<PAGE>
<PAGE>
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Schroder International Smaller Companies Fund
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Two Portland Square, Portland, Maine 04101
General Information (207) 879-6200
Account Information (800) 344-8332
Fund Literature (800) 290-9826
Fax (207) 879-6050
INVESTMENT OBJECTIVE
The investment objective of the Fund is long-term capital appreciation through
investment in securities markets outside the United States.
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. 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.
June 15, 1998
Dear Shareholder:
For the six months ending April 30, 1998, the Schroder International
Smaller Companies Fund rose 17.7% while for the same period its benchmark, the
unmanaged Salomon Smith Barney Extended Market Index(Registered) EPAC region
('EMI EPAC') rose 11.2%.
The Fund benefited from its overweight position in continental Europe as
well as management's decision to remain underweight in Southeast Asian markets.
This was partially offset by an overweight stance in Japan for much of the
period, and the decision to underweight the U.K. The main contributor to the
Fund's outperformance over the period was stock selection. In the U.K., the Fund
returned 42% versus the Salomon EMI EPAC return of 21%; in continental Europe
the returns were 33% versus the Salomon EMI EPAC return of 27%.
The environment for international small company investing improved during
the period under review. Although smaller companies outside Southeast Asia were
relatively insulated from the economic fallout of the Asian crisis, stocks were
down sharply in all markets in the final months of 1997. Management used this
buying opportunity to increase the Fund's exposure to continental Europe and the
U.K., while reducing holdings in Japan. Increased investor interest, an
improving outlook in Continental Europe, and bid activity in the U.K., drove
smaller company prices higher after calendar year-end. In Japan, small stocks
remain inexpensive on all valuation measures, but the economic situation remains
difficult.
Although stock prices in both the U.K. and continental Europe moved higher
over the last 6 months, valuations are still attractive. In the U.K., valuations
reached depressed levels in the manufacturing sector as the market
over-discounted the impact of the sterling's strength. In continental Europe,
earnings momentum improved significantly as private consumption began to recover
in 1997. Since domestic economic growth is an important earnings driver for
smaller companies, this factor has had a positive impact on the outlook for
European smaller companies' earnings.
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<PAGE>
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Schroder International Smaller Companies Fund
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In Japan, small companies have suffered as earnings projections have been
downgraded following persistent economic weakness. Valuations are attractive on
both historical and absolute terms. However, management's experience in small
company investing suggests that this type of valuation gap can persist for some
time without a catalyst to reverse it. Presently, management is unable to
identify a suitable catalyst.
Thank you for your interest in the Schroder International Smaller Companies
Fund.
Sincerely,
/s/ Mark J. Smith
Mark J. Smith
President
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2
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Schroder International Smaller Companies Fund
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MANAGEMENT DISCUSSION AND ANALYSIS (As of April 30, 1998) (Unaudited)
Q: Since the beginning of 1998, the Fund's U.K. weighting gradually increased to
become the largest geographic weighting while the Japanese weighting has dropped
to become the second largest. What is the background for this change in position
and do you see it continuing?
A: Over the past few months management has reduced the Fund's Japanese holdings
in the belief that the outlook for smaller companies and, in particular,
prospects for earnings growth are more attractive in continental Europe and the
U.K. than in Japan at the moment. Management added to the U.K. as sterling's
strength provided some excellent opportunities to buy good companies at low
prices. However, the Fund's single largest regional position is in continental
Europe (51% of total assets) as management believes that the environment for
equity investing in general, and for smaller companies in particular, is
presently favorable.
Q: What regions do you see as offering the most potential for earnings growth?
A: Management anticipates strong earnings growth (possibly in excess of 15% in
some cases) in continental Europe for both 1998 and 1999. Growth in the U.K. is
anticipated to be slower than this, and visibility in Japan remains limited.
Q: International small companies' returns last year lagged those of larger ones
as a whole. Is the outlook improving for the relative performance of smaller
companies?
A: So far, in 1998, smaller companies have outperformed larger ones in many
major markets after a protracted period during which they lagged. In continental
Europe, larger companies, especially financials, were in vogue in the first
quarter but since then have given back some of their relative strength.
Historically, smaller companies have tended to show good relative returns in
periods of rising domestic economic activity; this should boost their fortunes
in continental Europe. In the U.K., bid activity and cheap relative valuations
have revived interest in this group. Here, however, the rate of economic growth
is likely to moderate in the second half of 1998 and is one factor causing us to
remain underweight in this area relative to the rest of Europe. In Japan,
valuations appear compelling in comparison to larger companies and any domestic
revival should work to their benefit.
