<PAGE>
As filed with the Securities and Exchange Commission on April 11, 1997
Securities Act File No. 33-65632
Investment Company Act File No. 811-7840
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 5 /X/
AND/OR
REGISTRATION STATEMENT UNDER
INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 7 /X/
(Check appropriate box or boxes)
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SCHRODER SERIES TRUST
(Exact Name of Registrant as Specified in Charter)
787 Seventh Avenue, New York, New York 10019
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 492-6000
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It is proposed that this filing will become effective (Check appropriate box):
immediately upon filing pursuant to paragraph (b)
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on (date) pursuant to paragraph (b)
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X 60 days after filing pursuant to paragraph (a)(1)
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on (date) pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2)
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on (date) pursuant to paragraph (a)(2)
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CATHERINE A. MAZZA
VICE PRESIDENT
SCHRODER SERIES TRUST
787 SEVENTH AVENUE
NEW YORK, NEW YORK 10019
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPIES TO:
TIMOTHY W. DIGGINS, ESQ.
ROPES & GRAY
ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110-2624
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO
THE PUBLIC: As soon as practicable after this Registration
Statement becomes effective.
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The Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933, as amended, pursuant to Rule 24f-2 and filed a Rule
24f-2 notice for its fiscal year most recently ended on December 12, 1996.
<PAGE>
SCHRODER SERIES TRUST
CROSS REFERENCE SHEET
PART A
PROSPECTUS FOR INVESTOR SHARES
The cross-reference sheet relating to the Trust's Prospectus for Investor
Shares, dated March 1, 1997, is incorporated herein by reference to
Post-Effective Amendment No. 4 to the Trust's Registration Statement filed
electronically with the Securities and Exchange Commission on February 28, 1997
(Accession Number: 0000912057-97-00730).
Prospectus for Advisor Shares
<TABLE>
<CAPTION>
N-1A Item No. Location
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<S> <C> <C>
1. Cover Page................................ Cover page
2. Synopsis.................................. Summary of expenses
3. Condensed Financial Information........... Not Applicable
4. General Description of Registrant......... Investment objectives and policies;
Additional information about the Trust
5. Management of the Fund.................... Additional information about the
Trust; Management of the Trust
5A. Management's Discussion of Fund Performance Not applicable
6. Capital Stock and Other Securities........ Additional information about the
Trust; Distributions
7. Purchase of Securities Being Offered...... How to buy shares; Determination
of Net Asset Value
8. Redemption or Repurchase.................. How to sell shares
9. Pending Legal Proceedings................. Not Applicable
<CAPTION>
PART B (for Investor and Advisor Shares)
N-1A Item No. Location
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<S> <C> <C>
10. Cover Page................................ Cover Page
11. Table of Contents......................... Cover Page
12. General Information and History........... Additional information about the
Trust (Part A)
13. Investment Objectives and Policies........ Investment Objectives and Policies
of the Trust; Investment Restrictions
14. Management of the Registrant.............. Management Contract
15. Control Persons and Principal Holders
of Securities............................. Principal Holders of Securities
16. Investment Advisory and Other Services.... Management Contract
17. Brokerage Allocation...................... Management Contract (Brokerage
and Research Services)
18. Capital Stock and Other Securities........ Additional information about the Trust
(Part A); Distributions (Part A)
19. Purchase, Redemption, and Pricing
of Securities Being Offered............... How to buy shares (Part A); How
to sell shares (Part A);
Determination of Net Asset Value
20. Tax Status................................ Taxes (Part A); Taxes
<PAGE>
21. Underwriters.............................. Principal Underwriter
22. Calculation of Performance Data........... Performance Information
23. Financial Statements...................... Financial Statements
</TABLE>
PART C
The information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
INCORPORATION BY REFERENCE
PART A RELATING TO THE SOLE CLASS OF SHARES OF THE TRUST CURRENTLY
OUTSTANDING (TO BE DESIGNATED "INVESTOR SHARES") AND THE FINANCIAL STATEMENTS
REQUIRED BY PART B ARE INCORPORATED HEREIN BY REFERENCE TO POST-EFFECTIVE
AMENDMENT NO. 4 TO THE TRUST'S REGISTRATION STATEMENT FILED ELECTRONICALLY WITH
THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 28, 1997 (ACCESSION NUMBER:
0000912057-97-00730).
-2-
<PAGE>
SCHRODER SERIES TRUST
PROSPECTUS
ADVISOR SHARES
Schroder Series Trust is an open-end management investment company offering by
this Prospectus Advisor Shares of three separate investment portfolios: Schroder
Equity Value Fund, Schroder Small Capitalization Value Fund, and Schroder
Investment Grade Income Fund. Schroder Capital Management Inc. ("Schroder")
serves as investment adviser to each of the Funds.
The Trust provides investors an opportunity to design their own investment
programs through investing in a wide range of mutual funds managed by Schroder.
Each Fund pursues its investment objectives through the investment policies
described in this Prospectus.
This Prospectus explains concisely the information that a prospective investor
should know before investing in Advisor Shares of the Funds. Please read it
carefully and keep it for future reference. Investors can find more detailed
information about the Trust in the June __, 1997 Statement of Additional
Information, as amended from time to time. For a free copy of the Statement of
Additional Information, please call 1-800-464-3108. The Statement of Additional
Information has been filed with the Securities and Exchange Commission and is
incorporated into this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY FINANCIAL INSTITUTION, ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND INVOLVE RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
June __, 1997
<PAGE>
TABLE OF CONTENTS
Page
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Summary of expenses..........................................................3
Investment objectives and policies...........................................5
Schroder Equity Value Fund...................................................5
Schroder Small Capitalization Value Fund.....................................6
Schroder Investment Grade Income Fund........................................7
Other investment practices and risk considerations...........................8
Portfolio turnover..........................................................11
How to buy shares...........................................................11
How to sell shares..........................................................12
Exchanges...................................................................13
Determination of net asset value............................................13
Distributions...............................................................14
Taxes.......................................................................14
Management of the Trust.....................................................15
Performance information.....................................................17
Additional information about the Trust......................................17
<PAGE>
SUMMARY OF EXPENSES
Expenses are one of several factors to consider when investing in Advisor Shares
of the Funds. The "Shareholder Transaction Expenses" table below summarizes the
maximum transaction costs you would incur by investing in Advisor Shares of the
Funds. The "Annual Operating Expenses" table and related Example estimate the
expenses of each Fund that an investor in Advisor Shares would incur based upon
the Fund's expenses for the most recent fiscal year. The Example shows the
cumulative expenses attributable to a hypothetical $1,000 investment in the
Funds over specified periods.
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fee None
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
Schroder
Schroder Small Investment
Schroder Equity Capitalization Grade
Value Fund Value Fund Income Fund
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Management Fees(1) 0.75 0.95 0.38(1)
12b-1 Fees(2) None None None
Other Expenses(3) 0.76 0.73 0.99(1)
Total Fund Operating Expenses(3) 1.51 1.68 1.37(1)
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(1) After expense limitation.
(2) Each Fund has adopted a Distribution Plan under Rule 12b-1 of the
Investment Company Act of 1940, as amended, although none of the Funds
currently make payments under the Plans. See "How to Buy Shares
--Distribution Plans."
(3) Estimated based on actual expenses incurred by Investor Shares of the
Funds for the fiscal year ended October 31, 1996. The Management Fees and
Total Fund Operating Expenses for the Investment Grade Income Fund reflect
expense limitations currently in effect. See "Management of the Trust"
below. In the absence of these limitations, Management Fees and Total Fund
Operating Expenses, respectively, for Advisor Shares of that Fund would be
as follows: 0.50% and 1.49%.
3
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EXAMPLE
Your investment of $1,000 would incur the following expenses, assuming 5% annual
return and redemption at the end of each period:
FUNDS: 1 year 3 years 5 years 10 years
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Schroder Equity Value Fund $15 $48 $83 $181
Schroder Small Capitalization Value Fund $17 $53 $92 $200
Schroder Investment Grade Income Fund $14 $44 $75 $165
The tables and Example are provided to help you understand the expenses of
investing in Advisor Shares of each of the Funds and your share of the operating
expenses of the Funds attributable to Advisor Shares. THE TABLES AND EXAMPLE DO
NOT REPRESENT PAST OR FUTURE EXPENSE LEVELS. ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN. FEDERAL REGULATIONS REQUIRE THE EXAMPLE TO ASSUME A 5%
ANNUAL RETURN, BUT ACTUAL ANNUAL RETURN WILL VARY.
4
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INVESTMENT OBJECTIVES AND POLICIES
Each Fund has a different investment objective or objectives which it pursues
through the investment policies described below. Because of the differences in
objectives and policies among the Funds, the Funds will achieve different
investment returns and will be subject to varying degrees of market and
financial risk. The investment objectives and policies of each Fund may, unless
otherwise specifically stated, be changed by the Trustees of the Trust without a
vote of the shareholders. As a matter of policy, the Trustees would not
materially change an investment objective of a Fund without shareholder
approval. There is no assurance that any Fund will achieve its objective or
objectives. Additional Funds may be created from time to time with different
investment objectives and policies.
If the securities rating of a debt security held by a Fund declines below any
minimum rating for securities in which the Fund may invest, the Fund will not be
required to dispose of the security, but Schroder will consider whether
continued investment in the security is consistent with the Fund's investment
objectives. Certain of the Funds may also use a variety of derivative strategies
including, without limitation, options, futures contracts, and forward
contracts, and mortgage-backed securities described below. See "Other investment
practices and risk considerations."
None of the Funds is intended to be a complete investment program, and there is
no assurance that a Fund will achieve its objectives.
SCHRODER EQUITY VALUE FUND
SCHRODER EQUITY VALUE FUND'S INVESTMENT OBJECTIVE IS TO SEEK LONG-TERM GROWTH OF
CAPITAL. The Fund invests in common stocks and other securities that Schroder
believes offer the potential for long-term growth of capital.
The Fund will under normal circumstances invest primarily in equity securities
Schroder believes to be undervalued. In selecting such securities, Schroder will
focus on industries and issuers it believes offer the possibility for growth of
capital from earnings potential and other factors not fully reflected in current
market prices. Such factors may include a company's probable future earnings,
the ratio of its market value to its book value, and its dividends, cash flow,
financial strength, debt-to-capital ratio, working assets, and competitive
position, as well as other factors Schroder may consider significant in a
particular industry or under varying market conditions. In identifying
undervalued securities, Schroder may make investment judgments contrary to those
of most investors.
The Fund may invest in securities of any kind Schroder believes consistent with
the Fund's objective of long-term growth of capital. The Fund will normally
invest at least 65% of its total assets in equity securities, including common
and preferred stocks and warrants to purchase common or preferred stocks. The
Fund may also invest in debt securities if Schroder believes such investments
would help achieve the Fund's objective and may hold a portion of its assets in
cash or money market instruments. Debt securities in which the Fund may invest
will be rated, at the time of investment, at least Baa by Moody's Investors
Service, Inc. or BBB by Standard & Poor's Corporation or, if unrated, determined
by Schroder at the time of investment to be of comparable quality. Securities
rated Baa or BBB lack outstanding investment characteristics and have
speculative characteristics and are subject to greater credit and market risks
than higher-rated securities.
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<PAGE>
At times, Schroder may judge that conditions in the securities markets make
pursuing the Fund's basic investment strategy inconsistent with the best
interests of its shareholders. At such times, Schroder may temporarily use
alternate investment strategies primarily designed to reduce fluctuations in the
value of the Fund's assets. In implementing these "defensive" strategies, the
Fund would invest in high-quality debt securities, cash, or money market
instruments to any extent Schroder considers consistent with such defensive
strategies. It is impossible to predict when, or for how long, the Fund will use
these alternate strategies.
SCHRODER SMALL CAPITALIZATION VALUE FUND
SCHRODER SMALL CAPITALIZATION VALUE FUND'S INVESTMENT OBJECTIVE IS TO SEEK
CAPITAL APPRECIATION. The Fund invests primarily in equity securities of
companies having a relatively small market capitalization (generally less than
$1 billion) that Schroder believes have potential for capital appreciation. In
choosing portfolio investments for the Fund, Schroder attempts to identify
securities whose potential for long-term capital appreciation is not fully
reflected in their market prices. This may be the result, for example, of the
market's undervaluation of a company's potential for earnings growth or of its
financial or business assets or other assets.
The companies in which the Fund invests may offer greater opportunities for
capital appreciation than larger companies, but investments in such companies
may involve certain special risks. Such companies may have limited product
lines, markets or financial resources and may be dependent on a limited
management group. While the markets in securities of such companies have grown
rapidly in recent years, such securities may trade less frequently and in
smaller volume than more widely held securities. The values of these securities
may fluctuate more sharply than other securities, and the Fund may experience
some difficulty in establishing or closing out positions in these securities at
prevailing market prices. There may be less publicly available information about
the issuers of these securities or less market interest in such securities than
in the case of larger companies, and it may take longer for the prices of such
securities to reflect the full value of their issuers' underlying earnings
potential or assets.
The Fund will normally invest at least 65% of its total assets in common and
preferred stocks, and warrants to purchase common or preferred stocks, of
companies having market capitalizations of less than $1 billion. The Fund may
invest the remainder of its assets in equity securities of larger companies and
in debt securities (including convertible bonds) and may hold a portion of its
assets in cash or money market instruments. Debt securities in which the Fund
may invest will be rated, at the time of investment, at least Baa by Moody's or
BBB by Standard & Poor's or, if unrated, determined by Schroder at the time of
investment to be of comparable quality. Securities rated Baa or BBB lack
outstanding investment characteristics and have speculative characteristics and
are subject to greater credit and market risks than higher-rated securities.
At times, Schroder may judge that conditions in the securities markets make
pursuing the Fund's basic investment strategy inconsistent with the best
interests of its shareholders. At such times, Schroder may temporarily use
alternate investment strategies primarily designed to reduce fluctuations in the
value of the Fund's assets. In implementing these "defensive" strategies, the
Fund would invest in high-quality debt securities, cash, or money market
instruments to any extent Schroder considers consistent with such defensive
strategies. It is impossible to predict when, or for how long, the Fund will use
these alternate strategies.
6
<PAGE>
SCHRODER INVESTMENT GRADE INCOME FUND
SCHRODER INVESTMENT GRADE INCOME FUND'S INVESTMENT OBJECTIVE IS TO SEEK CURRENT
INCOME CONSISTENT WITH PRESERVATION OF CAPITAL. Growth of capital is a secondary
objective, to the extent consistent with the Fund's principal objective. The
Fund may invest in debt securities, including securities issued or guaranteed as
to principal or interest by the U.S. Government or any of its agencies or
instrumentalities and corporate obligations, preferred stocks, and
dividend-paying common stocks. The Fund will normally invest at least 90% of its
total assets in U.S. Government securities and in debt securities and preferred
stocks rated investment grade (or, if unrated, considered by Schroder to be of
comparable quality). A security will be considered to be of "investment grade"
if, at the time of investment by the Fund, it is rated at least Baa3 by Moody's
or BBB- by Standard & Poor's or, if unrated, determined by Schroder to be of
comparable quality. The Fund will not invest in a security rated below A3 or A-
if as a result more than 25% of the Fund's assets would, at the time of such
investment, be invested in securities rated below those rating categories. The
Fund may invest in mortgage-backed certificates and other securities
representing ownership interests in mortgage pools, including collateralized
mortgage obligations, some of which may be backed by agencies or
instrumentalities of the U.S. Government. The Fund may hold a portion of its
assets in cash or money market instruments.
Schroder may take full advantage of the entire range of maturities of the
securities in which the Fund may invest and may adjust the average maturity of
the Fund's portfolio from time to time, depending on its assessment of relative
yields on securities of different maturities and expectations of future changes
in interest rates. Thus, at certain times the average maturity of the portfolio
may be relatively short (from under one year to five years, for example) and at
other times may be relatively long (more than 10 years, for example).
