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Schroder U.S. Smaller Companies Fund
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Two Portland Square, Portland, Maine 04101
General Information (207) 879-6200
Account Information (800) 344-8332
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, under normal market conditions,
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 semi-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 March 31,
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.
June 15, 1997
Dear Shareholder:
We are pleased to present the semi-annual report for the Schroder U.S.
Smaller Companies Fund for the six month period ending April 30, 1997. Over the
period, the total return of the Fund was 2.7% compared with the Russell 2000,
which rose 1.6%.
The last six 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 will 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
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Schroder U.S. Smaller Companies Fund
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in U.S. business in the last few years, reflected in improved profitability and
productivity, appear to remain an important corporate goal 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 beyond
this period, 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
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2
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Schroder U.S. Smaller Companies Fund
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MANAGEMENT DISCUSSION AND ANALYSIS (As of April 30, 1997)
The past six months was an unusual period in many ways: America's largest
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 have improved. While valuations in the
large cap market 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 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, and Amphenol Corporation.
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. The Fund
significantly 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 in the fourth
calendar quarter of 1996, however, the energy sector proceeded to give up much
of the gain during the first four months of 1997.
The financial sector also performed well throughout 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
Bancorporation Inc., and Commercial Federal Corporation. 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 during the period. The less cyclical companies held in the
portfolio performed the best, led by Fine Host Corporation, 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 sectoral changes in the period, and 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
managers as of the dates specified and may not reflect the views of the
portfolio managers on the date this report is first published or any time
thereafter. These views are intended to assist shareholders of the Fund in
understanding their investment in the Fund and do not constitute investment
advice; investors should consult their own investment professionals as to their
individual investment programs.
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3
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Schroder U.S. Smaller Companies Fund
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PORTFOLIO CHARACTERISTICS AS OF APRIL 30, 1997 (UNAUDITED)
INVESTMENT BY INDUSTRY
INDUSTRY % OF NET ASSETS
- ----------------------------------------------------------
Consumer Cyclicals 20.9%
Finance 16.9%
Healthcare 11.8%
Technology 11.8%
Capital Goods 10.0%
Energy 7.2%
Consumer Staples 6.9%
Basic Materials 4.4%
Transportation/Services/Miscellaneous 4.1%
Cash & Other Assets 6.0%
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Total 100.0%
------
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TOP TEN HOLDINGS
SECURITY % OF NET ASSETS
- ----------------------------------------------------------
Tosco Corp. 2.0%
Commercial Federal Corp. 1.9%
HFS Inc. 1.7%
Regal Cinemas Inc. 1.6%
Fine Host Corp. 1.6%
Petco Animal Supplies Inc. 1.6%
WestPoint Stevens Inc. 1.5%
Gucci Group 1.5%
CMAC Investment Corp. 1.4%
UST Inc. 1.4%
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Total 16.2%
-------
-------
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4
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Schroder U.S. Smaller Companies Fund
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STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments (Notes 1 and 2):
Investments in Schroder U.S. Smaller Companies Portfolio (the
'Portfolio') (cost $18,172,166) $19,738,693
Receivable for Fund shares sold 12,000
Organization costs, net of amortization (Note 2) 7,119
-----------
Total Assets 19,757,812
-----------
LIABILITIES:
Payable for Fund shares redeemed 19,967
Payables and accrued expenses 11,431
-----------
Total Liabilities 31,398
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Net Assets $19,726,414
-----------
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COMPONENTS OF NET ASSETS:
Paid-in capital $16,839,816
Undistributed net investment income (loss) (29,905)
Accumulated net realized gain (loss) 1,349,976
Net unrealized appreciation (depreciation) on investments 1,566,527
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Net Assets $19,726,414
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NET ASSETS BY CLASS
Investor Class $19,629,463
Advisor Class 96,951
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Net Assets $19,726,414
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SHARES OF BENEFICIAL INTEREST
Investor Class 1,654,123
Advisor Class 8,179
NET ASSET VALUE OFFERING AND REDEMPTION PRICE PER SHARE
(NET ASSETS (DIVIDED BY) SHARES OF BENEFICIAL INTEREST)
Investor Class $11.87
Advisor Class $11.85
</TABLE>
The accompanying notes are an integral part of the financial statements.
