[LOGO] Schroders
Schroder
Emerging Markets Fund
ANNUAL REPORT
MAY 31, 1998
Schroder Capital Funds (Delaware)
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SCHRODER EMERGING MARKETS 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 Schroder Emerging Markets Fund (the "Fund") is to
seek long-term capital appreciation. The Fund invests primarily in equity
securities of issuers domiciled or doing business in emerging market countries,
in regions such as Southeast Asia, Latin America, and Eastern and Southern
Europe.
INVSTMENT ADVISER
Schroder Capital Management International Inc. (the "Investment Adviser") is a
wholly owned U.S subsidiary of Schroder U.S. Holdings, Inc. an indirect wholly
owned U.S. 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. As of 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, of which, over $6 billion was invested in
emerging markets countries.
July 15, 1998
Dear Shareholder,
The Schroder Emerging Markets Fund returned -9.60% from inception on October 31,
1997 to May 31, 1998, its fiscal year end. This compares with the unmanaged,
customized Morgan Stanley Capital International Emerging Markets Free (excluding
Malaysia) Index (MSCI Ex-Malaysia"), which returned -9.05% for the same period.
While the Asian crisis brought some economic slowdown to Latin America,
management considers there to be great value in the region. However, management
is wary of increasing positions there due to the present global volatility.
Mexico and Brazil remain the region's favored markets, as well as the Fund's top
two country weights. In Mexico, governmental structure and policies have led to
market stability while Brazilian companies are currently attractively valued and
the government's privatization program is on track. The winner of Brazil's
presidential election, scheduled for later this year, will need to tackle the
fiscal deficit for the market to perform well on a twelve-month view.
Management is likely to maintain its current strategy with particular caution
being paid to Southeast Asia. We do believe that the long-term prospects for
many emerging markets remain solid. We continue to seek to identify those
companies that exhibit strong balance sheets, market shares, franchise values,
and other strengths that may enable companies to survive the recent market
volatility.
Thank you for your interest in the Schroder Emerging Markets Fund.
Sincerely,
/s/ M. J. Smith
Mark J. Smith
President
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SCHRODER EMERGING MARKETS FUND
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MANAGEMENT DISCUSSION AND ANALYSIS (AS OF MAY 31, 1998)
Q: CERTAIN ASIAN MARKETS REBOUNDED SINCE THEIR DRAMATIC FALLS IN LATE 1997. ARE
THERE ANY PARTICULAR MARKETS THAT HAVE COME THE FURTHEST TO BEST ADDRESS THE
ECONOMIC ISSUES?
A: Korea and Thailand have been taking the most positive steps in restructuring
their economies. Both countries are complying with the IMF in their attempts to
reschedule external debt and both raised interest rates to stabilize their
currencies after dramatic falls. As the currencies recovered, both governments
then initiated tough reforms of the financial systems in an attempt to enforce
stringent Western standards of regulation. Bankruptcy laws were tightened,
forcing the closure of many unviable businesses and bank recapitalization
programs have begun. Corporate restructuring is now vital, especially for the
conglomerates in Korea. This has been facilitated by a recovery of foreign
investment, such as Volvo's decision to buy a subsidiary of Samsung. Both
countries' equity markets have recovered sharply from their lows but the
restructuring process will take a long time for real economic and market
stability to return.
Q: HAS FUND MANAGEMENT CHANGED ITS VIEWS ON LATIN AMERICA AS A RESULT OF THE
ASIAN CRISIS?
A: As the depth and gravity of the economic and structural problems faced by the
Asian countries became apparent in the latter half of 1997, management
significantly reduced positions in Asia in light of uncertainty with regard to
future growth prospects. Over a six-month period, the cash proceeds from these
sales were reinvested in Latin America, in particular Brazil, because we
believed Latin America would be less severely affected. The Brazilian
Government's swift response to the crisis with a tight fiscal package to protect
the currency was notably effective. Mexican consumer stocks have been favored by
the Fund as the domestic economy has remained strong, supported by the U.S.
economy which has not been greatly impacted by the crisis. Smaller economies
were more severely affected, principally due to the fall in commodity prices
(for example, Chile and Venezuela's export dependence on copper and oil,
respectively) and positions in those countries were reduced, as this situation
is expected to continue.
Q: DO STOCK VALUATIONS REMAIN ATTRACTIVE IN EMERGING MARKETS WHEN COMPARED TO
THOSE IN DEVELOPED MARKETS?
A: Management believes that the valuation case for emerging markets is
attractive. On a relative basis, emerging markets now look cheap considering
what we believe are their superior long-term earnings growth prospects. Certain
markets in Latin America appear inexpensive and look fundamentally stronger than
most Asian markets, which need to undergo painful restructuring before earnings
can recover and improve valuation measures. Valuations in the EMEA countries
(Europe, Middle East and Africa) are also generally attractive and are supported
by visible earnings growth potential.
Q: WHAT IS THE FUND'S INVESTMENT STRATEGY GOING FORWARD?
A: Management remains particularly cautious about the Southeast Asian markets,
which remain heavily dependent on the success of economic restructuring. The
violent instability in Indonesia and the continuing weakness of the Japanese
economy depress the region's prospects. Certain Latin American markets appear
more attractive particularly Mexico and Brazil. Within the EMEA region, economic
growth remains robust in Hungary and Poland, where we continue to find
attractive and well-managed companies. Russia remains beset by political
instability and, therefore, the Fund is likely to remain underweight versus MSCI
EMF Ex-Malaysia until management sees clearer signs of tangible reforms.
