[Logo] SCHRODERS
Schroder
Emerging Markets Fund
Institutional Portfolio
ANNUAL REPORT
October 31, 1997
Schroder Capital Funds
(Delaware)
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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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 to achieve long-term capital appreciation through direct or
indirect investment in equity and debt securities of issuers domiciled or doing
business in emerging markets countries in regions such as Asia, Latin America,
Eastern and Southern Europe and Africa. It is designed for investors who seek
the aggressive growth potential of emerging world markets and are willing to
bear the special risks of investing in these markets. Securities are selected on
the basis of potential for capital appreciation without regard for current
income. The Fund currently seeks to achieve its investment objective by
investing all of its investable assets in Schroder Emerging Markets Fund
Institutional Portfolio (the "Portfolio"), a series of a registered open-end
investment company that has substantially the same investment objective and
policies as 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 20
countries worldwide including 11 offices in emerging markets. The Schroder Group
has been managing international investment portfolios since the early years of
this century. At the end of the last calendar quarter, September 30, 1997, the
Schroder Group had over $175 billion in assets under management. At that same
date, the Investment Adviser, together with its U.K. affiliate, Schroder Capital
Management International Ltd., had over $28 billion under management, of which
approximately $7.6 billion was invested in dedicated emerging markets mandates.
December 19, 1997
Dear Shareholder:
The Schroder Emerging Markets Fund Institutional Portfolio's total return for
Investor Shares for the six month period and fiscal year ended October 31, 1997
was -13.23% and 0.27%, respectively (total return does not reflect the deduction
of the purchase and redemption fee of 0.50%, respectively). The Fund
underperformed the unmanaged Morgan Stanley Capital International Emerging
Markets Free (excluding Malaysia) Index ("Index") which returned -11.67% for the
six month period and 1.02% for the fiscal year. Stock selection was the main
cause of underperformance over the last year, but the return for the period
exceeded the Index because of strategic country weighting decisions.
Stock selection in South Africa, Mexico and China were strong performers while
holdings in Taiwan, Indonesia, Chile and Israel negatively impacted performance.
At the country level, the decisions to overweight China (+ 22.3% in the fiscal
year) and India (+18.1%) and to be underweight Thailand (- 67.7%) and South
Africa (-5.7%) benefited the Fund. An overweighting in the Philippines (-54.5%)
and a general underweighting in Latin America (+23.9%) diminished returns.
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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Looking ahead, management expects to see continued volatility over the coming
months, especially in Asia. An important indicator for Asia will be the onset of
currency stability, which should lead to a reduction in interest rates and allow
some form of stability to return to the financial systems of these countries. We
anticipate an improvement in exports and current account balances generally in
1998, following the recent currency declines. After the recent dramatic declines
in many of the Asian markets, the correction in Latin America, improving
fundamentals in Europe and Africa, we believe that valuations in many of the
emerging markets are attractive and that favorable longer term prospects will
start to reassert themselves. Management believes the long-term fundamentals for
emerging markets remain intact, it is now a question of how long before they are
realized.
Thank you for your continued support and interest in the Schroder Emerging
Markets Fund Insitutional Portfolio.
Sincerely,
/s/ M. J. Smith
Mark J. Smith
President
2
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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MANAGEMENT DISCUSSION AND ANALYSIS (As of October 31, 1997)
Q: What is the Fund's investment approach for choosing companies in emerging
markets?
A: The Fund's approach is to target companies that offer sustainable growth,
professional management, and a strong domestic market share in their business or
a powerful franchise. The primary attraction of emerging markets is the high
growth rates that they may offer relative to the developed world. Fund
management searches for companies that appear to be in a position to benefit
from rising living standards and increased infrastructure development.
Schroders' extensive network of 53 analysts, located in eleven emerging market
offices around the world, assist Fund management in identifying attractively
priced securities across a broad capitalization range.
Q: Has the Fund's exposure to Asian markets been reduced over the past six
months?
A: Yes, the Fund's exposure to Asian markets was reduced from 39.7% to 30.1% in
the last six months. Compared with the MSCI Emerging Markets Free (ex-Malaysia)
Index, the Fund is now in a neutral position. However, within this overall
neutral position, the Fund remains overweight in India and China and underweight
in Thailand and Taiwan.
Q: How quickly might we see a recovery in the Asian markets?
A: The dramatic falls in many Asian emerging markets are likely to generate
opportunities over the next year. However, the response of governments will be
crucial, with some countries likely to address their problems more quickly than
others. Many of the problems originate from weak financial sectors and over
investment in unproductive assets such as property. Those countries that are
prepared to reduce budget deficits, restructure financial sectors and embrace
IMF restructuring packages should see their economies recover. With currencies
now extremely competitive, following devaluations in many countries, current
account deficits should shrink as imports slow and exports accelerate. This in
turn should lead to currency stability and falling interest rates allowing for a
more conducive environment for equity markets.
Q: What is the Fund's asset composition for the 12-month period ended October
31, 1997?
A: As of October 31, 1997, the Fund was approximately 91.6% invested in equities
and 8.4% in cash and other assets. The largest regional position was Latin
America where the weighting has increased from 30.6% a year ago to 34.8% today.
In contrast, over the fiscal year, the Asian weighting has fallen from 44.2% to
30.1%. Against the MSCI Emerging Markets Free (ex-Malaysia) Index, the Fund's
key positions at fiscal year end are to be underweight Brazil, South East Asia
and South Africa and overweight India, China, and Eastern Europe.
Q: Will we see continued economic growth in Latin American markets?
A: Latin America has enjoyed a strong cyclical upswing in the past couple of
years. The region has ridden on the coattails of a vigorous U.S. economy and
management believes U.S. growth is expected to remain firm in the year ahead.
Latin America is quite dependent, however, on foreign capital inflows.
Deterioration in foreign investors' confidence in the region's currencies could
slow growth there, just as it has done in Asia.
Management scaled back exposure over the summer and fall and are now concerned
that the Asian problems could spread to Latin America. Brazil appears
particularly vulnerable to an attack on its currency, as its trade deficit
worsens.
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.
3
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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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 Morgan Stanley Capital International
("MSCI") Emerging Markets Free ("EMF") Index and MSCI EMF ex-Malaysia Index. The
MSCI EMF Index is a market capitalization index of companies representative of
the market structure of 26 emerging countries in Europe, Latin America, and the
Pacific Basin. The index excludes closed markets and those shares that are not
purchasable by foreigners in otherwise free markets. The MSCI EMF Index
Ex-Malaysia Index is a benchmark used by the Fund's Investment Adviser to
exclude investments in Malaysia, which may be considered a developed market.
Malaysia represented between 7.6% and 16.7% of the MSCI EMF Index during the
period reported. The index is unmanaged and 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 reinvestments of dividends and distributions and reflects
the deduction of the purchase and redemption fee of 0.50%, respectively, imposed
by the Fund. Advisor Shares have higher expenses and, therefore, have lower
performance than Investor Shares. The Schroder Emerging Markets Fund
Institutional Portfolio - Investor Shares average annual return as of the
calendar quarter ending September 30, 1997 for the one year and since inception
periods was 14.57% and 12.13%, respectively. PAST PERFORMANCE CANNOT PREDICT NOR
GUARANTEE FUTURE RESULTS.
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO - INVESTOR SHARES VS.
