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Schroder U.S. Equity 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 primary investment objective of the Fund is to seek growth of capital. It
seeks to achieve its objective by investing in common stock and securities
convertible into common stock.
INVESTMENT ADVISER
Schroder Capital Management International Inc. (the 'Investment Adviser') is a
wholly owned indirect subsidiary of Schroders plc, the London Stock Exchange
listed holding company parent of an investment banking and investment management
group of companies (the 'Schroder Group') that dates its origins to 1804. The
investment management operations of the Schroder Group are located in 20
countries worldwide. At the end of the last calendar quarter, September 30,
1997, the Schroder Group had over $175 billion in assets under management. At
that same date, the Investment Adviser, together with its U.K. affiliate,
Schroder Capital Management International Ltd., had over $28 billion under
management.
December 19, 1997
Dear Shareholder:
The Schroder U.S. Equity Fund appreciated 13.41% and 26.49% respectively
for the six and twelve month periods ended October 31,1997. These results may be
compared with its benchmark, the S&P 500(Registered) Index, which returned
15.16% and 32.10% over the same period. Concerns regarding Asian economic growth
and its impact on U.S. corporate profits caused a fall in the U.S. equity market
for the last fiscal quarter. The relatively high market capitalization of the
Fund's holdings depressed performance as small capitalization stocks
significantly outpaced larger company stocks. Indicative of this performance
disparity, the small cap Russell 2000(Registered) Index outperformed the S&P 500
Index by over eight and one-half percent during the quarter, and the top fifty
stocks by market capitalization in the S&P 500 underperformed the total index by
over one percent in August alone. The Dow Jones Industrial Average was also down
over nine percent during the three months ending October 31, 1997. Stock
selection in the capital goods and healthcare sectors also hurt performance as
well as an overweighting in the capital goods and consumer staples sectors.
While previously it appeared that higher interest rates would ultimately be
necessary to reign in U.S. economic growth, a much wider trade deficit with Asia
combined with limited pricing power for U.S. companies could well exert a
similar effect on U.S. growth and thereby eliminate the need for the Federal
Reserve to tighten monetary policy. Higher labor costs and limited pricing power
due to weakness in developing market economies may pressure corporate margins.
Management expects that 1998 profit growth will significantly lag what was seen
this year. Due to concerns regarding 1998 earnings growth, the Fund will
continue to emphasize industries where positive business trends may offset the
pressures on corporate profitability and focus on companies that we believe have
the wherewithal to maintain consistent earnings. As indicated in the semi-annual
review, the Fund continues
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Schroder U.S. Equity Fund
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to have no exposure in the telecommunications or utility sectors, where
deregulation is spurring large capital commitments in increasingly competitive
environments. In the energy sector, emphasis will be on the services companies.
This industry is in the middle of a very powerful cyclical and secular up-trend,
which may offer good visibility to earnings and drive growth at a pace above the
market's.
Thank you for your continued support and interest in the Schroder U.S.
Equity Fund.
Sincerely,
Mark J. Smith
President
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2
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Schroder U.S. Equity Fund
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MANAGEMENT DISCUSSION AND ANALYSIS (As of October 31, 1997)
Q: Earlier in the year, technology was considered a key area of competitive
advantage for the U.S. and an important strategic sector for the Fund. Does
management still find this is the case or will you reduce your exposure in the
technology sector of the market?
A: Management believes that in the foreseeable future technology will be an area
of competitive advantage for the U.S. This, in and of itself, does not guarantee
superior stock returns for the sector. We have concerns about the sector on both
valuation and fundamental grounds as many stocks have risen to unsustainable
multiples of earnings. In addition, there are some signs of slightly lower
demand for personal computers at a time when prices are falling. Therefore,
management's focus is on companies with reasonable valuations and prospects
within the control of management. A holding such as Cisco Systems Inc. is
attractive because of its industry dominance and ability to gain market share.
Q: Over the past six months, which areas of the market were the best performers?
Which areas lagged?