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
2
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SCHRODER EMERGING MARKETS FUND
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Investment Adviser's Report-Comparison of Change in Value of $10,000 Investment
The following information compares a change in value of a $10,000 investment in
the Investor Shares of the Fund with the performance of the Morgan Stanley
Capital International Emerging Markets Free "MSCI EMF" Index and MCSI EMF
Ex-Malaysia. The MSCI EMF 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 MSCI EMF excludes closed markets and those
shares that are not purchasable by foreigners in otherwise free markets. The
MSCI EMF Ex-Malaysia is a benchmark used by the Fund's Investment Adviser to
exclude investments in Malaysia, which may be considered a developed market.
Malaysia represented 5.7% and 12.6% of the MSCI EMF during the period reported.
The MSCI EMF Ex-Malaysia 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 reinvestment of dividends and distributions. Returns for
less than one year are not annualized. PAST PERFORMANCE CANNOT PREDICT NOR
GUARANTEE FUTURE RESULTS.
SCHRODER EMERGING MARKETS FUND - INVESTOR SHARES VS.
MSCI EMF AND MSCI EMF EX-MALAYSIA
INVESTMENT VALUE ON 5/31/98
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Schroder Emerging Markets Fund - Investor Shares $9,040
MSCI EMF $8,944
MSCI EMF EX-MALAYSIA $9,095
CUMULATIVE TOTAL RETURN ON 5/31/98 SINCE INCEPTION
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Schroder Emerging Markets Fund - Investor Shares -9.60%(a)
MSCI EMF -10.56%(b)
MSCI EMF EX-MALAYSIA -9.05%(b)
[EDGAR REPRESENTATION OF GRAPH CHART]
DATE FUND INDEX
9/30/97 10000
10/30/97 10,000.00
10/31/97 10,010.00 9231.4
11/30/97 9,670.00 9137.332034
12/31/97 10,050.00 9217.027844
01/31/98 9,370.00 9638.559395
02/28/98 10,140.00 10257.0272
03/31/98 10,440.00 10572.86158
04/30/98 10,470.00 10656.54578
05/31/98 9,040.00 10604.81891
(a) Inception date of the Fund was October 30, 1997.
(b) Total Returns for the MSCI EMF ex-Malaysia are based on an inception date
of October 31, 1997.
3
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SCHRODER EMERGING MARKETS FUND
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<TABLE>
PORTFOLIO CHARACTERISTICS AS OF MAY 31, 1998 (UNAUDITED)
<S> <C> <C> <C>
TOP TEN HOLDINGS INVESTMENTS BY INDUSTRY
Security % of Net Assets Industry % of Net Assets
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Telecomunicacoes Brasileiras -Telebras (Braz) 3.35% Capital Equipment 3.97%
Bank Leumi Le-Israel (Isr) 2.19% Consumer Durables 3.71%
Telefonos De Mexico SA ADR (Mex) 2.01% Consumer Staples 7.08%
Cemex, S.A. de C.V. (Mex) 1.85% Energy 15.21%
Elektrim Spolka Akcyjna (Pol) 1.72% Finance 17.47%
Centrais Electricas Brasileiras - Eletrobras (Braz) 1.62% Healthcare 3.40%
Teva Pharmaceutical Industries Ltd. ADR (Isr) 1.47% Materials 5.53%
SPT Telekom AS (Cze) 1.43% Multi-Industry 6.63%
FirstRand Limited (S. Afr) 1.32% Real Estate 1.36%
CEMIG ADR (Braz) 1.32% Services 9.90%
Total 18.28% Telecommunications 16.04%
Cash & Other Net Assets 9.70%
Total 100.0%
</TABLE>
<TABLE>
<S> <C> <C>
COUNTRY WEIGHTINGS
Country % of Net Assets MSCI EMF ex-Malaysia Index
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Argentina 3.67% 4.70%
Botswana 0.54% 0.00%
Brazil 14.52% 16.60%
Chile 3.92% 3.90%
China 0.70% 0.80%
Czech Republic 1.43% 1.20%
Egypt 0.60% 0.00%
Greece 4.12% 5.20%
Hong Kong 3.17% 0.00%
Hungary 3.43% 1.50%
India 6.66% 7.20%
Indonesia 1.16% 1.10%
Israel 4.87% 3.50%
Luxembourg 0.34% 0.00%
Korea, Republic of 4.84% 2.10%
Malaysia 0.66% 0.00%
Mauritius 0.34% 0.00%
Mexico 12.35% 12.50%
Pakistan 0.17% 0.50%
Peru 0.91% 1.40%
Philippines 1.76% 1.90%
Poland 2.31% 0.70%
Russia 2.38% 3.50%
South Africa 9.24% 14.70%
Taiwan 3.84% 9.70%
Thailand 1.08% 2.00%
Turkey 0.63% 3.00%
Venezuela 0.47% 1.30%
Zimbabwe 0.19% 0.00%
Cash & Cash Equivalents 9.70% 0.00%
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Total 100.0%
======
</TABLE>
4
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SCHRODER EMERGING MARKETS FUND
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<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1998
<S> <C>
ASSETS:
Investments (Notes 1 and 2):
Investment in Schroder EM Core Portfolio
(the "Portfolio") $ 17,832
Receivable from Administrator ( Notes 3 and 4) 17,876
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Total Assets 35,708
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LIABILITIES:
Accrued expenses and other liabilities 17,881
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Total Liabilities 17,881
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Net Assets $ 17,827
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COMPONENTS OF NET ASSETS:
Paid-in capital $ 20,895
Undistributed net investment income (loss) 39
Accumulated net realized gain (loss) (917)
Net unrealized appreciation (depreciation) on investments (2,190)
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Net Assets $ 17,827
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SHARES OF BENEFICIAL INTEREST 1,971
NET ASSET VALUE OFFERING AND REDEMPTION PRICE PER SHARE
(NET ASSETS / SHARES OF BENEFICIAL INTEREST) $ 9.04
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
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SCHRODER EMERGING MARKETS FUND
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<TABLE>
STATEMENT OF OPERATIONS
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FOR THE
PERIOD ENDED
MAY 31, 1998
(NOTE 1)
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NET INVESTMENT INCOME ALLOCATED FROM THE PORTFOLIO:
Dividend income (net of unrecoverable foreign withholding taxes of $5) $ 63
Interest income 10
Net expenses (31)
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Net Investment Income Allocated from the Portfolio 42
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EXPENSES:
Administration (Note 3) 2
Subadministration (Note 3) 2,740
Transfer agency (Note 3) 1,338
Accounting (Note 3) 1,300
Audit 10,755
Registration 21,915
Reporting 4,500
Miscellaneous 1
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Total Expenses 42,551
Fees waived and expenses reimbursed (Note 4) (42,546)
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Net Expenses 5
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NET INVESTMENT INCOME (LOSS) 37
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NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS ALLOCATED FROM THE PORTFOLIO:
Net realized gain (loss) on investments sold (917)
Net realized gain (loss) on foreign currency transactions 2
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Net realized gain (loss) on investments and foreign
