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Schroder International 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 seeks long-term capital appreciation through investment in securities
markets outside the United States. Securities are selected on the basis of
potential for capital appreciation without regard for current income. The Fund
currently seeks to achieve its investment objective by investing all of its
investable assets in International Equity Fund (the 'Portfolio'), a registered
open-end investment company with substantially the same investment objective and
policies of the Fund. The enclosed annual report includes the financial
statements of both the Fund and the Portfolio.
INVESTMENT ADVISER
Schroder Capital Management International Inc. 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 managment
operations of the Schroder Group are located in 20 countries worldwide. The
Schroder Group has been managing international investment portfolios since the
early years of this century. At the end of the last calendar quarter, September
30, 1997, the Schroder Group had over $175 billion in assets under management.
At that 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 fiscal year ended October 31, 1997 was a challenging one for
international investors. For the twelve months ended October 31, 1997, the
Schroder International Fund outperformed the Morgan Stanley Capital
International ('MSCI') EAFE(Registered) benchmark by 3.57%. The Fund returned
8.33% over this period, while the index returned only 4.76%. For the six months
ended October 31, 1997, the Fund returned 1.83% compared to the benchmark, which
returned 3.05% for the same period.
Management's stock selection contributed to two-thirds of the Fund's
outperformance, while top-down decisions were responsible for one-third of the
value added. Stock picking was particularly effective in Japan, Sweden, France,
Brazil, Australia and the Philippines. Strong stock selection performance across
a variety of regions reflects the broad-based local research resources of the
Schroder Group. In Japan alone, the Fund exceeded the local benchmark by 17.8%,
reflecting management's emphasis on high-quality growth stocks and the absence
of bank holdings.
Management's best country decisions were to overweight, versus the MSCI
EAFE index, the Netherlands (+32% in the fiscal year), Switzerland (+31%), and
Brazil (+19%) and to underweight Japanese equities (-18%). As the dollar rose
during most of the year, management's active hedging of Japanese and European
currencies also added significant value to performance.
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Schroder International Fund
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Fund management anticipates volatile market conditions to persist over the
next six months. Under those conditions, management intends to focus on high
growth companies and will continue to play a pro-active role in country
allocations. Laggard markets, like Singapore and Italy, are expected to perform
well, and Continental Europe appears to be in a good economic cycle with room
for growth.
Thank you for your continuing support and interest in the Schroder
International Fund.
Sincerely,
Mark J. Smith
President
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Schroder International Fund
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MANAGEMENT DISCUSSION AND ANALYSIS (As of October 31, 1997)
Q: What is the Fund's overall investment strategy?
A : Equity markets have become more turbulent in recent months. In this new
market environment, Fund management believes that the current stock selection
strategy should continue to perform well. Through Schroder's global network of
offices, we seek to identify high-quality growth stocks and look to buy them at
a reasonable price. This approach means that the portfolio should perform well
in a discriminating environment. Country allocation is also becoming more
selective, focusing on overlooked or underfollowed markets that appear to offer
improved earnings with modest valuations.
Q: Earlier in the year, management reduced the Fund's exposure in selected Asian
markets. Will the Fund continue to reduce its exposure in these markets or are
there favorable long-term growth prospects in Asia?
A : Since March 1997, when the Fund reduced its exposure in Malaysia, management
has continuously cut back on its Asian positions. Management believes that the
currency, interest rate, and equity turmoil in Asia negatively impacts the
underlying fundamentals for the region over the next twelve months. From a
macroeconomic perspective, the combination of higher interest rates and falling
equity prices means that economic growth will be scaled back sharply in the
region over the next year. From an equity perspective, corporate earnings
estimates will be trimmed for most companies, more of which unfortunately are
interest-rate sensitive.
In the long-term, management believes these economies and markets will recover
through strong exports. The prospects for a recovery could be sooner if central
banks in the region lower interest rates and stop defending exchange rate
targets.
Q: What is the Fund's outlook on Japan?
A : During the fiscal year, management has been reducing its position in
Japanese equities and concentrating positions in high-quality, export-oriented
companies, which are performing well on the back of a more competitive currency.
We have no holdings in the Japanese banking sector, which has been performing
particularly poorly due to the overhang of bad debt. While the Japanese market's
valuation is improving, a recovery in the stock market can only be sparked by an
expectation of a substantial upturn in the Japanese economy. That upturn
requires a U-turn in government policy away from fiscal consolidation and
towards fiscal expansion, or a substantially weaker yen. We are partially
protecting the portfolio against the possibility of a weakening yen.
Q: Is the Fund concentrated in any particular region?
A : The Fund is most heavily concentrated in Continental European equities,
which comprise over 40% of total exposure. Continental Europe is in a favorable
part of the economic cycle for equities, as economies are expanding and
corporate earnings estimates are being revised upward. In addition, many
European companies are copying the successful corporate model of the United
States, focusing on maximizing shareholder value.
In Asia, management is obviously more selective, and, at the end of the fiscal
year, the Fund's only overweighting was Singapore. We believe Singapore will
benefit directly from the gathering export boom in Southeast Asia, as Singapore
is the service and transportation hub of the region.
In the emerging markets, the Fund's largest position is Chile (0.8%). Chile
currently appears to be the least vulnerable market to foreign capital outflows,
which means it is functioning as a safe haven in time of global equity market
volatility.
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Schroder International Fund
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Q: What is the Fund's position in the emerging markets? Will we see continued
economic growth in Latin American markets?
