<PAGE>
<PAGE>
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SCHRODER INTERNATIONAL FUND
- --------------------------------------------------------------------------------
Two Portland Square, Portland, Maine 04101
<TABLE>
<S> <C>
General Information (207) 879-6200
Account Information (800) 344-8332
Fund Literature (800) 290-9826
Fax (207) 879-6050
</TABLE>
INVESTMENT OBJECTIVE
The Fund seeks long term capital appreciation through investment in securities
markets outside the United States. Securities are selected on the basis of
potential for capital appreciation without regard for current income. The Fund
currently seeks to achieve its investment objective by investing all of its
investable assets in International Equity Fund (the 'Portfolio'), a registered
open-end investment company with substantially the same investment objective and
policies of the Fund. The enclosed annual report includes the 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. At October 31, 1996
the Schroder Group had over $130 billion in assets under management. At that
date, the Investment Adviser, together with its U.K. affiliate, Schroder Capital
Management International Ltd., had over $20 billion under management.
December 2, 1996
Dear Shareholder:
The fiscal year ending October 31, 1996 was a slightly disappointing one
for international markets, compared with the U.S. market, and for the Schroder
International Fund, compared with the unmanaged MSCI EAFE Index. The MSCI EAFE
index returned 10.44% compared with 24.01% for the unmanaged S&P 500 Index'r',
while your Fund's return was 10.05% for the fiscal year. Nearly all the relative
underperformance occurred in late 1995 and over the most recent fiscal quarter
(August 1 -- October 31, 1996). During the summer, the Fund took a slightly more
aggressive stance on a view that the world economic outlook appeared positive
and moved more assets into smaller Japanese companies and the peripheral markets
of Europe whose bond markets would be beneficiaries of investor perceptions that
European Monetary Union would proceed. We believe that this has positioned the
Fund well for the next 18-24 months.
International markets were influenced by a number of factors over the last
year: (i) the continued strength of the U.S. economy but a softer U.S. dollar,
(ii) a slow recovery of the Japanese economy, (iii) a rally in European bond
markets -- especially in the weaker currency markets like Spain, Italy and
Portugal, (iv) a marked slowdown in the rate of growth of several economies of
the Pacific Basin. On the political front, in addition to maintaining the status
quo in the U.S. elections, the Japanese were reluctant to give the Liberal
Democratic Party a full mandate. They increased their number of representatives
but failed to gain an outright majority.
We believe the overall economic background around the world is still sound
and should continue to favor equity investments. Inflation remains subdued in
the major industrialized countries as Consumer Price Index (CPI)
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SCHRODER INTERNATIONAL FUND
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numbers vary from a negative 0.4% in Japan to 1.5% in Germany and 2.7% in the
United Kingdom, all lower then the U.S. where the CPI is now at 3.0%. The
resulting effect is that interest rates are very low and, especially in
Continental Europe, are unlikely to increase significantly in the near future.
The discount rate in Germany is 2.5% while in Japan it remains at its historic
low of 0.5% compared to 5.0% in the U.S. Looking at the long term, ten year
bonds yield less than 3.0% in Japan and less then 6.0% in Germany. The United
Kingdom, which is enjoying more robust economic growth and higher inflation than
the rest of Europe, has seen a small hike in their discount rate and has a
weaker bond market with yields on ten year bonds around the 7.3% mark.
The case for placing a portion of a long term investment portfolio into an
international fund is even more compelling after yet another year of superior
U.S. returns. The restructuring of corporations around the world which is well
advanced and recognized in the U.S. is just getting underway in continental
Europe and has much further to go in Japan. As developed countries grapple with
the implications of their aging populations, more and more emphasis will be
placed towards self-directed, equity pension provisions. This is a marked
change, offering an opportunity for greater realization of shareholder value.
We remain excited by the investment opportunities around the world and
thank you for your continuing support and interest in the Fund.
Sincerely,
<TABLE>
<S> <C>
HERMANN C. SCHWAB LAURA E. LUCKYN-MALONE
Hermann C. Schwab Laura E. Luckyn-Malone
Chairman President
</TABLE>
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2
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SCHRODER INTERNATIONAL FUND
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MANAGEMENT DISCUSSION AND ANALYSIS (AS OF OCTOBER 31, 1996)
At fiscal year end, October 31, 1996, the Portfolio was approximately 95.6%
invested in equities and 4.4% in cash and other assets.
In Japan, our forecast for growth was substantially higher than the
consensus and as a result we were relatively optimistic about the equity market.
Since then, consensus estimates for growth in 1996 have risen from 1.5% to 3.6%.
For 1997 we are again more bullish than most, projecting a 3.0% GDP growth
versus an average forecast of 1.8%. Moreover, this consensus estimate includes
overseas forecasters and it is likely that a domestic consensus would be closer
to 1.0%, reflecting continued gloom prevailing in Japan. Our more optimistic
view is driven in part by continuing higher expectations on private capital
investments. If anything, we have underestimated the strength of many companies'
cashflow which should continue to lead investment spending.
Hence we have shifted the portfolio in Japan in order to reflect our more
bullish view on the economy. Small and medium capitalization companies, whose
stocks tend to perform better in an expanding economy, have been added and
profits have been taken in larger companies. The proceeds of sales of companies
like Matsushita Electric Industrial Company Ltd., Sankyo Company Ltd, Fanuc
Company and Shin-Etsu Chemical Company have been invested in securities such as
Credit Saison, a very successful consumer credit company; Glory Ltd., a
manufacturer of ATMs; and Meiko Shokai, a leading producer of environmentally
friendly paper shredding machines.
In Continental Europe, we believe the key focuses that have been driving
the markets are and will continue to be (i) expectations of non-inflationary
recovery, (ii) EMU convergence, and (iii) the broad theme of corporate
restructuring and increased attention from corporations to shareholder value.
Within Continental Europe, we have slightly repositioned the Fund in favor
of the Southern countries. We have bought for the first time in a long while
some Spanish and Portuguese stocks, including Centros Comerciales Pryca SA, a
leading Spanish retailer, Banco Popular Espanol, Sociedaded de Investimento e
Gestao SGPS SA Semapa, the second largest cement producer in Portugal and
Portugal Telecom SA. In France, we have purchased Canal Plus after a major
acquisition which currently makes them the largest pay TV company in Continental
Europe and Societe Generale, in our opinion, one of the best run private banks
in France. We have also added I.S.S. International Service System, a Danish
service company, when management announced the divestment of their loss making
U.S. operations and Gucci Group NV, the well-known luxury goods manufacturer.
The under-performance of the Southern European countries over the last
three years has prompted us to look for value in these markets. We believe it is
a good time to take some profits in stocks that have dramatically outperformed,
especially in the Netherlands, and to take advantage of an improving interest
rate environment South of the Rhine. With the expectation of EMU approaching,
bond rates in Continental Europe are moving more in line with German rates. The
interest rate gap between Germany and the other Continental European countries
is rapidly narrowing, thus creating a rally in bonds in the weak currency
markets of Europe that have had sound economic policies for several years now.
Spain and Portugal stand out in this regard while Italy and Greece still seem a
long way from joining mainstream Europe.