currency transactions (915)
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Net change in unrealized appreciation (depreciation) on investments (2,188)
Net change in unrealized appreciation (depreciation) on foreign
currency transactions (2)
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Net change in unrealized appreciation (depreciation) on
investments and foreign currency transactions (2,190)
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NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS ALLOCATED FROM THE PORTFOLIO (3,105)
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NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (3,068)
==================
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
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SCHRODER EMERGING MARKETS FUND
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<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<S> <C>
FOR THE
PERIOD ENDED
MAY 31, 1998
(NOTE 1)
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NET ASSETS, BEGINNING OF PERIOD $ -
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OPERATIONS:
Net investment income (loss) 37
Net realized gain (loss) on investments
and foreign currency transactions (915)
Net change in unrealized appreciation (depreciation) on investments
and foreign currency tranactions (2,190)
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Net increase (decrease) in net assets resulting from operations (3,068)
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CAPITAL SHARE TRANSACTIONS:
Sale of shares 20,895
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Net increase (decrease) from capital share transactions 20,895
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Net increase (decrease) in net assets 17,827
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NET ASSETS, END OF PERIOD $ 17,827
==================
(Including accumulated undistributed net investment income (loss) of $39)
SHARE TRANSACTIONS:*
Sale of shares 1,971
* At May 31, 1998, one affiliated shareholder was record owner of
approximately 100% of the total outstanding shares of the Fund.
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
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SCHRODER EMERGING MARKETS FUND
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FINANCIAL HIGHLIGHTS-INVESTOR SHARES
Selected per share data and ratios for an Investor share outstanding throughout
the period:
<TABLE>
<S> <C>
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) 0.02
Net Realized and Unrealized Gain (Loss) on Investments (0.98)
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Total from Investment Operations (0.96)
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Net Asset Value, End of Period $9.04
=================
Total Return (b) (9.60)%
Ratio/Supplementary Data
Net Assets at End of Period (in thousands) $18
Ratios to Average Net Assets:
Expenses including reimbursement/waiver of fees 1.70%(c) (d)
Expenses excluding reimbursement/waiver of fees - (e)
Net investment income (loss) including reimbursement/waiver of fees 1.72%(c) (d)
Average Commission Rate Per Share (f) 0.0039
Portfolio Turnover Rate (g) 22.97%
</TABLE>
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(a) Investor Class shares were first issued on October 31, 1997.
(b) Total returns would have been lower had certain expenses not been reduced
during the period shown (See Note 4).
(c) Includes the Fund's proportionate share of income and expenses of the
Portfolio.
(d) Annualized.
(e) Amount is not meaningful due to short period of operations.
(f) Amount represents the average commissions per share paid by the Portfolio
to brokers on the purchase and sale of equity securities on which
commissions are charged.
(g) Portfolio turnover represents the rate of portfolio activity of the
Portfolio.
The accompanying notes are an integral part of the financial statements.
8
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SCHRODER EMERGING MARKETS FUND
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NOTES TO FINANCIAL STATEMENTS
MAY 31, 1998
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 (the "Fund"), a non-diversified portfolio
that commenced operations on October 31, 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.
MASTER-FEEDER ARRANGEMENT - The Fund seeks to achieve its investment objective
by investing all of its investable assets in Schroder EM Core Portfolio (the
"Portfolio"), a separate non-diversified portfolio, of Schroder Capital Funds
("Schroder Core") that has the same investment objective and substantially
similar investment policies as the Fund. This is commonly referred to as a
master-feeder arrangement. Schroder Core also is registered as an open-end
management investment company. The Fund may withdraw its investment from the
Portfolio at any time if the Trust's Board of Trustees determines that it is in
the best interest of the Fund and its shareholders to do so. The Fund accounts
for its investment in the Portfolio as a partnership interest 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 12 to 29 of
this report and should be read in conjunction with the Fund's financial
statements. As of May 31, 1998, the Fund owns approximately 0.6% of the
Portfolio's interests.
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 - 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 Fund records daily its pro rata share of
the Portfolio's income, expenses and realized and unrealized gain and loss. In
addition, the Fund accrues its own expenses.
DISTRIBUTIONS TO SHAREHOLDERS - Dividends and capital gain distributions, if
any, are distributed to shareholders at least annually. Distributions are based
on amounts calculated in accordance with applicable federal income tax
regulations, which may differ from generally accepted accounting principles.
These differences are due primarily to differing treatments of income and gain
on various investment securities held by the Fund, timing differences and
differing characterizations of distributions made by the Fund.
9
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SCHRODER EMERGING MARKETS FUND
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NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
FEDERAL TAXES - The Fund intends to qualify and continue to qualify each year as
a regulated investment company and distribute all of its taxable income. In
addition, by distributing in each calendar year substantially all of its net
investment income, capital gain and certain other amounts, if any, the Fund will
not be subject to a federal excise tax. Therefore, no federal income or excise
tax provision is required.
