<PAGE>
<PAGE>
- - --------------------------------------------------------------------------------
SCHRODER U.S. SMALLER COMPANIES 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's investment objective is capital appreciation. Current income will be
incidental to the objective of capital appreciation. The Portfolio will seek to
achieve its investment objective by investing, under normal market conditions,
at least 65% of its total assets 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. The Fund currently seeks to achieve its investment
objective by investing all of its investable assets in Schroder U.S. Smaller
Companies Fund (Portfolio) (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 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:
We are pleased to report that the Schroder U.S. Smaller Companies Fund has
continued its strong performance over the past year. For the twelve month period
ended October 31, 1996, the Fund achieved a total return of 29.4%, comparing
favorably with a rise of 16.7% for the Russell 2000 Index and 20.4% for the
Lipper Smaller Growth Index. Since inception on August 6, 1993, the Fund's
annualized return has been 24.6% as compared to 11.9% for the Russell 2000 and
16.0% for the Lipper Index.
As we look at the economic situation, we see no serious threat to the
current expansion. Imbalances such as significant inflation pressures and/or
excessive debt that normally herald recessions are absent. Real GDP growth is
forecast at about 2.5% in 1997 (Q4/Q4), and the consumer price index is
projected to advance by 3.4%. Nonetheless there are likely to be some challenges
ahead.
Capacity constraints are becoming evident in the labor market, and
employment costs are beginning to edge higher. Foreign demand for U.S. products
ought to strengthen in 1997 as Western Europe and Japan recover, and this will
further strain domestic resources. We expect the Federal Reserve to begin
tightening monetary policy sometime in the first half of 1997, although the lack
of a pronounced inflation threat ought to keep the adjustment
- - --------------------------------------------------------------------------------
<PAGE>
<PAGE>
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SCHRODER U.S. SMALLER COMPANIES FUND
- - --------------------------------------------------------------------------------
a modest one. Furthermore, we strongly believe that the secular trend for both
interest rates and inflation remains downward, driven by demographic factors
which will constrain nominal growth and boost productivity. This will cap any
cyclical increases in inflation and interest rates and will also act as a solid
basis of long run support for U.S. financial markets.
We thank you for your continued support and interest in the Fund.
Sincerely,
<TABLE>
<S> <C> <C>
Hermann C. Schwab Fariba Talebi Ira Unschuld
Chairman Portfolio Manager Portfolio Manager
</TABLE>
- - --------------------------------------------------------------------------------
2
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<PAGE>
- - --------------------------------------------------------------------------------
SCHRODER U.S. SMALLER COMPANIES FUND
- - --------------------------------------------------------------------------------
MANAGEMENT DISCUSSION AND ANALYSIS (AS OF OCTOBER 31, 1996)
Our strong performance is attributable primarily to successful stock
picking and secondarily, to certain sector bets. The most significant sector bet
was in energy, where we added to our weighting in the fourth quarter of calendar
1995 to take advantage of a positive supply demand situation in oil and
attractive equity valuations. Our overweight position in energy enhanced
performance, as energy has enjoyed the highest returns of the Russell 2000 so
far in 1996. We began taking profits in this sector more recently.
Another area of strength for the Russell 2000 during the period was
consumer cyclicals. Retail stocks were very strong early in calendar 1996 as
same store sales showed improvement and management initiatives resulted in
higher full price sales, boosting gross margins. Our retail holdings,
Consolidated Stores, Petco Animal Supplies and Wet Seal all registered strong
gains for the period. Hotel stocks performed well as the industry continued to
show strong growth in revenue per available room, driven by greater new demand
than available new supply. We participated in the run in temporary help
companies with Accustaff, Robert Half International, and Career Horizons.
Financials performed relatively well during the period, especially during the
second half of 1996 as fears of an overheating economy appeared premature.
Penncorp Financial, Walden Bancorp, and North Fork Bancorporation were
particularly profitable positions. We are underweight compared to the Russell
2000 in this group, and will likely remain somewhat underweight as valuations
appear to reflect the group's fundamentals. The technology sector has been
difficult during the period, showing both large positive and negative returns
during the year. We have been neutral to slightly underweight in the sector for
most of the year, reflecting our concerns regarding a cyclical peak and industry
overcapacity in the semi-conductor industry.
Looking forward, we continue 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. A number of smaller companies have faster
growth rates relative to larger companies and sell at a greater discount to
their growth rates than larger companies. We will remain focused on our
research-intensive individual stock selection, concentrating on underfollowed
and misunderstood companies that can offer superior earnings growth.
PORTFOLIO MANAGERS' Q&A
Describe your investment criteria.
We focus on companies in industries with favorable industry structures and
growth rates. Within these industries we search for profitable companies with
dominant market positions and a well-articulated strategy for growth. We look
for companies which generate free cash flow, which have incentivized management,
significant management ownership, and conservative accounting practices. In our
valuation analysis, we look for companies with an earnings multiple that is at a
discount to its earnings growth rate.
Financial stocks have been strong performers for the last several years. What is
your outlook for the future?
