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Schroder International Smaller Companies Fund
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Two Portland Square, Portland, Maine 04101
General Information (207) 879-6200
Account Information (800) 344-8332
Fund Literature (800) 290-9826
Fax (207) 879-6050
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation through investment in securities
markets outside the United States. It is intended for long-term investors
seeking international diversification and willing to accept the risks associated
with investments in smaller companies of foreign markets. Securities are
selected on the basis of potential for capital appreciation without regard for
current income and, at the time of purchase, have market capitalizations of $1.5
billion or less at the time of investment. The Fund currently seeks to achieve
its investment objective by investing all of its investable assets in Schroder
International Smaller Companies Portfolio (the 'Portfolio'), a series of a
registered open-end investment company with substantially the same investment
objective and policies as the Fund.
The enclosed 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 20
countries worldwide. At the end of the last calendar quarter, September 30,
1997, the Schroder Group had over $175 billion in assets under management. At
the same date, the Investment Adviser, together with its U.K. affiliate,
Schroder Capital Management International Ltd., had over $28 billion under
management.
December 19, 1997
Dear Shareholder:
The environment over the fiscal year ended October 31, 1997 was not an easy
one for international smaller companies, despite the continuing overall equity
bull market. The Fund's return from inception on November 4, 1996 to the end of
the fiscal year on October 31, 1997, was -7.73%. The unmanaged Salomon Brothers
Extended Market Index(Registered), EPAC region ('EMI EPAC') against which the
Fund is measured, fell by -4.57% for the same period. Over the six months ended
October 31, 1997, the Fund returned -1.39% versus the Salomon EMI EPAC -0.79%.
The fiscal year was characterized by low inflation, an improving outlook
for G7 economies excluding Japan, a strong dollar, and a loose monetary
environment. Corporate cashflow was strong with focus on globalization,
consolidation and restructuring as the low inflation environment whittled away
at companies' pricing power. Small companies found it hard to shine in this
setting. Economic and earnings growth was more abundant in fiscal 1997 than in
prior years; therefore, small growth companies have seemed less attractive than
before. Smaller companies typically did not participate in the large sector
restructurings of the past twelve months because they tend to operate in niches
where scale arguments have far less force. Currency, a crucial factor in the
performance of large companies in the European bloc, has not benefited smaller
companies in general as they normally have a greater domestic exposure than
their larger counterparts.
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Schroder International Smaller Companies Fund
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Management's decision to overweight Continental Europe and underweight Asia
ex-Japan added value to the Fund's performance. We were able to add value
through stock selection in both the U.K. and Continental Europe. Even the
environment for growth stocks throughout Europe was far from favorable,
particularly for the export focused U.K. sector, as the sterling's strength
posed a persistent problem.
The Fund's overweight position in Japan was the main factor contributing to
underperformance for the period. At the beginning of the fiscal year, management
believed that the economic situation in Japan had stabilized and that valuations
were compellingly attractive. Unfortunately, fiscal tightening and the recent
Asian currency turmoil had a pronounced negative effect on the Japanese economy.
The problems the country faced over the year were difficult to foresee twelve
months ago and although the economic environment remains uncertain, valuations
continue to look attractive with stocks now selling at fifteen times normalized
earnings through March 1999.
Thank you for your continued support and interest in the Schroder
International Smaller Companies Fund.
Sincerely,
/s/ Mark J. Smith
Mark J. Smith
President
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2
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Schroder International Smaller Companies Fund
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MANAGEMENT DISCUSSION AND ANALYSIS (As of October 31, 1997)
Q: Earlier in the year the Fund was overweight in Hong Kong and Japan relative
to its benchmark, the Salomon Brothers EMI EPAC. How did the Fund position
itself over the past six months in these regions?
A: The Fund reduced its weighting in Hong Kong and is now underweight versus its
benchmark. Although management does not believe that Hong Kong's currency peg to
the U.S. dollar will break, we do think that the competitive devaluations in the
region may affect small manufacturers. We also expect that small property
companies will feel the effects of the correction in the physical property
market. Management has maintained the overweight position in Japan in the belief
that valuations are too attractive to warrant a deep reduction in exposure.
Q: Small capitalization stock returns were modest in the U.K. for the six months
ended April 30, 1997 due to the anticipation of rising interest rates and the
sterling's strength. Was there an improvement in small capitalization stock
returns over the past six months?
A: Yes, there was an improvement in the performance of U.K. small stocks in the
past six months. This was partially due to a slowdown in the sterling's rise and
strong domestic economic growth. Performance in October was particularly strong
with a return of 6% for the Fund's stocks despite extreme stock market
volatility.
Q: Looking ahead six months, what is the Fund's investment strategy?
A: Fund management expects a more favorable environment for smaller
capitalization stocks over the next six months. In particular, we believe that
concerns over valuation and a general lack of pricing flexibility will focus
investor's attention on stable growth companies, such as those in the portfolio.
Given the market environment, management plans to continue favoring Europe,
adding to the U.K. where appropriate, and shifting out of cyclical European
markets such as Germany and the Netherlands into those with a greater domestic
focus including France, Italy, and Sweden.
The views expressed in this report were those of the Fund's portfolio
managers as of October 31, 1997, and may not reflect the views of the portfolio
managers on the date this report is first published or any time thereafter.
These views are intended to assist shareholders of the Fund in understanding
their investment in the Fund and do not constitute investment advice; investors
should consult their own investment professionals as to their individual
investment programs.
