<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Fund
- --------------------------------------------------------------------------------
Two Portland Square, Portland, Maine 04101
General Information (207) 879-6200
Account Information (800) 344-8332
Fund Literature (800) 290-9826
Fax (207) 879-6050
INVESTMENT OBJECTIVE
The Fund's investment objective is capital appreciation. Current income is
incidental to the objective of capital appreciation. The Portfolio seeks to
achieve its investment objective by investing primarily in equity securities of
companies domiciled in the United States that, at the time of purchase, have
market capitalizations of $1.5 billion or less. It is intended for long-term
investors seeking to diversify their growth investments who are willing to
accept the risks associated with investments in smaller companies. The Fund
currently seeks to achieve its investment objective by investing all of its
investable assets in Schroder U.S. Smaller Companies Portfolio (the
'Portfolio'), a series of a registered open-end investment company with
substantially the same investment objective and policies as the Fund. This
annual report includes financial statements of both the Fund and the Portfolio.
INVESTMENT ADVISER
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 Group has been managing international
investment portfolios since the early years of this century . As of June 30,
1997, the Schroder Group had over $150 billion in assets under management. At
that same date, the Investment Adviser, together with its U.K. affiliate,
Schroder Capital Management International Ltd., had over $23 billion under
management.
July 23, 1997
Dear Shareholder:
We are pleased to present the annual report for the Schroder U.S. Smaller
Companies Fund for the period from November 1, 1996 through May 31, 1997. The
change of the Fund's fiscal year from October 31 became effective on May 31,
1997. Over this seven month period, the total return of the Fund was 14.73%
compared with the Russell 2000, which rose 8.40%
The last seven months have been a period in which the fundamental economic
background in the U.S. has remained favorable. Growth in the first quarter of
1997 was significantly faster than most commentators had predicted late in 1996
and exceeded our own relatively optimistic expectations. That this growth
continues to be achieved with little upward pressure on inflation is encouraging
but equally prompts questions as to its sustainability when the economy is
operating with so little slack. It is, therefore, not surprising that markets
have become more volatile in the last few months, debating the timing of
interest rate increases and the probability of wage cost pressure showing up in
the published inflation indices as the year progresses.
It appears likely that some such inflationary pressures may materialize
and, further, that interest rate increases should be expected in the second half
of the year. We, nevertheless, continue to expect any upward pressure on
inflation to be very modest and, hence, the extent of interest rate increases
needed to control it to be low by historic standards, perhaps only 1% in total.
It is, moreover, encouraging that the very significant changes evident
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Fund
- --------------------------------------------------------------------------------
in U.S. business in the last few years, reflecting in improved profitability and
productivity, appear to remain important goals and one which other countries are
keen to emulate.
Small companies as a class have failed to keep up with the rally in larger
stocks for some time now, including in this reporting period, although in May,
small companies enjoyed a month of strong relative outperformance. The
valuations of many small companies now appear compelling when compared to large
ones, presenting stock-pickers such as Schroders with attractive investment
opportunities for the Fund.
Sincerely,
/s/ Hermann C. Schwab /s/ Mark J. Smith
Hermann C. Schwab Mark J. Smith
Chairman President
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Fund
- --------------------------------------------------------------------------------
MANAGEMENT DISCUSSION AND ANALYSIS (As of May 31, 1997)
The past seven months was an unusual period in many ways: the largest U.S.
companies substantially outperformed smaller companies, and growth stocks
returned one of their poorest showings in recent memory. As a result, the
opportunities in small cap investing appear improved. While large cap valuations
have risen, small cap valuations have remained relatively reasonable.
Additionally, there has been little sign of speculation in the small cap market,
providing a favorable environment for long-term oriented, opportunistic
stock-pickers.
The Schroder U.S. Smaller Companies Fund performed well relative to the
Russell 2000 Index in the period under review. Several of the companies in the
portfolio were the subject of takeover activity, including Healthsource Inc.,
Value Health Inc., Healthdyne Technologies, Inc. and Amphenol Corp.
Sector level performance was quite volatile during the period. Technology,
which had led the market earlier, was the worst performing sector, down over
17%, of the Russell 2000 Index in the first calendar quarter of 1997. However,
technology rebounded sharply in May. The Fund outperformed in technology during
this time frame due to management's conservative stance. The energy sector also
exhibited a high degree of volatility and enjoyed the highest returns of the
Russell 2000 Index in the fourth calendar quarter of 1996. The energy sector
proceeded to give up much of the gain, however, during the first five months of
1997.
The financial sector also performed well through the period, showing
positive returns even as the Federal Reserve raised interest rates. The Fund's
best returns in the financial sector came in regional banks, with North Fork
BanCorp. Inc., and Commercial Federal Corp. Our real estate investment trust
holdings also performed well, with Starwood Lodging Trust and Innkeepers USA
Trust leading the group. Consumer stocks slightly underperformed the Russell
2000 Index during the period. The less cyclical companies held in the portfolio
performed the best, led by Fine Host Corp., which we had added to the portfolio
earlier in the fiscal year. Fine Host is a small, focused, fast growing
consolidator of the contract food management industry with a reputation for
quality.
There were no major changes in sectors during the period, as the Fund
remained well-diversified across sectors with investments continuing to be made
primarily on a bottom-up and opportunistic basis. Looking forward, management
continues to search for companies that can grow their earnings independently of
the economic cycle. We believe that many smaller companies offer more attractive
investment opportunities than larger companies based on valuations and growth
rates. We will remain focused on our research-intensive individual stock
selection, concentrating on underfollowed and misunderstood companies that can
offer superior earnings growth.
The views expressed in this report were those of the Fund's portfolio
manager as of the dates specified and may not reflect the views of the portfolio
manager on the date this report is first published or any time thereafter. These
views are intended to assist shareholders of the Fund in understanding their
investment in the Fund and do not constitute investment advice; investors should
consult their own investment professionals as to their individual investment
programs.