For the last several years the fund has benefitted from its holdings in
smaller banks and thrifts. Not only have many of these companies experienced
strong earnings rebounds as they recovered from the credit quality problems of
the early 1990's but many have been acquired as part of the consolidation of the
American banking industry. Today, the universe of attractive banks and thrifts
has shrunk considerably. Nonetheless there are still some companies such as UST
Corp., a Boston based commerical bank, which have been overlooked by Wall Street
and remain very attractive. Furthermore there are a number of specialty finance
companies which can grow into niches that develop as the banking system
consolidates. So, while we would expect our weighting in financials to fall a
bit over time, we would expect to maintain a significant position in the group.
- - --------------------------------------------------------------------------------
3
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<PAGE>
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SCHRODER U.S. SMALLER COMPANIES FUND
- - --------------------------------------------------------------------------------
Smaller Companies have underperformed large companies thus far in 1996. What is
your outlook for 1997?
We are optimistic about the prospects for smaller companies. We expect a
continuation of moderate growth and low inflation. This is a favorable
environment for companies which can grow their sales and earnings at better than
average rates. We believe a strong dollar also favors smaller companies over
large multinationals since smaller companies tend to derive most of their
earnings domestically. Finally, the relative valuations of smaller companies are
quite attractive, and this, coupled with their inherently faster internal growth
rates may cause smaller companies to outperform in 1997.
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.
- - --------------------------------------------------------------------------------
4
<PAGE>
<PAGE>
- - --------------------------------------------------------------------------------
SCHRODER U.S. SMALLER COMPANIES FUND
- - --------------------------------------------------------------------------------
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 Russell 2000 Index. The Russell 2000 is a
capitalization weighted index of 2000 small capitalization U.S. companies. The
Index excludes the effect of any fees or sales charges. Total return and
principal value of an investment in the Fund will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. Total return for the Fund assumes reinvestment of dividends and
distributions. Past performance cannot predict nor guarantee future results.
Schroder U.S. Smaller Companies Fund vs Russell 2000 Index
<TABLE>
<S> <C> <C>
Investment Value on 10/31/96
- - ----------------------------
Schroder U.S. Smaller Companies Fund $20,448
Russell 2000 Index $14,414
Average Annual Total Return on 10/31/96 1 Year Since Inception on 08/06/93*
- - --------------------------------------- ------ ---------------------------
Schroder U.S. Smaller Companies Fund 29.35% 24.60%
Russell 2000 Index 16.70% 11.85%
</TABLE>
[GRAPH]
<TABLE>
<CAPTION>
SCHRODER U.S. SMALLER
COMPANIES FUND RUSSELL 2000 INDEX
<S> <C>
10,350 10,411
10,820 10,696
10,990 10,959
10,710 10,589
11,202 10,935
11,656 11,270
11,807 11,228
11,223 10,617
11,385 10,680
11,345 10,542
11,143 10,163
11,274 10,321
11,919 10,882
11,668 10,832
11,900 10,786
11,386 10,331
11,694 10,589
11,747 10,441
12,373 10,851
12,749 11,028
13,083 11,256
13,375 11,429
13,949 11,994
15,108 12,674
15,671 12,910
16,214 13,125
15,807 12,527
16,673 13,049
17,431 13,360
17,348 13,336
17,823 13,739
18,773 13,985
19,960 14,725
21,147 15,298
20,447 14,654
18,905 13,360
19,488 14,114
20,602 14,642
20,448 14,414
</TABLE>
* Annualized returns for the Russell 2000 Index are based on an inception date
of 7/31/93.
- - --------------------------------------------------------------------------------
5
<PAGE>
<PAGE>
- - --------------------------------------------------------------------------------
SCHRODER U.S. SMALLER COMPANIES FUND
- - --------------------------------------------------------------------------------
PORTFOLIO CHARACTERISTICS AS OF OCTOBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
INVESTMENT BY INDUSTRY
<S> <C>
INDUSTRY % OF NET ASSETS
- - --------------------------------------------------------
Basic Materials 3.5%
Capital Goods/Construction 9.6%
Consumer Cyclicals 18.3%
Consumer Staples 6.9%
Energy 7.8%
Financial Services 19.0%
Healthcare 9.5%
Technology 11.7%
Transportation/Services/Miscellaneous 5.7%
Cash & Other Assets 8.0%
---------------
Total 100.0%
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
TOP TEN HOLDINGS
<S> <C>
SECURITY % OF NET ASSETS
- - --------------------------------------------------------
Commercial Federal Corporation 2.2%
Regal Cinemas Inc. 1.6%
HFS, Inc. 1.6%
Union Planters Corporation 1.5%
Computervision Corporation 1.4%
Petco Animal Supplies, Inc. 1.4%
BMC Industries 1.3%
Thomas & Betts Corporation 1.3%
CMAC Investment Corporation 1.3%
CWM Mortgage Holdings Inc. 1.3%
---------------
Total 14.9%
---------------
---------------
</TABLE>
- - --------------------------------------------------------------------------------
6
<PAGE>
<PAGE>
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SCHRODER U.S. SMALLER COMPANIES FUND
- - --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investment in Schroder U.S. Smaller Companies Portfolio
(Portfolio) (cost $10,917,720) (Note 2) $13,751,213
Deferred organizational expense (Note 2) 10,029
-----------
Total Assets 13,761,242
-----------
LIABILITIES:
Accrued payables and accrued expenses 18,687
-----------
Total Liabilities 18,687
-----------
Net Assets $13,742,555
-----------
-----------
NET ASSETS CONSIST OF:
Paid-in capital $ 6,578,797
Accumulated net realized gain on investments 4,330,265
Net unrealized appreciation of investments 2,833,493
-----------
Net Assets $13,742,555
-----------
-----------
Net Asset Value per share ($13,742,555
divided by 797,795 shares outstanding) $17.23
-----------
-----------
</TABLE>
The accompanying notes are an intergral part of the financial statements.
