<PAGE>
- --------------------------------------------------------------------------------
Schroder All-Asia Fund
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is long-term capital appreciation through
investment primarily in equity securities of Asian companies.
INVESTMENT ADVISER
Schroder Capital Management International Inc. (the "Investment Adviser") is a
wholly owned indirect subsidiary of Schroders plc, a London Stock Exchange
listed holding company parent of an investment banking and investment management
group of companies (the "Schroder Group") that dates its origins to 1804. The
investment operations of the Schroder Group has been managing international
investment portfolios since the early years of this century. As of June 30,
1998, the Schroder Group had over $195 billion in assets under management. As of
September 30, 1998, the Investment Adviser, together with its U.K. affiliate,
Schroder Capital Management International Ltd., had approximately $24 billion
under management, of which approximately $5.6 billion was invested in the Asian
region.
December 22, 1998
Dear Shareholder:
We are pleased to present the annual report for the Schroder All-Asia Fund
for the fiscal year ended October 31, 1998. This past fiscal year saw markedly
divergent performance among the world's markets, as well as considerable
volatility of performance within certain individual markets. In general, in the
first half of the fiscal year, economic problems appeared largely contained
within Asia and parts of the broader emerging markets universe. In the last
fiscal quarter, European and American markets--which previously had behaved as
if insulated from the difficulties--experienced some volatility.
While Asia experienced a very sharp contraction in 1998, we believe that
activity may be stabilizing, although further structural reforms, especially
within the banking sector, are needed to sustain a significant recovery.
Deflation is likely to appear a bigger risk than inflation in several major
economies, notably Japan. Although deflation is an issue in Japan, we believe
that certain companies in the financial sector with strong earnings visibility
offer good investment opportunities. While it appears unlikely that the world as
a whole is facing a deflationary spiral, the absence of inflationary pressure is
likely to support bond markets and lead to interest rate cuts in many markets.
Correspondingly, however, we believe that the inability of producers of consumer
goods and services to raise prices in these markets, including the U.S., will
hurt corporate profits growth.
We expect further uncertainty and volatility in the year ahead.
Nevertheless, compelling values exist in many emerging and Asian equity markets
after this year's correction, and many high quality stocks have been sold
indiscriminately.
Schroders' investment approach stresses the rewards of identifying high
quality franchises with sustainable growth prospects at attractive valuations.
The present environment presents great scope for our extensive global research
network to identify such opportunities for the long-term benefit of our
investors.
Thank you for your interest in the Schroder All-Asia Fund.
Sincerely,
/s/ I. Peter Sedgwick /s/ Louise Croset
--------------------- -----------------
I. Peter Sedgwick Louise Croset
Chairman President
<PAGE>
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Schroder All-Asia Fund
- --------------------------------------------------------------------------------
MANAGEMENT DISCUSSION AND ANALYSIS
PERFORMANCE
The Schroder All-Asia Fund returned -25.59% (not including the deduction of
maximum applicable sales charges) for the fiscal year ending October 31, 1998.
Had the sales charge been in effect during the entire fiscal period, the Fund's
return would have been -29.51%. Its benchmark, the 50% MSCI Japan Index/50% MSCI
All Country Asia Free ex-Japan Index returned -21.24% over the same period.
Schroder All-Asia Fund is the successor to Schroder Asian Growth Fund, Inc., a
closed-end management investment company, whose assets were acquired by the Fund
on March 20, 1998. (Additional information is included in Note 1 to the Fund's
Financial Statements.) Performance information for periods through March 20,
1998 is that of the Schroder Asian Growth Fund, Inc.
MARKET BACKGROUND
The fiscal year witnessed significant market volatility. Initially,
currency devaluation was confined to the emerging markets, but the contagion
spread to certain developed markets. With the ending of fixed exchange rates,
local interest rates rose significantly throughout the region. The impact of
higher interest rates--and the evidence of a sharp contraction in domestic
demand--led to downgrades in the economic and corporate earnings expectations.
The operating environment of real estate and banking, two significant industries
in the region, deteriorated substantially.
External factors, particularly the crisis in Russia and fears of spreading
contagion in Latin American markets, impacted investor sentiment. Government
intervention in Malaysia and Hong Kong added to concerns. However, in September
and October, investor sentiment improved. Co-ordinated interest rate cuts
worldwide, in response to evidence of slowing global growth, provided the
trigger for Asian markets to rally. The yen strengthened, providing further
support to the region's currencies.
INVESTMENT POLICY
Against the volatile investment background, our investment focus remained
defensive throughout the fiscal year. We favored companies in the consumer
staples, telecommunications, and utility sectors. In general, we emphasized
quality companies with solid domestic franchises. Thus, we:
o Increased our exposure to Japan, with the emphasis on trading companies
and exporters.
o Favored Singapore. The government continued to focus on maintaining
Singapore's competitive advantage over its neighbors.
o Reduced Hong Kong. The macroeconomic environment deteriorated, but
China-related companies focused on infrastructure should benefit from
that country's fiscal spending.
o Favored those emerging markets where governments have been proactive in
response to the current economic crisis, such as Korea.
OUTLOOK
The prospects for this region remain dependent on currency stability and an
environment of lower interest rates. In the short term, markets may well be
influenced additionally by external developments in the U.S. and Brazil.
Economic data still indicates severe stress within the region and we expect that
the Asian economies will remain weak into the first half of 1999. Certain issues
remain key to the longer term outlook for this region. The actions of the
Japanese government remain pivotal. Long term banking and taxation reform would
help restore domestic demand and this would be viewed positively given Japan's
significant demand for Asian product. The level
2
<PAGE>
- --------------------------------------------------------------------------------
Schroder All-Asia Fund
- --------------------------------------------------------------------------------
of non-performing loans in financial institutions, particularly in emerging
economies, remains of concern. However, further rescheduling of debt and
measures to recapitalize the banking system would be viewed favorably by
investors.
In JAPAN, economic data have remained very weak, and a sharp contraction in
growth is expected this year, followed by no growth next year. Faced with two
choices--demand stimulus or restructuring--to address the collapse in corporate
profits, government policy has targeted the former course, in an attempt to push
demand and sales back to a level at which the corporate sector can operate
comfortably. As a consequence, much needed restructuring remains too slow and
government debt has ballooned. However, although the profit outlook is weak,
company restructuring and greater focus on shareholder returns are positive and
we favor companies with proactive management. Our stock selection has emphasized
"quality" stocks with strong financials and good earnings visibility.
Within the region, the HONG KONG economy is currently weak. Unemployment is
rising and consumer demand remains depressed. Real estate prices have fallen
some 50% from their 1997 peaks, prompting the government to announce measures to
stabilize the residential market. As a service based economy, Hong Kong's
economic activity is tied to that of China. While CHINA'S growth rate in 1998 is
slowing, the government in China has initiated a program of substantial fixed
asset investment. Opportunities to participate in China's infrastructure sector
are well represented on the Hong Kong Stock Exchange and portfolio investment
has focused on companies such as China Telecom. More generally we will also look
for opportunities where valuation levels have become very oversold.
MALAYSIA'S imposition of capital controls led to an effective closure of
that stock market. The government has now embarked on a significiant reflation
program. By comparison, events in Malaysia have served to underscore the
strength of SINGAPORE'S government. Here we favor companies that focus on
shareholder value, such as Singapore Press.
Within the emerging markets, our investment focus will remain on countries
that have shown the greatest commitment to reform. THAILAND continues to focus
on financial restructuring. Industrial production and domestic demand are
selectively improving, while currency remains stable and interest rates are
declining. KOREA remains the most advanced in its restructuring process and has
strong recovery prospects. The economy in the PHILIPPINES has begun to show
weakness. INDONESIA continues to be plagued by social unrest.
The views expressed in this report were those of the Fund's portfolio
managers as of December 22, 1998, and may not reflect the views of the portfolio
managers on the date this report is first published or any time thereafter.
These views are intended to assist shareholders of the Fund in understanding
their investments in the Fund and do not constitute investment advice; investors
should consult their own investment professional as to their individual
investment programs.
3
<PAGE>
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Schroder All-Asia Fund
- --------------------------------------------------------------------------------
INVESTMENT ADVISER'S REPORT--COMPARISON OF CHANGE OF VALUE OF $10,000 INVESTMENT
The following information compares a change in value of a $10,000 investment in
the Fund with the performance of a benchmark composed of 50% Morgan Stanley
Capital Information (MSCI) Japan Index/50% MSCI All Country Asia Free ex-Japan
Index (the "Benchmark") since the Fund's inception date of December 31, 1993.
