<PAGE>
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Schroder International Smaller Companies Fund
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to seek long-term capital appreciation
through investment in securities markets outside the United States.
INVESTMENT ADVISER
Schroder Capital Management International Inc. (the "Investment Adviser") is a
wholly owned indirect subsidiary of 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 Capital Management
International Ltd., had approximately $28 billion under management.
June 3, 1999
Dear Shareholder:
We are pleased to present the semi-annual report for the Schroder International
Smaller Companies Fund for the six months ended April 30, 1999. During this
period the anxieties about the world's economies that were prevalent towards the
end of 1998 have lessened. The U.S. remained a surprisingly solid engine of
growth; moreover, it achieved this growth with consistent improvements in
productivity and with little pressure on core inflation. Continental European
economies clearly slowed, but we anticipate that rapid action by the monetary
authorities in the future to reduce interest rates should ensure that the
economies do not stall. In addition, the U.K. seems set for a softer landing
than seemed likely late last year. Elsewhere, in Asian economies outside Japan,
economic recovery is broadening out from the export sectors to areas of domestic
demand. A number of economies in the region have experienced upgrades in their
GDP forecasts for 1999 and many remain on course with restructuring programs.
The devaluation of the Brazilian currency in January this year turned out not to
be the precursor of further global instability as feared. Better than expected
inflation patterns in Brazil and adherence to credible fiscal policies during
the period helped to boost confidence and, although the Brazilian economy
remains under pressure, there is the potential for a smooth recovery. Even in
Japan, where the risks of deflation remain high and there are few signs of
economic recovery, pockets of apparent stability have formed and there is a more
widespread commitment to structural reform. The interest rate gap between many
emerging economies' debt and that of U.S. Treasury bonds has narrowed as the
risks of last year are believed to be diminished. Increased confidence in an
emerging markets recovery is evident in the narrowing interest rate gap between
emerging markets and U.S. Treasury debt.
Looking ahead, we believe that it is unlikely that stock valuations in developed
markets will expand as fast as they have in the last few years. Although
valuations in many developed markets are relatively high, there remain areas of
compelling value, as large parts of these markets (often including smaller and
mid cap companies) have not participated in this trend. While the global
interest rate environment might provide less support for stock prices than it
has done, corporate earnings should continue to benefit from the effect of
previous interest rate cuts. Opportunities exist with companies that distinguish
themselves through improving internal operations and learning to use capital
more efficiently. We are encouraged by this trend, which is becoming more common
in many markets outside the U.S., and the benefits of such restructuring
activity is likely to be a positive influence on companies' profitability for an
extended period of time. Schroders' investment process, based on detailed
fundamental research and carried out globally, is designed to highlight such
opportunities for the long-term benefit of our investors.
Since your last report, Mark Smith has resigned as President and Chairman of the
Fund. As you may already know, Schroder Capital Management International Inc.,
and its sister company responsible for investing in domestic markets, will be
merging into a newly created corporation called Schroder Investment Management
North America Inc.
1
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Schroder International Smaller Companies Fund
- --------------------------------------------------------------------------------
This change will allow us to simplify our corporate structure and to integrate
our global equity and fixed income management services for U.S. clients into one
corporate entity. We can assure you that no changes in Fund management are
planned or anticipated in connection with the merger. We expect the merger to be
effective on or about July 1, 1999.
Thank you for your interest in the Schroder International Smaller Companies
Fund.
Sincerely,
/s/ Nancy A. Curtin /s/ Alexandra Poe
- ---------------------------- -----------------------------
Nancy A. Curtin Alexandra Poe
Chairman President
2
<PAGE>
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Schroder International Smaller Companies Fund
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MANAGEMENT DISCUSSION AND ANALYSIS (AS OF APRIL 30, 1999) (UNAUDITED)
HOW DID THE FUND PERFORM FOR THE SIX MONTHS ENDED APRIL 30, 1999?
For the six months ended April 30, 1999, the Schroder International Smaller
Companies Fund's Investor Shares rose 31.38%. Its benchmark, the unmanaged
Salomon Smith Barney Extended Market Index EPAC region ("EMI EPAC"), rose 12.54%
over the same period.
WHAT CONTRIBUTED MOST TO THE FUND'S PERFORMANCE OVER THE PERIOD AND WHY?
Strong stock selection was the main contributor to the Fund's performance. In
Continental Europe the Fund participated in a number of initial public offerings
which significantly benefited the Fund. In particular, we invested in several
technology and telecommunications stocks in Germany, Belgium and Italy, and
these stocks were key beneficiaries of the market rally. For example, one of our
best performing stocks was Class Editore, an Italian online business. We have
sought to balance relatively volatile stocks such as these with lower risk
industrial and service-related stocks. In the U.K., we maintained the Fund's
bias towards general industrial companies, which suffered following the rise in
U.K. interest rates last June. Since then, interest rates have fallen in the
U.K. and the U.K. economy has performed better than expected. Consequently,
those industrial stocks have delivered strong gains.