- - --------------------------------------------------------------------------------
7
<PAGE>
<PAGE>
- - --------------------------------------------------------------------------------
SCHRODER U.S. SMALLER COMPANIES FUND
- - --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividend income $ 115,293
Interest income 15,293
----------
130,586
----------
INVESTMENT INCOME ALLOCATED FROM SCHRODER U.S. SMALLER COMPANIES
PORTFOLIO:
Dividend income 22,752
Interest income 14,679
Expenses (24,767)
----------
Net Investment Income from Schroder U.S. Smaller Companies Portfolio 12,664
----------
Total Investment Income 143,250
----------
EXPENSES:
Investment advisory fees (Note 3) 58,914
Administration fees (Note 3) 38,881
Transfer agent fees and expenses (Note 3) 12,464
Custodian fees 8,968
Accounting service fees (Note 3) 32,903
Other professional fees 25,309
Printing 16,809
Registration fees 15,730
Other 7,757
Amortization of organization costs (Note 2) 5,818
----------
Total Expenses 223,553
Fee waiver (Note 3) (29,507)
----------
Net Expenses 194,046
----------
NET INVESTMENT LOSS (50,796)
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 3,879,614
Net realized gain on investments from Portfolio 718,000
----------
Net realized gain on investments 4,597,614
----------
Net change in unrealized appreciation of investments (3,676,928)
Net change in unrealized appreciation of investments from
Portfolio 2,833,493
----------
Net change in unrealized appreciation of investments (843,435)
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 3,754,179
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $3,703,383
----------
----------
</TABLE>
The accompanying notes are an intergral part of the financial statements.
- - --------------------------------------------------------------------------------
8
<PAGE>
<PAGE>
- - --------------------------------------------------------------------------------
SCHRODER U.S. SMALLER COMPANIES FUND
- - --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss $ (50,796) $ (42,343)
Net realized gain on investments 4,597,614 1,960,897
Net change in unrealized appreciation of
investments (843,435) 2,234,952
----------- -----------
Net increase in net assets resulting from
operations 3,703,383 4,153,506
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2):
Net realized gain on investments (1,965,720) (458,547)
----------- -----------
NET DECREASE FROM CAPITAL SHARE TRANSACTIONS (NOTE 5) (3,282,324) (1,731,532)
----------- -----------
INCREASE (DECREASE) IN NET ASSETS (1,544,661) 1,963,427
NET ASSETS:
Beginning of period 15,287,216 13,323,789
----------- -----------
End of period $13,742,555 $15,287,216
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an intergral part of the financial statements.
- - --------------------------------------------------------------------------------
9
<PAGE>
<PAGE>
- - --------------------------------------------------------------------------------
SCHRODER U.S. SMALLER COMPANIES FUND
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION:
SCHRODER U.S. SMALLER COMPANIES FUND (THE 'FUND') is a diversified
portfolio of Schroder Capital Funds (Delaware) (the 'Trust'), which is
registered under the Investment Company Act of 1940 (the 'Act'), as amended,
as an open-end management investment company. On August 15, 1996, the Fund
contributed substantially all of its assets in the Schroder U.S. Smaller
Companies Portfolio (the 'Portfolio'), a separate portfolio of an open-ended
investment company which has the same investment objective and substantially
similar 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 was not the only institutional investor that has invested in
the Portfolio. 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. The percentage of
the Portfolio owned by the Fund at October 31, 1996, was approximately 48%.
On May 17, 1996, the Fund began offering two classes of shares
('Investor Shares' and 'Advisor Shares'). On May 17, 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. SUMMARY OF 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 those estimates.
SECURITY VALUATION
Currently, the Fund records its investment in the Portfolio at value.
Valuation of securities held by the Portfolio is discussed in the Portfolio
Notes to Financial Statements which are included elsewhere in this report.
Prior to the Fund's investment in the Portfolio, the Fund held its
investments directly. The value of securities traded on the New York Stock
Exchange was based on the last sale price. The value of securities traded on
any other national stock exchange is based on the last sale price as of 4:00
p.m. in New York as quoted by authoritative sources. In the absence of a
recorded sale, the average of the closing bid and asked prices is used.
Securities traded on other organized markets are valued at the average of the
bid and asked prices as of 4:00 p.m. in New York as available from
authoritative sources at the end of the business day.