Higher-rated securities do not involve the degree of credit risk associated with
investments in lower quality fixed-income securities, although, as a result, the
yields available from higher-rated securities are generally lower than the
yields available from many other fixed-income securities. Like other
fixed-income securities, however, the values of higher-rated securities change
as interest rates fluctuate. Fluctuations in the value of the Fund's securities
generally will not affect interest income on securities already held by the
Fund, but will be reflected in the Fund's net asset value. Because the magnitude
of these fluctuations generally will be greater at times when the Fund's average
maturity is longer, under certain market conditions the Fund may invest in
short-term investments yielding lower current income rather than invest in
higher yielding longer-term securities. Securities rated Baa or BBB lack
outstanding investment characteristics and have speculative characteristics and
are subject to greater credit and market risks than higher-rated securities.
At times Schroder may decide that conditions in the securities markets make
pursuing the Fund's basic investment strategy inconsistent with the best
interests of its shareholders. At such times, Schroder may temporarily use
alternate investment strategies primarily designed to reduce fluctuations in the
value of the Fund's assets. In implementing these "defensive" strategies, the
Fund would hold all or any portion of its assets in cash or money market
instruments, to any extent Schroder considers consistent with such defensive
strategies. It is impossible to predict when, or for how long, the Fund will use
these alternate strategies.
7
<PAGE>
OTHER INVESTMENT PRACTICES AND RISK CONSIDERATIONS
The Funds may also engage in the following investment practices, each of which
involves certain special risks. The Statement of Additional Information contains
more detailed information about these practices (some of which may be considered
"derivative" investments), including limitations designed to reduce these risks.
OPTIONS AND FUTURES PORTFOLIO STRATEGIES. Each of the Funds may engage in a
variety of transactions involving the use of options and futures contracts for
purposes of increasing its investment return or hedging against market changes.
A Fund may seek to increase its current return by writing covered call options
and covered put options on its portfolio securities or other securities in which
it may invest. A Fund receives a premium from writing a call or put option,
which increases the Fund's return if the option expires unexercised or is closed
out at a net profit. A Fund may also buy and sell put and call options on such
securities for hedging purposes. When a Fund writes a call option on a portfolio
security, it gives up the opportunity to profit from any increase in the price
of the security above the exercise price of the option; when it writes a put
option, a Fund takes the risk that it will be required to purchase a security
from the option holder at a price above the current market price of the
security. A Fund may terminate an option that it has written prior to its
expiration by entering into a closing purchase transaction in which it purchases
an option having the same terms as the option written. A Fund may also from time
to time buy and sell combinations of put and call options on the same underlying
security to earn additional income.
A Fund may buy and sell index futures contracts. An "index future" is a contract
to buy or sell units of a particular index at an agreed price on a specified
future date. Depending on the change in value of the index between the time when
a Fund enters into and terminates an index future transaction, the Fund may
realize a gain or loss. A Fund may also purchase warrants, issued by banks or
other financial institutions, whose values are based on the values from time to
time of one or more securities indices.
A Fund may buy and sell futures contracts on U.S. Government securities or other
debt securities. A futures contract on a debt security is a contract to buy or
sell a certain amount of the debt security at an agreed price on a specified
future date. Depending on the change in the value of the security when the Fund
enters into and terminates a futures contract, the Fund realizes a gain or loss.
A Fund may purchase and sell options on futures contracts or on securities
indices in addition to or as an alternative to purchasing and selling futures
contracts.
A Fund may purchase and sell futures contracts, options on futures contracts,
and options on securities indices for hedging purposes or, to the extent
permitted by applicable law, to increase its current return.
RISK FACTORS IN OPTIONS AND FUTURES TRANSACTIONS. Options and futures
transactions involve costs and may result in losses. The use of options and
futures involves certain special risks, including the risks that a Fund may be
unable at times to close out such positions, that hedging transactions may not
accomplish their purpose because of imperfect market correlations, or that
Schroder may not forecast market movements correctly.
8
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The effective use of options and futures strategies is dependent on, among other
things, a Fund's ability to terminate options and futures positions at times
when Schroder deems it desirable to do so. Although a Fund will enter into an
option or futures contract position only if Schroder believes that a liquid
secondary market exists for that option or futures contract, there is no
assurance that a Fund will be able to effect closing transactions at any
particular time or at an acceptable price.
Each Fund generally expects that its options and futures contract transactions
will be conducted on recognized exchanges. In certain instances, however, a Fund
may purchase and sell options in the over-the-counter markets. A Fund's ability
to terminate options in the over-the-counter markets may be more limited than
for exchange-traded options and may also involve the risk that securities
dealers participating in such transactions would be unable to meet their
obligations to a Fund. A Fund will, however, engage in over-the-counter
transactions only when appropriate exchange-traded transactions are unavailable
and when, in the opinion of 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.
The use of options and futures strategies also involves the risk of imperfect
correlation between movements in the prices of options and futures contracts and
movements in the value of the underlying securities or index, or in the prices
of the securities that are the subject of a hedge. The successful use of these
strategies further depends on the ability of Schroder to forecast market
movements correctly.
Because the markets for certain options and futures contracts in which a Fund
will invest (including markets located in foreign countries) are relatively new
and still developing and may be subject to regulatory restraints, a Fund's
ability to engage in transactions using such investments may be limited. A
Fund's ability to engage in hedging transactions may be limited by certain
regulatory and tax considerations. A Fund's hedging transactions may affect the
character or amount of its distributions.
For more information about any of the options or futures portfolio transactions
described above, see the Statement of Additional Information.
MORTGAGE-BACKED SECURITIES. A Fund may invest a portion of its assets in
mortgage-backed certificates and other securities representing ownership
interests in mortgage pools, including collateralized mortgage obligations.
Interest and principal payments on the mortgages underlying mortgage-backed
securities are passed through to the holder of the mortgage-backed securities.
Prepayments of principal and interest on mortgages underlying mortgage-backed
securities may shorten the effective maturity of certain of such obligations.
Generally, prepayment rates increase if interest rates fall and decrease if
interest rates rise. For many types of mortgage-backed securities, this can
result in unfavorable changes in price and yield characteristics in response to
changes in interest rates and other market considerations.
Mortgage-backed securities have yield and maturity characteristics that are
dependent upon the mortgages underlying them. Thus, unlike traditional debt
securities, which may pay a fixed rate of interest until maturity when the
entire principal amount comes due, payments on these securities may include both
interest and a partial payment of principal. In addition to scheduled loan
amortization, payments of principal may result from the voluntary prepayment,
refinancing, or foreclosure of the
9
<PAGE>
underlying mortgage loans. Such prepayments may significantly shorten the
effective maturities of mortgage-backed securities, especially during periods of
declining interest rates. Similarly, during periods of rising interest rates, a
reduction in the rate of prepayments may significantly lengthen the effective
maturities of such securities.
Mortgage-backed securities currently offer yields higher than those available
from many other types of debt securities, but their price volatility and yield
characteristics change based on increases and decreases in prepayment rates, and
they are less effective than other types of securities as a means of "locking
in" attractive long-term interest rates. This is caused by the need to reinvest
prepayments of principal generally and the possibility of significant
unscheduled prepayments resulting from declines in mortgage interest rates.
These prepayments would have to be reinvested at the lower rates. As a result, a
Fund's mortgage-backed securities may have less potential for capital
appreciation during periods of declining interest rates than other debt
securities of comparable maturities, although such obligations may have a
comparable risk of decline in market value during periods of rising interest
rates.
ZERO-COUPON BONDS. Each Fund which may invest in debt securities may invest in
zero-coupon securities. 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. Additional
information concerning zero-coupon bonds is set out in the Statement of
Additional Information.
SECURITIES LOANS, REPURCHASE AGREEMENTS, AND FORWARD COMMITMENTS. Each Fund may
lend portfolio securities amounting to not more than 25% of its assets to
broker-dealers, and may enter into repurchase agreements on up to 25% of its
assets. 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. A Fund may
also purchase securities for future delivery, which may increase its overall
investment exposure and involves a risk of loss if the value of the securities
declines prior to the settlement date.
FOREIGN INVESTMENTS. Each Fund may invest without limit in securities
principally traded in foreign markets, although it is not currently expected
that any of the Funds will invest in securities of foreign issuers to a
substantial degree. Each Fund may also purchase Eurodollar certificates of
deposit without limitation. 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. 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.
In addition, with respect to certain foreign countries, there is a possibility
of nationalization or expropriation of assets, imposition of currency exchange
controls, confiscatory taxation, political or
10
<PAGE>
financial instability, and diplomatic developments which could affect the value
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. 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.
A Fund may buy or sell foreign currencies, foreign currency forward contracts,
and options on foreign currencies for hedging purposes in connection with its
foreign investments.
LIQUIDITY. A 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 a 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 a Fund's
investment in illiquid securities. There can, however, be no assurance that a
Fund will be able to sell such securities at any time when Schroder deems it
advisable to do so or at prices prevailing for comparable securities that are
more widely held.
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 result in realization of taxable capital gains. The Funds portfolio turnover
rates for their most recent fiscal year were as follows: Schroder Equity Value
Fund -- 56.38%; Schroder Small Capitalization Value Fund -- 81.63%; Schroder
Investment Grade Income Fund -- 68.76%.
HOW TO BUY SHARES
You can purchase Advisor Shares of any of the Funds through a Service
Organization such as a bank, trust company, broker-dealer, or other financial
organization having an arrangement with Schroder Fund Advisors Inc. Your Service
Organization may impose investment minimums on initial and/or subsequent
investments. 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 are sold at their net asset value per share next determined after
the Trust receives your order. In order for you to receive that day's net asset
value, Schroder Fund Advisors Inc. must receive your order before the close of
regular trading on the New York Stock Exchange.
If Advisor Shares purchased by you will be held in your own name (rather than in
the name of your Service Organization), payment for your shares must be
accompanied by a completed Account Application in proper form. The Trust or
Boston Financial Data Services, Inc., the Trust's transfer agent (the "Transfer
Agent"), may request additional documentation, such as copies of corporate
resolutions and instruments of authority, from corporations, administrators,
executors, personal
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representatives, directors, or custodians. You may obtain an Account Application
from your Service Organization.
Each Fund reserves the right to reject any purchase, in whole or in part, and to
suspend the offering of its shares for any period of time and to change or waive
any minimum investment amounts.
DISTRIBUTION PLANS. Schroder Fund Advisors Inc. serves as distributor of the
Trust's shares. To compensate Schroder Fund Advisors Inc. for the services it
provides and for the expenses it bears in connection with the distribution of
Advisor Shares, each Fund has adopted a Distribution Plan pursuant to which the
Fund may pay Schroder Fund Advisors Inc. compensation in an amount limited in
any fiscal year to the annual rate of 0.50% of the Fund's average daily net
assets attributable to Advisor Shares. The Funds presently make no payments
under the Distribution Plans, although the Trustees may at any time authorize
payments at an annual rate of up to 0.50% of a Fund's average daily net assets.
HOW TO SELL SHARES
You can sell your Advisor Shares in a Fund to that Fund any day the New York
Stock Exchange is open, either through your Service Organization or directly to
the Fund. If your shares are held in the name of a Service Organization, you may
only sell the shares through that Service Organization. A Fund will only redeem
shares for which it has received payment.
SELLING SHARES THROUGH YOUR SERVICE ORGANIZATION
Your Service Organization and Schroder Fund Advisors Inc. must receive your
request before the close of regular trading on the New York Stock Exchange to
receive that day's net asset value. Your Service Organization will be
responsible for furnishing all necessary documentation to Schroder Fund Advisors
Inc., and may charge you for its services.
SELLING SHARES DIRECTLY TO A FUND
If your Advisor Shares of a Fund are held in your own name (rather than in the
name of your Service Organization), you may redeem your shares by mailing a
written request for redemption to the Transfer Agent that:
(1) states the number of shares or dollar amount to be redeemed;
(2) identifies your account number; and
(3) is signed by you and all other owners of the account exactly as their
names appear on the account.
If you request that the proceeds from your redemption 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
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details at 1-800-464-3108. Corporations, fiduciaries, and other types of
shareholders may be required to supply additional documents which support their
authority to effect a redemption.
WIRE TRANSFER. If your Service Organization receives Federal Reserve wires, you
may instruct that your redemption proceeds be forwarded to your account with
your Service Organization or to you by a wire transfer. Please indicate your
Service Organization's or your own complete wiring instructions. The Funds will
forward proceeds from telephone redemptions only to the bank or brokerage
account that you have authorized in writing.
GENERAL REDEMPTION POLICIES
The redemption price per share is the net asset value per share next determined
after the Transfer Agent receives the request for redemption in proper form, and
each Fund will make payment for redeemed shares within seven days thereafter.
Under unusual circumstances, a Fund may suspend repurchases, or postpone payment
of redemption proceeds for more than seven days, as permitted by federal
securities law. If you purchase shares of a Fund by check (including certified
check) and redeem them shortly thereafter, the Fund will delay payment of the
redemption proceeds for up to fifteen days after the Fund's receipt of the check
or until the check has cleared, whichever occurs first. 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
at the appropriate time.
EXCHANGES
You can exchange your Advisor Shares of any Fund for Advisor Shares of any other
Fund at any time at their respective net asset values. Contact your Service
Organization or the Transfer Agent for details. For federal income tax purposes,
an exchange is treated as a sale of shares and generally results in a capital
gain or loss. 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. Shares of the Funds are not available to residents of all states.
DETERMINATION OF NET ASSET VALUE
Each Fund calculates the net asset value of its Advisor Shares by dividing the
total value of its assets attributable to its Advisor Shares, less its
liabilities attributable to those shares, by the number of its Advisor Shares
outstanding. Shares are valued as of the close of regular trading on the New
York Stock Exchange each day the Exchange is open. Fund securities for which
market quotations are readily available are stated at market value. Short-term
investments that will mature in 60 days or less are stated at amortized cost,
which approximates market value. All other securities and assets are valued at
their fair values determined by Schroder. The net asset value of a Fund's
Advisor Shares will generally differ from that of its other classes of shares
due to the variance in daily net income realized by and dividends paid on each
class of shares, and any differences in the expenses of the different classes.
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DISTRIBUTIONS
SCHRODER EQUITY VALUE FUND AND SCHRODER SMALL CAPITALIZATION VALUE FUND. The
Equity Value Fund and the Small Capitalization Value Fund distribute any net
investment income and any net realized capital gains at least annually.
Distributions from net investment income, if any, are expected to be small.
Distributions from net capital gains are made after applying any available
capital loss carryovers.
SCHRODER INVESTMENT GRADE INCOME FUND. The Investment Grade Income Fund
distributes net investment income monthly and any net realized capital gains at
least annually. Distributions from capital gains are made after applying any
available capital loss carryovers.
YOU CAN CHOOSE FROM THREE DISTRIBUTION OPTIONS: (1) reinvest all distributions
in additional Advisor Shares of your Fund; (2) receive distributions from net
investment income in cash while reinvesting capital gains distributions in
additional Advisor Shares of your Fund; or (3) 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
Each Fund intends to qualify as a "regulated investment company" for federal
income tax purposes and to meet all other requirements that are necessary for it
to be relieved of federal taxes on income and gains it distributes to
shareholders. A Fund will distribute substantially all of its net investment
income and net capital gain income on a current basis.
All Fund distributions will be taxable to you as ordinary income, except that
any distributions of net long-term capital gains will be taxed as such,
regardless of how long you have held the shares. Distributions will be taxable
as described above whether received in cash or in shares through the
reinvestment of distributions.
Early in each year the Trust will notify you of the amount and tax status of
distributions paid to you by each of the Funds for the preceding year.
The foregoing is a summary of certain federal income tax consequences of
investing in a Fund. You should consult your tax adviser to determine the
precise effect of an investment in a Fund on your particular tax situation.
