Schroder Securities do not exceed the usual
and customary broker's commission. In addition, the Funds and the Portfolios
will adhere to the rule, under the Securities Exchange Act of 1934, governing
floor trading. This rule permits the Funds and the Portfolios to effect, but not
execute, exchange listed securities transactions with Schroder & Co. Schroder &
Co. pays a portion of the brokerage commissions it receives from a Fund or a
Portfolio to the brokers executing the transactions. Also, due to securities law
limitations, the Funds or the Portfolios may be required to limit purchases of
securities in a public offering if Schroder & Co. or Schroder Securities or one
of their affiliates is a member of the syndicate for that offering.

None of the Funds or the Portfolios has any understanding or arrangement
to direct any specific portion of its brokerage to Schroder & Co. or Schroder
Securities, and none will direct brokerage to Schroder & Co. or Schroder
Securities in recognition of research services.

The following tables show the aggregate brokerage commissions paid for
the three most recent fiscal years with respect to each Fund that incurred
brokerage costs. For each Fund that invests in a related Portfolio, the amounts
listed represent aggregate brokerage commissions paid by the Portfolio.

45
<PAGE>

Funds with May 31 fiscal year end:
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Fund Brokerage Commissions Paid Brokerage Commissions Brokerage Commissions Paid
During Fiscal Year Ended Paid During Fiscal Year During Fiscal Year Ended
5/31/98 Ended 5/31/97 5/31/96
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Schroder Emerging Markets $92,986 N/A N/A
Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Schroder U.S. Smaller $491,278 $167,043 $137,589(a)
Companies Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Schroder Micro Cap Fund $11,185 $2,966(b) N/A
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>

(a) Year Ended October 31, 1996
(b) Period Ended November 30, 1997

Funds with October 31 fiscal year end:
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Fund Brokerage Commissions Paid Brokerage Commissions Brokerage Commissions Paid
During Fiscal Year Ended Paid During Fiscal Year During Fiscal Year Ended
10/31/98 Ended 10/31/97 10/31/96
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------
$421,129 $756,181
Schroder International Fund $430,627
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Schroder International $25,266 $37,223 N/A
Smaller Companies Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Schroder U.S. Diversified $40,509 $20,510 N/A
Growth Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>

Fund with December 31 fiscal year end:
<TABLE>
<S> <C> <C> <C>
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Fund Brokerage Commissions Paid Brokerage Commissions Brokerage Commissions Paid
During Fiscal Year Ended Paid During Fiscal Year During Fiscal Year Ended
12/31/98 Ended 12/31/97 12/31/96
- ------------------------------ ---------------------------- --------------------------- ----------------------------
- ------------------------------ ---------------------------- --------------------------- ----------------------------

Schroder International Bond $223 $297 N/A
Fund
- ------------------------------ ---------------------------- --------------------------- ----------------------------
</TABLE>

46
<PAGE>

For the fiscal year ended May 31, 1998, the total brokerage commissions paid by
the Funds to brokers and dealers in transactions identified for execution on the
basis of research and other services provided to the Funds are summarized below.
<TABLE>
<S> <C> <C>
Fund Name Commissions
- --------- -----------
Schroder Emerging Markets Fund $4159 (which amount represents
approximately 4.5% of the
total brokerage commissions
paid by the Fund)

Schroder U.S. Smaller Companies Fund $108,827 (which amount represents
approximately 22% of the
total brokerage commissions
paid by the Fund)

Schroder Micro Cap Fund $219 (which amount represents
approximately 2% of the total
brokerage commissions paid by the Fund)
</TABLE>

For each Fund that invests in a related Portfolio, the amounts listed represent
aggregate brokerage commissions paid by the Portfolio. Funds that are not in the
table did not pay any commissions related to research for the stated periods.

The Funds paid no brokerage commissions to
Schroder & Co. or Schroder Securities in the three most recent fiscal years.

47
<PAGE>

DETERMINATION OF NET ASSET VALUE

The net asset value per share of each class of shares of each Fund is
determined daily as of the close of trading on the New York Stock Exchange
(normally 4:00 p.m., Eastern Time) on each day the Exchange is open for trading.
Any assets or liabilities initially expressed in terms of foreign currencies are
translated into U.S. dollars at the prevailing market rates as quoted by one or
more banks or dealers on the afternoon of valuation. The New York Stock Exchange
is normally closed on the following national holidays: New Years Day, Martin
Luther King, Jr. Day, Presidents Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving, and Christmas.

48
<PAGE>

The Trustees have established procedures for the valuation of a Fund's
securities, as follows:

Equities listed or traded on a domestic or foreign stock exchange for which
last sales information is regularly reported, are valued at their last reported
sales prices on such exchange on that day or, in the absence of sales that
day,at values based on the closing mid-market price, or, if none, the last sales
price on the preceding trading day. (Where the securities are traded on more
than one exchange, they are valued on the exchange on which the security is
primarily traded. Unlisted securities for which over-the-counter market
quotations are readily available generally are valued at the most recently
reported mid-market prices. Securities that do not have readily available market
quotations are valued at fair value pursuant to procedures established by the
Trustees. Fixed income securities are valued based on quotations provided by the
pricing services approved by the Trustees. Money market instruments having a
remaining maturity of 60 days or less may be valued at amortized cost unless
Schroder believes another valuation is more appropriate.

Reliable market quotations are not considered to be readily available for
long-term corporate bonds and notes, certain preferred stocks, tax-exempt
securities or certain foreign securities. These investments are stated at fair
value on the basis of valuations furnished by pricing services approved by the
Trustees, which determine valuations for normal, institutional-size trading
units of such securities using methods based on market transactions for
comparable securities and various relationships between securities which are
generally recognized by institutional traders.

If any securities held by a Fund are restricted as to resale, Schroder will
obtain a valuation based on the current bid for the restricted security from one
or more independent dealers or other parties reasonably familiar with the facts
and circumstances of the security. If Schroder is unable to obtain a fair
valuation for a restricted security from an independent dealer or other
independent party, a pricing committee (comprised of certain directors and
officers at Schroder) shall determine the bid value of such security. The
valuation procedures applied in any specific instance are likely to vary from
case to case. However, consideration is generally given to the financial
position of the issuer and other fundamental analytical data relating to the
investment and to the nature of the restrictions on disposition of the
securities (including any registration expenses that might be borne by the Trust
in connection with such disposition). In addition, specific factors are also
generally considered, such as the cost of the investment, the market value of
any unrestricted securities of the same class (both at the time of purchase and
at the time of valuation), the size of the holding, the prices of any recent
transactions or offers with respect to such securities, and any available
analysts' reports regarding the issuer.

Generally, trading in certain securities (such as foreign securities) is
substantially completed each day at various times prior to the close of the New
York Stock Exchange. The values of these securities used in determining the net
asset value of the Trust's shares are computed as of such times. Also, because
of the amount of time required to collect and process trading information as to
large numbers of securities issues, the values of certain securities (such as
convertible bonds and U.S. Government Securities) are determined based on market
quotations collected earlier in the day at the latest practicable time prior to
the close of the Exchange. Occasionally, events affecting the value of such
securities may occur between such times and the close of the Exchange which will
not be reflected in the computation of the Trust's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value, in the manner described
above.

The proceeds received by each Fund for each issue or sale of its shares,
and all income, earnings, profits, and proceeds thereof, subject only to the
rights of creditors, will be specifically allocated to such Fund, and constitute
the underlying assets of that Fund. The underlying assets of each Fund will be
segregated on the Trust's books of account, and will be charged with the
liabilities in respect of such Fund and with a share of the general liabilities
of the Trust. Each Fund's assets will be further allocated among its constituent
classes of shares on the Trust's books of account. Expenses with respect to any
two or more Funds or classes may be allocated in proportion to the net asset
values

49
<PAGE>

of the respective Funds or classes except where allocations of direct expenses
can otherwise be fairly made to a specific Fund or class.

REDEMPTIONS IN KIND

In consideration of the best interests of the remaining shareholders,
the Trust may pay certain redemption proceeds in whole or in part by a
distribution in kind of securities held by a Fund in lieu of cash. The Trust
will, however, redeem Investor Shares or Advisor Shares of a Fund solely in cash
up to the lesser of $250,000 or 1% of net assets during any 90-day period for
any one shareholder. The Trust does not expect to redeem shares in kind under
normal circumstances. If your shares are redeemed in kind, you should expect to
incur transaction costs upon the disposition of the securities received in the
distribution.