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3
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Schroder International Smaller Companies Fund
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INVESTMENT ADVISER'S REPORT - COMPARISON OF CHANGE IN VALUE OF $10,000
INVESTMENT
The following information compares a change in value of a $10,000 investment in
the Fund with the performance of the Salomon Brothers Extended Market Index,
EPAC region (the 'EMI EPAC'). The EMI EPAC is the portion of the Salomon
Brothers Broad Market Index related to companies with small index capitalization
in approximately 22 European and Pacific Basin countries. The EMI EPAC
represents the smallest companies in each country based on total market capital
having in the aggregate 20% of the cumulative available market capital in such
country. The index excludes the effect of any expenses, which have been deducted
from the Fund's return. 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. The Schroder International Smaller
Companies Fund's average annual return from inception to the calendar quarter
ended September 30, 1997 was -4.76%. Past performance cannot predict nor
guarantee future results.
[LINE GRAPH]
Schroder International Smaller Companies Fund vs Salomon Brothers EMI EPAC
Investment Value on 10/31/97
- ----------------------------
Schroder International Smaller Companies Fund $9,227
Salomon Brothers EMI EPAC $9,543
Average Annual Total Return on 10/31/97
- --------------------------------------- 1 Year
------
Schroder International Smaller Companies Fund -7.73%(a)
Salomon Brothers EMI EPAC -4.57%
Schroder International Salomon Brothers
Date Smaller Companies Fund EPAC EMI
---- ---------------------- ----------------
11/04/96 $10,000.00 $10,000.00
11/30/96 9,970.00 10,147.00
12/31/96 9,917.78 9,962.00
01/31/97 9,527.47 9,697.00
02/28/97 9,677.59 9,875.00
03/31/97 9,637.56 9,765.00
04/30/97 9,357.34 9,619.00
05/31/97 9,997.84 10,226.00
06/30/97 10,288.07 10,469.00
07/31/97 9,947.80 10,265.00
08/31/97 9,477.43 9,804.00
09/31/97 9,567.50 9,932.00
10/31/97 9,227.24 9,543.00
(a) For the period November 4, 1996 (commencement of operations)
through October 31, 1997.
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4
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Schroder International Smaller Companies Fund
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PORTFOLIO CHARACTERISTICS AS OF OCTOBER 31, 1997 (UNAUDITED)
COUNTRY WEIGHTINGS
SALOMON
BROTHERS
COUNTRY % OF NET ASSETS EMI EPAC
- ----------------------------------------------------------
Japan 28.1% 23.3%
United Kingdom 20.8% 28.4%
France 11.0% 5.9%
Germany 10.6% 7.5%
Switzerland 7.6% 8.2%
Netherlands 6.3% 5.6%
Italy 4.0% 2.8%
Hong Kong 2.9% 3.3%
Finland 1.5% 1.0%
Denmark 1.4% 0.8%
Sweden 1.2% 3.1%
Singapore 0.7% 0.6%
Malaysia 0.6% 0.9%
Cash and Other Net Assets 3.3% 0.0%
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Total 100.0%
---------------
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INVESTMENT BY INDUSTRY
INDUSTRY % OF NET ASSETS
- ----------------------------------------------------------
Services 21.96%
Capital Equipment 17.62%
Consumer Durables 13.59%
Materials 10.91%
Retail 9.01%
Finance 8.16%
Manufacturing 5.42%
Consumer Non-Durables 4.76%
Machinery 4.37%
Multi-Industry 0.93%
Cash and Other Net Assets 3.27%
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Total 100.0%
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TOP TEN HOLDINGS
SECURITY % OF NET ASSETS
- ----------------------------------------------------------
Lapeyre SA (Fr) 1.89%
Whatman plc (U.K.) 1.79%
Hugo Boss AG (Ger) 1.67%
Gewiss SpA (It) 1.66%
Sto AG Pfd. (Ger) 1.65%
Safra Republic Holdings SA (Swtz) 1.63%
Devro plc (U.K.) 1.60%
Bespak plc (U.K.) 1.58%
Volker Stevin N.V. (Net) 1.51%
Taylor Nelson AGB plc (U.K.) 1.51%
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Total 16.49%
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5
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Schroder International Smaller Companies Fund
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STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments (Notes 1 and 2):
Investment in Schroder International Smaller Companies
Portfolio (the 'Portfolio') $ 6,825,551
Receivable from administrator (Note 4) 34,442
Organization costs, net of amortization (Note 2) 12,088
-----------
Total Assets 6,872,081
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LIABILITIES:
Payable to subadministrator (Note 3) 451
Accrued expenses and other liabilities 35,546
-----------
Total Liabilities 35,997
-----------
Net Assets $ 6,836,084
-----------
-----------
COMPONENTS OF NET ASSETS:
Paid-in capital $ 7,402,031
Undistributed net investment income (loss) 9,567
Accumulated net realized gain (loss) 377,721
Net unrealized appreciation (depreciation) on investments (953,235)
-----------
Net Assets $ 6,836,084
-----------
-----------
SHARES OF BENEFICIAL INTEREST 741,676
NET ASSET VALUE OFFERING AND REDEMPTION PRICE PER SHARE
(NET ASSETS DIVIDED BY SHARES OF BENEFICIAL INTEREST) $ 9.22
</TABLE>
The accompanying notes are an integral part of the financial statements.