In order to permit Schroder Investment Grade Income Fund to maintain a more
stable monthly dividend, the Fund may from time to time pay out less than the
entire amount of net investment income earned in any particular period. Any such
amount retained by the Fund would be available to stabilize future dividends. As
a result, the dividends paid by the Fund for any particular period may be more
or less than the amount of net investment income actually earned by the Fund
during the period.
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None of the Funds intends to distribute in respect of any taxable year more than
the Fund's net income for federal income tax purposes for that year, nor does
any of the Funds intend to stabilize its dividends in any year in such a manner
as to cause the Fund to pay federal tax.
In order to avoid dilution of the undistributed net investment income of
Schroder Investment Grade Income Fund, the Fund follows an accounting practice
known as "equalization." A portion of the purchase price paid for shares of the
Fund (including shares purchased by reinvestment of Fund distributions) equal to
the undistributed net investment income per share of the Fund at the time of
purchase is segregated for accounting purposes and is available for payment of
future dividends. As a result, future dividends may include a non-taxable return
of capital to shareholders.
MANAGEMENT OF THE TRUST
The Trustees of the Trust are responsible for generally overseeing the conduct
of the Trust's business. The Trust's investment adviser is Schroder Capital
Management Inc. ("Schroder"). Schroder is a wholly owned subsidiary of Schroders
Incorporated, which engages through its subsidiary firms in the investment
banking, asset management, and securities businesses. Affiliates of Schroders
Incorporated (or their predecessors) have been investment managers since 1927.
Schroder itself has been an investment manager since 1962, and served as
investment manager for approximately $4 billion as of December 31, 1996.
Schroders Incorporated 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, 1996, had under
management assets of approximately $150 billion. Schroder Fund Advisors Inc. is
a wholly owned subsidiary of Schroder Capital Management International Inc.
Schroder Capital Management International Inc. is also a wholly owned subsidiary
of Schroders Incorporated.
Subject to such policies as the Trustees may determine, Schroder furnishes a
continuing investment program for the Funds and makes investment decisions on
their behalf. Subject to the control of the Trustees, Schroder also manages the
Trust's other affairs and business. The Trust's principal office is located at
787 Seventh Avenue, New York, New York 10019 (which is also the address of
Schroder's principal office), and its telephone number is (212) 641-3900.
Schroder has served as investment adviser to the Trust since its inception.
Prior to March 1997, Schroder was known as "Schroder Wertheim Investment
Services, Inc."
The Funds pay management fees to Schroder monthly at the following annual rates
(based on the assets of each Fund taken separately): Schroder Equity Value Fund
- -- 0.75% of the Fund's average net assets; Schroder Small Capitalization Value
Fund -- 0.95% of the Fund's average net assets; and Schroder Investment Grade
Income Fund -- 0.50% of the Fund's average net assets. In order to limit the
Funds' expenses, Schroder has voluntarily agreed to reduce its compensation
(and, if necessary, to pay certain expenses of each of the Funds) until October
31, 1997 with respect to each of the Funds to the extent that a Fund's expenses
(other than Schroder's compensation, brokerage, interest, taxes, deferred
organizational expenses, shareholder service fees, and extraordinary expenses)
exceed the following annual rates (expressed as a percentage of a Fund's average
net assets): Schroder Equity Value Fund -- 0.80%; Schroder Small Capitalization
Value Fund -- 0.75%; and Schroder Investment Grade Income Fund -- 0.62%. The
Trust pays all expenses not assumed by Schroder, including Trustees' fees,
auditing, legal, custodial, and investor servicing and shareholder reporting
expenses.
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Schroder's investment decisions for each of the Funds are generally made by a
committee of Schroder's investment professionals. Mr. Paul Morris, Director and
Portfolio Manager at Schroder, is primarily responsible for making
recommendations to the committee for Schroder Equity Value Fund. Ms. Nancy B.
Tooke, Director, Senior Vice President and Portfolio Manager at Schroder, is
primarily responsible for making recommendations to the committee for Schroder
Small Capitalization Value Fund. Mr. Gary S. Zeltzer, Group Vice President and
Portfolio Manager at Schroder, is primarily responsible for making
recommendations to the committee for Schroder Investment Grade Income Fund. Each
of the persons named has had that responsibility since the organization of the
Funds (other than Mr. Morris, who has had that responsibility since March 1997)
and has several years of experience in managing investment portfolios comparable
to those for which each has such responsibility.
Schroder places all orders for purchases and sales of the Funds' securities. In
selecting broker-dealers, Schroder may consider research and brokerage services
furnished to it and its affiliates. Schroder Wertheim & Co. Incorporated, an
affiliate of Schroder, may receive brokerage commissions from the Funds in
accordance with procedures adopted by the Trustees under the Investment Company
Act of 1940 which require periodic review of these transactions. Subject to
seeking the most favorable price and execution available, Schroder may consider
sales of shares of the Funds as a factor in the selection of broker-dealers.
SHAREHOLDER SERVICE 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. 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 conditions or fees in addition to those incurred by
a Fund, 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 Schroder Fund Advisors Inc.
Please contact your Service Organization for details.
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PERFORMANCE INFORMATION
Yield and total return data relating to Advisor Shares of the Funds may from
time to time be included in advertisements about the Funds. The "yield" of a
Fund's Advisor Shares is calculated by dividing the Fund's annualized net
investment income per Advisor Shares during a recent 30-day period by the net
asset value per Advisor Shares on the last day of that period. When a Fund's
total return is advertised with respect to Advisor Shares, it will be
calculated for the past year, the past five years, and the past ten years (or
if a Fund's Advisor Shares have been offered for a period shorter than one,
five, or ten years, that period will be substituted) since the establishment
of the Fund, as more fully described in the Statement of Additional
Information. Advertisements about a Fund may include total return information
for the Fund's Investor Shares for periods prior to the initial offering date
of the Fund's Advisor Shares; that information may be adjusted to reflect the
actual fees and expenses attributable to the Advisor Shares that were not
applicable to the Fund's Investor Shares during the periods presented. Total
return quotations assume that all dividends and distributions are reinvested
when paid.
ALL DATA IS BASED ON PAST INVESTMENT RESULTS AND DOES NOT PREDICT FUTURE
PERFORMANCE. Investment performance of a Fund's Advisor Shares, which will vary,
is based on many factors, including market conditions, the composition of each
Fund's portfolio, and each Fund's operating expenses attributable to Advisor
Shares. Investment performance also often reflects the risks associated with
each Fund's investment objectives and policies. Quotations of yield or total
return for any period when an expense limitation is in effect will be greater
than if the limitation had not been in effect. These factors should be
considered when comparing the investment results of a Fund's Advisor Shares to
those of various classes of other mutual funds and other investment vehicles.
Performance for each Fund's Advisor Shares may be compared to various indices.
See the Statement of Additional Information for a fuller discussion of
performance information.
ADDITIONAL INFORMATION ABOUT THE TRUST
The Trust was established as a Massachusetts business trust in 1993. The Trust
has an unlimited number of shares of beneficial interest that may, without
shareholder approval, be divided into an unlimited number of series of such
shares, which, in turn, may be divided into an unlimited number of classes of
such shares. The Trust's shares of beneficial interest are presently divided
into five different series, including each of the Funds. Each Fund is presently
divided into two classes of shares, Advisor Shares, which are offered in this
Prospectus, and Investor Shares, which are offered through a separate
prospectus. Unlike Advisor Shares, Investor Shares are not subject to
shareholder service fees or to possible distribution fees, which will affect
performance. To obtain more information about Investor Shares, contact Schroder
Fund Advisors Inc. at (800) 464-3108.
Each share has one vote, with fractional shares voting proportionally.
Shareholders of a class of shares or Fund have separate voting rights with
respect to matters that affect only that class or Fund. See "Organization and
Capitalization" in the Statement of Additional Information. Shares are freely
transferable and are entitled to dividends and other distributions as declared
by the Trustees. Due to the differing expenses borne by the two classes, a
Fund's dividends and other distributions will
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normally differ in amount between the classes. If a Fund were liquidated, each
class of shares would receive the net assets of the Fund attributable to that
class. A Fund may suspend the sale of shares at any time and may refuse any
order to purchase shares. Although the Trust is not required to hold annual
meetings of its shareholders, shareholders have the right to call a meeting to
elect or remove Trustees, or to take other actions as provided in the
Declaration of Trust. Prior to March 1997, the Trust was know as "WSIS Series
Trust".
Due to their ownership of shares of each of the Funds, the Schroder Wertheim &
Co. Incorporated Profit-Sharing, Savings Incentive, and Pension Plans and the
Lewco Securities Corp. Profit-Sharing and Thrift Plans may be deemed to control
those Funds. See the Statement of Additional Information.
If you own fewer shares than a minimum amount set by the Trustees (presently 50
shares) 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.
Schroder Fund Advisors Inc., 787 Seventh Avenue, New York, New York 10019, is
the principal underwriter for the Trust. State Street Bank and Trust Company,
225 Franklin Street, Boston, Massachusetts 02110, is the Trust's administrator
and custodian. The Trust currently pays State Street fees for its services as
administrator at the annual rate of 0.08% of each Fund's average daily net
assets (subject to certain minimum charges). The Trust's transfer agent and
registrar is Boston Financial Data Services, Inc., Two Heritage Drive, Quincy,
Massachusetts 02171.
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SCHRODERS
SCHRODER SERIES TRUST
Schroder Equity
Value Fund
Schroder Small
Capitalization Value Fund
Schroder Investment
Grade Income Fund
ADVISOR SHARES
SCHRODER SERIES TRUST PROSPECTUS
P.O. BOX 8507
BOSTON, MASS. 02266 June __, 1997
1-800-464-3108
<PAGE>
SCHRODER SERIES TRUST
FORM N-1A
PART B
STATEMENT OF ADDITIONAL INFORMATION
JUNE __, 1997
This Statement of Additional Information contains information that may be
of interest to investors but which is not included in the Prospectuses of
Schroder Series Trust (the "Trust"). This Statement relates to the Funds'
Investor Shares and Advisor Shares. Investor Shares are offered through a
Prospectus dated March 1, 1997 and Advisor Shares are offered through a
Prospectus dated June __, 1997. This Statement is not a prospectus and should be
read in conjunction with the Prospectuses, as they may be revised from time to
time. Investors may obtain free copies of the Prospectuses by calling Schroder
Capital Management Inc., the Trust's investment adviser, at 1-800- 464-3108.
<PAGE>
TABLE OF CONTENTS
DEFINITIONS.......................................................... 1
INVESTMENT OBJECTIVES AND POLICIES OF THE TRUST
AND RISK CONSIDERATIONS ............................................. 1
INVESTMENT RESTRICTIONS ............................................. 14
TRUSTEES AND OFFICERS ............................................... 17
MANAGEMENT CONTRACT ................................................. 19
DETERMINATION OF NET ASSET VALUE .................................... 23
TAXES ............................................................... 24
PRINCIPAL HOLDERS OF SECURITIES ..................................... 26
PERFORMANCE INFORMATION ............................................. 27
ORGANIZATION AND CAPITALIZATION ..................................... 28
PRINCIPAL UNDERWRITER ............................................... 28
CUSTODIAN............................................................ 29
INDEPENDENT AUDITORS ................................................ 29
SHAREHOLDER LIABILITY ............................................... 29
FINANCIAL STATEMENTS ................................................ 31
<PAGE>
SCHRODER SERIES TRUST
STATEMENT OF ADDITIONAL INFORMATION
DEFINITIONS
The "Trust" -- Schroder Series Trust
"Schroder" -- Schroder Capital Management Inc., the
Trust's investment adviser
INVESTMENT OBJECTIVES AND POLICIES OF THE TRUST AND RISK
CONSIDERATIONS
The Trust currently offers shares of beneficial interest of five series
(the "Funds") with separate investment objectives and policies. The investment
objectives and policies of each of the Funds are described in the Prospectus.
This Statement contains additional information concerning certain investment
practices and investment restrictions of the Trust.
Except as described below under "Investment Restrictions", the investment
objectives and policies described in the Prospectus and in this Statement are
not fundamental, and the Trustees may change the investment objectives and
policies of a Fund without an affirmative vote of shareholders of the Fund.
Except as otherwise noted below, the following descriptions of certain
investment policies and techniques are applicable to all of the Funds.
OPTIONS
Each Fund may purchase and sell covered put and call options on its
portfolio securities to enhance investment performance and to protect against
changes in market prices.
COVERED CALL OPTIONS. A Fund may write covered call options on its
securities to realize a greater current return through the receipt of premiums
than it would realize on its securities alone. Such option transactions may also
be used as a limited form of hedging against a decline in the price of
securities owned by the Fund.
A call option gives the holder the right to purchase, and obligates the
writer to sell, a security at the exercise price at any time before the
expiration date. A call option is "covered" if the writer, at all times while
obligated as a writer, either owns the underlying securities (or comparable
securities satisfying the cover requirements of the securities exchanges), or
has the right to acquire such securities through immediate conversion of
securities.
In return for the premium received when it writes a covered call option,
the Fund gives up some or all of the opportunity to profit from an increase in
the market price of the securities covering the call option during the life of
the option. The Fund retains the risk of loss should the price of such
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securities decline. If the option expires unexercised, the Fund realizes a gain
equal to the premium, which may be offset by a decline in price of the
underlying security. If the option is exercised, the Fund realizes a gain or
loss equal to the difference between the Fund's cost for the underlying security
and the proceeds of sale (exercise price minus commissions) plus the amount of
the premium.
A Fund may terminate a call option that it has written before it expires
by entering into a closing purchase transaction. A Fund may enter into closing
purchase transactions in order to free itself to sell the underlying security or
to write another call on the security, realize a profit on a previously written
call option, or protect a security from being called in an unexpected market
rise. Any profits from a closing purchase transaction may be offset by a decline
in the value of the underlying security. Conversely, because increases in the
market price of a call option will generally reflect increases in the market
price of the underlying security, any loss resulting from a closing purchase
transaction is likely to be offset in whole or in part by unrealized
appreciation of the underlying security owned by the Trust.
COVERED PUT OPTIONS. A Fund may write covered put options in order to
enhance its current return. Such options transactions may also be used as a
limited form of hedging against an increase in the price of securities that the
Fund plans to purchase. A put option gives the holder the right to sell, and
obligates the writer to buy, a security at the exercise price at any time before
the expiration date. A put option is "covered" if the writer segregates cash and
high-grade short-term debt obligations or other permissible collateral equal to
the price to be paid if the option is exercised.
In addition to the receipt of premiums and the potential gains from
terminating such options in closing purchase transactions, the Fund also
receives interest on the cash and debt securities maintained to cover the
exercise price of the option. By writing a put option, the Fund assumes the risk
that it may be required to purchase the underlying security for an exercise
price higher than its then current market value, resulting in a potential
capital loss unless the security later appreciates in value.
A Fund may terminate a put option that it has written before it expires by
a closing purchase transaction. Any loss from this transaction may be partially
or entirely offset by the premium received on the terminated option.
PURCHASING PUT AND CALL OPTIONS. A Fund may also purchase put options to
protect portfolio holdings against a decline in market value. This protection
lasts for the life of the put option because the Fund, as a holder of the
option, may sell the underlying security at the exercise price regardless of any
decline in its market price. In order for a put option to be profitable, the
market price of the underlying security must decline sufficiently below the
exercise price to cover the premium and transaction costs that the Fund must
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
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to cover the premium and transaction costs. These costs will reduce any profit
the Fund might have realized had it bought the underlying security at the time
it purchased the call option.
A Fund may also purchase put and call options to enhance its current
return.
OPTIONS ON FOREIGN SECURITIES. A Fund may purchase and sell options on
foreign securities if in 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. 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 Trust's use
of options. The exchanges have established limitations on the maximum number of
calls and puts of each class that may be held or written by an investor or group
of investors acting in concert. It is possible that the Trust and other clients
of Schroder may be considered such a group. These position limits may restrict
the Trust's ability to purchase or sell options on particular securities.
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 unlisted options than listed options.
Furthermore, unlisted options are not subject to the protection afforded
purchasers of listed options by The Options Clearing Corporation.