In general, we believe that international smaller companies remain underfollowed
and often, therefore, undervalued, and that in many cases they operate in
attractive niche industries with sustainable earnings growth prospects. An
increasing new issue calendar, especially in Europe, coupled with greater
interest in equity investments in general, has the potential to stimulate
interest in this group.
Q: What is the Fund's investment strategy for the next six months?
A: The Fund's strategy is unlikely to change significantly over the next six
months. The Fund is likely to remain overweight in Continental Europe, slightly
underweight in the U.K. and underweight in the Asian region (including Japan)
compared to its benchmark.
The views expressed in this report were those of the Fund's portfolio managers
as of April 30, 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.
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3
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Schroder International Smaller Companies Fund
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PORTFOLIO CHARACTERISTICS AS OF APRIL 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
COUNTRY WEIGHTINGS
SALOMON
BROTHERS
COUNTRY % OF NET ASSETS EMI EPAC INDEX
- -----------------------------------------------------------
<S> <C> <C>
United Kingdom 23.07% 30.25%
Japan 17.10% 17.81%
France 13.72% 7.21%
Germany 9.93% 8.17%
Switzerland 7.55% 8.43%
Spain 5.46% 2.94%
Netherlands 5.33% 6.08%
Italy 3.62% 4.39%
Finland 2.52% 1.25%
Hong Kong 2.32% 2.41%
Belgium 2.12% 1.28%
Sweden 1.49% 3.19%
Denmark 1.18% 0.80%
Malaysia 0.57% 0.45%
Singapore 0.13% 0.46%
Cash & Other Net
Assets 3.89% 0.00%
---------------
Total 100.00%
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT BY INDUSTRY
INDUSTRY % OF NET ASSETS
- ----------------------------------------------------------
<S> <C>
Services 24.91%
Capital Equipment 20.81%
Finance 10.57%
Consumer Durables 10.39%
Materials 9.59%
Manufacturing 5.66%
Consumer Non-Durables 4.93%
Machinery 3.69%
Retail 2.89%
Multi-Industry 2.20%
Energy 0.47%
Cash & Other Net Assets 3.89%
---------------
Total 100.00%
---------------
---------------
</TABLE>
TOP TEN HOLDINGS
<TABLE>
<CAPTION>
SECURITY % OF NET ASSETS
<S> <C>
- ----------------------------------------------------------
Kinepolis (Belg) 2.11%
Gautier France (Fr) 2.04%
PSD Group plc (U.K.) 2.02%
HF Company (Fr) 1.97%
Safra Republic Holdings (Swtz) 1.89%
Corp. Financiera Reunida (Sp) 1.76%
Hugo Boss Pfd. (Ger) 1.72%
Jungheinrich Non Vtg Pfd. (Ger) 1.70%
Amey plc (U.K.) 1.68%
Logica plc (U.K.) 1.65%
---------------
Total 18.54%
---------------
---------------
</TABLE>
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4
<PAGE>
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Schroder International Smaller Companies Fund
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STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments (Notes 1 and 2):
Investment in Schroder International Smaller Companies Portfolio
(the 'Portfolio') $6,403,344
Organization costs, net of amortization (Note 2) 10,577
----------
Total Assets 6,413,921
----------
LIABILITIES:
Payable to subadministrator (Note 3) 387
Accrued expenses and other liabilities 1,017
----------
Total Liabilities 1,404
----------
Net Assets $6,412,517
----------
----------
COMPONENTS OF NET ASSETS:
Paid-in capital $6,379,300
Undistributed net investment income (loss) (1,528)
Accumulated net realized gain (loss) on investments and foreign
currency transactions 130,600
Net unrealized appreciation (depreciation) on investments and
foreign currency transactions (95,855)
----------
Net Assets $6,412,517
----------
----------
SHARES OF BENEFICIAL INTEREST 634,039
NET ASSET VALUE OFFERING AND REDEMPTION PRICE PER SHARE
(NET ASSETS DIVIDED BY SHARES OF BENEFICIAL INTEREST) $10.11
</TABLE>
The accompanying notes are an integral part of the financial statements.