The weakness of manufacturing in the United Kingdom has been in marked
contrast to consumer demand, where most indices of activity such as retail and
auto sales, housing prices, consumer credit and money supply growth have
continued to accelerate. Typically, manufacturing tends to lag the pick-up in
consumer demand by six months and in anticipation of this we have bought stocks
such as Pilkington plc, the glass manufacturer, and British Steel plc. Overall,
we have steadily increased our weighting over the last two quarters in spite of
inflationary pressures because we believe the outlook for the stock market in
the medium term looks favorable, so long as bond yields remain stable. The
prospective rating on the market is also in line with its ten year average.
Emerging Asia as a group gave back much of its gains acquired in the first
half of the fiscal year. Factors preventing a sustained recovery in Asian
markets include worries over debt accumulation in Thailand, political
instability in Indonesia, weak economic growth rates in the region as a whole
and disappointing earnings results.
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3
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The weakness of the yen combined with sharp drops in semi-conductor prices and
lackluster global demand for electronic goods have had a depressing effect on
exports for many countries in South East Asia. A notable exception in the region
has been Hong Kong, where local shares benefited from accelerated growth in
China and strengthening real estate prices.
PORTFOLIO MANAGERS' Q & A
IS THE EUROPEAN MONETARY UNION (EMU) GOING TO TAKE PLACE?
Joining EMU has now become the major policy issue of most Continental
European countries. It explains to a large extent the prolonged recession these
countries have endured. The 'Maastricht' requirements have led to very tight
fiscal and monetary policies. Towards the end of the Fund's fiscal year there
began to be signs of an economic recovery throughout the continent. It would
thus be a very inopportune time to cancel a process of unification that has been
going on for so long and that is about to succeed. We believe it is too late for
the political authorities in charge in Europe to retreat. Too much of their
credibility is at stake.
WHO WILL JOIN EMU?
Six countries are most likely to become members at the outset: Germany,
France, Austria, Belgium, Luxembourg and the Netherlands. Lately, several
countries have been pushing hard to join the union by 1999. These are Spain,
Portugal, Ireland and Italy. It is likely that some of these will be accepted.
Those who will not be admitted will join at a later stage and will in the
meantime be part of a monetary system that will help stabilize their currency.
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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4
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SCHRODER INTERNATIONAL FUND
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INVESTMENT ADVISER'S REPORT -- COMPARISON OF CHANGE IN VALUE OF $10,000
INVESTMENT
The following Chart compares a change in value of a $10,000 investment in the
Fund and the performance of the Morgan Stanley Capital International ('MSCI')
EAFE Index. The MSCI EAFE Index is a market capitalization index composed of
companies representative of the market structure of 20 Developed Market
countries in Europe, Australasia, and the Far East. As of December 1995, the
EAFE index was composed of 1,112 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. Past performance cannot predict nor
guarantee future results.
Schroder International Fund vs Morgan Stanley EAFE Index
Investment Value on 10/31/96
- ----------------------------
Schroder International Fund $26,956
MSCI EAFE Index $24,352
Average Annual Total Return on 10/31/96
- ---------------------------------------
1 Year 5 Years 10 Years
------ -------- --------
Schroder International Fund 10.05% 10.55% 10.42%
MSCI EAFE Index 10.44% 7.64% 9.30%
[GRAPH]
<TABLE>
<CAPTION>
Schroder International Fund MSCI EAFE INDEX
<S> <C>
$ 1,000 $ 1,000
10,567 10,576
11,585 11,137
11,697 12,319
12,012 12,689
12,415 13,729
13,140 15,182
13,431 15,182
13,640 14,698
14,051 14,673
14,616 15,773
14,526 15,525
11,374 13,350
11,285 13,481
12,016 13,881
12,042 14,130
12,655 15,071
13,269 15,996
13,545 16,228
13,340 15,709
13,224 15,296
13,322 15,775
12,691 14,749
12,815 15,392
13,454 16,708
14,272 17,704
14,358 17,803
14,528 18,117
14,349 18,209
14,260 17,852
14,572 18,018
14,287 17,038
14,331 16,752
15,770 18,854
16,118 18,008
16,940 18,827
16,263 18,072
16,815 18,979
17,535 19,680
17,453 18,947
16,627 17,627
16,215 15,790
16,160 15,665
17,629 17,453
18,098 17,300
18,584 17,542
16,730 15,839
14,516 13,631
16,251 15,753
15,507 14,824
15,535 15,064
15,962 15,550
17,201 17,217
16,174 16,184
16,324 16,343
16,254 16,513
15,407 15,301
16,119 16,052
15,708 15,726
16,443 16,611
16,323 16,847
15,538 16,061
16,251 16,891
16,292 16,531
16,086 15,939
15,575 14,887
16,076 14,957
16,978 15,959
16,559 15,203
16,077 14,814
16,281 15,743
15,954 15,431
15,523 14,621
15,421 14,758
15,600 14,835
15,568 14,833
15,909 15,281
16,797 16,614
17,933 18,192
18,098 18,576
18,045 18,286
18,675 18,926
19,883 19,948
20,090 19,500
21,040 20,100
20,266 18,343
22,732 19,668
24,030 21,330
23,499 21,270
22,422 20,353
23,083 21,216
23,104 21,095
22,845 21,393
23,218 21,598
24,172 22,108
23,602 21,411
24,005 22,124
23,035 21,060
22,782 21,193
21,458 20,379
21,337 20,320
22,548 21,558
23,227 22,400
23,638 22,131
23,730 21,744
24,960 23,098
24,211 22,216
24,983 22,649
24,503 22,038
24,665 22,655
25,413 23,568
26,058 23,664
26,339 23,745
26,729 24,248
27,496 24,954
27,496 24,495
27,738 24,632
26,823 23,912
27,024 23,965
27,562 24,603
26,956 24,352
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5
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PORTFOLIO CHARACTERISTICS AS OF OCTOBER 31, 1996 (UNAUDITED)
COUNTRY WEIGHTINGS
</TABLE>
<TABLE>
<CAPTION>
COUNTRY % OF NET ASSETS MSCI EAFE INDEX
- -----------------------------------------------------
<S> <C> <C>
Japan 27.6% 35.4%
United Kingdom 15.2% 18.2%
Switzerland 8.8% 5.9%
Netherlands 8.5% 4.5%
Germany 7.4% 7.3%
France 6.5% 6.8%
Hong Kong 4.1% 3.6%
Malaysia 2.9% 2.6%
Sweden 2.0% 2.4%
Singapore 2.0% 1.3%
Korea, Republic
Of 1.5% 0.0%
Indonesia 1.5% 0.0%
Philippines 1.3% 0.0%
Spain 1.0% 2.0%
Thailand 0.9% 0.0%
Brazil 0.8% 0.0%
Italy 0.8% 2.7%
Portugal 0.7% 0.0%
Canada 0.6% 0.0%
Denmark 0.6% 0.9%
Chile 0.3% 0.0%
Argentina 0.3% 0.0%
Mexico 0.3% 0.0%
Cash & Other
Assets 4.4% 0.0%
---------------
Total 100.0%
---------------
---------------
</TABLE>
INVESTMENT BY INDUSTRY
<TABLE>
<CAPTION>
INDUSTRY % OF NET ASSETS
- --------------------------------------------------------
<S> <C>
Capital Equipment 21.3%
Consumer Durables 3.2%
Consumer Non-durables 6.1%
Energy 6.8%
Finance 15.8%
Materials 11.2%
Multi-Industry 6.9%
Services 24.3%
Cash & Other Assets 4.4%
---------------
Total 100.0%
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
TOP TEN HOLDINGS
SECURITY % OF NET ASSETS
<S> <C>
- --------------------------------------------------------
Ito-Yakado Company Ltd. (Jpn) 2.9%
Ciba-Geigy AG (Swtz) 2.7%
Int'l Nederlanden Group NV (Net) 2.6%
Takeda Chemical Industries (Jpn) 2.4%
ABB Asea Brown Boveri Ltd. (Swtz) 2.1%
Tokio Marine & Fire Insurance Company
(Jpn) 2.1%
Kobe Steel Ltd. (Jpn) 2.1%
Fuji Photo Film Company (Jpn) 1.9%
Heineken NV (Net) 1.7%
Elf Aquitaine (Fr) 1.6%
---------------
Total 22.1%
---------------