Government regulations, particularly the requirements for qualification as
a "regulated investment company" under the Internal Revenue Code, may also
restrict the Trust's use of options.
FUTURES CONTRACTS
In order to hedge against the effects of adverse market changes each Fund
that may invest in debt securities may buy and sell futures contracts on debt
securities of the type in which the Fund may invest and on indexes of debt
securities. In addition, each Fund that may invest in equity
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securities may purchase and sell stock index futures to hedge against changes in
stock market prices. Each Fund may also, to the extent permitted by applicable
law, buy and sell futures contracts and options on futures contracts to increase
the Fund's current return. All such futures and related options will, as may be
required by applicable law, be traded on exchanges that are licensed and
regulated by the Commodity Futures Trading Commission (the "CFTC").
FUTURES ON DEBT SECURITIES AND RELATED OPTIONS. A futures contract on a
debt security is a binding contractual commitment which, if held to maturity,
will result in an obligation to make or accept delivery, during a particular
month, of securities having a standardized face value and rate of return. By
purchasing futures on debt securities -- assuming a "long" position -- a Fund
will legally obligate itself to accept the future delivery of the underlying
security and pay the agreed price. By selling futures on debt securities --
assuming a "short" position -- it will legally obligate itself to make the
future delivery of the security against payment of the agreed price. Open
futures positions on debt securities will be valued at the most recent
settlement price, unless that price does not, in the judgment of persons acting
at the direction of the Trustees as to the valuation of the Trust's assets,
reflect the fair value of the contract, in which case the positions will be
valued by the Trustees or such persons.
Positions taken in the futures markets are not normally held to maturity,
but are instead liquidated through offsetting transactions that may result in a
profit or a loss. While futures positions taken by a Fund will usually be
liquidated in this manner, a Fund may instead make or take delivery of the
underlying securities whenever it appears economically advantageous to the Fund
to do so. A clearing corporation associated with the exchange on which futures
are traded assumes responsibility for such closing transactions and guarantees
that a Fund's sale and purchase obligations under closed-out positions will be
performed at the termination of the contract.
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 Trust
expects to purchase for the Fund 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
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rates which would adversely affect the market prices of debt securities held by
it and the prices of such securities increase instead, the Fund will lose part
or all of the benefit of the increased value of its securities which it has
hedged because it will have offsetting losses in its futures positions. In
addition, in such situations, if the Fund has insufficient cash, it may have to
sell securities to meet daily maintenance margin requirements. The Fund may have
to sell securities at a time when it may be disadvantageous to do so.
A Fund may purchase and write put and call options on certain debt futures
contracts, as they become available. Such options are similar to options on
securities except that options on futures contracts give the purchaser the
right, in return for the premium paid, to assume a position in a futures
contract (a long position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during the period of
the option. As with options on securities, the holder or writer of an option may
terminate his position by selling or purchasing an option of the same series.
There is no guarantee that such closing transactions can be effected. A Fund
will be required to deposit initial margin and maintenance margin with respect
to put and call options on futures contracts written by it pursuant to brokers'
requirements, and, in addition, net option premiums received will be included as
initial margin deposits. See "Margin Payments" below. Compared to the purchase
or sale of futures contracts, the purchase of call or put options on futures
contracts involves less potential risk to a Fund because the maximum amount at
risk is the premium paid for the options plus transactions costs. However, there
may be circumstances when the purchase of call or put options on a futures
contract would result in a loss to a Fund when the purchase or sale of the
futures contracts would not, such as when there is no movement in the prices of
debt securities. The writing of a put or call option on a futures contract
involves risks similar to those risks relating to the purchase or sale of
futures contracts.
INDEX FUTURES CONTRACTS AND OPTIONS. Certain Funds may invest in debt
index futures contracts and stock index futures contracts, and in related
options. A debt index futures contract is a contract to buy or sell units of a
specified debt index at a specified future date at a price agreed upon when the
contract is made. A unit is the current value of the index. Debt index futures
in which the Funds are presently expected to invest are not now available,
although such futures contracts are expected to become available in the future.
A stock index futures contract is a contract to buy or sell units of a stock
index at a specified future date at a price agreed upon when the contract is
made. A unit is the current value of the stock index.
The following example illustrates generally the manner in which index
futures contracts operate. The Standard & Poor's 100 Stock Index is composed of
100 selected common stocks, most of which are listed on the New York Stock
Exchange. The S&P 100 Index assigns relative weightings to the common stocks
included in the Index, and the Index fluctuates with changes in the market
values of those common stocks. In the case of the S&P 100 Index, contracts are
to buy or sell 100 units. Thus, if the value of the S&P 100 Index were $180, one
contract 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
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a contract price of $180 and the S&P 100 Index is at $182 on that future date,
the Fund will lose $200 (100 units x loss of $2).
A Fund may purchase or sell futures contracts with respect to any
securities indexes. Positions in index futures may be closed out only on an
exchange or board of trade which provides a secondary market for such futures.
In order to hedge a Fund's investments successfully using futures
contracts and related options, a Fund must invest in futures contracts with
respect to indexes or sub-indexes the movements of which will, in its judgment,
have a significant correlation with movements in the prices of the Fund's
securities.
Options on index futures contracts are similar to options on securities
except that options on index futures contracts give the purchaser the right, in
return for the premium paid, to assume a position in an index futures contract
(a long position if the option is a call and a short position if the option is a
put) at a specified exercise price at any time during the period of the option.
Upon exercise of the option, the holder would assume the underlying futures
position and would receive a variation margin payment of cash or securities
approximating the increase in the value of the holder's option position. If an
option is exercised on the last trading day prior to the expiration date of the
option, the settlement will be made entirely in cash based on the difference
between the exercise price of the option and the closing level of the index on
which the futures contract is based on the expiration date. Purchasers of
options who fail to exercise their options prior to the exercise date suffer a
loss of the premium paid.
As an alternative to purchasing and selling call and put options on index
futures contracts, each of the Funds which may purchase and sell index futures
contracts may purchase and sell call and put options on the underlying indexes
themselves to the extent that such options are traded on national securities
exchanges. Index options are similar to options on individual securities in that
the purchaser of an index option acquires the right to buy (in the case of a
call) or sell (in the case of a put), and the writer undertakes the obligation
to sell or buy (as the case may be), units of an index at a stated exercise
price during the term of the option. Instead of giving the right to take or make
actual delivery of securities, the holder of an index option has the right to
receive a cash "exercise settlement amount". This amount is equal to the amount
by which the fixed exercise price of the option exceeds (in the case of a put)
or is less than (in the case of a call) the closing value of the underlying
index on the date of the exercise, multiplied by a fixed "index multiplier".
A Fund may purchase or sell options on stock indices in order to close out
its outstanding positions in options on stock indices which it has purchased. A
Fund may also allow such options to expire unexercised.
Compared to the purchase or sale of futures contracts, the purchase of
call or put options on an index involves less potential risk to a Fund because
the maximum amount at risk is the premium paid for the options plus transactions
costs. The writing of a put or call option on an index involves risks similar to
those risks relating to the purchase or sale of index futures contracts.
MARGIN PAYMENTS. When a Fund purchases or sells a futures contract, it is
required to deposit with its custodian an amount of cash, U.S. Treasury bills,
or other permissible collateral equal to a
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small percentage of the amount of the futures contract. This amount is known as
"initial margin". The nature of initial margin is different from that of margin
in security transactions in that it does not involve borrowing money to finance
transactions. Rather, initial margin is similar to a performance bond or good
faith deposit that is returned to a Fund upon termination of the contract,
assuming a Fund satisfies its contractual obligations.
Subsequent payments to and from the broker occur on a daily basis in a
process known as "marking to market". These payments are called "variation
margin" and are made as the value of the underlying futures contract fluctuates.
For example, when a Fund sells a futures contract and the price of the
underlying debt security rises above the delivery price, the Fund's position
declines in value. The Fund then pays the broker a variation margin payment
equal to the difference between the delivery price of the futures contract and
the market price of the securities underlying the futures contract. Conversely,
if the price of the underlying security falls below the delivery price of the
contract, the Fund's futures position increases in value. The broker then must
make a variation margin payment equal to the difference between the delivery
price of the futures contract and the market price of the securities underlying
the futures contract.
When a Fund terminates a position in a futures contract, a final
determination of variation margin is made, additional cash is paid by or to the
Fund, and the Fund realizes a loss or a gain. Such closing transactions involve
additional commission costs.
SPECIAL RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS
LIQUIDITY RISKS. Positions in futures contracts may be closed out only on
an exchange or board of trade which provides a secondary market for such
futures. Although the Trust 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
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correlation between movements in the prices of the futures contracts and options
and movements in the underlying securities or index or movements in the prices
of a Fund's securities which are the subject of a hedge. Schroder will, however,
attempt to reduce this risk by purchasing and selling, to the extent possible,
futures contracts and related options on securities and indexes the movements of
which will, in its judgment, correlate closely with movements in the prices of
the underlying securities or index and a Fund's portfolio securities sought to
be hedged.
Successful use of futures contracts and options by a Fund for hedging
purposes is also subject to Schroder's ability to predict correctly movements in
the direction of the market. It is possible that, where a Fund has purchased
puts on futures contracts to hedge its portfolio against a decline in the
market, the securities or index on which the puts are purchased may increase in
value and the value of securities held in the portfolio may decline. If this
occurred, the Fund would lose money on the puts and also experience a decline in
value in its portfolio securities. In addition, the prices of futures, for a
number of reasons, may not correlate perfectly with movements in the underlying
securities or index due to certain market distortions. First, all participants
in the futures market are subject to margin deposit requirements. Such
requirements may cause investors to close futures contracts through offsetting
transactions which could distort the normal relationship between the underlying
security or index and futures markets. Second, the margin requirements in the
futures markets are less onerous than margin requirements in the securities
markets in general, and as a result the futures markets may attract more
speculators than the securities markets do. Increased participation by
speculators in the futures markets may also cause temporary price distortions.
Due to the possibility of price distortion, even a correct forecast of general
market trends by Schroder may still not result in a successful hedging
transaction over a very short time period.
OTHER RISKS. Funds will incur brokerage fees in connection with their
futures and options transactions. In addition, while futures contracts and
options on futures will be purchased and sold to reduce certain risks, those
transactions themselves entail certain other risks. Thus, while a Fund may
benefit from the use of futures and related options, unanticipated changes in
interest rates or stock price movements may result in a poorer overall
performance for the Fund than if it had not entered into any futures contracts
or options transactions. Moreover, in the event of an imperfect correlation
between the futures position and the portfolio position which is intended to be
protected, the desired protection may not be obtained and the Fund may be
exposed to risk of loss.
FORWARD COMMITMENTS
Each Fund may enter into contracts to purchase securities for a fixed
price at a future date beyond customary settlement time ("forward commitments")
if the Fund holds, and maintains until the settlement date in a segregated
account, cash or high-grade debt obligations in an amount sufficient to meet the
purchase price, or if the Fund enters into offsetting contracts for the forward
sale of other securities it owns. Forward commitments may be considered
securities in themselves, and involve a risk of loss if the value of the
security to be purchased declines prior to the settlement date, which risk is in
addition to the risk of decline in the value of the Fund's other assets. Where
such purchases are made through dealers, the Funds rely 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
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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.
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 high-grade debt obligations at
least equal in value to commitments for when-issued securities. Such segregated
securities either will mature or, if necessary, be sold on or before the
settlement date.
LOANS OF FUND SECURITIES
A Fund may lend its portfolio securities, provided: (1) the loan is
secured continuously by collateral consisting of U.S. Government Securities,
cash, or cash equivalents adjusted daily to have market value at least equal to
the current market value of the securities loaned; (2) the Fund may at
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any time call the loan and regain the securities loaned; (3) a Fund will receive
any interest or dividends paid on the loaned securities; and (4) the aggregate
market value of securities of any Fund loaned will not at any time exceed
one-third of the total assets of the Fund. In addition, it is anticipated that
the Fund may share with the borrower some of the income received on the
collateral for the loan or that it will be paid a premium for the loan. Before a
Fund enters into a loan, Schroder considers all relevant facts and circumstances
including the creditworthiness of the borrower. The risks in lending portfolio
securities, as with other extensions of credit, consist of possible delay in
recovery of the securities or possible loss of rights in the collateral should
the borrower fail financially. Although voting rights or rights to consent with
respect to the loaned securities pass to the borrower, a Fund retains the right
to call the loans at any time on reasonable notice, and it will do so in order
that the securities may be voted by a Fund if the holders of such securities are
asked to vote upon or consent to matters materially affecting the investment. A
Fund will not lend portfolio securities to borrowers affiliated with a Fund.
FOREIGN SECURITIES
Each Fund may invest in foreign securities and in certificates of deposit
issued by United States branches of foreign banks and foreign branches of United
States banks.
Investments in foreign securities may involve considerations different
from investments in domestic securities due to limited publicly available
information, non-uniform accounting standards, lower trading volume and possible
consequent illiquidity, greater volatility in price, the possible imposition of
withholding or confiscatory taxes, the possible adoption of foreign governmental
restrictions affecting the payment of principal and interest, expropriation of
assets, nationalization, or other adverse political or economic developments.
Foreign companies may not be subject to auditing and financial reporting
standards and requirements comparable to those which apply to U.S. companies.
Foreign brokerage commissions and other fees are generally higher than in the
United States. It may be more difficult to obtain and enforce a judgment against
a foreign issuer.
In addition, to the extent that any Fund's foreign investments are not
United States dollar-denominated, the Fund may be affected favorably or
unfavorably by changes in currency exchange rates or exchange control
regulations and may incur costs in connection with conversion between
currencies.
In determining whether to invest in securities of foreign issuers, the
investment adviser of a Fund seeking current income will consider the likely
impact of foreign taxes on the net yield available to the Fund and its
shareholders. Income received by a Fund from sources within foreign countries
may be reduced by withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. It is impossible to determine the effective rate of
foreign tax in advance since the amount of a Fund's assets to be invested in
various countries is not known, and tax laws and their interpretations may
change from time to time and may change without advance notice. Any such taxes
paid by a Fund will reduce its net income available for distribution to
shareholders.
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FOREIGN CURRENCY TRANSACTIONS
Each Fund may engage in currency exchange transactions to protect against
uncertainty in the level of future foreign currency exchange rates and to
increase current return. A Fund may engage in both "transaction hedging" and
"position hedging".
When it engages in transaction hedging, a Fund enters into foreign
currency transactions with respect to specific receivables or payables of a Fund
generally arising in connection with the purchase or sale of its portfolio
securities. A Fund will engage in transaction hedging when it desires to "lock
in" the U.S. dollar price of a security it has agreed to purchase or sell, or
the U.S. dollar equivalent of a dividend or interest payment in a foreign
currency. By transaction hedging a Fund will attempt to protect against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the applicable foreign currency during the period between the
date on which the security is purchased or sold or on which the dividend or
interest payment is declared, and the date on which such payments are made or
received.
A Fund may purchase or sell a foreign currency on a spot (or cash) basis
at the prevailing spot rate in connection with transaction hedging. A Fund may
also enter into contracts to purchase or sell foreign currencies at a future
date ("forward contracts") and purchase and sell foreign currency futures
contracts.
For transaction hedging purposes a Fund may also purchase exchange-listed
and over-the-counter call and put options on foreign currency futures contracts
and on foreign currencies. A put option on a futures contract gives a Fund the
right to assume a short position in the futures contract until expiration of the
option. A put option on currency gives a Fund the right to sell a currency at an
exercise price until the expiration of the option. A call option on a futures
contract gives a Fund the right to assume a long position in the futures
contract until the expiration of the option. A call option on currency gives a
Fund the right to purchase a currency at the exercise price until the expiration
of the option. A Fund will engage in over-the-counter transactions only when
appropriate exchange-traded transactions are unavailable and when, in 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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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.
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
usually effected with the currency trader who is a party to the original forward
contract.
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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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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.
