<PAGE>
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INTERNATIONAL EQUITY FUND
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Two Portland Square, Portland, Maine 04101
<TABLE>
<S> <C>
General Information (207) 879-6200
Account Information (800) 344-8332
Fax (207) 879-6050
</TABLE>
INVESTMENT OBJECTIVE
To provide shareholders with capital appreciation through investments in
securities markets outside the U.S. Securities are selected on the basis of
potential for capital appreciation without regard for current income.
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
international 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 International Equity Fund has enjoyed
another year of positive returns relative to its benchmark, the MSCI EAFE Index.
In the year ended October 31, 1995, the Fund's net asset value per share rose by
2.1% in U.S. dollar terms adjusting for reinvestment of income dividends,
compared to a neutral return from the unmanaged EAFE Index. Performance over the
year also exceeded the Lipper Analytical Data Services average for diversified
international funds, with strong value added from stock selection.
In the early part of the year, the decision to underweight Japan and
overweight fundamentally strong European countries such as the Netherlands and
Switzerland resulted in good returns. After the Japanese market bottomed in late
June, we started to reduce our extremely negative stance towards that market,
which proved to be a well timed decision. Over the year our ability to add value
by focusing on quality growth companies around the world was highlighted.
Despite superior returns from the U.S. market over this past year, we
believe that investors should be mindful of the benefits of international
diversification, which both lowers overall portfolio volatility and creates a
potential
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INTERNATIONAL EQUITY FUND
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for higher overall portfolio returns. While the timing of the relative
underperformance of the U.S. market as compared to international markets cannot
be known, the discipline of setting aside a portion of the assets of a long term
investment program into an international fund will help create a portfolio with
lower risk characteristics than one invested wholly in the U.S.
In October, shareholders of the Fund approved several proposals, details of
which are outlined in the Notes to Financial Statements on page 18. The two
significant proposals were the conversion of the Fund from a Maryland
corporation to a Delaware business trust and the implementation of a Core and
Gateway'c' structure which should allow the Fund to be sold with a higher degree
of flexibility by third parties such as banks thereby potentially facilitating
further asset growth.
The Core and Gateway Fund Structure (commonly known as a master-feeder fund
structure) is an arrangement whereby one or more investment companies or other
collective investment vehicles sharing investment objectives, but offering their
shares through distinct distribution channels, pool their assets by investing in
a single investment company having substantially the same investment objective
and policies. This structure can achieve economies of scale by allowing funds
with different shareholder-related features or distribution channels, but having
the same investment objective, policies and restrictions, to combine their
investments by investing all of their assets in the same portfolio instead of
managing them separately.
We remain optimistic about the prospects for international investing and
thank you for your continued support and interest in the Fund.
Sincerely,
<TABLE>
<S> <C>
HERMANN C. SCHWAB LAURA E. LUCKYN-MALONE
Hermann C. Schwab Laura E. Luckyn-Malone
Chairman President
</TABLE>
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2
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INTERNATIONAL EQUITY FUND
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PORTFOLIO STRATEGY
At the end of October 1995, the composition of the Fund was as follows:
approximately 97.0% invested in equity securities and 3.0% in cash and other net
assets. International markets were dominated by three factors over the past six
months: (i) a dramatic recovery in the U.S. dollar against the Japanese yen
since August, (ii) clear evidence of weaker than expected economic growth in
Japan and Europe and, (iii) highly visible attempts by the Japanese authorities
to address some of the many problems affecting their economy.
All of these were positive factors for equity returns measured in local
currency terms, but the dollar recovery reduced the returns when translated into
U.S. dollars. (Historically, this is invariably the case in most markets, with
Japan an occasional exception to the rule). South East Asia and Australia were
independent of these trends and were influenced by other local factors.
The recovery in the dollar had its origins in the G7 finance ministers,
meeting in April. The coordinated statements and actions by authorities in the
U.S., Japan and Europe that followed were timed skillfully to have maximum
effect, that is, when dollar bears were taking profits in July. Action by the
Japanese authorities was particularly aggressive while, by contrast, European
Central Banks played only minor roles. From July 31, 1995 to the end of the
fiscal year, the yen was down 13.27% against the U.S. dollar and the
deutschemark was down 1.48%. Since November 1994, the yen was down 2.99%, the
U.K. pound was up 1.02%, the deutschemark was up 11.1% and the Swiss franc was
up 17.01% relative to the dollar.
The Japanese stock market bottomed in July after a five and a half year
bear market. The turning point came when the Government finally admitted that
the economy had problems requiring action. Subsequently announced measures have
so far addressed the easy issues: resolution of the bad debt problems of the
financial sector and much needed deregulation of the economy remain outstanding.
After a 21.88% rise in yen terms since bottoming, further progress by the stock
market will require reassurance on one, if not both, of the latter problems.
Sector performance was led by manufacturing companies and domestic cyclical
sectors such as construction and department stores; defensive sectors and
financials lagged. The portfolio was heavily biased towards manufacturing stocks
such as Hitachi Ltd. and Murata Manufacturing Co., Ltd. and less oriented to
pure cyclicals and remained almost totally devoid of financials.
In Europe, markets began to emerge from the consolidation pattern that held
them since January 1994. Weak economic demand, which was a reflection of high
interest rates, strong currencies and tight fiscal policies, was taken
positively by markets in the belief that it would lead to a longer, less
inflationary cycle. The worst performing markets (of those we invest in) over
the quarter and year-to-date were France and Italy both of which had weak
governments lacking the apparent power to pursue harsh policies in the style of
Germany. Where countries have confidence in governments (Germany, Netherlands,
Switzerland) or economies benefitting from cheap currencies (UK, Spain,
Scandinavia), markets moved to all-time highs.