The MSCI Japan Index is an unmanaged index that groups Japanese securities by
industry and the most "investable" stocks (as determined by size, long- and
short-term volume, and free float). The MSCI All Country Asia Free ex-Japan
Index (the "Asia Free Index") is also an unmanaged market capitalization index,
representing 12 developed and emerging markets of the Asia region but excluding
Japan. Both indices reflect actual buyable opportunities for the non-domestic
investor by taking into account local market restrictions on share ownership by
foreigners. The Benchmark is intended to reflect a hypothetical allocation of
the Fund's assets between Schroder Japan Portfolio and Schroder Asian Growth
Fund Portfolio, in which the Fund presently invests all of its assets. As of
October 31, 1998, the Fund had allocated 52.16% of its investable assets to the
Asian Growth Portfolio and the remaining 47.84% to the Japan Portfolio. The
Investment Adviser adjusts those percentages from time to time in response to
market and other factors. The Benchmark is unmanaged and excludes the effect of
any expenses and a 5.25% sales charge, which have been deducted from the Fund's
return. The Fund's return reflects deduction of applicable fees and expenses;
Benchmark return does not reflect deduction of any fees and expenses. For
periods prior to March 20, 1998, the performance information includes data
relating to Schroder Asian Growth Fund, Inc. Such performance was then adjusted
to reflect the deduction of the maximum sales charge applicable to Class A
shares of the Fund. Total return and principal value of an investment in the
Fund will fluctuate so that an investor's shares, when redeemed, may be worth
more or less than their original cost. Past performance cannot predict or
guarantee future results.
- --------------------------------------------------------------------------------
4
<PAGE>
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Schroder All-Asia Fund
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTED ON 12/31/93
SCHRODER ALL-ASIA FUND VS 50% MSCI JAPAN INDEX/50% MSCI ALL COUNTRY ASIA FREE
EX-JAPAN INDEX
Investment Value on 10/31/98
- ----------------------------
Schroder All-Asia Fund $4,700
50% MSCI Japan Index/
50% MSCI All Country
Asia Free ex-Japan Index $6,301
Average Annual Total Return on 10/31/98
Since
1 Year Inception
------ -------------
Schroder All-Asia Fund -29.51% -14.45%(a)(b)
[Plot Points represent Line Graph in Printed Copy]
50% MSCI Japan Index/
Schroder 50% MSCI All Country
All-Asia Fund Asia Free ex-Japan Index
12/31/93 $9,475.00 $10,000.00
1/31/94 $9,251.82 $10,465.72
2/28/94 $9,123.32 $10,479.85
3/31/94 $8,440.26 $9,692.66
4/30/94 $8,744.59 $10,084.85
5/31/94 $8,967.77 $10,384.85
6/30/94 $8,791.93 $10,466.33
7/31/94 $8,879.85 $10,550.15
8/31/94 $9,441.18 $11,006.79
9/30/94 $9,143.61 $10,764.36
10/31/94 $9,360.03 $10,996.08
11/30/94 $8,710.78 $10,233.91
12/31/94 $8,676.96 $10,149.45
1/31/95 $7,831.58 $9,332.06
2/28/95 $8,075.05 $9,496.41
3/31/95 $8,193.26 $9,930.30
4/30/95 $8,054.76 $10,103.86
5/31/95 $8,744.59 $10,359.79
6/30/95 $8,663.44 $10,030.39
7/31/95 $9,001.59 $10,523.72
8/31/95 $8,764.88 $10,069.51
9/30/95 $8,805.46 $10,172.27
10/31/95 $8,534.94 $9,800.37
11/30/95 $8,365.96 $9,979.18
12/31/95 $8,798.70 $10,480.99
1/31/96 $9,475.00 $10,919.43
2/29/96 $9,447.95 $10,782.17
3/31/96 $9,461.47 $11,011.94
4/30/96 $9,826.68 $11,523.32
5/31/96 $9,698.18 $11,162.10
6/30/96 $9,664.36 $11,108.56
7/31/96 $9,136.85 $10,449.67
8/31/96 $9,239.29 $10,373.96
9/30/96 $9,292.40 $10,642.80
10/31/96 $8,893.38 $10,184.87
11/30/96 $9,211.24 $10,522.56
12/31/96 $9,292.40 $10,140.65
1/31/97 $9,231.53 $9,693.58
2/28/97 $9,251.82 $9,848.23
3/31/97 $8,818.99 $9,407.82
4/30/97 $8,656.67 $9,508.12
5/31/97 $9,292.40 $10,248.24
6/30/97 $9,684.65 $10,818.73
7/31/97 $9,502.05 $10,699.18
8/31/97 $7,818.06 $9,296.49
9/30/97 $7,730.14 $9,195.51
10/31/97 $6,316.67 $7,745.03
11/30/97 $5,917.65 $7,241.81
12/31/97 $5,735.05 $6,899.49
1/31/98 $5,376.61 $6,909.03
2/28/98 $6,134.06 $7,659.50
3/31/98 $5,883.83 $7,342.59
4/30/98 $5,538.92 $7,005.94
5/31/98 $4,889.67 $6,278.93
6/30/98 $4,558.28 $5,970.58
7/31/98 $4,456.83 $5,855.54
8/31/98 $3,936.08 $5,100.09
9/30/98 $4,172.79 $5,293.32
10/31/98 $4,700.30 $6,300.59
(a) Inception date is December 31, 1993.
(b) The Fund converted from Schroder Asian Growth Fund, Inc. on
March 20, 1998.
The Schroder All-Asia Fund's average annual total return as of the calendar
quarter ended December 31, 1998, for the 1 and 5 year periods, was -14.41% and
- -12.32%, respectively.
5
<PAGE>
- --------------------------------------------------------------------------------
Schroder All-Asia Fund
- --------------------------------------------------------------------------------
PORTFOLIO CHARACTERISTICS AS OF OCTOBER 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
COUNTRY WEIGHTINGS
COUNTRY % OF NET ASSETS
- ----------------------------------------------------------
<S> <C>
Japan 45.85%
Hong Kong 20.24%
Singapore 6.73%
Taiwan 5.47%
Korea, Republic of 5.46%
Malaysia 4.46%
India 3.50%
Philippines 1.71%
Thailand 0.85%
China 0.53%
Cash and Other Net Assets 5.20%
-------
Total 100.00%
-------
-------
</TABLE>
TOP TEN HOLDINGS
<TABLE>
<CAPTION>
SECURITY % OF NET ASSETS
- ----------------------------------------------------------
<S> <C>
Takeda Chemical Ind. 2.88%
Cheung Kong 2.81%
Sun Hung Kai Properties 2.57%
Hutchison Whampoa 2.35%
Fuji Photo Film Co. 2.30%
China Telecom (Hong Kong) 2.08%
Matsushita Electric Ind. 2.05%
CLP Holdings Ltd. 2.02%
Samsung Electronics 1.92%
Bridgestone Corp. 1.90%
-------
Total 22.88%
-------
-------
</TABLE>
6
<PAGE>
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Schroder All-Asia Fund
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments in Portfolios (Notes 1 and 2):
Schroder Asian Growth Fund Portfolio $ 22,496,246
Schroder Japan Portfolio 20,635,520
Receivable for Fund shares sold 196
Receivable from Administrator (Note 4) 36,952
Other receivables 2,317
Organization costs, net of amortization (Note 2) 5,586
------------
Total Assets 43,176,817
------------
LIABILITIES:
Payable for Fund shares redeemed 215,866
Payable to Subadministrator (Note 3) 1,800
Accrued expenses and other liabilities 172,050
------------
Total Liabilities 389,716
------------
Net Assets $ 42,787,101
------------
------------
COMPONENTS OF NET ASSETS:
Paid-in capital $147,891,701
Undistributed net investment income (loss) 65,941
Accumulated net realized gain (loss) (93,995,520)
Net unrealized appreciation (depreciation) on investments (11,175,021)
------------
Net Assets $ 42,787,101
------------
------------
SHARES OF BENEFICIAL INTEREST 6,157,481
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
(NET ASSETS DIVIDED BY SHARES OF BENEFICIAL INTEREST) $6.95
OFFERING PRICE PER SHARE (NAV DIVIDED BY (1-MAXIMUM SALES LOAD)) $7.34
MAXIMUM SALES LOAD 5.25%
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
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Schroder All-Asia Fund
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
OCTOBER 31, 1998
------------------
<S> <C>
INVESTMENT INCOME (NOTE 1):
Dividend income (Net of foreign withholding taxes of $6,471) $ 402,100
Interest income 492,511
------------
Total Investment Income 894,611
------------
NET INVESTMENT INCOME ALLOCATED FROM THE PORTFOLIOS (NOTE 1):
Dividend income (Net of foreign withholding taxes of $119,295) 908,003
Interest income 163,815
Net expenses (416,789)
------------
Net Investment Income Allocated from the Portfolios 655,029
------------
Total Income 1,549,640
------------
EXPENSES:
Investment advisory (Note 3) 536,538
Asset allocation (Note 3) 74,023
Administration (Note 3) 152,641
Subadministration (Note 3) 18,506
Shareholder services (Note 3) 92,529
Transfer agency (Note 3) 132,525
Custody 45,823
Accounting (Note 3) 7,290
Reporting 67,515
Registration 34,114
Audit 24,518
Amortization of organization costs (Note 2) 33,982
Legal 135,197
Trustees 27,313
Miscellaneous 57,423
------------
Total Expenses 1,439,937
Fees waived and expenses reimbursed (Note 4) (145,318)
------------
Net Expenses 1,294,619
------------
NET INVESTMENT INCOME (LOSS) 255,021
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized gain (loss) on investments sold (65,195,603)
Net realized gain (loss) on foreign currency transactions (133,493)
------------
Net realized gain (loss) on investments and foreign
currency transactions (a)(b) (65,329,096)
------------
Net change in unrealized appreciation (depreciation) on
investments 34,751,012
Net change in unrealized appreciation (depreciation) on foreign
currency transactions 1,854
------------
Net change in unrealized appreciation (depreciation) on
investments and foreign currency transactions (a) 34,752,866
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS (30,576,230)
------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $(30,321,209)
------------
------------
</TABLE>
(a) Realized and unrealized gain (loss) passed through from portfolios was
$(18,825,086) and $(3,007,862), respectively.