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Fund
- --------------------------------------------------------------------------------
INVESTMENT ADVISER'S REPORT--COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
The following information compares a change in value of a $10,000 investment in
the Investor Shares of the Fund (because Advisor Shares were not issued for the
periods presented) with the performance of the Russell 2000 Index over the past
10 fiscal year periods or since inception (for funds lacking 10-year records).
The Russell 2000 is a capitalization weighted index of 2000 small capitalization
U.S. companies. The Index excludes the effect of any fees or sales charges.
Total return and principal value of an investment in the Fund will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost. Total return for the Fund assumes reinvestment of dividends and
distributions. Advisor Shares have higher expenses and, therefore, have lower
performance than Investor Shares. Past performance cannot predict nor guarantee
future results.
Schroder U.S. Smaller Companies Fund vs Russell 2000 Index
Investment Value on 5/31/97
- ---------------------------
Schroder U.S. Smaller Companies Fund - Investor Shares $23,473
Schroder U.S. Smaller Companies Fund - Advisor Shares $11,135
Russell 2000 Index $16,643
Average Annual Total Return on 5/31/97 1 Year Since inception
- -------------------------------------- ------ ---------------
Schroder U.S. Smaller Companies Fund - Investor Shares 21.39% 26.14%(a)
Schroder U.S. Smaller Companies Fund - Advisor Shares N/A 36.38%(b)
Russell 2000 Index 16.34% 15.89%(c)
[PERFORMANCE GRAPH]
Date Russell 2000 Index Schroder U.S. Smaller Companies Fund
- ---- ------------------ ------------------------------------
6-Aug-93 $10,000 $10,000
Aug-93 $10,411 $10,350
Sep-93 $10,696 $10,820
Oct-93 $10,959 $10,990
Nov-93 $10,589 $10,710
Dec-93 $10,935 $11,202
Jan-94 $11,270 $11,656
Feb-94 $11,228 $11,807
Mar-94 $10,617 $11,222
Apr-94 $10,680 $11,374
May-94 $10,542 $11,343
Jun-94 $10,163 $11,142
Jul-94 $10,321 $11,273
Aug-94 $10,882 $11,918
Sep-94 $10,832 $11,666
Oct-94 $10,786 $11,897
Nov-94 $10,331 $11,384
Dec-94 $10,589 $11,701
Jan-95 $10,447 $11,753
Feb-95 $10,868 $12,380
Mar-95 $11,046 $12,756
Apr-95 $11,275 $13,090
May-95 $11,460 $13,383
Jun-95 $12,043 $13,957
Jul-95 $12,736 $15,117
Aug-95 $12,991 $15,681
Sep-95 $13,223 $16,224
Oct-95 $12,633 $15,817
Nov-95 $13,178 $16,684
Dec-95 $13,514 $17,444
Jan-96 $13,499 $17,360
Feb-96 $13,925 $17,835
Mar-96 $14,201 $18,785
Apr-96 $14,964 $19,973
May-96 $15,565 $21,160
Jun-96 $14,931 $20,460
Jul-96 $13,628 $18,916
Aug-96 $14,419 $19,498
Sep-96 $14,982 $20,614
Oct-96 $14,749 $20,460
Nov-96 $15,354 $21,125
Dec-96 $15,748 $21,331
Jan-97 $16,060 $21,720
Feb-97 $15,671 $21,720
Mar-97 $14,937 $20,942
Apr-97 $14,973 $21,012
May-97 $16,643 $23,473
(a) Inception date for Investor Shares is August 6, 1993.
(b) Inception date for Advisor Shares is December 20, 1996
(c) Annualized returns for the Russell 2000 Index are based on an inception date
of July 31, 1993.
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Fund
- --------------------------------------------------------------------------------
PORTFOLIO CHARACTERISTICS AS OF MAY 31, 1997 (UNAUDITED)
INVESTMENT BY INDUSTRY
INDUSTRY % OF NET ASSETS
- ----------------------------------------------------------
Consumer Cyclicals 19.2%
Financial 17.2%
Healthcare 12.2%
Technology 11.6%
Capital Goods/Construction 10.0%
Energy 6.8%
Consumer Staples 5.4%
Transportation/Services/Miscellaneous 5.4%
Basic Materials 4.3%
Cash & Other Assets 7.9%
---------------
Total 100.0%
---------------
---------------
TOP TEN HOLDINGS
SECURITY % OF NET ASSETS
- ----------------------------------------------------------
Petco Animal Supplies Inc. 2.0%
BA Merchant Services Inc. 1.7%
Multicare Companies Inc. 1.7%
UST Corp. 1.6%
CMAC Investment Corp. 1.6%
Cooper Cameron Corp. 1.6%
Fine Host Corp. 1.5%
USA Waste Services Inc. 1.5%
Pillowtex Corp. 1.5%
Regal Cinemas Inc. 1.5%
-------
Total 16.2%
-------
-------
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Fund
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments (Notes 1 and 2):
Investment in Schroder U.S. Smaller Companies Portfolio (the
'Portfolio') (cost $22,250,270) $26,100,778
Receivable for Fund shares sold 120,095
Organization costs, net of amortization (Note 2) 6,634
-----------
Total Assets 26,227,507
-----------
LIABILITIES:
Payable for Fund shares redeemed 25,408
Accrued expenses and other liabilities 17,022
-----------
Total Liabilities 42,430
-----------
Net Assets $26,185,077
-----------
-----------
COMPONENTS OF NET ASSETS:
Paid-in capital $20,825,459
Undistributed net investment income (loss) 887
Accumulated net realized gain (loss) 1,508,223
Net unrealized appreciation (depreciation) on investments 3,850,508
-----------
Net Assets $26,185,077
-----------
-----------
NET ASSETS BY CLASS
Investor Class $26,104,350
Advisor Class 80,727
-----------
Net Assets $26,185,077
-----------
-----------
SHARES OF BENEFICIAL INTEREST
Investor Class 1,969,016
Advisor Class 6,098
NET ASSET VALUE OFFERING AND REDEMPTION PRICE PER SHARE
(NET ASSETS [DIVIDED BY] SHARES OF BENEFICIAL INTEREST)
Investor Class $13.26
Advisor Class $13.24
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Fund
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Period For the Year
Ended Ended
May 31, 1997 October 31, 1996
-------------- ----------------
<S> <C> <C>
INVESTMENT INCOME:
Dividend income $ -- $ 115,293
Interest income -- 15,293
-------------- ----------------
-- 130,586
-------------- ----------------
NET INVESTMENT INCOME ALLOCATED FROM
THE PORTFOLIO:
Dividend income 73,393 22,752
Interest income 33,234 14,679
Net expenses (84,771) (24,767)
-------------- ----------------
Net Investment Income allocated from the
Portfolio 21,856 12,664
-------------- ----------------