Hong Kong continued to strengthen as pessimism on the local real estate
market and a Chinese hard economic landing eased. Elsewhere, South East Asian
markets all reflected to varying degrees of concern about overheating local
economies. That said, corporate profit growth continued to come through strongly
and price earnings ratios were becoming cheap by historical standards. Australia
benefited from a strong currency boosting an otherwise modest local market
return.
The Brazilian and Mexican stock markets continued their recoveries, the
former encouraged by further progress towards constitutional reform, and the
latter by the proximity of the trough of the economic cycle.
INVESTMENT REVIEW
We have added significantly to Japan since the summer, reducing the extreme
underweighting, as compared to the MSCI EAFE Index, at the end of June. This was
financed by reducing the overweight position in the United Kingdom and from
available cash. This leaves the portfolio 13% overweight in the South East Asian
and emerging markets generally and 12% underweight in Japan, with Europe
(ex-United Kingdom) now 1% overweighted and Australia 3% underweighted.
Our major change of stance in Japan reflects the initiatives taken by the
Government to stimulate the domestic economy; for this reason, our purchases
were for the most part in domestic services, such as mobile telephones,
retailing and leisure. Such purchases complemented the existing extreme bias in
the portfolio towards manufacturing companies which have already shown strong
relative performance and continued to do so during the quarter. For
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3
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INTERNATIONAL EQUITY FUND
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several years we have had no Japanese bank stocks in the portfolio and although
an end to uncertainty would be positive for that sector, we believe there
remains a major risk that healthy banks will be forced to contribute so much to
an industry rescue package that the cost will be a burden for many years to
come.
In Europe, we have started to reduce exposure to the United Kingdom. The
economy recovered strongly in areas such as manufacturing, and United Kingdom
companies enjoyed very strong cash flow. Dividend increases in the past year
were substantial and the market witnessed a massive wave of acquisitions, mostly
paid for with cash. This combination of factors seems extremely favorable and,
with political risk beginning to rise ahead of an election within 18 months, we
suspect that the market may soon exhaust its own optimism. Elsewhere in Europe,
we retained a heavily overweighted position in the Netherlands (+6%) which
reflected the cheapness of individual stocks like Heineken NV and Philips
Electronics NV in a country which by European standards has few problems.
The continued overweight position across the markets of Asia reflects the
long term growth potential of these countries' economies. Having reached
excessively high levels twenty months ago, stock prices have returned to levels
where, by historical standards, they are cheap. Although there are apparent
economic risks, we believe these to be fully reflected in prices; moreover, such
economies are more responsive to policy changes than developed economies so
negative sentiment may already be excessive.
The portfolio has in place for defensive purposes a hedge position totaling
9% of total net assets out of yen into U.S. dollars. We anticipate a sharp fall
in the next 12 months in the Japanese balance of payments as the economy
recovers. At such times in the past, the yen has weakened and our partial hedge
reflects the risk of this happening again.
MANAGEMENT DISCUSSION
WHY HAS SWITZERLAND BEEN SUCH A STRONG PERFORMING MARKET?
The Swiss market has risen by 24% in local currency over the past year; in
addition, the Swiss currency has been the strongest in the world, rising 11%
against the U.S. dollar. European currencies generally have been strong but the
Swiss Franc has benefited from holders of other European currencies, uneasy
about the implications of European Monetary Union seeking a safe haven. Because
Switzerland is outside of the European community its currency is immune to
sentiment swings for and against monetary union.
WHY HAS THE FUND INCREASED ITS INVESTMENTS IN JAPAN RECENTLY?
Since early August, the Fund's exposure to Japan has increased by
approximately 4% through investment in such companies as Takeda Chemical and DDI
Corporation. In early August, there was concerted Central Bank action globally
to drive down the value of the yen, which had hit a high of 'Y'79.7 to US$1 on
April 19, 1995. This coincided with depositors withdrawing funds from a number
of smaller Japanese financial institutions and deepening concerns about Japan's
deflationary pressures (which had largely been contained within the real estate
and stock markets) spilling over into the general price level. The Central Bank
action has been largely successful as of the time of this writing the yen/dollar
exchange rate had depreciated by approximately 25% to 'Y'102. The weakening of
the exchange rate is important to the exporting sector of the Japanese economy
and allows Japan's leading corporations an opportunity to reappraise their
hiring and investment plans and a chance to regain some lost sales in overseas
markets. Consequently these companies can play an important role in restarting
the stalled Japanese economy. This action was followed through with a cut in the
Official Discount Rate to a record low 0.5% and the announcement of a large
fiscal stimulus in September. Taken together these allow management of your Fund
to take a more constructive view again of the Japanese market.
WHAT IS THE FUND'S OUTLOOK FOR THE U.S. DOLLAR?
It is too soon to establish whether the U.S. Government will deliver real
spending cuts over the next five years enabling the government budget to move
towards balance. Such action would be reflected by the dollar entering into an
uptrend. What can be said is that the Japanese Government would be happy to see
a lower yen; moreover, a falling foreign trade surplus and extraordinarily low
interest rates are usually associated with a falling yen so we are moderately
bearish for the yen. There are no similar arguments against the deutschemark
bloc of European currencies and we therefore see any weakness only if the dollar
earns a more bullish following. We are not yet ready to make that judgment.
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4
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INTERNATIONAL EQUITY 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 International Equity Fund, including reinvested dividends and
distributions, and the performance of the Morgan Stanley EAFE 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.
INTERNATIONAL EQUITY FUND
VS.