TOWARDS THE END OF THE SIX-MONTH PERIOD THERE WAS A TURNAROUND IN SMALL CAPS IN
JAPAN. HOW DID THIS AFFECT PERFORMANCE AND WHAT CHANGES WERE MADE TO THE FUND'S
PORTFOLIO AS A CONSEQUENCE?
We increased our Japanese weighting over the period because valuations were
attractive and the outlook for smaller companies was positive (the latest
surveys have indicated an improvement in small companies' business confidence).
Although the economic environment in Japan remains difficult, in recent months
we were able to buy several economically sensitive Japanese stocks at notably
low valuations. For example, Nippon Thomson, a manufacturer of ball bearings,
and Eiden Corp., a leading regional retailer of electrical goods, were both
attractively priced and we believe they are likely to benefit from any upturn in
economic activity in Japan.
THERE WAS A REVIVAL IN TAKEOVER ACTIVITY IN THE UK MARKET DURING THE SIX-MONTH
PERIOD. WHAT IMPACT DID THIS HAVE ON THE FUND?
Although there was a revival in takeover activity in the UK, none of the stocks
owned by the Fund were bought out during the six-month period. However, the
increase in takeover activity triggered a revival of interest in small companies
which in turn benefited the Fund. A number of the Fund's holdings in
economically-sensitive industries whose valuations had become especially low
benefited from bid activity in similar stocks. International smaller companies
had experienced such a large sell-off that we were able to buy top-quality
companies at attractive prices. For example, we purchased stock in leading
sports retailer, John David Sports, whose price subsequently rose dramatically.
WHAT IS YOUR OUTLOOK FOR INTERNATIONAL SMALLER COMPANIES?
We are optimistic in our outlook for international smaller companies. Small
companies outside the U.S. have underperformed large stocks for a protracted
period in all major markets. Their performance has been handicapped by a number
of cyclical factors, including a liquidity driven trend towards investment in
only the largest U.S. companies. Cuts in U.S. interest rates last November, and
more recently in Europe, have returned investors' focus to areas of the market
where stocks are clearly undervalued. Although the main beneficiaries of this
change in sentiment have been the larger industrial companies, small companies
have also begun to attract more attention in recent months. Small companies
generally sell on low valuations relative to their larger counterparts and
relative to their potential earnings growth. Most importantly, they can offer
the potential for good and stable earnings growth and above-average returns.
3
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Schroder International Smaller Companies Fund
- --------------------------------------------------------------------------------
We believe that an investment in international smaller companies is a good
complement to investments in larger companies. Unlike larger companies, small
companies can react quickly to changing circumstances and can benefit from
growth in a niche area of the economy. An investment in the international
smaller company asset class combined with a core equity portfolio can lower
overall portfolio risk to the extent that returns from small and large companies
do not always move in tandem. Generally speaking, an investment in international
smaller companies should be made by investors who can tolerate the higher level
of risk associated with a specialized product and should not be considered a
complete investment program.
The views expressed in this report were those of the Fund's portfolio manager as
of April 30, 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.
4
<PAGE>
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Schroder International Smaller Companies Fund
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PORTFOLIO CHARACTERISTICS AS OF APRIL 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
COUNTRY WEIGHTINGS TOP TEN HOLDINGS
COUNTRY % OF NET ASSETS SECURITY % OF NET ASSETS
- ---------------------------------------------- ----------------------------------------------------------
<S> <C> <C> <C>
United Kingdom 23.55% Telegate AG 2.18%
Japan 21.88 Infogrames Entertainment SA 2.04
France 10.86 HF Co. 1.92
Germany 9.71 Endemol Entertainment Holdings NV 1.87
Netherlands 8.29 Tan Chong International Ltd. 1.81
Switzerland 5.03 John David Sports plc 1.75
Italy 4.18 Marschollek, Lautenschlaeger und Partner AG 1.74
Spain 3.42 Wing Tai Holdings Ltd. 1.64
Singapore 3.41 Nissan Fire & Marine Insurance Co. Ltd. 1.56
Hong Kong 2.62 ADVA AG Optical Networking 1.54
Belgium 1.98 -------
Sweden 1.73 Total 18.05%
Denmark 1.02 =======
Cash and Other Net Assets 2.32
--------
Total 100.00%
========
</TABLE>
5
<PAGE>
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Schroder International Smaller Companies Fund
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999 (UNAUDITED)
ASSETS:
Investments (Notes 1 and 2):
Investment in Schroder International
Smaller Companies Portfolio (the "Portfolio") $ 7,407,222
Receivable for Fund shares sold 24,902
Receivable from investment adviser (Note 4) 29,103
Organization costs, net of amortization (Note 2) 7,555
------------
Total Assets 7,468,782
------------
LIABILITIES:
Payable to subadministrator (Note 3) 440
Accrued expenses and other liabilities 32,992
------------
Total Liabilities 33,432
------------
Net Assets $ 7,435,350
============
COMPONENTS OF NET ASSETS:
Paid-in capital $ 6,626,640