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6
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Schroder International Smaller Companies Fund
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STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Period
November 4, 1996
(commencement of operations)
to October 31, 1997
----------------------------
<S> <C>
NET INVESTMENT INCOME ALLOCATED FROM THE PORTFOLIO:
Dividend income (net of foreign withholding taxes of $13,842) $ 100,427
Interest income 20,623
Net expenses (84,784)
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Net Investment Income Allocated from the
Portfolio 36,266
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EXPENSES:
Administration (Note 3) 7,352
Subadministration (Note 3) 5,009
Transfer agency (Note 3) 12,487
Accounting (Note 3) 11,867
Legal 623
Audit 9,103
Registration 10,118
Reporting 25,580
Trustees 147
Amortization of organization costs (Note 2) 3,022
Miscellaneous 853
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Total Expenses 86,161
Fees waived and expenses reimbursed (Note 4) (64,963)
------------
Net Expenses 21,198
------------
NET INVESTMENT INCOME (LOSS) 15,068
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS ALLOCATED FROM THE PORTFOLIO:
Net realized gain (loss) on investments sold 377,721
Net realized gain (loss) on foreign currency transactions (74)
------------
Net realized gain (loss) on investments and
foreign currency transactions 377,647
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Net change in unrealized appreciation (depreciation) on
investments (953,435)
Net change in unrealized appreciation (depreciation) on foreign
currency transactions 200
------------
Net change in unrealized appreciation
(depreciation) on investments and foreign
currency transactions (953,235)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS ALLOCATED FROM THE PORTFOLIO (575,588)
------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (560,520)
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
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7
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Schroder International Smaller Companies Fund
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STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Period
November 4, 1996
(commencement of operations)
to October 31, 1997
----------------------------
<S> <C>
NET ASSETS, BEGINNING OF PERIOD $ --
-------------
OPERATIONS:
Net investment income (loss) 15,068
Net realized gain (loss) on investments sold 377,647
Net change in unrealized appreciation (depreciation) on investments (953,235)
-------------
Net increase (decrease) in net assets resulting from operations (560,520)
-------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (5,427)
-------------
CAPITAL SHARE TRANSACTIONS:
Sale of shares 7,555,555
Redemption of shares (153,524)
-------------
Net increase (decrease) from capital share transactions 7,402,031
-------------
Net increase (decrease) in net assets 6,836,084
-------------
-------------
NET ASSETS, END OF PERIOD (INCLUDING LINE A) $6,836,084
-------------
-------------
(A) Accumulated undistributed net investment income (loss) $ 9,567
-------------
-------------
SHARE TRANSACTIONS
Sale of shares 757,675
Redemption of shares (15,999)
-------------
Net increase (decrease) in shares 741,676
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
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8
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Schroder International Smaller Companies Fund
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FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a share outstanding throughout the
period:
<TABLE>
<CAPTION>
For the Period
November 4, 1996
through
October 31, 1997(a)
- ---------------------------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period $ 10.00
-------------------
Investment Operations
Net Investment Income (Loss) 0.02(b)
Net Realized and Unrealized Gain (Loss) on Investments (0.79)
-------------------
Total from Investment Operations (0.77)
-------------------
Distributions From
Net Investment Income (0.01)
-------------------
Net Asset Value, End of Period $ 9.22
-------------------
-------------------
Total Return (c) (7.73)%(d)
Ratio/Supplementary Data
Net Assets at End of Period (in thousands) $ 6,836
Ratios to Average Net Assets:
Expenses including reimbursement/waiver of fees 1.50%(b)(e)
Expenses excluding reimbursement/waiver of fees 3.93%(b)(e)
Net investment income (loss) including reimbursement/waiver of fees 0.21%(b)(e)
Average Commission Rate Per Share (f) $ 0.0389
Portfolio Turnover Rate (g) 32.30%
</TABLE>
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(a) The Fund commenced operations on November 4, 1996.
(b) Includes the Fund's proportionate share of income and expenses of the
Portfolio.
(c) Total returns would have been lower had certain expenses not been reduced
during the period shown (See Note 4).
(d) Not annualized.
(e) Annualized.
(f) Amount represents the average commissions per share paid by the Portfolio to
brokers on the purchase and sale of equity securities on which commissions
are charged.
(g) Portfolio turnover rate represents the rate of portfolio activity of the
Portfolio.
The accompanying notes are an integral part of the financial statements.
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9
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Schroder International Smaller Companies Fund
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NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
Schroder Capital Funds (Delaware) (the 'Trust') was organized as a
Maryland corporation on July 30, 1969; reorganized as a series company on
February 29, 1988, as Schroder Capital Funds, Inc.; and reorganized on
January 9, 1996, as a Delaware business trust. The Trust, which is registered
as an open-end, management investment company under the Investment Company
Act of 1940 (the 'Act'), currently has eight investment portfolios. Included
in this report is the Schroder International Smaller Companies Fund (the
'Fund'), a diversified portfolio that commenced operations on November 4,
1996. Under its Trust Instrument, the Trust is authorized to issue an
unlimited number of the Fund's Investor Shares and Advisor Shares of
beneficial interest without par value. As of October 31, 1997, only Investor
Shares had been issued.
MASTER-FEEDER ARRANGEMENT
The Fund seeks to achieve its investment objective by investing all of
its investable assets in a separate diversified portfolio, Schroder
International Smaller Companies Portfolio (the 'Portfolio') of Schroder
Capital Funds ('Schroder Core') that has the same investment objective and
substantially similar investment policies as the Fund. This is commonly
referred to as a master-feeder arrangement. Schroder Core also is registered
as an open-end, management investment company. The Fund may withdraw its
investment from the Portfolio at any time if the Trust's Board of Trustees
determines that it is in the best interest of the Fund and its shareholders
to do so. The Fund accounts for its investment in the Portfolio as a
partnership investment and records daily its share of the Portfolio's income,
expenses and realized and unrealized gain and loss. The Portfolio's financial
statements are included on pages 15 to 25 in this report and should be read
in conjunction with the Fund's financial statements. The Fund owns
substantially all of the interests in the Portfolio and may be deemed under
certain circumstances, for purposes of the Act, to control the Portfolio.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with generally
accepted accounting principles, which require management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of increase and decrease in net assets
from operations during the fiscal period. Actual results could differ from
those estimates.