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5
<PAGE>
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Schroder International Smaller Companies Fund
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STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Period
Ended
April 30, 1998
(unaudited)
--------------
<S> <C>
NET INVESTMENT INCOME ALLOCATED FROM THE PORTFOLIO:
Dividend income (net of foreign withholding taxes of $5,531) $ 43,437
Interest income 2,670
Net expenses (38,104)
--------------
Net Investment Income Allocated from the Portfolio 8,003
--------------
EXPENSES:
Administration (Note 3) 3,178
Subadministration (Note 3) 12,500
Transfer agency (Note 3) 6,208
Accounting (Note 3) 6,000
Reporting 112
Registration 6,548
Audit 7,145
Amortization of organization costs (Note 2) 1,511
Legal 228
Trustees 155
Miscellaneous 401
--------------
Total Expenses 43,986
Fees waived and expenses reimbursed (Note 4) (34,457)
--------------
Net Expenses 9,529
--------------
NET INVESTMENT INCOME (LOSS) (1,526)
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
ALLOCATED FROM THE PORTFOLIO:
Net realized gain (loss) on investments sold 131,998
Net realized gain (loss) on foreign currency transactions (1,395)
--------------
Net realized gain (loss) on investments and foreign
currency transactions 130,603
--------------
Net change in unrealized appreciation (depreciation) on investments 857,962
Net change in unrealized appreciation (depreciation) on foreign currency
transactions (582)
--------------
Net change in unrealized appreciation (depreciation) on
investments and foreign currency transactions 857,380
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
ALLOCATED FROM THE PORTFOLIO: 987,983
--------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $986,457
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
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6
<PAGE>
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Schroder International Smaller Companies Fund
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STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the For the Period
Period Ended November 4, 1996
April 30, 1998 through
(unaudited) October 31, 1997
-------------- -----------------
<S> <C> <C>
NET ASSETS, BEGINNING OF PERIOD $6,836,084 $ --
-------------- -----------------
OPERATIONS:
Net investment income (loss) (1,526) 15,068
Net realized gain (loss) on investments 130,603 377,647
Net change in unrealized appreciation (depreciation) on investments 857,380 (953,235)
-------------- -----------------
Net increase (decrease) in net assets resulting from operations 986,457 (560,520)
-------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (9,569) (5,427)
Net realized gain on investments sold (377,722) --
-------------- -----------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (387,291) (5,427)
-------------- -----------------
CAPITAL TRANSACTIONS:
Sale of shares 145,822 7,555,555
Reinvestment of distributions 75,896 --
Redemption of shares (1,244,451) (153,524)
-------------- -----------------
Net increase (decrease) in net assets from capital transactions (1,022,733) 7,402,031
-------------- -----------------
Net increase (decrease) in net assets (423,567) 6,836,084
-------------- -----------------
NET ASSETS, END OF PERIOD, INCLUDING LINE (A) $6,412,517 $ 6,836,084
-------------- -----------------
-------------- -----------------
(A) Accumulated undistributed net investment income (loss) $ (1,528) $ 9,567
-------------- -----------------
-------------- -----------------
SHARE TRANSACTIONS:
Sale of shares 16,818 757,675
Reinvestment of distributions in shares 9,348 --
Redemption of shares (133,802) (15,999)
-------------- -----------------
Net increase (decrease) in shares (107,636) 741,676
-------------- -----------------
-------------- -----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
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7
<PAGE>
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Schroder International Smaller Companies Fund
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FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a share outstanding throughout the
period:
<TABLE>
<CAPTION>
For the Period For the Period
Ended November 4, 1996
April 30, 1998 through
(unaudited) October 31, 1997 (a)
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 9.22 $ 10.00
-------------- ----------
Investment Operations
Net Investment Income (Loss) (b) -- 0.02
Net Realized and Unrealized Gain (Loss) on Investments 1.41 (0.79)
-------------- ----------
Total from Investment Operations 1.41 (0.77)
-------------- ----------
Distributions From
Net Investment Income (0.01) (0.01)
Net Realized Gain on Investments (0.51) --
-------------- ----------
Total Distributions (0.52) (0.01)
-------------- ----------
Net Asset Value, End of Period $ 10.11 $ 9.22
-------------- ----------
-------------- ----------
Total Return (c) 16.64%(d) (7.73)%(e)
Ratio/Supplementary Data
Net Assets at End of Period (in thousands) $ 6,413 $ 6,836
Ratios to Average Net Assets:
Expenses including reimbursement/waiver (b)(d) 1.50% 1.50%
Expenses excluding reimbursement/waiver (b)(d) 4.79% 3.93%
Net investment income (loss) including reimbursement/waiver (b)(d) (0.05)% 0.21%
Average Commision Rate Per Share (f) $ 0.0195 $0.0389
Portfolio Turnover Rate (g) 20.14% 32.30%
</TABLE>
- ------------------
(a) The Fund commenced operations on November 4, 1996.
(b) Includes the Fund's proportionate share of income and expenses of the
Portfolio.
(c) Total returns would have been lower had certain expenses not been reduced
during the period shown (See Note 4).
(d) Annualized.
(e) Not Annualized.
(f) Amount represents the average commissions per share paid by the Portfolio to
brokers on the purchase and sale of equity securities on which commissions
are charged.
(g) Portfolio turnover rate represents the rate of portfolio activity of the
Portfolio.