INVESTMENT INCOME AND EXPENSES
Currently, the Fund records daily its pro rata share of the Portfolio's
income, expenses and realized gains and losses. In addition, the Fund accrues
its own expenses. Prior to the Fund's investment in the Portfolio, the Fund
held its investments directly. For investments held directly, interest income
was determined on the basis of interest accrued, dividend income was recorded
on the ex-dividend date and realized gains and losses from securities sold
were recorded on the identified cost basis.
ORGANIZATIONAL COSTS
Costs incurred by the Fund in connection with its organization and
initial registration are being amortized on a straight line basis over a
five-year period.
- - --------------------------------------------------------------------------------
10
<PAGE>
<PAGE>
- - --------------------------------------------------------------------------------
SCHRODER U.S. SMALLER COMPANIES FUND
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
3. 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 Advisor) $58,914 $ 2,657 $56,257
Schroder Fund Advisors Inc. (Administrator) 36,697 26,850 9,847
Forum Financial Services
(Sub-Adminstrator) 2,184 -- 2,184
Forum Financial Corp. (Fund Accountant and
Transfer agent) 45,367 -- 45,367
</TABLE>
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 0.60% of the average daily net
assets of the Portfolio. Prior to August 15, 1996, the Fund retained SCMI as
its investment adviser. The advisory contract provided for an annual fee,
payable monthly, of 0.50% on the first $100,000,000 of average daily net
assets and 0.40% on the next $150,000,000 of average daily net assets and
0.35% on average daily net assets in excess of $250,000,000 of the Fund.
The Fund may, at any time, withdraw its investment from the Portfolio
if the Board of Trustees determines that 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 does
withdraw 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 separate
Administrative Services Contracts with Schroder Fund Advisors Inc. ('Schroder
Advisors') and 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
administrative services provided to the Fund by SCMI. For these services, the
Fund pays Schroder Advisors a monthly fee at the annual rate of 0.25% of the
Fund's average daily net assets and pays Forum a monthly fee at the annual
rate of 0.075% of the Fund's average daily net assets. Schroder Advisors and
Forum provide similar services to the Portfolio, for which the Portfolio pays
Forum a monthly fee at the
- - --------------------------------------------------------------------------------
11
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<PAGE>
- - --------------------------------------------------------------------------------
SCHRODER U.S. SMALLER COMPANIES FUND
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
annual rate of 0.075% of the Portfolio's average daily net assets. Schroder
Advisors receives no fee for the administration services it provides the
Portfolio. Prior to August 15, 1996, Schroder Advisors was the sole provider
of administrative services and the monthly fee at the annual rate was 0.25%
on the first $100,000,000 of average daily net assets and 0.20% on the next
$150,000,000 of average daily net assets and 0.175% on average daily net
assets in excess of $250,000,000.
SCMI and Schroder Advisors have voluntarily undertaken to waive a
portion of their fees or assume certain expenses of the Fund during the
current fiscal year to the extent that the Fund's total expenses, including
its allocation of expenses from the Portfolio, exceed 1.49% of the Fund's
average daily net assets. This undertaking cannot be withdrawn except by a
majority vote of the Trust's 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 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.
- - --------------------------------------------------------------------------------
12
<PAGE>
<PAGE>
- - --------------------------------------------------------------------------------
SCHRODER U.S. SMALLER COMPANIES FUND
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. CAPITAL SHARE 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 797,795 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
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Number Number
of of
Shares Amount Shares Amount
- - --------------------------------------------------------------------------------------------------------------
Shares sold 95,854 $ 1,697,351 169 $ 2,000
Shares issued for reinvestment of dividend and
distribution 106,834 1,522,389 37,357 410,171
-------- ----------- -------- -----------
202,688 3,219,740 37,526 412,171
Shares redeemed (414,456) (6,502,064) (156,000) (2,143,703)
-------- ----------- -------- -----------
Net decrease (211,768) $(3,282,324) (118,474) $(1,731,532)
-------- ----------- -------- -----------
-------- ----------- -------- -----------
</TABLE>
6. PURCHASE AND SALES:
For the period when the Fund held its investments directly, the
aggregate cost of securities purchased and the proceeds from sales of
securities for the year ended October 31, 1996 were $15,782,556 and
$3,228,903, respectively.
- - --------------------------------------------------------------------------------
13
<PAGE>
<PAGE>
- - --------------------------------------------------------------------------------
SCHRODER U.S. SMALLER COMPANIES FUND
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. FINANCIAL HIGHLIGHTS:
Selected per share data and ratios:
<TABLE>
<CAPTION>
For the Years Ended For the Period
October 31, August 6, 1993(a)-
1996(g) 1995 1994 October 31, 1993
- - ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of period $ 15.14 $ 11.81 $ 10.99 $ 10.00
------- ------- ------- ----------
Investment Operations:
Net investment loss (0.06)(e) (0.04) (0.07) (0.02)
Net realized and unrealized gain on
investments 4.10 3.78 0.97 1.01
------- ------- ------- ----------
Total from investment operations 4.04 3.74 0.90 0.99
------- ------- ------- ----------
Distributions from net realized gains on
investments (1.95) (0.41) (0.08) --
------- ------- ------- ----------
Net Asset Value, End of period $ 17.23 $ 15.14 $ 11.81 $ 10.99
------- ------- ------- ----------
------- ------- ------- ----------
Total Return 29.35% 32.84% 8.26% 9.90%
Ratios/Supplementary Data:
Net Assets, End of period (thousands) $13,743 $15,287 $13,324 $ 12,489
Ratio of expenses to average net assets 1.49%(e)(f) 1.49% 1.45% 2.03%(b)
Ratio of net investment loss to average net
assets (0.35)%(e)(f) (0.30)% (0.58)% (0.99)%(b)
Portfolio turnover rate(d) 58.50% 92.68% 70.82% 12.58%
Average brokerage commission rate(c) $0.0583 N/A N/A N/A
</TABLE>
(a) Commencement of operations.