Total Investment Income 21,856 143,250
-------------- ----------------
EXPENSES:
Investment advisory (Note 3) -- 58,914
Administration (Note 3) 32,578 38,881
Transfer agency (Note 3) 15,240 12,464
Shareholder services - Advisor Shares (Note 3) 70 --
Custody -- 8,968
Accounting (Note 3) 7,000 32,903
Legal 620 15,969
Audit 11,254 9,340
Registration 16,196 15,730
Reporting 19,648 16,809
Trustees 335 422
Amortization of organization costs (Note 2) 3,394 5,818
Miscellaneous 1,628 7,335
-------------- ----------------
Total Expenses 107,963 223,553
Fees waived and expenses reimbursed (Note 4) (43,580) (29,507)
-------------- ----------------
Net Expenses 64,383 194,046
-------------- ----------------
NET INVESTMENT INCOME (LOSS) (42,527) (50,796)
-------------- ----------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments sold -- 3,879,614
Net realized gain (loss) on investments from the Portfolio 1,749,974 718,000
-------------- ----------------
Net realized gain on investments 1,749,974 4,597,614
Net change in unrealized appreciation (depreciation) on
investments -- (3,676,928)
Net change in unrealized appreciation (depreciation) on
investments from the Portfolio 1,017,015 2,833,493
-------------- ----------------
Net change in unrealized appreciation
(depreciation) on investments 1,017,015 (843,435)
-------------- ----------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 2,766,989 3,754,179
-------------- ----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $2,724,462 $3,703,383
-------------- ----------------
-------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Fund
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the For the Year For the Year
Period Ended Ended Ended
May 31, 1997 October 31, 1996 October 31, 1995
-------------- ---------------- ----------------
<S> <C> <C> <C>
NET ASSETS, BEGINNING OF PERIOD $ 13,742,555 $ 15,287,216 $ 13,323,789
-------------- ---------------- ----------------
OPERATIONS:
Net investment income (loss) (42,527) (50,796) (42,343)
Net realized gain (loss) on investments sold 1,749,974 4,597,614 1,960,897
Net change in unrealized appreciation (depreciation)
on investments 1,017,015 (843,435) 2,234,952
-------------- ---------------- ----------------
Net increase (decrease) in net assets resulting from
operations 2,724,462 3,703,383 4,153,506
-------------- ---------------- ----------------
DISTRIBUTION TO SHAREHOLDERS FROM:
Net realized gain on investments - Investor Class (4,517,569) (1,965,720) (458,547)
-------------- ---------------- ----------------
CAPITAL SHARE TRANSACTIONS:
Sale of shares - Investor Class 14,779,822 1,697,351 2,000
Sale of shares - Advisor Class 129,171 -- --
Reinvestment of distributions - Investor Class 3,516,999 1,522,389 410,171
Redemption of shares - Investor Class (4,133,899) (6,502,064) (2,143,703)
Redemption of shares - Advisor Class (56,464) -- --
-------------- ---------------- ----------------
Net increase (decrease) from capital transactions 14,235,629 (3,282,324) (1,731,532)
-------------- ---------------- ----------------
Net increase (decrease) in net assets 12,442,522 (1,544,661) 1,963,427
-------------- ---------------- ----------------
NET ASSETS, END OF PERIOD (INCLUDING LINE A) $ 26,185,077 $ 13,742,555 $ 15,287,216
-------------- ---------------- ----------------
-------------- ---------------- ----------------
(A) Accumulated undistributed net investment income (loss) $ 887 $ -- $ --
-------------- ---------------- ----------------
-------------- ---------------- ----------------
SHARE TRANSACTIONS
Sale of shares - Investor Class 1,190,001 95,854 169
Sale of shares - Advisor Class 10,511 -- --
Reinvestment of distributions
in shares - Investor Class 296,293 106,834 37,357
Redemption of shares - Investor Class (315,073) (414,456) (156,000)
Redemption of shares - Advisor Class (4,413) -- --
-------------- ---------------- ----------------
Net increase (decrease) in shares 1,177,319 (211,768) (118,474)
-------------- ---------------- ----------------
-------------- ---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS--INVESTOR SHARES
Selected per share data and ratios for an Investor share outstanding
throughout each period:
<TABLE>
<CAPTION>
For the
Period Ended
May 31, For the Year Ended October 31,
1997 1996(a) 1995 1994 1993(b)
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 17.23 $ 15.14 $ 11.81 $ 10.99 $ 10.00
------------ ------- ------- ------- -------
Investment Operations
Net Investment Income (Loss) (0.02)(c) (0.06)(c) (0.04) (0.07) (0.02)
Net Realized and Unrealized Gain (Loss) on
Investments 1.88 4.10 3.78 0.97 1.01
------------ ------- ------- ------- -------
Total from Investment Operations 1.86 4.04 3.74 0.90 0.99
------------ ------- ------- ------- -------
Distributions From
Net Realized Gain on Investments (5.83) (1.95) (0.41) (0.08) --
------------ ------- ------- ------- -------
Total Distributions (5.83) (1.95) (0.41) (0.08) --
------------ ------- ------- ------- -------
Net Asset Value, End of Period $ 13.26 $ 17.23 $ 15.14 $ 11.81 $ 10.99
------------ ------- ------- ------- -------
------------ ------- ------- ------- -------
Total Return 14.73%(d) 29.35% 32.84% 8.26% 9.90%
Ratio/Supplementary Data
Net Assets at End of Period (in thousands) $ 26,104 $13,743 $15,287 $13,324 $12,489
Ratios to Average Net Assets:
Expenses including reimbursement/waiver 1.49%(c)(e) 1.49%(c)(e) 1.49% 1.45% 2.03%(e)
Expenses excluding reimbursement/waiver 1.87%(c)(e) N/A N/A N/A N/A
Net investment income (loss) including
reimbursement/waiver (0.42)%(c)(e) (0.35)%(c)(e) (0.30)% (0.58)% (0.99)%(e)
Average commission rate (f) $ 0.0584 $0.0583 N/A N/A N/A
Portfolio turnover rate (g) 34.45% 58.50% 92.68% 70.82% 12.58%
</TABLE>
- ------------------
(a) On May 17, 1996, the Fund began offering two classes of shares Investor
Shares and Advisor Shares, and all then outstanding shares of the Fund were
converted to Investor Shares.