A : Management scaled back exposure in emerging markets over the summer and fall
and is now concerned that the Asian problems could spread to Latin America.
Brazil appears particularly vulnerable to an attack on its currency, as its
trade deficit worsens.
Latin America has enjoyed a strong cyclical upswing in the past couple of years.
The region has ridden on the coattails of a vigorous U.S. economy, and we
believe U.S. growth should remain firm in the year ahead. Latin America is quite
dependent, however, on foreign capital inflows. Deterioration in foreign
investors' confidence in the region's currencies could slow growth there, just
as it has done in Asia.
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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Schroder International 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 Morgan Stanley Capital International
Europe, Australasia, Far East Index (the 'MSCI EAFE'). The MSCI EAFE is a market
weighted index composed of companies representative of the market structure of
20 Developed Market countries in Europe, Australasia and the Far East, 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 International Fund's average annual total return as
of the calendar quarter ended September 30, 1997 for the 1, 5 and 10 year
periods was 13.67%, 14.34%, and 7.94% 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 International Fund 8.33% 13.36% 9.83%
MSCI EAFE Index 4.76% 11.93% 6.88%
[PLOT POINTS TO COME]
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Schroder International Fund
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PORTFOLIO CHARACTERISTICS AS OF OCTOBER 31, 1997 (UNAUDITED)
COUNTRY WEIGHTINGS
COUNTRY % OF NET ASSETS MSCI EAFE INDEX
- -----------------------------------------------------------
Japan 18.6% 28.7%
United Kingdom 14.7% 21.1%
Netherlands 9.5% 5.6%
Switzerland 9.4% 7.3%
France 7.7% 7.1%
Germany 5.3% 9.2%
Italy 2.9% 3.7%
Australia 2.4% 2.6%
Sweden 2.3% 2.6%
Singapore 1.9% 0.9%
Portugal 1.5% 0.0%
Hong Kong 1.4% 2.8%
Spain 0.9% 2.5%
Chile 0.8% 0.0%
Denmark 0.6% 1.0%
Malaysia 0.4% 1.1%
Mexico 0.4% 0.0%
Argentina 0.4% 0.0%
Korea, Republic of 0.3% 0.0%
Indonesia 0.3% 0.0%
Finland 0.3% 0.8%
Austria 0.3% 0.4%
Belgium 0.2% 1.2%
Philippines 0.1% 0.0%
Cash and Other Net
Assets 17.4% 0.0%
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Total 100.0%
---------------
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INVESTMENT BY INDUSTRY
INDUSTRY % OF NET ASSETS
- ----------------------------------------------------------
Services 19.43%
Capital Equipment 18.81%
Finance 14.61%
Materials 6.84%
Energy 6.62%
Consumer Non-Durables 6.20%
Consumer Durables 5.74%
Multi-Industry 4.27%
Cash and Other Net Assets 17.48%
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Total 100.0%
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TOP TEN HOLDINGS
SECURITY % OF NET ASSETS
- ----------------------------------------------------------
Novartis (Swtz) 4.20%
Internationale Nederlanden Group NV
(Net) 3.64%
Philips Electronics NV (Net) 2.67%
Telecom Italia SpA (Ita) 1.94%
Elf Aquitaine (Fr) 1.67%
Asea Brown Boveri Ltd. (Swtz) 1.48%
Atlas Copco AB (Sw) 1.36%
Heineken NV (Net) 1.31%
Fuji Photo Film Co. (Jpn) 1.27%
Roche Holding AG (Swtz) 1.21%
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Total 20.75%
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6
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Schroder International Fund
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STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments (Notes 1 and 2):
Investment in International Equity Fund (the 'Portfolio') $190,992,943
Receivable for Fund shares sold 410,865
------------
Total Assets 191,403,808
------------
LIABILITIES:
Payable for Fund shares redeemed 118,434
Payable to administrator (Note 3) 15,948
Payable to subadministrator (Note 3) 8,468
Accrued expenses and other liabilities 41,825
------------
Total Liabilities 184,675
------------
Net Assets $191,219,133
------------
------------
COMPONENTS OF NET ASSETS:
Paid-in capital $145,379,246
Undistributed net investment income (loss) 2,915,643
Accumulated net realized gain (loss) 15,515,065
Net unrealized appreciation (depreciation) on investments 27,409,179
------------
Net Assets $191,219,133
------------
------------
SHARES OF BENEFICIAL INTEREST 10,410,792
NET ASSET VALUE OFFERING AND REDEMPTION PRICE PER SHARE
(NET ASSETS DIVIDED BY SHARES OF BENEFICIAL INTEREST) $ 18.37
</TABLE>
The accompanying notes are an integral part of the financial statements.