(b) Annualized.
(c) The average commission per share paid to brokers represents the amount on
the purchase and sale of portfolio securities while the Fund was making
investments directly in securities.
(d) 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.
(e) Includes the Fund's proportionate share of income and expenses of the
Portfolio.
(f) During the year ended October 31, 1996, various fees were waived. Had such
waivers not occurred, the ratio of expenses to average net assets would have
been 1.80% (e) and the ratio of net investment loss to average net assets
would have been (0.66)% (e).
(g) On May 17, 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.
- - --------------------------------------------------------------------------------
14
<PAGE>
<PAGE>
- - --------------------------------------------------------------------------------
SCHRODER U.S. SMALLER COMPANIES FUND
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
SPECIAL MEETING OF SHAREHOLDERS (UNAUDITED)
There was a special meeting of the shareholders of Schroder U.S.
Smaller Companies Fund on June 28, 1996. At the special meeting, shareholders
of the Fund approved the conversion of the Fund to a Core and Gateway'r'
structure, approved the amendment to the Fund's investment objective, and
approved changes to the Fund's fundamental investment restrictions. Of
787,037 shares outstanding of the Fund as of the record date of the special
meeting, 558,595 were present in person or by proxy.
The first matter about which the shareholders of the Fund voted was the
conversion of the Fund to a Core and Gateway structure pursuant to which the
Fund would adopt a new investment policy permitting the Fund to invest all of
its assets in a portfolio (the 'Portfolio') of Schroder Capital Funds with
the same investment objective and policies as the Fund. Incident to this
conversion, Schroder Capital Management, Inc. (SCMI), the Fund's investment
adviser, prior to August 15, 1996, Schroder Fund Advisors, Inc. ('Schroder
Advisors'), the Fund's administrator and distributor, and Forum Financial
Services, Inc. ('Forum'), the sub-administrator, will be paid at a different
fee rate than that was paid by the fund for the year ended October 31, 1995.
SCMI will receive from the Portfolio a fee of 0.60% of the Portfolio's
average daily net assets for its investment advisory services to the
Portfolio. For its administrative services to the Fund, Schroder Advisors and
Forum will receive a fee of 0.25% and 0.075%, respectively, of the Fund's
average daily net assets. In addition, the Fund will be responsible for its
pro rata portion of the administrative services fees of 0.075% of the average
daily net assets paid by the Portfolio with respect to administrative
services performed for the Portfolio by Forum. With respect to this matter,
the 558,595 shares of the Fund present at the special meeting were voted as
follows:
<TABLE>
<CAPTION>
% of
Outstanding
Shares Voted Shares
- - ---------------------------------------------------------------------------------------
<S> <C> <C>
For 558,595 71%
Against -- --
Abstain -- --
</TABLE>
The second matter about which the Fund's shareholders voted was that
the Fund's investment objective be amended to provide that the Fund's
investment objective is capital appreciation. With respect to this matter,
the 558,595 shares of the Fund present at the special meeting were voted as
follows:
<TABLE>
<CAPTION>
% of
Outstanding
Shares Voted Shares
- - ---------------------------------------------------------------------------------------
<S> <C> <C>
For 558,595 71%
Against -- --
Abstain -- --
</TABLE>
The final matter about which the Fund's shareholders voted was to
approve changes to the Fund's fundamental investment restrictions to enhance
management's ability to manage efficiently and effectively the Fund's assets
in changing regulatory and investment environments. With respect to this
matter, the 558,595 shares of the Fund present at the special meeting were
voted as follows:
<TABLE>
<CAPTION>
% of
Outstanding
Shares Voted Shares
- - ---------------------------------------------------------------------------------------
<S> <C> <C>
For 558,595 71%
Against -- --
Abstain -- --
</TABLE>
DISTRIBUTIONS (UNAUDITED)
During the fiscal year ended October 31, 1996, the Fund distributed
$716,083 in long term capital gain to shareholders.