INVESTMENT RESTRICTIONS
The Trust has adopted the following investment restrictions which 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 Investment Company Act
of 1940 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. A Fund may not:
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1. Borrow money in excess of 10% of the value (taken at the lower of
cost or current value) of its total assets (not including the amount
borrowed) at the time the borrowing is made, and then only from
banks as a temporary measure (not for leverage) in situations which
might otherwise require the untimely disposition of portfolio
investments or for extraordinary or emergency purposes. Such
borrowings will be repaid before any additional investments are
purchased.
2. Pledge, hypothecate, mortgage, or otherwise encumber its assets in
excess of 15% of its total assets (taken at the lower of cost and
current value) and then only in connection with borrowings permitted
by restriction 1 above.
3. Purchase securities on margin, except such short-term credits as may
be necessary for the clearance of purchases and sales of securities,
and except that it may make margin payments in connection with
transactions in futures contracts, options, and other financial
instruments.
4. Make short sales of securities or maintain a short position for the
account of a Fund unless at all times when a short position is open
it owns an equal amount of such securities or owns securities which,
without payment of any further consideration, are convertible into
or exchangeable for securities of the same issue as, and in equal
amount to, the securities sold short.
5. 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 the federal
securities laws.
6. Purchase or sell real estate or interests in real estate limited
partnerships, although it may purchase securities of issuers which
deal in real estate, securities which are secured by interests in
real estate, and securities representing interests in real estate,
and it may acquire and dispose of real estate or interests in real
estate acquired through the exercise of its rights as a holder of
debt obligations secured by real estate or interests therein.
7. Purchase or sell commodities or commodity contracts, except that it
may purchase or sell financial futures contracts and options and
other financial instruments.
8. Make loans, except by purchase of debt obligations in which a Fund
may invest consistent with its investment policies, by entering into
repurchase agreements with respect to not more than 25% of its total
assets (taken at current value), or through the lending of its
portfolio securities with respect to not more than 25% of its total
assets.
9. Invest in securities of any issuer, if officers and Trustees of the
Trust and officers and directors of Schroder who beneficially own
more than 0.5% of the securities of that issuer together own more
than 5% of such securities.
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10. As to 75% of its assets, invest in securities of any issuer if,
immediately after such investment, more than 5% of the total assets
of a Fund (taken at current value) would be invested in the
securities of such issuer; provided that this limitation does not
apply to securities issued or guaranteed as to principal or interest
by the U.S. Government or its agencies or instrumentalities.
11. Acquire more than 10% of the voting securities of any issuer.
12. Invest more than 25% of the value of its total assets in securities
of issuers in any one industry. (Securities issued or guaranteed as
to principal or interest by the U.S. Government or its agencies or
instrumentalities are not considered to represent industries.)
13. Buy or sell oil, gas, or other mineral leases, rights, or royalty
contracts, although it may purchase securities of issuers which deal
in, represent interests in, or are secured by interests in such
leases, rights, or contracts, and it may acquire or dispose of such
leases, rights, or contracts acquired through the exercise of its
rights as a holder of debt obligations secured thereby.
14. Make investments for the purpose of gaining control of a company's
management.
In addition, it is contrary to the Trust's present policy, which may be
changed without shareholder approval, for any of the Funds to invest more than
15% of its net assets in securities which are not readily marketable, including
securities restricted as to resale (other than securities restricted as to
resale but determined by the Trustees, or persons designated by the Trustees to
make such determinations, to be readily marketable).
-------------------
All percentage limitations on investments 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. Except
for investment restrictions 1 through 14 listed above, the other investment
policies described in the Prospectus and this Statement are not fundamental and
may be changed by the Trustees, without shareholder approval. As a matter of
policy, the Trustees would not materially change a Fund's investment objective
without shareholder approval.
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TRUSTEES AND OFFICERS
The Trustees of the Trust are responsible for the general oversight of the
Trust's business. The Trustees and executive officers of the Trust and their
principal occupations during the last five years are set forth below. The
mailing address of each of the officers and Trustees is 787 Seventh Avenue, New
York, New York 10019.
David N. Dinkins, Trustee. 69. Professor, Columbia University School of
International and Public Affairs. Director, American Stock Exchange, Amrep
Corporation, Carver Federal Savings Bank, New World Communications Group,
Incorporated, and Transderm Laboratory Corporation. Formerly, Mayor, City of New
York.
(*) David Gibson, Trustee and Vice President of the Trust. 36. Director,
Schroder Capital Management Inc. and Schroder Investment Management Ltd.
Director and Senior Vice President, Schroder Capital Management International
Inc.
John I. Howell, Trustee. 80. Trustee, Schroder Capital Funds and Schroder
Capital Funds (Delaware). Director, Schroder Asian Growth Fund, Inc. and
American International Life Assurance Company of New York. Private consultant
since 1987.
Peter S. Knight, Trustee. 46. Partner, Wunder, Diefenderfer, Cannon &
Thelen. Previously, Campaign Manager, Clinton/Gore '96.
Madelon DeVoe Talley, Trustee. 65. Vice Chairman, W.P. Carey & Co. Board
Member and Trustee, Smith Barney Equity Funds, Income Funds, and Trak Fund.
Director, Global Asset Management Funds, Inc., Alliance Capital Management L.P.,
Biocraft Laboratories, Schroder Asian Growth Fund, Inc., and Laidlaw Covenant
Fund. Marketing consultant, Three Cities Research. Commissioner, The Port
Authority of New York and New Jersey.
Ashbel C. Williams, Jr., President of the Trust. 42. President, Schroder
Capital Management Inc. Formerly, Executive Director, Florida State Board of
Administration.
Robert Jackowitz, Treasurer of the Trust. 30. Vice President and
Comptroller, Schroder Capital Management International Inc. Vice President and
Treasurer, Schroder Capital Management Inc. Treasurer and Chief Financial
Officer, Schroder Fund Advisors Inc. Treasurer, Schroder Asian Growth Fund,
Inc., Schroder Capital Funds, Schroder Capital Funds II, and Schroder Capital
Funds (Delaware).
Catherine A. Mazza, Vice President of the Trust. 37. First Vice President,
Schroder Capital Management International Inc. and Schroder Capital Management
Inc. President, Schroder Fund Advisors Inc. Vice President, Schroder Asian
Growth Fund, Inc., Schroder Capital Funds, Schroder Capital Funds II, and
Schroder Capital Funds (Delaware). Previously served as Vice President, Alliance
Capital.
Alexandra Poe, Clerk of the Trust. 37. Senior Vice President, Secretary,
and Fund Counsel, Schroder Fund Advisors Inc. Vice President and Secretary,
Schroder Capital Funds, Schroder Capital Funds II, and Schroder Capital Funds
(Delaware). Assistant Secretary, Schroder Asian Growth Fund,
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Inc. Vice President, Schroder Capital Management International Inc. Formerly,
Senior Associate Attorney, Gordon, Altman, Butowsky, Weitzen, Shalov & Wein;
Vice President and Counsel, Citibank, N.A.
Mark J. Smith, Vice President of the Trust. 36. Director, Schroder
Investment Management Ltd. Director and Senior Vice President, Schroder Capital
Management International Inc. and Schroder Capital Management International Ltd.
Director and Vice President, Schroder Fund Advisors Inc. Trustee and President,
Schroder Capital Funds and Schroder Capital Funds (Delaware). President,
Schroder Capital Funds II. Director, Schroder Investment Management (Guernsey)
Ltd. and Schroder Japanese Warrant Fund Ltd.
Jane E. Lucas, Vice President of the Trust. 35. Director and Senior Vice
President, Schroder Capital Management International Inc. Director, Schroder
Capital Management Inc. Assistant Director, Schroder Investment Management Ltd.
Director, Schroder Fund Advisors Inc. Vice President, Schroder Capital Funds,
Schroder Capital Funds II, and Schroder Capital Funds (Delaware).
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(*) Trustee who is an "interested person" (as defined in the Investment
Company Act of 1940) of the Trust, Schroder, or Schroder Fund Advisors Inc.
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.
Each Trustee of the Trust who is not an interested person of the Trust,
Schroder, or Schroder Fund Advisors Inc. receives an annual fee of $5,000 and an
additional fee for each Trustees' meeting attended. Trustees who are not
interested persons of Schroder and who serve on committees of the Trustees
receive additional fees for attendance at certain committee meetings and for
special services rendered in that connection. The Trust paid Trustees' fees
aggregating $33,000 for the fiscal year ended October 31, 1996. The following
table sets forth information regarding compensation paid for the fiscal year
ended October 31, 1996 to those Trustees who are not interested persons of the
Trust.
COMPENSATION TABLE
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(1) (2) (3)
NAME OF AGGREGATE TOTAL
TRUSTEE COMPENSATION COMPENSATION FROM
FROM TRUST TRUST AND
FUND COMPLEX
PAID TO TRUSTEES
- -----------------------------------------------------------------
David N. Dinkins $11,000 $11,000
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John I. Howell* 2,750 21,500
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- -----------------------------------------------------------------
Peter S. Knight 11,000 11,000
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Michael R. Steed** 5,500 5,500
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Madelon DeVoe Talley*** 2,750 15,250
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* Mr. Howell was elected a Trustee on June 25, 1996. The Total
Compensation listed in column (3) for Mr. Howell includes
compensation for his services as a Trustee of Schroder Capital Funds
("SCF") and Schroder Capital Funds (Delaware) ("SCFD") and as a
Director of Schroder Asian Growth Fund, Inc. ("SAGF"). The Trust,
SCF, SCFD, and SAGF are considered part of the same "Fund Complex"
for these purposes.
** Mr. Steed resigned from the Board of Trustees as of May 15, 1996.
*** Ms. DeVoe Talley was elected a Trustee on June 25, 1996. The
Total Compensation listed in column (3) for Ms. DeVoe Talley
includes compensation for her services as a Director of SAGF.
As of April 1, 1997, the Trustees of the Trust as a group owned less than
1% of the outstanding shares of each Fund.
The Agreement and Declaration of Trust of the Trust 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 Agreement and Declaration of Trust 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.
MANAGEMENT CONTRACT
Under a Management Contract between the Trust and Schroder (the
"Management Contract"), 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 Contract are set forth in the Trust's prospectus.
In providing investment advisory services to the various Funds of the
Trust, Schroder regularly provides 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 Agreement and Declaration of
Trust and Bylaws, and of the Investment Company Act of 1940, 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 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
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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 Management Contract, the Trust is responsible for all its other
expenses, including clerical salaries not related to investment activities; fees
and expenses incurred in connection with membership in investment company
organizations; brokers' commissions; payment for portfolio pricing services to a
pricing agent, if any; legal expenses; auditing expenses; accounting expenses;
taxes and governmental fees; fees and expenses of the transfer agent and
investor servicing agent of the Trust; the cost of preparing share certificates
or any other expenses, including clerical expenses, incurred in connection with
the issue, sale, underwriting, redemption, or repurchase of shares; the expenses
of and fees for registering or qualifying securities for sale; the fees and
expenses of the Trustees of the Trust who are not affiliated with Schroder; the
cost of preparing and distributing reports and notices to shareholders; public
and investor relations expenses; and fees and disbursements of custodians of the
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 Management Contract 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.
State Street Bank and Trust Company ("State Street") provides certain
accounting, transfer agency, and other services to the Trust. The Trust
reimburses State Street on a basis approved by the Trustees.
The Management Contract provides that Schroder shall not be subject to any
liability for any error of judgment or mistake of law or for any loss suffered
by the Trust in connection with rendering services to the Trust in the absence
of willful misfeasance, bad faith, gross negligence, or reckless disregard of
its duties.
The Management Contract 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. The Management Contract also terminates without payment of
any penalty in the event of its assignment. In addition, the Management Contract
may be amended only by a vote of the shareholders of the affected Fund(s), and
the Contract 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.
RECENT MANAGEMENT FEES. For its fiscal years ended October 31, 1996, 1995,
and 1994, respectively, pursuant to the Management Contract, each Fund paid fees
to Schroder as follows (reflecting reductions in such fees pursuant to expense
limitations in effect during such periods): Schroder Equity Value Fund -
$318,145, $252,615, and $72,738; Schroder Small Capitalization
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Value Fund - $471,712, $349,672, and $58,538; Schroder High Yield Income Fund -
$99,827, $176,520, and $43,688; Schroder Investment Grade Income Fund - $97,566,
$98,478, and $17,751; and Schroder Short-Term Investment Fund - $133,208,
$131,121, and $46,643. Schroder voluntarily waived its fees in the following
amounts during the fiscal years ended October 31, 1996, 1995, and 1994,
respectively, pursuant to expense limitations in effect during such periods:
Schroder Equity Value Fund - $0, $16,285, and $84,725; Schroder Small
Capitalization Value Fund - $0, $22,164, and $104,661; Schroder High Yield
Income Fund - $59,514, $93,036, and $110,694; Schroder Investment Grade Income
Fund - $29,635, $88,653, and $109,927; and Schroder Short-Term Investment Fund -
$0, $42,642, and $103,477.
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. 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 for the Trust and buys and sells securities for the Trust through a
substantial number of brokers and dealers. In so doing, it uses its best efforts
to obtain for the Trust the best price and execution available. In seeking the
best price and execution, Schroder, having in mind the Trust's best interests,
considers all factors it deems relevant, including, by way of illustration,
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.
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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
which execute portfolio transactions for the clients of such advisers.
Consistent with this practice, Schroder receives research, statistical, and
quotation services from many broker-dealers with which it places the Trust's
portfolio transactions. These services, which in some cases may also be
purchased for cash, include such matters as general economic and security market
reviews, industry and company reviews, evaluations of securities, and
recommendations as to the purchase and sale of securities. Some of these
services are of value to Schroder and its affiliates in advising various of
their clients (including the Trust), although not all of these services are
necessarily useful and of value in managing the Trust. The management fee paid
by the Trust is not reduced because Schroder and its affiliates receive such
services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934, and
by the Management Contract, Schroder may cause a Fund to pay a broker which
provides brokerage and research services to Schroder an amount of disclosed
commission for effecting a securities transaction for the Fund in excess of the
commission which another broker would have charged for effecting that
transaction. Schroder's authority to cause a Fund to pay any such greater
commissions in also subject to such policies as the Trustees may adopt from time
to time.
To the extent permitted by law, the Funds may engage in brokerage
transactions with Schroder Wertheim & Co. Incorporated ("Wertheim") or Lewco
Securities, Inc. ("Lewco"), each of which is an affiliate of Schroder, or with
unaffiliated brokers who trade or clear through Wertheim or Lewco. (The
Investment Company Act of 1940 generally prohibits the Funds from engaging in
securities transactions with Wertheim and Lewco or their affiliates, as
principal, unless pursuant to an exemptive order from the Securities and
Exchange Commission.) Consistent with regulations under the Investment Company
Act of 1940, the Funds have adopted procedures which are reasonably designed to
provide that any commissions or other remuneration they pay to Wertheim and
Lewco do not exceed the usual and customary broker's commission. In addition,
the Funds will adhere to the rule, under the Securities Exchange Act of 1934,
governing floor trading. This rule permits the Funds to effect, but not execute,
exchange listed securities transactions with Wertheim and Lewco. Also, due to
securities law limitations, the Funds will limit purchases of securities in a
public offering if Wertheim or Lewco or one of their affiliates is a member of
the syndicate for that offering.
In the fiscal years ended October 31, 1996, 1995, and 1994, respectively,
the Funds paid brokerage commissions in the following amounts: Schroder Equity
Value Fund - $56,986, $78,776, and $51,642; Schroder Small Capitalization Value
Fund - $151,845, $125,945, and $43,183; Schroder High Yield Income Fund - $17,
$2,166, and $843; and Schroder Investment Grade Income Fund - $0, $30, and $3.
Schroder Short-Term Investment Fund paid no brokerage commissions in the fiscal
years ended October 31, 1996, 1995, and 1994.