TAXES

Each Fund intends to qualify each year and elect to be taxed as a
regulated investment company under Subchapter M of the United States Internal
Revenue Code of 1986, as amended (the "Code").

As a regulated investment company qualifying to have its tax liability
determined under Subchapter M, a Fund will not be subject to federal income tax
on any of its net investment income or net realized capital gains that are
distributed to shareholders.

In order to qualify as a "regulated investment company," a Fund must,
among other things, (a) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, gains from the sale or
other dispositions of stock, securities, or foreign currencies, and other income
(including gains from options, futures, or forward contracts) derived with
respect to its business of investing in such stock, securities, or currencies,
and (b) diversify its holdings so that, at the close of each quarter of its
taxable year, (i) at least 50% of the value of its total assets consists of
cash, cash items, U.S. Government Securities, and other securities limited
generally with respect to any one issuer to not more than 5% of the total assets
of the Fund and not more than 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its assets is invested in the
securities of any issuer (other than U.S. Government Securities).

If a Fund fails to distribute in a calendar year substantially all of
its ordinary income for such year and substantially all of its capital gain net
income for the one-year period ending October 31 (or later if a Fund is
permitted so to elect and so elects), plus any retained amount from the prior
year, that Fund will be subject to a 4% excise tax on the undistributed amounts.
A dividend paid to shareholders by a Fund in January of a year generally is
deemed to have been paid by that Fund on December 31 of the preceding year, if
the dividend was declared and payable to shareholders of record on a date in
October, November, or December of that preceding year. Each Fund intends
generally to make distributions sufficient to avoid imposition of the 4% excise
tax. In order to receive the favorable tax treatment accorded regulated
investment companies and their shareholders, moreover, a Fund must in general
distribute with respect to each taxable year at least 90% of the sum of its
taxable net investment income, its net tax-exempt income, and, the excess, if
any, of net short-term capital gains over net long-term capital losses for such
year.

50
<PAGE>
A Fund's distributions will be taxable to you as ordinary income to the
extent derived from the Fund's investment income and net short-term gains (that
is, net gains from capital assets held for no more than one year). Distributions
designated by a Fund as deriving from net gains on capital assets held for more
than one year will be taxable to you as long-term capital gains (generally
subject to a 20% tax rate), regardless of how long you have held the shares.
Distributions will be taxable to you as described above whether received in cash
or in shares through the reinvestment of distributions. Early in each year the
Trust will notify each shareholder of the amount and tax status of distributions
paid to the shareholder by each of the Funds for the preceding year.

Upon the disposition of shares of a Fund (whether by sale, exchange, or
redemption), a shareholder will realize a gain or loss. Such gain or loss will
be capital gain or loss if the shares are capital assets in the shareholder's
hands, and will be long-term or short-term generally depending upon the
shareholder's holding period for the shares. Long-term capital gains will
generally be taxed at a federal income tax rate of 20%. Any loss realized by a
shareholder on a disposition of shares held by the shareholder for six months or
less will be treated as a long-term capital loss to the extent of any
distributions of capital gain dividends received by the shareholder with respect
to such shares. In general, any loss realized upon a taxable disposition of
shares will be treated as long-term capital loss if the shares have been held
for more than one year, and otherwise as short-term capital loss. With respect
to investment income and gains received by a Fund from sources outside the
United States, such income and gains may be subject to foreign taxes which are
withheld at the source. The effective rate of foreign taxes in which a Fund will
be subject depends on the specific countries in which its assets will be
invested and the extent of the assets invested in each such country and,
therefore, cannot be determined in advance.

A Fund's ability to use options, futures, and forward contracts and
other hedging techniques, and to engage in certain other transactions, may be
limited by tax considerations. A Fund's transactions in
foreign-currency-denominated debt instruments and its hedging activities will
likely produce a difference between its book income and its taxable income. This
difference may cause a portion of the Fund's distributions of book income to
constitute returns of capital for tax purposes or require the Fund to make
distributions exceeding book income in order to permit the Trust to continue to
qualify, and be taxed under Subchapter M of the Code, as a regulated investment
company. The tax consequences of certain hedging transactions have been modified
by the Taxpayer Relief Act of 1997.

Under federal income tax law, a portion of the difference between the
purchase price of zero-coupon securities in which a Fund has invested and their
face value ("original issue discount") is considered to be income to the Fund
each year, even though the Fund will not receive cash interest payments from
these securities. This original issue discount (imputed income) will comprise a
part of the net investment income of the Fund which must be distributed to
shareholders in order to maintain the qualification of the Fund as a regulated
investment company and to avoid federal income tax at the level of the Fund.

This discussion of the federal income tax and state tax treatment of the
Trust and its shareholders is based on the law as of the date of this SAI.

51
<PAGE>

PRINCIPAL HOLDERS OF SECURITIES

As of February 1, 1999, the Trustees of the Trust and, except as noted
below, the officers of the Trust, as a group owned less than 1% of the
outstanding shares of either class of each Fund.

The table attached as Appendix A lists those shareholders that owned 5%
or more of the shares of each Fund as of February 1, 1999, and therefore are
controlling persons of such Fund. Because these shareholders hold a substantial
number of shares, they may be able to require that the Trust hold special
shareholder meetings and may be able to determine the outcome of any shareholder
vote.

PERFORMANCE INFORMATION

Average annual total return of a class of shares of a Fund for one-,
five-, and ten-year periods (or for such shorter periods as shares of that class
of shares of the Fund have been offered) is determined by calculating the actual
dollar amount of investment return on a $1,000 investment in that class of
shares at the beginning of the period, and then calculating the annual
compounded rate of return which would produce that amount. Total return for a
period of one year or less is equal to the actual return during that period.
Total return calculations assume reinvestment of all Fund distributions at net
asset value on their respective reinvestment dates. Total return may be
presented for other periods.

ALL PERFORMANCE DATA IS BASED ON PAST INVESTMENT RESULTS AND DOES NOT
PREDICT FUTURE PERFORMANCE. Investment performance of a particular class of a
Fund's shares, which will vary, is based on many factors, including market
conditions, the composition of the Fund's portfolio, and the Fund's operating
expenses attributable to that class of shares. Investment performance also often
reflects the risks associated with a Fund's investment objectives and policies.
Quotations of yield or total return for any period when an expense limitation is
in effect will be greater than if the limitation had not been in effect. These
factors should be considered when comparing the investment results of a Fund's
shares to those of various classes of other mutual funds and other investment
vehicles. Performance for each Fund's shares may be compared to various indices.

The tables below set forth the total return of Investor Shares of the Funds
for the one-year period ended October 31, 1998 (November 30, 1998 for those
Funds with a May 31 fiscal year end and December 31, 1998 for those Funds with a
December 31 fiscal year end) and for the period from the commencement of each
Fund's operations until October 31, 1998 (November 30, 1998 for those Funds with
a May 31 fiscal year end). The table also sets forth total return information
for a Fund's Advisor Shares for any periods (or partial periods) when they were
outstanding, and pro forma total return information for periods (or partial
periods) when there were no Advisor Shares outstanding. Pro forma total return
information for Advisor Shares is estimated by restating the total return of
Investor Shares for the same period to reflect the actual fees and expenses
applicable to Advisor Shares, which are higher than the fees and expenses
applicable to Investor Shares (for instance, Advisor shares are subject to
shareholder servicing fees paid at a rate of up to 0.25% of the average daily
net asset value of a Fund attributable to its Advisor Shares). PLEASE NOTE THAT
THE HIGHER EXPENSES APPLICABLE TO A FUND'S ADVISOR SHARES SHOULD HAVE THE EFFECT
OF REDUCING THE TOTAL RETURN OF THE ADVISOR SHARES BELOW THAT OF THE INVESTOR
SHARES BY THE AMOUNT OF SUCH HIGHER EXPENSES, COMPOUNDED OVER THE RELEVANT
PERIOD.