A: The best performing sectors of the market during the last six months, in
descending order, were telecommunications, financials, energy, and consumer
cyclicals. The worst performing sectors, in ascending order, were consumer
staples, basic materials, capital goods, and utilities. The Fund benefitted from
an underweight position in basic materials and utilities and an overweight
position in financial services. Underweighting in telecommunications and
technology hindered the Fund as did overweighting in consumer staples and
capital goods.
Q: Looking to the future, what will the investment strategy be for the Fund?
A: The Fund will focus on growth companies in the mid to large capitalization
segments of the market. Investments will be made in companies' where we believe
earnings growth to be in excess of the market and consensus expectations. It is
anticipated that the Fund will address its growth objective, in light of
anticipated market trends, by focuing on approximately 60 stocks which meet the
criteria discussed above. The Fund will remain diversified. The investment
process will be highly systematic and disciplined with a bottom-up selection
process that will drive sector exposures.
The views expressed in this report were those of the Fund's portfolio
managers as of October 31, 1997, and may not reflect the views of the portfolio
managers on the date this report is first published or any time thereafter.
These views are intended to assist shareholders of the Fund in understanding
their investment in the Fund and do not constitute investment advice; investors
should consult their own investment professionals as to their individual
investment programs.
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3
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Schroder U.S. Equity Fund
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INVESTMENT ADVISER'S REPORT - COMPARISON OF CHANGE IN VALUE OF $10,000
INVESTMENT
The following information compares a change in value of a $10,000 investment in
the Fund with the performance of the Standard & Poor's 500 Index (the 'S&P
500'). The S&P 500 is a market weighted index composed of 500 large
capitalization companies and reflects the reinvestment of dividends. The index
excludes the effect of any expenses, which have been deducted from the Fund's
return. Total return and principal value of an investment in the Fund will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. Total return for the Fund assumes reinvestment of
dividends and distributions. The Schroder U.S. Equity Fund's average annual
total return as of the calendar quarter ended September 30, 1997 for the 1, 5
and 10 year periods was 29.85%, 17.00%, and 12.30% respectively. Past
performance cannot predict nor guarantee future results.
[INSERT GRAPH OF $10,000 INVESTMENT]
Caption: Average Annual Total Return on 10/31/97
1 Year 5 Years 10 Years
------ ------- --------
Schroder U.S. Equity Fund 26.49% 15.79% 14.95%
S&P 500 Index 32.01% 19.85% 17.14%
Schroder U.S. Equity Fund S&P 500 Index
------------------------- -------------
10/31/87 10000 $10,000
11/30/87 9123.15 $9,175.9
12/31/87 9719.74 $9,873.9565925
1/31/88 10133.04 $10,288.9589881
2/28/88 10133.04 $10,766.4078410
3/31/88 10407.19 $10,434.2641591
4/30/88 10564.44 $10,549.6566864
5/31/88 10521.55 $10,639.6452579
6/30/88 10836.05 $11,127.5581102
7/31/88 10711.81 $11,085.1509862
8/31/88 10338.98 $10,709.3643678
9/30/88 10673.1 $11,165.1442059
10/31/88 10773.79 $11,475.8255086
11/30/88 10658.71 $11,311.9507203
12/31/88 10888.12 $11,509.1406453