MSCI EMF INDEX AND MSCI EMF EX-MALAYSIA INDEX
[Graph begins]
<TABLE>
<S> <C> <C> <C> <C> <C>
Mar-95 (a) Apr-95 May-95 Jun-95 Jul-95
Schroder Emerging Markets Fund Institutional Portfolio -Investor Shares $ 9,950 $10,268 $ 10,875 $ 10,905 $ 11,214
MSCI EMF Index $ 10,000 $10,449 $ 11,005 $ 11,038 $ 11,285
MSCI EMF ex-Malaysia Index $ 10,000 $10,570 $ 11,077 $ 11,090 $ 11,339
</TABLE>
<TABLE>
<S><C> <C> <C> <C> <C> <C>
Aug-95 Sep-95 Oct-95 Nov-95 Dec-95
$ 10,885 $ 10,945 $ 10,577 $ 10,368 $ 10,694
$ 11,019 $ 10,967 $ 10,547 $ 10,359 $ 10,819
$ 11,150 $ 11,130 $ 10,740 $ 10,507 $ 10,944
Jan-96 Feb-96 Mar-96 Apr-96 May-96 Jun-96
$ 11,830 $ 11,541 $ 11,551 $ 12,010 $ 12,199 $ 12,070
$ 11,588 $ 11,404 $ 11,493 $ 11,952 $ 11,899 $ 11,973
$ 11,798 $ 11,489 $ 11,446 $ 11,873 $ 11,909 $ 11,989
Jul-96 Aug-96 Sep-96 Oct-96 Nov-96 Dec-96
$ 11,312 $ 11,521 $ 11,571 $ 11,023 $ 11,192 $ 11,542
$ 11,155 $ 11,441 $ 11,540 $ 11,232 $ 11,420 $ 11,472
$ 11,151 $ 11,367 $ 11,445 $ 11,040 $ 11,173 $ 11,211
Jan-97 Feb-97 Mar-97 Apr-97 May-97 Jun-97
$ 12,250 $ 12,729 $ 12,499 $ 12,739 $ 13,238 $ 14,016
$ 12,254 $ 12,779 $ 12,443 $ 12,465 $ 12,822 $ 13,508
$ 12,093 $ 12,609 $ 12,348 $ 12,626 $ 13,003 $ 13,865
Jul-97 Aug-97 Sep-97 Oct-97
$ 14,325 $ 12,799 $ 13,258 $ 10,998
$ 13,710 $ 11,966 $ 12,298 $ 10,280
$ 14,299 $ 12,798 $ 13,280 $ 11,153
</TABLE>
[Graph ends]
<TABLE>
<S> <C>
INVESTMENT VALUE ON 10/31/97
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Schroder Emerging Markets Fund Institutional Portfolio - Investor Shares $ 10,998
Schroder Emerging Markets Fund Institutional Portfolio - Advisor Shares $ 9,760
MSCI EMF Index $ 10,280
MSCI EMF ex-Malaysia Index $ 11,153
</TABLE>
<TABLE>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURN ON 10/31/97 1 YEAR SINCE INCEPTION
- --------------------------------------- ------ ---------------
Schroder Emerging Markets Fund Institutional Portfolio - Investor Shares (0.77)% 3.74%(a)
Schroder Emerging Markets Fund Institutional Portfolio - Advisor Shares N/A (2.54)%(b)
MSCI EMF Index (8.48)% 1.07%
MSCI EMF ex-Malaysia Index 1.02% 4.31%
</TABLE>
(a) Inception date for Investor Shares is March 31, 1995.
(b) Inception date for Advisor Shares is November 21, 1996.
4
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO
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PORTFOLIO CHARACTERISTICS AS OF OCTOBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C> <S> <C>
COUNTRY WEIGHTINGS INVESTMENT BY INDUSTRY
MSCI EMF
(ex-Malaysia)
Country % of Net Assets Index Industry % of Net Assets
- ----------------------------------------------------- ----------------------------------------------
Brazil 12.5% 16.0% Energy 18.70%
Mexico 12.3% 12.0% Telecommunications 13.66%
India 9.8% 7.7% Services 13.29%
South Africa 7.2% 12.6% Capital Equipment 11.94%
China/Hong Kong 5.4% 0.7% Materials 11.37%
Chile 4.4% 4.8% Finance 10.49%
Korea, Republic of 4.2% 3.2% Multi-Industry 6.33%
Argentina 4.2% 4.4% Consumer Goods 4.99%
Taiwan 4.1% 9.7% Retail 0.98%
Portugal 3.6% 4.0% Cash and Other Net Assets 8.25%
Philippines 2.9% 1.7% -------
Total 100.00%
Indonesia 2.8% 3.9% -------
Israel 2.6% 2.9%
Turkey 2.6% 3.0%
Hungary 2.3% 0.8%
Poland 2.2% 0.7% TOP TEN HOLDINGS
Venezuela 1.5% 1.8%
Greece 1.1% 3.0% <S> <C>
Egypt 1.0% 0.0% Security % of Net Assets
Thailand 0.9% 2.4% ---------------------------------------------------
Migros Turk (Tky) 2.00%
Czech Republic 0.8% 1.2% Telecomunicacoes Brasilerias SA
Pakistan 0.7% 1.0% Telebras (Bz) 1.99%
Russia 0.7% 0.0% Telefonos de Mexico SA
Botswana 0.5% 0.0% ADR (Mex) 1.87%
Mauritius 0.5% 0.0% Petrol Brasileiro-Petrobras (Bz) 1.78%
Peru 0.3% 1.3% Fomento Economico Mexicano
Croatia 0.3% 0.0% SA de CV(Mex) 1.69%
Slovak Republic 0.1% 0.0% Electricidad de Caracas (Vz) 1.48%
Zimbabwe 0.1% 0.0% Mahanagar Telephone
Cash and Other Net Assets 8.4% Nigam Ltd.(Ind) 1.41%
------
Total 100.0% Centrias Electricas Brasileiras SA
------ Electrobras (Bz) 1.40%
YPF Sociedad Anonima ADR (Arg) 1.33%
Cifra SA de CV (Mex) 1.33%
------
Total 16.28%
------
</TABLE>
5
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (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 Emerging Markets Fund Institutional
Portfolio (the "Portfolio") $ 204,415,739
Receivable for Fund shares sold 348,250
Other receivables 41,689
Organization cost, net of amortization (Note 2) 14,533
--------------------
Total Assets 204,820,211
--------------------
LIABILITIES:
Payable to administrator (Note 3) 67,856
Payable to subadministrator (Note 3) 9,817
Accrued expenses and other liabilities 26,776
--------------------
Total Liabilities 104,449
--------------------
Net Assets $ 204,715,762
====================
COMPONENTS OF NET ASSETS:
Paid-in capital $ 213,131,683
Undistributed net investment income (loss) 431,813
Accumulated net realized gain (loss) (10,764,936)
Net unrealized appreciation (depreciation) on investments 1,917,202
--------------------
Net Assets $ 204,715,762
====================
NET ASSETS BY CLASS
Investor Class $ 179,435,507
Advisor Class 25,280,255
--------------------
Net Assets $ 204,715,762
====================
SHARES OF BENEFICIAL INTEREST
Investor Class 16,199,944
Advisor Class 2,276,150
NET ASSET VALUE OFFERING AND REDEMPTION PRICE PER SHARE
(NET ASSETS / SHARES OF BENEFICIAL INTEREST)
Investor Class $ 11.08
Advisor Class $ 11.11
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (FUND)
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<TABLE>
STATEMENT OF OPERATIONS
<S> <C>
FOR THE
YEAR ENDED
OCTOBER 31, 1997
--------------------
NET INVESTMENT INCOME ALLOCATED FROM THE PORTFOLIO (PORTFOLIO):
Dividend income (net of foreign withholding taxes of $301,502) $ 3,811,777
Interest income 447,639
Net expenses (2,756,426)
--------------------
Net Investment Income Allocated from the Portfolio 1,502,990
--------------------
EXPENSES:
Administration (Note 3) 117,170
Subadministration (Note 3) 105,382
Transfer agency (Note 3) 28,386
Shareholder services - Advisor Shares (Note 3) 43,522
Accounting (Note 3) 12,000
Legal 17,413
Audit 10,609
Registration 35,482
Reporting 46,897
Trustees 4,824
Amortization of organization costs (Note 2) 6,000
Miscellaneous 18,857
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Total Expenses 446,542
Fees waived and expenses reimbursed (Note 4) (28,384)
--------------------
Net Expenses 418,158
--------------------
NET INVESTMENT INCOME (LOSS) 1,084,832
--------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS ALLOCATED FROM THE PORTFOLIO:
Net realized gain (loss) on investments sold (A) (4,471,715)
Net realized gain (loss) on foreign currency transactions (220,354)
--------------------
Net realized gain (loss) on investments and foreign
currency transactions (4,692,069)
--------------------
Net change in unrealized appreciation (depreciation) on investments (B) 292,954
Net change in unrealized appreciation (depreciation) on foreign
currency transactions (50,106)
--------------------
Net change in unrealized appreciation (depreciation) on
investments and foreign currency transactions 242,848
--------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS ALLOCATED FROM THE PORTFOLIO (4,449,221)
--------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (3,364,389)
====================
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</TABLE>
(A) Net of Indian capital gain tax of $430,959.