Undistributed net investment income 3,697
Accumulated net realized gain on investments
and foreign currency transactions 493,055
Net unrealized appreciation on investments
and foreign currency transactions 311,958
------------
Net Assets $ 7,435,350
============
SHARES OF BENEFICIAL INTEREST 654,640
NET ASSET VALUE, OFFERING, AND REDEMPTION PRICE PER SHARE $11.36
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
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Schroder International Smaller Companies Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1999 (UNAUDITED)
<S> <C>
NET INVESTMENT INCOME ALLOCATED FROM THE PORTFOLIO:
Dividend income (net of foreign withholding taxes of $5,735) $ 40,135
Interest income 5,318
Net expenses (29,768)
------------
Net Investment Income Allocated from the Portfolio 15,685
------------
EXPENSES:
Administration (Note 3) 2,489
Subadministration (Note 3) 12,500
Transfer agency (Note 3) 6,473
Accounting (Note 3) 6,000
Printing 8,297
Registration 4,970
Audit 6,070
Amortization of organization costs (Note 2) 1,511
Legal 322
Trustees 228
Miscellaneous 827
------------
Total Expenses 49,687
Fees waived and expenses reimbursed (Note 4) (42,226)
------------
Net Expenses 7,461
------------
NET INVESTMENT INCOME 8,224
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS ALLOCATED
FROM THE PORTFOLIO:
Net realized gain on investments sold 501,466
Net realized gain on foreign currency transactions 3,195
------------
Net realized gain on investments and
foreign currency transactions 504,661
------------
Net change in unrealized appreciation on investments 932,744
Net change in unrealized depreciation on
foreign currency transactions (1,720)
------------
Net change in unrealized appreciation on investments and
foreign currency transactions 931,024
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS ALLOCATED
FROM THE PORTFOLIO 1,435,685
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,443,909
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
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Schroder International Smaller Companies Fund
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<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the For the
Six Months Ended Year Ended
April 30, 1999 October 31, 1998
(unaudited)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, BEGINNING OF PERIOD $ 4,164,684 $ 6,836,084
----------- -----------
OPERATIONS:
Net investment income 8,224 20,201
Net realized gain on investments and
foreign currency transactions 504,661 293,969
Net change in unrealized appreciation on investments
and foreign currency transactions 931,024 334,169
----------- -----------
Net increase in net assets resulting from operations 1,443,909 648,339
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (16,342) (9,569)
Net realized gain on investments (313,960) (377,722)
----------- -----------
Total distributions to shareholders (330,302) (387,291)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Sale of shares 2,065,972 192,122
Reinvestment of distributions 104,039 75,896
Redemption of shares (12,952) (3,200,466)
----------- -----------
Net increase (decrease) from capital share transactions 2,157,059 (2,932,448)
----------- -----------
Net increase (decrease) in net assets 3,270,666 (2,671,400)
----------- -----------
NET ASSETS, END OF PERIOD (a) $ 7,435,350 $ 4,164,684
=========== ===========
SHARE TRANSACTIONS:
Sale of shares 199,227 21,307
Reinvestment of distributions in shares 11,420 9,348
Redemption of shares (1,320) (327,018)
----------- -----------
Net increase (decrease) in shares 209,327 (296,363)
=========== ===========
</TABLE>
- --------------------------------------
(a) Includes accumulated undistributed net investment income of $3,697 and
$11,815, respectively, for the six months ended April 30, 1999 and the
year ended October 31, 1998.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
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Schroder International Smaller Companies Fund
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FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a share outstanding throughout each
period:
<TABLE>
<CAPTION>
For the For the For the
Six Months Ended Year Ended Period Ended
April 30, October 31, October 31,
1999 1998 1997 (a)
(unaudited)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $9.35 $9.22 $10.00
------- ------- ------
Investment Operations
Net Investment Income (b) 0.01 0.05 0.02
Net Realized and Unrealized Gain (Loss)
on Investments 2.60 0.60 (0.79)
------- ------- ------
Total from Investment Operations 2.61 0.65 (0.77)
------- ------- ------
Distributions From
Net Investment Income (0.03) (0.01) (0.01)
Net Realized Gain on Investments (0.57) (0.51) -
------- ------- ------
Total Distributions (0.60) (0.52) (0.01)
------- ------- ------
Net Asset Value, End of Period $11.36 $9.35 $9.22
======= ======= ======
Total Return (c) 31.38% 7.88% (7.73)%
Ratio/Supplementary Data:
Net Assets at End of Period (in thousands) $7,435 $4,165 $6,836
Ratios to Average Net Assets (b):
Expenses, including
reimbursement/waiver of fees 1.50%(d) 1.50% 1.50%(d)
Expenses, excluding
reimbursement/waiver of fees 5.87%(d) 5.26% 3.93%(d)
Net investment income (loss),
including reimbursement/waiver 0.33%(d) 0.33% 0.21%(d)
Portfolio Turnover Rate (e) 49% 82% 32%
</TABLE>
- ----------------------------------------
(a) For the period November 4, 1996 (commencement of operations) through
October 31, 1997.