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5
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Schroder U.S. Smaller Companies Fund
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STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1997 (UNAUDITED)
<TABLE>
<S> <C>
NET INVESTMENT INCOME ALLOCATED FROM
THE PORTFOLIO:
Dividend income $ 63,483
Interest income 26,571
Net expenses (68,138)
----------
Net Investment Income allocated from the
Portfolio 21,916
----------
EXPENSES:
Administration (Note 3) 26,169
Transfer agency (Note 3) 12,709
Shareholder services - Advisor Shares (Note 3) 48
Accounting (Note 3) 6,000
Legal 6,977
Audit 4,670
Registration 10,793
Reporting 7,169
Trustees 294
Miscellaneous 3,427
----------
Total Expenses 78,256
Fees waived and expenses reimbursed (Note 4) (26,435)
----------
Net Expenses 51,821
----------
NET INVESTMENT INCOME (LOSS) (29,905)
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ALLOCATED FROM THE
PORTFOLIO:
Net realized gain (loss) on investments sold 1,537,280
Net change in appreciation (depreciation) in investments (1,266,966)
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ALLOCATED FROM THE
PORTFOLIO 270,314
----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 240,409
----------
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
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6
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Schroder U.S. Smaller Companies Fund
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STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six
Months Ended For the Year
April 30, 1997 Ended
(Unaudited) October 31, 1996
-------------- ----------------
<S> <C> <C>
NET ASSETS, BEGINNING OF PERIOD $ 13,742,555 $ 15,287,216
-------------- ----------------
OPERATIONS:
Net investment income (loss) (29,905) (50,796)
Net realized gain (loss) on investments sold 1,537,280 4,597,614
Net change in unrealized appreciation
(depreciation) on investments (1,266,966) (843,435)
-------------- ----------------
Net increase (decrease) in net assets
resulting from operations 240,409 3,703,383
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DISTRIBUTION TO SHAREHOLDERS FROM:
Net realized gain on investments - Investor Class (4,517,569) (1,965,720)
-------------- ----------------
CAPITAL SHARE TRANSACTIONS:
Sale of shares - Investor Class 10,667,572 1,697,351
Sale of shares - Advisor Class 123,171 --
Reinvestment of distributions - Investor Class 3,516,999 1,522,389
Redemption of shares - Investor Class (4,023,839) (6,502,064)
Redemption of shares - Advisor Class (22,884) --
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Net increase (decrease) in capital transactions 10,261,019 (3,282,324)
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Net increase (decrease) in net assets 5,983,859 (1,544,661)
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NET ASSETS, END OF PERIOD (INCLUDING LINE A) $ 19,726,414 $ 13,742,555
-------------- ----------------
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(A) Accumulated undistributed net investment income (loss) $ (29,905) $ --
-------------- ----------------
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SHARE TRANSACTIONS
Sale of shares - Investor Class 867,608 95,854
Sale of shares - Advisor Class 10,334 --
Reinvestment of distributions
in shares - Investor Class 296,293 106,834
Redemption of shares - Investor Class (303,095) (414,456)
Redemption of shares - Advisor Class (1,855) --
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Net increase (decrease) in shares 869,285 (211,768)
-------------- ----------------
-------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
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7
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Schroder U.S. Smaller Companies Fund
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FINANCIAL HIGHLIGHTS--INVESTOR SHARES
Selected per share data and ratios for an Investor share outstanding
throughout each period:
<TABLE>
<CAPTION>
For the
Six Months Ended
April 30,
1997 For the Year Ended October 31,
(Unaudited) 1996(a) 1995 1994 1993(b)
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<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 0.49 4.10 3.78 0.97 1.01
---------------- ------- ------- ------- -------
Total from Investment Operations 0.47 4.04 3.74 0.90 0.99
---------------- ------- ------- ------- -------
Distributions From
Net Realized Capital Gain (5.83) (1.95) (0.41) (0.08) --
---------------- ------- ------- ------- -------
Total Distributions (5.83) (1.95) (0.41) (0.08) --
---------------- ------- ------- ------- -------
Net Asset Value, End of Period $ 11.87 $ 17.23 $ 15.14 $ 11.81 $ 10.99
---------------- ------- ------- ------- -------
---------------- ------- ------- ------- -------
Total Return 2.70%(d) 29.35% 32.84% 8.26% 9.90%
Ratio/Supplementary Data
Net Assets at End of Period (in thousands) $19,629 $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 1.71%(c)(e) 1.80% N/A N/A N/A
Net investment income (loss) including
reimbursement/waiver (0.37)%(c)(e) (0.35)%(c)(e) (0.30)% (0.58)% (0.99)%(e)
Average Commission rate (f) $0.0585 $0.0583 N/A N/A N/A
Portfolio turnover rate (g) 24.66% 58.50% 92.68% 70.82% 12.58%
</TABLE>
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(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.
