[Logo} SCHRODERS
SCHRODER
MICRO CAP FUND
ANNUAL REPORT
MAY 31, 1998
SCHRODER CAPITAL FUNDS (DELAWARE)
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SCHRODER MICRO CAP 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 investment objective of the Fund is long-term capital appreciation. It seeks
to achieve its investment objective by investing at least 65% of its total
assets in equity securities of U.S.- domiciled micro cap companies. A micro cap
company is a company with, at the time of initial purchase, a market
capitalization in the bottom one third of companies in the Russell 2000 Growth
Index (measured by capitalization); in addition, any company with a market
capitalization of $300 million or less will be considered a micro cap company.
INVESTMENT ADVISER
Schroder Capital Management International Inc. (the "Investment Adviser") is a
wholly owned indirect subsidiary of Schroders plc, a 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 year, December 31, 1997,
the Schroder Group had over $175 billion in assets under management. As of March
31, 1998, the Investment Adviser, together with its U.K. affiliate, Schroder
Capital Management International Ltd., had over $29 billion under management.
July 15, 1998
Dear Shareholder,
From its inception on October 15, 1997 to the fiscal year ending May 31, 1998,
the Schroder Micro Cap Fund returned 45.41% as compared to 1.40% for the Russell
2000 Growth Index(R) (the "Russell 2000") and 12.95% for the S&P 500 Index(R).
This performance is particularly noteworthy in view of the market volatility
that characterized this period. Indeed, on October 29, 1997 less than two weeks
after the Fund was launched, the U.S. equity market experienced its sharpest one
day decline in several years, with the Dow Jones Industrial Average falling by
over 550 points. While the market has rebounded since then, smaller companies
have underperformed larger companies by a wide margin. Thus, while it is true
that many large companies are trading at relatively high price-earnings
multiples, the relative multiple of smaller companies to larger ones is quite
low.
Fund management follows a growth at a reasonable price approach to investing and
tries to find companies whose earnings prospects have not yet been discovered by
investors. As a result the Fund is heavily weighted in the
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consumer sectors, with little exposure to the more speculative sectors of the
market such as biotechnology or the internet. While companies with little in the
way of current revenues or earnings may offer great promise for the future,
their stocks tend to be very volatile and risky investments. Given the large
number of public companies in the micro cap universe, management is able to
develop a portfolio of more stable companies with the belief that they will
continue to bear fruit for the future.
Thank you for your interest in the Schroder Micro Cap Fund.
Sincerely,
/s/ M. J. Smith
Mark J. Smith
President
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MANAGEMENT DISCUSSION AND ANALYSIS (AS OF MAY 31, 1998)
The seven months ending May 31, 1998 (the Schroder Micro Cap Fund's
operating period) was a difficult time for small company investors. In five of
those months, larger companies outperformed smaller ones, while in the two
months that smaller companies outperformed, they did so by a small amount. As a
result, there continue to be many attractive investment opportunities in the
micro cap sector. While large cap valuations have risen, small and micro cap
valuations have remained relatively reasonable. Furthermore, with the exception
of internet related stocks, there has been little sign of speculation in the
small cap market, providing a favorable environment for opportunistic stock
pickers.
The Schroder Micro Cap Fund performed well relative to the Russell 2000
from its inception on October 15, 1997 to the end of the fiscal year end on May
31, 1998. One of the Fund's holdings, POLLO TROPICAL INC., was the subject of a
takeover bid while others such as DUFF & PHELPS CREDIT RATING CO., PILLOWTEX
CORP., MUSICLAND STORES CORP. and MAPICS INC. reported strong earnings growth
that resulted in significant market appreciation.
During the fiscal period, the Fund was heavily invested in consumer
stocks. Low unemployment, a strong domestic economy and rising wages all
provided a favorable backdrop for the retailers, restaurants and consumer
products companies that make up a substantial percentage of the Fund's holdings.
Many of the other securities in the portfolio represent opportunistic
investments in undervalued and misunderstood companies. BAYOU STEEL CORP. for
example, has no analyst coverage despite having $250 million in revenue.
Similarly DUFF & PHELPS CREDIT RATING CO. has only two analyst estimates even
though it is very profitable, generates significant cash and uses that cash to
buy back stock.