(B) Net of deferred Indian capital gain tax of $210,969.
The accompanying notes are an integral part of the financial statements.
7
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (FUND)
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STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<S> <C> <C>
For the Year Ended October 31,
--------------------------------------------
1997 1996
-------------------- --------------------
NET ASSETS, BEGINNING OF PERIOD $ 167,570,050 $ 18,423,256
-------------------- --------------------
OPERATIONS:
Net investment income (loss) 1,084,832 425,357
Net realized gain (loss) on investments sold (4,692,069) (6,759,042)
Net change in unrealized appreciation (depreciation) on investments 242,848 604,159
-------------------- --------------------
Net increase (decrease) in net assets resulting from operations (3,364,389) (5,729,526)
-------------------- --------------------
DISTRIBUTION TO SHAREHOLDERS FROM:
Net investment income - Investor Shares (150,511) (102,592)
Net investment income - Advisor Shares (10,884) -
-------------------- --------------------
Total distributions to shareholders (161,395) (102,592)
-------------------- --------------------
CAPITAL SHARE TRANSACTIONS: (NOTE 5)
Sale of shares - Investor Class * 38,703,940 156,323,036
Sale of shares - Advisor Class * 28,015,324 -
Reinvestment of distributions - Investor Class 87,690 33,428
Reinvestment of distributions - Advisor Class 10,884 -
Redemption of shares - Investor Class * (26,043,240) (1,377,552)
Redemption of shares - Advisor Class * (103,102) -
-------------------- --------------------
Net increase (decrease) from capital share transactions 40,671,496 154,978,912
-------------------- --------------------
Net increase (decrease) in net assets 37,145,712 149,146,794
-------------------- --------------------
NET ASSETS, END OF PERIOD (INCLUDING LINE A) $ 204,715,762 $ 167,570,050
==================== ====================
(A) Accumulated undistributed net investment income (loss) $ 431,813 $ 152,823
==================== ====================
SHARE TRANSACTIONS
Sale of shares - Investor Class 3,082,070 13,540,103
Sale of shares - Advisor Class 2,284,352 -
Reinvestment of distributions in shares - Investor Class 7,929 3,127
Reinvestment of distributions in shares - Advisor Class 979 -
Redemption of shares - Investor Class (2,043,429) (123,180)
Redemption of shares - Advisor Class (9,181) -
-------------------- --------------------
Net increase (decrease) in shares 3,322,720 13,420,050
==================== ====================
- ------------------------------
</TABLE>
(*) Includes purchase and redemption fees (Note 5).
The accompanying notes are an integral part of the financial statements.
8
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (FUND)
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FINANCIAL HIGHLIGHTS - INVESTOR SHARES
Selected per share data and ratios for an Investor share outstanding throughout
each period:
<TABLE>
<S> <C> <C> <C>
For the Year Ended October 31,
---------------------------------------------
1997 1996(a) 1995 (b)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $11.06 $10.63 $10.00
------------ ------------ ------------
Investment Operations
Net Investment Income (Loss) 0.06(c) 0.02(c) 0.02
Net Realized and Unrealized Gain (Loss) on Investments (0.03) 0.43(d) 0.61
------------ ------------ ------------
Total from Investment Operations 0.03 0.45 0.63
------------ ------------ ------------
Distributions From
Net Investment Income (0.01) (0.02) -
------------ ------------ ------------
Total Distributions (0.01) (0.02) -
------------ ------------ ------------
Net Asset Value, End of Period $11.08 $11.06 $10.63
============ ============ ============
Total Return (e)(f) 0.27% 4.22% 6.30%
Ratio/Supplementary Data
Net Assets at End of Period (in thousands) $179,436 $167,570 $18,423
Ratios to Average Net Assets:
Expenses including reimbursement/waiver of fees 1.41%(c) 1.60%(c) 1.58(g)
Expenses excluding reimbursement/waiver of fees 1.62%(c) 1.71%(c) 2.45%(g)
Net investment income (loss) including reimbursement/waiver of fees 0.51%(c) 0.36%(c) 0.46%(g)
Average Commission Rate Per Share (h) $0.0020 $0.0008 N/A
Portfolio Turnover Rate (i) 43.13% 102.70% 44.10%
</TABLE>
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(a) On May 17, 1996, the Fund began offering two classes of shares, Investor
Shares and Advisor Shares, and all then outstanding shares of the Fund were
designated to Investor Shares.
(b) The Fund commenced operations on March 31, 1995 and converted to Core and
Gateway(R) on November 1, 1995.
(c) Includes the Fund's proportionate share of income and expenses of the
Portfolio.
(d) The amount shown for a share outstanding does not correspond with the
aggregate net gain (loss) on investments for the period ended due to the
timing of sales and repurchases of the Fund shares in relation to
fluctuating market values of the investments of the Fund.
(e) Total return calculation does not include the purchase or redemption fee of
0.50%, respectively.
(f) Total return would have been lower had certain expenses not been reduced
during the periods shown. (See Note 4)
(g) Annualized.
(h) For the fiscal year beginning on or after September 1, 1995, the Fund is
required to disclose average commission per share paid by the Portfolio to
brokers on the purchase and sale of Portfolio's equity securities on which
commissions are charged.
(i) Portfolio turnover represents the rate of portfolio activity. The rate
after October 31, 1995 represents the portfolio turnover rate of the
Portfolio.er rate of the Portfolio.
The accompanying notes are an integral part of the financial statements.
9
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (FUND)
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FINANCIAL HIGHLIGHTS - ADVISOR SHARES
Selected per share data and ratios for an Advisor share outstanding throughout
the period:
<TABLE>
<S> <C>
For the
Period Ended
October 31,
- -----------------------------------------------------------------------------------------------------------------------
1997 (a)
-------------
Net Asset Value, Beginning of Period $11.28
-------------
Investment Operations
Net Investment Income (Loss) 0.03(b)
Net Realized and Unrealized Gain (Loss) on Investments (0.19)
-------------
Total from Investment Operations (0.16)
-------------
Distributions From
Net Investment Income (0.01)
-------------
Total Distributions (0.01)
-------------
Net Asset Value, End of Period $11.11
=============
Total Return (c)(d)(e) (1.42)%
Ratio/Supplementary Data
Net Assets at End of Period (in thousands) $25,280
Ratios to Average Net Assets:
Expenses including reimbursement/waiver of fees 1.66%(b) (f)
Expenses excluding reimbursement/waiver of fees 2.03%(b) (f)
Net investment income (loss) including reimbursement/waiver of fees 0.27%(b) (f)
Average Commission Rate Per Share (g) $0.0020
Portfolio Turnover Rate (h) 43.13%
</TABLE>
- ---------------------------------------------------
(a) Advisor Class shares were first issued on November 21, 1996.