(b) Includes capital gains tax paid for sales of Indian securities in the amount
of $55,587.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
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Schroder All-Asia Fund
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED OCTOBER 31,
------------------------------------
1998 1997
---------------- ----------------
<S> <C> <C>
NET ASSETS, BEGINNING OF PERIOD $ 150,405,575 $ 257,844,712
-------------- --------------
OPERATIONS:
Net investment income (loss) 255,021 (716,825)
Net realized gain (loss) on investments and
foreign currency transactions (65,329,096) 3,109,202
Net change in unrealized appreciation
(depreciation) on investments and foreign
currency transactions 34,752,866 (62,127,283)
-------------- --------------
Net increase (decrease) in net assets
resulting from operations (30,321,209) (59,734,906)
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- (1,826,573)
-------------- --------------
CAPITAL SHARE TRANSACTIONS:
Sale of shares 497,253 --
Fee charge on redemption of shares (Note 5) 1,447,222 --
Redemption of shares (79,241,740) --
Cost of shares redeemed pursuant to tender
offer (Note 6) -- (45,640,000)
Tender offer costs charged to paid in capital
in excess of par (Note 6) -- (237,658)
-------------- --------------
Net increase (decrease) from capital share
transactions (77,297,265) (45,877,658)
-------------- --------------
Net increase (decrease) in net assets (107,618,474) (107,439,137)
-------------- --------------
NET ASSETS, END OF PERIOD (INCLUDING LINE A) $ 42,787,101 $ 150,405,575
-------------- --------------
-------------- --------------
(A) Undistributed net investment income (loss) $ 65,941 $ (245,643)
-------------- --------------
-------------- --------------
SHARE TRANSACTIONS
Sale of shares 72,790 --
Redemption of shares (10,022,409) --
-------------- --------------
Net increase (decrease) in shares (9,949,619) --
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
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Schroder All-Asia Fund
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FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a share outstanding throughout each
period:
<TABLE>
<CAPTION>
For the Period
For the Year Ended October 31, December 30, 1993 (b)
---------------------------------------------- to October 31,
1998 (a) 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period $ 9.34 $ 13.15 $ 12.62 $ 13.84 $ 14.01 (c)
-------- -------- -------- -------- ---------
Investment Operations
Net Investment Income (Loss) 0.02 (d) (0.05) (0.03) 0.02 (0.01)
Net Realized and
Unrealized Gain (Loss)
on Investments and foreign
currency transactions (2.57) (3.66) 0.56 (1.24) (0.16)
-------- -------- -------- -------- ---------
Total from Investment
Operations (2.55) (3.71) 0.53 (1.22) (0.17)
-------- -------- -------- -------- ---------
Distributions from
Net Investment Income -- (0.09) -- -- --
-------- -------- -------- -------- ---------
Tender offer costs charged to
paid-in-capital in excess of
par -- (0.01) -- -- --
-------- -------- -------- -------- ---------
Redemption Fee 0.16 -- -- -- --
-------- -------- -------- -------- ---------
Net Asset Value, End of
Period $ 6.95 $ 9.34 $ 13.15 $ 12.62 $ 13.84
-------- -------- -------- -------- ---------
-------- -------- -------- -------- ---------
Market Value, End of Period N/A $ 8.50 $ 12.00 $ 11.13 $ 12.00
-------- -------- -------- -------- ---------
-------- -------- -------- -------- ---------
Total investment return based
on (e):
Market Value N/A (28.62)% 7.87% (7.29)% (20.00)%
-------- -------- -------- -------- ---------
-------- -------- -------- -------- ---------
Net Asset Value (25.59)% (h) (28.43)% 4.20% (8.82)% (1.21)%
-------- -------- -------- -------- ---------
-------- -------- -------- -------- ---------
Ratio/Supplementary Data:
Net Assets at End of Period
(in thousands) $ 42,787 $150,406 $257,840 $247,490 $ 271,420
Ratios to Average Net Assets:
Expenses including
reimbursement/waiver of fees 1.90% (d) 1.78% 1.57% 1.65% 1.59% (f)
Expenses excluding
reimbursement/waiver of fees 2.13% (d) 1.78% 1.57% 1.65% 1.59% (f)
Net investment income
(loss) including
reimbursement/waiver of fees 0.28% (d) (0.31)% (0.19)% 0.12% (0.10)% (f)
Portfolio Turnover Rate N/A (g) 39% 35% 67% 20%
</TABLE>
(a) The Fund converted from Schroder Asian Growth Fund, Inc., a closed-end fund,
on March 20, 1998 (See Note 1).
(b) Commencement of operations.
(c) Net of $.09 offering expenses.
(d) Includes the Fund's proportionate share of income and expenses of the
Portfolios, which commenced operations on March 23, 1998.
(e) Total returns would have been lower had certain expenses not been reduced
during the periods shown (See Note 4).
(f) Annualized.
(g) Investment securities were not held directly by the Fund (See Note 1).
Portfolio turnover rate is not applicable.
(h) Total return does not include sales charge.
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
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Schroder All-Asia Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
Schroder Series Trust II (the "Trust") was organized as a Delaware
business trust on December 5, 1997. The Trust, which is registered as an
open-end, management investment company under the Investment Company Act of
1940 (the "Act"), currently has one investment portfolio, the Schroder
All-Asia Fund. Included in this report is the Schroder All-Asia Fund (the
"Fund"), a non-diversified portfolio that was converted, as of March 20,
1998, from Schroder Asian Growth Fund, Inc., a closed-end fund that commenced
operations on December 30, 1993. Under its Trust Instrument, the Trust is
authorized to issue an unlimited number of the Fund's Class A Shares of
beneficial interest without par value.
As part of the closed-end fund conversion that occurred on March 20,
1998, the former Schroder Asian Growth Fund, Inc. converted to an open-end,
Core and Gateway(Registered) structure ("the conversion"). The Fund operates
through this structure as a "gateway" fund investing in two "core"
portfolios, managed by the Fund's investment adviser. To effect the
conversion, the Fund, on March 20, 1998, contributed assets invested in Asian
countries other than Japan to a "core" portfolio, the Schroder Asian Growth
Fund Portfolio, and contributed assets invested in Japan to a second "core"
portfolio, the Schroder Japan Portfolio (each a "Portfolio," and,
collectively, the "Portfolios"). Each Portfolio, which commenced operations
on March 23, 1998, is a separately managed, non-diversified investment
portfolio of Schroder Capital Funds ("Schroder Core"). Schroder Core also is
registered as an open-end, management investment company. Since the
conversion, the Fund has invested in the Portfolios in proportions consistent
with the Fund's investment objective. The Fund may withdraw its investment
from a Portfolio at any time if the Trust's Board of Trustees determines that
it is in the best interest of the Fund and its shareholders to do so. The
Fund accounts for its investment in each Portfolio as a partnership
investment and records daily its share of each Portfolio's income, expenses
and realized and unrealized gain and loss. The Portfolios' financial
statements are included later in this report and should be read in
conjunction with the Fund's financial statements. As of October 31, 1998, the
Fund owns substantially all of the interests in the Schroder Asian Growth
Fund Portfolio and the Schroder Japan Portfolio, respectively, and is deemed,
for purposes of the Act, to control the Portfolios.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with generally
accepted accounting principles, which require management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of increase and decrease in net assets
from operations during the fiscal period. Actual amounts could differ from
those estimates.
The following represent significant accounting policies of the Fund:
SECURITY VALUATION
Effective March 23, 1998, the Trust determines the net asset value per
share of the Fund as of the close of trading on the New York Stock Exchange
on each Fund business day. Valuation of securities held in each Portfolio is
discussed in the Notes to the Financial Statements of the Portfolios.
