<PAGE>
Schroder
Micro Cap Fund
ANNUAL REPORT
May 31, 1999
Schroder Capital Funds (Delaware)
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Schroder Micro Cap Fund
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INVESTMENT OBJECTIVE
The investment objective of the Fund is long-term capital appreciation.
INVESTMENT ADVISER
Schroder Investment Management North America Inc. (the "Investment Adviser") is
a wholly owned subsidiary of Schroders U.S. Holdings, Inc., an indirect wholly
owned U.S. subsidiary of Schroder 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 22 countries
worldwide. As of December 31, 1998, the Schroder Group had over $195 billion in
assets under management. As of March 31, 1999, the Investment Adviser, together
with its U.K. affiliate, Schroder Investment Management North America Limited,
had approximately $28 billion under management.
July 21, 1999
Dear Shareholder:
We are pleased to present the Schroder Micro Cap Fund annual report for the
fiscal year ended May 31, 1999. The U.S. economy maintained considerable
momentum through the second quarter of this year following the Federal Reserve's
reduction in interest rates last October. Moreover, after slowing in 1998, U.S.
corporate profits have also increased, boosted by good reserve growth and better
controlled labor costs.
In general, inflation has remained benign, although data became more mixed in
the first part of 1999. This prompted the Federal Reserve's announcement in May
to move its bias towards tightening monetary policy and to increase interest
rates by 0.25% the following month. We expect that faster than desired economic
growth will lead to further interest rate increases in the months ahead, but do
not anticipate an extended tightening phase. We continue to believe that a
disinflationary trend remains in place. Additionally, positive long-term
structural shifts in the U.S. economy, such as increased employee productivity,
ought to moderate any inflationary pressures that do develop.
As anticipated, long bond yields rose in early 1999 due to growing concern about
the economy's strength. Many parts of the U.S. equity market, however, did not
decline alongside the bond market, but continued to register good gains. As a
result, some parts of the U.S. market appear fully valued relative to interest
rates and we are encouraged to see that bond yields have subsequently retraced
some of this earlier move.
We do not anticipate a rise in interest rates of the magnitude that historically
has caused substantial falls in equity values. We recognize, however, that many
leading stocks in the U.S. market have become more expensive and that investors
will need to be particularly selective in their investment choices. Having
significantly lagged the performance of large companies, many smaller companies
now appear unusually attractive both in terms of valuation and prospective
earnings growth. In many cases these companies have remained fundamentally
strong and have generated good earnings growth. Throughout the spring of 1999,
smaller companies showed clear signs of attracting more favor. While it is too
early to determine if this marks a change in trend, it suggests that the
long-term return potential of smaller companies is being recognized.
Thank you for your interest in the Schroder Micro Cap Fund.
Sincerely,
/S/ Nancy A. Curtin /S/ Alexandra Poe
Nancy A. Curtin Alexandra Poe
Chairman President
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Schroder Micro Cap Fund
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MANAGEMENT DISCUSSION AND ANALYSIS (As of May 31, 1999)
Performance
For the fiscal year ended May 31, 1999, the Schroder Micro Cap Fund
returned 64.56%. Its benchmark, the Russell 2000 Index, returned -2.62%. The
Lipper average of peer group funds returned 7.56% for the same period.
Market Background
The last twelve months were eventful for the U.S. equity market in
general and smaller companies in particular. After a strong start to the period,
the equity markets peaked in mid-July, 1998, with the Dow Jones reaching a then
record level of 9337. Over the next three months the markets sold off
considerably as fears of recession, concerns over the stability of the financial
markets, and continued turmoil in the emerging markets caused a flight to
quality and security. By early October the Russell 2000 Index had fallen by
23.6%, underperforming the S&P 500 by 9.9% over a three-month period. The micro
cap sector was particularly hard-hit during this period as investors and
market-makers lost all interest in companies with limited liquidity. In the
aftermath of the interest rate cut of October 15, both small and large cap
stocks rallied, though most smaller companies continued to underperform through
the end of the first calendar quarter. By the end of March, smaller companies
were trading at record low valuations, while the large growth stocks were at
record high valuations. In April, smaller companies started to outperform as
investors shifted their attention to more cyclical issues, and both corporate
and financial buyers began to take advantage of the tremendous bargains
available in the smaller company universe. Despite this outperformance at the
end of the fiscal year smaller companies significantly underperformed the S&P
500, with the Russell 2000 Index still well below its all-time high level of 491
in April 1998.