- - --------------------------------------------------------------------------------
15
<PAGE>
<PAGE>
- - --------------------------------------------------------------------------------
SCHRODER U.S. SMALLER COMPANIES FUND
- - --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of Schroder U.S. Smaller Companies
Fund:
We have audited the accompanying statement of assets and liabilities of
the Schroder U.S. Smaller Companies Fund (a separately managed portfolio of
Schroder Capital Funds (Delaware)), as of 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 three years in the period then ended and
the period August 6, 1993 (commencement of operations) to October 31, 1993.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Schroder U.S. Smaller Companies Fund as of October 31, 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 three years in the period then ended and the
period August 6, 1993 (commencement of operations) to October 31, 1993, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
December 23, 1996
- - --------------------------------------------------------------------------------
16
<PAGE>
<PAGE>
- - --------------------------------------------------------------------------------
SCHRODER U.S. SMALLER COMPANIES PORTFOLIO
- - --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK - 92.0%
SHARES VALUE US$
<C> <S> <C>
BASIC MATERIALS - 3.5%
14,300 AMCOL International Corporation $ 212,681
7,000 Ball Corporation 168,837
27,900 Calgon Carbon Corporation 279,000
12,500 Ferro Corporation 337,500
-----------
998,018
-----------
CAPITAL GOODS/CONSTRUCTION - 9.6%
9,400 American Homestar Corporation* 199,740
13,200 BMC Industries Inc. 391,050
9,900 Cavalier Homes Inc. 184,389
15,300 Dal-Tile International Inc.* 267,750
10,000 Donaldson Company Inc. 292,500
4,600 Harsco Corporation 293,825
12,100 Miller Industries Inc.* 282,839
10,500 Tracor Inc.* 238,875
8,300 Trinova Corporation 272,865
11,000 USA Waste Services Inc.* 352,000
-----------
2,775,833
-----------
CONSUMER CYCLICALS - 18.3%
6,700 Barnett Inc.* 158,289
5,550 CDW Computer Centers Inc.* 349,304
6,400 Career Horizons Inc.* 260,001
8,000 Consolidated Stores Corporation* 309,002
11,700 Day Runner Inc.* 327,600
1,400 Ethan Allen Interiors Inc. 50,050
6,300 HFS Inc.* 461,475
2,000 La Quinta Inns Inc. 40,000
8,700 Nautica Enterprises* 267,525
7,300 Performance Food Group Company* 112,238
17,300 Petco Animal Supplies Inc.* 406,550
18,350 Regal Cinemas Inc.* 477,100
5,000 Robert Half International Inc.* 200,626
18,700 ShoLodge Inc.* 247,775
15,950 Sonic Corporation* 362,863
6,000 Tiffany & Company 222,000
8,300 Viking Office Products Inc.* 241,738
8,800 Warnaco Group Inc. Class A 218,901
13,500 WestPoint Stevens Inc.* 359,439
7,400 Wet Seal Inc.* 233,100
-----------
5,305,576
-----------
CONSUMER STAPLES - 6.9%
8,100 Compdent Corporation* 278,438
11,500 Data Processing Resources
Corporation* 231,438
10,100 Eckerd Corporation* 280,275
21,900 Fine Host Corporation* 317,550
5,550 Harman International Industries
Inc. 285,132
7,900 Henry Schein Inc.* 314,025
<CAPTION>
SHARES VALUE US$
<C> <S> <C>
CONSUMER STAPLES (CONCLUDED)
13,100 Physician Sales & Service Inc.* $ 278,375
-----------
1,985,233
-----------
ENERGY - 7.8%
7,400 B.J. Service Company* 332,078
5,700 Cooper Cameron Corporation* 364,090
7,200 Flores & Rucks Inc.* 340,200
8,400 Input/Output Inc.* 249,900
6,500 Tosco Corporation 364,814
12,000 Union Tex Pete Holdings Inc. 256,503
17,500 Varco International Inc.* 345,625
-----------
2,253,210
-----------
FINANCIAL SERVICES - 19.0%
7,900 American States Financial
Corporation 186,638
6,900 Astoria Financial Corporation 244,088
9,300 Bank United Corporation* 247,614
5,100 Banknorth Group Inc. 175,950
5,500 CMAC Investment Corporation 380,190
17,700 CWM Mortgage Holdings Inc. 367,275
2,950 Charter One Financial Inc. 128,141
14,900 Commercial Federal Corporation 623,941
3,500 Community First Bankshares Inc. 86,625
8,000 Compass Bancshares Inc. 289,002
10,400 Cullen/Frost Bankers Inc. 312,651
12,700 FBL Financial Group Inc.* 287,339
12,700 Innkeepers USA Trust 149,225
10,300 MLF Bancorp Inc. 143,557
7,200 North Fork Bancorporation Inc. 227,702
10,500 Penncorp Financial Group Inc. 363,564
6,600 Starwood Lodging Trust 297,000
7,300 UST Inc.* 130,947
12,182 Union Planters Corporation 423,325
14,300 UnionBancorp Inc. 175,175
5,200 Walden Bancorp Inc. 170,300
1,700 Westamerica Bancorporation 86,275
-----------
5,496,524
-----------
HEALTHCARE - 9.5%
1,500 AmeriSource Health Corporation* 63,563
10,200 Bergen Brunswig Corporation 320,027
30,100 Community Psychiatric Centers* 267,138
17,400 Coventry Corporation* 176,176
7,100 Genzyme Corporation* 163,300
15,900 Haemonetics Corporation* 284,213
24,262 Healthdyne Technologies Inc.* 215,325
6,200 Invacare Corporation 173,600
16,900 Isis Pharmaceuticals Inc.* 274,625
22,100 Matria Healthcare Inc.* 162,988
17,250 Multicare Companies Inc.* 310,500
</TABLE>
- - --------------------------------------------------------------------------------
17
<PAGE>
<PAGE>
- - --------------------------------------------------------------------------------
SCHRODER U.S. SMALLER COMPANIES PORTFOLIO
- - --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONCLUDED)