The accompanying notes are an integral part of the financial statements.
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8
<PAGE>
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Schroder International Smaller Companies Fund
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NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998 (UNAUDITED)
NOTE 1. ORGANIZATION
Schroder Capital Funds (Delaware) (the 'Trust') was organized as a
Maryland corporation on July 30, 1969; reorganized as a series company on
February 29, 1988, as Schroder Capital Funds, Inc.; and reorganized on
January 9, 1996, as a Delaware business trust. The Trust, which is registered
as an open-end, management investment company under the Investment Company
Act of 1940 (the 'Act'), currently has eight investment portfolios. Included
in this report is the Schroder International Smaller Companies Fund (the
'Fund'), a diversified portfolio that commenced operations on November 4,
1996. Under its Trust Instrument, the Trust is authorized to issue an
unlimited number of the Fund's Investor Shares and Advisor Shares of
beneficial interest without par value. As of April 30, 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 International Smaller Companies Portfolio
(the 'Portfolio'), a separate 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 investment and
records its share of the Portfolio's income, expenses and realized and
unrealized gain and loss daily. The Portfolio's financial statements are
included on pages 12 to 21 in this report and should be read in conjunction
with the Fund's financial statements. The Fund owns substantially all of the
interests in the Portfolio, and is deemed, for purposes of the Act, to
control the Portfolio.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with generally
accepted accounting principles, which require management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of increase and decrease in net assets
from operations during the fiscal period. Actual results could differ from
those estimates.
The following represent significant accounting policies of the Fund:
SECURITY VALUATION
The Trust determines the net asset value per share of the Fund as of
the close of trading on the New York Stock Exchange on each Fund business
day. Valuation of securities held in the Portfolio are discussed in the Notes
to the Financial Statements of the Portfolio.
INVESTMENT INCOME AND EXPENSES
The Trust records daily its pro rata share of the Portfolio's income,
expenses and realized and unrealized gain and loss. In addition, the Fund
accrues its own expenses.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends and capital gain distributions, if any, are distributed to
shareholders at least annually. Distributions are based on amounts calculated
in accordance with applicable federal income tax regulations, which may
differ from generally accepted accounting principles. These differences are
due primarily to
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9
<PAGE>
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Schroder International Smaller Companies Fund
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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.
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.
ORGANIZATIONAL COSTS
Costs incurred by the Fund in connection with its organization are
amortized on a straight line basis over a five year period.
NOTE 3. INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
The Fund currently invests all of its assets in the Portfolio, which
retains Schroder Capital Management International Inc. ('SCMI') to act as
investment adviser pursuant to an Investment Advisory Agreement. See Notes to
the Financial Statements of the Portfolio.
ADMINISTRATOR AND SUBADMINISTRATOR
The Trust, on behalf of the Fund, has entered into Administration and
Subadministration Agreements with Schroder Fund Advisors Inc. ('Schroder
Advisors') and Forum Administrative Services, LLC ('FAdS'), respectively. For
its services, Schroder Advisors is entitled to receive compensation at an
annual rate, payable monthly, of 0.10% of the average daily net assets of the
Fund. For its services, 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 an annual minimum fee of $25,000.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
The transfer agent and dividend disbursing agent for the Fund is Forum
Shareholder Services, LLC ('FSS'). The transfer agent is paid a transfer
agent fee in the amount of $12,000 per year, plus certain other charges.
OTHER SERVICE PROVIDERS
Forum Accounting Services, LLC ('FAcS') is the fund accountant. For its
services to the Fund, FAcS is entitled to receive from the Trust a fee of
$12,000 per year.
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10
<PAGE>
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Schroder International Smaller Companies Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONCLUDED)
NOTE 4. WAIVER OF FEES AND REIMBURSEMENT OF EXPENSES
Schroder Advisors voluntarily has waived a portion of its fee and has
assumed certain expenses of the Fund so that the Fund's expenses chargeable
to Investor Shares, including indirect expenses borne by the Fund as a result
of investing in the Portfolio, would not exceed an annual rate of 1.50% of
the Fund's average daily net assets attributable to such shares. The expense
limitation cannot be modified or withdrawn except by a majority vote of the
Trustees of the Trust who are not affiliated persons (as defined in the Act)
of the Trust. Schroder Advisors, FAdS, FSS and FAcS may voluntarily waive all
or a portion of their fees, from time to time. For the six months ended April
30, 1998, Schroder Advisors waived fees and reimbursed expenses of $3,178 and
$21,162, respectively, and FAdS waived fees of $10,117.
NOTE 5. BENEFICIAL INTEREST
For the period ended April 30, 1998, there were two unaffiliated
shareholders owning more than 10% of the Fund's net assets totaling 22.7%.