Portfolio Review
When evaluating investment performance over the past year it is
important to recognize that, in the last nine months of the period, there was a
tremendous speculative bubble in internet stocks. Indeed, companies with
18-month operating histories and negligible revenues, much less earnings, were
afforded multi-billion dollar market capitalizations. While we took advantage of
opportunistic investments in the internet sector, this was not our focus. We
maintained our discipline of investing in growing and profitable companies that
trade at reasonable valuations and avoided the high flyers and Wall Street
favorites. Throughout the fiscal year, we maintained an overweight position in
consumer stocks, such as retailers, restaurants, and textile companies. Some of
the Fund's better performers included InterTAN, the operator of Radio Shack
stores in Canada and Australia, Brauns Fashions, a women's apparel retailer and
PJ America, a restaurant franchise. Healthcare has also been a profitable area
for the Fund, and in this sector we have focused on investments in niche
companies which generate superior cash flow. In May, this approach was rewarded
as two of our larger healthcare holdings, Empi and Unilab, received takeover
bids. We continue to look for new investments which offer favorable risk-reward
characteristics. Among the recent additions to the Fund are healthcare companies
Hanger Orthopedic Group and Matria Heathcare, agricultural services company
Embrex and power supply manufacturer Power One, Inc.
In addition to its equity holdings, the Fund continued to hedge its
exposure through puts on the Russell 2000 Index. Given the high volatility of
micro cap stocks in general, we believe it is prudent to reduce the risk of the
Fund by hedging against a market decline. While this view cost us money over the
past few months, it has helped to reduce volatility in times of declining
markets.
2
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Schroder Micro Cap Fund
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Outlook
We continue to search for companies that can grow their earnings
independently of the economic cycle. The last quarter showed that our focus on
strong fundamentals is shared by the buyers who made takeover offers for two of
the Fund's portfolio holdings. The potential of rising interest rates is a
negative for stock markets around the world. However we believe that rising
rates will have more of an impact on highly valued "growth" companies, including
many large-cap favorites, than on the more reasonably priced companies that we
invest in. We believe that over time the market is efficient and that the
extremely large valuation disparity between large and smaller companies will
narrow as investors return to the smaller companies sector. In any event, we
will remain true to our discipline of investing in underfollowed and
misunderstood companies that can offer superior earnings growth.
The views expressed in this report were those of the Fund's portfolio manager as
of May 31, 1999, and may not reflect the views of the portfolio manager 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.
3
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Schroder Micro Cap Fund
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Investment Adviser's Report -- Comparison of Change in Value of $10,000
Investment
The following information compares a change in value of a $10,000 investment in
the Investor Shares of the Fund with the performance of the Russell 2000 Index
since inception of the Fund. The Russell 2000 Index is an unmanaged
capitalization weighted, broad based index of 2000 small capitalization U.S.
companies. The Fund's total return includes operating expenses that reduce
returns, while the total return of the Russell 2000 Index does not. 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. Past performance cannot predict nor guarantee future results.
Schroder Micro Cap Fund - Investor Shares vs. Russell 2000 Index
[GRAPHIC OMITTED]
Investment Value on 5/31/99 of $10,000 invested on 10/15/97
- -----------------------------------------------------------
Schroder Micro Cap Fund - Investor Shares $23,929
Russell 2000 Index $9,680
<TABLE>
<CAPTION>
Average Annual Total Return on 5/31/99 1 Year Since Inception
- -------------------------------------- ------ ---------------
<S> <C> <C>
Schroder Micro Cap Fund - Investor Shares 64.56% 71.09% (a)
Russell 2000 Index -2.62% -1.93% (b)
</TABLE>
<TABLE>
<CAPTION>
Schroder Micro Cap Fund Russell 2000 Index
<S> <C> <C>
10/15/97 $ 10,000.00 $ 10,000.00
10/31/97 $ 10,260.00 $ 9,367.60
11/30/97 $ 10,370.00 $ 9,303.83
12/31/97 $ 10,778.36 $ 9,470.83
01/31/98 $ 10,747.77 $ 9,326.59
02/28/98 $ 12,124.38 $ 10,025.92
03/31/98 $ 13,592.76 $ 10,447.21
04/30/98 $ 14,632.87 $ 10,504.60
05/31/98 $ 14,541.10 $ 9,941.03
06/30/98 $ 14,683.86 $ 9,969.48
07/31/98 $ 14,765.43 $ 9,155.37
08/31/98 $ 13,582.57 $ 7,380.14
09/30/98 $ 14,265.77 $ 7,951.18
10/31/98 $ 15,275.29 $ 8,277.35
11/30/98 $ 16,352.09 $ 8,714.39
12/31/98 $ 17,573.46 $ 9,258.43
01/31/99 $ 18,344.22 $ 9,378.53
02/28/99 $ 19,814.61 $ 8,622.90
03/31/99 $ 19,553.73 $ 8,755.84
04/30/99 $ 21,735.59 $ 9,539.43
05/31/99 $ 23,929.31 $ 9,680.50
</TABLE>
(a) Inception date of the Fund was October 15, 1997.