Through March 20, 1998, securities listed on recognized stock exchanges
were valued at the last reported sale price on the exchange on which the
securities are principally traded. Listed securities traded on recognized
stock exchanges where last sale prices are not available were valued at the
last sale price prior to the time of determination. If there was no sales
price on such date, and if bid and asked quotations were available, such
securities were valued at the mean between the last current bid and asked
prices. The value of a foreign security was determined in its national
currency as of 9:00 a.m., New York time, and that value was then converted
into its U.S. dollar equivalent on the day of valuation as of 11:30 a.m., New
York time. Other securities and assets for which market quotations were not
readily available were valued at fair value as determined in good faith using
methods approved by the Board of Trustees of Schroder Asian Growth Fund, Inc.
11
<PAGE>
- --------------------------------------------------------------------------------
Schroder All-Asia Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
INVESTMENT INCOME AND EXPENSES
Effective March 23, 1998, the Trust records daily its pro rata share of
the Portfolios' income, expenses and realized and unrealized gain and loss.
In addition, the Fund incurs its own expenses.
Through March 20, 1998, dividend income was recorded on the ex-dividend
date except for certain dividends from foreign securities which were recorded
as soon as the Fund was informed of the ex-dividend date. Interest income was
recorded on the accrual basis. Realized gains and losses from security
transactions were determined on the identified cost basis.
FOREIGN CURRENCY TRANSLATION
Through March 20, 1998, foreign currency amounts denominated in or
expected to settle in foreign currencies ("FC") were translated in U.S.
dollars as follows: (i) assets and liabilities at the rate of exchange at the
end of the respective period; and (ii) purchases and sales of investment
securities and income and expenses at the rate of exchange prevailing on the
respective dates of such transactions.
FORWARD FOREIGN CURRENCY CONTRACTS
Through March 20, 1998, the Fund entered into forward contracts to
purchase or sell FCs to protect against the effect of possible adverse
movements in foreign exchange rates on the U.S. dollar value of the
underlying security. Forward currency contracts were valued at the forward
rate and were marked to market weekly. Fluctuations in the value of such
contracts were recorded as unrealized gains or losses.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends and capital gain distributions, if any, are distributed to
shareholders at least annually and are recorded on the ex-dividend date.
Distributions are based on amounts calculated in accordance with applicable
federal income tax regulations, which may differ from generally accepted
accounting principles. These differences are due primarily to differing
treatments of income and gain on various investment securities held by the
Portfolios, timing differences and differing characterizations of
distributions made by the Fund.
FEDERAL TAXES
The Fund intends to qualify, and continue to qualify, each year as a
regulated investment company and distribute all its taxable income. In
addition, by distributing in each calendar year substantially all its net
investment income, capital gain and certain other amounts, if any, the Fund
will not be subject to a federal excise tax. Therefore, no federal income or
excise tax provision is required.
EXPENSE ALLOCATION
The Trust accounts separately for the assets and liabilities and
operation of each Fund. Expenses that are directly attributable to more than
one fund are allocated among the respective funds in proportion to each
fund's average net assets.
ORGANIZATION COSTS
Costs incurred by the Fund in connection with its organization are
amortized on a straight line basis over a five-year period.
NOTE 3. INVESTMENT ADVISORY AND OTHER SERVICES WITH AFFILIATES
INVESTMENT ADVISER
The Fund currently invests all of its investable assets in the
Portfolios, which retain Schroder Capital Management International Inc.
("SCMI") to act as investment adviser pursuant to an Investment Advisory
Agreement. See Notes to the Financial Statements of each Portfolio. SCMI also
serves as investment adviser to the Fund under an investment advisory and
asset allocation agreement with the Trust. Under this agreement, SCMI is
entitled to receive a monthly investment advisory fee for asset allocation
services at an annual rate of 0.20% of the Fund's average daily net assets
with respect to assets invested in the Portfolios.
12
<PAGE>
- --------------------------------------------------------------------------------
Schroder All-Asia Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Through March 20, 1998, the Fund had an investment advisory agreement
with SCMI which provided for a monthly fee at the annual rate of (1) 1.00% of
the Fund's average weekly net assets up to and including $300 million, and
(2) 0.85% of the Fund's average weekly net assets in excess of $300 million.
The Fund paid or accrued fees to the Adviser of $536,538 for the period prior
to conversion.
ADMINISTRATOR AND SUBADMINISTRATOR
Effective March 23, 1998, the administrator of the Fund is Schroder
Fund Advisors Inc. ("Schroder Advisors") and the subadministrator is Forum
Administrative Services, LLC ("FAdS"). For its services, Schroder Advisors is
entitled to receive compensation at an annual rate, payable monthly, of 0.05%
of the average daily net assets of the Fund. For its services, FAdS is
entitled to receive compensation at an annual rate, payable monthly, of 0.05%
of the average daily net assets of the Fund.
For the period March 23, 1998 to October 31, 1998, Schroder Advisors
retained sales commissions in the amount of $837.
Through March 20, 1998, the Fund retained Princeton Administrators,
L.P. ("Princeton") as the Administrator. Pursuant to their administration
agreement, Princeton received a monthly fee equal to the greater of
(a) $150,000 per annum or (b) an annual rate of (1) 0.25% of the Fund's
average weekly net assets up to and including $300 million, and (2) 0.22% of
the Fund's average weekly net assets in excess of $300 million. The Fund paid
or accrued fees to Princeton of $134,135 for the period prior to conversion.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
The transfer agent and dividend disbursing agent for the Fund is Boston
Financial Data Services.
SHAREHOLDER SERVICE PLAN
Effective March 23, 1998, the Trust has adopted a Shareholder Service
Plan (the "Plan") for Class A Shares under which Schroder Advisors, or other
shareholder servicing organizations, provide administrative support services
to shareholders of the Fund's Class A Shares. For providing for or arranging
for the provision of those shareholder services, Schroder Advisors receives
compensation monthly at an annual rate of up to 0.25% of the average daily
net assets of the Fund attributable to its Class A Shares. Schroder Advisors
may pay shareholder servicing organizations for those services at an annual
rate of up to 0.25%.
OTHER SERVICE PROVIDERS
Effective March 23, 1998, Forum Accounting Services, LLC ("FAcS") is
the Fund's fund accountant. For its services to the Fund, FAcS is entitled to
receive from the Fund a fee of $12,000 per year.
NOTE 4. WAIVER OF FEES AND REIMBURSEMENT OF EXPENSES
Effective March 20, 1998, SCMI and FAcS have agreed to waive
voluntarily all or a portion of their fees (and, if necessary, SCMI and
Schroder Advisors have agreed to assume Fund Expenses), from time to time so
that the Fund's total expenses, including indirect expenses borne by the Fund
as a result of investing in the Portfolio, would not exceed 1.95% of the
Fund's average daily net assets. The expense limitations cannot be modified
or withdrawn except by a majority vote of the Trustees of the Trust who are
not affiliated persons (as defined in the Act) of the Trust. For the year
ended October 31, 1998, SCMI, Schroder Advisors and FAcS waived fees of
$74,024, $60,987 and $3,645, respectively. Schroder Advisors also reimbursed
expenses in the amount of $6,662.
NOTE 5. PURCHASE AND REDEMPTION FEES
Shares redeemed in connection with the conversion of Schroder Asian
Growth Fund, Inc. were subject to a redemption fee of 2.00% for the six-month
period following the conversion on March 20, 1998. Redemption fees collected
by the Fund during the six-month period totaled $1,447,222.
13
<PAGE>
- --------------------------------------------------------------------------------
Schroder All-Asia Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
NOTE 6. CAPITAL STOCK
On February 18, 1997, the Fund's Board of Directors approved a tender
offer (the "Tender Offer") to purchase up to 3.5 million shares of
outstanding common stock. The offer commenced on February 19, 1997 and
expired on March 20, 1997. The Fund received tenders representing 13,268,062
shares of common stock. Pursuant to the terms of the Tender Offer, the Fund
determined to accept 3.5 million common shares. As a result of the Tender
Offer, the Fund purchased 3.5 million shares for a total of $45,640,000. As
of October 31, 1997, costs incurred in connection with the tender offer in
the amount of $237,658 have been charged to paid-in-capital in excess of par.
NOTE 7. FEDERAL INCOME TAXES
As of October 31, 1998, the Fund has capital loss carryovers available
to offset future capital gains as follows:
<TABLE>
<S> <C>
Carryovers expire on October 31, 2003............................................. $ 2,615,657
Carryovers expire on October 31, 2004............................................. $ 26,048,489
Carryovers expire on October 31, 2006............................................. $ 64,861,903
</TABLE>
NOTE 8. BENEFICIAL INTEREST
For the year ended October 31, 1998, there were two shareholders,
otherwise unaffiliated with the Fund, each owning more than 5% of the Fund's
net assets, totaling 41%.