1/31/89 11521.33 $12,349.5726226
2/28/89 11274.23 $12,042.5622472
3/31/89 11351.45 $12,323.1780327
4/30/89 12061.88 $12,962.3319846
5/31/89 12648.76 $13,484.8176622
6/30/89 12417.09 $13,408.9251084
7/31/89 13315.51 $14,618.5442424
8/31/89 13596.17 $14,903.3719584
9/30/89 13549.39 $14,842.6854278
10/31/89 13019.27 $14,498.4835528
11/30/89 13175.19 $14,792.9477537
12/31/89 13546.72 $15,147.6826408
1/31/90 12487.86 $14,131.2731356
2/28/90 12807.2 $14,314.6264046
3/31/90 13210.57 $14,693.6633971
4/30/90 12941.66 $14,327.6442419
5/31/90 14084.56 $15,721.5950779
6/30/90 14067.75 $15,615.6158054
7/31/90 13830.84 $15,565.7082973
8/31/90 12935.81 $14,160.4361522
9/30/90 12175.87 $13,472.2389552
10/31/90 11905.67 $13,415.2918012
11/30/90 12682.5 $14,280.7525212
12/31/90 13004.77 $14,678.3429521
1/31/91 13449.09 $15,315.9848483
2/28/91 14559.88 $16,409.9750140
3/31/91 14935.84 $16,806.9487196
4/30/91 14918.75 $16,846.4450491
5/31/91 15448.51 $17,571.1791151
6/30/91 14816.21 $16,766.7705352
7/31/91 15640.47 $17,547.6158058
8/31/91 16500.78 $17,962.1255864
9/30/91 16191.07 $17,661.4396040
10/31/91 16449.16 $17,897.8909575
11/30/91 15864.15 $17,179.1116566
12/31/91 17982.74 $19,140.4508344
1/31/92 17597.4 $18,783.7493927
2/28/92 17909.34 $19,027.3746223
3/31/92 17579.05 $18,657.7488429
4/30/92 17817.59 $19,204.8313545
5/31/92 18019.44 $19,298.7429798
6/30/92 17230.4 $19,011.7706717
7/31/92 18187.52 $19,788.2874330
8/31/92 18095.39 $19,383.6169550
9/30/92 18850.9 $19,611.4713723
10/31/92 19366.86 $19,678.7975535
11/30/92 20048.66 $20,347.0304820
12/31/92 20721.19 $20,596.6681990
1/31/93 20802.93 $20,768.7121685
2/28/93 20516.84 $21,051.6651031
3/31/93 21477.29 $21,495.8131334
4/30/93 20843.8 $20,976.2593300
5/31/93 21559.03 $21,535.7381188
6/30/93 21252.5 $21,598.6224742
7/31/93 21027.47 $21,511.7312159
8/31/93 22114.75 $22,326.2729184
9/30/93 22504.52 $22,150.0293200
10/31/93 23140.48 $22,607.8482760
11/30/93 22791.73 $22,393.3450116
12/31/93 23311.35 $22,664.1701262
1/31/94 23550.85 $23,433.9586645
2/28/94 23444.4 $22,798.4297055
3/31/94 22113.85 $21,805.7860761
4/30/94 22566.24 $22,085.6415346
5/31/94 22566.24 $22,447.1614009
6/30/94 21821.12 $21,897.4304182
7/31/94 22246.9 $22,615.9508025
8/31/94 23125.07 $23,541.5764370
9/30/94 22459.79 $22,966.9265561
10/31/94 22672.68 $23,481.2019756
11/30/94 21501.79 $22,627.1906597
12/31/94 22096.01 $22,962.1409631
1/31/95 22209.46 $23,557.1359597
2/28/95 23173.86 $24,474.3094912
3/31/95 23599.33 $25,195.3471231
4/30/95 24053.16 $25,936.7706029
5/31/95 24790.64 $26,971.3624454
6/30/95 25272.84 $27,597.3677678
7/31/95 26662.7 $28,512.0549251
8/31/95 26407.42 $28,583.4491106
9/30/95 27116.54 $29,789.0704107
10/31/95 26691.07 $29,682.6936402
11/30/95 27967.47 $30,984.4281698
12/31/95 28288.68 $31,581.2502252
1/31/96 29040 $32,654.8548266
2/28/96 29138 $32,958.4470120
3/31/96 29987.31 $33,275.8368567
4/30/96 30183.31 $33,765.9233819
5/31/96 30738.63 $34,635.3621431
6/30/96 30346.64 $34,767.3575082
7/31/96 28974.67 $33,232.0310006
8/31/96 29889.31 $33,934.0244235
9/30/96 31849.27 $35,842.2703529
10/31/96 31881.93 $36,830.4775888
11/30/96 34821.87 $39,611.9520868
12/31/96 34366.42 $38,827.2393160
1/31/97 36339.61 $41,251.6121389
2/28/97 36504.04 $41,575.4372941
3/31/97 34366.42 $39,870.4286107
4/30/97 35558.56 $42,248.5800661
5/31/97 37531.75 $44,819.1104230
6/30/97 39052.75 $46,825.9757304
7/31/97 42135.86 $50,550.7479699
8/31/97 39587.15 $47,720.9170985
9/30/97 41354.81 $50,332.8737750
10/31/97 40327.1 $48,653.8697716
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4