(b) The Fund commenced operations on August 6, 1993 and converted to Core and
Gateway(Registered) on August 15, 1996.
(c) Includes the Fund's proportionate share of income and expenses of the
Portfolio.
(d) Not annualized.
(e) Annualized.
(f) For the fiscal years beginning on or after September 1, 1995, the Fund is
required to disclose average commission per share paid to brokers on the
purchase and sale of equity securities. The rate for the period ended May
31, 1997 represents the average commission per share paid by the Portfolio.
Prior to May 31, 1997, the rate represents the average commission per share
paid by the Fund while it was making investments directly in securities.
(g) Portfolio turnover represents the rate of portfolio activity. The rate for
the period ended May 31, 1997 represents the portfolio turnover rate of the
Portfolio. Prior to May 31, 1997, the rate represents portfolio activity
while the Fund was making investments directly in securities.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS--ADVISOR SHARES
Selected per share data and ratios for an Advisor share outstanding
throughout the period:
<TABLE>
<CAPTION>
For the
Period Ended
May 31,
1997(a)
<S> <C>
- ---------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 11.89
--------------
Investment Operations
Net Investment Income (Loss) (0.03)(b)
Net Realized and Unrealized Gain (Loss) on Investments 1.38
--------------
Total from Investment Operations 1.35
--------------
Net Asset Value, End of Period $ 13.24
--------------
--------------
Total Return 11.35%(c)
Ratio/Supplementary Data
Net Assets at End of Period (in thousands) $ 81
Ratios to Average Net Assets:
Expenses including reimbursement/waiver 1.74%(b)(d)
Expenses excluding reimbursement/waiver 57.02%(b)(d)
Net investment income (loss) including reimbursement/waiver (0.67)%(b)(d)
Average commission rate (e) $ 0.0584
Portfolio turnover rate (f) 34.45%
</TABLE>
- ------------------
(a) Advisor Class shares were first issued on December 23, 1996.
(b) Includes the Fund's proportionate share of income and expenses of the
Portfolio.
(c) Not annualized.
(d) Annualized.
(e) Amount represents the average commission per share paid to brokers by the
Portfolio on the purchase and sale of equity securities.
(f) Portfolio turnover represents the rate of portfolio activity of the
Portfolio.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
Schroder Capital Funds (Delaware) (the 'Trust') was organized as a
Maryland corporation on July 30, 1969; reorganized as a series company on
February 29, 1988, as Schroder Capital Funds, Inc.; and reorganized on
January 9, 1996, as a Delaware business trust. The Trust, which is registered
as an open-end, management investment company under the Investment Company
Act of 1940 (the 'Act'), currently has six investment portfolios. Included in
this report is the Schroder U.S. Smaller Companies Fund (the 'Fund'), a
diversified portfolio that commenced operations on August 6, 1993. Under its
Trust Instrument, the Trust is authorized to issue an unlimited number of the
Fund's Investor Shares and Advisor Shares of beneficial interest without par
value. As of May 31, 1997, both Investor Shares and Advisor Shares had been
issued.
Effective May 31, 1997, the Fund changed its fiscal year end to May 31
from October 31.
MASTER FEEDER ARRANGEMENT
Effective August 15, 1996, the Fund seeks to achieve its investment
objective by investing all of its investable assets in a separate diversified
portfolio, Schroder U.S. Smaller Companies Portfolio (the 'Portfolio'), of
Schroder Capital Funds ('Schroder Core') that has the same investment
objective and substantially similar investment policies as the Fund. This is
commonly referred to as a master-feeder arrangement. Schroder Core also is
registered as an open-end, management investment company. The Fund may
withdraw its investment from the Portfolio at any time if the Trust's Board
of Trustees determines that it is in the best interest of the Fund and its
shareholders to do so. The Fund accounts for its investment in the Portfolio
as a partnership investment and records its share of the Portfolio income,
expense and realized and unrealized gain and loss daily. The financial
statements of the Portfolio are on pages 15 to 23 in this report and should
be read in conjunction with the Fund's financial statements. The percentage
of the Portfolio owned by the Fund as of May 31, 1997 was approximately
25.25%.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with generally
accepted accounting principles, which require management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increase and decrease in net assets
from operations during the fiscal period. Actual results could differ from
those estimates.
The following represent significant accounting policies of the Fund:
SECURITY VALUATION
The Trust determines the net asset value per share of the Fund as of
4:00 p.m., Eastern time, on each Fund business day. Valuation of securities
held in the Portfolios are discussed in the Notes to the Financial Statement
of the Portfolio.