14
<PAGE>
- --------------------------------------------------------------------------------
Schroder All-Asia Fund
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Schroder Series Trust II and Shareholders of Schroder
All-Asia Fund:
In our opinion, the accompanying statement of assets and liabilities and
the related statements of operations and of changes in net assets and the
financial highlights present fairly, in all material respects, the financial
position of the Schroder All-Asia Fund (formerly Schroder Asian Growth Fund,
Inc.) (a separately managed portfolio of Schroder Series Trust II) at
October 31, 1998, and the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 22, 1998
15
<PAGE>
- --------------------------------------------------------------------------------
Schroder Asian Growth Fund Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1998
<TABLE>
<CAPTION>
STOCKS AND WARRANTS - 93.2%
SHARES VALUE US$
- ---------- ----------
<S> <C> <C>
CHINA - 1.0%
COMMON STOCK -
16,500 Huaneng Power International Inc. ADR(a)
Energy $ 226,875
----------
HONG KONG - 38.5%
COMMON STOCK -
154,000 CLP Holdings Ltd.
Finance 864,856
586,000 Chen Hsong Holdings
Finance 61,280
176,000 Cheung Kong Holdings Ltd.
Capital Equipment 1,204,266
316,000 Cheung Kong Infrastructure Holdings
Capital Equipment 803,687
476,000 China Telecom (Hong Kong) Ltd.(a)
Services 894,136
766,000 Cosco Pacific Ltd.
Finance 375,791
59,000 Henderson Land Development Co. Ltd.
Finance 290,209
398,600 Hong Kong and China Gas Co. Ltd.
Energy 566,062
182,000 Hong Kong Electric Holdings Ltd.
Energy 667,304
277,600 Hong Kong Telecommunications Ltd.
Services 555,501
141,000 Hutchison Whampoa Ltd.
Multi-Industry 1,010,289
534,000 South China Morning Post Holdings Ltd.
Services 286,103
158,000 Sun Hung Kai Properties Ltd.
Finance 1,101,500
----------
8,680,984
WARRANTS -
35,800 Hong Kong and China Gas Co. Ltd.
Energy 3,697
----------
Total Hong Kong 8,684,681
----------
INDIA - 6.7%
COMMON STOCK -
31,000 Bajaj Auto Ltd.
Services 405,258
56,500 Bharat Petroleum Corp. Ltd.
Capital Equipment 340,263
20,000 Hindustan Lever Ltd.
Multi-Industry 756,868
<CAPTION>
SHARES VALUE US$
- ---------- ----------
<S> <C> <C>
INDIA (CONCLUDED)
77 Tata Engineering and Locomotive Co. Ltd.
Capital Equipment $ 205
----------
Total India 1,502,594
----------
KOREA, REPUBLIC OF - 10.4%
COMMON STOCK -
76,521 Kookmin Bank(a)
Finance 276,052
16,700 Korea Electric Power Corp.
Energy 297,432
70,700 LG Electronics
Electrical Appliances 626,916
2,000 Pohang Iron and Steel Co. Ltd. (b)
Materials 113,410
7,800 Pohang Iron and Steel Co. Ltd. ADR
Materials 140,400
87 SK Telecom Co. Ltd. (b)
Telecommunications 61,480
20,173 Samsung Electronics Co.
Capital Equipment 825,597
----------
Total Korea, Republic of 2,341,287
----------
MALAYSIA - 8.5% (B) (C)
COMMON STOCK -
222,000 Gamuda Berhad
Services 130,013
171,500 Genting Berhad
Services 219,511
648,000 Island & Peninsular Berhad
Multi-Industry 286,414
313,000 Malaysia International Shipping Berhad
Services 239,798
151,000 Malaysian Assurance Alliance Berhad
Finance 77,865
174,000 Petronas Gas Berhad
Energy 219,507
208,000 RJ Reynolds Berhad
Consumer Non-Durables 112,238
95,000 Tanjong PLC
Finance 63,684
175,000 Telekom Malaysia Berhad
Services 217,545
440,000 Tenaga Nasional Berhad
Energy 348,442
----------
Total Malaysia 1,915,017
----------
</TABLE>
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
Schroder Asian Growth Fund Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONCLUDED)
OCTOBER 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE US$
- ---------- ----------
<S> <C> <C>
PHILIPPINES - 3.3%
COMMON STOCK -
715,000 Ayala Land Inc.
Finance $ 217,076
132,300 Manila Electric Co. "B" Shares
Energy 390,190
5,340 Philippine Long Distance Telephone Co.
Telecommunications 127,714
----------
Total Philippines 734,980
----------
SINGAPORE - 12.8%
COMMON STOCK -
148,000 City Developments Ltd.
Finance 536,298
67,000 Singapore Airlines Ltd.
Capital Equipment 411,497
85,344 Singapore Press Holdings Ltd.
Services 739,070
160,000 Singapore Technologies Engineering Ltd.
Technology 157,229
178,000 Singapore Telecommunications Ltd.
Services 307,198
115,880 United Overseas Bank Ltd.
Finance 544,455
58,000 Venture Manufacturing (Singapore) Ltd.
Services 192,360
----------
Total Singapore 2,888,107
----------
TAIWAN - 10.4%
COMMON STOCK -
34,000 Asustek Computer, Inc.(a)
Capital Equipment 251,362
133,000 Cathay Life Insurance Co.
Services 469,102
681,000 China Steel Corp.
Materials 461,509
<CAPTION>
SHARES VALUE US$
- ---------- ----------
<S> <C> <C>
TAIWAN (CONCLUDED)
117,000 D-Link Corp.(a)
Materials $ 257,693
175,000 Nan Ya Plastic Corp.(a)
Materials 221,020
144,000 Siliconware Precision Industries Co.(a)
Materials 230,662
219,000 Taiwan Semiconductor Manufacturing
Co.(a)
Energy 441,871
-----------
Total Taiwan 2,333,219
-----------
THAILAND - 1.6%
COMMON STOCK -
4,000 Advanced Info Service Public Co. Ltd.
Services 29,393
68,000 Electricity Generating Public Co.
Ltd.(a) Services 179,513
16,000 PTT Exploration and Production Public
Co. Ltd.(a)
Energy 154,148
-----------
Total Thailand 363,054
-----------
Total Investments - 93.2%
(cost $26,436,189) 20,989,814
Other Assets Less Liabilities - 6.8% 1,541,612
-----------
Total Net Assets - 100.0% $22,531,426
-----------
-----------
</TABLE>
- ------------------
ADR - American Depository Receipt.
(a) Non-income producing security.
(b) Priced at fair value as determined by the Investment Adviser and approved by
the Board of Trustees (Note 2).
(c) Illiquid (Note 7).
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
Schroder Asian Growth Fund Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments (Note 2):
Investments at cost $26,436,189
Net unrealized appreciation (depreciation) (5,446,375)
-----------
Total Investments at value 20,989,814
Cash 1,093,033
Receivable for dividends and interest 91,618
Receivable for investments sold 424,851
Organization costs, net of amortization (Note 2) 3,338
-----------
Total Assets 22,602,654
-----------
LIABILITIES:
Payable to investment adviser (Note 3) 23,793
Payable to administrator (Note 3) 983
Payable to subadministrator (Note 3) 983
Accrued expenses and other liabilities 45,469
-----------
Total Liabilities 71,228
-----------
Net Assets $22,531,426
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
- --------------------------------------------------------------------------------
Schroder Asian Growth Fund Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
March 23, 1998
(commencement of operations)
to October 31, 1998
----------------------------
<S> <C>
INVESTMENT INCOME:
Dividend income (net of foreign withholding taxes of $87,154) $ 728,307
Interest income 107,961
------------
Total Investment Income 836,268
------------
EXPENSES:
Investment advisory (Note 3) 159,392
Administration (Note 3) 11,385
Subadministration (Note 3) 15,274
Transfer agency (Note 3) 7,336
Custody 19,855
Accounting (Note 3) 37,452
Legal 9,516
Audit 24,500
Pricing 3,620
Trustees 1,057
Amortization of organization costs (Note 2) 462
Miscellaneous 57
------------
Total Expenses 289,906
Fees waived (Note 6) (25,254)
------------
Net Expenses 264,652
------------
NET INVESTMENT INCOME 571,616
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) on investments (15,843,254)
Net realized gain on foreign currency transactions 2,716
------------
Net realized gain (loss) on investments and foreign
currency transactions (15,840,538)
------------
Net change in unrealized appreciation (depreciation) on investments (4,111,203)
Net change in unrealized appreciation (depreciation) on foreign
currency transactions (4,646)
------------
Net change in unrealized appreciation (depreciation)
on investments and foreign currency transactions (4,115,849)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS (19,956,387)
------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $(19,384,771)
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
- --------------------------------------------------------------------------------
Schroder Asian Growth Fund Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Period
March 23, 1998
(commencement of operations)
to October 31, 1998
----------------------------
<S> <C>
NET ASSETS, BEGINNING OF PERIOD $ --
------------
OPERATIONS:
Net investment income 571,616
Net realized gain (loss) on investments (15,840,538)
Net change in unrealized appreciation (depreciation) on investments (4,115,849)
------------
Net increase (decrease) in net assets resulting from operations (19,384,771)
------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST:
Contributions (a) 93,722,315
Withdrawals (51,806,118)
------------
Net increase in net assets from transactions in investors' beneficial
interest 41,916,197
------------
Net increase in net assets 22,531,426
------------
NET ASSETS, END OF PERIOD $ 22,531,426
------------
------------
</TABLE>
(a) Includes initial contribution from Core and Gateway(Registered) structure
conversion of $85,862,089 (Note 1).