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7
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Schroder International Fund
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STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Year
Ended October
31, 1997
----------------
<S> <C>
NET INVESTMENT INCOME ALLOCATED FROM THE PORTFOLIO:
Dividend income (net of foreign withholding taxes of $421,654) $ 2,858,125
Interest income 421,646
Net expenses (1,486,649)
----------------
Net Investment Income Allocated from the Portfolio 1,793,122
----------------
EXPENSES:
Administration (Note 3) 304,065
Subadministration (Note 3) 91,859
Transfer agency (Note 3) 38,896
Accounting (Note 3) 12,000
Legal 17,604
Audit 10,802
Registration 29,225
Reporting 38,152
Trustees 5,068
Miscellaneous 24,573
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Total Expenses 572,244
Fees waived (Note 4) (97,253)
----------------
Net Expenses 474,991
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NET INVESTMENT INCOME (LOSS) 1,318,131
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NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FORWARD FOREIGN CURRENCY CONTRACTS AND FOREIGN CURRENCY
TRANSACTIONS ALLOCATED FROM THE PORTFOLIO:
Net realized gain (loss) on investments sold 15,542,896
Net realized gain (loss) on forward foreign currency contracts and foreign
currency transactions 1,772,188
----------------
Net realized gain (loss) on investments, forward
foreign currency contracts and foreign currency
transactions 17,315,084
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Net change in unrealized appreciation (depreciation) on investments (3,707,649)
Net change in unrealized appreciation (depreciation) on forward foreign
currency contracts and foreign currency transactions 126,570
----------------
Net change in unrealized appreciation (depreciation) on
investments, forward foreign currency contracts and
foreign currency transactions (3,581,079)
----------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FORWARD FOREIGN CURRENCY CONTRACTS AND FOREIGN CURRENCY
TRANSACTIONS ALLOCATED FROM THE PORTFOLIO 13,734,005
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NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 15,052,136
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
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8
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Schroder International 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 $ 202,735,202 $ 212,329,579
-------------- ----------------
OPERATIONS:
Net investment income (loss) 1,318,131 1,876,713
Net realized gain (loss) on investments sold 17,315,084 29,130,476
Net change in unrealized appreciation (depreciation) on investments (3,581,079) (10,183,473)
-------------- ----------------
Net increase (decrease) in net assets resulting from operations 15,052,136 20,823,716
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DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (4,570,768) (5,164,431)
Net realized gain on investments (26,130,027) (23,782,759)
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Total distributions to shareholders (30,700,795) (28,947,190)
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CAPITAL SHARE TRANSACTIONS:
Sale of shares 67,836,994 48,286,814
Reinvestment of distributions 17,731,934 13,346,133
Redemption of shares (81,436,338) (63,103,850)
-------------- ----------------
Net increase (decrease) from capital share transactions 4,132,590 (1,470,903)
-------------- ----------------
Net increase (decrease) in net assets (11,516,069) (9,594,377)
-------------- ----------------
NET ASSETS, END OF PERIOD (INCLUDING LINE A) $ 191,219,133 $ 202,735,202
-------------- ----------------
-------------- ----------------
(A) Accumulated undistributed net investment income (loss) $ 2,915,643 $ 4,398,568
-------------- ----------------
-------------- ----------------
SHARE TRANSACTIONS
Sale of shares 3,607,984 2,432,723
Reinvestment of distributions in shares 1,033,932 702,811
Redemption of shares (4,365,136) (3,155,010)
-------------- ----------------
Net increase (decrease) in shares 276,780 (19,476)
-------------- ----------------
-------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
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Schroder International 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,
--------------------------------------------------------
1997 1996(a) 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 20.01 $ 20.91 $ 23.17 $ 20.38 $ 15.15
-------- -------- -------- -------- --------
Investment Operations
Net Investment Income (Loss) 0.14(b) 0.15(b) 0.46 0.18 0.08
Net Realized and Unrealized Gain (Loss) on
Investments 1.31 1.74 (0.18) 2.69 5.27
-------- -------- -------- -------- --------
Total from Investment Operations 1.45 1.89 0.28 2.87 5.35
-------- -------- -------- -------- --------
Distributions From
Net Investment Income (0.46) (0.47) -- (0.08) (0.12)
Net Realized Gain on Investments (2.63) (2.32) (2.54) -- --
-------- -------- -------- -------- --------
Total Distributions (3.09) (2.79) (2.54) (0.08) (0.12)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $ 18.37 $ 20.01 $ 20.91 $ 23.17 $ 20.38
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total Return (c) 8.33% 10.05% 2.08% 14.10% 35.54%
Ratio/Supplementary Data
Net Assets at End of Period (in thousands) $191,219 $202,735 $212,330 $500,504 $320,550
Ratios to Average Net Assets:
Expenses including waiver of fees 0.99%(b) 0.99%(b) 0.91% 0.90% 0.91%
Expenses excluding waiver of fees 1.06%(b) 1.04%(b) N/A N/A N/A
Net investment income (loss) including
waiver of fees 0.67%(b) 0.86%(b) 0.99% 0.94% 0.87%
Average Commission Rate Per Share (d) $ 0.0280 $ 0.0256 N/A N/A N/A
Portfolio Turnover Rate (e) 36.22% 56.20% 61.26% 25.17% 56.05%
</TABLE>
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(a) On November 1, 1995 the Fund converted to Core and Gateway(Registered). On
May 16, 1996, the Fund began offering two classes of shares, Investor Shares
and Advisor Shares, and then all outstanding shares of the Fund were
designated as Investor Shares.
(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) For the fiscal years beginning on or after September 1, 1995, the Fund is
required to disclose average commission per share paid by the Portfolio to
brokers on the purchase and sale of equity securities on which commissions
are charged.
(e) Portfolio turnover represents the rate of portfolio activity. The rate after
October 31, 1995 represents the portfolio turnover rate of the Portfolio.
The accompanying notes are an integral part of the financial statements.
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Schroder International 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 International Fund (the 'Fund'), a diversified
portfolio that commenced operations on December 19, 1985. 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 October 31, 1997, only Investor Shares had been issued.