Looking forward, management will continue to search for companies that
can grow their earnings independently of the economic cycle. We believe that
many micro cap companies offer more attractive investment opportunities than
large companies based on valuation and growth rates. Furthermore, smaller
companies in the U.S. tend to serve the domestic market and so they will be much
less affected by the weakness in Southeast Asia. In the future, as in the past,
we will remain focused on individual stock selection, concentrating on
underfollowed and misunderstood companies that we believe offer superior
earnings growth.
THE VIEWS EXPRESSED IN THIS REPORT WERE THOSE OF THE FUND'S PORTFOLIO
MANAGERS AS OF MAY 31, 1998, 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 INVESTMENTS 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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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 Investor Shares of the Fund with the performance of the Russell 2000 since
inception. The Russell 2000 is a capitalization weighted index of 2000 small
capitalization U.S. companies. The Funds total return includes operating
expenses that reduce returns, while the total return of the Russell 2000 does
not. 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. Returns for less than one year are not annualized.
PAST PERFORMANCE CANNOT PREDICT NOR GUARANTEE FUTURE RESULTS.
SCHRODER MICRO CAP FUND VS RUSSELL 2000 INDEX
INVESTMENT VALUE ON 5/31/98
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Schroder Micro Cap Fund - Investor Shares $ 14,541
Russell 2000 $ 10,140
TOTAL RETURN ON 5/31/98 SINCE INCEPTION
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Schroder Micro Cap Fund - Investor Shares 45.41% (a)
Russell 2000 1.40% (b)
[EDGAR REPRESENTATION OF GRAPH CHART]
DATE FUND INDEX
9/30/97 10000
10/15/97 10000.00
10/31/97 10260.00 9555.5
11/30/97 10370.00 9490.455712
12/31/97 10778.36 9660.809392
01/31/98 10747.76 9513.675264
02/28/98 12124.38 10227.03918
03/31/98 13592.76 10656.77936
04/30/98 14632.87 10715.31705
05/31/98 14541.09 10140.44029
(a) Inception date for Investor Shares is October 15, 1997.
(b) Total returns for the Russell 2000 Index are based on an inception date
of September 30, 1997.
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PORTFOLIO CHARACTERISTICS AS OF MAY 31, 1998 (UNAUDITED)
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TOP TEN HOLDINGS INVESTMENTS BY INDUSTRY
SECURITY % OF NET ASSETS INDUSTRY % OF NET ASSETS
- ------------------------------------------ ----------------------------------------
Waste Connections, Inc. 4.19% Basic Materials 9.6%
Duff & Phelps Credit Rating Co. 4.08% Capital Goods/Construction 6.0%
Galey & Lord, Inc. 3.90% Consumer Cyclicals 20.3%
Fred's, Inc. 3.90% Energy 2.0%
Braun's Fashions Corp. 3.80% Financial 8.9%
Wilsons, The Leather Expert, Inc. 3.59% Health Care 7.7%
Elder-Beerman Stores Corp. 3.55% Retail 13.8%
Pollo Tropical, Inc. 3.12% Technology 8.1%
LADD Furniture, Inc. 3.06% Transportation/Services/Misc. 12.9%
Pillowtex Corp. 3.02% Cash & Other Net Assets 10.7%
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Total 36.21% Total 100.0%
====== =======
</TABLE>
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SCHEDULE OF INVESTMENTS
AS OF MAY 31, 1998
COMMON STOCK - 89.3%
SHARES VALUE US$
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BASIC MATERIALS - 9.6% ---------
20,000 Bayou Steel Corp. (a) 128,750
4,000 Dan River, Inc. (a) 76,500
12,000 EASCO, Inc. 156,000
10,000 Galey & Lord, Inc. (a) 247,500
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608,750
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CAPITAL GOODS/CONSTRUCTION - 6.0%
4,000 Group Maintenance America Corp. (a) 75,000
5,000 Nortek, Inc. (a) 153,750
9,200 TriStar Aerospace Co. (a) 148,925
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377,675
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CONSUMER CYCLICALS - 20.3%
7,500 Blue Rhino Corp. (a) 116,250
2,000 Cost Plus Inc. (a) 59,250
10,525 Fred's, Inc. 247,337
7,500 LADD Furniture, Inc. (a) 194,063
6,000 O'Charleys Inc. (a) 124,875
4,100 Pillowtex Corp. 191,675
3,200 PJ America Inc. (a) 63,600
20,000 Pollo Tropical, Inc. (a) 197,501
7,200 R & B, Inc. (a) 94,500
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1,289,051
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ENERGY - 2.0%
8,000 UTI Energy Corp. (a) 129,000
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FINANCIAL - 8.9%
6,480 Allied Capital Corp. 157,140
4,500 Duff & Phelps Credit Rating Co. 258,750
2,200 Resource America Inc. 146,850
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562,740
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The accompanying notes are an integral part of the financial statements.