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Schroder U.S. Equity Fund
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PORTFOLIO CHARACTERISTICS AS OF OCTOBER 31, 1997 (UNAUDITED)
TOP TEN HOLDINGS
SECURITY % OF NET ASSETS
- ----------------------------------------------------------
BankAmerica Corp. 4.75%
General Electric Co. 4.10%
U.S. Bancorp 4.04%
Cisco Systems Inc. 3.91%
Rite Aid Corp. 3.30%
Unum Corp. 3.24%
Wal-Mart Stores Inc. 3.22%
Travelers Group Inc. 3.13%
Procter & Gamble Co. 3.04%
Philip Morris Cos. Inc. 2.94%
---------------
Total 35.67%
---------------
---------------
INVESTMENT BY INDUSTRY
INDUSTRY % OF NET ASSETS
- ----------------------------------------------------------
Financial Services 20.4%
Consumer Staples 19.1%
Technology 14.6%
Capital Goods/Construction 14.4%
Consumer Cyclical 12.0%
Healthcare 11.0%
Energy 4.6%
Basic Materials 1.8%
Transportation 0.3%
Cash and Other Net Assets 1.8%
-------
Total 100.0%
-------
-------
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5
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Schroder U.S. Equity Fund
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SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1997
COMMON STOCK - 98.2%
SHARES VALUE US$
- ------- -----------
BASIC MATERIALS - 1.8%
4,500 E.I. du Pont de Nemours & Co. $ 255,935
-----------
CAPITAL GOODS/
CONSTRUCTION - 14.4%
10,000 Allied-Signal Inc. 360,000
3,600 American Standard Cos. Inc.(a) 128,700
2,400 Caterpillar Inc. 123,000
8,800 General Electric Co. 568,150
3,300 Rockwell International Corp. 161,700
4,500 Stanley Works 190,125
4,300 Sundstrand Corp. 233,813
6,200 Tyco International Ltd. 234,050
-----------
1,999,538
-----------
CONSUMER CYCLICAL - 12.0%
5,200 Gap Inc. 276,577
2,449 Home Depot Inc. 136,226
3,600 McDonald's Corp. 161,325
2,900 McGraw-Hill Cos. Inc. 189,588
7,700 Newell Co. 295,488
5,800 Staples Inc.(a) 152,250
12,700 Wal-Mart Stores Inc. 446,088
-----------
1,657,542
-----------
CONSUMER STAPLES - 19.1%
5,900 American Stores Co. 151,556
2,500 CPC International Inc. 247,500
6,300 Colgate-Palmolive Co. 407,925
6,600 Conagra Inc. 198,825
6,800 Kimberly-Clark Corp. 353,175
10,300 Philip Morris Cos. Inc. 408,138
6,200 Procter & Gamble Co. 421,600
7,700 Rite Aid Corp. 457,184
-----------
2,645,903
-----------
ENERGY - 4.6%
9,000 Noble Drilling Corp.(a) 320,063
3,600 Schlumberger Ltd. 315,000
-----------
635,063
-----------
FINANCIAL SERVICES - 20.4%
9,200 BankAmerica Corp. $ 657,800
2,500 Citicorp 312,656
1,100 FNMA 53,281
12,200 North Fork Bancorporation Inc. 359,138
6,200 Travelers Group Inc. 434,000
5,500 U.S. Bancorp 559,282
9,200 Unum Corp. 448,500
-----------
2,824,657
-----------
HEALTHCARE - 11.0%
5,700 Abbott Laboratories 349,481
4,800 Amgen Inc.(a) 236,400
4,500 Bristol-Myers Squibb Co. 394,875
5,300 Johnson & Johnson 304,088
2,700 Merck & Co. Inc. 240,975
-----------
1,525,819
-----------
TECHNOLOGY - 14.6%
3,800 Automatic Data Processing Inc. 194,275
6,600 Cisco Systems Inc.(a) 541,407
4,500 Diebold Inc. 198,281
3,800 Intel Corp. 292,600
2,500 Microsoft Corp.(a) 325,000
9,000 Sun Microsystems Inc.(a) 308,250
7,200 Sungard Data Systems Inc.(a) 170,100
-----------
2,029,913
-----------
TRANSPORTATION - 0.3%
1,766 Meritor Automotive Inc.(a) 39,404
-----------
Total Investments - 98.2%
(cost $9,458,266) 13,613,774
Other Assets Less
Liabilities - 1.8% 247,376
-----------
Total Net Assets - 100.0% $13,861,150
-----------
-----------
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(a) Non-income producing security.
