[LOGO] Schroders
Schroder
Micro Cap Fund
SEMI-ANNUAL REPORT
November 30, 1997
(Unaudited)
Schroder Capital Funds
(Delaware)
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SCHRODER MICRO CAP FUND
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Two Portland Square, Portland Maine 04101
General Information (207) 879-6200
Account Information (800) 344-8332
Fund Literature (800) 290-9826
Fax (207) 879-6050
INVESTMENT OBJECTIVE
The Fund's investment objective is long-term capital appreciation. It seeks to
achieve its objective by investing at least 65% of its total assets in equity
securities of U.S. domiciled micro cap companies. A micro cap company is a
company with, at the time of initial purchase, a market capitalization in the
bottom one third of companies in the Russell 2000(R) Growth Index (measured by
capitalization); in addition, any company with a market capitalization of $300
million or less is considered a micro cap company.
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. As of September 30, 1997, the Schroder Group had over $175
billion in assets under management. At the same date, the Investment Adviser,
together with its U.K. affiliate, Schroder Capital Management International
Ltd., had over $28 billion under management.
January 15, 1998
Dear Shareholder:
The first six weeks of your Fund's operations were a very challenging period in
the market. During this time, turmoil in Asia had spread to the U.S. and market
volatility increased significantly. On October 27, 1997, less than two weeks
after the Fund was launched, the U.S. equity market experienced its sharpest one
day decline in several years, with the Dow Jones Industrial Average declining by
over 550 points. Despite the market decline, management is pleased to report
that the Fund performed well during the reporting period (October 15, 1997 -
November 30, 1997), rising by 3.74%, compared with a 6.96% decline for the
Russell 2000(R) Index and a 0.85% decline for the S&P 500(R) Index.
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Fund Management follows a growth at a reasonable price approach to investing. As
a result, the Fund is invested in companies that management believes have
revenues and cash flow as well as earnings and cash flow growth prospects that
are not yet fully reflected in the share price. This approach benefitted the
Fund during the volatile time in the market, as these stocks performed better
than those with great prospects but little in the way of current revenues or
earnings. Given the very large number of public companies in the micro cap
universe, management believes that this investment approach will continue to
bear fruit in the long-term.
Thank you for your interest in the Schroder Micro Cap Fund.
Sincerely,
Mark J. Smith
President
2
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SCHRODER MICRO CAP FUND
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MANAGEMENT DISCUSSION AND ANALYSIS (AS OF NOVEMBER 30, 1997)
Management acted cautiously when making the Fund's initial investments by
maintaining the discipline of investing in underfollowed and unappreciated
companies that offer the potential of superior earnings growth. Management
believes very strongly in balancing risk and return and liquidity and return
and, thus, tends to avoid many of the "high flyers" and institutional favorites.
Instead, the focus is on companies trading at more reasonable valuations.
Indeed, many of the companies that were added to the Fund have little or no Wall
Street coverage, and most are trading at attractive valuations, relative to
their earnings growth prospects and to the valuations of their better known
peers. In all, the Fund is now 72.7% invested, divided across a wide variety of
industries.
Looking forward, management continues to search for companies that can grow
their earnings independently of the economic cycle. We believe that many smaller
companies offer more attractive investment opportunities than larger companies
based on valuation and growth rates. Furthermore, because smaller companies tend
to serve the domestic market, they should be less affected by the recent
weakness in Southeast Asia than larger companies. The U.S. continues to have a
very entreprenurial economy and, thus, provides a continually growing supply of
attractive investment opportunities. In the future, the Fund's management will
remain focused on individual stock selection and will seek to concentrate on
underfollowed and misunderstood companies that can offer the potential of
superior earnings growth.
