<PAGE>
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SCHRODER U.S. SMALLER COMPANIES FUND
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Two Portland Square, Portland, Maine 04101
General Information (207) 879-6200
Account Information (800) 344-8332
Fax (207) 879-6050
INVESTMENT OBJECTIVE
Capital appreciation through investments in a diversified portfolio which under
normal conditions will have at least 65% of its total assets invested in equity
securities of companies having market capitalizations under
$1 billion.
INVESTMENT MANAGER
Schroder Capital Management International Inc., (the 'Investment Adviser') is a
wholly-owned indirect subsidiary of Schroders plc, the 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 management operations of the Schroder Group are located in 18
countries worldwide. The Schroder Investment Management Group has been managing
investment portfolios since the early years of this century. At October 31, 1995
the Schroder Investment Management Group had over $100 billion in assets under
management. At that date, the Investment Adviser, together with its U.K.
affiliate, Schroder Capital Management International Ltd., had over $15 billion
under management.
December 15, 1995
Dear Shareholder:
We are pleased to report that the Schroder U.S. Smaller Companies Fund has
once again continued its strong performance over the past year. On October 31,
1995, the end of the Fund's fiscal year, the Fund's net assets were $15,287,216
and net asset value per share was $15.14. For the same twelve month period, the
Fund registered a total return of 32.84%, comparing favorably with a rise of
18.35% for the Russell 2000. Since inception on August 6, 1993, the Fund has
appreciated by 58.05% as compared to 24.38% for the Russell 2000.
This past year has been an exceptional one for U.S. equity investing.
Against a background of declining bond yields and subdued inflationary
pressures, companies have generally delivered sound profits growth. In the small
capitalization sector, technology stocks have come into sharp focus with the
introduction of new products. It is to the credit of your Fund's management team
that the excellent annual performance was attained without taking an excessive
portfolio risk by overweighting the technology sector.
As we look at the economic situation, we remain optimistic that the
current economic cycle will endure at least through 1996, as imbalances which
normally herald recessions are notably absent. Inflation has been well
controlled by a proactive Federal Reserve Board and by fierce international
competition in many key industries. Importantly, we do not believe that consumer
debt is nearly as serious a problem as conventional wisdom would have it, with
debt service costs currently well below past peaks and broad measures of
delinquency rates subdued. Schroder economists expect the U.S. economy to grow
at a rate of 2.5% to 3.0% in 1996, which should be
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SCHRODER U.S. SMALLER COMPANIES FUND
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sufficiently moderate to prevent a serious increase in inflation. Furthermore,
the economic background ought to be enhanced at some stage in the not too
distant future by a budget package that will put fiscal policy on a more
sustainable path and that could give the Federal Reserve room to implement
another modest reduction in interest rates. Against such a background the
environment for small capitalization equity investment should remain positive.
We thank you for your continued support and interest in the Fund.
Sincerely,
HERMANN C. SCHWAB LAURA E. LUCKYN-MALONE
Hermann C. Schwab Laura E. Luckyn-Malone
Chairman President
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2
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SCHRODER U.S. SMALLER COMPANIES FUND
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PORTFOLIO STRATEGY
The Schroder U.S. Smaller Companies Fund rose by 20.80% and 32.84% during
the six and twelve month periods ending October 31, 1995, comparing favorably to
the 12.30% and 18.35% rise registered by the Russell 2000 for the comparable
period. The Fund's net assets at year end were $15,287,216.
The Fund's strategy during the past fiscal year was focused on investing
in companies that were expected to register above average earnings growth in a
slowing economy. This was based on management's belief that a `soft landing' in
the economy would be achieved successfully, and that, while the effect of
interest rate increases in 1994 would moderate the rate of economic growth, it
would not push the economy into recession. We have therefore continued to look
for an elongated economic cycle, with continued low inflation. Consequently, we
reduced our weighting in the basic materials sector during the year, as the
threat of commodity price inflation was reduced due to slowing demand growth.