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
- --------------------------------------------------------------------------------
Schroder Asian Growth Fund Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Portfolio performance for the following period:
<TABLE>
<CAPTION>
For the Period
March 23, 1998
(commencement of operations)
to October 31, 1998
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
Ratio to Average Net Assets:
Expenses including waiver of fees 1.16% (a)
Expenses excluding waiver of fees 1.27% (a)
Net investment income including waiver of fees 2.51% (a)
Portfolio Turnover Rate 100%
</TABLE>
(a) Annualized.
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
- --------------------------------------------------------------------------------
Schroder Asian Growth Fund Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
Schroder Capital Funds ("Schroder Core") was organized as a Delaware
business trust on September 7, 1995. Schroder Core, which is registered as an
open-end, management investment company under the Investment Company Act of
1940, currently has eight investment portfolios, including the Schroder Asian
Growth Fund Portfolio (the "Portfolio"), a diversified portfolio that
received assets invested in Asian countries other than Japan from Schroder
Asian Growth Fund, Inc. in that Fund's Core and Gateway(Registered) structure
conversion and commenced operations on March 23, 1998. The net assets
received as a result of the conversion amounted to $85,862,089, which
included unrealized depreciation of $1,248,006. Under its Trust Instrument,
Schroder Core is authorized to issue an unlimited number of interests without
par value. Interests in the Portfolio are sold in private placement
transactions without any sales charges to qualified investors, including
open-end, management investment companies.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with generally
accepted accounting principles, which require management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of increase and decrease in net assets
from operations during the fiscal period. Actual amounts could differ from
those estimates.
The following represent significant accounting policies of the
Portfolio:
SECURITY VALUATION
Portfolio securities listed on recognized stock exchanges are valued at
the last reported sale price on the exchange on which the securities are
principally traded. Listed securities traded on recognized stock exchanges
where last sale prices are not available are valued at the mean of the
closing bid and ask prices ("mid-market price"), or, if none, the last sale
price on the preceding trading day. Securities traded in over-the-counter
markets, or listed securities for which no trade is reported on the valuation
date, generally are valued at the most recent reported mid-market price.
Domestic short-term investments having a maturity of 60 days or less,
generally are valued at amortized cost, which approximates market value.
Foreign short-term investments are valued at current market price, then
marked to market to recognize any gain or loss on the transaction. Prices
used for valuation may be provided by independent pricing services. Other
securities and assets for which market quotations are not readily available
are valued at fair value as determined in good faith using methods approved
by Schroder Core's Board of Trustees. As of October 31, 1998, the Portfolio
held 12 fair valued securities with an aggregate market value of $2,089,907,
representing 9.3% of the total net assets of the Portfolio.
SECURITY TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on the trade date. Dividend
income is recorded on the ex-dividend date except that certain dividends from
foreign securities where the ex-dividend date may have passed are recorded as
soon as the Portfolio is informed of the ex-dividend date. Dividend income is
recorded net of unrecoverable withholding tax. Interest income, including
accretion of discount, is recorded as earned. Identified cost of investments
sold is used to determine gain and loss for both financial statement and
federal income tax purposes. Foreign dividend and interest income amounts and
realized capital gain and loss are converted to U.S. dollar equivalents using
foreign exchange rates in effect at the date of the transactions.
Foreign currency amounts are translated into U.S. dollars at the mean
of the bid and asked prices of such currencies against U.S. dollars as
follows: (i) assets and liabilities at the rate of exchange at the end of the
respective period; and (ii) purchases and sales of securities and income and
expenses at the rate of exchange
22
<PAGE>
- --------------------------------------------------------------------------------
Schroder Asian Growth Fund Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
prevailing on the dates of such transactions. The portion of the results of
operations arising from changes in the exchange rates and the portion due to
fluctuations arising from changes in the market prices of securities are not
isolated. Such fluctuations are included with the net realized and unrealized
gain or loss on investments.
The Portfolio may enter into forward contracts to purchase or sell
foreign currencies to protect the U.S. dollar value of the underlying
portfolio against the effect of possible adverse movements in foreign
exchange rates. Risks associated with such contracts include the movement in
value of the foreign currency relative to the U.S. dollar and the ability of
the counterparty to perform. Fluctuations in the value of such contracts are
recorded daily as unrealized gain or loss; realized gain or loss includes net
gain or loss on contracts that have terminated by settlement or by the
Portfolio entering into offsetting commitments.
REPURCHASE AGREEMENTS
The Portfolio may invest in repurchase agreements. The Portfolio,
through its custodian, receives delivery of the underlying collateral, whose
market value must always equal or exceed the repurchase price. The investment
adviser is responsible for determining the value of the underlying collateral
at all times. In the event of default, the Portfolio may have difficulties
with the disposition of any securities held as collateral.
EXPENSE ALLOCATION
Schroder Core accounts separately for the assets and liabilities and
operation of each of its portfolios. Expenses that are directly attributable
to more than one portfolio are allocated among the respective portfolios in
proportion to each portfolio's net assets.
ORGANIZATION COSTS
Costs incurred by the Portfolio in connection with its organization are
amortized on a straight line basis over a five-year period.
NOTE 3. INVESTMENT ADVISORY AND OTHER SERVICES WITH AFFILIATES
INVESTMENT ADVISER
Schroder Capital Management International Inc. ("SCMI") is the
investment adviser to the Portfolio. Pursuant to an Investment Advisory
Agreement, SCMI is entitled to receive an annual fee, payable monthly, of
0.70% of the average daily net assets of the Portfolio.
ADMINISTRATOR AND SUBADMINISTRATOR
The administrator of the Portfolio is Schroder Advisors Inc. ("Schroder
Advisors"). The subadministrator of the Portfolio is Forum Administrative
Services, LLC, ("FAdS"). Pursuant to their agreements, Schroder Advisors and
FAdS provide certain management and administrative services to the Portfolio.
For their services, Schroder Advisors and FAdS are each entitled to receive
an annual fee, payable monthly, of 0.05% of the Portfolio's average daily net
assets, subject to a minimum annual fee of $25,000 payable to FAdS for
subadministration.
OTHER SERVICE PROVIDERS
Forum Accounting Services, LLC ("FAcS") performs portfolio accounting
for the Portfolio and is entitled to receive compensation for those services
in the amount of $60,000 per year, plus certain amounts based upon the number
and types of portfolio transactions. FAcS also serves as the Portfolio's
transfer agent and is entitled
23
<PAGE>
- --------------------------------------------------------------------------------
Schroder Asian Growth Fund Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
to compensation for those services from Schroder Core with respect to the
Portfolio in the amount of $12,000 per year, plus certain other fees and
expenses.
NOTE 4. PURCHASES AND SALES OF SECURITIES
The cost of securities purchased and the proceeds from sales of
securities (excluding short-term securities) for the period ended
October 31, 1998, aggregated $76,379,942 and $34,100,918, respectively.
For federal income tax purposes, the tax basis of investment securities
owned as of October 31, 1998, was $26,697,304, and the net unrealized
depreciation of investment securities was $5,707,490. The aggregate gross
unrealized appreciation for all securities in which there was an excess of
market value over tax cost was $1,497,434, and the aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost over
market value was $7,204,924.
NOTE 5. FEDERAL TAXES
The Portfolio is not required to pay federal income taxes on its net
investment income and net capital gain as it is treated as a partnership for
federal income tax purposes. All interest, dividends, gain and loss of the
Portfolio are deemed to have been "passed through" to the partners in
proportion to their holdings in the Portfolio regardless of whether such
interest, dividends or gain have been distributed by the Portfolio.
Under the applicable foreign tax law, a withholding tax may be imposed
on interest, dividends, and capital gains at various rates. The Portfolio
provides for taxes on realized gains on Indian securities sold and unrealized
appreciation on Indian securities held.
NOTE 6. WAIVER OF FEES
SCMI, Schroder Advisors, FAdS and FAcS may voluntarily waive all or a
portion of their fees from time to time. For the period ended October 31,
1998, SCMI, FAdS and FAcS waived fees of $12,252, $3,889 and $9,113,
respectively.