(g) Portfolio turnover represents the rate of portfolio activity. The rate for
the period ending after October 31, 1996 represents the portfolio turnover
rate of the Portfolio. Prior to October 31, 1996, the rate represents
portfolio activity while the Fund was making investments directly in
securities.
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8
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Schroder U.S. Smaller Companies Fund
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FINANCIAL HIGHLIGHTS--ADVISOR SHARES
Selected per share data and ratios for an Advisor share outstanding
throughout the period:
<TABLE>
<CAPTION>
For the
Six Months Ended
April 30,
1997(a)
(Unaudited)
<S> <C>
- ------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 11.89
------------
Investment Operations
Net Investment Income (Loss) (0.01)(b)
Net Realized and Unrealized Gain (Loss) on Investments (0.03)
------------
Total from Investment Operations (0.04)
------------
Net Asset Value, End of Period $ 11.85
------------
------------
Total Return (0.34)%(c)
Ratio/Supplementary Data
Net Assets at End of Period (in thousands) $ 97
Ratios to Average Net Assets:
Expenses including reimbursement/waiver 1.74%(b)(d)
Expenses excluding reimbursement/waiver 60.90%(b)(d)
Net investment income (loss) including reimbursement/waiver (0.65)%(b)(d)
Average Commission rate (e) $ 0.0585
Portfolio turnover rate (f) 24.66%
</TABLE>
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(a) Advisor Class shares were first issued on December 20, 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 on the
purchase and sale of equity securities.
(f) Portfolio turnover represents the rate of portfolio activity of the
Portfolio.
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9
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Schroder U.S. Smaller Companies Fund
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 April 30, 1997, both Investor Shares and Advisor Shares had been
issued.
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 13 to 20 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 April 30, 1997 was approximately
23.8%.
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.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends and net capital gain, if any, are distributed to shareholders
at least annually. Distributions are based on amounts calculated in
accordance with applicable federal income tax regulations.
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10
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Schroder U.S. Smaller Companies Fund
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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.
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.
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.
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11
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Schroder U.S. Smaller Companies Fund
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONCLUDED)
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 REIMBURSEMENT OF EXPENSES
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 shares' 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 six months ended April 30, 1997, fees waived and
expenses reimbursed by Schroder Advisors were $15,204 and 11,231,
respectively.
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12
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Schroder U.S. Smaller Companies Portfolio
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SCHEDULE OF INVESTMENTS
AS OF APRIL 30, 1997 (UNAUDITED)
COMMON STOCK - 93.7%
SHARES VALUE US$
- ------- -----------
BASIC MATERIALS - 4.4%
46,600 AMCOL International Corp. $ 792,200
27,500 Ball Corp. 739,062
83,100 Calgon Carbon Corp. 1,017,975
36,100 Ferro Corp. 1,123,612
-----------
3,672,849
-----------
CAPITAL GOODS/
CONSTRUCTION - 10.0%
22,100 Aeroquip-Vickers Inc. 892,287
41,600 Aftermarket Technology Corp. (a) 769,600
37,800 BMC Industries Inc. 1,096,200
29,800 Donaldson Co. Inc. 1,020,650
43,700 Falcon Building Products, Inc.