52
<PAGE>
<TABLE>
<CAPTION>

AVERAGE ANNUAL TOTAL RETURN FOR PERIODS ENDED NOVEMBER 30, 1998
(FOR FUNDS WITH MAY 31 FISCAL YEAR END)
<S> <C> <C> <C> <C> <C> <C>
- -------------------------- ------------- ------------- ------------- ------------------ ------------- -------------

SINCE INCEPTION INCEPTION INCEPTION
OF FUND DATE OF FUND DATE OF
FUND CLASS 1 YEAR 5 YEAR (ANNUALIZED) CLASS
- -------------------------- ------------- ------------- ------------- ------------------ ------------- -------------
- -------------------------- ------------- ------------- ------------- ------------------ ------------- -------------

Schroder Emerging Investor (17.99)% N/A (19.20)% 10/30/97 10/30/97
Markets Fund Shares

Advisor N/A N/A N/A N/A
Shares
- -------------------------- ------------- ------------- ------------- ------------------ ------------- -------------
- -------------------------- ------------- ------------- ------------- ------------------ ------------- -------------

Schroder U.S. Smaller Investor (10.17)% 13.09% 17.95% 8/16/93 8/16/93
Companies Fund Shares

Advisor (10.21)% N/A N/A 12/23/96
Shares**

- -------------------------- ------------- ------------- ------------- ------------------ ------------- -------------
- -------------------------- ------------- ------------- ------------- ------------------ ------------- -------------

Schroder Micro Cap Fund Investor 57.69% N/A 54.76% 10/15/97 10/15/97
Shares

- -------------------------- ------------- ------------- ------------- ------------------ ------------- -------------
</TABLE>
<TABLE>
<CAPTION>

AVERAGE ANNUAL TOTAL RETURN FOR PERIODS ENDED OCTOBER 31, 1998
(FOR FUNDS WITH OCTOBER 31 FISCAL YEAR END)
<S> <C> <C> <C> <C> <C> <C>
- -------------------------- ------------- ------------- ------------- ------------- ---------------- ------------ -------------
SINCE
INCEPTION INCEPTION INCEPTION
OF FUND DATE OF DATE OF
FUND CLASS 1 YEAR 5 YEAR 10 YEAR (ANNUALIZED) FUND CLASS
- -------------------------- ------------- ------------- ------------- ------------- ---------------- ------------ -------------
- -------------------------- ------------- ------------- ------------- ------------- ---------------- ------------ -------------

Schroder International Investor 3.82% 7.48% 8.41% 11.24% 12/19/85 12/19/85
Fund Shares

Advisor 3.53% 7.45% 8.40% 11.14% 1/21/98
Shares***
- -------------------------- ------------- ------------- ------------- ------------- ---------------- ------------ -------------
- -------------------------- ------------- ------------- ------------- ------------- ---------------- ------------ -------------

Schroder International Investor 7.88% N/A N/A (0.23)% 11/4/96 11/4/96
Smaller Companies Fund Shares

Advisor N/A N/A N/A N/A% N/A
Shares

- -------------------------- ------------- ------------- ------------- ------------- ---------------- ------------ -------------
- -------------------------- ------------- ------------- ------------- ------------- ---------------- ------------ -------------

Schroder U.S. Investor 8.87% 13.66% 15.08% 11.20% 10/31/70 10/31/70
Diversified Growth Fund Shares

Advisor N/A N/A N/A N/A N/A
Shares
- -------------------------- ------------- ------------- ------------- ------------- ---------------- ------------ -------------
</TABLE>

53
<PAGE>

AVERAGE ANNUAL TOTAL RETURN FOR PERIODS ENDED DECEMBER 31, 1998
(FOR FUND WITH DECEMBER 31 FISCAL YEAR END)
<S> <C> <C> <C> <C> <C>
- -------------------------- ------------- ------------- ----------------- ------------- -------------

SINCE INCEPTION INCEPTION INCEPTION
OF FUND DATE OF FUND DATE OF
FUND CLASS 1 YEAR (ANNUALIZED) CLASS
- -------------------------- ------------- ------------- ----------------- ------------- -------------
- -------------------------- ------------- ------------- ----------------- ------------- -------------

Schroder International Investor N/A 14.00% 1/15/98 1/15/98
Bond Fund* Shares

Advisor N/A N/A N/A
Shares
- -------------------------- ------------- ------------- ----------------- ------------- -------------
</TABLE>

* Pro forma.
** Total return for Advisor Shares of Schroder U.S. Smaller Companies Fund
reflects pro forma information (based on Investor Share performance)
through December 22, 1996, and actual total return from December 23,
1996 (the inception date of Advisor Shares of the Fund) through November
30, 1998. The actual total return of Advisor Shares of the Fund from
December 23, 1996 through November 30, 1998 (not annualized) was 12.82%.
*** Total return for Advisor Shares of Schroder International Fund reflects
pro forma information (based on Investor Share performance) through
January 20, 1998, and actual total return from January 21, 1998 (the
inception date of Advisor Shares of the Fund) through October 31, 1998.
The actual total return of Advisor Shares of the Fund from January 21,
1998 through October 31, 1998 (not annualized) was 0.47%.

From time to time, Schroder or Forum may reduce its compensation or
assume expenses of a Fund in order to reduce the Fund's expenses, as described
in the Trust's current Prospectuses. Any such waiver or assumption would
increase a Fund's yield or total return for each class of shares during the
period of the waiver or assumption.

THE PORTFOLIOS

Each of the related Portfolios (other than Schroder International Bond
Portfolio) is a separate series of Schroder Capital Funds, an open-end
management investment company. Schroder International Bond Portfolio is a series
of Schroder Capital Funds II. Schroder Capital Funds and Schroder Capital Funds
II both are business trusts organized under the laws of the State of Delaware.

A Fund's investment in a Portfolio is in the form of a non-transferable
beneficial interest. A Portfolio may have other investors, each of whom will
invest on the same conditions as the related Fund and will pay a proportionate
share of the Portfolio's expenses.

54
<PAGE>

A Portfolio normally will not hold meetings of investors except as
required by the 1940 Act. Each investor in a Portfolio is entitled to vote in
proportion to its relative beneficial interest in the Portfolio. If a Portfolio
has investors other than the related Fund, there can be no assurance that any
issue that receives a majority of the votes cast by Fund shareholders will
receive of majority of votes cast by all Portfolio shareholders. If other
investors hold a majority interest of any Portfolio, they could have voting
control of that Portfolio.

The Portfolios do not sell their shares directly to the public. Another
investor (such as an investment company) in a Portfolio that might sell its
shares to the public would not be required to sell its shares at the same
offering price as the related Fund, and could have different fees and expenses
than that Fund. Therefore, the Fund's shareholders may have different returns
than shareholders of another investment company that invests in the Portfolio.

The investors in each Portfolio, including each related Fund, have
agreed to indemnify Schroder Capital Funds or Schroder Capital Funds II, as
applicable, and such trust's trustees and officers, against certain claims.

CERTAIN RISKS OF INVESTING IN THE PORTFOLIOS. A Fund's investment in a
Portfolio may be affected by the actions of other large investors in the
Portfolio, if any. For example, if a Portfolio has a large investor other than
the Fund and that investor redeems its interests in the Portfolio, the
Portfolio's remaining investors (including the Fund) might bear a larger portion
of the Portfolio's operating expenses. This would result in lower returns for
the Fund.

A Fund may withdraw its entire investment from a Portfolio at any time,
if the Trustees determine that it is in the best interests of the Fund and its
shareholders to do so. Such a withdrawal may result in a distribution in kind of
portfolio securities by the Portfolio, which could adversely affect the
liquidity of the Fund's assets. If the Fund converted those securities to cash,
it would likely incur brokerage fees or other transaction costs. In the event
that a Fund withdraws its entire investment from its related Portfolio, the
Fund's inability to find a suitable replacement investment could have a
significant negative impact on the Fund's shareholders.

Each investor in a Portfolio, including the related Fund, may be liable
for all obligations of the Portfolio. The risk that this would cause an investor
financial loss, however, is limited to circumstances in which the Portfolio
would be unable to meet its obligations. Schroder considers this risk to be
remote. Upon liquidation of a Portfolio, investors in that Portfolio (including
the related Fund) would be entitled to share pro rata in the Portfolio's net
assets available for distribution to investors.