---------------
</TABLE>
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6
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SCHRODER INTERNATIONAL FUND
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STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investment in International Equity Fund (Portfolio) (cost
$171,921,093) (Note 2) $202,743,299
Receivable for Fund shares sold 129,038
------------
Total Assets 202,872,337
------------
LIABILITIES:
Payable for Fund shares redeemed 64,222
Accrued administration fees (Note 3) 29,548
Other payables and accrued expenses 43,365
------------
Total Liabilities 137,135
------------
Net Assets $202,735,202
------------
------------
NET ASSETS CONSIST OF:
Paid-in capital $141,244,182
Undistributed net investment income 4,398,568
Accumulated net realized gains on investments, forward
foreign currency contracts and foreign currency
transactions 26,102,194
Net unrealized appreciation of investments, forward foreign
currency contracts and foreign currency transactions 30,990,258
------------
Net Assets $202,735,202
------------
------------
Net Asset Value per share
($202,735,202 divided by
10,134,012 shares outstanding) $20.01
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
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7
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SCHRODER INTERNATIONAL FUND
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STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME ALLOCATED FROM INTERNATIONAL EQUITY FUND
(PORTFOLIO):
Dividend income (net of foreign withholding taxes of $627,277) $ 3,819,695
Interest income 215,253
Expenses (1,633,225)
-----------
Net Investment Income from International
Equity Fund (Portfolio) 2,401,723
-----------
EXPENSES:
Administration fees (Note 3) 434,804
Transfer agent fees and expenses (Note 3) 51,328
Accounting service fees (Note 3) 12,000
Other professional fees 28,549
Registration fees 15,114
Trustees fees and expenses 6,155
Other 38,319
-----------
Total Expenses 586,269
Fee waiver (Note 3) (61,259)
-----------
Net Expenses 525,010
-----------
NET INVESTMENT INCOME 1,876,713
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN
CURRENCY CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS ALLOCATED FROM
INTERNATIONAL EQUITY FUND (PORTFOLIO):
Net realized gain on investments 26,223,818
Net realized gain on forward foreign currency contracts and
foreign currency transactions 2,906,658
-----------
Net realized gain on investments, forward
foreign currency contracts and foreign
currency transactions 29,130,476
-----------
Net change in unrealized appreciation of investments (10,351,525)
Net change in unrealized appreciation of forward foreign
currency contracts and foreign currency transactions 168,052
-----------
Net change in unrealized appreciation of
investments, forward foreign currency
contracts and foreign currency
transactions (10,183,473)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN
CURRENCY CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS 18,947,003
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $20,823,716
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
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8
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SCHRODER INTERNATIONAL FUND
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STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 1996 OCTOBER 31, 1995
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 1,876,713 $ 1,965,002
Net realized gain on investments, forward
foreign currency contracts and foreign
currency transactions 29,130,476 58,061,286
Net change in unrealized appreciation of
investments, forward foreign currency
contracts and foreign currency
transactions (10,183,473) (59,690,024)
---------------- ----------------
Net increase in net assets resulting from
operations 20,823,716 336,264
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2):
Net realized gain on investments (23,782,759) (54,730,616)
Net investment income (5,164,431) --
---------------- ----------------
Total distributions to shareholders (28,947,190) (54,730,616)
---------------- ----------------
NET DECREASE FROM CAPITAL SHARE TRANSACTIONS (NOTE 5) (1,470,903) (233,780,034)
---------------- ----------------
DECREASE IN NET ASSETS (9,594,377) (288,174,386)
NET ASSETS:
Beginning of period 212,329,579 500,503,965
---------------- ----------------
End of period $202,735,202 $212,329,579
---------------- ----------------
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
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9
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SCHRODER INTERNATIONAL FUND
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NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION:
SCHRODER INTERNATIONAL FUND (THE 'FUND'), formerly known as
International Equity Fund, is a separately managed, diversified portfolio of
Schroder Capital Funds (Delaware) (the 'Trust'), a registered open-end
management investment company under the Investment Company Act of 1940 (the
'Act'). On November 1, 1996, the Fund contributed substantially all its
investable assets to the International Equity Fund (Portfolio) (the
'Portfolio') in exchange for an interest in the Portfolio. The Fund currently
seeks to achieve its investment objective by holding as its only investment
security, an interest in the Portfolio, a separate portfolio of a registered
open-end management investment company having the same investment objective
and policies as the Fund. The Fund's investment in the Portfolio is in the
form of a non-transferable beneficial interest. As of the date of this
report, the Fund is the only institutional investor that has invested in the
Portfolio. The Portfolio may permit other investment companies or
institutional investors to invest in it. All investors will invest on the
same terms and conditions as the Fund and will pay a proportionate share of
the Portfolio's expenses. The financial statements of the Portfolio,
including the Schedule of Investments, are included elsewhere in this report
and should be read in conjunction with the Fund's financial statements.
On May 16, 1996, the Fund began offering two classes of shares
('Investor Shares' and 'Advisor Shares'). On May 16, 1996, all existing
shares of the Fund were converted to Investor Shares. As of October 31, 1996,
the Fund had not sold any Advisor Shares.
2. SIGNIFICANT ACCOUNTING POLICIES:
The Fund's financial statements are prepared in accordance with
generally accepted accounting principles based upon the following significant
accounting policies. The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from these estimates.
SECURITY VALUATION
The Fund records its investment in the Portfolio at value. Valuation of
securities held by the Portfolio is discussed in the Portfolio Notes to the
Financial Statements which are included elsewhere in this report.
INVESTMENT INCOME AND EXPENSES
The Fund records daily its prorata 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
Distributions to shareholders are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per share allocation between net investment income and realized or
unrealized gain or loss. Undistributed net investment income and accumulated
undistributed net realized gain or loss may include temporary book and tax
basis differences that will reverse in a subsequent period. Any taxable
income or gain remaining at fiscal year end is distributed in the following
year.