AS OF OCTOBER 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE US$
<C> <S> <C>
US$HEALTHCARE (CONCLUDED)
2,900 Shared Medical Systems Corporation $ 139,925
11,700 Value Health Inc.* 203,289
----------
2,754,669
----------
TECHNOLOLGY - 11.7%
13,000 Amphenol Corporation* 258,377
12,000 Antec Corporation* 128,251
9,975 Cadence Design Systems Inc.* 364,088
45,800 Computervision Corporation* 412,200
9,500 Credence Systems Corporation* 129,439
2,000 Cymer Inc.* 47,000
15,300 EG&G Inc. 269,663
13,000 Exabyte Corporation* 172,250
11,500 INTERSOLV* 93,440
12,700 Intergraph Corporation* 119,064
4,600 Lam Research Corporation* 112,126
9,800 Marcam Corporation* 120,050
8,400 MicroTouch Systems Inc.* 152,252
3,300 Symbol Technologies Inc.* 148,090
16,300 System Software Associates Inc. 190,506
<CAPTION>
SHARES VALUE US$
<C> <S> <C>
TECHNOLOLGY (CONCLUDED)
9,200 Thomas & Betts Corporation $ 389,851
12,300 Wang Laboratories Inc.* 287,514
-----------
3,394,161
-----------
TRANSPORTATION/SERVICES/MISCELLANEOUS - 5.7%
American Radio Systems
2,100 Corporation* 64,050
9,700 Atlantic Southeast Airlines Inc. 203,700
15,000 Comair Holdings Inc. 301,877
5,000 Heritage Media Corporation* 76,250
4,100 Jacor Communications Inc.* 114,800
7,300 Landstar System Inc.* 172,465
Mid-America Apartment Communities
10,100 Inc. 256,290
17,700 RemedyTemp Inc.* 354,000
6,500 Skywest Inc. 97,500
-----------
1,640,932
-----------
Total Investments
(cost $23,652,061) 92.0% 26,604,156
Other Assets Less Liabilities,
8.0% 2,325,321
-----------
Total Net Assets 100.0% $28,929,477
-----------
-----------
</TABLE>
* Non-income producing security
The accompanying notes are an integral part of the financial statements.
- - --------------------------------------------------------------------------------
18
<PAGE>
<PAGE>
- - --------------------------------------------------------------------------------
SCHRODER U.S. SMALLER COMPANIES PORTFOLIO
- - --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $23,652,061) (Note 2) $26,604,156
Cash 2,209,666
Receivable for investments sold 257,011
Receivable for dividends and interest 29,134
-----------
Total Assets 29,099,967
-----------
LIABILITIES:
Payable for investments purchased 141,032
Accrued investment advisory and administration fees (Note 2) 7,762
Other payables and accrued expenses 21,696
-----------
Total Liabilities 170,490
-----------
Net Assets $28,929,477
-----------
-----------
NET ASSETS CONSIST OF:
Investors' capital $25,977,382
Net unrealized appreciation of investments 2,952,095
-----------
Net Assets $28,929,477
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- - --------------------------------------------------------------------------------
19
<PAGE>
<PAGE>
- - --------------------------------------------------------------------------------
SCHRODER U.S. SMALLER COMPANIES PORTFOLIO
- - --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE PERIOD AUGUST 15, 1996 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividend income $ 36,852
Interest income 22,652
----------
Total Investment Income 59,504
----------
EXPENSES:
Investment advisory fees (Note 4) 26,334
Administration fees (Note 4) 3,292
Transfer agent fees and expenses (Note 4) 2,558
Custodian fees 1,930
Accounting service fees (Note 4) 7,645
Other professional fees 13,957
Trustees fees and expenses 103
Other 1,808
----------
Total Expenses 57,627
Fee waiver (Note 4) (20,260)
----------
Net Expenses 37,367
----------
NET INVESTMENT INCOME 22,137
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 735,049
Net change in unrealized appreciation of investments 2,952,095
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 3,687,144
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $3,709,281
----------
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- - --------------------------------------------------------------------------------
20
<PAGE>
<PAGE>
- - --------------------------------------------------------------------------------
SCHRODER U.S. SMALLER COMPANIES PORTFOLIO
- - --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD AUGUST 15, 1996
TO
OCTOBER 31, 1996
------------------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 22,137
Net realized gain on investments 735,049
Net change in unrealized appreciation of
investments 2,952,095
----------------
Net increase in net assets
resulting from operations 3,709,281
----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 26,247,304
Withdrawals (1,027,108)
----------------
Net Transactions in Investors' Beneficial
Interests 25,220,196
----------------
INCREASE IN NET ASSETS 28,929,477
NET ASSETS:
Beginning of period --
----------------
End of period $ 28,929,477
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- - --------------------------------------------------------------------------------
21
<PAGE>
<PAGE>
- - --------------------------------------------------------------------------------
SCHRODER U.S. SMALLER COMPANIES PORTFOLIO
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION:
Schroder U.S. Smaller Companies Portfolio (the 'Portfolio') is a
separately managed, diversified portfolio of Schroder Capital Funds, a
registered open-end management investment company.