- --------------------------------------------------------------------------------
11
<PAGE>
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Schroder International Smaller Companies Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
AS OF APRIL 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
STOCKS AND WARRANTS - 96.1%
SHARES VALUE US$
- ------- ------------
<S> <C> <C>
BELGIUM - (2.1%)
COMMON STOCK
2,000 Kinepolis (a)
Services $ 135,285
------------
DENMARK - (1.2%)
COMMON STOCK
1,000 Carli Gry International
Consumer Durables 75,257
------------
FINLAND - (2.5%)
COMMON STOCK
1,750 KCI Konecranes International
Machinery 83,515
2,500 Martela OY--A
Consumer Durables 78,009
------------
161,524
------------
FRANCE - (13.7%)
COMMON STOCK
340 Filipacchi Medias
Services 91,472
2,200 Gautier France SA
Consumer Durables 130,878
900 Genset SA (a)
Services 82,854
1,900 HF Co. (a)
Capital Equipment 126,292
6,000 ILOG SA ADR (a)
Capital Equipment 93,001
1,300 Lapeyre SA
Materials 98,724
500 Manitou B.F. SA
Capital Equipment 75,775
2,500 Societe Generale dEnterprises SA
(a)
Capital Equipment 97,419
1,500 Tansgene SA (a)
Services 82,406
------------
878,821
------------
GERMANY - (9.9%)
COMMON STOCK
130 Buderus AG
Manufacturing 61,070
540 Jungheinrich AG
Manufacturing 108,632
700 Rhoen--Klinikum AG
Consumer Durables 73,140
200 Sartorius AG
Capital Equipment 104,765
------------
347,607
------------
<CAPTION>
SHARES VALUE US$
- ------- ------------
<S> <C> <C>
GERMANY (CONCLUDED)
PREFERRED STOCK
60 Hugo Boss AG
Consumer Durables $ 110,337
250 Marschollek Lautenschlaeger und
Partner AG
Finance 97,451
1,900 Moebel Walther AG
Capital Equipment 80,468
------------
288,256
------------
635,863
------------
HONG KONG - (2.3%)
COMMON STOCK
62,000 Chen Hsong Holdings Ltd.
Capital Equipment 15,848
57,200 HKR International Ltd.
Finance 34,337
35,000 Varitronix International Ltd.
Manufacturing 70,487
49,000 YGM Trading Ltd.
Consumer Durables 28,150
------------
148,822
------------
ITALY - (3.6%)
COMMON STOCK
5,001 Brembo SpA (a)
Capital Equipment 67,580
3,000 Gewiss SpA
Machinery 73,817
3,500 Industrie Natuzzi SpA ADR
Retail 89,907
------------
231,304
------------
JAPAN - (17.1%)
COMMON STOCK
2,000 Aichi Toyota Motor Co. Ltd.
Capital Equipment 18,164
14,000 Airport Facilities Co. Ltd.
Services 42,383
8,000 Amada Metrecs Co. Ltd.
Machinery 46,742
5,000 Arcland Sakamoto
Services 27,624
11,000 Canon Copyer Sales Co.
Consumer Durables 50,783
6,000 Charle Co.
Services 50,405
8,000 Daidoh Ltd.
Consumer Durables 23,008
8,000 Diamond City Co.
Finance 37,842
</TABLE>
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12
<PAGE>
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Schroder International Smaller Companies Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF APRIL 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE US$
- ------- ------------
<S> <C> <C>
JAPAN (CONCLUDED)
6,000 Eiden Sakakiya Co. Ltd.
Services $ 25,202
4,000 Hitachi Transport System
Services 32,695
12,000 Idec Izumi
Capital Equipment 66,389
4,000 Inaba Denkisangyo Co.
Capital Equipment 42,383
9,000 Inabata & Co.
Services 28,540
4,000 Japan Airport Terminal Co.
Services 25,127
5,000 Kansai Kosaido Co. Ltd.
Services 33,036
5,000 Mandom Corp.
Consumer Non-Durables 37,841
6,000 Maruzen Co. Ltd.
Consumer Durables 17,936
2,000 Meiko Shokai
Capital Equipment 24,219
3,000 Mirai Industry Co. Ltd.
Manufacturing 30,538
1,000 Nagaileben Co. Ltd.
Materials 18,921
6,000 Nippon Cable System
Capital Equipment 40,914
4,000 Nishio Rent All Co.
Services 33,907
11,000 Nissan Fire & Marine Insurance
Finance 39,961
4,000 Sanki Engineering
Capital Equipment 30,516
3,000 Santen Pharmaceutical
Consumer Non-Durables 30,198
10,000 Sumitomo Warehouse
Services 41,247
1,000 Tachihi Enterprise Co. Ltd.