- --------------------------------------------------------------------------------
10
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SCHRODER INTERNATIONAL FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. RELATED PARTIES:
The Fund currently invests all of its assets in the Portfolio, which
retains Schroder Capital Management International Inc. ('SCMI') as investment
adviser pursuant to an Investment Advisory Contract. SCMI manages the
investment and reinvestment of the assets included in the Portfolio and
continuously reviews, supervises and administers the Portfolio's investments.
It is the responsibility of SCMI to make decisions relating to the
Portfolio's investments and to place purchase and sale orders regarding such
investments with brokers or dealers selected at its discretion. For its
services as investment adviser to the Portfolio, SCMI is entitled to receive
a monthly fee equal on an annual basis to 0.45% of the average daily net
assets of the Portfolio.
The Fund may, at any time, withdraw its investment from the Portfolio
if the Board of Trustees determines that it is in the best interests of the
Fund and its shareholders to do so. Accordingly, the Fund has retained SCMI
as its investment adviser to manage the Fund's assets in the event the Fund
so withdraws its investment. SCMI will not receive an investment advisory fee
with respect to the Fund so long as the Fund remains completely invested in
the Portfolio or any other investment company.
On behalf of the Fund , the Trust has entered into an Administrative
Services Contract with Schroder Fund Advisors Inc. ('Schroder Advisors'). In
addition, the Trust and Schroder Advisors have entered into a
Sub-Administration Agreement with Forum Financial Services, Inc. ('Forum').
Pursuant to their agreements, Schroder Advisors and Forum provide certain
management and administrative services necessary to the Fund's operations
other than the investment management and administrative services provided to
the Fund by SCMI pursuant to the Investment Advisory Contract. For these
services, Schroder Advisors receives from the Fund, a fee payable monthly at
an annual rate of 0.20% of the average daily net assets of the Fund. Payment
for Forum's services is made by Schroder Advisors and is not a separate
expense of the Fund. Schroder Advisors and Forum provide similar services to
the Portfolio, for which Schroder Advisors is separately compensated at an
annual rate of 0.15% of the average daily net assets of the Portfolio, a
portion of which Forum receives for its services with respect to the
Portfolio. For the year ended October 31, 1996, Schroder Advisors waived a
portion of its fees totaling $61,259 with respect to the Fund. SCMI and
Schroder Advisors have voluntarily undertaken to waive a portion of their
fees and assume certain expenses of the Fund during the current fiscal year
to the extent that the Fund's total expenses exceed 0.99% of the Fund's
average daily net assets. This undertaking cannot be withdrawn except by a
majority vote of the Board of Trustees.
Forum Financial Corp. ('FFC') , an affiliate of Forum, performs
portfolio accounting services for the Fund pursuant to a Fund Accounting
Agreement with the Trust. Under its agreement, FFC prepares and maintains
books and records of the Fund on behalf of the Trust that are required to be
maintained under the Act, calculates the net asset value per share of the
Fund, calculates dividend and capital gain distributions and prepares
periodic reports to the shareholders and the Securities and Exchange
Commission. For its services, FFC receives from the Trust, with respect to
the Fund, a fee of $12,000 per year.
FFC is also the Fund's transfer agent and dividend disbursing agent and
is compensated for those services by the Fund in the amount of $12,000 per
year, plus certain shareholder account fees.
4. FEDERAL INCOME TAXES:
As it is the Fund's policy to comply with requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income to its shareholders, no Federal income tax
provision is required.
- --------------------------------------------------------------------------------
11
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER INTERNATIONAL FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. CAPITAL SHARES TRANSACTIONS:
The Fund is authorized under the Trust's Trust Instrument to issue an
unlimited number of Investor shares and Advisor shares of beneficial interest
without par value. At October 31, 1996, the Fund had issued only one class of
shares, Investor Shares, of which there were 10,134,012 shares outstanding.
Transactions in the Fund's capital shares for the years ended October 31,
1996 and 1995 were as follows:
<TABLE>
<CAPTION>
Year Ended October 31, Year Ended October 31,
1996 1995
- ------------------------------------------------------------------------------------------------------------
Number Number
of of
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 2,432,723 $48,286,814 3,833,382 $ 76,164,063
Shares issued for reinvestment of dividends 702,811 13,346,133 370,622 7,211,233
---------- ----------- ----------- -------------
3,135,534 61,632,947 4,204,004 83,375,296
Shares redeemed (3,155,010) (63,103,850) (15,654,701) (317,155,330)*
---------- ----------- ----------- -------------
Net (decrease) (19,476) $(1,470,903) (11,450,697) $(233,780,034)
---------- ----------- ----------- -------------
---------- ----------- ----------- -------------
</TABLE>
* In November 1994, a major institutional investor in the Fund redeemed-in-kind
on a pro-rata basis approximately $281 million in securities held by the fund
resulting in a gain of $51,501,484 to the Fund. Through this redemption such
institutional investor transferred its investments in the Fund to a fund in
its own family of mutual funds, for which Schroder Capital Management
International Inc. serves as the investment adviser.
- --------------------------------------------------------------------------------
12
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER INTERNATIONAL FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. FINANCIAL HIGHLIGHTS:
Selected per share data and ratios:
<TABLE>
<CAPTION>
Year Ended October 31,
1996(c) 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of period $20.91 $23.17 $20.38 $15.15 $16.22
-------- ------ ------ ------ ------
Investment Operations:
Net investment income 0.15(b) 0.46 0.18 0.08 0.25
Net realized and unrealized gain (loss)
on investments 1.74 (0.18) 2.69 5.27 (1.04)
-------- ------ ------ ------ ------
Total from investment operations 1.89 0.28 2.87 5.35 (0.79)
-------- ------ ------ ------ ------
Distributions to shareholders:
From net investment income (0.47) -- (0.08) (0.12) (0.23)
From net realized gain on investments (2.32) (2.54) -- -- (0.05)
-------- ------ ------ ------ ------
Total distributions (2.79) (2.54) (0.08) (0.12) (0.28)
-------- ------ ------ ------ ------
Net Asset Value, End of period $20.01 $20.91 $23.17 $20.38 $15.15
-------- ------ ------ ------ ------
-------- ------ ------ ------ ------
Total Return 10.05% 2.08% 14.10% 35.54% (4.93%)
Ratios/Supplementary Data:
Net Assets, End of period (thousands) 2$02,735 $212,330 $500,504 $320,550 $159,556
Ratio of expenses to average net assets net
of fee waivers 0.99%(b) 0.91% 0.90% 0.91% 0.93%
Ratio of net investment income to average net
assets net of fee waivers 0.86%(b) 0.99% 0.94% 0.87% 1.62%
Ratio of expenses to average net assets
excluding fee waivers 1.04%(b) N/A N/A N/A N/A
Ratio of net investment income to average net
assets excluding fee waivers 0.81%(b) N/A N/A N/A N/A
Portfolio turnover rate(a) N/A 61.26% 25.17% 56.05% 49.42%
</TABLE>
(a) Portfolio turnover represents the rate of portfolio activity for the period
while the Fund was making investments directly in securities. The portfolio
turnover rate for the period since the Fund transferred substantially all of
its investable assets to the Portfolio is shown in the Portfolio's financial
statements which are included elsewhere in this report.