MORGAN STANLEY EAFE INDEX
VALUE ON 10/31/95
- -----------------
International Equity Fund $32,072
Morgan Stanley EAFE Index $33,541
AVERAGE ANNUAL TOTAL RETURN
- ---------------------------
International Equity MSCI EAFE*
---------------------- ------------
One Year 2.08% -0.37%
Five Year 8.56% 6.95%
Since Inception 12.51% 13.10%**
on 12/19/85
[PERFORMANCE GRAPH]
INTERNATIONAL
EQUITY FUND MSCI EAFE*
--------- ------------
12/19/85 10000 10000
OCT-86 13060 15214
OCT-87 14855 20309
OCT-88 17574 25423
OCT-89 21241 27493
OCT-90 21225 23968
OCT-91 21321 25635
OCT-92 20276 22247
OCT-93 27483 30580
OCT-94 31358 33667
OCT-95 32010 33541
* The Morgan Stanley Capital International (MSCI) EAFE'r' Index is a market
capitalization index composed of companies representative of the market
structure of 20 Developed Market countries in Europe, Australasia, and the Far
East.
** Annualized return for the MSCI EAFE'r' is based on an inception date of
12/31/85. Index return does not include expenses, which have been deducted from
the Fund's return.
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5
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INTERNATIONAL EQUITY FUND
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PORTFOLIO CHARACTERISTICS AS OF OCTOBER 31, 1995
INVESTMENT BY INDUSTRY
<TABLE>
<CAPTION>
INDUSTRY % OF NET ASSETS
- --------------------------------------------------------
<S> <C>
Capital Equipment 20.0%
Consumer Goods 24.2%
Energy 6.6%
Financial 14.4%
Materials 6.8%
Multi-Industry 3.5%
Services 21.6%
Cash & Other Net Assets 2.9%
-------
Total 100.0%
</TABLE>
TOP TEN HOLDINGS
<TABLE>
<CAPTION>
SECURITY % OF NET ASSETS
- --------------------------------------------------------
<S> <C>
Ito-Yokado Company Ltd. 2.8%
Veba 2.8%
Heineken NV 2.6%
BBC Brown Boveri AG 2.6%
Philips Electronics NV 2.5%
DDI Corporation 2.1%
Murata Manufacturing Co., Ltd. 2.1%
Elf Aquitaine 1.7%
Int'l Nederlanden Group NV 1.5%
Astra AB 1.5%
------
Total 22.2%
</TABLE>
COUNTRY WEIGHTINGS
<TABLE>
<CAPTION>
COUNTRY % OF NET ASSETS
- --------------------------------------------------------
<S> <C>
Japan 27.2%
United Kingdom 14.1%
Netherlands 10.4%
Switzerland 6.8%
Hong Kong 6.7%
Germany 6.5%
France 4.8%
Malaysia 3.1%
Sweden 3.0%
Singapore 2.5%
Thailand 2.5%
</TABLE>
<TABLE>
<CAPTION>
COUNTRY % OF NET ASSETS
- --------------------------------------------------------
<S> <C>
Indonesia 1.9%
South Korea 1.7%
Philippines 1.5%
Italy 1.3%
Brazil 1.1%
Norway 1.0%
Mexico 0.6%
Chile 0.2%
Argentina 0.2%
Cash & Other Net Assets 2.9%
-------
Total 100.0%
</TABLE>
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6
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INTERNATIONAL EQUITY FUND
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SCHEDULE OF INVESTMENTS
OCTOBER 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE US$
---------- -----------
<S> <C> <C>
ARGENTINA - 0.2%
COMMON STOCK
79,400 Compania Naviera Perez Companc
SA
Oil Exploration & Production 347,842
-----------
347,842
-----------
BRAZIL - 1.1%
COMMON STOCK
17,271 Cia Ener De Minas Gerais, ADR*
Support Services 373,510
30,600 Telecomunicacoes Brasileiras
S/A-Telebras*
Communications 1,232,859
81,400 Usiminas Siderurg Minas, ADR*
Engineering 770,166
-----------
2,376,535
-----------
CHILE - 0.2%
COMMON STOCK
7,000 Compania Telecomunicacion
Chile Communications 504,000
-----------
504,000
-----------
FRANCE - 5.0%
COMMON STOCK
741 Cardif SA*
Insurance 68,908
17,325 Compagnie Generale des Eaux*
Utilities 1,609,347
2,205 Degremont
Environmental Control 185,222
2,825 Docks de France, SA
Food/Grocery Products 429,570
53,755 Elf Aquitaine*
Oil 3,658,523
6,484 Guilbert SA*
Wholesale Trade 777,900
6,000 LVMH (Louis Vuitton
Moet-Hennessy)
Luxury Goods 1,193,182
13,820 Primagaz (Cie Des Gaz Petrole)
Energy 1,072,767
27,500 Valeo*
Automobiles 1,241,570
WARRANTS
1,256 Primagaz (Cie Des Gaz
Petrole)* Energy 10,011
-----------
10,247,000
-----------
GERMANY - 6.6%
COMMON STOCK
1,072 Allianz AG Holding
Insurance 1,970,129
GERMANY (CONCLUDED)
1,390 Buderus AG
Machinery Engineering
Services 596,687
4,500 Mannesmann AG
Machinery 1,476,353
8,770 Otto Reichelt AG
Food/Grocery Products 155,695
145,000 Veba
Holdings Company 5,934,065
62 Wella AG
Health/Personal Care 34,320
PREFERRED STOCK
1,336 Friedrich Grohe AG
Building Materials 321,619
12,000 SAP AG
Business Services/Computer
Software 1,836,387
2,496 Wella AG
Health/Personal Care 1,371,896
-----------
13,697,151
-----------
HONG KONG - 6.9%
COMMON STOCK
305,100 Cheung Kong (Holdings) Ltd
Real Estate 1,720,496
188,813 HSBC Holdings plc*
Banks 2,747,322
379,600 Hongkong Electric Holdings Ltd
Electricity & Gas 1,291,240
504,400 Hutchison Whampoa Ltd
Commercial/Industrial 2,779,137
259,229 Mandarin Oriental
International, Ltd.*
Leisure & Hotels 290,336
314,400 Sun Hung Kai Properties Ltd
Real Estate 2,510,988
252,400 Swire Pacific Ltd
Commerce/Industrial 1,893,400
288,700 Wharf (Holdings) Ltd
Real Estate 974,568
-----------
14,207,487
-----------
INDONESIA - 1.9%
COMMON STOCK
278,600 Indocement Tunggal Prakarsa
Building Materials and
Components 1,030,488
258,550 PT Indofoods Sukses Makmur
Food and Household Products 1,195,410
335,000 PT Indosat
Communications 1,135,843
42,490 Unilever Indonesia
Retailers, General 598,714
-----------
3,960,455
-----------
</TABLE>
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7
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INTERNATIONAL EQUITY FUND
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SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE US$
-------- ----------
ITALY - 1.4%
<C> <S> <C>
COMMON STOCK
652,785 Telecom Italia Mobile SpA*
Communications 1,095,380
1,124,455 Telecom Italia SpA*
Communications 1,706,979
-----------
2,802,359
-----------
JAPAN - 28.0%
COMMON STOCK
16,000 Advantest Corporation
Electrical Equipment 907,623
47,000 Amada Metrics Co. Ltd.