(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 periods shown (See Note 4).
(d) Annualized.
(e) The rate represents the turnover of the underlying Portfolio.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
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Schroder International Smaller Companies Fund
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. ORGANIZATION
Schroder Capital Funds (Delaware) (the "Trust") was organized as a Maryland
corporation on July 30, 1969; reorganized as Schroder Capital Funds, Inc., 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 nine investment portfolios. Included in this
report is the Schroder International Smaller Companies Fund (the "Fund"), which
is a diversified portfolio that commenced operations on November 4, 1996. Under
its Trust Instrument, the Trust is authorized to issue an unlimited number of
the Fund's Investor Shares and Advisor Shares of beneficial interest without par
value. As of April 30, 1999, only Investor Shares of the Fund had been issued.
Until May 28, 1999, the Fund sought to achieve its investment objective by
investing all its investable assets in Schroder International Smaller Companies
Portfolio (the "Portfolio"), a separate diversified portfolio of Schroder
Capital Funds ("Schroder Core") that had the same investment objective and
substantially similar investment policies as the Fund. The Fund accounted for
its investment in the Portfolio as a partnership investment and recorded daily
its share of the Portfolio's income, expenses and realized and unrealized gain
and loss. The Portfolio's financial statements are included elsewhere in this
report and should be read in conjunction with the Fund's financial statements.
As of April 30, 1999, the Fund owned substantially all the interests of the
Portfolio. Since May 28, 1999, the Fund has sought its objective by investing
directly in a portfolio of securities considered by Schroder Capital Management
International Inc., the Fund's investment adviser, to be consistent with the
Fund's investment objectives and policies and has ceased to invest in the
Portfolio.
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 amounts could differ
from those estimates.
The following represent the 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 is discussed in the Notes to the
Financial Statements of the Portfolio. Investments held directly by the Fund
will be valued in the same manner as the Portfolio would value such investments.
INVESTMENT INCOME AND EXPENSES
For the periods covered by these Financial Statements, the Fund recorded
daily its pro rata share of the Portfolio's income, expenses and realized and
unrealized gain and loss. In addition, the Fund incurred its own expenses.
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income and net capital gain, 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
Portfolio or the Fund, timing differences and differing characterizations of
distributions made by the Fund.
10
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Schroder International Smaller Companies Fund
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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 each of its funds. Expenses that are directly attributable to more than one
fund are allocated among the respective funds in proportion to each fund's
average net assets.
ORGANIZATION COSTS
Costs incurred by the Fund in connection with its organization are
amortized on a straight-line basis over a five-year period.
NOTE 3. INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
Schroder Capital Management International Inc. ("SCMI") is the investment
adviser to the Fund. Prior to May 28, 1999, the Fund invested all its assets in
the Portfolio, which had retained SCMI to act as investment adviser pursuant to
an Investment Advisory Agreement. See Notes to the Financial Statements of the
Portfolio. Beginning June 1, 1999, the Fund incurs investment advisory fees at
an annual rate, payable monthly, of 0.85% of the Fund's average daily net
assets, to SCMI. Pursuant to a Subadvisory Agreement among SCMI, Schroder
Investment Management International Ltd. ("SIMIL"), and the Fund, SIMIL serves
as investment subadviser to the Fund. Under the Subadvisory Agreement, SCMI pays
SIMIL a monthly fee at the annual rate of 0.25% of the Fund's average net
assets.
SCMI has informed the Trust that it expects on or about July 1, 1999 to be
merged into Schroder Investment Management North America Inc., a newly organized
Delaware corporation. SCMI and Schroder Investment Management North America Inc.
are both wholly owned subsidiaries of Schroder U.S. Holdings, Inc.
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 Fund's average
daily net assets. (Until May 31, 1999, Schroder Advisors was entitled to receive
compensation at an annual rate, payable monthly, of 0.10% of the Fund's average
daily net assets; Schroder also received fees from the Portfolio for providing
administrative services at an annual rate of 0.15% of the Portfolio's average
daily net assets.) In addition, the Trust has entered into a Sub-Administration
Agreement with State Street Bank and Trust Company and Schroder Advisors. Under
that Agreement, the Fund, together with other mutual funds managed by SCMI 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 assets in excess of $3.4 billion,
subject to certain minimum requirements. Pursuant to a separate agreement, the
Fund pays State Street fees for accounting services at the following rates:
0.02% of the first $100 million of net assets, 0.015% of the next $100 million;
0.005% of the next $300 million, and 0.0025% of assets in excess of $500
million, subject to certain other minimum requirements. Prior to June 1, 1999,
the Fund paid subadministration fees to Forum Administrative Services, LLC
("FAdS") at an annual rate of 0.075% of the average daily net assets of the
Fund, subject to a minimum annual fee of $25,000, and paid accounting fees to
Forum Accounting Services, LLC at an annual rate of $12,000.