The following represent significant accounting policies of the Fund:
SECURITY VALUATION
The Trust determines the net asset value per share of the Fund as of
the close of trading on the New York Stock Exchange on each Fund business
day. Valuation of securities held in the Portfolio are discussed in the Notes
to the Financial Statements of the Portfolio.
INVESTMENT INCOME AND EXPENSES
The Trust records daily its pro rata share of the Portfolio's income,
expenses and realized and unrealized gain and loss. In addition, the Fund
accrues its own expenses.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends and capital gain distributions, if any, are distributed to
shareholders at least annually. Distributions are based on amounts calculated
in accordance with applicable federal income tax regulations, which may
differ from generally accepted accounting principles. These differences are
due primarily to differing treatments
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10
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Schroder International Smaller Companies Fund
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
of income and gain on various investment securities held by the Fund, timing
differences and differing characterizations of distributions made by the
Fund.
FEDERAL TAXES
The Fund intends to qualify and continue to qualify each year as a
regulated investment company and distribute all of its taxable income. In
addition, by distributing in each calendar year substantially all of its net
investment income, capital gain and certain other amounts, if any, the Fund
will not be subject to a federal excise tax. Therefore, no federal income or
excise tax provision is required.
EXPENSE ALLOCATION
The Trust accounts separately for the assets and liabilities and
operation of each Fund. Expenses that are directly attributable to more than
one Fund are allocated among the respective Funds.
ORGANIZATIONAL COSTS
Costs incurred by the Fund in connection with its organization and
initial registration are being amortized on a straight line basis over a five
year period.
NOTE 3. INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
The Fund currently invests all of its assets in the Portfolio, which
retains Schroder Capital Management International Inc. ('SCMI') to act as
investment adviser pursuant to an Investment Advisory Agreement. See Notes to
the Financial Statements of the Portfolio.
ADMINISTRATOR AND SUBADMINISTRATOR
Effective November 26, 1996 and February 1, 1997, the Trust, on behalf
of the Fund, entered into Administration and Subadministration Agreements
with Schroder Fund Advisors Inc. ('Schroder Advisors') and Forum
Administrative Services, LLC ('Forum'). From November 26, 1996 through
January 31, 1997, the Fund had a Subadministration Agreement with Forum
Financial Services, Inc.(Registered) ('FFSI') that was identical in all
material terms to the February 1, 1997 Agreement with Forum. For its
services, Schroder Advisors is entitled to receive compensation at an annual
rate, payable monthly, of 0.10% of the average daily net assets of the Fund.
For its services, Forum is entitled to receive compensation at an annual
rate, payable monthly, of 0.075% of the average daily net assets of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
The transfer agent and dividend disbursing agent for the Fund is Forum
Financial Corp.(Registered) ('FFC'). The transfer agent is paid a transfer
agent fee in the amount of $12,000 per year, plus certain other fees and
expenses.
OTHER SERVICE PROVIDERS
FFC is the Fund's fund accountant. For its services to the Fund, FFC is
entitled to receive from the Fund a fee of $12,000 per year.
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11
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Schroder International Smaller Companies Fund
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. WAIVER OF FEES AND REIMBURSEMENT OF EXPENSES
Schroder Advisors voluntarily has waived a portion of its fee and has
assumed certain expenses of the Fund so that the Fund's total expenses,
including indirect expenses borne by the Fund as a result of investing in the
Portfolio, would not exceed 1.50% of the Fund's average daily net assets on
an annual basis. The expense limitation cannot be modified or withdrawn
except by a majority vote of the Trustees of the Trust who are not affiliated
persons (as defined in the Act) of the Trust. Forum and FFC may waive
voluntarily all or a portion of their fees, from time to time. For the period
ended October 31, 1997, Schroder Advisors waived fees and reimbursed expenses
of $7,063 and $57,900, respectively.
NOTE 5. BENEFICIAL INTEREST
For the year ended October 31, 1997, there were two unaffiliated
shareholders owning more than 10% of the Fund's net assets totaling 94.3%.
- ------------------------
SUPPLEMENTAL INFORMATION (UNAUDITED)
A meeting of the Shareholders of the Schroder Capital Funds (Delaware)
was held on December 9, 1997
at the offices of the Trust, 787 Seventh Avenue, New York, New York.
PROXY VOTE
The proxy had one proposal of which the following relate to the fund in
this report.
PROPOSAL 1.
Election of Trustees. (For Shareholders of all Funds)
Each nominee was elected by shareholders. The vote is listed below.
% OF TRUST
FOR VOTED
---------- ----------
Hon. David N. Dinkins..... 14,626,220 42.12%
Mr. Peter S. Knight....... 14,626,220 42.12%
Ms. Sharon L. Haugh....... 14,626,220 42.12%
The Trustees have approved a change in the calculation of fees payable
to the Trustees of the Trust effective November 1, 1997. Fees will be
calculated and payable as follows. Trustees will receive an annual retainer
of $11,000 for their services as Trustees of all open end investment
companies distributed by Schroder Fund Advisors Inc., and $1,250 per meeting
attended in person or $500 per meeting attended by telephone. Members of an
Audit Commitee for one or more of the investment companies will receive an
additional $1,000 per year. Payment of the annual retainer will be allocated
among the various investment companies based on their relative net assets.