The accompanying notes are an integral part of the financial statements.
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6
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Schroder U.S. Equity Fund
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STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments (Note 2):
Investments at cost $ 9,458,266
Net unrealized appreciation (depreciation) 4,155,508
-----------
Total Investments at value 13,613,774
Cash and Cash Equivalents (Note 2) 293,115
Interest, dividends and other receivables 13,265
-----------
Total Assets 13,920,154
-----------
LIABILITIES:
Payable to investment adviser (Note 3) 25,364
Payable to subadministrator (Note 3) 1,222
Accrued expenses and other liabilities 32,418
-----------
Total Liabilities 59,004
-----------
Net Assets $13,861,150
-----------
-----------
COMPONENTS OF NET ASSETS:
Paid-in capital $ 5,839,530
Accumulated net realized gain (loss) 3,866,112
Net unrealized appreciation (depreciation) on investments 4,155,508
-----------
Net Assets $13,861,150
-----------
-----------
SHARES OF BENEFICIAL INTEREST 1,412,181
NET ASSET VALUE OFFERING AND REDEMPTION PRICE PER SHARE
(NET ASSETS DIVIDED BY SHARES OF BENEFICIAL INTEREST) $ 9.82
</TABLE>
The accompanying notes are an integral part of the financial statements.
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7
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Schroder U.S. Equity Fund
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STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Year
Ended
October 31, 1997
----------------
<S> <C>
INVESTMENT INCOME:
Dividend income $ 208,569
Interest income 14,098
----------------
Total Investment Income 222,667
----------------
EXPENSES:
Investment advisory (Note 3) 118,887
Subadministration (Note 3) 15,853
Transfer agency (Note 3) 28,813
Custody 6,650
Accounting (Note 3) 36,000
Legal 1,278
Audit 20,755
Registration 15,162
Reporting 14,931
Trustees 431
Miscellaneous 7,246
----------------
Total Expenses 266,006
Fees waived (Note 5) (28,422)
----------------
Net Expenses 237,584
----------------
NET INVESTMENT INCOME (LOSS) (14,917)
----------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments sold 3,881,030
Net change in unrealized appreciation (depreciation) on investments 164,449
----------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 4,045,479
----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $4,030,562
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
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8
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Schroder U.S. Equity Fund
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STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Year Ended October 31,
------------------------------------
1997 1996
---------------- ----------------
<S> <C> <C>
NET ASSETS, BEGINNING OF PERIOD $ 17,186,636 $ 19,687,691
---------------- ----------------
OPERATIONS:
Net investment income (loss) (14,917) 80,462
Net realized gain (loss) on investments sold 3,881,030 3,648,561
Net change in unrealized appreciation (depreciation) on investments 164,449 (368,123)
---------------- ----------------
Net increase (decrease) in net assets resulting from operations 4,030,562 3,360,900
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDER FROM:
Net investment income (41,186) (158,133)
Net realized gain on investments (3,648,561) (2,560,576)
---------------- ----------------
Total distributions to shareholders (3,689,747) (2,718,709)
---------------- ----------------
CAPITAL SHARE TRANSACTIONS:
Sale of shares 187,894 613,444
Reinvestment of distributions 2,684,379 1,811,255
Redemption of shares (6,538,574) (5,567,945)
---------------- ----------------
Net increase (decrease) from capital share transactions (3,666,301) (3,143,246)
---------------- ----------------
Net increase (decrease) in net assets (3,325,486) (2,501,055)
---------------- ----------------
NET ASSETS, END OF PERIOD (INCLUDING LINE A) $ 13,861,150 $ 17,186,636
---------------- ----------------
---------------- ----------------
(A) Accumulated undistributed net investment income (loss) $ -- $ 41,186
---------------- ----------------
---------------- ----------------
SHARE TRANSACTIONS
Sale of shares 20,314 66,732
Reinvestment of distributions in shares 324,592 207,563
Redemption of shares (693,796) (605,228)