Electrical Appliances 634,359
120,000 Bridgestone Corporation
Tires 1,666,585
555 DDI Corporation
Communications 4,499,927
90,000 Dai Nippon Printing Company Ltd
Paper, Packaging & Printing 1,434,789
90,000 Dai-Tokyo Fire & Marine
Insurance Company
Insurance 578,317
250 East Japan Railway Company Land
Transport 1,180,987
18,000 Fanuc Company
Machinery 779,891
50,000 Fuji Photo Film Company
Miscellaneous Manufacturing 1,237,225
60,000 Fujitsu Ltd.
Computers 715,927
19,950 Hirose Electric Company
Electrical Appliances 1,274,131
295,000 Hitachi Ltd
Electrical Appliances 3,029,487
27,000 Hoya Corporation
Jewelry/Gemstones/Glass 792,214
110,000 Ito-Yokado Company Ltd
Retail Sales 6,013,986
22,000 Japan Airport Terminal Company
Commercial Services 251,747
126,000 Kuraray Company Ltd
Textiles 1,244,657
24,000 Kyocera Corporation
Electrical Appliances 1,967,040
22,000 Mabuchi Motor Company
Electrical Appliances 1,331,899
38,000 Makita Corporation
Electrical Appliances 590,934
144,000 Matsushita Electric Industrial
Company Ltd
Electrical Appliances 2,042,154
JAPAN (CONCLUDED)
100,000 Mitsubishi Corporation
Miscellaneous Distribution/
Wholesale Trade 1,105,189
125,000 Murata Manufacturing Company,
Ltd.
Electrical Appliances 4,388,967
70,000 NEC Corporation
Computers/Communications/Office
Equipment 924,251
3,000 Nippon Television Network
Corporation
Communications 715,926
7,000 Ryoyo Electro Corporation
Electrical Appliances 163,627
49,000 Sankyo Company Limited
Pharmaceuticals 1,078,293
25,000 Seino Transportation Company
Land Transport 386,327
72,000 Sharp Corporation
Electrical Appliances 999,951
87,000 Shin-Etsu Chemical Company
Chemicals 1,778,376
136,000 Showa Shell Sekiyu KK
Oil Exploration & Production 1,085,393
215,000 Takeda Chemical
Pharmaceuticals 3,028,021
8,000 Toho Company
Leisure & Hotels 1,126,706
193,000 Tokio Marine & Fire Insurance
Company
Insurance 1,982,004
51,000 Tokyo Electron Ltd
Electrical Appliances 2,214,680
80,000 Toppan Printing Company, Ltd.
Paper, Packaging & Printing 1,056,287
63,000 Tokyo Style
Textiles & Apparel 955,059
17,000 Toyo Information Systems Company
Software 169,593
128,000 Toyota Motor Corporation
Automobiles 2,378,601
-----------
57,711,130
-----------
KOREA, REPUBLIC OF - 1.8%
COMMON STOCK
19,000 Korea Electric Power Corporation
Electricity & Gas 848,687
25,048 L.G. Electronics
Electrical Appliances 1,077,015
10,250 Pohang Iron & Steel Company Ltd
Iron & Steel 1,048,308
</TABLE>
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8
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INTERNATIONAL EQUITY FUND
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SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE US$
---------- -----------
KOREA, REPUBLIC OF (CONCLUDED)
<C> <S> <C>
29,957 Shinhan Bank
Banks 702,108
-----------
3,676,118
-----------
MALAYSIA - 3.2%
COMMON STOCK
270,000 Genting Berhad (see note 1A)
Hotels & Leisure 2,278,791
293,500 Malayan Banking Berhad
Banks 2,366,099
490,000 Renong Berhad
Commerce/Industrial 747,651
177,000 Telekom Malaysia Berhad
Communications 1,266,822
-----------
6,659,363
-----------
MEXICO - 0.6%
COMMON STOCK
82,700 Apasco SA de CV
Building Materials &
Merchandise 305,782
387,200 Cifra SA de CV
Retailers, General 401,300
124,900 Grupo Financiero Banamax Accivl,
SA de CV
Banks 213,415
92,000 Industrias Penoles
Mining Metals/Minerals 349,188
-----------
1,269,685
-----------
NETHERLANDS - 10.7%
COMMON STOCK
33,000 Cap Volmac Group NV
Business Services/Computer
Software 380,103
6,816 Ceteco Holdings NV*
Household Durable Appliances 222,153
31,216 Getronics NV*
Computers/Communications/Office
Equipment 1,487,605
18,000 Hagemeyer N.V.*
Miscellaneous
Distribution/Wholesale 895,386
30,875 Heineken NV
Beverage Manufacturers 5,471,172
53,828 Internationale Nederlanden Group NV*
Insurance 3,205,630
33,804 KLM Royal Dutch Air Lines NV*
Transportation 1,114,606
34,818 NV Koninklijke Sphinx*
Building Materials &
Merchandise 965,147
6,932 Nedcon Group NV*
Fabricated Metal Products 173,289
NETHERLANDS (CONCLUDED)
25,000 Oce-Van Der Grinten NV
Computers/Communications/Office
Equipment 1,431,871
2,700 Otra NV
Building Materials &