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SCHEDULE OF INVESTMENTS (CONCLUDED)
AS OF MAY 31, 1998
SHARES VALUE US$
------ HEALTH CARE - 7.7% ---------
6,000 Centennial HealthCare Corp. (a) $ 125,250
6,800 Chattem, Inc. (a) 178,500
6,000 Maxxim Medical, Inc. (a) 140,250
3,000 Young Innovations Inc. (a) 47,250
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491,250
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RETAIL - 13.8%
20,000 Braun's Fashions Corp. (a) 240,626
9,000 Elder-Beerman Stores Corp. (a) 225,000
12,500 Musicland Stores Corp. (a) 180,469
14,000 Wilsons, The Leather Experts, Inc. (a) 227,500
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873,595
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TECHNOLOGY - 8.1%
10,000 Baldwin Technology Co. Inc. (a) 61,250
7,500 MAPICS Inc. (a) 132,187
4,500 OYO Geospace Corp. (a) 137,250
8,000 Pomeroy Computer Resources Inc. (a) 180,000
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510,687
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TRANSPORTATION/SERVICES/MISCELLANEOUS-12.9%
15,000 Bluegreen Corp. (a) 125,625
6,000 Championship Auto Racing (a) 117,000
10,000 Innovative Valve Technologies, Inc. (a) 135,000
4,050 Mesaba Holdings, Inc. (a) 88,087
3,000 RemedyTemp, Inc. (a) 87,375
17,500 Waste Connections, Inc. (a) 265,781
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818,868
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Total Common Stock (cost $5,070,543) 5,661,616
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PAR REPURCHASE AGREEMENTS - 13.0%
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821,000 Chase Securities, Inc., 5.05%, to be repurchased on 6/1/98
for $821,346. Collateralized by Par $740,000 U.S. Treasury
Bonds, 6.75% due 8/15/26 (cost $821,000) 821,000
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Total Investments - 102.3% (cost $5,891,543) 6,482,616
Other Assets Less Liabilities - (2.3)% (143,017)
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Total Net Assets - 100.0% $ 6,339,599
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(a) Non-income producing security.
The accompanying notes are an integral part of the financial statements.
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STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1998
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ASSETS:
Investments (Note 2):
Investments at cost $ 5,070,543
Repurchase agreement at cost 821,000
Net unrealized appreciation (depreciation) 591,073
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Total Investments at Value 6,482,616
Cash and cash equivalents (Note 2) 830
Receivable from administrator (Notes 3 and 5) 20,657
Receivable for dividends and interest 1,014
Other receivables 4,846
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Total Assets 6,509,963
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LIABILITIES:
Payable for investments purchased 139,085
Payable to subadministrator ( Note 3) 532
Accrued expenses and other liabilities 30,747
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Total Liabilities 170,364
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Net Assets $ 6,339,599
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COMPONENTS OF NET ASSETS:
Paid-in capital 5,158,961
Accumulated net realized gain (loss) 589,565
Net unrealized appreciation (depreciation) on investments 591,073
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Net Assets $ 6,339,599
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SHARES OF BENEFICIAL INTEREST 444,612
NET ASSET VALUE OFFERING AND REDEMPTION PRICE PER SHARE
(NET ASSETS / SHARES OF BENEFICIAL INTEREST) $ 14.26
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The accompanying notes are an integral part of the financial statements.
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STATEMENT OF OPERATIONS
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FOR THE
PERIOD ENDED
MAY 31, 1998
(NOTE 1)
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INVESTMENT INCOME:
Dividend income $ 6,833
Interest income 19,542
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Total Investment Income 26,375
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EXPENSES:
Investment advisory (Note 3) 26,896
Administration (Note 3) 5,379
Subadministration (Note 3) 15,685
Transfer agency (Note 3) 7,835
Custody 151
Accounting (Note 3) 27,645
Legal 449
Audit 14,850
Registration 24,475
Reporting 4,750
Trustees' fees 60
Miscellaneous 1,393
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Total Expenses 129,568
Fees waived and expenses reimbursed (Note 4) (86,644)
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Net Expenses 42,924
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NET INVESTMENT INCOME (LOSS) (16,549)
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NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments sold 651,514
Net change in unrealized appreciation (depreciation) on investments 591,073
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NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 1,242,587
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NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 1,226,038
=======================
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The accompanying notes are an integral part of the financial statements.