THE VIEWS EXPRESSED IN THIS REPORT WERE THOSE OF THE FUND'S PORTFOLIO MANAGERS
AS OF THE DATES SPECIFIED 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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SCHRODER MICRO CAP FUND
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PORTFOLIO CHARACTERISTICS AS OF NOVEMBER 30, 1997
<TABLE>
<S> <C> <S> <C>
TOP TEN HOLDINGS INVESTMENT BY INDUSTRY
SECURITY % OF NET ASSETS INDUSTRY % OF NET ASSETS
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Allied Capital Advisors Inc. 4.49% Consumer Cyclicals 20.05%
Tuesday Morning Corp. 3.93% Financial 16.38%
Priority Healthcare Corp. 3.58% Technology 10.70%
White Cap Industries Inc. 3.43% Health Care 9.20%
Pillowtex Corp. 3.42% Capital Equipment 5.63%
Fred's Inc. 3.36% Energy 3.23%
Baldwin Technology Co. Inc. 3.18% Transportation/Services/Misc. 2.83%
Young Innovations Inc. 3.09% Basic Materials 2.47%
Innovative Valve Technologies Inc. 2.83% Capital Goods/Construction 2.21%
PAULA Financial 2.78% Cash & Other Net Assets 27.30%
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Total 34.09% Total 100.00%
====== ========
</TABLE>
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SCHRODER MICRO CAP FUND
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SCHEDULE OF INVESTMENTS
AS OF NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
COMMON STOCK - 72.7%
SHARES VALUE US$
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BASIC MATERIALS - 2.5%
16,400 Bayou Steel Corp. (a) $ 59,450
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CAPITAL EQUIPMENT - 5.6%
1,500 Lufkin Industries Inc. 52,875
4,300 White Cap Industries Inc. (a) 82,506
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135,381
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CAPITAL GOODS/
CONSTRUCTION - 2.2%
3,800 Group Maintenance America Corp. (a) 53,200
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CONSUMER CYCLICALS - 20.1%
4,800 Cato Corp. 44,400
1,000 Cost Plus Inc. (a) 33,125
3,300 Fred's Inc. 80,850
7,000 Musicland Stores Corp. (a) 38,063
3,600 O'Charleys Inc. (a) 64,800
3,100 Pillowtex Corp. 82,150
3,200 PJ America Inc. (a) 44,000
3,800 Tuesday Morning Corp. (a) 94,525
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481,913
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ENERGY - 3.2%
3,700 Coho Energy Inc. (a) 37,694
2,400 Domain Energy Corp. (a) 39,900
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77,594
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FINANCIAL - 16.4%
18,000 Allied Capital Advisors Inc. (a) 108,000
800 Cenit Bancorp Inc. 54,400
1,800 Duff & Phelps Credit Rating Co. 64,688
800 Harbor Florida Bancorp Inc. 52,000
3,000 PAULA Financial (a) 66,750
1,000 Resource America Inc. 48,000
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393,838
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HEALTH CARE - 9.2%
2,500 ChiRex Inc. (a) 60,938
5,500 Priority Healthcare Corp. (a) 85,938
</TABLE>
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SCHRODER MICRO CAP FUND
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SCHEDULE OF INVESTMENTS (CONCLUDED)
AS OF NOVEMBER 30, 1997 (UNAUDITED)
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<S> <C> <C> <C>
SHARES VALUE US$
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HEALTH CARE (CONCLUDED)
5,000 Young Innovations Inc. (a) 74,375
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221,251
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TECHNOLOGY - 10.7%
15,300 Baldwin Technology Co. Inc. (a) $ 76,500
4,000 International Manufacturing Services Inc. (a) 40,500
3,600 MAPICS Inc. (a) 40,050
3,000 OYO Geospace Corp. (a) 47,810
2,000 Pomeroy Computer Resources Inc. (a) 50,000
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254,860
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TRANSPORTATION/SERVICES/MISCELLANEOUS - 2.8%
4,000 Innovative Valve Technologies Inc. (a) 68,000
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Total Common Stock (cost $1,711,537) 1,745,487
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PAR
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REPURCHASE AGREEMENTS - 11.9%
287,000 Chase Securities, Inc., 5.63%, 12/1/97, to be repurchased at
$287,135. Collateralized by Par $275,000 U.S. Treasury
Notes, 7.75%, 12/31/99 (cost $287,000) 287,000
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U.S. TREASURY OBLIGATIONS - 16.6%
U.S. TREASURY BILLS - 16.6%
400,000 4.69%, 12/4/97 (cost $399,846) 399,846
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Total Investments - 101.2% (cost $2,398,383) 2,432,333
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Other Assets Less Liabilities - (1.2)% (28,548)
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Total Net Assets - 100.0% $ 2,403,785
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</TABLE>
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(a) Non-income producing security.
The accompanying notes are an integral part of the financial statements.