MASTER-FEEDER ARRANGEMENT
Effective November 1, 1995, the Fund seeks to achieve its investment
objective by investing all of its investable assets in a separate diversified
portfolio, International Equity Fund (the '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 daily its share of the Portfolio's income,
expenses and realized and unrealized gain and loss. The Portfolio's financial
statements are included on pages 15 to 26 in this report and should be read
in conjunction with the Fund's financial statements. The Fund owns
approximately 90.23% of the interests in the Portfolio and may be deemed
under certain circumstances, 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 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 International 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.
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
Effective November 26, 1996 and February 1, 1997, the Trust, on behalf
of the Fund, entered into Administration and Subadministration Agreements
with Schroder Fund Advisors Inc. ('Schroder Advisors') and Forum
Administrative Services, LLC ('Forum'). From November 26, 1996 through
January 31, 1997, the Fund had a Subadministration Agreement with Forum
Financial Services, Inc.(Registered) ('FFSI') that was identical in all
material terms to the February 1, 1997 Agreement with Forum. For its
services, Schroder Advisors is entitled to receive compensation at an annual
rate, payable monthly, of 0.15% of average daily net assets of the Fund. For
its services, Forum is entitled to receive compensation at an annual rate,
payable monthly, of 0.05% of average daily net assets of the Fund. Prior to
November 26, 1996, Schroder Advisors was entitled to compensation at an
annual rate of 0.20% and was obligated to pay a fee to FFSI.
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 Fund a fee of $12,000 per year.
NOTE 4. WAIVER OF FEES
Schroder Advisors voluntarily has waived a portion of its fees so that
the Fund's total expenses, including indirect expenses borne by the Fund as a
result of investing in the Portfolio, would not exceed 0.99% 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 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, Schroder Advisors waived
fees of $97,253 and $61,259, respectively.
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12
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Schroder International Fund
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SUPPLEMENTAL INFORMATION (UNAUDITED)
A meeting of the Shareholders of the Schroder Capital Funds (Delaware)
was held on December 9, 1997 at the offices of the Trust, 787 Seventh Avenue,
New York, NY.
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.
% OF TRUST
FOR VOTED
---------- ----------
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%
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.
SPECIAL 1997 TAX INFORMATION
The Fund intends to elect to pass through the credit for taxes paid in
foreign countries during its fiscal year ended October 31, 1997. In
accordance with current tax laws, the foreign income and foreign tax per
share (for a share outstanding October 31, 1997) is as follows:
<TABLE>
<CAPTION>
COUNTRY DIVIDENDS FOREIGN TAX COUNTRY DIVIDENDS FOREIGN TAX
- --------------- --------- ----------- -------------- --------- -----------
<S> <C> <C> <C> <C> <C>
Argentina $0.0023 $0.0000 Malaysia $0.0038 $0.0011
Australia 0.0080 0.0001 Mexico 0.0006 0.0000
Brazil 0.0034 0.0000 Netherlands 0.0289 0.0043
Canada 0.0034 0.0005 Philippines 0.0017 0.0004
Chile 0.0020 0.0005 Portugal 0.0102 0.0016
France 0.0244 0.0050 Singapore 0.0043 0.0011
Germany 0.0074 0.0008 Spain 0.0103 0.0011
Hong Kong 0.0169 0.0000 Sweden 0.0048 0.0009
Indonesia 0.0033 0.0005 Switzerland 0.0138 0.0026
Italy 0.0011 0.0002 Thailand 0.0017 0.0002
Japan 0.0300 0.0045 United Kingdom 0.0904 0.0139
Korea,
Republic of 0.0034 0.0006 Total $0.2761 $0.0399
--------- -----------
--------- -----------
</TABLE>
The pass through of foreign tax credit will affect only those
shareholders of the Fund who are holders on the dividend record date in
December 1997. Accordingly, shareholders will receive more detailed
information along with their form 1099-DIV in January 1998.
DISTRIBUTIONS
During the fiscal year ended October 31, 1997, the Fund distributed
$25,704,415 in long term capital gain to shareholders.
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Fund
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Schroder Capital Funds (Delaware) and Shareholders of
Schroder International Fund:
We have audited the accompanying statement of assets and liabilities of the
Schroder International Fund (a separately managed portfolio of Schroder Capital
Funds (Delaware)), 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. 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 International 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
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
International Equity Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
AS OF OCTOBER 31, 1997
STOCKS AND WARRANTS - 82.6%
SHARES VALUE US$
- ------- ------------
ARGENTINA - 0.4%
COMMON STOCK
23,400 YPF Sociedad Anonima ADR
Energy $ 748,800
------------
AUSTRALIA - 2.4%
COMMON STOCK
213,000 Australia & New Zealand Banking
Group Ltd.
Finance 1,489,363
79,000 Brambles Industries Ltd.
Materials 1,522,422
116,000 Broken Hill Proprietary Co. Ltd.
Multi-Industry 1,152,886
108,000 Woodside Petroleum Ltd.
Energy 914,274
------------
5,078,945
------------
AUSTRIA - 0.3%
PREFERRED STOCK
11,440 Bank Austria AG
Finance 538,286
------------
BELGIUM - 0.2%
COMMON STOCK
36,000 Xeikon N.V. (a)
Services 490,500
------------
CHILE - 0.8%
COMMON STOCK
61,950 Compania de Telecomunicacion de
Chile SA ADR
Services 1,719,113
------------
DENMARK - 0.6%
COMMON STOCK
40,300 International Service
System A/S (a)
Services 1,224,213
------------
FINLAND - 0.3%
COMMON STOCK
33,200 The Rauma Group
Capital Equipment 623,227
------------
FRANCE - 7.7%
COMMON STOCK
12,340 Accor SA
Services 2,302,495
8,790 Canal Plus
Services 1,533,210
14,409 Compagnie Generale des Eaux
Multi-Industry 1,684,721
28,500 Elf Aquitaine
Energy 3,535,268
9,300 Legrand SA
Capital Equipment 1,735,268
SHARES VALUE US$
- ------- ------------
FRANCE (CONCLUDED)
39,000 METALEUROP SA (a)
Materials $ 410,598
38,727 Michelin (Cie Gle Des Etabl.)