Merchandise 555,345
135,000 Philips Electronics NV
Electrical Equipment 5,211,697
21,000 Samas-Groep NV*
Computers/Communications/Office
Equipment 917,031
PREFERRED STOCK
4,800 Internationale Nederlanden Group
NV
Insurance 24,910
WARRANTS
1,043 Borsumij Wehry Kon Nv*
Wholesale Trade 33,665
-----------
22,089,610
-----------
NORWAY - 1.1%
COMMON STOCK
55,000 Norsk Hydro AS
Oil 2,189,758
-----------
2,189,758
-----------
PHILIPPINES - 1.6%
COMMON STOCK
747,625 Ayala Land Incorporated
Real Estate 862,312
23,670 Manila Electric Company
Electricity & Gas 899,460
7,000 Philippine Long Distance
Telephone Company
Communications 390,235
8,550 Philippine Long Distance
Telephone Company ADR
Communications 479,869
1,360,000 SM Prime Holdings
Real Estate 366,013
70,330 San Miguel Corporation
Food & Beverage Manufacturers 232,541
-----------
3,230,430
-----------
SINGAPORE - 2.6%
COMMON STOCK
155,000 City Developments, Ltd.
Real Estate 958,752
104,750 Development Bank of Singapore
Limited
Banks 1,199,597
150,000 Keppel Corporation Ltd
Commerce/Industrial 1,230,030
</TABLE>
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9
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SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE US$
---------- -----------
SINGAPORE (CONCLUDED)
<C> <S> <C>
86,333 Oversea-Chinese Banking
Corporation
Banks 1,013,098
61,920 Singapore Press Holdings Ltd
Communications 967,363
-----------
5,368,840
-----------
SWEDEN - 3.0%
COMMON STOCK
126,000 Stora Kopparbergs 'B' Shares
Forestry, Paper Products 1,526,755
86,000 Astra AB
Pharmaceuticals 3,106,796
70,000 Telefonaktiebolaget LM Ericsson
'B' Shares
Communications 1,485,663
7,000 Telefonaktiebolaget LM Ericsson
'New' Shares*
Communications 148,566
-----------
6,267,780
-----------
SWITZERLAND - 7.0%
COMMON STOCK
1,500 Alusuisse-Lonza Holding AG
Mining Metals/Minerals 1,141,663
4,700 BBC Brown Boveri AG
Electrical Equipment 5,446,457
1,200 Ciba-Geigy AG
Chemicals 1,037,923
2,800 Nestle SA
Food/Grocery Products 2,931,808
300 Roche Holding AG
Health/Personal Care 2,177,739
2,100 Sandoz AG
Health/Personal Care 1,731,368
-----------
14,466,958
-----------
THAILAND - 2.5%
COMMON STOCK
56,000 Land & House Company Ltd
Real Estate 903,656
17,300 Siam Cement Company Ltd Building
Materials & Components 943,386
1,025,000 Siam City Bank
Banks 1,303,655
328,000 TelecomAsia Corporation*
Communications 1,003,816
130,400 Thai Farmers Bank Ltd
Banks 1,078,028
-----------
5,232,541
-----------
UNITED KINGDOM - 14.6%
COMMON STOCK
140,700 Airtours plc
Leisure & Hotels 730,476
252,600 Allied Colloids Group plc
Chemicals 530,152
577,000 Asda Group plc
Retailers, Food 933,287
55,000 BOC Group plc
Chemicals 754,221
72,000 Barclays plc*
Banks 844,185
182,000 Barratt Developments plc
Building & Construction 557,172
88,400 Blenheim Group plc
Media 359,905
134,000 Blue Circle Industries plc*
Building Materials &
Merchandise 615,338
108,000 British Airways plc
Transportation 775,446
158,829 British Land Company plc
Property 907,308
335,000 British Steel plc
Engineering 864,329
173,000 Burton Group plc
Retailers, General 275,730
130,000 Cable & Wireless plc*
Communications 849,298
73,000 Cadbury Schweppes plc*
Food Producers 602,478
99,000 Christies International plc
Miscellaneous
Distribution/Wholesale 321,824
80,000 Courtaulds plc
Chemicals 488,559
56,000 David S. Smith (Holdings) plc
Paper, Packaging & Printing 510,777
132,000 English China Clays plc*
Extractive Industries 712,387
132,773 Enterprise Oil plc
Oil Exploration & Production 701,893
104,000 Glaxo Wellcome plc
Pharmaceuticals 1,400,726
162,400 Guardian Royal Exchange plc
Insurance 586,865
96,000 Guinness plc
Beverages 768,061
83,250 Hogg Robinson plc
Commercial Services 264,057
70,000 Johnson Matthey plc
Diversified Industrials 669,402
89,000 Kingfisher plc*
Retailers, General 667,113
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE US$
---------- -----------
UNITED KINGDOM (CONTINUED)
<C> <S> <C>
414,000 LASMO plc
Oil/Gas 1,006,092
129,960 Laird Group plc
Engineering, Vehicles 855,188
128,100 London & Manchester Group plc
Life Assurance 796,456
250,000 Lucas Industries, Inc.