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STATEMENT OF CHANGES IN NET ASSETS
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FOR THE
PERIOD ENDED
MAY 31, 1998
(NOTE 1)
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NET ASSETS, BEGINNING OF PERIOD $ -
-----------------------
OPERATIONS:
Net investment income (loss) (16,549)
Net realized gain (loss) on investments sold 651,514
Net change in unrealized appreciation (depreciation) on investments 591,073
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Net increase (decrease) in net assets resulting from operations 1,226,038
-----------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments (45,400)
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CAPITAL SHARE TRANSACTIONS:
Sale of shares 6,068,331
Reinvestment of distributions 45,400
Redemption of shares (954,770)
-----------------------
Net increase (decrease) from capital share transactions 5,158,961
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Net increase (decrease) in net assets 6,339,599
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NET ASSETS, END OF PERIOD $ 6,339,599
=======================
SHARE TRANSACTIONS:*
Sale of shares 508,435
Reinvestment of distributions in shares 4,567
Redemption of shares (68,390)
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Net increase (decrease) in shares 444,612
=======================
* At May 31, 1998, one affiliated shareholder was record owner of
approximately 32% of the total outstanding shares of the Fund.
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The accompanying notes are an integral part of the financial statements.
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FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a share outstanding throughout the
period:
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FOR THE
PERIOD ENDED
MAY 31, 1998 (A)
-------------------------
Net Asset Value, Beginning of Period $10.00
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Investment Operations:
Net Investment Income (Loss) (0.04)
Net Realized and Unrealized Gain (Loss) on Investments 4.50
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Total from Investment Operations 4.46
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Distributions from Net Realized Gain on Investments (0.20)
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Net Asset Value, End of Period $14.26
=========================
Total Return (b) 45.41%
Ratio/Supplementary Data
Net Assets at End of Period (in thousands) $6,340
Ratios to Average Net Assets:
Expenses including reimbursement/waiver of fees 2.00%(c)
Expenses excluding reimbursement/waiver of fees 6.02%(c)
Net investment income (loss) including reimbursement/waiver of fees (0.77)%(c)%
Average Commission Rate Per Share (d) $0.0590
Portfolio Turnover Rate 165.71%
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(a) The Fund commenced operations on October 15, 1997.
(b) Total returns would have been lower had certain expenses not been limited
during the period shown. (See Note 5.)
(c) Annualized.
(d) 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.
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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 Micro Cap Fund (the "Fund"), a diversified portfolio that commenced
operations on October 15, 1997. 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 which have equal rights
as to assets and voting privileges. As of May 31, 1998, only Investor Shares had
been issued.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with generally accepted
accounting principles, that require management to make certain estimates and
assumptions which 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 summarizes the significant accounting policies of the
Fund:
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, or listed securities for which no trade is
reported on the valuation date, are valued at the most recent reported
mid-market price. Prices used for valuations generally are provided by
independent pricing services. Short-term investments, having a maturity of 60
days or less, are valued at amortized cost which approximates market value.
Prices used for valuations may be provided by independent pricing services.
Other securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith using methods
approved by the Board of Trustees.
CASH EQUIVALENTS - The Fund considers all deposits and the related interest
income in money market sweep vehicles to be cash equivalents.
SECURITY TRANSACTIONS AND INVESTMENT INCOME - Investment transactions are
accounted for on trade date. Dividend income is recorded on the ex-dividend
date. Interest income is recorded on an accrual basis.
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.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
EXPENSE ALLOCATION - The Trust accounts separately for the assets and
liabilities and operation of each of its funds. Expenses that are directly
attributable to more than one fund are allocated among the respective funds in
proportion to each fund's net assets
REPURCHASE AGREEMENTS - The Fund may invest in repurchase agreements. The Fund,
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 Fund may have difficulties with the
disposition of any securities held as collateral.
REALIZED GAIN AND LOSS - Security transactions are recorded on trade date.