(b) Includes the Fund's proportionate share of income and expenses of the
Portfolio.
(c) Total return calculation does not include the purchase or redemption fee of
0.50%, respectively.
(d) Not Annualized.
(e) Total return would have been lower had certain expenses not been reduced
during the period shown. (See Note 4)
(f) Annualized.
(g) Amount represents the average commission per share paid to brokers on the
purchase and sale of Portfolio's equity securities for which commissions
are charged.
(h) Portfolio turnover represents the rate of portfolio activity of the
Portfolio.
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
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SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (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 Emerging Markets Fund Institutional Portfolio (the "Fund"), a
non-diversified portfolio that commenced operations on March 31, 1995. 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, both Investor Shares and Advisor Shares had been
issued.
MASTER-FEEDER ARRANGEMENT - Effective November 1, 1995, the Fund has sought to
achieve its investment objective by investing all of its investable assets in a
separate diversified portfolio, Schroder Emerging Markets Fund Institutional
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 ("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 16 to 35 in
this report and should be read in conjunction with the Fund's financial
statements. The Fund owns approximately 78.90% of interest 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 Portfolios' 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 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.
11
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (FUND)
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
EXPENSE ALLOCATION - The Trust accounts separately for the assets and
liabilities and operation of each Fund. Expenses that are directly attributable
to more than one Fund are allocated among the respective Funds. Expenses that
are directly attributable to a class are allocated to that class.
ORGANIZATIONAL COSTS - Costs incurred by the Fund in connection with its
organization and initial registration are being amortized on a straight line
basis over a five year period.
NOTE 3. INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISERS - 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"), respectively. From
November 26, 1996 through January 31, 1997, the Fund had a Subadministration
Agreement with Forum Financial Services, Inc.(R) ("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 0.05% of average daily net assets of the Fund. For its
services, Forum is entitled to receive compensation at an annual rate, payable
monthly, of 0.05% of average daily net assets of the Fund. Prior to November 26,
1996, Schroder Advisors was entitled to compensation at an annual rate of 0.10%
and was obligated to pay a fee to FFSI.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT - The transfer agent and dividend
disbursing agent for the Fund is Forum Financial Corp.(R) ("FFC"). The transfer
agent is paid a transfer agent fee in the amount of $12,000 per year, plus
certain other fees and expenses.
SHAREHOLDER SERVICE PLAN AND SERVICE ORGANIZATIONS - The Trust has adopted a
Shareholder Service Plan (the "Plan") for the Advisor Share Class under which
Schroder Advisors is authorized to pay service organizations a servicing fee.
Payments under the Plan may be for various types of services. The maximum annual
amount payable under the Plan is 0.25% of the Fund's average net assets
attributable to the Advisor Shares.
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.
NOTE 4. WAIVER OF FEES AND REIMBURSEMENT OF EXPENSES
Schroder Advisors has voluntarily waived a portion of its fee and has assumed
certain expenses of the Fund so that its total expenses, including indirect
expenses borne by the Fund as a result of investing in the Portfolio, would not
exceed 1.45% on Investor Shares and 1.70% on Advisor Shares of the respective
share's average daily net assets. The expense limitations cannot be modified or
withdrawn except by a majority vote of the Trustees of the Trust who are not
affiliated persons (as defined in the Act) of the Trust. SCMI, Forum and FFC may
waive voluntarily all or a portion of their fees, from time to time. For the
year ended October 31, 1997, Schroder Advisors waived fees and reimbursed
expenses of $19,679 and $8,705, respectively. For the year ended October 31,
1996, Schroder Advisors waived fees of $53,602.
12
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (FUND)
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
NOTE 5. PURCHASE AND REDEMPTION FEES
Purchases and redemptions of Fund shares are subjected to a transaction fee of
0.50% of the amount invested and the net asset value redeemed, respectively.
These charges are designed to cover the transaction costs the Portfolio incurs
(either directly or indirectly as a result of Fund's investment in the
Portfolio) as a result of investments or the redemption of Fund shares. These
charges, which are not sales charges, are paid to the Fund, not Schroder
Advisors or any other entity. The purchase and redemption fees are included in
the Statements of Changes in Net Assets shares sold and shared redeemed amounts,
respectively, and are included as part of Paid-in Capital in the Statement of
Assets and Liabilities. The purchase and redemption fee for each class are as
follows:
<TABLE>
<S> <C> <C> <C> <C>
For the Year Ended Investor Shares Advisor Shares
------------------ ----------------------- --------------------------
Purchase Redemption Purchase Redemption
-------- ---------- -------- ----------
1996 $787,563 $ 6,886 $ - $ -
1997 192,175 130,890 140,252 566
</TABLE>
NOTE 6. FEDERAL INCOME TAXES
As of October 31, 1997, the Fund has capital loss carryovers available to offset
future capital gains as follows:
Carryovers expire on October 31, 2003............................. $ 159,533
Carryovers expire on October 31, 2004............................. 6,451,242
Carryovers expire on October 31, 2005............................. 3,251,813
NOTE 7. BENEFICIAL INTEREST
For the year ended October 31, 1997, there were 3 unaffiliated shareholders each
owning more than 10% of the Fund's net assets totaling 59.3%.
13
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (FUND)
- --------------------------------------------------------------------------------
SUPPLEMENTAL INFORMATION (UNAUDITED)
A meeting of the Shareholders of the Schroder Capital Funds (Delaware) was
held on December 9, 1997 at the office of the Trust, 787 Seventh Avenue,
New York, NY.
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 Committee 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.
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>
<S> <C> <C> <C> <C> <C> <C>
Country Dividends Foreign Tax Country Dividends Foreign Tax
------- --------- ----------- ------- --------- -----------
Argentina $0.0128 $0.0000 Mauritius 0.0017 0.0000
Botswana 0.0039 0.0000 Mexico 0.0259 0.0000
Brazil 0.0442 0.0027 Peru 0.0020 0.0000
Chile 0.0113 0.0030 Philippines 0.0028 0.0007
Croatia 0.0010 0.0000 Poland 0.0024 0.0004
Czech Republic 0.0018 0.0003 Portugal 0.0068 0.0011
Greece 0.0012 0.0000 Slovak Republic 0.0002 0.0000
Hong Kong 0.0058 0.0000 South Africa 0.0132 0.0000
Hungary 0.0042 0.0001 Taiwan 0.0116 0.0011
India 0.0047 0.0225 Thailand 0.0053 0.0005
Indonesia 0.0090 0.0013 Turkey 0.0003 0.0000
Israel 0.0030 0.0007 Venezuela 0.0007 0.0000
South Korea 0.0065 0.0011 ------ ------
Total $0.1823 $0.0355
------- -------
</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.