CUSTODIAN

The Chase Manhattan Bank, through its Global Custody Division located at
125 London Wall, London EC2Y 5AJ, United Kingdom, acts as custodian of the
assets of the Funds and the Portfolios (other than Schroder U.S. Smaller
Companies Fund, Schroder U.S. Smaller Companies Portfolio, Schroder U.S.
Diversified

55
<PAGE>

Growth Fund and Schroder Micro Cap Fund). Norwest Bank, Sixth Street and
Marquette, Minneapolis, Minnesota 55479, acts as custodian of the assets of each
of Schroder U.S. Smaller Companies Fund, Schroder U.S. Smaller Companies
Portfolio, Schroder U.S. Diversified Growth Fund and Schroder Micro Cap Fund.
The custodians' responsibilities include safeguarding and controlling the Funds'
cash and securities, handling the receipt and delivery of securities, and
collecting interest and dividends on the Funds' investments. Neither custodian
determines the investment policies of the Funds or decides which securities a
Fund will buy or sell.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Forum Shareholder Services, LLC, Two Portland Square, Portland, Maine
04101, is the Funds' transfer agent and dividend disbursing agent.

INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers LLP, the Trust's independent accountants, provide
audit services, and tax return preparation services. Their address is One Post
Office Square, Boston, Massachusetts 02109.

LEGAL COUNSEL

Ropes & Gray, One International Place, Boston, Massachusetts 02110-2624,
serves as counsel to the Trust.

SHAREHOLDER LIABILITY

Under Delaware law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Trust. However, the Trust's
Trust Instrument disclaims shareholder liability for acts or obligations of the
Trust and requires that notice of such disclaimer be given in each agreement,
obligation, or instrument entered into or executed by the Trust or the Trustees.
The Trust's Trust Instrument provides for indemnification out of a Fund's
property for all loss and expense of any shareholder held personally liable for
the obligations of a Fund. Thus the risk of a shareholder's incurring financial
loss on account of shareholder liability is limited to circumstances in which
the Fund would be unable to meet its obligations.

FINANCIAL STATEMENTS

The fiscal year end of Schroder International Fund, Schroder International
Smaller Companies Fund and Schroder U.S. Diversified Growth Fund is October 31.
The required Financial Statements and the related Report of Independent
Accountants are incorporated herein by reference to the Trust's Annual Reports,
dated October 31, 1998, which were filed electronically with the Securities and
Exchange Commission on January 22, 1999 Accession Numbers: 0000889812-99-000186,
0000889812-99-000187, 0001004402-99-000032. The fiscal year end of Schroder
Emerging Markets Fund, Schroder U.S. Smaller Companies Fund and Schroder Micro
Cap Fund is May 31. The required Financial Statements are included herein by
reference to the Trust's Semi- Annual Reports dated November 30, 1998 which were
filed electronically with the Securities and Exchange Commission for Schroder
U.S. Smaller Companies Fund on February 4, 1999, Accession Number
0000889812-99-000319, for Schroder Micro Cap Fund on February 8, 1999,
Accession Number 0001004402-99-000070, and for Schroder Emerging Markets Fund on
February 8, 1999, Accession Number 0001004402-99-000069. The fiscal year end of
Schroder International Bond Fund is December 31 and the required financial
statements for this Fund are attached as Appendix C.

60
<PAGE>

APPENDIX A - HOLDERS OF 5% OR MORE OF OUTSTANDING SHARES

As of February 1, 1999, the shareholders listed below owned more than 5%
of a Fund as noted. Shareholders owning 25% or more of the shares of a Fund or
of the Trust as a whole may be deemed to be controlling persons. By reason of
their substantial holdings of shares, these persons may be able to require the
Trust to hold a shareholder meeting to vote on certain issues and may be able to
determine the outcome of any shareholder vote. As noted, certain of these
shareholders are known to the Trust to hold their shares of record only and have
no beneficial interest, including the right to vote, in the shares.
<TABLE>
<S> <C> <C> <C>
NUMBER OF NUMBER % OF
INVESTOR OF SHARES
SCHRODER INTERNATIONAL FUND SHARES ADVISOR OF FUND
SHARES CLASS
OWNED
- --------------------------------------------------------------------------- ------------------- --------------- -----------------

Mac & Co.
Mellon Bank NA
PO Box 3198
Pittsburgh PA 15230-3198 13.38
1,136,170.120

Union College Pooled Endowment Funds
PO Box 3199 Church Street Station
New York NY 10008 11.82
1,003,831.055

Mac & Co.
Mellon Bank NA
PO Box 3198
Pittsburgh PA 15230-3198 912,701.671 10.75

Norwest Bank Minnesota NA, Trustee
PO Box 1450 NW 8477
Minneapolis MN 55480-8477 664,402.084 7.83

Lutheran Church
Missouri Synod Foundation
1333 5 Kirkwood Road
St. Louis MO 63122 661,134.137 7.79

Northern Trust Company TTEE for
Norwest Foundation
c/o Mutual Fund Processing
P.O. Box 92956
Chicago IL 60675-2956 576,465.647 6.79

Miter & Co
c/o Marshall & Ilsley Trust Company
PO Box 2977
Milwaukee WI 53202-2977 554,829.917 6.53

Forum Administrative Services, LLC
ATTN Corporate Accounting
Two Portland Square
Portland ME 04101 6.554 100.00
</TABLE>

A-1
<PAGE>
<TABLE>
<S> <C> <C> <C>
NUMBER OF NUMBER % OF SHARES
INVESTOR OF OF FUND
SCHRODER INTERNATIONAL SMALLER COMPANIES FUND SHARES ADVISOR CLASS OWNED
SHARES
------------------------------------------------------------------- ------------------ --------------- --------------------

Schroder Investment Management
Client Account
33 Gutter Lane
London EC2V 8AS
United Kingdom 300,000.00 65.54

Hudson-Webber Foundation
333 West Fort Street, Suite 1310
Detroit, MI 48226 113,848.946 24.87

Charles Schwab & Co. Inc.
Special Customer Account
Attn: Mutual Funds
101 Montgomery Street
San Francisco CA 94104 43,552.023 9.52
</TABLE>

A-2
<PAGE>
<TABLE>
<S> <C> <C> <C>
% OF SHARES
NUMBER OF NUMBER OF FUND
SCHRODER U.S. DIVERSIFIED GROWTH FUND INVESTOR OF CLASS OWNED
SHARES ADVISOR
SHARES
- --------------------------------------------------------------------------------- ------------------ --------------- -------------

Wendel & Co.
c/o The Bank of New York
Mutual Fund Reorg. Dept.
PO Box 1066
Wall Street Station
New York NY 10268 229,921.589 10.32

Security Nominees Incorporated
1 State Street
New York NY 10017 171,856.010 7.71

Fox & Co.
PO Box 976
New York NY 10268 162,110.251 7.27

Citibank F.S.B. as Trustee
for Natwest Crawley
1410 N. Westshore Blvd.
Tampa FL 33607 138,860.821 6.23

Wendel & Co.
c/o The Bank of New York
EBT Mutual Fund Section
PO Box 1066
Wall Street Station
New York NY 10268 122,433.626 5.49
</TABLE>

A-3
<PAGE>
<TABLE>
<S> <C> <C> <C>
% OF
NUMBER NUMBER OF SHARES OF
SCHRODER INTERNATIONAL BOND FUND OF ADVISOR FUNDCLASS OWNED
INVESTOR SHARES
SHARES
- -------------------------------------------------------------------------- ----------------- -------------------- ----------------

Charles Schwab & Co. Inc.
101 Montgomery Street
San Francisco CA 94104 20,168.910 100.00

<PAGE>

% OF
NUMBER OF NUMBER SHARES
SCHRODER EMERGING MARKETS FUND INVESTOR OF OF FUND
SHARES ADVISOR CLASS
SHARES OWNED
- ------------------------------------------------------------------------- ----------------- -------------- -----------------

Wachovia Bank NA
USAA Savings & Investment Plan
301 N Main Street, P.O. Box 3073
Winston-Salem, NC 27150 72.57
184,609.409

Charles Schwab & Co. Inc.
Special Cust Account FBO
101 Montgomery Street
San Francisco CA 94104 66,155.788 26.01