Realized gain and loss on investments sold are recorded on the basis of
identified cost for both financial statement and federal income tax purposes.
NOTE 3. INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER - The investment adviser to the Fund is Schroder Capital
Management International Inc. ("SCMI"). Pursuant to an Investment Advisory
Agreement, SCMI is entitled to receive an annual fee, payable monthly, of 1.25%
of the average daily net assets of the Fund.
ADMINISTRATOR AND SUBADMINISTRATOR - The Trust on behalf of the Fund, has
entered into an Administration Agreement with Schroder Fund Advisors Inc.
("SFA") and a Subadministration Agreement with Forum Administrative Services,
LLC ("FAdS"). For its services, SFA is entitled to receive compensation at an
annual rate, payable monthly, of 0.25% of the average daily net assets of the
Fund. For its services, FAdS is entitled to receive compensation at an annual
rate, payable monthly of 0.10% 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 Shareholder Services, LLC ("FSS"). For
its services, FSS is paid a fee in the amount of $12,000 per year, plus certain
other charges.
OTHER SERVICE PROVIDERS - Forum Accounting Services, LLC ("FAcS") provides fund
accounting services to the Fund. For its services, FAcS is entitled to receive
from the Trust a fee of $36,000 per year plus certain other charges.
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 period ended May 31, 1998
aggregated $9,473,346 and $5,054,319, respectively.
For federal income tax purposes, the tax basis of investment securities owned as
of May 31, 1998 was $5,907,500. The aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost was
$708,768, and aggregate gross unrealized depreciation for all securities in
which there was an excess of tax cost over market value was $133,652.
13
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NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
NOTE 5. WAIVER OF FEES AND REIMBURSEMENT OF EXPENSES
In order to limit the Fund's expenses, SCMI and SFA have voluntarily agreed to
reduce their compensation (and, if necessary, to pay certain expenses of the
Fund) to the extent that the Fund's expenses exceed 2.00% of the Fund's average
daily net assets. The expense limitations cannot be modified or withdrawn except
by a majority vote of the Trustees of the Trust. FAdS, FSS and FAcS may waive
voluntarily all or a portion of their fees, from time to time. For the period
ended May 31, 1998, SCMI, SFA and FAdS waived fees of $26,896, $5,379 and
$13,533 respectively, and SFA reimbursed expenses of $40,836.
- --------------------
SUPPLEMENTARY UNAUDITED INFORMATION
DISTRIBUTIONS - During the fiscal year ended May 31, 1998, the Fund distributed
$45,400 of ordinary income to shareholders of which .93% may qualify for the
dividends received deduction available to corporate shareholders.
14
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REPORT OF INDEPENDENT ACCOUNTANTS
To Trustees of Schroder Capital Funds (Delaware) and Shareholders of
Schroder Micro Cap Fund
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and related statement of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of Schroder Micro Cap Fund (the "Fund"), (a
separately managed portfolio of Schroder Capital Funds (Delaware)), at May 31,
1998, the results of its operations, the changes in its net assets and the
financial highlights for the period indicated therein, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (herein referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit, which included
confirmation of securities at May 31, 1998, by correspondence with the custodian
and brokers, provides a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
July 21, 1998
15
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TRUSTEES
Hermann C. Schwab
Peter E. Guernsey
John I. Howell
Clarence F. Michalis
Mark J. Smith
David N. Dinkins
Peter S. Knight
Sharon L. Haugh
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 R. Foulkes
Vice President
John Y. Keffer
Vice President
Jane P. 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
Fergal Cassidy
Treasurer
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INVESTMENT ADVISER
Schroder Capital Management International Inc.
787 Seventh Avenue, 34th Floor
New York, New York 10019
ADMINISTRATOR AND DISTRIBUTOR
Schroder Fund Advisors Inc.
787 Seventh Avenue, 34th Floor
New York, New York 10019
CUSTODIAN
The Chase Manhattan Bank, N.A.
Chase MetroTech Center
Brooklyn, New York 11245
TRANSFER AND DIVIDEND DISBURSING AGENT
Forum Shareholder Services, LLC
Two Portland Square
Portland, Maine 04101
COUNSEL
Ropes & Gray
One International Place
Boston, Massachusettes 02110
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109
This report is for the information of the shareholders
of the Schroder Micro Cap 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.
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