Class A (a) 759,287
24,500 Harsco Corp. 903,437
46,450 Miller Industries Inc. (a) 551,593
29,000 Tracor Inc. (a) 630,750
21,800 Triangle Pacific Corp. (a) 591,325
33,300 USA Waste Services Inc. (a) 1,090,575
-----------
8,305,704
-----------
CONSUMER CYCLICALS - 20.9%
25,292 Accustaff Inc. (a) 461,580
17,800 Barnett Inc. (a) 329,300
22,150 CDW Computer Centers Inc. (a) 1,063,200
23,950 Consolidated Stores Corp. (a) 958,000
39,900 Furniture Brands International
Inc. (a) 588,525
17,200 Gucci Group 1,193,252
23,400 HFS Inc. (a) 1,386,450
27,800 Nautica Enterprises (a) 615,075
8,300 Performance Food Group Co. (a) 157,700
61,000 Petco Animal Supplies Inc. (a) 1,303,875
50,500 Pier 1 Imports Inc. 997,375
56,300 Pillowtex Corp. 999,325
24,400 Promus Hotel Corp. (a) 860,100
48,850 Regal Cinemas Inc. (a) 1,331,162
15,400 Robert Half International Inc.
(a) 604,450
53,900 ShoLodge Inc. (a) 592,900
34,850 Sonic Corp. (a) 461,763
18,900 Tiffany & Co. 748,912
6,700 Viking Office Products Inc. (a) 91,288
26,200 Warnaco Group Inc. Class A 746,700
32,400 WestPoint Stevens Inc. (a) 1,267,650
24,400 Wet Seal Inc. Class A (a) 603,900
-----------
17,362,482
-----------
CONSUMER STAPLES - 6.9%
29,100 Compdent Corp. (a) 469,237
21,900 Data Processing Resources Corp.
(a) 402,412
52,300 Fine Host Corp. (a) 1,320,575
98,600 Foodmaker Inc. (a) 1,072,275
SHARES VALUE US$
- ------- -----------
CONSUMER STAPLES (CONCLUDED)
13,050 Harman International Industries
Inc. $ 499,163
21,100 Henry Schein Inc. (a) 585,525
23,400 Physician Sales & Service Inc.
(a) 339,300
36,100 Suiza Foods Corp. (a) 1,033,363
-----------
5,721,850
-----------
ENERGY - 7.2%
20,600 B.J. Service Co. (a) 970,775
15,200 Cooper Cameron Corp. (a) 1,083,000
10,700 Flores & Rucks Inc. (a) 466,787
54,600 Tosco Corp. 1,617,525
35,700 Union Tex Pete Holdings Inc. 673,837
48,400 Varco International Inc. (a) 1,113,200
-----------
5,925,124
-----------
FINANCIAL - 16.6%
27,800 Amerus Life Holdings Inc. Class A
(a) 639,400
81,100 BA Merchant Services Inc. Class A
(a) 1,135,400
26,600 Bank United Corp. Class A 811,300
16,000 Bay View Capital Corp. (a) 777,000
31,100 CMAC Investment Corp. 1,181,800
47,700 CWM Mortgage Holdings Inc. 948,037
7,650 Charter One Financial Inc. 340,425
41,950 Commercial Federal Corp. 1,405,325
30,700 Cullen/Frost Bankers Inc. 1,074,500
35,200 FBL Financial Group Inc. Class A 884,400
34,600 Inkeepers USA Trust 484,400
21,500 MLF Bancorp Inc. 349,375
27,000 North Fork BanCorp. Inc. 1,069,875
13,700 Penncorp Financial Group Inc. 470,937
25,600 Starwood Lodging Trust 985,600
1,600 Sun Communities Inc. 51,200
62,710 UST Corp. 1,175,812
-----------
13,784,786
-----------
HEALTH CARE - 11.8%
8,900 AmeriSource Health Corp. Class A
(a) 397,162
16,400 Arbor Health Care Co. (a) 401,800
13,400 Bergen Brunswig Corp. Class A 457,275
65,700 Coventry Corp. (a) 849,993
11,500 Express Scripts Inc. Class A (a) 422,625
25,700 Genzyme Corp. (a) 594,312
56,300 Haemonetics Corp. (a) 935,987
31,200 Health Care and Retirement Corp. 986,700
27,662 Healthdyne Technologies Inc. (a) 408,015
39,100 Healthsource Inc. (a) 821,100
17,800 Invacare Corp. 353,775
39,600 Isis Pharmaceuticals Inc. (a) 584,100
54,000 Matria Healthcare Inc. (a) 209,250
53,250 Multicare Companies Inc. (a) 991,781
98,100 Transitional Hospitals Corp. (a) 981,000
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONCLUDED)
AS OF APRIL 30, 1997 (UNAUDITED)
SHARES VALUE US$
- ------- -----------
HEALTH CARE (CONCLUDED)
18,500 Value Health Inc. (a) $ 372,315
-----------
9,767,190
-----------
TECHNOLOGY - 11.8%