Capital Equipment 1,990,848
12,120 Primagaz (Cie Des Gaz Petrole)
Energy 905,420
15,914 Societe Generale
Finance 2,184,166
WARRANTS
14,156 Compagnie Generale de Eaux (a)
Multi-Industry 7,501
1,256 Primagaz (Cie Des Gaz Petrole)
(a)
Energy 13,529
------------
16,303,024
------------
GERMANY - 5.3%
COMMON STOCK
13,080 Adidas AG
Consumer Non-Durables 1,896,038
53,500 Bayer AG
Materials 1,880,519
3,500 Mannesmann AG
Capital Equipment 1,480,363
49,870 Tarkett AG
Materials 1,327,007
43,235 Veba AG
Multi-Industry 2,413,946
62 Wella AG
Consumer Non-Durables 39,804
PREFERRED STOCK
7,400 SAP AG
Services 2,207,704
------------
11,245,381
------------
HONG KONG - 1.4%
COMMON STOCK
105,100 Cheung Kong Holdings Ltd.
Finance 730,852
135,000 Citic Pacific Ltd.
Multi-Industry 646,226
147,400 Hutchison Whampoa Ltd.
Finance 1,020,235
139,000 New World Development Co. Ltd.
Finance 489,139
------------
2,886,452
------------
INDONESIA - 0.3%
COMMON STOCK
197,520 PT Indofoods Sukses Makmur
Consumer Non-Durables 197,246
126,000 PT Telekomunikasi Indonesia
Services 117,087
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
International Equity Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF OCTOBER 31, 1997
SHARES VALUE US$
- ------- ------------
INDONESIA (CONCLUDED)
42,490 PT Unilever Indonesia
Services $ 330,019
------------
644,352
------------
ITALY - 2.9%
COMMON STOCK
55,410 Gucci Group
Consumer Non-Durables 2,015,539
652,585 Telecom Italia SpA
Energy 4,096,607
------------
6,112,146
------------
JAPAN - 18.6%
COMMON STOCK
106,000 Amada Metrecs Co. Ltd.
Capital Equipment 779,996
61,000 Arcland Sakamoto
Services 532,551
118,000 Bridgestone Corp.
Materials 2,550,927
68,100 Credit Saison Co., Ltd.
Finance 1,828,909
60,000 Dai-Dan Co., Ltd.
Capital Equipment 444,001
321,000 Dai-Tokyo Fire & Marine
Insurance Co.
Finance 1,377,201
85,000 Daiwa House Industry Co., Ltd.
Capital Equipment 819,822
54,000 Daiwa Securities Co., Ltd.
Finance 326,864
300 East Japan Railway Co.
Services 1,459,217
74,000 Fuji Photo Film Co.
Capital Equipment 2,682,630
29,000 Glory Ltd.
Capital Equipment 475,015
264,000 Hanshin Electric Railway
Services 893,392
243,000 Hitachi Ltd.
Capital Equipment 1,868,920
29,000 Ito-Yokado Co. Ltd.
Services 1,441,922
62,000 Japan Airport Terminal Co.
Services 608,299
907,000 Kobe Steel Ltd. (a)
Materials 1,093,498
15,000 Kyocera Corp.
Capital Equipment 859,316
25,000 Mabuchi Motor Co.
Capital Equipment 1,392,700
18,000 Meiko Shokai
Capital Equipment 553,754
130,000 Mitsubishi Corp.
Services 1,113,329
SHARES VALUE US$
- ------- ------------
JAPAN (CONCLUDED)
391,000 Mitsubishi Electric Corp.
Capital Equipment $ 1,303,659
30,000 Murata Manufacturing Co., Ltd.
Capital Equipment 1,217,262
26,000 Nagaileben Co., Ltd.
Consumer Durables 745,820
159,000 Oji Paper Co., Ltd.
Materials 806,436
82,000 Omron Corp.
Capital Equipment 1,390,871
29,100 SMC Corp.
Capital Equipment 2,516,339
11,000 Secom
Services 711,566
82,000 Showa Shell Sekiyu
Energy 574,757
58,000 Takeda Chemical Inds.
Consumer Durables 1,581,775
10,230 Toho Co.
Services 1,343,927
81,000 Tokio Marine & Fire Insurance
Co.
Finance 808,182
94,000 Toppan Printing Co., Ltd.
Services 1,180,178
9,000 Tostem Corp.
Capital Equipment 124,969
70,000 Toyota Motor Corp.
Capital Equipment 1,949,780
------------
39,357,784
------------
KOREA, REPUBLIC OF - 0.3%
COMMON STOCK
10,500 Korea Electric Power Corp.
Energy 149,098
4,250 Pohang Iron & Steel Co., Ltd.
Materials 186,800
318 SK Telecom Co. Ltd.
Services (b) 107,307
4,066 Samsung Electronics Co.