In the fiscal year ended October 31, 1996, Schroder, on behalf of the
Trust, placed agency and underwritten transactions having an approximate
aggregate dollar value of $94,676,425 (99.61% of the Trust's aggregate agency
and underwritten transactions, on which approximately $208,128 of commissions
were paid) with brokers and dealers (other than Wertheim and Lewco) whose
research, statistical, and quotation services Schroder considered to be
particularly useful to it and its affiliates. However, many of such transactions
were placed with such brokers and dealers without regard to the furnishing of
such services.
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In the fiscal years ended October 31, 1996, 1995, and 1994, respectively,
the Trust paid brokerage commissions to Wertheim and Lewco in the following
amounts: Wertheim - $0, $120, and $1,194; Lewco - $720, $7,612, and $23,160.
During the fiscal year ended October 31, 1996, commissions paid to Lewco
constituted 0.01% of all of the Trust's brokerage commissions paid during such
fiscal year and transactions with respect to which those commissions were paid
constituted 0.39% of all the transactions on which the Trust paid brokerage
commissions during such fiscal year.
SHAREHOLDER SERVICING PLAN FOR ADVISOR SHARES. 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 Fund's average daily
net assets represented by Advisor Shares. Schroder Fund Advisors Inc. may
enter into shareholder service agreements with Service Organizations, such as
banks, trust companies, broker-dealers, or other financial organizations,
pursuant to which the Services 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. 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 conditions or fees in addition to those
incurred by a Fund, 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 Schroder Fund
Advisors Inc. Please contact your Service Organization for details.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of each class of shares of each Fund is
determined daily as of 4:00 p.m. New York time on each day the New York Stock
Exchange is open for trading. The New York Stock Exchange is normally closed on
the following national holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas.
Securities traded on a national securities exchange or quoted on the
NASDAQ National Market System are valued at their last-reported sale price on
the principal exchange or reported by NASDAQ or, if there is no reported sale,
and in the case of over-the-counter securities not included in the NASDAQ
National Market System, at a bid price estimated by a broker or dealer. Debt
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securities, including zero-coupon securities, and certain foreign securities
will be valued by a pricing service. Other foreign securities will be valued by
the Trust's custodian based on outside pricing sources. Securities for which
current market quotations are not readily available and all other assets are
valued at fair value as determined by Schroder in good faith in accordance with
procedures approved by the Trustees.
If any securities held by a Fund are restricted as to resale, their fair
value is generally determined as the amount which the Trust could reasonably
expect to realize from an orderly disposition of such securities over a
reasonable period of time. The valuation procedures applied in any specific
instance are likely to vary from case to case. However, consideration is
generally given to the financial position of the issuer and other fundamental
analytical data relating to the investment and to the nature of the restrictions
on disposition of the securities (including any registration expenses that might
be borne by the Trust in connection with such disposition). In addition,
specific factors are also generally considered, such as the cost of the
investment, the market value of any unrestricted securities of the same class
(both at the time of purchase and at the time of valuation), the size of the
holding, the prices of any recent transactions or offers with respect to such
securities, and any available analysts' reports regarding the issuer.
Generally, trading in certain securities (such as foreign securities) is
substantially completed each day at various times prior to the close of the New
York Stock Exchange. The values of these securities used in determining the net
asset value of the Trust's shares are computed as of such times. Also, because
of the amount of time required to collect and process trading information as to
large numbers of securities issues, the values of certain securities (such as
convertible bonds and U.S. Government Securities) are determined based on market
quotations collected earlier in the day at the latest practicable time prior to
the close of the Exchange. Occasionally, events affecting the value of such
securities may occur between such times and the close of the Exchange which will
not be reflected in the computation of the Trust's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value, in the manner described
above.
----------------
The proceeds received by each Fund for each issue or sale of its shares,
and all income, earnings, profits, and proceeds thereof, subject only to the
rights of creditors, will be specifically allocated to such Fund, and constitute
the underlying assets of that Fund. The underlying assets of each Fund will be
segregated on the Trust's books of account, and will be charged with the
liabilities in respect of such Fund and with a share of the general liabilities
of the Trust. Each Fund's assets will be further allocated among its constituent
classes of shares on the Trust's books of account. Expenses with respect to any
two or more Funds or classes may be allocated in proportion to the net asset
values of the respective Funds or classes except where allocations of direct
expenses can otherwise be fairly made to a specific Fund or class.
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").
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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 the separate accounts of the Participating Insurance Companies
which hold its shares. As a Massachusetts business trust, a Fund under present
law will not be subject to any excise or income taxes in Massachusetts.
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;
(b) derive less than 30% of its gross income from the sale or other disposition
of certain assets (including stock and securities) held less than three months;
(c) 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). In order to receive the
favorable tax treatment accorded regulated investment companies and their
shareholders, moreover, a Fund must in general distribute at least 90% of its
interest, dividends, net short-term capital gain, and certain other income each
year.
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.
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.
It is the policy of each of the Funds to meet the requirements of the Code
to qualify as a regulated investment company that is taxed pursuant to
Subchapter M of the Code. One of these requirements is that less than 30% of a
Fund's gross income must be derived from gains from sale or other disposition of
securities held for less than three months (with special rules applying to
so-called
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<PAGE>
designated hedges). Accordingly, a Fund will be restricted in selling
securities held or considered under Code rules to have been held less than three
months, and in engaging in hedging or other activities (including entering into
options, futures, or short-sale transactions) which may cause the Trust's
holding period in certain of its assets to be less than three months.
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 Statement
of Additional Information.
PRINCIPAL HOLDERS OF SECURITIES
The following table shows the percentage of the outstanding shares of each
Fund owned as of March 31, 1997 by the Schroder Wertheim & Co. Incorporated
Profit-Sharing, Savings Incentive, and Pension Plans (the "Schroder Wertheim
Plans") (all located at 787 Seventh Avenue, New York, NY 10019), and the Lewco
Securities Corp. Profit Sharing and Thrift Plans (the "Lewco Plans") (located at
Lewco Securities Corp., 34 Exchange Place, Jersey City, NJ 07311). Certain of
the directors and officers of Schroder and Schroder Wertheim & Co. Incorporated,
and certain of the officers of the Trust, are participants in one or more of the
Schroder Wertheim Plans. Schroder Wertheim & Co. Incorporated owns 80.0% of the
outstanding voting securities of Lewco Securities Corp.
% of Fund Shares*
Owned by
Schroder Wertheim and Lewco Plans
---------------------------------
Schroder Equity Value Fund 68%
Schroder Small Capitalization Value Fund 31%
Schroder Investment Grade Income Fund 75%
Schroder High Yield Income Fund 59%
Schroder Short-Term Investment Fund 94%
- -------------------
* Reflects ownership of Investor Shares of the Funds. Advisor Shares were not
offered prior to the date of this Statement.
To the knowledge of the Trust, as of March 31, 1997, no other person owned
of record or beneficially more than 5% of the outstanding shares of any Fund,
except that Northern Trust Bank of Texas, custodian for the Bernard and Andre
Rapoport Foundation, 2701 Kirby Drive, Houston, TX 77098-1218 owned 9.48% of
the outstanding shares of Schroder Equity Value Fund and 9.43% of the
outstanding shares of Schroder Small Capitalization Value Fund; The Hillman
Foundation, Inc., 2000 Grant Building, Pittsburgh, PA 15219 owned 5.04% of the
outstanding shares of Schroder Small Capitalization Value Fund; Saxon & Co., FBO
W.S. Dietrich Schroder, P.O. Box 7780-1888, Philadelphia, PA 19182-0001 owned
12.02% of the outstanding shares of Schroder Small Capitalization Value Fund;
The Bank of New York, trustee FBO Tri Valley Growers, P.O. Box 11010,
New York, NY 10286-1010 owned 5.08% of the outstanding shares of Schroder
Small Capitalization Value Fund; the Stitzel Family Partnership, 102 Mountain
View Avenue, San Rafael, CA 94901-1348 owned 6.45% of the outstanding shares of
Schroder High Yield Income Fund; and Alumax Grantor Trust, FBO Allen Born,
Alumax, Inc., 5655 Peachtree Parkway, Norcross, GA 30092-2812 owned 7.57% of
the outstanding shares of Schroder High Yield Income Fund.
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<PAGE>
PERFORMANCE INFORMATION
Certain Funds may advertise the yield of each class of its shares. Yield
is presented for a specified 30-day period (the "base period"). Yield for a
class of shares of a Fund is based on the amount determined by (i) calculating
the aggregate of dividends and interest earned by the Fund and attributable to
the class during the base period less the Fund's expenses attributable to the
class and accrued for that period, and (ii) dividing that amount by the product
of (A) the average daily number of shares of the class of the Fund outstanding
during the base period and entitled to receive dividends and (B) the net asset
value per share of the class of the Fund on the last day of the base period. The
result is annualized on a compounding basis to determine the yield. For this
calculation, interest earned on debt obligations held by a Fund is generally
calculated using the yield to maturity (or first expected call date) of such
obligations based on their market values (or, in the case of receivables-backed
securities such as Ginnie Maes, based on cost). Dividends on equity securities
are accrued daily at their stated dividend rates. The yield of Investor Shares
of Schroder Investment Grade Income Fund, Schroder High Yield Income Fund, and
Schroder Short-Term Investment Fund for the thirty-day period ended October 31,
1996 was 8.14%, 5.49% and 4.44%, respectively. (No Advisor Shares were
outstanding during such period).
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 of that class of shares
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.
The total return of Investor Shares of each Fund for the one-year period
ending October 31, 1996 and for the period from the commencement of the Fund's
operations until October 31, 1996 is set forth below. (No Advisor Shares were
outstanding during those periods).
Total Return of Investor Shares for the Periods Listed
Total Return
------------
Total Return (Life of
------------ --------
(One-Year) Fund) Yield
---------- ----- -----
Schroder Equity Value Fund (commencement of 19.30% 11.35% --
operations: February 16, 1994)
Schroder High Yield Income Fund 9.98% 4.33% 8.14%
(commencement of operations: February 16,
1994)
Schroder Investment Grade Income Fund 4.38% 5.25% 5.49%
(commencement of operations: February 22,
1994)
Schroder Short-Term Investment Fund 4.63% 4.09% 4.44%
(commencement of operations: January 11,
1994)
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<PAGE>
Schroder Small Capitalization Value Fund 21.17% 10.36% --
(commencement of operations: February 16,
1994)
Average annual total return of a Fund's Investor Shares may at times be
presented in advertisements for the Fund's Advisor Shares restated to reflect
the actual fees and expenses attributable to the Advisor Shares that were not
applicable to the Fund's Investor Shares during the periods presented.
From time to time, Schroder 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 and total return for each class of shares during the period of the waiver
or assumption.
ORGANIZATION AND CAPITALIZATION
The Trust is an open-end investment company established under the laws of
The Commonwealth of Massachusetts by an Agreement and Declaration of Trust dated
May 6, 1993.
Shares entitle their holders to one vote per share, with fractional shares
voting proportionally; however, separate vote will be taken by each Fund or
class of shares on matters affecting the particular Fund or class. For example,
a change in a fundamental investment policy for a Fund would be voted upon only
by shareholders of that Fund and a material change to a distribution plan
relating to a particular class would be voted upon only by that class.
Additionally, approval of the Management Contract is a matter to be determined
separately by each Fund. 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 Declaration of Trust. 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.
The Trust may create additional Funds from time to time with different
investment objectives and policies. Each Fund may offer additional classes of
shares subject to different expenses and other features.
PRINCIPAL UNDERWRITER
Schroder Fund Advisors Inc. is the principal underwriter of the
continually offered shares of each of the Funds. Schroder Fund Advisors Inc. is
not obligated to sell any specific amount of shares of any Fund and will
purchase shares of a Fund for resale only against orders for shares.
DISTRIBUTION PLAN FOR ADVISOR SHARES. To compensate Schroder Fund Advisors
Inc. for the services it provides and for the expenses it bears in connection
with the distribution of Advisor Shares, each Fund has adopted a Distribution
Plan pursuant to which the Fund may pay
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<PAGE>
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 Advisor Shares. The Funds presently make no payments under the Distribution
Plans, although the Trustees 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 its
Advisor Shares.
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 Schroder Fund Advisors Inc., 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 Schroder Fund Advisors Inc.) 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 Investment Company Act of 1940) 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.
CUSTODIAN
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110 is the custodian of the Trust's assets. The custodian's
responsibilities include safeguarding and controlling the Trust's cash and
securities, handling the receipt and delivery of securities, and collecting
interest and dividends on the Trust's investments. The custodian does not
determine the investment policies of the Trust or decide which securities the
Trust will buy or sell. Boston Financial Data Services, Inc., Two Heritage
Drive, Quincy, Massachusetts 02171, serves as registrar and transfer agent for
the Trust.
INDEPENDENT AUDITORS
Arthur Andersen LLP, the Trust's independent accountants, provide audit
services, tax return preparation services, and assistance and consultation in
connection with the Trust's various Securities and Exchange Commission filings.
SHAREHOLDER LIABILITY
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<PAGE>
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Agreement and Declaration of Trust 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 Agreement and Declaration of Trust 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.
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<PAGE>
FINANCIAL STATEMENTS
The Financial Statements required by Part B and the related Report of
Independent Public Accountants are incorporated herein by reference to
Post-Effective Amendment No. 4 to the Trust's Registration Statement filed
electronically with the Securities and Exchange Commission on February 28, 1997
(Accession Number: 0000912057-97-00730).
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<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements Included in Parts A and B:
(1) Report of Independent Auditors
(2) Statements of assets and liabilities, October 31, 1996.
Statements of Operations -- period ended October 31, 1996.
Statements of Changes in net assets -- period ended October 31,
1996. Financial Highlights -- period ended October 31, 1996.
Notes to Financial Statements.
Included in Part C: None.
(b) Exhibits
(1) - Agreement and Declaration of Trust*
(2) - Bylaws*
(3) - Inapplicable
(4)(A) - Forms of certificate representing shares of beneficial
interest*
(B) - Portions of Agreement and Declaration of Trust Relating to
Shareholders' Rights*
(C) - Portions of Bylaws Relating to Shareholders' Rights*
(5) - Form of Management Contract*
(6) - Form of Distributor's Contract*
(7) - Inapplicable
(8) - Form of Custodian Agreement*
(9)(A) - Form of Transfer Agent and Servicing Agreement*
(B) - Form of Administration Agreement*
(C) - Form of Shareholder Service Agreement for Advisor Shares
(D) - Form of Shareholder Servicing Plan for Advisor Shares
(10) - Opinion and Consent of Ropes & Gray*
(11) - Consent of Independent Public Accountants*
(12) - Inapplicable
(13) - Form of Initial Capital Agreement*
(14) - Inapplicable
(15) - Form of Distribution Plan and Agreement for Advisor Shares
(16) - Schedule for Computation of Performance Information*
(17) - Financial Data Schedule*
(18) - Multiclass (Rule 18f-3) Plan
<PAGE>
(19)(A) - Powers of Attorney for Messrs. Knight, Dinkins, and Steed*
(B) - Powers of Attorney for Messrs. Gibson, Knight, Dinkins,
Howell, Williams, and Jackowitz, and Ms. DeVoe Talley*
- ----------
* Previously filed.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
The Schroder Wertheim & Co. Incorporated Profit-Sharing and Savings
Incentive Plans and the Lewco Securities Corp. Profit Sharing and Thrift Plans,
and the Schroder Wertheim & Co. Pension Plan may be deemed to "control" certain
of the Funds. See "Principal Holders of Securities" in the Statement of
Additional Information.
