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SCHRODER SERIES TRUST
PROSPECTUS SUPPLEMENT
TO INVESTOR SHARES PROSPECTUS DATED MARCH 1, 2000
INVESTMENT GRADE INCOME FUND
The Shareholders of Schroder Investment Grade Income Fund have approved
a change to the investment objective, and certain investment policies, of the
Fund. THE FUND'S NAME HAS ALSO BEEN CHANGED TO "SCHRODER TOTAL RETURN FIXED
INCOME FUND." The information relating to the Fund beginning on page 6 of the
Prospectus and ending immediately before the bar chart on page 7 is amended to
read as follows:
- INVESTMENT OBJECTIVE. To seek maximum long-term total return consistent
with preservation of capital.
- PRINCIPAL INVESTMENT STRATEGIES. The Fund normally invests at least 65%
of its assets in fixed-income securities that are "investment grade"
quality. To be considered "investment grade," the securities must be
rated (at the time of investment) in one of the four highest grades by
Moody's Investors Service, Inc. or Standard and Poor's Ratings
Services, or determined by Schroder to be of comparable quality. The
Fund may invest the remainder of its assets in securities rated below
investment grade.
The Fund normally expects to invest a substantial portion of its assets
in U.S. Government securities. The Fund may also invest in a variety of
other fixed-income securities, including corporate debt securities,
preferred stocks, and money market instruments. The Fund may invest up
to 20% of its assets in debt securities denominated in currencies other
than the U.S. dollar, including up to 10% of its assets in securities
of developing countries and of private issuers in those countries.
The Fund may invest a substantial portion of its assets in
mortgage-backed certificates and other securities representing
ownership interests in mortgage pools, including collateralized
mortgage obligations, and in other types of asset-backed securities. In
addition, the Fund may buy or sell a variety of derivative and related
instruments with respect to fixed-income securities, indices and
interest rates for risk management or investment purposes. These may
include short sales, options, futures contracts, and options on futures
contracts.
The Fund may trade its portfolio securities actively to take advantage
of perceived inefficiencies in the fixed-income markets based on
Schroder's research and analyses regarding market sectors, individual
issuers, and market conditions. The Fund's active trading strategy may
lead to high levels of portfolio turnover, which may involve higher
Fund expenses and tax liability for shareholders.
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The Fund will normally maintain an average portfolio duration of
between three and seven years. Portfolio duration is a measure of the
expected life of a fixed income security that was developed as a more
precise alternative to the concept of "term to maturity", and is used
to determine the sensitivity of a security's price to changes in
interest rates.
- PRINCIPAL RISKS.
DEBT SECURITIES. The principal risks of investing in the Fund include
the risk that interest rates will rise or fall in ways not anticipated
by Schroder. For example, if interest rates were to rise, the value of
fixed-income securities held by the Fund would typically fall.
Securities having longer durations would tend to experience greater
price declines in response to rising interest rates. If the Fund's
portfolio duration is relatively long at a time when interest rates
were to rise, the value of the Fund's shares would likely fall more
than if the Fund had invested in securities with shorter durations. By
contrast, if interest rates were to fall, the value of fixed-income
securities held by the Fund would typically rise. Securities having
shorter durations would tend to experience smaller price increases in
response to falling interest rates. If the Fund's portfolio duration is
relatively short at a time when interest rates were to decline, the
value of the Fund's shares would likely rise less than if the Fund had
invested in securities with longer durations.
The Fund is also subject to the risk that the issuer of a fixed-income
security will have its credit rating downgraded or will be unable to
pay its obligations when due. This could cause the Fund's portfolio
securities to decline in value, especially where an issuer defaults on
its obligations.
FOREIGN SECURITIES. Investments in foreign securities entail risks not
present in domestic investments including, among others, risks related
to political or economic instability, currency exchange, and taxation.
Investments in securities of issuers in developing countries may
experience high levels of volatility. Risks of investing in such
countries include greater political and economic instability than in
foreign developed markets, currency transfer restrictions, a more
limited number of potential buyers, and uncertainties associated with
dependence on revenue from particular commodities or international aid.