Engineering, Vehicles 757,456
159,300 MAI plc
Other Financial 827,043
360,400 MFI Furniture plc
Retailers, General 807,587
174,300 Midland Independent Newspapers
plc
Media 341,064
82,600 National Westminster Bank plc*
Banks 823,784
72,000 Rank Organisation plc
Leisure & Hotels 478,334
168,000 Rolls-Royce plc*
Engineering 408,269
72,100 Scottish Power plc
Electricity 397,079
UNITED KINGDOM (CONCLUDED)
137,100 Sedgwick Group plc
Insurance 229,329
39,000 THORN EMI plc
Entertainment 906,533
257,400 TSB Group plc
Banks 1,515,073
82,188 The Peninsular and Orient Steam
Navigational Company
Transportation 625,132
81,000 United News & Media plc
Media 662,112
144,000 Vickers PLC
Engineering 570,365
130,700 Vodafone Group plc
Communications 538,310
38,000 Zeneca Group plc
Pharmaceuticals 706,691
-----------
29,942,886
-----------
Total Investments 100.0%
(cost $164,976,954) 206,247,928
-----------
-----------
</TABLE>
* Non-income producing security
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments at value (cost $164,976,954) (Notes 1A and 2) $206,247,928
Cash 4,231,795
Receivable for stock sold 1,556,172
Receivable for fund shares sold 103,207
Receivable for dividends, tax reclaims and interest 593,980
------------
Total Assets 212,733,082
------------
LIABILITIES:
Payable for fund shares redeemed 4,176
Payable for forward foreign contracts, net (Note 1E) 97,423
Accrued advisory fees (Note 3) 81,123
Accrued administration fees (Note 3) 40,561
Accrued directors fees and expenses 1,995
Other payables and accrued expenses 178,225
------------
Total Liabilities 403,503
------------
Net Assets $212,329,579
------------
NET ASSETS CONSIST OF:
Paid-in capital (Note 4) $142,717,561
Accumulated undistributed net investment income 4,654,675
Accumulated undistributed net realized gain on investments
and foreign currency transactions 23,783,612
Net unrealized appreciation of investments and foreign
currency transactions 41,173,731
------------
Net Assets $212,329,579
------------
------------
Net asset value per share ($212,329,579
divided by 10,153,488 shares
outstanding) (Note 4) $20.91
-------
-------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $523,316) $ 3,244,579
Interest 529,515
-----------
Total Income 3,774,094
-----------
EXPENSES:
Investment advisory fees (Note 3) 893,082
Administration fees (Note 3) 446,541
Transfer agent fees and expenses (Note 3) 64,874
Accounting services fees (Note 3) 72,000
Custodian Fees 247,679
Auditing fees 30,131
Other professional fees 14,047
Directors fees and expenses 8,516
Other 32,222
-----------
Total Expenses 1,809,092
-----------
NET INVESTMENT INCOME 1,965,002
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 55,371,613
Net realized gain on foreign currency transactions 2,689,673
Change in unrealized appreciation on investments (59,592,783)
Change in unrealized appreciation on foreign currency
transactions (97,241)
-----------
Net loss on investments and foreign currency (1,628,738)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 336,264
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994
---------------- ----------------
<S> <C> <C>
DECREASE (INCREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 1,965,002 $ 3,868,320
Net realized gain on investments 55,371,613 18,133,830
Net realized gain (loss) on foreign currency
transactions 2,689,673 (6,521,496)
Change in unrealized appreciation on
investments (59,592,783) 36,789,769
Change in unrealized depreciation on foreign
currency transactions (97,241) (1,665,610)
---------------- ----------------
Net increase in net assets resulting from
operations 336,264 50,604,813
DIVIDENDS TO SHAREHOLDERS FROM NET REALIZED GAINS (54,730,616) (1,237,551)
CAPITAL SHARE TRANSACTIONS (NOTE 4) (233,780,034) 130,586,312
---------------- ----------------
(DECREASE)/INCREASE IN NET ASSETS (288,174,386) 179,953,574
NET ASSETS:
Beginning of year 500,503,965 320,550,391
---------------- ----------------
End of year (including undistributed net
investment income of $4,654,675 and $0
respectively) $212,329,579 $500,503,965
---------------- ----------------
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES:
INTERNATIONAL EQUITY FUND (THE 'FUND') is a separately managed
portfolio of Schroder Capital Funds, Inc., an open-end management investment
company currently consisting of four portfolios. The Fund was previously
organized as the International Equity Trust series of Fund Source, a
Massachusetts business trust established on July 17, 1984. On August 1, 1989,
the newly created International Equity Fund series of Schroder Capital Funds,
Inc. acquired all the assets and liabilities of International Equity Trust in
a tax free re-organization. The Fund invests in securities of foreign issuers
which may subject it to risks not normally associated with investing in
securities of United States corporations. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements:
A. Portfolio securities listed on the recognized stock exchanges
are valued at the last reported trade price on the exchange on which the
securities are principally traded. Listed securities traded on recognized
stock exchanges where last trade prices are not available are valued at
mid-market prices. Securities traded in over-the-counter markets, or
listed securities for which no trade is reported on the valuation date,
are valued at the most recent reported mid-market price. Other securities
and assets for which market quotations are not readily available are
valued at fair value as determined in good faith using methods approved
by the Board of Directors. As of October 31, 1995 the portfolio owned
270,000 shares of Genting Berhad (cost $992,838) for which a market
quotation was not available. This security had a value of $2,278,791
representing 1.1% of the Fund's net assets.
B. 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 'investment company taxable income,' as defined in
the Code, and net capital gains to its shareholders. Therefore, no
Federal income tax provision is required.
C. Investment transactions are accounted for on the trade date.
Dividend income is recorded on the ex-dividend date. Interest income,
including amortization of discount or premium, is recorded as earned.