11
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Schroder International Smaller Companies Fund
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONCLUDED)
NOTE 4. WAIVER OF FEES AND REIMBURSEMENT OF EXPENSES
In order to limit the Fund's expenses, SCMI is contractually obligated to
reduce its compensation (and, if necessary, to pay certain other Fund expenses)
until December 31, 1999, to the extent that the Fund's net expenses exceed 1.50%
(based on the Fund's average daily net assets). For the period ended April 30,
1999, Schroder Advisors waived fees and reimbursed expenses of $2,492 and
$29,103, respectively, and FAdS waived fees of $10,631.
NOTE 5. BENEFICIAL INTEREST
For the period ended April 30, 1999, there were 3 shareholders, each owning
more than 5% of the Fund's net assets, totaling 99.4%, of which approximately
46% was owned by an affiliated party.
12
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Schroder International Smaller Companies Portfolio
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SCHEDULE OF INVESTMENTS
APRIL 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
STOCKS - 97.7%
SHARES VALUE US$ SHARES VALUE US$
- ---------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
BELGIUM - 2.0 % JAPAN - 21.9%
COMMON STOCK COMMON STOCK
1,900 Netvision NV (a) $ 68,344 6,000 Airport Facilities Co. Ltd. $ 27,647
1,300 Roularta Media Group NV (a) 78,738 16,000 Amada Metrecs Co. Ltd. 94,235
--------- 4,000 Arcland Sakamoto 38,874
147,082 14,000 Canon Copyer Sales Co. 59,349
--------- 6,000 Charle Co. 66,353
DENMARK - 1.0% 6,000 DAIDOH Ltd. 16,086
COMMON STOCK 12,000 Diamond City Co. 49,262
760 Christian Hansen Holdings AS 75,257 10,000 Eiden Corp. Ltd. 78,752
---------- 6,000 Idec Izumi Corp. 32,674
FRANCE - 10.9% 5,000 Inaba Denkisangyo Co. Ltd. 53,828
COMMON STOCK 7,000 Inabata & Co. Ltd. 23,986
1,500 Alten (a) 92,042 3,000 Japan Airport Terminal Co. Ltd. 31,669
2,400 Coflexip SA, ADR 106,800 10,000 Kansai Kosaido Co. Ltd. 60,740
6,810 Cyrano (a) 72,047 4,000 Mandom Corp. 50,268
390 Filipacchi Medias 90,195 4,000 Maruzen Co. Ltd. 14,578
710 GFI Informatique (a) 90,814 1,000 Meiko Shokai 39,376
1,700 HF Co. (a) 142,982 5,000 Mirai Industry Co. Ltd. 67,023
2,000 Infogrames Entertainment SA (a) 151,287 1,000 Nagaileben Co. Ltd. 26,809
400 Manitou BF SA 57,976 4,000 Nippon Cable System 35,522
---------- 20,000 Nippon Thomson Co. Ltd. 107,572
804,143 6,500 Nishio Rent All Co. 62,353
---------- 35,000 Nissan Fire & Marine
Insurance Co. Ltd. (a) 116,118
GERMANY - 9.7% 12,000 Sanki Engineering Co. Ltd. 85,857
COMMON STOCK 5,000 Sanyo Chemical Industries Ltd. 52,446
1,500 ADVA AG Optical Networking (a) 114,100 14,000 Sumitomo Warehouse Co. Ltd. 57,590
1,750 PrimaCom AG (a) 75,908 2,000 Tachihi Enterprise Co. Ltd. 55,462
1,030 Rhoen-Klinikum AG 103,521 10,000 Toho Real Estate Co. Ltd. 44,235
3,600 Telegate AG (a) 161,867 1,500 Trusco Nakayama Corp. 18,360
2,900 Winkler & Duennebier AG (a) 78,266 10,000 Tsubaki Nakashima Co. Ltd. 69,956