Despite great publicity concerning new technology product introductions, we
lowered our exposure to technology stocks mid-year from neutral to an
underweight position, as the sector's increased valuation and announcements of
additional capacity investment in semiconductors significantly added to
investment risk. Areas where we have continued to build up our investments are
the healthcare and temporary employment sectors, where there is reasonable
certainty about the predictability of earnings growth.
Smaller companies underperformed the S&P 500 for much of fiscal 1995, as
strong corporate profit growth and a declining dollar helped boost larger
multinational companies' shares. This trend was reversed in early summer, as the
dollar bottomed against the major currencies and corporate profits growth
appeared to reach peak levels. From June through September, small capitalization
stocks (as measured by the Russell 2000) outperformed the S&P 500 by 3.98%. By
September, there was a healthy environment for new small company Initial Public
Offering activity which broadened the investment selection availability for your
Fund. One addition to the portfolio after year end was Pete's Brewing Company,
the fastest growing and second largest domestic specialty brewer in the United
States.
Within the small cap universe, technology was the best performing sector
by a substantial margin, driven by strong consumer demand for high performance
personal computers. But financials performed well too, helped by declining
interest rates, as well as merger and acquisition activity in the banking and
savings and loan industries. Turning to poor performers, the consumer cyclical
sector underperformed the Russell 2000 throughout the year, as retailing results
continued to be disappointing due to weak consumer spending and industry
over-capacity. The Fund, however, substantially outperformed the Russell 2000 in
this sector, helped by holdings such as Accustaff, Inc, a temporary employment
company that rose by 220% during the fiscal year, and HFS Incorporated, a
franchiser of hotel properties that added 125% to its market value during the
same period.
At year end, the Fund was overweighted in the healthcare, consumer
cyclical and energy sectors and underweighted in technology, financials, and
basic materials relative to the Russell 2000 index. Bottom-up stock selection
continues to drive sector allocation.
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3
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SCHRODER U.S. SMALLER COMPANIES FUND
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MANAGEMENT DISCUSSION
WHY IS THE FUND SO HEAVILY WEIGHTED IN HEALTHCARE?
The healthcare sector is one of the least economically-sensitive sectors
in the market, and would not be affected by an earnings slowdown. This is a
dynamic sector, characterized by consolidation and rapid market change, offering
significant earnings growth opportunities for a selected group of companies. The
Fund holds, for example, Compdent Corporation, a leading consolidator in the
managed dental care industry. We expect that the company will experience strong
revenue and earnings growth through both enrollment growth and acquisitions.
WHAT ARE THE CHARACTERISTICS OF THE COMPANIES IN WHICH YOU INVEST?
We invest in companies where management has a significant ownership stake
and incentive to increase shareholder value. We focus on companies in profitable
businesses with dominant market positions, and a well-articulated strategy to
grow. Valuation is an important consideration in the purchase decision and given
the extensive research resources of the Investment Adviser we believe we are
able to identify a broad number of inefficiently priced securities.
HOW DO YOU EXPECT THE ENVIRONMENT FOR INVESTING TO BE NEXT YEAR?
Considering the outlook for moderate economic growth, benign inflation,
possibility of a capital gains tax cut, and increased attention on 1996
Presidential elections, we are cautiously optimistic about next year's
investment environment. However, valuations have crept up during this year, and
selected areas of the market
will be vulnerable. We believe selectivity will be key in achieving performance
results next year.
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4
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SCHRODER U.S. SMALLER COMPANIES FUND
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INVESTMENT ADVISER'S REPORT -- COMPARISON OF CHANGE IN VALUE OF $10,000
INVESTMENT
The following chart reflects a comparison of a change in value of a $10,000
investment in Schroder U.S. Smaller Companies Fund, including reinvested
dividends and distributions, and the performance of the Russell 2000 Index.
Investment 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 is not predictive nor a guarantee of
future results.
SCHRODER U.S. SMALLER COMPANIES
VS.