INVESTMENT INCOME AND EXPENSES
The Trust records daily its pro rata share of the Portfolio's income,
expenses and realized and unrealized gain and loss. In addition, the Fund
accrues its own expenses.
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DISTRIBUTIONS TO SHAREHOLDERS
Dividends and capital gain distributions, if any, are distributed to
shareholders at least annually. Distributions are based on amounts calculated
in accordance with applicable federal income tax regulations.
FEDERAL TAXES
The Fund intends to qualify and continue to qualify each year as
regulated investment company and distribute all of its taxable income. In
addition, by distributing in each calendar year substantially all of its net
investment income, capital gain and certain other amounts, if any, the Fund
will not be subject to a federal excise tax. Therefore, no federal income or
excise tax provision is required.
EXPENSE ALLOCATION
The Trust accounts separately for the assets and liabilities and
operation of each Fund. Expenses that are directly attributable to more than
one Fund are allocated among the respective Funds. Expenses that are directly
attributable to a class are allocated to that class.
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.
NOTE 3. INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
The Fund currently invests all of its assets in the Portfolio, which
retains Schroder Capital Management International Inc. ('SCMI') to act as
investment adviser pursuant to an Investment Advisory Agreement. See Notes to
the Financial Statements of the Portfolio.
ADMINISTRATION
On behalf of the Fund, the Trust has entered into an Administration
Agreement with Schroder Fund Advisors Inc. ('Schroder Advisors') under which
Schroder Advisors is entitled to receive an annual fee, payable monthly, at
the rate of 0.25% of the Fund's average daily net assets. In addition, the
Trust has entered into a Subadministration Agreement with Forum
Administrative Services, Limited Liability Company ('Forum') under which
Forum is entitled to receive an annual fee, payable monthly, at the rate of
0.075% of the Fund's average daily net assets. Previous subadministration
agreements in effect with Forum Financial Services, Inc. during the period
were identical in all material terms including fees.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
The transfer agent and dividend disbursing agent for the Fund is Forum
Financial Corp.(Registered) ('FFC'). The Transfer Agent is paid a transfer
agent fee in the amount of $12,000 per year, plus certain other fees and
expenses.
- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
SHAREHOLDER SERVICE PLAN AND SERVICE ORGANIZATIONS
The Trust has adopted a Shareholder Service Plan ('the Plan') with
respect to the Advisor Share Class pursuant to which Schroder Advisors is
authorized to pay Service Organizations a servicing fee. Payments under the
Plan may be for various types of services. The maximum annual amount payable
under the Plan is 0.25% of the Fund's average daily net assets attributable
to the Advisor Shares.
OTHER SERVICE PROVIDERS
The fund accountant of the Fund is FFC. For its services to the Fund,
FFC is entitled to receive from the Trust a fee of $12,000 per year.
NOTE 4. WAIVER OF FEES AND EXPENSE REIMBURSEMENTS
Schroder Advisors voluntarily has waived a portion of its fees and have
assumed certain expenses of the Portfolio so that its total expenses would
not exceed 1.49% on Investor Shares and 1.74% on Advisor Shares of the
respective share's average daily net assets. The expense limitations cannot
be modified or withdrawn except by a majority vote of the Trustees of the
Trust. Forum and FFC may waive voluntarily all or a portion of their fees,
from time to time. For the period ended May 31, 1997, fees waived and
expenses reimbursed by Schroder Advisors were $25,060 and $12,799,
respectively, and fees waived by FFC were $5,721. For the year ended October
31, 1996, SCMI and Schroder Advisors waived fees in the amount of $2,657 and
$26,850, respectively.
- ------------------------
SUPPLEMENTARY UNAUDITED INFORMATION
DISTRIBUTIONS
During the fiscal period ended May 31, 1997, the Fund distributed
$3,129,098 in long term capital gains and $1,388,471 of ordinary income to
shareholders. 11.6% of the ordinary income distribution may qualify for the
dividends received deduction available to corporate shareholders.
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Fund
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees 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 (Delaware)), as of May 31, 1997, and the related statements of
operations for the period ended May 31, 1997 and for the year then ended October
31, 1996, the statements of changes in net assets for the period ended May 31,
1997 and each of the two years ended October 31, 1996 and 1995, and the
financial highlights for the Investor Shares for the period ended May 31, 1997,
each of the three years in the period ended October 31, 1996 and the period
August 6, 1993 (commencement of operations) to October 31, 1993, and for the
period from December 23, 1996 to May 31, 1997 for the Advisor Shares. 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. 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 May 31, 1997, the results of its
operations for the period ended May 31, 1997 and for the year then ended October
31, 1996, the changes in its net assets for the period ended May 31, 1997 and
each of the two years ended October 31, 1996 and 1995, and the financial
highlights for the Investor Shares for the period ended May 31, 1997, each of
the three years in the period ended October 31, 1996 and the period August 6,
1993 (commencement of operations) to October 31, 1993, and for the period from
December 23, 1996 to May 31, 1997 for the Advisor Shares, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
July 14, 1997
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
AS OF MAY 31, 1997
COMMON STOCK - 92.1%
SHARES VALUE US$
- ------- ------------
BASIC MATERIALS - 4.3%
46,600 AMCOL International Corp. $ 856,279
35,400 Ball Corp. 1,031,030
83,100 Calgon Carbon Corp. 1,163,400
36,100 Ferro Corp. 1,349,052
------------
4,399,761
------------
CAPITAL GOODS/CONSTRUCTION - 10.0%
22,100 Aeroquip-Vickers Inc. 958,593
53,600 Aftermarket Technology Corp. (a) 978,200
37,800 BMC Industries Inc. 1,242,678
38,400 Donaldson Co. Inc. 1,406,403
26,200 Falcon Building Products Inc.