(b) Includes of the Fund's proportionate share of income and expenses of the
Portfolio.
(c) On May 16, 1996, the Fund began offering two classes of shares Investor
Shares and Advisor Shares, and all existing shares of the Fund were
converted to Investor Shares.
* * * *
- --------------------------------------------------------------------------------
13
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER INTERNATIONAL FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
SPECIAL 1996 TAX INFORMATION (UNAUDITED)
The Fund intends to elect to pass through the credit for taxes paid in
foreign countries during its fiscal year ended October 31, 1996. In
accordance with current tax laws, the foreign income and foreign tax per
share (for a share outstanding October 31, 1996) is as follows:
<TABLE>
<CAPTION>
COUNTRY DIVIDENDS FOREIGN TAX
- ----------------------- --------- -----------
<S> <C> <C>
Argentina $ 0.0009 $0.0000
Brazil 0.0105 0.0014
Canada 0.0040 0.0006
Chile 0.0022 0.0008
France 0.0344 0.0054
Germany 0.0288 0.0024
Hong Kong 0.0265 0.0000
Indonesia 0.0073 0.0011
Korea 0.0052 0.0008
Italy 0.0094 0.0016
Japan 0.0391 0.0057
Malaysia 0.0053 0.0015
<CAPTION>
COUNTRY DIVIDENDS FOREIGN TAX
- ----------------------- --------- -----------
<S> <C> <C>
Mexico $ 0.0026 $0.0000
Netherlands 0.0548 0.0080
Philippines 0.0017 0.0004
Singapore 0.0064 0.0017
Spain 0.0011 0.0002
Sweden 0.0126 0.0019
Switzerland 0.0302 0.0045
Thailand 0.0076 0.0008
United Kingdom 0.1455 0.0232
Venezuela 0.0001 0.0000
--------- -----------
Total $ 0.4362 $0.0620
--------- -----------
--------- -----------
</TABLE>
The pass through of foreign tax credit will affect only those
shareholders of the Fund who are holders on the dividend record date in
December 1996. The foreign taxes paid or withheld per share represent taxes
incurred by the Fund on interest and dividends received by the Fund from
foreign sources. Foreign taxes paid or withheld should be included in gross
income for U.S. federal income tax purposes with an offsetting deduction from
gross income or a credit for taxes paid to foreign governments. You should
consult your tax counsel or other tax advisors regarding the appropriate
treatment of foreign taxes paid. The allocation of foreign taxes will be
reflected in your 1996 Form 1099-Div.
DISTRIBUTIONS (UNAUDITED)
During the fiscal year ended October 31, 1996, the Fund distributed
$14,028,573 in long term capital gain to shareholders.
- --------------------------------------------------------------------------------
14
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER INTERNATIONAL FUND
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of Schroder International Fund:
We have audited the accompanying statement of assets and liabilities of
the Schroder International Fund (a separately managed portfolio of Schroder
Capital Funds (Delaware)), as of October 31, 1996, and the related statement
of operations for the year then ended, the statements of changes in net
assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. 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 International Fund as of October 31, 1996, the
results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
December 23, 1996
- --------------------------------------------------------------------------------
15
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1996
STOCKS AND WARRANTS - 95.6%
<TABLE>
<CAPTION>
SHARES VALUE US$
------- ----------
<C> <S> <C>
ARGENTINA - 0.3%
COMMON STOCK
101,222 Compania Naviera Perez
Companc SA
Multi-Industry $ 637,817
------------
637,817
------------
BRAZIL - 0.8%
COMMON STOCK
21,500 Telecomunicacoes Brasileiras
SA - Telebras ADR
Services 1,601,750
------------
1,601,750
------------
CANADA - 0.6%
COMMON STOCK
72,000 NOVA Corporation
Materials 622,819
32,000 Noranda Inc.
Materials 703,952
------------
1,326,771
------------
CHILE - 0.3%
COMMON STOCK
7,000 Compania de Telecomunicacion
de Chile SA ADR
Services 690,375
------------
690,375
------------
DENMARK - 0.6%
COMMON STOCK
41,600 ISS International Service
System A/S
Services 1,181,086
------------
1,181,086
------------
FRANCE - 6.5%
COMMON STOCK
8,900 Canal Plus
Services 2,205,748
17,556 Compagnie Generale des Eaux
Energy 2,099,902
41,500 Elf Aquitaine
Energy 3,321,170
50,301 Michelin(Cie Gle Des Etabl.)
Materials 2,427,312
13,820 Primagaz (Cie Des Gaz
Petrole)*
Energy 1,428,480
16,000 Societe Generale
Finance 1,725,853
WARRANTS
1,256 Primagaz (Cie Des Gaz
Petrole)*
Energy 24,342
------------
13,232,807
------------
GERMANY - 7.4%
COMMON STOCK
58,500 Bayer AG
Materials $ 2,211,340
1,500 Linde AG
Capital Equipment 935,765
4,500 Mannesmann AG
Capital Equipment 1,754,560
44,000 Siemens AG
Capital Equipment 2,277,055
59,000 Veba AG
Multi-Industry 3,151,579
62 Wella AG
Consumer Non-Durables 35,441
PREFERRED STOCK
9,585 GEA AG
Services 3,243,140
2,496 Wella AG
Consumer Non-Durables 1,420,206
------------
15,029,086
------------
HONG KONG - 4.1%
COMMON STOCK
148,100 Cheung Kong Holdings Ltd.
Finance 1,187,512
488,000 Citic Pacific Ltd.
Multi-Industry 2,373,007
298,400 Hutchison Whampoa Ltd.
Multi-Industry 2,083,934
93,000 Sun Hung Kai Properties Ltd.
Finance 1,058,417
174,400 Swire Pacific Ltd.
Multi-Industry 1,539,361
------------
8,242,231
------------
INDONESIA - 1.5%
COMMON STOCK
387,100 PT Indofoods Sukses Makmur
Consumer Non-Durables 814,599
213,000 PT Indosat
Services 644,901
578,000 PT Telekomunikasi Indonesia
Services 862,594
42,490 PT Unilever Indonesia
Services 638,673
------------
2,960,767
------------
ITALY - 0.8%
COMMON STOCK
704,455 Telecom Italia SpA
Energy 1,570,256
------------
1,570,256
------------
</TABLE>
- --------------------------------------------------------------------------------
16
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF OCTOBER 31, 1996
<TABLE>
<CAPTION>
SHARES Value
- ------------ -----------
<C> <S> <C>
JAPAN - 27.6%
COMMON STOCK
82,000 Amada Metrecs Company Ltd.
Capital Equipment $ 973,271
61,000 Arcland Sakamoto
Multi-Industry 842,009
151,000 Bridgestone Corporation
Materials 2,548,971
74,000 Credit Saison Company Ltd.
Services 1,711,096
150 DDI Corporation
Energy 1,127,572
321,000 Dai-Tokyo Fire & Marine
Insurance Company
Finance 2,006,602
250 East Japan Railway Company
Services 1,149,552
133,000 Fuji Photo Film Company
Capital Equipment 3,823,721
29,000 Glory Ltd.