RUSSELL 2000 INDEX
VALUE ON 10/31/95
- -----------------
Schroder U.S. Smaller Companies Fund $15,805 (58.05% cumulative return)
Russell 2000 Index $12,438 (24.38% cumulative return)
AVERAGE ANNUAL TOTAL RETURN
- ---------------------------
U.S. Smaller Companies Russell 2000*
---------------------- ------------
One Year 32.84% 18.35%
Since Inception 22.57% 10.59%**
on 8/6/93
[PERFORMANCE GRAPH]
SCHRODER RUSSELL 2000
--------- ------------
31-AUG-93 10000 10000
OCT-93 10599 10547
OCT-94 11898 10510
OCT-95 15805 12438
* The Russell 2000 is a capitalization weighted index of 2000 small
capitalization U.S. companies.
** Annualized return for the Russell 2000 is based on an inception date of
8/31/93. Index return does not include expenses, which have been deducted from
the Fund's return.
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5
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SCHRODER U.S. SMALLER COMPANIES FUND
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PORTFOLIO CHARACTERISTICS AS OF OCTOBER 31, 1995
INVESTMENT BY INDUSTRY
INDUSTRY % OF NET ASSETS
- --------------------------------------------------------
Basic Materials 2.7%
Capital Goods/Construction 6.8%
Consumer Cyclicals 19.5%
Consumer Staples 7.9%
Energy 10.2%
Financial 13.1%
Healthcare 14.6%
Technology 12.6%
Transportation/Services/
Miscellaneous 8.9%
Cash & Other Net Assets 3.7%
--------
Total 100.0%
TOP TEN HOLDINGS
SECURITY % OF NET ASSETS
- --------------------------------------------------------
Computervision Corp. 2.7%
Eckerd Corp. 1.6%
Performance Food Group Co. 1.5%
Nellcor Puritan Bennett, Inc. 1.5%
Daka International Inc. 1.5%
Haemonetics Corp. 1.5%
Cadence Design System, Inc. 1.4%
U.S. Facilities Corp. 1.4%
Leader Financial Corp. 1.4%
Compdent Corp. 1.4%
-------
Total 15.9%
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6
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SCHRODER U.S. SMALLER COMPANIES FUND
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SCHEDULE OF INVESTMENTS
OCTOBER 31, 1995
<TABLE>
<CAPTION>
COMMON STOCK - 96.3%
SHARES VALUE US$
---------- -----------
<C> <S> <C>
BASIC MATERIALS - 2.7%
3,000 Bowater, Inc. 132,750
7,000 Chase Brass Industries Inc.* 91,875
4,700 Quanex Corporation 92,825
8,400 U.S. Can Corporation* 102,900
-----------
420,350
-----------
CAPITAL GOODS/CONSTRUCTION - 6.8%
6,000 Donaldson Company, Inc. 146,250
3,000 Harsco Corporation 158,250
8,500 Kirby Corporation* 140,250
5,000 Larson Davis Incorporated* 26,250
8,000 Masland Corporation 112,000
4,800 Stewart Stevenson Services 109,200
7,000 U.S.A. Waste Services, Inc.* 147,000
2,500 Varity Corporation* 90,625
2,500 York International Corporation 109,375
-----------
1,039,200
-----------
CONSUMER CYCLICALS - 19.5%
4,500 Accustaff, Inc.* 200,250
6,500 Barefoot Inc. 78,812
5,900 Career Horizons Incorporated* 157,825
5,700 Consolidated Stores
Corporation* 131,812
7,500 Daka International
Incorporated* 227,812
6,500 Dave & Buster's, Inc.* 97,500
7,800 Finlay Enterprises Inc.* 107,250
3,000 HFS Incorporated* 183,750
10,000 Interface Inc. 151,250
4,262 La Quinta Inns, Incorporated 109,746
2,000 Movie Gallery, Incorporated* 77,000
3,750 Nautica Enterprises* 128,437
4,600 Petco Animal Supplies* 128,800
6,500 Quiksilver Inc* 201,500
5,000 River Oaks Furniture,
Incorporated* 40,000
4,400 Scientific Games Holdings
Corp.* 144,100
8,250 Sonic Corporation* 181,500
5,000 Talbots, Inc. 121,250
3,800 Viking Office Products* 169,100
8,000 Warnaco Group, Inc., Class A 186,000
7,500 WestPoint Stevens, Inc.* 158,437
-----------
2,982,131
-----------
CONSUMER STAPLES - 7.9%
5,500 Big B, Inc. 81,125
10,000 Continental Waste Industries
Inc.* 172,500
6,000 Eckerd Corporation* 237,750