EXPENSE ALLOCATION - The Trust accounts separately for the assets and
liabilities and operation of each 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. Expenses that are directly attributable to
a class are allocated to that class.
NOTE 3. INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER - The Fund currently invests all of its assets in the
Portfolio, which retains Schroder Capital Management International Inc. ("SCMI")
to act as investment adviser pursuant to an Investment Advisory Agreement. See
Notes to the Financial Statements of the Portfolio.
ADMINISTRATOR AND SUBADMINISTRATOR - 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 0.15% 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 0.075% of the average daily net assets of the Fund,
subject to a $25,000 minimum annual fee plus a $12,000 charge per class.
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 share class, per
year, plus certain other charges.
OTHER SERVICE PROVIDERS - Forum Accounting Services, LLC ("FAcS") provides fund
accounting services to the Fund. For its services to the Fund, FAcS is entitled
to receive from the Trust a fee of $12,000 per year.
NOTE 4. 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 1.70% of the Fund's average
daily net assets attributable to Investor shares. The expense limitations cannot
be modified or withdrawn except by a majority vote of the Trustees of the Trust.
SCMI, SFA, FAdS, FSS and FAcS may voluntarily waive all or a portion of their
fees, from time to time. For the period ended May 31, 1998, SFA and FAdS waived
fees of $2 and $2,740, respectively, and SFA reimbursed expenses of $39,804.
10
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SCHRODER EMERGING MARKETS FUND
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REPORT OF INDEPENDENT ACCOUNTANTS
To Trustees of Schroder Capital Funds (Delaware) and Shareholders of Schroder
Emerging Markets Fund
In our opinion, the accompanying statement of assets and liabilities and related
statement of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Schroder Emerging Markets Fund (the "Fund"), (a separately managed portfolio of
Schroder Capital Funds (Delaware)), at May 31, 1998, the results of its
operations, the changes in its net assets and the financial highlights for the
period indicated therein, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (herein referred
to as "financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
July 21, 1998
11
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SCHRODER EM CORE PORTFOLIO
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<TABLE>
SCHEDULE OF INVESTMENTS
AS OF MAY 31, 1998
<S> <C> <C>
SHARES VALUE US$
- --------- -------------
ARGENTINA (3.7%)
COMMON STOCK
40,100 Astra Cia Argentina de Petroleo SA 65,797
ENERGY
3,877 Banco de Galicia y Buenos Aires
SA de CV ADR 79,478
FINANCE
3,200 Cresud SA ADR (a) 57,000
CONSUMER NON-DURABLES
900 Disco SA ADR (a) 31,163
CONSUMER NON-DURABLES
17,100 IRSA Inversiones y Representaciones SA 60,905
Finance
8,500 Compania Naviera Perez Companc SA 47,113
Energy
3,500 Telecom Argentina ADR 108,500
SERVICES
5,700 Telefonica de Argentina SA ADR 185,607
SERVICES
11,100 YPF Sociedad Anonima ADR 344,794
ENERGY -------
980,357
BOTSWANA (0.5%) -------
COMMON STOCK
90,000 Sechaba Ord 144,860
Consumer Non-Durables -------
BRAZIL (14.5%)
COMMON STOCK
7,800 Aracruz Celulose SA ADR 105,300
SERVICES
24,300 Centrais Electricas Brasileiras SA Electrobras 433,104
ENERGY
200,000 Cia Cimento Portland Itau 36,515
MATERIALS
10,769 Cia Ener de Minas Gerais ADR 352,525
ENERGY
11,200 Companhia Brasileira de Distribuicao Grupo Pao de Acucar 261,800
CONSUMER NON-DURABLES
7,800 Companhia Paranaense de Energia-Copel 77,512
ENERGY
12,400 Petrol Brasileiro SA - Petrobas 242,570
ENERGY
8,400 Telecomunicacoes Brasileiras SA Telebras ADR 895,650
SERVICES
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
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SCHRODER EM CORE PORTFOLIO
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<TABLE>
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF MAY 31, 1998
<S> <C> <C>
SHARES VALUE US$
- --------- -------------
1,040,000 Telecomunicacoes de Sao Paulp SA - Telesp 153,712
SERVICES
590,000 Telecomunicacoes do Parana SA - Telepar 212,875
SERVICES
590,000 Telepar Tel Parana (a) 80,021
SERVICES
1,040,000 Telesp Tel Sao (a) 62,380
SERVICES
8,300 Unibanco-Uniao Banco 259,894
PREFERRED STOCK
108,000 Banco Itau SA PN 64,789
FINANCE
5,540,000 Centrais Eletricas Brasileiras SA Electrobras 184,474
ENERGY
15,000 Companhia Vale do Rio Doce 306,473
ENERGY
770,000 Petrol Brasileiro - Petrobras 150,626
ENERGY -------
3,880,220
CHILE, REPUBLIC OF (3.9%) ---------
COMMON STOCK
10,200 Banco BHIF 154,275
FINANCE
10,800 Chilectra SA 263,026
ENERGY
5,500 Compania Cervecerias Unidas SA 132,000
CONSUMER NON-DURABLES
13,200 Compania de Telecomunicacion de Chile SA ADR 292,875
SERVICES
9,900 Distribucion y Servico 156,544
SERVICES
5,100 Quinenco SA ADR 48,450
SERVICES ------
1,047,170
CHINA, PEOPLES REPUBLIC OF (0.7%) ---------