Class A (a) 458,500
24,500 Harsco Corp. 955,500
59,850 Miller Industries Inc. 980,048
37,400 Tracor Inc. (a) 949,029
28,100 Triangle Pacific Corp. (a) 839,490
42,900 USA Waste Services Inc. (a) 1,555,125
------------
10,323,566
------------
CONSUMER CYCLICALS - 19.2%
46,692 Accustaff Inc. (a) 1,121,454
22,900 Barnett Inc. (a) 509,525
12,750 CDW Computer Centers Inc. (a) 624,750
12,300 Consolidated Cigar Holdings Inc. (a) 372,018
23,950 Consolidated Stores Corp. (a) 916,089
23,000 Goody's Family Clothing Inc. (a) 530,438
16,500 Gucci Group 1,150,875
27,800 Nautica Enterprises (a) 653,300
8,300 Performance Food Group Co. (a) 172,225
78,600 Petco Animal Supplies Inc. (a) 2,102,550
65,100 Pier 1 Imports Inc. 1,456,614
72,500 Pillowtex Corp. 1,549,690
31,400 Promus Hotel Corp. (a) 1,134,328
45,250 Regal Cinemas Inc. (a) 1,488,449
19,800 Robert Half International Inc. (a) 848,929
53,900 ShoLodge Inc. (a) 714,175
34,850 Sonic Corp. (a) 609,875
24,400 Tiffany & Co. 1,131,553
26,200 Warnaco Group Inc. Class A 858,050
26,200 WestPoint Stevens Inc. (a) 992,329
31,400 Wet Seal Inc. Class A (a) 922,380
------------
19,859,596
------------
CONSUMER STAPLES - 5.4%
29,100 Compdent Corp. (a) 527,443
52,300 Fine Host Corp. (a) 1,595,150
98,600 Foodmaker Inc. (a) 1,380,400
21,100 Henry Schein Inc. (a) 704,215
23,400 Physician Sales & Service Inc. (a) 339,300
SHARES VALUE US$
- ------- ------------
CONSUMER STAPLES (CONCLUDED)
36,100 Suiza Foods Corp. (a) $ 1,078,489
------------
5,624,997
------------
ENERGY - 6.8%
26,500 B.J. Service Company (a) 1,464,125
19,600 Cooper Cameron Corp. (a) 1,604,755
10,700 Flores & Rucks Inc. (a) 524,300
36,900 Tosco Corp. 1,203,864
46,000 Union Tex Pete Holdings Inc. 925,757
48,400 Varco International Inc. (a) 1,331,000
------------
7,053,801
------------
FINANCIAL - 17.2%
33,700 AmerUs Life Holdings Inc. 871,992
104,500 BA Merchant Services Inc. Class
A (a) 1,711,193
34,300 Bank United Corp. 1,191,925
20,600 Bay View Capital Corp. 1,035,150
40,100 CMAC Investment Corp. 1,669,164
61,500 CWM Mortgage Holdings Inc. 1,283,816
7,650 Charter One Financial Inc. 358,596
39,050 Commercial Federal Corp. 1,361,870
10,300 ContiFinancial Corp. (a) 346,409
30,700 Cullen/Frost Bankers Inc. 1,208,817
35,200 FBL Financial Group Inc. Class A 1,034,004
9,900 Fremont General Corp. 347,738
44,600 Inkeepers USA Trust 624,400
27,700 MLF Bancorp Inc. 481,290
54,000 North Fork BanCorp Inc. 1,134,000
4,100 Penncorp Financial Group Inc. 139,914
33,000 Starwood Lodging Trust 1,229,254
1,600 Sun Communities Inc. 52,200
80,810 UST Corp. 1,697,010
------------
17,778,742
------------
HEALTH CARE - 12.2%
8,900 AmeriSource Health Corp. Class A (a) 379,365
21,100 Arbor Health Care Co. (a) 601,350
17,300 Bergen Brunswig Corp. Class A 657,400
65,700 Coventry Corp. (a) 956,759
14,800 Express Scripts Inc. Class A (a) 675,251
33,100 Genzyme Corp. (a) 790,265
72,500 Haemonetics Corp. (a) 1,241,566
31,200 Health Care and Retirement
Corp. (a) 1,060,800
27,662 Healthdyne Technologies Inc. (a) 408,015
39,100 Healthsource Inc. (a) 840,650
22,900 Invacare Corp. 492,350
51,000 Isis Pharmaceuticals Inc. (a) 803,250
54,000 Matria Healthcare Inc. (a) 236,252
68,650 Multicare Companies Inc. (a) 1,707,674
87,300 Transitional Hospitals Corp. (a) 1,385,891
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONCLUDED)
AS OF MAY 31, 1997
SHARES VALUE US$
- ------- ------------
HEALTH CARE (CONCLUDED)
18,500 Value Health Inc. (a) $ 374,625
------------
12,611,463
------------
TECHNOLOGY - 11.6%
19,300 Antec Corp. (a) 238,841
137,600 Computervision Corp. (a) 670,804
26,800 Credence Systems Corp. (a) 790,600
2,600 Cymer Inc. (a) 137,800
43,200 EG&G Inc. 842,400
25,500 Evans & Sutherland Computer
Corp. (a) 669,375
36,000 Exabyte Corp. (a) 508,504
65,800 INTERSOLV (a) 649,781
55,700 InterVoice, Inc. (a) 612,700
15,400 Intergraph Corp. (a) 108,764
18,900 Lam Research Corp. (a) 687,492
46,300 Marcam Corp. (a) 572,967
39,100 MicroTouch Systems Inc. (a) 987,275
37,900 Molecular Dynamics Inc. (a) 549,550
36,500 Symbol Technologies Inc. 1,145,191
37,700 System Software Associates Inc. (a) 348,725
24,600 Thomas & Betts Corp. 1,251,529
SHARES VALUE US$
- ------- ------------
TECHNOLOGY (CONCLUDED)
57,500 Wang Laboratories Inc. (a) $ 1,178,750
------------
11,951,048
------------
TRANSPORTATION/SERVICES/
MISCELLANEOUS - 5.4%
31,800 ASA Holdings Inc. 830,778
22,200 Aviall Inc. (a) 327,450
25,600 CNF Transportation Inc. 825,600
51,400 Comair Holdings Inc. 1,336,400
41,100 Jacor Communications Inc. (a) 1,417,950
2,100 Mid-America Apartment
Communities Inc. 55,913
28,100 RemedyTemp Inc. Class A (a) 488,241
15,000 U.S. Rentals Inc. (a) 356,251
------------
5,638,583
------------
Total Investments - 92.1%
(cost $84,209,629) 95,241,557
Other Assets Less
Liabilities - 7.9% 8,143,701
------------
Total Net Assets - 100.0% $103,385,258
------------
------------
- ------------------
(a) Non-income producing security.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments (Note 2):
Investments at cost $ 84,209,629
Net unrealized appreciation (depreciation) 11,031,928
------------
Total Investments at value 95,241,557
Cash and Cash Equivalents (Note 2) 6,922,881
Receivable for investments sold 2,252,183
Receivable for dividends and interest 79,383
Organization costs, net of amortization (Note 2) 21,095
------------
Total Assets 104,517,099
------------
LIABILITIES:
Payable for investments purchased 1,049,223