7,000 General Nutrition Companies* 174,125
3,150 Harman International
Industries, Inc. 145,294
CONSUMER STAPLES (CONCLUDED)
4,100 McKesson Corporation 195,775
5,600 Omnicare, Inc. 203,000
-----------
1,209,569
-----------
ENERGY - 10.2%
3,500 Cairn Energy USA, Inc.* 42,000
6,000 Camco International,
Incorporated 137,250
5,000 Cooper Cameron Corporation* 126,876
8,000 Cross Timbers Oil Company 116,000
10,000 Flores & Rucks, Inc.* 130,000
2,000 Input/Output, Inc.* 74,750
5,500 Noble Affiliates Inc 136,125
6,400 Phoenix Resource Cos Inc 113,600
8,000 Seagull Energy Corporation* 137,000
11,500 Tesoro Petroleum Corporation* 90,563
10,000 Texas Meridian Resources
Corporation* 108,750
4,100 Tosco Corporation 141,450
3,000 Ultramar Corporation 73,125
7,000 Union Tex Pete Holdings Inc. 126,000
-----------
1,553,489
-----------
FINANCIAL - 13.1%
5,000 AT&T Capital Corp. 200,000
6,000 Allmerica Financial
Corporation* 150,751
6,000 Center Financial Corporation 108,000
3,000 Commercial Federal Corporation 98,625
5,000 Compass Bancshares
Incorporated 155,000
5,000 General Acceptance Corp.* 132,500
6,000 Leader Financial Corporation 213,750
8,000 MLF Bancorp, Inc. 180,000
8,000 Penncorp Financial Group,
Incorporated 191,000
3,000 TCF Financial Corporation 176,250
11,500 U.S. Facilites Corporation 217,063
6,000 Union Planters Corp. 183,751
-----------
2,006,690
-----------
HEALTHCARE - 14.6%
7,000 Bergen Brunswig Corporation 145,250
7,000 Community Psychiatric Centers 76,125
6,800 Compdent Corporation* 211,650
3,000 Genzyme Corporation* 174,750
12,000 Haemonetics Corporation* 226,500
17,000 Healthdyne Inc.* 168,937
11,062 Healthdyne Technologies
Incorporated* 118,916
8,000 Invacare Corporation 202,000
18,000 Isis Pharmaceuticals,
Incorporated* 182,250
6,500 Multicare Companies Inc.* 121,875
</TABLE>
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7
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SCHRODER U.S. SMALLER COMPANIES FUND
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SCHEDULE OF INVESTMENTS (CONCLUDED)
OCTOBER 31, 1995
<TABLE>
<CAPTION>
COMMON STOCK
SHARES VALUE US$
---------- -----------
<C> <S> <C>
HEALTHCARE (CONCLUDED)
4,000 Nellcor Puritan Bennett,
Incorporated* 230,000
7,000 Respironics, Inc.* 152,250
3,000 Shared Medical Systems Corp. 115,875
10,000 Sullivan Dental Products, Inc. 97,500
-----------
2,223,878
-----------
TECHNOLOGY - 12.6%
6,000 Amphenol Corporation* 129,750
4,000 Andros Incorporated* 69,000
6,750 Cadence Design Systems,
Incorporated* 217,687
35,000 Computervision Corporation* 411,250
20,000 Convex Computer Corporation* 90,000
10,000 EG&G, Inc. 186,250
13,000 Intergraph Corporation* 157,625
4,000 KLA Instruments Corporation* 171,000
11,000 Marcam Corporation* 165,000
4,000 Network Equipment Technologies,
Incorporated* 130,500
3,800 System Software Associates,
Incorporated 117,325
5,000 Wang Laboratories Incorporated* 83,125
-----------
1,928,512
-----------
TRANSPORTATION/SERVICES/
MISCELLANEOUS - 8.9%
6,000 ABC Rail Products Corporation* 133,500
5,000 Mid-America Apartment
Communities, Incorporated 115,000
5,000 Northwest Airlines Corporation* 200,625
10,000 Performance Food Group Company* 232,500
6,500 Redman Industries,
Incorporated* 169,000
15,000 SCP Pool Corporation* 151,875
9,000 Skywest Incorporated 154,125
15,000 Sunstone Hotel Investors,
Incorporated 135,000
4,050 TNT Freightways Corporation 72,900
-----------
1,364,525
-----------
Total Investments
(Cost $11,051,416) 96.3% 14,728,344
-----------
Other Assets, Net 3.7% 558,872
-----------
Total Net Assets 100.0% $15,287,216
-----------
-----------
</TABLE>
* Non-income producing security
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8