Capital Equipment 160,123
14,957 Shinhan Bank
Finance 114,720
------------
718,048
------------
MALAYSIA - 0.4%
COMMON STOCK
33,400 RHB Sakura Merchant Bankers
Berhad (a)
Finance 20,937
203,000 Sime Darby Berhad
Multi-Industry 290,866
193,000 Tenaga Nasional Berhad
Energy 414,806
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
International Equity Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
AS OF OCTOBER 31, 1997
SHARES VALUE US$
- ------- ------------
MALAYSIA (CONCLUDED)
64,000 United Engineers (Malaysia)
Berhad
Capital Equipment $ 150,925
------------
877,534
------------
MEXICO - 0.4%
COMMON STOCK
88,000 Desc SA de CV
Multi-Industry 762,946
------------
NETHERLANDS - 9.5%
COMMON STOCK
123,000 Elsevier NV
Services 1,933,065
17,100 Heineken NV
Consumer Non-Durables 2,782,594
183,509 Internationale Nederlanden Group
NV
Finance 7,706,490
17,438 Oce-Van Der Grinten NV
Capital Equipment 1,990,270
72,190 Philips Electronics NV
Capital Equipment 5,654,084
PREFERRED STOCK
4,800 Internationale Nederlanden Group
NV
Finance 24,115
------------
20,090,618
------------
PHILIPPINES - 0.1%
COMMON STOCK
7,431 Manila Electric Co. GDR
Energy 131,906
------------
PORTUGAL - 1.5%
COMMON STOCK
49,720 Portugal Telecom
Services 2,041,253
50,770 Semapa - Sociedade de
Investimento e Gestao SGPS SA
Materials 1,172,903
------------
3,214,156
------------
SINGAPORE - 1.9%
COMMON STOCK
182,000 City Developments Ltd.
Finance 763,636
99,750 Development Bank of Singapore
Ltd.
Finance 932,184
143,000 Keppel Corp. Ltd.
Services 452,727
85,420 Singapore Press Holdings Ltd.
Services 1,178,394
129,000 United Overseas Bank Ltd.
Finance 713,478
------------
4,040,419
------------
SHARES VALUE US$
- ------- ------------
SPAIN - 0.9%
COMMON STOCK
23,200 Banco Popular Espanol SA
Finance $ 1,370,996
35,800 Centros Comerciales Pryca SA
Services 568,918
------------
1,939,914
------------
SWEDEN - 2.3%
COMMON STOCK
96,800 Atlas Copco AB
Capital Equipment 2,877,796
46,790 Telefonaktiebolaget LM Ericsson
'B' Shares
Services 2,063,106
------------
4,940,902
------------
SWITZERLAND - 9.4%
COMMON STOCK
2,400 Asea Brown Boveri Ltd.
Capital Equipment 3,136,637
4,370 Adecco SA
Multi-Industry 1,392,617
1,690 Alusuisse-Lonza Holding AG
Materials 1,500,558
5,663 Novartis
Consumer Durables 8,893,553
290 Roche Holding AG
Consumer Non-Durables 2,555,464
5,250 The Selectra Group (a)
Consumer Non-Durables 736,895
4,080 Zurich
Versicherungs-Gesellschaft
Finance 1,688,800
------------
19,904,524
------------
THAILAND - 0.0%
COMMON STOCK
32,368 Land & House Public Co., Ltd.
Finance 27,615
------------
UNITED KINGDOM - 14.7%
COMMON STOCK
126,700 Airtours plc
Services 2,512,540
110,000 Allied Domecq plc
Consumer Non-Durables 890,072
214,000 Asda Group plc
Services 556,264
39,200 Barclays plc
Finance 981,479
95,831 Blue Circle Industries plc
Materials 563,286
79,360 British Airways plc
Services 775,233
127,800 British Land Co. plc
Finance 1,476,675
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
International Equity Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONCLUDED)
AS OF OCTOBER 31, 1997
SHARES VALUE US$
- ------- ------------
UNITED KINGDOM (CONCLUDED)
118,400 Cable & Wireless plc
Services $ 940,171
96,260 Cadbury Schweppes plc
Consumer Non-Durables 968,573
381,000 David S. Smith Holdings plc
Services 1,456,784
58,000 De La Rue plc
Services 411,437
130,000 EMI Group plc
Consumer Non-Durables 1,050,810
100,773 Enterprise Oil plc
Energy 1,125,521
53,000 Johnson Matthey plc
Capital Equipment 520,845
68,070 Kingfisher plc
Services 979,441
303,640 LASMO plc
Energy 1,400,319
143,400 Lloyds TSB Group plc
Finance 1,791,599
226,400 Lucas Varity plc
Capital Equipment 774,537
312,400 MFI Furniture plc
Services 623,438
9,490 National Westminster Bank plc
Finance 137,186
284,000 Pilkington Brothers plc
Materials 719,169
131,555 Prudential Corp. plc
Finance 1,402,033
137,000 Rank Group plc
Services 762,771
58,180 Rio Tinto plc
Materials 749,325
100,000 Rolls-Royce plc
Capital Equipment 348,520
SHARES VALUE US$
- ------- ------------
UNITED KINGDOM (CONCLUDED)
90,000 Standard Chartered plc
Finance $ 975,765
74,175 Tesco plc
Services 593,661
91,150 Tibbett and Britten Group plc
Services 871,298
119,082 United News & Media plc
Services 1,497,761
291,390 Vodafone Group plc
Services 1,588,156
116,100 Williams Holdings plc
Multi-Industry 686,805
29,500 Zeneca Group plc
Consumer Durables 935,016
------------
31,066,490
------------
Total Stocks and Warrants (cost
$147,466,525) 174,687,295
REPURCHASE AGREEMENTS - 17.4%
Chase Securities, Inc., 5.55%,
11/3/97 to be repurchased at
$37,017,113. Collateralized by
Par $34,825,000 U.S. Treasury
Notes, 6.88%, 5/15/06. 37,000,000
------------
Total Investments - 100.0%
(cost $184,466,525) 211,687,295
Other Assets Less
Liabilities - 0.0% (3,438)
------------
Total Net Assets - 100.0% $211,683,857
------------
------------
- ------------------
(a) Non-income producing security.