Payable to Investment Adviser (Note 3) 20,211
Payable to other related parties (Note 3) 6,031
Accrued expenses and other liabilities 56,376
------------
Total Liabilities 1,131,841
------------
Net Assets $103,385,258
------------
------------
COMPONENTS OF NET ASSETS:
Investors' capital $ 92,353,330
Net unrealized appreciation (depreciation) on investments 11,031,928
------------
Net Assets $103,385,258
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Portfolio
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Period
For the Period August 15, 1996
Ended through
May 31, 1997 October 31, 1996
-------------- ----------------
<S> <C> <C>
INVESTMENT INCOME:
Dividend income $ 260,037 $ 36,852
Interest income 116,204 22,652
-------------- ----------------
Total Investment Income 376,241 59,504
-------------- ----------------
EXPENSES:
Investment advisory (Note 3) 211,277 26,334
Administration (Note 3) 26,410 3,292
Transfer agency (Note 3) 7,029 2,558
Custody 33,146 1,930
Accounting (Note 3) 21,000 7,645
Legal 936 2,957
Audit 21,629 11,000
Trustees 1,680 103
Amortization of organization costs (Note 2) 2,927 1,066
Miscellaneous 8,254 742
-------------- ----------------
Total Expenses 334,288 57,627
Fees waived (Note 6) (35,396) (20,260)
-------------- ----------------
Net Expenses 298,892 37,367
-------------- ----------------
NET INVESTMENT INCOME (LOSS) 77,349 22,137
-------------- ----------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments sold 2,311,789 735,049
Net change in unrealized appreciation (depreciation) on
investments 8,079,833 2,952,095
-------------- ----------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 10,391,622 3,687,144
-------------- ----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 10,468,971 $3,709,281
-------------- ----------------
-------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Portfolio
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Period
For the Period August 15, 1996
Ended through
May 31, 1997 October 31, 1996
-------------- ----------------
<S> <C> <C>
NET ASSETS, BEGINNING OF PERIOD $ 28,929,477 $ --
-------------- ----------------
OPERATIONS:
Net investment income (loss) 77,349 22,137
Net realized gain (loss) on investments sold 2,311,789 735,049
Net change in unrealized appreciation (depreciation) on
investments 8,079,833 2,952,095
-------------- ----------------
Net increase (decrease) in net assets resulting from operations 10,468,971 3,709,281
-------------- ----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST:
Contributions 69,106,539 26,247,304
Withdrawals (5,119,729) (1,027,108)
-------------- ----------------
Net transactions from investors' beneficial interest 63,986,810 25,220,196
-------------- ----------------
Net increase (decrease) in net assets 74,455,781 28,929,477
-------------- ----------------
NET ASSETS, END OF PERIOD $ 103,385,258 $ 28,929,477
-------------- ----------------
-------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Portfolio performance for the following periods:
<TABLE>
<CAPTION>
For the Period For the Period
Ended Ended
May 31, 1997 October 31, 1996 (a)
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
Ratio to Average Net Assets:
Expenses including reimbursement/waiver 0.85%(b) 0.85%(b)
Expenses excluding reimbursement/waiver 0.95%(b) 1.31%(b)
Net investment income including reimbursement/waiver 0.22%(b) 0.50%(b)
Average commission rate (c) $ 0.0584 $ 0.0562
Portfolio turnover rate 34.45% 17.30%
</TABLE>
- ------------------
(a) For the period from August 15, 1996, commencement of operations, to October
31, 1996.
(b) Annualized.
(c) Amount represents the average commission per share paid to brokers on the
purchase and sale of portfolio securities.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
Schroder Capital Funds ('Schroder Core') was organized as a Delaware
business trust on September 7, 1995. Schroder Core, which is registered as an
open-end, managment investment company under the Investment Company Act of
1940 (the 'Act'), currently has five investment portfolios. Included in this
report is Schroder U.S. Smaller Companies Portfolio (the 'Portfolio'), a
diversified portfolio that commenced operations on August 15, 1996. Under its
Trust Instrument, Schroder Core is authorized to issue an unlimited number of
interests without par value. Interests in the Portfolio are sold in private
placement transactions without any sales charges to institutional clients,
including open-end, management investment companies.
Effective May 31, 1997, the Portfolio changed its fiscal year end to
May 31 from October 31.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with generally
accepted accounting principles, which require management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of increase and decrease in net assets
from operations during the fiscal period. Actual results could differ from
those estimates.
The following represent significant accounting policies of the
Portfolio:
SECURITY VALUATION
Portfolio securities listed on recognized stock exchanges are valued at
the last reported sale price on the exchange on which the securities are
principally traded. Listed securities traded on recognized stock exchanges
where last sale prices are not available are valued at the last sale price on
the proceeding trading day or at closing 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 Schroder Core Board of Trustees.