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SCHRODER U.S. SMALLER COMPANIES FUND
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STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, at value (at cost, $11,051,416) (Note 1) $14,728,344
Cash and cash equivalents (Note 1) 593,057
Interest and dividends receivable 7,005
Deferred organization costs, net 15,831
-----------
Total Assets 15,344,237
-----------
LIABILITIES:
Payables:
Accrued advisory fees (Note 3) 6,554
Accrued administration fees (Note 3) 3,277
Accrued directors fees and expenses 144
Other payables and accrued expenses 47,046
-----------
Total Liabilities 57,021
-----------
Net Assets $15,287,216
-----------
NET ASSETS CONSIST OF:
Paid-in capital $ 9,687,381
Accumulated undistributed net realized gains on investments 1,922,907
Net unrealized appreciation of investments 3,676,928
-----------
Net Assets $15,287,216
-----------
-----------
Net asset value price per share
($15,287,216 divided by 1,009,563
shares outstanding) $15.14
-------
-------
</TABLE>
The accompanying notes are an integral part of the financial statements.
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9
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SCHRODER U.S. SMALLER COMPANIES FUND
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STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends $ 112,734
Interest 56,378
----------
Total Income 169,112
----------
EXPENSES:
Investment advisory fees (Note 3) 71,188
Administration fees (Note 3) 35,594
Transfer agent fees and expenses (Note 3) 12,820
Custodian fees 9,157
Accounting services fees (Note 3) 36,000
Auditing fees 22,250
Other professional fees 818
Directors fees and expenses 1,292
Other 16,592
Amortization of organization cost 5,744
----------
Total Expenses 211,455
----------
NET INVESTMENT LOSS (42,343)
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 1,960,897
Change in unrealized appreciation of investments 2,234,952
----------
NET GAIN ON INVESTMENTS 4,195,849
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $4,153,506
----------
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
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10
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SCHRODER U.S. SMALLER COMPANIES FUND
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STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994
---------------- ----------------
<S> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment loss $ (42,343) $ (74,317)
Net realized gain on investments 1,960,897 562,545
Change in unrealized appreciation of
investments 2,234,952 548,825
---------------- ----------------
Net increase in net assets resulting
from operations 4,153,506 1,037,053
DISTRIBUTIONS TO SHAREHOLDERS FROM
NET REALIZED GAIN ON INVESTMENTS (458,547) (91,295)
DECREASE FROM CAPITAL SHARE TRANSACTIONS (NOTE 5) (1,731,532) (111,087)
---------------- ----------------
INCREASE IN NET ASSETS 1,963,427 834,671
NET ASSETS:
Beginning of year 13,323,789 12,489,118
---------------- ----------------
End of the year $ 15,287,216 $ 13,323,789
---------------- ----------------
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
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11
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SCHRODER U.S. SMALLER COMPANIES FUND
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NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Schroder U.S. Smaller Companies Fund (the 'Fund') is a portfolio of
Schroder Capital Funds, Inc. The Fund is registered under the Investment
Company Act of 1940, as amended, as a diversified open-end management
investment company. The following summarizes the significant accounting
policies of the Fund.