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SCHRODER MICRO CAP FUND
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STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1997 (UNAUDITED)
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ASSETS:
Investments (Note 2):
Investments at cost $ 2,111,383
Repurchase agreement at cost 287,000
Net unrealized appreciation (depreciation) 33,950
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Total Investments at value 2,432,333
Cash 662
Receivable for investments sold 36,749
Receivable from administrator (Note 3) 3,492
Interest and dividend receivables 994
Organization costs, net of amortization (Note 2) 5,895
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Total Assets 2,480,125
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LIABILITIES:
Payable for investments purchased 63,333
Payable to subadministrator (Note 3) 194
Accrued expenses 12,813
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Total Liabilities 76,340
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NET ASSETS $ 2,403,785
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COMPONENTS OF NET ASSETS:
Paid-in capital $ 2,320,020
Undistributed net investment income (loss) 1,819
Accumulated net realized gain (loss) 47,996
Net unrealized appreciation (depreciation) on investments 33,950
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NET ASSETS $ 2,403,785
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SHARES OF BENEFICIAL INTEREST 231,702
NET ASSET VALUE OFFERING AND
REDEMPTION PRICE PER SHARE
(NET ASSETS / SHARES OF BENEFICIAL INTEREST) $ 10.37
</TABLE>
The accompanying notes are an integral part of the financial statements.
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SCHRODER MICRO CAP FUND
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STATEMENT OF OPERATIONS
FOR THE PERIOD OCTOBER 15, 1997 (COMMENCEMENT OF OPERATIONS) THROUGH
NOVEMBER 30, 1997 (UNAUDITED)
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INVESTMENT INCOME:
Interest income 6,873
Dividend income $ 911
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Total Investment Income 7,784
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EXPENSES:
Investment advisory (Note 3) 3,733
Administration (Note 3) 747
Subadministration (Note 3) 299
Transfer agency (Note 3) 1,569
Accounting (Note 3) 4,645
Audit 1,344
Amortization of organization costs (Note 2) 105
Registration 21,466
Miscellaneous 206
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Total Expenses 34,114
Fees waived and expenses reimbursed (Note 5) (28,149)
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Net Expenses 5,965
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NET INVESTMENT INCOME (LOSS) 1,819
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NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on investments sold 47,996
Net change in unrealized appreciation (depreciation) on
investments 33,950
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NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS 81,946
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NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ 83,765
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</TABLE>
The accompanying notes are an integral part of the financial statements.
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SCHRODER MICRO CAP FUND
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STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD OCTOBER 15, 1997 (COMMENCEMENT OF OPERATIONS) THROUGH
NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<S> <C>
NET ASSETS, BEGINNING OF PERIOD $ -
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OPERATIONS:
Net investment income (loss) 1,819
Net realized gain (loss) on investments sold 47,996
Net change in unrealized appreciation (depreciation) on investments 33,950
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Net increase (decrease) in net assets resulting from operations 83,765
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CAPITAL SHARE TRANSACTIONS:
Sale of shares 2,320,020
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Net increase (decrease) from capital share transactions 2,320,020
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Net increase (decrease) in net assets 2,403,785
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NET ASSETS, END OF PERIOD (INCLUDING LINE A) $ 2,403,785
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(A) Accumulated undistributed net investment income (loss) $ 1,819
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SHARE TRANSACTIONS
Sale of shares 231,702
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Net increase (decrease) in shares 231,702
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</TABLE>
The accompanying notes are an integral part of the financial statements.
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SCHRODER MICRO CAP FUND
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FINANCIAL HIGHLIGHTS - INVESTOR SHARES
Selected per share data and ratios for an Investor share outstanding throughout
the period:
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Period Ended
November 30, 1997 (a)
(Unaudited)
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Net Asset Value, Beginning of Period $10.00
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Investment Operations
Net Investment Income (Loss) 0.01
Net Realized and Unrealized Gain (Loss) on Investments 0.36
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Total from Investment Operations 0.37
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Net Asset Value, End of Period $10.37
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Total Return (b) 3.70%(c)
Ratio/Supplementary Data
Net Assets at End of Period (in thousands) $2,471
Ratios to Average Net Assets:
Expenses including reimbursement/waiver of fees 2.00%(d)
Expenses excluding reimbursement/waiver of fees 11.42%(d)
Net investment income (loss) including reimbursement/waiver of fees 0.07%(d)
Average Commission Rate Per Share (e) $0.0595
Portfolio Turnover Rate 32.64%
</TABLE>
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(a) The Fund commenced operations on October 15, 1997.
(b) Total returns would have been lower had certain expenses not been reduced
during the period shown (see Note 5).