PREFERRED STOCK 4 Yoshinoya D&C Co. Ltd. 63,672
40 Hugo Boss AG 56,918 5,000 Yushiro Chemical Industry Co.
230 Marschollek, Lautenschlaeger Ltd. 20,400
und Partner AG 128,965 ---------
---------- 1,621,052
719,545 ---------
----------
HONG KONG - 2.6% NETHERLANDS - 8.3%
COMMON STOCK COMMON STOCK
150,000 Elec & Eltek International 4,000 Apothekers Cooperatie OPG 100,506
Holdings Ltd. 26,902 13,800 BE Semiconductor
738,000 Tan Chong International Ltd. 134,265 Industries NV (a) 92,709
19,000 Varitronix International Ltd. 32,606 6,000 Devote NV (a) 96,485
---------- 4,034 Endemol Entertainment
193,773 Holdings NV 138,703
---------- 5,040 Koninklijke Ahrend Groep NV 98,110
5,200 Petroleum Geo-Services (a) 87,821
ITALY - 4.2% -----------
COMMON STOCK 614,334
89,200 Ciga SpA (a) 60,491 -----------
11,500 Class Editore SpA (a) 111,932 SINGAPORE - 3.4%
8,950 De Rigo SpA, ADR (a) 61,531 COMMON STOCK
3,800 Gewiss SpA 75,379 18,000 Parkway Holdings Ltd. 43,791
---------- 70,000 Singapore Bus Services Ltd. 86,389
309,333 98,000 Wing Tai Holdings Ltd. 122,103
---------- -----------
252,283
-----------
</TABLE>
13
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Smaller Companies Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
STOCKS - CONTINUED
SHARES VALUE US$ SHARES VALUE US$
- ---------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
SPAIN - 3.4% UNITED KINGDOM - 23.6%
COMMON STOCK COMMON STOCK
3,500 Cortefiel SA $ 96,274 98,200 Amstrad plc $ 72,732
7,700 NH Hoteles SA (a) 90,668 45,580 British Regional Air Lines
5,700 Prosegur Companhia Group plc (a) 47,703
de Seguridad SA 66,032 60,000 Capital Industries plc 48,303
---------- 1,822 City Gourmet Holdings plc (a) 924
252,974 20,000 Dawson Holdings plc 53,133
---------- 17,500 Fairey Group plc 107,635
10,000 Freeport Leisure plc 87,590
SWEDEN - 1.7% 11,700 Galen Holdings plc 88,822
COMMON STOCK 37,800 Jarvis Hotels plc 89,010
5,050 Nobel Biocare AB 80,156 60,000 John David Sports plc 130,418
1,600 Scandic Hotels AB 47,748 29,000 Low & Bonar plc 90,584
---------- 30,000 Merant plc (a) 70,039
127,904 58,500 Ockham Holdings plc 70,172
---------- 12,000 Old English Pub Co. plc 24,731
20,450 Oriflame International SA 60,914
SWITZERLAND - 5.0% 22,300 Penna Holdings plc 82,582
COMMON STOCK 12,000 Photo-Me International plc 104,335
110 ESEC Holding AG 98,985 12,300 Renishaw plc 80,405
4 Lindt & Spruengli AG 102,204 38,000 Scapa Group plc 82,598
282 Sez Holding AG 75,017 19,290 Tilbury Douglas plc 89,138
290 The Selectra Group (a) 96,193 33,200 Torex plc 106,911
---------- 4,800 Whatman plc 49,268
372,399 16,630 Wickes plc 106,568
---------- -----------
1,744,515
-----------
Total Investments - 97.7%
(cost $6,934,138) 7,234,596
Other Assets Less
Liabilities -2.3% 172,626
-----------
Total Net Assets - (100.0%) $ 7,407,222
===========
</TABLE>
- --------------------------------------------------
(a) Non-income producing security.
ADR - American Depository Receipts
Forward Foreign Currency Contracts
Contracts to Sell
<TABLE>
<CAPTION>
Underlying Face
Amount of Unrealized
Contract Date Currency Units Value Appreciation
- ------------- --------------- ----------- ----------------- ---------------
<S> <C> <C> <C> <C>
5/18/99 Japanese Yen 46,625,000 $ 391,182 $ 11,958
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Smaller Companies Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999 (UNAUDITED)
ASSETS:
Investments (Note 2)
Investments, at cost $ 6,934,138
Net unrealized appreciation 300,458
------------
Total Investments, at value 7,234,596
Cash 126,598
Receivable for dividends and interest 24,175
Receivable for tax reclaims 11,492
Receivable for forward foreign currency contracts 11,958
Receivable from investment adviser (Note 6) 31,244
Organization costs, net of amortization (Note 2) 7,555
------------
Total Assets 7,447,618
------------
LIABILITIES:
Payable to subadministrator (Note 3) 440
Accrued expenses and other liabilities 39,956
------------
Total Liabilities 40,396
------------
Net Assets $ 7,407,222
============
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Smaller Companies Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1999 (UNAUDITED)
INVESTMENT INCOME:
Dividend income (net of foreign withholding taxes of $5,735) $ 40,135
Interest income 5,318
-----------
Total Investment Income 45,453
-----------
EXPENSES:
Investment advisory (Note 3) 21,130
Administration (Note 3) 3,729
Subadministration (Note 3) 12,500
Interest holder recordkeeping (Note 3) 6,025
Custody 1,549
Accounting (Note 3) 32,000
Legal 516
Audit 12,646
Pricing 4,347
Trustees 228
Amortization of organization costs (Note 2) 1,511
Miscellaneous 326
-----------
Total Expenses 96,507
Fees waived and expenses reimbursed (Note 6) (66,739)
-----------
Net Expenses 29,768
-----------
NET INVESTMENT INCOME 15,685
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investments 501,466
Net realized gain on foreign currency transactions 3,195
-----------
Net realized gain on investments
and foreign currency transactions 504,661
-----------
Net change in unrealized appreciation on investments 932,744
Net change in unrealized depreciation on