SECURITY VALUATION
The value of securities traded on the New York Stock Exchange is based
on the last sale price, and the value of securities traded on any other
national stock exchange is based on the last sale price as of 4:00 p.m. in
New York as quoted by authoritative sources. In the absence of a recorded
sale, the average of the closing bid and asked prices is used. Securities
traded on other organized markets are valued at the average of the bid and
asked prices as of 4:00 p.m. in New York as available from authoritative
sources at the end of the business day.
SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are recorded on trade date. Dividend income is
recorded on the ex-dividend date. Interest income is recorded on the accrual
basis.
Realized gains and losses from security transactions are determined on
the basis of identified cost.
CASH EQUIVALENTS
The Fund considers all deposits and the related interest income in the
Chase Money Market account to be cash equivalents.
ORGANIZATIONAL COSTS
Costs incurred by the Fund in connection with its organization and
initial registration are being amortized on a straight line basis over a
five-year period.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions are recorded on the ex-dividend date. Income and capital
gain distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. Permanent
book and tax basis differences relating to shareholder distributions will
result in reclassifications to paid in capital and may affect the per share
allocation between net investment income and realized or unrealized gain or
loss. Undistributed net investment income and accumulated undistributed net
realized gains or losses may include temporary book and tax basis
differences, primarily due to wash sales which will reverse in a subsequent
period. Any taxable income or gain remaining at fiscal year end is
distributed in the following year.
2. PURCHASES AND SALES OF SECURITIES
The aggregate cost of securities purchased and the proceeds from sales
of securities or maturities for the year ended October 31, 1995 were
$12,279,882 and $13,682,191 respectively.
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12
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SCHRODER U.S. SMALLER COMPANIES FUND
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. RELATED PARTIES:
Remunerations to related parties were paid or accrued in the following
amounts:
<TABLE>
<CAPTION>
For The Year Ended
October 31, 1995
- ---------------------------------------------------------------------------
<S> <C>
Schroder Capital Management International Inc.
(investment advisory fees) $ 71,188
Schroder Fund Advisors Inc. (administration fees) 35,594
Forum Financial Corp. (accounting and transfer agency
fees) 48,820
-----------
$155,602
-----------
-----------
</TABLE>
The advisory contract provides for an annual fee, payable monthly, of
1/2 of 1% on the first $100,000,000 of average daily net assets and 2/5 of 1%
on the next $150 million of average daily net assets and 7/20 of 1% on
average daily net assets in excess of $250,000,000.
The administrative services contract provides for an annual fee,
payable monthly, of 1/4 of 1% on the first $100,000,000 of average daily net
assets and 1/5 of 1% on the next $150 million of average daily net assets and
7/40 of 1% on average daily net assets in excess of $250,000,000.
Forum Financial Corp. serves as the Fund's transfer agent and dividend
disbursing agent and is compensated for those services by the Fund in the
amount of $12,000 per year plus certain shareholder account fees. Forum
Financial Corp. also performs portfolio accounting for the Fund and is
compensated for those services by the Fund in the amount of $36,000 per year,
plus certain amounts based upon the number and types of portfolio
transactions.
4. FEDERAL INCOME TAXES:
Since it is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to its shareholders, no Federal income
tax provision is required.