Finance 23,689
2,500 Trusco Nakayama Corp.
Machinery 32,355
7,000 Tsubaki Nakashima Co. Ltd.
Capital Equipment 37,721
6,000 Yodogawa Steel Works
Materials 25,430
6 Yoshinoya D & C Co. Ltd.
Services 49,950
7,000 Yushiro Chemical Industry
Energy 29,138
------------
1,094,804
------------
<CAPTION>
SHARES VALUE US$
- ------- ------------
<S> <C> <C>
MALAYSIA - (0.6%)
COMMON STOCK
28,000 Nylex (Malaysia) Berhad
Materials $ 13,850
26,000 Sime UEP Properties Berhad
Finance 22,941
------------
36,791
------------
NETHERLANDS - (5.3%)
COMMON STOCK
6,000 BE Semiconductor Industries N.V.
(a)
Capital Equipment 65,330
1,100 Endemol Entertainment
Services 25,533
2,250 Koninklijke Ahrend Groep N.V.
Consumer Durables 77,951
2,600 Unique International N.V.
Multi-Industry 82,742
2,700 Volker Stevin N.V.
Materials 89,933
------------
341,489
------------
SINGAPORE - (0.1%)
COMMON STOCK
6,000 Clipsal Industries Ltd.
Capital Equipment 8,640
------------
SPAIN - (5.5%)
COMMON STOCK
2,600 Banco de Valencia
Finance 76,764
10,000 Corp. Financiera Reunida SA (a)
Finance 112,522
1,300 Inmobiliaria Metropolitan Vasco
Central SA
Services 78,897
2,000 Viscofan Industria Navarra De
Envolturas Celulosicas, SA
Consumer Non-Durables 81,357
------------
349,540
------------
SWEDEN - (1.5%)
COMMON STOCK
7,000 Hemkopakedjan AB (a)
Retail 95,429
------------
SWITZERLAND - (7.6%)
COMMON STOCK
650 AGIE Charmilles Holding AG
Multi-Industry 58,071
20 Gurit-Heberlein AG
Materials 71,338
4 Lindt & Spruengli AG (a)
Consumer Non-Durables 94,340
</TABLE>
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Smaller Companies Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONCLUDED)
AS OF APRIL 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE US$
- ------- ------------
<S> <C> <C>
SWITZERLAND (CONCLUDED)
40 SEZ Holding AG
Capital Equipment $ 70,671
750 Safra Republic Holdings SA
Finance 121,125
750 TEGE SA (a)
Services 68,005
------------
483,550
------------
UNITED KINGDOM - (23.1%)
COMMON STOCK
7,000 AEA Technology plc
Capital Equipment 84,033
9,000 Amey plc
Capital Equipment 107,290
10,000 Avesco plc
Services 69,804
11,000 Cammell Laird Holdings plc
Services 79,544
17,500 Canning plc
Materials 80,024
16,400 Dawson Holdings plc
Finance 47,986
13,000 Helphire Group plc
Services 85,855
65,000 ITE Group plc (a)
Materials 83,682
1,667 Lanica Trust (a)(b)
Finance 1,402
4,000 Logica plc
Services 105,869
9,800 Low & Bonar plc
Materials 55,054
<CAPTION>
SHARES VALUE US$
- ------- ------------
<S> <C> <C>
UNITED KINGDOM (CONCLUDED)
8,450 Oriflame International SA
Consumer Non-Durables $ 71,912
11,700 PSD Group plc
Services 129,109
10,000 Penna Holdings plc
Services 36,783
10,500 Renishaw plc
Capital Equipment 75,313
60,000 Rutland Trust plc
Finance 60,692
10,500 Servisair plc
Services 45,863
21,000 Tilbury Douglas plc
Services 87,776
7,000 Whatman plc
Manufacturing 91,872
13,100 Wickes plc
Materials 77,315
------------
1,477,178
------------
Total Investments - (96.1%)
(cost $6,249,768) 6,154,297
Other Assets Less
Liabilities - (3.9%) 249,167
------------
Total Net Assets - (100.0%) $ 6,403,464
------------
------------
</TABLE>
- ------------------
ADR - American Depository Receipts.
(a) Non-income producing security.