Multi-Industry 747,055
206,000 Hanshin Electric Railway*
Services 836,752
26,400 Hirose Electric Company
Capital Equipment 1,569,053
283,000 Hitachi Ltd.
Capital Equipment 2,513,013
119,000 Ito-Yokado Company Ltd.
Services 5,942,676
62,000 Japan Airport Terminal Company
Services 823,106
1,787,000 Kobe Steel Ltd.*
Materials 4,242,043
15,000 Kyocera Corporation
Capital Equipment 990,417
36,000 Mabuchi Motor Company
Capital Equipment 1,835,766
6,000 Meiko Shokai
Capital Equipment 246,878
250,000 Mitsubishi Electric
Corporation
Capital Equipment 1,448,479
102,000 Murata Manufacturing Company
Ltd.
Capital Equipment 3,282,223
14,000 Nagaileben Company Ltd.
Consumer Durables 572,358
82,000 Omron Corporation
Services 1,463,514
38,700 SMC Corporation
Capital Equipment 2,511,043
286,000 Takeda Chemical Industries
Consumer Durables 4,903,288
9,300 Toho Company
Services 1,430,895
JAPAN (CONCLUDED)
393,000 Tokio Marine & Fire Insurance
Company
Finance $ 4,319,062
92,000 Toyota Motor Corporation
Capital Equipment 2,175,840
------------
56,036,255
------------
KOREA, REPUBLIC OF - 1.5%
COMMON STOCK
19,000 Korea Electric Power
Corporation
Energy 558,249
600 Korea Mobile
Telecommunications(a)
Services 615,379
23,500 Korean Air(a)
Services 476,961
7,250 Pohang Iron & Steel Company
Ltd.(a)
Materials 470,411
6,000 Samsung Electronics Company
Capital Equipment 425,713
29,957 Shinhan Bank(a)
Finance 594,957
------------
3,141,670
------------
MALAYSIA - 2.9%
Common Stock
908,000 DCB Holdings Berhad(a)
Finance 3,108,604
325,000 Hicom Holdings Berhad
Multi-Industry 868,262
193,000 Tenaga Nasional Berhad
Energy 771,511
138,000 United Engineers (Malaysia)
Ltd.
Multi-Industry 1,092,377
------------
5,840,754
------------
MEXICO - 0.3%
COMMON STOCK
166,000 Cemex SA de CV
Capital Equipment 551,967
------------
551,967
------------
NETHERLANDS - 8.5%
COMMON STOCK
127,000 Elsevier NV
Capital Equipment 2,111,924
85,056 Getronics NV
Capital Equipment 2,091,541
15,000 Gucci Group
Services 1,035,000
18,700 Heineken NV
Consumer Non-Durables 3,534,231
</TABLE>
- --------------------------------------------------------------------------------
17
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF OCTOBER 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE US$
----------- -----------
NETHERLANDS (CONCLUDED)
<C> <S> <C>
167,305 Internationale Nederlanden
Group NV
Finance $ 5,219,033
33,804 KLM Royal Dutch Air Lines NV
Services 805,332
35,265 NV Koninklijke Sphinx
Gustavsberg
Materials 484,535
18,039 Oce-Van Der Grinten NV
Capital Equipment 1,925,380
718 Samas-Groep NV
Capital Equipment 24,557
PREFERRED STOCK
4,800 Internationale Nederlanden
Group NV
Finance 25,503
------------
17,257,036
------------
PHILIPPINES - 1.3%
COMMON STOCK
691,937 Ayala Land Inc.
Finance 737,223
24,771 Manila Electric Company GDR
Energy 879,371
7,000 Philippine Long Distance
Telephone Company
Services 419,521
6,550 Philippine Long Distance
Telephone Company ADR
Services 392,181
572,000 SM Prime Holdings*
Finance 121,887
------------
2,550,183
------------
PORTUGAL - 0.7%
COMMON STOCK
30,250 Portugal Telecom
Services 787,050
43,270 Semapa - Sociedade de
Investimento e Gestao SGPS
SA*
Materials 647,763
------------
1,434,813
------------
SINGAPORE - 2.0%
COMMON STOCK
205,000 City Developments Ltd.
Finance 1,615,090
120,750 Development Bank of Singapore
Ltd.
Finance 1,448,417
57,420 Singapore Press Holdings Ltd.
Services 953,671
------------
4,017,178
------------
SPAIN - 1.0%
COMMON STOCK
6,000 Banco Popular Espanol SA
Finance $ 1,147,990
37,000 Centros Comerciales Pryca SA
Services 850,441
------------
1,998,431
------------
SWEDEN - 2.0%
COMMON STOCK
100,000 Atlas Copco AB
Capital Equipment 2,064,133
77,000 Telefonaktiebolaget LM
Ericsson 'B' Shares
Services 2,087,897
------------
4,152,030
------------
SWITZERLAND - 8.8%
COMMON STOCK
3,500 ABB Asea Brown Boveri Ltd.
Capital Equipment 4,343,370
5,900 Adecco SA
Services 1,664,018
21,000 CS Holding AG
Finance 2,106,340
4,400 Ciba-Geigy AG
Materials 5,442,760
1,860 Nestle SA
Consumer Non-Durables 2,028,902
300 Roche Holding AG
Consumer Non-Durables 2,278,541
------------
17,863,931
------------
THAILAND - 0.9%
COMMON STOCK
48,000 Bangkok Bank Public Company
Ltd.
Finance 511,899
36,000 Land & House Public Company
Ltd.
Finance 299,236
70,400 Thai Farmers Bank Public
Company Ltd.
Finance 538,248
50,000 United Communication Industry
Services 415,604
WARRANTS
16,300 Thai Farmers Bank Public
Company Ltd.*(a)
Finance 15,977
------------
1,780,964
------------
</TABLE>
- --------------------------------------------------------------------------------
18
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONCLUDED)
AS OF OCTOBER 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE US$
----------- ----------
UNITED KINGDOM - 15.2%
<C> <S> <C>
COMMON STOCK
140,700 Airtours plc
Services $ 1,496,370
289,000 Asda Group plc
Services 550,700
53,500 Barclays plc
Finance 840,403
35,000 British Aerospace plc
Capital Equipment 665,228
112,000 British Airways plc
Services 1,010,554
156,800 British Land Company plc
Finance 1,170,892
443,500 British Steel plc
Capital Equipment 1,233,349
130,000 Cable & Wireless plc
Services 1,035,342
108,000 Cadbury Schweppes plc
Consumer Non-Durables 900,587
135,000 Courtaulds plc
Materials 1,002,606
415,000 David S. Smith Holdings plc
Services 2,108,795
75,000 De La Rue plc
Services 715,798
116,773 Enterprise Oil plc
Energy 1,058,375
183,600 Guinness plc
Consumer Non-Durables 1,315,700
70,000 Johnson Matthey plc
Multi-Industry 693,730
76,800 Kingfisher plc
Services 819,283
414,000 LASMO plc
Services 1,436,189
165,400 Lloyds TSB Group plc
Finance 1,049,240
297,000 LucasVarity plc*
Capital Equipment 1,202,028
UNITED KINGDOM (CONCLUDED)
360,400 MFI Furniture plc
Services $ 1,179,812
284,000 Pilkington Brothers plc
Materials 788,632
160,835 Prudential Corporation plc
Finance 1,215,430
74,000 RTZ Corporation plc
Materials 1,184,723
157,000 Rank Group plc
Services 1,044,536
191,750 Tesco plc
Services 1,039,947
157,352 United News & Media plc
Services 1,727,284
349,200 Vodafone Group plc
Services 1,353,588
35,000 Zeneca Group plc
Consumer Durables 953,094
------------
30,792,215
------------
<CAPTION>
Par
-----------
<C> <S> <C>
REPURCHASE AGREEMENTS - 1.5%
$3,000,000 Chase Securities, Inc., 5.47%,
due 11/1/96,
to be repurchased at
$3,000,455.83.