</TABLE>

A-4
<PAGE>
<TABLE>
<S> <C> <C> <C>
NUMBER OF NUMBER OF % OF SHARES
INVESTOR ADVISOR OF FUND
SCHRODER U.S. SMALLER COMPANIES FUND SHARES SHARES CLASS OWNED
- --------------------------------------------------------------------------- -------------------- ----------------- ----------------

First American Trust Co TTEE
FBO Managed Omnibus Reinvestment
421 North Main Street 1,155,381.617 28.73

BALSA & Co.
c/o Chase Manhattan Bank
PO Box 1768
Grand Central Station
New York NY 10163-1768 747,695.448 18.59

Charles Schwab & Co Inc.
101 Montgomery Street
San Francisco CA 94104 502,119.092 12.49

Schroders Incorporated
787 Seventh Avenue 275,578.786 6.85
New York NY 10019

American Express Trust Co.
FBO American Express Trust Retirement Service
P.O. Box 534
Minneapolis MN 55440 85.21
374,630.486

National Investor Services Corp.
55 Water Street
New York NY 10041 27,102.428 6.30

Schroders Incorporated
787 Seventh Avenue 27,102.428 6.16
New York NY 10019

</TABLE>

A-5
<PAGE>

<TABLE>
<S> <C> <C> <C>
NUMBER OF NUMBER OF % OF SHARES
INVESTOR ADVISOR OF FUND
SCHRODER MICRO CAP FUND SHARES SHARES CLASS OWNED
- ------------------------------------------------------------------------------- ----------------- ---------------- -----------------

Schroders Incorporated
787 Seventh Avenue
New York NY 10019 32.85
172,849.986

Charles Schwab & Co. Inc.
101 Montgomery Street
San Francisco CA 94104 73,649.450 14.00

Schroder Capital Management International Inc.
ATTN: Fergal Cassidy
787 7th Avenue, 34th Floor
New York NY 10019 69,824.291 13.27

Ira Unschuld
150 East 56th Street
New York NY 10022 65,132.757 12.38

</TABLE>

A-6
<PAGE>
APPENDIX B

RATINGS OF CORPORATE DEBT INSTRUMENTS

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-1
<PAGE>

"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.

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.

B-2
<PAGE>

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.

"CCC" Fixed-income securities rated "CCC" have a current identifiable
vulnerability to

B-3
<PAGE>

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.

"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.

B-4
<PAGE>

"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.

B-5

<PAGE>

- --------------------------------------------------------------------------------
Schroder International Bond Fund
- --------------------------------------------------------------------------------

Investment Adviser's Report - Comparison of Change in
Value of $10,000 Investment

The following information compares a change in value of a $10,000 investment in
the Fund with the performance of the Salomon Smith Barney World Government Bond
ex-US (unhedged) Index (the "WGB Index") since inception date of the Fund. The
WGB Index is a market capitalization weighted benchmark that tracks the
performance of 16 government bond markets of Europe and Asia. The Fund's return
reflects deduction of applicable fees and expenses; the WGB Index return does
not reflect deduction of any fees and expenses. Total return and principal value
of an investment in the Fund will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Total return for
the Fund assumes reinvestment of dividends and distributions. Past performance
cannot predict or guarantee future results.

SCHRODER INTERNATIONAL BOND FUND - INVESTOR SHARES VS. WGB INDEX

Investment Value on 12/31/98
- -----------------------------
Schroder International Bond Fund - Investor Shares $11,400
WGB Index $11,791

Cumulative total Return on 12/31/98 Since Inception
- ----------------------------------- ---------------
Schroder International Bond Fund - Investor Shares 14.00%(a)

[EDGAR REPRESENTATION OF GRAPH CHART]

1/15/98 10,000.00 10,000.00
1/31/98 10,080.00 10,077.86
2/28/98 10,170.00 10,219.49
3/31/98 9,970.00 10,051.38
4/30/98 10,130.00 10,272.53
5/31/98 9,990.00 10,255.76
6/30/98 9,830.00 10,218.90
7/31/98 9,830.00 10,231.12
8/31/98 10,040.00 10,511.49
9/30/98 10,690.00 11,201.02
10/31/98 11,070.00 11,706.46
11/30/98 10,950.00 11,468.00
12/31/98 11,400.12 11,790.99

(a) Inception date of the Fund was January 15, 1998.

C-1
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Bond Fund
- --------------------------------------------------------------------------------

Statement of Assets and Liabilities
December 31, 1998
<TABLE>
<S> <C>

Assets:
Investments (Notes 1 and 2):
Investment in Schroder International Bond Portfolio
(the "Portfolio") $ 229,482
Receivable from administrator 38,944
Receivable for Fund shares sold 409
------------------
Total Assets 268,835
------------------

Liabilities:
Payable to subadministrator 61
Accrued expenses and other liabilities 39,045
------------------
Total Liabilities 39,106
------------------

Net Assets $ 229,729
==================

Components of Net Assets:
Paid-in capital $ 217,677
Undistributed (distributions in excess of) net investment income 1,080
Accumulated net realized gain (loss) (1,353)
Net unrealized appreciation (depreciation) on investments 12,325
------------------

Net Assets $ 229,729
==================

Shares of Beneficial Interest 20,421

Net Asset Value, Offering, and Redemption Price Per Share $ 11.25
</TABLE>

The accompanying notes are an integral part of the financial statements.

C-2
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Bond Fund
- --------------------------------------------------------------------------------

Statement of Operations
For the Period Ended December 31, 1998 (a)

<TABLE>
<S> <C>
Net Investment Income Allocated from the Portfolio:
Interest income $ 4,848
Net expenses (604)
------------------
Net Investment Income Allocated from the Portfolio 4,244
------------------

Expenses:
Administration (Note 3) 81
Subadministration (Note 3) 24,041
Transfer agency (Note 3) 11,575
Accounting (Note 3) 11,548
Legal 762
Audit 11,119
Trustees 7
Reporting 2,026
Registration 12,859
Miscellaneous 16
------------------
Total Expenses 74,034
Fees waived and expenses reimbursed (Note 4) (73,872)
------------------
Net Expenses 162
------------------

Net Investment Income (Loss) 4,082
------------------

Net Realized and Unrealized Gain (Loss) on Investments and Foreign Currency
Transactions Allocated from the Portfolio:
Net realized gain (loss) on investments sold (495)
Net realized gain (loss) on foreign currency transactions (1,103)
------------------
Net realized gain (loss) on investments and foreign
currency transactions (1,598)
------------------

Net change in unrealized appreciation (depreciation) on investments 13,120
Net change in unrealized appreciation (depreciation) on foreign
currency transactions (795)
------------------
Net change in unrealized appreciation (depreciation) on
investments and foreign currency transactions 12,325
------------------

Net Realized and Unrealized Gain (Loss) on Investments and Foreign
Currency Transactions Allocated from the Portfolio 10,727
------------------

Net Increase (Decrease) in Net Assets Resulting From Operations $ 14,809
==================

</TABLE>

- -----------------------------------------------------------------------

(a) The Fund commenced operations on January 15, 1998.

The accompanying notes are an integral part of the financial statements.

C-3
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Bond Fund
- --------------------------------------------------------------------------------

Statement of Changes in Net Assets
For the Period Ended December 31, 1998 (a)

<TABLE>
<S> <C>
Net Assets, Beginning of Period $ -
------------------

Operations:
Net investment income (loss) 4,082
Net realized gain (loss) on investments and foreign currency
transactions (1,598)
Net change in unrealized appreciation (depreciation) on investments
and foreign currency transactions 12,325
------------------
Net increase (decrease) in net assets resulting from operations 14,809
------------------

Distributions to Shareholders From:
Net investment income (2,542)
Net realized gain on investments (399)
------------------
Total distributions to shareholders (2,941)
------------------

Capital Share Transactions:
Sale of shares 215,146
Reinvestment of distributions 2,941
Redemption of shares (226)
------------------
Net increase (decrease) from capital share transactions 217,861
------------------

Net increase (decrease) in net assets 229,729
------------------

Net Assets, End of Period (b) $ 229,729
==================

Share Transactions:
Sale of shares 20,179
Reinvestment of distributions 265
Redemption of shares (23)
------------------
==================
Net increase (decrease) from share transactions 20,421
==================

</TABLE>

- -----------------------------------------------------------------------

(a) The Fund commenced operations on January 15, 1998.
(b) Includes undistributed net investment income of $1,080.