23,500 Amphenol Corp. Class A (a) 596,312
19,300 Antec Corp. (a) 168,875
137,600 Computervision Corp. (a) 481,600
26,800 Credence Systems Corp. (a) 425,450
2,600 Cymer Inc. (a) 106,926
43,200 EG&G Inc. 815,400
25,500 Evans & Sutherland Computer Corp.
(a) 592,875
36,000 Exabyte Corp. (a) 486,000
51,100 INTERSOLV (a) 389,637
43,200 InterVoice Inc. (a) 410,400
15,400 Intergraph Corp. (a) 98,175
14,700 Lam Research Corp. (a) 426,300
46,300 Marcam Corp. (a) 544,025
39,100 MicroTouch Systems Inc. (a) 835,762
29,400 Molecular Dynamics Inc. (a) 363,825
28,300 Symbol Technologies Inc. 916,212
37,700 System Software Associates Inc. 202,637
24,600 Thomas & Betts Corp. 1,116,225
SHARES VALUE US$
- ------- -----------
TECHNOLOGY (CONCLUDED)
44,600 Wang Laboratories Inc. (a) $ 774,925
-----------
9,751,561
-----------
TRANSPORTATION/SERVICES/
MISCELLANEOUS - 4.1%
24,700 ASA Holdings Inc. 524,875
22,200 Aviall Inc. 263,686
39,900 Comair Holdings Inc. 842,887
19,400 Jacor Communications Inc. (a) 545,627
15,600 Mid-America Apartment Communities
Inc. 403,650
2,200 Premier Parks Inc. (a) 65,176
28,100 RemedyTemp Inc. Class A (a) 428,525
15,000 U.S. Rentals Inc. (a) 285,000
-----------
3,359,426
-----------
Total Investments - 93.7%
(cost $76,453,591) 77,650,972
Other Assets Less
Liabilities - 6.3% 5,194,310
-----------
Total Net Assets - 100.0% $82,845,282
-----------
-----------
- ------------------
(a) Non-income producing security.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
Schroder of U.S. Smaller Companies Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments (Note 2):
Investments at cost $76,453,591
Net unrealized appreciation (depreciation) 1,197,381
-----------
Total Investments at value 77,650,972
Cash and Cash Equivalents (Note 2) 4,291,371
Receivable for securities sold 993,313
Receivable for dividends and interest 85,101
-----------
Total Assets 83,020,757
-----------
LIABILITIES:
Payable for securities purchased 89,513
Payable to investment adviser (Note 3) 38,394
Payable to other related parties (Note 3) 4,861
Accrued fees and other expenses 42,707
-----------
Total Liabilities 175,475
-----------
Net Assets $82,845,282
-----------
-----------
COMPONENTS OF NET ASSETS:
Investors' capital $81,647,901
Net unrealized appreciation (depreciation) on investments 1,197,381
-----------
Net Assets $82,845,282
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
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15
<PAGE>
- --------------------------------------------------------------------------------
Schroder of U.S. Smaller Companies Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1997 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividend income $ 219,428
Interest income 89,273
------------
Total Investment Income 308,701
------------
EXPENSES:
Investment advisory (Note 3) 163,030
Administration (Note 3) 20,379
Transfer agency (Note 3) 6,025
Custody 9,657
Accounting (Note 3) 18,000
Legal 4,522
Audit 5,500
Trustees 1,374
Miscellaneous 10,346
------------
Total Expenses 238,833
Fees waived and expenses reimbursed (Note 6) (7,858)
------------
Net Expenses 230,975
------------
NET INVESTMENT INCOME (LOSS) 77,726
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments sold 1,865,744
Net change in unrealized appreciation (depreciation) on
investments (1,754,714)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 111,030
------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 188,756
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
Schroder of U.S. Smaller Companies Portfolio