NOTE 7. CONCENTRATION OF RISK
The Portfolio's investments in companies domiciled in Asian countries
other than Japan, including countries with limited or developing markets, may
cause the Portfolio to be more susceptible to political, social and economic
events adversely affecting Asian countries in which it invests than
portfolios not so concentrated.
Effective September 1, 1998, the Malaysian government has suspended the
repatriation of the proceeds from the sale of all Malaysian securities until
at least September 1, 1999, causing the Portfolio's holdings in Malaysian
securities to be deemed "illiquid". However, Malaysian securities are freely
trading on the Kuala Lumpur Stock Exchange and price quotations are readily
available. The value of the Portfolio's Malaysian holdings have been
calculated as of October 31, 1998, using the local price quotations converted
to U.S. dollars at a discounted exchange rate determined in accordance with
the Portfolio's fair valued pricing procedures.
24
<PAGE>
- --------------------------------------------------------------------------------
Schroder Asian Growth Fund Portfolio
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Schroder Capital Funds and Interestholders of Schroder Asian
Growth Fund Portfolio:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Schroder Asian Growth Fund
Portfolio (a separately managed portfolio of Schroder Capital Funds) at
October 31, 1998, and the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 22, 1998
25
<PAGE>
- --------------------------------------------------------------------------------
Schroder Japan Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK - 95.2%
SHARES VALUE US$
- ------- ------------
<S> <C> <C>
CAPITAL EQUIPMENT - 21.6%
50,000 Amada Metrecs Co., Ltd. $ 205,962
35,000 Daiwa House Industry Co., Ltd. 394,975
16,000 Glory Ltd. 193,604
28,000 Inaba Denkisangyo Co., Ltd. 204,245
2,800 Kyocera Corp. 123,749
15,000 Meiko Shokai 225,271
22,000 Murata Manufacturing Co., Ltd. 741,977
4,000 Rohm Co., Ltd 353,568
28,000 Sanki Engineering Co., Ltd. 164,598
3,800 SMC Corp. 286,647
9,700 Sony Corp. 615,997
155,000 Sumitomo Metal Industries Ltd. 164,941
25,000 Toyota Motor Corp. 600,722
20,000 Yamatake Corp. 196,693
------------
4,472,949
------------
CONSUMER DURABLES - 10.3%
60,000 Matsushita Electric Industrial
Co., Ltd. 881,001
38,000 Takeda Chemical Industries 1,235,942
------------
2,116,943
------------
CONSUMER NON-DURABLES - 0.6%
5,200 Aoyamma Trading Co., Ltd.B54 128,296
------------
ELECTRIC - 8.3%
27,000 Fuji Photo Film Co. 989,388
144,000 Hitachi Ltd. 732,812
------------
1,722,200
------------
ENERGY - 2.6%
31,000 Nittetsu Mining Co., Ltd. 77,948
73,000 Showa Shell Sekiyu 467,971
------------
545,919
------------
FINANCE - 11.5%
49,000 Asahi Bank Ltd. 163,997
20,700 Credit Saison Co., Ltd. 487,627
91,000 KOA Fire & Marine Insurance Co.,
Ltd. 273,328
50,000 Nomura Securities Co., Ltd. 377,597
55,000 Sumitomo Marine & Fire Insurance
Co., Ltd. 321,901
151,000 Yasuda Fire & Marine Insurance
Co., Ltd. 743,814
------------
2,368,264
------------
<CAPTION>
SHARES VALUE US$
- ------- ------------
<S> <C> <C>
MATERIALS - 10.4%
37,000 Bridgestone Corp. $ 814,450
38,000 Kuraray Co., Ltd. 405,350
75,000 Nippon Paper Industries Co. 299,932
19,000 Nitto Denko Corp. 229,905
36,000 Oji Paper Co., Ltd. 146,748
80,000 Sakata Inx Corp. 258,139
------------
2,154,524
------------
MULTI-INDUSTRY - 5.8%
99,000 Mitsui & Co., Ltd. 528,446
55,000 Sumitomo Corp. 263,374
32,000 TOC Co., Ltd. 298,782
11,000 Trusco Nakayama Corp. 102,801
------------
1,193,403
------------
SERVICES - 23.5%
88,000 Airport Facilities Co., Ltd. 287,729
22,000 Banyu Pharmaceutical Co., Ltd. 373,632
9,000 Chubu-Nippon Broadcast Co., Ltd. 77,236
85 East Japan Railway Co. 504,048
111,000 Hanshin Electric Railway Co.,
Ltd. 351,499
9,000 Ito-Yokado Co., Ltd. 525,202
24,000 Japan Airport Terminal Co., Ltd. 127,490
13,000 Kinden Corp. 174,149
62,000 Mitsubishi Corp. 328,286
13 NTT Mobile Communication
Network, Inc. 469,679
40,000 Omron Corp. 391,327
2,000 Secom Co., Ltd. 148,464
39,000 Sekisui House, Ltd. 388,573
70,000 Toppan Printing Co., Ltd. 717,862
------------
4,865,176
------------
TRANSPORTATION SERVICES - 0.6%
15,000 Yusen Air & Sea Service Co.,
Ltd. 117,140
------------
Total Investments - 95.2%
(cost $25,413,562) 19,684,814
Other Assets Less
Liabilities - 4.8% 998,751
------------
Total Net Assets - 100.0% $ 20,683,565
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
- --------------------------------------------------------------------------------
Schroder Japan Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments (Note 2):
Investments at cost $ 25,413,562
Net unrealized appreciation (depreciation) (5,728,748)
------------
Total Investments at value 19,684,814
Cash 556,913
Receivable for dividends and interest 55,548
Receivable for investments sold 436,148
Organization costs, net of amortization (Note 2) 3,338
------------
Total Assets 20,736,761
------------
LIABILITIES:
Payable to investment adviser (Note 3) 13,621
Payable to administrator (Note 3) 845
Payable to subadministrator (Note 3) 845
Accrued expenses and other liabilities 37,885
------------
Total Liabilities 53,196
------------
Net Assets $ 20,683,565
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
- --------------------------------------------------------------------------------
Schroder Japan Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Period
March 23, 1998
(commencement of operations)
to October 31, 1998
----------------------------
<S> <C>
INVESTMENT INCOME:
Dividend income (net of foreign withholding taxes of $32,141) $ 180,673
Interest income 56,016
------------
Total Investment Income 236,689
------------
EXPENSES:
Investment advisory (Note 3) 84,686
Administration (Note 3) 7,699
Subadministration (Note 3) 15,274
Transfer agency (Note 3) 7,336
Custody 4,168
Accounting (Note 3) 36,452
Legal 6,046
Audit 24,500
Pricing 3,543
Trustees 723
Amortization of organization costs (Note 2) 462
Miscellaneous 48
------------
Total Expenses 190,937
Fees waived (Note 6) (38,238)
------------
Net Expenses 152,699
------------
NET INVESTMENT INCOME 83,990
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) on investments (2,995,326)
Net realized gain (loss) on foreign currency transactions (13,833)
------------
Net realized gain (loss) on investments and foreign currency
transactions (3,009,159)
------------
Net change in unrealized appreciation (depreciation) on investments 1,185,377
Net change in unrealized appreciation (depreciation) on foreign
currency transactions 7,575
------------
Net change in unrealized appreciation (depreciation) on
investments and foreign currency transactions 1,192,952
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS (1,816,207)
------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (1,732,217)
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
- --------------------------------------------------------------------------------
Schroder Japan Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Period
March 23, 1998
(commencement of operations)
to October 31, 1998
----------------------------
<S> <C>
NET ASSETS, BEGINNING OF PERIOD $ --
------------
OPERATIONS:
Net investment income 83,990
Net realized gain (loss) on investments (3,009,159)
Net change in unrealized appreciation (depreciation) on investments 1,192,952
------------
Net increase (decrease) in net assets resulting from operations (1,732,217)
------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST:
Contributions (a) 57,952,999
Withdrawals (35,537,217)
------------
Net increase in net assets from transactions in investors' beneficial
interest 22,415,782
------------
Net increase in net assets 20,683,565
------------
NET ASSETS, END OF PERIOD $ 20,683,565
------------
------------
</TABLE>
(a) Includes initial contribution from Core and Gateway(Registered) structure
conversion of $55,886,917 (Note 1).
The accompanying notes are an integral part of the financial statements.
29
<PAGE>
- --------------------------------------------------------------------------------
Schroder Japan Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Portfolio performance for the following period:
<TABLE>
<CAPTION>
For the Period
March 23, 1998
(commencement of operations)
to October 31, 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Ratio to Average Net Assets:
Expenses including waiver of fees 0.99% (a)
Expenses excluding waiver of fees 1.24% (a)
Net investment income including waiver of fees 0.55% (a)
Portfolio Turnover Rate 36%
</TABLE>
(a) Annualized.