Payment of meeting fees will be allocated only among those investment
companies to which the meeting relates.
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12
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Schroder International Smaller Companies Fund
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SUPPLEMENTAL INFORMATION (UNAUDITED) (CONTINUED)
SPECIAL 1997 TAX INFORMATION
The Fund intends to elect to pass through the credit for taxes paid in
foreign countries during its fiscal year ended October 31, 1997. In
accordance with current tax laws, the foreign income and foreign tax per
share (for a share outstanding October 31, 1997) is as follows:
<TABLE>
<CAPTION>
COUNTRY DIVIDENDS FOREIGN TAX COUNTRY DIVIDENDS FOREIGN TAX
--------------- --------- ----------- -------------- --------- -----------
<S> <C> <C> <C> <C> <C>
Denmark $0.0016 $0.0002 Malaysia $0.0020 $0.0006
Finland 0.0026 0.0004 Netherlands 0.0022 0.0003
France 0.0019 0.0080 Singapore 0.0016 0.0002
Germany 0.0149 0.0017 Spain 0.0023 0.0004
Hong Kong 0.0147 0.0000 Sweden 0.0024 0.0004
Italy 0.0029 0.0005 Switzerland 0.0031 0.0006
Japan 0.0223 0.0033 United Kingdom 0.0390 0.0060
--------- -----------
Total $0.1135 $0.0226
--------- -----------
--------- -----------
</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 1997. Accordingly, shareholders will receive more detailed
information along with their form 1099-DIV in January 1998.
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13
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Schroder International Smaller Companies Fund
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Schroder Capital Funds (Delaware) and Shareholders of
Schroder International Smaller Companies Fund:
We have audited the accompanying statement of assets and liabilities of the
Schroder International Smaller Companies Fund (a separately managed portfolio of
Schroder Capital Funds (Delaware)), as of October 31, 1997, and the related
statement of operations, the statement of changes in net assets and the
financial highlights for the period from November 4, 1996 (commencement of
operations) to October 31, 1997. 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 audit.
We conducted our audit 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, 1997 by correspondence with the custodian. 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 audit provides 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 Smaller Companies Fund as of October 31, 1997, the
results of its operations, the changes in its net assets and the financial
highlights for the period from November 4, 1996 (commencement of operations) to
October 31, 1997, in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
December 19, 1997
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14
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Schroder International Smaller Companies Portfolio
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SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1997
STOCKS - 96.7%
SHARES VALUE US$
- ------- ------------
DENMARK - 1.4%
COMMON STOCK
2,000 Carli Gry International AS
Consumer Durables $ 98,927
------------
FINLAND - 1.5%
COMMON STOCK
1,750 KCI Konecranes International
Machinery 66,040
1,850 The Rauma Group
Capital Equipment 34,728
------------
100,768
------------
FRANCE - 11.0%
COMMON STOCK
900 Gascogne SA
Retail 81,932
2,200 Gautier France SA
Consumer Durables 92,571
1,500 Genset SA (a)
Consumer Durables 84,825
2,200 Lapeyre SA
Materials 128,805
500 Manitou B.F. SA
Capital Equipment 64,628
1,500 Regional Airlines SA
Services 70,413
3,000 Servant Soft SA
Services 80,264
2,800 Societe Generale d'Enterprises
SA (a)
Materials 71,897
2,200 Sommer Allibert
Consumer Durables 74,531
------------
749,866
------------
GERMANY - 10.6%
COMMON STOCK
180 Buderus AG
Manufacturing 87,427
600 Jungheinrich AG
Manufacturing 94,121
700 Rhoen - Klinikum AG
Consumer Durables 67,104
PREFERRED STOCK
90 Hugo Boss AG
Consumer Durables 113,990
300 KSB AG Pfd
Capital Equipment 76,691
400 Marschollek Lautenschlaeger und
Partner AG
Finance 91,796
SHARES VALUE US$
- ------- ------------
GERMANY (CONCLUDED)
1,900 Moebel Walther AG
Retail $ 77,272
280 Sto AG Pfd.
Materials 112,736
------------
721,137
------------
HONG KONG - 2.9%
COMMON STOCK
110,000 Chen Hsong Holdings Ltd.
Capital Equipment 42,694
57,200 HKR International Ltd.
Finance 37,741
35,000 Varitronix International Ltd.
Manufacturing 57,960
83,000 YGM Trading Ltd.
Retail 60,133
------------
198,528
------------
ITALY - 4.0%
COMMON STOCK
6,900 Brembo SpA
Consumer Durables 68,790
5,810 Gewiss SpA
Consumer Durables 113,439
4,000 Industrie Natuzzi SpA ADR
Retail 89,500
------------
271,729
------------
JAPAN - 28.1%
COMMON STOCK
5,000 Aichi Toyota Motor Co. Ltd.
Capital Equipment 54,045
14,300 Airport Facilities Co. Ltd.
Services 51,127
8,000 Amada Metrecs Co. Ltd.
Machinery 58,867
5,000 Arcland Sakamoto
Retail 43,651
11,000 Canon Copyer Sales Co.
Capital Equipment 74,998
6,000 Charle Co.
Retail 55,874
200 Chubu - Nippon Broadcast Co.
Ltd.
Services 2,994
14,000 Daidoh Ltd.
Materials 62,277
8,000 Diamond City Co.
Finance 31,928
6,000 Eiden Sakakiya Co. Ltd.
Retail 33,175
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Smaller Companies Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF OCTOBER 31, 1997
SHARES VALUE US$
- ------- ------------
JAPAN (CONTINUED)
3,000 Glory Ltd.