14
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (FUND)
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Schroder Capital Funds (Delaware) and Shareholders of
Schroder Emerging Markets Fund Institutional Portfolio:
We have audited the accompanying statement of assets and liabilities of the
Schroder Emerging Markets Fund Institutional Portfolio (a separately managed
portfolio of Schroder Capital Funds (Delaware)), as of October 31, 1997, 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 the Investor Shares for each of the two years in the
period then ended and for the period March 31, 1995 (commencement of operations)
to October 31, 1995, and the Advisor Shares for the period from November 21,
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 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. Our procedures included
confirmation of securities owned as of October 31, 1997 by correspondence with
the custodian. 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 Emerging Markets Fund Institutional Portfolio as of October 31, 1997,
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 the Investor Shares for each of the two years in the period then
ended and for the period March 31, 1995 (commencement of operations) to October
31, 1995, and the Advisor Shares for the period from November 21, 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
15
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1997
<TABLE>
<S> <S> <C> <C>
STOCKS AND WARRANTS - 91.6%
SHARES VALUE US$
------ ---------
ARGENTINA - 4.2%
COMMON STOCK
59,246 Banco de Galicia y Buenos Aires SA de CV ADR
Finance $ 1,436,139
251,520 CIADEA SA
Capital Equipment 495,791
165,114 Compania Naviera Perez Companc SA
Multi-Industry 1,030,930
252,300 IRSA Inversiones y Representaciones SA
Finance 848,237
259,200 Telecom Argentina Stet - Fran Tel SA
Telecommunications 1,322,713
489,000 Telefonica de Argentina SA
Telecommunications 1,335,771
30,300 Telefonica de Argentina SA ADR
Telecommunications 852,188
107,900 YPF Sociedad Anonima ADR
Energy 3,452,800
------------------
10,774,569
------------------
BOTSWANA - 0.5%
COMMON STOCK
195,000 Sechaba Ord
Services 1,395,616
------------------
BRAZIL - 12.5%
COMMON STOCK
1,850,000 Centrais Eletricas Brasileiras SA - Eletrobras
Energy 780,272
1,927,000 Companhia Cervejaria Brahma
Services 1,221,744
37,000,000 Companhia Energetica de Minas Gerais
Services 1,476,644
16,440,000 Companhia Paulista de Forca e Luz - CPFL
Energy 2,408,217
3,680,000 Light - Servicos de Electricidade SA
Energy 1,218,322
30,383,000 Telecomunicacoes Brasileiras SA - Telebras
Telecommunications 2,742,049
</TABLE>
16
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF OCTOBER 31, 1997
<TABLE>
<S> <C> <C> <C>
SHARES VALUE US$
------ ---------
BRAZIL (CONCLUDED)
PREFERRED STOCK
76,662,800 Banco Brasileiro de Decontos SA
Finance $ 564,298
19,000,000 Banco Nacional SA(a)(b)
Finance 0
6,551,000 Centrais Eletricas Brasileiras SA - Eletrobras
Energy 2,852,137
65,300 Companhia Vale Rio Doce
Finance 1,279,346
1,180,250 IKPC - Industrias Klabin de Papel e Celulose SA
Services 909,945
1,915,000 Itausa Investimentos Itau SA
Multi-Industry 1,302,721
1,558,055 Multibras Eletrodomesticos SA
Capital Equipment 847,921
23,190,000 Petrol Brasileiro - Petrobras
Energy 4,606,450
23,700 Telecomunicacoes Brasileiras SA Telebras ADR
Telecommunications 2,405,550
10,418,070 Telecomunicacoes de Sao Paulo SA - TELESP
Telecommunications 2,778,152
2,464,858 Telecomunicacoes do Parana SA-Telepar
Telecommunications 1,296,707
8,389,194 Telecomunicacoes do Rio de Janeiro SA-Telerj
Capital Equipment 806,581
24,900,000 Unibanco-Uniao Bco(b)
Finance 1,987,483
115,530 Usinas Siderurgicas de Minas Gerais SA
Capital Equipment 864,510
47,200 Vale Rio Doce B shares(a)(b)
Materials 0
RIGHTS
325,282 Telecomunicacoes Do Rio De Janeiro(a)
Capital Equipment 4,426
120,223 Telecomunicacoes do Parana SA-Telepar - Rights(a)
Telecommunications 0
482,097 Telesp Tel Sao(a)
Telecommunications 437
------------------
32,353,912
------------------
CHILE - 4.4%
COMMON STOCK
23,500 Administradora de Fondos de Pensiones Provida SA ADR
Materials 393,625
</TABLE>
17
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF OCTOBER 31, 1997
<TABLE>
<S> <C> <C> <C>
SHARES VALUE US$
------ ---------
CHILE (CONCLUDED)
120,000 Banco Santander Chile ADR
Finance $ 1,560,000
41,400 Chilectra SA
Energy 1,118,387
61,841 Chilgener SA
Energy 1,685,167
27,700 Compania Cervecerias Unidas SA
Services 675,188
107,925 Compania de Telecomunicacion de Chile SA ADR
Telecommunications 2,994,918
63,300 Maderas y Sinteticos Sociedad Anonima SA ADR
Multi-Industry 775,425
26,800 Quimica y Minera Chile SA ADR
Materials 1,390,253
38,900 Santa Isabel SA ADR
Services 719,650
------------------
11,312,613
------------------
CHINA, PEOPLES REPUBLIC OF - 1.8%
COMMON STOCK
3,750,000 Beijing Datang Power Gen H(a)
Energy 1,892,101
56,000 Huaneng Power International Inc. ADR(a)
Energy 1,232,000
2,434,000 Qingling Motors Co.
Services 1,590,232
------------------
4,714,333
------------------
CROATIA - 0.3%
COMMON STOCK
60,060 Pliva DD GDR
Consumer Goods 873,870
------------------
CZECH REPUBLIC - 0.8%
COMMON STOCK
13,630 SPT Telekom AS(a)
Energy 1,569,754
2,430 Tabak AS
Consumer Goods 612,601
------------------
2,182,355
------------------
</TABLE>
18
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF OCTOBER 31, 1997
<TABLE>
<S> <C> <C> <C>
SHARES VALUE US$
------ ---------
EGYPT - 1.0%
COMMON STOCK
122,000 Commercial International Bank GDR
Finance $ 2,653,500
------------------
GREECE - 1.1%
COMMON STOCK
58,930 Hellenic Bottling Co. SA
Consumer Goods 2,437,226
6,440 Titan Cement Co. SA
Materials 315,116
------------------
2,752,342
------------------
HONG KONG - 3.6%
COMMON STOCK
676,000 Anhui Expressway Co. Ltd.
Capital Equipment 118,068
518,000 Cheung Kong Infrastructure Holdings
Capital Equipment 1,340,319
1,748,000 China Resources Beijing Land
Finance 712,361
409,000 China Resources Enterprise Ltd.
Finance 1,121,780
391,000 Citic Pacific Ltd.
Multi-Industry 1,871,661
772,000 Cosco Pacific Ltd.
Services 898,894
864,000 Guangnan Holdings
Services 793,635
685,000 New World Infrastructure(a)
Finance 1,355,909
164,000 Shanghai Industrial Holdings
Multi-Industry 729,880
2,105,000 Tingyi (Cayamn Islands) Holding Co.
Consumer Goods 354,034
Warrants
121,428 Guangnan Holdings(a)
Services 18,852
------------------
9,315,393
------------------
HUNGARY - 2.3%
COMMON STOCK
10,600 OTP Bank GDR(a)
Finance 328,600
</TABLE>
19
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF OCTOBER 31, 1997
<TABLE>
<S> <C> <C> <C>
SHARES VALUE US$
------ ---------
HUNGARY (CONCLUDED)
40,460 BorsodChem RT
Materials $ 1,426,215
18,200 Gedeon Richter RT
Consumer Goods 1,692,600
53,230 MOL Magyar Olaj GDR
Energy 1,155,091
25,599 Pannonplast RT
Materials 1,408,686
------------------
6,011,192
------------------
INDIA - 9.8%
COMMON STOCK
166,000 BSES Ltd.
Energy 829,658
90,000 Bajaj Auto Ltd.
Capital Equipment 1,426,908
283,000 Bharat Heavy Electricals Ltd.