Collateralized by $3,000,000
U.S. Treasury Notes,
7.50%, due 1/31/97. 3,000,000
------------
Total Investments
(cost $166,068,167) 97.1% 196,890,373
Other Assets and Less
Liabilities, 2.9% 5,852,926
------------
Total Net Assets 100% $202,743,299
------------
------------
</TABLE>
* Non-income producing security.
ADR - American Depositary Receipts
GDR - Global Depositary Receipts
(a) Valued pursuant to methodology approved by the Board of Trustees.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
19
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $166,068,167) (Note 2) $196,890,373
Cash 5,435,781
Receivable for forward foreign currency contracts (Note 2) 160,604
Receivable for dividends, tax reclaims and interest 405,325
Deferred organizational expense (Note 2) 9,894
------------
Total Assets 202,901,977
------------
LIABILITIES:
Accrued investment advisory fees (Note 4) 95,192
Other payables and accrued expenses 63,486
------------
Total Liabilities 158,678
------------
Net Assets $202,743,299
------------
------------
NET ASSETS CONSIST OF:
Investors' capital $171,753,041
Net unrealized appreciation of investments, forward foreign
currency contracts and foreign currency transactions 30,990,258
------------
Net Assets $202,743,299
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
20
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividend income (net of foreign withholding taxes of $627,277) $ 3,819,695
Interest income 215,253
-----------
Total Investment Income 4,034,948
-----------
EXPENSES:
Investment advisory fees (Note 4) 978,697
Administration fees (Note 4) 326,232
Transfer agent fees and expenses (Note 4) 12,038
Custodian fees 181,130
Accounting service fees (Note 4) 74,000
Other professional fees 47,630
Trustees fees and expenses 13,608
Other 49,388
Amortization of organization costs (Note 2) 2,473
-----------
Total Expenses 1,685,196
Fee waiver (Note 4) (51,971)
-----------
Net Expenses 1,633,225
-----------
NET INVESTMENT INCOME 2,401,723
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investments 26,223,818
Net realized gain on forward foreign currency contracts and
foreign currency transactions 2,906,658
-----------
Net realized gain on investments, forward
foreign currency contracts and foreign
currency transactions 29,130,476
-----------
Net change in unrealized appreciation of investments 30,822,206
Net change in unrealized appreciation of forward foreign
currency contracts and foreign currency transactions 168,052
-----------
Net change in unrealized appreciation of
investments, forward foreign currency
contracts and foreign currency
transactions 30,990,258
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS, FORWARD FOREIGN
CURRENCY CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS 60,120,734
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $62,522,457
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
21
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED
OCTOBER 31, 1996
----------------
<S> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income $ 2,401,723
Net realized gain on investments, forward foreign currency
contracts and foreign currency transactions 29,130,476
Net change in unrealized appreciation of investments, forward
foreign currency contracts and foreign currency transactions 30,990,258
----------------
Net increase in net assets resulting from operations 62,522,457
----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 201,091,364
Withdrawals (60,870,522)
----------------
Net Transactions in Investors' Beneficial Interests 140,220,842
----------------
INCREASE IN NET ASSETS 202,743,299
NET ASSETS:
Beginning of period --
----------------
End of period $202,743,299
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
22
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION:
INTERNATIONAL EQUITY FUND (THE 'PORTFOLIO') is a separately managed,
diversified portfolio of Schroder Capital Funds, a registered open-end
management investment company. The Portfolio's investment objective is
long-term capital appreciation through investment in securities markets
outside the United States.
2. SIGNIFICANT ACCOUNTING POLICIES:
The Portfolio's financial statements are prepared in accordance with
generally accepted accounting principles based upon the following significant
accounting policies. The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those estimates.
SECURITY VALUATION
Portfolio securities listed on the 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 trade prices are not available are valued at
mid-market prices. Securities traded in over-the-counter markets, or listed
securities for which no trade is reported on the valuation date, are valued
at the most recent reported price. Other securities and assets for which
market quotations are not readily available, are valued at fair value as
determined in good faith using methods approved by the Board of Trustees.
Board valued securities represented approximately 2.7% of total investments.
SECURITY TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on the trade date. Dividend
income is recorded on the ex-dividend date or upon receipt of notification of
the dividend and verification of its effective date. Interest income,
including amortization of discount or premium, is recorded as earned.
Identified cost of investments sold is used to determine gains and losses for
both financial statement and Federal income tax purposes. Foreign dividend
and interest income amounts and realized capital gain and loss are converted
to U.S. dollar equivalents using foreign exchange rates in effect at the date
of the transactions.
Foreign currency amounts are translated into U.S. dollars at the mean
of the bid and asked prices of such currencies against U.S. dollars as
follows: assets and liabilities at the rate of exchange at the end of the
respective period; purchases and sales of securities and income and expenses
at the rate of exchange prevailing on the dates of such transactions. The
portion of the results of operations arising from changes in the exchange
rates and the portion due to fluctuations arising from changes in the market
prices of securities is not isolated. Such fluctuations are included with the
net realized and unrealized gain or loss on investments.
The Portfolio may enter into forward contracts to purchase or sell
foreign currencies to protect against the effect on the U.S. dollar value of
the underlying portfolio of possible adverse movements in foreign exchange
rates. Risks associated with such contracts include the movement in value of
the foreign currency relative to the U.S. dollar and the ability of the
counterparty to perform. Fluctuations in the value of such contracts are
recorded as unrealized gain or loss; realized gain or loss includes net gain
or loss on contracts that have terminated by settlement or by the Portfolio
entering into offsetting commitments.
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INTERNATIONAL EQUITY FUND
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
At October 31, 1996, the Portfolio was obligated to sell foreign
currencies in exchange for U.S. dollars as follows:
<TABLE>
<CAPTION>
Contract Date Currency Units US Dollars Unrealized Gain
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<S> <C> <C> <C> <C> <C>
12/16/96 Swiss Francs 5,700,000 $4,637,529 $ 124,099
Deutsche
12/18/96 Marks 8,500,000 5,653,475 36,505
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$ 160,604
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</TABLE>
REPURCHASE AGREEMENTS
The Portfolio may invest in repurchase agreements. The Portfolio,
through its custodian, receives delivery of the underlying securities, whose
market value must always equal or exceed the repurchase price. The investment
adviser (SCMI) is responsible for determining the value of the underlying
securities at all times. In the event of default, the Portfolio may have
difficulties with the disposition of such securities.