The accompanying notes are an integral part of the financial statements.
C-4
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Bond Fund
- --------------------------------------------------------------------------------

Financial Highlights - Investor Shares
For the Period Ended December 31, 1998 (a)

Selected per share data and ratios for a Share outstanding throughout the
period:

<TABLE>
<S> <C>
Net Asset Value, Beginning of Period $10.00
---------------------

Investment Operations:
Net investment income (loss) 0.20
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 1.20
---------------------
Total from investment operations 1.40
---------------------

Distributions from:
Net investment income (0.13)
Net realized gain on investments (0.02)
---------------------
---------------------
Total distributions (0.15)
---------------------

Net Asset Value, End of Period $11.25
=====================

Total Return 14.00% (b)(c)

Ratio/Supplementary Data:
Net assets at end of period (in thousands) $230

Ratios to Average Net Assets:
Expenses including reimbursement/waiver of fees 0.95% (d)(e)
Expenses excluding reimbursement/waiver of fees 92.87% (d)(e)
Net investment income including reimbursement/waiver of fees 5.03% (d)(e)

Portfolio Turnover Rate 140% (f)
</TABLE>

- --------------------------------------------------------------------------------
(a) The Fund commenced operations on January 15, 1998.
(b) Total return would have been lower had certain expenses not been reduced
during the period shown (See Note 4).
(c) Total return is calculated from Fund's inception to date.
(d) Includes the Fund's proportionate share of income and expenses of the
Portfolio.
(e) Annualized.
(f) Rate represents the turnover of the underlying Portfolio.
The accompanying notes are an integral part of the financial statements.

The accompanying notes are an integral part of the financial statements.

C-5
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Bond Fund
- --------------------------------------------------------------------------------

NOTES TO FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION

Schroder Capital Funds (Delaware) (the "Trust") was organized as a
Maryland corporation on July 30, 1969; reorganized as a series company on
February 29, 1988, as Schroder Capital Funds, Inc.; and reorganized on January
9, 1996, as a Delaware business trust. The Trust, which is registered as an
open-end management investment company under the Investment Company Act of 1940
(the "Act"), currently has nine investment portfolios. Included in this report
is the Schroder International Bond Fund (the "Fund"), which is a non-diversified
portfolio that commenced operations on January 15, 1998. Under its Trust
Instrument, the Trust is authorized to issue an unlimited number of the Fund's
Investor Shares and Advisor Shares of beneficial interest without par value,
which have equal rights as to assets and voting privileges. As of December 31,
1998, only Investor Shares had been issued.

MASTER-FEEDER ARRANGEMENT

The Fund seeks to achieve its investment objective by investing all its
investable assets in Schroder International Bond Portfolio (the "Portfolio"), a
separate non-diversified portfolio of Schroder Capital Funds II ("Schroder
Core") that has the same investment objective and substantially similar
investment policies as the Fund. This is commonly referred to as a master-feeder
arrangement. Schroder Core also is registered as an open-end management
investment company. The Fund may withdraw its investment from the Portfolio at
any time if the Trust's Board of Trustees determines that it is in the best
interest of the Fund and its shareholders to do so. The Fund accounts for its
investment in the Portfolio as a partnership investment and records daily its
share of the Portfolio's income, expenses and realized and unrealized gain or
loss. The Portfolio's financial statements are included elsewhere in this report
and should be read in conjunction with the Fund's financial statements. As of
December 31, 1998, the Fund owned approximately 2.38% of the Portfolio's
interests.

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

These financial statements are prepared in accordance with generally
accepted accounting principles, which require management to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of increase and decrease in net
assets from operations during the fiscal period. Actual results could differ
from those estimates.

The following represent the significant accounting policies of the Fund:

SECURITY VALUATION

The Trust determines the net asset value per share of the Fund as of the
close of trading on the New York Stock Exchange on each Fund business day.
Valuation of securities held in the Portfolio is discussed in the Notes to the
Financial Statements of the Portfolio.

INVESTMENT INCOME AND EXPENSES

The Fund records daily its pro rata share of the Portfolio's income,
expenses and realized and unrealized gain or loss. In addition, the Fund accrues
its own expenses.
C-6
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Bond Fund
- --------------------------------------------------------------------------------

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

DISTRIBUTIONS TO SHAREHOLDERS

Net investment income and net capital gain, if any, are distributed to
shareholders at least annually and are recorded on the ex-dividend date.
Distributions are based on amounts calculated in accordance with applicable
federal income tax regulations, which may differ from generally accepted
accounting principles. These differences are due primarily to differing
treatments of income and gain on various investment securities held by the
Portfolio, timing differences and differing characterizations of distributions
made by the Fund.

FEDERAL TAXES

The Fund intends to qualify, and continue to qualify, each year as a
regulated investment company and distribute all its taxable income. In addition,
by distributing in each calendar year substantially all its net investment
income, capital gain and certain other amounts, if any, the Fund will not be
subject to federal excise tax. Therefore, no federal income or excise tax
provision is required.

EXPENSE ALLOCATION

The Trust accounts separately for the assets and liabilities and
operation of each of its funds. Expenses that are directly attributable to more
than one fund are allocated among the respective funds in proportion to each
fund's average net assets.

NOTE 3. INVESTMENT ADVISORY AND OTHER SERVICES

INVESTMENT ADVISER

The Fund currently invests all its assets in the Portfolio, which retains
Schroder Capital Management International Inc. ("SCMI") to act as investment
adviser pursuant to an Investment Advisory Agreement. See Notes to the Financial
Statements of the Portfolio.

ADMINISTRATOR AND SUBADMINISTRATOR

The administrator of the Fund is Schroder Fund Advisors Inc. ("Schroder
Advisors"). For its services, Schroder Advisors is entitled to receive
compensation at an annual rate, payable monthly, of 0.10% of the Fund's average
daily net assets. The subadministrator of the Fund is Forum Administrative
Services, LLC ("FAdS"). FAdS is entitled to receive compensation at an annual
rate, payable monthly, of 0.075% of the Fund's average daily net assets, subject
to an annual minimum of $25,000 for its services, plus a $12,000 charge per
additional class of shares.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

The transfer agent and dividend disbursing agent for the Fund is Forum
Shareholder Services, LLC ("FSS"). FSS is paid a fee in the amount of $12,000
per share class, per year, plus certain other fees and expenses.

OTHER SERVICE PROVIDERS

Forum Accounting Services, LLC ("FAcS") provides fund accounting services
to the Fund. For its services to the Fund, FAcS is entitled to receive from the
Fund a fee of $12,000 per year.

C-7
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Bond Fund
- --------------------------------------------------------------------------------

NOTES TO FINANCIAL STATEMENTS (CONCLUDED)

NOTE 4. WAIVER OF FEES AND REIMBURSEMENT OF EXPENSES

In order to limit the Fund's expenses, SCMI and Schroder Advisors have
voluntarily agreed to reduce their compensation (and, if necessary, to pay
certain expenses of the Fund) to the extent that the Fund's expenses exceed
0.95% of the Fund's average daily net assets attributable to Investor Shares.
The expense limitation cannot be modified or withdrawn except by a majority vote
of the Trustees who are not affiliated persons (as defined in the Act) of the
Trust. SCMI, Schroder Advisors, FAdS, FSS and FAcS may voluntarily waive all or
a portion of their fees at any time. For the year ended December 31, 1998,
Schroder Advisors and FAdS waived fees of $81 and $23,980, respectively, and
Schroder Advisors reimbursed expenses of $49,811.

NOTE 5. BENEFICIAL INTEREST

At December 31, 1998, there was one shareholder, otherwise unaffiliated
with the Fund, owning 100% of the Fund's shares.

- ---------------------------------

SUPPLEMENTAL INFORMATION (UNAUDITED)

DISTRIBUTIONS

During the fiscal year ended December 31, 1998, the Fund distributed $11 in
long term capital gain to shareholders.