COMMON STOCK
6,000 Huaneng Power International, Inc. ADR (a) 104,250
ENERGY
120,000 Qingling Motors Co. 47,232
CAPITAL EQUIPMENT
9,000 Shanghai Industrial Holdings 25,261
Multi-Industry -------
176,743
-------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
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SCHRODER EM CORE PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF MAY 31, 1998
<S> <C> <C>
SHARES VALUE US$
- --------- -------------
CZECH REPUBLIC (1.4%)
COMMON STOCK
2,970 SPT Telekom AS 381,976
SERVICES -------
EGYPT (0.6%)
COMMON STOCK
11,200 Commercial International Bank GDR 159,040
FINANCE -------
GREECE (4.1%)
COMMON STOCK
2,250 Alfa Credit Bank 234,937
FINANCE
2,430 Delta Informatics SA 106,936
SERVICES
9,400 Hellenic Bottling Co. SA 314,876
CONSUMER NON-DURABLES
10,880 Hellenic Telecommunication Organization SA 319,790
SERVICES
864 National Bank of Greece 124,407
FINANCE -------
1,100,946
HONG KONG (3.2%) ---------
COMMON STOCK
244,000 Anhui Expressway Co. Ltd. 30,543
SERVICES
223,000 Beijing Datang Power 78,420
MULTI-INDUSTRY
38,000 Cheung Kong Infrastructure Holdings 84,346
CAPITAL EQUIPMENT
191,000 China Resources Beijing Land 88,735
FINANCE
18,000 China Resources Enterprise Ltd. 21,022
FINANCE
43,000 China Telecom (Hong Kong) (a) 76,855
SERVICES
10,000 Citic Pacific Ltd. 24,325
FINANCE
36,000 Cosco Pacific Ltd. 18,699
FINANCE
82,400 Founder Hong Kong Ltd. 51,307
CAPITAL EQUIPMENT
57,000 Guangdong Kelon Electrical Holdings Co. Ltd. 54,434
CONSUMER DURABLES
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
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SCHRODER EM CORE PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF MAY 31, 1998
<S> <C> <C>
SHARES VALUE US$
- --------- -------------
44,000 Guangnan Holdings 22,003
CONSUMER NON-DURABLES
62,000 Guangshen Railway 8,561
SERVICES
64,000 Legend Holdings Ltd. (a) 22,505
CAPITAL EQUIPMENT
22,000 New World Development Co. Ltd. 51,955
MULTI-INDUSTRY
44,000 New World Infrastructure (a) 77,790
CAPITAL EQUIPMENT
29,000 Ng Fung Hong Ltd. 24,700
CONSUMER NON-DURABLES
460,000 Yanzhou Coal Mining Co. Ltd. (a) 94,980
ENERGY
125,000 Zhejiang Expressway Co. Ltd 28,392
SERVICES ------
859,572
HUNGARY (3.4%) -------
COMMON STOCK
2,600 Gedeon Richter 219,830
CONSUMER NON-DURABLES
9,260 MOL Magyar Olaj GDR 211,822
ENERGY
10,460 Matav RT ADR 292,880
SERVICES
4,600 OTP Bank GDR 192,050
FINANCE -------
916,582
INDIA (6.7%) -------
COMMON STOCK
4,000 BSES Ltd. GDR (a) 53,500
ENERGY
14,000 Grasim Industries Ltd. GDR 108,850
MATERIALS
23,500 Great Eastern Shipping Co. GDR 131,013
MULTI-INDUSTRY
8,000 Indian Hotels Co. Ltd. GDR (a) 88,500
SERVICES
9,000 Indian Petrochemicals GDR 38,250
MATERIALS
7,000 Larsen & Toubro GDR 88,375
MULTI-INDUSTRY
25,700 Mahanagar Telephone GDR (a) 326,070
SERVICES
18,000 Mahindra & Mahindra Ltd. GDR 90,000
CAPITAL EQUIPMENT
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
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SCHRODER EM CORE PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF MAY 31, 1998
<S> <C> <C>
SHARES VALUE US$
- --------- -------------
5,000 Ranbaxy Laboratories Ltd. GDR 81,500
MATERIALS
27,900 Reliance Industries Ltd. GDS 207,157
MATERIALS
22,000 State Bank of India GDR 305,250
FINANCE
550 Tata Electric Co. GDR (b) 126,445
ENERGY
11,500 Videsh Sanchar Nigam Ltd. GDR (a) 135,125
SERVICES -------
1,780,035
INDONESIA (1.2%) ---------
COMMON STOCK
3,500 Gulf Indonesia Resources Ltd. (a) 43,532
ENERGY
15,000 PT Gudang Garam 11,018
CONSUMER NON-DURABLES
44,000 PT HM Sampoerna 14,795
CONSUMER NON-DURABLES
94,000 PT Indofoods Sukses Makmur 13,102
CONSUMER NON-DURABLES
29,000 PT Indostat ADR 38,367
SERVICES
149,000 PT Telekomunikasi Indonesia 49,447
SERVICES
TREASURY BILLS
Bank Indonesia Treasury Bill, 5.05%, due 6/1/98 138,994
-------
309,255
ISRAEL (4.9%) -------
COMMON STOCK
14,930 Bank Hapoalim Ltd. 45,880
FINANCE
290,300 Bank Leumi Le-Israel 586,256
FINANCE
18,970 Blue Square-Israel Ltd. 275,065
CONSUMER NON-DURABLES
9,600 Teva Pharmaceutical Industries Ltd. ADR 393,600
MATERIALS -------
1,300,801
KOREA, REPUBLIC OF (4.8%) ---------
COMMON STOCK
17,000 Daewoo Heavy Industries 58,337
CAPITAL EQUIPMENT
26,323 Kookmin Bank (a) 129,978
FINANCE
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
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SCHRODER EM CORE PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF MAY 31, 1998
<S> <C> <C>
SHARES VALUE US$
- --------- -------------
6,000 Korea Electric Power Corp. 60,107
ENERGY
19,210 LG Electronics 180,158
CONSUMER DURABLES
3,000 LG Information & Communication Ltd. 70,338
CAPITAL EQUIPMENT
1,500 Pohang Iron & Steel Co. Ltd. (b) 61,725
MATERIALS
123 SK Telecom Co. Ltd. (b) 56,700
SERVICES
7,440 Samsung Display Devices Co. 263,770
CAPITAL EQUIPMENT
7,850 Samsung Electronics Co. 298,383
CONSUMER DURABLES
8,000 Samsung Heavy Industries (a) 48,085
CAPITAL EQUIPMENT
16,000 Shinhan Bank (a) 62,523
FINANCE ------
1,290,104
LUXEMBOURG (0.3%) ---------
COMMON STOCK
9,400 Quilmes Industrial SA ADR 90,475