- --------------------------------------------------------------------------------
13
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SCHRODER U.S. SMALLER COMPANIES FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. CAPITAL SHARES:
At October 31, 1995, the Fund has one class of common shares ($0.01 par
value per share) of which 10,000,000 shares are authorized and 1,009,563
shares are outstanding. Transactions in the Fund's capital shares for the
years ended October 31, 1995 and October 31, 1994 were as follows:
<TABLE>
<CAPTION>
Year Ended October 31, Year Ended October 31,
1995 1994
- ---------------------------------------------------------------------------------------------------------------
Number of Number of
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares subscribed 169 $ 2,000 440 $ 5,023
Shares issued for dividend reinvestment 37,357 410,171 7,181 77,623
--------- ----------- --------- ---------
37,526 412,171 7,621 82,646
Shares redeemed (156,000 ) (2,143,703) (16,502) (193,733)
--------- ----------- --------- ---------
Net increase (decrease) in outstanding shares (118,474 ) $(1,731,532) (8,881) $(111,087)
--------- ----------- --------- ---------
--------- ----------- --------- ---------
</TABLE>
6. APPRECIATION OF INVESTMENTS
As of October 31, 1995, the aggregate cost of investment securities for
Federal income tax purposes was $11,055,712 and the gross unrealized
appreciation (depreciation) of investments was as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation $4,097,812
Gross unrealized depreciation (425,180)
----------
Net unrealized appreciation $3,672,632
----------
----------
</TABLE>
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14
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SCHRODER U.S. SMALLER COMPANIES FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios for the Periods Indicated.
<TABLE>
<CAPTION>
Year Ended Year Ended August 6, 1993(a)-
October 31, 1995 October 31, 1994 October 31, 1993
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, beginning of period $ 11.81 $ 10.99 $ 10.00
---------------- ---------------- ----------
Investment Operations:
Net investment income (0.04) (0.07) (0.02)
Net realized and unrealized gain (loss) on
investments 3.78 0.97 1.01
---------------- ---------------- ----------
Total from investment operations 3.74 0.90 0.99
Distributions from realized capital gains (0.41) (0.08) --
---------------- ---------------- ----------
Net Asset Value, end of period $ 15.14 $ 11.81 $ 10.99
---------------- ---------------- ----------
---------------- ---------------- ----------
Total return 32.84% 8.26% 9.90%
---------------- ---------------- ----------
---------------- ---------------- ----------
Ratios/Supplementary Data:
Net assets, end of period (Thousands) $ 15,287 $ 13,324 $12,489
Ratio of expenses to average net assets 1.49% 1.45% 2.03%(b)
Ratio of net investment loss to average net
assets (0.30)% (0.58)% (0.99)%(b)
Portfolio turnover rate 92.68% 70.82% 12.58%
</TABLE>
(a) Commencement of operations.
(b) Annualized.
8. SUBSEQUENT EVENT
Shareholders of Schroder Capital Funds, Inc. (the 'Company') have
approved the reorganization of the Company from a Maryland corporation into a
Delaware business trust under the name Schroder Capital Funds (Delaware).
This reorganization occurred on December 11, 1995. As a Delaware business
trust, the Trust's operations will be governed by its Trust Instrument and
applicable Delaware law rather than by the Articles of Incorporation, By-Laws
and Maryland law which presently govern the Company's operations.
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15
<PAGE>
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SCHRODER U.S. SMALLER COMPANIES FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
* * * *
SPECIAL MEETING OF SHAREHOLDER (UNAUDITED)
There was a special meeting of the shareholders of Schroder Capital
Funds, Inc. (the 'Company'), including shareholders of the Fund, on October
23, 1995. At the special meeting, shareholders of the Company re-elected the
current directors of the Company, approved the reorganization of the Company
as a Delaware business trust under the name Schroder Capital Funds (Delaware)
and approved the conversion of the Fund to a Core and Gateway'r' structure.
Of 1,017,862 shares outstanding of the Fund as of the record date for the
special meeting, 1,017,758 were present in person or by proxy.