Machinery $ 49,139
11,000 Hitachi Transport System
Services 99,692
12,000 Idec Izumi
Machinery 69,344
4,000 Inaba Denkisangyo Co.
Capital Equipment 44,899
9,000 Inabata & Co.
Consumer Durables 47,069
5,000 Kansai Kosaido Co. Ltd.
Capital Equipment 47,394
5,000 Mandom Corp.
Consumer Non-Durables 46,978
6,000 Maruzen Co. Ltd.
Capital Equipment 21,950
2,000 Meiko Shokai
Capital Equipment 61,528
3,000 Mirai Industry Co. Ltd.
Manufacturing 41,407
1,000 Nagaileben Co. Ltd.
Consumer Durables 28,685
9,000 Nippon Cable System
Capital Equipment 69,219
6,000 Nishio Rent All Co.
Capital Equipment 56,872
16,000 Nissan Fire & Marine Insurance
Finance 65,851
8,000 Sanki Engineering
Capital Equipment 66,517
5,000 Santen Pharmaceutical
Consumer Durables 88,551
10,000 Sumitomo Warehouse
Services 49,638
12,000 Tachibana Shokai
Services 81,816
1,000 Tachihi Enterprise Co. Ltd.
Finance 24,279
14,000 Tokyo Soir
Retail 27,123
13,000 Toyo Shutter
Capital Equipment 46,154
3,500 Trusco Nakayama Corp.
Services 56,747
7,000 Tsubaki Nakashima Co. Ltd.
Capital Equipment 48,018
3,000 Tsutsumi Jewelry Co. Ltd.
Capital Equipment 41,906
11,000 Yodogawa Steel Works
Materials 58,626
6 Yoshinoya D & C Co. Ltd.
Retail 63,358
SHARES VALUE US$
- ------- ------------
JAPAN (CONCLUDED)
7,000 Yushiro Chemical Industry
Materials $ 44,816
------------
1,916,512
------------
MALAYSIA - 0.6%
COMMON STOCK
28,000 Nylex (Malaysia) Berhad
Capital Equipment 15,045
26,000 Sime UEP Properties Berhad
Finance 24,060
------------
39,105
------------
NETHERLANDS - 6.3%
COMMON STOCK
6,000 BE Semiconductor Industries N.V.
(a)
Capital Equipment 89,658
6,400 ICT Automatisering N.V. (a)
Services 77,498
3,100 NBM-Amstelland N.V.
Materials 86,577
3,000 Unique International N.V.
Services 74,664
3,400 Volker Stevin N.V.
Materials 103,365
------------
431,762
------------
SINGAPORE - 0.7%
COMMON STOCK
19,000 Clipsal Industries Ltd.
Consumer Durables 49,210
------------
SWEDEN - 1.2%
COMMON STOCK
8,000 Hemkopskedjan AB (a)
Retail 82,841
------------
SWITZERLAND - 7.6%
COMMON STOCK
650 AGIE Charmilles Holding AG (a)
Capital Equipment 55,858
35 Bobst SA
Machinery 54,641
20 Gurit-Heberlein AG
Multi-Industry 63,378
5 Lindt & Spruengli AG
Consumer Non-Durables 100,258
40 SEZ Holding AG
Capital Equipment 67,889
1,000 Safra Republic Holdings SA
Finance 111,000
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Smaller Companies Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONCLUDED)
AS OF OCTOBER 31, 1997
SHARES VALUE US$
- ------- ------------
SWITZERLAND (CONCLUDED)
600 TAG Heuer International SA (a)
Consumer Non-Durables $ 68,748
------------
521,772
------------
UNITED KINGDOM - 20.8%
COMMON STOCK
7,000 AEA Technology plc
Services 54,704
9,900 Bespak plc
Services 107,916
22,800 Blagden Industries plc
Services 65,001
8,000 Candover Investments plc
Finance 96,327
17,500 W. Canning plc
Materials 75,864
17,600 Devro plc
Consumer Non-Durables 109,059
15,300 Helphire Group plc (a)
Services 58,886
1,667 Lanica Trust (a) (b)
Finance 1,406
5,700 Logica plc
Services 80,774
14,300 London Clubs International plc
Services 74,702
9,800 Low & Bonar plc
Services 52,098
8,450 Oriflame International SA (b)
Services 68,020
SHARES VALUE US$
- ------- ------------
UNITED KINGDOM (CONCLUDED)
11,700 PSD Group plc
Services $ 77,797
86,000 Rutland Trust plc
Finance 72,472
10,500 Servisair plc
Services 59,869
85,500 Taylor Nelson AGB plc
Services 102,878
16,000 Ultra Electronics Holdings plc
Manufacturing 89,351
14,300 Watmoughs Holdings plc
Services 51,080
9,100 Whatman plc
Capital Equipment 122,082
------------
1,420,286
------------
Total Investments - 96.7%
(cost $7,555,878) 6,602,443
Other Assets Less
Liabilities - 3.3% 223,108
------------
Total Net Assets - 100.0% $ 6,825,551
------------
------------
- ------------------
(a) Non-income producing security.
(b) Valued pursuant to methodology approved by the Board of Trustees.