(b) Total returns for the Russell 2000 Index are based on an inception date of
September 30, 1997.
4
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Schroder Micro Cap Fund
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Portfolio Characteristics as of May 31, 1999 (unaudited)
<TABLE>
<CAPTION>
Top Ten Holdings Investment by Industry
Security % of Net Assets Industry % of Net Assets
- ---------------------------------------------- ----------------------------------------------------------
<S> <C> <C> <C>
Forward Air Corp. 3.8 % Transportation/Services/Miscellaneous 20.8 %
InterTAN, Inc. 3.8 Consumer Cyclicals 12.5
Unilab Corp. 3.7 Health Care 11.9
Buckle, Inc. 3.4 Capital Goods/Construction 6.5
Empi, Inc. 3.2 Retail 6.2
Mesaba Holdings, Inc. 3.1 Basic Materials 6.2
NPC International, Inc. 3.1 Financial 3.6
Movie Gallery, Inc. 3.1 Consumer Staples 2.5
Ivex Packaging Corp. 3.0 Utilities 0.9
Racing Champions Corp. 3.0 Index Options 0.3
---------------- Cash & Other Net Assets 28.6
33.2 % --------------
================ 100.0 %
==============
</TABLE>
5
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Schroder Micro Cap Fund
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Schedule of Investments
As of May 31, 1999
<TABLE>
<CAPTION>
Shares Security Description Value
----------- ---------------------------------------- --------------
<S> <C> <C>
Common Stocks - 71.1%
Basic Materials - 6.2%
50,000 Bayou Steel Corp.* $ 181,250
22,500 Ivex Packaging Corp.* 433,125
30,000 U.S. Concrete, Inc.* 266,250
-------
880,625
-------
Capital Goods/Construction - 6.5%
15,000 EMCOR Group, Inc.* 339,375
4,000 Group Maintenance America Corp.* 54,502
12,000 Nortek, Inc.* 367,500
10,000 Power-One, Inc.* 163,125
-------
924,502
-------
Consumer Cyclicals - 12.5%
25,000 Barnett, Inc.* 231,250
5,000 Cato Corp. 65,625
15,000 DM Management 241,875
14,425 Fred's, Inc. 187,525
25,000 NPC International, Inc.* 440,627
15,000 O'Charley's, Inc.* 195,937
25,000 Racing Champions Corp.* 428,125
-------
1,790,964
---------
Consumer Staples - 2.5%
15,000 Performance Food Group* 357,187
---------
Financial - 3.6%
10,000 Cotton States Life Insurance Co. 118,750
6,500 Duff & Phelps Credit 400,156
-------
518,906
-------
Health Care - 11.9%
18,500 Empi, Inc.* 453,250
7,000 FPIC Insurance Group, Inc.* 315,875
25,000 Hanger Orthopedic Group, Inc.* 409,375
100,000 Unilab Corp.* 531,250
---------
1,709,750
---------
</TABLE>
6
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Schroder Micro Cap Fund
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Schedule of Investments
As of May 31, 1999
<TABLE>
<CAPTION>
Shares Security Description Value
-------------- --------------------------------------------------- ---------------
<S> <C> <C>
Retail - 6.2%
24,000 Braun's Fashions Corp.* $ 264,000
17,500 Buckle, Inc.* 484,531
5,000 Wet Seal, Inc.* 138,750
-------
887,281
-------
Transportation/Services/Miscellaneous - 20.8%
7,000 Career Education Corp.* 245,875
20,000 Forward Air Corp.* 547,500
35,000 InterTAN, Inc.* 540,312
30,000 Mesaba Holdings, Inc.* 446,250
70,000 Movie Gallery, Inc.* 437,500
30,000 Quest Education Corp.* 337,500
12,000 RemedyTemp, Inc.* 162,000
3,600 School Specialty, Inc.* 53,550
6,000 Syncor International Corp.* 204,000
-------
2,974,487
---------
Utilities - 0.9%
15,000 El Paso Electric Co.* 128,437
-------
Total Common Stocks (cost $8,280,733) 10,172,139
----------
Contracts Purchased Options - 0.3%
------------
3,000 Russell 2000 Index Put (expiring June 1999, exercise
price $430)* 21,750
13,000 Russell 2000 Index Put (expiring June 1999, exercise
price $410)* 27,625
------
Total Purchased Options (cost $416,730) 49,375
------
Principal
Amount Short Term Investments - 9.3%
------------
$ 669,140 Dreyfus Cash Management 669,140
669,140 Federated Prime Obligation Fund 669,140
--------- -------
Total Short Term Investments (cost $1,338,280) 1,338,280
---------
Total Investments - 80.7% (cost $10,035,743) 11,559,794
Other Assets Less Liabilities -19.3% 2,757,563
---------
Total Net Assets - 100.0% $ 14,317,357
============
</TABLE>
*Non-income producing security.