Capital Equipment 2,916,383
275,000 Bharat Petroleum
Energy 3,297,127
98,700 Hindustan Petroleum Corp. Ltd.
Energy 1,297,092
114,000 ITC Ltd.
Consumer Goods 1,763,372
68,000 Indian Hotels Co. Ltd.
Services 1,100,454
523,000 Mahanagar Telephone Nigam Ltd.
Telecommunications 3,646,546
85,000 Mahindra & Mahindra Ltd.
Capital Equipment 850,117
48,000 Ranbaxy Laboratories Ltd.
Consumer Goods 935,647
630,000 Reliance Industries Ltd.
Materials 3,140,038
322,000 State Bank of India
Finance 2,323,464
3,200 Steel Authority of India Ltd.
Materials 1,311
125,000 Tata Engineering and Locomotive Co.
Capital Equipment 1,096,177
30,300 Videsh Sanchar Nigam Ltd.
Telecommunications 708,236
------------------
25,332,530
------------------
</TABLE>
20
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF OCTOBER 31, 1997
<TABLE>
<S> <C> <C> <C>
SHARES VALUE US$
------ --------
INDONESIA - 2.8%
COMMON STOCK
276,480 Astra
Capital Equipment $ 205,155
164,500 Daya Guna Samudera
Consumer Goods 212,185
15,500 Gulf Indonesia Resources Ltd.(a)
Energy 325,500
1,110,200 London Sumatra Indonesia
Energy 1,193,349
376,000 PT Gudang Garam
Capital Equipment 1,063,854
519,200 PT Indofoods Sukses Makmur
Consumer Goods 518,479
255,500 PT Indostat ADR
Telecommunications 575,851
816,500 PT Jaya Real Property
Finance 141,557
2,923,000 PT Telekomunikasi Indonesia
Telecommunications 2,716,238
31,500 PT Unilever Indonesia
Services 244,660
WARRANTS
253,682 PT Bank International Indonesia(a)
Finance 14,355
------------------
7,211,183
------------------
ISRAEL - 2.6%
COMMON STOCK
579,900 Bank Leumi Le-Israel
Finance 888,824
88,900 Blue Square-Israel Ltd.(a)
Services 1,033,463
88,290 Osem Investment Ltd.
Consumer Goods 471,384
403,800 Supersol Ltd.
Services 1,157,891
65,000 Tadiran Telecommunications Ltd.
Telecommunications 1,470,626
36,950 Teva Pharmaceutical Industries Ltd. ADR
Consumer Goods 1,727,413
WARRANTS
107,500 Bank Leumi 3(a)
Finance 6,749
</TABLE>
21
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF OCTOBER 31, 1997
<TABLE>
<S> <C> <C> <C>
SHARES VALUE US$
------ ---------
ISRAEL (CONCLUDED)
107,500 Bank Leumi 4(a)
Finance $ 16,872
------------------
6,773,222
------------------
KOREA, REPUBLIC OF - 4.2%
COMMON STOCK
72,000 Daewoo Securities(a)
Finance 888,060
6,795 Kookmin Bank GDR
Finance 54,935
77,010 Korea Electric Power Corp.
Energy 1,093,530
168,000 L.G. Electronics
Capital Equipment 2,263,684
10,173 L.G. Information and Communication Ltd.
Capital Equipment 582,038
17,000 L.G. Semiconductor Co.(a)
Capital Equipment 280,162
28,000 Pohang Iron & Steel Co. Ltd.
Materials 1,230,683
2,239 SK Telecom Co. Ltd.(b)
Telecommunications 755,535
25,044 Samsung Electronics Co.
Capital Equipment 986,256
42,000 Shinhan Bank
Finance 322,140
57,750 Ssangyong Oil Refining Co. Ltd.
Energy 784,127
118,000 Yukong Ltd.
Energy 1,589,968
------------------
10,831,118
------------------
MAURITIUS - 0.5%
COMMON STOCK
2,250,000 State Bank of Mauritius Ltd.
Finance 1,309,768
------------------
MEXICO - 12.3%
COMMON STOCK
40,200 Bufete Industrial SA ADR(a)
Capital Equipment 592,950
781,720 Cemex SA de CV(a)
Materials 3,063,749
</TABLE>
22
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF OCTOBER 31, 1997
<TABLE>
<S> <C> <C> <C>
SHARES VALUE US$
------ ----------
MEXICO (CONCLUDED)
110,048 Cifra SA - Ser A
Services $ 198,660
1,963,000 Cifra SA de CV
Services 3,450,404
586,000 Consorcio ARA SA(a)
Capital Equipment 2,167,922
246,000 Desc SA de CV
Multi-Industry 2,132,779
623,000 Fomento Economico Mexicano SA de CV
Services 4,372,838
286,400 Grupo Carso SA de CV
Multi-Industry 1,819,761
2,050,000 Grupo Financiero Bancomer(a)
Services 988,480
191,800 Hylsamex SA
Capital Equipment 1,234,628
381,000 Industrias Penoles
Materials 1,502,282
332,500 Kimberly-Clark de Mexico SA de CV
Services 1,425,565
263,300 Sanluis Corporacion SA de CV
Multi-Industry 2,004,457
111,900 Telefonos de Mexico SA ADR
Telecommunications 4,839,675
102,600 Tubos de Acero de Mexico SA ADR(a)
Materials 2,071,239
------------------
31,865,389
------------------
PAKISTAN - 0.7%
COMMON STOCK
41,000 Hub Power Co. Ltd.(a)(b)
Multi-Industry 1,311,180
6,000 Pakistan Telecommunications Corp.(a)
Services 488,812
------------------
1,799,992
------------------
PERU - 0.3%
COMMON STOCK
40,500 CPT Telefonica del Peru SA ADR
Telecommunications 799,875
------------------
</TABLE>
23
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF OCTOBER 31, 1997
<TABLE>
<S> <C> <C> <C>
SHARES VALUE US$
------ ---------
PHILIPPINES - 2.9%
COMMON STOCK
3,735,843 Ayala Land Inc.
Finance $ 1,452,094
9,880,000 Belle Corp.(a)
Materials 893,739
3,727,000 Digital Telecommunications Phils., Inc.(a)
Telecommunications 181,213
443,280 Manila Electric Co. "B" Shares
Energy 1,353,335
128,540 Philippine Long Distance Telephone Co.
Telecommunications 3,179,435
1,840,000 SM Prime Holdings
Finance 322,488
18,000 Universal Robina Corp.
Consumer Goods 2,290
WARRANTS
1,529,000 Belle Corp.(a)(b)
Materials 281
------------------
7,384,875
------------------
POLAND - 2.2%
COMMON STOCK
33,080 Bank Rozwoju Eksportu SA
Finance 598,003
208,330 Bydgoska Fabryka Kabli SA(a)
Capital Equipment 1,703,705
59,410 Gorazdze
Materials 1,679,164
48,850 Krosno SA(a)
Materials 483,593
14,000 Wedel SA
Consumer Goods 674,892
34,004 Zaklandy Metali Lekkich Kety(a)
Materials 459,566
------------------
5,598,923
------------------
PORTUGAL - 3.6%
COMMON STOCK
28,750 Banco Espirito Santo e Comercial de Lisboa
Finance 834,329
38,894 Estabelecimentos Jeronimo Martins & Filho
Retail 2,545,128
32,640 Portugal Telecom
Energy 1,340,032
</TABLE>
24
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF OCTOBER 31, 1997
<TABLE>
<S> <C> <C> <C>
SHARES VALUE US$
------ ---------
PORTUGAL (CONCLUDED)
135,100 Semapa - Sociedade de Investimento e Gestao SGPS SA
Materials $ 3,121,117
17,000 Telecel-Comunicacaoes Pessoais SA(a)
Energy 1,538,066
------------------
9,378,672
------------------
RUSSIA - 0.7%
COMMON STOCK
36,000 Gazprom ADR
Energy 805,500
11,300 Lukoil Holding
Energy 987,301
------------------
1,792,801
------------------
SLOVAK REPUBLIC - 0.1%
COMMON STOCK
9,076 Nafta Gbely AS
Services 354,362
------------------
SOUTH AFRICA - 7.2%
COMMON STOCK
215,800 Amalgamated Banks of South Africa
Finance 1,277,989
57,800 Anglo American Corp. of South Africa Ltd.