foreign currency transactions (1,720)
-----------
Net change in unrealized appreciation on
investments and foreign currency transactions 931,024
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS 1,435,685
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,451,370
===========
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
- --------------------------------------------------------------------------------
Schroder International Smaller Companies Portfolio
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six Months For the Year
Ended April 30, Ended October 31,
1999 1998
(unaudited)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, BEGINNING OF PERIOD $ 4,156,489 $ 6,825,551
------------ -----------
OPERATIONS:
Net investment income 15,685 38,349
Net realized gain on investments
and foreign currency transactions 504,661 293,969
Net change in unrealized appreciation
on investments and foreign currency transactions 931,024 334,169
------------ -----------
Net increase in net assets resulting from operations 1,451,370 666,487
------------ -----------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST:
Contributions 2,101,481 279,625
Withdrawals (302,118) (3,615,174)
------------ -----------
Net increase (decrease) in net assets from
transactions in investors' beneficial interest 1,799,363 (3,335,549)
------------ -----------
Net increase (decrease) in net assets 3,250,733 (2,669,062)
------------ -----------
NET ASSETS, END OF PERIOD $ 7,407,222 $ 4,156,489
============ ===========
</TABLE>
FINANCIAL HIGHLIGHTS
Portfolio performance for the following periods:
<TABLE>
<CAPTION>
For the Six Months For the Year For the Period
Ended April 30, Ended October 31, Ended October 31,
1999 1998 1997 (a)
(unaudited)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ratio to Average Net Assets:
Expenses, including reimbursement/waiver of fees 1.20%(b) 1.20% 1.20%(b)
Expenses, excluding reimbursement/waiver of fees 3.88%(b) 3.50% 2.72%(b)
Net investment income,
including reimbursement/waiver of fees 0.63%(b) 0.63% 0.51%(b)
Portfolio Turnover Rate 49% 82% 32%
</TABLE>
- --------------------------------------------------------
(a) For the period November 4, 1996 (commencement of operations) through
October 31 1997.
(b) Annualized.
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
- -------------------------------------------------------------------------------
Schroder International Smaller Companies Portfolio
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. ORGANIZATION
Schroder Capital Funds ("Schroder Core") was organized as a Delaware
business trust on September 7, 1995. Schroder Core, which is registered as an
open-end, management investment company under the Investment Company Act of
1940, as amended (the "Act") currently has eight investment portfolios. Included
in this report is the Schroder International Smaller Companies Portfolio (the
"Portfolio"), a diversified portfolio that commenced operations on November 4,
1996. Under its Trust Instrument, Schroder Core is authorized to issue an
unlimited number of interests without par value. On May 28, 1999, the Portfolio
distributed all of its net assets to shareholders in complete liquidation and
ceased investment operations.
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 amounts could differ from those
estimates.
The following represent the 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 preceding 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 generally are provided by
independent pricing services. Domestic short-term investments having a maturity
of 60 days or less, generally are valued at amortized cost, which approximates
market value. Foreign short-term investments are valued at current market price,
then marked-to-market to recognize any gain or loss on the transaction. Other
securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith using methods approved by
Schroder Core's Board of Trustees. As of April 30, 1999, the Portfolio 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 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 unrecoverable withholding tax. Interest income is recorded as
earned. Identified cost of investments sold is used to determine gain and loss
for both financial statement and federal income tax purposes. Foreign dividend
and interest income amounts and realized capital gain and loss are converted to
U.S. dollar equivalents using foreign exchange rates in effect on the date of
the transactions.
Foreign currency amounts are translated into U.S. dollars at the mean of
the bid and asked prices of such currencies against U.S. dollars as follows: (i)
assets and liabilities at the rate of exchange at the end of the respective
period; and (ii) purchases and sales of securities and income and expenses at
the rate of exchange prevailing on the dates of such transactions. The portion
of the results of operations arising from changes in the exchange rates and the
portion due to fluctuations arising from changes in the market prices of
securities are not isolated. Such fluctuations are included with the net
realized and unrealized gain or loss on investments.