CONSUMER NON-DURABLES ------
MALAYSIA (0.7%)
COMMON STOCK
7,000 Berjaya Sports Toto Berhad 14,672
SERVICES
34,000 Magnum Corp. Berhad 17,884
SERVICES
18,000 Resorts World Berhad 27,887
SERVICES
18,000 Tanjong PLC 29,762
SERVICES
11,000 Telekom Malaysia Berhad 25,205
SERVICES
37,000 Tenaga Nasional Berhad 61,176
ENERGY ------
176,586
MAURITIUS (0.3%) -------
COMMON STOCK
135,000 State Bank of Mauritius Ltd. (a) 90,320
FINANCE ------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
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SCHRODER EM CORE PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF MAY 31, 1998
<S> <C> <C>
SHARES VALUE US$
- --------- -------------
MEXICO (12.4%)
COMMON STOCK
120,000 Cemex SA de CV 494,782
MATERIALS
228,000 Cifra SA de CV 318,104
SERVICES
37,000 Consorcio ARA S.A.(a) 142,275
CAPITAL EQUIPMENT
245,000 Controladora Comercial Mexicana SA de CV 240,108
SERVICES
20,200 Desc SA de CV 113,648
MULTI-INDUSTRY
9,600 Fomento Economico Mexica SA de CV 319,056
CONSUMER NON-DURABLES
22,500 Grupo Carso SA de CV 113,955
MULTI-INDUSTRY
17,700 Grupo Financiero Banamax Accivl SA de CV (a) 44,170
FINANCE
243,000 Grupo Financiero Bancomer 121,830
FINANCE
94,222 Grupo Industrial Bimbo SA 207,340
CONSUMER NON-DURABLES
35,000 Grupo Industrial Saltillo SA de CV 127,043
MATERIALS
6,400 Grupo Televisa SA (a) 250,000
SERVICES
66,000 Sistema Argos SA de CV 63,335
CONSUMER NON-DURABLES
8,400 TV Azteca SA de CV 121,275
SERVICES
11,300 Telefonos de Mexico SA ADR 536,044
SERVICES
6,000 Tubos de Acero de Mexico SA ADR 89,625
MATERIALS
RIGHTS
3,600 Cemex SA de CV (a) 1,232
MATERIALS -----
3,303,822
PAKISTAN (0.2%) ---------
COMMON STOCK
4,800 Hub Power Co. Ltd. 45,600
ENERGY -------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
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SCHRODER EM CORE PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF MAY 31, 1998
<S> <C> <C>
SHARES VALUE US$
- --------- -------------
PERU (0.9%)
COMMON STOCK
5,800 CPT Telefonica del Peru SA ADS 125,425
SERVICES
7,370 Credicorp Ltd. 116,999
FINANCE -------
242,424
PHILIPPINES (1.8%) -------
COMMON STOCK
322,000 Ayala Land, Inc 109,538
SERVICES
1,155,000 Digital Telecommunications Philippines, Inc. (a) 46,853
SERVICES
37,000 Manila Electric Company "B" Shares 109,242
ENERGY
8,000 Philippine Long Distance Telephone Co. 205,391
SERVICES -------
471,024
POLAND (2.3%) -------
COMMON STOCK
800 Bank Przemslowo-Handlowy SA 59,353
FINANCE
35,000 Elektrim Spolka Akcyjna SA 460,183
MULTI-INDUSTRY
14,000 WBK Ord 100,258
FINANCE -------
619,794
RUSSIA (2.4%) -------
COMMON STOCK
13,210 Gazprom ADR 184,611
ENERGY
4,010 Lukoil Holding ADR 165,118
ENERGY
8,200 Pliva DD GDR 134,890
MATERIALS
8,720 Unified Energy Systems 153,356
ENERGY -------
637,975
SOUTH AFRICA (9.2%) -------
COMMON STOCK
10,900 ABSA Group Ltd. 85,619
FINANCE
4,400 Anglo American Corp. of South Africa Ltd. 210,784
FINANCE
3,000 Anglo American Industrial Corp. 88,441
MULTI-INDUSTRY
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
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SCHRODER EM CORE PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF MAY 31, 1998
<S> <C> <C>
SHARES VALUE US$
- --------- -------------
28,463 Barlow Ltd. 233,236
MULTI-INDUSTRY
7,180 Dimension Data Holdings Ltd. (a) 48,043
FINANCE
13,000 Ellerine Holdings Ltd. 111,191
CONSUMER DURABLES
15,000 Fedsure Holdings Ltd. 230,993
FINANCE
180,900 FirstRand Ltd. 352,608
FINANCE
27,000 Ingwe Coal Corp. 95,306
ENERGY
26,700 LA Retail Stores Ltd. 84,408
CONSUMER DURABLES
78,000 Malbak Ltd. 70,345
MATERIALS
39,300 Nampak Ltd. 137,200
MATERIALS
22,800 Rembrandt Group Ltd. 187,714
MULTI-INDUSTRY
24,600 Sasol Ltd. 195,617
MULTI-INDUSTRY
9,200 South African Breweries Ltd. 259,441
MULTI-INDUSTRY
15,000 South African Druggists Ltd. 78,549
MATERIALS ------
2,469,495
TAIWAN (3.8%) ---------
COMMON STOCK
26,000 Acer, Inc. GDR (a) 188,500
SERVICES
6,000 Asustek Computer, Inc. (a) 110,251
CAPITAL EQUIPMENT
7,000 Fubon Insurance Co. Ltd. GDR (a) 127,750
FINANCE
13,000 ROC Taiwan Fund 93,438
FINANCE
9,520 Siliconware Precision Industries Co. (a) 78,064
ENERGY
6,500 Taiwan Fund, Inc. 91,406
FINANCE
13,300 Taiwan Semiconductor Manufacturing Co. (a) 251,038
ENERGY
8,000 Teco Electric & Machinery GDR 86,800
MULTI-INDUSTRY ------
1,027,247
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
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SCHRODER EM CORE PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF MAY 31, 1998
<S> <C> <C>
SHARES VALUE US$
- --------- -------------
THAILAND (1.1%)
COMMON STOCK
7,000 Advanced Info Service Public Co. Ltd. 38,129
SERVICES
28,000 Bangkok Bank Public Co. Ltd. 57,192
FINANCE
26,000 Electricity Generating Public Co. Ltd. 41,843
ENERGY
12,000 PTT Exploration & Production Public Co. Ltd. 103,987
ENERGY
31,000 Thai Farmers Bank Public Co. Ltd. 47,202
FINANCE ------
288,353
TURKEY (0.6%) -------
COMMON STOCK
3,324,675 Akbank T.A.S. 97,814
FINANCE
234,000 Netas Telekomunik (a) 68,844
CAPITAL EQUIPMENT
15,200 Turkiye Is Bankasi (Isbank) 617