---------------- ----------------
Net increase (decrease) in shares (348,890) (330,933)
---------------- ----------------
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
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Schroder U.S. Equity Fund
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FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a share outstanding throughout each
period:
<TABLE>
<CAPTION>
For the Year Ended October 31,
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 9.76 $ 9.41 $ 8.52 $ 11.28 $ 10.51
------- ------- ------- ------- -------
Investment Operations
Net Investment Income (Loss) (0.01) 0.04 0.07 0.04 0.05
Net Realized and Unrealized Gain (Loss) on
Investments 2.20 1.62 1.33 (0.27) 1.86
------- ------- ------- ------- -------
Total from Investment Operations 2.19 1.66 1.40 (0.23) 1.91
------- ------- ------- ------- -------
Distributions From
Net Investment Income (0.02) (0.07) (0.05) (0.01) (0.04)
Net Realized Gain on Investments (2.11) (1.24) (0.46) (2.52) (1.10)
------- ------- ------- ------- -------
Total Distributions (2.13) (1.31) (0.51) (2.53) (1.14)
------- ------- ------- ------- -------
Net Asset Value, End of Period $ 9.82 $ 9.76 $ 9.41 $ 8.52 $ 11.28
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total Return (a) 26.49% 19.45% 17.68% (2.01)% 19.49%
Ratio/Supplementary Data
Net Assets at End of Period (in thousands) $13,861 $17,187 $19,688 $18,483 $21,865
Ratios to Average Net Assets:
Expenses including waiver of fees 1.50% 1.40% 1.40% 1.31% 1.18%
Expenses excluding waiver of fees 1.68% 1.43% N/A N/A N/A
Net investment income (loss) including waiver
of fees (0.09)% 0.43% 0.78% 0.41% 0.51%
Average Commission Rate Per Share (b) $0.0563 $0.0599 N/A N/A N/A
Portfolio Turnover Rate 44.28% 56.80% 57.21% 27.43% 57.78%
</TABLE>
- ------------------
(a) Total Returns would have been lower had certain expenses not been reduced
during the period shown (see Note 5).
(b) For the fiscal years beginning on or after September 1, 1995, the Fund is
required to disclose average commission per share paid to brokers on the
purchase and sale of equity securities on which commissions are charged.
The accompanying notes are an integral part of the financial statements.
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10
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Schroder U.S. Equity Fund
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NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
Schroder Capital Funds (Delaware) (the 'Trust') was organized as a
Maryland corporation on July 30, 1969; reorganized as a series company on
February 29, 1988, as Schroder Capital Funds, Inc. and reorganized on January
9, 1996, as a Delaware business trust. The Trust, which is registered as an
open-end, management investment company under the Investment Company Act of
1940 (the 'Act'), currently has eight investment portfolios. Included in this
report is the Schroder U.S. Equity Fund (the 'Fund'), a diversified portfolio
that commenced operations on October 31, 1970. Under its Trust Instrument,
the Trust is authorized to issue an unlimited number of the Funds Investor
Shares and Advisor Shares of beneficial interest without par value. As of
October 31, 1997, only Investor Shares had been issued.
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
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. Short-term investments, having a maturity of 60 days or less, are
valued at amortized cost which approximates market value. Prices used for
valuations may be provided by independent pricing services. Other securities
and assets for which market quotations are not readily available are valued
at fair value as determined in good faith using methods approved by the Board
of Trustees.
CASH EQUIVALENTS
The Fund considers all deposits and the related interest income in the
Chase Money Market Account to be cash equivalents.
INVESTMENT INCOME
Dividend income is recorded on the ex-dividend date. Interest income is
recorded on an accrual basis.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends and capital gain distributions, if any, are distributed to
shareholders at least annually. Distributions are based on amounts calculated
in accordance with applicable federal income tax regulations, which may
differ from generally accepted accounting practices. 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.