ITEM 26. NUMBER OF RECORD HOLDERS OF SECURITIES
As of March 31, 1997, the number of shareholders of record of each Fund was
as follows:
Fund # record shareholders
- ---- ---------------------
Schroder Equity Value Fund 628
Schroder Small Capitalization
Value Fund 729
Schroder Investment Grade
Income Fund 298
Schroder High Yield Income Fund 358
Schroder Short-Term Investment Fund 393
ITEM 27. INDEMNIFICATION
Article VIII of the Registrant's Agreement and Declaration of Trust
provides as follows:
SECTION 1. The Trust shall indemnify each of its Trustees and officers
(including persons who serve at the Trust's request as directors, officers or
trustees of another organization in which the Trust has any interest as a
shareholder, creditor or otherwise) (hereinafter referred to as a "Covered
Person") against all liabilities and expenses, including but not limited to
amounts paid in satisfaction of judgments, in compromise or as fines and
penalties, and counsel fees reasonably incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such Covered Person may be or may have
been threatened, while in office or thereafter, by reason of being or having
been such a Covered Person except with respect to any matter as to which such
Covered Person shall have been finally adjudicated in any such action, suit or
other proceeding (a) not to have acted in good faith in the reasonable belief
that such Covered Person's action was in the best interests
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<PAGE>
of the Trust or (b) to be liable to the Trust or its Shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office. Expenses,
including counsel fees so incurred by any such Covered Person (but excluding
amounts paid in satisfaction of judgments, in compromise or as fines or
penalties), shall be paid from time to time by the Trust in advance of the final
disposition of any such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Covered Person to repay amounts so paid to
the Trust if it is ultimately determined that indemnification of such expenses
is not authorized under this Article, provided, however, that either (a) such
Covered Person shall have provided appropriate security for such undertaking,
(b) the Trust shall be insured against losses arising from any such advance
payments or (c) either a majority of the disinterested Trustees acting on the
matter (provided that a majority of the uninterested Trustees then in office act
on the matter), or independent legal counsel in a written opinion, shall have
determined, based upon a review of readily available facts (as opposed to a full
trial type inquiry), that there is reason to believe that such Covered Person
will be found entitled to indemnification under this Article.
SECTION 2. As to any matter disposed of (whether by a compromise payment,
pursuant to a consent decree or otherwise) without an adjudication by a court,
or by any other body before which the proceeding was brought, that such Covered
Person either (a) did not act in good faith in the reasonable belief that his or
her action was in the best interests of the Trust or (b) is liable to the Trust
or its Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office, indemnification shall be provided if (a) approved as in the best
interests of the Trust, after notice that it involves such indemnification, by
at least a majority of the disinterested Trustees acting on the matter (provided
that a majority of the disinterested Trustees then in office act on the matter)
upon a determination, based upon a review of readily available facts (as opposed
to a full trial type inquiry) that such Covered Person acted in good faith in
the reasonable belief that his or her action was in the best interests of the
Trust and is not liable to the Trust or its Shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office, or (b) there has been obtained an
opinion in writing of independent legal counsel, based upon a review of readily
available facts (as opposed to a full trial type inquiry), to the effect that
such Covered Person appears to have acted in good faith in the reasonable belief
that his or her action was in the best interests of the Trust and that such
indemnification would not protect such Covered Person against any liability to
the Trust to which he or she would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office. Any approval pursuant to this
Section shall not prevent the recovery from any Covered Person of any amount
paid to such Covered Person in accordance with this Section as indemnification
if such Covered Person is subsequently adjudicated by a court of competent
jurisdiction not to have acted in good faith in the reasonable belief that such
Covered Person's action was in the best interests of the Trust or to have been
liable to the Trust or its Shareholders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office.
SECTION 3. The right of indemnification hereby provided shall not be
exclusive of or affect any other rights to which such Covered Person may be
entitled. As used in this Article VIII, the term "Covered Person" shall include
such person's heirs, executors and administrators, and a "disinterested Trustee"
is a Trustee who is not an "interested person" of the Trust as defined in
Section 2(a)(19) of the 1940 Act (or who has been exempted from being an
"interested person" by any rule, regulation or order of the Securities and
Exchange Commission) and against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the same or similar
grounds is then or has been pending. Nothing contained in this Article shall
affect any rights to indemnification to which
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<PAGE>
personnel of the Trust, other than Trustees or officers, and other persons may
be entitled by contract or otherwise under law, nor the power of the Trust to
purchase and maintain liability insurance on behalf of any such person.
----------
Reference is made to the Distributor's Contract, previously filed, which
contains provisions for the indemnification by Schroder Fund Advisors Inc. of
the Registrant and Trustees and officers of the Registrant under certain
circumstances. Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to Trustees and officers of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a Trustee or officer of the Registrant in the successful defense of
any action, suit, or proceeding) is asserted by such Trustee or officer in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The directors and officers of the Registrant's investment adviser have been
engaged during the past two fiscal years in no business, vocation, or employment
of a substantial nature other than as directors, officers, or employees of the
investment adviser or certain of its corporate affiliates, except the following,
whose principal occupations during that period, other than as directors or
officers of the investment adviser or certain of its corporate affiliates, are
as follows: Ashbel C. Williams, Jr., President and Director, who was Executive
Director, Florida State Board of Administration; Paul M. Morris, Director, who
was Principal and Senior Portfolio Manager at Weiss Peck & Greer, L.L.C.; Connie
Moak-Mazur, Group Vice President, who was Managing Director/Marketing and Client
Service, Wasserstein Perella Asset Management; Locke W. Ogens, First Vice
President, who was Vice President and Portfolio Manager, Greenville Capital
Management; Cheryl Cohen, Vice President, who was Vice President, Goldman Sachs
& Co.; James Gray, Vice President, who was First Vice President, Concord Holding
Corporation; and Anita L. Whelan, Vice President/Compliance Officer, who was
First Vice President and Director of Compliance, Prudential Securities
Incorporated Asset Management Group. The address of the investment adviser and
its corporate affiliates is 787 Seventh Avenue, New York, New York 10019.
-4-
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Schroder Fund Advisors Inc. currently acts as the principal underwriter
for Schroder Capital Funds (Delaware), the series of which are Schroder U.S.
Equity Fund, Schroder Emerging Markets Fund Institutional Portfolio, Schroder
U.S. Smaller Companies Fund, Schroder International Fund, Schroder International
Smaller Companies Fund, and Schroder International Bond Portfolio.
(b) The directors and officers of the Registrant's principal underwriter
are:
Positions and Offices Positions and Offices
Name with Registrant with Underwriter
- ---- --------------------- ---------------------
Kathleen Adams None Vice President
John Burns None Vice President
Barbara Gottlieb Assistant Clerk Assistant Vice President
James L. Gray None Senior Vice President
Lynne D. Gravelle None Assistant Vice President
Fredrica G. Grizzel None Assistant Vice President
Sharon L. Haugh None Director; Chairman
Robert Jackowitz Treasurer Treasurer; Chief Financial
Officer
Sean P. Keegan None Assistant Vice President
Mary Kunkemueller None Assistant Vice President
Jane E. Lucas Vice President Director
Catherine A. Mazza Vice President President
Alexandra Poe Clerk Fund Counsel; Senior Vice
President; Secretary
Mark J. Smith Vice President Director; Vice President
M. Randall Strickland None Vice President
Anita L. Whelan None Vice President
-5-
<PAGE>
The principal business address of each person listed above is 787 Seventh
Avenue, New York, New York 10019.
(c) Inapplicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Persons maintaining physical possession of accounts, books, and other
documents required to be maintained by Section 31(a) of the Investment Company
Act of 1940 and the Rules promulgated thereunder are Registrant's Clerk,
Alexandra Poe; Registrant's investment adviser, Schroder Capital Management
Inc.; Registrant's custodian, State Street Bank & Trust Company; and
Registrant's transfer agent and registrar, Boston Financial Data Services, Inc.
The address of the Clerk and investment adviser is Equitable Center, 787 Seventh
Avenue, New York, New York 10019. The address of the custodian is 225 Franklin
Street, Boston, Massachusetts 02110. The address of the transfer agent and
registrar is Two Heritage Drive, Quincy, Massachusetts, 02171.
ITEM 31. MANAGEMENT SERVICES
None.
ITEM 32. UNDERTAKINGS
(a) Inapplicable.
(b) Inapplicable.
(c) The Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual report to
shareholders upon request and without charge.
(d) The Registrant undertakes, if requested to do so by the holders of at
least 10% of the Registrant's outstanding shares of beneficial
interest, to call a meeting of shareholders for the purpose of voting
upon the question of removal of a Trustee or Trustees and to assist in
communications with other shareholders as required by Section 16(c) of
the Investment Company Act of 1940.
NOTICE
A copy of the Agreement and Declaration of Trust of Schroder Series Trust
is on file with the Secretary of State of The Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed on behalf of the
Registrant by an officer of the Registrant as an officer and not individually
and that the obligations of or arising out of this instrument are not binding
upon any of the Trustees, officers, or shareholders individually but are binding
only upon the assets and property of the Registrant.
-6-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of New York and the State of New York, on this 9th day
of April, 1997.
SCHRODER SERIES TRUST
By: /s/ Catherine A. Mazza
--------------------------------
Name: Catherine A. Mazza
Title: Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on this 9th day of April, 1997.
Signature Title
--------- -----
* President of the Trust
- ---------------------------
Ashbel C. Williams, Jr.
* Treasurer; Principal Financial
- --------------------------- Officer; Principal Accounting
Robert Jackowitz Officer
* Trustee
- ---------------------------
David N. Dinkins
* Trustee
- ---------------------------
David Gibson
* Trustee
- ---------------------------
John I. Howell
* Trustee
- ---------------------------
Peter S. Knight
* Trustee
- ---------------------------
Madelon DeVoe Talley
* By: /s/ Catherine A. Mazza
----------------------------
Catherine A. Mazza
Attorney-In-Fact
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. TITLE PAGE
- ----------- ----- ----
9(C) Form of Shareholder Service Agreement
for Advisor Shares
9(D) Form of Shareholder Servicing Plan
for Advisor Shares
15 Form of Distribution Plan and
Agreement for Advisor Shares
18 Multiclass Plan
<PAGE>
SCHRODER SERIES TRUST
SHAREHOLDER SERVICE AGREEMENT
AGREEMENT made this ___ day of ____, 199_, between Schroder Fund Advisors
Inc. ("Schroder Advisors"), as administrator for Schroder Series Trust, with its
principal place of business at 787 Seventh Avenue, New York, New York 10019 and
____________, (the "Service Organization").
WHEREAS, Schroder Advisors acts as administrator and distributor for
Schroder Series Trust (the "Trust"), a Massachusetts business trust registered
under the Investment Company Act of 1940, as amended (the "Act") as an open-end
management investment company, which may issue its shares of common stock in
separate series (the "Funds"); and
WHEREAS, the Trust has adopted a Shareholder Service Plan with respect to
the Advisor Shares of each Fund of the Trust (the "Service Plan") that
authorizes Schroder Advisors to pay fees to qualified financial institutions for
maintaining and providing services to shareholder accounts of each Fund; and
WHEREAS, Schroder Advisors desires that the Service Organization perform
certain service activities on behalf of Schroder Advisors and the Trust with
respect to the Funds and the Service Organization is willing to perform those
services on the terms and conditions set forth in this Agreement;
NOW THEREFORE, in consideration of the mutual promises contained herein and
other valuable consideration, the undersigned parties agree as follows:
SECTION 1. SERVICE ACTIVITIES
In connection with providing services and maintaining shareholder accounts
of each Fund listed on Appendix A hereto with respect to its various customers,
the Service Organization may provide services including: (a) establishing and
maintaining accounts and records relating to clients of the Service
Organization; (b) answering shareholder inquiries regarding the manner in which
purchases, exchanges and redemptions of shares of the Trust may be effected and
other matters pertaining to the Trust's services; (c) providing necessary
personnel and facilities to establish and maintain shareholder accounts and
records; (d) assisting shareholders in arranging for processing purchase,
exchange and redemption transactions; (e) arranging for the wiring of funds; (f)
guaranteeing shareholder signatures in connection with redemption orders and
transfers and changes in shareholder-designated accounts; (g) integrating
periodic statements with other shareholder transactions; and (h) providing such
other related services as the shareholder may request. The Service Organization
shall not be obligated to perform any specific service for its clients. The
Service Organization's appointment shall be nonexclusive and Schroder Advisors
may enter into similar agreements with other persons.
<PAGE>
SECTION 2. COMPENSATION
(a) As compensation for the Service Organization's service activities with
respect to each Fund, Schroder Advisors shall pay the Service Organization fees
in the amounts listed on Appendix B to this Agreement (the "Payments");
provided, however, that in no event will Schroder Advisors be required to make
any payments for service activities in an amount greater than that which
Schroder Advisors is paid by the respective Fund of the Trust for such services.
(b) The Payments shall be accrued daily and paid monthly or at such other
interval as Schroder Advisors and the Service Organization shall agree.
(c) On behalf of each Fund, the Service Organization may spend such amounts
and incur such expenses as it deems appropriate or necessary on any service
activities. Such expenses may include compensation to employees and expenses,
including overhead and telephone and other communication expenses, of the
Service Organization. The Service Organization shall be solely liable for any
expenses it incurs.
SECTION 3. REPRESENTATIONS OF SERVICE ORGANIZATION
The Service Organization represents that:
(a) the compensation payable to it under this Agreement in connection with
the investment in any Fund of the assets of its customers (i) will be disclosed
by the Service Organization to its customers, (ii) will be authorized by its
customers, and (iii) will not result in an excessive fee to the Service
Organization;
(b) if it is a member of the National Association of Securities Dealers,
Inc. ("NASD"), it shall abide by the Rules of Conduct of the NASD;
(c) it will, in connection with sales and offers to sell shares, furnish to
or otherwise insure that each person to whom any such sale or offer is made
receives, a copy of the Fund's then current prospectus, as applicable;
(d) it will purchase shares only from Schroder Advisors as agent of the
Trust and that it will purchase shares only for the purpose of covering purchase
orders already received or for its own bona fide investment purposes;
(e) the performance of all its obligations hereunder will comply with all
applicable laws and regulations, including any applicable federal securities
laws and any requirements to deliver confirmations to its customers, the
provisions of its charter documents and bylaws and all material contractual
obligations binding upon the Service Organization;
-2-
<PAGE>
(f) it will promptly inform the Trust of any change in applicable laws or
regulations (or interpretations thereof) or in its charter or bylaws or material
contracts which would prevent or impair full performance of any of its
obligations hereunder; and
(g) it will reconcile daily the purchase and redemption orders placed with
trade confirmations received from the transfer agent, it being understood that
neither the Fund nor its transfer agent shall be responsible for trade errors
resulting from the Service Organization's failure to reconcile within 24 hours
of receipt of confirmation.
SECTION 4. PORTFOLIO LITERATURE
The Service Organization is not authorized to make any representations
concerning shares of a Fund except those contained in the Fund's then current
prospectus and statement of additional information ("SAI") and printed
information issued by the Trust or by Schroder Advisors as information
supplemental to the prospectus. Schroder Advisors will supply the Service
Organization upon its request with prospectuses, SAIs, reasonable quantities of
supplemental sales literature and additional information. The Service
Organization agrees not to use other advertising or sales material relating to a
Fund unless approved in writing by Schroder Advisors in advance of such use. Any
printed information furnished by Schroder Advisors other than the then current
prospectus and SAI, periodic reports and proxy solicitation materials are
Schroder Advisor's sole responsibility and are not the responsibility of the
Trust and the Trust shall have no liability or responsibility to the Service
Organization in these respects unless expressly assumed in connection therewith.
The Service Organization shall have no responsibility with regard to the
accuracy or completeness of any of the printed information furnished by Schroder
Advisors and shall be held harmless by Schroder Advisors from and against any
cost or loss arising therefrom.
SECTION 5. REPORTS
Upon request, the Service Organization shall prepare and furnish to
Schroder Advisors written reports setting forth all amounts expended by the
Service Organization and identifying the activities for which the expenditures
were made.
SECTION 6. INDEMNIFICATION
The Service Organization agrees to indemnify and hold harmless Schroder
Advisors and the Trust from any claims, expenses, or liabilities incurred by
Schroder Advisors or the Trust as a result of any act or omission of the Service
Organization in connection with its services under this Agreement.