FINANCE ---
167,275
VENEZUELA (0.5%) -------
COMMON STOCK
4,100 Compania Anonima 126,332
SERVICES -------
ZIMBABWE (0.2%)
COMMON STOCK
69,000 NMBZ Holdings Ltd. (a) 51,750
FINANCE ------
TOTAL INVESTMENTS (90.3%) (COST $26,482,507) 24,136,133
OTHER ASSETS LESS LIABILITIES (9.7%) 2,593,902
---------
TOTAL NET ASSETS (100.0%) $26,730,035
===========
</TABLE>
(a) Non-income Producing Security.
(b) Valued pursuant to methodology approved by the Board of Trustees.
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
GDS - Global Depositary Shares
The accompanying notes are an integral part of the financial statements.
21
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- --------------------------------------------------------------------------------
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1998
<S> <C>
ASSETS:
Investments (Note 2):
Investments at cost $ 26,482,507
Net unrealized appreciation (depreciation) (2,346,374)
--------------------
Total Investments at Value 24,136,133
Cash 2,606,408
Receivable for investments sold 71,010
Receivable for dividends, tax reclaims and interest 139,532
Organization costs, net of amortization (Note 2) 859
--------------------
Total Assets 26,953,942
--------------------
LIABILITIES:
Payable for investments purchased 131,306
Payable to investment adviser (Note 3) 13,351
Payable to administrator (Note 3) 15,555
Payable to subadministrator(Note 3) 1,791
Accrued expenses and other liabilities 61,904
--------------------
Total Liabilities 223,907
--------------------
Net Assets $ 26,730,035
====================
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
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SCHRODER EM CORE PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
FOR THE
PERIOD ENDED
MAY 31, 1998
(NOTE 1)
--------------------
INVESTMENT INCOME:
Dividend income (net of unrecoverable foreign withholding taxes of $24,069) $ 282,910
Interest income 153,053
--------------------
Total Investment Income 435,963
--------------------
EXPENSES:
Investment advisory (Note 3) 155,546
Administration (Note 3) 15,555
Subadministration (Note 3) 14,658
Interest holder recordkeeping (Note 3) 7,208
Custody 105,578
Accounting (Note 3) 40,323
Legal 3,435
Audit 20,250
Trustees 599
Amortization of organization costs (Note 2) 115
Miscellaneous 7,532
--------------------
Total Expenses 370,799
Fees waived and expenses reimbursed (Note 6) (145,187)
--------------------
Net Expenses 225,612
--------------------
NET INVESTMENT INCOME (LOSS) 210,351
--------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS:
Net realized gain (loss) on investments sold (490,158)
Net realized gain (loss) on foreign currency transactions (28,826)
--------------------
Net realized gain (loss) on investments and foreign
currency transactions (518,984)
--------------------
Net change in unrealized appreciation (depreciation) on investments (2,346,374)
Net change in unrealized appreciation (depreciation) on foreign
currency transactions (188)
--------------------
Net change in unrealized appreciation (depreciation) on
investments and foreign currency transactions (2,346,562)
--------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS (2,865,546)
--------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (2,655,195)
====================
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
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SCHRODER EM CORE PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE
PERIOD ENDED
MAY 31, 1998
(NOTE 1)
--------------------
NET ASSETS, BEGINNING OF PERIOD $ -
--------------------
OPERATIONS:
Net investment income (loss) 210,351
Net realized gain (loss) on investments
and foreign currency transactions (518,984)
Net change in unrealized appreciation (depreciation) on investments
and foreign currency transactions (2,346,562)
--------------------
Net increase (decrease) in net assets resulting from operations (2,655,195)
--------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 39,419,804
Withdrawals (10,034,574)
--------------------
Net increase (decrease) from transactions in investors'
beneficial interest 29,385,230
--------------------
Net increase (decrease) in net assets 26,730,035
--------------------
NET ASSETS, END OF PERIOD $ 26,730,035
====================
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
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- --------------------------------------------------------------------------------
<TABLE>
FINANCIAL HIGHLIGHTS
Portfolio performance for the following periods:
<S> <C>
FOR THE
PERIOD ENDED
MAY 31, 1998 (A)
---------------------
Net Assets at End of Period (in thousands) $26,730
Ratios to Average Net Assets:
Expenses including reimbursement/waiver of fees 1.45%(b)
Expenses excluding reimbursement/waiver of fees 2.38%(b)
Net investment income (loss) including reimbursement/waiver of fees 1.35%(b)
Average Commission Rate Per Share (c) $0.0039
Portfolio Turnover Rate 22.97%
</TABLE>
- ----------------------------------------------
(a) See Note 1.