Materials 2,498,161
220,854 Barlow Ltd.
Multi-Industry 2,225,750
325,000 Billiton plc(a)
Materials 952,208
219,400 Dimension Data Holdings Ltd.(a)
Capital Equipment 911,793
85,000 Dorbyl Ltd.
Capital Equipment 868,987
101,776 Ellerine Holdings Ltd.
Services 771,912
140,100 Fedsure Holdings Ltd.
Finance 1,513,808
128,649 Foodcorp Ltd.
Services 735,137
596,000 Malbak Ltd.
Multi-Industry 696,004
369,000 Nampak Ltd.
Services 1,150,130
</TABLE>
25
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF OCTOBER 31, 1997
<TABLE>
<S> <C> <C> <C>
SHARES VALUE US$
------ ---------
SOUTH AFRICA (CONCLUDED)
186 New Clicks Holdings Ltd.
Services $ 243
184,000 Sasol Ltd.
Energy 2,217,558
78,368 South African Breweries Ltd.
Services 2,077,871
105,114 South African Druggists Ltd.
Consumer Goods 658,532
------------------
18,556,083
------------------
TAIWAN - 4.1%
COMMON STOCK
100,000 Acer Inc. GDR(a)
Capital Equipment 649,000
79,559 Asia Cement Corp. GDR
Capital Equipment 873,159
43,000 Asustek Computer, Inc.(a)
Multi-Industry 497,080
138,600 China Steel Corp. GDR
Materials 2,033,955
50,397 Evergreen Marine Corp.
Capital Equipment 519,089
116,500 ROC Taiwan Fund
Finance 1,027,734
104,200 Siliconware Precision Industries Co.(a)
Capital Equipment 1,002,925
10,000 Taiwan Fund Inc.
Finance 189,743
99,000 Taiwan Semiconductor Manufacturing Co.(a)
Capital Equipment 1,961,435
139,345 Teco Electric & Mach GDR(a)
Capital Equipment 1,833,301
------------------
10,587,421
------------------
THAILAND - 0.9%
COMMON STOCK
256,000 Electricity Generating Public Co. Ltd.
Energy 418,087
173,789 Land & House Public Co. Ltd.
Finance 148,267
108,000 PTT Exploration and Production Public Co. Ltd.
Materials 1,079,345
699,000 TelecomAsia Corp. Public Co. Ltd.(a)
Telecommunications 302,430
</TABLE>
26
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONCLUDED)
AS OF OCTOBER 31, 1997
<TABLE>
<S> <C> <C> <C>
SHARES VALUE US$
------ ---------
THAILAND (CONCLUDED)
258,000 Total Access Communication Public Co. Ltd.
Telecommunications $ 492,780
------------------
2,440,909
------------------
TURKEY - 2.6%
COMMON STOCK
4,946,640 Migros Turk
Services 5,189,250
5,223,720 Netas Telekomunik(a)
Energy 1,565,690
------------------
6,754,940
------------------
VENEZUELA - 1.5%
COMMON STOCK
2,918,823 Electricidad De Caracas
Energy 3,833,162
------------------
ZIMBABWE - 0.1%
COMMON STOCK
153,000 Meikles Africa Ltd.
Materials 306,000
------------------
PAR
---
CORPORATE BONDS - 0.2%
428,000 Delta Electronic, 0.05%, 3/6/04
Capital Equipment 470,800
------------------
REPURCHASE AGREEMENTS - 4.2%
11,000,000 Chase Securities, Inc., 5.55%, 11/3/97, to be
repurchased at $11,005,087. Collateralized by
$10,355,000 U.S. Treasury Notes, 6.88%, 5/15/06. 11,000,000
------------------
Total Investments - 96.0% (cost $249,810,879) 248,721,720
Other Assets Less Liabilities - 4.0% 10,354,172
------------------
Total Net Assets - 100% $ 259,075,892
==================
</TABLE>
- ------------------------------------
(a) Non-income producing security.
(b) Valued pursuant to methodology approved by the Board of Trustees.
ADR - American Depository Receipts
GDR - Global Depository Receipts
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments (Note 2)
Investments at cost $ 249,810,879
Net unrealized appreciation (depreciation) (1,089,159)
--------------------
Total Investments at value 248,721,720
Cash 7,802,685
Receivable for investments sold 4,428,593
Receivable for dividends, tax reclaims and interest 294,672
Organization costs, net of amortization (Note 2) 7,420
--------------------
Total Assets 261,255,090
--------------------
LIABILITIES:
Payable for investments purchased 1,551,192
Payable to investment adviser (Note 3) 147,396
Payable to administrator (Note 3) 12,476
Payable to subadministrator (Note 3) 24,951
Accrued foreign taxes payable (Note 5) 303,077
Accrued expenses and other liabilities 140,106
--------------------
Total Liabilities 2,179,198
--------------------
Net Assets $ 259,075,892
====================
COMPONENTS OF NET ASSETS:
Investors' capital $ 260,212,052
Net unrealized appreciation (depreciation) on investments (1,136,160)
--------------------
Net Assets $ 259,075,892
====================
</TABLE>
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
FOR THE
YEAR ENDED
OCTOBER 31, 1997
--------------------
INVESTMENT INCOME:
Dividend income (net of foreign withholding taxes of $301,502) $ 4,379,899
Interest income 510,880
--------------------
Total Investment Income 4,890,779
--------------------
EXPENSES:
Investment advisory ( Note 3) 2,548,282
Administration (Note 3) 139,234
Subadministration (Note 3) 243,008
Transfer agency (Note 3) 12,038
Custody 520,856
Accounting (Note 3) 73,000
Audit 47,144
Legal 12,893
Trustees 9,216
Amortization of organization costs (Note 2) 2,474
Miscellaneous 46,982
--------------------
Total Expenses 3,655,127
Fees waived (Note 6) (534,861)
--------------------
Net Expenses 3,120,266
--------------------
NET INVESTMENT INCOME (LOSS) 1,770,513
--------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized gain (loss) on investments sold (A) (9,939,119)
Net realized gain (loss) on foreign currency transactions (324,841)
--------------------
Net realized gain (loss) on investments and foreign currency
transactions (10,263,960)
--------------------
Net change in unrealized appreciation (depreciation) on investments (B) (2,807,672)
Net change in unrealized appreciation (depreciation) on foreign currency
transactions transactions (2,842)
--------------------
Net change in unrealized appreciation (depreciation) on
investments and foreign currency transactions (2,810,514)
--------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS (13,074,474)
--------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (11,303,961)
====================
- ------------------------------
</TABLE>
(A) Net of Indian capital gain tax of $430,959. (B) Net of deferred Indian
capital gain tax of $210,969.
The accompanying notes are an integral part of the financial statements.