(b) Valued pursuant to methodology
approved by the Board of Trustees.
ADR - American Depositary Receipts
GDR - Global Depositary Receipts
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS
CONTRACTS TO SELL
CONTRACT DATE CURRENCY UNITS US DOLLARS UNREALIZED GAIN
- -------------- --------- ------------ ----------- ----------------
Japanese
12/19/97 Yen 740,000,000 $6,329,249 $136,485
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
International Equity Fund
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments (Note 2):
Investments at cost $147,466,525
Repurchase agreement at cost 37,000,000
Net unrealized appreciation (depreciation) 27,220,770
------------
Total Investments at value 211,687,295
Cash 4,091,154
Net receivable for forward foreign currency contracts 136,485
Receivable for dividends, tax reclaims and interest 398,907
Receivable for investments sold 2,777,611
Organization costs, net of amortization (Note 2) 7,420
------------
Total Assets 219,098,872
------------
LIABILITIES:
Payable for investments purchased 7,252,086
Payable to investment adviser (Note 3) 75,200
Payable to administrator (Note 3) 12,769
Payable to subadministrator (Note 3) 12,769
Accrued expenses and other liabilites 62,191
------------
Total Liabilities 7,415,015
------------
Net Assets $211,683,857
------------
------------
COMPONENTS OF NET ASSETS:
Investors' capital $184,278,074
Net unrealized appreciation (depreciation) on investments 27,405,783
------------
Net Assets $211,683,857
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
International Equity Fund
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Year
Ended
October 31, 1997
----------------
<S> <C>
INVESTMENT INCOME:
Dividend income (net of foreign withholding taxes of $421,654) $ 2,858,125
Interest income 422,524
----------------
Total Investment Income 3,280,649
----------------
EXPENSES:
Investment advisory (Note 3) 892,167
Administration (Note 3) 159,379
Subadministration (Note 3) 138,011
Transfer agency (Note 3) 12,029
Custody 139,728
Accounting (Note 3) 72,000
Legal 10,473
Audit 46,189
Pricing 24,809
Trustees 9,970
Amortization of organization costs (Note 2) 2,473
Miscellaneous 27,740
----------------
Total Expenses 1,534,968
Fees waived (Note 6) (47,471)
----------------
Net Expenses 1,487,497
----------------
NET INVESTMENT INCOME (LOSS) 1,793,152
----------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) on investments sold 15,496,728
Net realized gain (loss) on forward foreign currency contracts and foreign
currency transactions 1,772,188
----------------
Net realized gain (loss) on investments, forward
foreign currency contracts and foreign currency
transactions 17,268,916
----------------
Net change in unrealized appreciation (depreciation) on investments (3,724,486)
Net change in unrealized appreciation (depreciation) on forward foreign
currency contracts and foreign currency transactions 140,011
----------------
Net change in unrealized appreciation (depreciation) on
investments, forward foreign currency contracts and
foreign currency transactions (3,584,475)
----------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS 13,684,441
----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 15,477,593
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
International Equity Fund
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Year Ended October 31,
------------------------------------
1997 1996
---------------- ----------------
<S> <C>
NET ASSETS, BEGINNING OF PERIOD $ 202,743,299 -
---------------- ----------------
OPERATIONS:
Net investment income (loss) 1,793,152 2,401,723
Net realized gain (loss) on investments sold 17,268,916 29,130,258
Net change in unrealized appreciation (depreciation) on investments (3,584,475) 30,990,258
---------------- ----------------
Net increase (decrease) in net assets resulting from operations 15,477,593 62,522,457
---------------- ----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST:
Contributions 70,336,827 201,091,364
Withdrawals (76,873,862) (60,870,522)
---------------- ----------------
Net increase (decrease) in net assets from transactions in investors'
beneficial interest (6,537,035) 140,220,842
---------------- ----------------
Net increase (decrease) in net assets 8,940,558 202,743,299
---------------- ----------------
NET ASSETS, END OF PERIOD $ 211,683,857 $ 202,743,299
---------------- ----------------
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
21
<PAGE>
- --------------------------------------------------------------------------------
International Equity Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Portfolio performance for the following periods:
<TABLE>
<CAPTION>
For the Year Ended October 31,
------------------------------
1997 1996
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Ratio to Average Net Assets:
Expenses including waiver of fees 0.75% 0.75%
Expenses excluding waiver of fees 0.77% 0.77%
Net investment income including waiver of fees 0.90% 1.10%
Average Commission Rate Per Share (a) $ 0.0280 $0.0256
Portfolio Turnover Rate 36.22% 56.20%
</TABLE>
- ------------------
(a) 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.
- --------------------------------------------------------------------------------
22
<PAGE>
- --------------------------------------------------------------------------------
International Equity Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
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, currently has six investment portfolios. Included in this report is
International Equity Fund (the 'Portfolio'), a diversified portfolio that
commenced operations on November 1, 1995. 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 proceeding trading day or at closing mid-market prices. Securities traded
in over-the-counter markets, or listed securities for which no trade is
reported on the valuation date, are valued at the most recent reported
mid-market price. Short-term investments having a maturity of 60 days or less
are valued at amortized cost, which approximates market value. 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 0.05% of total investments at October 31, 1997.