ORGANIZATIONAL COSTS
Costs incurred by the Portfolio in connection with its organization and
initial registration are being amortized on a straight line basis over a
five-year period.
3. PURCHASES AND SALES OF SECURITIES:
The cost of securities purchased and the proceeds from sales of
securities (excluding short-term securities for the year ended October 31,
1996, aggregated $118,629,667 and $210,762,070, respectively.
For Federal income tax purposes, the tax basis of investment securities
owned at October 31, 1996 was $166,095,944. The aggregate gross unrealized
appreciation for all securities in which there was an excess of market value
over tax cost was $53,479,944 and the aggregate gross unrealized depreciation
for all securities in which there was an excess of tax cost over market value
was $22,685,515.
4. RELATED PARTIES:
For the year ended October 31, 1996, remunerations to related parties
were paid or accrued in the following amounts:
<TABLE>
<CAPTION>
EARNED WAIVED NET
-------- ------- --------
<S> <C> <C> <C>
Schroder Capital Management International Inc.
(Investment Adviser) $978,697 $51,971 $926,726
Schroder Fund Advisors Inc.
(Administrator) 326,232 -- 326,232
Forum Financial Corp.
(Fund Accountant and Transfer Agent) 86,038 -- 86,038
</TABLE>
The Portfolio retains Schroder Capital Management International Inc.
('SCMI') to act as investment adviser pursuant to an Investment Advisory
Contract. SCMI manages the investment and reinvestment of the assets included
in the Portfolio and continuously reviews, supervises and administers the
Portfolio's investments. It is the responsibility of SCMI to make decisions
relating to the Portfolio's investments and to
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INTERNATIONAL EQUITY FUND
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NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
place purchase and sale orders regarding such investments with brokers or
dealers selected at its discretion. For its services as investment adviser to
the Portfolio, SCMI receives a monthly fee equal on an annual basis to 0.45%
of the average daily net assets of the Portfolio.
The Portfolio has entered into an Administrative Services Contract with
Schroder Fund Advisors Inc. ('Schroder Advisors'). In addition, the Portfolio
and Schroder Advisors have entered into a Sub-Administration Agreement with
Forum Financial Services, Inc. ('Forum'). Pursuant to their agreements,
Schroder Advisors and Forum provide certain management and administrative
services necessary to the Portfolio's operations other than the investment
management and administrative services provided to the Portfolio by SCMI
pursuant to the Investment Advisory Contract. Schroder Advisors is
compensated for these services at an annual rate of 0.15% of the average
daily net assets of the Portfolio, a portion of which Forum receives for its
services with respect to the Portfolio. SCMI and Schroder Advisors have
voluntarily undertaken to waive a portion of their fees and assume certain
expenses of the Fund during fiscal year.
Forum Financial Corp. ('FFC') , an affiliate of Forum, performs
portfolio accounting services for the Portfolio pursuant to a Fund Accounting
Agreement with Schroder Capital Funds. For its services, FFC receives a fee
of $60,000 per year, plus additional surcharges based upon total assets or
security positions.
FFC is also the Portfolio's transfer agent pursuant to a Transfer
Agency Agreement between Schroder Capital Funds and FFC. FFC is compensated
for those services in the amount of $12,000 per year, plus certain
interestholder account fees.
5. CONCENTRATION OF CREDIT RISK
The Portfolio has a relatively large concentration of portfolio
securities invested in companies domiciled in Japan. The Portfolio may be
more susceptible to political, social and economic events adversely affecting
Japanese companies than portfolios not so concentrated.
6. FEDERAL INCOME TAXES:
The Portfolio is not required to pay Federal income taxes on its net
investment income and net capital gain, as it is treated as a partnership for
Federal income tax purposes. All interest, dividends, gain and loss of the
Portfolio are deemed to have been 'passed through' to the partners in
proportion to their holdings of the Portfolio regardless of whether such
interest, dividends or gain have been distributed by the Portfolio.
7. FINANCIAL HIGHLIGHTS:
Portfolio performance for the year ended October 31, 1996.
<TABLE>
<S> <C>
Ratio of expenses to average net assets net of fee waiver 0.75%
Ratio of net investment income to average net assets net of fee waiver 1.10%
Ratio of expenses to average net assets excluding fee waivers 0.77%
Ratio of net investment income to average net assets excluding fee waiver 1.08%
Portfolio turnover rate 56.20%
Average brokerage commission per share (a) $0.0256
</TABLE>
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(a) Amount represents the average commission per share paid to brokers on the
purchase and sale of portfolio securities.
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INTERNATIONAL EQUITY FUND
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Investors and Trustees of International Equity Fund:
We have audited the accompanying statement of assets and liabilities of
the International Equity Fund (a separate portfolio of Schroder Capital
Funds), including the schedule of investments, as of October 31, 1996, and
the related statement of operations, the statement of changes in net assets
and the financial highlights for the year then ended. 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 October 31, 1996 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the International Equity Fund as of October 31, 1996, the results
of its operations, the changes in its net assets and the financial highlights
for the year then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
December 23, 1996
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TRUSTEES
Laura E. Luckyn-Malone
Hermann C. Schwab
Peter E. Guernsey
Ralph E. Hansmann (Honorary)
John I. Howell
Clarence F. Michalis
Mark J. Smith
OFFICERS
Hermann C. Schwab
Chairman of the Board
Laura E. Luckyn-Malone
President
John Troiano
Vice President
Mark J. Smith
Vice President
Robert G. Davy
Vice President
Richard Foulkes
Vice President
Fariba Talebi
Vice President
Ira L. Unschuld
Vice President
John Y. Keffer
Vice President
Catherine A. Mazza
Vice President
Jane Lucas
Vice President
Robert Jackowitz
Treasurer
Thomas G. Sheehan
Assistant Treasurer
Assistant Secretary
David I. Goldstein
Assistant Treasurer
Assistant Secretary
Margaret H. Douglas-Hamilton
Secretary
Gerardo Machado
Assistant Secretary
Barbara Gottlieb
Assistant Secretary
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INVESTMENT ADVISER
Schroder Capital Management International Inc.
787 Seventh Avenue
New York, New York 10019
ADMINISTRATOR & DISTRIBUTOR
Schroder Fund Advisors Inc.
787 Seventh Avenue
New York, New York 10019
CUSTODIAN
The Chase Manhattan Bank, N.A.
Global Custody Division
Woolgate House, Coleman Street
London EC2P 2HD, United Kingdom
TRANSFER AND DIVIDEND
DISBURSING AGENT
Forum Financial Corp.
Two Portland Square
Portland, Maine 04101
COUNSEL
Jacobs Persinger & Parker
77 Water Street
New York, New York 10005
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
This report is for the information of the shareholders
of the Schroder International Fund. Its use in connec-
tion with any offering of the Fund's shares is author-
ized only in case of a concurrent or prior delivery of
the Fund's current prospectus.
[Logo]
Schroder
International
Fund
ANNUAL REPORT
October 31, 1996
Schroder Capital Funds
(Delaware)
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STATEMENT OF DIFFERENCES
The registered trademark symbol shall be expressed as................ 'r'