The accompanying notes are an integral part of the financial statements.
7
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Schroder Micro Cap Fund
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Statement of Assets and Liabilities
May 31, 1999
<TABLE>
<S> <C>
Assets:
Investments (Note 2):
Investments at cost $ 10,035,743
Net unrealized appreciation 1,524,051
-----------------------
Total Investments at value 11,559,794
-----------------------
Cash and cash equivalents 2,368,626
Receivable for investments sold 934,400
Receivable for Fund shares sold 100,693
Receivable for dividends and interest 10,771
Other receivables 5,412
-----------------------
Total Assets 14,979,696
-----------------------
Liabilities:
Payable for investments purchased 618,688
Payable to investment adviser (Note 3) 9,486
Payable to administrator (Note 3) 9,669
Accrued expenses and other liabilities 24,496
-----------------------
Total Liabilities 662,339
-----------------------
Net Assets $ 14,317,357
=======================
Components of Net Assets:
Paid-in capital 9,586,331
Accumulated net realized gain 3,206,975
Net unrealized appreciation on investments 1,524,051
-----------------------
Net Assets $ 14,317,357
=======================
Shares of Beneficial Interest 709,648
Net Asset Value, Offering, and Redemption Price Per Share $ 20.18
</TABLE>
The accompanying notes are an integral part of the financial statements
8
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Schroder Micro Cap Fund
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Statement of Operations
For the Year Ended May 31, 1999
<TABLE>
<S> <C>
Investment Income:
Dividend income $ 11,262
Interest income 61,772
------------------
Total Investment Income 73,034
------------------
Expenses:
Investment advisory (Note 3) 102,215
Administration (Note 3) 20,443
Subadministration (Note 3) 25,000
Transfer agency 30,691
Custody 595
Accounting 47,000
Legal 3,191
Audit 17,653
Printing 2,538
Registration 13,234
Trustees 824
Miscellaneous 3,873
------------------
Total Expenses 267,257
Fees waived (Note 5) (104,034)
------------------
Net Expenses 163,223
------------------
Net Investment Loss (90,189)
------------------
Net Realized and Unrealized Gain on Investments:
Net realized gain on investments sold 3,798,687
Net change in unrealized appreciation on investments 932,978
------------------
Net Realized and Unrealized Gain on Investments 4,731,665
------------------
Net Increase in Net Assets Resulting from Operations $ 4,641,476
==================
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
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Schroder Micro Cap Fund
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Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the For the
Year Ended Period Ended
May 31, 1999 May 31, 1998 (a)
------------------ ------------------
Net Assets, Beginning of Period $ 6,339,599 $ -
------------------ ------------------
<S> <C> <C>
Operations:
Net investment loss (90,189) (16,549)
Net realized gain on investments 3,798,687 651,514
Net change in unrealized appreciation on investments 932,978 591,073
------------------ ------------------
Net increase in net assets resulting from operations 4,641,476 1,226,038
------------------ ------------------
Distributions to Shareholders from:
Net realized gain on investments (1,091,088) (45,400)
------------------ ------------------
Capital Share Transactions:
Sale of shares 6,563,434 6,068,331
Reinvestment of distributions 770,633 45,400
Redemption of shares (2,906,697) (954,770)
------------------ ------------------
Net increase from capital share transactions 4,427,370 5,158,961
------------------ ------------------
Net increase in net assets 7,977,758 6,339,599
------------------ ------------------
Net Assets, End of Period (Including line A) $ 14,317,357 $ 6,339,599
================== ==================
(A) Undistributed net investment income $ - $ -
================== ==================
Share Transactions:
Sale of shares 409,850 508,435
Reinvestment of distributions in shares 56,415 4,567
Redemption of shares (201,229) (68,390)
------------------ ------------------
Net increase in shares 265,036 444,612
================== ==================
</TABLE>
(a) From October 15, 1997 (commencement of operations) through May 31, 1998.