(c) Not annualized.
(d) Annualized
(e) Amount represents the average commission per share paid to brokers on the
purchase and sale of equity securities on which commissions are charged.
The accompanying notes are an integral part of the financial statements.
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SCHRODER MICRO CAP FUND
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NOTES TO FINANCIAL STATEMENTS (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 Micro Cap Fund (the "Fund"), a diversified portfolio that commenced
operations on October 15, 1997. Under its Trust Instrument, the Trust is
authorized to issue an unlimited number of the Fund's Investor Shares of
interest without par value.
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 proceeding 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.
REPURCHASE AGREEMENTS - The Fund may invest in repurchase agreements. The Fund,
through its custodian, receives delivery of the underlying collateral, whose
market value must always equal or exceed the repurchase price. The investment
adviser is responsible for determining the value of the underlying collateral at
all times. In the event of default, the Fund may have difficulties with the
disposition of any securities held as collateral.
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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SCHRODER MICRO CAP FUND
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NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
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.
ORGANIZATIONAL COSTS - Costs incurred by the Portfolio in connection with its
organization and initial registration are being amortized on a straight line
basis over a five year period.
NOTE 3. INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER - Schroder Capital Management International Inc. ("SCMI") is
the investment adviser. Pursuant to an Investment Advisory Agreement, SCMI is
entitled to receive an annual fee, payable monthly, of 1.25% of the average
daily net assets of the Fund
ADMINISTRATIVE SERVICES - The Trust has entered into an administrative agreement
with Schroder Advisors and a subadministration agreement with Forum
Administrative Services, LLC ("Forum"). Under these agreements, Schroder
Advisors and Forum are entitled to receive compensation at an annual rate of
0.25% and 0.10%, respectively, of the average daily net assets of the Fund
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT - The transfer agent and dividend
disbursing agent for the Fund is Forum Financial Corp.(R) ("FFC"). The transfer
agent is paid a transfer agent fee in the amount of $12,000 per year, plus
certain other fees and expenses.
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.
NOTE 4. PURCHASES AND SALES OF SECURITIES
The cost of securities purchased and the proceeds from sales of securities
(excluding short-term investments) for the period ended November 30, 1997,
aggregated $2,199,828 and $536,297, respectively.
For federal income tax purposes, the tax basis of investment securities owned as
of November 30, 1997 was $2,398,383 and the net unrealized appreciation of
investment securities was $33,950. The aggregate gross unrealized appreciation
for all securities in which there was an excess of market value over tax cost
was $111,924 and aggregate gross unrealized depreciation for all securities in
which there was an excess of tax cost over market value was $77,974.
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SCHRODER MICRO CAP FUND
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NOTES TO FINANCIAL STATEMENTS (CONCLUDED) (UNAUDITED)
NOTE 5. WAIVER OF FEES
SCMI voluntarily has waived a portion of its fee and has assumed certain
expenses of the Fund so that its total expenses would not exceed 2.00% of the
average daily net assests of the Fund 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 Act) of the Trust. Forum
and FFC may waive voluntarily all or a portion of their fees, from time to time.
For the six weeks ended November 30, 1997, SCMI waived fees of $4,480, and
reimbursed fees of $23,669.
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SUPPLEMENTARY INFORMATION (UNAUDITED)
A meeting of the Shareholders of the Schroder Capital Funds (Deleware) was held
on December 9, 1997 at the offices of the Investment Advisor (SCMI), 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>
<S> <C> <C>
% of Trust
For Voted
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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.
13
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TRUSTEES
Hermann C. Schwab
Peter E. Guernsey
John I. Howell
Clarence F. Michalis
Mark J. Smith
David N. Dinkins
Sharon L. Haugh
Peter S. Knight
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
Fergal Cassidy
Treasurer
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INVESTMENT ADVISER
Schroder Capital Management International Inc.
787 Seventh Avenue
New York, New York 10019
ADMINISTRATOR & DISTRIBUTOR
Schroder Fund Advisors Inc.
787 Seventh Avenue
New York, New York 10019
CUSTODIAN
The Chase Manhattan Bank, N.A.
Chase MetroTech Center
Brooklyn, New York 11245
TRANSFER AND DIVIDEND DISBURSING AGENT
Forum Financial Corp.
P.O.Box 446
Portland, Maine 04112
COUNSEL
Ropes & Gray
One International Place
Boston, Massachusettes 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 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.