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
- --------------------------------------------------------------------------------
Schroder Japan Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
Schroder Capital Funds ("Schroder Core") was organized as a Delaware
business trust on September 7, 1995. Schroder Core, which is registered as an
open-end, management investment company under the Investment Company Act of
1940, currently has eight investment portfolios including the Japan Portfolio
(the "Portfolio"), a non-diversified portfolio that received assets invested
in Japan from Schroder Asian Growth Fund, Inc. in that Fund's Core and
Gateway(Registered) structure conversion and commenced operations on
March 23, 1998. The net assets received as a result of the conversion
amounted to $55,886,917, which included unrealized depreciation of
$6,914,125. Under its Trust Instrument, Schroder Core is authorized to issue
an unlimited number of interests without par value. Interests in the
Portfolio are sold in private placement transactions without any sales
charges to qualified investors, including open-end, management investment
companies.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with generally
accepted accounting principles, which require management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of increase and decrease in net assets
from operations during the fiscal period. Actual amounts could differ from
those estimates.
The following represent significant accounting policies of the
Portfolio:
SECURITY VALUATION
Portfolio securities listed on recognized stock exchanges are valued at
the last reported sale price on the exchange on which the securities are
principally traded. Listed securities traded on recognized stock exchanges
where last sale prices are not available are valued at the mean of the
closing bid and ask prices ("mid-market price"), or, if none, the last sale
price on the preceding trading day. Securities traded in over-the-counter
markets, or listed securities for which no trade is reported on the valuation
date, generally are valued at the most recent reported mid-market price.
Domestic short-term investments having a maturity of 60 days or less,
generally are valued at amortized cost, which approximates market value.
Foreign short-term investments are valued at current market price, then
marked to market to recognize any gain or loss on the transaction. Prices
used for valuation may be provided by independent pricing services. Other
securities and assets for which market quotations are not readily available
are valued at fair value as determined in good faith using methods approved
by Schroder Core's Board of Trustees. As of October 31, 1998, the Portfolio
did not hold a position in fair valued securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on the trade date. Dividend
income is recorded on the ex-dividend date except that certain dividends from
foreign securities where the ex-dividend date may have passed are recorded as
soon as the Portfolio is informed of the ex-dividend date. Dividend income is
recorded net of unrecoverable withholding tax. Interest income, including
accretion of discount, is recorded as earned. Identified cost of investments
sold is used to determine gain and loss for both financial statement and
federal income tax purposes. Foreign dividend and interest income amounts and
realized capital gain and loss are converted to U.S. dollar equivalents using
foreign exchange rates in effect on the date of the transactions.
Foreign currency amounts are translated into U.S. dollars at the mean
of the bid and asked prices of such currencies against U.S. dollars as
follows: (i) assets and liabilities at the rate of exchange at the end of the
respective period; and (ii) purchases and sales of securities and income and
expenses at the rate of exchange prevailing on the dates of such
transactions. The portion of the results of operations arising from changes
in the
31
<PAGE>
- --------------------------------------------------------------------------------
Schroder Japan Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
exchange rates and the portion due to fluctuations arising from changes in
the market prices of securities are not isolated. Such fluctuations are
included with the net realized and unrealized gain or loss on investments.
The Portfolio may enter into forward contracts to purchase or sell
foreign currencies to protect the U.S. dollar value of the underlying
portfolio against the effect of possible adverse movements in foreign
exchange rates. Risks associated with such contracts include the movement in
value of the foreign currency relative to the U.S. dollar and the ability of
the counterparty to perform. Fluctuations in the value of such contracts are
recorded daily as unrealized gain or loss; realized gain or loss includes net
gain or loss on contracts that have terminated by settlement or by the
Portfolio entering into offsetting commitments.
REPURCHASE AGREEMENTS
The Portfolio may invest in repurchase agreements. The Portfolio,
through its custodian, receives delivery of the underlying collateral, whose
market value must always equal or exceed the repurchase price. The investment
adviser is responsible for determining the value of the underlying collateral
at all times. In the event of default, the Portfolio may have difficulties
with the disposition of any securities held as collateral.
EXPENSE ALLOCATION
Schroder Core accounts separately for the assets and liabilities and
operation of each of its portfolios. Expenses that are directly attributable
to more than one portfolio are allocated among the respective portfolios in
proportion to each portfolio's net assets.
ORGANIZATION COSTS
Costs incurred by the Portfolio in connection with its organization are
amortized on a straight line basis over a five-year period.
NOTE 3. INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
Schroder Capital Management International Inc. ("SCMI") is the
investment adviser to the Portfolio. Pursuant to an Investment Advisory
Agreement, SCMI is entitled to receive an annual fee, payable monthly, of
0.55% of the average daily net assets of the Portfolio.
ADMINISTRATOR AND SUBADMINISTRATOR
The administrator of the Portfolio is Schroder Advisors Inc. ("Schroder
Advisors"). The subadministrator of the Portfolio is Forum Administrative
Services, LLC, ("FAdS"). Pursuant to their agreements, Schroder Advisors and
FAdS provide certain management and administrative services to the Portfolio.
For their services, Schroder Advisors and FAdS are each entitled to receive
an annual fee, payable monthly, of 0.05% of the Portfolio's average daily net
assets, subject to a minimum annual fee of $25,000 payable to FAdS for
subadministration.
OTHER SERVICE PROVIDERS
Forum Accounting Services, LLC ("FAcS") performs portfolio accounting
for the Portfolio and is entitled to receive compensation for those services
in the amount of $60,000 per year, plus certain amounts based upon the number
and types of portfolio transactions. FAcS also serves as the Portfolio's
transfer agent and is entitled
32
<PAGE>
- --------------------------------------------------------------------------------
Schroder Japan Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
to compensation for those services from Schroder Core with respect to the
Portfolio in the amount of $12,000 per year, plus certain other fees and
expenses.
NOTE 4. PURCHASES AND SALES OF SECURITIES
The cost of securities purchased and the proceeds from sales of
securities (excluding short-term securities) for the period ended
October 31, 1998, aggregated $8,314,194 and $10,899,547, respectively.
For federal income tax purposes, the tax basis of investment securities
owned as of October 31, 1998, was $25,413,562, and the net unrealized
depreciation of investment securities was $5,728,748. The aggregate gross
unrealized appreciation for all securities in which there was an excess of
market value over tax cost was $856,509, and the aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost over
market value was $6,585,257.
NOTE 5. FEDERAL TAXES
The Portfolio is not required to pay federal income taxes on its net
investment income and net capital gain as it is treated as a partnership for
federal income tax purposes. All interest, dividends, gain and loss of the
Portfolio are deemed to have been "passed through" to the partners in
proportion to their holdings of the Portfolio regardless of whether such
interest, dividends or gain have been distributed by the Portfolio.
NOTE 6. WAIVER OF FEES
SCMI voluntarily waived a portion of its advisory fees. Schroder
Advisors, FAdS and FAcS may voluntarily waive all or a portion of their fees
from time to time. For the period ended October 31, 1998, SCMI, FAdS and FAcS
have waived fees of $21,550, $7,575 and $9,113, respectively.
NOTE 7. CONCENTRATION OF RISK
The Portfolio's investments in companies domiciled in Japan may cause
the Portfolio to be more susceptible to political, social and economic events
adversely affecting Japanese companies than portfolios not so concentrated.
33
<PAGE>
- --------------------------------------------------------------------------------
Schroder Japan Portfolio
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Schroder Capital Funds and Interestholders of Schroder
Japan Portfolio:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Schroder Japan Portfolio (a
separately managed portfolio of Schroder Capital Funds) at October 31, 1998, and
the results of its operations, the changes in its net assets and the financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 22, 1998
34
<PAGE>
[This page intentionally left blank]
<PAGE>
TRUSTEES
I. Peter Sedgwick, Chairman
Louise Croset, President
Peter E. Guernsey
John I. Howell
William L. Means
David M. Salisbury
INVESTMENT ADVISER
Schroder Capital Management International Inc.
787 Seventh Avenue, 34th Floor
New York, NY 10019
ADMINISTRATOR & DISTRIBUTOR
Schroder Fund Advisors Inc.
787 Seventh Avenue, 34th Floor
New York, New York 10019
CUSTODIAN
The Chase Manhattan Bank
Global Custody Division
175 London Wall
London EC2Y 5A5, United Kingdom
TRANSFER AGENT
Boston Financial Data Services Inc.
Two Heritage Drive
Quincy, MA 02171
(800) 464-3108
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
One Post Office Square
Boston, MA 02109
COUNSEL
Ropes & Gray
One International Place
Boston, MA 02110
This report is for the information of the Shareholders of the Schroder All-Asia
Fund. Its use in connection with any offering of the Fund's shares is authorized
only in case of a concurrent or prior delivery of the Fund's current prospectus.
SAAFANN1098
<PAGE>
Schroder
All-Asia
Fund
ANNUAL REPORT
OCTOBER 31, 1998
Schroder Series Trust II