JUNK BONDS. The Fund may invest up to 35% of its assets in securities
rated below investment grade (sometimes referred to as "junk bonds").
Lower-rated securities lack outstanding investment characteristics and
have speculative characteristics and are subject to greater credit and
market risks than higher-rated securities. The lower ratings of such
securities reflect a greater possibility that adverse changes in the
financial condition of the issuer or in general economic conditions, or
an unanticipated rise in interest rates, may impair the ability of the
issuer to make payments of interest and principal. The values of lower
rated securities held by the Fund may be more volatile than those of
higher rated securities.
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MORTGAGE-BACKED SECURITIES. The Fund's investment in mortgage-backed
securities may involve special risks relating to unscheduled prepayment
on the mortgages underlying the securities. Falling interest rates tend
to increase prepayments, which could significantly shorten the
effective maturities of mortgage-backed securities. Similarly, rising
interest rates tend to reduce prepayments, which could significantly
lengthen the effective maturities. When interest rates decline,
significant unscheduled prepayments on the underlying mortgages would
have to be reinvested at the then-prevailing lower rates. Therefore,
the Fund's mortgage-backed securities may have less potential for
capital appreciation during periods of falling interest rates than
other fixed-income securities of comparable maturities. However, the
securities have a comparable risk of decline in market value during
periods of rising interest rates. The Fund's investments in other types
of asset-backed securities are subject to risks similar to those
associated with mortgage-backed securities.
SHORT SALES. The Fund may sell securities short. The Fund may sell a
security short and borrow the same security from a broker or other
institution to complete the sale when Schroder anticipates that the
price of the security will decline, or when Schroder attempts to take
advantage of temporary disparities in pricing in the fixed-income
securities markets. Short positions may result in a loss if the market
price of the security in question increases between the date when the
Fund enters into the short position and the date when the Fund closes
the short position. Such a loss could theoretically be unlimited in a
case where the Fund is unable, for whatever reason, to close out its
short position. In addition, short positions may result in a loss if a
portfolio strategy of which the short position is a part is otherwise
unsuccessful.
ACTIVE TRADING STRATEGY. The Fund is also subject to the risk that
Schroder's active trading strategy will not be successful, which
depends greatly on Schroder's ability to analyze and identify
inefficiencies accurately in fixed-income markets, sectors and issuers,
and to predict market movements generally.
DERIVATIVES. The Fund's use of derivative instruments involves the risk
that the instrument may not work as intended due to unanticipated
developments in market conditions or other causes. Derivatives often
involve the risk that the other party to the transaction will be unable
to meet its obligations or that the Fund will be unable to close out
the position at any particular time or at an acceptable price. When the
Fund uses derivatives for investment purposes, it could lose more than
the original cost of the investment and its potential loss could be
unlimited. Also, suitable derivative transactions may not be available
in all circumstances, and there can be no assurance that the Fund will
engage in these transactions when that would be beneficial.
In the future, the Fund's investment objective and strategies may be
changed solely by vote of the Trustees.
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LARGE CAPITALIZATION EQUITY FUND
(1) The information relating to Schroder Large Capitalization Equity
Fund and Mr. Paul Morris is deleted from the table under "Portfolio Managers" on
page 16 of the Prospectus. Investment decisions for that Fund are made by
Schroder's U.S. equity investment team.
(2) The Board of Trustees of Schroder Series Trust has approved an
Agreement and Plan of Reorganization pursuant to which Schroder Large
Capitalization Equity Fund would merge into Schroder U.S. Diversified Growth
Fund, a series of Schroder Capital Funds (Delaware). If shareholders of Schroder
Large Capitalization Equity Fund likewise approve the Agreement and Plan of
Reorganization, it is expected that the merger will occur in September, 2000.
SHORT-TERM INVESTMENT FUND
Schroder Short-Term Investment Fund has terminated and is no longer
offered to investors.
If you have any questions regarding these matters, please contact
Schroder at (800) 464-3108.
August 11, 2000