The accompanying notes are an integral part of the financial statements.
10
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Schroder Micro Cap Fund
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Financial Highlights - Investor Shares
Selected per share data and ratios for a share outstanding throughout each
period:
<TABLE>
<CAPTION>
For the Year For the
Ended Period Ended
May 31, 1999 May 31, 1998 (c)
------------------- -------------------
<S> <C> <C>
Net Asset Value, Beginning of Period $14.26 $10.00
------------------- -------------------
Investment Operations:
Net Investment Loss (0.13) (0.04)
Net Realized and Unrealized Gain on Investments 8.28 4.50
------------------- -------------------
Total from Investment Operations 8.15 4.46
------------------- -------------------
Distributions from Net Realized Gain on Investments (2.23) (0.20)
------------------- -------------------
Net Asset Value, End of Period $20.18 $14.26
=================== ===================
Total Return (a) 64.56% 45.41%
Ratio/Supplementary Data:
Net Assets at End of Period (in thousands) $14,317 $6,340
Ratios to Average Net Assets:
Expenses including reimbursement/waiver of fees 2.00% 2.00% (b)
Expenses excluding reimbursement/waiver of fees 3.27% 6.02% (b)
Net investment loss including reimbursement/
waiver of fees (1.10)% (0.77)%(b)
Portfolio Turnover Rate 341% 166%
</TABLE>
(a) Total returns would have been lower had certain expenses not been
limited during the periods shown (See Note 5). Total return calculations
for a period of less than one year are not annualized.
(b) Annualized.
(c) Investor Class shares were first issued on October 15, 1997.
The accompanying notes are an integral part of the financial statements.
11
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Schroder Micro Cap 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 Schroder Capital Funds, a
series company, on February 29, 1988; 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, as
amended (the "Act"), currently has eight investment portfolios. Included in this
report is the Schroder Micro Cap Fund (the "Fund"), which is 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 and Advisor Shares of beneficial interest without par value. As
of May 31, 1999, only Investor Shares had been issued. Shares of the Fund are
not currently being offered to the public generally, and may be purchased only
by existing shareholders and by employees of Schroder Capital Management North
America Inc. ("Schroder") and its affiliates, the Fund's investment adviser, and
its affiliates.
Note 2. Significant Accounting Policies
These financial statements are prepared in accordance with generally
accepted accounting principles, which require management to make certain
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 summarizes the 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
preceding trading day or at the mean of the closing bid and ask prices
("mid-market price"). Securities traded in over-the-counter markets, or listed
securities for which no trade is reported on the valuation date, generally are
valued at the most recent reported mid-market price. Prices used for valuations
may be provided by independent pricing services. Domestic short-term
investments, having a maturity of 60 days or less, are valued at amortized cost,
which approximates market value. 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 Trust's Board of Trustees. As of May
31, 1999, the Fund did not hold a position in any fair valued securities.
Security Transactions and Investment Income
Investment transactions are accounted for on the trade date. Dividend
income is recorded on the ex-dividend date. Interest income 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.
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 advisor 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.
12
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Schroder Micro Cap Fund
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Notes to Financial Statements (continued)
Distributions to Shareholders
Dividends and capital gain distributions, if any, are distributed to
shareholders at least annually and are recorded on the ex-dividend date.
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. The Fund may utilize earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for income tax
purposes.
Federal Taxes
The Fund intends to qualify each year as a regulated investment company
and distribute all its taxable income. In addition, by distributing in each
calendar year substantially all its net investment income, capital gain and
certain other amounts, if any, the Fund will not be subject to 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 its funds. Expenses that are directly attributable to more than one
fund are allocated among the respective funds in proportion to each fund's net
assets.
Financial Instruments
Option contracts involve the risk that they may not work as intended
due to unanticipated developments in market conditions or other causes. Options
also involve the risk that the other party to the transaction will be unable to
meet its obligations or that the Fund will be unable to close out the position
at any particular time or at an acceptable price.
Note 3. Investment Advisory and Other Services
Investment Adviser
Schroder Investment Management North America Inc. ("SIMNA") serves as
investment adviser to the Fund pursuant to an Investment Advisory Agreement with
the Fund. Until July 1, 1999, Schroder Capital Management International Inc.