The first matter about which the Fund's shareholders voted was the
reelection of the Company's directors: Peter E. Guernsey, Ralph E. Hansmann,
John I. Howell, Laura E. Luckyn-Malone, Clarence F. Michalis, Hermann C.
Schwab and Mark J. Smith. The Fund's shareholders voted with the other
shareholders of the Company with respect to this matter. Each of the shares
of the Fund present at the special meeting was voted in favor of reelection
of the current directors of the Company. There were no shares voted against
reelection, and no abstentions or broker non-votes.
The other matter about which the Fund's shareholders voted was the
reorganization of the Company from a Maryland corporation into a Delaware
business trust. The Fund's shareholders voted with the other shareholders of
the Company with respect to this matter. Each of the shares of the Fund
present at the special meeting was voted in favor of reorganization of the
Company as a Delaware business trust. There were no shares voted against the
reorganization, and no abstentions or broker non-votes.
DISTRIBUTIONS (UNAUDITED)
During the fiscal year ended October 31, 1995, the fund distributed
$135,365 in long-term capital gains to shareholders.
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16
<PAGE>
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SCHRODER U.S. SMALLER COMPANIES FUND
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Directors of Schroder U.S. Smaller Companies
Fund:
We have audited the accompanying statement of assets and liabilities of
the Schroder U.S. Smaller Companies Fund (a separately managed portfolio of
Schroder Capital Funds, Inc.), including the schedule of investments, as of
October 31, 1995, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in
the period that ended, and the financial highlights for each of the two years
in the period then ended and the period August 6, 1993 to October 31, 1993.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1995 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Schroder U.S. Smaller Companies Fund as of October 31, 1995,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period that ended, and the financial
highlights for each of the two years in the period then ended and the period
August 6, 1993 to October 31, 1993 in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND, L.L.P.
Boston, Massachusetts
December 27, 1995
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17
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
DIRECTORS
Peter E. Guernsey
Ralph E. Hansmann
John I. Howell
Laura E. Luckyn-Malone
Clarence F. Michalis
Hermann C. Schwab
Mark J. Smith
OFFICERS
Hermann C. Schwab
Chairman of the Board
Laura E. Luckyn-Malone
President
Robert G. Davy
Vice President
Richard Foulkes
Vice President
John Y. Keffer
Vice President
Jane Lucas
Vice President
Catherine A. Mazza
Vice President
Mark J. Smith
Vice President
Fariba Talebi
Vice President
John Troiano
Vice President
Ira L. Unschuld
Vice President
Robert Jackowitz
Treasurer
Margaret H. Douglas-Hamilton
Secretary
Thomas G. Sheehan
Assistant Treasurer
Assistant Secretary
David I. Goldstein
Assistant Treasurer
Assistant Secretary
Gerardo Machado
Assistant Secretary
Barbara Gottlieb
Assistant Secretary
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<PAGE>
INVESTMENT ADVISER
Schroder Capital Management International Inc.
787 Seventh Avenue
New York, New York 10019
ADMINISTRATOR & DISTRIBUTOR
Schroder Fund Advisors, Inc.
787 Seventh Avenue
New York, New York 10019
CUSTODIAN
The Chase Manhattan Bank, N.A.
Chase MetroTech Center
Brooklyn, New York 11245
ACCOUNTING, TRANSFER AND DIVIDEND
DISBURSING AGENT
Forum Financial Corp.
Two Portland Square
Portland, Maine 04101
COUNSEL
Jacobs Persinger & Parker
77 Water Street
New York, New York 10005
INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
This report is for the information of the shareholders
of the Schroder U.S. Smaller Companies Fund. Its use
in connection with any offering of the Fund's shares is
authorized only in case of a concurrent or prior deliv-
ery of the Fund's current prospectus.
[Logo]
<PAGE>
Schroder
U.S. Smaller
Companies
Fund
ANNUAL REPORT
October 31, 1995
Schroder Capital Funds, Inc.