(b) Annualized.
(c) 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.
25
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SCHRODER EM CORE PORTFOLIO
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1998
NOTE 1. ORGANIZATION
Schroder Capital Funds ("Schroder Core") was organized as a Delaware business
trust on September 7, 1995. Schroder Core, which is registered as an open-end,
management investment company under the Investment Company Act of 1940 (the
"Act"), currently has eight investment portfolios. Included in this report is
Schroder EM Core Portfolio (the "Portfolio" ). Schroder EM Core Portfolio is a
non-diversified portfolio that commenced operations on October 30, 1997. 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.
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
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, 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. Domestic short-term investments, having a maturity
of 60 days or less, are valued at amortized cost which approximates market
value. Foreign currency denominated short-term investments are valued at local
amortized cost and then translated into U.S. dollars. 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 Schroder Core
Board of Trustees. Fair valued securities represented approximately 1.07% of the
Schroder EM Core Portfolio's total investments at May 31, 1998.
SECURITY TRANSACTIONS AND INVESTMENT INCOME - Investment transactions are
accounted for on trade date. Dividend income is recorded on ex-dividend date.
With respect to dividends on foreign securities, certain instances may arise
where a Portfolio is not notified of a dividend until after the ex-dividend date
has passed. In these instances a dividend is recorded as soon as the Portfolio
is informed of the dividend. Dividend income is recorded net of unrecoverable
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.
26
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SCHRODER EM CORE PORTFOLIO
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1998
The Portfolio may enter into forward contracts to purchase or sell foreign
currencies to protect the U.S. dollar value of the underlying portfolio against
the effect 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 in proportion to each Portfolio's net assets.
ORGANIZATIONAL COSTS - Costs incurred by the Portfolio in connection with its
organization are being amortized on a straight line basis over a five-year
period.
NOTE 3. INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER - Schroder Capital Management International Inc. ("SCMI") is
the investment adviser to the Portfolio. Pursuant to an Investment Advisory
Agreement, SCMI is entitled to receive from Schroder EM Core Portfolio an annual
fee, payable monthly, of 1.00% of the Portfolio's average daily net assets.
ADMINISTRATOR AND SUBADMINISTRATOR - On behalf of the Portfolio, Schroder Core
has entered into an Administration Agreement with Schroder Fund Advisors Inc.
("SFA") which entitles SFA to receive from Schroder EM Core Portfolio an annual
fee, payable monthly, at a rate of 0.10% of the Portfolio's average daily net
assets. In addition, Schroder Core has entered into Subadministration Agreements
with Forum Administrative Services, LLC ("FAdS") under which FadS is entitled to
receive from Schroder EM Core Portfolio an annual fee, payable monthly, of
0.075% of the Portfolio's average daily net assets subject to an annual minimum
of $25,000.
OTHER SERVICE PROVIDERS - Forum Accounting Services, LLC ("FAcS") performs
portfolio accounting services for the Portfolio and is entitled to receive
compensation for its services in the amount of $60,000 per year, plus certain
other charges, based upon the number and types of portfolio transactions. FAcS
also provides interest holder record keeping services to the Portfolio for which
it receives, from Schroder Core, $12,000 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 securities) for the period ended May 31, 1998 were
$31,575,645 and $4,697,232, respectively.
For federal income tax purposes, the tax basis of investment securities owned,
the aggregate gross unrealized appreciation and the aggregate gross unrealized
depreciation as of May 31, 1998 were $ 26,526,803, $1,321,048, and $3,711,718,
respectively.
27
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SCHRODER EM CORE PORTFOLIO
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
MAY 31, 1998
NOTE 5. FEDERAL TAXES
The Portfolio is not required to pay federal income tax on its net investment
income and net capital gain as is treated as a partnership for federal income
tax purposes. All interest, dividends, gain and loss of the Portfolio is deemed
to have been "passed through" to the interest holders 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.
NOTE 6. WAIVER OF FEES
For the period ended May 31, 1998, SCMI and FAds voluntarily waived fees of $
142,195 and $2,992, respectively.
NOTE 7. CONCENTRATION OF RISK
The Portfolio may invest more than 25% of its total assets in issuers located in
any one country. To the extent that it does so, the Portfolio is susceptible to
a range of factors that could adversely affect that country, including political
and economic developments and foreign exchange-rate fluctuations. As a result of
investing substantially in one country, the value of the Portfolio's assets may
fluctuate more widely than the value of shares of a comparable fund with a
lesser degree of geographic concentration. The Portfolio invests in countries
with limited or developing capital markets. Investments in these markets may
involve greater risks than investments in more developed markets.
28
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SCHRODER EM CORE PORTFOLIO
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REPORT OF INDEPENDENT ACCOUNTANTS
To Trustees of Schroder Capital Funds and Investors of Schroder EM Core
Portfolio
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 EM Core Portfolio (the
"Portfolio"), (a separately managed portfolio of Schroder Capital Funds), 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 Portfolio's management; our responsibility is to express
an opinion on these financial statements based on our audit. We conducted our
audit of these financial 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
29
<PAGE>
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
<PAGE>
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.