ADR - American Depositary Receipts
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Smaller Companies Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments (Note 2):
Investments at cost $ 7,555,878
Net unrealized appreciation (depreciation) (953,435)
------------
Total Investments at value 6,602,443
Cash 195,768
Receivable from investment adviser (Note 6) 30,753
Receivable for dividends, tax reclaims and interest 21,759
Organization costs, net of amortization (Note 2) 12,088
------------
Total Assets 6,862,811
------------
LIABILITIES:
Payable to administrator (Note 3) 450
Accrued expenses and other liabilities 36,810
------------
Total Liabilities 37,260
------------
Net Assets $ 6,825,551
------------
------------
COMPONENTS OF NET ASSETS:
Investors' capital $ 7,778,786
Net unrealized appreciation (depreciation) on investments (953,235)
------------
Net Assets $ 6,825,551
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Smaller Companies Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Period
November 4, 1996
(commencement of operations)
to October 31, 1997
----------------------------
<S> <C>
INVESTMENT INCOME:
Dividend income (net of foreign withholding taxes of $13,842) $ 100,427
Interest income 20,623
------------
Total Investment Income 121,050
------------
EXPENSES:
Investment advisory (Note 3) 60,033
Administration (Note 3) 10,882
Subadministration (Note 3) 5,009
Transfer agency (Note 3) 11,906
Custody 5,171
Accounting (Note 3) 59,333
Legal 374
Audit 23,900
Pricing 11,037
Trustees 538
Amortization of organization costs (Note 2) 2,770
Miscellaneous 1,056
------------
Total Expenses 192,009
Fees waived and expenses reimbursed (Note 6) (107,225)
------------
Net Expenses 84,784
------------
NET INVESTMENT INCOME (LOSS) 36,266
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) on investments sold 377,721
Net realized gain (loss) on foreign currency transactions (74)
------------
Net realized gain (loss) on investments
and foreign currency transactions 377,647
------------
Net change in unrealized appreciation (depreciation) on
investments (953,435)
Net change in unrealized appreciation (depreciation) on foreign
currency transactions 200
------------
Net change in unrealized appreciation
(depreciation) on investments and
foreign currency transactions (953,235)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS (575,588)
------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (539,322)
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Smaller Companies Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Period
November 4, 1996
(commencement of operations)
to October 31, 1997
----------------------------
<S> <C>
NET ASSETS, BEGINNING OF PERIOD $ --
-------------
OPERATIONS:
Net investment income (loss) 36,266
Net realized gain (loss) on investments sold 377,647
Net change in unrealized appreciation (depreciation) on investments (953,235)
-------------
Net increase (decrease) in net assets resulting from operations (539,322)
-------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST:
Contributions 7,554,417
Withdrawals (189,544)
-------------
Net increase (decrease) in net assets from transactions in investors'
beneficial interest 7,364,873
-------------
Net increase (decrease) in net assets 6,825,551
-------------
NET ASSETS, END OF PERIOD $6,825,551
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Smaller Companies Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Portfolio performance for the period:
<TABLE>
<CAPTION>
For the Period
November 4, 1996
through
October 31, 1997(a)
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Ratio to Average Net Assets:
Expenses including reimbursement/waiver of fees 1.20%(b)
Expenses excluding reimbursement/waiver of fees 2.72%(b)
Net investment income including reimbursement/waiver of fees 0.51%(b)
Average Commission Rate Per Share (c) $ 0.0389
Portfolio Turnover Rate 32.30%
</TABLE>
- ------------------
(a) The Portfolio commenced operations on November 4, 1996.
(b) Annualized.
(c) Amount represents the average commission per share paid to brokers on the
purchase and sale of equity securities on which commissions are charged.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
21
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Smaller Companies Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
Schroder Capital Funds ('Schroder Core') was organized as a Delaware
business trust on September 7, 1995. Schroder Core, which is registered as an
open-end, managment investment company under the Investment Company Act of
1940, currently has six investment portfolios. Included in this report is
Schroder International Smaller Companies Portfolio (the 'Portfolio'), a
diversified portfolio that commenced operations on November 4, 1996. Under
the Trust Instrument, Schroder Core is authorized to issue an unlimited
number of interests without par value. Interests in the Portfolio are sold in
private placement transactions without any sales charges to qualified
investors, including open-end, management investment companies.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with generally
accepted accounting principles, which require management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of increase and decrease in net assets
from operations during the fiscal period. Actual results could differ from
those estimates.
The following represent significant accounting policies of the
Portfolio:
SECURITY VALUATION
Portfolio securities listed on recognized stock exchanges are valued at
the last reported sale price on the exchange on which the securities are
principally traded. Listed securities traded on recognized stock exchanges
where last sale prices are not available are valued at the last sale price on
the proceeding trading day or at closing mid-market prices. Securities traded
in over-the-counter markets are valued at the most recent reported mid-market
price. Short-term investments having a maturity of 60 days or less are valued
at amortized cost, which approximates market value. 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 Schroder
Core's Board of Trustees. Fair valued securities represented approximately
1.05% of total investments at October 31, 1997.
SECURITY TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on the trade date. Dividend
income is recorded on the ex-dividend date except that certain dividends from
foreign securities where the ex-dividend date may have passed are recorded as
soon as the Portfolio is informed of the ex-dividend date. Dividend income is
recorded net of withholding tax. Interest income, including amortization of
discount or premium, is recorded as earned. Identified cost of investments
sold is used to determine realized gain and loss 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: (i) assets and liabilities at the rate of exchange at the end of the
respective period; and (ii) 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 are 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 daily as unrealized gain or loss; realized gain or loss include net
gain or loss on contracts that have terminated by settlement or by the
Portfolio entering into offsetting commitments.
- --------------------------------------------------------------------------------
22
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Smaller Companies Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
EXPENSE ALLOCATION
Schroder Core accounts separately for the assets and liabilities and
operation of each Portfolio. Expenses that are directly attributable to more
than one Portfolio are allocated among the respective Portfolios.
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.