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
The value of securities traded on the New York Stock Exchange is based
on the last sale price, and the value of securities traded on any other
national stock exchange is based on the last sale price as of 4:00 p.m. in
New York as quoted by authoritative sources. In the absence of a recorded
sale, the average of the closing bid and asked prices is used. Securities
traded on other organized markets are valued at the average of the bid and
asked prices as of 4:00 p.m. in New York as available from authoritative
sources at the end of the business day.
SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are recorded on trade date. Dividend income is
recorded on the ex-dividend date. Interest income is recorded on an accrual
basis.
Realized gains and losses from security transactions are determined on
the basis of identified cost.
3. PURCHASES AND SALES OF SECURITIES:
The cost of securities purchased and the proceeds from sales of
securities (excluding short-term investments) for the period ended October
31, 1996, aggregated $15,782,556 and $3,228,903, respectively.
As of October 31, 1996, the aggregate cost of investment securities for
Federal income tax purposes was $23,671,972. The gross unrealized
appreciation of investments was $3,913,613 and the gross unrealized
depreciation of investments was $981,429.
4. RELATED PARTIES:
For the period 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 Advisor) $26,334 $20,260 $ 6,074
Forum Financial Services, Inc.
(Administrator) 3,292 -- 3,292
Forum Financial Corp.
(Fund Accountant
and Transfer agent) 10,203 -- 10,203
</TABLE>
- - --------------------------------------------------------------------------------
22
<PAGE>
<PAGE>
- - --------------------------------------------------------------------------------
SCHRODER U.S. SMALLER COMPANIES PORTFOLIO
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
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 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 0.60% 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 0.075% 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 the fiscal year ended October 31, 1996.
Forum Financial Corp. ('FFC') performs portfolio accounting for the
Portfolio and is compensated for those services by the Portfolio in the
amount of $36,000 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. FEDERAL INCOME 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, gains and losses 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 gains have been distributed by the Portfolio.
6. FINANCIAL HIGHLIGHTS:
<TABLE>
<S> <C>
Portfolio performance for the period ended October 31, 1996.(b)
Ratio of expenses to average net assets net of fee waivers 0.85%(c)
Ratio of net investment income to average net assets net of fee waivers 0.50%(c)
Ratio of expenses to average net assets excluding fee waivers 1.31%(c)
Ratio of net investment income to average net assets excluding fee waivers 0.04%(c)
Portfolio turnover rate 17.30%
Average brokerage commission per share(a) $0.0562
</TABLE>
- - ------------
(a) Amount represents the average commission per share paid to brokers on the
purchase and sale of portfolio securities.
(b) Commencement of operations was August 15, 1996.
(c) Annualized.
- - --------------------------------------------------------------------------------
23
<PAGE>
<PAGE>
- - --------------------------------------------------------------------------------
SCHRODER U.S. SMALLER COMPANIES PORTFOLIO
- - --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Investors and Trustees of Schroder U.S. Smaller Companies
Portfolio:
We have audited the accompanying statement of assets and liabilities of
the Schroder U.S. Smaller Companies Portfolio (a separate portfolio of
Schroder Capital Funds), including the schedule of investments, as of October
31, 1996, and the related statement of operations, the statement of changes
in net assets and the financial highlights for the period August 15, 1996
(commencement of operations) to October 31, 1996. These financial statements
and financial highlights are the responsibility of the Portfolio's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of 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 Schroder U.S. Smaller Companies Portfolio as of October 31,
1996, the results of its operations, the changes in its net assets and the
financial highlights for the period August 15, 1996 (commencement of
operations) to October 31, 1996, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
December 23, 1996
- - --------------------------------------------------------------------------------
24
<PAGE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
- - --------------------------------------------------------------------------------
<PAGE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
- - --------------------------------------------------------------------------------
<PAGE>
<PAGE>
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
Margaret H. Douglas-Hamilton
Secretary
Thomas G. Sheehan
Assistant Treasurer
Assistant Secretary
David I. Goldstein
Assistant Treasurer
Assistant Secretary
Gerardo Machado
Assistant Secretary
Barbara Gottlieb
Assistant Secretary
<PAGE>
<PAGE>
INVESTMENT ADVISER
Schroder Capital Management International Inc.
787 Seventh Avenue
New York, New York 10019
ADMINISTRATOR & DISTRIBUTOR
Schroder Fund Advisors Inc.
787 Seventh Avenue
New York, New York 10019
CUSTODIAN
The Chase Manhattan Bank, N.A.
Chase MetroTech Center
Brooklyn, New York 11245
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 U.S. Smaller Companies Fund. Its use
in connection with any offering of the Fund's shares is
authorized only in case of a concurrent or prior deliv-
ery of the Fund's current prospectus.
[Logo]
Schroder
U.S. Smaller
Companies
Fund
ANNUAL REPORT
October 31, 1996
Schroder Capital Funds
(Delaware)