29
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended October 31,
--------------------------------------------
1997 1996
-------------------- --------------------
NET ASSETS, BEGINNING OF PERIOD $ 167,549,528 $ -
-------------------- --------------------
OPERATIONS:
Net investment income (loss) 1,770,513 605,321
Net realized gain (loss) on investments (10,263,960) (6,759,042)
Net change in unrealized appreciation (depreciation) on investments (2,810,514) 1,674,354
-------------------- --------------------
Net increase (decrease) in net assets resulting from operations (11,303,961) (4,479,367)
-------------------- --------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST (A):
Contributions 129,110,600 173,679,036
Withdrawals (26,280,275) (1,650,141)
-------------------- --------------------
Net increase (decrease) in net assets from
transactions from investors' beneficial interest 102,830,325 172,028,895
-------------------- --------------------
Net increase (decrease) in net assets 91,526,364 167,549,528
-------------------- --------------------
NET ASSETS, END OF PERIOD $ 259,075,892 $ 167,549,528
==================== ====================
(A) Includes purchase and redemption fees (Note 7).
</TABLE>
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Portfolio performance for the following periods:
<TABLE>
<S> <C> <C>
For the Year Ended October 31,
---------------------------------------
1997 1996
- -------------------------------------------------------------------------------------------------------------------------
Ratio to Average Net Assets:
Expenses including reimbursement/waiver of fees 1.22% 1.45%
Expenses excluding reimbursement/waiver of fees 1.43% 1.51%
Net investment income including reimbursement/waiver of fees 0.69% 0.52%
Average Commission Rate Per Share (a) $0.0020 $0.0008
Portfolio Turnover Rate 43.13% 102.70%
</TABLE>
- ---------------------------------------------------
(a) Amount represents the average commission per share paid by the Portfolio 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.
31
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
Schroder Capital Funds ("Schroder Core") was organized as a Delaware business
trust by on September 7, 1995. Schroder Core, which is registered as an
open-end, management investment company under the Investment Company Act of 1940
(the "Act"), currently has six investment portfolios. Included in this report is
Schroder Emerging Markets Fund Institutional Portfolio (the "Portfolio"), a
non-diversified portfolio that commenced operations on November 1, 1995. Under
its Trust Instrument, Schroder Core is authorized to issue an unlimited number
of interests without par value. Interests in the Portfolio are sold in private
placement transactions without any sales charges to qualified investors,
including open-end, management investment companies. Purchases and redemptions
are subject to a subscription transactions charge of 0.50% payable to the
Portfolio to reimburse transaction costs incurred with respect to the
Portfolio's purchase or sale of portfolio investments.
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 preceding 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 1.63% 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.
32
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
REPURCHASE AGREEMENTS - The Portfolio may invest in repurchase agreements. The
Portfolio, through its custodian, receives delivery of the underlying
collateral, whose market value must always equal or exceed the repurchase price.
The investment adviser is responsible for determining the value of the
underlying collateral at all times. In the event of default, the Portfolio may
have difficulties with the disposition of any securities held as collateral.
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 this
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. Pursuant to an Investment Advisory Agreement, SCMI is
entitled to receive an annual fee, payable monthly, of 1.00% of the average
daily net assets of the Portfolio. SCMI voluntarily has undertaken to waive a
portion of its fees in order to limit fees paid for the Portfolio's investment
advisory services to 0.85% of its average daily net assets. This fee waiver
cannot be 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. Prior to
February 1, 1997, the total advisory fees paid by the Portfolio to SCMI
represented an annual effective rate of 1.00% of the Portfolio's average daily
net assets.
ADMINISTRATOR AND SUBADMINISTRATOR - Effective February 1, 1997, the
administrator of the Portfolio is Schroder Fund Advisors Inc. ("Schroder
Advisors"). In addition, the Portfolio has entered into a Subadministration
Agreement with Forum Administrative Services, LLC ("Forum"). For its services,
Schroder Advisors and Forum are entitled to receive compensation at annual
rates, payable monthly, of 0.05% and 0.10%, respectively of the average daily
net assets of the Portfolio. Prior to February 1, 1997, Schroder Advisors was
entitled to compensation at an annual rate of 0.15% of the average daily net
assets and obligated to make subadministration payment to Forum Financial
Services, Inc.(R) ("FFSI").
TRANSFER AGENT - Forum Financial Corp.(R) ("FFC") serves as the Portfolio's
transfer agent and is entitled to receive 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 receive 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 investments) for the year ended October 31, 1997
aggregated $191,338,159 and $103,179,104, respectively.
33
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
For federal income tax purposes, the tax basis of investment securities owned as
of October 31, 1997 was $250,930,132 and the net unrealized depreciation of
investment securities was $2,208,412. The aggregate gross unrealized
appreciation for all securities in which there was an excess of market value
over tax cost was $37,582,316, and aggregate gross unrealized depreciation for
all securities in which there was an excess of tax cost over market value was
$39,790,728.
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.
Under the applicable foreign tax law, a withholding tax may be imposed on
interest, dividends, and capital gains at various rates. Indian tax regulations
require that taxes be paid on capital gains realized by the Portfolio. At
October 31, 1997, the Portfolio decreased net unrealized appreciation on
investments by the estimated tax liability attributable to Indian investments of
$210,969 and decreased net realized gains on investments by $430,959 for taxes
incurred on gains realized from Indian investments.
NOTE 6. WAIVER OF FEES
Effective May 5, 1997, SCMI voluntarily waived a portion of its advisory fee so
that the Portfolio's total expenses would not exceed 1.18% of the Portfolio's
average daily net assets. Prior to May 5, 1997, the expense ratio cap ranged
between 1.30% and 1.45% of total expenses of the Portfolio's average daily net
assets. Schroder Advisors, Forum and FFC may waive voluntarily all or a portion
of their fees from time to time. For the year ended October 31, 1997, SCMI
waived fees of $534,861 and for the year ended October 31, 1996, SCMI and
Schroder Advisors waived fees of $51,560 and $12,743, respectively.
NOTE 7. PURCHASE AND REDEMPTION FEE
Purchases and redemptions of interest in the Portfolio are subject to a charge
of 0.50% of the net asset value of the interests purchased or redeemed. This
charge is designed to cover the transaction costs incurred by the Portfolio
(either directly or indirectly) as a result of a purchases or redemptions of
interests in the Portfolio, including brokerage commissions in acquiring or
selling portfolio securities; currency transactions costs; interest recordkeeper
costs; and to protect the interests of other interestholders. These charges,
which are not sales charges, are paid to the Portfolio, not SCMI, Forum or any
other entity. The purchase and redemption fees for the year ended October 31,
1997 were $644,942 and $131,930, respectively. The purchase and redemption fees
are included in the Statement of Changes in Net Assets contributions and
withdrawal amounts, respectively, and are included in the Investors' Capital in
the Statement of Assets and Liabilities.
NOTE 8. CONCENTRATION OF RISK
The Portfolio's investments in countries with limited or developing capital
markets may involve greater risks than investments in more developed markets and
the prices of such investments may be volatile. The consequences of political,
social or economic events in these markets may have disruptive effects on the
market prices of the Portfolio's investments.
34
<PAGE>
- --------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS FUND INSTITUTIONAL PORTFOLIO (PORTFOLIO)
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Schroder Capital Funds and Investors of Schroder Emerging
Markets Fund Institutional Portfolio:
We have audited the accompanying statement of assets and liabilities of the
Schroder Emerging Markets Fund Institutional Portfolio (a separate portfolio of
Schroder Capital Funds), including the schedule of investments, as of October
31, 1997, and the related statement of operations for the year then ended, and
the statements of changes in net assets and the financial highlights for each of
the two years in the period then ended. These financial statements and financial
highlights are the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Schroder Emerging Markets Fund Institutional Portfolio as of October 31, 1997,
the results of its operations for the year then ended, and the changes in its
net assets and the financial highlights for each of the two years in the period
then ended, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
December 19, 1997
35
<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 02110-2624
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 Emerging
Markets Fund Institutional Portfolio. 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.