Identified cost of investments sold is used to determine gains and losses
for both financial statement and Federal income tax purposes. Foreign
dividend and interest income amounts and realized capital gains and
losses are converted to U.S. dollar equivalents using foreign exchange
rates in effect at the date of the transactions.
D. 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: assets and liabilities at the rate of exchange at the end of
the respective period, purchases and sales of securities and income and
expenses at the rate of exchange prevailing on the dates of such
transactions. It is not practical to isolate that portion of the results
of operations arising from changes in the exchange rates from the portion
arising from changes in the market prices of securities.
E. The Fund may enter into forward contracts to purchase or sell
foreign currencies to protect against the effect on the U.S. dollar value
of the underlying portfolio 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 as unrealized gains or losses; realized gains or
losses include net gains or losses on contracts which have terminated by
settlement or by the Fund entering into offsetting commitments. At
October 31, 1995 the Fund was obligated to deliver (sell) foreign
currencies in exchange for US dollars as follows:
<TABLE>
<CAPTION>
Contract Date Currency Units US Dollars Unrealized Loss
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sell 12/21/95 Japanese Yen 2,000,000,000 19,684,384 97,423
</TABLE>
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
F. Distributions to shareholders 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 and unrealized gain and or loss. Undistributed net
investment income and accumulated undistributed net realized gains or
losses may include temporary book and tax basis differences 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 cost of securities purchased and the proceeds from sales of
securities or maturities for the year ended October 31,1995 aggregated
$123,151,336 and $427,503,057 respectively.
For Federal income tax purposes, the tax basis of investment securities
owned at October 31, 1995 was $165,228,136. The aggregate gross unrealized
appreciation for all securities in which there was an excess of market value
over tax cost was $47,579,635 and aggregate gross unrealized depreciation for
all securities in which there was an excess of tax cost over market value was
$6,559,843.
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) $ 893,082
Schroder Fund Advisors Inc.
(administrator and distributor) 446,541
Forum Financial Corp.
(accounting and transfer agency services) 136,874
------------------
$1,476,497
------------------
------------------
</TABLE>
The Fund retains Schroder Capital Management International, Inc.
('SCMI') to act as adviser and Schroder Fund Advisors Inc. ('Schroder
Advisors') to act as Administrator and Distributor for the Fund. SCMI manages
the investment and reinvestment of the assets included in the Fund's
portfolio and continuously reviews, supervises and administers the Fund's
investments. It is the responsibility of SCMI to make decisions relating to
the Fund's investments and to place purchase and sale orders regarding such
investments with brokers or dealers selected at its discretion. For its
services as Investment Adviser, SCMI receives an annual fee, payable monthly,
of 0.5% on the first $100,000,000 of average daily net assets, 0.4% on the
next $150,000,000 of average daily net assets and 0.35% on the average daily
net assets in excess of $250,000,000.
Schroder Advisors provides management and administrative services
necessary for the Fund's operations, other than the services provided above.
For these services, Schroder Advisors receives an annual fee, payable
monthly, of 0.25% on the first $100,000,000 of average daily net assets, 0.2%
of the next $150,000,000 of average daily net assets and 0.175% on the
average daily net assets in excess of $250,000,000.
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Forum Financial Corp. ('Forum') 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 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.
The Fund bears all costs of its operations other than those
specifically assumed by the Adviser or Administrator and Distributor.
Expenses directly attributable to a fund within Schroder Capital Funds, Inc.,
are charged to that fund. Other expenses are allocated proportionately among
the funds in relation to the net assets of each fund.
4. CAPITAL SHARES:
At October 31,1995 the Fund had one class of common shares ($0.01 par
value per share) of which 30,000,000 shares are authorized and 10,153,488 are
outstanding. Transactions in the Fund's capital shares for the year ended
October 31,1995 and year ended October 31, 1994 were as follows:
<TABLE>
<CAPTION>
Year Ended October 31, Year Ended October 31,
1995 1994
- -----------------------------------------------------------------------------------------------------------
Number Number
of of
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 3,833,382 $ 76,164,063 6,883,240 $152,383,108
Shares issued for reinvestment of
dividends 370,622 7,211,233 48,177 1,021,836
----------- ------------- ---------- ------------
4,204,004 83,375,296 6,931,417 153,404,944
Shares redeemed (15,654,701) (317,155,330)* (1,055,126) (22,818,632)
----------- ------------- ---------- ------------
Net decrease/increase in outstanding
shares (11,450,697) $(233,780,034) 5,876,291 $130,586,312
----------- ------------- ---------- ------------
----------- ------------- ---------- ------------
</TABLE>
* Shortly after the beginning of the fiscal year, a major institutional investor
in the Fund redeemed-in-kind on a pro-rata basis approximately $281 million in
securities held by the Fund resulting in a gain of $51,501,484 to the Fund.
Through this redemption such institutional investor transferred its
investments in the Fund to its own family of mutual funds, for which Schroder
Capital Management International Inc. serves as the investment adviser.
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
Year ended October 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
Net Asset Value, beginning of year $23.17 $20.38 $15.15 $16.22 $17.70
------ ------ ------ ------ ------
Investment Operations:
Net investment income 0.46 0.18 0.08 0.25 0.25
Net realized and unrealized gain (loss) on
investments (0.18) 2.69 5.27 (1.04) (0.25)
------ ------ ------ ------ ------
Total from investment operations 0.28 2.87 5.35 (0.79) 0.00
------ ------ ------ ------ ------
Distributions
Dividends from net investment income -- (0.08) (0.12) (0.23) (0.25)
Distribution from realized capital gains (2.54) -- -- (0.05) (1.23)
------ ------ ------ ------ ------
Total distributions (2.54) (0.08) (0.12) (0.28) (1.47)
Net Asset Value, end of year $20.91 $23.17 $20.38 $15.15 $16.22
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Total Return 2.08% 14.10% 35.54% (4.93%) 0.45%
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Ratio/Supplementary Data:
Net assets, end of year (Thousands) 212,330 500,504 320,550 159,556 108,398
Ratio of expenses to average net assets 0.91% 0.90% 0.91% 0.93% 1.07%
Ratio of net investment income to average net
assets 0.99% 0.94% 0.87% 1.62% 1.59%
Portfolio turnover rate 61.26% 25.17% 56.05% 49.42% 50.58%
</TABLE>
6. 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 will occur on or about January 9, 1996. 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.