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 realized gain and loss for both financial statement
and federal income tax purposes. Foreign dividend and interest income amounts
and realized capital gain and loss are converted to U.S. dollar equivalents
using foreign exchange rates in effect at the date of the transactions.
Foreign currency amounts are translated into U.S. dollars at the mean
of the bid and asked prices of such currencies against U.S. dollars as
follows: (i) assets and liabilities at the rate of exchange at the end of the
respective period; and (ii) purchases and sales of securities and income and
expenses at the rate of exchange prevailing on the dates of such
transactions. The portion of the results of operations arising from changes
in the exchange rates and the portion due to fluctuations arising from
changes in the market prices of securities are not isolated. Such
fluctuations are included with the net realized and unrealized gain or loss
on investments.
The Portfolio may enter into forward contracts to purchase or sell
foreign currencies to protect against the effect on the U.S. dollar value of
the underlying portfolio 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
- --------------------------------------------------------------------------------
23
<PAGE>
- --------------------------------------------------------------------------------
International Equity Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
U.S. dollar and the ability of the counterparty to perform. Fluctuations in
the value of such contracts are recorded daily as unrealized gain or loss;
realized gain or loss include net gain or loss on contracts that have
terminated by settlement or by the Portfolio entering into offsetting
commitments.
REPURCHASE AGREEMENTS
The Portfolio may invest in repurchase agreements. The Portfolio,
through its custodian, receives delivery of the underlying collateral, whose
market value must always equal or exceed the repurchase price. The investment
adviser is responsible for determining the value of the underlying collateral
at all times. In the event of default, the Portfolio may have difficulties
with the disposition of any securities held as collateral.
EXPENSE ALLOCATION
Schroder Core accounts separately for the assets and liabilities and
operation of each Portfolio. Expenses that are directly attributable to more
than one Portfolio are allocated among the respective Portfolios.
ORGANIZATIONAL COSTS
Costs incurred by the Portfolio in connection with this 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 to the Portfolio. Pursuant to an Investment Advisory
Agreement, SCMI is entitled to receive an annual fee, payable monthly, of
0.45% of the average daily net assets of the Portfolio.
ADMINISTRATOR AND SUBADMINISTRATOR
Effective November 26, 1996 and February 1, 1997, Schroder Core, on
behalf of the Portfolio, entered into Administration and Subadministration
Agreements with Schroder Fund Advisors Inc. ('Schroder Advisors') and Forum
Administrative Services, LLC ('Forum'). From November 26, 1996 through
January 31, 1997, the Portfolio has a Subadministration Agreement with Forum
Financial Services, Inc.(Registered) ('FFSI') that was identical in all
material terms to the February 1, 1997 Agreement with Forum. For its
services, Schroder Advisors is entitled to receive compensation at an annual
rate, payable monthly, of 0.075% of average daily net assets of the
Portfolio. For its services, Forum is entitled to receive compensation at an
annual rate, payable monthly, of 0.075% of average daily net assets of the
Portfolio. Prior to November 26, 1996, Schroder Advisors was entitled to
compensation at an annual rate of 0.15% and was obligated to pay a fee to
FFSI.
TRANSFER AGENT
Forum Financial Corp.(Registered) ('FFC') 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 other fees and expenses.
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International Equity Fund
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NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
OTHER SERVICE PROVIDERS
FFC also performs portfolio accounting for the Portfolio and is
entitled to receive compensation for those services in the amount of $60,000
per year, plus certain amounts based upon the number and types of portfolio
transactions.
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 year ended October 31,
1997 aggregated $65,465,859 and $96,564,229, respectively.
For federal income tax purposes, the tax basis of investment securities
owned as of October 31, 1997 was $184,561,193 and the net unrealized
appreciation of investment securities was $27,126,302. The aggregate gross
unrealized appreciation for all securities in which there was an excess of
market value over tax cost was $43,321,244, and the aggregate gross
unrealized depreciation for all securities in which there was an excess of
tax cost over market value was $16,194,942.
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 of the Portfolio regardless of whether such
interest, dividends or gain have been distributed by the Portfolio.
NOTE 6. WAIVER OF FEES
SCMI voluntarily has waived a portion of its advisory fees so that the
Portfolio's total expenses would not exceed 0.75% of the Portfolio's average
daily net assets. Schroder Advisors, 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 $47,471 and $51,971, respectively.
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25
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International Equity Fund
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Schroder Capital Funds and Investors of International Equity
Fund:
We have audited the accompanying statement of assets and liabilities of the
International Equity Fund (a separate portfolio of Schroder Capital Funds),
including the schedule of investments, as of October 31, 1997, and the related
statement of operations for the year then ended and the statement of changes in
net assets and the financial highlights for each of the two years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Portfolio'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
International Equity Fund as of October 31, 1997, the results of its operations
for the year then ended and the changes in its net assets and the financial
highlights for each of the two 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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26
<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
Global Custody Division
125 London Wall
London EC2Y 5AJ, United Kingdom
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
International Fund. Its use in connection with any offering of the Fund's shares
is authorized only in case of a concurrent or prior delivery of the Fund's
current prospectus.
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Schroder
International
Fund
ANNUAL REPORT
October 31, 1997
Schroder Capital Funds (Delaware)