CASH EQUIVALENTS
The Portfolio considers all deposits and the related interest income in
the Chase Money Market Account to be cash equivalents.
INVESTMENT INCOME
Dividend income is recorded on the ex-dividend date. Interest income is
recorded on an accrual basis.
SECURITY TRANSACTIONS
Investment transactions are accounted on the trade date basis. Realized
gain and loss from investment transactions are determined on the basis of
identified cost.
ORGANIZATIONAL COSTS
Costs incurred by the Portfolio in connection with this organization
and initial registration are being amortized on a straight line basis over a
five-year period.
- --------------------------------------------------------------------------------
21
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
NOTE 3. INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
The investment adviser to the Portfolio is Schroder Capital Management
International Inc. ('SCMI'). Pursuant to an Investment Advisory Agreement,
SCMI is entitled to receive an annual fee, payable monthly, of 0.60% of the
average daily net assets.
ADMINISTRATION
On behalf of the Portfolio, the Trust has entered into an
Administration Agreement with Schroder Fund Advisors Inc. In addition, the
Trust has entered into a Subadministration Agreement with Forum
Administrative Services, Limited Liability Company ('Forum') under which
Forum is entitled to receive an annual fee, payable monthly, at the rate of
0.075% of the Portfolio's average daily net assets. Previous
subadministration agreements in effect with Forum Financial Services, Inc.
during the period were identical in all material terms including fees.
TRANSFER AGENT AND SHAREHOLDER SERVICE AGENTS
Forum Financial Corp.(Registered) ('FFC') serves as the Portfolio's
transfer agent and dividend disbursing agent and is entitled to receive
compensation for those services from the Schroder Core with respect to the
Portfolio in the amount of $12,000 per year plus certain other fees and
expenses.
OTHER SERVICE PROVIDERS
FFC also performs portfolio accounting for the Portfolio and is
entitled to receive compensation for those services by the Portfolio in the
amount of $36,000 per year, plus certain amounts based upon the number and
types of portfolio transactions.
NOTE 4. PURCHASES AND SALES OF SECURITIES
The cost of securities purchased and the proceeds from sales of
securities (excluding short-term investments) for the seven months ended May
31, 1997 aggregated $77,464,947 and $19,124,031, respectively.
For federal income tax purposes, the tax basis of investment securities
owned as of May 31, 1997 was $84,237,580. The aggregate gross unrealized
appreciation for all securities in which there was an excess of market value
over tax cost was $13,288,495, and aggregate gross unrealized depreciation
for all securities in which there was an excess of tax cost over market value
was $2,284,518.
NOTE 5. FEDERAL TAXES
The Portfolio is not required to pay federal income taxes on its net
investment income and capital gain, as it is treated as a partnership for
federal income tax purposes. All interest, dividends, gain and loss of the
Portfolio are deemed to have been 'passed through' to the partners in
proportion to their holdings of the Portfolio, regardless of whether such
interest, dividends or gain have been distributed by the Portfolio.
NOTE 6. WAIVER OF FEES
SCMI voluntarily has waived a portion of its fees and has assumed
certain expenses of the Portfolio so that its total expenses would not exceed
certain limitations. The expense limitations cannot be modified or withdrawn
except by a majority vote of the Trustees of Schroder Core. Forum and FFC may
waive voluntarily all or a portion of their fees, from time to time. Fees
waived by SCMI were $35,396 and $20,260 for the period ended May 31, 1997 and
October 31, 1996, respectively.
- --------------------------------------------------------------------------------
22
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Portfolio
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Investors and Trustees of Schroder U.S. Smaller Companies Portfolio:
We have audited the accompanying statement of assets and liabilities of the
Schroder U.S. Smaller Companies Portfolio (a separate portfolio of Schroder
Capital Funds), including the schedule of investments, as of May 31, 1997, and
the related statements of operations, the statements of changes in net assets
and the financial highlights for the period then ended and for the period August
15, 1996 (commencement of operations) to October 31, 1996. These financial
statements and financial highlights are the responsibility of the Portfolio'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 May
31, 1997 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 Portfolio as of May 31, 1997, the results of its
operations, the changes in its net assets and the financial highlights for the
period then ended and for the period August 15, 1996 (commencement of
operations) to October 31, 1996, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
July 14, 1997
- --------------------------------------------------------------------------------
23
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
TRUSTEES
Hermann C. Schwab
Peter E. Guernsey
John I. Howell
Clarence F. Michalis
Mark J. Smith
OFFICERS
Hermann C. Schwab
Chairman of the Board
Mark J. Smith
President
Mark Astley
Vice President
Robert G. Davy
Vice President
Margaret H. Douglas-Hamilton
Vice President
Richard Foulkes
Vice President
John Y. Keffer
Vice President
Jane Lucas
Vice President
Catherine A. Mazza
Vice President
Michael Perelstein
Vice President
Fariba Talebi
Vice President
John A. Troiano
Vice President
Ira L. Unschuld
Vice President
Alexandra Poe
Vice President
Secretary
Robert Jackowitz
Treasurer
Thomas G. Sheehan
Assistant Treasurer
Assistant Secretary
Catherine S. Wooledge
Assistant Treasurer
Assistant Secretary
Barbara Gottlieb
Assistant Secretary
Mary Kunkemueller
Assistant Secretary
Gerardo Machado
Assistant Secretary
<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
Chase MetroTech Center
Brooklyn, NY 11245
TRANSFER AND DIVIDEND
DISBURSING AGENT
Forum Financial Corp.
Two Portland Square
Portland, Maine 04101
COUNSEL
Ropes & Gray
One International Place
Boston, MA 02110-2624
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 delivery of the
Fund's current prospectus.
[Logo] SCHRODERS
Schroder
U.S. Smaller
Companies
Fund
ANNUAL REPORT
May 31, 1997
Schroder Capital Funds (Delaware)