(b) Valued pursuant to methodology approved by the Board of Trustees.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Smaller Companies Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments (Note 2):
Investments at cost $ 6,249,768
Net unrealized appreciation (depreciation) (95,471)
------------
Total Investments at value 6,154,297
------------
Cash 158,148
Receivable for dividends, tax reclaims and interest 29,069
Receivable for investments sold 82,819
Organization costs, net of amortization (Note 2) 10,577
------------
Total Assets 6,434,910
------------
LIABILITIES:
Payable for investments purchased 25,922
Payable to administrator (Note 3) 386
Accrued expenses and other liabilities 5,138
------------
Total Liabilities 31,446
------------
Net Assets $ 6,403,464
------------
------------
COMPONENTS OF NET ASSETS:
Investors' capital $ 6,499,321
Net unrealized appreciation (depreciation) on investments and
foreign currency transactions (95,857)
------------
Net Assets $6,403,464
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Smaller Companies Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Period
Ended
April 30, 1998
(unaudited)
--------------
<S> <C>
INVESTMENT INCOME:
Dividend income (net of foreign withholding taxes of $5,531) $ 43,437
Interest income 2,670
--------------
Total Investment Income 46,107
--------------
EXPENSES:
Investment advisory (Note 3) 27,031
Administration (Note 3) 4,770
Subadministration (Note 3) 12,500
Transfer agency (Note 3) 6,025
Custody 2,046
Accounting (Note 3) 33,000
Legal 252
Audit 14,141
Pricing 6,364
Trustees 149
Amortization of organization costs (Note 2) 1,511
Miscellaneous 579
--------------
Total Expenses 108,368
Fees waived and expenses reimbursed (Note 6) (70,264)
--------------
Net Expenses 38,104
--------------
NET INVESTMENT INCOME (LOSS) 8,003
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized gain (loss) on investments sold 132,013
Net realized gain (loss) on foreign currency transactions (1,391)
--------------
Net realized gain (loss) on investments and foreign
currency transactions 130,622
--------------
Net change in unrealized appreciation (depreciation) on investments 857,964
Net change in unrealized appreciation (depreciation) on foreign currency
transactions (586)
--------------
Net change in unrealized appreciation (depreciation) on
investments and foreign currency transactions 857,378
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS 988,000
--------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $996,003
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Smaller Companies Portfolio
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the For the Period
Period Ended November 4, 1996
April 30, 1998 through
(unaudited) October 31, 1997
-------------- ----------------
<S> <C> <C>
NET ASSETS, BEGINNING OF PERIOD $6,825,551 $ --
-------------- ----------------
OPERATIONS:
Net investment income (loss) 8,003 36,266
Net realized gain (loss) on investments 130,622 377,647
Net change in unrealized appreciation (depreciation) on investments 857,378 (953,235)
-------------- ----------------
Net increase (decrease) in net assets resulting from operations 996,003 (539,322)
-------------- ----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST:
Contributions 153,354 7,554,417
Withdrawals (1,571,444) (189,544)
-------------- ----------------
Net increase (decrease) in net assets from transactions in investors'
beneficial interest (1,418,090) 7,364,873
-------------- ----------------
Net increase (decrease) in net assets (422,087) 6,825,551
-------------- ----------------
NET ASSETS, END OF PERIOD $6,403,464 $6,825,551
-------------- ----------------
-------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Smaller Companies Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Portfolio performance for the period:
<TABLE>
<CAPTION>
For the Six For the Period
Months Ended November 4, 1996
April 30, 1998 through
(Unaudited) October 31, 1997 (a)
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Ratio to Average Net Assets:
Expenses including reimbursement/waiver 1.20% (b) 1.20% (b)
Expenses excluding reimbursement/waiver 3.41% (b) 2.72% (b)
Net investment income including reimbursement/waiver 0.25% (b) 0.51% (b)
Average Commission Rate Per Share (c) $ 0.0195 $ 0.0389
Portfolio Turnover Rate 20.14% 32.30%
</TABLE>
- ------------------
(a) The Portfolio commenced operations on November 4, 1996.
(b) Annualized.
(c) Amount represents the average commission per share paid to brokers on the
purchase and sale of equity securities on which commissions are charged.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Smaller Companies Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998 (UNAUDITED)
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 International Smaller Companies Portfolio (the
'Portfolio'), a diversified portfolio that commenced operations on November
4, 1996. Under the Trust Instrument, Schroder Core is authorized to issue an
unlimited number of interests without par value. Interests in the Portfolio
are sold in private placement transactions without any sales charges to
qualified investors, including open-end, management investment companies.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with generally
accepted accounting principles, which require management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of increase and decrease in net assets
from operations during the fiscal period. Actual results could differ from
those estimates.
The following represent significant accounting policies of the
Portfolio:
SECURITY VALUATION
Portfolio securities listed on recognized stock exchanges are valued at
the last reported sale price on the exchange on which the securities are
principally traded. Listed securities traded on recognized stock exchanges
where last sale prices are not available are valued at the last sale price on
the preceeding 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. Domestic short-term investments having a maturity of 60 days or less
generally are valued at amortized cost, which approximates market value.