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11
<PAGE>
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Schroder U.S. Equity Fund
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FEDERAL TAXES
The Fund intends to qualify and continue to qualify each year as a
regulated investment company and distribute all of its taxable income. In
addition, by distributing in each calendar year substantially all of its net
investment income, capital gain and certain other amounts, if any, the Fund
will not be subject to a federal excise tax. Therefore, no federal income or
excise tax provision is required.
EXPENSE ALLOCATION
The Trust accounts separately for the assets and liabilities and
operation of each Fund. Expenses that are directly attributable to more than
one Fund are allocated among the respective Funds.
REALIZED GAIN AND LOSS
Security transactions are recorded on trade date. Realized gain and
loss on investments sold are recorded on the basis of identified cost for
both financial statement and federal income tax purposes.
NOTE 3. INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
The investment adviser to the Fund is Schroder Capital Management
International Inc. ('SCMI'). Pursuant to an Investment Advisory Agreement,
SCMI is entitled to receive a fee for its services at the annual rate,
payable monthly, of 0.75% of the first $100 million of the Fund's average
daily net assets and 0.50% of the Fund's average daily net assets in excess
of $100 million. SCMI voluntarily has undertaken to waive a portion of its
fees in order to limit fees paid for the Fund's investment advisory services
to 0.65% of its average daily net assets. This fee waiver cannot be withdrawn
except by a majority vote of the Trustees of the Trust who are not affiliated
persons (as defined in the Act) of the Trust. Prior to November 26, 1996, the
total advisory fees paid by the Fund to SCMI represented an annual effective
rate of 0.75% of the Fund's average daily net assets.
SUBADMINISTRATOR
The Trust has entered into a Subadministration Agreement with Forum
Administrative Services, LLC ('Forum'). Under the Subadministration
Agreement, Forum is entitled to receive a fee payable monthly at the annual
rate of 0.10% of the Fund's average daily net assets. Prior to November 26,
1996, the Trust, SCMI and Schroder Fund Advisors Inc. had entered into a
Subadministration Agreement with Forum Financial Services, Inc.(Registered)
('FFSI') that had substantially similar terms except payment for FFSIs
services was made by SCMI and was not a separate expense of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
The transfer agent and dividend disbursing agent for the Fund is Forum
Financial Corp.(Registered) ('FFC'). The transfer agent is paid a transfer
agent fee in the amount of $12,000 per year, plus certain other fees and
expenses.
OTHER SERVICE PROVIDERS
FFC is the Fund's fund accountant. For its services to the Fund, FFC is
entitled to receive from the Trust a fee of $36,000 per year plus certain
additional charges.
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12
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Schroder U.S. Equity Fund
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. PURCHASES AND SALES OF SECURITIES
The cost of securities purchased and the proceeds from sales of
securities (excluding short-term investments) for the year ended October 31,
1997, aggregated $6,814,160 and $13,984,935, respectively.
For federal income tax purposes, the tax basis of investment securities
owned as of October 31, 1997 was $9,458,808 and the net unrealized
appreciation of investment securities was $4,154,966. The aggregate gross
unrealized appreciation for all securities in which there was an excess of
market value over tax cost was $4,349,463, and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost over
market value was $194,497.
NOTE 5. WAIVER OF FEES
SCMI voluntarily has waived a portion of its fee so that the Fund's
total expenses would not exceed 1.50% of the Fund's average daily net assets
on an annual basis. The expense limitation cannot be modified or withdrawn
except by a majority vote of the Trustees of the Trust who are not affiliated
persons (as defined in the 40 Act) of the Trust. Forum and FFC may waive
voluntarily all or a portion of their fees, from time to time. For the years
ended October 31, 1997 and 1996, SCMI waived fees of $28,422 and $4,355,
respectively.
- ------------------------
SUPPLEMENTARY INFORMATION (UNAUDITED)
A meeting of the Shareholders of the Schroder Capital Funds was held on
December 9, 1997 at the offices of the Trust, 787 Seventh Avenue, New York,
New York.