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED FOR THE YEAR
APRIL 30, 1997 ENDED
(UNAUDITED) OCTOBER 31, 1996
------------------ ----------------
<S> <C> <C>
NET ASSETS, BEGINNING OF PERIOD $ 28,929,477 $ --
------------------ ----------------
OPERATIONS:
Net investment income (loss) 77,726 22,137
Net realized gain (loss) on investments sold 1,865,744 735,049
Net change in unrealized appreciation (depreciation) on
investments (1,754,714) 2,952,095
------------------ ----------------
Net increase (decrease) in net assets resulting from
operations 188,756 3,709,281
------------------ ----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST:
Contributions 58,739,351 26,247,304
Withdrawals (5,012,302) (1,027,108)
------------------ ----------------
Net transactions in investors' beneficial interest 53,727,049 25,220,196
------------------ ----------------
Net increase (decrease) in net assets 53,915,805 28,929,477
------------------ ----------------
NET ASSETS, END OF PERIOD $ 82,845,282 $ 28,929,477
------------------ ----------------
------------------ ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Portfolio performance for the following periods:
<TABLE>
<CAPTION>
For the Six
Months Ended For the Period
April 30, 1997 Ended
(Unaudited) 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 0.88%(b) 1.31%(b)
Net investment income including reimbursement/waiver 0.29%(b) 0.50%(b)
Average brokerage commission per share (c) $ 0.0585 $ 0.0562
Portfolio turnover rate 24.66% 17.30%
</TABLE>
- ------------------
(a) Commencement of operations was August 15, 1996.
(b) Annualized.
(c) Amount represents the average commission per share paid to brokers on the
purchase and sale of portfolio securities.
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. ORGANIZATION
Schroder Capital Funds ('Schroder Core') was organized as a Delaware
business trust on September 7, 1995. Schroder Core, which is registered as an
open-end, management investment company under the Investment Company Act of
1940 (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.
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 for on the trade date. Realized
gain and loss from investment transactions are determined on the basis of
identified cost.
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.
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
Schroder U.S. Smaller Companies Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONCLUDED)
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
Forum Financial Corp.(Registered) ('FFC') serves as the Portfolio's
transfer 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 six months ended April
30, 1997 aggregated $63,598,756 and $12,308,930, respectively.
For federal income tax purposes, the tax basis of investment securities
owned as of April 30, 1997 was $80,743,830. The aggregate gross unrealized
appreciation for all securities in which there was an excess of market value
over tax cost was $6,487,682, and aggregate gross unrealized depreciation for
all securities in which there was an excess of tax cost over market value was
$5,259,248.
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 AND REIMBURSEMENT OF EXPENSES
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. For the
period ended April 30, 1997, fees waived by SCMI were $7,858.
- --------------------------------------------------------------------------------
20
<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.
[SCHRODERS LOGO]
Schroder
U.S. Smaller
Companies
Fund
SEMI-ANNUAL REPORT
April 30, 1997
(Unaudited)
Schroder Capital Funds
(Delaware)