C-8
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Bond Fund
- --------------------------------------------------------------------------------

REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustees of Schroder Capital Funds (Delaware) and Shareholders of
Schroder International Bond Fund:

In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the Schroder International Bond Fund (a series of Schroder Capital Funds
(Delaware)) at December 31, 1998, and the results of its operations, the changes
in its net assets and the financial highlights for the period indicated, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audit. We
conducted our audit of these financial statements in accordance with generally
accepted auditing standards, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.

Boston, Massachusetts PricewaterhouseCoopers LLP
February 5, 1999

C-9
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Bond Portfolio
- --------------------------------------------------------------------------------
Schedule of Investments

As of December 31, 1998

Fixed Income Investments - 94.0%
<S> <C> <C> <C>
Principal
Currency Amount Value (US$)

Austria - 3.6%
DEM 550,000 Republic of Austria, 6.88%, 4/3/00 $ 344,910

Belgium - 4.5%
BEF 13,250,000 Kingdom of Belgium, 9.00%, 6/27/01 437,582

Canada - 5.7%
GBP 120,000 Government of Canada, 6.25%, 11/26/04 215,154
DEM 500,000 Province of Ontario, 6.25%, 1/13/04 334,460
549,614

Denmark - 5.1%
DKK 1,500,000 Kingdom of Denmark, 7.00%, 11/10/24 302,546
DKK 1,100,000 Kingdom of Denmark, 8.00%, 11/15/01 191,895
494,441

France - 9.1%
FRF 2,000,000 Government of France, 4.75%, 3/12/02 373,896
FRF 2,500,000 Societe Nationale des Chemins de Fer,
7.75%, 3/1/02 503,517
877,413

Germany - 22.8%
DEM 1,920,000 Bundesobligation, 6.50%, 3/15/00 1,197,940
DEM 750,000 KFW International Finance, 6.25%, 10/15/03 502,890
DEM 660,000 Deutschland Republik, 6.50%, 7/4/27 495,373
2,196,203

Italy - 4.0%
ITL 570,000,000 Republic of Italy, 10.5%, 7/15/00 382,634

Netherlands - 3.5%
DEM 500,000 LKB Baden-Wuerttemberg Finance, 6.63%, 8/20/03 338,458

Spain - 4.1%
ESP 50,000,000 Government of Spain, 8.40%, 4/30/01 394,120

Supra-National - 15.9%
DEM 800,000 Asian Development Bank, 5.50%, 10/24/07 524,414
JPY 100,000,000 International Bank for Reconstruction &
Development, 5.25%, 3/20/02 1,008,385
1,532,799

Sweden - 5.8%
SEK 3,600,000 Government of Sweden, 10.25%, 5/5/03 558,607

</TABLE>

The accompanying notes are an integral part of the financial statements.

C-10
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Bond Portfolio
- --------------------------------------------------------------------------------

Schedule of Investments (concluded)
As of December 31, 1998
<TABLE>
<S> <C> <C> <C>
Principal
Currency Amount Value (US$)

United Kingdom - 9.9%
GBP 420,000 United Kingdom Treasury, 9.00%, 10/13/08 $ 953,211

Total Investments - 94.0% (cost $8,473,848) 9,059,992
Other Assets Less Liabilities - 6.0% 573,506
Total Net Assets - 100.0% $ 9,633,498
</TABLE>

Forward Foreign Currency Contracts

Contracts to Sell
<TABLE>
<S> <C> <C> <C> <C>
Underlying Unrealized
Face Amount Appreciation/
Maturity Date Currency Units of Value (Depreciation)

1/20/99 AUD 206,677 $ 130,000 $ 3,212
1/20/99 CAD 470,000 304,296 (1,694)
1/20/99 DEM 8,813,066 5,245,936 (49,104)
1/20/99 GBP 585,183 975,913 2,700
1/20/99 SEK 4,500,000 563,415 8,065
$ 7,219,560 $ (36,821)

Contracts to Buy

Underlying Unrealized
Face Amount Appreciation/
Maturity Date Currency Units of Value (Depreciation)

1/20/99 AUD 205,242 $ 130,000 $ (4,093)
1/20/99 CAD 985,600 640,000 1,667
1/20/99 DEM 7,452,920 4,530,000 (52,158)
1/20/99 DKK 160,000 25,023 120
1/20/99 GBP 235,696 400,000 (8,016)
1/20/99 JPY 243,028,000 2,043,119 115,210
$ 7,768,142 $ 52,730
</TABLE>

Net Receivable for Forward Foreign
Currency Contracts (Note 2) $ 15,909
<TABLE>
<CAPTION>
CURRENCY ABBREVIATIONS
<S> <C>
AUD - Australian Dollar FRF - French Franc
BEF - Belgian Franc GBP - British Pound
CAD - Canadian Dollar ITL - Italian Lira
DEM - German Mark JPY - Japanese Yen
DKK - Danish Krone SEK - Swedish Krona
ESP - Spanish Peseta
</TABLE>

The accompanying notes are an integral part of the financial statements.

C-11
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Bond Portfolio
- --------------------------------------------------------------------------------

Statement of Assets and Liabilities
December 31, 1998

<TABLE>
<S> <C>
Assets:
Investments (Note 2):
Investments at cost $ 8,473,848
Net unrealized appreciation (depreciation) 586,144
------------------
Total Investments at Value 9,059,992

Cash 292,438
Cash denominated in foreign currencies (cost $7,568) 7,443
Receivable for forward foreign currency contracts (Note 2) 15,909
Interest and other receivables 291,868
Organization costs, net of amortization (Note 2) 4,963
------------------

Total Assets 9,672,613
------------------

Liabilities:
Payable to subadministrator (Note 3) 1,071
Accrued expenses and other liabilities 38,044
------------------

Total Liabilities 39,115
------------------

Net Assets $ 9,633,498
==================
</TABLE>

The accompanying notes are an integral part of the financial statements.

C-12
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Bond Portfolio
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Statement of Operations
For the Year Ended December 31, 1998

Investment Income:
Interest income $ 857,701
------------------

Expenses:
Investment advisory (Note 3) 70,985
Administration (Note 3) 14,197
Subadministration (Note 3) 25,000
Interestholder recordkeeping (Note 3) 12,131
Custody 4,626
Accounting (Note 3) 67,000
Legal 2,764
Audit 27,278
Trustees 1,185
Amortization of organization costs (Note 2) 1,654
Miscellaneous 5,860
------------------
Total Expenses 232,680
Fees waived and expenses reimbursed (Note 6) (126,250)
------------------
Net Expenses 106,430
------------------

Net Investment Income (Loss) 751,271
------------------

Net Realized and Unrealized Gain (Loss) on Investments and Foreign
Currency Transactions:
Net realized gain (loss) on investments sold (20,937)
Net realized gain (loss) on foreign currency transactions (776,235)
------------------
Net realized gain (loss) on investments and foreign
currency transactions (797,172)
------------------

Net change in unrealized appreciation (depreciation) on investments 1,328,529
Net change in unrealized appreciation (depreciation) on foreign
currency transactions 33,915
------------------
Net change in unrealized appreciation (depreciation) on
investments and foreign currency transactions 1,362,444
------------------
Net Realized and Unrealized Gain (Loss) on Investments and Foreign
Currency Transactions 565,272
------------------

Net Increase (Decrease) in Net Assets Resulting from Operations $ 1,316,543
==================

</TABLE>

The accompanying notes are an integral part of the financial statements.

C-13
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Bond Portfolio
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Statements of Changes in Net Assets
For the For the
Year Ended Year Ended
December 31, 1998 December 31, 1997

Net Assets, Beginning of Period $ 16,515,402 $ 3,000,100
------------------- ---------------------

Operations:
Net investment income (loss) 751,271 580,748
Net realized gain (loss) on investments and foreign currency (551,808)
transactions (797,172)
Net change in unrealized appreciation (depreciation) on
investments and foreign currency transactions 1,362,444 (752,540)
------------------- ---------------------
Net increase (decrease) in net assets resulting from operations 1,316,543 (723,600)
------------------- ---------------------

Transactions in Investors' Beneficial Interests:
Contributions 4,891,436 18,113,652
Withdrawals (13,089,883) (3,874,750)
------------------- ---------------------
Net increase (decrease) from transactions in investors'
beneficial interests (8,198,447) 14,238,902
------------------- ---------------------

Net increase (decrease) in net assets (6,881,904) 13,515,302
------------------- ---------------------

Net Assets, End of Period $ 9,633,498 $ 16,515,402
=================== =====================
</TABLE>

Financial Highlights
For the For the
Year Ended Year Ended
December 31, 1998 December 31, 1997

Net Assets at End of Period (in thousands) $9,633 $16,515

Ratios to Average Net Assets:
Expenses including reimbursement/waiver of fees 0.75% 0.75%
Expenses excluding reimbursement/waiver of fees 1.64% 1.99%
Net investment income (loss) including reimbursement/
waiver of fees 5.29% 5.42%

Portfolio Turnover Rate 140% 112%
</TABLE>

The accompanying notes are an integral part of the financial statements.