Effective November 1, 1995, the Fund restructured its method of doing
business and now seeks to achieve its investment objective by investing all
of its investable assets in a separate portfolio of Schroder Capital Funds.
Schroder Capital Funds is registered as an open-end management investment
company under the Act. The Adviser and Forum perform substantially similar
services for each portfolio of Schroder Capital Funds as they do for the
Fund.
* * * *
SPECIAL MEETING OF SHAREHOLDERS (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
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
business trust under the name Schroder Capital Funds (Delaware) and approved
the conversion of the Fund to a Core and Gateway'r' structure. Of 10,007,301
shares outstanding of the Fund as of the record date for the special meeting,
7,373,223 were present in person or by proxy.
The first matter about which the Fund's shareholders voted was the
reelection of each 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 second 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. With respect to this matter, the
7,373,223 shares of the Fund present at the special meeting were voted as
follows:
<TABLE>
<CAPTION>
SHARES VOTED
- --------------------------------------------------------------------
<S> <C>
For 7,339,236
Against 30,214
Abstain 573
Broker Non-Vote 3,200
</TABLE>
The final matter about which the shareholders of the Fund voted was the
conversion of the Fund to a Core and Gateway structure pursuant to which the
Fund would adopt a new investment policy permitting the Fund to invest all of
its assets in a portfolio (the 'Portfolio') of Schroder Capital Funds with
the same investment objective and policies as the Fund. Incident to this
conversion, Schroder Capital Management, Inc. ('SCMI'), the Fund's investment
advisor, and Schroder Fund Advisors, Inc. ('Schroder Advisors'), the Fund's
administrator and distributor, will be paid at a different fee rate than the
rate that was paid by the Fund for the year ended October 31, 1995. SCMI will
receive from the Portfolio a fee of 0.45% of the Portfolio's average daily
net assets for its investment advisory services to the Portfolio. For its
administrative services to the Fund, Schroder Advisors will receive a fee of
0.20% of the Fund's average daily net assets. In addition, the Fund will be
responsible for its pro rata portion of the administrative services fee of
0.15% of average daily net assets paid by the Portfolio with respect to
administrative services performed for the Portfolio by Schroder Advisors.
With respect to this matter, the 7,373,223 shares of the Fund present at the
special meeting were voted as follows:
<TABLE>
<CAPTION>
SHARES VOTED
- --------------------------------------------------------------------
<S> <C>
For 7,363,354
Against 6,096
Abstain 573
Broker Non-Vote 3,200
</TABLE>
DISTRIBUTIONS (UNAUDITED)
During the fiscal year ended October 31, 1995 the fund distributed
$50,535,059 in long term capital gains to shareholders.
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SPECIAL 1995 TAX INFORMATION (UNAUDITED)
The Fund intends to elect to pass through the credit for taxes paid in
foreign countries during its fiscal year ended October 31, 1995. In
accordance with current tax laws, the foreign income and foreign tax per
share (for a share outstanding October 31, 1995) is as follows:
<TABLE>
<CAPTION>
COUNTRY DIVIDENDS FOREIGN TAX
- ----------------------- --------- -----------
<S> <C> <C>
Argentina 0.0003 0.0000
Brazil 0.0035 0.0011
Chile 0.0006 0.0001
France 0.0178 0.0039
Germany 0.0121 0.0024
Hong Kong 0.0187 0.0000
Indonesia 0.0031 0.0007
Italy 0.0057 0.0018
Japan 0.0205 0.0057
Korea 0.0030 0.0010
Malaysia 0.0019 0.0014
<CAPTION>
COUNTRY DIVIDENDS FOREIGN TAX
- ----------------------- --------- -----------
<S> <C> <C>
Mexico 0.0012 0.0000
Netherlands 0.0235 0.0045
Norway 0.0018 0.0006
Philippines 0.0004 0.0001
Singapore 0.0023 0.0015
Sweden 0.0027 0.0009
Switzerland 0.0119 0.0037
Thailand 0.0033 0.0006
United Kingdom 0.0590 0.0189
Venezuela 0.0001 0.0000
Total 0.1934 0.0489
</TABLE>
The pass through of foreign tax credit will affect only those
shareholders of the Fund who are holders on the dividend record date in
December 1995. Accordingly, shareholders will receive more detailed
information along with their form 1099-DIV in January 1996.
- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Directors of the International Equity Fund:
We have audited the accompanying statement of assets and liabilities of
the International Equity 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 two years in the period
then ended, and the financial highlights for each of the five years in the
period then ended. 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 International Equity 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 two years in the period then ended and the financial highlights for
each of the five years in the period then ended in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND, L.L.P.
Boston, Massachusetts
December 27, 1995
- --------------------------------------------------------------------------------
21
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
- --------------------------------------------------------------------------------
<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.
Global Custody Division
Woolgate House, Coleman Street
London EC2P 2HD, United Kingdom
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 International Equity Fund. Its use in connec-
tion with any offering of the Fund's shares is author-
ized only in case of a concurrent or prior delivery of
the Fund's current prospectus.
[Logo]
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International
Equity Fund
ANNUAL REPORT
October 31, 1995
Schroder Capital Funds, Inc.
STATEMENT OF DIFFERENCES
The Yen sign shall be expressed as ........................... 'Y'
The registered trademark symbol shall be expressed as ........ 'r'