NOTE 3. INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
Schroder Capital Management International Inc. ('SCMI') is the
investment adviser to the Portfolio. Pursuant to an Investment Advisory
Agreement, SCMI is entitled to receive an annual fee, payable monthly, of
0.85% of the average daily net assets of the Portfolio.
ADMINISTRATOR AND SUBADMINISTRATOR
Effective November 26, 1996 and February 1, 1997, Schroder Core, on
behalf of Portfolio, entered into Administration and Subadministration
Agreements with Schroder Fund Advisors Inc. ('Schroder Advisors') and Forum
Administrative Services, LLC ('Forum'). From November 26, 1996 through
January 31, 1997, the Portfolio had a Subadministration Agreement with Forum
Financial Services, Inc. ('FFSI') that was identical in all material terms to
the February 1, 1997 Agreement with Forum. For its services, Schroder
Advisors is entitled to receive compensation at an annual rate, payable
monthly, of 0.15% of the average daily net assets of the Portfolio. For its
services, Forum is entitled to receive compensation at an annual rate,
payable monthly, of 0.075% of the average daily net assets of the Portfolio.
TRANSFER AGENT
Forum Financial Corp.(Registered) ('FFC') serves as the Portfolio's
transfer agent and is entitled to compensation for those services from
Schroder Core with respect to the Portfolio in the amount of $12,000 per year
plus certain other fees and expenses.
OTHER SERVICE PROVIDERS
FFC also performs portfolio accounting for the Portfolio and is
entitled to compensation for those services in the amount of $60,000 per
year, plus certain amounts based upon the number and types of portfolio
transactions.
NOTE 4. PURCHASES AND SALES OF SECURITIES
The cost of securities purchased and the proceeds from sales of
securities (excluding short-term securities) for the year ended October 31,
1997 aggregated $9,392,808 and $2,214,651, respectively.
For federal income tax purposes, the tax basis of investment securities
owned as of October 31, 1997 was $7,555,878 and the net unrealized
depreciation of investment securities was $953,435. The aggregate gross
unrealized appreciation for all securities in which there was an excess of
market value over tax cost was $481,076, and the aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost over
market value was $1,434,511.
- --------------------------------------------------------------------------------
23
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Smaller Companies Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
NOTE 5. FEDERAL 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.
NOTE 6. WAIVER OF FEES AND REIMBURSEMENT OF EXPENSES
SCMI voluntarily has waived a portion of its advisory fees and has
assumed certain expenses of the Portfolio so that its total expenses would
not exceed 1.20% of the Portfolio's average daily net assets. Schroder
Advisors, SCMI, Forum and FFC may waive voluntarily all or a portion of their
fees from time to time. For the period ended October 31, 1997, fees waived
and expenses reimbursed were as follows:
<TABLE>
<CAPTION>
WAIVED REIMBURSED
------- ----------
<S> <C> <C>
SCMI $60,033 $ 36,598
Schroder Advisors 10,594 --
</TABLE>
NOTE 7. CONCENTRATION OF RISK
The Portfolio has a relatively large concentration of portfolio
securities invested in companies domiciled in Japan and the United Kingdom.
The Portfolio may be more susceptible to political, social and economic
events adversely affecting Japanese and United Kingdom companies than
portfolios not so concentrated.
- --------------------------------------------------------------------------------
24
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Smaller Companies Portfolio
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Schroder Capital Funds and Investors of Schroder
International Smaller Companies Portfolio:
We have audited the accompanying statement of assets and liabilities of the
Schroder International Smaller Companies Portfolio (a separate portfolio of
Schroder Capital Funds), including the schedule of investments, as of October
31, 1997, and the related statement of operations, the statement of changes in
net assets and the financial highlights for the period from November 4, 1996
(commencement of operations) to October 31, 1997. 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 audit.
We conducted our audit 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, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides 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 Smaller Companies Portfolio as of October 31, 1997, the
results of its operations, the changes in its net assets and the financial
highlights for the period from November 4, 1996 (commencement of operations) to
October 31, 1997, in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
December 19, 1997
- --------------------------------------------------------------------------------
25
<PAGE>
TRUSTEES
Hermann C. Schwab
Peter E. Guernsey
John I. Howell
Clarence F. Michalis
Mark J. Smith
OFFICERS
Hermann C. Schwab
Chairman of the Board
Mark J. Smith
President
Mark Astley
Vice President
Robert G. Davy
Vice President
Margaret H. Douglas-Hamilton
Vice President
Richard Foulkes
Vice President
John Y. Keffer
Vice President
Jane Lucas
Vice President
Catherine A. Mazza
Vice President
Michael Perelstein
Vice President
Fariba Talebi
Vice President
John A. Troiano
Vice President
Ira L. Unschuld
Vice President
Alexandra Poe
Vice President
Secretary
Thomas G. Sheehan
Assistant Treasurer
Assistant Secretary
Catherine S. Wooledge
Assistant Treasurer
Assistant Secretary
Barbara Gottlieb
Assistant Secretary
Mary Kunkemueller
Assistant Secretary
Gerardo Machado
Assistant Secretary
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<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
Global Custody Division
125 London Wall
London EC2Y 5AJ, United Kingdom
TRANSFER AND DIVIDEND
DISBURSING AGENT
Forum Financial Corp.
Two Portland Square
Portland, Maine 04101
COUNSEL
Ropes & Gray
One International Place
Boston, Massachusetts 02110
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 Smaller Companies Fund. Its use in connection with any offering of
the Fund's shares is authorized only in case of a concurrent or prior delivery
of the Fund's current prospectus.
ISCANN1097
[logo]
Schroder
International
Smaller Companies
Fund
ANNUAL REPORT
October 31, 1997
Schroder Capital Funds (Delaware)