C-14
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Bond Portfolio
- --------------------------------------------------------------------------------

NOTES TO FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION

Schroder Capital Funds II ("Schroder Core") was organized as a Delaware
business trust on December 27, 1996. Schroder Core, which is registered as an
open-end management investment company under the Investment Company Act of 1940
(the "Act"), currently has one investment portfolio. Included in this report is
Schroder International Bond Portfolio ("Portfolio"), which is a non-diversified
portfolio that commenced operations on December 31, 1996. Under its Trust
Instrument, Schroder Core is authorized to issue an unlimited number of
interests without par value. Interests in the Portfolio are sold without any
sales charges in private placement transactions to qualified investors,
including open-end management investment companies.

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

The following represent the significant accounting policies of the
Portfolio:

INVESTMENT VALUATION

Portfolio securities listed on recognized stock exchanges are valued at
the last reported sales price on the exchange on which the securities are
principally traded. Listed securities traded on recognized stock exchanges where
last sales prices are not available are valued at the last sale price on the
preceding day or at the mean of the closing bid and ask ("mid-market price").
Securities traded in over-the-counter markets, or listed securities for which no
trade is reported on the valuation date, are valued at the most recent reported
mid-market price. Prices used for valuations generally are provided by
independent pricing services. Domestic short-term investments, having a maturity
of 60 days or less, are valued at amortized cost, which approximates market
value. Foreign short-term investments are valued at the current market price,
then marked to market to recognize any gain or loss on the transaction. Other
securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith using methods approved by the
Schroder Core's Board of Trustees. As of December 31, 1998, the Portfolio did
not hold a position in any fair valued securities.

SECURITY TRANSACTIONS AND INVESTMENT INCOME

Investment transactions are accounted for on trade date. Interest income,
including accretion of discount, is recorded as earned. Identified cost of
investments sold is used to determine realized gain and loss for both financial
statement and federal income tax purposes. Foreign interest income amounts and
realized capital gain and loss are converted to U.S. dollar equivalents using
foreign exchange rates in effect at the date of the transactions.

Foreign currency amounts are translated into U.S. dollars at the mean of
the bid and asked prices of such currencies against U.S. dollars as follows: (i)
assets and liabilities at the rate of exchange at the end of the respective
period; and (ii) purchases and sales of securities and income and expenses at
the rate of exchange prevailing on the dates of such transactions. The portion
of the results of operations arising from changes in the

C-15
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Bond Portfolio
- --------------------------------------------------------------------------------

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

exchange rates and the portion due to fluctuations arising from changes in the
market prices of securities are not isolated. Such fluctuations are included
with the net realized and unrealized gain or loss on investments.

The Portfolio may enter into forward contracts to purchase or sell
foreign currencies to protect the U.S. dollar value of the underlying portfolio
of securities against the effect of possible adverse movements in foreign
exchange rates. Risks associated with such contracts include the movement in
value of the foreign currency relative to the U.S. dollar and the ability of the
counterparty to perform. Fluctuations in the value of such contracts are
recorded daily as unrealized gain or loss; realized gain or loss includes net
gain or loss on contracts that have terminated by settlement or by the Portfolio
entering into offsetting commitments.

ORGANIZATION COSTS

Costs incurred by the Portfolio in connection with its organization are
amortized on a straight line basis over a five-year period.

NOTE 3. INVESTMENT ADVISORY AND OTHER SERVICES

INVESTMENT ADVISER

Schroder Capital Management International Inc. ("SCMI") is the investment
adviser to the Portfolio. Pursuant to an Investment Advisory Agreement, SCMI is
entitled to receive compensation at an annual rate, payable monthly, of 0.50% of
the Portfolio's average daily net assets.

ADMINISTRATOR AND SUBADMINISTRATOR

The administrator of the Portfolio is Schroder Fund Advisors Inc.
("Schroder Advisors"). For its services, Schroder Advisors is entitled to
receive compensation at an annual rate, payable monthly, of 0.10% of the
Portfolio's average daily net assets. The subadministrator of the Portfolio is
Forum Administrative Services, LLC ("FAdS"). FAdS is entitled to receive
compensation at an annual rate, payable monthly, of 0.075% of the Portfolio's
average daily net assets, subject to an annual minimum of $25,000 for its
services.

OTHER SERVICE PROVIDERS

Forum Accounting Services, LLC ("FAcS") performs portfolio accounting
services for the Portfolio and is entitled to receive compensation for its
services in the amount of $60,000 per year, plus certain other charges, based
upon the number and types of portfolio transactions. FAcS also provides
interestholder recordkeeping services to the Portfolio for which it receives
$12,000 per year, plus certain other charges.

NOTE 4. PURCHASES AND SALES OF SECURITIES

The cost of securities purchased and the proceeds from sales of
securities (excluding short-term securities) for the period ended December 31,
1998, were $22,224,990 and $29,698,947, respectively.

For federal income tax purposes, the tax basis of investment securities
owned, the aggregate gross unrealized appreciation and the aggregate gross
unrealized depreciation as of December 31, 1998, were $8,493,563, $689,600, and
$123,171, respectively.

C-16
<PAGE>

- --------------------------------------------------------------------------------
Schroder International Bond Portfolio
- --------------------------------------------------------------------------------

NOTES TO FINANCIAL STATEMENTS (CONCLUDED)

NOTE 5. FEDERAL TAXES

The Portfolio is not required to pay federal income tax on its net
investment income and net capital gain because it is treated as a partnership
for federal income tax purposes. All interest, dividends, gain and loss of the
Portfolio are deemed to have been "passed through" to the Portfolio's
interestholders in proportion to their holdings of the Portfolio, regardless of
whether such interest, dividends or gain have been distributed by the Portfolio.

NOTE 6. WAIVER OF FEES AND REIMBURSEMENT OF EXPENSES

SCMI, Schroder Advisors, FAdS and FAcS voluntarily waived a portion of
their fees and assumed certain expenses of the Portfolio so that the Portfolio's
total expenses would not exceed 0.75% of its average daily net assets. For the
period ended December 31, 1998, SCMI, Schroder Advisors, FAdS and FAcS waived
fees of $70,985, $14,197, $19,960 and $21,108, respectively.

NOTE 7. BENEFICIAL INTEREST

At December 31, 1998, there was one interestholder, otherwise
unaffiliated with the Portfolio, owning a 96.44% interest in the Portfolio.

NOTE 8. CONCENTRATION OF RISK

The Portfolio may invest more than 25% of its total assets in issuers
located in any one country. To the extent that it does so, the Portfolio is
susceptible to a range of factors that could adversely affect that country,
including political and economic developments and foreign exchange-rate
fluctuations. As a result of investing a substantial amount of its assets in a
single country, the value of the Portfolio's assets may fluctuate more widely
than the value of shares of a comparable fund with a lesser degree of geographic
concentration. The Portfolio also invests in countries with limited or
developing capital markets. Investments in such countries may involve greater
risks than investments in more developed markets.

C-17
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Bond Portfolio
- --------------------------------------------------------------------------------

Report of Independent Accountants

To the Trustees of Schroder Capital Funds II and Investors of Schroder
International Bond Portfolio:

In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Schroder International Bond
Portfolio (a portfolio of Schroder Capital Funds II) at December 31, 1998, and
the results of its operations, the changes in its net assets and the financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Portfolio's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.

Boston, Massachusetts PricewaterhouseCoopers LLP
February 5, 1999

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