PROXY VOTE
The proxy had one proposal of which the following relate to the fund in
this report.
PROPOSAL 1.
Election of Trustees. (For Shareholders of all Funds)
Each nominee was elected by shareholders. The vote is listed below.
<TABLE>
<CAPTION>
% OF TRUST
FOR VOTED
---------- ----------
<S> <C> <C>
Hon. David N. Dinkins........................ 14,626,220 42.12%
Mr. Peter S. Knight.......................... 14,626,220 42.12%
Ms. Sharon L. Haugh.......................... 14,626,220 42.12%
</TABLE>
The Trustees have approved a change in the calculation of fees payable
to the Trustees of the Trust effective November 1, 1997. Fees will be
calculated and payable as follows: Trustees will receive an annual retainer
of $11,000 for their services as Trustees of all open end investment
companies distributed by Schroder Fund Advisors Inc., and $1,250 per meeting
attended in person or $500 per meeting attended by telephone. Members of an
Audit Committee for one or more of the investment companies will receive an
additional $1,000 per year. Payment of the annual retainer will be allocated
among the various investment companies based on their relative net assets.
Payment of meeting fees will be allocated only among those investment
companies to which the meeting relates.
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13
<PAGE>
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Schroder U.S. Equity Fund
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SUPPLEMENTARY INFORMATION (UNAUDITED) (CONTINUED)
DISTRIBUTIONS
For federal income tax purposes, dividends from short-term capital
gains are classified as ordinary income. The percentage of qualifying
dividends eligible for corporate dividends received deduction is 70.74%.
During the fiscal year ended October 31, 1997, the Fund distributed
$3,062,947 in long term capital gain to shareholders.
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14
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Schroder U.S. Equity Fund
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Schroder Capital Funds (Delaware) and Shareholders of
Schroder U.S. Equity Fund:
We have audited the accompanying statement of assets and liabilities of the
Schroder U.S. Equity Fund (a separately managed portfolio of Schroder Capital
Funds (Delaware)), including the schedule of investments, as of October 31,
1997, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended and the financial highlights for each of the five years in the period then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Schroder U.S. Equity Fund as of October 31, 1997, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended and the financial highlights for each of the five years
in the period then ended, in conformity with generally accepted accounting
principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
December 19, 1997
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15
<PAGE>
TRUSTEES
Hermann C. Schwab
Peter E. Guernsey
John I. Howell
Clarence F. Michalis
Mark J. Smith
OFFICERS
Hermann C. Schwab
Chairman of the Board
Mark J. Smith
President
Mark Astley
Vice President
Robert G. Davy
Vice President
Margaret H. Douglas-Hamilton
Vice President
Richard Foulkes
Vice President
John Y. Keffer
Vice President
Jane Lucas
Vice President
Catherine A. Mazza
Vice President
Michael Perelstein
Vice President
Fariba Talebi
Vice President
John A. Troiano
Vice President
Ira L. Unschuld
Vice President
Alexandra Poe
Vice President
Secretary
Thomas G. Sheehan
Assistant Treasurer
Assistant Secretary
Catherine S. Wooledge
Assistant Treasurer
Assistant Secretary
Barbara Gottlieb
Assistant Secretary
Mary Kunkemueller
Assistant Secretary
Gerardo Machado
Assistant Secretary
<PAGE>
INVESTMENT ADVISER
Schroder Capital Management International Inc.
787 Seventh Avenue, 34th Floor
New York, New York 10019
ADMINISTRATOR & DISTRIBUTOR
Schroder Fund Advisors Inc.
787 Seventh Avenue, 34th Floor
New York, New York 10019
CUSTODIAN
The Chase Manhattan Bank
Chase MetroTech Center
Brooklyn, New York 11245
TRANSFER AND DIVIDEND
DISBURSING AGENT
Forum Financial Corp.
Two Portland Square
Portland, Maine 04101
COUNSEL
Ropes & Gray
One International Place
Boston, Massachusetts 02110
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
This report is for the information of the shareholders of the Schroder U.S.
Equity 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
U.S. Equity
Fund
ANNUAL REPORT
October 31, 1997
Schroder Capital Funds (Delaware)