Foreign short-term investments are valued at a current market price then
marked to market to recognize any gain or loss on the transaction. 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 0.02% of the total investments at April 30, 1998.
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 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 on 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.
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Smaller Companies Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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 includes net
gain or loss on contracts that have terminated by settlement or by the
Portfolio entering into offsetting commitments.
EXPENSE ALLOCATION
Schroder Core accounts separately for the assets and liabilities and
operation of each of its portfolios. 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
amortized on a straight line basis over a five year period.
NOTE 3. INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
Schroder Capital Management International Inc. ('SCMI') is the
investment adviser to the Portfolio. Pursuant to an Investment Advisory
Agreement, SCMI is entitled to receive an annual fee, payable monthly, of
0.85% of the average daily net assets of the Portfolio. SCMI voluntarily has
undertaken to waive 0.10% of the advisory fees payable by the Fund. This fee
limitation arrangement shall remain in effect until its elimination is
approved by the Board of Trustees of Schroder Core.
ADMINISTRATOR AND SUBADMINISTRATOR
Schroder Core, on behalf of the Portfolio, has entered into
Administration and Subadministration Agreements with Schroder Fund Advisors
Inc. ('Schroder Advisors') and Forum Administrative Services, LLC ('FAdS'),
respectively. For its services, Schroder Advisors is entitled to receive
compensation at an annual rate, payable monthly, of 0.15% of the average
daily net assets of the Portfolio. For its services, FAdS is entitled to
receive compensation at an annual rate, payable monthly, of 0.075% of the
average daily net assets of the Portfolio, subject to an annual minimum of
$25,000.
OTHER SERVICE PROVIDERS
Forum Accounting Services, LLC ('FAcS') performs portfolio accounting
for the Portfolio and is entitled to compensation for those services in the
amount of $60,000 per year, plus certain amounts based upon the number and
types of portfolio transactions. FAcS also serves as the Portfolio's transfer
agent and is entitled to compensation for those services from Schroder Core
with respect to the Portfolio in the amount of $12,000 per year plus certain
additional 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 six months ended April
30, 1998 aggregated $1,247,462 and $1,783,571, respectively.
- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Smaller Companies Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONCLUDED)
For federal income tax purposes, the tax basis of investment securities
owned as of April 30, 1998 was $6,249,768. The aggregate gross unrealized
appreciation for all securities in which there was an excess of market value
over tax cost was $1,248,131 and the aggregate gross unrealized depreciation
for all securities in which there was an excess of tax cost over market value
was $1,343,602.
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 in the Portfolio regardless of whether such
interest, dividends or gain have been distributed by the Portfolio.
NOTE 6. WAIVER OF FEES AND REIMBURSEMENT OF EXPENSES
SCMI voluntarily has waived a portion of its advisory fees and has
assumed certain expenses of the Portfolio so that its total expenses would
not exceed 1.20% of the Portfolio's average daily net assets. Schroder
Advisors, SCMI, FAdS, and FAcS may voluntarily waive all or a portion of
their fees from time to time. For the six months ended April 30, 1998, fees
waived and expenses reimbursed were as follows:
<TABLE>
<CAPTION>
WAIVED REIMBURSED
<S> <C> <C>
- ----------------------------------------------------------------------------
SCMI $27,031 $ 28,348
Schroder Advisors 4,770 --
FAdS 10,115 --
</TABLE>
NOTE 7. CONCENTRATION OF RISK
Because the Portfolio has a relatively large concentration of portfolio
securities invested in companies domiciled in Japan and the United Kingdom,
it may be more susceptible to political, social and economic events adversely
affecting Japanese and United Kingdom companies than portfolios not so
concentrated.
- --------------------------------------------------------------------------------
21
<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, NY 10019
ADMINISTRATOR AND DISTRIBUTOR
Schroder Fund Advisors Inc.
787 Seventh Avenue, 34th Floor
New York, NY 10019
CUSTODIAN
The Chase Manhattan Bank
Global Custody Division
125 London Wall
London EC2Y 5AJ, U. K.
TRANSFER AND DIVIDEND
DISBURSING AGENT
Forum Shareholder Services, LLC
Two Portland Square
Portland, ME 04101
COUNSEL
Ropes & Gray
One International Place
Boston, MA 02110-2624
INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
This report is for the information of the shareholders of the Schroder
International Smaller Companies Fund. Its use in connection with any offering of
the Fund's shares is authorized only in case of a concurrent or prior delivery
of the Fund's current prospectus.
[ LOGO ] SCHRODERS
- ---------------------------
Schroder
International
Smaller
Companies
Fund
SEMI-ANNUAL REPORT
April 30, 1998
(Unaudited)
Schroder Capital Funds
(Delaware)