("SCMI") served as investment adviser to the Fund; on that date, SCMI was merged
into SIMNA, and SIMNA commenced serving as investment adviser to the Fund. SCMI
was, and SIMNA is, a wholly owned subsidiary of Schroder U.S. Holdings, Inc.
Pursuant to the Investment Advisory Agreement, SIMNA is entitled to receive an
annual fee, payable monthly, of 1.25% of the average daily net assets of the
Fund.
Administrator and Subadministrator
The administrator of the Fund is Schroder Fund Advisors Inc. ("Schroder
Advisors"). For its services, Schroder Advisors is entitled to receive
compensation at an annual rate, payable monthly, of 0.25% of the average daily
net assets of the Fund. Through May 31,1999, the Fund paid subadministration
fees to Forum Administrative Services, LLC ("FAdS") at an annual rate of 0.10%
of the average daily net assets of the Fund. Effective June 1,1999, the Fund has
entered into a Sub-Administration Agreement with State Street Bank and Trust
Company ("State Street") and Schroder Advisors. Under that agreement, the Fund,
together with other mutual funds managed by SIMNA and certain related entities,
pays fees to State Street based on the combined average daily net assets of all
of the funds in the Schroder complex, according to the following annual rates:
0.06% of the first $1.7 billion of such assets, 0.04% of the next $1.7 billion,
and 0.02% of the assets in excess of $3.4 billion, subject to certain minimum
requirements.
13
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Schroder Micro Cap Fund
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Notes to Financial Statements (concluded)
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 May 31, 1999
were, $23,496,715 and $24,033,976, respectively.
For federal income tax purposes, the tax basis of investment securities
owned as of May 31, 1999, was $10,071,778 and the net unrealized appreciation
was $1,488,016. The aggregate gross unrealized appreciation for all securities
in which there was an excess of market value over tax cost was $2,022,304, and
the aggregate gross unrealized depreciation for all securities in which there
was an excess of tax cost over market value was $534,288.
Note 5. Waiver of Fees and Reimbursement of Expenses
SIMNA is contractually obligated to reduce its compensation during the
current fiscal year (and, if necessary, to pay certain expenses of the Fund)
until December 31,1999 to the extent that the Fund's expenses exceed 2.00% of
the Fund's average daily net assets attributable to Investor Shares. SIMNA and
Schroder Advisors may voluntarily waive all or a portion of their fees, from
time to time. For the year ended May 31, 1999, SCMI, FAdS, and Forum Shareholder
Services, LLC, then the Fund's transfer and dividend disbursing agent, waived
fees of $72,211, $16,823, and $15,000, respectively.
Note 6. Beneficial Interest
As of May 31, 1999, three affiliated shareholders were owners of
record, in the aggregate, of approximately 67.4% of the total outstanding shares
of the Fund.
- ------------------------------------
Supplementary Unaudited Information
Distributions
During the fiscal year ended May 31, 1999, the Fund distributed
$177,805 of long-term capital gain and $913,283 of ordinary income to
shareholders, of which 0.02% of the ordinary income distribution may qualify for
the dividends received deduction available to corporate shareholders.
14
<PAGE>
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Schroder Micro Cap Fund
- --------------------------------------------------------------------------------
Report of Independent Accountants
To the Trustees of Schroder Capital Funds (Delaware) and Shareholders of
Schroder Micro Cap Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Schroder Micro Cap Fund (a
separate portfolio of Schroder Capital Funds (Delaware)) at May 31,1999, and the
results of its operations, the changes in its net assets and the financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at May 31,1999 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
July 15, 1999
15
<PAGE>
TRUSTEES
Nancy A. Curtin, Chairman
David N. Dinkins
Peter E. Guernsey
Sharon L. Haugh
John I. Howell
Peter S. Knight
William L. Means
Clarence F. Michalis
Hermann C. Schwab
INVESTMENT ADVISER
Schroder Investment Management North America Inc.
787 Seventh Avenue, 34th Floor
New York, NY 10019
ADMINISTRATOR AND DISTRIBUTOR
Schroder Fund Advisors Inc.
787 Seventh Avenue, 34th Floor
New York, NY 10019
CUSTODIAN
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
TRANSFER AND DIVIDEND DISBURSING AGENT
Boston Financial Data Services
Two Heritage Drive
North Quincy, MA 02171
(800) 464 - 3108
COUNSEL
Ropes & Gray
One International Place
Boston, MA 02110
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
160 Federal Street
Boston, MA 02110
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.