-3-
<PAGE>
SECTION 7. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Agreement shall become effective on the date hereof and upon its
effectiveness, shall supersede all previous agreements between the parties
covering the subject matter hereof.
(b) This Agreement may be terminated as follows:
(i) at any time, without the payment of any penalty, by the vote of a
majority of the Directors of the Trust;
(ii) automatically in the event of the termination of the
Administration or Distribution agreements between the Trust and Schroder
Advisors or the Service Plan;
(iii) automatically in the event of the assignment of this Agreement
as defined in the Act; and
(iv) by either party to the Agreement without cause by giving the
other party at least sixty (60) days' written notice of its intention to
terminate.
SECTION 8. NOTICES
Any notice under this Agreement shall be in writing and shall be addressed
and delivered, or mailed, postage prepaid to the other party's principal place
of business, or to such other place as shall have been previously specified by
written notice given to the other party.
SECTION 9. AMENDMENTS
Subject to approval of material amendments to the form of this Agreement by
the Trust's Board of Trustees, this Agreement may be amended by the parties at
any time. In addition, this Agreement may be amended by Schroder Advisors from
time to time by the following procedure: Schroder Advisors will mail a copy of
the amendment to the Service Organization at its principal place of business or
such other address as the Service Organization shall in writing provide to
Schroder Advisors. If the Service Organization does not object to the amendment
within thirty (30) days after its receipt, the amendment will become part of the
Agreement. The Service Organization's objection must be in writing and be
received by Schroder Advisors within the thirty days.
SECTION 10. USE OF THE TRUST'S NAME
The Service Organization shall not use the name of the Trust on any checks,
bank drafts, bank statements or forms for other than internal use in a manner
not approved by the Trust prior thereto in writing; provided however, that the
approval of the Trust shall not be required for the use of the Trust's name
which merely refers in accurate and factual terms to the Trust in connection
with the Service Organization's role hereunder or which is required by any
appropriate regulatory,
-4-
<PAGE>
governmental or judicial authority; and further provided that in no event shall
such approval be unreasonably withheld or delayed.
SECTION 11. MISCELLANEOUS
(a) This Agreement shall be construed in accordance with the laws of the
State of New York.
(b) If any provision of this Agreement shall be held invalid by a court
decision, statute, rule or otherwise, the remainder of the Agreement shall not
be affected thereby.
(c) Schroder Advisors may delegate to any sub-administrator approved by the
Board of Trustees of the Trust its obligations under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
[NAME OF SERVICE ORGANIZATION]
By:
Name:
Title:
SCHRODER FUND ADVISORS INC.
By:
Name:
Title:
-5-
<PAGE>
SCHRODER SERIES TRUST
AND [SERVICE ORGANIZATION]
SHAREHOLDER SERVICE AGREEMENT
APPENDIX A
FUNDS COVERED BY THE AGREEMENT
<TABLE>
<CAPTION>
FUND NAME CUSIP TICKER SYMBOL TRADING CUTOFF TIME
--------- ----- ------------- -------------------
<C> <C> <C> <C>
1. Schroder Small Capitalization Value Fund WSCVX 4:00 p.m. EST
2. Schroder Equity Value Fund WEQVX 4:00 p.m. EST
3. Schroder Investment Grade Income Fund WSIGX 4:00 p.m. EST
</TABLE>
<PAGE>
SCHRODER SERIES TRUST
AND [SERVICE ORGANIZATION]
SHAREHOLDER SERVICE AGREEMENT
APPENDIX B
PAYMENTS PURSUANT TO THE SERVICE PLAN
0.25% of the average daily net assets of each Fund represented by shares
owned by investors for which the Service Organization maintains a servicing
relationship.
<PAGE>
SHAREHOLDER SERVICE PLAN
This SHAREHOLDER SERVICE PLAN is adopted this ___ day of __________, 1997
in respect of the Advisor Shares of the Funds of Schroder Series Trust set forth
on Schedule A hereto, as supplemented from time to time. In consideration of the
mutual covenants hereinafter contained, it is hereby agreed by and between the
parties hereto as follows:
1. This Plan describes the circumstances under which Schroder Fund Advisors
Inc. (the "Service Agent"), itself, or through other financial institutions or
other intermediaries, may provide shareholder support services to the Funds and
their shareholders in respect of the Funds' Advisor Shares. These administrative
services may include, but are not limited to, the following functions:
establishing and maintaining shareholder accounts and records; answering
shareholder inquiries regarding the manner in which purchases, exchanges, and
redemptions of Advisor Shares of the Funds 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 shareholder services as the
Trust or shareholders reasonably request.
2. To compensate the Service Agent for the services it provides and the
expenses it bears hereunder, the Trust will, on behalf of each Fund listed on
Schedule A, pay the Service Agent a service fee (the "Service Fee") accrued
daily and paid promptly (but in any event within seven business days) after the
last day of each calendar month at an annual rate determined by the Trustees of
up to 0.25 of one percent (0.25%) of the average daily net assets of the Advisor
Shares of such Fund listed on such Schedule A (the amount of such net assets,
and the Advisor Shares in respect of which it shall be calculated, to be
determined from time to time by the Trustees). The Service Fee paid under this
Plan is intended to qualify as a "service fee" as defined in Section 2830 of the
Conduct Rules of the National Association of Securities Dealers, Inc. (or any
successor provision) as in effect from time to time.
If this Plan is terminated as of any date not the last day of a calendar
month, then the fee payable to the Service Agent shall be paid promptly (but in
any event within seven business days) after such date of termination.
3. The Service Agent shall provide the Trust for review by the Trustees a
written report of the amounts expended under the Plan and the purposes for which
such expenditures were made, in such form and at such times as the Trustees may
from time to time require.
4. This Plan shall continue in effect for one year from the date of its
execution, and thereafter for successive periods of one year if this Plan is
approved at least annually by the Trustees, including a majority of the Trustees
who are not interested persons of the Trust
<PAGE>
and have no direct or indirect financial interest in the operation of this Plan
(the "Disinterested Trustees").
5. Notwithstanding paragraph 4, this Plan may be terminated as follows:
(a) at any time, without the payment of any penalty, by the Service
Agent, on the one hand, or by the vote of a majority of the Disinterested
Trustees or by a vote of a majority of the outstanding voting securities of
the affected Fund as defined in the Investment Company Act of 1940, as
amended, on the other, on not more than sixty (60) days written notice; and
(b) automatically in the event of the Plan's assignment, as defined in
the Investment Company Act of 1940, as amended.
6. This Plan shall be construed in accordance with the laws of the State of
New York.
IN WITNESS WHEREOF, this Shareholder Service Plan is hereby adopted as of
the date first written above.
SCHRODER SERIES TRUST
By:________________________
Title:
<PAGE>
EXHIBIT A
to the
Shareholder Service Plan
SCHRODER SERIES TRUST
Advisor Shares of the following Funds:
Schroder Equity Value Fund
Schroder Small Capitalization Value Fund
Schroder Investment Grade Income Fund
This Plan is adopted by Schroder Series Trust with respect to the Classes
of shares of the Funds set forth above.
Witness the due execution hereof this ____ day of _______, 199_.
SCHRODER SERIES TRUST
By:______________________________
<PAGE>
DISTRIBUTION PLAN AND AGREEMENT
ADVISOR SHARES
This Plan and Agreement (the "Plan") constitutes the Distribution Plan of
[Name of Fund] (the "Fund"), a series of shares of beneficial interest of
Schroder Series Trust (the "Trust"), adopted in respect of the Fund's Advisor
Shares pursuant to the provisions of Rule 12b-1 under the Investment Company Act
of 1940, as amended (the "Act"), and the Distributor's Contract between the
Trust and Schroder Fund Advisors Inc. ("Schroder Fund Advisors"), the principal
underwriter of the Trust's shares. During the effective term of this Plan, the
Fund may make payments to Schroder Fund Advisors upon the terms and conditions
hereinafter set forth:
Section 1. The Fund may make payments to Schroder Fund Advisors, in the
form of fees or reimbursements, to compensate Schroder Fund Advisors for
services provided and expenses incurred by it for purposes of promoting the sale
of Advisor Shares of the Fund, reducing redemptions of Advisor Shares, or
maintaining or improving services provided to shareholders by Schroder Fund
Advisors and financial institutions, including without limitation investment
dealers. The amount of such payments and the purposes for which they are made
shall be determined by the Qualified Trustees. Payments under this Plan shall
not exceed in any fiscal year the annual rate of 0.50% of the average net asset
value of the Fund attributable to its Advisor Shares, as determined at the close
of each business day during the year. A majority of the Qualified Trustees (as
defined below) may, at any time and from time to time, reduce the amount of such
payments, or may suspend the operation of the Plan for such period or periods of
time as they may determine.
Section 2. This Plan shall not take effect until it has been approved by
votes of the majority (or whatever greater percentage may, from time to time, be
required by Section 12(b) of the Act or the rules and regulations thereunder) of
both (i) the Trustees of the Trust, and (ii) the Qualified Trustees of the
Trust, cast in person at a meeting called for the purpose of voting on this
Plan.
Section 3. This Plan shall continue in effect for a period of more than one
year after it takes effect only so long as such continuance is specifically
approved at least annually in the manner provided for approval of this Plan in
Section 2.
Section 4. Schroder Fund Advisors shall provide to the Trustees of the
Trust, and the Trustees shall review, at least quarterly, a written report of
the amounts so expended and the purposes for which such expenditures were made.
Section 5. This 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
voting securities.
<PAGE>
Section 6. All agreements with any person relating to implementation of
this Plan shall be in writing, and any agreement related to this Plan shall
provide:
(a) that such agreement may be terminated at any time, without payment
of any penalty, by vote of a majority of the Qualified Trustees or by vote
of a majority of the Fund's outstanding voting securities, on not more than
60 days' written notice to any other party to the agreement; and
(b) that such agreement shall terminate automatically in the event of
its assignment.
Section 7. This Plan may not be amended to increase materially the amount
of distribution expenses permitted pursuant to Section 1 hereof without the
approval of a majority of the outstanding voting securities of the Fund, and all
material amendments to this Plan shall be approved in the manner provided for
approval of this Plan in Section 2.
Section 8. As used in this Plan, (a) the term "Qualified Trustees" shall
mean those Trustees of the Trust who are not interested persons of the Trust,
and have no direct or indirect financial interest in the operation of this Plan
or any agreements related to it, and (b) the terms "assignment", "interested
person", and "vote of a majority of the outstanding voting securities" shall
have the respective meanings specified in the Act and the rules and regulations
thereunder, subject to such exemptions as may be granted by the Securities and
Exchange Commission; provided, however, that any references to the Fund's voting
securities shall be deemed to include only references to the Fund's Advisor
Shares, except to the extent otherwise required by law.
Section 9. A copy of the Agreement and Declaration of Trust of the Trust is
on file with the Secretary of State of The Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed on behalf of the
Trustees of the Trust as Trustees and not individually, and that the obligations
of or arising out of this instrument are not binding upon any of the Trustees,
officers, or shareholders individually but are binding only upon the assets and
property of the Fund.
Executed as of [date].
SCHRODER FUND ADVISORS INC. SCHRODER SERIES TRUST
on behalf of
[Name of Fund]
By: ___________________________ By: ________________________
-2-
<PAGE>
SCHRODER SERIES TRUST
MULTICLASS (RULE 18f-3) PLAN
March 5, 1997
This Plan is adopted by Schroder Series Trust (the "Trust") pursuant to
Rule 18f-3 under the Investment Company Act of 1940, as amended (the "Act"), in
order to document the separate arrangements and expense allocations of each of
the classes of shares of beneficial interest (the "Classes") of the constituent
Funds of the Trust specified on Schedule A attached hereto (the "Multiclass
Funds").
SECTION 1. CLASS DESIGNATIONS
The types of Classes are "Investor Shares" and "Advisor Shares."
Each Class has a different arrangement for shareholder services or
distribution or both, as follows:
(a) INVESTOR SHARES -- are offered with no sales charges or distribution
expenses. The investment minimum for such shares of each Multiclass Fund will
typically be significantly higher than that for Advisor Shares for such
Multiclass Fund, subject to reduction by Schroder Fund Advisors Inc. ("Schroder
Advisors").
(b) ADVISOR SHARES - are offered with no sales charges, but are subject to
a distribution plan adopted in accordance with Rule 12b-1 under the Act. The
investment minimum for Advisor Shares of each Multiclass Fund will typically be
significantly lower than that for "Investor Shares" for such Multiclass Fund.
SECTION 2. VOTING
Each Class shall have the voting rights set out in the Agreement and
Declaration of Trust of the Trust and the Bylaws of the Trust, as they may be
amended from time to time.
SECTION 3. EXPENSES
(a) DISTRIBUTION EXPENSES. All expenses incurred under a Class's
distribution plan adopted in accordance with Rule 12b-1 under the Act shall be
allocated to that Class.
(b) SHAREHOLDER SERVICE EXPENSES. All expenses incurred under a Class's
shareholder service plan shall be allocated to that Class.
<PAGE>
(c) OTHER CLASS EXPENSES. The following expenses, to the extent they are
determined by the Trustees, or by Schroder Advisors or Schroder Capital
Management Inc., to have been incurred by or in respect of one but not both
Classes of a Fund or otherwise unequally as between such Classes (collectively
with expenses under Sections 3(a) and 3(b) "Class Expenses"), shall be allocated
as between the Classes in accordance with such determination (or in such other
manner as the Trustees may in their discretion consider fair and equitable to
each):
(i) Administration (if any) and transfer agent fees and expenses;
(ii) Litigation, legal, and audit fees;
(iii) State and foreign securities registration fees;
(iv) Shareholder report expenses;
(v) Trustee fees and expenses;
(vi) Preparation, printing, and related fees and expenses for proxy
statements and, with respect to current shareholders, prospectuses
and statements of additional information;
(vii) Expenses incurred in connection with shareholder meetings; and
(viii)Subject to approval by the Trustees, such other fees and expenses as
Schroder Advisors or Schroder Capital Management Inc., pursuant to
Rule 18f-3, deems to be allocable to specified Classes.
(d) CLASS EXPENSES ALLOCATIONS. Class Expenses are to be borne solely by
the Class to which they relate.
SECTION 4. OTHER ALLOCATIONS AND WAIVERS/REIMBURSEMENTS
(a) EXPENSES APPLICABLE TO MORE THAN ONE FUND. Expenses incurred by the
Trust on behalf of a Fund, including any Multiclass Fund, shall be allocated to
that Fund, and expenses incurred by the Trust on behalf of more than one Fund
shall be allocated among the Funds that incurred the expenses based on the net
asset values of the several Funds in relation to the aggregate net asset value
of all Funds to which the expense relates, or on such other basis as the
Trustees may in their discretion consider fair and equitable to each.
(b) OTHER ALLOCATIONS. Income, realized and unrealized capital gains and
losses, and expenses other than Class Expenses related to a Multiclass Fund
shall be allocated to each Class on the basis of the net asset value of that
Class in relation to the net asset value of the Multiclass Fund, or on such
other basis as the Trustees may in their discretion consider fair and equitable
to each.
(c) WAIVERS AND REIMBURSEMENTS. Nothing in this Plan shall be construed as
limiting the ability of any person to waive any fee paid by a Fund or Class to
that person or to reimburse any or all expenses of a Fund or Class.
-2-
<PAGE>
SECTION 5. EXCHANGES
Shareholders of a Class may, as and to the extent permitted by the
prospectuses of the Funds in question, exchange their shares for shares of the
same Class of any other Fund in accordance with Section 11(a) of the Act, the
rules thereunder.
-3-
<PAGE>
SCHEDULE A
CONSTITUENT FUNDS OF SCHRODER SERIES TRUST
TO WHICH THE MULTICLASS PLAN APPLIES
FUND DATE SUBJECT TO PLAN
---- --------------------
Schroder Equity Value Fund
Schroder Small Capitalization
Value Fund
Schroder Investment Grade
Income Fund
-4-