18
<PAGE>
- -------------------------------------------------------------------------------
Schroder International Smaller Companies Portfolio
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
The Portfolio may enter into forward contracts to purchase or sell foreign
currencies to protect the U.S. dollar value of the underlying portfolio of
securities against the effect of possible adverse movements in foreign exchange
rates. Risks associated with such contracts include the movement in value of the
foreign currency relative to the U.S. dollar and the ability of the counterparty
to perform. Fluctuations in the value of such contracts are recorded daily as
unrealized gain or loss; realized gain or loss includes net gain or loss on
contracts that have terminated by settlement or by the Portfolio entering into
offsetting commitments.
EXPENSE ALLOCATION
Schroder Core accounts separately for the assets and liabilities and
operation of each of its portfolios. Expenses that are directly attributable to
more than one portfolio are allocated among the respective portfolios in
proportion to each portfolio's average net assets.
ORGANIZATION COSTS
Costs incurred by the Portfolio in connection with its organization are
amortized on a straight-line basis over a five-year period.
NOTE 3. INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER AND SUBADVISER
Schroder Capital Management International Inc. ("SCMI") is the investment
adviser to the Portfolio. Pursuant to an Investment Advisory Agreement, SCMI is
entitled to receive compensation at an annual rate, payable monthly, of 0.85% of
the average daily net assets of the Portfolio. Pursuant to a Subadvisory
Agreement among SCMI, Schroder Investment Management International Ltd.
("SIMIL") and Schroder Core, SIMIL is the investment subadviser to the
Portfolio. Under the Subadvisory Agreement, SCMI pays SIMIL a monthly fee at the
annual rate of 0.25% of the Portfolio's average net assets.
SCMI has informed the Trust that it expects on or about July 1, 1999 to be
merged into Schroder Investment Management North America Inc., a newly organized
Delaware corporation. SCMI and Schroder Investment Management North America Inc.
are both wholly owned subsidiaries of Schroder U.S. Holdings, Inc.
ADMINISTRATOR AND SUBADMINISTRATOR
The administrator of the Portfolio is Schroder Fund Advisors Inc.
("Schroder Advisors"). For its services, Schroder Advisors is entitled to
receive compensation at an annual rate, payable monthly, of 0.15% of the average
daily net assets of the Portfolio. The subadministrator is Forum Administrative
Services, LLC ("FAdS"). FAdS is entitled to receive compensation at an annual
rate, payable monthly, of 0.075% of the average daily net assets of the
Portfolio, subject to an annual minimum of $25,000.
OTHER SERVICE PROVIDERS
Forum Accounting Services, LLC ("FAcS") performs portfolio accounting for
the Portfolio and is entitled to receive compensation for those services in the
amount of $60,000 per year, plus certain other charges based upon the number and
19
<PAGE>
- -------------------------------------------------------------------------------
Schroder International Smaller Companies Portfolio
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONCLUDED)
types of portfolio transactions. FAcS also provides interestholder recordkeeping
services to the Portfolio for which it receives $12,000 per year, plus certain
other charges.
NOTE 4. PURCHASES AND SALES OF SECURITIES
The cost of securities purchased and the proceeds from sales of securities
(excluding short-term investments) for the period ended April 30, 1999,
aggregated $4,352,253 and $2,299,777, respectively.
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 interest holders in
proportion to their holdings in the Portfolio regardless of whether such
interest, dividends or gain have been distributed by the Portfolio.
NOTE 6. WAIVER OF FEES AND REIMBURSEMENT OF EXPENSES
SCMI voluntarily waived a portion of its advisory fees and assumed certain
expenses of the Portfolio so that its total expenses would not exceed 1.20% of
the Portfolio's average daily net assets. SCMI has voluntarily undertaken to
waive 0.10% of the advisory fees payable by the Portfolio. This fee limitation
arrangement shall remain in effect until its elimination is approved by the
Board of Trustees of Schroder Core. For the period ended April 30, 1999, SCMI,
Schroder Advisors and FAdS waived fees of $21,130, $3,729, and $10,636,
respectively. Schroder Advisors reimbursed expenses of $31,244.
NOTE 7. CONCENTRATION OF RISK
The Portfolio has a relatively large number of portfolio securities
invested in companies domiciled in the United Kingdom, France and Japan. The
Portfolio may be more susceptible to political, social and economic events
adversely affecting those countries than portfolios not so invested.
20
<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 Capital Management International Inc.
787 Seventh Avenue, 34th Floor
New York, NY 10019
ADMINISTRATOR AND DISTRIBUTOR
Schroder Fund Advisors Inc.
787 Seventh Avenue, 34th Floor
New York, NY 10019
CUSTODIAN
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
This report is for the information of the
shareholders of the Schroder International Smaller
Companies Fund. Its use in connection with any
offering of the Fund's shares is authorized only
in case of a concurrent or prior delivery of the
Fund's current prospectus.
<PAGE>
[GRAPHIC] SCHRODERS
Schroder
International Smaller
Companies Fund
SEMI-ANNUAL REPORT
APRIL 30, 1999
(Unaudited)
Schroder Capital Funds (Delaware)
